EX-99.1 2 ex99-1.htm EX-99.1

EXHIBIT 99.1

FOR IMMEDIATE RELEASE

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, CONNECTICUT, November 7, 2019--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.”

3 

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:

o More aggressive promotions, discounts, rebates and the extension of payment terms offered by our competitors,

o Relatively fewer new product shipments compared to 2018, which benefitted from the launch of four major products in December of 2017,

o 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,

o Increased sales of used firearms at retail, which are captured by adjusted NICS checks, and

o 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.

4 

· 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:

o the payment of $12 million of dividends, and

o 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.

5 

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.

6 

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

7 

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

8 

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

9 

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

10 

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

11 

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%

12