What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2024-02-21 compared with 2023-02-22 · 244 added, 244 removed, 332 unchanged (60% of the section changed)

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distributors tend to be stronger in the first quarter of the year and weaker in the third quarter of the year.

Impact of COVID-19

The global outbreak of the Coronavirus disease 2019

was declared a pandemic by the World Health Organization and a national emergency by the U.S.

Government in March 2020.

The COVID-19 pandemic

has created significant uncertainty and adversely impacted many industries throughout the global economy.

In 2022, the Company was able

to mitigate the 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, with guidance from a dedicated

Company COVID-19 Task Force, continues to monitor and assess the situation, take proactive steps to promote the health and safety of its

employees, and 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 continue to manage through this global crisis.

At the end of 2022, the Company was debt-free and had

cash and short-term investments totaling $224.3 million.

The impact of COVID-19 in 2022 and future years on

consumer demand and the Company’s business, operations, financial results financial condition, and cash flows is dependent on future

developments, including the duration of the pandemic and the related impact on the global economy, which remains uncertain.

Results of Operations - 2023

Product Demand

The estimated sell-through of

the Company’s products from the independent distributors to retailers in 2022 decreased 25% from 2021.

For the same period, adjusted

NICS decreased 11%.

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.The greater reduction in the sell-through of the Company’s products relative to

adjusted NICS background checks may be attributable to the following:

● More aggressive promotions, discounts, rebates, and the extension of payment terms offered by our competitors,

● An apparent increase in sales of used firearms at retail, which are included in the adjusted NICS checks,

but are not distinguished from new gun sales, and

● Decreased retailer inventories as the anticipation of further discounting may be encouraging cautious

buying behavior by retailers.

The estimated sell-through of the Company’s

products from the independent distributors to retailers in 2023 decreased 7% from 2022.

For the same period, adjusted NICS decreased 4%.

The greater reduction in the sell-through of the Company’s products relative to adjusted NICS background checks may be attributable

to aggressive promotions, discounts, rebates, and the extension of payment terms offered by the Company’s competitors.

Estimated sell-through from distributors to retailers and total adjusted

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NICS background checks are also performed for permit applications, permit renewals, and other administrative

The adjusted NICS data presented above was

derived by the NSSF by subtracting NICS checks that are not directly related to the sale of a firearm, including checks

used for concealed

The adjusted NICS data presented above

was derived by the NSSF by subtracting NICS checks that are not directly related to the sale of a firearm, including checks used for concealed

carry (“CCW”) permit application checks as well as checks on active CCW permit databases.

Adjusted NICS data can be impacted by changes

in state laws and regulations and any directives and interpretations issued by governmental agencies.

Adjusted NICS data can be impacted by

changes in state laws and regulations and any directives and interpretations issued by governmental agencies.

Orders Received and Ending Backlog

The Company uses the estimated unit sell-through of

our 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 units ordered, value of orders received and ending backlog,

net of Federal Excise Tax, for the trailing three years are as follows (dollars in millions, except average sales price):

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 units ordered, value of orders received and ending backlog, net

of Federal Excise Tax, for the trailing three years are as follows (dollars in millions, except average sales price):

Orders Received

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Average Sales Price of Ending Backlog

The Company reviews the estimated sell-through from

the independent distributors to retailers, as well as inventory levels at the independent distributors and at the Company, to plan production

levels and manage inventories.

The Company reviews the estimated sell-through

from the independent distributors to retailers, as well as inventory levels at the independent distributors and at the Company, to plan

production levels and manage inventories.

These reviews resulted in a decrease in total unit production of 19% in 2023 compared to 2022.

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by 30,700 units during 2023.

inventories of the Company’s products increased by 134,200 units during 2022, and approximate a reasonable level to support rapid

inventories of the Company’s products decreased by 39,100 units during 2023, and approximate a reasonable level to support rapid

fulfillment of retailer demand for most product families .

