Sturm, Ruger & Company, Inc. Reports Second Quarter Diluted Earnings of 86¢ Per Share and Declares Dividend of 34¢ Per Share

Sturm, Ruger & Company, Inc. (NYSE-RGR) announced today that for the second quarter of 2018 the Company reported net sales of $128.4 million and diluted earnings of 86¢ per share, compared with net sales of $131.9 million and diluted earnings of 57¢ per share in the second quarter of 2017.

For the six months ended June 30, 2018, net sales were $259.6 million and diluted earnings were $1.68 per share. For the corresponding period in 2017, net sales were $299.2 million and diluted earnings were $1.79 per share.

The Company also announced today that its Board of Directors declared a dividend of 34¢ per share for the second quarter for stockholders of record as of August 17, 2018, payable on August 31, 2018. 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 Christopher J. Killoy made the following observations related to the Company’s 2018 second quarter performance:

In the second quarter of 2018, net sales decreased 3% and earnings per share increased 51% from the second quarter of 2017. In addition to improved operating performance, earnings per share benefitted by the following:
- Effective January 1, 2018, the Company adopted Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606), which modified the timing of revenue recognition related to certain sales promotion activities involving the shipment of no charge firearms. Consequently, net sales in the second quarter of 2018 were increased by $2.6 million. As a result, quarterly diluted earnings per share was increased by approximately 5¢.
- The reduced effective tax rate in 2018, resulting from the Tax Cuts and Job Act of 2017, increased the quarterly diluted earnings per share by 12¢.
- The repurchase of 1.3 million shares of common stock in 2017 increased the quarterly diluted earnings per share by 6¢.
Sales of new products, including the Pistol Caliber Carbine, the Mark IV pistol, the LCP II pistol, the EC9s pistol, the Security-9 pistol, and the Precision Rimfire Rifle, represented $75.5 million or 29% of firearm sales in the first half of 2018. New product sales include only major new products that were introduced in the past two years.
The estimated unit sell-through of the Company’s products from the independent distributors to retailers decreased 1% in the first half of 2018 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) decreased 3%. The slight decrease in estimated sell-through of the Company’s products from the independent distributors to retailers is attributable to decreased overall consumer demand in the first half of 2018, partially offset by increased demand for some of the Company’s recently introduced products.
During the second quarter of 2018, the Company’s finished goods inventory increased by 3,700 units and distributor inventories of the Company’s products increased by 30,400 units. However, the Company’s finished goods inventory and the distributor inventories have decreased 67% and 25%, respectively, from the 2017 second quarter.
Cash generated from operations during the first half of 2018 was $81 million. At June 30, 2018, our cash totaled $132 million. Our current ratio is 3.3 to 1 and we have no debt.
In the first half of 2018, capital expenditures totaled $2 million. We expect our 2018 capital expenditures to total approximately $10 million.
In the first half of 2018, the Company returned $10 million to its shareholders through the payment of dividends.
At June 30, 2018, stockholders’ equity was $249 million, which equates to a book value of $14.29 per share, of which $7.54 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, August 2, 2018, Sturm, Ruger will host a webcast at 9:00 a.m. ET to discuss the second quarter operating results. Interested parties can access the webcast at Ruger.com/corporate or by dialing 855-871-7398, participant code 2195388.

The Quarterly Report on Form 10-Q is available on the SEC website at SEC.gov and the Ruger website at 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 & Co., Inc.

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 600 variations of more than 40 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 thousand)

June 30, 2018 December 31, 2017 Assets Current Assets Cash $ 131,711 $ 63,487 Trade receivables, net 50,138 60,082 Gross inventories 71,104 87,592 Less LIFO reserve (45,097 ) (45,180 ) Less excess and obsolescence reserve (1,994 ) (2,698 ) Net inventories 24,013 39,714 Prepaid expenses and other current assets 2,597 3,501 Total Current Assets 208,459 166,784 Property, plant and equipment 360,554 365,013 Less allowances for depreciation (270,576 ) (261,218 ) Net property, plant and equipment 89,978 103,795 Other assets 14,321 13,739 Total Assets $ 312,758 $ 284,318 STURM, RUGER & COMPANY, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)

(Dollars in thousands, except per share data)

