Sturm, Ruger & Company, Inc. · NYSE:RGR
Sturm, Ruger & — Investor Presentation (May 2017)
95 slides from Sturm, Ruger &'s investor presentation, May 9, 2017
Slide 1: Ruger Meeting
RUGER MEETING
Slide 2: Caution: Forward Looking Statements
Caution: Forward Looking Statements 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 is important to note that the Company’s actual results could differ ma
Slide 3: Overview
OVERVIEW
Slide 4: Christopher J. Killoy, CEO
CHRISTOPHER J. KILLOY, CEO STARTED SHOOTING AS. AYOUNG BOY WITH HIS GRANDFATHER. ALWAYS HAD A DEEP INTEREST IN FIREARMS AND SHOOTING SPORTS.
Slide 5: Christopher J. Killoy, CEO
CHRISTOPHER J. KILLOY, CEO GRADUATE OF THE UNITED STATES MILITARY ACADEMY AT WEST POINT. SUBSEQUENTLY SERVED IN A VARIETY OF ARMOR AND INFANTRY ASSIGNMENTS IN THE U.S. ARMY.
Slide 6: Almost years of experience in the firearms industry
ALMOST 30 YEARS OF EXPERIENCE IN THE FIREARMS INDUSTRY. PRIOR TO JOINING RUGER, MR. KILLOY WAS VICE PRESIDENT OF SALES AND MARKETING FOR SMITH & WESSON.
Slide 7: Christopher J. Killoy, CEO
CHRISTOPHER J. KILLOY, CEO SERVED AS VICE PRESIDENT OF SALES AND MARKETING SINCE NOVEMBER 2006. NAMED PRESIDENT AND COO OF THE COMPANY ON JANUARY 1, 2014.
Slide 8: We make rugged, reliable firearms for responsible citizens
WE MAKE RUGGED, RELIABLE FIREARMS FOR RESPONSIBLE CITIZENS. INNOVATIVE FIREARMS THAT THE AVERAGE PERSON CAN AFFORD.
Slide 9: What Sets Us Apart
WHAT SETS US APART OVER 600 AMERICAN-MADE FIREARM MODELS IN 10 PRODUCT CATEGORIES... SOLD THROUGH OUR 2-STEP PROCESS TO. INDEPENDENT DISTRIBUTORS: 18 DOMESTIC DISTRIBUTORS, 24 LAW ENFORCEMENT DISTRIBUTORS. 42 EXPORT DISTRIBUTORS.
Slide 10: What Sets Us Apart
WHAT SETS US APART MANUFACTURED IN AMERICAN FACTORIES WITH FACILITIES IN FOUR STATES: NEWPORT, NH MAYODAN, NC PRESCOTT, AZ ST. LOUIS, MO
Slide 11: What Sets Us Apart
WHAT SETS US APART MADE BY 2,080 NON-UNION AMERICAN WORKERS , AND 280 TEMPORARY EMPLOYEES... ——
Slide 12: A Consistent Game Plan
A CONSISTENT GAME PLAN WE HAVE DEMONSTRATED. CONSTANCY OF PURPOSE IN BOTH GROWING AND CONTRACTING MARKETS. OUR GAME PLAN IS DESIGNED FOR SUCCESS IN A VOLATILE INDUSTRY.
Slide 13: Market Conditions
MARKET CONDITIONS
Slide 14: New Firearms Available for Sale in U.S.
