Good day, ladies and gentlemen, and welcome to the Q2 2019 Sturm Ruger Earnings Conference Call. At this time, all participants are on the listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. Should anyone require assistance at any time during the conference, please press star and zero on your touch-tone telephone. Also, as a reminder, this conference call is being recorded. At this time, I'd like to turn the call over to your host, to Chris Killoy, Chief Executive Officer. Please go ahead.
Good morning, welcome to the Sturm, Ruger & Company second quarter 2019 conference call. I would like to ask Kevin Reid, our General Counsel, to read the caution on forward-looking statements. Tom Dineen, our Chief Financial Officer, will give an overview of the second quarter financial results, and then I will discuss the state of the market and update you on our operations. We'll get to your questions. Kevin, let's get started.
Sure, Chris. We want 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 is 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-K for the year ended December 31st, 2018, and Form 10-Q, for the fiscal quarter ended June 29th, 2019. Copies of these documents may be obtained by contacting the company or the SEC or on the company website at ruger.com/corporate or at 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-K for the year ended December 31st, 2018, and our Form 10-Q for the quarter ended June 29, 2019, which also are posted on our website. The company disclaims all responsibility to update forward-looking statements. Chris?
Thanks, Kevin. Now Tom will provide a financial summary of the second quarter. Tom?
Thanks, Chris. For the second quarter of 2019, net sales were $96.3 million and diluted earnings were $0.35 per share. For the comparable prior year period, net sales were $128.4 million and diluted earnings were $0.86 per share. For the first six months of 2019, net sales were at $210.4 million and diluted earnings were $1.09 per share. For the corresponding period in 2018, net sales were at $259.6 million and diluted earnings were $1.68 per share. The reduced profitability in the second quarter and first half of 2019 was due primarily to the decrease in our sales and production, which resulted in unfavorable deleveraging of fixed costs, such as depreciation, maintenance, indirect labor, and engineering. The balance sheet. At June 29th, 2019, our cash and short-term investments totaled $131.8 million. Our current ratio was 5.1 to 1, and we have no debt.
At June 29th, 2019, stockholders' equity totaled $275.8 million, which equates to a book value of $15.76 per share. In the first half of 2019, we used $6.4 million of cash in our operations. Cash returned to shareholders. In the first half of 2019, the company returned $10 million to its shareholders through the payment of dividends. Our board of directors declared a $0.14 per share quarterly dividend for shareholders of record as of August 15th, 2019, payable on August 30th, 2019. 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 second quarter. Chris?
Thanks, Tom. Demand. Thus far, 2019 has been challenging for the firearms industry. The adjusted NICS checks decreased 5% in the first six months of 2019 from the comparable prior year period. Our internal surveys of distributors and retailers indicate that the overall market for new firearms in the first half of the year may have declined more than adjusted NICS data would indicate. The estimated unit sell-through of our products from the independent distributors to retailers decreased 26% for the same period. The discrepancy between the decrease in our sell-through and the decrease in adjusted NICS may be attributable to the following: The discounting and extension of payment terms offered by our competitors, relatively fewer new product shipments compared to the first half of 2018, which benefited from the launch of four major new products in December of 2017.
The loss of a formerly significant distributor that ultimately filed for bankruptcy protection in June 2019. Our shipments to them were significantly reduced in 2019 and decreased retailer inventories as the anticipation of further discounting led to cautious buying behavior by the retailers. Our surveys indicate used firearm sales at retail increased in the first half of 2019. This would also explain some of the disparity between our sales results and the adjusted NICS data, which includes both new and used firearms. Despite the softness and demand and the weaker market, we did not attempt any quick fixes. Unlike some of our competitors who offer deep discounts and reckless extension of payment terms in an effort to generate better short-term results, we remain focused and consistent on the execution of our long-term strategy.
We will continue to develop innovative and exciting new products, optimize our cost efficiency through our commitment to lean business practices, and employ a disciplined approach to capital allocation. New product sales represented $43 million, or 22% of firearm sales in the first six months of 2019. New product sales include only major new products that were introduced in the past two years, which include the Wrangler Revolver, the PC Carbine, the EC9s Pistol, the Security-9 Pistol, the AR-556 Pistol, and the Ruger Precision Rimfire. As a reminder, derivatives, distributor specials, and line extensions are not included in our calculation of new product sales. Production and inventory. We base our production and manage our inventory levels primarily through semi-monthly reviews of the estimated sell-through of our products from the independent distributors to retailers. We also review our inventory and that of our independent distributors.
