Sturm, Ruger & Company, Inc. Reports 2018 Diluted Earnings of $2.88 Per Share and Declares Dividend of 28¢ Per Share

SOUTHPORT, Conn.–(BUSINESS WIRE)–Sturm, Ruger & Company, Inc. (NYSE-RGR) announced today that for 2018
the Company reported net sales of $495.6 million and diluted earnings of
$2.88 per share, compared with net sales of $522.3 million and diluted
earnings of $2.91 per share in 2017.

For the fourth quarter of 2018, net sales were $121.1 million and
diluted earnings were $0.69 per share. For the corresponding period in
2017, net sales were $118.2 million and diluted earnings were $0.59 per
share.

The Company also announced today that its Board of Directors declared a
dividend of 28¢ per share for the fourth quarter, for shareholders of
record as of March 15, 2019, payable on March 29, 2019. 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 made the following
observations related to the Company’s 2018 results:

  • In 2018, net sales decreased 5% from 2017, reflecting an apparent
    reduction in overall industry demand as evidenced by the National
    Instant Criminal Background Check System (“NICS”) background checks
    (as adjusted by the National Shooting Sports Foundation), which
    decreased 6% in the same period.

    The estimated sell-through
    of the Company’s products from the independent distributors to
    retailers remained consistent with the prior year due in part to
    continuing demand for some of the Company’s products, particularly
    those that were introduced in December 2017.

  • 2018 earnings per share of $2.88, which were negatively impacted by
    the reduction in sales, benefited by the following:

    • The reduced effective tax rate in 2018, resulting from the Tax
      Cuts and Jobs Act of 2017, increased diluted earnings per share by
      27¢.
    • The repurchase of 1.3 million shares of common stock in 2017
      increased diluted earnings per share by 20¢.
  • The comparison of earnings per share for 2018 to 2017 was impacted by
    27¢ due to the change in the rates used to absorb overhead and direct
    labor expenses into inventory in each year:

    • In 2018, improved manufacturing efficiencies and favorable
      leveraging decreased the carrying cost of inventory $2.0 million
      and resulted in a corresponding increase to cost of products sold,
      which reduced 2018 earnings by 8¢.
    • In 2017, decreased manufacturing efficiencies increased the
      carrying cost of inventory $4.8 million and resulted in a
      corresponding decrease to cost of products sold, which increased
      2017 earnings by 19¢.
  • New products represented $145.6 million or 30% of firearms sales in
    2018, compared to $137.8 million or 27% of firearms sales in 2017. New
    product sales include only major new products that were introduced in
    the past two years. In 2018, new products included the Pistol Caliber
    Carbine, the Precision Rimfire Rifle, the Mark IV pistol, the LCP II
    pistol, the Security-9 pistol, and the EC9s pistol.
  • In 2018, the Company’s finished goods inventory decreased 23,000 units
    and distributor inventories of the Company’s products decreased
    22,000. In the aggregate, total Company and distributor inventories
    decreased by 10% in 2018.
  • Cash generated from operations during 2018 was $119.8 million. At
    December 31, 2018, our cash and short-term investments totaled $152.8
    million. Our current ratio is 3.3 to 1 and we have no debt.
  • In 2018, capital expenditures totaled $10.5 million. We expect our
    2019 capital expenditures to total approximately $25 million.
  • In 2018, the Company returned $19.2 million to its shareholders
    through the payment of dividends.
  • At December 31, 2018, stockholders’ equity was $264.2 million, which
    equates to a book value of $15.14 per share, of which $8.75 per share
    was cash and short-term investments.

Today, the Company filed its Annual Report on Form 10-K for 2018. The
financial statements included in this Annual Report on Form 10-K are
attached to this press release.

Tomorrow, February 21, 2019, Sturm, Ruger will host a webcast at 9:00
a.m. ET to discuss the 2018 operating results. Interested parties can
access the webcast at Ruger.com/corporate
or by dialing 855-871-7398, participant code 6481069.

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. As a
full-line manufacturer of American-made firearms, Ruger offers consumers
over 600 variations of more than 40 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.
 
Consolidated Balance Sheets

(Dollars in thousands, except per share data)

             
December 31,   2018     2017  
 
Assets
Current Assets
Cash and cash equivalents $ 38,492 $ 63,487
Short-term investments 114,326
Trade receivables, net 45,031 60,082
 
Gross inventories 80,288 87,592
Less LIFO reserve (46,341 ) (45,180 )
Less excess and obsolescence reserve     (2,527 )     (2,698 )
Net inventories     31,420       39,714  
 
Prepaid expenses and other current assets     2,920       3,501  
Total Current Assets 232,189 166,784
 
Property, Plant, and Equipment 358,756 365,013
Less allowances for depreciation     (276,045 )     (261,218 )
Net property, plant and equipment     82,711       103,795  
 
Deferred income taxes 2,969
Other assets     17,663       13,739  
Total Assets   $ 335,532     $ 284,318  
 
   
STURM, RUGER & COMPANY, INC.
 
