OOOF! Take a look at the terms of this COLT note: LIBOR PLUS 9.75% and it SOLD AT A $2.3 Million DISCOUNT... That my friends is not typical of a healthy company
On July 12, 2013, in connection with the Merger, we 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 3-month LIBOR rate or 1%. Interest is payable quarterly in arrears on the first day of the subsequent calendar quarter. Under the Term Loan, our obligations are secured by a first priority security interest in our intellectual property and a second priority security interest in substantially all other assets. The Term Loan was issued at a discount of $2.3 million from its principal value of $50.0 million. We also incurred $2.0 million in financing fees. The discount and the financing fees are being amortized as additional interest expense over the life of the indebtedness. Principal repayments, which are due quarterly on the last day of each calendar quarter, are as follows ($ in thousands):
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 debt covenants as of December 31, 2013 and we monitor our future compliance based on current and anticipated financial results. 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.
March 2014 quarterly sales off 26% from March 2013.
March 2014 sales $50,080
March 2014 Net loss $7,828
March 2013 sales $63,849
March 2013 Net income $5,070
The company also reports about $260 million in NEGATIVE TANGIBLE EQUITY. The company is controlled by an equity fund... Several directors/officers have left the company in recent months. Colt might be lining itself up for a breach of covenants soon, as its debt coverage is getting thin. Thank god for rolling 12 month covenants! Colt might have to go into the tank (bankruptcy) to clean off the debt. At this point, its debts far exceed any takeout valuation, so a BK might be the answer. Some lucky bidder will take the assets in 363 sale.
Who gets the spoils? Colt likely has some ancient manufacturing techniques and equipment, so there may be an opportunity for a technologically savvy company like SWHC to make vast improvements. Colt, like smith, is on the upper end of the AR market. However, SWHC might have to install an electric motor in CT to replace the water driven apparatus.
I don't follow atk very much. Buying Savage and buying Bushnell are two totally separate animals. Atk production/testing facilities are huge with all the machining equipment you can think of. If atk really wanted to get into the firearms segment, they would not "have" to buy an existing company. They are fully capable of engineering, testing, and manufacturing their own product. Bushnell was an acquisition in optics, perhaps an area of engineering atk was looking to better establish or was lacking in. Savage has been around for a long time, but over the past 10 years they have made a big push from a mediocre firearm to much higher quality ones. Sub MOA right out of the box on a $500 rifle is very impressive. The tack driving affect of a $1500 Weatherby at 1/3 the cost is eye catching to many consumers. Remington rifles have a great reputation and are very reliable, but I feel like Remington puts much more innovation into their shotguns ie the Versa Max. If I were to go rifle shopping today, Remington is an option, but is definitely not a priority. Shotgun shopping would have Remington at the top of my list.
On a Smith note pertaining to the $150 million in cash currently on hand, an acquisition of a rifle manufacturer would bring much lower margin to the table. Smith may be better off fighting for a military contract with low margin rather than acquiring a rifle manufacturer with potentially lower margin. Savage and Remington are private so I have no numbers to evaluate what they might be worth besides some educated guessing. If Smith's inventory is around 90 million carrying a market value for the entire company somewhere close to market cap, both Savage and Remington are presumed to have much higher inventory levels which would likely value them equal to or greater than what Smith is worth. So $150 million to acquire Savage or Remington is nowhere close to what would be needed using inventory as a gauge.
The Milwaukee - Wisconsin Journal Sentinel has an article dated Nov. 27, 2012 you should read that might give you some insight as to why Smith was convicted. If the account is true, it appears Smith executed the girl AFTER he shot her several times with a rifle. No castle doctrine in the country supports execution and that's what apparently took place in this instance.
Is it smart for atk to own firearms manufacturing and an ancilliary products business?
I speak directly to bushnell division. Bushnell products go on any rifle, and until atks acquisition of bushnell, competing manufacturers may have been more inclined to form association with atk. Now, they are feeding a competitor in savage. So, should a firearms company go horizontal? Should atk bust out savage?
Should atk stick to bullets and riflescopes?
When will we experience the second coming of Dat?
Buyback is about over...maybe $20 million left in authorization.....
Maybe they are going to buy........savage? Remington?
Swhc has developed a knack for marketing,,, they are being copied in certain situations.
Something meaningful is coming up.
yep... the funds are loading back up. They know an acquisition is on the way, and revenues will be $700 million in 2015
That remains a concern. But it seems that the army wants to move forward. These systems do not come on online for several years, so you have to think ahead to World War III
It's hard for me to imagine the military spending any significant money on a marginally better service pistol while at the same time they are cutting manpower due to budget pressures. Make no sense at all. And didn't I also read that the army has an order in for a new batch of M9s right now?
How can such a good company be such a loser? this thing has gone down like a rock in spite of a good market. Is there any hope? I t finds a new low each day.
IMO 40 is the best trade-off between hitting power, recoil, weight, magazine capacity, etc. The logical thing to do beyond that would be to offer the 9mm for women to use, but the deciders would have to overcome the political hurdles caused by the suggestion that men and women might actually be different in that regard.
The M9 9mm pistol has been with the Army since the Cold War, but now it’s looking for something better. On July 29, the service will open its doors to gun makers to figure out how to make it happen.
The Army has been working with the small arms industry for the past five years, and now it is on the cusp of making the Modular Handgun System (MHS) a reality. The new handgun will replace its current inventory of 200,000 M9 pistols.
“It’s a total system replacement — new gun, new ammo, new holster, everything,” Daryl Easlick, a project officer with the Army’s Maneuver Center of Excellence at Fort Benning, Georgia, told Fox News Thursday. “The 9mm doesn’t score high with soldier feedback. … We have to do better than our current 9mm.”
Soldiers say that the problem with the M9 is that it simply isn’t capable of doing the kind of damage needed in combat environment.
The Army plans on evaluating rounds such as .357 Sig, .40 S&W and .45 ACP during its elimination process, Fox News reported. If its competition goes according to plan, 400,000 new pistols will be purchased.