Page 1 of 32 Total Pages
Index to Schedules and
Exhibits are at Page 14 and 15
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the fiscal year ended December 31, 2000
or
[ ] 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 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
Title of each class on which registered
------------------- -------------------
$1.00 par value common stock New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
----
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 the 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, 2001, was
$199,356,357.
The number of shares outstanding of each of the registrant's classes of common
stock, as of February 28, 2001, was 6,877,445.
2
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 dated March 30, 2001 Part III
Except as specifically incorporated herein by reference, the foregoing Proxy
Statement is not deemed filed as part of this report.
3
PART I
------
ITEM 1. BUSINESS
A. DESCRIPTION OF BUSINESS
The business of National Presto Industries, Inc., and its consolidated
subsidiaries (the "Company") consists of a single business segment. 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(R) heat control
single thermostatic control line of fry pans in several sizes, griddles
and combination griddle/warmers and multi-purpose cookers; deep fryers
of various sizes; pizza ovens, can openers, slicer/shredders; electric
heaters; corn poppers (hot air and microwave); microwave bacon cookers;
coffeemakers; electric grills; 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,
as well. The Company believes it is one of the principal manufacturers
of pressure cookers in the United States.
For the year ended December 31, 2000, approximately 58% of consolidated
net sales were provided by cast products (fry pans, griddles, grills,
deep fryers and multi- cookers), approximately 6% by motorized
nonthermal appliances (can openers, slicer/shredders, knife sharpeners,
electric knives, and bread slicing systems), and approximately 32% by
noncast/thermal appliances (stamped cookers and canners, stainless
steel cookers, pizza ovens, corn poppers (hot air and microwave),
coffeemakers, microwave bacon cookers, tea kettles, and heaters). For
the year ended December 31, 1999, approximately 61% of consolidated net
sales were provided by cast products, approximately 9% by motorized
nonthermal appliances and approximately 26% by noncast/thermal
appliances. For the year ended December 31, 1998, approximately 59% of
consolidated net sales were provided by cast products, approximately
13% by motorized nonthermal appliances and approximately 25% by
noncast/thermal appliances.
For the year ended December 31, 2000, Wal-Mart Stores, Inc. accounted
for 42% and Target, Inc. accounted for 11% of consolidated net sales.
Wal-Mart Stores, Inc., accounted for 46% and Target, Inc. accounted for
12% of consolidated net sales in 1999. Wal-Mart Stores, Inc. accounted
for 44% of consolidated net sales for the year ended December 31, 1998.
Products are sold directly to retailers throughout the United States
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 (see Footnote J in the Notes to
Consolidated Financial Statements).
4
The Company has a sales force of approximately ten employees that sell
to and service customers. In selected geographic areas sales are
handled by manufacturers' representatives who may also sell other
product lines. Sales promotional activities are conducted through the
use of television, radio and newspaper advertising. The Company's
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
electrical 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 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 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 2000, 1999 and 1998 were absorbed in operations of these
years and were not a material element in the aggregate costs incurred
by the Company.
Company 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 return privilege through cooperating dealers. The Company
services its products through independent service providers throughout
the United States and 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's products are manufactured in plants located at Jackson,
Mississippi and Alamogordo, New Mexico. The Company also purchases a
portion (18% in 2000) of its products from nonaffiliated companies in
the Pacific Rim Countries.
The Company warehouses and distributes its products from a distribution
center located in Canton, Mississippi. Selective use is made of leased
tractors and trailers with back- hauls scheduled on return trips
carrying goods consigned for internal corporate use.
The Company invests funds not currently required for business
activities (see Footnote B (3) in the Notes to Consolidated Financial
Statements). Income from invested funds is included in Other Income in
the accompanying financial statements.
5
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, reacquisition of Company stock, acquisitions and newly
identified business activities.
B. OTHER COMMENTS
1. Sources and Availability of Materials
Production levels at the Company's manufacturing 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 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 in recent years 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
In recent years, patents on new products have become more meaningful to
operating results. Trademarks and know-how are considered significant.
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 in May 1996 the final
record of decision (ROD) was issued for the site by the EPA. At year
end 2000, all remediation projects at the Eau Claire, Wisconsin, site
had been installed, were fully operational, and restoration activities
had been completed.