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The Company does not have access to data on retailer

Year ended December 31, 2022, as compared to year

ended December 31, 2021:

Net Sales, Cost of Products Sold, and Gross Profit

Year ended December 31, 2023, as compared to year ended December

Net Sales, Cost of Products Sold, and Gross

sales, c ost of products sold, and gross profit data for the year ended (dollars in millions):

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Cost of products sold

Firearms sales and unit shipments decreased 18.5% and 23.4%, respectively, in 2022.

New products represented $78.4 million or 14% of firearms sales in 2022, compared to $155.5 million or 22% of firearms sales in 2021.

Firearms sales and unit shipments decreased 9%

and 17%, respectively, in 2023.

New products represented $121.7 million or 23% of firearms sales in 2023, an increase from $78.4 million

or 14% of firearms sales in 2022.

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

In 2022, new products included the MAX-9

pistol, LCP MAX, Marlin 1895 lever-action rifles, PC Charger, LC Carbine, and Small-Frame Autoloading Rifle.

The decreased gross profit for the year ended December 31, 2022 is attributable to the significant decrease in sales ,

as well as inflationary cost increases in materials, commodities, services, energy, fuel and transportation, which were partially offset

by increased pricing .

decrease in gross margin for the year ended December 31, 2022 is attributable to the

aforementioned inflationary cost increases and unfavorable deleveraging of fixed costs resulting from decreased production and sales.

new products included the MAX-9 pistol (during the first quarter only), Security-380 pistol, Super Wrangler revolver, LCP MAX pistol,

Marlin lever-action rifles, LC Carbine, Small-Frame Autoloading Rifle, and American Centerfire Rifle Generation II.

decreased gross profit for the year ended December 31, 2023 is attributable to the significant decrease in sales , as well as inflationary

cost increases in materials, commodities, services, wages, energy, fuel and transportation, unfavorable deleveraging of fixed costs resulting

from decreased production, a product mix shift toward products with relatively lower margins that remain in stronger demand, and increased

promotional costs.

The decrease in gross margin for the year ended

December 31, 2023 is attributable to the aforementioned factors, partially offset by increased pricing.

Selling, General and Administrative

general and administrative expenses were $76.6 million in 2022, a slight increase of $0.1 million from $76.5 million in 2021, and an increase

from 10.5% of sales in 2021 to 12.9% of sales in 2022.

The increase in these expenses was primarily attributable to increased shipping

costs and to the resumption of trade show participation costs, travel expenditures, and advertising that had been deferred during the

height of the COVID-19 restrictions, almost entirely offset by decreased

incentive compensation expenses and decreased variable costs,

such as shipping, as a result of the reduced sales volume.

Other Operating Income (Expense), Net

Other operating income (expense), net was de minimis

in 2022 and an expense of $0.1 million in 2021.

Selling and general and administrative expenses data for the year ended

(dollars in millions):

Selling expenses

General and administrative expenses

Total operating expenses

The increase in selling expenses for the year

ended December 31, 2023 was primarily attributable to increased trade show costs, travel expenditures, and advertising, partially

offset by decreased sales volume.

The increase in general, and administrative expenses

for the year ended December 31, 2023 was primarily attributable to increased professional service costs.

Operating Income

Operating income was $103.5 million or 17.3% of sales

Operating income was $52.1 million or 9.6% of

sales in 2023.

This is a decrease of $51.4 million from 2022 operating income of $103.5 million or 17.3% of sales.

Other Operating Income (Expense), Net

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

Royalty income

Royalty income was $0.8 million in 2022 and $2.0 million

Interest income

Interest income was $2.6 million in 2022, an increase

from de minimis earnings in 2021, due to significantly increased interest rates earned on short-term investments beginning in the second

quarter of 2022.

Interest expense

Interest expense was $0.3 million in 2022 and $0.2

million and 2021.

Other income, net

Other income, net was $1.7 million in 2022, an increase

of $0.1 million from $1.6 million in 2021.

