Sturm, Ruger & Company - Earnings Call - Q3 2020

Transcript

Speaker 0

Ladies and gentlemen, thank you for standing by, and welcome to the Third Quarter twenty twenty Sturm Brugger Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer As a reminder, today's program is being recorded. I would now like to introduce your host for today's program, Chris Kilroy, Chief Executive Officer. Please go ahead, sir.

Speaker 1

Good morning, and welcome to the Sturm, Ruger and Company third quarter twenty twenty conference call. Before we get started, I would like to ask Kevin Reed, our General Counsel, to read the caution on forward looking statements. Kevin? Thanks, Chris. We want

Speaker 2

to remind everyone that statements made in the course of this meeting that state the company's or management's intentions, hopes, beliefs, expectations or predictions of the future are forward looking statements. It's important to note that the company's actual results could differ materially from those projected in such forward looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward looking statements is contained from time to time in the company's SEC filings, including, but not limited to, the company's reports on Form 10 ks for the year ended December 3139, and of course, on the Form 10 Q for the 2020, which we filed last night. Copies of these documents may be obtained by contacting the company or the SEC or on the company website at ruber.com/corporate or of course the SEC website at sec.gov. We do reference non GAAP EBITDA.

Please note that the reconciliation of GAAP net income to non GAAP EBITDA can be found in our Form 10 ks for the year ended December 3139, and again, on our Form 10 Q for the 2020, both of which are posted on our website. Furthermore, the company disclaims all responsibility to update forward looking statements. Chris?

Speaker 1

Thank you, Kevin. Before we discuss our third quarter results, I want to provide an update on the impact that the coronavirus pandemic or COVID-nineteen has had on Ruger. The COVID-nineteen pandemic continues to cast uncertainty throughout the global economy. Nevertheless, any adverse financial impact on our business resulting from COVID-nineteen was negligible in the 2020. Since its onset in March, we have remained proactive in maintaining the health and safety of our employees and mitigating its impact on our business by providing all hourly employees with an additional two weeks of paid time off, encouraging employees to continue to work remotely wherever possible, maintaining social distancing throughout each manufacturing facility, including every manufacturing cell, confidentially communicating with and assisting employees with potential health issues through our dedicated facility nurses, restricting visitor access to minimize the introduction of new people to the factory environment, implementing additional cleaning, sanitizing and other health and safety processes to maintain a clean and safe workplace, and manufacturing and donating personal protective equipment to local hospitals, healthcare facilities and police and fire departments in our local communities.

The cost of these actions are expected to total approximately $3,500,000 in 2020, of which approximately $2,400,000 has already been recognized. We have also realized some expense reductions and deferrals in certain areas of our business, including conference and trade show participation costs, travel expenditures, sponsorships and advertising. These expense reductions and deferrals, approximate $2,200,000 largely offset the incremental COVID-nineteen costs. We suspended hiring from the onset of COVID-nineteen in March until June, when we resumed hiring at a modest rate to ensure the health and safety of everyone involved. This action may have hampered our ability to ramp up production, but the long term benefits of maintaining a healthy workforce and clean facilities far outweigh any short term adverse impact on our operations.

It was the right thing to do, and we will continue to keep the health and safety of the Ruger team as our paramount priority. And I'm happy to report that despite the self imposed limits on the size of our current workforce, the hard work and commitment of our dedicated employees allowed us to increase production 15% from the prior quarter and 50% from the 2019. The future impact of COVID-nineteen remains unknown. We have been fortunate to have only limited restrictions on our operations thus far. Our financial strength evidenced by our debt free balance sheet provides financial security and flexibility as we continue to manage through this crisis and focus on our long term goals and creation of shareholder value.

Now I'd like to ask Tom Deneen, our Chief Financial Officer, to give an overview of the third quarter financial results. Then I will discuss the current market and update you on our operations and the recent approval of our offer to purchase Marlin's firearms assets. Then we'll get to your questions. Tom?

