Sturm, Ruger & Company
Annual Report 2023

Plain-text annual report

SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) THE SECURITIES EXCHANGE ACT OF 1934 (Mark One)  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2023 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 0-4776 STURM, RUGER & COMPANY, INC. (Exact Name of Registrant as Specified in Its Charter) Delaware (State or Other Jurisdiction of Incorporation or Organization) 1 Lacey Place, Southport, Connecticut (Address of Principal Executive Offices) 06-0633559 (I.R.S. Employer Identification No.) 06890 (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 Common Stock, $1 par value Trading Symbol(s) RGR Name of Each Exchange on Which Registered New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None (Title of Class) Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES  NO Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES NO  Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or Section 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or shorter such period of time that the registrant was required to file such reports), and (2) has been subject to such filing 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, a smaller reporting company, or an emerging growth company. See definition of “accelerated filer,” “large 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C 7262(b)) by the registered public accounting firm that prepared or issued its audit report. [  ] If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. YES NO  Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). [ ] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES NO  The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of June 30, 2023: Common Stock, $1 par value - $1,112,555,000 1 The number of shares outstanding of the registrant's common stock as of February 15, 2024: Common Stock, $1 par value –17,664,200 shares Portions of the registrant’s Proxy Statement relating to the 2024 Annual Meeting of Stockholders to be held May 30, 2024 are incorporated by reference into Part III (Items 10 through 14) of this Report. DOCUMENTS INCORPORATED BY REFERENCE. 2 TABLE OF CONTENTS PART I Item 1. Business.…………………………………..…………………………………………………………… 5 Item 1A. Risk Factors……………………………………………………………………………………………. 12 Item 1B. Unresolved Staff Comments…………………………………………………………………………... 17 Item 1C. Cybersecurity……………………………………………………………………………………...…… 17 Item 2. Properties.……………………………………………………………………………………………… 18 Item 3. Legal Proceedings....…………………………………………………………………………………... 19 Item 4. Mine Safety Disclosures……………………………………………….................................................. 19 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.…………………………………………………………………….... 20 Item 6. [Reserved]……………………………………………………………………………………………... 21 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations…………. 22 Item 7A. Quantitative and Qualitative Disclosures About Market Risk……………………………………….... 44 Item 8. Financial Statements and Supplementary Data………………………………………………………... 46 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure ………... 77 Item 9A. Controls and Procedures.……………………………………………………………………………..... 77 Item 9B. Other Information.……………………………………………………………………………………... 78 Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections………………………………... 79 PART III Item 10. Directors, Executive Officers and Corporate Governance…………………………………………….. 79 Item 11. Executive Compensation.…………………………………………………………………………….... 79 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.……………………………………………………………………………………………..... 79 Item 13. Certain Relationships and Related Transactions and Director Independence…………………………. 80 Item 14. Principal Accountant Fees and Services….………………………………………………………….... 80 3 PART IV Item 15. Exhibits and Financial Statement Schedules.……………………………………………...................... 81 Signatures…... …………………………………………………………………………………………………………. Exhibit Index.. …………………………………………………………………………………………………………. Financial Statement Schedule... ………………………………………………………………………………………... Exhibits……... ………………………………………………………………………………………………………..... 84 85 87 89 EXPLANATORY NOTE: In this Annual Report on Form 10-K, Sturm, Ruger & Company, Inc. and Subsidiary (the “Company”) makes forward- looking statements and projections concerning future expectations. Such statements are based on current expectations and are subject to certain qualifying risks and uncertainties, such as market demand, sales levels of firearms, anticipated castings sales and earnings, the need for external financing for operations or capital expenditures, the results of pending litigation against the Company, the impact of future firearms control and environmental legislation, and accounting estimates, any one or more of which could cause actual results to differ materially from those projected. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “will,” “should,” “could” and other words and terms of similar meaning, typically identify such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date made. The Company undertakes no obligation to publish revised forward- looking statements to reflect events or circumstances after the date such forward-looking statements are made or to reflect the occurrence of subsequent unanticipated events. 4 PART I ITEM 1—BUSINESS Company Overview Sturm, Ruger & Company, Inc. and Subsidiary (the “Company”) is principally engaged in the design, manufacture, and sale of firearms to domestic customers. Virtually all of the Company’s sales for the year ended December 31, 2023 were from the firearms segment, with less than 1% from the castings segment. Export sales represent approximately 6% 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 has been in business since 1949 and was incorporated in its present form under the laws of Delaware in 1969. The Company primarily offers products in three industry product categories – rifles, pistols, and revolvers. The Company’s firearms are sold through independent wholesale distributors, principally to the commercial sporting market. The Company manufactures and sells investment castings made from steel alloys and metal injection molding (“MIM”) parts for internal use in the firearms segment and has minimal sales to outside customers. The castings and MIM parts are sold to outside customers, either directly or through manufacturers’ representatives. For the years ended December 31, 2023, 2022, and 2021, net sales attributable to the Company's firearms operations were $540.7 million, $593.3 million and $728.1 million. The balance of the Company's net sales for the aforementioned periods was attributable to its castings operations. Firearms Products The Company presently manufactures firearm products, under the “Ruger” name and trademark, in the following industry categories: Rifles  Single-shot  Autoloading  Bolt-action  Modern sporting Pistols  Rimfire autoloading  Centerfire autoloading Revolvers  Single-action  Double-action In addition, the Company manufactures lever-action rifles under the “Marlin” name and trademark. Most firearms are available in several models based upon caliber, finish, barrel length, and other features. 5 Rifles A rifle is a long gun with spiral grooves cut into the interior of the barrel to give the bullet a stabilizing spin after it leaves the barrel. Net sales of rifles by the Company accounted for $306.8 million, $305.4 million, and $317.5 million of total net sales for the years 2023, 2022, and 2021, respectively. Pistols A pistol is a handgun in which the ammunition chamber is an integral part of the barrel and which typically is fed ammunition from a magazine contained in the grip. Net sales of pistols by the Company accounted for $131.4 million, $184.7 million, and $278.4 million of revenues for the years 2023, 2022, and 2021, respectively. Revolvers A revolver is a handgun that has a cylinder that holds the ammunition in a series of chambers which are successively aligned with the barrel of the gun during each firing cycle. There are two general types of revolvers, single-action and double-action. To fire a single-action revolver, the hammer is pulled back to cock the gun and align the cylinder before the trigger is pulled. To fire a double-action revolver, a single trigger pull advances the cylinder and cocks and releases the hammer. Net sales of revolvers by the Company accounted for $72.5 million, $70.0 million, and $84.4 million of revenues for the years 2023, 2022, and 2021, respectively. Accessories The Company also manufactures and sells accessories and replacement parts for its firearms. These sales accounted for $30.0 million, $33.2 million, and $47.8 million of total net sales for the years 2023, 2022, and 2021, respectively. Castings Products Net sales attributable to the Company’s casting operations (excluding intercompany transactions) accounted for $3.0 million, $2.6 million, and $2.6 million, for 2023, 2022, and 2021, respectively. These sales represented less than 1% of total net sales in each of 2023, 2022, and 2021. Manufacturing Firearms The Company produces some of its pistol models, most of its revolvers, and some of its rifle models at the Newport, New Hampshire facility. One model of revolver, one model of rifle, and most of the Company’s pistols are produced at the Prescott, Arizona facility. Some rifle models and pistol models are produced at the Mayodan, North Carolina facility. Many of the basic metal component parts of the firearms manufactured by the Company are produced by the Company's castings segment through processes known as precision investment casting. The Company also uses many MIM parts in its firearms. See "Manufacturing- Investment Castings and Metal Injected Moldings" below for a description of these processes. The Company believes that investment castings and MIM parts provide greater design flexibility and result in component parts which are generally close to their ultimate shape and, therefore, require less machining than processes requiring machining a solid billet of metal to obtain a part. Through the 6 use of investment castings and MIM parts, the Company endeavors to produce durable and less costly component parts for its firearms. All assembly, inspection, and testing of firearms manufactured by the Company are performed at the Company's manufacturing facilities. Every firearm, including every chamber of every revolver manufactured by the Company, is test-fired prior to shipment. Investment Castings and Metal Injection Moldings To produce a product by the investment casting method, a wax model of the part is created and coated (“invested”) with several layers of ceramic material. The shell is then heated to melt the interior wax, which is poured off, leaving a hollow mold. To cast the desired part, molten metal is poured into the mold and allowed to cool and solidify. The mold is then broken off to reveal a near net shape cast metal part. Metal injection molding is a three part powder metallurgy process by which a feedstock consisting of finely powdered metal and binders is processed through injection molding, debinding, and sintering equipment to produce steel, stainless steel, and alloy parts of complex shape and geometry. This process allows for high volume production while eliminating many of the wastes of traditional metal working methods, yielding net shape and near net shape parts. Marketing and Distribution Firearms The Company's firearms are primarily marketed through a network of federally licensed, independent wholesale distributors who purchase the products directly from the Company. They resell to federally licensed, independent retail firearms dealers who in turn resell to legally authorized end users. All retail purchasers are subject to a point-of-sale background check by law enforcement. These end users include sportsmen, hunters, people interested in self-defense, law enforcement and other governmental organizations, and gun collectors. Each domestic distributor carries the entire line of firearms manufactured by the Company for the commercial market. Currently, 15 distributors service the domestic commercial market, with an additional 26 distributors servicing the domestic law enforcement market and 44 distributors servicing the export market. 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%. In 2022, the Company’s largest customers and the percent of firearms sales they represented were as follows: Lipsey’s - 23%; Davidson’s - 23%; and Sports South - 21%. In 2021, the Company’s largest customers and the percent of firearms sales they represented were as follows: Lipsey’s - 21%; Sports South - 19%; and Davidson’s - 19%. The Company employs 18 employees who service these distributors and call on retailers and law enforcement agencies. Because the ultimate demand for the Company's firearms comes from end users rather than from the independent wholesale distributors, the Company believes that the loss 7 of any distributor would not have a material, long-term adverse effect on the Company, but may have a material adverse effect on the Company’s financial results for a particular period. The Company considers its relationships with its distributors to be satisfactory. The Company also exports its firearms through a network of selected commercial distributors and directly to certain foreign customers, consisting primarily of law enforcement agencies and foreign governments. Foreign sales were 6% of the Company’s consolidated net sales for the year ended December 31, 2023, and 6% of the Company’s consolidated net sales for the year ended December 31, 2022, and 5% of the Company's consolidated net sales for year ended December 31, 2021. The Company does not consider its overall firearms business to be predictably seasonal; however, orders of many models of firearms from the distributors tend to be stronger in the first quarter of the year and weaker in the third quarter of the year. Investment Castings and Metal Injection Moldings The castings segment provides castings and MIM parts for the Company’s firearms segment. In addition, the castings segment produces some products for a number of customers in a variety of industries. Competition Firearms Competition in the firearms industry is intense and comes from both foreign and domestic manufacturers. While some of these competitors concentrate on a single industry product category such as rifles or pistols, several competitors manufacture products in all four industry categories (rifles, shotguns, pistols, and revolvers). The principal methods of competition in the industry are product innovation, quality, availability, brand, and price. The Company believes that it can compete effectively with all of its present competitors. Investment Castings and Metal Injection Moldings There are a large number of investment castings and MIM manufacturers, both domestic and foreign, with which the Company competes. Competition varies based on the type of investment castings products and the end use of the product. Companies offering alternative methods of manufacturing such as wire electric discharge machining (EDM) and advancements in computer numeric controlled (CNC) machining also compete with the Company’s castings segment. Many of these competitors are larger corporations than the Company with substantially greater financial resources than the Company, which could affect the Company’s ability to compete with these competitors. The principal methods of competition in the industry are quality, price, and production lead time. 8 Human Capital The Company is an equal opportunity employer dedicated to the attraction, development, and retention of our employees by providing a preferred work environment that promotes and celebrates our core values of Integrity, Respect, Innovation and Teamwork. Our goal is to develop, motivate, retain and reward passionate and dedicated employees. As of February 1, 2024, the Company employed approximately 1,820 full-time employees, approximately 32% of whom had at least ten years of service with the Company. The Company attracts candidates and retains employees by offering competitive compensation packages, which include:  Base wages,  Profit sharing,  Medical and welfare benefits,  Holidays and other paid time off, and  401(k) plan participation and matching program. The Company believes its compensation packages:  Provide a base level of compensation to reflect an individual’s role and responsibilities,  Recognize and reward employees for the Company’s success, and  Provide for the safety, security and well-being of employees. Our primary vehicle for human capital development is Ruger University, which has a mission to:  Enhance the understanding of our industry, Company and culture,  Strengthen the technical, interpersonal and leadership skills of each employee, and  Allow employees to positively change their own lives while creating value for all Ruger stakeholders. In addition to providing a competitive compensation package and emphasizing the development of employees, the Company retains its employees by maintaining a safe, responsible, and preferred workplace. The Company is committed to conducting business in conformance with the highest ethical standards and in compliance with all applicable legal and regulatory requirements. The “Code of Business Conduct and Ethics” and the “Corporate Compliance Program” are two active programs that guide the Company’s practices to achieve these goals. In addition, since the beginning of the global outbreak of the Coronavirus disease 2019 (“COVID- 19”) in March 2020, the Company continues to take multiple proactive steps to promote the health and safety of its employees and maintain a clean, safe, and preferred workplace. To assess and improve employee retention and engagement, the Company surveys employees on an annual basis with the assistance of a third-party consultant, and takes actions to address areas of employee concern and build on the competencies that are important for our future success. 