Company: CODI-PB
Filing Date: 2025-02-27
Form Type: 10-K
Source: 0001345126-25-000015
Chunk: 57

Company: Compass Diversified Holdings
Filing Date: 2025-02-27
Form: 10-K
Item: Item 7
Chunk 57
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 we have recapitalized, and expect to continue to recapitalize, these businesses in the normal course of our business. The recapitalization process involves funding the intercompany debt using either cash on hand at the parent or our revolving credit facility, and serves the purpose of optimizing the capital structure at our subsidiaries and providing the noncontrolling shareholders with a distribution on their ownership interest in a cash flow positive business.  

We have made several amendments to the Lugano intercompany credit agreement to allow Lugano to continue to expand its operations and build inventory to support its salon expansion. Amendments were made to the Lugano intercompany credit agreement in the first, second, third and fourth quarter of 2024, the second, third and fourth quarter of 2023 and the second and fourth quarter of 2022. We expect to continue to fund Lugano to support profitable sales growth.

In the first quarter of 2024, we amended the PrimaLoft intercompany credit agreement to amend the fixed charge ratio and leverage ratio covenants contained within its intercompany credit agreement.

104

In the second quarter of 2024, we amended the Velocity intercompany credit agreement to reflect the sale of the Crosman division. The amendment revises the principal payments due under the credit facility and waives the fixed charge coverage covenant for the quarters ended June 30, 2024 and September 30, 2024.

In the third quarter of 2024, we amended the Arnold intercompany credit agreement to increase the amount of the term loan outstanding under the credit agreement and to increase the amount of capital expenditures permitted under the credit agreement. Arnold was in the process of relocating two of their product divisions to a new facility and expected to incur approximately $10 million in capital expenditures and $7 - $8 million in expenses during the third and fourth quarter of 2024 and the first quarter of 2025, with a majority of the spend in the fourth quarter of 2024. Arnold exceeded the capital expenditure spend that was permitted under the amendment and was granted a waiver at December 31, 2024.

In the fourth quarter of 2024, we amended the Altor intercompany credit agreement to increase the amount of the term loan to finance the acquisition of Lifoam on October 1, 2024, and extended the term of the intercompany credit agreement by an additional three years.

In the second quarter of 2023, we amended the Velocity intercompany credit agreement to extend the term of the facility and to