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Case 15-11296-LSS Doc 688-1 Filed 11/11/15 Page 1 of 8
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Exhibit C
Colt – Financial Projections
(Unaudited)
($ in thousands)
Notes:
(1) Assumes tax reincorporation transaction. Illustratively assumes 40% tax rate
INCOME STATEMENTFiscal Year Ended December 31,
2016E 2017E 2018E 2019E
Total Net Sales $269,391 $302,964 $293,033 $354,385
Less: Cost of Goods Sold 214,173 233,561 223,511 261,927
Gross Profit $55,218 $69,403 $69,522 $92,458
Margin % 20.5% 22.9% 23.7% 26.1%
Less: SG&A $41,525 $43,138 $46,511 $49,946
EBIT $13,692 $26,265 $23,010 $42,512
Margin % 5.1% 8.7% 7.9% 12.0%
Other Expenses (Income) $154 $154 $154 $154
Interest / Fees 18,092 18,471 18,882 19,326
Foreign Taxes 444 705 959 1,415
Net Income ($4,998) $6,935 $3,016 $21,617
EBITDA Adjustments
EBIT $13,692 $26,265 $23,010 $42,512
Depreciation 6,308 5,827 6,149 6,886
Amortization 1,605 1,559 1,534 1,510
EBITDA $21,605 $33,652 $30,693 $50,907
Margin % 8.0% 11.1% 10.5% 14.4%
Sponsor Fees & Expenses 1,000 1,000 1,000 1,000
Adjusted EBITDA $22,605 $34,652 $31,693 $51,907
Margin % 8.4% 11.4% 10.8% 14.6%
Free Cash Flow
EBITDA $21,605 $33,652 $30,693 $50,907
Add: Net Deferral / (Payment) of Sponsor Fees 1,000 125 (750) (375)
Less: CapEx (9,243) (9,605) (9,745) (9,520)
Less: Changes in NWC (3,216) (634) 4,533 (7,727)
Less: Pension Plan Funding (1,200) (1,200) (1,200) (1,200)
Less: Foreign Taxes (444) (705) (959) (1,415)
Less: Other Expenses / (Income) (154) (154) (154) (154)
Less: Tax Related Distributions(1)
- (775) (1,217) (8,636)
Unlevered Free Cash Flow $8,348 $20,704 $21,202 $21,881
Case 15-11296-LSS Doc 688-1 Filed 11/11/15 Page 2 of 8
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BALANCE SHEETFiscal Year Ended December 31,
ProjectedOpening B/S 2016E 2017E 2018E 2019E
Current Assets
Cash $20,822 $16,256 $24,047 $32,325 $41,304
Restricted Cash 7,019 7,019 7,019 7,019 7,019
Accounts Receivable, Net 23,231 19,728 18,122 14,539 16,978
Inventory, Net 45,223 49,621 53,795 52,221 61,427
Deferred Income Tax Benefit 155 155 155 155 155
Prepaids & Other Current Assets 5,324 4,324 4,324 4,324 4,324
Total Current Assets $101,774 $97,102 $107,462 $110,583 $131,207
Other Assets
Fixed Assets, Net $22,733 $25,668 $29,446 $33,042 $35,676
Goodwill 8,597 8,597 8,597 8,597 8,597
Trademarks 38,350 38,350 38,350 38,350 38,350
I. P. & Other Intangibles 8,515 6,910 5,351 3,817 2,308
Deferred Financing Fees 2,638 2,110 1,583 1,055 528
Deferred License Fee 572 572 572 572 572
Other Assets & Security Deposit 616 616 616 616 616
Total Other Assets $82,021 $82,824 $84,515 $86,049 $86,646
Total Assets $183,795 $179,926 $191,977 $196,632 $217,853
Fiscal Year Ended December 31,
ProjectedOpening B/S 2016E 2017E 2018E 2019E
Current Liabilities
Accounts Payable $17,655 $15,670 $16,756 $16,406 $18,604
Accrued Expenses 13,599 13,261 14,236 13,212 14,557
C. P. of Employee Ben Costs 1,544 1,544 1,544 1,544 1,544
Customer Advances & Deferred Income 8,589 8,589 8,589 8,589 8,589
