Compass Diversified Holdings CODI Form 10-Q filing Q2 FY2026

Page Number

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

CONDENSED CONSOLIDATED BALANCE SHEETS 7

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 8

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) 9

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY 10

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 12

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 14

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 44

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 79

ITEM 4. CONTROLS AND PROCEDURES 79

PART II. OTHER INFORMATION 81

ITEM 1. LEGAL PROCEEDINGS 81

ITEM 1A. RISK FACTORS 81

ITEM 6. EXHIBITS 82

SIGNATURES 85

NOTE TO READER

In reading this Quarterly Report on Form 10-Q, references to:

• the “Trust” and “Holdings” refer to Compass Diversified Holdings;
• the “LLC” refers to Compass Group Diversified Holdings LLC;
• the "Company" refers to Compass Diversified Holdings and Compass Group Diversified Holdings LLC, collectively;
• “businesses”, “operating segments”, “subsidiaries” and “reporting units” all refer to, collectively, the businesses controlled by the Company;
• the “Manager” refers to Compass Group Management LLC (“CGM”);
• the "Trust Agreement" refers to the Third Amended and Restated Trust Agreement of the Trust dated as of August 3, 2021, as further amended;
• the "2022 Credit Facility" refers to the third amended and restated credit agreement entered into on July 12, 2022, as further amended, among the LLC, the lenders from time to time party thereto, Bank of America, N.A., as Administrative Agent, Swing Line Lender and letter of credit issuer (the "agent");
• the "LLC Agreement" refers to the Sixth Amended and Restated Operating Agreement of the Company dated as of August 3, 2021, as further amended;
• the “Management Services Agreement” or “MSA” refer to the Management Services Agreement with CGM effective May 16, 2006, as amended; and
• "we," "us" and "our" refer to the Trust, the Company and the businesses together;
• the “2025 Form 10-K” refers to the Company’s Form 10-K for the fiscal year ended December 31, 2025 filed with the United States Securities and Exchange Commission (“SEC”) on February 27, 2026.

Explanatory Note

As previously disclosed, in April 2025, the Audit Committee of the Company’s board of directors commenced an internal investigation into the financing, accounting, and inventory practices of Lugano Holding, Inc. (“Lugano”), a subsidiary and operating segment of the Company (the “Lugano Investigation”). The Lugano Investigation identified certain unrecorded financing arrangements and irregularities involving, among other things, sales, cost of sales, inventory, and accounts receivable recorded by Lugano.

The Lugano Investigation and related matters significantly affected the Company during 2025 and continued to affect the Company during the first and second quarters of 2026. In November 2025, Lugano and certain of its subsidiaries filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code and, as a result, Lugano was deconsolidated from the Company’s consolidated financial statements as of the bankruptcy filing date. The Company also incurred significant professional fees and other expenses related to the Lugano Investigation, the preparation of restated and delayed periodic financial statements, related litigation and investigations, financing arrangements and internal control remediation. In addition, the Company suspended its quarterly cash distribution on its common shares in 2025, and its ability to access the capital markets, including through its at-the-market equity programs, was limited in light of these events.

This Form 10-Q should be read in conjunction with the Company’s 2025 Form 10-K for additional information regarding the Lugano Investigation and restatement, the deconsolidation of Lugano, related financing arrangements, internal control remediation efforts and related risks.

PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

See notes to condensed consolidated financial statements.

See notes to condensed consolidated financial statements.

See notes to condensed consolidated financial statements.

(1) Represents the non-cash settlement of subsidiary financing arrangements.

See notes to condensed consolidated financial statements.

COMPASS DIVERSIFIED HOLDINGS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

June 30, 2026

Note A - Presentation and Principles of Consolidation

Compass Diversified Holdings, a Delaware statutory trust (the "Trust") and Compass Group Diversified Holdings LLC, a Delaware limited liability company (the "LLC"), were formed to acquire and manage a group of small and middle-market businesses headquartered in North America. Collectively, Compass Diversified Holdings and Compass Group Diversified Holdings, LLC are referred to as the "Company". In accordance with the Third Amended and Restated Trust Agreement, dated as of August 3, 2021 (as further amended and restated, the "Trust Agreement"), the Trust is sole owner of 100% of the Trust Interests (as defined in the LLC’s Sixth Amended and Restated Operating Agreement, dated as of August 3, 2021 (as further amended and restated, the "LLC Agreement")) of the LLC and, pursuant to the LLC Agreement, the LLC has, outstanding, the identical number of Trust Interests as the number of outstanding common shares of the Trust. The LLC is the operating entity with a board of directors and other corporate governance responsibilities, similar to that of a Delaware corporation. The Trust does not have operations independent of acting as the parent company of the LLC. Compass Group Management LLC, a Delaware limited liability Company ("CGM" or the "Manager"), manages the day to day operations of the LLC and oversees the management and operations of our businesses pursuant to a management services agreement (the "Management Services Agreement" or "MSA").

The LLC is a controlling owner of eight businesses, or operating segments, at June 30, 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 Rimports Holdings, Inc. ("Rimports"). The segments are referred to interchangeably as “businesses”, “operating segments” or “subsidiaries” throughout the financial statements. During the second quarter of 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, Rimports is presented as the Company’s operating segment following the distribution, and the results of Sterno’s food service business through the date of sale and Rimports for all periods presented are included in continuing operations. Refer to Note B - "Dispositions" for further discussion of the sale of Sterno’s food service business and the Rimports distribution. Refer to Note O - "Operating Segment Data" for further discussion of the operating segments. Lugano Holding, Inc. ("Lugano") was an operating segment of the Company until November 16, 2025 when Lugano was deconsolidated. Refer to Note B - "Dispositions" for further discussion of the accounting for Lugano.

Basis of Presentation

The condensed consolidated financial statements for the three and six month periods ended June 30, 2026 and June 30, 2025 are unaudited, and in the opinion of management, contain all adjustments necessary for a fair presentation of the condensed consolidated financial statements. Such adjustments consist solely of normal recurring items. Interim results are not necessarily indicative of results for a full year or any subsequent interim period. The condensed consolidated financial statements and notes are prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP" or "GAAP") and presented as permitted by Form 10-Q and do not contain certain information included in the annual consolidated financial statements and accompanying notes of the Company.

The accompanying consolidated financial statements have been prepared on a going concern basis, which assumes the Company will continue to realize its assets and satisfy its liabilities in the ordinary course of business.

Correction of Prior Period Financial Statements

During the second quarter ended June 30, 2026, the Company identified an immaterial classification misstatement related to the presentation of the gain of $10.2 million recognized in connection with Altor’s January 23, 2026 sale-leaseback transaction, which was previously presented in other income (expense), net in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2026 and corrected to be presented in other operating income within operating expenses in the condensed consolidated statements of operations. The correction reflects management’s determination that the gain is appropriately presented within operating results because the transaction related to Altor’s manufacturing facilities and underlying operating assets. This correction increased previously reported operating income by the amount of the sale-leaseback gain and decreased other income (expense), net by the same amount, with no effect on previously reported income from continuing operations before income taxes, net income, cash flows, or stockholders’ equity.

Consolidation

The condensed consolidated financial statements include the accounts of the Company, as well as the businesses acquired as of their respective acquisition date. All significant intercompany accounts and transactions have been eliminated in consolidation. Businesses or components that meet the criteria for discontinued operations are presented as discontinued operations for all periods presented.

Seasonality

The results of operations of certain of our operating segments are subject to seasonal fluctuations due to the timing of recurring events, holidays, weather patterns, customer purchasing activity and other industry-specific factors. The impact of seasonality on our consolidated results may vary from period to period based on the relative size, mix and timing of acquisitions, dispositions and changes in the operating performance of our businesses. Historically, our consolidated net sales have generally been higher in the third and fourth quarters of the fiscal year; however, the degree of seasonality has varied in recent years as a result of changes in the composition of our businesses.

Recently Adopted Accounting Pronouncements

Income Taxes (Topic 740): Improvements to Income Tax Disclosures

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This guidance will require, among other things, the following for public business entities: (i) enhanced disclosures of specific categories of reconciling items included in the rate reconciliation, as well as additional information for any of these items meeting certain qualitative and quantitative thresholds; (ii) disclosure of the judgment used in categorizing them if not otherwise evident; and (iii) enhanced disclosures for income taxes paid, which includes federal, state, and foreign taxes, as well as for individual jurisdictions over a certain quantitative threshold. The amendments in ASU 2023-09 eliminate the requirement to disclose the nature and estimate of the range of the reasonably possible change in unrecognized tax benefits for the 12 months after the balance sheet date. The guidance is effective for annual periods beginning after December 15, 2024. The Company adopted ASU 2023-09 for the year ended December 31, 2025 and applied the new disclosure requirements prospectively to the 2025 annual period.

Recently Issued Accounting Pronouncements

Disaggregation of Income Statement Expenses

In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income- Expense Disaggregation Disclosures (Subtopic 220-40). This guidance will require the disclosure of disaggregation of certain relevant expenses presented in the consolidated statements of operations, including inventory purchases, employee compensation, selling expense and depreciation expense. The guidance is effective for our annual period ending December 31, 2027 and interim periods thereafter. The Company is currently evaluating the impact this standard will have on the consolidated financial statements.

Note B — Dispositions

Sale of Sterno and Distribution of Rimports

On March 28, 2026, the LLC, in its capacity as representative of the holders of common stock of SternoCandleLamp Holdings, Inc. (“Sterno”), a then-majority-owned subsidiary of the LLC, and, for the limited purposes of the Rimports Distribution described below, entered into a definitive Agreement and Plan of Merger (the “Sterno Agreement”) with WCHG Buyer, Inc. (“Parent”), WCHG Heat Merger Sub, Inc. (“Merger Sub”) and Sterno. Pursuant to the Sterno Agreement, Parent agreed to acquire Sterno through the merger of Merger Sub with and into Sterno, with Sterno surviving the merger as a wholly owned subsidiary of Parent.

Immediately prior to the closing of the merger, on April 30, 2026, Sterno completed the distribution of all of the limited liability company interests of its indirect wholly owned subsidiary Rimports, LLC (“Rimports”), which operates Sterno’s home fragrance business, to Rimports Holdings, Inc., the equity of which was, in turn, distributed pro rata to the Sterno stockholders, including the LLC (the “Rimports Distribution”), with Rimports remaining a majority owned subsidiary of the LLC. On May 1, 2026, the parties completed the merger pursuant to the Sterno Agreement, resulting in the sale of Sterno’s food service business.

The purchase consideration for Sterno’s food service business was based on an enterprise value of $292.5 million and was subject to customary adjustments, including for transaction expenses, change-of-control payments, option termination payments and the net working capital, cash and debt balances of Sterno and its subsidiaries, excluding Rimports and its subsidiaries, at closing. Approximately $2.6 million of the closing proceeds were placed in escrow to satisfy post-closing purchase price true-ups, if any.

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.

The Rimports Distribution represented a transfer of equity interests between entities under common control because the Company controlled Sterno, inclusive of Rimports, before the distribution and continues to control Rimports after the distribution. Accordingly, the Rimports Distribution was accounted for as a transaction between entities under common control at historical carrying amounts, and no gain or loss was recognized in the Company’s condensed consolidated financial statements as a result of the distribution.

As of March 31, 2026, the Company had classified Sterno’s food service business as held for sale. Because the Company retained Rimports following the Rimports Distribution, the assets and liabilities of Rimports were excluded from the held-for-sale disposal group and continued to be presented within the Company’s condensed consolidated balance sheet. Upon completion of the sale on May 1, 2026, the Company deconsolidated Sterno’s food service business and recognized a gain on the sale of approximately $182.3 million within income from continuing operations during the three months ended June 30, 2026.

The sale did not represent a strategic shift that had, or will have, a major effect on the Company’s operations or financial results and therefore did not qualify for discontinued operations presentation. Accordingly, the results of operations and cash flows of Sterno’s food service business through the date of sale, and Rimports for all periods presented, are included within continuing operations in the Company’s condensed consolidated statements of operations and cash flows.

Summarized results of operations of Sterno for the three and six months ended June 30, 2026 through the date of disposition and the three and six months ended June 30, 2025 are as follows (in thousands):

(1) The results of operations for the periods from April 1, 2026 through disposition, January 1, 2026 through disposition, and the three and six months ended June 30, 2025, each exclude $0.3 million and $1.4 million, $2.2 million and $4.5 million, respectively, of intercompany interest expense which is eliminated in consolidation.

Lugano

Deconsolidation

On November 16, 2025, Lugano and certain of its subsidiaries filed a voluntary Chapter 11 petition under the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (the “Lugano Bankruptcy”). The Lugano Bankruptcy resulted in the deconsolidation of Lugano as of the date of the bankruptcy filing. The Company retained its equity ownership of Lugano subsequent to the bankruptcy but has neither control nor significant influence over Lugano due to the bankruptcy filing. The Company elected the fair value option under Accounting Standards Codification ("ASC") 825 - Financial Instruments to account for its retained financial interest. Accordingly, the investment is measured at fair value on a recurring basis, with changes in fair value, if any, recognized in earnings each reporting period. As a result of this accounting election, the carrying value of the investment, and the related impact on the Company’s results of operations, may fluctuate from period to period due to non‑cash mark‑to‑market adjustments. These fair value adjustments do not impact the Company’s cash flows or liquidity.

Separately, prior to the bankruptcy filing, the Company had outstanding intercompany indebtedness owed by Lugano (the "Lugano intercompany loan"), including amounts that were secured by certain Lugano assets. Because intercompany balances are eliminated in consolidation, the fair value of intercompany indebtedness owed by Lugano to the Company was recognized upon deconsolidation in accordance with ASC 810. Any expected recovery (or lack thereof) on the secured claim is reflected through the measurement of the receivable/claim due from affiliate (including any impairment or allowance), rather than through the fair value of any retained equity interest.

The Company recorded a receivable based on management's estimate of recoveries expected from the Lugano bankruptcy proceedings with respect to the Company’s senior secured receivable/claim against Lugano as of the deconsolidation date, measured using the fair value option under ASC 825. The receivable is remeasured at fair value at each reporting date, and changes in fair value are recognized in earnings in the period in which they occur. During the three months ended June 30, 2026, the estimated fair value of the receivable decreased from $97.0 million to $39.0 million following CODI’s entry on June 24, 2026 into a Settlement Agreement and Mutual Release and a Plan Support Agreement with Lugano, the official committee of unsecured creditors and the other parties thereto. Subject to creditor approval, bankruptcy court confirmation and effectiveness of the proposed Plan of Liquidation, CODI would be entitled to receive 34.79% of specified net inventory, tax-refund and insurance proceeds, 45% of net proceeds from specified litigation against a third party and 25% of net proceeds from certain other litigation claims. The Settlement Agreement will become effective and binding only upon satisfaction or waiver of its conditions, including the effective date of the Plan of Liquidation, and there can be no assurance as to confirmation, effectiveness, timing or the amount of recoveries. These revised recovery amounts and timing assumptions resulted in the $58.0 million decrease in fair value. At June 30, 2026, the receivable due from unconsolidated affiliate was estimated to have a value of $39.0 million, with $19.2 million classified as current and $19.8 million classified as noncurrent in the condensed consolidated balance sheet. At December 31, 2025, the receivable due from unconsolidated affiliate was estimated to have a value of $97.0 million, with $71.0 million classified as current and $26.0 million classified as noncurrent in the condensed consolidated balance sheet. The classification between current and noncurrent is based on management’s estimate of the timing of expected cash receipts from the Lugano bankruptcy proceedings. Refer to "Note J - Fair Value Measurements" for additional information.