6
In February 1988, the Company entered into an agreement with the
Department of the Army (the 1988 agreement), pursuant to which the Army
agreed to fund environmental restoration activities related to the
site. As a result of the 1988 Agreement, a total of $27,000,000 has
been appropriated and spent for environmental matters. Based on factors
known as of December 31, 2000, it is believed that funds existing in
corporate reserves, 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 funds could be inadequate.
Management believes that in the absence of any unforeseen future
developments, known environmental matters will not have any material
affect on the results of operations or financial condition of the
Company.
4. Number of Employees of the Company
As of December 31, 2000, the Company had 624 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
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 Company purchases components and raw
materials in advance of production requirements where such purchases
are necessary to ensure supply or provide advantageous long-term
pricing and/or costing.
The current year resulted in lower than expected acceptance of the
Company's primary new product, the Pizzazz(TM) pizza oven, resulting in
higher than expected inventory levels. There are no assurances that
this inventory will be sold in the normal course of business.
6. Backlog
Shipment of most of the Company's 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.
C. INDUSTRY SEGMENTS
The Company operates in one business segment.
7
ITEM 2. PROPERTIES (Owned Except Where Indicated)
The Company's Eau Claire facility is approximately 560,000 square feet.
Leases for 237,000 square feet of this area have been entered into with
outside tenants. The Company's corporate office is also located in Eau
Claire.
The Company manufactures products in Jackson, Mississippi and
Alamogordo, New Mexico.
The Jackson plant contains 283,000 square feet, of which 119,600 square
feet are used for warehousing.
The facility at Alamogordo contains 170,700 square feet, of which
24,800 square feet are used for warehousing. An additional 15,500
square feet has been leased for warehousing.
The Company has a 191,900 square foot building at 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. During the
peak season, an additional 35,000 square feet has been leased.
ITEM 3. LEGAL PROCEEDINGS
The Company is subject to various legal actions incidental to its
normal business operations. In the opinion of management such actions
will be resolved for amounts that in the aggregate will not be material
to the results of operations or financial condition of the Company.
See Item 1.B.3. For information regarding certain environmental
matters.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
8
EXECUTIVE OFFICERS OF THE REGISTRANT
The following information is provided with regard to the executive officers of
the registrant: (All terms of office are for one year or until their respective
successors are duly elected.)
NAME TITLE AGE
------ ------- -----
Melvin S. Cohen Chairman of the Board 83
Maryjo Cohen President and Chief 48
Executive Officer
James F. Bartl Executive Vice President 60
and Secretary
Richard F. Anderl Vice President, Engineering 57
Neil L. Brown Vice President, Manufacturing 57
Larry R. Hoepner Vice President, Purchasing 59
Donald E. Hoeschen Vice President, Sales 53
Randy F. Lieble Chief Financial Officer 47
and Treasurer
Mr. Cohen was elected Chairman of the Board in May 1975. Prior to that
date he was President, a position that he again held from November 1986
to May 1989. Mr. Cohen is the father of Maryjo Cohen and has been
associated with the registrant since 1944.
Ms. Cohen was elected Treasurer in September 1983, to the additional
positions of 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. Ms. Cohen is the
daughter of Melvin S. Cohen.
Mr. Bartl was elected Secretary in May 1978 and the additional position
of Executive Vice President in November 1998. 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.
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.
9
Mr. Brown was elected Vice President in November 1997. He has been
associated with the registrant since 1966. Prior to becoming an
officer, he was Director of Manufacturing.
Mr. Hoepner was elected Vice President in November 1998. He has been
associated with the registrant since 1966. Prior to becoming an
officer, he was Director of Purchasing.
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. Lieble was elected Treasurer in November 1995 and the additional
position of Chief Financial Officer in November 1999. He has been
associated with the registrant since 1977. Prior to becoming an
officer, he was Manager of Investments and Government Contracts.
