RGR Sturm Ruger and Co

Sturm, Ruger & Company, Inc. (NYSE:RGR) announced today that for the third quarter of 2018 the Company reported net sales of $114.9 million and diluted earnings of 52¢ per share, compared with net sales of $104.8 million and diluted earnings of 53¢ per share in the third quarter of 2017.

For the nine months ended September 29, 2018, net sales were $374.5 million and diluted earnings were $2.19 per share. For the corresponding period in 2017, net sales were $404.0 million and diluted earnings were $2.32 per share.

The Company also announced today that its Board of Directors declared a dividend of 21¢ per share for the third quarter for stockholders of record as of November 16, 2018, payable on November 30, 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 third quarter performance:

• In the third quarter of 2018, net sales increased 10% from the third quarter of 2017.
• Earnings per share, which were 52¢ in the third quarter of 2018, 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 third quarter of 2018 were increased by $0.6 million. As a result, quarterly diluted earnings per share was increased by approximately 1¢.
  • The reduced effective tax rate in 2018, resulting from the Tax Cuts and Jobs Act of 2017, increased the quarterly diluted earnings per share by 7¢.
  • The repurchase of 1.3 million shares of common stock in 2017 increased the quarterly diluted earnings per share by 4¢.
• The comparison of earnings per share for the third quarter of 2018 to the third quarter of 2017 was adversely impacted by 16¢ due to improved manufacturing efficiencies and favorable leveraging in the current quarter, which reduced the carrying cost of inventory and increased cost of sales in the current quarter by $0.9 million. Conversely, unfavorable deleveraging in the prior year increased the carrying cost of inventory and decreased cost of sales by $2.1 million in the third quarter of 2017.
• In October 2018, the Company issued a safety bulletin announcing that some Ruger American Pistols chambered in 9mm may exhibit premature wear of the locking surfaces between the slide and barrel. The Company is offering a free retrofit to customers of affected pistols and recorded a $1.0 million expense in the third quarter of 2018, which was the expected total cost of the safety bulletin.
• 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 $112.7 million or 30% of firearm sales in the first nine months 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 increased 1% in the first nine months of 2018 compared to the prior year period. For the same period, the National Instant Criminal Background Check System (“NICS”) background checks (as adjusted by the National Shooting Sports Foundation (“NSSF”)) decreased 5%. The slight increase in estimated sell-through of the Company’s products from the independent distributors to retailers is attributable to strong demand for some of the Company’s recently introduced products, partially offset by decreased overall consumer demand in the first nine months of 2018.
• During the third quarter of 2018, the Company’s finished goods inventory increased by 18,000 units and distributor inventories of the Company’s products increased by 22,100 units. In the aggregate, total Company and distributor inventories decreased 151,700 units from the end of the third quarter of 2017.
• Cash generated from operations during the first nine months of 2018 was $96 million. At September 29, 2018, our cash totaled $138 million. Our current ratio is 3.5 to 1 and we have no debt.
• In the first nine months of 2018, capital expenditures totaled $5 million. We expect our 2018 capital expenditures to total approximately $10 million.
• In the first nine months of 2018, the Company returned $16 million to its shareholders through the payment of dividends.
• At September 29, 2018, stockholders’ equity was $254 million, which equates to a book value of $14.34 per share, of which $7.78 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 1, 2018, 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 Ruger.com/corporate or by dialing 855-871-7398, participant code 1387199.

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 thousands)

        September 29, 2018     December 31, 2017           Assets   Current Assets Cash $ 137,839 $ 63,487 Trade receivables, net 46,810 60,082   Gross inventories 74,198 87,592 Less LIFO reserve (45,811 ) (45,180 ) Less excess and obsolescence reserve       (2,195 )       (2,698 ) Net inventories       26,192         39,714     Prepaid expenses and other current assets       3,582         3,501   Total Current Assets 214,423 166,784   Property, plant and equipment 353,115 365,013 Less allowances for depreciation       (268,702 )       (261,218 ) Net property, plant and equipment       84,413         103,795     Deferred income taxes 931 - Other assets       16,285         13,739   Total Assets     $ 316,052       $ 284,318    

STURM, RUGER & COMPANY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)

(Dollars in thousands, except per share data)

