What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-07-31 compared with 2024-05-07 · 109 added, 70 removed, 192 unchanged (48% of the section changed)

5 unchanged sentences

99% of sales are from firearms.

Export sales accounted for approximately 5% and 7% of total sales for the three month periods ended March

30, 2024 and April 1, 2023, respectively.

Export sales accounted for approximately 5% and 7% of total sales for the six month periods ended June

29, 2024 and July 1, 2023, respectively.

The Company’s design and manufacturing operations are located in the United States and

11 unchanged sentences

The estimated unit sell-through

of the Company’s products from the independent distributors to retailers increased 1% in the first quarter months of 2024 compared

to the prior year period.

For the same period, National Instant Criminal Background Check System (“NICS”) background checks

(as adjusted by the National Shooting Sports Foundation (“NSSF”)) decreased 4%.

Estimated sell-through from the independent

distributors to retailers and total adjusted NICS background checks for the trailing five quarters follow:

of the Company’s products from the independent distributors to retailers increased 1% in the first half of 2024 compared to the

prior year period.

For the same period, National Instant Criminal Background Check System (“NICS”) background checks (as adjusted

by the National Shooting Sports Foundation (“NSSF”)) decreased 6%.

Estimated sell-through from the independent distributors

to retailers and total adjusted NICS background checks for the trailing six quarters follow:

Estimated Units Sold from Distributors to Retailers (1)

10 unchanged sentences

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 out NICS checks that are not directly related to the sale of a firearm, including

The adjusted NICS data

presented above was derived by the NSSF by subtracting out 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.

NICS checks represent less than half of the total NICS checks.

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

5 unchanged sentences

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,

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):

9 unchanged sentences

to plan production levels.

Consequently, the Company’s overall production in the first quarter of 2024 increased 3% from the fourth

Consequently, the Company’s overall production in the second quarter of 2024 increased 18% from the first

quarter of 2024 .

1 unchanged sentence

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):

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 2024,

the Company’s finished goods inventory decreased by 30,900 units and distributor inventories of the Company’s products decreased

During the first half of 2024,

the Company’s finished goods inventory increased by 3,200 units and distributor inventories of the Company’s products decreased

by 42,800 units.

Inventory unit data for the trailing five quarters

Inventory unit data for the trailing six quarters follows:

Company Inventory

10 unchanged sentences

and gross profit data for the three months ended (dollars in millions):

March 30, 2024

April 1, 2023

June 29, 2024

Net firearms sales

2 unchanged sentences

Cost of products sold

Sales of new products, including

the Security-380 pistol, Super Wrangler revolver, Marlin lever-action rifles, LC Carbine, Small-Frame Autoloading Rifle, and American

Centerfire Rifle Generation II represented $41.8 million or 32.0% of firearm sales in the three months ended March 30, 2024.

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

The decrease in total consolidated

net sales and net firearms sales for the three months ended June 29, 2024 is attributable to decreased consumer demand for firearms.

of new products, including the Security-380 pistol, Super Wrangler revolver, Marlin lever-action rifles, LC Carbine, Small-Frame Autoloading

Rifle, and American Centerfire Rifle Generation II represented $37.9 million or 30.6% of firearm sales in the three months ended June

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

The decreased gross profit for

the three months ended March 30, 2024 is attributable to the decrease in sales, a product mix shift toward products with relatively lower

margins that remain in relatively stronger demand, unfavorable deleveraging of fixed costs resulting from decreased production, and inflationary

cost increases in materials, commodities, services, wages, energy, fuel and transportation.

the three months ended June 29, 2024 is attributable to unfavorable deleveraging of fixed costs resulting from decreased production, a

product mix shift toward products with relatively lower margins that remain in relatively stronger demand, and the decrease in sales.

The decrease in gross margin for

the three months ended March 30, 2024 is attributable the aforementioned factors, partially offset by increased pricing.

the three months ended June 29, 2024 is attributable to the aforementioned factors, partially offset by increased pricing.

