What changed in this filing

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Item 1. Financial Statements

2023-11-01 compared with 2023-08-02 · 158 added, 127 removed, 442 unchanged (39% of the section changed)

3 unchanged sentences

(Dollars in thousands)

September 30, 2023

December 31, 2022

19 unchanged sentences

(Dollars in thousands, except per share data )

September 30, 2023

December 31, 2022

37 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Net firearms sales

20 unchanged sentences

STURM, RUGER & COMPANY, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (UNAUDITED)

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’

EQUITY (UNAUDITED)

(Dollars in thousands)

7 unchanged sentences

Recognition of stock-based compensation expense

Balance at July 1, 2023

Balance at September 30, 2023

$ ( 145,812 )

3 unchanged sentences

( Dollars in thousands)

Six Months Ended

Nine Months Ended

September 30,

Operating Activities

2 unchanged sentences

Stock-based compensation

Gain on sale of assets

(Gain) loss on sale of assets

Deferred income taxes

15 unchanged sentences

Financing Activities

Remittance of taxes withheld from employees related to share-based compensation

Remittance of taxes withheld from employees related to

share-based compensation

Repurchase of common stock

Dividends paid

14 unchanged sentences

financial statements.

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 and six months ended July 1, 2023 may not be indicative of the results

to be expected for the full year ending December 31, 2023.

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, 2022.

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 and nine months ended

September 30, 2023 may not be indicative of the results to be expected for the full year ending December 31, 2023.

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, 2022.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

4 unchanged sentences

99 % of sales are from firearms.

Export sales accounted for approximately 7 % of total sales for the six month periods ended July 1, 2023

and July 2, 2022.

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

The Company’s firearms are sold through a select number of independent wholesale distributors, principally to the commercial

sporting market.

Export sales accounted for approximately 7 % of total sales for the nine month periods ended September

30, 2023 and October 1, 2022.

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.

The Company also manufactures

7 unchanged sentences

Revenue Recognition:

The Company recognizes revenue

in accordance with the provisions of Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (“ASC

The Company recognizes

revenue in accordance with the provisions of Accounting Standards Codification Topic 606, Revenue from Contracts with

Customers (“ASC 606”).

Substantially all product sales are sold FOB (free on board) shipping point.

Customary payment terms are 2% 30 days , net

Generally, all performance obligations are satisfied when product is shipped and the customer takes ownership and assumes the

risk of loss.

payment terms are 2% 30 days, net 40 days .

Generally, all performance obligations are satisfied when product is shipped and the

customer takes ownership and assumes the risk of loss.

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

instances, the Company allocates the revenue of the promotional sales based on the estimated level of participation in the sales promotional

program and the timing of the shipment of all of the firearms included in the promotional program, including the no charge firearms.

is recognized proportionally as each performance obligation is satisfied, based on the relative customary price of each product.

prices are generally determined based on the prices charged to the independent distributors.

The net change in contract liabilities for

a given period is reported as an increase or decrease to sales.

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.

In such instances, the Company allocates the revenue of the

promotional sales based on the estimated level of participation in the sales promotional program and the timing of the shipment of

all of the firearms included in the promotional program, including the no charge firearms.

Revenue is recognized proportionally as

each performance obligation is satisfied, based on the relative customary price of each product.

Customary prices are generally

determined based on the prices charged to the independent distributors.

The net change in contract liabilities for a given period is

reported as an increase or decrease to sales.

Fair Value of Financial Instruments:

17 unchanged sentences

The impact of ASC 606 on revenue

recognized during the three and six months ended July 1, 2023 and July 2, 2022 is as follows:

recognized during the three and nine months ended September 30, 2023 and October 1, 2022 is as follows:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Contract liabilities with customers at beginning of period

2 unchanged sentences

Contract liabilities with customers at end of period

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 expects the remaining deferred revenue from this

contract liability with customers to be recognized in the third quarter of 2023.

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 expects the remaining

deferred revenue from this contract liability with customers to be recognized in the fourth quarter of 2023.

Practical Expedients and Exemptions

12 unchanged sentences

Inventories consist of the following:

September 30, 2023

December 31, 2022

14 unchanged sentences

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 July 1, 2023:

The table below presents the right-of- use assets and related lease liabilities recognized on the Condensed Consolidated Balance

Sheet as of September 30, 2023:

Balance Sheet Line Item

September 30, 2023

Right-of-use assets

11 unchanged sentences

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 1, 2023:

lease liabilities recognized on the Condensed Consolidated Balance Sheet as of September 30, 2023:

Remainder of 2023

8 unchanged sentences

The Company’s weighted average remaining lease term for

operating leases as of July 1, 2023 is 8.4 years.

operating leases as of September 30, 2023 is 8.1 years.

