SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from_______________ to _______________
Commission file number 1-10435
STURM, RUGER & COMPANY, INC.
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(Exact name of registrant as specified in its charter)
Delaware 06-0633559
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(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
Lacey Place, Southport, Connecticut 06890
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(Address of principal executive offices) (Zip code)
(203) 259-7843
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]
The number of shares outstanding of the issuer's common stock as of
October 31, 2004: Common Stock, $1 par value - 26,910,720.
Page 1 of 24
INDEX
STURM, RUGER & COMPANY, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed balance sheets--September 30, 2004 and December 31, 2003 3
Condensed statements of income--Three months ended September 30,
2004 and 2003; Nine months ended September 30,2004 and 2003 5
Condensed statements of cash flows--Nine months ended
September 30, 2004 and 2003 6
Notes to condensed financial statements--September 30, 2004 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 14
Item 3. Quantitative and Qualitative Disclosures About Market Risk 20
Item 4. Controls and Procedures 21
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 22
Item 3. Defaults Upon Senior Securities 22
Item 4. Submission of Matters to a vote of Security Holders 22
Item 5. Other Information 22
Item 6. Exhibits 23
SIGNATURES 24
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
STURM, RUGER & COMPANY, INC.
CONDENSED BALANCE SHEETS
(Dollars in thousands, except per share data)
September 30, December 31,
2004 2003
------------- ------------
(Unaudited) (Note)
ASSETS
Current Assets
Cash and cash equivalents $ 3,801 $ 3,446
Short-term investments 32,927 50,026
Trade receivables, less allowances for
doubtful accounts ($373 and $441) and
discounts ($234 and $772) 17,385 13,284
Inventories:
Finished products 13,895 15,243
Materials and products in process 36,415 33,286
--------- ---------
50,310 48,529
Deferred income taxes 6,760 7,284
Prepaid expenses and other current assets 3,034 1,985
--------- ---------
Total current assets 114,217 124,554
Property, plant and equipment 157,945 155,689
Less allowances for depreciation (131,583) (128,525)
--------- ---------
26,362 27,164
Deferred income taxes 819 1,108
Other assets 9,614 10,047
--------- ---------
Total Assets $ 151,012 $ 162,873
========= =========
3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
STURM, RUGER & COMPANY, INC.
CONDENSED BALANCE SHEETS
(Dollars in thousands, except per share data)
September 30, December 31,
2004 2003
------------- ------------
(Unaudited) (Note)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Trade accounts payable and accrued expenses $ 4,574 $ 4,386
Product liability 4,000 4,000
Employee compensation 5,816 6,177
Workers' compensation 5,843 6,057
Income taxes 917 1,219
--------- ---------
Total current liabilities 21,150 21,839
Accrued pension liability 5,022 4,729
Product liability accrual 1,257 2,665
Contingent liabilities--Note 8 -- --
Stockholders' Equity
Common Stock, non-voting, par value $1:
Authorized shares 50,000; none issued -- --
Common Stock, par value $1:
Authorized shares - 40,000,000
Issued and outstanding - 26,910,720 26,911 26,911
Additional paid-in capital 2,509 2,508
Retained earnings 102,808 112,866
Accumulated other comprehensive income (8,645) (8,645)
--------- ---------
Total Stockholders' Equity 123,583 133,640
--------- ---------
Total Liabilities and Stockholders' Equity $ 151,012 $ 162,873
========= =========
Note:
The balance sheet at December 31, 2003 has been derived from the audited
financial statements at that date but does not include all the information
and footnotes required by generally accepted accounting principles for
complete financial statements.
See notes to condensed consolidated financial statements.
4
STURM, RUGER & COMPANY, INC.
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
----------------------- -----------------------
Firearms sales $ 29,063 $32,237 $ 92,798 $ 95,876
Castings sales 6,317 4,583 15,531 13,877
-------- ------- -------- --------
Net sales 35,380 36,820 108,329 109,753
Cost of products sold 30,382 31,102 86,358 85,091
-------- ------- -------- --------
Gross profit 4,998 5,718 21,971 24,662
Expenses:
Selling 4,504 3,987 12,519 11,197
General and administrative 1,410 1,465 4,747 4,532
-------- ------- -------- --------
5,914 5,452 17,266 15,729
-------- ------- -------- --------
Operating income(loss) (916) 266 4,705 8,933
Gain on sale of real estate 874 5,922 874 5,922
Other income - net 9 243 92 861
-------- ------- -------- --------
Total other income 883 6,165 966 6,783
-------- ------- -------- --------
Income(loss) before income taxes (33) 6,431 5,671 15,716
Income taxes (13) 2,579 2,274 6,302
-------- ------- -------- --------
Net income(loss) ($ 20) $ 3,852 $ 3,397 $ 9,414
======== ======= ======== ========
Earnings per share
Basic $ 0.00 $ 0.14 $ 0.13 $ 0.35
======== ======= ======== ========
Diluted $ 0.00 $ 0.14 $ 0.13 $ 0.35
======== ======= ======== ========
Cash dividends per share $ 0.10 $ 0.20 $ 0.50 $ 0.60
======== ======= ======== ========
Average shares outstanding
Basic 26,911 26,911 26,911 26,911
======== ======= ======== ========
Diluted 26,911 26,928 26,940 26,914
======== ======= ======== ========
See notes to condensed financial statements.
5
STURM, RUGER & COMPANY, INC.
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
Nine Months Ended September 30,
2004 2003
-------------------------------
Cash Provided (Used) by Operating Activities ($ 572) $ 9,759
Investing Activities
Property, plant and equipment additions (4,297) (2,982)
Purchases of short-term investments (95,712) (112,540)
Proceeds from maturities of short-term investments 112,811 109,988
Proceeds from sale of real estate 1,580 10,873
--------- ---------
Cash provided by investing activities 14,382 5,339
--------- ---------
Financing Activities
Dividends paid (13,455) (16,146)
--------- ---------
Cash used by financing activities (13,455) (16,146)
--------- ---------
Increase(decrease) in cash and cash equivalents 355 (1,048)
Cash and cash equivalents at beginning of period 3,446 3,598
--------- ---------
Cash and cash equivalents at end of period $ 3,801 $ 2,550
========= =========
See notes to condensed consolidated financial statements.