The following table summarizes Lugano's results of operations that are included in the Company's consolidated results of operations for the period from January 1, 2025 through June 30, 2025:

(1) The results of operations for the three and six months ended June 30, 2025 exclude $16.9 million and $32.8 million, respectively, of intercompany interest expense which is eliminated in consolidation.

Note C — Revenue

The Company recognizes revenue when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these goods or services, and excludes any sales incentives or taxes collected from customers which are subsequently remitted to government authorities.

Disaggregated Revenue - The Company disaggregates revenue by operating segment and by geography for each strategic business unit which are categories that depict how the nature, amount and uncertainty of revenue and cash flows are affected by economic factors. The disaggregation in the tables below reflects where revenue is earned based on the shipping address of our customers unless otherwise noted. This disaggregation also represents how the Company evaluates its financial performance, as well as how the Company communicates its financial performance to the investors and other users of its financial statements. Each strategic business unit represents one of the Company’s reportable segments and offers different products and services. During the second quarter of 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 disaggregation of revenue by reportable segment includes the results of Sterno’s food service business through the May 1, 2026 date of sale and the results of Rimports for all periods presented, including the three and six months ended June 30, 2025 and 2026. The results of operations of Lugano are included in the Company's consolidated results of operations for the period from January 1, 2025 through November 16, 2025 and therefore in the disaggregation of revenue by reportable segment in the table below only for the three and six months ended June 30, 2025.

The following tables provide disaggregation of revenue by reportable segment geography for the three and six months ended June 30, 2026 and 2025 (in thousands):

(1) For BOA, revenue reflects the location of the Brand Partners of the business.

Note D — Property, Plant and Equipment and Inventory

Property, plant and equipment

Property, plant and equipment is comprised of the following at June 30, 2026 and December 31, 2025 (in thousands):

Depreciation expense was $10.4 million and $22.3 million for the three and six months ended June 30, 2026 and $11.1 million and $23.4 million for the three and six months ended June 30, 2025, respectively.

Inventory

Inventory is comprised of the following at June 30, 2026 and December 31, 2025 (in thousands):

Note E — Goodwill and Other Intangible Assets

As a result of acquisitions of various businesses, the Company has significant intangible assets on its balance sheet that include goodwill and an indefinite-lived intangible. The Company’s goodwill and indefinite-lived intangibles are tested and reviewed for impairment annually as of March 31st or more frequently if facts and circumstances warrant by comparing the fair value of each reporting unit to its carrying value. Each of the Company’s businesses represent a reporting unit.

Goodwill

Annual Impairment Testing

The Company uses a qualitative approach to test goodwill and indefinite lived intangible assets for impairment by first assessing qualitative factors to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform quantitative goodwill impairment testing.

2026 Annual Impairment Testing

For the Company’s annual goodwill impairment test as of March 31, 2026, the Company performed a qualitative assessment of its reporting units with goodwill balances to determine whether it was more-likely-than-not that the fair value of each reporting unit was less than its carrying amount. Based on this assessment, the Company concluded that it was more-likely-than-not that the fair value of each reporting unit exceeded its carrying amount, except the PrimaLoft reporting unit. As a result, the Company performed a quantitative goodwill impairment test for the PrimaLoft reporting unit.

The Company estimated the fair value of the PrimaLoft reporting unit using a combination of the income approach (discounted cash flow method) and the market approach (guideline company multiples). Significant assumptions used in the quantitative test included, among others, projected revenue growth, operating margins, the terminal growth rate and the discount rate, each of which reflects management’s best estimates based on historical performance, current market conditions and expectations of future operating performance. The discount rate used in the income approach was 13.4%. The quantitative test indicated that the fair value of the PrimaLoft reporting unit was less than its carrying amount; accordingly, the Company recorded a goodwill impairment charge of $20.5 million during the three months ended March 31, 2026, which is included in operating income/(loss) in the consolidated statements of operations.

2025 Annual Impairment Testing

For the Company's annual impairment testing at March 31, 2025, the Company performed a qualitative assessment of our reporting units with goodwill balances. The results of the qualitative analysis indicated that it was more-likely-than-not that the fair value of each of the reporting units tested except the PrimaLoft reporting unit exceeded their carrying value. Based on the Company's analysis, the Company determined that the PrimaLoft reporting unit required quantitative testing because we could not conclude that the fair value of this reporting unit significantly exceeded the carrying value based on qualitative factors alone. The Company performed a quantitative test of PrimaLoft using an income approach and a market approach to determine the fair value of the PrimaLoft reporting unit. The discount rate used in the income approach was 11.3%. The results of the testing indicated that the fair value of PrimaLoft exceeded the carrying value by 12.1%.

2025 Interim Impairment Testing

Arnold - The Company performed an interim impairment test of goodwill at Arnold as of October 31, 2025. During 2025, Arnold was negatively impacted by both production delays related to facility transitions, and supply chain constraints caused by export controls and disruption in the market for rare earth minerals, a key component in certain of Arnold's products. As a result, the operating results of Arnold were below our forecast and prior year results for the business. While Arnold's backlog continued to grow, the production delays and supply chain disruption caused by the export controls led us to determine that a triggering event had occurred. The Company used an income approach for the impairment test, whereby we estimated the fair value of the reporting unit based on the present value of future cash flows. Cash flow projections are based on management's estimate of revenue growth rates and operating margins and take into consideration industry and market conditions as well as company specific economic factors. The Company used a discount rate of 14.2% in the income approach. The results of the testing indicated that the fair value of Arnold exceeded the carrying value by 77%.

The following is a summary of the net carrying amount of goodwill at June 30, 2026 and December 31, 2025, (in thousands):

(1) Comprised of accumulated goodwill impairment expense of $72.7 million at Velocity, $24.9 million at Arnold and $78.3 million at PrimaLoft.

The following is a reconciliation of the change in the carrying value of goodwill for the six months ended June 30, 2026 by operating segment (in thousands):

(1) The Sterno food service product division was sold on May 1, 2026. The balance at June 30, 2026 represents the goodwill balance of the Rimports product division that remains after the sale of Sterno.

Long lived assets

Other intangible assets are comprised of the following at June 30, 2026 and December 31, 2025 (in thousands):

(1) Represents the indefinite-lived trade name related to the Sterno operating segment that was sold in May 2026.

(2) In-process research and development is considered indefinite-lived until the underlying technology becomes viable, at which point the intangible asset will be amortized over the expected useful life.

Amortization expense related to intangible assets was $22.7 million and $45.5 million for the three and six months ended June 30, 2026 and $23.1 million and $46.5 million for the three and six months ended June 30, 2025, respectively.

Estimated charges to amortization expense of intangible assets for the remainder of 2026 and the next four years, are as follows (in thousands):

Interim long-lived asset impairment testing

Lugano - As a result of the preliminary findings of the Lugano Investigation, the Company determined that a triggering event had occurred in the second quarter of 2025 and tested the long-lived assets of Lugano for impairment. The long-lived assets at Lugano were comprised of a tradename intangible asset, property, plant and equipment and right-of-use lease assets. The long-lived assets were assessed as definite lived assets to be held and used as of the impairment testing in the second quarter. The assessment of the recoverability of the carrying value of the Lugano assets resulted in an impairment loss of $29.5 million related to property, plant and equipment and $1.9 million related to right-of-use assets as of June 30, 2025. The impairment of the property, plant and equipment reflects the amount by which the carrying value of these assets exceed their estimated fair value, with fair value determined primarily through a market comparison method. The right-of-use asset related to a retail salon in Toronto, Canada. At the time of the triggering event, the Toronto retail salon had not yet opened and the Company's assessment determined that given the findings of the Lugano Investigation, it was unlikely that the Toronto salon would open in the near term. The impairment test for right-of-use assets involves comparing the right-of-use asset's carrying value to the undiscounted cash flows expected from its future use. Given the expectation that the Toronto retail salon would not open, no cash flows were expected from its future use and an impairment loss was recognized for the entire balance of the right-of-use asset associated with the Toronto salon lease.

Note F — Warranties

The Company’s BOA and Velocity Outdoor operating segments estimate their exposure to warranty claims based on both current and historical product sales data and warranty costs incurred. The Company assesses the adequacy of its recorded warranty liability quarterly and adjusts the amount as necessary. Warranty liability is included in accrued expenses in the accompanying consolidated balance sheets. A reconciliation of the change in the carrying value of the Company’s warranty liability for the six months ended June 30, 2026 and the year ended December 31, 2025 is as follows ( in thousands):

Note G — Debt

2022 Credit Facility

The LLC is party to a Third Amended and Restated Credit Agreement, dated July 12, 2022, as amended from time to time, which we refer to as the “2022 Credit Facility.” As of June 30, 2026, the 2022 Credit Facility provided for revolving loans, swing line loans and letters of credit in an aggregate amount of up to $100.0 million, and term loans with an aggregate principal amount of $252.3 million outstanding. At June 30, 2026, there were $2.0 million of revolving borrowings and approximately $0.8 million of outstanding letters of credit under the 2022 Credit Facility, resulting in net availability of approximately $97.2 million. Amounts outstanding under the 2022 Credit Facility mature on July 12, 2027.

Borrowings bear interest at either a base rate or Term SOFR, plus an applicable margin based on the Company’s Consolidated Total Leverage Ratio, which applicable margin ranges from 0.50% to 2.25% for borrowings bearing interest based on the base rate and from 1.50% to 3.25% for borrowings bearing interest based on Term SOFR. The 2022 Credit Facility is secured by substantially all assets of the Company, including equity interests in, and loans to, its consolidated subsidiaries, and contains customary affirmative and negative covenants, financial covenants, restrictions on certain restricted payments and management fee payments, enhanced reporting requirements, and requirements to use net cash proceeds from certain dispositions and deleveraging transactions to repay indebtedness. 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”). Under the Transaction Letter, the applicable milestone fee is waived for a specific quarter if either the Consolidated Total Leverage Ratio is not greater than 4.50:1.00 or the Consolidated Senior Secured Leverage Ratio is not greater than 1:00:1:00. The milestone fees for the fiscal quarters ending June 30, 2026, September 30, 2026, December 31, 2026 and March 31, 2027, are $5.0 million, $6.5 million, $8.0 million and $9.5 million, respectively, subject to the terms and conditions of the Transaction Letter. At June 30, 2026, the Consolidated Senior Secured Leverage Ratio was 0.66:1.00. Accordingly, no milestone fee was payable for the quarter ended June 30, 2026.

Senior Notes

The Company has outstanding $1,029.4 million aggregate principal amount of 5.250% Senior Notes due April 15, 2029 (the “2029 Senior Notes”) and $308.8 million aggregate principal amount of 5.000% Senior Notes due January 15, 2032 (the “2032 Senior Notes”), which we refer to collectively as the “Senior Notes.” Interest on the 2029 Senior Notes is payable in cash semi-annually on April 15 and October 15 of each year, and interest on the 2032 Senior Notes is payable in cash semi-annually on January 15 and July 15 of each year. The outstanding principal amounts of the Senior Notes reflect paid-in-kind payments made in 2025 in connection with an indenture forbearance arrangement which was described in detail in the 2025 Form 10-K.

The Senior Notes rank equal in right of payment with all of the Company’s existing and future senior unsecured indebtedness and senior in right of payment to all of the Company’s future subordinated indebtedness, if any. The Senior Notes are effectively subordinated to the Company’s existing and future secured indebtedness, including indebtedness under the 2022 Credit Facility, to the extent of the value of the assets securing such indebtedness. The indentures governing the Senior Notes contain customary restrictive covenants, subject to certain exceptions, including limitations on the incurrence of additional indebtedness, restricted payments, transactions with affiliates, asset sales, mergers and consolidations, subsidiary guarantees, liens, sale-leaseback transactions and certain investments.

Lugano Financing Arrangements

Lugano entered into various financing arrangements with third parties that were not recorded in the financial statements of Lugano as debt. In connection with the Lugano Investigation, the Company determined that the inventory and sales transactions recorded in connection with these financing agreements were invalid because they were inconsistent with the underlying substance of the agreements. These financing arrangements represented debt and the financing arrangements and related interest expense were recorded in the consolidated financial statements. Interest expense was determined based on documentation related to the underlying arrangement or, when no documentation existed related to the financing arrangement, imputed based on various factors associated with the arrangement. Lugano recorded $15.8 million in interest expense in the six months ended June 30, 2025 related to these financing arrangements which is included in interest expense in the consolidated statement of operations.

Covenants

The Company is subject to customary affirmative and restrictive covenants under the 2022 Credit Facility, including financial maintenance covenants. The following table reflects the financial covenant requirements and actual ratios as of June 30, 2026 under the 2022 Credit Facility, as amended by the Fifth Amendment:

The following table provides the Company’s outstanding long-term debt and effective interest rates at June 30, 2026 and December 31, 2025 (in thousands):

The contractual annual maturities of the Company's debt obligations at June 30, 2026 are as follows (in thousands):

The Senior Notes consisted of the following carrying value and estimated fair value (in thousands):

Debt Issuance Costs

Deferred debt issuance costs represent the costs incurred in connection with the Company's financing arrangements. Debt issuance costs associated with the revolving loan commitments under the 2022 Credit Facility are recorded in other non-current assets because the commitments are available under a revolving credit arrangement. Debt issuance costs associated with term loans under the 2022 Credit Facility and the Senior Notes are recorded as a reduction of the related debt balances. Deferred debt issuance costs at June 30, 2026 included approximately $5.0 million of costs incurred in connection with the Fifth Amendment to the 2022 Credit Facility.

The following table summarizes debt issuance costs at June 30, 2026 and December 31, 2025, and the balance sheet classification in each of the periods presented (in thousands):

Note H — Stockholders’ Equity

Trust Common Shares

The Trust is authorized to issue 500,000,000 Trust common shares and the LLC is authorized to issue a corresponding number of Trust common interests. The Company will at all times have the identical number of Trust interests outstanding as Trust shares. Each Trust share represents an undivided beneficial interest in the Trust, and each Trust share is entitled to one vote per share on any matter with respect to which members of the LLC are entitled to vote. At June 30, 2026, the Trust had 76,135,000 common shares issued and 75,236,000 common shares outstanding. The Company did not issue any common shares under its at-the-market equity programs during the three months ended June 30, 2026, and, as a result of the commencement of the Lugano Investigation and related events, the Company determined during the quarter ended June 30, 2025 that it was unable to continue offering and selling common shares under this program. The Company did not declare or pay any distributions on its common shares during the three months ended June 30, 2026, following the suspension of common share distributions in 2025.

Trust Preferred Shares

The Trust is authorized to issue up to 50,000,000 Trust preferred shares and the Company is authorized to issue a corresponding number of Trust preferred interests.

The Trust has outstanding 7.250% Series A Preferred Shares, 7.875% Series B Preferred Shares and 7.875% Series C Preferred Shares, each representing beneficial interests in the Trust (collectively, the “Preferred Shares”). Each series of Preferred Shares has a liquidation preference of $25.00 per share. Distributions on the Series A Preferred Shares are discretionary and non-cumulative. When, and if declared by the Company's board of directors, distribution on the Series A Preferred Shares will be payable quarterly on January 30, April 30, July 30, and October 30 of each year, at a rate per annum of 7.250%. Distributions on the Series B Preferred Shares and Series C

Preferred Shares are cumulative and, when and as declared by the Company’s board of directors, are also payable quarterly in arrears on January 30, April 30, July 30 and October 30 of each year. The Series B Preferred Shares bear distributions at a fixed rate of 7.875% per annum until April 30, 2028, after which the distribution rate will reset quarterly at a floating rate equal to the applicable successor to three-month LIBOR plus a spread of 4.985% per annum. Distributions on the Series C Preferred Shares are payable at a rate per annum of 7.875%.