Total Current Liabilities $41,388 $39,065 $41,125 $39,751 $43,295
Long Term Debt
Senior Loan Exit Facility $41,200 $41,200 $41,200 $41,200 $41,200
Term Loan Exit Facility 87,932 87,932 87,932 87,932 87,932
Third Lien Exit Facility 50,000 54,080 58,493 63,266 68,428
Fourth Lien Note to GUCs 7,000 7,571 8,189 8,857 9,580
Total Long Term Debt $186,132 $190,783 $195,814 $201,255 $207,140
Other Liabilities
Pension and retirement obligations $37,403 $36,203 $35,003 $33,803 $32,603
Long-term deferred tax liability 14,870 14,870 14,870 14,870 14,870
Other long-term liabilities 6,505 6,505 6,505 6,505 6,505
Total Other Long Term Liabilities $58,778 $57,578 $56,378 $55,167 $53,978
Total Liabilities $286,297 $287,426 $293,317 $296,173 $304,413
Equity
Total Member's Equity ($102,502) ($107,500) ($101,340) ($99,541) ($86,560)
Total Liabilities & Member's Equity $183,795 $179,926 $191,977 $196,632 $217,853
Case 15-11296-LSS Doc 688-1 Filed 11/11/15 Page 3 of 8
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CASH FLOW STATEMENTFiscal Year Ended December 31,
2016E 2017E 2018E 2019E
Operating Activities
Net income (loss) ($4,998) $6,935 $3,016 $21,617
Adjustments
Depreciation and Amortization 8,440 7,914 8,211 8,923
PIK Accretion 4,651 5,031 5,441 5,885
Changes in operating assets and liabilities:
Accounts Receivable 3,504 1,605 3,583 (2,439)
Inventories (4,398) (4,174) 1,574 (9,206)
Prepaid expenses and other assets 1,000 - - -
Accounts payable and accrued expenses (2,323) 2,060 (1,374) 3,544
Accrued pension and retirement liabilities (1,200) (1,200) (1,200) (1,200)
Other Liabilities - - (11) 11
Net cash (used in) provided by operating activities $4,678 $18,171 $19,240 $27,135
Investing Activities
Purchases of property and equipment ($9,243) ($9,605) ($9,745) ($9,520)
Net cash used in investing activities ($9,243) ($9,605) ($9,745) ($9,520)
Financing Activities
Repayment of debt $- $- $- $-
Tax related distributions - (775) (1,217) (8,636)
Net cash used in financing activities $- ($775) ($1,217) ($8,636)
Change in cash and cash equivalents ($4,565) $7,791 $8,278 $8,979
Cash and cash equivalents, beginning of period 20,822 16,256 24,047 32,325
Cash and cash equivalents, end of period $16,256 $24,047 $32,325 $41,304
Case 15-11296-LSS Doc 688-1 Filed 11/11/15 Page 4 of 8
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ASSUMPTIONS TO FINANCIAL PROJECTIONS
A. General Assumptions
i. The Financial Projections have been prepared for the years 2016 through 2019.
ii. The Financial Projections assume no public company costs as of the Effective Date.
iii. The Company exits bankruptcy at the end of December 2015. The Company will
adopt fresh start accounting post-exit, which will have a material impact on the
opening balance sheet. This impact is not reflected in the Financial Projections.
iv. The Company remains in the existing manufacturing facility through the projection
period.
v. The Company is successful in implementing its turnaround initiatives related to
margin improvement, supply chain management and product offering.
