What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-03-02 compared with 2025-02-19 · 196 added, 162 removed, 412 unchanged (46% of the section changed)

ITEM 7—MANAGEMENT'S DISCUSSION

AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

7—MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Company Overview

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Less than 1% of sales are from the castings segment.

Results of Operations - 2024

of Operations - 2025

Product Demand

3 unchanged sentences

The increase in the sell-through of the Company’s products despite the decrease in adjusted NICS background checks may be attributable

to new product introductions, like the Ruger American Rifle Generation II bolt-action rifles, the Marlin lever-action rifles, and the

RXM pistol, which helped offset aggressive promotions, discounts, rebates, and the extension of payment terms offered by the Company’s

to new product introductions, like the Ruger American Rifle Generation II bolt-action rifles, the Marlin lever-action rifles, Glenfield

and Harrier rifles, and the RXM pistol, which helped offset 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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that are not verified by the Company,

● Do not consider potential timing issues within

the distribution channel, including goods-in-transit, and

● Do not consider fluctuations in inventory at

Do not consider potential timing issues within the

distribution channel, including goods-in-transit, and

Do not consider fluctuations in inventory at retail.

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

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

Orders Received and Ending Backlog

Orders Received and Ending

The Company uses the estimated unit sell-through

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production levels and manage inventories.

These reviews resulted in a decrease in total unit production of 1% in 2024 compared to 2023.

Annual Summary Unit Data

These reviews resulted in an increase in total unit production of 6% in 2025 compared to 2024.

Summary Unit Data

Firearms unit data for orders, production, and

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This total does not include inventory at retailers.

The Company does not have access to data on retailer

The Company does not have access to data on retailer inventories.

Year ended December 31, 2025, 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):

Cost of Products Sold, and Gross Profit

sales, c ost of products sold, and gross profit data for the year ended December 31, (dollars in millions):

Net firearms sales

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Cost of products sold

Firearms sales decreased 2% and unit shipments

increased 3%, respectively, in 2024.

New products represented $159.3 million or 32% of firearms sales in 2024, an increase from $119.0

million or 23% of firearms sales in 2023.

Firearms sales increased 2%, driven by a 7% increase

in unit shipments, partially offset by the $5.7 million reduction related to the close out of 67,000 units of discontinued models in the

second quarter of 2025.

New products represented $169.5 million or 33% of firearms sales in 2025, an increase from $159.3 million or 32%

of firearms sales in 2024.

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

In 2024, new products included the RXM pistol, American Centerfire Rifle Generation II, Marlin 1894 lever-action rifles, Security-380

pistol, Super Wrangler revolver, LC Carbine, and the Small-Frame Autoloading Rifle and the Marlin 1895 Marlin lever-action rifles, which

were only included for a portion of the year.

decreased gross profit for the year ended December 31, 2024 is attributable to the decrease in sales , unfavorable deleveraging

of fixed costs resulting from decreased production, and a product mix shift toward products with relatively lower margins that remain

in stronger demand.

products included the RXM pistol, American Centerfire Rifle Generation II, Marlin 1894 lever-action rifles, Glenfield rifles, Harrier

rifles, and the Ruger Red Label Shotgun, as well as the Super Wrangler revolver, which was only included for a portion of the year.

The decreased gross profit for the year ended

December 31, 2025 is attributable to inventory rationalization write-offs and the aforementioned sales reductions taken in the second

quarter of 2025, $4.3 million of operating costs at the new Hebron facility that was acquired in July, increased

associated with material and technology, a product mix shift toward products with relatively lower margins that remain in relatively stronger

demand and increased sales promotional expenses, partially off-set by favorable deleveraging of fixed costs resulting from increased production .

The decrease in gross margin for the year ended

December 31, 2024 is attributable to the aforementioned factors, partially offset by increased pricing.

Selling, General and Administrative

December 31, 2025 is attributable to the aforementioned factors.

General and Administrative

Selling and general and administrative expenses data for the year ended

(dollars in millions):

December 31, (dollars in millions):

Selling expenses

General and administrative expenses

Other operating expenses

Total operating expenses

Selling expenses for the year ended December 31,

2024 were substantially unchanged from 2023, as increased spending on advertising was offset by modest reductions in several selling and

marketing initiatives.

increase in general, and administrative expenses for the year ended December 31, 2024 was primarily attributable to increased professional

service costs and accrued severances of $1.5 million taken in the first quarter of 2024 related to a reduction in force involving

approximately 80 employees.

