Document_and_Entity_Informatio
Document and Entity Information | 6 Months Ended | |
Jun. 29, 2014 | 29-May-15 | |
Document and Entity Information | ||
Entity Registrant Name | Colt Defense LLC | |
Entity Central Index Key | 1508677 | |
Document Type | 10-Q/A | |
Document Period End Date | 29-Jun-14 | |
Amendment Flag | TRUE | |
Amendment Description | In this amended Quarterly Report on Form 10-Q/A for the quarter ended June 29, 2014 we are (a) responding to Securities and Exchange Commission (the "SEC") comments on our second quarter 2014 Form 10-Q ("Quarterly Report") filed September 15, 2014 to (i) include certifications under Section 906 of the Sarbanes-Oxley Act and (ii) update our certifications under Section 302 of the Sarbanes-Oxley Act to include internal control over financial reporting language in the introductory portion of paragraph 4 as well as paragraph 4(b) and (b) updating Item 4 "Controls and Procedures" of this amended Quarterly Report. In connection with our response to SEC comments and the refiling of this Quarterly Report we have included language in Note 21 "Subsequent Events" with respect to our current liquidity position and ability to continue as a going concern. In addition to the changes noted above, we have revised our disclosure in Part I, Item 1: Financial Statements, Note 17 "Segment Information" as the Company identified an internal consistency error in its table reconciling Adjusted EBITDA to Net income (loss) in its Quarterly Report. As previously disclosed in our Form 8-K filing on February 10, 2015, the table incorrectly disclosed Net income (loss) (in thousands of dollars) as $12,589 and $12,535 for the three and six months ended June 29, 2014, respectively. The table now reflects the appropriate Net income (loss) (in thousands of dollars) of ($12,589) and ($20,535) for the three and six months ended June 29, 2014, respectively. The error did not impact the actual amount of Adjusted EBITDA reported in the original Form 10-Q for the quarter ended June 29, 2014.(See Note 16 "Commitments and Contingencies"). In addition, the Company identified an error in its Consolidated Statement of Changes in Cash Flows for the six months ended June 29, 2014. To correct for such error, the Company has revised the Statement of Changes in Cash Flows to correct for the $196 (in thousands of dollars) misclassification between depreciation and amortization and purchases of property and equipment. The impact of correcting the error is an increase in cash used in operations and a decrease in cash used in investing activities of $196 (in thousands of dollars). In conjunction with the correction, the Company updated its disclosures in Note 17 (to reflect an increase of the same amount to Adjusted EBITDA) and Part I, Item 2 : Managements Discussion and Analysis of Financial Condition and Results of Operations -- Cash Flows to reflect the change. We do not consider the cash flow error to be material. As previously disclosed in our Form 10-Q/A for the period ended September 28, 2014, as filed December 2, 2014, we revised our disclosure with respect to our inventory reserves related to the M240 Program as of December 31, 2013 from $206 to $639 (in thousands of dollars). This Quarterly Report also includes updates to reflect certain monetary amounts, percentages and other figures that have been subject to rounding adjustments in the notes to the financial statements and Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations" which updates we believe are not material. This explanatory note is an integral part of this Form 10-Q/A. Except as described above, this amended Quarterly Report does not amend, update or change any other items or disclosures in the original filing and does not purport to reflect any information or events subsequent to the filing date of the original filing. As such, this amended Quarterly Report speaks only as of the date the original filing was filed, and the Registrants have not undertaken herein to amend, supplement or update any information contained in the original filing to give effect to any subsequent events. Accordingly this amended Quarterly Report should be read in conjunction with the Registrants' filings made with the SEC subsequent to the filing of the original filing, including any amendment to those filings. | |
Current Fiscal Year End Date | -19 | |
Entity Current Reporting Status | No | |
Entity Filer Category | Non-accelerated Filer | |
Entity Common Stock, Shares Outstanding | 0 | |
Document Fiscal Year Focus | 2014 | |
Document Fiscal Period Focus | Q2 |
Consolidated_Balance_Sheets
Consolidated Balance Sheets (USD $) | Jun. 29, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Current assets: | ||
Cash and cash equivalents | $2,198 | $12,594 |
Restricted cash | 771 | 771 |
Accounts receivable, net | 15,896 | 22,482 |
Inventories | 75,507 | 66,674 |
Deferred tax assets | 173 | 954 |
Other current assets | 3,787 | 5,962 |
Total current assets | 98,332 | 109,437 |
Property and equipment, net | 29,051 | 30,733 |
Goodwill | 51,188 | 51,225 |
Trademarks | 50,100 | 50,100 |
Intangible assets with finite lives, net | 11,766 | 13,415 |
Deferred financing costs | 6,531 | 7,742 |
Long-term restricted cash | 572 | 572 |
Other assets | 1,480 | 1,510 |
Total assets | 249,020 | 264,734 |
Current liabilities: | ||
Line of credit | 13,500 | 7,083 |
Accounts payable | 16,444 | 14,038 |
Accrued expenses (Note 10) | 21,039 | 22,158 |
Pension and retirement liabilities - current portion | 1,085 | 1,085 |
Customer advances and deferred income | 17,867 | 19,467 |
Long-term debt - current portion (Note 9) | 625 | 5,000 |
Accrued distributions to members | 670 | |
Total current liabilities | 70,560 | 69,501 |
Long-term debt | 294,180 | 289,817 |
Pension and retirement liabilities | 22,758 | 21,670 |
Long-term deferred tax liability | 17,808 | 18,715 |
Long-term distribution payable to members | 2,277 | 2,277 |
Other long-term liabilities | 3,139 | 2,230 |
Total long-term liabilities | 340,162 | 334,709 |
Total liabilities | 410,722 | 404,210 |
Commitments and Contingencies (Note 16) | ||
Deficit: | ||
Accumulated deficit | -150,755 | -130,136 |
Accumulated other comprehensive loss | -10,947 | -9,340 |
Total deficit | -161,702 | -139,476 |
Total liabilities and deficit | $249,020 | $264,734 |
Consolidated_Statements_of_Ope
Consolidated Statements of Operations (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 29, 2014 | Jun. 30, 2013 | Jun. 29, 2014 | Jun. 30, 2013 |
Consolidated Statements of Operations | ||||
Net sales | $49,633 | $64,212 | $99,713 | $128,061 |
Cost of sales | 44,640 | 45,830 | 85,026 | 90,942 |
Gross profit | 4,993 | 18,382 | 14,687 | 37,119 |
Operating expenses: | ||||
Selling and commissions | 4,620 | 3,452 | 9,081 | 6,547 |
Research and development | 1,392 | 1,481 | 2,635 | 2,301 |
General and administrative | 3,801 | 3,015 | 7,710 | 6,745 |
Total selling and commissions, research and development, general and administrative | 9,813 | 7,948 | 19,426 | 15,593 |
Business development | 9 | 169 | 509 | 244 |
Certain transaction costs | 416 | 416 | ||
Restructuring costs (Note 4) | -76 | -76 | ||
Total operating expenses | 9,746 | 8,533 | 19,859 | 16,253 |
Operating income | -4,753 | 9,849 | -5,172 | 20,866 |
Other expense (income): | ||||
Interest expense | 7,859 | 6,069 | 15,543 | 12,063 |
Other income, net | -42 | -685 | -113 | -1,472 |
Total other expense, net | 7,817 | 5,384 | 15,430 | 10,591 |
Income (loss) before provision for income taxes | -12,570 | 4,465 | -20,602 | 10,275 |
Income tax (benefit) expense | 19 | 78 | -67 | 759 |
Net (loss) income | ($12,589) | $4,387 | ($20,535) | $9,516 |
Consolidated_Statements_of_Com
Consolidated Statements of Comprehensive Income (Loss) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 29, 2014 | Jun. 30, 2013 | Jun. 29, 2014 | Jun. 30, 2013 |
Consolidated Statements of Comprehensive Income (Loss) | ||||
Net income (loss) | ($12,589) | $4,387 | ($20,535) | $9,516 |
Foreign currency translation adjustment | ||||
Foreign currency translation losses | 798 | -1,035 | -140 | -1,611 |
Pension and postretirement benefit liabilities: | ||||
Other comprehensive income arising during the period | -1,550 | -1,550 | ||
Reclassification adjustment for unrecognized prior service costs and unrecognized loss included in net income (loss) | 36 | 117 | 83 | 250 |
Total | -1,514 | 117 | -1,467 | 250 |
Comprehensive income (loss) | ($13,305) | $3,469 | ($22,142) | $8,155 |
Consolidated_Statements_of_Cha
Consolidated Statements of Changes in Cash Flows (USD $) | 6 Months Ended | |
In Thousands, unless otherwise specified | Jun. 29, 2014 | Jun. 30, 2013 |
Operating Activities | ||
Net income (loss) | ($20,535) | $9,516 |
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: | ||
Depreciation and amortization | 4,649 | 2,368 |
Amortization of financing fees | 1,211 | 828 |
Amortization of debt discount | 613 | 206 |
Postretirement health plan curtailment | -98 | |
Deferred income taxes | -119 | 15 |
Other non-cash items | 19 | -17 |
Changes in operating assets and liabilities, net of acquisition: | ||
Accounts receivable | 6,407 | -11,836 |
Inventories | -8,856 | -11,148 |
Prepaid expenses and other current assets | 2,174 | -510 |
Accounts payable and accrued expenses | 801 | 1,922 |
Accrued pension and retirement liabilities | -378 | -546 |
Customer advances and deferred income | -1,544 | -577 |
Other | 988 | 96 |
Net cash used in operating activities | -14,668 | -9,683 |
Investing Activities | ||
Purchases of property and equipment | -1,345 | -3,260 |
Change in restricted cash | 5 | |
Net cash used in investing activities | -1,345 | -3,255 |
Financing Activities | ||
Repayments of long-term debt | -625 | |
Line of credit advances | 13,500 | 74 |
Line of credit repayments | -7,083 | |
Purchase of common units | -14,000 | |
Distributions paid to members | -683 | -1,357 |
Net cash provided by (used in) financing activities | 5,109 | -15,283 |
Effect of exchange rates on cash and cash equivalents | 508 | -543 |
Change in cash and cash equivalents | -10,396 | -28,764 |
Cash and cash equivalents, beginning of period | 12,594 | 42,373 |
Cash and cash equivalents, end of period | 2,198 | 13,609 |
Supplemental Disclosure of Cash Flow Information | ||
Cash paid for interest | 12,468 | 11,401 |
Cash paid for income taxes | 576 | 586 |
Non-cash consideration for sale of equipment | 7 | |
Accrued purchases of fixed assets | 126 | 42 |
Accrued distribution to members | $13 | $3,508 |
Nature_of_Business
Nature of Business | 6 Months Ended |
Jun. 29, 2014 | |
Nature of Business | |
Nature of Business | Note 1 Nature of Business |
Colt Defense LLC (“Colt Defense” or the “Company”) is one of the world’s oldest and most renowned designers, developers and manufacturers of firearms for military, personal defense and recreational purposes. Our founder, Samuel Colt, patented the first commercially successful revolving cylinder firearm in 1836 and, in 1847, began supplying U.S. and international military customers with firearms that have set the standards of their era. Today, our end customers encompass every segment of the worldwide firearms market, including U.S., Canadian and foreign military forces, global law enforcement and security agencies, consumers seeking personal protection, the hunting and sporting community and collectors. | |
As of January 1, 2014, Colt Defense effected a legal entity restructuring whereby Colt Defense and New Colt Holding Corp. (“New Colt”) (See Note 3, “Acquisition” and Note 11, “Income Taxes”) contributed their assets and operations to Colt’s Manufacturing Company LLC (“Colt’s Manufacturing”), a limited liability corporation. The contribution created a combined operating entity for the Company’s U.S. based operations. | |
As of December 31, 2013, Colt Defense owned 100% of Colt Finance, New Colt and Colt Defense Technical Services LLC (“CDTS”), New Colt owned 100% of Colt’s Manufacturing and Colt Defense and CDTS collectively owned 100% of Colt International which owned 100% of Colt Canada. Effective January 1, 2014, Colt Defense, a limited liability corporation, owned 100% of Colt Finance Corp. (“Colt Finance”), New Colt, a C corporation, and CDTS, a limited liability corporation. Colt Defense and New Colt collectively own 100% of Colt’s Manufacturing as a result of the legal entity restructuring and Colt Defense and CDTS collectively own 100% of Colt International Coöperatief U.A. (“Colt International”), a Dutch cooperatief, which owns 100% of Colt Canada Corporation (“Colt Canada”), a Canadian C corporation. | |
The Company operates on a monthly 4-4-5 week calendar with the end of each month on a Sunday, except for the month of December which ends on the 31st. The first two months of each quarter, with the exception of January, have four weeks and the third month of each quarter, with the exception of December, has five weeks. The 4-4-5 calendar ensures that the end date of the period is always the same day of the week, which is utilized by the Company for shift and manufacturing planning, and it also ensures that every period is the same length. | |
The following items, which are discussed in further detail in the notes to the consolidated financial statements for the second quarter of 2014 had an impact on the Company’s results as included in the Form 10-Q: | |
The Company restated its Annual Report on Form 10-K/A for the year ended December 31, 2013 and revised the unaudited interim financial statements for the first three quarters in the fiscal year ended December 31, 2013. (See Note 2, “Summary of Significant Accounting Policies — Restatement of Previously Issued Consolidated Financial Statements”). | |
The Company, as a result of the decrease in demand for commercial rifles, concluded that a triggering event had occurred and an interim impairment test for indefinite lived intangible assets, Goodwill and Trademarks, was conducted as of June 29, 2014. (See Note 8, “Goodwill, Trademarks and Other Intangible Assets”). The Company concluded no impairment existed as of June 29, 2014. | |
On August 6, 2014, the Company entered into Amendment No. 1 to the Term Loan (the “Term Loan Amendment”). Absent an amendment to the Term Loan, the Company would have been in violation of certain of its financial covenants as of June 29, 2014. The Term Loan Amendment eliminated and modified certain covenants and provided for an extension of the time period for delivery of certain financial information to its lenders. Also, on August 6, 2014, the Company obtained an amendment to its credit agreement that provided an extension of the time period for delivery of certain financial information to its lenders, (See Note 9, “Notes Payable and Long-Term Debt”). It is possible the Company will not meet one or more of the term loan covenants, as amended, as of December 31, 2014, or subsequent quarters of 2015. | |
On March 30, 2014, Colt Defense through its domestic operating subsidiary Colt’s Manufacturing reached tentative agreement with UAW Local 376 for a new five year contract covering approximately 529 employees, which was ratified by the union membership on March 31, 2014. The new contract will be in effect from April 1, 2014 through March 31, 2019. | |
In response to, among other factors, the decrease in demand for commercial rifles, the Company initiated actions which resulted in a workforce reduction of 24 salaried and 64 hourly employees in the second quarter of 2014. In addition, subsequent to June 29, 2014 the Company initiated an additional workforce reduction of 9 salaried employees. (See Note 16, “Commitments and Contingencies”). | |
In conjunction with the workforce reduction, the Company recognized a curtailment of its postretirement health plan. (See Note 12, “Pension and Postretirement Benefits”). | |
During the second quarter of 2014, based upon new additional information, the Company reassessed the M240 machine gun program (the “M240 Program”) accruals and determined an incremental $4,779 contract obligation expense was required. (See Note 16, “Commitments and Contingencies”). The Company also accrued $480 in connection with the Company’s No-Cost Cancellation of its M249 contract with the U.S. Government. | |
Summary_of_Significant_Account
Summary of Significant Accounting Policies | 6 Months Ended | |||||||||||||||||||
Jun. 29, 2014 | ||||||||||||||||||||
Summary of Significant Accounting Policies | ||||||||||||||||||||
Summary of Significant Accounting Policies | Note 2 Summary of Significant Accounting Policies | |||||||||||||||||||
Restatement of Previously Issued Consolidated Financial Statements | ||||||||||||||||||||
In the Company’s 2013 Annual Report on Form 10-K/A filed September 15, 2014, it restated its previously issued consolidated financial statements and the related disclosures for the year ended December 31, 2013 (the “Restated Period”). The Company also revised the unaudited interim financial statements for the first quarter of the fiscal year ended December 31, 2014, first three quarters in the fiscal year ended December 31, 2013 and the fourth quarter in the fiscal year ended December 31, 2012 (the “Revised Periods”). | ||||||||||||||||||||
The restatement is the result of the Company’s correction of a financial statement error attributable to the lack of recognition of the impact of a contract modification related to the M240 Program for the U.S. Government in the Company’s fourth quarter 2013 results. There was no impact to the Company’s net sales or cost of sales in the three and six month periods ended June 30, 2013 related to the M240 Program error. In conjunction with the correction of the M240 Program error, other previously identified, immaterial out-of-period adjustments were also adjusted to be reflected in the proper period, along with the reclassification of business development expenses from other expense (income) to operating income. Correction of these previously recorded, immaterial out-of-period adjustments had the combined effect on the consolidated statements of operations for the three and six month periods ended June 30, 2013 of increasing net income by $229 and $288, respectively. | ||||||||||||||||||||
The impacts of correcting the previously recorded, immaterial out-of-period adjustments and the reclassification of business development expenses for the three and six month periods ended June 30, 2013 were as follows (“in thousands”): | ||||||||||||||||||||
Adjustments to | ||||||||||||||||||||
Previously Reported Income | ||||||||||||||||||||
Statement - Income / (Expense) | ||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||
For the years ended | June 30, 2013 | June 30, 2013 | ||||||||||||||||||
Net sales | $ | (23 | ) | (23 | ) | |||||||||||||||
Cost of sales | 65 | 79 | ||||||||||||||||||
Gross profit | (88 | ) | (102 | ) | ||||||||||||||||
Selling and commissions (A) | (130 | ) | (209 | ) | ||||||||||||||||
Research and development | 1 | 2 | ||||||||||||||||||
General and administrative (B) | (222 | ) | (217 | ) | ||||||||||||||||
Business development (C) | 169 | 244 | ||||||||||||||||||
Operating income | 94 | 78 | ||||||||||||||||||
Other (income) / expense (C) | (192 | ) | (267 | ) | ||||||||||||||||
Income tax expense | 57 | 57 | ||||||||||||||||||
Net income (loss) (B) | 229 | 288 | ||||||||||||||||||
(A) Primarily relates to the reclassification of $132 of armorers training expenses from selling and commissions to cost of sales. | ||||||||||||||||||||
(B) Primarily relates to the timing of recognition of certain professional fees. | ||||||||||||||||||||
(C) Primarily relates to the reclassification of transaction costs incurred in connection with contemplated merger and acquisition activities from other expense/(income) to business development. | ||||||||||||||||||||
In addition, the Company identified an error in its Consolidated Statement of Changes in Cash Flows for the six months ended June 29, 2014. To correct for such error, the Company has revised the Statement of Changes in Cash Flows to correct for the $196 misclassification between depreciation and amortization and purchases of property and equipment. The impact of correcting the error is an increase in cash used in operations and a decrease in cash used in investing activities of $196. The impact of the error was not material to the previously issued financial statements. | ||||||||||||||||||||
The Company’s previously filed Annual Reports on Form 10-K for the year ended December 31, 2012 and Quarterly Reports on Form 10-Q for the Revised Periods will not be amended. | ||||||||||||||||||||
Comparison of revised financial statements to financial statements as previously reported | ||||||||||||||||||||
The following tables compare our previously reported Consolidated Statements of Operations, Comprehensive Income (Loss) and Changes in Cash Flows for the quarter ended June 29, 2013 to the corresponding financial statements for the quarterly period as revised. | ||||||||||||||||||||
Colt Defense LLC and Subsidiaries | ||||||||||||||||||||
Consolidated Statement of Operations | ||||||||||||||||||||
(In thousands of dollars) | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
Three months ended June 30, 2013 | Six months ended June 30, 2013 | |||||||||||||||||||
As Revised | As Revised | |||||||||||||||||||
As | in this Quarterly | As | in this Quarterly | |||||||||||||||||
Previously | Report on | Previously | Report on | |||||||||||||||||
Reported | Adjustments | Form 10-Q | Reported | Adjustments | Form 10-Q | |||||||||||||||
Net sales | $ | 64,235 | $ | (23 | ) | $ | 64,212 | $ | 128,084 | $ | (23 | ) | $ | 128,061 | ||||||
Cost of sales | 45,765 | 65 | 45,830 | 90,863 | 79 | 90,942 | ||||||||||||||
Gross Profit | 18,470 | (88 | ) | 18,382 | 37,221 | (102 | ) | 37,119 | ||||||||||||
Operating expenses: | ||||||||||||||||||||
Selling and commissions | 3,582 | (130 | ) | 3,452 | 6,756 | (209 | ) | 6,547 | ||||||||||||
Research and development | 1,480 | 1 | 1,481 | 2,299 | 2 | 2,301 | ||||||||||||||
General and administrative | 3,237 | (222 | ) | 3,015 | 6,962 | (217 | ) | 6,745 | ||||||||||||
8,299 | (351 | ) | 7,948 | 16,017 | (424 | ) | 15,593 | |||||||||||||
Business development | — | 169 | 169 | — | 244 | 244 | ||||||||||||||
Certain transaction costs | 416 | — | 416 | 416 | — | 416 | ||||||||||||||
Total operating expenses | 8,715 | (182 | ) | 8,533 | 16,433 | (180 | ) | 16,253 | ||||||||||||
Operating income | 9,755 | 94 | 9,849 | 20,788 | 78 | 20,866 | ||||||||||||||
Other expense/(income): | ||||||||||||||||||||
Interest expense | 6,069 | — | 6,069 | 12,063 | — | 12,063 | ||||||||||||||
Other (income)/expense, net | (493 | ) | (192 | ) | (685 | ) | (1,205 | ) | (267 | ) | (1,472 | ) | ||||||||
Total other expenses, net | 5,576 | (192 | ) | 5,384 | 10,858 | (267 | ) | 10,591 | ||||||||||||
Income (loss) before provision for income taxes | 4,179 | 286 | 4,465 | 9,930 | 345 | 10,275 | ||||||||||||||
Income tax expense | 21 | 57 | 78 | 702 | 57 | 759 | ||||||||||||||
Net income (loss) | $ | 4,158 | $ | 229 | $ | 4,387 | $ | 9,228 | $ | 288 | $ | 9,516 | ||||||||
Colt Defense LLC and Subsidiaries | ||||||||||||||||||||
Consolidated Statements of Comprehensive Income (Loss) | ||||||||||||||||||||
(In thousands of dollars) | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
For the Three Months Ended June 30, 2013 | ||||||||||||||||||||
As Revised | ||||||||||||||||||||
As | in this Quarterly | |||||||||||||||||||
Previously | Report on | |||||||||||||||||||
Reported | Adjustments | Form 10-Q | ||||||||||||||||||
Net income (loss) | $ | 4,158 | $ | 229 | $ | 4,387 | ||||||||||||||
Other comprehensive income (loss), net of tax: | ||||||||||||||||||||
Foreign currency translation adjustment: | ||||||||||||||||||||
Foreign currency translation gains (losses) | (1,020 | ) | (15 | ) | (1,035 | ) | ||||||||||||||
Pension and postretirement benefit liabilities: | ||||||||||||||||||||
Other comprehensive income (loss) arising during the period | — | — | — | |||||||||||||||||
Reclassification adjustment for unrecognized prior service costs and unrecognized loss included in net income (loss) | 117 | — | 117 | |||||||||||||||||
117 | — | 117 | ||||||||||||||||||
Comprehensive income (loss) | $ | 3,255 | $ | 214 | $ | 3,469 | ||||||||||||||
Consolidated Statements of Comprehensive Income (Loss) | ||||||||||||||||||||
(In thousands of dollars) | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
For the Six Months Ended June 30, 2013 | ||||||||||||||||||||
As Revised | ||||||||||||||||||||
As | in this Quarterly | |||||||||||||||||||
Previously | Report on | |||||||||||||||||||
Reported | Adjustments | Form 10-Q | ||||||||||||||||||
Net income (loss) | $ | 9,228 | $ | 288 | $ | 9,516 | ||||||||||||||
Other comprehensive income (loss), net of tax: | ||||||||||||||||||||
Foreign currency translation adjustment: | ||||||||||||||||||||
Foreign currency translation gains (losses) | (1,597 | ) | (14 | ) | (1,611 | ) | ||||||||||||||
Pension and postretirement benefit liabilities: | ||||||||||||||||||||
Other comprehensive income (loss) arising during the period | — | — | — | |||||||||||||||||
Reclassification adjustment for unrecognized prior service costs and unrecognized loss included in net income (loss) | 250 | — | 250 | |||||||||||||||||
250 | — | 250 | ||||||||||||||||||
Comprehensive income (loss) | $ | 7,881 | $ | 274 | $ | 8,155 | ||||||||||||||
Colt Defense LLC and Subsidiaries | ||||||||||||||||||||
Consolidated Statement of Changes in Cash Flows | ||||||||||||||||||||
(In thousands of dollars) | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
For the Six Months Ended June 30, 2013 | ||||||||||||||||||||
As Revised | ||||||||||||||||||||
As | in this Quarterly | |||||||||||||||||||
Previously | Report on | |||||||||||||||||||
Reported | Adjustments | Form 10-Q | ||||||||||||||||||
Operating Activities | ||||||||||||||||||||
Net income (loss) | $ | 9,228 | $ | 288 | $ | 9,516 | ||||||||||||||
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: | ||||||||||||||||||||
Depreciation and amortization | 2,368 | — | 2,368 | |||||||||||||||||
Amortization of financing fees | 828 | — | 828 | |||||||||||||||||
Amortization of debt discount | 206 | — | 206 | |||||||||||||||||
Deferred income taxes | 15 | — | 15 | |||||||||||||||||
Other non-cash items | (17 | ) | — | (17 | ) | |||||||||||||||
Changes in operating assets and liabilites, net of acquisition: | ||||||||||||||||||||
Accounts receivable | (11,852 | ) | 16 | (11,836 | ) | |||||||||||||||
Inventories | (11,148 | ) | — | (11,148 | ) | |||||||||||||||
Prepaid expense and other current assets | (333 | ) | (177 | ) | (510 | ) | ||||||||||||||
Accounts payable and accrued expense | 2,145 | (223 | ) | 1,922 | ||||||||||||||||
Accrued pension and retirement liabilities | (658 | ) | 112 | (546 | ) | |||||||||||||||
Customer advances and deferred income | (577 | ) | — | (577 | ) | |||||||||||||||
