STURM, RUGER & COMPANY, INC.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 2, 2022
or
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________

Commission file number 1-10435

STURM, RUGER & COMPANY, INC.

(Exact name of registrant as specified in its charter)

Delaware	06-0633559
(State or other jurisdiction of incorporation or organization)	(I.R.S. employer identification no.)

One Lacey Place, Southport, Connecticut	06890
(Address of principal executive offices)	(Zip code)

(203) 259-7843

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $1 par value	RGR	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of the issuer's common stock as of July 15, 2022: 17,668,670.

INDEX

STURM, RUGER & COMPANY, INC.

	Page Number
PART I.FINANCIAL INFORMATION
Item 1.Financial Statements (Unaudited)	3
Condensed consolidated balance sheets – July 2, 2022 and December 31, 2021	3
Condensed consolidated statements of income and comprehensive income – Three and six months ended July 2, 2022 and July 3, 2021	5
Condensed consolidated statement of stockholders’ equity – Six months ended July 3, 2022	6
Condensed consolidated statements of cash flows – Six months ended July 2, 2022 and July 3, 2021	7
Notes to condensed consolidated financial statements – July 2, 2022	8
Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.Controls and Procedures	27
PART II.OTHER INFORMATION
Item 1.Legal Proceedings	28
Item 1A.Risk Factors	28
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3.Defaults Upon Senior Securities	28
Item 4.Mine Safety Disclosures	28
Item 5.Other Information	28
Item 6.Exhibits	29
SIGNATURES	30

	July 2, 2022	December 31, 2021
		(Note)
Assets

Current Assets
Cash	$43,539	$21,044
Short-term investments	165,000	199,971
Trade receivables, net	56,243	57,036

Gross inventories (Note 4)	114,863	100,023
Less LIFO reserve	(53,532)	(51,826)
Less excess and obsolescence reserve	(4,186)	(4,347)
Net inventories	57,145	43,850

Prepaid expenses and other current assets	12,150	6,832
Total Current Assets	334,077	328,733

Property, plant and equipment	434,790	421,282
Less allowances for depreciation	(359,566)	(347,651)
Net property, plant and equipment	75,224	73,631

Deferred income taxes	291	536
Other assets	34,140	39,443
Total Assets	$443,732	$442,343

	Three Months Ended		Six Months Ended
	July 2, 2022	July 3, 2021	July 2, 2022	July 3, 2021
Net firearms sales	$139,911	$199,447	$305,844	$383,049
Net castings sales	742	625	1,384	1,400
Total net sales	140,653	200,072	307,228	384,449

Cost of products sold	97,099	121,315	205,566	233,126

Gross profit	43,554	78,757	101,662	151,323

Operating expenses:
Selling	8,630	8,449	17,065	16,537
General and administrative	9,734	10,639	20,680	23,161
Total operating expenses	18,364	19,088	37,745	39,698

Operating income	25,190	59,669	63,917	111,625

Other income:
Interest income	190	12	221	20
Interest expense	(26)	(25)	(117)	(50)
Other income, net	750	610	1,602	1,061
Total other income, net	914	597	1,706	1,031

Income before income taxes	26,104	60,266	65,623	112,656

Income taxes	5,347	15,882	14,634	30,080

Net income and comprehensive income	$20,757	$44,384	$50,989	$82,576

Basic earnings per share	$1.18	$2.52	$2.89	$4.70

Diluted earnings per share	$1.17	$2.50	$2.87	$4.66

Weighted average number of commonshares outstanding - Basic	17,652,148	17,590,305	17,631,060	17,574,798

Weighted average number of commonshares outstanding - Diluted	17,799,707	17,766,868	17,762,765	17,735,910

Cash dividends per share	$0.68	$0.86	$1.54	$1.57

	Common Stock	Additional Paid-in Capital	Retained Earnings	Treasury Stock	Total
Balance at December 31, 2021	$24,306	$46,847	$438,098	$(145,590)	$363,661
Net income and comprehensive income			50,989		50,989
Common stock issued – compensation plans	72	(72)			—
Vesting of RSUs		(3,371)			(3,371)
Dividends paid			(27,170)		(27,170)
Unpaid dividends accrued			(508)		(508)
Recognition of stock-based compensation expense		3,356			3,356
Balance at July 2, 2022	$24,378	$46,760	$461,409	$(145,590)	$386,957

	Three Months Ended		Six Months Ended
	July 2, 2022	July 3, 2021	July 2, 2022	July 3, 2021
Contract liabilities with customers at beginning of period	$—	$—	$—	$84
Revenue deferred	—	—	—	—
Revenue recognized	—	—	—	(84)
Contract liabilities with customers at end of period	$—	$—	$—	$—

	July 2, 2022	December 31, 2021
Inventory at FIFO
Finished products	$23,236	$7,322
Materials and work in process	91,627	92,701
Gross inventories	114,863	100,023
Less: LIFO reserve	(53,532)	(51,826)
Less: excess and obsolescence reserve	(4,186)	(4,347)
Net inventories	$57,145	$43,850

	Balance Sheet Line Item	July 2, 2022
Right-of-use assets	Other assets	$2,498
Operating lease liabilities
Current portion	Trade accounts payable and accrued expenses	$336

