10-Q/A

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(Mark one)

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

For the quarterly period ended March 30, 2014

OR

o TRANSITION 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 March 30, 2014 we are responding to Securities and Exchange Commission (the “SEC”) comments on our first quarter 2014 Form 10-Q (“Quarterly Report”) filed May 14, 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.  In connection with our response to the SEC comments, we are also updating Item 4 “Controls and Procedures” and amending the financial statements included in this Quarterly Report to (i) reflect the correction of previously identified out of period errors that were immaterial to the consolidated financial statements individually and in the aggregate prior to the discovery of the M240 machine gun program (the “M240 Program”) error (see Note 2 Summary of Significant Accounting Policies and “Restatement of Previously Issued Consolidated Financial Statements ”) (ii) updated Note 16 “Commitments and Contingencies” with respect to the correction of the M240 Program error and updated related M240 Program disclosures and (iii) include language in Note 21  “Subsequent Events” with respect to our current liquidity position and ability to continue as a going concern and other recent events. In addition, the Company identified an error in its Consolidated Statement of Changes in Cash Flows for the three months ended March 30, 2014.  To correct for such error, the Company has revised the Statement of Changes in Cash Flows to correct for the $19 (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 $19 (in thousands of dollars). We do not consider the cash flow error to be material. 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 on May 14, 2014 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 Registrant’s filings made with the SEC subsequent to the filing of the original filing, including any amendment to those filings.

Restatement of Previously Issued Consolidated Financial Statements

In our amended Annual Report on Form 10-K/A for the fiscal year ended December 31, 2013, filed September 15, 2014 (Form 10-K/A #1), we restated our previously issued consolidated financial statements for the year ended December 31, 2013, (the “Restated Period”).  We also restated the Selected Financial Data in Item 6 for fiscal 2013.  The restatement was 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 the Company’s fourth quarter 2013 results.  We assessed the impact of this error on our 2013 annual financial statements and concluded that the impact of this error was material to these financial statements.  Consequently, we restated the financial statements for the year ended December 31, 2013.  As a result of this restatement we restated our Consolidated Balance Sheet as of December 31, 2013 to reflect a $4.1 million decrease in accrued expenses, a $6.8 million increase in customer advances and deferred income and a $2.7 million increase in accumulated deficit, primarily as a result of the correction of the M240 Program error.  In conjunction with the correction of the M240 Program error, other previously recorded out of period errors which were immaterial to the consolidated financial statements individually or in the aggregate prior to the discovery of the M240 Program error were also adjusted to be reflected in the proper period.

Because the correction of the M240 Program error did not impact the consolidated statement of operations for the quarter ended March 30, 2014 and the correction of the previously identified out of period adjustments related to the quarters ended March 30, 2014 and March 31, 2013 were not material (see Note 2 Summary of Significant Accounting Policies), we did not revise our Form 10-Q for the quarter ended March 30, 2014 at the time we filed Form 10-K/A #1.  In connection with our response to SEC comments on our first quarter Form 10-Q, however, we have revised our results for the quarters ended March 30, 2014 and March 31, 2013 to reflect the correction of the previously recorded out of period adjustments.

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.

2

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.

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.

3

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.

4

COLT DEFENSE LLC and Subsidiaries

INDEX

	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets — As of March 30, 2014 (As Revised) and December 31, 2013 (As Restated)	6
Consolidated Statements of Operations — Three Months Ended March 30, 2014 (As Revised) and March 31, 2013 (As Revised)	7
Consolidated Statements of Comprehensive Loss — Three Months Ended March 30, 2014 (As Revised) and March 31, 2013 (As Revised)	8
Consolidated Statements of Changes in Cash Flows — Three Months Ended March 30, 2014 (As Revised) and March 31, 2013 (As Revised)	9
Notes to Consolidated Financial Statements (unaudited)	10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
Item 3. Quantitative and Qualitative Disclosures about Market Risk	44
Item 4. Controls and Procedures	44
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	46
Item 1A. Risk Factors	46
Item 6. Exhibits	46
Signatures	47

5

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Colt Defense LLC and Subsidiaries

Consolidated Balance Sheets

(In thousands of dollars)

(Unaudited)

	March 30, 2014			December 31, 2013
	(As Revised)			(As Restated)
ASSETS
Current assets:
Cash and cash equivalents	$	7,399		$	12,594
Restricted cash	771			771
Accounts receivable, net	13,536			22,482
Inventories	77,074			66,674
Deferred tax assets	106			954
Other current assets	5,193			5,962
Total current assets	104,079			109,437
Property and equipment, net	29,709			30,733
Goodwill	50,836			51,225
Trademarks	50,100			50,100
Intangible assets with finite lives, net	12,456			13,415
Deferred financing costs	7,135			7,742
Long-term restricted cash	572			572
Other assets	1,491			1,510
Total assets	$	256,378		$	264,734
LIABILITIES AND DEFICIT
Current liabilities:
Line of credit	$	—		$	7,083
Accounts payable	16,224			14,038
Accrued expenses (Note 10)	27,054			22,158
Pension and retirement liabilities - current portion	1,085			1,085
Customer advances and deferred income	21,211			19,467
Long-term debt - current portion	5,000			5,000
Accrued distributions to members	670			670
Total current liabilities	71,244			69,501
Long-term debt	290,123			289,817
Pension and retirement liabilities	21,252			21,670
Long-term deferred tax liability	17,819			18,715
Long-term distribution payable to members	2,277			2,277
Other long-term liabilities	2,082			2,230
Total long-term liabilities	333,553			334,709
Total liabilities	404,797			404,210
Commitments and Contingencies (Note 16)
Deficit:
Accumulated deficit	(138,188		)	(130,136		)
Accumulated other comprehensive loss	(10,231		)	(9,340		)
Total deficit	(148,419		)	(139,476		)
Total liabilities and deficit	$	256,378		$	264,734

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

6

Colt Defense LLC and Subsidiaries

Consolidated Statements of Operations

(In thousands of dollars)

(Unaudited)

	For the Three Months Ended
	March 30, 2014			March 31, 2013
	(As Revised)			(As Revised)
Net sales	$	50,080		$	63,849
Cost of sales	40,386			45,112
Gross profit	9,694			18,737
Operating expenses:
Selling and commissions	4,461			3,095
Research and development	1,243			820
General and administrative	3,909			3,730
	9,613			7,645
Business development	500			75
Total operating expenses	10,113			7,720
Operating income	(419		)	11,017
Other expense (income):
Interest expense	7,684			5,994
Other income	(71		)	(787		)
Total other expense, net	7,613			5,207
Income (loss) before provision for income taxes	(8,032		)	5,810
Income tax expense (benefit)	(86		)	681
Net income (loss)	$	(7,946	)	$	5,129

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

7

Colt Defense LLC and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

(In thousands of dollars)
(Unaudited)

	For the Three Months Ended
	March 30, 2014			March 31, 2013
	(As Revised)			(As Revised)
Net income (loss)	$	(7,946	)	$	5,129
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment:
Foreign currency translation losses	(938		)	(577		)
Pension and postretirement benefit liabilities:
Reclassification adjustment for unrecognized prior service costs and unrecognized loss included in net income (loss)	47			133
	47			133
Comprehensive income (loss)	$	(8,837	)	$	4,685

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

8

Colt Defense LLC and Subsidiaries

Consolidated Statements of Changes in Cash Flows

(In thousands of dollars)
(Unaudited)

	For the Three Months Ended
	March 30, 2014			March 31, 2013
	(As Revised)			(As Revised)
Operating Activities
Net income (loss)	$	(7,946	)	$	5,129
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization	2,289			1,162
Amortization of financing fees	606			414
Amortization of debt discount	305			104
Deferred income taxes	3			(60		)
Other non-cash items	(15		)	13
Changes in operating assets and liabilities:
Accounts receivable	8,649			(15,611		)
Inventories	(10,672		)	(6,151		)
Prepaid expenses and other current assets	734			(209		)
Accounts payable and accrued expenses	6,955			7,166
Accrued pension and retirement liabilities	(371		)	(282		)
Customer advances and deferred income	2,076			(711		)
Other	(105		)	5
Net cash provided by (used in) operating activities	2,508			(9,031		)
Investing Activities
Purchases of property and equipment	(634		)	(1,265		)
Change in restricted cash	—			5
Net cash used in investing activities	(634		)	(1,260		)
Financing Activities
Line of credit repayments	(7,083		)	(6		)
Purchase of common units	—			(14,000		)
Net cash used in financing activities	(7,083		)	(14,006		)
Effect of exchange rates on cash and cash equivalents	14			(117		)
Change in cash and cash equivalents	(5,195		)	(24,414		)
Cash and cash equivalents, beginning of period	12,594			42,373
Cash and cash equivalents, end of period	$	7,399		$	17,959
Supplemental Disclosure of Cash Flow Information
Cash paid for interest	$	63		$	378
Cash paid for income taxes	313			295
Non-cash consideration for sale of equipment	—			23
Accrued purchases of fixed assets	—			7
Accrued distribution to members	2,947			1,418

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

9

Notes to Consolidated Financial Statements (unaudited)

(in thousands of dollars)

Note 1Nature of 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.  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 effected a legal entity restructuring whereby Colt Defense LLC (“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.

At March 30, 2014, Colt Defense, a limited liability corporation, owned 100% of Colt Finance Corp. (“Colt Finance”), New Colt, a C corporation, and Colt Defense Technical Services LLC (“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 Cooperatief U.A. (“Colt International”), a Dutch cooperatief, which owns 100% of Colt Canada Corporation (“Colt Canada”), a Canadian C corporation.  At December 31, 2013, Colt Defense owned 100% of Colt Finance, New Colt and 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.

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 Company restated its Annual Report on Form 10-K/A, filed September 15, 2014, 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”).

Note 2Summary 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 and the year ended 2011, (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 quarters ended March 30, 2014 and March 31, 2013 related to the M240 Program error.  The Company restated the Company’s Consolidated Balance Sheet as of December 31, 2013 to reflect a $4,133 decrease in accrued expenses, a $6,820 increase in customer advances and deferred income and a $2,689 increase in

10

total deficit, primarily as a result of the correction of the M240 Program error. In conjunction with the correction of the M240 Program error, other previously recorded, immaterial out of period adjustments were also adjusted to be reflected in the proper period.  Correction of these adjustments had the combined effect on the consolidated statements of operations for the three month period ended March 30, 2014 and March 31, 2013 of decreasing net income by $118 and increasing net income by $59, respectively.

The impacts of these adjustments for the three month periods ended March 30, 2014 and March 31, 2013 were as follows:

	Adjustments to
	Previously Reported Income Statement
	Increase (Decrease)
	Three Months Ended			Three Months Ended
	March 30, 2014			March 31, 2013
Net sales	$	—		$	—
Cost of sales	118		(A)	(67		)(B)
Gross profit	(118		)	67
Selling and commissions	—			2
Research and development	—			1
General and administrative	—			5
Operating income	(118		)	59
Net income (loss)	(118		)	59

(A) Relates to correcting an error in provision for inventory loss in the three months ended March 30, 2014.

(B) Relates to an incorrect overpayment to a vendor which was originally recorded in the three months ended December 31, 2013, but relates to the three months ended March 31, 2013.

Comparison of revised financial statements to financial statements as previously reported

The following tables compare the Company’s previously reported Consolidated Statements of Operations, Comprehensive Income (Loss) and Changes in Cash Flows for the quarters ended March 30, 2014 and March 31, 2013 to the corresponding financial statements for the quarterly periods as revised.

11

Colt Defense LLC and Subsidiaries

Consolidated Balance Sheets

(In thousands of dollars)

(Unaudited)

	March 30, 2014
							As Revised in
	As						this Quarterly
	Previously						Report on
	Reported			Adjustments			Form 10-Q
ASSETS
Current assets:
Cash and cash equivalents	$	7,399		$	—		$	7,399
Restricted cash	771			—			771
Accounts receivable, net	13,536			—			13,536
Inventories	77,192			(118		)	77,074
Deferred tax assets	106			—			106
Other current assets	5,193			—			5,193
Total current assets	104,197			(118		)	104,079
Property and equipment, net	29,709			—			29,709
Goodwill	50,836			—			50,836
Trademarks	50,100			—			50,100
Intangible assets with finite lives, net	12,456			—			12,456
Deferred financing costs	7,135			—			7,135
Long-term restricted cash	572			—			572
Other assets	1,491			—			1,491
Total assets	$	256,496		$	(118	)	$	256,378
LIABILITIES AND DEFICIT
Current liabilities:
Accounts payable	$	16,224		$	—		$	16,224
Accrued expenses (Note 10)	31,185			(4,131		)	27,054
Pension and retirement liabilities - current portion	1,085			—			1,085
Customer advances and deferred income	14,391			6,820			21,211
Long-term debt - current portion	5,000			—			5,000
Accrued distributions to members	670			—			670
Total current liabilities	68,555			2,689			71,244
Long-term debt	290,123			—			290,123
Pension and retirement liabilities	21,252			—			21,252
Long-term deferred tax liability	17,819			—			17,819
Long-term distribution payable to members	2,277			—			2,277
Other long-term liabilities	2,082			—			2,082
Total long-term liabilities	333,553			—			333,553
Total liabilities	402,108			2,689			404,797
Deficit:
Accumulated deficit	(135,399		)	(2,789		)	(138,188		)
Accumulated other comprehensive loss	(10,213		)	(18		)	(10,231		)
Total deficit	(145,612		)	(2,807		)	(148,419		)
Total liabilities and deficit	$	256,496		$	(118	)	$	256,378

12

Colt Defense LLC and Subsidiaries

Consolidated Statement of Operations

(In thousands of dollars)

(Unaudited)

	Three months ended March 30, 2014									Three months ended March 31, 2013
							As Revised in									As Revised in
	As						this Quarterly			As						this Quarterly
	Previously						Report on			Previously						Report on
	Reported			Adjustments			Form 10-Q			Reported			Adjustments			Form 10-Q
Net sales	$	50,080		$	—		$	50,080		$	63,849		$	—		$	63,849
Cost of sales	40,268			118			40,386			45,179			(67		)	45,112
Gross Profit	9,812			(118		)	9,694			18,670			67			18,737
Operating expenses:
Selling and commissions	4,461			—			4,461			3,093			2			3,095
Research and development	1,243			—			1,243			819			1			820
General and administrative	3,909			—			3,909			3,725			5			3,730
	9,613			—			9,613			7,637			8			7,645
Business development	500			—			500			75			—			75
Total operating expenses	10,113			—			10,113			7,712			8			7,720
Operating income	(301		)	(118		)	(419		)	10,958			59			11,017
Other expense/(income):
Interest expense	7,684			—			7,684			5,994			—			5,994
Other (income)/expense, net	(71		)	—			(71		)	(787		)	—			(787		)
Total other expenses, net	7,613			—			7,613			5,207			—			5,207
Income (loss) before provision for income taxes	(7,914		)	(118		)	(8,032		)	5,751			59			5,810
Income tax expense	(86		)	—			(86		)	681			—			681
Net income (loss)	$	(7,828	)	$	(118	)	$	(7,946	)	$	5,070		$	59		$	5,129

13

Colt Defense LLC and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

(In thousands of dollars)

(Unaudited)

	Three Months Ended March 30, 2014									Three Months Ended March 31, 2013
							As Revised in								As Revised in
	As						this Quarterly			As					this Quarterly
	Previously						Report on			Previously					Report on
	Reported			Adjustments			Form 10-Q			Reported			Adjustments		Form 10-Q
Net income (loss)	$	(7,828	)	$	(118	)	$	(7,946	)	$	5,070		$	59	$	5,129
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment:
Foreign currency translation gains (losses)	(938		)				(938		)	(577		)	—		(577		)
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	47			—			47			133			—		133
	47			—			47			133			—		133
Comprehensive income (loss)	$	(8,719	)	$	(118	)	$	(8,837	)	$	4,626		$	59	$	4,685

14

Colt Defense LLC and Subsidiaries

Consolidated Statement of Changes in Cash Flows

(In thousands of dollars)

(Unaudited)

	For the Three Months Ended March 30, 2014
							As Revised in
	As						this Quarterly
	Previously						Report on
	Reported			Adjustments			Form 10-Q
Operating Activities
Net income (loss)	$	(7,828	)	$	(118	)	$	(7,946	)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization	2,308			(19		)	2,289
Amortization of financing fees	606			—			606
Amortization of debt discount	305			—			305
Deferred income taxes	3			—			3
Other non-cash items	(15		)	—			(15		)
Changes in operating assets and liabilites:
Accounts receivable	8,648			1			8,649
Inventories	(10,790		)	118			(10,672		)
Prepaid expense and other current assets	736			(2		)	734
Accounts payable and accrued expense	6,952			3			6,955
Accrued pension and retirement liabilities	(371		)	—			(371		)
Customer advances and deferred income	2,076			—			2,076
Other	(103		)	(2		)	(105		)
Net cash provided by operating activities	2,527			(19		)	2,508
Investing Activities
Purchase of property and equipment	(653		)	19			(634		)
Net cash used in investing activities	(653		)	19			(634		)
Financing Activities
Line of credit repayments	(7,083		)	—			(7,083		)
Net cash used financing activities	(7,083		)	—			(7,083		)
Effect of exchange rates on cash and cash equivalents	14			—			14
Change in cash and cash equivalents	(5,195		)	—			(5,195		)
Cash and cash equivalents, beginning of period	12,594			—			12,594
Cash and cash equivalents, end of period	$	7,399		$	—		$	7,399

15

Colt Defense LLC and Subsidiaries

Consolidated Statement of Changes in Cash Flows

(In thousands of dollars)

(Unaudited)

	For the Three Months Ended March 31, 2013
							As Revised in
	As						this Quarterly
	Previously						Report on
	Reported			Adjustments			Form 10-Q
Operating Activities
Net income	$	5,070		$	59		$	5,129
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization	1,162			—			1,162
Amortization of financing fees	414			—			414
Amortization of debt discount	104			—			104
Deferred income taxes	(60		)	—			(60		)
Other non-cash items	13			—			13
Changes in operating assets and liabilites:
Accounts receivable	(15,618		)	7			(15,611		)
Inventories	(6,151		)	—			(6,151		)
Prepaid expense and other current assets	(91		)	(118		)	(209		)
Accounts payable and accrued expense	7,166			—			7,166
Accrued pension and retirement liabilities	(338		)	56			(282		)
Customer advances and deferred income	(711		)	—			(711		)
Other	5			—			5
Net cash (used in) provided by operating activities	(9,035		)	4			(9,031		)
Investing Activities
Purchase of property and equipment	(1,265		)	—			(1,265		)
Change in restricted cash	5			—			5
Net cash used in investing activities	(1,260		)	—			(1,260		)
Financing Activities
Line of credit repayments	(6		)	—			(6		)
Purchase of common units	(14,000		)	—			(14,000		)
Net cash used financing activities	(14,006		)	—			(14,006		)
Effect of exchange rates on cash and cash equivalents	(113		)	(4		)	(117		)
Change in cash and cash equivalents	(24,414		)	—			(24,414		)
Cash and cash equivalents, beginning of period	42,373			—			42,373
Cash and cash equivalents, end of period	$	17,959		$	—		$	17,959

16

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 months ended March 30, 2014 and March 31, 2013 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 (Amendment No. 2) for the fiscal year ended December 31, 2013. The consolidated balance sheet dated December 31, 2013 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 months ended March 30, 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.