Other | 96 | — | 96 | |||||||||||||||||
Net cash (used in) provided by operating activities | (9,699 | ) | 16 | (9,683 | ) | |||||||||||||||
Investing Activities | ||||||||||||||||||||
Purchase of property and equipment | (3,260 | ) | — | (3,260 | ) | |||||||||||||||
Change in restricted cash | 5 | — | 5 | |||||||||||||||||
Net cash used in investing activities | (3,255 | ) | — | (3,255 | ) | |||||||||||||||
Financing Activities | ||||||||||||||||||||
Line of credit advances | 74 | — | 74 | |||||||||||||||||
Purchase of common units | (14,000 | ) | — | (14,000 | ) | |||||||||||||||
Distributions paid to members | (1,357 | ) | — | (1,357 | ) | |||||||||||||||
Net cash used financing activities | (15,283 | ) | — | (15,283 | ) | |||||||||||||||
Effect of exchange rates on cash and cash equivalents | (527 | ) | (16 | ) | (543 | ) | ||||||||||||||
Change in cash and cash equivalents | (28,764 | ) | — | (28,764 | ) | |||||||||||||||
Cash and cash equivalents, beginning of period | 42,373 | — | 42,373 | |||||||||||||||||
Cash and cash equivalents, end of period | $ | 13,609 | $ | — | $ | 13,609 | ||||||||||||||
Basis of Accounting and Consolidation | ||||||||||||||||||||
The accompanying unaudited consolidated financial statements of Colt Defense and Colt Finance (collectively, the “Company”, or “Colt”) have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all significant adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of the financial position, results of operations and cash flows for the three and six months ended June 29, 2014 and June 30, 2013, as revised, have been included. The financial information included in this Quarterly Report on Form 10-Q/A should be read in conjunction with the consolidated financial statements and notes in the Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2013, as restated. The consolidated balance sheet dated December 31, 2013, as restated, included in this Quarterly Report on Form 10-Q/A has been derived from the audited consolidated financial statements at that time, but does not include all disclosures required by GAAP. Operating results for the three and six months ended June 29, 2014 are not necessarily indicative of the results to be expected for any subsequent interim period or for the year ending December 31, 2014. | ||||||||||||||||||||
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated. | ||||||||||||||||||||
On July 12, 2013 (the “Merger Date”), the Company acquired 100% ownership (the “Merger”) of New Colt. The results of New Colt have been included in the unaudited consolidated financial statements from the Merger Date. | ||||||||||||||||||||
Use of Estimates | ||||||||||||||||||||
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company’s significant estimates include estimates used to determine the fair value of assets acquired and liabilities assumed related to the acquisition of New Colt (see Note 3, “Acquisition”) and accruals for the Company’s M240 Program (see Note 16, “Commitments and Contingencies”), excess and obsolete inventory, income tax expense, deferred tax asset valuation, medical claims payable, and worker’s compensation expense. Actual results could differ materially from those estimates. | ||||||||||||||||||||
Cash and Cash Equivalents | ||||||||||||||||||||
Cash and cash equivalents consists of cash and short-term, highly liquid investments with original maturities of three months or less at the date of purchase. | ||||||||||||||||||||
Restricted Cash | ||||||||||||||||||||
Restricted cash at June 29, 2014 and December 31, 2013, consists of funds deposited to secure standby letters of credit primarily for performance guarantees related to the Company’s international business. | ||||||||||||||||||||
Revenue | ||||||||||||||||||||
The Company recognizes revenue when evidence of an arrangement exists, delivery of the product or service has occurred and title and risk of loss have passed to the customer, the sales price is fixed or determinable, and collectability of the resulting receivable is reasonably assured. | ||||||||||||||||||||
The Company accounts for revenues and earnings under two long-term government contracts/programs with interrelated multiple elements (procurement of parts, manufacturing and refurbishment services) using concepts of proportionate performance. These contracts effect reported results for all periods presented. The Company estimates the total profit on each contract as the difference between the total estimated revenue and total estimated cost of the contract and recognizes that profit over the remaining life of the contract using an output measure (the ratio of units completed to the total number of units to be refurbished under the contract). The Company computes an earnings rate for each contract, including general and administrative expense, to determine operating earnings. The Company reviews the earnings rate quarterly to assess revisions in contract values and estimated costs at completion. Any changes in earnings rates and recognized contract to date earnings resulting from these assessments are made in the period the revisions are identified. Contract costs include production costs, related overhead and allocated general and administrative costs. Amounts billed and collected on these contracts in excess of revenue recorded are reflected as customer advances and deferred revenue in the Company’s consolidated balance sheets. | ||||||||||||||||||||
Anticipated contract losses are charged to operations as soon as they are identified. Anticipated losses cover all costs allocable to the contracts, including certain general and administrative expenses. If a contract is cancelled by the government for its convenience, the Company can make a claim against the customer for fair compensation for worked performed plus costs of settling and paying claims by terminated subcontractors, other settlement expenses and a reasonable profit on costs incurred. When the Company has a customer claim, revenue arising from the claims process is either recognized as revenue or as an offset against a potential loss only when the amount of the claim can be estimated reliably and its realization is probable. The Company had no claims recorded at any period-end presented. | ||||||||||||||||||||
Prior to the Merger, Colt Defense generated an immaterial amount of royalty income, which it included in other income in its consolidated statements of operations. As a result of the Merger, the Company now generates a higher amount of royalty income on a quarterly basis and has therefore determined that royalty income should now be recorded as net sales in the Consolidated Statements of Operations. | ||||||||||||||||||||
The Company recognizes trademark licensing revenue for individual licensees based on historical experience and expected cash receipts from licensees. Licensing revenue consists of minimum royalties and/or a percentage of a licensee’s sales on licensed products. Under most of the Company’s current licensing agreements, royalties are payable in arrears on a calendar quarter basis. | ||||||||||||||||||||
Income Taxes | ||||||||||||||||||||
The Company utilizes the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement carrying amounts and tax basis of assets and liabilities using enacted tax rates in effect for years in which the temporary differences are expected to reverse. The Company provides a valuation allowance when it is more likely than not that deferred tax assets will not be realized. The Company recognizes the benefit of an uncertain tax position that has been taken or it expects to take on income tax returns if such tax position is more likely than not to be sustained. | ||||||||||||||||||||
The Company follows the authoritative guidance regarding accounting for uncertainty in income taxes, which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. These unrecognized tax benefits relate primarily to issues common among multinational corporations in its industry. The Company applies a variety of methodologies in making these estimates, which include studies performed by independent economists, advice from industry and subject experts, evaluation of public actions taken by the Internal Revenue Service and other taxing authorities, as well as its own industry experience. The Company provides estimates for unrecognized tax benefits which may be subject to material adjustments until matters are resolved with taxing authorities or statutes expire. If its estimates are not representative of actual outcomes, its results of operations could be materially impacted. | ||||||||||||||||||||
The Company continues to maintain a valuation allowance against certain deferred tax assets where realization is not certain. The Company periodically evaluates the likelihood of the realization of deferred tax assets and reduces the carrying amount of these deferred tax assets by a valuation allowance to the extent it believes a portion will not be realized. The Company considers many factors when assessing the likelihood of future realization of deferred tax assets, including its recent cumulative earnings experience by taxing jurisdiction, expectations of future taxable income, carryforward periods available to it for tax reporting purposes, various income tax strategies and other relevant factors. Significant judgment is required in making this assessment and, to the extent future expectations change; the Company would assess the recoverability of its deferred tax assets at that time. If the Company determines that the deferred tax assets are not realizable in a future period, the Company would record material adjustments to income tax expense in that period. | ||||||||||||||||||||
Recent Accounting Pronouncements | ||||||||||||||||||||
Revenue from Contracts with Customers - In May 2014, the FASB issued ASU No. 2014-09, that requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for the Company on January 1, 2017. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting. | ||||||||||||||||||||
Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists - In July 2013, the FASB issued ASU 2013-11 to provide guidance on the presentation of unrecognized tax benefits. ASU 2013-11 requires an entity to present an unrecognized tax benefit, or a portion of an unrecognized tax benefit, as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows: to the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. ASU 2013-11 is effective for interim and annual periods beginning after December 15, 2013 with earlier adoption permitted. ASU 2013-11 should be applied prospectively with retroactive application permitted. The Company has adopted ASU 2013-11 in the first quarter of 2014. |
Acquisition
Acquisition | 6 Months Ended | |||||||
Jun. 29, 2014 | ||||||||
Acquisition | ||||||||
Acquisition | Note 3 Acquisition | |||||||
On the Merger Date, the Company consummated the Merger with New Colt, a privately-held company, which is a world leader in the design, development and manufacture of pistols and revolvers. As a result of the Merger, the two manufacturers of Colt-branded firearms were consolidated into a single enterprise providing Colt Defense direct access to the commercial market for Colt Defense’s rifles and carbines, ownership of the Colt brand name and other related trademarks, and the technology and production facilities for the full line of Colt handguns. | ||||||||
Prior to determining the purchase price allocation of the Merger consideration, Colt Defense recorded the effective settlement of a pre-existing relationship with New Colt related to Colt Defense’s license agreement (the “License”) with New Colt for the use of certain Colt trademarks. As a result of the effective settlement of the pre-existing relationship, Colt Defense recorded a gain in the third quarter of 2013 of $15,264 (“Settlement Gain”), which equals the calculated gain of $16,320 reduced by the write-off of Colt Defense’s prepaid license balance of $1,056. A third-party valuation firm assisted management’s calculation of the gain by comparing the value of the royalty rate in the License to the current market rate for such a license. | ||||||||
The Company acquired New Colt for an aggregate purchase price of $82,543, which included the Settlement Gain of $15,264. The cash portion of the purchase price was funded by the proceeds from a new $50,000 senior secured term loan (“Term Loan”), cash on hand and $9,000 of consideration from the issuance and sale of the Company’s common units, of which $5,000 was paid in cash and $4,000 was related to Merger consideration reinvested by certain New Colt investors into Colt Defense. | ||||||||
The following table summarizes the fair values of the assets acquired and the liabilities assumed at the Merger Date: | ||||||||
Cash and cash equivalents | $ | 3,791 | ||||||
Accounts receivable | 3,318 | |||||||
Inventories | 7,585 | |||||||
Property and equipment | 5,182 | |||||||
Other assets | 3,090 | |||||||
Intangible assets with finite lives | 9,340 | |||||||
Trademarks | 50,100 | |||||||
Goodwill | 36,974 | |||||||
Total assets acquired | 119,380 | |||||||
Accounts payable and accrued expenses | 8,808 | |||||||
Customer advances and deferred revenue | 1,832 | |||||||
Capital lease obligations | 393 | |||||||
Pension and retirement liabilities | 9,357 | |||||||
Deferred tax liabilities | 16,447 | |||||||
Total liabilities assumed | 36,837 | |||||||
Net assets acquired | $ | 82,543 | ||||||
The Company believes that this information is a reasonable estimate of the fair values of assets acquired and liabilities assumed. | ||||||||
The Company, with the assistance of a third party valuation firm, valued the Colt brand and related trademarks by comparing the value of the royalty rate inherent in the prepaid license fee to the current market rate for such a license based upon both the value of the Colt brand and related trademarks in both the defense and commercial marketplace utilizing a relief from royalty methodology. | ||||||||
The Company, with the assistance of a third party valuation firm, determined the fair value of the finite-lived intangible assets which includes $5,240 of existing license agreements, valued based on a discounted cash flow approach, which represents the estimated fair value of New Colt license agreements for licensing the Colt trademarks to various third parties, $2,970 of developed technology, valued based on a relief from royalty method, which represents the estimated fair value of designs, trade secrets, materials, specifications and other proprietary intellectual property included in the technical data packages and related manufacturing processes and know-how and $1,130 of backlog, valued based on an excess earnings method, which represents the estimated fair value of unfilled contractual orders from customers. The weighted average useful lives of the acquired existing license agreements, developed technology and backlog were 6 years, 20 years, and 3 years respectively. In addition, the Company, with the assistance of a third party valuation firm, valued the Colt brand and related trade marks by comparing the value of the royalty rate inherent in the license (see Note 8,”Goodwill, Trademarks and Other Intangible Assets”) to the current market rate for such a license based upon both the value of the Colt brand and related trade marks in both the defense and the commercial marketplace utilizing a relief from royalty methodology. | ||||||||
Deferred income taxes arise from temporary differences between tax and financial statement recognition of revenue and expense. In evaluating the Company’s ability to recover the deferred tax assets acquired through the acquisition of New Colt, the Company considered all available positive and negative evidence, including scheduled reversals of deferred tax assets and liabilities, projected future taxable income, tax-planning strategies and results of recent operations. In projecting future taxable income for New Colt, the Company began with historical results adjusted to include the $50,000 Term Loan (see Note 9, “Notes Payable and Long-Term Debt”) and related interest expense, incorporated assumptions including the amount of future state and federal pre-tax operating income, the reversal of temporary differences and the implementation of feasible and prudent tax-planning strategies. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates the Company is using to manage the underlying business. Based on the analysis performed, the Company believes, as of the acquisition date, that it is more likely than not that the benefit from New Colt’s deferred tax assets will not be realized. In recognition of this risk, the Company provided a valuation allowance against New Colt’s deferred tax assets as part of the Company’s purchase accounting adjustments. | ||||||||
Goodwill is the excess of the purchase price of an acquired business over the fair value of net assets acquired. Goodwill will not be amortized but instead will be tested for impairment at least annually or more frequently if indicators of impairment arise. The $36,974 of goodwill is not deductible for federal income tax purposes. | ||||||||
The following table reflects the unaudited pro forma operating results of the Company for three and six months ended June 30, 2013, which gives effect to the Merger with New Colt as if it had occurred on January 1, 2012. The pro forma results are based on assumptions that the Company believes are reasonable under the circumstances. The pro forma results are not necessarily indicative of the operating results that would have occurred had the Merger been effective January 1, 2012, nor are they intended to be indicative of results that may occur in the future. The underlying pro forma information includes historical financial results of the Company and New Colt adjusted for certain items including depreciation and amortization expense associated with the assets acquired, the Company’s expense related to financing arrangements and the elimination of intercompany transactions. The pro forma information does not include the effects of any synergies or cost reduction initiatives related to the Merger. | ||||||||
Unaudited Pro Forma | Unaudited Pro Forma | |||||||
Three Months Ended | Six Months Ended | |||||||
June 30, 2013 | June 30, 2013 | |||||||
(As Revised) | (As Revised) | |||||||
Net sales | $ | 85,209 | $ | 167,022 | ||||
Net income (loss) | 4,709 | 10,254 | ||||||
Pro forma net income for the three and six months ended June 30, 2013 were adjusted to include $1,579 and $3,208, respectively, of additional interest expense related to the Company’s $50,000 Term Loan and to include $664 and $1,328, respectively, of additional expense related to the amortization of finite-lived intangible assets. |
Restructuring_Costs
Restructuring Costs | 6 Months Ended | ||||
Jun. 29, 2014 | |||||
Restructuring Costs | |||||
Restructuring Costs | Note 4 Restructuring Costs | ||||
During the third and fourth quarters of the year ended December 31, 2013, as restated, the Company recorded restructuring costs of $1,118 for restructuring actions that were initiated as a result of the Merger with New Colt. Of these costs, $336 is being reimbursed from an escrow established at the time of the Merger and $782 was recorded as operating expenses. The costs consist of severance, continuation of benefits and other compensation-related expenses. These actions, which have been completed, resulted in a workforce reduction of 10 salaried employees. Restructuring accruals are included in accounts payable, accrued expenses and other long-term liabilities on the Consolidated Balance Sheets. | |||||
The following table summarizes the Company’s restructuring activity for the six months ended June 29, 2014: | |||||
Restructuring accruals at December 31, 2013 | $ | 706 | |||
Accrual reversal | (76 | ) | |||
Utilization | (442 | ) | |||
Balance at June 29, 2014 | $ | 188 | |||
Subsequent to June 29, 2014 the Company received the remaining $268 for the reimbursement of restructuring costs from an escrow established at the time of the Merger. |
Accounts_Receivable
Accounts Receivable | 6 Months Ended |
Jun. 29, 2014 | |
Accounts Receivable | |
Accounts Receivable | Note 5 Accounts Receivable |
Accounts receivable are net of an allowance for doubtful accounts of $84 and $78 at June 29, 2014 and December 31, 2013, respectively. |
Inventories
Inventories | 6 Months Ended | |||||||
Jun. 29, 2014 | ||||||||
Inventories | ||||||||
Inventories | Note 6 Inventories | |||||||
The following table sets forth a summary of inventories, net of reserves at the lower of cost or market: | ||||||||
June 29, 2014 | December 31, 2013 | |||||||
Raw materials | $ | 44,877 | $ | 43,469 | ||||
Work in process | 13,938 | 9,476 | ||||||
Finished products | 16,692 | 13,729 | ||||||
$ | 75,507 | $ | 66,674 |
Property_and_Equipment
Property and Equipment | 6 Months Ended | |||||||||
Jun. 29, 2014 | ||||||||||
Property and Equipment | ||||||||||
Property and Equipment | Note 7 Property and Equipment | |||||||||
Property and equipment are recorded at cost. Depreciation of building and equipment (including assets recorded under capital leases) and amortization of leasehold improvements are computed using the straight-line method over the estimated useful life of the assets, or for leasehold improvements, over the remaining life of the lease term if shorter. | ||||||||||
Expenditures that improve or extend the lives of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. | ||||||||||
The fair value of the property and equipment acquired as a result of the Merger are allocated to machinery and equipment, furniture, fixtures and leasehold improvements and construction in process was $4,420, $30 and $732, respectively. | ||||||||||
Property and equipment consist of the following as of: | ||||||||||
Estimated | ||||||||||
June 29, 2014 | December 31, 2013 | Useful Life | ||||||||
Land | $ | 337 | $ | 338 | — | |||||
Building | 2,643 | 2,653 | 33 | |||||||
Machinery and equipment | 51,652 | 47,476 | 10-Jul | |||||||
Furniture, fixtures and leasehold improvements | 7,150 | 7,081 | 5-Mar | |||||||
61,782 | 57,548 | |||||||||
Less accumulated depreciation and amortization | (34,953 | ) | (32,152 | ) | ||||||
26,829 | 25,396 | |||||||||
Construction in process | 2,222 | 5,337 | ||||||||
Property and equipment, net | $ | 29,051 | $ | 30,733 | ||||||
Goodwill_Trademarks_and_Other_
Goodwill, Trademarks and Other Intangible Assets | 6 Months Ended | ||||||||||||
Jun. 29, 2014 | |||||||||||||
Goodwill, Trademarks and Other Intangible Assets | |||||||||||||
Goodwill, Trademarks and Other Intangible Assets | Note 8 Goodwill, Trademarks and Other Intangible Assets | ||||||||||||
Goodwill | |||||||||||||
Goodwill is tested for impairment annually as of the beginning of the Company’s fourth fiscal quarter, or when events or circumstances indicate that its value may have declined. Impairment exists when the carrying amount of goodwill exceeds its fair market value. Management estimates the fair value of each reporting unit primarily using the income approach. Specifically the discounted cash flow (“DCF”) model was utilized for the valuation of each reporting unit. Management develops cash flow forecasts based on existing firm orders, expected future orders, contracts with suppliers, labor agreements and general market conditions. The Company discounts the cash flow forecasts using the weighted-average cost of capital method at the date of evaluation. The Company also calculates the fair value of its reporting units using the market approach in order to corroborate its DCF model results. These methodologies used in the current year are consistent with those used in the prior year. | |||||||||||||
The following table sets forth the changes in the carrying amount of goodwill for the Company as of and for the six months ended June 29, 2014: | |||||||||||||
Total | |||||||||||||
Balance at December 31, 2013 | $ | 51,225 | |||||||||||
Effect of foreign currency translation | (37 | ) | |||||||||||
Balance at June 29, 2014 | $ | 51,188 | |||||||||||
Trademarks | |||||||||||||
In connection with the Merger, the Company recorded an indefinite-lived intangible asset of $50,100 for the Colt brand and related trademarks. The Company, with the assistance of a third party valuation firm, valued the Colt brand and related trademarks by comparing the value of the royalty rate inherent in the prepaid license fee to the current market rate for such a license based upon both the value of the Colt brand and related trademarks in both the defense and the commercial marketplace utilizing a relief from royalty methodology. | |||||||||||||
Impairment Evaluation | |||||||||||||
During the first six months of 2014, the Company has seen a continued decrease in the demand for commercial rifles. The Company concluded that a triggering event had occurred and an interim impairment test for indefinite lived intangible assets, Goodwill and Trademarks, was required as of June 29, 2014. Management developed cash flow forecasts based on existing firm orders, expected future orders, contracts with suppliers, labor agreements and general market conditions. The Company, with the assistance of a third party valuation firm, discounted the cash flow forecasts using the weighted-average cost of capital method as of June 29, 2014. The Company also calculated the fair value of its reporting units using the market approach in order to corroborate its DCF model results. Based on completion of Step 1 of the impairment analysis for indefinite lived intangible assets the fair value of the Company’s indefinite lived intangible assets exceeds the book value and therefore the Company concluded no impairment existed as of June 29, 2014. While the Company concluded there was no current impairment to the extent that demand for commercial rifles continues to decline, or does not recover when we have predicted it will, impairment charges may be required in the future. | |||||||||||||
Intangible Assets | |||||||||||||
The Company reviews long-lived assets, including intangible assets subject to amortization, for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Impairment losses, where identified, are determined as the excess of the carrying value over the estimated fair value of the long-lived asset. The Company assesses the recoverability of the carrying value of assets held for use based on a review of projected, undiscounted cash flows. When long-lived assets are reclassified to “held for sale”, the Company compares the asset’s carrying amount to its estimated fair value less cost to sell to evaluate impairment. No long-lived assets have been reclassified to held for sale for any period presented. | |||||||||||||
