Compass Diversified Holdings

Previous wording

Compass Diversified Holdings ("Holdings", or the "Trust") was formed in Delaware on November 18, 2005. Compass Group Diversified Holdings LLC (the "LLC") was also formed on November 18, 2005. Holdings and the LLC (collectively, the "Company") were formed to acquire and manage a group of small and middle-market businesses headquartered in North America. The LLC is a controlling owner of eight businesses, or operating segments, at March 31, 2026. The segments are as follows: 5.11 Acquisition Corp. ("5.11"), Boa Holdings Inc. ("BOA"), Relentless Topco, Inc. ("PrimaLoft"), THP Topco, Inc. ("The Honey Pot Co." or "THP"), CBCP Products, LLC ("Velocity Outdoor" or "Velocity"), AMTAC Holdings LLC ("Arnold"), FFI Compass, Inc. ("Altor Solutions" or "Altor"), and SternoCandleLamp Holdings, Inc. ("Sterno"). Lugano Holding, Inc. ("Lugano") was an operating segment of the Company until November 16, 2025 when Lugano was deconsolidated. The results of operations of Lugano are included in the Company's results of operations through the date of the deconsolidation.

Current wording

Compass Diversified Holdings ("Holdings", or the "Trust") was formed in Delaware on November 18, 2005. Compass Group Diversified Holdings LLC (the "LLC") was also formed on November 18, 2005. Holdings and the LLC (collectively, the "Company") were formed to acquire and manage a group of small and middle-market businesses headquartered in North America. The LLC is a controlling owner of eight businesses, or operating segments, at June 30, 2026: 5.11 Acquisition Corp. ("5.11"), Boa Holdings Inc. ("BOA"), Relentless Topco, Inc. ("PrimaLoft"), THP Topco, Inc. ("The Honey Pot Co." or "THP"), CBCP Products, LLC ("Velocity Outdoor" or "Velocity"), AMTAC Holdings LLC ("Arnold"), FFI Compass, Inc. ("Altor Solutions" or "Altor"), and Rimports Holdings, Inc. ("Rimports"). On May 1, 2026, the Company completed the sale of Sterno’s food service business. Prior to the sale, Sterno distributed Rimports, its home fragrance business, to its stockholders, and Rimports remained a majority owned subsidiary of the LLC. Accordingly, the Rimports operating segment reflects the home fragrance business retained by the Company following the sale of Sterno’s food service business. Lugano Holding, Inc. ("Lugano") was an operating segment of the Company until November 16, 2025 when Lugano was deconsolidated. The results of operations of Lugano are included in the Company's results of operations through the date of the deconsolidation.

Previous wording

We categorize our subsidiary businesses into two separate groups of businesses: (i) branded consumer businesses, and (ii) industrial businesses. Branded consumer businesses are those businesses that we believe capitalize on a valuable brand name in their respective market sectors. We believe that our branded consumer businesses are leaders in their respective particular product categories. Industrial businesses are those businesses that focus on manufacturing and selling particular products and/ or industrial services within a specific market sector. We believe that our industrial businesses are leaders in their specific market sector. We previously announced our desire to acquire businesses in the healthcare sector, with a focus on outsourced pharma, medical manufacturing services and provider services. We have not yet acquired a business in the healthcare sector.

Current wording

We categorize our subsidiary businesses into two separate groups of businesses: (i) branded consumer businesses, and (ii) industrial businesses. Branded consumer businesses are those businesses that we believe capitalize on a valuable brand name in their respective market sectors. We believe that our branded consumer businesses are leaders in their respective particular product categories. Industrial businesses are those businesses that focus on manufacturing and selling particular products and/ or industrial services within a specific market sector. We believe that our industrial businesses are leaders in their specific market sector.

Previous wording

BOA- BOA, creatorof the award-winning, patented BOA Fit System, partners with market-leading brands to make the best gear even better. Delivering fit solutions purpose-built for performance, the BOA Fit System is featured in footwear across snow sports, cycling, outdoor, athletic, workwear as well as performance headwear and bracing. The system consists of three integral parts: a micro-adjustable dial, high-tensile lightweight laces, and low friction lace guides creating a superior alternative to laces, buckles, Velcro, and other traditional closure mechanisms. Each unique BOA configuration is designed with brand partners to deliver superior fit and performance for athletes, is engineered to perform in the toughest conditions and is backed by The BOA Lifetime Guarantee. BOA is headquartered in Denver, Colorado and has operations in Austria, China, South Korea, Japan and Vietnam.

Current wording

BOA- BOA, creatorof the patented BOA Fit System, partners with market-leading brands to make the best gear even better. Delivering fit solutions purpose-built for performance, the BOA Fit System is featured in footwear across snow sports, cycling, outdoor, athletic, workwear as well as performance headwear and bracing. The system consists of three integral parts: a micro-adjustable dial, high-tensile lightweight laces, and low friction lace guides creating a superior alternative to laces, buckles, Velcro, and other traditional closure mechanisms. Each unique BOA configuration is designed with brand partners to deliver superior fit and performance for athletes, is engineered to perform in the toughest conditions and is backed by The BOA Lifetime Guarantee. BOA is headquartered in Denver, Colorado and has operations in Austria, China, South Korea, Japan and Vietnam.

Previous wording

The macroeconomic environment remains choppy, as geopolitical uncertainty and evolving trade dynamics continue to impact the operating environment; however, we believe that our diversified businesses have characteristics that may help them navigate these conditions, including leading positions in a number of categories and a disciplined focus on operating execution. Macroeconomic conditions affect our subsidiaries differently given our mix of branded consumer and industrial businesses. For our branded consumer businesses, changes in consumer confidence, discretionary spending and promotional intensity can affect demand, channel inventory levels and pricing, while persistent inflation in household essentials may continue to pressure consumer budgets in certain categories. For our industrial businesses, end-market activity and customer capital spending may be influenced by interest rates and broader manufacturing and infrastructure conditions, which can impact order patterns and project timing. Across the portfolio, we continue to experience input-cost volatility (including labor, freight and certain commodities and packaging materials), and the extent to which we can offset higher costs through pricing actions depends on competitive dynamics, contractual terms and customer demand. While changes in benchmark rates and credit spreads can affect financing markets more broadly, a significant portion of our outstanding debt is fixed-rate and, as a result, our consolidated interest expense is generally less sensitive in the near term to changes in market rates and credit spreads than it would be under a predominantly variable-rate capital structure. However, higher rates and tighter credit conditions may still affect the availability and cost of incremental financing (including for refinancings), as well as consumer and business demand and our customers’ spending decisions. Finally, evolving trade and tariff policies and supply chain reconfiguration may require certain subsidiaries to adjust sourcing, manufacturing footprint and inventory positioning, which can increase working capital requirements and, in some cases, create intermittent disruptions (including those experienced by Arnold in connection with export licensing requirements in China).

