<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from_______________ to
_______________
Commission file number 0-4776
STURM, RUGER & COMPANY, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
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)
</TABLE>
(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 _____
The number of shares outstanding of the issuer's common stock
as of July 31, 1998: Common Stock, $1 par value - 26,910,720.
Page 1 of 19
<PAGE> 2
INDEX
STURM, RUGER & COMPANY, INC. AND SUBSIDIARIES
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets--June 30, 1998 and
December 31, 1997 3
Condensed consolidated statements of income--Three months ended
June 30, 1998 and 1997; Six months ended June 30, 1998 and 1997 5
Condensed consolidated statements of cash flows--Six months
ended June 30, 1998 and 1997 6
Notes to condensed consolidated financial statements--June 30, 1998 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
STURM, RUGER & COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------- ------------
(unaudited) (Note)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 6,129 $ 4,488
Short-term investments 55,256 45,484
Trade receivables, less allowances for
doubtful accounts ($1,211 and $1,001) and
discounts ($382 and $2,842) 21,311 21,118
Inventories:
Finished products 11,240 12,708
Materials and products in process 31,991 32,841
--------- ---------
43,231 45,549
Deferred income taxes 8,845 7,224
Prepaid expenses and other assets 338 1,344
--------- ---------
TOTAL CURRENT ASSETS 135,110 125,207
PROPERTY, PLANT AND EQUIPMENT 141,859 139,201
Less allowances for depreciation (88,327) (83,538)
--------- ---------
53,532 55,663
DEFERRED INCOME TAXES 4,502 4,701
OTHER ASSETS 14,263 14,223
--------- ---------
$ 207,407 $ 199,794
========= =========
</TABLE>
3
<PAGE> 4
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
STURM, RUGER & COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------- ------------
(unaudited) (Note)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable and accrued expenses $ 5,865 $ 4,628
Product safety modifications 791 870
Product liability 3,000 3,000
Employee compensation 13,750 10,303
Workers' compensation 4,683 5,063
Income taxes 3,350 3,792
--------- ---------
TOTAL CURRENT LIABILITIES 31,439 27,656
PRODUCT LIABILITY ACCRUAL 18,455 19,218
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 shares-
26,910,720 and 26,922,800 26,911 26,923
Additional paid-in capital 2,434 2,632
Retained earnings 128,313 123,510
Additional minimum pension liability (145) (145)
--------- ---------
157,513 152,920
--------- ---------
$ 207,407 $ 199,794
========= =========
</TABLE>
Note:
The balance sheet at December 31, 1997 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
<PAGE> 5
STURM, RUGER & COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Firearms sales $41,773 $ 40,772 $ 78,786 $ 82,924
Castings sales 18,224 13,733 39,732 26,669
-------- -------- -------- --------
Net sales 59,997 54,505 118,518 109,593
Cost of products sold 42,679 36,397 84,876 74,749
-------- -------- -------- --------
17,318 18,108 33,642 34,844
Expenses:
Selling 3,468 3,083 6,774 6,242
General and administrative 1,419 1,847 3,156 2,723
-------- -------- -------- --------
4,887 4,930 9,930 8,965
-------- -------- -------- --------
12,431 13,178 23,712 25,879
Other income (expense)-net 1,698 (99) 2,454 70
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 14,129 13,079 26,166 25,949
Income taxes 5,722 5,431 10,597 10,553
-------- -------- -------- --------
NET INCOME $ 8,407 $ 7,648 $ 15,569 $ 15,396
======== ======== ======== ========
Basic and diluted earnings per share $ 0.31 $ 0.28 $ 0.58 $ 0.57
======== ======== ======== ========
Cash dividends per share $ 0.20 $ 0.20 $ 0.40 $ 0.40
======== ======== ======== ========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE> 6
STURM, RUGER & COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1998 1997
-------- --------
<S> <C> <C>
CASH PROVIDED BY OPERATING ACTIVITIES $ 24,153 $ 38,152
INVESTING ACTIVITIES
Property, plant and equipment additions (2,841) (2,465)
Purchases of short-term investments (77,544) (89,596)
Proceeds from sales or maturities of
short-term investments 67,772 74,802
Net proceeds from sale of land 1,077 --
Investment in joint venture -- 518
Purchase of Callaway's interest in joint venture -- (7,000)
-------- --------
Cash used in investing activities (11,536) (23,741)
-------- --------
FINANCING ACTIVITIES
Repurchase of Common Stock (210) --
Dividends paid (10,766) (10,766)
-------- --------
Cash used by financing activities (10,976) (10,766)
-------- --------
INCREASE IN CASH AND CASH EQUIVALENTS 1,641 3,645
Cash and cash equivalents at beginning of period 4,488 2,729
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,129 $ 6,374
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
6
<PAGE> 7
STURM, RUGER & COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1998
NOTE 1--BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
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 six months ended June 30, 1998
are not necessarily indicative of the results to be expected for the full year
ending December 31, 1998. For further information refer to the consolidated
financial statements and footnotes thereto included in the Sturm, Ruger &
Company, Inc. Annual Report on Form 10-K for the year ended December 31, 1997.