NOTE 6 - LINE OF CREDIT

5 unchanged sentences

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

At July 1, 2023, the Company was in compliance with the

terms and covenants of the credit facility and the line of credit was unused.

At September 30, 2023, the Company was in compliance

with the terms and covenants of the credit facility and the line of credit was unused.

NOTE 7 - EMPLOYEE BENEFIT PLANS

4 unchanged sentences

Expenses related to these matching contributions totaled $ 1.0 million and $ 3.7 million for the

three and six months ended July 1, 2023, respectively, and $ 0.9 million and $ 2.3 million for the three and six months ended July 2, 2022,

three and nine months ended September 30, 2023, respectively, and $ 0.9 million and $ 3.1 million for the three and nine months ended October

1, 2022, respectively.

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

The Company plans to contribute approximately $ 1.0 million to the plan in matching employee contributions during

the remainder of 2023.

In addition, the Company provided

supplemental discretionary contributions to the 401(k) plan totaling $ 1.6 million and $ 3.7 million for the three and six months ended

July 1, 2023, respectively, and $ 1.5 million and $ 3.9 million for the three and six months ended July 2, 2022, respectively.

plans to contribute approximately $ 3.0 million in supplemental contributions to the plan during the remainder of 2023.

supplemental discretionary contributions to the 401(k) plan totaling $ 1.6 million and $ 5.3 million for the three and nine months ended

September 30, 2023, respectively, and $ 1.5 million and $ 5.4 million for the three and nine months ended October 1, 2022, respectively.

The Company plans to contribute approximately $ 1.6 million in supplemental contributions to the plan during the remainder of 2023.

NOTE 8 - INCOME TAXES

3 unchanged sentences

The Company’s effective income tax rate was 8.1 % and 18.9 %

21.1 % for the three and six months ended July 1, 2023, respectively.

for the three and nine months ended September 30, 2023, respectively.

The Company’s effective income tax rate was 12.4 % and 19.9 %

for the three and six months ended July 2, 2022, respectively.

for the three and nine months October 1, 2022, respectively.

The lower effective income tax rates for the three and nine months ended

September 30, 2023 resulted from the recognition of higher than anticipated tax credits that were noted when the Company filed its 2022

Federal and state income tax returns.

Income tax payments for the three

and six months ended July 1, 2023 totaled $ 13.5 million and $ 16.5 million, respectively.

Income tax payments for the three and six months

ended July 2, 2022 totaled $ 17.6 million and $ 20.7 million, respectively.

and nine months ended September 30, 2023 totaled $ 7.3 million and $ 23.8 million, respectively.

Income tax payments for the three and nine

months ended October 1, 2022 totaled $ 6.0 million and $ 26.6 million, respectively.

The Company files income tax returns

12 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Weighted average number of common shares outstanding – Basic

13 unchanged sentences

The Company reserved 750,000 shares for issuance under the 2017 SIP.

In June 2023, the Company’s shareholders approved the Company’s

2023 Stock Incentive Plan (the “2023 SIP”) under which employees, independent contractors, and non-employee directors may

be granted stock options, restricted stock, deferred stock awards, and stock appreciation rights, any of which may or may not require

the satisfaction of performance objectives.

Subject to the terms of the 2023 SIP, vesting requirements are determined by the Compensation

Committee of the Board of Directors .

The Company reserved 1,000,000 new shares for issuance under the 2023 SIP and, further, any

unused shares remaining from the 2017 SIP will also be available for future grants under the terms of the 2023 SIP.

As of June 30, 2023,

121,034 shares remained unawarded from the 2017 SIP.

Since the 2023 SIP was approved by the Company’s shareholders, no additional

awards have been or will be granted under the 2017 SIP.

Previously granted and outstanding awards under the 2017 SIP will remain

subject to the terms of the 2017 SIP.

In June 2023, the Company’s

shareholders approved the 2023 Stock Incentive Plan (the “2023 SIP”) under which employees, independent contractors, and non-employee

directors may be granted stock options, restricted stock, deferred stock awards, and stock appreciation rights, any of which may or may

not require the satisfaction of performance objectives.

