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<SEC-DOCUMENT>0000950123-06-012718.txt : 20070201
<SEC-HEADER>0000950123-06-012718.hdr.sgml : 20070201
<ACCEPTANCE-DATETIME>20061018144740
<PRIVATE-TO-PUBLIC>
ACCESSION NUMBER:		0000950123-06-012718
CONFORMED SUBMISSION TYPE:	CORRESP
PUBLIC DOCUMENT COUNT:		2
FILED AS OF DATE:		20061018

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			STURM RUGER & CO INC
		CENTRAL INDEX KEY:			0000095029
		STANDARD INDUSTRIAL CLASSIFICATION:	ORDNANCE & ACCESSORIES, (NO VEHICLES/GUIDED MISSILES) [3480]
		IRS NUMBER:				060633559
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		CORRESP

	BUSINESS ADDRESS:	
		STREET 1:		1 LACEY PLACE
		CITY:			SOUTHPORT
		STATE:			CT
		ZIP:			06490
		BUSINESS PHONE:		2032597843

	MAIL ADDRESS:	
		STREET 2:		1 LACEY PLACE
		CITY:			SOUTHPORT
		STATE:			CT
		ZIP:			06490
</SEC-HEADER>
<DOCUMENT>
<TYPE>CORRESP
<SEQUENCE>1
<FILENAME>filename1.htm
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><IMG src="y26058cry2605800.gif" alt="(STURM, RUGER & CO., INC. LOGO)">

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 0pt"><B>SOUTHPORT, CONNECTICUT 06890 U.S.A.</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">October&nbsp;17, 2006
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Mr.&nbsp;John Hartz<BR>
Senior Assistant Chief Accountant<BR>
United States Securities and Exchange Commission<BR>
Division of Corporation Finance<BR>
100 F Street, N.E., Stop 7010<BR>
Washington, D.C. 20549-7010

</DIV>

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">Re:</TD>
    <TD>&nbsp;</TD>
    <TD>Form&nbsp;10-K for the fiscal year ended December&nbsp;31, 2005<br>
File No.&nbsp;1-10435</TD>
</TR>
</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Dear Mr.&nbsp;Hartz:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The comments included in your September&nbsp;27, 2006 letter and our responses follow:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Comment</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We appreciate your response to prior comments 3 and 4. We note that your product liability expense
and cash outlays are significant relative to your operating profits and cash flows from operations.
We also note, and we agree, that your accounting policies related to your product liabilities are
critical.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We had previously requested that you provide an explanatory narrative to accompany your
roll-forward of the reserve for product liabilities. Please provide us with an analysis of each
element of the roll-forward. Tell us the components of the expense amounts in each period, and
explain the amount of the charge. Tell us the components of the ending balance (i.e. settlement,
legal, admin, etc). Discuss the underlying reasons for the changes in the amounts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Response</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Please see Attachment I which has been augmented to include a discussion of the elements of the
roll-forward.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Further, the components of the expense amounts are included in Attachment I. A discussion of each
component of product liability expense follows:
</DIV>