10
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
RECORD OF DIVIDENDS PAID AND MARKET PRICE OF COMMON STOCK
2000 1999
---------------------------------- ----------------------------------
Applicable Market Price Applicable Market Price
Dividends Paid ------------------ Dividends Paid ------------------
per Share High Low per Share High Low
------------ ------ ----- --------- ------ -----
First Quarter $ 2.10 $35.81 $31.00 $ 2.00 $42.88 $35.13
Second Quarter -- 35.19 29.56 -- 38.94 34.13
Third Quarter -- 31.19 29.63 -- 41.00 35.50
Fourth Quarter -- 32.00 29.06 -- 39.00 34.13
-----------------------------------------------------------------------
Full Year $ 2.10 $35.81 $29.06 $ 2.00 $42.88 $34.13
Common stock of National Presto Industries, Inc., is traded on the New
York Stock Exchange under the symbol NPK. As of December 31, 2000, there were
731 stockholders of record. There were 730 stockholders of record as of February
28, 2001, the latest practicable date.
ITEM 6. SELECTED FINANCIAL DATA
(in thousands except per share data)
For the years ended December 31, 2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Gross sales $ 120,079 $ 116,723 $ 108,861 $ 111,423 $ 107,878
Net earnings 15,158 20,822 19,733 16,982 14,720
Net earnings per share 2.16 2.84 2.68 2.31 2.00
Total assets 288,707 299,393 294,762 291,870 285,385
Dividends paid per common share
applicable to current year 2.10 2.00 2.00 2.00 2.00
11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
Forward-looking statements in this Annual Report 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
historical results. Investors are cautioned that all forward-looking statements
involve risks and uncertainty. The 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; competitive pressure on sales and pricing, and increases in
material or production cost which cannot be recouped in product pricing.
Additional information concerning those and other factors is contained in the
Company's Securities and Exchange Commission filings, including but not limited
to the Form 10-K, copies of which are available from the Company without charge.
2000 COMPARED TO 1999
Net sales increased by $1,871,000 from $114,697,000 to $116,568,000 or 2%. The
increase was due primarily to the sale of new products offset in part by
decreased unit volume.
Gross profit for 2000 decreased $1,151,000 from $36,831,000 to $35,680,000 or
31% versus 32% as a percentage of net sales. The reduction of gross profit
percentage was largely caused by less favorable manufacturing efficiencies at
the Company's manufacturing facilities.
Selling and general expenses increased $9,613,000 largely due to increased
advertising expenses related to new product introductions. As a percentage of
net sales, selling and general expenses increased from 15% to 23%.
Earnings before provision for income taxes decreased $9,849,000 from $29,177,000
to $19,328,000. The provision for income taxes decreased from $8,355,000 to
$4,170,000, which resulted in an effective income tax rate decrease from 29% to
22%, as a result of decreased earnings subject to tax. Net earnings decreased
$5,664,000 from $20,822,000 to $15,158,000, or 27%.
The Company maintains adequate liquidity for all of its anticipated capital
requirements and dividend payments. As of year-end 2000, there were no material
capital commitments outstanding.
1999 COMPARED TO 1998
Net sales increased by $7,624,000 from $107,073,000 to $114,697,000 or 7%. The
increase was due primarily to increased unit volume.
Gross profit for 1999 increased $611,000 from $36,220,000 to $36,831,000 or 32%
versus 34% as a percentage of net sales. The reduction of gross profit
percentage was largely caused by increased material costs.
Selling and general expenses decreased $834,000 largely due to a more favorable
bad debt experience. As a percentage of net sales, selling and general expenses
decreased from 17% to 15%.
12
Earnings before provision for income taxes increased $1,781,000 from $27,396,000
to $29,177,000. The provision for income taxes increased from $7,663,000 to
$8,355,000, which resulted in an effective income tax rate increase from 28% to
29%, as a result of increased earnings subject to tax. Net earnings increased
$1,089,000 from $19,733,000 to $20,822,000, or 6%.
ITEM 7A. QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's interest income on cash equivalents and investments is affected by
changes in interest rates in the United States. The Company's investments are
held primarily in municipal bonds, a majority of which earn a fixed rate of
interest, while the remaining bonds earn a variable interest rate. The Company
uses sensitivity analysis to determine its exposure to changes in interest
rates. Through December 31, 2000, changes in these 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 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 hedges. Any transactions that are currently entered into in foreign
currency are not deemed material to the financial statements. Thus, the exposure
to foreign exchange market risk is not material.
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-12
of this report.
