What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-04-30 compared with 2024-10-30 · 81 added, 133 removed, 182 unchanged (54% 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 nine month periods ended September

28, 2024 and September 30, 2023, respectively.

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

and almost all product content is domestic.

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

principally to the commercial sporting market.

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

29, 2025 and March 30, 2024.

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

content is domestic.

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

to the commercial sporting market.

The Company also manufactures

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The estimated unit sell-through

of the Company’s products from the independent distributors to retailers increased 4% in the first nine 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 3%.

Estimated sell-through from the independent

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

of the Company’s products from the independent distributors to retailers decreased 8% in the first quarter of 2025 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:

Estimated Units Sold from Distributors to Retailers (1)

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● Do not consider potential timing issues within the distribution channel, including goods-in-transit, and

Do not consider fluctuations in inventory at retail.

not consider fluctuations in inventory at retail.

(2) NICS background checks are performed when the ownership of most firearms, either new or used, is transferred

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The units ordered, value of

orders received, average sales price of units ordered, and ending backlog for the trailing seven quarters are as follows (dollars in millions,

orders received, average sales price of units ordered, and ending backlog for the trailing five quarters are as follows (dollars in millions,

except average sales price):

9 unchanged sentences

to plan production levels.

The Company’s overall production in the third quarter of 2024 decreased 11% from the second quarter

The Company’s overall production in the first quarter of 2025 increased 2% from the fourth quarter of

Summary Unit Data

Firearms unit data for the

trailing seven quarters are as follows (dollar amounts shown are net of Federal Excise Tax of 10% for handguns and 11% for long guns):

trailing five quarters are as follows (dollar amounts shown are net of Federal Excise Tax of 10% for handguns and 11% for long guns):

Units Ordered

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Ending Unit Backlog

During the third quarter

of 2024, the Company’s finished goods inventory increased by 2,900 units and distributor inventories of the Company’s

products decreased by 8,900 units.

Inventory unit data for the trailing seven quarters

During the first quarter of

2025, the Company’s finished goods inventory increased by 15,300 units and distributor inventories of the Company’s products

decreased by 7,900 units.

Inventory unit data for the trailing five quarters

Company Inventory

10 unchanged sentences

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

September 28,

September 30,

Net firearms sales

Net castings sales

Total net sales

Cost of products sold

The increase in total consolidated

net sales and net firearms sales for the three months ended September 28, 2024 is attributable to strong demand for certain of the Commpany’s

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 $35.5 million or 31.0% of firearm sales in the three months

ended September 28, 2024.

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 September 28, 2024 is attributable to unfavorable deleveraging of fixed costs resulting from decreased production

and a product mix shift toward products with relatively lower margins that remain in relatively stronger demand.

The decrease in gross margin

for the three months ended September 28, 2024 is attributable to the aforementioned factors, partially offset by increased pricing.

Net sales, cost of products

sold, and gross profit data for the nine months ended (dollars in millions):

September 28,

September 30,

March 29, 2025

March 30, 2024

Net firearms sales

2 unchanged sentences

Cost of products sold

The decrease in total consolidated

net sales and net firearms sales for the nine months ended September 28, 2024 is attributable to decreased consumer demand for firearms.

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 $113.3 million or 31.2% of firearm sales in the first nine

months of 2024.

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

The decreased gross profit

for the nine months ended September 28, 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 nine months ended September 28, 2024 is attributable to the aforementioned factors, partially offset by increased pricing.

Total consolidated net sales

and net firearms sales decreased slightly for the three months ended March 29, 2025.

Sales of new products, including the RXM pistol,

Super Wrangler revolver, Marlin lever-action rifles, and American Centerfire Rifle Generation II represented $40.7 million or 31.6% of

firearm sales in the three months ended March 29, 2025.

New product sales include only major new products that were introduced in the

past two years.

The increased gross profit for

the three months ended March 29, 2025 is attributable to favorable leveraging of fixed costs resulting from increased production, despite

the $0.8 million of deferred revenue related to sales promotions.

The increase in gross margin

for the three months ended March 29, 2025 is attributable to the aforementioned factors.

Selling and General and Administrative Expenses

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

September 28,

September 30,

Selling expenses

General and administrative expenses

Total operating expenses

The increase in selling

expenses for the three months ended September 28, 2024 was attributable to increased spending on advertising, partially offset by

modest reductions in several selling and marketing initiatives.

The increase in general and

administrative expenses for the three months ended September 28, 2024 was primarily attributable to increased professional service costs.

Selling and general and administrative

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

September 28,

September 30,

March 29, 2025

March 30, 2024

Selling expenses

1 unchanged sentence

Total operating expenses

The increase in selling expenses

for the nine months ended September 28, 2024 was attributable increased spending on advertising, partially offset by modest reductions

in several selling and marketing initiatives.

The increase in general and

administrative expenses for the nine months ended September 28, 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, partially 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 to result in approximately $9 million of annualized cash savings.

This action is part of the Company’s initiatives to reallocate

its resources and cost structure into prioritized areas that will drive long-term growth and improve margins.

The decrease in selling expenses

for the three months ended March 29, 2025 was attributable to decreased spending on industry shows, personnel costs, and shipping expenses,

partially offset by increases in travel costs and several promotional and marketing initiatives.

The slight decrease in general

and administrative expenses for the three months ended March 29, 2025 was primarily attributable to the initial expense of the prior year’s

reduction in force, partially offset by increased professional service costs.

