What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2025-02-19 compared with 2024-02-21 · 365 added, 301 removed, 746 unchanged (47% of the section changed)

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Company, Inc.

and Subsidiary

and Subsidiaries

Opinion on the Internal Control Over Financial Reporting

We have audited Sturm, Ruger & Company, Inc.

and Subsidiary’s

(the Company) internal control over financial reporting as of December 31, 2023, based on criteria established in Internal

Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31,

2023, based on criteria established in Internal Control—Integrated Framework issued by

the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

and Subsidiaries'

(the Company) internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control

— Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

In our opinion,

the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on

criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the

Treadway Commission in 2013.

We have also audited, in accordance with the standards of the Public

Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and

2022, and the related consolidated statements of income and comprehensive income, stockholders' equity, and cash flows for each of the

three years in the period ended December 31, 2023, and our report dated February 21, 2024 expressed an unqualified opinion.

Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023

and 2022, and the related consolidated statements of income and comprehensive income, stockholders' equity, and cash flows for each of

the three years in the period ended December 31, 2023, and our report dated February

19, 2025 expressed an unqualified opinion.

Basis for Opinion

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We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

Definition and Limitations of Internal Control Over Financial

A company's internal control over financial reporting is a process

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Company, Inc.

and Subsidiary

and Subsidiaries

Opinion on the Financial Statements

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Ruger & Company, Inc.

and Subsidiary (the Company) as of December 31, 2023 and 2022, the related consolidated statements of income

and comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2023,

and its subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statements of

income and comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2024,

and the related notes to the consolidated financial statements and schedule (collectively, the financial statements).

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Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31,

2023, based on criteria established in Internal Control—Integrated Framework issued by

the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated February 21, 2024 expressed an unqualified

opinion on the effectiveness of the Company’s internal control over financial reporting.

2024, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations

of the Treadway Commission in 2013, and our report dated February 19, 2025 expressed an unqualified opinion on the effectiveness of the

Company's internal control over financial reporting.

Basis for Opinion

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Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was

communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material

to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical

audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the

critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it

The critical audit matter communicated below is a matter arising from

the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,

subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements,

taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit

matter or on the accounts or disclosures to which it relates.

Last-In, First-Out Inventory Reserve

As described in Notes 1 and 4 to the financial statements, substantially all of the Company’s inventories are valued at the

lower of cost, which is principally determined by the last-in, first-out (LIFO) method, or net realizable value, and the Company’s

consolidated net inventories balance of $79.8 million as of December 31, 2023, included a LIFO inventory reserve of $64.3 million.

Company records its net inventories under the LIFO method at the end of each year based on the inventory levels at the measurement date

and the prevailing inventory costs existing at that time, which are estimated using a complex manual calculation.

As described in Notes 1 and 4 to the financial statements, substantially

all of the Company’s inventories are valued at the lower of cost, which is principally determined by the last-in, first-out (LIFO)

method, or net realizable value, and the Company’s consolidated net inventories balance of $76.5 million as of December 31, 2024,

included a LIFO inventory reserve of $66.4 million.

The Company records its net inventories under the LIFO method at the end of each year

based on the inventory levels at the measurement date and the prevailing inventory costs existing at that time, which are estimated using

a complex manual calculation.

We identified the LIFO inventory reserve as a critical audit matter

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reserve included the following, among others:

● We obtained an understanding of the relevant controls related to the LIFO

inventory reserve and tested such controls for design and operating effectiveness, including controls related to the review of the calculations

related to the estimate of the current year price level changes, the calculation of the cumulative price indexes, and the estimate of

the LIFO inventory reserve.

● We tested the completeness, accuracy, and relevance of the underlying data

used in management’s estimate of the current year price level changes, the calculation of cumulative price index and the LIFO inventory

● We tested the mathematical accuracy of the Company’s calculation to

estimate the LIFO inventory reserve.

● We evaluated the appropriateness of management’s methodologies to develop

the estimate of the LIFO inventory reserve.

● We evaluated the reasonableness of management’s estimate of the current

year price level changes by comparing management’s estimate to external market data.

● We obtained an understanding of the relevant controls

related to the LIFO inventory reserve and tested such controls for design and operating effectiveness, including controls related to

management’s review of the calculations related to the estimate of the current year price level changes, the calculation of

the cumulative price indexes, and the estimate of the LIFO inventory reserve.

● We tested the completeness, accuracy, and relevance of the

significant underlying data used in management’s estimate of the current year price level changes, the calculation of cumulative

price index and the LIFO inventory reserve.

● We tested the mathematical accuracy of the Company’s

calculation to estimate the LIFO inventory reserve.

● We evaluated the appropriateness of management’s methodologies

to develop the estimate of the LIFO inventory reserve.