</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Accrued Legal Expense</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Legal defense costs are accrued for each lawsuit and claim, when appropriate. The amount of the
accrual is based on the nature of each such lawsuit or claim and reflects the Company&#146;s experience
in defending similar claims. Occasionally, charges are made for claims made in prior periods
because the cumulative actual costs incurred for that claim, or reasonably expected to be incurred
in the future, exceed amounts already provided. Likewise, credits may be taken if cumulative
actual costs incurred for that claim, or reasonably expected to be incurred in the future, are less
than amounts previously provided.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The timing of legal expense costs is event driven. Notification of a credible threat made to the
Company related to an alleged product defect, plaintiff&#146;s filing of a lawsuit, plaintiff&#146;s filing
of an appeal, a jury verdict, and dismissal of a lawsuit are common events that trigger the
recognition of an expense or an adjustment to a previously recognized expense. In 2004, eighteen
claims and cases were dismissed or otherwise resolved at various stages of the legal process.
Costs related to these eighteen claims and cases at the time of resolution were as follows:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>$8.1&nbsp;million had been expensed,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>$4.3&nbsp;million of payments had been made, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>$3.8&nbsp;million remained in the accrual.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The remaining accrual of $3.8&nbsp;million related to these cases was reversed, resulting in a decrease
to product liability expense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Please note that of the approximately 21 suits by governmental entities (involving 34 plaintiffs)
that were filed against the Company, only three remain pending and active. These cases are in
various stages of decision on their dismissal pursuant to the recently enacted Protection of Lawful
Commerce in Arms Act. Notably, one of these three cases is the <U>New York City</U> case, for
which the Company incurred and paid $2.7&nbsp;million of legal fees in 2005 alone. The increase in
product liability expense and legal fee payments from 2004 to 2005 is principally attributable to
this one case. For the first three quarters of 2006, the Company incurred and paid less than
$250,000 of legal fees for the <U>New York </U>City case.<U> </U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Insurance</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Product liability insurance expense is amortized over the term of the policy, typically one year.
Insurance expense fluctuates based on the economic conditions of the commercial insurance market,
and the relative success of our negotiations with individual insurance underwriters.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Administrative Expense</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Administrative costs represent personnel related and travel expenses of Company employees and
firearm experts in performance of the management and defense of product
</DIV></DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">liability matters. Administrative costs may vary from period to period based on the time spent by
Company employees on product liability matters.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Comment</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Explain to us how you account for, and classify your insurance premiums and provide support for
that treatment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Response</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Insurance premiums are paid at the beginning of the policy term and are therefore classified as a
prepaid expense on the Company&#146;s balance sheet. Product liability insurance expense is amortized
over the term of the policy, typically one year. Product liability insurance expense, like other
product liability expenses, is classified as a cost of goods sold. As product liability matters
stem directly from the design, manufacture and sale of firearms, we consider this expense
classification to be appropriate. This classification is disclosed in Footnote 1, &#147;Significant
Accounting Policies&#148; in our Annual Report on Form 10-K which reads in part,
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&#147;<B>Product Liability</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">The Company provides for product liability claims including estimated legal costs
to be incurred defending such claims. The provision for product liability claims
is charged to cost of products sold.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Comment</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Tell us why you cannot establish a reasonably possible range of loss in excess of your accruals as
they related to legal and administrative costs, rather than settlements.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Response</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Administrative costs are expensed as incurred, and therefore not accrued. As our experience in
defending these lawsuits and claims is that unfavorable outcomes are typically not probable or
estimable, only in rare cases is an accrual established for settlements or other such costs.
Therefore, in most cases, an accrual is established only for estimated legal defense costs.
Although legal defense costs can vary widely depending on the nature of the case and the manner in
which a case proceeds, we will endeavor to project a &#147;reasonably possible range&#148; of legal costs and
will disclose it within Management&#146;s Discussion and Analysis of Financial Condition and Results of
Operations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Comment</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We also note our request that you quantify the amount of product liability expense. We direct your
attention to the requirements of Item&nbsp;303 of Regulation&nbsp;S-K. This item requires that the
discussion shall provide information necessary to an understanding of the results of operations.
Considering the impact that product liabilities had on your
</DIV></DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">results of operations in 2005, you may want to consider this Item further. We also direct your
attention to Release 33-8350 <I>Commission Guidance Regarding Management&#146;s Discussion and Analysis of
Financial Condition and Results of Operations</I>, for further guidance on preparing and presenting
your MD&#038;A. Please advise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We also direct your attention to Staff Accounting Bulletin 5:Y. This SAB was issued to provide our
interpretation of current accounting literature and disclosure requirements and serve as guidance
for public companies in their disclosures regarding contingent liabilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In that SAB, we clearly state that we believe that product liabilities typically are of such
significance that <U>detailed</U> disclosures regarding judgments and assumptions underlying the
recognition and measurement of the liabilities are necessary to prevent the financial statements
from being unclear and to inform readers fully regarding the range of reasonably possible outcomes
that could have a material effect on a registrant&#146;s financial condition, results of operations, or
liquidity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Among the disclosures called for in the SAB are as follows:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#150;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Nature of the personal injury or property damages alleged. If an individual case
could be material, you should discuss the nature of that case and the specific
aggregations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#150;</B></TD>

