"We are pleased to have completed this extensive restatement process. The financial and accounting fraud perpetrated by the former CEO of Lugano Holding, Inc. ("Lugano") was pervasive, complex and isolated to Lugano. Our restatement is an important step in putting this chapter behind us," said Elias Sabo, CEO of CODI. "We are focused on reducing our leverage and continuing to execute on the strategy that has made CODI successful since inception: managing and growing high-quality middle-market companies to generate durable, long-term value for our shareholders."
"Importantly, our eight other subsidiaries were not involved with the events at Lugano and, collectively, continue to perform well. Their execution highlights the strength of these businesses and the resilience of our business model," Sabo continued. "As a result, we are adjusting our full year 2025 guidance for Subsidiary Adjusted EBITDA to between $330 million and $360 million, which is consistent with our prior guidance, when you exclude Lugano."
Sabo added, "We are in active discussions with our senior lenders regarding an amendment to our credit agreement that would provide additional relief and flexibility with respect to our current leverage profile and certain other covenants. We currently anticipate announcing an amendment in the coming weeks."
In the coming weeks CODI also expects to file 2025 first, second and third quarter financial results on Form 10-Q, which will bring the Company back into compliance with the Securities and Exchange Commission's annual and quarterly filing requirements.
Note Regarding Use of Non-GAAP Financial Measures
Adjusted EBITDA is a non-GAAP measure used by the Company to assess its performance. We have reconciled Adjusted EBITDA to Income (Loss) from Continuing Operations on the attached schedules. We consider Income (Loss) from Continuing Operations to be the most directly comparable GAAP financial measure to Adjusted EBITDA. We believe that Adjusted EBITDA provides useful information to investors and reflects important financial measures as it excludes the effects of items which reflect the impact of long-term investment decisions, rather than the performance of near-term operations. When compared to Income (Loss) from Continuing Operations, Adjusted EBITDA is limited in that it does not reflect the periodic costs of certain capital assets used in generating revenues of our businesses or the non-cash charges associated with impairments, as well as certain cash charges. The presentation of Adjusted EBITDA allows investors to view the performance of our businesses in a manner similar to the methods used by us and the management of our businesses, provides additional insight into our operating results and provides a measure for evaluating targeted businesses for acquisition.
In reliance on the unreasonable efforts exception provided under Item 10(e)(1)(i)(B) of Regulation S-K, we have not reconciled 2025 Subsidiary Adjusted EBITDA to its comparable GAAP measure because we do not provide guidance on Net Income (Loss) from Continuing Operations or the applicable reconciling items as a result of the uncertainty regarding, and the potential variability of, these items. For the same reasons, we are unable to address the probable significance of the unavailable information, which could be material to future results.
Adjusted EBITDA is not meant to be a substitute for GAAP measures and may be different from or otherwise inconsistent with non-GAAP financial measures used by other companies.
Forward Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including without limitation, CODI's expectations with respect to the timing of its delinquent financial statements, CODI's expectations regarding its future performance, liquidity and leverage, the future performance of CODI's subsidiaries, potential amendments to CODI's credit agreement and potential relief granted by CODI's lenders and the filing or delay of CODI's periodic reports. Such forward-looking statements may be identified by, among other things, the use of forward-looking terminology such as "believe," "expect," "may," "could," "would," "plan," "intend," "estimate," "predict," "potential," "continue," "should" or "anticipate" or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties. These statements are based on beliefs and assumptions by CODI's Board of Directors and management, and on information currently available to CODI's Board of Directors and management. These statements involve risk and uncertainties that could cause CODI's actual results and outcomes to differ, perhaps materially, including but not limited to: the discovery of additional information relevant to the Lugano investigation; a further material delay in CODI's financial reporting or ability to hold an annual meeting of stockholders; the impacts of restatement; CODI's ability to regain compliance with NYSE continued listing requirements; the cooperation of, and future concessions granted by, CODI's lenders; control deficiencies identified or that may be identified in the future that will result in material weaknesses in CODI's internal control over financial reporting; and litigation relating to the investigation, including CODI's representations regarding its financial statements, and current and future litigation, enforcement actions or investigations relating to CODI's internal controls, restatement reviews, the Lugano investigation or related matters. Please see CODI's Amendment No. 1 to Annual Report on Form 10-K/A for the year ended December 31, 2024 filed with the SEC on December 8, 2025 for other risk factors that you should consider in connection with such forward-looking statements. Investors are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date such statements have been made. Except as required by law, CODI does not undertake any public obligation to update any forward-looking statements to reflect events, circumstances, or new information after the date of this press release, or to reflect the occurrence of unanticipated events.