In connection with the Merger, the Company recorded finite-lived intangible assets of $9,340 which includes $5,240 of existing license agreements which represents the estimated fair value of New Colt license agreements for licensing the Colt trademarks to various third parties, $2,970 of developed technology which represents the estimated fair value of designs, trade secrets, materials, specifications and other proprietary intellectual property included in the technical data packages and related manufacturing processes and know-how and $1,130 of backlog which represents the estimated fair value of unfilled contractual orders from customers. The weighted average useful lives of the acquired existing license agreements, developed technology and backlog were 6 years, 20 years and 3 years, respectively. | |||||||||||||
The net carrying value of the Company’s intangible assets with finite lives follows: | |||||||||||||
As of June 29, 2014 | |||||||||||||
Gross | Estimated | ||||||||||||
Carrying | Accumulated | Useful | |||||||||||
Amount | Amortization | Net | Life | ||||||||||
Customer relationship Canadian Government | $ | 2,360 | $ | (714 | ) | $ | 1,646 | 30 | |||||
Customer relationships other | 6,137 | (4,229 | ) | 1,908 | 20 | ||||||||
License agreements | 5,240 | (1,614 | ) | 3,626 | 6 | ||||||||
Backlog | 1,720 | (916 | ) | 804 | 3 | ||||||||
Technology-based intangibles | 6,580 | (2,798 | ) | 3,782 | 15-20 | ||||||||
$ | 22,037 | $ | (10,271 | ) | $ | 11,766 | |||||||
As of December 31, 2013 | |||||||||||||
Gross | Estimated | ||||||||||||
Carrying | Accumulated | Useful | |||||||||||
Amount | Amortization | Net | Life | ||||||||||
Customer relationship Canadian Government | $ | 2,369 | $ | (678 | ) | $ | 1,691 | 30 | |||||
Customer relationships other | 6,160 | (4,077 | ) | 2,083 | 20 | ||||||||
License agreements | 5,240 | (805 | ) | 4,435 | 6 | ||||||||
Backlog | 1,722 | (604 | ) | 1,118 | 3 | ||||||||
Technology-based intangibles | 6,580 | (2,492 | ) | 4,088 | 15 - 20 | ||||||||
$ | 22,071 | $ | (8,656 | ) | $ | 13,415 | |||||||
The Company expects to record annual amortization expense of $3,270, $2,783, $1,926, $1,186, and $871 for 2014, 2015, 2016, 2017 and 2018, respectively. | |||||||||||||
Notes_Payable_and_LongTerm_Deb
Notes Payable and Long-Term Debt | 6 Months Ended | |||||||||||||
Jun. 29, 2014 | ||||||||||||||
Notes Payable and Long-Term Debt | ||||||||||||||
Notes Payable and Long-Term Debt | Note 9 Notes Payable and Long-Term Debt | |||||||||||||
Term Loan | ||||||||||||||
On July 12, 2013, in connection with the Merger, the Company entered into the Term Loan agreement, which matures on November 15, 2016. The Term Loan bears interest at a variable rate of 9.75% plus the greater of the three month LIBOR rate or 1%. Interest is payable quarterly in arrears on the first day of the subsequent calendar quarter. Under the Term Loan, the Company’s obligations are secured by a first priority security interest in the Company’s intellectual property and a second priority security interest in substantially all other assets. The Term Loan was issued at a discount of $2,293, which represents the lenders fees and legal expenses. The Company also incurred $2,120 in financing fees. The discount and the financing fees are being amortized as additional interest expense over the life of the indebtedness. | ||||||||||||||
On August 6, 2014, the Company entered into Amendment No. 1 to the Term Loan (the “Term Loan Amendment”). Absent an amendment to the Term Loan, the Company would have been in violation of certain of its financial covenants as of June 29, 2014. The Term Loan Amendment is discussed in more detail in the following paragraph. The Company was in compliance with its Term Loan covenants, as amended, as of June 29, 2014 and December 31, 2013. It is possible the Company will not meet one or more of the Term Loan covenants, as amended, as of December 31, 2014, or subsequent quarters of 2015. If the Company were not to meet certain of the Term Loan covenants, as amended, in the future, the Company would likely seek a waiver from the Term Loan lenders. There is no assurance that such a waiver could be obtained from the Term Loan lenders in a timely basis, or at all, in which case the Company would be in default under the Term Loan and the Term Loan would become a current liability. | ||||||||||||||
The “Term Loan Amendment”, provided that, (i) the financial covenants were eliminated for the rolling four quarter periods ended June 29, 2014 and September 30, 2014 and modified for the rolling four quarter period ended December 31, 2014, (ii) the Company was granted the option to not pay principal installment payments of $1,875 due on September 30, 2014, December 31, 2014 and March 31, 2015, (iii) the applicable prepayment premium was increased from 2% to 6% of the outstanding principal balance of the Term Loan, (iv) the date of the applicable prepayment determination was extended to July 31, 2016 and (v) the Company has been granted a 30 day extension to deliver financial information to the Term Loan lenders to allow for completion of the restatement of the Company’s 2013 10-K (see Note 2. Summary of Significant Accounting Policies). Additionally, the Company agreed to pay an amendment fee of $0.5 million that will be capitalized and paid-in-kind by being added to the outstanding principal balance of the Term Loan. | ||||||||||||||
The Term Loan Amendment fee of $0.5 million, along with Term Loan lenders legal fees to be paid by the Company in conjunction with the Term Loan Amendment, will be recorded as additional debt discount in the third quarter of 2014 and amortized as interest expense over the remaining term of the Term Loan. The Company will expense costs incurred by the Company in conjunction with the Term Loan Amendment in the third quarter of 2014. The Company currently intends to not pay principal installment payments due on September 30, 2014, December 31, 2014 and March 31, 2015 and, therefore, the long term debt — current portion on the consolidated balance sheet as of June 29, 2014, has been adjusted accordingly, to reflect anticipated Term Loan principal installment payments over the next twelve months. | ||||||||||||||
On March 31, 2014 and on June 30, 2014, the Company made Term Loan principal installment payments of $625 and interest payments of $1,310 and $1,308, respectively. | ||||||||||||||
The Term Loan agreement also contains non-financial covenants and other restrictions which limit the Company’s ability to incur additional indebtedness, make investments or certain payments, pay dividends (other than member distributions to support the Company’s member related taxes) enter into a merger and acquire or sell assets. | ||||||||||||||
Principal repayments, which are due quarterly on the last day of each calendar quarter, are as follows: | ||||||||||||||
Amount | ||||||||||||||
Remaining 2014 | $ | 625 | ||||||||||||
2015 | 5,625 | |||||||||||||
2016 | 41,875 | |||||||||||||
Total | $ | 48,125 | ||||||||||||
Credit Agreement | ||||||||||||||
On September 29, 2011, the Company entered into a credit agreement (“Credit Agreement”) with Wells Fargo Capital Finance, LLC (“WFCF”). Under the terms of the Credit Agreement, senior secured revolving loans are available up to $50,000, inclusive of $20,000 available for letters of credit. Revolving loans are subject to, among other things, the borrowing base, which is calculated monthly based on specified percentages of eligible accounts receivable and inventory and specified values of fixed assets. Under the Credit Agreement, the Company’s obligations are secured by a first-priority security interest in substantially all of its assets (other than intellectual property), including accounts receivable, inventory and certain other collateral, and a second-priority security interest in its intellectual property. The Credit Agreement matures on September 28, 2016. | ||||||||||||||
Borrowings under the Credit Agreement bear interest at a variable rate based on the London Inter-Bank Offered Rate (“LIBOR”), the Canadian Banker’s Acceptance Rate or the lender’s prime rate, as defined in the Credit Agreement, plus a spread. The interest rate spread on borrowing varies based on both the rate option selected and Colt’s quarterly average excess availability under the Credit Agreement. There is an unused line fee of .50% per annum, payable quarterly on the unused portion under the facility and a $40 annual servicing fee. | ||||||||||||||
On August 6, 2014, the Company entered into Amendment No. 5 to the Credit Agreement, whereby WFCF consented to, among other things, extending the delivery date to September 15, 2014 for the Company to deliver financial statements for the month and fiscal quarter ended June 29, 2014. | ||||||||||||||
The Credit Agreement limits the Company’s ability to incur additional indebtedness, make investments or certain payments, pay dividends (other than for member distributions to support member LLC-related taxes) and merge, acquire or sell assets. In addition, certain covenants would be triggered if excess availability were to fall below a specified level. Excess availability is determined as the lesser of our borrowing base or $50,000, reduced by outstanding obligations under the Credit Agreement and trade payables that are more than 60 days past due. Furthermore, if excess availability falls below $11,000 or an event of default occurs, the Company would be required to provide WFCF with more frequent compliance reporting and the WFCF may also assume certain other contractual privileges. The Credit Agreement contains customary events of default. As of June 29, 2014 and December 31, 2013, the Company was in compliance with all covenants and restrictions, as amended, and the Company monitors its future compliance based on current and anticipated financial results. | ||||||||||||||
As of June 29, 2014, there were advances of $13,500 and $3,906 of letters of credit outstanding under the Credit Agreement. As of December 31, 2013, there was a $7,083 line advance and $3,486 of letters of credit outstanding under the Credit Agreement. As of September 12, 2014, there were advances of $13,000 outstanding under the Credit Agreement. | ||||||||||||||
On March 22, 2013, the Company entered into Amendment No. 2 to the Credit Agreement, whereby, among other things, WFCF consented to the transaction pursuant to the Unit Repurchase Agreement. For additional information about this transaction, see Note 13, “Accumulated Deficit” in this Form 10-Q/A. | ||||||||||||||
On June 19, 2013, the Company entered into Amendment No. 3 to the Credit Agreement, whereby WFCF consented to the contribution of all the issued and outstanding equity interests issued by Colt Canada to Colt International so that Colt Canada would become a wholly-owned subsidiary of Colt International, and providing for Colt International to become a guarantor under the Credit Agreement. | ||||||||||||||
On July 12, 2013, the Company entered into Amendment No. 4 to the Credit Agreement, which provided for New Colt to become a guarantor and Colt’s Manufacturing Company LLC (“Colt’s Manufacturing”) to become a borrower under the Credit Agreement in connection with the Merger. | ||||||||||||||
Senior Notes | ||||||||||||||
On November 10, 2009, Colt Defense LLC and Colt Finance Corp., the Company’s 100%-owned subsidiary, jointly and severally co-issued $250,000 of unsecured senior notes (“Senior Notes”) under an indenture (“Indenture”). The Senior Notes bear interest at 8.75% and mature on November 15, 2017. Interest is payable semi-annually in arrears on May 15 and November 15. The Company issued the Senior Notes at a discount of $3,522 from par value. This discount is being amortized as additional interest expense over the life of the indebtedness. No principal repayments are required until maturity. | ||||||||||||||
The Senior Notes do not contain financial covenants that require the Company to maintain compliance with any financial ratios or measurements on a periodic basis. The Senior Notes do contain non-financial covenants that, among other things, limit the Company’s ability to incur additional indebtedness, enter into certain mergers or consolidations, incur certain liens and engage in certain transactions with its affiliates. In addition, the Indenture restricts the Company’s ability to pay dividends or make other Restricted Payments (as defined in the Indenture) to its members, subject to certain exceptions. Such restrictions are not expected to affect the Company’s ability to meet its cash obligations for the next twelve months. Additionally, the Senior Notes contain certain cross-default provisions with other indebtedness if such indebtedness in default aggregates to $20,000 or more. | ||||||||||||||
On June 19, 2013, the Company entered into a supplement to the Indenture by which Colt International, Colt Canada and CDTS became new subsidiary guarantors to the Senior Notes. As such, each agreed to jointly and severally guarantee the obligations under the Indenture. | ||||||||||||||
On July 12, 2013, the Company entered into a supplement to the Indenture, by which New Colt and Colt’s Manufacturing became parties to the Indenture and each agreed to jointly and severally guarantee the obligations under the Indenture. | ||||||||||||||
The outstanding loan balances at June 29, 2014 and December 31, 2013 were as follows: | ||||||||||||||
June 29, 2014 | December 31, 2013 | |||||||||||||
Senior Notes | $ | 248,204 | $ | 247,984 | ||||||||||
Term Loan | 46,601 | 46,833 | ||||||||||||
Credit Agreement | 13,500 | 7,083 | ||||||||||||
Total debt | 308,305 | 301,900 | ||||||||||||
Less: current portion | (14,125 | ) | (12,083 | ) | ||||||||||
Long-term debt | $ | 294,180 | $ | 289,817 | ||||||||||
Long-term debt was recorded net of unamortized original issue and debt discounts of $3,319 at June 29, 2014 and $3,932 at December 31, 2013. | ||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
June 29, 2014 | June 30, 2013 | June 29, 2014 | June 30, 2013 | |||||||||||
Amortization of discount | $ | 308 | $ | 102 | $ | 613 | $ | 206 | ||||||
Amortization of deferred financing costs | 604 | 414 | 1,211 | 828 | ||||||||||
Accrued_Expenses
Accrued Expenses | 6 Months Ended | |||||||
Jun. 29, 2014 | ||||||||
Accrued Expenses | ||||||||
Accrued Expenses | Note 10 Accrued Expenses | |||||||
Accrued expenses consisted of: | ||||||||
June 29, 2014 | December 31, 2013 | |||||||
(As Restated) | ||||||||
Accrued compensation and benefits | $ | 4,811 | $ | 7,154 | ||||
Accrued contract obligation expense | 2,411 | 1,194 | ||||||
Accrued federal, excise and other taxes | 3,009 | 4,902 | ||||||
Accrued interest | 4,111 | 2,879 | ||||||
Accrued commissions | 1,129 | 929 | ||||||
Other accrued expenses | 5,568 | 5,100 | ||||||
$ | 21,039 | $ | 22,158 |
Income_Taxes
Income Taxes | 6 Months Ended | |||||||||||||
Jun. 29, 2014 | ||||||||||||||
Income Taxes | ||||||||||||||
Income Taxes | Note 11 Income Taxes | |||||||||||||
Colt Defense is a limited liability company organized under the laws of Delaware. Colt Defense is treated as a partnership for federal and state income tax purposes and is not subject to U.S. federal or state income taxes. Consequently, all taxable income (loss) of Colt Defense is reported to its members for inclusion in their respective income tax returns. The limited liability company agreement of Colt Defense requires distributions to the members in any year in which there is U.S. taxable income. The member’s distribution is equal to the product of the highest combined marginal federal, state, or local income tax rate applicable to any member and the highest taxable income allocated to any one unit, to the extent that the Governing Board determines that sufficient funds are available. | ||||||||||||||
As a result of the Merger with New Colt effective July 12, 2013, Colt Defense owns 100% of New Colt, a C corporation organized under the laws of Delaware. New Colt is taxed as a corporation for U.S. federal and state income tax purposes. Through December 31, 2013, New Colt owned 100% of Colt’s Manufacturing, New Colt’s operating entity. | ||||||||||||||
Effective January 1, 2014 (see Note 1, “Nature of Business”), Colt Defense and New Colt each contributed their assets and operations to Colt’s Manufacturing. As a result, Colt Defense and New Colt collectively own 100% of Colt’s Manufacturing, the combined domestic operating entity of the Company. The Company estimated the fair value of the Colt Defense and New Colt contributions to determine the respective ownership percentages of Colt Defense and New Colt. The allocation of the fair value of the contributions to the individual assets and liabilities contributed is preliminary and subject to change. | ||||||||||||||
The combined operations of Colt’s Manufacturing are treated as a partnership for federal income tax purposes. Consequently, taxable income is computed at the partnership level to determine New Colt’s income tax expense and Colt Defense’s member distribution payable. In conjunction with the transaction, New Colt acquired a preferred investment in Colt’s Manufacturing and a common equity interest in exchange for its contribution. Colt Defense acquired the remaining common equity interest in exchange for its contribution. Since each member contributed assets, the Company is allocating the built in gain (the difference between fair market value and tax basis) back to the contributing member in accordance with a permitted method under Section 704(c) of the Internal Revenue Code. | ||||||||||||||
Colt Defense and CDTS, a wholly owned subsidiary, collectively own 100% of Colt International, a Dutch cooperatief. Colt International owns 100% of Colt Canada, a Canadian C corporation. The income (loss) of Colt Canada is subject to entity level Canadian federal and provincial taxes. On April 16, 2014, Colt Canada declared and paid a $2,000 dividend to Colt International. Under the terms of the treaty between Canada and The Netherlands, Colt Canada is required to withhold taxes on the dividends at a rate of 5%. | ||||||||||||||
The provision (benefit) for foreign income taxes is as follows: | ||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
June 29, 2014 | June 30, 2013 | June 29, 2014 | June 30, 2013 | |||||||||||
(As Revised) | (As Revised) | |||||||||||||
Current | $ | 141 | $ | 3 | $ | 52 | $ | 744 | ||||||
Deferred | (122 | ) | 75 | (119 | ) | 15 | ||||||||
Total | $ | 19 | $ | 78 | $ | (67 | ) | $ | 759 | |||||
New Colt has a partnership interest in Colt’s Manufacturing in which the book basis of New Colt’s assets and liabilities contributed exceeds the tax basis of those assets and liabilities. Therefore, New Colt has a deferred tax liability with respect to their partnership interest as of June 29, 2014. The requirement that the partnership use carryover basis with respect to the contributed assets resulted in the partnership’s basis in the assets being equal to New Colt’s investment in the partnership. | ||||||||||||||
A valuation allowance is established if it is more likely than not that all or a portion of the deferred tax asset will not be realized. A significant portion of the value of New Colt’s asset contribution was attributed to indefinite lived intangible assets. Consequently, the exclusion of the portion of the contribution related the indefinite lived intangible asset from the deferred tax liability associated with the partnership interest would put New Colt in a net deferred tax asset position. The Company has established that it is more likely than not that the full amount of New Colt’s deferred tax assets will not be recognized in future years. Consequently, New Colt continues to maintain a valuation allowance on its net deferred tax assets. | ||||||||||||||
Pension_and_Postretirement_Ben
Pension and Postretirement Benefits | 6 Months Ended | |||||||||||||
Jun. 29, 2014 | ||||||||||||||
Pension and Postretirement Benefits | ||||||||||||||
Pension and Postretirement Benefits | Note 12 Pension and Postretirement Benefits | |||||||||||||
As a result of the Merger in 2013, the Company had four noncontributory, domestic defined benefit pension plans (“Plans”) that covered substantially all eligible salaried and hourly U.S. employees. The bargaining unit Plans were combined on January 1, 2014 and the salaried Plans were combined on January 1, 2014. | ||||||||||||||
Effective December 31, 2012, the pension benefits under the two hourly defined benefit plans were frozen. The benefits under the two salaried defined benefit plans have been frozen since December 31, 2008. Accordingly, participants retain the pension benefits that have already accrued. However, no additional benefits have accrued since the effective date of the freeze. | ||||||||||||||
Pension expense for the New Colt plans is included in the amounts below from the Merger Date. | ||||||||||||||
The components of income recognized in the Company’s Consolidated Statements of Operations for pension plans are as follows: | ||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
June 29, 2014 | June 30, 2013 | June 29, 2014 | June 30, 2013 | |||||||||||
(As Revised) | (As Revised) | |||||||||||||
Interest cost | $ | 413 | $ | 277 | $ | 792 | $ | 550 | ||||||
Expected return on assets | (461 | ) | (365 | ) | (955 | ) | (730 | ) | ||||||
Amortization of unrecognized loss | 27 | 109 | 93 | 214 | ||||||||||
Net periodic cost (income) | $ | (21 | ) | $ | 21 | $ | (70 | ) | $ | 34 | ||||
The Company also provides certain postretirement health care coverage to retired U.S. employees who were subject to a collective bargaining agreement when they were employees. The cost of these postretirement benefits is determined actuarially and is recognized in the Company’s consolidated financial statements during the employees’ active working career. In connection with the Company’s collective bargaining agreement, it has capped certain retirees to approximately $250 (not in thousands) per employee per month. | ||||||||||||||
As a result of the Merger in 2013, the Company had two postretirement health care plans that applied to employees covered by the collective bargaining agreement. The postretirement health care plans were combined on April 1, 2014. Expense for the New Colt plan is included in the amounts below from the Merger Date. | ||||||||||||||
As a result of the workforce reduction in the second quarter of 2014 the Company recognized a $98 curtailment gain with respect to the Company’s postretirement health care plans. | ||||||||||||||
The components of cost recognized in the Company’s Consolidated Statements of Operations for postretirement health care coverage are as follows: | ||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
June 29, 2014 | June 30, 2013 | June 29, 2014 | June 30, 2013 | |||||||||||
Service cost | $ | 170 | $ | 162 | $ | 346 | $ | 226 | ||||||
Interest cost | 252 | 112 | 467 | 244 | ||||||||||
Curtailment of postretirement health plan | (98 | ) | — | (98 | ) | — | ||||||||
Amortization of unrecognized prior service costs | (33 | ) | (43 | ) | (76 | ) | (86 | ) | ||||||
Amortization of unrecognized loss | 57 | 51 | 66 | 122 | ||||||||||
Net periodic cost | $ | 348 | $ | 282 | $ | 705 | $ | 506 | ||||||
Accumulated_Deficit
Accumulated Deficit | 6 Months Ended |
Jun. 29, 2014 | |
Accumulated Deficit | |
Accumulated Deficit | Note 13 Accumulated Deficit |
Colt Defense’s authorized capitalization consists of 1,000,000 common units, which include 18,878 nonvoting Class B common units, and 250,000 preferred units. Common units issued and outstanding as of both June 29, 2014 and December 31, 2013 were 132,174. No Class B common units or preferred units have been issued. | |
On March 22, 2013, Colt Defense purchased 31,165.589 common units (“Unit Repurchase”) from Blackstone Mezzanine Partners II-A L.P. and Blackstone Mezzanine Holdings II USS L.P. (collectively, “Blackstone Funds”) (representing 100% of the Colt Defense common membership units held by the Blackstone Funds) for an aggregate purchase price of $14,000 pursuant to an equity purchase agreement, dated as of March 22, 2013 (“Unit Repurchase Agreement”), by and among Colt Defense and the Blackstone Funds. In accordance with the Unit Repurchase Agreement, upon consummation of the Unit Repurchase, the Blackstone Funds delivered the certificates representing the common units held by the Blackstone Funds to Colt Defense for cancellation, and the rights of the Blackstone Funds under the Amended and Restated LLC Agreement, including appointment rights with respect to Colt Defense’s Governing Board, were terminated. The Unit Repurchase Agreement provided customary releases and indemnities for Colt Defense and the Blackstone Funds. | |
On July 12, 2013, the Company issued and sold 31,165.589 of Colt Defense common units to certain new and existing holders for $9,000 of consideration, of which $5,000 was paid in cash and $4,000 was related to Merger consideration reinvested by certain New Colt investors into Colt Defense. The Company used the $9,000 of consideration, together with the proceeds from the Term Loan and cash on hand, to fund the Merger and pay related fees and expenses. | |
In the first quarter of 2014, and 2013, respectively, there were no tax distribution payments to members. During the second quarter of 2014, the Company made tax distribution payments to members of $683 along with State of Connecticut members’ withholding payments of $530, both of which were accrued for in 2013 based on our 2013 taxable income. In the second quarter of 2013, the Company made tax distributions to members of $1,357 and no distributions to the State of Connecticut. | |
Due to limitations on distributions to the Company’s members associated with the Company’s Term Loan, there was a $2,277 long term liability payable to members at June 29, 2014 and December 31, 2013, respectively. | |
Common_Unit_Compensation
Common Unit Compensation | 6 Months Ended |
Jun. 29, 2014 | |
Common Unit Compensation | |
Common Unit Compensation | Note 14 Common Unit Compensation |
On March 1, 2012, the Governing Board approved the Colt Defense Long Term Incentive Plan (the “Plan”). The purpose of the Plan is to advance the interests of Colt Defense and its equity holders by providing a means to attract, retain and motivate key employees, advisors and members of the Governing Board. Awards under the Plan may consist of options, restricted units, restricted phantom units, performance units or other unit-based awards. A total of 18,878 nonvoting Class B common units have been reserved for issuance in connection with awards under the Plan. | |
Under the Plan, the exercise price of option awards is set at the grant date and may not be less than the fair market value per unit on that date. The term of each option is ten years from the grant date. The vesting periods, which vary by grant, may be time based, performance based or a combination thereof. Compensation expense equal to the grant date fair value of the option is generally recognized over the period during which the employee is required to provide service in exchange for the award or as the performance obligation is met. Fair value of the option was estimated on the date of grant using the Black-Scholes valuation method. | |
