STURM RUGER & CO INC 10-K

ITEM 8—FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Reports of Independent Registered Public Accounting Firm (PCAOB ID 49 ) 49 Consolidated Balance Sheets at December 31, 2025 and 2024 52 Consolidated Statements of Income and Comprehensive Income for the years ended December 31, 2025, 2024 and 2023 54 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2025, 2024 and 2023 55 Consolidated Statements of Cash Flows for the years ended December 31, 2025, 2024 and 2023 56 Notes to Consolidated Financial Statements 57 48 Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Sturm, Ruger & Company, Inc. and Subsidiaries Opinion on the Internal Control Over Financial Reporting We have audited Sturm, Ruger & Company, Inc. and Subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2025, 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, 2025, 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 2025 and 2024, 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, 2025 and the related notes to the consolidated financial statements of the Company and our report dated, March 2, 2026 expressed an unqualified opinion. As described in Management’s Report on Internal Control over Financial Reporting, management has excluded its Hebron operations resulting from the acquisition of Anderson Manufacturing assets from its assessment of internal control over financial reporting as of December 31, 2025, because it was acquired by the Company in a purchase business combination in the third quarter of 2025. We have also excluded Hebron operations resulting from the acquisition of Anderson Manufacturing assets from our audit of internal control over financial reporting. The Hebron operations’ total assets and net sales represent approximately 3% and less than 1%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2025. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/RSM US LLP Stamford, Connecticut March 2, 2026 49 Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Sturm, Ruger & Company, Inc. and Subsidiaries Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Sturm, Ruger & Company, Inc. and its subsidiaries (the Company) as of December 31, 2025 and 2024, 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, 2025, and the related notes to the consolidated financial statements and schedule (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2025, 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 March 2, 2026 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter 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 relates. Last-In, First-Out Inventory Reserve As described in Notes 1 and 5 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 50 net realizable value, and the Company’s consolidated net inventories balance of $42.9 million as of December 31, 2025, included a LIFO inventory reserve of $67.1 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 because of the complexities of the manual calculations performed by management to estimate the prevailing inventory costs, which includes calculations to estimate current year price level changes through the development of a prior year and a current year cumulative price index. Auditing management’s estimate of the LIFO inventory reserve was complex and required a high degree of auditor judgment and increased audit effort due to the complexities of management’s manual calculations and the impact those manual calculations have on the accounting estimate. Our audit procedures related to the Company’s LIFO inventory 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 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 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 We have served as the Company's auditor since 2005. Stamford, Connecticut March 2, 2026 51 Consolidated Balance Sheets (Dollars in thousands, except per share data) December 31, 2025 2024 Assets Current Assets Cash and cash equivalents $ 18,451 $ 10,028 Short-term investments 74,082 95,453 Trade receivables, net 64,510 67,145 Gross inventories 113,166 149,417 Less LIFO reserve ( 67,058 ) ( 66,398 ) Less excess and obsolescence reserve ( 3,227 ) ( 6,533 ) Net inventories 42,881 76,486 Prepaid expenses and other current assets 11,680 9,245 Total Current Assets 211,604 258,357 Property, plant and equipment 506,799 477,622 Less allowances for depreciation ( 426,702 ) ( 406,373 ) Net property, plant and equipment 80,097 71,249 Deferred income taxes 19,720 16,681 Other assets 30,576 37,747 Total Assets $ 341,997 $ 384,034 See accompanying notes to consolidated financial statements. 52 December 31, 2025 2024 Liabilities and Stockholders’ Equity Current Liabilities Trade accounts payable and accrued expenses $ 34,122 $ 35,750 Contract liabilities with customers (Note 3) — — Product liability 964 431 Employee compensation and benefits 15,023 18,824 Workers’ compensation 4,638 5,804 Total Current Liabilities 54,747 60,809 Lease liability (Note 8) 1,158 1,747 Employee compensation 2,271 1,835 Product liability accrual 61 61 Contingent liabilities (Note 20) — — Stockholders’ Equity Common stock, non-voting, par value $ 1 : Authorized shares – 50,000 ; none issued Common stock, par value $ 1 : Authorized shares – 40,000,000 2025 – 24,490,478 issued, 15,944,253 outstanding 2024 – 24,467,983 issued, 16,790,824 outstanding 24,490 24,468 Additional paid-in capital 55,356 50,536 Retained earnings 422,045 436,609 Less: Treasury stock – at cost 2025 – 8,546,225 shares 2024 – 7,677,159 shares ( 218,131 ) ( 192,031 ) Total Stockholders’ Equity 283,760 319,582 Total Liabilities and Stockholders’ Equity $ 341,997 $ 384,034 See accompanying notes to consolidated financial statements. 53 Consolidated Statements of Income and Comprehensive Income (In thousands, except per share data) Year ended December 31, 2025 2024 2023 Net firearms sales $ 543,474 $ 532,608 $ 540,746 Net castings sales 2,583 3,035 3,021 Total net sales 546,057 535,643 543,767 Cost of products sold 464,906 421,228 410,148 Gross profit 81,151 114,415 133,619 Operating Expenses (Income): Selling 39,062 38,755 38,788 General and administrative 54,201 44,006 42,752 Other operating expense (income), net 187 — ( 5 ) Total operating expenses 93,450 82,761 81,535 Operating (loss) income ( 12,299 ) 31,654 52,084 Other income: Royalty income 1,401 857 658 Interest income 3,259 4,885 5,465 Interest expense ( 94 ) ( 102 ) ( 205 ) Other income, net 572 481 822 Total other income, net 5,138 6,121 6,740 (Loss) income before income taxes ( 7,161 ) 37,775 58,824 Income taxes ( 2,770 ) 7,212 10,609 Net (loss) income and comprehensive (loss) income $ ( 4,391 ) $ 30,563 $ 48,215 Basic (Loss) Earnings Per Share $ ( 0.27 ) $ 1.79 $ 2.73 Diluted (Loss) Earnings Per Share $ ( 0.27 ) $ 1.77 $ 2.71 Weighted average number of common shares outstanding – Basic 16,235,995 17,088,205 17,676,955 Weighted average number of common shares outstanding – Diluted 16,235,995 17,270,101 17,811,218 Cash Dividends Per Share $ 0.62 $ 0.69 $ 6.27 See accompanying notes to consolidated financial statements. 