9 Research and Development In 2023, 2022, and 2021, the Company spent approximately $9.8 million, $9.6 million, and $11.7 million, respectively, on research and development activities relating to new products and the improvement of existing products. Research and development expenses are included in costs of products sold. As of February 1, 2024, the Company had approximately 67 employees whose primary responsibilities were research and development activities. Patents and Trademarks The Company owns various United States and foreign patents and trademarks which have been secured over a period of years and which expire at various times. It is the policy of the Company to apply for patents and trademarks whenever new products or processes deemed commercially valuable are developed or marketed by the Company. The Company deems its patents and trademarks to be valuable and therefore works to police and protect them. Environmental Matters The Company is committed to achieving high standards of environmental quality and product safety, and strives to provide a safe and healthy workplace for its employees and others in the communities in which it operates. The Company has programs in place that monitor compliance with various environmental regulations. However, in the normal course of its manufacturing operations the Company is subject to governmental proceedings and orders pertaining to waste disposal, air emissions, and water discharges into the environment. These regulations are integrated into the Company’s manufacturing, assembly, and testing processes. The Company believes that it is generally in compliance with applicable environmental regulations and that the outcome of any environmental proceedings and orders will not have a material adverse effect on the financial position of the Company, but could have a material adverse effect on the financial results for a particular period. 10 Information about our Executive Officers Set forth below are the names, ages, and positions of the executive officers of the Company. Officers serve at the discretion of the Board of Directors of the Company. Name Age Position With Company Christopher J. Killoy Thomas A. Dineen Kevin B. Reid, Sr. Shawn C. Leska Sarah F. Colbert Timothy M. Lowney 65 55 63 52 43 60 President and Chief Executive Officer Senior Vice President, Treasurer, and Chief Financial Officer Vice President, General Counsel, and Corporate Secretary Vice President, Sales Vice President, Administration Vice President of Operations for Newport, Prescott and RPM Manufacturing Michael W. Wilson 47 Vice President of Operations for New Product Development, Product Engineering and Mayodan Manufacturing Robert J. Werkmeister, Jr. 49 Vice President of Marketing Christopher J. Killoy became President & Chief Executive Officer on May 9, 2017. Previously he served as President and Chief Operating Officer since January 1, 2014. Prior to that he served as Vice President of Sales and Marketing since November 27, 2006. Mr. Killoy originally joined the Company in 2003 as Executive Director of Sales and Marketing, and subsequently served as Vice President of Sales and Marketing from November 1, 2004 to January 25, 2005. Thomas A. Dineen became Senior Vice President on July 10, 2017. Previously he served as Vice President since May 24, 2006. Prior to that he served as Treasurer and Chief Financial Officer since May 6, 2003 and had been Assistant Controller since 2001. Mr. Dineen joined the Company as Manager, Corporate Accounting in 1997. Kevin B. Reid, Sr. became Vice President and General Counsel on April 23, 2008. Previously he served as the Company’s Director of Marketing from June 4, 2007. Mr. Reid joined the Company in July 2001 as an Assistant General Counsel. Shawn C. Leska became Vice President, Sales on November 6, 2015. Mr. Leska joined the Company in 1989 and has served in a variety of positions in the sales department. Most recently, Mr. Leska served as Director of Sales since 2011. Sarah F. Colbert became Vice President of Administration on June 1, 2017. Ms. Colbert has served the Company in various human resource and legal capacities since joining the Company in 2011. 11 Timothy M. Lowney became Vice President of Operations for Newport, Prescott and RPM Manufacturing on June 15, 2023. Previously, he served as the Company’s Vice President of Prescott Operations since April 1, 2019. Mr. Lowney joined the Company in January 2007. Michael W. Wilson became Vice President of Operations for New Product Development, Product Engineering and Mayodan Manufacturing on June 15, 2023. Previously, he served as the Company’s Vice President of Mayodan Operations since June 1, 2017. Mr. Wilson joined the Company in July 2007. Robert J. Werkmeister, Jr. became Vice President of Marketing upon joining the Company on June 1, 2017. Mr. Werkmeister has served as the Company’s Director of Marketing since January 2013 as President and founder of Symbolic, Inc., a full-service marketing agency. While with Symbolic, Rob began working with Ruger as a client in 2002 and has been the primary strategic marketing driver for the Ruger account since 2007. Where You Can Find More Information The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and accordingly, files its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Definitive Proxy Statements, Current Reports on Form 8-K, and other information with the Securities and Exchange Commission (the “SEC”). As an electronic filer, the Company's public filings are maintained on the SEC's Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that website is http://www.sec.gov. The Company makes its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Definitive Proxy Statements, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act accessible free of charge through the Company's Internet site after the Company has electronically filed such material with, or furnished it to, the SEC. The address of that website is http://www.ruger.com. However, such reports may not be accessible through the Company's website as promptly as they are accessible on the SEC’s website. Additionally, the Company’s corporate governance materials, including its Corporate Governance Guidelines, the charters of the Audit, Compensation, Nominating and Corporate Governance, Risk Oversight and Capital Policy committees, and the Code of Business Conduct and Ethics may also be found under the “Investor Relations” subsection of the “Corporate” section of the Company’s Internet site at http://www.ruger.com/corporate. A copy of the foregoing corporate governance materials is available upon written request to the Corporate Secretary at Sturm, Ruger & Company, Inc., 1 Lacey Place, Southport, Connecticut 06890. ITEM 1A—RISK FACTORS The Company’s operations could be affected by various risks, many of which are beyond its control. Based on current information, the Company believes that the following identifies the most significant risk factors that could have a material, adverse effect on its business, operating results, 12 and financial condition. Past financial performance may not be a reliable indicator of future performance and historical trends should not be used to anticipate results or trends in future periods. In evaluating the Company’s business, the following risk factors, as well as other information in this report, should be carefully considered. Changes in government policies and firearms legislation could adversely affect the Company’s financial results. The sale, purchase, ownership, and use of firearms are subject to thousands of federal, state and local governmental regulations. The basic federal laws are the National Firearms Act, the Federal Firearms Act, and the Gun Control Act of 1968. Federal law generally prohibits the private ownership of fully automatic weapons manufactured after 1986 and places certain restrictions on the interstate sale of firearms unless certain licenses are obtained. The Company does not manufacture fully automatic weapons and holds all necessary licenses under these federal laws. If the scope of the National Firearms Act is expanded to regulate firearms currently regulated by the Gun Control Act, it could make acquisition of commonly owned and used firearms more expensive and complicated for consumers, which could have a material adverse impact on demand for Company products. Several states currently have laws in effect similar to the aforementioned legislation. In 2005, Congress enacted the Protection of Lawful Commerce in Arms Act (“PLCAA”). The PLCAA was enacted to address abuses by cities and agenda-driven individuals who wrongly sought to make firearms manufacturers liable for legally manufactured and lawfully sold products if those products were later used in criminal acts. The Company believes the PLCAA merely codifies common sense and long standing tort principles. If the PLCAA is repealed or efforts to circumvent it are successful and lawsuits similar to those filed by cities and agenda-driven individuals in the late 1990s and early 2000s are allowed to proceed, it could have a material adverse impact on the Company. Currently, federal and several states’ legislatures are considering additional legislation relating to the regulation of firearms, and a number of new laws have been enacted at the federal, state, and local level. Enacted legislation and proposed bills are numerous and extremely varied, but many seek to limit magazine capacity, restrict or ban the sale and, in some cases, the ownership of various types of firearms, or ban commonly owned firearms with certain features. Other legislation seeks to require new technologies, such as microstamping and so-called “smart gun” technology, which are not proven, reliable or feasible. The Company believes that the lawful private ownership of firearms is guaranteed by the Second Amendment to the United States Constitution and that the widespread private ownership of firearms in the United States will continue. However, there can be no assurance that the regulation of firearms will not become more restrictive in the future and that any such restriction would not have a material adverse effect on the business of the Company. Numerous bills regulating the ownership of firearms have been proposed at the state and federal levels, and these bills propose a wide variety of restrictions including, for example, limiting the number of firearms that may be purchased in a specified time, increasing the age for ownership, imposing additional licensing or 13 registration requirements, creating additional restrictions on certain, common firearm features, and levying new taxes on firearms and/or ammunition. The Company’s results of operations could be further adversely affected if legislation with diverse requirements is enacted. With literally thousands of laws being proposed at the federal, state and local levels, if even a small percentage of these laws are enacted and they are incongruent, the Company could find it difficult, expensive or even practically impossible to comply with them, impeding new product development and distribution of existing products. The Company’s results of operations could be adversely affected by litigation. The Company faces risks arising from various asserted and unasserted litigation matters. These matters include, but are not limited to, assertions of allegedly defective product design or manufacture, alleged failure to warn, claimed unfair trade practices, purported class actions against firearms manufacturers, generally seeking relief such as medical expense reimbursement, property damages, and punitive damages arising from accidents involving firearms or the criminal misuse of firearms, and those lawsuits filed on behalf of municipalities alleging harm to the general public. Various factors or developments can lead to changes in current estimates of liabilities such as final adverse judgment, significant settlement or changes in applicable law. A future adverse outcome in any one or more of these matters could have a material adverse effect on the Company’s financial results. See Note 20 to the financial statements which are included in this Annual Report on Form 10-K. The Company relies upon relationships with financial institutions. The Company utilizes the services of numerous financial institutions, including banks, insurance carriers, transfer agents, and others. Anti-gun politicians, gun-control activists, and others may target these institutions and attempt to pressure them into ceasing to do business with the Company, or to use financial relationships to impose unacceptable and improper restrictions on the Company’s business, which could have a material adverse impact on the Company’s business, operating results, and financial condition. The Company’s insurance may be insufficient to protect us from claims or losses. The Company maintains insurance coverage with third-party insurers. However, not every risk or liability is or can be protected by insurance, and, for those risks it insures, the limits of coverage it purchases or that are reasonably obtainable in the market may not be sufficient to cover all actual losses or liabilities incurred. Moreover, there is a risk that commercially available liability insurance will not continue to be available to the Company at a reasonable cost, if at all. If liability claims or losses exceed the Company’s current or available insurance coverage, its business may be harmed. The Company’s results of operations could be adversely affected by a decrease in demand for Company products. If demand for the Company’s products decreases significantly, the Company would be unable to efficiently utilize its capacity, and profitability would suffer. Decreased demand could result from a macroeconomic downturn, or could be specific to the firearms industry as a result of social, 14 political, or other factors. If the decrease in demand occurs abruptly, the adverse impact would be even greater. The financial health of the Company’s independent distributors is critical to its success. Over 90% of the Company’s sales are made to 15 federally licensed, independent wholesale distributors. The Company reviews its distributors’ financial statements and has credit insurance for many of them. However, the Company’s credit evaluations of distributors and credit insurance may not be completely effective, especially if higher interest rates continue to exact a financial strain. If one or more independent distributors experience financial distress or liquidity issues, the Company’s sales could be adversely affected and the Company may not be able to collect its accounts receivable on a timely basis, which would have an adverse impact on its operating results and financial condition. The Company must comply with various laws and regulations pertaining to workplace safety and environment, environmental matters, and firearms manufacturing. In the normal course of its manufacturing operations, the Company is subject to numerous federal, state and local laws and governmental regulations, and governmental proceedings and orders. These laws and regulations pertain to matters like workplace safety and environment, firearms serial number tracking and control, waste disposal, air emissions and water discharges into the environment. Noncompliance with any one or more of these laws and regulations could have a material adverse impact on the Company. Misconduct of the Company’s employees or contractors could cause the Company to lose customers and could have a significant adverse impact on its business and reputation. Misconduct, fraud or other improper activities by the Company’s employees or contractors could have a material adverse impact on its business and reputation. Such misconduct could include the failure to comply with federal, state, local or foreign government procurement regulations, regulations regarding the protection of personal information, laws and regulations relating to antitrust and any other applicable laws or regulations. Product quality and performance is important to the Company’s success. The Company has a long history of producing rugged, reliable firearms for the commercial market. While the Company believes its record of designing, manufacturing, and selling high-quality products demonstrates its commitment to safety and quality, the Company has occasionally identified design and/or manufacturing issues with respect to some firearms and, as a result, issued a product safety bulletin or initiated a product recall. Depending upon the volume of products the Company has shipped into the market, any future recall or safety bulletin could harm its reputation, cause the Company to lose business, and cause the Company to incur significant support and repair costs. Business disruptions at one of the Company’s manufacturing facilities could adversely affect the Company’s financial results. The Newport, New Hampshire, Prescott, Arizona, Mayodan, North Carolina, and Earth City, Missouri facilities are critical to the Company’s success. These facilities house the Company’s principal production, research, development, engineering, design, and shipping operations. Any event that causes a disruption of the operation of any of these facilities for even a relatively short 15 period of time could have a material adverse effect on the Company’s ability to produce and ship products and to provide service to its customers. The Company relies on its information and communications systems in its operations. Security breaches and other disruptions could adversely affect its business and results of operations. Cybersecurity threats are significant and evolving and include, among others, malicious software, attempts to gain unauthorized access to data, and other electronic security breaches that could lead to disruptions in mission critical systems, unauthorized release of confidential or otherwise protected information and corruption of data. In addition to security threats, the Company is also subject to other systems