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Sturm, Ruger & Company, Inc. to Include Non-Cash Inventory and Asset Impairment Charges of Approximately $7 Million Pre-Tax ($0.19 Per Share After-Tax) in the Fourth Quarter

Sturm, Ruger & Company, Inc. (NYSE: RGR) announced that it expects to include non-cash charges in the fourth quarter of 2006 related to excess and obsolete inventory recognition, inventory valuation, and fixed asset impairment.

The final amount of these non-cash charges cannot be determined until the year-end. The Company's current estimate of the pre-tax impact on the fourth quarter and full year 2006 is approximately $7 million, net of the estimated LIFO reserve impact:

Excess and obsolete inventory $3 million
Inventory valuation adjustment $3 million
Asset impairment $1 million
Total $7 million

The non-cash charge for excess and obsolete inventory relates to a revision in the Company's estimation of reserves for such inventory. Included in the material identified as excess and obsolete are firearms raw materials and work in process inventory in excess of 3 years' estimated production requirements.

The non-cash inventory valuation adjustment is attributable to the recognition of inefficiencies in labor and overhead during a period of rapid inventory reduction as the Company converts to a manufacturing system that emphasizes continuous improvement in customer service, quality and productivity. This over-absorption of labor and overhead was quantified by a physical inventory taken in the fourth quarter. The Company has identified the delayed recognition of this over-absorption of labor and overhead as an internal control deficiency that constitutes a material weakness, as defined by the Public Company Accounting Oversight Board. The Company has implemented corrective actions to timely identify, recognize and reduce labor and overhead inefficiencies. The Company will conduct physical inventories at the end of 2006 and at the end of each quarter in 2007 to validate the effectiveness of the corrective actions.

The non-cash asset impairment charges relate primarily to certain underutilized non-manufacturing real property assets whose net book value exceeds current market value.

Anticipated 2007 Events
The Company expects to incur reduction-in-force severance expenses of approximately $3 million to achieve approximately $6 million in annualized labor-related savings. The $3 million severance expense will be spread throughout 2007 as incurred, with a significant portion expected in the first quarter.

Also for 2007, the Company has identified and plans to sell non-manufacturing real property assets that appear to have market values substantially in excess of their book values. The Company has started to market these properties and artwork owned by the Company in an effort to convert them to cash for the benefit of the shareholders.

About Sturm, Ruger
Sturm, Ruger was founded in 1949. The Company's business segments are engaged in the manufacture of the world famous RUGER® brand of sporting and law enforcement firearms and steel investment castings for a variety of customers and end uses. Plants are located in Newport, New Hampshire and Prescott, Arizona. Corporate headquarters is located in Southport, Connecticut.