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Text: Then Tom Dineen, our Chief Financial Officer, will give an overview of the third quarter 2021 financial results, and then I will discuss our operations and the state of the market.
Copy of these documents may be obtained by contacting the company or the SEC or on the company website at ruger.com/corporate or, of course, the SEC website at sec.gov.
We do reference non-GAAP EBITDA.
Now Tom will discuss the company's third quarter 2021 results.
For the third quarter of 2021, net sales were $178.2 million and diluted earnings were $1.98 per share.
For the comparable prior year period, net sales were $145.7 million and diluted earnings were $1.39 per share.
For the first nine months of 2021, net sales were $562.7 million and diluted earnings were $6.64 per share.
For the corresponding period in 2020, net sales were $399.6 million and diluted earnings were $3.31 per share.
The substantial increase in profitability for the third quarter compared to the third quarter of 2020 was primarily attributable to the increase in sales and production, resulting in favorable leveraging of fixed costs including depreciation, engineering and other indirect labor expenses.
Compared to the second quarter of 2021, profitability declined principally due to three factors: First, all of our firearms facilities took a very well-deserved shutdown week in July, which reduced the number of workdays in the quarter to 59 compared to 64 workdays in Q2.
This decrease in production reduced sales and resulted in some unfavorable deleveraging of fixed costs.
Second, after a relatively quiet second quarter, COVID positive cases in our plants were then tripled in the third quarter.
This resulted in significant increases in lost production.
And third, following six quarters of exceptional demand, excess resales decreased from the second quarter, adversely impacting our overall profitability.
Our strong financial results yielded significant cash generation.
During the first nine months of 2021, we generated $117 million of cash from operations.
We reinvested $15.6 million of that back into the company in the form of capital expenditures.
We estimate that 2021 capital expenditures will be approximately $20 million, predominantly related to new product development.
Our ability to shift manufacturing equipment between cells and between facilities improves our overall utilization and allows for reduced capital investment.
Our balance sheet at October 2, 2021, remain strong.
Our cash and short-term investments, which are invested in U.S. T-bills totaled $192.7 million.
Our current ratio was 3.8:1, and we had no debt.
Our stockholders' equity was $338.1 million, which equates to a book value of $19.21 per share, of which $10.95 per share was cash and short-term investments.
In the first nine months of 2021, we returned $45.2 million to our shareholders through the payment of dividends.
Our Board of Directors declared a $0.79 per share quarterly dividend for shareholders of record as of November 15, 2021, payable on November 30, 2021.
Upon receiving this $0.79 quarterly dividend, shareholders will have received $3.36 of dividends per share in 2021.
As a reminder, our quarterly dividend is approximately 40% of net income, and therefore, it varies quarter-to-quarter.
That's the financial update for the quarter.
Demand for our products has remained strong.
Despite a moderation of overall industry demand, as reflected in the last two quarters of adjusted NICS, we shipped all of the firearms that we built this quarter without the need to aggressively promote or discount any of our products.
We've just begun to replenish the distributor and retail inventories that were largely depleted over the past 18 months, putting us in a great position as we head into the fourth quarter, which has traditionally been a period of strong demand.
The estimated unit sell-through of the company's products from the independent distributors to retailers increased 9% in the first nine months of 2021 compared to the prior-year period.
For the same period, the National Instant Criminal Background Check System, background checks, as adjusted by the National Shooting Sports Foundation, commonly referred to as NICS checks, decreased 11%.
The increase in the sell-through of the company's products compared favorably to the decrease in adjusted NICS background checks, and may be attributable to strong consumer demand for Ruger products, increased production in 2021 and the introduction of new products that have been met with strong demand.
New product development continues to drive results.
The MAX-9 pistol and the Ruger LCP MAX pistol, which were both launched in 2021 remain in strong demand.
In the first nine months of 2021, new product sales represented $116 million or 22% of firearm sales compared to $88 million or 24% of firearm sales in the first nine months of 2020.
As a reminder, we include only major products introduced in the past eight quarters in our new product sales metric.
Derivatives, product line extensions of mature product families and models introduced more than two years ago are not included.
We are hard at work on some exciting new product initiatives, including the return of Marlin lever action rifles, which we begin -- plan to begin shipping later in the fourth quarter.
Since March of 2020, our workforce has been strengthened by 370 folks, an increase of just over 20%, and our quarterly unit production has increased by more than 160,000 units or 45% during that period.
A 20% increase in personnel yielding a 45% increase in production.
That is a tremendous accomplishment by our operations teams at all of our manufacturing plants.
Despite the growth in production at the end of third quarter 2021, our finished goods inventories remained near historic lows and distributor inventories of Ruger products were 150,000 units lower than they were at the end of 2019, the last time inventories were at what we would consider normal or expected pre-COVID-19 levels.
As Tom mentioned earlier, after an unprecedented 16-month run of seemingly insatiable product demand and continual monthly production increases, we took a one week shutdown during the first week of July.
This is our first shutdown in two years, which gave our workforce a very well-deserved break and allowed us to perform some routine maintenance and reconfigure some of our manufacturing operations.
The shutdown reduced our third quarter production sales and earnings, but that was a small price to pay.
It was the right thing to do, and I'm glad we did it.
Our dedicated and hard-working folks deserved and needed a break.
And after the shutdown, we are better prepared as we head into what we expect will be a busy fourth quarter and 2022.
Since the onset of the COVID-19 pandemic in March 2020, we have remained proactive in maintaining the health and safety of our employees and mitigating its impact on our business.
We provide all hourly employees with additional paid time off and offer incentives to any employee who becomes vaccinated.
If practical, we allow employees to work remotely.
And we continue to follow robust cleaning, sanitizing and social distancing protocols to maintain a cleaner and safer workplace.
With the United States once again seeing a rise in COVID-19 cases in positivity rates, we remain vigilant and are proactively adjusting our plan accordingly to keep our associates healthy and safe and to minimize any disruption to our business.
Our financial strength, evidenced by our debt-free balance sheet provides financial security and flexibility as we manage through the challenges like COVID-19 and remain focused on our long-term goals and the creation of shareholder value.
In the third quarter, we added a 225,000 square foot facility in Mayodan, North Carolina, about 1.5 miles down the road from our original Mayodan building that we purchased in 2013.
This new facility doubles the size of our footprint in Mayodan and provide some room for expansion.
We moved our finished goods inventory, our ShopRuger operations and our customer service call center into the new facility.
This freed up some manufacturing space in our original building in addition to the overall -- excuse me, to the available space in the new facility.
Those are the highlights of the third quarter of 2021.
Operator, may we have the first question?

user
compname reports q3 sales of $178.2 million.
compname reports third quarter diluted earnings of $1.98 per share and declares quarterly dividend of 79¢ per share.
q3 earnings per share $1.98.
q3 sales $178.2 million.

assistant