EX-99.1 2 ex99-1.htm EX-99.1

EXHIBIT 99.1

Ruger-logo_final_lg.jpg

 

Corp_Fifer_Ltrhd_2012.jpg

 

 

 

FOR IMMEDIATE RELEASE               

 

STURM, RUGER & COMPANY, INC. REPORTS FOURTH QUARTER

AND FISCAL 2014 FINANCIAL RESULTS

 

SOUTHPORT, CONNECTICUT, February 25, 2015--Sturm, Ruger & Company, Inc. (NYSE-RGR) announced today that for 2014 the Company had net sales of $544.5 million and fully diluted earnings of $1.95 per share, compared with net sales of $688.3 million and fully diluted earnings of $5.58 per share in 2013.

For the fourth quarter 2014, net sales were $122.6 million and the Company realized a fully diluted loss of $(0.77) per share. For the corresponding period in 2013, net sales were $181.9 million and fully diluted earnings were $1.33 per share.

In the fourth quarter of 2014, the Company recorded an expense of $41.0 million related to the termination and settlement of its defined benefit pension plans. Excluding this expense, 2014 net income was $64.0 million or $3.22 per share, and fourth quarter 2014 net income was $10.5 million or 53¢ per share. The cash requirement for the termination and settlement of the defined benefit pension plans was $7.5 million.

3
 

The Company also announced today that its Board of Directors declared a dividend of 17¢ per share for the fourth quarter for shareholders of record as of March 13, 2015, payable on March 27, 2015. This dividend varies every quarter because the Company pays a percent of earnings rather than a fixed amount per share. This dividend is approximately 40% of net income. The pension plan termination expense was excluded when calculating this dividend.

Chief Executive Officer Michael O. Fifer made the following observations related to the Company’s 2014 performance:

·The strong demand experienced in 2013 remained through the first quarter of 2014 and much of the second quarter of 2014. However, during the latter half of 2014 demand for our products declined significantly, as a result of the following:

 

·the reduction in overall consumer demand,
·high inventory levels at retail, which encouraged retailers to buy fewer firearms than they were selling, in an effort to reduce their inventories and generate cash,
·aggressive price discounting by many of our competitors, and
·the lack of significant new product introductions from the Company.

 

·In 2014, sales to the independent distributors and the estimated sell-through of the Company’s products from the independent distributors to retailers decreased 21% and 20%, respectively, from 2013. The National Instant Criminal Background Check System (“NICS”) background checks (as adjusted by the National Shooting Sports Foundation) decreased 12% in 2014 from 2013.

 

·Demand for higher-margin firearms accessories, especially magazines, which was very strong in 2013, softened in the first half of 2014 and then decreased significantly in the latter half of 2014.

 

·Excluding the expense related to the termination of our defined benefit pension plans, in 2014 earnings decreased 42% and EBITDA decreased 36% from 2013. The main drivers of the reduced operating margins were:

 

·reduced sales of firearms and firearms accessories,
·the de-leveraging of fixed costs, including depreciation, indirect labor, engineering, and product development costs,
·approximately $7 million of increased depreciation expense due to the reduction in the estimated useful lives of the Company’s capital assets, and
·approximately $8 million of increased depreciation expense due to the $151 million of capital equipment purchases as the Company increased firearm sales from $144 million in 2007 to $679 million in 2013.

 

4
 

·New product introductions in 2014 included the AR-556 modern sporting rifle and the LC9s pistol. New products represented $89.4 million or 16% of firearm sales in 2014, compared to $195.8 million or 29% of firearms sales in 2013. New product sales include only major new products that were introduced in the past two years.

 

·Cash generated from operations during 2014 was $55.6 million. At December 31, 2014, our cash totaled $9 million. Our current ratio is 2.0 to 1 and we have no debt.

 

·In 2014, capital expenditures totaled $45.6 million, a decrease from $54.6 million in 2013. We expect our 2015 capital expenditures to total approximately $30 million.