Reclassification of Prior Period Amounts

Certain prior period amounts have been reclassified to conform with the current year presentation. The amounts reclassified relate to cost of training revenue which was reclassified from selling and commission expense to cost of sales and royalty revenue reclassified from other (income) expense, to net sales. Amortization of purchased intangibles was reclassified from a separate line item to selling and commission expense and business development expenses were reclassified from other income to a separate line.

The cost of training reclassification was $81 for the three months ended March 31, 2013.  The royalty revenue reclassification had no impact on the financial statements as amounts were intercompany transactions and eliminated for the three months ended March 31, 2013. The amortization of purchased intangibles reclassification was $117 for the three months ended March 31, 2013. The reclassification of business development expenses was $75 for the three months ended March 30, 2013.

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 March 30, 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.

17

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 this contract 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.

18

Guarantor Financial Statements

In accordance with Rule 3-10 of SEC Regulation S-X, the Company is not presenting condensed consolidating financial statements as Colt Defense and Colt Finance have no independent assets or operations.  All of the Company’s subsidiaries are 100% owned and have guaranteed the Company’s Senior Notes; and all of the guarantees are full, unconditional, joint and several.

Recent Accounting Pronouncements

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 3Acquisition

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

19

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 trade marks 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 months ended March 31, 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
	Three Months Ended
	March 31, 2013
Net sales	$	81,813
Net income	5,605

Pro forma net income for the three months ended March 31, 2013 were adjusted to include $1,629 of additional interest expense related to the Company’s $50,000 Term Loan and to include $664 of additional expense related to the amortization of finite-lived intangible assets.

Note 4Restructuring Costs

During the third and fourth quarters of the year ended December 31, 2013, 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,

20

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 three month 2014 activity in the accrual balances:

Restructuring accruals at December 31, 2013	$	706
Utilization	(319		)
Balance at March 30, 2014	$	387

Note 5Accounts Receivable

Accounts receivable are net of an allowance for doubtful accounts of $58 and $78 at March 30, 2014 and December 31, 2013, respectively.

Note 6Inventories

The following table sets forth a summary of inventories, net of reserves at the lower of cost or market:

	March 30, 2014		December 31, 2013
	(As Revised)
Raw materials	$	47,165	$	43,469
Work in process	12,570		9,476
Finished products	17,339		13,729
	$	77,074	$	66,674

21

Note 7Property 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 in the amounts of $4,420, $30 and $732, respectively.

Property and equipment consist of the following as of:

							Estimated
	March 30, 2014			December 31, 2013			Useful Life
Land	$	325		$	338		—
Building	2,551			2,653			33
Machinery and equipment	50,144			47,476			7-10
Furniture, fixtures and leasehold improvements	7,116			7,081			3-5
	60,136			57,548
Less accumulated depreciation and amortization	(33,463		)	(32,152		)
	26,673			25,396
Construction in process	3,036			5,337
Property and equipment, net	$	29,709		$	30,733

Note 8Goodwill, 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.

During the first quarter of 2014, the Company has seen a decrease in the demand for commercial rifles and a decrease in international sales when compared to 2013.  The Company concluded that a triggering event has not occurred and an interim impairment test for goodwill was not necessary as of March 30, 2014.  These conclusions were based on its most recent financial projections.  If the Company’s actual results are lower than its financial projections on a longer term basis, an impairment test may be necessary which may result in future impairment.

The following table sets forth the changes in the carrying amount of goodwill for the Company as of and for the three months ended March 30, 2014:

	Total
Balance at December 31, 2013	$	51,225
Effect of foreign currency translation	(389		)
Balance at March 30, 2014	$	50,836

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.

22

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 March 30, 2014
	Gross							Estimated
	Carrying		Accumulated					Useful
	Amount		Amortization			Net		Life
Customer relationship Canadian Government	$	2,278	$	(671	)	$	1,607	30
Customer relationships other	5,922		(4,000		)	1,922		20
License agreements	5,240		(1,210		)	4,030		6
Backlog	1,699		(737		)	962		3
Technology-based intangibles	6,580		(2,645		)	3,935		15-20
	$	21,719	$	(9,263	)	$	12,456

	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 $3,254, $2,770, $1,913, $1,174 and $861 for 2014, 2015, 2016, 2017 and 2018, respectively.

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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, 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. Principal repayments, which are due quarterly on the last day of each calendar quarter, are as follows:

	Amount
Remaining 2014	$	5,000
2015	7,500
2016	36,250
Total	$	48,750

On March 31, 2014, the Company made Term Loan principal and interest payments of $625 and $1,310, respectively.

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, the Company cannot exceed specified levels of capital expenditures. All financial covenants, with limited exceptions, are calculated on a rolling 4-quarter basis based on financial results for the current and three preceding fiscal quarters. The Company was in compliance with its Term Loan covenants as of March 30, 2014 and December 31, 2013 and the Company monitors its future compliance based on current and anticipated financial results.  It is possible the Company will not meet one or more of the Term Loan covenants in one or more quarters in 2014.  If the Company were to not meet certain of the Term Loan covenants, 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 on a timely basis or at all, in which case the Term Loan would become a current liability.

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 for member distributions to support member LLC-related taxes) and merge, acquire or sell assets.

Credit Agreement

On September 29, 2011, the Company 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 $50,000, 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.

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 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 March 30, 2014 and December 31, 2013, the Company was in compliance with all covenants and restrictions and the Company monitors its future compliance based on current and anticipated financial results.

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As of March 30, 2014, there were no advances and $3,486 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.

On March 22, 2013, the Company entered into Amendment No. 2 to the Credit Agreement, whereby, among other things, the lenders 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.

On June 19, 2013, Colt Defense entered into Amendment No. 3 to the Credit Agreement, whereby the lenders 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, Colt Defense 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 other 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 March 30, 2014 and December 31, 2013 were as follows:

	March 30, 2014			December 31, 2013
Senior Notes	$	248,092		$	247,984
Term Loan	47,031			46,833
Credit Agreement	—			7,083
Total debt	295,123			301,900
Less: current portion	(5,000		)	(12,083		)
Long-term debt	$	290,123		$	289,817

Long-term debt was recorded net of unamortized original issue and debt discounts of $3,627 at March 30, 2014 and $3,932 at December 31, 2013.

	Three Months Ended
	March 30, 2014		March 31, 2013
Amortization of discount	$	305	$	104
Amortization of deferred financing costs	606		414

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Note 10   Accrued Expenses

Accrued expenses consisted of:

	March 30, 2014		December 31, 2013
	(As Revised)		(As Restated)
Accrued compensation and benefits	$	5,105	$	7,154
Accrued contract obligation expense	1,133		1,194
Accrued federal, excise and other taxes	4,110		4,902
Accrued interest	9,583		2,879
Accrued commissions	1,232		929
Other accrued expenses	5,891		5,100
	$	27,054	$	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.

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. Subsequent to March 30, 2014, Colt Canada declared and paid dividends 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%.

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The provision (benefit) for foreign income taxes is as follows:

	Three Months Ended
	March 30, 2014			March 31, 2013
Current	$	(89	)	$	741
Deferred	3			(60		)
Total	$	(86	)	$	681

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 March 30, 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 an indefinite lived intangible asset. 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
	March 30, 2014			March 31, 2013
				(As Revised)
Service cost	$	—		$	—
Interest cost	379			273
Expected return on assets	(494		)	(365		)
Amortization of unrecognized loss	66			105
Net periodic (income)	$	(49	)	$	13

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.

Postretirement health care expense for the New Colt plan is included in the amounts below from the Merger Date.

The components of cost recognized in the Company’s Consolidated Statements of Operations for postretirement health care coverage are as follows:

	Three Months Ended
	March 30, 2014			March 31, 2013
Service cost	$	164		$	64
Interest cost	212			132
Amortization of unrecognized prior service costs	(43		)	(43		)
Amortization of unrecognized loss	24			71
Net periodic cost	$	357		$	224

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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 March 30, 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 $14.0 million 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. Subsequent to March 30, 2014, the Company made tax distribution payments to members of $683 along with State of Connecticut members’ withholding payments of $530.

Based on the distribution limitations associated with the Company’s Term Loan, there was a $2,277 long term liability payable to members at March 30, 2014 and December 31, 2013, respectively.

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 the first quarter of 2014, there were no options granted. 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 immaterial for the three months ended March 30, 2014 and March 31, 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.

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The costs for the services provided and the related expenses under the agreements with Sciens Institutional and Sciens Management were $250 and $108 for the three months ended March 30, 2014 and March 31, 2013, respectively, and they are recorded within general and administrative expenses in the Consolidated Statements of Operations.

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 also 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 March 30, 2014, and March 31, 2013, the rent expense under this lease was $210 and $119, respectively.

In addition, Colt Security LLC, a wholly owned subsidiary of Employee Plan Holding Corp., provides security guard services to Colt.

Prior to the Merger, transactions with New Colt were as follows:

	Three Months
	Ended
	March 30, 2013
Net sales to New Colt	$	22,522
Purchases from New Colt	994
Administration and services fees charged to New Colt	442

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:

	March 30, 2014		December 31, 2013
Standby letters of credit secured by restricted cash	$	1,183	$	1,185
Standby letters of credit under Credit Agreement	3,486		3,486
Guarantees of standby letters of credit established by a sales agent on behalf of Colt	74		74

At March 30, 2014 and December 31, 2013, the Company had unconditional purchase obligations related to capital expenditures for machinery and equipment of $1,104 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 March 30, 2014 and December 31, 2013, remaining gross offset purchase commitments totaled $63,504 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 $1,599 and $1,639 as of March 30, 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.

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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 first quarter of 2014 the Company, based on additional available information, continually assessed the M240 Program accruals and determined that an incremental $311 of M240 Program contract obligation expense was required. The expense recorded was based on the Company’s best estimate of the costs to satisfy the obligation given a range of possible outcomes.  The Company believes the actual costs to satisfy this obligation may vary from the original estimate.

As of March 30, 2014 and December 31, 2013, the Company had the following amounts included in the consolidated balance sheets related to the M240 Program:

	March 30, 2014		December 31, 2013
	(As Revised)		(As Restated)
Inventory Reserves	$	453	$	639
Accrued Contract Obligation	$	1,133	$	1,194
Customer Advances and Deferred Income	$	6,820	$	6,820
Other Long-Term Liabilities	$	—	$	—

At March 30, 2014 and December 31, 2013, the Company had unconditional purchase obligations related to capital expenditures for machinery and equipment of $1,104 and $892, respectively.

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 months ended March 30, 2014 and March 31, 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 their 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 March 30, 2014 and December 31, 2013, deferred lease expense was $56 and $36, respectively. In connection with the lease, the Company was required to hire a minimum number of employees commencing in 2013. As of March 30, 2014, the Company had not occupied the Florida facility and had not hired any employees.  The Company has accrued a contractual penalty of $63 and $50 at March 30, 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 County to assist with the cost of the renovations.  In conjunction with the Florida lease, the Company entered into a quick action closing fund agreement, as amended, with the state of Florida which requires the Company to make a minimum capital investment of $2,500 by December 31, 2015, of which $181 had been made through both March 30, 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 March 30, 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 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.

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Adjusted EBITDA consists of income (loss) before interest, income taxes, depreciation and amortization and other expenses as noted below. Management uses Adjusted EBITDA to evaluate the financial performance of and make operating decisions.  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
	March 30, 2014			March 31, 2013
	(As Revised)			(As Revised)
Statement of Operations Data:
Net income (loss)	$	(7,946	)	$	5,129
Income tax (benefit) expense	(86		)	681
Depreciation and amortization (i)	2,289			1,162
Interest expense, net	7,684			5,994
Sciens fees and expenses (ii)	250			108
Contract obligation expense add back (iii)	311			—
Business development costs (iv)	500			75
Severance costs (v)	145			—
Other income, net (vi)	(71		)	(345		)
Adjusted EBITDA	$	3,076		$	12,804

(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)Expenses related to Company’s contract obligation. See Note 16, “Commitments and Contingencies”

(iv)Includes transaction costs incurred in connection with contemplated merger and acquisition activities.

(v)Includes non-recurring severance costs.

(vi)Includes income and/or expenses such as foreign currency exchange gains or losses and other less significant charges not related to on-going operations.

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Product Information

The following table shows net sales for the three months ended March 30, 2014 and March 31, 2013 by product category. The table includes the results of New Colt from the Merger Date.  After intercompany sales eliminations, the New Colt acquisition provided $17.1 million of incremental sales for the three months ended March 30, 2014.

	Three Months Ended
	March 30, 2014		March 31, 2013
Long guns	$	24,716	$	52,271
Handguns	15,539		1,261
Spares and other	9,825		10,317
Total	$	50,080	$	63,849

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 specific geographic regions:

	Three Months Ended
	March 30, 2014		March 31, 2013
United States	$	41,495	$	35,708
Canada	4,357		10,751
Latin America/Caribbean	1,785		38
Middle East/Africa	1,724		1,001
Europe	424		1,331
Asia/Pacific	295		15,020
	$	50,080	$	63,849

Long-lived assets are net fixed assets attributed to specific geographic regions:

	March 30, 2014		December 31, 2013
United States	$	25,010	$	25,745
Canada	4,699		4,988
	$	29,709	$	30,733

Major Customer Information

For the three months ended March 30, 2014, no foreign customers accounted for more than 10% of net sales.  For the three months ended March 31, 2013, two direct foreign customers accounted for 23% and 16% of net sales, respectively.

For the three months ended March 30, 2014, one commercial customer accounted for 11% of net sales. For the three months ended March 31, 2013 (prior to the Merger), sales to New Colt accounted for 35% of net sales.

For the three months ended March 30, 2014 and March 31, 2013, sales to the U.S. Government accounted for 7% and 12%, respectively, 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 March 30, 2014, the two largest individual trade receivable balances accounted for 25% and 9% of total accounts receivable, respectively.  At December 31, 2013, the two largest individual trade receivable balances accounted for 28% and 16% of total accounts receivable, respectively.

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Labor

The United Automobile, Aerospace & Agricultural Implements Workers of America (the “Union”) represents our West Hartford work force pursuant to a collective bargaining agreement that expires March 31, 2019. The Union represents approximately 72% of Colt’s U.S. workforce.

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 $295,123 and $294,817 at March 30, 2014 and December 31, 2013, respectively, was recorded at amortized cost. The estimated fair value of long-term debt was approximately $275,575 and $262,775 at March 30, 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 March 30, 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 three months ended March 31, 2014.

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	)	$	2,733		$	(13,841	)
Other comprehensive income before reclassifications	—			—			—			—
Amounts reclassified from accumulated other comprehensive income	(43		)	176			—			133
Currency translation	—			—			(577		)	(577		)
Net current period other comprehensive income	(43		)	176			(577		)	(444		)
Balance, March 31, 2013	$	782		$	(17,223	)	$	2,156		$	(14,285	)
Balance, December 31, 2013	$	653		$	(10,836	)	$	843		$	(9,340	)
Other comprehensive income before reclassifications	—			—			—			—
Amounts reclassified from accumulated other comprehensive income	(43		)	90			—			47
Currency translation	—			—			(938		)	(938		)
Net current period other comprehensive income	(43		)	90			(938		)	(891		)
Balance, March 30, 2014	$	610		$	(10,746	)	$	(95	)	$	(10,231	)

Amounts are on a before-tax basis.

