SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14a INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
STURM, RUGER & COMPANY, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement no.:
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(4) Date Filed:
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 3, 2005
NOTICE IS HEREBY GIVEN THAT the Annual Meeting of Stockholders of STURM,
RUGER & COMPANY, INC. (the "Company") will be held at the Lake Sunapee Country
Club, 100 Country Club Lane, New London, New Hampshire 03257 on the 3rd day of
May, 2005 at 10:30 a.m. to consider and act upon the following:
1. A proposal to elect six (6) Directors to serve on the Board of
Directors for the ensuing year;
2. A proposal to approve the appointment of KPMG LLP as the Company's
independent auditors for the 2005 fiscal year; and
3. Any other business as may properly come before the Annual Meeting or
any adjournment or postponement thereof.
Only holders of record of Common Stock at the close of business on March
4, 2005 will be entitled to notice of and to vote at the Annual Meeting or any
adjournment or postponement thereof. The complete list of stockholders entitled
to vote at the Annual Meeting shall be open to the examination of any
stockholder, for any purpose germane to the Annual Meeting, during ordinary
business hours, for a period of 10 days prior to the Annual Meeting, at the
Company's offices located at 411 Sunapee Street, Newport, New Hampshire 03773.
The Company's Proxy Statement is attached hereto.
By Order of the Board of Directors
/s/ Leslie M. Gasper
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Leslie M. Gasper
Corporate Secretary
Southport, Connecticut
March 14, 2005
All Stockholders are cordially invited to attend the Annual Meeting. If
you do not expect to be present, please date, mark and sign the enclosed form of
proxy and return it to Computershare Investor Services LLC, P.O. Box 2000,
Bedford Park, Illinois 60499-9910. A postage-paid envelope is enclosed for your
convenience.
TABLE OF CONTENTS
PAGE
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Proxy Solicitation and Voting Information 1
Proposal No. 1: Election of Directors 2
The Board of Directors and Its Committees 5
Compensation Committee Report on Executive Compensation 11
Compensation Committee Interlocks and Insider Participation 12
Executive Compensation Summary Compensation Table 13
Option/SAR Grants in Last Fiscal Year 14
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR Values 15
Pension Plan Table 16
Supplemental Executive Retirement Plan Table 17
Comparison of Five-Year Cumulative Total Return 19
Principal Stockholders 20
Security Ownership of Management 22
Section 16(a) Beneficial Ownership Reporting Compliance 23
Certain Relationships and Related Transactions 23
Report of the Audit Committee 24
Proposal No. 2: Approval of Independent Auditors 25
Stockholder Proposals and Director Nominations for 2006 27
Other Matters 27
March 14, 2005
STURM, RUGER & COMPANY, INC.
LACEY PLACE, SOUTHPORT, CONNECTICUT 06890
PROXY STATEMENT
2005 ANNUAL MEETING OF THE STOCKHOLDERS
PROXY SOLICITATION AND VOTING INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Sturm, Ruger & Company, Inc. (the
"Company") for use at the 2005 Annual Meeting of Stockholders (the "Meeting") of
the Company to be held at 10:30 a.m. on May 3, 2005 at the Lake Sunapee Country
Club, 100 Country Club Lane, New London, New Hampshire 03257 or at any
adjournment or postponement thereof for the purposes set forth in the
accompanying Notice of Annual Meeting of Stockholders. This Proxy Statement and
enclosed proxy are first being sent to stockholders on or about March 14, 2005.
The mailing address of the principal executive office of the Company is
Lacey Place, Southport, Connecticut 06890.
If the enclosed proxy is signed and returned, it will be voted in
accordance with its terms. However, a stockholder of record may revoke his or
her proxy before it is exercised by (i) giving written notice to the Company's
Secretary at the Company's address indicated above, (ii) duly executing a
subsequent proxy relating to the same shares and delivering it to the Company's
Secretary at or before the Meeting, or (iii) attending the Meeting and voting in
person (although attendance at the Meeting will not, in and of itself,
constitute revocation of a proxy). All expenses in connection with the
solicitation of these proxies, which are estimated to be $75,000, will be borne
by the Company.
The Annual Report of the Company for the year ended December 31, 2004,
including financial statements, is enclosed herewith.
Only holders of Common Stock, $1.00 par value, of the Company (the "Common
Stock") of record at the close of business on March 4, 2005 will be entitled to
vote at the Meeting. Each holder of record of the issued and outstanding shares
of voting Common Stock is entitled to one vote per share. As of March 4, 2005,
26,910,720 shares of Common Stock were issued and outstanding and there were no
outstanding shares of any other class of stock. The stockholders holding a
majority of the issued and outstanding Common Stock, either present in person or
represented by proxy, will constitute a quorum for the transaction of business
at the Meeting.
In accordance with the Company's by-laws and applicable law, the election
of Directors will be determined by a plurality of the votes cast by the holders
of shares present in person or by proxy and entitled to vote. Consequently, the
six nominees who receive the greatest number of votes cast for election as
Directors will be elected. Shares present which are properly withheld as to
voting with respect to any one or more nominees, and shares present with respect
to which a broker indicates that it does not have authority to vote ("broker
non-votes") will be counted as being present at the Meeting. However, these
shares will not be counted as voting on the election of Directors, with the
result that
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such abstentions and broker non-votes will have the same effect as votes against
the election of Directors.
The affirmative vote of shares representing a majority of the shares
present and entitled to vote is required to approve the appointment of KPMG LLP
as the Company's independent auditors for the 2005 fiscal year, which is also to
be voted on at the Meeting and to approve any other matters properly presented
at the Meeting. Shares which are voted to abstain on these matters and broker
non-votes will be considered present at the Meeting but will not be counted as
voting for these matters, with the result that abstention and broker non-votes
will have the same effect as votes against the proposal.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Six Directors will be elected at the Meeting, each to hold office until
the next Annual Meeting of Stockholders or until his successor is elected and
has qualified. There will be one fewer Director elected at the Meeting than was
elected at last year's Annual Meeting of Stockholders. Paul X. Kelley, a
Director since 1990, retired as a Director on October 7, 2004, and on October
21, 2004, rather than fill the vacancy left by General Kelley's retirement, the
Board of Directors acted to reduce the number of Directors from seven to six.
All of the six nominees for Director listed below were elected at last
year's Annual Meeting. If no contrary instructions are indicated, proxies will
be voted for the election of the nominees for Director listed below. Should any
of the said nominees for Director not remain a candidate at the time of the
Meeting (a condition which is not now anticipated), proxies solicited hereunder
will be voted in favor of those nominees for Director selected by management of
the Company.
The following table sets forth certain information concerning each
nominee's age, business experience, other directorships in publicly-held
corporations and the number and percentage of shares of Common Stock of the
Company beneficially owned by such nominee as of January 15, 2005.
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BUSINESS EXPERIENCE FIRST SHARES PERCENT
DURING THE PAST FIVE YEARS AND BECAME A BENEFICIALLY OF
NAME AGE OTHER DIRECTORSHIPS DIRECTOR OWNED CLASS
--------------------- --- ------------------------------------------------------------------------- --------- ------------ --------
William B. Ruger, Jr. 65 Chairman of the Board of Directors and Chief Executive Officer as of March, 5,322,000(1) 19.59%
October 24, 2000. Prior thereto, Vice Chairman, Senior Executive Officer 1970
from July 18, 1995, and President and Chief Operating Officer from March
1, 1998. Governor, Sporting Arms & Ammunition Manufacturers' Institute,
Trustee, St. Paul's School and the Buffalo Bill Memorial Association.
Stephen L. Sanetti 55 Vice Chairman, President, Chief Operating Officer and General Counsel as March, 232,000(2) *
of May 6, 2003. Prior thereto, Senior Executive Vice President and 1998
General Counsel from October 24, 2000. Prior thereto, Vice President and
General Counsel from March 11, 1993. Governor, National Shooting Sports
Foundation and Hunting & Shooting Sports Heritage Foundation. Trustee,
Friends of Boothe Park.
