Table of Contents
SECURITIES AND EXCHANGE COMMISSION
UNDER
THE SECURITIES ACT OF 1933
COLT FINANCE CORP.
Delaware | 551112 | 32-0031950 | ||
Delaware | 522220 | 27-1237687 | ||
(State or Other Jurisdiction | (Primary Standard Industrial | (I.R.S. Employer | ||
of Incorporation or Organization) | Classification Code Number) | Identification No.) |
Scott Flaherty | ||
Chief Financial Officer | ||
547 New Park Avenue | 547 New Park Avenue | |
West Hartford, Connecticut 06110 | West Hartford, Connecticut 06110 | |
(860) 232-4489 | (860) 232-4489 | |
(Address, Including Zip Code, and Telephone Number, Including | (Name, Address, Including Zip Code, and Telephone Number, | |
Area Code, of Registrant’s Principal Executive Offices) | Including Area Code, of Agent for Service) |
Jeffrey Grody
General Counsel and Secretary
547 New Park Avenue
West Hartford, Connecticut 06110
(860) 232-4489
Cahill Gordon & Reindelllp
80 Pine Street
New York, New York 10005
Telephone No.: (212) 701-3000
Facsimile No.: (212) 269-5420
As soon as practicable after this Registration Statement becomes effective.
Large accelerated filer o | Accelerated filer o | Non-accelerated filer þ (Do not check if a smaller reporting company) | Smaller reporting company o |
Proposed | Proposed | |||||||||||||||||||||
Maximum | Maximum | Amount of | ||||||||||||||||||||
Title of Each Class | Amount | Offering Price | Aggregate | Registration | ||||||||||||||||||
of Securities to be Registered | to be Registered | Per Unit(1) | Offering Price(1) | Fee(2)(3) | ||||||||||||||||||
8.75% Senior Notes due 2017 | $ | 250,000,000 | 100.000 | % | $ | 250,000,000 | $ | 29,025.00 | ||||||||||||||
(1) | Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(f) of the Securities Act of 1933. | |
(2) | Calculated pursuant to Rule 457(f)(2) of the Securities Act of 1933. | |
(3) | No separate consideration will be received for the guarantees, and no separate fee is payable pursuant to Rule 457(n) of the Securities Act. |
Table of Contents
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities, and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
Outstanding 8.75% Senior Notes due 2017
for
Registered 8.75% Senior Notes due 2017
• | All outstanding notes that are validly tendered and not validly withdrawn prior to the expiration of the exchange offer will be exchanged for the registered notes. | ||
• | You may withdraw tendered outstanding notes at any time before the exchange offer expires. | ||
• | The exchange of the outstanding notes for the registered notes will not be a taxable event for federal income tax purposes. | ||
• | We will not receive any proceeds from the exchange offer. | ||
• | The exchange offer is subject to customary conditions, including the conditions that the exchange offer not violate applicable law or any applicable interpretation of the staff of the Securities and Exchange Commission. | ||
• | We can amend or terminate the exchange offer. |
Table of Contents
• | The registered notes are being offered in order to satisfy our obligations under the registration rights agreement entered in connection with the private offering of the outstanding notes. | ||
• | The registered notes will be our general senior unsecured obligations. | ||
• | No public market currently exists for the registered notes. We do not intend to apply for listing of the registered notes on any securities exchange or to arrange for them to be quoted on any quotation system. |
Page | ||||||||
ii | ||||||||
iii | ||||||||
1 | ||||||||
9 | ||||||||
25 | ||||||||
26 | ||||||||
27 | ||||||||
28 | ||||||||
29 | ||||||||
52 | ||||||||
68 | ||||||||
71 | ||||||||
81 | ||||||||
82 | ||||||||
84 | ||||||||
85 | ||||||||
94 | ||||||||
154 | ||||||||
155 | ||||||||
156 | ||||||||
157 | ||||||||
157 | ||||||||
157 | ||||||||
F-1 | ||||||||
EX-12 | ||||||||
EX-21 | ||||||||
EX-23.1 | ||||||||
EX-23.2 | ||||||||
EX-24.1 | ||||||||
EX-25.1 |
• | the terms “the Company,” “Colt,” “we,” “us” and “our,” collectively, refer to Colt Defense LLC, its subsidiaries and predecessors; | ||
• | “Colt Finance Corp.” or “Colt Finance” refers to Colt Finance Corp., a Delaware corporation and a wholly-owned subsidiary of the Company that was incorporated for the purpose of serving as a co-issuer of the notes in order to accommodate the issuance thereof by the Company, and (a) does not have any operations, assets or revenues of any kind other than as may be incidental to its activities as co-issuer of the notes and (b) has no obligations other than the notes; holders of the notes should not expect Colt Finance to participate in servicing the interest and principal obligations on the notes; | ||
• | the term “Colt’s Manufacturing” refers to Colt’s Manufacturing Company LLC, a Delaware limited liability company, an affiliate of one of our sponsors that we do not control; | ||
• | “notes” refers collectively to the outstanding notes and the registered notes; and | ||
• | “indenture” refers to the indenture that applies to both the outstanding notes and the registered notes. |
-i-
Table of Contents
• | our dependence on sales to the U.S. Government; | ||
• | changes to U.S. Government spending priorities; | ||
• | our continued eligibility to contract with the U.S. Government or Department of Defense; | ||
• | the selection by the U.S. military of other arms manufacturers to manufacture the M4 carbine; | ||
• | our inability to compete successfully for contracts that are the subject of competitive solicitations; | ||
• | the loss of any of our top international customers; | ||
• | the potential for a strike, other work stoppages or labor unrest at our manufacturing facilities; | ||
• | our ability to comply with complex procurement laws and regulations; | ||
• | our ability to implement effective business plans in the industries in which we operate; | ||
• | our ability to adapt to technological change; | ||
• | our ability to compete in the industries in which we operate; | ||
• | the potential for our backlog to be reduced or cancelled; | ||
• | the risks of doing business internationally, including conditions that may cause customers to delay placing orders; | ||
• | our ability to implement our acquisition strategy and integrate our acquired companies successfully; | ||
• | the availability and timely delivery of materials to us by our suppliers; | ||
• | our ability to manage costs under our fixed-price contracts effectively; | ||
• | our ability to attract and retain qualified personnel; | ||
• | the ability to protect our intellectual property rights; | ||
• | fluctuations in workers’ compensation and health care costs for our employees; | ||
• | our ability to comply with environmental, health and safety laws and regulations; | ||
• | our ability to maintain and upgrade our manufacturing capabilities to stay competitive; |
-ii-
Table of Contents
• | our ability to comply with covenants under our revolving credit facility; and | ||
• | the potential for a fire or other significant casualty to occur at either of our manufacturing facilities. |
-iii-
Table of Contents
-1-
Table of Contents
Background | On November 10, 2009, we completed a private placement of $250,000,000 aggregate principal amount of the outstanding notes. In connection with that private placement, we and the initial purchasers entered into a registration rights agreement for the benefit of the holders of the outstanding notes. As described below, under the registration rights agreement, we agreed to, among other things, deliver this prospectus to you and to consummate the exchange offer for the outstanding notes within 540 days following the issue date of the outstanding notes. If we do not consummate the exchange offer for the outstanding notes by such date, we will be required to pay additional interest on the outstanding notes until the exchange offer is completed. | |
The Exchange Offer | We are offering to exchange the registered notes which have been registered under the Securities Act for a like principal amount of the outstanding notes. You may only tender outstanding notes in minimal denominations of $2,000 principal amount and integral multiples of $1,000 in excess thereof. See “The Exchange Offer —Terms of the Exchange Offer.” | |
Registration Rights Agreement | On November 10, 2009, we and the initial purchasers entered into a registration rights agreement for the benefit of the holders of the outstanding notes. The registration rights agreement provides that if we do not consummate the exchange offer for the outstanding notes within 540 days following the issue date of the outstanding notes, we are required to pay additional interest on the outstanding notes at an initial rate of 0.25% per annum. The additional interest will increase by an additional 0.25% per annum with respect to each 90-day period until the exchange offer is consummated, up to a maximum of 1.00% per annum. After the exchange offer is complete, except as set forth in the next paragraph, you will no longer be entitled to any exchange or registration rights with respect to your outstanding notes. | |
The registration rights agreement requires us to file a shelf registration statement for a continuous offering in accordance with Rule 415 under the Securities Act for your benefit if: | ||
• the exchange offer is not consummated within 540 days following the issue date of the outstanding notes; | ||
• we are not permitted to consummate the exchange offer because the exchange offer would violate applicable law or SEC policy; or | ||
• you are a broker-dealer and hold outstanding notes acquired directly from us or any of our affiliates. | ||
Expiration Date | The exchange offer will expire at 5:00 p.m., New York City time, on , 2011, or a later date and time to which we may extend it. We do not currently intend to extend the expiration of the exchange offer. |
-2-
Table of Contents
See “The Exchange Offer — Expiration Date; Extensions; Amendments.” | ||
Withdrawal | You may withdraw your tender of outstanding notes in the exchange offer at any time before the expiration of the exchange offer. Any outstanding notes not accepted for exchange for any reason will be returned without expense to you promptly after the expiration or termination of the exchange offer. See “The Exchange Offer — Withdrawal of Tenders.” | |
Exchange Date | The date of acceptance for exchange of the outstanding notes is the exchange date, which will be as soon as practicable following the expiration date of the exchange offer. See “The Exchange Offer —Terms of the Exchange Offer.” | |
Issuance of Registered Notes | We will issue registered notes in exchange for outstanding notes tendered and accepted in the exchange offer promptly following the exchange date. See “The Exchange Offer —Terms of the Exchange Offer.” | |
Conditions to the Exchange Offer | The exchange offer is subject to customary conditions, which we may assert or waive. See “The Exchange Offer — Conditions to the Exchange Offer.” | |
Procedures for Tendering Outstanding Notes | We issued all of the outstanding notes as global securities in fully registered form without coupons. Beneficial interests in the outstanding notes which are held by direct or indirect participants in The Depository Trust Company through certificate less depositary interests are shown on, and transfers of the outstanding notes can be made only through, records maintained in book-entry form by DTC with respect to its participants. | |
If you wish to participate in the exchange offer, you must complete, sign and date the accompanying letter of transmittal, or a facsimile of the letter of transmittal, according to the instructions contained in this prospectus and the letter of transmittal. You must then mail or otherwise deliver the letter of transmittal, or a facsimile of the letter of transmittal, together with the outstanding notes and any other required documents, to the exchange agent at the address set forth on the cover page of the letter of transmittal. See “The Exchange Offer — Procedures for Tendering.” | ||
Special Procedures for Beneficial Owners | If you are a beneficial owner whose outstanding notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee, and you want to tender outstanding notes in the exchange offer, you should contact the registered owner promptly and instruct the registered holder to tender on your behalf. If you wish to tender in the exchange offer on your own behalf, you must, before completing and executing the letter of transmittal and delivering your outstanding notes, either make appropriate arrangements to register ownership of the outstanding notes in your name or obtain a properly completed bond power from the registered holder. The transfer of registered own- |
-3-
Table of Contents
ership may take considerable time. See “The Exchange Offer —Procedures for Tendering.” | ||
Guaranteed Delivery Procedures | If you wish to tender your outstanding notes, and time will not permit your required documents to reach the exchange agent by the expiration date, or the procedure for book-entry transfer cannot be completed on time, you may tender your outstanding notes under the procedures described under “The Exchange Offer — Guaranteed Delivery Procedures.” | |
Resales | Under existing interpretations of the Securities Act by the staff of the SEC contained in several no-action letters to third parties, and subject to the immediately following sentence, we believe that the registered notes will generally be freely transferable by holders after the exchange offer without further compliance with the registration and prospectus delivery requirements of the Securities Act, if: | |
• you are not one of our “affiliates” as defined in Rule 405 under the Securities Act; | ||
• you are acquiring the registered notes in the ordinary course of your business; and | ||
• you have not engaged in, do not intend to engage in and have no arrangement or understanding with any person to participate in a distribution of the registered notes. | ||
If you are our affiliate, or are engaging in, or intend to engage in, or have any arrangement or understanding with any person to participate in, a distribution of the registered notes, or are not acquiring the registered notes in the ordinary course of your business, you will not be able to rely on the interpretations of the staff of the SEC, will not be permitted to tender outstanding notes in the exchange offer and, in the absence of any exemption, you must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale of the registered notes. | ||
Our belief that transfers of registered notes would be permitted without registration or prospectus delivery under the conditions described above is based on SEC interpretations given to other, unrelated issuers in similar exchange offers. We cannot assure you that the SEC would make a similar interpretation with respect to our exchange offer. We will not be responsible for or indemnify you against any liability you may incur under the Securities Act. | ||
If you are a broker-dealer and receive registered notes for your own account in exchange for outstanding notes that you acquired as a result of market-making or other trading activity, you must acknowledge that you will deliver this prospectus in connection with any resale of the registered notes. See “Plan of Distribution.” | ||
We do not intend to list the registered notes on any securities exchange or for quotation on an automated dealer quotation system. Accordingly, there can be no assurance that an active market will develop for the registered notes upon completion of the exchange offer or, if devel- |
-4-
Table of Contents
oped, that such market will be sustained or as to the liquidity of any market. | ||
Consequences of Failure to Exchange | Outstanding notes that are not tendered in the exchange offer or are not accepted for exchange will continue to bear legends restricting their transfer. You will not be able to offer or sell such outstanding notes: | |
• except pursuant to an exemption from the requirements of the Securities Act; | ||
• unless the outstanding notes are registered under the Securities Act; or | ||
• if neither such registration nor such exemption is required by law. | ||
Exchange Agent | Wilmington Trust FSB is serving as the exchange agent in connection with the exchange offer. The address and telephone number of the exchange agent are set forth in the section entitled “Exchange Offer — Exchange Agent.” | |
Use of Proceeds | We will not receive any cash proceeds from the issuance of the registered notes in the exchange offer. See “Use of Proceeds.” | |
Accounting Treatment | We will not recognize any gain or loss for accounting purposes upon completion of the exchange offer. | |
U.S. Federal Tax Considerations | The exchange of the outstanding notes will not be a taxable exchange for federal income tax purposes. See “Certain U.S. Federal Income Tax Considerations.” |
-5-
Table of Contents
Co-Issuers | Colt Defense LLC and Colt Finance Corp. | |
Registered Notes Offered | $250.0 million aggregate principal amount of registered 8.75% senior notes due 2017. The registered notes will evidence the same debt as the outstanding notes and will be issued under, and entitled to the benefits of, the same indenture. The registered notes will be identical in all material respects to the outstanding notes for which they have been exchanged, except: | |
• the registered notes have been registered under the Securities Act and thus generally will not be subject to restrictions on transfer applicable to the outstanding notes or bear restrictive legends; | ||
• the registered notes will bear a different CUSIP number from the outstanding notes; | ||
• the registered notes will not be entitled to registration rights; and | ||
• the registered notes will not have the right to earn additional interest under circumstances relating to our registration obligations. | ||
Maturity | November 15, 2017. | |
Interest Payment Dates | May 15 and November 15 of each year. | |
Guarantees | Following the dissolution of Colt Rapid Mat, as discussed elsewhere in this prospectus and as of the date of this prospectus, none of our subsidiaries will guarantee the registered notes. Any subsidiaries that in the future guarantee our indebtedness, including indebtedness under our letter of credit facility, or indebtedness of any subsidiary guarantor, will guarantee the registered notes on a senior unsecured basis. Under certain circumstances, subsidiaries may be released from these guarantees without the consent of the holders of the registered notes. See “Description of the Registered Notes — Subsidiary guarantees.” | |
Ranking | The registered notes will constitute senior unsecured debt of the Company and will have the same ranking as the outstanding notes. The outstanding notes: | |
• are our senior unsecured obligations; | ||
• are effectively junior in right of payment to our secured debt to the extent of the value of the assets securing such debt; | ||
• rank equally in right of payment with all of our existing and future senior debt; |
-6-
Table of Contents
• are senior in right of payment to all of our existing and future senior subordinated or subordinated debt; and | ||
• are structurally subordinated to all of the existing and future liabilities (including trade payables) of each of our subsidiaries that do not guarantee the notes. | ||
As of October 3, 2010, | ||
• we had approximately $249.4 million of total indebtedness (including the outstanding notes), of which $2.7 million ranked senior to the outstanding notes and none of which was subordinated to the notes; | ||
