10-K405
1
Page 1
of 28 Total Pages
Index
to Schedules and
Exhibits is at Page 12
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR
15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994 Commission File Number 1-2451
NATIONAL PRESTO INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Wisconsin Corporation 39-0494170
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
3925 North Hastings Way
Eau Claire, Wisconsin 54703-3703
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (715) 839-2121
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
$1.00 par value common stock New York Stock Exchange
Securities registered pursuant to Section 12 (g) of the Act:
NONE
Title of Class
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 _X__ No ____
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
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to the Form 10-K. __X__
The aggregate market value of the voting stock held by non-affiliates of the
registrant computed by reference to the price at which the stock was sold, or
the average bid and asked prices of such stock, as of February 28, 1995, was
$311,867,040. The number of shares outstanding of each of the registrant's
classes of common stock, as of February 28, 1995, was 7,338,048.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated by reference into that part of this
Form 10-K designated to the right of the document title.
TITLE PART
Proxy Statement Part III
Except as specifically incorporated herein by reference, the foregoing Proxy
Statement is not deemed filed as part of this report.
PART I
ITEM 1. BUSINESS
A. The business of National Presto Industries, Inc. and its
consolidated subsidiaries (the "Company") consists of a single business
category. Comments on individual portions of that category follow.
COMMERCIAL
The Company manufactures and distributes small electrical
appliances and housewares, including comfort appliances, pressure cookers and
canners, private label and premium sales products.
Electrical appliances and housewares sold by the Company include
pressure cookers and canners; the Presto* Control Master* single thermostatic
control line of fry pans in several sizes, griddles and combination
griddle/warmers and multi-purpose cookers; deep fryers of various sizes; food
processors, can openers, slicer/shredders, curly cutters, potato chippers, ice
cream makers and electric shoe polishers; electric heaters; corn poppers (hot
air and microwave); coffeemakers; electric tea kettles; electric knives; bread
slicing systems; electric knife sharpeners; 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. The
Company believes it is the principal manufacturer of pressure cookers in the
United States.
For the year ended December 31, 1994, approximately 43% of
consolidated revenues were provided by cast products (fry pans, griddles, deep
fryers and electric cookers), approximately 22% by motorized nonthermal
appliances (can openers, slicer/shredders, curly cutters, ice cream makers knife
sharpeners, potato chippers, electric knives, bread slicing systems and shoe
polishers), and approximately 31% by noncast/thermal appliances (stamped cookers
and canners, stainless steel cookers, corn poppers (hot air and microwave),
coffeemakers, tea kettles, and heaters). For the year ended December 31, 1993,
approximately 48% of consolidated revenues were provided by cast products,
approximately 26% by motorized nonthermal appliances and approximately 20% by
noncast/thermal appliances. For the year ended December 31, 1992, approximately
52% of consolidated revenues were provided by cast products, approximately 23%
by motorized nonthermal appliances and approximately 19% by noncast/thermal
appliances.
Wal-Mart Stores, Inc., accounted for 35% and 34% of consolidated
revenues for the years ended December 31, 1994 and 1993 respectively. For the
year ended December 31, 1992, Wal-Mart Stores, Inc., accounted for 31% and Kmart
Corporation accounted for 14% of consolidated revenues.
In the fall of 1993, Kmart Corporation notified the Company that
the Company would not be shipping any significant quantities of product to Kmart
in 1994. This action by Kmart occurred because of the inability of the parties
to agree upon modification of terms and conditions which affect Kmart's net
cost, and did not involve delivery, quality or any other matters related to
pricing of the products. In latter 1994, renewed relations with Kmart were made,
albeit on a relatively nominal scale when compared to earlier years.
Products are sold directly to retail outlets throughout the United
States and also through independent distributors.
The Company has a sales force of approximately nineteen employees
which sells to and services customers. In selected geographic areas sales are
handled by manufacturers' representatives who may handle other product lines.
Sales promotional activities include television and radio.The Company's
commercial business is highly competitive and seasonal, with the normal peak
sales period occurring in the fourth quarter of the year prior to the holiday
season. Many companies compete for sales of housewares and small appliances,
some of which are larger than the Company and others which are smaller. 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. New products entail unusual risks.
Engineering and tooling costs are increasingly expensive, as are components and
finished goods that may not have a ready market or achieve a widespread consumer
acceptance. High-cost advertising commitments accompanying such new products or
to maintain sales of existing products may not be fully absorbed by ultimate
product sale. 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 1994, 1993 and 1992 were absorbed in that years' operations and
were not a material element in the aggregate costs incurred by the Company.
Presto products are generally warranted to the original owner to be
free from defects in material and workmanship for a period of two years from
date of purchase. The Company allows a sixty-day over-the-counter initial
failure return privilege through cooperating dealers. The Company services its
products through independent service stations throughout the United States and
the corporate service repair operation. The Company's service and warranty
programs are competitive to those offered by other manufacturers in the
industry.