At June 30, 2026, accumulated and unpaid distributions were approximately $2.5 million on the Series B Preferred Shares and approximately $2.6 million on the Series C Preferred Shares. The Series A Preferred Shares and Series C Preferred Shares are currently redeemable at the Company’s option, in whole or in part, and the Series B Preferred Shares are redeemable at the Company’s option, in whole or in part, on or after April 30, 2028, in each case at a redemption price of $25.00 per share plus any applicable declared or accumulated and unpaid distributions to, but excluding, the redemption date. The Preferred Shares are not convertible into Trust common shares and have no voting rights, except in limited circumstances as provided in the applicable share designations.

Unless full cumulative distributions on the Series B Preferred Shares and Series C Preferred Shares have been declared and paid or set apart for payment for all past distribution periods, the Company may not declare or pay distributions on the Trust common shares. In addition, if the Company’s board of directors does not declare a distribution on the Series A Preferred Shares for a quarterly distribution period, the Company may not declare or pay distributions on the Trust common shares during the remainder of that quarterly distribution period.

At-the-Market Equity Offering Program

In 2024, the Company established at-the-market equity offering program for the Preferred Shares. As a result of the commencement of the Lugano Investigation and related events, the Company determined during the quarter ended June 30, 2025 that it was unable to continue offering and selling its preferred shares under the Amended Preferred Sales Agreement. No preferred shares were sold during the three and six months ended June 30, 2026.

The following table reflects the activity in the preferred share ATM program during the three and six months ended June 30, 2025 (in thousands, except share data):

The Company incurred less than $0.1 million in total costs related to the preferred share ATM program during both the three and six months ended June 30, 2025, respectively.

Allocation Interests

The holder of the Allocation Interests ( the "Holder"), Sostratus LLC, is entitled to receive distributions pursuant to a profit allocation formula upon the occurrence of certain events. The profit allocation is payable upon the sale of a business (a "Sale Event") and, at the election of the Holder, during the 30-day period following the fifth anniversary of the date upon which the Company acquired a controlling interest in a business (a "Holding Event"). The Company records distributions of the profit allocation upon occurrence of a Sale Event or Holding Event as dividends declared on Allocation Interests within stockholders’ equity when approved by the Company’s board of directors.

The deconsolidation of Lugano in November 2025 represented a Sale Event; however the calculation of the profit allocation payment resulted in a negative amount. Therefore no profit allocation payment was due to the Holder. The negative amount will offset future profit allocation payments due to the Holder.

The sale of the Sterno food service product division in the second quarter of 2026 was a Sale Event. Although the sale of Sterno resulted in the calculation of a positive profit allocation distribution, no amount will be paid to the Holder as a result of the sale of Sterno as the amount of profit allocation payment due was not sufficient to exceed the high water mark in the profit allocation formula.

Reconciliation of net income (loss) available to common shares of Holdings

The following table reconciles net income (loss) attributable to Holdings to net income (loss) attributable to the common shares of Holdings (in thousands):

Earnings per share

The Company calculates basic and diluted earnings per share using the two-class method which requires the Company to allocate to participating securities that have rights to earnings that otherwise would have been available only to Trust shareholders as a separate class of securities in calculating earnings per share. The Allocation Interests are considered participating securities that contain participating rights to receive profit allocations upon the occurrence of a Holding Event or Sale Event. The calculation of basic and diluted earnings per share for the three and six months ended June 30, 2026 and 2025 reflects the incremental increase during the period in the profit allocation distribution to Holder related to Holding Events.

Basic and diluted earnings per share for the three and six months ended June 30, 2026 and 2025 attributable to the common shares of Holdings is calculated as follows (in thousands, except per share data):

Distributions

On May 27, 2025, the Company announced that it suspended the quarterly cash distribution historically paid to common shareholders. No common distributions were paid subsequent to April 24, 2025. The following table summarizes information related to our quarterly cash distributions on our Trust common and preferred shares (in thousands, except per share data):

Period Cash Distribution per Share Total Cash Distributions Record Date Payment Date

(1) This distribution was declared on July 1, 2026.

Note I — Noncontrolling Interest

Noncontrolling interest represents the portion of the Company’s majority owned subsidiaries' net income (loss) and equity that is owned by noncontrolling shareholders. The following tables reflect the LLC’s ownership percentage of its majority owned operating segments and related noncontrolling interest balances as of June 30, 2026 and December 31, 2025:

(1) The principal difference between primary and diluted percentages of our operating segments is due to stock option issuances of subsidiary stock to management of the respective businesses.

(2) As of December 31, 2025, the Company owned approximately 98.4% of Sterno on a primary basis, inclusive of its indirect ownership interest in Rimports. In connection with the Rimports Distribution completed immediately prior to the sale of Sterno’s food service business, the Sterno stockholders, including holders of in-the-money Sterno equity awards, received their proportionate interests in Rimports. As a result, as of June 30, 2026, the Company continued to own approximately 93.3% of Rimports on a primary and fully diluted basis and consolidates Rimports in its condensed consolidated financial statements, with the remaining ownership interest reflected as noncontrolling interest. Following the May 1, 2026 sale, the Company no longer owns an equity interest in Sterno’s food service business.

(1) The noncontrolling interest balance at Rimports as of December 31, 2025 reflected the ownership interest in Sterno held by minority shareholders. In connection with the Rimports Distribution completed immediately prior to the May 1, 2026 sale of Sterno’s food service business, Sterno’s shareholders, received their proportionate interests in Rimports. Accordingly, the noncontrolling interest balance at June 30, 2026 primarily reflects the ownership interest in Rimports held by minority shareholders.

Note J — Fair Value Measurement

Recurring Fair Value Measurements

The following tables present, by level within the fair value hierarchy, the Company's financial assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2026 or December 31, 2025 according to the valuation technique utilized to determine their fair values.

The Company had no assets or liabilities Level 3 fair value measurements during the six months ended June 30, 2025. A reconciliation of the change in the carrying value of the Company's Level 3 fair value measurement during the six months ended June 30, 2026 is as follows:

Valuation Techniques

The Company has not changed its valuation techniques in measuring the fair value of any of its other financial assets and liabilities during the period. For details of the Company’s fair value measurement policies under the fair value hierarchy, refer to the 2025 Form 10-K.

Nonrecurring Fair Value Measurements

The following table provides the assets and liabilities carried at fair value measured on a non-recurring basis as of June 30, 2026 and December 31, 2025. Refer to "Note E - Goodwill and Intangible Assets", for a description of the valuation techniques used to determine fair value of the assets measured on a non-recurring basis in the tables below.

(1) Lugano recorded impairment expense in the second quarter of 2025 related to long-lived assets. As a result of the deconsolidation of Lugano on November 16, 2025, the carrying value of the related assets as of December 31, 2025 was $0.

Note K — Income taxes

The Company estimates its annual effective tax rate each fiscal quarter and applies that estimated rate to its interim pre-tax earnings. In this regard, the Company reflects the full year’s estimated tax impact of certain unusual or infrequently occurring items and the effects of changes in tax laws or rates in the interim period in which they occur. The Company's parent, the Trust, is subject to entity-level U.S. federal, state and local corporate income taxes on the Company's earnings that flow through to the Trust.

The computation of the annual estimated effective tax rate for each interim period requires certain assumptions, estimates, and significant judgment, including with respect to the projected operating income for the year, projections of income earned and taxes incurred in various jurisdictions, permanent and temporary differences and the likelihood of recovering deferred tax assets. The accounting estimates used to compute the provision for income taxes may change as new events occur, as additional information is obtained, as our tax structure changes or as the tax laws change. Certain foreign operations are subject to foreign income taxation under existing provisions of the laws of those jurisdictions.

The Company recognizes interest and penalties related to unrecognized tax benefits within income tax expense. The Company accrues interest on all cumulative unrecognized tax benefits, reflecting financial exposure that spans both historical tax years and the current reporting period. During the current quarter, the Company identified that interest associated with certain previously recognized uncertain tax positions had not been accrued in prior reporting periods. The Company recorded approximately $5.5 million of additional accrued interest during the quarter, substantially all of which relates to prior years. Management concluded that the adjustment was not material to any previously issued financial statements or the current interim period and, accordingly, recorded the adjustment as a component of income tax expense during the current quarter.

The reconciliation between the Federal Statutory Rate and the effective income tax rate for the six months ended June 30, 2026 and 2025 is as follows:

Note L — Defined Benefit Plan

In connection with the acquisition of Arnold, the company has a defined benefit plan covering substantially all of Arnold’s employees at its Lupfig, Switzerland location. The benefits are based on years of service and the employees’ highest average compensation during the specific period.

The unfunded liability of $2.8 million is recognized in the consolidated balance sheet as a component of other non-current liabilities at June 30, 2026. Net periodic benefit cost consists of the following for the three and six months ended June 30, 2026 and 2025 (in thousands):

During the six months ended June 30, 2026, per the terms of the pension agreement, Arnold contributed approximately $0.3 million to the plan. For the remainder of 2026, the expected contribution to the plan will be approximately $0.3 million.

The plan assets are pooled with assets of other participating employers and are not separable; therefore, the fair values of the pension plan assets at June 30, 2026 were considered Level 3.

Note M - Commitments and Contingencies

Legal Matters

The Company and its subsidiaries are subject to legal proceedings and claims that arise in the ordinary course of business. The Company accrues a liability for a loss contingency when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. For material loss contingencies that are reasonably possible or for which the amount of loss cannot be reasonably estimated, the Company discloses the nature of the contingency. The Lugano Investigation, the restatement of the Company’s previously issued consolidated financial statements and related matters may result in additional litigation, regulatory investigations and liabilities in future periods.

Securities Class Actions Involving the Company

Following the Company’s announcement of the Lugano Investigation and restatement, several putative securities class actions were filed against the Company and certain of its officers and directors. The previously filed California actions were consolidated and later voluntarily dismissed so that the lead plaintiff could pursue its claims in the United States District Court for the District of Connecticut. The Connecticut action, originally captioned Moreno v. Compass Diversified Holdings LLC, et al., now known as In Re Compass Diversified Holdings Securities Litigation, asserts claims under Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5. The lead plaintiff filed an amended complaint on February 6, 2026, and the defendants filed motions to dismiss on March 23, 2026. All motions are fully briefed. The Company believes it has defenses available and intends to vigorously defend the action. Management has determined that a loss is reasonably possible but cannot reasonably estimate a range of potential loss.

Derivative Actions Involving the Company

Several shareholder derivative actions have been filed, purportedly on behalf of the Company, against certain current and former officers and directors. The derivative actions generally assert claims for breach of fiduciary duty and violations of the federal securities laws based on allegations related to Lugano and the restatement. The California derivative actions have been consolidated and stayed, and the Connecticut derivative actions have been consolidated and stayed, in each case pending further developments in the securities class action. A derivative action was also recently filed in Delaware Chancery Court. All derivative actions are in the early stages. The Company believes defenses are available and intends to vigorously defend these matters. Management has determined that a loss is reasonably possible but cannot reasonably estimate a range of potential loss.

External Investigations and Reviews

As a result of the Company’s withdrawal of reliance on its 2024, 2023 and 2022 financial statements, delayed periodic reporting and the underlying conduct at Lugano, the Company is subject to ongoing investigations by the SEC and the U.S. Department of Justice. The investigative process is inherently uncertain, and the Company cannot predict the outcome of these investigations. The Company is cooperating with the ongoing investigations. Management has determined that a loss is reasonably possible but cannot reasonably estimate a range of potential loss.

State Court Actions Naming Lugano and the Company as Defendants

Certain state court actions have been filed naming Lugano and, in some cases, the Company or related entities. In Kraus v. Lugano Diamonds & Jewelry, Inc., et al., the plaintiff seeks damages, plus interest and penalties. The Trust was named as a defendant and the plaintiff sought leave to amend its complaint; before the court ruled on that request, it stayed the case with respect to all defendants. In Royal T Diamonds Group Ltd. v. Lugano Diamonds & Jewelry Inc., et al., formerly filed by Champion Force Industrial Limited, the plaintiff seeks damages, principally for unpaid goods. The court granted CODI’s motion to quash for lack of personal jurisdiction on March 26, 2026. The Company intends to avail itself of all available defenses in any matter in which it remains a party. Management has determined that a loss is reasonably possible but cannot reasonably estimate a range of possible loss, if any, that may result from these matters.

Lugano Chapter 11 Filing and Related Matters

On November 16, 2025, Lugano and certain of its subsidiaries filed voluntary Chapter 11 petitions under the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. As a result, Lugano was deconsolidated from the Company’s consolidated financial statements. On June 24, 2026, CODI entered into the Settlement Agreement and Plan Support Agreement described in Note B. Subject to creditor approval, bankruptcy court confirmation and effectiveness of the proposed Plan of Liquidation, the Settlement Documents resolve claims that were alleged against CODI and its related parties by or on behalf of Lugano or its bankruptcy estate and provide for releases of CODI and its related parties from claims that could be asserted by or on behalf of Lugano or its bankruptcy estate. The Settlement Agreement is not binding until its conditions are satisfied or waived, including occurrence of the effective date of the Plan of Liquidation, and CODI may receive releases from certain creditors under the Plan of Liquidation. The Company cannot predict whether the Plan of Liquidation will be confirmed or become effective, the timing or amount of recoveries, or whether third parties may assert claims not covered by the releases. Any such matters could result in significant defense costs, settlement payments or judgments and could affect the timing and amount of recoveries in the bankruptcy proceedings.

Tariff Refunds

In February 2026, the U.S. Supreme Court issued a decision holding that tariffs imposed under the International Emergency Economic Powers Act ("IEEPA") were not authorized under the statute. As a result, the legal and regulatory framework surrounding certain IEEPA tariffs continues to evolve, including the process for seeking potential refunds of previously paid tariffs. Our subsidiaries have submitted claims for refunds related to certain eligible tariffs paid, however, the timing and approval of any refunds are uncertain and contingent upon further legal, regulatory, and administrative developments. Because significant uncertainty remains regarding the availability, timing, and amount of any potential recovery, the Company has not recognized a receivable or gain related to potential tariff refunds as of June 30, 2026. The Company will continue to monitor developments and recognize a receivable when amounts are realized or realizable.

Leases

The Company and its subsidiaries lease office and manufacturing facilities, computer equipment and software under various arrangements. Certain of the leases are subject to escalation clauses and renewal periods. The Company and its subsidiaries recognize lease expense, including predetermined fixed escalations, on a straight-line basis over the initial term of the lease including reasonably assured renewal periods from the time that the Company and its subsidiaries control the leased property. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. Certain of our subsidiaries have leases that contain both fixed rent costs and variable rent costs based on achievement of certain operating metrics. The variable lease expense was not a material component of our total lease expense for the three and six months ended June 30, 2026 and 2025. The Company recognized $12.5 million and $24.4 million in the three and six months ended June 30, 2026, respectively and $13.9 million and $27.4 million in the three and six months ended June 30, 2025, respectively, in expense related to operating leases in the condensed consolidated statements of operations. The Company entered into one finance lease in the fourth quarter of 2024. In both the three and six months ended June 30, 2026 and June 30, 2025 the Company recognized $0.2 million and $0.3 million, respectively, in interest expense related to its finance lease.

The maturities of lease liabilities at June 30, 2026 are as follows (in thousands):

The calculated amount of the right-of-use assets and lease liabilities are impacted by the length of the lease term and discount rate used to present value the minimum lease payments. The Company's lease agreements often include one or more options to renew at the Company's discretion. In general, it is not reasonably certain that lease renewals will be exercised at lease commencement and therefore lease renewals are not included in the lease term. As the discount rate is rarely determinable, the Company utilizes the incremental borrowing rate of the subsidiary entering into the lease arrangement, on a collateralized basis, over a similar term as adjusted for any country specific risk.