Current wording

We expect macroeconomic conditions to remain dynamic for the remainder of 2026, as geopolitical uncertainty, evolving trade dynamics, cost inflation and uneven consumer demand continue to shape the operating environment. We believe our diversified portfolio, leading positions in a number of categories and disciplined focus on operating execution position our subsidiaries to respond effectively to these conditions, although the magnitude and timing of impacts may vary across our branded consumer and industrial businesses. For our branded consumer businesses, future changes in consumer confidence, discretionary spending, promotional intensity and channel inventory levels may affect demand, pricing and gross margin performance; however, certain subsidiaries have demonstrated encouraging momentum through improved distribution, strong bookings, disciplined pricing and tariff-related recoveries. We expect these businesses to continue pursuing initiatives intended to strengthen customer relationships, enhance channel execution, improve product availability and protect margins where market conditions allow. For our industrial businesses, end-market activity and customer capital spending may continue to be influenced by interest rates, customer capital allocation decisions, broader manufacturing and infrastructure conditions, and the availability and cost of raw materials. These businesses are expected to continue focusing on operational efficiency, sourcing flexibility and pricing discipline to help mitigate input-cost volatility, including labor, freight, energy, packaging materials, commodities and raw materials. While a significant portion of our outstanding debt is fixed-rate and, as a result, our consolidated interest expense is generally less sensitive in the near term to changes in market rates and credit spreads than it would be under a predominantly variable-rate capital structure, higher rates and tighter credit conditions may still affect the availability and cost of incremental financing, the timing of refinancings, consumer and business demand, and our customers’ spending decisions. In addition, certain subsidiaries are expected to continue advancing supply chain reconfiguration, sourcing diversification and inventory management initiatives in response to evolving trade and tariff policies, including constraints experienced by Arnold in connection with export licensing requirements in China. We believe these actions, together with our subsidiaries’ ongoing operating initiatives, should enhance flexibility and resiliency over time, although intermittent disruptions, higher working capital requirements or timing differences in revenue and margin realization may occur in future periods.

Previous wording

Our near-term focus remains on strengthening the balance sheet, maintaining liquidity, and executing our day-to-day operating plan across our subsidiaries. Reducing leverage is our top financial priority, which we are pursuing through organic free cash flow generation and targeted divestitures, including the sale of Sterno's food service business, which closed in the second quarter of 2026, the net proceeds of which we expect to apply to repayment of senior secured debt.

Current wording

Our near-term focus remains on strengthening the balance sheet, maintaining liquidity, and executing our day-to-day operating plan across our subsidiaries. Reducing leverage is our top financial priority, which we are pursuing through organic free cash flow generation and targeted divestitures, including the sale of Sterno's food service business, which closed in the second quarter of 2026, the net proceeds of which we applied to repayment of senior secured debt.

Previous wording

On March 28, 2026, we signed an Agreement and Plan of Merger (the “Merger Agreement”) to sell Sterno, which we own approximately 92% of on a fully diluted basis. Under the Merger Agreement, WCHG Buyer, Inc. (the “Buyer”) will acquire Sterno’s food service business through the merger of a Buyer subsidiary with and into Sterno, with Sterno surviving as a wholly owned subsidiary of the Buyer. Immediately before the closing, Sterno is expected to distribute all of the equity interests in its indirect wholly owned subsidiary, Rimports, LLC (“Rimports”), to Sterno’s stockholders (the “Rimports Distribution”). After the Rimports Distribution, Rimports (which holds Sterno’s home fragrance business) will to remain a majority owned subsidiary of CODI.

Current wording

On March 28, 2026, we signed an Agreement and Plan of Merger (the “Merger Agreement”) to sell Sterno, which we owned approximately 92% of on a fully diluted basis. Under the Merger Agreement, WCHG Buyer, Inc. (the “Buyer”) acquired Sterno’s food service business through the merger of a Buyer subsidiary with and into Sterno, with Sterno surviving as a wholly owned subsidiary of the Buyer. Immediately before the closing, Sterno distributed all of the equity interests in its indirect wholly owned subsidiary, Rimports, LLC (“Rimports”), to Rimports Holdings, Inc., the equity of which was, in turn, distributed pro rata to Sterno’s stockholders, including the LLC (the “Rimports Distribution”). After the Rimports Distribution, Rimports (which holds Sterno’s home fragrance business) remains a majority-owned subsidiary of CODI.

Previous wording

The Sterno sale closed on May 1, 2026. The sale price was based on an enterprise value of $292.5 million, subject to customary adjustments (including for transaction expenses, change-of-control payments, and Sterno’s net working capital, cash and debt at closing), excluding Rimports and its subsidiaries. After the allocation of the sale price to Sterno’s non-controlling Stockholders and payment of transaction costs, CODI received approximately $282 million of total proceeds at closing. This amount is in respect to the Company's outstanding loans to Sterno (including accrued interest) and its equity interests in Sterno. The proceeds will be used to pay down outstanding debt under the Company’s senior credit facility. CODI expects to record a gain on the sale of Sterno’s food service business in the quarter ending June 30, 2026.

Current wording

The Sterno sale closed on May 1, 2026. The sale price was based on an enterprise value of $292.5 million. After allocation of the purchase consideration to Sterno’s noncontrolling stockholders and payment of transaction costs, CODI received approximately $282 million of total proceeds at closing, representing amounts received with respect to the Company’s outstanding loans to Sterno, including accrued interest, and its equity interests in Sterno. The Company used the proceeds received from the sale to repay outstanding borrowings under its senior credit facility.