B. Quarterly financial data is contained in Note M in Notes to
Consolidated Financial Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None
13
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 for information relating to
Directors of the Company.
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, 2000, the registrant intends to file a definitive proxy statement
pursuant to regulation 14A. Pursuant to the Rules and Regulations of the
Securities Exchange Act of 1934, the information required for Items 10, 11, 12
and 13 has been omitted and is incorporated herein from Proxy by reference.
14
14
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, 2000 and 1999 F-1 & F-2
2. Consolidated Statements of Earnings -
Years ended December 31, 2000, 1999 and 1998 F-3
3. Consolidated Statements of Cash Flows -
Years ended December 31, 2000, 1999 and 1998 F-4
4. Consolidated Statements of Stockholders' Equity -
Years ended December 31, 2000, 1999 and 1998 F-5
5. Notes to Consolidated Financial Statements F-6 thru F-11
6. Report of Independent Certified Public Accountants F-12
B. The following Schedules and Exhibits are included in this report:
Schedule II - Valuation and Qualifying Accounts F-13
Exhibit 3 (i) - Restated Articles of Incorporation -
incorporated by reference from Exhibit 3 (i)
of the Company's quarterly report on Form
10-Q for the quarter ended July 6, 1997
(ii) - By-Laws - incorporated by reference
from Exhibit 3 (ii) of the Company's
quarterly report on Form 10-Q for the
quarter ended October 3, 1999
Exhibit 9 - 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
Exhibit 10.1 - 1988 Stock Option Plan - incorporated by
reference from Exhibit 10.1 of the Company's
quarterly report on Form 10-Q for the
Quarter ended July 6, 1997
Exhibit 10.2 - Form of Incentive Stock Option Agreement
under the 1988 Stock Option Plan -
Incorporated by reference from Exhibit 10.2
of the Company's quarterly report on Form
10-Q for the Quarter ended July 6, 1997
Exhibit 11 - Statement Re Computaton of Per Share Earnings F-14
Exhibit 21 - Parent and Subsidiaries F-15
Exhibit 23.1 - Consent of Grant Thornton LLP F-16
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.
C. Reports on Form 8-K:
No reports on Form 8-K were filed during the last quarter of the
period covered by this Form 10-K.
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/ Randy F. Lieble
---------------------------------
Randy F. Lieble
Chief Financial Officer
and Treasurer
(Principal Accounting Officer)
By: /S/ Richard N. Cardozo By: /S/ Melvin S. Cohen
-------------------------------- ---------------------------------
Richard N. Cardozo Melvin S. Cohen
Director Chairman of the Board
By: /S/ John M. Sirianni By: /S/ James F. Bartl
-------------------------------- ---------------------------------
John M. Sirianni James F. Bartl
Director Executive Vice President,
Secretary and Director
By: /S/ Michael J. O'Meara By: /S/ Maryjo Cohen
-------------------------------- ---------------------------------
Michael J. O'Meara Maryjo Cohen
Director President and Chief Executive
Officer and Director
Date: March 23, 2001
---------------------
F-1
NATIONAL PRESTO INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except share and per share data)
DECEMBER 31, 2000 DECEMBER 31, 1999
-------------------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 79,624 $ 88,075
Marketable securities 143,205 150,455
Accounts receivable $ 10,473 $ 20,466
Less allowance for doubtful accounts 450 10,023 450 20,016
------------ ------------
Inventories:
Finished goods 21,056 5,548
Work in process 2,416 2,409
Raw materials 6,968 8,486
Supplies 867 31,307 884 17,327
------------ ------------
Prepaid expenses 47 72
------------ ------------
Total current assets 264,206 275,945
PROPERTY, PLANT AND EQUIPMENT:
Land and land improvements 212 176
Buildings 8,052 7,087
Machinery and equipment 18,014 17,065
------------ ------------
26,278 24,328
Less allowance for depreciation 12,984 13,294 12,019 12,309
------------ ------------
OTHER ASSETS 11,207 11,139
------------ ------------
$ 288,707 $ 299,393
============ ============
The accompanying notes are an integral part of the financial statements.
