What changed in this filing

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Item 1. Financial Statements

2022-08-03 compared with 2022-05-04 · 98 added, 95 removed, 471 unchanged (29% of the section changed)

3 unchanged sentences

(Dollars in thousands)

April 2, 2022

December 31, 2021

17 unchanged sentences

(Dollars in thousands, except per share data)

April 2, 2022

December 31, 2021

6 unchanged sentences

Workers’

Income taxes payable

Total Current Liabilities

26 unchanged sentences

Three Months Ended

April 2, 2022

April 3, 2021

Six Months Ended

Net firearms sales

31 unchanged sentences

Recognition of stock-based compensation expense

Balance at April 2, 2022

Balance at July 2, 2022

See notes to condensed consolidated financial statements.

2 unchanged sentences

(Dollars in thousands)

Three Months Ended

April 2, 2022

April 3, 2021

Six Months Ended

Operating Activities

35 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 2, 2022 may not be indicative of the results to be expected for the full year ending December 31, 2022.

Operating results for the three months ended July 2, 2022 may not be indicative of the results to be expected for the full year ending December 31, 2022.

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, 2021.

5 unchanged sentences

Approximately 99 % of sales are from firearms.

Export sales typically represent no more than 5 % of total sales.

Export sales typically represent no more than 5 % of total sales, although they accounted for 7 % of total sales for the six month period ended July 2, 2022.

The Company’s design and manufacturing operations are located in the United States and almost all product content is domestic.

11 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.

5 unchanged sentences

The carrying amounts of financial instruments, including cash, short-term investments, accounts receivable, accounts payable and accrued liabilities, approximate fair value due to the short-term maturity of these items.

The Company’s short-term investments consist of investments in a bank-managed money market fund that invests exclusively in United States Treasury obligations and is valued at the net asset value ("NAV") daily closing price, as reported by the Fund, based on the amortized cost of the Fund’s securities.

The NAV is used as a practical expedient to estimate fair value.

This practical expedient is not used when it is determined to be probable that the fund will sell the investment for an amount different than the reported NAV.

Business Combination:

14 unchanged sentences

REVENUE RECOGNITION AND CONTRACTS WITH CUSTOMERS

The impact of ASC 606 on revenue recognized during the three months ended April 2, 2022 and April 3, 2021 is as follows:

The impact of ASC 606 on revenue recognized during the three and six months ended July 2, 2022 and July 3, 2021 is as follows:

Three Months Ended

April 2, 2022

April 3, 2021

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 since April 3, 2021.

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

Practical Expedients and Exemptions

6 unchanged sentences

Inventories consist of the following:

April 2, 2022

December 31, 2021

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 2, 2022:

The table below presents the right-of-use assets and related lease liabilities recognized on the Condensed Consolidated Balance Sheet as of July 2, 2022:

Balance Sheet Line Item

April 2, 2022

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 2, 2022:

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 2, 2022:

Remainder of 2022

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 2, 2022 is 9.9 years.

The Company’s weighted average remaining lease term for operating leases as of July 2, 2022 is 9.7 years.

NOTE 6 —

4 unchanged sentences

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

At April 2, 2022, the Company was in compliance with the terms and covenants of the credit facility.

At April 2, 2022, there was no outstanding balance on the line of credit

The Company previously had a $ 40 million revolving line of credit with a different bank, which terminated on September 30, 2021.

At the line of credit’s termination date, the Company was in compliance with the terms and covenants of the credit facility.

At July 2, 2022, the Company was in compliance with the terms and covenants of the credit facility and the line of credit was unused.

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 both the three months ended April 2, 2022 and April 3, 2021.

Expenses related to these matching contributions totaled $ 0.9 million and $ 2.3 million for the three and six months ended July 2, 2022, respectively, and $ 0.9 million and $ 2.2 million for the three and six months ended July 3, 2021, respectively.

The Company plans to contribute approximately $ 2.0 million to the plan in matching employee contributions during the remainder of 2022.

In addition, the Company provided supplemental discretionary contributions to the 401(k) plan totaling $ 2.4 million for both the three months ended April 2, 2022 and April 3, 2021.

In addition, the Company provided supplemental discretionary contributions to the 401(k) plan totaling $ 1.5 million and $ 3.9 million for the three and six months ended July 2, 2022, respectively, and $ 1.6 million and $ 4.0 million for the three and six months ended July 3, 2021, respectively.

The Company plans to contribute approximately $ 3.0 million in supplemental contributions to the plan during the remainder of 2022.

