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FORM 10-K FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2012
10-K
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(cid:95) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2012
or
(cid:134) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________________ to __________________________
Commission File Number 1-2451
NATIONAL PRESTO INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Wisconsin
(State or other jurisdiction of
incorporation or organization)
3925 North Hastings Way
Eau Claire, Wisconsin
(Address of principal executive offices)
Registrant’s telephone number, including area code: (715) 839-2121
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
$1.00 par value common stock
Securities registered pursuant to Section 12(g) of the Act:
NONE
39-0494170
(IRS Employer
Identification Number)
54703-3703
(Zip Code)
Name of each exchange
on which registered
New York Stock Exchange
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes (cid:134) No (cid:95)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes (cid:134) No (cid:95)
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 filing requirements for
the past 90 days.
Yes (cid:95) No (cid:134)
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes (cid:95) No (cid:134)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or any amendment to the Form 10-K (cid:95)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer (cid:134) Accelerated filer (cid:95) Non-accelerated filer (cid:134) Smaller reporting company (cid:134)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes (cid:134) No (cid:95)
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common
equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second
fiscal quarter: $335,654,958. The number of shares outstanding of each of the registrant’s classes of common stock, as of March 1, 2013 was 6,894,158.
The Registrant has incorporated in Part II and Part III of Form 10-K, by reference, portions of its 2012 Annual Report and portions of its Proxy Statement for its
2013 Annual Meeting of Stockholders.
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ITEM 1. BUSINESS
A. DESCRIPTION OF BUSINESS
PART I
The business of National Presto Industries, Inc. (the “Company” or “National Presto”) consists of three business segments. For a further
discussion of the Company’s business, the segments in which it operates, and financial information about the segments, please refer to Note L
to the Consolidated Financial Statements. The Housewares/Small Appliance segment designs, markets and distributes housewares and small
electrical appliances, including pressure cookers and canners, kitchen electrics, and comfort appliances. The Defense segment manufactures
40mm ammunition, precision mechanical and electro-mechanical assemblies, medium caliber cartridge cases, performs Load, Assemble and
Pack (LAP) operations on ordnance-related products primarily for the U.S. Government and prime contractors, produces and sells a variety of
less than lethal products and support accessories, and provides training for the use of less than lethal products. The Absorbent Products
segment manufactures and sells primarily private label adult incontinence products.
1. Housewares/Small Appliance Segment
Housewares and electrical appliances sold by the Company include pressure cookers and canners; the Presto Control Master® heat control
single thermostatic control line of skillets in several sizes, griddles, woks and multi-purpose cookers; deep fryers of various sizes; waffle
makers; pizza ovens; slicer/shredders; electric heaters; corn poppers (hot air and microwave); dehydrators; rice cookers; microwave bacon
cookers; coffeemakers and coffeemaker accessories; electric tea kettles; electric knife sharpeners; shoe polishers; and timers. Pressure cookers
and canners are available in various sizes and are fabricated of aluminum and, in the case of cookers, of stainless steel, as well.
For the year ended December 31, 2012, approximately 13% of consolidated net sales were provided by cast products (griddles, waffle makers,
die cast deep fryers, skillets and multi-cookers), and approximately 17% by noncast/thermal appliances (stamped cookers and canners, pizza
ovens, corn poppers, coffee makers, microwave bacon cookers, dehydrators, rice cookers, tea kettles, electric stainless steel appliances, non-
cast fryers and heaters). For the year ended December 31, 2011, approximately 12% of consolidated net sales were provided by cast products,
and approximately 18% by noncast/thermal appliances. For the year ended December 31, 2010, approximately 15% of consolidated net sales
were provided by cast products, and approximately 17% by noncast/thermal appliances. For the years ended December 31, 2012 and 2010,
this segment had one customer which accounted for 10% or more of Company consolidated net sales. That customer was Wal-Mart Stores,
Inc. which accounted for 10% of consolidated net sales in 2012 and 11% in 2010. The loss of Wal-Mart Stores as a customer would have a
material adverse effect on the segment.
Products are sold primarily in the United States and Canada directly to retailers and also through independent distributors. Although the
Company has long established relationships with many of its customers, it does not have long-term supply contracts with them. The loss of, or
material reduction in, business from any of the Company’s major customers could adversely affect the Company’s business. Most housewares
and electrical appliances are sourced from vendors in the Orient. (See Note J to the Consolidated Financial Statements.)
The Company has a sales force of 13 employees that sell to and service most customers. A few selected accounts are handled by
manufacturers’ representatives who may also sell other product lines. Sales promotional activities are conducted through the use of newspaper
advertising and television. The business is seasonal, with the normal peak sales period occurring in the fourth quarter of the year prior to the
holiday season. This segment operates in a highly competitive and extremely price sensitive environment. Increased costs that cannot be fully
absorbed into the price of products or passed along in the form of price increases to the retail customer can have a significant adverse impact
on operating results. Several companies compete for sales of housewares and small electrical appliances, some of which are larger than the
Company’s segment and others which are smaller. In addition, some customers maintain their own private label, as well as purchase brokered
product directly from the Orient. Product competition extends to special product features, product pricing, marketing programs, warranty
provisions, service policies and other factors. New product introductions are an important part of the Company’s sales to offset the morbidity
rate of other products and/or the effect of lowered acceptance of seasonal products due to weather conditions.
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New products entail unusual risks. Engineering and tooling costs are increasingly expensive, as are finished goods that may not have a ready
market or achieve widespread consumer acceptance. High-cost advertising commitments which may accompany such new products or may be
required to maintain sales of existing products may not be fully absorbed by ultimate product sales. Initial production schedules, set in
advance of introduction, carry the possibility of excess unsold inventories. New product introductions are further subject to delivery delays
from supply sources, which can impact availability for the Company’s most active selling periods.
Research and development costs related to new product development for the years 2012, 2011, and 2010 were absorbed in operations of these
years and were not a material element in the aggregate costs incurred by the Company.
Products are generally warranted to the original owner to be free from defects in material and workmanship for a period of one to twelve
years from date of purchase, depending on the product. The Company allows a sixty-day over-the-counter initial return privilege through
cooperating dealers. Products are serviced through a corporate service repair operation. The Company’s service and warranty programs are
competitive with those offered by other manufacturers in the industry.
The Company primarily warehouses and distributes its products from distribution centers located in Canton and Jackson, Mississippi.
Selective use is made of leased tractors and trailers.
The Company invests funds not currently required for business activities (see Note A(5) to the Consolidated Financial Statements). Income
from invested funds is included in Other Income in the accompanying Consolidated Financial Statements.
Earnings from investments may vary significantly from year to year depending on interest yields on instruments meeting the Company’s
investment criteria, and the extent to which funds may be needed for internal growth, acquisitions, newly identified business activities, and
reacquisition of Company stock.
2. Defense Segment
AMTEC Corporation was acquired on February 24, 2001, and manufactures 40mm ammunition, and precision mechanical and electro-
mechanical products for the U.S. Department of Defense (DOD) and DOD prime contractors. AMTEC’s 75,000 square foot manufacturing
facility located in Janesville, Wisconsin is focused on producing niche market ordnance products (such as training ammunition, fuzes, firing
devices, and initiators). AMTEC is also the majority prime contractor for the 40mm ammunition system to the DOD (more fully described
below).
Spectra Technologies LLC, a subsidiary of AMTEC, was acquired on July 31, 2003, and is engaged in the manufacture and delivery of
munitions and ordnance-related products for the DOD and DOD prime contractors. Spectra maintains 283,000 square feet of space located in
East Camden, Arkansas, dedicated primarily to Load, Assemble and Pack (LAP) type work and during 2008, completed a facility which
enabled it to begin performance in 2008 of LAP work for the 40mm systems program previously mentioned and referenced below.
Amron, a division of AMTEC, holds the assets that were purchased from Amron LLC on January 30, 2006. Amron manufactures cartridge
cases used in medium caliber ammunition (20mm, 25mm, 30mm and 40mm) primarily for the DOD and DOD prime contractors, which
includes the 40mm systems program previously mentioned and referenced below. The Amron manufacturing facility is 208,000 square feet
and is located in Antigo, Wisconsin.
AMTEC Less Lethal Systems, Inc., a subsidiary of AMTEC Corporation, holds the assets that were purchased from ALS Technologies, Inc, a
small Arkansas manufacturer of less than lethal ammunition, on November 1, 2011. The subsidiary’s products include smoke and tear gas
grenades, specialty impact munitions, diversionary devices and stun munitions, support accessories like launchers and gas masks, as well as
training for the use of its products. The subsidiary’s manufacturing facility is 15,000 square feet and is located in Bull Shoals, Arkansas.
During 2012, the Company purchased 544 acres of vacant land in Perry, Florida on which facilities will be constructed that will house the
Company’s less than lethal ammunition manufacturing and training operations. The move from Bull Shoals, Arkansas to Perry, Florida is
expected to be completed in the second quarter of 2013.
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The Defense Products segment competes for its business primarily on the basis of technical competence, product quality, manufacturing
experience, and price. This segment operates in a highly competitive environment with many other organizations, some of which are larger
and others that are smaller.
On April 25, 2005, AMTEC Corporation was awarded the high volume, five-year prime contract for management and production of the
Army’s 40mm Ammunition System. The Army selected AMTEC as one of two prime contractors responsible for supplying all requirements
for 40mm practice and tactical ammunition for a period of five years. AMTEC was awarded the majority share of requirements, and the Army
estimated the total for the two contract awards, if all of the options were fully exercised, to be $1.3 billion. Deliveries under the contract
exceeded $669,000,000, with final deliveries completed in 2012. On February 18, 2010, the Army awarded AMTEC a second five-year
contract for the management and production of the 40mm Ammunition System. As in the original 5-year contract, AMTEC was awarded the
majority share of the 40mm requirement. The requirements for the first three years of the new five-year contract awarded to AMTEC exceed
$413,000,000. The actual and cumulative dollar volume with the Army over the remaining two years of the contract will be dependent upon
military requirements and funding, as well as government procurement regulations and other factors controlled by the Army and the
Department of Defense. Total deliveries under the systems program under the original and new 40mm contracts were $146,000,000 during
2012.
During 2012, almost all of the work performed by this segment directly or indirectly for the DOD was performed on a fixed price basis.
Under fixed-price contracts, the price paid to the contractor is awarded based on competition at the outset of the contract and therefore is
generally not subject to adjustments reflecting the actual costs incurred by the contractor, with the exception of some limited escalation
clauses, which on the newest contract apply to only three materials – steel, aluminum and zinc. The Defense segment’s contracts and
subcontracts contain the customary provision permitting termination at any time for the convenience of the government, with payment for any
work completed, associated profit and inventory/work in progress at the time of termination. The segment’s business does not tend to be
seasonal.
3. Absorbent Products Segment
The Absorbent Products segment business (Presto Absorbent Products, Inc.) was formed on November 21, 2001 to purchase assets from
RMED International, a company that manufactured primarily private label diapers. On October 6, 2003, the segment purchased the assets of
NCN Hygienic Products, Inc., a Marietta, Georgia company which manufactured adult incontinence products and pads for dogs, which were
likewise primarily private label products. Focus continues to be on private label, although branded product is produced under the “PRESTO”
label. The absorbent products business is capital intensive. New absorbent product equipment is extremely complex. Not only is considerable
time required to secure and install the equipment, but even more time is required to develop the requisite employee skill sets to utilize the
equipment efficiently. Sales channels must be in place to sell the increased production that results from new equipment and improved
efficiency in operations.
During the fourth quarter of 2006, in order to enhance the Absorbent Products segment’s long-term manufacturing efficiencies, the Company
decided to consolidate its adult incontinence production capabilities and, as a result, began the process of relocating its adult incontinence
manufacturing equipment from its Marietta, Georgia facility to its Eau Claire, Wisconsin facility. In addition, the Company made a decision
to discontinue the manufacture of dog pads, a business which did not fit the long-term Absorbent Products segment strategy. This transition
was largely completed by the end of the first quarter of 2007.
Unlike the housewares/small appliance business, the absorbent product business is not seasonal. To the extent there are variations from month
to month, that is primarily a function of customer promotional timing or a change in the customer base. As private label products tend to
emulate branded product as much as possible, new product development is important, but is largely limited to providing features similar to
those found in national branded product. Research and development costs are absorbed in operations.
The absorbent product industry is a very competitive, high volume-low margin business. There are several competitors, most of which are
larger than this segment of the Company. Product competition is largely based on product pricing, quality, and features.
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Product cost is heavily influenced by commodity costs which include wood pulp, as well as many petroleum based products. It is also
influenced by equipment operating speed, efficiency, and utilization.
Advertising is typically the responsibility of the owner of the private label and is thus minimal. Most sales are currently handled through
distributor/broker arrangements. Production for the most part is done to order.
For the years ended December 31, 2011 and 2010, this segment had one customer, Medline Industries Holdings LP, which accounted for 12%
and 11%, respectively, of consolidated net sales. The segment in 2009 implemented a program to diversify its customer base. Subsequently,
the customer announced a plan to build its own absorbent product facility, and began operating the facility late in 2011. As a result, purchases
for 2012 declined significantly and are expected to further decline in 2013. The segment had a one-year private label manufacturing
agreement with Medline, which provided a framework for the ongoing relationship. The contract ended in September 2012. At this point,
there is no commitment to extend the term of the contract.
The segment, which realized its first significantly profitable year in 2009, began experiencing capacity constraints towards the end of that
year and received Board authorization for a $30 million expansion. To date, it has ordered three multi-million dollar machines, one of which
was installed in the Eau Claire, Wisconsin facility during the third quarter of 2011. The segment also completed a warehouse addition to the
current facility in Eau Claire, and installed an automated handling system, both of which were in operation by the third quarter of 2011.
Additional equipment purchases are in process. See Note I to the Consolidated Financial Statements.
B. OTHER COMMENTS
1. Sources and Availability of Materials
See Note J to the Consolidated Financial Statements.