The Company's commercial products are manufactured in plants
located at Jackson, Mississippi and Alamogordo, New Mexico. The Company also
purchases a substantial portion of its products from nonaffiliated companies
located outside the United States.
DEFENSE
The Company commenced defense production in 1942. From 1966 through
1980, 105MM projectiles were produced in the Eau Claire facility (utilizing
Government owned equipment in Company owned buildings). Production of 8"
projectiles also occurred intermittently during this period.
Since completion of production in 1980, standby contracts had been
received and renewed on an annual basis through September, 1992. For the period
October, 1992 through September, 1993 a storage only contract was received.
In September, 1993, the Pentagon exercised its option of
abandoning, in place, the production equipment formerly utilized for projectile
fabrication. This equipment is being sold. Once the equipment has been sold and
removed, work will be undertaken to restore the plant for manufacturing, or
other purposes.
See Section B3 for comments regarding Defense related Environmental
Protection Agency matters.
WAREHOUSING AND TRANSPORTATION SERVICES
For a number of years, the Company has warehoused and distributed
its commercial products from a centrally located distribution center. Selective
use is made of a fleet of tractors and trailers with backhauls scheduled on
return trips carrying goods consigned for internal corporate use.
FINANCIAL MANAGEMENT
A separate subsidiary of the Company, a Delaware holding company,
carries responsibility for the maintenance and management of funds not currently
required for business activities and therefore temporarily available for
investments. Income from Financial Management activities is included in Other
Income in the accompanying financial statements.
Earnings for this subsidiary may vary widely from year to year
depending on interest yields on instruments meeting the investment criteria.
B. OTHER COMMENTS
1. Sources and Availability of Materials
Production levels at commercial plants may be affected by vendor
failure to deliver tooling, material and critical parts within commitments.
While recent years have witnessed virtual elimination of these circumstances,
there is no assurance against recurrence.
Deliveries of new products, many of which have been sourced
overseas, could be delayed by labor or supply problems at the vendors or in
transportation. As a consequence, these products may not be available in
sufficient quantities during the prime selling period. While there has been no
major incidence of such problems and the Company has made every reasonable
effort to prevent occurrence, there is no assurance that such effort will be
totally effective.
2. Trademarks, Licenses, Franchises and Concessions Held
With increased sales volume being generated by new products,
patents have become more meaningful to operating results. Trademarks and
know-how are considered material. 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. To date, the Company has vigorously protected its rights and
enjoyed success in all its intellectual property suits.
3. Effects of Compliance with Environmental and OSHA 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. During July 1986, the Company entered into an agreement with the
EPA and the Wisconsin Department of Natural Resources to conduct a Remedial
Investigation and Feasibility Study at the site. The Remedial Investigation was
completed in 1992, the Feasibility Study in 1994 and during 1993 and 1994
remedial action activities were initiated.
As a result of an April 1989 EPA Unilateral Order, and August 1990
EPA Record of Decision, followed by a directive from the Department of the Army,
the Company implemented an alternative drinking water system for approximately
200 homes and businesses in an area adjacent to the site. This system has since
been installed and become fully operational. In August 1993, after extensive
negotiations with the EPA, the Company entered into a settlement agreement to
reimburse remediation costs, plus interest, for groundwater contamination
affecting a municipal well field allegedly related to the site.
In February 1988 the Company entered into an agreement with the
Department of the Army pursuant to which the Army funded $5,000,000 of
environmental restoration costs related to the site. Based on Remedial
Investigation/Feasibility Study costs, the Army's direction to implement the
alternative drinking water system and costs for remedial action, it became
apparent that additional government funding was necessary (a factor that was
identified as a possibility in the original agreement with the government).
Further legislative action in 1992 resulted in an additional $7,000,000 for
funding environmental restoration activities, which was placed under a funding
agreement with the Company in 1993. A further supplement of $2,334,000 was
included in 1994 legislative action. As a result of the 1993 EPA settlement,
together with current and future remediation activities, efforts are ongoing to
obtain additional funds for site-related environmental restoration costs in
accordance with the provisions of the 1988 Agreement.
It does not presently appear that the ultimate liability associated
with the unresolved environmental contingencies will have a material effect on
the financial condition of the Company. If the Army honors its contractual
obligations there will not be any material effect on the results of operations.
There is, of course, always the possibility that something unforeseen could
occur. It is not possible to provide an opinion on the ultimate determination of
such an unforeseeable event.
4. Number of Employees of the Company
As of December 31, 1994, the Company had 674 employees.
5. Industry Practices Related to Working Capital Requirements
The major portion of the Company's commercial sales were made with terms of
90 days or shorter. A small portion of the sales were made with seasonal dating
provisions.
