The consolidated balance sheet at December
31, 2017 has been derived from the audited consolidated financial statements at that date but does not include all the information
and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.
The consolidated balance sheet at December
31, 2017 has been derived from the audited consolidated financial statements at that date but does not include all the information
and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in thousands, except per share)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited
condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the
United States for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and disclosures required by accounting principles generally accepted in the United States
of America for complete financial statements.
In the opinion of management,
the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring
accruals, considered necessary for a fair presentation of the results of the interim periods. Operating results for the nine months
ended September 29, 2018 may not be indicative of the results to be expected for the full year ending December 31, 2018. These
financial statements have been prepared on a basis that is substantially consistent with the accounting principles applied in our
Annual Report on Form 10-K for the year ended December 31, 2017.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Organization:
Sturm, Ruger & Company,
Inc. (the “Company”) is principally engaged in the design, manufacture, and sale of firearms to domestic customers.
Approximately 99% of sales are from firearms. Export sales represent approximately 4% of total sales. The Company’s design
and manufacturing operations are located in the United States and almost all product content is domestic. The Company’s firearms
are sold through a select number of independent wholesale distributors, principally to the commercial sporting market.
The Company also manufactures
investment castings made from steel alloys and metal injection molding (“MIM”) parts for internal use in its firearms
and for sale to unaffiliated, third-party customers. Approximately 1% of sales are from the castings segment.
Principles of Consolidation:
The consolidated financial
statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany accounts and transactions
have been eliminated.
Revenue Recognition:
The Company recognizes
revenue in accordance with the provisions of Accounting Standards Codification Topic 606,
Revenue from Contracts with Customers
(“ASC 606”)
,
which became effective January 1, 2018. Substantially all product sales are sold FOB (free on board)
shipping point. Customary payment terms are 2% 30 days, net 40 days. Generally, all performance obligations are satisfied when
product is shipped and the customer takes ownership and assumes the risk of loss. In some instances,
Index
sales include multiple performance obligations.
The most common of these instances relates to sales promotion programs under which downstream customers are entitled to receive
no charge products based on their purchases of certain of the Company’s products from the independent distributors. The fulfillment
of these no charge products is the Company’s responsibility. In such instances, the Company allocates the revenue of the
promotional sales based on the estimated level of participation in the sales promotional program and the timing of the shipment
of all of the firearms included in the promotional program, including the no charge firearms. Revenue is recognized proportionally
as each performance obligation is satisfied, based on the relative customary price of each product. Customary prices are generally
determined based on the prices charged to the independent distributors. The net change in contract liabilities for a given period
is reported as an increase or decrease to sales.
Fair Value of Financial Instruments:
The carrying amounts of
financial instruments, including cash, accounts receivable, accounts payable and accrued liabilities, approximate fair value due
to the short-term maturity of these items.
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.
Reclassifications:
Certain prior period balances
have been reclassified to conform to current year presentation.
Recent Accounting Pronouncements:
In May 2014, the Financial
Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, an update to Accounting
Standards Codification Topic 606,
Revenue from Contracts with Customers
(“ASC 606”), which supersedes nearly
all existing revenue recognition guidance. As more fully discussed in Note 3, the Company adopted ASC 606 using the modified retrospective
method on January 1, 2018.
On March 30, 2016, the
FASB issued ASU 2016-09,
Compensation - Stock Compensation (Topic 718)
. The most significant change in the new compensation
guidance is that all excess tax benefits and tax deficiencies (including tax benefits of dividends) on share-based compensation
awards should be recognized in the Statement of Income as income tax expense. Previously such benefits or deficiencies were recognized
in the Balance Sheet as adjustments to additional paid-in capital. The new guidance was effective in fiscal years beginning after
December 15, 2016 and interim periods thereafter. The Company adopted ASU 2016-09 in the first quarter of 2017. Adopting this change
in accounting principle reduced the Company’s effective tax rate by 2% for the period ending September 30, 2017. This did
not have a material impact on the Company’s results of operations or financial position.