Net sales, cost of products sold,

and gross profit data for the six months ended (dollars in millions):

June 29, 2024

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 six months ended June 29, 2024 is attributable to decreased consumer demand for firearms.

of new products, including the Security-380 pistol, Super Wrangler revolver, Marlin lever-action rifles, LC Carbine, Small-Frame Autoloading

Rifle, and American Centerfire Rifle Generation II, represented $79.7 million or 31.3% of firearm sales in the first half of 2024.

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

The decreased gross profit for

the six months ended June 29, 2024 is attributable to unfavorable deleveraging of fixed costs resulting from decreased production, a product

mix shift toward products with relatively lower margins that remain in relatively stronger demand, and the decrease in sales.

The decrease in gross margin for

the six months ended June 29, 2024 is attributable to a product mix shift toward products with relatively lower margins that remain in

relatively stronger demand and unfavorable deleveraging of fixed costs resulting from decreased production, partially offset by increased

Selling and General and Administrative Expenses

1 unchanged sentence

expenses data for the three months ended (dollars in millions):

March 30, 2024

April 1, 2023

June 29, 2024

Selling expenses

1 unchanged sentence

Total operating expenses

The increase in selling expenses

for the three months ended March 30, 2024 was primarily attributable to increases in shipping costs and increased advertising and promotional

The decrease in general, and administrative

expenses for the three months ended March 30, 2024 was primarily attributable to decreased professional service costs and decreased incentive

compensation, offset by accrued severance expense of $1.5 million related to a reduction in force that involved about 80 employees.

accrued severances are expected to be settled in cash and consist of one-time termination charges arising from severance obligations and

other customary employee benefit payments in connection with a reduction in force.

The decrease in selling expenses

for the three months ended June 29, 2024 was attributable to modest reductions in several selling and marketing initiatives.

The increase in general, and administrative

expenses for the three months ended June 29, 2024 was primarily attributable to increased professional service costs.

Selling and general and administrative

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

June 29, 2024

Selling expenses

General and administrative expenses

Total operating expenses

Selling expenses for the six months

ended June 29, 2024 was consistent with the prior year period.

The increase in general, and administrative

expenses for the six months ended June 29, 2024 was primarily attributable to accrued severances of $1.5 million taken in the first quarter

of 2024 related to a reduction in force involving approximately 80 employees, largely offset by decreased incentive compensation expenses.

The aforementioned accrued severances are expected to be settled in cash and consist of one-time termination charges arising from severance

obligations and other customary employee benefit payments in connection with a reduction in force.

The reduction in force is expected

3 unchanged sentences

As the Company focuses on

these goals, it will continue to pursue opportunities to consolidate functions and reduce or eliminate investment in areas of lower focus.

these goals, it will continue to pursue opportunities to reduce or eliminate investment in areas of lower focus.

Other income data for the three

months ended (dollars in millions):

March 30, 2024

April 1, 2023

Other income for the three months

ended March 30, 2024 was essentially unchanged as increases in interest income were offset by decreased royalty and miscellaneous income.

June 29, 2024

The decrease in other income for

the three months ended June 29, 2024 was attributable to decreased interest income and miscellaneous income.

Other income data for the six months

ended (dollars in millions):

June 29, 2024

The decrease in other income for

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

Income Taxes and Net Income

The Company's 2024 and 2023 effective

1 unchanged sentence

nondeductibility of certain executive compensation.

The Company’s effective income tax rate was 21.7% for the three months ended

March 30, 2024, a decrease from 22.4% for the three months ended April 1, 2023.

The Company’s effective income tax rate was 21.0% and 21.3% for the three and

six months ended June 29, 2024, respectively.

The Company’s effective income tax rate was 20.0% and 21.1% for the three and six

months ended July 1, 2023, respectively.

As a result of the foregoing factors,

consolidated net income was $8.3 million for the three months ended June 29, 2024, a decrease of 48.9% from $16.2 million in the comparable

prior year period.

