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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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, 2003
------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-4776
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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
October 15, 2003: Common Stock, $1 par value - 26,910,720.
Page 1 of 23
INDEX
STURM, RUGER & COMPANY, INC. AND SUBSIDIARIES
PART I FINANCIAL INFORMATION
Item 1 Financial Statements (Unaudited)
Condensed consolidated balance sheets--September 30, 2003 and
December 31, 2002 3
Condensed consolidated statements of income -- Three months ended September 30,
2003 and 2002; Nine months ended September 30,2003 and 2002 5
Condensed consolidated statements of cash flows--Nine months ended
September 30, 2003 and 2002 6
Notes to condensed consolidated financial statements--September 30, 2003 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 20
Item 6 Exhibits and Reports on Form 8-K 21
SIGNATURES 23
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
STURM, RUGER & COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
September 30, December 31,
2003 2002
----------- ------
(Unaudited) (Note)
ASSETS
Current Assets
Cash and cash equivalents $ 2,550 $ 3,598
Short-term investments 52,328 49,776
Trade receivables, less allowances for
doubtful accounts ($441 and $449) and
discounts ($247 and $783) 14,387 14,026
Inventories:
Finished products 16,801 16,999
Materials and products in process 33,674 34,629
--------- ---------
50,475 51,628
Deferred income taxes 6,683 6,985
Prepaid expenses and other current assets 4,067 4,536
--------- ---------
Total current assets 130,490 130,549
Property, plant and equipment 156,654 153,732
Less allowances for depreciation (128,970) (124,538)
--------- ---------
27,684 29,194
Deferred income taxes 8,675 9,594
Other assets 9,353 14,621
--------- ---------
$ 176,202 $ 183,958
========= =========
3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
STURM, RUGER & COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
September 30, December 31,
2003 2002
------------- ------------
(Unaudited) (Note)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Trade accounts payable and accrued expenses $ 4,806 $ 5,080
Product liability 4,000 4,000
Employee compensation 7,509 7,324
Workers' compensation 4,807 4,765
Dividends payable -- 5,382
Income taxes 906 882
--------- ---------
Total current liabilities 22,028 27,433
Accrued pension liability 5,078 6,423
Deferred income taxes 7,857 5,886
Product liability accrual 4,606 6,233
Contingent liabilities --Note 7 -- --
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 2,508 2,508
Retained earnings 115,299 116,649
Accumulated other comprehensive income (8,085) (8,085)
--------- ---------
136,633 137,983
--------- ---------
$ 176,202 $ 183,958
========= =========
Note:
- ----
The balance sheet at December 31, 2002 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. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2003 2002 2003 2002
---- ---- ---- ----
Firearms sales $ 32,237 $ 32,210 $ 95,876 $108,366
Castings sales 4,583 5,830 13,877 17,898
-------- -------- -------- --------
Net sales 36,820 38,040 109,753 126,264
Cost of products sold 31,102 31,115 85,091 97,114
-------- -------- -------- --------
Gross profit 5,718 6,925 24,662 29,150
Expenses:
Selling 3,987 3,696 11,197 11,111
General and administrative 1,465 1,504 4,532 4,720
-------- -------- -------- --------
5,452 5,200 15,729 15,831
-------- -------- -------- --------
Operating income 266 1,725 8,933 13,319
Gain on sale of real estate 5,922 -- 5,922 --
Other income - net 243 545 861 1,367
-------- -------- -------- --------
Total other income 6,165 545 6,783 1,367
-------- -------- -------- --------
Income before income taxes 6,431 2,270 15,716 14,686
Income taxes 2,579 910 6,302 5,889
-------- -------- -------- --------
Net income $ 3,852 $ 1,360 $ 9,414 $ 8,797
======== ======== ======== ========
Earnings per share
Basic $ 0.14 $ 0.05 $ 0.35 $ 0.33
======== ======== ======== ========
Diluted $ 0.14 $ 0.05 $ 0.35 $ 0.33
======== ======== ======== ========
Cash dividends per share $ 0.20 $ 0.20 $ 0.60 $ 0.60
======== ======== ======== ========
Average shares outstanding
Basic 26,911 26,911 26,911 26,911
======== ======== ======== ========
Diluted 26,928 27,093 26,914 27,062
======== ======== ======== ========
See notes to condensed consolidated financial statements.