Previous wording

The following discussion reflects a comparison of the historical results of operations of our consolidated business for the three months ended March 31, 2026 and March 31, 2025, and components of the results of operations for each of our operating segments on a stand-alone basis.

Current wording

The following discussion reflects a comparison of the historical results of operations of our consolidated business for the three and six months ended June 30, 2026 and June 30, 2025, and components of the results of operations for each of our operating segments on a stand-alone basis.

Previous wording

In the following results of operations, we provide (i) our actual Consolidated Results of Operations for the three months ended March 31, 2026 and 2025, which includes the historical results of operations of each of our businesses (operating segments) from the date of acquisition in accordance with US GAAP, and (ii) comparative historical components of the results of operations for each of our businesses on a stand-alone basis for the three months ended March 31, 2026 and 2025. The following results of operations at each of our businesses are not necessarily indicative of the results to be expected for a full year.

Current wording

In the following results of operations, we provide (i) our actual Consolidated Results of Operations for the three and six months ended June 30, 2026 and 2025, which includes the historical results of operations of each of our businesses (operating segments) from the date of acquisition in accordance with US GAAP, and (ii) comparative historical components of the results of operations for each of our businesses on a stand-alone basis for the three and six months ended June 30, 2026 and 2025. The following results of operations at each of our businesses are not necessarily indicative of the results to be expected for a full year.

Previous wording

For the three months ended March 31, 2026, we incurred approximately $15.9 million in management fees as compared to $18.9 million in fees in the three months ended March 31, 2025. The decrease in the management fee in the first quarter of 2026 is primarily due to the deconsolidation of Lugano in November 2025 which reduced the net assets used in the calculation of the management fee.

Current wording

Under the Management Services Agreement ("MSA"), we pay CGM (i) a base management fee equal to (a) 2% of the Company’s adjusted net assets when the adjusted net assets are less than or equal to $3.5 billion (the “Initial Threshold Fee”), and (b) an incentive fee if the adjusted net assets are greater than $3.5 billion. Such incentive management fee is subject to approval by the Compensation Committee of the Company’s board of directors. For the three months ended June 30, 2026, we incurred approximately $13.8 million in management fees as compared to $19.0 million in fees in the three months ended June 30, 2025. The decrease in the management fee in 2026 is primarily due to the deconsolidation of Lugano in November 2025 and the sale of Sterno in May 2026, which reduced the net assets used in the calculation of the management fee. The Management fee incurred in the three months ended June 30, 2025 reflects the amount incurred prior to the restatement of the Company's financial statements as the Company is not permitted under the MSA to adjust the amount owed to the Manager until the time when the restated financial information was available, which occurred upon the filing of the Company's 10-K/A on December 8, 2025. Therefore the expense recorded in the quarter ended June 30, 2025 reflects the amount that would have been due to the Manager at the time calculated, prior to the restatement of the Company's financial statements. While the MSA did not contain an express mechanism that permitted the Company to immediately clawback the overpayment of management fees, the MSA provided that future payments under the MSA would be reduced, on a dollar-for-dollar basis, by the aggregate amount of all overpaid management fees. The Company will reduce future management fee payments until the overpayment has been fully recouped. The total cash paid for Management fees in the quarter ended June 30, 2026 was $8.8 million as compared to total cash paid for Management fees for the quarter ended June 30, 2025 of $18.6 million.

Previous wording

Amortization expense for the three months ended March 31, 2026 decreased $0.5 million as compared to the three months ended March 31, 2025 due primarily to certain intangible assets at Sterno being fully amortized in the prior year and the Lugano deconsolidation.

Current wording

Amortization expense for the three months ended June 30, 2026 decreased $0.4 million as compared to the three months ended June 30, 2025 due to the effect of the sale of Sterno on May 1, 2026.

Previous wording

Net sales for thethree months ended March 31, 2026 were $124.0 million as compared to net sales of $129.4 million for thethree months ended March 31, 2025, a decrease of $5.4 million, or 4.2%. The decline was driven primarily by decreases in direct-to-consumer sales of approximately $4.0 million, reflecting a reduction in promotional activity compared to the prior year period, and international sales of approximately $1.8 million, primarily due to the timing of large contracts. These decreases were partially offset by an increase in domestic wholesale sales of approximately $0.5 million, driven by increased demand from key national accounts during the quarter.

Current wording

Net sales for the three months ended June 30, 2026 were $126.5 million as compared to net sales of $131.4 million for the three months ended June 30, 2025, a decrease of $4.9 million, or 3.8%. The decrease was primarily attributable to a decrease in direct-to-consumer sales of approximately $4.0 million, reflecting an intentional reduction in promotional activity compared to the prior year period, and a decrease in domestic wholesale sales of approximately $3.7 million, due to customer inventory reductions. These decreases were partially offset by an increase in international sales of approximately $2.4 million, driven by growth in EMEA, Australia, and Canada.

Previous wording

Segment operating income was $1.2 million in thethree months ended March 31, 2026, a decrease of $3.8 million as compared to thethree months ended March 31, 2025. Segment operating margin was 1.8% in the first three months of 2026 as compared to 6.5% in the first three months of 2025, with the decrease driven by a reduced sales volumes and the deleveraging effect of fixed costs, which negatively impacted gross margins in the current period. Gross profit as a percentage of net sales was 20.3% in the three months ended March 31, 2026 and 25.0% in the three months ended March 31, 2025.

Current wording

Segment operating income was $1.0 million in the three months ended June 30, 2026, a decrease of $6.2 million as compared to the three months ended June 30, 2025. Segment operating margin was 1.6% in the second quarter of 2026 as compared to 8.7% in the second quarter of 2025, with the decrease driven by lower sales volumes, the deleveraging effect of fixed costs, as well as a 21% increase in the index driving the main raw materials purchase price and freight inflation driven by rising oil costs. Gross margin was 18.3% in the three months ended June 30, 2026 and 27.3% in the three months ended June 30, 2025.

