SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
OR
Commission file number 0-4776
STURM, RUGER & COMPANY, INC.
(203) 259-7843(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days. Yes No
The number of shares outstanding of the issuer’s common stock as of July 31, 2002: Common Stock, $1 par value — 26,910,720.
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TABLE OF CONTENTS
INDEX
STURM, RUGER & COMPANY, INC. AND SUBSIDIARIES
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PART I. FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTS (UNAUDITED) STURM, RUGER & COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
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CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share data)
Note:
The balance sheet at December 31, 2001 has been derived from the audited financial statements at that date but does not include all the information and footnotes required by generally accepted accounting principles for complete financial statements.
See notes to condensed consolidated financial statements.
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)(Dollars in thousands, except per share data)
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)(Dollars in thousands)
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2002
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 footnotes required by generally accepted accounting principles for complete financial statements.
In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation of the results of the interim periods. Operating results for the six months ended June 30, 2002 are not necessarily indicative of the results to be expected for the full year ending December 31, 2002. For further information refer to the consolidated financial statements and footnotes thereto included in the Sturm, Ruger & Company, Inc. Annual Report on Form 10-K for the year ended December 31, 2001.
NOTE 2—SIGNIFICANT ACCOUNTING POLICIES
Organization: Sturm, Ruger & Company, Inc. (“Company”) is principally engaged in the design, manufacture, and sale of firearms and investment castings. The Company’s design and manufacturing operations are located in the United States. Substantially all sales are domestic. The Company’s firearms are sold through a select number of independent wholesale distributors to the sporting and law enforcement markets. Investment castings are sold either directly to or through manufacturers’ representatives to companies in a wide variety of industries.
Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Principles of Consolidation: The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. Certain prior year balances have been reclassified to conform with current year presentation.
NOTE 3—INVENTORIES
Inventories are valued using the last-in, first-out (LIFO) method. An actual valuation of inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs existing at that time. Accordingly, interim LIFO calculations must necessarily be based on management’s estimates of expected year-end inventory levels and costs. Because these are subject to many forces beyond management’s control, interim results are subject to the final year-end LIFO inventory valuation.
NOTE 4—INCOME TAXES
The Company’s effective tax rate differs from the statutory tax rate principally as a result of state income taxes. Total income tax payments during the six months ended June 30, 2002 and 2001 were $5.1 million and $0.7 million, respectively.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—CONTINUED
NOTE 5—BASIC AND DILUTED EARNINGS PER SHARE
Basic earnings per share is based upon the weighted average number of common shares outstanding during the period. Diluted earnings per share reflect the impact of options outstanding using the treasury stock method, when applicable. This resulted in diluted weighted-average shares outstanding for the three and six months ended June 30, 2002 and 2001 of 27,106,000 and 26,911,000, and 27,056,000 and 26,911,000, respectively.
NOTE 6—COMPREHENSIVE INCOME
As there were no non-owner changes in equity during the first half of 2002 and 2001, total comprehensive income equals net income for the three and six months ended June 30, 2002 and 2001, or $2.9 million and $1.8 million, and $7.4 million and $5.9 million, respectively.
NOTE 7 – CONTINGENT LIABILITIES
As of June 30, 2002, the Company is a defendant in approximately 28 lawsuits involving its products and is aware of certain other such claims. These lawsuits and claims fall into two categories:
In many of these cases punitive damages, as well as compensatory damages, are demanded. Management believes that, in every case, the allegations are unfounded, and that the shootings and any results therefrom were due to negligence or misuse of the firearms by third-parties or the claimant, and that there should be no recovery against the Company. Defenses further exist to the suits brought by cities, municipalities, counties, and the Attorney General based, among other reasons, on established state law precluding recovery by municipalities for essential government services, the remoteness of the claims, the types of damages sought to be recovered, and limitations on the extraterritorial authority which may be exerted by a city, municipality, county or state under state and federal law, including State and Federal Constitutions.
