10-Q/A

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(Mark one)

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934.

For the quarterly period ended June 29, 2014

OR

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934.

For the transition period from            to          

Commission file number 333-171547

Colt Defense LLC

Colt Finance Corp.

(Exact name of Registrant as specified in its charter)

Delaware	32-0031950
Delaware	27-1237687
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

547 New Park Avenue, West Hartford, CT	06110
(Address of principal executive offices)	(Zip Code)

(860) 232-4489

(Registrant’s telephone number, including area code)

Indicate by a check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  o   No x

Indicate by check mark whether the Registrant had submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for shorter period that the Registrant was required to submit and post such files).  Yes  x   No  o

Indicate by a check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer o Accelerated filer o Non-accelerated filer x Smaller reporting company o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes  o No x

The number of shares outstanding of the Registrant’s common stock as of May 29, 2015 was none.

EXPLANATORY NOTE

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 17 “Segment Information”). 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.  (See Note 2 “Summary of Significant Accounting Policies”).  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 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 disclosure revisions or 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.

Colt Retirement Defined Benefit Plan

As previously disclosed in our Form 8-K filed on February 10, 2015, we have determined that pension benefits for certain retirees that were hourly employees (“bargaining unit retirees”) covered by the Colt Retirement Defined Benefit Plan have been calculated incorrectly since the inception of the pension plans in 1990.  After working with our external actuarial pension plan consultant to determine which bargaining unit retirees have been affected and to quantify the effect of any calculation errors, we have concluded that the impact of the error is immaterial to all prior periods and the effect of the correction will be immaterial to the 2014 annual financial statements.  Accordingly, the cumulative effect of the error will be recorded as an out of period charge of $3.5 million in the fourth quarter of 2014.

Liquidity and Going Concern

As noted in our Form 12b-25 filed May 21, 2015 we continue to experience liquidity challenges.  Our liquidity challenges have limited our ability to produce sufficient commercial MSR and handgun products to meet market demand for those products during the fiscal quarter ended April 5, 2015.  We also continue to see delays in the timing of U.S. Government and certain international sales.

On April 14, 2015, the Company commenced an exchange offer (the “Exchange Offer”) and consent solicitation of our 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 continues its discussions with an ad hoc group of holders of the Senior Notes as discussed below.

As previously disclosed in the Company’s Current Report on Form 8-K filed on May 18, 2015, the Company has entered into the permitted grace period with respect to a $10.9 million interest payment due under the Indenture dated as of November 10, 2009 (as supplemented by the supplemental indenture, dated as of June 19, 2013 and the supplemental indenture, dated as of July 12, 2013, the “Indenture”), by and among the Registrants, certain subsidiary guarantors, and Wilmington Trust FSB, as indenture trustee (the “Trustee”), which governs its outstanding Senior Notes. The interest payment was due May 15, 2015; however, under the terms of the Indenture, the failure to make such payment does not become an event of default for 30 days after the scheduled due date.  If the Company does not make the interest payment on or before June 14, 2015, however, the Trustee or holders of at least 25% of the outstanding principal amount of the Senior Notes would be permitted to accelerate the payment of principal and accrued but unpaid interest on the outstanding Senior Notes to become immediately due and payable by providing notice of such acceleration. The Company believes it is in the best interests of its stakeholders to actively address the Company’s capital structure and has commenced discussions with an ad hoc group of holders of the Senior Notes.  The Company hopes that such discussions will result in a consensual restructuring transaction.

2

As of May 29, 2015, the Company has not made its Senior Notes interest payment due on May 15, 2015.  In addition, the Company is not in compliance under the Indenture governing its Senior Notes because the Company 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 its Senior Notes or holders of at least 25% of the aggregate principal amount of our Senior Notes and does not cure such non-compliance within 60 days from the receipt of such notice, the principal and accrued but unpaid interest on the Company’s 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 the Company may not be able to maintain compliance with such covenants in the future.

The matters discussed above raise substantial doubt about the Company’s ability to continue as a going concern.  The Company’s ability to continue as a going concern will be dependent upon its ability to complete asset sales, restructure or refinance existing debt, obtain modifications or waivers of our loan covenants or other actions.  There can be no assurance of the Company’s success in these efforts.  The Company’s inability to comply with its loan covenants, obtain waivers of non-compliance, restructure or refinance its existing debt or complete asset sales would have a material adverse effect on the Company’s financial position, results of operations and cash flows.

The Company’s plan to mitigate the business risk associated with its increased liquidity challenges include: (i) seeking revenue growth across all sales channels, (ii) executing initiatives designed to optimize its 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 its unsecured debt to reduce overall debt service costs.  There can be no assurance of the Company’s success in these efforts.

If the Company does not consummate the Exchange Offer or the Prepackaged Plan 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 the Company to other direct and indirect adverse consequences.

As noted in the Company’s Annual Report on Form 10-K/A (Amendment No. 2) for the fiscal year ended December 31, 2013, filed May 7, 2015, the Company had preliminarily determined, through its Step I goodwill impairment analysis, that the fair value of its West Hartford reporting unit was less than its carrying value and the Company was working to complete Step II of the goodwill impairment analysis to determine the actual amount of the non-cash impairment charge to be recorded in the fourth quarter of 2014 and that the Company may also need to record a non-cash impairment charge with respect to its indefinite-lived trademarks in the fourth quarter of 2014.  The preliminary Step II goodwill impairment analysis indicates that the Company will need to record a non-cash impairment charge in the fourth quarter of 2014 to write-off all of the Company’s West Hartford reporting unit’s goodwill and the Company is working to complete its analysis to determine the actual amount of the charge.  The goodwill recorded at the Company’s West Hartford reporting unit as of September 28, 2014 is $41.1 million.  The Company’s preliminary impairment analysis with respect to its indefinite-lived trademarks indicates that the Company will need to record a non-cash impairment charge in the fourth quarter of 2014 of $11.8 million.  The carrying value of the Company’s indefinite-lived trademarks recorded at September 28, 2014 was $50.1 million.  The preliminary analysis does not indicate any other fourth quarter 2014 impairment charges with respect to our other tangible or intangible assets.  The impairment of the Company’s West Hartford reporting unit’s goodwill and indefinite-lived trademarks is a result of decreased revenue and earnings projections as a result of the decline in market demand for its commercial modern sporting rifle (“MSR”), declines in demand for the Company’s commercial handguns and delays in the timing of U.S. Government and certain international sales.

As of May 22, 2015, we had $11.1 million of cash and cash equivalents, of which $4.7 million is restricted cash.  We do not have any incremental borrowing capacity under our existing debt agreements.

