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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM ____________ TO ___________
COMMISSION FILE NUMBER 0-4776
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 06490
(Address of principal executive offices) (Zip Code)
(203) 259-7843
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
COMMON STOCK, $1 PAR VALUE NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
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 filing
requirements for the past 90 days. YES [ X ] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ].
The aggregate market value of the voting stock held by nonaffiliates of the
registrant as of February 28, 1997:
Common Stock, $1 par value - $322,904,714
The number of shares outstanding of the issuer's common stock as of March 14,
1997:
Common Stock, $1 par value - 26,916,800
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Stockholders for the fiscal year ended December
31, 1996 are incorporated by reference into Parts I, II and IV of this Report.
Portions of the Proxy Statement relating to the Annual Meeting of Stockholders
to be held May 20, 1997 are incorporated by reference into Part III of this
Report.
Page 1 of 49
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PART I
ITEM 1--BUSINESS
The Company is principally engaged in the design, manufacture, and sale of
firearms and precision metal investment castings. The Company is the only U.S.
firearms manufacturer which offers products in all four industry categories
(rifles, shotguns, pistols, and revolvers) and believes that it is the largest
U.S. firearms manufacturer, based on data reported in the Bureau of Alcohol,
Tobacco and Firearms' 1995 Annual Firearms Manufacturing and Exportation Report
("BATF Data"). The Company, which has been profitable every year since 1950,
believes it has a preeminent reputation among sportsmen, hunters, and gun
collectors for technical innovation and quality construction, based on reports
in industry and business publications. The Company has been in business since
1949 and was incorporated in its present form under the laws of Delaware in
1969.
The Company's firearms, which are sold under the "Ruger" name and trademark,
consist of single-shot, autoloading, bolt action and lever action rifles in a
broad range of hunting calibers; shotguns in three gauges; .22 caliber rimfire
autoloading pistols and centerfire autoloading pistols in various calibers; and
single-action and double-action revolvers in various calibers. The Company
manufactures a wide range of high quality products and does not manufacture
inexpensive concealable firearms, sometimes known as "Saturday Night Specials,"
"Junk Guns," or any firearm included on the list of "assault weapons" which was
part of anti-crime legislation enacted by Congress in 1994.
Many of the firearms introduced by the Company over the years have become
"classics" which have retained their popularity for decades and are sought by
collectors. These firearms include the single-action Single-Six, Blackhawk, and
Bearcat revolvers, the double-action Redhawk revolvers, the 10/22, M-77, and
Number One Single-Shot rifles, and the Red Label over-and-under shotguns. The
Company has supplemented these "classics" with the introduction of new models
and variations of existing models. In 1987, the Company introduced the P85, a
9mm centerfire autoloading pistol, and the GP100 and Super Redhawk revolvers. In
1988 and 1989, it introduced a new line of small frame double-action revolvers,
the SP101. The Company augmented its line of centerfire autoloading pistols in
1990, 1991, and 1992 by offering new versions of the 9mm model and two new
calibers, .40 S&W and .45 ACP. In 1992 and 1993, the Company introduced the
Ruger 22/45 pistol, the Vaquero single-action revolver, the 77/22 Varmint
bolt-action rifle, the P89, P90, and P93 centerfire autoloading pistols, and the
Spurless SP101 double-action revolver. New variations of several of the
Company's most popular models were introduced in 1994 and 1995 including the P94
centerfire autoloading pistol in 9mm and .40 S&W calibers which further
strengthened the Company's P-Series pistol line, the 77/22 bolt-action rifle in
.22 Hornet caliber, and a Woodside model of the Company's over-and-under
shotgun. In 1996, the Company introduced the P95 pistol with an Isoplast polymer
grip frame, the MK-4B .22 caliber target pistol, the Model 96 Lever Action
rifle, and the 10/22 T Target rifle. All of these products have exhibited strong
sales and consumer interest since their introduction. The Company plans to
introduce in 1997 the all new Ruger Carbine, an autoloading rifle which uses
pistol ammunition, the Ruger M-77 Mark II stainless rifle with a laminated
wooden stock, the Ruger 10/22 "All-Weather" rifle featuring a stainless steel
barrel and synthetic stock, the Ruger 22/45 P-4 Target Pistol with a heavy
barrel, and the Ruger Bisley-Vaquero which features a Bisley target style
hammer, grip, and trigger.
The Company is also engaged in the manufacture of titanium, ferrous, and
aluminum investment castings for a wide variety of markets including sporting
goods, commercial, and military. In 1996 and 1995, the Company's foremost
investment castings product was titanium "Great Big Bertha" golf club heads for
Callaway Golf Company, Inc. ("Callaway Golf").