The increase in other income

for the year ended December 31, 2023 was the result of increases in interest income due to increased interest rates earned on short-term

investments, partially offset by decreased royalty and other income.

Income Taxes and Net Income

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of certain executive compensation.

The decrease in the 2022 effective tax rate was primarily attributable to research and development

tax credits, some of which related to amended prior year income tax returns.

The impact related to research and development tax credits

on the effective tax rate is expected to decline in future years.

The impact related to research and development tax credits on the effective tax rate is expected to

decline in future years.

As a result of the foregoing factors, consolidated

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EBITDA margin

EBITDA is defined as earnings before interest, taxes,

and depreciation and amortization.

The Company calculates this 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 to arrive at EBITDA.

EBITDA is defined as earnings before interest,

taxes, and depreciation and amortization.

The Company calculates this 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 to arrive at EBITDA.

The Company’s EBITDA calculation also excludes any one-time

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Quarterly Data

To supplement the summary annual unit data and discussion

above, the same data for the last eight quarters follows:

To supplement the summary annual unit data and

discussion above, the same data for the last eight quarters follows:

Units Ordered

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(5) Distributor ending inventory as provided by the independent distributors of the Company’s products.

(in millions except

average sales price, net of Federal Excise Tax)

except average sales price, net of Federal Excise Tax)

Orders Received

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Results of Operations - 2022

Year ended December 31, 2021, as compared to year

ended December 31, 2020:

Year ended December 31, 2022, as compared to

year ended December 31, 2021:

Annual Summary Unit Data

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Orders Received and Ending Backlog

(in millions except average sales price, net of Federal

(in millions except average sales price, net of

Federal Excise Tax):

Orders Received

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Product Demand

The estimated sell-through of

the Company’s products from the independent distributors to retailers in 2021 increased 3.5% from 2020.

For the same period, adjusted

NICS decreased 12%.

The increase in the sell-through

of the Company’s products compared favorably to the decrease in adjusted NICS background checks in 2021 and may be attributable

to the following:

● Strong consumer demand for the Company’s products,

● Increased production in 2021, and

● The introduction of popular new products.

The estimated sell-through of the

Company’s products from the independent distributors to retailers in 2022 decreased 25% from 2021.

For the same period,

adjusted NICS decreased 11%.

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.

The greater reduction in the sell-through of the

Company’s products relative to adjusted NICS background checks may be attributable to the following:

● More aggressive promotions, discounts, rebates, and the extension of payment terms offered by our competitors,

● An apparent increase in sales of used firearms at retail, which are included in the adjusted NICS checks,

but are not distinguished from new gun sales, and

● Decreased retailer inventories as the anticipation of further discounting may be encouraging cautious

buying behavior by retailers.

Estimated sell-through from distributors to retailers and total adjusted

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NICS background checks are also performed for permit applications, permit renewals, and other administrative

The adjusted NICS data presented above was

derived by the NSSF by subtracting NICS checks that are not directly related to the sale of a firearm, including checks used for concealed

The adjusted NICS data presented above

was derived by the NSSF by subtracting NICS checks that are not directly related to the sale of a firearm, including checks used for concealed

carry (“CCW”) permit application checks as well as checks on active CCW permit databases.

Adjusted NICS data can be impacted by changes

in state laws and regulations and any directives and interpretations issued by governmental agencies.

The Company reviews the estimated sell-through from

the independent distributors to retailers, as well as inventory levels at the independent distributors and at the Company, to plan production

levels and manage inventories.

These reviews resulted in an increase in total unit production of 29.9% in 2021 compared to 2020.

Adjusted NICS data can be impacted by

changes in state laws and regulations and any directives and interpretations issued by governmental agencies.

The Company reviews the estimated sell-through

from the independent distributors to retailers, as well as inventory levels at the independent distributors and at the Company, to plan

production levels and manage inventories.