5
STURM, RUGER & COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
Nine Months Ended September 30,
2003 2002
---- ----
Cash Provided By Operating Activities $ 9,759 $ 12,560
Investing Activities
Property, plant and equipment additions (2,982) (1,850)
Purchases of short-term investments (112,540) (112,060)
Proceeds from maturities of short-term investments 109,988 117,302
Proceeds from sale of real estate 10,873 --
--------- ---------
Cash provided by investing activities 5,339 3,392
--------- ---------
Financing Activities
Dividends paid (16,146) (16,146)
--------- ---------
Cash used in financing activities (16,146) (16,146)
--------- ---------
Decrease in cash and cash equivalents (1,048) (194)
Cash and cash equivalents at beginning of period 3,598 3,838
--------- ---------
Cash and cash equivalents at end of period $ 2,550 $ 3,644
========= =========
See notes to condensed consolidated financial statements.
6
STURM, RUGER & COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 2003
NOTE 1 -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated 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
consolidated 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, 2003 are not necessarily indicative of the results to be expected for the
full year ending December 31, 2003. 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, 2002.
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 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 and its wholly owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated. Certain prior year
balances have been reclassified to conform with the current year's 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 CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--CONTINUED
Three Months Nine Months
Ended September 30, Ended September 30,
------------------------ ------------------------
2003 2002 2003 2002
Net Income:
As reported $ 3,852 $ 1,360 $ 9,414 $ 8,797
Add: Recognized stock-based employee compensation,
net of tax -- -- -- 10
Deduct: Employee compensation expense determined under
fair value method, net of tax (97) (97) (290) (290)
--------- --------- --------- ---------
Pro forma $ 3,755 $ 1,263 $ 9,124 $ 8,517
========= ========= ========= =========
Basic Earnings per Share:
As reported $ 0.14 $ 0.05 $ 0.35 $ 0.33
Pro forma $ 0.14 $ 0.05 $ 0.34 $ 0.32
========= ========= ========= =========
Diluted Earnings per Share:
As reported $ 0.14 $ 0.05 $ 0.35 $ 0.33
Pro forma $ 0.14 $ 0.05 $ 0.34 $ 0.32
========= ========= ========= =========
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, 2003 and 2002 were $2.8 million and $5.1
million, respectively.
NOTE 5 -- 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. This resulted in diluted weighted-average shares outstanding for the
three and nine months ended September 30, 2003 and 2002 of 26,928,000 and
26,914,000, and 27,093,000 and 27,062,000, respectively.
8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--CONTINUED
NOTE 6 -- COMPREHENSIVE INCOME
As there were no non-owner changes in equity during the first nine months
of 2003 and 2002, total comprehensive income equals net income for the three
months ended September 30, 2003 and 2002 of $3.9 million and $1.4 million,
respectively, and for the nine months ended September 30, 2003 and 2002 of $9.4
million and $8.8 million, respectively.
NOTE 7 -- CONTINGENT LIABILITIES
As of September 30, 2003, the Company is a defendant in approximately 24
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, associations,
individuals and one state Attorney General 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, counties, and the 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
9
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--CONTINUED
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. The Court upheld the verdict of the jury and
dismissed each case as to the Company in its later opinion. The three defendants
found liable filed a notice of appeal from the Court's decision. On August 16,
2000, the U.S. 2nd Circuit Court of Appeals certified certain questions to the
Appellate Division of the New York State Supreme Court for resolution. On April
26, 2001, the Appellate Division of the New York State Supreme Court responded
to the U.S. 2nd Circuit Court of Appeals' certified questions. The questions
involved whether firearms manufacturers have a legal duty to prevent criminal
misuses of their lawfully-sold products and whether any liability of the
firearms manufacturers should be apportioned by a market share theory. The New
York State Appellate Division answered both questions in the negative. On August
30, 2001, the United States Court of Appeals for the 2nd Circuit vacated and
remanded the case with instructions for the trial court to enter a final
judgment of dismissal. The trial court finally dismissed the case on its merits
on September 17, 2001.
Of the lawsuits brought by municipalities or a state Attorney General,
fifteen have been dismissed. Twelve 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; and Wayne County -
dismissed by Michigan Court of Appeals, no appeal; New York State - dismissed by
New York Court of Appeals, no further appeal.
The Indiana Court of Appeals affirmed the dismissal of the Gary case by
the trial court and a decision by the Indiana Supreme Court is pending.