6
STURM, RUGER & COMPANY, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 2004
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States for interim financial information and the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements.
In the opinion of management, the accompanying unaudited condensed
financial statements include all adjustments, consisting of normal recurring
accruals, considered necessary for a fair presentation of the results of the
interim periods. Operating results for the nine months ended September 30, 2004
are not necessarily indicative of the results to be expected for the full year
ending December 31, 2004. These financial statements have been prepared on a
basis that is substantially consistent with the accounting principles applied in
our Annual Report on Form 10-K for the year ended December 31, 2003.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Organization: Sturm, Ruger & Company, Inc. (the "Company") is principally
engaged in the design, manufacture, and sale of firearms and investment
castings. The Company's design and manufacturing operations are located in the
United States. Substantially all sales are domestic. The Company's firearms are
sold through a select number of independent wholesale distributors to the
sporting and law enforcement markets. Investment castings are sold either
directly to or through manufacturers' representatives to companies in a wide
variety of industries.
Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Principles of Consolidation: The consolidated financial statements include
the accounts of the Company. All significant intercompany accounts and
transactions have been eliminated. Certain prior year balances have been
reclassified to conform with current year presentation.
Stock Incentive and Bonus Plans: The Company accounts for employee stock
options under Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees." The Company has adopted the disclosure-only provisions of
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation" as amended by SFAS No. 148, "Accounting for
Stock-Based Compensation-Transition and Disclosure." Had compensation expense
for the Plans been determined in accordance with SFAS No. 123 (using the
Black-Scholes option-pricing model), the Company's net income and earnings per
share would have been reduced to the following pro forma amounts (in thousands,
except per share data):
7
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
2004 2003 2004 2003
--------- --------- --------- ---------
Net Income(loss):
As reported ($ 20) $ 3,852 $ 3,397 $ 9,414
Add: Recognized stock-based employee
compensation, net of tax -- -- -- --
Deduct: Employee compensation
expense determined under fair value
method, net of tax (5) (97) (24) (290)
--------- --------- --------- ---------
Pro forma ($ 25) $ 3,755 $ 3,373 $ 9,124
========= ========= ========= =========
Basic Earnings per Share:
As reported $ 0.00 $ 0.14 $ 0.13 $ 0.35
Pro forma $ 0.00 $ 0.14 $ 0.13 $ 0.34
========= ========= ========= =========
Diluted Earnings per Share:
As reported $ 0.00 $ 0.14 $ 0.13 $ 0.35
Pro forma $ 0.00 $ 0.14 $ 0.13 $ 0.34
========= ========= ========= =========
The fair value of stock-based compensation expense was computed using the
Black-Scholes option-pricing model with the following weighted average
assumptions in 2001: dividend yield of 8.0%, expected volatility of 34.3%, risk
free rate of return of 2.0%, and expected lives of 5 years. The estimated fair
value of options granted is subject to the assumptions made and if the
assumptions changed, the estimated fair value amounts could be significantly
different. There have been no stock options granted since 2001.
Recent Accounting Pronouncements: The Company is not aware of any recent
accounting pronouncements that are expected to have a material effect on its
financial position or financial results.
NOTE 3 - INVENTORIES
Inventories are valued using the last-in, first-out (LIFO) method. An
actual valuation of inventory under the LIFO method can be made only at the end
of each year based on the inventory levels and costs existing at that time.
Accordingly, interim LIFO calculations must necessarily be based on management's
estimates of expected year-end inventory levels and costs. Because these are
subject to many forces beyond management's control, interim results are subject
to the final year-end LIFO inventory valuation.
NOTE 4 - INCOME TAXES
The Company's effective tax rate differs from the statutory tax rate
principally as a result of state income taxes. Total income tax payments during
the nine months ended September 30, 2004 and 2003 were $2.6 million and $2.8
million, respectively.
8
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
NOTE 5 - PENSION PLANS
The Company sponsors two defined benefit pension plans which cover
substantially all employees. A third defined benefit plan is non-qualified and
covers certain executive officers of the Company. The estimated cost of these
plans is summarized below:
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
2004 2003 2004 2003
--------- --------- --------- ---------
Service cost $ 210 $ 376 $ 947 $ 1,130
Interest cost 421 753 1,892 2,258
Expected return on plan assets (453) (808) (2,031) (2,423)
Amortization of prior service cost 82 145 363 433
Recognized actuarial gains 109 193 485 578
--------- --------- --------- ---------
Net periodic pension cost $ 369 $ 659 $ 1,656 $ 1,976
========= ========= ========= =========
NOTE 6 - BASIC AND DILUTED EARNINGS PER SHARE
Basic earnings per share is based upon the weighted average number of
common shares outstanding during the period. Diluted earnings per share reflect
the impact of options outstanding using the treasury stock method, when
applicable. For the three months ended September 30, 2004, the treasury stock
method would have been antidilutive, therefore the weighted average number of
common shares were used for this period's diluted earnings per share
calculation. This resulted in diluted weighted-average shares outstanding for
the three and nine months ended September 30, 2004 and 2003 of 26,911,000 and
26,940,000, and 26,928,000 and 26,914,000, respectively.
NOTE 7 - COMPREHENSIVE INCOME
As there were no non-owner changes in equity during the first nine months
of 2004 and 2003, total comprehensive income equals net income for the three
months ended September 30, 2004 and 2003 of $0.0 million and $3.9 million,
respectively, and for the nine months ended September 30, 2004 and 2003 of $3.4
million and $9.4 million, respectively.
