Sturm, Ruger & Company, Inc. Reports Third Quarter Diluted Earnings of 52¢ Per Share And Declares Dividend of 21¢ Per Share

Sturm, Ruger & Company, Inc. (NYSE-RGR) announced today that for the third quarter of 2018 the Company reported net sales of $114.9 million and diluted earnings of 52¢ per share, compared with net sales of $104.8 million and diluted earnings of 53¢ per share in the third quarter of 2017.

For the nine months ended September 29, 2018, net sales were $374.5 million and diluted earnings were $2.19 per share. For the corresponding period in 2017, net sales were $404.0 million and diluted earnings were $2.32 per share.

The Company also announced today that its Board of Directors declared a dividend of 21¢ per share for the third quarter for stockholders of record as of November 16, 2018, payable on November 30, 2018. 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 third quarter performance:

• In the third quarter of 2018, net sales increased 10% from the third quarter of 2017.
• Earnings per share, which were 52¢ in the third quarter of 2018, benefited by the following:
  • Effective January 1, 2018, the Company adopted Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606), which modified the timing of revenue recognition related to certain sales promotion activities involving the shipment of no charge firearms. Consequently, net sales in the third quarter of 2018 were increased by $0.6 million. As a result, quarterly diluted earnings per share was increased by approximately 1¢.
  • The reduced effective tax rate in 2018, resulting from the Tax Cuts and Jobs Act of 2017, increased the quarterly diluted earnings per share by 7¢.
  • The repurchase of 1.3 million shares of common stock in 2017 increased the quarterly diluted earnings per share by 4¢.
• The comparison of earnings per share for the third quarter of 2018 to the third quarter of 2017 was adversely impacted by 16¢ due to improved manufacturing efficiencies and favorable leveraging in the current quarter, which reduced the carrying cost of inventory and increased cost of sales in the current quarter by $0.9 million. Conversely, unfavorable deleveraging in the prior year increased the carrying cost of inventory and decreased cost of sales by $2.1 million in the third quarter of 2017.
• In October 2018, the Company issued a safety bulletin announcing that some Ruger American Pistols chambered in 9mm may exhibit premature wear of the locking surfaces between the slide and barrel. The Company is offering a free retrofit to customers of affected pistols and recorded a $1.0 million expense in the third quarter of 2018, which was the expected total cost of the safety bulletin.
• Sales of new products, including the Pistol Caliber Carbine, the Mark IV pistol, the LCP II pistol, the EC9s pistol, the Security-9 pistol, and the Precision Rimfire Rifle, represented $112.7 million or 30% of firearm sales in the first nine months of 2018. New product sales include only major new products that were introduced in the past two years.
• The estimated unit sell-through of the Company's products from the independent distributors to retailers increased 1% in the first nine months of 2018 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 ("NSSF")) decreased 5%. The slight increase in estimated sell-through of the Company's products from the independent distributors to retailers is attributable to strong demand for some of the Company's recently introduced products, partially offset by decreased overall consumer demand in the first nine months of 2018.
• During the third quarter of 2018, the Company's finished goods inventory increased by 18,000 units and distributor inventories of the Company's products increased by 22,100 units. In the aggregate, total Company and distributor inventories decreased 151,700 units from the end of the third quarter of 2017.
• Cash generated from operations during the first nine months of 2018 was $96 million. At September 29, 2018, our cash totaled $138 million. Our current ratio is 3.5 to 1 and we have no debt.
• In the first nine months of 2018, capital expenditures totaled $5 million. We expect our 2018 capital expenditures to total approximately $10 million.
• In the first nine months of 2018, the Company returned $16 million to its shareholders through the payment of dividends.
• At September 29, 2018, stockholders' equity was $254 million, which equates to a book value of $14.34 per share, of which $7.78 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. - View Release

Tomorrow, November 1, 2018, 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/corporate or by dialing 855-871-7398, participant code 1387199.

The Quarterly Report on Form 10-Q 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 to ensure that they have adequate information to make informed investment judgments.