These reviews resulted in a decrease in total unit production of 20% in 2022 compared to 2021.

The Company’s finished goods inventory increased

by 11,800 units during 2021, but remain significantly below pre-COVID-19 pandemic levels.

inventories of the Company’s products increased by 125,000 units during 2021, but remain significantly below the level needed to

support rapid fulfillment of retailer demand for most product families .

by 92,200 units during 2022.

inventories of the Company’s products increased by 134,200 units during 2022, and approximate a reasonable level to support rapid

fulfillment of retailer demand for most product families .

Inventory data follows:

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Quarterly Summary Unit Data

To supplement the summary annual unit data and discussion

above, the same data for the last eight quarters follows:

To supplement the summary annual unit data and

discussion above, the same data for the last eight quarters follows:

Units Ordered

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(5) Distributor ending inventory as provided by the independent distributors of the Company’s products.

(in millions except

average sales price, net of Federal Excise Tax)

except average sales price, net of Federal Excise Tax)

Orders Received

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Average Sales Price of Ending Backlog

Net Sales, Cost of Products Sold, and Gross Profit

Net Sales, Cost of Products Sold, and Gross

sales, c ost of products sold, and gross profit data for the year ended (dollars in millions):

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Cost of products sold

Firearms sales and unit shipments increased 28.7% and 24.8%, respectively, in 2021.

New products represented $155.5 million or 22% of firearms sales in 2021, compared to $111.2 million or 22% of firearms sales in 2020.

Firearms sales and unit shipments decreased 18.5%

and 23.4%, respectively, in 2022.

New products represented $78.4 million or 14% of firearms sales in 2022, compared to $155.5 million

or 22% of firearms sales in 2021.

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

In 2021, new products included the Ruger-57

pistol, the PC Charger, the MAX-9 pistol, the LCP II in .22 LR pistol, the LCP MAX pistol, the Wrangler revolver, and the Marlin 1895

lever-action rifle.

The increased gross profit for the year ended December

31, 2021 is attributable to the significant increase in sales and profitability.

The increase in gross margin for the year ended December

31, 2021 is attributable to favorable leveraging of fixed costs, including depreciation, engineering and other indirect labor, resulting

from the increased sales and production, labor efficiencies, and reduced sales promotional activities.

new products included the MAX-9 pistol, LCP MAX, Marlin 1895 lever-action rifles, PC Charger, LC Carbine, and Small-Frame Autoloading

decreased gross profit for the year ended December 31, 2022 is attributable to the significant decrease in sales , as well as inflationary

cost increases in materials, commodities, services, energy, fuel and transportation, which were partially offset by increased pricing .

decrease in gross margin for the year ended December 31, 2022 is attributable to the aforementioned inflationary cost increases and unfavorable

deleveraging of fixed costs resulting from decreased production and sales.

Selling, General and Administrative

general and administrative expenses were $76.5 million in 2021, an increase of $4.2 million from $72.3 million in 2020, and a decrease

general and administrative expenses were $76.6 million in 2022, a slight increase of $0.1 million from $76.5 million in 2021, and an increase

from 10.5% of sales in 2021 to 12.9% of sales in 2022.

The increase in expense was primarily attributable to increased sales and

incentive compensation expenses and the decrease in the percentage of sales was attributable to the significant increase in sales.

Other Operating Income, net

Other operating income, net was $0.1 million in 2021

and was de minimis in 2020.

The increase in these expenses was primarily attributable to increased shipping

costs and to the resumption of trade show participation costs, travel expenditures, and advertising that had been deferred during the

height of the COVID-19 restrictions, almost entirely offset by decreased incentive compensation expenses and decreased variable costs,

such as shipping, as a result of the reduced sales volume.

Other Operating Income (Expense), Net

Other operating income (expense), net was de minimis

in 2022 and an expense of $0.1 million in 2021.