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Note 21   Subsequent Events

Union Contract

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.

Workforce Reduction

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 will be recorded in the second quarter and amounted to $0.4 million. The Company is in the process of determining the severance costs for the hourly employees.

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

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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 the 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-Q/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 its 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.

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). 

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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.

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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 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.

Revision of Previously Issued Financial Statements

Certain monetary amounts, percentages and other figures included in Item 2 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations” previously disclosed in our Quarterly Report filed on September 15, 2014, have been subject to rounding adjustments in this amended Quarterly Report which we believe are not material.  The rounding adjustments resulted from amending the financial statements included in this amended Quarterly Report to reflect the correction of previously identified out of period errors that were immaterial to the consolidated financial statements individually and in aggregate prior to the discovery of the M240 Program error.  Further, all amounts in this Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this amended Quarterly Report affected by the restatement of the financial statements for the year ended December 31, 2013 or the revision of the interim financial statements for the first three quarters in the fiscal year ended December 31, 2013 reflect such amount as restated or as revised.  Please refer to the Explanatory Note for further information.

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 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):

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	Three Months Ended
	March 30, 2014			%		March 31, 2013			%
	(As Revised)			(As Revised)		(As Revised)			(As Revised)
Statement of Operations Data:
Net sales	$	50,080		100.0	%	$	63,849		100.0	%
Cost of sales	40,386			80.6	%	45,112			70.7	%
Gross profit	9,694			19.4	%	18,737			29.3	%
Selling and commissions	4,461			8.9	%	3,095			4.8	%
Research and development	1,243			2.5	%	820			1.3	%
General and administrative	3,909			7.8	%	3,730			5.8	%
	9,613			19.2	%	7,645			11.9	%
Business development costs	500			1.0	%	75			0.1	%
Total operating expenses	10,113			20.2	%	7,720			12.0	%
Operating income	(419		)	-0.8	%	11,017			17.3	%
Other expense (income)
Interest expense	7,684			15.3	%	5,994			9.4	%
Other income	(71		)	-0.1	%	(787		)	-1.2	%
Non operating expenses	7,613			15.2	%	5,207			8.2	%
Income (loss) before provision for income taxes	(8,032		)	-16.0	%	5,810			9.1	%
Income tax expense (benefit)	(86		)	-0.2	%	681			1.1	%
Net income (loss)	$	(7,946	)	-15.9	%	$	5,129		8.0	%

Three Months Ended March 30, 2014 Compared to the Three Months Ended March 31, 2013

On the Merger Date, the Company acquired 100% ownership of New 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 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 ended March 30, 2014 and March 31, 2013, respectively, by product category ($ in thousands):

	Three Months Ended
	March 30, 2014		March 31, 2013		% Change
Long guns	$	24,716	$	52,271	-52.7	%
Handguns	15,539		1,261		1,132.3	%
Spares and other	9,825		10,317		-4.8	%
Total	$	50,080	$	63,849	-21.6	%

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Net sales for the three months ended March 30, 2014 were $50.1 million compared to $63.8 million for the three months ended March 31, 2013. The decrease of $13.7 million, or 22%, was due to lower sales in long guns, spares and other partially offset by increases in handgun sales due to the acquisition of New Colt.  Sales in the first quarter of 2014 decreased when compared to the first quarter of 2013 due to $9.4 million of lower commercial/LE rifle sales related to the continued softness in the MSR market, a decrease in international sales of $19.6 million partially associated with the non-recurrence of a discrete large international rifle sale in the first quarter of 2013 and lower international spares and other sales made in the first quarter of 2014 and a decrease in U.S. government sales of $1.6 million primarily related to the timing of the fulfillment of certain U.S. government contracts.  The New Colt acquisition provided $17.1 million of incremental sales in the first quarter of 2014.  Without the impact of the New Colt acquisition, our first quarter sales were $33.0 million.

Cost of Sales/Gross Profit

Cost of sales was $40.4 million for the three months ended March 30, 2014 compared to $45.1 million for the three months ended March 31, 2013, as revised.  Without the acquisition of New Colt, cost of sales for the first quarter of 2014 would have been $27.8 million, or a decrease of $17.3 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 decreased from 29.3% to 19.4% in the comparable quarter of 2013.  The decline in gross margin was driven by a combination of lower international sales, which historically have had higher margins than domestic sales, lower volumes in our manufacturing facilities and, to a lesser extent, sales promotions into the commercial channel. The Company also recorded a contract obligation expense in the first quarter of 2014 which had a 0.6% negative effect on gross margins for the quarter. See Note 16, “Commitments and Contingencies.”

Selling and Commissions Expense

For the three months ended March 30, 2014, selling and commission expenses were $4.5 million compared to $3.1 million for the same period in 2013. The increase of $1.4 million, or 44%, 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 March 30, 2014 was $1.2 million versus $0.8 million for the three months ended March 31, 2013. The $0.4 million increase, or 52%, was primarily due to the 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.

General and Administrative Expense

General and administrative expense was $3.9 million in the first quarter of 2014 and $3.7 million in the first quarter of 2013. The increase of $0.2 million, or 5%, was due to higher audit, tax and other professional fees as the Company is a more complex entity after the Merger and increased expenses 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 expenses were $0.5 million in the first quarter of 2014 and $0.1 million in the first quarter of 2013. Business development expense increased in the first quarter of 2014 as compared to the first quarter of 2013 by $0.4 million as the Company had increased outside professional service fees associated with its strategic initiatives relative to the comparable prior year period.

Interest Expense

Interest expense for the three months ended March 30, 2014 was $7.7 million compared to $6.0 million in the comparable prior year period.  The increase of $1.7 million, or 28%, was primarily due to the $1.7 million of incremental interest expense on the Term Loan, which partially funded the acquisition of New Colt.

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Other Income

For the first quarter ended March 30, 2014, other income was $0.1 million versus $0.8 million of other income in the first quarter of 2013. In the first quarter of 2014, other income was primarily related to foreign exchange gains. The first quarter of 2013 included a gain on an international transaction.

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 legal entity 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 March 30, 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 first quarter of 2014, New Colt recorded an income tax expense of $0.1 million and Colt Canada recorded a foreign income tax benefit of $0.2 million. For the first quarter of 2013, foreign income tax expense of $0.7 million was recorded.  Tax benefits recorded in the first quarter of 2014 are attributable to operating losses recorded by the Company.

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, the Company 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 March 30, 2014 and December 31, 2013, we were in compliance with all covenants and restrictions. We monitor our future compliance based on current and anticipated financial results.

As of March 30, 2014, there were no advances and $3.5 million of letters of credit outstanding under the Credit Agreement.

On March 22, 2013, we entered into Amendment No. 2 to the Credit Agreement, whereby, among other things, the lenders 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.

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On June 19, 2013, we entered into Amendment No. 3 to the Credit Agreement, pursuant to which the lenders 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 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 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 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, the Company 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, the Company’s 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 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 $2.3 million from its principal value of $50.0 million. The Company 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	$	5,000
2015	7,500
2016	36,250
Total	$	48,750

On March 31, 2014, the Company made Term Loan principal and interest payments of $0.6 million and $1.3 million, respectively.

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. We were in compliance with our Term Loan covenants as of March 30, 2014 and we monitor our future compliance based on current and anticipated financial results.  In light of the decreased demand for MSRs management has taken actions focused on maintaining compliance with Term Loan covenants which include, but are not limited to, a workforce reduction, implementation of various procurement and inventory management initiatives, and various other sales and manufacturing initiatives focused on growing product sales in underserved markets.  It is possible that we will not meet one or more of our Term Loan covenants in one or more quarters in 2014.  If we were not to meet certain of our Term Loan covenants we would likely seek a waiver from our Term Loan lenders. There is no assurance that such a waiver could be obtained from our Term Loan lenders on a timely basis or at all, in which case the Term Loan would become a current liability.

41

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 the Company’s inventory levels to $77.1 million as of March 30, 2014 from $66.7 million as of December 31, 2013, an $10.4 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 with respect to our 2013 taxable income.

At March 30, 2014, we had cash and cash equivalents totaling $7.4 million.  We believe that our existing cash balances, Credit Agreement availability and forecasted operating results are sufficient to meet our obligations for the next twelve months.

Cash Flows

The following table sets forth our consolidated cash flows for the nine months ended March 30, 2014 and March 31, 2013, respectively (dollars in millions):

	Three Months Ended
	March 30, 2014			March 31, 2013
Cash provided by (used in) operating activities	$	2.5		$	(9.0	)
Cash (used in) investing activities	(0.6		)	(1.3		)
Cash (used in) financing activities	(7.1		)	(14.0		)

Cash Flows Used in Operating Activities

Net cash provided by operating activities for the three months ended March 30, 2014 was $2.5 million, compared to net cash used by operating activities of $9.0 million for the three months ended March 31, 2013.  We had a net loss of $7.9 million in the first three months of 2014 compared to net income of $5.1 million in the first three months of 2013.

During the first three months of 2014, changes in operating assets and liabilities were a $7.3 million source of cash versus a $15.8 million use of cash for the same period in 2013.  In 2014, accounts receivable decreased by $8.6 million, primarily due to lower sales. Accounts payable and accrued expenses increased by $7.0 million in 2014 due to higher accrued interest because of the timing of payments due.  In 2014, inventories increased by $10.7 million (excluding the effects of changes in foreign exchange rates on Canadian inventory) 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 three months of 2013, we used $15.8 million of cash to fund changes in operating assets and liabilities. In the first quarter of 2013, we used $15.6 million to fund an increase in accounts receivable, primarily due to a large international shipment in late March. Increasing sales volume drove a $6.2 million increase in inventory. This use of cash was partially offset by a $7.2 million increase in accounts payable and accrued expenses, which was mainly due to a volume-related increase in accounts payable and additional accrued interest on our debt due to the timing of our semi-annual payments.

42

Cash Flows Used in Investing Activities

Cash used in investing activities was $0.6 million for the first three months of 2014 and $1.3 million for the first three 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

In the first quarter of 2014, we used $7.1 million to repay the Company’s line of credit advances.  In the first quarter of 2013, we used $14.0 million of cash to repurchase all of our common units previously held by the Blackstone Funds.

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 $221.9 million at March 30, 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

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 for the fiscal year ended December 31, 2013, which was filed with the Securities and Exchange Commission on March 20, 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 will be in effect from April 1, 2014 through March 31, 2019.

As of March 30, 2014, there have been no other material changes to our contractual obligations outside the ordinary course of our business since December 31, 2013.

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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 foreign currency gains of $0.1 million for the three months ended March 30, 2014 and $0.1 million of foreign currency losses for the three months ended March 31, 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 March 30, 2014, there were no outstanding advances under the Credit Agreement and $48.8 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 March 30, 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, 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.

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

44

additional measures to address the material weakness or determine to supplement or modify certain of the remediation measures described above.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the quarter ended March 30, 2014 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

45

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 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.

Item 6. Exhibits

The following list of exhibits includes exhibits submitted with this Form 10-Q 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 March 30, 2014 and December 31, 2013, (ii) Consolidated Statements of Operations for the three months ended March 30, 2014 and March 31, 2013, (iii) Consolidated Statements of Comprehensive Income for the three months ended March 30, 2014 and March 31, 2013, (iv) Consolidated Statements of Cash Flows for the three months ended March 30, 2014 and March 31, 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 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.

46

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

47

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 registrant, 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 registrant, 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 March 30, 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)

3 Months Ended

Mar. 30, 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

	March 30, 2014		December 31, 2013
Standby letters of credit secured by restricted cash	$	1,183	$	1,185
Standby letters of credit under Credit Agreement	3,486		3,486
Guarantees of standby letters of credit established by a sales agent on behalf of Colt	74		74

Summary of M240 Program - amounts included in the consolidated balance sheets

	March 30, 2014		December 31, 2013
	(As Revised)		(As Restated)
Inventory Reserves	$	453	$	639
Accrued Contract Obligation	$	1,133	$	1,194
Customer Advances and Deferred Income	$	6,820	$	6,820
Other Long-Term Liabilities	$	—	$	—

XML

Inventories (Details) (USD $) In Thousands, unless otherwise specified	Mar. 30, 2014	Dec. 31, 2013
Inventories
Raw materials	$ 47,165	$ 43,469
Work in process	12,570	9,476
Finished products	17,339	13,729
Inventories	$ 77,074	$ 66,674

XML

Summary of Significant Accounting Policies (Details 6) (New Colt Holding)	Jul. 12, 2013
New Colt Holding
Basis of Accounting and Consolidation
Ownership interest acquired (as a percent)	100.00%

XML

Segment Information (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended	12 Months Ended
	Mar. 30, 2014	Mar. 31, 2013	Dec. 31, 2013	Dec. 31, 2013
Statement of Operations Data:
Net income (loss)	$ (7,946)	$ 5,129
Income tax (benefit) expense	(86)	681
Depreciation and amortization	2,289	1,162
Interest expense, net	7,684	5,994
Sciens fees and expenses	250	108
Contract obligation expense add back	311			3,381
Business development costs	500	75
Severance costs	145		782
Other income, net	(71)	(345)
Adjusted EBITDA	$ 3,076	$ 12,804

XML

Property and Equipment (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 30, 2014	Dec. 31, 2013	Mar. 31, 2013
Property and equipment
Property and equipment, gross, excluding Construction in process	$ 60,136		$ 57,548
Less accumulated depreciation and amortization	(33,463)		(32,152)
Property and equipment, net, excluding Construction in process	26,673		25,396
Construction in process	3,036		5,337
Property and equipment, net	29,709	30,733	30,733
Land
Property and equipment
Property and equipment, gross, excluding Construction in process	325		338
Building
Property and equipment
Property and equipment, gross, excluding Construction in process	2,551		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	50,144		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	7,116		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

Summary of Significant Accounting Policies (Details 4) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 30, 2014	Mar. 31, 2013
Consolidated Statements of Comprehensive Income Loss
Net income (loss)	$ (7,946)	$ 5,129
Foreign currency translation adjustment:
Foreign currency translation losses	(938)	(577)
Pension and postretirement benefit liabilities:
Reclassification adjustment for unrecognized prior service costs and unrecognized loss included in net income (loss)	47	133
Total	47	133
Comprehensive income (loss)	(8,837)	4,685
As Previously Reported
Consolidated Statements of Comprehensive Income Loss
Net income (loss)	(7,828)	5,070
Foreign currency translation adjustment:
Foreign currency translation losses	(938)	(577)
Pension and postretirement benefit liabilities:
Reclassification adjustment for unrecognized prior service costs and unrecognized loss included in net income (loss)	47	133
Total	47	133
Comprehensive income (loss)	(8,719)	4,626
Adjustments
Consolidated Statements of Comprehensive Income Loss
Net income (loss)	(118)	59
Pension and postretirement benefit liabilities:
Comprehensive income (loss)	$ (118)	$ 59

XML

Goodwill, Trademarks and Other Intangible Assets (Tables)

3 Months Ended

Mar. 30, 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	(389		)
Balance at March 30, 2014	$	50,836

Schedule of net carrying value of the intangible assets with finite lives

	As of March 30, 2014
	Gross							Estimated
	Carrying		Accumulated					Useful
	Amount		Amortization			Net		Life
Customer relationship Canadian Government	$	2,278	$	(671	)	$	1,607	30
Customer relationships other	5,922		(4,000		)	1,922		20
License agreements	5,240		(1,210		)	4,030		6
Backlog	1,699		(737		)	962		3
Technology-based intangibles	6,580		(2,645		)	3,935		15-20
	$	21,719	$	(9,263	)	$	12,456

	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

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Segment Information (Details 5) (Net sales, Customer concentration risk)	3 Months Ended
	Mar. 30, 2014	Mar. 31, 2013
New Colt
Major Customer Information
Percentage of net sales		35.00%
U.S. Government
Major Customer Information
Percentage of net sales	7.00%	12.00%
Direct foreign customer
Major Customer Information
Number of major customers	0	2
Direct foreign customer, one
Major Customer Information
Percentage of net sales		23.00%
Direct foreign customer, two
Major Customer Information
Percentage of net sales		16.00%
Commercial customer
Major Customer Information
Percentage of net sales	11.00%
Number of major customers	1

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

Accumulated Other Comprehensive Loss (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 30, 2014	Mar. 31, 2013
Components of accumulated other comprehensive loss
Balance at the beginning of the period	$ (9,340)	$ (13,841)
Amounts reclassified from accumulated other comprehensive income	47	133
Currency translation	(938)	(577)
Net current period other comprehensive income	(891)	(444)
Balance at the end of the period	(10,231)	(14,285)
Unrecognized Prior Service Cost
Components of accumulated other comprehensive loss
Balance at the beginning of the period	653	825
Amounts reclassified from accumulated other comprehensive income	(43)	(43)
Net current period other comprehensive income	(43)	(43)
Balance at the end of the period	610	782
Unrecognized Loss
Components of accumulated other comprehensive loss
Balance at the beginning of the period	(10,836)	(17,399)
Amounts reclassified from accumulated other comprehensive income	90	176
Net current period other comprehensive income	90	176
Balance at the end of the period	(10,746)	(17,223)
Foreign Currency Translation
Components of accumulated other comprehensive loss
Balance at the beginning of the period	843	2,733
Currency translation	(938)	(577)
Net current period other comprehensive income	(938)	(577)
Balance at the end of the period	$ (95)	$ 2,156