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The only case against the Company alleging liability for criminal shootings by third-parties to ever be permitted to go before a jury, Hamilton,et. al. v. Accu-tek, et. al., resulted in a defense verdict in favor of the Company on February 11, 1999. In that case, numerous firearms manufacturers and distributors had been sued, alleging damages as a result of alleged negligent sales practices and “industry-wide” liability. The Company and its marketing and distribution practices were exonerated from any claims of negligence in each of the seven cases decided by the jury. The Court upheld the verdict of the jury and dismissed each case as to the Company in its later opinion. The three defendants found liable filed a notice of appeal from the Court’s decision. On August 16, 2000, the U.S. 2nd Circuit Court of Appeals certified certain questions to the Appellate Division of the New York State Supreme Court for resolution. On April 26, 2001, the Appellate Division of the New York State Supreme Court responded to the U.S. 2nd Circuit Court of Appeals’ certified questions. The questions involved whether firearms manufacturers have a legal duty to prevent criminal misuses of their lawfully-sold products and whether any liability of the firearms manufacturers should be apportioned by a market share theory. The New York State Appellate Division answered both questions in the negative. On August 30, 2001, the U.S. 2nd Circuit Court of Appeals vacated and remanded the case with instructions for the trial court to enter a final judgment of dismissal. The trial court finally dismissed the case on its merits on September 17, 2001.
Of the lawsuits brought by municipalities or a state Attorney General, 10 have been dismissed as a matter of law. Six of those cases are concluded (Atlanta – dismissal by intermediate Appellate Court, no further appeal;Bridgeport – dismissal affirmed by Connecticut Supreme Court; County of Camden– dismissal affirmed by Third Circuit Court of Appeals; Miami – dismissal affirmed by intermediate Appellate Court, Florida Supreme Court declined review; New Orleans – dismissed by Louisiana Supreme Court, United States Supreme Court declined review; and Philadelphia – Third Circuit Court of Appeals affirmed dismissal). On June 12, 2002, the Ohio Supreme Court voted 4-3 to reverse the dismissals of the Cincinnati case by the trial and appellate courts and remanded the case to the trial court for discovery proceedings. The remainder (Chicago, Gary and New York State) are on appeal from their complete dismissal. An 11th case, Boston, was voluntarily dismissed with prejudice by the City at the close of fact discovery and is now concluded.
Of the remaining cases in which the Company has been served with process, two (Detroit/Wayne County and Newark) are on appeal from partial dismissal, two (Cleveland and New York City) are stayed, three (Camden City, St. Louis andWashington, DC) have pending motions to dismiss at the trial level, one (Wilmington) has a pending motion for summary judgment, and one (the consolidated California case) is proceeding with discovery following dismissal of certain damage claims.
Legislation has been passed in approximately 29 states precluding suits of the type brought by the municipalities mentioned above.
Aggregate claimed amounts presently exceed product liability accruals and applicable insurance coverage. For claims made after July 10, 1994, compensatory and punitive damage insurance coverage is provided, in states where permitted, coverage is provided for losses exceeding $2.0 million per claim, or an aggregate maximum loss of $6.0 million. For claims made after July 10, 1997, coverage is provided for annual losses exceeding $2.0 million per claim, or an aggregate maximum loss of $5.5 million annually. For claims made after July 10, 2000, coverage is provided for annual losses exceeding $5.0 million per claim, or an aggregate maximum loss of $10.0 million annually, except for certain new claims which might be brought by governments or municipalities after July 10, 2000, which are excluded from coverage.