Operating Income

Operating income was $203.1 million or 27.8% of sales

This is an increase of $84.0 million from 2020 operating income of $119.1 million or 20.9% of sales.

Operating income was $103.5 million or 17.3% of

sales in 2022.

This is a decrease of $99.6 million from 2021 operating income of $203.1 million or 27.8% of sales.

Royalty Income

Royalty income was $2.0 million in 2021 and $0.8 million

Royalty income was $0.8 million in 2022 and $2.0

million in 2021.

Interest Income

Interest income was de minimis in 2021, a decrease

from $1.1 million in 2020, due to significantly decreased interest rates earned on short-term investments in 2021.

Interest income was $2.6 million in 2022, an increase

from de minimis earnings in 2021, due to significantly increased interest rates earned on short-term investments beginning in the second

quarter of 2022.

Interest Expense

Interest expense was $0.3 million in 2022 and

$0.2 million and 2021.

Other Income, Net

Other income, net was $1.6 million in 2021, an increase

of $1.5 million from $0.1 million in 2020.

Other income, net was $1.7 million in 2022, an

increase of $0.1 million from $1.6 million in 2021.

Income Taxes and Net Income

effective income tax rate was 18.4% in 2022 and 24.5% in 2021.

The Company's 2021 effective tax rate differs from the statutory

federal tax rate due principally to state income taxes and the nondeductibility of certain executive compensation.

The Company's 2020

effective tax rate differs from the statutory federal tax rate due principally to state income taxes.

The Company's 2022 and 2021 effective tax rate differs from the

statutory federal tax rate due principally to the availability of research and development tax credits, state income taxes, and the nondeductibility

of certain executive compensation.

The decrease in the 2022 effective tax rate was primarily attributable to research and development

tax credits, some of which related to amended prior year income tax returns.

The impact related to research and development tax credits

on the effective tax rate is expected to decline in future years.

As a result of the foregoing factors, consolidated

net income was $88.3 million in 2022.

This represents an increase of $65.5 million from 2020 consolidated net income of $90.4 million.

This represents a decrease of $67.6 million from 2021 consolidated net income of $155.9 million.

Non-GAAP Financial Measure

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EBITDA margin

EBITDA is defined as earnings before interest, taxes,

and depreciation and amortization.

The Company calculates this 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 to arrive at EBITDA.

EBITDA is defined as earnings before interest,

taxes, and depreciation and amortization.

The Company calculates this 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 to arrive at EBITDA.

The Company’s EBITDA calculation also excludes any one-time

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Financial Condition

December 31, 2022, the Company had cash and cash equivalents of $65.2 million and $159.1 million

in short term investments.

Our pre-LIFO working capital of $258.3 million, less the LIFO reserve of $59.5 million, resulted in working

capital of $198.7 million and a current ratio of 2.2 to 1.

The Company’s current ratio is lower than previous years primarily due

to the dividends payable of $88 million related to the $5.00 per share special dividend that was declared on November 30, 2022 and paid

on January 5, 2023.

December 31, 2023, the Company had cash and cash equivalents of $15.2 million and $102.5 million in short term investments.

The Company’s

pre-LIFO working capital of $272.5 million, less the LIFO reserve of $64.3 million, resulted in working capital of $208.2 million and

a current ratio of 4.3 to 1.

The Company’s current ratio is higher than the previous year’s primarily due to the dividends

payable of $88 million related to the $5.00 per share special dividend that was declared on November 30, 2022 and paid on January 5, 2023.

The Company also has access to a $40 million unsecured revolving line of credit that is currently undrawn.

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The Company believes that its cash flow from operations,

current cash position, and access to capital markets will continue to be sufficient to meet its anticipated cash requirements and

current cash position, and access to capital markets will continue to be sufficient to meet its anticipated cash requirements and contractual

obligations, which includes funding the Company’s capital expenditures, acquisitions, dividend payments, and share repurchases.

Cash provided by operating activities was $77.2 million,

$172.3 million, and $143.8 million in 2022, 2021, and 2020, respectively.