Previous wording

Consolidated net revenues for the three months ended March 31, 2026 decreased by approximately $26.9 million, or 5.9%, compared to the corresponding period in 2025. During the three months ended March 31, 2026 compared to 2025, we saw notable increases in net revenues at BOA ($3.2 million increase), The Honey Pot Co. ($9.0 million increase), and Arnold ($6.2 million increase). These increases in net revenue were offset by decreases in net revenue at 5.11 ($5.4 million decrease) and Altor ($11.6 million decrease). Lugano recognized $26.8 million in revenue in the quarter ended March 31, 2025 which was nonrecurring due to the Lugano bankruptcy in November 2025. Refer to "Results of Operations - Operating Segments - Year-to-Date" for a more detailed analysis of net revenues by operating segment.

Current wording

Consolidated net revenues for the six months ended June 30, 2026 decreased by approximately $81.6 million, or 8.7%, compared to the corresponding period in 2025. During the six months ended June 30, 2026 compared to 2025, we saw notable increases in net revenues at BOA ($13.9 million increase), The Honey Pot Co. ($14.6 million increase), and Arnold ($11.0 million increase). These increases in net revenue were offset by decreases in net revenue at 5.11 ($10.3 million decrease) and Altor ($29.3 million decrease). Lugano recognized $53.6 million in revenue in the six months ended June 30, 2025 which was nonrecurring due to the Lugano bankruptcy in November 2025. Rimports revenue decreased $33.5 million due to the sale of the Sterno product division on May 1, 2026. Refer to "Results of Operations - Operating Segments - Year-to-Date" for a more detailed analysis of net revenues by operating segment.

Previous wording

On a consolidated basis, gross profit decreased approximately $6.7 million during the three months ended March 31, 2026 compared to the corresponding period in 2025. We saw notable increases in gross profit at BOA ($2.9 million increase), The Honey Pot Co. ($6.8 million increase) and Arnold($3.6 million increase) during the quarter. We saw decreases in gross profit at 5.11 ($2.2 million decrease) and Altor ($5.9 million decrease)that correlates with the decrease in net revenue in the first three months of 2026. Lugano recognized $13.2 million in gross profit during the three months ended March 31, 2025 that was nonrecurring due to the Lugano bankruptcy.

Current wording

On a consolidated basis, gross profit decreased approximately $15.3 million during the six months ended June 30, 2026 compared to the corresponding period in 2025. We saw notable increases in gross profit at BOA ($11.3 million increase), The Honey Pot Co. ($12.1 million increase) and Arnold($5.7 million increase) during the six month period. We saw decreases in gross profit at Altor ($16.6 million decrease) and Rimports ($5.1 million due to the sale of Sterno in May 2026) which correspond to the decrease in net revenue in the first six months of 2026. Lugano recognized $26.6 million in gross profit during the six months ended June 30, 2025 that was nonrecurring due to the Lugano bankruptcy.

Previous wording

Gross profit as a percentage of net revenues was 44.4% in the three months ended March 31, 2026 and 43.2% the three months ended March 31, 2025. Our branded consumer businesses had gross profit as a percentage of net revenues of 57.3% in the three months ended March 31, 2026 as compared to 54.9% in the three months ended March 31, 2025, with increases at each of our branded consumer business quarter over quarter. Our industrial businesses had gross profit as a percentage of net revenues of 24.8% in the three months ended March 31, 2026 as compared to 24.7% in the three months ended March 31, 2025. The decrease in gross profit as a percentage of net revenues at our indus trial businesses was attributable to higher fixed overhead costs absorbed on a lower revenue base at Altor, offset by improved gross margins at Arnold and Sterno during the quarter.

Current wording

Gross margin was 45.8% in the six months ended June 30, 2026 and 43.4% the six months ended June 30, 2025. Our branded consumer businesses had gross margin of 58.3% in the six months ended June 30, 2026 as compared to 55.0% in the six months ended June 30, 2025, with increases at each of our branded consumer business during the six months ended June 30, 2026. Gross margin at several of our businesses benefited from refunds of duties previously paid under IEEPA tariffs, which were recognized as a credit to cost of goods sold upon receipt of cash, consistent with the accounting for gain contingencies. Our industrial businesses had gross margin of 25.3% in the six months ended June 30, 2026 as compared to 26.1% in the six months ended June 30, 2025. The decrease in gross margin at our indus trial businesses was attributable to higher fixed overhead costs absorbed on a lower revenue base at Altor, offset by improved gross margins at Arnold and Rimports during the six months ended June 30, 2026.

Previous wording

Consolidated selling, general and administrative expense decreased approximately $18.4 million during the three months ended March 31, 2026, compared to the corresponding period in 2025, driven primarily by the impact of Lugano's bankruptcy. Lugano had selling, general and administrative expense of $26.6 million in the quarter ended March 31, 2025. This decrease was offset by an increase in corporate expenses of $8.4 million.

Current wording

Consolidated selling, general and administrative expense decreased approximately $46.1 million during the six months ended June 30, 2026, compared to the corresponding period in 2025, driven primarily by the impact of Lugano's bankruptcy. Lugano had selling, general and administrative expense of $55.2 million in the six months ended June 30, 2025 that was nonrecurring due to the November 2025 bankruptcy of Lugano. This decrease was offset by an increase in corporate expenses of $11.5 million in 2026 versus the same period in 2025 due to costs associated with the Lugano investigation, litigation, governmental-investigation, governance and internal-control remediation.

Previous wording

At the corporate level, general and administrative expense was $13.0 million in the three months ended March 31, 2026 and $4.6 million in the three months ended March 31, 2025. The increase was primarily attributable to one-time costs associated with our Lugano subsidiary and the ongoing lawsuits and corporate governance changes that we are making. Because the Lugano investigation commenced in April 2025, the prior-year quarter included no related costs. We continue to incur significant investigation-related and other associated costs, which may pressure corporate expenses in subsequent periods.

