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RGR Sturm, Ruger & Co.

Participants
Kevin Reid General Counsel
Chris Killoy Chief Executive Officer
Tom Dineen Chief Financial Officer
Ryan Hamilton Morgan Dempsey
Mark Smith Lake Street Capital
Call transcript
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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Sturm, Ruger Second Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I will now hand the conference over to your Chief Executive Officer, Chris Killoy.

Chris Killoy

to call. Ruger welcome quarter Company and conference XXXX morning, the & Sturm, second Good

get I caution we General Kevin? Before started, Counsel, Reid, ask to our Kevin read the on statements. would forward-looking like to

Kevin Reid

results is Chris. the of the of differ or such the forward-looking in could management's future Sure, statements hopes, company's beliefs, the It that course want are everyone this to those that important We from expectations, that made projected state statements. intentions, forward-looking meeting actual to company's note remind or materially statements. predictions in

all both disclaims year which company are or XX, for sec.gov. SEC, non-GAAP for our our to XXXX, XXXX, do website the Furthermore, actual year documents Additional income December December net the quarter to Please of ruger.com/corporate information on company's concerning or EBITDA of statements. from be the the factors obtained that to ended Chris? the is of of but XXXX, company statements Form and filings, EBITDA. of the materially reconciliation of that could XX-K XX-Q the night. time GAAP for We last in may the note the the the cause not these those SEC filed reference posted website XXXX, SEC non-GAAP on on course ended Copies time second to course the in the and in for update or Form results second XX-Q XX, can of company's reports be which from quarter website. forward-looking Form Form the contacting company's contained to XX-K at at found responsibility by we to differ forward-looking including limited

Chris Killoy

you, Kevin. Thank

our we The in Confidentially mitigating remained resulting business, on our Before additional deferrals remains assisting expense business we costs, uncertain. The Ruger. $X experienced reductions and XXXX. occurred our in expenditures, in and of and employees almost results, business future recognized fire to the sponsorships pandemic and potential economy. in cell. donating which and including advertising. police manufacturing COVID-XX every hiring and impact dedicated travel deferrals At of impact health of the has certain implementing on which are of all its The carve second the or a healthcare distancing throughout an adverse quarter quarter employees COVID-XX facility time of actions second Since areas any on to want These including wherever maintaining reductions of in from could in health impact onboarding our local cost and total employees when new departments these of nurses, one, personal people protective XXXX. to with visitor had other in update through off, entirely and impact and safety our paid to PPE two quarter. reduced the possible approximate social $X million I from delays some by of reduced on second providing pandemic manufacturing uncertainty and conference maintain the facilities to environment, discuss and hospitals, we've and training throughout negligible issues health COVID-XX a continue weeks work workplace participation equipment, safe manufacturing continues the responsible remotely COVID-XX half minimize and of global each communicating the its Nevertheless, reductions until restricting introduction provide financial of that million clean and XXXX, with proactive time, we're with involved. in approximately March approximately March, our the million and all maintaining was coronavirus was for Suspending and communities. expense $X.X factory in employees to June safe cleaning, first safety in our confident to onset sanitizing resume manner facility our also additional to same expected the and tradeshow access procedures the during and to we encouraging

have operations limited only been We our far. fortunate on to restrictions have thus

the the debt could to provides loyal strength at sheet as our free of and to instrumental manage of be employees has I and success Ruger this financial Our of continue continue perseverance focus evidenced in and by face this be of to everyone we responded dedication proud this our to and shareholder not has creation X,XXX flexibility value. crisis. will security on crisis. balance financial long-term crisis been success and through how The our

I’ll Tom? And questions. Officer ask to then will then get and I Tom quarter we'll operations. on our Now, Chief current give the your to overview and market of Dineen, you update Financial results, financial our an second the discuss

Tom Dineen

Thanks, Chris.

second net the $XXX.X and XXXX, For were quarter per diluted $X.XX sales were earnings of million share.

diluted For million per sales were earnings the and period, net share. $X.XX prior comparable were $XX.X year

were For earnings $X.XX diluted six share. were million of the months per first XXXX, $XXX.X net sales and

on the improved For reliance and significantly the increase last of year's $XXX.X sales cash in tripled main corresponding $XXX.X which results. and diluted The our promotions sheet, million. XXXX, XX, period earnings, second earnings drivers were reduce our investments XX% per were sales in at totaled were June $X.XX short-term XXXX, share. sales balance and million net The quarter

per value to by X no June and of $XXX.X a Our XXXX, was totaled $XX.XX to to was XX, At current In debt. provided which shareholders stockholders dividends. Cash equity first months towards $X.X million. X.X XXXX, shareholders. we XXXX first ratio book six share. have the of million, million returned the the company of payment returned half Cash of the through $XX.X equates during operations

