U.S. Markets closed

Sturm, Ruger & Company, Inc. Reports Third Quarter Diluted Earnings of 27¢ Per Share, Cash and Short-term Investments of $137 Million With No Debt, and Dividend of 11¢ Per Share

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

Sturm, Ruger & Company, Inc. (NYSE-RGR) announced today that for the third quarter of 2019 the Company reported net sales of $95.0 million and diluted earnings of 27¢ per share, compared with net sales of $114.9 million and diluted earnings of 52¢ per share in the third quarter of 2018.

For the nine months ended September 28, 2019, net sales were $305.4 million and diluted earnings were $1.37 per share. For the corresponding period in 2018, net sales were $374.5 million and diluted earnings were $2.19 per share.

The Company also announced today that its Board of Directors declared a dividend of 11¢ per share for the third quarter for stockholders of record as of November 15, 2019, payable on November 27, 2019. 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 commented on the third quarter results, “Demand has remained soft throughout this year. However, we once again elected to forgo opportunities to generate better short term results with overly aggressive discounting and promotions and the extension of payment terms, which would hinder our long term performance, value, and brand. Instead, we took the fiscally prudent measure of reducing production for the third consecutive quarter to moderate inventory levels in our warehouses and in the distribution channel.”

Mr. Killoy, concluded, “We are in this for the long haul. Our strategy is predicated on remaining financially strong, fiscally disciplined, and focused on delivering long-term value to our shareholders. This strategy has resulted in the return of over $230 million to our shareholders in the past five years alone, during which time we achieved an average annual return on net operating assets of 46%. Our engineering teams are actively engaged every day working on exciting new products and I remain optimistic about our future.”

Mr. Killoy made the following additional observations related to the Company’s 2019 third quarter and year to date performance:

  • The estimated unit sell-through of the Company’s products from the independent distributors to retailers decreased 24% in the first nine months of 2019 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 1%. The greater reduction in the sell-through of the Company’s products relative to adjusted NICS background checks may be attributable to the following:
    • More aggressive promotions, discounts, rebates and the extension of payment terms offered by our competitors,
    • Relatively fewer new product shipments compared to 2018, which benefited from the launch of four major products in December of 2017,
    • The loss of a formerly significant distributor that ultimately filed for bankruptcy protection in June 2019 and the market disruption caused by the liquidation of its inventory of Ruger products,
    • Increased sales of used firearms at retail, which are captured by adjusted NICS checks, and
    • Decreased retailer inventories as the anticipation of further discounting continues to encourage cautious buying behavior by retailers.
  • Sales of new products, including the Wrangler, which was introduced in April 2019, the Pistol Caliber Carbine, the EC9s pistol, the Security-9 pistol, and the Precision Rimfire Rifle, represented $70.6 million or 23% of firearm sales in the first nine months of 2019. New product sales include only major new products that were introduced in the past two years. During the first nine months of 2019, a total of 120 product line extensions and distributor exclusives were launched.
  • During the third quarter of 2019, total Company and distributor inventories decreased by 8,600 units.
  • Cash provided by operations during the first nine months of 2019 was $9 million. At September 28, 2019, our cash and short-term investments totaled $137 million. Our current ratio is 4.7 to 1 and we have no debt.
  • In the first nine months of 2019, capital expenditures totaled $9 million. We expect our 2019 capital expenditures to total approximately $15 million, most of which relate to new product introductions.
  • In the first nine months of 2019, the Company returned $14 million to its stockholders through:
    • the payment of $12 million of dividends, and
    • the repurchase of 44,500 shares of its common stock in the open market at an average price of $44.83 per share, for a total of $2 million.
  • At September 28, 2019, stockholders’ equity was $277.6 million, which equates to a book value of $15.91 per share, of which $7.87 per share is cash and short-term investments.

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 8, 2019, 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 2554387.