On February 25, 2016, the
FASB issued ASU 2016-02,
Leases (Topic 842)
, its long-awaited final standard on the accounting for leases. The most significant
change in the new lease guidance requires lessees to recognize right-of-use assets and lease liabilities for all leases other than
those that meet the definition of short-term leases. For short-term leases, lessees may elect an accounting policy by class of
underlying asset under which these assets and liabilities are not recognized and lease payments are generally recognized over the
lease term on a straight-line basis. This change will result in lessees recognizing right-of-use assets and lease liabilities for
most leases currently accounted for as
Index
operating leases under legacy U.S. GAAP. The
new lease guidance is effective in fiscal years beginning after December 15, 2018 and interim periods thereafter. Early application
is permitted for all entities. The Company is currently evaluating the effect that the standard will have on the consolidated financial
statements.
NOTE 3 – REVENUE RECOGNITION AND CONTRACTS WITH CUSTOMERS
On January 1, 2018, the
Company adopted ASC 606 using the modified retrospective method, applied to those contracts for which all performance obligations
were not completed as of that date. Under the modified retrospective, method results for reporting periods beginning after January
1, 2018 will be presented using the guidance of ASC 606, while prior period amounts are not adjusted and continue to be reported
in accordance with the previous guidance provided in ASC Topic 605,
Revenue Recognition
.
The effects of adjustments
to the December 31, 2017 consolidated balance sheet for the adoption of ASC 606 were as follows:
|
Balance at December 31, 2017
|
ASC 606 Adjustments
|
Opening Balance January 1, 2018
|
Trade accounts payable and accrued expenses
|
32,422
|
(4,000)
|
28,422
|
Deferred revenue from contracts with customers
|
-
|
6,950
|
6,950
|
Deferred taxes
|
1,402
|
(723)
|
679
|
Retained earnings
|
321,323
|
(2,227)
|
319,096
|
At December 31, 2017, the
Company had accrued $4.0 million related to certain of its sales promotion activities that included the shipment of no charge firearms.
Using the new accounting guidance, a deferred contract liability of $6.9 million was required at December 31, 2017 and an entry
for $2.9 million to increase the deferred contract liability, increase deferred tax assets by $0.7 million, and reduce beginning
retained earnings by $2.2 million was recorded on January 1, 2018 (the “transition entry”).
The impact of the adoption
of ASC 606 on revenue recognized during the three and nine months ended September 29, 2018 is as follows:
|
Three Months Ended September 29, 2018
|
Nine Months Ended September 29, 2018
|
Contract liabilities with customers
beginning of period
|
$ 6,674
|
$ 6,950
|
Revenue recognized
|
(7,090)
|
(16,807)
|
Revenue deferred
|
6,347
|
15,788
|
Contract liabilities with customers
at September 29, 2018
|
$ 5,931
|
$ 5,931
|
Index
During the three and nine
months ended September 29, 2018, the Company deferred $6.4 million and $15.8 million of revenue, respectively, offset by the recognition
of $7.1 million and $16.8 million, respectively, of revenue previously deferred as the performance obligations relating to the
shipment of free products were satisfied. This resulted in a net increase in firearms sales for the three and nine months ended
September 29, 2018 of $0.7 million and $1.0 million, respectively, and a deferred contract revenue liability at September 29, 2018
of $5.9 million. The Company estimates that revenue from this deferred contract liability will be recognized in the fourth quarter
of 2018. As a result of the adoption of ASC 606, for the three months ended September 29, 2018, the gross margin percentage was
reduced by 3% and earnings per share increased by approximately 1¢ over the comparable prior year period. As a result of the
adoption of ASC 606, for the nine months ended September 25, 2018, the gross margin percentage was reduced by 2% and earnings per
share increased by approximately 2¢ over the comparable prior year period.
Practical Expedients and Exemptions
The Company has elected
to account for shipping and handling activities that occur after control of the related product transfers to the customer as fulfillment
activities that are recognized upon shipment of the goods.
NOTE 4 - 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 factors beyond
management's control, interim results are subject to the final year-end LIFO inventory valuation.
During the nine month
period ended September 29, 2018, inventory quantities were reduced. If this reduction remains through year-end, it will result
in a liquidation of LIFO inventory quantities carried at lower costs prevailing in prior years as compared with the current cost
of purchases. Although the effect of such a liquidation cannot be precisely quantified at the present time, management believes
that if a LIFO liquidation occurs in 2018, the impact may be material to the Company’s results of operations for the period
but will not have a material impact on the financial position of the Company.
