Sturm, Ruger & Company Inc. announced that for the second quarter of 2017 the company reported net sales of $131.9 million and diluted earnings of 57 cents per share, compared with net sales of $167.9 million and diluted earnings of $1.22 per share in the second quarter of 2016.
For the six months ended July 1, 2017, net sales were $299.2 million and diluted earnings were $1.79 per share. For the corresponding period in 2016, net sales were $341.1 million and diluted earnings were $2.44 per share.
The company also announced that its Board of Directors declared a dividend of 23 cents per share for the second quarter for stockholders of record as of August 15, 2017, payable on August 31, 2017. 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 percent of net income.
Chief Executive Officer Christopher J. Killoy made the following observations related to the company’s 2017 second quarter performance:
- In the second quarter of 2017, net sales decreased 22 percent and earnings per share decreased 53 percent from the second quarter of 2016. The decrease in earnings is attributable to the sales decline, the unfavorable de-leveraging of fixed manufacturing costs due to the decline in production volumes, and the $2.5 million expense related to the recall of Mark IV pistols.
- EBITDA was $25.0 million, or 19 percent of sales, in the second quarter of 2017, a decrease of 44 percent from $45.1 million, or 27 percent of sales, in the comparable prior year period.
Sales of new products, including the Mark IV pistols, the LCP II pistol, and the Precision Rifle, represented $84.9 million or 29 percent of firearm sales in the first half of 2017. 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 decreased 13 percent in the first half of 2017 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) decreased 7 percent.
The decrease in estimated sell-through of the company’s products from the independent distributors to retailers is attributable to:
- Decreased overall consumer demand in 2017 due to stronger-than-normal demand during most of 2016, likely bolstered by the political campaigns for the November 2016 elections,
- Reduced purchasing by retailers in an effort to reduce their inventories and generate cash as they head into the typically slower summer season, and
- Aggressive price discounting and lucrative consumer rebates offered by many of our competitors.
Cash generated from operations during the first half of 2017 was $39.9 million. At July 1, 2017, our cash totaled $44.0 million. Our current ratio is 2.7 to 1 and we have no debt.
In the first half of 2017, capital expenditures totaled $10.9 million. We expect our 2017 capital expenditures to total approximately $35 million.
In June, the company discovered that Mark IV pistols manufactured prior to June 1, 2017 have the potential to discharge unintentionally if the safety is not utilized correctly. Although only a small percentage of Mark IV pistols appear to be affected and the company is not aware of any injuries, the company recalled all Mark IV pistols and recorded a $2.5 million expense in the second quarter, which is the expected total cost of the recall.
In the first half of 2017, the company returned $69.8 million to its shareholders through:
- the payment of $16.3 million of dividends, and
the repurchase of 1,074,300 shares of common stock in the open market at an average price of $49.73 per share, for a total of $53.5 million.
- At July 1, 2017, stockholders’ equity was $227.6 million, which equates to a book value of $12.89 per share, of which $2.49 per share is cash.
Photo courtesy Sturm, Ruger & Company