Our total unit production for the second quarter of 2019 was 20% below the first quarter of 2019. As a result of our disciplined approach to production, the combined inventories in our warehouses and at our distributors decreased 18,000 units during the second quarter of 2019, despite the reduced demand. This allows further flexibility in our production and inventory management as we enter the second half of the year. In response to the reduced production in the second quarter, we were proactive in managing our workforce. We maintained the hiring freeze that was implemented in the first quarter and let attrition reduce our workforce. Overtime was reduced. We took two additional shutdown days in the second quarter, and we will take three shutdown days in addition to our normal annual weekly shutdown in the third quarter. Capital expenditures.
Capital expenditures in the first six months of the year were $3.9 million, which is low for us. However, as we have mentioned in the past, this is not indicative of a lack of new product development activity, nor does it signal a change in our commitment to new products. Consequently, we expect our total capital expenditures to approximate $15 million in 2019. Cash and short-term investments. Our cash and short-term investments balance of $132 million is more than we need to support our normal operations. Our capital allocation philosophy has not changed. Our primary responsibility is the stewardship of our shareholders' assets and the creation of shareholder value. We are constantly looking for opportunities to generate strong returns with our capital. We stand ready to capitalize if the right opportunity arises at the right price.
Nevertheless, 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. Operator, may we please have the first question?
Thank you, sir. Ladies and gentlemen on the phone, if you have a question at this time, please press star and one. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. I show our first question comes from Brian Raff from Morgan Dempsey. Please go ahead.
Good morning, guys.
Good morning, Brian.
Yeah. Can you, Chris, just kind of take us through the second quarter and kind of look at maybe the cadence of business. Did it continue to decline month-over-month? I think you said it was down quarter-over-quarter, like 20% in your production SIOP. I'm just kind of wondering what you're seeing, the pattern of demand.
Well, Brian, as you will recall, the summer months typically are the slowest months in the firearms industry. What we saw was things slowed down perhaps a little bit earlier than they normally do. Not unexpectedly, we saw that seasonal downturn, but it stayed pretty soft, and I would tell you, it remains a buyer's market at all levels. We saw a lot of deals being offered by our competitors and, in many cases, we had some strong programs out there to allow retailers to buy Ruger guns at a discount. They were the same programs offered to all retailers. Candidly, we didn't cut any deals. We didn't offer any extended payment terms, and we likely may have paid a short-term price for that.
Yeah. What are you seeing relative to some of the, at the wholesale level, what kind of magnitude of discounting are you seeing? Maybe is it comparable to what you saw back in 2017?
The biggest thing we saw with the distributor network this year was the bankruptcy filing of one of our major distributors, and that certainly had an impact during the quarter as well as they slowed down and things started to really unravel as they approached bankruptcy. We saw that really throughout the first quarter as well. Being one of the few manufacturers in the business who are 100% two-step distribution, when that happens, it impacts those retailers who are serviced by that distributor, as well as some of the big box accounts that may have to move their business. All that is something that we had to react to throughout the first half of the year.
Yeah. Relative to, I think it was Ellett Brothers or whatever, historically, what's been kind of the dislocation there? Is that a reorg, or are they out of business?
Right now, I believe it's still in Chapter 11 proceedings. They're in the process. I think last we heard, I believe most of their inventory has been sold, some of it at steep discounts. Frankly, we're not sure where that's going to go. I'm less than optimistic that they will emerge as a viable distributor for us going forward. I think that's not likely to happen. When that does all of that disruption to that base, if you have retailers who are served by those distributors, that causes them to look for new lines of credit, new source of product, and it provides a pretty good level of disruption within the industry. At one time, the Ellett Brothers and Jerry's were a couple of our top distributors over the years. That had changed in the last couple of years, but it's still an impact on that distribution network.
Right. Do you see in your two-step process, do you see at least incrementally some higher demand as that gap or void? Do you think that with Jerry's and Ellett being out, that that's kind of a new lower level, and that business wholesale may not come back by being redistributed across other wholesalers?
Well, usually what we've seen in the past, again, this is pretty much behind us with the Ellett and Jerry's situation. It takes a while for that business to shift over to other wholesalers. We've got a lot of strong wholesalers in our network that we're very pleased to do business with. We think the vast majority of that business will likely move there, but you always may lose a little bit in the translation. It's hard to say.