Directors This quarter, dividends declared shareholders. of our for two our Board

share. normal The of our net is $X.XX dividend income. quarterly dividend, first is is which XX% approximately This per

shortly. record XX, XXXX quarter. special $X special dividend payable on be That’s to are will commentary of dividend a XX, August per further provide update as share. the declared shareholders August will dividends the dividend financial Chris? for second The is XXXX. Chris on of Both and second of the paid

Chris Killoy

Thanks of the unit to the period. first of Tom. intensify the the XXXX began The in estimated of Ruger prior to through increased in the sell consumer demand, products from quarter continue surge to in Demand, quarter. independent XX% first latter which half to compared second retailers stages year the distributors

checks the period, to as Check Criminal same as System, Shooting by adjusted XX%. the For Foundation, adjusted commonly background Sports Instant National The NICS increased National Background referred

United to in of demonstrations stemming defense pandemic; enforcement organizations. concerns States continuing XX% factors. quarter many from protests, increased some attributable in adjusted For and COVID-XX civil lastly, by the the This cities call the demand prior a few one, funding be and personal to various protection NICS reduction appears throughout unrest the and the from year. about Number for in second authority law staggering XXXX, and increase of home

sales half in products, XXXX. New our or of new of sales products the million $XX first XX% firearm in represented

the product the the include in two years, new rifle, that were in AR-XXX II revolver, charger major pistol, New long .XX the pistol. only products and which Ruger-XX introduced sales LCP include Wrangler the PC the past

of the quarter, and channel, second product launched including line calculation, extensions Production the the retailers, in the distributors, exclusives and As new XX demand we and the consumer. distributor extensions, ultimate Notably capability incredible second outstripped our quarter. the in inventory, production mature product surge all a new product they immediate wholesale independent sales line but great included in our our customers, derivatives provide and at points our are product distribution reminder, not value families in during

units. As a result, and combined the distributors decreased in our warehouses inventories at XXX,XXX our

have not to happy March expenditures first depleted year capital inventory well. going hiring Ruger in of by until efforts the was retail very headcount over the do our at since had as were our we of levels. remains the comprehensive at employees half that hiring gather we $X.X the are suspended well firearms most Capital mentioned the Although, And very inventory second at from quarter largely suggests end we I the that in low increased the retail quarter. the million. report that expenditures, June. earlier first information level, data is current XX brands retailer and I'm as

Our developing throughout actively engaged XXXX. engineering and providing products to forward look new updates I in teams are

decided also per capital of pursue product product Four, our families opportunities we $XX innovation, our is Three, to dividends our cash million shareholder short-term support quarterly paid, need the capacity value. to We special XXXX. in maintain the would the obvious to of million will short-term return cash in and targeted out new we investments more position of value. our more development demand. $X through the dividend continue to to question. still average has of our of dividend, capital our and paying and the investment support $XX that when some can reason, and million invest an after greatest in at financial for second will operations. expect we to to balance a the June. believe we to to further shouldn't reinvesting dividend. expansions capital our expenditures Despite past annually be change total capital commitment Cash, is in grow. to than T-bills $XXX than balance us through company responsibly we cash balance and income accumulate return million approximate lastly which Accordingly, $XX is strong. the end cash We shareholders investments continue Operator, or generate net for this our been our and share in shareholder We Number have XX our expenditures dividend cash may we holdings overlooked of cash first one was into the leave is employ that our our but our generation, through strong long-standing quarterly short-term allocation XX% made special philosophy of in expenditures reason in generate a back is invest and most one, years, number this shareholders our reasons. decision Two, to capital a consistently

Operator

Instructions] Please question with [Operator Ryan Morgan first ahead. Hamilton Our Dempsey. is from go

Ryan Hamilton

well. everyone. morning, everyone's Hope Good

Chris Killoy

morning, Good Ryan.