1 unchanged sentence

The Company's 2022 and 2021 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 23.5 % and 27.1 % for the three months ended April 3, 2022 and April 2, 2021, respectively.

Income tax payments for the three months ended April 3, 2022 and April 2, 2021 totaled $ 3.1 million and $ 0.2 million, respectively.

The Company’s effective income tax rate was 20.5 % and 22.3 % for the three and six months ended July 2, 2022, 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 decrease in the effective tax rates was primarily attributable to research and development tax credits.

Income tax payments for the three and six months ended July 2, 2022 totaled $ 17.6 million and $ 20.7 million, respectively.

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

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

10 unchanged sentences

Three Months Ended

April 2, 2022

April 3, 2021

Six Months Ended

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 136,000 shares remain available for future grants as of April 2, 2022.

The Company reserved 750,000 shares for issuance under the 2017 SIP, of which 121,000 shares remain available for future grants as of July 2, 2022.

Restricted Stock Units

2 unchanged sentences

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

There were 81,774 restricted stock units issued during the three months ended April 2, 2022.

There were 96,893 restricted stock units issued during the six months ended July 2, 2022.

Total compensation costs related to these restricted stock units are $ 7.0 million.

Compensation costs related to all outstanding restricted stock units recognized in the statements of income aggregated $ 1.7 million and $ 3.4 million for the three months ended April 2, 2022 and April 3, 2021, respectively.

Compensation costs related to all outstanding restricted stock units recognized in the statements of income aggregated $ 1.7 million and $ 3.4 million for the three and six months ended July 2, 2022, respectively, and $ 1.7 million and $ 5.0 million for the three and six months ended July 3, 2021, respectively.

NOTE 11 —

6 unchanged sentences

Three Months Ended

Six Months Ended

(in thousands)

April 2, 2022

April 3, 2021

Income (Loss) Before Income Taxes

Capital Expenditures

April 2, 2022

December 31, 2021

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 totaled $0.1 million for both the three months ended April 2, 2022 and April 3, 2021.

Payments made to the NRA in the three and six months ended July 2, 2022 totaled $ 0.1 million and $ 0.2 million, respectively.

Payments made to the NRA in the three and six months ended July 3, 2021 totaled $ 0.2 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 2, 2022, the Company was a defendant in three (3) lawsuits and is aware of certain other such claims.

As of July 2, 2022, the Company was a defendant in three (3) lawsuits and is aware of certain other such claims.

The lawsuits fall into two categories:

8 unchanged sentences

There are two lawsuits of this type:

The City of Gary , filed in Indiana State Court in 1999, and Estados Unidos Mexicanos v.

Smith & Wesson, et al ., which was filed in August 2021.

the City of Gary case, filed in Indiana State Court in 1999, and Estados Unidos Mexicanos v.

Smith & Wesson, et al .

, which was filed in August 2021.

The City of Gary Complaint seeks damages, among other things, for the costs of medical care, police and emergency services, public health services, and other services as well as punitive damages.

5 unchanged sentences

At that time, the court entered a scheduling order setting deadlines for Plaintiff to file a Second Amended Complaint, for Defendants to answer, and for Defendants to file dispositive motions.

The plaintiff did not file a Second Amended Complaint by the deadline.

Plaintiff did not file a Second Amended Complaint by the deadline.

In 2015, Indiana passed a new law such that Indiana Code §34-12-3-1 became applicable to the City's case.

The defendants filed a joint motion for judgment on the pleadings, asserting immunity under §34-12-3-1 and asking the court to revisit the Court of Appeals'

Defendants filed a joint motion for judgment on the pleadings, asserting immunity under §34-12-3-1 and asking the court to revisit the Court of Appeals'

decision holding the Protection of Lawful Commerce in Arms Act inapplicable to the City's claims.

8 unchanged sentences

request for attorney’s fees and costs.

On January 8, 2018, the court entered judgment for the defendants.

On January 8, 2018, the court entered judgment for Defendants.

The City filed a Notice of Appeal on February 1, 2018.

2 unchanged sentences

cross appeal on September 10, 2018.

The Court of Appeals issued its ruling on May 23, 2019, affirming dismissal of the City’s negligent design and warnings count on the basis that the City had not alleged that Manufacturer Defendants’

The Court of Appeals issued its ruling on May 23, 2019, affirming dismissal of the City’s negligent design and warnings count on the basis that the City had not alleged that the Manufacturer Defendants’

conduct was unlawful.

