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.