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Contingent Liabilities

12 Months Ended

Dec. 31, 2025

20.	Contingent Liabilities

As of December 31, 2025, the Company was a defendant in nine (9) lawsuits and is aware of certain other claims. The lawsuits generally fall into the categories of municipal litigation, unfair trade practices, product liability, employment, and trademark litigation. One (1) breach of contract matter was fully and finally resolved during the quarter. Material matters and developments are discussed in turn below.

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 are three pending lawsuits of this type: the City of Gary, filed in Indiana State Court in 1999; The City of Buffalo, filed in the Supreme Court of the State of New York for Erie County on December 20, 2022; and The City of Rochester, filed in the Supreme Court for the State of New York for Monroe County on December 21, 2022, each of which is described in more detail below.

The City of Gary 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 as well as nuisance abatement and/or injunctive relief to change the design, manufacture, marketing and distribution practices of the various Defendants. The Complaint 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 Indiana Court of Appeals recently reversed the trial court and ordered dismissal of the case. The Indiana Court of Appeals denied the City’s request for rehearing, and the parties are awaiting remand to the trial court for dismissal.

The City of Buffalo v. Smith & Wesson Brands, Inc., et al. and The City of Rochester v. Smith & Wesson Brands, Inc., et al were filed on consecutive days in New York State Court, naming a number of firearm manufacturers, distributors, and retailers as Defendants, including the Company. The complaints are virtually identical and, relying primarily on New York’s General Business Law §898-b, generally allege that the criminal misuse of firearms in their cities is the result of the manufacturing, sales, marketing, and distribution practices of the Defendants. These matters seek unspecified compensatory damages, creation of an abatement fund, punitive damages and other relief. Both matters were timely removed to federal court and were consolidated for pretrial purposes only. Those matters were stayed pending the outcome of a different matter that challenges New York’s law, which was decided earlier this year. The Defendants have moved to dismiss the cases and are vigorously defending these matters.

Breach of Contract

As reported in prior periods, the Company was a defendant in Jones v. Sturm, Ruger & Co., a purported class action lawsuit arising out of a data breach at Freestyle Solutions, Inc., the vendor

who was hosting the Company’s eCommerce website at the time of the breach. The settlement was finalized during the quarter and the matter is now closed.

Unfair Trade Practices

Estate of Suzanne Fountain v. Sturm, Ruger & Co., Inc., and Estate of Nevin Stanisic v. Sturm, Ruger & Co., Inc. are pending in Connecticut state court and arise out of the criminal shootings at the King Soopers supermarket in Boulder, Colorado on March 22, 2021. The Complaints allege that the Company’s advertising and marketing of the Ruger AR-556 pistol violate the Connecticut Unfair Trade Practices Act and seek damages for the alleged wrongful death of the victims.

The Fountain and Stanisic cases were consolidated for discovery purposes only and transferred by the court to the Complex Litigation Docket. Oral argument on the Company’s pending Motion to Strike was held on July 21, 2025 and the court stayed discovery pending the outcome of that motion. The court denied the motion during the quarter, the stay was lifted and the parties have commenced discovery.

Product Liability

The Company is a defendant in two unrelated traditional product liability matters, both of which were filed during the quarter. Fortenberry v. Sturm, Ruger & Company, Inc. was served on July 11, 2025 and is pending in the Circuit Court of Arkansas County, Arkansas Northern District, Civil Division. This complaint alleges a product design defect in an “old model” Ruger Single-Six revolver and seeks damages for the death of the plaintiff’s decedent.

Thorne v. Sturm, Ruger & Company, Inc. is a product liability matter in which the plaintiff alleges personal injuries resulting from a manufacturing defect in his SR22 pistol. This matter was served on November 13, 2025 and was withdrawn in January 2026 when the plaintiff filed a stipulation of dismissal with prejudice.

During the quarter, Willeford v. Sturm, Ruger & Company, Inc., a product liability case that was filed on July 25, 2025 was withdrawn when the plaintiff filed a stipulation of dismissal without prejudice.

Employment

The Company was also named in Thompson v. Sturm, Ruger & Company, Inc., an employment matter that was filed in the Superior Court for the State of Arizona, in and for the County of Yavapai, which was filed on August 21, 2025. The plaintiff seeks damages for alleged employment discrimination. The Company disputes the allegations of the complaint and has responded accordingly.

