SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED OCTOBER 4, 1998
[ ] 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 (I.R.S. Employer
incorporation or organization) Identification No.)
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
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 [ ]
There were 7,358,590 shares of the Issuer's Common Stock outstanding as of the
close of the period covered by this report.
<PAGE>
NATIONAL PRESTO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
October 4, 1998 and December 31, 1997
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
1998 1997
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 93,627 $ 91,639
Marketable securities 122,430 140,651
Accounts receivable, net 14,420 20,242
Inventories:
Finished goods $ 19,232 $ 9,058
Work in process 2,953 1,675
Raw materials 5,073 6,900
Supplies 954 28,212 1,000 18,633
-------- --------
Prepaid expenses 736 918
-------- --------
Total current assets 259,425 272,083
PROPERTY, PLANT AND EQUIPMENT: 22,456 20,008
Less allowance for depreciation 12,511 9,945 11,002 9,006
-------- --------
OTHER ASSETS 10,855 10,781
-------- --------
$280,225 $291,870
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
NATIONAL PRESTO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
October 4, 1998 and December 31, 1997
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
1998 1997
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LIABILITIES
CURRENT LIABILITIES:
Accounts payable $ 10,985 $ 15,958
Federal and state income taxes 2,268 4,923
Accrued liabilities 23,032 21,791
-------- --------
Total current liabilities 36,285 42,672
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 976 925
Retained earnings 237,687 243,092
-------- --------
246,104 251,458
Treasury stock, at cost 2,164 2,260
-------- --------
Total stockholders' equity 243,940 249,198
-------- --------
$280,225 $291,870
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
NATIONAL PRESTO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
Three Months and Nine Months ended October 4, 1998 and October 5, 1997
(Unaudited)
(In thousands except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
1998 1997 1998 1997
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $24,306 $24,917 $59,565 $59,734
Cost of sales 16,125 16,646 41,752 42,600
------- ------- ------- -------
Gross profit 8,181 8,271 17,813 17,134
Selling and general expenses 5,516 6,121 13,589 14,552
------- ------- ------- -------
Operating profit 2,665 2,150 4,224 2,582
Other income, principally interest 2,153 2,249 6,883 7,037
Other, principally litgation judgments/settlements -- -- -- 550
------- ------- ------- -------
Earnings before provision for income taxes 4,818 4,399 11,107 10,169
Provision for income taxes 1,083 896 1,802 1,448
------- ------- ------- -------
Net earnings $ 3,735 $ 3,503 $ 9,305 $ 8,721
======= ======= ======= =======
Weighted average shares outstanding:
Basic 7,357 7,354 7,357 7,354
======= ======= ======= =======
Diluted 7,358 7,355 7,358 7,355
======= ======= ======= =======
Net earnings per share:
Basic $ 0.50 $ 0.48 $ 1.26 $ 1.19
======= ======= ======= =======
Diluted $ 0.50 $ 0.48 $ 1.26 $ 1.19
======= ======= ======= =======
Cash dividends declared and paid per common share $ -- $ -- $ 2.00 $ 2.00
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
NATIONAL PRESTO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months ended October 4, 1998 and October 5, 1997
(Unaudited)
(Dollars in thousands)
1998 1997
- --------------------------------------------------------------------------------
Cash flows from operating activities:
Net earnings $ 9,305 $ 8,721
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Provision for depreciation 1,517 1,357
Stock compensation expense 122 67
Changes in:
Accounts receivable 5,822 5,964
Inventories (9,579) (9,793)
Prepaid expenses 182 (22)
Accounts payable and accrued liabilities (3,732) (794)
Federal and state income taxes (2,655) (3,037)
-------- --------
Net cash provided by operating activities 982 2,463
-------- --------
Cash flows from investing activities:
Marketable securities purchased (76,316) (60,023)
Marketable securities - maturities and sales 94,537 73,159
Acquisition of property, plant and equipment (2,456) (2,917)
Other (74) 26
-------- --------
Net cash provided by investing activities 15,691 10,245
-------- --------
Cash flows from financing activities:
Dividends paid (14,710) (14,706)
Other 25 (11)
-------- --------
Net cash used in financing activities (14,685) (14,717)
-------- --------
Net increase (decrease) in cash and cash equivalents 1,988 (2,009)
Cash and cash equivalents at beginning of period 91,639 91,878
-------- --------
Cash and cash equivalents at end of period $ 93,627 $ 89,869
======== ========
The accompanying notes are an integral part of the financial statements.
<PAGE>
NATIONAL PRESTO INDUSTRIES, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - EARNINGS PER SHARE
The Company's basic net earnings per share amounts have been computed by
dividing net earnings by the weighted average number of outstanding common
shares. The Company's 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.
- --------------------------------------------------------------------------------
The foregoing information for the periods ended October 4, 1998, and October 5,
1997, is unaudited; however, in the opinion of management of the Registrant, it
reflects all the adjustments, which were of a normal recurring nature, necessary
for a fair statement of the results for the interim periods. The condensed
consolidated balance sheet as of December 31, 1997, is summarized from audited
consolidated financial statements, but does not include all the disclosures
contained therein and should be read in conjunction with the 1997 Annual Report.
Interim results for the period are not indicative of those for the year.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Comparison Third Quarter 1998 and 1997
Net sales were relatively flat at $24,306,000 versus $24,917,000 in the
prior year's comparable quarter.
Gross margin as a percentage of sales was comparable to the prior year.
The Company accrues unexpended advertising costs budgeted for the year
against each quarter's sales. Major advertising commitments are incurred in
advance of the expenditures, and the timing of sales through dealers and
distributors to the ultimate customer does not permit specific identification of
the customers' purchase to the actual time an advertisement appears. Advertising
charges included in selling expense in each quarter represent that percentage of
the annual advertising budget associated with that quarter's shipments.
