What changed in this filing

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Item 1. Financial Statements

2021-08-04 compared with 2021-05-05 · 120 added, 122 removed, 475 unchanged (34% of the section changed)

3 unchanged sentences

(Dollars in thousands)

April 3, 2021

December 31, 2020

17 unchanged sentences

(Dollars in thousands, except per share data)

April 3, 2021

December 31, 2020

36 unchanged sentences

Three Months Ended

April 3, 2021

March 28, 2020

Six Months Ended

June 27, 2020

Net firearms sales

31 unchanged sentences

Recognition of stock-based compensation expense

Balance at April 3, 2021

Balance at July 3, 2021

See notes to condensed consolidated financial statements.

2 unchanged sentences

(Dollars in thousands)

Three Months Ended

April 3, 2021

March 28, 2020

Six Months Ended

June 27, 2020

Operating Activities

2 unchanged sentences

Stock-based compensation

(Gain) loss on sale of assets

Gain on sale of assets

Deferred income taxes

18 unchanged sentences

Cash used for financing activities

Increase in cash and cash equivalents

Increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

9 unchanged sentences

In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation of the results of the interim periods.

Operating results for the three months ended April 3, 2021 may not be indicative of the results to be expected for the full year ending December 31, 2021.

Operating results for the six months ended July 3, 2021 may not be indicative of the results to be expected for the full year ending December 31, 2021.

These financial statements have been prepared on a basis that is substantially consistent with the accounting principles applied in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

19 unchanged sentences

In some instances, sales include multiple performance obligations.

The most common of these instances relates to sales promotion programs under which downstream customers are entitled to receive no charge products based on their purchases of certain of the Company’s products from the independent distributors.

The most common of these instances relates to sales

promotion programs under which downstream customers are entitled to receive no charge products based on their purchases of certain of the Company’s products from the independent distributors.

The fulfillment of these no charge products is the Company’s responsibility.

13 unchanged sentences

During the measurement period, not to exceed one year from the date of acquisition, the Company may record adjustments to the estimated fair values of the assets acquired and liabilities assumed with a corresponding adjustment to goodwill in the period in which such revised estimates are identified.

No such adjustments were recorded in the three months ended April 3, 2021.

No such adjustments were recorded in the three and six months ended July 3, 2021.

Use of Estimates:

5 unchanged sentences

REVENUE RECOGNITION AND CONTRACTS WITH CUSTOMERS

The impact of ASC 606 on revenue recognized during the three months ended April 3, 2021 and March 28, 2020 is as follows:

The impact of ASC 606 on revenue recognized during the three and six months ended July 3, 2021 and June 27, 2020 is as follows:

Three Months Ended

April 3, 2021

March 28, 2020

Six Months Ended

Contract liabilities with customers at beginning of period

3 unchanged sentences

As more fully described in the Revenue Recognition section of Note 2, the deferral of revenue and subsequent recognition thereof relates to certain of the Company’s sales promotion programs that include the future shipment of free products.

The Company was not responsible for the shipment of any free products arising from such sales promotion programs as of April 3, 2021.

The Company was not responsible for the shipment of any free products arising from such sales promotion programs as of July 3, 2021.

Practical Expedients and Exemptions

5 unchanged sentences

Because these are subject to many factors beyond management's control, interim results are subject to the final year-end LIFO inventory valuation.

During the three month period ended April 3, 2021, inventory quantities were reduced.

If this reduction remains through year-end, it will result in a liquidation of LIFO inventory quantities carried at lower costs prevailing in prior years as compared with the current cost of purchases.

Although the effect of such a liquidation cannot be precisely quantified at the present time, management believes that if a LIFO liquidation occurs in 2021, the impact may be material to the Company’s results of operations for the period but will not have a material impact on the financial position of the Company.

Inventories consist of the following:

April 3, 2021

December 31, 2020

11 unchanged sentences

Under the provisions of ASU 2016-02, the Company records right-of-use assets equal to the present value of the contractual liability for future lease payments.