John M. Kingsley, Jr. 73 Director, Neurological Institute of New Jersey and former Trustee, April, 24,160(3) *
Brundge, Story and Rose Investment Trust. Executive Vice President of th 1972
Company from 1971 to 1996. Former Vice President, F.S. Smithers & Company
Former Vice President, Finance, General Host Company. Former Associate,
Corporate Finance, Dillon, Read & Co., Inc. Former Senior Accountant,
Price, Waterhouse & Company.
Townsend Hornor 78 Director and Audit Committee member, Nickerson Lumber Company. Chairman, April, 23,200(4) *
The National Marine Life Center. Former Senior Securities Analyst member 1972
of Boston and New York Societies of Securities Analysts. First Vice
President and general partner of White Weld & Co., (investment bankers)
1952 to 1978. Former Director and Audit Committee member, Kollmorgen
Corp. Former Director, Simon & Schuster, Ealing Corp., and Endevco Corp.
Trustee or director of various charitable organizations.
Richard T. Cunniff 82 Vice Chairman and Director of the Sequoia Fund, an investment company December, 55,500(5) *
registered under the Investment Company Act of 1940. Vice Chairman and 1986
Principal of Ruane, Cunniff & Goldfarb, Inc., an investment advisor under
the Investment Advisers Act of 1940.
James E. Service 74 Consultant, PGR Solutions (investment management). Commander, United July, 21,000(6) *
States Naval Air Force, Pacific Fleet, from 1985 to 1987. Director of 1992
Wood River Medical Center, Ketchum, Idaho from 1992 to 1996.
* Beneficial owner of less than 1% of the outstanding Common Stock of the
Company.
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(1) Includes 4,272,000 shares of Common Stock held in the name of Ruger
Business Holdings, L.P., of which the William B. Ruger Revocable Trust of
1988 is the sole limited partner and Ruger Management, Inc. is the sole
general partner. William B. Ruger, Jr. and Carolyn Ruger Vogel (son and
daughter of William B. Ruger) are co-trustees of the William B. Ruger
Revocable Trust of 1988. Ruger Management, Inc. is owned by William B.
Ruger, Jr. and Carolyn R. Vogel. Mr. Ruger, Jr. and Mrs. Vogel have shared
investment and voting control with respect to such 4,272,000 shares of
Common Stock. Also includes 800,000 shares of Common Stock owned directly
by Mr. Ruger, Jr. Mr. Ruger, Jr. has sole investment and voting control
with respect to such 800,000 shares. Also includes 250,000 shares of
Common Stock subject to options currently exercisable or which will become
exercisable within 60 days of January 15, 2005 under the 1998 Stock
Incentive Plan.
(2) Includes 32,000 shares of Common Stock held directly by Mr. Sanetti. Also
includes 200,000 shares of Common Stock options currently exercisable or
which will become exercisable within 60 days of January 15, 2005 under the
1998 Stock Incentive Plan.
(3) Includes 4,160 shares of Common Stock held directly by Mr. Kingsley. Also
includes 20,000 shares of Common Stock subject to options currently
exercisable or which will become exercisable within 60 days of January 15,
2005 under the 2001 Stock Option Plan for Non-Employee Directors.
(4) Includes 3,200 shares of Common Stock held directly by Mr. Hornor. Also
includes 20,000 shares of Common Stock subject to options currently
exercisable or which will become exercisable within 60 days of January 15,
2005 under the 2001 Stock Option Plan for Non-Employee Directors.
(5) Includes 35,500 shares of Common Stock held directly by Mr. Cunniff. Also
includes 20,000 shares of Common Stock subject to options currently
exercisable or which will become exercisable within 60 days of January 15,
2005 under the 2001 Stock Option Plan for Non-Employee Directors. Does not
include 35,500 shares of Common Stock owned by Mr. Cunniff's wife as to
which Mr. Cunniff disclaims beneficial ownership. Mr. Cunniff is the Vice
Chairman, a director and a principal stockholder of Ruane, Cunniff &
Goldfarb, Inc., which manages discretionary accounts and which holds
66,444 shares of Common Stock. The firm of Ruane, Cunniff & Goldfarb, Inc.
is able to direct the sale or disposition of the 66,444 shares; however,
all such shares may be voted only by their beneficial owners. Mr. Cunniff
disclaims beneficial ownership of such 66,444 shares.
(6) Includes 1,000 shares of Common Stock held directly by Admiral Service.
Also includes 20,000 shares of Common Stock subject to options currently
exercisable or which will become exercisable within 60 days of January 15,
2005 under the 2001 Stock Option Plan for Non-Employee Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES NAMED ABOVE.
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THE BOARD OF DIRECTORS AND ITS COMMITTEES
GENERAL
The Board of Directors is committed to good business practice,
transparency in financial reporting and the highest level of corporate
governance. To that end, the Board of Directors and its committees continually
review the Company's governance policies and practices against the practices of
other public companies, specialists in corporate governance, the rules and
regulations of the Securities and Exchange Commission (the "SEC"), Delaware law
(the state in which the Company is incorporated) and the listing standards of
the New York Stock Exchange, Inc. ("NYSE"). As a result of these reviews, the
Board of Directors has, over the past several years, among other things:
- Adopted a revised charter for the Audit Committee;
- Adopted a charter for the Compensation Committee;
- Established and adopted a charter for the Nominating and Corporate
Governance Committee;
- Adopted a Code of Business Conduct and Ethics;
- Adopted Corporate Board Governance Guidelines;
- Adopted a method by which stockholders can send communications to
the Board of Directors;
- Adopted procedures for the succession of the Chief Executive
Officer;
- Adopted criteria for the selection of new Directors; and
- Caused the non-management Directors of the Board of Directors to
meet regularly in executive sessions.
CORPORATE BOARD GOVERNANCE GUIDELINES
The Company's corporate governance practices are embodied in the Corporate
Board Governance Guidelines. A copy of the Corporate Board Governance Guidelines
is posted on the Company's website at www.ruger.com, and is available in print
to any stockholder who requests it by contacting the Corporate Secretary as set
forth in "Stockholder Communications" below.
BOARD OF DIRECTORS
The Company's business and affairs are under the direction of the Board of
Directors of the Company pursuant to the General Corporation Law of the State of
Delaware as in effect from time to time and the Company's By-Laws. Members of
the Board of Directors are kept informed of the Company's affairs through
discussions with the Company's executive officers, by careful review of
materials provided to them and by participating in meetings of the Board of
Directors and the committees of the Board of Directors.
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More than a majority of the current Directors are "independent" under the
rules of the NYSE. The Board of Directors has affirmatively determined that none
of Messrs. Hornor, Kingsley, Cunniff, Kelley (prior to his retirement on October
4, 2004) and Service has or had a material relationship with the Company or any
affiliate of the Company, either directly or indirectly, as a partner,
shareholder or officer of an organization (including a charitable organization)
that has a relationship with the Company, and are therefore "independent" for
such purposes under the rules of the NYSE, including Rule 303A thereof.
The Board of Directors held four meetings during 2004. All Directors
attended all meetings of the Board of Directors as well as last year's Annual
Meeting of Stockholders. It is the policy of the Company that attendance at all
meetings of the Board of Directors and the Annual Meeting of Stockholders of the
Company is expected of all Directors, unless the Director has been previously
excused by the Chairman of the Board of Directors for good cause.
DIRECTOR COMPENSATION
The Board of Directors believes that compensation for our independent
directors should be a combination of cash and equity-based compensation.
During 2004, the Company paid each independent Director $20,000 in annual
fees for services as a member of the Board of Directors. Each Director who was
not independent received $6,000 in annual fees.
During 2004, each independent Director received an attendance fee of
$1,500 per meeting, and each Director who was not independent received an
attendance fee of $500 per meeting. Each independent Director received $1,500
for each committee meeting attended, and any chairman of such committee received
$2,000 for each committee meeting attended. No Director who was not independent
served on any committees of the Board of Directors. All Directors were
reimbursed for out-of-pocket expenses related to attendance at meetings.
On January 5, 2001, each independent Director was granted a non-qualified
stock option to purchase 20,000 shares of Common Stock at an exercise price of
$9.875 per share under the 2001 Stock Option Plan for Non-Employee Directors,
which was approved by the stockholders of the Company on May 3, 2001. These
options vested and became exercisable in four equal annual installments of 25%
of the total number of options awarded, beginning on the date of grant and on
each of the next succeeding three anniversaries thereafter, and all such options
are therefore currently vested and exercisable.
AUDIT COMMITTEE
In 2004, the members of the Audit Committee of the Board of Directors were
Townsend Hornor, Richard T. Cunniff and General Paul X. Kelley (until his
retirement on October 7, 2004). Mr. Hornor served as Committee Chairman until
October 21, 2004, at which time John M. Kingsley, Jr. became the Committee
Chairman. On May 4, 2004, the Board appointed John M. Kingsley, Jr. as a member
of the Audit Committee and on October 21, 2004 the Board appointed Admiral James
E. Service as a member of the Audit Committee. Each of Messrs. Hornor, Kingsley,
Cunniff, Kelley and Service are "independent" for purposes of service on the
Audit Committee under the rules of the NYSE, including Rule 303A thereof, and
Rule 10A-3 under the Securities and Exchange Act of 1934, as amended (the
"Exchange Act"). All members of the Audit Committee are financially literate and
have a working
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familiarity with basic finance and accounting practices. In addition, the
Company has determined that Mr. Kingsley is an "audit committee financial
expert" as defined by SEC rules and regulations.
The purpose of the Audit Committee is to provide assistance to the Board
of Directors in fulfilling its responsibility with respect to its oversight of:
(i) the quality and integrity of the Company's financial statements; (ii) the
Company's compliance with legal and regulatory requirements; (iii) the
independent auditor's qualifications and independence; and (iv) the performance
of the Company's internal audit function and independent auditors. In addition,
the Committee shall prepare the report required by SEC rules to be included in
the Company's annual proxy statement.
The Audit Committee is governed by a written charter adopted by the Board
of Directors. A copy of the Audit Committee charter was attached as an appendix
to the Proxy Statement furnished in connection with last year's Annual Meeting
of Stockholders. A copy of the Audit Committee charter is posted on the
Company's website at www.ruger.com, and is available in print to any stockholder
who requests it by contacting the Corporate Secretary as set forth in
"Stockholder Communications" below.
The Audit Committee held eight meetings during 2004. In addition to
out-of-pocket expenses related to attendance at meetings, Mr. Hornor received
$15,500, Mr. Kingsley received $5,000, including $1,500 for his attendance at
one Audit Committee meeting prior to his appointment to the Committee at the
invitation of the Committee Chairman, Mr. Cunniff received $12,000, General
Kelley received $7,500, and Admiral Service received $1,500 for service on the
Audit Committee in 2004. In fiscal 2004, Messrs. Hornor, and Cunniff, attended
eight meetings of the Audit Committee, John M. Kingsley, Jr. attended two
meetings and Admiral Service attended one meeting of the Audit Committee
following their individual appointments to the Committee, and General Kelley
attended five meetings of the Audit Committee prior to his retirement from the
Board. The annual Report of the Audit Committee is included in this Proxy
Statement.
COMPENSATION COMMITTEE
In 2004, the members of the Compensation Committee of the Board of
Directors were Admiral James E. Service, Richard T. Cunniff and General Paul X.
Kelley (until his retirement on October 7, 2004). Admiral Service served as
Committee Chairman. On October 21, 2004, the Board appointed Townsend Hornor and
John M. Kingsley, Jr. as members of the Compensation Committee. Each of Messrs.
Service, Cunniff, Hornor, Kelley and Kingsley are "independent" for purposes of
service on the Compensation Committee under the rules of the NYSE, including
Rule 303A thereof.
The purposes of the Compensation Committee are (i) discharging the
responsibilities of the Board of Directors with respect to the compensation of
the Chief Executive Officer of the Company, the other executive officers of the
Company and members of the Board of Directors, and under the Company's incentive
and equity-based plans and (ii) producing an annual report on executive
compensation to be included in the Company's annual proxy statement, in
accordance with the rules and regulations of the NYSE and the SEC, and any other
applicable rules or regulations.
The Compensation Committee is governed by a written charter adopted by the
Board of Directors. A copy of the Compensation Committee charter is posted on
the Company's website at www.ruger.com, and is available in print to any
stockholder who requests it by contacting the Corporate Secretary as set forth
in "Stockholder Communications" below.
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The Compensation Committee held two meetings during 2004. In addition to
out-of-pocket expenses related to attendance at meetings, Admiral Service
received $4,000, Mr. Cunniff received $3,000 and General Kelley received $1,500
for service on the Compensation Committee in 2004. Messrs. Hornor and Kingsley,
who were not Committee members until October 21, 2004, attended the Compensation
Committee meetings at the invitation of the Committee Chairman, and each
received $3,000 for their attendance at such meetings. All Directors who served
on the Compensation Committee in fiscal 2004 attended all meetings of the
Compensation Committee in fiscal 2004.
The annual Compensation Committee Report on Executive Compensation is
included in this Proxy Statement.
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
In 2004, the members of the Nominating and Corporate Governance Committee
were General Paul X. Kelley, Townsend Hornor and Admiral James E. Service.
General Kelley served as Committee Chairman until his retirement on October 7,
2004, and was replaced by Townsend Hornor as Committee Chairman on October 21,
2004. On October 21, 2004, the Board appointed Richard T. Cunniff and John M.
Kingsley, Jr. as members of the Nominating and Corporate Governance Committee.
Each of Messrs. Kelley, Hornor, Cunniff, Kingsley and Service are "independent"
for purposes of service on the Nominating and Corporate Governance Committee
under the rules of the NYSE, including Rule 303A thereof.
The Nominating and Corporate Governance Committee is responsible to the
Board of Directors for identifying, vetting and nominating potential Directors
and establishing, maintaining and supervising the corporate governance program.
Some of these responsibilities are discussed in more detail below.
The Nominating and Corporate Governance Committee is governed by a written
charter adopted by the Board of Directors. The Nominating and Corporate
Governance Committee charter is posted on the Company's website at
www.ruger.com, and is available in print to any stockholder who requests it by
contacting the Corporate Secretary as set forth in "Stockholder Communications"
below.
The Nominating and Corporate Governance Committee held two meetings during
2004. In addition to out-of-pocket expenses related to attendance at meetings,
General Kelley received $2,000, Mr. Hornor received $3,500 and Admiral Service
received $3,000 for service on the Nominating and Corporate Governance Committee
in 2004. Richard T. Cunniff and John M. Kingsley, Jr., who were not Committee
members until October 21, 2004, attended the Nominating and Corporate Governance
Committee meetings at the invitation of the Committee Chairman, and each
received $3,000 in 2004 for their attendance at such meetings. In fiscal 2004,
all Directors who served on the Nominating and Corporate Governance Committee
attended all meetings of the Nominating and Corporate Governance Committee.
As required under its charter, the Nominating and Corporate Governance
Committee has adopted criteria for the selection of new Directors, including,
among other things, career specialization, technical skills, strength of
character, independent thought, practical wisdom, mature judgment, and gender
and ethnic diversity. Functional skills considered important for Directors to
possess include experience as a chief executive or financial officer or similar
position in finance, audit, manufacturing, advertising, military, or government,
and knowledge and familiarity of firearms and the firearms industry. The
Committee will also consider any such qualifications as required by law or
applicable rule or regulation,
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and will consider questions of independence and conflicts of interest. In
addition, the following characteristics and abilities, as excerpted from the
Company's Corporate Board Governance Guidelines, will be important
considerations of the Nominating and Corporate Governance Committee:
- personal and professional ethics, strength of character, integrity,
and values;
- success in dealing with complex problems or have obtained and
excelled in a position of leadership;
- sufficient education, experience, intelligence, independence,
fairness, reasoning ability, practicality, wisdom, and vision to
exercise sound and mature judgment;
- stature and capability to represent the Company before the public
and the stockholders;
- the personality, confidence, and independence to undertake full and
frank discussion of the Company's business assumptions;
- willingness to learn the business of the Company, to understand all
Company policies, and to make themselves aware of the Company's
finances; and
- willingness at all times to execute their independent business
judgment in the conduct of all Company matters.