NOTE 8 - CONTINGENT LIABILITIES
As of September 30, 2004, the Company is a defendant in approximately 16
lawsuits involving its products and is aware of certain other such claims. These
lawsuits and claims fall into two categories:
(i) those that claim damages from the Company related to allegedly
defective product design which stem from a specific incident.
These lawsuits and claims are based principally on the theory
of "strict liability" but also may be based on negligence,
breach of warranty, and other legal theories, and
9
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
(ii) those brought by cities, municipalities, counties,
associations, and individuals against firearms manufacturers,
distributors and dealers seeking to recover damages allegedly
arising out of the misuse of firearms by third-parties in the
commission of homicides, suicides and other shootings
involving juveniles and adults. The complaints by
municipalities seek damages, among other things, for the costs
of medical care, police and emergency services, public health
services, and the maintenance of courts, prisons, and other
services. In certain instances, the plaintiffs seek to recover
for decreases in property values and loss of business within
the city due to criminal violence. In addition, nuisance
abatement and/or injunctive relief is sought to change the
design, manufacture, marketing and distribution practices of
the various defendants. These suits allege, among other
claims, strict liability or negligence in the design of
products, public nuisance, negligent entrustment, negligent
distribution, deceptive or fraudulent advertising, violation
of consumer protection statutes and conspiracy or concert of
action theories. Most of these cases do not allege a specific
injury to a specific individual as a result of the misuse or
use of any of the Company's products.
Management believes that, in every case, the allegations are unfounded,
and that the shootings and any results therefrom were due to negligence or
misuse of the firearms by third-parties or the claimant, and that there should
be no recovery against the Company. Defenses further exist to the suits brought
by cities, municipalities, and counties based, among other reasons, on
established state law precluding recovery by municipalities for essential
government services, the remoteness of the claims, the types of damages sought
to be recovered, and limitations on the extraterritorial authority which may be
exerted by a city, municipality, county or state under state and federal law,
including State and Federal Constitutions.
The only case against the Company alleging liability for criminal
shootings by third-parties to ever be permitted to go before a constitutional
jury, Hamilton, et al. v. Accu-tek, et al., resulted in a defense verdict in
favor of the Company on February 11, 1999. In that case, numerous firearms
manufacturers and distributors had been sued, alleging damages as a result of
alleged negligent sales practices and "industry-wide" liability. The Company and
its marketing and distribution practices were exonerated from any claims of
negligence in each of the seven cases decided by the jury. In subsequent
proceedings involving other defendants, the New York Court of Appeals as a
matter of law confirmed that 1) no legal duty existed under the circumstances to
prevent or investigate criminal misuses of a manufacturer's lawfully made
products; and 2) liability of firearms manufacturers could not be apportioned
under a market share theory. More recently, the New York Court of Appeals on
October 21, 2003 declined to hear the appeal from the decision of the New York
Supreme Court, Appellate Division, affirming the dismissal of New York Attorney
General Eliot Spitzer's public nuisance suit against the Company and other
manufacturers and distributors of firearms. In its decision, the Appellate
Division relied heavily on Hamilton in concluding that it was "legally
inappropriate," "impractical," "unrealistic" and "unfair" to attempt to hold
firearms manufacturers responsible under theories of public nuisance for the
criminal acts of others.
Of the lawsuits brought by municipalities or a state Attorney General,
fifteen have been dismissed with no appeal pending. Fourteen of those cases are
concluded: Atlanta - dismissal by intermediate Appellate Court, no further
appeal; Bridgeport - dismissal affirmed by Connecticut Supreme Court; County of
Camden - dismissal affirmed by U.S. Third Circuit Court of Appeals; Miami -
dismissal affirmed by intermediate appellate court, Florida Supreme Court
declined review; New Orleans - dismissed by Louisiana Supreme Court, United
States Supreme Court declined review; Philadelphia - U.S. Third Circuit Court of
Appeals
10
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
affirmed dismissal, no further appeal; Wilmington - dismissed by trial court, no
appeal; Boston - voluntary dismissal with prejudice by the City at the close of
fact discovery; Cincinnati - voluntarily withdrawn after a unanimous vote of the
city council; Detroit - dismissed by Michigan Court of Appeals, no appeal; Wayne
County - dismissed by Michigan Court of Appeals, no appeal; New York State -
Court of Appeals denied plaintiff's petition for leave to appeal the
Intermediate Appellate Court's dismissal, no further appeal; Newark - Superior
Court of New Jersey Law Division for Essex County dismissed the case with
prejudice; and City of Camden - dismissed on July 7, 2003, not reopened.
On November 13, 2003, plaintiffs in the Jersey City case voluntarily
dismissed the matter. It is unknown whether plaintiffs will re-file.
The dismissal of the Washington, D.C. lawsuit was sustained on appeal, but
individual plaintiffs were permitted to proceed to discovery and attempt to
identify the manufacturers of the firearms used in their shootings as "machine
guns" under the city's "strict liability" law. Rehearing of the entire appeal is
currently pending. On March 7, 2003, the consolidated California Cities case
involving nine cities and three counties was dismissed as to all manufacturer
defendants, and plaintiffs appealed on June 9, 2003. The Chicago dismissal was
reversed in part on appeal, and an appeal to the Illinois Supreme Court is
pending.
On October 20, 2003, the St. Louis Circuit Court dismissed the St. Louis
case, and the city filed a notice of appeal. The Missouri Court of Appeals
affirmed the trial court's dismissal on July 27, 2004. The plaintiffs then filed
a motion for rehearing and/or a transfer of the appeal to the Missouri Supreme
Court, which was denied. Thereafter, the plaintiffs filed a motion directly to
the Missouri Supreme Court, requesting that it accept transfer of the appeal.
That motion was denied on October 26, 2004.