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 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.
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 six months ended June 30, 1998 and 1997 were $12.5 million and $10.1
million, respectively.
7
<PAGE> 8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--CONTINUED
NOTE 5--BASIC AND DILUTED EARNINGS PER SHARE
Basic and diluted earnings per share is based upon the weighted average
number of common shares outstanding during the period.
NOTE 6--COMPREHENSIVE INCOME
As of January 1, 1998, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income". SFAS
130 establishes new rules for the reporting and display of comprehensive income
and its components; however, the adoption of SFAS 130 had no impact on the
Company's net income or shareholders' equity. SFAS 130 requires that all
non-owner changes in equity, such as additional minimum pension liability, which
are not included in net income, be included in other comprehensive income. As
there were no non-owner changes in equity during the first half of 1998 and
1997, total comprehensive income equals net income for the three and six months
ended June 30, 1998 and 1997, or $8.4 million and $7.6 million, and $15.6
million and $15.4 million, respectively.
NOTE 7--CONTINGENT LIABILITIES
The Company is a defendant in approximately 11 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 Company has reported all product liability lawsuits instituted
against it through March 31, 1998 and the results of those lawsuits, where
terminated, to the S.E.C. on its Form 10-K and Form 10-Q reports, to which
reference is hereby made.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Consolidated net sales of $60.0 million and $118.5 million were
achieved by the Company for the three and six months ended June 30, 1998. This
represents an increase of 10.1% and 8.1% from the respective 1997 consolidated
net sales amounts of $54.5 million and $109.6 million.
Firearms segment net sales increased by $1.0 million or 2.5% in the
second quarter to $41.8 million from $40.8 million in the prior year. For the
six months ended June 30, 1998, firearms segment net sales decreased by $4.1
million or 5.0% to $78.8 million, compared to the corresponding 1997 period.
Although firearms unit shipments decreased 1.4% in the second quarter and 6.4%
for the six-month period ended June 30, 1998, net firearms sales for the second
quarter increased slightly due to a favorable product mix. The unit decrease in
both of these periods reflects reduced overall market demand, particularly for
certain revolvers and rifles, partially offset by continuing strong demand for
centerfire pistols and shotguns. Shipments in the second quarter may have been
favorably impacted by a pricing increase in selected models, effective July 1,
1998, that was announced in May. The Company continues to employ three sales
incentive programs which were in effect in 1997. Two of these programs provide
discounts of up to 10% of the sales price of selected pistol and revolver
models, while another provides a 1% overall discount for customers meeting
specific annual sales targets. In 1998 one new program was introduced offering
an additional 1% for distributors qualifying for each of the aforementioned
three programs. The Company anticipates that total firearm shipments for the
second half of the year will be below those of the first half.