failures, including network, software or hardware failures, whether caused by the Company, third-party service providers, natural disasters, power shortages, terrorist attacks or other events. The unavailability of the Company’s information or communications systems, the failure of these systems to perform as anticipated or any significant breach of data security could cause loss of data, disrupt Company operations, lead to financial losses from remedial actions, require significant management attention and resources, and negatively impact the Company’s reputation among its customers and the public, which could have a negative impact on the Company’s financial condition, results of operations and liquidity. The lack of available raw materials or component parts could disrupt or even cease the Company’s manufacturing operations. Even if manufacturing operations are not disrupted, increased costs of raw materials and component parts could adversely affect the Company’s financial results. Third parties supply the Company with various raw materials for its firearms and castings, such as fabricated steel components, walnut, birch, beech, maple and laminated lumber for rifle stocks, wax, ceramic material, metal alloys, various synthetic products and other component parts. There is a limited supply of these materials in the marketplace at any given time, which can cause the purchase prices to vary based upon numerous market factors. If market conditions result in a significant prolonged inflation of certain prices or if adequate quantities of raw materials cannot be obtained, the Company’s manufacturing processes could be interrupted and the Company’s financial condition or results of operations could be materially adversely affected. The Company relies primarily on third parties for transportation of the products it manufactures as well as delivery of its raw materials. Any increase in the cost of the transportation of the Company’s raw materials or products, as a result of increases in fuel or labor costs, higher demand for logistics services, consolidation in the transportation industry or otherwise, increased restrictions on the transportation of firearms, may adversely affect its results of operations. If any of these providers were to fail to deliver raw materials to the Company in a timely manner, the Company may be unable to manufacture and deliver its products in a timely manner. In addition, if any of these third parties were to cease operations or cease doing business with the Company, the Company may be unable to replace them at a reasonable cost. And such failure of a third-party transportation provider could harm the Company’s reputation, negatively affect its customer relationships and have a material adverse effect on its financial position and results of operations. 16 Availability and retention of the Company’s labor force, especially its key management, is critical to the success of the Company. The Company has observed an overall tightening and increasingly competitive labor market, which could inhibit its ability to recruit and retain the employees it requires and could lead to increased costs, such as additional overtime to meet demand and increased wage rates to attract and retain employees. The Company relies on the knowledge, experience, and leadership skills of its senior management team. The Company’s senior executives are not bound by employment agreements. The loss of the services of one or more of the Company’s senior executives or other key personnel could have a significant adverse impact on its business. A pandemic, like the COVID-19 pandemic, could have a significant adverse impact on the Company’s operations, financial results, cash flow, and financial condition. The COVID-19 pandemic created significant uncertainty and adversely impacted many industries throughout the global economy. Thus far, the Company has been able to mitigate the impact of COVID-19 through its proactive measures. The extent to which a future pandemic may impact the Company’s operations, financial results, cash flow, and financial condition is difficult to predict and dependent upon many factors over which the Company has no control. These factors include, but are not limited to, the duration and severity of the pandemic; government restrictions on businesses and individuals; potential significant adverse impacts on the Company’s employees, customers, suppliers, or service providers; the impact on U.S. and global economies and the timing and rate of economic recovery; and potential adverse effects on the financial markets, any of which could negatively impact the Company. ITEM 1B—UNRESOLVED STAFF COMMENTS None ITEM 1C—CYBERSECURITY Risk management and strategy The Company has processes for assessing, identifying, and managing material risks from cybersecurity threats. These processes are integrated into the Company’s overall risk management systems, as overseen by the Company’s Board of Directors, primarily through its Risk Oversight Committee. These processes also include overseeing and identifying risks from cybersecurity threats associated with the use of third-party service providers. The Company conducts security assessments of certain third-party providers before engagement and has established monitoring procedures in its effort to mitigate risks related to data breaches or other security incidents originating from third parties. The Company from time to time engages third-party consultants, legal advisors, and audit firms in evaluating and testing the Company’s risk management systems and assessing and remediating certain potential cybersecurity incidents as appropriate. The Company has an Information Security Program (“Program”) to protect personal and proprietary information in compliance with applicable federal and state requirements. The Program is designed to:  Ensure the security and confidentiality of employee and customer personal information and Company proprietary information; 17  Protect against anticipated threats or hazards to the security or integrity of such information; and  Protect against unauthorized access to, use of, or transfer of such information in a manner that could harm or inconvenience the Company, employees or customers. For more information about these risks, see the risk factor titled “The Company relies on its information and communications systems in its operations. Security breaches and other disruptions could adversely affect its business and results of operations” under Item 1A. Governance The Company’s Board of Directors has assigned oversight of cybersecurity risk management to the Risk Oversight Committee. The Risk Oversight Committee regularly receives reports from management, including senior information technology (“IT”) leadership, and third parties on cybersecurity matters. In addition, the Company’s full Board of Directors receives reports addressing cybersecurity as part of the Company’s overall enterprise risk management program and to the extent cybersecurity matters are addressed in regular business updates. Senior IT leaders are responsible for developing appropriate cybersecurity programs, including as may be required by applicable law or regulation. These individuals’ expertise in IT and cybersecurity generally has been gained from a combination of education, including relevant degrees and/or certifications, and work experience. They are informed by their respective cybersecurity teams about, and monitor, the prevention, detection, mitigation and remediation of cybersecurity incidents as part of the cybersecurity programs described above. Information regarding cybersecurity risks may be elevated by IT leadership through a variety of channels, including discussions between or among key leaders and Company management and reports to the Company’s Board of Directors and/or certain Board committees. As noted above, the Risk Oversight Committee regularly receives reports on cybersecurity matters from senior IT leadership. ITEM 2—PROPERTIES The Company’s manufacturing operations are carried out at four facilities. The following table sets forth certain information regarding each of these facilities: Approximate Aggregate Usable Square Feet Status Segment Newport, New Hampshire 350,000 Owned Firearms/Castings Prescott, Arizona 230,000 Mayodan, North Carolina 220,000 Earth City, Missouri 35,000 Leased Owned Leased Firearms Firearms Castings 18 Each firearms facility contains enclosed ranges for testing firearms. The lease of the Prescott facility provides for rental payments which are approximately equivalent to estimated rates for real property taxes. The Company has other facilities that were not used in its manufacturing operations in 2023: Approximate Aggregate Usable Square Feet Status Segment Southport, Connecticut 25,000 Owned Corporate Newport, New Hampshire (Dorr Woolen Building) Enfield, Connecticut Fairport, New York 45,000 10,000 3,700 Mayodan, North Carolina 225,000 Owned Leased Leased Owned Firearms Firearms Corporate Firearms There are no mortgages or any other major encumbrance on any of the real estate owned by the Company. The Company’s principal executive offices are located in Southport, Connecticut. ITEM 3—LEGAL PROCEEDINGS The nature of the legal proceedings against the Company is discussed at Note 20 to the financial statements, which are included in this Form 10-K. The Company has reported all cases instituted against it through September 30, 2023, and the results of those cases, where terminated, to the SEC on its previous Form 10-Q and 10-K reports, to which reference is hereby made. There was one lawsuit formally instituted against the Company during the three months ending December 31, 2023, as follows: Jennifer Laws v. Sturm, Ruger & Co., filed in the U.S. District Court for the District of New Mexico on November 20, 2023. ITEM 4—MINE SAFETY DISCLOSURES – NOT APPLICABLE 19 PART II ITEM 5—MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The Company’s common stock is traded on the New York Stock Exchange under the symbol “RGR.” At February 5, 2024, the Company had 1,800 stockholders of record. Issuer Repurchase of Equity Securities In 2022 and 2023 the Company repurchased shares of its common stock. In 2021, the Company did not repurchase any shares of its common stock. Details of the purchases in 2022 and 2023 follow: Total Number of Shares Purchased as Part of Publicly Announced Program Maximum Dollar Value of Shares that May Yet Be Purchased Under the Program - - 2,136 - 2,304 - - 179,341 84,721 268,502 $74,680,000 Total Number of Shares Purchased Average Price Paid per Share - - 2,136 - 2,304 - - 179,341 84,721 268,502 - - $49.97 - $49.77 - - $45.20 $43.67 $44.79 Period Third Quarter 2022 July 3 to July 30 July 31 to August 27 August 28 to October 1 Fourth Quarter 2022 October 2 to October 29 October 30 to November 26 November 27 to December 31 Fourth Quarter 2023 October 1 to October 28 October 29 to November 25 November 26 to December 31 Total All of these purchases were made with cash held by the Company and no debt was incurred. At December 31, 2023 approximately $74.7 million remained authorized for share repurchases. 20 Comparison of Five-Year Cumulative Total Return* Sturm, Ruger & Co., Inc., Standard & Poor’s 500, Dow Jones US Recreational Products TSM Index, and Russell 2000 Index (Performance Results Through 12/31/23) Sturm, Ruger & Company, Inc. S&P 500 Russell 2000 Dow Jones US Recreational Products TSM 249.86 200.37 172.90 147.45 190.95 155.68 150.58 134.94 207.21 202.05 160.85 114.49 164.08 164.08 137.56 124.52 $300 $250 $200 $150 141.70 131.49 125.52 89.86 $100 100.00 $50 $0 2018 2019 2020 2021 2022 2023 *Assumes $100 invested on 12/31/18 in stock or index, including reinvestment of dividends. Sturm, Ruger & Company, Inc. Standard & Poors 500 Russell 2000 Index Dow Jones US Recreational Products TSM 2018 100.00 100.00 100.00 100.00 2019 89.86 131.49 125.52 141.70 2020 134.94 155.68 150.58 190.95 2021 147.45 200.37 172.90 249.86 2022 124.52 164.08 137.56 164.08 2023 114.49 207.21 160.85 202.05 For the year ended December 31, 2023, the Company has provided the five year cumulative total return results for the Dow Jones US Recreational Products Index, a widely-published index tracking companies that provide recreational products. ITEM 6—[RESERVED] 21 ITEM 7—MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Company Overview Sturm, Ruger & Company, Inc. (the “Company”) is principally engaged in the design, manufacture, and sale of firearms to domestic customers. Approximately 99% of sales are from firearms. Export sales represent approximately 6% of total 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 also manufactures investment castings made from steel alloys and metal injection molding (“MIM”) parts for internal use in its firearms and for sale to unaffiliated, third-party customers. Less than 1% of sales are from the castings segment. Orders of many models of firearms from the independent distributors tend to be stronger in the first quarter of the year and weaker in the third quarter of the year. Results of Operations - 2023 Product Demand The estimated sell-through of the Company’s products from the independent distributors to retailers in 2023 decreased 7% from 2022. For the same period, adjusted NICS decreased 4%. The greater reduction in the sell-through of the Company’s products relative to adjusted NICS background checks may be attributable to aggressive promotions, discounts, rebates, and the extension of payment terms offered by the Company’s competitors. Estimated sell-through from distributors to retailers and total adjusted NICS background checks: 2023 2022 2021 Estimated Units Sold from Distributors to Retailers (1) 1,406,600 1,506,800 2,017,800 Total Adjusted NICS Background Checks (2) 15,848,000 16,425,000 18,515,000 (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, 22  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. The adjusted NICS data presented above was derived by the NSSF by subtracting NICS checks that are not directly related to the sale of a firearm, including checks used for concealed carry (“CCW”) permit application checks as well as checks on active CCW permit databases. Adjusted NICS data can be impacted by changes in state laws and regulations and any directives and interpretations issued by governmental agencies. Orders Received and Ending Backlog The Company uses the estimated unit sell-through of its products from the independent distributors to retailers, along with inventory levels at the independent distributors and at the Company, as the key metrics for planning production levels. The units ordered, value of orders received and ending backlog, net of Federal Excise Tax, for the trailing three years are as follows (dollars in millions, except average sales price): 2023 2022 2021 Orders Received $433.8 $451.2 $606.5 Average Sales Price of Orders Received $374 $416 $330 Ending Backlog $229.0 $314.4 $429.7 Average Sales Price of Ending Backlog $522 $486 $357 Production The Company reviews the estimated sell-through from the independent distributors to retailers, as well as inventory levels at the independent distributors and at the Company, to plan production levels and manage inventories. These reviews resulted in a decrease in total unit production of 19% in 2023 compared to 2022. 23 Annual Summary Unit Data Firearms unit data for orders, production, and shipments follows: Units Ordered Units Produced Units Shipped 2023 2022 2021 1,159,000 1,083,800 1,835,500 1,398,200 1,733,200 2,154,600 1,367,500 1,641,000 2,142,900 Average Sales Price $395 $362 $340 Units – Backlog 438,800 647,300 1,204,500 Inventories The Company’s finished goods inventory increased by 30,700 units during 2023. Distributor inventories of the Company’s products decreased by 39,100 units during 2023, and approximate a reasonable level to support rapid fulfillment of retailer demand for most product families. Inventory data follows: 2023 2022 2021 Units – Company Inventory 143,500 112,800 20,600 Units – Distributor Inventory (3) 259,300 298,400 164,200 Total inventory (4) 402,800 411,200 184,800 (3) (4) Distributor ending inventory as provided by the independent distributors of the Company’s products. These numbers do not include goods-in-transit inventory that has been shipped from the Company but not yet received by the distributors. This total does not include inventory at retailers. The Company does not have access to data on retailer inventories. 24 Year ended December 31, 2023, as compared to year ended December 31, 2022: Net Sales, Cost of Products Sold, and Gross Profit Net sales, cost of products sold, and gross profit data for the year ended (dollars in millions): Net firearms sales December 31, 2023 December 31, 2022 $540.7 $593.3 Change $(52.6) % Change (8.9)% Net casting sales 3.0 2.5 0.5 18.3% Total net sales 543.7 595.8 (52.1) (8.7)% Cost of products sold 410.1 415.7 (5.6) (1.3)% Gross profit $133.6 $180.1 $ (46.5) (25.8)% Gross margin 24.6% 30.2% (5.6)% (18.5)% Firearms sales and unit shipments decreased 9% and 17%, respectively, in 2023. New products represented $121.7 million or 23% of firearms sales in 2023, an increase from $78.4 million or 14% of firearms sales in 2022. New product sales include only major new products that were introduced in the past two years. In 2023, new products included the MAX-9 pistol (during the first quarter only), Security-380 pistol, Super Wrangler revolver, LCP MAX pistol, Marlin lever- action rifles, LC Carbine, Small-Frame Autoloading Rifle, and American Centerfire Rifle Generation II. The decreased gross profit for the year ended December 31, 2023 is attributable to the significant decrease in sales, as well as inflationary cost increases in materials, commodities, services, wages, energy, fuel and transportation, unfavorable deleveraging of fixed costs resulting from decreased production, a product mix shift toward products with relatively lower margins that remain in stronger demand, and increased promotional costs. The decrease in gross margin for the year ended December 31, 2023 is attributable to the aforementioned factors, partially offset by increased pricing. 