● We evaluated the reasonableness of management’s estimate

of the current year price level changes by comparing management’s estimate to external market data.

/s/ RSM US LLP

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Trade accounts payable and accrued expenses

Dividends payable

Contract liabilities with customers (Note 2)

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Workers’ compensation

Income taxes payable

Total Current Liabilities

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Cost of products sold

Operating Expenses (Incomes):

Operating Expenses (Income):

General and administrative

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Unpaid dividends accrued

Repurchase of 4,440 shares of common stock

Balance at December 31, 2022

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Operating Activities

Adjustments to reconcile net income to cash provided by operating activities, net of effects of acquisition:

Adjustments to reconcile net income to cash provided by operating activities:

Depreciation and amortization

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Net proceeds from sale of assets

Cash provided by (used for) investing activities

Cash (used for) provided by investing activities

Financing Activities

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Repurchase of common stock

Payment of employee

withholding tax related to share-based compensation

Payment of employee withholding tax related to share-based compensation

Cash used for financing activities

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The consolidated financial statements include

the accounts of the Company and its wholly owned subsidiary.

the accounts of the Company and its wholly owned subsidiaries.

All significant intercompany accounts and transactions have been eliminated.

Revenue Recognition

The Company recognizes revenue in accordance

with the provisions of Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (“ASC 606”), which

became effective January 1, 2018.

The Company recognizes revenue in accordance with

the provisions of Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (“ASC 606”), which became

effective January 1, 2018.

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

Customary 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.

Customary 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.

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of the Company’s products from the independent distributors.

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

The fulfillment of these no charge products

is the Company’s

responsibility.

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Plant and Equipment

Property, plant and equipment are carried at

Depreciation is computed over useful lives using the straight-line and declining balance methods predominately over 15 years for

buildings, 7 years for machinery and equipment and 3 years for tools and dies.

When assets are retired, sold or otherwise disposed of,

their gross carrying values and related accumulated depreciation are removed from the accounts and a gain or loss on such disposals is

recognized when appropriate.

Property, plant and equipment are carried at cost.

Depreciation is computed over useful lives using the straight-line and declining balance methods predominately over 15 years for buildings,

7 years for machinery and equipment and 3 years for tools and dies.

When assets are retired, sold or otherwise disposed of, their gross

carrying values and related accumulated depreciation are removed from the accounts and a gain or loss on such disposals is recognized

when appropriate.

Maintenance and repairs are charged to operations;

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The Company bases fair

value of the assets on quoted market prices if available or, if not available,

quoted market prices of similar assets.

value of the assets on quoted market prices if available or, if not available, quoted market prices of similar assets.

Where quoted market

prices are not available, the Company estimates fair value using the estimated future cash flows generated by the assets discounted at

prices are not available, the Company

estimates fair value using the estimated future cash flows generated by the assets discounted at

a rate commensurate with the risks associated with the recovery of the assets.

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are any indications of impairment related to long-lived assets.

The Company’s

goodwill represents the excess of the purchase price of business combinations over the fair value of the net assets acquired.

goodwill for impairment on an annual basis during the fourth quarter of each year, and between annual tests whenever events or changes

in circumstances indicate that the carrying amount may not be recoverable.

An impairment exists by the amount the fair value of a reporting

unit to which goodwill has been allocated is less than their respective carrying values.

The impairment for goodwill is limited to the

total amount of goodwill allocated to the reporting unit.

Goodwill impairment testing requires significant judgment and management estimates,

including, but not limited to, the determination of (i) the number of reporting units, (ii) the goodwill and other assets and

liabilities to be allocated to the reporting units and (iii) the fair values of the reporting units.

The estimates and assumptions

described above, along with other factors such as discount rates, will significantly affect the outcome of the impairment tests and the

amounts of any resulting impairment losses.

As of December 31, 2023, the Company does not believe there are any indications of

impairment related to goodwill.

The Company’s goodwill represents the excess

of the purchase price of business combinations over the fair value of the net assets acquired.

We assess goodwill for impairment on an

annual basis during the fourth quarter of each year, and between annual tests whenever events or changes in circumstances indicate that

the carrying amount may not be recoverable.

An impairment exists by the amount the fair value of a reporting unit to which goodwill has

been allocated is less than their respective carrying values.

The impairment for goodwill is limited to the total amount of goodwill allocated

to the reporting unit.

Goodwill impairment testing requires significant judgment and management estimates, including, but not limited

to, the determination of (i) the number of reporting units, (ii) the goodwill and other assets and liabilities to be allocated

to the reporting units and (iii) the fair values of the reporting units.

The estimates and assumptions described above, along with

other factors such as discount rates, will significantly affect the outcome of the impairment tests and the amounts of any resulting impairment

As of December 31, 2024, the Company does not believe there are any indications of impairment related to goodwill.

