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 June 30, 2005
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.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 06-0633559
-------------------------------------------- ------------------------------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
Lacey Place, Southport, Connecticut 06890
-------------------------------------------- ------------------------------
(Address of principal executive offices) (Zip code)
(203) 259-7843
----------------
(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 July
31, 2005: 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--June 30, 2005 and December 31, 2004 3
Condensed statements of income--Three months ended June 30, 2005 and
2004, Six months ended June 30, 2005 and 2004 5
Condensed statements of cash flows--Six months ended June 30, 2005
and 2004 6
Notes to condensed financial statements -- June 30, 2005 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 20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 21
Item 3. Defaults Upon Senior Securities 21
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)
June 30, December 31,
2005 2004
--------- ------------
(Note)
ASSETS
Current Assets
Cash and cash equivalents $ 4,161 $ 4,841
Short-term investments 28,905 28,430
Trade receivables, less allowances for
doubtful accounts ($378 and $373) and
discounts ($415 and $555) 14,257 16,082
Inventories:
Finished products 12,273 13,289
Materials and products in process 39,298 36,230
--------- ------------
51,571 49,519
Deferred income taxes 6,984 6,445
Prepaid expenses and other current assets 2,687 4,383
--------- ------------
Total current assets 108,565 109,700
Property, plant and equipment 161,036 160,434
Less allowances for depreciation (134,617) (132,860)
--------- ------------
26,419 27,574
Deferred income taxes 833 1,178
Other assets 8,679 8,489
--------- ------------
Total Assets $ 144,496 $ 146,941
========= ============
3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
STURM, RUGER & COMPANY, INC.
CONDENSED BALANCE SHEETS
(Dollars in thousands, except per share data)
June 30, December 31,
2005 2004
--------- ------------
(Note)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Trade accounts payable and accrued expenses $ 4,108 $ 5,281
Product liability 1,302 1,968
Employee compensation and benefits 6,519 5,868
Workers' compensation 5,653 5,387
Income taxes 935 768
--------- ------------
Total current liabilities 18,517 19,272
Accrued pension liability 6,422 6,337
Product liability accrual 1,092 1,164
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 26,910,700 26,911 26,911
Additional paid-in capital 2,508 2,508
Retained earnings 99,321 101,024
Accumulated other comprehensive income (loss) (10,275) (10,275)
--------- ------------
Total Stockholders' Equity 118,465 120,168
--------- ------------
Total Liabilities and Stockholders' Equity $ 144,496 $ 146,941
========= ============
Note:
The balance sheet at December 31, 2004 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 financial statements.
4
STURM, RUGER & COMPANY, INC.
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands, except per share data)
Three Months Ended June 30, Six Months Ended June 30,
2005 2004 2005 2004
---------------------------- -------------------------
Firearms sales $ 28,720 $ 27,598 $ 67,821 $ 63,736
Castings sales 5,675 5,115 10,835 9,214
--------- --------- -------- --------
Net sales 34,395 32,713 78,656 72,950
Cost of products sold 28,750 27,951 61,163 55,977
--------- --------- -------- --------
Gross profit 5,645 4,762 17,493 16,973
Expenses:
Selling 4,149 3,865 8,210 8,015
General and administrative 1,634 1,660 3,262 3,336
--------- --------- -------- --------
5,783 5,525 11,472 11,351
--------- --------- -------- --------
Operating income(loss) (138) (763) 6,021 5,622
Other income(expense)-net 135 (7) 121 83
--------- --------- -------- --------
Income(loss) before income taxes (3) (770) 6,142 5,705
Income taxes (1) (309) 2,463 2,288
--------- --------- -------- --------
Net income(loss) ($ 2) ($ 461) $ 3,679 $ 3,417
========= ========= ======== ========
Earnings(loss) per share
Basic ($ 0.00) ($ 0.02) $ 0.14 $ 0.13
========= ========= ======== ========
Diluted ($ 0.00) ($ 0.02) $ 0.14 $ 0.13
========= ========= ======== ========
Cash dividends per share $ 0.10 $ 0.20 $ 0.20 $ 0.40
========= ========= ======== ========
Average shares outstanding
Basic 26,911 26,911 26,911 26,911
========= ========= ======== ========
Diluted 26,911 26,911 26,911 26,983
========= ========= ======== ========
See notes to condensed financial statements.
