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Sturm, Ruger & Company, Inc. Reports Third Quarter Diluted Earnings of $1.39 Per Share and Declares Quarterly Dividend of 56¢ Per Share

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Sturm, Ruger & Company, Inc. (NYSE-RGR) announced today that for the third quarter of 2020 the Company reported net sales of $145.7 million and diluted earnings of $1.39 per share, compared with net sales of $95.0 million and diluted earnings of 27¢ per share in the third quarter of 2019.

For the nine months ended September 26, 2020, net sales were $399.6 million and diluted earnings were $3.31 per share. For the corresponding period in 2019, net sales were $305.4 million and diluted earnings were $1.37 per share.

The Company also announced today that its Board of Directors declared a dividend of 56¢ per share for the third quarter for stockholders of record as of November 13, 2020, payable on November 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 strong financial results for the third quarter of 2020, "Consumer demand showed no signs of letting up during the quarter as concerns about personal protection and home defense were stoked by civil unrest in some cities around the United States, the call, by some, for the reduction in funding and authority of law enforcement organizations, and the continuing COVID-19 pandemic. As a result of this unprecedented demand, inventories remained significantly reduced at all levels in the channel during the third quarter."

Mr. Killoy reaffirmed the Company's commitment to the health and safety of its employees, "We suspended hiring from the onset of COVID-19 in March until June when we resumed hiring at a modest, albeit growing, rate to ensure the health and safety of everyone involved. This action has hampered our ability to ramp production, but we know the long-term benefits of maintaining a healthy workforce and clean facilities are well worth any short-term, adverse impact on our operations. And I am happy to report that despite the self-imposed limits on the size of our current workforce, the hard work and commitment of our dedicated employees allowed us to increase production 15% from the prior quarter and 50% from the third quarter of 2019."

Mr. Killoy provided an update on the Company's recently announced approval to purchase substantially all of the Marlin firearms assets for $30 million, "We are excited to broaden our catalog of rugged, reliable, and exciting products with the addition of Marlin rifles, and the new product lines will be well-supported in our existing facilities. Customer response to our purchase has been overwhelmingly positive, reinforcing our assertion that the Marlin lineup is an excellent fit for Ruger. We anticipate closing on this purchase in the fourth quarter of 2020 and look forward to re-introducing shooters to Marlin rifles in the second half of 2021."

Mr. Killoy made the following observations related to the Company's third quarter 2020 performance:

  • The estimated unit sell-through of the Company's products from the independent distributors to retailers increased 50% in the first nine months of 2020 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) increased 68%. These substantial increases are attributable to increased consumer demand for firearms in the first nine months of 2020, and have likely been constrained due to limited available inventory in the distribution channel.
  • Sales of new products, including the Wrangler, the Ruger-57, the LCP II in .22 LR, the PC Charger, and the AR-556 pistol, represented $87.9 million or 24% of firearm sales in the first nine months of 2020. New product sales include only major new products that were introduced in the past two years.
  • During the third quarter of 2020, the Company's finished goods inventory remained near historic lows. Distributor inventories of the Company's products decreased 26,700 units, or 31% during the quarter.
  • Cash provided by operations during the first nine months of 2020 was $82.0 million. At September 26, 2020, our cash and short-term investments totaled $133.6 million. Our current ratio is 3.2 to 1 and we have no debt.
  • In the first nine months of 2020, capital expenditures totaled $8.0 million. We expect our 2020 capital expenditures to total approximately $20 million, most of which relate to new product introductions.
  • In the first nine months of 2020, the Company returned $104.1 million to its shareholders through the payment of dividends, reflecting the customary quarterly dividends and a special dividend of $5.00 per share that was paid in August.
  • At September 26, 2020, stockholders' equity was $241.3 million, which equates to a book value of $13.79 per share, of which $7.64 per share was cash and short-term investments.

Today, the Company filed its Quarterly Report on Form 10-Q for the third quarter of 2020. The financial statements included in this Quarterly Report on Form 10-Q are attached to this press release.