Washington, D.C. is on appeal from its complete dismissal. 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. Camden City was dismissed on July 7, 2003 due
to the bankruptcy of one of the parties; no further action has been taken by the
city. On October 15, 2003, the Circuit Court of the County of St. Louis
dismissed the St. Louis case. It is presently unknown if plaintiffs will appeal.
Cleveland and New York City are stayed. On March 11, 2003, the
intermediate New Jersey Court of Appeals in the Newark lawsuit affirmed the
decision of the trial court permitting certain claims to proceed into pretrial
discovery. Newark and Jersey City are proceeding with pretrial discovery. 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 on October 27, 2003 the NAACP announced that it was withdrawing its
appeal.
Legislation has been passed in approximately 31 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 has over 55 co-sponsors in 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 claims made after July
10, 1994, compensatory and punitive damage insurance coverage is provided, in
states where permitted, coverage is provided 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,
10
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--CONTINUED
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.
On March 17, 2000, Smith & Wesson announced that it had reached a
settlement to conclude some of the municipal lawsuits with various governmental
entities. On March 30, 2000, the Office of the Connecticut Attorney General
began an investigation of certain alleged "anticompetitive practices in the
firearms industry." On April 17, 2000, the State of Maryland's Attorney General
also made similar inquiries as to the Company. On August 9, 2000, the U.S.
Federal Trade Commission also filed such a civil investigative demand regarding
the Smith & Wesson settlement. During April 2002, after the city of Boston
voluntarily withdrew its case with prejudice as to all remaining defendants,
Boston moved jointly with Smith & Wesson to dissolve their consent decree
settlement, which motion the court accepted. The Company has not engaged in any
improper conduct and has cooperated with these investigations. The U.S. Federal
Trade Commission announced that it was terminating this investigation without
further action on August 22, 2003.
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 $437 million
at September 30, 2003, 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,
2003 and the results of those cases, where terminated, to the Securities and
Exchange Commission on its previous Form 10-K and 10-Q reports, to which
reference is hereby made.
11
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--CONTINUED
NOTE 8 -- RELATED PARTY TRANSACTIONS
For the three and nine months ended September 30, 2003 and 2002, 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 $81,000 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 9 -- 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 Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
2003 2002 2003 2002
---- ---- ---- ----
Net Sales
Firearms $ 32,237 $ 32,210 $ 95,876 $ 108,366
Castings
Unaffiliated 4,583 5,830 13,877 17,898
Intersegment 2,754 3,968 12,368 13,268
--------- --------- --------- ---------
7,337 9,798 26,245 31,166
Eliminations (2,754) (3,968) (12,368) (13,268)
--------- --------- --------- ---------
$ 36,820 $ 38,040 $ 109,753 $ 126,264
========= ========= ========= =========
Income/(loss) before
income taxes
Firearms $ 916 $ 3,856 $ 11,228 $ 19,921
Castings (633) (2,059) (2,107) (6,400)
Corporate 6,148 473 6,595 1,165
--------- --------- --------- ---------
$ 6,431 $ 2,270 $ 15,716 $ 14,686
========= ========= ========= =========
12
September 30, December 31,
2003 2002
---- ----
Identifiable Assets
Firearms $ 78,058 $ 79,301
Castings 19,025 19,394
Corporate 79,119 85,263
-------- --------
$176,202 $183,958
======== ========
13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
The Company achieved consolidated net sales of $36.8 million and $109.8
million for the three and nine months ended September 30, 2003, respectively.
This represents a decrease of 3.2% from third quarter sales in 2002 of $38.0
million and a decrease of 13.1% from net sales of $126.3 million for the nine
months ended September 30, 2002.
Firearms segment net sales of $32.2 million in the third quarter of 2003
were consistent with the third quarter of 2002. For the nine months ended
September 30, 2003, firearms segment net sales decreased by $12.5 million or
11.5% to $95.9 million compared to the corresponding 2002 period. Firearms unit
shipments were consistent for the three month period and decreased 10.2% for the
nine month period ended September 30, 2003 from the comparable 2002 periods. For
the quarter, shipments of rifles and shotguns declined, while shipments of
revolvers and pistols improved. Revolver shipments benefited from the popularity
of the new Single Six revolver in the .17 HMR caliber which was introduced in
2003. Pistol shipments reflected strong demand for the recently-introduced
MK-4NRA, a .22 caliber pistol commemorating William B. Ruger, the Company's
founder. The decrease for the nine month period ended September 30, 2003
reflected decreased demand for pistols, rifles, revolvers and shotguns. In 2003,
the Company instituted a sales incentive program for its distributors which
allows them to earn rebates of up to 1.5% if certain annual overall sales
targets are achieved. This program replaces a similar sales incentive program in
2002. From May 1, 2003 to September 30, 2003, the Company offered a
consumer-driven sales incentive program for certain centerfire pistols. From
August 1, 2002 through November 30, 2002, the Company conducted a similar
consumer-driven sales incentive program for certain hunting rifles and
revolvers.