5
STURM, RUGER & COMPANY, INC.
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
Six Months Ended June 30,
2005 2004
-------------------------
Cash Provided by Operating Activities $ 6,870 $ 4,524
Investing Activities
Property, plant and equipment additions (1,694) (1,969)
Purchases of short-term investments (66,608) (67,830)
Proceeds from maturities of short-term investments 66,134 73,852
--------- --------
Cash provided (used) by investing activities (2,168) 4,053
--------- --------
Financing Activities
Dividends paid (5,382) (10,764)
--------- --------
Cash used by financing activities (5,382) (10,764)
--------- --------
Decrease in cash and cash equivalents (680) (2,187)
Cash and cash equivalents at beginning of period 4,841 3,446
--------- --------
Cash and cash equivalents at end of period $ 4,161 $ 1,259
========= ========
See notes to condensed financial statements.
6
STURM, RUGER & COMPANY, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2005
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 six months ended June 30, 2005 are
not necessarily indicative of the results to be expected for the full year
ending December 31, 2005. 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, 2004.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
Organization: Sturm, Ruger & Company, Inc. ("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 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 have
been prepared from the Company's books and records and include all of the
Company's accounts. All significant intercompany accounts and transactions have
been eliminated. Certain prior year balances may 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 June 30, Six Months Ended June 30,
--------------------------- -------------------------
2005 2004 2005 2004
------- -------- -------- --------
Net Income(loss):
As reported ($ 2) ($ 461) $ 3,679 $ 3,417
Add: Recognized stock-based employee
compensation, net of tax -- -- -- --
Deduct: Employee compensation
expense determined under fair value
method, net of tax (4) (7) (9) (19)
------- -------- -------- --------
Pro forma ($ 6) ($ 468) $ 3,670 $ 3,398
======= ======== ======== ========
Basic Earnings(loss) per Share:
As reported ($ 0.00) ($ 0.02) $ 0.14 $ 0.13
Pro forma ($ 0.00) ($ 0.02) $ 0.14 $ 0.13
======= ======== ======== ========
Diluted Earnings(loss) per Share:
As reported ($ 0.00) ($ 0.02) $ 0.14 $ 0.13
Pro forma ($ 0.00) ($ 0.02) $ 0.14 $ 0.13
======= ======== ======== ========
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: In November 2004, the Financial
Accounting Standards Board ("FASB") issued SFAS 151, "Inventory Costs -- an
amendment of ARB No. 43, Chapter 4" which clarifies the accounting for abnormal
amounts of idle facility expense, freight, handling costs, and wasted material.
SFAS 151 requires that these costs be recognized as current period charges
regardless of whether they are abnormal. In addition, SFAS 151 requires that
allocation of fixed production overheads to the costs of manufacturing be based
on the normal capacity of the production facilities. SFAS 151 is effective for
fiscal years beginning after June 15, 2005. The Company has not completed its
evaluation of the impact that the adoption of this statement will have on its
financial position or results of operations.
In December 2004, the FASB issued SFAS No. 123R, "Share-Based Payment",
which requires that the cost resulting from all share-based payment transactions
be recognized in the financial statements. This Statement requires a public
entity to measure the cost of employee services received in exchange for an
award of equity instruments based on the grant-date fair value of the award.
That cost will be recognized over the period during which an employee is
required to provide service in exchange for the award. SFAS 123R is effective
for fiscal years beginning after June 15, 2005. The Company does not expect the
adoption of this statement to have a material effect on its financial position
or results of operations.
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.
8
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED
NOTE 4--INCOME TAXES
The Company's 2005 effective tax rate differs from the statutory tax rate
due to state income taxes and the newly enacted tax deduction for qualified
production activities provided under the American Jobs Creation Act of 2004.