Tom Dineen

morning. Good

Ryan Hamilton

if XXXX. I'm I'd curious Mark's thoughts little talk current call. last like of with about of compares XXXX your it did quarter. are – off you surge same a and He asked kind of from kind does the know quarter. this I question last how this to to just bit compare on late kind lead

Chris Killoy

been in the different Well, I I the saw probably I've assault this saw level XX strongest of took do ’XX. what in before XXXX for surge we years, is the seen. place. industry surge in ban that this is than demand think This Having doing weapons

has on inventory impact the the levels. channel. – is significant One And the impacted of at how most all it differences of all the levels

far as start Just the confirm as again, the is some about gun And will the significant continuing move to a store appears trip we to information your was as out purchase. we third sustain be for quarter. it strong local inventory of – and that to talked itself available

Ryan Hamilton

into leads quite of I'm ammo’s I kind that for impact kind picked get to and start I it? at gun clean – a decreased further also shelves. have whatnot. someone that ammo some up a out if firearms, of of noticing At with can't kind am new the question, stores a thing Great, check they gun or bit all that inventories your brand being and a new been business to along buys does and level in an I One inventories go noticing avid;

Chris Killoy

We've in past. seen that the

our .XX felt where ammo. low .XX the by You several of sale may of rimfire we of firearms impacted some the the are recall availability back being years

a impact ensure We they will dealers haven't firearm certainly I yet. new that a for retail the on at of lot seen the that level of believe purchase firearms firearms independent store. a supply new that least their the into caliber at their they can coming for firearm, that buyers ammunition have customers and minimal of support right first so in certainly their

that as heard. side least on a this firearm point the seeing impact at not we've that negative we're So at

Ryan Hamilton

last June? Okay. and and the walk kind April Could cadence, then May the through of look quarter, year you to us compared how did

Chris Killoy

on quarter. me individual the typically down into break thing we our – feeling within biggest the factories. or response in way impact But in were quarters. you months April, we to I excuse individual coronavirus and would tell the Well, our the The still don't its through

our ensure a with having practices into make out – coming spent and had in work, time to factory them, putting temperatures to to we're nursing working people checking screening we're coordinate in we if returning were keep we're our safe, travel some needing town, every people or cases So significant place they to sure to of folks staff self-quarantine of they that self-isolate. to

transition. And our April. people, great great our staff. in day and was HR two, open place job our as of a course, in we big able a lines lost to in keep We getting had kind staff, leaders all EHS that So a individual and we’re that then did They of to We have a factories through we never impacts that adjustment a our but operations us of shift some all work for between production. through or nursing of operating. and team our cases,

the had more those to practices implemented were procedures our that the so was thing we procedures the with used and keep solid folks though was to in really change, dealing got we cadence And a become as much that COVID-XX. biggest throughout. we really we able But was to is place And changed, even solidified we in and demand factories. – what that of routine, our unfortunately, saw

Ryan Hamilton

That's great.

fantastic talk You like guys the the shifts – at looking Could what little how operators. plants? different a are are about you bit

Chris Killoy

equipment in have a expansion. with maximize working not lot shifts five place. and lines. factories can. we become have the days, keep best move we six the certainly that four and we the a areas running particular then weekend on at you're as to are hard certain the some machinery to all very Well, run lines, shifts And a depends up where or they're on trying some very of noted, folks in into demand lines, some running always our ability straddle weekend, support what their three to XX-hour three some skilled rapidly call as question we just to multiple product It's shifts, And

Ryan Hamilton

the me, and good Sounds any of last commodity one note? for inflation

Chris Killoy

that ability businesses. run need our raw strong Not we supply of we've seen sheet a balance our maintain is good of to of to one benefits materials the the our

operations. indicators seen inflation, haven't closely. commodity anything. it like certainly like but hasn't our look So We economic today really it watch pricing, we very We at impacted

Ryan Hamilton

you I’ll very in Sounds Thank line. back get good, much.

Operator

Our Thank Mark with you go Instructions] Capital. [Operator Street from so Please Smith question is next much. Lake ahead.

Mark Smith

Hey, good guys. morning,

wanted quarterly why me, levels production, in units maybe XXX,XXX it talk levels about bit First given to back levels. on little you the for strong or basis? Can this lower peak ran these get in question And historical QX. so a about talk guys to kind production of a demand at

Chris Killoy

Back was number lot come talking a going about talk back few historical levels, concentrated lines. the you LCP XX/XX peak mind. a at when in probably when Well, you're years, Ruger that some of of and time, that product most to