54 Consolidated Statements of Stockholders’ Equity (Dollars in thousands) Common Stock Additional Paid-in Capital Retained Earnings Treasury Stock Total Balance at December 31, 2022 $ 24,378 $ 45,075 $ 393,097 $ ( 145,812 ) $ 316,738 Net income 48,215 48,215 Dividends paid ( 22,446 ) ( 22,446 ) Stock-based compensation 3,989 3,989 Vesting of RSU’s ( 2,156 ) ( 2,156 ) Common stock issued – compensation plans 59 ( 59 ) — Unpaid dividends accrued ( 808 ) ( 808 ) Repurchase of 264,062 shares of common stock ( 11,811 ) ( 11,811 ) Balance at December 31, 2023 24,437 46,849 418,058 ( 157,623 ) 331,721 Net income 30,563 30,563 Dividends paid ( 11,829 ) ( 11,829 ) Stock-based compensation 4,342 4,342 Vesting of RSU’s ( 624 ) ( 624 ) Common stock issued – compensation plans 31 ( 31 ) — Unpaid dividends accrued ( 183 ) ( 183 ) Repurchase of 835,060 shares of common stock ( 34,408 ) ( 34,408 ) Balance at December 31, 2024 24,468 50,536 436,609 ( 192,031 ) 319,582 Net income ( 4,391 ) ( 4,391 ) Dividends paid ( 10,122 ) ( 10,122 ) Stock-based compensation 5,020 5,020 Vesting of RSU’s ( 178 ) ( 178 ) Common stock issued – compensation plans 22 ( 22 ) — Unpaid dividends accrued ( 51 ) ( 51 ) Repurchase of 732,765 shares of common stock ( 26,100 ) ( 26,100 ) Balance at December 31,2025 $ 24,490 $ 55,356 422,045 $ ( 218,131 ) $ 283,760 See accompanying notes to consolidated financial statements. 55 Consolidated Statements of Cash Flows (In thousands) Year ended December 31, 2025 2024 2023 Operating Activities Net (loss) income $ ( 4,391 ) $ 30,563 $ 48,215 Adjustments to reconcile net (loss) income to cash provided by operating activities: Depreciation and amortization 22,871 22,063 22,383 Stock-based compensation 5,020 4,342 3,989 Excess and obsolescence inventory reserve ( 767 ) 413 1,308 Inventory write-off 17,002 — — Loss (gain) on disposal of assets 187 — ( 5 ) Deferred income taxes ( 3,039 ) ( 4,705 ) ( 5,867 ) Changes in operating assets and liabilities: Trade receivables 2,635 ( 7,281 ) 5,585 Inventories 21,191 2,911 ( 16,125 ) Trade accounts payable and accrued expenses ( 2,746 ) 3,789 ( 4,406 ) Contract liability with customers — ( 149 ) ( 882 ) Employee compensation and benefits ( 3,416 ) ( 5,869 ) ( 6,469 ) Product liability 533 ( 188 ) 372 Prepaid expenses, other assets and other liabilities ( 772 ) 9,615 ( 13,026 ) Income taxes receivable/payable — — ( 1,171 ) Cash provided by operating activities 54,308 55,504 33,901 Investing Activities Property, plant and equipment additions ( 15,846 ) ( 20,821 ) ( 15,796 ) Purchase of Anderson Manufacturing assets ( 15,010 ) — — Purchases of short-term investments ( 108,905 ) ( 138,885 ) ( 192,627 ) Proceeds from maturity of short-term investments 130,276 145,917 249,274 Net proceeds from sale of assets — — 5 Cash (used for) provided by investing activities ( 9,485 ) ( 13,789 ) 40,856 Financing Activities Dividends paid ( 10,122 ) ( 11,829 ) ( 110,789 ) Repurchase of common stock ( 26,100 ) ( 34,408 ) ( 11,811 ) Payment of employee withholding tax related to share-based compensation ( 178 ) ( 624 ) ( 2,156 ) Cash used for financing activities ( 36,400 ) ( 46,861 ) ( 124,756 ) Increase (decrease) in cash and cash equivalents 8,423 ( 5,146 ) ( 49,999 ) Cash and cash equivalents at beginning of year 10,028 15,174 65,173 Cash and cash equivalents at end of year $ 18,451 $ 10,028 $ 15,174 See accompanying notes to consolidated financial statements. 56 Notes to Consolidated Financial Statements (Dollars in thousands, except per share) 1. Summary of Significant Accounting Policies Organization Sturm, Ruger & Company, Inc. (the “Company”) is principally engaged in the design, manufacture, and sale of firearms to domestic customers. Approximately 99 % of sales were from firearms. Export sales represented approximately 5 % of firearms sales. 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 manufactures investment castings made from steel alloys and metal injection molding (“MIM”) parts for internal use in its firearms and utilizes available capacity to manufacture and sell investment castings and MIM parts to unaffiliated, third-party customers. Castings were less than 1 % of the Company’s total sales for the year ended December 31, 2025. Preparation of Financial Statements The Company follows United States generally accepted accounting principles (“GAAP”). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. The significant accounting policies described below, together with the notes that follow, are an integral part of the consolidated financial statements. Principles of Consolidation The consolidated financial statements include 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 (“ASC”) 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. In some instances, sales include multiple performance obligations. The most common of these instances relates to sales promotion programs under which downstream customers are entitled to receive no charge products based on their purchases of certain of the Company’s products from the independent distributors. The fulfillment of these no charge products 57 is the Company’s responsibility. In such instances, the Company allocates the revenue of the promotional sales based on the estimated level of participation in the sales promotional program and the timing of the shipment of all of the firearms included in the promotional program, including the no charge firearms. Revenue is recognized proportionally as each performance obligation is satisfied, based on the relative customary price of each product. Customary prices are generally determined based on the prices charged to the independent distributors. The net change in contract liabilities for a given period is reported as an increase or decrease to sales. The Company accounts for cash sales discounts as a reduction in sales. Amounts billed to customers for shipping and handling fees are included in net sales and costs incurred by the Company for the delivery of goods are classified as selling expenses. Federal excise taxes are excluded from net sales. Business Combination: On July 1, 2025, the Company acquired substantially all of the assets of Anderson Manufacturing (“Anderson”) for a total purchase price of $ 15.8 million in cash, with $ 15 million having been paid in cash at the closing of the transaction and $ 0.8 million having been held back from the purchase price for the purposes described in Note 2 below (the “Anderson Acquisition”). The Anderson Acquisition was funded by the Company with cash on hand and has been accounted for in accordance with ASC 805 - Business Combinations, which requires, among other things, an assignment of the acquisition consideration transferred to the sellers for the assets acquired, using the bottom up approach, to estimate their fair value at acquisition date. Any excess of the fair value of the purchase consideration over these identified net assets was recorded as goodwill. Our estimates of fair value are based upon assumptions believed to be reasonable, yet are inherently uncertain and, as a result, may differ from actual performance. During the measurement period, not to exceed one year from the date of acquisition, the Company may record adjustments to the estimated fair values of the assets acquired and liabilities assumed with a corresponding adjustment to goodwill in the period in which such revised estimates are identified. No such adjustments were recorded as of December 31, 2025. Cash and Cash Equivalents The Company considers interest-bearing deposits with financial institutions with remaining maturities of three months or less at the time of acquisition to be cash equivalents. Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal or most advantageous market at the measurement date. Fair value is established according to a hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below: Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. 