25 Selling, General and Administrative Selling and general and administrative expenses data for the year ended (dollars in millions): December 31, 2023 December 31, 2022 Change % Change Selling expenses $38.8 $36.1 $2.7 General and administrative expenses 42.7 40.5 2.2 Total operating expenses $81.5 $76.6 $4.9 7.4% 5.4% 6.4% The increase in selling expenses for the year ended December 31, 2023 was primarily attributable to increased trade show costs, travel expenditures, and advertising, partially offset by decreased sales volume. The increase in general, and administrative expenses for the year ended December 31, 2023 was primarily attributable to increased professional service costs. Operating Income Operating income was $52.1 million or 9.6% of sales in 2023. This is a decrease of $51.4 million from 2022 operating income of $103.5 million or 17.3% of sales. Other Operating Income (Expense), Net Other income data for the year ended (dollars in millions): Royalty income Interest income Interest expense Other income, net Other income December 31, 2023 December 31, 2022 Change % Change $ 0.6 5.5 (0.2) 0.8 $ 0.8 2.6 (0.3) 1.7 (0.2) 2.9 0.1 (0.9) (21.4%) 114.1% (19.9%) (51.4%) $ 6.7 $ 4.8 $ 1.9 39.7% The increase in other income for the year ended December 31, 2023 was the result of increases in interest income due to increased interest rates earned on short-term investments, partially offset by decreased royalty and other income. 26 Income Taxes and Net Income The effective income tax rate was 18.0% in 2023 and 18.4% in 2022. The Company's 2023 and 2022 effective tax rate differs from the statutory federal tax rate due principally to the availability of research and development tax credits, state income taxes, and the nondeductibility of certain executive compensation. The impact related to research and development tax credits on the effective tax rate is expected to decline in future years. As a result of the foregoing factors, consolidated net income was $48.2 million in 2023. This represents a decrease of $40.1 million from 2022 consolidated net income of $88.3 million. 27 Non-GAAP Financial Measure In an effort to provide investors with additional information regarding its results, the Company refers to various United States generally accepted accounting principles (“GAAP”) financial measures and two non-GAAP financial measures, EBITDA and EBITDA margin, which management believes provides useful information to investors. These non-GAAP measures may not be comparable to similarly titled measures being disclosed by other companies. In addition, the Company believes that the non-GAAP financial measures should be considered in addition to, and not in lieu of, GAAP financial measures. The Company believes that EBITDA and EBITDA margin are useful to understanding its operating results and the ongoing performance of its underlying business, as EBITDA provides information on the Company’s ability to meet its capital expenditure and working capital requirements, and is also an indicator of profitability. The Company believes that this reporting provides better transparency and comparability to its operating results. The Company uses both GAAP and non-GAAP financial measures to evaluate its financial performance. Non-GAAP Reconciliation – EBITDA EBITDA (Unaudited, dollars in thousands) Year ended December 31, Net income Income tax expense Depreciation and amortization expense Interest expense Interest income EBITDA EBITDA margin 2023 2022 $ 48,215 $ 88,332 10,609 22,383 205 (5,465) $75,947 14.0% 19,947 25,789 256 (2,552) $131,772 22.1% EBITDA is defined as earnings before interest, taxes, and depreciation and amortization. The Company calculates this by adding the amount of interest expense, income tax expense and depreciation and amortization expenses that have been deducted from net income back into net income, and subtracting the amount of interest income that was included in net income from net income to arrive at EBITDA. The Company’s EBITDA calculation also excludes any one-time non-cash, non-operating expense. 28 Quarterly Data To supplement the summary annual unit data and discussion above, the same data for the last eight quarters follows: Units Ordered Units Produced Units Shipped Estimated Units Sold from Distributors to Retailers Total Adjusted NICS Background Checks Q4 2023 Q3 Q2 Q1 316,600 176,300 258,100 408,000 305,200 324,500 387,500 381,000 337,800 308,400 336,400 384,900 384,700 307,400 323,000 391,500 4,742,000 3,284,000 3,654,000 4,168,000 Average Unit Sales Price $383 $390 $422 $387 Units – Backlog 438,800 460,000 592,100 670,400 Units – Company Inventory 143,500 176,100 160,000 108,900 Units – Distributor Inventory (5) 259,300 306,200 305,200 291,800 Units Ordered Units Produced Units Shipped Estimated Units Sold from Distributors to Retailers Total Adjusted NICS Background Checks Q4 2022 Q3 Q2 Q1 156,000 295,600 250,600 381,600 397,300 382,800 431,800 521,300 393,100 373,800 382,600 491,500 397,800 343,500 354,300 411,200 4,531,000 3,764,000 3,917,000 4,213,000 Average Unit Sales Price $378 $371 $366 $338 Units – Backlog 647,300 884,400 962,600 1,094,600 Units – Company Inventory 112,800 108,600 99,700 50,400 Units – Distributor Inventory (5) 298,400 303,100 272,800 244,600 29 (5) Distributor ending inventory as provided by the independent distributors of the Company’s products. (in millions except average sales price, net of Federal Excise Tax) Q4 2023 Q3 Q2 Q1 Orders Received $116.7 $58.8 $102.1 $156.2 Average Sales Price of Orders Received $369 $334 $396 $383 Ending Backlog $229.0 $234.8 $293.7 $327.3 Average Sales Price of Ending Backlog $522 $488 $510 $496 Q4 2022 Q3 Q2 Q1 Orders Received $81.0 $124.3 $98.9 $147.0 Average Sales Price of Orders Received $519 $421 $395 $385 Ending Backlog $314.4 $377.6 $389.6 $420.5 $486 $384 $427 $405 Average Sales Price of Ending Backlog 30 Fourth Quarter Net Sales and Gross Profit Analysis Net sales, cost of products sold, and gross profit data for the three months ended (dollars in millions): Net firearms sales December 31, 2023 December 31, 2022 $129.6 $148.7 Change $(19.1) % Change (12.8)% Net casting sales 1.0 0.5 0.5 79.1% Total net sales Cost of products sold 130.6 98.3 149.2 109.6 (18.6) (12.5)% (11.3) (10.3)% Gross profit Gross margin $ 32.3 $ 39.6 $(7.3) (18.4)% 24.7% 26.5% (1.8)% (5.6)% 31 Results of Operations - 2022 Year ended December 31, 2022, as compared to year ended December 31, 2021: Annual Summary Unit Data Firearms unit data for orders, production, shipments and ending inventory, and castings setups (a measure of foundry production) are as follows: Units Ordered Units Produced Units Shipped Average Sales Price Units – Backlog 2022 2021 2020 1,083,800 1,835,500 3,041,700 1,733,200 2,154,600 1,659,100 1,641,000 2,142,900 1,717,700 $362 $340 $329 647,300 1,204,500 1,511,900 Units – Company Inventory 112,800 20,600 8,800 Units – Distributor Inventory (1) 298,400 164,200 39,200 Castings Setups 55,971 68,469 66,044 Orders Received and Ending Backlog (in millions except average sales price, net of Federal Excise Tax): 2022 2021 2020 Orders Received 451.2 $606.5 $992.9 Average Sales Price of Orders Received (2) $416 $330 $326 Ending Backlog $314.4 $429.7 $516.6 Average Sales Price of Ending Backlog (2) $486 $357 $342 (1) Distributor ending inventory as provided by the independent distributors of the Company’s products. (2) Average sales price for orders received and ending backlog is net of Federal Excise Tax of 10% for handguns and 11% for long guns. 32 Product Demand The estimated sell-through of the Company’s products from the independent distributors to retailers in 2022 decreased 25% from 2021. For the same period, adjusted NICS decreased 11%. These decreases are attributable to decreased consumer demand for firearms from the unprecedented levels of the surge that began in 2020 and remained for most of 2021.The greater reduction in the sell-through of the Company’s products relative to adjusted NICS background checks may be attributable to the following:  More aggressive promotions, discounts, rebates, and the extension of payment terms offered by our competitors,  An apparent increase in sales of used firearms at retail, which are included in the adjusted NICS checks, but are not distinguished from new gun sales, and  Decreased retailer inventories as the anticipation of further discounting may be encouraging cautious buying behavior by retailers. Estimated sell-through from distributors to retailers and total adjusted NICS background checks: 2022 2021 2020 Estimated Units Sold from Distributors to Retailers (1) 1,506,800 2,017,800 1,948,900 Total Adjusted NICS Background Checks (2) 16,425,000 18,515,000 21,084,000 (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. The adjusted NICS data presented above was derived by the NSSF by subtracting NICS checks that are not directly related to the sale of a firearm, including checks used for concealed carry (“CCW”) permit application checks as well as checks on active CCW permit databases. 33 Adjusted NICS data can be impacted by changes in state laws and regulations and any directives and interpretations issued by governmental agencies. Production The Company reviews the estimated sell-through from the independent distributors to retailers, as well as inventory levels at the independent distributors and at the Company, to plan production levels and manage inventories. These reviews resulted in a decrease in total unit production of 20% in 2022 compared to 2021. Inventories The Company’s finished goods inventory increased by 92,200 units during 2022. Distributor inventories of the Company’s products increased by 134,200 units during 2022, and approximate a reasonable level to support rapid fulfillment of retailer demand for most product families. Inventory data follows: 2022 2021 2020 Units – Company Inventory 112,800 20,600 8,800 Units – Distributor Inventory (3) 298,400 164,200 39,200 Total inventory (4) 411,200 184,800 48,000 (3) (4) Distributor ending inventory as provided by the independent distributors of the Company’s products. These numbers do not include goods-in-transit inventory that has been shipped from the Company but not yet received by the distributors. This total does not include inventory at retailers. The Company does not have access to data on retailer inventories. 34 Quarterly Summary Unit Data To supplement the summary annual unit data and discussion above, the same data for the last eight quarters follows: Units Ordered Units Produced Units Shipped Estimated Units Sold from Distributors to Retailers Total Adjusted NICS Background Checks Q4 2022 Q3 Q2 Q1 156,000 295,600 250,600 381,600 397,300 382,800 431,800 521,300 393,100 373,800 382,600 491,500 397,800 343,500 354,300 411,200 4,531,000 3,764,000 3,917,000 4,213,000 Average Unit Sales Price $378 $371 $366 $338 Units – Backlog 647,300 884,400 962,600 1,094,600 Units – Company Inventory 112,800 108,600 99,700 50,400 Units – Distributor Inventory (5) 298,400 303,100 272,800 244,600 Units Ordered Units Produced Units Shipped Estimated Units Sold from Distributors to Retailers Total Adjusted NICS Background Checks Q4 2021 Q3 Q2 Q1 373,000 218,800 453,400 790,300 512,100 525,200 575,400 541,900 502,300 524,800 580,800 535,000 458,200 457,400 583,300 518,900 4,763,000 3,971,000 4,298,000 5,483,000 Average Unit Sales Price $334 $338 $343 $343 Units – Backlog 1,204,500 1,333,800 1,639,800 1,767,200 Units – Company Inventory 20,600 10,900 Units – Distributor Inventory (5) 164,200 120,100 10,400 52,800 15,700 55,300 35 (5) Distributor ending inventory as provided by the independent distributors of the Company’s products. (in millions except average sales price, net of Federal Excise Tax) Q4 2022 Q3 Q2 Q1 Orders Received $81.0 $124.3 $98.9 $147.0 Average Sales Price of Orders Received $519 $421 $395 $385 Ending Backlog $314.4 $377.6 $389.6 $420.5 Average Sales Price of Ending Backlog $486 $427 $384 $405 Q4 2021 Q3 Q2 Q1 Orders Received $119.2 $61.1 $158.3 $267.9 Average Sales Price of Orders Received $320 $279 $349 $339 Ending Backlog $429.7 $471.7 $582.3 $612.3 $357 $346 $354 $355 Average Sales Price of Ending Backlog 36 Net Sales, Cost of Products Sold, and Gross Profit Net sales, cost of products sold, and gross profit data for the year ended (dollars in millions): Net firearms sales $593.3 $728.1 December 31, 2022 December 31, 2021 Change $(134.8) % Change (18.5)% Net casting sales 2.5 2.6 (0.1) (1.6)% Total net sales 595.8 730.7 (134.9) (18.5)% Cost of products sold 415.7 451.2 (35.5) (7.8)% Gross profit $180.1 $279.5 $ (99.4) (35.6)% Gross margin 30.2% 38.3% (8.1)% (29.7)% Firearms sales and unit shipments decreased 18.5% and 23.4%, respectively, in 2022. New products represented $78.4 million or 14% of firearms sales in 2022, compared to $155.5 million or 22% of firearms sales in 2021. New product sales include only major new products that were introduced in the past two years. In 2022, new products included the MAX-9 pistol, LCP MAX, Marlin 1895 lever-action rifles, PC Charger, LC Carbine, and Small-Frame Autoloading Rifle. The decreased gross profit for the year ended December 31, 2022 is attributable to the significant decrease in sales, as well as inflationary cost increases in materials, commodities, services, energy, fuel and transportation, which were partially offset by increased pricing. The decrease in gross margin for the year ended December 31, 2022 is attributable to the aforementioned inflationary cost increases and unfavorable deleveraging of fixed costs resulting from decreased production and sales. Selling, General and Administrative Selling, general and administrative expenses were $76.6 million in 2022, a slight increase of $0.1 million from $76.5 million in 2021, and an increase from 10.5% of sales in 2021 to 12.9% of sales in 2022. The increase in these expenses was primarily attributable to increased shipping costs and to the resumption of trade show participation costs, travel expenditures, and advertising that had been deferred during the height of the COVID-19 restrictions, almost entirely offset by decreased incentive compensation expenses and decreased variable costs, such as shipping, as a result of the reduced sales volume. 37 Other Operating Income (Expense), Net Other operating income (expense), net was de minimis in 2022 and an expense of $0.1 million in 2021. Operating Income Operating income was $103.5 million or 17.3% of sales in 2022. This is a decrease of $99.6 million from 2021 operating income of $203.1 million or 27.8% of sales. Royalty Income Royalty income was $0.8 million in 2022 and $2.0 million in 2021. Interest Income Interest income was $2.6 million in 2022, an increase from de minimis earnings in 2021, due to significantly increased interest rates earned on short-term investments beginning in the second quarter of 2022. Interest Expense Interest expense was $0.3 million in 2022 and $0.2 million and 2021. Other Income, Net Other income, net was $1.7 million in 2022, an increase of $0.1 million from $1.6 million in 2021. Income Taxes and Net Income The effective income tax rate was 18.4% in 2022 and 24.5% in 2021. The Company's 2022 and 2021 effective tax rate differs from the statutory federal tax rate due principally to the availability of research and development tax credits, state income taxes, and the nondeductibility of certain executive compensation. The decrease in the 2022 effective tax rate was primarily attributable to research and development tax credits, some of which related to amended prior year income tax returns. The impact related to research and development tax credits on the effective tax rate is expected to decline in future years. As a result of the foregoing factors, consolidated net income was $88.3 million in 2022. This represents a decrease of $67.6 million from 2021 consolidated net income of $155.9 million. 38 Non-GAAP Financial Measure In an effort to provide investors with additional information regarding its results, the Company refers to various United States generally accepted accounting principles (“GAAP”) financial measures and two non-GAAP financial measures, EBITDA and EBITDA margin, which management believes provides useful information to investors. These non-GAAP measures may not be comparable to similarly titled measures being disclosed by other companies. In addition, the Company believes that the non-GAAP financial measures should be considered in addition to, and not in lieu of, GAAP financial measures. The Company believes that EBITDA and EBITDA margin are useful to understanding its operating results and the ongoing performance of its underlying business, as EBITDA provides information on the Company’s ability to meet its capital expenditure and working capital requirements, and is also an indicator of profitability. The Company believes that this reporting provides better transparency and comparability to its operating results. The Company uses both GAAP and non-GAAP financial measures to evaluate its financial performance. Non-GAAP Reconciliation – EBITDA EBITDA (Unaudited, dollars in thousands) Year ended December 31, Net income Income tax expense Depreciation and amortization expense Interest expense Interest income EBITDA EBITDA margin 2022 2021 $ 88,332 $155,899 19,947 25,789 256 (2,552) $131,772 22.1% 50,695 26,152 164 (49) $232,861 31.9% EBITDA is defined as earnings before interest, taxes, and depreciation and amortization. The Company calculates this by adding the amount of interest expense, income tax expense and depreciation and amortization expenses that have been deducted from net income back into net income, and subtracting the amount of interest income that was included in net income from net income to arrive at EBITDA. The Company’s EBITDA calculation also excludes any one-time non-cash, non-operating expense. 