2. Patents, Trademarks, and Licenses
Patents, particularly on new products, trademarks and know-how are considered significant to the Company’s Housewares/Small Appliance
segment. The Company’s current and future success depends upon judicial protection of its intellectual property rights (patents, trademarks
and trade dress). Removal of that protection would expose the Company to competitors who seek to take advantage of the Company’s
innovations and proprietary rights. The Company has dozens of U.S. and foreign patents pending and granted. Of those U.S. patents granted,
the following is a non-exhaustive list of those relevant to current products and their expiration dates, assuming continued payment of
maintenance fees (the date is the latest expiration date of the corresponding patents): Quick Release Appliance Cord Assemblies (US
6,719,576, December 2022, and 6,527,570, October 2021), Rotatable Cooking Apparatus (US 6,125,740 and 6,354,194, March 2019), Food
Processor (5,680,997, October 2014), Microwave Corn Popper Device and Methods (5,397,879, November 2013), and Parabolic Heater
(D633,189, February 2025). To date, the Company has vigorously protected its rights and enjoyed success in all its intellectual property suits.
The Defense and Absorbent Products segments do not currently hold patents, trademarks, and licenses which would be deemed significant to
their respective operations.
3. Effects of Compliance with Environmental Regulations
In May 1986, the Company’s Eau Claire, Wisconsin, site was placed on the United States Environmental Protection Agency’s (EPA) National
Priorities List (NPL) under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA) because of
alleged hazardous waste deposited on the property. At year end 1998, all remediation projects at the Eau Claire, Wisconsin, site had been
installed, were fully operational, and restoration activities had been completed.
Based on factors known as of December 31, 2012, it is believed that the Company’s environmental liability reserve will be adequate to satisfy
on-going remediation operations and monitoring activities; however, should environmental agencies require additional studies or remediation
projects, it is possible the existing accrual could be inadequate.
Management believes that in the absence of any unforeseen future developments, known environmental matters will not have any material
effect on the results of operations or financial condition of the Company.
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4. Number of Employees of the Company
As of December 31, 2012, the Company had 1,006 employees compared to 992 employees at the end of December 2011.
Approximately 242 employees of Amron are members of the United Steel Workers union. The contract between Amron and the union is
effective through February 28, 2015.
5. Industry Practices Related to Working Capital Requirements
The major portion of the Company’s sales was made with terms of 60 days or shorter.
For the Housewares/Small Appliance segment, inventory levels increase in advance of the selling period for products that are seasonal, such
as pressure canners, heaters, and major new product introductions. Inventory build-up also occurs to create stock levels required to support the
higher sales that occur in the latter half of each year. Buying practices of the Company’s customers require “just-in-time” delivery,
necessitating that the Company carry large finished goods inventories.
The multiple stock keeping units inherent in the private label absorbent product business, combined with the desire to avoid excessive
machine changeover (which can have a negative impact on efficiency), necessitates the carrying of a large finished goods inventory in the
Absorbent Product segment as well.
The ability to meet U.S. Department of Defense demands also necessitates the carrying of large inventories in the Defense segment.
6. Order Backlog
Shipment of most of the Company’s Housewares/Small Appliance products occurs within a relatively short time after receipt of the order and,
therefore, there is usually no substantial order backlog. New product introductions may result in order backlogs that vary from product to
product and as to timing of introduction.
The contract backlog of the Defense segment was approximately $310,000,000, $342,000,000, and $329,000,000 at December 31, 2012,
2011, and 2010, respectively. Backlog is defined as the value of orders from the customer less the amount of sales recognized against the
orders. It is anticipated that the backlog will be produced and shipped during an 18 to 24-month period, after December 31, 2012.
Shipment of Absorbent Products typically occurs within 15 to 30 days from receipt of an order and thus there is usually no substantial long
term backlog of orders.
C. AVAILABLE INFORMATION
The Company has a web site at www.gopresto.com. The contents of the Company’s web site are not part of, nor are they incorporated by
reference into, this annual report.
The Company makes available on its web site its annual reports on Form 10-K or 10-K/A and, beginning with its second quarter filing in
2011, quarterly reports on Form 10-Q. It does not provide its current reports on Form 8-K or amendments to those reports filed or furnished
pursuant to Section 13(a) or 15(d) of the Exchange Act on its web site. The Company does not do so because these and all other reports it files
with the SEC are readily available to the public on the SEC web site at www.sec.gov, and can be located with ease using the link provided on
the Company’s web site. The Company also provides paper copies of its annual report free of charge upon request.
The public also may read and copy any materials that the Company files with the SEC at the SEC’s Public Reference Room at 100 F Street,
NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-
SEC-0330.
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ITEM 1A. RISK FACTORS
The Company’s three business segments described above are all subject to a number of risk factors, the occurrence of any one or more of
which could have a significant adverse impact on the business, financial condition, or results of operations of the Company as a whole.
Housewares/Small Appliance Segment:
Increases in the costs for raw materials, energy, transportation and other necessary supplies could adversely affect the results of the
Company’s operations.
The Company’s suppliers purchase significant amounts of metals, plastics, and energy to manufacture the Company’s products. Also, the cost
of fuel has a major impact on transportation costs. Any increased costs that cannot be fully absorbed or passed along in the form of price
increases to the retail customer can have a material adverse impact on the Company’s operating results.
Reliance on third-party suppliers in Asia makes this segment vulnerable to supply interruptions and foreign business risks.
The majority of the housewares/small appliance products are manufactured by a handful of third-party suppliers in Asia, primarily in the
People’s Republic of China. The Company’s ability to continue to select and develop relationships with reliable vendors who provide timely
deliveries of quality parts and products will impact its success in meeting customer demand. Most products are procured on a “purchase
order” basis. As a result, the Company may be subject to unexpected changes in pricing or supply of products. There is no assurance that it
could quickly or effectively replace any of its vendors if the need arose. Any significant failure to obtain products on a timely basis at an
affordable cost or any significant delays or interruptions of supply may disrupt customer relationships and have a material adverse effect on
the Company’s business.
In addition, international manufacturing is subject to significant risks, including, among others, labor unrest, adverse social, political and
economic conditions, interruptions in international shipments, tariffs and other trade barriers, legal and regulatory constraints and fluctuations
in currency exchange rates. Although China currently enjoys “most favored nation” trading status with the United States, the U.S.
Government has in the past proposed to revoke that status and to impose higher tariffs on products imported from China, which could have a
material adverse effect on the Company’s business.
The Housewares/Small Appliance segment is dependent on key customers, and any significant decline in business from one or more of its key
customers could adversely affect the segment’s operating results.
Although the Company has a long-established relationship with its major customers, it does not have any long-term supply agreement or
guaranty of minimum purchases. As a result, the customers may fail to place planned orders, change planned quantities, delay purchases, or
change product assortments for reasons beyond the Company’s control, which could prove detrimental to the segment’s operating results.
The sales for this segment are highly seasonal and dependent upon the United States retail markets and consumer spending.
Traditionally, this segment has recognized a substantial portion of its sales during the Holiday selling season. Any downturn in the general
economy or a shift in consumer spending away from its housewares/small appliances could adversely affect sales and operating results.
The Company may not be successful in developing and introducing new and improved consumer products.
The development and introduction of new housewares/small appliance products is very important to the Company’s long-term success. The
ability to develop new products is affected by, among other things, whether the Company can develop and fund technological innovations and
successfully anticipate consumer needs and preferences, as well as the intellectual property rights of others. The introduction of new products
may require substantial expenditures for advertising and marketing to gain marketplace recognition or to license intellectual property. There is
no guarantee that the Company will be aware of all relevant intellectual property in the industry and may be subject to claims of infringement,
which could preclude it from producing and selling a product. Likewise, there is no guarantee that the Company will be successful in
developing products necessary to compete effectively in the industry or that it will be successful in advertising, marketing and selling any new
products.
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Product recalls or lawsuits relating to defective products could have an adverse effect on the Company, as could the imposition of industry
sustainability standards.
As distributors of consumer products in the United States, the Company is subject to the Consumer Products Safety Act, which empowers the
U.S. Consumer Products Safety Commission to exclude from the market products that are found to be unsafe or hazardous. Under certain
circumstances, the U.S. Consumer Products Safety Commission could require the Company to repair, replace or refund the purchase price of
one or more of its products, or it may voluntarily do so. Any repurchase or recall of products could be costly and damage the Company’s
reputation, as well as subject it to a sizable penalty that the Commission is empowered to impose. If the Company removed products from the
market, its reputation or brands could be tarnished and it might have large quantities of finished products that could not be sold.
The Company could also face exposure to product liability claims if one of its products were alleged to have caused property damage, bodily
injury or other adverse effects. It is self-insured to specified levels of those claims and maintains product liability insurance for claims above
the self-insured levels. The Company may not be able to maintain such insurance on acceptable terms, if at all, in the future. In addition,
product liability claims may exceed the amount of insurance coverage. Moreover, many states do not allow insurance companies to provide
coverage of punitive damages, in the event such damages are imposed. Additionally, the Company does not maintain product recall insurance.
As a result, product recalls or product liability claims could have a material adverse effect on the Company’s business, results of operations
and financial condition.
The portable appliance and floor care companies’ industry association is in the process of trying to promulgate sustainability standards for the
industry. If the association is successful, the standards are expected to ultimately become mandatory. The standards as drafted will do nothing
for the environment, but will entail the addition of significant bureaucracy and outside certification fees. As such, compliance will be
burdensome and expensive.
The housewares/small appliance industry continues to consolidate, which could ultimately impede the Company’s ability to secure product
placement at key customers.
Over the past decade, the housewares/small appliance industry has undergone significant consolidation, and, as a result, the industry primarily
consists of a limited number of larger companies. Larger companies do enjoy a competitive advantage in terms of the ability to offer a larger
assortment of product to any one customer. As a result, the Company may find it more difficult or lose the ability to place its products with its
customers.
Defense Segment:
The Company relies primarily on sales to U.S. Government entities, and the loss of a significant contract or contracts could have a material
adverse effect on its results of operations.
As the Company’s sales in the Defense segment are primarily to the U.S. Government and its prime contractors, it depends heavily on the
contracts underlying these programs. The loss or significant reduction of a major program in which the Company participates could have a
material adverse effect on the results of operations.
In April 2005, AMTEC Corporation was selected as one of two prime contractors responsible for supplying all requirements for 40mm
practice and tactical ammunition rounds for the Army’s five year 40mm systems program. AMTEC’s deliveries to the Army over the life of
the contract exceeded $669,000,000. In February 2010, the Army awarded AMTEC a new contract for an additional five-year period. As in
the original contract, AMTEC and one other prime contractor will be responsible for supplying all of the requirements for the 40mm family of
ammunition rounds. The actual annual and cumulative dollar volume with the Army will be dependent on military requirements and funding.
Total deliveries under the systems program for the two 40mm contracts were $146,000,000 during 2012.
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A decline in or a redirection of the U.S. defense budget could result in a material decrease in the Defense segment sales and earnings.
Government contracts are primarily dependent upon the U.S. defense budget. During recent years, the Company’s sales have been augmented
by increased defense spending, including supplemental appropriations for operations in Iraq and Afghanistan. However, future defense
budgets could be negatively affected by several factors, including U.S. Government budget deficits, administration priorities, U.S. national
security strategies, a change in spending priorities, and the reduction of military operations in Afghanistan and other parts of the world. Any
significant decline or redirection of U.S. military expenditures could result in a decrease to the Company’s sales and earnings.
U.S. Government contracts are also dependent on the continuing availability of Congressional appropriations. Congress usually appropriates
funds for a given program on a fiscal year basis even though contract performance may take more than one year. As a result, at the outset of a
major program, the contract is usually incrementally funded, and additional monies are normally committed to the contract by the procuring
agency only as Congress makes appropriations for future fiscal years. In addition, most U.S. Government contracts are subject to modification
if funding is changed. Any failure by Congress to appropriate additional funds to any program in which the Company participates, or any
contract modification as a result of funding changes, could materially delay or terminate the program. This could have a material adverse
effect on the results of the Company’s operations. In particular, because Congress failed to act by March 1, 2013, the U.S. defense budget is
generally subject to across-the-board federal sequestration cuts which may adversely impact the Company’s operations.
The Company may not be able to react to increases in its costs due to the nature of its U.S. Government contracts.
Substantially all of the Company’s U.S. Government contracts are being performed on fixed-price basis. Under fixed-price contracts, the
Company agrees to perform the work for a fixed price, subject to limited escalation provisions on specified raw materials. Thus it bears the
risk that any increases or unexpected costs may reduce profits or potentially cause losses on the contract, which could have a material adverse
effect on results of operations and financial condition. That risk is potentially compounded by the political actions under consideration by
federal and state governments, including climate change and labor regulations, which could have an impact if enacted or promulgated on the
availability of affordable labor, energy and ultimately, materials, as the effects of the legislation/regulation ripple throughout the economy. In
addition, products are accepted by test firing samples from a production lot. Lots typically constitute a sizable amount of product. Should a
sample not fire as required by the specifications, the cost to rework or scrap the entire lot could be substantial.
The Company’s U.S. Government contracts are subject to terminations.
All of the Company’s U.S. Government contracts can be terminated by the U.S. Government either for its convenience or if the Company
defaults by failing to perform under the contract. Performance failure can occur from a myriad of factors, which include late shipments due to
the inability to secure requisite raw materials or components or strikes or other labor unrest, equipment failures or quality issues which result
in products that do not meet specifications, etc. Termination for convenience provisions provide only for recovery of costs incurred and profit
on the work completed prior to termination. Termination for default provisions provide for the contractor to be liable for excess costs incurred
by the U.S. Government in procuring undelivered items from another source. If a termination provision is exercised, it could have a material
adverse effect on the Company’s business, results of operations and financial condition.
Failure of the Company’s subcontractors to perform their contractual obligations could materially and adversely impact contract
performance.
Key components and services are provided by third party subcontractors, several of which the segment is required to work with by
government edict. Under the contract, the segment is responsible for the performance of those subcontractors, many of which it does not
control. There is a risk that the Company may have disputes with its subcontractors, including disputes regarding the quality and timeliness of
work performed by subcontractors. A failure by one or more of the Company’s subcontractors to satisfactorily provide on a timely basis the
agreed-upon supplies or perform the agreed-upon services may materially and adversely impact the Company’s ability to perform its
obligations as the prime contractor.
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Absorbent Products Segment:
The Absorbent Products segment is dependent on key customers, and any significant decline in business from one or more of its key customers
could adversely affect the segment’s operating results.
One customer, Medline Industries Holdings LP, has accounted for more than 10% of consolidated net sales in two of the last three fiscal
years: 2011 and 2010. During the last several years, the Absorbent Products segment has been implementing a customer diversification
program to reduce its reliance on this customer. In fourth quarter 2011, Medline began operating its own absorbent products facility. As a
result, sales to Medline for 2012 declined significantly, and are expected to further decline in 2013.