Income taxes are accounted for using the asset

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number of shares of common stock outstanding during the year.

Diluted earnings per share reflect the impact of options, restricted stock

units, and deferred stock outstanding using the treasury stock method.

Diluted earnings per share reflect the impact of restricted stock units

and deferred stock outstanding using the treasury stock method.

Recent Accounting Pronouncements

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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.

The Company adopted ASU 2023-07, beginning with the current filing.

The adoption of the new guidance required

additional disclosures, but did not have a material impact to the Company.

Refer to Note 17, Operating Segment Information, for the updated

presentation.

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

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

In November 2024, the FASB issued ASU No.

“Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures,” which requires additional

disclosure of certain costs and expenses within the notes to the financial statements.

The updated standard is effective for annual reporting

periods beginning after December 15, 2026 and interim reporting periods within annual reporting periods beginning after December 15,

The requirements will be applied prospectively with the option for retrospective application.

Early adoption is permitted.

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

Revenue Recognition and Contracts with Customers

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During the year ended December 31, 2024, the Company

did not defer any revenue and recognized $ 0.1 million of revenue previously deferred as the performance obligations relating to the shipment

of free products were satisfied.

This resulted in a net increase in firearms sales for the year ended December 31, 2024 of $ 0.1 million

and there being no deferred contract revenue liability at December 31, 2024.

During the year ended December 31, 2023, the Company

deferred $ 3.2 million of revenue, offset by the recognition of $ 4.1 million of revenue previously deferred as the performance obligations

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31, 2023 of $ 0.9 million and a deferred contract revenue liability at December 31, 2023 of $ 0.1 million.

The Company estimates that revenue

from this deferred contract liability will be recognized in the first quarter of 2024.

During the year ended December 31, 2022, the Company

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for the year ended December 31, 2022 of $ 1.0 million and a deferred contract revenue liability at December 31, 2022 of $ 1.0 million.

During the year ended December 31, 2021, there

were no promotions giving rise to deferred contract liabilities and, therefore, there was no additional deferred revenue.

Previously deferred

revenue of $ 0.1 million was recognized in the first quarter of 2021.

The Company did not have a deferred contract revenue liability at

December 31, 2021.

Practical Expedients and Exemptions

The Company has elected to account for shipping

and handling activities that occur after control of the related product transfers to the customer as fulfillment activities that are recognized

upon shipment of the goods.

and handling activities that occur after control of the related product transfers to the customer as fulfillment activities that are

recognized upon shipment of the goods.

Trade Receivables, Net

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Patents, at cost

Accumulated amortization

Deposits on capital items

Marlin trade name

The capitalized cost of patents is amortized

using the straight-line method over their useful lives.

Expenses related to patent amortization was $ 0.4 million in 2023, $ 0.4 million

in 2022, and $ 0.3 million in 2021.

Marlin trade name, at cost

Accumulated amortization

The capitalized cost of patents is amortized using

the straight-line method over their useful lives.

Expenses related to patent amortization was $ 0.5 million in 2024, $ 0.4 million in 2023,

and $ 0.4 million in 2022.

The estimated annual patent amortization expense for each of the next five years is $ 0.4 million.

Costs incurred to maintain existing patents are charged to expense in the year incurred.

The Marlin trade name will be amortized using

the straight-line method over its useful life.

The estimated annual trade name amortization cost for each of the next five years is $ 0.4

The intangible asset related to Marlin customer relationships are included in Other above and will be amortized using the straight-line

Costs incurred

to maintain existing patents are charged to expense in the year incurred.

The Marlin trade name will be amortized using the straight-line

method over its useful life.

The estimated annual customer relationship name amortization expense for each of the next five years is

$ 0.1 million.

The estimated annual trade name amortization cost for each of the next five years is $ 0.4 million.

The intangible

asset related to Marlin customer relationships are included in Other above and will be amortized using the straight-line method over its

The estimated annual customer relationship name amortization expense for each of the next five years is $ 0.1 million.

Leased Assets

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Balance Sheet Line

Right-of-use assets

Item December 31,

2024 December 31,

Right-of-use assets Other assets $ 2,345 $ 2,781

Operating lease liabilities

Current portion

Trade accounts payable and accrued expenses

Noncurrent portion

Lease liabilities

Current portion Trade accounts payable and accrued expenses $ 598 $ 611

Noncurrent portion Lease liabilities 1,747 2,170

Total operating lease liabilities $ 2,345 $ 2,781

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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 December 31, 2023:

The table below includes cash

paid for our operating lease liabilities, other non-cash information, our weighted average remaining lease term and weighted average discount

2024 December 31,

Cash paid for amounts included in the measurement of lease liabilities $ 796 $ 796

Cash amounts paid for short-term leases $ 449 $ 565

Right-of-use assets obtained in exchange for lease liabilities $ — $ —

Weighted average remaining lease term (years) 7.7 7.9

Weighted average discount rate 8.0 % 5.0 %

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 December 31, 2024:

Total undiscounted future minimum lease payments

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Line of Credit

During 2021 the Company had a $ 40

million unsecured revolving line of credit with a bank.

