Sturm, Ruger & Company, Inc. Reports First Quarter Diluted Earnings of $1.70 Per Share and Declares Quarterly Dividend of 68¢ Per Share

SOUTHPORT, Conn.--(BUSINESS WIRE)--Sturm, Ruger & Company, Inc. (NYSE: RGR) announced today that for the first quarter of 2022 the Company reported net sales of $166.6 million and diluted earnings of $1.70 per share, compared with net sales of $184.4 million and diluted earnings of $2.16 per share in the first quarter of 2021.

The Company also announced today that its Board of Directors declared a dividend of 68¢ per share for the first quarter for stockholders of record as of May 16, 2022, payable on May 31, 2022. 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 first quarter of 2022, “During the quarter, consumer demand for firearms subsided from the unprecedented levels of the surge that began early in 2020, resulting in the 10% reduction in our sales. Consequently, we shifted our production mix to allow for a healthy replenishment of Ruger firearms in our warehouses and in the distribution channel, as inventories of many of our product families were depleted in 2020. We prioritize production of our product families in strong demand, often right down to the individual model, in an effort to optimize the inventory mix at each level of the distribution chain. Our operations and logistics folks have done a great job navigating the challenges brought about by tight labor markets, transportation issues, and supply chain delays, which allowed for greater flexibility in our production mix and mitigated the impact of these challenges.”

Mr. Killoy reaffirmed the Company’s commitment to new product innovation, “Our new product development teams continue to design and create the firearms of the future, many of which are recognized by the industry. Most recently, the Ruger Custom Shop 10/22 Left-Handed Competition Rifle was awarded the prestigious Golden Bullseye Award as the American Rifleman Rifle of the Year. We are excited to see the ongoing progress of our Marlin product line. We continue to increase production volumes and look forward to re-introducing additional Ruger-made Marlin lever-action rifles throughout this year. We are just scratching the surface of the value that Marlin products and the Marlin brand will bring to Ruger. We know that Ruger and Marlin fans alike are eagerly awaiting additional offerings and we look forward to more new product launches in 2022.”

Mr. Killoy made the following observations related to the Company’s first quarter 2022 performance:

• The estimated unit sell-through of the Company’s products from the independent distributors to retailers decreased 21% in the first quarter of 2022 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) decreased 23%. These decreases are attributable to decreased consumer demand for firearms from the unprecedented levels of the surge that began in 2020 and remained for most of 2021.

• Sales of new products, including the PC Charger, the MAX-9 pistol, the LCP MAX pistol, and the Marlin 1895 lever-action rifle, represented $21.4 million or 13% of firearm sales in the first quarter of 2022. New product sales include only major new products that were introduced in the past two years. Several popular firearms that were considered new products in 2021, including the Wrangler revolver, the Ruger-5.7 pistol, and the LCP II in .22 LR pistol, have now been in production for over two years and are no longer included in new product sales for the first quarter of 2022.

• Our profitability declined in the first quarter of 2022 from the first quarter of 2021 as our gross margin decreased from 39.4% to 34.9% and our operating profit margin decreased from 28.2% to 23.2%. In addition to unfavorable deleveraging of fixed costs resulting from decreased production and sales, inflationary cost increases in materials, commodities, services, energy, fuel and transportation, partially offset by increased pricing, resulted in the lower margins.

• During the first quarter of 2022, the Company’s finished goods inventory and distributor inventories of the Company’s products increased 29,800 units and 80,400 units, respectively.

• Cash provided by operations during the first quarter of 2022 was $18.8 million. At April 2, 2022, our cash and short-term investments totaled $211.6 million. Our current ratio is 5.1 to 1 and we have no debt.

• In the first quarter of 2022, capital expenditures totaled $10.9 million. We expect our 2022 capital expenditures to total approximately $25 million, most of which relate to new product introductions.

• In the first quarter of 2022, the Company returned $15.2 million to its shareholders through the payment of dividends.

• At April 2, 2022, stockholders’ equity was $378.0 million, which equates to a book value of $21.43 per share, of which $12.00 per share was cash and short-term investments.

Today, the Company filed its Quarterly Report on Form 10-Q for the first quarter of 2022. The financial statements included in this Quarterly Report on Form 10-Q are attached to this press release.

Tomorrow, May 5, 2022, Sturm, Ruger will host a webcast at 9:00 a.m. ET to discuss the first quarter operating results. Interested parties can access the webcast at Ruger.com/corporate or by dialing 855-871-7398, participant code 1188423.

The Company will host a virtual Annual Meeting of Shareholders at 9 a.m. ET on Wednesday, June 1, 2022. The virtual meeting is open to shareholders as well as anyone interested in the Company. The login information is available at www.virtualshareholdermeeting.com/RGR2022.