Revisions to this budget result in periodic changes to the accrued liability for
committed advertising expenditures.
Earnings before provision for income taxes increased $419,000 from
$4,399,000 to $4,818,000. The provision for income taxes increased from $896,000
to $1,083,000 and the effective income tax rate increased from 20% to 22%, as a
result of increased earnings subject to tax. Net earnings increased $232,000
from $3,503,000 to $3,735,000, or 7% and earnings per share increased from $.48
to $.50.
The Company maintains adequate liquidity for all of its anticipated
capital requirements. As of quarter-end, there were no material capital
commitments outstanding.
Forward looking statements in this Quarterly 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.
<PAGE>
Comparison First Nine Months 1998 and 1997
Net sales were flat when compared to the prior year's.
Gross margins as a percentage of sales increased from 29% to 30%,
primarily due to higher efficiencies at the Company's manufacturing facilities.
The accrual for unexpended advertising costs discussed in the Third
Quarter comparison also applies to the first nine months.
Other income, principally interest, decreased from the 1997 level
primarily as a result of a lower level of invested funds at approximately the
same rate of return.
Earnings before provision for income taxes increased $938,000 from
$10,169,000 to $11,107,000. The provision for income taxes increased from
$1,448,000 to $1,802,000 and the effective income tax rate increased from 14% to
16%, as a result of increased earnings subject to tax. Net earnings increased
$584,000 from $8,721,000 to $9,305,000, or 7% and earnings per share increased
from $1.19 to $1.26.
Year 2000
The year 2000 (Y2K) issue is the result of computer programs
using a two-digit format to indicate the year in any date. Computer systems with
such software will be unable to interpret dates beyond the year 1999, thus
causing computer errors which could lead to disruptions in operations. In 1997
the Company began the work necessary to address its Y2K exposure and focused
primarily on two areas:
Internal Systems: During 1997 the Company began upgrading or replacing
its affected programs or systems to become Y2K compliant, and expects this
effort to be completed by March 31, 1999. The conversion costs have been
expensed as incurred, and are not considered material. At this time the Company
believes it is unnecessary to adopt a contingency plan, but as part of the
overall project will continue to assess the need for a contingency plan.
External (Supplier) Systems: The Company has contacted critical
suppliers of products and services to assess whether the suppliers are Y2K
compliant or to monitor their progress toward Y2K compliance. The failure of any
key supplier to provide adequate responses as to their Y2K readiness will result
in the Company's developing contingency plans at that time, including use of
alternate suppliers. However, there can be no absolute assurance that suppliers
and others will timely resolve their own Y2K compliance issues.
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 5. Other Information
Since publication of the Company's proxy statement for its 1998 Annual
Meeting of Stockholders, the Securities and Exchange Commission has
amended its Rules 14a-4 and 14a-5(e), which govern the use by the
Company of its discretionary voting authority with respect to certain
shareholder proposals. Pursuant to these amendments, should the Company
receive notice after February 17, 1999, of any such stockholder
proposal which will be circulated independent of the Company's proxy
statement, the persons named in proxies solicited by the Board of
Directors of the Company for its 1999 Annual Meeting of Stockholders
may exercise discretionary voting power with respect to any such
proposal.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
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 July 6, 1997
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 regarding computation of per share
earnings
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K:
None
SIGNATURES
----------
Pursuant to the requirements 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.
----------------------------------------
Date: November 5, 1998 /S/ M. J. Cohen
----------------------------------------
M. J. Cohen, President
(Principal operating officer)
Date: November 5, 1998 /S/ R. F. Lieble
----------------------------------------
R. F. Lieble, Treasurer
(Principal accounting officer)
<PAGE>
National Presto Industries, Inc.
Exhibit Index
Exhibit
Number Exhibit Description
------ -------------------
11 Computation of Earnings per Share
27 Financial Data Schedule
National Presto Industries, Inc.
Exhibit 11
The following presents the computation of per share earnings reflecting the
assumption that the granted shares under the 1988 Stock Option Plan will be
exercised.
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Third Quarter First Nine Months
------------- -----------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Earnings (1) $3,735 $3,503 $9,305 $8,721
=============== ===============
Weighted average common shares outstanding (2) 7,357 7,354 7,357 7,354
Common share equivalents relating to stock options 1 1 1 1
Adjusted common and common equivalent --------------- ---------------
shares for computation (3) 7,358 7,355 7,358 7,355
=============== ===============
Net earnings per share:
Basic (1/2) $ 0.50 $ 0.48 $ 1.26 $ 1.19
=============== ---------------
Diluted (1/3) $ 0.50 $ 0.48 $ 1.26 $ 1.19
=============== ===============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NATIONAL
PRESTO INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> OCT-04-1998
<CASH> 93,627
<SECURITIES> 122,430
<RECEIVABLES> 14,420
<ALLOWANCES> 0
<INVENTORY> 28,212
<CURRENT-ASSETS> 259,425
<PP&E> 22,456
<DEPRECIATION> 12,511
<TOTAL-ASSETS> 280,225
<CURRENT-LIABILITIES> 36,285
<BONDS> 0
0
0
<COMMON> 7,441
<OTHER-SE> 236,499
<TOTAL-LIABILITY-AND-EQUITY> 280,225
<SALES> 59,565
<TOTAL-REVENUES> 59,565
<CGS> 41,752
<TOTAL-COSTS> 41,752
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 11,107
<INCOME-TAX> 1,802
<INCOME-CONTINUING> 9,305
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,305
<EPS-PRIMARY> 1.26
<EPS-DILUTED> 1.26
</TABLE>