The table below presents the right-of-use assets and related lease liabilities recognized on the Condensed Consolidated Balance Sheet as of April 3, 2021:

The table below presents the right-of-use assets and related lease liabilities recognized on the Condensed Consolidated Balance Sheet as of July 3, 2021:

Balance Sheet Line Item

April 3, 2021

Right-of-use assets

7 unchanged sentences

The Company’s leases generally do not provide an implicit interest rate, and therefore the Company calculates an incremental borrowing rate to determine the present value of its operating lease liabilities.

The following table reconciles the undiscounted future minimum lease payments to the total operating lease liabilities recognized on the Condensed Consolidated Balance Sheet as of April 3, 2021:

The following table reconciles the undiscounted future minimum lease payments to the total operating lease liabilities recognized on the Condensed Consolidated Balance Sheet as of July 3, 2021:

Remainder of 2021

4 unchanged sentences

The Company does not recognize right-of-use assets or lease liabilities for leases of one year or less or for renewal periods unless it is reasonably certain that the Company will exercise the renewal option at the inception of the lease or when a triggering event occurs.

The Company’s weighted average remaining lease term for operating leases as of April 3, 2021 is 11.61 years.

The Company’s weighted average remaining lease term for operating leases as of July 3, 2021 is 11.36 years.

NOTE 6 —

1 unchanged sentence

The Company has a $ 40 million revolving line of credit with a bank.

This facility is renewable annually and terminates on September 30, 2021 .

Borrowings under this facility bear interest at the one-month LIBOR rate ( 0.11 % at April 3, 2021) plus 150 basis points.

This facility terminates on September 30, 2021 .

Borrowings under this facility bear interest at the one-month LIBOR rate ( 0.10 % at July 3, 2021) plus 150 basis points.

The Company is charged one-quarter of a percent ( 0.25 %) per year on the unused portion.

The facility includes certain terms and covenants, including the requirement that the Company to maintain a minimum earnings before interest, taxes, depreciation and amortization (EBITDA) for the preceding four quarters in any quarter that the Company draws on the line of credit.

The facility includes certain terms and covenants, including the requirement that the Company maintain a minimum earnings before interest, taxes, depreciation and amortization (EBITDA) for the preceding four quarters in any quarter that the Company draws on the line of credit.

During the first quarter of 2020, the Company made a $ 1 million draw from the facility while it was not in compliance with this covenant.

1 unchanged sentence

The Company notified the lender and was granted a waiver on June 30, 2020.

At April 3, 2021 and December 31, 2020, the Company was in compliance with the terms and covenants of the credit facility.

At April 3, 2021, there was no outstanding balance on the line of credit.

At July 3, 2021 and December 31, 2020, the Company was in compliance with the terms and covenants of the credit facility.

At July 3, 2021, there was no outstanding balance on the line of credit.

NOTE 7 —

2 unchanged sentences

The Company matches a certain portion of employee contributions using the safe harbor guidelines contained in the Internal Revenue Code.

Expenses related to these matching contributions totaled $ 1.3 million for the three months ended April 3, 2021, and $ 0.9 million for the three months ended March 28, 2020.

Expenses related to these matching contributions totaled $ 0.9 million and $ 2.2 million for the three and six months ended July 3, 2021, respectively, and $ 0.8 million and $ 1.7 million for the three and six months ended June 27, 2020, respectively.

The Company plans to contribute approximately $ 1.8 million to the plan in matching employee contributions during the remainder of 2021.

In addition, the Company provided supplemental discretionary contributions to the 401(k) plan totaling $ 2.4 million for the three months ended April 3, 2021, and $ 1.5 million for the three months ended March 28, 2020.

In addition, the Company provided supplemental discretionary contributions to the 401(k) plan totaling $ 1.6 million and $ 4.0 million for the three and six months ended July 3, 2021, respectively, and $ 1.1 million and $ 2.6 million for the three and six months ended June 27, 2020, respectively.

The Company plans to contribute approximately $ 3.0 million in supplemental contributions to the plan during the remainder of 2021.

