Ruger(RGR) - 2019 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q3 2019, net sales were $95 million, down from $114.9 million in the same period last year, and diluted earnings per share decreased to $0.27 from $0.52 [5][6] - For the first nine months of 2019, net sales totaled $305.4 million compared to $374.5 million in 2018, with diluted earnings per share dropping to $1.37 from $2.19 [5][6] - Cash and short-term investments were $137.3 million as of September 28, 2019, with a current ratio of 4.7:1 and no debt [7] Business Line Data and Key Metrics Changes - New product sales accounted for $71 million or 23% of firearm sales in the first nine months of 2019, with 120 new distributor exclusives and product line extensions launched [11] - Total unit production in Q3 2019 was 4% below Q2 2019, with a 15% decrease in sales value of production [12] Market Data and Key Metrics Changes - Adjusted NICS background checks, used as a proxy for consumer firearms demand, increased by 7% in Q3 2019, but decreased by 2% for the nine months ended September 28, 2019 [10] - The market experienced soft demand throughout the year, attributed to aggressive promotions and the loss of a significant distributor [9] Company Strategy and Development Direction - The company has opted to reduce production to moderate inventory levels rather than engage in aggressive discounting, aiming for long-term brand value [9] - The capital allocation strategy focuses on maintaining financial strength and returning cash to shareholders, with over $230 million returned in the past five years [15] Management's Comments on Operating Environment and Future Outlook - Management noted that the market remains soft, with cautious buying from retailers due to anticipated further discounting [9] - The company is optimistic about new product development and expects to continue launching new products [14] Other Important Information - The company declared a quarterly dividend of $0.11 per share, approximately 40% of net income, payable on November 27, 2019 [8] - Ruger was recognized as the Firearms Manufacturer of the Year for the 13th consecutive year at the NASGW annual meeting [16] Q&A Session Summary Question: Can you provide more details on the quarter's cadence? - July was slow due to a maintenance shutdown, but sales picked up in September, typical for the fall hunting season [18] Question: Are there any shortages in talent? - No significant shortages were reported, and hiring is being managed cautiously [21] Question: How is the discounting environment in 2019 compared to previous years? - Significant discounting is observed, particularly in the centerfire pistol and AR categories [27] Question: What is the impact of the distributor bankruptcy on the market? - The situation is improving, but the loss of a significant distributor has long-term effects on credit extension to retailers [84] Question: Is the company considering acquisitions? - The company is open to exploring acquisition opportunities but will conduct thorough due diligence [48]