In 2013, options were granted for 5,300 common units at a weighted-average exercise price of $288.78 (not in thousands). The Company’s common unit compensation expense, which is included in general and administrative expense in the consolidated statements of operations, was $65 and $1 for the three months ended June 29, 2014 and June 30, 2013, respectively. Common unit compensation expense was $82 and $0 for the six month periods ended June 29, 2014 and June 30, 2013, respectively. | |
Transactions_with_Related_Part
Transactions with Related Parties | 6 Months Ended | |||||||
Jun. 29, 2014 | ||||||||
Transactions with Related Parties | ||||||||
Transactions with Related Parties | Note 15 Transactions with Related Parties | |||||||
In July 2007, Colt Defense entered into a financial advisory agreement with Sciens Management LLC (“Sciens Management”), which through its affiliates, may be deemed to beneficially own a substantial portion of Colt Defense’s limited liability interests and whose managing member is also a member of Colt Defense’s Governing Board. Under the terms of the agreement, the Company paid Sciens Management an aggregate annual retainer of $350. In July 2013, Colt Defense entered into a consulting services agreement (“Consulting Agreement”) with Sciens Institutional Services LLC (“Sciens Institutional”), an affiliate of Sciens Management. Affiliates of Sciens Institutional beneficially own a substantial portion of Colt Defense’s limited liability interests and Sciens Institutional’s managing member is a member of Colt Defense’s Governing Board. Under the terms of the Consulting Agreement, Sciens Institutional provides consulting services to Colt Defense for an aggregate annual fee of $650, payable quarterly in advance. | ||||||||
The costs for the services provided and the related expenses under the agreements with Sciens Institutional and Sciens Management were recorded within general and administrative expenses in the consolidated statements of operations and were $250 and $108 for the three months ended June 29, 2014 and June 30, 2013, respectively. The Company’s cost for these services were $500 and $216 for the six months ended June 29, 2014 and June 30, 2013, respectively. | ||||||||
In July 2013, the Company entered into a services agreement (“Archives Agreement”) with Colt Archive Properties LLC (“Archives Properties”), one of the owners of which is a member of Colt Defense’s Governing Board and affiliates of which beneficially own a substantial portion of Colt Defense’s limited liability interests. Under the Archives Agreement, Colt agrees to provide designated employees to perform services for Archive Properties for an initial annual fee of $241, payable quarterly in arrears. The Company records revenue related to archive services as net sales and costs associated with providing archive services in cost of sales. | ||||||||
The Company leases its West Hartford facility from NPA Hartford LLC, a related party, for its corporate headquarters and primary manufacturing facility. The lease expires on October 25, 2015. For the three months ended June 29, 2014, and June 30, 2013, the rent expense under this lease was $210 and $206, respectively. Rent expense for the six months ended June 29, 2014 and June 30, 2013 was $421 and $412 respectively. | ||||||||
In addition, Colt Security LLC, a wholly owned subsidiary of Employee Plan Holding Corp., provides security guard services to the Company. | ||||||||
Prior to the Merger, transactions with New Colt were as follows: | ||||||||
Three Months | Six Months | |||||||
Ended | Ended | |||||||
June 30, 2013 | June 30, 2013 | |||||||
Net sales to New Colt | $ | 21,310 | $ | 43,835 | ||||
Purchases from New Colt | 892 | 1,887 | ||||||
Administration and services fees charged to New Colt | 442 | 883 | ||||||
Commitments_and_Contingencies
Commitments and Contingencies | 6 Months Ended | |||||||
Jun. 29, 2014 | ||||||||
Commitments and Contingencies | ||||||||
Commitments and Contingencies | Note 16 Commitments and Contingencies | |||||||
A summary of standby letters of credit issued principally in connection with performance and warranty bonds established for the benefit of certain international customers is as follows: | ||||||||
June 29, 2014 | December 31, 2013 | |||||||
Standby letters of credit secured by restricted cash | $ | 1,181 | $ | 1,185 | ||||
Standby letters of credit under Credit Agreement | 3,906 | 3,486 | ||||||
Guarantees of standby letters of credit established by a sales agent on behalf of Colt | 74 | 74 | ||||||
At June 29, 2014 and December 31, 2013, the Company had unconditional purchase obligations related to capital expenditures for machinery and equipment of $981 and $892, respectively. | ||||||||
The Company also had certain industrial cooperation agreements, which stipulate its commitments to provide offsetting business to certain countries that have purchased Colt’s products. Colt generally settles its offset purchase commitments under industrial cooperation agreements through offsetting business and/or cooperating with other contractors on their spending during the related period. Additionally, the Company identifies future purchases and other satisfaction plans for the remainder of the offset purchase commitment period. Should there be a projected net purchase commitment after such consideration; Colt accrues the estimated cost to settle the offset purchase commitment. | ||||||||
The Company’s remaining gross offset purchase commitment is the total amount of offset purchase commitments reduced for claims submitted and approved by the governing agencies. At June 29, 2014 and December 31, 2013, remaining gross offset purchase commitments totaled $64,937 and $64,131, respectively. The Company has evaluated the settlement of its remaining gross offset purchase commitments through probable planned spending and other probable satisfaction plans to determine the net offset purchase commitment. The Company has accrued $1,648 and $1,639 as of June 29, 2014 and December 31, 2013, respectively, based on the estimated cost of settling the remaining net offset purchase commitment. | ||||||||
During the year ended December 31, 2013, as restated, the Company recorded a contract obligation expense of $3,381, and an M240 Program contract modification of $6,820 (reduction of net sales), for an aggregate reduction in gross profit of $10,201 related to the Company’s M240 Program with the U.S. Government. The M240 Program contract obligation expense and the M240 Program contract modification, relate to estimated costs (contract obligation expense) to retrofit products previously sold to the U.S. Government as well as the incorporation of changes into the Company’s M240 Program product design and production processes and the reduced funding of (contract modification) the M240 Program. During the second quarter of 2014, based on additional available information, the Company reassessed the M240 Program accruals and determined that an incremental $4,779 M240 Program contract obligation expense was required. The second quarter expense related to $1,997 of inventory reserves and $2,782 of incremental costs related to M240 Program. The incremental contract obligation expense recorded was based on the Company’s best estimate of the costs to satisfy the M240 Program obligations given a range of possible outcomes. The Company believes that actual costs to satisfy this obligation may vary significantly from this revised estimate. As of June 29, 2014 and December 31, 2013, as restated, the Company had inventory reserves of $1,619 and $639, as revised, accrued contract obligation expenses of $3,550 and $1,194, of which $1,139 and $0 is included in other long-term liabilities, and deferred income of $6,820 and $6,820, respectively, included on the consolidated balance sheets related to the M240 Program. The Company expects to deliver new M240 units to the U.S. Government related to the contract modification and complete the retrofit of previously delivered units within the next twelve months, and accordingly; both the M240 Program accrued contract obligation and deferred revenue have been classified as current liabilities in the consolidated balance sheets. The Company revised its disclosure with respect to the Company's inventory reserves related to the M240 Program as of December 31, 2013 from $206 to $639. The Company does not consider the revision of this disclosure material. | ||||||||
During the second quarter of 2014, the Company agreed to a No-Cost Cancellation of the M249 contract with the U.S. Government. In connection with the cancellation, the Company recorded an expense of $480 which is included in cost of sales in the consolidated statements of operations. The $480 is comprised of a write-off of $344 of inventory and $136 of accruals for other liabilities associated with the program. | ||||||||
During the second quarter of 2014, the Company initiated actions which resulted in a workforce reduction of 24 salaried employees and 64 hourly employees. The severance expenses for the 24 salaried employees were included in operating income during the three months ended June 29, 2014 and amounted to $382. In addition, subsequent to June 29, 2014 the Company initiated an additional workforce reduction of nine salaried employees whose severance expenses amounted to $164 and was recorded in cost of sales in the third quarter of 2014. | ||||||||
The Company is involved in various legal claims and disputes in the ordinary course of business. The Company accrues for such liabilities when it is both (i) probable that a loss has occurred and (ii) the amount of the loss can be reasonably estimated in accordance with ASC 450, Contingencies. The Company evaluates, on a quarterly basis, developments affecting legal claims and disputes that could cause an increase or decrease in the amount of the liability that has been previously accrued. At this time, management does not anticipate any such loss would have a material adverse impact on the Company’s consolidated financial position, results of operations or cash flows. | ||||||||
During the three and six month periods ended June 29, 2014 and June 30, 2013, respectively, there were no material tax examinations. | ||||||||
In 2011, New Colt entered into a twelve year agreement with Osceola County in Florida to lease a 16,000 square foot facility in Kissimmee, Florida. This facility was renovated by the County at its cost and the building was made available for occupancy during 2012. There are no lease payments due during the initial five years of the lease and the annual cost of the lease will be $108 per year with the lease expiring on January 15, 2023. The lease expense is being accounted for on a straight-line basis, with an annual charge of $78 being incurred over the term of the lease. At June 29, 2014 and December 31, 2013, deferred lease expense was $75 and $36, respectively. In connection with the lease, the Company was required to hire a minimum number of employees commencing in 2013. As of June 29, 2014, the Company had not occupied the Florida facility and had not hired any employees. The Company has accrued a contractual penalty of $75 and $50 at June 29, 2014 and December 31, 2013, respectively, for not meeting the minimum hiring requirement. In addition, the State of Florida contributed $250 of funds to the Osceola County to assist with the cost of the renovations. The Company is responsible for making a minimum capital investment of $2,500, of which $181 had been made through both June 29, 2014 and December 31, 2013, respectively. |
Segment_Information
Segment Information | 6 Months Ended | |||||||||||||
Jun. 29, 2014 | ||||||||||||||
Segment Information | ||||||||||||||
Segment Information | Note 17 Segment Information | |||||||||||||
As a result of the Merger (see Note 3, “Acquisition”), the two manufacturers of Colt firearms were consolidated into a single enterprise providing the Company with direct access to the commercial market for Colt rifles and carbines, ownership of the Colt brand name and other related trademarks and the technology and production facilities for the full line of Colt handguns. As of June 29, 2014 and December 31, 2013, the Company’s operations are conducted through two segments, firearms and spares/other. These operating segments have similar characteristics and have been aggregated into the Company’s only reportable segment. The firearms segment designs, develops, and manufactures firearms for domestic and international military and law enforcement markets as well as the domestic and international commercial markets. The spares and other segment primarily provides spare parts and kits and accessories for domestic and international military and law enforcement markets as well as domestic and international commercial markets. Other activities are de minimus and consist of product service, archive service, training and royalties from the license of the Colt brand and related trademarks. | ||||||||||||||
Adjusted EBITDA consists of income (loss) before interest, income taxes, depreciation and amortization and other expenses as noted below. Management uses Adjusted EBITDA to evaluate the financial performance of the business and to make operating decisions. See the footnotes that follow the reconciliation tables below for additional information regarding the adjustments made to arrive at Adjusted EBITDA. | ||||||||||||||
The following table represents a reconciliation of net income (loss) to Adjusted EBITDA: | ||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
Statement of Operations Data: | June 29, 2014 | June 30, 2013 | June 29, 2014 | June 30, 2013 | ||||||||||
(As Revised) | (As Revised) | (As Revised) | (As Revised) | |||||||||||
Net income (loss) | $ | (12,589 | ) | $ | 4,387 | $ | (20,535 | ) | $ | 9,516 | ||||
Income tax (benefit) expense | 19 | 78 | (67 | ) | 759 | |||||||||
Depreciation and amortization (i) | 2,369 | 1,206 | 4,649 | 2,368 | ||||||||||
Interest expense, net | 7,859 | 6,069 | 15,543 | 12,063 | ||||||||||
Sciens fees and expenses (ii) | 250 | 108 | 500 | 216 | ||||||||||
Transaction costs (iii) | — | 416 | — | 416 | ||||||||||
Restructuring costs (iv) | (76 | ) | — | (76 | ) | — | ||||||||
M240 Program contract obligation expense (v) | 4,779 | — | 5,090 | — | ||||||||||
Business development costs (vi) | 9 | 169 | 509 | 244 | ||||||||||
Severance costs (vii) | 382 | — | 527 | — | ||||||||||
Other (income)/expense, net (viii) | (42 | ) | (199 | ) | (113 | ) | (590 | ) | ||||||
Adjusted EBITDA | $ | 2,960 | $ | 12,234 | $ | 6,027 | $ | 24,992 | ||||||
(i) Includes depreciation and amortization of intangible assets. | ||||||||||||||
(ii) Includes fees and expenses pursuant to the Company’s agreements with Sciens Management and Sciens Institutional. | ||||||||||||||
(iii) Non-recurring costs associated with the July 12, 2013 acquisition of New Colt. | ||||||||||||||
(iv) Includes costs related to the Merger, including severance, continuation of benefits, and other. See Note 4 “Restructuring Costs.” | ||||||||||||||
(v) Expenses related to Company’s M240 Program. See Note 16 “Commitments and Contingencies.” | ||||||||||||||
(vi) Includes transaction costs incurred in connection with contemplated acquisition activities. | ||||||||||||||
(vii) Includes non-recurring severance costs. | ||||||||||||||
(viii) Includes income and/or expenses such as foreign currency exchange gains or losses and other less significant charges not related to on-going operations. | ||||||||||||||
Product Information | ||||||||||||||
The following table shows net sales for the three and six months ended June 29, 2014 and June 30, 2013, as revised, by product category. The table includes the results of New Colt from the Merger Date. After intercompany sales eliminations, the New Colt acquisition provided $19.3 and $36.4 million of incremental sales for the three months and six months ended June 29, 2014, respectively. | ||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
June 29, 2014 | June 30, 2013 | June 29, 2014 | June 30, 2013 | |||||||||||
(As Revised) | (As Revised) | |||||||||||||
Long guns | $ | 15,870 | $ | 53,599 | $ | 40,307 | $ | 105,870 | ||||||
Handguns | 18,570 | 1,260 | 33,890 | 2,521 | ||||||||||
Spares and other | 15,193 | 9,353 | 25,516 | 19,670 | ||||||||||
Total | $ | 49,633 | $ | 64,212 | $ | 99,713 | $ | 128,061 | ||||||
Geographical Information | ||||||||||||||
Geographic external revenues are attributed to the geographic regions based on the customer’s location of origin. Colt’s net sales in the United States include revenues that arise from sales to the U.S. Government under its Foreign Military Sales (“FMS”) program, which involves product that is resold by the U.S. Government to foreign governments and generally shipped directly to the foreign government by the Company. | ||||||||||||||
The table below presents net sales for the three and six months ended June 29, 2014 and June 30, 2013, as revised, for specific geographic regions: | ||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
June 29, 2014 | June 30, 2013 | June 29, 2014 | June 30, 2013 | |||||||||||
(As Revised) | (As Revised) | |||||||||||||
United States | $ | 31,725 | $ | 38,985 | $ | 73,220 | $ | 74,693 | ||||||
Canada | 3,960 | 4,202 | 8,317 | 14,953 | ||||||||||
Latin America/Caribbean | 1,185 | 43 | 2,970 | 1,044 | ||||||||||
Middle East/Africa | 1,609 | 532 | 3,333 | 570 | ||||||||||
Europe | 5,309 | 3,272 | 5,733 | 4,603 | ||||||||||
Asia/Pacific | 5,845 | 17,178 | 6,140 | 32,198 | ||||||||||
$ | 49,633 | $ | 64,212 | $ | 99,713 | $ | 128,061 | |||||||
Long-lived assets are net fixed assets attributed to specific geographic regions: | ||||||||||||||
June 29, 2014 | December 31, 2013 | |||||||||||||
United States | $ | 24,307 | $ | 25,745 | ||||||||||
Canada | 4,744 | 4,988 | ||||||||||||
$ | 29,051 | $ | 30,733 | |||||||||||
Major Customer Information | ||||||||||||||
For the three and six months ended June 29, 2014, no foreign customer accounted for more than 10% of net sales. For the three months ended June 30, 2013, one foreign direct customer accounted for 24% of net sales and for the six months ended June 30, 2013, two foreign direct customers accounted for 24% and 11% of net sales, respectively. | ||||||||||||||
For the three and six months ended June 30, 2013, sales to Colt’s Manufacturing, represented 33% and 34% of net sales, respectively. | ||||||||||||||
For the three months ended June 29, 2014, no commercial customers accounted for more than 10% of net sales and for the six months ended June 29, 2014, no commercial customers accounted for more than 10% of net sales. For the three and six months ended March 31, 2013 (prior to the Merger), sales to New Colt accounted for 35% of net sales. | ||||||||||||||
For the three months and six months ended June 29, 2014, sales to the U.S. Government accounted for 5.8% and 6.2%, respectively, of net sales. For the three and six months ended June 30, 2013, sales to the U.S. Government accounted for 13% of net sales. | ||||||||||||||
Concentration_of_risk
Concentration of risk | 6 Months Ended |
Jun. 29, 2014 | |
Concentration of risk | |
Concentration of risk | Note 18 Concentration of risk |
Accounts Receivable | |
Financial instruments, which potentially subject the Company to concentration of credit risk, consist primarily of accounts receivable. At June 29, 2014, the two largest individual trade receivable balances accounted for 23% and 19% of total accounts receivable, respectively. At December 31, 2013, the two largest individual trade receivable balances accounted for 28% and 18% of total accounts receivable, respectively. | |
Labor | |
The United Automobile, Aerospace & Agricultural Implements Workers of America (the “Union”) represents the Company’s West Hartford work force pursuant to a collective bargaining agreement that expired on March 31, 2019. The Union represents approximately 72% of Colt’s U.S. workforce. On March 30, 2014, Colt Defense through its domestic operating subsidiary Colt’s Manufacturing reached tentative agreement with UAW Local 376 for a new five year contract covering approximately 529 employees, which was ratified by the union membership on March 31, 2014. The new contract will be in effect from April 1, 2014 through March 31, 2019. | |
Fair_Value_of_Financial_Instru
Fair Value of Financial Instruments | 6 Months Ended |
Jun. 29, 2014 | |
Fair Value of Financial Instruments | |
Fair Value of Financial Instruments | Note 19 Fair Value of Financial Instruments |
The fair value of an asset or liability is the amount at which the instrument could be exchanged or settled in a current transaction between willing parties where neither is compelled to buy or sell. The carrying values for cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and other current assets and liabilities approximate their fair value due to their short maturities. The carrying value of the Company’s long-term debt of $294,180 and $294,817 at June 29, 2014 and December 31, 2013, respectively, was recorded at amortized cost. The estimated fair value of long-term debt was approximately $247,359 and $262,775 at June 29, 2014 and December 31, 2013, respectively. The fair value of the Senior Notes was based on quoted market prices, which are Level 1 inputs and the fair value of the Term Loan was based on Level 3 inputs. | |
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The inputs used to measure fair value fall into the following hierarchy: | |
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. | |
As of June 29, 2014 and December 31, 2013, the Company did not have any financial assets and liabilities reported at fair value and measured on a recurring basis or any significant nonfinancial assets or nonfinancial liabilities. Therefore, Colt did not have any transfers of assets and liabilities between Level 1 and Level 2 of the fair value measurement hierarchy during the six months ended June 29, 2014. | |
Accumulated_Other_Comprehensiv
Accumulated Other Comprehensive Loss | 6 Months Ended | |||||||||||||
Jun. 29, 2014 | ||||||||||||||
Accumulated Other Comprehensive Loss | ||||||||||||||
Accumulated Other Comprehensive Loss | Note 20 Accumulated Other Comprehensive Loss | |||||||||||||
The components of accumulated other comprehensive loss were as follows: | ||||||||||||||
Unrecognized | Foreign | |||||||||||||
Prior Service | Unrecognized | Currency | ||||||||||||
Cost | Loss | Translation | Total | |||||||||||
Balance, December 31, 2012 | $ | 825 | $ | (17,399 | ) | $ | 2,732 | $ | (13,842 | ) | ||||
Other comprehensive income before reclassifications | — | — | — | — | ||||||||||
Amounts reclassified from accumulated other comprehensive income | (86 | ) | 336 | — | 250 | |||||||||
Currency translation | — | — | (1,611 | ) | (1,611 | ) | ||||||||
Net current period other comprehensive income | (86 | ) | 336 | (1,611 | ) | (1,361 | ) | |||||||
Balance, June 30, 2013 | $ | 739 | $ | (17,063 | ) | $ | 1,121 | $ | (15,203 | ) | ||||
Balance, December 31, 2013 | $ | 653 | $ | (10,836 | ) | $ | 843 | (9,340 | ) | |||||
Other comprehensive income before reclassifications | (97 | ) | (1,453 | ) | — | (1,550 | ) | |||||||
Amounts reclassified from accumulated other comprehensive income | (76 | ) | 159 | — | 83 | |||||||||
Currency translation | — | — | (140 | ) | (140 | ) | ||||||||
Net current period other comprehensive income | (173 | ) | (1,294 | ) | (140 | ) | (1,607 | ) | ||||||
Balance, June 29, 2014 | $ | 480 | $ | (12,130 | ) | $ | 703 | $ | (10,947 | ) | ||||
Amounts are on a before-tax basis. | ||||||||||||||
Subsequent_Event
Subsequent Event | 6 Months Ended |
Jun. 29, 2014 | |
Subsequent Event | |
Subsequent Event | Note 21 Subsequent Event |
Employment Matters | |
On July 3, 2014, Jeff Grody, Senior Vice President, General Counsel, resigned from the Company. On that date, the Company, and Mr. Grody entered into a severance agreement under which Mr. Grody has agreed to continue to provide certain services to the Company, through July 3, 2015. The full value of Mr. Grody’s severance agreement has been expensed and is included in operating income in the third quarter of 2014. Mr. John Coghlin succeeded Mr. Grody as Senior Vice President and General Counsel on July 7, 2014. | |
Going Concern Uncertainty Disclosure | |
The Company’s financial statements are presented in this report on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has experienced liquidity challenges as a result of several business trends including the continued decline in market demand for the Company’s commercial modern sporting rifle (“MSR”), declines in demand for the Company’s commercial handguns and delays in anticipated timing of U.S. Government and certain international sales. These business trends will continue to adversely impact the Company’s operations. These factors have materially affected the Company’s liquidity, including its ability to repay existing indebtedness as it becomes due and to meet other current obligations, including, as discussed below, the probability that the Company will not be able to make its May 15, 2015 Senior Notes interest payment prior to the grace period deadline of June 14, 2015. As of May 29, 2015 we have not made our Senior Notes interest payment due May 15, 2015. In addition, the Company is also not in compliance under the Indenture governing its Senior Notes because it has not yet filed its Annual Report on Form 10-K for the fiscal year ended December 31, 2014 or its Quarterly Report on Form 10-Q for the fiscal quarter ended April 5, 2015. In the event that the Company receives a notice from the trustee under the Indenture governing our Senior Notes or holders of at least 25% of the aggregate principal amount of its Senior Notes and does not cure such non-compliance within 60 days from the receipt of such notice, the principal and accrued and unpaid interest on its outstanding Senior Notes may be accelerated. As of May 29, 2015 the Company has not received such notice. The Company is otherwise in compliance with financial and other covenants contained in its existing debt agreements, but it may not be able to maintain compliance with such financial and other covenants in the future. These factors raise substantial doubt about the Company’s ability to continue as a going concern. | |