1 unchanged sentence

The Company's 2021 and 2020 effective tax rates differ from the statutory federal tax rate due principally to state income taxes and the nondeductibility of certain executive compensation.

The Company’s effective income tax rate was 27.1 % and 26.3 % for the three months ended April 3, 2021 and March 28, 2020, respectively.

Income tax payments for the three months ended April 3, 2021 and March 28, 2020 totaled $ 0.2 million and $ 1.6 million, respectively.

The Company’s effective income tax rate was 26.4 % and 26.7 % for the three and six months ended July 3, 2021, respectively.

The Company’s effective income tax rate was 24.7 % and 25.4 % for the three and six months ended June 27, 2020, respectively.

Income tax payments for the three and six months ended July 3, 2021 totaled $ 22.6 million and $ 22.8 million, respectively.

Income tax payments for the three and six months ended June 27, 2020 totaled $ 2.4 million and $ 4.0 million, respectively.

The Company files income tax returns in the U.S.

10 unchanged sentences

Three Months Ended

April 3, 2021

March 28, 2020

Six Months Ended

June 27, 2020

Weighted average number of common shares outstanding –

7 unchanged sentences

Vesting requirements are determined by the Compensation Committee of the Board of Directors .

The Company reserved 750,000 shares for issuance under the 2017 SIP, of which 230,000 shares remain available for future grants as of April 3, 2021.

The Company reserved 750,000 shares for issuance under the 2017 SIP, of which 218,000 shares remain available for future grants as of July 3, 2021.

Restricted Stock Units

2 unchanged sentences

The retention-based awards are subject only to the three-year vesting period.

There were 40,792 restricted stock units issued during the three months ended April 3, 2021.

There were 93,939 restricted stock units issued during the six months ended July 3, 2021.

Total compensation costs related to these restricted stock units are $ 6.5 million.

Compensation costs related to all outstanding restricted stock units recognized in the statements of income aggregated $ 3.4 million and $ 1.4 million for the three months ended April 3, 2021 and March 28, 2020, respectively.

Compensation costs related to all outstanding restricted stock units recognized in the statements of income aggregated $ 1.7 million and $ 5.0 million for the three and six months ended July 3, 2021, respectively, and $ 1.3 million and $ 2.7 million for the three and six months ended June 27, 2020, respectively.

NOTE 11 —

6 unchanged sentences

Three Months Ended

Six Months Ended

(in thousands)

April 3, 2021

March 28, 2020

June 27, 2020

Income (Loss) Before Income Taxes

April 3, 2021

December 31, 2020

Identifiable Assets

2 unchanged sentences

The Company contracts with the National Rifle Association (“NRA”) for some of its promotional and advertising activities.

Payments made to the NRA in the three months ended April 3, 2021 totaled $ 0.1 million and were de minimis in the three months ended March 28, 2020.

Payments made to the NRA in the three and six months ended July 3, 2021 totaled $ 0.2 million and $ 0.2 million, respectively.

Payments made to the NRA in the three and six months ended June 27, 2020 totaled $ 0.1 million and $ 0.2 million, respectively.

One of the Company’s Directors also serves as a Director on the Board of the NRA.

1 unchanged sentence

CONTINGENT LIABILITIES

As of April 3, 2021, the Company was a defendant in five (5) lawsuits and is aware of certain other such claims.

As of July 3, 2021, the Company was a defendant in four (4) lawsuits and is aware of certain other such claims.

The lawsuits fall into three categories:

6 unchanged sentences

Non-Product Litigation

Primus Group LLC v.

Smith and Wesson, et al.

is a putative class action filed in the United States District Court for the Southern District of Ohio on August 8, 2019.

Plaintiff alleges that the defendants’

lawful sale of modern sporting rifles violates the Racketeer Influenced Corrupt Organizations Act and seeks a temporary restraining order (“TRO”) and permanent injunction.

On August 20, 2019, the court denied plaintiff’s request for a TRO.

On September 3, 2019, defendants filed a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6).