58 Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data. Level 3: Unobservable inputs are used when little or no market data is available. Level 3 inputs are given the lowest priority in the fair value hierarchy. The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. The carrying amounts of financial instruments, including cash, short-term investments, accounts receivable, accounts payable and accrued liabilities, approximate fair value due to the short-term maturity of these items. As of December 31, 2025, the Company’s short-term investments consist of U.S. Treasury instruments (Level 1), maturing within one year, and investments in a bank-managed money market fund that invests exclusively in United States Treasury obligations and is valued at the net asset value ("NAV") daily closing price, as reported by the fund, based on the amortized cost of the fund’s securities (Level 2) . For the bank-managed money market fund, t he NAV is used as a practical expedient to estimate fair value. This practical expedient is not used when it is determined to be probable that the fund will sell the investment for an amount different than the reported NAV . Such securities are classified as held to maturity, since the Company has the intent and ability to do so, and are carried at cost plus accrued interest, which approximates fair value. The fair value of inventory acquired as part of business combination is based on a third-party valuation utilizing the comparable sales method which is based on Level 2 and Level 3 inputs. The fair value of property, plant and equipment acquired as part of business combination is based on a third-party valuation utilizing the indirect method of cost approach, which is based on Level 2 and Level 3 inputs. The fair value of patents acquired as part of business combination is based on a third-party valuation utilizing the replacement cost method, which is based on Level 2 and Level 3 inputs. The fair value of the remaining intangible assets as part of business combination are based on a third-party valuation utilizing discounted cash flow methods that involves inputs, which are not observable in the market (Level 3). Accounts Receivable The Company establishes an allowance for doubtful accounts based on the creditworthiness of its customers and historical experience. While the Company uses the best information available to make its evaluation, future adjustments to the allowance for doubtful accounts may be necessary if there are significant changes in economic and industry conditions or any other factors considered in the Company’s evaluation. Bad debt expense has been immaterial during each of the last three years. The Company mitigates its credit risk by maintaining credit insurance on most of its significant customers. 59 Inventories Substantially all of the Company’s inventories are valued at the lower of cost, principally determined by the last-in, first-out (LIFO) method, or net realizable value. Elements of cost in inventories include raw materials, direct labor and manufacturing overhead. Property, Plant and Equipment 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; replacements and improvements are capitalized. Long-lived Assets The Company evaluates the carrying value of long-lived assets to be held and used when events or changes in circumstances indicate the carrying value may not be recoverable. In performing this review, the carrying value of the assets is compared to the projected undiscounted cash flows to be generated from the assets. If the sum of the undiscounted expected future cash flows is less than the carrying value of the assets, the assets are considered to be impaired. Impairment losses are measured as the amount by which the carrying value of the assets exceeds their fair value. The Company bases fair 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 a rate commensurate with the risks associated with the recovery of the assets. As of December 31, 2025, the Company does not believe there are any indications of impairment related to long-lived assets. 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 losses. As of 60 December 31, 2025, the Company does not believe there are any indications of impairment related to goodwill. Income Taxes Income taxes are accounted for using the asset and liability method. Under this method, deferred income taxes are recognized for the tax consequences of “temporary differences” by applying enacted statutory rates applicable to future years to temporary differences between the financial statement carrying amounts and the tax basis of the Company’s assets and liabilities. Product Liability The Company provides for product liability claims including estimated legal costs to be incurred defending such claims. The provision for product liability claims is charged to cost of products sold. Advertising Costs The Company includes advertising costs in selling expenses and these costs are expensed as incurred. Advertising costs for 2025, 2024, and 2023, were $ 3.3 million, $ 3.4 million, and $ 3.1 million, respectively. Shipping Costs Costs incurred related to the shipment of products are included in selling expense. Such costs totaled $ 3.8 million, $ 4.3 million, and $ 4.4 million in 2025, 2024, and 2023, respectively. Research and Development In 2025, 2024, and 2023, the Company spent approximately $ 8.4 million, $ 8.2 million, and $ 9.8 million, respectively, on research and development activities relating to new products and the improvement of existing products. These costs are included in costs of products sold and are expensed as incurred. These costs are capitalized for tax purposes under the provisions of the Tax Cuts and Jobs Act of 2017 that relate to IRS Code Section 174, as discussed in Note 13. Earnings per Share Basic earnings per share is based upon the weighted-average number of shares of common stock outstanding during the year. Diluted earnings per share reflect the impact of restricted stock units and deferred stock outstanding using the treasury stock method. Recent 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 61 fiscal years beginning after December 15, 2024. Prospective 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. 2024-03, “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, 2027. The requirements will be applied prospectively with the option for retrospective application. Early adoption is permitted. The Company is currently evaluating the effect the updated guidance will have on its financial statement disclosures. 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 ASU 2025-12. In September 2025, the FASB issued ASU No. 2025-06, “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. 2. Acquisition of Anderson Manufacturing Assets As described in Note 1, the Company closed on the Anderson Acquisition on July 1, 2025. The Company paid $ 15.0 million dollars in cash for Anderson assets at the closing of the transaction, with an additional $ 0.8 million held back for the purposes described below. The Anderson Acquisition included, among other things, property, equipment, inventory, and all intellectual property related to Anderson, including the Anderson trademarks and tradenames, and all derivatives thereof. The primary purpose of the Anderson Acquisition was to increase the Company’s production capabilities. The Anderson Acquisition was accounted for in accordance with ASC Topic 805, Business Combinations. Accordingly, the total purchase price has been allocated to the assets based on their fair value at the date of acquisition. The Company assumed no debt or long-term liabilities in this transaction. These allocations reflect various provisional estimates that were based on the information available at the time and are subject to change during the purchase price allocation period. 