• we had $0.8 million of secured indebtedness represented by letters of credit under our letter of credit facility to which the outstanding notes were effectively subordinated, and had additional commitments under our letter of credit facility available to us of $9.2 million, all of which would be secured if borrowed and effectively senior to the outstanding notes to the extent of the collateral securing such facility; and | ||
• our non-guarantor subsidiaries had $13.7 million of total liabilities (including trade payables and deferred income, but excluding intercompany liabilities), all of which is structurally senior to the outstanding notes. | ||
Optional Redemption | See also “Risk Factors — Risks related to our indebtedness and the notes.” The registered notes will be redeemable at our option, in whole or in part, at any time on or after November 15, 2013, at the redemption prices set forth in this prospectus, plus accrued and unpaid interest, if any, to the date of redemption. | |
At any time prior to November 15, 2013, we may also redeem some or all of the registered notes at a price equal to 100% of the principal amount of the registered notes plus accrued and unpaid interest, if any, plus a make-whole premium. | ||
At any time prior to November 15, 2012, we may redeem up to 35% of the original principal amount of the registered notes with the proceeds of certain equity offerings at a redemption price of 108.75% of the principal amount of the registered notes, plus accrued and unpaid interest, if any, to the date of redemption. | ||
Change of Control | The occurrence of a change of control will be a triggering event requiring us to offer to purchase from you all or a portion of your registered notes at a price equal to 101% of their principal amount, together with accrued and unpaid interest, if any, to the date of purchase. | |
Certain Covenants | The indenture governing the notes contains certain covenants limiting our ability and the ability of our restricted subsidiaries to, under certain circumstances: | |
• incur, assume or guarantee additional indebtedness; |
-7-
Table of Contents
• issue redeemable stock and preferred stock; | ||
• pay dividends or distributions or redeem or repurchase capital stock; | ||
• prepay, redeem or repurchase debt that is junior in right of payment to the notes; | ||
• make loans, investments and capital expenditures; | ||
• incur liens; | ||
• engage in sale/leaseback transactions; | ||
• restrict dividends, loans or asset transfers from our subsidiaries to unaffiliated third parties; | ||
• sell or otherwise dispose of assets, including capital stock of subsidiaries; | ||
• consolidate or merge with or into, or sell substantially all of our assets to, another person; | ||
• enter into transactions with affiliates; and | ||
• enter into new lines of business. | ||
These covenants are subject to a number of important exceptions and qualifications. For more details, see “Description of the Registered Notes.” | ||
No Prior Public Market | The registered notes will generally be freely transferable but will be a new issue of securities for which there is currently no established market. Accordingly, there can be no assurance as to the development or liquidity of any market for the registered notes. We do not intend to make a trading market in the registered notes after the exchange offer. We do not intend to apply for a listing of the registered notes on any securities exchange or an automated dealer quotation system. | |
Risk Factors | You should carefully consider the information under “Risk Factors” and all other information included in this prospectus before exchanging your outstanding notes for registered notes. |
-8-
Table of Contents
• | a decline in demand for the M4 carbine and related small arms weapons systems; | ||
• | a failure to achieve continued market acceptance of our key products; | ||
• | export restrictions or other regulatory, legislative or multinational actions which could limit our ability to sell those products to key customers or market segments, especially existing and potential international customers; | ||
• | improved competitive alternatives to our products gaining acceptance in the markets in which we participate; | ||
• | increased pressure from competitors that offer broader product lines; | ||
• | technological change that we are unable to address with our products; or | ||
• | a failure to release new or enhanced versions of our products to our military or other customers on a timely basis. |
-9-
Table of Contents
• | difficulty in predicting the timing of international orders and shipments; | ||
• | increased liquidity requirements as a result of bonding or letters of credit requirements; | ||
• | unexpected changes in regulatory requirements; | ||
• | changes in foreign legislation; | ||
• | multinational agreements restricting international trade in small arms weapons systems; | ||
• | possible foreign currency controls, currency exchange rate fluctuations or devaluations; | ||
• | tariffs; | ||
• | difficulties in staffing and managing foreign operations; | ||
• | difficulties in obtaining and managing vendors and distributors; | ||
• | potential negative tax consequences; | ||
• | greater difficulties in protecting intellectual property rights; | ||
• | greater potential for violation of U.S. and foreign anti-bribery and export-import laws; and | ||
• | difficulties collecting or managing accounts receivable. |
-10-
Table of Contents
• | We may not successfully identify companies that have complementary product lines or technological competencies or that can diversify our revenue or enhance our ability to implement our business strategy. | ||
• | We may not successfully acquire companies if we fail to obtain financing, or to negotiate the acquisition on acceptable terms, or for other related reasons. | ||
• | We may incur additional expenses due to acquisition due diligence, including legal, accounting, consulting and other professional fees and disbursements. Such additional expenses may be material, will likely not be reimbursed and would increase the aggregate investment cost of any acquisition. | ||
• | Any acquired business will expose us to the acquired company’s liabilities and to risks inherent to its industry. We may not be able to ascertain or assess all of the significant risks. | ||
• | We may require additional financing in connection with any future acquisition. Such financing may adversely impact, or be restricted by, our capital structure and our ability to pay amounts owed under the notes when due and payable. Increasing our indebtedness could increase the risk of a default that would entitle the holder to declare all of such indebtedness due and payable, as well as the risk of cross-defaults under other debt facilities. | ||
• | Achieving the anticipated potential benefits of a strategic acquisition will depend in part on the successful integration of the operations, administrative infrastructures and personnel of the acquired company or companies in a timely and efficient manner. Some of the challenges involved in such an integration include: |
• | demonstrating to the customers of the acquired company that the consolidation will not result in adverse changes in quality, customer service standards or business focus; | ||
• | preserving important relationships of the acquired company; | ||
• | coordinating sales and marketing efforts to effectively communicate the expanded capabilities of the combined company; and | ||
• | coordinating the supply chains. |
-11-
Table of Contents
-12-
Table of Contents
-13-
Table of Contents
-14-
Table of Contents
-15-
Table of Contents
-16-
Table of Contents
-17-
Table of Contents
-18-
Table of Contents
• | make it more difficult for us to pay our debts, including payment on the notes, as they become due, especially during general negative economic and market industry conditions because if our net sales decrease due to general economic or industry conditions, we may not have sufficient cash flow from operations to make our scheduled debt payments; | ||
• | increase our vulnerability to adverse economic, regulatory and general industry conditions; | ||
• | require us to dedicate a substantial portion of our cash flow from operations to payments on our debt, which would reduce the availability of our cash flow from operations to fund working capital, capital expenditures, acquisitions or other general corporate purposes; |
-19-
Table of Contents
• | limit our flexibility in planning for, or reacting to, changes in our business and industry in which we operate and, consequently, place us at a competitive disadvantage to our competitors with less debt; | ||
• | limit our ability to obtain additional debt or equity financing, particularly in the current economic environment; and | ||
• | increase our cost of borrowing. |
• | our debt holders could declare all outstanding principal and interest to be due and payable; | ||
• | the lenders under our letter of credit facility could terminate their commitments to lend us money and foreclose against the assets securing their borrowings; and |
-20-
Table of Contents
• | we could be forced into bankruptcy or liquidation, which could result in you losing your investment in the notes. |
• | pay dividends or distributions, redeem or repurchase equity, prepay, redeem or repurchase subordinated debt; | ||
• | make certain loans, investments or capital expenditures; | ||
• | incur or assume additional debt or provide guarantees in respect of obligations of other persons or issue certain disqualified stock; | ||
• | incur liens on assets; | ||
• | merge or consolidate with or into, or sell all or substantially all of our assets to, another person; | ||
• | sell or otherwise dispose of assets, including capital stock of subsidiaries; | ||
• | enter into transactions with affiliates; and | ||
• | restrict dividends, loans or asset transfers from our subsidiaries to unaffiliated third parties |
-21-
Table of Contents
-22-
Table of Contents
• | was insolvent or rendered insolvent by reason of such incurrence; | ||
• | was engaged in a business or transaction for which its remaining assets constituted unreasonably small capital; or | ||
• | intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they mature. |
• | the sum of its debts, including contingent liabilities, was greater than the fair saleable value of its assets; | ||
• | the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or | ||
• | it could not pay its debts as they become due. |
-23-
Table of Contents
-24-
Table of Contents
-25-
Table of Contents
Year ended December 31, | Nine months ended | |||||||||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | October 4, 2009 | October 3, 2010 | ||||||||||||||||||||||
Ratio of earnings to fixed charges(1) | — | (2) | 4.47x | — | (3) | 3.14x | 2.53x | 3.33x | — | (4) |
(1) | Refer to Exhibit 12 filed with the registration statement of which this prospectus forms a part for the computation of this ratio. | |
(2) | Our earnings were insufficient to cover our fixed charges in 2005 by $10.7 million. | |
(3) | Our earnings covered our fixed charges in 2007 by $5.2 million. | |
(4) | Our earnings covered our fixed charges for the nine months ended October 3, 2010 by $5.7 million. |
-26-
Table of Contents
($ in thousands) | October 3, 2010 | |||
Cash and cash equivalents: | $ | 68,734 | ||
Debt: | ||||
Secured letter of credit facility (a) | — | |||
Capital leases | 2,670 | |||
Equipment indebtedness | — | |||
Senior notes (b) | 246,758 | |||
Total debt | 249,428 | |||
Total deficit | (139,894 | ) | ||
Total capitalization | $ | 109,534 | ||
(a) | This letter of credit facility provides for up to $10 million of letter of credit availability. For a more complete description of our letter of credit facility see “Description of Other Indebtedness.” As of October 3, 2010, $0.8 million in letters of credit were issued and drawn. | |
(b) | Represents the principal amount of the notes. The notes were issued at a price of 98.591% of the principal amount thereof, resulting in approximately $246.5 million of gross proceeds. The approximately $3.5 million discount will accrete over the life of the notes and be amortized into interest expense. |
-27-
Table of Contents
Nine Months Ended | For the Year Ended December 31, | |||||||||||||||||||||||||||
October 3, | October 4, | |||||||||||||||||||||||||||
($ in thousands) | 2010 | 2009 | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||||||||
Statement of operations data: | ||||||||||||||||||||||||||||
Net sales | $ | 131,594 | $ | 204,122 | $ | 274,026 | $ | 270,376 | $ | 180,732 | $ | 136,032 | $ | 91,915 | ||||||||||||||
Cost of sales | 98,291 | 138,042 | 185,942 | 181,459 | 128,619 | 89,792 | 62,518 | |||||||||||||||||||||
Gross profit | 33,303 | 66,080 | 88,084 | 88,917 | 52,113 | 46,240 | 29,397 | |||||||||||||||||||||
Selling and commissions | 6,968 | 6,912 | 9,295 | 5,836 | 5,005 | 3,867 | 4,066 | |||||||||||||||||||||
General and administrative | 12,507 | 10,810 | 14,265 | 14,109 | 11,558 | 10,507 | 10,649 | |||||||||||||||||||||
Amortization of purchased intangibles | 408 | 381 | 525 | 888 | 826 | 913 | 1,031 | |||||||||||||||||||||
Impairment of goodwill | — | — | — | 2,631 | — | — | — | |||||||||||||||||||||
Common Unit compensation expense (benefit)(a) | — | — | — | 45 | 25,157 | (683 | ) | 17,588 | ||||||||||||||||||||
Operating income (loss) | 13,420 | 47,977 | 63,999 | 65,408 | 9,567 | 31,636 | (3,937 | ) | ||||||||||||||||||||
Other expense (income): | ||||||||||||||||||||||||||||
Interest expense | 18,854 | 13,532 | 18,847 | 19,281 | 14,105 | 6,160 | 4,669 | |||||||||||||||||||||
Other, net | 342 | (68 | ) | 13,359 | 799 | 668 | 138 | 2,591 | ||||||||||||||||||||
19,196 | 13,464 | 32,206 | 20,080 | 14,773 | 6,298 | 7,260 | ||||||||||||||||||||||
Income (loss) before foreign income taxes | (5,776 | ) | 34,513 | 31,793 | 45,328 | (5,206 | ) | 25,338 | (11,197 | ) | ||||||||||||||||||
Provision for foreign income taxes(b) | 1,599 | 1,283 | 2,320 | 1,097 | 1,539 | 111 | (236 | ) | ||||||||||||||||||||
Net income (loss)(b) | (7,375 | ) | 33,230 | 29,473 | 44,231 | (6,745 | ) | 25,227 | (10,961 | ) | ||||||||||||||||||
Less: net (loss) income attributable to non-controlling interest | (67 | ) | 66 | 75 | (47 | ) | (47 | ) | (49 | ) | (28 | ) | ||||||||||||||||
Net income (loss) attributable to members | $ | (7,308 | ) | $ | 33,164 | $ | 29,398 | $ | 44,278 | $ | (6,698 | ) | $ | 25,276 | $ | (10,933 | ) | |||||||||||
Balance sheet data (at period ended): | ||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 68,734 | $ | 35,559 | $ | 72,705 | $ | 29,248 | $ | 270 | $ | 233 | $ | 525 | ||||||||||||||
Accounts receivable, net | 11,565 | 23,750 | 20,328 | 7,735 | 15,115 | 7,562 | 10,192 | |||||||||||||||||||||
Inventories | 34,390 | 31,946 | 35,448 | 26,997 | 21,062 | 13,211 | 9,730 | |||||||||||||||||||||
Property and equipment, net | 20,609 | 16,282 | 17,919 | 13,736 | 13,844 | 8,575 | 6,606 | |||||||||||||||||||||
Total assets | 169,800 | 137,047 | 184,102 | 107,120 | 86,697 | 59,316 | 56,823 | |||||||||||||||||||||
Total debt and capital lease obligations | 249,428 | 193,148 | 250,058 | 195,100 | 197,558 | 87,791 | 59,962 | |||||||||||||||||||||
Total deficit | (139,894 | ) | (108,965 | ) | (113,887 | ) | (133,260 | ) | (149,646 | ) | (61,332 | ) | (38,719 | ) | ||||||||||||||
(a) | Such non-cash charge relates to the adjustment required to record a compensation charge related to an increase from our 2006 valuation of the fair market value of our Common Units to our 2007 valuation of the fair market value of our Common Units. | |
(b) | As a limited liability company, the Company is treated as a partnership for U.S. federal and state income tax reporting purposes and, therefore, is not subject to U.S. federal or state income taxes. The taxable income (loss) of the Company is reported to the members for inclusion in their individual tax returns. Colt Canada files separate income tax returns in Canada. Distributions to members equal to 45 percent of taxable income are made in any year in which U.S. taxable income is allocated to the Company’s members and to the extent the Company’s Governing Board determines that sufficient funds are available. |
-28-
Table of Contents
• | Net loss in the first nine months of 2010 was ($7.4) million, compared with net income of $33.2 million in the same period in 2009. Operating income in the first nine months of 2010 decreased to $13.4 million compared to $48.0 million in the same period in 2009. | ||
• | Sales in the first nine months of 2010 decreased 36% to $131.6 million, compared with $204.1 million in the same period in the prior year, primarily due to a decrease in demand for U.S. Government and law enforcement model carbines of $42.2 million and $28.9 million respectively. | ||
• | Our operating income in the first nine months of 2010 decreased to 10.2% of sales compared to 23.5% of sales the same period a year ago. This erosion is primarily attributable to a significant downturn in the production demands supporting the sales of U.S. Government carbines and sales to law enforcement distributors which negatively impacted overall gross margin resulting in higher per unit manufacturing costs as individual units absorbed greater amounts of fixed costs. | ||
• | Our backlog increased 20.8% to $185.5 million in the first nine months of 2010 compared to $153.6 million at the end of the fourth quarter of 2009. |
• | Our increase in net sales was achieved through a diversification of the Company’s revenue streams. Sales of accessories, and law enforcement model carbines, including sales of Match Target®rifles to Colt’s Manufacturing increased 395% and 140% respectively over 2008. Sales increases in these channels more than offset a decline of 18% in sales of carbines and spares to our largest customer, the U.S. Government. | ||
• | On November 10, 2009, we issued $250 million of unsecured 8.75% Senior Notes due 2017 (the “outstanding notes”), which we are offering to exchange for the registered notes offered hereby. Proceeds from the offering of the outstanding notes repaid outstanding indebtedness associated with our then existing senior secured credit facility and senior subordinated notes. Net income for the year was reduced by $11.7 million of one-time debt prepayment expenses associated with our November recapitalization. As a result of the offering of the outstanding notes and a new senior secured credit facility, consisting of a $50 million revolving credit line (the “senior secured credit facility”), we had $122 million of liquidity at December 31, 2009. Net income includes $11.7 million of debt repayment charges in 2009. |
-29-
Table of Contents
-30-
Table of Contents
-31-
Table of Contents
-32-
Table of Contents
-33-
Table of Contents
Level 1: | Unadjusted quoted prices in active markets for identical assets or liabilities. | ||
Level 2: | Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that were observable for the asset or liability. |
-34-
Table of Contents
Level 3: | Unobservable inputs for the asset or liability. |
Fair Value Measurement Using | ||||||||||||||||
Quoted Prices in | Significant | Significant | ||||||||||||||
Active Market for | Other | Unobservable | ||||||||||||||
Identical Assets | Observable | Inputs | ||||||||||||||
Description | Total | (Level 1) | Inputs (Level 2) | (Level 3) | ||||||||||||
Interest Rate Swap Liability at December 31, 2008 | $ | 6,992 | $ | — | $ | 6,992 | $ | — | ||||||||
December 31, 2009 | — | — | — | — | ||||||||||||
October 3, 2010 | — | — | — | — |
• | A decrease of 25 basis points in the long-term rate of return on assets would have increased our net 2010 benefit cost by approximately $0.04 million; and | ||
