STURM RUGER & CO INC

Previous wording

Sturm, Ruger & Company, Inc. (the “Company”) is principally engaged in the design, manufacture, and sale of firearms to domestic customers. Approximately 99% of sales are from firearms. Export sales accounted for approximately 5% and 7% of total sales for the three month periods ended March 30, 2024 and April 1, 2023, respectively. The Company’s design and manufacturing operations are located in the United States and almost all product content is domestic. The Company’s firearms are sold through a select number of independent wholesale distributors, principally to the commercial sporting market.

Current wording

Sturm, Ruger & Company, Inc. (the “Company”) is principally engaged in the design, manufacture, and sale of firearms to domestic customers. Approximately 99% of sales are from firearms. Export sales accounted for approximately 5% and 7% of total sales for the six month periods ended June 29, 2024 and July 1, 2023, respectively. The Company’s design and manufacturing operations are located in the United States and almost all product content is domestic. The Company’s firearms are sold through a select number of independent wholesale distributors, principally to the commercial sporting market.

Previous wording

The estimated unit sell-through of the Company’s products from the independent distributors to retailers increased 1% in the first quarter months of 2024 compared to the prior year period. For the same period, National Instant Criminal Background Check System (“NICS”) background checks (as adjusted by the National Shooting Sports Foundation (“NSSF”)) decreased 4%. Estimated sell-through from the independent distributors to retailers and total adjusted NICS background checks for the trailing five quarters follow:

Current wording

The estimated unit sell-through of the Company’s products from the independent distributors to retailers increased 1% in the first half of 2024 compared to the prior year period. For the same period, National Instant Criminal Background Check System (“NICS”) background checks (as adjusted by the National Shooting Sports Foundation (“NSSF”)) decreased 6%. Estimated sell-through from the independent distributors to retailers and total adjusted NICS background checks for the trailing six quarters follow:

Previous wording

The units ordered, value of orders received, average sales price of units ordered, and ending backlog for the trailing five quarters are as follows (dollars in millions, except average sales price):

Current wording

The units ordered, value of orders received, average sales price of units ordered, and ending backlog for the trailing six quarters are as follows (dollars in millions, except average sales price):

Previous wording

The Company reviews the estimated sell-through from the independent distributors to retailers, as well as inventory levels at the independent distributors and at the Company to plan production levels. Consequently, the Company’s overall production in the first quarter of 2024 increased 3% from the fourth quarter of 2023*.*

Current wording

The Company reviews the estimated sell-through from the independent distributors to retailers, as well as inventory levels at the independent distributors and at the Company to plan production levels. Consequently, the Company’s overall production in the second quarter of 2024 increased 18% from the first quarter of 2024*.*

Previous wording

Firearms unit data for the trailing five quarters are as follows (dollar amounts shown are net of Federal Excise Tax of 10% for handguns and 11% for long guns):

Current wording

Firearms unit data for the trailing six quarters are as follows (dollar amounts shown are net of Federal Excise Tax of 10% for handguns and 11% for long guns):

Previous wording

During the first quarter of 2024, the Company’s finished goods inventory decreased by 30,900 units and distributor inventories of the Company’s products decreased by 51,300 units.

Current wording

During the first half of 2024, the Company’s finished goods inventory increased by 3,200 units and distributor inventories of the Company’s products decreased by 42,800 units.

Previous wording

Inventory unit data for the trailing five quarters follows:

Current wording

Inventory unit data for the trailing six quarters follows:

Previous wording

Sales of new products, including the Security-380 pistol, Super Wrangler revolver, Marlin lever-action rifles, LC Carbine, Small-Frame Autoloading Rifle, and American Centerfire Rifle Generation II represented $41.8 million or 32.0% of firearm sales in the three months ended March 30, 2024. New product sales include only major new products that were introduced in the past two years.

Current wording

The decrease in total consolidated net sales and net firearms sales for the three months ended June 29, 2024 is attributable to decreased consumer demand for firearms. Sales of new products, including the Security-380 pistol, Super Wrangler revolver, Marlin lever-action rifles, LC Carbine, Small-Frame Autoloading Rifle, and American Centerfire Rifle Generation II represented $37.9 million or 30.6% of firearm sales in the three months ended June 29, 2024. New product sales include only major new products that were introduced in the past two years.