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 700 variations of more than 40 product lines. For 70 years, Ruger has been a model of corporate and community responsibility. Our motto, “Arms Makers for Responsible Citizens®,” echoes our commitment to 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 (UNAUDITED)

(Dollars in thousands)

 

 

September 28, 2019

December 31, 2018

 

 

 

Assets

 

 

 

 

 

Current Assets

 

 

Cash

$

22,813

 

$

38,492

 

Short-term investments

 

114,507

 

 

114,326

 

Trade receivables, net

 

55,988

 

 

45,031

 

 

 

 

Gross inventories

 

84,660

 

 

80,288

 

Less LIFO reserve

 

(48,113

)

 

(46,341

)

Less excess and obsolescence reserve

 

(3,566

)

 

(2,527

)

Net inventories

 

32,981

 

 

31,420

 

 

 

 

Prepaid expenses and other current assets

 

3,636

 

 

2,920

 

Total Current Assets

 

229,925

 

 

232,189

 

 

 

 

Property, plant and equipment

 

362,778

 

 

358,756

 

Less allowances for depreciation

 

(293,213

)

 

(276,045

)

Net property, plant and equipment

 

69,565

 

 

82,711

 

 

 

 

Deferred income taxes

 

2,939

 

 

2,969

 

Other assets

 

26,078

 

 

17,663

 

Total Assets

$

328,507

 

$

335,532

 

STURM, RUGER & COMPANY, INC.

 

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Continued)

(Dollars in thousands, except per share data)

 

 

September 28, 2019

December 31, 2018

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

Current Liabilities

 

 

Trade accounts payable and accrued expenses

$

25,073

 

$

33,021

 

Contract liabilities with customers

 

3,640

 

 

7,477

 

Product liability

 

973

 

 

1,073

 

Employee compensation and benefits

 

13,561

 

 

20,729

 

Workers’ compensation

 

5,465

 

 

5,551

 

Income taxes payable

 

-

 

 

3,340

 

Total Current Liabilities

 

48,712

 

 

71,191

 

 

 

 

Product liability

 

77

 

 

99

 

Lease liability

 

2,086

 

 

-

 

 

 

 

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

 

 

2019 – 24,157,806 issued,

 

 

17,447,908 outstanding

 

 

2018 – 24,123,418 issued,

 

 

17,458,020 outstanding

 

24,158

 

 

24,123

 

Additional paid-in capital

 

37,108

 

 

33,291

 

Retained earnings

 

361,957

 

 

350,423

 

Less: Treasury stock – at cost

 

 

2019 – 6,709,898 shares

 

 

2018 – 6,665,398 shares

 

(145,591

)

 

(143,595

)

Total Stockholders’ Equity

 

277,632

 

 

264,242

 

Total Liabilities and Stockholders’ Equity

$

328,507

 

$

335,532

 

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 28, 2019

September 29, 2018

September 28, 2019

September 29, 2018

 

 

 

 

 

Net firearms sales

$

94,062

 

$

113,798

 

$

301,965

 

$

370,697

 

Net castings sales

 

937

 

 

1,147

 

 

3,402

 

 

3,817

 

Total net sales

 

94,999

 

 

114,945

 

 

305,367

 

 

374,514

 

 

 

 

 

 

Cost of products sold

 

75,132

 

 

86,853

 

 

230,600

 

 

274,003

 

 

 

 

 

 

Gross profit

 

19,867

 

 

28,092

 

 

74,767

 

 

100,511

 

 

 

 

 

 

Operating expenses:

 

 

 

 

Selling

 

7,465

 

 

8,922

 

 

22,861

 

 

27,045

 

General and administrative

 

6,827

 

 

7,213

 

 

22,412

 

 

23,545

 

Total operating expenses

 

14,292

 

 

16,135

 

 

45,273

 

 

50,590

 

 

 

 

 

 

Operating income

 

5,575

 

 

11,957

 

 

29,494

 

 

49,921

 

 

 

 

 

 

Other income:

 

 

 

 

Interest income

 

611

 

 

-

 

 

1,973

 

 

-

 

Interest expense

 

(90

)

 

(92

)

 

(141

)

 

(141

)

Other income, net

 

277

 

 

328

 

 

858

 

 

1,363

 

Total other income, net

 

798

 

 

236

 

 

2,690

 

 

1,222

 

 

 

 

 

 

Income before income taxes

 

6,373

 

 

12,193

 

 

32,184

 

 

51,143

 

 

 

 

 

 

Income taxes

 

1,556

 

 

2,987

 

 

8,101

 

 

12,484

 

 

 

 

 

 

Net income and comprehensive income

$

4,817

 

$

9,206

 

$

24,083

 

$

38,659

 

 

 

 

 

 

Basic earnings per share

$

0.28

 

$

0.53

 

$

1.38

 

$

2.22

 