62 The following table summarizes the Company's preliminary fair value of the assets acquired, as of July 1, 2025, for the Company’s Anderson Acquisition. Purchase Price Cash paid to sellers $ 15,010 Holdback 750 Total Purchase Price $ 15,760 Purchase Price Allocation Assets Acquired Land and building $ 5,900 Machinery and equipment 5,800 Inventory 2,045 Other assets 1,625 Goodwill 390 Net Assets Acquired $ 15,760 Identifiable assets acquired were recorded at their estimated fair values based on the methodology described under “Fair Value Measurements” in Note 1 - Significant Accounting Policies. The Fair Value of any intangible assets acquired in the Anderson Acquisition were considered negligible. The Company held back $ 0.8 million from their purchase payment for potential repair mediation costs, which will either be applied to repair costs or paid to Anderson. This holdback was included in trade accounts payable and accrued expenses on the Company’s Condensed Consolidated Balance Sheet at December 31, 2025. The excess purchase price over the fair value of the assets acquired was recorded as goodwill in the amount of $ 0.4 million, primarily related to assembled workforce and increased manufacturing capacity. The goodwill is expected to be deductible for tax purposes. The Company incurred acquisition related costs of approximately $ 0.5 million, which are included in selling, general and administrative expenses in the Company’s Consolidated Statements of Income and Comprehensive Income. The pro forma impact of the acquisition and the results of operations attributable to Anderson in 2024 and 2025 have not been presented, as they are not material to the Company’s consolidated results of operations. 63 3. Revenue Recognition and Contracts with Customers The impact of ASC 60 6 on revenue recognized during the years ended December 31, 2025, December 31, 2024, and December 31, 2023 is as follows: 2025 2024 2023 Contract liabilities with customers at January 1, $ — $ 149 $ 1,031 Revenue recognized ( 1,669 ) ( 149 ) ( 4,084 ) Revenue deferred 1,669 — 3,202 Contract liabilities with customers at December 31, $ — $ — $ 149 During the year ended December 31, 2025, the Company deferred $ 1.7 million of revenue, completely offset by the recognition of $ 1.7 million of revenue previously deferred as the performance obligations relating to the shipment of free products were all satisfied during the year. This resulted in there being no change in firearms sales for the year ended December 31, 2025 and there being no deferred contract revenue liability at December 31, 2025. 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 relating to the shipment of free products were satisfied. This resulted in a net increase in firearms sales for the year ended December 31, 2023 of $ 0.9 million and a deferred contract revenue liability at December 31, 2023 of $ 0.1 million. 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. 64 4. Trade Receivables, Net Trade receivables consist of the following: December 31, 2025 2024 Trade receivables $ 66,217 $ 68,855 Allowance for doubtful accounts ( 400 ) ( 400 ) Allowance for discounts ( 1,307 ) ( 1,310 ) $ 64,510 $ 67,145 In 2025, the largest individual trade receivable balances accounted for 28 %, 25 %, and 18 % of total trade receivables, respectively. In 2024, the largest individual trade receivable balances accounted for 26 %, 20 %, 14 %, and 11 % of total trade receivables, respectively. 5. Inventories Inventories consist of the following: December 31, 2025 2024 Inventory at FIFO Finished goods $ 10,993 $ 26,022 Materials and products in process 102,173 123,395 Gross inventories 113,166 149,417 Less: LIFO reserve ( 67,058 ) ( 66,398 ) Less: excess and obsolescence reserve ( 3,227 ) ( 6,533 ) Net inventories $ 42,881 $ 76,486 6. Property, Plant and Equipment Property, plant and equipment consist of the following: December 31, 2025 2024 Land and improvements $ 3,333 $ 2,826 Buildings and improvements 83,368 76,153 Machinery and equipment 352,353 333,365 Dies and tools 67,745 65,278 Property, plant and equipment 506,799 477,622 Less allowances for depreciation ( 426,702 ) ( 406,373 ) Net property, plant and equipment $ 80,097 $ 71,249 65 Depreciation expense totaled $ 22.0 million, $ 21.1 million, and $ 21.1 million in 2025, 2024, and 2023, respectively. 7. Other Assets Other assets consist of the following: December 31, 2025 2024 Patents, at cost $ 10,339 $ 10,339 Deposits on capital items 12,148 18,443 Marlin trade name, at cost 7,800 7,800 Accumulated amortization ( 9,384 ) ( 8,524 ) Other 9,673 9,689 $ 30,576 $ 37,747 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 2025, $ 0.5 million in 2024, and $ 0.4 million in 2023. 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 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 useful life. The estimated annual customer relationship name amortization expense for each of the next five years is $ 0.1 million. 8. Leased Assets The Company leases certain of its real estate and equipment. The Company has evaluated all its leases and determined that all are operating leases under the definitions of the guidance of ASU 2016-02. The Company’s lease agreements generally do not require material variable lease payments, residual value guarantees or restrictive covenants. 66 The Company uses the effective interest method to record right-of-use assets equal to the present value of the contractual liability for future lease payments. The table below presents the right-of-use assets and related lease liabilities recognized on the condensed consolidated balance sheet as of December 31, 2025: Balance Sheet Line Item December 31, 2025 December 31, 2024 Right-of-use assets Other assets $ 1,805 $ 2,345 Operating lease liabilities Current portion Trade accounts payable and accrued expenses $ 647 $ 598 Noncurrent portion Lease liabilities 1,158 1,747 Total operating lease liabilities $ 1,805 $ 2,345 The depreciable lives of right-of-use assets are limited by the lease term and are amortized on a straight line basis over the life of the lease. The Company’s leases generally do not provide an implicit interest rate, and therefore the Company calculates an incremental borrowing rate to determine the present value of its operating lease liabilities. 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 rate: Year Ended December 31, 2025 December 31, 2024 Cash paid for amounts included in the measurement of lease liabilities $ 540 $ 796 Cash amounts paid for short-term leases $ 492 $ 449 Right-of-use assets obtained in exchange for lease liabilities $ 70 $ — Weighted average remaining lease term (years) 6.3 7.7 Weighted average discount rate 8.0 % 8.0 % 67 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, 2025: 2026 $ 771 2027 297 2028 230 2029 160 2030 160 Thereafter 640 Total undiscounted future minimum lease payments 2,258 Less: Difference between undiscounted lease payments & the present value of future lease payments ( 453 ) Total operating lease liabilities $ 1,805 Certain of the Company’s lease agreements contain renewal options at the Company’s discretion. The Company does not recognize right-of-use assets or lease liabilities for leases of one year or less or for renewal periods unless it is reasonably certain that the Company will exercise the renewal option at the inception of the lease or when a triggering event occurs. The Company’s weighted average remaining lease term for operating leases as of December 31, 2025 is 6.3 years. 