The weighted average remaining lease terms and discount rates for all of our operating leases were as follows:

Supplemental balance sheet information related to leases was as follows (in thousands):

Supplemental cash flow information related to leases was as follows (in thousands):

Altor Sale Leaseback

On January 23, 2026, Altor completed a sale leaseback transaction for its manufacturing facilities in Bloomsburg, Pennsylvania; New Albany, Indiana; and El Dorado Springs, Missouri (the “Properties”). Under the purchase and sale agreement, Altor sold the land, buildings and certain integrated fixtures to the buyer/lessor for total consideration of $11.75 million and recognized a gain on the transaction of $10.2 million in other operating income (expense) from continuing operations in the six months ended June 30, 2026. Concurrently with the execution of the purchase and sale agreement, Altor entered into a 20 year triple-net master lease to lease back all three Properties.

Accounting for the transaction is governed by ASC 842, Leases. Under ASC 842, a sale leaseback is accounted for as a sale and a lease only if the transfer of the Properties qualifies as a sale in accordance with ASC 606, including that control of the Properties transferred to the buyer/lessor and the leaseback does not include (among other things) a repurchase option or other provisions that would prevent the transfer from being accounted for as a sale. When a sale is achieved, the seller-lessee derecognizes the carrying amount of the Properties, recognizes any resulting gain or loss, and recognizes a right-of-use asset and lease liability for the leaseback measured in accordance with ASC 842. Altor determined that the sale leaseback transaction qualified as a sale under ASC 606 and accordingly recognized a gain and recognized a right-of-use asset and lease liability for the leaseback.

For the leaseback, Altor will recognize lease expense generally on a straight-line basis over the lease term, and the related lease payments will be presented within operating cash flows. Because the lease is a triple-net lease, Altor is generally responsible for certain costs associated with the Properties, such as real estate taxes, insurance and maintenance; amounts paid for these items are generally excluded from the measurement of the lease liability when they represent non-lease components or variable payments, and are recognized in expense as incurred.

Exit Costs

Altor

Subsequent to the acquisition of Lifoam in October 2024, Altor determined that they would shut down four of their facilities that had geographic overlap with Lifoam facilities. During the three months ended March 31, 2025, Altor recorded approximately $0.6 million in exit costs related to the plant closures in selling general and administrative expense. The plant closures were finalized in the fourth quarter of 2025 and no additional expense was recorded in the three months ended June 30, 2026.

Arnold

During 2024, Arnold relocated two of its facilities located in Marengo, Illinois into one combined facility in Woodstock, Illinois. Arnold recorded $0.9 million in costs in selling, general and administrative expense in the three months ended March 31, 2025 related to the relocation of the two facilities. The exit from the Marengo facility was completed during 2025.

Note N — Related Party Transactions

Management Services Agreement

The LLC entered into a MSA with CGM effective May 16, 2006, as amended. CGM is managed by Wayfinder Partners LLC, of which Zachary T. Sawtelle, the Company’s Chief Operating Officer, is the managing member. Elias J. Sabo, the Company’s Chief Executive Officer, is also a member of CGM. The MSA provides for, among other things, CGM to perform services for the LLC in exchange for a management fee. The management fee is required to be paid prior to the payment of any distributions to shareholders.

Pursuant to the MSA, CGM is entitled to enter into off-setting management service agreements with each of the operating segments. The amount of the fee is negotiated between CGM and the operating management of each segment and is based upon the value of the services to be provided. The fees paid directly to CGM by the segments offset on a dollar for dollar basis the amount due CGM by the LLC under the MSA.

Amendments to Management Services Agreement

On February 23, 2026, the LLC and CGM entered into an Eighth Amended and Restated Management Services Agreement (the “Eighth MSA”), which amended and restated the MSA. The Eighth MSA, among other things, (i) established a repayment protocol for previously overpaid management fees, including permitting the Company, subject to interest, to fund all or a portion of otherwise payable quarterly fees while an overpayment balance remains outstanding, (ii) provided for a dollar-for-dollar reduction of fees payable under the MSA for certain services outsourced by the Company to third-party service providers and excludes such services from the scope of services to be provided by CGM, (iii) clarified requirements and restrictions applicable to personnel seconded by CGM to the Company, and (iv) updated certain operational, governance, authority and indemnification provisions.

On July 12, 2026, the LLC and CGM entered into the Ninth Amended and Restated Management Services Agreement (the “Ninth MSA”), which became effective upon execution and amends and restates the Eighth MSA. The fee and incentive-award provisions described in Note P become effective January 1, 2027; the fee provisions of the Eighth MSA remain applicable through December 31, 2026. Refer to Note P - “Subsequent Events.”

Effect of Restatement on Management Fees

As a result of the restatement of the financial statements as of December 31, 2024, 2023 and 2022 and for the years ended December 31, 2024, 2023 and 2022, as well as for the period ended December 31, 2021 and revisions made in the quarter ended March 31, 2025, the management fees paid to CGM were in excess of the amounts that should have been due under the MSA. While the MSA did not, prior to the MSA Amendment, contain an express mechanism that permitted the Company to immediately clawback the overpayment of management fees during the aforementioned periods, 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 calculated the total aggregate amount of excess management fees paid as a result of the restatement of the financial statements as $50.4 million. In 2025, restrictions under the Company’s financing arrangements limited the Company’s ability to pay management fees, resulting in management fee expense being incurred but not fully paid. The Company determined that the amount of management fees that had been overpaid at December 31, 2025 was $33.8 million, which was recorded as an asset (“Due from CGM”) and reduced management fee expense for the year ended December 31, 2025. For the six months ended June 30, 2026, the Company recorded management fee expense of $29.8 million. During the six months ended June 30, 2026, the Company reduced the Due from CGM balance by $14.9 million for management fees applied against the prior overpayment by reducing the management fee due to CGM. As of June 30, 2026, the Due from CGM balance of $6.3 million reflects amounts due from CGM of $19.3 million including interest expense in accordance with the Eighth MSA Amendment, net of management fees accrued of $13.0 million. Subsequent to June 30, 2026, the Company elected to fund $6.4 million of the quarterly management fee that otherwise would have been payable for the second quarter of 2026.

The Company expects to continue to reduce future management fee payments until the overpayment has been fully recouped. Total cash paid for Management fees in the six months ended June 30, 2026 was $15.4 million as compared to total cash paid for Management fees for the six months ended June 30, 2025 of $37.7 million.

LLC Agreement

The LLC agreement gives the Holder the right to distributions pursuant to a profit allocation formula upon the occurrence of a Sale Event or a Holding Event. The Holder is entitled to receive and as such can elect to receive, if due pursuant to the profit allocation formula, an allocation payment upon a Sale Event and upon election of the Holders upon a Holding Event. The Lugano Bankruptcy was a Sale Event and any corresponding loss on such Sale Event will have the effect of reducing future allocation payments. The LLC Agreement also contains a mechanism to adjust future profit allocation payments by over-paid and under-paid profit distributions. The Company intends to cause future allocation payments to be adjusted, as necessary, to reflect the impact of the restatement of the Company’s financial statements.

The sale of the Sterno food service product division in the second quarter of 2026 was a Sale Event. Although the sale of Sterno resulted in the calculation of a positive profit allocation distribution, no amount will paid to the Holder as a result of the sale of Sterno as the amount of profit allocation payment due was not sufficient to exceed the high water mark in the profit allocation formula.

Integration Services

During the quarter months ended March 31, 2025, The Honey Pot Co., paid CGM $0.9 million in integration service fees under an integration services agreement that has since been fully paid. An amendment to the Management Services Agreement entered into in January 2025 eliminated integration service fees for future acquisitions therefore no integration service fees were incurred subsequent to March 31, 2025.

The Company and its businesses have the following significant related party transactions

5.11

Related Party Vendor Purchases - 5.11 purchases inventory from a vendor who is a related party to 5.11 through one of the executive officers of 5.11 via the executive's 40% ownership interest in the vendor. 5.11 purchased approximately $0.2 million and $0.3 million during the three and six months ended June 30, 2026, respectively and $0.2 million and $0.6 million during the three and six months ended June 30, 2025, respectively in inventory from the vendor.

BOA

Related Party Vendor Purchases - A contract manufacturer used by BOA as the primary supplier of molded injection parts is a noncontrolling shareholder of BOA. BOA purchased approximately $12.9 million and $24.0 million from this supplier during the three and six months ended June 30, 2026, respectively and $11.1 million and $23.1 million from this supplier during the three and six months ended June 30, 2025, respectively.

Lugano

Related Party Transaction - In the first quarter of 2025, the former Chief Executive Officer of Lugano represented that he had entered into an agreement with a customer of Lugano to pay, on behalf of the customer, an $8.8 million outstanding account receivable owed to Lugano since July 2024. However, the former Chief Executive Officer of Lugano misrepresented the purpose and explanation for the transaction. It was subsequently determined that neither the account receivable nor the purpose of the payment by the former Chief Executive Officer of Lugano were factually accurate, and that instead the payment was made by the former Chief Executive Officer of Lugano in furtherance of his previously described schemes.

Related Party Vendor Purchases -Lugano purchases inventory from a vendor who is a related party to Lugano through one of the executive officers of Lugano. The related party relationship commenced in the second quarter of 2024 and ended in the fourth quarter of 2025. Lugano had approximately $(1.6) million and $0.3 million in net purchases during the three and six months ended June 30, 2025, respectively. During the three months ended June 30, 2025, Lugano had $12 thousand in purchases from the vendor and $1.6 million in returns to the vendor, resulting in ($1.6) million in net returns during the quarter.

Note O — Operating Segment Data

At June 30, 2026, the Company had eight reportable operating segments. Each operating segment represents a platform acquisition. The Company’s operating segments are strategic business units that offer different products and services. While each is actively managed by the Company, they are managed separately because each business requires different technology and marketing strategies. A description of each of the reportable segments and the types of products from which each segment derives its revenues is as follows:

• 5.11 is a global apparel, footwear, and gear company serving consumers who demand performance, durability, and versatility across work, training, and adventure. 5.11 is a brand known for innovation and authenticity and works directly with end users to create purpose-built apparel, footwear and gear designed to enhance the safety, accuracy, speed and performance of tactical professionals and enthusiasts worldwide. 5.11 operates sales offices and distribution centers globally, and 5.11 products are widely distributed in uniform stores, military exchanges, outdoor retail stores, its own retail stores and on 511tactical.com.
• BOA, creator of 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.
• PrimaLoft is a leading provider of branded, high-performance synthetic insulation and materials used primarily in consumer outerwear, and accessories. The portfolio of PrimaLoft synthetic insulations offers products that can both mimic natural down aesthetics and provide the freedom to design garments ranging from stylish puffers to lightweight performance apparel. PrimaLoft insulations also offer superior economics to the brand partner and enable better sustainability characteristics through the use of recycled, low-carbon inputs. PrimaLoft is headquartered in Latham, New York.
• The Honey Pot Co. is a leading “better-for-you” feminine care brand, powered by plant-derived ingredients and clinically tested formulas. Founded in 2012 by CEO Beatrice Dixon, The Honey Pot Co. is rooted in the belief that all products should be made with healthy and efficacious ingredients that are kind to and safe for skin. The company offers an extensive range of holistic wellness products across the feminine hygiene, menstrual, personal care, and sexual wellness categories. The Honey Pot Co.'s mission is to educate, support, and provide consumers around the world with tools and resources that promote menstrual health and vaginal wellness. Its products can be found in more than 33,000 stores across the U.S. through mass merchants, drug and grocery retail chains, and online. The Honey Pot Co. is headquartered in Atlanta, Georgia.
• Velocity Outdoor is a leading designer, manufacturer, and marketer of archery products, hunting apparel and related accessories. The archery product category consists of products including Ravin crossbows and CenterPoint archery products, and the apparel category offers high-performance, feature rich hunting and casual apparel under the King's Camo brand, utilizing King’s own proprietary camo patterns. Velocity Outdoor offers its products through national retail chains and dealer and distributor networks. Velocity Outdoor is headquartered in Rochester, New York. On April 30, 2024, Velocity Outdoor sold the Crosman airgun product division. The results of operation for Crosman are included in the accompanying financial statements through the date of sale.
• Altor Solutions is a designer and manufacturer of custom molded protective foam solutions and original equipment manufacturer components made from expanded polystyrene and expanded polypropylene. Altor provides products to a variety of end markets, including appliances and electronics, pharmaceuticals, health and wellness, automotive, building and other products. Altor is headquartered in St. Louis, Missouri and operates 19 molding and fabricating facilities across North America.
• Arnold is a global solutions provider and manufacturer of engineered solutions for a wide range of specialty applications and end-markets, including aerospace and defense, general industrial, motorsport/transportation, oil and gas, medical, energy, semiconductor and advertising specialties. Arnold engineers solutions for and produces high performance permanent magnets (PMAG), stators, rotors and full electric motors (Ramco), precision foil products (Precision Thin Metals), and flexible magnets (Flexmag™) that are mission critical in motors, generators, sensors and other systems and components. Based on its long-term relationships, Arnold has built a diverse and blue-chip customer base totaling more than 2,000 customers and leading systems-integrators worldwide with a focus on North America, Europe, and Asia. Arnold has built a preferred rare earth supply chain and has leading rare earth and other permanent magnet production capabilities. Arnold is headquartered in Rochester, New York.
• Rimports manufactures and distributes branded and private label wickless candle products used for home decor and fragrance systems under the ScentSationals and Fusion brands. Rimports offers unique lines of wickless candle products including ceramic wax warmers, scented wax cubes, fragrance oils, essential oils, and diffusers. Rimports also sells flameless candles, lanterns, and outdoor lighting. Rimports was acquired by Sterno in February 2018 and is headquartered in Provo, Utah.

The function of chief operating decision-maker (“CODM”) is performed collectively by the Company's Chief Executive Officer, the Chief Operating Officer of CGM and the partners of CGM. The CODM evaluates financial results by segment, utilizing segment operating income to assess performance and allocate resources. The allocation of resources to operating segments may include, but is not limited to, debt financing through the Company's intercompany credit agreements with its operating segments to fund working capital needs, purchases of capital equipment and add-on acquisitions. The primary resource allocation process occurs predominantly in the annual budget and forecasting process. The CODM then reviews and considers budget-to-actual variances on a monthly basis for segment operating income in order to determine whether to make any adjustments to capital allocations.

The tabular information that follows shows data for each of the operating segments reconciled to amounts reflected in the consolidated financial statements. The operations of each of the operating segments are included in consolidated operating results as of their date of acquisition. During the second quarter of 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. The December 31, 2025 balance sheet disclosures include Sterno’s food service business prior to the sale and distribution of Rimports. The results of Sterno’s food service business through the date of sale and the results of Rimports for all periods presented are included in continuing operations and reflected in the operating segment data, as applicable. Lugano was an operating segment of the Company until November 16, 2025 when Lugano filed for bankruptcy and was deconsolidated. The results of operation of Lugano are included in the Summary of Operating Segments table and the Depreciation and Amortization table for the three and six months ended June 30, 2025. Segment profit is determined based on internal performance measures used by the CODM to assess the performance of each business. The significant expense categories and amounts align with the segment-level information that is regularly provided to the CODM. In comparison to the Consolidated Statement of Operations, selling, general and administrative expense is exclusive of stock-based compensation and acquisition costs, which are categorized to Other. Corporate consists of corporate overhead and management fees to CGM that are not allocated to the Company's reportable segments. There were no significant inter-segment transactions.

