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Document and Entity Information
3 Months Ended
Apr. 01, 2012
May 01, 2012
Document and Entity Information
Entity Registrant Name Colt Defense LLC
Entity Central Index Key 0001508677
Document Type 10-Q
Document Period End Date Apr 1, 2012
Amendment Flag false
Current Fiscal Year End Date --12-31
Entity Current Reporting Status Yes
Entity Filer Category Non-accelerated Filer
Entity Common Stock, Shares Outstanding 0
Document Fiscal Year Focus 2012
Document Fiscal Period Focus Q1
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Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Apr. 01, 2012
Dec. 31, 2011
Current assets:
Cash and cash equivalents $ 29,280 $ 38,236
Restricted cash 1,241 1,241
Accounts receivable, net 33,035 30,575
Inventories 35,781 36,215
Other current assets 2,527 2,481
Total current assets 101,864 108,748
Property and equipment, net 21,915 22,589
Goodwill 14,902 14,713
Intangible assets with finite lives, net 6,547 6,635
Deferred financing costs 8,882 9,312
Long-term restricted cash 810 810
Other assets 1,995 2,149
Total assets 156,915 164,956
Current liabilities:
Capital lease obligations - current portion 825 1,148
Accounts payable 8,805 11,114
Accrued compensation and benefits 3,462 4,984
Accrued commissions 1,110 2,872
Accrued expenses 5,674 5,410
Pension and retirement obligations - current portion 890 890
Accrued interest 8,422 2,923
Customer advances and deferred income 8,913 8,804
Accrued distributions to members 3,343
Total current liabilities 38,101 41,488
Long-term debt, less current portion 247,280 247,186
Pension and retirement liabilities 17,452 17,953
Other long-term liabilities 1,512 1,501
Total long-term liabilities 266,244 266,640
Total liabilities 304,345 308,128
Commitments and Contingencies (Note 10)      
Deficit:
Accumulated deficit (137,370) (130,769)
Accumulated other comprehensive loss (10,060) (12,403)
Total deficit (147,430) (143,172)
Total liabilities and deficit $ 156,915 $ 164,956
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Consolidated Statements of Operations (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Apr. 01, 2012
Apr. 03, 2011
Net sales $ 44,577 $ 48,497
Cost of sales 36,270 35,425
Gross profit 8,307 13,072
Selling and commissions 2,944 3,296
Research and development 1,265 727
General and administrative 4,304 3,477
Amortization of purchased intangibles 126 136
Operating (loss) income (332) 5,436
Interest expense 6,100 6,085
Other income, net (238) (29)
Non-operating expense 5,862 6,056
Loss before provision for foreign income taxes (6,194) (620)
Provision for foreign income taxes 416 1,139
Net loss $ (6,610) $ (1,759)
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Consolidated Statements of Comprehensive Loss (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Apr. 01, 2012
Apr. 03, 2011
Net loss $ (6,610) $ (1,759)
Other comprehensive income, net of tax:
Foreign currency translation adjustments 398 1,056
Change in pension and retirement benefit plans 1,945 96
Comprehensive loss $ (4,267) $ (607)
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Consolidated Statements of Changes in Cash Flows (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Apr. 01, 2012
Apr. 03, 2011
Operating Activities
Net loss $ (6,610) $ (1,759)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization 1,440 1,370
Amortization of financing fees 413 363
Deferred foreign income taxes (99) (43)
Amortization of debt discount 94 87
Pension curtailment expense 1,527
Amortization of deferred income (47)
Loss on sale/disposal of fixed assets 11
Common unit compensation expense 9
Changes in operating assets and liabilities:
Accounts receivable (2,338) (18,620)
Inventories 579 (5,262)
Prepaid expenses and other assets 61 404
Accounts payable and accrued expenses 29 12,225
Accrued pension and retirement liabilities (83) (171)
Customer advances and deferred income (45) 1,096
Other 129 47
Net cash used in operating activities:
Continuing operations (4,883) (10,310)
Discontinued operations (28)
Net cash used in operating activities (4,883) (10,338)
Investing Activities
Purchases of property and equipment (563) (1,215)
Proceeds from disposal of property 66
Net cash used in investing activities (497) (1,215)
Financing Activities
Capital lease obligation payments (323) (298)
Distributions paid to members (3,343)
Net cash used in financing activities (3,666) (298)
Effect of exchange rates on cash 90 287
Change in cash and cash equivalents (8,956) (11,564)
Cash and cash equivalents, beginning of period 38,236 61,444
Cash and cash equivalents, end of period 29,280 49,880
Supplemental Disclosure of Cash Flow Information
Cash paid for interest 84 63
Cash paid for foreign income taxes 1,599 572
Accrued distribution to members 12,889
Non-cash consideration for sale of equipment $ 75
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Basis of Presentation
3 Months Ended
Apr. 01, 2012
Basis of Presentation
Basis of Presentation

