Thursday, August 2, 2012

Ruger Has Another Great Quarter

Ruger released their 2nd quarter 2012 financial results yesterday and held an earnings conference call with investment analysts and those interested this morning. Suffice to say, Ruger had another great quarter.

CEO Mike Fifer reported that Ruger's earnings were up 63% for the quarter compared to the same quarter in 2011. Earnings growth was driven by a 50% growth in sales as well as some operational efficiencies. Breaking down sales, new products introduced in 2012 accounted for 38% of sales in the first half of 2012. Fifer attributed the following new products for driving this 38% increase:

  • Ruger American rifle
  • SR22 pistol
  • 10/22 Take-down rifle
  • 22/45 Lite pistol
In terms of dollars figures, Ruger reported the following for the 2nd quarter of 2012:
The Company reported net sales of $119.6 million and fully diluted earnings of 91¢ per share, compared with net sales of $79.6 million and fully diluted earnings of 56¢ per share in the second quarter of 2011.

For the six months ended June 30, 2012, net sales were $231.9 million and fully diluted earnings were $1.71 per share. For the corresponding period in 2011, net sales were $155.1 million and fully diluted earnings were 99¢ per share.
Ruger's unit sales or the number of firearms sold to distributors rose by  55% for the quarter. If one uses the NSSF adjusted NICS checks as a proxy for the industry as a whole, it only rose 18% during the quarter.

During the conference call, one analyst asked if the growth in sales for the LC9 were as a result of cannibalizing the sales of the LCP. Fifer replied, "Not in the slightest."

Fifer was asked about the $9 million in capital expenditures during the quarter. He replied:
Well, the important thing to know about the capital expenditures as I described is that we recognize them when they are placed in service. Which is -- so it's when I order it, not when I put a deposit on machinery, not when the machinery arrives, not even when I just get the tools up, but when I actually start producing parts. So the fact that I recognize $9 million in the quarter, it means I had a lot of equipment start producing parts in the quarter.
Finally, there was a question about the backlog and whether the orders submitted were firm orders or not. Fifer replied that Ruger had a policy of only accepting firm non-cancelable orders. Part of the rationale behind the suspension of taking new orders this Spring was the company's desire to maintain this policy. Prior to lifting this suspension, their sales staff worked with distributors reminding them to only order what they could actually sell to gun shops.

Ruger had a great quarter and with all the talk of new gun control measure plus the elections I fully expect them to have a very good 3rd quarter.

Note: In the interest of full disclosure, I am a shareholder in Sturm, Ruger and Company and have been for a number of years.

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