Management’s plan to mitigate the business risk associated with the Company’s increased liquidity challenges include: (i) seeking revenue growth across all sales channels, (ii) executing initiatives designed to optimize the Company’s performance and reduce costs, (iii) managing inventory levels for positive cash flow, (iv) working closely with U.S. Government regulators to obtain timely approval of international sales and (v) seeking ways to restructure the Company’s unsecured debt to reduce overall debt service costs. There can be no assurance of the Company's success in these efforts. In conjunction with the Company’s plan to restructure its unsecured debt, the Company announced on April 14, 2015 that it has commenced an exchange offer for its Senior Notes. See “Restructuring Transaction” below. | |
Refinancing of $70 Million Senior Secured Term Loan | |
On November 17, 2014, the Company entered into a $70.0 million senior secured term loan facility with Wilmington Savings Fund Society, FSB, as agent, and Morgan Stanley Senior Funding Inc., as lender, (the “MS Term Loan”) which replaced the Company’s former Term Loan agreement (see Note 6 “Notes Payable and Long-Term Debt — Term Loan”) and provided the Company a net amount of $4.1 million of additional liquidity. The $70 million of proceeds from the MS Term Loan were disbursed as follows: $53.0 million for repayment of the Company’s former Term Loan principal, interest and premium, $10.9 million for its Senior Notes interest payment paid on November 17, 2014, $2.0 million for fees and expenses associated with the MS Term Loan and $4.1 million of net proceeds remitted to the Company for additional liquidity. The MS Term Loan (i) does not contain financial covenants or amortization provisions similar to those provisions in the Company’s former Term Loan agreement; (ii) provides for the accrual of interest on an 8% cash and 2% payment-in-kind basis; and (iii) will mature no later than August 15, 2018 subject to the satisfaction of certain conditions. The former Term Loan agreement did not permit pre-payment at such time and thus, the Company agreed with the former Term Loan lenders to pay a premium of $4.3 million in addition to the outstanding principal and accrued interest balances. | |
The lenders under the Company’s former Credit Agreement also agreed to amendments to the Credit Agreement (see Note 6 “Notes Payable and Long-Term Debt”) necessary for the Company to enter into the MS Term Loan. These amendments included, among other things, (i) reducing the senior secured revolving loans available from $50.0 million to $33.0 million and (ii) incorporating a minimum $7.5 million excess availability threshold for borrowings. The former Credit Agreement also contained customary events of default including, but not limited to, no material litigation or defaults under material contracts and no material adverse change. In connection with any borrowing requests, management must certify, among other things, to no default or event of default. | |
The MS Term Loan also contained a covenant requiring the Company to deliver audited financial statements within 90 days following each fiscal year, together with an audit opinion that does not contain a “going concern” explanatory paragraph. | |
The Company entered into Amendment No. 1 to the MS Term Loan on December 16, 2014 waiving the requirement that the consolidated financial statements for the year ended December 31, 2013 does not contain an audit opinion that contains a “going concern” or like qualification or exception in connection with the filing of its 2013 Form 10-K/A. | |
The Company entered into Amendment No 2 to the MS Term Loan on February 9, 2015 which allows the consolidated financial statements for the years ended December 31, 2013, 2014 and 2015 to contain an audit opinion that contains a “going concern” or like qualification or exception in connection with the filing of the 2013 Form 10-K/A and the 2014 and 2015 Form 10-K. | |
Refinancing of $33 Million Senior Secured Term Loan Facility | |
On February 9, 2015, the Company entered into a credit agreement (“Cortland Credit Agreement”) dated as of February 9, 2015 with Cortland Capital Market Services LLC (“Cortland”) as agent, and certain lenders party thereto from time to time. The Cortland Credit Agreement provides for a term loan of $33.0 million, which includes the arrangement of certain cash collateralized letters of credit in an aggregate face amount of up to $7.0 million. Under the Cortland Credit Agreement, the Company’s obligations are secured by a first-priority security interest in substantially all of its assets (other than intellectual property), including accounts receivable, inventory and certain other collateral, and a second-priority security interest in its intellectual property. The Cortland Credit Agreement provides for the accrual of interest at a fixed rate of 10% per annum and matures August 15, 2018. The Cortland Credit Agreement limits the Company’s ability to incur additional indebtedness, make certain investments or restricted payments, pay dividends (other than for member distributions to support member LLC-related taxes) and merge, acquire or sell assets. The Cortland Credit Agreement requires the Company to comply with financial covenants which primarily relate to maintaining a minimum amount of collateral (measured as the sum of cash and cash equivalents, inventory and accounts receivable, each as determined in accordance with the Cortland Credit Agreement) and a minimum amount of inventory. As of the date of this form 10-K/A, the Company is in compliance with the minimum collateral and minimum inventory covenants. | |
The Cortland Credit Agreement also contains customary events of default including, but not limited to, no material litigation or defaults under material contracts and no material adverse change. | |
The $33.0 million of proceeds from the Cortland Credit Agreement were disbursed as follows: $12.1 million were used to repay all amounts outstanding under the Company’s former Credit Agreement dated as of September 29, 2011 with Wells Fargo Capital Finance, LLC, $5.3 million for cash collateral for certain letters of credit, $2.4 million to pay fees incurred in connection with the consummation of the Cortland Credit Agreement and the termination of the former Credit Agreement and $13.2 million for additional liquidity and for general working capital purposes. | |
The former Credit Agreement and all commitments to lend thereunder were terminated on February 9, 2015. At that time, the Company had approximately $4.8 million of outstanding letters of credit under the former Credit Agreement. Approximately $5.3 million of proceeds from the Cortland Credit Agreement were utilized to collateralize letters of credit arranged by Cortland, which backed the outstanding letters of credit under the former Credit Agreement and the availability of cash collateralized letters of credit under the Cortland Credit Agreement was reduced to approximately $1.7 million. | |
The lenders under the Company’s existing MS Term Loan dated as of November 17, 2014 agreed to amendments to the MS Term Loan necessary for the Company to enter into the Cortland Credit Agreement. Such amendments were effective on February 9, 2015. | |
Restructuring Transaction | |
On April 14, 2015, the Company commenced an exchange offer (the “Exchange Offer”) and consent solicitation of its Senior Notes and a solicitation of acceptances to a prepackaged plan of reorganization (the “Prepackaged Plan”). On May 26, 2015 the Company announced an extension of our Exchange Offer and solicitation of acceptances to the Prepackaged Plan until June 2, 2015 as the Company is in discussions with an ad hoc group of holders of the Senior Notes. | |
The Exchange Offer will offer the Company’s 10.0% Junior Priority Senior Secured Notes due 2023 (the “New Notes”) and related guarantees for any and all outstanding Senior Notes. Holders of the Senior Notes will be offered New Notes in the amount of $300, plus accrued and unpaid interest, per $1,000 principal amount of Senior Notes (not in thousands). In addition, holders of the Senior Notes who validly tender their Senior Notes and validly vote to accept the Prepackaged Plan prior to 5:00pm, New York City time, on June 2, 2015, will receive an additional consent payment of $50 per $1,000 principal amount of Senior Notes (not in thousands). The New Notes will mature on November 15, 2023. Interest on the New Notes will accrue from the issue date of the New Notes at the rate of 10.00% per annum in cash. | |
The closing of the Exchange Offer is conditioned upon, among other things, the valid tender of no less than 98% of the aggregate principal amount of Senior Notes. In the event that the conditions to the Exchange Offer are not satisfied and such conditions are not waived by the Company, the Company would need to determine whether it would be more advantageous to file petitions under Chapter 11 of the Bankruptcy Code to consummate the Prepackaged Plan. Therefore, the Company and its subsidiaries are simultaneously soliciting holders of the Senior Notes to approve the Prepackaged Plan as an alternative to the Exchange Offer. If the restructuring is accomplished through the Prepackaged Plan, 100% of the Senior Notes, plus accrued and unpaid interest, will be cancelled and holders of the Senior Notes will receive their pro rata share of the New Notes. The Company and its subsidiaries, however, have not made any affirmative decision to proceed with any bankruptcy filing at this time. | |
Consummation of the Prepackaged Plan through an in-court restructuring would have principally the same effect as if 100% of the holders of Senior Notes had tendered their Senior Notes in the Exchange Offer, except a consent payment, if any, will only be payable upon successful completion of the Exchange Offer. To obtain requisite acceptance of the Prepackaged Plan by virtue of the Bankruptcy Code’s plan confirmation requirements, holders of the Senior Notes representing at least two-thirds in amount and more than one half in number of those who actually vote must accept the Prepackaged Plan. | |
If the Exchange Offer or the Prepackaged Plan is not consummated for any reason, the Company may need to seek relief under the Bankruptcy Code without the benefit of a plan of reorganization that has been pre-approved by its creditors. The Company believes that seeking relief under the Bankruptcy Code, other than in connection with the Prepackaged Plan, could materially and adversely affect the relationships between the Company and its existing and potential customers, employees, partners and other stakeholders and subject it to other direct and indirect adverse consequences. | |
Summary_of_Significant_Account1
Summary of Significant Accounting Policies (Policies) | 6 Months Ended | |||||||||||||||||||
Jun. 29, 2014 | ||||||||||||||||||||
Summary of Significant Accounting Policies | ||||||||||||||||||||
Restatement of Previously Issued Consolidated Financial Statements | Restatement of Previously Issued Consolidated Financial Statements | |||||||||||||||||||
In the Company’s 2013 Annual Report on Form 10-K/A filed September 15, 2014, it restated its previously issued consolidated financial statements and the related disclosures for the year ended December 31, 2013 (the “Restated Period”). The Company also revised the unaudited interim financial statements for the first quarter of the fiscal year ended December 31, 2014, first three quarters in the fiscal year ended December 31, 2013 and the fourth quarter in the fiscal year ended December 31, 2012 (the “Revised Periods”). | ||||||||||||||||||||
The restatement is the result of the Company’s correction of a financial statement error attributable to the lack of recognition of the impact of a contract modification related to the M240 Program for the U.S. Government in the Company’s fourth quarter 2013 results. There was no impact to the Company’s net sales or cost of sales in the three and six month periods ended June 30, 2013 related to the M240 Program error. In conjunction with the correction of the M240 Program error, other previously identified, immaterial out-of-period adjustments were also adjusted to be reflected in the proper period, along with the reclassification of business development expenses from other expense (income) to operating income. Correction of these previously recorded, immaterial out-of-period adjustments had the combined effect on the consolidated statements of operations for the three and six month periods ended June 30, 2013 of increasing net income by $229 and $288, respectively. | ||||||||||||||||||||
The impacts of correcting the previously recorded, immaterial out-of-period adjustments and the reclassification of business development expenses for the three and six month periods ended June 30, 2013 were as follows (“in thousands”): | ||||||||||||||||||||
Adjustments to | ||||||||||||||||||||
Previously Reported Income | ||||||||||||||||||||
Statement - Income / (Expense) | ||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||
For the years ended | June 30, 2013 | June 30, 2013 | ||||||||||||||||||
Net sales | $ | (23 | ) | (23 | ) | |||||||||||||||
Cost of sales | 65 | 79 | ||||||||||||||||||
Gross profit | (88 | ) | (102 | ) | ||||||||||||||||
Selling and commissions (A) | (130 | ) | (209 | ) | ||||||||||||||||
Research and development | 1 | 2 | ||||||||||||||||||
General and administrative (B) | (222 | ) | (217 | ) | ||||||||||||||||
Business development (C) | 169 | 244 | ||||||||||||||||||
Operating income | 94 | 78 | ||||||||||||||||||
Other (income) / expense (C) | (192 | ) | (267 | ) | ||||||||||||||||
Income tax expense | 57 | 57 | ||||||||||||||||||
Net income (loss) (B) | 229 | 288 | ||||||||||||||||||
(A) Primarily relates to the reclassification of $132 of armorers training expenses from selling and commissions to cost of sales. | ||||||||||||||||||||
(B) Primarily relates to the timing of recognition of certain professional fees. | ||||||||||||||||||||
(C) Primarily relates to the reclassification of transaction costs incurred in connection with contemplated merger and acquisition activities from other expense/(income) to business development. | ||||||||||||||||||||
In addition, the Company identified an error in its Consolidated Statement of Changes in Cash Flows for the six months ended June 29, 2014. To correct for such error, the Company has revised the Statement of Changes in Cash Flows to correct for the $196 misclassification between depreciation and amortization and purchases of property and equipment. The impact of correcting the error is an increase in cash used in operations and a decrease in cash used in investing activities of $196. The impact of the error was not material to the previously issued financial statements. | ||||||||||||||||||||
The Company’s previously filed Annual Reports on Form 10-K for the year ended December 31, 2012 and Quarterly Reports on Form 10-Q for the Revised Periods will not be amended. | ||||||||||||||||||||
Comparison of revised financial statements to financial statements as previously reported | ||||||||||||||||||||
The following tables compare our previously reported Consolidated Statements of Operations, Comprehensive Income (Loss) and Changes in Cash Flows for the quarter ended June 29, 2013 to the corresponding financial statements for the quarterly period as revised. | ||||||||||||||||||||
Colt Defense LLC and Subsidiaries | ||||||||||||||||||||
Consolidated Statement of Operations | ||||||||||||||||||||
(In thousands of dollars) | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
Three months ended June 30, 2013 | Six months ended June 30, 2013 | |||||||||||||||||||
As Revised | As Revised | |||||||||||||||||||
As | in this Quarterly | As | in this Quarterly | |||||||||||||||||
Previously | Report on | Previously | Report on | |||||||||||||||||
Reported | Adjustments | Form 10-Q | Reported | Adjustments | Form 10-Q | |||||||||||||||
Net sales | $ | 64,235 | $ | (23 | ) | $ | 64,212 | $ | 128,084 | $ | (23 | ) | $ | 128,061 | ||||||
Cost of sales | 45,765 | 65 | 45,830 | 90,863 | 79 | 90,942 | ||||||||||||||
Gross Profit | 18,470 | (88 | ) | 18,382 | 37,221 | (102 | ) | 37,119 | ||||||||||||
Operating expenses: | ||||||||||||||||||||
Selling and commissions | 3,582 | (130 | ) | 3,452 | 6,756 | (209 | ) | 6,547 | ||||||||||||
Research and development | 1,480 | 1 | 1,481 | 2,299 | 2 | 2,301 | ||||||||||||||
General and administrative | 3,237 | (222 | ) | 3,015 | 6,962 | (217 | ) | 6,745 | ||||||||||||
8,299 | (351 | ) | 7,948 | 16,017 | (424 | ) | 15,593 | |||||||||||||
Business development | — | 169 | 169 | — | 244 | 244 | ||||||||||||||
Certain transaction costs | 416 | — | 416 | 416 | — | 416 | ||||||||||||||
Total operating expenses | 8,715 | (182 | ) | 8,533 | 16,433 | (180 | ) | 16,253 | ||||||||||||
Operating income | 9,755 | 94 | 9,849 | 20,788 | 78 | 20,866 | ||||||||||||||
Other expense/(income): | ||||||||||||||||||||
Interest expense | 6,069 | — | 6,069 | 12,063 | — | 12,063 | ||||||||||||||
Other (income)/expense, net | (493 | ) | (192 | ) | (685 | ) | (1,205 | ) | (267 | ) | (1,472 | ) | ||||||||
Total other expenses, net | 5,576 | (192 | ) | 5,384 | 10,858 | (267 | ) | 10,591 | ||||||||||||
Income (loss) before provision for income taxes | 4,179 | 286 | 4,465 | 9,930 | 345 | 10,275 | ||||||||||||||
Income tax expense | 21 | 57 | 78 | 702 | 57 | 759 | ||||||||||||||
Net income (loss) | $ | 4,158 | $ | 229 | $ | 4,387 | $ | 9,228 | $ | 288 | $ | 9,516 | ||||||||
Colt Defense LLC and Subsidiaries | ||||||||||||||||||||
Consolidated Statements of Comprehensive Income (Loss) | ||||||||||||||||||||
(In thousands of dollars) | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
For the Three Months Ended June 30, 2013 | ||||||||||||||||||||
As Revised | ||||||||||||||||||||
As | in this Quarterly | |||||||||||||||||||
Previously | Report on | |||||||||||||||||||
Reported | Adjustments | Form 10-Q | ||||||||||||||||||
Net income (loss) | $ | 4,158 | $ | 229 | $ | 4,387 | ||||||||||||||
Other comprehensive income (loss), net of tax: | ||||||||||||||||||||
Foreign currency translation adjustment: | ||||||||||||||||||||
Foreign currency translation gains (losses) | (1,020 | ) | (15 | ) | (1,035 | ) | ||||||||||||||
Pension and postretirement benefit liabilities: | ||||||||||||||||||||
Other comprehensive income (loss) arising during the period | — | — | — | |||||||||||||||||
Reclassification adjustment for unrecognized prior service costs and unrecognized loss included in net income (loss) | 117 | — | 117 | |||||||||||||||||
117 | — | 117 | ||||||||||||||||||
Comprehensive income (loss) | $ | 3,255 | $ | 214 | $ | 3,469 | ||||||||||||||
Consolidated Statements of Comprehensive Income (Loss) | ||||||||||||||||||||
(In thousands of dollars) | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
For the Six Months Ended June 30, 2013 | ||||||||||||||||||||
As Revised | ||||||||||||||||||||
As | in this Quarterly | |||||||||||||||||||
Previously | Report on | |||||||||||||||||||
Reported | Adjustments | Form 10-Q | ||||||||||||||||||
Net income (loss) | $ | 9,228 | $ | 288 | $ | 9,516 | ||||||||||||||
Other comprehensive income (loss), net of tax: | ||||||||||||||||||||
Foreign currency translation adjustment: | ||||||||||||||||||||
Foreign currency translation gains (losses) | (1,597 | ) | (14 | ) | (1,611 | ) | ||||||||||||||
Pension and postretirement benefit liabilities: | ||||||||||||||||||||
Other comprehensive income (loss) arising during the period | — | — | — | |||||||||||||||||
Reclassification adjustment for unrecognized prior service costs and unrecognized loss included in net income (loss) | 250 | — | 250 | |||||||||||||||||
250 | — | 250 | ||||||||||||||||||
Comprehensive income (loss) | $ | 7,881 | $ | 274 | $ | 8,155 | ||||||||||||||
Colt Defense LLC and Subsidiaries | ||||||||||||||||||||
Consolidated Statement of Changes in Cash Flows | ||||||||||||||||||||
(In thousands of dollars) | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
For the Six Months Ended June 30, 2013 | ||||||||||||||||||||
As Revised | ||||||||||||||||||||
As | in this Quarterly | |||||||||||||||||||
Previously | Report on | |||||||||||||||||||
Reported | Adjustments | Form 10-Q | ||||||||||||||||||
Operating Activities | ||||||||||||||||||||
Net income (loss) | $ | 9,228 | $ | 288 | $ | 9,516 | ||||||||||||||
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: | ||||||||||||||||||||
Depreciation and amortization | 2,368 | — | 2,368 | |||||||||||||||||
Amortization of financing fees | 828 | — | 828 | |||||||||||||||||
Amortization of debt discount | 206 | — | 206 | |||||||||||||||||
Deferred income taxes | 15 | — | 15 | |||||||||||||||||
Other non-cash items | (17 | ) | — | (17 | ) | |||||||||||||||
Changes in operating assets and liabilites, net of acquisition: | ||||||||||||||||||||
Accounts receivable | (11,852 | ) | 16 | (11,836 | ) | |||||||||||||||
Inventories | (11,148 | ) | — | (11,148 | ) | |||||||||||||||
Prepaid expense and other current assets | (333 | ) | (177 | ) | (510 | ) | ||||||||||||||
Accounts payable and accrued expense | 2,145 | (223 | ) | 1,922 | ||||||||||||||||
Accrued pension and retirement liabilities | (658 | ) | 112 | (546 | ) | |||||||||||||||
Customer advances and deferred income | (577 | ) | — | (577 | ) | |||||||||||||||
Other | 96 | — | 96 | |||||||||||||||||
Net cash (used in) provided by operating activities | (9,699 | ) | 16 | (9,683 | ) | |||||||||||||||
Investing Activities | ||||||||||||||||||||
Purchase of property and equipment | (3,260 | ) | — | (3,260 | ) | |||||||||||||||
Change in restricted cash | 5 | — | 5 | |||||||||||||||||
Net cash used in investing activities | (3,255 | ) | — | (3,255 | ) | |||||||||||||||
Financing Activities | ||||||||||||||||||||
Line of credit advances | 74 | — | 74 | |||||||||||||||||
Purchase of common units | (14,000 | ) | — | (14,000 | ) | |||||||||||||||
Distributions paid to members | (1,357 | ) | — | (1,357 | ) | |||||||||||||||
Net cash used financing activities | (15,283 | ) | — | (15,283 | ) | |||||||||||||||
Effect of exchange rates on cash and cash equivalents | (527 | ) | (16 | ) | (543 | ) | ||||||||||||||
Change in cash and cash equivalents | (28,764 | ) | — | (28,764 | ) | |||||||||||||||
Cash and cash equivalents, beginning of period | 42,373 | — | 42,373 | |||||||||||||||||
Cash and cash equivalents, end of period | $ | 13,609 | $ | — | $ | 13,609 | ||||||||||||||
Basis of Accounting and Consolidation | Basis of Accounting and Consolidation | |||||||||||||||||||
The accompanying unaudited consolidated financial statements of Colt Defense and Colt Finance (collectively, the “Company”, or “Colt”) have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all significant adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of the financial position, results of operations and cash flows for the three and six months ended June 29, 2014 and June 30, 2013, as revised, have been included. The financial information included in this Quarterly Report on Form 10-Q/A should be read in conjunction with the consolidated financial statements and notes in the Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2013, as restated. The consolidated balance sheet dated December 31, 2013, as restated, included in this Quarterly Report on Form 10-Q/A has been derived from the audited consolidated financial statements at that time, but does not include all disclosures required by GAAP. Operating results for the three and six months ended June 29, 2014 are not necessarily indicative of the results to be expected for any subsequent interim period or for the year ending December 31, 2014. | ||||||||||||||||||||
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated. | ||||||||||||||||||||
On July 12, 2013 (the “Merger Date”), the Company acquired 100% ownership (the “Merger”) of New Colt. The results of New Colt have been included in the unaudited consolidated financial statements from the Merger Date. | ||||||||||||||||||||
Use of Estimates | Use of Estimates | |||||||||||||||||||
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company’s significant estimates include estimates used to determine the fair value of assets acquired and liabilities assumed related to the acquisition of New Colt (see Note 3, “Acquisition”) and accruals for the Company’s M240 Program (see Note 16, “Commitments and Contingencies”), excess and obsolete inventory, income tax expense, deferred tax asset valuation, medical claims payable, and worker’s compensation expense. Actual results could differ materially from those estimates. | ||||||||||||||||||||
Cash and Cash Equivalents | Cash and Cash Equivalents | |||||||||||||||||||
Cash and cash equivalents consists of cash and short-term, highly liquid investments with original maturities of three months or less at the date of purchase. | ||||||||||||||||||||
Restricted Cash | Restricted Cash | |||||||||||||||||||
Restricted cash at June 29, 2014 and December 31, 2013, consists of funds deposited to secure standby letters of credit primarily for performance guarantees related to the Company’s international business. | ||||||||||||||||||||
Revenue | Revenue | |||||||||||||||||||
The Company recognizes revenue when evidence of an arrangement exists, delivery of the product or service has occurred and title and risk of loss have passed to the customer, the sales price is fixed or determinable, and collectability of the resulting receivable is reasonably assured. | ||||||||||||||||||||
The Company accounts for revenues and earnings under two long-term government contracts/programs with interrelated multiple elements (procurement of parts, manufacturing and refurbishment services) using concepts of proportionate performance. These contracts effect reported results for all periods presented. The Company estimates the total profit on each contract as the difference between the total estimated revenue and total estimated cost of the contract and recognizes that profit over the remaining life of the contract using an output measure (the ratio of units completed to the total number of units to be refurbished under the contract). The Company computes an earnings rate for each contract, including general and administrative expense, to determine operating earnings. The Company reviews the earnings rate quarterly to assess revisions in contract values and estimated costs at completion. Any changes in earnings rates and recognized contract to date earnings resulting from these assessments are made in the period the revisions are identified. Contract costs include production costs, related overhead and allocated general and administrative costs. Amounts billed and collected on these contracts in excess of revenue recorded are reflected as customer advances and deferred revenue in the Company’s consolidated balance sheets. | ||||||||||||||||||||