3

COLT DEFENSE LLC AND SUBSIDIARIES

INDEX

	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets — As of June 29, 2014 and December 31, 2013 (As Restated)	5
Consolidated Statements of Operations — Three and Six Months Ended June 29, 2014 and June 30, 2013 (As Revised)	6
Consolidated Statements of Comprehensive Income (Loss) — Three and Six Months Ended June 29, 2014 and June 30, 2013(As Revised)	7
Consolidated Statements of Changes in Cash Flows — Six Months Ended June 29, 2014 (As Revised) and June 30, 2013 (As Revised)	8
Notes to Consolidated Financial Statements (Unaudited)	9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
Item 3. Quantitative and Qualitative Disclosures about Market Risk	42
Item 4. Controls and Procedures	42
PART II. OTHER INFORMATION	44
Item 1. Legal Proceedings	44
Item 1A. Risk Factors	44
Item 6. Exhibits	45
Signatures	46

4

PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

Colt Defense LLC and Subsidiaries

Consolidated Balance Sheets

(In thousands of dollars)

(Unaudited)

	June 29, 2014			December 31, 2013
				(As Restated)
ASSETS
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
LIABILITIES AND DEFICIT
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

The accompanying notes are an integral part of these consolidated financial statements.

5

Colt Defense LLC and Subsidiaries

Consolidated Statements of Operations

(In thousands of dollars)

(Unaudited)

	For the Three Months Ended						For the Six Months Ended
	June 29, 2014			June 30, 2013			June 29, 2014			June 30, 2013
				(As Revised)						(As Revised)
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
	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 expense	19			78			(67		)	759
Net (loss) income	$	(12,589	)	$	4,387		$	(20,535	)	$	9,516

The accompanying notes are an integral part of these consolidated financial statements.

6

Colt Defense LLC and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

(In thousands of dollars)

(Unaudited)

	For the Three Months Ended						For the Six Months Ended
	June 29, 2014			June 30, 2013			June 29, 2014			June 30, 2013
				(As Revised)						(As Revised)
Net income (loss)	$	(12,589	)	$	4,387		$	(20,535	)	$	9,516
Other comprehensive income (loss), net of tax:
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
	(1,514		)	117			(1,467		)	250
Comprehensive income (loss)	$	(13,305	)	$	3,469		$	(22,142	)	$	8,155

The accompanying notes are an integral part of these consolidated financial statements.

7

Colt Defense LLC and Subsidiaries

Consolidated Statements of Changes in Cash Flows

(In thousands of dollars)

(Unaudited)

	For the Six Months Ended
	June 29, 2014			June 30, 2013
	(As Revised)			(As Revised)
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

The accompanying notes are an integral part of these consolidated financial statements.

8

Notes to Consolidated Financial Statements (unaudited)

(in thousands of dollars)

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”).

9

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.

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.

10

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

11

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

12

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.

13

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.

14

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.

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.

15

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

16

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.

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.

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.

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

17

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			7-10
Furniture, fixtures and leasehold improvements	7,150			7,081			3-5
	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

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.

18

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.

19

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

20

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.

21

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

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

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.

22

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.

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

23

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

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.

24

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.

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 Ended		Six Months 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

25

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, 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.

26

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.

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

27

(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

28

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.

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.

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.

29

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.

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

30

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.

31

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 5:00 p.m., 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 theBankruptcy 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.

32

ITEM 2. — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Form 10-Q, including the documents that we incorporate by reference, contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, that are subject to the “safe harbor” created by those sections. Any statements about our expectations, beliefs, plans, objectives, assumptions or future events or our future financial performance and/or operating performance are not statements of historical fact and reflect only our current expectations regarding these matters. These statements are often, but not always, made through the use of words such as “may,” “will,” “expect,” “anticipate,”“believe,” “intend,” “predict,” “potential,” “estimate,” “plan” or variations of these words or similar expressions. These statements inherently involve a wide range of known and unknown uncertainties.  Our actual actions and results may differ materially from what is expressed or implied by these statements. Factors that could cause such a difference include, but are not limited to, those set forth as “Risk Factors” under Section 1A herein and in our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2013, which was filed with the Securities and Exchange Commission on March 20, 2014. Given these factors, you should not rely on forward-looking statements, assume that past financial performance will be a reliable indicator of future performance nor use historical trends to anticipate results or trends in future periods. We expressly disclaim any obligation or intention to provide updates to the forward-looking statements and estimates and assumptions associated with them.

As used in this report, the terms “we”, “us”, “our”, “Colt Defense”, “Colt” and the “Company” mean Colt Defense LLC , Colt Finance Corp. and all of their subsidiaries that are consolidated under GAAP.

Certain monetary amounts, percentages and other figures included in this section have been subject to rounding adjustments.  Accordingly, figures shown as totals in certain tables may not be the arithmetic aggregation of the figures that precede them and figures expressed as percentages in the text may not total 100% or, as applicable, when aggregated may not be the arithmetic aggregation of the percentages that precede them.

Restatement of Previously Issued Consolidated Financial Statements

As discussed further in Note 2, Summary of Significant Accounting Policies - Restatement of Previously Issued Consolidated Financial Statements, in the Notes to Consolidated Financial Statements included in Part I, Item 1, Consolidated Financial Statements of this Quarterly Report on Form 10-Q/A, in our 2013 Annual Report on Form 10-K/A, we restated our previously issued consolidated financial statements and the related disclosures for the year ended December 31, 2013 (the “Restated Period”) and revised the unaudited interim financial statements for the first three quarters in the fiscal year ended December 31, 2013 (the “Revised Periods”).

The restatement is the result of our 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 our fourth quarter 2013 results.  In conjunction with the correction of the M240 machine gun program (the “M240 Program”) error, other previously recorded 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.

All amounts in this Quarterly Report on Form 10-Q/A affected by the restatement or revision reflect such amounts as restated or as revised. The impact of the correction of these errors in the restatement on the applicable line items in the consolidated financial statements for the quarter ended June 29, 2014 resulting from the restatement is set forth in Note 2 to the Notes to Consolidated Financial Statements. Our Quarterly Reports on Form 10-Q for subsequent periods during 2014 will also include the impacts of the restatement on applicable 2013 comparable prior quarter and year to date periods. See Note 2 of the Notes to Consolidated Financial Statements for further detail.

Overview of Our Business

Colt 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.  On July 12, 2013 (the “Merger Date”), the Company acquired 100% ownership (the “Merger”) of New Colt Holding Corp. (“New

33

Colt”), a privately-held company, which is a world leader in the design, development and manufacture of Colt pistols and revolvers.  As a result of the Merger, the two manufacturers of Colt 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. 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.