On September 16, 2019, plaintiff filed an Amended Complaint.

On October 9, 2019, the court dismissed plaintiff’s Amended Complaint, with prejudice.

Plaintiff filed a Notice of Appeal on October 15, 2019.

The parties fully briefed the appeal and the Court of Appeals for the Sixth Circuit entered an order affirming the dismissal on February 8, 2021.

Plaintiff has 90 days from that date to file a Writ of Certiorari with the United States Supreme Court.

FN Herstal S.A.

5 unchanged sentences

The Company believes that the suit lacks any merit and has filed an Answer denying all material allegations and Counterclaims seeking cancellation of certain of Plaintiff’s registered trademarks.

Discovery was set to close on March 9, 2021.

During the quarter ended April 3.

2021, the parties engaged in settlement discussions, which are ongoing.

The District Court has extended discovery deadlines to accommodate the parties’

Discovery was set to close on March 9, 2021, but the court extended discovery deadlines to accommodate settlement discussions between the parties, which were unsuccessful.

No new deadlines have been established and discovery is ongoing.

Municipal Litigation

48 unchanged sentences

Threatened product liability claims are reflected in the Company's product liability accrual on the same basis as actual claims;

i.e., an accrual is made for reasonably anticipated possible liability and claims handling expenses on an ongoing basis.

, an accrual is made for reasonably anticipated possible liability and claims handling expenses on an ongoing basis.

A range of reasonably possible losses relating to unfavorable outcomes cannot be made.

2 unchanged sentences

SUBSEQUENT EVENTS

On April 30, 2021, the Board of Directors authorized a dividend of 86 ¢

per share, for shareholders of record as of May 17, 2021, payable on May 28, 2021.

The Company has evaluated events and transactions occurring subsequent to April 3, 2021 and determined that there were no other unreported events or transactions that would have a material impact on the Company’s results of operations or financial position.

On July 30, 2021, the Board of Directors authorized a dividend of $ 1.00 per share, for shareholders of record as of August 16, 2021, payable on August 27, 2021.

The Company has evaluated events and transactions occurring subsequent to July 3, 2021 and determined that there were no other unreported events or transactions that would have a material impact on the Company’s results of operations or financial position.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

14 unchanged sentences

The COVID-19 pandemic has created significant uncertainty and adversely impacted many industries throughout the global economy.

In the first quarter of 2021, the Company did not experience a significant adverse impact on its business resulting from government restrictions on the movement of people, goods, and services.

In the first half of 2021, the Company did not experience a significant adverse impact on its business resulting from government restrictions on the movement of people, goods, and services.

The impact of the COVID-19 pandemic is fluid and continues to evolve, and, therefore, the Company cannot predict the extent to which its business, results of operations, financial condition, or cash flows will ultimately be impacted.

Management continues to monitor and assess the situation and to prepare for potential implications for the Company’s business, supply chain and customer demand.

Management continues to monitor and assess the situation and to prepare for potential implications for the Company’s business, supply chain and customer demand.

From a liquidity perspective, the Company believes it is currently well positioned to manage through this global crisis.

At the end of the first quarter of 2021, the Company was debt-free, and had cash and short-term investments totaling $146.1 million and an unused $40.0 million revolving credit facility.

At the end of the second quarter of 2021, the Company was debt-free, and had cash and short-term investments totaling $173.6 million and an unused $40.0 million revolving credit facility.

The Company has taken many proactive steps to maintain the health and safety of its employees and to mitigate the impact on its business.

These actions include:

Providing all hourly employees with an additional two weeks of paid time off in 2020 and one week of paid time off in 2021,

Providing cash incentives for employees to become fully vaccinated,

Reducing hiring from the outset to the latter half of 2020 to help maintain the health and safety of employees and the cleanliness of our facilities,

Encouraging employees to work remotely, wherever possible, and implementing social distancing throughout each manufacturing facility, including in every manufacturing cell,

Communicating with and assisting employees with potential health issues,

Restricting visitor access to avoid introducing new people to the factory environment,

Implementing additional cleaning, sanitizing and other health and safety processes to maintain a clean and safe workplace, and

Manufacturing and donating personal protective equipment to local hospitals, health care facilities, and police and fire departments in its local communities.