Casting segment net sales decreased by $1.2 million or 21.4% to $4.6
million in the three months ended September 30, 2003 from $5.8 million in the
third quarter of 2002. For the nine months ended September 30, 2003, casting
segment net sales decreased $4.0 million or 22.5% to $13.9 million. The
reduction in casting segment sales in 2003 is primarily due to an apparent
weakened demand for titanium castings. Shipments of titanium golf clubheads to
Karsten Manufacturing Corporation decreased $6.0 million for the nine months
ended September 30, 2003 compared to the corresponding period in 2002. There are
no future shipments expected to Karsten Manufacturing Corporation in 2003. The
Company anticipates that total casting segment sales in 2003 may be below the
level achieved in 2002. The Company continues to actively pursue other casting
business opportunities.
Consolidated cost of products sold for the third quarter of 2003 and for
the third quarter of 2002 was $31.1 million each, respectively. For the nine
months ended September 30, 2003, consolidated cost of products sold was $85.1
million compared to $97.1 million in the corresponding 2002 period, representing
a decrease of 13.1% for the nine month period. The decrease was primarily
attributable to decreased net sales in both firearms and castings and to reduced
production costs in the castings segment, and are partially offset by increases
in product liability costs and a charge related to certain obsolete firearms
inventory during the third quarter.
For the third quarter of 2003, gross profit as a percent of net sales
decreased to 15.5% from 18.2% in the third quarter of 2002. Gross profit as a
percentage of net sales decreased to 22.5% for the nine month period ended
September 30, 2003 from 23.1% for the nine month period ended September 30,
2002. The decrease in margin in the quarter ended September 30, 2003 was
primarily caused by an unfavorable adjustment in the firearms segment for a
charge related to certain obsolete firearms inventory and increased product
liability costs, offset by improved margins in the castings segment compared to
the corresponding 2002 period. The decrease in margin for the nine month period
ended September 30, 2003 is primarily attributable to decreased firearm sales,
increased product liability costs and a charge related to certain obsolete
firearms inventory.
14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--CONTINUED
Selling, general and administrative expenses increased $0.3 million to
$5.5 million for the quarter ended September 30, 2003 compared with the prior
year period principally reflecting royalties to the NRA Foundation for shipments
of the MK4-NRA commemorative pistol, as well as increased national advertising
expenditures. Selling, general and administrative expenses of $15.7 million for
the nine months ended September 30, 2003 were consistent with the corresponding
2002 period.
Total other income increased by $5.6 million and $5.4 million in the
quarter and nine months ended September 30, 2003, respectively, compared to the
corresponding 2002 periods. Included in total other income for the third quarter
and nine months ended September 30, 2003 is the pretax gain of $5.9 million from
the sale of certain non-manufacturing real estate in Arizona, known as the
Single Six Ranch. Conversely, the decrease in other income-net for the quarter
and nine months ended September 30, 2003 compared to the corresponding 2002
periods is primarily attributable to decreased earnings on short-term
investments as a result of declining interest rates and reduced principal.
The effective income tax rate was 40.1% in both the third quarter and nine
months ended September 30, 2003 and September 30, 2002, respectively.
As a result of the foregoing factors, consolidated net income for the
three and nine months ended September 30, 2003 increased to $3.9 million and to
$9.4 million, respectively, from $1.4 million and $8.8 million for the three and
nine months ended September 30, 2002, respectively.
Financial Condition
At September 30, 2003, the Company had cash, cash equivalents and
short-term investments of $54.9 million, working capital of $108.5 million and a
current ratio of 5.9 to 1.
Cash provided by operating activities was $9.8 million and $12.6 million
for the nine months ended September 30, 2003 and 2002, respectively. The
increase in cash provided by investing activities in 2003 is principally a
result of the sale of certain non-manufacturing real estate in Arizona, known as
the Single Six Ranch.
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 90 days. Dating plan receivable
balances were $4.8 million at September 30, 2003 compared to $9.3 million at
September 30, 2002. The consumer-driven sales incentive program offered from
August 2002 through November 2002 included certain hunting rifles eligible for
dating discounts. 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.