The Indiana Court of Appeals affirmed the dismissal of the Gary case by
the trial court, but the Indiana Supreme Court reversed this dismissal and
remanded the case for discovery proceedings on December 23, 2003. Cleveland and
New York City are open cases and the New York City case is scheduled to begin
trial in April, 2005.
In the NAACP case, on May 14, 2003, an advisory jury returned a verdict
rejecting the NAACP's claims. On July 21, 2003, Judge Jack B. Weinstein entered
an order dismissing the NAACP lawsuit, but this order contained lengthy dicta
which defendants believe are contrary to law and fact. Appeals by both sides
were filed, but plaintiffs withdrew their appeal. On August 3, 2004, the United
States Court of Appeals for the Second Circuit granted the NAACP's motion to
dismiss the defendants' appeal of Judge Weinstein's order denying defendants'
motion to strike his dicta made in his order dismissing the NAACP's case, and
the defendants' motion for summary disposition was denied as moot. The ruling of
the Second Circuit effectively confirmed the decision in favor of defendants and
brought this matter to a conclusion.
Legislation has been passed in approximately 34 states precluding suits of
the type brought by the municipalities mentioned above, and similar federal
legislation has been introduced in the U.S. Congress. It passed the House by a
2-to-1 bipartisan majority and had over 54 co-sponsors in the Senate. It was
considered by the Senate in February 2004, but failed to gain final passage
after it was encumbered with numerous non-germane amendments. It is uncertain
when it may be reconsidered by the Senate.
Punitive damages, as well as compensatory damages, are demanded in many of
the lawsuits and claims. Aggregate claimed amounts presently exceed product
liability accruals and applicable insurance coverage. For
11
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
claims made after July 10, 1994, compensatory and punitive damage insurance
coverage is provided, in states where permitted, for losses exceeding $2.0
million per claim, or an aggregate maximum loss of $6.0 million. For claims made
after July 10, 1997, coverage is provided for annual losses exceeding $2.0
million per claim, or an aggregate maximum loss of $5.5 million annually. For
claims made after July 10, 2000, coverage is provided for annual losses
exceeding $5 million per claim, or an aggregate maximum loss of $10 million
annually, except for certain new claims which might be brought by governments or
municipalities after July 10, 2000, which are excluded from coverage.
Provision is made for product liability claims based upon many factors
related to the severity of the alleged injury and potential liability exposure,
based upon prior claim experience. Because our experience in defending these
lawsuits and claims is that unfavorable outcomes are typically not probable or
estimable, only in rare cases is an accrual established for such costs. In most
cases, an accrual is established only for estimated legal defense costs. Product
liability accruals are periodically reviewed to reflect then-current estimates
of possible liabilities and expenses incurred to date and reasonably anticipated
in the future. Threatened product liability claims are reflected in our product
liability accrual on the same basis as actual claims; i.e., an accrual is made
for reasonably anticipated possible liability and claims-handling expenses on an
ongoing basis.
A range of reasonably possible loss relating to unfavorable outcomes
cannot be made. However, in the product liability cases in which a dollar amount
of damages is claimed, the amount of damages claimed, which totaled $433 million
at September 30, 2004, is set forth as an indication of possible maximum
liability that the Company might be required to incur in these cases (regardless
of the likelihood or reasonable probability of any or all of this amount being
awarded to claimants) as a result of adverse judgments that are sustained on
appeal.
Product liability claim payments are made when appropriate if, as, and
when claimants and the Company reach agreement upon an amount to finally resolve
all claims. Legal costs are paid as the lawsuits and claims develop, the timing
of which may vary greatly from case to case. A time schedule cannot be
determined in advance with any reliability concerning when payments will be made
in any given case.
The Company management monitors the status of known claims and the product
liability accrual, which includes amounts for asserted and unasserted claims.
While it is not possible to forecast the outcome of litigation or the timing of
costs, in the opinion of management, after consultation with independent and
corporate counsel, it is not probable and is unlikely that litigation, including
punitive damage claims, will have a material adverse effect on the financial
position of the Company, but may have a material impact on the Company's
financial results for a particular period.
The Company has reported all cases instituted against it through June 30,
2004 and the results of those cases, where terminated, to the S.E.C. on its
previous Form 10-K and 10-Q reports, to which reference is hereby made.
13
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
NOTE 9 - RELATED PARTY TRANSACTIONS
For the three and nine months ended September 30, 2004 and 2003, the
Company paid Newport Mills, of which William B. Ruger, Jr., Chairman and Chief
Executive Officer of the Company, is the sole proprietor, $60,750 and $182,250,
and $60,750 and $182,250, respectively, for storage rental and office space. On
July 17, 2003, the Company sold two automobiles to William B. Ruger, Jr. for
$60,000.
NOTE 10 - OPERATING SEGMENT INFORMATION
The Company has two reportable segments: firearms and investment castings.
The firearms segment manufactures and sells rifles, pistols, revolvers, and
shotguns principally to a select number of independent wholesale distributors
primarily located in the United States. The investment castings segment consists
of two operating divisions which manufacture and sell titanium and steel
investment castings. Selected operating segment financial information follows
(in thousands):
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
2004 2003 2004 2003
--------- --------- --------- ---------
Net Sales
Firearms $ 29,063 $ 32,237 $ 92,798 $ 95,876
Castings
Unaffiliated 6,317 4,583 15,531 13,877
Intersegment 3,695 2,754 11,694 12,368
--------- --------- --------- ---------
10,012 7,337 27,225 26,245
Eliminations (3,695) (2,754) (11,694) (12,368)
--------- --------- --------- ---------
$ 35,380 $ 36,820 $ 108,329 $ 109,753
========= ========= ========= =========
Income(loss) before income taxes
Firearms $ 307 $ 916 $ 8,368 $ 11,228
Castings (1,375) (633) (3,686) (2,107)
Corporate 1,035 6,148 989 6,595
--------- --------- --------- ---------
($ 33) $ 6,431 $ 5,671 $ 15,716
========= ========= ========= =========
September 30, December 31,
2004 2003
------------- ------------
Identifiable Assets
Firearms $ 77,612 $ 72,600
Castings 19,443 17,939
Corporate 53,957 72,334
--------- ---------
$ 151,012 $ 162,873
========= =========
14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Company Overview
Sturm, Ruger & Company, Inc. (the "Company") is principally engaged in the
design, manufacture, and sale of firearms and precision investment castings. The
Company's design and manufacturing operations are located in the United States.