In 1995, the Company entered into a joint venture agreement with Callaway Golf
to construct and operate a foundry for the production of golf club heads
investment cast in titanium. The joint venture, named Antelope Hills, LLC is
owned 50% by the Company and 50% by Callaway Golf. Construction of the Antelope
Hills foundry is substantially complete and production could commence in 1997.
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ITEM 1--BUSINESS (CONTINUED)
For the years ended December 31, 1996, 1995, and 1994, net sales attributable to
the Company's firearms operations were approximately 66.7%, 80.9%, and 91.7%,
respectively, of total net sales. The balance of the Company's net sales for the
aforementioned periods was attributable to its investment castings operations.
Further information regarding industry segment data is incorporated by reference
to pages 20 and 21 of the Company's 1996 Annual Report to Stockholders.
PRODUCTS--FIREARMS
The Company presently manufactures 26 different types of firearm products in
four industry categories: rifles, shotguns, pistols, and revolvers. Most are
available in several models based upon caliber, finish, barrel length, and other
features.
RIFLES--A rifle is a long gun with spiral grooves cut into the interior of the
barrel to give the bullet a stabilizing spin after it leaves the barrel. The
Company presently manufactures nine different types of rifles: the M77 Mark II,
the M77 Mark II Magnum, the 77/22, the 10/22, the Model 96, the Mini-14, the
Mini Thirty, the Ruger Carbine, and the No. 1 Single-Shot. Sales of rifles by
the Company accounted for approximately $77.0 million, $76.5 million, and $68.6
million of revenues for the years 1996, 1995, and 1994, respectively.
SHOTGUNS--A shotgun is a long gun with a smooth barrel interior which fires lead
or steel pellets. The Company presently manufactures two different types of
over-and-under shotguns: the Red Label available in 12, 20, and 28 gauge, and
the Woodside available in 12 gauge. Most of the Red Label models are available
in special Sporting Clays and English Field versions. Sales of shotguns by the
Company accounted for approximately $7.6 million, $4.7 million, and $5.1 million
of revenues for the years 1996, 1995, and 1994, respectively.
PISTOLS--A pistol is a handgun in which the ammunition chamber is an integral
part of the barrel and which is fed ammunition from a magazine contained in the
grip. The Company presently manufactures three different types of pistols, the
Ruger Mark II .22 caliber in Standard, Competition, and Target models, the Ruger
22/45, and the P-series centerfire autoloading pistols in various calibers,
configurations, and finishes. Sales of pistols by the Company accounted for
approximately $30.3 million, $37.0 million, and $70.6 million of revenues for
the years 1996, 1995, and 1994, respectively.
REVOLVERS--A revolver is a handgun which has a cylinder that holds the
ammunition in a series of chambers which are successively aligned with the
barrel of the gun during each firing cycle. There are two general types of
revolvers, single-action and double-action. To fire a single-action revolver,
the hammer must be pulled back to cock the gun and align the cylinder before the
trigger is pulled. To fire a double-action revolver, a single trigger pull
advances the cylinder and cocks and releases the hammer. The Company presently
manufactures eight different types of single-action revolvers: the New Model
Super Single-Six, the New Model .32 magnum Super Single-Six, the New Model
Blackhawk, the New Model Super Blackhawk, the Vaquero, the Bisley, the Old Army
Cap & Ball, and the New Bearcat. The Company presently manufactures four
different types of double-action revolvers: the SP101, the GP100, the Redhawk,
and the Super Redhawk. Sales of revolvers by the Company accounted for
approximately $31.5 million, $34.8 million, and $32.9 million of revenues for
the years 1996, 1995, and 1994, respectively.
The Company also manufactures and sells accessories and replacement parts for
its firearms. These sales accounted for approximately $2.4 million, $2.6
million, and $2.9 million of revenues for the years 1996, 1995, and 1994,
respectively.
PRODUCTS--INVESTMENT CASTINGS
The investment castings products currently manufactured by the Company and sold
to unrelated third parties consist of titanium, ferrous (both chrome-moly and
stainless), and aluminum parts for a wide variety of industries including
sporting goods, commercial, and military.
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ITEM 1--BUSINESS (CONTINUED)
The Company's newest castings facility, Ruger Investment Casting ("RIC"),
located in Prescott, Arizona, engineers and produces titanium, ferrous, and
aluminum castings. This facility's manufacturing activity during 1996 and 1995
for outside customers consisted primarily of producing titanium "Great Big
Bertha" golf club heads for Callaway Golf. Sales of golf club heads to Callaway
Golf accounted for approximately $59.7 million and $23.1 million of revenues
during 1996 and 1995, respectively. No sales were made to Callaway Golf during
1994.
The Pine Tree Castings Division of the Company, located in Newport, New
Hampshire, engineers and produces ferrous castings for a wide range of
commercial customers.