39 Financial Condition Liquidity At December 31, 2023, the Company had cash and cash equivalents of $15.2 million and $102.5 million in short term investments. The Company’s pre-LIFO working capital of $272.5 million, less the LIFO reserve of $64.3 million, resulted in working capital of $208.2 million and a current ratio of 4.3 to 1. The Company’s current ratio is higher than the previous year’s primarily due to the dividends payable of $88 million related to the $5.00 per share special dividend that was declared on November 30, 2022 and paid on January 5, 2023. The Company also has access to a $40 million unsecured revolving line of credit that is currently undrawn. Capital Resources The Company believes that its cash flow from operations, current cash position, and access to capital markets will continue to be sufficient to meet its anticipated cash requirements and contractual obligations, which includes funding the Company’s capital expenditures, acquisitions, dividend payments, and share repurchases. Operations Cash provided by operating activities was $33.9 million, $77.2 million, and $172.3 million in 2023, 2022, and 2021, respectively. The decrease in cash provided in 2023 compared to 2022 is primarily attributable to significantly decreased earnings in 2023. The decrease in cash provided in 2022 compared to 2021 is primarily attributable to significantly decreased earnings in 2022 and increased inventories and trade receivables in 2022. Third parties supply the Company with various raw materials for its firearms and castings, such as fabricated steel components, walnut, birch, beech, maple and laminated lumber for rifle stocks, wax, ceramic material, metal alloys, various synthetic products and other component parts. There is a limited supply of these materials in the marketplace at any given time, which can cause the purchase prices to vary based upon numerous market factors. If market conditions result in a significant prolonged inflation of certain prices or if adequate quantities of raw materials cannot be obtained, the Company’s manufacturing processes could be interrupted and the Company’s financial condition or results of operations could be materially adversely affected. Investing and Financing Capital expenditures were $15.8 million, $27.7 million, and $28.8 million in 2023, 2022, and 2021, respectively. In 2024, the Company expects capital expenditures to approximate $15 million, much of which will relate to tooling and fixtures for new product introductions and to upgrade and modernize manufacturing equipment. Due to market conditions and business circumstances, actual capital expenditures could vary significantly from the budgeted amount. The Company finances, and intends to continue to finance, all of these activities with funds provided by operations and current cash. 40 Included in capital expenditures amount noted above, on October 3, 2022 the Company purchased a 225,000 square foot facility, which it had previously been leasing, in Mayodan, North Carolina for $8.3 million for use in its manufacturing and warehousing operations. As of December 31, 2023, the Company had $74.7 million of United States Treasury instruments which mature within one year. The Company also invests available cash in a bank-managed money market fund that invests exclusively in United States Treasury instruments which mature within one year. At December 31, 2023, the Company’s investment in this money market fund totaled $27.8 million. In 2023, the Company repurchased 264,062 shares of its common stock for $11.8 million in the open market. The average price per share purchased was $44.71. These purchases were funded with cash on hand. In 2022, the Company repurchased 4,440 shares of its common stock for $0.2 million in the open market. The average price per share purchased was $49.87. These purchases were funded with cash on hand. No shares were repurchased in 2021. At December 31, 2023, approximately $74.7 million remained authorized for future share repurchases. On January 5, 2023, the Company paid a $5.00 per share special dividend to shareholders of record on December 15, 2022. Including the $5.00 per share special dividend paid on January 5, 2023, the Company paid dividends totaling $110.8 million, $42.7 million, and $59.1 million in 2023, 2022, and 2021, respectively. The quarterly dividend varies every quarter because the Company pays a percentage of earnings rather than a fixed amount per share. The Company’s practice is to pay a dividend of approximately 40% of net income. On February 16, 2024, the Company’s Board of Directors authorized a dividend of 23¢ per share to shareholders of record on March 15, 2024. The payment of future dividends depends on many factors, including internal estimates of future performance, then-current cash, and the Company’s need for funds. The Company provides supplemental discretionary contributions to substantially all employees’ individual 401(k) accounts. Based on its unencumbered assets, the Company believes it has the ability to raise cash through issuance of short-term or long-term debt. Contractual Obligations At December 31, 2023, the Company had approximately $51.3 million in agreements to purchase goods or services that are enforceable and legally binding on the Company, all of which are expected to be settled in less than one year. Additionally, the Company has approximately $3.6 41 million in operating lease obligations, which will be payable through 2034. The Company expects to fund all of these commitments with cash flows from operations and current cash. Firearms Legislation and Litigation See Item 1A - Risk Factors and Note 20 to the financial statements which are included in the Annual Report on Form 10-K for a discussion of firearms legislation and litigation. Other Operational Matters In the normal course of its manufacturing operations, the Company is subject to occasional governmental proceedings and orders pertaining to workplace safety, firearms serial number tracking and control, waste disposal, air emissions and water discharges into the environment. The Company believes that it is generally in compliance with applicable Bureau of Alcohol, Tobacco, Firearms & Explosives, environmental, and safety regulations and the outcome of any proceedings or orders will not have a material adverse effect on the financial position or results of operations of the Company. If these regulations become more stringent in the future and we are not able to comply with them, such noncompliance could have a material adverse impact on the Company. Currently, there are 15 domestic distributors. Additionally, the Company has 44 and 26 distributors servicing the export and law enforcement markets, respectively. The Company self-insures a significant amount of its product liability, workers’ compensation, medical, and other insurance. It also carries significant deductible amounts on various insurance policies. The global outbreak of the Coronavirus disease 2019 was declared a pandemic by the World Health Organization and a national emergency by the U.S. Government in March 2020. The Company has taken many proactive steps to maintain the health and safety of its employees and to mitigate the impact on its business. During the twelve month period ended December 31, 2023, the Company did not experience a significant adverse impact on its business from COVID-19 or related government restrictions. The Company cannot predict the extent to which its business, results of operations, financial condition, or cash flows will ultimately be impacted by COVID- 19. The Company expects to realize its deferred tax assets through tax deductions against future taxable income. Critical Accounting Policies and Estimates The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make assumptions and estimates that affect the reported amounts of assets and liabilities as of the balance sheet date and net sales and expenses recognized and incurred during the reporting period then ended. The Company bases estimates on prior experience, facts and circumstances, and other assumptions, including those reviewed with actuarial consultants and independent counsel, when applicable, that are believed to be reasonable. However, actual results may differ from these estimates. 42 The Company believes that the assumptions and judgments involved in the accounting estimates below have the greatest potential impact on its financial statements, so the Company believes these to be its critical accounting estimates. The methodologies applied for determining the estimates related to the below critical accounting estimates have not changed from the prior year. Product Liability Accrual The Company believes the determination of its product liability accrual is a critical accounting policy. The Company’s management reviews every lawsuit and claim and is in contact with independent and corporate counsel on an ongoing basis. The provision for product liability claims is based upon many factors, which vary for each case. These factors include the type of claim, nature and extent of injuries, historical settlement ranges, jurisdiction where filed, and advice of counsel. An accrual is established for each lawsuit and claim, when appropriate, based on the nature of each such lawsuit or claim. Amounts are charged to product liability expense in the period in which the Company becomes aware that a claim or, in some instances a threat of a claim, has been made when potential losses or costs of defense are probable and can be reasonably estimated. Such amounts are determined based on the Company’s experience in defending similar claims. Occasionally, charges are made for claims made in prior periods because the cumulative actual costs incurred for that claim, or reasonably expected to be incurred in the future, exceed amounts already provided with respect to such claims. Likewise, credits may be taken if cumulative actual costs incurred for that claim, or reasonably expected to be incurred in the future, are less than amounts previously provided. While it is not possible to forecast the outcome of litigation or the timing of related costs, in the opinion of management, after consultation with independent and corporate counsel, there is a remote likelihood that litigation, including punitive damage claims, will have a material adverse effect on the financial position of the Company, but such litigation may have a material impact on the Company’s financial results and cash flows for a particular period. Inventory Valuation and Reserves The Company believes the valuation of its inventory and the related excess and obsolescence reserve is also a critical accounting policy. Inventories are carried at the lower of cost, principally determined by the last-in, first-out (LIFO) method, or market. An actual valuation of inventory under the LIFO method is made at the end of each year based on the inventory levels and the Company’s estimates of the prevailing costs of the many components of inventory existing at that time. The Company determines its excess and obsolescence reserve by projecting the year in which inventory will be consumed into a finished product. Given ever-changing market conditions, customer preferences and the anticipated introduction of new products, projecting the future usage of inventory is subjective. As such, it does not seem prudent to carry inventory at full cost beyond what the Company projects to be needed during the next 36 months. 43 Recent Accounting Pronouncements In November of 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” The updated accounting guidance requires enhanced reportable segment disclosures, primarily related to significant segment expenses which are regularly provided to the chief operating decision maker. The guidance is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. Retrospective application is required and early adoption is permitted. The Company is currently evaluating the effect the updated guidance will have on its financial statement disclosures. In December of 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The updated accounting guidance requires expanded income tax disclosures, including the disaggregation of existing disclosures related to the effective tax rate reconciliation and income taxes paid. The guidance is effective for fiscal years beginning after December 15, 2024. Prospective application is required, with retrospective application permitted. The Company is currently evaluating the effect the updated guidance will have on its financial statement disclosures. Forward-Looking Statements and Projections The Company may, from time to time, make forward-looking statements and projections concerning future expectations. Such statements are based on current expectations and are subject to certain qualifying risks and uncertainties, such as market demand, sales levels of firearms, anticipated castings sales and earnings, the need for external financing for operations or capital expenditures, the results of pending litigation against the Company, the impact of future firearms control and environmental legislation and accounting estimates, any one or more of which could cause actual results to differ materially from those projected. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “will,” “should,” “could” and other words and terms of similar meaning, typically identify such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date made. The Company undertakes no obligation to publish revised forward-looking statements to reflect events or circumstances after the date such forward-looking statements are made or to reflect the occurrence of subsequent unanticipated events. ITEM 7A—QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to changing interest rates on its investments, which consist primarily of United States Treasury instruments with short-term (less than one year) maturities and cash. The interest rate market risk implicit in the Company's investments at any given time is low, as the investments mature within short periods and the Company does not have significant exposure to changing interest rates on invested cash. The Company has not undertaken any actions to cover interest rate market risk and is not a party to any interest rate market risk management activities. 44 A hypothetical 100 basis point change in market interest rates over the next year would not materially impact the Company’s earnings or cash flows. A hypothetical 100 basis point change in market interest rates would not have a material effect on the fair value of the Company’s investments. 45 ITEM 8—FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Reports of Independent Registered Public Accounting Firm (PCAOB ID 49) Consolidated Balance Sheets at December 31, 2023 and 2022 Consolidated Statements of Income and Comprehensive Income for the years ended December 31, 2023, 2022 and 2021 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2023, 2022 and 2021 Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022 and 2021 Notes to Consolidated Financial Statements 47 50 52 53 54 55 46 Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Sturm, Ruger & Company, Inc. and Subsidiary Opinion on the Internal Control Over Financial Reporting We have audited Sturm, Ruger & Company, Inc. and Subsidiary’s (the Company) internal control over financial reporting as of December 31, 2023, 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, 2023, 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 31, 2023 and 2022, and 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, 2023, and our report dated February 21, 2024 expressed an unqualified opinion. 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 February 21, 2024 47 Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Sturm, Ruger & Company, Inc. and Subsidiary Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Sturm, Ruger & Company, Inc. and Subsidiary (the Company) as of December 31, 2023 and 2022, 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, 2023, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, 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, 2023, 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 February 21, 2024 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 Matters 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. 48 Last-In, First-Out Inventory Reserve As described in Notes 1 and 4 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 net realizable value, and the Company’s consolidated net inventories balance of $79.8 million as of December 31, 2023, included a LIFO inventory reserve of $64.3 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 judgement and increased audit effort due to the complexities of management’s manual calculations. 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 the 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 February 21, 2024 49 Consolidated Balance Sheets (Dollars in thousands, except per share data) December 31, Assets Current Assets Cash and cash equivalents Short-term investments Trade receivables, net Gross inventories Less LIFO reserve Less excess and obsolescence reserve Net inventories Prepaid expenses and other current assets Total Current Assets Property, plant and equipment Less allowances for depreciation Net property, plant and equipment Deferred income taxes Other assets Total Assets See accompanying notes to consolidated financial statements. 