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On March 17, 2000, Smith & Wesson announced that it had reached a settlement to conclude some of the municipal lawsuits with various governmental entities. On March 30, 2000, the Office of the Connecticut Attorney General began an investigation of certain alleged “anticompetitive practices in the firearms industry.” On April 17, the State of Maryland’s Attorney General also made similar inquiries as to the Company. On August 9, 2000, the U.S. Federal Trade Commission also filed such a civil investigative demand regarding the Smith & Wesson settlement. During April 2002, after the city of Boston voluntarily withdrew its case with prejudice as to all remaining defendants, Boston moved jointly with Smith & Wesson to dissolve their consent decree settlement, which motion the court accepted. The Company has not engaged in any improper conduct and has cooperated with these investigations.
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 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 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. Threatened product liability claims are reflected in our 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 loss relating to unfavorable outcomes can not be made. However, in the product liability cases in which a dollar amount of damages is claimed, the amount of damages claimed, which totaled $837 million at June 30, 2002, is 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.
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 can not be determined in advance with any reliability concerning when payments will be made in any given case.
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 Company, but may have a material impact on the Company’s financial results for a particular period.
The Company has reported all cases instituted against it through March 31, 2002 and the results of those cases, where terminated, to the S.E.C. on its previous Form 10-K and 10-Q reports, to which reference is hereby made.
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NOTE 8—OPERATING SEGMENT INFORMATION
The Company has two reportable segments: firearms and investment castings. The firearms segment manufactures and sells rifles, pistols, revolvers, and shotguns principally to a select number of independent wholesale distributors primarily located in the United States. The investment castings segment consists of two operating divisions which manufacture and sell titanium and steel investment castings. Selected operating segment financial information follows (in thousands):
NOTE 9—SUBSEQUENT EVENTS
On July 2, 2002, the Company agreed to purchase an undivided ownership interest in an airplane from William B. Ruger, Sr., Company Founder and Chairman Emeritus, for $1.2 million, the fair market value of the ownership interest as determined by the airplane management company.
On July 6, 2002, William B. Ruger, Sr., Company Founder and Chairman Emeritus, passed away after a period of failing health. Mr. Ruger retired as Chairman, Chief Executive Officer and Treasurer on October 24, 2000. Following the death of Mr. Ruger, the Board of Directors voted to reduce the number of directors of the Company from ten to nine.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Consolidated net sales of $39.8 million and $88.2 million were achieved by the Company for the three and six months ended June 30, 2002. This represents an increase of 5.6% and 8.2% from 2001 consolidated net sales of $37.7 million and $81.5 million, respectively.
Firearms segment net sales increased by $3.9 million, or 13.1%, in the second quarter of 2002 to $33.4 million from $29.5 million in the second quarter of the prior year. For the six months ended June 30, 2002, firearms segment net sales increased by $10.8 million, or 16.5% to $76.2 million, compared to the corresponding 2001 period. Firearms unit shipments increased 11.7% for the three-month period and 17.0% for the six-month period ended June 30, 2002 from the comparable 2001 periods. The unit increase reflects heightened demand for certain models of our .22 caliber rifles, rimfire pistols, and single action revolvers. In 2002, the Company instituted a sales incentive program for its distributors which allows them to earn rebates of up to 1.5% if certain annual overall sales targets are achieved. This program replaces a similar sales incentive program in 2001 which allowed rebates of up to 5% if certain annual overall sales targets were achieved.
Casting segment net sales decreased by 21.8% and 25.3% to $6.4 million and $12.1 million, respectively, for the three and six months ended June 30, 2002 from $8.1 million and $16.2 million in the comparable 2001 periods. The decrease in castings sales is due to weakened demand for both steel and titanium castings. The Company anticipates that total casting segment sales in 2002 may be below the level achieved in 2001. The Company continues to actively pursue other casting business opportunities.
Consolidated cost of products sold for the second quarter and the six months ended June 30, 2002 were $29.8 million and $66.0 million compared to $30.4 million and $62.3 million in the corresponding 2001 periods, representing a decrease of 2.0% and an increase of 5.9%, respectively. The decrease for the three months ended June 30, 2002 is attributable to a decline in product liability expenses. The increase in the six months ended June 30, 2002 is primarily attributable to increased firearms sales, as discussed above.