 

 

 

 

 

Diluted earnings per share

$

0.27

 

$

0.52

 

$

1.37

 

$

2.19

 

 

 

 

 

 

Cash dividends per share

$

0.14

 

$

0.34

 

$

0.71

 

$

0.89

 

STURM, RUGER & COMPANY, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Dollars in thousands)

 

 

Nine Months Ended

 

September 28,

2019

September 29,

2018

 

 

 

Operating Activities

 

 

Net income

$

24,083

 

$

38,659

 

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

 

 

Depreciation and amortization

 

22,458

 

 

24,517

 

Slow moving inventory valuation adjustment

 

1,039

 

 

(147

)

Stock-based compensation

 

4,752

 

 

4,239

 

(Gain) loss on sale of assets

 

54

 

 

(9

)

Deferred income taxes

 

30

 

 

(2,333

)

Changes in operating assets and liabilities:

 

 

Trade receivables

 

(10,957

)

 

13,272

 

Inventories

 

(2,600

)

 

13,669

 

Trade accounts payable and accrued expenses

 

(8,472

)

 

(2,238

)

Contract liability to customers

 

(3,837

)

 

3,704

 

Employee compensation and benefits

 

(7,318

)

 

5,079

 

Product liability

 

(122

)

 

44

 

Prepaid expenses, other assets and other liabilities

 

(6,837

)

 

(2,878

)

Income taxes payable

 

(3,340

)

 

-

 

Cash provided by operating activities

 

8,933

 

 

95,578

 

 

 

 

Investing Activities

 

 

Property, plant and equipment additions

 

(9,150

)

 

(4,884

)

Proceeds from sale of assets

 

14

 

 

9

 

Purchases of short-term investments

 

(203,342

)

 

-

 

Proceeds from maturities of short-term investments

 

203,161

 

 

-

 

Cash used for investing activities

 

(9,317

)

 

(4,875

)

 

 

 

Financing Activities

 

 

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

(900

)

(816

)

Repurchase of common stock

 

(1,996

)

 

-

 

Dividends paid

 

(12,399

)

 

(15,535

)

Cash used for financing activities

 

(15,295

)

 

(16,351

)

 

 

 

(Decrease) increase in cash and cash equivalents

 

(15,679

)

 

74,352

 

 

 

 

Cash and cash equivalents at beginning of period

 

38,492

 

 

63,487

 

 

 

 

Cash and cash equivalents at end of period

$

22,813

 

$

137,839

 

Non-GAAP Financial Measures

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 two non-GAAP financial measures, EBITDA and RONA, which management believes provide useful information to investors. These non-GAAP financial measures may not be comparable to similarly titled financial measures being disclosed by other companies. In addition, the Company believes that the non-GAAP financial measures should be considered in addition to, and not in lieu of, GAAP financial measures. The Company uses both GAAP and non-GAAP financial measures to evaluate the Company’s financial performance.

EBITDA

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.

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

(Unaudited, dollars in thousands)

 

 

Three Months Ended

Nine Months Ended

 

September 28, 2019

September 29, 2018

September 28, 2019

September 29, 2018

 

 

 

 

Net income

$

4,817

 

$

9,206

$

24,083

 

$

38,659

 

 

 

 

 

Income tax expense

 

1,556

 

 

2,987

 

8,101

 

 

12,484

Depreciation and amortization expense

7,486

8,173

22,458

24,517

Interest income

 

(611

)

 

-

 

(1,973

)

 

-

Interest expense

 

90

 

 

92

 

141

 

 

141

EBITDA

$

13,338

 

$

20,458

$

52,810

 

$

75,801

RONA

The Company also uses Return on Net Assets (“RONA”) for measuring profitability. RONA takes into account the financial performance of the company in relation to its net assets. The Company believes that RONA is useful to investors in determining the Company’s effectiveness in utilizing its assets to generate profitability.

The Company calculates RONA by dividing the average annual income before income taxes by average year-end net assets, which is defined as total assets, less total liabilities and total cash and short-term investments, plus the LIFO reserve. The RONA calculation for the five years ended December 31, 2018 follows:

 

 

 

(Unaudited, dollars in thousands)

Five Years Ended

December 31, 2018

 

Average net assets

 

$

 

202,205

 

 

Average annual income before income taxes

$

93,711

RONA

46

%

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20191107006050/en/