Increases in costs for raw materials, transportation, energy and other supplies could adversely affect the results of its operations.
At times, the Company has experienced significant increases in its raw material, transportation, energy, and other supply costs primarily due
to limited global supply and increased demand. Any increased costs that cannot be fully absorbed or passed along in the form of price
increases to its customers could adversely affect earnings. Global economic conditions, supplier capacity constraints and other factors could
affect the availability of, or prices for, those raw materials. The risk is further compounded by the political actions under consideration by
federal and state governments, including climate change and labor regulations, which could have an impact if enacted or promulgated on the
availability of affordable labor, energy, and ultimately, materials, as the effects of the legislation ripple throughout the economy.
The Company may not be successful in developing and introducing new and improved absorbent products.
The development and introduction of new absorbent products is very important to long-term success. The ability to develop new products is
affected by, among other things, whether the Company can develop and fund technological innovations and successfully anticipate consumer
needs and preferences. The introduction of new products may require substantial expenditures for advertising and marketing to gain
marketplace recognition or to license intellectual property. There is no guarantee that it will be aware of all relevant intellectual property in
the industry and may be subject to claims of infringement, which could preclude it from producing and selling a product. Likewise, there is no
guarantee that the Company will be successful in developing products necessary to compete effectively in the industry or that it will be
successful in advertising, marketing and selling new products it develops.
The inability to operate the Company’s manufacturing facility at or near full capacity could adversely affect the result of operations.
The Absorbent Products segment is a very capital-intensive business, utilizing high cost, high-speed equipment. Since the segment operates in
a market that is highly competitive with relatively low margins, it is essential to operate near full capacity to achieve high efficiencies and
profitable financial results.
Acquisition Risks:
The Company may pursue acquisitions of new product lines or businesses. It may not be able to identify suitable acquisition candidates or, if
suitable candidates are identified, it may not be able to complete the acquisition on commercially acceptable terms. Even if the Company is
able to consummate an acquisition, the transaction would present many risks, including, among others: failing to achieve anticipated benefits
or cost savings; difficulty incorporating and integrating the acquired technologies, services or products; coordinating, establishing or
expanding sales, distribution and marketing functions, as necessary; diversion of management’s attention from other business concerns; being
exposed to unanticipated or contingent liabilities or incurring the impairment of goodwill; the loss of key employees, customers, or
distribution partners; and difficulties implementing and maintaining sufficient controls, policies and procedures over the systems, products
and processes of the acquired company. If the Company does not achieve the anticipated benefits of its acquisitions as rapidly or to the extent
anticipated by management, or if others do not perceive the same benefits of the acquisition as the Company does, there could be a material,
adverse effect on the Company’s business, financial condition or results of operations.
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ITEM 1B. UNRESOLVED STAFF COMMENTS
None
ITEM 2. PROPERTIES (Owned Except Where Indicated)
The Company’s Eau Claire facility is approximately 522,000 square feet, of which Presto Absorbent Products, Inc. leases approximately 380,000
square feet. The Company’s corporate office occupies the balance of the space in Eau Claire.
The Company also has Defense manufacturing facilities located in Janesville and Antigo, Wisconsin and East Camden and Bull Shoals, Arkansas;
and two warehousing facilities located in Jackson and Canton, Mississippi used in the Housewares/Small Appliance segment.
The Janesville, Wisconsin facility is comprised of approximately 75,000 square feet and the Antigo, Wisconsin facility is comprised of
approximately 208,000 square feet. The East Camden and Bull Shoals, Arkansas operations lease approximately 283,000 and 15,000 square feet,
respectively. During 2012, the Company purchased 544 acres of vacant land in Perry, Florida on which facilities will be constructed that will house
the Company’s less than lethal ammunition manufacturing and training operations. The move from Bull Shoals, Arkansas to the new facility is
expected to be completed in the second quarter of 2013.
The Jackson facility contains 252,000 square feet. The Company leases a 184,000 square foot building in Canton, Mississippi which is used
primarily for warehousing and distribution and some activities for product service functions. An additional 72,000 square feet has been leased in
adjacent buildings for warehousing.
The facilities in use for each of the segments are believed to be adequate for their ongoing business needs.
ITEM 3. LEGAL PROCEEDINGS
See Note I to the Consolidated Financial Statements.
See Item 1-B-3 of this Form 10-K and Note K to the Consolidated Financial Statements for information regarding certain environmental matters.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
Record of Dividends Paid and Market Price of Common Stock
2012
High
Market Price
Low
Applicable
Dividends Paid
per Share
Applicable
Dividends Paid
per Share
2011
High
Market Price
Low
First Quarter
Second Quarter
Third Quarter
Fourth Quarter*
Full Year
$
$
6.00
—
—
6.50
12.50
$
$
105.67
76.38
77.38
83.37
105.67
$
$
75.02
65.19
65.06
67.37
65.06
$
$
$
8.25
—
—
—
136.77
114.21
105.44
99.99
8.25
$
136.77
$
$
102.49
95.65
85.74
82.76
82.76
* Fourth quarter 2012 reflects an accelerated payment made in late December of the annual 2013 dividend. The acceleration was occasioned by the uncertainty
over the federal income tax rate that would be in effect in 2013.
The common stock of National Presto Industries, Inc. is traded on the New York Stock Exchange under the symbol “NPK”. As of March 1, 2013, there were 324
holders of record of the Company’s common stock. This number does not reflect shareholders who hold their shares in the name of broker dealers or other
nominees. During the fourth quarter of 2012, the Company did not purchase any of its equity securities.
The information under the heading “Equity Compensation Plan Information,” in the Company’s Proxy Statement for its 2013 Annual Meeting of Stockholders, is
incorporated by reference.
The line graph and related information set forth under the heading “Performance Graph” in the Company’s 2012 Annual Report is incorporated by reference.
ITEM 6. SELECTED FINANCIAL DATA
For the years ended December 31,
Net sales
Net earnings
Net earnings per share - Basic
Net earnings per share - Diluted
Total assets
Dividends paid per common share
Regular
Extra
2013 Regular
2013 Extra
Total
2012
472,490
38,875
5.64
5.64
353,912
1.00
5.00
1.00
5.50
12.50
$
$
$
$
$
$
$
$
$
$
$
$
$
$
2011
431,021
$
$
$
(In thousands except per share data)
2010
479,000
63,531
9.26
9.26
415,133
$
$
$
$
$
$
$
47,968
6.98
6.98
411,641
1.00
7.25
0.00
0.00
8.25
$
$
1.00
7.15
0.00
0.00
8.15
$
$
2009
478,468
62,576
9.13
9.13
402,405
1.00
4.55
0.00
0.00
5.55
2008
448,253
44,183
6.45
6.45
365,883
1.00
3.25
0.00
0.00
4.25
$
$
$
$
$
$
$
** Fiscal year 2012 reflects the 2012 dividend paid in March, as well as a second accelerated payment made in late December of the annual 2013 dividend. The
acceleration was occasioned by the uncertainty over the federal income tax rate that would be in effect in 2013.
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
An overview of the Company’s business and segments in which the Company operates and risk factors can be found in Items 1 and 1A of this Form
10-K. Forward-looking statements in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, elsewhere in
this Form 10-K, in the Company’s 2012 Annual Report to Shareholders, in the Proxy Statement for the annual meeting to be held May 21, 2013, and
in the Company’s press releases and oral statements made with the approval of an authorized executive officer are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. There are certain important factors that could cause results to differ materially
from those anticipated by some of the statements made herein. Investors are cautioned that all forward-looking statements involve risks and
uncertainty. In addition to the factors discussed herein and in the notes to Consolidated Financial Statements, among the other factors that could
cause actual results to differ materially are the following: consumer spending and debt levels; interest rates; continuity of relationships with and
purchases by major customers; product mix; the benefit and risk of business acquisitions; competitive pressure on sales and pricing; increases in
material, freight/shipping, or production cost which cannot be recouped in product pricing; delays or interruptions in shipping or production from
machine issues; work or labor disruptions stemming from a unionized work force; changes in government requirements and funding of government
contracts; failure of subcontractors or vendors to perform as required by contract; the efficient start-up and utilization of capital equipment
investments; and political actions of federal and state governments which could have an impact on everything from the value of the U.S. dollar vis-
à-vis other currencies to the availability of affordable labor and energy. Additional information concerning these and other factors is contained in the
Company’s Securities and Exchange Commission filings.
2012 COMPARED TO 2011
Readers are directed to Note L, “Business Segments,” to the Consolidated Financial Statements for data on the financial results of the Company’s
three business segments for the years ended December 31, 2012 and 2011.
On a consolidated basis, sales increased by $41,469,000 (10%), gross margins increased by $1,104,000 (1%), and selling and general expense
increased by $15,122,000 (76%). Other income, principally interest, decreased by $583,000 (45%), while earnings before provision for income taxes
decreased by $14,601,000 (20%), and net earnings decreased by $9,093,000 (19%). Details concerning these changes can be found in the comments
by segment found below.
Housewares/Small Appliance net sales increased $14,171,000 from $130,852,000 to $145,023,000, or 11%, which was attributable to an increase in
units shipped. Defense net sales increased by $42,626,000, from $202,372,000 to $244,998,000, or 21%, primarily reflecting an increase in unit
shipments, a significant part of which was attributable to shipments from the segment’s backlog of Department of Defense orders. Absorbent
Products net sales decreased by $15,328,000 from $97,797,000 to $82,469,000, or 16%, primarily from a decrease in unit shipments due in large
part to a decline in shipments to a significant customer which opened its own facility during the fourth quarter of 2011.
Housewares/Small Appliance gross profit increased $842,000 from $27,016,000 (21% of sales) in 2011 to $27,858,000 (19% of sales) in 2012,
primarily reflecting the increase in sales mentioned above, largely offset by increases in product and ocean freight costs. Defense gross profit
increased $2,089,000 from $62,006,000 (31% of sales) to $64,095,000 (26% of sales), reflecting the increase in sales mentioned above,
approximately 84% of which was offset by a less favorable product mix primarily related to the five-year 40mm contract awarded in 2010.
Absorbent products gross profit decreased $1,827,000, from $4,737,000 (5% of sales) to $2,910,000 (4% of sales), reflecting the decrease in sales
mentioned above and lower production efficiencies due largely to the inability to absorb fixed costs incident to the sales decline, partially offset by
lower costs on certain key raw materials.
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Selling and general expenses for the Housewares/Small Appliance segment increased $1,844,000 from the prior year’s levels. Significant items were
increased litigation costs stemming from lawsuits of a spurious nature and increased employee health and accident costs of $1,400,000 and
$696,000, respectively, partially offset by decreases in accruals for environmental costs and bad debts of $413,000 and $339,000, respectively.
Defense segment selling and general expenses increased $2,067,000, primarily reflecting ongoing operational costs of $1,474,000 and intangible
asset amortization of $1,049,000, both associated with the acquisition of a less than lethal manufacturing facility during the fourth quarter of 2011.
The acquisition and intangible asset amortization are more fully described in Note P, “Business Acquisition,” and Note A(9), “Goodwill and
Intangible Assets,” to the Company’s Consolidated Financial Statements. Selling and general expenses for the Absorbent Products segment
increased $11,211,000, stemming from the financial difficulties of a foreign independent manufacturing facility. During 2012, due to uncertainties
attributed to the facility’s government’s legal system and the financial health of the facility, all Company-owned equipment located at the foreign
facility was written off, as well as all note and accounts receivables related to the facility. Future recovery of some portion of that write-off is
possible.
The above items were responsible for the change in operating profit.
Other income decreased $583,000, which was attributable to lower interest income resulting from decreased yields on lower dollars of marketable
securities invested.
Earnings before provision for income taxes decreased $14,601,000 from $75,025,000 to $60,424,000. The provision for income taxes decreased
from $27,057,000 to $21,549,000, which resulted in an effective income tax rate of 36% in both years. Net earnings decreased $9,093,000 from
$47,968,000 to $38,875,000.
2011 COMPARED TO 2010
Readers are directed to Note L, “Business Segments,” to the Consolidated Financial Statements for data on the financial results of the Company’s
three business segments for the years ended December 31, 2011 and 2010.
On a consolidated basis, sales decreased by $47,979,000 (10%), gross margins decreased by $19,815,000 (17%), and selling and general expense
increased by $3,699,000 (23%). Other income, principally interest, decreased by $816,000 (39%), while earnings before provision for income taxes
decreased by $24,330,000 (25%), and net earnings decreased by $15,563,000 (25%). Details concerning these changes can be found in the
comments by segment found below.
Housewares/Small Appliance net sales decreased $26,622,000 from $157,474,000 to $130,852,000, or 17%, which was primarily attributable to a
decrease in units shipped, largely attributed to the growing retail trend of purchasing private label products, coupled with a phenomenon known as
the just in time consumer, resulting in the retailers’ failure to maintain adequate stock when the consumers were ready to make a purchase. Defense
net sales decreased by $38,390,000, from $240,762,000 to $202,372,000, or 16%, primarily reflecting a decrease in unit shipments, which has had
the effect of deferring sales to a later date. Absorbent Products net sales increased by $17,033,000 from $80,764,000 to $97,797,000, or 21%,
primarily from an increase in unit shipments due in large part to its successful implementation of its customer diversification program.
Housewares/Small Appliance gross profit decreased $10,016,000 from $37,032,000 (24% of sales) in 2010 to $27,016,000 (21% of sales) in 2011,
primarily reflecting the decrease in sales mentioned above, augmented by increased commodity costs. Defense gross profit decreased $6,065,000
from $68,071,000 (28% of sales) to $62,006,000 (31% of sales), reflecting the decrease in sales mentioned above, approximately half of which was
offset by realized efficiencies and a more favorable product mix. Absorbent products gross profit decreased $3,734,000, from $8,471,000 (11% of
sales) to $4,737,000 (5% of sales), primarily reflecting increased commodity costs, inefficiencies stemming from the installation and startup of new
production equipment, and a fire on one of the segment’s machines. The decrease was further augmented by differences in year to year supplier
rebate timing, which favorably affected prior year margins by $401,000.