F-2
NATIONAL PRESTO INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
DECEMBER 31, 2000 DECEMBER 31, 1999
----------------------------------------------------------------------------------------------------------------------------
LIABILITIES
CURRENT LIABILITIES:
Accounts payable $ 16,014 $ 14,395
Federal and state income taxes 3,108 6,064
Accrued liabilities 24,425 23,602
------------ ------------
Total current liabilities 43,547 44,061
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 1,027 1,033
Retained earnings 254,381 254,218
------------ ------------
262,849 262,692
Treasury stock, at cost, 562,798 shares
in 2000 and 230,912 shares in 1999 17,689 7,360
------------ ------------
Total stockholders' equity 245,160 255,332
------------ ------------
$ 288,707 $ 299,393
============ ============
The accompanying notes are an integral part of the financial statements.
F-3
NATIONAL PRESTO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands except per share data)
For the years ended December 31, 2000 1999 1998
------------------------------------------------------------------------------------------------
Gross sales $120,079 $116,723 $108,861
Less freight, discounts, etc 3,511 2,026 1,788
------------------------------------
Net sales 116,568 114,697 107,073
Cost of sales 80,888 77,866 70,853
------------------------------------
Gross profit 35,680 36,831 36,220
Selling and general expenses 26,680 17,067 17,901
------------------------------------
Operating profit 9,000 19,764 18,319
Other income, principally interest 10,328 9,413 9,077
------------------------------------
Earnings before provision for income taxes 19,328 29,177 27,396
Provision for income taxes 4,170 8,355 7,663
------------------------------------
Net earnings $ 15,158 $ 20,822 $ 19,733
====================================
Weighted average shares outstanding:
Basic 7,014 7,343 7,357
====================================
Diluted 7,015 7,344 7,358
====================================
Net earnings per share:
Basic $ 2.16 $ 2.84 $ 2.68
====================================
Diluted $ 2.16 $ 2.84 $ 2.68
====================================
The accompanying notes are an integral part of the financial statements.
F-4
NATIONAL PRESTO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
For the years ended December 31, 2000 1999 1998
-----------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net earnings $ 15,158 $ 20,822 $ 19,733
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Provision for depreciation 2,786 2,296 2,098
Deferred income taxes 198 202 (42)
Other 209 187 184
Changes in:
Accounts receivable 9,993 (4,176) 4,402
Inventories (13,980) (1,354) 2,660
Prepaid expenses 25 185 661
Accounts payable and accrued liabilities 2,442 3,856 (3,608)
Federal and state income taxes (2,956) (152) 1,293
-----------------------------------------
Net cash provided by operating activities 13,875 21,866 27,381
-----------------------------------------
Cash flows from investing activities:
Marketable securities purchased (50,747) (92,665) (51,471)
Marketable securities - maturities and sales 57,997 68,876 65,456
Acquisition of property, plant and equipment (3,843) (4,151) (3,656)
Changes in other assets (194) (334) (74)
-----------------------------------------
Net cash provided by (used in) investing activities 3,213 (28,274) 10,255
-----------------------------------------
Cash flows from financing activities:
Dividends paid (14,995) (14,719) (14,710)
Purchase of treasury stock (10,544) (5,363) --
-----------------------------------------
Net cash used in financing activities (25,539) (20,082) (14,710)
-----------------------------------------
Net increase (decrease) in cash and cash equivalents (8,451) (26,490) 22,926
Cash and cash equivalents at beginning of year 88,075 114,565 91,639
-----------------------------------------
Cash and cash equivalents at end of year $ 79,624 $ 88,075 $ 114,565
=========================================
Supplemental disclosures of cash flow information:
Cash paid during the year for income taxes $ 6,930 $ 8,305 $ 5,914
=========================================
The accompanying notes are an integral part of the financial statements.