This facility terminated on September 30, 2021.

On January 7, 2022, the

Company entered into a new $ 40 million unsecured revolving line of credit agreement with a different bank that expires January 7, 2025 .

Borrowings under this new facility bear interest at either 1) the Bloomberg short-Term Bank Yield Index – 1 month plus 150 basis

points, or 2) a fluctuating rate per annum equal to the greater of (i) the Bank’s prime rate or (ii) the federal funds rate plus

50 basis points.

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

At December 31, 2023, the

Company was in compliance with the terms and covenants of the credit facility.

On January 7, 2022, the Company entered into a

three-year, $ 40 million unsecured revolving line of credit agreement with a bank.

On June 6, 2024, the Company amended its existing line

of credit agreement, which now expires January 7, 2028 .

Borrowings under this new facility bear interest at the applicable Secured Overnight

Financing Rate (SOFR), plus 150 basis points, plus an additional adjustment of eight basis points.

The Company is also charged one-quarter

( 0.25 %) per year on the unused portion.

At December 31, 2024, the Company was in compliance with the terms and covenants

of the credit facility.

Employee Benefit Plans

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Net deferred tax assets

Prior to 2022, the Company expensed research and

development costs in the period in which they were incurred for both financial accounting and income tax purposes.

In 2022 the Company

adopted the provisions of the Tax Cuts and Jobs Act of 2017 that relate to IRS Code Section 174.

Under these provisions, research and

development costs must be capitalized and amortized over five years for income tax purposes.

The Company continues to expense these costs

in the period incurred for financial accounting purposes.

In 2022, the Company adopted the provisions of

the Tax Cuts and Jobs Act of 2017 that relate to IRS Code Section 174.

Under these provisions, research and development costs must be

capitalized and amortized over five years for income tax purposes.

The Company continues to expense these costs in the period incurred

for financial accounting purposes.

The Company made income tax payments of approximately

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tax assets through tax deductions against future taxable income .

The Company does not believe it has included any

“uncertain tax positions” in its federal income tax return or any of the state income tax returns it is currently filing.

The Company does not believe it has included

any “uncertain tax positions” in its federal income tax return or any of the state income tax returns it is currently filing.

The Company has made an evaluation of the potential impact of additional state taxes being assessed by jurisdictions in which the Company

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Stock Repurchases

In 2023 and 2022 the Company repurchased shares

of its common stock.

In 2024, 2023, and 2022 the Company repurchased

shares of its common stock.

Details of these purchases are as follows:

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November 26 to December 31

First Quarter 2024

January 1 to January 27

January 28 to February 24

February 25 to March 30

Second Quarter 2024

March 31 to April 27

April 28 to May 25

May 26 to June 29

Third Quarter 2024

June 30 to July 27

July 28 to August 24

August 25 to September 28

Fourth Quarter 2024

September 29 to October 26

October 27 to November 23

November 23 to December 31

All of these purchases were made with cash held

by the Company and no debt was incurred

No shares were repurchased in 2021.

At December 31, 2024, approximately $ 40.3 million

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December 31, 2023.

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

As of December

31, 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.

Approximately 150,000 shares remaining from the 2017 SIP will be available for future grants under the terms of

the 2023 SIP.

Since the shareholder approval of the 2023 SIP, no additional awards have been or will be granted under the 2017 SIP.

granted and outstanding awards under the 2017 SIP will remain subject to the terms of the 2017 SIP.

Compensation expense related to deferred stock,

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In 2023, 7,566 deferred stock awards were issued

to non-employee directors that vested in June 2024 and 9,760 deferred stock awards were issued to non-employee directors that will

vest in June 2026.

In 2022, 5,953 deferred stock awards were issued

to non-employee directors that vested in May 2023, 7,688 deferred stock awards were issued to non-employee directors that will vest in

May 2025 and a 1,478 deferred stock award was issued to a non-employee director that will vest in June 2027.

In 2021, 5,113 deferred stock awards were issued

to non-employee directors that vested in May 2022 and 6,615 deferred stock awards were issued to non-employee directors that will vest

Compensation expense related to these awards is

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Compensation costs related to these restricted stock units was $ 6.1 million, of which $ 1.3 million was recognized in 2023.

costs are being recognized ratably over the remaining periods required before the units vest, which range from 24 to 26 months.

are being recognized ratably over the remaining periods required before the units vest, which range from 24 to 26 months.

During 2022, 82,000 restricted stock units were

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profit percentage.