Note 1 — Basis of Presentation

 

The accompanying unaudited consolidated financial statements of Colt Defense LLC and Colt Finance Corp.  (the “Company”, “Colt”, “we”, or “us”) 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 months ended April 1, 2012 and April 3, 2011 have been included.  The financial information included in this quarterly report on Form 10-Q should be read in conjunction with the consolidated financial statements and notes in the Annual Report on Form 10-K for the fiscal year ended December 31, 2011, which was filed with the Securities and Exchange Commission on February 24, 2012. The consolidated balance sheet dated December 31, 2011 included in this quarterly report on Form 10-Q has been derived from the audited consolidated financial statements at that time, but does not include all disclosures required by GAAP.

 

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated.  We have reclassified certain prior period amounts to conform with our current year presentation. Operating results for the three months ended April 1, 2012 are not necessarily indicative of the results to be expected for any subsequent interim period or for the year ending December 31, 2012.

 

Recent Accounting Pronouncements

 

Presentation of Comprehensive Income — In June 2011, the Financial Accounting Standards Board (“FASB”) issued ASU 2011-05, which requires an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income, or in two separate but consecutive statements. This update eliminates the option to present components of other comprehensive income as part of the statement of equity, but it does not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. In December 2011, FASB issued ASU 2011-12, which amends ASU 2011-05. This amendment defers the requirement to present components of reclassifications of other comprehensive income on the face of the income statement. Both standards were effective for us beginning on January 1, 2012. The adoption of these standards had no impact on our consolidated financial statements.

 

Intangibles — Goodwill and Other — In September 2011, FASB issued ASU 2011-08, which provides entities the option to perform a qualitative assessment in order to determine whether additional quantitative impairment testing is necessary. This amendment is effective for reporting periods beginning after December 15, 2011. This amendment does not impact the quantitative testing methodology, should it be necessary. We adopted this standard on January 1, 2012 and it had no impact on our operating results or financial position.

 

Fair Value Measurement — In May 2011, FASB issued an amendment to revise the wording used to describe the requirements for measuring fair value and for disclosing information about fair value measurements. For many of the requirements, the FASB does not intend for the amendments to result in a change in the application of existing fair value measurement requirements, such as specifying that the concepts of the highest and best use and valuation premise in a fair value measurement are relevant only when measuring the fair value of nonfinancial assets. Other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements such as specifying that, in the absence of a Level 1 input, a reporting entity should apply premiums or discounts when market participants would do so when pricing the asset or liability. The amendment is effective for interim and annual periods beginning after December 15, 2011. We adopted this standard on January 1, 2012 and it had no impact on our operating results or financial position.

 

Goodwill

 

The net carrying amount of goodwill may change from period to period as a result of fluctuations in exchange rates at our Canadian operation.

 

Prior Period Adjustments

 

During the first quarter of 2011, we recorded a pre-tax adjustment of $127, related to immaterial errors in prior periods. Management has concluded based on its quantitative and qualitative analysis such amounts are not material to our operations.

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Accounts Receivable
3 Months Ended
Apr. 01, 2012
Accounts Receivable
Accounts Receivable

Note 2 — Accounts Receivable

 

Accounts receivable are net of an allowance for doubtful accounts of $0 and $1 at April 1, 2012 and December 31, 2011, respectively.

 

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Inventories
3 Months Ended
Apr. 01, 2012
Inventories
Inventories

Note 3 — Inventories

 

Inventories consist of:

 

 

 

April 1, 2012

 

December 31, 2011

 

Materials

 

$

24,875

 

$

22,422

 

Work in process

 

7,777

 

8,211

 

Finished products

 

3,129

 

5,582

 

 

 

$

35,781

 

$

36,215

 

 

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Notes Payable and Long-term Debt
3 Months Ended
Apr. 01, 2012
Notes Payable and Long-term Debt
Notes Payable and Long-term Debt

Note 4 — Notes Payable and Long-term Debt

 

Credit Agreement

 

On September 29, 2011, we entered into a credit agreement (the “Credit Agreement”) with Wells Fargo Capital Finance, LLC.  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, our obligations are secured by a first-priority security interest in substantially all of our assets, including accounts receivable, inventory and certain other collateral. 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 Offer 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 our quarterly average excess availability under the Credit Agreement.