Substantially all sales are domestic.
The Company is the only U.S. firearms manufacturer which offers products
in all four industry product categories - rifles, shotguns, pistols, and
revolvers. The Company's firearms are sold through a select number of
independent wholesale distributors principally to the commercial sporting
market.
Investment castings manufactured are of titanium and steel alloys.
Investment castings are sold either directly to or through manufacturers'
representatives to companies in a wide variety of industries.
The Company measures its performance only against its own historical
results because the Company is unable to compare its performance to other
companies or specific current industry trends in a timely manner. Many of the
Company's competitors are private companies not subject to public information
reporting requirements, and most industry-wide data is generally not available
on a current basis.
The Company does not consider its overall firearms business to be
predictably seasonal; however, sales of certain models of firearms are usually
lower in the third quarter of the year.
Results of Operations
The Company achieved consolidated net sales of $35.4 million and $108.3
million for the three and nine months ended September 30, 2004, respectively.
This represents a decrease of 3.9% from third quarter sales in 2003 of $36.8
million and a decrease of 1.3% from net sales of $109.8 million for the nine
months ended September 30, 2003.
Firearms segment net sales of $29.1 million in the third quarter of 2004
were $3.2 million, or 9.8% below the third quarter of 2003. For the nine months
ended September 30, 2004, firearms segment net sales decreased by $3.1 million
or 3.2% to $92.8 million compared to the corresponding 2003 period. Firearms
unit shipments decreased 15.3% for the three month period and 6.4% for the nine
month period ended September 30, 2004 from the comparable 2003 periods. For the
third quarter of 2004, shipments of revolvers and pistols declined, while
shipments of shotguns and rifles improved. The decrease in shipments for the
nine month period ended September 30, 2004 reflected decreased demand for
pistols and revolvers. 2003 pistol shipments reflected strong demand for the
MK-4NRA, a .22 caliber pistol commemorating William B. Ruger, the Company's
founder, which was available only in 2003. In 2004, the Company continued a
sales incentive program begun in 2003 for its distributors which allows them to
earn rebates of up to 1.5% if certain annual overall sales targets are achieved.
From May 1, 2003 to September 30, 2003, the Company offered a consumer-driven
sales incentive program for certain centerfire pistols.
Casting segment net sales increased by $1.7 million or 37.8% to $6.3
million in the three months ended September 30, 2004 from $4.6 million in the
third quarter of 2003. For the nine months ended September 30, 2004, casting
segment net sales increased $1.7 million or 11.9% to $15.5 million. The increase
in casting
15
segment sales in 2004 is the result of a broadening of our customer base in
several industries, particularly the firearms industry. The Company continues to
explore casting business opportunities.
16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - CONTINUED
Consolidated cost of products sold for the third quarter of 2004 was $30.4
million compared to $31.1 million in the third quarter of 2003. For the nine
months ended September 30, 2004, consolidated cost of products sold was $86.4
million compared to $85.1 million in the corresponding 2003 period, representing
an increase of 1.5% for the nine month period ended September 30, 2004. The
slight decrease in the three month period ended September 30, 2004 is
attributable to decreased firearms sales and decreased product liability costs,
partially offset by increased production costs in the castings segment, and
increased unitary overhead expenses resulting from a reduction in production
volume. The increase for the nine month period ended September 30, 2004 is
primarily attributable to increased production costs in the castings segment,
and increased unitary overhead expenses resulting from a reduction in production
volume, partially offset by decreased product liability costs. The Company
incurred an expense of $1.0 million for the relocation of two titanium furnaces
from its Arizona foundry to New Hampshire. The furnace relocation is nearly
complete. In addition, the Company will incur further costs for the development
of an additional foundry in New Hampshire.
For the third quarter of 2004, gross profit as a percent of net sales
decreased to 14.1% from 15.5% in the third quarter of 2003. Gross profit as a
percentage of net sales decreased to 20.3% for the nine month period ended
September 30, 2004 from 22.5% for the nine month period ended September 30,
2003. Margin deterioration during the three and nine month periods ended
September 30, 2004 was caused by less efficient firearms production due to lower
rates of production, discounts offered on discontinued firearm models, increased
production costs in the castings segment, and the aforementioned relocation
expenses related to the two titanium furnaces, partially offset by decreased
product liability expenses.
Selling, general and administrative expenses increased $0.5 million to
$5.9 million for the quarter ended September 30, 2004 compared with the prior
year period principally reflecting increased personnel costs and national
advertising expenditures. Selling, general and administrative expenses of $17.3
million for the nine months ended September 30, 2004 increased $1.5 million from
the corresponding 2003 period resulting from additional firearms promotional and
advertising expenses as well as increased personnel related expenses.
Total other income decreased by $5.3 million and $5.8 million in the
quarter and nine months ended September 30, 2004, respectively, compared to the
corresponding 2003 periods. Included in total other income for the third quarter
and nine months ended September 30, 2003 was the pretax gain of $5.9 million
from the sale of certain non-manufacturing real estate in Arizona, known as the
Single Six Ranch. Included in total other income for the three and nine months
ended September 30, 2004 is a $0.9 million gain from the sale of the property
and building that housed the Company's Uni-Cast division prior to its sale in
2000.
The effective income tax rate was 40.1% in both the third quarter and nine
months ended September 30, 2004 and 2003, respectively.