This segment structure reflects the financial

information and reports used by the Company’s management, specifically its CODM, to make decisions regarding the Company’s

business, including resource allocations and performance assessments, as well as the current operating focus in compliance with ASC 280,

Segment Reporting.

The Company’s reportable segments are not aggregated.

The Company’s method for measuring performance

of a reportable segment is primarily gross profit.

The CODM does not review disaggregated assets by segment.

The Company adopted ASU 2023-07

in January 2025.

The most significant provision was the required disclosure of significant segment expenses that are regularly provided

The Company’s CODM periodically reviews cost of goods sold by segment and treats it as a significant segment expense.

Year ended December 31,

Costs of Goods Sold

Gross Profit (Loss)

Operating Income (Loss)

Income (Loss) Before Income Taxes

Year ended December 31,

Identifiable Assets

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Lipsey’s - 28 %;

Davidson’s - 19 %;

and Sports South - 15 %.

Sports South - 18 %;

and Davidson’s - 16 %.

In 2023, the Company’s largest customers

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Lipsey’s - 23 %;

Sports South - 19 %;

and Davidson’s - 19 %.

Davidson’s - 23 %;

and Sports South - 21 %.

The Company’s assets are located entirely

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Contingent Liabilities

of December 31, 2023, the Company was a defendant in nine (9) lawsuits and is aware of certain other such claims.

of December 31, 2024, the Company was a defendant in eight (8) lawsuits and is aware of cert ain other such claims.

generally fall into four (4) categories:

traditional product liability litigation,

municipal litigation , negligence, and unfair trade practices .

discussed in turn below.

Traditional Product Liability Litigation

One lawsuit involves a claim for damages

related to an allegedly defective product due to its design and/or manufacture.

The lawsuit stems from a specific incident of

personal injury and is based on traditional product liability theories such as strict liability, negligence, and/or breach of

The Company believes that the allegations in this

case are unfounded, that the incident is unrelated to the design or manufacture of the firearm involved, and that there should be no recovery

against the Company.

municipal litigation, breach of contract, unfair trade practices, and trademark litigation.

is discussed in turn below.

Municipal Litigation

litigation generally includes those cases brought by cities or other governmental entities against firearms manufacturers, distributors

and retailers seeking to recover damages allegedly arising out of the criminal misuse of firearms by third parties.

There are four

(4) lawsuits of this type, as follows:

The Complaint in City of Gary v.

Wesson Corp., et al .

was filed in Indiana State Court in 1999 and 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.

In addition , nuisance abatement and/or

injunctive relief is sought to change th e design ,

manufacture , mark e ting

and distribution practices of th e various defendants.

alleges , among other claims ,

negligence in the design of products , public

nuisance , negligent distribution and marketing ,

Municipal litigation generally includes those

cases brought by cities or other governmental entities against firearms manufacturers, distributors and retailers seeking to recover damages

allegedly arising out of the criminal misuse of firearms by third parties.

There are four (4) lawsuits of this type, as follows.

In City of Gary v.

Smith & Wesson Corp.,

et al , filed in Indiana State Court in 1999, the City of Gary, Indiana 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.

In addition, nuisance abatement

and/or injunctive relief is sought to change the design, manufacture, marketing and distribution practices of the various Defendants.

The Complaint alleges, among other claims, negligence in the design of products, public nuisance, negligent distribution and marketing,

negligence per se and deceptive advertising.

The case does not allege a specific injury 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.

Discovery is ongoing.

Unidos Mexicanos v.

Smith & Wesson Brands, Inc., et al.

was filed by the Country of Mexico in August 2021 in the U.S.

Court for the District of Massachusetts and names seven defendants, mostly U.S.-based firearms manufacturers, including the Company.

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

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, Defendants filed a joint motion to dismiss the Complaint for, among

other things, failure to state a claim on which relief may be granted.

On September 30, 2022, the court entered an order granting Defendants’

On October 26, 2022, Plaintiff filed a Notice of Appeal and the matter was briefed before the First Circuit Court of Appeals.

Oral argument was held on July 24, 2023.

On January 22, 2024, the First Circuit Court of Appeals issued an opinion reversing the District

Court’s dismissal case and remanding the case for further proceedings.

The case does not allege a specific injury 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.

On March 15, 2024, Indiana Governor Eric Holcomb

signed into law HB 1235, which reserves to the State of Indiana the right to bring an action on behalf of a political subdivision against

a firearm or ammunition manufacturer, trade association, seller, or dealer, concerning certain matters.

The new law also prohibits a political

subdivision from bringing or maintaining such an action.

Following passage of this new law, the Company and other Defendants filed a Motion

for Judgment on the Pleadings on March 18, 2024.

On August 12, 2024, the Court denied Defendants’ motion.

The Court granted Defendants’

subsequent request to certify the Order for appeal.