Speaker 3

Thanks, Chris. For the 2020, net sales were $145,700,000 and diluted earnings were $1.39 per share. For the comparable prior year period, net sales were $95,000,000 and diluted earnings were $0.27 per share. For the first nine months of 2020, net sales were $399,600,000 and diluted earnings were $3.31 per share. For the corresponding period in 2019, net sales were $305,400,000 and diluted earnings were $1.37 per share.

The 53% increase in third quarter sales and reduced reliance on sales promotions were the main drivers of our significantly improved earnings, which were more than five times greater than last year. The balance sheet. At 09/26/2020, our cash and short term investments totaled $133,600,000 Our current ratio was 3.2:one and we have no debt. Our current cash balance is approximately $150,000,000 At 09/26/2020, stockholders' equity totaled $241,300,000 which was reduced by the $88,000,000 special dividend paid in August. This equates to a book value of $13.79 per share.

Cash generated by operations during the first nine months of 2020 was $82,000,000 Cash returned to shareholders. In the first nine months of 2020, the company returned $104,100,000 to its shareholders through the payment of dividends, reflecting the customary quarterly dividends and the aforementioned special dividend of $5 per share. Our Board of Directors declared a $0.56 per share quarterly dividend for shareholders of record as of 11/13/2020 payable on 11/27/2020. As a reminder, our quarterly dividend is approximately 40% of net income and therefore varies quarter to quarter. That's the financial update for the third quarter.

Chris?

Speaker 1

Thanks, Tom. Demand. Consumer demand, began to surge in the latter stages of the first quarter, continued to intensify in the third quarter. The estimated unit sell through of Ruger products from the independent distributors to retailers increased 50% in the 2020 compared to the prior year period. For the same period, the National Instant Criminal Background Check System, background checks, as adjusted by the National Shooting Sports Foundation, commonly referred to as adjusted NICS, increased 68%.

These staggering increases are attributable to increased consumer demand for firearms and have likely been constrained due to limited available inventory in the distribution channel. The surge in consumer demand likely continues to be driven by the call by some for the reduction in funding and authority of law enforcement organizations. Protests, demonstrations, and civil unrest in many cities throughout The United States, and concerns about personal protection and home defense stemming from the continuing COVID nineteen pandemic. In August, right in the middle of our third quarter, the National Shooting Sports Foundation, our industry trade association, released an updated report that concluded that nearly 12,500,000 Americans had purchased firearms this year alone. With that, the survey showed that 40% of those purchases were by first time gun owners.

Think about that. Approximately 5,000,000 Americans entered the firearms market for the first time in 2020. That is a tremendous opportunity for growth in our industry. Additionally, female consumers represented almost 40% of those new gun buyers. We are also seeing increases in hunter education, hunting license sales and participation in programs like the NSSF's Field to Fork program.

So we are excited for the future, and certainly increased participation in firearms ownership might have come about due to the pandemic or civil unrest. But what we are starting to see now is a stickiness amongst new and established consumers who are enjoying all aspects of our industry, from personal defense to hunting to plinking and competitive shooting. We believe that the future is bright. New products. Sales of new products represented $88,000,000 or 24% of our firearms sales in the first nine months of twenty twenty.

New product sales include only major new products that were introduced in the past two years, which include the extremely popular Ruger 5.7 pistol, which was recently awarded the twenty twenty caliber award for best overall new product by the Professional Outdoor Media Association in conjunction with the NASGW. The LCP II and 22 Long Rifle, which is based on the venerable LCP and LCP II platforms, utilize our Light Rack system allowing for easier slide manipulation for those with weakened hand strength and providing a lower recoil platform for comfortable training or shooting at the range. The Wrangler revolver, our latest take on the classic single action revolver, which has taken off even more than we could have hoped and also provides a fun way to enjoy a day at the range or introduce new shooters to the sport. Lastly, our two pistol configurations based on existing firearms, the PC charger and the AR-five 56 pistol. These products both represent a response to market demand for this new style of pistol.