B. Key Revenue Assumptions
i. The Company currently operates in three key business segments of the firearms
industry: US Government (“USG”); International; and Commercial/Law
Enforcement (“Comm/LE”).
ii. USG assumptions:
a. The Company has historically allocated significant resources to procure and
deliver on large scale United States government contracts. These large-scale
contracts have a significant impact on plant utilization as well as blended gross
margins.
b. These projections assume that the Company continues to sell through the
existing backlog and concurrently pursues certain contracts that fit with the
overall strategy.
iii. International assumptions
a. 2016 revenue is driven from orders currently in backlog and from securing
specific opportunities that are currently in the pipeline.
b. 2017-2019 annual revenue increases at the current CPI rate of approximately
2.5%, based on a consistent sales mix from recurring customers and a robust
pipeline of new opportunities.
iv. Commercial/ Law Enforcement Assumptions
a. The commercial channel is Colt’s largest long-term growth opportunity given
Colt’s low market share and high level of brand recognition. These products
offer attractive gross margins and will be a key focus for management to drive
overall profitability.
b. The Company plans to expand its production capacity and efficiency to support
growth in market share in the commercial segment.
c. Based on current demand, revenue from existing rifle and hand gun products is
projected to achieve a compounded annual growth rate of 2.6% from 2015-
2019.
Case 15-11296-LSS Doc 688-1 Filed 11/11/15 Page 5 of 8
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d. New product lines developed by the Company are projected to generate
approximately $265mm in sales over 2016-2019. The table below highlights the
required investment and estimated sales for 2016 to 2019, for the commercial
new product offerings:
New Products Summary ($000’s) 2016-2019
Product Projected
Investment
Estimated Sales
New Product A $0 $74,749
New Product B 3,150 60,000
New Product C 1,100 52,500
New Product D 4,250 55,000
New Product E 5,600 22,500
New Product F 6,500 0
Grand Total $20,600 $264,749
v. Colt Canada Assumptions
a. Assumes modest growth across all channels with no material next generation
program sales
C. Cost of Goods Sold Assumptions
i. Direct material and direct labor expenses are based on standards set by the
Company effective April 2015.
ii. Assumes standard overhead costs are fully absorbed and flexed with
increased/decreased labor. With few exceptions, the fixed component of overhead
expense increases by 2.0% per year based on current CPI.
iii. Gross margin on new products manufactured in West Hartford is adjusted for an
incremental fixed cost burden, which is higher in the first two years of production
due to new product learning curve.
iv. Adjustments for Scrap, Material Variances, Amortization, etc. are projected based
on the levels experienced in 2015.
v. 2016 includes $2.0mm in other manufacturing costs to account for additional
expenses as the Company makes changes to its operating and supply chain platform
and ramps up its production.
D. SG&A Assumptions
i. Engineering department includes the one-time G&A component of the new product
costs (excluding capex), as well as growth in headcount to support new product
development.
ii. Sales & Marketing department includes the ramp up of expenses for advertising,
publicity and promotions as a percentage of commercial sales and will also require
additional personnel to support commercial marketing efforts.
Case 15-11296-LSS Doc 688-1 Filed 11/11/15 Page 6 of 8
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iii. Commissions are based on the existing rates as a percentage of sales for customers
in the Commercial and International segments.
iv. Administrative
a. Reflects normal course operations, simpler capital structure and non-SEC
registrant status. While there are no expected increases in headcount, the
projections do include additional corporate bonuses based on improved
performance.
b. Includes one-time costs related to IT initiatives as well as recurring spend
for increased IT budget.
E. Tax Assumptions
i. The Company is projected to pay foreign taxes which are predominantly Canadian.
ii. The Company is projected to make tax-related distributions as necessary.
