CODI

MKT CAP $773.4MP/E —DIV YIELD —FCF YIELD 10.29%REV TTM $1.8B −4.8%NET INCOME −$94.9MNET DEBT $1.5B52W 4.65 – 12.71SEC XBRL · TTM TO Invalid Date

How CODI rewrote its risk factors

10-K ITEM 1A · FY2024 → FY2025

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The following discussion of risk factors should be read in conjunction with the Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth in Part II, Item. 7 and the "Consolidated Financial Statements" and related notes of this Form 10-K.
In addition to the factors affecting our specific operating segments identified in connection with the descriptions of these segments and the financial results of the operations of these operating segments elsewhere in this report, the following discussion sets forth the material risk factors we face which make an investment in us speculative or risky.
Risk Factors Relating to the Lugano Investigation and Restatements We have restated certain of our prior consolidated financial statements as a result of the Lugano Investigation, which resulted in unanticipated costs, litigation against Lugano and the Company and stockholder litigation against the Company, and may result in additional stockholder litigation, regulatory consequences and additional liabilities we are currently unaware of, and may adversely affect investor confidence, our stock price, our ability to raise capital in the future, and our reputation.
As previously disclosed, following concerns reported to the Company’s management, the Company commenced the Lugano Investigation.
As a result of the Lugano Investigation, the Company determined that the Company’s previously issued financial statements for fiscal years 2022, 2023, 2024, and the first three fiscal quarters of 2025 including other interim and full-year financial information should no longer be relied upon.
The Company corrected these errors in its 2024 Form 10K/A which was filed on December 8, 2025, and its Quarterly Reports on Form 10-Q for the first, second, and third quarters of 2025, which were filed on December 18, 2025, December 29, 2025 and January 14, 2026 respectively.
We have incurred unanticipated costs for accounting, financing and legal fees in connection with the Lugano Investigation and the restatements, including those associated with our entry into forbearance agreements, amendments, and waivers with respect to our Credit Agreement and senior note indentures due to potential defaults or events of default thereunder.
The restatements may erode investor confidence in our Company, our financial reporting, accounting practices and processes, and may raise reputational issues for our business.
The Lugano Investigation and the restatement of our historical financial statements have negatively impacted, and may continue to negatively impact, the trading price of our securities, have made it more difficult for us to comply with our debt covenants and tightened our liquidity, and may make it more difficult for us to raise capital on acceptable terms, or at all, in the future.
In light of the Lugano Investigation and related matters, we have taken certain actions to preserve liquidity, including suspending distributions on our common shares, and our ability to access the equity capital markets, including through at-the-market equity offerings, was limited during 2025 in light of the Lugano Investigation and related events.
In addition, the Lugano Investigation, the restatements and related material weaknesses in our internal control over financial reporting have resulted in litigation against Lugano and the Company, and stockholder litigation against the Company, and regulatory investigations and inquiries which may result in adverse regulatory consequences.
As previously disclosed, there are ongoing investigations initiated by the SEC and the U.S.
Department of Justice (“DOJ”), and FINRA conducted a review of trading activity in our securities and referred the matter to the SEC for whatever actions the SEC deemed appropriate, if any.
These and any future regulatory consequences, litigation, claims or disputes, whether successful or not, could subject us to additional costs or liabilities we are currently unaware of, divert the attention of our management, or impair our reputation.
Each of these consequences could have a material adverse effect on our business, results of operations and financial condition.
We have identified material weaknesses in our internal control over financial reporting, which could, if not properly remediated, result in additional material misstatements in our interim or annual consolidated financial statements, impact the Company’s ability to report its results of operations and financial condition accurately and in a timely manner.
If we are unable to remediate these material weaknesses, or if we identify additional material weaknesses in the future or otherwise fail to maintain effective internal control over financial reporting or disclosure controls and procedures, it could result in future material misstatements of our consolidated financial statements or could cause us to fail to meet our periodic reporting obligations, which may adversely affect our business, financial condition, results of operations, investor confidence in our business, or the trading price of our securities.
In connection with the Lugano Investigation and the restatements, we identified material weaknesses in our internal control over financial reporting as of December 31, 2024 and 2025, which are described in more detail in Part II, Item 9A.
“Controls and Procedures” of the 2024 Form 10-K/A and this Form 10-K.