9. Trade Accounts Payable and Accrued Expenses Trade accounts payable and accrued expenses consist of the following: December 31, 2025 2024 Trade accounts payable $ 10,044 $ 13,170 Federal excise taxes payable 13,913 13,192 Accrued other 10,165 9,388 $ 34,122 $ 35,750 10. Line of Credit 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 of a percent ( 0.25 %) per year on the unused portion. At December 31, 2025, the Company was in compliance with the terms and covenants of the credit facility. 11. Employee Benefit Plans The Company sponsors a qualified defined-contribution 401(k) plan that covers substantially all of its employees. Under the terms of the 401(k) plan, the Company matches a certain portion of 68 employee contributions to their individual 401(k) accounts using the “safe harbor” guidelines provided in the Internal Revenue Code. Expenses related to matching employee contributions to the 401(k) plan were $ 4.2 million, $ 4.1 million, and $ 4.7 million in 2025, 2024, and 2023, respectively. Additionally, in 2025, 2024, and 2023 the Company provided discretionary supplemental contributions to the individual 401(k) accounts of substantially all employees. Each employee received a supplemental contribution to their account based on a uniform percentage of qualifying compensation established annually. The cost of these supplemental contributions totaled $ 7.0 million, $ 7.0 million, and $ 6.9 million in 2025, 2024, and 2023, respectively. 12. Other Operating Income, Net Other operating income, net consists of the following: Year ended December 31, 2025 2024 2023 (Loss) gain on disposal of operating assets $ ( 187 ) $ — $ 5 13. Income Taxes The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal and state income tax examinations by tax authorities for years before 2018. Our (loss) income before income taxes is derived solely from within the United States. The federal and state income tax provision consisted of the following: Year ended December 31, 2025 2024 2023 Current Federal $ ( 49 ) $ 10,310 $ 14,763 State ( 146 ) 1,607 1,713 Total current tax expense ( 195 ) 11,917 16,476 Deferred Federal ( 2,150 ) ( 4,190 ) ( 5,285 ) State ( 425 ) ( 515 ) ( 582 ) Total deferred tax expense ( 2,575 ) ( 4,705 ) ( 5,867 ) Provision for income taxes $ ( 2,770 ) $ 7,212 $ 10,609 The reconciliation of the U.S. federal income tax provision at the statutory federal income tax rate of 21 % for the year ended December 31, 2025, to our provision for income taxes was as follows: The table reflects the ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which was adopted prospectively for the year ended December 31, 2025. See “Note 1. Organization and Summary of Significant Accounting Policies — Recently 69 Adopted Accounting Pronouncements ” for additional information on the adoption of ASU 2023-09. Year ended December 31, 2025 Amount Percent Statutory federal income tax rate $ ( 1,504 ) 21.0 % State and local income taxes, net of federal tax benefit ( 570 ) 8.0 Research and development tax credits ( 1,027 ) 14.3 Nontaxable or nondeductible items Share based compensation 521 ( 7.3 ) Officers compensation – 162(M) ( 204 ) 2.9 Other nontaxable or nondeductible items 63 ( 0.9 ) Other ( 49 ) 0.7 Effective income tax rate ( 2,770 ) 38.7 % State taxes in New Hampshire made up the majority (greater than 50 %) of the tax effect in the state and local income taxes, net of federal income tax effect category for 2025. The reconciliation of the U.S. federal income tax provision at the statutory federal income tax rate of 21 % for each of the years ended December 31, 2024 and 2023, respectively, to our provision for income taxes, as previously disclosed, prior to the adoption of ASU 2023-09, were as follows: Year ended December 31, 2024 2023 Statutory federal income tax rate 21.0 % 21.0 % State income taxes, net of federal tax benefit 1.5 2.2 Research and development tax credits ( 5.9 ) ( 2.7 ) Other 2.5 ( 2.5 ) Effective income tax rate 19.1 % 18.0 % The Company made income tax payments of approximately $ 2.8 million, $ 10.6 million, and $ 26.0 million, during 2025, 2024, and 2023, respectively. The amounts of cash paid for income taxes, for the year ended December 31, 2025, were as follows: Year ended December 31, 2025 Amount Percent Federal income taxes paid $ 3,000 106.0 % State and local income taxes paid New Hampshire 100 3.6 % North Carolina ( 200 ) ( 7.1 )% Other immaterial state taxes paid ( 69 ) ( 2.5 )% Total cash paid for income taxes $ 2,831 100 % 70 Deferred tax assets and liabilities reflect the net tax effects of net operating loss and tax credit carryforwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows: December 31, 2025 2024 Deferred tax assets Net Operating Loss Carryforwards $ 5,461 $ — Research and development tax credits 1,036 — Capitalized research and development costs 7,361 12,566 Employee compensation and benefits 2,553 2,483 Allowances for doubtful accounts and discounts 434 452 Inventories 902 1,831 Stock-based compensation 2,989 1,876 ASC 842 lease liabilities 428 — Other 850 1,537 Total deferred tax assets 22,014 20,745 Deferred tax liabilities: ASC 842 right-of-use asset 428 — Depreciation 997 2,868 Other 869 1,196 Total deferred tax liabilities 2,294 4,064 Net deferred tax assets $ 19,720 $ 16,681 The Company expects to realize its deferred 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 has made an evaluation of the potential impact of additional state taxes being assessed by jurisdictions in which the Company does not currently consider itself liable. The Company does not anticipate that such additional taxes, if any, would result in a material change to its financial position. 71 14. Earnings Per Share Set forth below is a reconciliation of the numerator and denominator for the basic and diluted earnings per share calculations for the periods indicated: Year ended December 31, 2025 2024 2023 Numerator: Net (loss) income $ ( 4,391 ) $ 30,563 $ 48,215 Denominator: Weighted average number of common shares outstanding – Basic 16,235,995 17,088,205 17,676,955 Dilutive effect of options and restricted stock units outstanding under the Company’s employee compensation plans — 181,896 134,263 Weighted average number of common shares outstanding – Diluted 16,235,995 17,270,101 17,811,218 15. Stock Repurchases In 2025, 2024, and 2023 the Company repurchased shares of its common stock. Details of these purchases are as follows: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Program Maximum Dollar Value of Shares that May Yet Be Purchased Under the Program Fourth Quarter 2023 October 1 to October 28 — — — October 29 to November 25 179,341 $ 45.20 179,341 November 26 to December 31 84,721 $ 43.67 84,721 First Quarter 2024 January 1 to January 27 7,317 $ 43.42 7,317 January 28 to February 24 20,307 $ 42.93 20,307 February 25 to March 30 47,400 $ 42.79 47,400 Second Quarter 2024 March 31 to April 27 — — — April 28 to May 25 28,924 $ 42.92 28,924 May 26 to June 29 373,969 $ 42.27 373,969 Third Quarter 2024 June 30 to July 27 156,517 $ 41.27 156,517 July 28 to August 24 — — — August 25 to September 28 64,325 $ 40.66 64,325 Fourth Quarter 2024 September 29 to October 26 11,340 $ 40.50 11,340 October 27 to November 23 52,129 $ 39.50 52,129 November 23 to December 31 72,832 $ 34.81 72,832 First Quarter 2025 January 1 to January 25 28,720 $ 34.44 28,720 January 26 to February 22 — — — February 23 to March 29 50,480 $ 39.62 50,480 Second Quarter 2025 March 30 to April 26 99,951 $ 37.98 99,951 April 27 to May 24 171,061 $ 35.20 171,061 May 25 to June 28 92,872 $ 35.86 92,872 Third Quarter 2025 June 29 to July 26 116,667 $ 35.24 116,667 July 27 to August 23 173,014 $ 33.75 173,014 August 24 to September 27 — — — Total 1,831,887 $ 39.48 1,831,887 $ 14,300,000 72 All of these purchases were made with cash held by the Company and no debt was incurred At December 31, 2025, approximately $ 14.3 million remained authorized for share repurchases. 