New Products in High Demand and Continue to Drive Market Share Increase w/o Cannabilization
From the Q4 2012 Earnings Release:
New product introductions were a significant component of our sales growth as new
product sales represented $182.0 million or 38% of firearm sales in 2012. New product
introductions in 2012 included:
o the Ruger American rifle,
o the 10/22 TakeDown rifle,
o the SR22 pistol,
o the 22/45 Lite pistol, and
o the Single-Nine revolver.
Brian Rafn - Morgan Dempsey Capital Management - Analyst
Yes, Mike, what I'm wondering is you developed new product. Are you seeing any changes in the lifecycle of sales of new products falling off quicker? There is a lot of noise out. There is a lot of launches, a lot of demand. I'm just wondering what you are seeing from the standpoint of units and dollar sales as you go out one, two, three years after a launch, and how much advertising support do you have to bring to a new product?
Michael Fifer - Sturm, Ruger & Company, Inc. - President & CEO
If you look back at what we talked about for capital expenditures each of the last three, four years, and we would say, for example, we think we're going to spend $15 million this year on CapEx. And the year would finish, and we'd end up spending $19 million or $20 million. And the reason for that is that I constantly predict the new products will cannibalize the old and that the initial first-year demand will taper off, and
it doesn't happen very often. And so I've made plans to use equipment from existing lines on the next line, as the volume of the existing line declines, and the volume of the existing lines haven't declined. So I haven't been able to repatriate equipment to the extent I thought I could, and so I end up having to acquire more equipment. So it's a long answer, but we are not seeing the product lifecycles that we expected to see where you would have enormous first-year demand, and then it would taper off significantly after that. We expect it, but we haven't observed it.