Capital expenditures during the nine months ended September 30, 2003
totaled $3.0 million. For the past two years capital expenditures averaged
approximately $0.8 million per quarter. In 2003, the Company expects to spend
approximately $5.0 million on capital expenditures to upgrade and modernize
manufacturing
15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- CONTINUED
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.
For the nine months ended September 30, 2003 dividends paid totaled $16.1
million. This amount reflects the regular quarterly dividend of $.20 per share
paid in March, June and September 2003. On October 23, 2003, the Company
declared a regular quarterly dividend of $.20 per share payable on December 15,
2003. Future dividends depend on many factors, including internal estimates of
future performance and the Company's need for funds.
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 2002, the Company established an additional collateralized line of credit for
the purchaser and, as of September 30, 2003, the total amount due from the
purchaser was $2.0 million. The Company purchases aluminum castings used in the
manufacture of certain models of pistols exclusively from Uni-Cast.
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 2003.
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." 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.
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
16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--CONTINUED
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. The Court upheld the
verdict of the jury and dismissed each case as to the Company in its later
opinion. The three defendants found liable filed a notice of appeal from the
Court's decision. On August 16, 2000, the U.S. 2nd Circuit Court of Appeals
certified certain questions to the Appellate Division of the New York State
Supreme Court for resolution. On April 26, 2001, the Appellate Division of the
New York State Supreme Court responded to the U.S. 2nd Circuit Court of Appeals'
certified questions. The questions involved whether firearms manufacturers have
a legal duty to prevent criminal misuses of their lawfully-sold products and
whether any liability of the firearms manufacturers should be apportioned by a
market share theory. The New York State Appellate Division answered both
questions in the negative. On August 30, 2001, the United States Court of
Appeals for the 2nd Circuit vacated and remanded the case with instructions for
the trial court to enter a final judgment of dismissal. The trial court finally
dismissed the case on its merits on September 17, 2001.
Of the lawsuits brought by municipalities or a state Attorney General,
fifteen have been dismissed. Twelve 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; and Wayne County -
dismissed by Michigan Court of Appeals, no appeal; New York State - dismissed by
New York Court of Appeals, no further appeal.
The Indiana Court of Appeals affirmed the dismissal of the Gary case by
the trial court and a decision by the Indiana Supreme Court is pending.
Washington, D.C. is on appeal from its complete dismissal. 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. Camden City was dismissed on July 7, 2003 due
to the bankruptcy of one of the parties; no further action has been taken by the
city. On October 15, 2003, the Circuit Court of the County of St. Louis
dismissed the St. Louis case. It is presently unknown if plaintiffs will appeal.
17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--CONTINUED
Cleveland and New York City are stayed. On March 11, 2003, the
intermediate New Jersey Court of Appeals in the Newark lawsuit affirmed the
decision of the trial court permitting certain claims to proceed into pretrial
discovery. Newark and Jersey City are proceeding with pretrial discovery. 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 on October 27, 2003 the NAACP announced that it was withdrawing its
appeal.
Legislation has been passed in approximately 31 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 has over 55 co-sponsors in the Senate.
The Company's management reviews every lawsuit and claim at the outset and
is in contact with independent and corporate counsel on an ongoing basis. The
provision for product liability claims is based upon many factors, which vary
for each case. These factors include the type of claim, nature and extent of
injuries, historical settlement ranges, jurisdiction where filed, and advice of
counsel. An accrual is established for each lawsuit and claim, when appropriate,
based on the nature of each such lawsuit or claim.
Amounts are charged to product liability expense in the period in which
the Company becomes aware that a claim or, in some instances a threat of claim,
has been made when potential losses or costs of defense can be reasonably
estimated. Such amounts are determined based on the Company's experience in
defending similar claims. Occasionally, charges are made for claims made in
prior periods because the cumulative actual costs incurred for that claim, or
reasonably expected to be incurred in the future, exceed amounts already
provided. Likewise credits may be taken if cumulative actual costs incurred for
that claim, or reasonably expected to be incurred in the future, are less than
amounts previously provided.
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.
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 its business.
The valuation of the future defined benefit pension obligations at
December 31, 2002 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 $7.9 million in 2002.
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
18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--CONTINUED
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.