Previous wording

The decreased gross profit for the three months ended March 30, 2024 is attributable to the decrease in sales, a product mix shift toward products with relatively lower margins that remain in relatively stronger demand, unfavorable deleveraging of fixed costs resulting from decreased production, and inflationary cost increases in materials, commodities, services, wages, energy, fuel and transportation.

Current wording

The decreased gross profit for the three months ended June 29, 2024 is attributable to unfavorable deleveraging of fixed costs resulting from decreased production, a product mix shift toward products with relatively lower margins that remain in relatively stronger demand, and the decrease in sales.

Previous wording

The decrease in gross margin for the three months ended March 30, 2024 is attributable the aforementioned factors, partially offset by increased pricing.

Current wording

The decrease in gross margin for the three months ended June 29, 2024 is attributable to the aforementioned factors, partially offset by increased pricing.

Previous wording

The increase in selling expenses for the three months ended March 30, 2024 was primarily attributable to increases in shipping costs and increased advertising and promotional activity.

Current wording

The increase in general, and administrative expenses for the three months ended June 29, 2024 was primarily attributable to increased professional service costs.

Previous wording

The decrease in general, and administrative expenses for the three months ended March 30, 2024 was primarily attributable to decreased professional service costs and decreased incentive compensation, offset by accrued severance expense of $1.5 million related to a reduction in force that involved about 80 employees. The accrued severances are expected to be settled in cash and consist of one-time termination charges arising from severance obligations and other customary employee benefit payments in connection with a reduction in force.

Current wording

The increase in general, and administrative expenses for the six months ended June 29, 2024 was primarily attributable to accrued severances of $1.5 million taken in the first quarter of 2024 related to a reduction in force involving approximately 80 employees, largely offset by decreased incentive compensation expenses. The aforementioned accrued severances are expected to be settled in cash and consist of one-time termination charges arising from severance obligations and other customary employee benefit payments in connection with a reduction in force.

Previous wording

The reduction in force is expected to result in approximately $9 million of annualized cash savings. This action is part of the Company’s initiatives to reallocate its resources and cost structure into prioritized areas that will drive long-term growth and improve margins. As the Company focuses on these goals, it will continue to pursue opportunities to consolidate functions and reduce or eliminate investment in areas of lower focus.

Current wording

The reduction in force is expected to result in approximately $9 million of annualized cash savings. This action is part of the Company’s initiatives to reallocate its resources and cost structure into prioritized areas that will drive long-term growth and improve margins. As the Company focuses on these goals, it will continue to pursue opportunities to reduce or eliminate investment in areas of lower focus.

Previous wording

Other income for the three months ended March 30, 2024 was essentially unchanged as increases in interest income were offset by decreased royalty and miscellaneous income.

Current wording

The decrease in other income for the three months ended June 29, 2024 was attributable to decreased interest income and miscellaneous income.

Previous wording

The Company's 2024 and 2023 effective tax rates differ from the statutory federal tax rate due principally to research and development tax credits, state income taxes and the nondeductibility of certain executive compensation. The Company’s effective income tax rate was 21.7% for the three months ended March 30, 2024, a decrease from 22.4% for the three months ended April 1, 2023.

Current wording

The Company's 2024 and 2023 effective tax rates differ from the statutory federal tax rate due principally to research and development tax credits, state income taxes and the nondeductibility of certain executive compensation. The Company’s effective income tax rate was 21.0% and 21.3% for the three and six months ended June 29, 2024, respectively. The Company’s effective income tax rate was 20.0% and 21.1% for the three and six months ended July 1, 2023, respectively.

Previous wording

At the end of the first quarter of 2024, the Company’s cash and short-term investments totaled $115.3 million. Pre-LIFO working capital of $274.1 million, less the LIFO reserve of $65.6 million, resulted in working capital of $208.5 million and a current ratio of 5.2 to 1.

Current wording

At the end of the second quarter of 2024, the Company’s cash and short-term investments totaled $105.6 million. Pre-LIFO working capital of $266.8 million, less the LIFO reserve of $66.9 million, resulted in working capital of $199.9 million and a current ratio of 4.8 to 1.