As a result of the foregoing factors, consolidated net income for the
three and nine months ended September 30, 2004 decreased to a break-even and to
$3.4 million, respectively, from $3.9 million and $9.4 million for the three and
nine months ended September 30, 2003, respectively.
17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - CONTINUED
Financial Condition
OPERATIONS
At September 30, 2004, the Company had cash, cash equivalents and
short-term investments of $36.7 million, working capital of $93.1 million and a
current ratio of 5.4 to 1.
Cash used by operating activities was $0.6 million for the nine months
ended September 30, 2004. For the nine months ended September 30, 2003,
operations provided $9.8 million in cash. The adverse fluctuation in cash
provided by operations is attributable to reduced earnings in 2004 and a greater
increase in accounts receivable in 2004 compared to 2003.
The Company follows an industry-wide practice of offering a "dating plan"
to its firearms customers on selected products, which allows the purchasing
distributor to buy the products commencing in December, the start of the
Company's marketing year, and pay for them on extended terms. Discounts are
offered for early payment. The dating plan provides a revolving payment plan
under which payments for all shipments made during the period December through
February must be made by April 30. Generally, shipments made in subsequent
months must be paid within approximately 120 days. Dating plan receivable
balances were $3.7 million at September 30, 2004 compared to $4.8 million at
September 30, 2003. The Company has reserved the right to discontinue the dating
plan at any time and has been able to finance this dating plan from internally
generated funds provided by operating activities.
The Company purchases its various raw materials from a number of
suppliers. There is, however, a limited supply of these materials in the
marketplace at any given time which can cause the purchase prices to vary based
upon numerous market factors. The Company believes that it has adequate
quantities of raw materials in inventory to provide ample time to locate and
obtain additional items at a reasonable cost without interruption of its
manufacturing operations. However, if market conditions result in a significant
prolonged inflation of certain prices, the Company's results could be materially
adversely affected.
In conjunction with the sale of its Uni-Cast division in June 2000, the
Company extended credit to the purchaser in the form of a note and a line of
credit, both of which are collateralized by certain of the assets of Uni-Cast.
In July 2002, the Company established an additional collateralized line of
credit for the purchaser and, as of September 30, 2004, the total amount due
from the purchaser was $1.5 million. The Company purchases aluminum castings
used in the manufacture of certain models of pistols exclusively from Uni-Cast.
INVESTING AND FINANCING
Capital expenditures during the nine months ended September 30, 2004
totaled $4.3 million. For the past two years capital expenditures averaged
approximately $1.1 million per quarter. In 2004, the Company expects to spend
approximately $6.0 million on capital expenditures to upgrade and modernize
manufacturing equipment primarily at the Newport Firearms, Ruger Investment
Casting, and Pine Tree Castings Divisions. The Company finances, and intends to
continue to finance, all of these activities with funds provided by operations
and available cash and short-term investments.
18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - CONTINUED
For the nine months ended September 30, 2004 dividends paid totaled $13.5
million. This amount reflects a quarterly dividend of $.20 per share paid in
March and June and a $.10 dividend paid in September 2004. On October 21, 2004,
the Company declared a quarterly dividend of $.10 per share payable on December
15, 2004. Future dividends depend on many factors, including internal estimates
of future performance and the Company's need for funds.
Historically, the Company has not required external financing. Based on
its cash flow and unencumbered assets, the Company believes it has the ability
to raise substantial amounts of short-term or long-term debt. The Company does
not anticipate any need for external financing through 2004.
Firearms Legislation
The sale, purchase, ownership, and use of firearms are subject to
thousands of federal, state and local governmental regulations. The basic
federal laws are the National Firearms Act, the Federal Firearms Act, and the
Gun Control Act of 1968. These laws generally prohibit the private ownership of
fully automatic weapons and place certain restrictions on the interstate sale of
firearms unless certain licenses are obtained. The Company does not manufacture
fully automatic weapons, other than for the law enforcement market, and holds
all necessary licenses under these federal laws. From time to time,
congressional committees review proposed bills relating to the regulation of
firearms. These proposed bills generally seek either to restrict or ban the sale
and, in some cases, the ownership of various types of firearms. Several states
currently have laws in effect similar to the aforementioned legislation.
Until November 30, 1998, the "Brady Law" mandated a nationwide five-day waiting
period and background check prior to the purchase of a handgun. As of November
30, 1998, the National Instant Check System, which applies to both handguns and
long guns, replaced the five-day waiting period. The Company believes that the
"Brady Law" has not had a significant effect on the Company's sales of firearms,
nor does it anticipate any impact on sales in the future. The "Crime Bill" took
effect on September 13, 1994, but none of the Company's products were banned as
so-called "assault weapons." To the contrary, all the Company's then-
manufactured commercially-sold long guns were exempted by name as "legitimate
sporting firearms." This ban expired by operation of law on September 13, 2004.
The Company remains strongly opposed to laws which would restrict the rights of
law-abiding citizens to lawfully acquire firearms. The Company believes that the
lawful private ownership of firearms is guaranteed by the Second Amendment to
the United States Constitution and that the widespread private ownership of
firearms in the United States will continue. However, there can be no assurance
that the regulation of firearms will not become more restrictive in the future
and that any such restriction would not have a material adverse effect on the
business of the Company.
Firearms Litigation
The Company is a defendant in numerous lawsuits involving its products and
is aware of certain other such claims. The Company has expended significant
amounts of financial resources and management time in connection with product
liability litigation. Management believes that, in every case, the allegations
are unfounded, and that the shootings and any results therefrom were due to
negligence or misuse of the firearms by third-parties or the claimant, and that
there should be no recovery against the Company. Defenses further exist to the
suits brought by cities, municipalities, counties, and a state attorney general
based, among other
19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - CONTINUED
reasons, on established state law precluding recovery by municipalities for
essential government services, the remoteness of the claims, the types of
damages sought to be recovered, and limitations on the extraterritorial
authority which may be exerted by a city, municipality, county or state under
state and federal law, including State and Federal Constitutions.