    <TD width="1%">&nbsp;</TD>
    <TD>Circumstances affecting the reliability and precision of loss estimates;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#150;</B></TD>

    <TD width="1%">&nbsp;</TD>
    <TD>The extent of which unasserted claims are reflected in any accrual or may affect the
magnitude of the contingency;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#150;</B></TD>

    <TD width="1%">&nbsp;</TD>
    <TD>Whether, and to what extent, losses may be recoverable from third parties;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#150;</B></TD>

    <TD width="1%">&nbsp;</TD>
    <TD>Uncertainties regarding the legal sufficiency of insurance claims or solvency of
insurance carriers;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#150;</B></TD>

    <TD width="1%">&nbsp;</TD>
    <TD>The timing of payments of accrued and unrecognized amounts;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#150;</B></TD>

    <TD width="1%">&nbsp;</TD>
    <TD>The material components of the accruals and significant assumptions underlying
estimates. Therefore the amount of the accrual that relates to legal fees and
administrative costs should be disclosed;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#150;</B></TD>

    <TD width="1%">&nbsp;</TD>
    <TD>The total claims pending at each balance sheet date;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#150;</B></TD>

    <TD width="1%">&nbsp;</TD>
    <TD>The number of claims filed for each period presented;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#150;</B></TD>

    <TD width="1%">&nbsp;</TD>
    <TD>The number of claims dismissed;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#150;</B></TD>

    <TD width="1%">&nbsp;</TD>
    <TD>The number of claims settled;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#150;</B></TD>

    <TD width="1%">&nbsp;</TD>
    <TD>The number of claims otherwise resolved;
</TD>
</TR>
</TABLE>
</DIV></DIV>
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<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#150;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The average costs per settled claim;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#150;</B></TD>

    <TD width="1%">&nbsp;</TD>
    <TD>The total damages alleged at each balance sheet date (Reg. S-K, Item&nbsp;103);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#150;</B></TD>

    <TD width="1%">&nbsp;</TD>
    <TD>The aggregated settlement costs to date;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#150;</B></TD>

