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 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.

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 nine month periods ended September 28, 2024 and September 30, 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 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:

Current wording

The estimated unit sell-through of the Company’s products from the independent distributors to retailers increased 4% in the first nine 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 3%. Estimated sell-through from the independent distributors to retailers and total adjusted NICS background checks for the trailing seven quarters follow:

Previous 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):

Current wording

The units ordered, value of orders received, average sales price of units ordered, and ending backlog for the trailing seven 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 second quarter of 2024 increased 18% from the first quarter of 2024*.*

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. The Company’s overall production in the third quarter of 2024 decreased 11% from the second quarter of 2024*.*

Previous 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):

Current wording

Firearms unit data for the trailing seven 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 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.

Current wording

During the third quarter of 2024, the Company’s finished goods inventory increased by 2,900 units and distributor inventories of the Company’s products decreased by 8,900 units.

Previous wording

Inventory unit data for the trailing six quarters follows:

Current wording

Inventory unit data for the trailing seven quarters follows:

Previous 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.

Current wording

The increase in total consolidated net sales and net firearms sales for the three months ended September 28, 2024 is attributable to strong demand for certain of the Commpany’s 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 $35.5 million or 31.0% of firearm sales in the three months ended September 28, 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 six 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.

Current wording

The decreased gross profit for the three months ended September 28, 2024 is attributable to unfavorable deleveraging of fixed costs resulting from decreased production and a product mix shift toward products with relatively lower margins that remain in relatively stronger demand.

Previous wording

Net sales, cost of products sold, and gross profit data for the six months ended (dollars in millions):

Current wording

Net sales, cost of products sold, and gross profit data for the nine months ended (dollars in millions):

Previous wording

The decrease in total consolidated net sales and net firearms sales for the six 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 $79.7 million or 31.3% of firearm sales in the first half of 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 nine months ended September 28, 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 $113.3 million or 31.2% of firearm sales in the first nine months of 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 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.

Current wording

The decreased gross profit for the nine months ended September 28, 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 selling expenses for the three months ended June 29, 2024 was attributable to modest reductions in several selling and marketing initiatives.

Current wording

The increase in selling expenses for the three months ended September 28, 2024 was attributable to increased spending on advertising, partially offset by modest reductions in several selling and marketing initiatives.

Previous wording

Selling and general and administrative expenses data for the six months ended (dollars in millions):

Current wording

Selling and general and administrative expenses data for the nine months ended (dollars in millions):

Previous 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.

Current wording

The increase in general and administrative expenses for the nine months ended September 28, 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, partially 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 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.

Previous wording

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

Current wording

The decrease in other income for the three months ended September 28, 2024 was attributable to decreased interest income.

Previous wording

Other income data for the six months ended (dollars in millions):

Current wording

Other income data for the nine months ended (dollars in millions):

Previous wording

The decrease in other income for the six months ended June 29, 2024 was the result of decreases in interest income and miscellaneous income.

Current wording

The decrease in other income for the nine months ended September 28, 2024 was the result of decreases in 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 21.0% 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.

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 10.0% and 18.9% for the three and nine months ended September 28, 2024, respectively. The Company’s effective income tax rate was 8.1% and 18.9% for the three and nine months ended September 30, 2023, respectively.

Previous wording

As a result of the foregoing factors, consolidated net income was $8.3 million for the three months ended June 29, 2024, a decrease of 48.9% from $16.2 million in the comparable prior year period.

Current wording

As a result of the foregoing factors, consolidated net income was $4.7 million for the three months ended September 28, 2024, a decrease of 36.2% from $7.4 million in the comparable prior year period.

Previous wording

Consolidated net income was $15.3 million for the six months ended June 29, 2024, a decrease of 49.7% from $30.5 million in the comparable prior year period.

Current wording

Consolidated net income was $20.1 million for the nine months ended September 28, 2024, a decrease of 47.1% from $38.0 million in the comparable prior year period.

Previous wording

For the six months ended June 29, 2024 EBITDA was $28.0 million, a decrease of 43.0% from $49.1 million in the comparable prior year period.

Current wording

For the nine months ended September 28, 2024 EBITDA was $37.9 million, a decrease of 39.2% from $62.4 million in the comparable prior year period.

Previous 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.

Current wording

At the end of the third quarter of 2024, the Company’s cash and short-term investments totaled $96.0 million. Pre-LIFO working capital of $260.4 million, less the LIFO reserve of $68.3 million, resulted in working capital of $192.1 million and a current ratio of 4.5 to 1.

Previous 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.

Current wording

Cash provided by operating activities was $35.5 million for the nine months ended September 28, 2024, compared to $1.3 million for the comparable prior year period. The increase in cash provided in the nine months ended September 28, 2024 is primarily attributable to decreases in inventory and prepaid expenses and other assets in the nine months ended September 28, 2024, partially offset by the decrease in net income in the nine months ended September 28, 2024.

Previous 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.

Current wording

Capital expenditures for the nine months ended September 28, 2024 totaled $17.2 million, an increase from $11.6 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. Actual capital expenditures could vary significantly from the projected amount due to the timing of capital projects. 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 $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.

Current wording

Dividends of $10.0 million were paid during the nine months ended September 28, 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 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.

Current wording

On October 25, 2024, the Company’s Board of Directors authorized a dividend of 11¢ per share to shareholders of record on November 13, 2024, payable on November 27, 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 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.

Current wording

As of September 28, 2024, the Company had $61.5 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 September 28, 2024, the Company’s investment in this money market fund totaled $27.0 million.

Previous 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.

Current wording

During the nine months ended September 28, 2024 the Company purchased 698,759 shares of its common stock for $29.3 million in the open market. The average price per share purchased was $41.99. These purchases were funded with cash on hand. As of September 28, 2024, $45.3 million remained authorized for future stock repurchases.

Previous wording

The Company self-insures a significant amount of its product liability, workers’ compensation, medical, and other insurance. It also carries significant deductible amounts on various insurance policies.

Current wording

The Company self-insures a significant amount of its product liability, workers’ compensation, medical, and other insurance. It also carries significant deductible amounts on various insurance policies. In September 2024, the Company did not renew its product liability coverage with its incumbent carriers and established a wholly-owned captive insurance company for claims made on or after September 1, 2024.