Inventories consist of the following:
|
September 29, 2018
|
December 31, 2017
|
Inventory at FIFO
|
|
|
Finished products
|
$ 13,613
|
$ 22,558
|
Materials and work in process
|
60,585
|
65,034
|
Gross inventories
|
74,198
|
87,592
|
Less: LIFO reserve
|
(45,811)
|
(45,180)
|
Less: excess and obsolescence reserve
|
(2,195)
|
(2,698)
|
Net inventories
|
$ 26,192
|
$ 39,714
|
Index
NOTE 5 - LINE OF CREDIT
The
Company has a
$40 million
revolving line of credit
with a bank. This facility is renewable annually and terminates on August 31, 2019. Borrowings under this facility bear interest
at the one-month LIBOR rate (2.256% at September 28, 2018) plus 150 basis points. The Company is charged one-quarter of a percent
(0.25%) per year on the unused portion. At September 29, 2018, the Company was in compliance with the terms and covenants of the
credit facility, which remains unused. At December 31, 2017, the Company was in compliance with the terms and covenants of a previous
credit facility.
NOTE 6 - EMPLOYEE BENEFIT PLANS
The Company sponsors a
401(k) plan that covers substantially all employees. The Company matches a certain portion of employee contributions using the
safe harbor guidelines contained in the Internal Revenue Code. Expenses related to these matching contributions totaled $0.7 million
and $2.3 million for the three and nine months ended September 29, 2018, respectively, and $0.7 million and $2.5 million for the
three and nine months ended September 30, 2017, respectively. The Company plans to contribute approximately $0.7 million to the
plan in matching employee contributions during the remainder of 2018.
In addition, the Company
provided supplemental discretionary contributions to the 401(k) plan totaling $1.2 million and $3.8 million for the three and nine
months ended September 29, 2018, respectively, and $1.2 million and $4.4 million for the three and nine months ended September 30,
2017, respectively. The Company plans to contribute approximately $1.2 million in supplemental contributions to the plan during
the remainder of 2018.
NOTE 7 - INCOME TAXES
The Company's 2018 and
2017 effective tax rates differ from the statutory federal tax rate due principally to state income taxes. The Company’s
effective income tax rate was 24.5% and 24.4% for the three and nine months ended September 29, 2018, respectively. The Company’s
effective income tax rate for the three and nine months ended September 30, 2017 was 30.3% and 34.0%, respectively. This reduction
is primarily the result of the Tax Cuts and Jobs Act of 2017, which reduced the statutory Federal tax rate from 35% to 21% effective
January 1, 2018, partially offset by the loss of tax benefits available in the prior period related to the American Jobs Creation
Act of 2004 that expired effective December 31, 2017. The reduced effective tax rate resulting from the Tax Cuts and Jobs Act of
2017 increased earnings per share by 4¢ and 29¢ for the three and nine months ended September 29, 2018.
Income tax payments for
the three and nine months ended September 29, 2018 totaled $7.3 million and $15.3 million, respectively. Income tax payments for
the three and nine months ended September 30, 2017 totaled $1.3 million and $18.6 million, respectively.
The Company files income
tax returns in the U.S. federal jurisdiction and various state jurisdictions. With few exceptions, the Company is no longer subject
to U.S. federal and state income tax examinations by tax authorities for years before 2015.
The Company does not believe
it has included any “uncertain tax positions” in its federal income tax return or any of the state income tax returns
it is currently filing. The Company has made an evaluation of the potential impact of additional state taxes being assessed by
jurisdictions in which the
Index
Company does not currently consider itself
liable. The Company does not anticipate that such additional taxes, if any, would result in a material change to its financial
position.