10 unchanged sentences

The Complaint advances a variety of legal theories including negligence, public nuisance, unjust enrichment, restitution, and others.

Plaintiff essentially alleges that the defendants design, manufacture, distribute, market and sell firearms in a way that they know results in the illegal trafficking of firearms into Mexico, where they are used by Mexican drug cartels for criminal activities.

Plaintiff essentially alleges that Defendants design, manufacture, distribute, market and sell firearms in a way that they know results in the illegal trafficking of firearms into Mexico, where they are used by Mexican drug cartels for criminal activities.

Plaintiff seeks injunctive relief and monetary damages.

On November 22, 2021, the defendants filed a joint Rule 12(b)(6) motion to dismiss the Mexican Government’s complaint based on the Government’s lack of Article III standing, Protection of Lawful Commerce in Arms Act immunity, and lack of proximate cause.

On November 22, 2021, Defendants filed a joint Rule 12(b)(6) motion to dismiss the Mexican Government’s complaint based on the Plaintiff’s lack of Article III standing, Protection of Lawful Commerce in Arms Act immunity, and lack of proximate cause.

The Company, along with other non-Massachusetts defendants, also filed a Rule 12(b)(2) motion to dismiss based on lack of specific personal jurisdiction.

The motions were fully briefed and the court heard oral argument on April 12, 2022.

The court has not yet issued its decision on the motions to dismiss.

Summary of Claimed Damages and Explanation of Product Liability Accruals

12 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 29, 2022, the Board of Directors authorized a dividend of $ 0.68 per share, for shareholders of record as of May 16, 2022, payable on May 31, 2022.

The Company has evaluated events and transactions occurring subsequent to April 2, 2022 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 August 3, 2022, the Board of Directors authorized a dividend of 47 ¢

per share, for shareholders of record as of August 17, 2022, payable on August 31, 2022.

The Company has evaluated events and transactions occurring subsequent to July 2, 2022 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

3 unchanged sentences

Approximately 99% of sales are from firearms.

Export sales typically represent no more than 5% of total sales.

Export sales typically represent no more than 5% of total sales, although they did account for 7% of total sales for the six month period ended July 2, 2022.

The Company’s design and manufacturing operations are located in the United States and almost all product content is domestic.

8 unchanged sentences

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

In the first quarter of 2022, the Company did not experience a significant adverse impact on its business from COVID-19 or related government restrictions.

During the six month period ended July 2, 2022, the Company did not experience a significant adverse impact on its business from COVID-19 or related government restrictions.

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.

13 unchanged sentences

The Company believes it is currently well positioned to manage through this global crisis.

At the end of the first quarter of 2022, the Company was debt-free, and had cash and short-term investments totaling $212 million.

At the end of the second quarter of 2022, the Company was debt-free, and had cash and short-term investments totaling $209 million.

The ultimate impact of COVID-19 on the Company’s business, results of operations, financial condition and cash flows is dependent on future developments, including the duration of the pandemic and the related length of its impact on the global economy, which are uncertain and cannot be predicted at this time.

Results of Operations

The estimated unit sell-through of the Company’s products from the independent distributors to retailers decreased 21% in the first quarter of 2022 compared to the prior year period.

The estimated unit sell-through of the Company’s products from the independent distributors to retailers decreased 31% in the first half of 2022 compared to the prior year period.

For the same period, NICS background checks (as adjusted by the National Shooting Sports Foundation (“NSSF”)) decreased 17%.

These decreases are attributable to decreased consumer demand for firearms from the unprecedented levels of the surge that began in 2020 and remained for most of 2021.

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

The second quarter of 2021 had the highest quarterly distributor unit sell-through in the Company’s history, which led to the significant year-over-year decrease in distributor sell-through in the current quarter.

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)

11 unchanged sentences

Orders Received and Ending Backlog

The Company uses the estimated unit sell-through of its products from the independent distributors to retailers, along with inventory levels at the independent distributors and at the Company, as the key metrics for planning production levels.

The Company uses the estimated unit sell-through of its products from the independent distributors to retailers, along with inventory levels at the independent distributors and at the Company, as the key metrics for planning production levels.

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 decreased overall production in the first quarter of 2022 by 4% from the first quarter of 2021.

The Company’s overall production in the first half of 2022 decreased by 15% from the first half of 2021.

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 2022, the Company’s finished goods inventory increased by 29,800 units and distributor inventories of the Company’s products increased by 80,400 units.

