CODI 10-K & 10-Q changes, risk factors and insider trading

Risk Factors Relating to the Lugano Investigation and Restatements

We have restated certain of our prior consolidated financial statements as a result of the Lugano Investigation, which resulted in unanticipated costs, litigation against Lugano and the Company and stockholder litigation against the Company, and may result in additional stockholder litigation, regulatory consequences and additional liabilities we are currently unaware of, and may adversely affect investor confidence, our stock price, our ability to raise capital in the future, and our reputation.

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, 2024, and the first three fiscal quarters of 2025 including other interim and full-year financial information should no longer be relied upon. The Company corrected these errors in its 2024 Form 10K/A which was filed on December 8, 2025, and its Quarterly Reports on Form 10-Q for the first, second, and third quarters of 2025, which were filed on December 18, 2025, December 29, 2025 and January 14, 2026 respectively.

We have incurred unanticipated costs for accounting, financing and legal fees in connection with the Lugano Investigation and the restatements, including those associated with our entry into forbearance agreements, amendments, and waivers with respect to our Credit Agreement and senior note indentures due to potential defaults or events of default thereunder. The restatements may erode investor confidence in our Company, our financial reporting, accounting practices and processes, and may raise reputational issues for our business. The Lugano Investigation and the restatement of our historical financial statements have negatively impacted, and may continue to negatively impact, the trading price of our securities, have made it more difficult for us to comply with our debt covenants and tightened our liquidity, and may make it more difficult for us to raise capital on acceptable terms, or at all, in the future. In light of the Lugano Investigation and related matters, we have taken certain actions to preserve liquidity, including suspending distributions on our common shares, and our ability to access the equity capital markets, including through at-the-market equity offerings, was limited during 2025 in light of the Lugano Investigation and related events.

In addition, the Lugano Investigation, the restatements and related material weaknesses in our internal control over financial reporting have resulted in litigation against Lugano and the Company, and stockholder litigation against the Company, and regulatory investigations and inquiries which may result in adverse regulatory consequences. As previously disclosed, there are ongoing investigations initiated by the SEC and the U.S. Department of Justice (“DOJ”), and FINRA conducted a review of trading activity in our securities and referred the matter to the SEC for whatever actions the SEC deemed appropriate, if any. These and any future regulatory consequences, litigation, claims or disputes, whether successful or not, could subject us to additional costs or liabilities we are currently unaware of, divert the attention of our management, or impair our reputation. Each of these consequences could have a material adverse effect on our business, results of operations and financial condition.

We have identified material weaknesses in our internal control over financial reporting, which could, if not properly remediated, result in additional material misstatements in our interim or annual consolidated financial statements, impact the Company’s ability to report its results of operations and financial condition accurately and in a timely manner. If we are unable to remediate these material weaknesses, or if we identify additional material weaknesses in the future or otherwise fail to maintain effective internal control over financial reporting or disclosure controls and procedures, it could result in future material misstatements of our consolidated financial statements or could cause us to fail to meet our periodic reporting obligations, which may adversely affect our business, financial condition, results of operations, investor confidence in our business, or the trading price of our securities.

In connection with the Lugano Investigation and the restatements, we identified material weaknesses in our internal control over financial reporting as of December 31, 2024 and 2025, which are described in more detail in Part II, Item 9A. “Controls and Procedures” of the 2024 Form 10-K/A and this Form 10-K. We also determined that our disclosure controls and procedures were not effective as of December 31, 2024 and 2025. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of a company’s consolidated interim or annual financial statements will not be prevented or detected on a timely basis. If the material weaknesses are not remediated in a timely manner, or if additional material weaknesses in our internal controls over financial reporting are discovered, they may adversely affect our ability to record, process, summarize and report financial information timely and accurately and, as a result, our consolidated interim or annual financial statements may contain material misstatements or omissions.

While the Company has implemented a remediation plan with respect to these material weaknesses, the Company will not be able to conclude whether the steps the Company has taken will remediate the material weaknesses until a sustained period of time has passed to allow management to test the design and operating effectiveness of the new and enhanced controls. We may be unable to timely file, or may be required to amend, future periodic reports if our remediation efforts are not successful or if we identify additional material weaknesses or control deficiencies.