Inventory levels increase in advance of the selling period for
products which are seasonal, such as heaters, and in preparation for new product
introductions. Inventory build-up also occurs to create stock levels required to
support the higher sales which occur in the latter half of each year. Recent
changes in the buying practices of the Company's customers indicate a movement
away from substantial advance stocking orders and to smaller, more frequent
orders. As this trend continues and is expanded upon, the Company is being
required to carry larger finished goods inventories than those historically
maintained. The Company purchases components and raw materials in advance of
production requirements where such purchases are required to ensure supply or
provide advantageous long-term pricing.
6. Backlog
Shipment of most of the Company's commercial products occurs within
a relatively short time after receipt of the order and, therefore, there is
usually no substantial order backlog. New product introductions do result in
order backlogs which vary from product to product and as to timing of
introduction.
C. INDUSTRY SEGMENTS
The Company operates in one Business Segment.
ITEM 2. PROPERTIES (Owned Except Where Indicated)
The Company's principal Eau Claire facilities are approximately
560,000 square feet of which 428,000 square feet were related to ordnance
activities. Leases for 28,610 square feet have been entered into with outside
tenants. The Company's corporate office is also located in Eau Claire.
The Company manufactures consumer products in Jackson, Mississippi
and Alamogordo, New Mexico.
The Jackson plant contains 283,000 square feet, of which 183,000
square feet is used for warehousing.
The facility at Alamogordo contains 163,200 square feet, of which
24,800 square feet is used for warehousing.
The Company has a 162,400 square foot building at Canton,
Mississippi which is used primarily for warehousing, distribution and in part
for product service functions. An additional 24,000 square feet has been leased
in adjacent buildings for storage area.
ITEM 3. LEGAL PROCEEDINGS
The Company is subject to various action incidental to its normal
business operations. In the opinion of management such actions will be resolved
for amounts which in the aggregate will not be material in relation to the
financial statements.
See Item 1.B.3. for comment regarding EPA actions.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
EXECUTIVE OFFICERS OF THE REGISTRANT
The following information is provided with regard to the executive officers of
the registrant:
FAMILY
NAME TITLE AGE RELATIONSHIP
Melvin S. Cohen Chairman of the Board 77 Father of
Maryjo Cohen
Joseph H. Berney Vice-Chairman and 62 None
Director of Sales
Maryjo Cohen President, Chief Executive, 42 Daughter of
Operating and Financial Melvin S. Cohen
Officer
Richard F. Anderl Vice-President, Engineering 51 None
James F. Bartl Secretary 54 None
Mr. Cohen was elected Chairman of the Board in May, 1975. Prior to
that date he was President, a position which he again held from November, 1986
to May, 1989.
Mr. Berney was elected Vice-President in May, 1969, to the
additional position of Treasurer in January, 1971, to Senior Vice-President in
May, 1982, President on September 1, 1983 and Vice-Chairman in November, 1986.
He became Director of Sales in February, 1989.
Ms. Cohen was elected Treasurer in September, 1983, to the
additional positions of Vice- President in May, 1986 and President in May 1989.
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. Anderl was elected Vice-President in May, 1989. He has been
associated with the registrant since 1963 and prior to
becoming an officer, he was Director of Engineering
Mr. Bartl was elected Secretary in May, 1978. He has been
associated with the registrant since 1969. Prior to becoming an officer, he was
Resident Counsel and Director of Industrial Relations, positions he continues to
hold.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Record of Dividends Paid and Market Price of Common Stock
1994 Fiscal Year 1993 Fiscal Year
Applicable Market Price Applicable Market Price
Dividends Paid Dividends Paid
per Share High Low per Share High Low
Prior Year - - - $2.55 - -
First Quarter $1.90 $48 $43 3/4 - $60 1/8 $49 7/8
Second Quarter - 45 1/8 39 1/2 - 56 3/8 50
Third Quarter - 43 7/8 39 1/8 - 55 1/4 50
Fourth Quarter - 43 1/8 39 1/8 - 56 1/4 45 1/2
Full Year $1.90 $48 $39 1/8 $2.55 $60 1/8 $45 1/2
Common stock of National Presto Industries, Inc., is traded on the
New York Stock Exchange using the symbol NPK. As of December 31, 1994, there
were 1,362 stockholders. There were 1337 stockholders as of February 28, 1995,
the latest practicable date.
ITEM 6. SELECTED FINANCIAL DATA
(In thousands except per share data)
For the Years Ended December 31, 1994 1993 1992 1991 1990
Net sales $128,070 $118,580 $128,263 $161,522 $127,008
Net earnings $ 21,455 $ 18,655 $ 25,882 $ 36,703 $ 29,120
Net earnings per common and
common equivalent share $ 2.92 $ 2.55 $ 3.53 $ 4.98 $ 3.94
Total assets $291,036 $283,004 $263,928 $268,591 $241,958
Long-term debt $ 5,103 $ 5,103 $ 5,103 $ 5,103 $ 5,103
Dividends paid per common share
applicable to current year $ 1.90 - $ 1.25 $ 1.00 $ 2.55
Dividends paid per common share
applicable to subsequent year - - $ 2.55 $ 1.70 $ 1.60
Total dividends paid $ 1.90 $ - * $ 3.80 $ 2.70 $ 4.15
* The 1993 dividend was paid on December 28, 1992.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
1994 Compared to 1993
Net sales increased by $9,490,000 from $118,580,000 to $128,070,000, primarily
due to new product introductions, offset in part by a decrease in sales from
products that were either no longer part of the line or that had matured, and
the cessation of revenues from the storage and maintenance of government
equipment.