This deduction is available to the Company for the first time in 2005. The
Company's 2004 effective tax rate differs from the statutory tax rate
principally as a result of state income taxes. Total income tax payments during
the six months ended June 30, 2005 and 2004 were $3.0 million and $2.4 million,
respectively.
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 June 30, Six Months Ended June 30,
--------------------------- -------------------------
2005 2004 2005 2004
------ ------ ------- -------
Service cost $ 319 $ 361 $ 665 $ 737
Interest cost 650 718 1,355 1,471
Expected return on plan assets (763) (773) (1,592) (1,578)
Amortization of prior service cost 67 136 141 281
Recognized actuarial gains 177 185 370 376
------ ------ ------- -------
Net periodic pension cost $ 450 $ 627 $ 939 $ 1,287
====== ====== ======= =======
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 June 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 six
months ended June 30, 2005 and 2004 of 26,911,000 and 26,911,000, and 26,911,000
and 26,983,000, respectively.
NOTE 7--COMPREHENSIVE INCOME
As there were no non-owner changes in equity during the first half of 2005
and 2004, total comprehensive income(loss) equals net income(loss) for the three
and six months ended June 30, 2005 and 2004, or ($0.0) million and ($0.5)
million, and $3.7 million and $3.4 million, respectively.
9
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED
NOTE 8 -- CONTINGENT LIABILITIES
As of June 30, 2005, the Company is a defendant in approximately 5
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
(ii) those brought by cities, municipalities, counties, 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.
10
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED
Of the lawsuits brought by municipalities or a state Attorney General,
twenty have been 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; City of Camden - dismissed on July 7, 2003, not
reopened; Jersey City - voluntarily dismissed and not re-filed; St. Louis -
Missouri Supreme Court denied plaintiffs' motion to appeal Missouri Appellate
Court's affirmance of dismissal; Chicago - Illinois Supreme Court denied
plaintiffs' petition for rehearing; and Los Angeles City, Los Angeles County,
and San Francisco - Appellate Court affirmed summary judgment in favor of
defendants, no further appeal.
The dismissal of the Washington, D.C. municipal 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. On October 19, 2004, the
D.C. Court of Appeals vacated the court's judgment, which dismissed the city's
claim against firearms manufacturers but let stand certain individuals' claims
against the manufacturers of firearms allegedly used in criminal assaults
against plaintiffs under the Washington, D.C. "Strict Liability Act," subject to
proof of causation. The appellate court in an en banc hearing unanimously
dismissed all negligence and public nuisance claims, but let stand individual
claims based upon a Washington, D.C. act imposing "strict liability" for
manufacturers of "machine guns." Based on present information, none of the
Company's products have been identified with any of the criminal assaults which
form the basis of the individual claims. It is uncertain whether any further
appeal will be pursued.
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 presently scheduled
to begin trial in September 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 was
reintroduced in early 2005, and Senate hearings were held in March 2005. It is
uncertain when it will be voted upon by either the Senate Judiciary Committee or
the full Senate.
11
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED
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 claims made after July
10, 2000, coverage is provided on an annual basis for 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 $1.6 million
at June 30, 2005, 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's 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 special
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 March 31,
2005 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.
NOTE 9--RELATED PARTY TRANSACTIONS
For the three and six months ended June 30, 2005 and 2004, 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 $121,500, and
$60,750 and $121,500, respectively, for storage rental and office space.