The charter also grants the Nominating and Corporate Governance Committee
the responsibility to identify and meet individuals believed to be qualified to
serve on the Board and recommend that the Board select candidates for
directorships. The Nominating and Corporate Governance Committee's process for
identifying and evaluating nominees for Director, as set forth in the charter,
includes inquiries into the backgrounds and qualifications of candidates. These
inquiries include studies by the Nominating and Corporate Governance Committee
and may also include the retention of a professional search firm to be used to
assist it in identifying or evaluating candidates. The Nominating and Corporate
Governance Committee has to date retained the firm of Korn/Ferry International
to assist in the search for qualified Directors.
The Nominating and Corporate Governance Committee has a written policy
which states that it will consider Director candidates recommended by
stockholders. There is no difference in the manner in which the Nominating and
Corporate Governance Committee will evaluate nominees recommended by
stockholders and the manner in which it evaluates candidates recommended by
other sources. Any stockholder interested in recommending a candidate for
consideration should send information relating to such stockholder's ownership
of Common Stock of the Company, the biographical information about the candidate
as set forth under Proposal No. 1 of this Proxy Statement, a statement of the
qualifications of the candidate and at least three business references, to the
Corporate Secretary, Sturm, Ruger & Company, Inc., 1 Lacey Place, Southport, CT
06890. The Corporate Secretary will accept such recommendations and forward them
to the Chairman of the Nominating and Corporate Governance Committee. In order
to be considered for inclusion by the Nominating and Corporate Governance
Committee as a candidate at the Company's next Annual Meeting of Stockholders,
stockholder recommendations for Director candidates must be received by the
Company on or before November 14, 2005.
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The Company has not rejected any Director candidates put forward by a
stockholder or group of stockholders who beneficially owned more than 5 percent
of the Company's common stock for at least one year prior to the date of the
recommendation.
STOCKHOLDER COMMUNICATIONS
The Board of Directors has adopted a method by which stockholders can send
communications to the Board of Directors. Stockholders may communicate in
writing any questions or other communications to the Board of Directors by
contacting the Corporate Secretary at Sturm, Ruger & Company, Inc., 1 Lacey
Place, Southport, CT 06890; or by telephone at (203) 259-7843; or by fax at
(203) 256-3367; or by use of the Company's corporate communications "hotline" at
1-800-826-6762. The "hotline" is monitored 24 hours a day, 7 days a week.
Stockholders may also communicate in writing any questions or other
communications to the non-management Directors of the Board of Directors, in the
same manner.
Stockholders may contact the Corporate Secretary at (203) 259-7843 or
Computershare Investor Services, LLC, which is the Company's stock transfer
agent, at (312) 360-5190 for questions regarding routine stockholder matters.
CODE OF BUSINESS CONDUCT AND ETHICS
The Board of Directors has adopted a "Code of Business Conduct and Ethics"
as part of the Company's Corporate Compliance Program, which governs the
obligation of all employees, executive officers and Directors of the Company to
conform their business conduct to be in compliance with all applicable laws and
regulations, among other things. The Code of Business Conduct and Ethics is
posted on the Company's website at www.ruger.com, and is available in print to
any stockholder who requests it by contacting the Corporate Secretary as set
forth in "Stockholder Communications" below.
NON-MANAGEMENT DIRECTORS
The non-management Directors of the Board of Directors meet regularly in
executive sessions and each such meeting is led by a presiding Director. The
current presiding Director is John M. Kingsley, Jr., who was selected on May 4,
2004. A new presiding Director is chosen annually for a one-year term at the
first executive session held in concurrence with the organizational meeting of
the Board of Directors held after each Annual Meeting of Stockholders. The
Director who is the most senior Director, based on the number of years of
service as a Director of the Company, and who has not previously served as
presiding Director of the executive sessions (or has not so served for the
greatest period of time prior to such decision), is chosen to be the presiding
Director. The presiding Director presides at all executive session meetings, and
is also looked upon to act as an intermediary between the non-management
Directors and management of the Company when special circumstances exist or
communication out of the ordinary course is necessary.
10
COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION *
Overall Policy
The Company's executive compensation program is designed to reflect both
corporate performance and individual responsibilities and performance. The
Compensation Committee administers the Company's overall compensation strategy
in an attempt to relate executive compensation appropriately to the Company's
overall growth and success and to the executive's duties and demonstrated
abilities. The objectives of this strategy are to attract and retain the best
possible executives, to motivate these executives to achieve the Company's
business goals and to provide a compensation package that recognizes individual
contributions as well as overall business results. The Compensation Committee
and the Board of Directors as a whole have ultimate responsibility for executive
compensation.
These reviews permit an ongoing evaluation of the relationship between the
size and scope of the Company's operations, its performance and its executive
compensation. The Compensation Committee also considers the legal and tax effect
(including, without limitation, the effects of Section 162(m) of the Internal
Revenue Code of 1986, as amended) of the Company's executive compensation
program in order to provide the most favorable legal and tax consequences for
the Company and its executive officers.
The Compensation Committee determines the compensation of the Company's
executive officers, including the individuals whose compensation is detailed in
this proxy statement. The key elements of the Company's executive compensation
consist of base salary, annual bonus and stock options, as discussed below.
Base Salaries
Base salaries for executive officers are determined by considering
historical salaries paid by the Company to officers having certain duties and
responsibilities and then evaluating the current responsibilities of the
position, the scope of the operations under management and the experience of the
individual. Salary adjustments are determined by evaluating on an individual
basis new responsibilities of the executive's position, changes in the scope of
the operations managed, the performance of such operations, the performance of
the executive in the position and annual increases in the cost of living.
Annual Bonus
The Company's executive officers are eligible for an annual cash bonus.
Annual bonuses are determined on the basis of corporate performance. The most
significant corporate performance measure for bonus payments is earnings of the
Company. In determining annual bonuses, the Compensation Committee considers the
views of the Chief Executive Officer and discusses with him the appropriate
bonuses for all officers.
----------
* The report of the Compensation Committee shall not be deemed incorporated
by reference by any general statement incorporating by reference this
Proxy Statement into any filing under either the Securities Act of 1933,
as amended, or the Exchange Act (together, the "Acts"), except to the
extent that the Company specifically incorporates such report by
reference; and further, such report shall not otherwise be deemed to be
"soliciting material" or "filed" under the Acts.
11
Stock Options
Under the Company's 1998 Stock Incentive Plan, stock options may be
granted to the Company's executive officers. The Compensation Committee sets
guidelines for the size of stock option awards based on factors similar to those
used to determine base salaries and annual bonuses. Stock options are designed
to align the interests of executives with those of the stockholders.
Under the 1998 Stock Incentive Plan, stock options are typically granted
with an exercise price equal to the market price of the Company's common stock
on the date of grant and vest over time. This approach is designed to encourage
the creation of stockholder value over the long term since the full benefit of
the compensation package cannot be realized unless stock price appreciation
occurs over time.
Chief Executive Officer's Compensation
Following William B. Ruger, Jr.'s appointment as Chief Executive Officer
on October 24, 2000, the Compensation Committee reviewed Mr. Ruger, Jr.'s
compensation as well as the compensation of the Company's other executive
officers who had been assigned positions of increased responsibility. Based on
the Committee's recommendations as a result of this review, the Board of
Directors approved an increase to William B. Ruger, Jr.'s base salary from
$225,000 per year to $400,000. Mr. Ruger, Jr.'s base salary has not increased
since October 24, 2000. Prior thereto, Mr. Ruger, Jr.'s base salary had not
increased since January 1, 1998.
Conclusion
Through the programs described above, a significant portion of the
Company's executive compensation is linked directly to individual and corporate
performance. The Compensation Committee intends to continue the policy of
linking executive compensation to corporate and individual performance,
recognizing that the ups and downs of the business cycle from time to time may
result in an imbalance for a particular period.
COMPENSATION COMMITTEE
James E. Service, Committee Chairman
Richard T. Cunniff
Townsend Hornor
John M. Kingsley, Jr.
January 19, 2005
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION
The members of the Compensation Committee of the Company's Board of
Directors for the year 2004 were those named above in the Compensation Committee
Report on Executive Compensation. No member of the Committee was at any time
during the year 2004 or at any other time an officer or employee of the Company.
No executive officer of the Company has served on the Board of Directors or
compensation committee of any other entity that has or has had one or more
executive officers serving as a member of the Board of Directors.
12
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information with respect to the
compensation for calendar years 2004, 2003 and 2002 for the Company's Chief
Executive Officer and the other individuals who served as executive officers of
the Company during 2004.
LONG TERM COMPENSATION
OTHER ----------------------
ANNUAL COMPENSATION ANNUAL ALL OTHER
----------------------- COMPENSATION COMPENSATION
NAME AND SALARY (1) BONUS (2) (3), (4)
PRINCIPAL POSITION YEAR $ $ $ $
------------------ ---- ---------- -------- ------------- -------------
William B. Ruger, Jr. - 2004 $ 408,000 $ 0 $ 10,876 $ 31,478
Chairman of the Board of Directors 2003 408,000 15,000 22,310 60,792
and Chief Executive Officer. 2002 408,500 39,500 22,310 60,792
Stephen L. Sanetti - 2004 $ 283,000 $ 7,500 $ 18,773 $ 21,305
Vice Chairman of the Board of 2003 283,000 15,000 36,801 41,757
Directors, President, Chief 2002 283,500 32,000 36,801 42,457
Operating Officer and General
Counsel.
Christopher J. Killoy - 2004 $ 175,000 $ 1,000 $ 0 $ 13,305
Vice President of Sales and 2003 11,330 0 0 0
Marketing (5) 2002 0 0 0 0
Thomas A. Dineen - 2004 $ 134,500 $ 7,000 $ 9,182 $ 10,196
Treasurer and Chief Financial 2003 130,750 15,920 17,498 19,716
Officer 2002 130,000 16,000 17,397 19,596
Leslie M. Gasper - 2004 $ 101,000 $ 5,500 $ 6,895 $ 7,851
Corporate Secretary 2003 98,083 12,190 13,125 14,956
2002 97,500 12,000 13,048 14,805
----------
(1) Includes Director's fees.
(2) The amounts set forth in this column represent "gross-ups" for taxes
incurred on benefits received pursuant to the Company's Supplemental
Executive Profit Sharing Plan (the "Supplemental Plan").
(3) The amounts set forth in this column represent benefits received pursuant
to the Company's Salaried Employees' Profit Sharing Plan, Supplemental
Plan, and taxable premiums paid by the Company for group term life
insurance for the named individuals, respectively, as follows: William B.
Ruger, Jr., 2004 - $15,375, $14,625 and $1,478, 2003 - $30,000, $30,000
and $792, 2002 - $30,000, $30,000 and $792; Stephen L Sanetti, 2004 - $0,
$20,625 and $416, 2003 - $0, $41,250 and $276, 2002 - $0, $41,250 and
$276; Christopher J. Killoy, 2004 - $13,125, $0 and $180, 2003 - $0, $0
and $0, 2002 - $0, $0 and $0; Thomas A. Dineen, 2004 - $0, $10,088 and
$108, 2003 - $0, $19,613 and $103, 2002 - $0, $19,500 and $96; Leslie M.
Gasper, 2004 - $0, $7,575 and $276, 2003 - $0, $14,712 and $244, 2002 -
$0, $14,625 and $180.
(4) The amounts set forth in this column include the taxable value of Company
products given to the named individuals respectively as follows: William
B. Ruger, Jr., 2004 - $0, 2003 - $0, 2002 - $0; Stephen L. Sanetti, 2004 -
$264, 2003 - $231, 2002 - $931; Christopher J. Killoy, 2004 - $0, 2003 -
$0, 2002 - $0; Thomas A. Dineen, 2004 - $0, 2003 - $0, 2002 - $0; Leslie
M. Gasper, 2004 - $0, 2003 - $0, 2002 - $0.
(5) Christopher J. Killoy was appointed Vice President of Sales and Marketing
as of November 1, 2004 and resigned from the Company as of January 25,
2005.
13
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding stock options
and Stock Appreciation Rights ("SARs") granted during fiscal 2004 by the Company
to the executive officers named in the Summary Compensation Table.
INDIVIDUAL GRANTS
----------------------------------
PERCENT OF
TOTAL POTENTIAL REALIZABLE VALUE AT
NUMBER OF OPTIONS ASSUMED INTEREST RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION FOR OPTION TERM
UNDERLYING EMPLOYEES (3)
OPTIONS IN FISCAL EXERCISE OR BASE ----------------------------------
GRANTED (1) YEAR PRICE (2) EXPIRATION @5% @10%
NAME # % $ / SHARE DATE $ $
---- ----------- ----------------- ----------------- ---------- ------- ------
William B. Ruger Jr. 0 0.0% n/a n/a n/a n/a
Stephen L. Sanetti 0 0.0% n/a n/a n/a n/a
Christopher J. Killoy (4) 0 0.0% n/a n/a n/a n/a
Thomas A. Dineen 0 0.0% n/a n/a n/a n/a
Leslie M. Gasper 0 0.0% n/a n/a n/a n/a
----------
(1) All options granted under the Company's 1998 Stock Incentive Plan vest in
five equal annual installments.
(2) The exercise price for options granted under the Company's 1998 Stock
Incentive Plan is the closing price of the Common Stock as of the date of
grant.
(3) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed annual rates of share price appreciation mandated by
the Securities and Exchange Commission of 5% and 10% of the fair value of
the Common Stock on the date of grant of the options, compounded annually
from the date of the grant to the option expiration date. The gains shown
are net of the option exercise price, but do not include deductions for
taxes or other expenses associated with the exercise. Actual gains, if
any, are dependent upon the performance of the Common Stock and the date
on which the option is exercised. There can be no assurance that the
values reflected will be achieved.
(4) Christopher J. Killoy was appointed Vice President of Sales and Marketing
as of November 1, 2004 and resigned from the Company as of January 25,
2005. Mr. Killoy had no options granted under the Company's 1998 Stock
Incentive Plan.
14
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
The following table sets forth certain information regarding stock options
and SARs granted which were exercised during fiscal 2004 by the executive
officers of the Company named in the Summary Compensation Table.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS/SARS AT IN-THE-MONEY OPTIONS/SARS AT
ACQUIRED ON FISCAL YEAR-END FISCAL YEAR-END
EXERCISE VALUE REALIZED EXERCISABLE/UNEXERCISABLE(1) EXERCISABLE/UNEXERCISABLE(2)
NAME # $ # $
---- ----------- -------------- ---------------------------- -----------------------------
William B. Ruger Jr. 0 $ 0.00 250,000 / 0 $ 0 /$0
Stephen L. Sanetti 0 0.00 200,000 / 0 0 / 0
Christopher J. Killoy (3) 0 0.00 0 / 0 0 / 0
Thomas A. Dineen 0 0.00 35,000 / 0 0 / 0
Leslie M. Gasper 0 0.00 50,000 / 0 0 / 0
----------
(1) Stock options awarded December 31, 1998 to William B. Ruger, Jr., Stephen
L. Sanetti, Thomas A. Dineen and Leslie M. Gasper under the 1998 Stock
Incentive Plan at an exercise price of $11.9375 per share.
(2) The closing price of the Common Stock on December 31, 2004, $9.03, was
less than the exercise price on the date of grant.
(3) Christopher J. Killoy was appointed Vice President of Sales and Marketing
as of November 1, 2004 and resigned from the Company as of January 25,
2005. Mr. Killoy had no options granted under the Company's 1998 Stock
Incentive Plan.
