RGR Sturm Ruger and Co

Sturm, Ruger & Company, Inc. (NYSE-RGR) announced today that for the third quarter of 2016 the Company reported net sales of $161.4 million and diluted earnings of $1.03 per share, compared with net sales of $120.9 million and diluted earnings of 62¢ per share in the third quarter of 2015.

For the nine months ended October 1, 2016, net sales were $502.5 million and diluted earnings were $3.48 per share. For the corresponding period in 2015, net sales were $398.7 million and diluted earnings were $2.33 per share.

The Company also announced today that its Board of Directors declared a dividend of 41¢ per share for the third quarter for stockholders of record as of November 18, 2016, payable on November 25, 2016. This dividend varies every quarter because the Company pays a percentage of earnings rather than a fixed amount per share. This dividend is approximately 40% of net income.

Chief Executive Officer Michael O. Fifer made the following observations related to the Company’s 2016 third quarter performance:

• In the third quarter of 2016, net sales increased 34% and earnings per share increased 66% from the third quarter of 2015.
• EBITDA was $39 million, or 24% of sales, in the third quarter of 2016, an increase of 44% from $27 million, or 22% of sales, in the comparable prior year period.
• The following new products were launched in September:

• the Mark IV pistols, similar to the classic Mark III designs, but with a greatly simplified one-button takedown,
• the LCP II pistol, a major re-design of the popular LCP pistol that was introduced in 2008, and
• the American Compact pistols, an expansion of the American pistol family that was launched in 2015.

• New product sales, which include those launched in the third quarter as well as the Ruger Precision Rifle, the AR-556 modern sporting rifle, and the LC9s pistol, were $58 million or 36% of firearm sales in the third quarter of 2016. New product sales include only major new products that were introduced in the past two years. The new product sales percentage is expected to decrease next quarter as sales of the AR-556 and the LC9s will no longer be included among the new products.
• The estimated unit sell-through of the Company’s products from the independent distributors to retailers increased 21% in the third quarter of 2016 from the comparable prior-year period. For the same period, the National Instant Criminal Background Check System background checks (as adjusted by the National Shooting Sports Foundation) increased 16%.
• The increase in estimated sell-through of the Company’s products from the independent distributors to retailers is attributable to:

• stronger-than-normal industry demand during the summer, likely bolstered by the political campaigns for the November elections,
• strong demand for certain new products,
• greater availability of rimfire ammunition which spurred demand for our 10/22 rifle and other rimfire firearms, and
• increased production of several products in strong demand.

• Cash generated from operations during the first nine months of 2016 was $85 million. At October 1, 2016, our cash totaled $101 million. Our current ratio is 2.7 to 1 and we have no debt.
• In the first nine months of 2016, capital expenditures totaled $23 million, much of it related to tooling and equipment for new products. We expect our 2016 capital expenditures to total approximately $30 million.
• In the first nine months of 2016, the Company returned $25 million to its shareholders through the payment of dividends.
• At October 1, 2016, stockholders’ equity was $266 million, which equates to a book value of $14.02 per share, of which $5.34 per share is cash.

Today, the Company filed its Quarterly Report on Form 10-Q. The financial statements included in this Quarterly Report on Form 10-Q are attached to this press release.

Tomorrow, November 2, 2016, Sturm, Ruger will host a webcast at 9:00 a.m. ET to discuss the third quarter operating results. Interested parties can access the webcast at www.ruger.com/corporate or by dialing 855-871-7398, participant code 1173648.

The Quarterly Report on Form 10-Q is available on the SEC website at www.sec.gov and the Ruger website at www.ruger.com/corporate. Investors are urged to read the complete Quarterly Report on Form 10-Q to ensure that they have adequate information to make informed investment judgments.

About Sturm, Ruger

Sturm, Ruger & Co., Inc. is one of the nation’s leading manufacturers of rugged, reliable firearms for the commercial sporting market. As a full-line manufacturer of American-made firearms, Ruger offers consumers over 400 variations of more than 30 product lines. For more than 60 years, Ruger has been a model of corporate and community responsibility. Our motto, “Arms Makers for Responsible Citizens,” echoes the importance of these principles as we work hard to deliver quality and innovative firearms.

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. 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.

 

STURM, RUGER & COMPANY, INC.

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

      October 1, 2016   December 31, 2015     Assets   Current Assets Cash $ 101,363 $ 69,225 Trade receivables, net 70,323 71,721   Gross inventories 89,858 81,278 Less LIFO reserve (43,836 ) (42,061 ) Less excess and obsolescence reserve     (2,448 )     (2,118 ) Net inventories     43,574       37,099     Deferred income taxes 9,085 8,219 Prepaid expenses and other current assets     6,773       3,008   Total Current Assets 231,118 189,272   Property, plant and equipment 320,465 308,597 Less allowances for depreciation     (218,401 )     (204,777 ) Net property, plant and equipment     102,064       103,820     Other assets     27,670       22,791   Total Assets   $ 360,852     $ 315,883      

STURM, RUGER & COMPANY, INC.

 

CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)

(Dollars in thousands, except per share data)

      October 1, 2016   December 31, 2015    

Liabilities and Stockholders’ Equity

  Current Liabilities Trade accounts payable and accrued expenses $ 53,432 $ 42,991 Product liability 1,455 642 Employee compensation and benefits 25,897 28,298 Workers’ compensation 4,421 5,100 Income taxes payable     --       4,962   Total Current Liabilities 85,205 81,993   Product liability 95 102 Deferred income taxes 9,436 6,050   Contingent liabilities -- --   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 2016 – 24,034,201 issued, 18,971,854 outstanding 2015 – 23,775,766 issued, 18,713,419 outstanding 24,034 23,776 Additional paid-in capital 26,371 29,591 Retained earnings 280,438 239,098 Less: Treasury stock – at cost 2016 – 5,062,347 shares 2015 – 5,062,347 shares     (64,727 )     (64,727 ) Total Stockholders’ Equity     266,116       227,738   Total Liabilities and Stockholders’ Equity   $ 360,852     $ 315,883       STURM, RUGER & COMPANY, INC.   CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)

(Dollars in thousands, except per share data)

      Three Months Ended   Nine Months Ended  

October 1,2016

 

September 26,2015

 

October 1,2016

 

September 26,2015

      Net firearms sales $ 160,058 $ 119,281 $ 497,889 $ 394,084 Net castings sales     1,369       1,590       4,591       4,614   Total net sales 161,427 120,871 502,480 398,698   Cost of products sold 111,176 86,860 336,422 274,781                   Gross profit     50,251       34,011       166,058       123,917     Operating expenses: Selling 13,378 9,170 41,261 34,255 General and administrative     6,805       6,880       22,045       21,214   Total operating expenses     20,183       16,050       63,306       55,469     Operating income     30,068       17,961       102,752       68,448     Other income: Interest expense, net (32 ) (36 ) (102 ) (113 ) Other income, net     418       247       917       1,333   Total other income, net     386       211       815       1,220     Income before income taxes 30,454 18,172 103,567 69,668   Income taxes     10,604       6,209       36,925       24,642     Net income and comprehensive income   $ 19,850     $ 11,963     $ 66,642     $ 45,026     Basic earnings per share   $ 1.05     $ 0.64     $ 3.51     $ 2.41     Diluted earnings per share   $ 1.03     $ 0.62     $ 3.48     $ 2.33     Cash dividends per share   $ 0.49     $ 0.36     $ 1.32     $ 0.85       STURM, RUGER & COMPANY, INC.   CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Dollars in thousands)

      Nine Months Ended  

October 1,2016

 

September 26,2015

  Operating Activities Net income $ 66,642 $ 45,026 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 25,257 26,693 Slow moving inventory valuation adjustment 630 (1,126 ) Stock-based compensation 2,213 3,442 Loss (gain) on sale of assets 50 (157 ) Deferred income taxes 2,520 (78 ) Impairment of assets 6 32 Changes in operating assets and liabilities: Trade receivables 1,398 (3,247 ) Inventories (7,105 ) 5,054 Trade accounts payable and accrued expenses 9,762 956 Employee compensation and benefits (2,667 ) 8,602 Product liability 806 (101 ) Prepaid expenses, other assets and other liabilities (5,340 ) 5,652 Income taxes payable and prepaid income taxes     (8,781 )     4,201   Cash provided by operating activities     85,391       94,949     Investing Activities Property, plant and equipment additions (23,049 ) (24,488 ) Proceeds from sale of assets     7       222   Cash used for investing activities     (23,042 )     (24,266 )   Financing Activities Tax benefit from exercise of stock options and vesting of RSU’s 8,826 305 Remittance of taxes withheld from employees related to share-based compensation (14,001 ) (1,000 ) Proceeds from exercise of stock options - 97 Repurchase of common stock - (2,841 ) Dividends paid     (25,036 )     (15,893 ) Cash used for financing activities     (30,211 )     (19,332 )   Increase in cash and cash equivalents 32,138 51,351   Cash and cash equivalents at beginning of period 69,225 8,901           Cash and cash equivalents at end of period   $ 101,363     $ 60,252    

Non-GAAP Financial Measure

In an effort to provide investors with additional information regarding its financial results, the Company refers to various United States generally accepted accounting principles (“GAAP”) financial measures and one non-GAAP financial measure, EBITDA, which management believes provides useful information to investors. This non-GAAP financial measure may not be comparable to similarly titled financial measures being disclosed by other companies. In addition, the Company believes that the non-GAAP financial measure should be considered in addition to, and not in lieu of, GAAP financial measures. The Company believes that EBITDA is 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 the Company’s financial performance.

EBITDA is defined as earnings before interest, taxes, and depreciation and amortization. The Company calculates its EBITDA 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.

  Non-GAAP Reconciliation – EBITDA

EBITDA

(Unaudited, dollars in thousands)

      Three Months Ended   Nine Months Ended  

October 1,2016

 

September 26,2015

 

October 1,2016

 

September 26,2015

      Net income $ 19,850 $ 11,963 $ 66,642 $ 45,026   Income tax expense 10,604 6,209 36,925 24,642 Depreciation and amortization expense 8,567 8,852 25,257 26,693 Interest expense, net     32     36     102     113 EBITDA   $ 39,053   $ 27,060   $ 128,926   $ 96,474

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Sturm, Ruger & Company, Inc.One Lacey PlaceSouthport, CT 06890www.ruger.com203-259-7843