Market Overview

Sturm, Ruger & Company, Inc. Reports 2019 Diluted Earnings of $1.82 Per Share and Declares Dividend of 18¢ Per Share

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Sturm, Ruger & Company, Inc. (NYSE-RGR) announced today that for 2019 the Company reported net sales of $410.5 million and diluted earnings of $1.82 per share, compared with net sales of $495.6 million and diluted earnings of $2.88 per share in 2018.

For the fourth quarter of 2019, net sales were $105.1 million and diluted earnings were $0.46 per share. For the corresponding period in 2018, net sales were $121.1 million and diluted earnings were $0.69 per share.

The Company also announced today that its Board of Directors declared a dividend of 18¢ per share for the fourth quarter, for shareholders of record as of March 13, 2020, payable on March 27, 2020. 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 year, "2019 was challenging for the firearms industry as manufacturing overcapacity, excess inventories at all levels of the channel, and a continued softness of demand led to a marketplace saddled with undisciplined discounting, reckless extension of payment terms, and excessive promotions. This left some distributors and manufacturers in its wake. Conversely, our promotional efforts in 2019 were more measured and instead we focused on delivering shareholder value over the long term, including our steadfast commitment to new product development."

Mr. Killoy continued, "As a consequence, we are well positioned as we head into 2020. The Ruger-57 pistol, which was launched in December, has received an overwhelming reception. We also just launched the latest LCP pistol, the LCP II in .22 LR, which is enjoying strong demand and we look forward to introducing additional new and innovative firearms in 2020. Our financial strength, evidenced by our $165 million of cash and short-term investments, places us in a unique position in our industry from which we can either profitably weather a storm or thrive in a recovering market, always keeping an eye out for any long-term opportunities that may emerge."

Mr. Killoy made the following additional observations related to the Company's 2019 performance:

  • In 2019, sales decreased 17% from 2018 and the estimated sell-through of the Company's products from the independent distributors to retailers decreased 18% from 2018. For the same period, the National Instant Criminal Background Check System ("NICS") background checks (as adjusted by the National Shooting Sports Foundation) increased 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,
    • The loss of a formerly significant distributor that ultimately filed for bankruptcy protection in June 2019 and the market disruption caused by the subsequent liquidation of its inventory of Ruger products,
    • The loss of three additional smaller distributors in the second half of 2019,
    • An apparent increase in sales of used firearms at retail, which are captured by adjusted NICS checks, and
    • Decreased retailer inventories as the anticipation of further discounting continued to encourage cautious buying behavior by retailers.
  • New products represented $102.0 million or 26% of firearms sales in 2019. New product sales include only major new products that were introduced in the past two years. In 2019, new products included the Ruger-57, the LCP II in .22 LR, the Wrangler, the Pistol Caliber Carbine, the Precision Rimfire Rifle, the AR pistol, the Security-9 pistol, and the EC9s pistol.
  • In 2019, the Company's finished goods inventory decreased 12,900 units and distributor inventories of the Company's products decreased 29,300. In the aggregate, total Company and distributor inventories decreased by 11% in 2019.
  • Cash generated from operations during 2019 was $49.6 million. At December 31, 2019, our cash and short-term investments totaled $165 million. Our current ratio is 4.1 to 1 and we have no debt.
  • In 2019, capital expenditures totaled $20.3 million. We expect our 2020 capital expenditures to total approximately $20 million.
  • In 2019, the Company returned $16.3 million to its shareholders through:
    • the payment of $14.3 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 December 31, 2019, stockholders' equity was $285.5 million, which equates to a book value of $16.05 per share, of which $9.28 per share was cash and short-term investments.

Today, the Company filed its Annual Report on Form 10-K for 2019. The financial statements included in this Annual Report on Form 10-K are attached to this press release.

Tomorrow, Thursday, February 20, 2020, Sturm, Ruger will host a webcast at 9:00 a.m. ET to discuss the 2019 operating results. Interested parties can access the webcast at Ruger.com/corporate or by dialing 855-871-7398, participant code 3039214.

The Annual Report on Form 10-K is available on the SEC website at SEC.gov and the Ruger website at Ruger.com/corporate. Investors are urged to read the complete Annual Report on Form 10-K 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. With products made in America, Ruger offers consumers almost 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.

 

Consolidated Balance Sheets

(Dollars in thousands, except per share data)

 

December 31,

2019

2018

 

 

 

Assets

 

 

Current Assets

 

 

Cash and cash equivalents

$ 35,420

$ 38,492

Short-term investments

129,488

114,326

Trade receivables, net

52,640

45,031

 

 

 

Gross inventories

79,011

80,288

Less LIFO reserve

(47,137)

(46,341)

Less excess and obsolescence reserve

(3,573)

(2,527)

Net inventories

28,301

31,420

 

 

 

Prepaid expenses and other current assets

3,467

2,920

Total Current Assets

249,316

232,189

 

 

 

Property, Plant, and Equipment

372,482

358,756

Less allowances for depreciation

(298,568)

(276,045)

Net property, plant and equipment

73,914

82,711

 

 

 

Deferred income taxes

5,393

2,969

Other assets

20,338

17,663

Total Assets

$ 348,961

$ 335,532

STURM, RUGER & COMPANY, INC.