We are very excited about the reception of these new platforms. Even in this current market, the consumer and media reception for these lines is impressive and keeps us excited for the future. As a reminder, derivatives and product line extensions of mature product families are not included in our new product sales calculation, but they provide a great value to our distributors, retailers and our loyal RURA customers. With the ferocious pace of business in the third quarter, we intentionally focused on high demand core product lines and therefore only launched four new models and seven new distributor exclusives. This brings our total number of unique firearms offerings to over 900 different models, which is still very impressive.

Please note, our engineering teams have not taken their foot off of the gas pedal in 2020. We are developing exciting new products and have taken the opportunity to queue up a variety of new platforms, products and models heading into 2021. I look forward to providing updates when we get closer to launching these innovative new firearms. Production and inventory. The incredible surge in demand again outstripped our production capacity during the third quarter.

As a result, the combined inventories in our warehouses and at our distributors decreased 27,000 units. To put this in some context, this combined inventory is down over 300,000 units compared to the end of third quarter last year. Although we do not have comprehensive inventory data available at the retail level, the information available suggests that the retailer inventory of Ruger as well as most other firearms brands remains largely depleted. I mentioned earlier that we had suspended hiring from March until June and had limited the rate at which we were bringing new folks on board. Despite these limitations, I am happy to report that our hiring efforts have allowed our current headcount to increase by over 140 employees since the end of the second quarter, allowing us to increase production at all facilities to better help meet demand.

Capital expenditures. Capital expenditures in the first nine months of the year were $8,000,000 The lion's share of these investments relate to new product development and targeted capacity expansions for some of our product families in the greatest demand. Now I'll talk about Marlin. As many of you are likely aware, our offer to purchase some of the Marlin assets in conjunction with the Remington Outdoors Company bankruptcy proceeding was accepted by Remington and approved by the Baxley Court in late September. We are very excited to broaden our catalog of rugged and reliable products with the addition of Marlin Firearms.

And the loyal Marlin customers are excited too. We have been bombarded with overwhelmingly positive emails and phone calls since the announcement of our pending purchase, reinforcing our assertions the Marlin lineup is an excellent fit for Ruger. We anticipate closing on this purchase in the 2020, and then we will focus on getting the Marlin lines up and running in our existing Ruger facilities. We look forward to reintroducing shooters to Marlin rifles in the 2021. Operator, may we have the first question?

Speaker 0

Our first question comes from the line of Ryan Hamilton from Morgan Dempsey. Your question please.

Speaker 4

Congrats on the quarter.

Speaker 1

Thank you.

Speaker 4

You're most welcome. Could you walk us through the cadence of the quarter, kind of what July looked like compared to June and so on? As

Speaker 1

you know, we typically don't disclose monthly sales data and such. But frankly, the level of demand we saw throughout the quarter stayed constant. We did not see it necessarily accelerating or decelerating. We saw it constant right from July right through September.

Speaker 4

Excellent. You talked a lot about safely bringing on new bodies, the headcount to help on the manufacturing side. Are there any other constraints that you're seeing to increasing production? Maybe touch on commodities at all, commodity prices?

Speaker 1

Good question. We haven't really seen any impact negatively in the way of commodity pricing or availability. We've had some limited interruptions from some of our suppliers who may have had COVID related shutdowns or temporary constraints within their facilities. But other than that, we haven't seen anything in the way of either commodities or suppliers negatively impacting our production.

Speaker 4

Great. And as far as headcount goes, roughly where are you at right now?

Speaker 1

We're I think, last I checked, somewhere north of 1,700 employees, somewhere between, you know, on or about 1,750 folks.

Speaker 4

Great. And what are what are the current shifts looking looking like at you don't have to walk me through each plant. Just just give me a a rough estimate as far as how things look, shift count and whatnot.

Speaker 1

Well, I mean, in you know, of course, in a modern factory, it's not as always as clean as first, second or third shift. We've got, in some cases, as many as five different shifts for a given product line when we take into account weekend time and things like that. So depending on the product, depending on the demand and how we can best accommodate the schedules in the factory and with associates, we'll break those shifts up. Typically, all three of our major firearms factories are running, obviously, full first shift, second shift, and then some staggered shifts depending on what we can do on the weekends and to be flexible in terms of additional capacity.