The Company's Uni-Cast Division, located in Manchester, New Hampshire, engineers
and produces primarily large complicated aluminum castings for a number of prime
defense contractors. Uni-Cast is also involved with research and development of
composite metal matrix technology licensed from the Lanxide Corporation.
Sales from the Company's investment castings operations (excluding intercompany
transactions) accounted for approximately $74.5 million, $36.8 million, and
$16.4 million or 33.3%, 19.1%, and 8.3% of the Company's total net sales for
1996, 1995, and 1994, respectively.
MANUFACTURING
FIREARMS--The Company produces most rifles, and all shotguns and revolvers at
the Newport, New Hampshire facility. Some rifles and all pistols are produced at
the Prescott, Arizona facility.
Many of the basic metal component parts of the firearms manufactured by the
Company are produced by the Company's castings facilities through a process
known as precision investment castings. See "Manufacturing-Investment Castings"
for a description of the investment castings process. The Company initiated the
use of this process in the production of component parts for firearms in 1953
and believes that its widespread use of investment castings in the firearms
manufacturing process is unique among firearms manufacturers. The investment
castings process provides greater design flexibility and results in component
parts which are generally close to their ultimate shape and, therefore, require
less machining. Through the use of investment castings, the Company is able to
produce durable and less costly component parts for its firearms.
Third parties supply the Company with various raw materials for its firearms,
such as fabricated steel components, walnut and birch lumber for rifle and
shotgun stocks and other component parts. These raw materials and component
parts are readily available from multiple sources at competitive prices.
All assembly, inspection, and testing of firearms manufactured by the Company is
performed at the Company's manufacturing facilities. Every firearm, including
every chamber of every revolver, manufactured by the Company is test-fired prior
to shipment.
INVESTMENT CASTINGS--The Company manufactures all of its precision investment
castings products at one of its three investment castings facilities. To produce
a product by the investment castings method, a wax model of the product is
created and coated ("invested") with several layers of ceramic material. The
shell is then heated to melt the interior wax which is poured off, leaving a
hollow mold. To cast the desired product, molten metal is poured into the mold
and allowed to cool and solidify. The mold is then broken off to reveal a near
net shape cast metal part.
Titanium investment castings products are manufactured by the Company's RIC
Division located in Prescott, Arizona. This is the Company's newest investment
castings facility and also has the capabilities of producing ferrous and
aluminum investment castings products. In the latter part of 1994 and throughout
1995 and 1996, the Company significantly added to the production capacity of
Ruger Investment Casting and believes that this facility is one of the largest
investment castings facilities in the Southwest.
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ITEM 1--BUSINESS (CONTINUED)
The Company and Callaway Golf entered into a joint venture agreement in June
1995 to plan, develop, build, and operate a foundry for the production of golf
club heads investment cast in titanium. The joint venture, named Antelope Hills,
LLC, is owned 50% by the Company and 50% by Callaway Golf. This facility was
completed in the first quarter of 1997 and has production capacity for titanium
products similar to that of RIC.
The Company's Pine Tree Castings Division manufactures primarily all of the
ferrous investment castings produced by the Company. Aluminum investment
castings products are primarily manufactured by the Company's Uni-Cast Division
located in Manchester, New Hampshire. In 1996 the Company spent $2.2 million in
capital expenditures for the Uni-Cast Division to both modernize and outfit the
facility to produce castings made of inorganic composites such as ceramic
reinforced aluminum alloys. Additional capital expenditures of $2.5 million are
budgeted in 1997.
Raw materials including wax, ceramic material, and metal alloys necessary for
the production of investment cast products are supplied to the Company through
third parties. The Company believes that all these raw materials, with the
exception of certain titanium metal alloys ("titanium"), are readily available
from multiple sources at competitive prices. Presently, the Company buys most of
its titanium under a short-term (approximately one year) purchasing arrangement
from one supplier. Although there are limited suppliers of titanium, management
believes that other sources could provide the Company with the requirements to
meet production demands. If it becomes necessary to change titanium suppliers,
the Company believes that it has adequate quantities of titanium in inventory to
provide enough time to locate another supplier without interruption of
manufacturing operations.
MARKETING AND DISTRIBUTION
FIREARMS--The Company's firearms are primarily marketed through a network of
selected independent distributors who purchase the products directly from the
Company for resale to gun dealers and legally authorized end-users. These
end-users include sportsmen, hunters, law enforcement and other governmental
organizations, and gun collectors. In late 1987, the Company reduced by more
than one-half the number of domestic commercial distributors of its firearms in
order to encourage its remaining distributors to focus their efforts on the
Company's products. Each of these distributors carries the entire line of
firearms manufactured by the Company for the commercial market. Management
believes that the increase in sales since 1988 is due in part to this strategy.
In 1996, the number of distributors decreased primarily as a result of certain
distributors consolidating operations with other distributors of the Company.
