Company: CODI-PB
Filing Date: 2025-12-08
Form Type: 10-K/A
Source: 0001345126-25-000078
Chunk: 290

Company: Compass Diversified Holdings
Filing Date: 2025-12-08
Form: 10-K/A
Chunk 290
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 contribution. According to the terms of the arrangement, the third-party investors made an upfront payment to Lugano in exchange for the right to receive a return of their initial investment plus either (i) a portion of the profit when the jewelry was sold to a buyer, or (ii) interest on their invested cash if the third-party requested to liquidate their investment prior to the sale of the specified jewelry to a buyer. Lugano also entered into financing arrangements that were not specific to the acquisition of a specified jewel or piece of jewelry. These arrangements involved cash receipts that were recorded as payment of accounts receivable balances or customer deposits and cash payments that were recorded as inventory purchases or purchase deposits. Other financing arrangements with third parties involved the receipt of cash by Lugano from third parties and repayment of cash to those third parties that was not associated with purported investment in a specified jewel or piece of jewelry.

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 represent debt and the financing arrangements and related interest expense have been recorded in the restated 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 relevant to the arrangement such as applicable statutorily-required default interest rates. Arrangements that entitled third-party investors to a profit share from the fictitious sales were reported as interest expense based on the cash payment when settled. Management is unable to estimate any potential profit share associated with unsettled financing arrangements since the underlying sales transactions were not valid. The Lugano financing arrangements have been classified as current in the accompanying consolidated balance sheets for the years ended December 31, 2024, 2023 and 2022.

The following table provides the Lugano financing arrangements and effective interest rates at December 31, 2024, December 31, 2023 and December 31, 2022 (in thousands) :

|                               |     |                         | December 31, 2024 |   |     |        |     |         |     |                         | December 31, 2023 |   |     |        |     |         |     |                         | December 31, 2022 |   |     |        |     |        |
|:------------------------------|:----|:------------------------|------------------:|:--|:----|:-------|: