Sturm Ruger & Company (RGR) Risk Analysis

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Public companies are required to disclose risks that can affect the business and impact the stock. These disclosures are known as “Risk Factors”. Companies disclose these risks in their yearly (Form 10-K), quarterly earnings (Form 10-Q), or “foreign private issuer” reports (Form 20-F). Risk factors show the challenges a company faces. Investors can consider the worst-case scenarios before making an investment. TipRanks’ Risk Analysis categorizes risks based on proprietary classification algorithms and machine learning.

Sturm Ruger & Company disclosed 17 risk factors in its most recent earnings report. Sturm Ruger & Company reported the most risks in the “Production” category.

Risk Overview Q4, 2024

Risk Distribution

35% Production

24% Legal & Regulatory

12% Tech & Innovation

12% Ability to Sell

12% Macro & Political

6% Finance & Corporate

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

This chart displays the stock's most recent risk distribution according to category. TipRanks has identified 6 major categories: Finance & corporate, legal & regulatory, macro & political, production, tech & innovation, and ability to sell.

Risk Change Over Time

2022

S&P500 Average

Sector Average

Risks removed

Risks added

Risks changed

Sturm Ruger & Company Risk Factors

New Risk (0)

Risk Changed (0)

Risk Removed (0)

No changes from previous report

The chart shows the number of risks a company has disclosed. You can compare this to the sector average or S&P 500 average.

The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.

Risk Highlights Q4, 2024

Main Risk Category

Production

With 6 Risks

Production

With 6 Risks

Number of Disclosed Risks

From last report

S&P 500 Average: 32

From last report

S&P 500 Average: 32

Recent Changes

2Risks added

1Risks removed

0Risks changed

Since Dec 2024

2Risks added

1Risks removed

0Risks changed

Since Dec 2024

Number of Risk Changed

No changes from last report

S&P 500 Average: 4

No changes from last report

S&P 500 Average: 4

See the risk highlights of Sturm Ruger & Company in the last period.

Risk Word Cloud

The most common phrases about risk factors from the most recent report. Larger texts indicate more widely used phrases.

Risk Factors Full Breakdown - Total Risks 17

Production

Total Risks: 6/17 (35%)Above Sector Average

Manufacturing1 | 5.9%

Manufacturing - Risk 1

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.

Employment / Personnel2 | 11.8%

Employment / Personnel - Risk 1

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.

Employment / Personnel - Risk 2

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 wages and benefits 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 generally 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.

Supply Chain2 | 11.8%

Supply Chain - Risk 1

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.

Supply Chain - Risk 2

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.

Costs1 | 5.9%

Costs - Risk 1

The Company's insurance may be insufficient to protect us from claims or losses.

The Company maintains insurance coverage with third-party insurers and through a wholly-owned captive insurance company with respect to product liability claims, which the Company established in 2024. 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, or the funding level of the Company's wholly-owned captive insurance company 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.

Legal & Regulatory

Total Risks: 4/17 (24%)Above Sector Average

Regulation2 | 11.8%

Regulation - Risk 1

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 registration requirements, creating additional restrictions on certain, common firearm features, and levying new taxes on firearms and/or ammunition.

Regulation - Risk 2

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.

Litigation & Legal Liabilities1 | 5.9%

Litigation & Legal Liabilities - Risk 1

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.

Environmental / Social1 | 5.9%

Environmental / Social - Risk 1

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.

Tech & Innovation

Total Risks: 2/17 (12%)Below Sector Average

Innovation / R&D1 | 5.9%

Innovation / R&D - Risk 1

Added

The ability to develop and produce new products is important to the Company's success.

The Company has a long history of designing, engineering, and manufacturing innovative new products. These new products help to drive growth, excitement, and profitability and have historically allowed the Company to refrain from having to extend some of the aggressive promotions, discounts, rebates, and the extension of payment terms offered by its competitors. While the Company believes it has a strong record of designing, manufacturing, and selling new, high-quality products, failure to continue to do so in the future could harm its reputation, cause the Company to lose business, and cause the Company to incur significant promotional costs, which would have an adverse impact on its operating results and financial condition.

Cyber Security1 | 5.9%

Cyber Security - Risk 1

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.

Ability to Sell

Total Risks: 2/17 (12%)Below Sector Average

Competition1 | 5.9%

Competition - Risk 1

Added

The Company may be impacted by the actions of its competitors.

The Company remains focused on the long-term goal of creating shareholder value. Its disciplined pricing and promotion strategy may not always benefit current period sales and profitability, but endeavors to enhance its long-term performance and promote consistency throughout the distribution channel. Allowing both independent distributors and retailers to confidently invest in its inventory is essential to the Company's long-term success and leadership in the volatile firearms market. However, the aggressive promotions, discounts, rebates, and the extension of payment terms offered by its competitors could negatively impact the Company's market share, which would have an adverse impact on its operating results and financial condition.

Demand1 | 5.9%

Demand - Risk 1

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 Company and/or the firearms industry as a result of social, political, or other factors. If the decrease in demand occurs abruptly, the adverse impact would be even greater.