Speaker 4

All right. You you kinda just touched on the Marlin purchase at the end end of your remarks there. Did I hear you correctly as far as your plan is to bring over all of their manufacturing into your current facilities?

Speaker 1

Yes. The Marlin product line was split between the Ilien, New York facility, Huntsville, Alabama facility, and their wood shop in Lexington, Missouri. We're in the process of coordinating that move to move all the equipment, fixtures, tools, gauges, etcetera, into existing Ruger facilities.

Speaker 4

One more for me, then I'll hop back on. As far as maybe we can touch on that just a little bit more. What kind of capacity were they at? And do you think that this will add additional capacity? Obviously, the new adding Marlin line will add capacity.

But is there a potential to add capacity to your current production using, you know, Marlin tooling and whatnot?

Speaker 1

Yeah. That would that's obviously the the plan. I mean, we've got a full slate of equipment, everything from CNC machines and, as I mentioned, fixtures, tools, gauges, etcetera, as well as the intellectual property engineering drawing. And while we still haven't closed the transaction yet, we're very excited that this will be incremental volume to our overall business. And the important thing to consumers is that we plan to bring back Marlin to its former glory and continue to deliver some great products to our customer base.

Speaker 4

Have you and I know you can't touch probably a whole lot on this. Have you been seeing a lot of inefficiencies just in their in the way that they had been running businesses or the business where you think you can add a lot of value?

Speaker 1

Well, I'm not really able to comment on how it was done under the prior regime. Of course, as they got closer to bankruptcy, they were constrained, I'm sure, by limited ability, limited capacity to produce. So obviously, given our capital structure, we're looking forward to a new day for Marlin in the Ruger facilities. I couldn't agree more.

Speaker 4

I think it's a great move, I think

Speaker 5

you guys will add a lot

Speaker 1

of value.

Speaker 4

I'll hop back in line. Thank you.

Speaker 1

Thank you.

Speaker 0

Thank you. Our next question comes from the line of Mark Smith from Lake Street Capital. Your question please.

Speaker 6

First off from me, can you talk a little bit about ASP? How much of that was mix versus price increases?

Speaker 1

In the third quarter, none of it was related to price increases. That was all product mix, Mark, is where that came from. And just as things move around, you've got in the Ruger product line, of course, you've got products such as the Wrangler revolver at a you know, kind of a value priced entry entry level price point, all the way up to some other guns that are, you know, much much higher priced. So depending on the both the order book, when we look at ASP for orders, and we look at the the shipments, it moves around quite a bit.

Speaker 6

And are there plans on taking price increases that you can talk about?

Speaker 1

We did take a small price increase effective the November. So most of that will be reflected in the fourth quarter.

Speaker 6

Okay. And then gross profit margin, obviously fantastic during the quarter. Can you just speak to sustainability of gross profit margins? And anything that you can give us on kind of your outlook there?

Speaker 1

Well, as you know, we don't comment, make forward looking projections and things of that nature. However, as we increase volume with any of our factories, our efficiencies increase. And the other thing we're seeing is the in this environment where we're seeing continued sustained demand, the level of promotional activity is significantly scaled back. So in addition to saving money on things like certain trade shows and travel, we've got the a much decreased need to discount or promote the products. And that obviously has a positive effect on margins.

Speaker 6

Okay. And then I know that you don't comment on cadence on kind of demand and sales during the quarter. But can you talk about the production increases during the quarter and kind of the cadence of that and maybe potential for continued increases in capacity?

Speaker 1

Well, the biggest thing, as we said, we started our hiring efforts, turned them back on in June. And with that, we've had a steady increase in our headcount at all of our facilities, trying to bring folks on safely, get them get those new employees up to speed on the shop floor and get them productive. And that increased throughout the third quarter. And I would expect that effort to continue as we go forward. Right now, our HR and operations folks are doing a great job bringing new people on in a safe fashion and trying to increase production where it makes sense.

