Related Party Transactions |
6 Months Ended |
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Jun. 30, 2026 | |
| Related Party Transactions [Abstract] | |
| Related Party Transactions | 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.
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