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Sturm, Ruger & Co. Management Discusses Q2 2012 Results - Earnings Call Transcript

Inventory and production. In response to the strong demand and the new products that were added in the first half of 2012, we increased our unit production by 52% from the first half of 2011. This increase in production would not have been possible without our investment of $27 million in capital expenditures in the past 4 quarters. These capital expenditures exceeded depreciation by approximately $13 million during this period, which represented a 7% increase to our capital equipment base. Our commitment to continuous improvement through the implementation of lean business practices enabled us to leverage this investment to achieve the 52% increase in unit production. Despite the significant increase in production, our finished goods inventory decreased slightly during the first half of 2012.

Our independent wholesale distributors' inventory were reduced by 50% or 68,000 units during the same period as retailer demand pulled Ruger product through the channel. We believe that both Ruger and our independent distributors would benefit by having more finished goods in inventory to allow for a rapid fulfillment of demand. Our goal is to replenish -- let me say this, our long-term goal is to replenish our finished goods inventory in future periods to levels that would better serve our customers. This replenishment could increase the value of finished goods inventory by as much as $15 million from the current level, but try as we might, I don't think it will happen too soon.

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