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 October 2, 2021
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.)

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 October 15, 2021: 17,596,600

INDEX

STURM, RUGER & COMPANY, INC.

	Page Number
PART I.FINANCIAL INFORMATION
Item 1.Financial Statements (Unaudited)	3
Condensed consolidated balance sheets – October 2, 2021 and December 31, 2020	3
Condensed consolidated statements of income and comprehensive income – Three and nine months ended October 2, 2021 and September 26, 2020	5
Condensed consolidated statement of stockholders’ equity – Nine months ended October 2, 2021	6
Condensed consolidated statements of cash flows – Nine months ended October 2, 2021 and September 26, 2020	7
Notes to condensed consolidated financial statements – October 2, 2021	8
Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.Controls and Procedures	28
PART II.OTHER INFORMATION
Item 1.Legal Proceedings	29
Item 1A.Risk Factors	29
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 3.Defaults Upon Senior Securities	29
Item 4.Mine Safety Disclosures	29
Item 5.Other Information	29
Item 6.Exhibits	30
SIGNATURES	31

	October 2, 2021	December 31, 2020
		(Note)
Assets

Current Assets
Cash	$27,677	$20,147
Short-term investments	164,996	121,007
Trade receivables, net	71,861	57,876

Gross inventories (Note 4)	92,475	80,487
Less LIFO reserve	(49,473)	(48,016)
Less excess and obsolescence reserve	(3,887)	(3,394)
Net inventories	39,115	29,077

Prepaid expenses and other current assets	5,210	6,266
Total Current Assets	308,859	234,373

Property, plant and equipment	408,733	393,843
Less allowances for depreciation	(344,192)	(323,110)
Net property, plant and equipment	64,541	70,733

Deferred income taxes	11	1,530
Other assets	46,650	41,622
Total Assets	$420,061	$348,258

	Three Months Ended		Nine Months Ended
	October 2, 2021	September 26, 2020	October 2, 2021	September 26, 2020
Net firearms sales	$177,529	$145,157	$560,578	$397,335
Net castings sales	717	548	2,116	2,273
Total net sales	178,246	145,705	562,694	399,608

Cost of products sold	113,444	94,553	346,569	272,362

Gross profit	64,802	51,152	216,125	127,246

Operating expenses:
Selling	7,753	8,432	24,290	23,355
General and administrative	10,323	9,862	33,484	26,844
Total operating expenses	18,076	18,294	57,774	50,199

Operating income	46,726	32,858	158,351	77,047

Other income:
Interest income	11	112	31	1,072
Interest expense	(114)	(114)	(164)	(166)
Other income, net	1,401	38	2,462	451
Total other income, net	1,298	36	2,329	1,357

Income before income taxes	48,024	32,894	160,680	78,404

Income taxes	12,822	8,141	42,902	19,719

Net income and comprehensive income	$35,202	$24,753	$117,778	$58,685

Basic earnings per share	$2.00	$1.42	$6.70	$3.36

Diluted earnings per share	$1.98	$1.39	$6.64	$3.31

Weighted average number of common shares outstanding - Basic	17,596,588	17,489,642	17,582,009	17,475,819

Weighted average number of common shares outstanding - Diluted	17,778,177	17,763,277	17,749,897	17,735,474

Cash dividends per share	$1.00	$5.42	$2.57	$5.95

	Common Stock	Additional Paid-in Capital	Retained Earnings	Treasury Stock	Total
Balance at December 31, 2020	$24,206	$43,468	$342,615	$(145,590)	$264,699
Net income and comprehensive income			117,778		117,778
Common stock issued – compensation plans	100	(100)			—
Vesting of RSUs		(4,801)			(4,801)
Dividends paid			(45,202)		(45,202)
Unpaid dividends accrued			(1,076)		(1,076)
Recognition of stock-based compensation expense		6,672			6,672
Balance at October 2, 2021	$24,306	$45,239	$414,115	$(145,590)	$338,070

	Three Months Ended		Nine Months Ended
	October 2, 2021	September 26, 2020	October 2, 2021	September 26, 2020
Contract liabilities with customers at beginning of period	$—	$3,646	$84	$9,623
Revenue deferred	—	150	—	4,843
Revenue recognized	—	(2,593)	(84)	(13,263)
Contract liabilities with customers at end of period	$—	$1,203	$—	$1,203

	October 2, 2021	December 31, 2020
Inventory at FIFO
Finished products	$4,946	$2,878
Materials and work in process	87,529	77,609
Gross inventories	92,475	80,487
Less: LIFO reserve	(49,473)	(48,016)
Less: excess and obsolescence reserve	(3,887)	(3,394)
Net inventories	$39,115	$29,077

	Balance Sheet Line Item	October 2, 2021
Right-of-use assets	Other assets	$1,788
Operating lease liabilities
Current portion	Trade accounts payable and accrued expenses	$330

Noncurrent portion	Lease liabilities	1,509
Total operating lease liabilities		$1,839