Our around diverse operations lines, equipment skilled at make. is we very product team the support products moving to reconfiguring

board, And combination mean, everything and seeing and is hunting the support to so across in move and, the rifles our the there's all to case, a demand of we're XX/XXs where to equipment categories. I demand from demand this way and strong pistol trying AR-XXX

we're very support to then factor So terms is staffing. of you're trying those lines. cautious biggest the And in

into new and health we environment employees. We of manufacturing And March the shoulder on speed. from that would with communication safety I'll we factory turned We're hands in as that to there's in and piece noted, our reason, still factory lot team on, one people well things But over get new didn't focused of products, the that made we training June. hiring say to this very that up as a bringing as hire folks We we for them to keep the is pandemic, of to obviously a did on During expect, engaged cell, – within with our one the a associate known a a were back focus that. of, But efforts. constraint a that our was on keep then doing flow with doing job people a safe. management our you it. job and fantastic fantastic a and training we

decision So each the that ability new there proud likely and of associates in rapidly to to techniques, that, increase also training the train our some using was I'm classroom, first things on satisfied position. novel we're candidly, put But approach with and we that frankly limited but employees doing in using very microphones And our and a fairly course, staff foremost. QX. our some of production and safety headsets new then one conscious

Mark Smith

Okay, sense. that makes

Chris was think little XX You a about that commentary, about I since new the your in I of hiring talked think the quarter. bit employees, end

looked you opportunity capacity kind of QX, If at percentage kind any where at you're increase here? of today, versus mid maybe of in idea production on your a

Chris Killoy

don’t And disclose very leaders of work production needed to a of plan have on and type front and good-looking a and we're them support but in figures, going started that contribution. a to continue meaningful good really those Well, we're ops in achieving think I a we very do make folks our to to those demand, to place. defined have

Mark Smith

then brought look you just market versus machinery outlook of hunting calibers firearms, and kind you much moving rifles as turning and you a share products more hunting of high self-defense and hunting to What's pure firearms. talked And about Okay. into stuff, up especially and today we move kind demand to focus also you've are as then the your competition, on able season? fall guys how little historical bit at

Chris Killoy

travel and if of – think bolt-action we will, up on their in the the surprised look some more strong. category, the interest the had well going as – more field seeing frequently. movement, case, the both which home, passions you their demand take of far the our on moving I hobbies moving as Hawkeyes. maybe people line, attention as I that demand across board. hunting we about – about our do the predominantly on again, the to a we've that the hunting, pleasantly – mean, – micro to board. what's first, you to We to macro when to and we – the put do they rifle strong of ability they're close centerfire been society, hunting fork talk equipment. again, much people as our things roots, guess strong in get And able with hold We're last is back – that's trends say the maybe of American our been But at and question across the But whole being we'll macro as the we're one very hunting, but when when part what society. trends strong in see we rifles we But within talk to across cuts seeing, it's pretty

and Some lines we leaders product have ops people at been while we've we'll been actually about to move people flexible. help others. And are dividends. successful move easier to pay have good us with in demand. local more our a level very to been few very continue I those than Again lines think But the – very ailed that's

very our leaders in We've place throw rise them, they associates at a all up are succeed. Our and got and and we team whatever flexible. they challenge good

Mark Smith

Perfect.

a on kind headwinds But promotional I margins at the You already. you the the strong of long you're need quarter, these at given you that or during that And two-part how very see headwinds to seeing levels, that firearms profit of materials And today? really Anything low these question. strong, fact move to some of guys selling little lower just really was levels, talked do selling assume think there? potential you profit raw you can demand? expense kind be maintain about also running don't bit your then gross gross any in

Chris Killoy

that running put I January promotional – And programs. we Well, the we've past those in the you'll in programs, place in place September. right we've would promotional also we we're any May, others that that's interim the some along season not have some kick And for or many of in sure. off years in a April now, or recall with show put industry. in about mean, environment, talked factor programs big

now of not big programs But we fact having the the So Ruger impact run more products, small a see gross going to got but as kicked the January, right any bit leads think a of margin. and throughout impact. on you're programs pricing amount. still to to And off to that's in a I – some those – that little for that as marketplace we're as stability that well on very fulfill

that it's impact to decreased on promotional of gross So have the environment, longer we dollars. a more positive the stay going margin in

Mark Smith

you, guys. thank Excellent,

Operator

turn Thank [Operator any I Chris you. I the Instructions] to further final remarks. his questions the to in back queue. Killoy for don't see would call like

Chris Killoy

who operator, employees thank all Ruger, of would way conference continue during October. again and go me in bear moment. and forward look Ruger. you, our nurses, attending hard want pandemic to emergency continued to these for Americans work call times. fellow personnel your behalf and need. with and discussing dedication in are other fight On the medical for Stay our to results interest at their also safe. first to help like most thank Thank just in who Thank X,XXX our this us I to We of I our harm's into a third quarter difficult you and for responders, doctors all

Operator

program. with ladies participating gentlemen, you we thank and today's in And that, for

You may a disconnect. now great day. Have