On October 2, 2024, Defendants filed a motion with the Indiana Court of Appeals to

accept jurisdiction over the interlocutory appeal, which was granted over Plaintiff’s objection on November 1, 2024.

16, 2024, the trial court entered an Order staying all proceedings pending the interlocutory appeal.

Briefing of the appeal is underway.

Estados Unidos Mexicanos v.

Smith & Wesson

Brands, Inc., et al.

was filed by the Country of Mexico and names seven Defendants, mostly U.S.-based firearms manufacturers, including

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

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, Defendants jointly filed

a motion to dismiss the Complaint, which was granted on September 30, 2022.

Several defendants, including the Company, also filed Rule

12(b)(2) motions to dismiss for lack of personal jurisdiction, which the Court declined to rule on in light of its dismissal.

appealed the dismissal to the First Circuit Court of Appeals and, on January 22, 2024, the Court of Appeals reversed the District Court’s

dismissal and remanded the case for further proceedings.

The Defendants filed a Petition for Writ of

Certiorari seeking review by the

United States Supreme Court while the case moved forward at the District Court.

On June 17, 2024, the District Court heard argument

on the pending Rule 12(b)(2) motions to dismiss.

On August 7, 2024, the Court granted the motions, dismissing the Company and some of

the other Defendants from the case, but has not yet entered judgement in favor of these Defendants.

Because judgment has not entered in

favor of the Company, the 30-day period in which Plaintiff may appeal the Court’s August 7, 2024 ruling has not yet begun to run.

Subsequently, the Supreme Court granted the Defendants’ Petition for Writ of Certiorari.

Oral argument at the Supreme Court is scheduled

for March 4, 2025.

On December 20, 2022, the City of Buffalo, New

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for Monroe County, New York.

The suit names a number of firearm manufacturers, distributors, and retailers as defendants, including the

Company, and purports to state causes of action for violations of Sections 898, 349 and 350 of the New York General Business Law, as well

as common law public nuisance.

The allegations essentially mirror those in Buffalo , discussed in the preceding paragraph.

timely removed the matter to the U.S.

The suit names the same defendants and makes essentially the same allegations raised in Buffalo , discussed

in the preceding paragraph.

Defendants timely removed the matter to the U.S.

District Court for the Western District of New York.

Defendants moved to consolidate the Buffalo

and 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.

and Rochester cases for pretrial purposes only and 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

LAW §§ 898-a–e.

On June 8, 2023, the court granted

Defendants’ motions and the cases were consolidated for pretrial purposes and stayed.

Sturm, Ruger, et al.

arising out of a slip and fall accident by a contract security officer in December 2019.

The Complaint was filed in the Superior Court

for Sullivan County, New Hampshire on December 13, 2022 and names Pine Hill Construction, a snow removal contractor, as a Defendant.

Company has tendered the defense of this matter to its insurance carrier and is assisting as required.

The Company was named in two purported class action

lawsuits arising out of a data breach at Freestyle Solutions, Inc., the vendor who was hosting the Company’s ShopRuger.com website

at the time of the breach.

Sturm, Ruger & Co., was filed in the U.S.

District Court for Connecticut on October 4,

2022 and Copeland v.

Sturm, Ruger & Company, et al.

was filed in the U.S.

District Court for New Jersey on October 27, 2022.

Copeland also named Freestyle Solutions, Inc.

as a defendant.

By agreement of the parties, Copeland was dismissed, without

prejudice, and consolidated with Jones in the pending Connecticut case.

On January 20, 2023, five plaintiffs filed an Amended Complaint

naming the Company and Freestyle Solutions, Inc.

On June 8, 2023, the Court granted Defendants’ motions and the cases were

consolidated for pretrial purposes and stayed.

Breach of Contract

The Company is a defendant in Jones v.

Ruger & Co., a purported class action lawsuit arising out of a data breach at Freestyle Solutions, Inc., the vendor who was hosting

the Company’s ShopRuger.com website at the time of the breach.

On January 20, 2023, five Plaintiffs filed an Amended Complaint naming

the Company and Freestyle Solutions, Inc.

as Defendants.

The Complaint alleges causes of action for negligence, breach of implied

warranties, and unjust enrichment.

The Company moved to dismiss the Amended Complaint, the motion has been briefed fully, and the parties

are awaiting a ruling.

The Complaint alleged causes of action for negligence, breach of implied warranties,

and unjust enrichment.

The Company moved to dismiss the Amended Complaint,

and on March 27, 2024, the Court dismissed Plaintiffs’ negligence and unjust enrichment claims against the Company.

The Court denied

the motion with respect to Plaintiffs’ breach of contract claim, concluding that development

of additional information is required

to assess the applicability of the limitation of liability clause contained in the Company’s terms and conditions of use.

is proceeding accordingly.