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Subsequent Events (Details) (USD $)	3 Months Ended		9 Months Ended	0 Months Ended
	Mar. 30, 2014	Mar. 31, 2013	Sep. 28, 2014	May 18, 2015	Nov. 17, 2014	Feb. 09, 2015	Apr. 14, 2015	Nov. 10, 2009	Sep. 29, 2011
Subsequent events
Interest payments	$ 63,000	$ 378,000
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	1,310,000
Credit Agreement
Subsequent events
Maximum borrowing capacity									50,000,000
Agreement with UAW Local 376 | Colt's Manufacturing Company LLC
Subsequent events
Term of contract	5 years
Number of employee covered	529
Subsequent event
Subsequent events
Reduction of salaried employees	24
Reduction of hourly employees	64
Severance costs	400,000
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 debt						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 debt					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

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Segment Information (Details 3) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 30, 2014	Mar. 31, 2013
Product Information
Net sales	$ 50,080	$ 63,849
New Colt
Product Information
Net sales	17,100
Long guns
Product Information
Net sales	24,716	52,271
Handguns
Product Information
Net sales	15,539	1,261
Spares and other
Product Information
Net sales	$ 9,825	$ 10,317

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Accumulated Other Comprehensive Loss

3 Months Ended

Mar. 30, 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	)	$	2,733		$	(13,841	)
Other comprehensive income before reclassifications	—			—			—			—
Amounts reclassified from accumulated other comprehensive income	(43		)	176			—			133
Currency translation	—			—			(577		)	(577		)
Net current period other comprehensive income	(43		)	176			(577		)	(444		)
Balance, March 31, 2013	$	782		$	(17,223	)	$	2,156		$	(14,285	)
Balance, December 31, 2013	$	653		$	(10,836	)	$	843		$	(9,340	)
Other comprehensive income before reclassifications	—			—			—			—
Amounts reclassified from accumulated other comprehensive income	(43		)	90			—			47
Currency translation	—			—			(938		)	(938		)
Net current period other comprehensive income	(43		)	90			(938		)	(891		)
Balance, March 30, 2014	$	610		$	(10,746	)	$	(95	)	$	(10,231	)

Amounts are on a before-tax basis.

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Summary of Significant Accounting Policies (Details 8)	3 Months Ended
	Mar. 30, 2014 item
Revenue
Number of long-term contracts/programs	2
Number of claims recorded	0
Subsidiaries
Reclassification of royalty income from other income to net sales
Ownership percentage	100.00%

XML

Nature of Business (Details)	3 Months Ended
	Mar. 30, 2014 WK	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
Colt Finance Corp.
Nature of Business
Ownership percentage	100.00%	100.00%	100.00%
New Colt
Nature of Business
Ownership percentage	100.00%	100.00%
CDTS
Nature of Business
Ownership percentage	100.00%	100.00%
Colt Defense LLC and New Colt | Colt's Manufacturing
Nature of Business
Ownership percentage	100.00%
Colt Defense LLC and CDTS | Colt International
Nature of Business
Ownership percentage	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%

XML

Fair Value of Financial Instruments (Details) (USD $) In Thousands, unless otherwise specified	Mar. 30, 2014	Dec. 31, 2013
Fair Value of Financial Instruments
Carrying value of long-term debt	$ 290,123	$ 289,817
Estimated fair value of long-term debt	$ 275,575	$ 262,775

XML

Pension and Postretirement Benefits (Tables)

3 Months Ended

Mar. 30, 2014

Pension plans

Pension and postretirement benefits

Schedule of the components of income and cost recognized in Consolidated Statements of Operations

	Three Months Ended
	March 30, 2014			March 31, 2013
				(As Revised)
Service cost	$	—		$	—
Interest cost	379			273
Expected return on assets	(494		)	(365		)
Amortization of unrecognized loss	66			105
Net periodic (income)	$	(49	)	$	13

Postretirement Healthcare Coverage

Pension and postretirement benefits

Schedule of the components of income and cost recognized in Consolidated Statements of Operations

	Three Months Ended
	March 30, 2014			March 31, 2013
Service cost	$	164		$	64
Interest cost	212			132
Amortization of unrecognized prior service costs	(43		)	(43		)
Amortization of unrecognized loss	24			71
Net periodic cost	$	357		$	224

XML

Restructuring Costs (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	6 Months Ended
	Mar. 30, 2014	Dec. 31, 2013 item
Restructuring Costs
Net pre-tax restructuring costs		$ 1,118
Reimbursement from an escrow		336
Restructuring costs recorded as operating expenses	145	782
Number of salaried employees, reduction in workforce		10
Accrual balances and utilization for restructuring action
Balance at the beginning of the period	706
Utilization	(319)
Balance at the end of the period	$ 387	$ 706

XML

Transactions with Related Parties (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		1 Months Ended
	Mar. 30, 2014	Mar. 31, 2013	Jul. 31, 2013	Jul. 31, 2007
Transactions with Certain Other Parties
Annual advisory fees	$ 250	$ 108
New Colt
Transactions with Certain Other Parties
Net sales to New Colt		22,522
Purchases from New Colt		994
Administration and services fees charged to New Colt		442
West Hartford facility
Transactions with Certain Other Parties
Rent expense	210	119
Sciens Institutional and Sciens Management
Transactions with Certain Other Parties
Annual advisory fees	250	108
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

Income Taxes (Details)	3 Months Ended
	Mar. 30, 2014 item	Dec. 31, 2013
Income Taxes
Number of units to which highest taxable income allocated	1
New Colt Holding
Income taxes
Ownership percentage	100.00%	100.00%
Colt Canada | Colt International
Income taxes
Ownership percentage	100.00%
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%
New Colt Holding | Colt's Manufacturing
Income taxes
Ownership percentage	100.00%
Colt Defense LLC and New Colt | Colt's Manufacturing
Income taxes
Ownership percentage	100.00%

XML

Summary of Significant Accounting Policies (Details 5) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 30, 2014	Mar. 31, 2013
Operating Activities
Net income (loss)	$ (7,946)	$ 5,129
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization	2,289	1,162
Amortization of financing fees	606	414
Amortization of debt discount	305	104
Deferred income taxes	3	(60)
Other non-cash items	(15)	13
Changes in operating assets and liabilities:
Accounts receivable	8,649	(15,611)
Inventories	(10,672)	(6,151)
Prepaid expenses and other current assets	734	(209)
Accounts payable and accrued expenses	6,955	7,166
Accrued pension and retirement liabilities	(371)	(282)
Customer advances and deferred income	2,076	(711)
Other	(105)	5
Net cash provided by (used in) operating activities	2,508	(9,031)
Investing Activities
Purchases of property and equipment	(634)	(1,265)
Change in restricted cash		5
Net cash used in investing activities	(634)	(1,260)
Financing Activities
Line of Credit repayments	(7,083)	(6)
Purchase of common units		(14,000)
Net cash used in financing activities	(7,083)	(14,006)
Effect of exchange rates on cash and cash equivalents	14	(117)
Change in cash and cash equivalents	(5,195)	(24,414)
Cash and cash equivalents, beginning of period	12,594	42,373
Cash and cash equivalents, end of period	7,399	17,959
As Previously Reported
Operating Activities
Net income (loss)	(7,828)	5,070
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization	2,308	1,162
Amortization of financing fees	606	414
Amortization of debt discount	305	104
Deferred income taxes	3	(60)
Other non-cash items	(15)	13
Changes in operating assets and liabilities:
Accounts receivable	8,648	(15,618)
Inventories	(10,790)	(6,151)
Prepaid expenses and other current assets	736	(91)
Accounts payable and accrued expenses	6,952	7,166
Accrued pension and retirement liabilities	(371)	(338)
Customer advances and deferred income	2,076	(711)
Other	(103)	5
Net cash provided by (used in) operating activities	2,527	(9,035)
Investing Activities
Purchases of property and equipment	(653)	(1,265)
Change in restricted cash		5
Net cash used in investing activities	653	1,260
Financing Activities
Line of Credit repayments	(7,083)	(6)
Purchase of common units		(14,000)
Net cash used in financing activities	(7,083)	(14,006)
Effect of exchange rates on cash and cash equivalents	14	(113)
Change in cash and cash equivalents	(5,195)	(24,414)
Cash and cash equivalents, beginning of period	12,594	42,373
Cash and cash equivalents, end of period	7,399	17,959
Adjustments
Operating Activities
Net income (loss)	(118)	59
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization	(19)
Changes in operating assets and liabilities:
Accounts receivable	1	7
Inventories	118
Prepaid expenses and other current assets	(2)	(118)
Accounts payable and accrued expenses	3
Accrued pension and retirement liabilities		56
Other	(2)
Net cash provided by (used in) operating activities	(19)	4
Investing Activities
Purchases of property and equipment	19
Net cash used in investing activities	19
Financing Activities
Effect of exchange rates on cash and cash equivalents		$ (4)

XML

Restructuring Costs

3 Months Ended

Mar. 30, 2014

Restructuring Costs

Restructuring Costs

Note 4 Restructuring Costs

During the third and fourth quarters of the year ended December 31, 2013, 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 three month 2014 activity in the accrual balances:

Restructuring accruals at December 31, 2013	$	706
Utilization	(319		)
Balance at March 30, 2014	$	387

XML

Income Taxes (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 30, 2014	Mar. 31, 2013
Components of income (loss) before provision for income taxes
Current	$ (89)	$ 741
Deferred	3	(60)
Total	$ (86)	$ 681

XML

Summary of Significant Accounting Policies (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 30, 2014	Mar. 31, 2013	Dec. 31, 2013
Accrued expenses	$ 27,054		$ 22,158
Customer advances and deferred revenue	21,211		19,467
Accumulated deficit	(138,188)		(130,136)
Net sales	50,080	63,849
Cost of sales	40,386	45,112
Gross profit	9,694	18,737
Selling and commissions	4,461	3,095
Research and development	1,243	820
General and administrative	3,909	3,730
Operating income	(419)	11,017
Net income (loss)	(7,946)	5,129
Adjustments
Accrued expenses	(4,131)
Customer advances and deferred revenue	6,820
Accumulated deficit	(2,789)
Cost of sales	118	(67)
Gross profit	(118)	67
Selling and commissions		2
Research and development		1
General and administrative		5
Operating income	(118)	59
Net income (loss)	(118)	59
Impact of correcting error related to the M240 Program, previously recorded immaterial out-of-period adjustments and the reclassification of business development expenses | Adjustments
Cost of sales	118	(67)
Gross profit	(118)	67
Selling and commissions		2
Research and development		1
General and administrative		5
Operating income	(118)	59
Net income (loss)	(118)	59
Impact of a contract modification related to the M240 machine gun program | Adjustments
Accrued expenses			(4,133)
Customer advances and deferred revenue			6,820
Accumulated deficit			$ 2,689

XML

Acquisition (Tables)

3 Months Ended

Mar. 30, 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
	Three Months Ended
	March 31, 2013
Net sales	$	81,813
Net income	5,605

XML

Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 30, 2014

Schedule of comparison of revised financial statements to financial statements as previously reported

Colt Defense LLC and Subsidiaries

Consolidated Balance Sheets

(In thousands of dollars)

(Unaudited)

	March 30, 2014
							As Revised in
	As						this Quarterly
	Previously						Report on
	Reported			Adjustments			Form 10-Q
ASSETS
Current assets:
Cash and cash equivalents	$	7,399		$	—		$	7,399
Restricted cash	771			—			771
Accounts receivable, net	13,536			—			13,536
Inventories	77,192			(118		)	77,074
Deferred tax assets	106			—			106
Other current assets	5,193			—			5,193
Total current assets	104,197			(118		)	104,079
Property and equipment, net	29,709			—			29,709
Goodwill	50,836			—			50,836
Trademarks	50,100			—			50,100
Intangible assets with finite lives, net	12,456			—			12,456
Deferred financing costs	7,135			—			7,135
Long-term restricted cash	572			—			572
Other assets	1,491			—			1,491
Total assets	$	256,496		$	(118	)	$	256,378
LIABILITIES AND DEFICIT
Current liabilities:
Accounts payable	$	16,224		$	—		$	16,224
Accrued expenses (Note 10)	31,185			(4,131		)	27,054
Pension and retirement liabilities - current portion	1,085			—			1,085
Customer advances and deferred income	14,391			6,820			21,211
Long-term debt - current portion	5,000			—			5,000
Accrued distributions to members	670			—			670
Total current liabilities	68,555			2,689			71,244
Long-term debt	290,123			—			290,123
Pension and retirement liabilities	21,252			—			21,252
Long-term deferred tax liability	17,819			—			17,819
Long-term distribution payable to members	2,277			—			2,277
Other long-term liabilities	2,082			—			2,082
Total long-term liabilities	333,553			—			333,553
Total liabilities	402,108			2,689			404,797
Deficit:
Accumulated deficit	(135,399		)	(2,789		)	(138,188		)
Accumulated other comprehensive loss	(10,213		)	(18)			(10,231		)
Total deficit	(145,612		)	(2,807		)	(148,419		)
Total liabilities and deficit	$	256,496		$	(118	)	$	256,378

Colt Defense LLC and Subsidiaries

Consolidated Statement of Operations

(In thousands of dollars)

(Unaudited)

	Three months ended March 30, 2014									Three months ended March 31, 2013
							As Revised in									As Revised in
	As						this Quarterly			As						this Quarterly
	Previously						Report on			Previously						Report on
	Reported			Adjustments			Form 10-Q			Reported			Adjustments			Form 10-Q
Net sales	$	50,080		$	—		$	50,080		$	63,849		$	—		$	63,849
Cost of sales	40,268			118			40,386			45,179			(67		)	45,112
Gross Profit	9,812			(118		)	9,694			18,670			67			18,737
Operating expenses:
Selling and commissions	4,461			—			4,461			3,093			2			3,095
Research and development	1,243			—			1,243			819			1			820
General and administrative	3,909			—			3,909			3,725			5			3,730
	9,613			—			9,613			7,637			8			7,645
Business development	500			—			500			75			—			75
Total operating expenses	10,113			—			10,113			7,712			8			7,720
Operating income	(301		)	(118		)	(419		)	10,958			59			11,017
Other expense/(income):
Interest expense	7,684			—			7,684			5,994			—			5,994
Other (income)/expense, net	(71		)	—			(71		)	(787		)	—			(787		)
Total other expenses, net	7,613			—			7,613			5,207			—			5,207
Income (loss) before provision for income taxes	(7,914		)	(118		)	(8,032		)	5,751			59			5,810
Income tax expense	(86		)	—			(86		)	681			—			681
Net income (loss)	$	(7,828	)	$	(118	)	$	(7,946	)	$	5,070		$	59		$	5,129

Colt Defense LLC and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

(In thousands of dollars)

(Unaudited)

	Three Months Ended March 30, 2014									Three Months Ended March 31, 2013
							As Revised in								As Revised in
	As						this Quarterly			As					this Quarterly
	Previously						Report on			Previously					Report on
	Reported			Adjustments			Form 10-Q			Reported			Adjustments		Form 10-Q
Net income (loss)	$	(7,828	)	$	(118	)	$	(7,946	)	$	5,070		$	59	$	5,129
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment:
Foreign currency translation gains (losses)	(938		)				(938		)	(577		)	—		(577		)
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	47			—			47			133			—		133
	47			—			47			133			—		133
Comprehensive income (loss)	$	(8,719	)	$	(118	)	$	(8,837	)	$	4,626		$	59	$	4,685

Colt Defense LLC and Subsidiaries

Consolidated Statement of Changes in Cash Flows

(In thousands of dollars)

(Unaudited)

	For the Three Months Ended March 30, 2014
							As Revised in
	As						this Quarterly
	Previously						Report on
	Reported			Adjustments			Form 10-Q
Operating Activities
Net income (loss)	$	(7,828	)	$	(118	)	$	(7,946	)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization	2,308			(19		)	2,289
Amortization of financing fees	606			—			606
Amortization of debt discount	305			—			305
Deferred income taxes	3			—			3
Other non-cash items	(15		)	—			(15		)
Changes in operating assets and liabilites:
Accounts receivable	8,648			1			8,649
Inventories	(10,790		)	118			(10,672		)
Prepaid expense and other current assets	736			(2		)	734
Accounts payable and accrued expense	6,952			3			6,955
Accrued pension and retirement liabilities	(371		)	—			(371		)
Customer advances and deferred income	2,076			—			2,076
Other	(103		)	(2		)	(105		)
Net cash provided by operating activities	2,527			(19		)	2,508
Investing Activities
Purchase of property and equipment	(653		)	19			(634		)
Net cash used in investing activities	(653		)	19			(634		)
Financing Activities
Line of credit repayments	(7,083		)	—			(7,083		)
Net cash used financing activities	(7,083		)	—			(7,083		)
Effect of exchange rates on cash and cash equivalents	14			—			14
Change in cash and cash equivalents	(5,195		)	—			(5,195		)
Cash and cash equivalents, beginning of period	12,594			—			12,594
Cash and cash equivalents, end of period	$	7,399		$	—		$	7,399