16. Compensation Plans In May 2017, the Company’s shareholders approved the 2017 Stock Incentive Plan (the “2017 SIP”) under which employees, independent contractors, and non-employee directors may be granted stock options, restricted stock, deferred stock awards, and stock appreciation rights, any of which may or may not require the satisfaction of performance objectives. Vesting requirements are determined by the Compensation Committee of the Board of Directors . The Company has reserved 750,000 shares for issuance under the 2017 SIP. In June 2023, the Company’s shareholders approved the 2023 Stock Incentive Plan (the “2023 SIP”) under which employees, independent contractors, and non-employee directors may be granted stock options, restricted stock, deferred stock awards, and stock appreciation rights, any of which may or may not require the satisfaction of performance objectives. Vesting requirements are determined by the Compensation Committee of the Board of Directors. The Company reserved 1,000,000 shares for issuance under the 2023 SIP, of which 418,000 shares remain available for future grants as of December 31, 2025. Approximately 120,000 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. Previously granted and outstanding awards under the 2017 SIP will remain subject to the terms of the 2017 SIP. 73 Compensation expense related to deferred stock, restricted stock, and restricted stock units is recognized based on the grant-date fair value of the Company’s common stock, using either the actual share price or an estimated value using the Monte Carlo valuation model. The total stock-based compensation cost included in the Statements of Income was $ 7.4 million, $ 5.8 million, and $ 6.2 million in 2025, 2024, and 2023, respectively. Deferred Stock Deferred stock awards vest based on the passage of time or the Company’s attainment of performance objectives. Upon vesting, these awards convert one-for-one to common stock. In 2025, 12,341 deferred stock awards were issued to non-employee directors that will vest in June 2026, 15,888 deferred stock awards were issued to non-employee directors that will vest in June 2028 and a 2,786 deferred stock award was issued to a non-employee director that will vest in June 2030. In 2024, 9,291 deferred stock awards were issued to non-employee directors that will vest in June 2025 and 11,992 deferred stock awards were issued to non-employee directors that will vest in June 2027. 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. Compensation expense related to these awards is amortized ratably over the vesting period. Compensation expense related to these awards was $ 1.0 million in 2025, $ 0.9 million in 2024, and $ 0.9 million in 2023. At December 31, 2025, there was $ 1.2 million of unrecognized compensation cost related to deferred stock that is expected to be recognized over a period of 4.5 years. Restricted Stock Units The Company grants restricted stock units (RSU’s) to senior employees. Some of these RSU’s are retention awards and have only time-based vesting. Other RSU’s have a vesting “double trigger.” The vesting of these RSU’s is dependent on the achievement of corporate objectives established by the Compensation Committee of the Board of Directors, including return on net operating assets, stock performance, and the passage of time. During 2025, 248,000 restricted stock units were issued. Compensation costs related to these restricted stock units was $ 9.5 million, of which $ 2.6 million was recognized in 2025. The costs 74 are being recognized ratably over the remaining periods required before the units vest, which range from 24 to 38 months. During 2024, 153,000 restricted stock units were issued. Compensation costs related to these restricted stock units was $ 6.8 million, of which $ 1.9 million was recognized in 2024. The costs are being recognized ratably over the remaining periods required before the units vest, which ranged from 24 to 26 months. During 2023, 114,000 restricted stock units were issued. Compensation costs related to these restricted stock units was $ 6.1 million, of which $ 1.3 million was recognized in 2023. The costs are being recognized ratably over the remaining periods required before the units vest, which ranged from 24 to 26 months. At December 31, 2025, there was $ 9.9 million of unrecognized compensation cost related to restricted stock units that is expected to be recognized over a period of 3.3 years. 17. Operating Segment Information The Company has two reportable operating segments: firearms and castings. The firearms segment manufactures and sells rifles, pistols, and revolvers principally to a number of federally-licensed, independent wholesale distributors primarily located in the United States. The castings segment manufactures and sells steel investment castings and metal injection molding parts. Corporate segment income relates to interest income, the sale of non-operating assets, and other non-operating activities. Corporate segment assets consist of cash and other non-operating assets. The Company evaluates performance and allocates resources, in part, based on income (loss) before taxes. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies (see Note 1). Intersegment sales are recorded at the Company’s cost plus a fixed 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 to the CODM. The Company’s CODM periodically reviews cost of goods sold by segment and treats it as a significant segment expense. 75 Year ended December 31, 2025 2024 2023 Net Sales Firearms $ 543,474 $ 532,608 $ 540,746 Castings Unaffiliated 2,583 3,035 3,021 Intersegment 23,570 31,528 33,086 26,153 34,563 36,107 Eliminations ( 23,570 ) ( 31,528 ) ( 33,086 ) $ 546,057 $ 535,643 $ 543,767 Costs of Goods Sold Firearms $ 461,416 $ 417,222 $ 407,068 Castings Unaffiliated 3,490 4,006 3,080 Intersegment 23,570 31,528 33,086 27,060 35,534 36,166 Eliminations ( 23,570 ) ( 31,528 ) ( 33,086 ) $ 464,906 $ 421,228 $ 410,148 Gross (Loss) Profit Firearms $ 82,058 $ 115,386 $ 133,678 Castings ( 907 ) ( 971 ) ( 59 ) $ 81,151 $ 114,415 $ 133,619 Operating (Loss) Income Firearms $ ( 10,722 ) $ 33,273 $ 52,887 Castings ( 1,577 ) ( 1,619 ) ( 803 ) $ ( 12,299 ) $ 31,654 $ 52,084 (Loss) Income Before Income Taxes Firearms $ ( 9,965 ) $ 34,051 $ 53,723 Castings ( 1,535 ) ( 1,616 ) ( 799 ) Corporate 4,339 5,340 5,900 $ ( 7,161 ) $ 37,775 $ 58,824 Year ended December 31, 2025 2024 2023 Identifiable Assets Firearms $ 205,061 $ 230,024 $ 228,699 Castings 7,659 9,303 11,144 Corporate 129,277 144,707 158,974 $ 341,997 $ 384,034 $ 398,817 Goodwill Firearms $ 3,445 $ 3,055 $ 3,055 Castings 209 209 209 $ 3,654 $ 3,264 $ 3,264 Depreciation Firearms $ 20,853 $ 19,952 $ 19,301 Castings 1,153 1,154 1,814 $ 22,006 $ 21,106 $ 21,115 Capital Expenditures Firearms $ 30,509 $ 20,488 $ 15,395 Castings 347 333 401 $ 30,856 $ 20,821 $ 15,796 76 In 2025, the Company’s largest customers and the percent of firearms sales they represented were as follows: Lipsey’s - 27 %; Sports South - 22 %; and Davidson’s - 18 %. In 2024, the Company’s largest customers and the percent of firearms sales they represented were as follows: Lipsey’s - 28 %; Sports South - 18 %; and Davidson’s - 16 %. In 2023, the Company’s largest customers and the percent of firearms sales they represented were as follows: Lipsey’s - 24 %; Davidson’s - 19 %; and Sports South - 15 %. The Company’s assets are located entirely in the United States and domestic sales represented at least 94 % of total sales in 2025, 2024, and 2023. 