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

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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

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