Yeah.
Especially the bigger accounts get a lot of hand-holding from the new distributor they're going to be working with, as well as our sales staff, to make sure that we can help them through that transition and get back up and running with their new source of supply.
Yeah. Got you. With your kind of bi-monthly SIOP planning as you kind of level load, what are you kind of running? Obviously, seasonally, summer is really slow, and I certainly understand that. What are you running shift-wise? Are you down to maybe one shift across most of the production lines?
It varies, Ryan, depending on the product line. For example, on a new product like the Wrangler built up in New Hampshire, we've got significant amount of demand. We're putting new equipment into place. In the meantime, we're actually working some weekend shifts to support the demand we're seeing out there. In other case, it makes more sense to stay with a second shift in certain parts of the business rather than try to put more capacity on a first shift. It really does vary. We've got some that are running through the weekend and some that are first shift only.
Yeah. Okay. I think you had mentioned back in 2018 that that was really a record year in repurposing CNC machine tools and moving tooling and that around. Was the second quarter and maybe the first quarter kind of the same pace, or has that backed off a little, or has that accelerated?
No. Our folks have become very proficient at moving machines and equipment from plant to plant as we need to for both increased production as well as new product development. The biggest thing when you look at capital expenditures, of course, is that what you see as a CapEx number for a given quarter doesn't mean that cash was spent that quarter. That cash may have been spent sometime before, and we don't roll it into the CapEx number until we go into production. There are some significant things we're working on for the back half of the year and for 2020 that you'll see that in future CapEx numbers.
Yeah. Okay. Chris, you guys have run roughly about 140 guys in your research group, and you got 85, 90, or 100 kind of engineering guys on your design teams. Any contraction in headcount there? The second part of the question might be, given how kind of tepid sales are, do you guys maybe stage or emphasize some of the major new frame product launches versus something that might just be a caliber iteration when you're kind of looking at, you're trying to create some buzz and demand, a new product that's kind of a dynamic new frame versus something that may be just an iteration?
Well, it's really a combination. To the first part of your question, there's been no cutback in our commitment to engineering and R&D. We've got full speed ahead in that regard. We were recently looking for some mechanical engineers. We've got our internship program right now going on for young folks in between, typically, their junior and senior year in college, hoping to recruit some additional mechanical engineers into our pipeline. That part of our strategy really remains unchanged. When it comes to those derivatives and things like that's been a unique part of Ruger's success of late. We have, I believe at last count, we're probably 750 individual SKUs built this year to date, and that includes maybe 300 to 400 catalog items, and the rest are things like Cerakote models, camouflage dip models, different slide configurations.
Recently, we launched what we call the Flag Series of products. We had an AR-556 MPR, we had the AR-556 Pistol, Precision Rimfire, and a PC Carbine, all with a distinctive flag pattern that our folks produced using Cerakote technology. We've got Cerakote and dipping in all three facilities, so it gives us a unique ability to kind of capitalize on those short runs. Might be only a couple of hundred units that a particular distributor or even a big retailer may request.
Yeah. Okay. All right. You're talking dealer specials though, right?
Distributor specials, yes.
Yeah
line extensions where it might be a caliber in a rifle, it might be a niche caliber in a number one product, for example. It might be color case hardened frames on a single-action revolver. All of those are things that we do as distributor, kind of limited runs.
Yeah. Right. When you look at your new product development, when you look at your design teams, given again how weak the economy, do you give any priority to design teams that are developing maybe more of a revolutionary new frame design versus just a caliber iteration, as an extension, and not a dealer special. I understand the specials. I'm just trying to think of how you look at the flow. Do you let your design teams just kind of evolve at their own pace? You're not trying to prioritize, I guess, a major new product launch, versus moving at the head of the pack or trying to put more engineers on it or whatever.
Actually, we put a lot of effort into our prioritization efforts. We have quarterly new product review sessions, so we cover all three of our factories, and we go through that, and basically, we rank order and prioritize our projects based on what we call gross margin dollars per day. It's a rank ordering. We look at a forecast, we look at where we might be on a cost, we look at the competitive landscape and say, "This one needs to move to the head of the pack." The more complex projects that are a brand-new frame, brand-new platform, as we would say, those typically have a full team involved in it.
