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Taser: Missed It by *That* Much

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I must say, that was some mighty fine shootin' there, Taser (Nasdaq: TASR  ) . Didn't hit the target, mind you. But you sure talked a good game.

Taser, as you've probably heard by now, filed its third-quarter earnings -- sorry, make that its third-quarter losses -- report yesterday afternoon. Sales were down 10% year over year. No surprise there, given the weakness in state and local tax revenues that fund purchases by Taser's law enforcement customers. Word has it that Sturm, Ruger (NYSE: RGR  ) , and Smith & Wesson (Nasdaq: SHWC  ) aren't doing so hot lately, either. Still, gross margins tumbled 750 basis points as Taser lost ground in the battle for efficiencies of scale, and a series of "inventory obsolescence and restructuring charges" didn't help much either. Result: Taser lost $0.04 per diluted share for the quarter, four times worse than predicted.

Lesson one: Don't shoot yourself in the foot
And yet, it could have been worse. Putting the best spin possible on the quarterly loss, CEO Rick Smith (no relation) noted that "continued reduction in the fixed costs needed to run the business" prevented this quarter's loss from being any bigger. Plus, as Smith pointed out, the company is finally seeing "improvements in our cash earnings." Improvements that should continue now that "the economy is moving into an upswing [and] we are moving from a heavy investment phase into a profitable and growth phase." (Oh, really?)

I mean, that sounds great, but ... is the economy really doing all that well? And these "improvements" Smith tells us are in the cash flow statements -- is it too much to ask for a chance to check Taser's math?

Range officer? We need a paper target
For reasons only Taser knows, the company only included an abridged cash flow statement with this quarter's report. Cash flow from operations so far this year is running negative by $2.6 million, which when combined with $3.7 million in "investment activities" suggests the company will probably end up burning about $8.4 million this year.

Assuming most the "investment activity" is capital expenditures, that actually sounds worse than the $3.6 million that Taser burned last year. Then again, I haven't seen the cash flow statement -- which is exactly the point.

Don't just tell us about your cash flow, Taser. Show us the money. Put up or shut up.

Are there any bargains anywhere in arms manufacturer stocks these days. Actually, yes, there are.

Fool contributor Rich Smith does not own shares of any company named above. The Motley Fool has a disclosure policy.

True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community.

Read/Post Comments (3) | Recommend This Article (9)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 29, 2010, at 4:28 PM, dzuskin wrote:

    Did Taser International forget to mention that in mid-August 2010, smack dab in the middle of the reporting period, they've settled with Steven Butler for about $3M? Mr. Butler suffered brain injury from cardiac arrest caused by the use of a taser. Taser International tried to keep this settlement a secret, but the presiding judge made it public.

    I don't know if they've yet signed the check, or if it's covered by The World's Stupidest Insurance Company, but $3M is worth mentioning. Unless they're trying to deceive their shareholders.

  • Report this Comment On October 29, 2010, at 11:39 PM, crca99 wrote:

    thanks for these updates...easier to understand than the quarterly/annual reports.

  • Report this Comment On November 17, 2010, at 11:32 PM, suemwf wrote:

    So I have a question. How can you give this company 4 stars with everything you said in the article above? I do not understand. I thought I understood your star rating system, but now I am confused.

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