The costs of these actions are expected to total approximately $1.5 million in 2021 and totaled approximately $3.6 million in 2020, of which approximately $0.4 million and $0.4 million was recognized during the three months ended April 3, 2021 and March 28, 2020, respectively.

Providing all hourly employees with an additional two weeks of paid time off in 2020 and an additional week in 2021,

Providing cash and other incentives for employees to become fully vaccinated,

Holding multiple onsite COVID-19 vaccination clinics at our manufacturing facilities,

Reducing hiring early in 2020 to help maintain the health and safety of employees and the cleanliness of our facilities,

Encouraging employees to continue to work remotely, wherever possible, and maintaining social distancing throughout each manufacturing facility, including in every manufacturing cell,

Confidentially communicating with and assisting employees with potential health issues through our dedicated facility   nurses,

Restricting visitor access to minimize the introduction of new people to the factory environment,

Implementing additional cleaning and sanitizing, improved ventilation, and other health and safety processes to maintain a clean and safe workplace,

Providing all employees with multiple facemask coverings and other personal protective equipment and currently mandating their use by unvaccinated and “at risk”

individuals at all times in our facilities,

Issuing periodic guidance and reminders to all associates –

directly to their phones when possible –

to encourage them to engage in safe and responsible behaviors, and

Manufacturing and donating personal protective equipment to local hospitals, health care facilities, and police and fire departments in our local communities.

The costs of these actions are expected to total approximately $1.5 million in 2021, of which approximately $0.3 million and $0.7 million was recognized during the three and six months ended July 3, 2021, respectively.

The comparable expenses totaled $3.6 million in 2020, of which approximately $1.2 million and $1.6 million were recognized during the three and six months ended June 27, 2020, respectively.

The Company has also experienced expense reductions and deferrals in certain areas of its business, including reductions or delays in sponsorships and advertising, reduced conference and trade show participation costs, and reduced travel expenditures.

These expense reductions and deferrals approximate $0.9 million for the three months April 3, 2021.

There were minimal expense reductions or deferrals identified in the three months ended March 28, 2020.

The net expense reductions and deferrals for the three and six months ended July 3, 2021 approximated $0.7 million and $1.6 million, respectively.

These expense reductions and deferrals approximated $1.0 million for both the three and six months ended June 27, 2020.

In the three months ended July 3, 2021 some business activities that had been cancelled or deferred as a result of the pandemic began to resume and the related expenses increased.

If COVID-19 restrictions continue to ease, these expense reductions and deferrals could lessen and may ultimately be eliminated.

With the United States once again seeing a rise in COVID-19 cases and positivity rates, we remain vigilant and are proactively adjusting our plan accordingly to keep our associates healthy and safe, and to minimize any disruption to our business.

The Company has been able to keep all of its facilities safe and open with only limited restrictions on operations.

While certain parts of the economy have begun to reopen as restrictions have been lifted, it is possible that additional restrictions will be put in place in the future which could adversely impact the Company’s business for an indeterminate period.

While certain parts of the economy have begun to reopen as restrictions have been lifted, additional restrictions could be put in place in the future which would adversely impact the Company’s business for an indeterminate period.

Since the latter stages of the first quarter of 2020, there has been a significant increase in consumer demand for firearms, as evidenced by the increase in adjusted National Instant Criminal Background Check System (“NICS”) checks.

3 unchanged sentences

Results of Operations

The estimated unit sell-through of the Company’s products from the independent distributors to retailers increased 9% in the first quarter of 2021 compared to the prior year period.

For the same period, NICS background checks (as adjusted by the National Shooting Sports Foundation (“NSSF”)) increased 13%.

These increases may be attributable to increased public concern about personal protection and home defense in reaction to:

Some political and public leaders calling for a reduction in funding and limitations on law enforcement activities,

Protests, demonstrations, and civil unrest in many cities throughout the United States,

Concern about possible legislation that could curtail or limit gun ownership rights by both state and Federal governments, and

The continuing COVID-19 pandemic.