That team includes design engineers, mechanical engineers that will support the fixturing, tooling, and gaging once it gets into the shop floor, as well as supply chain personnel and product management folks to ensure that big project comes in as close to on target for both time and budget as possible. We definitely prioritize the big payoff projects, and typically those are our new platforms. Something like when you think about the PC Carbine or the Wrangler, those are ones where we had a full engineering development team assigned to it with their own dedicated project management staff to go through and make sure we hit all our key milestones.
Yeah. No, it's a good answer, and I appreciate that. As we saw kind of 2012, 2013, was a MSR rifle, a lot of accessory furniture, and then we kind of got into the smaller self-defense, the palm guns, the smaller like your LCR and LCP. As you look across the landscape in the firearms industry, are you seeing any revolutionary design? Are you seeing any direction in new product categories that might draw some interest? Without specifically talking about what's in your pipeline. I understand you want to be a little careful on that.
Well, we think concealed carry remains a very strong segment of the market. We also think the MSR market has good opportunity, and frankly, even the bolt-action rifles in the hunting category. We've had great success the last couple of years with calibers like the 450 Bushmaster and recently the 350 Legend. We've got not only standard SKUs or models, but we've got a bunch of distributor specials in the works for 350 Legend. We try to go where that opportunity is. Some of those are bigger pockets of opportunity than others. I think things like even bolt-action rifles, we've seen some nice opportunities as long as we focus on the right niche.
Yeah. Okay. Your Ruger Custom Shop, you started with Doug Koenig's 1911, the 10/22. Are you continuing to develop at a pace that you're happy with new product launches there?
We are. Candidly, I'd like to go faster, but these are type of high-end products that we really need to take our time on and make sure we get it right in terms of features and quality. We recently had the GP100 product. It was very cool, that we had out there, had a vented look on a barrel shroud. We have most recent addition is a Custom Shop, SR1911 in 45 Auto, that's another one that Doug Koenig helped us both conceive and design and make sure we were bringing it up to the right standards. We've been very happy with that, and we're going to continue to take, I'll say, a measured approach to make sure we don't slip up in terms of either the specs or quality.
Okay. I'll get back in line. Thanks.
Thanks, Brian.
Thank you. Our next question comes from Max Metryakov from 2AMED Incorporated. Please go ahead.
Hey, good morning, guys.
Good morning, Max.
Good morning.
A quick question for you. Perhaps if you can shine a little bit more light on this. You guys have had a really good new product launch that has received really good response from the media and most of all, the consumers and the retailers. Doing a lot of the channel checks, I mean, you go into a Cabela's, you go into your local FFL, and they can't get in stock a lot of the new products. On the other hand, here we have year-over-year declining numbers. I mean, if you can possibly fill in the gap on there, possibly with the distribution channel or with somebody, I guess, very conservative in terms of expectations for the new launches.
In particular, a couple that you may be talking about, Max, the Wrangler revolver we make up in Newport, New Hampshire, got off to a great start. It fills a unique niche at a very attractive price point. I mean, we typically see that advertised below $200 in a lot of cases. It hits a nice price point. We know there's a lot of volume there. The challenge on new products is the demand is always greatest when production is frankly at its lowest or ramping up point. We are working very hard to get more Wranglers out. This is a gun that I think we have a total of actually five shifts throughout the week, that cover seven days, to maximize what we can build and ship. We're in a process of moving more machines into that line to increase production there.
This one here, we think there's a lot of good opportunities, and that's really only in the three models we introduced, the three different color versions of the .22 Long Rifle. We're excited about it, but yeah, I know there's some frustration out there at the certain retailers that haven't seen maybe their allocation or what they'd like to get from distributors. It is a challenge sometimes with new products. We've seen it in the past. When you work through two-step distribution, we don't necessarily connect with demand as fairly and as fluidly as perhaps we'd like, or as perhaps some dealers would like. They are out there. We're making them every day and shipping them every day. There's more coming.
Okay. The next question I was looking for this, can you comment on your recent product mix, I mean, basically between long gun versus handgun? Perhaps if you can comment on possibly the new introduction product overlap with the recent increases we saw in the NICS data for May and June, particularly as it related to the frenzy buying for California and Washington. What I'm getting at is, did you guys were not able to possibly participate in that as much as you can because a lot of the new product introductions that would fit that bill weren't available?