We also determined that our disclosure controls and procedures were not effective as of December 31, 2024 and 2025.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of a company’s consolidated interim or annual financial statements will not be prevented or detected on a timely basis.
If the material weaknesses are not remediated in a timely manner, or if additional material weaknesses in our internal controls over financial reporting are discovered, they may adversely affect our ability to record, process, summarize and report financial information timely and accurately and, as a result, our consolidated interim or annual financial statements may contain material misstatements or omissions.
While the Company has implemented a remediation plan with respect to these material weaknesses, the Company will not be able to conclude whether the steps the Company has taken will remediate the material weaknesses until a sustained period of time has passed to allow management to test the design and operating effectiveness of the new and enhanced controls.
We may be unable to timely file, or may be required to amend, future periodic reports if our remediation efforts are not successful or if we identify additional material weaknesses or control deficiencies.
At this time, we cannot provide an estimate of costs expected to be incurred in connection with continuing to implement our remediation plan or identify a date on which the remediation efforts will be concluded.
However, these remediation measures may be time consuming, may result in us incurring significant costs, and will place significant demands on our financial and operational resources.
Our remediation plan also depends in part on the performance of third parties (including advisors, consultants, and service providers) supporting our financial reporting and internal control environment; if these third parties fail to perform as expected, or if we are unable to retain or recruit qualified personnel, remediation could be delayed or unsuccessful.
Remediation measures we have taken to date and may take in the future may not be sufficient to remediate the control deficiencies that led to our material weaknesses in internal control over financial reporting or prevent or avoid potential future material weaknesses or other significant deficiencies in the future.
The effectiveness of our internal control over financial reporting is subject to various inherent limitations, including cost limitations, judgments used in decision making, assumptions about the likelihood of future events, the possibility of human error and the risk of fraud.
Any failure to design, implement and maintain effective internal control over financial reporting and effective disclosure controls and procedures could harm our results of operations or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods, such as the previous restatements disclosed in the 2024 Form 10-K/A.
Any failure to implement and maintain effective internal control over financial reporting in a timely manner or with adequate compliance could also adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we are required to include in our Annual Reports on Form 10-K.
Ineffective disclosure controls and procedures and internal control over financial reporting could also have a material adverse effect on our business and cause investors to lose confidence in our reported financial and other information, which would likely adversely affect the market price of our common stock.
We may breach certain covenants and other obligations under our Credit Agreement and our senior note indentures.
As a result, our Credit Agreement Lenders may have the right in the future to accelerate our indebtedness and exercise other remedies, which could materially and adversely affect our liquidity, financial condition, and ability to continue as a going concern.
As a result of the Lugano Investigation, the Company was in breach of certain financial and other covenants under its 2022 Credit Facility.
As a result of the Fifth Amendment , the Company is no longer in default under its obligations under the 2022 Credit Facility; however, there is no certainty that the Company will be able to comply with the amended covenants under the 2022 Credit Facility when they are next tested.
If the Company fails to comply with its amended covenants and is determined to be in default under the 2022 Credit Facility, our Credit Agreement Lenders may elect to exercise the remedies available to them, including but not limited to declaring our borrowings under the Credit Agreement due and payable, discontinuing further lending commitments, imposing cash dominion or other cash-management controls, and instructing our debtors and customers (and those of our subsidiaries) to remit payments directly to the Credit Agreement Administrative Agent.
In the event of a future default under the 2022 Credit Facility, if our borrowings under the Credit Agreement are accelerated and the acceleration is not rescinded, annulled, or otherwise cured within thirty (30) days after the notice of acceleration, the holders of our Notes would have the right to declare the Notes due and payable.
Any such outcome in the event of a breach would materially and adversely affect our liquidity, results of operations, financial condition, ability to execute on our business strategies, stock price, and our ability to continue as a going concern, and may require us to seek additional capital, refinance or restructure our indebtedness, sell assets, or pursue other strategic alternatives, none of which may be available on acceptable terms, if at all.
Any new financing, if available, may impose significantly higher costs, require additional restrictive covenants, or result in substantial dilution to our stockholders.

