Ruger second-quarter sales drop, but income rises
But decline in orders appears to be leveling off
Sturm Ruger & Co. sold fewer guns but made more money last quarter, partly because of an accounting change, federal tax cuts and the repurchase of shares.
The Connecticut-based company, with a major plant in Newport, reported net sales of $128.4 million in the second quarter ending June 30, about $3.5 million less than the second quarter last year. The company reported $15.2 million (57 cents a share) in net earnings, a 51 percent increase
Year to date, the $29.5 million of net income is still behind last year by about $3 million, as sales – $247 million – are about $40 million behind last year’s pace.
This is due to the continued falloff from the gun-buying frenzy during President Obama’s administration and the expectation that he be followed by a Democrat who would have been even a stronger advocate of gun control. The demand plummeted following President Trump’s election, when gun lovers thought they had a friend in the White House.
But the decline might be leveling off.
For instance, bun orders year to date are nearly double what they were in 2017, and production is picking up after a series of layoffs and an idle shutdown at the Newport plant during the week of July 4. The company still has 1,800 employees at its three facilities, though it did not break down the number of employees at each plant.
“We've actually been working overtime in all three of the major facilities, and we're looking for additional associates right now. We are hiring at all three locations for new sale associates,” said CEO Chris Killoy in an edited transcript of an earnings call provided to the Securities and Exchange Commission.
So far, Ruger has not been directly affected by the trade war, “because we order the vast majority of our raw materials domestically,” Killoy said. But indirectly, the Trump tariffs have made domestic steel more expensive.
The tariffs, he said, “have led to some price increases and some shortages of raw materials. That shouldn’t affect production, “but it's a tighter inventory situation than we would like and than we've seen in quite a while.”
The big increase in profits is good news for shareholders, because the 34-cents second-quarter dividend was based on 40 percent of net earnings, though most of the earnings boost was not related to regular operations.
Twelve of the 29 cents per share earnings increase was due to the Trump tax cuts, which reduced the company’s tax rate from 35 to 24 percent. The actual tax payments this year totaled $16 million, less than half the amount in the previous year.
The company gained another nickel of profit over last year from an accounting change, and 6 more cents through a stock repurchase.
Even so, the Ruger growth is not just on paper. It now has $132 million in cash, more than double the $63.5 million it had at the beginning of the year, and “more than we need to support our normal daily operations.”
And while eyeing possible acquisition – Killoy mused he might be interest in the remnants of Remington Arms, if the North Carolina-based firearms manufacturer goes on the market while emerging from bankruptcy.
That said, “if we get to a point where we decide that we will not be able to employ our capital, we will return the cash to our shareholders in the form of dividends,” said Killoy.