Speaker 6

Perfect. And then just two questions on Marlin as much as you can talk about that. You guys talked about CapEx, I think, being maybe roughly $20,000,000 for the full year, if you can confirm that. And then how much of that, if any, is Marlin kind of acquisition, some of that tooling and equipment that's in that number?

Speaker 1

That $20,000,000 CapEx figure is existing Ruger business. And so that's strictly related to existing Ruger facilities and new product line primarily new product lines, as we talked about, and expansion of certain product lines. And the Marlin transaction, none of that is reflected in the current figures. That was you may recall from the filings, that was a $30,000,000 purchase price, of which we paid a small deposit. And so we've still got the balance of that to pay from our cash on hand.

Speaker 6

Okay. And then last one on Marlin. Any idea on maybe where the inventory stands today, at least out at distributor or or retail? And do you see any issues in in pushing having that inventory kind of gone and depleted by the time that you start producing new Marlin firearms?

Speaker 1

I have to think most of that inventory is probably depleted already. I'm not you know, most if you look at the inventory at most of our distributors and and retailers throughout the country, Inventory, not just of Ruger firearms, where obviously we have better visibility of, but most firearms brands have been cleaned out at all levels of the channel. So we think that that's probably likely the same scenario with Marlin, although we don't know for sure.

Speaker 6

Okay. Sounds great. Thank you, guys.

Speaker 1

Thank you.

Speaker 0

Thank you. Our next question comes from the line of Raimo Diovanizio Your question please.

Speaker 5

Thanks. Good morning everyone. Chris in your comments you touched a little bit about upcoming new products. I just wanted to ask about that a little more. You know, just given how strong the demand is for your existing products, obviously including the new products launched within the last two years in that, as well as, you know, perhaps some limitations or whatever you want to call that because of COVID in terms of the potential for marketing.

I know SHOT Show is still scheduled for January at least for now. But could you just maybe talk about how we should think about the cadence just given that as we approach year end and beginning of the new year that's typically when many new products are introduced. Do you think about maybe pushing that out a little bit? Or are you just maybe going to stick with the originally planned schedule, just given all these sort of moving factors? Yes.

Speaker 1

Well, Ramel, as you know, we focus on the Frankly, our new product schedule is going to be driven more by when those products are ready to launch. We've got a couple really cool products in the hopper. They're not quite ready for prime time. And so the SHOT Show window and the normal distributor show season of January, February, typically, people see a lot of new product launches.

But as you know, with Ruger, a lot of times we'll do them, second, third or fourth quarter based on when that new product is ready. So that's the same thing this year. We've got a couple, great new products. We're going as fast as we can. If they're ready, we'll have them out in the January time period.

But I think, more likely, it'll be driven by when we can make sure the the guns are ready to go and we have sufficient quantity for our distributors to have inventory when we make the announcement. And again, in this environment, we want to make sure that even though while we're focusing on maximizing production for existing product lines, our engineering teams are really shielded from that in the sense that they are going flat out to get those new products ready to launch. So it's an interesting dichotomy. The new products teams are really paying no attention to the fact that existing products are selling at a rapid rate. They're going full speed ahead and we'll be ready as soon as those products are.

Speaker 5

Okay, great. Well, we look forward to seeing them. And thanks and congrats on the quarter. Thanks, Ramel.

Speaker 0

Thank you. Our next question is a follow-up from the line of Ryan Hamilton from Morgan Dempsey. Your question, please.

Speaker 4

I know I've asked this a couple of times over the last couple of quarters. But are you seeing any indication from retailers or whatnot on shortages of ammo or spike prices and ammo prices being a constraint to potential new buyers?

