FINAL TRANSCRIPT

at our website at www.ruger.com or from the SEC. Furthermore, management disclaims all responsibility to update forward-looking statements. Mike?

 Michael O. Fifer  - Sturm, Ruger & Company, Inc. - President, CEO

 Thank you, Kevin. For the second quarter of 2011, net sales were $79.6 million, and earnings were $0.57 per share. For the corresponding period in 2010, net sales were $64.4 million, and earnings were $0.43 per share.

In the second quarter of 2011, about 34% of sales were from new products, compared to 22% of sales for the second quarter 2010. The definition we use for new products include only the first two years of sales from major product introductions. During the second quarter, we launched the SR1911 pistol, the SR40 compact striker fire pistol, and the single-ten single action revolver.

We're putting up a slide now that shows some history of our quarterly bookings and distributor sell-through numbers, and there are several things to note from the slide. First, the pattern is similar each year, with very strong bookings in the first quarter. This tracks the schedule of distributor shows and the shot show, wherein the independent distributors host retailers and book a lot of business for the coming year from retailers. The distributors then place orders with all of their manufacturers. They typically order far more than they expect to receive or ship within the quarter.

Second, bookings from distributors are generally less than distributors' sell-through to retailers for the rest of the year, with the fewest bookings usually in the third quarter. Third, distributors sell-through to retailers is generally more stable and far less volatile than bookings from distributors. That is the primary reason we give more weight to distributor sell-through than we give to distributor bookings when deciding what to produce in our factories.

This slide shows the National Instant Criminal Background Check Systems background check numbers, known as NICS checks and distributor sell-through data for the past five years. We included annualized 2011 data for comparative purposes. NICS checks have grown steadily and continue to be very strong during the first half of the year. Nonetheless, we have outperformed them. The distributor sell-through data supports our belief (inaudible) the strength of our new products to generate consumer demand for Ruger and to subsequently pull Ruger products through the channel.

Next will be an inventory slide. We are putting up a slide that shows some history of our quarterly finished goods inventory at Ruger and at our independent distributors. Last year at this time, we took a cautious approach to production levels and did our best to match our production levels in the third quarter to distributor sell-through. Consequently, there was not much buildup of inventory.

As we have disclosed during the annual meeting of shareholders and our recent quarterly filings, we plan to take a different approach this year during the third quarter. Our intention is to try to maintain our current production levels for high demand products. In other words, we will try to level load our production sales as much as practical, consistent with letting our folks take some vacation during the summer.

This is a deliberate effort to build inventory in advance of the 2012 distributor show season and the coming presidential election year, when we anticipate strong demand. This inventory build could be as much as $15 million to $25 million at its peak.

We have encouraged the independent distributors to continue buying through the summer, so it's possible that our inventory may not grow that much, but it is also possible that the overall inventory growth, when you combine Ruger and the distributors, may be more significant than it has been in the past couple of years during the third quarter. Remember, we target our lowest inventory levels for when we have fulfilled the distributor show orders, typically late second quarter, and our highest inventory levels, just prior to next year's shows, typically late in the fourth quarter.

During the period covered by this graph, the Company sales have nearly doubled, while the combined inventory is at about one-half of its peak amount. Ruger certainly had too much inventory in the past, but probably does not have enough now. We also feel the distributors do not have enough inventory, especially as consumer demand for our new products has increased. The principle to take away from this slide, however, is that we believe all levels of the channel would benefit from more Ruger inventory, which we hope to encourage during the rest of the year, as we try to position our brand for a successful distributor trade show season in the first quarter of 2012.

During the second quarter, we launched our Million Gun challenge to benefit the NRA. No company in history, to the best of our knowledge, has ever built and shipped one million firearms in one year. We would like to be the first, and we've launched a promotional program to get the consumers behind us for this ambitious program.

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