        September 29, 2018     December 31, 2017           Liabilities and Stockholders’ Equity   Current Liabilities Trade accounts payable and accrued expenses $ 30,219 $ 32,422 Contract liabilities with customers 5,931 - Product liability 765 729 Employee compensation and benefits 19,707 14,315 Workers’ compensation       5,175         5,211   Total Current Liabilities 61,797 52,677   Product liability 99 90 Deferred income taxes - 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 31,721 28,329 Retained earnings 341,907 321,323

Less: Treasury stock – at cost

2018 – 6,665,398 shares

2017 – 6,665,398 shares

     

(143,595

)

     

(143,595

)

Total Stockholders’ Equity       254,156         230,149   Total Liabilities and Stockholders’ Equity     $ 316,052       $ 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     Nine Months Ended    

September 29,

 

September 30,

   

September 29,

 

September 30,

2018

 

2017

   

2018

 

2017

  Net firearms sales $ 113,798 $ 103,658 $ 370,697 $ 400,533 Net castings sales       1,147       1,159         3,817       3,493   Total net sales 114,945 104,817 374,514 404,026   Cost of products sold 86,853 74,603 274,003 283,113                       Gross profit       28,092       30,214         100,511       120,913     Operating expenses: Selling 8,922 10,606 27,045 36,650 General and administrative       7,213       6,291         23,545       21,779   Total operating expenses       16,135       16,897         50,590       58,429     Operating income       11,957       13,317         49,921       62,484     Other income: Interest expense, net (92 ) (30 ) (141 ) (96 ) Other income, net       328       154         1,363       935   Total other income, net       236       124         1,222       839     Income before income taxes 12,193 13,441 51,143 63,323   Income taxes       2,987       4,071         12,484       21,530     Net income and comprehensive income    

$

9,206

   

$

9,370

     

$

38,659

   

$

41,793

    Basic earnings per share     $ 0.53     $ 0.53       $ 2.22     $ 2.34     Diluted earnings per share     $ 0.52     $ 0.53       $ 2.19     $ 2.32     Cash dividends per share     $ 0.34     $ 0.23       $ 0.89     $ 1.15    

STURM, RUGER & COMPANY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Dollars in thousands)

        Nine Months Ended    

September 29,

 

September 30,

2018

 

2017

  Operating Activities Net income $ 38,659 $ 41,793 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 24,517 26,026 Slow moving inventory valuation adjustment (147 ) 694 Stock-based compensation 4,239 2,647 (Gain) loss on sale of assets (9 ) 31 Deferred income taxes (2,333 ) 925 Changes in operating assets and liabilities: Trade receivables 13,272 16,288 Inventories 13,669 1,672 Trade accounts payable and accrued expenses (2,238 ) (17,805 ) Contract liability to customers 3,704 - Employee compensation and benefits 5,079 (11,028 ) Product liability 44 (549 ) Prepaid expenses, other assets and other liabilities (2,878 ) (4,259 ) Income taxes payable       -       2,578   Cash provided by operating activities       95,578       59,013     Investing Activities Property, plant and equipment additions (4,884 ) (13,205 ) Proceeds from sale of assets       9       3   Cash used for investing activities       (4,875 )     (13,202 )   Financing Activities

Remittance of taxes withheld from employees related to share-based compensation

(816

)

(2,482

)

Repurchase of common stock - (64,850 ) Dividends paid       (15,535 )     (20,246 ) Cash used for financing activities       (16,351 )     (87,578 )   Increase (decrease) in cash and cash equivalents 74,352 (41,767 )   Cash and cash equivalents at beginning of period 63,487 87,126             Cash and cash equivalents at end of period     $ 137,839     $ 45,359    

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

   

September 29,

 

September 30,

   

September 29,

 

September 30,

2018

 

2017

   

2018

 

2017

Net income $ 9,206 $ 9,370 $ 38,659 $ 41,793   Income tax expense 2,987 4,071 12,484 21,530 Depreciation and amortization expense

8,173

7,373

24,517

26,026

Interest expense, net       92       30         141       96   EBITDA     $ 20,458     $ 20,844       $ 75,801     $ 89,445  

View source version on businesswire.com: https://www.businesswire.com/news/home/20181031005725/en/

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