Previous wording

Cash provided by operating activities was $7.3 million for the three months ended March 30, 2024, compared to $5.3 million for the comparable prior year period. The increase in cash provided in the three months ended March 30, 2024 is primarily attributable to the decrease in inventory and the decrease in prepaid expenses and other assets in the three months ended March 30, 2024, partially offset by the decrease in net income and the increase in accounts receivable in the three months ended March 30, 2024.

Current wording

Cash provided by operating activities was $26.1 million for the six months ended June 29, 2024, compared to $21.8 million for the comparable prior year period. The increase in cash provided in the six months ended June 29, 2024 is primarily attributable to decreases in inventory and prepaid expenses and other assets in the six months ended June 29, 2024, partially offset by the decrease in net income in the six months ended June 29, 2024.

Previous wording

Capital expenditures for the three months ended March 30, 2024 totaled $1.8 million, an increase from $1.7 million in the comparable prior year period. In 2024, the Company expects capital expenditures related to new product introductions and upgrades to our manufacturing equipment and facilities to total approximately $15 million. Due to market conditions and business circumstances, actual capital expenditures could vary significantly from the projected amount. The Company finances, and intends to continue to finance, all of these activities with funds provided by operations and current cash and cash equivalents.

Current wording

Capital expenditures for the six months ended June 29, 2024 totaled $10.4 million, an increase from $4.9 million in the comparable prior year period. In 2024, the Company expects capital expenditures related to new product introductions and upgrades to our manufacturing equipment and facilities to total approximately $20 million. Due to market conditions and business circumstances, actual capital expenditures could vary significantly from the projected amount. The Company finances, and intends to continue to finance, all of these activities with funds provided by operations and current cash and cash equivalents.

Previous wording

Dividends of $4.1 million were paid during the three months ended March 30, 2024. The Company has financed its dividends with cash provided by operations and current cash. The quarterly dividend varies every quarter because the Company pays a percentage of earnings rather than a fixed amount per share. The Company’s practice is to pay a dividend of approximately 40% of net income.

Current wording

Dividends of $6.7 million were paid during the six months ended June 29, 2024. The Company has financed its dividends with cash provided by operations and current cash. The quarterly dividend varies every quarter because the Company pays a percentage of earnings rather than a fixed amount per share. The Company’s practice is to pay a dividend of approximately 40% of net income.

Previous wording

On April 26, 2024, the Company’s Board of Directors authorized a dividend of 16¢ per share to shareholders of record on May 20, 2024, payable on June 7, 2024. The payment of future dividends depends on many factors, including internal estimates of future performance, then-current cash and short-term investments, and the Company’s need for funds.

Current wording

On July 26, 2024, the Company’s Board of Directors authorized a dividend of 19¢ per share to shareholders of record on August 15, 2024, payable on August 30, 2024. The payment of future dividends depends on many factors, including internal estimates of future performance, then-current cash and short-term investments, and the Company’s need for funds.

Previous wording

As of March 30, 2024, the Company had $75.3 million of United States Treasury instruments which mature within one year. The Company also invests available cash in a bank-managed money market fund that invests exclusively in United States Treasury instruments which mature within one year. At March 30, 2024, the Company’s investment in this money market fund totaled $24.2 million.

Current wording

As of June 29, 2024, the Company had $76.4 million of United States Treasury instruments which mature within one year. The Company also invests available cash in a bank-managed money market fund that invests exclusively in United States Treasury instruments which mature within one year. At June 29, 2024, the Company’s investment in this money market fund totaled $22.1 million.

Previous wording

During the three months ended March 30, 2024 the Company purchased 75,024 shares of its common stock for $3.2 million in the open market. The average price per share purchased was $42.89. These purchases were funded with cash on hand. As of March 30, 2024, $71.5 million remained authorized for future stock repurchases.

Current wording

During the six months ended June 29, 2024 the Company purchased 477,917 shares of its common stock for $20.3 million in the open market. The average price per share purchased was $42.41. These purchases were funded with cash on hand. As of June 29, 2024, $54.4 million remained authorized for future stock repurchases.