These increases were partially offset by a reduction in incentive compensation expenses.

The aforementioned

accrued severances were 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.

Operating Income

Operating income was $31.6 million or 5.9% of

sales in 2024.

2025 were substantially unchanged from 2024, as increases in promotional and marketing initiatives was largely offset by decreases in

spending on industry shows, personnel costs, and shipping expenses.

The increase in general and administrative expenses

for the year ended December 31, 2025 was primarily attributable to expenses incurred due to the Company’s leadership transition

and organizational realignment, as well as increased information technologies related expenses and professional fees associated with the

purchase of the Anderson Manufacturing assets and the implementation of the Rights Plan.

Operating (Loss) Income

Operating loss was $12.3 million or 2.3% of sales

This is a decrease of $43.9 million from 2024 operating income of $31.6 million or 5.9% of sales.

Other Operating Income (Expense), Net

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

Other Operating Income (Expense),

Other income data for the year ended December 31, (dollars

in millions):

Royalty income

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December 31, 2025 was primarily the result of decreases in interest income due to decreased interest rates earned on short-term investments

and other income, partially offset by increased royalty.

Income Taxes and Net Income

and other income, partially offset by increased royalty income.

Taxes and Net Income

effective income tax rate was 38.7% in 2025 and 19.1% in 2024.

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As a result of the foregoing factors, consolidated

net income was $30.6 million in 2024.

net loss was $4.4 million in 2025.

This represents a decrease of $35.0 million from 2024 consolidated net income of $30.6 million.

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(Unaudited, dollars in thousands)

Year ended December 31,

Income tax expense

Net (loss) income

Inventory rationalization

Income tax (benefit) expense

Depreciation and amortization expense

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Net income 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.

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

non-cash, non-operating expense.

Quarterly Data

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 certain non-recurring,

non-cash, non-operating expenses.

To supplement the summary annual unit data and

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Estimated Units Sold from Distributors to Retailers

Total Adjusted NICS Background Checks

Total Adjusted NICS BackgroundChecks

Average Unit Sales Price

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Estimated Units Sold from Distributors to Retailers

Total Adjusted NICS Background Checks

Total Adjusted NICS BackgroundChecks

Average Unit Sales Price

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

Received and Ending Backlog

except average sales price, net of Federal Excise Tax)

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Average Sales Price of Ending Backlog

Fourth Quarter Net Sales and Gross Profit Analysis

Fourth Quarter Net Sales and

Gross Profit Analysis

Net sales, cost of products sold, and gross profit

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

data for the three months ended December 31, (dollars in millions):

Net firearms sales

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year ended December 31, 2023

Annual Summary Unit Data

Summary Unit Data

Firearms unit data for orders, production, shipments and ending inventory,

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Units – Distributor Inventory (1)

Castings Setups

Orders Received and Ending Backlog

Received and Ending Backlog

(in millions except average sales price, net of

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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.

products from the independent distributors to retailers in 2024 increased 5% from 2023.

In 2024, adjusted NICS decreased 4% from 2023.

The increase in the sell-through of the Company’s products despite the decrease in adjusted NICS background checks may be attributable

to new product introductions, like the Ruger American Rifle Generation II bolt-action rifles, the Marlin lever-action rifles, and the

RXM pistol, which helped offset aggressive promotions, discounts, rebates, and the extension of payment terms offered by the Company’s

Estimated sell-through from distributors to retailers and total adjusted

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that are not verified by the Company,

● Do not consider potential timing issues within

the distribution channel, including goods-in-transit, and

● Do not consider fluctuations in inventory at

Do not consider potential timing issues within the

distribution channel, including goods-in-transit, and

Do not consider fluctuations in inventory at retail.

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

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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.

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

levels and manage inventories.

production levels and manage inventories.

These reviews resulted in a decrease in total unit production of 1% in 2024 compared to 2023.

The Company’s finished goods inventory increased

by 30,700 units during 2023.

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 .

The Company’s finished goods inventory decreased

by 28,300 units during 2024, while distributor inventories of the Company’s

products decreased by 63,500 units during the same period.

Inventory data follows:

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This total does not include inventory at retailers.

The Company does not have access to data on retailer

Quarterly Data

The Company does not have access to data on retailer inventories.