2023 2022 $ 15,174 $ 65,173 102,485 59,864 150,192 (64,262) (6,120) 79,810 14,062 271,395 159,132 65,449 129,294 (59,489) (4,812) 64,993 7,091 361,838 462,397 (390,863) 71,534 447,126 (370,273) 76,853 11,976 43,912 $ 398,817 6,109 39,963 $ 484,763 50 December 31, 2023 2022 Liabilities and Stockholders’ Equity Current Liabilities Trade accounts payable and accrued expenses Dividends payable Contract liabilities with customers (Note 2) Product liability Employee compensation and benefits Workers’ compensation Income taxes payable Total Current Liabilities Lease liability (Note 7) Employee compensation Product liability accrual 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 2023 – 24,437,020 issued, 17,458,620 outstanding 2022 – 24,378,568 issued, 17,664,230 outstanding Additional paid-in capital Retained earnings Less: Treasury stock – at cost 2023 – 6,978,400 shares 2022 – 6,714,338 shares Total Stockholders’ Equity Total Liabilities and Stockholders’ Equity See accompanying notes to consolidated financial statements. $ 31,708 $ 35,658 - 149 634 24,660 6,044 - 63,195 2,170 1,685 46 - 88,343 1,031 235 30,160 6,469 1,171 163,067 3,039 1,846 73 - 24,437 46,849 418,058 24,378 45,075 393,097 (157,623) 331,721 $ 398,817 (145,812) 316,738 $ 484,763 51 Consolidated Statements of Income and Comprehensive Income (In thousands, except per share data) Year ended December 31, 2023 2022 2021 Net firearms sales Net castings sales Total net sales Cost of products sold Gross profit Operating Expenses (Incomes): Selling General and administrative Other operating income, net Total operating expenses Operating income Other income: Royalty income Interest income Interest expense Other income, net Total other income, net $540,746 3,021 543,767 $593,289 2,553 595,842 $728,141 2,595 730,736 410,148 415,757 451,179 133,619 180,085 279,557 38,788 42,752 (5) 81,535 36,114 40,551 (36) 76,629 33,259 43,289 (127) 76,421 52,084 103,456 203,136 658 5,465 (205) 822 6,740 837 2,552 (256) 1,690 4,823 1,975 49 (164) 1,598 3,458 Income before income taxes 58,824 108,279 206,594 Income taxes 10,609 19,947 50,695 Net income and comprehensive income $ 48,215 $ 88,332 $155,899 Basic Earnings Per Share Diluted Earnings Per Share $2.73 $2.71 $5.00 $4.96 $8.87 $8.78 Weighted average number of common shares outstanding – Basic 17,676,955 17,648,850 17,585,604 Weighted average number of common shares outstanding – Diluted 17,811,218 17,793,348 17,757,834 Cash Dividends Per Share $6.27 $2.42 $3.36 See accompanying notes to consolidated financial statements. 52 Consolidated Statements of Stockholders’ Equity (Dollars in thousands) Balance at December 31, 2020 Net income Dividends paid Stock-based compensation Vesting of RSU’s Common stock issued – compensation plans Unpaid dividends accrued Balance at December 31, 2021 Net income Dividends paid Stock-based compensation Vesting of RSU’s Common stock issued – compensation plans Unpaid dividends accrued Repurchase of 4,440 shares of common stock Balance at December 31, 2022 Net income Dividends paid Stock-based compensation Vesting of RSU’s Common stock issued – compensation plans Unpaid dividends accrued Repurchase of 264,062 shares of common stock Balance at December 31, 2023 Common Stock $24,206 Additional Paid-in Capital $43,468 Treasury Stock $(145,590) Retained Earnings $342,615 155,899 (59,104) 8,280 (4,801) 100 (100) 24,306 46,847 1,671 (3,371) 72 (72) 24,378 45,075 3,989 (2,156) 59 (59) (145,590) (222) (145,812) (1,312) 438,098 88,332 (42,718) (90,615) 393,097 48,215 (22,446) (808) Total $264,699 155,899 (59,104) 8,280 (4,801) - (1,312) 363,661 88,332 (42,718) 1,671 (3,371) - (90,615) (222) 316,738 48,215 (22,446) 3,989 (2,156) - (808) $24,437 $46,849 $418,058 (11,811) $(157,623) (11,811) $331,721 See accompanying notes to consolidated financial statements. 53 Consolidated Statements of Cash Flows (In thousands) Year ended December 31, 2023 2022 2021 Operating Activities Net income Adjustments to reconcile net income to cash provided by operating activities, net of effects of acquisition: Depreciation and amortization Stock-based compensation Excess and obsolescence inventory reserve Gain on sale of assets Deferred income taxes Changes in operating assets and liabilities: Trade receivables Inventories Trade accounts payable and accrued expenses Contract liability with customers Employee compensation and benefits Product liability Prepaid expenses, other assets and other liabilities Income taxes receivable/payable Cash provided by operating activities Investing Activities Property, plant and equipment additions Purchases of short-term investments Proceeds from maturity of short-term investments Net proceeds from sale of assets Cash provided by (used for) investing activities Financing Activities Dividends paid Repurchase of common stock Payment of employee withholding tax related to share- based compensation Cash used for financing activities (Decrease) increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year See accompanying notes to consolidated financial statements. $ 48,215 $ 88,332 $ 155,899 22,383 3,989 1,308 (5) (5,867) 5,585 (16,125) (4,406) (882) (6,469) 372 (13,026) (1,171) 33,901 25,789 1,671 501 (36) (5,573) (8,413) (21,644) (640) 1,031 (3,420) (584) (954) 1,171 77,231 26,152 8,280 953 (127) 994 840 (15,726) (392) (84) (5,433) (234) 1,217 - 172,339 (15,796) (192,627) 249,274 5 40,856 (27,730) (365,480) 406,319 100 13,209 (28,776) (681,940) 602,976 203 (107,537) (110,789) (11,811) (42,718) (222) (59,104) - (2,156) (124,756) (3,371) (46,311) (4,801) (63,905) (49,999) 65,173 $ 15,174 44,129 21,044 $ 65,173 897 20,147 $ 21,044 54 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 6% 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, 2023. 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 subsidiary. All significant intercompany accounts and transactions have been eliminated. Revenue Recognition The Company recognizes revenue in accordance with the provisions of Accounting Standards Codification 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 55 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. 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 of Short-term Investments 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. 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. As of December 31, 2023, 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, the 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. 56 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. 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, 57 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, 2023, 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 December 31, 2023, 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 2023, 2022, and 2021, were $3.1 million, $2.4 million, and $2.6 million, respectively. Shipping Costs Costs incurred related to the shipment of products are included in selling expense. Such costs totaled $4.4 million, $4.7 million, and $4.2 million in 2023, 2022, and 2021, respectively. 58 Research and Development In 2023, 2022, and 2021, the Company spent approximately $9.8 million, $9.6 million, and $11.7 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 options, restricted stock units, and deferred stock outstanding using the treasury stock method. Recent Accounting Pronouncements In November of 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” The updated accounting guidance requires enhanced reportable segment disclosures, primarily related to significant segment expenses which are regularly provided to the chief operating decision maker. The guidance is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. Retrospective application is required and early adoption is permitted. The Company is currently evaluating the effect the updated guidance will have on its financial statement disclosures. In December of 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The updated accounting guidance requires expanded income tax disclosures, including the disaggregation of existing disclosures related to the effective tax rate reconciliation and income taxes paid. The guidance is effective for fiscal years beginning after December 15, 2024. Prospective application is required, with retrospective application permitted. The Company is currently evaluating the effect the updated guidance will have on its financial statement disclosures. 2. Revenue Recognition and Contracts with Customers The impact of ASC 606 on revenue recognized during the years ended December 31, 2023, December 31, 2022, and December 31, 2021 is as follows: Contract liabilities with customers at January 1, Revenue recognized Revenue deferred 2023 $ 1,031 2022 $ - 2021 $ 84 (4,084) - 3,202 1,031 (84) - Contract liabilities with customers at December 31, $ 149 $ 1,031 $ - 59 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. The Company estimates that revenue from this deferred contract liability will be recognized in the first quarter of 2024. During the year ended December 31, 2022, the Company deferred $1.0 million of revenue. There was no offset for the recognition from previously deferred revenue as the Company did not satisfy any performance obligations relating to the shipment of free products during the year. This resulted in a net decrease in firearms sales for the year ended December 31, 2022 of $1.0 million and a deferred contract revenue liability at December 31, 2022 of $1.0 million. During the year ended December 31, 2021, there were no promotions giving rise to deferred contract liabilities and, therefore, there was no additional deferred revenue. Previously deferred revenue of $0.1 million was recognized in the first quarter of 2021. The Company did not have a deferred contract revenue liability at December 31, 2021. 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. 3. Trade Receivables, Net Trade receivables consist of the following: December 31, Trade receivables Allowance for doubtful accounts Allowance for discounts 2023 2022 $61,428 (400) (1,164) $59,864 $67,183 (400) (1,334) $65,449 In 2023, the largest individual trade receivable balances accounted for 22%, 20%, and 17% of total trade receivables, respectively. In 2022, the largest individual trade receivable balances accounted for 26%, 23%, and 18% of total trade receivables, respectively. 60 4. Inventories Inventories consist of the following: December 31, Inventory at FIFO Finished goods Materials and products in process Gross inventories Less: LIFO reserve Less: excess and obsolescence reserve Net inventories 5. Property, Plant and Equipment Property, plant and equipment consist of the following: December 31, Land and improvements Buildings and improvements Machinery and equipment Dies and tools Property, plant and equipment Less allowances for depreciation Net property, plant and equipment 2023 2022 $ 30,989 119,203 150,192 (64,262) (6,120) $ 79,810 $ 23,573 105,721 129,294 (59,489) (4,812) $ 64,993 2023 2022 $ 2,826 74,650 322,730 62,191 462,397 (390,863) $ 71,534 $ 2,826 72,788 314,032 57,480 447,126 (370,273) $ 76,853 Depreciation expense totaled $21.1 million, $24.4 million, and $25.8 million in 2023, 2022, and 2021, respectively. 6. Other Assets Other assets consist of the following: December 31, Patents, at cost Accumulated amortization Deposits on capital items Marlin trade name Other 2023 2022 $10,280 (7,171) 23,045 7,800 9,958 $43,912 $10,126 (6,318) 17,106 7,800 11,249 $39,963 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 2023, $0.4 million in 2022, and $0.3 million in 2021. The estimated annual patent amortization expense for each of the next five years 61 is $0.3 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. 7. 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. 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, 2023: Balance Sheet Line Item December 31, 2023 December 31, 2022 Right-of-use assets Other assets $2,781 $3,681 Operating lease liabilities Current portion Trade accounts payable and accrued expenses Noncurrent portion Lease liabilities Total operating lease liabilities $ 611 2,170 $2,781 $ 642 3,039 $3,681 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. 62 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 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, 2023: 2024 2025 2026 2027 2028 Thereafter Total undiscounted future minimum lease payments Less: Difference between undiscounted lease payments & the present value of future lease payments Total operating lease liabilities $ 808 702 705 229 160 960 3,564 (783) $2,781 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, 2023 is 7.9 years. 8. Trade Accounts Payable and Accrued Expenses Trade accounts payable and accrued expenses consist of the following: December 31, Trade accounts payable Federal excise taxes payable Accrued other 9. Accrued Dividends 2023 2022 $11,100 11,954 8,654 $31,708 $13,281 13,635 8,742 $35,658 On November 30, 2022, the Company’s Board of Directors declared a $5.00 per share special dividend payable on January 5, 2023 to stockholders of record as of December 15, 2022. The dividend, which totaled $88.3 million, was paid on January 5, 2023. 10. Line of Credit During 2021 the Company had a $40 million unsecured revolving line of credit with a bank. This facility terminated on September 30, 2021. On January 7, 2022, the Company entered into a new $40 million unsecured revolving line of credit agreement with a different bank that expires January 7, 2025. Borrowings under this new facility bear interest at either 1) the Bloomberg short-Term 63 Bank Yield Index – 1 month plus 150 basis points, or 2) a fluctuating rate per annum equal to the greater of (i) the Bank’s prime rate or (ii) the federal funds rate plus 50 basis points. The Company is also charged one-quarter of a percent (0.25%) per year on the unused portion. At December 31, 2023, 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 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 $4.7 million, $4.1 million, and $4.0 million in 2023, 2022, and 2021, respectively. Additionally, in 2023, 2022, and 2021 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 $6.9 million, $7.4 million, and $7.4 million in 2023, 2022, and 2021, respectively. 12. Other Operating Income, Net Other operating income, net consists of the following: Year ended December 31, Gain on sale of operating assets 13. Income Taxes 2023 $5 2022 $36 2021 $127 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 2017. The federal and state income tax provision consisted of the following: Year ended December 31, Federal State 2023 2022 Current Deferred Current Deferred Current Deferred $14,763 $863 131 1,713 $994 $16,476 $(5,285) $21,741 (582) 3,779 $(5,867) $25,520 $(4,694) $42,422 (879) 7,279 $(5,573) $49,701 2021 64 The effective income tax rate varied from the statutory federal income tax rate as follows: Year ended December 31, Statutory federal income tax rate State income taxes, net of federal tax benefit Research and development tax credits Other Effective income tax rate 2023 21.0% 2.2 (2.7) (2.5) 18.0% 2022 21.0% 2.7 (4.2) (1.1) 18.4% 2021 21.0% 3.4 (0.4) 0.5 24.5% The Company estimates that its effective tax rate in 2024 will approximate 21%. Significant components of the Company’s deferred tax assets and liabilities are as follows: December 31, Deferred tax assets Capitalized research and development costs Employee compensation and benefits Allowances for doubtful accounts and discounts Inventories Stock-based compensation Other Total deferred tax assets Deferred tax liabilities: Depreciation Other Total deferred tax liabilities Net deferred tax assets 2023 2022 9,144 2,452 431 1,635 1,698 1,608 16,968 3,578 1,414 4,992 $11,976 4,838 2,316 637 1,196 1,661 1,705 12,353 5,070 1,174 6,244 $ 6,109 Prior to 2022, the Company expensed research and development costs in the period in which they were incurred for both financial accounting and income tax purposes. In 2022 the Company adopted the provisions of the Tax Cuts and Jobs Act of 2017 that relate to IRS Code Section 174. Under these provisions, research and development costs must be capitalized and amortized over five years for income tax purposes. The Company continues to expense these costs in the period incurred for financial accounting purposes. The Company made income tax payments of approximately $26.0 million, $28.7 million, and $49.5 million, during 2023, 2022, and 2021, respectively. 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. 65 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, 2023 2022 2021 Numerator: Net income Denominator: $48,215 $88,332 $155,899 Weighted average number of common shares outstanding – Basic 17,676,955 17,648,850 17,585,604 Dilutive effect of options and restricted stock units outstanding under the Company’s employee compensation plans Weighted average number of common shares 134,263 144,498 172,230 outstanding – Diluted 17,811,218 17,793,348 17,757,834 15. Stock Repurchases In 2023 and 2022 the Company repurchased shares of its common stock. Details of these purchases are as follows: Period Third Quarter 2022 July 3 to July 30 July 31 to August 27 August 28 to October 1 Fourth Quarter 2022 October 2 to October 29 October 30 to November 26 November 27 to December 31 Fourth Quarter 2023 October 1 to October 28 October 29 to November 25 November 26 to December 31 Total 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 - - $49.97 - $49.77 - - $45.20 $43.67 $44.79 - - 2,136 - 2,304 - - 179,341 84,721 268,502 $74,680,000 - - 2,136 - 2,304 - - 179,341 84,721 268,502 66 All of these purchases were made with cash held by the Company and no debt was incurred. No shares were repurchased in 2021. At December 31, 2023, approximately $74.7 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 869,000 shares remain available for future grants as of December 31, 2023. Any shares remaining from the 2017 SIP will be available for future grants under the terms of the 2023 SIP. As of December 31, 2023, 121,034 shares remained unawarded from the 2017 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. 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 $6.2 million, $5.7 million, and $8.3 million in 2023, 2022, and 2021, 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 2023, 7,566 deferred stock awards were issued to non-employee directors that will vest in June 2024 and 9,760 deferred stock awards were issued to non-employee directors that will vest in June 2026. In 2022, 5,953 deferred stock awards were issued to non-employee directors that vested in May 2023, 7,688 deferred stock awards were issued to non-employee directors that will vest in May 2025 and a 1,478 deferred stock award was issued to a non-employee director that will vest in June 2027. 