Casting segment net sales increased by 32.7% and 49.0% to $18.2 million
and $39.7 million, respectively, in the three and six months ended June 30, 1998
from $13.7 million and $26.7 million in the comparable 1997 periods. This was
principally due to increased shipments of titanium golf club heads to Callaway
Golf Company, Inc. ("Callaway") which increased 48.7% and 78.0% for the three
and six months ended June 30, 1998, respectively. The Company has commenced
shipments to other golf companies, however these shipments were not material to
the results of either the second quarter or the first half of 1998. The Company
anticipates that total casting segment sales in the second half of 1998 may be
below those of the first half. However, the Company continues to actively pursue
other titanium markets as well as other golf club casting business.
Consolidated cost of products sold for the second quarter and the six
months ended June 30, 1998 were $42.7 million and $84.9 million compared to
$36.4 million and $74.7 million in the corresponding 1997 periods, respectively,
representing an increase of 17.3% and 13.5%, respectively. This was primarily
attributable to increased sales activities by the investment casting segment
during the second quarter and the six months ended June 30, 1998, as detailed
above.
Gross profit as a percentage of net sales decreased to 28.9% in the
second quarter from 33.2% in the second quarter of 1997 and decreased to 28.4%
in the six-month period ended June 30, 1998 from 31.8% in the first half of
1997. The margin erosion in the second quarter and the first six months of 1998
is primarily due to increased costs associated with the additional capacity
provided by the Company's June 25, 1997 purchase of Callaway's interest in
Antelope Hills, LLC ("Antelope Hills"), coupled with reduced overall business
volume in the firearms segment during the first half of the year. Antelope
Hills, a former joint venture between the Company and Callaway, was formed to
construct and operate a foundry for the production of golf club heads investment
cast in titanium.
9
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--CONTINUED
Selling, general & administrative expenses were unchanged at $4.9
million in the second quarter and increased by 10.8% to $9.9 million from $9.0
million in the six months ended June 30, 1998. Selling, general & administrative
expense as a percentage of sales in the three and six months ended June 30, 1998
of 8.1% and 8.4%, respectively, is consistent with the 8.5% ratio for the year
ended December 31, 1997. The increase during the first half of 1998 reflects
higher than anticipated employee related expenses as well as increased
professional services fees in the first quarter, and increased expenses related
to national advertising and promotional efforts in the firearms segment.
Other income (expense)-net increased by $1.8 million and $2.4 million
in three and six months ended June 30, 1998, respectively, compared to the
corresponding 1997 periods due to expenses incurred in 1997 at Antelope Hills, a
gain on the sale of non-manufacturing real estate in the second quarter of 1998,
and increased interest income resulting from greater Treasury bill investments
in 1998.
The effective income tax rate decreased to 40.5% in both the second
quarter and six months ended June 30, 1998 from 41.5% and 40.7% in the
corresponding 1997 periods due to decreased state income taxes.
As a result of the foregoing factors, consolidated net income for the
three and six months ended June 30, 1998 increased to $8.4 million and $15.6
million, respectively, from $7.6 million and $15.4 million for the three and six
months ended June 30, 1997, representing increases of $0.8 million or 9.9% and
$0.2 million or 1.1%, respectively.
Financial Condition
At June 30, 1998, the Company had cash, cash equivalents and short-term
investments of $61.4 million, working capital of $103.7 million and a current
ratio of 4.3 to 1.
Cash provided by operating activities was $24.2 million and $38.2
million for the six months ended June 30, 1998 and 1997, respectively. The
decrease in cash provided is principally a result of large reductions in
inventories and trade receivables in 1997, which did not recur in 1998.
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 dating plan 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 have to be made by April 30. Shipments made in subsequent months have
to be paid within 90 days. Dating plan receivable balances were $6.6 million at
June 30, 1998 compared to $5.1 million at June 30, 1997. 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 six months ended June 30, 1998 totaled
$2.8 million. For the past two years capital expenditures averaged approximately
$1.4 million per quarter. For 1998, the Company expects to spend approximately
$8.3 million on capital expenditures to upgrade and modernize manufacturing
equipment primarily at the Newport Firearms, Ruger Investment Casting, and Pine
Tree Castings Divisions. The Company finances, and intends to continue to
finance, all of these activities with funds provided by operations.