F. Balance Sheet and Cash Flow Assumptions
i. Assumes carryforward of historical cost. The Company will adopt fresh start
accounting for subsequent periods which will have material impact on the opening
balance sheet. This impact is not reflected in the Financial Projections.
ii. Opening balance sheet cash is based on projections for the 4th
quarter 2015 which
assumes payment of all bankruptcy administrative costs and pre-petition expenses
associated with assumed liabilities.
iii. Accounts Receivable is based on percentage of sales and assumed collection cycle
by segment. USG and Commercial collections are based on a 10 day collection
cycle, while International is based on a 45 day collection cycle.
iv. Inventory: beginning balance based on the Company’s 2015 projection:
a. Raw Materials is calculated as a percentage of COGS based on historical
trends.
b. WIP is adjusted based on assumed improvements to inventory
management, procurement efficiencies and labor improvements resulting
in reduced WIP inventory balances as percentage of COGS.
c. Due to the quick turnover, relative to the USG and Commercial business,
USG and Commercial FG inventory levels are based on historical levels of
FG as percentage of COGS relative to same month COGS. However, the
first 6 months of 2016 also reflects a buildup of Commercial FG
inventory, from approximately 10 days to 30 days. This represents a
defined effort to support the broader commercial business in the sales
projections.
d. International FG inventory as percentage of COGS is higher (relative to
USG and Commercial) and is calculated using forward looking COGS
levels and adjusting for the increased inventory levels to account for the
“build-up” required for large international orders.
v. Accounts Payable is based on DPO of 40 days
vi. Capex:
a. IT Capex is approximately $500k and $300k in 2016 and 2017,
respectively, and then drops to a nominal amount in years 2018 and 2019.
Case 15-11296-LSS Doc 688-1 Filed 11/11/15 Page 7 of 8
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b. Spending on new product lines has been budgeted, by product, over the
period of one year prior to the anticipated launch date.
c. New Equipment spending of $3.0mm per year to continuously improve
the Company’s equipment and systems to shift to a more technologically
driven manufacturing process.
d. Maintenance spend of $1.5mm per year is both preventative and reactive
as machines and equipment age.
e. Capex spending is depreciable after 6 months (7 year straight line
method).
G. Key Capital Structure Assumptions
i. The Company is projected to exit with approximately $186.1mm of total debt,
$129.1mm of which would be cash-pay starting at the Effective Date bearing a 10%
interest rate.
ii. The Company will raise new capital, through a rights offering, in the form of a
Third Lien Facility with a 8% PIK interest and 5-year maturity.
iii. Senior Notes/General Unsecured Claims that do not elect to participate in the rights
offering will receive either cash (up to $3.0mm) or a Fourth Lien Note (up to
$7.0mm). The Fourth Lien Note will bear 8% PIK interest and a 5.5-year maturity.
Case 15-11296-LSS Doc 688-1 Filed 11/11/15 Page 8 of 8
Case 15-11296-LSS Doc 688-2 Filed 11/11/15 Page 1 of 4
B-1
EXHIBIT D
Hypothetical Liquidation Analysis Summary (Unaudited)
(US$ in millions)
Calculation of Fees and Expenses
Book Value
Month Ended Aug. 15 Hypothetical Recovery Percentages Estimated Liquidation Value
(Except where noted) Low High Low High
Cash and Equivalents (Unrestricted) (12/31/15 Est.) (1) $0.0 100.0% 100.0% 0.0 0.0
Cash and Equivalents (Restricted for LCs) (12/31/15 Est.) (2) 7.0 0.0% 0.0% 0.0 0.0
Accounts Receivable, Gross (3)
US 10.6 65.0% 85.0% 6.9 9.0
Non-US 3.1 45.0% 65.0% 1.4 2.0
Inventories, Gross (4)
US
Finished Goods 9.6 95.0% 100.0% 9.1 9.6
Work in Process 40.8 10.0% 20.0% 4.1 8.2
Raw Materials 2.0 5.0% 10.0% 0.1 0.2
Non-US
Finished Goods 0.4 65.0% 75.0% 0.3 0.3
Work in Process 4.0 10.0% 20.0% 0.4 0.8
Raw Materials 2.7 5.0% 10.0% 0.1 0.3
Equipment (Gross Value) (5) 60.1 22.5% 23.7% 13.5 14.2
Real Estate (Gross Value) - Non-US (6) 2.1 88.9% 109.6% 1.9 2.3
Gross Estimated Liquidation Proceeds from A/R, Inventory and Fixed Assets $37.8 $46.9
Intellectual Property (7) 31.1 72.7
Gross Estimated Liquidation Proceeds $68.9 $119.7
Less: Fees and Expenses (8) (3.1) (5.6)
Net Estimated Liquidation Proceeds (9) $65.9 $114.1
Low High
Chapter 7 Trustee Fees and Expenses (10) $2.1 $3.6
Chapter 7 Professional Fees and Expenses (11) 0.5 1.0
Employee Expenses/Wind-down Costs (12) 0.5 1.0
Total Fees and Expenses $3.1 $5.6
Case 15-11296-LSS Doc 688-2 Filed 11/11/15 Page 2 of 4
B-2
Distribution Analysis
Notes:
Existing West Hartford lease with NPA Hartford expires January 2016 and may need to be extended to enable an
orderly liquidation.