At this time, we cannot provide an estimate of costs expected to be incurred in connection with continuing to implement our remediation plan or identify a date on which the remediation efforts will be concluded. However, these remediation measures may be time consuming, may result in us incurring significant costs, and will place significant demands on our financial and operational resources. Our remediation plan also depends in part on the performance of third parties (including advisors, consultants, and service providers) supporting our financial reporting and internal control environment; if these third parties fail to perform as expected, or if we are unable to retain or recruit qualified personnel, remediation could be delayed or unsuccessful.

Remediation measures we have taken to date and may take in the future may not be sufficient to remediate the control deficiencies that led to our material weaknesses in internal control over financial reporting or prevent or avoid potential future material weaknesses or other significant deficiencies in the future. The effectiveness of our internal control over financial reporting is subject to various inherent limitations, including cost limitations, judgments used in decision making, assumptions about the likelihood of future events, the possibility of human error and the risk of fraud. Any failure to design, implement and maintain effective internal control over financial reporting and effective disclosure controls and procedures could harm our results of operations or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods, such as the previous restatements disclosed in the 2024 Form 10-K/A. Any failure to implement and maintain effective internal control over financial reporting in a timely manner or with adequate compliance could also adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we are required to include in our Annual Reports on Form 10-K. Ineffective disclosure controls and procedures and internal control over financial reporting could also have a material adverse effect on our business and cause investors to lose confidence in our reported financial and other information, which would likely adversely affect the market price of our common stock.

We may breach certain covenants and other obligations under our Credit Agreement and our senior note indentures. As a result, our Credit Agreement Lenders may have the right in the future to accelerate our indebtedness and exercise other remedies, which could materially and adversely affect our liquidity, financial condition, and ability to continue as a going concern.

As a result of the Lugano Investigation, the Company was in breach of certain financial and other covenants under its 2022 Credit Facility. As a result of the Fifth Amendment, the Company is no longer in default under its obligations under the 2022 Credit Facility; however, there is no certainty that the Company will be able to comply with the amended covenants under the 2022 Credit Facility when they are next tested. If the Company fails to comply with its amended covenants and is determined to be in default under the 2022 Credit Facility, our Credit Agreement Lenders may elect to exercise the remedies available to them, including but not limited to declaring our borrowings under the Credit Agreement due and payable, discontinuing further lending commitments, imposing cash dominion or other cash-management controls, and instructing our debtors and customers (and those of our subsidiaries) to remit payments directly to the Credit Agreement Administrative Agent.

In the event of a future default under the 2022 Credit Facility, if our borrowings under the Credit Agreement are accelerated and the acceleration is not rescinded, annulled, or otherwise cured within thirty (30) days after the notice of acceleration, the holders of our Notes would have the right to declare the Notes due and payable.

Any such outcome in the event of a breach would materially and adversely affect our liquidity, results of operations, financial condition, ability to execute on our business strategies, stock price, and our ability to continue as a going concern, and may require us to seek additional capital, refinance or restructure our indebtedness, sell assets, or pursue other strategic alternatives, none of which may be available on acceptable terms, if at all. Any new financing, if available, may impose significantly higher costs, require additional restrictive covenants, or result in substantial dilution to our stockholders. Additionally, the exercise of other remedies available to the Lenders under the Credit Agreement could disrupt our operations by interrupting our supply chain, limiting our ability to pay vendors, delaying customer deliveries, and increase the risk of losing key employees, any of which would materially harm our financial performance and business prospects. These circumstances may also negatively affect our relationships with customers, suppliers, employees, and other stakeholders. They have also required, and will continue to require, substantial management time and increased professional advisory costs.

Our intercompany loan to Lugano is subject to risk of loss.