Vesting requirements are determined by the Compensation Committee of the Board

of Directors .

The Company reserved 1,000,000 shares for issuance under the 2023 SIP, of which 869,000 shares remain available for

future grants as of September 30, 2023.

Any shares remaining from the 2017 SIP will be available for future grants under the terms of

the 2023 SIP.

As of September 30, 2023, 121,034 shares remained unawarded from the 2017 SIP.

Since the shareholder approval of the 2023

SIP, no additional awards have been or will be granted under the 2017 SIP.

Previously granted and outstanding awards under the 2017 SIP

will remain subject to the terms of the 2017 SIP.

Restricted Stock Units

The Company grants performance-based

and retention-based restricted stock units to senior employees.

The vesting of the performance-based awards is dependent on the achievement

of corporate objectives established by the Compensation Committee of the Board of Directors and a three-year vesting period.

The retention-based

awards are subject only to a three-year vesting period.

There were 113,862 restricted stock units issued during the six months ended July

Total compensation costs related to these restricted stock units are $ 6.0 million.

The Company grants

performance-based and retention-based restricted stock units to senior employees.

The vesting of the performance-based awards is

dependent on the achievement of corporate objectives established by the Compensation Committee of the Board of Directors and a

three-year vesting period.

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

There were 113,862 restricted

stock units issued during the nine months ended September 30, 2023.

Total compensation costs related to these restricted stock units

are $ 6.1 million.

Compensation costs related to

all outstanding restricted stock units recognized in the statements of income aggregated $ 1.6 million and $ 5.0 million for the three and

six months ended July 1, 2023, respectively, and $ 1.7 million and $ 3.4 million for the three and six months ended July 2, 2022, respectively.

nine months ended September 30, 2023, respectively, and $ 1.7 million and $ 5.1 million for the three and nine months ended October 1, 2022,

respectively.

NOTE 11 - OPERATING SEGMENT INFORMATION

8 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Income (Loss) Before Income Taxes

Capital Expenditures

September 30,

Identifiable Assets

3 unchanged sentences

Payments made to the NRA in the

three and six months ended July 1, 2023 totaled $ 0.2 million and $ 0.3 million, respectively.

Payments made to the NRA in the three and

six months ended July 2, 2022 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.

The Company is a member of

the National Shooting Sports Foundation (“NSSF”), the firearm industry trade association.

three and nine months ended September 30, 2023 totaled $ 0.1 million and $ 0.4 million, respectively.

Payments made to the NRA in the three

and nine months ended October 1, 2022 totaled $ 0.2 million and $ 0.4 million, respectively.

One of the Company’s Directors also serves

as a Director on the Board of the NRA.

The Company is a member of the

National Shooting Sports Foundation (“NSSF”), the firearm industry trade association.

Payments made to the NSSF in the

three and nine month periods ended September 30, 2023 totaled $ 0.1 million and $ 0.3 million, respectively.

Payments made to the

NSSF totaled $ 0.1 million in both the three and six month periods ended July 1, 2023.

Payments made to the NSSF totaled $ 0.1

million in both the three and six month periods ended July 2, 2022.

One of the Company’s Directors also serves on the Board of

NSSF in the three and nine months ended October 1, 2022 totaled $ 0.1 million and $ 0.2 million, respectively.

One of the Company’s

Directors also serves on the Board of the NSSF.

NOTE 13 - CONTINGENT LIABILITIES

As of July 1, 2023, the Company

was a defendant in eight (8) lawsuits and is aware of certain other such claims.

As of September 30, 2023, the

Company was a defendant in eight (8) lawsuits and is aware of certain other such claims.

The lawsuits fall into three categories:

municipal litigation,

negligence, and unfair trade practices.

litigation, negligence, and unfair trade practices.

Each is discussed in turn below.

22 unchanged sentences

to a specific individual as a result of the misuse or use of any of the Company's products.

After a long procedural history, during the

quarter ended April 3, 2021, the City initiated discovery and the manufacturer defendants reciprocated.

procedural history , during the quarter ended April 3, 2021, the City initiated discovery and

the manufacturer defendants reciprocated.

Discovery is ongoing.

25 unchanged sentences

District Court for the Western District of New York.

The matter was transferred to the New York Supreme Court for Monroe County

and consolidated with The City of Rochester v.