F-5
NATIONAL PRESTO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands except share and per share data)
For the years ended December 31, 2000, 1999, 1998
---------------------------------------------------------------------------------------------------------------
Common Paid-in Retained Treasury
Stock Capital Earnings Stock Total
----- ------- -------- ----- -----
Balance January 1, 1998 $ 7,441 $ 925 $ 243,092 $ (2,260) $ 249,198
Net earnings -- -- 19,733 -- 19,733
Dividends paid, $2.00 per share -- -- (14,710) -- (14,710)
Other -- 65 -- 119 184
------------------------------------------------------------------
Balance December 31, 1998 7,441 990 248,115 (2,141) 254,405
Net earnings -- -- 20,822 -- 20,822
Dividends paid, $2.00 per share -- -- (14,719) -- (14,719)
Purchase of treasury stock - 155,000 shares -- -- -- (5,363) (5,363)
Other -- 43 -- 144 187
------------------------------------------------------------------
Balance December 31, 1999 7,441 1,033 254,218 (7,360) 255,332
Net earnings -- -- 15,158 -- 15,158
Dividends paid, $2.10 per share -- -- (14,995) -- (14,995)
Purchase of treasury stock - 338,600 shares -- -- -- (10,544) (10,544)
Other -- (6) -- 215 209
------------------------------------------------------------------
Balance December 31, 2000 $ 7,441 $ 1,027 $ 254,381 $ (17,689) $ 245,160
==================================================================
The accompanying notes are an integral part of the financial statements.
F-6
NATIONAL PRESTO INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. NATURE OF OPERATIONS:
The Company manufactures and distributes small electrical appliances and
housewares. Products are sold directly to retail outlets throughout the
United States and also through independent distributors. These products are
manufactured in plants located at Jackson, Mississippi and Alamogordo, New
Mexico. A portion of its products are imported from nonaffiliated companies
in the Pacific Rim countries. The Company's operations are in one industry
segment.
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(1) USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS: In
preparation of the Company's consolidated financial statements,
management is required to make estimates and assumptions that affect
the reported amounts of assets and liabilities and related revenues
and expenses. Actual results may differ from the estimates used by
management.
(2) 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.
(3) 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. Cash equivalent securities
totaled $80,231,000 and $88,333,000 at December 31, 2000 and 1999. The
Company invests principally in A-rated or higher tax exempt bonds
issued by entities throughout the United States.
The Company has classified all cash equivalents and marketable
securities as available for sale, 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, 2000 and
1999, cost approximated market value for all securities using the
specific identification method. The contractual maturities of the
marketable securities held at December 31, 2000 were $99,395,000 in
2001, $34,002,000 in 2002, $8,412,000 in 2003 and $1,396,000 with
indeterminate maturities.
(4) INVENTORIES: Inventories are stated at the lower of cost or market
with cost being determined principally on the last-in, first-out
(LIFO) method.
(5) PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are
stated at cost. For machinery and equipment, all amounts that are
fully depreciated have been eliminated from both the asset and
allowance accounts. Depreciation is provided in amounts sufficient to
relate the costs of depreciable assets to operations over their
service lives, which are estimated at fifteen to forty years for
buildings and three to seven years for machinery and equipment.
(6) REVENUE RECOGNITION: The Company recognizes revenue when product is
shipped. The Company provides for its 60-day over-the-counter return
privilege, warranties at the time of shipment and other customer
returns.
F-7
(7) ADVERTISING: The Company's policy is to expense advertising as
incurred for the year. Advertising expense was $15,195,000, $6,876,000
and $6,856,000 in 2000, 1999 and 1998.
(8) STOCK OPTIONS: The intrinsic value method is used for valuing stock
options issued.
(9) RECLASSIFICATIONS: Certain reclassifications have been made to the
1999 and 1998 financial statements to conform with the 2000 financial
statement presentation.
C. INVENTORIES:
The amount of inventories valued on the LIFO basis was $30,440,000 and
$16,443,000 as of December 31, 2000 and 1999. Under LIFO, inventories are
valued at approximately $11,244,000 and $10,876,000 below current cost
determined on a first-in, first-out (FIFO) basis at December 31, 2000 and
1999. The Company uses the LIFO method of inventory accounting to improve
the 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
---- ----- -------- ---------
2000 $ (368,000) $ 228,000 $ 0.03
1999 (286,000) 177,000 0.02
1998 1,353,000 (838,000) (0.11)
This information is provided for comparison with companies using the FIFO
basis.
D. ACCRUED LIABILITIES:
At December 31, 2000 accrued liabilities consisted of payroll $2,767,000,
insurance $15,923,000, environmental $3,320,000 and other $2,415,000. At
December 31, 1999 accrued liabilities consisted of payroll $2,590,000,
insurance $14,442,000, environmental $3,642,000 and other $2,928,000.