Current wording

At the corporate level, general and administrative expense was $29.3 million in the six months ended June 30, 2026 and $17.8 million in the six months ended June 30, 2025. The increase was primarily attributable to costs associated with Lugano and the ongoing lawsuits and corporate governance changes that we are making. Because the Lugano investigation commenced in April 2025, the prior-year expense included lower related costs. We continue to incur significant investigation-related and other associated costs, which may pressure corporate expenses in subsequent periods.

Previous wording

In connection with the Company's annual goodwill impairment test as of March 31, 2026, the Company recorded a goodwill impairment charge at the PrimaLoft reporting unit of$20.5 million. Refer to "Note E - Goodwill and Other Intangible Assets"in the "Notes to the Condensed Consolidated Financial Statements" for additional information.

Current wording

In connection with the Company's annual goodwill impairment test in 2026, the Company recorded a goodwill impairment charge at the PrimaLoft reporting unit of$20.5 million. Refer to "Note E - Goodwill and Other Intangible Assets"in the "Notes to the Condensed Consolidated Financial Statements" for additional information. In the prior year period, the Company recorded $31.5 million in impairment expense related to long-lived assets at Lugano.

Previous wording

We recorded interest expense totaling $27.5 million for the three months ended March 31, 2026 compared to $35.9 million for the comparable period in 2025, a decrease of $8.4 million. Interest expense in the quarter ended March 31, 2025 includes $8.9 million related to financing arrangements at Lugano, which was deconsolidated in November 2025. Excluding the impact of the Lugano financing arrangement in the prior-year period, interest expense increased $0.5 million, primarily due to higher interest expense on the Company’s Senior Notes resulting from the increased principal amount of the Senior Notes following the paid-in-kind payments made in 2025 in connection with the indenture forbearance agreement described in the 2025 Form 10-K.

Current wording

We recorded interest expense totaling $51.4 million for the six months ended June 30, 2026 compared to $69.9 million for the comparable period in 2025, a decrease of $18.6 million. Interest expense in the six months ended June 30, 2025 includes $15.8 million related to financing arrangements at Lugano, which was deconsolidated in November 2025. Excluding the impact of the Lugano financing arrangement in the prior-year period, interest expense decreased $2.8 million, primarily due to pay down of the Company's 2022 Credit Facility during 2026, offset by higher interest expense on the Company’s Senior Notes resulting from the increased principal amount of the Senior Notes following the paid-in-kind payments made in 2025 in connection with the indenture forbearance agreement described in the 2025 Form 10-K.

Previous wording

For the three months ended March 31, 2026, other income was $7.7 million, an increase of $21.4 million as compared to $13.7 million in other expense in the three months ended March 31, 2025. Other income (expense) typically reflects the movement in foreign currency at our subsidiary businesses with international operations, gains or (losses) realized on the sale of property, plant and equipment, and expenses incurred or income earned that are not considered a part of our operations. In the current year, other income includes the proceeds from the sale-leaseback transaction completed by Altor in the first quarter, offset by a finance charge at the corporate entity related to Lugano. The other expense in the three months ended March 31, 2025 primarily represents expense recognized at Lugano related to losses resulting fromthe accounting for the transactions associated with the off-balance sheet arrangements ($13.8 million in expense in the three months ended March 31, 2025).

Current wording

For the six months ended June 30, 2026, other expense, net was $2.8 million, compared to $12.0 million in other expense in the six months ended June 30, 2025. Other income (expense) generally reflects foreign currency movements at our subsidiary businesses with international operations, gains or (losses) realized on the sale of property, plant and equipment, and expenses incurred a finance charge at the corporate entity related to Lugano. The other expense in the three months ended June 30, 2025 primarily represents expense recognized at Lugano related to losses resulting fromthe accounting for the transactions associated with the off-balance sheet arrangements ($11.7 million in expense in the six months ended June 30, 2025). The $10.2 million Altor sale-leaseback gain is presented separately in other operating (income) expense and is not included in this caption.

Previous wording

We had an income tax provision of $7.1 million during the three months ended March 31, 2026 compared to an income tax provision of $2.5 million during the same period in 2025, an increase of $4.5 million due to the reduction in the loss from continuing operation before income taxes. Our effective tax rate in the three months ended March 31, 2026 was 29.7%, compared to an effective income tax rate of 5.4% during the same period in 2025. Our tax rate is affected by recurring items, such as tax rates in foreign jurisdictions and the relative amounts of income we earn in those jurisdictions. It is also affected by discrete items that may occur in any given year but are not consistent from year to year. In the current year, the effe ctive tax rate was impacted by the goodwill impairment at PrimaLoft, the effect of foreign taxes and changes in valuation allowances.

Current wording

We had an income tax provision of $52.4 million during the six months ended June 30, 2026 compared to an income tax provision of $19.9 million during the same period in 2025, an increase of $32.5 million due to the reduction in the loss from continuing operation before income taxes and driven by the tax effect at the Trust of the sale of the Sterno product division. Our effective tax rate in the six months ended June 30, 2026 was 50.7%, compared to an effective income tax rate of 18.0% during the same period in 2025. Our tax rate is affected by recurring items, such as tax rates in foreign jurisdictions and the relative amounts of income we earn in those jurisdictions. It is also affected by discrete items that may occur in any given year but are not consistent from year to year. In the current year, the effe ctive tax rate was impacted by the sale of the Sterno product division, the goodwill impairment at PrimaLoft, the effect of state taxes and changes in valuation allowances. In connection with the sale of Sterno, we recorded a liability for unrecognized tax benefits of $21.3 million in the six months ended June 30, 2026, and approximately $5.5 million ininterest associated with certain previously recognized uncertain tax positions that had not been accrued in prior reporting periods, substantially all of which relates to prior years.

Previous wording

Net sales for the three months ended March 31, 2026 were $52.1 million as compared to net sales of $48.9 million for the three months ended March 31, 2025, an increase of $3.2 million, or 6.6%. BOA adult premium performance sales increased across key industries including Cycling, Workwear, Outdoor, and Snow Sports, offset by reduced kids-based business in China. This continued momentum was primarily a result of market share gains in many of BOA's key industries.