Gross profit as a percentage of net sales was 25.2% for the six month period ended June 30, 2002 as compared to 23.5% in the comparable 2001 period. For the second quarter of 2002, gross profit as a percent of sales improved to 25.0% from 19.2% in the second quarter of 2001. Margin improvement in both periods was caused by increased firearms sales, the reversal of an overaccrual related to a pistol rebate program that ended at December 31, 2001 and a decline in product liability expenses, partially offset by increased production costs in the castings segment.
Selling, general and administrative expenses were $5.4 million and $10.6 million for the three and six months ended June 30, 2002, representing an increase of $0.3 million and a decrease of $0.8 million from the corresponding periods of 2001. The increase for the quarter ended June 30, 2002 is attributable to increased advertising and marketing efforts. The decrease for the six months ended June 30, 2002 is due in part to start-up costs related to a voluntary firearms lock exchange program incurred in the first quarter of 2001.
Other income-net decreased by $0.5 million and $1.2 million in the three and six months ended June 30, 2002 compared to the corresponding 2001 periods, respectively. These decreases are due to decreased earnings on short-term investments resulting from lower yields on these investments.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS—CONTINUED
The effective income tax rate of 41.5% and 40.1% in the second quarter and six months ended June 30, 2002 increased slightly from the corresponding periods in 2001 to reflect an increase in effective state tax rates.
As a result of the foregoing factors, consolidated net income increased $1.1 million, or 60.9%, from $1.8 million to $2.9 million for the three months ended June 30, 2002 as compared to the second quarter of 2001, and increased $1.5 million, or 25.2%, from $5.9 million to $7.4 million for the six months ended June 30, 2002 as compared to the first half of 2001.
Financial Condition
At June 30, 2002, the Company had cash, cash equivalents and short-term investments of $70.3 million, working capital of $113.4 million and a current ratio of 5.2 to 1.
Cash provided by operating activities was $14.5 million and $2.5 million for the six months ended June 30, 2002 and 2001, respectively. The increase in cash provided is principally a result of the increase in inventories during the first six months of 2001 compared to the decrease in inventories during the first half of 2002.
The Company follows an industry-wide practice of offering a “dating plan” to its firearms customers on selected products, which allows the purchasing distributor to buy the products commencing in December, the start of the Company’s marketing year, and pay for them on extended terms. Discounts are offered for early payment. The dating plan provides a revolving payment plan under which payments for all shipments made during the period December through February must be made by April 30. Generally, shipments made in subsequent months must be paid within approximately 90 days. Dating plan receivable balances were $4.2 million at June 30, 2002 compared to $4.6 million at June 30, 2001. The Company has reserved the right to discontinue the dating plan at any time and has been able to finance this dating plan from internally generated funds provided by operating activities.
Capital expenditures during the six months ended June 30, 2002 totaled $1.3 million. For the past two years capital expenditures averaged approximately $1.2 million per quarter. In 2002, the Company expects to spend approximately $5.0 million on capital expenditures to upgrade and modernize manufacturing equipment primarily at the Newport Firearms, Ruger Investment Casting, and Pine Tree Castings Divisions and purchase an undivided ownership interest in an airplane for $1.2 million. The Company finances, and intends to continue to finance, all of these activities with funds provided by operations.
For the six months ended June 30, 2002 dividends paid totaled $10.8 million. This amount reflects the regular quarterly dividend of $.20 per share paid in March and June 2002. On July 25, 2002, the Company declared a regular quarterly dividend of $.20 per share payable on September 15, 2002. Future dividends depend on many factors, including internal estimates of future performance and the Company’s need for funds.
Historically, the Company has not required external financing. Based on its cash flow and unencumbered assets, the Company believes it has the ability to raise substantial amounts of short-term or long-term debt. The Company does not anticipate any need for external financing through 2002.