 

Consolidated Balance Sheets (Continued)

(Dollars in thousands, except per share data)

 

December 31,

2019

2018

 

 

 

Liabilities and Stockholders' Equity

 

 

Current Liabilities

 

 

 

 

 

Trade accounts payable and accrued expenses

$ 29,771

$ 33,021

Contract liabilities with customers

9,623

7,477

Product liability

735

1,073

Employee compensation and benefits

14,273

20,729

Workers' compensation

5,619

5,551

Income taxes payable

1,223

3,340

Total Current Liabilities

61,244

71,191

 

 

 

Lease liability

2,176

-

Product liability accrual

83

99

 

 

 

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 – 24,160,424 issued,

 

 

17,450,526 outstanding

 

 

2018 – 24,123,418 issued,

 

 

17,458,020 outstanding

24,160

24,123

Additional paid-in capital

38,683

33,291

Retained earnings

368,205

350,423

Less: Treasury stock – at cost

 

 

2019 – 6,709,898 shares

 

 

2018 – 6,665,398 shares

(145,590)

(143,595)

Total Stockholders' Equity

285,458

264,242

Total Liabilities and Stockholders' Equity

$ 348,961

$ 335,532

STURM, RUGER & COMPANY, INC.

 

Consolidated Statements of Income and Comprehensive Income

(Dollars in thousands, except per share data)

 

Year ended December 31,

2019

2018

2017

 

 

 

 

Net firearms sales

$406,326

$490,607

$517,701

Net castings sales

4,180

5,028

4,555

Total net sales

410,506

495,635

522,256

 

 

 

 

Cost of products sold

310,958

361,277

368,248

 

 

 

 

Gross profit

99,548

134,358

154,008

 

 

 

 

Operating Expenses:

 

 

 

Selling

29,775

35,111

49,232

General and administrative

30,344

32,248

28,396

Other operating expense (income), net

54

(10)

31

Total operating expenses

60,173

67,349

77,659

 

 

 

 

Operating income

39,375

67,009

76,349

 

 

 

 

Other income:

 

 

 

Royalty income

698

804

506

Interest income

2,594

211

27

Interest expense

(192)

(330)

(152)

Other income, net

552

1,020

916

Total other income, net

3,652

1,705

1,297

 

 

 

 

Income before income taxes

43,027

68,714

77,646

 

 

 

 

Income taxes

10,736

17,781

25,504

 

 

 

 

Net income and comprehensive income

$ 32,291

$ 50,933

$ 52,142

 

 

 

 

 

 

 

 

Basic Earnings Per Share

$1.85

$2.92

$2.94

 

 

 

 

Diluted Earnings Per Share

$1.82

$2.88

$2.91

 

 

 

 

Cash Dividends Per Share

$0.82

$1.10

$1.36

STURM, RUGER & COMPANY, INC.

 

Consolidated Statements of Cash Flows

(In thousands)

 

Year ended December 31,

2019

2018

2017

 

 

 

 

Operating Activities

 

 

 

Net income

$ 32,291

$ 50,933

$ 52,142

Adjustments to reconcile net income to cash

provided by operating activities:

 

 

 

Depreciation and amortization

29,331

31,972

34,264

Stock-based compensation

6,330

5,809

3,659

Excess and obsolescence inventory reserve

1,046

(185)

358

Loss (gain) on sale of assets

54

(10)

31

Deferred income taxes

(2,424)

(4,371)

1,736

Changes in operating assets and liabilities:

 

 

 

Trade receivables

(7,609)

15,051

9,360

Inventories

2,073

8,479

14,463

Trade accounts payable and accrued expenses

(3,646)

939

(16,060)

Contract liability to customers

2,146

5,250

-

Employee compensation and benefits

(6,646)

6,009

(11,466)

Product liability

(354)

353

(1,000)

Prepaid expenses, other assets and other

 

 

 

liabilities

(888)

(3,757)

13,704

Income taxes payable

(2,117)

3,340

-

Cash provided by operating activities

49,587

119,812

101,191

 

 

 

 

Investing Activities

 

 

 

Property, plant, and equipment additions

(20,296)

(10,541)

(33,596)

Purchases of short-term investments

(282,738)

(114,259)

-

Proceeds from maturity of short-term investments

267,576

-

-

Net proceeds from sale of assets

14

10

3

Cash used for investing activities

(35,444)

(124,790)

(33,593)

 

 

 

 

Financing Activities

 

 

 

Dividends paid

(14,319)

(19,201)

(23,905)

Repurchase of common stock

(1,995)

-

(64,850)

Payment of employee withholding tax related to

share-based compensation

(901)

(816)

(2,482)

Cash used for financing activities

(17,215)

(20,017)

(91,237)

 

 

 

 

(Decrease) increase in cash and cash equivalents

(3,072)

(24,995)

(23,639)

Cash and cash equivalents at beginning of year

38,492

63,487

87,126

Cash and cash equivalents at end of year

$ 35,420

$ 38,492

$ 63,487

Non-GAAP Financial Measure

In an effort to provide investors with additional information regarding its 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 measure may not be comparable to similarly titled 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 its financial performance.

Non-GAAP Reconciliation – EBITDA

EBITDA

 

(Unaudited, dollars in thousands)

 

Year ended December 31,

2019

2018

 

 

 

Net income

$ 32,291

$ 50,933

 

 

 

Income tax expense

10,736

17,781

Depreciation and amortization expense

29,331

31,972

Interest expense

192

330

Interest income

(2,594)

(211)

EBITDA

$69,956

$100,805

EBITDA is defined as earnings before interest, taxes, and depreciation and amortization. The Company calculates this 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 to arrive at EBITDA. The Company's EBITDA calculation also excludes any one-time non-cash, non-operating expense.

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