Anticipated contract losses are charged to operations as soon as they are identified. Anticipated losses cover all costs allocable to the contracts, including certain general and administrative expenses. If a contract is cancelled by the government for its convenience, the Company can make a claim against the customer for fair compensation for worked performed plus costs of settling and paying claims by terminated subcontractors, other settlement expenses and a reasonable profit on costs incurred. When the Company has a customer claim, revenue arising from the claims process is either recognized as revenue or as an offset against a potential loss only when the amount of the claim can be estimated reliably and its realization is probable. The Company had no claims recorded at any period-end presented. | ||||||||||||||||||||
Prior to the Merger, Colt Defense generated an immaterial amount of royalty income, which it included in other income in its consolidated statements of operations. As a result of the Merger, the Company now generates a higher amount of royalty income on a quarterly basis and has therefore determined that royalty income should now be recorded as net sales in the Consolidated Statements of Operations. | ||||||||||||||||||||
The Company recognizes trademark licensing revenue for individual licensees based on historical experience and expected cash receipts from licensees. Licensing revenue consists of minimum royalties and/or a percentage of a licensee’s sales on licensed products. Under most of the Company’s current licensing agreements, royalties are payable in arrears on a calendar quarter basis. | ||||||||||||||||||||
Income Taxes | Income Taxes | |||||||||||||||||||
The Company utilizes the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement carrying amounts and tax basis of assets and liabilities using enacted tax rates in effect for years in which the temporary differences are expected to reverse. The Company provides a valuation allowance when it is more likely than not that deferred tax assets will not be realized. The Company recognizes the benefit of an uncertain tax position that has been taken or it expects to take on income tax returns if such tax position is more likely than not to be sustained. | ||||||||||||||||||||
The Company follows the authoritative guidance regarding accounting for uncertainty in income taxes, which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. These unrecognized tax benefits relate primarily to issues common among multinational corporations in its industry. The Company applies a variety of methodologies in making these estimates, which include studies performed by independent economists, advice from industry and subject experts, evaluation of public actions taken by the Internal Revenue Service and other taxing authorities, as well as its own industry experience. The Company provides estimates for unrecognized tax benefits which may be subject to material adjustments until matters are resolved with taxing authorities or statutes expire. If its estimates are not representative of actual outcomes, its results of operations could be materially impacted. | ||||||||||||||||||||
The Company continues to maintain a valuation allowance against certain deferred tax assets where realization is not certain. The Company periodically evaluates the likelihood of the realization of deferred tax assets and reduces the carrying amount of these deferred tax assets by a valuation allowance to the extent it believes a portion will not be realized. The Company considers many factors when assessing the likelihood of future realization of deferred tax assets, including its recent cumulative earnings experience by taxing jurisdiction, expectations of future taxable income, carryforward periods available to it for tax reporting purposes, various income tax strategies and other relevant factors. Significant judgment is required in making this assessment and, to the extent future expectations change; the Company would assess the recoverability of its deferred tax assets at that time. If the Company determines that the deferred tax assets are not realizable in a future period, the Company would record material adjustments to income tax expense in that period. | ||||||||||||||||||||
Recently Accounting Pronouncements | Recent Accounting Pronouncements | |||||||||||||||||||
Revenue from Contracts with Customers - In May 2014, the FASB issued ASU No. 2014-09, that requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for the Company on January 1, 2017. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting. | ||||||||||||||||||||
Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists - In July 2013, the FASB issued ASU 2013-11 to provide guidance on the presentation of unrecognized tax benefits. ASU 2013-11 requires an entity to present an unrecognized tax benefit, or a portion of an unrecognized tax benefit, as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows: to the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. ASU 2013-11 is effective for interim and annual periods beginning after December 15, 2013 with earlier adoption permitted. ASU 2013-11 should be applied prospectively with retroactive application permitted. The Company has adopted ASU 2013-11 in the first quarter of 2014. | ||||||||||||||||||||
Summary_of_Significant_Account2
Summary of Significant Accounting Policies (Tables) | 6 Months Ended | |||||||||||||||||||
Jun. 29, 2014 | ||||||||||||||||||||
Impacts of correcting the previously recorded immaterial out-of-period adjustments and the reclassification of business development expenses | ||||||||||||||||||||
Schedule of adjustments to previously reported income statement - Income/ (Expense) | ||||||||||||||||||||
Adjustments to | ||||||||||||||||||||
Previously Reported Income | ||||||||||||||||||||
Statement - Income / (Expense) | ||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||
For the years ended | June 30, 2013 | June 30, 2013 | ||||||||||||||||||
Net sales | $ | (23 | ) | (23 | ) | |||||||||||||||
Cost of sales | 65 | 79 | ||||||||||||||||||
Gross profit | (88 | ) | (102 | ) | ||||||||||||||||
Selling and commissions (A) | (130 | ) | (209 | ) | ||||||||||||||||
Research and development | 1 | 2 | ||||||||||||||||||
General and administrative (B) | (222 | ) | (217 | ) | ||||||||||||||||
Business development (C) | 169 | 244 | ||||||||||||||||||
Operating income | 94 | 78 | ||||||||||||||||||
Other (income) / expense (C) | (192 | ) | (267 | ) | ||||||||||||||||
Income tax expense | 57 | 57 | ||||||||||||||||||
Net income (loss) (B) | 229 | 288 | ||||||||||||||||||
(A) Primarily relates to the reclassification of $132 of armorers training expenses from selling and commissions to cost of sales. | ||||||||||||||||||||
(B) Primarily relates to the timing of recognition of certain professional fees. | ||||||||||||||||||||
(C) Primarily relates to the reclassification of transaction costs incurred in connection with contemplated merger and acquisition activities from other expense/(income) to business development. | ||||||||||||||||||||
Consolidated Statements of Operations | ||||||||||||||||||||
Restatement of Previously Issued Consolidated Financial Statements | ||||||||||||||||||||
Colt Defense LLC and Subsidiaries | ||||||||||||||||||||
Consolidated Statement of Operations | ||||||||||||||||||||
(In thousands of dollars) | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
Three months ended June 30, 2013 | Six months ended June 30, 2013 | |||||||||||||||||||
As Revised | As Revised | |||||||||||||||||||
As | in this Quarterly | As | in this Quarterly | |||||||||||||||||
Previously | Report on | Previously | Report on | |||||||||||||||||
Reported | Adjustments | Form 10-Q | Reported | Adjustments | Form 10-Q | |||||||||||||||
Net sales | $ | 64,235 | $ | (23 | ) | $ | 64,212 | $ | 128,084 | $ | (23 | ) | $ | 128,061 | ||||||
Cost of sales | 45,765 | 65 | 45,830 | 90,863 | 79 | 90,942 | ||||||||||||||
Gross Profit | 18,470 | (88 | ) | 18,382 | 37,221 | (102 | ) | 37,119 | ||||||||||||
Operating expenses: | ||||||||||||||||||||
Selling and commissions | 3,582 | (130 | ) | 3,452 | 6,756 | (209 | ) | 6,547 | ||||||||||||
Research and development | 1,480 | 1 | 1,481 | 2,299 | 2 | 2,301 | ||||||||||||||
General and administrative | 3,237 | (222 | ) | 3,015 | 6,962 | (217 | ) | 6,745 | ||||||||||||
8,299 | (351 | ) | 7,948 | 16,017 | (424 | ) | 15,593 | |||||||||||||
Business development | — | 169 | 169 | — | 244 | 244 | ||||||||||||||
Certain transaction costs | 416 | — | 416 | 416 | — | 416 | ||||||||||||||
Total operating expenses | 8,715 | (182 | ) | 8,533 | 16,433 | (180 | ) | 16,253 | ||||||||||||
Operating income | 9,755 | 94 | 9,849 | 20,788 | 78 | 20,866 | ||||||||||||||
Other expense/(income): | ||||||||||||||||||||
Interest expense | 6,069 | — | 6,069 | 12,063 | — | 12,063 | ||||||||||||||
Other (income)/expense, net | (493 | ) | (192 | ) | (685 | ) | (1,205 | ) | (267 | ) | (1,472 | ) | ||||||||
Total other expenses, net | 5,576 | (192 | ) | 5,384 | 10,858 | (267 | ) | 10,591 | ||||||||||||
Income (loss) before provision for income taxes | 4,179 | 286 | 4,465 | 9,930 | 345 | 10,275 | ||||||||||||||
Income tax expense | 21 | 57 | 78 | 702 | 57 | 759 | ||||||||||||||
Net income (loss) | $ | 4,158 | $ | 229 | $ | 4,387 | $ | 9,228 | $ | 288 | $ | 9,516 | ||||||||
Consolidated Statements of Comprehensive Income (Loss) | ||||||||||||||||||||
Restatement of Previously Issued Consolidated Financial Statements | Colt Defense LLC and Subsidiaries | |||||||||||||||||||
Consolidated Statements of Comprehensive Income (Loss) | ||||||||||||||||||||
(In thousands of dollars) | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
For the Three Months Ended June 30, 2013 | ||||||||||||||||||||
As Revised | ||||||||||||||||||||
As | in this Quarterly | |||||||||||||||||||
Previously | Report on | |||||||||||||||||||
Reported | Adjustments | Form 10-Q | ||||||||||||||||||
Net income (loss) | $ | 4,158 | $ | 229 | $ | 4,387 | ||||||||||||||
Other comprehensive income (loss), net of tax: | ||||||||||||||||||||
Foreign currency translation adjustment: | ||||||||||||||||||||
Foreign currency translation gains (losses) | (1,020 | ) | (15 | ) | (1,035 | ) | ||||||||||||||
Pension and postretirement benefit liabilities: | ||||||||||||||||||||
Other comprehensive income (loss) arising during the period | — | — | — | |||||||||||||||||
Reclassification adjustment for unrecognized prior service costs and unrecognized loss included in net income (loss) | 117 | — | 117 | |||||||||||||||||
117 | — | 117 | ||||||||||||||||||
Comprehensive income (loss) | $ | 3,255 | $ | 214 | $ | 3,469 | ||||||||||||||
Consolidated Statements of Comprehensive Income (Loss) | ||||||||||||||||||||
(In thousands of dollars) | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
For the Six Months Ended June 30, 2013 | ||||||||||||||||||||
As Revised | ||||||||||||||||||||
As | in this Quarterly | |||||||||||||||||||
Previously | Report on | |||||||||||||||||||
Reported | Adjustments | Form 10-Q | ||||||||||||||||||
Net income (loss) | $ | 9,228 | $ | 288 | $ | 9,516 | ||||||||||||||
Other comprehensive income (loss), net of tax: | ||||||||||||||||||||
Foreign currency translation adjustment: | ||||||||||||||||||||
Foreign currency translation gains (losses) | (1,597 | ) | (14 | ) | (1,611 | ) | ||||||||||||||
Pension and postretirement benefit liabilities: | ||||||||||||||||||||
Other comprehensive income (loss) arising during the period | — | — | — | |||||||||||||||||
Reclassification adjustment for unrecognized prior service costs and unrecognized loss included in net income (loss) | 250 | — | 250 | |||||||||||||||||
250 | — | 250 | ||||||||||||||||||
Comprehensive income (loss) | $ | 7,881 | $ | 274 | $ | 8,155 | ||||||||||||||
Consolidated Statements of Changes in Cash Flows | ||||||||||||||||||||
Restatement of Previously Issued Consolidated Financial Statements | Colt Defense LLC and Subsidiaries | |||||||||||||||||||
Consolidated Statement of Changes in Cash Flows | ||||||||||||||||||||
(In thousands of dollars) | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
For the Six Months Ended June 30, 2013 | ||||||||||||||||||||
As Revised | ||||||||||||||||||||
As | in this Quarterly | |||||||||||||||||||
Previously | Report on | |||||||||||||||||||
Reported | Adjustments | Form 10-Q | ||||||||||||||||||
Operating Activities | ||||||||||||||||||||
Net income (loss) | $ | 9,228 | $ | 288 | $ | 9,516 | ||||||||||||||
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: | ||||||||||||||||||||
Depreciation and amortization | 2,368 | — | 2,368 | |||||||||||||||||
Amortization of financing fees | 828 | — | 828 | |||||||||||||||||
Amortization of debt discount | 206 | — | 206 | |||||||||||||||||
Deferred income taxes | 15 | — | 15 | |||||||||||||||||
Other non-cash items | (17 | ) | — | (17 | ) | |||||||||||||||
Changes in operating assets and liabilites, net of acquisition: | ||||||||||||||||||||
Accounts receivable | (11,852 | ) | 16 | (11,836 | ) | |||||||||||||||
Inventories | (11,148 | ) | — | (11,148 | ) | |||||||||||||||
Prepaid expense and other current assets | (333 | ) | (177 | ) | (510 | ) | ||||||||||||||
Accounts payable and accrued expense | 2,145 | (223 | ) | 1,922 | ||||||||||||||||
Accrued pension and retirement liabilities | (658 | ) | 112 | (546 | ) | |||||||||||||||
Customer advances and deferred income | (577 | ) | — | (577 | ) | |||||||||||||||
Other | 96 | — | 96 | |||||||||||||||||
Net cash (used in) provided by operating activities | (9,699 | ) | 16 | (9,683 | ) | |||||||||||||||
Investing Activities | ||||||||||||||||||||
Purchase of property and equipment | (3,260 | ) | — | (3,260 | ) | |||||||||||||||
Change in restricted cash | 5 | — | 5 | |||||||||||||||||
Net cash used in investing activities | (3,255 | ) | — | (3,255 | ) | |||||||||||||||
Financing Activities | ||||||||||||||||||||
Line of credit advances | 74 | — | 74 | |||||||||||||||||
Purchase of common units | (14,000 | ) | — | (14,000 | ) | |||||||||||||||
Distributions paid to members | (1,357 | ) | — | (1,357 | ) | |||||||||||||||
Net cash used financing activities | (15,283 | ) | — | (15,283 | ) | |||||||||||||||
Effect of exchange rates on cash and cash equivalents | (527 | ) | (16 | ) | (543 | ) | ||||||||||||||
Change in cash and cash equivalents | (28,764 | ) | — | (28,764 | ) | |||||||||||||||
Cash and cash equivalents, beginning of period | 42,373 | — | 42,373 | |||||||||||||||||
Cash and cash equivalents, end of period | $ | 13,609 | $ | — | $ | 13,609 | ||||||||||||||
Acquisition_Tables
Acquisition (Tables) | 6 Months Ended | |||||||
Jun. 29, 2014 | ||||||||
Acquisition | ||||||||
Summary of the fair values of the assets acquired and the liabilities assumed at the Merger Date | ||||||||
Cash and cash equivalents | $ | 3,791 | ||||||
Accounts receivable | 3,318 | |||||||
Inventories | 7,585 | |||||||
Property and equipment | 5,182 | |||||||
Other assets | 3,090 | |||||||
Intangible assets with finite lives | 9,340 | |||||||
Trademarks | 50,100 | |||||||
Goodwill | 36,974 | |||||||
Total assets acquired | 119,380 | |||||||
Accounts payable and accrued expenses | 8,808 | |||||||
Customer advances and deferred revenue | 1,832 | |||||||
Capital lease obligations | 393 | |||||||
Pension and retirement liabilities | 9,357 | |||||||
Deferred tax liabilities | 16,447 | |||||||
Total liabilities assumed | 36,837 | |||||||
Net assets acquired | $ | 82,543 | ||||||
Schedule of unaudited pro forma operating results | ||||||||
Unaudited Pro Forma | Unaudited Pro Forma | |||||||
Three Months Ended | Six Months Ended | |||||||
June 30, 2013 | June 30, 2013 | |||||||
(As Revised) | (As Revised) | |||||||
Net sales | $ | 85,209 | $ | 167,022 | ||||
Net income (loss) | 4,709 | 10,254 | ||||||
Restructuring_Costs_Tables
Restructuring Costs (Tables) | 6 Months Ended | ||||
Jun. 29, 2014 | |||||
Restructuring Costs | |||||
Summary of Company's restructuring activity | |||||
Restructuring accruals at December 31, 2013 | $ | 706 | |||
Accrual reversal | (76 | ) | |||
Utilization | (442 | ) | |||
Balance at June 29, 2014 | $ | 188 |
Inventories_Tables
Inventories (Tables) | 6 Months Ended | |||||||
Jun. 29, 2014 | ||||||||
Inventories | ||||||||
Summary of inventories, net of reserves at the lower of cost or market | ||||||||
June 29, 2014 | December 31, 2013 | |||||||
Raw materials | $ | 44,877 | $ | 43,469 | ||||
Work in process | 13,938 | 9,476 | ||||||
Finished products | 16,692 | 13,729 | ||||||
$ | 75,507 | $ | 66,674 |
Property_and_Equipment_Tables
Property and Equipment (Tables) | 6 Months Ended | |||||||||
Jun. 29, 2014 | ||||||||||
Property and Equipment | ||||||||||
Schedule of property and equipment | ||||||||||
Estimated | ||||||||||
June 29, 2014 | December 31, 2013 | Useful Life | ||||||||
Land | $ | 337 | $ | 338 | — | |||||
Building | 2,643 | 2,653 | 33 | |||||||
Machinery and equipment | 51,652 | 47,476 | 10-Jul | |||||||
Furniture, fixtures and leasehold improvements | 7,150 | 7,081 | 5-Mar | |||||||
61,782 | 57,548 | |||||||||
Less accumulated depreciation and amortization | (34,953 | ) | (32,152 | ) | ||||||
26,829 | 25,396 | |||||||||
Construction in process | 2,222 | 5,337 | ||||||||
Property and equipment, net | $ | 29,051 | $ | 30,733 |
Goodwill_Trademarks_and_Other_1
Goodwill, Trademarks and Other Intangible Assets (Tables) | 6 Months Ended | ||||||||||||
Jun. 29, 2014 | |||||||||||||
Goodwill, Trademarks and Other Intangible Assets | |||||||||||||
Schedule of changes in the carrying amount of goodwill | |||||||||||||
Total | |||||||||||||
Balance at December 31, 2013 | $ | 51,225 | |||||||||||
Effect of foreign currency translation | (37 | ) | |||||||||||
Balance at June 29, 2014 | $ | 51,188 | |||||||||||
Schedule of net carrying value of the intangible assets with finite lives | |||||||||||||
As of June 29, 2014 | |||||||||||||
Gross | Estimated | ||||||||||||
Carrying | Accumulated | Useful | |||||||||||
Amount | Amortization | Net | Life | ||||||||||
Customer relationship Canadian Government | $ | 2,360 | $ | (714 | ) | $ | 1,646 | 30 | |||||
Customer relationships other | 6,137 | (4,229 | ) | 1,908 | 20 | ||||||||
License agreements | 5,240 | (1,614 | ) | 3,626 | 6 | ||||||||
Backlog | 1,720 | (916 | ) | 804 | 3 | ||||||||
Technology-based intangibles | 6,580 | (2,798 | ) | 3,782 | 15-20 | ||||||||
$ | 22,037 | $ | (10,271 | ) | $ | 11,766 | |||||||
As of December 31, 2013 | |||||||||||||
Gross | Estimated | ||||||||||||
Carrying | Accumulated | Useful | |||||||||||
Amount | Amortization | Net | Life | ||||||||||
Customer relationship Canadian Government | $ | 2,369 | $ | (678 | ) | $ | 1,691 | 30 | |||||
Customer relationships other | 6,160 | (4,077 | ) | 2,083 | 20 | ||||||||
License agreements | 5,240 | (805 | ) | 4,435 | 6 | ||||||||
Backlog | 1,722 | (604 | ) | 1,118 | 3 | ||||||||
Technology-based intangibles | 6,580 | (2,492 | ) | 4,088 | 15 - 20 | ||||||||
$ | 22,071 | $ | (8,656 | ) | $ | 13,415 | |||||||
Notes_Payable_and_LongTerm_Deb1
Notes Payable and Long-Term Debt (Tables) | 6 Months Ended | |||||||||||||
Jun. 29, 2014 | ||||||||||||||
Notes Payable and Long-Term Debt | ||||||||||||||
Schedule of principal repayments, which are due quarterly on the last day of each calendar quarter | ||||||||||||||
Amount | ||||||||||||||
Remaining 2014 | $ | 625 | ||||||||||||
2015 | 5,625 | |||||||||||||
2016 | 41,875 | |||||||||||||
Total | $ | 48,125 | ||||||||||||
Schedule of outstanding loan balances | ||||||||||||||
June 29, 2014 | December 31, 2013 | |||||||||||||
Senior Notes | $ | 248,204 | $ | 247,984 | ||||||||||
Term Loan | 46,601 | 46,833 | ||||||||||||
Credit Agreement | 13,500 | 7,083 | ||||||||||||
Total debt | 308,305 | 301,900 | ||||||||||||
Less: current portion | (14,125 | ) | (12,083 | ) | ||||||||||
Long-term debt | $ | 294,180 | $ | 289,817 | ||||||||||
Schedule of effective interest rate and amortization | ||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
June 29, 2014 | June 30, 2013 | June 29, 2014 | June 30, 2013 | |||||||||||
Amortization of discount | $ | 308 | $ | 102 | $ | 613 | $ | 206 | ||||||
Amortization of deferred financing costs | 604 | 414 | 1,211 | 828 | ||||||||||
Accrued_Expenses_Tables
Accrued Expenses (Tables) | 6 Months Ended | |||||||
Jun. 29, 2014 | ||||||||
Accrued Expenses | ||||||||
Schedule of accrued expenses | ||||||||
June 29, 2014 | December 31, 2013 | |||||||
(As Restated) | ||||||||
Accrued compensation and benefits | $ | 4,811 | $ | 7,154 | ||||
Accrued contract obligation expense | 2,411 | 1,194 | ||||||
Accrued federal, excise and other taxes | 3,009 | 4,902 | ||||||
Accrued interest | 4,111 | 2,879 | ||||||
Accrued commissions | 1,129 | 929 | ||||||
Other accrued expenses | 5,568 | 5,100 | ||||||
$ | 21,039 | $ | 22,158 |
Income_Taxes_Tables
Income Taxes (Tables) | 6 Months Ended | |||||||||||||
Jun. 29, 2014 | ||||||||||||||
Income Taxes | ||||||||||||||
Schedule of components of income (loss) before provision for income taxes | ||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
June 29, 2014 | June 30, 2013 | June 29, 2014 | June 30, 2013 | |||||||||||
(As Revised) | (As Revised) | |||||||||||||
Current | $ | 141 | $ | 3 | $ | 52 | $ | 744 | ||||||
Deferred | (122 | ) | 75 | (119 | ) | 15 | ||||||||
Total | $ | 19 | $ | 78 | $ | (67 | ) | $ | 759 |
Pension_and_Postretirement_Ben1
Pension and Postretirement Benefits (Tables) | 6 Months Ended | |||||||||||||
Jun. 29, 2014 | ||||||||||||||
Pension plans | ||||||||||||||
Pension and postretirement benefits | ||||||||||||||
Schedule of the components of income and cost recognized in Consolidated Statements of Operations | ||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
June 29, 2014 | June 30, 2013 | June 29, 2014 | June 30, 2013 | |||||||||||
(As Revised) | (As Revised) | |||||||||||||
Interest cost | $ | 413 | $ | 277 | $ | 792 | $ | 550 | ||||||
Expected return on assets | (461 | ) | (365 | ) | (955 | ) | (730 | ) | ||||||
Amortization of unrecognized loss | 27 | 109 | 93 | 214 | ||||||||||
Net periodic cost (income) | $ | (21 | ) | $ | 21 | $ | (70 | ) | $ | 34 | ||||
Postretirement health cost coverage | ||||||||||||||
Pension and postretirement benefits | ||||||||||||||
Schedule of the components of income and cost recognized in Consolidated Statements of Operations | ||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
June 29, 2014 | June 30, 2013 | June 29, 2014 | June 30, 2013 | |||||||||||
Service cost | $ | 170 | $ | 162 | $ | 346 | $ | 226 | ||||||
Interest cost | 252 | 112 | 467 | 244 | ||||||||||
Curtailment of postretirement health plan | (98 | ) | — | (98 | ) | — | ||||||||
Amortization of unrecognized prior service costs | (33 | ) | (43 | ) | (76 | ) | (86 | ) | ||||||
Amortization of unrecognized loss | 57 | 51 | 66 | 122 | ||||||||||
Net periodic cost | $ | 348 | $ | 282 | $ | 705 | $ | 506 |
Transactions_with_Related_Part1
Transactions with Related Parties (Tables) | 6 Months Ended | |||||||
Jun. 29, 2014 | ||||||||
Transactions with Related Parties | ||||||||
Schedule of transactions with New Colt | ||||||||
Three Months | Six Months | |||||||
Ended | Ended | |||||||
June 30, 2013 | June 30, 2013 | |||||||
Net sales to New Colt | $ | 21,310 | $ | 43,835 | ||||
Purchases from New Colt | 892 | 1,887 | ||||||
Administration and services fees charged to New Colt | 442 | 883 | ||||||
Commitments_and_Contingencies_
Commitments and Contingencies (Tables) | 6 Months Ended | |||||||
Jun. 29, 2014 | ||||||||
Commitments and Contingencies | ||||||||
Summary of standby letters of credit issued principally in connection with performance and warranty bonds established for the benefit of certain international customers | ||||||||
June 29, 2014 | December 31, 2013 | |||||||
Standby letters of credit secured by restricted cash | $ | 1,181 | $ | 1,185 | ||||
Standby letters of credit under Credit Agreement | 3,906 | 3,486 | ||||||
Guarantees of standby letters of credit established by a sales agent on behalf of Colt | 74 | 74 | ||||||
Segment_Information_Tables
Segment Information (Tables) | 6 Months Ended | |||||||||||||
Jun. 29, 2014 | ||||||||||||||
Segment Information | ||||||||||||||
Schedule of reconciliation of net income (loss) to Adjusted EBITDA | ||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
Statement of Operations Data: | June 29, 2014 | June 30, 2013 | June 29, 2014 | June 30, 2013 | ||||||||||
(As Revised) | (As Revised) | (As Revised) | (As Revised) | |||||||||||
Net income (loss) | $ | (12,589 | ) | $ | 4,387 | $ | (20,535 | ) | $ | 9,516 | ||||
Income tax (benefit) expense | 19 | 78 | (67 | ) | 759 | |||||||||
Depreciation and amortization (i) | 2,369 | 1,206 | 4,649 | 2,368 | ||||||||||
Interest expense, net | 7,859 | 6,069 | 15,543 | 12,063 | ||||||||||
Sciens fees and expenses (ii) | 250 | 108 | 500 | 216 | ||||||||||
Transaction costs (iii) | — | 416 | — | 416 | ||||||||||
Restructuring costs (iv) | (76 | ) | — | (76 | ) | — | ||||||||
M240 Program contract obligation expense (v) | 4,779 | — | 5,090 | — | ||||||||||
Business development costs (vi) | 9 | 169 | 509 | 244 | ||||||||||
Severance costs (vii) | 382 | — | 527 | — | ||||||||||
Other (income)/expense, net (viii) | (42 | ) | (199 | ) | (113 | ) | (590 | ) | ||||||
Adjusted EBITDA | $ | 2,960 | $ | 12,234 | $ | 6,027 | $ | 24,992 | ||||||
(i) Includes depreciation and amortization of intangible assets. | ||||||||||||||
(ii) Includes fees and expenses pursuant to the Company’s agreements with Sciens Management and Sciens Institutional. | ||||||||||||||
(iii) Non-recurring costs associated with the July 12, 2013 acquisition of New Colt. | ||||||||||||||
(iv) Includes costs related to the Merger, including severance, continuation of benefits, and other. See Note 4 “Restructuring Costs.” | ||||||||||||||
(v) Expenses related to Company’s M240 Program. See Note 16 “Commitments and Contingencies.” | ||||||||||||||
(vi) Includes transaction costs incurred in connection with contemplated acquisition activities. | ||||||||||||||
(vii) Includes non-recurring severance costs. | ||||||||||||||
(viii) Includes income and/or expenses such as foreign currency exchange gains or losses and other less significant charges not related to on-going operations. | ||||||||||||||
Schedule of net sales by product category | ||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
June 29, 2014 | June 30, 2013 | June 29, 2014 | June 30, 2013 | |||||||||||
(As Revised) | (As Revised) | |||||||||||||
Long guns | $ | 15,870 | $ | 53,599 | $ | 40,307 | $ | 105,870 | ||||||
Handguns | 18,570 | 1,260 | 33,890 | 2,521 | ||||||||||
Spares and other | 15,193 | 9,353 | 25,516 | 19,670 | ||||||||||
Total | $ | 49,633 | $ | 64,212 | $ | 99,713 | $ | 128,061 | ||||||
Schedule of net sales for specific geographic regions | ||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
June 29, 2014 | June 30, 2013 | June 29, 2014 | June 30, 2013 | |||||||||||
(As Revised) | (As Revised) | |||||||||||||
United States | $ | 31,725 | $ | 38,985 | $ | 73,220 | $ | 74,693 | ||||||
Canada | 3,960 | 4,202 | 8,317 | 14,953 | ||||||||||