Other income data for the

three months ended (dollars in millions):

September 28,

September 30,

The decrease in other income

for the three months ended September 28, 2024 was attributable to decreased interest income.

Other income data for the nine

months ended (dollars in millions):

September 28,

September 30,

March 29, 2025

March 30, 2024

The decrease in other income

for the nine months ended September 28, 2024 was the result of decreases in interest income and miscellaneous income.

for the three months ended March 29, 2025 was attributable to decreased interest income.

Income Taxes and Net Income

3 unchanged sentences

The Company’s effective income tax rate was 20.3% and 21.7% for the

three and nine months ended September 28, 2024, respectively.

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

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

three months ended March 29, 2025 and March 30, 2024, respectively

As a result of the foregoing

factors, consolidated net income was $4.7 million for the three months ended September 28, 2024, a decrease of 36.2% from $7.4 million

in the comparable prior year period.

Consolidated net income was

$20.1 million for the nine months ended September 28, 2024, a decrease of 47.1% from $38.0 million in the comparable prior year period.

factors, consolidated net income was $7.8 million for the three months ended March 29, 2025, an increase of 9.7% from $7.1 million in

the comparable prior year period.

Non-GAAP Financial Measures

22 unchanged sentences

EBITDA was $14.3 million for

the three months ended September 28, 2024, a decrease of 25.2% from $13.3 million in the comparable prior year period.

For the nine months ended

September 28, 2024 EBITDA was $37.9 million, a decrease of 39.2% from $62.4 million in the comparable prior year period.

the three months ended March 29, 2025, an increase of 5.6% from $13.5 million in the comparable prior year period.

Non-GAAP Reconciliation – EBITDA

1 unchanged sentence

Three Months Ended

Nine Months Ended

September 28,

September 30,

September 28,

September 30,

March 29, 2025

March 30, 2024

Income tax expense

6 unchanged sentences

Liquidity and Capital Resources

At the end of the third quarter

At the end of the first quarter

of 2025, the Company’s cash and short-term investments totaled $108.3 million.

Pre-LIFO working capital of $260.4 million, less the

LIFO reserve of $68.3 million, resulted in working capital of $192.1 million and a current ratio of 4.5 to 1.

Cash provided by operating

activities was $35.5 million for the nine months ended September 28, 2024, compared to $1.3 million for the comparable prior year period.

The increase in cash provided in the nine months ended September 28, 2024 is primarily attributable to decreases in inventory and prepaid

expenses and other assets in the nine months ended September 28, 2024, partially offset by the decrease in net income in the nine months

ended September 28, 2024.

Pre-LIFO working capital of $266.1 million, less

the LIFO reserve of $67.5 million, resulted in working capital of $198.6 million and a current ratio of 4.6 to 1.

Cash provided by operating activities

was $11.1 million for the three months ended March 29, 2025, compared to $7.3 million for the comparable prior year period.

in cash provided in the three months ended March 29, 2025 is primarily attributable to the increase in net income and the lesser increase

in deferred income taxes and lower net payouts of accrued employee compensation and benefits in the three months ended March 29, 2025,

partially offset by the lesser reductions in inventory and prepaid expenses and other current assets in the three months ended March 29,

Third parties supply the Company

6 unchanged sentences

Investing and Financing

Capital expenditures for the

nine months ended September 28, 2024 totaled $17.2 million, an increase from $11.6 million in the comparable prior year period.

the Company expects capital expenditures related to new product introductions and upgrades to our manufacturing equipment and facilities

to total approximately $20 million.

Actual capital expenditures could vary significantly from the projected amount due to the timing of

Capital expenditures for the three

months ended March 29, 2025 totaled $1.1 million, a decrease from $1.8 million in the comparable prior year period.

In 2025, the Company

expects capital expenditures related to new product introductions and upgrades to our manufacturing equipment and facilities could range

from $20 million to $30 million.

Actual capital expenditures could vary significantly from the projected amounts due to the timing of

capital projects.

2 unchanged sentences

Dividends of $4.0 million

were paid during the nine months ended September 28, 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

were paid during the three months ended March 29, 2025.

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

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 October 25, 2024, the Company’s

Board of Directors authorized a dividend of 11¢ per share to shareholders of record on November 13, 2024, payable on November 27,

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 September 28, 2024,

the Company had $61.5 million of United States Treasury instruments which mature within one year.

On April 25, 2025, the Company’s

Board of Directors authorized a dividend of 18¢ per share to shareholders of record on May 16, 2025, payable on May 30, 2025.

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 29, 2025, the

Company had $63.3 million of United States Treasury instruments which mature within one year.

The Company also invests available cash

1 unchanged sentence

29, 2025, the Company’s investment in this money market fund totaled $28.9 million.

During the nine months ended

September 28, 2024 the Company purchased 698,759 shares of its common stock for $29.3 million in the open market.

The average price per

share purchased was $41.99.

During the three months ended

March 29, 2025 the Company purchased 79,200 shares of its common stock for $3.0 million in the open market.

The average price per share

purchased was $37.74.

These purchases were funded with cash on hand.

As of September 28, 2024, $45.3 million remained authorized

for future stock repurchases.

As of March 29, 2025, $37.3 million remained authorized for future

stock repurchases.

Based on its unencumbered

1 unchanged sentence

The Company’s

unsecured $40 million credit facility, which expires on January 7, 2028, was unused at September 28, 2024.

unsecured $40 million credit facility, which expires on January 7, 2028, was unused at March 29, 2025.

Other Operational Matters

37 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