Sturm, Ruger & Company, Inc. Reports Third Quarter Diluted Earnings of $1.03 Per Share and Declares Dividend of 41¢ Per Share

SOUTHPORT, Conn.--(BUSINESS WIRE)--Sturm, Ruger & Company, Inc. (NYSE-RGR) announced today that for the third quarter of 2016 the Company reported net sales of $161.4 million and diluted earnings of $1.03 per share, compared with net sales of $120.9 million and diluted earnings of 62¢ per share in the third quarter of 2015.

For the nine months ended October 1, 2016, net sales were $502.5 million and diluted earnings were $3.48 per share. For the corresponding period in 2015, net sales were $398.7 million and diluted earnings were $2.33 per share.

The Company also announced today that its Board of Directors declared a dividend of 41¢ per share for the third quarter for stockholders of record as of November 18, 2016, payable on November 25, 2016. 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 Michael O. Fifer made the following observations related to the Company’s 2016 third quarter performance:

• In the third quarter of 2016, net sales increased 34% and earnings per share increased 66% from the third quarter of 2015.
• EBITDA was $39 million, or 24% of sales, in the third quarter of 2016, an increase of 44% from $27 million, or 22% of sales, in the comparable prior year period.
• The following new products were launched in September:

• the Mark IV pistols, similar to the classic Mark III designs, but with a greatly simplified one-button takedown,
• the LCP II pistol, a major re-design of the popular LCP pistol that was introduced in 2008, and
• the American Compact pistols, an expansion of the American pistol family that was launched in 2015.

• New product sales, which include those launched in the third quarter as well as the Ruger Precision Rifle, the AR-556 modern sporting rifle, and the LC9s pistol, were $58 million or 36% of firearm sales in the third quarter of 2016. New product sales include only major new products that were introduced in the past two years. The new product sales percentage is expected to decrease next quarter as sales of the AR-556 and the LC9s will no longer be included among the new products.
• The estimated unit sell-through of the Company’s products from the independent distributors to retailers increased 21% in the third quarter of 2016 from the comparable prior-year period. For the same period, the National Instant Criminal Background Check System background checks (as adjusted by the National Shooting Sports Foundation) increased 16%.
• The increase in estimated sell-through of the Company’s products from the independent distributors to retailers is attributable to:

• stronger-than-normal industry demand during the summer, likely bolstered by the political campaigns for the November elections,
• strong demand for certain new products,
• greater availability of rimfire ammunition which spurred demand for our 10/22 rifle and other rimfire firearms, and
• increased production of several products in strong demand.

• Cash generated from operations during the first nine months of 2016 was $85 million. At October 1, 2016, our cash totaled $101 million. Our current ratio is 2.7 to 1 and we have no debt.
• In the first nine months of 2016, capital expenditures totaled $23 million, much of it related to tooling and equipment for new products. We expect our 2016 capital expenditures to total approximately $30 million.
• In the first nine months of 2016, the Company returned $25 million to its shareholders through the payment of dividends.
• At October 1, 2016, stockholders’ equity was $266 million, which equates to a book value of $14.02 per share, of which $5.34 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, November 2, 2016, 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 www.ruger.com/corporate or by dialing 855-871-7398, participant code 1173648.

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. As a 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)
	October 1, 2016			December 31, 2015
Assets
Current Assets
Cash	$	101,363		$	69,225
Trade receivables, net		70,323			71,721
Gross inventories		89,858			81,278
Less LIFO reserve		(43,836	)		(42,061	)
Less excess and obsolescence reserve		(2,448	)		(2,118	)
Net inventories		43,574			37,099
Deferred income taxes		9,085			8,219
Prepaid expenses and other current assets		6,773			3,008
Total Current Assets		231,118			189,272
Property, plant and equipment		320,465			308,597
Less allowances for depreciation		(218,401	)		(204,777	)
Net property, plant and equipment		102,064			103,820
Other assets		27,670			22,791
Total Assets	$	360,852		$	315,883