As noted above, on June 25, 1997, the Company purchased Callaway's
interest in Antelope Hills for $7.0 million, an amount approximating Callaway's
equity in the venture.
10
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--CONTINUED
For the six months ended June 30, 1998 dividends paid totaled $10.8
million. This amount reflects the regular quarterly dividend of $.20 per share
paid in March and June 1998. On July 30, 1998, the Company declared a regular
quarterly dividend of $.20 per share payable on September 15, 1998. Future
dividends depend on many factors, including internal estimates of future
performance and the Company's need for funds.
Historically, the Company has not required external financing. Based on
its cash flow and unencumbered assets, the Company believes it has the ability
to raise substantial amounts of short-term or long-term debt. The Company does
not anticipate any need for external financing through 1998.
The purchase of firearms is subject to federal, state and local
governmental regulations. The basic federal laws are the National Firearms Act
and the Federal Firearms Act. 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.
The "Brady Law" mandates a nationwide 5-day waiting period prior to the
purchase of a handgun. The Company believes that, because its customers are
sportsmen, hunters, gun collectors and law enforcement agencies and since 26
states had previously enacted some form of a waiting period prior to purchase,
the "Brady Law" has not had a significant effect on the Company's sales of
firearms. 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 long guns were exempted by name as
"legitimate sporting firearms." A separate provision of the Crime Bill
prohibited production or sale of detachable magazines of over 10-round capacity
manufactured after September 13, 1994, other than to law enforcement. Only two
such magazines (9mm and .40 caliber) were commercially sold by the Company, and
production of substitute 10-round magazines in these calibers (approved by the
BATF) began immediately. The Company remains strongly opposed to laws which
would unduly restrict the rights of law-abiding citizens to acquire firearms for
legitimate purposes. The Company believes that the 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 has expended significant amounts of financial resources and
management time in connection with product liability litigation. While it is
difficult to forecast the outcome of litigation or the timing of costs,
management believes, after consultation with counsel, that this litigation will
not have a material adverse effect on the financial condition of the Company.
The Company is not aware of any adverse trends in its litigation as a whole.
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.
11
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--CONTINUED
The Company expects to realize its deferred tax assets through tax
deductions against future taxable income or carry back against taxes previously
paid.
Inflation's effect on the Company's operations is most immediately felt
in cost of products sold because the Company values inventory on the LIFO basis.
Generally under this method, the cost of products sold reported in the financial
statements approximates current costs, and thus, reduces distortion in reported
income which would result from the slower recognition of increased costs when
other methods are used. The use of historical cost depreciation has a beneficial
effect on cost of products sold. The Company has been affected by inflation in
line with the general economy.
Some of the Company's computer programs were written using two digits
rather than four to define the applicable year. As a result, those computer
programs have time-sensitive software that recognizes a date using "00" as the
year 1900 rather than the year 2000. This could cause a system failure or
miscalculation causing disruptions of operations, including a temporary
inability to process transactions, send invoices, or engage in similar normal
business activities. Efforts are currently underway to modify or replace certain
portions of the Company's software and hardware so that its computer systems
will function properly with respect to dates in the year 2000 and thereafter.
The Company is, however, still in the process of assessing the manner in which
it will modify or replace other portions of its software or hardware. Current
results of the efforts underway and the ongoing assessment continue to indicate
that the impact of this replacement or modification will be immaterial to the
Company's future operating results and cash flows.
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures about
Segments of an Enterprise and Related Information" which establishes standards
for the way that public business enterprises report information about operating
segments. SFAS 131 is effective for financial statements for fiscal years
beginning after December 15, 1997, and therefore the Company will adopt the new
requirements before the end of 1998. SFAS 131 does not need to be applied to
interim financial information in the year of adoption. Management has not
completed its review of SFAS 131, but does not anticipate that the adoption of
this statement will result in the identification of additional segments.
In October 1997, the FASB issued SFAS No. 132, "Employer's Disclosures
about Pensions and Other Post Retirement Benefits" which changes financial
statement disclosure requirements for pension and other post retirement
benefits. While the Company is studying the application of these disclosure
provisions, it does not expect SFAS 132 to affect its financial position or
results of operations.