Currently, 21 distributors service the domestic commercial market, with an
additional 57 servicing the domestic law enforcement market and two servicing
the Canadian market. Three of these distributors service both the domestic
commercial market and the domestic law enforcement market. Currently, five
distributors account for approximately 54% of the Company's sales of firearms,
with the largest distributor, Jerry's Sport Center (Forest City, Pennsylvania),
accounting for approximately 12% of consolidated net sales. The Company employs
seven employees and two independent contractors who service these distributors
and call on dealers and law enforcement agencies. Because the ultimate demand
for the Company's firearms comes from end-users, rather than from the Company's
distributors, the Company believes that the loss of any distributor would not
have a material adverse effect on the Company. The Company considers its
relationships with its distributors to be satisfactory.
In addition, the Company markets its firearms directly to foreign customers,
consisting primarily of law enforcement agencies and foreign governments.
Foreign sales were less than 10% of the Company's consolidated net sales for
each of the past three years. No material portion of the Company's business is
subject to renegotiation of profits or termination of contracts at the election
of a government purchaser.
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ITEM 1--BUSINESS (CONTINUED)
In the fourth quarter of 1996, the Company received annual orders from its
distributors for the 1997 marketing year. These orders may be adjusted quarterly
by the distributors to allow for market fluctuations. In prior years, only one
adjustment to the annual orders, in the second quarter of the year, was allowed.
As of March 1, 1997, unfilled firearms were approximately $122.4 million as
compared to approximately $203.7 million at March 1, 1996. The Company believes
that the major reason for this decrease is an overall slowdown in the United
States firearms market, especially in the industry product categories of rifles,
shotguns, and revolvers. In addition, the Company believes that firearms segment
orders at March 1, 1996 were inflated by distributors seeking certain models of
the Company's products that were in short supply due to production constraints
during 1995. The impact of the Company's change in the annual order policy and
recently introduced firearm models on unfilled orders as of March 1, 1997 is not
readily determinable at this time. However, it is anticipated that demand for
new firearms models will be strong.
Most of the firearms manufactured by the Company are sold on terms requiring
payment in full within 30 days. However, certain products which are generally
used during the fall hunting season are sold pursuant to a "dating plan" which
in general allows the purchasing distributor to buy the products commencing in
December, the normal start of the Company's dating plan year, and pay for them
on extended terms. Discounts are offered for early payment. Management believes
that this dating plan serves to level out the demand for these seasonal products
throughout the entire year and facilitates an efficient manufacturing schedule.
The Company does not consider its overall firearms business to be significantly
seasonal; however sales of certain models of firearms are usually lower in the
third quarter of the year.
INVESTMENT CASTINGS--The investment castings segment's principal markets are
sporting goods, commercial, and military. Sales are made directly to customers
or through manufacturers' representatives. The Company's largest castings
segment customer in 1996 and 1995, Callaway Golf Company, Inc. (Carlsbad,
California) accounted for approximately 27% and 12% of consolidated net sales
and 80% and 62% of castings segment sales, respectively. One customer in 1994
represented 23% of castings segment sales.
COMPETITION
FIREARMS--Competition in the firearms industry is intense and comes from both
foreign and domestic manufacturers. While some of these competitors concentrate
on a single industry product category, such as rifles or pistols, several
foreign competitors manufacture products in all four industry categories
(rifles, shotguns, pistols and revolvers). Some of these competitors are
subsidiaries of large corporations with substantially greater financial
resources than the Company. The Company is the only domestic manufacturer which
produces firearms in all four industry product categories and believes that it
is the largest U.S. firearms manufacturer, according to BATF Data. The principal
methods of competition in the industry are product quality and price. The
Company believes that it can compete effectively with all of its present
competitors based upon the high quality, reliability and performance of its
products, and the competitiveness of its pricing.
INVESTMENT CASTINGS--There are a large number of investment castings
manufacturers, both domestic and foreign, with which the Company competes.
Competition varies based on the type of investment castings products (titanium,
ferrous, or aluminum) and the end use of the product (sporting goods,
commercial, or military). Many of these competitors are larger than the Company
and may have greater resources. The principal methods of competition in the
industry are quality, production lead time, and price. The Company believes that
it can compete effectively with all of its present competitors and has expended
significant amounts of resources on both expanding and modernizing its
investment castings facilities in 1996, 1995 and 1994.
-6-
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ITEM 1--BUSINESS (CONTINUED)
EMPLOYEES
As of February 28, 1997, the Company employed 2,010 full-time employees of which
approximately 26% had at least ten years of service with the Company.
None of the Company's employees are subject to a collective bargaining
agreement. The Company has never experienced a strike during its entire 47-year
history and believes its employee relations are satisfactory.