Recent Accounting Standards
Statement of Financial Accounting Standards ("SFAS") No. 143, "Accounting
for Asset Retirement Obligations," requires the recognition of an asset and a
liability equal to the present value of the estimated costs associated with the
retirement of long-lived assets where a legal or contractual obligation exists.
Financial Accounting Standards Board ("FASB") Interpretation No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others," requires a guarantor to
recognize a liability with respect to a non-contingent obligation to stand ready
to perform under the guarantee even if the probability of future payments under
the conditions of a guarantee is remote, for periods beginning after December
15, 2002, and requires certain related disclosures as of December 31, 2002.
SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal
Activities," requires that a liability for a cost associated with an exit or
disposal activity be recognized when the liability is incurred, as opposed to
when management is committed to an exit plan.
The Company adopted these statements effective January 1, 2003. The
adoption of these statements did not have a material impact on the Company's
financial statements.
FASB Interpretation No. 46, "Consolidation of Variable Interest Entities,"
introduces a new consolidation model with respect to variable interest entities.
The new model requires that the determination of control should be based on the
potential variability in gains and losses of the variable interest entity being
evaluated. The Company adopted this statement effective July 1, 2003. The
adoption of this statement did not have a material impact on the Company's
financial statements.
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
19
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, a state attorney 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
At the end of the period covered by this report, the Company carried out
an evaluation, under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and Treasurer and
Chief Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures pursuant to Rule 13a-15(e)
promulgated under the Securities and Exchange Act of 1934. Based upon that
evaluation, the Chief Executive Officer and Treasurer and Chief Financial
Officer concluded that the Company's disclosure controls and procedures were
effective in ensuring that material information related to the Company is made
known to the Chief Executive Officer and Treasurer and Chief Financial Officer
by others within the Company during the period in which this report was being
prepared. During the third quarter of 2003, there were no changes in the
Company's internal control over financial reporting that has materially
affected, or is 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 7 to this Form 10-Q report, which is incorporated herein by reference.
The Company has reported all cases instituted against it through June 30,
2003, and the results of those cases, where terminated, to the Securities and
Exchange Commission 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, 2003, 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, 2003, no previously reported
cases were settled.
On July 21, 2003, Judge Jack B. Weinstein entered an order dismissing the
previously reported NAACP (NY) lawsuit. Judge Weinstein stated that plaintiffs
failed to prove specific harm to their organization, and that required dismissal
of the case. His opinion of dismissal contained lengthy dicta which defendants
believe are contrary to law and fact. Appeals by both sides were filed, but on
October 27, 2003, the NAACP announced that it was withdrawing its appeal.
On August 7, 2003, the Michigan Court of Appeals unanimously reversed the
trial court's decision in both the Detroit (MI) and Wayne County (MI) lawsuits
and dismissed these cases. The trial court had denied
20
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS - CONTINUED
the defendants' motion for summary disposition based on Michigan law, which
prohibits cities from bringing civil actions against manufacturers of firearms
or ammunition unless the product is defective, or its sale breaches a warranty
or contract with a city. The trial court found the statute to be invalid, but
the appellate court found it to be both constitutional and controlling.
Plaintiffs did not appeal.
On August 22, 2003, the Federal Trade Commission closed its two-year
investigation of a number of members of the firearms industry without action.
The stated purpose of the investigation was to determine whether any members of
the firearms industry violated Section 5 of the FTC Act by illegally conspiring
to boycott Smith & Wesson after that company concluded an agreement with the
Clinton Administration in March, 2000.
On September 30, 2003, in the previously reported Lawn (Canada) lawsuit,
an order of dismissal was entered, dismissing the Company from the original
claim by the plaintiffs and a cross-claim that was filed by the ammunition
manufacturer.
On October 6, 2003, the jury in the previously reported Whaley (AK) case
returned with a unanimous defense verdict. The case involved a claimed
accidental discharge of a Ruger M77 rifle. It is unknown at this time if
plaintiffs will appeal this verdict.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(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
21
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
(b) The Company filed the following reports on Form 8-K during the
three months ended September 30, 2003:
On July 18, 2003, the Company filed a Current Report on Form
8-K regarding an update to stockholders and other interested
parties on financial results for the second quarter and six
months ended June 30, 2003.
22
STURM, RUGER & COMPANY, INC.
FORM 10-Q FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2003
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: October 31 , 2003 S/THOMAS A. DINEEN
----------------- -------------------------------------
Thomas A. Dineen
Principal Financial Officer,
Treasurer and Chief Financial Officer
23