In November 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. While our intercompany loan to Lugano is secured, the anticipated value of the collateral securing the loan is less than the value of the loan. Our ability to access the collateral may also be limited by bankruptcy and other applicable laws as well as claims by Lugano or its stakeholders attempting to invalidate or subordinate the intercompany loan. There is no assurance that the liquidation of the collateral securing our intercompany loan to Lugano will occur in a timely fashion or that the collateral can be readily liquidated. The amount and timing of any recoveries on our secured position are inherently uncertain and may differ from the amounts reflected in our estimates as of December 31, 2025. Our secured position may be challenged in the bankruptcy proceedings (including through claims seeking to subordinate or recharacterize our claim), and adverse outcomes could materially reduce or eliminate recoveries. In addition, parties in interest in the bankruptcy proceedings or other third parties could assert claims or causes of action against the Company and/or its directors and officers arising out of or relating to Lugano and the bankruptcy proceedings, which could result in substantial defense costs, potential liability or settlement payments, and could further reduce the net amount and timing of any recoveries.

In addition, as previously disclosed, at Lugano’s request and subject to Bankruptcy Court approval, we agreed to provide Lugano with debtor-in-possession financing under Section 364 of the Bankruptcy Code in an amount not to exceed $12.0 million (inclusive of any “roll up” of prepetition indebtedness) (the “Lugano DIP Loan”). The Bankruptcy Court approved the Lugano DIP Loan on an interim basis, but never on a final basis as Lugano determined that it no longer needed the financing. Bankruptcy proceedings are inherently uncertain and may result in delays, additional claims, litigation, administrative expenses, and outcomes that are adverse to us.

We are subject to ongoing government investigations relating to the Lugano matters, and such investigations could result in enforcement actions, penalties, and additional costs.

As previously disclosed, we and our Lugano subsidiary are subject to ongoing investigations initiated by the SEC and the DOJ relating to the Lugano Investigation, the related restatements, and our prior filing delays. Government investigations and enforcement proceedings are inherently uncertain, may take years to resolve, and may require us to devote substantial management time and resources to respond to subpoenas, information requests, interviews, and other investigative steps.

These matters could result in civil or criminal enforcement actions, settlements, fines, penalties, disgorgement, injunctive relief, or other remedies, including undertakings relating to compliance and internal controls. Any such outcomes could adversely affect our reputation, business, results of operations, financial condition, liquidity, and the market price of our securities, and could impair our ability to access the capital markets or refinance existing indebtedness.

We have received notice from the NYSE that we were not in compliance with certain continued listing standards, and if we fail to regain and maintain compliance with NYSE listing standards, our securities could be delisted.

We have received notices from NYSE regarding compliance with certain NYSE continued listing standards. In January 2026, the NYSE notified us that we were not in compliance with the NYSE’s corporate governance listing standards requiring issuers to hold an annual meeting during each fiscal year due to our inability to hold an annual meeting during fiscal 2025, and the NYSE appended a “below compliance” (“.BC”) indicator to our ticker symbols until we regain compliance. Although we intend to regain compliance by holding an annual meeting as soon as practicable in fiscal 2026, there can be no assurance that we will regain compliance within the timeframe expected or that we will not receive additional notices of noncompliance.

In addition, in 2025 the NYSE notified us that we were not in compliance with NYSE’s timely filing requirements due to our inability to timely file certain periodic reports while the Lugano Investigation and the related restatement process were ongoing. While we have resolved our late filings for 2025, if we fail to timely file future periodic reports or otherwise fail to satisfy continued listing requirements, the NYSE may commence delisting procedures. A delisting would likely reduce the liquidity of our securities, increase our cost of capital, limit our ability to access the public capital markets, and could trigger defaults or other adverse consequences under certain agreements.

The success of our branded consumer businesses depends on our ability to maintain the value and reputation of the brand and the failure to do so could reduce profits and adversely impact our financial condition.

The name of our branded consumer businesses is integral to those businesses. Maintaining, promoting, and positioning our branded consumer businesses will depend, in part, on the success of marketing and merchandising efforts and the ability to provide a consistent, high quality products and services. Our branded consumer businesses rely on social media, as one of their marketing strategies, to have a positive impact on both brand value and reputation. The brand and reputation of our branded consumer businesses could be adversely affected if those subsidiaries fail to achieve their objectives, if their public image was to be tarnished by negative publicity, which could be amplified by social media, or if they fail to deliver innovative and high quality products. The reputation of our branded consumer businesses could also be impacted by adverse publicity, whether or not valid, regarding allegations that we or our subsidiaries, or persons associated with us or our subsidiaries or formerly associated with us or our subsidiaries, have violated applicable laws or regulations, including but not limited to those related to safety, employment, discrimination, harassment, whistle-blowing, privacy, corporate citizenship or improper business practices. Additionally, the value of our businesses’ brands may be harmed if our businesses fail to protect their intellectual property. Any harm to the brand or reputation of our subsidiaries could have a material adverse effect on our profitability and financial condition.