Gross profit for 1994 increased $2,775,000 primarily due to the increased
volume, offset in part by cost increases stemming from higher commodity prices,
costs entailed in storage and handling of carryover products, and the impact of
the LIFO adjustment which was considerably more unfavorable in 1994 than in
1993. See Footnote B for additional information on the LIFO adjustments. Gross
margins as a percentage of sales were 40% in both periods.
Selling and general expenses decreased $823,000 primarily as a result of
decreased selling and advertising expenses. As a percentage of sales, selling
and general expenses decreased from 23% to 21%.
Other income increased from the 1993 level primarily as a result of a higher
level of invested funds and a higher pretax rate of return on the Company's
portfolio of short-term marketable securities.
Earnings before provision for income taxes increased $4,357,000 from $26,162,000
to $30,519,000. The provision for income taxes increased from $7,507,000 to
$9,064,000, the effective income tax rate increased from 29% to 30%, as a result
of increased earnings subject to tax. Net earnings increased $2,800,000 from
$18,655,000 to $21,455,000, or 15%.
The Company maintains adequate liquidity for all of its anticipated capital
requirements. As of year-end 1994, there were no material capital commitments
outstanding.
1993 Compared to 1992
Net sales decreased by $9,683,000 from $128,263,000 to $118,580,000, primarily
due to decreased unit volume sales by the Company's commercial division, but
also due to the discounted pricing of TaterTwister* curly cutters, and the
partial elimination of storage and complete elimination of maintenance revenue
from the storage and maintenance of equipment for the Defense Department.
Gross profit for 1993 decreased $11,905,000 primarily due to the volume
reduction, a less favorable product mix, less favorable manufacturing variances,
and the comparative effect of an unfavorable LIFO adjustment in 1993 versus a
favorable one in 1992. See Footnote B for additional information on the LIFO
adjustments. Gross margins as a percentage of sales decreased from 47% to 40%.
Selling and general expenses decreased $3.1 million in largest part due to a
decrease in cooperative advertising expenditures and a reduction in patent suit
related legal and professional expenditures. As a percentage of sales, selling
and general expenses decreased from 24% to 23%.
Other income decreased from the 1992 level primarily as a result of a lower rate
of return on the Company's portfolio of short-term marketable securities.
Earnings before provision of income taxes decreased $10,546,000 from $36,708,000
to $26,162,000. The provision for income taxes decreased from $10,826,000 to
$7,507,000. The effective income tax rate was 29% in both years. See Footnote I.
Net earnings decreased $7,227,000 from $25,882,000 to $18,655,000, or 28%.
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
Certified Public Accountants are contained on pages F-1 through F-10 of this
report.
B. Quarterly financial data is contained in Note L in Notes to
Consolidated Financial Statements.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
A listing of the Executive Officers of the Registrant is included
in Part I. See Note following Item 13.
ITEM 11. EXECUTIVE COMPENSATION
See Note following Item 13.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
See Note following Item 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See Note following.
NOTE: Within 120 days after the close of the registrant's fiscal year ended
December 31, 1994, the registrant will file a definitive proxy statement
pursuant to regulations 14A. Therefore, pursuant to the Rules and Regulations of
the Securities Exchange Act of 1934, the additional information required for
Items 10, 11, 12 and 13 has been omitted and is incorporated herein from the
Proxy by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
A. The following consolidated financial statements of National
Presto Industries, Inc., and its subsidiaries and the related Report of
Independent Certified Public Accountants are included in this report: Form 10-K
Page Reference
1. Consolidated Balance Sheets - December 31, 1994 and 1993 F-1 & F-2
2. Consolidated Statements of Earnings - Years ended December 31,
1994, 1993 and 1992 F-3
3. Consolidated Statements of Cash Flows - Years ended December 31,
1994, 1993 and 1992 F-4
4. Consolidated Statements of Stockholders' Equity - Years ended
December 31, 1994, 1993 and 1992 F-5
5. Notes to Consolidated Financial Statements F-6 thru F-10
6. Report of Independent Certified Public Accountants F-10
Statements and schedules of the registrant have been omitted as the
consolidated statements of the registrant and its subsidiaries are included. All
subsidiaries included in the consolidated financial statements are wholly owned.
