Business Wire | Jul 29, 2020 05:05PM EDT

Sturm, Ruger & Company, Inc. Reports Second Quarter Diluted Earnings of $1.05 Per Share, Declares Special Dividend of $5.00 Per Share and Declares Quarterly Dividend of 42 Per Share

Jul. 29, 2020

SOUTHPORT, Conn.--(BUSINESS WIRE)--Jul. 29, 2020--Sturm, Ruger & Company, Inc. (NYSE-RGR) announced today that for the second quarter of 2020 the Company reported net sales of $130.3 million and diluted earnings of $1.05 per share, compared with net sales of $96.3 million and diluted earnings of 35 per share in the second quarter of 2019.

For the six months ended June 27, 2020, net sales were $253.9 million and diluted earnings were $1.91 per share. For the corresponding period in 2019, net sales were $210.4 million and diluted earnings were $1.09 per share.

The Company also announced today that its Board of Directors declared two dividends:

* a quarterly dividend of 42 per share based on the results of the second quarter, and * a special dividend of $5.00 per share.

Both dividends are for shareholders of record as of August 14, 2020, and are payable on August 28, 2020.

Chief Executive Officer Christopher J. Killoy commented on the $5.00 per share special dividend, "Given our strong operational and financial performance, including our consistently positive cashflow, and our current cash balance of $227 million, we are returning some of our cash to shareholders. Our remaining cash holdings will allow us to continue to invest in capital expenditures in support of our commitment to new product development and innovation, maintain our quarterly dividend, and pursue opportunities that would further generate shareholder value."

Mr. Killoy commented on the financial results for the second quarter of 2020, "Consumer demand, which began to surge in the latter stages on the first quarter, continued to intensify in the second quarter. This increased demand appears to be driven, in part, by concerns about personal protection and home defense stemming from the continuing COVID-19 pandemic; protests, demonstrations, and civil unrest in many cities throughout the United States; and the call, by some, for the reduction in funding and authority of various law enforcement organizations. As a result of this oversized demand, inventories were significantly reduced at all levels in the channel during the second quarter."

Mr. Killoy commented on the COVID-19 pandemic and its impact on the Company, "The COVID-19 pandemic continues to cast uncertainty throughout the global economy. Nevertheless, any adverse financial impact on our business resulting from COVID-19 was negligible in the second quarter of 2020. Since its onset in March, we have remained proactive in maintaining the health and safety of our employees during this pandemic and mitigating its impact on our business. For example, we suspended hiring from March until June, when we were confident that we could resume onboarding in a safe and responsible manner for all involved. The future impact of COVID-19 remains unknown. We have been fortunate to have only limited restrictions on our operations thus far. Our financial strength, evidenced by our debt-free balance sheet, provides financial security and flexibility as we continue to manage through this crisis."

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

* The estimated unit sell-through of the Company's products from the independent distributors to retailers increased 47% in the first half 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 65%. These substantial increases are attributable to increased consumer demand for firearms in the first half of 2020.

* 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 $48 million or 21% of firearm sales in the first half of 2020. New product sales include only major new products that were introduced in the past two years.

* During the second quarter of 2020, the Company's finished goods inventory decreased 20,800 units and distributor inventories of the Company's products decreased 106,500 units. In the aggregate, total Company and distributor inventories decreased by 57% during the quarter.

* Cash provided by operations during the first half of 2020 was $78.1 million. At June 27, 2020, our cash and short-term investments totaled $226.6 million. Our current ratio is 3.9 to 1 and we have no debt.

* In the first half of 2020, capital expenditures totaled $5.9 million. We expect our 2020 capital expenditures to total approximately $20 million, most of which relate to new product introductions.

* In the first half of 2020, the Company returned $9.3 million to its shareholders through the payment of dividends.

* At June 27, 2020, stockholders' equity was $311.5 million, which equates to a book value of $17.80 per share, of which $12.95 per share was cash and short-term investments.

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

Tomorrow, July 30, 2020, 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/corporateor by dialing 855-871-7398, participant code 3253225.

The Quarterly Report on Form 10-Q for the second 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 second 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 700 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(r)," 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)

June 27, 2020 December 31, 2019





Assets



Current Assets

Cash $ 17,701 $ 35,420

Short-term investments 208,882 129,488

Trade receivables, net 53,653 52,640



Gross inventories 62,580 79,011

Less LIFO reserve (47,489 ) (47,137 )

Less excess and obsolescence reserve (3,025 ) (3,573 )

Net inventories 12,066 28,301



Prepaid expenses and other current assets 2,637 3,467

Total Current Assets 294,939 249,316



Property, plant and equipment 376,648 372,482

Less allowances for depreciation (311,103 ) (298,568 )

Net property, plant and equipment 65,545 73,914



Deferred income taxes 2,260 5,393

Other assets 27,112 20,338

Total Assets $ 389,856 $ 348,961



STURM, RUGER & COMPANY, INC.



CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Continued)

(Dollars in thousands, except per share data)

June 27, 2020 December 31, 2019





Liabilities and Stockholders' Equity



Current Liabilities

Trade accounts payable and accrued expenses $ 40,110 $ 29,771

Contract liabilities with customers 3,646 9,623

Product liability 733 735

Employee compensation and benefits 20,405 14,273

Workers' compensation 5,730 5,619

Income taxes payable 5,689 1,223

Total Current Liabilities 76,313 61,244



Product liability accrual 43 83

Lease liability 1,953 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 40,085 38,683

Retained earnings 392,859 368,205

Less: Treasury stock - at cost

2020 - 6,709,898 shares

2019 - 6,709,898 shares (145,590 ) (145,590 )

Total Stockholders' Equity 311,547 285,458

Total Liabilities and Stockholders' Equity $ 389,856 $ 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 Six Months Ended

June 27, June 29, June 27, June 29, 2020 2019 2020 2019



Net firearms sales $ 129,413 $ 94,971 $ 252,178 $ 207,903

Net castings sales 851 1,358 1,725 2,464

Total net sales 130,264 96,329 253,903 210,367



Cost of products sold 90,179 74,027 177,809 155,467



Gross profit 40,085 22,302 76,094 54,900



Operating expenses:

Selling 7,286 7,265 14,923 15,396

General and administrative 8,773 7,572 16,982 15,586

Total operating expenses 16,059 14,837 31,905 30,982



Operating income 24,026 7,465 44,189 23,918



Other income:

Interest income 394 682 960 1,361

Interest expense (27 ) (25 ) (52 ) (51 )

Other income, net 306 288 413 582

Total other income, net 673 945 1,321 1,892



Income before income taxes 24,699 8,410 45,510 25,810



Income taxes 6,105 2,177 11,578 6,544



Net income and comprehensive $ 18,594 $ 6,233 $ 33,932 $ 19,266 income



Basic earnings per share $ 1.06 $ 0.36 $ 1.94 $ 1.10



Diluted earnings per share $ 1.05 $ 0.35 $ 1.91 $ 1.09



Cash dividends per share $ 0.35 $ 0.29 $ 0.53 $ 0.57



STURM, RUGER & COMPANY, INC.



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Dollars in thousands)

Six Months Ended

June 27, June 29, 2020 2019



Operating Activities

Net income $ 33,932 $ 19,266

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

Depreciation and amortization 14,429 14,972

Stock-based compensation 2,732 3,174

(Gain) loss on sale of assets (48 ) 53

Deferred income taxes 3,133 1,125

Changes in operating assets and liabilities:

Trade receivables (1,013 ) 3,537

Inventories 16,235 (10,047 )

Trade accounts payable and accrued expenses 10,465 (10,804 )

Contract liability to customers (5,977 ) (6,202 )

Employee compensation and benefits 6,123 (8,119 )

Product liability (42 ) 117

Prepaid expenses, other assets and other liabilities (6,327 ) (10,157 )

Income taxes payable 4,466 (3,340 )

Cash provided by (used for) operating activities 78,108 (6,425 )



Investing Activities

Property, plant and equipment additions (5,921 ) (3,890 )

Proceeds from sale of assets 54 14

Purchases of short-term investments (233,466 ) (118,972 )

Proceeds from maturities of short-term investments 154,072 133,736

Cash (used for) provided by investing activities (85,261 ) 10,888



Financing Activities

Remittance of taxes withheld from employees related (1,297 ) (779 )to share-based compensation

Dividends paid (9,269 ) (9,956 )

Cash used for financing activities (10,566 ) (10,735 )



Decrease in cash and cash equivalents (17,719 ) (6,272 )



Cash and cash equivalents at beginning of period 35,420 38,492



Cash and cash equivalents at end of period $ 17,701 $ 32,220



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 inthousands)

Three Months Ended Six Months Ended

June 27, June 29, June 27, June 29, 2020 2019 2019 2019



Net income $ 18,594 $ 6,233 $ 33,932 $ 19,266

Income tax expense 6,105 2,177 11,578 6,544

Depreciation and amortization 7,215 7,486 14,429 14,972expense

Interest income (394 ) (682 ) (960 ) (1,361 )

Interest expense 27 25 52 51

EBITDA $ 31,547 $ 15,239 $ 59,031 $ 39,472



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CONTACT: Sturm, Ruger & Company, Inc. One Lacey Place Southport, CT 06890 www.ruger.com 203-259-7843