The Quarterly Report on Form 10-Q for the first quarter of 2022 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 first quarter of 2022 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, across both the Ruger and Marlin brands. For more than 70 years, Ruger has been a model of corporate and community responsibility. Our motto, “Arms Makers for Responsible Citizens^®,” 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)
	April 2, 2022			December 31, 2021
Assets
Current Assets
Cash	$	41,586		$	21,044
Short-term investments		169,990			199,971
Trade receivables, net		69,347			57,036
Gross inventories		103,501			100,023
Less LIFO reserve		(52,674	)		(51,826	)
Less excess and obsolescence reserve		(3,913	)		(4,347	)
Net inventories		46,914			43,850
Prepaid expenses and other current assets		8,416			6,832
Total Current Assets		336,253			328,733
Property, plant and equipment		431,439			421,282
Less allowances for depreciation		(353,310	)		(347,651	)
Net property, plant and equipment		78,129			73,631
Deferred income taxes		93			536
Other assets		32,003			39,443
Total Assets	$	446,478		$	442,343

STURM, RUGER & COMPANY, INC.   CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Continued) (Dollars in thousands, except per share data)
	April 2, 2022			December 31, 2021
Liabilities and Stockholders’ Equity
Current Liabilities
Trade accounts payable and accrued expenses	$	33,874		$	36,400
Contract liabilities with customers		-			-
Product liability		503			795
Employee compensation and benefits		19,607			33,154
Workers’ compensation		6,956			6,760
Income taxes payable		5,237			-
Total Current Liabilities		66,177			77,109
Product liability accrual		100			97
Lease liability		2,248			1,476
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
2022 – 24,343,323 issued,
17,633,425 outstanding
2021 – 24,306,486 issued,
17,596,588 outstanding		24,343			24,306
Additional paid-in capital		46,328			46,847
Retained earnings		452,872			438,098
Less: Treasury stock – at cost
2022 – 6,709,898 shares
2021 – 6,709,898 shares		(145,590	)		(145,590	)
Total Stockholders’ Equity		377,953			363,661
Total Liabilities and Stockholders’ Equity	$	446,478		$	442,343

STURM, RUGER & COMPANY, INC.   CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED) (Dollars in thousands, except per share data)
	Three Months Ended
	April 2, 2022			April 3, 2021
Net firearms sales	$	165,933		$	183,603
Net castings sales		642			774
Total net sales		166,575			184,377
Cost of products sold		108,467			111,811
Gross profit		58,108			72,566
Operating expenses:
Selling		8,435			8,088
General and administrative		10,946			12,522
Total operating expenses		19,381			20,610
Operating income		38,727			51,956
Other income:
Interest income		31			8
Interest expense		(91	)		(25	)
Other income, net		852			451
Total other income, net		792			434
Income before income taxes		39,519			52,390
Income taxes		9,287			14,198
Net income and comprehensive income	$	30,232		$	38,192
Basic earnings per share	$	1.72		$	2.18
Diluted earnings per share	$	1.70		$	2.16
Weighted average number of common shares outstanding - Basic		17,610,202			17,559,624
Weighted average number of common shares outstanding - Diluted		17,806,457			17,718,481
Cash dividends per share	$	0.86		$	0.71

STURM, RUGER & COMPANY, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Dollars in thousands)
	Three Months Ended
	April 2, 2022			April 3, 2021
Operating Activities
Net income	$	30,232		$	38,192
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		6,755			7,501
Stock-based compensation		1,672			3,381
Gain on sale of assets		(5	)		(11	)
Deferred income taxes		443			2,406
Changes in operating assets and liabilities:
Trade receivables		(12,311	)		(15,289	)
Inventories		(3,064	)		323
Trade accounts payable and accrued expenses		(2,232	)		(1,836	)
Contract liability with customers		-			(84	)
Employee compensation and benefits		(13,840	)		(16,495	)
Product liability		(289	)		(108	)
Prepaid expenses, other assets and other liabilities		6,163			530
Income taxes payable		5,237			9,260
Cash provided by operating activities		18,761			27,770
Investing Activities
Property, plant and equipment additions		(10,881	)		(5,516	)
Proceeds from sale of assets		-			11
Purchases of short-term investments		(29,992	)		(146,992	)
Proceeds from maturities of short-term investments		59,973			146,002
Cash provided by (used for) investing activities		19,100			(6,495	)
Financing Activities
Remittance of taxes withheld from employees related to share-based compensation		(2,154	)		(4,801	)
Dividends paid		(15,165	)		(12,484	)
Cash used for financing activities		(17,319	)		(17,285	)
Increase in cash and cash equivalents		20,542			3,990
Cash and cash equivalents at beginning of period		21,044			20,147
Cash and cash equivalents at end of period	$	41,586		$	24,137

Non-GAAP Financial Measures

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 two non-GAAP financial measures, EBITDA and EBITDA margin, which management believes provides useful information to investors. These non-GAAP financial measures may not be comparable to similarly titled financial measures being disclosed by other companies. In addition, the Company believes that the non-GAAP financial measures should be considered in addition to, and not in lieu of, GAAP financial measures. The Company believes that EBITDA and EBITDA margin are 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 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 calculates EBITDA margin by dividing EBITDA by total net sales.

Non-GAAP Reconciliation – EBITDA
EBITDA
(Unaudited, dollars in thousands)
	Three Months Ended
	April 2, 2022			April 3, 2021
Net income	$	30,232		$	38,192
Income tax expense		9,287			14,198
Depreciation and amortization expense		6,755			7,501
Interest income		(31	)		(8	)
Interest expense		91			25
EBITDA	$	46,334		$	59,908
EBITDA margin		27.8	%		32.5	%