STURM, RUGER & COMPANY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(Dollars in thousands, except per share data)
	October 1, 2016			December 31, 2015
Liabilities and Stockholders’ Equity
Current Liabilities
Trade accounts payable and accrued expenses	$	53,432		$	42,991
Product liability		1,455			642
Employee compensation and benefits		25,897			28,298
Workers’ compensation		4,421			5,100
Income taxes payable		--			4,962
Total Current Liabilities		85,205			81,993
Product liability		95			102
Deferred income taxes		9,436			6,050
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
2016 – 24,034,201 issued,
18,971,854 outstanding
2015 – 23,775,766 issued,
18,713,419 outstanding		24,034			23,776
Additional paid-in capital		26,371			29,591
Retained earnings		280,438			239,098
Less: Treasury stock – at cost
2016 – 5,062,347 shares
2015 – 5,062,347 shares		(64,727	)		(64,727	)
Total Stockholders’ Equity		266,116			227,738
Total Liabilities and Stockholders’ Equity	$	360,852		$	315,883

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
	October 1, 2016			September 26, 2015			October 1, 2016			September 26, 2015
Net firearms sales	$	160,058		$	119,281		$	497,889		$	394,084
Net castings sales		1,369			1,590			4,591			4,614
Total net sales		161,427			120,871			502,480			398,698
Cost of products sold		111,176			86,860			336,422			274,781
Gross profit		50,251			34,011			166,058			123,917
Operating expenses:
Selling		13,378			9,170			41,261			34,255
General and administrative		6,805			6,880			22,045			21,214
Total operating expenses		20,183			16,050			63,306			55,469
Operating income		30,068			17,961			102,752			68,448
Other income:
Interest expense, net		(32	)		(36	)		(102	)		(113	)
Other income, net		418			247			917			1,333
Total other income, net		386			211			815			1,220
Income before income taxes		30,454			18,172			103,567			69,668
Income taxes		10,604			6,209			36,925			24,642
Net income and comprehensive income	$	19,850		$	11,963		$	66,642		$	45,026
Basic earnings per share	$	1.05		$	0.64		$	3.51		$	2.41
Diluted earnings per share	$	1.03		$	0.62		$	3.48		$	2.33
Cash dividends per share	$	0.49		$	0.36		$	1.32		$	0.85

STURM, RUGER & COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
	Nine Months Ended
	October 1, 2016			September 26, 2015
Operating Activities
Net income	$	66,642		$	45,026
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization		25,257			26,693
Slow moving inventory valuation adjustment		630			(1,126	)
Stock-based compensation		2,213			3,442
Loss (gain) on sale of assets		50			(157	)
Deferred income taxes		2,520			(78	)
Impairment of assets		6			32
Changes in operating assets and liabilities:
Trade receivables		1,398			(3,247	)
Inventories		(7,105	)		5,054
Trade accounts payable and accrued expenses		9,762			956
Employee compensation and benefits		(2,667	)		8,602
Product liability		806			(101	)
Prepaid expenses, other assets and other liabilities		(5,340	)		5,652
Income taxes payable and prepaid income taxes		(8,781	)		4,201
Cash provided by operating activities		85,391			94,949
Investing Activities
Property, plant and equipment additions		(23,049	)		(24,488	)
Proceeds from sale of assets		7			222
Cash used for investing activities		(23,042	)		(24,266	)
Financing Activities
Tax benefit from exercise of stock options and vesting of RSU’s		8,826			305
Remittance of taxes withheld from employees related to
share-based compensation		(14,001	)		(1,000	)
Proceeds from exercise of stock options		-			97
Repurchase of common stock		-			(2,841	)
Dividends paid		(25,036	)		(15,893	)
Cash used for financing activities		(30,211	)		(19,332	)
Increase in cash and cash equivalents		32,138			51,351
Cash and cash equivalents at beginning of period		69,225			8,901
Cash and cash equivalents at end of period	$	101,363		$	60,252

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
	October 1, 2016		September 26, 2015		October 1, 2016		September 26, 2015
Net income	$	19,850	$	11,963	$	66,642	$	45,026
Income tax expense		10,604		6,209		36,925		24,642
Depreciation and amortization
expense		8,567		8,852		25,257		26,693
Interest expense, net		32		36		102		113
EBITDA	$	39,053	$	27,060	$	128,926	$	96,474