B. The following Schedules and Exhibits are included in this
report:
Schedule II - Valuation and Qualifying Accounts F-11
Exhibit 11 - Statement Re Computation of Per Share Earnings F-12
Exhibit 22 - Parent and Subsidiaries F-13
Exhibit 23.1 - Auditors' Consent F-14
Exhibit 27 - Financial Data Schedule F-15
All other Schedules and Exhibits for which provision is made in the
applicable accounting regulations of the Securities and Exchange Commission are
not required under the related instructions or are inapplicable, and therefore
have been omitted. Columns omitted from schedules filed have been omitted
because the information is not applicable.
SIGNATURE
Pursuant to the Requirements of Section 13 or 14 (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.
NATIONAL PRESTO INDUSTRIES, INC.
(registrant)
By: /S/ Walter G. Ryberg By: /S/ Melvin S. Cohen
Walter G. Ryberg Melvin S. Cohen
Director
By: /S/ John M. Sirianni By: /S/ Joseph H. Berney
John M. Sirianni Joseph H. Berney
Director
By: /S/ Ralph Strangis By: /S/ Maryjo Cohen
Ralph Strangis Maryjo Cohen
Director
Date: March 24, 1995
NATIONAL PRESTO INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
DECEMBER 31, 1994 DECEMBER 31, 1993
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $109,444 $115,496
Marketable securities 112,754 105,186
Accounts receivable $ 37,385 $ 28,014
Less allowance for doubtful accounts 36,935 27,564
450 450
Inventories:
Finished goods 8,549 13,543
Work in process 1,617 1,731
Raw materials 7,416 6,982
Supplies 1,283 18,865 1,286 23,542
Prepaid expenses
912 802
Total current assets 278,910 272,590
PROPERTY, PLANT AND EQUIPMENT:
Land and land improvements
140 140
Buildings 5,412 5,412
Machinery and equipment 8,166 7,441
13,718 12,993
Less allowance for depreciation 9,380 4,338 9,145 3,848
OTHER ASSETS 7,788 6,566
$291,036 $283,004
The accompanying notes are an integral part of the financial statements.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
December 3, 1994 December 31, 1993
LIABILITIES
CURRENT LIABILITIES:
Accounts payable $ 16,769 $ 21,321
Federal and state income taxes 7,867 5,431
Accrued liabilities 18,358 15,837
Total current liabilities 42,994 42,589
LONG-TERM DEBT, to a related party 5,103 5,103
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY
Common stock, $1 par value:
Authorized: 12,000,000 shares
Issued: 7,440,518 shares $ 7,441 $ 7,441
Paid-in capital 590 548
Retained earnings 237,604 230,087
245,635 238,076
Treasury stock, at cost, 102,720 shares
in 1994 and 105,292 shares in 1993 2,696 2,764
Total stockholders' equity 242,939 235,312
$291,036 $283,004
The accompanying notes are an integral part of the financial statements.
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands except per share data)
For the years ended December 31, 1994 1993 1992
Gross sales $130,364 $120,534 $130,345
Less freight, discounts, etc. 2,294 1,954 2,082
Net sales 128,070 118,580 128,263
Cost of sales 77,389 70,674 68,452
Gross profit 50,681 47,906 59,811
Selling and general expenses 26,469 27,292 30,393
Operating profit 24,212 20,614 29,418
Other income, principally interest 6,851 6,302 7,961
Interest expense (544) (754) (671)
Earnings before provision for income taxes 30,519 26,162 36,708
Provision for income taxes:
Current:
Federal 9,013 6,527 9,925
State 1,415 1,296 1,475
Deferred (1,364) (316) (574)
9,064 7,507 10,826
Net earnings $ 21,455 $ 18,655 $ 25,882
Weighted average common and common
equivalent shares outstanding 7,458 7,430 7,427
Net earnings per common share $ 2.92 $ 2.55 $ 3.53
The accompanying notes are an integral part of the financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the years ended December 31, 1994 1993 1992
Cash flows from operating activities:
Net earnings $ 21,455 $ 18,655 $ 25,882
Adjustments to reconcile net earnings to cash flows from operating
activities:
Provision for depreciation 1,173 1,150 1,253
Deferred income taxes (1,364) (316) (574)
Stock compensation expense 401(k) 91 91 144
Changes in:
Accounts receivable (9,371) 150 10,358
Inventories 4,677 (4,266) 652
Accounts payable and accrued expenses (2,031) 1,717 759
Federal and state income taxes 2,436 (1,387) (3,606)
Other (112) (703) 127
Total 16,954 15,091 34,995
Cash flows from investing activities:
Marketable securities purchased (98,673) (91,738) (90,362)
Marketable securities - maturities and sales 91,105 66,003 82,413
Acquisition of property, plant and equipment (1,661) (1,038) (1,470)
Changes in other assets
142 377 (29)
Total (9,087) (26,396) (9,448)
Cash flows from financing activities:
Treasury stock transactions -
19 20
Dividends paid (13,938) - (27,862)
Total (13,919) - (27,842)
Change in cash and cash equivalents (6,052) (11,305) (2,295)
Cash and cash equivalents at beginning of year 115,496 126,801 129,096
Cash and cash equivalents at end of year $109,444 $115,496 $126,801
Supplemental disclosures of cash flow information: Cash paid during the year
for:
Interest $ 544 $ 754 $ 671
Income taxes $ 7,991 $ 9,262 $ 15,285