Latin America/Caribbean | 1,185 | 43 | 2,970 | 1,044 | ||||||||||
Middle East/Africa | 1,609 | 532 | 3,333 | 570 | ||||||||||
Europe | 5,309 | 3,272 | 5,733 | 4,603 | ||||||||||
Asia/Pacific | 5,845 | 17,178 | 6,140 | 32,198 | ||||||||||
$ | 49,633 | $ | 64,212 | $ | 99,713 | $ | 128,061 | |||||||
Schedule of long-lived assets, which are net fixed assets attributed to specific geographic regions: | ||||||||||||||
June 29, 2014 | December 31, 2013 | |||||||||||||
United States | $ | 24,307 | $ | 25,745 | ||||||||||
Canada | 4,744 | 4,988 | ||||||||||||
$ | 29,051 | $ | 30,733 |
Accumulated_Other_Comprehensiv1
Accumulated Other Comprehensive Loss (Tables) | 6 Months Ended | |||||||||||||
Jun. 29, 2014 | ||||||||||||||
Accumulated Other Comprehensive Loss | ||||||||||||||
Schedule of the components of accumulated other comprehensive loss | ||||||||||||||
Unrecognized | Foreign | |||||||||||||
Prior Service | Unrecognized | Currency | ||||||||||||
Cost | Loss | Translation | Total | |||||||||||
Balance, December 31, 2012 | $ | 825 | $ | (17,399 | ) | $ | 2,732 | $ | (13,842 | ) | ||||
Other comprehensive income before reclassifications | — | — | — | — | ||||||||||
Amounts reclassified from accumulated other comprehensive income | (86 | ) | 336 | — | 250 | |||||||||
Currency translation | — | — | (1,611 | ) | (1,611 | ) | ||||||||
Net current period other comprehensive income | (86 | ) | 336 | (1,611 | ) | (1,361 | ) | |||||||
Balance, June 30, 2013 | $ | 739 | $ | (17,063 | ) | $ | 1,121 | $ | (15,203 | ) | ||||
Balance, December 31, 2013 | $ | 653 | $ | (10,836 | ) | $ | 843 | (9,340 | ) | |||||
Other comprehensive income before reclassifications | (97 | ) | (1,453 | ) | — | (1,550 | ) | |||||||
Amounts reclassified from accumulated other comprehensive income | (76 | ) | 159 | — | 83 | |||||||||
Currency translation | — | — | (140 | ) | (140 | ) | ||||||||
Net current period other comprehensive income | (173 | ) | (1,294 | ) | (140 | ) | (1,607 | ) | ||||||
Balance, June 29, 2014 | $ | 480 | $ | (12,130 | ) | $ | 703 | $ | (10,947 | ) | ||||
Nature_of_Business_Details
Nature of Business (Details) (USD $) | 3 Months Ended | 6 Months Ended | 0 Months Ended | 3 Months Ended | 0 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 29, 2014 | Jun. 29, 2014 | Jul. 01, 2014 | Sep. 29, 2014 | Mar. 30, 2014 | Dec. 31, 2013 | Nov. 10, 2009 |
item | WK | item | item | item | |||
Nature of Business | |||||||
Number of weeks in first two months of each quarter except January | 4 | ||||||
Number of weeks in third month of each quarter except December | 5 | ||||||
Impairment charge | $0 | ||||||
Reduction of salaried employees | 24 | ||||||
Reduction of hourly employees | 64 | ||||||
M240 Program | |||||||
Nature of Business | |||||||
Incremental contract obligation expense | 4,779 | ||||||
M249 contract | |||||||
Nature of Business | |||||||
No-Cost Cancellation expense | 480 | ||||||
Subsequent event | |||||||
Nature of Business | |||||||
Reduction of salaried employees | 9 | 9 | |||||
Colt Finance Corp. | |||||||
Nature of Business | |||||||
Ownership percentage | 100.00% | 100.00% | 100.00% | 100.00% | |||
New Colt | |||||||
Nature of Business | |||||||
Ownership percentage | 100.00% | 100.00% | 100.00% | ||||
CDTS | |||||||
Nature of Business | |||||||
Ownership percentage | 100.00% | 100.00% | 100.00% | ||||
Colt Defense LLC and New Colt | Colt's Manufacturing | |||||||
Nature of Business | |||||||
Ownership percentage | 100.00% | 100.00% | |||||
Colt Defense LLC and CDTS | Colt International | |||||||
Nature of Business | |||||||
Ownership percentage | 100.00% | 100.00% | 100.00% | ||||
New Colt | Colt's Manufacturing | |||||||
Nature of Business | |||||||
Ownership percentage | 100.00% | ||||||
Colt International | Colt Canada | |||||||
Nature of Business | |||||||
Ownership percentage | 100.00% | 100.00% | 100.00% | ||||
Agreement with UAW Local 376 | Colt's Manufacturing | |||||||
Nature of Business | |||||||
Term of contract | 5 years | ||||||
Number of employee covered | 529 |
Summary_of_Significant_Account3
Summary of Significant Accounting Policies (Details) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 29, 2014 | Jun. 30, 2013 | Jun. 29, 2014 | Jun. 30, 2013 |
Net sales | $49,633 | $64,212 | $99,713 | $128,061 |
Cost of sales | 44,640 | 45,830 | 85,026 | 90,942 |
Gross profit | 4,993 | 18,382 | 14,687 | 37,119 |
Selling and commissions | 4,620 | 3,452 | 9,081 | 6,547 |
Research and development | 1,392 | 1,481 | 2,635 | 2,301 |
General and administrative | 3,801 | 3,015 | 7,710 | 6,745 |
Business development | 9 | 169 | 509 | 244 |
Operating income | -4,753 | 9,849 | -5,172 | 20,866 |
Other (income)/ expense | -7,817 | -5,384 | -15,430 | -10,591 |
Income tax expense | 19 | 78 | -67 | 759 |
Net income (loss) | -12,589 | 4,387 | -20,535 | 9,516 |
Depreciation and amortization | -2,369 | -1,206 | -4,649 | -2,368 |
Purchases of property and equipment | -1,345 | -3,260 | ||
Net cash used in operating activities | -14,668 | -9,683 | ||
Net cash used in investing activities | -1,345 | -3,255 | ||
Adjustments | ||||
Net sales | -23 | -23 | ||
Cost of sales | 65 | 79 | ||
Gross profit | -88 | -102 | ||
Selling and commissions | -130 | -209 | ||
Research and development | 1 | 2 | ||
General and administrative | -222 | -217 | ||
Business development | 169 | 244 | ||
Operating income | 94 | 78 | ||
Other (income)/ expense | 192 | 267 | ||
Income tax expense | 57 | 57 | ||
Net income (loss) | 229 | 288 | ||
Depreciation and amortization | 196 | |||
Purchases of property and equipment | 196 | |||
Net cash used in operating activities | -196 | 16 | ||
Net cash used in investing activities | 196 | |||
Impact of a contract modification related to the M240 Program | ||||
Net sales | 0 | 0 | ||
Cost of sales | 0 | 0 | ||
Impacts of correcting the previously recorded immaterial out-of-period adjustments and the reclassification of business development expenses | Adjustments | ||||
Net sales | -23 | -23 | ||
Cost of sales | 65 | 79 | ||
Gross profit | -88 | -102 | ||
Selling and commissions | -130 | -209 | ||
Research and development | 1 | 2 | ||
General and administrative | -222 | -217 | ||
Business development | 169 | 244 | ||
Operating income | 94 | 78 | ||
Other (income)/ expense | -192 | -267 | ||
Income tax expense | 57 | 57 | ||
Net income (loss) | 229 | 288 | ||
Reclassification of armorers training expenses from selling and commissions to cost of sales | $132 | $132 |
Summary_of_Significant_Account4
Summary of Significant Accounting Policies (Details 2) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 29, 2014 | Jun. 30, 2013 | Jun. 29, 2014 | Jun. 30, 2013 |
Net sales | $49,633 | $64,212 | $99,713 | $128,061 |
Cost of sales | 44,640 | 45,830 | 85,026 | 90,942 |
Gross profit | 4,993 | 18,382 | 14,687 | 37,119 |
Operating expenses: | ||||
Selling and commissions | 4,620 | 3,452 | 9,081 | 6,547 |
Research and development | 1,392 | 1,481 | 2,635 | 2,301 |
General and administrative | 3,801 | 3,015 | 7,710 | 6,745 |
Total selling and commissions, research and development, general and administrative | 9,813 | 7,948 | 19,426 | 15,593 |
Business development | 9 | 169 | 509 | 244 |
Certain transaction costs (Note 3) | 416 | 416 | ||
Total operating expenses | 9,746 | 8,533 | 19,859 | 16,253 |
Operating income | -4,753 | 9,849 | -5,172 | 20,866 |
Other expense (income): | ||||
Interest expense | 7,859 | 6,069 | 15,543 | 12,063 |
Other (income)/expense, net | -42 | -685 | -113 | -1,472 |
Total other expense, net | 7,817 | 5,384 | 15,430 | 10,591 |
Income (loss) before provision for income taxes | -12,570 | 4,465 | -20,602 | 10,275 |
Income tax expense | 19 | 78 | -67 | 759 |
Net (loss) income | -12,589 | 4,387 | -20,535 | 9,516 |
Previously reported | ||||
Net sales | 64,235 | 128,084 | ||
Cost of sales | 45,765 | 90,863 | ||
Gross profit | 18,470 | 37,221 | ||
Operating expenses: | ||||
Selling and commissions | 3,582 | 6,756 | ||
Research and development | 1,480 | 2,299 | ||
General and administrative | 3,237 | 6,962 | ||
Total selling and commissions, research and development, general and administrative | 8,299 | 16,017 | ||
Certain transaction costs (Note 3) | 416 | 416 | ||
Total operating expenses | 8,715 | 16,433 | ||
Operating income | 9,755 | 20,788 | ||
Other expense (income): | ||||
Interest expense | 6,069 | 12,063 | ||
Other (income)/expense, net | -493 | -1,205 | ||
Total other expense, net | 5,576 | 10,858 | ||
Income (loss) before provision for income taxes | 4,179 | 9,930 | ||
Income tax expense | 21 | 702 | ||
Net (loss) income | 4,158 | 9,228 | ||
Adjustments | ||||
Net sales | -23 | -23 | ||
Cost of sales | 65 | 79 | ||
Gross profit | -88 | -102 | ||
Operating expenses: | ||||
Selling and commissions | -130 | -209 | ||
Research and development | 1 | 2 | ||
General and administrative | -222 | -217 | ||
Total selling and commissions, research and development, general and administrative | -351 | -424 | ||
Business development | 169 | 244 | ||
Total operating expenses | -182 | -180 | ||
Operating income | 94 | 78 | ||
Other expense (income): | ||||
Other (income)/expense, net | -192 | -267 | ||
Total other expense, net | -192 | -267 | ||
Income (loss) before provision for income taxes | 286 | 345 | ||
Income tax expense | 57 | 57 | ||
Net (loss) income | $229 | $288 |
Summary_of_Significant_Account5
Summary of Significant Accounting Policies (Details 3) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 29, 2014 | Jun. 30, 2013 | Jun. 29, 2014 | Jun. 30, 2013 |
Net income (loss) | ($12,589) | $4,387 | ($20,535) | $9,516 |
Foreign currency translation adjustment | ||||
Foreign currency translation gains (losses) | 798 | -1,035 | -140 | -1,611 |
Pension and postretirement benefit liabilities: | ||||
Reclassification adjustment for unrecognized prior service costs and unrecognized loss included in net income (loss) | 36 | 117 | 83 | 250 |
Total | -1,514 | 117 | -1,467 | 250 |
Comprehensive income (loss) | -13,305 | 3,469 | -22,142 | 8,155 |
Previously reported | ||||
Net income (loss) | 4,158 | 9,228 | ||
Foreign currency translation adjustment | ||||
Foreign currency translation gains (losses) | -1,020 | -1,597 | ||
Pension and postretirement benefit liabilities: | ||||
Reclassification adjustment for unrecognized prior service costs and unrecognized loss included in net income (loss) | 117 | 250 | ||
Total | 117 | 250 | ||
Comprehensive income (loss) | 3,255 | 7,881 | ||
Adjustments | ||||
Net income (loss) | 229 | 288 | ||
Foreign currency translation adjustment | ||||
Foreign currency translation gains (losses) | -15 | -14 | ||
Pension and postretirement benefit liabilities: | ||||
Comprehensive income (loss) | $214 | $274 |
Summary_of_Significant_Account6
Summary of Significant Accounting Policies (Details 4) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 29, 2014 | Jun. 30, 2013 | Jun. 29, 2014 | Jun. 30, 2013 |
Operating Activities | ||||
Net income (loss) | ($12,589) | $4,387 | ($20,535) | $9,516 |
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: | ||||
Depreciation and amortization | 2,369 | 1,206 | 4,649 | 2,368 |
Amortization of financing fees | 604 | 414 | 1,211 | 828 |
Amortization of debt discount | 308 | 102 | 613 | 206 |
Deferred income taxes | -119 | 15 | ||
Other non-cash items | 19 | -17 | ||
Changes in operating assets and liabilities, net of acquisitions: | ||||
Accounts receivable | 6,407 | -11,836 | ||
Inventories | -8,856 | -11,148 | ||
Prepaid expenses and other current assets | 2,174 | -510 | ||
Accounts payable and accrued expenses | 801 | 1,922 | ||
Accrued pension and retirement liabilities | -378 | -546 | ||
Customer advances and deferred income | -1,544 | -577 | ||
Other | 988 | 96 | ||
Net cash used in operating activities | -14,668 | -9,683 | ||
Investing Activities | ||||
Purchases of property and equipment | -1,345 | -3,260 | ||
Change in restricted cash | 5 | |||
Net cash used in investing activities | -1,345 | -3,255 | ||
Financing Activities | ||||
Line of credit advances | 13,500 | 74 | ||
Purchase of common units | -14,000 | |||
Distributions paid to members | -683 | -1,357 | ||
Net cash provided by (used in) financing activities | 5,109 | -15,283 | ||
Effect of exchange rates on cash and cash equivalents | 508 | -543 | ||
Change in cash and cash equivalents | -10,396 | -28,764 | ||
Cash and cash equivalents, beginning of period | 12,594 | 42,373 | ||
Cash and cash equivalents, end of period | 2,198 | 13,609 | 2,198 | 13,609 |
Previously reported | ||||
Operating Activities | ||||
Net income (loss) | 4,158 | 9,228 | ||
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: | ||||
Depreciation and amortization | 2,368 | |||
Amortization of financing fees | 828 | |||
Amortization of debt discount | 206 | |||
Deferred income taxes | 15 | |||
Other non-cash items | -17 | |||
Changes in operating assets and liabilities, net of acquisitions: | ||||
Accounts receivable | -11,852 | |||
Inventories | -11,148 | |||
Prepaid expenses and other current assets | -333 | |||
Accounts payable and accrued expenses | 2,145 | |||
Accrued pension and retirement liabilities | -658 | |||
Customer advances and deferred income | -577 | |||
Other | 96 | |||
Net cash used in operating activities | -9,699 | |||
Investing Activities | ||||
Purchases of property and equipment | -3,260 | |||
Change in restricted cash | 5 | |||
Net cash used in investing activities | -3,255 | |||
Financing Activities | ||||
Line of credit advances | 74 | |||
Purchase of common units | -14,000 | |||
Distributions paid to members | -1,357 | |||
Net cash provided by (used in) financing activities | -15,283 | |||
Effect of exchange rates on cash and cash equivalents | -527 | |||
Change in cash and cash equivalents | -28,764 | |||
Cash and cash equivalents, beginning of period | 42,373 | |||
Cash and cash equivalents, end of period | 13,609 | 13,609 | ||
Adjustments | ||||
Operating Activities | ||||
Net income (loss) | 229 | 288 | ||
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: | ||||
Depreciation and amortization | -196 | |||
Changes in operating assets and liabilities, net of acquisitions: | ||||
Accounts receivable | 16 | |||
Prepaid expenses and other current assets | -177 | |||
Accounts payable and accrued expenses | -223 | |||
Accrued pension and retirement liabilities | 112 | |||
Net cash used in operating activities | -196 | 16 | ||
Investing Activities | ||||
Purchases of property and equipment | 196 | |||
Net cash used in investing activities | 196 | |||
Financing Activities | ||||
Effect of exchange rates on cash and cash equivalents | ($16) |
Summary_of_Significant_Account7
Summary of Significant Accounting Policies (Details 5) (New Colt Holding Corp.) | Jul. 12, 2013 |
New Colt Holding Corp. | |
Basis of Accounting and Consolidation | |
Ownership interest acquired (as a percent) | 100.00% |
Summary_of_Significant_Account8
Summary of Significant Accounting Policies (Details 6) | 6 Months Ended |
Jun. 29, 2014 | |
item | |
Revenue | |
Number of long-term contracts/programs | 2 |
Number of claims recorded | 0 |
Acquisition_Details
Acquisition (Details) (USD $) | 3 Months Ended | 6 Months Ended | 0 Months Ended | 3 Months Ended | ||||
In Thousands, unless otherwise specified | Jun. 30, 2013 | Jun. 30, 2013 | Jul. 12, 2013 | Jul. 12, 2013 | Mar. 31, 2013 | Jun. 29, 2014 | Dec. 31, 2013 | Sep. 29, 2013 |
item | ||||||||
Fair values of the assets acquired, net of cash acquired, and the liabilities assumed at the Merger Date | ||||||||
Goodwill | $51,188 | $51,225 | ||||||
Interest expense | New Colt | ||||||||
Unaudited pro forma operating results | ||||||||
Net income (loss) | 1,579 | 3,208 | ||||||
New Colt | ||||||||
Acquisition | ||||||||
Number of manufacturers of Colt firearms to be consolidated | 2 | |||||||
Aggregate purchase price | 82,543 | |||||||
Aggregate purchase price paid in cash | 5,000 | |||||||
Merger consideration reinvested by certain investors | 4,000 | |||||||
Fair values of the assets acquired, net of cash acquired, and the liabilities assumed at the Merger Date | ||||||||
Cash and cash equivalents | 3,791 | 3,791 | ||||||
Accounts receivable | 3,318 | 3,318 | ||||||
Inventories | 7,585 | 7,585 | ||||||
Property and equipment | 5,182 | 5,182 | ||||||
Other assets | 3,090 | 3,090 | ||||||
Intangible assets with finite lives | 9,340 | 9,340 | ||||||
Trademarks | 50,100 | 50,100 | ||||||
Goodwill | 36,974 | 36,974 | ||||||
Total assets acquired | 119,380 | 119,380 | ||||||
Accounts payable and accrued expenses | 8,808 | 8,808 | ||||||
Customer advances and deferred revenue | 1,832 | 1,832 | ||||||
Capital lease obligations | 393 | 393 | ||||||
Pension and retirement liabilities | 9,357 | 9,357 | ||||||
Deferred tax liabilities | 16,447 | 16,447 | ||||||
Total liabilities assumed | 36,837 | 36,837 | ||||||
Net assets acquired | 82,543 | 82,543 | ||||||
Unaudited pro forma operating results | ||||||||
Net sales | 85,209 | 167,022 | ||||||
Net income (loss) | 4,709 | 10,254 | ||||||
New Colt | License agreements | ||||||||
Fair values of the assets acquired, net of cash acquired, and the liabilities assumed at the Merger Date | ||||||||
Intangible assets with finite lives | 5,240 | 5,240 | ||||||
Weighted-average useful lives of acquired assets | 6 years | |||||||
New Colt | Developed technology | ||||||||
Fair values of the assets acquired, net of cash acquired, and the liabilities assumed at the Merger Date | ||||||||
Intangible assets with finite lives | 2,970 | 2,970 | ||||||
Weighted-average useful lives of acquired assets | 20 years | |||||||
New Colt | Backlog | ||||||||
Fair values of the assets acquired, net of cash acquired, and the liabilities assumed at the Merger Date | ||||||||
Intangible assets with finite lives | 1,130 | 1,130 | ||||||
Weighted-average useful lives of acquired assets | 3 years | |||||||
New Colt | Amortization of finite-lived intangible assets | ||||||||
Unaudited pro forma operating results | ||||||||
Net income (loss) | 664 | 1,328 | ||||||
New Colt | Common units | ||||||||
Acquisition | ||||||||
Aggregate consideration from issue and sale of common units | 9,000 | |||||||
New Colt | Term Loan | ||||||||
Acquisition | ||||||||
Proceeds from senior secured term loan | 50,000 | |||||||
Unaudited pro forma operating results | ||||||||
Net income (loss) | 50,000 | |||||||
New Colt | Trademarks | ||||||||
Acquisition | ||||||||
Settlement gain on pre-existing relationship | 15,264 | |||||||
Gross settlement gain | 16,320 | |||||||
Prepaid license balance | $1,056 |
Restructuring_Costs_Details
Restructuring Costs (Details) (USD $) | 3 Months Ended | 6 Months Ended | 0 Months Ended | |
In Thousands, unless otherwise specified | Jun. 29, 2014 | Jun. 29, 2014 | Dec. 31, 2013 | Jun. 29, 2014 |
item | ||||
Restructuring Costs | ||||
Net pre-tax restructuring costs | $1,118 | |||
Reimbursement from an escrow | 336 | |||
Restructuring costs recorded as operating expenses | 382 | 527 | 782 | |
Number of salaried employees, reduction in workforce | 10 | |||
Summary of restructuring activity | ||||
Balance at the beginning of the period | 706 | |||
Accrual reversal | 76 | 76 | ||
Utilization | -442 | |||
Balance at the end of the period | 188 | 188 | 706 | 188 |
Restructuring Costs | ||||
Reimbursement from an escrow | -336 | |||
Subsequent event | ||||
Restructuring Costs | ||||
Reimbursement from an escrow | -268 | |||
Restructuring Costs | ||||
Reimbursement from an escrow | $268 |
Accounts_Receivable_Details
Accounts Receivable (Details) (USD $) | Jun. 29, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Accounts Receivable | ||
Allowance for doubtful accounts | $84 | $78 |
Inventories_Details
Inventories (Details) (USD $) | Jun. 29, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Inventories | ||
Raw materials | $44,877 | $43,469 |
Work in process | 13,938 | 9,476 |
Finished products | 16,692 | 13,729 |
Inventories | $75,507 | $66,674 |
Property_and_Equipment_Details
Property and Equipment (Details) (USD $) | 6 Months Ended | |
In Thousands, unless otherwise specified | Jun. 29, 2014 | Dec. 31, 2013 |
Property and equipment | ||
Property and equipment, gross, excluding Construction in process | $61,782 | $57,548 |
Less accumulated depreciation and amortization | -34,953 | -32,152 |
Property and equipment, net, excluding Construction in process | 26,829 | 25,396 |
Construction in process | 2,222 | 5,337 |
Property and equipment, net | 29,051 | 30,733 |
Land | ||
Property and equipment | ||
Property and equipment, gross, excluding Construction in process | 337 | 338 |
Building | ||
Property and equipment | ||
Property and equipment, gross, excluding Construction in process | 2,643 | 2,653 |
Estimated Useful Life | 33 years | |
Machinery and equipment | ||
Property and equipment | ||
Fair value of the property and equipment acquired | 4,420 | |
Property and equipment, gross, excluding Construction in process | 51,652 | 47,476 |
Machinery and equipment | Minimum | ||
Property and equipment | ||
Estimated Useful Life | 7 years | |
Machinery and equipment | Maximum | ||
Property and equipment | ||
Estimated Useful Life | 10 years | |
Furniture, fixtures and leasehold improvements | ||
Property and equipment | ||
Fair value of the property and equipment acquired | 30 | |
Property and equipment, gross, excluding Construction in process | 7,150 | 7,081 |
Furniture, fixtures and leasehold improvements | Minimum | ||
Property and equipment | ||
Estimated Useful Life | 3 years | |
Furniture, fixtures and leasehold improvements | Maximum | ||
Property and equipment | ||
Estimated Useful Life | 5 years | |
Construction in process | ||
Property and equipment | ||
Fair value of the property and equipment acquired | $732 |
Goodwill_Trademarks_and_Other_2
Goodwill, Trademarks and Other Intangible Assets (Details) (USD $) | 0 Months Ended | 6 Months Ended |
In Thousands, unless otherwise specified | Jul. 12, 2013 | Jun. 29, 2014 |
Changes in the carrying amount of goodwill | ||
Balance at the beginning of the period | $51,225 | |
Effect of foreign currency translation | -37 | |
Balance at the end of the period | 51,188 | |
Acquired indefinite-lived intangible for the Colt brand and related trademarks | 50,100 | |
Impairment charge | $0 |
Goodwill_Trademarks_and_Other_3
Goodwill, Trademarks and Other Intangible Assets (Details 2) (New Colt, USD $) | 0 Months Ended | |
In Thousands, unless otherwise specified | Jul. 12, 2013 | Jul. 12, 2013 |
Acquired finite-lived intangible assets: | ||
Acquired finite-lived intangible assets | $9,340 | |
License agreements | ||
Acquired finite-lived intangible assets: | ||
Acquired finite-lived intangible assets | 5,240 | |
Weighted-average useful lives of acquired assets | 6 years | |
Developed technology | ||
Acquired finite-lived intangible assets: | ||
Acquired finite-lived intangible assets | 2,970 | |
Weighted-average useful lives of acquired assets | 20 years | |
Backlog | ||
Acquired finite-lived intangible assets: | ||
Acquired finite-lived intangible assets | $1,130 | |
Weighted-average useful lives of acquired assets | 3 years |
Goodwill_Trademarks_and_Other_4
Goodwill, Trademarks and Other Intangible Assets (Details 3) (USD $) | 6 Months Ended | 12 Months Ended |
In Thousands, unless otherwise specified | Jun. 29, 2014 | Dec. 31, 2013 |
Net carrying value of intangible assets with finite lives | ||
Gross Carrying Amount | $22,037 | $22,071 |
Accumulated Amortization | -10,271 | -8,656 |
Net | 11,766 | 13,415 |
Expected annual amortization expense | ||
2014 | 3,270 | |
2015 | 2,783 | |
2016 | 1,926 | |
2017 | 1,186 | |
2018 | 871 | |
Customer relationship Canadian Government | ||
Net carrying value of intangible assets with finite lives | ||
Gross Carrying Amount | 2,360 | 2,369 |
Accumulated Amortization | -714 | -678 |
Net | 1,646 | 1,691 |
Estimated Useful Life | 30 years | 30 years |
Customer relationships other | ||
Net carrying value of intangible assets with finite lives | ||
Gross Carrying Amount | 6,137 | 6,160 |
Accumulated Amortization | -4,229 | -4,077 |
Net | 1,908 | 2,083 |
Estimated Useful Life | 20 years | 20 years |
License agreements | ||
Net carrying value of intangible assets with finite lives | ||
Gross Carrying Amount | 5,240 | 5,240 |
Accumulated Amortization | -1,614 | -805 |
Net | 3,626 | 4,435 |
Estimated Useful Life | 6 years | 6 years |
Backlog | ||
Net carrying value of intangible assets with finite lives | ||
Gross Carrying Amount | 1,720 | 1,722 |
Accumulated Amortization | -916 | -604 |
Net | 804 | 1,118 |
Estimated Useful Life | 3 years | 3 years |
Technology-based intangibles | ||
Net carrying value of intangible assets with finite lives | ||
Gross Carrying Amount | 6,580 | 6,580 |
Accumulated Amortization | -2,798 | -2,492 |
Net | $3,782 | $4,088 |
Technology-based intangibles | Minimum | ||
Net carrying value of intangible assets with finite lives | ||
Estimated Useful Life | 15 years | 15 years |
Technology-based intangibles | Maximum | ||
Net carrying value of intangible assets with finite lives | ||
Estimated Useful Life | 20 years | 20 years |
Notes_Payable_and_LongTerm_Deb2
Notes Payable and Long-Term Debt (Details) (USD $) | 3 Months Ended | 6 Months Ended | 0 Months Ended | 3 Months Ended | 0 Months Ended | ||||||||
Jun. 29, 2014 | Jun. 30, 2013 | Jun. 29, 2014 | Jun. 30, 2013 | Jul. 12, 2013 | Mar. 30, 2014 | Aug. 06, 2014 | Nov. 10, 2009 | Nov. 17, 2014 | Sep. 12, 2014 | Dec. 31, 2013 | Sep. 29, 2011 | Feb. 09, 2015 | |
item | |||||||||||||
Notes payable and long-term debt | |||||||||||||
Lenders fees and legal expenses | $3,319,000 | $3,319,000 | $3,932,000 | ||||||||||
Principal repayments | 625,000 | ||||||||||||
Interest payments | 12,468,000 | 11,401,000 | |||||||||||
Principal repayments which are due quarterly on the last day of each calendar quarter | |||||||||||||
Total | 308,305,000 | 308,305,000 | 301,900,000 | ||||||||||
Line of credit advance | 13,500,000 | 13,500,000 | 13,000,000 | 7,083,000 | |||||||||
Outstanding debt balances | |||||||||||||
Total | 308,305,000 | 308,305,000 | 301,900,000 | ||||||||||
Less: current portion | -14,125,000 | -14,125,000 | -12,083,000 | ||||||||||
Long-term debt | 294,180,000 | 294,180,000 | 289,817,000 | ||||||||||
Outstanding debt balances | |||||||||||||
Amortization of discount | 308,000 | 102,000 | 613,000 | 206,000 | |||||||||
Amortization of deferred financing costs | 604,000 | 414,000 | 1,211,000 | 828,000 | |||||||||
Subsequent event | |||||||||||||
Principal repayments which are due quarterly on the last day of each calendar quarter | |||||||||||||
Line of credit advance | 13,500,000 | ||||||||||||
Colt Finance Corp | |||||||||||||
Outstanding debt balances | |||||||||||||
Percentage of ownership | 100.00% | 100.00% | 100.00% | 100.00% | |||||||||
Credit Agreement | |||||||||||||
Principal repayments which are due quarterly on the last day of each calendar quarter | |||||||||||||
Total | 13,500,000 | 13,500,000 | 7,083,000 | ||||||||||