Selling and general expenses for the Housewares/Small Appliance segment increased $826,000 from the prior year’s levels. Significant items were
increases in employee benefit cost and bad debt accruals of $1,076,000 and $350,000, respectively, and legal and professional costs of $260,000,
partially offset by decreases in self-insurance and environmental reserves of $771,000 and $159,000, respectively. Defense segment selling and
general expenses increased $329,000, primarily reflecting increases in legal and professional costs of $127,000, employee benefit costs of $51,000,
and other individually insignificant items. Selling and general expenses for the Absorbent Products segment increased $2,544,000. The most
significant items were the absence of the prior year’s gain on the sale of obsolete equipment of $1,293,000 and an increase in the reserve for bad
debts of $638,000.
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The above items were responsible for the change in operating profit.
Other income decreased $816,000, which was attributable to lower interest income resulting from decreased yields on lower dollars of marketable
securities invested.
Earnings before provision for income taxes decreased $24,330,000 from $99,355,000 to $75,025,000. The provision for income taxes decreased
from $35,824,000 to $27,057,000, which resulted in an effective income tax rate of 36% in both years. Net earnings decreased $15,563,000 from
$63,531,000 to $47,968,000.
LIQUIDITY AND CAPITAL RESOURCES
2012 COMPARED TO 2011
Cash provided by operating activities was $62,342,000 during 2012 as compared to $58,686,000 during 2011. The principal factors behind the
increase in cash provided can be found in the changes in the components of working capital within the Consolidated Statements of Cash Flows. Of
particular note during 2012 were net earnings of $38,875,000 and decreases in inventory levels and deposits with vendors included in other current
assets. These were partially offset by a decrease in net payables and an increase in accounts receivable levels. Of particular note during 2011 were
net earnings of $47,968,000, reflecting a decrease in late fourth quarter sales and a reduction in accounts receivable levels. These items were offset
by increases in inventory levels and deposits with vendors included in other current assets, and a decrease in payable levels.
Net cash used in investing activities was $13,578,000 during 2012 as compared to $21,816,000 provided by investing activities during 2011. Of note
during 2012 were the acquisition of plant and equipment of $13,584,000, primarily to support the expansion of the Absorbent Products segment, and
a note receivable of $3,500,000. The note receivable is described further in Note Q, “Other,” to the Consolidated Financial Statements. These were
partially offset by net maturities/sales of marketable securities of $3,744,000. Of note during 2011 were net maturities/sales of marketable securities
of $41,559,000, partially offset by the acquisition of plant and equipment of $15,003,000, primarily to support the expansion of the Absorbent
Products segment, and the acquisition of assets comprising a small business in the Defense segment, described in Note P to the Consolidated
Financial Statements, of $4,526,000.
Based on the accounting profession’s 2005 interpretation of cash equivalents under Financial Accounting Standards Board (“FASB”) Accounting
Standard Codification (“ASC”) 230, the Company’s variable rate demand notes have been classified as marketable securities. This interpretation,
which is contrary to the interpretation that the Company’s representative received directly from the FASB (which indicated it would not object to the
Company’s classification of variable rate demand notes as cash equivalents), has resulted in a presentation of the Company’s Consolidated Balance
Sheets that the Company believes understates the true liquidity of the Company’s income portfolio. As of December 31, 2012 and 2011,
$31,092,000 and $33,034,000, respectively, of variable rate demand notes are classified as marketable securities. These notes have
structural features that allow the Company to tender them at par plus interest within any 7-day period for cash to the notes’
trustees or remarketers, and thus provide the liquidity of cash equivalents.
Cash used in financing activities for 2012 and 2011 differed primarily as a result of the payment of two dividends in 2012. The first was the 2012
dividend paid in March, while the second was an accelerated payment made in late December of the annual 2013 dividend. The acceleration was
occasioned by the uncertainty over the federal income tax rates that would be in effect in 2013. In contrast, a single payment was made in 2011 per
the Company’s normal practice.
As a result of the foregoing factors, cash and cash equivalents decreased in 2012 by $36,558,000 to $37,437,000.
Working capital decreased by $48,178,000 to $214,781,000 at December 31, 2012 for the reasons stated above. The Company’s current ratio was
4.8 to 1.0 at December 31, 2012, compared to 5.0 to 1.0 at December 31, 2011.
The Company expects to continue to evaluate acquisition opportunities that align with its business segments and will make further acquisitions, as
well as continue to make capital investments in these segments per existing authorized projects and for additional projects if the appropriate return
on investment is projected. See Items 1-A-2 and 1-A-3.
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The Company has substantial liquidity in the form of cash and cash equivalents and marketable securities to meet all of its anticipated capital
requirements, to make dividend payments, and to fund future growth through acquisitions and other means. The bulk of its marketable securities are
invested in the tax-exempt variable rate demand notes described above and in municipal bonds that are pre-refunded with escrowed U.S. Treasuries.
The Company intends to continue its investment strategy of safety and short-term liquidity throughout its investment holdings. Comparative yields
during 2012 were lower than those in the preceding year. The lower yields, combined with a decrease in the Company’s investment holdings, served
to decrease interest income. There can be no assurance that interest rates will not continue to decline. The interest rate environment is a function of
national and international monetary policies as well as the growth and inflation rates of the U.S. and foreign economies, and is not controllable by
the Company.
2011 COMPARED TO 2010
Cash provided by operating activities was $58,686,000 during 2011 as compared to $57,768,000 during 2010. The principal factors behind the
increase in cash provided can be found in the changes in the components of working capital within the Consolidated Statements of Cash Flows. Of
particular note during 2011 were net earnings of $47,968,000, reflecting a decrease in late fourth quarter sales and a reduction in accounts receivable
levels. These items were offset by increases in inventory levels and deposits with vendors included in other current assets, and a decrease in payable
levels. Of particular note during 2010 were net earnings of $63,531,000 and an increase in payable levels, largely reflecting deposits received from
one customer during the year. Also of note were an increase in inventory levels and a change in other current assets attributable to additional
deposits made to vendors.
Net cash provided by investing activities was $21,816,000 during 2011 compared to $1,542,000 used during 2010. Of note during 2011 were net
maturities/sales of marketable securities of $41,559,000, partially offset by the acquisition of plant and equipment of $15,003,000, primarily to
support the expansion of the Absorbent Products segment, and the acquisition of assets comprising a small business in the Defense segment,
described in Note P to the Consolidated Financial Statements, of $4,526,000. Of note during 2010 was the $17,972,000 of cash used in the
acquisition of plant and equipment primarily to support the expansion of the Absorbent Products segment. The purchase of plant and equipment was
essentially funded through the sale of marketable securities.
Based on the accounting profession’s 2005 interpretation of cash equivalents under Financial Accounting Standards Board (“FASB”) Accounting
Standard Codification (“ASC”) 230, the Company’s variable rate demand notes have been classified as marketable securities. This interpretation,
which is contrary to the interpretation that the Company’s representative received directly from the FASB (which indicated it would not object to the
Company’s classification of variable rate demand notes as cash equivalents), has resulted in a presentation of the Company’s Consolidated Balance
sheets that the Company believes understates the true liquidity of the Company’s income portfolio. As of December 31, 2011 and 2010, $33,034,000
and $37,779,000, respectively, of variable rate demand notes are classified as marketable securities. These notes have structural features that allow
the Company to tender them at par plus interest within any 7-day period for cash to the notes’ trustees or remarketers, and thus provide the liquidity
of cash equivalents.
The Company increased its dividends paid in 2011 by $0.10, which accounted for the increase in cash used in financing activities.
As a result of the foregoing factors, cash and cash equivalents increased in 2011 by $24,276,000 to $73,995,000.
Working capital decreased by $15,852,000 to $262,959,000 at December 31, 2011 for the reasons stated above. The Company’s current ratio was
5.0 to 1.0 at December 31, 2011, compared to 5.2 to 1.0 at December 31, 2010.
DEFENSE SEGMENT BACKLOG
The Company’s Defense segment contract backlog was approximately $310,000,000 at December 31, 2012, and $342,000,000 at December 31,
2011. Backlog is defined as the value of orders from the customer less the amount of sales recognized against the orders. It is anticipated that the
backlog will be produced and shipped during an 18 to 24-month period.
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CONTRACTUAL OBLIGATIONS
The below table discloses a summary of the Company’s specified contractual obligations at December 31, 2012:
Payments Due By Period (In thousands)
Contractual Obligations
Total
Under 1 Year
1-3 Years
3-5 Years
More Than
5 Years
Operating lease obligations
Purchase obligations(1)
Earn-out payments(2)
Total
$
$
$
401
201,073
3,000
$
300
201,073
0
204,474
$
201,373
$
$
44
0
3,000
3,044
$
44
0
0
44
$
$
13
0
0
13
(1)Purchase obligations includes outstanding purchase orders at December 31, 2012. Included are purchase orders issued to the Company’s
housewares manufacturers in the Orient, to equipment manufacturers of absorbent products machinery, and to material suppliers and building
contractors in the Defense and Absorbent Products segments. The Company can cancel or change many of these purchase orders, but may incur
costs if its supplier cannot use the material to manufacture the Company’s or other customers’ products in other applications or return the
material to their supplier. As a result, the actual amount the Company is obligated to pay cannot be estimated.
(2)The Company has agreed to make certain payments dependent upon the future performance of a Defense segment subsidiary based upon its
anticipated future level of earnings.
CRITICAL ACCOUNTING POLICIES
The preparation of the Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States requires
management to make certain estimates and assumptions that affect the amount of reported assets and liabilities and disclosure of contingent assets
and liabilities at the date of the Consolidated Financial Statements and revenues and expenses during the periods reported. Actual results may differ
from those estimates. The Company reviewed the development and selection of the critical accounting policies and believes the following are the
most critical accounting policies that could have an effect on the Company’s reported results. These critical accounting policies and estimates have
been reviewed with the Audit Committee of the Board of Directors.
Inventories
New Housewares/Small Appliance product introductions are an important part of the Company’s sales to offset the morbidity rate of other
Housewares/Small Appliance products and/or the effect of lowered acceptance of seasonal products due to weather conditions. New products entail
unusual risks and have occasionally in the past resulted in losses related to obsolete or excess inventory as a result of low or diminishing demand for
a product. There were no such obsolescence issues that had a material effect during the current year and, accordingly, the Company did not record a
reserve for obsolete product. In the future should product demand issues arise, the Company may incur losses related to the obsolescence of the
related inventory. Inventory risk for the Company’s other segments is not deemed to be significant, as products are largely built pursuant to
customers’ specific orders.
Self Insured Product Liability & Health Insurance
The Company is subject to product liability claims in the normal course of business and is self-insured for health care costs, although it does carry
stop loss and other insurance to cover claims once a health care claim reaches a specified threshold. The Company’s insurance coverage varies from
policy year to policy year, and there are typically limits on all types of insurance coverage, which also vary from policy year to policy year.
Accordingly, the Company records an accrual for known claims and incurred but not reported claims, including an estimate for related legal fees in
the Company’s Consolidated Financial Statements. The Company utilizes historical trends and other analysis to assist in determining the appropriate
accrual. There are no known claims that would have a material adverse impact on the Company beyond the reserve levels that have been accrued
and recorded on the Company’s books and records. An increase in the number or magnitude of claims could have a material impact on the
Company’s financial condition and results of operations.
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Sales and Returns
Sales are recorded net of discounts and returns. The latter pertain primarily to warranty returns, returns of seasonal items, and returns of those newly
introduced products sold with a return privilege. The calculation of warranty returns is based in large part on historical data, while seasonal and new
product returns are primarily developed using customer provided information.
NEW ACCOUNTING PRONOUNCEMENTS
Please refer to Note A(17) to the Consolidated Financial Statements for information related to the effect of adopting new accounting
pronouncements on the Company’s Consolidated Financial Statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company’s interest income on cash equivalents and marketable securities is affected by changes in interest rates in the United States. Cash
equivalents primarily consist of money market funds. Based on the accounting profession’s 2005 interpretation of cash equivalents under FASB
ASC 230, the Company’s 7-day variable rate demand notes are classified as marketable securities rather than as cash equivalents. The demand notes
are highly liquid instruments with interest rates set every 7 days that can be tendered to the trustee or remarketer upon 7 days notice for payment of
principal and accrued interest amounts. The 7-day tender feature of these variable rate demand notes is further supported by an irrevocable letter of
credit from highly rated U.S. banks. To the extent a bond is not remarketed at par plus accrued interest, the difference is drawn from the bank’s letter
of credit. The Company has had no issues tendering these notes to the trustees or remarketers. Other than a failure of a major U.S. bank, there are no
known risks of which the Company is aware that relate to these notes in the current market. The balance of the Company’s investments is held
primarily in fixed rate municipal bonds with an average life of 1.8 years. Accordingly, changes in interest rates have not had a material effect on the
Company, and the Company does not anticipate that future exposure to interest rate market risk will be material. The Company uses sensitivity
analysis to determine its exposure to changes in interest rates.
The Company has no history of, and does not anticipate in the future, investing in derivative financial instruments. Most transactions with
international customers are entered into in U.S. dollars, precluding the need for foreign currency cash flow hedges. As the majority of the
Housewares/Small Appliance segment’s suppliers are located in China, periodic changes in the U.S. dollar and Chinese Renminbi (RMB) exchange
rates do have an impact on that segment’s product costs. It is anticipated that any potential material impact from fluctuations in the exchange rate
will be to the cost of products secured via purchase orders issued subsequent to the revaluation.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
A.
The Consolidated Financial Statements of National Presto Industries, Inc. and its subsidiaries and the related Report of Independent
Registered Public Accounting Firm can be found on pages F-1 through F-18.
B. Quarterly financial data is contained in Note N to the Consolidated Financial Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
None
ITEM 9A. CONTROLS AND PROCEDURES
The Company’s management, including the Chief Executive Officer and Chief Financial Officer, have conducted an evaluation of the effectiveness
of the design and operation of the Company’s disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of
1934 (the “1934 Act”) as of December 31, 2012. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer
concluded that the Company’s disclosure controls and procedures were effective as of that date.
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The Company did make changes to its internal control over financial reporting during the quarter ended April 1, 2012 to address a fourth quarter
2011 personnel change. That personnel change resulted in a segregation of duties issue, which was a deemed material weakness, in which members
of the financial staff in the Company’s Defense segment had access to automated accounting functions, and thus the potential ability to administer
security over the processing of accounting data. The issue was remedied during the first fiscal quarter of 2012. In addition, a quarterly system access
review program was instituted to ensure that proper segregation of duties is maintained. There were no other changes to internal control over
financial reporting during the year ended December 31, 2012, and none during the quarter ended on that same date, that have materially affected, or
are reasonably likely to materially affect, the Company’s internal control over financial reporting.
