MRO Magazine

Sturm, Ruger & Company, Inc. Reports Second Quarter Fully Diluted Earnings of 91¢ Per Share and Declares Dividend of 36¢ Per Share


July 28, 2015
By Business Wire News

SOUTHPORT, Conn.

Sturm, Ruger & Company, Inc. (NYSE:RGR) announced today that for the second quarter of 2015 the Company reported net sales of $140.9 million and fully diluted earnings of 91¢ per share, compared with net sales of $153.7 million and fully diluted earnings of $1.12 per share in the second quarter of 2014.

For the six months ended June 27, 2015, net sales were $277.8 million and fully diluted earnings were $1.71 per share. For the corresponding period in 2014, net sales were $323.5 million and fully diluted earnings were $2.34 per share.

The Company also announced today that its Board of Directors declared a dividend of 36¢ per share for the second quarter for stockholders of record as of August 14, 2015, payable on August 28, 2015. This dividend varies every quarter because the Company pays a percent of earnings rather than a fixed amount per share. This dividend is approximately 40% of net income.

Chief Executive Officer Michael O. Fifer made the following observations related to the Company’s 2015 second quarter performance:

  • In the second quarter of 2015, net sales increased 3% and earnings increased 14% from the first quarter of 2015.
  • New products, including the AR-556 modern sporting rifle and the LC9s pistol, represented $47.7 million or 17% of firearm sales in the first half of 2015. New product sales include only major new products that were introduced in the past two years. The recently introduced Ruger Precision Rifle did not begin to ship until July, and therefore did not impact the second quarter’s results.
  • In the second quarter of 2015, the estimated sell-through of the Company’s products from the independent distributors to retailers decreased 22% from the first quarter of 2015. The National Instant Criminal Background Check System background checks (as adjusted by the National Shooting Sports Foundation) decreased 21% during the same period.
  • Inventory of the Company’s products at the independent distributors increased by 63,500 units during the second quarter of 2015 and the Company’s finished goods inventory increased by 44,100 units during the same period.
  • Cash generated from operations during the six months ended June 27, 2015 was $80.9 million. At June 27, 2015, our cash totaled $61.1 million. Our current ratio is 2.2 to 1 and we have no debt.
  • In the first half of 2015, capital expenditures totaled $16.3 million, much of it related to tooling and equipment for new products. We expect our 2015 capital expenditures to total approximately $30 million.
  • In the first half of 2015, the Company returned $12.0 million to its shareholders through:
    • the payment of $9.2 million of dividends, and
    • the repurchase of 82,100 shares of our common stock in the open market at an average price of $34.57 per share, for a total of $2.8 million.
  • At June 27, 2015, stockholders’ equity was $208.0 million, which equates to a book value of $11.12 per share, of which $3.27 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, July 29, 2015, 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 www.ruger.com/corporateor by dialing 866-318-8615, participant code 30947759.

The Quarterly Report on Form 10-Q is available on the SEC website at www.sec.gov and the Ruger website at www.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

Sturm, Ruger & Co., Inc. is one of the nation’s leading manufacturers of rugged, reliable firearms for the commercial sporting market. The only full-line manufacturer of American-made firearms, Ruger offers consumers over 400 variations of more than 30 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 thousands)

         
    June 27, 2015   December 31,2014
   
 
Assets
 
Current Assets
Cash $ 61,124 $ 8,901
Trade receivables, net 54,113 49,735
 
Gross inventories 77,923 89,017
Less LIFO reserve (41,614 ) (40,578 )
Less excess and obsolescence reserve     (2,120 )     (3,750 )
Net inventories     34,189       44,689  
 
Deferred income taxes 8,870 7,246
Prepaid expenses and other current assets     2,802       7,603  
Total Current Assets 161,098 118,174
 
Property, plant and equipment 303,919 288,236
Less allowances for depreciation     (194,487 )     (177,575 )
Net property, plant and equipment     109,432       110,661  
 
 
Other assets     21,137       25,547  
Total Assets   $ 291,667     $ 254,382  
 
 

STURM, RUGER & COMPANY, INC.