Summary of Operating Segments

(1) Other consists of segment allocated management fees, amortization expense of intangible assets, stock-based compensation and other operating (income) expense.

(1) Other consists of segment allocated management fees, amortization expense of intangible assets, and stock-based compensation and impairment expense at Lugano of $31.5 million.

(1) Other consists of segment allocated management fees, amortization expense of intangible assets, stock-based compensation, other operating (income) expense and impairment expense at PrimaLoft of $20.5 million.

(1) Other consists of segment allocated management fees, amortization expense of intangible assets, and stock-based compensation and impairment expense at Lugano of $31.5 million.

(1) Does not include accounts receivable balances per schedule above or goodwill balances - refer to Note E - "Goodwill and Other Intangible Assets".

Note P - Subsequent Events

Sixth Amendment to the 2022 Credit Facility

On August 6, 2026, the LLC entered into a Sixth Amendment to Credit Agreement (the “Sixth Amendment”) with Bank of America, N.A. (the “Administrative Agent”), in its capacity as administrative agent for the lenders, swing line lender, and L/C issuer. The Sixth Amendment, among other things, waived the milestone fees that otherwise would have been payable under the Fifth Amendment Transaction Letter, reduced the aggregate revolving commitments under the Credit Agreement from $100,000,000 to $54,000,000, and extended the maturity date to January 12, 2028.The Sixth Amendment also made several other changes to the Credit Agreement, including reducing the portion of Combined Eligible Availability that may be attributable to any individual subsidiary business from 40% to 25%, removing the Incremental Delayed Draw Term Loan facility, permitting Rimports Holdings, Inc., any other individual subsidiary business approved by the administrative agent, and their respective subsidiaries to enter into supply chain financing arrangements, and permitting the Company and its subsidiaries to pay fees under the Ninth Amended and Restated Management Services Agreement, dated July 12, 2026, between the Company and Compass Group Management LLC. In addition, the Sixth Amendment reduced the aggregate amount available under the incremental facilities from $250,000,000 to $150,000,000. Under the Sixth Amendment, the Company is required to maintain a Consolidated Total Leverage Ratio of no more than 5.75 to 1.00 for the fiscal quarter ending September 30, 2026, (b) 5.25 to 1.00 for the fiscal quarters ending December 31, 2026 and March 31, 2027, (c) 5.00 to 1.00 for fiscal quarters ending June 30, 2027 and September 30, 2027 and (d) 4.50 to 1.00 for each fiscal quarter thereafter. If the Company has not repaid the term loans under the Credit Agreement on or before December 31, 2026, the Company will be required to pay a milestone fee in the amount of $4,000,000.

Ninth Amended and Restated Management Services Agreement

On July 12, 2026, the LLC and CGM entered into the Ninth MSA, which became effective upon execution and amends and restates the Eighth MSA. The Ninth MSA revises the Company’s management fee and incentive compensation arrangements with CGM. The fee and incentive-award provisions described below become effective January 1, 2027 and the fee provisions of the Eighth MSA remain in effect through December 31, 2026.

Beginning in 2027, the annual base management fee will equal 1.25% of the first $3.0 billion of Adjusted Net Assets, 1.125% of Adjusted Net Assets between $3.0 billion and $5.0 billion and 1.0% of Adjusted Net Assets above $5.0 billion, with Adjusted Net Assets as defined in the Ninth MSA. The 2027 base management fee will be capped at $30.0 million. In addition, aggregate fees and awards attributable to 2027 will be subject to a cap equal to 1.75% of 2026 Average Adjusted Net Assets, with reductions applied in the order specified in the Ninth MSA.

The Ninth MSA also replaces the existing incentive management fee structure with an annual Share Alignment Award and an annual Performance-Based Award. The Share Alignment Award will equal 0.125% of the Company’s Average Adjusted Net Assets for the preceding fiscal year, and the Performance-Based Award will have a target opportunity equal to the same amount. For 2027, the Share Alignment Award will be paid in cash, and the Performance-Based Award will be denominated by reference to notional CODI common shares and settled solely in cash following certification of performance by the Compensation Committee.

The Performance-Based Award will be based 70% on CODI’s total shareholder return relative to the S&P SmallCap 600 Index, with target performance at the 60th percentile, and 30% on Company-level adjusted EBITDA objectives established by the Compensation Committee. The relative total shareholder return component will be subject to a requirement that CODI’s absolute total shareholder return for the applicable performance period not be negative and, for 2027, a $17.25 dividend-adjusted stock-price threshold. The awards are subject to the terms, certification, forfeiture, acceleration and clawback provisions set forth in the Ninth MSA.

For fiscal years after 2027, the parties intend to seek shareholder approval of an equity-based structure for the Share Alignment Award and the Performance-Based Award. If no equity-based or other permanent structure is operative for a later year, the cash-based award structure applicable to 2027 generally will continue, subject to the terms of the Ninth MSA; however, the 2027 Aggregate Fee Cap and the $17.25 threshold are specific to 2027. For any later year in which the awards remain cash-based, aggregate Management Fees may not exceed the amount that would have been payable under the Eighth MSA for that year. Any amount excluded by this limitation will be carried forward solely for purposes of calculating Management Fees in subsequent years and will not otherwise be payable for the year in which it is excluded. The Ninth MSA also requires the Manager to maintain share ownership guidelines for senior Manager personnel who provide material services to the Company and confirms that amounts paid or payable under the Ninth MSA are subject to the Company’s Dodd-Frank clawback policy if and to the extent applicable.

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Item 2 contains forward-looking statements. Forward-looking statements in this Quarterly Report on Form 10-Q are subject to a number of risks and uncertainties, some of which are beyond our control. Our actual results, performance, prospects or opportunities could differ materially from those expressed in or implied by the forward-looking statements. Additional risks of which we are not currently aware or which we currently deem immaterial could also cause our actual results to differ, including those discussed in the section entitled "Forward-Looking Statements" included elsewhere in this Quarterly Report on Form 10-Q as well as those risk factors discussed in the section entitled "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2025 and in the section entitled "Risk Factors" in Part II, Item 1A of this Quarterly Report on Form 10-Q.

Overview

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.

We acquired our existing businesses that we own at June 30, 2026 as follows:

• During the second quarter of 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.

** Lugano was deconsolidated on November 16, 2025. The Company retained its equity interest in Lugano at June 30, 2026.

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.

The following is an overview of each of our operating segments:

Branded Consumer

5.11 - 5.11 is a global apparel, footwear, and gear company serving consumers who demand performance, durability, and versatility across work, training, and adventure. 5.11 is a brand known for innovation and authenticity and works directly with end users to create purpose-built apparel, footwear and gear designed to enhance the safety, accuracy, speed and performance of tactical professionals and enthusiasts worldwide. 5.11 operates sales offices and distribution centers globally, and 5.11 products are widely distributed in uniform stores, military exchanges, outdoor retail stores, its own retail stores and on 511tactical.com.

BOA - BOA, creator of 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.

PrimaLoft - PrimaLoft is a leading provider of branded, high-performance synthetic insulation and materials used primarily in consumer outerwear and accessories. The portfolio of PrimaLoft synthetic insulations offers products that can both mimic natural down aesthetics and provide the freedom to design garments ranging from stylish puffers to lightweight performance apparel. PrimaLoft insulations also offer superior economics to the brand partner and enable better sustainability characteristics through the use of recycled, low-carbon inputs. PrimaLoft is headquartered in Latham, New York.

The Honey Pot Co. - The Honey Pot Co. is a leading “better-for-you” feminine care brand, powered by plant-derived ingredients and clinically tested formulas. Founded in 2012, The Honey Pot Co. is rooted in the belief that all products should be made with healthy and efficacious ingredients that are kind to and safe for skin. The Honey Pot Co. offers an extensive range of holistic wellness products across the feminine hygiene, menstrual, personal care, and sexual wellness categories. The Honey Pot Co.'s mission is to educate, support, and provide consumers around the world with tools and resources that promote menstrual health and vaginal wellness. Its products can be found in more than 33,000 stores across the U.S. through mass merchants, drug and grocery retail chains, and online. The Honey Pot Co. is headquartered in Atlanta, Georgia.

Velocity Outdoor - Velocity Outdoor is a leading designer, manufacturer, and marketer of archery products, hunting apparel and related accessories. The archery product category consists of products including Ravin crossbows and CenterPoint archery products, and the apparel category offers high-performance, feature rich hunting and casual apparel under the King's Camo brand, utilizing King’s own proprietary camo patterns. Velocity Outdoor offers its products through national retail chains and dealer and distributor networks. Velocity Outdoor is headquartered in Rochester, New York.

Industrial

Altor Solutions - Founded in 1957 and headquartered in St. Louis, Missouri, Altor Solutions is a designer and manufacturer of custom molded cold chain and protective foam solutions including OEM components made from EPS and EPP. Altor operates molding and fabricating facilities across North America and provides products to a variety of end-markets, including appliances and electronics, pharmaceuticals, health and wellness, building products and others.

Arnold - Arnold serves a variety of markets including aerospace and defense, general industrial, motorsport/ transportation, oil and gas, medical, energy, semiconductor and advertising specialties. Over the course of more than 100 years, Arnold has successfully evolved and adapted its products, technologies, and manufacturing presence to meet the demands of current and emerging markets. Arnold engineers solutions for and produces high performance permanent magnets (PMAG), stators, rotors and full electric motors (Ramco), precision foil products (Precision Thin Metals), and flexible magnets (Flexmag™) that are mission critical in motors, generators, sensors and other systems and components. Based on its long-term relationships, Arnold has built a diverse and blue-chip customer base totaling more than 2,000 customers and leading systems-integrators worldwide with a focus on North America, Europe, and Asia. Arnold has built a preferred rare earth supply chain and has leading rare earth

and other permanent magnet production capabilities.

Rimports - Rimports manufactures and distributes branded and private label wickless candle products used for home decor and fragrance systems under the ScentSationals, and Fusion brands. Rimports offers unique lines of wickless candle products including ceramic wax warmers, scented wax cubes, fragrance oils, essential oils, and diffusers. Rimports also sells flameless candles, lanterns, and outdoor lighting. Rimports was acquired by Sterno in February 2018 and is headquartered in Provo, Utah.

2026 Outlook and Significant Trends Impacting our Subsidiary Businesses

Macroeconomic Trends

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.

Geopolitics and Trade Policy

Geopolitical and trade policy conditions are expected to remain fluid and may continue to affect energy costs, sourcing decisions, tariff exposure, pricing strategies and customer demand patterns. While we do not currently expect the ongoing conflict in the Middle East to have a material direct impact on our businesses, broader geopolitical and trade uncertainty may influence input costs, customer purchasing behavior and the timing of capital allocation decisions across certain end markets. Tariffs and related policy changes can operate economically as an increase in landed product cost, which may compress margins if not offset through pricing, sourcing changes, productivity initiatives or customer negotiations, and may also affect demand where higher costs are passed through to customers. Our subsidiaries are continuing to diversify sourcing, reduce concentrated exposure to China and implement pricing, inventory and customer negotiation strategies intended to mitigate the potential impact of new, expanded or reinterpreted tariffs while balancing working capital efficiency and product availability. The recent U.S. Supreme Court ruling related to certain tariff authorities may continue to create uncertainty regarding the interpretation and administration of certain tariffs, including the timing, amount and accounting for refunds of previously paid tariffs. We continue to monitor geopolitical developments, tariff policies and related government actions and will adjust our strategies to mitigate impacts as conditions evolve.

Business Outlook

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.

Our operating priorities for 2026 include: (i) generating free cash flow through improved operating performance, disciplined capital spending, and focused working capital management; (ii) driving profitable growth through product innovation, distribution expansion, and customer wins where returns are attractive; (iii) protecting margins through pricing actions, productivity initiatives, and active management of input-cost volatility; and (iv) enhancing resilience and oversight through supply chain diversification, selective technology investments, and continued improvement of governance and financial reporting processes.

Lugano Restatement and Deconsolidation

As previously disclosed, following concerns reported to the Company’s management, the Company commenced the Lugano Investigation. As a result of the Lugano Investigation, the Company determined that the Company’s previously issued financial statements for fiscal years 2022, 2023 and 2024, including other interim and full-year financial information, should no longer be relied upon. In connection with the restatement process, the Company corrected these errors in its 2024 Form 10‑K/A, which was filed on December 8, 2025. The Company then filed its Quarterly Reports on Form 10‑Q for the first, second and third quarters of 2025, on December 18, 2025, December 29, 2025, and January 14, 2026, respectively. In addition, as a result of the Lugano Bankruptcy, effective November 16, 2025, Lugano and its subsidiaries were deconsolidated from the Company’s consolidated financial statements in accordance with ASC 810 – Consolidation. Accordingly, the results of Lugano are included in the Company’s consolidated results through November 16, 2025, and periods subsequent to that date do not include Lugano’s results of operations, assets or liabilities, except to the extent of any retained interest or other continuing involvement recognized in accordance with applicable accounting guidance.

Recent Events

Amendment to the 2022 Credit Facility

On August 6, 2026, we entered into a Sixth Amendment to the 2022 Credit Facility. The amendment extends the maturity of the revolving commitments and term loans to January 12, 2028 and modifies certain terms of the facility. Among other changes, the amendment reduces the aggregate revolving commitments from $100.0 million to $54.0 million, waives milestone fees that otherwise would have been payable under the Fifth Amendment transaction letter, removes the incremental delayed draw term loan facility, reduces the aggregate amount available under incremental facilities from $250.0 million to $150.0 million, and revises certain covenant and availability provisions, including reducing the concentration limit for Combined Eligible Availability attributable to any one portfolio company from 40% to 25%. The amendment also permits certain supply chain financing arrangements and payments under the Ninth Amended and Restated Management Services Agreement. In addition, if the term loans under the 2022 Credit Facility have not been repaid on or before December 31, 2026, we will be required to pay a $4.0 million milestone fee. We believe the Sixth Amendment provides additional time and flexibility to execute our deleveraging and liquidity plans; however, our ability to maintain adequate liquidity and comply with the amended covenants will depend on our operating performance, cash generation, asset monetization activity and other factors discussed in this Form 10-Q.

MSA Amendment

On July 12, 2026, the Company and the Manager entered into an amendment to the Management Service Agreement (the "Ninth MSA"). Beginning January 1, 2027, the Ninth MSA reduces the base management fee rates, caps the 2027 base management fee at $30.0 million, establishes the 2027 Aggregate Fee Cap and replaces the existing incentive management fee with the Share Alignment Award and Performance-Based Award described in Note P. The revised fee and award structure is expected to reduce total management fees for 2027 relative to the amounts that otherwise would have been payable under the Eighth MSA, although actual amounts will depend on the Company’s Adjusted Net Assets, the level of payout under the Performance-Based Award and other applicable factors.

Chief Executive Officer Succession

In June 2026, the Company announced that Elias J. Sabo is expected to retire as Chief Executive Officer at the end of 2026 and that Zachary T. Sawtelle, who was appointed Chief Operating Officer, is expected to succeed him as Chief Executive Officer on January 1, 2027.

Lugano Settlement

On June 24, 2026, CODI entered into the Settlement Agreement and Plan Support Agreement described in Note B. The Settlement Documents provide for specified percentages of net inventory, tax-refund, insurance and litigation recoveries, subject to creditor approval, bankruptcy court confirmation and effectiveness of the proposed Plan of Liquidation. The settlement terms and related changes in the estimated amount and timing of recoveries resulted in a $58.0 million non-cash decrease in the fair value of the Company’s Lugano receivable during the quarter. The amount and timing of any recoveries remain uncertain and depend on, among other things, confirmation and effectiveness of the proposed Plan of Liquidation and the proceeds ultimately realized from the applicable assets and claims.