0 2 4 6 8 10 12 14 16 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 New Firearms Available for Sale in U.S. (In Millions of Units) Source: U.S. Firearm Production Figures from ATF: Annual Firearms Manufacturing & Export Report (AFMER). February 3, 2016
Slide 15: Total Annual U.S. FAET Collected
$- $1 $2 $3 $4 $5 $6 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 07 09 10 11 12 13 14 15 16 Total Annual U.S. FAET Collected (In Billions) Source: Annual Firearms & Ammunition Excise Tax (FAET) Collected by the Alcohol and Tobacco, Tax and Trade Bureau (TTB . January 31, 2017
Slide 16: Number of FFLs
Number of FFLs 0 50,000 100,000 150,000 200,000 250,000 300,000 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 Dealer (Type 1) Total (All Types)
Slide 17: Monthly Adjusted NICS
500 750 1,000 1,250 1,500 1,750 2,000 2,250 2,500 Monthly Adjusted NICS (In Thousands) December 2011 December 2010 December 2012 December 2013 December 2014 December 2015 December 2016
Slide 18: Trends in Retail Demand
250 450 650 850 1,050 1,250 1,450 1,650 1,850 2,050 6 8 10 12 14 16 18 20 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Unit Sell - Through (in Thousands) NICS Checks (in Millions) Adjusted NICS 198 % Growth Ruger Distributor Sell - Through 415 % Growth Trends in Retail Demand The adjusted
Slide 19: Product Development Process
PRODUCT DEVELOPMENT PROCESS
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Slide 21: New Product Engineering & Development
NEW PRODUCT ENGINEERING & DEVELOPMENT
Slide 22: Rapid Prototyping & Testing
RAPID PROTOTYPING & TESTING
Slide 23: Slide 23
Slide 24: Slide 24
Slide 25: Distributor Sales
DISTRIBUTOR SALES
Slide 26: New Product Launch
NEW PRODUCT LAUNCH
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Slide 28: Stamper
Stamper ‘Stampea st THeSUNSITE tesaer i} Mens cunsof, PeARLANRG0R)
Slide 29: Slide 29
Slide 30: Rifleshooter
= RIFLESHOOTER 2 SHOW FAVORITES USERS NEW FTW HRNTER Tes canesens, . THEM TIC'S NEW __ COMPASS 6.5-300
Slide 31: Slide 31
Slide 32: Slide 32
Slide 33: ies
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Slide 34: Retail Promotions
RETAIL PROMOTIONS
Slide 35: Best-in-Class Customer Service
BEST-IN-CLAS STOMER SERVICE
Slide 36: New Products
NEW PRODUCTS
Slide 37: New product platforms, line extensions and distributor exclusives
2 NEW PRODUCT PLATFORMS, OVER 30 NEW PRODUCT LINE EXTENSIONS OVER 300 DISTRIBUTOR EXCLUSIVES
Slide 38: Highlighted New Products: New Product Platforms
HIGHLIGHTED NEW PRODUCTS ¢ 2016 AND YTD 2017 2 NEW PRODUCT PLATFORMS MARK IV" PISTOLS SILENT-SR® SUPPRESSORS
Slide 39: Highlighted New Products 2016 and YTD 2017
HIGHLIGHTED NEW PRODUCTS ¢ 2016 AND YTD 2017
Slide 40: Mark IV Pistols
a i MARKIV™ MARK IV™ 22/45” 22/45" 22/45” LITE TACTICAL
Slide 41: Silent-SR .22 LR Suppressor
SILENT-SR’ .22 LR SUPPRESSOR
Slide 42: Silent-SR ISB Integrally Suppressed Barrel
SILENT-SR ISB INTEGRALLY SUPPRESSED BARREL
Slide 43: Over New Line Extensions
OVER 30 NEW LINE EXTENSIONS
Slide 44: Duty Model with Manual Safety
DUTY MODEL WITH MANUAL SAFETY COMPACT MODELS. QD owc182007
Slide 45: Highlighted New Products 2016 and YTD 2017
HIGHLIGHTED NEW PRODUCTS ¢ 2016 AND YTD 2017 TARGET MODEL LIGHTWEIGHT COMMANDER-:STYLE IN 9MM LUGER SRI911
Slide 46: Highlighted New Products 2016 and YTD 2017
HIGHLIGHTED NEW PRODUCTS ¢ 2016 AND YTD 2017 LCYs WITH HIVIZ LIGHTWAVE® FIBER OPTIC SIGHTS.
Slide 47: LCP and LCP II
LCP WITH VIRIDIAN® E-SERIES’ RED LASER LCP II WITH VIRIDIAN® E-SERIES RED LASER
Slide 48: .22 Charger
22, CHARGER WITH POLYMER STOCK (IN BOTH STANDARD. & TAKEDOWN MODELS)
Slide 49: AR-556
AR-556 STATE COMPLIANT (MD, CO) WITH HERA STOCK (CA)
Slide 50: AR-Lower Receivers
fit : AR-LOWER RECEIVERS
Slide 51: Mini-14 Ranch Rifle
HIGHLIGHTED NEW PRODUCTS ¢ 2016 AND YTD 2017 ~ MINI-14 RANCH RIFLE WITH HARDWOOD STOCK AND SATIN STAINLESS FINISH
Slide 52: Mini Thirty
MINI THIRTY WITH HARDWOOD STOCK MINI THIRTY TACTICAL RIFLE WITH MATTE STAINLESS FINISH.