From its inception and for over 175 years, Colt has distinguished itself by translating innovative military weapons into the most desired law enforcement, personal protection and recreational firearms. From the Model P “Peacemaker” revolver to the 1911 automatic pistol, the M16 rifle and the M4 carbine, “Colt” defines iconic firearms that first establish worldwide military standards and then become the guns every law enforcement officer and serious recreational shooter wants to own.  That Colt tradition continues to this day.  The Colt-designed M16 rifle and M4 carbine have served as the principal battle rifles of the U.S. Armed Forces for the last 50 years and are currently in military and law enforcement service in more than 80 countries around the world.  These Colt rifles created the consumer “modern sporting rifle” (“MSR”) market in the United States.  The Colt Close Quarter Battle Pistol, a 1911 derivative, was selected for acquisition by the U.S. Marine Corps in 2012, just following the 100th anniversary of the first government contract for the 1911 pistol, and is now a highly sought after handgun by commercial gun owners.

The “Colt” name and trademarks stand for quality, reliability, accuracy and the assurance of customer satisfaction.  Our brand and global footprint position us for long-term growth in a world market that offers continued opportunities in all of our sales channels: military, law enforcement and commercial.

We operate from facilities located in West Hartford, Connecticut and Kitchener, Ontario, Canada.

Results of Operations

The following table sets forth our results of operations in dollars and as a percentage of total net sales for the periods presented ($ in thousands):

	Three Months Ended										Six Months Ended
	June 29, 2014			%		June 30, 2013			%		June 29, 2014			%		June 30, 2013			%
						(As Revised)			(As Revised)							(As Revised)			(As Revised)
Data:
Net sales	$	49,633		100.0	%	$	64,212		100.0	%	$	99,713		100.0	%	$	128,061		100.0	%
Cost of sales	44,640			89.9	%	45,830			71.4	%	85,026			85.3	%	90,942			71.0	%
Gross profit	4,993			10.1	%	18,382			28.6	%	14,687			14.7	%	37,119			29.0	%
Selling and commissions	4,620			9.3	%	3,452			5.4	%	9,081			9.1	%	6,547			5.1	%
Research and development	1,392			2.8	%	1,481			2.3	%	2,635			2.6	%	2,301			1.8	%
General and administrative	3,801			7.7	%	3,015			4.7	%	7,710			7.8	%	6,745			5.3	%
Business development	9			0.0	%	169			0.3	%	509			0.5	%	244			0.2	%
Certain transaction costs	—			0.0	%	416			0.6	%	—			0.0	%	416			0.3	%
Restructuring costs	(76		)	-0.2	%	—			0.0	%	(76		)	-0.1	%	—			0.0	%
Total operating expenses	9,746			19.6	%	8,533			13.3	%	19,859			19.9	%	16,253			12.7	%
Operating income	(4,753		)	-9.5	%	9,849			15.3	%	(5,172		)	-5.2	%	20,866			16.3	%
Other expense (income)
Interest expense	7,859			15.8	%	6,069			9.5	%	15,543			15.6	%	12,063			9.4	%
Other expense (income), net	(42		)	-0.1	%	(685		)	-1.1	%	(113		)	-0.1	%	(1,472		)	-1.1	%
Non operating expenses	7,817			15.7	%	5,384			8.4	%	15,430			15.5	%	10,591			8.3	%
Income (loss) before provision for income taxes	(12,570		)	-25.2	%	4,465			6.9	%	(20,602		)	-20.7	%	10,275			8.0	%
Income tax expense (benefit)	19			0.0	%	78			0.1	%	(67		)	-0.1	%	759			0.6	%
Net income (loss)	$	(12,589	)	-25.2	%	$	4,387		6.8	%	$	(20,535	)	-20.6	%	$	9,516		7.4	%

34

Three and Six Months Ended June 29, 2014 Compared to the Three and Six Months Ended June 30, 2013

On the Merger Date, the Company acquired 100% ownership of New Colt, which is a world leader in the design, development and manufacture of Colt pistols and revolvers. As a result of the Merger, the two manufacturers of Colt firearms were consolidated into a single enterprise providing Colt Defense direct access to the commercial market for Colt Defense rifles and carbines, ownership of the Colt brand and related trademarks and the technology and production facilities for the full line of Colt handguns. The operating results for New Colt have been included in the Consolidated Statements of Operations since the Merger Date.

Net Sales

The following table shows net sales for the three months and six months ended June 29, 2014 and June 30, 2013, as revised, respectively, by product category ($ in thousands):

	Three Months Ended						Six Months Ended
	June 29, 2014		June 30, 2013		% Change		June 29, 2014		June 30, 2013		% Change
			(As Revised)		(As Revised)				(As Revised)		(As Revised)
Long guns	$	15,870	$	53,599	-70.4	%	$	40,307	$	105,870	-61.9	%
Handguns	18,570		1,260		1,373.7	%	33,890		2,521		1,244.3	%
Spares and other	15,193		9,353		62.4	%	25,516		19,670		29.7	%
Total	$	49,633	$	64,212	-22.7	%	$	99,713	$	128,061	-22.1	%

Net sales for the three months ended June 29, 2014 were $49.6 million compared to $64.2 million for the three months ended June 30, 2013. The decrease of $14.6 million, or 22.7%, was due to lower sales of long guns, spares and other partially offset by increases in handgun sales due to the acquisition of New Colt.  Sales in the second quarter of 2014 decreased when compared to the second quarter of 2013 due to $21.2 million lower of commercial and law enforcement rifle sales related to the continued softness in the MSR market, a decrease in direct foreign sales of $10.5 million associated with the non-recurrence of a discrete large international rifle sale in the second quarter of 2013 and a decrease in U.S. government sales of $5.8 million primarily related to the timing of the fulfillment of certain U.S. government contracts.  These decreases were partially offset by an increase of $18.2 million of commercial handguns related to the acquisition of New Colt and an increase in international spares and miscellaneous of $5.1 million primarily related to an increase in overall volume of rifle kits sold in 2014.  The New Colt acquisition provided $19.3 million of incremental sales in the second quarter of 2014.  Without the impact of the New Colt acquisition, our second quarter sales would have been $30.3 million.

Net sales for the six months ended June 29, 2014 were $99.7 million compared to $128.1 million for the six month ended June 30, 2013.  The decrease of $28.3 million, or 22.1% was due to due to lower sales of long guns, spares and other partially offset by increases in handgun sales due to the acquisition of New Colt.  Sales for the six months ended June 29, 2014 decreased compared to June 30, 2013 due to $30.6 million lower of commercial and law enforcement rifle sales related to the continued softness of the MSR market, a decrease in direct foreign sales of $23.1 million partially associated with the non-recurrence of a large discrete international rifle sale in the second quarter of 2013 and a decrease in US government sales of $7.4 million primarily related to the timing of the fulfillment of certain U.S. government contracts.  These decreases were partially offset by an increase of $32.5 million of commercial handguns related to the acquisition of New Colt and an increase in spares and miscellaneous of $5.5 primarily related to an overall increase in rifle kits sold in 2014.