NOTE 8 - EARNINGS PER SHARE
Set forth below is a reconciliation
of the numerator and denominator for basic and diluted earnings per share calculations for the periods indicated:
|
Three Months Ended
|
Nine Months Ended
|
|
September 29, 2018
|
September 30, 2017
|
September 29, 2018
|
September 30, 2017
|
Numerator:
|
|
|
|
|
Net income
|
$9,206
|
$9,370
|
$38,659
|
$41,793
|
Denominator:
|
|
|
|
|
Weighted average number of common shares outstanding – Basic
|
17,458,020
|
17,590,341
|
17,448,141
|
17,826,137
|
|
|
|
|
|
Dilutive effect of options and restricted stock units outstanding under the Company’s employee compensation plans
|
261,263
|
222,232
|
209,126
|
192,038
|
|
|
|
|
|
Weighted average number of common shares outstanding – Diluted
|
17,719,283
|
17,812,573
|
17,657,267
|
18,018,175
|
The dilutive effect of
outstanding options and restricted stock units is calculated using the treasury stock method. There were no stock options that
were anti-dilutive and therefore not included in the diluted earnings per share calculation.
NOTE 9 - COMPENSATION PLANS
In May 2017, the Company’s
shareholders approved the 2017 Stock Incentive Plan (the “2017 SIP”) under which employees, independent contractors,
and non-employee directors may be granted stock options, restricted stock, deferred stock awards, and stock appreciation rights,
any of which may or may not require the satisfaction of performance objectives. Vesting requirements are determined by the Compensation
Committee of the Board of Directors
.
The Company has reserved 750,000 shares for issuance under the 2017 SIP, of which 543,000
shares remain available for future grants as of September 29, 2018.
In April 2007, the Company
adopted and the shareholders approved the 2007 Stock Incentive Plan (the “2007 SIP”), which had similar provisions
as the 2017 SIP. The 2007 SIP plan expired April 24, 2017. The Company had reserved 2,550,000 shares for issuance under the 2007
SIP, of which 2,181,000 shares were issued.
Index
Restricted Stock Units
Beginning in 2009, the
Company began granting performance-based and retention-based restricted stock units to senior employees in lieu of incentive stock
options. The vesting of the performance-based awards is dependent on the achievement of corporate objectives established by the
Compensation Committee of the Board of Directors and a three-year vesting period. The retention-based awards are subject only
to the three-year vesting period. There were 184,200 restricted stock units issued during the nine months ended September 29,
2018. Total compensation costs related to these restricted stock units are $8.8 million.
Compensation costs related
to all outstanding restricted stock units recognized in the statements of income aggregated $1.6 million and $4.2 million for the
three and nine months ended September 29, 2018, respectively, and $1.0 million and $2.6 million for the three and nine months ended
September 30, 2017, respectively.
Stock Options
A summary of changes in
options outstanding under the 2007 SIP is summarized below:
|
Shares
|
Weighted Average Exercise Price
|
Grant Date
Fair Value
|
Outstanding at December 31, 2017
|
11,838
|
$8.95
|
$6.69
|
Granted
|
-
|
-
|
-
|
Exercised
|
(4,616)
|
8.28
|
6.90
|
Expired
|
-
|
-
|
-
|
Outstanding at September 29, 2018
|
7,222
|
$9.38
|
$6.56
|
The aggregate intrinsic
value (mean market price at September 29, 2018 less the weighted average exercise price) of options outstanding under the 2007
SIP was approximately $0.4 million.
NOTE 10 - OPERATING SEGMENT INFORMATION
The Company has two reportable
segments: firearms and castings. The firearms segment manufactures and sells rifles, pistols, and revolvers principally to a select
number of independent wholesale distributors primarily located in the United States. The castings segment manufactures and sells
steel investment castings and metal injection molding parts.