Sales of new products, including the Wrangler, the Ruger-57, the LCP II in .22 LR, the PC Charger, and the Max-9 pistol, represented $34.8 million or 21% of firearm sales in the first quarter of 2021.

The estimated unit sell-through of the Company’s products from the independent distributors to retailers increased 13% in the first half of 2021 compared to the prior year period.

For the same period, NICS background checks (as adjusted by the National Shooting Sports Foundation (“NSSF”)) decreased 5%.

The increase in the sell-through of the Company’s products compared favorably to the decrease in adjusted NICS background checks and may be attributable to the following:

Strong consumer demand for the Company’s products,

Increases in production for each of the past seven quarters, and

Introduction of new products that have been met with strong demand.

Sales of new products, including the Wrangler, the Ruger-57, the LCP II in .22 LR, the PC Charger, the MAX-9 pistol, and the LCP MAX represented $77.9 million or 22% of firearm sales in the first half of 2021.

New product sales include only major new products that were introduced in the past two years.

Estimated sell-through from the independent distributors to retailers and total adjusted NICS background checks for the trailing five quarters follow:

Estimated sell-through from the independent distributors to retailers and total adjusted NICS background checks for the trailing six quarters follow:

Estimated Units Sold from Distributors to Retailers (1)

13 unchanged sentences

The Company generally does not use the orders received or ending backlog for planning production levels.

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):

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):

(All amounts shown are net of Federal Excise Tax of 10% for handguns and 11% for long guns.)

5 unchanged sentences

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, semi-monthly to plan production levels.

The Company increased overall production in the first quarter of 2021 by 49% from the first quarter of 2020.

The Company increased overall production in the first half of 2021 by 51% from the first half of 2020.

Summary Unit Data

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):

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):

Units Ordered

3 unchanged sentences

Ending Unit Backlog

During the first quarter of 2021, the Company’s finished goods inventory and distributor inventories of the Company’s products increased slightly.

However, in the aggregate, total Company and distributor inventories decreased 153,400 units from the end of the first quarter of 2020.

Inventory data for the trailing five quarters follows:

During the second quarter of 2021, the Company’s finished goods inventory and distributor inventories of the Company’s products decreased 7,800 units and remain significantly below pre-COVID-19 pandemic levels.

Inventory data for the trailing six quarters follows:

Units —

7 unchanged sentences

The Company does not have access to data on retailer inventories of the Company’s products.

Consolidated net sales were $184.4 million for the three months ended April 3, 2021, an increase of 49.1% from $123.6 million in the comparable prior year period.

Firearms net sales were $183.6 million for the three months ended April 3, 2021, an increase of 49.6% from $122.8 million in the comparable prior year period.

Firearms unit shipments increased 34.1% for the three months ended April 3, 2021, from the comparable prior year period.

Castings net sales were $0.8 million for the three months ended April 3, 2021, a decrease of 11.4% from $0.9 million in the comparable prior year period.

Consolidated net sales were $200.1 million for the three months ended July 3, 2021, an increase of 53.6% from $130.3 million in the comparable prior year period.

For the six months ended July 3, 2021, consolidated net sales were $384.4 million, an increase of 51.4% from $253.9 million in the comparable prior year period.

Firearms net sales were $199.4 million for the three months ended July 3, 2021, an increase of 54.1% from $129.4 million in the comparable prior year period.

For the six months ended July 3, 2021 firearms net sales were $383.0 million, an increase of 51.9% from $252.2 million in the comparable prior year period.

Firearms unit shipments increased 47.0% and 40.5% for the three and six months ended July 3, 2021, from the comparable prior year periods.

Castings net sales were $0.6 million for the three months ended July 3, 2021, a decrease of 26.6% from $0.9 million in the comparable prior year period.

For the six months ended July 3, 2021, castings net sales were $1.4 million, a decrease of 18.8% from $1.7 million in the comparable prior year period.