Inventory data for the trailing five quarters follows:

During the second quarter of 2022, the Company’s finished goods inventory increased by 49,300 units and distributor inventories of the Company’s products increased by 28,200 units.

Inventory data for the trailing six quarters follows:

Units —

9 unchanged sentences

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

April 2, 2022

April 3, 2021

Net firearms sales

2 unchanged sentences

Cost of products sold

The decrease in total consolidated net sales and net firearms sales for the three months ended April 2, 2022 is attributable to decreased consumer demand for firearms from the unprecedented levels of the surge that began in 2020 and remained for most of 2021.

Sales of new products, including the PC Charger, the MAX-9 pistol, the LCP MAX pistol, and the Marlin 1895 lever-action rifle represented $21.4 million or 13% of firearm sales in the first quarter of 2022.

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

Net firearms sales

Net castings sales

Total net sales

Cost of products sold

The decrease in total consolidated net sales and net firearms sales for the three and six months ended July 2, 2022 is attributable to decreased consumer demand for firearms from the unprecedented levels of the surge that began in 2020 and remained for most of 2021.

Sales of new products, including the PC Charger, the MAX-9 pistol, the LCP MAX pistol, and the Marlin 1895 lever-action rifles represented $33.8 million or 11% of firearm sales in the first half of 2022.

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

Several popular firearms that were considered new products in 2021, including the Wrangler revolver, the Ruger-5.7 pistol, and the LCP II in .22 LR pistol, have now been in production for over two years and are no longer included in new product sales for the first quarter of 2022.

The decreased gross profit for the three months ended April 2, 2022 is attributable to the decrease in sales and inflationary cost increases in materials, commodities, services, energy, fuel and transportation.

The decrease in gross margin for the three months ended April 2, 2022 is attributable to unfavorable deleveraging of fixed costs, including depreciation, engineering and other indirect labor, resulting from decreased sales and production and decreased labor efficiencies.

The decreased gross profit for the three and six months ended July 2, 2022 is attributable to the decrease in sales and inflationary cost increases in materials, commodities, services, energy, fuel and transportation.

The decrease in gross margin for the three and six months ended July 2, 2022 is attributable to unfavorable deleveraging of fixed costs, including depreciation, engineering and other indirect labor, resulting from decreased sales and production and decreased labor efficiencies.

In addition to unfavorable deleveraging of fixed costs, the aforementioned inflationary cost increases, partially offset by increased pricing, resulted in lower margins.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $19.4 million for the three months ended April 2, 2022, a decrease of $1.2 million or 6.0% from $20.6 million in the comparable prior year period.

As a percentage of sales, selling, general, and administrative expenses increased slightly to 11.6% in the three months ended April 2, 2022 from 11.2% in the prior year period.

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

Selling, general and administrative expenses were $18.4 million for the three months ended July 2, 2022, a decrease of $0.7 million or 3.8% from $19.1 million in the comparable prior year period.

As a percentage of sales, selling, general, and administrative expenses increased to 13.1% in the three months ended July 2, 2022 from 9.5% in the prior year period.

Selling, general and administrative expenses were $37.7 million for the six months ended July 2, 2022, a decrease of $2.0 million or 4.9% from $39.7 million in the comparable prior year period.

As a percentage of sales, selling, general, and administrative expenses increased to 12.3% in the six months ended July 2, 2022 from 10.3% in the prior year period.

Other income, net

Other income, net of $0.8 million for the three months ended April 2, 2022, increased from $0.4 million for the three months ended April 3, 2021 as a result of increased royalty and miscellaneous income in 2022 compared to 2021.

Other income, net of $0.9 million and $1.7 million for the three and six months ended July 2, 2022, respectively, increased from $0.6 million and $1.0 million for the three and six months ended July 3, 2021 as a result of increased interest, royalty, and miscellaneous income in 2022 compared to 2021.

Income Taxes and Net Income

The Company’s 2022 and 2021 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 23.5% and 27.1% for the three months ended April 2, 2022 and April 3, 2021, respectively.

As a result of the foregoing factors, consolidated net income was $30.2 million for the three months ended April 2, 2022.

This represents a decrease of 20.8% from $38.2 million in the comparable prior year period.

The Company's 2022 and 2021 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 20.5% and 22.3% for the three and six months ended July 2, 2022, 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 decrease in the effective tax rates was primarily attributable to research and development tax credits.

As a result of the foregoing factors, consolidated net income was $20.8 million and $51.0 million for the three and six months ended July 2, 2022.