Colt Defense LLC and Subsidiaries

Consolidated Statement of Changes in Cash Flows

(In thousands of dollars)

(Unaudited)

	For the Three Months Ended March 31, 2013
							As Revised in
	As						this Quarterly
	Previously						Report on
	Reported			Adjustments			Form 10-Q
Operating Activities
Net income	$	5,070		$	59		$	5,129
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization	1,162			—			1,162
Amortization of financing fees	414			—			414
Amortization of debt discount	104			—			104
Deferred income taxes	(60		)	—			(60		)
Other non-cash items	13			—			13
Changes in operating assets and liabilites:
Accounts receivable	(15,618		)	7			(15,611		)
Inventories	(6,151		)	—			(6,151		)
Prepaid expense and other current assets	(91		)	(118		)	(209		)
Accounts payable and accrued expense	7,166			—			7,166
Accrued pension and retirement liabilities	(338		)	56			(282		)
Customer advances and deferred income	(711		)	—			(711		)
Other	5			—			5
Net cash (used in) provided by operating activities	(9,035		)	4			(9,031		)
Investing Activities
Purchase of property and equipment	(1,265		)	—			(1,265		)
Change in restricted cash	5			—			5
Net cash used in investing activities	(1,260		)	—			(1,260		)
Financing Activities
Line of credit repayments	(6		)	—			(6		)
Purchase of common units	(14,000		)	—			(14,000		)
Net cash used financing activities	(14,006		)	—			(14,006		)
Effect of exchange rates on cash and cash equivalents	(113		)	(4		)	(117		)
Change in cash and cash equivalents	(24,414		)	—			(24,414		)
Cash and cash equivalents, beginning of period	42,373			—			42,373
Cash and cash equivalents, end of period	$	17,959		$	—		$	17,959

Impact of correcting error related to the M240 Program, 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
	Increase (Decrease)
	Three Months Ended			Three Months Ended
	March 30, 2014			March 31, 2013
Net sales	$	—		$	—
Cost of sales	118		(A)	(67		)(B)
Gross profit	(118		)	67
Selling and commissions	—			2
Research and development	—			1
General and administrative	—			5
Operating income	(118		)	59
Net income (loss)	(118		)	59

(A) Relates to the recording of a provision for inventory loss which was originally recorded in the three months ended June 30, 2014, but relates to the three months ended March 30, 2014.

(B) Relates to an incorrect overpayment to a vendor which was originally recorded in the three months ended December 31, 2013, but relates to the three months ended March 31, 2013.

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Goodwill, Trademarks and Other Intangible Assets (Details) (USD $) In Thousands, unless otherwise specified	0 Months Ended	3 Months Ended
	Jul. 12, 2013	Mar. 30, 2014
Changes in the carrying amount of goodwill
Balance at the beginning of the period		$ 51,225
Effect of foreign currency translation		(389)
Balance at the end of the period		50,836
Acquired indefinite-lived intangible for the Colt brand and related trademarks	$ 50,100

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Summary of Significant Accounting Policies (Details 2) (USD $) In Thousands, unless otherwise specified	Mar. 30, 2014	Dec. 31, 2013	Mar. 31, 2013	Dec. 31, 2012
Current assets:
Cash and cash equivalents	$ 7,399	$ 12,594	$ 17,959	$ 42,373
Restricted cash	771	771
Accounts receivable, net	13,536	22,842
Inventories	77,074	66,674
Deferred tax assets	106	954
Other current assets	5,193	5,962
Total current assets	104,079	109,437
Property and equipment, net	29,709	30,733	30,733
Goodwill	50,836	51,225
Trademarks	50,100	50,100
Intangible assets with finite lives, net	12,456	13,415
Deferred financing costs	7,135	7,742
Long-term restricted cash	572	572
Other assets	1,491	1,510
Total assets	256,378	264,734
Current liabilities:
Accounts payable	16,224	14,038
Accrued expenses	27,054	22,158
Pension and retirement liabilities - current portion	1,085	1,085
Customer advances and deferred revenue	21,211	19,467
Long-term debt - current portion	5,000	5,000
Accrued distributions to members	670	670
Total current liabilities	71,244	69,501
Long-term debt	290,123	289,817
Pension and retirement liabilities	21,252	21,670
Long-term deferred tax liability	17,819	18,715
Long-term distribution payable to members	2,277	2,277
Other long-term liabilities	2,082	2,230
Total long-term liabilities	333,553	334,709
Total liabilities	404,797	404,210
Deficit:
Accumulated deficit	(138,188)	(130,136)
Accumulated other comprehensive loss	(10,231)	(9,340)	(14,285)	(13,841)
Total deficit	(148,419)	(139,476)
Total liabilities and deficit	256,378	264,734
As Previously Reported
Current assets:
Cash and cash equivalents	7,399	12,594	17,959	42,373
Restricted cash	771
Accounts receivable, net	13,536
Inventories	77,192
Deferred tax assets	106
Other current assets	5,193
Total current assets	104,197
Property and equipment, net	29,709
Goodwill	50,836
Trademarks	50,100
Intangible assets with finite lives, net	12,456
Deferred financing costs	7,135
Long-term restricted cash	572
Other assets	1,491
Total assets	256,496
Current liabilities:
Accounts payable	16,224
Accrued expenses	31,185
Pension and retirement liabilities - current portion	1,085
Customer advances and deferred revenue	14,391
Long-term debt - current portion	5,000
Accrued distributions to members	670
Total current liabilities	68,555
Long-term debt	290,123
Pension and retirement liabilities	21,252
Long-term deferred tax liability	17,819
Long-term distribution payable to members	2,277
Other long-term liabilities	2,082
Total long-term liabilities	333,553
Total liabilities	402,108
Deficit:
Accumulated deficit	(135,399)
Accumulated other comprehensive loss	(10,213)
Total deficit	(145,612)
Total liabilities and deficit	256,496
Adjustments
Current assets:
Inventories	(118)
Total current assets	(118)
Total assets	(118)
Current liabilities:
Accrued expenses	(4,131)
Customer advances and deferred revenue	6,820
Total current liabilities	2,689
Total liabilities	2,689
Deficit:
Accumulated deficit	(2,789)
Accumulated other comprehensive loss	(18)
Total deficit	(2,807)
Total liabilities and deficit	$ (118)

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Restructuring Costs (Tables)

3 Months Ended

Mar. 30, 2014

Restructuring Costs

Summary of activity in the accrual balances

Restructuring accruals at December 31, 2013	$	706
Utilization	(319		)
Balance at March 30, 2014	$	387

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Inventories (Tables)

3 Months Ended

Mar. 30, 2014

Inventories

Summary of inventories, net of reserves at the lower of cost or market

	March 30, 2014		December 31, 2013
	(As Revised)
Raw materials	$	47,165	$	43,469
Work in process	12,570		9,476
Finished products	17,339		13,729
	$	77,074	$	66,674

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Acquisition

3 Months Ended

Mar. 30, 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 trade marks 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 months ended March 31, 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
	Three Months Ended
	March 31, 2013
Net sales	$	81,813
Net income	5,605

Pro forma net income for the three months ended March 31, 2013 were adjusted to include $1,629 of additional interest expense related to the Company’s $50,000 Term Loan and to include $664 of additional expense related to the amortization of finite-lived intangible assets.

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Property and Equipment (Tables)

3 Months Ended

Mar. 30, 2014

Property and Equipment

Schedule of property and equipment

							Estimated
	March 30, 2014			December 31, 2013			Useful Life
Land	$	325		$	338		—
Building	2,551			2,653			33
Machinery and equipment	50,144			47,476			7-10
Furniture, fixtures and leasehold improvements	7,116			7,081			3-5
	60,136			57,548
Less accumulated depreciation and amortization	(33,463		)	(32,152		)
	26,673			25,396
Construction in process	3,036			5,337
Property and equipment, net	$	29,709		$	30,733

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Segment Information (Tables)

3 Months Ended

Mar. 30, 2014

Segment Information

Schedule of reconciliation of net income (loss) to Adjusted EBITDA

	Three Months Ended
	March 30, 2014			March 31, 2013
	(As Revised)			(As Revised)
Statement of Operations Data:
Net income (loss)	$	(7,946	)	$	5,129
Income tax (benefit) expense	(86		)	681
Depreciation and amortization (i)	2,289			1,162
Interest expense, net	7,684			5,994
Sciens fees and expenses (ii)	250			108
Contract obligation expense add back (iii)	311			—
Business development costs (iv)	500			75
Severance costs (v)	145			—
Other income, net (vi)	(71		)	(345		)
Adjusted EBITDA	$	3,076		$	12,804

(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) Expenses related to Company’s contract obligation. See Note 16, “Commitments and Contingencies”

(iv) Includes transaction costs incurred in connection with contemplated merger and acquisition activities.

(v) Includes non-recurring severance costs.

(vi) 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
	March 30, 2014		March 31, 2013
Long guns	$	24,716	$	52,271
Handguns	15,539		1,261
Spares and other	9,825		10,317
Total	$	50,080	$	63,849

Schedule of net sales for specific geographic regions

	Three Months Ended
	March 30, 2014		March 31, 2013
United States	$	41,495	$	35,708
Canada	4,357		10,751
Latin America/Caribbean	1,785		38
Middle East/Africa	1,724		1,001
Europe	424		1,331
Asia/Pacific	295		15,020
	$	50,080	$	63,849

Schedule of long-lived assets, which are net fixed assets attributed to specific geographic regions:

	March 30, 2014		December 31, 2013
United States	$	25,010	$	25,745
Canada	4,699		4,988
	$	29,709	$	30,733

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Accounts Receivable (Details) (USD $) In Thousands, unless otherwise specified	Mar. 30, 2014	Dec. 31, 2013
Accounts Receivable
Allowance for doubtful accounts	$ 58	$ 78

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Segment Information (Details 4) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 30, 2014	Mar. 31, 2013	Dec. 31, 2013
Geographical Information
Net sales	$ 50,080	$ 63,849
Long-lived assets	29,709	30,733	30,733
United States
Geographical Information
Net sales	41,495	35,708
Long-lived assets	25,010		25,745
Canada
Geographical Information
Net sales	4,357	10,751
Long-lived assets	4,699		4,988
Latin America/Caribbean
Geographical Information
Net sales	1,785	38
Middle East/Africa
Geographical Information
Net sales	1,724	1,001
Europe
Geographical Information
Net sales	424	1,331
Asia/Pacific
Geographical Information
Net sales	$ 295	$ 15,020

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Mar. 30, 2014	Dec. 31, 2013
Current assets:
Cash and cash equivalents	$ 7,399	$ 12,594
Restricted cash	771	771
Accounts receivable, net	13,536	22,842
Inventories	77,074	66,674
Deferred tax assets	106	954
Other current assets	5,193	5,962
Total current assets	104,079	109,437
Property and equipment, net	29,709	30,733
Goodwill	50,836	51,225
Trademarks	50,100	50,100
Intangible assets with finite lives, net	12,456	13,415
Deferred financing costs	7,135	7,742
Long-term restricted cash	572	572
Other assets	1,491	1,510
Total assets	256,378	264,734
Current liabilities:
Line of credit		7,083
Accounts payable	16,224	14,038
Accrued expenses (Note 10)	27,054	22,158
Pension and retirement liabilities - current portion	1,085	1,085
Customer advances and deferred income	21,211	19,467
Long-term debt - current portion	5,000	5,000
Accrued distributions to members	670	670
Total current liabilities	71,244	69,501
Long-term debt	290,123	289,817
Pension and retirement liabilities	21,252	21,670
Long-term deferred tax liability	17,819	18,715
Long-term distribution payable to members	2,277	2,277
Other long-term liabilities	2,082	2,230
Total long-term liabilities	333,553	334,709
Total liabilities	404,797	404,210
Commitments and Contingencies (Note 16)
Deficit:
Accumulated deficit	(138,188)	(130,136)
Accumulated other comprehensive loss	(10,231)	(9,340)
Total deficit	(148,419)	(139,476)
Total liabilities and deficit	$ 256,378	$ 264,734

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Summary of Significant Accounting Policies (Details 3) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 30, 2014	Mar. 31, 2013
Consolidated Statements of Operations
Net sales	$ 50,080	$ 63,849
Cost of sales	40,386	45,112
Gross profit	9,694	18,737
Operating expenses:
Selling and commissions	4,461	3,095
Research and development	1,243	820
General and administrative	3,909	3,730
Total selling and commissions, research and development, general and administrative	9,613	7,645
Business development	500	75
Total operating expenses	10,113	7,720
Operating income	(419)	11,017
Other expense (income):
Interest expense	7,684	5,994
Other income	(71)	(787)
Total other expense, net	7,613	5,207
Income (loss) before provision for income taxes	(8,032)	5,810
Income tax expense (benefit)	(86)	681
Net income (loss)	(7,946)	5,129
As Previously Reported
Consolidated Statements of Operations
Net sales	50,080	63,849
Cost of sales	40,268	45,179
Gross profit	9,812	18,670
Operating expenses:
Selling and commissions	4,461	3,093
Research and development	1,243	819
General and administrative	3,909	3,725
Total selling and commissions, research and development, general and administrative	9,613	7,637
Business development	500	75
Total operating expenses	10,113	7,712
Operating income	(301)	10,958
Other expense (income):
Interest expense	7,684	5,994
Other income	(71)	(787)
Total other expense, net	7,613	5,207
Income (loss) before provision for income taxes	(7,914)	5,751
Income tax expense (benefit)	(86)	681
Net income (loss)	(7,828)	5,070
Adjustments
Consolidated Statements of Operations
Cost of sales	118	(67)
Gross profit	(118)	67
Operating expenses:
Selling and commissions		2
Research and development		1
General and administrative		5
Total selling and commissions, research and development, general and administrative		8
Total operating expenses		8
Operating income	(118)	59
Other expense (income):
Income (loss) before provision for income taxes	(118)	59
Net income (loss)	$ (118)	$ 59

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Nature of Business

3 Months Ended

Mar. 30, 2014

Nature of Business

Nature of Business

Note 1 Nature of 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.  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 effected a legal entity restructuring whereby Colt Defense LLC (“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.

At March 30, 2014, Colt Defense, a limited liability corporation, owned 100% of Colt Finance Corp. (“Colt Finance”), New Colt, a C corporation, and Colt Defense Technical Services LLC (“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 Cooperatief U.A. (“Colt International”), a Dutch cooperatief, which owns 100% of Colt Canada Corporation (“Colt Canada”), a Canadian C corporation.  At December 31, 2013, Colt Defense owned 100% of Colt Finance, New Colt and 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.

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 Company restated its Annual Report on Form 10-K/A, filed September 15, 2014, 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”).