Cost of Sales/Gross Profit

Cost of sales for the three months ended June 29, 2014 was $44.6 million compared to $45.8 million for the three months ended June 30, 2013.  Without the acquisition of New Colt, cost of sales for the second quarter of 2014 would have been $29.2 million, or a decrease of $16.6 million. Our cost of sales consists of direct labor and benefits, materials, subcontractor costs and manufacturing overhead, including depreciation and amortization, utilities, and maintenance and repairs.  Gross margin for the period decreased from 28.6% to 10.1% in the comparable quarter of 2013.  The decline in gross margin of $13.5 million was driven by a combination of lower international sales, which historically have had higher margins than domestic sales, decreased demand for commercial and law enforcement rifles of $21.2 million, lower volume in our manufacturing facilities leading to unfavorable labor and overhead capitalization of $5.9 million, additional M240 contract obligation expenses of $4.8 million (See Note 16, “Commitments and Contingencies”) and the No-Cost Cancellation of the M249 U.S. Government contract resulting in expense of $0.5 million.

Cost of sales for the six months ended June 29, 2014 was $85.0 million compared to $90.9 million for the six months ended June 30, 2013.  Without the acquisition of New Colt, cost of sales for the first six months of 2014 would have been $57.2 million, or a decrease of $33.7 million.  Our cost of sales consists of direct labor and benefits, materials, subcontractor costs and manufacturing overhead, including depreciation and amortization, utilities, and maintenance and repairs.  Gross margin for the period decreased from 29.0% to 14.7% in the comparable period of 2013.  The decline in gross margin was primarily driven by a $4.8 million M240 Program contract obligation expense (See Note 16, “Commitments and Contingencies.”) and a combination of lower international sales, which

35

historically have had higher margins than domestic sales, lower volumes in our manufacturing facilities resulting in unfavorable absorption and to a lesser extent, unfavorable inventory adjustments.

Selling and Commissions Expense

For the three months ended June 29, 2014, selling and commission expenses were $4.6 million compared to $3.5 million for the same period in 2013. The increase of $1.2 million, or 33.8%, was primarily due to the acquisition of New Colt.  Selling expense consists primarily of compensation, advertising, promotions, travel, trade shows, consulting fees and marketing materials. In addition, we pay commissions to independent foreign sales representatives on certain direct foreign sales and to domestic representatives on most commercial law enforcement rifle sales, which generally are a percentage of the selling price.

For the six months ended June 29, 2014, selling and commission expenses were $9.1 million compared to $6.5 million for the same period in 2013. The increase of $2.5 million, or 38.7%, was primarily due to the acquisition of New Colt.  Selling expense consists primarily of compensation, advertising, promotions, travel, trade shows, consulting fees and marketing materials. In addition, we pay commissions to independent foreign sales representatives on certain direct foreign sales and to domestic representatives on most commercial law enforcement rifle sales, which generally are a percentage of the selling price.

Research and Development

Research and development expense for the three months ended June 29, 2014 was $1.4 million compared to $1.5 million for the three months ended June 30, 2013. The $0.1 million decrease, or (6.0)%, was primarily due to the reduced spend year over year at our Canadian location partially offset by increased engineering costs related to our acquisition of New Colt.  Research and development expenses consist primarily of compensation and benefit expenses and experimental work materials for our employees who are responsible for the development and enhancement of new and existing products as well as expenses for outside engineering services.

Research and development expense for the six months ended June 29, 2014 was $2.6 million compared to $2.3 million for the six months ended June 30, 2013. The $0.3 million increase, or 14.5%, was primarily due to increase engineering costs related to our acquisition of New Colt partially offset by reduced use of external service providers at our Canadian location.  Research and development expenses consist primarily of compensation and benefit expenses and experimental work materials for our employees who are responsible for the development and enhancement of new and existing products as well as expenses for outside engineering services.

General and Administrative Expense

General and administrative expense for the three months ended June 29, 2014 was $3.8 million compared to $3.0 million for the three months ended June 30. 2013.  The $0.8 million increase, or 26.1%, was primarily due to higher audit, tax and other professional fees due to the acquisition of New Colt.  General and administrative expense consists of compensation and benefits, professional services and other general office administration expenses.  These costs do not change proportionately with changes in sales.

General and administrative expense for the six months ended June 29, 2014 was $7.7 million compared to $6.7 million for the six months ended June 30. 2013.  The $1.0 million increase, or 14.3%, was primarily due to higher audit, tax and other professional fees due to the acquisition of New Colt.  General and administrative expense consists of compensation and benefits, professional services and other general office administration expenses.  These costs do not change proportionately with changes in sales.

Business Development Expenses

Business development expense for the three months ended June 29, 2014 was $0.0 million compared to $0.2 million for the three months ended June 30, 2013.  The $0.2 million decrease, or 94.7%, was primarily due to decreased outside professional service fees associated with its strategic initiatives relative to the comparable prior year period.

Business development expense for the six months ended June 29, 2014 was $0.5 million compared to $0.2 million for the six months ended June 30, 2013.  The $0.3 million increase, or 108.6%, was primarily related to professional fees incurred in the first quarter of 2014 related to strategic initiatives relative to the comparable prior year period.

36

Certain Transaction Costs

Certain transaction costs expense for the three and six months ended June 29, 2014 was $0.0 million compared to $0.4 million for the three and six months ended June 30, 2013.  The decrease of $0.4 million, or 100%, is primarily related to the absence of Merger related costs in the current periods relative to the comparable prior year periods.

Restructuring Costs

Restructuring costs for the three and six months ended June 29, 2014 was ($0.1) million compared to $0.0 million for the three and six months ended June 30, 2013.  The $0.1 million benefit, in the current periods is related to a reversal of a severance related restructuring expense recorded in the prior year.

Interest Expense

Interest expense for the three months ended June 29, 2014 was $7.9 million compared to $6.1 million for the three months ended June 30, 2013.  The increase of $1.8 million, or 29.5%, was primarily due to the $1.7 million of incremental interest expense on the Term Loan, which partially funded the acquisition of New Colt.

Interest expense for the six months ended June 29, 2014 was $15.5 million compared to $12.1 million for the six months ended June 30, 2013.  The increase of $3.5 million, or 28.8%, was primarily due to the $3.5 million of incremental interest expense on the Term Loan, which partially funded the acquisition of New Colt.

Other Expense (Income), net

Other income for the three months ended June 29, 2014 was $0.0 million compared to ($0.7) million for the three months ended June 30, 2013. The decrease of $0.7 million, or 93.9%, was primarily related to a decrease in service income as a result of the acquisition of New Colt.