Tomorrow, October 29, 2020, 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 7593918.

The Quarterly Report on Form 10-Q for the third quarter of 2020 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 for the third quarter of 2020 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 800 variations of more than 40 product lines. For more than 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 26, 2020

December 31, 2019

 

 

 

 

 

 

Assets

 

 

 

 

 

Current Assets

 

 

Cash

$

29,650

 

$

35,420

 

Short-term investments

 

103,977

 

 

129,488

 

Trade receivables, net

 

58,220

 

 

52,640

 

 

 

 

Gross inventories

 

63,926

 

 

79,011

 

Less LIFO reserve

 

(47,331

)

 

(47,137

)

Less excess and obsolescence reserve

 

(3,016

)

 

(3,573

)

Net inventories

 

13,579

 

 

28,301

 

 

 

 

Prepaid expenses and other current assets

 

7,548

 

 

3,467

 

Total Current Assets

 

212,974

 

 

249,316

 

 

 

 

Property, plant and equipment

 

378,182

 

 

372,482

 

Less allowances for depreciation

 

(317,757

)

 

(298,568

)

Net property, plant and equipment

 

60,425

 

 

73,914

 

 

 

 

Deferred income taxes

 

2,266

 

 

5,393

 

Other assets

 

34,903

 

 

20,338

 

Total Assets

$

310,568

 

$

348,961

 

STURM, RUGER & COMPANY, INC.

 

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Continued)

(Dollars in thousands, except per share data)

 

 

September 26, 2020

December 31, 2019

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

Current Liabilities

 

 

Trade accounts payable and accrued expenses

$

27,561

 

$

29,771

 

Contract liabilities with customers

 

1,203

 

 

9,623

 

Product liability

 

959

 

 

735

 

Employee compensation and benefits

 

31,469

 

 

14,273

 

Workers' compensation

 

6,200

 

 

5,619

 

Income taxes payable

 

-

 

 

1,223

 

Total Current Liabilities

 

67,392

 

 

61,244

 

 

 

 

Product liability accrual

 

55

 

 

83

 

Lease liability

 

1,839

 

 

2,176

 

 

 

 

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

 

 

2020 – 24,205,749 issued,

 

 

17,495,851 outstanding

 

 

2019 – 24,160,424 issued,

 

 

17,450,526 outstanding

 

24,193

 

 

24,160

 

Additional paid-in capital

 

41,783

 

 

38,683

 

Retained earnings

 

320,896

 

 

368,205

 

Less: Treasury stock – at cost

 

 

2020 – 6,709,898 shares

 

 

2019 – 6,709,898 shares

 

(145,590

)

 

(145,590

)

Total Stockholders' Equity

 

241,282

 

 

285,458

 

Total Liabilities and Stockholders' Equity

$

310,568

 

$

348,961

 

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 26,

2020

September 28,

2019

September 26,

2020

September 28,

2019

 

 

 

 

 

Net firearms sales

$

145,157

 

$

94,062

 

$

397,335

 

$

301,965

 

Net castings sales

 

548

 

 

937

 

 

2,273

 

 

3,402

 

Total net sales

 

145,705

 

 

94,999

 

 

399,608

 

 

305,367

 

 

 

 

 

 

Cost of products sold

 

94,553

 

 

75,132

 

 

272,362

 

 

230,600

 

 

 

 

 

 

Gross profit

 

51,152

 

 

19,867

 

 

127,246

 

 

74,767

 

 

 

 

 

 

Operating expenses:

 

 

 

 

Selling

 

8,432

 

 

7,465

 

 

23,355

 

 

22,861

 

General and administrative

 

9,862

 

 

6,827

 

 

26,844

 

 

22,412

 

Total operating expenses

 

18,294

 

 

14,292

 

 

50,199

 

 

45,273

 

 

 

 

 

 

Operating income

 

32,858

 

 

5,575

 

 

77,047

 

 

29,494

 

 

 

 

 

 

Other income:

 

 

 

 

Interest income

 

112

 

 

611

 

 