We may experience challenges in identifying acquisition targets and, in the event we do acquire a target, we may be unable to effectively integrate or manage such target or it may fail to perform as expected which could adversely impact our financial condition and results of operations.

We rely on distributions and other payments from our operating subsidiaries to meet our obligations and to make distributions to our shareholders, and minority owners of our subsidiaries may reduce amounts available to us.

As of December 31, 2025, we had approximately $1.89 billion of consolidated debt outstanding. Our level of indebtedness, and the debt service obligations associated with it, could have significant adverse consequences, including, among other things: (i) requiring a substantial portion of our cash flows to be used for interest and principal payments, thereby reducing cash available for working capital, capital expenditures, acquisitions, and distributions; (ii) limiting our ability to obtain additional financing (including to refinance existing indebtedness) on acceptable terms, or at all; (iii) increasing our vulnerability to adverse economic, industry, and business conditions, including periods of reduced demand or compressed margins at our subsidiaries; (iv) limiting our flexibility in planning for, or reacting to, changes in our business and the businesses of our subsidiaries; and (v) increasing the cost of future borrowings and/or increasing the likelihood that we would need to sell assets, raise equity (potentially on dilutive terms), or pursue other strategic alternatives to generate liquidity.

Our indebtedness also subjects us and certain of our subsidiaries to restrictive covenants and other contractual requirements, including financial maintenance covenants and limitations on, among other things, additional indebtedness, liens, asset sales, investments, and distributions. These restrictions may limit our operating flexibility and may constrain our ability to respond to changing market conditions or pursue our strategic objectives. If we fail to comply with the covenants or other terms of our indebtedness, we could be required to seek waivers or amendments, which may not be available on acceptable terms, or at all. A covenant breach or other event of default could result in increased borrowing costs, the acceleration of some or all of our indebtedness, the imposition of additional lender controls (including cash management measures), and cross-defaults under other debt instruments, any of which could materially and adversely affect our liquidity and financial condition.

In addition, a portion of our indebtedness—most significantly borrowings under our credit facility—bears interest at floating rates. As a result, increases in benchmark interest rates and/or applicable margins would increase our interest expense and debt service requirements. Higher interest expense could reduce our earnings and cash flows, make it more difficult to comply with financial covenants, reduce cash available for distributions, and adversely affect our ability to refinance indebtedness or incur additional debt. While we may from time to time enter into hedging arrangements to mitigate exposure to interest rate volatility, any such arrangements may not be available on acceptable terms, may not be effective, and may expose us to additional risks, including counterparty risk and potential cash payment obligations.

Any of the foregoing risks could materially and adversely affect our business, results of operations, financial condition, liquidity, and the trading price of our securities.

Our management fee consists of a base management fee and, if specified performance measure is met under certain circumstances, an incentive management fee. Both the base management fee and the incentive management fee are calculated by reference to the Company’s adjusted net assets, which will be impacted by the acquisition or disposition of businesses, which can be significantly influenced by our Manager, as well as the performance of our businesses and other businesses we may acquire in the future. Changes in adjusted net assets and in the resulting management fees could be significant, resulting in a material adverse effect on the Company’s results of operations. In addition, if the performance of the Company declines, assuming adjusted net assets remains the same, management fees will increase as a percentage of the Company’s net income. While the MSA provides for a reduction of future payments due to an overpayment to the Manager, for example as a result of the Lugano Investigation, the timeline of such reductions is subject to negotiation between the Company and the Manager and may delay the return of any overpayments.

Our operations face continuing cybersecurity risks, including information technology and artificial intelligence (“AI”) system or process failures and data breaches, which may result in unexpected and significant remediation costs, increased liabilities, and reputational damage.