Good point. One of the things you covered, I think, Max, in one of your articles, looking at states like Illinois and California. For example, in California, we only have one pistol model on the Department of Justice roster. In that center-fire, semi-automatic, higher capacity magazine world, there's not much we can do to play in California. We do try to make products available for those markets that have changed their laws, whether it's a 10-round or 15-round magazine limit. We recently introduced, you may have seen the California compliant version of our AR-556 using Juggernaut Tactical's fixed magazine kit. Again, we try to have those models to be state compliant as quickly as we can and adapt to rules and changes in the law.
We did see, for example, when California changed some of the laws on magazines, we saw our magazines basically cleaned out, both at our level and distributor level. That goes very quickly, and you have to move on to, I think, the products with good staying power. We see it, we react to it as best we can, but in some cases, like you pointed out with Illinois and I think it was California, it's tough to anticipate those changes in the law. We do our best to react to it and make sure we can continue to serve all our customers with compliant models for their states.
I guess the final question, if you can comment, so shopruger.com, the website has gotten better. You started carrying more products on there. Is that going to be a focus point going forward? I'm assuming now it's not going to be driving significant revenue, but are there possibly hopes that it will in the future?
I think Shop Ruger is always going to be a good complement for our product line. A lot of our customers like to buy Ruger accessories or Ruger OEM parts directly from us, rather than through a third party. We're always sensitive to competing with our bricks and mortar retailers. If that same item is available from a retailer, that's great. We'd rather they get the sale of that magazine from a local retailer than necessarily Shop Ruger, but we want to be able to supply that magazine for customers who can't get it. Our customers are used to buying things online, so we want to certainly participate in it. I don't think it'll be a major contributor from a revenue standpoint, but I think it's an important one to make sure we take care of our customers.
Awesome. Thank you very much, guys.
Thank you.
Thank you. Our next question comes from Austin Bond from Rule One Partners. Please go ahead.
Hey. Good morning, guys.
Good morning.
Good morning.
Okay. Just first off, I wanted to thank you guys for, as a customer and a shareholder, sticking true to your values and not bending to some of the activist pressures that have been coming at you the past couple of years. Thank you.
Thank you.
Yeah. As a first question or my only question, do you guys have any estimates of how many first-time firearm owners there are annually in the U.S.? Just looking to get some type of a baseline of new owners overall.
Off the top of my head, I don't have that estimate. I know the National Shooting Sports Foundation, our industry trade association, has some pretty good data that's fairly current. I'm not sure it's been updated for anything as close to the current quarter or recent past. I think it's fairly current. Again, rather than hazard a guess, I'd suggest possibly talking to folks at NSSF. I would tell you that it's a mix of customers. We see the new customers we love to get, we love to help them get their first gun, learn to use it safely, and then hopefully, our goal is always to get them started with a Ruger beyond just a one gun, maybe concealed carry or personal protection situation, and get them where they really start to enjoy the shooting sports. Get them into a 10/22 or a Precision Rimfire.
Maybe get them into one of our Mark IV pistols, let them really have a good time shooting, and then move their way up and through the product line. Once we get a Ruger customer, we tend to retain a Ruger customer for life.
All right. I'll reach out to NSSF and see if they have any new stuff coming in. I think the last report that I saw was a couple of years old. Thanks, guys.
Okay, thank you.
Thank you. Our next question comes from Joe Edelstein from Johnson Asset Management. Please go ahead.
Hi. Good morning, everyone.
Good morning.
Good morning.
Thanks for taking the questions. First question for you is just if you could quantify the sales impact from losing the distributor that went bankrupt, and related to that, how do you view the health of your other partner distributors? Should we be anticipating any additional bankruptcies across the distribution chain?
Well, we don't really quantify individual distributor sales or the impact. Certainly, again, Ellett and Jerry's were both strong wholesalers for decades, candidly. I've dealt with them as companies in the 30 years I've been in the industry. It's a shame to see them go by the wayside, but that happens. I would tell you on the remaining members of our distributor base, our biggest and best distributors are extremely solid. They're well-capitalized. They watch their balance sheet as closely as we do, and we're very pleased with their performance. We'd always like them to buy more Ruger and keep more Ruger inventory, but in large measure, we're very satisfied with their performance. There may be some smaller distributors that may struggle during this period, but that remains to be seen.