Speaker 1

Well, we're certainly hearing anecdotal evidence, and our our sales folks are hearing that from their retailers as far as the the demand for ammo. I think it's you know, I think our fellow, folks in the industry at the ammunition facilities are are flat out as well producing ammo. So I think it's a question of them, in their case, likely demand outstripping supply as well. But certainly haven't seen that yet negatively impacting, sale of firearms, I think because in this case, unlike previous times where we've seen some ammunition shortages that definitely impacted the sale of firearms, in this case, the demand is at high levels for both the firearms and the ammo, and you're seeing supply you're seeing the the supply not caught up with demand in in either case. So it's not a question like we've seen in some past situations where guns were available, but ammo was not, and it had a negative impact on the sale of the gun.

At least that's what we're hearing to our informal feedback from our sales force.

Speaker 4

Makes sense. On on, Marlon, do you plan on classifying those products as as new, you know, new design, new product sales, or is that gonna be put somewhere else when that starts coming offline?

Speaker 0

Good question.

Speaker 1

I I think we'll probably count as as new product sales. That's a good question. We'll probably identify it. So we know what's a Ruger new product versus Marlin new product. We've got a lot of work ahead of us on the Marlin product line.

We've got to get through the closing, got to get all that equipment moved into Ruger facilities. And there's a lot of work to be done. And of course, the Marlin product line has some great products. I mean, beyond just the centerfire lever action firearms that we think of like the three thirty six, eighteen ninety four and eighteen ninety five, they've also got the model 60 semiautomatic 22 caliber rifle that over time, I believe, sold probably more units than than even the Ruger ten twenty two. So we're very excited by the the mix of products that we're going to have access to bring back to the marketplace.

Speaker 4

And I may have missed it earlier. Did you say where you were going to put that production?

Speaker 1

We haven't made final determination. It's going to be split between at least two Ruger facilities, potentially all three, but I think it's more likely to be split between the Mahaden, North Carolina facility and the Newport, New Hampshire facility. But that still remains to be seen.

Speaker 4

And then one more for me, just kind of from a historical perspective. We see this happen every couple of years where we have surge in demand. Could you maybe just touch as far as historically goes, what time of period does this most reflect? Obviously, can take COVID out of that equation. But just from the production, the demand, could you maybe just touch on that and see where we're what this compares to historically?

Speaker 1

Well, in my thirty years plus in the industry, frankly, I think it's different than what we've seen in some of the past demand surges. You know, even in the run up to the 1994 assault weapons ban, we saw it, you know, in 2013. But again, this is, I think, stronger and fundamentally different in that it affects a wide variety of product categories. And when combined with the things that COVID-nineteen has forced us to spend more time at home, more time with our families, and resulted in some long term positives for the industry with getting people out to the field, out to the range, where you can social distance but still enjoy your sport or practice with your firearms. I think there's some fundamental differences that positive for the industry longer term rather than just a surge in demand and then as things slow down, some of the negative implications that we've seen over the years.

So I think we'll be very attuned to watching how demand continues to flow. We'll look at we pay attention very close attention to our distributor inventories. Our salespeople are in touch with their key retailers to watch for trends. And we'll be keeping an eye on it. But like I said, I think the good long term trends associated with this, new buyers, return to getting outside with your friends and family to shoot while you can still social distance, are fundamentally different.

And the other thing is we've never quite seen the level of inventory depletion within the entire channel. I mean the whether it's Ruger warehouses or distributor warehouses or the shelves at your local retailer, there's not a lot of inventory out there right now, especially in the key product families. So I think it's fundamentally stronger and different than I've seen in my three decades in the business.

Speaker 4

Thank you for the color. I appreciate it. Good luck on the rest of the year.

Speaker 1

Thank you.

Speaker 0

Thank you. Our next question comes from the line of Paul Saperstein from First New York. Your question please.

Speaker 7

Thanks for taking my question. You guys are in a unique position here in our COVID world. Could you just talk a little bit about it, kind of related to your comments on the demand side? You mentioned 5,000,000 new gun owners. What history tells you about how many purchases they might make of your product versus kind of multiple manufacturers and brands?

And then secondly, to the point of cautious hiring, which I'm sympathetic to, I mean, your 10 Q, you have over $400,000,000 of backlog demand, which, I guess, there's some risk that it would potentially go away if you don't fulfill that. Can you just talk about how you see clearing that backlog? Many quarters it might take relative to incremental demand that you're forecasting? Yes.