Other income for the six months ended June 29, 2014 was ($0.1) million compared to ($1.5) million for the six months ended June 29, 2014.  The decrease of $1.4 million, or 92.3%, was primarily related to a decrease in service income as a result of the acquisition of New Colt and a gain on an international transaction recorded in 2013.

Income Taxes

Colt Defense is a limited liability company, treated as a partnership for U.S. federal and state income tax reporting 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.

Colt Defense and Colt Technical Services LLC, a wholly owned subsidiary, collectively own 100% of Colt International, an entity formed under the laws of The Netherlands. 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.

As a result of the Merger, effective July 12, 2013, Colt Defense owns 100% of New Colt.  Effective as of January 1, 2014, Colt affected a restructuring whereby Colt Defense and New Colt contributed their assets and operations to Colt’s Manufacturing.  The contribution created a combined operating entity for the Company’s U.S. based operations.  At June 29, 2014, Colt Defense owned 100% of Colt Finance, New Colt (a C corporation) and CDTS.  Colt Defense and New Colt collectively own 100% of Colt’s Manufacturing as a result of the legal entity restructuring.

For the three months ended June 29, 2014, Colt International recorded an income tax expense of $0.1 million and Colt Canada recorded a foreign income tax benefit of $0.1 million for a consolidated Company tax expense of $0.0.  For the three months ended June 30, 2013, Colt International recorded an income tax expense of $0.1 million and Colt Canada recorded an income tax benefit of $0.0 for a consolidated Company tax expense of $0.1.  Tax benefits recorded in the three months ended June 29, 2014 are attributable to operating losses recorded by the Company.

For the six months ended June 29, 2014, Colt International and New Colt both recorded an income tax expense of $0.1 million each and Colt Canada recorded a foreign income tax benefit of $0.2 million for a consolidated Company tax expense of ($0.1).  For the six months ended June 30, 2013, Colt International and Colt’s Manufacturing both recorded an income tax expense of $0.1 million each and Colt Canada recorded an income tax benefit of $0.6 for a consolidated Company tax expense of $0.8.  Tax benefits recorded in the six months ended June 29, 2014 are attributable to operating losses recorded by the Company.

37

Liquidity and Capital Resources

Our primary liquidity requirements are for debt service, working capital and capital expenditures.  We have historically funded these requirements through internally generated operating cash flow.  In order to support the growth in our working capital requirements related to our expanding business, on September 29, 2011, we entered into a Credit Agreement (“Credit Agreement”) with Wells Fargo Capital Finance, LLC.  Under the terms of the Credit Agreement, senior secured revolving loans are available up to $50.0 million, inclusive of $20.0 million available for letters of credit.  Revolving loans are subject to, among other things, a 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 (other than intellectual property), including accounts receivable, inventory and certain other collateral, and a second-priority security interest in our 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 our 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 thousand annual servicing fee.

The Credit Agreement limits our 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 $50.0 million, 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 $11.0 million or an event of default occurs, we would be required to provide the lender with more frequent compliance reporting and the lender may also assume certain other contractual privileges. The Credit Agreement contains customary events of default. As of June 29, 2014 and December 31, 2013, we were in compliance with all covenants and restrictions, as amended. We monitor our future compliance based on current and anticipated financial results.

As of June 29, 2014, there were revolving loans of $13.5 million outstanding and $3.9 million of letters of credit outstanding under the Credit Agreement.  As of December 31, 2013 there were revolving loans of $7.1 million outstanding and $3.5 million of letters of credit outstanding under the Credit Agreement.  As of September 12, 2014, there were revolving loans of $13.0 million outstanding under the credit agreement.

On March 22, 2013, we entered into Amendment No. 2 to the Credit Agreement, whereby, among other things, Wells Fargo Capital Finance, LLC (“WFCF”), under the Credit Agreement, 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, we entered into Amendment No. 3 to the Credit Agreement, pursuant to which the 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 be a wholly owned subsidiary of to Colt International, and provided for Colt International to become a guarantor under the Credit Agreement. For more information about this amendment, see the Form 8-K that was filed with the SEC on June 25, 2013.

On July 12, 2013, we entered into Amendment No. 4 to the Credit Agreement, whereby Colt’s Manufacturing became a borrower and New Colt became a guarantor under the Credit Agreement. For more information about this amendment, see the Form 8-K that was filed with the SEC on July 15, 2013.

On August 6, 2014, we entered into Amendment No. 5 to the Credit Agreement, whereby the WFCF consented to, among other things, extending the delivery date to September 15, 2014 of our obligation to deliver financial statements for the month and fiscal quarter ended June 29, 2014.

On November 10, 2009, Colt Defense and Colt Finance, our 100%-owned finance subsidiary, jointly and severally co-issued $250.0 million of unsecured senior notes (“Senior Notes”).  The Senior Notes bear interest at 8.75% and mature 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 $3.5 million 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 do not have financial condition covenants that require us to maintain compliance with financial ratios or other 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

38

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 twelve months. Additionally, the Senior Notes contain certain cross default provisions with other indebtedness if such indebtedness in default aggregates to $20.0 million or more.

On June 19, 2013, we entered into an indenture supplement 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. For more information about this indenture supplement, see the Form 8-K that was filed with the SEC on June 25, 2013.

On July 12, 2013, we entered into an indenture supplement to the Indenture (“Supplemental Indenture”) by which New Colt and Colt’s Manufacturing became new subsidiary guarantors to the Senior Notes. As such, each agreed to jointly and severally guarantee the obligations under the Indenture. For more information about the Supplemental Indenture, see the Form 8-K that was filed with the SEC on July 15, 2013.

On July 12, 2013, in connection with the Merger, we entered into the Term Loan, which matures on November 15, 2016. The Term Loan is variable rate and bears interest at a rate of 9.75% plus the greater of the 3-month LIBOR rate or 1%. Interest is payable quarterly in arrears on the first day of the subsequent calendar quarter. Under the Term Loan, our obligations are secured by a second priority security interest in the assets securing obligations under the Credit Agreement and a first priority security interest in our intellectual property and a second priority security interest in substantially all other assets.  The Term Loan was issued at a discount of $2.3 million from its principal value of $50.0 million. We also incurred $2.1 million in financing fees. The discount and the financing fees are being amortized as additional interest expense over the life of the indebtedness. Principal repayments, which are due quarterly on the last day of each calendar quarter, are as follows ($ in thousands):

	Amount
Remaining 2014	$	625
2015	5,625
2016	41,875
Total	$	48,125

On March 31, 2014 (second quarter of 2014) and June 29, 2014 (third quarter of 2014), we made Term Loan principal installment payments of $0.6 million and interest payments of $1.3 million, respectively.

