Ruger to Pursue M4 Upper Contract?

29 Jul

During their 2010 Q2 conference call this morning, Ruger CEO Michael Fifer discussed the possibility of government contracts for the Ruger SR-556 AR platform rifle. According to Fifer the Ruger SR-556 program is so new it would likely take years to gain a foothold in the military and police markets. However he did mention the possibility of pursuing a contract to supply replacement M4 uppers to US armed forces. When queried about the caliber of these replacement uppers he stated “I don’t even think the Pentagon knows”. Additional details on their pursuit of an M4 contract, or what the possible specs would be (would it have a piston????), were not discussed.

Fifer talked about the large number of first time gun buyers during the recent boom in gun sales and whether they will become repeat customers. He believes some of these new buyers are likely to purchase a second or third firearm since they had already crossed any perceived barriers when purchasing their first gun.

Fifer does not think the recent favorable Supreme Court decisions in Washington D.C and Chicago will have a large impact in the firearms market. These cities have quickly passed new laws making private firearm ownership nearly impossible, according to Fifer.

When asked whether Ruger would enter the derringer market, Fifer said the derringer market was good but quite small at about 50,000 units annually. A Ruger derringer would be a nice compliment to their SAA revolvers, but don’t expect them to enter such a small market.

Below is the Ruger press release announcing their 2010 Q2 earnings:

————————————————————————————

Ruger Reports Q2 Earnings, Declares Dividend
SOUTHPORT, CONNECTICUT–Sturm, Ruger & Company, Inc. (NYSE-RGR), announced today that for the second quarter of 2010, the Company reported net sales of $64.4 million and earnings per share of 43¢, compared with sales of $72.4 million and earnings per share of 46¢ in the second quarter of 2009.

For the six months ended July 3, 2010, net sales were $132.7 million and earnings were 86¢ per share. For the corresponding period in 2009, net sales were $135.9 million and earnings were 76¢ per share.

The Company also announced today that its Board of Directors declared a dividend of 10.0¢ per share for the second quarter, for shareholders of record as of August 13, 2010, payable on August 27, 2010. The amount of the dividend was based on a percentage of Operating Profit after adjustment for certain items, the same approach used by the Company since 2009. Under this approach, the amount of the quarterly dividend fluctuates directly with certain operating results of the Company.

Chief Executive Officer Michael O. Fifer made the following comments related to the Company’s results of 2010:

* New product introductions remain a strong driver of demand and represented $42 million, or 32% of sales, in the first six months of 2010.

* The estimated sell-through of the Company’s products from distributors to retailers in the first half of 2010 increased 1% from the first half of 2009, despite a reduction in National Instant Criminal Background Check System (NICS) background checks of 2% during this period.

* Cash generated from operations during the first half of 2010 was $17.8 million. At the end of the second quarter of 2010, our cash and equivalents totaled $58.7 million. Our current ratio is 4.0 to 1 and we have no debt.

* During the first half of 2010, capital expenditures totaled $12.6 million, much of it related to tooling and equipment for new products. We expect to invest approximately $18 to $20 million for capital expenditures during 2010.

* At the end of the second quarter of 2010, stockholders’ equity was $109 million, which equates to a book value of $5.68 per share, of which $3.05 per share was cash and equivalents.

* For the third consecutive year, a Ruger handgun has been named the Shooting Industry Academy of Excellence “Handgun of the Year”. The Ruger SR9c is the compact version of the SR9 striker-fired pistol, one of the slimmest and most ergonomic 9mm pistols on the market today.

The Company filed its Quarterly Report on Form 10-Q for the second quarter of 2010. The financial statements included in this Quarterly Report on Form 10-Q are attached to this press release.

The Quarterly Report on Form 10-Q is available on the SEC website at www.sec.gov and the Ruger website at www.ruger.com/corporate/. Investors are urged to read the complete Form 10-Q to ensure that they have adequate information to make informed investment judgments.

About Sturm, Ruger
Sturm, Ruger was founded in 1949 and is one of the nation’s leading manufacturers of high-quality firearms for the commercial sporting market. Sturm, Ruger is headquartered in Southport, CT, with manufacturing facilities located in Newport, NH and Prescott, AZ.

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