Index
Selected operating segment financial information follows:
(in thousands)
|
Three Months Ended
|
Nine Months Ended
|
|
September 29, 2018
|
September 30,
2017
|
September 29, 2018
|
September 30,
2017
|
Net Sales
|
|
|
|
|
Firearms
|
$113,798
|
$103,658
|
$370,697
|
$400,533
|
Castings
|
|
|
|
|
Unaffiliated
|
1,147
|
1,159
|
3,817
|
3,493
|
Intersegment
|
5,723
|
4,745
|
16,902
|
19,866
|
|
6,870
|
5,904
|
20,719
|
23,359
|
Eliminations
|
(5,723)
|
(4,745)
|
(16,902)
|
(19,866)
|
|
$114,945
|
$104,817
|
$374,514
|
$404,026
|
|
|
|
|
|
Income (Loss) Before Income Taxes
|
|
|
|
|
Firearms
|
$12,866
|
$13,459
|
$52,363
|
$62,957
|
Castings
|
(635)
|
112
|
(1,578)
|
267
|
Corporate
|
(38)
|
(130)
|
358
|
99
|
|
$12,193
|
$13,441
|
$51,143
|
$63,323
|
|
|
|
|
|
|
|
|
September 29, 2018
|
December 31, 2017
|
Identifiable Assets
|
|
|
|
|
Firearms
|
|
|
$166,901
|
$206,091
|
Castings
|
|
|
10,532
|
12,524
|
Corporate
|
|
|
138,619
|
65,703
|
|
|
|
$316,052
|
$284,318
|
NOTE 11 – RELATED PARTY TRANSACTIONS
The Company contracts with
the National Rifle Association (“NRA”) for some of its promotional and advertising activities, including the 2016 “Ruger
$5 Million Match Campaign” and the 2015-16 “2.5 Million Gun Challenge”. Payments made to the NRA in the three
and nine months ended September 29, 2018 totaled $224,000 and $435,000, respectively. Payments made to the NRA in the three and
nine months ended September 30, 2017 were insignificant. One of the Company’s Directors also serves as a Director on the
Board of the NRA.
In the past, the Company
had contracted with Symbolic, Inc. (“Symbolic”) to assist in its marketing efforts. During the three and nine months
ended September 29, 2018, payments made to Symbolic were de minimis. During the three and nine months ended September 30, 2017,
the Company paid Symbolic $0.3 million and $1.3 million, respectively, which amounts included $0.3 million and $0.8 million, respectively,
for the reimbursement of expenses paid by Symbolic on the Company’s behalf. Symbolic’s principal and founder was named
the Company’s Vice President of Marketing in June 2017, and remains the president of Symbolic.
Index
NOTE 12 - CONTINGENT LIABILITIES
As of September
29, 2018, the Company was a defendant in three (3) lawsuits and is aware of certain other such claims. The lawsuits fall into three
categories: traditional product liability litigation, non-product litigation, and municipal litigation, discussed in turn below.
Traditional Product Liability Litigation
One of the three
lawsuits mentioned above involves claims for damages related to an allegedly defective product due to its design and/or manufacture.
This lawsuit stems from a specific incident of personal injury and is based on a traditional product liability theory such as strict
liability, negligence and/or breach of warranty.
The Company management
believes that the allegation in this case is unfounded, that the incident was unrelated to the design or manufacture of the firearm,
and that there should be no recovery against the Company.
Non-Product Liability
David S.
Palmer, on behalf of himself and all others similarly situated vs. Sturm, Ruger & Co.
is a putative class-action
suit filed in Florida state court on behalf of Florida consumers. The suit alleges breach of warranty and deceptive trade practices
related to the sale of 10/22 Target Rifles. The Company filed an Answer denying all material allegations and a Motion to Strike
the putative class representative’s claims. That motion remains pending.
Municipal Litigation
Municipal litigation
generally includes those cases brought by cities or other governmental entities against firearms manufacturers, distributors and
retailers seeking to recover damages allegedly arising out of the misuse of firearms by third-parties.
There is only
one remaining lawsuit of this type, filed by the City of Gary in Indiana State Court in 1999. The complaint in that case seeks
damages, among other things, for the costs of
medical care
,
police
and emergency services, public health services
,
and other
services as well as punitive damages. In addition
,
nuisance
abatement and/or injunctive relief is sought to change th
e
design
,
manufacture
,
mark
e
ting
and distribution practices of th
e
various defendants. The
suit alleges
,
among other claims
,
negligence in the design of products
,
public
nuisance
,
negligent distribution and marketing
,
negligence per se and deceptive advertising. The case does not allege a specific injury to
a specific individual as a result of the misuse or use of any of the Company's products.
After
a long procedural history
,
the case was scheduled for trial
on June 15
,
2009. The case was not tried on that date and
was largely dormant until a status conference was held on July 27
,
2015.
At that time
,
the court entered a scheduling order setting
deadlines for plaintiff to file a Second Amended Complaint
,
for
defendants to answer
,
and for defendants to file dispositive
motions. The plaintiff did not file a Second Amended Complaint by the deadline.
