Sturm, Ruger & Company, Inc. (NYSE-RGR) announced today that for the second quarter of 2016 the Company reported net sales of $167.9 million and diluted earnings of $1.22 per share, compared with net sales of $140.9 million and diluted earnings of 91¢ per share in the second quarter of 2015.

For the six months ended July 2, 2016, net sales were $341.1 million and fully diluted earnings were $2.44 per share. For the corresponding period in 2015, net sales were $277.8 million and fully diluted earnings were $1.71 per share.

The Company also announced today that its Board of Directors declared a dividend of 49¢ per share for the second quarter for stockholders of record as of August 12, 2016, payable on August 26, 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 second quarter performance:
  • In the second quarter of 2016, net sales increased 19% and earnings per share increased 34% from the second quarter of 2015.
  • EBITDA was $45 million, or 27% of sales, in the second quarter of 2016, an increase of 25% from $36 million, or 26% of sales, in the comparable prior year period.
  • New products, including the American Pistol, the Precision Rifle, the AR-556 modern sporting rifle, and the LC9s pistol, represented $53 million or 33% of firearm sales in the second quarter of 2016. 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 20% in the second 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 15%.
  • The increase in estimated sell-through of the Company's products from the independent distributors to retailers is attributable to:
  • the increase in overall industry demand,
  • strong demand for certain new products, and
  • increased production of several products in strong demand .
  • During the second quarter of 2016, the Company's finished goods inventory increased by 25,700 units and distributor inventories of the Company's products increased by 50,300 units.
  • Cash generated from operations during the first half of 2016 was $66 million. At July 2, 2016, our cash totaled $103 million. Our current ratio is 2.8 to 1 and we have no debt.
  • In the first half of 2016, capital expenditures totaled $11 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 half of 2016, the Company returned $16 million to its shareholders through the payment of dividends.
  • At July 2, 2016, stockholders' equity was $255 million, which equates to a book value of $13.27 per share, of which $5.37 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, August 3, 2016, Sturm, Ruger will host a webcast at 9:00 a.m. ET to discuss the second quarter operating results. Interested parties can access the webcast at www.ruger.com/corporate or by dialing 720-634-2919, participant code 50151643.

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)
 
    July 2, 2016   December 31, 2015
   
Assets
 
Current Assets
Cash $ 103,069 $ 69,225
Trade receivables, net 64,978 71,721
 
Gross inventories 84,613 81,278
Less LIFO reserve (43,260 ) (42,061 )
Less excess and obsolescence reserve     (2,570 )     (2,118 )
Net inventories     38,783       37,099  
 
Deferred income taxes 10,474 8,219
Prepaid expenses and other current assets     2,508       3,008  
Total Current Assets 219,812 189,272
 
Property, plant and equipment 309,470 308,597
Less allowances for depreciation     (210,631 )     (204,777 )
Net property, plant and equipment     98,839       103,820  
 
 
Other assets     25,056       22,791  
Total Assets   $ 343,707     $ 315,883  
 
 
STURM, RUGER & COMPANY, INC.
 
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)

(Dollars in thousands, except per share data)
 
    July 2, 2016   December 31, 2015
   
 
Liabilities and Stockholders' Equity
 
Current Liabilities
Trade accounts payable and accrued expenses $ 50,364 $ 42,991
Product liability 941 642
Employee compensation and benefits 22,975 28,298
Workers' compensation 4,604 5,100
Income taxes payable     185       4,962  
Total Current Liabilities 79,069 81,993
 
Product liability 92 102
Deferred income taxes 9,718 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 25,530 29,591
Retained earnings 269,991 239,098
Less: Treasury stock - at cost
2016 - 5,062,347 shares
2015 - 5,062,347 shares     (64,727 )     (64,727 )
Total Stockholders' Equity     254,828       227,738  
Total Liabilities and Stockholders' Equity   $ 343,707     $ 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   Six Months Ended
 

July 2,2016
 

June 27,2015
 

July 2,2016
 

June 27,2015
     
Net firearms sales $ 166,311 $ 139,224 $ 337,831 $ 274,804
Net castings sales     1,633       1,648       3,222       3,023  
Total net sales 167,944 140,872 341,053 277,827
 
Cost of products sold 111,250 92,364 225,246 187,921
                 
Gross profit     56,694       48,508       115,807       89,906  
 
Operating expenses:
Selling 12,808 14,858 27,882 25,085
General and administrative     7,402       6,957       15,241       14,334  
Total operating expenses     20,210       21,815       43,123       39,419  
 
Operating income     36,484       26,693       72,684       50,487  
 
Other income:
Interest expense, net (35 ) (37 ) (70 ) (77 )
Other income, net     293       617       499       1,086  
Total other income, net     258       580       429       1,009  
 
Income before income taxes 36,742 27,273 73,113 51,496
 
Income taxes     13,227       9,713       26,321       18,433  
 
Net income and comprehensive income   $ 23,515     $ 17,560     $ 46,792     $ 33,063  
 
Basic earnings per share   $ 1.24     $ 0.94     $ 2.47     $ 1.77  
 
Diluted earnings per share   $ 1.22     $ 0.91     $ 2.44     $ 1.71  
 
Cash dividends per share   $ 0.48     $ 0.32     $ 0.83     $ 0.49  
 
 
STURM, RUGER & COMPANY, INC.
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Dollars in thousands)
 
    Six Months Ended
  July 2, 2016   June 27, 2015
 
Operating Activities
Net income $ 46,792 $ 33,063

Adjustments to reconcile net income to cash provided byoperating activities:
Depreciation and amortization 16,690 17,841
Slow moving inventory valuation adjustment 452 (1,011 )
Stock-based compensation 1,373 2,298
Loss (gain) on sale of assets 1 (157 )
Deferred income taxes 1,413 (1,176 )
Impairment of assets (10 ) 12
Changes in operating assets and liabilities:
Trade receivables 6,743 (4,378 )
Inventories (2,136 ) 11,511
Trade accounts payable and accrued expenses 6,877 5,925
Employee compensation and benefits (5,482 ) 6,881
Product liability 289 (401 )
Prepaid expenses, other assets and other liabilities (2,134 ) 8,785
Income taxes payable     (4,777 )     1,671  
Cash provided by operating activities     66,091       80,864  
 
Investing Activities
Property, plant and equipment additions (11,334 ) (16,259 )
Proceeds from sale of assets     3       218  
Cash used for investing activities     (11,331 )     (16,041 )
 
Financing Activities

Tax benefit from exercise of stock options and vesting of RSU's
8,825 305

Remittance of taxes withheld from employees related toshare-based compensation

(14,001

)

(1,000

)
Proceeds from exercise of stock options - 97
Repurchase of common stock - (2,841 )
Dividends paid     (15,740 )     (9,161 )
Cash used for financing activities     (20,916 )     (12,600 )
 
Increase in cash and cash equivalents 33,844 52,223
 
Cash and cash equivalents at beginning of period 69,225 8,901
         
Cash and cash equivalents at end of period   $ 103,069     $ 61,124  
 

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   Six Months Ended
 

July 2,2016
 

June 27,2015
 

July 2,2016
 

June 27,2015
     
Net income $ 23,515 $ 17,560 $ 46,792 $ 33,063
 
Income tax expense 13,227 9,713 26,321 18,433

Depreciation and amortizationexpense

8,346

8,884
16,690

17,841
Interest expense, net     35     37     70     77
EBITDA   $ 45,123   $ 36,194   $ 89,873   $ 69,414

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