The accompanying notes are an integral part of the financial statements.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands except per share data)
For the years ended December 31, 1994, 1993, 1992
Common Paid-in Retained Treasury
Stock Capital Earnings Stock Total
Balance January 1, 1992 $ 7,441 $ 411 $213,412 $ (2,882) $218,382
Net earnings for the year 25,882 25,882
Treasury stock transactions
92 72 164
Dividends pard, $1.25 per share* (9,163) (9,163)
Balance prior to payment of 1993
regular and extra dividend 7,441 503 230,131 (2,810) 235,265
Dividends paid applicable to
1993, $2.55 per share (18,699) (18,699)
Balance December 31, 1992 7,441 503 211,432 (2,810) 216,566
Net earnings for the year 18,655 18,655
Treasury stock transactions 45 46 91
Balance December 31, 1993 7,441 548 230,087 (2,764) 235,312
Net earnings for the year 21,455 21,455
Treasury stock transactions 42 68 110
Dividends paid, $1.90 per share (13,938) (13,938)
Balance December 31, 1994 $ 7,441 $ 590 $237,604 $ (2,696) $242,939
* Does not include the December 28, 1992 payment of the 1993 regular and extra
dividend.
The accompanying notes are an integral part of the financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(1) PRINCIPLES OF CONSOLIDATION: 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.
(2) CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES: The
Company considers all highly liquid marketable securities with a maturity of one
week or less to be cash equivalents. The Company's cash equivalents and
marketable securities are diversely invested principally in A-rated or higher
tax exempt bonds issued by entities throughout the United States. For 1993,
marketable securities were valued at cost plus accrued interest, which
approximated market and fair value. During 1994, the Company adopted Statement
of Financial Accounting Standards No 115 (SFAS#115) "Accounting for Certain
Investments in Debt and Equity Securities". The adoption of SFAS 115 did not
have a material effect on the financial statements. The Company has classified
all marketable securities as available-for-sale under SFAS 115, which requires
the securities to be reported at fair value, with unrealized gains and losses
reported as a separate component of stockholders' equity. At December 31,1994,
cost approximated market value for all investments using the specific
identification method. The contractual maturities of the securities held at
December 31, 1994 were $81,081,000 in 1995, $30,232,000 in 1996 and $1,441,000
with indeterminate maturities.
(3) INVENTORIES: Inventories are stated at the lower of cost
or market with cost being determined principally on the last-in, first-out
(LIFO) method.
(4) 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. Depreciation is computed over the estimated useful lives of the
property using the straight line method.
(5) REVENUE RECOGNITION: The Company recognizes revenues when
product is shipped.
B. INVENTORIES:
The aggregate amount of inventories valued on the LIFO basis
is $17,886,000 and $22,256,000 as of December 31, 1994 and 1993, respectively.
Under LIFO, inventories are valued at approximately $10,550,000 and $8,868,000
below current cost determined on a first-in, first-out (FIFO) basis at December
31, 1994 and 1993, respectively.
The Company uses the LIFO method of inventory accounting to
improve matching of costs and revenues.
The following table describes that which would have occurred
if LIFO inventories had been valued at current cost determined on a FIFO basis:
Increase (Decrease)
Cost of Net Earnings
Year Sales Earnings Per Share
1994 ($1,682,000) $1,043,000 $.14
1993 (674,000) 418,000 .06
1992 728,000 (459,000) (.06)
This information is provided for comparison with companies
using the FIFO basis.
C. ACCRUED LIABILITIES:
At December 31, 1994 accrued liabilities consisted of payroll
$2,466,000, insurance $9,051,000, environmental $3,612,000 and other $3,229,000.
At December 31, 1993 accrued liabilities consisted of payroll $2,294,000,
insurance $9,179,000, environmental $3,612,000 and other $752,000.
D. LONG-TERM DEBT:
Long-term debt at December 31, 1994 and 1993 consisted of a
Convertible Senior Debenture, with interest at 10%.
Payment of the Convertible Senior Debenture principal amount
is due January 2, 1996. The Company may redeem the Debenture at 101% of par
amount as of January 5, 1995. The Debenture is convertible at the option of the
holder, a private charitable foundation which is a related party, into shares of
the Company's common stock based on the average daily closing price of the stock
on the New York Stock Exchange for a specified time period.
The Company believes that it is not practicable to estimate
the fair value of this financial instrument since this is a single instrument
for which there is no publicly traded market.
E. TREASURY STOCK:
The Board of Directors has authorized corporate reacquisition
of up to 750,000 common shares of the Company stock. No shares were acquired in
1994, 1993 and 1992.