The sale, purchase, ownership, and use of firearms are subject to thousands of federal, state and local governmental regulations. The basic federal laws are the National Firearms Act, the Federal Firearms Act, and the Gun Control Act of 1968. These laws generally prohibit the private ownership of fully automatic weapons and place certain restrictions on the interstate sale of firearms unless certain licenses are obtained. The Company does
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not manufacture fully automatic weapons, other than for the law enforcement market, and holds all necessary licenses under these federal laws. From time to time, congressional committees review proposed bills relating to the regulation of firearms. These proposed bills generally seek either to restrict or ban the sale and, in some cases, the ownership of various types of firearms. Several states currently have laws in effect similar to the aforementioned legislation.
Until November 30, 1998, the “Brady Law” mandated a nationwide five-day waiting period and background check prior to the purchase of a handgun. As of November 30, 1998, the National Instant Check System, which applies to both handguns and long guns, replaced the five-day waiting period. The Company believes that the “Brady Law” has not had a significant effect on the Company’s sales of firearms, nor does it anticipate any impact on sales in the future. The “Crime Bill” took effect on September 13, 1994, but none of the Company’s products were banned as so-called “assault weapons.” To the contrary, all the Company’s then-manufactured commercially-sold long guns were exempted by name as “legitimate sporting firearms.” The Company remains strongly opposed to laws which would restrict the rights of law-abiding citizens to lawfully acquire firearms. The Company believes that the lawful private ownership of firearms is guaranteed by the Second Amendment to the United States Constitution (a position adopted by the U.S. Court of Appeals for the 5th Circuit in the case of U.S. v. Emerson on October 16, 2001) and that the widespread private ownership of firearms in the United States will continue. However, there can be no assurance that the regulation of firearms will not become more restrictive in the future and that any such restriction would not have a material adverse effect on the business of the Company.
The Company is a defendant in numerous lawsuits involving its products and is aware of certain other such claims. The Company has expended significant amounts of financial resources and management time in connection with product liability litigation. Management believes that, in every case, the allegations are unfounded, and that the shootings and any results therefrom were due to negligence or misuse of the firearms by third-parties or the claimant, and that there should be no recovery against the Company. Defenses further exist to the suits brought by cities, municipalities, counties, and a state attorney general based, among other reasons, on established state law precluding recovery by municipalities for essential government services, the remoteness of the claims, the types of damages sought to be recovered, and limitations on the extraterritorial authority which may be exerted by a city, municipality, county or state under state and federal law, including State and Federal Constitutions.
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Of the lawsuits brought by municipalities or a state attorney general, 10 have been dismissed as a matter of law. Six of those cases are concluded (Atlanta – dismissal by intermediate Appellate Court, no further appeal;Bridgeport – dismissal affirmed by Connecticut Supreme Court; County of Camden– dismissal affirmed by Third Circuit Court of Appeals; Miami – dismissal affirmed by intermediate Appellate Court, Florida Supreme Court declined review; New Orleans – dismissed by Louisiana Supreme Court, United States Supreme Court declined review; and Philadelphia – Third Circuit Court of Appeals affirmed dismissal). On June 12, 2002, the Ohio Supreme Court voted 4-3 to reverse the dismissals of the Cincinnati case by the trial and appellate courts and remanded the case to the trial court for discovery proceedings. The remainder (Chicago, Gary and New York State) are on appeal from their complete dismissal. An 11th case, Boston, was voluntarily dismissed with prejudice by the City at the close of fact discovery and is now concluded.
The Company’s management reviews every lawsuit and claim at the outset and is in contact with independent and corporate counsel on an ongoing basis. The provision for product liability claims is based upon many factors, which vary for each case. These factors include the type of claim, nature and extent of injuries, historical settlement ranges, jurisdiction where filed, and advice of counsel. An accrual is established for each lawsuit and claim, when appropriate, based on the nature of each such lawsuit or claim.