Remainder of 2021	$140
2022	244
2023	213
2024	215
2025	160
Thereafter	1,440
Total undiscounted future minimum lease payments	2,412
Less: Difference between undiscounted lease payments & the present value of future lease payments	(573)
Total operating lease liabilities	$1,839

	Three Months Ended		Nine Months Ended
(in thousands)	October 2, 2021	September 26, 2020	October 2, 2021	September 26, 2020
Net Sales
Firearms	$177,529	$145,157	$560,578	$397,335
Castings
Unaffiliated	717	548	2,116	2,273
Intersegment	5,774	5,996	19,995	15,784
	6,491	6,544	22,111	18,057
Eliminations	(5,774)	(5,996)	(19,995)	(15,784)
	$178,246	$145,705	$562,694	$399,608

Income (Loss) Before Income Taxes
Firearms	$48,139	$33,659	$161,941	$78,859
Castings	(753)	(633)	(2,084)	(1,356)
Corporate	638	(132)	823	901
	$48,024	$32,894	$160,680	$78,404

			October 2, 2021	December 31, 2020
Identifiable Assets
Firearms			$197,158	$174,500
Castings			13,456	11,959
Corporate			209,447	161,799
			$420,061	$348,258

	2021			2020
	Q3	Q2	Q1	Q4	Q3	Q2	Q1
Estimated Units Sold from Distributors to Retailers (1)	457,400	583,300	518,900	513,100	457,400	501,600	476,800
Total adjusted NICS Background Checks (thousands) (2)	3,971	4,298	5,483	5,626	5,165	5,452	4,841


(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:

	Nine Months Ended
	October 2, 2021	September 26, 2020
Operating Activities
Net income	$117,778	$58,685
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	22,001	21,644
Stock-based compensation	6,672	4,430
Gain on sale of assets	(111)	(72)
Deferred income taxes	1,519	3,127
Changes in operating assets and liabilities:
Trade receivables	(13,985)	(5,580)
Inventories	(10,038)	14,722
Trade accounts payable and accrued expenses	1,720	(1,614)
Contract liability to customers	(84)	(8,420)
Employee compensation and benefits	(6,569)	15,299
Product liability	(161)	196
Prepaid expenses, other assets and other liabilities	(4,282)	(19,215)
Income taxes payable	2,544	(1,223)
Cash provided by operating activities	117,004	81,979

Investing Activities
Property, plant and equipment additions	(15,617)	(8,044)
Proceeds from sale of assets	135	178
Purchases of short-term investments	(376,979)	(268,451)
Proceeds from maturities of short-term investments	332,990	293,962
Cash (used for) provided by investing activities	(59,471)	17,645

Financing Activities
Remittance of taxes withheld from employees related to share-based compensation	(4,801)	(1,297)
Dividends paid	(45,202)	(104,097)
Cash used for financing activities	(50,003)	(105,394)

Increase (decrease) in cash and cash equivalents	7,530	(5,770)

Cash and cash equivalents at beginning of period	20,147	35,420

Cash and cash equivalents at end of period	$27,677	$29,650


	• 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.

	2021			2020
	Q3	Q2	Q1	Q4	Q3	Q2	Q1
Units Ordered	218,800	453,400	790,300	733,200	935,200	746,600	626,700
Orders Received	$61.1	$158.3	$267.9	$277.1	$284.0	$228.8	$203.0
Average Sales Price of Units Ordered	$279	$349	$339	$352	$304	$306	$324
Ending Backlog	$471.7	$582.3	$612.3	$516.6	$410.1	$255.6	$142.7
Average Sales Price of Ending Unit Backlog	$354	$355	$346	$342	$322	$333	$343

	2021			2020
	Q3	Q2	Q1	Q4	Q3	Q2	Q1
Units Ordered	218,800	453,400	790,300	733,200	935,200	746,600	626,700
Units Produced	525,200	575,400	541,900	491,000	430,400	374,400	363,300
Units Shipped	524,800	580,800	535,000	493,000	430,700	395,100	398,900
Average Sales Price of Units Shipped	$338	$343	$343	$342	$337	$328	$285
Ending Unit Backlog	1,333,800	1,639,800	1,767,200	511,900	1,271,700	767,200	415,700

	2021			2020
	Q3	Q2	Q1	Q4	Q3	Q2	Q1
Units — Company Inventory	10,900	10,400	15,700	8,800	10,700	11,100	31,900
Units — Distributor Inventory (1)	120,100	52,800	55,300	39,200	59,300	86,000	192,500
Total Inventory (2)	131,000	63,200	71,000	48,000	70,000	97,100	224,400


(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.

	October 2, 2021	September 26, 2020	Change	% Change
Firearms	$177.5	$145.2	$32.3	22.3%

Castings	$0.7	$0.5	$0.2	30.7%

Total	$178.2	$145.7	$32.5	22.3%

(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: November 3, 2021		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.