Business Wire | Oct 28, 2020 05:05PM EDT

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

Oct. 28, 2020

SOUTHPORT, Conn.--(BUSINESS WIRE)--Oct. 28, 2020--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/corporateor 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(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)

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 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 $ 27,561 $ 29,771 expenses

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 INCOME AND COMPREHENSIVE INCOME(UNAUDITED)

(Dollars in thousands, except per share data)

Three Months Ended Nine Months Ended

September September September September 26, 28, 26, 28, 2020 2019 2020 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 $ 24,753 $ 4,817 $ 58,685 $ 24,083 income



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

STURM, RUGER & COMPANY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Dollars in thousands)

Nine Months Ended

September September 26, 28, 2020 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 September September September 26, 28, 26, 28, 2020 2019 2020 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 7,215 7,486 21,644 22,458 expense

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