Noncurrent portion	Lease liabilities	$2,162
Total operating lease liabilities		$2,498

Remainder of 2022	$250
2023	449
2024	449
2025	340
2026	340
Thereafter	1,310
Total undiscounted future minimum lease payments	3,138
Less: Difference between undiscounted lease payments & the present value of future lease payments	(640)
Total operating lease liabilities	$2,498

	Three Months Ended		Six Months Ended
(in thousands)	July 2, 2022	July 3, 2021	July 2, 2022	July 3, 2021
Net Sales
Firearms	$139,911	$199,447	$305,844	$383,049
Castings
Unaffiliated	742	625	1,384	1,400
Intersegment	4,515	7,151	9,328	14,221
	5,257	7,776	10,712	15,621
Eliminations	(4,515)	(7,151)	(9,328)	(14,221)
	$140,653	$200,072	$307,228	$384,449

Income (Loss) Before Income Taxes
Firearms	$27,096	$61,316	$66,791	$113,802
Castings	(1,342)	(1,170)	(1,725)	(1,331)
Corporate	350	120	557	185
	$26,104	$60,266	$65,623	$112,656
Depreciation
Firearms	$5,805	$6,466	$11,615	$13,184
Castings	584	712	1,162	1,423
	$6,389	$7,178	$12,777	$14,607
Capital Expenditures
Firearms	$3,383	$5,270	$13,647	$8,947
Castings	109	678	683	2,517
	$3,492	$5,948	$14,330	$11,464

			July 2, 2022	December 31, 2021
Identifiable Assets
Firearms			$196,624	$188,290
Castings			13,228	13,889
Corporate			233,880	240,164
			$443,732	$442,343
Goodwill
Firearms			$3,055	$3,055
Castings			209	209
			$3,264	$3,264

	2022		2021
	Q2	Q1	Q4	Q3	Q2	Q1
Estimated Units Sold from Distributors to Retailers (1)	354,300	411,200	458,200	457,400	583,300	518,900
Total adjusted NICS Background Checks (thousands) (2)	3,917	4,213	4,763	3,971	4,298	5,483


(1)	The estimates for each period were calculated by taking the beginning inventory at the distributors, plus shipments from the Company to distributors during the period, less the ending inventory at distributors. These estimates are only a proxy for actual market demand as they:


	• Rely on data provided by independent distributors 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 retail.

(2)	NICS background checks are performed when the ownership of most firearms, either new or used, is transferred by a Federal Firearms Licensee. NICS background checks are also performed for permit applications, permit renewals, and other administrative reasons.

	2022		2021
	Q2	Q1	Q4	Q3	Q2	Q1
Units Ordered	250,600	381,600	373,000	218,800	453,400	790,300
Orders Received	$98.9	$147.0	$119.2	$61.1	$158.3	$267.9
Average Sales Price of Units Ordered	$395	$385	$320	$279	$349	$339
Ending Backlog	$389.6	$420.5	$429.7	$471.7	$582.3	$612.3
Average Sales Price of Ending Unit Backlog	$405	$384	$357	$354	$355	$346

	2022		2021
	Q2	Q1	Q4	Q3	Q2	Q1
Units Ordered	250,600	381,600	373,000	218,800	453,400	790,300
Units Produced	431,800	521,300	512,100	525,200	575,400	541,900
Units Shipped	382,600	491,500	502,300	524,800	580,800	535,000
Average Sales Price of Units Shipped	$366	$338	$334	$338	$343	$343
Ending Unit Backlog	962,600	1,094,600	1,204,500	1,333,800	1,639,800	1,767,200

	2022		2021
	Q2	Q1	Q4	Q3	Q2	Q1
Units — Company Inventory	99,700	50,400	20,600	10,900	10,400	15,700
Units — Distributor Inventory (1)	272,800	244,600	164,200	120,100	52,800	55,300
Total Inventory (2)	372,500	295,000	184,800	131,000	63,200	71,000


(1)	Distributor ending inventory is provided by the Company’s independent distributors. These numbers do not include goods-in-transit inventory that has been shipped from the Company but not yet received by the distributors.

(2)	This total does not include inventory at retailers. The Company does not have access to data on retailer inventories of the Company’s products.


	July 2, 2022	July 3, 2021	Change	% Change
Net firearms sales	$139.9	$199.5	$(59.6)	(29.9%)
Net castings sales	0.8	0.6	0.2	18.5%
Total net sales	140.7	200.1	(59.4)	(29.7%)
Cost of products sold	97.1	121.3	(24.2)	(20.0%)
Gross profit	$ 43.6	$ 78.8	$(35.2)	(44.7%)
Gross margin	31.0%	39.4%	(8.4%)	(21.3%)

(a)	Exhibits:
31.1	Certification Pursuant to Rule 13a-14(a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification Pursuant to Rule 13a-14(a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

		STURM, RUGER & COMPANY, INC.
Date: August 3, 2022	S/	THOMAS A. DINEEN
		Thomas A. Dineen
		Principal Financial Officer, Principal Accounting Officer, Senior Vice President, Treasurer and Chief Financial Officer

SEC Form 10-Q filed by Sturm Ruger & Company Inc.