12
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED
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 June 30, Six Months Ended June 30,
---------------------------- -------------------------
2005 2004 2005 2004
-------- -------- ------- -------
Net Sales
Firearms $28,720 $27,598 $67,821 $63,736
Castings
Unaffiliated 5,675 5,115 10,835 9,214
Intersegment 3,007 3,937 8,671 7,999
-------- -------- ------- -------
8,682 9,052 19,506 17,213
Eliminations (3,007) (3,937) (8,671) (7,999)
-------- -------- ------- -------
$34,395 $32,713 $78,656 $72,950
======== ======== ======= =======
Income (Loss) Before Income Taxes
Firearms ($ 209) $ 1,150 $ 6,170 $ 8,062
Castings (4) (1,807) (337) (2,311)
Corporate 210 (113) 309 (46)
-------- -------- ------- -------
($ 3) ($ 770) $ 6,142 $ 5,705
======== ======== ======= =======
June 30, December 31,
2005 2004
-------- ------------
Identifiable Assets
Firearms $ 72,559 $ 77,049
Castings 20,837 19,581
Corporate 51,100 50,311
-------- ------------
$144,496 $ 146,941
======== ============
13
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.
Because many of the Company's competitors are not subject to public filing
requirements and industry-wide data is generally not available in a timely
manner, the Company is unable to compare its performance to other companies or
specific current industry trends. Instead, the Company measures itself against
its own historical results.
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
Consolidated net sales of $34.4 million were achieved by the Company for
the three months ended June 30, 2005. This represents an increase of 5.2% from
2004 consolidated net sales of $32.7 million. Sales for the six month period
ended June 30, 2005 were $78.7 million, an increase of $5.8 million over sales
of $72.9 million in the comparable 2004 period.
Firearms segment net sales increased by $1.1 million, or 4.0%, in the
second quarter of 2005 to $28.7 million from $27.6 million in the second quarter
of the prior year. For the six months ended June 30, 2005 firearms segment net
sales increased by $4.1 million, to $67.8 million from $63.7 million in the
corresponding 2004 period. Firearms unit shipments increased 11.3% for the
three-month period ended June 30, 2005 and 5.9% for the six-month period ended
June 30, 2005 from the comparable 2004 periods. For the quarter ended June 30,
2005, shipments of revolvers were below the second quarter of 2004, while
pistol, rifle and shotgun shipments exceeded 2004. The increase in shipments of
pistols was attributable to the popularity of the new Ruger MKIII rimfire and
Ruger P345 centerfire models, the increase in rifle shipments is due largely to
a dealer-driven rebate program for 10/22 rifles in effect in May and June of
2005, while the increase in shotguns reflected greater availability of the
side-by-side model. For the six months ended June 30, 2005, rifle and revolver
shipments were below the first half of 2004, and pistols and shotguns, due to
the greater availability of the side-by-side and introduction of the new pistol
models, increased sharply from 2004. Change in product mix from higher priced
products to lower priced products partially offset by pricing increases resulted
in a lesser increase in sales versus unit shipments.
Casting segment net sales increased by $0.6 million or 10.9% to $5.7
million for the three month period ended June 30, 2005 from the three month
period ended June 30, 2004 due to increased demand for titanium castings. For
the six month period ended June 30, 2005 casting segment net sales increased
17.6% or $1.6 million to $10.8 million, reflecting an increase in demand for
titanium castings. Increased sales were primarily generated from existing
customers in a variety of industries.
14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- CONTINUED
Consolidated cost of products sold for the three and the six months ended
June 30, 2005 were $28.8 million and $61.2 million compared to $28.0 million and
$56.0 million for the three and six months ended June 30, 2004, representing an
increase of 2.9% and 9.3%, respectively. The respective increases are primarily
attributable to increased firearms and casting sales, and increased unitary
overhead expenses resulting from a reduction in firearms production volume. For
the three month period ended June 30, 2005, these increased expenses were
partially offset by decreased product liability costs. For the six month period
ended June 30, 2005, increased product liability expenses resulted in a further
increase in cost of products sold.
Gross profit as a percentage of net sales was 22.2% for the six month
period ended June 30, 2005 as compared to 23.3% in the comparable 2004 period.
For the second quarter of 2005, gross profit as a percent of sales increased to
16.4% from 14.6% in the second quarter of 2004. Margin improvement during the
three month period ended June 30, 2005 resulted from increased castings sales
volume, improved castings manufacturing efficiency and decreased product
liability expense partially offset by less efficient firearms production caused
by lower rates of production. Gross margin deterioration for the six month
period ended June 30, 2005 is primarily due to less efficient firearms
production caused by lower rates of production, and increased product liability
costs partially offset by the benefits of increased castings sales volume.