• | A decrease of 25 basis points in the liability discount rate would have increased our 2010 net benefit cost by approximately $0.06 million. |
-35-
Table of Contents
• | if we lose one or more of our top customers (including the U.S. Government, our largest current customer) or if one or more of these customers significantly decreases orders for our products; | ||
• | if the U.S. military selects other small arms manufacturers to supply the M4 carbine for use by U.S. military personnel or we are not able to continue to successfully compete in international sales; | ||
• | general economic and political conditions in the foreign markets where we currently, or may seek to, do business may impact our international net sales, as such conditions may cause customers to delay placing orders or to deploy capital to other governmental priorities; | ||
• | we may not be able to identify businesses that we can acquire on acceptable terms; we may not be able to obtain necessary financing or may face risks due to indebtedness; and our acquisition strategy may incur significant costs or expose us to numerous risks inherent in the acquired business’s operations; and | ||
• | other factors, including those that may impact our prospective industry trends and uncertainties, that are described in “Risk Factors” elsewhere in this prospectus. |
• | Net sales; | ||
• | Net sales growth; | ||
• | Gross profit as a percentage of net sales; | ||
• | Operating income as a percentage of net sales; | ||
• | Adjusted EBITDA; and | ||
• | Adjusted EBITDA as a percentage of net sales (Adjusted EBITDA margin). |
-36-
Table of Contents
Nine Months Ended | ||||||||||||||||||||
Year Ended December 31, | October 4, | October 3, | ||||||||||||||||||
2007 | 2008 | 2009 | 2009 | 2010 | ||||||||||||||||
Net sales | $ | 180,732 | $ | 270,376 | $ | 274,026 | $ | 204,122 | $ | 131,594 | ||||||||||
Net sales growth | 32.9 | % | 49.6 | % | 1.3 | % | (1.1 | %) | (35.5 | %) | ||||||||||
Gross profit as a percentage of net sales | 28.8 | % | 32.9 | % | 32.1 | % | 32.4 | % | 25.3 | % | ||||||||||
Operating income as a percentage of net sales | 5.3 | % | 24.2 | % | 23.4 | % | 23.5 | % | 10.2 | % | ||||||||||
Adjusted EBITDA(a) | $ | 37,543 | $ | 69,499 | $ | 67,767 | $ | 50,735 | $ | 16,741 | ||||||||||
Adjusted EBITDA margin(b) | 20.8 | % | 25.7 | % | 24.7 | % | 24.9 | % | 12.7 | % |
(a) | Adjusted EBITDA and Adjusted EBITDA margin are not financial measures under U.S. GAAP. We use Adjusted EBITDA as a supplemental financial measure. Adjusted EBITDA consists of net income (loss) before interest, income taxes depreciation and amortization of intangible assets and other income or expenses. We believe Adjusted EBITDA is a useful financial performance measures for our debt holders, members, and us as a complement to net income determined in accordance with U.S. GAAP. Because it excludes interest, other income and expenses and income taxes, Adjusted EBITDA provides insight with respect to our ongoing operating results irrespective of our capital structure and because it excludes depreciation and it provides a basis for measuring our financial performance unrelated to historical cost or carrying value of long-lived assets. We believe that the disclosure of the calculation of Adjusted EBITDA provides information that is useful to an investor’s understanding of our liquidity and financial flexibility. Adjusted EBITDA is not a measurement of financial performance or liquidity under GAAP; however, it should not be considered in isolation or as a substitute for net income, operating income, cash flows from operating, investing or financing activities, or any other measure calculated in accordance with GAAP. Adjusted EBITDA is not necessarily comparable to other similarly titled financial measures of other companies due to the potential inconsistencies in the method of calculation. |
Adjusted EBITDA provides a benchmark for comparing operating results between periods and does not measure the capital we require to maintain our property and equipment and does not take into account the total amount of interest we pay on outstanding debt nor do they show trends in interest costs due to changes in our borrowings or changes in interest rates. | ||
Our management considers Adjusted EBITDA a key performance measure for numerous reasons, including, without limitation: |
• | Adjusted EBITDA is a cash flow metric that helps us evaluate leverage opportunities/potential in the context of transactions such as acquisitions or recapitalizations; | ||
• | Adjusted EBITDA is a leverage neutral measurement of profitability for the overall business; and | ||
• | Adjusted EBITDA normalizes the Company’s unlevered cash flows so that we can appropriately be compared to peers. |
Nine Months Ended | ||||||||||||||||||||
Year Ended December 31, | October 4, | October 3, | ||||||||||||||||||
2007 | 2008 | 2009 | 2009 | 2010 | ||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||
Net income (loss) | $ | (6,745 | ) | $ | 44,231 | $ | 29,473 | $ | 33,230 | $ | (7,375 | ) | ||||||||
Provision for foreign income taxes | 1,539 | 1,097 | 2,320 | 1,283 | 1,599 | |||||||||||||||
Depreciation and amortization (i) | 2,819 | 4,046 | 3,768 | 2,758 | 3,321 | |||||||||||||||
Interest expense, net | 14,105 | 19,281 | 18,847 | 13,532 | 18,854 | |||||||||||||||
Non-cash Common Unit compensation expense (ii) | 25,157 | 45 | — | — | — | |||||||||||||||
Other expense, net (iii) | 668 | 799 | 13,359 | (68 | ) | 342 | ||||||||||||||
Adjusted EBITDA | $ | 37,543 | $ | 69,499 | $ | 67,767 | $ | 50,735 | $ | 16,741 | ||||||||||
-37-
Table of Contents
(i) | Includes depreciation and amortization of intangible assets. | |
(ii) | Includes a non-cash charge of $25,157 in 2007 related to the adjustment required to record a compensation charge as a result of a significant increase from our 2006 valuation of the fair market value of our Common Units to the 2007 fair market value of our Common Units. | |
(iii) | Includes: |
• | expenses associated with the write-off of unamortized deferred financing fees associated with the refinancing of credit arrangements in 2007 and 2009 as well as the 2009 settlement of outstanding interest rate swap agreements and the 2009 payment of a prepayment premium on our Senior Subordinated Notes; and | ||
• | expenses incurred in connection with prior refinancing activities, transactions costs incurred in connection with our contemplated merger and acquisition activities, foreign currency exchange gains or losses, service income from an affiliate and other less significant charges not related to on-going operations. |
(b) | Adjusted EBITDA margin is Adjusted EBITDA as a percentage of sales. |
Nine Months Ended | ||||||||||||||||||||||||||||||||||||||||
Year Ended December 31, | October 4, | October 3, | ||||||||||||||||||||||||||||||||||||||
2007 | % | 2008 | % | 2009 | % | 2009 | % | 2010 | % | |||||||||||||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||||||||||||||||||||||
Net sales | $ | 180,732 | 100.0 | % | $ | 270,376 | 100.0 | % | $ | 274,026 | 100.0 | % | $ | 204,122 | 100.0 | % | $ | 131,594 | 100.0 | % | ||||||||||||||||||||
Cost of sales | 128,619 | 71.2 | 181,459 | 67.1 | 185,942 | 67.9 | 138,042 | 67.6 | 98,291 | 74.7 | ||||||||||||||||||||||||||||||
Gross profit | 52,113 | 28.8 | 88,917 | 32.9 | 88,084 | 32.1 | 66,080 | 32.4 | 33,303 | 25.3 | ||||||||||||||||||||||||||||||
Selling and commissions | 5,005 | 2.8 | 5,836 | 2.2 | 9,295 | 3.4 | 6,912 | 3.4 | 6,968 | 5.3 | ||||||||||||||||||||||||||||||
General and administrative | 11,558 | 6.4 | 14,109 | 5.2 | 14,265 | 5.2 | 10,810 | 5.3 | 12,507 | 9.5 | ||||||||||||||||||||||||||||||
Amortization of purchased intangibles | 826 | 0.4 | 888 | 0.3 | 525 | 0.2 | 381 | 0.2 | 408 | 0.3 | ||||||||||||||||||||||||||||||
Impairment of goodwill | — | — | 2,631 | 1.0 | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
Common unit compensation (benefit) expense | 25,157 | 13.9 | 45 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
42,546 | 23.5 | 23,509 | 8.7 | 24,085 | 8.8 | 18,103 | 8.9 | 19,883 | 15.1 | |||||||||||||||||||||||||||||||
Operating income | 9,567 | 5.3 | 65,408 | 24.2 | 63,999 | 23.4 | 47,977 | 23.5 | 13,420 | 10.2 | ||||||||||||||||||||||||||||||
Other expense (income): | ||||||||||||||||||||||||||||||||||||||||
Interest expense | 14,105 | 7.8 | 19,281 | 7.1 | 18,847 | 6.9 | 13,532 | 6.6 | 18,854 | 14.3 | ||||||||||||||||||||||||||||||
Debt prepayment expense | 727 | 0.4 | — | — | 11,687 | 4.3 | — | — | ||||||||||||||||||||||||||||||||
Other, net | (59 | ) | — | 799 | 0.3 | 1,672 | 0.6 | (68 | ) | — | 342 | 0.3 | ||||||||||||||||||||||||||||
14,773 | 8.2 | 20,080 | 7.4 | 32,206 | 11.8 | 13,464 | 6.6 | 19,196 | 14.6 | |||||||||||||||||||||||||||||||
Income (loss) before foreign income taxes | (5,206 | ) | (2.9 | ) | 45,328 | 16.8 | 31,793 | 11.6 | 34,513 | 16.9 | (5,776 | ) | (4.4 | ) | ||||||||||||||||||||||||||
Provision for foreign income taxes | 1,539 | 0.8 | 1,097 | 0.4 | 2,320 | 0.8 | 1,283 | 0.6 | 1,599 | 1.2 | ||||||||||||||||||||||||||||||
Net income (loss) | $ | (6,745 | ) | (3.7 | %) | $ | 44,231 | 16.4 | % | $ | 29,473 | 10.8 | % | 33,230 | 16.3 | % | (7,375 | ) | (5.6 | ) | ||||||||||||||||||||
Less: net (loss) income attributable to non-controlling interest | (47 | ) | (47 | ) | 75 | 66 | (67 | ) | ||||||||||||||||||||||||||||||||
Net income (loss) attributable to members | $ | (6,698 | ) | $ | 44,278 | $ | 29,398 | $ | 3,164 | $ | (7,308 | ) | ||||||||||||||||||||||||||||
-38-
Table of Contents
For the Nine Months Ended | ||||||||||||
October 4, | October 3, | % | ||||||||||
2009 | 2010 | change | ||||||||||
Weapon systems | $ | 159,531 | $ | 90,154 | -43.5 | % | ||||||
Spares / other | 44,591 | 41,440 | -7.1 | % | ||||||||
Total | $ | 204,122 | $ | 131,594 | -35.5 | % | ||||||
-39-
Table of Contents
Year Ended December 31, | ||||||||||||
% | ||||||||||||
2008 | 2009 | change | ||||||||||
Weapon systems | $ | 229,779 | $ | 215,393 | (6.3 | )% | ||||||
Spares / other | 40,597 | 58,633 | 44.4 | % | ||||||||
Total | $ | 270,376 | $ | 274,026 | 1.3 | % | ||||||
-40-
Table of Contents
-41-
Table of Contents
Year Ended December 31, | ||||||||||||
2007 | 2008 | % change | ||||||||||
Weapon systems | $ | 150,795 | $ | 229,779 | 52.4 | % | ||||||
Spares / other | 29,937 | 40,597 | 35.6 | % | ||||||||
Total | $ | 180,732 | $ | 270,376 | 49.6 | % | ||||||
-42-
Table of Contents
-43-
Table of Contents
Year Ended December 31, | Nine Months Ended | |||||||||||||||||||
2007 | 2008 | 2009 | October 4, 2009 | October 3, 2010 | ||||||||||||||||
Cash provided by operating activities | $ | 9,402 | $ | 52,092 | $ | 34,107 | $ | 27,170 | $ | 6,847 | ||||||||||
Cash used in investing activities | (815 | ) | (3,166 | ) | (7,369 | ) | (4,374 | ) | (5,024 | ) | ||||||||||
Cash (used in) provided by financing activities | (8,127 | ) | (20,251 | ) | 16,396 | (16,685 | ) | (5,844 | ) |
-44-
Table of Contents
Year | Capital Expenditures | |||
2007 | $ | 6,500 | ||
2008 | 3,200 | |||
2009 | 6,800 | |||
Nine months ended October 3, 2010 | 5,299 |
Year Ended December 31, | Nine Months Ended | |||||||||||||||||||
2007 | 2008 | 2009 | October 4, 2009 | October 3, 2010 | ||||||||||||||||
Net borrowings (repayments) (a) | $ | 103.3 | $ | (3.8 | ) | $ | 54.9 | $ | (2.0 | ) | $ | (0.9 | ) | |||||||
Tax distributions to members (b) | (6.3 | ) | (16.2 | ) | (14.7 | ) | (14.7 | ) | (5.0 | ) | ||||||||||
Distributions to members (a) | (131.2 | ) | — | — | — | — | ||||||||||||||
Sale of Common Units (a) | 29.9 | — | — | — | — | |||||||||||||||
Deferred financing costs (a) | (10.0 | ) | (0.3 | ) | (12.8 | ) | — | — | ||||||||||||
Debt prepayment expense (a) | — | — | (6.0 | ) | — | — | ||||||||||||||
Purchase of Common Units (c) | — | — | (5.0 | ) | — | — | ||||||||||||||
Collection of notes receivables from members (d) | 5.4 | — | — | — | — | |||||||||||||||
Other | 0.8 | — | — | — | — | |||||||||||||||
Total | $ | (8.1 | ) | $ | (20.3 | ) | $ | 16.4 | $ | (16.7 | ) | $ | (5.9 | ) | ||||||
(a) | During 2007, we completed a Leveraged Recapitalization which resulted in a refinancing of our debt as well as the sale of Common Units to investors and a special distribution to our members. During 2009 we completed a refinancing of our debt by issuing new outstanding notes and entering into the senior secured credit facility. | |
(b) | Tax distributions were made to our members equal to 45% of our taxable income. | |
(c) | During 2009, we purchased $5 million of Common Units from an officer of our company. |
-45-
Table of Contents
(d) | During 2007, certain members repaid borrowings against non-recourse notes which they had borrowed from us in connection with their exercise of Common Unit warrants. |
• | at any time prior to November 15, 2012, we may redeem up to 35% of the notes with the proceeds of certain equity offerings at a redemption price equal to 108.75% of their principal amount together with accrued unpaid interest to the date of redemption; and | ||
• | at any time prior to November 15, 2013, we may redeem some or all of the notes at a price equal to 100% of the principal amount of the notes together with accrued and unpaid interest plus a make whole premium, as defined in the indenture; and | ||
• | on and after November 15, 2013, we may redeem all or, from time to time, a part of the notes at the following redemption process (expressed as a percentage of principal amount of the notes to be redeemed) plus accrued and unpaid interest, including additional interest, if any on the notes to the applicable redemption date if redeemed during the twelve month period beginning on November 15 of the years indicated below: |
-46-
Table of Contents
Year | Percentage | |||
2013 | 104.375 | % | ||
20014 | 102.187 | % | ||
20015 and thereafer | 100.000 | % |
-47-
Table of Contents
Payments Due by Period | ||||||||||||||||||||
Less than | 13 - 35 | 36 - 60 | More than | |||||||||||||||||
Total | 1 Year | Months | Months | 5 Years | ||||||||||||||||
Long-term debt principal payments (a) | $ | 250,000 | $ | — | $ | — | $ | — | $ | 250,000 | ||||||||||
Interest payments | 156,801 | 21,973 | 43,900 | 43,775 | 47,153 | |||||||||||||||
Capital lease obligations, including interest | 2,912 | 1,374 | 1,538 | — | — | |||||||||||||||
Operating leases | 2,659 | 1,052 | 1,515 | 92 | — | |||||||||||||||
Payments to pension trust(b) | 14,353 | 1,331 | 2,906 | 3,265 | 6,851 | |||||||||||||||
Postretirement healthcare payments(b) | 9,536 | 868 | 1,886 | 1,955 | 4,827 | |||||||||||||||
Purchase obligations(c) | 1,629 | 1,629 | — | — | — | |||||||||||||||
Total contractual obligations | $ | 437,890 | $ | 28,227 | $ | 51,745 | $ | 49,087 | $ | 308,831 | ||||||||||
(a) | Includes $250 million of outstanding notes which were issued at a discount of $3.5 million. | |
(b) | Payments to the pension trust and post retirement plan are required pursuant to our plan. | |
(c) | We had unconditional purchase obligations related to capital expenditures for machinery. |
-48-
Table of Contents
-49-
Table of Contents
-50-
Table of Contents
-51-
Table of Contents
• | proprietary military products, including the M4 and C8 carbines, M16 and C7 rifles and new products such as our IAR, CM901TM, SCW and APC; | ||
• | military products manufactured under license such as M249 machine gun barrels and the M240 machine gun; | ||
• | the M203 and Eagle grenade launcher; | ||
• | proprietary products designed for law enforcement uses, including our LE 6920 and LE 6940 Law Enforcement Carbines, AR-15A2 Government Carbine, AR-15A3 Tactical Carbine, Colt Accurized Rifle and 9mm Submachine Gun; and | ||
• | conversion and upgrade kits, spare parts and accessories, such as rail systems and sights. |
-52-
Table of Contents
• | further penetrate the global military and law enforcement related markets with our advanced M4, M16 and C7 and C8 family of weapons; | ||
• | provide related after-market products and accessories, including upgrades, spare parts, replacement kits and logistic support and remanufacture, refurbishment and conversion of small arms weapons systems; | ||
• | acquire knowledge of combat force requirements and the performance of weapons on the battlefield to develop additional advanced soldier-centric small arms weapons systems; and | ||
• | use our U.S. and foreign government relationships and knowledge to market additional products and related services that better equip, train and deploy individual forces. |
• | war-fighting variants such as a marksman rifle or close quarter battle carbine, featuring situation-optimized barrel lengths; | ||
• | electronic accessories such as lasers, illuminators or a combination of laser and optics; | ||
• | optical accessories such as infrared and thermal sights; | ||
• | firepower enhancements such as grenade launchers or sound suppression systems; and | ||
• | other accessories such as flashlights, slings, bipods or bayonets. |
-53-
Table of Contents
• | the large installed base of our battlefield-proven products, their quality and reliability, and our ability to offer related products and services; | ||
• | our more than 150 years of experience with the customs, practices and logistical and legal frameworks associated with supplying small arms weapons systems to the international market; | ||
• | our manufacturing, logistics, research and design capabilities enable us to customize our existing product line to effectively address specific international customer requirements; | ||
• | our familiarity with U.S. foreign military sales (“FMS”) procedures; | ||
• | our willingness and ability to support the increasing desire of international customers to establish in-country manufacturing license and similar co-production arrangements; and | ||
• | our network of foreign sales representatives that provides us with effective presence, marketing and after-market support capabilities. |
-54-
Table of Contents
• | increasing the consistently superior quality of our products; | ||
• | increasing our production capacity and ability to efficiently produce our existing product line; and | ||
• | expeditiously introducing additional product lines, such as the M240 and M249 machine gun barrels and the M240 machine gun, while maintaining superior levels of quality control. |
• | producing and delivering a broad range of quality proprietary small arms such as our M4 carbine and its variations, and our C7 and C8 family of weapons; | ||
• | continuing our leadership in the research and development of small arms weapons systems; | ||
• | diversifying our product line by developing new products, including the next generation of small arms weapons systems, by incorporating our TDPs and developing other technologies; | ||
• | diversifying our product line through offering accessories and related components, such as replacement barrels, rail systems, sights and other products that enhance the capability and functionality of our existing core product lines, including contract manufacturing of third parties’ proprietary products; and | ||
• | providing superior aftermarket service. |
-55-
Table of Contents
• | familiarity with the M4 weapons systems, including the components and accessories, weight and functionality lessens required training and maintenance resources; | ||
• | use of similar systems provides synergy for skill training as the individual completes courses and training in his or her military and civilian positions; | ||
• | use of our weapon systems in actual battle conditions provides independent evidence about the quality and functionality of our weapon systems; and | ||