18. Quarterly Results of Operations (Unaudited) The following is a tabulation of the unaudited quarterly results of operations for the two years ended December 31, 2025: Three Months Ended 3/29/25 6/28/25 9/27/25 12/31/25 Net Sales $ 135,738 $ 132,491 $ 126,766 $ 151,062 Gross profit 29,895 5,146 19,155 26,955 Net income (loss) 7,768 ( 17,226 ) 1,582 3,485 Basic earnings per share 0.47 ( 1.05 ) 0.10 0.22 Diluted earnings per share $ 0.46 $ ( 1.05 ) $ 0.10 $ 0.21 Three Months Ended 3/30/24 6/29/24 9/28/24 12/31/24 Net Sales $ 136,820 $ 130,761 $ 122,287 $ 145,775 Gross profit 29,403 29,154 22,672 33,186 Net income 7,084 8,264 4,738 10,477 Basic earnings per share 0.41 0.48 0.28 0.63 Diluted earnings per share $ 0.40 $ 0.47 $ 0.28 $ 0.62 19. Related Party Transactions From time to time, the Company contracts with the National Rifle Association (“NRA”) for some of its promotional and advertising activities. The Company paid the NRA $ 0.7 million, $ 0.5 million and $ 0.5 million in 2025, 2024, and 2023, respectively. One of the Company’s Directors served as a Director on the Board of the NRA until October 27, 2025. The Company is a member of the National Shooting Sports Foundation (“NSSF”), the firearm industry trade association. The Company paid the NSSF $ 0.3 million, $ 0.4 million and $ 0.3 million in 2025, 2024, and 2023, respectively. One of the Company’s Directors also serves on the Board of the NSSF. 77 20. Contingent Liabilities As of December 31, 2025, the Company was a defendant in nine (9) lawsuits and is aware of certain other claims. The lawsuits generally fall into the categories of municipal litigation, unfair trade practices, product liability, employment, and trademark litigation. One (1) breach of contract matter was fully and finally resolved during the quarter. Material matters and developments are discussed in turn below. Municipal Litigation 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 misuse of firearms by third parties. There are three pending lawsuits of this type: the City of Gary , filed in Indiana State Court in 1999; The City of Buffalo , filed in the Supreme Court of the State of New York for Erie County on December 20, 2022; and The City of Rochester , filed in the Supreme Court for the State of New York for Monroe County on December 21, 2022, each of which is described in more detail below. The City of Gary 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 as well as nuisance abatement and/or injunctive relief 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, the Indiana Court of Appeals recently reversed the trial court and ordered dismissal of the case. The Indiana Court of Appeals denied the City’s request for rehearing, and the parties are awaiting remand to the trial court for dismissal. The City of Buffalo v. Smith & Wesson Brands, Inc., et al. and The City of Rochester v. Smith & Wesson Brands, Inc., et al were filed on consecutive days in New York State Court, naming a number of firearm manufacturers, distributors, and retailers as Defendants, including the Company. The complaints are virtually identical and, relying primarily on New York’s General Business Law §898-b, generally allege that the criminal misuse of firearms in their cities is the result of the manufacturing, sales, marketing, and distribution practices of the Defendants. These matters seek unspecified compensatory damages, creation of an abatement fund, punitive damages and other relief. Both matters were timely removed to federal court and were consolidated for pretrial purposes only. Those matters were stayed pending the outcome of a different matter that challenges New York’s law, which was decided earlier this year. The Defendants have moved to dismiss the cases and are vigorously defending these matters. Breach of Contract As reported in prior periods, the Company was a defendant in Jones v. Sturm, Ruger & Co., a purported class action lawsuit arising out of a data breach at Freestyle Solutions, Inc., the vendor 78 who was hosting the Company’s eCommerce website at the time of the breach. The settlement was finalized during the quarter and the matter is now closed. Unfair Trade Practices Estate of Suzanne Fountain v. Sturm, Ruger & Co., Inc., and Estate of Nevin Stanisic v. Sturm, Ruger & Co., Inc. are pending in Connecticut state court and arise out of the criminal shootings at the King Soopers supermarket in Boulder, Colorado on March 22, 2021. The Complaints allege that the Company’s advertising and marketing of the Ruger AR-556 pistol violate the Connecticut Unfair Trade Practices Act and seek damages for the alleged wrongful death of the victims. The Fountain and Stanisic cases were consolidated for discovery purposes only and transferred by the court to the Complex Litigation Docket. Oral argument on the Company’s pending Motion to Strike was held on July 21, 2025 and the court stayed discovery pending the outcome of that motion. The court denied the motion during the quarter, the stay was lifted and the parties have commenced discovery. Product Liability The Company is a defendant in two unrelated traditional product liability matters, both of which were filed during the quarter. Fortenberry v. Sturm, Ruger & Company, Inc. was served on July 11, 2025 and is pending in the Circuit Court of Arkansas County, Arkansas Northern District, Civil Division. This complaint alleges a product design defect in an “old model” Ruger Single-Six revolver and seeks damages for the death of the plaintiff’s decedent. Thorne v. Sturm, Ruger & Company, Inc. is a product liability matter in which the plaintiff alleges personal injuries resulting from a manufacturing defect in his SR22 pistol. This matter was served on November 13, 2025 and was withdrawn in January 2026 when the plaintiff filed a stipulation of dismissal with prejudice. During the quarter, Willeford v. Sturm, Ruger & Company, Inc., a product liability case that was filed on July 25, 2025 was withdrawn when the plaintiff filed a stipulation of dismissal without prejudice. Employment The Company was also named in Thompson v. Sturm, Ruger & Company, Inc. , an employment matter that was filed in the Superior Court for the State of Arizona, in and for the County of Yavapai, which was filed on August 21, 2025. The plaintiff seeks damages for alleged employment discrimination. The Company disputes the allegations of the complaint and has responded accordingly. Trademark Litigation T he Company is a defendant in FN Herstal, et al. v. Sturm, Ruger & Company, Inc. , which is pending in North Carolina. T he Complaint alleges that the Company’s use of the initialism 79 “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 parties are awaiting decision on dispositive motions. 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 aggregate amounts ultimately sought may exceed product liability accruals and applicable insurance coverage. 