The Committee has contended throughout these Chapter 11 Cases that the Debtors assets may include certain claims
and causes of action against the Sciens Group (See, Section IV.M of the Disclosure Statement for the views of the
Committee with respect to such claims). The Debtors, on the other hand, do not believe that such claims have merit,
and, as a result, have not included the potential value of such claims in its liquidation analysis (See, Section IV.M of the
Disclosure Statement for the views of the Debtors and Sciens with respect to such claims).
Low Liquidation Value High Liquidation Value Remaining Value (A/R, Inv, FA)
Gross Estimated Liquidation Proceeds from A/R, Inventory and Fixed Assets $37.8 $46.9
Less: Fees and Expenses Allocated (13) (1.7) (2.2)
Net Estimated Liquidation Proceeds from Cash, A/R, Inventory and Fixed Assets $36.1 $44.7
DIP Senior Loan Holder Claims (14) $46.5 $46.5
Recovery Amount from 1st Lien on A/R, Inventory and Fixed Assets 36.1 44.7
Recovery Amount from 2nd Lien on Intellectual Property 0.0 1.8
DIP Senior Loan Holder Recovery Amount $36.1 $46.5
% of Claims 77.7% 100.0%
Liquidation Proceeds Remaining from A/R, Inventory and Fixed Assets $0.0 $0.0
Gross Estimated Liquidation Proceeds from Intellectual Property $31.1 $72.7
Less: Fees and Expenses Allocated (13) (1.4) (3.4)
Net Estimated Liquidation Proceeds from Intellectual Property $29.7 $69.3
DIP Term Loan Holder Claims (15) $34.3 $34.3
Recovery Amount from 1st Lien on Intellectual Property 29.7 34.3
Recovery Amount from 2nd Lien on A/R, Inventory and Fixed Assets 0.0 0.0
DIP Term Loan Holder Recovery Amount $29.7 $34.3
% of Claims 86.6% 100.0%
Remaining Net Estimated Liquidation Proceeds $0.0 $33.2
Prepetition Term Loan Holder Claims (16) $64.4 $64.4
Prepetition Term Loan Holder Recovery Amount $0.0 $33.2
% of Claims 0.0% 51.6%
Administrative Claims (17) $17.2 $17.2
Administrative Recovery Amount $0.0 $0.0
% of Claims 0.0% 0.0%
Senior Notes Claims (18) $262.7 $262.7
Senior Notes Recovery Amount $0.0 $0.0
% of Claims 0.0% 0.0%
Other General Unsecured Claims (estimate) (19) $25.3 $63.9
(pari passu to Senior Notes Claims)
Other General Unsecured Claims Recovery Amount $0.0 $0.0
% of Claims 0.0% 0.0%
Case 15-11296-LSS Doc 688-2 Filed 11/11/15 Page 3 of 4
B-3
NOTES TO LIQUIDATION ANALYSIS
No. Item Notes 1 Cash and Equivalents
(Unrestricted)
100% realization expected on the book value for unrestricted cash and liquid investments with
maturities of three months or less on Colt’s balance sheet estimated as of 12/31/2015. Based
on projected operating losses, unrestricted cash balance is estimated to be $0mm on the
Effective Date
2 Cash and Equivalents
(Restricted for LCs)
Represents letters of credit covered by restricted cash on Colt’s balance sheet as of
12/31/2015. Estimated recoveries are based on management estimates
3 Accounts Receivable,
Gross
Estimated proceeds realizable from short-term and long-term accounts receivable are based
on management's assessment of the ability of the Debtors to collect on their accounts, taking
into consideration the credit quality and aging of the accounts. The Liquidation Analysis for
accounts receivable is based on estimated recoveries of aging receivables using a declining
scale of recoveries. These estimates take into account the inevitable difficulty in collecting
receivables and any concessions that might be required to facilitate the collection of certain
accounts receivable