E. TREASURY STOCK:
As of December 31, 2000, the Company has authority from the Board of
Directors to reacquire an additional 569,200 shares. During 2000 and 1999,
338,600 and 155,000 shares were reacquired. No shares were reacquired in
1998. Treasury shares have been used for the exercise of stock options and
to fund the Company's 401(k) contributions (see note H).
F. NET EARNINGS PER COMMON SHARE:
Basic net earnings per share amounts have been computed by dividing net
earnings by the weighted average number of outstanding common shares.
Diluted net earnings per share is computed by dividing net earnings by the
weighted average number of outstanding common shares and common share
equivalents relating to stock options, when dilutive. Options to purchase
8,750; 10,000; and 11,500 shares of common stock with a weighted average
exercise price of $39.41, $39.43 and $39.45 were outstanding at December
31, 2000, 1999 and 1998, but were excluded from the computation of common
share equivalents because their exercise prices were greater than the
average market price of the common shares.
F-8
G. STOCK OPTION PLAN:
The National Presto Industries, Inc. Stock Option Plan reserves 100,000
shares of common stock for key employees. Stock options for 8,750 shares at
a weighted average price of $39.41 per share were outstanding at December
31, 2000. Stock options for 10,000 shares at a weighted average price of
$39.43 per share were outstanding at December 31, 1999. There were 1,250
shares exercisable at $39.41 at December 31, 2000 and 1,250 shares
exercisable at $39.43 at December 31, 1999. The pro forma effect of
accounting for stock options using the fair value method is immaterial.
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 (72%) of
interest bearing securities with the balance in corporate stocks,
principally National Presto Industries, Inc. common stock.
(In thousands)
Pension Benefits
--------------------------------
2000 1999 1998
---- ---- ----
Net periodic benefit cost $ 529 $ 713 $ 392
================================
Fair value of plan assets $ 8,656 $ 8,066
Benefit obligation 9,683 9,112
--------------------
Benefit obligations in excess of fair value of plan assets (1,027) (1,046)
Unrecognized actuarial loss 2,941 2,157
Unrecognized prior service cost 1,039 1,267
Unrecognized net transition obligation (187) (291)
--------------------
Prepaid benefit $ 2,766 $ 2,087
====================
WEIGHTED-AVERAGE ASSUMPTIONS AS OF DECEMBER 31:
Discount rate 7.50% 7.75%
Expected return on plan assets 8.00% 8.00%
Rate of compensation increase 5.00% 5.00%
401(k) PLAN:
The Company also has a 401(k) retirement plan which covers substantially
all employees. At its discretion, the Company will match up to 50% of the
first 4% contributed by employees to the plan. The matching contribution
can be made with either cash or common stock. Contributions made from the
treasury stock, including the Company's cash dividends, totaled $209,000 in
2000, $187,000 in 1999, and $184,000 in 1998.
F-9
I. INCOME TAXES:
The following table summarizes the provision for income taxes:
(In thousands)
--------------
2000 1999 1998
---- ---- ----
Current:
Federal $ 3,345 $ 6,817 $ 6,355
State 627 1,336 1,350
-------------------------------
3,972 8,153 7,705
-------------------------------
Deferred:
Federal 170 169 (39)
State 28 33 (3)
-------------------------------
198 202 (42)
-------------------------------
Total tax provision $ 4,170 $ 8,355 $ 7,663
===============================
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
-------------------------
2000 1999 1998
---- ---- ----
Statutory rate 35.0% 35.0% 35.0%
State tax 2.2% 3.0% 3.2%
Tax exempt interest and dividends -14.9% -9.2% -10.8%
Other -0.7% -0.2% 0.6%
-------------------------------
Effective rate 21.6% 28.6% 28.0%
===============================
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)
--------------
2000 1999
---- ----
Insurance $ 6,114 $ 5,546
Environmental 1,275 1,371
Pension (1,368) (1,265)
Other 1,474 2,041
-------------------
$ 7,495 $ 7,693
===================
J. CONCENTRATIONS:
One customer accounted for 42%, 46% and 44% of net sales for the years
ended December 2000, 1999 and 1998. Another customer accounted for 11% and
12% of net sales for the years ended December 31, 2000 and 1999.