Smith & Wesson Brands, Inc., et al., discussed below.

On December 21, 2022, the City

6 unchanged sentences

Defendants timely removed the matter to the U.S.

District Court for the Western District of New York and the

matter was consolidated with The City of Buffalo .

Defendants moved to stay the consolidated Buffalo/Rochester

case pending a decision by the Second Circuit Court of Appeals in National Shooting Sports Foundation, Inc.

James , which

challenges the constitutionality of the recently enacted N.Y.

District Court for the Western District of New York.

Defendants moved to consolidate

the The City of Buffalo and The City of Rochester cases for pretrial purposes only.

Defendants also moved to stay the cases

pending a decision by the Second Circuit Court of Appeals in National Shooting Sports Foundation, Inc.

James , which challenges

the constitutionality of the recently enacted N.Y.

Law §§ 898-a–e.

On June 8, 2023, the court granted defendants’ motion and the matter is currently stayed.

On June 8, 2023, the court granted defendants’ motions and the cases were consolidated for pretrial purposes and stayed.

Sturm, Ruger, et

23 unchanged sentences

The Company filed a Motion to Dismiss on a variety of grounds.

And the matter has been fully briefed.

The matter has been briefed fully, and

a decision is pending.

Unfair Trade Practices

4 unchanged sentences

murdered by 21-year-old Ahmad Al Aliwi Al-Issa.

The Complaint alleges that the Company’s advertising

and marketing of the Ruger AR-556 pistol involved in the criminal shootings violate the Connecticut Unfair Trade Practices Act and were

a substantial factor in bringing about the wrongful death of Suzanne Fountain.

On April 24, 2023, the Connecticut Superior Court in Stamford

sua sponte transferred the case to the Connecticut Superior Court in Bridgeport.

Estate of Neven Stanisic

The Complaint alleges that the Company’s

advertising and marketing of the Ruger AR-556 pistol violate the Connecticut Unfair Trade Practices Act and were a substantial factor

in bringing about the wrongful death of Suzanne Fountain.

Estate of Neven Stanisic et

Sturm, Ruger & Co., Inc., was filed in the Connecticut Superior Court in Stamford on behalf of five plaintiffs.

Like Estate of Suzanne Fountain , the claims arise from the criminal shootings at the King Soopers supermarket in Boulder,

Colorado on March 22, 2021.

Plaintiffs’ decedents were murdered by Ahmad Al Aliwi

Al-Issa and plaintiffs allege that the Company’s advertising and marketing of the Ruger AR-556 pistol involved in the criminal

shootings violate the Connecticut Unfair Trade Practices Act and were a substantial factor in causing the wrongful death of

plaintiffs’ decedents.

and Stanisic cases have been consolidated for discovery purposes only.

The Company recently filed its Answer and Special Defenses

to each of the Complaints.

of Suzanne Fountain , the claims arise from the criminal shootings at the King Soopers supermarket in Boulder, Colorado on March 22,

Plaintiffs’ decedents were murdered by Ahmad Al Aliwi Al-Issa and plaintiffs

allege that the Company’s advertising and marketing of the Ruger AR-556 pistol violate the Connecticut Unfair Trade Practices Act

and were a substantial factor in causing the wrongful death of plaintiffs’ decedents.

and Stanisic cases have been consolidated for discovery purposes only and transferred by the court to the Complex Litigation Docket.

Plaintiffs sought leave to file an amended complaint, essentially abandoning their negligent marketing allegations and advancing a new

theory predicated upon alleged violations of the Gun Control Act and National Firearms Act.

Over the Company’s objections, plaintiffs

were permitted to file the amended complaint.

The matter was timely removed to the U.S.

District Court for the District of Connecticut

based upon federal question jurisdiction.

Summary of Claimed Damages and Explanation of Product Liability Accruals

40 unchanged sentences

NOTE 14 - SUBSEQUENT EVENTS

On August 1, 2023,

the Board of Directors authorized a dividend of 36 ¢ per share, for shareholders of record as of August 15, 2023, payable on August

On October 27, 2023,

the Board of Directors authorized a dividend of 17 ¢ per share, for shareholders of record as of November 15, 2023, payable on November

The Company has evaluated

events and transactions occurring subsequent to July 1, 2023 and determined that there were no other unreported events or transactions

events and transactions occurring subsequent to September 30, 2023 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.

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