Macro & Political

Total Risks: 2/17 (12%)Below Sector Average

Economy & Political Environment1 | 5.9%

Economy & Political Environment - Risk 1

The financial health of the Company's independent distributors is critical to its success.

Over 90% of the Company's sales are made to 14 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.

Natural and Human Disruptions1 | 5.9%

Natural and Human Disruptions - Risk 1

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 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.

Finance & Corporate

Total Risks: 1/17 (6%)Below Sector Average

Debt & Financing1 | 5.9%

Debt & Financing - Risk 1

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 potential volatility of these relationships may also impact the Company's decision making regarding the appropriate allocation of capital to be used for activities such as internal investment, share repurchases, and potential acquisitions.

See a full breakdown of risk according to category and subcategory. The list starts with the category with the most risk. Click on subcategories to read relevant extracts from the most recent report.

FAQ

What are “Risk Factors”?

Risk factors are any situations or occurrences that could make investing in a company risky.

The Securities and Exchange Commission (SEC) requires that publicly traded companies disclose their most significant risk factors. This is so that potential investors can consider any risks before they make an investment.

They also offer companies protection, as a company can use risk factors as liability protection. This could happen if a company underperforms and investors take legal action as a result.

It is worth noting that smaller companies, that is those with a public float of under $75 million on the last business day, do not have to include risk factors in their 10-K and 10-Q forms, although some may choose to do so.

How do companies disclose their risk factors?

Publicly traded companies initially disclose their risk factors to the SEC through their S-1 filings as part of the IPO process.

Additionally, companies must provide a complete list of risk factors in their Annual Reports (Form 10-K) or (Form 20-F) for “foreign private issuers”.

Quarterly Reports also include a section on risk factors (Form 10-Q) where companies are only required to update any changes since the previous report.

According to the SEC, risk factors should be reported concisely, logically and in “plain English” so investors can understand them.

How can I use TipRanks risk factors in my stock research?

Use the Risk Factors tab to get data about the risk factors of any company in which you are considering investing.

You can easily see the most significant risks a company is facing. Additionally, you can find out which risk factors a company has added, removed or adjusted since its previous disclosure. You can also see how a company’s risk factors compare to others in its sector.

Without reading company reports or participating in conference calls, you would most likely not have access to this sort of information, which is usually not included in press releases or other public announcements.

A simplified analysis of risk factors is unique to TipRanks.

What are all the risk factor categories?

TipRanks has identified 6 major categories of risk factors and a number of subcategories for each. You can see how these categories are broken down in the list below.

1. Financial & Corporate

Accounting & Financial Operations - risks related to accounting loss, value of intangible assets, financial statements, value of intangible assets, financial reporting, estimates, guidance, company profitability, dividends, fluctuating results.
Share Price & Shareholder Rights – risks related to things that impact share prices and the rights of shareholders, including analyst ratings, major shareholder activity, trade volatility, liquidity of shares, anti-takeover provisions, international listing, dual listing.
Debt & Financing – risks related to debt, funding, financing and interest rates, financial investments.
Corporate Activity and Growth – risks related to restructuring, M&As, joint ventures, execution of corporate strategy, strategic alliances.

2. Legal & Regulatory

Litigation and Legal Liabilities – risks related to litigation/ lawsuits against the company.
Regulation – risks related to compliance, GDPR, and new legislation.
Environmental / Social – risks related to environmental regulation and to data privacy.
Taxation & Government Incentives – risks related to taxation and changes in government incentives.

3. Production

Costs – risks related to costs of production including commodity prices, future contracts, inventory.
Supply Chain – risks related to the company’s suppliers.
Manufacturing – risks related to the company’s manufacturing process including product quality and product recalls.
Human Capital – risks related to recruitment, training and retention of key employees, employee relationships & unions labor disputes, pension, and post retirement benefits, medical, health and welfare benefits, employee misconduct, employee litigation.

4. Technology & Innovation

Innovation / R&D – risks related to innovation and new product development.
Technology – risks related to the company’s reliance on technology.
Cyber Security – risks related to securing the company’s digital assets and from cyber attacks.
Trade Secrets & Patents – risks related to the company’s ability to protect its intellectual property and to infringement claims against the company as well as piracy and unlicensed copying.

5. Ability to Sell

Demand – risks related to the demand of the company’s goods and services including seasonality, reliance on key customers.
Competition – risks related to the company’s competition including substitutes.
Sales & Marketing – risks related to sales, marketing, and distribution channels, pricing, and market penetration.
Brand & Reputation – risks related to the company’s brand and reputation.

6. Macro & Political

Economy & Political Environment – risks related to changes in economic and political conditions.
Natural and Human Disruptions – risks related to catastrophes, floods, storms, terror, earthquakes, coronavirus pandemic/COVID-19.
International Operations – risks related to the global nature of the company.
Capital Markets – risks related to exchange rates and trade, cryptocurrency.

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