MANAGEMENT’S ASSESSMENT OF INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of National Presto Industries, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting
as defined in Rules 13a-15(f) and 15d-15(f) under the 1934 Act. The Company’s internal control system was designed to provide reasonable
assurance to the Company’s management and Board of Directors regarding the preparation and fair presentation of published financial statements.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can
provide only reasonable assurance with respect to financial statement preparation and presentation.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2012. In making this
assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control –
Integrated Framework. Based on our assessment and those criteria, management concluded that, as of December 31, 2012, the Company’s internal
control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the 1934 Act, was effective.
The Company’s independent registered public accounting firm has issued its report on the effectiveness of the Company’s internal control over
financial reporting. The report appears below.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
National Presto Industries, Inc.
Eau Claire, Wisconsin
We have audited National Presto Industries, Inc.’s internal control over financial reporting as of December 31, 2012, based on criteria established in
Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria).
National Presto Industries, Inc’s management is responsible for maintaining effective internal control over financial reporting and for its assessment
of the effectiveness of internal control over financial reporting, included in the accompanying “Item 9A Management’s Assessment of Internal
Control over Financial Reporting.” Our responsibility is to express an opinion on the company’s internal control over financial reporting based on
our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that
a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit
also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A
company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and
that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;
and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
In our opinion, National Presto Industries, Inc. maintained, in all material respects, effective internal control over financial reporting as of December
31, 2012, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated
balance sheets of National Presto Industries, Inc. as of December 31, 2012 and 2011, and the related consolidated statements of comprehensive
income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2012 and our report dated March 18,
2013 expressed an unqualified opinion thereon.
/s/ BDO USA, LLP
Milwaukee, Wisconsin
March 18, 2013
ITEM 9B. OTHER INFORMATION
None
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
IDENTIFICATION OF EXECUTIVE OFFICERS
The following information is provided with regard to the executive officers of the registrant:
(All terms for elected officers are one year or until their respective successors are elected.)
NAME
Maryjo Cohen
Donald E. Hoeschen
Larry J. Tienor
Randy F. Lieble
Douglas J. Frederick
TITLE
Chair of the Board, President, And Chief Executive Officer,
Vice President, Sales
Vice President, Engineering
Vice President, Chief Financial Officer, Treasurer, and Director
Secretary and General Counsel
AGE
60
65
64
59
42
Ms. Cohen became Chair of the Board on January 1, 2002. Prior to that date she had been elected Treasurer in September 1983, Vice President in
May 1986, President in May 1989 and Chief Executive Officer in May 1994. She has been associated with the registrant since 1976. Prior to
becoming an officer, she was Associate Resident Counsel and Assistant to the Treasurer.
Mr. Hoeschen was elected Vice President in May 1997. He has been associated with the registrant since 1971. Prior to becoming an officer, he was
Director of Sales.
Mr. Tienor was elected Vice President in November 2003. He has been associated with the registrant since 1971. Prior to becoming an officer, he
was Director of Engineering.
Mr. Lieble was elected Chief Financial Officer, Vice President and Treasurer on September 8, 2008. He has been a member of the Board of
Directors since 2008. Other than a brief hiatus of one year during which he worked as a financial advisor for UBS Financial Services, Mr. Lieble
had worked for the registrant since 1977 in a variety of capacities, including the positions listed above.
Mr. Frederick was elected Corporate Secretary on November 17, 2009. He has been associated with the registrant since 2007 as an in-house attorney
with expertise in litigation and intellectual property matters and in the capacity of General Counsel since January 2009. Prior to his employment
with the registrant, Mr. Frederick was a litigation attorney with the firm Rider Bennett, LLP.
The information under the headings “Section 16(a) Beneficial Ownership Reporting Compliance,” “Information Concerning Directors and
Nominees” and “Corporate Governance” in the Company’s Proxy Statement for its 2013 Annual Meeting of Stockholders is incorporated by
reference.
The Company has adopted a code of ethics that applies to all Company employees, entitled the “Corporate Code of Conduct,” which is set forth in
the Corporate Governance section of the Company’s website located at www.gopresto.com.
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ITEM 11. EXECUTIVE COMPENSATION
The information under the headings “Executive Compensation and Other Information,” “Summary Compensation Table,” “Director Compensation” and
“Compensation Committee Interlocks and Insider Participation” in the Company’s Proxy Statement for its 2013 Annual Meeting of Stockholders is incorporated
by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The security ownership and related stockholder matters information set forth under the heading “Voting Securities and Principal Holders Thereof” in the
Company’s Proxy Statement for its 2013 Annual Meeting of Stockholders is incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The certain relationships and related transactions and director independence information set forth under the heading “Corporate Governance” in the Company’s
Proxy Statement for its 2013 Annual Meeting of Stockholders is incorporated by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The principal accountant fees and services information set forth under the heading “Independent Registered Public Accountants” in the Company’s Proxy
Statement for its 2013 Annual Meeting of Stockholders is incorporated by reference.
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ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
PART IV
(a) Documents filed as part of this Form 10-K:
1.
Consolidated Financial Statements:
Consolidated Balance Sheets - December 31, 2012 and 2011
a.
b.
c.
d.
e.
f.
Consolidated Statements of Comprehensive Income - Years ended December 31, 2012, 2011 and
2010
Consolidated Statements of Cash Flows - Years ended December 31, 2012, 2011 and 2010
Consolidated Statements of Stockholders’ Equity - Years ended December 31, 2012, 2011 and 2010
F-3
F-4
F-5
Notes to Consolidated Financial Statements
F-6 through F-17
Report of Independent Registered Public Accounting Firm
Form 10-K
Page Reference
F-1 & F-2
F-18
F-19
2.
Consolidated Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts
(b) Exhibits:
Exhibit Number
Description
Exhibit 3(i)
Exhibit 3(ii)
Exhibit 9.1
Exhibit 9.2
Exhibit 10.1*
Exhibit 10.2*
Exhibit 21
Exhibit 23.1
Exhibit 31.1
Restated Articles of Incorporation – incorporated by reference from Exhibit 3(i) of the Company’s report on Form 10-
K/A for the year ended December 31, 2005
By-Laws - incorporated by reference from Exhibit 3(ii) of the Company’s current report on Form 8-K dated July 6, 2007
Voting Trust Agreement - incorporated by reference from Exhibit 9 of the Company’s quarterly report on Form 10-Q for
the quarter ended July 6, 1997
Voting Trust Agreement Amendment – incorporated by reference from Exhibit 9.2 of the Company’s annual report on
Form 10-K for the year ended December 31, 2008
Incentive Compensation Plan – incorporated by reference from Exhibit 10.1 of the Company’s quarterly report on Form
10-Q for the quarter ended July 4, 2010
Form of Restricted Stock Award Agreement – incorporated by reference from Exhibit 10.2 of the Company’s quarterly
report on Form 10-Q for the quarter ended July 4, 2010
* Compensatory Plans
Subsidiaries of the Registrant
Consent of BDO USA, LLP
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002
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Exhibit Number
Description
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2
Exhibit 101
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes- Oxley Act of 2002
Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes- Oxley Act of 2002
Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes- Oxley Act of 2002
The following financial information from National Presto Industries, Inc.’s annual report on Form 10-K for the period
ended December 31, 2012, formatted in eXtensible Business Reporting Language (XBRL): (i) Consolidated Balance
Sheets, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Statements of Cash Flows, (iv)
Consolidated Statements of Stockholders’ Equity, (v) Notes to Consolidated Financial Statements, and (vi) Schedule II -
Valuation and Qualifying Accounts.*
*The XBRL related information in Exhibit 101 to this annual report on Form 10-K shall not be deemed “filed” for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or
other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or
document.
(c)
Schedules:
Reference is made to Item 15(a)2 of this Form 10-K.
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Pursuant to the Requirements of Section 13 or 15 (d) 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.
SIGNATURES
Date: March 18, 2013
NATIONAL PRESTO INDUSTRIES, INC.
(registrant)
By:
/S/ Maryjo Cohen
Maryjo Cohen
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
By:
By:
By:
/S/ Richard N. Cardozo
Richard N. Cardozo
Director
/S/ Maryjo Cohen
Maryjo Cohen
Chair of the Board, President,
Chief Executive Officer (Principal
Executive Officer), and Director
/S/ Randy F. Lieble
Randy F. Lieble
Vice President, Chief Financial
Officer (Principal Financial
Officer), Treasurer, and Director
Date: March 18, 2013
By:
By:
/S/ Patrick J. Quinn
Patrick J. Quinn
Director
/S/ Joseph G. Stienessen
Joseph G. Stienessen
Director
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NATIONAL PRESTO INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except share and per share data)
December 31
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
Marketable securities
Accounts receivable
Less allowance for doubtful accounts
Inventories:
Finished goods
Work in process
Raw materials
Deferred tax assets
Other current assets
Total current assets
PROPERTY, PLANT AND EQUIPMENT:
Land and land improvements
Buildings
Machinery and equipment
Less allowance for depreciation and amortization
GOODWILL & INTANGIBLE ASSETS
NOTE RECEIVABLE
The accompanying notes are an integral part of the Consolidated Financial Statements.
F-1
2012
$
37,437
55,586
2011
$
$
82,554
$
6,111
76,443
33,851
40,340
9,173
2,010
30,708
90,700
123,418
61,553
83,364
8,906
9,018
270,754
61,865
17,722
3,571
74,995
1,361
32,759
50,462
11,285
1,955
29,348
90,305
121,608
57,340
73,995
59,360
73,634
94,506
6,140
21,270
328,905
64,268
18,468
—
$
353,912
$
411,641
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NATIONAL PRESTO INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except share and per share data)
December 31
LIABILITIES
CURRENT LIABILITIES:
Accounts payable
Federal and state income taxes
Accrued liabilities
Total current liabilities
DEFERRED INCOME TAXES
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY
Common stock, $1 par value:
Authorized: 12,000,000 shares at December 31, 2012 and 2011
Issued: 7,440,518 shares at December 31, 2012 and 2011
Outstanding: 6,894,158 and 6,875,001 shares at December 31, 2012 and 2011,
respectively
$
Paid-in capital
Retained earnings
Accumulated other comprehensive income
Less treasury stock, at cost, 546,360 and 565,517 shares at December 31, 2012 and
2011, respectively
Total stockholders’ equity
The accompanying notes are an integral part of the Consolidated Financial Statements.
F-2
2012
$
39,077
1,642
15,254
55,973
7,368
2011
$
48,344
1,567
16,035
65,946
9,405
7,441
4,472
295,643
53
307,609
17,038
$
7,441
3,539
342,873
72
353,925
17,635
290,571
$
353,912
336,290
$
411,641
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NATIONAL PRESTO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands except per share data)
Net sales
Cost of sales
Gross profit
Selling and general expenses
Operating profit
Other income, principally interest
Earnings before provision for income taxes
Provision for income taxes
Net earnings
Weighted average common shares outstanding:
Basic
Diluted
Net earnings per share:
Basic
Diluted
Comprehensive income:
Net earnings
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on available-for-sale securities
Comprehensive income
The accompanying notes are an integral part of the Consolidated Financial Statements.
F-3
$
$
$
$
$
2012
472,490
377,627
94,863
35,144
59,719
705
60,424
21,549
For the years ended December 31,
2011
$
431,021
$
337,262
93,759
20,022
73,737
1,288
75,025
27,057
2010
479,000
365,426
113,574
16,323
97,251
2,104
99,355
35,824
38,875
$
47,968
$
63,531
6,889
6,891
6,875
6,876
5.64
5.64
$
$
6.98
6.98
$
$
6,864
6,864
9.26
9.26
38,875
47,968
63,531
(19)
(57)
(514)
38,856
$
47,911
$
63,017
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NATIONAL PRESTO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Cash flows from operating activities:
Net earnings
Adjustments to reconcile net earnings to net cash provided by operating activities:
Provision for depreciation
Loss (gain) on disposal and impairment of property, plant and equipment
Provision for doubtful accounts
Deferred income taxes
Intangibles amortization
Other
Changes in operating accounts:
Accounts receivable, net
Inventories
Other current assets
Accounts payable and accrued liabilities
Federal and state income taxes payable
Net cash provided by operating activities
Cash flows from investing activities:
Marketable securities purchased
Marketable securities - maturities and sales
Acquisition of property, plant and equipment
Notes issued
Sale of property, plant and equipment
Acquisition of businesses, net of cash acquired
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Dividends paid
Other
Net cash used in financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Income taxes
$
$
The accompanying notes are an integral part of the Consolidated Financial Statements.
F-4
2012
For the years ended December 31,
2011
2010
$
38,875
$
47,968
$
63,531
10,136
5,843
5,629
(4,792)
1,049
568
(6,546)
11,091
10,360
(9,999)
128
62,342
(26,023)
29,767
(13,584)
(3,500)
8
(246)
(13,578)
(86,106)
784
(85,322)
(36,558)
73,995
37,437
26,532
$
$
9,037
10
1,037
5,096
—
618
16,936
(10,284)
(6,729)
(711)
(4,292)
58,686
(40,962)
82,521
(15,003)
(220)
6
(4,526)
21,816
(56,665)
439
(56,226)
24,276
49,719
73,995
26,686
$
$
8,637
(1,290)
50
(399)
—
500
1,194
(14,557)
(5,604)
6,138
(432)
57,768
(45,464)
62,109
(17,972)
(1,580)
1,365
—
(1,542)
(55,889)
408
(55,481)
745
48,974
49,719
36,479
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NATIONAL PRESTO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands except per share data)
For the years ended December 31, 2012, 2011, 2010
Balance December 31, 2009
Net earnings
Unrealized loss on available-for-sale securities,
net of tax
Dividends paid March 15, $1.00 per share
regular, $7.15 per share extra
Other
Balance December 31, 2010
Net earnings
Unrealized loss on available-for-sale securities,
net of tax
Dividends paid March 15, $1.00 per share
regular, $7.25 per share extra
Other
Balance December 31, 2011
Net earnings
Unrealized loss on available-for-sale securities,
net of tax
Dividends paid March 15, $1.00 per share
regular, $5.00 per share extra
Dividends paid December 28, $1.00 per share
regular, $5.50 per share extra
Other
Shares of
Common
Stock
Outstanding
6,858
Common
Stock
Paid-in
Capital
Retained
Earnings
$
7,441
$
2,037
$
343,930
$
Accumulated
Comprehensive
Income (Loss)
643 $
63,531
(55,889)
(1)
(514)
7
701
Treasury
Stock
(18,179) $
Total
335,872
63,531
(514)
(55,889)
237
937
6,865
7,441
2,738
351,571
129
(17,942)
343,937
47,968
(56,665)
(1)
(57)
47,968
(57)
(56,665)
307
1,107
10
801
6,875
7,441
3,539
342,873
72
(17,635)
336,290
(19)
38,875
(41,292)
(44,814)
38,875
(19)
(41,292)
(44,814)
19
933
1
597
1,531
Balance December 31, 2012
6,894
$
7,441
$
4,472
$
295,643
$
53 $
(17,038) $
290,571
The accompanying notes are an integral part of the Consolidated Financial Statements.