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 below.  We were in compliance with our Term Loan covenants as of June 29, 2014, as amended, 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 we were not to meet certain of the Term Loan covenants, as amended, in the future we would likely seek a waiver from our 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) we were granted the option to not pay principal installment payments of $1.9 million 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)we have been granted a 30 day extension to deliver financial information to the Term Loan lenders to allow for completion of the restatement of our 2013 10-K (see Note 2. Summary of Significant Accounting Policies).  Additionally, we 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 us 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.  We will expense costs incurred by us in conjunction with the Term Loan Amendment in the third quarter of 2014.  We do not intend to 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.

The Term Loan agreement also contains non-financial covenants and other restrictions which limits our ability to incur additional indebtedness, make investments or certain payments, pay dividends (other than member distributions to support member LLC related taxes) and merger, acquire or sell assets.

39

The Term Loan agreement contains financial covenants including a minimum EBITDA threshold, a fixed charge coverage ratio and a maximum secured leverage ratio, each as defined by the Term Loan agreement. In addition, we cannot exceed specified levels of capital expenditures. All financial covenants are calculated on a rolling 4-quarter basis based on financial results for the current and three preceding fiscal quarters.

The Term Loan agreement also contains non-financial covenants that limit our ability to incur additional indebtedness, make investments or certain payments, pay dividends (other than for the payment of taxes to Colt Defense’s members) and merge, acquire or sell assets.

Our cash used in or generated from operating activities is generally a reflection of our operating results adjusted for non-cash charges or credits such as depreciation and amortization and changes in working capital, including accounts receivable and our investment in inventory.  Changes in accounts receivable and inventory can cause significant fluctuations in our cash flow from operations.  U.S. Government receivables are generally collected within 10 to 30 days. Payment terms for international orders are negotiated individually with each customer and tend to experience a longer collection cycle. Commercial law enforcement receivables are generally collected within 10 to 30 days as distributors take advantage of payment terms. To date, we have not experienced any significant receivable losses.

The increase in our inventory levels to $75.5 million as of June 29, 2014 from $66.7 million as of December 31, 2013, an $8.8 million increase, is a result of continued softness in the commercial MSR market, inventory on hand to support certain U.S. Government contracts as well as inventory for international orders which can ship only after receipt of required regulatory approval.

Historically, tax distributions to our members have been made in amounts equal to the highest combined marginal federal, state and/or local tax rate applicable to any member as applied to our taxable income, as defined, for the applicable period.  Our Governing Board may also declare other distributions to our members from time to time. In addition, our cash requirements and liquidity could be impacted by potential acquisitions. In April 2014, we made tax distributions to our members of $0.7 million and remitted $0.5 million to the State of Connecticut both of which were accrued in 2013 based on our 2013 taxable income.

At June 29, 2014, we had cash and cash equivalents totaling $2.2 million.  We believe that our existing cash balances, Credit Agreement availability and forecasted operating cash flows are sufficient to meet our obligations for the next twelve months.

Cash Flows

The following table sets forth our consolidated cash flows for the six months ended June 29, 2014 and June 30, 2013, respectively (dollars in millions):

	Six Months Ended
	June 29, 2014			June 30, 2013
	(As Revised)			(As Revised)
Cash used in operating activities	$	(14.7	)	$	(9.7	)
Cash used in investing activities	(1.3		)	(3.3		)
Cash used in financing activities	5.1			(15.3		)

Cash Flows Used in Operating Activities

Net cash used in operating activities for the six months ended June 29, 2014 was $14.7 million, as revised, compared to net cash used by operating activities of $9.7 million for the six months ended June 30, 2013, as revised.  We had a net loss of $20.5 million in the first six months of 2014 compared to net income of $9.5 million in the first six months of 2013, as revised.

During the first six months of 2014, changes in operating assets and liabilities were a $0.4 million use of cash versus a $22.6 million use of cash for the same period in 2013.  In 2014, accounts receivable decreased by $6.4 million, primarily due to lower sales. Accounts payable and accrued expenses increased by $0.8 million in 2014 primarily due increased accruals related to the M240 Program, partially offset by higher accrued interest because of the timing of payments due.  In 2014, inventories increased by $8.9 million due to first quarter softness in the commercial MSR market and increased inventory levels necessary to support U.S. Government contracts and international sales orders.

During the first six months of 2013, we used $22.6 million of cash to fund changes in operating assets and liabilities.  Accounts receivable grew $11.8 million primarily because of a large international shipment in June 2013.  In addition, we used $11.1 million to fund an increase in inventory to support increased production volume.  These uses of cash were partially offset by a $1.9 million related increase in accounts payable and accrued expenses.

40

Cash Flows Used in Investing Activities

Cash used in investing activities was $1.3 million, as revised, for the first six months of 2014 and $3.3 million for the first six months of 2013. Cash used was primarily for capital expenditures in both periods. In 2014, capital expenditures were primarily for capacity expansion. In 2013, capital expenditures were primarily for new product production and capacity expansion.

Cash Flows Used in Financing Activities

Net cash from financing activities in the first six months of 2014 was $5.1 million.  Our net borrowings on our line of credit for the period were $6.4 million, we used $0.6 million to make a schedule repayment of our Term Loan and we used $0.7 million to fund distributions to our members.

Net cash used for financing activities in the first six months of 2013 was $15.3 million.  We used $14.0 million of cash to repurchase all of our common units held by the Blackstone Funds, $1.4 million to fund distributions to our members and we borrowed $0.1 on our line of credit.

Backlog

Because a substantial portion of our business is of a build-to-order nature, we generally have a significant backlog of orders to be shipped. Our backlog increased from $206.9 million at December 31, 2013 to $218.1 million at June 29, 2014. The increase was primarily driven by increased U.S government spare orders.  When factoring the commercial component of purchase orders into our backlog analysis, we only include orders that are scheduled to ship in the next six months in our backlog.  Commercial orders received that have not yet shipped could be cancelled, particularly if demand were to suddenly decrease.

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.

Critical Accounting Policies and Estimates

The preparations of our financial statements requires us 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 income and expenses during the reporting period. The Company reaffirms the significant accounting policies as disclosed in Note 2 of the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2013, which was filed with the Securities and Exchange Commission on September 12, 2014.

Contractual Obligations

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 is in effect from April 1, 2014 through March 31, 2019.

As of June 29, 2014, there have been no other material changes to our contractual obligations outside the ordinary course of our business since December 31, 2013.

41

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Exposure

We are subject to foreign currency exchange risks relating to receipts from customers, payments to suppliers and some intercompany transactions.  As a matter of policy, we do not engage in currency speculation and therefore, we have no derivative financial instruments to hedge this exposure.  In our consolidated statements of operations, we had de minimis foreign currency gains for the six months ended June 29, 2014 and $0.1 million of foreign currency gains for the six months ended June 30, 2013.  The foreign currency amounts reported in the consolidated statement of operations may change materially should our international business continue to grow or if changes in the Canadian dollar or Euro versus the U.S. dollar fluctuate materially.