    <TD width="1%">&nbsp;</TD>
    <TD>The aggregate costs of administering and litigating the claims.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Please note that disaggregated disclosures that describe accrued and reasonably likely losses with
respect to particular claims may be necessary if they are individually material.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Please address each of these disclosures requirements in your response.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Response</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Many of the disclosures listed above are included in our quarterly and annual reports on Forms 10-Q
and 10-K, some of which appear within our Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations, while others appear in the footnotes to our financial
statements. In an effort to better address your concerns regarding our disclosures within our
Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations, we will
include additional disclosures therein. A detailed response to each of the disclosure noted above
follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Nature of the personal injury or property damages alleged. If an individual case could be
material, you should discuss the nature of that case and the specific aggregations;</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We will enhance our related disclosure in Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations to include the following which is currently included in our
&#147;Contingent Liability&#148; footnote to the financial statements:
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&#147;Lawsuits and claims fall into two categories:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">(i)&nbsp;Those that claim damages from the Company related to allegedly defective
product design which stem from a specific incident. These lawsuits and claims are
based principally on the theory of &#147;strict liability&#148; but also may be based on
negligence, breach of warranty, and other legal theories, and (ii)&nbsp;those brought
by cities, municipalities, counties, and individuals against firearms
manufacturers, distributors and dealers seeking to recover damages allegedly
arising out of the misuse of firearms by third parties in the commission of
homicides, suicides and other shootings involving juveniles and adults. The
complaints by municipalities seek damages, among other things, for the costs of
medical care, police and emergency services, public health services, and the
maintenance of courts, prisons, and other services. In certain instances, the
plaintiffs seek to recover for decreases in property values and loss of business
within the city due to criminal violence. In addition, nuisance abatement and/or
injunctive relief is sought to change the design,
</DIV>
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">manufacture, marketing and distribution practices of the various defendants.
These suits allege, among other claims, strict liability or negligence in the
design of products, public nuisance, negligent entrustment, negligent
distribution, deceptive or fraudulent advertising, violation of consumer
protection statutes and conspiracy or concert of action theories. Most of these
cases do not allege a specific injury to a specific individual as a result of the
misuse or use of any of the Company&#146;s products.&#148;
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Detailed disclosure of specific cases has been, and will continue to be, made when appropriate.
For example, the cases in which cities, municipalities, counties, and individuals have filed suit
against the firearms manufacturers, distributors and dealers seeking to recover damages allegedly
arising out of the misuse of firearms by third parties in the commission of crimes, have been
specifically disclosed in our Management&#146;s Discussion and Analysis of Financial Condition and
Results of Operations. Please note that of the 21 suits by governmental entities (involving 34
plaintiffs) that were filed against the Company, only three remain pending and active. These cases
are in various stages of decision on their dismissal pursuant to the recently enacted Protection of
Lawful Commerce in Arms Act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To the extent new cases arise that specific disclosure is warranted, specific disclosures will be
made.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Circumstances affecting the reliability and precision of loss estimates;</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In our Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations, we
indicate the subjectivity and imprecision of our accrual throughout our disclosures. For example,
we state:
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&#147;An accrual is established for each lawsuit and claim, when appropriate, based on
the nature of each such lawsuit or claim. Such amounts are determined based on
the Company&#146;s experience in defending similar claims. Occasionally, charges are
made for claims made in prior periods because the cumulative actual costs incurred
for that claim, or reasonably expected to be incurred in the future, exceed
amounts already provided. Likewise credits may be taken if cumulative actual
costs incurred for that claim, or reasonably expected to be incurred in the
future, are less than amounts previously provided.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">While it is not possible to forecast the outcome of litigation or the timing of
costs, in the opinion of management, after consultation with independent and
corporate counsel, it is not probable and is unlikely that litigation, including
punitive damage claims, will have a material adverse effect on the financial
position of the Company, but may have a material impact on the Company&#146;s financial
results for a particular period.&#148;
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We believe that our disclosures adequately and properly explain the circumstance which may impair
our ability to provide a precise accrual.
</DIV>

</DIV>
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="center" style="font-size: 10pt"><!-- Folio -->7<!-- /Folio -->


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>The extent to which unasserted claims are reflected in any accrual or may affect the magnitude of
the contingency;</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We address the extent to which unasserted claims are reflected in the Company&#146;s product liability
accrual in Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations
(emphasis added):
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&#147;Amounts are charged to product liability expense in the period in which the
Company becomes aware that a claim or<B>, in some instances a threat of claim</B>, has
been made when potential losses or costs of defense can be reasonably estimated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">Threatened product liability claims are reflected in the Company&#146;s product
liability accrual on the same basis as actual claims; i.e., an accrual is made for
reasonably anticipated liability and claims-handling expenses on an ongoing
basis.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We believe that our disclosures adequately and properly reflect the imprecision of our accrual.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Whether, and to what extent, losses may be recoverable from third parties;</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Presently, we believe this disclosure is not applicable. If in the future, any accrued losses
arise that may be recoverable from third parties, we will make appropriate disclosures.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We propose the following additional disclosure within our Management&#146;s Discussion and Analysis of
Financial Condition and Results of Operations, related to possible recoverability from insurance
companies:
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&#147;Punitive damages, as well as compensatory damages, are commonly demanded in many
of the lawsuits and claims brought against the Company. Aggregate claimed amounts
may exceed product liability accruals and applicable insurance coverage. For
claims made before July&nbsp;10, 2000, coverage is provided on an annual basis for
losses exceeding $2&nbsp;million per claim, or an aggregate maximum loss of $5.5
million annually. For claims made after July&nbsp;10, 2000, coverage is provided on an
annual basis for losses exceeding $5&nbsp;million per claim, or an aggregate maximum
loss of $10&nbsp;million annually, except for certain new claims which might be brought
by governments or municipalities after July&nbsp;10, 2000, which are excluded from
coverage.&#148;
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Uncertainties regarding the legal sufficiency of insurance claims or solvency of insurance
carriers;</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Currently this criterion is not applicable to the Company. However, if it becomes relevant, we
will include an appropriate disclosure.
</DIV>

