Ruger’s CEO, Michael Fifer, gave additional details today about the company’s pending purchase of a third manufacturing plant, and perhaps provided some insight into what new guns will be made there. The comments were made by Fifer during Ruger’s Q2 2013 earnings conference call.
The Mayodan facility is “ideally suited for what we want to do,” said Fifer. During the call, Fifer stated there was not a lot of work that needs to be done to the facility to bring it online. Installing the equipment for heat treating and bluing were the only significant projects mentioned by Fifer.
The importance of the new plant cannot be understated if Ruger’s growth is to continue.
New Guns Driving Sales
During the conference call Fifer stated new products offer the single best return on investments. Looking at the numbers, Ruger’s bottom line is significantly fed by new products. In fact, during the first half of the year, more than 30% of Ruger’s firearms sales were just new products like the LC380 pistol and the SR45 handgun.
According to Fifer, the new facility will “really lubricate” the process of introducing new products to the market. In the past, Fifer stated new product introductions were hamstrung by existing manufacturing capacity and the lack of engineering teams to bring new guns into production.
Fifer offered insight into how new product development plays a role into profitability. According to Fifer, Ruger’s legacy products are not optimized for manufacturing as the new product offerings are. In times past, the assumption was the guns would be hand-fitted and assembled by a gunsmith. No significant thought was put into efficient manufacturing processes. This likely means slower production, and a greater per piece production cost.
In contrast, Ruger’s current model of product development takes a team based approach. The design engineers work directly with the production engineers to make sure new guns are both reliable and can be built in an efficient manner. ”Very manufacturable products” are what the company wants to see said Fifer.
Having skilled engineers on that development team is very important to the new firearms’ development. Finding a skilled workforce with engineers was an important aspect of the company’s factory search. Ruger has held two job fairs in the Mayodan area and Fifer said the area workforce is excellent.
“[The] caliber of potential employees is impressive,” said Fifer.
Pistols, Rifles…or Shotguns?
While handguns have been a large part of Ruger’s market growth in the past several years, long arms have also been selling well. ”The long gun market has been very strong for [Ruger],” said Fifer.
Fifer specifically mentioned the Gunsite Scout Rifle as being a really good seller. Additionally, Fifer said the recently introduced American Rifle has “exceeded expectations,” and the company has put the manufacturing in place to double production capacity for the gun.
Not mentioned was the SR556 rifle, Ruger’s piston operated AR-style rifle line. In a prior earnings call, Fifer stated the line continued to sell well, but he seemed hesitant about extending the line beyond what it is now.
As to what will be made in the new plant, well that is open to speculation. The new plant will be responsible for up to 10 new lines of firearms Fifer has said in the past. In today’s conference call, he declined to say what those new lines might look like. When asked specifically about the possibility of Ruger building shotguns in the new plant, Fifer said “Can’t comment.”
When asked about possible acquisitions, Fifer dismissed the possibility saying that most acquisitions are “grossly overpriced.” This was consistent with comments he made in a previous earning call where he stated Ruger did not have a serious interest in acquiring the Freedom Group due to the cost of the acquisition as compared to its potential value to the company. So, for now, look for new guns from Ruger, not the buying of other company’s assets.
Ruger expects to complete the purchase of the Mayodan plant in the current quarter, and have it start production in the first quarter of 2014. This could mean we will see at least one new gun at the SHOT Show that will be made at the new manufacturing plant.