• | highly-customizable modular weapon platform provides access to a wide selection of components and accessories, from more value-oriented offerings to battlefield-proven high-end products. |
-56-
Table of Contents
-57-
Table of Contents
• | military and law enforcement small arms weapons systems such as rifles, carbines, grenade launchers, and submachine guns; and | ||
• | a range of weapons-related products and accessories. |
-58-
Table of Contents
-59-
Table of Contents
-60-
Table of Contents
• | include companies that have complementary product lines or technological competencies and are in related or adjacent areas; | ||
• | respond to the needs of our core customers; and | ||
• | utilize our expertise in government procurement to field new technologies and understand the needs of the war-fighting forces. |
• | U.S. Government (including FMS sales by the U.S. Government); | ||
• | direct sales to foreign governments; and | ||
• | domestic law enforcement agencies and select distributors of law enforcement model weapons systems. |
-61-
Table of Contents
-62-
Table of Contents
-63-
Table of Contents
-64-
Table of Contents
-65-
Table of Contents
-66-
Table of Contents
-67-
Table of Contents
Name | Age | Position | ||||
Gerald R. Dinkel | 64 | Chief Executive Officer and Manger | ||||
Maj. Gen. James R. Battaglini, USMC (ret.) | 60 | Executive Vice President, Business Development | ||||
Scott B. Flaherty | 45 | Chief Financial Officer | ||||
J. Michael Magouirk | 49 | Chief Operating Officer | ||||
Jeffrey G. Grody | 55 | General Counsel and Secretary | ||||
Cynthia J. McNickle | 44 | Chief Accounting Officer | ||||
Marc Baliotti | 40 | Manager | ||||
Gen. the Lord Guthrie of Craigiebank | 71 | Manager | ||||
Michael Holmes | 45 | Manager | ||||
Lt. Gen. William M. Keys, USMC (ret.) | 73 | Manager | ||||
Vincent Lu | 46 | Manager | ||||
John P. Rigas | 47 | Manager | ||||
Daniel J. Standen | 42 | Manager | ||||
Gen. Gordon R. Sullivan, USA (ret.) | 73 | Manager | ||||
Philip A. Wheeler | 68 | Manager |
-68-
Table of Contents
-69-
Table of Contents
-70-
Table of Contents
• | Lt. General William M. Keys, USMC (ret.), President and Chief Executive Officer since 2002(1) | ||
• | John A. Krichavsky, Sr. VP and Chief Financial Officer from May 3, 2007 through April 2010(2) | ||
• | David A. Almeida, Chief Financial Officer from April 2010 through October 2010(2) | ||
• | Jeffrey G. Grody, Sr. VP and General Counsel since September 6, 2005 | ||
• | Maj. General James R. Battaglini (ret.), Executive VP, Business Development since November 2008 | ||
• | J. Michael Magouirk, Sr. VP of Operations and COO since November 2008 |
(1) | Lt. General Keys served as CEO until October 11, 2010 when Gerald R. Dinkel was appointed President and Chief Executive Officer. Lt. General Keys remained with Colt Defense in an advisory capacity until December 31, 2010 and he continues as a Manager. | |
(2) | Mr. Krichavsky served as the Chief Financial Officer of Colt Defense until April 28, 2010 and voluntarily terminated his employment with Colt Defense on July 2, 2010. From April 28, 2010 until the termination of employment on July 2, 2010, Mr. Krichavsky was employed by Colt Defense as an advisor. David Almeida was hired on April 28, 2010 as the new Chief Financial Officer of Colt Defense. Mr. Almeida voluntarily terminated his employment with Colt Defense on October 15, 2010 and upon his resignation, the duties of Chief Financial Officer were assumed by Scott Flaherty on an interim basis. Mr. Flaherty was subsequently appointed Chief Financial Officer by the Governing Board of Directors in October 2010. |
-71-
Table of Contents
• | have sought to provide a total compensation package that is competitive with other companies in our industry and other companies of a similar size, based on institutional knowledge of our industry and informal research regarding the compensation practices typical of our industry and companies of similar size; | ||
• | evaluate and reward executive officers based on dynamic factors such as whether they are willing and able to accept and meet challenges and to work as a team to achieve corporate objectives; and | ||
• | reward all employees with cash bonuses when warranted by the company’s annual performance in order to more completely align individual performance with shareholders’ objectives. |
• | Annual base salary | ||
• | Annual cash bonus incentive compensation |
-72-
Table of Contents
• | Equity incentive awards | ||
• | Pension and retirement benefits | ||
• | Severance benefits | ||
• | Perquisites and other benefits |
-73-
Table of Contents
-74-
Table of Contents
Change in | ||||||||||||||||||||||||
Pension | ||||||||||||||||||||||||
Annual | Value and | |||||||||||||||||||||||
Cash | NQDC | All Other | ||||||||||||||||||||||
Names & Principal | Salary | Bonus | Earnings | Comp. | Total | |||||||||||||||||||
Position | Year* | ($)(1) | ($)(2) | ($)(3) | ($) | ($) | ||||||||||||||||||
Lt. General William M. Keys, Former Chief Executive Officer | 2010 | $ | 573,661 | $ | — | $ | — | $ | 154,828 | (4) | $ | 728,489 | ||||||||||||
John A. Krichavsky, Former Chief Financial Officer | 2010 | $ | 197,370 | $ | — | $ | — | $ | 34,652 | (5) | $ | 232,022 | ||||||||||||
David Almeida, Former Chief Financial Officer | 2010 | $ | 162,000 | $ | — | $ | — | $ | 2,925 | (6) | $ | 164,925 | ||||||||||||
Jeffrey Grody, Sr. VP and General Counsel | 2010 | $ | 314,826 | $ | — | $ | — | $ | 6,297 | (7) | $ | 321,123 | ||||||||||||
James R. Battaglini, Executive VP, Business Development | 2010 | $ | 237,508 | $ | — | $ | — | $ | 36,468 | (8) | $ | 273,976 | ||||||||||||
J. Michael Magouirk, Sr. VP of Operations and COO | 2010 | $ | 211,950 | $ | — | $ | — | $ | 5,342 | (9) | $ | 217,292 |
* | Compensation is disclosed to the extent the individual was a named executive officer of Colt Defense for the applicable fiscal year. | |
(1) | Figures represent compensation received from January 1, 2010 through October 3, 2010. Compensation for Mr. Krichavsky is for the period January 1, 2010 through July 2, 2010 when he was the Chief Financial Officer. Compensation for Mr. Almeida was for the period from April 28, 2010 through October 15, 2010 when he was the Chief Financial Officer. | |
(2) | Cash bonuses, if earned, are paid during the fourth quarter of the year. Accordingly no cash bonuses have been paid during the first nine months of 2010. | |
(3) | Plan values are calculated annually as of December 31. Accordingly plan values are not available as of October 3, 2010. | |
(4) | Amount reflects living and commuting expenses, a tax gross-up on living and commuting expenses and Company matching contributions to the 401K Plan in the amounts of $85,242, $62,236 and $7,350, respectively. | |
(5) | Amount reflects consulting fees of $28,950 paid from July 2, 2010 through October 3, 2010 for services rendered after his voluntary termination of employment and Company matching contributions to his 401K Plan. | |
(6) | Amount reflects Company matching contributions to his 401K Plan. | |
(7) | Amount reflects Company matching contributions to his 401K Plan. | |
(8) | Amount reflects living and commuting expenses, a tax gross-up on living and commuting expenses and Company matching contributions to the 401K Plan in the amounts of $16,126, $12,992 and $7,350, respectively. | |
(9) | Amount reflects Company matching contributions to his 401K Plan. |
-75-
Table of Contents
-76-
Table of Contents
Stock Awards | ||||||||||||||||||||||||||||
Market | ||||||||||||||||||||||||||||
Option Awards | Number of | Value of | ||||||||||||||||||||||||||
Number of | Number of | Shares or | Shares or | |||||||||||||||||||||||||
Securities | Securities | Units of | Units of | |||||||||||||||||||||||||
Underlying | Underlying | Stock That | Stock That | |||||||||||||||||||||||||
Unexercised | Unexercised | Options | Option | Have | Have | |||||||||||||||||||||||
Grant | Options | Options | Exercise | Expiration | Not Vested | Not Vested | ||||||||||||||||||||||
Name | Date | (#) Exercisable | (#) Unexercisable | Price ($) | Date | (#) | ($) | |||||||||||||||||||||
Jeffrey Grody | 12/31/2005 | 783 | — | $ | 357 | 12/31/10 | — | $ | — |
Number of Years | Present Value of | |||||||||||
of Credited Service | Accumulated Benefit | Payments During | ||||||||||
Name | Plan Name | (#) | ($)(1) | Last Fiscal Year ($) | ||||||||
Lt. General William M. Keys Chief Executive Officer | Salaried Retirement Income Plan | 9.33 | $ | 102,236 | None | |||||||
John A. Krichavsky Chief Financial Officer | Salaried Retirement Income Plan | 1.67 | $ | 17,067 | None | |||||||
Jeffrey Grody Sr. Vice President and General Counsel | Salaried Retirement Income Plan | 3.3 | $ | 28,172 | None | |||||||
James R. Battaglini Executive VP, Business Development | Salaried Retirement Income Plan | 4.42 | $ | 37,766 | None | |||||||
J. Michael Magouirk Senior VP of Operations and COO | Salaried Retirement Income Plan | 8.75 | $ | 59,644 | None |
(1) | These figures represent the value as of December 31, 2009. Plan Values are calculated annually as of December 31. Accordingly plan values are not available as of October 3, 2010. |
-77-
Table of Contents
-78-
Table of Contents
Terminated | Resign with | Resign without | ||||||||||||||||||||||
Death and | Terminated | without | Good | Good | Change in | |||||||||||||||||||
Disability | with Cause | Cause | Reason | Reason | Control | |||||||||||||||||||
Salary (1) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 440,337 |
(1) | Salary is one-time Mr. Grody’s base salary payable at the time of termination. |
Terminated | Resign with | Resign without | ||||||||||||||||||||||
Death and | Terminated | without | Good | Good | Change in | |||||||||||||||||||
Disability | with Cause | Cause (1) | Reason | Reason | Control | |||||||||||||||||||
Salary (1) | $ | — | $ | — | $ | 330,120 | $ | — | $ | — | $ | — |
(1) | Salary is one-time Maj. General Battaglini’s base salary, payable on a monthly basis while Maj. General Battaglini is unemployed and actively searching for work. |
Terminated | Resign with | Resign without | ||||||||||||||||||||||
Death and | Terminated | without | Good | Good | Change in | |||||||||||||||||||
Disability | with Cause | Cause (1) | Reason | Reason (8) | Control (9) | |||||||||||||||||||
Salary (1) | $ | — | $ | — | $ | 350,000 | $ | — | $ | — | $ | — |
(1) | Salary is one-time Mr. Magouirk’s base salary, payable on a monthly basis while Mr. Magouirk is unemployed and actively searching for work. |
-79-
Table of Contents
Total Fees | ||||||||||||
Earned or | ||||||||||||
Retainer | Reimbursed | Paid in | ||||||||||
Name | Fees | Expenses | Cash | |||||||||
General the Lord Guthrie of Craigiebank (Charles Guthrie) | $ | 40,000 | $ | — | $ | 40,000 | ||||||
General Gordon R. Sullivan | $ | 40,000 | $ | 1,268 | $ | 41,268 | ||||||
Phil Wheeler | $ | 40,000 | $ | — | $ | 40,000 |
-80-
Table of Contents
-81-
Table of Contents
• | License Agreement. We have an exclusive, worldwide, license right from New Colt to use the Colt® brand name for the sale of small arms, spare parts and other products and services for military use and to use the Colt® brand name for the sale of firearms, except handguns, plus spare parts and related products for law enforcement use. This license also includes the right to use the Rampant Colt Logo and the Colt Logo trademarks. The trademark license is fully paid up for its initial 20-year term, and may be extended indefinitely at our option for successive five-year periods upon payment of $250,000 for each additional five-year period. | ||
• | Sublease. We sublease portions of our West Hartford, Connecticut manufacturing facility and administrative offices to Colt’s Manufacturing in return for monthly rental payments of $13,400. The sublease expires on October 25, 2012. | ||
• | Services Agreement. We provide certain factory, overhead, administrative and management services to Colt’s Manufacturing. The services are provided pursuant to an Intercompany Services Agreement that automatically renews for successive one-year periods. Services covered by the agreement and the associated charges include the following: (i) executive, sales management and legal services ($25,000 per year); (ii) utilities, building maintenance and supplies, equipment and general facility maintenance, product engineering and manufacturing engineering services ($350,000 per year); (iii) tumbling and heat-treating factory services ($30,000) year and (iv) accounting and data processing services ($25,000) year. Amounts charged to Colt’s Manufacturing do not necessarily reflect the actual cost to us of providing the services in question, nor does the Services Agreement reflect all of the benefits that we provide to Colt’s Manufacturing. | ||
• | Match Target® Supply Relationship. We supply Match Target® rifles, a commercial version of our military and law enforcement model rifles, to Colt’s Manufacturing at a price that is intended to permit us and Colt’s Manufacturing to share the profit margin that would ordinarily be generated by a sale from manufacturer to distributor. We sold $2.4 million of Match Target® rifles to Colt’s Manufacturing in 2008 and $4.6 million of rifles in 2009. In connection with this relationship, we have licensed the Match Target® TDP and trademark to Colt’s Manufacturing. | ||
• | Collective Bargaining Agreement. Our union employees at our West Hartford, Connecticut facility are members of a single bargaining unit with the employees of Colt’s Manufacturing and a single collective bargaining agreement covers the union employees of both companies. Seniority, “bumping” and other rights and obligations operate across two companies. The impact of cross-company seniority and bumping rights causes layoffs and recalls at one company to affect the other company. |
-82-
Table of Contents
-83-
Table of Contents
-84-
Table of Contents
-85-
Table of Contents
• | the registered notes will have been registered under the Securities Act, and thus the registered notes generally will not be subject to the restrictions on transfer applicable to the outstanding notes or bear restrictive legends; | ||
• | the registered notes will bear a different CUSIP number from the outstanding notes; | ||
• | the registered notes will not be entitled to registration rights; and | ||
• | the registered notes will not have the right to earn additional interest under circumstances relating to our registration obligations. |
-86-
Table of Contents
• | to extend the offer or to terminate the exchange offer if, in our reasonable judgment, any of the conditions described below shall not have been satisfied, by giving oral or written notice of the extension or termination to the exchange agent; or | ||
• | to amend the terms of the exchange offer in any manner. |
• | the exchange offer violates any applicable law; or | ||
• | the exchange offer violates any applicable interpretation of the staff of the SEC. |
• | refuse to accept any outstanding notes and return all tendered outstanding notes to the tendering holders; | ||
• | extend the exchange offer and retain all outstanding notes tendered before the expiration of the exchange offer, subject, however, to the rights of holders to withdraw these outstanding notes (see “— Withdrawal of Tenders” below); or | ||
• | waive unsatisfied conditions relating to the exchange offer and accept all properly tendered outstanding notes which have not been withdrawn. |
• | complete, sign and date the letter of transmittal, or a facsimile of it; | ||
• | have the signatures guaranteed if required by the letter of transmittal; and |
-87-
Table of Contents
• | mail or otherwise deliver the letter of transmittal or the facsimile, the outstanding notes and any other required documents to the exchange agent prior to 5:00 p.m., New York City time, on the expiration date. |
• | by a registered holder who has not completed the box entitled “Special Registration Instructions” or “Special Delivery Instructions” on the letter of transmittal; or | ||
• | for the account of an eligible guarantor institution. |
• | a member firm of a registered national securities exchange or of the Financial Industry Regulatory Authority; | ||
• | a commercial bank or trust company having an office or correspondent in the United States; or | ||
• | an “eligible guarantor institution.” |
-88-
Table of Contents
• | the registered notes acquired in connection with the exchange offer are being obtained in the ordinary course of business of the person receiving the registered notes, whether or not such person is the holder; | ||
• | neither the holder nor any such other person has an arrangement or understanding with any person to participate in the distribution of such registered notes; and | ||
• | neither the holder nor any such other person is our “affiliate” (as defined in Rule 405 under the Securities Act). |
• | whose outstanding notes are not immediately available; | ||
• | who cannot deliver the holder’s outstanding notes, the letter of transmittal or any other required documents to the exchange agent prior to the expiration date; or | ||
• | who cannot complete the procedures for book-entry transfer before the expiration date; |
• | the tender is made through an eligible guarantor institution; | ||
• | before the expiration date, the exchange agent receives from the eligible guarantor institution: |
-89-
Table of Contents
• | the exchange agent receives, within three New York Stock Exchange trading days after the expiration date, a properly completed and executed letter of transmittal or facsimile, as well as the certificate(s) representing all tendered outstanding notes in proper form for transfer or a confirmation of book-entry transfer, and all other documents required by the letter of transmittal. |
• | specify the name of the person who deposited the outstanding notes to be withdrawn; | ||
• | identify the outstanding notes to be withdrawn (including the certificate number(s) and principal amount of such outstanding notes); | ||
• | be signed by the depositor in the same manner as the original signature on the letter of transmittal by which such outstanding notes were tendered (including any required signature guarantees) or be accompanied by documents of transfer sufficient to have the Trustee register the transfer of such outstanding notes into the name of the person withdrawing the tender; and | ||
• | specify the name in which any such outstanding notes are to be registered, if different from that of the depositor. |
-90-
Table of Contents
• | file with the SEC a registration statement for the exchange offer; | ||
• | cause such registration statement to be declared effective under the Securities Act; | ||
• | have such registration statement remain effective until the closing of the exchange offer; | ||
• | commence the exchange offer promptly after the exchange offer registration statement is declared effective by the Commission; and | ||
• | consummate the exchange offer not later than 540 days following the issue date of the outstanding notes. |
• | the exchange offer is not consummated within 540 days following the issue date of the outstanding notes; | ||
• | we are not permitted to consummate the exchange offer because the exchange offer is not permitted by applicable law or SEC policy; | ||
• | you are prohibited by applicable law or SEC policy to participate in the exchange offer and indicate that you wish to have your outstanding notes registered under the Securities Act; | ||
• | you may not resell registered notes you have acquired in the exchange offer to the public without delivering a prospectus and this prospectus (including any amendment or supplement thereto) is not appropriate or available for resales by you; or | ||
