Sturm, Ruger & Company, Inc. Reports Second Quarter Fully Diluted Earnings of $1.12 Per Share, Declares Dividend of 45¢ Per Share and Expansion of Its Stock Repurchase Program to $100 Million

Business Wire

SOUTHPORT, Conn.--(BUSINESS WIRE)--

Sturm, Ruger & Company, Inc. (RGR) announced today that for the second quarter of 2014 the Company reported net sales of $153.7 million and fully diluted earnings of $1.12 per share, compared with net sales of $179.5 million and fully diluted earnings of $1.63 per share in the second quarter of 2013.

For the six months ended June 28, 2014, net sales were $323.5 million and fully diluted earnings were $2.34 per share. For the corresponding period in 2013, net sales were $335.4 million and fully diluted earnings were $2.83 per share.

The Company also announced today that its Board of Directors declared a dividend of 45¢ per share for the second quarter, for shareholders of record as of August 15, 2014, payable on August 29, 2014. This dividend varies every quarter because the Company pays a percent of earnings rather than a fixed amount per share. This dividend is approximately 40% of net income.

In addition, the Company announced that its Board of Directors expanded its authorization to repurchase shares of its common stock from $25 million to $100 million.

Chief Executive Officer Michael O. Fifer made the following observations related to the Company’s 2014 second quarter performance:

  • Our sales decreased 14% from the second quarter of 2013 due to a reduction in demand for firearms and accessories.
  • Our earnings decreased 31% and our EBITDA decreased 25%, from the second quarter of 2013. The main drivers of the reduced operating margins were the reduced sales volume, a product mix shift away from unusually strong sales of higher-margin firearms accessories last year, and increased depreciation expense.
  • New products represented $57.1 million or 18% of firearm sales in the first half of 2014.
  • The decrease in the estimated sell-through of Ruger products from distributors to retailers and the decrease in industry demand as measured by the National Instant Criminal Background Check System (“NICS”) background checks (as adjusted by the National Shooting Sports Foundation) for the second quarter and six months ended June 28, 2014 follow:
   
Period ended June 28, 2014
Q2     Six Months
Decrease in estimated Ruger Units Sold from Distributors to Retailers

(31)%

(11)%

 
Decrease in total adjusted NICS Background Checks

(12)%

(18)%

 

The estimated sell-through of our products from distributors to retailers in the second quarter was adversely impacted by the following:

  • the reduction in overall industry demand,
  • the aggressive discounting of many of our competitors, and
  • the absence of recent significant new product introductions from the Company.

Nonetheless, the estimated sell-through of our products from the independent distributors to retailers for the six months ended June 28, 2014 was the second highest in the Company’s history, exceeding the estimated sell-through from the first half of 2012 by 83,100 units or 10%.

  • Cash generated from operations during the six months ended June 28, 2014 was $35.6 million. At June 28, 2014, our cash totaled $47.4 million. Our current ratio is 2.3 to 1 and we have no debt.
  • In the first half of 2014, capital expenditures totaled $22.8 million, much of it related to tooling fixtures and equipment for new product introductions and to upgrade and modernize manufacturing equipment. We expect to invest approximately $40 million on capital expenditures during 2014 as we continue to prioritize new product development.
  • In the first half of 2014, the Company returned $20.0 million to its shareholders through the payment of dividends.
  • At June 28, 2014, stockholders’ equity was $207.1 million, which equates to a book value of $10.67 per share, of which $2.44 per share was 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, July 30, 2014, 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 www.ruger.com/corporate or by dialing 866-314-5232, participant code 75848002.

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. The only 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 BALANCE SHEETS

(Dollars in thousands)

               
        June 28, 2014     December 31, 2013
         
 
Assets
 
Current Assets
Cash $ 47,435 $ 55,064
Trade receivables, net 51,704 67,384
 
Gross inventories 83,033 64,199
Less LIFO reserve (39,291 ) (38,516 )
Less excess and obsolescence reserve         (3,363 )       (2,422 )
Net inventories         40,379         23,261  
 
Deferred income taxes 8,092 7,637
Prepaid expenses and other current assets         2,802         4,280  
Total Current Assets 150,412 157,626
 
Property, plant and equipment 271,882 250,127
Less allowances for depreciation         (165,826 )       (149,099 )
Net property, plant and equipment         106,056         101,028  
 
 
Other assets         27,222         18,464  
Total Assets       $ 283,690       $ 277,118  
 
 

STURM, RUGER & COMPANY, INC.