Maximum borrowing capacity | 50,000,000 | ||||||||||||
Annual fee on unused available balance payable quarterly (as a percent) | 0.50% | ||||||||||||
Annual servicing fee | 40,000 | ||||||||||||
Outstanding debt balances | |||||||||||||
Total | 13,500,000 | 13,500,000 | 7,083,000 | ||||||||||
Outstanding debt balances | |||||||||||||
Number of consecutive days threshold | 60 days | ||||||||||||
Credit Agreement | Subsequent event | |||||||||||||
Principal repayments which are due quarterly on the last day of each calendar quarter | |||||||||||||
Maximum borrowing capacity | 33,000,000 | ||||||||||||
Letters of credit outstanding | 4,800,000 | ||||||||||||
Credit Agreement | Canadian Banker's Acceptance Rate | |||||||||||||
Notes payable and long-term debt | |||||||||||||
Variable interest rate base | Canadian Banker's Acceptance Rate | ||||||||||||
Credit Agreement | Lender's prime rate | |||||||||||||
Notes payable and long-term debt | |||||||||||||
Variable interest rate base | Lender's prime rate | ||||||||||||
Credit Agreement | Minimum | |||||||||||||
Principal repayments which are due quarterly on the last day of each calendar quarter | |||||||||||||
Excess availability calculation, trade payables, number of days past due | 60 days | ||||||||||||
Excess availability threshold amount | 11,000,000 | 11,000,000 | |||||||||||
Credit Agreement | Maximum | |||||||||||||
Principal repayments which are due quarterly on the last day of each calendar quarter | |||||||||||||
Excess availability, threshold limit | 50,000,000 | 50,000,000 | |||||||||||
Term Loan | |||||||||||||
Notes payable and long-term debt | |||||||||||||
Lenders fees and legal expenses | 2,293,000 | ||||||||||||
Prepayment premium (as a percent) | 2.00% | ||||||||||||
Principal repayments | 625,000 | 625,000 | |||||||||||
Interest payments | 1,308,000 | 1,310,000 | |||||||||||
Principal repayments which are due quarterly on the last day of each calendar quarter | |||||||||||||
Remaining 2014 | 625,000 | 625,000 | |||||||||||
2015 | 5,625,000 | 5,625,000 | |||||||||||
2016 | 41,875,000 | 41,875,000 | |||||||||||
Total | 48,125,000 | 48,125,000 | 46,833,000 | ||||||||||
Outstanding debt balances | |||||||||||||
Total | 48,125,000 | 48,125,000 | 46,833,000 | ||||||||||
Outstanding debt balances | |||||||||||||
Financing fees incurred | 2,120,000 | ||||||||||||
Term Loan | Subsequent event | |||||||||||||
Notes payable and long-term debt | |||||||||||||
Number of rolling quarters for which financial covenants were eliminated | 4 | ||||||||||||
Number of rolling quarters for which financial covenants were modified | 4 | ||||||||||||
Principal installment payments not to be paid under option granted | 1,875,000 | ||||||||||||
Prepayment premium (as a percent) | 6.00% | ||||||||||||
Extension term granted to deliver financial information to lenders | 30 days | ||||||||||||
Amendment fee agreed to be paid | 500,000 | ||||||||||||
Term Loan | 3-month LIBOR | |||||||||||||
Notes payable and long-term debt | |||||||||||||
Basis spread on variable rate (as a percent) | 9.75% | ||||||||||||
Variable interest rate base | 3-month LIBOR | ||||||||||||
Term Loan | Base rate | |||||||||||||
Notes payable and long-term debt | |||||||||||||
Alternative reference rate if greater than 3-month LIBOR | 1.00% | ||||||||||||
Letters of credit facility | |||||||||||||
Principal repayments which are due quarterly on the last day of each calendar quarter | |||||||||||||
Maximum borrowing capacity | 20,000,000 | ||||||||||||
Letters of credit outstanding | 3,906,000 | 3,906,000 | 3,486,000 | ||||||||||
Senior Notes | |||||||||||||
Notes payable and long-term debt | |||||||||||||
Notes issued | 250,000,000 | ||||||||||||
Lenders fees and legal expenses | 3,522,000 | ||||||||||||
Principal repayments which are due quarterly on the last day of each calendar quarter | |||||||||||||
Total | 248,204,000 | 248,204,000 | 247,984,000 | ||||||||||
Interest rate (as a percent) | 8.75% | ||||||||||||
Principal repayments required until maturity | 0 | 0 | |||||||||||
Outstanding debt balances | |||||||||||||
Total | 248,204,000 | 248,204,000 | 247,984,000 | ||||||||||
Senior Notes | Subsequent event | |||||||||||||
Notes payable and long-term debt | |||||||||||||
Interest payments | 10,900,000 | ||||||||||||
Senior Notes | Minimum | |||||||||||||
Principal repayments which are due quarterly on the last day of each calendar quarter | |||||||||||||
Aggregate default indebtedness | $20,000,000 | $20,000,000 |
Accrued_Expenses_Details
Accrued Expenses (Details) (USD $) | Jun. 29, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Accrued Expenses | ||
Accrued compensation and benefits | $4,811 | $7,154 |
Accrued contract obligation expense | 2,411 | 1,194 |
Accrued federal, excise and other taxes | 3,009 | 4,902 |
Accrued interest | 4,111 | 2,879 |
Accrued commissions | 1,129 | 929 |
Other accrued expenses | 5,568 | 5,100 |
Total accrued expenses | $21,039 | $22,158 |
Income_Taxes_Details
Income Taxes (Details) (USD $) | 6 Months Ended | 0 Months Ended | |
In Thousands, unless otherwise specified | Jun. 29, 2014 | Apr. 16, 2014 | Dec. 31, 2013 |
item | |||
Income Taxes | |||
Number of units to which highest taxable income allocated | 1 | ||
New Colt Holding Corp. | |||
Income taxes | |||
Ownership percentage | 100.00% | 100.00% | |
Colt Canada | |||
Income taxes | |||
Dividends paid | $2,000 | ||
Colt International | Colt Canada | |||
Income taxes | |||
Ownership percentage | 100.00% | 100.00% | |
Colt International | Colt Canada | |||
Income taxes | |||
Rate to withhold taxes on dividends (as a percent) | 5.00% | ||
Colt Defense and Colt Technical Services LLC | Colt International | |||
Income taxes | |||
Ownership percentage | 100.00% | 100.00% | |
Colt Defense LLC and New Colt | Colt's Manufacturing | |||
Income taxes | |||
Ownership percentage | 100.00% |
Income_Taxes_Details_2
Income Taxes (Details 2) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 29, 2014 | Jun. 30, 2013 | Jun. 29, 2014 | Jun. 30, 2013 |
Components of income (loss) before provision for income taxes | ||||
Current | $141 | $3 | $52 | $744 |
Deferred | -122 | 75 | -119 | 15 |
Total | $19 | $78 | ($67) | $759 |
Pension_and_Postretirement_Ben2
Pension and Postretirement Benefits (Details) (USD $) | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||
Jun. 29, 2014 | Jun. 30, 2013 | Jun. 29, 2014 | Jun. 30, 2013 | Dec. 31, 2013 | Jun. 29, 2014 | |
item | item | |||||
Pension plans | ||||||
Pension and postretirement benefits | ||||||
Number of noncontributory plans | 4 | |||||
Additional benefits accrued since effective dates of the freezes of plan | $0 | $0 | 0 | |||
Components of income and cost recognized in our consolidated statement of operations | ||||||
Interest cost | 413,000 | 277,000 | 792,000 | 550,000 | ||
Expected return on assets | -461,000 | -365,000 | -955,000 | -730,000 | ||
Amortization of unrecognized loss | 27,000 | 109,000 | 93,000 | 214,000 | ||
Net periodic cost (income) | -21,000 | 21,000 | -70,000 | 34,000 | ||
Hourly Plan | ||||||
Pension and postretirement benefits | ||||||
Number of hourly defined benefit plans | 2 | |||||
Salaried Plan | ||||||
Pension and postretirement benefits | ||||||
Number of salaried defined benefit plans | 2 | |||||
Postretirement health cost coverage | ||||||
Pension and postretirement benefits | ||||||
Monthly maximum contribution to the cost of providing retiree health care benefits (in dollars per employee) | 250 | |||||
Number of postretirement health care plans | 2 | |||||
Curtailment of postretirement health care plan | 98,000 | 98,000 | ||||
Components of income and cost recognized in our consolidated statement of operations | ||||||
Service cost | 170,000 | 162,000 | 346,000 | 226,000 | ||
Interest cost | 252,000 | 112,000 | 467,000 | 244,000 | ||
Curtailment of postretirement health plan | -98,000 | -98,000 | ||||
Amortization of unrecognized prior service costs | -33,000 | -43,000 | -76,000 | -86,000 | ||
Amortization of unrecognized loss | 57,000 | 51,000 | 66,000 | 122,000 | ||
Net periodic cost (income) | $348,000 | $282,000 | $705,000 | $506,000 |
Accumulated_Deficit_Details
Accumulated Deficit (Details) | Jun. 29, 2014 | Dec. 31, 2013 |
Colt Defense LLC Accumulated Deficit | ||
Authorized preferred units (in shares) | 250,000 | |
Preferred units issued (in shares) | 0 | |
Common units | ||
Colt Defense LLC Accumulated Deficit | ||
Authorized common units (in shares) | 1,000,000 | |
Common units issued (in shares) | 132,174 | 132,174 |
Common units outstanding (in shares) | 132,174 | 132,174 |
Class B common units | ||
Colt Defense LLC Accumulated Deficit | ||
Authorized common units (in shares) | 18,878 | |
Common units issued (in shares) | 0 |
Accumulated_Deficit_Details_2
Accumulated Deficit (Details 2) (USD $) | 3 Months Ended | 0 Months Ended | ||||||
In Thousands, except Share data, unless otherwise specified | Jun. 29, 2014 | Mar. 30, 2014 | Jun. 30, 2013 | Mar. 31, 2013 | Jul. 12, 2013 | Jul. 12, 2013 | Mar. 22, 2013 | Dec. 31, 2013 |
Colt defense LLC accumulated deficit | ||||||||
Tax distribution payments to members | $683 | $0 | $1,357 | $0 | ||||
State of Connecticut members' withholding | 530 | |||||||
Distribution classified as a long term liability | 2,277 | 2,277 | ||||||
New Colt | ||||||||
Colt defense LLC accumulated deficit | ||||||||
Aggregate purchase price paid in cash | 5,000 | |||||||
Merger consideration reinvested by certain investors | 4,000 | |||||||
Common units | New Colt | ||||||||
Colt defense LLC accumulated deficit | ||||||||
Aggregate consideration from issue and sale of common units | 9,000 | |||||||
Common units | Blackstone Funds | ||||||||
Colt defense LLC accumulated deficit | ||||||||
Repurchase of common units (in shares) | 31,165.59 | |||||||
Common membership units held by the Blackstone Funds (as a percent) | 100.00% | |||||||
Aggregate purchase price | $14,000 | |||||||
Common units issued and sold (in shares) | 31,165.59 |
Common_Unit_Compensation_Detai
Common Unit Compensation (Details) (USD $) | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||
In Thousands, except Share data, unless otherwise specified | Jun. 29, 2014 | Jun. 30, 2013 | Jun. 29, 2014 | Jun. 30, 2013 | Dec. 31, 2013 | Mar. 02, 2012 |
Common Unit Compensation | ||||||
Nonvoting Class B common units reserved for issuance in connection with awards under the Plan (in shares) | 18,878 | |||||
Term of each option from the grant date | P10Y | |||||
Options granted (in shares) | 5,300 | |||||
Weighted-average exercise price (in dollars per share) | $288.78 | |||||
Compensation expense | ||||||
Allocated share-based compensation expense in general and administrative expense | $65 | $1 | $82 | $0 |
Transactions_with_Related_Part2
Transactions with Related Parties (Details) (USD $) | 3 Months Ended | 6 Months Ended | 1 Months Ended | |||
In Thousands, unless otherwise specified | Jun. 29, 2014 | Jun. 30, 2013 | Jun. 29, 2014 | Jun. 30, 2013 | Jul. 31, 2013 | Jul. 31, 2007 |
Transactions with Certain Other Parties | ||||||
Annual advisory fees | $250 | $108 | $500 | $216 | ||
New Colt | ||||||
Transactions with Certain Other Parties | ||||||
Net sales to New Colt | 21,310 | 43,835 | ||||
Purchases from New Colt | 892 | 1,887 | ||||
Administration and services fees charged to New Colt | 442 | 883 | ||||
West Hartford facility | ||||||
Transactions with Certain Other Parties | ||||||
Rent expense | 210 | 206 | 421 | 412 | ||
Sciens Institutional and Sciens Management | ||||||
Transactions with Certain Other Parties | ||||||
Annual advisory fees | 250 | 108 | 500 | 216 | ||
Consulting Agreement | Sciens Institutional | ||||||
Transactions with Certain Other Parties | ||||||
Aggregate annual advisory fees | 350 | |||||
Aggregate annual fees of agreement | 650 | |||||
Archive Services Agreement | Archives Properties | ||||||
Transactions with Certain Other Parties | ||||||
Aggregate annual fees of agreement | $241 |
Commitments_and_Contingencies_1
Commitments and Contingencies (Details) (USD $) | 3 Months Ended | 6 Months Ended | 12 Months Ended | 0 Months Ended | 3 Months Ended | |||
In Thousands, unless otherwise specified | Jun. 29, 2014 | Jun. 30, 2013 | Jun. 29, 2014 | Jun. 30, 2013 | Dec. 31, 2013 | Jul. 01, 2014 | Sep. 29, 2014 | Dec. 31, 2011 |
item | item | item | sqft | |||||
Commitments and contingencies | ||||||||
Contract obligation expense | $4,779 | $5,090 | $3,381 | |||||
Net sales | 49,633 | 64,212 | 99,713 | 128,061 | ||||
Gross profit | 4,993 | 18,382 | 14,687 | 37,119 | ||||
Accrued contract obligation expenses | 2,411 | 2,411 | 1,194 | |||||
Other long-term liabilities | 3,139 | 3,139 | 2,230 | |||||
Deferred income | 17,867 | 17,867 | 19,467 | |||||
Reduction of salaried employees | 24 | |||||||
Reduction of hourly employees | 64 | |||||||
Severance expenses | 382 | |||||||
Area of lease facility with Osceola County in Florida (in square feet) | 16,000 | |||||||
Contributed amount of funds to the County to assist with the cost of the renovations | 250 | |||||||
Minimum capital investment | 2,500 | 2,500 | ||||||
Capital investment in lease | 181 | 181 | ||||||
Lease term | 12 years | |||||||
Lease payments due for the initial five years | 0 | 0 | ||||||
Lease initial specific period | 5 years | |||||||
Lease annual cost | 108 | |||||||
Lease annual charge accounted under straight-line basis | 78 | |||||||
Deferred lease expense | 75 | 75 | 36 | |||||
Accrued contractual penalty | 75 | 75 | 50 | |||||
Subsequent event | ||||||||
Commitments and contingencies | ||||||||
Reduction of salaried employees | 9 | 9 | ||||||
Severance expenses | 164 | |||||||
M240 Program | ||||||||
Commitments and contingencies | ||||||||
Incremental contract obligation expense | 4,779 | |||||||
Incremental contract obligation expense related to inventory reserves | 1,997 | |||||||
Incremental contract obligation expense excluding inventory reserves | 2,782 | |||||||
Inventory reserves | 1,619 | 1,619 | 639 | |||||
Accrued contract obligation expenses | 3,550 | 3,550 | 1,194 | |||||
Other long-term liabilities | 1,139 | 1,139 | 0 | |||||
Deferred income | 6,820 | 6,820 | 6,820 | |||||
Term to retrofit previously delivered units | 12 months | |||||||
M249 contract | ||||||||
Commitments and contingencies | ||||||||
No-Cost Cancellation expense | 480 | |||||||
No-Cost Cancellation expense related to inventory write-off | 344 | |||||||
No-Cost Cancellation expense related to accruals for other liabilities | 136 | |||||||
Adjustments | ||||||||
Commitments and contingencies | ||||||||
Net sales | -23 | -23 | ||||||
Gross profit | -88 | -102 | ||||||
Previously reported | ||||||||
Commitments and contingencies | ||||||||
Net sales | 64,235 | 128,084 | ||||||
Gross profit | 18,470 | 37,221 | ||||||
Previously reported | M240 Program | ||||||||
Commitments and contingencies | ||||||||
Inventory reserves | 206 | |||||||
M240 Program - contract modification and contract obligation expense | Adjustments | ||||||||
Commitments and contingencies | ||||||||
Net sales | -6,820 | |||||||
Gross profit | -10,201 | |||||||
Capital expenditures for machinery and equipment | ||||||||
Commitments and contingencies | ||||||||
Unconditional purchase obligations | 981 | 981 | 892 | |||||
Standby letters of credit | Secured by restricted cash | ||||||||
Commitments and contingencies | ||||||||
Standby letters of credit | 1,181 | 1,181 | 1,185 | |||||
Standby letters of credit | Secured by Credit Agreement | ||||||||
Commitments and contingencies | ||||||||
Standby letters of credit | 3,906 | 3,906 | 3,486 | |||||
Standby letters of credit | Established by a sales agent on behalf of Colt | ||||||||
Commitments and contingencies | ||||||||
Standby letters of credit | 74 | 74 | 74 | |||||
Industrial Cooperation Agreements | ||||||||
Commitments and contingencies | ||||||||
Remaining gross offset purchase commitments | 64,937 | 64,937 | 64,131 | |||||
Remaining net offset purchase commitments, accrual amount | $1,648 | $1,648 | $1,639 |
Segment_Information_Details
Segment Information (Details) | 6 Months Ended | 12 Months Ended | 0 Months Ended |
Jun. 29, 2014 | Dec. 31, 2013 | Jul. 12, 2013 | |
item | item | item | |
Segment information | |||
Number of operating segments | 2 | 2 | |
New Colt | |||
Segment information | |||
Number of manufacturers of Colt firearms to be consolidated | 2 |
Segment_Information_Details_2
Segment Information (Details 2) (USD $) | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||
In Thousands, unless otherwise specified | Jun. 29, 2014 | Jun. 30, 2013 | Jun. 29, 2014 | Dec. 31, 2013 | Jun. 30, 2013 | Dec. 31, 2013 |
Statement of Operations Data: | ||||||
Net (loss) income | ($12,589) | $4,387 | ($20,535) | $9,516 | ||
Income tax (benefit) expense | 19 | 78 | -67 | 759 | ||
Depreciation and amortization | 2,369 | 1,206 | 4,649 | 2,368 | ||
Interest expense, net | 7,859 | 6,069 | 15,543 | 12,063 | ||
Sciens fees and expenses | 250 | 108 | 500 | 216 | ||
Transaction costs | 416 | 416 | ||||
Restructuring costs | -76 | -76 | ||||
M240 Program contract obligation expense | 4,779 | 5,090 | 3,381 | |||
Business development costs | 9 | 169 | 509 | 244 | ||
Severance costs | 382 | 527 | 782 | |||
Other (income)/expense, net | -42 | -199 | -113 | -590 | ||
Adjusted EBITDA | $2,960 | $12,234 | $6,027 | $24,992 |
Segment_Information_Details_3
Segment Information (Details 3) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 29, 2014 | Jun. 30, 2013 | Jun. 29, 2014 | Jun. 30, 2013 |
Product Information | ||||
Net sales | $49,633 | $64,212 | $99,713 | $128,061 |
New Colt | ||||
Product Information | ||||
Net sales | 19,300 | 36,400 | ||
Long guns | ||||
Product Information | ||||
Net sales | 15,870 | 53,599 | 40,307 | 105,870 |
Handguns | ||||
Product Information | ||||
Net sales | 18,570 | 1,260 | 33,890 | 2,521 |
Spares and other | ||||
Product Information | ||||
Net sales | $15,193 | $9,353 | $25,516 | $19,670 |
Segment_Information_Details_4
Segment Information (Details 4) (USD $) | 3 Months Ended | 6 Months Ended | |||
In Thousands, unless otherwise specified | Jun. 29, 2014 | Jun. 30, 2013 | Jun. 29, 2014 | Jun. 30, 2013 | Dec. 31, 2013 |
Geographical Information | |||||
Net sales | $49,633 | $64,212 | $99,713 | $128,061 | |
Long-lived assets | 29,051 | 29,051 | 30,733 | ||
United States | |||||
Geographical Information | |||||
Net sales | 31,725 | 38,985 | 73,220 | 74,693 | |
Long-lived assets | 24,307 | 24,307 | 25,745 | ||
Canada | |||||
Geographical Information | |||||
Net sales | 3,960 | 4,202 | 8,317 | 14,953 | |
Long-lived assets | 4,744 | 4,744 | 4,988 | ||
Latin America/Caribbean | |||||
Geographical Information | |||||
Net sales | 1,185 | 43 | 2,970 | 1,044 | |
Middle East/Africa | |||||
Geographical Information | |||||
Net sales | 1,609 | 532 | 3,333 | 570 | |
Europe | |||||
Geographical Information | |||||
Net sales | 5,309 | 3,272 | 5,733 | 4,603 | |
Asia/Pacific | |||||
Geographical Information | |||||
Net sales | $5,845 | $17,178 | $6,140 | $32,198 |
Segment_Information_Details_5
Segment Information (Details 5) (Net sales, Customer concentration risk) | 3 Months Ended | 6 Months Ended | ||
Jun. 29, 2014 | Jun. 30, 2013 | Jun. 29, 2014 | Jun. 30, 2013 | |
Direct foreign customer | ||||
Major Customer Information | ||||
Percentage of net sales | 24.00% | |||
Number of major customers | 1 | 2 | ||
Direct foreign customer, one | ||||
Major Customer Information | ||||
Percentage of net sales | 24.00% | |||
Direct foreign customer, two | ||||
Major Customer Information | ||||
Percentage of net sales | 11.00% | |||
Colt's Manufacturing | ||||
Major Customer Information | ||||
Percentage of net sales | 33.00% | 34.00% | ||
New Colt | ||||
Major Customer Information | ||||
Percentage of net sales | 35.00% | 35.00% | ||
Commercial customer | ||||
Major Customer Information | ||||
Number of major customers | 0 | |||
Commercial customer | Maximum | ||||
Major Customer Information | ||||
Percentage of net sales | 10.00% | |||
U.S. Government | ||||
Major Customer Information | ||||
Percentage of net sales | 5.80% | 13.00% | 6.20% | 13.00% |
Concentration_of_risk_Details
Concentration of risk (Details) | 0 Months Ended | 6 Months Ended | 12 Months Ended |
Mar. 30, 2014 | Jun. 29, 2014 | Dec. 31, 2013 | |
item | |||
Agreement with UAW Local 376 | Colt's Manufacturing Company LLC | |||
Concentration of risks | |||
Term of contract | 5 years | ||
Number of employee covered | 529 | ||
Labor concentration risk | Agreement with UAW Local 376 | Colt's Manufacturing Company LLC | |||
Concentration of risks | |||
Term of contract | 5 years | ||
Number of employee covered | 529 | ||
Accounts receivable | Concentration of credit risk | |||
Concentration of risks | |||
Number of largest individual trade receivable balances | 2 | 2 | |
Accounts receivable | Concentration of credit risk | Customer with largest individual trade balance | |||
Concentration of risks | |||
Concentration risk, percentage | 23.00% | 28.00% | |
Accounts receivable | Concentration of credit risk | Customer with second largest individual trade balance | |||
Concentration of risks | |||
Concentration risk, percentage | 19.00% | 18.00% | |
U.S. workforce | Labor concentration risk | |||
Concentration of risks | |||
Concentration risk, percentage | 72.00% |
Fair_Value_of_Financial_Instru1
Fair Value of Financial Instruments (Details) (USD $) | Jun. 29, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Fair Value of Financial Instruments | ||
Carrying value of long-term debt | $294,180 | $289,817 |
Estimated fair value of long-term debt | $247,359 | $262,775 |
Accumulated_Other_Comprehensiv2
Accumulated Other Comprehensive Loss (Details) (USD $) | 3 Months Ended | 6 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 29, 2014 | Jun. 30, 2013 | Jun. 29, 2014 | Jun. 30, 2013 |
Components of accumulated other comprehensive loss | ||||
Balance at the beginning of the period | ($9,340) | ($13,842) | ||
Other comprehensive income before reclassifications | -1,550 | -1,550 | ||
Amounts reclassified from accumulated other comprehensive income | 36 | 117 | 83 | 250 |
Currency translation | 798 | -1,035 | -140 | -1,611 |
Net current period other comprehensive income | -1,607 | -1,361 | ||
Balance at the end of the period | -10,947 | -15,203 | -10,947 | -15,203 |
Unrecognized Prior Service Cost | ||||
Components of accumulated other comprehensive loss | ||||
Balance at the beginning of the period | 653 | 825 | ||
Other comprehensive income before reclassifications | -97 | |||
Amounts reclassified from accumulated other comprehensive income | -76 | -86 | ||
Net current period other comprehensive income | -173 | -86 | ||
Balance at the end of the period | 480 | 739 | 480 | 739 |
Unrecognized Loss | ||||
Components of accumulated other comprehensive loss | ||||
Balance at the beginning of the period | -10,836 | -17,399 | ||
Other comprehensive income before reclassifications | -1,453 | |||
Amounts reclassified from accumulated other comprehensive income | 159 | 336 | ||
Net current period other comprehensive income | -1,294 | 336 | ||
Balance at the end of the period | -12,130 | -17,063 | -12,130 | -17,063 |
Foreign Currency Translation | ||||
Components of accumulated other comprehensive loss | ||||
Balance at the beginning of the period | 843 | 2,722 | ||
Currency translation | -140 | -1,611 | ||
Net current period other comprehensive income | -140 | -1,611 | ||
Balance at the end of the period | $703 | $1,121 | $703 | $1,121 |
Subsequent_Events_Details
Subsequent Events (Details) (USD $) | 6 Months Ended | 9 Months Ended | 3 Months Ended | 0 Months Ended | |||||||
Jun. 29, 2014 | Jun. 30, 2013 | Sep. 28, 2014 | Jun. 29, 2014 | Mar. 30, 2014 | Feb. 09, 2015 | 20-May-15 | Nov. 17, 2014 | Apr. 14, 2015 | Nov. 10, 2009 | Sep. 29, 2011 | |
Subsequent events | |||||||||||
Interest payments | $12,468,000 | $11,401,000 | |||||||||
Senior Notes | |||||||||||
Subsequent events | |||||||||||
Interest rate (as a percent) | 8.75% | ||||||||||
MS Term Loan | |||||||||||
Subsequent events | |||||||||||
Period following each fiscal year within which to provide audited financials per debt covenant | 90 days | ||||||||||
Term Loan | |||||||||||
Subsequent events | |||||||||||
Interest payments | 1,308,000 | 1,310,000 | |||||||||
Credit Agreement | |||||||||||
Subsequent events | |||||||||||
Maximum borrowing capacity | 50,000,000 | ||||||||||
Subsequent event | Cortland | Credit Agreement | |||||||||||
Subsequent events | |||||||||||
Additional liquidity | 13,200,000 | ||||||||||
Interest rate (as a percent) | 10.00% | ||||||||||
Subsequent event | Cortland | Credit Agreement | Term loan due August 15, 2018 | |||||||||||
Subsequent events | |||||||||||
Face amount of term loan facility | 33,000,000 | ||||||||||
Subsequent event | Cortland | Letters of credit facility | |||||||||||
Subsequent events | |||||||||||
Maximum borrowing capacity | 7,000,000 | ||||||||||
Cash collateral | 5,300,000 | ||||||||||
Amount available under credit agreement | 1,700,000 | ||||||||||
Subsequent event | Senior Notes | |||||||||||
Subsequent events | |||||||||||
Minimum percentage of the aggregate principal amount of debt held for which holders may provide notice to the borrower for non-compliance | 25.00% | ||||||||||
Period from receipt of notice of non-compliance from holders that entity must cure debt before acceleration of repayment | 60 days | ||||||||||
Interest payments | 10,900,000 | ||||||||||
Subsequent event | MS Term Loan | |||||||||||
Subsequent events | |||||||||||
Face amount of term loan facility | 70,000,000 | ||||||||||
Additional liquidity | 4,100,000 | ||||||||||
Percentage of accrual of interest in cash | 8.00% | ||||||||||
Percentage of accrual of interest in kind | 2.00% | ||||||||||
Subsequent event | Term Loan | |||||||||||
Subsequent events | |||||||||||
Repayments of Debt | 53,000,000 | ||||||||||
Amount of premium payable | 4,300,000 | ||||||||||
Subsequent event | Credit Agreement | |||||||||||
Subsequent events | |||||||||||
Repayments of Debt | 12,100,000 | ||||||||||
Maximum borrowing capacity | 33,000,000 | ||||||||||
Threshold minimum borrowing capacity | 7,500,000 | ||||||||||
Letters of credit | $4,800,000 | ||||||||||
Subsequent event | Forecast | New Notes | |||||||||||
Subsequent events | |||||||||||
Interest rate (as a percent) | 10.00% | ||||||||||
Debt exchange ratio | 0.3 | ||||||||||
Minimum percentage of Senior Notes tendered necessary for closing of Exchange Offer | 98.00% | ||||||||||
Percentage of principal amount of debt to be cancelled in exchange for pro rata share of new debt issuance under Chapter 11 bankruptcy petitions | 100.00% | ||||||||||
Percentage of principal amount of debt tendered in exchange offer for similarity to debt restructuring under Chapter11 Bankruptcy petitions | 100.00% | ||||||||||
Subsequent event | Forecast | Senior Notes | |||||||||||
Subsequent events | |||||||||||
Additional consent payment ratio | 0.5 |