• | you are a broker-dealer and hold outstanding notes acquired directly from us or any of our affiliates. |
-91-
Table of Contents
By Mail, Hand or Overnight Delivery: | By Facsimile: | |
Wilmington Trust FSB | (302) 636-4139 | |
c/o Wilmington Trust Company | ||
Corporate Capital Markets | For Information or Confirmation by Telephone: | |
Rodney Square North | ||
1100 North Market Street | Sam Hamed | |
Wilmington, Delaware 19890-1626 | (302) 636-6181 |
• | registered notes are to be delivered to, or issued in the name of, any person other than the registered holder of the outstanding notes tendered; or | ||
• | tendered outstanding notes are registered in the name of any person other than the person signing the letter of transmittal; or | ||
• | a transfer tax is imposed for any reason other than the exchange of outstanding notes in connection with the exchange offer; |
-92-
Table of Contents
• | the remaining outstanding notes may be resold only (i) if registered pursuant to the Securities Act, (ii) if an exemption from registration is available, or (iii) if neither such registration nor such exemption is required by law; and | ||
• | the remaining outstanding notes will bear a legend restricting transfer in the absence of registration or an exemption. |
• | certificates representing outstanding notes for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be issued in the name of, any person other than the registered holder of outstanding notes tendered; | ||
• | tendered outstanding notes are registered in the name of any other person other than the person signing the letter of transmittal; or | ||
• | a transfer tax is imposed for any reason other than the exchange of outstanding notes under the exchange offer. |
-93-
Table of Contents
• | are general unsecured, senior obligations of the Issuers; | ||
• | were limited to an aggregate principal amount of $250.0 million on the Issue Date, subject to our ability to issue Additional Notes thereafter; | ||
• | mature on November 15, 2017; | ||
• | will be unconditionally Guaranteed on a senior basis by each Subsidiary of the Company that Guarantees certain other Indebtedness of the Company or other Subsidiary Guarantors. See “— Subsidiary guarantees”; | ||
• | are issued in denominations of $2,000 and larger integral multiples of $1,000; | ||
• | are represented by one or more registered Notes in global form, but in certain circumstances may be represented by Notes in definitive form; |
-94-
Table of Contents
• | rank equally in right of payment to any future senior Indebtedness of the Issuers; | ||
• | are effectively subordinated to all Secured Indebtedness of the Issuers (including the Senior Credit Facility) to the extent of the value of the assets securing such Indebtedness; and | ||
• | are senior in right of payment to any future Subordinated Obligations of the Issuers. |
• | accrue at the rate of 8.75% per annum; | ||
• | accrue from the date of original issuance or, if interest has already been paid, from the most recent interest payment date; | ||
• | be payable in cash semiannually in arrears on May 15 and November 15, commencing on May 15, 2010; | ||
• | be payable to the Holders of record on the May 1 and November 1 immediately preceding the related interest payment dates; and | ||
• | be computed on the basis of a 360-day year comprised of twelve 30-day months. |
-95-
Table of Contents
Year | Percentage | |||
2013 | 104.375 | % | ||
2014 | 102.187 | % | ||
2015 and thereafter | 100.000 | % |
-96-
Table of Contents
• | outstanding Indebtedness of the Issuers and the Subsidiary Guarantors was approximately $249.4 million, including the Notes, of which $2.7 million ranked senior to the Notes and Subsidiary Guarantees; | ||
• | the Issuers had no Subordinated Obligations outstanding; and the Subsidiary Guarantors had no Guarantor Subordinated Obligations; and | ||
• | our Non-Guarantor Subsidiaries had $13.7 million of total liabilities (including trade payables and deferred income but excluding intercompany liabilities) all of which was structurally senior to the Notes. |
• | will be a general unsecured senior obligation of each Subsidiary Guarantor; | ||
• | will be pari passu in right of payment with any existing and future senior Indebtedness of each such entity; and |
-97-
Table of Contents
• | will be effectively subordinated to all Secured Indebtedness (including the Guarantee of the Senior Credit Facility) of each such entity (to the extent of the value of the assets securing such Indebtedness). |
(1) | (a) | any sale, assignment, exchange, transfer, conveyance, exchange or other disposition (by merger, consolidation or otherwise) of the Capital Stock of such Subsidiary Guarantor, after which the applicable Subsidiary Guarantor is no longer a Restricted Subsidiary, or all or substantially all the assets of such Subsidiary (other than by lease), which sale, exchange or transfer is made in compliance with the applicable provisions of the Indenture;providedthat in the case of any Restricted Subsidiary that is required to guarantee the Notes after the Issue Date pursuant to the covenant described under “— Certain Covenants — Future subsidiary guarantors,” all the obligations of such Subsidiary Guarantor under all Indebtedness of the Company or its Restricted Subsidiaries that resulted in the obligation to guarantee the Notes terminate upon consummation of such transaction; |
(b) | the release or discharge of such Subsidiary Guarantor from its Guarantee of Indebtedness of the Company and the Subsidiary Guarantors under the Senior Credit Facility (including by reason of the termination of the Senior Credit Facility), all other Indebtedness of the Company and its Restricted Subsidiaries and/or the Guarantee that resulted in the obligation of such Subsidiary Guarantor to Guarantee the Notes, if such Subsidiary Guarantor would not then otherwise be required to Guarantee the Notes pursuant to the Indenture (and treating any Guarantees of such Subsidiary Guarantor that remain outstanding as Incurred at least 30 days prior to such release or discharge), except a discharge or release by or as a result of payment under such Guarantee;provided, that if such Person has Incurred any Indebtedness or issued any Preferred Stock or Disqualified Stock in reliance on its status as a Subsidiary Guarantor under the covenant “Certain covenants — Limitation on indebtedness,” such Subsidiary Guarantor’s obligations under such Indebtedness, Disqualified Stock or Preferred Stock, as the case may be, so Incurred are satisfied in full and discharged or are otherwise permitted to be Incurred by a Restricted Subsidiary (other than a Subsidiary Guarantor) under “Certain covenants — Limitation on indebtedness”; | ||
(c) | the proper designation of any Restricted Subsidiary that is a Subsidiary Guarantor as an Unrestricted Subsidiary; or | ||
(d) | the Issuers exercising their legal defeasance option or covenant defeasance option as described under “— Defeasance” or the Issuers’ obligations under the Indenture being discharged in accordance with the terms of the Indenture; and |
-98-
Table of Contents
(2) | such Subsidiary Guarantor delivering to the Trustee an Officers’ Certificate and an Opinion of Counsel stating that all conditions precedent provided for in the Indenture relating to such transaction have been complied with. |
-99-
Table of Contents
-100-
Table of Contents
-101-
Table of Contents
-102-
Table of Contents
(a) | the Notes have an Investment Grade Rating from both of the Ratings Agencies; and | ||
(b) | no Default has occurred and is continuing under the Indenture, |
• | “Repurchase at the option of holders—Sales of assets,” | ||
• | “— Limitation on indebtedness,” | ||
• | “— Limitation on restricted payments,” | ||
• | “— Limitation on restrictions on distributions from restricted subsidiaries,” | ||
• | “— Limitation on affiliate transactions,” and | ||
• | Clause (4) of “— Merger and consolidation” |
-103-
Table of Contents
-104-
Table of Contents
(a) | if the Company is the obligor on Indebtedness owing to a Non-Guarantor Subsidiary, such Indebtedness is expressly subordinated to the prior payment in full in cash of all obligations with respect to the Notes; | ||
(b) | if a Subsidiary Guarantor is the obligor on such Indebtedness and a Non-Guarantor Subsidiary is the obligee, such Indebtedness is subordinated in right of payment to the Subsidiary Guarantees of such Subsidiary Guarantor; and |
(c) | (i) any subsequent issuance or transfer of Capital Stock or any other event which results in any such Indebtedness being beneficially held by a Person other than the Company or a Restricted Subsidiary (other than a Receivables Entity) of the Company; and |
(ii) | any sale or other transfer of any such Indebtedness to a Person other than the Company or a Restricted Subsidiary (other than a Receivables Entity) of the Company |
(a) | the Company would have been able to Incur $1.00 of additional Indebtedness pursuant to the first paragraph of this covenant after giving effect to the Incurrence of such Indebtedness pursuant to this clause (6); or | ||
(b) | the Consolidated Coverage Ratio of the Company and its Restricted Subsidiaries is higher than immediately prior to such acquisition or merger;providedthat in the case of clause (y) above only, the Consolidated Coverage Ratio for the Company and its Restricted Subsidiaries is at least 1.75 to 1.00 after giving effect to the Incurrence of such Indebtedness pursuant to this clause (6); |
-105-
Table of Contents
-106-
Table of Contents
-107-
Table of Contents
(a) | dividends or distributions payable solely in Capital Stock of the Company (other than Disqualified Stock) or in options, warrants or other rights to purchase such Capital Stock of the Company; and | ||
(b) | dividends or distributions by a Restricted Subsidiary payable to the Company or another Restricted Subsidiary (and if such Restricted Subsidiary is not a Wholly-Owned Subsidiary, to its other holders of common Capital Stock on a pro rata basis); |
(a) | Indebtedness of the Company owing to and held by any Subsidiary Guarantor or Indebtedness of a Subsidiary Guarantor owing to and held by the Company or any other Subsidiary Guarantor permitted under clause (5) of the second paragraph of the covenant “— Limitation on indebtedness” or | ||
(b) | the purchase, repurchase, redemption, defeasance or other acquisition or retirement of Subordinated Obligations or Guarantor Subordinated Obligations purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of purchase, repurchase, redemption, defeasance or other acquisition or retirement); or |
-108-
Table of Contents
(i) | 50% of Consolidated Net Income for the period (treated as one accounting period) from October 5, 2009 to the end of the most recent fiscal quarter ending prior to the date of such Restricted Payment for which financial statements are available (or, in case such Consolidated Net Income is a deficit, minus 100% of such deficit);plus | ||
(ii) | 100% of the aggregate Net Cash Proceeds and the fair market value, as determined in good faith by the Board of Directors of the Company, of marketable securities or other property received by the Company from the issue or sale of its Capital Stock (other than Disqualified Stock, Cash Contribution Amount or Excluded Contributions) or other capital contributions subsequent to the Issue Date, other than: |
(x) | Net Cash Proceeds received from an issuance or sale of such Capital Stock to a Subsidiary of the Company or to an employee stock ownership plan, option plan or similar trust to the extent such sale to an employee stock ownership plan or similar trust is financed by loans from or Guaranteed by the Company or any Restricted Subsidiary unless such loans have been repaid with cash on or prior to the date of determination); and | ||
(y) | Net Cash Proceeds received by the Company from the issue and sale of its Capital Stock or capital contributions to the extent applied to redeem Notes in compliance with the provisions set forth under the second paragraph of the caption “— Optional redemption”;plus |
(iii) | the amount by which Indebtedness of the Company or its Restricted Subsidiaries is reduced on the Company’s consolidated balance sheet upon the conversion or exchange (other than debt held by a Subsidiary of the Company) subsequent to the Issue Date of any Indebtedness of the Company or its Restricted Subsidiaries convertible or exchangeable for Capital Stock (other than Disqualified Stock) of the Company (less the amount of any cash, or the fair market value of any other property, distributed by the Company upon such conversion or exchange);plus | ||
(iv) | the amount equal to the net reduction in Restricted Investments made by the Company or any of its Restricted Subsidiaries in any Person resulting from: |
(x) | repurchases or redemptions of such Restricted Investments by such Person, proceeds realized upon the sale of such Restricted Investment (other than sales to the Company or any Restricted Subsidiary), repayments of loans or advances or other transfers of assets (including by way of dividend or distribution) by such Person to the Company or any Restricted Subsidiary (other than for reimbursement of tax payments); or |
-109-
Table of Contents
(y) | the redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries or the merger or consolidation of an Unrestricted Subsidiary with and into the Company or any of its Restricted Subsidiaries (valued in each case as provided in the definition of “Investment”) not to exceed the fair market value of Investments previously made by the Company or any Restricted Subsidiary in such Unrestricted Subsidiary at the time of such redesignation, |
which amount in each case under this clause (iv) was included in the calculation of the amount of Restricted Payments;provided,however, that no amount will be included under this clause (iv) to the extent it is already included in Consolidated Net Income. |
-110-
Table of Contents
(a) | the Net Cash Proceeds from the sale of Capital Stock (other than Disqualified Stock) of the Company and, to the extent contributed to the Company, Capital Stock of any of the Company’s direct or indirect parent companies, in each case to existing or former employees or members of management of the Company, any of its Subsidiaries or any of its direct or indirect parent companies that occurs after the Issue Date, to the extent the cash proceeds from the sale of such Capital Stock have not otherwise been applied to the payment of Restricted Payments (provided that the Net Cash Proceeds from such sales or contributions will be excluded from clause (c)(ii) of the preceding paragraph);plus | ||
(b) | the cash proceeds of key man life insurance policies received by the Company or its Restricted Subsidiaries after the Issue Date;less | ||
(c) | the amount of any Restricted Payments previously made with the cash proceeds described in the clauses (a) and (b) of this clause (7)provided, that the Issuers may elect to apply all or any portion of the aggregate increase contemplated by clause (a), (b) or (c) above in any calendar year; |
-111-
Table of Contents
(a) | pay amounts equal to the amounts required for any direct or indirect parent of the Issuers to pay fees and expenses (including franchise or similar taxes) required to maintain its corporate existence, customary salary, bonus and other benefits payable to officers and employees of any direct or indirect parent of the Issuers, if applicable, and general corporate overhead expenses of any direct or indirect parent of the Issuers, if applicable, in each case to the extent such fees, expenses, salaries, bonuses, benefits and indemnities are attributable to the ownership or operation of the Issuers, if applicable, and the Restricted Subsidiaries; and | ||
(b) | pay, if applicable, amounts equal to amounts required for any direct or indirect parent of the Issuers, if applicable, to pay interest and/or principal on Indebtedness the proceeds of which have been permanently contributed to the Issuers or any of the Restricted Subsidiaries and that has been guaranteed by, or is otherwise considered Indebtedness of, the Issuers or any of the Restricted Subsidiaries Incurred in accordance with the covenant described under “— Limitation on indebtedness”; and |
-112-
Table of Contents
-113-
Table of Contents
The preceding provisions will not prohibit encumbrances or restrictions existing under or by reason of: |
-114-
Table of Contents
-115-
Table of Contents
-116-
Table of Contents
-117-
Table of Contents
(a) | the Successor Company would be able to Incur at least $1.00 of additional Indebtedness pursuant to the first paragraph of the “— Limitation on indebtedness” covenant, or | ||
(b) | the Consolidated Coverage Ratio for the Successor Company and its Restricted Subsidiaries would be greater than such ratio for the Company and its Restricted Subsidiaries immediately prior to such transaction; |
-118-
Table of Contents
-119-
Table of Contents
-120-
Table of Contents
(a) | is caused by a failure to pay principal of, or interest or premium, if any, on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness (“payment default”); or | ||
(b) | results in the acceleration of such Indebtedness prior to its maturity (the “cross acceleration provision”); |
-121-
Table of Contents
-122-
Table of Contents
-123-
Table of Contents
-124-
Table of Contents
-125-
Table of Contents
(a) | all Notes that have been authenticated, except lost, stolen or destroyed Notes that have been replaced or paid and Notes for whose payment money has been deposited in trust and thereafter repaid to the Issuers, have been delivered to the Trustee for cancellation; or | ||
(b) | all Notes not theretofore delivered to the Trustee for cancellation have become due and payable by reason of the making of a notice of redemption or otherwise, will become due and payable within one year or may be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Issuers, and the Issuers or any Subsidiary Guarantor has irrevocably deposited or caused to be deposited with the Trustee, as trust funds in trust solely for the benefit of the Holders, cash in U.S. dollars, Government Securities, or a combination thereof, in such amounts as will be sufficient without consideration of any reinvestment of interest to pay and discharge the entire Indebtedness on the Notes not theretofore delivered to the Trustee for cancellation for principal, premium, if any, and accrued interest to the date of maturity or redemption; |
-126-
Table of Contents
-127-
Table of Contents
-128-
Table of Contents
-129-
Table of Contents
-130-
Table of Contents
-131-
Table of Contents
(a) | has Incurred any Indebtedness since the beginning of such period that remains outstanding on such date of determination or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio includes an Incurrence of Indebtedness, Consolidated EBITDA and Consolidated Interest Expense for such period will be calculated after giving effect on a pro forma basis to such Indebtedness as if such Indebtedness had been Incurred on the first day of such period (except that in making such computation, the amount of Indebtedness outstanding during such four fiscal quarters under any revolving Debt Facility existing on the date of such calculation will be deemed to be (i) the average daily balance of such Indebtedness during such four fiscal quarters or such shorter period for which such facility was outstanding or (ii) if such facility was created after the end of such four fiscal quarters, the average daily balance of such Indebtedness during the period from the date of creation of such facility to the date of such calculation) and the discharge of any other Indebtedness repaid, repurchased, defeased or otherwise discharged with the proceeds of such new Indebtedness as if such discharge had occurred on the first day of such period; or | ||