Amounts are charged to product liability expense in the period in which the Company becomes aware that a claim or, in some instances a threat of claim, has been made when potential losses or costs of defense can be reasonably estimated. Such amounts are determined based on the Company’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.
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’s financial results for a particular period.
In the normal course of its manufacturing operations, the Company is subject to occasional governmental proceedings and orders pertaining to waste disposal, air emissions and water discharges into the environment. The Company believes that it is generally in compliance with applicable environmental regulations and the outcome of such proceedings and orders will not have a material adverse effect on its business.
The Company expects to realize its deferred tax assets through tax deductions against future taxable income or carry back against taxes previously paid.
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Inflation’s effect on the Company’s operations is most immediately felt in cost of products sold because the Company values inventory on the LIFO basis. Generally under this method, the cost of products sold reported in the financial statements approximates current costs, and thus, reduces distortion in reported income which would result from the slower recognition of increased costs when other methods are used. The use of historical cost depreciation has a beneficial effect on cost of products sold. The Company has been affected by inflation in line with the general economy.
Forward-Looking Statements and Projections
The Company may, from time to time, make forward-looking statements and projections concerning future expectations. Such statements are based on current expectations and are subject to certain qualifying risks and uncertainties, such as market demand, sales levels of firearms, anticipated castings sales and earnings, the need for external financing for operations or capital expenditures, the results of pending litigation against the Company including lawsuits filed by mayors, a state attorney general and other governmental entities and membership organizations, and the impact of future firearms control and environmental legislation, any one or more of which could cause actual results to differ materially from those projected. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date made. The Company undertakes no obligation to publish revised forward-looking statements to reflect events or circumstances after the date such forward-looking statements are made or to reflect the occurrence of subsequent unanticipated events.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to changes in prevailing market interest rates affecting the return on its investments but does not consider this interest rate market risk exposure to be material to its financial condition or results of operations. The Company invests primarily in United States Treasury instruments with short-term (less than one year) maturities. The carrying amount of these investments approximates fair value due to the short-term maturities. Under its current policies, the Company does not use derivative financial instruments, derivative commodity instruments or other financial instruments to manage its exposure to changes in interest rates or commodity prices.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The nature of the legal proceedings against the Company is discussed in Note 7 to the condensed consolidated financial statements included in this Form 10-Q report, which is incorporated herein by reference.
The Company has reported all cases instituted against it through March 31, 2002, and the results of those cases, where terminated, to the S.E.C. on its previous Form 10-K and 10-Q reports, to which reference is hereby made.
No cases were instituted against the Company during the three months ended June 30, 2002, which involved significant demands for compensatory and/or punitive damages and in which the Company has been served with process.
During the three months ending June 30, 2002, no previously-reported cases were settled.
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ITEM 1. LEGAL PROCEEDINGS — CONTINUED
On May 2, 2002, the previously reported Gerena (NY) and Harris (NY) cases were dismissed with prejudice for lack of prosecution by the United States District Court for the Eastern District of New York.
On May 20, 2002, in the previously reported Price (MD) case, the Company was dismissed by stipulation when the Maryland Court of Appeals denied plaintiffs’ request for a rehearing of the dismissal of the previously reportedHalliday (MD) case.
On January 11, 2002, in the previously reported Philadelphia case, the District Court’s order granting dismissal of all theories was affirmed by the United States Third Circuit Court of Appeals. On June 3, 2002, the plaintiffs’ time to file a petition for writ of certiorari with the U.S. Supreme Court expired, and the case is now closed.
On June 12, 2002, the Ohio Supreme Court voted 4-3 to reverse the dismissals of the Cincinnati case by the trial and appellate courts and remanded the case to the trial court for discovery proceedings.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The 2002 Annual Meeting of the Stockholders of the Company was held on May 9, 2002. The table below sets forth the results of the votes taken at the 2002 Annual Meeting:
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the three months ended June 30, 2002.
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FORM 10-Q FOR THE THREE MONTHS ENDED JUNE 30, 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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