F-5
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NATIONAL PRESTO INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(1)
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS: In preparation of the Company’s Consolidated Financial
Statements in conformity with accounting principles generally accepted in the United States, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities and related revenues and expenses. Actual results could differ from the
estimates used by management.
(2)
(3)
(4)
BASIS OF PRESENTATION: The Consolidated Financial Statements include the accounts of National Presto Industries, Inc. and its
subsidiaries, all of which are wholly-owned. All material intercompany accounts and transactions are eliminated. For a further discussion of the
Company’s business and the segments in which it operates, please refer to Note L.
RECLASSIFICATIONS: Certain reclassifications have been made to the prior periods’ financial statements to conform to the current period’s
financial statement presentation. These reclassifications did not affect net earnings or stockholders’ equity as previously reported.
FAIR VALUE OF FINANCIAL INSTRUMENTS: The Company utilizes the methods of determining fair value as described in Financial
Accounting Standard Board (“FASB”) Accounting Standard Codification (“ASC”) 820, Fair Value Measurements and Disclosures to value its
financial assets and liabilities. ASC 820 utilizes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. These
tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in
active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data
exists, therefore requiring an entity to develop its own assumptions.
The carrying amount for cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities approximates fair value due to
the immediate or short-term maturity of these financial instruments.
(5)
CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES:
Cash and Cash Equivalents: The Company considers all highly liquid marketable securities with an original maturity of three months or less to
be cash equivalents. Cash equivalents include money market funds. The Company deposits its cash in high quality financial institutions. The
balances, at times, may exceed federally insured limits. Money market funds are reported at fair value determined using quoted prices in active
markets for identical securities (Level 1, as defined by FASB ASC 820).
The Company’s cash management policy provides for its bank disbursement accounts to be reimbursed on a daily basis. Checks issued but not
presented to the bank for payment of $4,091,000 and $5,313,000 at December 31, 2012 and 2011, respectively, are included as reductions of cash
and cash equivalents or bank overdrafts in accounts payable, as appropriate.
Marketable Securities: The Company has classified all marketable securities as available-for-sale which requires the securities to be reported at
fair value, with unrealized gains and losses, net of tax, reported as a separate component of stockholders’ equity. Highly liquid, tax exempt
variable rate demand notes with put options exercisable in three months or less are classified as marketable securities.
F-6
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At December 31, 2012 and 2011, cost for marketable securities was determined using the specific identification method. A summary of the
amortized costs and fair values of the Company’s marketable securities at December 31 is shown in the following table. All of the Company’s
marketable securities are classified as Level 2, as defined by FASB ASC 820, with fair values determined using significant other observable
inputs, which include quoted prices in markets that are not active, quoted prices of similar securities, recently executed transactions, broker
quotations, and other inputs that are observable. There were no transfers into or out of Level 2 during 2012.
December 31, 2012
Tax-exempt Municipal Bonds
Variable Rate Demand Notes
Total Marketable Securities
December 31, 2011
Tax-exempt Municipal Bonds
Variable Rate Demand Notes
Total Marketable Securities
Amortized Cost
$
$
$
$
24,412
31,092
55,504
26,214
33,034
59,248
$
$
$
$
(In thousands)
MARKETABLE SECURITIES
Gross
Unrealized
Gains
Fair Value
Gross
Unrealized
Losses
24,494
31,092
55,586
26,326
33,034
59,360
$
$
$
$
94
—
94
128
—
128
$
$
$
$
12
—
12
16
—
16
Proceeds from sales of marketable securities totaled $29,767,000 in 2012, $82,521,000 in 2011, and $62,109,000 in 2010. There were no gross
gains or losses related to sales of marketable securities during the years ended December 31, 2012, 2011 and 2010. Net unrealized losses
included in other comprehensive income were $30,000, $87,000 and $792,000 before taxes for the years ended December 31, 2012, 2011, and
2010, respectively. No unrealized gains were reclassified out of accumulated other comprehensive income during the same periods.
(6)
(7)
(8)
The contractual maturities of the marketable securities held at December 31, 2012 are as follows: $5,697,000 within one year; $25,566,000
beyond one year to five years; $8,520,000 beyond five years to ten years, and $15,803,000 beyond ten years. All of the instruments in the beyond
five year ranges are variable rate demand notes which as noted above can be tendered for cash at par plus interest within seven days. Despite the
stated contractual maturity date, to the extent a tender is not honored, the notes become immediately due and payable.
ACCOUNTS RECEIVABLE: The Company’s accounts receivable are related to sales of products. Credit is extended based on prior experience
with the customer and evaluation of customers’ financial condition. Accounts receivable are primarily due within 30 to 60 days. The Company
does not accrue interest on past due accounts receivable. Receivables are written off only after all collection attempts have failed and are based
on individual credit evaluation and the specific circumstances of the customer. The allowance for doubtful accounts represents an estimate of
amounts considered uncollectible and is determined based on the Company’s historical collection experience, adverse situations that may affect
the customer’s ability to pay, and prevailing economic conditions.
INVENTORIES: Housewares/Small Appliance segment inventories are stated at the lower of cost or market with cost being determined
principally on the last-in, first-out (LIFO) method. Inventories for the Defense and Absorbent Products segments are stated at the lower of cost or
market with cost being determined on the first-in, first-out (FIFO) method.
PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are stated at cost. For machinery and equipment, all amounts which
are fully depreciated have been eliminated from both the asset and allowance accounts. Straight-line depreciation is provided in amounts
sufficient to charge the costs of depreciable assets to operations over their service lives which are estimated at 15 to 40 years for buildings, 3 to
10 years for machinery and equipment, and 15 to 20 years for land improvements. The Company reviews long lived assets consisting principally
of property, plant, and equipment, for impairment when material events and changes in circumstances indicate the carrying value may not be
recoverable. See Note Q for a discussion of impairment charges recorded in the fourth quarter of 2012.
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(9)
GOODWILL AND INTANGIBLE ASSETS: The Company recognizes the excess cost of acquired entities over the net amount assigned to the
fair value of assets acquired and liabilities assumed as goodwill. Goodwill is tested for impairment on an annual basis at the start of the fourth
quarter and between annual tests whenever an impairment is indicated, such as the occurrence of an event that would more likely than not reduce
the fair value of the reporting unit below its carrying amount. Impairment losses are recognized whenever the implied fair value of goodwill is
less than its carrying value. No goodwill impairments were recognized during 2012, 2011, or 2010. The Company’s goodwill as of December 31,
2012 and 2011 was $14,325,000 and $14,023,000, respectively, relating entirely to its Defense Products segment, which had no cumulative
impairment charges at December 31, 2012. During 2012 and 2011, $302,000 and $2,538,000, respectively, was added to goodwill as a result of
the acquisition of the assets of ALS Technologies, Inc., more fully described in Note P.
Intangible assets primarily consist of the value of customer relationships, trademarks, product backlogs, and non-compete agreements recognized
as a result of the acquisition of the assets of ALS Technologies, Inc. mentioned above. Intangible assets are amortized on a straight-line basis that
approximates economic use, over periods ranging from one to nine years. The gross carrying amount of the intangible assets subject to
amortization was $4,445,000 at both December 31, 2012 and 2011, and accumulated amortization was $1,049,000 and $0 at December 31, 2012
and 2011, respectively. Amortization expense was $1,049,000, $0, and $0 during the years ended December 31, 2012, 2011, and 2010,
respectively. The amortization expense for 2012 was recorded entirely in the fourth quarter, as the value of the intangible assets became known at
that time. Estimated amortization expense for the five succeeding years are shown in the following table:
Years ending December 31:
2013
2014
2015
2016
2017
(In thousands)
$
667
667
667
663
550
The amounts shown above related to goodwill and intangible assets subject to amortization differ from amounts previously reported as a result of
provisional accounting related to the 2011 ALS Technologies, Inc. acquisition that was completed during the fourth quarter of 2012.
(10) REVENUE RECOGNITION: For all of its segments, the Company recognizes revenue when product is shipped or title passes pursuant to
customers’ orders, the price is fixed and collection is reasonably assured. For the Housewares/Small appliance segment, the Company provides
for its 60-day over-the-counter return privilege and warranties at the time of shipment. Net sales for this segment are calculated by deducting
early payment discounts and cooperative advertising allowances from gross sales. The Company records cooperative advertising allowances
when revenue is recognized. See Note A(11) for a description of the Company’s policy for sales returns.
(11)
(12)
SALES & RETURNS: Sales are recorded net of estimated discounts and returns. The latter pertain primarily to warranty returns, returns of
seasonal items, and returns of those newly introduced products sold with a return privilege. The calculation of warranty returns is based in large
part on historical data, while seasonal and new product returns are primarily developed using customer provided information.
SHIPPING AND HANDLING COSTS: In accordance with FASB ASC 605-45, Revenue Recognition, the Company includes shipping and
handling revenues in net sales and shipping costs in cost of sales.
(13) ADVERTISING: The Company’s policy is to expense advertising as incurred and include it in selling and general expenses. Advertising expense
was $210,000, $70,000, and $9,000 in 2012, 2011, and 2010, respectively.
(14)
PRODUCT WARRANTY: The Company’s Housewares/Small Appliance segment’s products are generally warranted to the original owner to be
free from defects in material and workmanship for a period of 1 to 12 years from date of purchase. The Company allows a 60-day over-the-
counter initial return privilege through cooperating dealers. The Company services its products through a corporate service repair operation. The
Company estimates its product warranty liability based on historical percentages which have remained relatively consistent over the years.
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The product warranty liability is included in accounts payable on the balance sheet. The following table shows the changes in product warranty
liability for the period:
Beginning balance January 1
Accruals during the period
Charges / payments made under the warranties
Balance December 31
(In thousands)
Year Ended December 31
2012
2011
341
528
(481)
388
$
$
326
523
(508)
341
$
$
(15)
(16)
STOCK-BASED COMPENSATION: The Company accounts for stock-based compensation in accordance with ASC 718, Compensation —
Stock Compensation. Under the fair value recognition provisions of ASC 718, stock-based compensation cost is measured at the grant date based
on the fair value of the award and is recognized as expense ratably over the requisite service period, net of estimated forfeitures. As more fully
described in Note F, the Company awards non-vested restricted stock to employees and executive officers.
INCOME TAXES: Deferred income tax assets and liabilities are recognized for the differences between the financial and income tax reporting
bases of assets and liabilities based on enacted tax rates and laws. The deferred income tax provision or benefit generally reflects the net change
in deferred income tax assets and liabilities during the year. The current income tax provision reflects the tax consequences of revenues and
expenses currently taxable or deductible on various income tax returns for the year reported. Income tax contingencies are accounted for in
accordance with FASB ASC 740, Income Taxes. See Note H for summaries of the provision, the effective tax rates, and the tax effects of the
cumulative temporary differences resulting in deferred tax assets and liabilities.
(17) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:
In December 2011, the FASB issued ASU No. 2011-11, Balance Sheet (Topic 210), Disclosures about Offsetting Assets and Liabilities. ASU
2011-11 requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to
understand the effect of those arrangements on its financial position. Entities are required to disclose both gross and net information about these
instruments. In January 2013, the FASB issued ASU No. 2013-01, Balance Sheet (Topic 210), Clarifying the Scope of Disclosures about
Offsetting Assets and Liabilities. ASU 2013-01 clarifies that ordinary trade receivables and receivables are not in the scope of ASU No. 2011-11.
Specifically, ASU 2011-11 applies only to derivatives, repurchase agreements and reverse purchase agreements, and securities borrowing and
securities lending transactions that are either offset in accordance with specific criteria contained in the FASB ASC or subject to a master netting
arrangement or similar agreement. ASU 2011-11 and 2013-01 are effective for annual reporting periods beginning on or after January 1, 2013,
and interim periods within those annual periods. The Company does not expect the adoption of either ASU will have a material impact on the
Company’s financial statements.
In June 2011, the FASB issued ASU No. 2011-05, Amendments to Topic 220, Comprehensive Income. Under the amendments in this ASU, an
entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive
income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity
is required to present each component of net income along with total net income, each component of other comprehensive income along with a
total for other comprehensive income, and a total amount for comprehensive income. This ASU eliminates the option to present the components
of other comprehensive income as part of the statement of changes in stockholders’ equity. The amendments in this ASU do not change the items
that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The
amendments in this ASU were to be applied retrospectively. For public entities, the amendments were effective for fiscal years, and interim
periods within those years, beginning after December 15, 2011. Early adoption was permitted, because compliance with the amendments was
already permitted. The amendments did not require any transition disclosures. In December 2011, the FASB deferred the requirement to present
reclassification adjustments for each component of accumulated other comprehensive income in both net income and other comprehensive
income with the issuance of ASU 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the
Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05.
Companies are required to either present amounts reclassified out of other comprehensive income on the face of the financial statements or
disclose those amounts in the notes to the financial statements. During the deferral period, there is no requirement to separately present or
disclose the reclassification adjustments into net income. The effective date of the deferral is consistent with the effective date of the ASU No.
2011-05. Except for the deferral of the presentation of reclassifications of items out of accumulated other comprehensive income, the Company
adopted ASU 2011-5 retrospectively in the first quarter of 2012. In February 2013, the FASB issued ASU 2013-02, Comprehensive Income
(Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, which adds additional disclosure
requirements for items reclassified out of accumulated other comprehensive income and will be effective for the first interim reporting period in
2013. The Company does not expect the adoption of the remaining deferred provisions of ASU 2011-05 to have a material impact on its
Consolidated Financial Statements.