The decrease in cash provided in 2022 compared to 2021 is primarily

attributable to significantly decreased earnings in 2022 and increased inventories in 2022.

The increase in cash provided in 2021 compared to

2020 is primarily attributable to significantly increased earnings in 2021.

Third parties supply the Company with various raw

materials for its firearms and castings, such as 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.

There is a limited supply of these

materials in the marketplace at any given time, which can cause the purchase prices to vary based upon numerous market factors.

conditions result in a significant prolonged inflation of certain prices or if adequate quantities of raw materials cannot be obtained,

the Company’s manufacturing processes could be interrupted and the Company’s financial condition or results of operations

Cash provided by operating activities was $33.9

million, $77.2 million, and $172.3 million in 2023, 2022, and 2021, respectively.

The decrease in cash provided in 2023 compared to 2022

is primarily attributable to significantly decreased earnings in 2023.

The decrease in cash provided in 2022 compared

to 2021 is primarily attributable to significantly decreased earnings in 2022 and increased inventories and trade receivables in 2022.

Third parties supply the Company with various

raw materials for its firearms and castings, such as 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.

There is a limited supply of

these materials in the marketplace at any given time, which can cause the purchase prices to vary based upon numerous market factors.

If market conditions result in a significant prolonged inflation of certain prices or if adequate quantities of raw materials cannot be

obtained, the Company’s manufacturing processes could be interrupted and the Company’s financial condition or results of operations

could be materially adversely affected.

Investing and

Capital expenditures were $27.7 million, $28.8 million,

and $24.2 million in 2022, 2021, and 2020, respectively.

In 2023, the Company expects capital expenditures to approximate $20 million,

much of which will relate to tooling and fixtures for new product introductions and to upgrade and modernize manufacturing equipment.

and Financing

Capital expenditures were $15.8 million, $27.7

million, and $28.8 million in 2023, 2022, and 2021, respectively.

In 2024, the Company expects capital expenditures to approximate $15

million, much of which will relate to tooling and fixtures for new product introductions and to upgrade and modernize manufacturing equipment.

Due to market conditions and business circumstances, actual capital expenditures could vary significantly from the budgeted amount.

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

Included in capital expenditures amount noted above,

on October 3, 2022 the Company purchased a 225,000 square foot facility, which it had previously been leasing, in Mayodan, North Carolina

for $8.3 million for use in its manufacturing and warehousing operations.

23, 2020, the Company acquired substantially all of the Marlin Firearms assets, consisting of inventory, machinery and equipment, and

intangible assets.

The agreement to purchase these assets emanated from the Remington Outdoor Company, Inc.

bankruptcy and was approved

by the United States Bankruptcy Court for the Northern District of Alabama on September 30, 2020.

The purchase price of approximately

$28.3 million was paid with available cash on hand.

Shipments of Ruger-made, Marlin lever-action rifles commenced in the fourth quarter

Included in capital expenditures amount noted

above, on October 3, 2022 the Company purchased a 225,000 square foot facility, which it had previously been leasing, in Mayodan, North

Carolina for $8.3 million for use in its manufacturing and warehousing operations.

of December 31, 2023, the Company had $74.7 million of United States Treasury instruments which mature within one year.

also invests available cash in a bank-managed

money market fund that invests exclusively in United States Treasury instruments which mature

also invests available cash in a bank-managed money market fund that invests exclusively in United States Treasury instruments which mature

within one year.

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were funded with cash on hand.

No shares were repurchased in 2020 or 2021.

In 2022, the Company repurchased

4,440 shares of its common stock for $0.2 million in the open market.

The average price per share purchased was $49.87.

These purchases

were funded with cash on hand.

No shares were repurchased in 2021.

At December 31, 2023, approximately $74.7 million

remained authorized for future share repurchases .