Current wording

Net sales for the six months ended June 30, 2026 were $111.2 million as compared to net sales of $97.2 million for the six months ended June 30, 2025, an increase of $13.9 million, or 14.3%. BOA adult premium performance sales increased across key industries including Athletic, Workwear, Cycling, Snowsports, Outdoor, Helmets, and Performance Bracing, partially offset by reduced kids-based business in China. This continued momentum was primarily a result of market share gains in many of BOA's key industries.

Previous wording

Segment operating income for thethree months ended March 31, 2026 was$16.1 million, an increase of$2.5 million when compared to segment operating income of$13.7 million for the same period in 2025. The increase in operating income was driven by an increase in net sales and improved gross profit margins, partially offset by an increase in selling, general, and administrative costs. Segment operating margin was 31.0% in the three months ended March 31, 2026 and 27.9% in the three months ended March 31, 2025.

Current wording

Segment operating income for thesix months ended June 30, 2026 was$36.2 million, as compared to segment operating income of$27.7 million for the same period in 2025, an increase of$8.5 million or 30.6%. The increase in operating income was driven by higher net sales and improved gross profit margins, partially offset by an increase in selling, general, and administrative expense related to BOA’s bonus plan. Segment operating margin was 32.5% in the six months ended June 30, 2026 and 28.5% in the six months ended June 30, 2025.

Previous wording

Segment operating loss for the three months ended March 31, 2026 was $17.6 million, a decrease of $21.8 million when compared to segment operating income of $4.2 million for the same period in 2025. PrimaLoft recorded a goodwill impairment charge of $20.5 million in the first quarter of 2026, which was the primary driver of the decrease. The remainder of the decrease was attributable to lower sales volume, partially offset by higher gross margins in the first quarter of 2026 based on sales mix. Segment operating margin was (80.3)% in the three months ended March 31, 2026 as compared to 17.6% in the three months ended March 31, 2025.

Current wording

Segment operating loss for the six months ended June 30, 2026 was $9.9 million, a decrease of $18.9 million when compared to segment operating income of $9.0 million for the same period in 2025. PrimaLoft recorded a goodwill impairment charge of $20.5 million in the first quarter of 2026, which was the primary driver of the decrease. The decrease was partially offset by higher sales volume during the period. Segment operating margin was (19.1)% in the six months ended June 30, 2026 as compared to 18.7% in the six months ended June 30, 2025.

Previous wording

Net sales for the three months ended March 31, 2026 were $45.2 million, an increase of $9.0 million or 24.8% from net sales of $36.2 million for the three months ended March 31, 2025. The increase in net sales is primarily due to strong volume growth across retail channels, the benefits of price pack architecture optimization implemented in late 2025, and modestly lower trade investment versus the prior year.

Current wording

Net sales for the six months ended June 30, 2026 were $83.5 million, an increase of $14.6 million or 21.1% from net sales of $69.0 million for the six months ended June 30, 2025. The increase in net sales is primarily due to strong volume growth across retail channels, the benefits of price pack architecture optimization implemented in late 2025, and modestly lower trade investment versus the prior year.

Previous wording

Segment operating income for the three months ended March 31, 2026 was$9.6 million, an increase of$4.7 million when compared to segment operating loss of$4.8 million for the same period in 2025. The increase was primarily driven by higher net sales and improved operating leverage, partially offset by increased investments in marketing and human capital. Segment operating margin in the three months ended March 31, 2026 was 21.2% as compared to 13.4% in the three months ended March 31, 2025.

Current wording

Segment operating income for the six months ended June 30, 2026 was$15.9 million, an increase of$7.4 million when compared to segment operating income of$8.5 million for the same period in 2025. The increase was primarily driven by higher net sales and improved operating leverage, partially offset by increased investments in marketing and human capital. Selling, general and administrative expense as a percentage of net sales was 31.3% in the first half of 2026 and 31.0% in the first half of 2025. Segment operating margin in the six months ended June 30, 2026 was 19.1% as compared to 12.4% in the six months ended June 30, 2025.

Previous wording

Net sales for the three months ended March 31, 2026 were $64.6 million, a decrease of $11.6 million, or (15.2)%, compared to net sales of $76.3 million in the three months ended March 31, 2025. The decrease in net sales during the period was primarily attributable to reduced consumer demand in the industrial white goods market, the introduction of alternative shipping materials in the GLP-1 market, and a life science customer's transition from a direct supply model to third-party distribution. Net sales in the perishables market remained consistent with the prior year period.

Current wording

Net sales for the six months ended June 30, 2026 were $130.3 million, a decrease of $29.3 million, or (18.3)%, compared to net sales of $159.6 million in the six months ended June 30, 2025. The decrease in net sales during the period was primarily attributable to reduced consumer demand in the industrial white goods market, the introduction of alternative shipping materials in the GLP-1 market, and a life science customer's transition from a direct supply model to third-party distribution. Net sales in the perishables market increased in the current year, reflecting a recovery from the prior-year decline in the market.

Previous wording

Net sales for the three months ended March 31, 2026 were approximately$40.2 million, an increase of$6.2 million compared to net sales of$34.0 million in the same period in 2025. The increase in net sales was primarily attributable to growing demand for non-China sourced permanent magnets. The uncertain geopolitical climate and heightened licensing requirements to export certain rare earth and strategic minerals out of China is causing significant supply chain disruptions. As a result, Arnold is seeing increased demand from customers seeking more predictable and sustainable, non-China sourced magnet materials. Arnold also benefitted during the current quarter from a softer year over year comparison, with the first quarter of 2025 down 18% from the first quarter of 2024.

Current wording

Net sales for the six months ended June 30, 2026 were approximately$83.4 million, an increase of$11.0 million compared to net sales of$72.4 million in the same period in 2025. The increase in net sales was primarily attributable to growing demand for non-China sourced permanent magnets. The uncertain geopolitical climate and heightened licensing requirements to export certain rare earth and strategic minerals out of China are causing significant supply chain disruptions. As a result, Arnold is seeing increased demand from customers seeking more predictable and sustainable, non-China sourced magnet materials. Arnold also benefitted during the six-month period from a softer year-over-year comparison, as the first half of 2025 had lower demand andde lays in production startup at new facilities.