 

The Credit Agreement limits the Company’s ability to incur additional indebtedness, make investments or certain payments, pay dividends and merge, acquire or sell assets. In addition, certain covenants would be triggered if excess availability were to fall below the specified level, including a fixed charge coverage ratio requirement.  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. The Credit Agreement contains customary events of default. In addition, if excess availability falls below $9,000 and the fixed charge coverage ratio is less than 1.0 to 1.0, the Company would be in default under the Credit Agreement. The Company was in compliance with all covenants and restrictions and there were no borrowings or letters of credit outstanding under the Credit Agreement as of April 1, 2012.

 

Senior Notes

 

On November 10, 2009, Colt Defense LLC and Colt Finance Corp, our 100%-owned subsidiary, jointly and severally co-issued $250,000 of unsecured senior notes (“the Senior Notes”). 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, commencing on May 15, 2010. We issued the Senior Notes at a discount of $3,522 from their principal 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 are not guaranteed by any of our subsidiaries and do not have any financial condition covenants that require us to maintain compliance with any financial ratios or measurements on a periodic basis. The Senior Notes do contain non-financial condition covenants that, among other things, limit our ability to incur additional indebtedness, enter into certain mergers or consolidations, incur certain liens and engage in certain transactions with our affiliates. In addition, the indenture restricts our ability to pay dividends or make other Restricted Payments (as defined in the indenture) to our members, subject to certain exceptions. Such restrictions are not expected to affect our ability to meet our cash obligations for the next 12 months. Additionally, the Senior Notes contain certain cross default provisions with other indebtedness, if such indebtedness in default aggregates to $20,000 or more.

 

The outstanding loan balances at April 1, 2012 and December 31, 2011 were as follows:

 

 

 

April 1, 2012

 

December 31, 2011

 

Senior notes principal amount

 

$

250,000

 

$

250,000

 

Unamortized discount

 

(2,720

)

(2,814

)

 

 

$

247,280

 

$

247,186

 

 

 

 

Three Months Ended

 

 

 

April 1, 2012

 

April 3, 2011

 

Effective interest rate

 

9.0

%

9.1

%

Amortization of discount

 

$

94

 

$

87

 

Amortization of deferred financing costs

 

413

 

363

 

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Income Taxes
3 Months Ended
Apr. 01, 2012
Income Taxes
Income Taxes

Note 5 - Income Taxes

 

As a limited liability company, we are treated as a partnership for U.S. federal and state income tax reporting purposes and therefore, are not subject to U.S. federal or state income taxes.  Our taxable income (loss) is reported to our members for inclusion in their individual tax returns.  Our Canadian operation files separate income tax returns in Canada. Our limited liability agreement requires that in any year in which U.S. taxable income is allocated to the members, we make distributions to members equal to 45% of the highest taxable income allocated to any one unit, to the extent our Governing Board determines that sufficient funds are available.

 

The provision (benefit) for foreign income taxes consists of the following:

 

 

 

Three Months Ended

 

 

 

April 1, 2012

 

April 3, 2011

 

Current

 

$

515

 

$

1,182

 

Deferred

 

(99

)

(43

)

Total

 

$

416

 

$

1,139

 

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Colt Defense LLC Deficit
3 Months Ended
Apr. 01, 2012
Colt Defense LLC Deficit
Colt Defense LLC Deficit

Note 6 — Colt Defense LLC Deficit

 

Our authorized capitalization consists of 1,000,000 common units and 250,000 preferred units. Common units issued and outstanding as of April 1, 2012 and December 31, 2011 were 132,174.  No preferred units have been issued.

 

In March 2012, we paid our members a tax distribution of $3,343, which had been accrued in December 2011.

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Common Unit Compensation
3 Months Ended
Apr. 01, 2012
Common Unit Compensation
Common Unit Compensation

Note 7 — 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 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 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 was estimated on the date of grant using the Black-Scholes valuation method.