(b) | has repaid, repurchased, redeemed, retired, defeased or otherwise discharged any Indebtedness since the beginning of the period that is no longer outstanding on such date of determination or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio includes a discharge of Indebtedness (in each case, other than Indebtedness Incurred under any revolving Debt Facility unless such Indebtedness has been permanently repaid and the related commitment terminated), Consolidated EBITDA and Consolidated Interest Expense for such period will be calculated after giving effect on a pro forma basis to such discharge of such Indebtedness, including with the proceeds of such new Indebtedness, as if such discharge had occurred on the first day of such period; |
(a) | the Consolidated EBITDA for such period will be reduced by an amount equal to the Consolidated EBITDA (if positive) attributable to the assets that are the subject of such disposition or discontinuation for such period or increased by an amount equal to the Consolidated EBITDA (if negative) attributable thereto for such period; and | ||
(b) | Consolidated Interest Expense for such period will be reduced by an amount equal to the Consolidated Interest Expense attributable to any Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased, redeemed, retired, defeased or otherwise dis- |
-132-
Table of Contents
charged with respect to the Company and its continuing Restricted Subsidiaries in connection with such transaction for such period (or, if the Capital Stock of any Restricted Subsidiary is sold, the Consolidated Interest Expense for such period attributable to the Indebtedness of such Restricted Subsidiary to the extent the Company and its continuing Restricted Subsidiaries are no longer liable for such Indebtedness after such sale); |
(a) | Consolidated Interest Expense;plus | ||
(b) | Consolidated Income Taxes;plus | ||
(c) | consolidated depreciation expense;plus | ||
(d) | consolidated amortization expense or impairment charges recorded in connection with the application of Financial Accounting Standard No. 142 “Goodwill and Other Intangibles” and Financial Accounting Standard No. 144 “Accounting for the Impairment or Disposal of Long Lived Assets”;plus | ||
(e) | other non cash charges reducing Consolidated Net Income, including any write-offs or write-downs (excluding any such non cash charge to the extent it represents an accrual of or reserve for cash charges in any future period or amortization of a prepaid cash expense that was paid in a prior period not included in the calculation);plus |
-133-
Table of Contents
(a) | any net gain or loss resulting in such period from Hedging Obligations and the application of Statement of Financial Accounting Standards No. 133; | ||
(b) | any net gain or loss resulting in such period from currency translation gains or losses related to currency remeasurements of Indebtedness (including any net loss or gain resulting from Hedging Obligations for currency exchange risk); and | ||
(c) | effects of adjustments (including the effects of such adjustments pushed down to the Company and its Restricted Subsidiaries) in any line item in such Person’s consolidated financial statements pursuant to GAAP resulting from the application of purchase accounting in relation to any completed acquisition. |
-134-
Table of Contents
-135-
Table of Contents
(a) | subject to the limitations contained in clauses (5) and (6) below, the Company’s equity in the net income of any such Person for such period will be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the Company or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution to a Restricted Subsidiary, to the limitations contained in clause (2) below); and | ||
(b) | the Company’s equity in a net loss of any such Person (other than an Unrestricted Subsidiary) for such period will be included in determining such Consolidated Net Income to the extent such loss has been funded with cash from the Company or a Restricted Subsidiary; |
(a) | subject to the limitations contained in clauses (5) and (6) below, the Company’s equity in the net income of any such Restricted Subsidiary for such period will be included in such Consolidated Net Income up to the aggregate amount of cash that could have been distributed by such Restricted Subsidiary during such period to the Company or another Restricted Subsidiary as a dividend (subject, in the case of a dividend to another Restricted Subsidiary, to the limitation contained in this clause); and | ||
(b) | the Company’s equity in a net loss of any such Restricted Subsidiary for such period will be included in determining such Consolidated Net Income; |
-136-
Table of Contents
-137-
Table of Contents
-138-
Table of Contents
-139-
Table of Contents
(a) | the lesser of (i) the net assets of the General Partner and (ii) the amount of such obligations to the extent that there is recourse, by contract or operation of law, to the property or assets of such Person or a Restricted Subsidiary of such Person; or | ||
(b) | if less than the amount determined pursuant to clause (a) immediately above, the actual amount of such Indebtedness that is recourse to such Person or a Restricted Subsidiary of such Person, if the Indebtedness is evidenced by a writing and is for a determinable amount. |
-140-
Table of Contents
-141-
Table of Contents
-142-
Table of Contents
(a) | such Person becomes a Restricted Subsidiary; or |
-143-
Table of Contents
(b) | such Person, in one transaction or a series of related transactions, is merged or consolidated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Restricted Subsidiary, |
(a) | in exchange for any other Investment or accounts receivable held by the Company or any such Restricted Subsidiary in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the issuer of such other Investment or accounts receivable; or | ||
(b) | as a result of a foreclosure by the Company or any of its Restricted Subsidiaries with respect to any secured Investment or other transfer of title with respect to any secured Investment in default; |
-144-
Table of Contents
-145-
Table of Contents
(a) | such deposit account is not a dedicated cash collateral account and is not subject to restrictions against access by the Company in excess of those set forth by regulations promulgated by the Federal Reserve Board; and | ||
(b) | such deposit account is not intended by the Company or any Restricted Subsidiary to provide a lien to the depository institution; |
-146-
Table of Contents
-147-
Table of Contents
-148-
Table of Contents
(a) | is Guaranteed by the Company, any direct or indirect parent of the Company or any of their respective Restricted Subsidiaries (excluding Guarantees of obligations (other than the principal of, and interest on, Indebtedness) pursuant to Standard Securitization Undertakings); | ||
(b) | is recourse to or obligates the Company, any direct or indirect parent of the Company or any of their respective Restricted Subsidiaries in any way other than pursuant to Standard Securitization Undertakings; or | ||
(c) | subjects any property or asset of the Company, any direct or indirect parent of the Company or any of their respective Restricted Subsidiaries any direct or indirect parent of the Company or any of their respective Restricted Subsidiaries, directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to Standard Securitization Undertakings; |
-149-
Table of Contents
-150-
Table of Contents
-151-
Table of Contents
(a) | to subscribe for additional Capital Stock of such Person; or |
-152-
Table of Contents
(b) | to maintain or preserve such Person’s financial condition or to cause such Person to achieve any specified levels of operating results; and |
-153-
Table of Contents
-154-
Table of Contents
-155-
Table of Contents
• | may not rely on the applicable interpretation of the staff of the SEC’s position contained in Exxon Capital Holdings Corp., SEC no-action letter (April 13, 1988), Morgan, Stanley & Co. Inc., SEC no-action letter (June 5, 1991) and Shearman & Sterling, SEC no-action letter (July 2, 1993); and | ||
• | must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale of the registered notes. |
-156-
Table of Contents
-157-
Page(s) | ||||
Reports of Independent Registered Public Accounting Firms | ||||
F-2 | ||||
F-3 | ||||
Audited Consolidated Financial Statements | ||||
F-4 | ||||
F-5 | ||||
F-6 | ||||
F-7 | ||||
F-8 | ||||
Unaudited Consolidated Financial Statements | ||||
F-39 | ||||
F-40 | ||||
F-41 | ||||
F-42 |
F-1
Table of Contents
March 15, 2010, except for
Note 12 as to which the date is
January 3, 2011
F-2
Table of Contents
October 22, 2009
F-3
Table of Contents
Consolidated Balance Sheets
December 31, 2009 and 2008
(in thousands of dollars)
2009 | 2008 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 72,705 | $ | 29,248 | ||||
Restricted cash | 1,136 | 476 | ||||||
Accounts receivable, net | 20,328 | 7,735 | ||||||
Inventories | 35,448 | 26,997 | ||||||
Other current assets | 2,678 | 1,737 | ||||||
Total current assets | 132,295 | 66,193 | ||||||
Property and equipment,net | 17,919 | 13,736 | ||||||
Goodwill | 11,245 | 10,263 | ||||||
intangible assets with finite lives | 7,942 | 7,827 | ||||||
Deferred financing costs | 12,541 | 6,720 | ||||||
Other assets | 2,160 | 2,381 | ||||||
Total assets | $ | 184,102 | $ | 107,120 | ||||
Liabilities and Deficit | ||||||||
Current liabilities: | ||||||||
Current portion of long term debt | $ | 15 | $ | 1,361 | ||||
Current portion capital lease obligations | 1,146 | 1,259 | ||||||
Accounts payable | 14,385 | 12,487 | ||||||
Accrued expenses | 10,221 | 3,847 | ||||||
Pension and retirement obligations — current portion | 1,989 | 1,808 | ||||||
Customer advances and deferred income | 6,927 | 4,450 | ||||||
Other current liabilities | 2,645 | 5,429 | ||||||
Total current liabilities | 37,328 | 30,641 | ||||||
Long-term debt, less current portion | 246,520 | 188,957 | ||||||
Capital lease obligations | 2,377 | 3,523 | ||||||
Pension and retirement liabilities | 11,318 | 12,201 | ||||||
Other long-term liabilities | 446 | 5,058 | ||||||
Total long-term liabilities | 260,661 | 209,739 | ||||||
Total liabilities | 297,989 | 240,380 | ||||||
Commitments and Contingencies (Note 11) | ||||||||
Deficit | ||||||||
Accumulated deficit | (107,644 | ) | (117,047 | ) | ||||
Accumulated other comprehensive loss | (6,147 | ) | (16,042 | ) | ||||
Total Colt Defense LLC members’ deficit | (113,791 | ) | (133,089 | ) | ||||
Non-controlling interest | (96 | ) | (171 | ) | ||||
Total deficit | (113,887 | ) | (133,260 | ) | ||||
Total liabilities and deficit | $ | 184,102 | $ | 107,120 | ||||
F-4
Table of Contents
Consolidated Statements of Operations
For the Years Ended December 31, 2009, 2008 and 2007
(in thousands of dollars)
2009 | 2008 | 2007 | ||||||||||
Net sales | $ | 274,026 | $ | 270,376 | $ | 180,732 | ||||||
Cost of sales | 185,942 | 181,459 | 128,619 | |||||||||
Gross profit | 88,084 | 88,917 | 52,113 | |||||||||
Selling and commissions | 9,295 | 5,836 | 5,005 | |||||||||
General and administrative | 14,265 | 14,109 | 11,558 | |||||||||
Amortization of purchased intangibles | 525 | 888 | 826 | |||||||||
Impairment of goodwill | — | 2,631 | — | |||||||||
Common unit compensation expense | — | 45 | 25,157 | |||||||||
24,085 | 23,509 | 42,546 | ||||||||||
Operating income | 63,999 | 65,408 | 9,567 | |||||||||
Other expense (income) | ||||||||||||
Interest expense | 18,847 | 19,281 | 14,105 | |||||||||
Debt prepayment expense | 11,687 | — | 727 | |||||||||
Other net | 1,672 | 799 | (59 | ) | ||||||||
32,206 | 20,080 | 14,773 | ||||||||||
Income (loss) before foreign income taxes | 31,793 | 45,328 | (5,206 | ) | ||||||||
Provision for foreign Income taxes | 2,320 | 1,097 | 1,539 | |||||||||
Net income (loss) | 29,473 | 44,231 | (6,745 | ) | ||||||||
Less: Net income (loss) attributable to non-controlling interest | 75 | (47 | ) | (47 | ) | |||||||
Net income (loss) attributed to Colt Defense LLC members | $ | 29,398 | $ | 44,278 | $ | (6,698 | ) | |||||
F-5
Table of Contents
Consolidated Statements of Changes in Deficit
For the Years Ended December 31, 2009, 2008 and 2007
(in thousands of dollars)
Accumulated | ||||||||||||||||||||||||
Accumulated | Other | Non- | ||||||||||||||||||||||
Member | Members’ | Notes | Comprehensive | Controlling | ||||||||||||||||||||
Units | Deficit | Receivable | Loss | Interest | Total | |||||||||||||||||||
Balance, December 31 , 2006 | 85,226 | $ | (53,535 | ) | $ | (5,278 | ) | $ | (2,442 | ) | $ | (77 | ) | $ | (61,332 | ) | ||||||||
Sale of common units | 45,679 | 29,900 | — | — | — | 29,900 | ||||||||||||||||||
Equity transaction costs | — | (1,806 | ) | — | — | — | (1,806 | ) | ||||||||||||||||
Exercise of options to purchase | — | — | — | — | — | — | ||||||||||||||||||
common units and warrants | 5,171 | 828 | — | — | — | 828 | ||||||||||||||||||
Purchase of Common Units | (83 | ) | (52 | ) | — | — | — | (52 | ) | |||||||||||||||
Accrued interest on notes receivable | — | 111 | (111 | ) | — | — | — | |||||||||||||||||
Repayment of notes receivable | — | — | 5,389 | — | — | 5,389 | ||||||||||||||||||
Distributions to unit holders | — | (131,204 | ) | — | — | — | (131,204 | ) | ||||||||||||||||
Tax distributions to members | — | (6,563 | ) | — | — | — | (6,563 | ) | ||||||||||||||||
Common unit compensation | — | 25,157 | — | — | — | 25,157 | ||||||||||||||||||
Net loss | — | (6,698 | ) | — | — | (47 | ) | (6,745 | ) | |||||||||||||||
Other comprehensive income/(loss): | ||||||||||||||||||||||||
Post-retirement health liability | — | — | — | (1,736 | ) | — | (1,736 | ) | ||||||||||||||||
Pension liability | — | — | — | (1,033 | ) | — | (1,033 | ) | ||||||||||||||||
Interest rate swap | — | — | — | (2,666 | ) | — | (2,666 | ) | ||||||||||||||||
Foreign currency translation | — | — | — | 2,217 | — | 2,217 | ||||||||||||||||||
Comprehensive loss | — | — | — | — | — | (9,963 | ) | |||||||||||||||||
Balance, December 31, 2007 | 135,993 | (143,862 | ) | — | (5,660 | ) | (124 | ) | (149,646 | ) | ||||||||||||||
Tax distributions to members | — | (17,508 | ) | — | — | — | (17,508 | ) | ||||||||||||||||
Common unit compensation | — | 45 | — | — | — | 45 | ||||||||||||||||||
Net income (loss) | — | 44,278 | — | — | (47 | ) | 44,231 | |||||||||||||||||
Other comprehensive income/(loss): | ||||||||||||||||||||||||
Pension liability | — | — | — | (2,899 | ) | — | (2,899 | ) | ||||||||||||||||
Interest rate swap | — | — | — | (4,326 | ) | — | (4,326 | ) | ||||||||||||||||
Foreign currency translation | — | — | — | (3,157 | ) | — | (3,157 | ) | ||||||||||||||||
Comprehensive income | — | — | — | — | — | 33,849 | ||||||||||||||||||
Balance, December 31, 2008 | 135,993 | (117,047 | ) | — | (16,042 | ) | (171 | ) | (133,260 | ) | ||||||||||||||
Purchase of common units | (3,819 | ) | (5,000 | ) | — | — | — | (5,000 | ) | |||||||||||||||
Tax distributions to members | — | (14,995 | ) | — | — | — | (14,995 | ) | ||||||||||||||||
Net income | — | 29,398 | — | — | 75 | 29,473 | ||||||||||||||||||
Other comprehensive income/(loss): | ||||||||||||||||||||||||
Post-retirement health liability | — | — | — | (388 | ) | — | (388 | ) | ||||||||||||||||
Pension liability | — | — | — | 611 | — | 611 | ||||||||||||||||||
Interest rate swap | — | — | — | 6,992 | — | 6,992 | ||||||||||||||||||
Foreign currency translation | — | — | — | 2,680 | — | 2,680 | ||||||||||||||||||
Comprehensive income | — | — | — | — | — | 39,368 | ||||||||||||||||||
Balance, December 31, 2009 | 132,174 | $ | (107,644 | ) | $ | — | $ | (6,147 | ) | $ | (96 | ) | $ | (113,887 | ) | |||||||||
F-6
Table of Contents
Consolidated Statements of Changes in Cash Flows
For the Years Ended December 31, 2009, 2008 and 2007
(in thousands of dollars)
2009 | 2008 | 2007 | ||||||||||
Operating Activities | ||||||||||||
Net income (loss) | $ | 29,473 | $ | 44,231 | $ | (6,745 | ) | |||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities | ||||||||||||
Depreciation and amortization | 3,768 | 4,046 | 2,819 | |||||||||
Prepaid financing fees and other prepaid expenses | 1,502 | 1,265 | 707 | |||||||||
(Gain) loss on disposal of property and equipment | (60 | ) | (92 | ) | 33 | |||||||
Deferred interest on subordinated debt | — | 1,303 | 824 | |||||||||
Debt prepayment expense | 11,687 | — | 727 | |||||||||
Amortization of deferred income | (188 | ) | (188 | ) | — | |||||||
Impairment of goodwill | — | 2,631 | — | |||||||||
Common unit compensation expense | — | 45 | 25,157 | |||||||||
Changes in operating assets and liabilities: | ||||||||||||
Accounts receivable | (11,970 | ) | 6,797 | (7,139 | ) | |||||||
Inventories | (7,670 | ) | (7,144 | ) | (7,230 | ) | ||||||
Prepaid expenses and other assets | (900 | ) | (497 | ) | 994 | |||||||
Accounts payable and accrued expenses | 7,197 | 1,257 | (584 | ) | ||||||||
Accrued pension and retirement liabilities | (475 | ) | (2,635 | ) | (729 | ) | ||||||
Other | 1,786 | 1,073 | 568 | |||||||||
Net cash povided by operating activities | 34,150 | 52,092 | 9,402 | |||||||||
Investing Activites | ||||||||||||
Purchases of property and equipment | (6,770 | ) | (3,248 | ) | (895 | ) | ||||||
Proceeds from sale of property | 60 | 93 | — | |||||||||
Change in restricted cash | (659 | ) | (11 | ) | 80 | |||||||
Net cash used in investing activites | (7,369 | ) | (3,166 | ) | (815 | ) | ||||||
Financing Activites | ||||||||||||
Issuance of senior notes | 246,477 | — | — | |||||||||
Debt issuance costs | (12,848 | ) | (302 | ) | (8,159 | ) | ||||||
Debt prepayment payment | (5,985 | ) | — | — | ||||||||
Term loan borrowings | — | — | 135,000 | |||||||||
Subordinated note borrowings | — | — | 56,000 | |||||||||
Term loan and note repayments | (132,176 | ) | (2,521 | ) | (85,958 | ) | ||||||
Subordinated note repayments | (58,127 | ) | — | — | ||||||||
Capital lease obligation payments | (1,259 | ) | (1,240 | ) | (430 | ) | ||||||
Tax distributions paid to members | (14,729 | ) | (16,188 | ) | (6,335 | ) | ||||||
Purchase of common units | (5,000 | ) | — | (52 | ) | |||||||
Distributions to members | — | — | (131,204 | ) | ||||||||
Sale of common units | — | — | 29,900 | |||||||||
Collection of notes receivable | — | — | 5,389 | |||||||||
Net activity under revolving line of credit | — | — | (1,300 | ) | ||||||||
Equity transaction costs | — | — | (1,806 | ) | ||||||||
Exercise of common unit options | — | — | 828 | |||||||||
Net cash provided by (used in) financing activities | 16,353 | (20,251 | ) | (8,127 | ) | |||||||
Effect of exchange rates on cash | 323 | 303 | (423 | ) | ||||||||
Change in cash and cash equivalants | 43,457 | 28,978 | 37 | |||||||||
Cash and cash equivalents, beginning of period | 29,248 | 270 | 233 | |||||||||
Cash and cash equivalents, end of period | $ | 72,705 | $ | 29,248 | $ | 270 | ||||||
Supplemental Disclosure of Cash Flow Information | ||||||||||||
Cash paid during the period for: | ||||||||||||
Interest | $ | 14,296 | $ | 16,722 | $ | 12,729 | ||||||
Foreign income taxes | 1,152 | 978 | 1,789 | |||||||||
Non-cash investing and financing activities: | ||||||||||||
Capital leases | — | — | 5,687 |
F-7
Table of Contents
Notes to Consolidated Financial Statements
(in thousands of dollars)
F-8
Table of Contents
Notes to Consolidated Financial Statements
(in thousands of dollars)
F-9
Table of Contents
Notes to Consolidated Financial Statements
(in thousands of dollars)
Estimated | ||||||||||||