To supplement the summary annual unit data and

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Estimated Units Sold from Distributors to Retailers

Total Adjusted NICS BackgroundChecks

Total Adjusted NICS Background Checks

Average Unit Sales Price

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Estimated Units Sold from Distributors to Retailers

Total Adjusted NICS BackgroundChecks

Total Adjusted NICS Background Checks

Average Unit Sales Price

3 unchanged sentences

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

Received and Ending Backlog

except average sales price, net of Federal Excise Tax)

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Average Sales Price of Ending Backlog

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):

Cost of Products Sold, and Gross Profit

sales, c ost of products sold, and gross profit data for the year ended December 31, (dollars in millions):

Net firearms sales

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Cost of products sold

Firearms sales and unit shipments decreased 9%

and 17%, respectively, in 2023.

New products represented $119.0 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.

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 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.

Firearms sales decreased 2% and unit shipments

increased 3%, respectively, in 2024.

New products represented $159.3 million or 32% of firearms sales in 2024, an increase from $119.0

million or 23% of firearms sales in 2023.

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

In 2024, new products included the RXM pistol,

American Centerfire Rifle Generation II, Marlin 1894 lever-action rifles, Security-380 pistol, Super Wrangler revolver, LC Carbine, and

the Small-Frame Autoloading Rifle and the Marlin 1895 Marlin lever-action rifles, which were only included for a portion of the year.

decreased gross profit for the year ended December 31, 2024 is attributable to the decrease in sales , unfavorable deleveraging

of fixed costs resulting from decreased production, and a product mix shift toward products with relatively lower margins that remain

in stronger demand.

The decrease in gross margin for the year ended

December 31, 2024 is attributable to the aforementioned factors, partially offset by increased pricing.

Selling, General and Administrative

General and Administrative

Selling and general and administrative expenses data for the year ended

(dollars in millions):

December 31, (dollars in millions):

Selling expenses

1 unchanged sentence

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.

Selling expenses for the year ended December 31,

2024 were substantially unchanged from 2023, as increased spending on advertising was offset by modest reductions in several selling and

marketing initiatives.

increase in general, and administrative expenses for the year ended December 31, 2024 was primarily attributable to increased professional

service costs and accrued severances of $1.5 million taken in the first quarter of 2024 related to a reduction in force involving

approximately 80 employees.

These increases were partially offset by a reduction in incentive compensation expenses.

The aforementioned

accrued severances were 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.

Operating Income

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This is a decrease of $20.4 million from 2023 operating income of $52.1 million or 9.6% of sales.

Other Operating Income (Expense), Net

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

Other Operating Income (Expense),

Other income data for the year ended December 31, (dollars

in millions):

Royalty income

2 unchanged sentences

Other income, net

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

The decrease in other income for the year ended

December 31, 2024 was primarily the result of decreases in interest income due to decreased interest rates earned on short-term investments

and other income, partially offset by increased royalty income.

Taxes and Net Income

effective income tax rate was 19.1% in 2024 and 18.0% in 2023.

The Company's 2023 and 2022 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 impact related to research and development tax credits on the effective tax rate is expected to

decline in future years.

The Company's 2024 and 2023 effective tax rates differ from the

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

executive compensation.

As a result of the foregoing factors, consolidated

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(Unaudited, dollars in thousands)

Year ended December 31,

ended December 31,

Income tax expense

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income that was included in net income from net income to arrive at EBITDA.

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

non-cash, non-operating expense.

The Company’s EBITDA calculation also excludes certain

non-recurring, non-cash, non-operating expenses.

Financial Condition

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

Capital Resources

The Company believes that its cash flow from operations,

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

Cash provided by operating activities was $55.5

million, $33.9 million, and $77.2 million in 2024, 2023, and 2022, respectively.

The increase in cash provided in 2024 compared to 2023

is primarily attributable to the decrease in inventory in 2024 compared to the increase in 2023, and the reduction in prepaid and other

assets compared to increases in those accounts in 2023, partially offset by reduced income in 2024.

Cash provided by operating activities was $54.3 million,

$55.5 million, and $33.9 million in 2025, 2024, and 2023, respectively.

The slight decrease in cash provided in 2025 compared to 2024

is primarily attributable to the decrease in net income, mostly offset by the reduction in inventory in excess of the increase in inventory

reserves related to the Company’s inventory rationalization in 2025.

The decrease in cash provided in 2024 compared

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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.

Included in capital expenditures amount noted above,

on July 1, 2025 the Company completed the asset purchase

of Anderson Manufacturing, a manufacturer of firearms and firearm accessories based in Hebron, Kentucky for a total purchase price of

$15.8 million, $15 million of which was paid at the closing of such transaction.