F-10
The Company's largest customer announced during 2000 that it would be
discontinuing the purchase of three of the Company's products during 2001.
For the year ended December 31, 2000, sales of these products to this
customer approximated $17,400,000, or 14% of the Company's sales. In
January 2001, the Company's second largest customer notified the Company
that it would be significantly reducing the products which it currently
purchases. For the year ended December 31, 2000, sales of these products to
this customer approximated $11,168,000, or 9% of the Company's year 2000
sales.
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, some
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.
K. RISKS AND UNCERTAINTIES:
ENVIRONMENTAL:
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. Based on factors known as of
December 31, 2000, it is believed that funds existing in corporate
reserves, 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 that existing
funds could be inadequate. Management believes that in the absence of any
unforeseen future developments, known environmental matters will not have
any material affect on the results of operations or financial condition of
the Company.
L. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Financial Accounting Standard Board Statement No. 133 "Accounting for
Derivative Instruments and Hedging Activities" is effective for fiscal
years beginning after June 15, 2000 as amended by SFAS137. SFAS 133
requires entities to recognize all derivatives in their financial
statements as either assets or liabilities measured at fair value. The
Statement also specifies new methods of accounting for derivatives used in
risk management strategies (hedging activities), prescribes the items and
transactions that may be hedged, and specifies detailed criteria required
to qualify for hedge accounting. The adoption of this standard is not
expected to have a material effect on the consolidated financial statements
of the Company.
F-11
M. INTERIM FINANCIAL INFORMATION (UNAUDITED):
The following represents unaudited financial information for 2000, 1999,
and 1998:
(In thousands)
-------------------------------------
Gross Gross Net Earnings
Quarter Sales Profit Earnings Per Share
----- ------ -------- ---------
2000
First $ 18,944 $ 4,687 $ 3,018 $ 0.42
Second $ 20,831 $ 5,658 $ 2,848 $ 0.40
Third $ 31,388 $ 10,041 $ 3,600 $ 0.52
Fourth $ 48,916 $ 15,294 $ 5,692 $ 0.82
--------------------------------------------------
Total $ 120,079 $ 35,680 $ 15,158 $ 2.16
==================================================
1999
First $ 21,963 $ 6,174 $ 3,280 $ 0.45
Second 19,176 5,919 3,133 $ 0.43
Third 25,594 7,910 3,744 $ 0.51
Fourth 49,990 16,828 10,665 $ 1.45
--------------------------------------------------
Total $ 116,723 $ 36,831 $ 20,822 $ 2.84
==================================================
1998
First $ 19,378 $ 4,922 $ 2,810 $ 0.38
Second 16,640 4,710 2,760 0.38
Third 24,752 8,181 3,735 0.50
Fourth 48,091 18,407 10,428 1.42
--------------------------------------------------
Total $ 108,861 $ 36,220 $ 19,733 $ 2.68
==================================================
N. SUBSEQUENT EVENT (UNAUDITED)
On February 24, 2001, the Company acquired the outstanding stock of a
supplier to the defense industry for cash. For the year ended December 31,
2000 this company's sales were approximately $10,900,000.
F-12
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, 2000 and
1999, and the related consolidated statements of earnings, stockholders' equity,
and cash flows for each of the three years in the period ended December 31,
2000. 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 auditing standards
generally accepted in the United States of America. 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. 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, 2000 and
1999, and the consolidated results of their operations and their consolidated
cash flows for each of the three years in the period ended December 31, 2000 in
conformity with accounting principles generally accepted in the United States of
America.
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,
2000. In our opinion, this schedule represents fairly, in all material respects,
the information required to be set forth therein.
/S/ Grant Thornton LLP
Minneapolis, Minnesota
February 16, 2001
F-13
NATIONAL PRESTO INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 2000, 1999 and 1998
(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, 2000 $ 450 $ (41) $ (41) $ 450
====================================================================
Year ended December 31, 1999 $ 450 $ (283) $ (283) $ 450
====================================================================
Year ended December 31, 1998 $ 450 $ 1,536 $ 1,536 $ 450
====================================================================
Notes:
(A) Amounts charged (credited) to selling and general expenses
(B) Principally bad debts written off, net of recoveries