Selling, general and administrative expenses were $5.8 million and $11.5
million for the three and six months ended June 30, 2005, respectively,
essentially unchanged from the corresponding 2004 periods.
Other income-net for the three and six months ended June 30, 2005 was
consistent with the corresponding 2004 periods.
The effective income tax rate of 40.1% in the three months and six months
ended June 30, 2005 remained consistent with the income tax rate in the
corresponding 2004 periods.
As a result of the foregoing factors, consolidated net income increased
$0.5 million from a loss of $0.5 million for the three months ended June 30,
2004 to a breakeven for the three months ended June 30, 2005, and increased $0.3
million, or 7.7%, from $3.4 million for the six months ended June 30, 2004 to
$3.7 million for the six months ended June 30, 2005.
Financial Condition
OPERATIONS
At June 30, 2005, the Company had cash, cash equivalents and short-term
investments of $33.1 million, working capital of $90.0 million and a current
ratio of 5.9 to 1.
Cash provided by operating activities was $6.9 million and $4.5 million
for the six months ended June 30, 2005 and 2004, respectively. The increase in
cash provided is principally a result of decreases in accounts receivable and
prepaid expenses during the first six months of 2005.
15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- CONTINUED
Until November 30, 2004, the Company followed a common industry practice
of offering a "dating plan" to its firearms customers on selected products,
which allowed the customer to buy the products commencing in December, the start
of the Company's marketing year, and pay for them on extended terms. Discounts
were offered for early payment. The dating plan provided a revolving payment
plan under which payments for all shipments made during the period December
through February were made by April 30. Shipments made in subsequent months were
paid for within a maximum of 120 days. On December 1, 2004, the Company modified
the payment terms on these selected products whereby payment is now due 45 days
after shipment. Discounts are offered for early payment. Dating plan receivable
balances were $5.9 million at June 30, 2005 compared to $6.2 million at June 30,
2004.
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.
INVESTING AND FINANCING
Capital expenditures during the six months ended June 30, 2005 totaled
$1.7 million. For the past two years capital expenditures averaged approximately
$1.3 million per quarter. In 2005, the Company expects to spend approximately $6
million on capital expenditures to upgrade and modernize manufacturing equipment
primarily at the Newport Firearms and Pine Tree Castings Divisions. The Company
finances, and intends to continue to finance, all of these activities with funds
provided by operations.
For the six months ended June 30, 2005 dividends paid totaled $5.4
million. This amount reflects a quarterly dividend of $.10 per share paid in
March and June 2005. On July 26, 2005, the Company declared a quarterly dividend
of $.10 per share payable on September 15, 2005. Future dividends depend on many
factors, including internal estimates of future performance, then-current cash
and short-term investments, 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 2005.
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
16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- CONTINUED
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 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.
17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- CONTINUED
Of the lawsuits brought by municipalities or a state Attorney General,
twenty have been 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; City of Camden - dismissed on July 7, 2003, not
reopened; Jersey City - voluntarily dismissed and not re-filed; St. Louis -
Missouri Supreme Court denied plaintiffs' motion to appeal Missouri Appellate
Court's affirmance of dismissal; Chicago - Illinois Supreme Court denied
plaintiffs' petition for rehearing; and Los Angeles City, Los Angeles County,
and San Francisco - Appellate Court affirmed summary judgment in favor of
defendants, no further appeal.
The dismissal of the Washington, D.C. municipal 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. On October 19, 2004, the
D.C. Court of Appeals vacated the court's judgment, which dismissed the city's
claim against firearms manufacturers but let stand certain individuals' claims
against the manufacturers of firearms allegedly used in criminal assaults
against plaintiffs under the Washington, D.C. "Strict Liability Act," subject to
proof of causation. The appellate court in an en banc hearing unanimously
dismissed all negligence and public nuisance claims, but let stand individual
claims based upon a Washington, D.C. act imposing "strict liability" for
manufacturers of "machine guns." Based on present information, none of the
Company's products have been identified with any of the criminal assaults which
form the basis of the individual claims. It is uncertain whether any further
appeal will be pursued.