At this point, we're not seeing anybody perhaps looking to go down the same path as Ellett Brothers and Jerry's, but you never know.
Okay, thank you. Maybe just related to the last question around new buyers and kind of what that underlying demand trend looks like, and obviously the market has been volatile, and I know that you don't give any sort of annual guidance, but could you share some thoughts just around what you do think long-term sales growth could look like? Any operating margin goals, earning algorithm goals that you might be able to share with us as you look out over the long term? Clearly things have not normalized yet, but just kind of where do you think we can go for this industry long term?
We certainly don't give financial guidance along those lines looking out to the future. I would tell you that we have a lot of confidence in the firearms business. That's all we do. We don't diversify beyond our core strengths. There's certainly some gaps in our product line that we want to strengthen and grow with new products, primarily organic growth, but if an opportunity presents itself down the road that might make sense for an acquisition, we're open to that as well. We think there's good headroom for Ruger to continue to grow in the firearms market. We don't plan to change our course of action, or frankly, what we do best, which is make great firearms.
The new products that we're working on right now cover a wide range of platforms, and we see a lot of opportunities for us to go out and get that business. Even in a declining or potentially stagnant market, it's incumbent on us to go out and take that business with exciting new products.
Related to just the comment that you would be open to acquisitions, is it fair to say that you at least did look at the Savage and Stevens shotgun brand portfolio?
We really can't comment on specifics there, but I would tell you that when these opportunities come up, we're on every investment banker's speed dial, and we get lots of calls to look at lots of companies. It just has to make sense for us. It has to make sense from both a product line overlap, multiple price point, and things of that nature. We get lots of calls from the investment bankers anytime they've got a project or a company they're working with to sell.
Okay, thanks for taking the questions and good luck.
Thank you.
Thank you. Our next question comes from Brian Raffin from Morgan Dempsey. Please go ahead.
Yeah. Chris, you had mentioned a little bit about MSR sales, and I'm wondering, are you seeing the market? You guys produce your SR762 and the AR-556 and also the lower price AR line. How are you seeing demand from a pricing standpoint? Do you see it migrating more toward the lower price lines versus maybe some of the higher price gas enhancement?
Brian, good question. Absolutely. We see a lot of downward pressure on pricing. We see some great prices out there right now on very well-executed M4 platforms like our AR-556. We're seeing a lot of pressure there. We see some bright spots when you've got the right new product mix, feature-based, things like when we launched our AR-556 with a free float handguard, or the MPR, the multipurpose rifle that we introduced last year. Those are really nice options that give you an upgraded look, maybe things like M-LOK attachment slots on the handguard, some things that buyers are looking for at a slightly higher price point. We're seeing overall, a lot of pricing pressure on that line. The things like the AR lowers, whether they're stripped lowers or loaded lowers, as we call them. You see those prices moving a little further south, almost on a weekly basis.
There's a lot of capacity out there still in the AR world.
Got you. You guys, I think, have been very careful in the past, in the SR and AR lines, not to develop too much accessory, and limit the application for demand. Does that still kind of preclude you from, on the M&A side, from going out, and looking at specific companies that might make stocks or receivers or anything that might be optics from that standpoint? You guys have always been, I think, kind of careful on how much detail you put in furniture coming out of the factory.
Again, good question. We really look at anything that comes our way. The accessory side is interesting. There's certainly things that we buy from great suppliers, people like Magpul, some of the magazine vendors throughout the world, some cool features we've put on. When you look at the AR world, they tend to change pretty quickly as far as what the consumer wants. If you think of the migration over what slots on the forends of an AR rifle, even that changes. The ability to be vertically integrated in some cases helps us react to that to make our own furniture in some cases. In other cases, some of the vendor-supplied items are very cool, very exciting, and things that our customers want. We'll go out and buy them from a good vendor and add them to our product mix.
When it comes to buying actual companies that produce those, again, it's the same thing. We look at the multiples people are looking at, we look at the long-term viability and whether it makes sense and make sure that we're bringing more than just being a banker with our balance sheet to the table. We'd rather make sure it makes sense for Ruger long term before we invest in it.
Got you. As you look to the turn going into the fall, Chris, being kind of a tepid market challenged on unit volume, as you kind of pre-position in the long gun area, is the hunting, kind of the standard bolt action, and obviously some of the MSR demand, how do you kind of go into this hunting season, given the fact that certainly volumes are down?