Sterno Sale

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.

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.

The Rimports distribution was accounted for as a transaction between entities under common control at historical carrying amounts because the Company controlled Sterno, inclusive of Rimports, before the distribution and continues to control Rimports after the distribution. No gain or loss was recognized as a result of the distribution. Because the Company retained Rimports following the distribution, the assets and liabilities of Rimports were excluded from the held-for-sale disposal group and continue to be presented in the Company’s condensed consolidated balance sheet.

Upon completion of the sale on May 1, 2026, the Company deconsolidated Sterno’s food service business and recognized a gain on the sale of approximately $182 million within income from continuing operations during the three and six months ended June 30, 2026.

Altor Sale Leaseback

On January 23, 2026, Altor completed a sale leaseback transaction for its manufacturing facilities in Bloomsburg, Pennsylvania; New Albany, Indiana; and El Dorado Springs, Missouri (the “Properties”). Under the purchase and sale agreement, Altor sold the land, buildings and certain integrated fixtures to the buyer/lessor for total consideration of $11.75 million. At the same time, Altor entered into a 20 year triple-net master lease to lease back all three Properties. As required by the Fifth amendment to the 2022 Credit Facility, the Company made a payment of the amount of the net proceeds to reduce the term loan under the 2022 Credit Facility by $11 million.

Non-GAAP Financial Measures

In addition to the results of operations contained in this report, which have been prepared and presented in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP" or "GAAP"), we have also included supplemental information concerning our results of operations on a non-GAAP basis. A non-GAAP financial measure is a numerical measure of historical or future performance, financial position or cash flow that excludes amounts, or is subject to adjustments that effectively exclude amounts, included in the most directly comparable measure calculated and presented in accordance with GAAP in our financial statements, and vice versa for measures that include amounts, or are subject to adjustments that effectively include amounts, that are excluded from the most directly comparable measure as calculated and presented.

See “Reconciliation of Non-GAAP Financial Measures” for further discussion of our non-GAAP financial measures and related reconciliations.

Results of Operations

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.

Lugano Bankruptcy - In November 2025, Lugano and certain of its subsidiaries filed the Lugano Bankruptcy. As a result of the bankruptcy filing, the Company no longer maintained a controlling financial interest in Lugano and, accordingly, deconsolidated Lugano and its subsidiaries in accordance with ASC 810 - Consolidation. The results of operations of Lugano are included in the Company’s consolidated results through the date control was lost. From that date forward, Lugano is no longer included as an operating segment of the Company. Following deconsolidation, the Company’s continuing involvement with Lugano is limited to its claims in the bankruptcy proceedings, including any secured positions.

Sale of Sterno Food Service Division - On May 1, 2026, the Company completed the sale of Sterno’s food service product division. Immediately prior to the sale, Rimports, which operates the retained home fragrance business, was separated from Sterno and remained a consolidated business of the Company. Because the sale did not qualify for discontinued operations presentation, the results of the food service product division are included in continuing operations through the date of sale. In addition, the historical results presented for Rimports include the amounts attributable to the food service product division for periods prior to the sale, which affects comparability between the current and prior-year periods.

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.

All dollar amounts in the financial tables are presented in thousands. Certain amounts and percentages may not sum or recalculate due to the presentation of rounded numbers. Amounts discussed within the supporting narrative are calculated based on unrounded numbers and consequently the sum of the components may not agree to totals using the rounded numbers provided. References in the financial tables to percentage changes that are not meaningful are denoted by "NM."

Consolidated Results of Operations - Quarter-to-Date

Three months ended June 30, 2026 compared to three months ended June 30, 2025

The following table sets forth our unaudited results of operations for the periods indicated, in dollars and as a percentage of net revenues:

Net revenues

Consolidated net revenues for the three months ended June 30, 2026 decreased by approximately $54.6 million, or 11.4%, compared to the corresponding period in 2025. During the three months ended June 30, 2026 compared to 2025, we saw notable increases in net revenues at BOA ($10.7 million increase), PrimaLoft ($4.9 million increase), The Honey Pot Co. ($5.6 million increase), and Arnold ($4.8 million increase). These increases in net revenue were

offset by decreases in net revenue at 5.11 ($4.9 million decrease), Altor ($17.6 million decrease), and Rimports ($33.2 million decrease). The decrease in net revenues at Rimports is attributable to the sale of the Sterno food service division on May 1, 2026. The net revenues of the Sterno product division are included in the historical results of operations of Rimports through the date of sale. Lugano recognized $26.8 million in revenue in the quarter ended June 30, 2025 which was nonrecurring due to the Lugano bankruptcy in November 2025. Refer to "Results of Operations - Operating Segments - Quarter-to-Date" for a more detailed analysis of net revenues by operating segment.

We do not generate any revenues apart from those generated by our subsidiaries. We may generate interest income on the investment of available funds, but expect such earnings to be minimal. We make loans from the Company to our subsidiary businesses and also hold equity interests in those businesses. Cash flows coming to the Trust and the LLC are the result of interest payments on those loans, amortization of those loans and additional principal payments on those loans. However, on a consolidated basis, these items will be eliminated.

Gross Profit

On a consolidated basis, gross profit decreased approximately $8.6 million during the three months ended June 30, 2026 compared to the corresponding period in 2025. We saw notable increases in gross profit at 5.11 ($2.5 million increase), BOA ($8.4 million increase), PrimaLoft ($3.4 million increase), The Honey Pot Co. ($5.3 million increase), and Arnold ($2.2 million increase). We saw decreases in gross profit at Altor ($10.7 million decrease) and Rimports ($6.2 million decrease) that corresponded to the decrease in net revenue noted above. The decrease in net revenues and gross profit at Rimports is attributable to the sale of the Sterno food service division on May 1, 2026. Lugano recognized $13.4 million in gross profit in the quarter ended June 30, 2025 which was nonrecurring due to the Lugano bankruptcy in November 2025.

Gross margin was approximately 47.2% in the three months ended June 30, 2026 compared to 43.6% in the three months ended June 30, 2025. The increase in gross margin in the quarter ended June 30, 2026 as compared to the quarter ended June 30, 2025 is driven by the increase in gross margin at our consumer businesses during the quarter. Our branded consumer businesses had gross margin of 59.2% in the second quarter of 2026 as compared to 55.2% in the second quarter of 2025, while our industrial businesses had gross margin of 25.8% in the second quarter of 2026 as compared to 27.3% in the second quarter of 2025. 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. The remainder of the increase in gross margin at the branded consumer businesses was primarily attributable to product mix, particularly

at BOA and PrimaLoft. The decrease in gross margin at our industrial businesses was attributable to higher fixed overhead costs absorbed on a lower revenue base and higher raw material costs at Altor during the quarter.

Selling, general and administrative expense

Consolidated selling, general and administrative expense decreased approximately $27.8 million during the three months ended June 30, 2026, compared to the corresponding period in 2025, driven primarily by expense incurred by Lugano ($28.6 million) in the prior year quarter which was nonrecurring due to the Lugano bankruptcy in November 2025, the sale of Sterno on May 1, 2026 and non-recurring exit costs and the impact of a workforce reduction at Altor ($4.5 million decrease in expense quarter over quarter). These decreases were offset by increases in selling, general and administrative expense at the corporate level ($3.1 million increase), and at The Honey Pot Co. ($2.7 million increase) due to increased product innovation and marketing investment.

At the corporate level, general and administrative expense was $16.3 million in the second quarter of 2026 and $13.2 million in the second quarter of 2025, an increase of $3.1 million. The increase in general and administrative expense in the second quarter of 2026 relates to costs associated with our Lugano subsidiary and the ongoing lawsuits, as well as corporate governance changes and internal control remediation that we are implementing.

Management fees

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.

Refer to "Note N - Related Party Transactions" in the "Notes to the Condensed Consolidated Financial Statements" for a description of the effect of the restatement on the Management Fees.

Amortization expense

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.

Interest expense, net

We recorded interest expense totaling $23.9 million for the three months ended June 30, 2026 compared to $34.1 million for the comparable period in 2025, a decrease of $10.2 million. During 2026, the Company has paid down approximately $300 million of principal on the 2022 Term Loan, reducing the total interest expense incurred. In the three months ended June 30, 2026, interest expense associated with the 2022 Term Loan was approximately $6.3 million as compared to $9.8 million in the three months ended June 30, 2025. Interest expense in the three months ended June 30, 2025 also included $6.9 million related to financing arrangements at Lugano, which was deconsolidated in November 2025. The decrease in interest expense was partially 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.

Loss on debt modification

During the second quarter of 2025, the Company entered into a forbearance agreement which reduced the aggregate borrowing amount available for revolving commitments to $100 million from $600 million. As a result of the reduction in available revolving commitments, the Company recognized $2.8 million in loss on debt modification in the second quarter of 2025.

Decrease in fair value of receivable due from unconsolidated affiliate

The receivable due from an unconsolidated affiliate represents the Company’s estimate of the fair value of its secured claim related to intercompany loans to Lugano, which is currently subject to bankruptcy proceedings. On June 24, 2026, the Company entered into a settlement agreement and a plan support agreement relating to the proposed resolution of claims alleged against the Company and its related parties by or on behalf of Lugano or its bankruptcy estate. The terms of those agreements changed the estimated amount and timing of the Company’s expected recoveries on its secured claim, resulting in a $58 million decrease in the fair value of the receivable at June 30, 2026.

Gain on sale of product division

On May 1, 2026, the Company sold the Sterno food service product division. The Company 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 recorded a gain on the sale of Sterno in the quarter ending June 30, 2026 of $182.3 million.

Other income (expense)

For the quarter ended June 30, 2026, we recorded $0.1 million in other expense as compared to $1.7 million in other income in the quarter ended June 30, 2025, an increase in expense of $1.8 million. 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 both the current quarter and prior year comparable quarter, the expense primary relates to foreign currency gains and losses.

Provision for income taxes

We had an income tax provision of $45.4 million during the three months ended June 30, 2026 compared to an income tax provision of $17.4 million during the same period in 2025, an increase of $28.0 million. 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 effective tax rate was impacted by the sale of Sterno and the tax effect at the Trust, the effect of foreign taxes and changes in valuation allowances, while in the prior year, the primary item affecting the effective tax rate was changes in valuation allowance. In connection with the sale of Sterno, we recorded a liability for unrecognized tax benefits of $21.3 million in the quarter ended June 30, 2026, and approximately $5.5 million in interest 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.

Results of Operations - Operating Segments - Quarter-to-Date

Three months ended June 30, 2026 compared to three months ended June 30, 2025

Branded Consumer Businesses

5.11

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.

Segment operating income for the three months ended June 30, 2026 was $12.2 million, an increase of $2.5 million when compared to segment operating income of $9.8 million for the same period in 2025. The increase was primarily attributable to improved gross margin and disciplined operating expense management, which more than offset the impact of lower net sales. Gross margin benefited from a higher mix of full-price sales and 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. Selling, general and administrative expenses were essentially flat compared to the prior year period, as lower payroll expense was offset by higher performance-based bonus accruals and increased investment in brand marketing.Segment operating margin was 9.7% in the second quarter of 2026 and 7.4% in the second quarter of 2025.

BOA

Net sales for the three months ended June 30, 2026 were $59.1 million as compared to net sales of $48.4 million for the three months ended June 30, 2025, an increase of $10.7 million, or 22.1%. 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.

Segment operating income for the three months ended June 30, 2026 was $20.1 million, an increase of $6.0 million when compared to segment operating income of $14.0 million for the same period in 2025. The increase in segment

operating income was driven by higher net sales, improved product margins, partially offset by an increase in selling, general, and administrative expense related to BOA's bonus plan. Segment operating margin increased to 33.9% in the second quarter of 2026 from 29.0% in the second quarter of 2025, primarily driven by improved gross margins.

PrimaLoft

Net sales for the three months ended June 30, 2026 were $29.7 million, an increase of $4.9 million as compared to net sales of $24.9 million for the three months ended June 30, 2025. The increase in net sales in the current quarter versus the quarter ended June 30, 2025 is primarily attributable to higher sales to Asia-based brand partners, reflecting continued strong demand for outdoor products in the region, as well as the Company's ongoing success in establishing new brand partnerships that have expanded its customer base.

Segment operating income for the three months ended June 30, 2026 was $7.7 million, an increase of $2.8 million when compared to segment operating income of $4.9 million for the same period in 2025, driven by higher net sales and improved gross margins in the current quarter. Segment operating margin was 26.0% in the second quarter of 2026 as compared to 19.7% in the second quarter of 2025.

The Honey Pot Co.

Net sales for the three months ended June 30, 2026 were $38.4 million, an increase of $5.6 million or 17.0% from net sales of $32.8 million for the three months ended June 30, 2025. The increase in net sales was primarily due to strong volume growth and market share gains in the Period Care product line, particularly in mass retail, drugstores and online channels, and the net pricing benefit related to Period Care pack price optimization implemented in late 2025. Overall, volume and share growth continued to be supported by compelling innovation, targeted investments in demand generation, and disciplined investments in capabilities to accelerate growth.

Segment operating income for the three months ended June 30, 2026 was $6.4 million, an increase of $2.7 million when compared to segment operating income of $3.7 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 34.2% in the second quarter of 2026 and 31.9% in the second quarter of 2025. Segment operating margin in the second quarter of 2026 was 16.6% as compared to 11.3% in the second quarter of 2025.

Velocity Outdoor

Net sales for the three months ended June 30, 2026 were $17.1 million, an increase of $1.9 million or 12.5%, compared to net sales of $15.2 million in the same period in 2025. The increase in net sales for the three months ended June 30, 2026 was primarily driven by increased archery and apparel sales through national retailer channels.

Segment operating loss for the three months ended June 30, 2026 was flat compared to the same period in 2025, reflecting an improvement of 3.7%. The modest improvement was driven by higher net sales combined with flat operating expenses. Segment operating margin was (5.1)% in the second quarter of 2026 as compared to (6.0)% in the second quarter of 2025.

Industrial Businesses

Altor Solutions

Net sales for the quarter ended June 30, 2026 were $65.7 million, a decrease of $17.6 million, or 21.2%, compared to net sales of $83.3 million in the quarter ended June 30, 2025. The decrease in net sales during the second quarter was primarily attributable to lower sales volumes resulting from reduced demand in the industrial white goods market and shifting market conditions in the perishable and cold chain markets.

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.

Arnold

Net sales for the three months ended June 30, 2026 were approximately $43.2 million, an increase of $4.8 million compared to net sales of $38.4 million in the same period in 2025. The increase in net sales was primarily attributable to growing demand for non-China sourced permanent magnets, partially offset by material and production constraints.

Segment operating income for the three months ended June 30, 2026 was approximately $3.6 million, an increase of $3.4 million when compared to the same period in 2025. The increase in segment operating income was driven by higher revenue and the resulting operating leverage, and non-recurring costs incurred in the first half of 2025. Segment operating margin was 8.3% in the second quarter of 2026 as compared to 0.5% in the second quarter of 2025.

Rimports (including Sterno's food service business through May 1, 2026)

Net sales for the three months ended June 30, 2026 were approximately $44.3 million, a decrease of $33.2 million, or 42.8%, compared to net sales of $77.5 million in the same period in 2025. The decrease was primarily attributable to the sale of Sterno Products’ food service business in May 2026. Excluding Sterno, Rimports-only net sales for the quarter-to-date period ended June 30, 2026 were $30.9 million, a decrease of $5.4 million, or 14.8%, compared to $36.3 million in the same period in 2025. The Rimports variance was primarily driven by a reduction in key distribution within the private label business.

