Right-of-Use Asset Obtained in Exchange for Operating Lease Liability

$ 15,813

$ 2,205

ote 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):


	Operating		Finance		Total
2026 (excluding the six months ended June 30, 2026)	$	27,135	$	359	$	27,494
2027	49,190		7,040		56,230
2028	39,550		—		39,550
2029	29,780		—		29,780
2030	25,867		—		25,867
Thereafter	79,041		—		79,041
Total undiscounted lease payments	$	250,563	$	7,399	$	257,962
Less: Interest	90,770		558		91,328
Present value of lease liabilities	$	159,793	$	6,841	$	166,634

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:


Lease Term and Discount Rate	June 30, 2026		June 30, 2025
Weighted-average remaining lease term (years)
Operating Leases	6.57		5.96
Finance Leases	0.83		1.83
Weighted-average discount rate
Operating Leases	8.87	%	8.88	%
Finance Leases	9.90	%	9.90	%

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


	Line Item in the Company’s Consolidated Balance Sheet	June 30, 2026		December 31, 2025

Assets:
Operating lease right-of-use assets	Other non-current assets	$	143,712	$	146,755
Finance lease right-of-use assets	Other non-current assets	6,881		$	6,881
		$	150,593	$	153,636
Liabilities
Operating lease liabilities - current	Other current liabilities	$	35,568	$	37,854
Operating lease liabilities - non-current	Other non-current liabilities	124,225		126,084
Finance lease liabilities - current	Other current liabilities	6,841		47
Finance lease liabilities - non-current	Other non-current liabilities	—		6,820
		$	166,634	$	170,805

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


	Six months ended June 30, 2026		Six months ended June 30, 2025
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	25,628	$	27,400
Operating cash flows from finance leases	334		336
Financing cash flows from finance leases	26		23
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	15,813	$	2,205

Lease, Right-of-Use Asset

$ 150,593

$ 153,636

Operating Lease, Liability, Noncurrent

124,225

126,084

Finance Lease, Liability, Noncurrent

6,820

Operating Lease, Right-of-Use Asset

143,712

146,755

Business Exit Costs

$ 900

Other Commitments [Line Items]