Previous wording

Segment operating income for thethree months ended March 31, 2026 was approximately $2.3 million, an increase of $3.2 million when compared to the same period in 2025. The improvement in segment operating results was driven primarily by strong sales growth and resulting operating leverage, combined with non-recurring costs incurred in the first quarter of 2025. Segment operating margin was 5.8% in the first three months of 2026 as compared to(2.7)% in the first three monthsof 2025.

Current wording

Segment operating income for thesix months ended June 30, 2026 was approximately $5.9 million, an increase of $6.6 million when compared to the same period in 2025. The improvement in segment operating results was driven primarily by strong sales growth and resulting operating leverage, combined with non-recurring costs incurred in the first half of 2025. Segment operating margin was 7.1% in the firstsix months of 2026 as compared to(1.0)% in the firstsix monthsof 2025.

Previous wording

As of March 31, 2026, we had $1,029.4 million of indebtedness associated with our 5.250% Senior Notes due 2029, $308.8 million of indebtedness associated with our 5.000% Senior Notes due 2032, $534.0 million outstanding under the term loans under our 2022 Credit Facility, and no revolving borrowings outstanding under the 2022 Credit Facility. At March 31, 2026, net availability under the 2022 Credit Facility was $99.1 million after giving effect to approximately $0.9 million of outstanding letters of credit. Long-term debt liquidity requirements consist of payment in full of the Senior Notes upon their respective maturity dates, principal and interest payments under the term loans under the 2022 Credit Facility, and repayment of any revolving borrowings under the 2022 Credit Facility upon maturity. Amounts outstanding under the 2022 Credit Facility mature on July 12, 2027. In addition, on December 19, 2025, the LLC entered into a Fifth Amendment to the 2022 Credit Facility (the “Fifth Amendment”) and a related transaction letter (the “Transaction Letter”) and, pursuant to the Transaction Letter, if (i) the Consolidated Total Leverage Ratio is not less than 4.50:1.00 and (ii) the Consolidated Senior Secured Leverage Ratio is not less than 1:00 to 1:00, as of the last day of the fiscal quarters ending June 30, 2026, September 30, 2026, December 31, 2026 and March 31, 2027, respectively, the Company is required to pay to the Administrative Agent, for the ratable benefit of the Lenders, the milestone fees in the amount of $5,000,000, $6,500,000, $8,000,000 and $9,500,000, respectively, subject to certain conditions. At March 31, 2026, approximately 29% of our outstanding debt was subject to interest rate changes.

Current wording

As of June 30, 2026, we had $1,029.4 million of indebtedness associated with our 5.250% Senior Notes due 2029, $308.8 million of indebtedness associated with our 5.000% Senior Notes due 2032, $252.3 million outstanding under the term loans under our 2022 Credit Facility, and no revolving borrowings outstanding under the 2022 Credit Facility. At June 30, 2026, net availability under the 2022 Credit Facility was $97.2 million after giving effect to approximately $0.8 million of outstanding letters of credit. Long-term debt liquidity requirements consist of payment in full of the Senior Notes upon their respective maturity dates, principal and interest payments under the term loans under the 2022 Credit Facility, and repayment of any revolving borrowings under the 2022 Credit Facility upon maturity. Amounts outstanding under the 2022 Credit Facility mature on July 12, 2027. In addition, on December 19, 2025, the LLC entered into a Fifth Amendment to the 2022 Credit Facility (the “Fifth Amendment”) and a related transaction letter (the “Transaction Letter”) and, pursuant to the Transaction Letter, if (i) the Consolidated Total Leverage Ratio is not less than 4.50:1.00 and (ii) the Consolidated Senior Secured Leverage Ratio is not less than 1:00 to 1:00, as of the last day of the fiscal quarters ending June 30, 2026, September 30, 2026, December 31, 2026 and March 31, 2027, respectively, the Company is required to pay to the Administrative Agent, for the ratable benefit of the Lenders, the milestone fees in the amount of $5,000,000, $6,500,000, $8,000,000 and $9,500,000, respectively, subject to certain conditions. No amount is due at June 30, 2026 related to the Transaction Letter as the Consolidated Total Leverage Ratio and the Consolidated Senior Secured Leverage Ratio were less than the required ratios. At June 30, 2026, approximately 16% of our outstanding debt was subject to interest rate changes.

Previous wording

At March 31, 2026, we had approximately $65.2 million of cash and cash equivalents on hand, a decrease of $2.8 million as compared to the year ended December 31, 2025. The majority of our cash is held in non-interest bearing checking accounts or invested in short-term money market accounts in accordance with the Company’s investment policy, which identifies allowable investments and specifies credit quality standards.

Current wording

At June 30, 2026, we had approximately $87.4 million of cash and cash equivalents on hand, an increase of $19.4 million as compared to the year ended December 31, 2025. The majority of our cash is held in non-interest bearing checking accounts or invested in short-term money market accounts in accordance with the Company’s investment policy, which identifies allowable investments and specifies credit quality standards.

Previous wording

Below is a summary of the change in cash and cash equivalents for the three months ended March 31, 2026 and 2025 is as follows :

Current wording

Below is a summary of the change in cash and cash equivalents for the six months ended June 30, 2026 and 2025 is as follows :

Previous wording

For the three months ended March 31, 2026, net cash provided by operating activities totaled approximately $23.9 million, which represents a $53.3 million decrease in cash use compared to cash used in operating activities of $29.3 million during the three-month period ended March 31, 2025. This change reflects improvements in operating results and other operating cash flow drivers, including working capital activity. Cash provided by working capital for the three months ended March 31, 2026 was $7.7 million, as compared to cash used for working capital of $12.6 million for the three months ended March 31, 2025. We typically use more cash for working capital in the first half of the year as we build inventories following the fourth quarter of the prior year. During the prior year period, we accelerated certain inventory receipts ahead of anticipated tariff implementations, which increased inventory levels and contributed to higher working capital cash outflows. Exclusive of inventory, working capital usage at the LLC and the Company’s other operating segments was generally consistent with the prior year. The prior period working capital usage also reflects the operating activities of Lugano, which is no longer an operating segment of the Company after filing for bankruptcy in November 2025.