RESEARCH AND DEVELOPMENT
In 1996, 1995 and 1994, the Company spent approximately $1.7 million, $1.7
million and $1.9 million, respectively, on research activities relating to the
development of new products and the improvement of existing products. As of
February 28, 1997, the Company had approximately 53 employees engaged in
research and development activities as part of their responsibilities.
PATENTS AND TRADEMARKS
The Company owns various United States and foreign patents and trademarks which
have been secured over a period of years and which expire at various times. It
is the policy of the Company to apply for patents and trademarks whenever new
products or processes deemed commercially valuable are developed or marketed by
the Company. However, none of these patents and trademarks are considered to be
basic to any important product or manufacturing process of the Company and,
although the Company deems its patents and trademarks to be of value, it does
not consider its business materially dependent on patent or trademark
protection.
ENVIRONMENTAL MATTERS
The Company has programs in place that monitor compliance with various
environmental regulations. However, 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 effect on its business.
EXECUTIVE OFFICERS OF THE COMPANY
Set forth below are the names, ages, and positions of the executive officers of
the Company. Officers serve at the pleasure of the Board of Directors of the
Company.
Name Age Position With Company
- --------------------------------------------------------------------------------
William B. Ruger 80 Chairman of the Board, Chief Executive Officer,
Treasurer, and Director
William B. Ruger, Jr. 57 Vice Chairman, Senior Executive Officer, and Director
Gerald W. Bersett 56 President, Chief Operating Officer, and Director
Erle G. Blanchard 50 Vice President, Controller
Stephen L. Sanetti 47 Vice President, General Counsel
Leslie M. Gasper 43 Corporate Secretary
John R. Pagano 32 Assistant Controller
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ITEM 1--BUSINESS (CONTINUED)
William B. Ruger has been the Chairman of the Board, Chief Executive Officer,
and Treasurer of the Company since 1949. He is the father of William B. Ruger,
Jr.
William B. Ruger, Jr. became Vice Chairman and Senior Executive Officer of the
Company in 1995 and has been a Director of the Company since 1970. Previously,
he served as President of the Company from 1991 to 1995 and as Senior Vice
President of the Company from 1970 to 1990.
Gerald W. Bersett became President and Chief Operating Officer of the Company in
August 1995 and a Director of the Company in November 1996. Previously, he was
the President of the Winchester Division of the Olin Corporation since 1988 and
Vice President of the Olin Corporation since 1993.
Erle G. Blanchard returned to the Company as Vice President, Controller in March
1996. From March 1995 to March 1996, he was not employed by the Company. Prior
to this, he served as Plant Manager of the Newport Firearms Manufacturing
facility since 1986 and became Vice President - Controller - Newport in 1993.
Stephen L. Sanetti has been Vice President, General Counsel of the Company since
1993. Prior to this, he served as General Counsel since 1980.
Leslie M. Gasper has been Secretary of the Company since 1994. Prior to this,
she was the Administrator of the Company's pension plans which position she held
for more than five years prior thereto.
John R. Pagano became Assistant Controller of the Company in 1996. Previously he
was the Manager of Corporate Accounting since 1991. Prior to joining the Company
in 1991, he was a Manager at Ernst & Young LLP.
ITEM 2--PROPERTIES
The Company's manufacturing operations are carried out at three facilities. The
following table sets forth certain information regarding each of these
facilities:
Approximate
Aggregate Usable
Square Feet Status
------------------------------------------
Newport, New Hampshire 350,000 Owned
Prescott, Arizona 230,000 Leased
Manchester, New Hampshire 50,000 Owned
The Company completed construction of a 15,000 square foot addition to the
Manchester, New Hampshire facility in 1996 to be used for manufacturing
operations.
The Newport and Prescott facilities each contain enclosed ranges for testing
firearms and also contain modern tool room facilities. The lease of the Prescott
facility provides for rental payments which approximate real property taxes.
The Company's headquarters and related operations are in Southport, Connecticut.
Manufacturing operations at this location were moved in 1991 to the Company's
Newport and Prescott facilities.
There are no mortgages on any of the real estate owned by the Company.
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ITEM 3--LEGAL PROCEEDINGS
The Company is a defendant in approximately 15 lawsuits involving product
liability claims which allege defective product design and is aware of other
product liability claims. 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. In many of the lawsuits, punitive damages,
as well as compensatory damages, are demanded. Aggregate claimed amounts
presently exceed product liability accruals and, if applicable, insurance
coverage. Management believes that, in every case, the allegations of defective
product design are unfounded, and that the shooting and any results therefrom
were due to negligence or misuse of the firearm by the claimant or a third party
and that there should be no recovery against the Company.