Cost of Products Sold and Gross Profit

Consolidated cost of products sold was $111.8 million for the three months ended April 3, 2021, an increase of 27.6% from $87.6 million in the comparable prior year period.

Gross profit for the three months ended April 3, 2021 was $72.6 million, an increase of $36.6 million from $36.0 million in the comparable prior year period.

As a percentage of sales, gross profit increased to 39.4% in the three months ended April 3, 2021, from 29.1% in the comparable prior year period.

Consolidated cost of products sold was $121.3 million for the three months ended July 3, 2021, an increase of 34.5% from $90.2 million in the comparable prior year period.

Consolidated cost of products sold was $233.1 million for the six months ended July 3, 2021, an increase of 31.1% from $177.8 million in the comparable prior year period.

Gross profit for the three and six months ended July 3, 2021 was $78.8 million and $151.3 million, respectively, an increase of $38.7 million and $75.2 million from $40.1 million and $76.1 million in the comparable prior year periods.

As a percentage of sales, gross profit increased to 39.4% in both the three and six months ended July 3, 2021, respectively, from 30.8% and 30.0% in the comparable prior year periods.

This significant increased profitability was due primarily to:

3 unchanged sentences

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $20.6 million for the three months ended April 3, 2021, an increase of $4.8 million or 30.1% from $15.8 million in the comparable prior year period.

As a percentage of sales, selling, general, and administrative expenses decreased to 11.2% in the three months ended April 3, 2021 from 12.8% in the prior period.

Selling, general and administrative expenses were $19.1 million for the three months ended July 3, 2021, an increase of $3.0 million or 18.9% from $16.1 million in the comparable prior year period.

As a percentage of sales, selling, general, and administrative expenses decreased to 9.5% in the three months ended July 3, 2021 from 12.3% in the prior period.

Selling, general and administrative expenses were $39.7 million for the six months ended July 3, 2021, an increase of $7.8 million or 24.4% from $31.9 million in the comparable prior year period.

As a percentage of sales, selling, general, and administrative

expenses decreased to 10.3% in the six months ended July 3, 2021 from 12.6% in the prior period.

The increase in these expenses was primarily attributable to increased sales and incentive compensation expenses and the decrease of such expenses as a percentage of sales was attributable to the significant increase in sales.

Other income, net

Other income, net was $0.4 million in the three months ended April 3, 2021, a decrease of $0.2 million from $0.6 million in the three months ended March 28, 2020 as a result of decreased interest income on short-term investments due to decreased interest rates in the three months ended April 3, 2021.

Other income, net of $0.6 million and $1.0 million for the three and six months ended July 3, 2021, respectively, decreased from $0.7 million and $1.3 million for the three and six months ended June 27, 2020 as a result of reduced interest rates earned on short-term investments in 2021 compared to 2020.

Income Taxes and Net Income

The Company's 2021 and 2020 effective tax rates differ from the statutory federal tax rate due principally to state income taxes and the nondeductibility of certain executive compensation.

The Company’s effective income tax rate was 27.1% and 26.3% for the three months ended April 3, 2021 and March 28, 2020, respectively.

As a result of the foregoing factors, consolidated net income was $38.2 million for the three months ended April 3, 2021.

This represents an increase of 149.0% from $15.3 million in the comparable prior year period.

The Company’s effective income tax rate was 26.4% and 26.7% the three and six months ended July 3, 2021, respectively.

The Company’s effective income tax rate was 24.7% and 25.4% for the three and six months ended June 27, 2020, respectively.

As a result of the foregoing factors, consolidated net income was $44.4 million and $82.6 million for the three and six months ended July 3, 2021, respectively.

This represents an increase of 138.7% and 143.4% from $18.6 million and $33.9 million in the comparable prior year periods.

Non-GAAP Financial Measure

7 unchanged sentences

The Company calculates its EBITDA by adding the amount of interest expense, income tax expense, and depreciation and amortization expenses that have been deducted from net income back into net income, and subtracting the amount of interest income that was included in net income from net income.