 

CONDENSED BALANCE SHEETS (Continued)

(Dollars in thousands, except share data)

                 
          June 28, 2014     December 31, 2013
           
 
Liabilities and Stockholders’ Equity
Current Liabilities
Trade accounts payable and accrued expenses $ 36,565 $ 46,991
Product liability 941 971
Employee compensation and benefits 22,573 34,626
Workers’ compensation 5,583 5,339
Income taxes payable           --         239  
Total Current Liabilities 65,662 88,166
 
Product liability 260 265
Deferred income taxes 10,679 9,601
 
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
2014 – 23,716,369 issued,
19,416,935 outstanding
2013 – 23,647,350 issued,
19,347,916 outstanding 23,716 23,647
Additional paid-in capital 22,629 20,614
Retained earnings 218,007 192,088
Less: Treasury stock – at cost
2014 and 2013 – 4,299,434 shares

(37,884

)

(37,884 )
Accumulated other comprehensive loss          

(19,379

)

      (19,379 )
Total Stockholders’ Equity           207,089         179,086  
Total Liabilities and Stockholders’ Equity         $ 283,690       $ 277,118  
 
 

STURM, RUGER & COMPANY, INC.

 

CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)

(Dollars in thousands, except per share data)

             
        Three Months Ended   Six Months Ended
      June 28, 2014   June 29, 2013   June 28, 2014   June 29, 2013
     
Net firearms sales $ 153,016 $ 176,787 $ 322,179 $ 330,227
Net castings sales         641       2,741       1,363       5,207  
Total net sales 153,657 179,528 323,542 335,434
 
Cost of products sold 103,304 108,804 212,066 203,401
                     
Gross profit         50,353       70,724       111,476       132,033  
 
Operating expenses:
Selling 10,062 11,823 24,483 27,588
General and administrative 7,244 8,317 15,976 16,760
Other operating expenses (income), net         --       (168 )     --       (238 )
Total operating expenses         17,306       19,972       40,459       44,110  
 
Operating income         33,047       50,752       71,017       87,923  
 
Other income:
Interest expense, net (36 ) (39 ) (73 ) (55 )
Other income, net         130       166       495       361  
Total other income, net         94       127       422       306  
 
Income before income taxes 33,141 50,879 71,439 88,229
 
Income taxes         10,855       18,571       24,834       32,203  
 
Net income and comprehensive income       $ 22,286     $ 32,308     $ 46,605     $ 56,026  
 
Basic earnings per share       $ 1.15     $ 1.67     $ 2.40     $ 2.90  
 
Fully diluted earnings per share       $ 1.12     $ 1.63     $ 2.34     $ 2.83  
 
Cash dividends per share       $ 0.490     $ 0.490     $ 1.030     $ 0.894  
 
 

STURM, RUGER & COMPANY, INC.

 

CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Dollars in thousands)

         
        Six Months Ended
      June 28,

2014

    June 29,

2013

   
Operating Activities
Net income $ 46,605 $ 56,026

Adjustments to reconcile net income to cash provided by operating
activities:

Depreciation and amortization 17,880 9,434
Slow moving inventory valuation adjustment 960 (261 )
Stock-based compensation 2,758 2,659
Gain on sale of assets (7 ) (70 )
Deferred income taxes 623 (2,691 )
Changes in operating assets and liabilities:
Trade receivables 15,680 (14,326 )
Inventories (18,078 ) 216
Trade accounts payable and accrued expenses (10,181 ) 5,483
Employee compensation and benefits (12,751 ) 10,861
Product liability (35 ) 170
Prepaid expenses, other assets and other liabilities (7,639 ) (3,296 )
Income taxes payable         (239 )       5,634  
Cash provided by operating activities         35,576         69,839  
 
Investing Activities
Property, plant and equipment additions (22,817 ) (18,820 )
Proceeds from sale of assets         275         70  
Cash used for investing activities         (22,542 )       (18,750 )
 
Financing Activities
Tax benefit from exercise of stock options and vesting of RSU’s 1,620 2,078
Remittance of taxes withheld from employees related to
share-based compensation (2,317 ) (2,082 )
Proceeds from exercise of stock options 23 -
Dividends paid         (19,989 )       (17,282 )
Cash used for financing activities         (20,663 )       (17,286 )
 
Increase (decrease) in cash and cash equivalents (7,629 ) 33,803
 
Cash and cash equivalents at beginning of period 55,064 30,978
               
Cash and cash equivalents at end of period       $ 47,435       $ 64,781  
 

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 EBITDA. a non-GAAP financial measure 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 this non-GAAP financial measure 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 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.

EBITDA decreased 25% and 9% for the three and six months ended June 28, 2014 compared to the prior year periods.

Non-GAAP Reconciliation – EBITDA

 

EBITDA

 

(Unaudited, dollars in thousands)

             
        Three Months Ended   Six Months Ended
      June 28, 2014   June 29, 2013   June 28, 2014   June 29, 2013
     
Net income $ 22,286 $ 32,308 $ 46,605 $ 56,026
 
Income tax expense 10,855 18,571 24,834 32,203
Depreciation and amortization expense 8,940 4,933 17,880 9,434
Interest expense, net         36     39     73     55
EBITDA       $ 42,117   $ 55,851   $ 89,392   $ 97,718

Contact:
Sturm, Ruger & Company, Inc.
One Lacey Place
Southport, CT 06890
www.ruger.com
203-259-7843
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