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 Compan y, but may have a material impact on the Company’ s financial results for a particular period. Product liability claim payments are made when appropriate if, as, and when claimants and the Company reach agreement upon an amount to finally resolve all claims. Legal costs are paid as the lawsuits and claims develop, the timing of which may vary greatly from case to case. A time schedule cannot be determined in advance with any reliability concerning when payments will be made in any given case. Provision is made for product liability claims based upon many factors related to the severity of the alleged injury and potential liability exposure, based upon prior claim experience. Because the Company's experience in defending these lawsuits and claims is that unfavorable outcomes are typically not probable or estimable, only in rare cases is an accrual established for such costs. In most cases, an accrual is established only for estimated legal defense costs. Product liability accruals are periodically reviewed to reflect then-current estimates of possible liabilities and expenses incurred to date and reasonably anticipated in the future. Threatened product liability claims are reflected in the Company's product liability accrual on the same basis as actual claims; i.e. , an accrual is made for reasonably anticipated possible liability and claims handling expenses on an ongoing basis. 80 Often, a Complaint does not specify the amount 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, 2025, December 31, 2024, and December 31, 2023 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 2025, three ( 3 ) traditional product liability cases were filed and one ( 1 ) employment case was filed. One ( 1 ) municipal lawsuit was resolved and one (1) breach of contract lawsuit was resolved. As of December 31, 2025, the Company was a defendant in eight ( 8 ) lawsuits involving its products, including three ( 3 ) municipal lawsuits, two ( 2 ) lawsuits alleging unfair trade practices, two ( 2 ) traditional product liability cases, and one ( 1 ) trademark case. 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. One (1) 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 lawsuit was filed against the Company and one ( 1 ) was resolved. As of December 31, 2023, the Company was a defendant in seven ( 7 ) lawsuits involving its products, including one ( 1 ) traditional product liability lawsuit, four ( 4 ) municipal lawsuits and two ( 2 ) lawsuits based upon alleged unfair trade practices. The Company was also a defendant in two ( 2 ) negligence lawsuits. The Company’s product liability expense was $ 0.8 million in 2025, $ 0.7 million in 2024, $ 1.5 million in 2023. This expense includes the cost of outside legal fees, and other expenses incurred in the management and defense of product liability matters. 81 A roll-forward of the product liability reserve and detail of product liability expense for the three years ended December 31, 2025 follows: Balance Sheet Roll-forward for Product Liability Reserve Cash Payments Balance Beginning of Year (a ) Accrued Legal Expense (Income) (b) Legal Fees (c) Settlements (d) Balance End of Year (a) 2023 $ 308 500 ( 129 ) — $ 679 2024 $ 679 67 ( 254 ) — $ 492 2025 $ 492 803 ( 270 ) — $ 1,025 Income Statement Detail for Product Liability Expense Accrued Legal Expense (b) Insurance Premium Expense (e) Total Product Liability Expense 2023 $ 500 1,226 $ 1,726 2024 $ 67 908 $ 975 2025 $ 803 808 $ 1,611 Notes (a) The beginning and ending liability balances represent accrued legal fees only. Settlements and administrative costs are expensed as incurred. Only in rare instances is an accrual established for settlements. (b) The expense accrued in the liability is for legal fees only. (c) Legal fees represent payments to outside counsel related to product liability matters. (d) Settlements represent payments made to plaintiffs or allegedly injured parties in exchange for a full and complete release of liability. (e) Insurance expense represents the cost of insurance premiums. There were no insurance recoveries during any of the above years. 82 21. Financial Instruments The Company does not hold or issue financial instruments for trading or hedging purposes, nor does it hold interest rate, leveraged, or other types of derivative financial instruments. Fair values of accounts receivable, accounts payable, accrued expenses and income taxes payable reflected in the December 31, 2025 and 2024 balance sheets approximate carrying values at those dates. 22. Stockholder Rights Plan 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. It is 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. The Rights Plan is a temporary measure to give the Board time to understand Beretta’s intentions and evaluate options. Pursuant to the Rights Plan, the Company has authorized and declared a dividend of one common share purchase right (a “Right”) for each share of Common Stock that is outstanding at the close of business on October 24, 2025 and that may become outstanding between such date and the Distribution Date (as defined below) or the earlier Expiration Date (as defined in the Rights Plan). The Rights are not exercisable until after the Distribution Date. After the Distribution Date, each Right will be exercisable to purchase from the Company one share of Common Stock at a purchase price of $ 200 per share of Common Stock, subject to adjustment. The “ Distribution Date ” means the close of business on the business day immediately following the earlier of (i) the Flip-In Date (as defined in the Rights Plan) or (ii) 10 business days after the date (prior to such time as any person becomes an Acquiring Person), if any, as may be determined by action of the Board, in its sole discretion, following the commencement of, or public announcement of an intention to commence, a tender or exchange offer the consummation of which would result in any person or group of affiliated or associated persons becoming an Acquiring Person. An “ Acquiring Person ” means any person who becomes the beneficial owner of 10 % or more of the outstanding shares of Common Stock of the Company, subject to certain specified exceptions set forth in the Rights Plan, including passive institutional investors. The Rights Plan also provides that any person who would otherwise be deemed an Acquiring Person as of the date of the adoption of the Rights Plan will not be deemed to be an Acquiring Person for so long as such person does not acquire, subject to certain specified exceptions, beneficial ownership of any additional shares of Common Stock following adoption of the Rights Plan. 83 If the Rights become exercisable, all holders of Rights (other than the person or group triggering the Rights Plan, whose Rights would become void) will be entitled to acquire shares of Common Stock at a 50 % discount to the then-current market price or the Company may exchange each Right held by such holders for one share of Common Stock. The Rights will expire at the close of business on the day before the first anniversary of the date of the Rights Plan, unless the Rights Plan is amended to change the Final Expiration Date (as defined in the Rights Plan) or the Rights are earlier redeemed or exchanged by the Company 23. Subsequent Events 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 . On February 22, 2026, the Company announced that each of Sandra Froman, Christopher Killoy and Rebecca Halstead retired from the Board of Directors. Following such retirements, on February 22, 2026, the Board of Directors elected each of Aaron Rivers, Stephen Timm and Lorin Cassidy Wolfe to fill the vacancies on the Board of Directors created through such retirements, effective immediately. The Company’s management has evaluated transactions occurring subsequent to December 31, 2025 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. 84 ITEM 9—CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.