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B. INVENTORIES:
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The amount of inventories valued on the LIFO basis was $29,463,000 and $30,159,000 as of December 31, 2012 and 2011, respectively, and consists of
housewares/small appliance finished goods. Under LIFO, inventories are valued at approximately $6,375,000 and $5,518,000 below current cost determined
on a first-in, first-out (FIFO) basis at December 31, 2012 and 2011, respectively. During the years ended December 31, 2012, 2011, and 2010, $858,000,
$5,474,000, and $601,000, respectively, of a LIFO layer was liquidated. The Company uses the LIFO method of inventory accounting to improve the
matching of costs and revenues for the Housewares/Small Appliance segment.
The following table describes that which would have occurred if LIFO inventories had been valued at current cost determined on a FIFO basis:
Year
2012
2011
2010
Increase (Decrease) – (In thousands, except per share data)
Cost of Sales
(857)
(1,313)
(1,850)
$
$
$
$
$
$
Net Earnings
546
832
1,169
$
$
$
Earnings Per
Share
0.08
0.12
0.17
This information is provided for comparison with companies using the FIFO basis.
Inventory for Defense, Absorbent Products, and raw materials of the Housewares/Small Appliance segments are valued under the FIFO method and total
$53,901,000 and $64,347,000 at December 31, 2012 and 2011, respectively. The December 31, 2012 FIFO total is comprised of $4,388,000 of finished
goods, $40,340,000 of work in process, and $9,173,000 of raw material and supplies. At December 31, 2011 the FIFO total was comprised of $2,600,000 of
finished goods, $50,462,000 of work in process, and $11,285,000 of raw material and supplies.
C. ACCRUED LIABILITIES:
At December 31, 2012, accrued liabilities consisted of product liability $6,395,000, payroll $5,721,000, environmental $1,875,000, and other $1,263,000. At
December 31, 2011, accrued liabilities consisted of payroll $6,472,000, product liability $6,052,000, environmental $2,250,000, and other $1,261,000.
The Company is self-insured for health care costs, although it does carry stop loss and other insurance to cover health care claims once they reach a
specified threshold. The Company is also subject to product liability claims in the normal course of business. It is partly self-insured for product liability
claims, and therefore records an accrual for known claims and estimated incurred but unreported claims in the Company’s Consolidated Financial
Statements. The Company utilizes historical trends and other analysis to assist in determining the appropriate accrual. An increase in the number or
magnitude of claims could have a material impact on the Company’s financial condition and results of operations. The Company’s policy is to accrue for
legal fees expected to be incurred in connection with loss contingencies. See Note K for a discussion of environmental remediation liabilities.
F-10
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D. TREASURY STOCK:
As of December 31, 2012, the Company has authority from the Board of Directors to reacquire an additional 504,600 shares. No shares were reacquired in
2012, 2011, or 2010. Treasury shares have been used for stock based compensation and to fund a portion of the Company’s 401(k) contributions.
E. NET EARNINGS PER SHARE:
Basic earnings per share is based on the weighted average number of common shares and participating securities outstanding during the period. Diluted
earnings per share also includes the dilutive effect of additional potential common shares issuable under the Company’s stock-based Incentive
Compensation Plan, which are determined using the treasury stock method. Unvested stock awards, which contain non-forfeitable rights to dividends,
whether paid or unpaid (“participating securities”), are included in the number of shares outstanding for both basic and diluted earnings per share
calculations.
F. STOCK-BASED COMPENSATION:
The Company, from time to time, enters into separate non-vested share-based payment arrangements with employees and executive officers under the
Incentive Compensation Plan approved by stockholders on May 18, 2010, which authorized 50,000 shares to be available for grants. The Compensation
Committee of the Company’s Board of Directors approves all stock-based compensation awards for employees and executive officers of the Company. The
Company grants restricted stock that is subject to continued employment and vesting conditions, but has dividend and voting rights, and uses the fair-market
value of the Company’s common stock on the grant date to measure the fair value of the awards. The fair value of restricted stock is recognized as expense
ratably over the requisite serviced period, net of estimated forfeitures. The Company does not capitalize stock-based compensation costs.
During 2012, 2011, and 2010, the Company granted 1,695, 3,402 and 3,328 shares of restricted stock, respectively, to 16 employees and executive officers
of the Company. The restricted stock vests on specified dates in 2015 through 2018, subject to the recipients’ continued employment or service through each
applicable vesting date.
The Company recognized pre-tax compensation expense in the Consolidated Statements of Comprehensive Income related to stock-based compensation of
$91,000, $29,000, and $3,000 in 2012, 2011, and 2010, respectively. Certain accrued bonuses as of December 31, 2009 were converted to restricted stock
awards during 2010. The fair value of the awards on the 2010 grant date was $238,000, which approximates the amount that was included in selling and
general expense in the Consolidated Statement of Comprehensive Income for 2009 when the bonuses were accrued.
As of December 31, 2012, there was approximately $449,000 of unrecognized compensation cost related to the restricted stock awards that is expected to be
recognized over a weighted-average period of 4.3 years. There were no shares of restricted stock that vested during 2012, 2011, or 2010.
The following table summarizes the activity for non-vested restricted stock:
Non-vested at
beginning of period
Granted
Forfeited
Non-vested at end of
period
2012
Weighted
Average
Fair Value
at Grant
Date
Shares
$
6,730
1,695
(32)
8,393
$
101.26
76.43
93.60
96.28
2011
2010
Weighted
Average
Fair Value
at Grant
Date
Weighted
Average
Fair Value
at Grant
Date
Shares
Shares
$
3,328
3,402
0
109.38
93.32
—
$
0
3,328
0
—
109.38
—
6,730
$
101.26
3,328
$
109.38
F-11
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G. 401(K) PLAN:
The Company sponsors a 401(k) retirement plan that covers substantially all non-union employees. Historically, the Company matched up to 50% of the
first 4% of salary contributed by employees to the plan. This matching contribution was made with common stock. Starting in 2004, the Company began to
match, in cash, an additional 50% of the first 4% of salary contributed by employees plus 3% of total compensation for certain employees. Contributions
made from treasury stock, including the Company’s related cash dividends, totaled $1,391,000 in 2012, $1,030,000 in 2011, and $904,000 in 2010. In
addition, the Company made cash contributions of $781,000 in 2012, $697,000 in 2011, and $667,000 in 2010 to the 401(k) Plan. The Company also
contributed $396,000, $369,000, and $370,000 to the 401(k) retirement plan covering its union employees at the Amron Division of the AMTEC subsidiary
during the years ended December 31, 2012, 2011, and 2010, respectively.
H. INCOME TAXES:
The following table summarizes the provision for income taxes:
Current:
Federal
State
Deferred:
Federal
State
Total tax provision
For Years Ended December 31 (in thousands)
2011
2010
2012
$
$
22,165
4,187
26,352
(3,938)
(865)
(4,803)
21,549
$
$
17,596
4,365
21,961
4,972
124
5,096
27,057
$
$
30,318
5,905
36,223
(997)
598
(399)
35,824
The effective rate of the provision for income taxes as shown in the Consolidated Statements of Comprehensive Income differs from the applicable statutory
federal income tax rate for the following reasons:
Statutory rate
State tax, net of federal benefit
Tax exempt interest and dividends
Other
Effective rate
2012
35.0%
3.6%
(0.3%)
(2.6%)
35.7%
35.0%
3.9%
(0.5%)
(2.3%)
36.1%
2010
35.0%
4.6%
(0.7%)
(2.8%)
36.1%
Percent of Pre-tax Income
2011
Deferred tax assets and liabilities are recorded based on the differences between the tax basis of assets and liabilities and their carrying amounts for financial
reporting purposes. The tax effects of the cumulative temporary differences resulting in deferred tax assets and liabilities are as follows at December 31:
Deferred tax assets
Doubtful accounts
Insurance (primarily product liability)
Vacation
Environmental
Goodwill and other intangibles
Other
Total deferred tax assets
Deferred tax liabilities
Depreciation
Other
Total deferred tax liabilities
$
2012
(In thousands)
2011
$
3,245
2,412
961
745
697
846
8,906
7,339
29
7,368
541
2,306
951
894
859
589
6,140
9,366
39
9,405
Net deferred tax assets (liabilities)
$
1,538
$
(3,265)
F-12
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The Company establishes tax reserves in accordance with FASB ASC 740, Income Taxes. As of December 31, 2012, the carrying amount of the Company’s
gross unrecognized tax benefits was $209,000 which, if recognized, would affect the Company’s effective income tax rate.
The following is a reconciliation of the Company’s unrecognized tax benefits for the years ended December 31, 2012 and 2011:
Balance at January 1
Additions for tax positions taken related to the current year
Additions for tax positions taken related to prior years
Settlements
Balance at December 31
(In thousands)
2012
2011
248
56
115
(210)
209
$
$
418
87
12
(269)
248
$
$
It is the Company’s practice to include interest and penalties in tax expense. During the years ended December 31, 2012 and 2011, the Company accrued
approximately $13,000 and $11,000 in interest, respectively.
The Company is subject to U.S. federal income tax as well as income taxes of multiple states. During the year ended December 31, 2012, the Company
finalized its most recent audit by the Internal Revenue Service for the tax years 2009 and 2010. For all states in which it does business, the Company is
subject to state audit statutes.
I. COMMITMENTS AND CONTINGENCIES
The Company is involved in largely routine litigation incidental to its business. Management believes the ultimate outcome of this litigation will not have a
material effect on the Company’s consolidated financial position, liquidity, or results of operations.
As of December 31, 2012, the Company had commitments to purchase approximately $13,900,000 of equipment for the Absorbent Products segment, most
of which is expected to be received by the Company in 2013. The Company also had commitments of approximately $2,500,000 for the Defense segment,
which is part of its facility construction project in Florida scheduled for completion in 2013. The construction project is more fully described in Note P.
J. CONCENTRATIONS:
In the Housewares/Small Appliance segment, one customer accounted for 10% and 11% of consolidated net sales for the years ended December 31, 2012
and 2010, respectively. In the Absorbent Products segment, one customer accounted for 12% and 11% of consolidated net sales for the years ended
December 31, 2011 and 2010, respectively.
The Company sources most of its housewares/small appliances from vendors in the Orient and, as a result, risks deliveries from the Orient being disrupted
by labor or supply problems at the vendors, or transportation delays. Should such problems or delays materialize, products might not be available in
sufficient quantities during the prime selling period. The Company has made and will continue to make every reasonable effort to prevent these problems;
however, there is no assurance that its efforts will be totally effective. As the majority of the Housewares/Small Appliance segment’s suppliers are located in
China, periodic changes in the U.S. dollar and Chinese Renminbi (RMB) exchange rates do have an impact on the segment’s product costs. To date, any
material impact from fluctuations in the exchange rate has been to the cost of products secured via purchase orders issued subsequent to the currency value
change. Foreign transaction gains/losses are immaterial to the financial statements for all years presented.
F-13
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The Company’s Defense segment manufactures products primarily for the U.S. Department of Defense (DOD) and DOD prime contractors. As a
consequence, this segment’s future business essentially depends on the product needs and governmental funding of the DOD. During 2012, 2011, and 2010,
almost all of the work performed by this segment directly or indirectly for the DOD was performed on a fixed-price basis. Under fixed-price contracts, the
price paid to the contractor is awarded based on competition at the outset of the contract and therefore, with the exception of limited escalation provisions on
specific materials, is generally not subject to any adjustments reflecting the actual costs incurred by the contractor. In addition, with the award of the 40mm
systems contract, key components and services are provided by third party subcontractors, several of which the segment is required to work with by
government edict. Under the contract, the segment is responsible for the performance of those subcontractors, many of which it does not control. The
Defense segment’s contracts and subcontracts contain the customary provision permitting termination at any time for the convenience of the government,
with payment for any work completed, associated profit, and inventory/work in process at the time of termination. Materials used in the Defense segment
are available from multiple sources. As of December 31, 2012, 242 employees of Amron, or 24% of the Company’s total workforce, are members of the
United Steel Workers union. The contract between Amron and the union is effective through February 28, 2015.
Raw materials for the Absorbent Products segment are commodities that are typically available from multiple sources.
K. ENVIRONMENTAL
In May 1986, the Company’s Eau Claire, Wisconsin site was placed on the United States Environmental Protection Agency’s National Priorities List under
the Comprehensive Environmental Response, Compensation and Liability Act of 1980 because of hazardous waste deposited on the property. As of
December 31, 1998, all remediation projects required at the Company’s Eau Claire, Wisconsin, site had been installed, were fully operational, and
restoration activities had been completed. In addition, the Company is a member of a group of companies that may have disposed of waste into an Eau
Claire area landfill in the 1960s and 1970s. After the landfill was closed, elevated volatile organic compounds were discovered in the groundwater.
Remediation plans were established, and the costs associated with remediation and monitoring at the landfill are split evenly between the group and the City
of Eau Claire. As of December 31, 2012, there does not appear to be exposure related to this site that would have a material impact on the operations or
financial condition of the Company.
Based on factors known as of December 31, 2012, it is believed that the Company’s existing environmental accrued liability reserve will be adequate to
satisfy on-going remediation operations and monitoring activities both on- and off-site; however, should environmental agencies require additional studies,
extended monitoring, or remediation projects, it is possible that the existing accrual could be inadequate. Management believes that in the absence of any
unforeseen future developments, known environmental matters will not have any material effect on the results of operations or financial condition of the
Company. The Company’s environmental accrued liability on an undiscounted basis was $1,875,000 and $2,250,000 as of December 31, 2012 and 2011,
respectively, and is included in accrued liabilities on the balance sheet.
Expected future payments for environmental matters are as follows:
Years Ending December 31:
2013
2014
2015
2016
2017
Thereafter
(In thousands)
$
$
310
245
230
215
200
675
1,875
L. BUSINESS SEGMENTS:
The Company operates in three business segments. The Company identifies its segments based on the Company’s organization structure, which is primarily
by principal products. The principal product groups are Housewares/Small Appliances, Defense Products, and Absorbent Products. Sales for all three
segments are primarily to customers in North America.