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Notes Payable and Long-Term Debt (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		0 Months Ended
	Mar. 30, 2014	Mar. 31, 2013	Jul. 12, 2013	Nov. 10, 2009	Nov. 17, 2014	Dec. 31, 2013	Sep. 29, 2011	Feb. 09, 2015
Notes payable and long-term debt
Lenders fees and legal expenses	$ 3,627					$ 3,932
Principal repayments which are due quarterly on the last day of each calendar quarter
Total	295,123					301,900
Interest payments	63	378
Line of credit advance						7,083
Outstanding debt balances
Total	295,123					301,900
Less: current portion	(5,000)					(12,083)
Long-term debt	290,123					289,817
Outstanding debt balances
Amortization of discount	305	104
Amortization of deferred financing costs	606	414
Colt Finance Corp
Outstanding debt balances
Percentage of ownership	100.00%			100.00%		100.00%
Credit Agreement
Principal repayments which are due quarterly on the last day of each calendar quarter
Total						7,083
Maximum borrowing capacity							50,000
Annual fee on unused available balance payable quarterly (as a percent)	0.50%
Annual servicing fee	40
Outstanding debt balances
Total						7,083
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
Letters of credit outstanding								4,800
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
Credit Agreement | Maximum
Principal repayments which are due quarterly on the last day of each calendar quarter
Excess availability, threshold limit	50,000
Term Loan
Notes payable and long-term debt
Lenders fees and legal expenses			2,293
Principal repayments which are due quarterly on the last day of each calendar quarter
Remaining 2014	5,000
2015	7,500
2016	36,250
Total	48,750					46,833
Principal repayments	625
Interest payments	1,310
Number of rolling quarters used in calculation of financial covenants	4
Number of proceeding fiscal quarters used in calculation of financial covenants	3
Outstanding debt balances
Total	48,750					46,833
Outstanding debt balances
Financing fees incurred			2,120
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
Letters of credit outstanding	3,486					3,486
Senior Notes
Notes payable and long-term debt
Notes issued				250,000
Lenders fees and legal expenses				3,522
Principal repayments which are due quarterly on the last day of each calendar quarter
Total	248,092					247,984
Interest rate (as a percent)				8.75%
Principal repayments required until maturity	0
Outstanding debt balances
Total	248,092					247,984
Senior Notes | Subsequent event
Principal repayments which are due quarterly on the last day of each calendar quarter
Interest payments					10,900
Senior Notes | Minimum
Principal repayments which are due quarterly on the last day of each calendar quarter
Aggregate default indebtedness	$ 20,000

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Accrued Expenses (Tables)

3 Months Ended

Mar. 30, 2014

Accrued Expenses

Schedule of accrued expenses

	March 30, 2014		December 31, 2013
	(As Revised)		(As Restated)
Accrued compensation and benefits	$	5,105	$	7,154
Accrued contract obligation expense	1,133		1,194
Accrued federal, excise and other taxes	4,110		4,902
Accrued interest	9,583		2,879
Accrued commissions	1,232		929
Other accrued expenses	5,891		5,100
	$	27,054	$	22,158

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Accumulated Deficit (Details 2) (USD $)	3 Months Ended		0 Months Ended
	Mar. 30, 2014	Mar. 31, 2013	Apr. 02, 2014	Jul. 12, 2013	Jul. 12, 2013	Mar. 22, 2013	Dec. 31, 2013
Colt defense LLC accumulated deficit
Tax distribution payments to members	$ 0	$ 0
Distribution classified as a long term liability	2,277,000						2,277,000
Subsequent event
Colt defense LLC accumulated deficit
Tax distribution payments to members			683,000
Distribution classified as a long term liability			530,000
New Colt
Colt defense LLC accumulated deficit
Aggregate purchase price paid in cash				5,000,000
Merger consideration reinvested by certain investors				4,000,000
Common units | New Colt
Colt defense LLC accumulated deficit
Aggregate consideration from issue and sale of common units				9,000,000
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						$ 14,000,000
Common units issued and sold (in shares)					31,165.589

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Segment Information

3 Months Ended

Mar. 30, 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 March 30, 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 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 and 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
	March 30, 2014			March 31, 2013
	(As Revised)			(As Revised)
Statement of Operations Data:
Net income (loss)	$	(7,946	)	$	5,129
Income tax (benefit) expense	(86		)	681
Depreciation and amortization (i)	2,289			1,162
Interest expense, net	7,684			5,994
Sciens fees and expenses (ii)	250			108
Contract obligation expense add back (iii)	311			—
Business development costs (iv)	500			75
Severance costs (v)	145			—
Other income, net (vi)	(71		)	(345		)
Adjusted EBITDA	$	3,076		$	12,804

(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) Expenses related to Company’s contract obligation. See Note 16, “Commitments and Contingencies”

(iv) Includes transaction costs incurred in connection with contemplated merger and acquisition activities.

(v) Includes non-recurring severance costs.

(vi) 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 months ended March 30, 2014 and March 31, 2013 by product category. The table includes the results of New Colt from the Merger Date.  After intercompany sales eliminations, the New Colt acquisition provided $17.1 million of incremental sales for the three months ended March 30, 2014.

	Three Months Ended
	March 30, 2014		March 31, 2013
Long guns	$	24,716	$	52,271
Handguns	15,539		1,261
Spares and other	9,825		10,317
Total	$	50,080	$	63,849

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 specific geographic regions:

	Three Months Ended
	March 30, 2014		March 31, 2013
United States	$	41,495	$	35,708
Canada	4,357		10,751
Latin America/Caribbean	1,785		38
Middle East/Africa	1,724		1,001
Europe	424		1,331
Asia/Pacific	295		15,020
	$	50,080	$	63,849

Long-lived assets are net fixed assets attributed to specific geographic regions:

	March 30, 2014		December 31, 2013
United States	$	25,010	$	25,745
Canada	4,699		4,988
	$	29,709	$	30,733

Major Customer Information

For the three months ended March 30, 2014, no foreign customers accounted for more than 10% of net sales.  For the three months ended March 31, 2013, two direct foreign customers accounted for 23% and 16% of net sales, respectively.

For the three months ended March 30, 2014, one commercial customer accounted for 11% of net sales. For the three months ended March 31, 2013 (prior to the Merger), sales to New Colt accounted for 35% of net sales.

For the three months ended March 30, 2014 and March 31, 2013, sales to the U.S. Government accounted for 7% and 12%, respectively, of net sales.

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Income Taxes (Tables)

3 Months Ended

Mar. 30, 2014

Income Taxes

Schedule of components of income (loss) before provision for income taxes

	Three Months Ended
	March 30, 2014			March 31, 2013
Current	$	(89	)	$	741
Deferred	3			(60		)
Total	$	(86	)	$	681

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Fair Value of Financial Instruments

3 Months Ended

Mar. 30, 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 $295,123 and $294,817 at March 30, 2014 and December 31, 2013, respectively, was recorded at amortized cost. The estimated fair value of long-term debt was approximately $275,575 and $262,775 at March 30, 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 March 30, 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 three months ended March 31, 2014.

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Commitments and Contingencies (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		12 Months Ended
	Mar. 30, 2014	Mar. 31, 2013	Dec. 31, 2013	Dec. 31, 2011 sqft
Commitments and contingencies
Contract obligation expense	$ 311		$ 3,381
Net sales	50,080	63,849
Gross profit	9,694	18,737
Accrued contract obligation expense	1,133		1,194
Customer advances and deferred revenue	21,211		19,467
Other long-term liabilities	2,082		2,230
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
Capital investment in lease	181		181
Lease term	12 years
Lease payments due for the initial five years	0
Lease initial specific period	5 years
Lease annual cost	108
Lease annual charge accounted under straight-line basis	78
Deferred lease expense	56		36
Accrued contractual penalty	63		50
M240 Program
Commitments and contingencies
Incremental contract obligation expense	311
Inventory Reserves	453		639
Accrued contract obligation expense	1,133		1,194
Customer advances and deferred revenue	6,820		6,820
Restatement Adjustment [Member]
Commitments and contingencies
Gross profit	(118)	67
Customer advances and deferred revenue	6,820
M240 Program - contract modification and contract obligation expens | Restatement Adjustment [Member]
Commitments and contingencies
Net sales			(6,820)
Gross profit			(10,201)
Capital expenditures for machinery and equipment
Commitments and contingencies
Unconditional purchase obligations	1,104		892
Standby letters of credit | Secured by restricted cash
Commitments and contingencies
Standby letters of credit	1,183		1,185
Standby letters of credit | Secured by Credit Agreement
Commitments and contingencies
Standby letters of credit	3,486		3,486
Standby letters of credit | Established by a sales agent on behalf of Colt
Commitments and contingencies
Standby letters of credit	74		74
Industrial Cooperation Agreements
Commitments and contingencies
Remaining gross offset purchase commitments	63,504		64,131
Remaining net offset purchase commitments, accrual amount	$ 1,599		$ 1,639

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Summary of Significant Accounting Policies

3 Months Ended

Mar. 30, 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 and the year ended 2011, (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 quarters ended March 30, 2014 and March 31, 2013 related to the M240 Program error.  The Company restated the Company’s Consolidated Balance Sheet as of December 31, 2013 to reflect a $4,133 decrease in accrued expenses, a $6,820 increase in customer advances and deferred income and a $2,689 increase in total deficit, primarily as a result of the correction of the M240 Program error. In conjunction with the correction of the M240 Program error, other previously recorded, immaterial out of period adjustments were also adjusted to be reflected in the proper period.  Correction of these adjustments had the combined effect on the consolidated statements of operations for the three month period ended March 30, 2014 and March 31, 2013 of decreasing net income by $118 and increasing net income by $59, respectively.

The impacts of these adjustments for the three month periods ended March 31, 2014 and March 31, 2013 were as follows:

	Adjustments to
	Previously Reported Income Statement
	Increase (Decrease)
	Three Months Ended			Three Months Ended
	March 30, 2014			March 31, 2013
Net sales	$	—		$	—
Cost of sales	118		(A)	(67		)(B)
Gross profit	(118		)	67
Selling and commissions	—			2
Research and development	—			1
General and administrative	—			5
Operating income	(118		)	59
Net income (loss)	(118		)	59

(A) Relates to the correcting an error in provision for inventory loss in the three months ended March 30, 2014.

(B) Relates to an incorrect overpayment to a vendor which was originally recorded in the three months ended December 31, 2013, but relates to the three months ended March 31, 2013.

Comparison of revised financial statements to financial statements as previously reported

The following tables compare the Company’s previously reported Consolidated Statements of Operations, Comprehensive Income (Loss) and Changes in Cash Flows for the quarters ended March 30, 2014 and March 31, 2013 to the corresponding financial statements for the quarterly periods as revised.

Colt Defense LLC and Subsidiaries

Consolidated Balance Sheets

(In thousands of dollars)

(Unaudited)

	March 30, 2014
							As Revised in
	As						this Quarterly
	Previously						Report on
	Reported			Adjustments			Form 10-Q
ASSETS
Current assets:
Cash and cash equivalents	$	7,399		$	—		$	7,399
Restricted cash	771			—			771
Accounts receivable, net	13,536			—			13,536
Inventories	77,192			(118		)	77,074
Deferred tax assets	106			—			106
Other current assets	5,193			—			5,193
Total current assets	104,197			(118		)	104,079
Property and equipment, net	29,709			—			29,709
Goodwill	50,836			—			50,836
Trademarks	50,100			—			50,100
Intangible assets with finite lives, net	12,456			—			12,456
Deferred financing costs	7,135			—			7,135
Long-term restricted cash	572			—			572
Other assets	1,491			—			1,491
Total assets	$	256,496		$	(118	)	$	256,378
LIABILITIES AND DEFICIT
Current liabilities:
Accounts payable	$	16,224		$	—		$	16,224
Accrued expenses (Note 10)	31,185			(4,131		)	27,054
Pension and retirement liabilities - current portion	1,085			—			1,085
Customer advances and deferred income	14,391			6,820			21,211
Long-term debt - current portion	5,000			—			5,000
Accrued distributions to members	670			—			670
Total current liabilities	68,555			2,689			71,244
Long-term debt	290,123			—			290,123
Pension and retirement liabilities	21,252			—			21,252
Long-term deferred tax liability	17,819			—			17,819
Long-term distribution payable to members	2,277			—			2,277
Other long-term liabilities	2,082			—			2,082
Total long-term liabilities	333,553			—			333,553
Total liabilities	402,108			2,689			404,797
Deficit:
Accumulated deficit	(135,399		)	(2,789		)	(138,188		)
Accumulated other comprehensive loss	(10,213		)	(18)			(10,231		)
Total deficit	(145,612		)	(2,807		)	(148,419		)
Total liabilities and deficit	$	256,496		$	(118	)	$	256,378

Colt Defense LLC and Subsidiaries

Consolidated Statement of Operations

(In thousands of dollars)

(Unaudited)

	Three months ended March 30, 2014									Three months ended March 31, 2013
							As Revised in									As Revised in
	As						this Quarterly			As						this Quarterly
	Previously						Report on			Previously						Report on
	Reported			Adjustments			Form 10-Q			Reported			Adjustments			Form 10-Q
Net sales	$	50,080		$	—		$	50,080		$	63,849		$	—		$	63,849
Cost of sales	40,268			118			40,386			45,179			(67		)	45,112
Gross Profit	9,812			(118		)	9,694			18,670			67			18,737
Operating expenses:
Selling and commissions	4,461			—			4,461			3,093			2			3,095
Research and development	1,243			—			1,243			819			1			820
General and administrative	3,909			—			3,909			3,725			5			3,730
	9,613			—			9,613			7,637			8			7,645
Business development	500			—			500			75			—			75
Total operating expenses	10,113			—			10,113			7,712			8			7,720
Operating income	(301		)	(118		)	(419		)	10,958			59			11,017
Other expense/(income):
Interest expense	7,684			—			7,684			5,994			—			5,994
Other (income)/expense, net	(71		)	—			(71		)	(787		)	—			(787		)
Total other expenses, net	7,613			—			7,613			5,207			—			5,207
Income (loss) before provision for income taxes	(7,914		)	(118		)	(8,032		)	5,751			59			5,810
Income tax expense	(86		)	—			(86		)	681			—			681
Net income (loss)	$	(7,828	)	$	(118	)	$	(7,946	)	$	5,070		$	59		$	5,129

Colt Defense LLC and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

(In thousands of dollars)

(Unaudited)

	Three Months Ended March 30, 2014									Three Months Ended March 31, 2013
							As Revised in								As Revised in
	As						this Quarterly			As					this Quarterly
	Previously						Report on			Previously					Report on
	Reported			Adjustments			Form 10-Q			Reported			Adjustments		Form 10-Q
Net income (loss)	$	(7,828	)	$	(118	)	$	(7,946	)	$	5,070		$	59	$	5,129
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment:
Foreign currency translation gains (losses)	(938		)				(938		)	(577		)	—		(577		)
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	47			—			47			133			—		133
	47			—			47			133			—		133
Comprehensive income (loss)	$	(8,719	)	$	(118	)	$	(8,837	)	$	4,626		$	59	$	4,685

Colt Defense LLC and Subsidiaries

Consolidated Statement of Changes in Cash Flows

(In thousands of dollars)

(Unaudited)

	For the Three Months Ended March 30, 2014
							As Revised in
	As						this Quarterly
	Previously						Report on
	Reported			Adjustments			Form 10-Q
Operating Activities
Net income (loss)	$	(7,828	)	$	(118	)	$	(7,946	)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization	2,308			(19		)	2,289
Amortization of financing fees	606			—			606
Amortization of debt discount	305			—			305
Deferred income taxes	3			—			3
Other non-cash items	(15		)	—			(15		)
Changes in operating assets and liabilites:
Accounts receivable	8,648			1			8,649
Inventories	(10,790		)	118			(10,672		)
Prepaid expense and other current assets	736			(2		)	734
Accounts payable and accrued expense	6,952			3			6,955
Accrued pension and retirement liabilities	(371		)	—			(371		)
Customer advances and deferred income	2,076			—			2,076
Other	(103		)	(2		)	(105		)
Net cash provided by operating activities	2,527			(19		)	2,508
Investing Activities
Purchase of property and equipment	(653		)	19			(634		)
Net cash used in investing activities	(653		)	19			(634		)
Financing Activities
Line of credit repayments	(7,083		)	—			(7,083		)
Net cash used financing activities	(7,083		)	—			(7,083		)
Effect of exchange rates on cash and cash equivalents	14			—			14
Change in cash and cash equivalents	(5,195		)	—			(5,195		)
Cash and cash equivalents, beginning of period	12,594			—			12,594
Cash and cash equivalents, end of period	$	7,399		$	—		$	7,399

Colt Defense LLC and Subsidiaries

Consolidated Statement of Changes in Cash Flows

(In thousands of dollars)

(Unaudited)

	For the Three Months Ended March 31, 2013
							As Revised in
	As						this Quarterly
	Previously						Report on
	Reported			Adjustments			Form 10-Q
Operating Activities
Net income	$	5,070		$	59		$	5,129
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization	1,162			—			1,162
Amortization of financing fees	414			—			414
Amortization of debt discount	104			—			104
Deferred income taxes	(60		)	—			(60		)
Other non-cash items	13			—			13
Changes in operating assets and liabilites:
Accounts receivable	(15,618		)	7			(15,611		)
Inventories	(6,151		)	—			(6,151		)
Prepaid expense and other current assets	(91		)	(118		)	(209		)
Accounts payable and accrued expense	7,166			—			7,166
Accrued pension and retirement liabilities	(338		)	56			(282		)
Customer advances and deferred income	(711		)	—			(711		)
Other	5			—			5
Net cash (used in) provided by operating activities	(9,035		)	4			(9,031		)
Investing Activities
Purchase of property and equipment	(1,265		)	—			(1,265		)
Change in restricted cash	5			—			5
Net cash used in investing activities	(1,260		)	—			(1,260		)
Financing Activities
Line of credit repayments	(6		)	—			(6		)
Purchase of common units	(14,000		)	—			(14,000		)
Net cash used financing activities	(14,006		)	—			(14,006		)
Effect of exchange rates on cash and cash equivalents	(113		)	(4		)	(117		)
Change in cash and cash equivalents	(24,414		)	—			(24,414		)
Cash and cash equivalents, beginning of period	42,373			—			42,373
Cash and cash equivalents, end of period	$	17,959		$	—		$	17,959

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 months ended March 30, 2014 and March 31, 2013 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 (Amendment No. 2) for the fiscal year ended December 31, 2013. The consolidated balance sheet dated December 31, 2013 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 months ended March 30, 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.

Reclassification of Prior Period Amounts

Certain prior period amounts have been reclassified to conform with the current year presentation. The amounts reclassified relate to cost of training revenue which was reclassified from selling and commission expense to cost of sales and royalty revenue reclassified from other (income) expense, to net sales. Amortization of purchased intangibles was reclassified from a separate line item to selling and commission expense and business development expenses were reclassified from other income to a separate line.

The cost of training reclassification was $81 for the three months ended March 31, 2013.  The royalty revenue reclassification had no impact on the financial statements as amounts were intercompany transactions and eliminated for the three months ended March 31, 2013. The amortization of purchased intangibles reclassification was $117 for the three months ended March 31, 2013. The reclassification of business development expenses was $75 for the three months ended March 30, 2013.

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 March 30, 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 this contract 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.

Guarantor Financial Statements

In accordance with Rule 3-10 of SEC Regulation S-X, the Company is not presenting condensed consolidating financial statements as Colt Defense and Colt Finance have no independent assets or operations.  All of the Company’s subsidiaries are 100% owned and have guaranteed the Company’s Senior Notes; and all of the guarantees are full, unconditional, joint and several.

Recent Accounting Pronouncements

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.

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Consolidated Statements of Operations (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 30, 2014	Mar. 31, 2013
Consolidated Statements of Operations
Net sales	$ 50,080	$ 63,849
Cost of sales	40,386	45,112
Gross profit	9,694	18,737
Operating expenses:
Selling and commissions	4,461	3,095
Research and development	1,243	820
General and administrative	3,909	3,730
Total selling and commissions, research and development, general and administrative	9,613	7,645
Business development	500	75
Total operating expenses	10,113	7,720
Operating income	(419)	11,017
Other expense (income):
Interest expense	7,684	5,994
Other income	(71)	(787)
Total other expense, net	7,613	5,207
Income (loss) before provision for income taxes	(8,032)	5,810
Income tax expense (benefit)	(86)	681
Net income (loss)	$ (7,946)	$ 5,129

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Pension and Postretirement Benefits

3 Months Ended

Mar. 30, 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
	March 30, 2014			March 31, 2013
				(As Revised)
Service cost	$	—		$	—
Interest cost	379			273
Expected return on assets	(494		)	(365		)
Amortization of unrecognized loss	66			105
Net periodic (income)	$	(49	)	$	13

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.

Postretirement health care expense for the New Colt plan is included in the amounts below from the Merger Date.

The components of cost recognized in the Company’s Consolidated Statements of Operations for postretirement health care coverage are as follows:

	Three Months Ended
	March 30, 2014			March 31, 2013
Service cost	$	164		$	64
Interest cost	212			132
Amortization of unrecognized prior service costs	(43		)	(43		)
Amortization of unrecognized loss	24			71
Net periodic cost	$	357		$	224

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Document and Entity Information	3 Months Ended
	Mar. 30, 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	Mar. 30, 2014
Amendment Flag	true
Amendment Description	In this amended Quarterly Report on Form 10-Q/A for the quarter ended March 30, 2014 we are responding to Securities and Exchange Commission (the "SEC") comments on our first quarter 2014 Form 10-Q ("Quarterly Report") filed May 14, 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. In connection with our response to the SEC comments, we are also updating Item 4 "Controls and Procedures" and amending the financial statements included in this Quarterly Report to (i) reflect the correction of previously identified out of period errors that were immaterial to the consolidated financial statements individually and in the aggregate prior to the discovery of the M240 machine gun program (the "M240 Program") error (see Note 2 Summary of Significant Accounting Policies and "Restatement of Previously Issued Consolidated Financial Statements")(ii) updated Note 16 "Commitments and Contingencies" with respect to the correction of the M240 Program error and updated related M240 Program disclosure and (iii) include language in Note 21 "Subsequent Events" with respect to our current liquidity position and ability to continue as a going concern and other recent events. In addition, the Company identified an error in its Consolidated Statement of Changes in Cash Flows for the three months ended March 30, 2014. To correct for such error, the Company has revised the Statement of Changes in Cash Flows to correct for the $19 (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 $19 (in thousands of dollars). We do not consider the cash flow error to be material. 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 on May 14, 2014 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 Registrant's 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	Q1

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Accumulated Deficit

3 Months Ended

Mar. 30, 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 March 30, 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 $14.0 million 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. Subsequent to March 30, 2014, the Company made tax distribution payments to members of $683 along with State of Connecticut members’ withholding payments of $530.

Based on the distribution limitations associated with the Company’s Term Loan, there was a $2,277 long term liability payable to members at March 30, 2014 and December 31, 2013, respectively.

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Consolidated Statements of Comprehensive Income (Loss) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 30, 2014	Mar. 31, 2013
Consolidated Statements of Comprehensive Income (Loss)
Net income (loss)	$ (7,946)	$ 5,129
Foreign currency translation adjustment:
Foreign currency translation losses	(938)	(577)
Pension and postretirement benefit liabilities:
Reclassification adjustment for unrecognized prior service costs and unrecognized loss included in net income (loss)	47	133
Total	47	133
Comprehensive income (loss)	$ (8,837)	$ 4,685

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Property and Equipment

3 Months Ended

Mar. 30, 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 in the amounts of $4,420, $30 and $732, respectively.

Property and equipment consist of the following as of:

							Estimated
	March 30, 2014			December 31, 2013			Useful Life
Land	$	325		$	338		—
Building	2,551			2,653			33
Machinery and equipment	50,144			47,476			7-10
Furniture, fixtures and leasehold improvements	7,116			7,081			3-5
	60,136			57,548
Less accumulated depreciation and amortization	(33,463		)	(32,152		)
	26,673			25,396
Construction in process	3,036			5,337
Property and equipment, net	$	29,709		$	30,733

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Inventories

3 Months Ended

Mar. 30, 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:

	March 30, 2014		December 31, 2013
	(As Revised)
Raw materials	$	47,165	$	43,469
Work in process	12,570		9,476
Finished products	17,339		13,729
	$	77,074	$	66,674

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Concentration of risk

3 Months Ended

Mar. 30, 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 March 30, 2014, the two largest individual trade receivable balances accounted for 25% and 9% of total accounts receivable, respectively.  At December 31, 2013, the two largest individual trade receivable balances accounted for 28% and 16% of total accounts receivable, respectively.

Labor

The United Automobile, Aerospace & Agricultural Implements Workers of America (the “Union”) represents our West Hartford work force pursuant to a collective bargaining agreement that expires March 31, 2019. The Union represents approximately 72% of Colt’s U.S. workforce.

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Common Unit Compensation

3 Months Ended

Mar. 30, 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 the first quarter of 2014, there were no options granted. 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 immaterial for the three months ended March 30, 2014 and March 31, 2013, respectively.

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Accrued Expenses

3 Months Ended

Mar. 30, 2014

Accrued Expenses

Accrued Expenses

Note 10   Accrued Expenses

Accrued expenses consisted of:

	March 30, 2014		December 31, 2013
	(As Revised)		(As Restated)
Accrued compensation and benefits	$	5,105	$	7,154
Accrued contract obligation expense	1,133		1,194
Accrued federal, excise and other taxes	4,110		4,902
Accrued interest	9,583		2,879
Accrued commissions	1,232		929
Other accrued expenses	5,891		5,100
	$	27,054	$	22,158

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Accrued Expenses (Details) (USD $) In Thousands, unless otherwise specified	Mar. 30, 2014	Dec. 31, 2013
Accrued Expenses
Accrued compensation and benefits	$ 5,105	$ 7,154
Accrued contract obligation expense	1,133	1,194
Accrued federal, excise and other taxes	4,110	4,902
Accrued interest	9,583	2,879
Accrued commissions	1,232	929
Other accrued expenses	5,891	5,100
Total accrued expenses	$ 27,054	$ 22,158

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Goodwill, Trademarks and Other Intangible Assets

3 Months Ended

Mar. 30, 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.

During the first quarter of 2014, the Company has seen a decrease in the demand for commercial rifles and a decrease in international sales when compared to 2013.  The Company concluded that a triggering event has not occurred and an interim impairment test for goodwill was not necessary as of March 30, 2014.  These conclusions were based on its most recent financial projections.  If the Company’s actual results are lower than its financial projections on a longer term basis, an impairment test may be necessary which may result in future impairment.

The following table sets forth the changes in the carrying amount of goodwill for the Company as of and for the three months ended March 30, 2014:

	Total
Balance at December 31, 2013	$	51,225
Effect of foreign currency translation	(389		)
Balance at March 30, 2014	$	50,836

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.

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 March 30, 2014
	Gross							Estimated
	Carrying		Accumulated					Useful
	Amount		Amortization			Net		Life
Customer relationship Canadian Government	$	2,278	$	(671	)	$	1,607	30
Customer relationships other	5,922		(4,000		)	1,922		20
License agreements	5,240		(1,210		)	4,030		6
Backlog	1,699		(737		)	962		3
Technology-based intangibles	6,580		(2,645		)	3,935		15-20
	$	21,719	$	(9,263	)	$	12,456

	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 $3,254, $2,770, $1,913, $1,174 and $861 for 2014, 2015, 2016, 2017 and 2018, respectively.

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Notes Payable and Long-Term Debt

3 Months Ended

Mar. 30, 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, 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. Principal repayments, which are due quarterly on the last day of each calendar quarter, are as follows:

	Amount
Remaining 2014	$	5,000
2015	7,500
2016	36,250
Total	$	48,750

On March 31, 2014, the Company made Term Loan principal and interest payments of $625 and $1,310, respectively.

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, the Company cannot exceed specified levels of capital expenditures. All financial covenants, with limited exceptions, are calculated on a rolling 4-quarter basis based on financial results for the current and three preceding fiscal quarters. The Company was in compliance with its Term Loan covenants as of March 30, 2014 and December 31, 2013 and the Company monitors its future compliance based on current and anticipated financial results.  It is possible the Company will not meet one or more of the Term Loan covenants in one or more quarters in 2014.  If the Company were to not meet certain of the Term Loan covenants, 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 on a timely basis or at all, in which case the Term Loan would become a current liability.

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 for member distributions to support member LLC-related taxes) and merge, acquire or sell assets.

Credit Agreement

On September 29, 2011, the Company 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 $50,000, 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.

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 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 March 30, 2014 and December 31, 2013, the Company was in compliance with all covenants and restrictions and the Company monitors its future compliance based on current and anticipated financial results.

As of March 30, 2014, there were no advances and $3,486 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.

On March 22, 2013, the Company entered into Amendment No. 2 to the Credit Agreement, whereby, among other things, the lenders 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.

On June 19, 2013, Colt Defense entered into Amendment No. 3 to the Credit Agreement, whereby the lenders 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, Colt Defense 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 other 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 March 30, 2014 and December 31, 2013 were as follows:

	March 30, 2014			December 31, 2013
Senior Notes	$	248,092		$	247,984
Term Loan	47,031			46,833
Credit Agreement	—			7,083
Total debt	295,123			301,900
Less: current portion	(5,000		)	(12,083		)
Long-term debt	$	290,123		$	289,817

Long-term debt was recorded net of unamortized original issue and debt discounts of $3,627 at March 30, 2014 and $3,932 at December 31, 2013.

	Three Months Ended
	March 30, 2014		March 31, 2013
Amortization of discount	$	305	$	104
Amortization of deferred financing costs	606		414

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Income Taxes

3 Months Ended

Mar. 30, 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. Subsequent to March 30, 2014, Colt Canada declared and paid dividends 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
	March 30, 2014			March 31, 2013
Current	$	(89	)	$	741
Deferred	3			(60		)
Total	$	(86	)	$	681

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 March 30, 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 an indefinite lived intangible asset. 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.

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Accumulated Deficit (Details)	Mar. 30, 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

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Common Unit Compensation (Details) (USD $)	3 Months Ended	12 Months Ended
	Mar. 30, 2014	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)	0	5,300
Weighted-average exercise price (in dollars per share)		$ 288.78

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Pension and Postretirement Benefits (Details) (USD $)	3 Months Ended		12 Months Ended	9 Months Ended
	Mar. 30, 2014	Mar. 31, 2013	Dec. 31, 2013 item	Mar. 30, 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
Components of income and cost recognized in our consolidated statement of operations
Interest cost	379,000	273,000
Expected return on assets	(494,000)	(365,000)
Amortization of unrecognized loss	66,000	105,000
Net periodic cost (income)	(49,000)	13,000
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 Healthcare Coverage
Pension and postretirement benefits
Monthly maximum contribution to the cost of providing retiree health care benefits (in dollars per employee)	250
Components of income and cost recognized in our consolidated statement of operations
Service cost	164,000	64,000
Interest cost	212,000	132,000
Amortization of unrecognized prior service costs	(43,000)	(43,000)
Amortization of unrecognized loss	24,000	71,000
Net periodic cost (income)	$ 357,000	$ 224,000

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Notes Payable and Long-Term Debt (Tables)

3 Months Ended

Mar. 30, 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	$	5,000
2015	7,500
2016	36,250
Total	$	48,750

Schedule of outstanding loan balances

	March 30, 2014			December 31, 2013
Senior Notes	$	248,092		$	247,984
Term Loan	47,031			46,833
Credit Agreement	—			7,083
Total debt	295,123			301,900
Less: current portion	(5,000		)	(12,083		)
Long-term debt	$	290,123		$	289,817

Schedule of effective interest rate and amortization

	Three Months Ended
	March 30, 2014		March 31, 2013
Amortization of discount	$	305	$	104
Amortization of deferred financing costs	606		414

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Acquisition (Details) (USD $)	3 Months Ended		0 Months Ended
	Mar. 30, 2014	Mar. 31, 2013	Jul. 12, 2013 item	Jul. 12, 2013	Dec. 31, 2013	Sep. 29, 2013
Acquisition
Sales	$ 50,080,000	$ 63,849,000
Fair values of the assets acquired, net of cash acquired, and the liabilities assumed at the Merger Date
Goodwill	50,836,000				51,225,000
Interest expense | New Colt
Unaudited pro forma operating results
Net income		1,629,000
New Colt
Acquisition
Sales	17,100,000
Number of manufacturers of Colt firearms to be consolidated			2
Aggregate purchase price			82,543,000
Aggregate purchase price paid in cash			5,000,000
Merger consideration reinvested by certain investors			4,000,000
Fair values of the assets acquired, net of cash acquired, and the liabilities assumed at the Merger Date
Cash and cash equivalents			3,791,000	3,791,000
Accounts receivable			3,318,000	3,318,000
Inventories			7,585,000	7,585,000
Property and equipment			5,182,000	5,182,000
Other assets			3,090,000	3,090,000
Intangible assets with finite lives			9,340,000	9,340,000
Trademarks			50,100,000	50,100,000
Goodwill			36,974,000	36,974,000
Total assets acquired			119,380,000	119,380,000
Accounts payable and accrued expenses			8,808,000	8,808,000
Customer advances and deferred revenue			1,832,000	1,832,000
Capital lease obligations			393,000	393,000
Pension and retirement liabilities			9,357,000	9,357,000
Deferred tax liabilities			16,447,000	16,447,000
Total liabilities assumed			36,837,000	36,837,000
Net assets acquired			82,543,000	82,543,000
Unaudited pro forma operating results
Net sales		81,813,000
Net income		5,605,000
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			5,240,000	5,240,000
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			2,970,000	2,970,000
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			1,130,000	1,130,000
Weighted-average useful lives of acquired assets				3 years
New Colt | Amortization of finite-lived intangible assets
Unaudited pro forma operating results
Net income		664,000
New Colt | Common units
Acquisition
Aggregate consideration from issue and sale of common units			9,000,000
New Colt | Term Loan
Acquisition
Proceeds from senior secured term loan			50,000,000
Unaudited pro forma operating results
Net income		50,000
New Colt | Trademarks
Acquisition
Settlement gain on pre-existing relationship						15,264,000
Gross settlement gain						16,320,000
Prepaid license balance						$ 1,056,000

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Commitments and Contingencies

3 Months Ended

Mar. 30, 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:

	March 30, 2014		December 31, 2013
Standby letters of credit secured by restricted cash	$	1,183	$	1,185
Standby letters of credit under Credit Agreement	3,486		3,486
Guarantees of standby letters of credit established by a sales agent on behalf of Colt	74		74

At March 30, 2014 and December 31, 2013, the Company had unconditional purchase obligations related to capital expenditures for machinery and equipment of $1,104 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 March 30, 2014 and December 31, 2013, remaining gross offset purchase commitments totaled $63,504 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 $1,599 and $1,639 as of March 30, 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 first quarter of 2014 the Company, based on additional available information, continually assessed the M240 Program accruals and determined that an incremental $311 of M240 Program contract obligation expense was required. The expense recorded was based on the Company’s best estimate of the costs to satisfy the obligation given a range of possible outcomes.  The Company believes the actual costs to satisfy this obligation may vary from the original estimate.

As of March 30, 2014 and December 31, 2013, the Company had the following amounts included in the consolidated balance sheets related to the M240 Program:

	March 30, 2014		December 31, 2013
	(As Revised)		(As Restated)
Inventory Reserves	$	453	$	639
Accrued Contract Obligation	$	1,133	$	1,194
Customer Advances and Deferred Income	$	6,820	$	6,820
Other Long-Term Liabilities	$	—	$	—

At March 30, 2014 and December 31, 2013, the Company had unconditional purchase obligations related to capital expenditures for machinery and equipment of $1,104 and $892, respectively.

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 months ended March 30, 2014 and March 31, 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 their 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 March 30, 2014 and December 31, 2013, deferred lease expense was $56 and $36, respectively. In connection with the lease, the Company was required to hire a minimum number of employees commencing in 2013. As of March 30, 2014, the Company had not occupied the Florida facility and had not hired any employees.  The Company has accrued a contractual penalty of $63 and $50 at March 30, 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 County to assist with the cost of the renovations.  In conjunction with the Florida lease, the Company entered into a quick action closing fund agreement, as amended, with the state of Florida which requires the Company to make a minimum capital investment of $2,500 by December 31, 2015, of which $181 had been made through both March 30, 2014 and December 31, 2013, respectively.