12
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--CONTINUED
Forward-Looking Statements and Projections
The Company may, from time to time, make forward-looking statements and
projections concerning future expectations. Such statements are based on current
expectations and are subject to certain qualifying risks and uncertainties, such
as market demand, sales levels of firearms, anticipated castings sales and
earnings (including those from titanium golf club components), the need for
external financing for operations or capital expenditures, the results of
pending litigation against the Company, and the impact of future firearms
control, environmental legislation, and computer systems replacement and
modification, 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 and the Company undertakes no obligation to republish revised
forward-looking statements to reflect events or circumstances after the date
such forward-looking statements are made or to reflect the occurrence of
unanticipated events.
13
<PAGE> 14
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
"Note 7--Contingent Liabilities" presented in Part I is incorporated herein by
reference.
There were no cases instituted against the Company during the three
months ended June 30, 1998, which involved significant demands for compensatory
and/or punitive damages.
During the three months ending June 30, 1998, two previously reported
cases were settled:
<TABLE>
<CAPTION>
Name Jurisdiction
---- ------------
<S> <C> <C>
Cota Arizona
Howard Alabama
</TABLE>
These cases were settled for minor amounts ($5,000 and under) within
the insurance limits and/or self-insured retention of the Company.
The dismissals of the previously reported cases of Lovett and Thomas
(MI) were finally affirmed on May 21, 1998, when plaintiffs' leave to appeal was
denied by the Michigan Supreme Court.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The 1998 Annual Meeting of the Stockholders of the Company was
held on May 12, 1998. The table below sets forth the results
of the votes taken at the 1998 Annual Meeting:
<TABLE>
<CAPTION>
1. Votes
Election of Directors Votes For Withheld
--------------------- ---------- --------
<S> <C> <C>
William B. Ruger 25,025,620 166,597
William B. Ruger, Jr. 25,039,587 152,630
Stephen L. Sanetti 25,039,670 152,547
Richard T. Cunniff 25,042,404 149,813
Townsend Hornor 25,045,784 146,433
Paul X. Kelley 25,052,316 139,901
John M. Kingsley, Jr. 25,037,259 154,958
James E. Service 25,047,247 144,970
Stanley B. Terhune 24,826,799 365,418
</TABLE>
2. Ratification of Ernst & Young LLP as Auditors for 1998:
<TABLE>
<CAPTION>
Votes For Votes Against Votes Withheld
--------- ------------- --------------
<S> <C> <C> <C>
25,116,921 18,302 56,994
</TABLE>
14
<PAGE> 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits -
Exhibit 27 - Financial Data Schedule
(b) The Company did not file any reports on Form 8-K during the three
months ended June 30, 1998.
15
<PAGE> 16
STURM, RUGER & COMPANY, INC.
FORM 10-Q FOR THE THREE MONTHS ENDED JUNE 30, 1998
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: August 12, 1998 /S/ ERLE G. BLANCHARD
--------------- -----------------------------
Erle G. Blanchard
Principal Financial and
Accounting Officer,
Vice President, Controller
16
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 6,129
<SECURITIES> 55,256
<RECEIVABLES> 22,904
<ALLOWANCES> 1,593
<INVENTORY> 43,231
<CURRENT-ASSETS> 135,110
<PP&E> 141,859
<DEPRECIATION> 88,327
<TOTAL-ASSETS> 207,407
<CURRENT-LIABILITIES> 31,439
<BONDS> 0
0
0
<COMMON> 26,911
<OTHER-SE> 130,602
<TOTAL-LIABILITY-AND-EQUITY> 207,407
<SALES> 118,518
<TOTAL-REVENUES> 118,518
<CGS> 84,876
<TOTAL-COSTS> 84,876
<OTHER-EXPENSES> 9,930
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 26,166
<INCOME-TAX> 10,597
<INCOME-CONTINUING> 15,569
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,569
<EPS-PRIMARY> 0.58
<EPS-DILUTED> 0.58
</TABLE>