Frankly, we're going into it pretty aggressively. We've got a lot of new SKUs in the bolt action arena coming out of both our New Hampshire facility and our North Carolina facility. Things like the 450 Bushmaster caliber that I mentioned before, as well as now the 350 Legend that Winchester brought to market, I think really open up a lot of new opportunities for folks. What we're seeing is what may initially start out as a niche caliber gets broad acceptance. We saw that with the 450 Bushmaster. We're probably, I think, going to see that with the 350 Legend. We've got, like I said, a lot of our distributors have already come back looking to have special makeups done in the 350 Legend caliber.
Got you. Anything on the commodity feedstock side, commodity inflation, steels, oils, woods, waxes, resins, green sands, anything that you're seeing on a cost pressure side?
No. We saw, frankly, when the tariffs were imposed on offshore steel manufacturers, we saw some tightening of our supply chain for steel. We always buy our steel domestically. We did see as supply looked like it was tightening, we made sure we had plenty of steel in inventory to cover our production. That's one of the things, the strength of our balance sheet allows us, when we need to go ahead and buy a little bit deeper in the raw material side than some people might be able to. That's how we make sure we're ready to go when things either pick back up or when that supply chain continues to get tight. Right now on the actual pricing, we're not really seeing it. We're in pretty good shape, I think, in terms of all those commodities you mentioned.
Yeah. Got you. Anything from the military or police on the MSR side? Any things that you're looking at, or what's kind of the field demand there? That's always kind of a special, I know from a distributor standpoint, but I'm just wondering if you see any business on that side.
It's typically not our biggest focus. We are seeing good interest from tactical teams on our Ruger Precision Rifle series, especially now that we've got the 300 Win Mag, 6.5 Creedmoor, and some of the Magnum calibers, 338 Lapua. We're seeing some good test and evaluation requests. Some of those may be for small police departments, some of those may be for larger groups, but so far, I wouldn't say it's having a measurable impact on our revenue just yet, but we're pleased with our performance in some of those T&E trials.
Okay. Just one on the foundries up at Newport or whatever. Anything on the legacy foundry relative to being wound down, or is it still going? I think you were running two of the mini foundries at the last call. Just any update there?
Yeah. We've got the two rollover furnaces or mini foundries working very well for us. They're pretty much covering all of our capacity that we need right now. No plans at the present time to put on a third. As far as the legacy foundry, we still use it for a few items, but very few. It's not completely shut down, but there's some things that we do for our revert or material that comes out of the casting process to be remelted down. Aside from that, most of our production, virtually all of our production, has shifted over to the mini foundries, and we're very pleased with the process the folks have made up there.
Yeah. Got you. Chris, you mentioned the bankers on the speed dial relative to Stevens and Savage and that on some of these deals. Given kind of this couple year malaise here, are you seeing any pricing come down on multiples? What's been from the standpoint of kind of the deal flow for you guys? Is it down? Is it up? Is it hit or miss all over the place? What's been kind of the pace?
They come in spurts, it seems like. We'll get a book from somebody on small accessory companies. We'll see a bigger company. I would say, prices have probably come down a little bit. Still, so far as you've seen, from a lack of an acquisition announcement from Ruger, they haven't come down to the point where we'd be comfortable making that change just yet. Who knows? As far as companies are at different levels of success right now in our industry, so there may be some other things coming. We're going to keep our eyes open, be opportunistic, and hopefully take advantage of our strong balance sheet if and when the right opportunity comes around. That may happen in the near term. If it doesn't, we're going to do our best to get that business by organic growth.
Yeah. How ridiculous are the multiples on EBITDA in some of those cases?
I wouldn't categorize them as ridiculous. I think some companies still have pretty high expectations of what they're going to see on a return, but I wouldn't put them in the ridiculous category. I think they've moderated maybe their expectations and I think getting closer to what might be a value for Ruger.
Yeah. Okay. All right, guys. Thanks.
Thank you, Brian.
Thank you. I show no further questions in the queue. At this time, I'd like to turn the call back over to Chris Killoy, Chief Executive Officer, for closing remarks.
Thank you. On behalf of our over 1,700 dedicated Ruger employees, I would like to thank you for your continued interest in Ruger. I look forward to speaking with all of you at our third quarter earnings call in November.
Thank you, ladies and gentlemen, for attending today's conference. This concludes the program. You may all disconnect. Good day.