We, and our businesses, use a variety of information technology systems in the ordinary course of business, which are potentially vulnerable to cybersecurity attacks, including cybersecurity attacks on our information technology infrastructure and attempts by others to gain access to our proprietary or sensitive information. Cybersecurity threats continue to increase in frequency and sophistication and new developments in the fields of generative AI, machine learning, and robotics may create new vulnerabilities and cybersecurity risks. In addition, our increasing reliance on third-party service providers, including those that may incorporate AI-enabled tools into their products and services, may increase our cybersecurity exposure and reduce our ability to directly control the confidentiality, integrity and availability of our systems and data.

•Forming strong subsidiary-level boards of directors, including independent directors, to supplement management in developing and implementing strategic goals and objectives.

Lugano Investigation and Restatement

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, 2024, and the first three fiscal quarters of 2025 including other interim and full-year financial information should no longer be relied upon. The Company corrected these errors in its 2024 Form 10-K/A which was filed on December 8, 2025, and its Quarterly Reports on Form 10-Q for the first, second, and third quarters of 2025, which were filed on December 18, 2025, December 29, 2025 and January 14, 2026 respectively. The financial information discussed herein reflects the correction of these errors.

* Lugano was deconsolidated on November 16, 2025. The Company retained its equity interest in Lugano at December 31, 2025.

Lugano Bankruptcy and Deconsolidation

On November 16, 2025, Lugano and certain of its subsidiaries filed the Lugano Bankruptcy. As a result of the Lugano Bankruptcy, effective November 16, 2025, Lugano and its subsidiaries were deconsolidated from the Company’s financial statements pursuant to ASC 810 - Consolidation. Refer to "Note C - Deconsolidation" in the accompanying notes to the consolidated financial statements for additional information.

Amendments and Waivers under the 2022 Credit Facility

In 2025, in connection with the Lugano matters and related events of default, the Company entered into the Forbearance Agreements and amendments under its 2022 Credit Facility to provide the Company with time to complete the restatement process and address Lugano-related defaults. These interim arrangements were superseded by the Fifth Amendment to the Credit Agreement and related Transaction Letter described below.

On December 19, 2025, the Company entered into the Fifth Amendment and the related Transaction Letter with the Administrative Agent and the required Lenders. Among other things, the Fifth Amendment and Transaction Letter (i) waived specified Lugano-related events of default that were outstanding prior to the Fifth Amendment, (ii) set the aggregate revolving commitments at $100.0 million, (iii) revised pricing and certain financial and other covenant requirements, including revised financial covenant levels for periods after the quarter ended March 31, 2025, (iv) imposed additional reporting and budgeting requirements (including periodic cash flow forecasting) and restrictions related to Lugano bankruptcy matters, (v) required the Company to use 100% of net cash proceeds from certain dispositions and deleveraging transactions to repay indebtedness, and (vi) imposed additional limitations on certain restricted payments and management fee payments. The Transaction Letter also provides for milestone fees payable to the lenders if certain leverage thresholds are not achieved on specified dates. Please see "Note I - Debt” in the notes to the consolidated financial statements for additional information concerning the 2022 Credit Facility.

Indenture Forbearance and Related PIK Payments

On August 29, 2025, the Company entered into the Indenture Forbearance Agreement with certain holders of its senior notes to provide additional time to complete its restatement and file its delayed periodic reports, and in connection therewith the Company agreed to pay the PIK Payments, which were effected through supplemental indentures dated September 9, 2025. Please see "Note I - Debt” in the notes to the consolidated financial statements for additional information concerning the Senior Notes.

2025 Distributions

Common shares - For the 2025 fiscal year we declared distributions to our common shareholders totaling $0.50 per share. 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.

Preferred shares - For the 2025 fiscal year we declared distributions to our preferred shareholders totaling $1.8125 per share on our Series A Preferred Shares, $1.96875 on our Series B Preferred Shares and $1.96875 on our Series C Preferred Shares.