EBITDA was $59.9 million for the three months ended April 3, 2021, an increase of 118.0% from $27.5 million in the comparable prior year period.

EBITDA was $67.5 million for the three months ended July 3, 2021, an increase of 114.1% from $31.5 million in the comparable prior year period.

For the six months ended July 3, 2021 EBITDA was $127.4 million, an increase of 115.9% from $59.0 million in the comparable prior year period.

Non-GAAP Reconciliation —

1 unchanged sentence

Three Months Ended

April 3, 2021

March 28, 2020

Six Months Ended

June 27, 2020

Income tax expense

3 unchanged sentences

Financial Condition

At the end of the first quarter of 2021, the Company’s cash and short-term investments totaled $146.1 million.

At the end of the second quarter of 2021, the Company’s cash and short-term investments totaled $173.6 million.

Pre-LIFO working capital of $256.8 million, less the LIFO reserve of $49.0 million, resulted in working capital of $207.9 million and a current ratio of 3.7 to 1.

Cash provided by operating activities was $27.8 million for the three months ended April 3, 2021, compared to $31.1 million for the comparable prior year period.

The decrease in cash provided in the three months ended April 3, 2021 is primarily attributable to the increase in accounts receivable and the payment of annual incentive compensation in the three months ended April 3, 2021 and the decrease in inventories in the prior period.

Cash provided by operating activities was $76.2 million for the six months ended July 3, 2021, compared to $78.1 million for the comparable prior year period.

The decrease in cash provided in the six months ended July 3, 2021 is primarily attributable to the increase in accounts receivable and the payment of the 2020 annual incentive compensation in the six months ended July 3, 2021 and the decrease in inventories in the prior period.

Third parties supply the Company with various raw materials for its firearms and castings, such as steel, fabricated steel components, walnut, birch, beech, maple and laminated lumber for rifle stocks, wax, ceramic material, metal alloys, various synthetic products and other component parts.

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Investing and Financing

Capital expenditures for the three months ended April 3, 2021 totaled $5.5 million, an increase from $4.1 million in the comparable prior year period.

Capital expenditures for the six months ended July 3, 2021 totaled $11.4 million, an increase from $5.9 million in the comparable prior year period.

In 2021, the Company expects to spend approximately $20 million on capital expenditures, much of which will relate to tooling and fixtures for new product introductions and to upgrade and modernize manufacturing equipment.

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Shipments of Marlin rifles are anticipated to begin in the fourth quarter of 2021.

Dividends of $12.5 million were paid during the three months ended April 3, 2021.

Dividends of $27.6 million were paid during the six months ended July 3, 2021.

The Company has financed its dividends with cash provided by operations and current cash.

On April 30, 2021, the Company’s Board of Directors authorized a dividend of 86¢

per share to shareholders of record on May 17, 2021, payable on May 28, 2021.

On July 30, 2021, the Company’s Board of Directors authorized a dividend of $1.00 per share to shareholders of record on August 16, 2021, payable on August 27, 2021.

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.

The Company purchases United States Treasury instruments which mature within one year with available cash.

At April 3, 2021, the Company’s investment in these instruments totaled $122.0 million.

The Company did not purchase any shares of its common stock in the three months ended April 3, 2021 and March 28, 2020.

As of April 3, 2021, $86.7 million remained authorized for future stock repurchases.

At July 3, 2021, the Company’s investment in these instruments totaled $150.0 million.

The Company did not purchase any shares of its common stock in the six months ended July 3, 2021 and June 27, 2020.

As of July 3, 2021, $86.7 million remained authorized for future stock repurchases.

Based on its unencumbered assets, the Company believes it has the ability to raise cash through the issuance of short-term or long-term debt.

The Company’s unsecured $40 million credit facility, which expires on September 30, 2021, was unused at April 3, 2021 and the Company has no debt.

The Company’s unsecured $40 million credit facility, which expires on September 30, 2021, was unused at July 3, 2021 and the Company has no debt.

Other Operational Matters

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements