XML 40 R25.htm IDEA: XBRL DOCUMENT v3.25.3
Commitments and Contingencies
12 Months Ended
Dec. 31, 2024
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies Commitments and Contingencies (As Restated)
Leases
The Company and its subsidiaries lease office and manufacturing facilities, computer equipment and software under various operating 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 years ending December 31, 2024, 2023 or 2022.
The maturities of lease liabilities at December 31, 2024 having an initial or remaining non-cancelable term of one year or more are as follows (in thousands):
OperatingFinanceTotal
2025$53,048 $719 $53,767 
202653,868 719 54,587 
202745,721 7,040 52,761 
202835,389 — 35,389 
202926,003 — 26,003 
Thereafter70,674 — 70,674 
Total undiscounted lease payments$284,703 $8,478 $293,181 
Less: Interest67,946 1,570 69,516 
Present value of lease liabilities$216,757 $6,908 $223,665 
The Company’s rent expense for the fiscal years ended December 31, 2024, 2023 and 2022 totaled $53.9 million, $50.3 million and $41.9 million, respectively. The Company entered into a finance lease during the year ended December 31, 2024. The amortization and interest related to this lease was not material in 2024.
The calculated amount of the right-of-use assets and lease liabilities in the table above 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 leases were as follows:
Lease Term and Discount RateDecember 31, 2024December 31, 2023December 31, 2022
Weighted-average remaining lease term (years)
     Operating Leases6.056.776.49
     Finance Leases2.33N/aN/a
Weighted-average discount rate
     Operating Leases8.90 %8.5 %7.77 %
     Finance Leases9.90 %N/aN/a
Supplemental balance sheet information related to leases was as follows (in thousands):
Line Item in the Company’s Consolidated Balance SheetDecember 31, 2024December 31, 2023December 31, 2022
Assets:
   Operating lease right-of-use assetsOther non-current assets$191,639 $177,323 $143,466 
   Finance lease right-of-use assetsOther non-current assets6,882 — — 
$198,521 $177,323 $143,466 
Liabilities:
   Operating lease liabilities - currentOther current liabilities$38,180 $28,997 $26,856 
   Operating lease liabilities - non-currentOther non-current liabilities178,577 173,558 137,085 
   Finance lease liabilities - currentOther current liabilities42 — — 
   Finance lease liabilities - non-currentOther non-current liabilities6,866 — — 
$223,665 $202,555 $163,941 
Supplemental cash flow information related to leases was as follows (in thousands):
Year ended December 31, 2024Year ended December 31, 2023Year ended December 31, 2022
Cash paid for amounts included in the measurement of lease liabilities:
     Operating cash flows from operating leases$47,688 $39,806 $36,239 
     Operating cash flows from finance leases447 — — 
     Financing cash flows from finance leases21 — — 
Right-of-use assets obtained in exchange for lease obligations:
     Operating leases$27,477 $61,560 $56,945 
     Finance leases6,883 — — 
Legal Proceedings
General Matters
The Company and its subsidiaries are subject to legal proceedings and claims that arise in the ordinary course of business. A liability for a loss contingency is accrued when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. For all other material loss contingencies, including those where the loss is reasonably possible or where the amount cannot be reasonably estimated, the Company discloses the nature of the contingency. The Lugano Investigation and the restatement of our previously issued consolidated financial statements for the periods ended at December 31, 2024, 2023 and 2022 has resulted in certain litigation and may result in additional stockholder litigation, regulatory investigations and additional liabilities in future periods.
State Court Action Naming Lugano and the Company as Defendants
On July 24, 2025, a complaint was filed against Lugano, the Company and others in California State Court, styled Champion Force Industrial Limited v. Lugano Diamonds & Jewelry Inc., et al., asserting claims for breach of contract, goods had and received, conversion, fraud, promissory estoppel, unjust enrichment, and fraudulent conveyance. The plaintiff is a vendor of diamonds and finished jewelry to Lugano and seeking in excess of $56.4 million in damages, principally for unpaid goods. The foregoing matter is in the early stages and the Company is currently unable to determine the likelihood of an unfavorable outcome.
As noted below under the heading Impact of Lugano Chapter 11 Filing on Lugano Claims and Litigation this matter is subject to an automatic stay that prohibits, among other things, the continuation of this action against Lugano, as debtor, outside of the bankruptcy process. If Lugano is determined to be a necessary party to this litigation, it is possible that the litigation may also be stayed as against the Company. Presently, the Company currently remains a
defendant in this case but believes that it can avail itself of certain defenses to these claims and intends to vigorously defend itself.
The Company has recorded an accrual of $49.8 million as of December 31, 2024 related to certain current contractual obligations to Lugano’s vendors, including Champion, in accordance with applicable accounting standards. Accordingly, the Company intends to avail itself of all available defenses in the Champion litigation. The Company is unable to reasonably estimate any additional loss or range of possible loss, if any, that may result from the Champion litigation or whether such loss or range of possible loss would be less than, equal or exceed the amounts accrued in respect of Lugano’s contract with Champion.
Lugano-Specific Claims and Threatened Claims
During the period from approximately April 1, 2025 to November 21, 2025, litigation has been threatened and initiated by counterparties to transactions that appear to have been overseen by Lugano’s former CEO, Moti Ferder, who resigned effective May 7, 2025. The vast majority involve purported investment arrangements whereby the claimant delivered a specified dollar amount to Lugano in exchange for either (a) a profits interest in the future sale of a specified diamond(s), or (b) a guaranteed interest rate (collectively, “Diamond Financing Arrangements”).
Certain Diamond Financing Arrangements are the subject of current litigation, primarily in California State court, and the majority of the plaintiffs in these cases have presented similar fact patterns and are primarily seeking damages for alleged losses of principal amounts invested (“Diamond Financing Litigation”). The total damages being sought by all plaintiffs in Diamond Financing Litigation, is approximately $32.2 million, plus interest and penalties, in most cases. The Diamond Financing Litigation is in the early stages and the Company is currently unable to determine the likelihood of an unfavorable outcome for any or all of these cases. At this time, management has determined that a loss is reasonably possible; however, management cannot currently reasonably estimate such loss or range of potential loss associated with the Diamond Financing Litigation.
As noted below under the heading Impact of Lugano Chapter 11 Filing on Lugano Claims and Litigation the Diamond Financing Litigation is subject to an automatic stay that prohibits, among other things, the continuation of these actions against Lugano, as debtor, outside of the bankruptcy process. The Company was named in a co-defendant in one Diamond Financing Litigation matter for which the plaintiff is seeking approximately $1.4 million in damages, plus interest and penalties. If Lugano is determined to be a necessary party to this litigation, it is possible that the litigation may also be stayed as against the Company. Nonetheless, the Company believes that it can avail itself of certain defenses to this claim and intends to vigorously defend itself.
While not the subject of active litigation, claims have been asserted against Lugano and legal action has been threatened by parties to alleged Diamond Financing Arrangements (the “Diamond Financing Arrangement Claims”). At this time, management has determined that a loss resulting from the Diamond Financing Arrangement Claims is reasonably possible; however, management cannot currently reasonably estimate such loss or range of potential loss.
The Company has recorded an accrual of $169.8 million as of December 31, 2024 of estimated principal as short-term debt and interest expense in its consolidated financial statements related to previously undisclosed financing arrangements at Lugano, in accordance with applicable accounting standards, although such financing arrangements are subject to dispute. Accordingly, the Company intends to avail itself of all available defenses in the Diamond Financing Litigation (or any Diamond Financing Arrangement Claim or other Diamond Financing Arrangements for which claims may arise). The Company is unable to reasonably estimate any additional loss or range of possible loss, if any, that may result from the Diamond Financing Litigation (or any Diamond Financing Arrangement Claim or other Diamond Financing Arrangements for which claims may arise) or whether such loss or range of possible loss would be less than, equal to or exceed the amounts accrued in respect of the previously undisclosed financing arrangements at Lugano.
Impact of Lugano Chapter 11 Filing on Lugano Claims and Litigation
On November 16, 2025, Lugano Holding, Inc. and certain of its subsidiaries, including Lugano, filed voluntary Chapter 11 petitions under the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. Upon the filing of a bankruptcy petition, Section 362 of the Bankruptcy Code imposes an automatic stay that prohibits, among other things, the commencement or continuation of numerous actions against the debtor entity (in this case, Lugano), which include all lawsuits and collection efforts. The stay goes into effect immediately upon the bankruptcy filing without any further action by the debtor entity or any other party. The automatic stay
remains in place until resolution of the bankruptcy case, or until otherwise waived by the debtor. The automatic stay generally protects only the debtor and does not usually extend to non-debtor parties who may be the subject of claims or litigation, including co-defendants named in litigation where Lugano is also defendant. In certain circumstances, a court may extend the stay to non-debtors if the debtor entity is a necessary party to the action. Thus, upon the filing of its bankruptcy petition, the automatic stay will immediately go into effect and prohibit further litigation against Lugano in courts outside of the Bankruptcy Court but will not necessarily prohibit continuation of actions against the Company in Lugano-related matters.