 

In March 2012, options were granted for 11,325 common units at a weighted-average exercise price of $100.00 (not in thousands). For the three months ended April 1, 2012, we recorded $9 of common unit compensation expense in general and administrative expense in our Consolidated Statements of Operations. We did not have any common unit compensation expense in the first quarter of 2011.

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Pension, Savings and Postretirement Benefits
3 Months Ended
Apr. 01, 2012
Pension, Savings and Postretirement Benefits
Pension, Savings and Postretirement Benefits

Note 8 — Pension, Savings and Postretirement Benefits

 

We have two noncontributory, domestic defined benefit pension plans that cover substantially all eligible salaried and hourly U.S. employees.

 

On March 31, 2012, we agreed to a new two-year collective bargaining agreement with Local 376 of the United Auto Workers (“Union”). Under the terms of the new contract, the accrual of benefits for employees participating in our bargaining unit pension plan will freeze effective December 31, 2012. All new bargaining unit employees hired after April 1, 2012 are no longer eligible to participate in the bargaining unit defined benefit plan. Instead, they will be eligible for our defined contribution 401k retirement plan.

 

Pension benefits under the salaried defined benefit plans have been frozen since 2009. Accordingly, participants retain the pension benefits already accrued, however no additional benefits will accrue.

 

The components of cost recognized in our Consolidated Statements of Operations for our pension plans are as follows:

 

 

 

Three Months Ended

 

 

 

April 1, 2012

 

April 3, 2011

 

Service cost

 

$

106

 

$

72

 

Interest cost

 

269

 

271

 

Expected return on assets

 

(393

)

(387

)

Amortization of unrecognized prior service costs

 

42

 

42

 

Curtailment of bargaining unit plan

 

1,527

 

 

Amortization of unrecognized loss

 

220

 

123

 

Net periodic cost

 

$

1,771

 

$

121

 

 

We also provide certain postretirement health care coverage to retired U.S. employees who were subject to our collective bargaining agreement when they were employees. The cost of these postretirement benefits is determined actuarially and is recognized in our consolidated financial statements during the employees’ active working career.

 

The components of cost recognized in our Consolidated Statements of Operations for our post-retirement health plan are as follows:

 

 

 

Three Months Ended

 

 

 

April 1, 2012

 

April 3, 2011

 

Service cost

 

$

63

 

$

64

 

Interest cost

 

135

 

167

 

Amortization of unrecognized prior service costs

 

(58

)

(71

)

Amortization of unrecognized loss

 

19

 

2

 

Net periodic cost

 

$

159

 

$

162

 

 

Per our collective bargaining agreement, we cap our monthly contribution to the cost of providing retiree health care benefits at approximately $250 (not in thousands) per employee. For the year ended December 31, 2011, the cost per month was $186 (not in thousands) per employee. For the quarter ended April 1, 2012, the cost per month was $184 (not in thousands) per employee.

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Transactions with Related Parties
3 Months Ended
Apr. 01, 2012
Transactions with Related Parties
Transactions with Related Parties

Note 9- Transactions with Related Parties

 

We have a financial advisory agreement with Sciens Management LLC, an affiliate of Sciens Capital Management LLC. Under the terms of the agreement, we also reimburse the affiliate for expenses incurred in connection with the financial advisory services provided. The cost for these advisory services and the expenses are recorded within general and administrative expenses.

 

We have a license agreement (the “License”) with New Colt Holding Corp (“NCHC”), an affiliate, for the use of certain Colt trademarks. Under the terms of the License, we received a 20-year paid-up license for the use of the Colt trademarks, which expires December 31, 2023. Thereafter, the License may be extended for successive five-year periods. Consideration for the License included the transfer to NCHC’s wholly owned subsidiary, Colt’s Manufacturing Company LLC (“Colt’s Manufacturing”), of the Colt Match Target® rifle line of business, inventories of $18 and cash of $2,000. The total transferred of $2,018 is recorded in other assets and is being amortized over 20 years. This intangible had an unamortized balance of $1,185 at April 1, 2012 and $1,210 at December 31, 2011.

 

Effective July 1, 2007, we entered into a service agreement with Colt’s Manufacturing, an affiliated entity, which provides for remuneration for certain factory, accounting, data processing and management services provided by us to Colt’s Manufacturing. Since January 1, 2009, the annual fee has been $430.  In accordance with the terms of this agreement, we have provided Colt’s Manufacturing the required six-months notice that we do not wish to extend the service agreement, under existing terms, beyond the end of its term on June 30, 2012.