Slide 53: Gunsite Scout Rifle
HIGHLIGHTED NEW PRODUCTS ¢ 2016 AND YTD 2017 GUNSITE SCOUT RIFLE IN .450 BUSHMASTER
Slide 54: Ruger Precision Rifle
RUGER PRECISION RIFLE ENHANCED VERSION AND NEW MODELS IN 6MM CREEDMOOR AND 5.56 NATO
Slide 55: Ruger American Rifle
HIGHLIGHTED NEW PRODUCTS ¢ 2016 AND YTD 2017 RUGER AMERICAN RIFLE’ PREDATOR IN 6MM CREEDMOOR ——_—., RUGER AMERICAN RIFLE’ RANCH IN .450 BUSHMASTER RUGER AMERICAN RIFLE’ PREDATOR WITH VORTEX® CROSSFIRE II® RIFLESCOPE
Slide 56: Ruger American Rimfire Target
HIGHLIGHTED NEW PRODUCTS ¢ 2016 AND YTD 2017 RUGER AMERICAN RIMFIRE’ TARGET
Slide 57: Hawkeye FTW Hunter
HIGHLIGHTED NEW PRODUCTS ¢ 2016 AND YTD 2017 Q ~ — HAWKEYE FTW HUNTER
Slide 58: 10/22 Takedown Lite
10/22 TAKEDOWN’ LITE
Slide 59: LCRx
LCRx IN 22 LR WITH 3” BARREL AND ADJUSTABLE REAR SIGHT LCRx IN 357 MAG.
Slide 60: Ruger revolver in .44 Special
lies, RUGER Gun yo \ 6 RF cro IN .44 SPECIAL
Slide 61: Redhawk
HIGHLIGHTED NEW PRODUCTS ¢ 2016 AND YTD 2017 REDHAWK IN 357 MAG.
Slide 62: Over Distributor Exclusives
OVER 300 —_ DISTRIBUTOR EXCLUSIVES
Slide 63: Competition (WBR 100 Years)
HIGHLIGHTED NEW PRODUCTS ¢ 2016 AND YTD 2017 COMPETITION (WBR 100 YEARS)
Slide 64: AR-556 with FDE Magpul Furniture
HIGHLIGHTED NEW PRODUCTS ¢ 2016 AND YTD 2017 AR-556 WITH FDE MAGPUL” FURNITURE
Slide 65: SR22 with Yellow Cerakote
* SR22 WITH YELLOW CERAKOTE® POLYMER GRIP FRAME
Slide 66: 10/22 Takedown Lite
10/22 TAKEDOWN LITE WITH RED RECEIVER AND BARREL SLEEVE
Slide 67: Vaquero Fast Draw
HIGHLIGHTED NEW PRODUCTS ¢ 2016 AND YTD 2017 VAQUERO “FAST DRAW"
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Slide 69: Financial & Operating Highlights
FINANCIAL & OPERATING HIGHLIGHTS
Slide 70: Quarterly Financial Results
Quarterly Financial Results (in Millions, Except Per Share Data) 2017 2016 Q1 Q4 Q3 Q2 Q1 Revenues $167.4 $161.8 $161.4 $167.9 $173.1 Gross Margin $55.8 $53.5 $50.3 $56.7 $59.1 Operating Profit $33.9 $31.7 $30.1 $36.5 $36.2 20% 20% 19% 22% 21% EPS $1.21 $1.10 $1.03 $1.22 $1.21 EBITDA $43.6 $42.5 $39
Slide 71: Current Events: Q1 2017 Financial Highlights
Current Events: Q1 2017 Financial Highlights • 2017 is o ff to a Solid Start • Sales Increased 3% from Q4 2016 • EPS Increased 10% from Q4 2016 • Cash Generated from Operations was $18.9 million • Distributor Inventory Decreased during Q1 2017
Slide 72: Current Events: Q1 2017 Financial Highlights
Current Events: Q1 2017 Financial Highlights • During Q4 2016 and Q1 2017; • We Repurchased 1.4 Million Shares of Our Stock • Representing 7.2% of the Outstanding Shares • At an Average Cost of $ 49.67/Share • A Total of $67.4 Million was Returned to Shareholders • Our Q1 2017 Ending Cash Balance wa
Slide 73: Accounts Receivable 99% Current
ACCOUNTS RECEIVABLE 99% CURRENT
Slide 74: Financial Management
FINANCIAL MANAGEMENT CONSERVATIVE BALANCE SHEET DISCIPLINED CAPITAL ALLOCATION
Slide 75: Company does not use backlog for planning production
THE COMPANY GENERALLY DOES NOT USE ORDERS RECEIVED OR ENDING BACKLOG FOR PLANNING PRODUCTION LEVELS.
