Sturm, Ruger & Company, Inc. Reports Third Quarter 2012 Fully Diluted Earnings of 88¢ Per Share

SOUTHPORT, Conn.--(BUSINESS WIRE)-- Sturm, Ruger & Company, Inc. (NYSE: RGR), announced today that for the third quarter 2012, the Company reported net sales of $118.2 million and fully diluted earnings of 88¢ per share, compared with net sales of $80.5 million and fully diluted earnings of 56¢ per share in the third quarter of 2011.

For the nine months ended September 29, 2012, net sales were $350.1 million and fully diluted earnings were $2.58 per share. For the corresponding period in 2011, net sales were $235.6 million and fully diluted earnings were $1.55 per share.

The Company also announced today that its Board of Directors declared a dividend of 38.2¢ per share for the third quarter, for shareholders of record as of November 12, 2012, payable on November 26, 2012. This dividend varies every quarter because the Company pays a percent of earnings rather than a fixed amount per share. Effective with the dividend paid in March 2012, the Company increased the percent of quarterly earnings paid out as dividends by 67%. This dividend is approximately 40% of net income.

Chief Executive Officer Michael O. Fifer made the following comments related to the Company’s results:

  • Our earnings increased 62% from the third quarter of 2011, driven by the 47% growth in sales and our ongoing focus on continuous improvement in our operations.
  • New product introductions were a significant component of our sales growth as new product sales represented $130.3 million or 38% of sales in the first nine months of 2012. New product introductions in the first nine months of 2012 included:

    • Ruger American Rifle
    • SR22 pistol
    • 10/22 Takedown rifle
    • 22/45 Lite pistol
    • Single-Nine revolver
    • Demand for our products outpaced the growth in overall industry demand as measured by the National Instant Criminal Background Check System (“NICS”) background checks (as adjusted by the National Shooting Sports Foundation) for both the third quarter and nine months ended September 29, 2012 as illustrated below:
    Period ended September 29, 2012
    Q3 Nine months

    Increase in estimated Ruger Units Sold
    from Distributors to Retailers

    62%

    60%

    Increase in total adjusted NICS
    Background Checks

    22%

    21%

    • Cash generated from operations during the nine months ended September 29, 2012 was $61.8 million. At September 29, 2012, our cash, cash equivalents, and short-term investments totaled $105.1 million, an increase of $24 million from December 2011. Our current ratio is 3.2 to 1 and we have no debt.
    • In the first nine months of 2012, capital expenditures totaled $20.3 million, much of it related to new products and the expansion of production capacity. We expect to invest approximately $25 million for capital expenditures during 2012.
    • In the first nine months of 2012, the Company returned $17.5 million to its shareholders through the payment of dividends. An additional $7.3 million in dividends will be paid to shareholders on November 26, 2012.
    • At September 29, 2012, stockholders’ equity was $174 million, which equates to a book value of $9.08 per share, of which $5.49 per share was cash and equivalents.

    Today, the Company filed its Quarterly Report on Form 10-Q for the third quarter of 2012. The financial statements included in this Quarterly Report on Form 10-Q are attached to this press release.

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

    About Sturm, Ruger

    Sturm, Ruger was founded in 1949 and is one of the nation’s leading manufacturers of high-quality firearms for the commercial sporting market. Sturm, Ruger is headquartered in Southport, CT, with manufacturing facilities located in Newport, NH and Prescott, AZ.

    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 Balance Sheets (Unaudited)
    (Dollars in thousands, except share data)

    September 29,
    2012

    December 31,
    2011

    Assets
    Current Assets
    Cash and cash equivalents $75,123 $ 81,056
    Short-term investments 29,973 -
    Trade receivables, net 47,474 42,225
    Gross inventories 53,517 49,004
    Less LIFO reserve (38,435) (37,476)
    Less excess and obsolescence reserve (1,712) (1,311)
    Net inventories 13,370 10,217
    Deferred income taxes 4,851 5,776
    Prepaid expenses and other current assets 1,725 6,968
    Total Current Assets 172,516 146,242
    Property, plant and equipment 189,137 169,142
    Less allowances for depreciation (126,006) (116,195)
    Net property, plant and equipment 63,131 52,947
    Deferred income taxes 1,222 32
    Other assets 10,916 7,289
    Total Assets $247,785 $206,510

    STURM, RUGER & COMPANY, INC.

