Sturm, Ruger & Co. reported earnings fell 47.7 percent in the third quarter on a 17.3 percent revenue decline.

Earnings reached $4.8 million, or 14 cents a share, down from $9.2 million, or 34 cents, a year ago. Sales were $94.1 million versus $113.8 million.

For the nine months ended September 28, 2019, net sales were $305.4 million and diluted earnings were $1.37 per share. For the corresponding period in 2018, net sales were $374.5 million and diluted earnings were $2.19 per share.

The company also announced that its Board of Directors declared a dividend of 11¢ per share for the third quarter for stockholders of record as of November 15, 2019, payable on November 27, 2019. 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 commented on the third-quarter results, “Demand has remained soft throughout this year. However, we once again elected to forgo opportunities to generate better short term results with overly aggressive discounting and promotions and the extension of payment terms, which would hinder our long term performance, value, and brand. Instead, we took the fiscally prudent measure of reducing production for the third consecutive quarter to moderate inventory levels in our warehouses and in the distribution channel.”

Killoy, concluded, “We are in this for the long haul. Our strategy is predicated on remaining financially strong, fiscally disciplined, and focused on delivering long-term value to our shareholders. This strategy has resulted in the return of over $230 million to our shareholders in the past five years alone, during which time we achieved an average annual return on net operating assets of 46 percent. Our engineering teams are actively engaged every day working on exciting new products and I remain optimistic about our future.”

Killoy made the following additional observations related to the company’s 2019 third quarter and year to date performance:

  • The estimated unit sell-through of the company’s products from the independent distributors to retailers decreased 24 percent in the first nine months of 2019 compared to the prior-year period. For the same period, the National Instant Criminal Background Check System (NICS) background checks (as adjusted by the National Shooting Sports Foundation (NSSF) decreased 1 percent. The greater reduction in the sell-through of the company’s products relative to adjusted NICS background checks may be attributable to the following:
    • More aggressive promotions, discounts, rebates and the extension of payment terms offered by our competitors,
      Relatively fewer new product shipments compared to 2018, which benefited from the launch of four major products in December of 2017,
    • The loss of a formerly significant distributor that ultimately filed for bankruptcy protection in June 2019 and the market disruption caused by the liquidation of its inventory of Ruger products,
    • Increased sales of used firearms at retail, which are captured by adjusted NICS checks, and
    • Decreased retailer inventories as the anticipation of further discounting continues to encourage cautious buying behavior by retailers.
  • Sales of new products, including the Wrangler, which was introduced in April 2019, the Pistol Caliber Carbine, the EC9s pistol, the Security-9 pistol, and the Precision Rimfire Rifle, represented $70.6 million or 23 percent of firearm sales in the first nine months of 2019. New product sales include only major new products that were introduced in the past two years.
  • During the first nine months of 2019, a total of 120 product line extensions and distributor exclusives were launched.
  • During the third quarter of 2019, total company and distributor inventories decreased by 8,600 units.
  • Cash provided by operations during the first nine months of 2019 was $9 million. At September 28, 2019, our cash and short-term investments totaled $137 million. Our current ratio is 4.7 to 1 and we have no debt.
  • In the first nine months of 2019, capital expenditures totaled $9 million. We expect our 2019 capital expenditures to total approximately $15 million, most of which relate to new product introductions.
    • In the first nine months of 2019, the company returned $14 million to its stockholders through:
      the payment of $12 million of dividends, and
    • the repurchase of 44,500 shares of its common stock in the open market at an average price of $44.83 per share, for a total of $2 million.
  • At September 28, 2019, stockholders’ equity was $277.6 million, which equates to a book value of $15.91 per share, of which $7.87 per share is cash and short-term investments.