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

SOUTHPORT, Conn.--(BUSINESS WIRE)--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		18,653
Interest expense, net		22		32		49		66
EBITDA	$	28,243	$	25,048	$	55,343	$	68,600