Index
In
2015
,
Indiana passed a new law such that Indiana Code §34-12-3-1
became applicable to the City's case. The defendants have filed a joint motion for judgment on the pleadings, asserting immunity
under §34-12-3-1 and asking the court to revisit the Court of Appeals' decision holding the Protection of Lawful Commerce
in Arms Act inapplicabl
e
to the City's claims. The motion
was fully briefed by the parties.
On
September 29, 2016, the court entered an order staying the case pending a decision by the Indiana Supreme Court in
KS&E
Sports v
.
Runnels,
which
presents related issues. The Indiana Supreme Court decided
KS&E Sports
on April 24
,
2017
,
and the
Gary
court lifted the stay. The
Gary
court also entered an order setting a supplemental briefing schedule under which the
parties addressed the impact of the
KS&E Sports
decision on defendants
'
motion
for judgment on the pleadings
.
A hearing on
the motion for judgment on the pleadings was held on December 12, 2017. On January 2, 2018, the court issued an order granting
Manufacturer Defendants’ motion for judgment on the pleadings, but denying Defendants’ request for attorney’s
fees and costs. On January 8, 2018, the court entered judgment for Manufacturer Defendants. The City filed a Notice of Appeal on
February 1, 2018. Defendants cross-appealed the order denying attorney’s fees and costs. The matter has been briefed fully
and the parties are awaiting a ruling.
Summary of Claimed Damages and Explanation
of Product Liability Accruals
Punitive
damages
,
as well as compensatory damages, are demanded
in certain of the lawsuits and claims. In many instances
,
the
plaintiff does not seek a specified amount of money
,
though
aggregate amounts ultimately sought may exceed product liability accruals and applicable insurance coverage. For product liability
claims made after July 10, 2000
,
coverage is provided on
an annual basis for losses exceeding $5 million per claim
,
or
an aggregate maximum loss of $10 million annually
,
except
for certain new claims which might be brought by governments or municipalities after July 10
,
2000
,
which are excluded
from coverage.
The
Company management monitors the status of known claims and the product liability accrual
,
which
includes amounts for asserted and unasserted claims. While it is not possible to forecast the outcome of litigation or the timing
of costs
,
in the opinion of management
,
after consultation with special and corporate counsel, it is not probable and is unlikely that
litigation
,
including punitive damage claims
,
will have a material adverse effect on the financial position of the Compan
y,
but may have a material impact on the Company’
s
financial results and cash flows for a particular period.
Product liability
claim payments are made when appropriate if, as, and when claimants and the Company reach agreement upon an amount to finally resolve
all claims. Legal costs are paid as the lawsuits and claims develop, the timing of which may vary greatly from case to case. A
time schedule cannot be determined in advance with any reliability concerning when payments will be made in any given case.
Provision is
made for product liability claims based upon many factors related to the severity of the alleged injury and potential liability
exposure, based upon prior claim experience. Because the Company's experience in defending these lawsuits and claims is that unfavorable
outcomes are typically not probable or estimable, only in rare cases is an accrual established for such costs.
Index
In most cases,
an accrual is established only for estimated legal defense costs. Product liability accruals are periodically reviewed to reflect
then-current estimates of possible liabilities and expenses incurred to date and reasonably anticipated in the future. Threatened
product liability claims are reflected in the Company's product liability accrual on the same basis as actual claims;
i.e.
,
an accrual is made for reasonably anticipated possible liability and claims handling expenses on an ongoing basis.
A range of reasonably
possible losses relating to unfavorable outcomes cannot be made. However, in product liability cases in which a dollar amount of
damages is claimed, the amount of damages claimed, which totaled $0.1 million and $0.1 million at December 31, 2017 and 2016, respectively,
are set forth as an indication of possible maximum liability the Company might be required to incur in these cases (regardless
of the likelihood or reasonable probability of any or all of this amount being awarded to claimants) as a result of adverse judgments
that are sustained on appeal.
NOTE 13 - SUBSEQUENT EVENTS
On October 30,
2018, the Company’s Board of Directors authorized a dividend of 21¢ per share, for shareholders of record as of November
16, 2018, payable on November 30, 2018.
The Company
has evaluated events and transactions occurring subsequent to September 29, 2018 and determined that there were no other unreported
events or transactions that would have a material impact on the Company’s results of operations or financial position.
Index