4 Inventory, Gross Estimated inventory recoveries are based on the stage of production and geography per
management estimates
5 Equipment Equipment includes production equipment, production support, material handling, titled
vehicles, test & measurement and general plant support. The hypothetical recovery rates
across all equipment classes was based on recovery rates for gross book values (recovery rates
based on Hilco appraisal dated September 26, 2013)
6 Real Estate Estimated recoveries on real estate assets are based on management’s assessment of recovery
rates for gross book values (recovery rates based on CBRE appraisal dated November 20,
2013)
7 Intellectual Property Intellectual Property includes the sum of trademarks, intellectual property and other
intangibles. The recovery values are based on the Hilco appraisal dated December 1, 2014
8 Fees and Expenses All fees and expenses associated with Chapter 7 liquidation process
9 Net Estimated
Liquidation Proceeds
Net proceeds available from the Chapter 7 liquidation process that would be applied to satisfy
the claims of the Current Asset Credit Facility, Term Loan and Senior Unsecured Noteholders
10 Chapter 7 Trustee
Fees and Expenses
Compensation for the Chapter 7 trustee will be limited to fee guidelines in section 326(a) of
the Bankruptcy Code. The Debtors’ management has assumed trustee fees of 3% of the gross
proceeds (excluding cash) in the liquidation
11 Chapter 7
Professional Fees and
Expenses
Represents compensation for the Chapter 7 trustee's counsel and other legal, financial and
professional services during the Chapter 7 case
12 Employee
Expenses/Wind-
down Costs
Wind-down costs are based on management’s best estimates of the costs associated with an
orderly liquidation. Corporate payroll and operating costs during liquidation are based on the
assumption that certain functions would be required during the liquidation process in order for
an orderly wind-down of the business and the plants. Costs would include costs associated
with shutting down the production lines as well as salaries of certain operating and
maintenance employees, severance and bonus pay that would be incurred during a Chapter 7
liquidation
13 Fees and Expenses
Allocated
All fees and expenses are allocated on a pro rata basis of the gross proceeds (excluding cash)
14 DIP Senior Loan
Holder Claims
Represents the sum of the DIP Senior Loan ($9.77mm), the rolled up Current Asset Credit
Facility ($35.0mm) and legal counsel estimated fees ($1.75mm)
15 DIP Term Loan
Holder Claims
Represents the sum of the DIP Term Loan ($13.39mm), the accreted value of the rolled up
Senior Secured Term Loan through December 31, 2015 ($20.5mm) and legal counsel
estimated fees ($0.5mm)
16 Prepetition Term
Loan Holder Claims
Represents the sum of the accreted value of the outstanding Prepetition Term Loan through
December 31, 2015 ($54.0mm) and $10.3mm of make whole payment/ repayment fee
through December 2015
17 Administrative
Claims
Represents the sum of all the Administrative Expense Claims filed with respect to the case (as
defined in the Plan of Reorganization) estimated to be $17.2mm
18 Senior Notes Claims Represents the principal value of 2017 Senior Unsecured Notes of $250mm and accrued
interest of $12.7mm
19 Other General
Unsecured Claims
Represents estimates related to claims, pension, retiree medical, severance, environmental
remediation and other real estate costs that would be borne by the estate
Case 15-11296-LSS Doc 688-2 Filed 11/11/15 Page 4 of 4