The Housewares/Small Appliance segment designs, markets, and distributes housewares and small appliances. These products are sold primarily in the
United States and Canada directly to retail outlets and also through independent distributors. As more fully described in Note J, the Company primarily
sources its Housewares/Small Appliance products from non-affiliated suppliers located in the Orient. Sales are seasonal, with the normal peak sales period
occurring in the fourth quarter of the year prior to the holiday season.
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The Defense segment was started in 2001 with the acquisition of AMTEC Corporation, which manufactures precision mechanical and electromechanical
assemblies for the U.S. Government and prime contractors. During 2005, and again during 2010, AMTEC Corporation was one of two prime contractors
selected by the Army to supply all requirements for the 40mm family of practice and tactical ammunition cartridges for a period of five years. AMTEC’s
manufacturing plant is located in Janesville, Wisconsin. During 2003, this segment was expanded with the acquisition of Spectra Technologies, LLC of
East Camden, Arkansas. This facility performs Load, Assemble, and Pack (LAP) operations on ordnance-related products for the U.S. Government and
prime contractors. During 2006, the segment was expanded with the acquisition of certain assets of Amron, LLC of Antigo, Wisconsin, which primarily
manufactures cartridge cases used in medium caliber (20-40mm) ammunition. In 2011 the segment was further augmented with the purchase of certain
assets of ALS Technologies, Inc. of Bull Shoals, Arkansas, which manufactures less than lethal ammunitions. The Company has begun the process of
relocating this operation to Perry, Florida. See Note P for further discussion of the relocation.
The Absorbent Products segment was started in 2001 with the acquisition of certain assets from RMED International, Inc, forming Presto Absorbent
Products, Inc. This company manufactured diapers. During 2003, this segment was expanded with the purchase of the assets of NCN Hygienic Products,
Inc., a Marietta, Georgia manufacturer of adult incontinence products and training pads for dogs. Starting in 2004, the company began making adult
incontinence products at the Company’s facilities in Eau Claire, Wisconsin. The segment’s products are sold to distributors and other absorbent product
manufacturers. In 2007, the Company completed the closure of the Georgia facility and consolidated its absorbent products manufacturing in the Eau
Claire, Wisconsin facility. It no longer manufactures dog pads or baby diapers.
In the following summary, operating profit represents earnings before other income (loss), principally interest income, and income taxes. The Company’s
segments operate discretely from each other with no shared manufacturing facilities. Costs associated with corporate activities (such as cash and
marketable securities management) and the assets associated with such activities are included within the Housewares/Small Appliance segment for all
periods presented.
Year ended December 31, 2012
External net sales
Gross profit
Operating profit
Total assets
Depreciation and amortization
Capital expenditures
Year ended December 31, 2011
External net sales
Gross profit
Operating profit
Total assets
Depreciation
Capital expenditures
Year ended December 31, 2010
External net sales
Gross profit
Operating profit
Total assets
Depreciation
Capital expenditures
Housewares /
Small Appliances
Defense Products
Absorbent
Products
Total
(in thousands)
$
$
$
$
$
$
145,023
27,858
15,714
194,214
1,088
1,138
130,852
27,016
16,716
238,534
993
3,249
157,474
37,032
27,558
256,945
926
1,117
F-15
$
$
$
244,998
64,095
55,071
102,406
4,203
2,681
202,372
62,006
55,049
109,137
3,469
1,558
240,762
68,071
61,443
106,487
3,650
3,473
$
$
$
82,469
2,910
(11,066)
57,292
5,894
9,765
97,797
4,737
1,972
63,970
4,575
10,196
80,764
8,471
8,250
51,701
4,061
13,382
472,490
94,863
59,719
353,912
11,185
13,584
431,021
93,759
73,737
411,641
9,037
15,003
479,000
113,574
97,251
415,133
8,637
17,972
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M.
OPERATING LEASES
The Company leases office, manufacturing, and warehouse facilities and equipment under noncancelable operating leases, many of which contain
renewal options ranging from one to five years. Rent expense was approximately $826,000, $806,000, and $771,000 for the years ended December 31,
2012, 2011, and 2010, respectively. Future minimum annual rental payments required under operating leases are as follows:
Years ending December 31:
2013
2014
2015
2016
2017
Thereafter
(In thousands)
300
22
22
22
22
13
401
$
$
N.
INTERIM FINANCIAL INFORMATION (UNAUDITED):
The following represents quarterly unaudited financial information for 2012 and 2011:
Quarter
2012
First
Second
Third
Fourth
Total
2011
First
Second
Third
Fourth
Total
Net Sales
Gross
Profit
Net
Earnings
Earnings
per Share
(Basic)
Earnings
per Share
(Diluted)
(In thousands, except per share data)
$
$
$
$
96,773
117,114
116,813
141,790
472,490
108,886
98,268
104,861
119,006
431,021
$
$
$
$
20,352
19,594
22,907
32,010
94,863
21,954
20,665
23,657
27,483
93,759
$
$
$
$
9,344
8,703
9,401
11,427
38,875
11,363
10,817
12,386
13,402
47,968
$
$
$
$
1.36
1.26
1.36
1.66
5.64
1.65
1.57
1.80
1.96
6.98
$
$
$
$
1.36
1.26
1.36
1.66
5.64
1.65
1.57
1.80
1.96
6.98
As shown above, fourth quarter sales are significantly impacted by the holiday driven seasonality of the Housewares/Small Appliance segment. This
segment purchases inventory during the first three quarters to meet the sales demand of the fourth quarter. The other segments are typically non-seasonal.
During the fourth quarter of 2012, the Company’s provision for doubtful accounts, impairment charges, and intangible asset amortization expenses were
significantly higher than historical quarterly results, and further discussion is included in Note A(9) and Note Q.
O.
LINE OF CREDIT AND COMMERCIAL LETTERS OF CREDIT
The Company maintains an unsecured line of credit for short term operating cash needs. The line of credit is renewed each year at the end of the third
quarter. As of December 31, 2012 and 2011, the line of credit limit was set at $5,000,000, with $0 outstanding on both dates. The interest rate on the line
of credit is reset monthly to the London Inter-Bank Offered Rate (LIBOR) plus one half of one percent. In addition, the Company had issued commercial
letters of credit totaling $3,380,000 and $1,940,000 as of December 31, 2012 and 2011, respectively, related to performance on certain customer
contracts. As of December 31, 2012, the entire balance of the letters of credit was unused.
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P.
Q.
BUSINESS ACQUISITION
On November 1, 2011, the Company purchased the assets of ALS Technologies, Inc., a small Arkansas manufacturer of less than lethal ammunition.
Products include smoke and tear gas grenades, specialty impact munitions, diversionary devices and stun munitions, support accessories like launchers
and gas masks, as well as training for the use of its products. Sales for 2011, including the portion of the year prior to the purchase, were $8,046,000. The
products are sold primarily to law enforcement, corrections, and military. The acquisition was immaterial to the Company’s Consolidated Financial
Statements. The purchase price allocation included in the Company’s financial statements was finalized during 2012 upon the completion of a business
valuation. During the second half of 2012, the Company began the process of relocating this operation to Perry, Florida, which is expected to be
completed during the second quarter of 2013. The cost of the relocation is expected to be immaterial to the Company’s Consolidated Financial
Statements.
OTHER
During 2011, the Company entered into a royalty agreement with another absorbent products company. Under the agreement, it received royalties for its
trademarks, technology, know-how, and the use of equipment that embodies that technology and know-how. It also purchased and sold to the other
company the requisite materials for the use of the technology. However, because of ongoing financial issues at the other absorbent products company,
sales of the requisite materials to the facility were discontinued during 2012. During 2012 and 2011, incident to the royalty agreement, the Company
recognized material sales of $598,000 and $4,874,000 (classified as Net Sales) and royalty income (included in Selling and General Expense) of
$247,000 and $479,000, respectively. Further, because of the other facility’s financial difficulties, the Company reserved for all receivables from the
other facility by increasing the provision for doubtful accounts by $3,887,000 during 2012. In addition, the Company fully reserved for a note receivable
of $1,592,000 and recorded impairment on equipment of $5,725,000 during the fourth quarter of 2012 (each classified as Selling and General Expense).
The Company has also entered into a licensing agreement with another firm that is developing certain products that would complement the assortment of
products currently sold by the Housewares/Small Appliances segment. Under the agreement, the Company has advanced the entity funds, and has agreed
to advance the entity additional funds as certain goals are achieved. In addition, the Company has also agreed to pay royalties to the entity on the
commercial sales of the developed products. As of December 31, 2012, a note receivable plus accrued interest of $3,571,000 related to the license
agreement was classified as Note Receivable on the Company’s Consolidated Balance Sheet.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
National Presto Industries, Inc.
Eau Claire, Wisconsin
We have audited the accompanying consolidated balance sheets of National Presto Industries, Inc. as of December 31, 2012 and 2011 and the related
consolidated statements of comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31,
2012. In connection with our audits of the financial statements, we have also audited the accompanying Schedule II, Valuation and Qualifying Accounts.
These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of National Presto
Industries, Inc. at December 31, 2012 and 2011, and the results of its operations and its cash flows for each of the three years in the period ended
December 31, 2012, in conformity with accounting principles generally accepted in the United States of America.
Also, in our opinion, the financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), National Presto Industries,
Inc.’s internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control – Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated March 18, 2013 expressed an unqualified
opinion thereon.
/s/ BDO USA, LLP
Milwaukee, Wisconsin
March 18, 2013
F-18
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NATIONAL PRESTO INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 2012, 2011 and 2010
Column A
Column B
(In thousands)
Column C
Additions -
Charged to
Costs and
Expenses
(A)
Column C
Additions -
Charged to
Other
Accounts
(B)
Column D
Column E
Deductions
(C)
Balance at
End of
Period
Balance at
Beginning of
Period
Description
Deducted from assets:
Allowance for doubtful accounts:
Year ended December 31, 2012
Year ended December 31, 2011
Year ended December 31, 2010
Allowance for doubtful note receivable:
Year ended December 31, 2012
Year ended December 31, 2011
Year ended December 31, 2010
Notes:
$
$
$
$
$
$
1,361
527
467
—
—
$
$
$
$
$
4,037
1,037
50
1,592
—
$
$
$
$
$
1,122
$
— $
—
—
—
$
$
$
409
203
(10)
—
—
$
$
$
$
$
— $
— $
— $
— $
6,111
1,361
527
1,592
—
—
(A) Amounts charged to selling and general expenses. See Note Q to the Company’s Consolidated Financial Statements for additional information.
(B) Amounts charged to other accounts - Deferred revenue related to sales to an independent foreign manufacturing facility, which was deemed
uncollectible during 2012, was reclassified to the allowance for doubtful accounts. The Company’s relationship with the foreign facility is described
in Note Q to the Company’s Consolidated Financial Statements.
(C) Principally bad debts written off, net of recoveries.
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EXHIBIT 21
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SUBSIDIARIES OF THE REGISTRANT
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PARENT AND SUBSIDIARIES
(Included in the Consolidated Financial Statements and Wholly-owned)
National Presto Industries, Inc.
Eau Claire, Wisconsin (A Wisconsin Corporation)
Its Subsidiaries:
National Holding Investment Company
Wilmington, Delaware (A Delaware Corporation)
Its Subsidiaries:
Presto Manufacturing Company
Jackson, Mississippi (A Mississippi Corporation)
Jackson Sales and Storage Company
Jackson, Mississippi (A Mississippi Corporation)
Canton Sales & Storage Company
Canton, Mississippi (A Mississippi Corporation)
National Defense Corporation (Inactive)
Eau Claire, Wisconsin (A Wisconsin Corporation)
AMTEC Corporation
Janesville, Wisconsin (A Wisconsin Corporation)
Its Division:
Amron
Antigo, Wisconsin
Its Subsidiaries:
Spectra Technologies LLC
East Camden, Arkansas (A Delaware Corporation)
AMTEC Less Lethal Systems, Inc.
Bull Shoals, AR (A Wisconsin Corporation)
Presto Absorbent Products, Inc.
Eau Claire, Wisconsin (A Wisconsin Corporation)
PEFC, Inc.
Eau Claire, Wisconsin (A Wisconsin Corporation)
presto125109_ex23-1.htm
CONSENT OF BDO USA, LLP
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EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
National Presto Industries, Inc.
Eau Claire, Wisconsin
We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (File No. 33-46711) of National Presto Industries, Inc. of our
reports dated March 18, 2013, relating to the consolidated financial statements, and the effectiveness of National Presto Industries, Inc.’s internal control over
financial reporting, which appear in this Form 10-K.
/s/ BDO USA, LLP
Milwaukee, Wisconsin
March 18, 2013
presto125109_ex31-1.htm
CERTIFICATION OF CEO PURSUANT TO SECTION
302
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EXHIBIT 31.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Maryjo Cohen, certify that:
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of National Presto Industries, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the registrant and have:
a)
b)
c)
d)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based upon such evaluation; and
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to
the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)
b)
Date: March 18, 2013
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
/S/ Maryjo Cohen
Maryjo Cohen
Chief Executive Officer
presto125109_ex31-2.htm
CERTIFICATION OF CFO PURSUANT TO SECTION
302
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EXHIBIT 31.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Randy Lieble, certify that:
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of National Presto Industries, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the registrant and have:
a)
b)
c)
d)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to
the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)
b)
Date: March 18, 2013
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
/S/ Randy Lieble
Randy Lieble
Chief Financial Officer
presto125109_ex32-1.htm
CERTIFICATION OF CEO PURSUANT TO SECTION
906
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EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to 18 U.S.C. §1350 (as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002), I the undersigned Chief Executive Officer of National Presto
Industries, Inc. (the “Company”), hereby certify that the Annual Report on Form 10-K of the Company for the year ended December 31, 2012 (the “Report”)
fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in the Report fairly
presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the
SEC or its Staff upon request.
Date: March 18, 2013
/S/ Maryjo Cohen
Maryjo Cohen,
Chief Executive Officer
presto125109_ex32-2.htm
CERTIFICATION OF CFO PURSUANT TO SECTION
906
EX-32.2
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EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to 18 U.S.C. §1350 (as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002), I, the undersigned Chief Financial Officer of National Presto
Industries, Inc. (the “Company”), hereby certify that the Annual Report on Form 10-K of the Company for the year ended December 31, 2012 (the “Report”)
fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in the Report fairly
presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the
SEC or its Staff upon request.
Date: March 18, 2013
/S/ Randy Lieble
Randy Lieble,
Chief Financial Officer