15
PENSION PLAN TABLE
Estimated Amounts of Annual Pension Payable from the
Salaried Employees' Retirement Income Plan
for the Participant's Life,
Commencing During 2004 at Age 65
YEARS OF CREDITED SERVICE
HIGHEST 60-CONSECUTIVE-MONTH ---------------------------------------------------------------------------------
AVERAGE ANNUALIZED BASE PAY 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
--------------------------- -------- -------- -------- -------- --------
$ 75,000 $ 10,487 $ 13,983 $ 17,479 $ 17,479 $ 17,479
100,000 15,487 20,650 25,812 25,812 25,812
125,000 20,487 27,316 34,145 34,145 34,145
150,000 25,487 33,983 42,479 42,479 42,479
175,000 30,487 40,650 50,812 50,812 50,812
200,000 35,487 47,316 59,145 59,145 59,145
225,000 35,687 47,583 59,479 59,479 59,479
250,000 35,687 47,583 59,479 59,479 59,479
All of the Company's salaried employees participate in the Sturm, Ruger &
Company, Inc. Salaried Employees' Retirement Income Plan (the "Pension Plan"),
which in general provides annual pension benefits at age 65 in the form of a
straight life annuity in an amount equal to: (i) 1-1/3% of the participant's
final average salary (highest 60-consecutive-month average annualized base pay
during the last 120 months of employment) less 0.65% of the participant's Social
Security covered compensation, multiplied by (ii) the participant's years of
credited service up to a maximum of 25 years.
The pensions listed in the table above are not subject to any offset or
deduction for Social Security or any other benefits.
As of December 31, 2004, William B. Ruger, Jr. and Leslie M. Gasper each
had more than 25 years of credited service, Stephen L. Sanetti had 24 years of
credited service, Thomas A. Dineen had 7 years of credited service, and
Christopher J. Killoy had 1 year of credited service.
An indication of the average annualized base pay under the Pension Plan
for these individuals can be found in the Salary column of the Summary
Compensation Table.
16
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN TABLE
Estimated Amounts of Annual Plan Benefit Payable from the
Supplemental Executive Retirement Plan
for the Participant's Life,
Commencing During 2004 at Age 65
YEARS OF CREDITED SERVICE
----------------------------------------------------------------------------
AVERAGE ANNUAL COMPENSATION 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
--------------------------- -------- -------- -------- -------- --------
$ 125,000 $ 3,105 $ 11,276 $ 19,447 $ 19,447 $ 19,447
150,000 7,105 16,609 26,113 26,113 26,113
175,000 11,105 21,942 32,780 32,780 32,780
200,000 15,105 27,276 39,447 39,447 39,447
225,000 19,105 32,609 46,113 46,113 46,113
250,000 23,105 37,942 52,780 52,780 52,780
300,000 32,905 51,009 69,113 69,113 69,113
400,000 62,905 91,009 119,113 119,113 119,113
The Sturm, Ruger & Company, Inc. Supplemental Executive Retirement Plan
(the "SERP") is a nonqualified supplemental retirement plan for certain senior
executives of the Company. Two of the executive officers who appear in the
Summary Compensation Table, William B. Ruger, Jr. and Stephen L. Sanetti
participate in the SERP. The SERP provides an annual benefit beginning at age 65
in an amount equal to 2% of the participant's average annual compensation for
each complete year of service with the Company up to a maximum of 50% of such
average compensation, for those participants who retire from the Company at or
after age 60 with 10 or more years of service. The annual benefits described in
the table above are already reduced by the amount the participant is entitled to
receive under the Pension Plan, and are further reduced by the amount of Social
Security benefit the participant is entitled to receive commencing at age 65.
The SERP benefit is payable as an annuity over the life of the participant, with
50% to continue for the life of the participant's surviving spouse after the
participant's death. Preretirement death or disability benefits are also
provided to plan participants under the SERP.
The average annual compensation shown in the above table includes the
participant's base pay, bonuses and other compensation for the participant's
highest consecutive 36 months of service (or, if the participant's service was
less than 36 months, then for the entire period of service) as reported in the
Summary Compensation Table, except that benefits received under the Pension
Plan, Salaried Employees' Profit Sharing Plan and taxable premiums paid by the
Company for group term life insurance are excluded from the SERP compensation
formula. The annual compensation upon which the SERP benefit is calculated is
limited to $400,000. As of December 31, 2004, William B. Ruger, Jr. had more
than 25 years of credited service and Stephen L. Sanetti had 24 years of
credited service. The estimated amounts presented above assume that the
participant attained age 65 in 2004.
John M. Kingsley, Jr., a Director who retired as Executive Vice President
of the Company on December 31, 1996, received $141,972 in benefits from the SERP
during 2004.
17
The SERP provides that in the event of a change in control of the Company
participants in pay status shall be entitled to receive a lump-sum payment equal
to the present value of the participant's benefit. Those not in pay status shall
become fully vested and generally, if terminated within three years of a change
in control, become entitled to a lump-sum payment. The payment shall be computed
based upon the participant's average compensation and years of service with the
Company on the date of change in control (provided, however, that in the event
of a change in control, the participant's years of service with the Company for
purposes of computing the benefit amount shall not be less than ten). A change
in control is defined to mean the effective date of one of the following events:
(i) sale or exchange of substantially all of the capital stock of the Company;
(ii) sale of substantially all of the assets of the Company; (iii) sale of
substantially all of the capital stock of the Company owned of record and
beneficially held by members of the William B. Ruger family; or (iv) the merger
or consolidation of the Company with or into one or more other corporations;
and, in each of such four cases, the sale of stock or assets is to, or the
exchange of stock is with, or the merger or consolidation is with or into one or
more persons, firms or corporations which does not own at least 10% of the
capital stock of the Company.
18
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
Sturm, Ruger & Company, Inc., Standard & Poor's 500 and Value Line
Recreation Industry Index (Performance Results Through December 31, 2004)
[LINE GRAPH]
Assumes $100 invested at the close of trading 12/99 in Sturm, Ruger & Company,
Inc. Common Stock, Standard & Poor's 500 and Value Line Recreation Industry
Index.
*Cumulative total return assumes reinvestment of dividends.
Factual material is obtained from sources believed to be reliable, but the
publisher is not responsible for any errors or omissions contained herein.
1999 2000 2001 2002 2003 2004
------ ------ ------ ------ ------ ------
Sturm, Ruger & Company, Inc. 100.00 116.11 159.18 135.57 174.03 145.75
Standard & Poor's 500 100.00 89.86 78.14 59.88 75.68 82.49
Value Line Recreation Industry 100.00 102.89 145.79 147.36 220.91 299.16
The peer group in the above graph is the Value Line Recreation Industry.
19
PRINCIPAL STOCKHOLDERS
The following table sets forth as of January 15, 2005 the ownership of
Common Stock by each person of record or known by the Company to beneficially
own more than 5% of such stock.
NAME AND ADDRESS AMOUNT AND NATURE OF
TITLE OF CLASS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
-------------- ------------------- -------------------- ----------------
Common Stock William B. Ruger, Jr.
P.O. Box 293 5,322,000 (1) 19.59%
Newport, NH 03773
Common Stock Carolyn R. Vogel 5,022,000 (2) 18.66%
P.O. Box 906
Harrisville, NH 03450
Common Stock Ruger Business Holdings, L.P. 4,272,000 (3) 15.87%
Lacey Place
Southport, CT 06890
Common Stock Ruger Management, Inc. 4,272,000 (4) 15.87%
Lacey Place
Southport, CT 06890
Common Stock NFJ Investment Group L.P.
2121 San Jacinto Street 1,639,650 (5) 6.09%
Suite 1840
Dallas, TX 75201
Common Stock Royce & Associates, LLC
1414 Avenue of the Americas 1,511,400 (6) 5.62%
New York, NY 10019
----------
(1) Includes 4,272,000 shares of Common Stock held in the name of Ruger
Business Holdings, L.P., of which the William B. Ruger Revocable Trust of
1988 is the sole limited partner and Ruger Management, Inc., is the sole
general partner. William B. Ruger, Jr. and Carolyn Ruger Vogel (son and
daughter of William B. Ruger) are co-trustees of the William B. Ruger
Revocable Trust of 1988. Ruger Management, Inc., is owned by William B.
Ruger, Jr. and Carolyn R. Vogel. Mr. Ruger, Jr. and Mrs. Vogel have shared
investment and voting control with respect to such 4,272,000 shares of
Common Stock. Also includes 800,000 shares of Common Stock owned directly
by Mr. Ruger, Jr. Mr. Ruger, Jr. has sole investment and voting control
with respect to such 800,000 shares. Also includes 250,000 shares of
Common Stock subject to options currently exercisable or which will become
exercisable within 60 days of January 15, 2005 under the 1998 Stock
Incentive Plan.
20
(2) Includes 4,272,000 shares of Common Stock as disclosed in footnote (1)
above. Also includes 750,000 shares of Common Stock owned directly by Mrs.
Vogel. Mrs. Vogel has sole investment and voting control with respect to
such 750,000 shares.
(3) Represents the 4,272,000 shares of Common Stock disclosed in footnote (1)
above.
(4) Represents the 4,272,000 shares of Common Stock disclosed in footnote (1)
above.
(5) Such information is as of December 31, 2004 derived exclusively from
Amendment No. 1 to Schedule 13G filed by NFJ Investment Group L.P. on
February 14, 2005.
(6) Such information is as of December 31, 2004 derived exclusively from
Amendment No. 2 to Schedule 13G filed by Royce & Associates, LLC on
February 3, 2005.
21
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information as of January 15, 2005
as to the number of shares of Common Stock beneficially owned by the Chief
Executive Officer of the Company and the other individuals who served as
executive officers of the Company during 2004, and all Directors and executive
officers of the Company as a group. See ELECTION OF DIRECTORS above for such
information with respect to each Director of the Company.
AMOUNT AND NATURE OF
TITLE OF CLASS NAME OF BENEFICIAL OWNER * BENEFICIAL OWNERSHIP PERCENT OF CLASS
------------- -------------------------------------------- -------------------- ----------------
Common Stock William B. Ruger, Jr. 5,322,000(1) 19.59%
Common Stock Stephen L. Sanetti 232,000(2) **
Common Stock Christopher J. Killoy 0(3) **
Common Stock Thomas A. Dineen 35,295(4) **
Common Stock Leslie M. Gasper 50,049(5) **
Common Stock Directors and executive officers as a group
(4 non-officer Directors, 2 Directors who
were also executive officers during 2004 and
3 other executive officers) 5,763,204 21.24%
--------------------------
* The address of each of the executive officers named in this Security
Ownership of Management table is c/o Sturm, Ruger & Company, Inc., Lacey
Place, Southport, Connecticut 06890.
** Beneficial owner of less than 1% of the outstanding Common Stock of the
Company.
(1) Includes 4,272,000 shares of Common Stock held in the name of Ruger Business
Holdings, L.P., of which the William B. Ruger Revocable Trust of 1988 is the
sole limited partner and Ruger Management, Inc. is the sole general partner.
William B. Ruger, Jr. and Carolyn Ruger Vogel (son and daughter of William
B. Ruger) are co-trustees of the William B. Ruger Revocable Trust of 1988.
Ruger Management, Inc. is owned by William B. Ruger, Jr. and Carolyn R.
Vogel. Mr. Ruger, Jr. and Mrs. Vogel have shared investment and voting
control with respect to such 4,272,000 shares of Common Stock. Also includes
800,000 shares of Common Stock owned directly by Mr. Ruger, Jr. Mr. Ruger,
Jr. has sole investment and voting control with respect to such 800,000
shares. Also includes 250,000 shares of Common Stock subject to options
currently exercisable or which will become exercisable within 60 days of
January 15, 2005 under the 1998 Stock Incentive Plan.
(2) Includes 32,000 shares of Common Stock held directly by Mr. Sanetti. Also
includes 200,000 shares of Common Stock options currently exercisable or
which will become exercisable within 60 days of January 15, 2005 under the
1998 Stock Incentive Plan.
(3) Mr. Killoy resigned as Vice President of Sales and Marketing of the Company
on January 25, 2005.
(4) Includes 295 shares of Common Stock held directly by Mr. Dineen. Also
includes 35,000 shares of Common Stock options currently exercisable or
which will become exercisable within 60 days of January 15, 2005 under the
1998 Stock Incentive Plan.
(5) Includes 49 shares of Common Stock held under the CT Gift to Minors Act for
the benefit of Ms. Gasper's two minor daughters. Also includes 50,000 shares
of Common Stock options currently exercisable or which will become
exercisable within 60 days of January 15, 2005 under the 1998 Stock
Incentive Plan.
22
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers and
Directors, and persons who own more than ten percent of a registered class of
the Company's equity securities, to file reports of ownership and changes in
ownership with the SEC and NYSE. Officers, Directors and greater than ten
percent stockholders are required by SEC regulations to furnish the Company with
copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of the
Section 16(a) report forms furnished to the Company and written representations
that no other reports were required, that with respect to the period from
January 1, 2004 through December 31, 2004, all such forms were filed in a timely
manner by the Company's officers, Directors and greater than ten percent
beneficial owners.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 2004, the Company paid the amount of $225,000 to Newport Mills, a
company owned by William B. Ruger, Jr., the Company's Chairman of the Board and
Chief Executive Officer, for the rental of storage space. The Company also paid
the amount of $18,000 to Mr. Ruger, Jr. for the rental of office space owned by
Mr. Ruger, Jr. in Newport, New Hampshire.
23
REPORT OF THE AUDIT COMMITTEE*
Management has the primary responsibility for the financial statements and
the reporting process including the systems of internal controls. In fulfilling
its oversight responsibilities, the Committee reviewed and discussed the audited
financial statements in the Annual Report with management, including a
discussion of the quality, not just the acceptability, of the accounting
principles, the reasonableness of significant judgments, and the clarity of
disclosures in the financial statements.
The Committee reviewed with the independent auditors, who are responsible
for expressing an opinion of the conformity of those audited financial
statements with accounting principles generally accepted in the United States,
their judgments as to the quality, not just the acceptability, of the Company's
accounting principles and such other matters as are required to be discussed
with the Committee by Statement on Auditing Standards No. 61 (Codification of
Statements on Auditing Standards, AU Section 380). In addition, the Committee
has discussed with the independent auditors the auditors' independence from
management and the Company, and has received the written disclosures and the
letter from the independent auditors as required by Independence Standard Board
Standard No. 1 (Independence Discussions with Audit Committees).
The Committee discussed with the independent auditors the overall scope
and plans for their audit. The Committee met with the independent auditors, with
and without management present, to discuss the results of their examinations,
their evaluations of the Company's internal controls, and the overall quality of
the Company's financial reporting. The Committee held eight meetings during
fiscal 2004.
In reliance on the reviews and discussions referred to above, the
Committee recommended to the Board of Directors that the audited financial
statements be included in the Annual Report on Form 10-K for the year ended
December 31, 2004 for filing with the Securities and Exchange Commission.
AUDIT COMMITTEE
John M. Kingsley, Jr., Committee Chairman
Richard T. Cunniff
Townsend Hornor
James E. Service
March 11, 2005
---------------------
* The report of the Audit Committee shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under either the Securities Act of 1933, as amended,
or the Exchange Act (together, the "Acts"), except to the extent that the
Company specifically incorporates such report by reference; and further, such
report shall not otherwise be deemed to be "soliciting material" or "filed"
under the Acts.
24
PROPOSAL NO. 2
APPROVAL OF INDEPENDENT AUDITORS
KPMG LLP has served as the Company's independent auditors since August 27,
2001. Subject to the ratification of the stockholders, the Board of Directors
has reappointed KPMG LLP as the Company's independent auditors for the 2005
fiscal year.
Audit Fees
KPMG LLP's aggregate fees, including expenses reimbursed, for professional
services rendered for the audit of the Company's financial statements for the
2004 fiscal year, the reviews of the Company's quarterly financial statements
for the 2004 fiscal year, and the audit of internal controls for the 2004 fiscal
year were $676,000 and KPMG LLP's aggregate fees, including expenses reimbursed,
for professional services rendered for the audit of the Company's annual
financial statements for the 2003 fiscal year and the reviews of the Company's
quarterly financial statements for the 2003 fiscal year were $255,000.
Audit - Related Fees
KPMG LLP's aggregate fees, including expenses reimbursed, for assurance
and related services for the 2004 fiscal year were $50,000 and KPMG LLP's
aggregate fees, including expenses reimbursed, for audit-related services for
the 2003 fiscal year were $45,000. These are fees for assurance and related
services performed by KPMG LLP that are reasonably related to the performance of
the audit or review of the Company's financial statements, such as employee
benefit and compensation plan audits.
Tax Fees
KPMG LLP's aggregate fees, including expenses reimbursed, for services
rendered for tax compliance, tax advice and tax planning for the 2004 fiscal
year were $20,000 and KPMG LLP's aggregate fees, including expenses reimbursed,
for services rendered for tax compliance, tax advice and tax planning for the
2003 fiscal year were $19,000. These are fees for preparation of original and
amended tax returns for the Company, tax audit assistance, and tax work stemming
from items reported under "Audit-Related Fees" above.
All Other Fees
There were no fees or expenses reimbursed for services rendered by KPMG
LLP to the Company, other than for services described above, for the year 2004
or the year 2003.
It is the policy of the Audit Committee to meet and review and approve in
advance, on a case-by-case basis, all engagements by the Company of permissible
non-audit services or audit, review or attest services for the Company to be
provided by the independent auditors, with exceptions provided for de minimus
amounts under certain circumstances as prescribed by the Exchange Act. The Audit
Committee may, at some later date, establish a more detailed pre-approval policy
pursuant to which such engagements may be pre-approved without a meeting of the
Audit Committee. Any request to perform any such services must be submitted to
the Audit Committee by the independent auditor and
25
management of the Company and must include their views on the consistency of
such request with the SEC's rules on auditor independence.
All of the services of KPMG LLP described above under "Audit-Related Fees"
and "Tax Fees" were approved by the Audit Committee in accordance with its
policy on permissible non-audit services or audit, review or attest services for
the Company to be provided by its independent auditors, and no such approval was
given through a waiver of such policy for de minimus amounts or under any of the
other circumstances as prescribed by the Exchange Act.
Representatives of KPMG LLP will be present at the Meeting, will have the
opportunity to make a statement if they so desire, and will be available to
respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL NO. 2.
26
STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS FOR 2006
To be considered for inclusion in the Proxy Statement distributed by the
Company in connection with next year's Annual Meeting of Stockholders,
stockholder proposals must be submitted in writing to the Company by November
14, 2005. Any stockholder proposal to be considered at next year's Annual
Meeting of Stockholders, but not included in next year's Proxy Statement, must
be submitted in writing to the Company by January 28, 2006.
Recommendations for nominees to stand for election as Directors at next
year's Annual Meeting of Stockholders must be received by November 14, 2005 and
include the information as required under "THE BOARD OF DIRECTORS AND ITS
COMMITTEES - Nominating and Corporate Governance Committee" described above.
All stockholder proposals or Director nominations should be submitted to
Leslie M. Gasper, Corporate Secretary, Sturm, Ruger & Company, Inc., Lacey
Place, Southport, Connecticut 06890.
OTHER MATTERS
Management of the Company does not intend to present any business at the
Meeting other than as set forth in Items 1 and 2 of the attached Notice of
Annual Meeting of Stockholders, and it has no information that others will
present any other business at the Meeting. If other matters requiring the vote
of the stockholders properly come before the Meeting, it is the intention of the
persons named in the proxy to vote the shares represented thereby in accordance
with their judgment on such matters.
The Company, upon written request, will provide without charge to each
person entitled to vote at the Meeting a copy of its Annual Report on Securities
and Exchange Commission Form 10-K for the year ended December 31, 2004,
including the financial statements and financial statement schedules. Such
requests should be directed to Leslie M. Gasper, Corporate Secretary, Sturm,
Ruger & Company, Inc., Lacey Place, Southport, Connecticut 06890.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Leslie M. Gasper
----------------------------------
Leslie M. Gasper
Corporate Secretary
Southport, Connecticut
March 14, 2005
27
LAKE SUNAPEE COUNTRY CLUB
100 COUNTRY CLUB LANE
NEW LONDON, NEW HAMPSHIRE 03257
(603) 526-6040
FROM NEW YORK (APPROXIMATELY 5 HOURS BY CAR) -
1) Take Interstate 95 North to Interstate 91 North in New Haven,
Connecticut.
2) Follow I-91 through Massachusetts to Interstate 89 at White River
Junction, Vermont.
3) Take I-89 South to Exit 11. Turn left at end of ramp, go straight
1-1/2 miles to 2nd flashing light. Fairway Motel and entrance to
Lake Sunapee Country Club is on the right.
4) Turn right into entrance; proceed approximately -1/4 mile to LAKE
SUNAPEE COUNTRY CLUB INN.
FROM BOSTON (APPROXIMATELY 1-3/4 HOURS BY CAR) -
1) Take Interstate 93 North from Boston to Interstate 89 North in
Concord, New Hampshire.
2) In Concord, take I-89 North to Exit 11. Turn right at end of ramp,
go straight 1-1/2 miles to 2nd flashing light. Fairway Motel and
entrance to Lake Sunapee Country Club is on the right.
3) Turn right into entrance; proceed approximately -1/4 mile to LAKE
SUNAPEE COUNTRY CLUB INN.
FROM MANCHESTER AIRPORT (APPROXIMATELY 1 HOUR BY CAR) -
1) When leaving Manchester Airport, turn right onto Brown Street
(residential). Go right onto Route 293/101 East, then left to
Interstate 93 North toward Concord, New Hampshire.
2) In Concord, take Interstate 89 North to Exit 11. Turn right at end
of ramp, go straight 1-1/2 miles to 2nd flashing light. Fairway
Motel and entrance to Lake Sunapee Country Club is on the right.
3) Turn right into entrance; proceed approximately -1/4 mile to LAKE
SUNAPEE COUNTRY CLUB INN.
PROXY PROXY
STURM, RUGER & COMPANY, INC.
LACEY PLACE, SOUTHPORT, CONNECTICUT 06890
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 3, 2005
The undersigned hereby appoints William B. Ruger, Jr., Stephen L. Sanetti
and Leslie M. Gasper as Proxies, each with the full power to appoint his or her
substitute, and hereby authorizes them to represent and to vote, as designated
below, all the shares of Common Stock of Sturm, Ruger & Company, Inc. (the
"Company"), held of record by the undersigned on March 4, 2005 at the Annual
Meeting of Stockholders to be held on May 3, 2005 or any adjournment or
postponement thereof.
The proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this proxy will
be voted "FOR" the election of all directors and "FOR" Proposal 2. Please sign
exactly as name appears on other side of this proxy form.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY FORM PROMPTLY
USING THE ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side.)
STURM, RUGER & COMPANY, INC.
PLEASE MARK VOTE IN BOX IN THE FOLLOWING MANNER USING DARK INK ONLY [ X ]
[ ]
A. ELECTION OF DIRECTORS
1. The Board of Directors unanimously recommends a Vote FOR the election of six
Directors:
FOR WITHHOLD FOR WITHHOLD
William B. Ruger, Jr. [ ] [ ] Townsend Hornor [ ] [ ]
Stephen L. Sanetti [ ] [ ] John M. Kingsley, Jr. [ ] [ ]
Richard T. Cunniff [ ] [ ] James E. Service [ ] [ ]
B. ISSUES
The Board of Directors unanimously recommends a Vote:
FOR AGAINST ABSTAIN
2. FOR The approval of the appointment of [ ] [ ] [ ]
KPMG LLP as the independent auditors
of the Company for the 2005 fiscal year.
FOR AGAINST ABSTAIN
3. In their discretion, the Proxies are authorized [ ] [ ] [ ]
to vote upon such other business as may
properly come before the meeting.
Dated: ____________________________________________, 2005
Signature(s): ___________________________________________________
___________________________________________________
When shares are held by joint tenants, both
should sign. When signing as an attorney,
as executor, administrator, trustee or
guardian, please give your full title as
such. If a corporation, please sign in full
corporate name by President or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person.