Interest Rate Exposures

Our debt portfolio consists of the fixed rate Senior Notes, the variable rate Term Loan and the variable rate Credit Agreement.  At June 29, 2014, there was $13.5 million outstanding under the Credit Agreement and $48.1 million owed on the Term Loan.  Our exposure to market risk for changes in interest rates relates to both the first quarter variable rate advances on the Credit Agreement and the first quarter variable rate Term Loan outstanding balance. We do not have any derivative financial instruments to hedge this exposure. At June 29, 2014, a hypothetical 100 basis point increase in the first quarter variable rate on the Credit Agreement advances and the Term Loan outstanding balance would have increased our interest expense by $0.1 million.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Management of the Company, with the participation of its Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period.

Based on their evaluation, as of the end of the period covered by this Form 10-Q/A, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) were not effective because of the material weakness in our internal control over financial reporting described below.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Contract Accounting

We did not maintain effective controls over contract modifications. Specifically, we did not appropriately consider the accounting implications of a contract modification to the M240 machine gun program for the U.S. Government (“M240 Program”) which impacted our net sales, cost of sales, accrued expenses, customer advances, deferred revenue and related financial disclosures.  This control deficiency resulted in the restatement of the Company’s consolidated financial statements for the year ended December 31, 2013. Additionally, this control deficiency could result in misstatements of the aforementioned accounts and related disclosures that would result in a material misstatement of the consolidated financial statements that would not be prevented or detected. Accordingly, our management has determined that this control deficiency constitutes a material weakness.

Remediation Efforts

Management has been actively engaged in developing a remediation plan to address the above material weakness.  The remediation efforts in process or expected to be implemented include the following.

·Reviewing all M240 Program contract amendments to ensure all material accounting considerations have been addressed,

·Reviewing non-M240 Program material contracts and material contract amendments to ensure all material accounting considerations have been addressed,

·Instituting additional training programs for accounting personnel.

We believe that the controls that we will be implementing will improve the effectiveness of our internal control over financial reporting.  As we continue to evaluate and work to improve our internal control over financial reporting, we may determine to take additional measures to address the material weakness or determine to supplement or modify certain of the remediation measures described above.

42

Financial Reporting and Disclosure

We did not maintain effective controls over financial reporting.  Specifically, we did not appropriately review our financial statements and ensure completeness of our required disclosures which impacted the accuracy of our financial statements. This control deficiency resulted in errors to the self-insurance disclosure included in the Company’s consolidated financial statements for the year ended December 31, 2013, errors to the inventory and  Adjusted EBITDA disclosures and the statement of cash flows for the quarter ended June 29, 2014  and errors to the statement of cash flows for the quarter ended September 28, 2014. As a result of these errors, the effected financial statements have been revised.  Additionally, this control deficiency could result in misstatements that would result in a material misstatement of the Company’s annual or interim financial statements that will not be prevented or detected on a timely basis.

Remediation Plan

Management has been and continues to be actively engaged in developing a remediation plan to address the above material weakness.  The remediation efforts that have been completed or are in progress or expected to be implemented include the following:

·     We have reviewed our Securities and Exchange Commission filings for the fiscal periods ended December 31, 2013, March 30, 2014 and June 29, 2014 to ensure all financial statements and financial statement disclosures are appropriately stated and internally consistent within each filing;

·     We have reviewed our financial statement support to ensure all financial statements and financial statement disclosures are adequately supported and consistent; and

·     We have engaged the services of an outside consulting firm to assist with an independent review and tie-out of our financial statements and financial statement disclosures.

We believe that the controls that we have implemented will improve the effectiveness of our internal control over financial statement preparation.  However, all deficiencies have not been remediated as of the date of this filing. The material weakness will not be fully remediated until, in the opinion of management, the revised control procedures have been operating for a sufficient period of time to adequately demonstrate their effectiveness.  As management continues to evaluate and work to improve our internal control over financial statement preparation, management may decide to take additional measures to address the material weakness or to supplement or modify certain of the remediation measures described above.

43

PART II. OTHER INFORMATION

Item 1.Legal Proceedings

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.  It is possible that we could incur losses in excess of any amounts accrued. There is no litigation pending that is likely to substantially negatively affect our financial condition, results of operations and cash flows.

Item 1A.Risk Factors

In addition to the information set forth in this report, you should carefully review and consider the information discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K/A for the year ended December 31, 2013, which could materially affect our business, financial condition or future results. These are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem immaterial also may materially adversely affect our business, financial condition or future results.

44

Item 6. Exhibits

The following list of exhibits includes exhibits submitted with this Form 10-Q/A as filed with the Securities and Exchange Commission and those incorporated by reference to other fillings.

31.1	Certification of Dennis R. Veilleux pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2	Certification of Scott B. Flaherty pursuant to Section 302 of Sarbanes-Oxley Act of 2002.*
32.1	Certification of Dennis R. Veilleux and Scott B. Flaherty pursuant to 18 U.S.C. Section 1350.*
101.INS	XBRL Instance Document**
101.SCH	XBRL Taxonomy Extension Schema Document**
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document**
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document**
101.LAB	XBRL Taxonomy Extension Label Linkbase Document**
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document**

Notes to Exhibits List:

*Filed electronically herewith

**Furnished and not filed herewith

Attached as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets at June 29, 2014 and June 30, 2013, (ii) Consolidated Statements of Operations for the three and six months ended June 29, 2014 and June 30, 2013, (iii) Consolidated Statements of Comprehensive Income for the six months ended June 29, 2014 and June 30, 2013, (iv) Consolidated Statements of Cash Flows for the six months ended June 290, 2014 and June 30, 2013 and (iv) Notes to the Consolidated Financial Statements.  In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q/A shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be part of any registration statement or other document filed under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

45

Signatures

Pursuant to the requirements of the Securities Act of 1934, the registrants have duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized, in West Hartford, Connecticut, on the 29th day of May, 2015.

COLT DEFENSE LLC
COLT FINANCE CORP.
By:	/s/ Scott B. Flaherty
Scott B. Flaherty
Senior Vice President and Chief Financial Officer

46

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Dennis R. Veilleux, certify that:

1. I have reviewed this quarterly report on Form 10-Q/A of Colt Defense LLC and Colt Finance Corp;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrants as of, and for, the periods presented in this report;

4. The registrants’ other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined by Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrants and we have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrants, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrants’ disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

and

d) disclosed in this report any change in the registrants’ internal control over financial reporting that occurred during the registrants’ most recent fiscal quarter (the registrants’ fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants’ internal control over financial reporting; and

5. The registrants’ other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants’ auditors and the audit committee of the registrants’ board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants’ ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants’ internal control over financial reporting.