 

·In 2014, the Company returned $55.4 million to its shareholders through:

 

§the payment of $31.4 million of dividends, and
§the repurchase of 680,813 shares of our common stock in the open market at an average price of $35.22 per share, for a total of $24.0 million.

 

·At December 31, 2014, stockholders’ equity was $185.5 million, which equates to a book value of $9.90 per share.

 

Today, the Company filed its Annual Report on Form 10-K. The financial statements included in this Annual Report on Form 10-K are attached to this press release.

Tomorrow, February 26, 2015, Sturm, Ruger will host a webcast at 9:00 a.m. ET to discuss the 2014 operating results. Interested parties can access the webcast at www.ruger.com/corporate or by dialing 877-415-3180, participant code 87093849.

The Annual Report on Form 10-K 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 Annual Report on Form 10-K to ensure that they have adequate information to make informed investment judgments.

 

5
 

About Sturm, Ruger

Sturm, Ruger & Co., Inc. is one of the nation’s leading manufacturers of rugged, reliable firearms for the commercial sporting market. The only 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.

 

 

 

 

6
 

 

 

STURM, RUGER & COMPANY, INC.

 

Consolidated Balance Sheets

(Dollars in thousands, except per share data)

 

December 31,  2014   2013 
           
Assets
          
Current Assets          
Cash and cash equivalents  $8,901   $55,064 
Trade receivables, net   49,735    67,384 
           
Gross inventories   89,017    64,199 
Less LIFO reserve   (40,578)   (38,516)
Less excess and obsolescence reserve   (3,750)   (2,422)
    Net inventories   44,689    23,261 
           
Deferred income taxes   7,246    7,637 
Prepaid expenses and other current assets   7,603    4,280 
Total Current Assets   118,174    157,626 
           
Property, Plant, and Equipment   288,236    250,127 
     Less allowances for depreciation   (177,575)   (149,099)
     Net property, plant and equipment   110,661    101,028 
           
Other assets   25,547    18,464 
Total Assets  $254,382   $277,118 

 

7
 

 

 

STURM, RUGER & COMPANY, INC.

 

Consolidated Balance Sheets (Continued)

(Dollars in thousands, except per share data)

 

December 31,  2014   2013 
         
Liabilities and Stockholders’ Equity
          
Current Liabilities          
Trade accounts payable and accrued expenses  $36,150   $46,991 
Product liability   641    971 
Employee compensation and benefits   18,302    34,626 
Workers’ compensation   5,133    5,339 
Income taxes payable   156    239 
Total Current Liabilities   60,382    88,166 
           
Product liability   204    265 
Deferred income taxes   8,334    9,601 
           
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
    2014 – 23,717,321 issued,
                18,737,074 outstanding
    2013 – 23,647,350 issued,
                19,347,916 outstanding
   23,717    23,647 
Additional paid-in capital   25,472    20,614 
Retained earnings   198,159    192,088 
Less: Treasury stock – at cost
    2014 – 5,054,747 shares
    2013 – 4,299,434 shares
   (61,886)   (37,884)
Accumulated other comprehensive loss       (19,379)
Total Stockholders’ Equity   185,462    179,086 
Total Liabilities and Stockholders’ Equity  $254,382   $277,118 

 

8
 

 

STURM, RUGER & COMPANY, INC.

 

Consolidated Statements of Income and Comprehensive Income

(In thousands, except per share data)

 

Year ended December 31,  2014   2013   2012 
             
Net firearms sales  $542,267   $678,552   $484,933 
Net castings sales   2,207    9,724    6,891 
Total net sales   544,474    688,276    491,824 
                
Cost of products sold   375,300    429,671    312,871 
                
Gross profit   169,174    258,605    178,953 
                
Operating Expenses:               
Selling   44,550    48,706    38,363 
General and administrative   28,899    35,394    29,231 
Defined benefit pension plans settlement charge   40,999         
Other operating (expenses), net   (1,612)   (401)   293 
Total operating expenses   112,836    83,699    67,887 
                