Unfair Trade Practices

Estate of Suzanne Fountain v.

& Co., Inc., was filed in the Connecticut Superior Court in Stamford and arises out of the criminal shootings at the King Soopers

supermarket in Boulder, Colorado on March 22, 2021.

On that date, Plaintiff’s decedent, Suzanne Fountain, was murdered by 21-year-old

Ahmad Al Aliwi Al-Issa.

The Complaint alleged 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.

& Co., Inc., was filed in Connecticut Superior Court and arises out of the criminal shooting at the King Soopers supermarket in

Boulder, Colorado on March 22, 2021.

On that date, Plaintiff’s decedent, Suzanne Fountain, was murdered by 21-year-old Ahmad

Al Aliwi Al-Issa.

The Complaint alleged 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 al.

& 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.

decedents were murdered by Ahmad Al Aliwi Al-Issa and Plaintiffs alleged 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.

Fountain and Stanisic cases were consolidated for discovery purposes only and transferred by the court to the Complex Litigation

& Co., Inc., was filed in Connecticut Superior Court on behalf of five Plaintiffs.

Like Estate of Suzanne Fountain , the

claims arise from the criminal shooting at the King Soopers supermarket in Boulder, Colorado on March 22, 2021.

Plaintiffs’ decedents

were murdered by Ahmad Al Aliwi Al-Issa and Plaintiffs alleged 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 were consolidated for discovery purposes only and transferred by the Court to the Complex Litigation Docket.

Plaintiffs then sought leave to file an Amended Complaint, essentially abandoning their negligent marketing allegations and advancing

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Plaintiffs were permitted to file the Amended Complaint.

matter was timely removed to the U.S.

District Court for the District of Connecticut based upon the new allegations and federal question

jurisdiction.

Plaintiffs moved to remand the case to state court, the matter has been briefed fully, and the parties are awaiting a ruling.

was timely removed to the U.S.

District Court for the District of Connecticut based upon the new allegations and federal question jurisdiction.

Plaintiffs moved to remand the case to state court and, following briefing and oral argument, the matter was remanded on April 25, 2024.

On June 12, 2024, Ruger filed Motions to Dismiss

the Connecticut state court cases based upon the doctrine of forum non conveniens .

Following oral argument on September 9, 2024,

the Court allowed Plaintiffs limited, additional discovery and requested further briefing on the matter.

The briefing has been completed

and the parties are awaiting a decision from the Court.

12, 2024, the Company was named as a defendant in FN Herstal, et al.

Sturm, Ruger & Company, Inc.

, which is pending

District Court for the Middle District of North Carolina.

T he Complaint alleges that

the Company’s use of the initialism “SFAR” in connection with the marketing of its Small Frame Autoloading Rifle infringes

the Plaintiffs’ SCAR trademark.

The Complaint alleges violations of the Lanham Act and the North Carolina Unfair and Deceptive Trade

Practices Act, as well as trademark infringement under North Carolina common law.

The Company believes that the allegations are meritless

and is defending the action accordingly.

Summary of Claimed Damages and Explanation

of Product Liability Accruals

Punitive damages ,

as well as compensatory damages, are demanded in certain of the lawsuits and claims.

In many instances ,

the plaintiff does not seek a specified amount of money , though

Punitive damages, as well as compensatory damages,

are demanded in certain of the lawsuits and claims.

In many instances, the plaintiff does not seek a specified amount of money, though

aggregate amounts ultimately sought may exceed product liability accruals and applicable insurance coverage.

For product liability claims

made after July 10, 2000 , coverage is provided on an annual basis

for losses exceeding $ 5 million per claim , or an aggregate maximum

loss of $ 10 million annually , except for certain new claims which

might be brought by governments or municipalities after July 10 , 2000 ,

which are excluded from coverage.

The Company management

monitors the status of known claims and the product liability accrual , which

includes amounts for asserted and unasserted claims.

While it is not possible to forecast the outcome of litigation or the timing of costs ,

in the opinion of management , after

consultation with special and corporate counsel, it is not probable and is unlikely that litigation ,

including punitive damage claims , will

have a material adverse effect on the financial position of the Compan y, but

may have a material impact on the Company’ s financial results

for a particular period.

For product liability claims made between July

10, 2000 and August 31, 2024, insurance coverage was provided on an annual basis for losses exceeding $ 5 million per claim, with an aggregate

maximum loss of $ 10 million annually, except for certain claims brought by governments or municipalities, which are excluded from coverage.

Insurance coverage was not renewed with incumbent carriers effective September 1, 2024.

Rather, the Company established a wholly-owned

captive insurance company for claims made on or after September 1, 2024.

Company management monitors the status of known

claims and the product liability accrual, which includes amounts for asserted and unasserted claims.