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 difficult to forecast the outcome of these claims, in the opinion of
management, after consultation with special and corporate counsel, the outcome
of these claims will not have a material adverse effect on the results of
operations or financial condition of the Company. The number of lawsuits and
claims that were tried, dismissed, settled, or otherwise resolved and average
settlement payments (excluding legal fees) were as follows: 1996-21 and $45,000,
1995-18 and $46,000, 1994-24 and $55,000.
For a description of all pending lawsuits against the Company through September
30, 1996, reference is made to the discussion under the caption "Item 3. LEGAL
PROCEEDINGS" of the Company's Annual Reports on Form 10-K for the years ended
December 31, 1988, 1994 and 1995 and to the discussion under caption "Item 1.
LEGAL PROCEEDINGS" of the Company's Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1987, September 30, 1990, September 30, 1993, June 30,
and September 30, 1994, March 31 and June 30, 1995, and March 31 and June 30,
1996.
The following case was instituted against the Company during the three months
ended December 31, 1996, which involved significant demands for compensatory
and/or punitive damages:
Armol J. Davidson v. Sturm Ruger & Company, Inc. instituted in the USDC for the
District of Mississippi (Southern Division) on October 29, 1996. The complaint
alleges that on or about May 31, 1996, a Ruger magnum pistol discharged while
plaintiff was loading it, resulting in injury to his right calf. Actual and
punitive damages totaling $30,000,000 are demanded.
During the three months ending December 31, 1996, two previously reported cases
were settled:
Clark Montana
Lowry Alaska
These cases were settled for amounts within the insurance limits and/or
self-insured retention of the Company.
The dismissal of the Forni case (New York), which involved a claim arising out
of an intentional criminal shooting, was upheld by the New York Supreme Court's
Appellate Division on October 3, 1996. No further appeal was taken by
plaintiffs.
ITEM 4--SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5--MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The information required for this Item is incorporated by reference to pages 4
and 23 of the Company's 1996 Annual Report to Stockholders.
ITEM 6--SELECTED FINANCIAL DATA
The information required for this Item is incorporated by reference to page 4 of
the Company's 1996 Annual Report to Stockholders.
ITEM 7--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required for this Item is incorporated by reference to pages 6
through 9 of the Company's 1996 Annual Report to Stockholders.
ITEM 8--FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(A) FINANCIAL STATEMENTS
The consolidated balance sheets of Sturm, Ruger & Company, Inc. and
Subsidiaries as of December 31, 1996 and 1995, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 1996 and the report dated
February 21, 1997 of Ernst & Young LLP, independent auditors, are
incorporated by reference to pages 12 through 22 of the Company's 1996
Annual Report to Stockholders.
(B) SUPPLEMENTARY DATA
Quarterly results of operations for 1996 and 1995 are incorporated by
reference to page 21 of the Company's 1996 Annual Report to Stockholders.
ITEM 9--CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10--DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information as to the directors of the Company under the caption "ELECTION
OF DIRECTORS" on pages 2 and 3 of the Company's Proxy Statement relating to the
Annual Meeting of Stockholders to be held May 20, 1997 is incorporated by
reference into this Report. The information set forth under the caption "SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE" on page 12 of the Proxy
Statement relating to the Annual Meeting of Stockholders to be held May 20, 1997
is incorporated by reference into this Report. The information as to executive
officers of the Company is included in Part I hereof under the caption
"Executive Officers of the Company" in reliance upon General Instruction G to
Form 10-K and Instruction 3 to Item 401(b) of Regulation S-K.
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11
ITEM 11--EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to those
sections of the Company's Proxy Statement relating to the Annual Meeting of
Stockholders to be held May 20, 1997 under the captions "DIRECTOR COMPENSATION
AND INFORMATION ABOUT THE BOARD OF DIRECTORS AND ITS COMMITTEES," "EXECUTIVE
COMPENSATION," "BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION,"
"COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION," "COMPANY STOCK
PRICE PERFORMANCE", "PENSION PLAN TABLE," and "SUPPLEMENTAL EXECUTIVE RETIREMENT
PLAN TABLE" on pages 4 through 10.
ITEM 12--SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference to those
sections of the Company's Proxy Statement relating to the Annual Meeting of
Stockholders to be held May 20, 1997 under the captions "ELECTION OF DIRECTORS,"
"PRINCIPAL STOCKHOLDERS," and "SECURITY OWNERSHIP OF MANAGEMENT" on pages 2, 3,
10, and 11.
ITEM 13--CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference to those
sections of the Company's Proxy Statement relating to the Annual Meeting of
Stockholders to be held May 20, 1997 under the caption "DIRECTOR COMPENSATION
AND INFORMATION ABOUT THE BOARD OF DIRECTORS AND ITS COMMITTEES" and "EXECUTIVE
COMPENSATION" on pages 4 and 5.
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PART IV
ITEM 14--EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as part of this Form 10-K.
(1) Financial Statements:
Consolidated Balance Sheets--December 31, 1996 and 1995
Consolidated Statements of Income--Years ended December 31, 1996,
1995, and 1994
Consolidated Statements of Stockholders' Equity--Years ended December
31, 1996, 1995, and 1994
Consolidated Statements of Cash Flows--Years ended December 31, 1996,
1995, and 1994
Notes to Consolidated Financial Statements
Report of Independent Auditors
This information is incorporated by reference to the Company's 1996 Annual
Report to Stockholders as noted in Item 8.
(2) Financial Statement Schedules:
Schedule II-Valuation and Qualifying Accounts-Page 15
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions, or are inapplicable, or the
required information is disclosed elsewhere, and therefore, have been
omitted.
(3) Listing of Exhibits: Page No.
--------
Exhibit 3.1 Certificate of Incorporation of the Company,
as amended (Incorporated by reference to
Exhibits 4.1 and 4.2 to the Form S-3
Registration Statement previously filed by the
Company File No. 33-62702).
Exhibit 3.2 Bylaws of the Company, as amended
(Incorporated by reference to Exhibit 3.2 to the
Company's Annual Report on Form 10-K for the
year ended December 31, 1995, SEC File No.
0-4776).
Exhibit 3.3 Amendment to Article 2, Sections 4 and 5 of the
Bylaws of the Company. 18
Exhibit 10.1 Sturm, Ruger & Company, Inc. 1986 Stock
Bonus Plan (Incorporated by reference to Exhibit
10.1 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1988, as amended
by Form 8 filed March 27, 1990, SEC File No.
0-4776).
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13
ITEM 14--EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(CONTINUED)
Page No.
--------
Exhibit 10.2 Amendment to Sturm, Ruger & Company, Inc. 1986
Stock Bonus Plan (Incorporated by reference to
Exhibit 10.3 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1991,
SEC File No. 0-4776).
Exhibit 10.3 Sturm, Ruger & Company, Inc. Supplemental
Executive Profit Sharing Retirement Plan
(Incorporated by reference to Exhibit 10.4 to
the Company's Annual Report on Form 10-K for the
year ended December 31, 1991, SEC File No.
0-4776).
Exhibit 10.4 Agreement and Assignment of Lease dated
September 30, 1987 by and between Emerson
Electric Co. and Sturm, Ruger & Company, Inc.
(Incorporated by reference to Exhibit 10.2 to
the Company's Annual Report on Form 10-K for the
year ended December 31, 1991, SEC File No.
0-4776).
Exhibit 10.5 Sturm, Ruger & Company, Inc. Supplemental
Executive Retirement Plan (Incorporated by
reference to Exhibit 10.5 to the Company's
Annual Report on Form 10-K for the year ended
December 31, 1995, SEC File No. 0-4776).
Exhibit 10.6 Operating Agreement of Antelope Hills, LLC,
a Delaware Limited Liability Company, dated as
of October 5, 1995 (Incorporated by reference to
Exhibit 10.6 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995,
SEC File No. 0-4776).
Exhibit 13.1 Annual Report to Stockholders of the
Company for the year ended December 31, 1996.
Except for those portions of such Annual Report
to Stockholders expressly incorporated by
reference into the Report, such Annual Report to
Stockholders is furnished solely for the
information of the Securities and Exchange
Commission and shall not be deemed a "filed"
document. 20
Exhibit 23.1 Consent of Independent Auditors. 49
Exhibit 99.1 Item 1 LEGAL PROCEEDINGS from the Quarterly
Report on Form 10-Q of the Company for the
quarter ended March 31, 1987, SEC File No.
1-10435, incorporated by reference in Item 3
LEGAL PROCEEDINGS.
Exhibit 99.2 Item 3 LEGAL PROCEEDINGS from the Annual
Report on Form 10-K of the Company for the year
ended December 31, 1988, SEC File No. 1-10435,
incorporated by reference in Item 3 LEGAL
PROCEEDINGS.
Exhibit 99.3 Item 1 LEGAL PROCEEDINGS from the Quarterly
Report on Form 10-Q of the Company for the
quarter ended September 30, 1990, SEC File No.
1-10435, incorporated by reference in Item 3
LEGAL PROCEEDINGS.
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14
ITEM 14--EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(CONTINUED)
Exhibit 99.4 Item 1 LEGAL PROCEEDINGS from the Quarterly
Report on Form 10-Q of the Company for the
quarter ended September 30, 1993, SEC File No.
1-10435, incorporated by reference in Item 3
LEGAL PROCEEDINGS.
Exhibit 99.5 Item 1 LEGAL PROCEEDINGS from the Quarterly
Reports on Form 10-Q of the Company for the
quarters ended June 30 and September 30, 1994,
SEC File No. 1-10435, incorporated by reference
in Item 3 LEGAL PROCEEDINGS.