</DIV>
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="center" style="font-size: 10pt"><!-- Folio -->8<!-- /Folio -->


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>The timing of payments of accrued and unrecognized amounts;</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We propose the following disclosure in Management&#146;s Discussion and Analysis of Financial Condition
and Results of Operations:
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&#147;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.&#148;
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>The material components of the accruals and significant assumptions underlying estimates.
Therefore the amount of the accrual that relates to legal fees and administrative costs should be
disclosed;</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our accrual is composed entirely of estimated legal fees. We propose to include the following
disclosure in Management&#146;s Discussion and Analysis of Financial Condition and Results of
Operations:
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&#147;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&#146;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. 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.&#148;
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>The total claims pending at each balance sheet date;</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>The number of claims filed for each period presented;</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>The number of claims dismissed;</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>The number of claims settled;</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>The number of claims otherwise resolved;</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>The average costs per settled claim;</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We propose the following disclosure to Management&#146;s Discussion and Analysis of Financial Condition
and Results of Operations:
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&#147;As of December&nbsp;31, 200X and 200Y, the Company was a defendant in x and x
lawsuits, respectively, involving its products and is aware of other
</DIV>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="center" style="font-size: 10pt"><!-- Folio -->9<!-- /Folio -->


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">such claims. During the year ended December&nbsp;31, 200X and 200Y, x and x claims
were filed against the Company, x and x claims were dismissed, x and x claims were
settled, and x and x claims were otherwise resolved (more specific description
will be provided based on the specific disposition of such cases). The average
cost per settled claim was $XX,000.&#148;
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>The total damages alleged at each balance sheet date</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We propose the following disclosure to Management&#146;s Discussion and Analysis of Financial Condition
and Results of Operations:
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&#147;A range of reasonably possible loss relating to unfavorable outcomes cannot be
made. However, in the product liability cases in which a dollar amount of damages
is claimed, the amount of damages claimed, which totaled $0.1&nbsp;million and $435
million at December&nbsp;31, 2005 and 2004, respectively, are set forth as an
indication of possible maximum liability that the Company might be required to
incur in these cases (regardless of the likelihood or reasonable probability of
any or all of this amount being awarded to claimants) as a result of adverse
judgments that are sustained on appeal.&#148;
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>The aggregated settlement costs to date</I>;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During 2004 and 2005, settlements were, and are expected to continue to be, an insignificant
component of product liability expense. As such, we believe this disclosure is not applicable. If
in the future, settlements become significant, we will include a disclosure of our aggregated
settlement costs to date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>The aggregate costs of administering and litigating the claims.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We propose the following disclosure within our Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations in our Annual Report on Form 10-K:
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&#147;During the years ended December&nbsp;31, 200X and 200Y, the Company incurred product
liability expense of $x million and $x million, respectively, which includes the
cost of outside legal fees, insurance, and other expenses incurred in the
management and defense of product liability matters.&#148;
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Please note that disaggregated disclosures that describe accrued and reasonably likely losses with
respect to particular claims may be necessary if they are individually material.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Detailed disclosure of specific cases has been, and will continue to be, made when appropriate.
For example, the cases in which cities, municipalities, counties, and individuals have filed suit
against the firearms manufacturers, distributors and dealers seeking to recover damages allegedly
arising out of the misuse of firearms by third
</DIV></DIV>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">
<P align="center" style="font-size: 10pt"><!-- Folio -->10<!-- /Folio -->