Company paid dividends totaling $42.7 million, $59.1 million, and $113.9 million in 2022, 2021, and 2020, respectively.

The increased

dividends paid in 2020 were attributable to a $5.00 per share special dividend paid in August 2020.

quarterly dividend varies every quarter because the Company pays a percentage of earnings rather than a fixed amount per share.

The Company’s

practice is to pay a dividend of approximately 40% of net income.

On January 5, 2023, the Company paid a $5.00 per share special dividend to shareholders of

record on December 15, 2022.

On February 17, 2023, the Company’s Board of Directors authorized a dividend of 42¢ per share

to shareholders of record on March 10, 2023.

The payment of future dividends depends on many factors, including internal estimates of

future performance, then-current cash, and the Company’s need for funds.

The Company provides supplemental discretionary contributions

to substantially all employees’ individual 401(k) accounts.

Based on its unencumbered assets, the Company believes

it has the ability to raise cash through issuance of short-term or long-term debt.

Contractual Obligations

At December 31, 2022, the Company had approximately $84.6 million in agreements

to purchase goods or services that are enforceable and legally binding on the Company, all of which are expected to be settled in less

than one year.

Additionally, the Company has approximately $4.4 million in operating lease obligations, which will be payable through

On January 5, 2023, the Company paid a $5.00 per

share special dividend to shareholders of record on December 15, 2022.

Including the $5.00 per share special dividend

paid on January 5, 2023, the Company paid dividends totaling $110.8 million, $42.7 million, and $59.1 million in 2023, 2022, and 2021,

respectively.

The quarterly dividend varies every quarter because the Company pays a percentage of earnings rather than a fixed amount

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

On February 16, 2024, the Company’s Board

of Directors authorized a dividend of 23¢ per share to shareholders of record on March 15, 2024.

The payment of future dividends

depends on many factors, including internal estimates of future performance, then-current cash, and the Company’s need for funds.

The Company provides supplemental discretionary

contributions to substantially all employees’ individual 401(k) accounts.

Based on its unencumbered assets, the Company

believes it has the ability to raise cash through issuance of short-term or long-term debt.

At December 31, 2023, the Company had approximately

$51.3 million in agreements to purchase goods or services that are enforceable and legally binding on the Company, all of which are expected

to be settled in less than one year.

Additionally, the Company has approximately $3.6 million in operating lease obligations, which will

be payable through 2034.

The Company expects to fund all of these commitments with cash flows from operations and current cash.

Firearms Legislation and

See Item 1A - Risk Factors and Note 21 to the financial

statements which are included in the Annual Report on Form 10-K for a discussion of firearms legislation and litigation.

Firearms Legislation

and Litigation

See Item 1A - Risk Factors and Note 20 to the

financial statements which are included in the Annual Report on Form 10-K for a discussion of firearms legislation and litigation.

Other Operational Matters

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and control, waste disposal, air emissions and water discharges into the environment.

Company believes that it is generally in compliance

The Company believes that it is generally in compliance

with applicable Bureau of Alcohol, Tobacco, Firearms & Explosives, environmental, and safety regulations and the outcome of any proceedings

3 unchanged sentences

Currently, there are 15 domestic distributors.

Additionally,

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

The Company self-insures a significant amount of its

product liability, workers’ compensation, medical, and other insurance.

It also carries significant deductible amounts on various

insurance policies.

The Company expects to realize its deferred tax assets

through tax deductions against future taxable income.

Additionally, the Company has 44 and 26 distributors servicing the export and law enforcement markets, respectively.

The Company self-insures a significant amount

of its product liability, workers’ compensation, medical, and other insurance.

It also carries significant deductible amounts on

various insurance policies.

The global outbreak of the Coronavirus disease

2019 was declared a pandemic by the World Health Organization and a national emergency by the U.S.

Government in March 2020.

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

twelve month period ended December 31, 2023, the Company did not experience a significant adverse impact on its business from COVID-19

or related government restrictions.