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The following discussion of risk factors should be read in conjunction with the Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) section and the consolidated financial statements and related notes.
In addition to the factors affecting our specific operating segments identified in connection with the descriptions of these segments and the financial results of the operations of these operating segments elsewhere in this report, the most significant factors affecting our operations include the following: Risks Related to Our Business and Structure Our future success is dependent on the employees of our Manager and the management teams of our businesses, the loss of any of whom could materially adversely affect our financial condition, business and results of operations.
The future success of our businesses also depends on their respective management teams because we operate our businesses on a stand-alone basis, primarily relying on existing management teams for management of their day-to-day operations.
We face risks with respect to the evaluation and management of future acquisitions.
In addition, we and our subsidiary companies may have difficulty effectively managing or integrating acquisitions.
We may experience greater than expected costs or difficulties relating to such acquisition, in which case, we might not achieve the anticipated returns from any particular acquisition, our financial condition, business and results of operations.
Such funding may not be available on acceptable terms.
Another source of capital for us may be the sale of additional shares, subject to market conditions and investor demand for the shares at prices that we consider to be in the interests of our shareholders.
The Board may, based on their review of our financial condition and results of operations and pending acquisitions or our tax structure, determine to reduce or eliminate distributions, which may have a material adverse effect on the market price of our shares.
The Trust’s sole asset is its interest in the LLC, which holds controlling interests in our businesses.
Therefore, we are dependent upon the ability of our businesses to generate earnings and cash flow and distribute them to us in the form of interest and principal payments on indebtedness and, from time to time, dividends on equity to enable us, first, to satisfy our financial and tax obligations and second to make distributions to our shareholders.
This ability may be subject to limitations under laws of the jurisdictions in which they are incorporated or organized.
If, as a consequence of these various restrictions, we are unable to generate sufficient receipts from our businesses, we may not be able to declare, or may have to delay or cancel payment of, distributions to our shareholders.
While we receive cash payments from our businesses which are in the form of interest payments, debt repayment and dividends, if any dividends were to be paid by our businesses, they would be shared pro rata with the minority shareholders of our businesses and the amounts of dividends made to minority shareholders would not be available to us for any purpose, including Company debt service or distributions to our shareholders.
Any proceeds from the sale of a business will be allocated among us and the non-controlling shareholders of the business that is sold.
These provisions include, among others: • restrictions on the LLC’s ability to enter into certain transactions with our major shareholders, with the exception of our Manager, modeled on the limitation contained in Section 203 of the Delaware General Corporation Law, or DGCL; • allowing only the LLC’s board of directors to fill newly created directorships, for those directors who are elected by our shareholders, and allowing only our Manager, as holder of a portion of the Allocation Interests, to fill vacancies with respect to the class of directors appointed by our Manager; • requiring that directors elected by our shareholders be removed, with or without cause, only by a vote of 85% of our shareholders; • requiring advance notice for nominations of candidates for election to the Company’s Board or for proposing matters that can be acted upon by our shareholders at a shareholders’ meeting; • having a substantial number of additional authorized but unissued shares that may be issued without shareholder action; • providing the Company’s Board with certain authority to amend the LLC Agreement and the Trust Agreement, subject to certain voting and consent rights of the holders of trust interests and Allocation Interests; and • limitations regarding calling special meetings and written consents of our shareholders.
Our financing arrangements expose us to additional risks associated with leverage, inhibit our operating flexibility and reduce earnings and cash available for distributions to our shareholders.
As of December 31, 2024, we had approximately $1,785 million of consolidated debt outstanding.
This level of consolidated debt could have important consequences, such as (i) limiting our ability to obtain additional financing to fund our potential growth; (ii) increasing the cost of future borrowings; (iii) limiting our ability to use operating cash flow in our other areas of our business because of cash requirements to service our debt; and (iv) increasing our vulnerability to adverse economic conditions.
Our financing arrangements subject the Company to certain customary affirmative and restrictive covenants.
If we violate any of these covenants, our lender may accelerate the maturity of any debt outstanding under our 2022 Credit Facility.
Our ability to meet our debt service obligations may be affected by events beyond our control and will depend primarily upon cash produced by our businesses.
Any failure to comply with the terms of our indebtedness could materially adversely affect us.
Changes in interest rates could materially adversely affect our profitability, ability to service debt, and our business as a whole.
Our 2022 Credit Facility bears interest at floating rates which will generally change as interest rates change.
We bear the risk that the rates we are charged by our lender will increase faster than the earnings and cash flow of our businesses, which could reduce profitability, adversely affect our ability to service our debt, cause us to breach covenants contained in our 2022 Credit Facility and reduce earnings and cash available for distribution, any of which could materially adversely affect us.
The fact that they do not enter into long-term contracts with their customers and clients means that they have no recourse in the event a customer or client no longer wants to use their services or purchase products from them.
The U.S. has recently enacted and proposed to enact significant new tariffs.
Risks Related to Taxation The Trust is subject to U.S. corporate income taxes which reduces the earnings and cash available for distributions to holders of Trust common shares in respect of such investments and could adversely affect the value of Trust common shareholders’ investment.
Following the Election, determinations, declarations, and payments of distributions to holders of Trust common shares will continue to be at the sole discretion of the Company’s Board.
Our distribution policy may be changed at any time at the discretion of the Company’s Board.
In addition, any general changes to tax laws, such as changes to limitations on the deductibility of interest, could result in the Trust or its shareholders paying tax at rates higher than anticipated.
Under the terms of the Management Services Agreement, our Manager cannot be removed as a result of under-performance.
If our Manager resigns, we may not be able to contract with a new manager or hire internal management with similar expertise and ability to provide the same or equivalent services on acceptable terms within 90 days, or at all, in which case our operations are likely to experience a disruption, our financial condition, business and results of operations as well as our ability to pay distributions are likely to be adversely affected and the market price of our shares may decline.
We cannot determine the amount of the management fee that will be paid over time with any certainty.
The management fee paid to CGM for the year ended December 31, 2024 was $74.8 million.
Going forward, the management fee will consist of a base management fee and, if specified performance measure is met under certain circumstances, an incentive management fee.
Such determination would be dependent on the potential sale proceeds received for any of our businesses and the performance of the Company and its businesses over a multi-year period of time, among other factors that cannot be predicted with certainty at this time.
Such factors may have a significant impact on the amount of any profit allocation to be paid.
Likewise, such determination would be dependent on whether certain hurdles were surpassed giving rise to a payment of profit allocation.

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Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2024 ↗, FY2025 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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