2009 | 2008 | Useful Life | ||||||||||
Land | $ | 344 | $ | 296 | — | |||||||
Building | 1,810 | 1,532 | 33 | |||||||||
Machinery and equipment | 24,826 | 19,565 | 7-10 | |||||||||
Furniture, fixtures and leasehold improvements | 4,445 | 3,831 | 3-5 | |||||||||
31,425 | 25,224 | |||||||||||
Less accumulated depreciation and amortization | (15,536 | ) | (13,223 | ) | ||||||||
15,889 | 12,001 | |||||||||||
Construction in process | 2,030 | 1,735 | ||||||||||
Property and equipment, net | $ | 17,919 | $ | 13,736 | ||||||||
F-10
Table of Contents
Notes to Consolidated Financial Statements
(in thousands of dollars)
Gross Book | Accumulated | |||||||||||
Value | Impairment | Net | ||||||||||
Balance at December 31, 2007 | $ | 15,500 | $ | 1,245 | $ | 14,255 | ||||||
Write-off Goodwill related to Colt Rapid Mat | — | 2,631 | (2,631 | ) | ||||||||
Effect of foreign currency translation | (1,361 | ) | — | (1,361 | ) | |||||||
Balance at December 31, 2008 | 14,139 | 3,876 | 10,263 | |||||||||
Effect of foreign currency translation | 982 | — | 982 | |||||||||
Balance at December 31, 2009 | 15,121 | 3,876 | 11,245 |
December 31, 2009 | December 31, 2008 | |||||||||||||||||||||||||||
Grass | Gross | |||||||||||||||||||||||||||
Carrying | Accumulated | Carrying | Accumulated | Estimated | ||||||||||||||||||||||||
Amount | Amortization | Net | Amount | Amortization | Net | Useful Life | ||||||||||||||||||||||
Canadian government customer intangible | $ | 2,405 | $ | 367 | $ | 2,038 | $ | 2,072 | $ | 248 | $ | 1,824 | 30 | |||||||||||||||
Canadian operation customer relationships | 6,255 | 2,483 | 3,772 | 5,903 | 2,234 | 3,669 | 20 | |||||||||||||||||||||
Technology based intangibles | 3,610 | 1,478 | 2,132 | 3,610 | 1,276 | 2,334 | 15 | |||||||||||||||||||||
$ | 12,270 | $ | 4,328 | $ | 7,942 | $ | 11,585 | $ | 3,758 | $ | 7,827 | |||||||||||||||||
F-11
Table of Contents
Notes to Consolidated Financial Statements
(in thousands of dollars)
2009 | 2008 | 2007 | ||||||||||
Balance at beginning of period | $ | 572 | $ | 204 | $ | 269 | ||||||
Net provision charged to operations | (45 | ) | 368 | (65 | ) | |||||||
Payments | — | — | — | |||||||||
Other | — | — | — | |||||||||
Balance at end of period | $ | 527 | $ | 572 | $ | 204 | ||||||
F-12
Table of Contents
Notes to Consolidated Financial Statements
(in thousands of dollars)
F-13
Table of Contents
Notes to Consolidated Financial Statements
(in thousands of dollars)
Level 1: | Unadjusted quoted prices in active markets for identical assets or liabilities. | ||
Level 2: | Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability. | ||
Level 3: | Unobservable inputs for the asset or liability. |
Quoted Prices | Significant | |||||||||||||||
in Active Market | Other | Significant | ||||||||||||||
for Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
Description | Total | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
Interest rate swap liability at December 31, 2008 | $ | 6,992 | $ | — | $ | 6,992 | $ | — | ||||||||
December 31, 2009 | — | — | — | — | ||||||||||||
F-14
Table of Contents
Notes to Consolidated Financial Statements
(in thousands of dollars)
F-15
Table of Contents
Notes to Consolidated Financial Statements
(in thousands of dollars)
December 31, | ||||||||
2009 | 2008 | |||||||
Materials | $ | 17,673 | $ | 16,216 | ||||
Work in process | 13,451 | 7,185 | ||||||
Finished products | 4,324 | 3,596 | ||||||
$ | 35,448 | $ | 26,997 | |||||
F-16
Table of Contents
Notes to Consolidated Financial Statements
(in thousands of dollars)
2009 | 2008 | 2007 | ||||||||||
Balance at beginning of period | $ | 2,061 | $ | 1,454 | $ | 1,366 | ||||||
Provision charged to operations | 92 | 1,079 | 274 | |||||||||
Reductions | (74 | ) | (472 | ) | (186 | ) | ||||||
Balance at end of period | $ | 2,079 | $ | 2,061 | $ | 1,454 | ||||||
• | at any time prior to November 15, 2012, we may redeem up to 35% of the notes with the proceeds of certain equity offerings at a redemption price equal to 108.75% of their principal amount together with accrued unpaid interest to the date of redemption; and |
• | at any time prior to November 15, 2013, we may redeem some or all of the notes at a price equal to 100% of the principal amount of the notes together with accrued and unpaid interest plus a make whole premium, as defined in the indenture; and |
• | on and after November 15, 2013, we may redeem all or, from time to time, a part of the Notes at the following redemption process (expressed as a percentage of principal amount of the Notes to be redeemed) plus accrued and unpaid interest, including additional interest, if any on |
F-17
Table of Contents
Notes to Consolidated Financial Statements
(in thousands of dollars)
the Notes to the applicable redemption date if redeemed during the twelve month period beginning on November 15 of the years indicated below: |
Year | Percentage | |||
2013 | 104.375 | % | ||
2014 | 102.187 | % | ||
2015 and thereafter | 100.000 | % |
F-18
Table of Contents
Notes to Consolidated Financial Statements
(in thousands of dollars)
• | a maximum senior secured debt ratio (total senior secured debt/EBITDA) at the end of any quarter not to exceed 2.0 to 1.0. |
• | a maximum leverage ratio (total indebtedness/EBITDA) at the end of any quarter through the third quarter of 2010 not to exceed 5.5 to 1.0 and quarters thereafter 4.5 to 1.0. |
• | a minimum interest coverage ratio (EBITDA/Cash interest expense, net) at the end of any quarter commencing with the first quarter of 2010 to be less than 2.0 to 1.0. |
• | in addition, we are subject to a covenant limiting out maximum capital expenditure made in the ordinary course of business in any year to $10 million, with provisions to carryover up to $5 million of the unused amounts to the succeeding year. |
F-19
Table of Contents
Notes to Consolidated Financial Statements
(in thousands of dollars)
Year Ended | Weighted | Year Ended | Weighted | |||||||||||||
December 31, | Average | December 31, | Average | |||||||||||||
2009 | Interest Rates | 2008 | Interest Rates | |||||||||||||
Senior Notes (a)(b) | $ | 246,520 | 9.0 | % | $ | — | — | |||||||||
Term Loan Facility | — | — | 132,157 | 6.5 | % | |||||||||||
Senior Subordinated Debt | — | — | 58,127 | (c) | 13.0 | % | ||||||||||
Equipment Indebtedness | 15 | 4.9 | % | 34 | 4.9 | % | ||||||||||
246,535 | 190,318 | |||||||||||||||
Less: Current Portion | 15 | 1,361 | ||||||||||||||
$ | 246,520 | $ | 188,957 | |||||||||||||
(a) | $250 million Senior Notes are recorded net of unamortized original issue discount of $3,480. Interest expense for 2009 includes $42 of amortization of original issue discount. | |
(b) | The Senior Notes bear interest at 8.75%. The effective rate of these notes is 9%, giving effect to the original issue discount. | |
(c) | The balance also includes $2,127 of deferred interest at December 31, 2008. This debt is payable to related parties. |
2010 | $ | 15 | ||
2017 | 250,000 | |||
$ | 250,015 | |||
F-20
Table of Contents
Notes to Consolidated Financial Statements
(in thousands of dollars)
Settlement of outstanding interest rate swap agreements | $ | 5,395 | ||
Prepayment premium on senior subordinated notes | 581 | |||
Write-off of deferred financing costs | 5,702 | |||
Legal costs | 9 | |||
$ | 11,687 | |||
F-21
Table of Contents
Notes to Consolidated Financial Statements
(in thousands of dollars)
Capital | Operating | |||||||
Leases | Leases | |||||||
2010 | $ | 1,386 | $ | 791 | ||||
2011 | 1,374 | 712 | ||||||
2012 | 1,195 | 598 | ||||||
2013 | — | 22 | ||||||
Total minimum lease payments | 3,955 | $ | 2,123 | |||||
Less amount representing interest | 432 | |||||||
Present value of net minimum lease payments | $ | 3,523 | ||||||
December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
United States | $ | 25,638 | $ | 42,978 | $ | (8,180 | ) | |||||
Foreign | 6,155 | 2,350 | 2,974 | |||||||||
Total | $ | 31,793 | $ | 45,328 | $ | (5,206 | ) | |||||
F-22
Table of Contents
Notes to Consolidated Financial Statements
(in thousands of dollars)
December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Current | $ | 2,372 | $ | 1,176 | $ | 1,539 | ||||||
Deferred | (52 | ) | (79 | ) | — | |||||||
$ | 2,320 | $ | 1,097 | $ | 1,539 | |||||||
December 31, | ||||||||
2009 | 2008 | |||||||
Deferred tax assets | ||||||||
Reserves | $ | 55 | $ | 42 | ||||
Other | — | 17 | ||||||
Deferred tax liabilities | ||||||||
Fixed assets | (209 | ) | (237 | ) | ||||
Net deferred tax liability | $ | (154 | ) | $ | (178 | ) | ||
F-23
Table of Contents
Notes to Consolidated Financial Statements
(in thousands of dollars)
Post-Retirement | ||||||||||||||||
Pension Plans | Healthcare Coverage | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Projected benefit obligation at beginning of year | $ | 18,135 | $ | 18,399 | $ | 11,263 | $ | 11,182 | ||||||||
Service cost | 401 | 676 | 289 | 310 | ||||||||||||
Interest cost | 1,109 | 1,028 | 673 | 644 | ||||||||||||
Curtailment of salaried plan | — | (221 | ) | — | — | |||||||||||
Actuarial loss/(gain) | 1,025 | (1,189 | ) | 27 | (312 | ) | ||||||||||
Benefits paid | (1,560 | ) | (558 | ) | (616 | ) | (561 | ) | ||||||||
Projected benefit obligation at end of year | 19,110 | 18,135 | 11,636 | 11,263 | ||||||||||||
Fair value of plan assets at beginning of year | 15,389 | 15,836 | — | — | ||||||||||||
Employer contributions | 1,273 | 3,576 | — | — | ||||||||||||
Actual return on plan assets | 2,337 | (3,465 | ) | — | — | |||||||||||
Benefits paid | (1,560 | ) | (558 | ) | — | — | ||||||||||
Fair value of plan assets at end of year | 17,439 | 15,389 | — | — | ||||||||||||
Unfunded benefit obligation at end of year | $ | (1,671 | ) | $ | (2,746 | ) | $ | (11,636 | ) | $ | (11,263 | ) | ||||
2009 | 2008 | |||||||||||||||||||||||
Hourly | Salaried | Hourly | Salaried | |||||||||||||||||||||
Plan | Plan | Total | Plan | Plan | Total | |||||||||||||||||||
Projected benefit obligation | $ | 12,811 | $ | 6,299 | $ | 19,110 | $ | 12,522 | $ | 5,613 | $ | 18,135 | ||||||||||||
Fair value of plan assets | 12,123 | 5,316 | 17,439 | 10,954 | 4,435 | 15,389 | ||||||||||||||||||
Unfunded benefit obligation | $ | (688 | ) | $ | (983 | ) | $ | (1,671 | ) | $ | (1,568 | ) | $ | (1,178 | ) | $ | (2,746 | ) | ||||||
F-24
Table of Contents
Notes to Consolidated Financial Statements
(in thousands of dollars)
December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Service cost | $ | 401 | $ | 676 | $ | 810 | ||||||
Interest cost | 1,109 | 1,028 | 967 | |||||||||
Expected return on assets | (1,244 | ) | (1,267 | ) | (1,140 | ) | ||||||
Amortization of unrecognized prior service cost | 170 | 260 | 262 | |||||||||
Amortization of unrecognized loss | 372 | 164 | 178 | |||||||||
Net periodic cost | $ | 808 | $ | 861 | $ | 1,077 | ||||||
December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Service cost | $ | 289 | $ | 310 | $ | 200 | ||||||
Interest cost | 673 | 644 | 625 | |||||||||
Amortization of unrecognized prior service cost | (361 | ) | (361 | ) | (361 | ) | ||||||
Amortization of unrecognized loss | — | 48 | 52 | |||||||||
Net periodic cost | $ | 601 | $ | 641 | $ | 516 | ||||||
Pension | Post Retirement | |||||||||||
Plans | Health | Total | ||||||||||
Balance at December, 31, 2007 | $ | (5,118 | ) | $ | 510 | $ | (4,608 | ) | ||||
Recognized in other comprehensive loss | (2,899 | ) | — | (2,899 | ) | |||||||
Balance at December, 31, 2008 | (8,017 | ) | 510 | (7,507 | ) | |||||||
Recognized in other comprehensive loss | 611 | (388 | ) | 223 | ||||||||
Balance at December 31, 2009 | $ | (7,406 | ) | $ | 122 | $ | (7,284 | ) | ||||
F-25
Table of Contents
Notes to Consolidated Financial Statements
(in thousands of dollars)
Pension | Post-Retirement | |||||||
Plans | Health | |||||||
Prior service cost/(gain) | $ | 170 | $ | (361 | ) | |||
Actuarial loss | 336 | — | ||||||
$ | 506 | $ | (361 | ) | ||||
F-26
Table of Contents
Notes to Consolidated Financial Statements
(in thousands of dollars)
Post-Retirement | ||||||||||||||||
Pension Plan | Health | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Discount rate | 6.00 | % | �� | 6.25 | % | 6.00 | % | 6.25 | % | |||||||
Expected return on plan assets | 8.00 | % | 8.00 | % | N/A | N/A |
Pension Plans | Post-Retirement Health | |||||||||||||||||||||||
2009 | 2008 | 2007 | 2009 | 2008 | 2007 | |||||||||||||||||||
Discount rate | 6.25 | % | 5.75 | % | 5.75 | % | 6.25 | % | 5.75 | % | 5.75 | % | ||||||||||||
Expected return on plan assets | 8.00 | % | 8.00 | % | 8.00 | % | N/A | N/A | N/A | |||||||||||||||
Rate of compensation increase (Salaried Plan Only) | N/A | 4.50 | % | 4.50 | % | N/A | N/A | N/A |
F-27
Table of Contents
Notes to Consolidated Financial Statements
(in thousands of dollars)
Domestic large capitalization equities | 40 | % | ||
Domestic small-mid capitalization equities | 5 | % | ||
International equities | 5 | % | ||
Total equities | 50 | % | ||
Domestic fixed income | 45 | % | ||
Money market | 5 | % | ||
100 | % | |||
Fair Value Measurements at | |||||||||||||||||||||
December 31, 2009 | |||||||||||||||||||||
Allocation | |||||||||||||||||||||
Total | Percent | Level 1 | Level 2 | Level 3 | |||||||||||||||||
Equity Mutual Funds | $ | 7,574 | 45.4 | % | $ | 7,574 | $ | — | $ | — | |||||||||||
Fixed Income Mutual Funds | 7,914 | 43.4 | % | 4,892 | $ | 3,022 | — | ||||||||||||||
Money Market Funds | 1,951 | 11.2 | % | 1,951 | — | — | |||||||||||||||
$ | 17,439 | 100.0 | % | $ | 14,417 | $ | 3,022 | $ | — | ||||||||||||
Post- | ||||||||||||||||||||||||||||||||||||||||||||
Retirement | ||||||||||||||||||||||||||||||||||||||||||||
Years Ending | Pension Plans | Health | ||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 1,024 | $ | 789 | ||||||||||||||||||||||||||||||||||||||||
2011 | 1,117 | 878 | ||||||||||||||||||||||||||||||||||||||||||
2012 | 1,204 | 924 | ||||||||||||||||||||||||||||||||||||||||||
2013 | 1,266 | 952 | ||||||||||||||||||||||||||||||||||||||||||
2014 | 1,308 | 970 | ||||||||||||||||||||||||||||||||||||||||||
2015-2019 | 7,068 | 4,896 |
F-28
Table of Contents
Notes to Consolidated Financial Statements
(in thousands of dollars)
F-29
Table of Contents
Notes to Consolidated Financial Statements
(in thousands of dollars)
2008 | 2007 | |||||||
Units owned by employees pursuant to non-recourse notes | $ | — | $ | 16,292 | ||||
Dividends paid to employee unitholders pursuant to non-recourse notes | 679 | |||||||
Option charges | 45 | 8,186 | ||||||
$ | 45 | $ | 25,157 | |||||
Weighted | Weighted | |||||||||||||||
Average | Average | |||||||||||||||
Exercise Price | Remaining | Aggregate | ||||||||||||||
Number | Per Unit | Contractual | Intrinsic | |||||||||||||
of Options | (Not In 000s) | Life In Years | Value | |||||||||||||
Outstanding at January 1, 2007 | $ | 6,215 | $ | 193 | $ | 3 | $ | 2,756 | ||||||||
Exercised | (5,171 | ) | 357 | |||||||||||||
Outstanding at December 31, 2007 | 1,044 | 357 | 4 | 311 | ||||||||||||
Exercised | ||||||||||||||||
Outstanding at December 31, 2008 | 1,044 | 357 | 3 | 311 | ||||||||||||
Exercised | ||||||||||||||||
Outstanding at December 31, 2009 | 1,044 | 357 | 2 | 952 | ||||||||||||
Exercisable at December 31, 2009 | 1,044 | 357 | 2 | 952 | ||||||||||||
F-30
Table of Contents
Notes to Consolidated Financial Statements
(in thousands of dollars)
Year Ended | ||||||||||||
December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Sales of rifles for the year | $ | 4,566 | $ | 2,450 | $ | 70 | ||||||
Accounts receivable for product sales as of year-end | 221 | 1,135 | — | |||||||||
Service fees earned | 430 | 480 | 282 |
F-31
Table of Contents
Notes to Consolidated Financial Statements
(in thousands of dollars)
F-32
Table of Contents
Notes to Consolidated Financial Statements
(in thousands of dollars)
As of December 31 | ||||||||
2009 | 2008 | |||||||
Standby letters of credit issued through revolving credit facilities | $ | — | $ | 1,953 | ||||
Standby letters of credit secured by restricted cash | 1,102 | 462 | ||||||
Guarantees of standby letters of credit established by a sales agent on behalf of Colt | 2,490 | 2,016 |
F-33
Table of Contents
Notes to Consolidated Financial Statements
(in thousands of dollars)
Year Ended December 31, | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Statement of Operations Data: | ||||||||||||
Adjusted EBITDA | $ | 67,767 | $ | 69,499 | $ | 37,543 | ||||||
Provision for foreign income taxes | (2,320 | ) | (1,097 | ) | (1,539 | ) | ||||||
Depreciation and amortization (i) | (3,768 | ) | (4,046 | ) | (2,819 | ) | ||||||
Interest expense, net | (18,847 | ) | (19,281 | ) | (14,105 | ) | ||||||
Non-cash common unit compensation expense (ii) | — | (45 | ) | (25,157 | ) | |||||||
Other expenses, net (iii) | (13,359 | ) | (799 | ) | (668 | ) | ||||||
Net income (loss)’ | $ | 29,473 | $ | 44,231 | $ | (6,745 | ) |
(i) | Includes depreciation and amortization of intangible assets. | |
(ii) | Includes a non-cash charge of $25,157 in 2007 related to the adjustment required to record a compensation charge as a result of a significant increase from our 2006 valuation of the fair market value of our Common Units to the 2007 fair market value of our Common Units. | |
(iii) | Includes: |
• | expenses associated with the write-off of unamortized deferred financing fees associated with the refinancing of credit arrangements in 2007 and 2009 as well as the 2009 settlement of outstanding interest rate swap agreements and the 2009 payment of a prepayment premium on our Senior Subordinated Notes. |
• | expenses incurred in connection with prior refinancing activities, transaction costs incurred in connection with our contemplated merger and acquisition activities, foreign currency exchange gains or losses, service income from an affiliate and other less significant charges not related to on-going operations. |
F-34
Table of Contents
Notes to Consolidated Financial Statements
(in thousands of dollars)
2009 | 2008 | 2007 | ||||||||||
United States | $ | 209,758 | $ | 221,254 | $ | 157,530 | ||||||
Canada | 18,109 | 14,915 | 11,720 | |||||||||
Asia | 18,359 | 23,009 | 4,085 | |||||||||
Europe | 20,601 | 10,293 | 7,174 | |||||||||
All other | 7,199 | 905 | 223 | |||||||||
$ | 274,026 | $ | 270,376 | $ | 180,732 | |||||||
2009 | 2008 | |||||||
Long-lived assets by geographical location: | ||||||||
United States | $ | 22,594 | $ | 19,476 | ||||
Canada | 15,925 | 13,863 | ||||||
$ | 38,519 | $ | 33,339 | |||||
F-35
Table of Contents
Notes to Consolidated Financial Statements
(in thousands of dollars)
December 31, 2009 | ||||
United States Government | $ | 9,059 | ||
Government of Netherlands | 4,985 | |||
Government of Canada | 2,261 | |||
December 31, 2008 | ||||
Government of Canada | $ | 1,583 | ||
Government of Denmark | 1,476 | |||
United States Government | 833 |
Year Ended December 31, | ||||||||
2009 | 2008 | |||||||
Interest rate swap obligation | $ | — | $ | 3,939 | ||||
Deferred income related to vendor supply contract | 125 | 313 | ||||||
Long-term account payable, less current portion | 78 | 227 | ||||||
Deferred Canadian income taxes | 154 | 178 | ||||||
Other | 89 | 401 | ||||||
$ | 446 | $ | 5,058 | |||||
F-36
Table of Contents
Notes to Consolidated Financial Statements
(in thousands of dollars)
Unrecognized | Foreign | |||||||||||||||||||||||||||||||||||||||||||
Prior Services | Unrecognized | Interest | Currency | |||||||||||||||||||||||||||||||||||||||||
Gain | Loss | Rate Swaps | Translation | Total | ||||||||||||||||||||||||||||||||||||||||
Balance at January 1, 2007 | $ | 3,629 | $ | (5,468 | ) | $ | — | $ | (603 | ) | $ | (2,442 | ) | |||||||||||||||||||||||||||||||
Pension Liability | (842 | ) | (191 | ) | — | — | (1,033 | ) | ||||||||||||||||||||||||||||||||||||