The Company cannot predict the extent to which its business, results of operations, financial condition,

or cash flows will ultimately be impacted by COVID-19.

The Company expects to realize its deferred tax

assets through tax deductions against future taxable income.

Critical Accounting Policies and Estimates

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Product Liability Accrual

The Company believes the determination of its product

liability accrual is a critical accounting policy.

The Company’s management reviews every lawsuit and claim and is in contact with

independent and corporate counsel on an ongoing basis.

The provision for product liability claims is based upon many factors, which vary

for each case.

These factors include the type of claim, nature and extent of injuries, historical settlement ranges, jurisdiction where

filed, and advice of counsel.

An accrual is established for each lawsuit and claim, when appropriate, based on the nature of each such

lawsuit or claim.

Amounts are charged to product liability expense in

the period in which the Company becomes aware that a claim or, in some instances a threat of a claim, has been made when potential losses

or costs of defense are probable and can be reasonably estimated.

The Company believes the determination of its

product liability accrual is a critical accounting policy.

The Company’s management reviews every lawsuit and claim and is in contact

with independent and corporate counsel on an ongoing basis.

The provision for product liability claims is based upon many factors, which

vary for each case.

These factors include the type of claim, nature and extent of injuries, historical settlement ranges, jurisdiction

where filed, and advice of counsel.

An accrual is established for each lawsuit and claim, when appropriate, based on the nature of each

such lawsuit or claim.

Amounts are charged to product liability expense

in the period in which the Company becomes aware that a claim or, in some instances a threat of a claim, has been made when potential

losses or costs of defense are probable and can be reasonably estimated.

Such amounts are determined based on the Company’s experience

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Occasionally, charges are made for claims made in prior periods because the cumulative actual costs incurred

for that claim, or reasonably expected to be incurred in the future, exceed amounts already provided with respect to

for that claim, or reasonably expected to be incurred in the future, exceed amounts already provided with respect to such claims.

credits may be taken if cumulative actual costs incurred for that claim, or reasonably expected to be incurred in the future, are less

than amounts previously provided.

While it is not possible to forecast the outcome of

litigation or the timing of related costs, in the opinion of management, after consultation with independent and corporate counsel, there

is a remote likelihood that litigation, including punitive damage claims, will have a material adverse effect on the financial position

While it is not possible to forecast the outcome

of litigation or the timing of related costs, in the opinion of management, after consultation with independent and corporate counsel,

there is a remote likelihood that litigation, including punitive damage claims, will have a material adverse effect on the financial position

of the Company, but such litigation may have a material impact on the Company’s financial results and cash flows for a particular

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Recent Accounting Pronouncements

In November of 2023, the FASB issued ASU 2023-07,

“Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.” The updated accounting guidance requires

enhanced reportable segment disclosures, primarily related to significant segment expenses which are regularly provided to the chief operating

decision maker.

The guidance is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning

after December 15, 2024.

Retrospective application is required and early adoption is permitted.

The Company is currently evaluating the

effect the updated guidance will have on its financial statement disclosures.

In December of 2023, the FASB issued ASU 2023-09,

“Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.” The updated accounting guidance requires expanded income

tax disclosures, including the disaggregation of existing disclosures related to the effective tax rate reconciliation and income taxes

The guidance is effective for fiscal years beginning after December 15, 2024.

Prospective application is required, with retrospective

application permitted.

The Company is currently evaluating the effect the updated guidance will have on its financial statement disclosures.

Forward-Looking Statements and Projections

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speak only as of the date made.

The Company undertakes no obligation to publish revised forward-looking statements to reflect events or

circumstances after the date such forward-looking statements are made or to reflect the occurrence of subsequent unanticipated events.

The Company undertakes no obligation to publish revised forward-looking statements to reflect events

or circumstances after the date such forward-looking statements are made or to reflect the occurrence of subsequent unanticipated events.

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-K

Item 7. Management’s Discussion and Analysis