Consolidated net income was $15.3

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

Non-GAAP Financial Measures

22 unchanged sentences

EBITDA was $14.5 million for the

three months ended March 30, 2024, a decrease of 43.2% from $23.8 million in the comparable prior year period.

three months ended June 29, 2024, a decrease of 42.9% from $25.3 million in the comparable prior year period.

For the six months ended June

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

Non-GAAP Reconciliation – EBITDA

1 unchanged sentence

Three Months Ended

March 30, 2024

April 1, 2023

Six Months Ended

June 29, 2024

Income tax expense

3 unchanged sentences

EBITDA margin

Net income margin

Financial Condition

Liquidity and Capital Resources

At the end of the first quarter

At the end of the second quarter

of 2024, the Company’s cash and short-term investments totaled $105.6 million.

2 unchanged sentences

Cash provided by operating activities

was $7.3 million for the three months ended March 30, 2024, compared to $5.3 million for the comparable prior year period.

in cash provided in the three months ended March 30, 2024 is primarily attributable to the decrease in inventory and the decrease in prepaid

expenses and other assets in the three months ended March 30, 2024, partially offset by the decrease in net income and the increase in

accounts receivable in the three months ended March 30, 2024.

was $26.1 million for the six months ended June 29, 2024, compared to $21.8 million for the comparable prior year period.

in cash provided in the six months ended June 29, 2024 is primarily attributable to decreases in inventory and prepaid expenses and other

assets in the six months ended June 29, 2024, partially offset by the decrease in net income in the six months ended June 29, 2024.

Third parties supply the Company

6 unchanged sentences

Investing and Financing

Capital expenditures for the three

months ended March 30, 2024 totaled $1.8 million, an increase from $1.7 million in the comparable prior year period.

Capital expenditures for the six

months ended June 29, 2024 totaled $10.4 million, an increase from $4.9 million in the comparable prior year period.

In 2024, the Company

6 unchanged sentences

Dividends of $6.7 million were

paid during the three months ended March 30, 2024.

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

paid during the six months ended June 29, 2024.

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

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

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

On April 26, 2024, the Company’s

Board of Directors authorized a dividend of 16¢ per share to shareholders of record on May 20, 2024, payable on June 7, 2024.

payment of future dividends depends on many factors, including internal estimates of future performance, then-current cash and short-term

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

On July 26, 2024, the Company’s

Board of Directors authorized a dividend of 19¢ per share to shareholders of record on August 15, 2024, payable on August 30, 2024.

The payment of future dividends depends on many factors, including internal estimates of future performance, then-current cash and short-term

investments, and the Company’s need for funds.

As of March 30, 2024, the Company

As of June 29, 2024, the Company

had $76.4 million of United States Treasury instruments which mature within one year.

1 unchanged sentence

money market fund that invests exclusively in United States Treasury instruments which mature within one year.

At March 30, 2024, the

Company’s investment in this money market fund totaled $24.2 million.

During the three months ended

March 30, 2024 the Company purchased 75,024 shares of its common stock for $3.2 million in the open market.

The average price per share

purchased was $42.89.

At June 29, 2024, the Company’s

investment in this money market fund totaled $22.1 million.

During the six months ended June

29, 2024 the Company purchased 477,917 shares of its common stock for $20.3 million in the open market.

The average price per share purchased

These purchases were funded with cash on hand.

As of March 30, 2024, $71.5 million remained authorized for future

stock repurchases.

As of June 29, 2024, $54.4 million remained authorized for future stock repurchases.

Based on its unencumbered assets,

1 unchanged sentence

The Company’s unsecured

$40 million credit facility, which expires on January 7, 2025, was unused at March 30, 2024.

$40 million credit facility, which expires on January 7, 2028, was unused at June 29, 2024.

Other Operational Matters

34 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 2. Management’s Discussion and Analysis