Current wording

For the six months ended June 30, 2026, net cash provided by operating activities totaled approximately $53.6 million, which represents a $118.1 million decrease in cash use compared to cash used in operating activities of $64.5 million during the six-month period ended June 30, 2025. This change reflects improvements in operating results and other operating cash flow drivers, including working capital activity. Cash provided by working capital for the six months ended June 30, 2026 was $40.9 million, as compared to cash used for working capital of $50.8 million for the six months ended June 30, 2025. We typically use more cash for working capital in the first half of the year as we build inventories following the fourth quarter of the prior year. The prior year period included accelerated certain inventory receipts ahead of anticipated tariff implementations, which increased inventory levels and contributed to higher working capital cash outflows, and Lugano operating activity (cash from operating activities of $13.1 million), while the current-year period was affected by the May 2026 sale ofthe Sterno food service product division.

Previous wording

Cash flows provided by investing activities for the three months ended March 31, 2026 totaled $6.2 million, compared to cash used in investing activities of $12.9 million in the same period of 2025. In the current year, cash provided by investing activities reflects cash proceeds from a sale leaseback transaction that occurred in the first quarter at our Altor business. The remainder of investing activities in the current year and investing activities in the prior year is primarily capital expenditures. Capital expenditures decreased $8.0 million during the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, with $5.1 million in capital expenditures in 2026 and $13.1 million in capital expenditures in 2025. Capital expenditures in the prior year included expenditures at Lugano, which is no longer an operating segment of the Company after filing for bankruptcy in November 2025, and higher than usual capital expenditures at Arnold as they relocated two of their product divisions to a new facility in the United States. We expect capital expenditures for the full year of 2026 to be approximately $30 million to $40 million.

Current wording

Cash flows provided by investing activities for the six months ended June 30, 2026 totaled $289.1 million, compared to cash used in investing activities of $22.2 million in the same period of 2025. In the current year, cash provided by investing activities reflects cash proceeds from a sale leaseback transaction that occurred in the first quarter at our Altor business and the proceeds from the sale of the Sterno product division in the second quarter. The remainder of investing activities in the current year and investing activities in the prior year is primarily capital expenditures. Capital expenditures decreased $12.6 million during the six months ended June 30, 2026 as compared to the six months ended June 30, 2025, with $11.3 million in capital expenditures in 2026 and $24.0 million in capital expenditures in 2025. Capital expenditures in the prior year included expenditures at Lugano, which is no longer an operating segment of the Company after filing for bankruptcy in November 2025, and higher than usual capital expenditures at Arnold as they relocated two of their product divisions to a new facility in the United States. We expect capital expenditures for the full year of 2026 to be approximately $30 million to $40 million.

Previous wording

Cash flows used by financing activities totaled approximately $32.8 million during the three months ended March 31, 2026 compared to cash flows provided by financing activities of $128.2 million during the three months ended March 31, 2025. Financing activities in the current year reflected repayments of term loans under the 2022 Credit Facility of $18.5 million, payment of the Trust preferred share distribution of $9.7 million and transactions with noncontrolling shareholders at the Company's subsidiaries. In the prior year, we added an additional $200 million in outstanding term loan, a portion of which was used to repay amounts outstanding under our revolving credit facility. Financing activities in the first three months of 2025 also reflects $58.1 million in proceeds from the issuance of Trust preferred shares, the payment of the Company's preferred share distribution of $8.4 million and the payment of the Company's common share distribution of $18.8 million. The Company suspended common share distributions in May 2025, therefore no common distribution was made subsequent to May 2025.

Current wording

Cash used by financing activities was $322.5 million during the six months ended June 30, 2026 compared to cash flows provided by financing activities of $98.4 million during the six months ended June 30, 2025. Financing activities in the current year included $300.3 million of term-loan repayments, including the use of proceeds from a sale leaseback transaction in the first quarter of 2026 and the proceeds from the sale of the Sterno product division in the second quarter, payment of the Trust preferred share distribution of $19.4 million and transactions with noncontrolling shareholders at the Company's subsidiaries. Prior year financing activities included $200 million in term-loan borrowings, a portion of which was used to repay amounts outstanding under our revolving credit facility. Financing activities in the first six months of 2025 also reflects $58.9 million in proceeds from the issuance of Trust preferred shares, the payment of the Company's preferred share distribution of $18.1 million and the payment of the Company's common share distribution of $37.6 million. The Company suspended common share distributions in May 2025, therefore no common distribution was made subsequent to May 2025.

Previous wording

Our Lugano business entered into various financing arrangements with third parties that resulted in debt being recorded. In the three months ended March 31, 2025, the net cash flows provided by these financing arrangements totaled $15.6 million.

Current wording

Our Lugano business entered into various financing arrangements with third parties that were accounted for as debt in the consolidated financial statements. In the six months ended June 30, 2025, the net cash flows provided by these financing arrangements totaled $18.7 million.

Previous wording

All of our subsidiaries were in compliance with the financial covenants under their intercompany credit arrangements at March 31, 2026 except Velocity and Arnold, each of which received waivers for the applicable covenant violations.

Current wording

All of our subsidiaries were in compliance with the financial covenants under their intercompany credit arrangements at June 30, 2026 except Velocityand Altor, each of which received waivers for the applicable covenant violations.

Previous wording

Net availability under the 2022 Revolving Credit Facility after giving effect to the Fifth Amendment was approximately $99.1 million at March 31, 2026. The outstanding borrowings under the 2022 Revolving Credit Facility include $0.9 million of outstanding letters of credit at March 31, 2026, which are not reflected on our balance sheet.

Current wording

Net availability under the 2022 Revolving Credit Facility after giving effect to the Fifth Amendment was approximately $97.2 million at June 30, 2026. The outstanding borrowings under the 2022 Revolving Credit Facility include $0.8 million of outstanding letters of credit at June 30, 2026, which are not reflected on our balance sheet.

Previous wording

(1) Other interest expense in the three months ended March 31, 2025 includes interest amounts related to Lugano financing arrangements.

Current wording

(1) Other interest expense in the six months ended June 30, 2025 includes interest amounts related to Lugano financing arrangements.