The only case against the Company alleging liability for criminal
shootings by third-parties to ever be permitted to go before a constitutional
jury, Hamilton, et al. v. Accu-tek, et al., resulted in a defense verdict in
favor of the Company on February 11, 1999. In that case, numerous firearms
manufacturers and distributors had been sued, alleging damages as a result of
alleged negligent sales practices and "industry-wide" liability. The Company and
its marketing and distribution practices were exonerated from any claims of
negligence in each of the seven cases decided by the jury. In subsequent
proceedings involving other defendants, the New York Court of Appeals as a
matter of law confirmed that 1) no legal duty existed under the circumstances to
prevent or investigate criminal misuses of a manufacturer's lawfully made
products; and 2) liability of firearms manufacturers could not be apportioned
under a market share theory. More recently, the New York Court of Appeals on
October 21, 2003 declined to hear the appeal from the decision of the New York
Supreme Court, Appellate Division, affirming the dismissal of New York Attorney
General Eliot Spitzer's public nuisance suit against the Company and other
manufacturers and distributors of firearms. In its decision, the Appellate
Division relied heavily on Hamilton in concluding that it was "legally
inappropriate," "impractical," "unrealistic" and "unfair" to attempt to hold
firearms manufacturers responsible under theories of public nuisance for the
criminal acts of others.
Of the lawsuits brought by municipalities or a state Attorney General,
fifteen have been dismissed with no appeal pending. Fourteen of those cases are
concluded: Atlanta - dismissal by intermediate Appellate Court, no further
appeal; Bridgeport - dismissal affirmed by Connecticut Supreme Court; County of
Camden - dismissal affirmed by U.S. Third Circuit Court of Appeals; Miami -
dismissal affirmed by intermediate appellate court, Florida Supreme Court
declined review; New Orleans - dismissed by Louisiana Supreme Court, United
States Supreme Court declined review; Philadelphia - U.S. Third Circuit Court of
Appeals affirmed dismissal, no further appeal; Wilmington - dismissed by trial
court, no appeal; Boston - voluntary dismissal with prejudice by the City at the
close of fact discovery; Cincinnati - voluntarily withdrawn after a unanimous
vote of the city council; Detroit - dismissed by Michigan Court of Appeals, no
appeal; Wayne County - dismissed by Michigan Court of Appeals, no appeal; New
York State - Court of Appeals denied plaintiff's petition for leave to appeal
the Intermediate Appellate Court's dismissal, no further appeal; Newark -
Superior Court of New Jersey Law Division for Essex County dismissed the case
with prejudice; and City of Camden - dismissed on July 7, 2003, not reopened.
On November 13, 2003, plaintiffs in the Jersey City case voluntarily
dismissed the matter. It is unknown whether plaintiffs will re-file.
The dismissal of the Washington, D.C. lawsuit was sustained on appeal, but
individual plaintiffs were permitted to proceed to discovery and attempt to
identify the manufacturers of the firearms used in their shootings as "machine
guns" under the city's "strict liability" law. Rehearing of the entire appeal is
currently pending. On March 7, 2003, the consolidated California Cities case
involving nine cities and three counties was dismissed as to all manufacturer
defendants, and plaintiffs appealed on June 9, 2003. The Chicago dismissal was
reversed in part on appeal, and an appeal to the Illinois Supreme Court is
pending.
20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - CONTINUED
On October 20, 2003, the St. Louis Circuit Court dismissed the St. Louis
case, and the city filed a notice of appeal. The Missouri Court of Appeals
affirmed the trial court's dismissal on July 27, 2004. The plaintiffs then filed
a motion for rehearing and/or a transfer of the appeal to the Missouri Supreme
Court, which was denied. Thereafter, the plaintiffs filed a motion directly to
the Missouri Supreme Court, requesting that it accept transfer of the appeal.
That motion was denied on October 26, 2004.
The Indiana Court of Appeals affirmed the dismissal of the Gary case by
the trial court, but the Indiana Supreme Court reversed this dismissal and
remanded the case for discovery proceedings on December 23, 2003. Cleveland and
New York City are open cases and the New York City case is scheduled to begin
trial in April, 2005.
In the NAACP case, on May 14, 2003, an advisory jury returned a verdict
rejecting the NAACP's claims. On July 21, 2003, Judge Jack B. Weinstein entered
an order dismissing the NAACP lawsuit, but this order contained lengthy dicta
which defendants believe are contrary to law and fact. Appeals by both sides
were filed, but plaintiffs withdrew their appeal. On August 3, 2004, the United
States Court of Appeals for the Second Circuit granted the NAACP's motion to
dismiss the defendants' appeal of Judge Weinstein's order denying defendants'
motion to strike his dicta made in his order dismissing the NAACP's case, and
the defendants' motion for summary disposition was denied as moot. The ruling of
the Second Circuit effectively confirmed the decision in favor of defendants and
brought this matter to a conclusion.
Legislation has been passed in approximately 34 states precluding suits of
the type brought by the municipalities mentioned above, and similar federal
legislation has been introduced in the U.S. Congress. It passed the House by a
2-to-1 bipartisan majority and had over 54 co-sponsors in the Senate. It was
considered by the Senate in February 2004, but failed to gain final passage
after it was encumbered with numerous non-germane amendments. It is uncertain
when it may be reconsidered by the Senate.
Other Operational Matters
In the normal course of its manufacturing operations, the Company is
subject to occasional governmental proceedings and orders pertaining to waste
disposal, air emissions and water discharges into the environment. The Company
believes that it is generally in compliance with applicable environmental
regulations and the outcome of such proceedings and orders will not have a
material adverse effect on the financial position or results of operations of
the Company.