Trademark Litigation

The Company is a defendant in FN Herstal, et al. v. Sturm, Ruger & Company, Inc., which is pending in North Carolina. The Complaint alleges that the Company’s use of the initialism

“SFAR” in connection with the marketing of its Small Frame Autoloading Rifle infringes the Plaintiffs’ SCAR trademark. The Complaint alleges violations of the Lanham Act and the North Carolina Unfair and Deceptive Trade Practices Act, as well as trademark infringement under North Carolina common law. The parties are awaiting decision on dispositive motions.

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 between July 10, 2000 and August 31, 2024, insurance coverage was provided on an annual basis for losses exceeding $5 million per claim, with an aggregate maximum loss of $10 million annually, except for certain claims brought by governments or municipalities, which are excluded from coverage. Insurance coverage was not renewed with incumbent carriers effective September 1, 2024. Rather, the Company established a wholly-owned captive insurance company for claims made on or after September 1, 2024.

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 Company, but may have a material impact on the Company’s financial results 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.

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.

Often, a Complaint does not specify the amount of damages being sought and range of reasonably possible losses relating to unfavorable outcomes cannot be made. The dollar amount of damages claimed at December 31, 2025, December 31, 2024, and December 31, 2023 was de minimis. The amount claimed at December 31, 2021 was $1.1 million and is 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.

During 2025, three (3) traditional product liability cases were filed and one (1) employment case was filed. One (1) municipal lawsuit was resolved and one (1) breach of contract lawsuit was resolved. As of December 31, 2025, the Company was a defendant in eight (8) lawsuits involving its products, including three (3) municipal lawsuits, two (2) lawsuits alleging unfair trade practices, two (2) traditional product liability cases, and one (1) trademark case.

During 2024, one (1) trademark lawsuit was filed against the Company, one (1) negligence lawsuit was resolved, and one (1) traditional product liability lawsuit was resolved. One (1) municipal lawsuit was dismissed, however the time period in which to file an appeal has been stayed by the Court and the Company considers this matter still open. As of December 31, 2024, the Company was a defendant in eight (8) lawsuits involving its products, including four (4) municipal lawsuits, two (2) lawsuits based upon unfair trade practices, one (1) breach of contract, and one (1) trademark litigation.

During 2023, one (1) traditional product liability lawsuit was filed against the Company and one (1) was resolved. As of December 31, 2023, the Company was a defendant in seven (7) lawsuits involving its products, including one (1) traditional product liability lawsuit, four (4) municipal lawsuits and two (2) lawsuits based upon alleged unfair trade practices. The Company was also a defendant in two (2) negligence lawsuits.

The Company’s product liability expense was $0.8 million in 2025, $0.7 million in 2024, $1.5 million in 2023. This expense includes the cost of outside legal fees, and other expenses incurred in the management and defense of product liability matters.

A roll-forward of the product liability reserve and detail of product liability expense for the three years ended December 31, 2025 follows:

Balance Sheet Roll-forward for Product Liability Reserve

					Cash Payments
	Balance Beginning of Year (a)		Accrued Legal Expense (Income) (b)		Legal Fees (c)			Settlements (d)		Balance End of Year (a)

2023	$	308		500		(129	)		—	$	679

2024	$	679		67		(254	)		—	$	492

2025	$	492		803		(270	)		—	$	1,025

Income Statement Detail for Product Liability Expense

	Accrued Legal Expense (b)		Insurance Premium Expense (e)		Total Product Liability Expense

2023	$	500		1,226	$	1,726

2024	$	67		908	$	975

2025	$	803		808	$	1,611

Notes

(a)

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.

(b)

The expense accrued in the liability is for legal fees only.

(c)	Legal fees represent payments to outside counsel related to product liability matters.

(d)

Settlements represent payments made to plaintiffs or allegedly injured parties in exchange for a full and complete release of liability.

(e)	Insurance expense represents the cost of insurance premiums.

There were no insurance recoveries during any of the above years.

21.	Financial Instruments

The Company does not hold or issue financial instruments for trading or hedging purposes, nor does it hold interest rate, leveraged, or other types of derivative financial instruments. Fair values of accounts receivable, accounts payable, accrued expenses and income taxes payable reflected in the December 31, 2025 and 2024 balance sheets approximate carrying values at those dates.