2026 Outlook and Significant Trends Impacting our Subsidiary Businesses

The macroeconomic environment remains choppy, as geopolitical uncertainty and evolving trade dynamics continue to impact the operating environment; however, we believe that our diversified businesses have characteristics that may help them navigate these conditions, including leading positions in a number of categories and a disciplined focus on operating execution. We continue to monitor how changing market conditions and trade-related costs may impact consumer sentiment and behavior, particularly for discretionary categories purchased by low- and middle-income consumers. While inflation moderated domestically in 2025, price levels for certain inputs remain elevated, and labor costs continue to create margin pressure in certain parts of our business. Although the Federal Reserve reduced interest rates in 2025, the outlook for monetary policy remains uncertain and financial conditions may remain volatile in 2026. Ultimately, our focus remains on disciplined capital allocation, operating execution and balance sheet strength, supported by our permanent capital structure and the quality of our subsidiaries.

Geopolitics and Trade Policy

Geopolitical conditions were volatile throughout 2025 and we expect geopolitical uncertainty to persist in 2026. Our subsidiaries have, over time, taken actions to diversify sourcing and reduce concentrated exposure to China; however, trade-war dynamics have broadened, and the risk of new or expanded tariffs across multiple regions and product categories remains a headwind. The rare earth and strategic minerals dispute created significant disruption for one of our subsidiaries, Arnold Magnetic Technologies, including constraints on its ability to ship certain products out of China due to heightened export licensing requirements. Over the longer term, these dynamics could support higher demand for Arnold’s solutions as customers seek more resilient and predictable sourcing and supply chain alternatives; however, the timing and magnitude of any such demand shift remains uncertain. During 2025, our businesses incurred increased costs and working capital requirements due to inventory pre-buys and front-loading of goods ahead of anticipated tariff actions and supply uncertainty. The extent to which similar actions are needed in 2026 will depend on the timing and scope of trade policy changes and the level of supply chain disruption. The Company continues to monitor tariff policies and tariff announcements, including various executive orders issued subsequent to year-end and will adjust its strategies to mitigate the impact of tariffs as trade policy evolves.

Technology and AI Investment

AI-related investment has been a meaningful contributor to global economic activity, but the durability of that cycle and its broader impacts remain uncertain. The effect of AI adoption on productivity and employment trends is unclear over the short, medium, and long term. We remain focused on targeted, ROI-driven technology investments to enhance operational efficiency at the subsidiary level, while maintaining disciplined capital allocation as these technologies evolve.

Our near-term focus is on strengthening the balance sheet and enhancing financial flexibility. In 2026, we expect to prioritize deleveraging through organic free cash flow generation and selective strategic actions, while continuing to execute our strategy and operating playbook across our subsidiaries.

The Company anticipates that the areas of focus for 2026, which are generally applicable to each of our businesses, include:

•Generating free cash flow through increased net income, disciplined capital investment, and effective working capital management, while maintaining flexibility amid a choppy operating environment;

•Driving profitable growth through new product development, expanded distribution, and new customer acquisition where returns are attractive;

•Managing pricing and costs by implementing pricing actions where appropriate and executing productivity and cost initiatives to protect margins in the face of inflation, tariffs, and other input cost volatility;

•Evaluating strategic alternatives and actions for certain businesses, where doing so would enhance financial flexibility and improve risk-adjusted returns;

•Pursuing opportunities to take market share where possible in our niche market-leading businesses as customers prioritize reliability, quality, and supplier resiliency;

•Continuing to strengthen our supply chain resilience through supplier diversification, improved planning and inventory management, and ongoing enhancements in manufacturing and operational capabilities;

•Leveraging technology, including targeted AI initiatives, to improve efficiency, decision-making, and service levels, while maintaining a disciplined, ROI-driven approach to investment; and

•Continuing to enhance our governance and oversight practices, and, as appropriate, financial reporting processes and internal controls.

The following discussion reflects a comparison of the historical results of operations of our consolidated business for the years ended December 31, 2025, 2024 and 2023, and components of the results of operations as well as those components presented as a percent of net revenues, for each of our businesses on a standalone 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. Any retained interest recognized in connection with deconsolidation was measured at fair value and reflects the Company’s estimate of recoveries expected from the bankruptcy proceedings as of December 31, 2025.

* 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.

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.

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.

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.

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.

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.

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.

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.

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.