 

In May 2011, we signed a memorandum of understanding (“MOU”) with Colt’s Manufacturing to jointly coordinate the marketing and sales of rifles in the commercial market. For additional information about sales and accounts receivable under this MOU, see Note 12 Segment Information and Note 13 Concentration of Risk in this Form 10-Q. We also lease our West Hartford facility from an affiliate and we sublease a portion of our facility to Colt’s Manufacturing. In addition, Colt Security LLC (“Security”), a wholly owned subsidiary of Employee Plan Holding Corp., provides security guard services to us.

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Commitments and Contingencies
3 Months Ended
Apr. 01, 2012
Commitments and Contingencies
Commitments and Contingencies

Note 10 - 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:

 

 

 

April 1, 2012

 

December 31, 2011

 

Standby letters of credit secured by restricted cash

 

$

1,683

 

$

1,660

 

Guarantees of standby letters of credit established by a sales agent on behalf of Colt

 

804

 

804

 

 

At April 1, 2012 and December 31, 2011, we had unconditional purchase obligations related to capital expenditures for machinery and equipment of $1,713 and $2,102, respectively.

 

We also had certain Industrial Cooperation Agreements, which stipulate our commitments to provide offsetting business to certain countries that have purchased our products. We generally settle our offset purchase commitments under Industrial Cooperation Agreements through on-going business and/or cooperating with other contractors on their spending during the related period. Additionally, we identify future purchases and other satisfaction plans for the remainder of the offset purchase commitment period and should there be a projected net purchase commitment after such consideration, we accrue the estimated cost to settle the offset purchase commitment.

 

Our remaining gross offset purchase commitment is the total amount of offset purchase commitments reduced for claims submitted and approved by the governing agencies. At April 1, 2012 and December 31, 2011, our remaining gross offset purchase commitments totaled $59,225 and $58,466, respectively.  We have evaluated our settlement of our remaining gross offset purchase commitments through probable planned spending and other probable satisfaction plans to determine our net offset purchase commitment.  We have accrued $1,633 and $1,563 as of April 1, 2012 and December 31, 2011, respectively, based on our estimated cost of settling the remaining net offset purchase commitment.

 

We are involved in various legal claims and disputes in the ordinary course of our business.   As such, 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 various legal claims and disputes that could cause an increase or decrease in the amount of the liability that has been previously accrued.  During the first quarter of 2012, we accrued $0.7 million with respect to a potential settlement of a dispute.  In determination of this accrual, the Company has estimated a range of potential liability.  It is possible that the Company could incur losses in excess of any amounts accrued.  While management does not anticipate any such loss would have a material adverse impact on the Company’s consolidated financial position; however, it is possible that the final outcome could have a material impact on the Company’s results of operations or cash flows in any given period.

 

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Segment Information
3 Months Ended
Apr. 01, 2012
Segment Information
Segment Information

Note 11 —Segment Information

 

Our small arms weapons systems segment represents our core business, as substantially all of our operations are conducted through this segment. Our small arms weapons systems segment consists of two operating segments which have similar economic characteristics and have been aggregated into the Company’s only reportable segment.  The small arms weapons systems segment designs, develops and manufactures small arms weapons systems for military and law enforcement personnel both domestically and internationally. In addition, we sell rifles and carbines to our affiliate, Colt’s Manufacturing, which resells them into the commercial market.

 

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 and make operating decisions for the small arms weapons systems segment.  See the footnotes that follow the reconciliation tables below for additional information regarding the adjustments made to arrive at Adjusted EBITDA of the small arms weapons systems segment.

 

The following table represents a reconciliation of adjusted EBITDA to net loss:

 

Statement of Operations Data:

 

April 1, 2012

 

April 3, 2011

 

Adjusted EBITDA

 

$

2,743

 

$

6,939

 

Provision for foreign income taxes

 

(416

)

(1,139

)

Depreciation and amortization (i) 

 

(1,440

)

(1,370

)

Interest expense, net

 

(6,100

)

(6,085

)

Sciens fees and expenses (ii)

 

(108

)

(133

)

Pension curtailment expense (iii)

 

(1,527

)

 

Other income, net (iv)

 

238

 

29

 

Net loss

 

$

(6,610

)

$

(1,759

)

 

 

(i)

 

Includes depreciation and amortization of intangible assets.