67 In 2021, 5,113 deferred stock awards were issued to non-employee directors that vested in May 2022 and 6,615 deferred stock awards were issued to non-employee directors that will vest in May 2024. Compensation expense related to these awards is amortized ratably over the vesting period. Compensation expense related to these awards was $0.9 million in 2023, $0.8 million in 2022, and $0.8 million in 2021. At December 31, 2023, there was $1.0 million of unrecognized compensation cost related to deferred stock that is expected to be recognized over a period of three 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 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 range from 24 to 26 months. During 2022, 82,000 restricted stock units were issued. Compensation costs related to these restricted stock units was $6.0 million, of which $1.7 million was recognized in 2022. The costs are being recognized ratably over the remaining periods required before the units vest, which range from 24 to 26 months. During 2021, 82,000 restricted stock units were issued. Compensation costs related to these restricted stock units was $5.6 million, of which $1.6 million was recognized in 2021. The costs are being recognized ratably over the remaining periods required before the units vest, which range from 24 to 26 months. At December 31, 2023, there was $7.5 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. 68 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. Year ended December 31, Net Sales Firearms Castings Unaffiliated Intersegment Eliminations Income (Loss) Before Income Taxes Firearms Castings Corporate Identifiable Assets Firearms Castings Corporate Goodwill Firearms Castings Depreciation Firearms Castings Capital Expenditures Firearms Castings 2023 2022 2021 $540,746 $593,289 $728,141 3,021 33,086 36,107 (33,086) $543,767 $53,723 (798) 5,899 $58,824 $228,699 11,144 158,974 $398,817 $3,055 209 $3,264 $19,301 1,814 $21,115 $15,395 401 $15,796 2,553 21,306 23,859 (21,306) $595,842 $108,610 (3,338) 3,007 $108,279 $223,301 11,910 249,552 $484,763 2,595 24,711 27,306 (24,711) $730,736 $207,657 (2,732) 1,669 $206,594 $188,290 13,889 240,164 $442,343 $3,055 209 $3,264 $3,055 209 $3,264 $21,992 2,452 $24,444 $26,598 1,175 $27,773 $22,842 2,959 $25,801 $25,239 3,537 $28,776 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%. In 2022, the Company’s largest customers and the percent of firearms sales they represented were as follows: Lipsey’s - 23%; Davidson’s - 23%; and Sports South - 21%. In 2021, the Company’s largest customers and the percent of firearms sales they represented were as follows: Lipsey’s - 21%; Sports South - 19%; and Davidson’s - 19%. 69 The Company’s assets are located entirely in the United States and domestic sales represented at least 94% of total sales in 2023, 2022, and 2021. 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, 2023: Net Sales Gross profit Net income Basic earnings per share Diluted earnings per share Net Sales Gross profit Net income Basic earnings per share Diluted earnings per share 19. Related Party Transactions Three Months Ended 4/1/23 $149,453 38,486 14,350 0.81 $0.81 7/1/23 $142,804 38,148 16,185 0.91 $0.91 9/30/23 $120,893 24,728 7,431 0.42 $0.42 Three Months Ended 4/2/22 $166,575 58,108 30,232 1.72 $1.70 7/2/22 $140,653 43,554 20,757 1.18 $1.17 10/1/22 $139,390 38,869 18,389 1.04 $1.03 12/31/23 $130,617 32,257 10,249 0.58 $0.58 12/31/22 $149,224 39,554 18,954 1.07 $1.06 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 $0.5 million, $0.7 million and $0.5 million in 2023, 2022, and 2021, respectively. One of the Company’s Directors also serves as a Director on the Board of the NRA. 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, $0.3 million and $0.4 million in 2023, 2022, and 2021, respectively. One of the Company’s Directors also serves on the Board of the NSSF. 20. Contingent Liabilities As of December 31, 2023, the Company was a defendant in nine (9) lawsuits and is aware of certain other such claims. The lawsuits generally fall into four (4) categories: traditional product liability litigation, municipal litigation, negligence, and unfair trade practices. Each is discussed in turn below. 70 Traditional Product Liability Litigation One lawsuit involves a claim for damages related to an allegedly defective product due to its design and/or manufacture. The lawsuit stems from a specific incident of personal injury and is based on traditional product liability theories such as strict liability, negligence, and/or breach of warranty. The Company believes that the allegations in this case are unfounded, that the incident is unrelated to the design or manufacture of the firearm involved, and that there should be no recovery against the Company. 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 criminal misuse of firearms by third parties. There are four (4) lawsuits of this type, as follows: The Complaint in City of Gary v. Smith & Wesson Corp., et al. was filed in Indiana State Court in 1999 and 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. In addition, nuisance abatement and/or injunctive relief is sought to change the design, manufacture, marketing and distribution practices of the various defendants. The suit 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, during the quarter ended April 3, 2021, the City initiated discovery and the manufacturer Defendants reciprocated. Discovery is ongoing. Estados Unidos Mexicanos v. Smith & Wesson Brands, Inc., et al. was filed by the Country of Mexico in August 2021 in the U.S. District Court for the District of Massachusetts and names seven defendants, mostly U.S.-based firearms manufacturers, including the Company. The Complaint advances a variety of legal theories including negligence, public nuisance, unjust enrichment, restitution, and others. Plaintiff essentially alleges that Defendants design, manufacture, distribute, market and sell firearms in a way that they know results in the illegal trafficking of firearms into Mexico, where they are used by Mexican drug cartels for criminal activities. Plaintiff seeks injunctive relief and monetary damages. On November 22, 2021, Defendants filed a joint motion to dismiss the Complaint for, among other things, failure to state a claim on which relief may be granted. On September 30, 2022, the court entered an order granting Defendants’ motion. On October 26, 2022, Plaintiff filed a Notice of Appeal and the matter was briefed before the First Circuit Court of Appeals. Oral argument was held on July 24, 2023. On January 22, 2024, the First Circuit Court of Appeals issued an opinion reversing the District Court’s dismissal case and remanding the case for further proceedings. On December 20, 2022, the City of Buffalo, New York filed a lawsuit captioned The City of Buffalo v. Smith & Wesson Brands, Inc., et al. in the New York State Supreme Court for Erie County, New 71 York. The suit names a number of firearm manufacturers, distributors, and retailers as defendants, including the Company, and purports to state causes of action for violations of Sections 898, 349 and 350 of the New York General Business Law, as well as common law public nuisance. Generally, plaintiff alleges that the criminal misuse of firearms in the City of Buffalo is the result of the manufacturing, sales, marketing, and distribution practices of the defendants. The defendants timely removed the matter to the U.S. District Court for the Western District of New York. On December 21, 2022, the City of Rochester, New York filed a lawsuit captioned The City of Rochester v. Smith & Wesson Brands, Inc., et al. in the New York State Supreme Court for Monroe County, New York. The suit names a number of firearm manufacturers, distributors, and retailers as defendants, including the Company, and purports to state causes of action for violations of Sections 898, 349 and 350 of the New York General Business Law, as well as common law public nuisance. The allegations essentially mirror those in Buffalo, discussed in the preceding paragraph. Defendants timely removed the matter to the U.S. District Court for the Western District of New York. Defendants moved to consolidate the Buffalo and Rochester cases for pretrial purposes only. Defendants also moved to stay the cases pending a decision by the Second Circuit Court of Appeals in National Shooting Sports Foundation, Inc. et al. v. James, which challenges the constitutionality of the recently enacted N.Y. GEN. BUS. LAW §§ 898-a–e. On June 8, 2023, the court granted Defendants’ motions and the cases were consolidated for pretrial purposes and stayed. Negligence Rossiter v. Sturm, Ruger, et al. is a lawsuit arising out of a slip and fall accident by a contract security officer in December 2019. The Complaint was filed in the Superior Court for Sullivan County, New Hampshire on December 13, 2022 and names Pine Hill Construction, a snow removal contractor, as a Defendant. The Company has tendered the defense of this matter to its insurance carrier and is assisting as required. The Company was named in two purported class action lawsuits arising out of a data breach at Freestyle Solutions, Inc., the vendor who was hosting the Company’s ShopRuger.com website at the time of the breach. Jones v. Sturm, Ruger & Co., was filed in the U.S. District Court for Connecticut on October 4, 2022 and Copeland v. Sturm, Ruger & Company, et al. was filed in the U.S. District Court for New Jersey on October 27, 2022. Copeland also named Freestyle Solutions, Inc. as a defendant. By agreement of the parties, Copeland was dismissed, without prejudice, and consolidated with Jones in the pending Connecticut case. On January 20, 2023, five plaintiffs filed an Amended Complaint naming the Company and Freestyle Solutions, Inc. as defendants. The Complaint alleges causes of action for negligence, breach of implied warranties, and unjust enrichment. The Company moved to dismiss the Amended Complaint, the motion has been briefed fully, and the parties are awaiting a ruling. 72 Unfair Trade Practices Estate of Suzanne Fountain v. Sturm, Ruger & Co., Inc., was filed in the Connecticut Superior Court in Stamford and arises out of the criminal shootings at the King Soopers supermarket in Boulder, Colorado on March 22, 2021. On that date, Plaintiff’s decedent, Suzanne Fountain, was murdered by 21-year-old Ahmad Al Aliwi Al-Issa. The Complaint alleged that the Company’s advertising and marketing of the Ruger AR-556 pistol violate the Connecticut Unfair Trade Practices Act and were a substantial factor in bringing about the wrongful death of Suzanne Fountain. Estate of Neven Stanisic et al. v. Sturm, Ruger & Co., Inc., was filed in the Connecticut Superior Court in Stamford on behalf of five plaintiffs. Like Estate of Suzanne Fountain, the claims arise from the criminal shootings at the King Soopers supermarket in Boulder, Colorado on March 22, 2021. Plaintiffs’ decedents were murdered by Ahmad Al Aliwi Al-Issa and Plaintiffs alleged that the Company’s advertising and marketing of the Ruger AR-556 pistol violate the Connecticut Unfair Trade Practices Act and were a substantial factor in causing the wrongful death of Plaintiffs’ decedents. The Fountain and Stanisic cases were consolidated for discovery purposes only and transferred by the court to the Complex Litigation Docket. Plaintiffs then sought leave to file an Amended Complaint, essentially abandoning their negligent marketing allegations and advancing a new theory predicated upon alleged violations of the Gun Control Act and National Firearms Act. Over the Company’s objections, Plaintiffs were permitted to file the Amended Complaint. The matter was timely removed to the U.S. District Court for the District of Connecticut based upon the new allegations and federal question jurisdiction. Plaintiffs moved to remand the case to state court, the matter has been briefed fully, and the parties are awaiting a ruling. 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 after July 10, 2000, coverage is provided on an annual basis for losses exceeding $5 million per claim, or an aggregate maximum loss of $10 million annually, except for certain new claims which might be brought by governments or municipalities after July 10, 2000, which are excluded from coverage. The 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 Company, but may have a material impact on the Company’s financial results for a particular period. 73 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 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. Often, a Complaint does not specify the amount of damages being sought and a range of reasonably possible losses relating to unfavorable outcomes cannot be made. The dollar amount of damages claimed at December 31, 2023 and December 31, 2022 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 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. During 2022, no traditional product liability lawsuits were filed against the Company and one (1) was resolved. As of December 31, 2022, the Company was a defendant in five (5) lawsuits involving its products, including one (1) traditional product liability lawsuit and four (4) municipal lawsuits. The Company also was a defendant in three (3) negligence lawsuits though, as discussed above, that number has since been reduced to two (2) lawsuits with the consolidation of the Jones and Copeland matters. During 2021, one (1) traditional product liability lawsuit was filed against the Company. As of December 31, 2021, the Company was a defendant in four (4) lawsuits involving its products, including two (2) traditional lawsuits and two (2) municipal lawsuits. 74 The Company’s product liability expense was $1.5 million in 2023, $1.3 million in 2022, and $1.1 million in 2021. This expense includes the cost of outside legal fees, insurance, and other expenses incurred in the management and defense of product liability matters. A roll-forward of the product liability reserve and detail of product liability expense for the three years ended December 31, 2023 follows: Balance Sheet Roll-forward for Product Liability Reserve Cash Payments Accrued Legal Expense (Income) (b) Balance Beginning of Year (a) Legal Fees (c) Settlements (d) Balance End of Year (a) 2021 2022 2023 $1,126 (7) $ 892 (417) $ 308 500 (227) (167) (129) - - - $ 892 $ 308 $ 679 Income Statement Detail for Product Liability Expense Accrued Legal Expense (b) $ (7) $(417) $ 500 Insurance Premium Expense (e) Total Product Liability Expense 1,119 1,524 1,226 $1,112 $1,107 $1,726 2021 2022 2023 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. In 2022 and 2021, the costs incurred related to cases that were settled or dismissed were less than the amounts accrued for these cases in prior years. (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. 75 There were no insurance recoveries during any of the above years. 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, 2023 and 2022 balance sheets approximate carrying values at those dates. 22. Subsequent Events On February 16, 2024, the Company’s Board of Directors authorized a dividend of 23¢ per share to shareholders of record on March 15, 2024. The Company’s management has evaluated transactions occurring subsequent to December 31, 2023 and determined that there were no events or transactions during that period that would have a material impact on the Company’s results of operations or financial position. 76 ITEM 9—CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. ITEM 9A—CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures The Company conducted an evaluation, with the participation of its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, as of December 31, 2023. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that as of December 31, 2023, the Company’s disclosure controls and procedures over financial reporting were effective. Management’s Report on Internal Control over Financial Reporting The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. 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. The Company conducted an evaluation, with the participation of its Chief Executive Officer and Chief Financial Officer, of the effectiveness of its internal control over financial reporting as of December 31, 2023. This evaluation was performed based on the criteria established in “Internal Control — Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in 2013. Management has concluded that the Company maintained effective internal control over financial reporting as of December 31, 2023, based on criteria established in “Internal Control — Integrated Framework” issued by the COSO in 2013. The effectiveness of the Company’s internal control over financial reporting as of December 31, 2023 has been audited by RSM US LLP, an independent registered public accounting firm, as stated in their report which is included in this Form 10-K. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting that occurred during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 77 New York Stock Exchange Certification Pursuant to Section 303A.12(a) of the New York Stock Exchange Listed Company Manual, the Company submitted an unqualified certification of our Chief Executive Officer to the New York Stock Exchange in 2023. The Company has also filed, as exhibits to this Annual Report on Form 10-K, the Chief Executive Officer and Chief Financial Officer Certifications required under the Sarbanes-Oxley Act of 2002. ITEM 9B—OTHER INFORMATION Rule 10b5-1 Trading Plans The adoption or termination of contracts, instructions or written plans for the purchase and sale of the Company’s securities by the Company’s Section 16 officers or directors for the three months ended December 31, 2023, each of which is intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act (“Rule 10b5-1 Plan”), were as follows: Name Christopher J. Killoy (1) Title President and Chief Executive Officer Director John A. Cosentino, Jr. (2) Action Adoption of Rule 10b5-1 Plan Adoption of Rule 10b5-1 Plan Expiration Date May 7, 2024 Aggregate # of Securities to be Purchased/Sold 30,000 Date Adopted November 7, 2023 November 7, 2023 November 7, 2024 3,000 (1) Christopher J. Killoy, an officer of the Company, entered into a Rule 10b5-1 Plan on November 7, 2023. Mr. Killoy’s Rule 10b5-1 Plan provides for the potential sale of up to 30,000 shares of the Company’s common stock. The Rule 10b5-1 Plan expires on May 7, 2024, or upon the earlier completion of all authorized transactions under such Rule 10b5- 1 Plan. (2) John A. Cosentino, Jr., a director of the Company, entered into a Rule 10b5-1 Plan on November 7, 2023. Mr. Cosentino’s Rule 10b5-1 Plan provides for the potential sale of up to 3,000 shares of the Company’s common stock. The Rule 10b5-1 Plan expires on November 7, 2024, or upon the earlier completion of all authorized transactions under such Rule 10b5-1 Plan. None of the Company’s directors or Section 16 officers adopted or terminated a “non-Rule 10b5-1 trading arrangement” as defined in Item 408 of Regulation S-K during the three months ended December 31, 2023. 78 ITEM 9C—DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. PART III ITEM 10—DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Information concerning the Company’s directors, including the Company’s separately designated standing audit committee, and on the Company’s code of business conduct and ethics required by this Item is incorporated by reference from the Company’s Proxy Statement relating to the 2024 Annual Meeting of Stockholders scheduled to be held May 30, 2024, which will be filed with the SEC in April 2024. Information concerning the Company’s executive officers required by this Item is set forth in Item 1 of this Annual Report on Form 10-K under the caption “Executive Officers of the Company.” Information concerning beneficial ownership reporting compliance required by this Item is incorporated by reference from the Company’s Proxy Statement relating to the 2024 Annual Meeting of Stockholders scheduled to be held May 30, 2024, which will be filed with the SEC in April 2024. ITEM 11—EXECUTIVE COMPENSATION Information concerning director and executive compensation required by this Item is incorporated by reference from the Company’s Proxy Statement relating to the 2024 Annual Meeting of Stockholders scheduled to be held May 30, 2024, which will be filed with the SEC in April 2024. ITEM 12—SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Information concerning the security ownership of certain beneficial owners and management and related stockholder matters required by this Item is incorporated by reference from the Company’s Proxy Statement relating to the 2024 Annual Meeting of Stockholders scheduled to be held May 30, 2024, which will be filed with the SEC in April 2024. 79 Securities Authorized for Issuance Under Equity Compensation Plans The following table provides information regarding compensation plans under which equity securities of the Company are authorized for issuance as of December 31, 2023: Equity Compensation Plan Information Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) Plan category (a) (b) * (c) Equity compensation plans approved by security holders 2017 Stock Incentive Plan 2023 Stock Incentive Plan 285,621 131,188 Equity compensation plans not approved by security holders None. Total 416,809 - - - - 0 989,846 ** 989,846 * ** Restricted stock units are settled in shares of common stock or the cash equivalent. Accordingly, the weighted-average exercise price is not applicable. Includes 121,034 unused shares previously authorized for issuance under the 2017 SIP that are now incorporated into and issuable under the 2023 SIP. ITEM 13—CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE Information concerning certain relationships and related transactions required by this Item is incorporated by reference from the Company’s Proxy Statement relating to the 2024 Annual Meeting of Stockholders scheduled to be held May 30, 2024. ITEM 14—PRINCIPAL ACCOUNTANT FEES AND SERVICES Information concerning the Company’s principal accountant fees and services and the pre- approval policies and procedures of the audit committee of the board of directors required by this Item is incorporated by reference from the Company’s Proxy Statement relating to the 2024 Annual Meeting of Stockholders scheduled to be held May 30, 2024, which will be filed with the SEC in April 2024. 80 PART IV ITEM 15—EXHIBITS AND FINANCIAL STATEMENT SCHEDULE (a) Exhibits and Financial Statement Schedule (1) Financial Statements can be found under Item 8 of Part II of this Form 10-K (2) Schedule can be found on Page 87 of this Form 10-K (3) Listing of Exhibits: Exhibit 3.1 Certificate of Incorporation of the Company, as amended (Incorporated by reference to Exhibit 4.1 to the Form S-8 Registration Statement previously filed by the Company File No. 333-272443 on June 6, 2023). Exhibit 3.2 Bylaws of the Company, as amended through November 12, 2019. Exhibit 4.1 Description of the Company’s Securities. Exhibit 10.1 Exhibit 10.2 Exhibit 10.3 Exhibit 10.4 Exhibit 10.5 Severance Agreement, dated as of April 10, 2008, by and between the Company and Thomas A. Dineen (Incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the SEC on April 11, 2008). ** Severance Agreement, dated as of May 2, 2008 by and between the Company and Kevin B. Reid, Sr. (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on May 5, 2008).** Transition Services and Consulting Agreement, dated August 1, 2016, by and between the Company and Michael O. Fifer (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on August 2, 2016).** Amended and Restated Agreement, dated November 10, 2020, by and between the Company and Christopher J. Killoy (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K/A filed with the SEC on November 12, 2020).** Executive Severance Agreement, dated August 1, 2016, by and between the Company and Shawn C. Leska (Incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed with the SEC on August 2, 2016).** 81 Exhibit 10.6 Exhibit 10.7 Exhibit 10.8 Exhibit 10.9 Loan Agreement, dated January 7, 2022 between Sturm, Ruger & Company, Inc. and Regions Bank. (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on January 11, 2022), as amended by that certain Amendment to Credit Agreement, dated November 3, 2022, between Sturm, Ruger & Company, Inc. and Regions Bank (Incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed with the SEC on November 4, 2022). The Sturm, Ruger & Company, Inc. 2017 Stock Incentive Plan (incorporated by reference to Annex A of the Company’s Definitive Proxy Statement of Schedule 14A, filed with the SEC on March 27, 2017).** The Sturm, Ruger & Company, Inc. 2023 Stock Incentive Plan (incorporated by reference to Annex A of the Company’s Definitive Proxy Statement of Schedule 14A, filed with the SEC on April 20, 2023)** Separation Agreement, dated as of December 21, 2023 by and between Sturm, Ruger, & Co., Inc. and Thomas P. Sullivan (Incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed with the SEC on December 21, 2023).** Exhibit 23.1 Consent of RSM US LLP Exhibit 31.1 Exhibit 31.2 Exhibit 32.1 Exhibit 32.2 Certification of Chief Executive Officer Pursuant to Rule 13a- 14(a) of the Exchange Act. Certification of Treasurer and Chief Financial Officer Pursuant to Rule 13a-14(a) of the Exchange Act. Certification of the Chief Executive Officer Pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Certification of the Treasurer and Chief Financial Officer Pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Exhibit 97 Executive Compensation Clawback Policy Exhibit 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. Exhibit 101.SCH* Inline XBRL Taxonomy Extension Schema Document 82 Exhibit 101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document Exhibit 101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document Exhibit 101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document Exhibit 101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document Exhibit 104* Cover Page Interactive Data File – the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. *Filed herewith **Indicates management contract or compensatory plan or arrangement 83 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. STURM, RUGER & COMPANY, INC. (Registrant) S/THOMAS A. DINEEN Thomas A. Dineen Principal Financial Officer Principal Accounting Officer, Senior Vice President, Treasurer, and Chief Financial Officer February 21, 2024 Date Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. S/CHRISTOPHER J. KILLOY 2/21/24 Christopher J. Killoy Chief Executive Officer, Director (Principal Executive Officer) S/RONALD C. WHITAKER 2/21/24 Ronald C. Whitaker Director S/JOHN A. COSENTINO, JR. 2/21/24 John A. Cosentino, Jr. Director S/PHILLIP C. WIDMAN 2/21/24 Phillip C. Widman Director S/AMIR P. ROSENTHAL 2/21/24 Amir P. Rosenthal Director S/SANDRA S. FROMAN 2/21/24 Sandra S. Froman Director S/TERRENCE G. O’CONNOR 2/21/24 Terrence G. O’Connor Director S/REBECCA S. HALSTEAD 2/21/24 Rebecca S. Halstead Director S/MICHAEL O. FIFER 2/21/24 Michael O. Fifer Director S/THOMAS A. DINEEN 2/21/24 Thomas A. Dineen Principal Financial Officer Principal Accounting Officer, Senior Vice President, Treasurer, and Chief Financial Officer 84 EXHIBIT INDEX Page No. Exhibit 3.1 Certificate of Incorporation of the Company, as amended (Incorporated by reference to Exhibit 4.1 to the Form S-8 Registration Statement previously filed by the Company File No. 333-272443 on June 6, 2023). Exhibit 3.2 Bylaws of the Company, as amended through November 12, 2019. Exhibit 4.1 Description of the Company’s Securities. Exhibit 10.1 Exhibit 10.2 Exhibit 10.3 Exhibit 10.4 Exhibit 10.5 Exhibit 10.6 Exhibit 10.7 Severance Agreement, dated as of April 10, 2008, by and between the Company and Thomas A. Dineen (Incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the SEC on April 11, 2008).** Severance Agreement, dated as of May 2, 2008 by and between the Company and Kevin B. Reid, Sr. (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on May 2, 2008).** Transition Services and Consulting Agreement, dated August 1, 2016, by and between the Company and Michael O. Fifer (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on August 2, 2016).** Amended and Restated Agreement, dated November 10, 2020, by and between the Company and Christopher J. Killoy (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K/A filed with the SEC on November 12, 2020).** Executive Severance Agreement, dated August 1, 2016, by and between the Company and Shawn C. Leska (Incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed with the SEC on August 2, 2016).** Loan Agreement, dated January 7, 2022 between Sturm, Ruger & Company, Inc. and Regions Bank. (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on January 11, 2022) , as amended by that certain Amendment to Credit Agreement, dated November 3, 2022, between Sturm, Ruger & Company, Inc. and Regions Bank (Incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed with the SEC on November 4, 2022). The Sturm, Ruger & Company, Inc. 2017 Stock Incentive Plan (incorporated by reference to Annex A of the Company’s Definitive Proxy Statement of Schedule 14A, filed with the SEC on March 27, 2017) 85 EXHIBIT INDEX (continued) Exhibit 10.8 Exhibit 10.9 The Sturm, Ruger & Company, Inc. 2023 Stock Incentive Plan (incorporated by reference to Annex A of the Company’s Definitive Proxy Statement of Schedule 14A, filed with the SEC on April 20, 2023).** Separation Agreement, dated as of December 21, 2023 by and between Sturm, Ruger, & Co., Inc. and Thomas P. Sullivan (Incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed with the SEC on December 21, 2023).** Exhibit 23.1 Consent of RSM US LLP Exhibit 31.1 Exhibit 31.2 Exhibit 32.1 Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Exchange Act. Certification of Treasurer and Chief Financial Officer Pursuant to Rule 13a-14(a) of the Exchange Act. Certification of the Chief Executive Officer Pursuant to Rule 13a- 14(b) of the Exchange Act and 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Exhibit 32.2 Certification of the Treasurer and Chief Financial Officer Pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Exhibit 97 Executive Compensation Clawback Policy Exhibit 101.INS* Inline 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. Exhibit 101.SCH* Inline XBRL Taxonomy Extension Schema Document Exhibit 101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document Exhibit 101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document Exhibit 101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document Exhibit 101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document Exhibit 104* Cover Page Interactive Data File – the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. *Filed herewith **Indicates management contract or compensatory plan or arrangement 89 90 92 94 95 86 YEAR ENDED DECEMBER 31, 2023 STURM, RUGER & COMPANY, INC. ITEMS 15(a) FINANCIAL STATEMENT SCHEDULE 87 Sturm, Ruger & Company, Inc. Item 15(a)--Financial Statement Schedule Schedule II—Valuation and Qualifying Accounts (In Thousands) COL. A COL. B COL. C ADDITIONS COL. D COL. E Description (1) Charged (Credited) to Costs and Expenses (2) Charged to Other Accounts –Describe Balance at Beginning of Period Balance at End of Period Deductions Deductions from asset accounts: Allowance for doubtful accounts: Year ended December 31, 2023 Year ended December 31, 2022 Year ended December 31, 2021 $ 400 $ 400 $ 400 $ - $ - $ - Allowance for discounts: Year ended December 31, 2023 Year ended December 31, 2022 Year ended December 31, 2021 $1,334 $1,169 $1,166 $12,540 $13,849 $16,116 Excess and obsolete inventory reserve: $ - $ - $ - $ 400 $ 400 $ 400 $12,710 (a) $13,684 (a) $16,113 (a) $1,164 $1,334 $1,169 Year ended December 31, 2023 Year ended December 31, 2022 Year ended December 31, 2021 $4,812 $4,347 $3,394 $1,615 $ 465 $ 953 $307 (b) $ - (b) $ - (b) $6,120 $4,812 $4,347 (a) Discounts taken (b) Inventory written off 88 Consent of Independent Registered Public Accounting Firm Exhibit 23.1 We consent to incorporation by reference in the Registration Statements (Nos. 333-217885, 333- 84677 and 333-53234) on Form S-8 of Sturm, Ruger & Company, Inc. of our reports dated February 21, 2024 relating to the consolidated financial statements, the financial statement schedule and the effectiveness of internal control over financial reporting of Sturm, Ruger & Company, Inc., appearing in the Annual Report on Form 10-K of Sturm, Ruger & Company, Inc. for the year ended December 31, 2023. /s/ RSM US LLP Stamford, Connecticut February 21, 2024 89 EXHIBIT 31.1 I, Christopher J. Killoy, certify that: CERTIFICATION 1. I have reviewed this Annual Report on Form 10-K (the “Report”) of Sturm, Ruger & Company, Inc. (the “Registrant”); 2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report; 3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects, the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Report; 4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a- 15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and d) Disclosed in this Report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting. 90  5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. Date: February 21, 2024 S/CHRISTOPHER J. KILLOY Christopher J. Killoy Chief Executive Officer 91 EXHIBIT 31.2 I, Thomas A. Dineen, certify that: CERTIFICATION 1. I have reviewed this Annual Report on Form 10-K (the “Report”) of Sturm, Ruger & Company, Inc. (the “Registrant”); 2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report; 3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects, the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Report; 4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a- 15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and d) Disclosed in this Report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting. 92  5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. Date: February 21, 2024 S/THOMAS A. DINEEN Thomas A. Dineen Senior Vice President, Treasurer and Chief Financial Officer 93 EXHIBIT 32.1 Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the Annual Report on Form 10-K of Sturm, Ruger & Company, Inc. (the “Company”) for the period ended December 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Christopher J. Killoy, Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge: (1) (2) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and The information contained in the Report fairly presents, in all material respect, the financial condition and results of operations of the Company. Date: February 21, 2024 S/CHRISTOPHER J. KILLOY Christopher J. Killoy Chief Executive Officer A signed original of this statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. 94 EXHIBIT 32.2 Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the Annual Report on Form 10-K of Sturm, Ruger & Company, Inc. (the “Company”) for the period ended December 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Thomas A. Dineen, Senior Vice President, Treasurer and Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge: (1) (2) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and The information contained in the Report fairly presents, in all material respect, the financial condition and results of operations of the Company. Date: February 21, 2024 S/THOMAS A. DINEEN Thomas A. Dineen Senior Vice President, Treasurer and Chief Financial Officer A signed original of this statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. 95 

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