Sturm, Ruger & Company Inc. reported earnings fell 52.8 percent in the third quarter as sales slid 35.1 percent.

Net earnings fell to $9.4 million, or 53 cents a share, from $19.9 million, or $1.03, in the same period a year ago. Revenues slumped to $104.8 million $161.4 million.

For the nine months ended September 30, 2017, net sales were $404 million and diluted earnings were $2.32 per share. For the corresponding period in 2016, net sales were $502.5 million and diluted earnings were $3.48 per share.

The company also announced that its Board of Directors declared a dividend of 21 cents per share for the third quarter for stockholders of record as of November 15, 2017, payable on November 30, 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 third quarter performance.

In the third quarter of 2017, net sales decreased 35 percent and earnings per share decreased 50 percent from the third quarter of 2016. The decrease in earnings is attributable to the sales decline and the unfavorable de-leveraging of fixed manufacturing costs due to the decline in production volumes.

Sales of new products, including the Mark IV pistols, the LCP II pistol, and the Precision Rifle, represented $118.8 million or 30 percent of firearm sales in the first nine months 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 25 percent and 16 percent in three and nine months ended September 30, 2017 from the comparable prior year periods. For the same periods, the National Instant Criminal Background Check System background checks (as adjusted by the National Shooting Sports Foundation) decreased 16 percent and 10 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 lower their inventories and generate cash,
  • Aggressive price discounting and lucrative consumer rebates offered by many of our competitors, and
  • Increased industry manufacturing capacity, which exacerbates the above factors.

Cash generated from operations during the first nine months of 2017 was $59 million. At September 30, 2017, our cash totaled $45 million. Our current ratio is 2.8 to 1 and the company has no debt.

In the first nine months of 2017, capital expenditures totaled $13 million. The company expects its 2017 capital expenditures to total approximately $30 million.

In the first nine months of 2017, the company returned $85 million to its shareholders through:
the payment of $20 million of dividends, and the repurchase of 1.3 million shares of common stock in the open market at an average price of $49.10 per share, for a total of $65 million.

At September 30, 2017, stockholders’ equity was $223 million, which equates to a book value of $12.77 per share, of which $2.60 per share is cash.

Photo courtesy Sturm, Ruger & Company