(ii)

 

Includes fees and expenses pursuant to our financial advisory agreement with Sciens Management LLC, an affiliate of Sciens Capital Management.

(iii)

 

Noncash expense associated with the curtailment of our bargaining unit pension plan

(iv)

 

Includes expenses incurred in connection with transaction costs incurred in connection with our contemplated merger and acquisition activities, foreign currency exchange gains or losses, service income from an affiliate and other less significant charges not related to on-going operations.

 

Geographical Information

 

Geographic external revenues are attributed to the geographic regions based on the customer’s location of origin.  Our reported net sales in the United States include revenues that arise from sales to the U.S. Government under its Foreign Military Sales program, which involve product that is resold by the U.S. Government to foreign governments and that we generally ship directly to the foreign government.

 

The table below presents net sales for specific geographic regions:

 

 

 

Three Months Ended

 

 

 

April 1, 2012

 

April 3, 2011

 

United States

 

$

13,239

 

$

20,694

 

Canada

 

11,573

 

6,323

 

Asia/Pacific

 

15,207

 

7,930

 

Europe

 

2,344

 

11,993

 

Middle East/Africa

 

1,573

 

7

 

Latin America/Caribbean

 

641

 

1,550

 

 

 

$

44,577

 

$

48,497

 

 

Major Customer Information

 

For the three months ended April 1, 2012, sales to one domestic customer, Colt’s Manufacturing, represented 17% of net sales. For the three months ended April 1, 2011, sales to one domestic customer, the U.S. Government, represented 36% of net sales.

 

For the three months ended April 1, 2012, two direct foreign customers accounted for 34% and 20% of net sales, respectively. For the three months ended April 3, 2011, two direct foreign customers accounted for 17% and 15% of net sales, respectively.

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Concentration of risk
3 Months Ended
Apr. 01, 2012
Concentration of risk
Concentration of risk

Note 12 - Concentration of risk

 

Accounts Receivable

 

Financial instruments, which potentially subject us to concentration of credit risk, consist primarily of accounts receivable.  At April 1, 2012, the largest individual trade receivable balances accounted for 45%, 16% and 12% of total receivables, respectively. At December 31, 2011, the largest individual trade receivable balances accounted for 53%, 15% and 10% of total accounts receivables, respectively.

 

Labor

 

The Union represents approximately 61% of our U.S. workforce. On March 31, 2012, we and the Union agreed to a new, two-year collective bargaining agreement.

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Fair Value of Financial Instruments
3 Months Ended
Apr. 01, 2012
Fair Value of Financial Instruments
Fair Value of Financial Instruments

Note 13 — Fair Value of Financial Instruments

 

The carrying values of 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 our long-term debt of $247,280 and $247,186 at April 1, 2012 and December 31, 2011, respectively, was recorded at amortized cost. The estimated fair value of long-term debt of approximately $176,400 and $172,500 at April 1, 2012 and December 31, 2011, respectively, was based on quoted market prices, which are Level 1 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 April 1, 2012 and December 31, 2011, we 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, we did not have any transfers of assets and liabilities between Level 1 and Level 2 of the fair value measurement hierarchy during the three months ended April 1, 2012.

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Accumulated Other Comprehensive Loss
3 Months Ended
Apr. 01, 2012
Accumulated Other Comprehensive Loss
Accumulated Other Comprehensive Loss

Note 14 — 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, 2010

 

$

(201

)

$

(8,898

)

$

2,659

 

$

(6,440

)

Pension liability

 

43

 

123

 

 

166

 

Change in post-retirement health liability

 

(71

)

1

 

 

(70

)

Currency translation

 

 

 

1,056

 

1,056

 

Balance, April 3, 2011

 

(229

)

(8,774

)

3,715

 

(5,288

)

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2011

 

(261

)

(14,357

)

2,215

 

(12,403

)

Pension liability

 

619

 

1,365

 

 

1,984

 

Change in post-retirement health liability

 

(58

)

19

 

 

(39

)

Currency translation

 

 

 

398

 

398

 

 

 

 

 

 

 

 

 

 

 

Balance, April 1, 2012

 

$

300

 

$

(12,973

)

$

2,613

 

$

(10,060

)

 

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