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">parties in the commission of crimes, have been specifically disclosed in our Management&#146;s
Discussion and Analysis of Financial Condition and Results of Operations. Please note that of the
21 suits by governmental entities (involving 34 plaintiffs) that were filed against the Company,
only three remain pending and active. These cases are in various stages of decision on their
dismissal pursuant to the recently enacted Protection of Lawful Commerce in Arms Act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To the extent new cases arise that specific disclosure is warranted, specific disclosures will be
made.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">*********************
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If you require any additional information or further clarification, please call me at (203)
259-7843.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Sincerely,
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Thomas A. Dineen<BR>
Vice President, Treasurer and Chief Financial Officer
</DIV>


<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">bcc:</TD>
    <TD>&nbsp;</TD>
    <TD>M. Fifer<br>
S. Sanetti<br>
L. Gasper<br>
D. Renken<br>
J. Dorr (Wildman, Harrold)<br>
J. LaGueux (Patterson, Belknap)<br>
P. Siciliano (McGladrey &#038; Pullen)</TD>
</TR>
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Attachment 1
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>STURM, RUGER &#038; COMPANY, INC.<BR>
ROLLFORWARD OF PRODUCT LIABILITY RESERVE<BR>
(Dollars in 000&#146;s)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Balance Sheet Rollforward</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Balance</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Accrued</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Cash Payments</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Balance</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Beginning</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Legal</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Legal</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Admin.</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>End</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>of Year (a)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Expense (b)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Fees (c)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Settlements (d)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Insurance</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Costs</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>of Year (a)</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,233</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,534</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,680</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(422</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">N/A</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">N/A</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,665</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,665</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,598</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,935</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">N/A</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">N/A</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,132</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,132</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,514</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,935</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(515</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">N/A</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">N/A</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,196</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Income Statement Detail</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="15%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Accrued</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Total Product</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Legal</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Admin.</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Liability</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Expense (b)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Insurance (e)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Expense (f)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Expense</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,534</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,181</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,241</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,956</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,598</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,524</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">878</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">804</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,514</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,338</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,041</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,893</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left"><B>Notes</B></TD>
    <TD>&nbsp;</TD>
    <TD><B>&nbsp;</B></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(a)</TD>
    <TD>&nbsp;</TD>
    <TD>The beginning and ending liability balances represent accrued legal fees only. Settlements
and administrative costs are expensed as
incurred. Only in rare instances is an accrual established for settlements.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(b)</TD>
    <TD>&nbsp;</TD>
    <TD>The expense accrued in the liability is for legal fees only. Total product liability expense
for the years presented is as follows:</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(c)</TD>
    <TD>&nbsp;</TD>
    <TD>Legal fees represent payments to outside counsel related to product liability matters.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(d)</TD>
    <TD>&nbsp;</TD>
    <TD>Settlements represent payments made to plaintiffs or allegedly injured parties in exchange for
a full and complete release of liability.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(e)</TD>
    <TD>&nbsp;</TD>
    <TD>Insurance expense represents the cost of insurance premiums.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(f)</TD>
    <TD>&nbsp;</TD>
    <TD>Administrative expense represents personnel related and travel expenses of Company employees
and firearm experts related to the management and monitoring of product liability matters.</TD>
</TR>

</TABLE>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="89%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Other notes:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">There were no insurance recoveries during any of the above years.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Please see discussion under &#147;Accrued Legal Expense&#148; on page 2 of the letter for a discussion
on the fluctuation of the accrued legal expense in 2004.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio --><!-- /Folio -->
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`
end
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