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Subsequent Events

3 Months Ended

Mar. 30, 2014

Subsequent Events

Subsequent Events

Note 21   Subsequent Events

Union Contract

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.

Workforce Reduction

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 will be recorded in the second quarter and amounted to $0.4 million. The Company is in the process of determining the severance costs for the hourly employees.

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 the 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-Q/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 its 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.

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.

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Summary of Significant Accounting Policies (Details 7) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 30, 2014	Mar. 31, 2013
Business development	$ 500	$ 75
Adjustments
Cost of training		81
Amortization of purchased intangibles		$ 117

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Accumulated Other Comprehensive Loss (Tables)

3 Months Ended

Mar. 30, 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	)	$	2,733		$	(13,841	)
Other comprehensive income before reclassifications	—			—			—			—
Amounts reclassified from accumulated other comprehensive income	(43		)	176			—			133
Currency translation	—			—			(577		)	(577		)
Net current period other comprehensive income	(43		)	176			(577		)	(444		)
Balance, March 31, 2013	$	782		$	(17,223	)	$	2,156		$	(14,285	)
Balance, December 31, 2013	$	653		$	(10,836	)	$	843		$	(9,340	)
Other comprehensive income before reclassifications	—			—			—			—
Amounts reclassified from accumulated other comprehensive income	(43		)	90			—			47
Currency translation	—			—			(938		)	(938		)
Net current period other comprehensive income	(43		)	90			(938		)	(891		)
Balance, March 30, 2014	$	610		$	(10,746	)	$	(95	)	$	(10,231	)

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Consolidated Statements of Changes in Cash Flows (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 30, 2014	Mar. 31, 2013
Operating Activities
Net income (loss)	$ (7,946)	$ 5,129
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization	2,289	1,162
Amortization of financing fees	606	414
Amortization of debt discount	305	104
Deferred income taxes	3	(60)
Other non-cash items	(15)	13
Changes in operating assets and liabilities:
Accounts receivable	8,649	(15,611)
Inventories	(10,672)	(6,151)
Prepaid expenses and other current assets	734	(209)
Accounts payable and accrued expenses	6,955	7,166
Accrued pension and retirement liabilities	(371)	(282)
Customer advances and deferred income	2,076	(711)
Other	(105)	5
Net cash provided by (used in) operating activities	2,508	(9,031)
Investing Activities
Purchases of property and equipment	(634)	(1,265)
Change in restricted cash		5
Net cash used in investing activities	(634)	(1,260)
Financing Activities
Line of credit repayments	(7,083)	(6)
Purchase of common units		(14,000)
Net cash used in financing activities	(7,083)	(14,006)
Effect of exchange rates on cash and cash equivalents	14	(117)
Change in cash and cash equivalents	(5,195)	(24,414)
Cash and cash equivalents, beginning of period	12,594	42,373
Cash and cash equivalents, end of period	7,399	17,959
Supplemental Disclosure of Cash Flow Information
Cash paid for interest	63	378
Cash paid for income taxes	313	295
Non-cash consideration for sale of equipment		23
Accrued purchases of fixed assets		7
Accrued distribution to members	$ 2,947	$ 1,418

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Accounts Receivable

3 Months Ended

Mar. 30, 2014

Accounts Receivable

Accounts Receivable

Note 5 Accounts Receivable

Accounts receivable are net of an allowance for doubtful accounts of $58 and $78 at March 30, 2014 and December 31, 2013, respectively.

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Goodwill, Trademarks and Other Intangible Assets (Details 3) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 30, 2014	Dec. 31, 2013
Net carrying value of intangible assets with finite lives
Gross Carrying Amount	$ 21,719	$ 22,071
Accumulated Amortization	(9,263)	(8,656)
Net	12,456	13,415
Expected annual amortization expense
2014	3,254
2015	2,770
2016	1,913
2017	1,174
2018	861
Customer relationship Canadian Government
Net carrying value of intangible assets with finite lives
Gross Carrying Amount	2,278	2,369
Accumulated Amortization	(671)	(678)
Net	1,607	1,691
Estimated Useful Life	30 years	30 years
Customer relationships other
Net carrying value of intangible assets with finite lives
Gross Carrying Amount	5,922	6,160
Accumulated Amortization	(4,000)	(4,077)
Net	1,922	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	(1,210)	(805)
Net	4,030	4,435
Estimated Useful Life	6 years	6 years
Backlog
Net carrying value of intangible assets with finite lives
Gross Carrying Amount	1,699	1,722
Accumulated Amortization	(737)	(604)
Net	962	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	(2,645)	(2,492)
Net	$ 3,935	$ 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

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Segment Information (Details)	3 Months Ended	12 Months Ended	0 Months Ended
	Mar. 30, 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

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 30, 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 and the year ended 2011, (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 quarters ended March 30, 2014 and March 31, 2013 related to the M240 Program error.  The Company restated the Company’s Consolidated Balance Sheet as of December 31, 2013 to reflect a $4,133 decrease in accrued expenses, a $6,820 increase in customer advances and deferred income and a $2,689 increase in total deficit, primarily as a result of the correction of the M240 Program error. In conjunction with the correction of the M240 Program error, other previously recorded, immaterial out of period adjustments were also adjusted to be reflected in the proper period.  Correction of these previously recorded, immaterial out of period adjustments had the combined effect on the consolidated statements of operations for the three month period ended March 30, 2014 and March 31, 2013 of decreasing net income by $118 and increasing net income by $59, respectively.

The impacts of correcting the previously recorded, immaterial out-of-period adjustments and the reclassification of business development expenses for the three month period ended March 31, 2013 were as follows:

	Adjustments to
	Previously Reported Income Statement
	Increase (Decrease)
	Three Months Ended			Three Months Ended
	March 30, 2014			March 31, 2013
Net sales	$	—		$	—
Cost of sales	118		(A)	(67		)(B)
Gross profit	(118		)	67
Selling and commissions	—			2
Research and development	—			1
General and administrative	—			5
Operating income	(118		)	59
Net income (loss)	(118		)	59

(A) Relates to the recording of a provision for inventory loss which was originally recorded in the three months ended June 30, 2014, but relates to the three months ended March 30, 2014.

(B) Relates to an incorrect overpayment to a vendor which was originally recorded in the three months ended December 31, 2013, but relates to the three months ended March 31, 2013.

Comparison of revised financial statements to financial statements as previously reported

The following tables compare the Company’s previously reported Consolidated Statements of Operations, Comprehensive Income (Loss) and Changes in Cash Flows for the quarters ended March 30, 2014 and March 31, 2013 to the corresponding financial statements for the quarterly periods as revised.

Colt Defense LLC and Subsidiaries

Consolidated Balance Sheets

(In thousands of dollars)

(Unaudited)

	March 30, 2014
							As Revised in
	As						this Quarterly
	Previously						Report on
	Reported			Adjustments			Form 10-Q
ASSETS
Current assets:
Cash and cash equivalents	$	7,399		$	—		$	7,399
Restricted cash	771			—			771
Accounts receivable, net	13,536			—			13,536
Inventories	77,192			(118		)	77,074
Deferred tax assets	106			—			106
Other current assets	5,193			—			5,193
Total current assets	104,197			(118		)	104,079
Property and equipment, net	29,709			—			29,709
Goodwill	50,836			—			50,836
Trademarks	50,100			—			50,100
Intangible assets with finite lives, net	12,456			—			12,456
Deferred financing costs	7,135			—			7,135
Long-term restricted cash	572			—			572
Other assets	1,491			—			1,491
Total assets	$	256,496		$	(118	)	$	256,378
LIABILITIES AND DEFICIT
Current liabilities:
Accounts payable	$	16,224		$	—		$	16,224
Accrued expenses (Note 10)	31,185			(4,131		)	27,054
Pension and retirement liabilities - current portion	1,085			—			1,085
Customer advances and deferred income	14,391			6,820			21,211
Long-term debt - current portion	5,000			—			5,000
Accrued distributions to members	670			—			670
Total current liabilities	68,555			2,689			71,244
Long-term debt	290,123			—			290,123
Pension and retirement liabilities	21,252			—			21,252
Long-term deferred tax liability	17,819			—			17,819
Long-term distribution payable to members	2,277			—			2,277
Other long-term liabilities	2,082			—			2,082
Total long-term liabilities	333,553			—			333,553
Total liabilities	402,108			2,689			404,797
Deficit:
Accumulated deficit	(135,399		)	(2,789		)	(138,188		)
Accumulated other comprehensive loss	(10,213		)	(18)			(10,231		)
Total deficit	(145,612		)	(2,807		)	(148,419		)
Total liabilities and deficit	$	256,496		$	(118	)	$	256,378

Colt Defense LLC and Subsidiaries

Consolidated Statement of Operations

(In thousands of dollars)

(Unaudited)

	Three months ended March 30, 2014									Three months ended March 31, 2013
							As Revised in									As Revised in
	As						this Quarterly			As						this Quarterly
	Previously						Report on			Previously						Report on
	Reported			Adjustments			Form 10-Q			Reported			Adjustments			Form 10-Q
Net sales	$	50,080		$	—		$	50,080		$	63,849		$	—		$	63,849
Cost of sales	40,268			118			40,386			45,179			(67		)	45,112
Gross Profit	9,812			(118		)	9,694			18,670			67			18,737
Operating expenses:
Selling and commissions	4,461			—			4,461			3,093			2			3,095
Research and development	1,243			—			1,243			819			1			820
General and administrative	3,909			—			3,909			3,725			5			3,730
	9,613			—			9,613			7,637			8			7,645
Business development	500			—			500			75			—			75
Total operating expenses	10,113			—			10,113			7,712			8			7,720
Operating income	(301		)	(118		)	(419		)	10,958			59			11,017
Other expense/(income):
Interest expense	7,684			—			7,684			5,994			—			5,994
Other (income)/expense, net	(71		)	—			(71		)	(787		)	—			(787		)
Total other expenses, net	7,613			—			7,613			5,207			—			5,207
Income (loss) before provision for income taxes	(7,914		)	(118		)	(8,032		)	5,751			59			5,810
Income tax expense	(86		)	—			(86		)	681			—			681
Net income (loss)	$	(7,828	)	$	(118	)	$	(7,946	)	$	5,070		$	59		$	5,129

Colt Defense LLC and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

(In thousands of dollars)

(Unaudited)

	Three Months Ended March 30, 2014									Three Months Ended March 31, 2013
							As Revised in								As Revised in
	As						this Quarterly			As					this Quarterly
	Previously						Report on			Previously					Report on
	Reported			Adjustments			Form 10-Q			Reported			Adjustments		Form 10-Q
Net income (loss)	$	(7,828	)	$	(118	)	$	(7,946	)	$	5,070		$	59	$	5,129
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment:
Foreign currency translation gains (losses)	(938		)				(938		)	(577		)	—		(577		)
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	47			—			47			133			—		133
	47			—			47			133			—		133
Comprehensive income (loss)	$	(8,719	)	$	(118	)	$	(8,837	)	$	4,626		$	59	$	4,685

Colt Defense LLC and Subsidiaries

Consolidated Statement of Changes in Cash Flows

(In thousands of dollars)

(Unaudited)

	For the Three Months Ended March 30, 2014
							As Revised in
	As						this Quarterly
	Previously						Report on
	Reported			Adjustments			Form 10-Q
Operating Activities
Net income (loss)	$	(7,828	)	$	(118	)	$	(7,946	)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization	2,308			(19		)	2,289
Amortization of financing fees	606			—			606
Amortization of debt discount	305			—			305
Deferred income taxes	3			—			3
Other non-cash items	(15		)	—			(15		)
Changes in operating assets and liabilites:
Accounts receivable	8,648			1			8,649
Inventories	(10,790		)	118			(10,672		)
Prepaid expense and other current assets	736			(2		)	734
Accounts payable and accrued expense	6,952			3			6,955
Accrued pension and retirement liabilities	(371		)	—			(371		)
Customer advances and deferred income	2,076			—			2,076
Other	(103		)	(2		)	(105		)
Net cash provided by operating activities	2,527			(19		)	2,508
Investing Activities
Purchase of property and equipment	(653		)	19			(634		)
Net cash used in investing activities	(653		)	19			(634		)
Financing Activities
Line of credit repayments	(7,083		)	—			(7,083		)
Net cash used financing activities	(7,083		)	—			(7,083		)
Effect of exchange rates on cash and cash equivalents	14			—			14
Change in cash and cash equivalents	(5,195		)	—			(5,195		)
Cash and cash equivalents, beginning of period	12,594			—			12,594
Cash and cash equivalents, end of period	$	7,399		$	—		$	7,399

Colt Defense LLC and Subsidiaries

Consolidated Statement of Changes in Cash Flows

(In thousands of dollars)

(Unaudited)

	For the Three Months Ended March 31, 2013
							As Revised in
	As						this Quarterly
	Previously						Report on
	Reported			Adjustments			Form 10-Q
Operating Activities
Net income	$	5,070		$	59		$	5,129
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization	1,162			—			1,162
Amortization of financing fees	414			—			414
Amortization of debt discount	104			—			104
Deferred income taxes	(60		)	—			(60		)
Other non-cash items	13			—			13
Changes in operating assets and liabilites:
Accounts receivable	(15,618		)	7			(15,611		)
Inventories	(6,151		)	—			(6,151		)
Prepaid expense and other current assets	(91		)	(118		)	(209		)
Accounts payable and accrued expense	7,166			—			7,166
Accrued pension and retirement liabilities	(338		)	56			(282		)
Customer advances and deferred income	(711		)	—			(711		)
Other	5			—			5
Net cash (used in) provided by operating activities	(9,035		)	4			(9,031		)
Investing Activities
Purchase of property and equipment	(1,265		)	—			(1,265		)
Change in restricted cash	5			—			5
Net cash used in investing activities	(1,260		)	—			(1,260		)
Financing Activities
Line of credit repayments	(6		)	—			(6		)
Purchase of common units	(14,000		)	—			(14,000		)
Net cash used financing activities	(14,006		)	—			(14,006		)
Effect of exchange rates on cash and cash equivalents	(113		)	(4		)	(117		)
Change in cash and cash equivalents	(24,414		)	—			(24,414		)
Cash and cash equivalents, beginning of period	42,373			—			42,373
Cash and cash equivalents, end of period	$	17,959		$	—		$	17,959

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 months ended March 30, 2014 and March 31, 2013 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 (Amendment No. 2) for the fiscal year ended December 31, 2013. The consolidated balance sheet dated December 31, 2013 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 months ended March 30, 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.

Reclassification of Prior Period Amounts

Reclassification of Prior Period Amounts

Certain prior period amounts have been reclassified to conform with the current year presentation. The amounts reclassified relate to cost of training revenue which was reclassified from selling and commission expense to cost of sales and royalty revenue reclassified from other (income) expense, to net sales. Amortization of purchased intangibles was reclassified from a separate line item to selling and commission expense and business development expenses were reclassified from other income to a separate line.

The cost of training reclassification was $81 for the three months ended March 31, 2013.  The royalty revenue reclassification had no impact on the financial statements as amounts were intercompany transactions and eliminated for the three months ended March 31, 2013. The amortization of purchased intangibles reclassification was $117 for the three months ended March 31, 2013. The reclassification of business development expenses was $75 for the three months ended March 30, 2013.

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 March 30, 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 this contract 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.

Guarantor Financial Statements

Guarantor Financial Statements

In accordance with Rule 3-10 of SEC Regulation S-X, the Company is not presenting condensed consolidating financial statements as Colt Defense and Colt Finance have no independent assets or operations.  All of the Company’s subsidiaries are 100% owned and have guaranteed the Company’s Senior Notes; and all of the guarantees are full, unconditional, joint and several.

Recently Accounting Pronouncements

Recent Accounting Pronouncements

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.

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Concentration of risk (Details)	3 Months Ended	12 Months Ended
	Mar. 30, 2014	Dec. 31, 2013
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	25.00%	28.00%
Accounts receivable | Concentration of credit risk | Customer with second largest individual trade balance
Concentration of risks
Concentration risk, percentage	9.00%	16.00%
U.S. workforce | Labor concentration risk
Concentration of risks
Concentration risk, percentage	72.00%

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Transactions with Related Parties (Tables)

3 Months Ended

Mar. 30, 2014

Transactions with Related Parties

Schedule of transactions with New Colt

	Three Months
	Ended
	March 30, 2013
Net sales to New Colt	$	22,522
Purchases from New Colt	994
Administration and services fees charged to New Colt	442

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Transactions with Related Parties

3 Months Ended

Mar. 30, 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 $250 and $108 for the three months ended March 30, 2014 and March 31, 2013, respectively, and they are recorded within general and administrative expenses in the Consolidated Statements of Operations.

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 also 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 March 30, 2014, and March 31, 2013, the rent expense under this lease was $210 and $119, respectively.

In addition, Colt Security LLC, a wholly owned subsidiary of Employee Plan Holding Corp., provides security guard services to Colt.

Prior to the Merger, transactions with New Colt were as follows:

	Three Months
	Ended
	March 30, 2013
Net sales to New Colt	$	22,522
Purchases from New Colt	994
Administration and services fees charged to New Colt	442