This represents a decrease of 53.2% and 38.3% from $44.4 million and $82.6 million in the comparable prior year periods.

Non-GAAP Financial Measures

8 unchanged sentences

The Company calculates EBITDA margin by dividing EBITDA by total net sales.

EBITDA was $46.3 million for the three months ended April 2, 2022, a decrease of 22.7% from $59.9 million in the comparable prior year period.

EBITDA was $32.6 million for the three months ended July 2, 2022, a decrease of 51.7% from $67.5 million in the comparable prior year period.

For the six months ended July 2, 2022 EBITDA was $79.0 million, a decrease of 38.0% from $127.4 million in the comparable prior year period.

Non-GAAP Reconciliation —

1 unchanged sentence

Three Months Ended

April 2, 2022

April 3, 2021

Six Months Ended

Income tax expense

4 unchanged sentences

Financial Condition

At the end of the first quarter of 2022, the Company’s cash and short-term investments totaled $211.6 million.

Liquidity and Capital Resources

At the end of the second quarter of 2022, the Company’s cash and short-term investments totaled $208.5 million.

Pre-LIFO working capital of $333.1 million, less the LIFO reserve of $53.5 million, resulted in working capital of $279.6 million and a current ratio of 6.1 to 1.

Cash provided by operating activities was $18.8 million for the three months ended April 2, 2022, compared to $27.8 million for the comparable prior year period.

The decrease in cash provided in the three months ended April 2, 2022 is primarily attributable to the decrease in net income.

Cash provided by operating activities was $32.4 million for the six months ended July 2, 2022, compared to $76.2 million for the comparable prior year period.

The decrease in cash provided in the six months ended July 2, 2022 is primarily attributable to the decrease in net income.

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.

In the three months ended April 2, 2022, the Company’s manufacturing operations were impacted by limited deliveries of raw materials.

In the six months ended July 2, 2022, the Company’s manufacturing operations were impacted by limited deliveries of raw materials.

A limited supply of these materials in the marketplace can result in increases to purchase prices and adversely affect production levels.

1 unchanged sentence

Investing and Financing

Capital expenditures for the three months ended April 2, 2022 totaled $10.9 million, an increase from $5.5 million in the comparable prior year period.

Capital expenditures for the six months ended July 2, 2022 totaled $14.3 million, an increase from $11.4 million in the comparable prior year period.

In 2022, the Company expects to spend approximately $25 million on capital expenditures, much of which will relate to tooling and fixtures for new product introductions and to upgrade and modernize manufacturing equipment.

1 unchanged sentence

The Company finances, and intends to continue to finance, all of these activities with funds provided by operations and current cash.

Dividends of $15.2 million were paid during the three months ended April 2, 2022.

Dividends of $27.2 million were paid during the six months ended July 2, 2022.

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

1 unchanged sentence

The Company’s practice is to pay a dividend of approximately 40% of net income.

On April 29, 2022, the Company’s Board of Directors authorized a dividend of 68¢

per share to shareholders of record on May 16, 2022, payable on May 31, 2022.

On August 3, 2022, the Company’s Board of Directors authorized a dividend of 47¢

per share to shareholders of record on August 17, 2022, payable on August 31, 2022.

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 invests in United States Treasury instruments which mature within one year with available cash.

At April 2, 2022, the Company’s investment in these instruments totaled $170.0 million.

The Company did not purchase any shares of its common stock in the three months ended April 2, 2022 and April 3, 2021.

As of April 2, 2022, $86.7 million remained authorized for future stock repurchases.

The Company invests in a bank-managed money market fund that invests exclusively in United States Treasury instruments which mature within one year with available cash.

At July 2, 2022, the Company’s investment in these instruments totaled $165.0 million.

The Company did not purchase any shares of its common stock in the six months ended July 2, 2022 and July 3, 2021.

As of July 2, 2022, $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 has no debt.

The Company’s unsecured $40 million credit facility, which expires on January 7, 2024, was unused at July 2, 2022.

Other Operational Matters

2 unchanged sentences

If these regulations become more stringent in the future and the Company is not able to comply with them, such noncompliance could have a material adverse impact on the Company.

Three of the Company’s smaller domestic distributors discontinued their firearms distribution operations in 2019.

Currently there are 14 domestic distributors.

The Company has 14 independent distributors that service the domestic commercial market.

Additionally, the Company has 45 and 25 distributors servicing the export and law enforcement markets, respectively.

11 unchanged sentences

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