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 April 3, 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 April 30, 2021: 17,583,600.

INDEX

STURM, RUGER & COMPANY, INC.

	Page Number
PART I.FINANCIAL INFORMATION
Item 1.Financial Statements (Unaudited)	3
Condensed consolidated balance sheets – April 3, 2021 and December 31, 2020	3
Condensed consolidated statements of income and comprehensive income – Three months ended April 3, 2021 and March 28, 2020	5
Condensed consolidated statement of stockholders’ equity – Three months ended April 3, 2021	6
Condensed consolidated statements of cash flows – Three months ended April 3, 2021 and March 28, 2020	7
Notes to condensed consolidated financial statements – April 3, 2021	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	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

	April 3, 2021	December 31, 2020
		(Note)
Assets

Current Assets
Cash	$24,137	$20,147
Short-term investments	121,997	121,007
Trade receivables, net	73,165	57,876

Gross inventories (Note 4)	80,215	80,487
Less LIFO reserve	(48,465)	(48,016)
Less excess and obsolescence reserve	(2,996)	(3,394)
Net inventories	28,754	29,077

Prepaid expenses and other current assets	4,195	6,266
Total Current Assets	252,248	234,373

Property, plant and equipment	399,176	393,843
Less allowances for depreciation	(330,356)	(323,110)
Net property, plant and equipment	68,820	70,733

Deferred income taxes	—	1,530
Other assets	43,061	41,622
Total Assets	$364,129	$348,258

	Three Months Ended
	April 3, 2021	March 28, 2020
Net firearms sales	$183,603	$122,765
Net castings sales	774	874
Total net sales	184,377	123,639

Cost of products sold	111,811	87,630

Gross profit	72,566	36,009

Operating expenses:
Selling	8,088	7,636
General and administrative	12,522	8,210
Total operating expenses	20,610	15,846

Operating income	51,956	20,163

Other income:
Interest income	8	566
Interest expense	(25)	(25)
Other income, net	451	107
Total other income, net	434	648

Income before income taxes	52,390	20,811

Income taxes	14,198	5,473

Net income and comprehensive income	$38,192	$15,338

Basic earnings per share	$2.18	$0.88

Diluted earnings per share	$2.16	$0.87

Weighted average number of common shares outstanding - Basic	17,559,624	17,461,524

Weighted average number of common shares outstanding - Diluted	17,718,481	17,719,418

Cash dividends per share	$0.71	$0.18

	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	—	—	38,192		38,192
Common stock issued – compensation plans	87	(87)			—
Vesting of RSUs		(4,801)			(4,801)
Dividends paid			(12,484)		(12,484)
Unpaid dividends accrued		—	(507)		(507)
Recognition of stock-based compensation expense		3,381			3,381
Balance at April 3, 2021	$24,293	$41,961	$367,816	$(145,590)	$288,480

	April 3, 2021	December 31, 2020
Inventory at FIFO
Finished products	$2,905	$2,878
Materials and work in process	77,310	77,609
Gross inventories	80,215	80,487
Less: LIFO reserve	(48,465)	(48,016)
Less: excess and obsolescence reserve	(2,996)	(3,394)
Net inventories	$28,754	$29,077

	Balance Sheet Line Item	April 3, 2021
Right-of-use assets	Other assets	$2,013
Operating lease liabilities
Current portion	Trade accounts payable and accrued expenses	$411

Noncurrent portion	Lease liabilities	1,654
Total operating lease liabilities		$2,065

Remainder of 2021	$419
2022	244
2023	213
2024	215
2025	160
Thereafter	1,440
Total undiscounted future minimum lease payments	2,691
Less: Difference between undiscounted lease payments & the present value of future lease payments	(626)
Total operating lease liabilities	$2,065

	Three Months Ended
(in thousands)	April 3, 2021	March 28, 2020
Net Sales
Firearms	$183,603	$122,765
Castings
Unaffiliated	774	874
Intersegment	7,070	4,773
	7,844	5,647
Eliminations	(7,070)	(4,773)
	$184,377	$123,639

Income (Loss) Before Income Taxes
Firearms	$52,486	$20,478
Castings	(161)	(210)
Corporate	65	543
	$52,390	$20,811

	April 3, 2021	December 31, 2020
Identifiable Assets
Firearms	$184,249	$174,500
Castings	13,031	11,959
Corporate	166,849	161,799
	$364,129	$348,258

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

	Three Months Ended
	April 3, 2021	March 28, 2020
Operating Activities
Net income	$38,192	$15,338
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	7,501	7,214
Stock-based compensation	3,381	1,354
(Gain) loss on sale of assets	(11)	—
Deferred income taxes	2,406	1,530
Changes in operating assets and liabilities:
Trade receivables	(15,289)	(3,196)
Inventories	323	10,012
Trade accounts payable and accrued expenses	(1,836)	(266)
Contract liability to customers	(84)	(1,060)
Employee compensation and benefits	(16,495)	127
Product liability	(108)	(58)
Prepaid expenses, other assets and other liabilities	530	(2,384)
Income taxes payable	9,260	2,460
Cash provided by operating activities	27,770	31,071

Investing Activities
Property, plant and equipment additions	(5,516)	(4,094)
Proceeds from sale of assets	11	—
Purchases of short-term investments	(146,992)	(89,535)
Proceeds from maturities of short-term investments	146,002	69,448
Cash used for investing activities	(6,495)	(24,181)

Financing Activities
Remittance of taxes withheld from employees related to share-based compensation	(4,801)	(1,297)
Dividends paid	(12,484)	(3,034)
Cash used for financing activities	(17,285)	(4,331)

Increase in cash and cash equivalents	3,990	2,559

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

Cash and cash equivalents at end of period	$24,137	$37,979

	Three Months Ended
	April 3, 2021	March 28, 2020
Contract liabilities with customers at beginning of period	$84	$9,623
Revenue deferred	—	3,484
Revenue recognized	(84)	(4,544)
Contract liabilities with customers at end of period	$—	$8,563


(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.

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

	2021	2020
	Q1	Q4	Q3	Q2	Q1
Units — Company Inventory	15,700	8,800	10,700	11,100	31,900
Units — Distributor Inventory (1)	55,300	39,200	59,300	86,000	192,500
Total Inventory (2)	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.

(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: May 5, 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.