F. NET EARNINGS PER COMMON SHARE:
Net earnings per common share are computed using the weighted
average common shares outstanding during each year and includes common
equivalent shares assuming conversion of the Convertible Debenture. Earnings for
calculation of the per share data are adjusted to reflect add-back of interest
expense on the Convertible Debenture.
G. STOCK OPTION PLAN:
On May 16, 1989, National Presto Industries, Inc Stock Option
Plan was adopted. The plan reserves 100,000 shares of the Company's common stock
for key employees of the Company. During 1989, the Company granted options for
5,000 shares at $39.88 per share. The options granted are exercisable 10% at
date of grant and 10% additional on each of the next nine anniversary dates.
Options not exercised between anniversary dates expire. Option for 250 shares
were exercised (proceeds of $11,000) during 1994 leaving 500 shares exercisable
at December 31, 1994. No options were exercised during 1993. Options for 2,500
shares and 3,000 shares were outstanding at December 31, 1994 and 1993,
respectively.
H. RETIREMENT PLANS:
PENSION PLANS:
The Company has pension plans which cover the majority of
employees. Pension benefits are based on an employee's years of service and
compensation near the end of those years of service. The Company's funding
policy has been to contribute such amounts as necessary, computed on an
actuarial basis, to provide the plans with assets sufficient to meet the
benefits to be paid to plan members. Plan assets consist primarily (82%) of
interest bearing securities with the balance in corporate stocks, principally
National Presto Industries, Inc, stock.
Assumptions used to calculate costs and actuarial present
values are reviewed regularly by the Company and its independent actuaries. The
assumptions used in accounting are an 8% discount rate, 5% increase in
compensation levels and a 7.5% long-term rate of return on investments. The
funded status of the plans is summarized below:
______(In thousands)______
As of December 31, 1994 1993 1992
Fair value of plan assets $9,330 $9,889 $9,674
Projected benefit obligation 8,003 8,008 7,049
Excess plan assets $1,327 $1,881 $2,625
Prepaid pension expense $3,190 $3,333 $3,399
401 (K) PLAN:
The Company has a 401 (k) retirement plan which covers
substantially all employees. At its discretion, the Company will match up to 25%
of the first 4% contributed by employees to the plan. The Company's matching
contribution can be made with either cash or common stock. Company contributions
made from the Company's treasury stock, including the Company's cash dividends,
totaled $99,000 in 1994, $91,000 in 1993 and $144,000 during 1992.
I. INCOME TAXES:
The effective rate of the provision for income taxes as shown
in the consolidated statements of earnings differs from the applicable statutory
federal income tax rate for the following reasons:
Percent of Pre-Tax Income
1994 1993 1992
Statutory rate 35.0% 35.0% 34.0%
State tax 2.6% 2.5% 2.9%
Tax exempt interest and dividends (7.8%) (8.5%) (7.3%)
Other (.1%) (.3%) (.1%)
Effective rate 29.7% 28.7% 29.5%
The Company follows the liability method of computing
deferred income taxes. The liability method provides that 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 a
deferred tax asset are as follows at December 31:
(In thousands)
1994 1993
Insurance $ 3,467 $ 3,258
Environmental 1,377 1,375
Pension (1,234) (1,285)
Other 823 (279
$ 4,433 $ 3,069
J. MAJOR CUSTOMERS:
The Company sells its products to the retail trade throughout
the United States under standard credit terms and does not require collateral to
support amounts due. One customer accounted for 35% and 34% of consolidated
revenues for the years ended December 31, 1994 and 1993, respectively. For the
year ended December 31, 1992, two customers accounted for 31% and 14% of
consolidated revenues.
K. ENVIRONMENTAL:
The Company is involved in certain environmental
investigation matters and restoration activities with governmental agencies. The
Company has entered into an agreement with the Department of Army that provides
a vehicle for funding costs related to environmental restoration. A total of
$14,334,000 has been appropriated in connection with that agreement to date.
Based on costs incurred and anticipated future remediation activities,
additional funds beyond the $14,334,000 will be required.
To the extent the Army honors its contractual obligations,
there will be no material effect on the results of operations. Management
believes that the impact of these environmental matters, if any, on the
Company's financial condition will not be material.
L. INTERIM FINANCIAL INFORMATION (UNAUDITED):
The following represents unaudited financial information for
1994, 1993 and 1992:
(In thousands)
Net Gross Net Earnings
Quarter Sales Profit Earnings Per Share
1994
First $ 16,202 $ 5,207 $ 2,192 $ .31
Second 16,487 5,200 2,220 .30
Third 35,488 14,202 4,799 .66
Fourth 59,893 26,072 12,244 1.65
Total $128,070 $ 50,681 $ 21,455 $ 2.92
1993
First $ 22,370 $ 7,612 $ 3,096 $ .43
Second 14,275 5,344 2,628 .36
Third 24,663 10,364 4,335 .60
Fourth 57,272 24,586 8,596 1.16
Total $118,580 $ 47,906 $ 18,655 $ 2.55
1992
First $ 24,871 $ 10,064 $ 4,732 $ .65
Second 17,533 7,405 4,013 .55
Third 26,755 12,018 5,417 .74
Fourth 59,104 30,324 11,720 1.59
Total $128,263 $ 59,811 $ 25,882 $ 3.53
The Company's operations are in only one industry segment.