The valuation of the future defined benefit pension obligations at
December 31, 2003 indicated that these plans were underfunded. While this
estimation has no bearing on the actual funded status of the pension plans, it
resulted in the recognition of other comprehensive loss of $0.5 million in 2003.
The Company expects to realize its deferred tax assets through tax
deductions against future taxable income or carry back against taxes previously
paid.
21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - CONTINUED
Inflation's effect on the Company's operations is most immediately felt in
cost of products sold because the Company values inventory on the LIFO basis.
Generally under this method, the cost of products sold reported in the financial
statements approximates current costs, and thus, reduces distortion in reported
income which would result from the slower recognition of increased costs when
other methods are used. The use of historical cost depreciation has a beneficial
effect on cost of products sold. The Company has been affected by inflation in
line with the general economy.
Adjustments to Critical Accounting Policies
The Company has not made any adjustments to its critical accounting
estimates and assumptions described in the Company's Annual Report on Form 10-K
filed on March 12, 2004, or the judgment affecting the application of those
estimates and assumptions.
Recent Accounting Pronouncements
The Company is not aware of any recent accounting pronouncements that are
expected to have a material effect on its financial position or financial
results.
Forward-Looking Statements and Projections
The Company may, from time to time, make forward-looking statements and
projections concerning future expectations. Such statements are based on current
expectations and are subject to certain qualifying risks and uncertainties, such
as market demand, sales levels of firearms, anticipated castings sales and
earnings, the need for external financing for operations or capital
expenditures, the results of pending litigation against the Company including
lawsuits filed by mayors, state attorneys general and other governmental
entities and membership organizations, and the impact of future firearms control
and environmental legislation, any one or more of which could cause actual
results to differ materially from those projected. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
the date made. The Company undertakes no obligation to publish revised
forward-looking statements to reflect events or circumstances after the date
such forward-looking statements are made or to reflect the occurrence of
subsequent unanticipated events.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to changes in prevailing market interest rates
affecting the return on its investments but does not consider this interest rate
market risk exposure to be material to its financial condition or results of
operations. The Company invests primarily in United States Treasury instruments
with short-term (less than one year) maturities. The carrying amount of these
investments approximates fair value due to the short-term maturities. Under its
current policies, the Company does not use derivative financial instruments,
derivative commodity instruments or other financial instruments to manage its
exposure to changes in interest rates or commodity prices.
23
ITEM 4. CONTROLS AND PROCEDURES
Evaluation
The Company's management, with the participation of the Company's Chief
Executive Officer and Treasurer and Chief Financial Officer, has evaluated the
effectiveness of the Company's disclosure controls and procedures (as such term
is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as amended (the "Exchange Act")) as of the end of the period covered by
this report.
Conclusions
Based on that evaluation, the Company's Chief Executive Officer and
Treasurer and Chief Financial Officer have concluded that, as of the end of such
period, the Company's disclosure controls and procedures are effective.
There have not been any changes in the Company's internal control over
financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act) during the Company's most recent quarter that have
materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The nature of the legal proceedings against the Company is discussed at
Note 8 to this Form 10-Q report, which is incorporated herein by reference.
The Company has reported all cases instituted against it through June 30,
2004, and the results of those cases, where terminated, to the S.E.C. on its
previous Form 10-K and 10-Q reports, to which reference is hereby made.
No cases were formally instituted against the Company during the three
months ended September 30, 2004, which involved significant demands for
compensatory and/or punitive damages and in which the Company has been served
with process.
During the three months ending September 30, 2004, one previously reported
case was settled.
Case Name Jurisdiction
--------- ------------
Beasley Alabama
The settlement amount was within the limits of its self-insurance coverage
or self-insurance retention.
On July 27, 2004, in the previously reported St. Louis (MO) case, the
Missouri Court of Appeals affirmed the trial court's dismissal. Plaintiffs have
filed a motion to appeal the affirmed dismissal directly to the Missouri Supreme
Court. That motion was denied on October 26, 2004.
24
ITEM 1. LEGAL PROCEEDINGS - CONTINUED
On August 3, 2004, in the previously reported NAACP (NY) case, the United
States Court of Appeals for the Second Circuit granted plaintiff's motion to
dismiss the defendants' appeal of Judge Weinstein's order denying defendants'
motion to strike his extraneous comments made in his order dismissing the
NAACP's case, and the defendants' motion for summary disposition was denied as
moot. The ruling of the Second Circuit effectively confirmed the decision in
favor of defendants and brought this matter to a conclusion.
In the previously reported case City of Camden (NJ), plaintiffs have
failed to take action to reopen after its dismissal by the trial court over a
year ago.
On September 30, 2004, in the previously reported Lemongello (WV) case
involving an alleged "straw purchase" from a firearms retailer, summary judgment
was entered in favor of the Company. The court found that the Company had
breached no legal duty to any of the plaintiffs, and further held that nothing
the Company did or failed to do in its sales policy was either a direct or an
indirect cause of plaintiff's injuries arising out of a criminal assault.
Plaintiffs have four months to file an appeal, and it is unknown at this time
whether they will do so.
After the jury returned a unanimous defense verdict on October 6, 2003 in
the previously reported Whaley (AK) case, plaintiffs filed a post-trial motion
seeking a new trial. Plaintiffs' motion was denied and the appeal has been
dismissed.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
25
ITEM 6. EXHIBITS
(a) Exhibits:
31.1 Certification Pursuant to Rule 13a-14(a) as Adopted Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification Pursuant to Rule 13a-14(a) as Adopted Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification Pursuant to 18 U.S.C. Section 1350 as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification Pursuant to 18 U.S.C. Section 1350 as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
26
STURM, RUGER & COMPANY, INC.
FORM 10-Q FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2004
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
STURM, RUGER & COMPANY, INC.
-------------------------------------
Date: November 4, 2004 S/THOMAS A. DINEEN
-------------------------------------
Thomas A. Dineen
Principal Financial Officer,
Treasurer and Chief Financial Officer
27