Operating income   56,338    174,906    111,066 
                
Other income:               
Royalty income   468    658    824 
Interest income   2    4    34 
Interest expense   (152)   (135)   (95)
Other income (expense), net   584    (201)   280 
Total other income, net   902    326    1,043 
                
Income before income taxes   57,240    175,232    112,109 
                
Income taxes   18,612    63,960    41,480 
                
Net income   38,628    111,272    70,629 
                
Other comprehensive income (loss), net of tax:               
Defined benefit pension plans       10,240    (2,077)
                
Comprehensive income  $38,628   $121,512   $68,552 
                
Basic Earnings Per Share  $1.99   $5.76   $3.69 
                
Fully Diluted Earnings Per Share  $1.95   $5.58   $3.60 
                
Cash Dividends Per Share  $1.62   $2.12   $5.80 

9
 

 

STURM, RUGER & COMPANY, INC.

 

Consolidated Statements of Cash Flows

(In thousands)

 

Year ended December 31,  2014   2013   2012 
             
Operating Activities               
Net income  $38,628   $111,272   $70,629 
Adjustments to reconcile net income to cash
provided by operating activities:
               
Pension plan settlement charge   32,218         
Depreciation and amortization   36,706    20,362    14,888 
Stock-based compensation   5,647    5,288    4,718 
Excess and obsolescence inventory reserve   1,347    693    761 
Loss (gain) on sale of assets   (1)   1    (944)
Deferred income taxes   (12,015)   5,736    (1,480)
Impairment of assets   178    911    1,134 
Changes in operating assets and liabilities:               
Trade receivables   17,649    (24,366)   (793)
Inventories   (22,775)   (7,945)   (6,553)
Trade accounts payable and accrued expenses   (11,047)   9,231    9,908 
Employee compensation and benefits   (17,435)   17,897    (4,345)
Product liability   (391)   179    (689)
Prepaid expenses, other assets and other liabilities   (13,075)   (19,340)   (321)
Income taxes payable   (83)   (250)   272 
Cash provided by operating activities   55,551    119,669    87,185 
                
Investing Activities               
Property, plant, and equipment additions   (45,571)   (54,616)   (27,282)
Purchases of short-term investments           (59,966)
Proceeds from sales or maturities of short-term investments           59,966 
Net proceeds from sale of assets   24    233    1,003 
Cash used for investing activities   (45,547)   (54,383)   (26,279)
                
Financing Activities               
Dividends paid   (31,446)   (41,079)   (111,523)
Tax benefit from exercise of stock options   1,621    2,302    3,474 
Repurchase of common stock   (24,002)        
Payment of employee withholding tax related to share-
              based compensation
   (2,363)   (2,423)   (3,083)
Proceeds from exercise of stock options   23        148 
Cash used for financing activities   (56,167)   (41,200)   (110,984)
                
Increase (decrease) in cash and cash equivalents   (46,163)   24,086    (50,078)
Cash and cash equivalents at beginning of year   55,064    30,978    81,056 
Cash and cash equivalents at end of year  $8,901   $55,064   $30,978 

 

10
 

Non-GAAP Financial Measure

In an effort to provide investors with additional information regarding its 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 measure may not be comparable to similarly titled 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.

Non-GAAP Reconciliation – EBITDA

EBITDA

(Unaudited, dollars in thousands)

 

Year ended December 31,  2014   2013 
         
Net income  $38,628   $111,272 
           
Income tax expense   18,612    63,960 
Depreciation and amortization expense   36,706    20,362 
Interest expense   152    135 
Interest income   (2)   (4)
Pension plan termination expense, net of cash payment   32,218     
EBITDA  $126,314   $195,725 

 

EBITDA is defined as earnings before interest, taxes, and depreciation and amortization. The Company calculates this 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 to arrive at EBITDA. The Company’s EBITDA calculation also excludes any one-time non-cash, non-operating expense, such as the pension plan termination expense.

 

11