Change in post retirement health liability | (2,173 | ) | 437 | — | — | (1,736 | ) | |||||||||||||||||||||||||||||||||||||
Change in fair value of interest rate swap | — | (2,666 | ) | — | (2,666 | ) | ||||||||||||||||||||||||||||||||||||||
Currency translation | — | 2,217 | 2,217 | |||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2007 | 614 | (5,222 | ) | (2,666 | ) | 1,614 | (5,660 | ) | ||||||||||||||||||||||||||||||||||||
Pension Liability | 260 | (3,159 | ) | — | — | (2,899 | ) | |||||||||||||||||||||||||||||||||||||
Change in post retirement health liability | (361 | ) | 361 | — | — | — | ||||||||||||||||||||||||||||||||||||||
Change in fair value of interest rate swap | — | — | (4,326 | ) | — | (4,326 | ) | |||||||||||||||||||||||||||||||||||||
Currency translation | — | — | — | (3,157 | ) | (3,157 | ) | |||||||||||||||||||||||||||||||||||||
Balance at December 31, 2008 | 513 | (8,020 | ) | (6,992 | ) | (1,543 | ) | (16,042 | ) | |||||||||||||||||||||||||||||||||||
Pension liability | 170 | 441 | 611 | |||||||||||||||||||||||||||||||||||||||||
Change in post retirement health liability | (361 | ) | (27 | ) | (388 | ) | ||||||||||||||||||||||||||||||||||||||
Change in fair value of interest rate swap | 6,992 | 6,992 | ||||||||||||||||||||||||||||||||||||||||||
Currency translation | 2,680 | 2,680 | ||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2009 | $ | 322 | $ | (7,606 | ) | $ | — | $ | 1,137 | $ | (6,147 | ) | ||||||||||||||||||||||||||||||||
F-37
Table of Contents
Notes to Consolidated Financial Statements
(in thousands of dollars)
F-38
Table of Contents
October 3, | December 31, | |||||||
2010 | 2009 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 68,734 | $ | 72,705 | ||||
Restricted cash | 870 | 1,136 | ||||||
Accounts receivable, net | �� | 11,565 | 20,328 | |||||
Inventories | 34,390 | 35,448 | ||||||
Other current assets | 1,196 | 2,678 | ||||||
Total current assets | 116,755 | 132,295 | ||||||
Property and equipment, net | 20,609 | 17,919 | ||||||
Goodwill | 11,426 | 11,245 | ||||||
Intangible assets with finite lives | 7,527 | 7,942 | ||||||
Deferred financing costs | 11,085 | 12,541 | ||||||
Other assets | 2,398 | 2,160 | ||||||
Total assets | $ | 169,800 | $ | 184,102 | ||||
Liabilities and Deficit | ||||||||
Current liabilities: | ||||||||
Current portion of long-term debt | $ | — | $ | 15 | ||||
Current portion capital lease obligations | 1,205 | 1,146 | ||||||
Accounts payable | 8,393 | 14,385 | ||||||
Accrued interest | 8,693 | 3,214 | ||||||
Other accrued expenses | 5,144 | 7,007 | ||||||
Pension and retirement obligations — current portion | 1,989 | 1,989 | ||||||
Customer advances and deferred income | 8,461 | 6,927 | ||||||
Accrued distributions | 15,606 | 2,645 | ||||||
Total current liabilities | 49,491 | 37,328 | ||||||
Long-term debt, less current portion | 246,758 | 246,520 | ||||||
Capital lease obligations | 1,465 | 2,377 | ||||||
Pension and retirement liabilities | 11,754 | 11,318 | ||||||
Other long-term liabilities | 226 | 446 | ||||||
Total long-term liabilities | 260,203 | 260,661 | ||||||
Total liabilities | 309,694 | 297,989 | ||||||
Commitments and contingencies (Note 9) | ||||||||
Deficit: | ||||||||
Accumulated deficit | (132,888 | ) | (107,644 | ) | ||||
Accumulated other comprehensive loss | (6,842 | ) | (6,147 | ) | ||||
Total Colt Defense LLC members’ deficit | (139,730 | ) | (113,791 | ) | ||||
Non-controlling interest | (164 | ) | (96 | ) | ||||
Total deficit | (139,894 | ) | (113,887 | ) | ||||
Total liabilities and deficit | $ | 169,800 | $ | 184,102 | ||||
F-39
Table of Contents
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
10/3/2010 | 10/4/2009 | 10/3/2010 | 10/4/2009 | |||||||||||||
Net sales | $ | 30,763 | $ | 61,300 | $ | 131,594 | $ | 204,122 | ||||||||
Cost of sales | 24,735 | 43,465 | 98,291 | 138,042 | ||||||||||||
Gross profit | 6,028 | 17,835 | 33,303 | 66,080 | ||||||||||||
Selling and commissions | 1,733 | 2,242 | 6,968 | 6,912 | ||||||||||||
General and administrative | 4,147 | 3,836 | 12,507 | 10,810 | ||||||||||||
Amortization of purchased intangibles | 135 | 135 | 408 | 381 | ||||||||||||
6,015 | 6,213 | 19,883 | 18,103 | |||||||||||||
Operating income | 13 | 11,622 | 13,420 | 47,977 | ||||||||||||
Other expense (income): | ||||||||||||||||
Interest expense | 6,219 | 4,429 | 18,854 | 13,532 | ||||||||||||
Other, net | (71 | ) | 467 | 342 | (68 | ) | ||||||||||
6,148 | 4,896 | 19,196 | 13,464 | |||||||||||||
Income (loss) before foreign income taxes | (6,135 | ) | 6,726 | (5,776 | ) | 34,513 | ||||||||||
Provision for foreign income taxes | 646 | 265 | 1,599 | 1,283 | ||||||||||||
Net income (loss) | (6,781 | ) | 6,461 | (7,375 | ) | 33,230 | ||||||||||
Less: net income (loss) attributable to non-controlling interest | (21 | ) | (36 | ) | (67 | ) | 66 | |||||||||
Net income (loss) attributed to Colt Defense LLC members | $ | (6,760 | ) | $ | 6,497 | $ | (7,308 | ) | $ | 33,164 | ||||||
F-40
Table of Contents
Consolidated Statements of Changes in Cash Flows (Unaudited)
For the Nine Months Ended October 3, 2010, and October 4, 2009
(in thousands of dollars)
For the Nine Months Ended | ||||||||
10/3/2010 | 10/4/2009 | |||||||
Operating Activities | ||||||||
Net (loss) income | $ | (7,375 | ) | $ | 33,230 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 3,321 | 2,758 | ||||||
Prepaid financing fees and other prepaid expenses | 1,769 | 1,029 | ||||||
Gain on disposal of property and equipment | (9 | ) | (60 | ) | ||||
Amortization of deferred income | (141 | ) | (141 | ) | ||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 8,934 | (15,618 | ) | |||||
Inventories | 1,290 | (4,383 | ) | |||||
Prepaid expenses and other assets | 1,117 | 625 | ||||||
Accrued interest | 5,479 | 198 | ||||||
Accounts payable and accrued expenses | (8,041 | ) | 9,711 | |||||
Accrued pension and retirement liabilities | (859 | ) | (351 | ) | ||||
Deferred income | 1,260 | (51 | ) | |||||
Other | 102 | 223 | ||||||
Net cash provided by operating activities | 6,847 | 27,170 | ||||||
Investing Activites | ||||||||
Purchases of property and equipment | (5,299 | ) | (4,434 | ) | ||||
Restricted cash | 266 | — | ||||||
Proceeds from sale of property | 9 | 60 | ||||||
Net cash used in investing activites | (5,024 | ) | (4,374 | ) | ||||
Financing Activites | ||||||||
Term loan and note repayments | (15 | ) | (1,021 | ) | ||||
Capital lease obligation payments | (853 | ) | (936 | ) | ||||
Distributions paid to members | (4,976 | ) | (14,728 | ) | ||||
Net cash used in financing activities | (5,844 | ) | (16,685 | ) | ||||
Effect of exchange rates on cash | 50 | 200 | ||||||
Change in cash and cash equivalants | (3,971 | ) | 6,311 | |||||
Cash and cash equivalents, beginning of period | 72,705 | 29,248 | ||||||
Cash and cash equivalents, end of period | $ | 68,734 | $ | 35,559 | ||||
F-41
Table of Contents
(in thousands of dollars)
2010 | 2009 | |||||||
Balance as of January 1 | $ | 527 | $ | 572 | ||||
Net provision charged to operations | (335 | ) | (34 | ) | ||||
Payments | — | — | ||||||
Balance at end of period | $ | 192 | $ | 538 | ||||
October 3, | December 31, | |||||||
2010 | 2009 | |||||||
Materials | $ | 19,001 | $ | 17,673 | ||||
Work in process | 9,897 | 13,451 | ||||||
Finished products | 5,492 | 4,324 | ||||||
$ | 34,390 | $ | 35,448 | |||||
F-42
Table of Contents
• | a maximum senior secured debt ratio (total senior secured debt/EBITDA) at the end of any quarter not to exceed 2.0 to 1.0; |
• | a maximum leverage ratio (total indebtedness/EBITDA) at the end of any quarter through the third quarter of 2010 not to exceed 5.5 to 1.0 and quarters thereafter 4.5 to 1.0; |
• | a minimum interest coverage ratio (EBITDA/Cash interest expense, net) at the end of any quarter commencing with the first quarter of 2010 must not be less than 2.0 to 1.0; and |
• | in addition, we were subject to a covenant limiting our maximum capital expenditure made in the ordinary course of business in any year to $10,000, with provisions to carryover up to $5,000 of the unused amounts to the succeeding year. |
F-43
Table of Contents
For the three Months Ended | For the nine Months Ended | |||||||||||||||
October 3, | October 4, | October 3, | October 4, | |||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Service cost | $ | 78 | $ | 100 | $ | 284 | $ | 301 | ||||||||
Interest cost | 281 | 277 | 842 | 832 | ||||||||||||
Expected return on assets | (346 | ) | (311 | ) | (1,043 | ) | (934 | ) | ||||||||
Amortization of unrecognized prior service cost | 42 | 42 | 127 | 127 | ||||||||||||
Amortization of unrecognized loss | 96 | 94 | 262 | 280 | ||||||||||||
Net periodic cost | $ | 151 | $ | 202 | $ | 472 | $ | 606 | ||||||||
For the three Months Ended | For the nine Months Ended | |||||||||||||||
October 3, | October 4, | October 3, | October 4, | |||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Service cost | $ | 55 | $ | 72 | $ | 203 | $ | 217 | ||||||||
Interest cost | 165 | 168 | 503 | 505 | ||||||||||||
Curtailment (gain) | — | — | (407 | ) | — | |||||||||||
Amortization of unrecognized prior service cost | (58 | ) | (90 | ) | (227 | ) | (271 | ) | ||||||||
Amortization of unrecognized loss | 2 | — | 5 | — | ||||||||||||
Net periodic cost | $ | 164 | $ | 150 | $ | 77 | $ | 451 | ||||||||
F-44
Table of Contents
For the three Months Ended | For the nine Months Ended | |||||||||||||||
October 3, | October 4, | October 3, | October 4, | |||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Sales of rifles for the period | $ | 143 | $ | 982 | $ | 701 | $ | 3,963 | ||||||||
Accounts receivables for product sales as of period end | 166 | 336 | 166 | 336 | ||||||||||||
Service fees earned | 107 | 107 | 322 | 322 |
October 3, | December 31, | |||||||
2010 | 2009 | |||||||
Standby letters of credit issued through Revolver (now letter of credit facility) | $ | 759 | $ | — | ||||
Standby letters of credit secured by restricted cash | 1,102 | 1,102 | ||||||
Guarantees of standby letters of credit established by a sales agent on behalf of Colt | 804 | 2,490 |
F-45
Table of Contents
For the Three Months Ended | ||||||||||||||||
October 3, 2010 | % | October 4, 2009 | % | |||||||||||||
Statement of Operations Data: | ||||||||||||||||
Net sales | $ | 30,763 | 100.0 | % | $ | 61,300 | 100.0 | % | ||||||||
Cost of sales | 24,735 | 80.4 | 43,465 | 70.9 | ||||||||||||
Gross profit | 6,028 | 19.6 | 17,835 | 29.1 | ||||||||||||
Selling and commissions | 1,733 | 5.6 | 2,242 | 3.7 | ||||||||||||
General and administrative | 4,147 | 13.5 | 3,836 | 6.3 | ||||||||||||
Amortization of purchased intangibles | 135 | 0.4 | 135 | 0.2 | ||||||||||||
6,015 | 19.5 | 6,213 | 10.2 | |||||||||||||
Operating income | 13 | 0.1 | 11,622 | 18.9 | ||||||||||||
Other expense (income): | ||||||||||||||||
Interest expense | 6,219 | 20.2 | 4,429 | 7.2 | ||||||||||||
Other, net | (71 | ) | (0.2 | ) | 467 | 0.8 | ||||||||||
6,148 | 20.0 | 4,896 | 8.0 | |||||||||||||
Income (loss) before foreign income taxes | (6,135 | ) | (19.9 | ) | 6,726 | 10.9 | ||||||||||
Provision for foreign income taxes | 646 | 2.1 | 265 | 0.4 | ||||||||||||
Net income (loss) | (6,781 | ) | (22.0 | )% | 6,461 | 10.5 | % | |||||||||
Less: net income (loss) attributable to non-controlling interest | (21 | ) | (36 | ) | ||||||||||||
Net income (loss) attributable to members | $ | (6,760 | ) | $ | 6,497 | |||||||||||
Reconciliation of adjusted EBITDA to net income (loss) | ||||||||||||||||
Adjusted EBITDA | $ | 1,129 | $ | 12,557 | ||||||||||||
Provision for foreign income taxes | (646 | ) | (265 | ) | ||||||||||||
Depreciation and amortization (i) | (1,116 | ) | (935 | ) | ||||||||||||
Interest expense | (6,219 | ) | (4,429 | ) | ||||||||||||
Interest income | — | — | ||||||||||||||
Other expense, net (ii) | 71 | (467 | ) | |||||||||||||
Net income (loss) | $ | (6,781 | ) | $ | 6,461 | |||||||||||
F-46
Table of Contents
For the Nine Months Ended | ||||||||||||||||
October 3, 2010 | % | October 4, 2009 | % | |||||||||||||
Statement of Operations Data: | ||||||||||||||||
Net sales | $ | 131,594 | 100.0 | % | $ | 204,122 | 100.0 | % | ||||||||
Cost of sales | 98,291 | 74.7 | 138,042 | 67.6 | ||||||||||||
Gross profit | 33,303 | 25.3 | 66,080 | 32.4 | ||||||||||||
Selling and commissions | 6,968 | 5.3 | 6,912 | 3.4 | ||||||||||||
General and administrative | 12,507 | 9.5 | 10,810 | 5.3 | ||||||||||||
Amortization of purchased intangibles | 408 | 0.3 | 381 | 0.2 | ||||||||||||
19,883 | 15.1 | 18,103 | 8.9 | |||||||||||||
Operating income | 13,420 | 10.2 | 47,977 | 23.5 | ||||||||||||
Other expense (income): | �� | |||||||||||||||
Interest expense | 18,854 | 14.3 | 13,532 | 6.6 | ||||||||||||
Other, net | 342 | 0.3 | (68 | ) | — | |||||||||||
19,196 | 14.6 | 13,464 | 6.6 | |||||||||||||
Income (loss) before foreign income taxes | (5,776 | ) | (4.4 | ) | 34,513 | 16.9 | ||||||||||
Provision for foreign income taxes | 1,599 | 1.2 | 1,283 | 0.6 | ||||||||||||
Net income (loss) | (7,375 | ) | (5.6 | )% | 33,230 | 16.3 | % | |||||||||
Less: net income (loss) attributable to non-controlling interest | (67 | ) | 66 | |||||||||||||
Net income (loss) attributable to members | $ | (7,308 | ) | $ | 33,164 | |||||||||||
Reconciliation of adjusted EBITDA to net income (loss) | ||||||||||||||||
Adjusted EBITDA | $ | 16,741 | $ | 50,735 | ||||||||||||
Provision for foreign income taxes | (1,599 | ) | (1,283 | ) | ||||||||||||
Depreciation and amortization (i) | (3,321 | ) | (2,758 | ) | ||||||||||||
Interest expense | (18,854 | ) | (13,532 | ) | ||||||||||||
Other expense, net (ii) | (342 | ) | 68 | |||||||||||||
Net income (loss) | $ | (7,375 | ) | $ | 33,230 | |||||||||||
(i) | Includes depreciation and amortization of intangible assets | |
(ii) | Includes expenses incurred in connection with prior refinancing activities, transaction costs incurred in connection with our contemplated merger and acquisition activities, foreign currency exchange gains or losses, service income from an affiliate, and other less significant charges not related to our on-going operations. |
October 3, 2010 | December 31, 2009 | |||||||
U.S. Government | $ | 1,897 | $ | 9,059 | ||||
Government of the Netherlands | 5,470 | 4,749 | ||||||
Government of Canada | 1,293 | 3,286 |
F-47
Table of Contents
For the three Months Ended | For the Nine Months Ended | |||||||||||||||
October 3, | October 4, | October 3, | October 4, | |||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Net income (loss) | $ | (6,760 | ) | $ | 6,497 | $ | (7,308 | ) | $ | 33,164 | ||||||
Changes in accumulated other comprehensive (loss) income: | ||||||||||||||||
Comprehensive income attributed to non-controlling interest | (21 | ) | (36 | ) | (67 | ) | 66 | |||||||||
Foreign currency translation | 990 | 1,222 | 599 | 2,004 | ||||||||||||
Post retirement health liability | (55 | ) | (89 | ) | (782 | ) | (270 | ) | ||||||||
Pension liability | 137 | 136 | (513 | ) | 406 | |||||||||||
Interest rate swap | — | 182 | — | 1,626 | ||||||||||||
Total comprehensive (loss) income | $ | (5,709 | ) | $ | 7,912 | $ | (8,071 | ) | $ | 36,996 | ||||||
F-48
Table of Contents
COLT FINANCE CORP.
8.75% Senior Notes
due 2017
8.75% Senior Notes
due 2017
Table of Contents
II-1
Table of Contents
II-2
Table of Contents
II-3
Table of Contents
COLT DEFENSE LLC COLT FINANCE CORP. | ||||
By: | /s/ Scott B. Flaherty | |||
Scott B. Flaherty | ||||
Chief Financial Officer | ||||
Signature | Title | Date | ||
/s/ Gerald R. Dinkel | Chief Executive Officer & Manager | January 4, 2011 | ||
/s/ Scott B. Flaherty | Chief Financial Officer | January 4, 2011 | ||
/s/ Gen. William Keys | Manager | January 4, 2011 | ||
/s/ Marc Baliotti | Manager | January 4, 2011 | ||
/s/ Gen. the Lord Guthrie of Craigiebank | Manager | January 4, 2011 | ||
/s/ Michael Holmes | Manager | January 4, 2011 | ||
/s/ Vincent Lu | Manager | January 4, 2011 | ||
/s/ John P. Rigas | Manager | January 4, 2011 | ||
/s/ Daniel J. Standen | Manager | January 4, 2011 |
II-4
Table of Contents
Signature | Title | Date | ||
/s/ Gen. Gordon R. Sullivan, USA (ret.) | Manager | January 4, 2011 | ||
/s/ Philip A. Wheeler | Manager | January 4, 2011 |
II-5
Table of Contents
Exhibit No. | Description | |
3.1 | Amended and Restated Limited Liability Company Agreement of Colt Defense LLC dated as of June 12, 2003 reflecting the amendments adopted as of July 9, 2007.* | |
3.2 | Certificate of Incorporation of Colt Finance Corp., effective October 15, 2009.* | |
3.3 | By-Laws of Colt Finance Corp., effective November 7, 2009.* | |
4.1 | Indenture, dated as of November 10. 2009, by and among Colt Defense LLC, Colt Finance Corp. and Wilmington Trust FSB as trustee. * | |
4.2 | Credit Agreement, dated as of November 10, 2009, among Colt Defense LLC, the other loan parties from time to time party thereto, the financial institutions party thereto from time to time and JPMorgan Chase Bank, N.A., as administrative agent.* | |
4.3 | Amendment No. 1 to Credit Agreement, dated as of March 11, 2010, among Colt Defense LLC, JPMorgan Chase Bank, N.A., as administrative agent and as a lender and Morgan Stanley Bank, N.A., as a lender.* | |
4.4 | Second Amendment and Limited Waiver to Credit Agreement, dated as of October 29, 2010 (effective as of November 1, 2010), among Colt Defense LLC, JPMorgan Chase Bank, N.A., as administrative agent and as a lender and Morgan Stanley Bank, N.A., as a lender.* | |
4.5 | Form of 8.75% Senior Note due 2017 (included as part of Exhibit 4.1).* | |
4.6 | Form of Guarantee 8.75% Senior Note due 2017 (included as part of Exhibit 4.1).* | |
5.1 | Opinion of Cahill Gordon & Reindelllp. * | |
10.1 | Letter Agreement, between certain of the management companies associated with Sciens Management, L.L.C. and Colt Defense LLC, dated as of July 9, 2007.* | |
10.2 | License Agreement, dated as of December 19, 2003, between Colt Defense LLC and New Colt Holding Corp.* | |
10.4 | First Amended and Restated Sublease Agreement, dated as of October 25, 2005, between Colt Defense LLC and Colt’s Manufacturing Company LLC.* | |
10.5.1 | Intercompany Services Agreement, dated as of June 26, 2007, between Colt Defense LLC and Colt’s Manufacturing Company LLC.* | |
10.5.2 | First Amendment to Intercompany Services Agreement dated as of December 1, 2007.* | |
10.5.3 | Second Amendment to Intercompany Services Agreement dated as of January 1, 2009.* | |
10.6 | Match Target License Agreement, dated as of December 19, 2003 (effective as of January 1, 2004), between Colt Defense LLC and Colt’s Manufacturing Company LLC.* | |
10.7.1 | Letter agreement dated as of August 30, 2005, between Jeffrey Grody and Colt Defense LLC. *† |
II-6
Table of Contents
Exhibit No. | Description | |
10.7.2 | Letter agreement dated as of August 23, 2004, between James R. Battaglini and Colt Defense LLC. *† | |
10.7.3 | Letter agreement dated as of April 28, 2003, between J. Michael Magouirk and Colt Defense LLC. *† | |
10.8 | Colt Defense Salaried Income Plan effective November 4, 2002.*† | |
10.9 | Amendment No. 1 to Colt Defense Salaried Income Plan effective December 31, 2008.*† | |
12 | Statement of ratio of earnings to fixed charges.** | |
21 | Subsidiaries of Registrant. ** | |
23.1 | Consent of PriceWaterhouseCoopers LLP.** | |
23.2 | Consent of UHY LLP.** | |
23.3 | Consent of Cahill Gordon & Reindelllp( included as part of Exhibit 5.1).* | |
24.1 | Power of Attorney. ** | |
25.1 | Form T-1 Statement of Eligibility of Wilmington Trust FSB, as Trustee for Indenture dated November 10, 2009.** | |
99.1 | Letter of Transmittal.* |
* | To be filed by amendment or as an exhibit to a report filed pursuant to Sections 13(a), 13(c) or 15(d) of the Exchange Act. | |
** | Filed herewith. | |
† | Management contracts and compensatory plans and arrangements. |
II-7