Segment operating income for the three months ended June 30, 2026 was approximately $7.4 million, a decrease of $3.7 million compared to the three months ended June 30, 2025, The decrease was primarily attributable to the sale of Sterno Products’ food service business in May 2026. Segment operating margin was 16.7% in the second quarter of 2026 as compared to 14.3% in the second quarter of 2025. Excluding Sterno, Rimports-only operating income for the quarter-to-date period ended June 30, 2026 was $3.7 million, a decrease of $0.2 million, or 6.0%, compared to $3.9 million in the same period in 2025. The Rimports variance was primarily driven by the reduction in revenue partially offset by IEEPA tariff refunds received within the quarter, which were recognized as a credit to cost of goods sold upon receipt of cash.

Consolidated Results of Operations - Year-to-Date

Six months ended June 30, 2026 compared to six months ended June 30, 2025

The following table sets forth our unaudited results of operations for the periods indicated, in dollars and as a percentage of net revenues:

Net revenues

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.

We do not generate any revenues apart from those generated by our subsidiaries. We may generate interest income on the investment of available funds, but expect such earnings to be minimal. We make loans from the Company to our subsidiary businesses and also hold equity interests in those businesses. Cash flows coming to the Trust and the LLC are the result of interest payments on those loans, amortization of those loans and additional principal payments on those loans. However, on a consolidated basis, these items will be eliminated.

Gross Profit

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.

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 industrial 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.

Selling, general and administrative expense

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.

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.

Management fees

For the six months ended June 30, 2026, we incurred $29.8 million in management fees as compared to $37.9 million in fees in the six 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 six 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 six months 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 six months ended ended June 30, 2026 was $15.4 million as compared to total cash paid for Management fees for the six months ended June 30, 2025 of $37.7 million.

Refer to "Note N - Related Party Transactions" in the "Notes to the Condensed Consolidated Financial Statements" for a description of the effect of the restatement on the Management Fees.

Amortization expense

Amortization expense for the six months ended June 30, 2026 decreased $0.9 million as compared to the six months ended June 30, 2025 due to the effect of the sale of Sterno on May 1, 2026.

Impairment expense

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.

Other operating (income) expense

Other operating income represents the gain on the sale leaseback completed at Altor in the six months ended June 30, 2026.

Interest expense, net

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.

Loss on debt modification

During the second quarter of 2025, the Company entered into a forbearance agreement which reduced the aggregate borrowing amount available for revolving commitments to $100 million from $600 million. As a result of the reduction in available revolving commitments, the Company recognized $2.8 million in loss on debt modification in the second quarter of 2025.

Decrease in fair value of receivable due from unconsolidated affiliate

The receivable due from an unconsolidated affiliate represents the Company’s estimate of the fair value of its secured claim related to intercompany loans to Lugano, which is currently subject to bankruptcy proceedings. On June 24, 2026, the Company entered into a settlement agreement and a plan support agreement relating to the proposed resolution of claims alleged against the Company and its related parties by or on behalf of Lugano or its bankruptcy estate. The terms of those agreements changed the estimated amount and timing of the Company’s expected recoveries on its secured claim, resulting in a $58 million decrease in the fair value of the receivable at June 30, 2026.

Gain on sale of product division

On May 1, 2026, the Company sold the Sterno food service product division. The Company 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 recorded a gain on the sale of Sterno in the quarter ending June 30, 2026 of $182.3 million.

Other income (expense)

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 from the 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.

Income taxes

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 effective 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 in interest 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.

Results of Operations - Operating Segments - Year-to-Date

Six months ended June 30, 2026 compared to six months ended June 30, 2025

Branded Consumer Businesses

5.11

Net sales for the six months ended June 30, 2026 were $250.5 million as compared to net sales of $260.8 million for the six months ended June 30, 2025, a decrease of $10.3 million, or 4.0%. The decline was primarily attributable to a decrease in direct-to-consumer sales of approximately $7.9 million, reflecting an intentional reduction in promotional activity compared to the prior year period, and a decrease in domestic wholesale sales of approximately $3.4 million, due to customer inventory reductions. These decreases were partially offset by increases in international sales of approximately $0.6 million, driven by growth in Australia and Canada.

Segment operating income for the six months ended June 30, 2026 was $20.0 million, an increase of $1.6 million when compared to segment operating income of $18.3 million for the same period in 2025. The increase was primarily attributable to improved gross margin and disciplined operating expense management, which more than offset the impact of lower net sales. Gross margin performance benefited from a higher mix of full-price sales, and included refunds of duties in the second quarter 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. Selling, general and administrative expenses decreased modestly compared to the prior year period, driven by lower payroll expense, partially offset by higher performance-based bonus accruals and increased investment in brand marketing. Segment operating margin was 8.0% in the six months ended June 30, 2026 and 7.0% in the six months ended June 30, 2025.

BOA

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.

Segment operating income for the six 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.

PrimaLoft

Net sales for the six months ended June 30, 2026 were $51.7 million, an increase of $3.2 million as compared to net sales of $48.5 million for the six months ended June 30, 2025. The increase in net sales in the current period versus the six months ended June 30, 2025 is primarily attributable to higher sales to Asia-based brand partners, reflecting continued strong demand for outdoor products in the region, as well as the Company's ongoing success in establishing new brand partnerships that have expanded its customer base.

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.

The Honey Pot Co.

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.

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.

Velocity Outdoor

Net sales for the six months ended June 30, 2026 were $30.9 million, an increase of $2.5 million or 8.9%, compared to net sales of $28.4 million in the same period in 2025. The increase in net sales for the six months ended June 30, 2026 was primarily driven by increased archery and apparel sales through national retail chains and direct to consumer channels.

Segment operating loss for the six months ended June 30, 2026 was $2.0 million compared to segment operating loss of $3.7 million for the same period in 2025. Segment operating margin was (6.5)% in the six months ended

June 30, 2026 as compared to (13.1)% in the six months ended June 30, 2025. The improvement was primarily driven by higher net sales and increased gross margins attributable to product mix along with favorable operating expenses, with gross margins of 31.0% in the six months ended June 30, 2026 as compared to 29.3% in the six months ended June 30, 2025.

Industrial Businesses

Altor Solutions

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.

Segment operating income was $12.6 million in the six months ended June 30, 2026, a decrease of $0.3 million as compared to the six months ended June 30, 2025. Segment operating income in the current year includes income of $10.2 million from a sale leaseback transaction that occurred in the first quarter of 2026. Excluding the income from the sale leaseback transaction, Altor would have had a decrease in segment operating income driven by reduced sales volumes the deleveraging effect of fixed costs and increases in raw material costs as a result of increasing oil prices, which negatively impacted gross margins in the current period. Gross margin was 19.3% in the six months ended June 30, 2026 and 26.2% in the six months ended June 30, 2025. Segment operating margin was 9.7% in the first six months of 2026 as compared to 7.7% in the first six months of 2025.

Arnold

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 and delays in production startup at new facilities.

Segment operating income for the six 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 first six months of 2026 as compared to (1.0)% in the first six months of 2025.

Rimports (including Sterno's food service business through May 1, 2026)

Net sales for the six months ended June 30, 2026 were approximately $109.4 million, a decrease of $(33.5) million, or 23.4%, compared to net sales of $142.9 million in the same period in 2025. The decrease was primarily attributable to the sale of Sterno Products’ food service business in May 2026. Sterno had net sales of $45.1 million for the six months ended June 30, 2026 (through the date of disposition of May 1, 2026) and net sales of $71.5 million for the six months ended June 30, 2025. The Rimports variance was primarily driven by a reduction in key distribution within the private label business.

Segment operating income for the six months ended June 30, 2026 was approximately $14.6 million, a decrease of $2.9 million compared to the six months ended June 30, 2025, The decrease was primarily attributable to the sale of Sterno Products’ food service business in May 2026. Segment operating margin was 13.4% in the first six months of 2026 as compared to 12.2% in the first six months of 2025. Sterno had segment operating income of $8.5 million for the six months ended June 30, 2026 (through the date of disposition of May 1, 2026) and segment operating income of $11.9 million for the six months ended June 30, 2025. The Rimports variance was primarily driven by IEEPA tariff refunds received within the period partially offset by the decline in revenue.

Liquidity and Capital Resources

We generate cash primarily from the operations of our subsidiaries, and we have the ability to borrow under our 2022 Credit Facility to fund our operating, investing and financing activities. Our principal uses of cash are operating expenses, management fees, capital expenditures, working capital needs, debt service, distributions on the preferred shares of the Trust and strategic growth initiatives, including acquisitions. In connection with the Lugano Investigation and the restatement of our previously issued financial statements, we incurred significant accounting, financing, legal and other professional costs, including costs related to litigation, governmental investigations, financing arrangements and internal control remediation. We also expect to continue to incur costs associated with ongoing securities litigation, derivative litigation, governmental investigations and efforts to remediate and strengthen internal controls.

Beginning in 2027, the Ninth MSA will reduce the base management fee rates, cap the 2027 base management fee at $30.0 million, establish the 2027 Aggregate Fee Cap and replace the existing incentive management fee with the Share Alignment Award and Performance-Based Award. The revised fee and award structure is expected to reduce total management fees for 2027 relative to the amounts that otherwise would have been payable under the Eighth MSA, although actual amounts will depend on the Company’s Adjusted Net Assets, the level of payout under the Performance-Based Award and other applicable factors.

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.

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.

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 :

Operating Activities:

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 of the Sterno food service product division.

Investing Activities:

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.

Financing Activities:

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.

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.

Intercompany Debt

A component of our acquisition financing strategy that we utilize in acquiring the subsidiary businesses we own and manage is to provide both equity capital and debt capital, raised at the parent level through our existing credit facility. Our strategy of providing intercompany debt financing within the capital structure of our subsidiaries allows us the ability to distribute cash to the parent company through monthly interest payments and amortization of the principal on these intercompany loans. Each loan to our subsidiary businesses has a scheduled maturity and each subsidiary business is entitled to repay all or a portion of the principal amount of the outstanding loans, without penalty, prior to maturity. Certain of our subsidiaries have paid down their respective intercompany debt balances through the cash flow generated by these subsidiaries and we have recapitalized, and expect to continue to recapitalize, these subsidiaries in the normal course of our business. The recapitalization process involves funding the intercompany debt using either cash on hand at the parent or our applicable credit facility, and serves the purpose of optimizing the capital structure at our subsidiaries and providing the noncontrolling shareholders with a distribution on their ownership interest in a cash flow positive business.

We will from time to time, amend the intercompany credit agreements to reflect changes in the business or funding needs of our businesses. The following amendments have been made in the time period indicated:

In the second quarter of 2026, we amended the Altor intercompany credit agreement to amend the applicable fixed charge coverage ratio covenant as Altor was not expected to be in compliance with the ratio through the remainder of 2026 based on their forecast for the remainder of 2026.

In the first quarter of 2025, we amended the Velocity intercompany credit agreement to amend the applicable fixed charge coverage ratio covenant and the applicable Total Debt to EBITDA ratio covenant. Velocity was not in compliance with the fixed charge coverage ratio or leverage ratio in their intercompany credit agreement at September 30, 2025, December 31, 2025, March 31, 2026 and June 30, 2026 and was granted a waiver for the covenant violations in each period.

At September 30, 2025, Arnold was not in compliance with the fixed charge coverage ratio and leverage ratio covenants contained within its intercompany credit agreement. In the fourth quarter of 2025, we amended the Arnold credit agreement to increase the amount of availability under the revolving credit facility and to waive the covenant violations that existed as of September 30, 2025. Arnold was not in compliance with the fixed charge coverage ratio and leverage ratio covenants contained within its intercompany credit agreement at December 31, 2025, and was not in compliance with the fixed charge coverage ratio at March 31, 2026 and was granted a waiver for the covenant violations in each period.

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

All intercompany loans eliminate in consolidation and are not reflected in the consolidated balance sheet. As of June 30, 2026, we had the following outstanding loans due from each of our subsidiary businesses (in thousands):

Our primary source of cash is from the receipt of interest and principal on the outstanding loans to our subsidiaries. Accordingly, we are dependent upon the earnings of and cash flow from these businesses, which are available for (i) operating expenses; (ii) payment of principal and interest under our applicable credit facility and interest on our Senior Notes; (iii) payments to CGM due pursuant to the MSA and payments to Sostratus LLC pursuant to the LLC Agreement; (iv) cash distributions to our shareholders; and (v) investments in future acquisitions. Payments made under (iii) above are required to be paid before distributions to shareholders and may be significant and exceed the funds held by us, which may require us to dispose of assets or incur debt to fund such expenditures.

Financing Arrangements

Debt and Capital Structure

Our capital structure includes (i) the 2022 Credit Facility and (ii) the Senior Notes. See “Note G — Debt” included in the "Notes to the Consolidated Financial Statements" in this Form 10-Q for additional detail regarding our debt instruments, including outstanding balances, borrowing terms, covenant requirements, and availability under the 2022 Credit Facility.

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.

Interest Expense

The components of interest expense and periodic interest charges on outstanding debt are as follows (in thousands):

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

The following table provides the effective interest rate of the Company’s outstanding debt at June 30, 2026 and December 31, 2025 (in thousands):

Reconciliation of Non-GAAP Financial Measures

GAAP or U.S. GAAP refer to generally accepted accounting principles in the United States. From time to time we may publicly disclose certain “non-GAAP” financial measures in the course of our investor presentations, earnings releases, earnings conference calls or other venues. A non-GAAP financial measure is a numerical measure of historical or future performance, financial position or cash flow that excludes amounts, or is subject to adjustments that effectively exclude amounts, included in the most directly comparable measure calculated and presented in accordance with GAAP in our financial statements, and vice versa for measures that include amounts, or are subject to adjustments that effectively include amounts, that are excluded from the most directly comparable measure as calculated and presented.

We have included information to reconcile non-GAAP financial measures for the periods presented to the most directly comparable GAAP financial measure. We use non-GAAP information for financial and operational decision-making purposes and as a means to evaluate the underlying performance of our business and/or in forecasting our business. We believe that the presentation of such non-GAAP information, when considered in conjunction with the most directly comparable GAAP information, provides additional useful information for investors in their assessment of the underlying performance of our business. The presentation of these non-GAAP financial measures supplements other metrics we use to internally evaluate our subsidiary businesses and facilitate the comparison of past and present operations. These measures are not intended to replace the presentation of financial results in accordance with U.S. GAAP, and may be different from or otherwise inconsistent with non-GAAP financial measures used by other companies.

The tables below reconcile the most directly comparable GAAP financial measures to Adjusted earnings before Interest, Income Taxes, Depreciation and Amortization ("Adjusted EBITDA") and Adjusted Earnings.

Adjusted EBITDA – EBITDA is calculated as net income (loss) from continuing operations before interest expense, income tax expense (benefit), depreciation expense and amortization expense. Amortization expenses consist of amortization of intangibles, amortization of inventory step-up associated with purchase price allocations of our acquisitions, and debt charges, including debt issuance costs. Adjusted EBITDA is calculated utilizing the same calculation as described in arriving at EBITDA further adjusted by: (i) non-controlling stockholder compensation, which generally consists of non-cash stock option expense; (ii) successful acquisition costs, which consist of transaction costs (legal, accounting, due diligence, etc.) incurred in connection with the successful acquisition of a business expensed during the period in compliance with ASC 805, Business Combinations; (iii) impairment charges, which reflect write downs to goodwill or other intangible assets; (iv) changes in the fair value of contingent consideration subsequent to initial purchase accounting, (v) integration service fees, which reflect fees paid by newly acquired companies to the Manager for integration services performed during the first year of ownership; and (vi) items of other income or expense that are material to a subsidiary and non-recurring in nature.