Investor Relations
Compass Diversified
Compass Diversified HoldingsCondensed Consolidated Balance Sheets
(in thousands)
December 31, 2024(As Restated)
December 31, 2023(As Restated)
Assets
Current assets
Cash and cash equivalents
$
59,659
$
446,616
Accounts receivable, net
207,172
185,237
Inventories, net
571,248
522,509
Prepaid expenses and other current assets
126,692
77,769
Current assets of discontinued operations
—
36,915
Total current assets
964,771
1,269,046
Property, plant and equipment, net
244,746
191,283
Goodwill
895,916
773,569
Intangible assets, net
983,396
808,344
Other non-current assets
208,593
195,016
Non-current assets of discontinued operations
—
87,883
Total assets
$
3,297,422
$
3,325,141
Liabilities and stockholders' equity
Current liabilities
Accounts payable
$
103,239
$
90,708
Accrued expenses
318,476
237,817
Due to related parties
18,036
16,025
Current portion, long-term debt
1,774,290
1,671,879
Subsidiary financing arrangements
169,765
100,741
Other current liabilities
49,617
34,812
Current liabilities of discontinued operations
—
8,986
Total current liabilities
2,433,423
2,160,968
Deferred income taxes
108,091
103,264
Other non-current liabilities
225,334
203,207
Non-current liabilities of discontinued operations
—
1,277
Total liabilities
2,766,848
2,468,716
Stockholders' equity
Total stockholders' equity attributable to Holdings
678,620
929,660
Noncontrolling interest
(148,046
)
(89,991
)
Noncontrolling interest of discontinued operations
—
16,756
Total stockholders' equity
530,574
856,425
Total liabilities and stockholders' equity
$
3,297,422
$
3,325,141
Compass Diversified HoldingsConsolidated Statements of Operations
Year ended December 31,
(in thousands, except per share data)
2024(As Restated)
2023(As Restated)
Net revenues
$
1,788,013
$
1,689,920
Cost of revenues
1,037,594
1,015,200
Gross profit
750,419
674,720
Operating expenses:
Selling, general and administrative expense
587,521
502,013
Management fees
74,767
67,945
Amortization expense
94,817
83,574
Impairment expense
8,182
90,597
Operating income (loss)
(14,868
)
(69,409
)
Other income (expense):
Interest expense, net
(122,802
)
(109,892
)
Amortization of debt issuance costs
(4,018
)
(4,038
)
Loss on sale of Crosman
(24,218
)
—
Other income (expense), net
(143,304
)
(83,114
)
Net income (loss) before income taxes
(309,210
)
(266,453
)
Provision for income taxes
18,612
8,198
Income (loss) from continuing operations
(327,822
)
(274,651
)
Income (loss) from discontinued operations, net of income tax
(6,905
)
24,208
Gain on sale of discontinued operations
11,957
283,025
Net income
(322,770
)
32,582
Less: Net income (loss) attributable to noncontrolling interest
(111,025
)
(75,761
)
Less: Net income (loss) from discontinued operations attributable tononcontrolling interest
(2,884
)
(304
)
Net income attributable to Holdings
$
(208,861
)
$
108,647
Basic income (loss) per common share attributable to Holdings
Continuing operations
$
(3.94
)
$
(3.57
)
Discontinued operations
0.11
4.27
$
(3.83
)
$
0.70
Basic weighted average number of common shares outstanding
75,454
72,105
Cash distributions declared per Trust common share
$
1.00
$
1.00
Restatement of Previously Issued Consolidated Financial Statements
The Company has restated its consolidated financial statements for the fiscal years ended December 31, 2024 and 2023 below. Below is a summary description of the significant adjustments made in connection with the restatement of the Consolidated Balance Sheet and Consolidated Statement of Operations for the fiscal years ended December 31, 2024 and 2023:
Consolidated Balance Sheets
ADJ 1
Accounts Receivable - amounts were recorded at Lugano as accounts receivable which did not represent activity associated with a valid revenue transaction.
ADJ 2
Inventory and Other Current Assets - amounts were recorded at Lugano as purchases of inventory or vendor prepayments which did not represent valid purchases. Invalid inventory transactions were also recorded in connection with barter purchases of jewelry or gems from customers in exchange for reducing accounts receivable transactions, and in connection with invalid revenue transactions. Other current assets increased as a result of the revised Lugano tax provision and a tax receivable that was recorded in each of the years presented in the consolidated financial statements.
