pass Diversified LLC(CODI) - 2025 Q2 - Quarterly Report

Financial Performance - Net revenues for Q2 2025 reached $478.69 million, a 12.2% increase from $426.71 million in Q2 2024[24] - Gross profit for the six months ended June 30, 2025, was $404.57 million, compared to $363.14 million for the same period in 2024, reflecting an increase of 11.5%[24] - Operating loss for Q2 2025 was $27.24 million, compared to an operating income of $7.48 million in Q2 2024[24] - Net loss attributable to Holdings for Q2 2025 was $51.22 million, a decrease from $73.05 million in Q2 2024[24] - Basic loss per common share attributable to Holdings for Q2 2025 was $(0.88), compared to $(1.12) in Q2 2024[24] - Total comprehensive loss attributable to Holdings for the six months ended June 30, 2025, was $78.55 million, compared to $133.75 million for the same period in 2024[27] - Net loss for the six months ended June 30, 2025, was $127,682 thousand, compared to a net loss of $188,358 thousand for the same period in 2024, representing a 32.2% improvement[33] - Net loss from continuing operations attributable to common shares for Q2 2025 was $68,884,000, compared to a loss of $83,251,000 in Q2 2024, representing a 17.5% improvement year-over-year[144] - The company reported a net loss from continuing operations for the six months ended June 30, 2025, of $107,355,000, compared to $198,412,000 for the same period in 2024, a 45.9% reduction[146] Assets and Liabilities - Total assets as of June 30, 2025, were $3.27 billion, slightly down from $3.30 billion as of December 31, 2024[21] - Current liabilities increased to $2.54 billion as of June 30, 2025, compared to $2.43 billion at the end of 2024, marking a rise of 4.3%[21] - Total stockholders' equity attributable to Holdings decreased to $601.88 million from $678.62 million at the end of 2024, a decline of 11.3%[21] - The balance of accumulated deficit increased to $(1,141,951) as of June 30, 2025[30] - Total debt as of June 30, 2025, amounted to $1,857.036 million, with a significant portion classified as current due to forbearance agreements[118] Cash Flow and Financing - Cash and cash equivalents increased to $73.76 million from $59.66 million at the end of 2024, representing a growth of 23.6%[21] - Cash used in operating activities for continuing operations was $64,508 thousand for the six months ended June 30, 2025, compared to $93,591 thousand in 2024, indicating a reduction of 30.1%[33] - Cash flows from financing activities generated net cash of $98,378 thousand in the first half of 2025, compared to $41,611 thousand in the same period of 2024, reflecting an increase of 136.1%[35] - Proceeds from the issuance of Trust preferred shares amounted to $58,998 thousand in 2025, significantly higher than $9,803 thousand in 2024[35] - The company entered into a First Amendment to its Credit Agreement, providing for an additional term loan of $200 million and delayed draw commitments of $100 million for acquisitions and working capital[97] Acquisitions and Dispositions - The acquisition of The Honey Pot Co. was completed on January 31, 2024, through a merger and stock purchase agreement, making it a wholly-owned subsidiary[57] - The fair value of identifiable assets acquired from The Honey Pot Co. was $313.2 million, with total liabilities assumed at $42.96 million, resulting in net identifiable assets of $270.29 million[61] - The company completed the sale of Ergobaby, which is reported as discontinued operations for the three and six months ended June 30, 2024[48] - The sale of Crosman Corporation resulted in a loss of $24.6 million, with net proceeds of approximately $61.9 million used to repay intercompany credit[71] Legal and Compliance Issues - The Company reported that it was not in compliance with certain financial covenants under its 2022 Credit Facility, but entered into a Fifth Amendment on December 19, 2025, waiving existing defaults and resetting financial covenants[40][41] - The company has ongoing investigations by the SEC and DOJ related to its financial statements and the conduct at its Lugano subsidiary[179] - The company is currently involved in multiple legal actions, including securities class actions and derivative actions, but cannot estimate the potential loss[172][177] Impairments and Expenses - The company incurred an impairment expense of $31,515 thousand in 2025, compared to $8,182 thousand in 2024, indicating a significant increase in impairment losses[33] - The company recognized an impairment loss of $29.5 million related to property, plant, and equipment and $1.9 million related to right-of-use assets due to the Lugano Investigation[88] - The company experienced a goodwill impairment expense of $8.2 million for Velocity Outdoor in the previous fiscal year, impacting overall financial performance[208] Management and Operational Changes - The company plans to continue its strategy of issuing shares to manage equity and support growth initiatives[30] - The management fees incurred for the quarter ended June 30, 2025, totaled $19.0 million, with an adjusted amount of $14.0 million calculated post-restatement[189] - The company estimates approximately $43.1 million in overpaid management fees as of March 31, 2025, which will reduce future payments on a dollar-for-dollar basis[188] Revenue Recognition and Segment Performance - The company recognizes revenue when control of goods or services is obtained by the customer, excluding sales incentives and taxes[72] - Total revenue for the three months ended June 30, 2025, was $478.69 million, a 12.2% increase from $426.71 million in the same period of 2024[74] - The Honey Pot Co. generated $32.8 million in revenue for the three months ended June 30, 2025, compared to $24.18 million in the same period of 2024, reflecting a 35.7% increase[74] - Total consolidated operating loss for the company was $27.2 million for the three months ended June 30, 2025, compared to an operating income of $7.5 million for the same period in 2024[205][206] Shareholder Distributions - The Company suspended its quarterly cash distribution to common shareholders on May 27, 2025, due to the Lugano Investigation, to preserve cash[131][132] - Total cash distributions for Trust common shares in Q1 2025 amounted to $18,809,000, maintaining a cash distribution per share of $0.25[147] - The Company declared cash distributions for Series A Preferred Shares of $2,120,000 for the period ending April 29, 2025[147] Future Projections and Concerns - The Company continues to evaluate its ability to comply with amended financial covenants, raising substantial doubt about its ability to continue as a going concern[43] - The company expects to contribute approximately $0.2 million to the defined benefit plan for the remainder of 2025[160] - The company intends to adjust future profit allocation payments to reflect the impact of the restatement of its financial statements[193]