Speaker 1

Thank you. I guess I'll talk to a couple of those aspects, maybe the last one first. So one thing, when we look at our backlog, candidly, as a lot of folks on this call know, we don't spend a lot of time dwelling on our backlog. It is significant right now. What we watch more closely is what we call distributors sell through and distributor sales.

We're looking at what distributors are selling into retail and seeing how the product's moving. And so one note on on Ruger back orders, our our orders from our distributors, our independent wholesale distributors are non cancelable. So while they're non cancelable, our goal is never to stuff the channel, so to speak. So we don't want to see our distributors struggle and not be able to pay their bills. Obviously, right now, it's the exact opposite where they've got empty shelves and in some cases, they're moving product and cross docking it very quickly and getting it out to retail.

But so while we don't pay a lot of attention to that backlog, we run our business based on, like I said, the sales from distributors to retail. So even while that's an impressive number, it's not something we focus on. The and, again, you'll have to remind me again the first part of your question, if you would, Paul.

Speaker 7

Maybe it's on the

Speaker 1

hiring aspects?

Speaker 7

Well, the hiring was kind of related to fulfilling kind of or diminishing decreasing the backlog. But it seems like if you if I extrapolate the 15 employee growth, you know, that would kind of talk to you about 60% annualized and at least keep up with what the demand numbers are. But the the the separate question really is related to the 5,000,000 new gun owners that you mentioned and what history tells you about how many guns they might buy.

Speaker 1

They right. Okay. Good. I appreciate it. That's the other thing that goes along with thirty years in the gun business.

I start to forget some things, but I appreciate

Speaker 7

your patience. Up there from there.

Speaker 1

So the challenge there from a marketing standpoint and operations standpoint is it's a great opportunity. If you've got 5,000,000 new customers, that's stickiness. It's great to get them into the fold as a gun buyer. How do we convince them to buy gun number two, three and four? And more importantly, how convince do them to make sure it's a Ruger?

So that's something that I think the Ruger product line with our broad range of products available. When you look at our entry level ten-twenty two, twenty two caliber semiautomatic rifles that so many people have grown up with and had so much fun on the range, our precision rimfire rifles. And then on the handgun side, you've got some great entry level new shooter rifles or excuse me, pistols like our point two two four five, our Mark IV pistols made out in Prescott, Arizona. And, you know, we've just got such a wide range that I think even for the customer who may have bought a gun potentially for home protection or personal protection, and that might or might not be that person's first firearm, we'd like to see them get into a second, third, and fourth firearm to show them just how much fun this sport can be. There's a lot you can do, whether you're interested in hunting or going to the range.

Beyond just that one firearm you may feel a need for, for a personal protection or home protection standpoint, we think the Ruger product line is very well suited because of its diversity and covering a wide range of calibers from 22 all the way up to the big bore calibers for serious hunters. So we think, given that opportunity, we like our chances to succeed. We think we've got the some great options for folks, and we think, frankly, the Marlin product line is gonna continue to add to that for us.

Speaker 7

And and I don't know if you could kinda point to a number. Like, if you look at history, how many of your guns, like, does one customer potentially buy? Like, on on on average?

Speaker 1

Well, I hate to I hate to throw that number out of the guess. I know we've got that in our marketing material. But, you know, it's a most most Ruger customers, you know, once you get them over that first first gun, most of them are multi gun owners. And we've got some folks that have a whole safe full of Ruger's that they can rattle off everyone and the story behind everyone that acquired it. But I'm not going to hazard a guess on the exact number per customer.

But I think we do we probably do better than most because of the diversity of the product line. When you look at the mix of products and over 900 separate line offerings, there's so much to choose from in the Ruger product line that I think we probably get more than our fair share of those multiple gun buyers.

Speaker 7

Got it. And if I could just just one last one sneak in. Getting a gun license right now seems like kind of an extended time frame from the government. Do you have any any comments around that?