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 presently scheduled
to begin trial in September, 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 was
reintroduced in early 2005, and Senate hearings were held in March 2005. It is
uncertain when it will be voted upon by either the Senate Judiciary Committee or
the full Senate.
18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- CONTINUED
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, 2004 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 a cumulative other comprehensive loss of $10.3
million at December 31, 2004.
The Company expects to realize its deferred tax assets through tax
deductions against future taxable income or carry back against taxes previously
paid.
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 15, 2005, or the judgment affecting the application of those
estimates and assumptions.
Recent Accounting Pronouncements
In November 2004, the Financial Accounting Standards Board ("FASB") issued
SFAS 151, "Inventory Costs -- an amendment of ARB No. 43, Chapter 4" which
clarifies the accounting for abnormal amounts of idle facility expense, freight,
handling costs, and wasted material. SFAS 151 requires that these costs be
recognized as current period charges regardless of whether they are abnormal. In
addition, SFAS 151 requires that allocation of fixed production overheads to the
costs of manufacturing be based on the normal capacity of the production
facilities. SFAS 151 is effective for fiscal years beginning after June 15,
2005. The Company has not completed its evaluation of the impact that the
adoption of this statement will have on its financial position or results of
operations.
In December 2004, the FASB issued SFAS No. 123R, "Share-Based Payment",
which requires that the cost resulting from all share-based payment transactions
be recognized in the financial statements. This Statement requires a public
entity to measure the cost of employee services received in exchange for an
award of equity instruments based on the grant-date fair value of the award.
That cost will be recognized over the period during which an employee is
required to provide service in exchange for the award. SFAS 123R is effective
for fiscal years beginning after June 15, 2005. The Company does not expect the
adoption of this statement to have a material effect on its financial position
or results of operations.
19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- CONTINUED
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.
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.
20
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 March 31,
2005, 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 June 30, 2005, which involved significant demands for compensatory
and/or punitive damages and in which the Company has been served with process.
During the three months ended June 30, 2005, one previously reported case
was settled.
Case Name Jurisdiction
--------- ------------
Leabo Arizona
The settlement amount was within the limits of its self-insurance coverage
or self-insurance retention.
In the previously reported Washington, D.C. municipal case, the appellate
court in an en banc hearing unanimously dismissed all negligence and public
nuisance claims. The court let stand individual claims based upon a Washington,
D.C. act imposing "strict liability" for manufacturers of "machine guns." Based
on present information, none of the Company's products have been identified with
any of the criminal assaults which form the basis of the individual claims. It
is uncertain whether any further appeals will be pursued.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
21
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The 2005 Annual Meeting of the Stockholders of the Company was held on May
3, 2005. The table below sets forth the results of the votes taken at the
2005 Annual Meeting:
1. Election of Directors Votes For Votes Withheld
------------------------ ---------- --------------
William B. Ruger, Jr. 25,401,399 417,615
Stephen L. Sanetti 25,404,343 414,671
Richard T. Cunniff 25,364,554 454,460
Townsend Hornor 25,364,329 454,685
John M. Kingsley, Jr. 23,857,699 1,961,315
James E. Service 25,372,044 446,970
2. Ratification of KPMG LLP as Auditors for 2005
Votes For Votes Against Votes Withheld
---------- ------------- --------------
25,504,401 250,288 64,325
ITEM 5. OTHER INFORMATION
None
22
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
23
STURM, RUGER & COMPANY, INC.
FORM 10-Q FOR THE THREE MONTHS ENDED JUNE 30, 2005
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: July 29, 2005 /S/ THOMAS A. DINEEN
-------------------------------------
Thomas A. Dineen
Principal Financial Officer,
Treasurer and Chief Financial Officer
24