June 30, 2018 December 31, 2017 Liabilities and Stockholders’ Equity Current Liabilities Trade accounts payable and accrued expenses $ 28,900 $ 32,422 Contract liabilities with customers (Note 3) 6,674 - Product liability 813 729 Employee compensation and benefits 19,755 14,315 Workers’ compensation 4,997 5,211 Income taxes payable 1,221 - Total Current Liabilities 62,360 52,677 Product liability 78 90 Deferred income taxes 889 1,402 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 2018 – 24,123,418 issued, 17,458,020 outstanding 2017 – 24,092,488 issued, 17,427,090 outstanding 24,123 24,092 Additional paid-in capital 30,150 28,329 Retained earnings 338,753 321,323 Less: Treasury stock – at cost 2018 – 6,665,398 shares 2017 – 6,665,398 shares (143,595 ) (143,595 ) Total Stockholders’ Equity 249,431 230,149 Total Liabilities and Stockholders’ Equity $ 312,758 $ 284,318 STURM, RUGER & COMPANY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(UNAUDITED)

(Dollars in thousands, except per share data)

Three Months Ended Six Months Ended

June 30,2018

July 1,2017

June 30,2018

July 1,2017

Net firearms sales $ 127,017 $ 130,510 $ 256,899 $ 296,876 Net castings sales 1,394 1,344 2,670 2,334 Total net sales 128,411 131,854 259,569 299,210 Cost of products sold 91,812 96,908 187,150 208,511 Gross profit 36,599 34,946 72,419 90,699 Operating expenses: Selling 9,785 12,505 18,123 26,044 General and administrative 7,446 7,145 16,332 15,488 Total operating expenses 17,231 19,650 34,455 41,532 Operating income 19,368 15,296 37,964 49,167 Other income: Interest expense, net (22 ) (32 ) (49 ) (66 ) Other income, net 703 426 1,035 780 Total other income, net 681 394 986 714 Income before income taxes 20,049 15,690 38,950 49,881 Income taxes 4,860 5,491 9,497 17,458 Net income and comprehensive income $ 15,189 $ 10,199 $ 29,453 $ 32,423 Basic earnings per share $ 0.87 $ 0.58 $ 1.69 $ 1.81 Diluted earnings per share $ 0.86 $ 0.57 $ 1.68 $ 1.79 Cash dividends per share $ 0.32 $ 0.48 $ 0.55 $ 0.92 STURM, RUGER & COMPANY, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Dollars in thousands)

Six Months Ended June 30, 2018 July 1, 2017 Operating Activities Net income $ 29,453 $ 32,423 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 16,344 18,653 Slow moving inventory valuation adjustment (348 ) 321 Stock-based compensation 2,668 1,643 (Gain) loss on sale of assets (4 ) 31 Deferred income taxes (513 ) 428 Changes in operating assets and liabilities: Trade receivables 9,944 13,880 Inventories 16,049 1,973 Trade accounts payable and accrued expenses (3,736 ) (14,158 ) Contract liability to customers 4,447 - Employee compensation and benefits 5,242 (10,612 ) Product liability 73 (305 ) Prepaid expenses, other assets and other liabilities 155 (4,704 ) Income taxes payable 1,221 333 Cash provided by operating activities 80,995 39,906 Investing Activities Property, plant and equipment additions (2,360 ) (10,875 ) Proceeds from sale of assets 4 3 Cash used for investing activities (2,356 ) (10,872 ) Financing Activities Remittance of taxes withheld from employees related to share-based compensation (816 ) (2,482 ) Repurchase of common stock - (53,469 ) Dividends paid (9,599 ) (16,255 ) Cash used for financing activities (10,415 ) (72,206 ) Increase (decrease) in cash and cash equivalents 68,224 (43,172 ) Cash and cash equivalents at beginning of period 63,487 87,126 Cash and cash equivalents at end of period $ 131,711 $ 43,954

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 Six Months Ended

June 30,2018

July 1,2017

June 30,2018

July 1,2017

Net income $ 15,189 $ 10,199 $ 29,453 $ 32,423 Income tax expense 4,860 5,491 9,497 17,458 Depreciation and amortization expense

8,172

9,326

16,344