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Sturm, Ruger
Trader: Hello and welcome to Sturm and Ruger’s Q3 2023 earnings conference call. [Operator’s Instructions]. Please note that today’s conference is being recorded. Now I have to introduce you to President and CEO, Chris Killoy.
Christopher Killoy: Good morning and welcome to the Sturm telephone convention, Ruger.
Kevin Reid: Absolutely, Chris. We need to remind everyone that statements made at this meeting that set forth the intentions, hopes, beliefs, expectations or predictions of the company or control relating to the long term are forward-looking statements. It is vital to note that the Company’s actual effects may differ materially from those projected in those forward-looking statements. From time to time, additional data is included relating to items that may cause actual effects to differ materially from those in the forward-looking statements. in the Company’s filings with the SEC, including, but not limited to, the Company’s reports on Form 10-K for the year ended December 31, 2022. And, of course, the 10-Q bureaucracy for the last, for the first, moment and third quarter of 2023, the last of which we presented last night.
A copy of the documents may be received by contacting the Company or the SEC or on the Company’s online page in ruger. com/corporate/ or, of course, on the SEC’s online page in sec. gov. We’re talking about non-GAAP EBITDA. Please note that the reconciliation of GAAP net revenue source to non-GAAP EBITDA can be found on our Form 10-K for the year ended December 31, 2022, and again on Form 10-Q for the first, second, and third quarters of 2023, all of which are posted on our online page. In addition, the Company undertakes no obligation to update any forward-looking statements. Chris?
Christopher Killoy: Thank you, Kevin. Tom will now talk about the company’s effects for the third quarter of 2023.
Thomas Dineen: Thank you, Chris. For the third quarter of 2023, net sales were $120. 9 million and diluted earnings were $0. 42 per share. During the same period in 2022, net sales were $139. 4 million and diluted earnings were $1. 03 consistent with participation. For the nine months ended September 30, 2023, net sales were $413. 2 million and diluted earnings were $2. 13 consistent with participation. For the consistent corresponding period in 2022, net sales were $446. 6 million and diluted earnings were $3. 90 consistent with participation. Our profitability was minimized in the third quarter of 2023 compared to the third quarter of 2022, with our gross margin trimming from 28% to 20%. The reduction in margin due to an unfavorable deleveraging of constant prices resulting from reduced production and increased sales promotional activity, in addition to the revaluation of our original LCP and Security-nine pistol models.
Our product suite is moving towards products with higher demand, with lower margins and price increases in materials, raw materials, services, wages, energy, fuel, and transportation. Our continued focus on the monetary field and long-term shareholder value is reflected in our strong debt-free balance sheet. As of September 30, 2023, our coins and short-term investments totaled $120 million. Our short-term investments are invested in U. S. Treasuries. In the U. S. , it is a currency fund that invests exclusively in U. S. Treasury instruments. U. S. bonds maturing in interior. de one year. As of September 30, 2023, our existing ratio was 4. 5:1 and we had no debt. Shareholders’ equity was $335. 5 million, equivalent to an e-book price of $18. 92 consistent with the stock, of which $6. 77 was coins and shorts. Term investments.
In the first nine months of 2023, we generated $17. 3 million in money from consistent operations. We reinvested $11. 6 million in the business in the form of capital expenditures. We expect our capital expenditures for 2023 to total approximately $20 million, similar to new product launches. , improvements to production apparatus and improvements to facilities. In the first nine months of 2023, we returned $107. 8 million to our consistent shareholders through the payment of our quarterly dividends and a special dividend of $5 consistent with the percentage paid in January 2023. Our Board of Directors has declared a quarterly dividend of $0. 17 in accordance with the percentage consistent with percentage holders recorded as of November 15, 2023, payable on November 29, 2023. As a reminder, our quarterly dividend represents approximately 40% of the net source of revenue and varies by quarter. to quarters.
This is the monetary update for the quarter. Cris?
Christopher Killoy: Thank you, Tom. Our sales and profitability in the third quarter declined compared to last year, as overall demand for firearms declined, creating a challenging and promotion-rich market. Estimated unit sales of our products from independent suppliers to stores in the first nine months of 2023 were minimized by 8% compared to the prior year period. Similarly, NICS background checks, adjusted through the National Shooting Sports Foundation, were minimized by 7% compared to the first nine months of 2022. We remain focused on our long-term strategy and have adjusted production rates across various product lines to better meet demands, which has reduced our overall production. Although our reduction in production hurt profitability in the current period, we were able to manage stock levels in the slow quarter, with only minimal accumulation of finished goods in our warehouses and virtually no replenishment in supplier inventories.
We are well placed heading into the fourth quarter. We remain disciplined and will only offer modest promotions in the third quarter. We run 3 in-store promotions, one for each of the 10/22 product families, Wrangler and American Centerfire Rifle, to ensure our strong retail presence. As Tom mentioned earlier, in September we also relocated our costs to two products: the LCP gun and the Security-9 gun. This has allowed stores to offer those products at competitive costs in very small markets. arms market, while ensuring the profitability of the three actors in the distribution channel; Ruger, vendors and shops. You may remember that we passed on our MAX-9 pistol prices in the first quarter of 2023.
We are incredibly pleased with the effects of this pricing strategy and the resulting functionality of the MAX-9. As we did with the MAX-9, we have protected the stock of independent distributors of LCP and Security-9 pistols, which has negatively impacted our existing margins, however, this will benefit us in the long run as we continue to demonstrate our commitment and appreciation for dealer investment. They can rest assured that their investment in Ruger is sound and profitable. Our debt-free balance sheet and diversified product give us a good position to capitalize on the rebound in the firearms market. We continue to pursue opportunities for our existing products and expand our product portfolio through innovation and product development.
2023 has been a busy year. Earlier this week, we introduced the Marlin Dark Series lever-action rifles manufactured through Ruger, which will appeal to a wide variety of gun enthusiasts interested in a more modern look and ability to design vintage rifles. Other new products introduced in 2023 come with 2 more Marlin lever-action rifles, the Model 336 Classic, chambered in Winchester 30-30, and the Model 1894 Classic lever-action shotguns chambered in Array44 Magnum. In April, we announced a Super Wrangler revolver, which comes with 2 cylinders, one for reasonable ammunition for Array22 rifle and one for the tougher Array22 Magnum ammo. As we discussed in the last quarter, in 2023 we will take the opportunity to offer new Ruger handguns in California for the first time in 10 years, thanks to some recent adjustments to gun requirements.
To date, four Ruger handguns have been added to California’s list of qualified handguns, adding a Mark IV, the SR22, an LCP, and a MAX-nine handgun. In the coming months, we look forward to introducing exciting new firearms under the Ruger brand. and Marlin, in addition to bringing more handguns to the California market. New product sales, which come with major new products introduced in the last 2 years, such as the Marlins and Super Wranglers I just mentioned, totaled $90. 5 million, or 23% of gun sales in the first nine months of 2023. This includes the MAX. -nine, the LCP MAX pistol, the LCP carbine, the small frame autoloader rifle, the Security-380 pistol, and the aforementioned Super Wrangler revolver and all Marlin rifles. Last week we attended the annual National Association of Sporting Goods Wholesalers, better known as the NASGW Show, in Columbus, Ohio.
We were revered for being identified through independent vendors, as we were named Gun Manufacturer of the Year and awarded Best New Rifle and Best New Product Overall for the Marlin Model 336. It’s a wonderful testament to our 1,800 unwavering and hardworking associates. Here are the highlights of the third quarter of 2023. Operator, can we ask the first question?
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