    Condensed Balance Sheets (Unaudited) (Continued)
    (Dollars in thousands, except share data)

    September 29,
    2012

    December 31,
    2011

    Liabilities and Stockholders’ Equity
    Current Liabilities
    Trade accounts payable and accrued expenses $ 31,330 $ 28,592
    Product liability 1,005 1,305
    Employee compensation and benefits 16,591 14,882
    Workers’ compensation 4,433 4,600
    Income taxes payable 848 217
    Total Current Liabilities 54,207 49,596
    Accrued pension liability 19,142 19,082
    Product liability accrual 389 441
    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

    2012 – 23,459,506 issued,

    19,160,072 outstanding

    2011 – 23,382,566 issued,

    19,083,132 outstanding

    23,460 23,383
    Additional paid-in capital 13,686 10,454
    Retained earnings 202,328 168,981

    Less: Treasury stock – at cost

    2012 – 4,299,434 shares

    2011 – 4,299,434 shares

    (37,884)

    (37,884)

    Accumulated other comprehensive loss (27,543) (27,543)
    Total Stockholders’ Equity 174,047 137,391
    Total Liabilities and Stockholders’ Equity $247,785 $206,510

    STURM, RUGER & COMPANY, INC.

    Condensed Statements of Income and Comprehensive Income (Unaudited)
    (Dollars in thousands, except per share data)

    Three Months Ended Nine Months Ended

    September 29,
    2012

    October 1,
    2011

    September 29,
    2012

    October 1,
    2011

    Net firearms sales $116,270 $79,214 $345,203 $232,126
    Net castings sales 1,882 1,298 4,854 3,449
    Total net sales 118,152 80,512 350,057 235,575
    Cost of products sold 75,587 51,385 220,565 153,989
    Gross profit 42,565 29,127 129,492 81,586
    Operating expenses:
    Selling 7,891 6,581 27,998 19,961
    General and administrative 7,437 5,659 21,543 15,218
    Total operating expenses 15,328 12,240 49,541 35,179
    Operating income 27,237 16,887 79,951 46,407
    Other income:
    Interest expense, net (18) (21) (62) (54)
    Other income, net 319 177 813 466
    Total other income, net 301 156 751 412
    Income before income taxes 27,538 17,043 80,702 46,819
    Income taxes 10,189 6,306 29,860 17,323
    Net income and comprehensive income $17,349 $10,737 $50,842 $ 29,496
    Basic earnings per share $0.91 $0.57 $2.66 $1.56
    Fully diluted earnings per share $0.88 $0.56 $2.58 $1.55
    Cash dividends per share $0.377 $0.142 $0.913 $0.289

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

    Source: Sturm, Ruger & Company, Inc.

    STURM, RUGER & COMPANY, INC.

    Condensed Statements of Cash Flows (Unaudited)
    (Dollars in thousands)

    Nine Months Ended

    September 29,
    2012

    October 1,
    2011

    Operating Activities
    Net income $50,842 $ 29,496
    Adjustments to reconcile net income to cash provided by operating activities:
    Depreciation 10,151 8,792
    Slow moving inventory valuation adjustment 446 (35)
    Stock-based compensation 3,317 2,110
    Gain on sale of assets (65) (82)
    Deferred income taxes (265) 1,376
    Changes in operating assets and liabilities:
    Trade receivables (5,249) (1,856)
    Inventories (3,599) 2,107
    Trade accounts payable and accrued expenses 2,571 2,870
    Employee compensation and benefits 1,709 1,007
    Product liability (352) 454
    Prepaid expenses, other assets and other liabilities 1,656 (4,419)
    Income taxes payable 631 1,147
    Cash provided by operating activities 61,793 42,967
    Investing Activities
    Property, plant and equipment additions (20,315) (12,209)
    Proceeds from sale of assets 65 127
    Purchases of short-term investments (59,966) (122,978)
    Proceeds from maturities of short-term investments 29,993 149,473
    Cash provided by (used for) investing activities (50,223) 14,413
    Financing Activities
    Tax benefit from exercise of stock options 1,038 3,087
    Repurchase of common stock

    Payment of employee withholding tax related to

    share-based compensation

    -

    (1,045)

    (1,999)

    (4,782)

    Dividends paid (17,496) (5,474)
    Cash used for financing activities (17,503) (9,168)
    (Decrease) Increase in cash and cash equivalents (5,933) 48,212
    Cash and cash equivalents at beginning of period 81,056 5,132
    Cash and cash equivalents at end of period $75,123 $ 53,344