This strategic purchase included Anderson’s manufacturing

facility and machinery and provided Ruger the opportunity to work with a skilled and experienced workforce, strengthening its production

capabilities and expanding its product offerings.

of December 31, 2025, the Company had $39.4 million of United States Treasury instruments which mature within one year.

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with cash on hand.

In 2023, the Company repurchased

264,062 shares of its common stock for $11.8 million in the open market.

In 2024, the Company repurchased 835,060 shares

of its common stock for $34.4 million in the open market.

The average price per share purchased was $41.19.

These purchases

were funded with cash on hand.

These purchases were funded

with cash on hand.

In 2023, the Company repurchased

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

On February 14, 2025, the Company’s Board

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

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.

On March 2, 2026, the Company’s Board of

Directors authorized a dividend of 8¢ per share to shareholders of record on March 16, 2026.

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

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

Firearms Legislation

and Litigation

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

Operational Matters

In the normal course of its manufacturing operations,

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assets through tax deductions against future taxable income.

Critical Accounting Policies and Estimates

On October 14, 2025, the Company’s Board

of Directors (the “Board”) approved the adoption of a limited-duration stockholder rights plan (the “Rights Plan”).

The Rights Plan is effective October 14, 2025 (“Effective Date”) and will expire on October 13, 2026.

The Board, in consultation

with its advisors, adopted the Rights Plan in response to the public announcement by Beretta Holding S.A.

(“Beretta”) that

it had accumulated a significant economic interest in Ruger’s common stock and intends to engage in discussions with the Company

regarding “potential areas of operational and strategic collaborations”.

The Rights Plan is intended to ensure that the Board

remains in the best position to perform its fiduciary duties and to enable all stockholders to receive fair and equal treatment.

also designed to allow all stockholders to realize the long-term value of their investment by reducing the likelihood that Beretta would

gain control through open market

accumulation or other coercive tactics without

appropriately compensating the Company’s stockholders or allowing the Board sufficient time to make informed judgments.

Plan is a temporary measure to give the Board time to understand Beretta’s intentions and evaluate options.

The summary of the terms

of the Rights Plan set forth in Note 22 is hereby incorporated by reference herein;

provided, however, that such summary of the Rights

Plan is qualified in its entirety by the Rights Plan.

Accounting Policies and Estimates

The preparation of financial statements in accordance

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results may differ from these estimates.

The Company believes that the assumptions and judgments involved in the accounting estimates below have the greatest potential impact

on its financial statements, so the Company believes these

to be its critical accounting estimates.

The methodologies applied for determining

the estimates related to the below critical accounting estimates have not changed from the prior year.

Product Liability Accrual

The Company believes that the assumptions

and judgments involved in the accounting estimates below have the greatest potential impact on its financial statements, so the Company

believes these to be its critical accounting estimates.

The methodologies applied for determining the estimates related to the below critical

accounting estimates have not changed from the prior year.

Liability Accrual

The Company believes the determination of its

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

Inventory Valuation and Reserves

Valuation and Reserves

The Company believes the valuation of its inventory

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not seem prudent to carry inventory at full cost beyond what the Company projects to be needed during the next 36 months.

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.

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

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

Accounting Pronouncements

In December of 2023, the FASB issued Accounting

Standards Update (“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 paid.

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.

application is required, with retrospective application permitted.

Refer to Note 13, Income Taxes, for the updated presentation.

In November 2024, the FASB issued ASU No.

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

Forward-Looking Statements and Projections

In December 2025, the FASB issued its final ASU which

makes improvements to the Accounting Standards Codification in response to feedback from stakeholders.

This standard, issued as ASU 2025-12,

specifically updates the Codification for a broad range of Topics arising from technical corrections, unintended application of the Codification,

clarifications, and other minor improvements.

This update is effective for annual reporting periods beginning after December 15, 2026,

including interim reporting periods within those annual reporting periods.

The Company is currently evaluating the impact of adopting

In September 2025, the FASB issued ASU No.

“Intangibles - Goodwill and Other - Internal Use Software (Subtopic 350-40):

Targeted Improvements to the Accounting for Internal

Use Software.” The standard modernizes and simplifies guidance for internal-use software costs.

This guidance is effective for annual

reporting periods beginning after December 15, 2027

including interim reporting periods within those annual

reporting periods.

The Company is evaluating the impact of this guidance on its Consolidated Financial Statements.

Forward-Looking

Statements and Projections

The Company may, from time to time, make forward-looking

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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