ADJ 3
Goodwill and Intangible Assets - the purchase price allocation of the assets acquired and liabilities assumed in the acquisition of Lugano in September 2021 was based upon materially incorrect financial information. As a result, the Company re-performed the purchase price allocation, which resulted in a change in the fair value of the intangible assets acquired and the calculation of goodwill. Additionally, due to the adjustments to historical financial information that resulted from the Lugano Investigation, the Company determined that a triggering event had occurred as of December 31, 2021 and December 31, 2022 and performed impairment testing of the goodwill and definite lived intangibles at Lugano as of these dates, resulting in the impairment of these balances.
ADJ 4
Accrued expenses - Unrecorded liabilities related to inventory transactions at Lugano and accrued interest associated with the Lugano Financing Arrangements have been recorded in the consolidated balance sheets
ADJ 5
Financing arrangements - Lugano entered into various financing arrangements with third parties that were not previously recorded in the historical financial statements of Lugano as debt. In connection with the Lugano Investigation, the Company determined that certain cash recorded as reduction of accounts receivable or purchases of inventory actually represented unrecorded financing arrangements made with third parties to purportedly jointly invest with Lugano in the purchase of a specified jewelry piece. These arrangements represent debt that has been recorded on the Company's consolidated balance sheets as such.
ADJ 6
Noncontrolling interest - the correction of the misstatements resulted in a decrease in the balance of noncontrolling interest at Lugano, and reduced the noncontrolling income that previously had been recorded related to Lugano.
Consolidated Statement of Operations
ADJ 7
Net revenues - net revenues at Lugano were overstated in each of the periods presented as a result of the recording of invalid revenue transactions or the misrepresentation of funds received as revenue.
ADJ 8
Cost of revenues - cost of revenues at Lugano was overstated in each of the periods presented as a result of the recording of the cost of revenues associated with invalid revenue transactions and the misapplication of funds paid as inventory purchases.
ADJ 9
Interest expense, net - interest expense associated with the Lugano financing arrangements described above have been recorded in the consolidated statement of operations in each of the periods presented.
ADJ 10
Other income (expense), net - reflects the expense recognized at Lugano related to losses resulting from the accounting for the transactions associated with the Lugano financing arrangements.
ADJ 11
Income tax provision (benefit) - the income tax provision (benefit) at Lugano has been recalculated in each of the periods presented as a result of the effect of the aforementioned adjustments to the consolidated statement of operations.
Compass Diversified Holdings Consolidated Balance Sheet
December 31, 2024
ADJReference
As Reported
Adjustments
As Restated
Assets
Current assets:
Cash and cash equivalents
$
59,727
(68
)
$
59,659
Accounts receivable, net
ADJ 1
444,386
(237,214
)
207,172
Inventories, net
ADJ 2
962,408
(391,160
)
571,248
Prepaid expenses and other current assets
ADJ 2
101,129
25,563
126,692
Total current assets
1,567,650
(602,879
)
964,771
Property, plant and equipment, net
244,746
—
244,746
Goodwill
ADJ 3
982,253
(86,337
)
895,916
Intangible assets, net
ADJ 3
1,049,186
(65,790
)
983,396
Other non-current assets
208,587
6
208,593
Total assets
$
4,052,422
$
(755,000
)
$
3,297,422
Liabilities and stockholders' equity
Current liabilities:
Accounts payable
104,304
(1,065
)
103,239
Accrued expenses
ADJ 4
197,829
120,647
318,476
Due to related parties
18,036
—
18,036
Current portion, long-term debt(1)
15,000
1,759,290
1,774,290
Subsidiary financing arrangements
ADJ 5
—
169,765
169,765
Other current liabilities
49,617
—
49,617
Total current liabilities
384,786
2,048,637
2,433,423
Deferred income taxes
119,948
(11,857
)
108,091
Long-term debt(1)
1,759,290
(1,759,290
)
—
Other non-current liabilities
225,334
—
225,334
Total liabilities
2,489,358
277,490
2,766,848
Stockholders' equity
Trust preferred shares, 50,000 authorized; 17,497 sharesissued and outstanding at December 31, 2024
Series A preferred shares, no par value, 4,551 sharesissued and outstanding at December 31, 2024
109,159
—
109,159
Series B preferred shares, no par value, 6,192 sharesissued and outstanding at December 31, 2024
147,906
—
147,906