Consolidated Balance Sheets (Continued)

(Dollars in thousands, except per share data)

             
December 31,   2018     2017  
 
Liabilities and Stockholders’ Equity
 
Current Liabilities
 
Trade accounts payable and accrued expenses $ 33,021 $ 32,422
Contract liabilities with customers 7,477
Product liability 1,073 729
Employee compensation and benefits 20,729 14,315
Workers’ compensation 5,551 5,211
Income taxes payable     3,340        
Total Current Liabilities 71,191 52,677
 
Product liability 99 90
Deferred income taxes 1,402
 
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
2018 – 24,123,418 issued,
17,458,020 outstanding
2017 – 24,092,488 issued,
17,427,090 outstanding 24,123 24,092
Additional paid-in capital 33,291 28,329
Retained earnings 350,423 321,323
Less: Treasury stock – at cost
2018 – 6,665,398 shares
2017 – 6,665,398 shares     (143,595 )     (143,595 )
Total Stockholders’ Equity     264,242       230,149  
Total Liabilities and Stockholders’ Equity   $ 335,532     $ 284,318  
 
     
STURM, RUGER & COMPANY, INC.
 
Consolidated Statements of Income and Comprehensive Income

(In thousands, except per share data)

                   
Year ended December 31,   2018     2017     2016  
 
Net firearms sales $ 490,607 $ 517,701 $ 658,433
Net castings sales     5,028       4,555       5,895  
Total net sales 495,635 522,256 664,328
 
Cost of products sold 361,277 368,248 444,774
                   
Gross profit     134,358       154,008       219,554  
 
Operating Expenses:
Selling 35,111 49,232 56,146
General and administrative 32,248 28,396 29,004
Other operating (expense) income, net     (10 )     31       (5 )
Total operating expenses 67,349 77,659 85,145
                   
Operating income     67,009       76,349       134,409  
 
Other income:
Royalty income 804 506 1,142
Interest income 211 27 14
Interest expense (330 ) (152 ) (186 )
Other income, net     1,020       916       542  
Total other income, net 1,705 1,297 1,512
                   
Income before income taxes     68,714       77,646       135,921  
 
Income taxes 17,781 25,504 48,449
                   
Net income and comprehensive income $ 50,933 $ 52,142 $ 87,472
                   
 
Basic Earnings Per Share   $ 2.92     $ 2.94     $ 4.62  
 
Diluted Earnings Per Share   $ 2.88     $ 2.91     $ 4.59  
 
Cash Dividends Per Share   $ 1.10     $ 1.36     $ 1.73  
 
     
STURM, RUGER & COMPANY, INC.
 
Consolidated Statements of Cash Flows

(In thousands)

                   
Year ended December 31,   2018     2017     2016  
 
Operating Activities
Net income $ 50,933 $ 52,142 $ 87,472
Adjustments to reconcile net income to cash

provided by operating activities:

Depreciation and amortization 31,972 34,264 35,355
Stock-based compensation 5,809 3,659 3,054
Excess and obsolescence inventory reserve (185 ) 358 522
Loss (gain) on sale of assets (10 ) 31 59
Deferred income taxes (4,371 ) 1,736 1,836
Changes in operating assets and liabilities:
Trade receivables 15,051 9,360 2,279
Inventories 8,479 14,463 (17,958 )
Trade accounts payable and accrued expenses 939 (16,060 ) 5,602
Contract liability to customers 5,250
Employee compensation and benefits 6,009 (11,466 ) (3,186 )
Product liability 353 (1,000 ) 1,075
Prepaid expenses, other assets and other liabilities

(3,757

)

13,704

(6,348

)

Income taxes payable     3,340             (4,962 )
Cash provided by operating activities 119,812 101,191 104,800
 
Investing Activities
Property, plant, and equipment additions (10,541 ) (33,596 ) (35,215 )
Purchases of short-term investments (114,259 )
Net proceeds from sale of assets     10       3       325  
Cash used for investing activities (124,790 ) (33,593 ) (34,890 )
 
Financing Activities
Dividends paid (19,201 ) (23,905 ) (32,815 )
Tax benefit from share-based compensation 8,825
Repurchase of common stock (64,850 ) (14,018 )
Payment of employee withholding tax related to share-based
compensation
   

(816

)

   

(2,482

)

   

(14,001

)

Cash used for financing activities     (20,017 )     (91,237 )     (52,009 )
 
(Decrease) increase in cash and cash equivalents (24,995 ) (23,639 ) 17,901
Cash and cash equivalents at beginning of year     63,487       87,126       69,225  
Cash and cash equivalents at end of year   $ 38,492     $ 63,487     $ 87,126  
 

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 the Company’s financial
performance.

   
Non-GAAP Reconciliation – EBITDA
 

EBITDA

(Unaudited, dollars in thousands)

             
Year ended December 31,   2018     2017  
 
Net income $ 50,933 $ 52,142
 
Income tax expense 17,781 25,504
Depreciation and amortization expense 31,972 34,264
Interest expense 330 152
Interest income     (211 )     (27 )
EBITDA   $ 100,805     $ 112,035  
 

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.

Contacts

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