Adjusted Earnings –– Adjusted Earnings is calculated as net income (loss) adjusted to include the cost of the distributions to preferred shareholders, and adjusted to exclude the impact of certain costs, expenses, gains and losses and other specified items the exclusion of which management believes provides insight regarding our ongoing operating performance. Depending on the period presented, these adjusted measures exclude the impact of certain of the following items: gains (losses) and income (loss) from discontinued operations, income (loss) from noncontrolling interest, amortization expense, subsidiary stock compensation expense, acquisition-related expenses and items of other income or expense that may be material to a subsidiary and non-recurring in nature.

Adjusted EBITDA and Adjusted Earnings are non-GAAP measures used by the Company to assess its performance. We believe that Adjusted EBITDA and Adjusted Earnings provide useful information to investors and reflect important financial measures that are used by management in the monthly analysis of our operating results and in preparation of our annual budgets. We believe that investors’ understanding of our performance is enhanced by disclosing these performance measures as this presentation allows investors to view the performance of our businesses in a manner similar to the methods used by us and the management of our subsidiary businesses, provides additional insight into our operating results and provides a measure for evaluating targeted businesses for acquisition.

Adjusted EBITDA and Adjusted Earnings exclude the effects of items which reflect the impact of long-term investment decisions, rather than the performance of near-term operations. When compared to net income (loss) and net income (loss) from continuing operations, Adjusted Earnings and Adjusted EBITDA, respectively, are each limited in that they do not reflect the periodic costs of certain capital assets used in generating revenues of our subsidiary businesses or the non-cash charges associated with impairments, as well as certain cash charges. The presentation of Adjusted Earnings provides insight into our operating results. Adjusted EBITDA and Adjusted Earnings are not meant to be a substitute for GAAP, and may be different from or otherwise inconsistent with non-GAAP financial measures used by other companies.

Reconciliation of Net income (loss) from continuing operations to Adjusted EBITDA

The following tables reconcile net income (loss) from continuing operations, which we consider to be the most comparable GAAP financial measure, to Adjusted EBITDA (in thousands):

(1) Rimports includes the Adjusted EBITDA of the Sterno food service product division from January 1, 2026 through the date of sale, May 1, 2026.

(2) The amount of Other (income) expense at corporate includes the change in the fair value of the receivable due from unconsolidated affiliate ($58.0 million) and the gain on the sale of the Sterno food service product division ($182.3 million).

(3) Other in the six months ended June 30, 2026 includes the add-back of a gain on sale leaseback at Altor.

(1) Other represents specified operating expenses that are included by management in the calculation of Adjusted EBITDA when analyzing monthly operating results of our subsidiaries. In the current year, the calculation of Adjusted EBITDA for Arnold includes the add-back of certain expenses that have been incurred related to the relocation of two of Arnold's facilities in the United States and costs related to the retirement of the chief executive officer at Arnold. For Altor, other includes the add-back of certain expenses incurred related to restructuring of their facilities after the acquisition of Lifoam.

Reconciliation of Net income (loss) to both Adjusted Earnings and Adjusted EBITDA

The following table reconciles Net income (loss), which we consider the most comparable GAAP financial measure, to both Adjusted Earnings and Adjusted EBITDA (in thousands):

Seasonality

Earnings of certain of our operating segments are seasonal in nature due to various recurring events, holidays and seasonal weather patterns, as well as the timing of our acquisitions during a given year. Historically, the third and fourth quarter have produced the highest net sales in our fiscal year.

Related Party Transactions

Management Services Agreement

The LLC entered into a MSA with CGM effective May 16, 2006, as amended. CGM is managed by Wayfinder Partners LLC, of which Zachary T. Sawtelle, the Company’s Chief Operating Officer, is the managing member. Elias J. Sabo, the Company’s Chief Executive Officer, is also member of CGM. CGM performs services for the LLC in

exchange for a management fee. The management fee is required to be paid prior to the payment of any distributions to shareholders.

Pursuant to the MSA, CGM is entitled to enter into off-setting management service agreements with each of the operating segments. The amount of the fee is negotiated between CGM and the operating management of each segment and is based upon the value of the services to be provided. The fees paid directly to CGM by the segments offset on a dollar for dollar basis the amount due CGM by the LLC under the MSA.

Amendment to Management Services Agreement

On February 23, 2026, the LLC and CGM entered into an Eighth Amended and Restated Management Services Agreement (the “Eighth MSA amendment”), which amended and restated the parties’ MSA. The Eighth MSA Amendment, among other things, (i) established a repayment protocol for previously overpaid management fees, including permitting the Company, subject to interest, to fund all or a portion of otherwise payable quarterly fees while an overpayment balance remains outstanding, (ii) provided for a dollar-for-dollar reduction of fees payable under the MSA for certain services outsourced by the Company to third-party service providers and excluded such services from the scope of services to be provided by CGM, (iii) clarified requirements and restrictions applicable to personnel seconded by CGM to the Company, and (iv) updated certain operational, governance, authority and indemnification provisions. On July 12, 2026, the LLC and CGM entered into the Ninth MSA, which became effective upon execution and amends and restates the Eighth MSA. The fee and incentive-award provisions of the Ninth MSA become effective January 1, 2027, and the fee provisions of the Eighth MSA remain applicable through December 31, 2026. Refer to Note P - “Subsequent Events.”

For the three and six months ended June 30, 2026 and 2025, the Company incurred the following management fees to CGM, by entity:

(1) Lugano ceased paying a management fee to CGM in June 2025.

Effect of Restatement on Management Fees

As a result of the restatement of the financial statements as of December 31, 2024, 2023 and 2022 and for the years ended December 31, 2024, 2023 and 2022, as well as for the period ended December 31, 2021 and revisions made in the quarter ended March 31, 2025, the management fees paid to CGM were in excess of the amounts that should have been due under the MSA. While the MSA did not, prior to the Eighth MSA amendment, contain an express mechanism that permitted the Company to immediately clawback the overpayment of management fees during these periods, the MSA provided that future payments would be reduced, on a dollar-for-dollar basis, by the aggregate amount of all overpaid management fees. The Company calculated the total aggregate amount of excess management fees paid as a result of the restatement of the financial statements as $50.4 million. In 2025, restrictions under the Company’s financing arrangements limited the Company’s ability to pay management fees, resulting in management fee expense being incurred but not fully paid. The Company determined that the amount of management fees that had been overpaid at December 31, 2025 was $33.8 million, which was recorded as an asset (“Due from CGM”) and reduced management fee expense for the year ended December 31, 2025. For the six months ended June 30, 2026, the Company recorded management fee expense of $29.8 million. During the six

months ended June 30, 2026, the Company reduced the Due from CGM balance by $14.9 million for management fees applied against the prior overpayment by reducing the management fee due to CGM. As of June 30, 2026, the Due from CGM balance of $6.3 million reflects amounts due from CGM of $19.3 million including interest expense in accordance with the Eighth MSA Amendment, net of management fees accrued of $13.0 million. After June 30, 2026, the Company elected to fund $6.365 million of the quarterly management fee that otherwise would have been payable for the second quarter of 2026.

The Company expects to continue to reduce future management fee payments until the overpayment has been fully recouped.

Integration Services Agreement

No integration service fees were incurred during the six months ended June 30, 2026. During the first quarter of 2025, The Honey Pot Co. paid CGM $0.9 million in integration service fees under an integration services agreement that has since been fully paid. An amendment to the Management Services Agreement entered into in January 2025 eliminated integration service fees for future acquisitions.

Allocation Interests

We have issued Allocation Interests, governed by our LLC agreement, to Sostratus, LLC (the "Holder") to receive distributions pursuant to a profit allocation formula upon the occurrence of certain events. The Holder is entitled to receive, if due pursuant to the profit allocation formula, an allocation payment upon the sale of a business (a "Sale Event") and upon election of the Holder during the 30-day period following the fifth anniversary of the date upon which we acquired a controlling interest in a business (a "Holding Event"). Payments of profit allocation to the Holder are accounted for as dividends declared on Allocation Interests and recorded in stockholders' equity once they are approved by the Company’s board of directors.

The Lugano Bankruptcy was a Sale Event and any corresponding loss on such Sale Event will have the effect of reducing future allocation payments. The LLC Agreement also contains a mechanism to adjust future profit allocation payments by over-paid and under-paid profit distributions. The Company intends to cause future allocation payments to be adjusted, as necessary, to reflect the impact of the restatement of the Company’s financial statements.

The sale of the Sterno food service product division in the second quarter of 2026 was a Sale Event. Although the sale of Sterno resulted in the calculation of a positive profit allocation distribution, no amount will be paid to the Holder as a result of the sale of Sterno as the amount of profit allocation payment due was not sufficient to exceed the high water mark in the profit allocation formula.

5.11

Related Party Vendor Purchases - 5.11 purchases inventory from a vendor who is a related party to 5.11 through one of the executive officers of 5.11 via the executive's 40% ownership interest in the vendor. 5.11 purchased approximately $0.2 million and $0.3 million during the three and six months ended June 30, 2026, respectively, and $0.2 million and $0.6 million during the three and six months ended June 30, 2025, respectively in inventory from the vendor.

BOA

Related Party Vendor Purchases - A contract manufacturer used by BOA as the primary supplier of molded injection parts is a noncontrolling shareholder of BOA. BOA purchased approximately $12.9 million and $24.0 million from this supplier during the three and six months ended June 30, 2026, respectively, and $11.1 million and $23.1 million from this supplier during the three and six months ended June 30, 2025, respectively.

Off-Balance Sheet Arrangements

We have no special purpose entities or off-balance sheet arrangements.

Critical Accounting Policies and Estimates

The preparation of our financial statements in conformity with GAAP requires management to adopt accounting policies and make estimates and judgments that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates under different assumptions and judgments and uncertainties, and potentially could result in materially different results under different conditions. These critical accounting policies and estimates are reviewed periodically by our independent auditors and the audit committee of our board of directors.

Except as set forth below, our critical accounting estimates have not changed materially from those disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the 2025 Form 10-K.

Goodwill and Indefinite-lived Intangible Asset Impairment Testing

Goodwill represents the excess amount of the purchase price over the fair value of the assets acquired. Our goodwill and indefinite lived intangible assets are tested for impairment on an annual basis as of March 31st, and if current events or circumstances require, on an interim basis. Goodwill is allocated to various reporting units, which are generally an operating segment. Each of our subsidiary businesses represents a reporting unit.

Goodwill is tested for impairment at least annually and more frequently when events or changes in circumstances indicate that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount. The determination of whether goodwill is impaired is a critical accounting estimate because it requires management to make significant judgments and assumptions when estimating the fair value of a reporting unit, and small changes in those judgments and assumptions could result in materially different fair value estimates and impairment conclusions. When qualitative factors are not sufficient to conclude that fair value exceeds carrying amount, we perform a quantitative goodwill impairment test and estimate reporting unit fair value using the income approach (discounted cash flow method), the market approach (guideline company multiples), or a weighting of the two methods. Key assumptions and estimates include projected revenue growth, operating margins, terminal growth rate, discount rate (including the weighted-average cost of capital and company-specific risk adjustments), and market multiples for comparable companies. These assumptions are based on historical performance, current and expected market and economic conditions, and our expectations regarding future operating performance; however, actual results may differ from those assumptions. Changes in the assumptions described above, including as a result of adverse changes in macroeconomic conditions, industry trends, competitive dynamics, customer demand, or our operating performance, could reduce the estimated fair value of a reporting unit and result in additional goodwill impairment charges in future periods.

In addition, certain reporting units may have fair values that exceed carrying values by a limited margin and therefore may be more sensitive to changes in key valuation assumptions or adverse business conditions. We continue to monitor these reporting units, including changes in forecasted operating results, customer demand, input costs, interest rates, market multiples and other macroeconomic or industry-specific factors. With respect to the Altor reporting unit, management continues to monitor the impact of adverse macroeconomic conditions, including sustained pressure on material costs, freight and distribution costs, customer demand, and related operating margins. Although these factors have not resulted in the identification of a goodwill impairment triggering event as of June 30, 2026, Altor’s estimated fair value may not continue to exceed its carrying value by a sufficient margin if financial performance declines relative to forecast or if valuation assumptions, including projected revenue growth, margin recovery, discount rates or market multiples, change unfavorably. Accordingly, if current trends persist or worsen, or if Altor does not achieve the operating improvements reflected in management’s forecasts, the reporting unit could become more susceptible to failing a future quantitative impairment assessment, which could result in a goodwill impairment charge in a future period.

Annual Impairment Testing

2026 Annual Impairment Testing

For the Company’s annual goodwill impairment test as of March 31, 2026, the Company performed a qualitative assessment of its reporting units with goodwill balances to determine whether it was more-likely-than-not that the fair value of each reporting unit was less than its carrying amount. Based on this assessment, the Company concluded that it was more-likely-than-not that the fair value of each reporting unit exceeded its carrying amount, except for the PrimaLoft reporting unit. As a result, the Company performed a quantitative goodwill impairment test for the PrimaLoft reporting unit.

The Company estimated the fair value of the PrimaLoft reporting unit using a combination of the income approach (discounted cash flow method) and the market approach (guideline company multiples). Significant assumptions used in the quantitative test included, among others, projected revenue growth, operating margins, the terminal growth rate and the discount rate, each of which reflects management’s best estimates based on historical performance, current market conditions and expectations of future operating performance. The discount rate used in the income approach was 13.4%. The quantitative test indicated that the fair value of the PrimaLoft reporting unit was less than its carrying amount; accordingly, the Company recorded a goodwill impairment charge of $20.5 million during the quarter ended March 31, 2026, which is included in operating income/(loss) in the consolidated statements of operations.

2025 Annual Impairment Testing

For our annual impairment testing at March 31, 2025, we performed a qualitative assessment of our reporting units with goodwill balances. The results of the qualitative analysis indicated that it was more-likely-than-not that the fair value of each of our reporting units except PrimaLoft exceeded their carrying value. Based on our analysis, we determined that the PrimaLoft operating segment required quantitative testing because we could not conclude that the fair value of the reporting unit significantly exceeded the carrying value based on qualitative factors alone. We performed a quantitative test of PrimaLoft using an income approach and a market approach to determine the fair value of the PrimaLoft reporting unit. The discount rate used in the income approach was 11.3%. The results of the testing indicated that the fair value of PrimaLoft exceeded the carrying value by 12.1%.

2025 Interim Impairment Testing

Arnold - During 2025, Arnold was negatively impacted by both production delays related to facility transitions, and supply chain constraints caused by export controls and disruption in the market for rare earth minerals, a key component in certain of Arnold's products. As a result, the operating results of Arnold were below our forecast and prior year results for the business. While Arnold's backlog continued to grow, the production delays and supply chain disruption caused by the export controls led us to determine that a triggering event occurred in the fourth quarter of 2025 and we performed an interim impairment test of goodwill as of October 31, 2025. We performed the impairment test using an income approach. The prospective financial information used in the income approach considered macroeconomic and geopolitical factors, industry and reporting unit specific data, and our best estimate of operational results and cash flows for the Arnold reporting unit as of the date of the impairment testing. The discount rate used in the income approach was 14.2%. The results of the testing indicated that the fair value of Arnold exceeded the carrying value by 77%.

Indefinite-lived intangible asset

The Company's indefinite lived intangible asset consisted of a tradename of approximately $30.8 million related to the Sterno food service business which was held for sale at March 31, 2026, and subsequently sold on May 1, 2026. Accordingly, the Company no longer has an indefinite intangible asset at June 30, 2026. Refer to "Note B - Dispositions" of the condensed consolidated financial statements.

Recent Accounting Pronouncements

Refer to Note A - "Presentation and Principles of Consolidation" of the condensed consolidated financial statements for a discussion of recent accounting pronouncements.