M. Reclassification:
Certain of the 1993 and 1992 amounts have been reclassified
to conform with the financial statement presentation used in 1994.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Stockholders and Board of Directors
National Presto Industries, Inc.
We have audited the accompanying consolidated balance sheets of National
Presto Industries, Inc. and Subsidiaries as of December 31, 1994 and 1993, and
the related consolidated statements of earnings, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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. An audit also includes
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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of National Presto
Industries, Inc. and Subsidiaries as of December 31, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1994 in conformity with generally
accepted accounting principles.
We have also audited Schedule II of National Presto Industries, Inc. and
Subsidiaries for each of the three years in the period ended December 31, 1994.
In our opinion, this schedule presents fairly, in all material respects, the
information required to be set forth therein.
/S/ Grant Thornton LLP
Minneapolis, Minnesota
February 15, 1995
NATIONAL PRESTO INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 1994, 1993 and 1992
(In thousands)
Column A Column B Column C Column D Column E
Balance at Balance at
Beginning End
Description of Period Additions (A) Deductions (B) of Period
Deducted from assets:
Allowance for doubtful accounts:
Year ended December 31, 1994 $ 450 $ 122 $ 122 $ 450
Year ended December 31, 1993 $ 450 $ (374) $ (374) $ 450
Year ended December 31, 1992 $ 450 $ 256 $ 256 $ 450
Notes:
(A) Amounts charged to selling and general expenses
(B) Principally bad debts written off, net of recoveries
EX-11
2
EXHIBIT 11
Statement Re Computation of Per Share Earnings
The following presents the computation of per share earnings reflecting the
assumption that convertible debentures are converted.
(IN THOUSONDS
EXCEPT PER SHARE DATA)
1994 1993 1992
Net earnings $ 21,455 $ 18,655 $ 25,882
Add interest expense related to convertible
debenture, net of income taxes 312 312 318
Adjusted net earnings for computation (1) $ 21,767 $ 18,967 $ 26,200
Weighted average common shares outstanding 7,337 7,334 7,332
Common equivalent shares from the assumed
debenture conversion 121 96 95
Adjusted common and common equivalent
shares for computation (2) 7,458 7,430 7,427
Net earnings per common and common equivalent
shares outstanding (1 / 2) $ 2.92 $ 2.55 $ 3.53
EX-22
3
EXHIBIT 22
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)
Its Division:
Presto Products Manufacturing Company
Alamogordo, New Mexico
Century Leasing and Liquidating, Inc.
Minneapolis, Minnesota (A Minnesota Corporation)
Its Subsidiary:
Presto Export, Inc. (Inactive)
Minneapolis, Minnesota (A Minnesota Corporation)
Jackson Sales and Storage Company
Jackson, Mississippi (A Mississippi Corporation)
Canton Sales & Storage Company
Canton, Mississippi (A Mississippi Corporation)
Presto Parts & Service, Inc. (Inactive)
Los Angeles, California (A California Corporation)
Presto Export, Ltd.
Christiansted, St. Croix, U.S. Virgin Islands
(A Virgin Islands Corporation)
National Defense Corporation
Eau Claire, Wisconsin (A Wisconsin Corporation)
NPI Export Corporation (Inactive)
Minneapolis, Minnesota (A Minnesota Corporation)
National Presto Industries Export Corporation (Inactive)
Wilmington, Delaware (A Delaware Corporation)
Operating results of all subsidiaries are included in the 1994 Annual Report to
Stockholders.
EX-23.1
4
EXHIBIT 23.1
AUDITORS' CONSENT
We have issued our report dated February 15, 1995, accompanying the
consolidated financial statements and schedule included in the Annual Report of
National Presto Industries, Inc. and Subsidiaries on Form 10-K for the year
ended December 31, 1994. We hereby consent to the incorporation by reference of
said report in the Registration Statement of National Presto Industries, Inc.
and Subsidiaries on Form S-8 (File No. 33-46711, effective March 27, 1992).
/S/ Grant Thornton LLP
Minneapolis, Minnesota
February 15, 1995
EX-27
5
5
1,000
YEAR
DEC-31-1994
DEC-31-1994
109,444
112,754
37,385
(450)
18,865
278,910
13,718
(9,380)
291,036
42,994
5,103
7,441
0
0
235,498
291,036
128,070
128,070
77,389
77,389
0
122
(544)
30,519
9,064
21,455
0
0
0
21,455
2.92
0