Sturm, Ruger & Company Inc. reported earnings rose 48.9 percent in the second quarter while sales declined 2.7 percent.
Earnings reached $15.2 million, or 86 cents a share, against $10.2 million, or 57 cents, a year ago. Sales were $128.4 million, down from $131.9 million.
For the six months ended June 30, 2018, net sales were $259.6 million and diluted earnings were $1.68 per share. For the corresponding period in 2017, net sales were $299.2 million and diluted earnings were $1.79 per share.
The company also announced today that its Board of Directors declared a dividend of 34¢ per share for the second quarter for stockholders of record as of August 17, 2018, payable on August 31, 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 percent of net income.
Chief Executive Officer Christopher J. Killoy made the following observations related to the company’s 2018 second quarter performance:
- In the second quarter of 2018, net sales decreased 3 percent and earnings per share increased 51 percent from the second quarter of 2017. In addition to improved operating performance, earnings per share benefitted 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 second quarter of 2018 were increased by $2.6 million. As a result, quarterly diluted earnings per share was increased by approximately 5¢.
- The reduced effective tax rate in 2018, resulting from the Tax Cuts and Job Act of 2017, increased the quarterly diluted earnings per share by 12¢.
- The repurchase of 1.3 million shares of common stock in 2017 increased the quarterly diluted earnings per share by 6¢.
- 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 $75.5 million or 29 percent of firearm sales in the first half 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 decreased 1 percent in the first half of 2018 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 3 percent. The slight decrease in estimated sell-through of the company’s products from the independent distributors to retailers is attributable to decreased overall consumer demand in the first half of 2018, partially offset by increased demand for some of the company’s recently introduced products.
- During the second quarter of 2018, the company’s finished goods inventory increased by 3,700 units and distributor inventories of the company’s products increased by 30,400 units. However, the company’s finished goods inventory and the distributor inventories have decreased 67 percent and 25 percent, respectively, from the 2017 second quarter.
- Cash generated from operations during the first half of 2018 was $81 million. At June 30, 2018, our cash totaled $132 million. The company’s current ratio is 3.3 to 1 and we have no debt.
- In the first half of 2018, capital expenditures totaled $2 million. The company expects our 2018 capital expenditures to total approximately $10 million.
- In the first half of 2018, the company returned $10 million to its shareholders through the payment of dividends.
- At June 30, 2018, stockholders’ equity was $249 million, which equates to a book value of $14.29 per share, of which $7.54 per share is cash.
Photo courtesy Strum Ruger