 

CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)

(Dollars in thousands, except share data)

         
    June 27, 2015   December 31, 2014
   
 
Liabilities and Stockholders’ Equity
 
Current Liabilities
Trade accounts payable and accrued expenses $ 41,881 $ 36,150
Product liability 344 641
Employee compensation and benefits 25,413 18,302
Workers’ compensation 5,327 5,133
Income taxes payable     1,827       156  
Total Current Liabilities 74,792 60,382
 
Product liability 100 204
Deferred income taxes 8,782 8,334
 
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
2015 – 23,763,877 issued,
18,701,530 outstanding
2014 – 23,717,321 issued,
18,737,074 outstanding 23,764 23,717
Additional paid-in capital 27,125 25,472
Retained earnings 221,831 198,159
Less: Treasury stock – at cost
2015 – 5,062,347 shares
2014 – 4,980,247 shares     (64,727 )     (61,886 )
Total Stockholders’ Equity     207,993       185,462  
Total Liabilities and Stockholders’ Equity   $ 291,667     $ 254,382  
 
 

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, 2015   June 28, 2014   June 27, 2015   June 28, 2014
     
Net firearms sales $ 139,224 $   153,016 $   274,804 $   322,179
Net castings sales     1,648         641           3,023           1,363    
Total net sales 140,872 153,657 277,827 323,542
 
Cost of products sold 92,364 103,304 187,921 212,066
                 
Gross profit     48,508         50,353           89,906           111,476    
 
Operating expenses:
Selling 14,858 10,062 25,085 24,483
General and administrative     6,957         7,244           14,334           15,976    
Total operating expenses     21,815         17,306           39,419           40,459    
 
Operating income     26,693         33,047           50,487           71,017    
 
Other income:
Interest expense, net (37 ) (36

)

 

(77

)

 

(73

)

 

Other income, net     617         130           1,086           495    
Total other income, net     580         94           1,009           422    
 
Income before income taxes 27,273 33,141 51,496 71,439
 
Income taxes     9,713         10,855           18,433           24,834    
 
Net income and comprehensive income   $ 17,560     $   22,286       $   33,063       $   46,605    
 
Basic earnings per share   $ 0.94     $   1.15       $   1.77       $   2.40    
 
Fully diluted earnings per share   $ 0.91     $   1.12       $   1.71       $   2.34    
 
Cash dividends per share   $ 0.32     $   0.49       $   0.49       $   1.03    
 
 

STURM, RUGER & COMPANY, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Dollars in thousands)

     
    Six Months Ended
  June 27,

2015

  June 28,

2014

 
Operating Activities
Net income $ 33,063 $ 46,605
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization 17,841 17,880
Slow moving inventory valuation adjustment (1,011 ) 960
Stock-based compensation 2,298 2,758
Gain on sale of assets (157 ) (7 )
Deferred income taxes (1,176 ) 623
Impairment of assets 12

Changes in operating assets and liabilities:
Trade receivables (4,378 ) 15,680
Inventories 11,511 (18,078 )
Trade accounts payable and accrued expenses 5,925 (10,181 )
Employee compensation and benefits 6,881 (12,751 )
Product liability (401 ) (35 )
Prepaid expenses, other assets and other liabilities 8,785 (7,639 )
Income taxes payable     1,671       (239 )
Cash provided by operating activities     80,864       35,576  
 
Investing Activities
Property, plant and equipment additions (16,259 ) (22,817 )
Proceeds from sale of assets     218       275  
Cash used for investing activities     (16,041 )     (22,542 )
 
Financing Activities
Tax benefit from exercise of stock options and vesting of RSU’s 305 1,620

Remittance of taxes withheld from employees related to share-based compensation

(1,000

)

(2,317

)

Proceeds from exercise of stock options 97 23
Repurchase of common stock (2,841 )

Dividends paid     (9,161 )     (19,989 )
Cash used for financing activities     (12,600 )     (20,663 )
 
Increase (decrease) in cash and cash equivalents 52,223 (7,629 )
 
Cash and cash equivalents at beginning of period 8,901 55,064
         
Cash and cash equivalents at end of period   $ 61,124     $ 47,435  
 

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 EBITDA, a non-GAAP financial measure 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 this non-GAAP financial measure 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 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 27, 2015   June 28, 2014   June 27, 2015   June 28, 2014
   
Net income $ 17,560 $ 22,286 $ 33,063 $ 46,605
 
Income tax expense 9,713 10,855 18,433 24,834
Depreciation and amortization expense 8,884 8,940 17,841 17,880
Interest expense, net     37     36     77     73
EBITDA   $ 36,194   $ 42,117   $ 69,414   $ 89,392

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