Exhibit 99.6 Item 3 LEGAL PROCEEDINGS from the Annual
Report on Form 10-K of the Company for the year
ended December 31, 1994, SEC File No. 1-10435,
incorporated by reference in Item 3 LEGAL
PROCEEDINGS.
Exhibit 99.7 Item 1 LEGAL PROCEEDINGS from the Quarterly
Reports on Form 10-Q of the Company for the
quarters ended March 31 and June 30, 1995, SEC
File No. 1-10435, incorporated by reference in
Item 3 LEGAL PROCEEDINGS.
Exhibit 99.8 Items 3 LEGAL PROCEEDINGS from the Annual
Report on Form 10-K of the Company for the year
ended December 31, 1995, SEC File No. 1-10435,
incorporated by reference in Item 3 LEGAL
PROCEEDINGS.
Exhibit 99.9 Item 1 LEGAL PROCEEDINGS from the Quarterly
Reports on Form 10-Q of the Company for the
quarters ended March 31 and June 30, 1996, SEC
File No. 1-10435, incorporated by reference in
Item 3 LEGAL PROCEEDINGS.
(b) Report on Form 8-K filed in the fourth quarter of 1996: None
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
(Registrant)
S/LESLIE M. GASPER
-----------------------
Leslie M. Gasper
Corporate Secretary
March 21, 1997
-----------------------
Date
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
S/WILLIAM B. RUGER 3/14/97 S/WILLIAM B. RUGER, JR. 3/14/97
- ---------------------------------------------------- ------------------------------------------------
William B. Ruger William B. Ruger, Jr.
Principal Executive Officer, Chairman, Vice Chairman, Senior Executive Officer,
Chief Executive Officer, Treasurer, Director Director
S/JOHN M. KINGSLEY, JR. 3/15/97 S/STANLEY B. TERHUNE 3/14/97
- ---------------------------------------------------- ------------------------------------------------
John M. Kingsley, Jr. Stanley B. Terhune
Director Director
S/RICHARD T. CUNNIFF 3/17/97 S/TOWNSEND HORNOR 3/17/97
- ---------------------------------------------------- ------------------------------------------------
Richard T. Cunniff Townsend Hornor
Director Director
S/PAUL X. KELLEY 3/14/97 S/GERALD W. BERSETT 3/14/97
- ---------------------------------------------------- ------------------------------------------------
Paul X. Kelley Gerald W. Bersett
Director President and Chief Operating
Officer, Director
S/JAMES E. SERVICE 3/14/97
- ----------------------------------------------------
James E. Service
Director
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ANNUAL REPORT ON FORM 10-K
YEAR ENDED DECEMBER 31, 1996
STURM, RUGER & COMPANY, INC. AND SUBSIDIARIES
SOUTHPORT, CONNECTICUT
ITEMS 14(a)(2) AND 14(d)
FINANCIAL STATEMENT SCHEDULE
CERTAIN EXHIBITS
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Sturm, Ruger & Company, Inc. and Subsidiaries
Item 14(a)(2) and Item 14(d)--Financial Statement Schedule
Schedule II--Valuation and Qualifying Accounts
(In Thousands)
- --------------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- --------------------------------------------------------------------------------------------------------------------------
ADDITIONS
--------------------------
(1) (2)
Charged to
Balance at Charged to Other Balance
Beginning Costs and Accounts at End
Description of Period Expenses -Describe Deductions of Period
- --------------------------------------------------------------------------------------------------------------------------
Deductions from asset accounts:
Allowance for doubtful accounts:
Year ended December 31, 1996 $ 981 $ 18 $ 165 (a) $ 834
------- -------- ----------- -------
Year ended December 31, 1995 $ 900 $ 200 $ 119 (a) $ 981
------- ------- ----------- -------
Year ended December 31, 1994 $ 922 $ 50 $ 72 (a) $ 900
------- -------- ------------ -------
Allowance for discounts:
Year ended December 31, 1996 $ 871 $4,408 $4,184 (b) $1,095
------- ------ ---------- ------
Year ended December 31, 1995 $ 650 $7,451 $7,230 (b) $ 871
------- ------ ---------- -------
Year ended December 31, 1994 $ 919 $4,202 $4,471 (b) $ 650
------- ------ ---------- -------
Product safety modifications accrual:
Year ended December 31, 1996 $1,439 $ 137 (c) $1,302
------ ---------- ------
Year ended December 31, 1995 $1,548 $ 109 (c) $1,439
------ ---------- ------
Year ended December 31, 1994 $1,705 $ 157 (c) $1,548
------ ---------- ------
]----------
(a) Accounts written off
(b) Discounts taken
(c) Costs incurred
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