While it is not possible to forecast

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

it is not probable and is unlikely that litigation, including punitive damage claims, will have a material adverse effect on the financial

position of the Company, but may have a material impact on the Company’s financial results for a particular period.

Product liability claim payments are made when

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as the lawsuits and claims develop, the timing of which may vary greatly from case to case.

A schedule cannot be determined in advance

A time schedule cannot be determined in advance

with any reliability concerning when payments will be made in any given case.

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Often, a Complaint does not specify the amount

of damages being sought and a range of reasonably possible losses relating to unfavorable outcomes cannot be made.

of damages being sought and range of reasonably possible losses relating to unfavorable outcomes cannot be made.

The dollar amount of

damages claimed at December 31, 2023 and December 31, 2022 was de minimis .

The amount claimed at December 31, 2021 was $ 1.1 million

and is set forth as an indication of possible maximum liability the Company might be required to incur in these cases (regardless of the

likelihood or reasonable probability of any or all of this amount being awarded to claimants) as a result of adverse judgments that are

sustained on appeal.

damages claimed at December 31, 2024, December 31, 2023, and December 31, 2022 was de minimis .

The amount claimed at December 31,

2021 was $ 1.1 million and is set forth as an indication of possible maximum liability the Company might be required to incur in these

cases (regardless

of the likelihood or reasonable probability of any or all of this amount being awarded to claimants) as a result of

adverse judgments that are sustained on appeal.

During 2024, one ( 1 ) trademark lawsuit was filed

against the Company, one ( 1 ) negligence lawsuit was resolved, and one ( 1 ) traditional product liability lawsuit was resolved.

municipal lawsuit was dismissed, however the time period in which to file an appeal has been stayed by the Court and the Company considers

this matter still open.

As of December 31, 2024, the Company was a defendant in eight ( 8 ) lawsuits involving its products, including four

( 4 ) municipal lawsuits, two ( 2 ) lawsuits based upon unfair trade practices, one (1) breach of contract, and one (1) trademark litigation.

During 2023, one ( 1 ) traditional product liability

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lawsuits were filed against the Company and one ( 1 ) was resolved.

As of December 31, 2022, the Company was a defendant in five ( 5 ) lawsuits

involving its products, including one ( 1 ) traditional product liability lawsuit and four ( 4 ) municipal lawsuits.

The Company also was

a defendant in three ( 3 ) negligence lawsuits though, as discussed above, that number has since been reduced to two (2) lawsuits with the

consolidation of the Jones and Copeland matters.

During 2021, one ( 1 ) traditional product liability

lawsuit was filed against the Company.

As of December 31, 2021, the Company was a defendant in four ( 4 ) lawsuits involving its products,

including two ( 2 ) traditional lawsuits and two (2) municipal lawsuits.

Company’s product liability expense was $ 1.5 million in 2023, $ 1.3

million in 2022, and $ 1.1 million in 2021.

This expense includes the cost of outside legal fees, insurance, and other expenses incurred

in the management and defense of product liability matters.

As of December 31, 2022, the Company was a defendant five lawsuits involving

its products, including one ( 1 ) traditional product liability lawsuit and four ( 4 ) municipal lawsuits.

The Company also was a defendant

in three ( 3 ) negligence lawsuits though, as discussed above, that number has since been reduced to two (2) lawsuits with the consolidation

of the Jones and Copeland matters.

The Company’s product liability expense

was $ 0.7 million in 2024, $ 1.5 million in 2023, $ 1.3 million in 2022.

This expense includes the cost of outside legal fees, and other

expenses incurred in the management and defense of product liability matters.

A roll-forward of the product liability reserve and detail of product

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(b) The expense accrued in the liability is for legal fees only.

In 2022 and 2021, the costs incurred related

In 2022, the costs incurred related

to cases that were settled or dismissed were less than the amounts accrued for these cases in prior years.

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of Directors authorized a dividend of 24 ¢ per share to shareholders of record on March 14, 2025 .

On January 17, 2025, the Company announced the

appointment of Mr.

Seyfert as its next President & Chief Executive Officer, effective March 1, 2025.

Christopher J.

will step down as President & Chief Executive Officer on that date and then serve as a Special Advisor through his planned retirement

from the Company in May 2025.

will step down as Vice

President, General Counsel, and Corporate Secretary on June 30, 2025 and then serve as Senior Counsel to the Company until his planned

retirement from the Company on June 30, 2026.

The Company’s management has evaluated transactions

occurring subsequent to December 31, 2023 and determined that there were no events or transactions during that period that would have

a material impact on the Company’s results of operations or financial position.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

occurring subsequent to December 31, 2024 and determined that there were no other events or transactions during that period that would

have a material impact on the Company’s results of operations or financial position.

ITEM 9—CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING

AND FINANCIAL DISCLOSURE

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 8. Financial Statements and Supplementary Data