Slide 76: SIOP: Sales & Inventory Operations Planning
SIOP: Sales & Inventory Operations Planning
Slide 77: Quarterly Sell-Through
Quarterly Sell - Through (in Thousands of Units) - 100 200 300 400 500 600 700 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Sell - Through 8,500/day
Slide 78: Quarterly Finished Goods Unit Inventory
Quarterly Finished Goods Unit Inventory (in Thousands) - 50 100 150 200 250 300 350 400 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Ruger 166,000
Slide 79: Quarterly Finished Goods Unit Inventory
Quarterly Finished Goods Unit Inventory (in Thousands) - 50 100 150 200 250 300 350 400 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Ruger 166,000 Distributor 306,000
Slide 80: Quarterly Finished Goods Unit Inventory
Quarterly Finished Goods Unit Inventory (in Thousands) - 50 100 150 200 250 300 350 400 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Target Distributor Inventory at 6 Turns is 328,000 Units Ruger 166,000 Distributor 306,000
Slide 81: Capital Allocation: Capital Expenditures
CAPITAL ALLOCATION IN THE PAST FIVE YEARS, WE INVESTED $191 MILLION IN CAPITAL EXPENDITURES TO GROW THE BUSINESS
Slide 82: Capital Allocation: Disciplined Stock Repurchases
CAPITAL ALLOCATION DISCIPLINED STOCK REPURCHASES SINCE 2006, WE HAVE REPURCHASED $157.2 MILLION IN STOCK ra
Slide 83: Disciplined Stock Repurchases
Disciplined Stock Repurchases Total Dollars (In Millions) Total Shares Price Per Share Q3 2006 $25.2 4,272,000 $5.90 Q4 2007 $20.0 2,216,000 $8.99 Q3 & Q4 2008 $10.2 1,535,000 $6.57 Q3 2010 to Q1 2011 $7.7 545,400 $14.10 Q4 2014 & Q1 2015 $26.7 762,900 $35.15 Q4 2016 & Q1 2017 $67.4 1,357,600 $49.67
Slide 84: Share Price & Repurchase History
Share Price & Repurchase History 2012 2011 2010 2009 2008 2007 2013 Q1 2017 2014 2015 2006 2016 $- $10 $20 $30 $40 $50 $60 $70 $80 $90 Repurchase $25 million Repurchase $20 million Repurchase $27 million Repurchase $67 million Share Price The volatility of our stock provides opportunities to return
Slide 85: Cash
Cash (in Millions) $0 $25 $50 $75 $100 $125 2012 2011 2010 2009 2008 2007 2013 Q1 2017 2014 2015 2006 2016 Special Dividend $87 million Stock Repurchase $25 million Stock Repurchase $20 million Stock Repurchase $27 million Stock Repurchase $67 million Our conservative balance sheet allows us to capi
Slide 86: Capital Allocation: Dividends
CAPITAL ALLOCATION SINCE 2009, WE HAVE RETURNED $179 MILLION IN REGULAR QUARTERLY DIVIDENDS, AND $87 MILLION IN A SPECIAL DIVIDEND.
Slide 87: Variable Quarterly Dividends
Variable Quarterly Dividends (per Share) $0.00 $0.10 $0.20 $0.30 $0.40 $0.50 $0.60 $0.70
Slide 88: Since early 2007 we have returned $398 million to shareholders
SINCE EARLY 2007 WE HAVE RETURNED $398 MILLION TO OUR SHAREHOLDERS. OUR MARKET CAPITALIZATION INCREASED FROM $220 MILLION TO $1 BILLION. OUR APRIL 1, 2017 CASH BALANCE WAS. $35 MILLION AND WE HAVE NO DEBT. I
Slide 89: RGR NYSE
RGR NYSE SHARES OUTSTANDING: 17.7 MILLION PRICE: $60.00 (5/517) MARKET CAPITALIZATION: $1.1 BILLION
Slide 90: Investor Communications
Investor Communications We anticipate releasing 2017 quarterly earnings and holding investor conference calls on the following dates: Earnings Release Conference Call Q2 2017 August 1, 2017 August 2, 2017 Q3 2017 October 31, 2017 November 1, 2017 Q4 2017 February 20, 2018 February 21, 2018
Slide 91: Investment Highlights
INVESTMENT HIGHLIGHTS HIGH VALUE PROPOSITION FOR CONSUMERS SALES DRIVEN THROUGH INNOVATION SCALABLE PRODUCTION AND MANAGED INVENTORIES. THROUGH 2-STEP DISTRIBUTION
Slide 92: Bottom-Line Driven
BOTTOM-LINE DRIVEN THROUGH LEAN METHODOLOGIES CAPITAL ALLOCATION DISCIPLINE CONSERVATIVE BALANCE SHEET VARIABLE DIVIDEND THAT PROMOTES CONSISTENT. CAPITAL ALLOCATION
Slide 93: A Consistent Game Plan
A CONSISTENT GAME PLAN WE HAVE DEMONSTRATED CONSTANCY OF PURPOSE IN BOTH GROWING AND CONTRACTING MARKETS. OUR GAME PLAN IS. DESIGNED FOR SUCCESS IN A VOLATILE INDUSTRY,
Slide 94: Questions
QUESTIONS
Slide 95: Caution: Forward Looking Statements
Caution: Forward Looking Statements 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 is important to note that the Company’s actual results could differ ma