1,072

 

 

1,973

 

Interest expense

 

(114

)

 

(90

)

 

(166

)

 

(141

)

Other income, net

 

38

 

 

277

 

 

451

 

 

858

 

Total other income, net

 

36

 

 

798

 

 

1,357

 

 

2,690

 

 

 

 

 

 

Income before income taxes

 

32,894

 

 

6,373

 

 

78,404

 

 

32,184

 

 

 

 

 

 

Income taxes

 

8,141

 

 

1,556

 

 

19,719

 

 

8,101

 

 

 

 

 

 

Net income and comprehensive income

$

24,753

 

$

4,817

 

$

58,685

 

$

24,083

 

 

 

 

 

 

Basic earnings per share

$

1.42

 

$

0.28

 

$

3.36

 

$

1.38

 

 

 

 

 

 

Diluted earnings per share

$

1.39

 

$

0.27

 

$

3.31

 

$

1.37

 

 

 

 

 

 

Cash dividends per share

$

5.42

 

$

0.14

 

$

5.95

 

$

0.71

 

STURM, RUGER & COMPANY, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Dollars in thousands)

 

 

Nine Months Ended

 

September 26,

2020

September 28,

2019

 

 

 

Operating Activities

 

 

Net income

$

58,685

 

$

24,083

 

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

 

 

Depreciation and amortization

 

21,644

 

 

22,458

 

Stock-based compensation

 

4,430

 

 

4,752

 

(Gain) loss on sale of assets

 

(72

)

 

54

 

Deferred income taxes

 

3,127

 

 

30

 

Changes in operating assets and liabilities:

 

 

Trade receivables

 

(5,580

)

 

(10,957

)

Inventories

 

14,722

 

 

(1,561

)

Trade accounts payable and accrued expenses

 

(1,614

)

 

(8,472

)

Contract liability to customers

 

(8,420

)

 

(3,837

)

Employee compensation and benefits

 

15,299

 

 

(7,318

)

Product liability

 

196

 

 

(122

)

Prepaid expenses, other assets and other liabilities

 

(19,215

)

 

(6,837

)

Income taxes payable

 

(1,223

)

 

(3,340

)

Cash provided by operating activities

 

81,979

 

 

8,933

 

 

 

 

Investing Activities

 

 

Property, plant and equipment additions

 

(8,044

)

 

(9,150

)

Proceeds from sale of assets

 

178

 

 

14

 

Purchases of short-term investments

 

(268,451

)

 

(203,342

)

Proceeds from maturities of short-term investments

 

293,962

 

 

203,161

 

Cash provided by (used for) investing activities

 

17,645

 

 

(9,317

)

 

 

 

Financing Activities

 

 

Remittance of taxes withheld from employees related to

 

 

share-based compensation

 

(1,297

)

 

(900

)

Repurchase of common stock

 

-

 

 

(1,996

)

Dividends paid

 

(104,097

)

 

(12,399

Cash used for financing activities

 

(105,394

)

 

(15,295

)

 

 

 

Decrease in cash and cash equivalents

 

(5,770

)

 

(15,679

)

 

 

 

Cash and cash equivalents at beginning of period

 

35,420

 

 

38,492

 

 

 

 

Cash and cash equivalents at end of period

$

29,650

 

$

22,813

 

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

Nine Months Ended

 

September 26,

2020

September 28,

2019

September 26,

2020

September 28,

2019

 

 

 

 

Net income

$

24,753

 

$

4,817

 

$

58,685

 

$

24,083

 

 

 

 

 

 

Income tax expense

 

8,141

 

 

1,556

 

 

19,719

 

 

8,101

 

Depreciation and amortization expense

 

7,215

 

 

7,486

 

 

21,644

 

 

22,458

 

Interest income

 

(112

)

 

(611

)

 

(1,072

)

 

(1,973

)

Interest expense

 

114

 

 

90

 

 

166

 

 

141

 

EBITDA

$

40,111

 

$

13,338

 

$

99,142

 

$

52,810

 

 

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