Speaker 1

Well, I think it probably varies by state, as you likely know. Depending on what state you're in, it can be a long process. I think a lot of potential buyers were surprised when they went to go buy that first firearm, again, depending on the state they live, that there were significant delays obstacles to getting that first purchase done. So one, we think that, of course, state and local governments were impacted by COVID nineteen just like us, you know, all of us were. And so I know that's had some impact.

But I think the biggest factor is just, you know, people were surprised, you know, if they hadn't been a gun buyer before. They were surprised at some of the hurdles and hoops that they may have had to jump through in order to exercise their second amendment rights.

Speaker 7

Yeah. Yeah. No. That's definitely the case in New York here. And just kind of the price increase that you just mentioned, can you quantify what the weighted average price increase would be?

And do you think that there'll be more increases over the several quarters because of the amount of demand you're seeing?

Speaker 1

Typically, you know, we've, you know, we've had, years where we we typically do a price increase on or about the beginning of the year. In this case, I think I mentioned, November. Was actually October. And, so it was about 3% across the board. And so, you know, that's kind of in in line with our normal annualized price increase.

Speaker 7

Okay. So about 3% annualized is kind of where you think things would be even with the the increase in demand?

Speaker 1

Yeah. I mean, I I think we we're we're conscious of the fact that a lot of people contemplate their purchases when it comes to firearms even in this market. They're thinking about that next favorite hunting rifle. And so we did take a price increase, but certainly did not do anything that I would consider to be opportunistic. It was just we did it took it in October rather than maybe normally we would do that in December.

But again, 3% is right in line with what we've done in years past.

Speaker 7

Great. Okay. Thanks again. Appreciate everything.

Speaker 0

Thank you. Our next question is a follow-up from the line of Mark Smith from Lake Street Capital. Your question please.

Speaker 6

Guys, just one quick one from me. Can you talk about the mix of demand that you've seen? We would expect handgun and MSR to be kind of the high ones. And and and then anecdotally, it seems like over the last month to couple months, we've seen more demand in kind of traditional hunting rifles. Can you say if if you've seen that?

And and if so, you know, if you think that's just driven driven by typical seasonality as we enter hunting season, or is it more a fact that people are now looking for just about any firearm they can find rather than maybe the one that they wanted?

Speaker 1

Good question. You know, on on the hunting rifle topic, our Ruger American centerfire rifles has done extremely well over the last couple of of years. And, you know, we were planning for a strong centerfire rifle market and, you know, production and demand cycle well prior to COVID. So we we thought our our sales would be strong there on hunting rifles. They have been.

I think to some extent, you're correct in that, people have gone into gun stores and maybe hoping to make a purchase on, something maybe they came in looking to make a purchase on, potentially a centerfire pistol or an MSR type product and ended up, based on available inventory, buying a bolt action rifle. So certainly, anecdotally, we've heard some of that. But we've been very pleased with the sale of hunting rifles in our traditional calibers as well as some newer calibers like the four fifty Bushmaster, three fifty Legend, etcetera. And so that's been stronger than we thought initially, but in line certainly, like I said, it's you know, we we were expecting a good hunting season, and we haven't been disappointed in that.

Speaker 6

Okay. Great. Thank you.

Speaker 0

Thank you. This does conclude the question and answer session of today's program. I'd like to hand program back to Chris Killoy for any further remarks.

Speaker 1

Thank you. In closing, I would like to again thank our 1,700 plus employees for their hard work and dedication during these difficult times. On behalf of all of us at Ruger, I also want to thank all the first responders, nurses, doctors, and other emergency and medical personnel who continue to go into harm's way to fight this pandemic and help our fellow Americans who are most in need. And please take the time next week to vote. Our right to vote should be cherished.

So please let your voice be heard at the ballot box. Thank you for attending our conference call and for your continued interest in Ruger. We look forward to discussing our fourth quarter results in February 2021. Thank you.

Speaker 0

Thank you, ladies and gentlemen, your participation in today's conference. This does conclude the program. You may now disconnect. Good day.