Date: May 29, 2015

/s/ Dennis R. Veilleux

Dennis R. Veilleux

President and Chief Executive Officer

1

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Scott B. Flaherty, certify that:

1. I have reviewed this quarterly report on Form 10-Q/A of Colt Defense LLC and Colt Finance Corp;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrants as of, and for, the periods presented in this report;

4. The registrants’ other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined by Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrants and we have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrants, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrants’ disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrants’ internal control over financial reporting that occurred during the registrants’ most recent fiscal quarter (the registrants’ fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants’ internal control over financial reporting; and

5. The registrants’ other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants’ auditors and the audit committee of the registrants’ board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants’ ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants’ internal control over financial reporting.

Date: May 29, 2015

/s/ Scott B. Flaherty

Scott B. Flaherty

Senior Vice President and Chief Financial Officer

1

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Colt Defense LLC and Colt Finance Corp. (collectively, the “Company”) on Form 10-Q/A for the period ending June 29, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: May 29, 2015

/s/ Dennis R. Veilleux

Dennis R. Veilleux

/s/ Scott B. Flaherty

Scott B. Flaherty

1

XML

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

XML

Goodwill, Trademarks and Other Intangible Assets (Details) (USD $) In Thousands, unless otherwise specified	0 Months Ended	6 Months Ended
	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

XML

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

XML

Segment Information (Details 4) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	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

XML

Goodwill, Trademarks and Other Intangible Assets (Details 2) (New Colt, USD $) In Thousands, unless otherwise specified	0 Months Ended
	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

XML

Summary of Significant Accounting Policies (Details 4) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	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)

XML

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

XML

Fair Value of Financial Instruments (Details) (USD $) In Thousands, unless otherwise specified	Jun. 29, 2014	Dec. 31, 2013
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

XML

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 item	Nov. 10, 2009	Nov. 17, 2014	Sep. 12, 2014	Dec. 31, 2013	Sep. 29, 2011	Feb. 09, 2015
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

XML

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%

XML

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.

XML

Restructuring Costs (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	6 Months Ended		0 Months Ended
	Jun. 29, 2014	Jun. 29, 2014	Dec. 31, 2013 item	Jun. 29, 2014
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

XML

Nature of Business (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	6 Months Ended	0 Months Ended	3 Months Ended	0 Months Ended
	Jun. 29, 2014 item	Jun. 29, 2014 WK	Jul. 01, 2014 item	Sep. 29, 2014 item	Mar. 30, 2014 item	Dec. 31, 2013	Nov. 10, 2009
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

XML

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	May 20, 2015	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									0.300
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									0.50

XML

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

XML

Inventories (Details) (USD $) In Thousands, unless otherwise specified	Jun. 29, 2014	Dec. 31, 2013
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

XML

Segment Information (Details)	6 Months Ended	12 Months Ended	0 Months Ended
	Jun. 29, 2014 item	Dec. 31, 2013 item	Jul. 12, 2013 item
Segment information
Number of operating segments	2	2
New Colt
Segment information
Number of manufacturers of Colt firearms to be consolidated			2

XML

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 item	Jun. 29, 2014 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

XML

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%

XML

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.

XML

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

XML

Summary of Significant Accounting Policies (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	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

XML

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

XML

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

XML

Goodwill, Trademarks and Other Intangible Assets (Details 3) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	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

XML

Summary of Significant Accounting Policies (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	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

XML

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

XML

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

XML

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.

XML

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			7-10
Furniture, fixtures and leasehold improvements	7,150			7,081			3-5
	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

XML

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

XML

Property and Equipment (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	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

XML

Concentration of risk (Details)	0 Months Ended	6 Months Ended	12 Months Ended
	Mar. 30, 2014 item	Jun. 29, 2014	Dec. 31, 2013
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%

XML

Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Jun. 29, 2014	Dec. 31, 2013
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

XML

Summary of Significant Accounting Policies (Details 3) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	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

XML

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.

XML

Income Taxes (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended	0 Months Ended
	Jun. 29, 2014 item	Apr. 16, 2014	Dec. 31, 2013
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%

XML

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

XML

Transactions with Related Parties (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended		1 Months Ended
	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

XML

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.

XML

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

XML

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.

XML

Segment Information (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended			12 Months Ended
	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

XML

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.

XML

Consolidated Statements of Operations (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	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

XML

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

XML

Document and Entity Information	6 Months Ended
	Jun. 29, 2014	May 29, 2015
Document and Entity Information
Entity Registrant Name	Colt Defense LLC
Entity Central Index Key	0001508677
Document Type	10-Q/A
Document Period End Date	Jun. 29, 2014
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	--12-31
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

XML

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.

XML

Consolidated Statements of Comprehensive Income (Loss) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	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

XML

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			7-10
Furniture, fixtures and leasehold improvements	7,150			7,081			3-5
	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

XML

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

XML

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.

XML

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.

XML

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

XML

Income Taxes (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	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

XML

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.

XML

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

XML

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.

XML

Common Unit Compensation (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended		12 Months Ended
	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

XML

Commitments and Contingencies (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended		12 Months Ended	0 Months Ended	3 Months Ended
	Jun. 29, 2014 item	Jun. 30, 2013	Jun. 29, 2014	Jun. 30, 2013	Dec. 31, 2013	Jul. 01, 2014 item	Sep. 29, 2014 item	Dec. 31, 2011 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

XML

Accumulated Deficit (Details 2) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended				0 Months Ended
	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)							31,165.589
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)						31,165.589

XML

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

XML

Accounts Receivable (Details) (USD $) In Thousands, unless otherwise specified	Jun. 29, 2014	Dec. 31, 2013
Accounts Receivable
Allowance for doubtful accounts	$ 84	$ 78

XML

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.

XML

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.

XML

Acquisition (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	6 Months Ended	0 Months Ended		3 Months Ended
	Jun. 30, 2013	Jun. 30, 2013	Jul. 12, 2013 item	Jul. 12, 2013	Mar. 31, 2013	Jun. 29, 2014	Dec. 31, 2013	Sep. 29, 2013
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

XML

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	)

XML

Consolidated Statements of Changes in Cash Flows (USD $) In Thousands, unless otherwise specified	6 Months Ended
	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

XML

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.

XML

Accrued Expenses (Details) (USD $) In Thousands, unless otherwise specified	Jun. 29, 2014	Dec. 31, 2013
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

XML

Segment Information (Details 3) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	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

XML

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.

XML

Accumulated Other Comprehensive Loss (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	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

XML

Transactions with Related Parties (Tables)

6 Months Ended

Jun. 29, 2014

Transactions with Related Parties

Schedule of transactions with New Colt

	Three Months Ended		Six Months 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

XML

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 Ended		Six Months 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