NATIONAL PRESTO INDUSTRIES INC
For the period ended Dec 31, 2024. Filed Mar 14, 2025.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 14, 2025
NPK$142.55+1.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-15.
0001437749-24-008099
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-14.
0001437749-25-007735
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 57 previous paragraphs and 50 current paragraphs.
31 unchanged; 14 reworded; 4 added; 10 removed; 2 previous and 1 current paragraphs rearranged.
Tables are not compared: 0 previous and 0 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (4)
Current report
On a consolidated basis, sales increased by $47,316,000 (14%), gross profit increased by $11,114,000 (17%), selling and general expense increased by $1,054,000 (3%), and intangibles amortization decreased by $120,000 (7%). Other income decreased by $1,941,000 (26%), earnings before provision for income taxes increased by $8,239,000 (19%), and net earnings increased by $6,901,000 (20%). Details concerning these changes can be found, by segment, in the comments below.
Current report
Net sales of the Housewares/Small Appliance segment increased by $5,180,000, from $97,619,000 to $102,799,000, or 5%, primarily attributable to the increase in units shipped. Net sales of the Defense segment increased by $42,322,000, from $241,703,000 to $284,025,000, or 18%, reflecting an increase in units shipped.
Current report
Selling and general expenses for the Housewares/Small Appliance segment increased $361,000, primarily reflecting increased personnel costs of $654,000 and accrual levels for self insurance of $339,000, partially offset by changes to accrual levels for bad debt of $571,000. Defense segment selling and general expenses increased $1,530,000, primarily due to increased personnel costs of $1,609,000, partially offset by decreased legal and professional expenses of $156,000. Safety segment selling and general expenses decreased $837,000, primarily reflecting decreased personnel costs of $935,000 and legal and professional expenses of $322,000, partially offset by the absence of the prior year's gain on the sale of Rusoh, Inc. of $351,000. See Notes L to the Company's Consolidated Financial Statements.
Current report
Intangibles amortization decreased as a result of the absence of the prior year's amortization of intellectual property intangibles from the acquisition of Knox Safety, Inc. See Note P to the Company's Consolidated Financial Statements.
Removed paragraphs (10)
Previous report
On a consolidated basis, sales decreased by $34,154,000 (10%), gross profit decreased by $9,271,000 (14%), selling and general expense decreased by $7,032,000 (21%), intangibles amortization increased by $368,000 (172%) and Impairments - goodwill and intangible assets increased $5,295,000. Other income increased by $1,387,000 (57%), earnings before provision for income taxes decreased by $6,515,000 (20%), and net earnings decreased by $4,955,000 (19%). Details concerning these changes can be found in the comments by segment below.
Previous report
Housewares/Small Appliance net sales increased by $2,424,000, from $115,924,000 to $118,348,000, or 2%, primarily attributable to an increase in pricing and changes in mix. Approximately 85% of the increase from price and mix changes were offset by a decrease in units shipped. The increase was further offset by the absence of the prior year's partial reversal of $1,530,000 of a reserve for estimated refunds related to a product recall of indoor smokers. Defense net sales decreased by $37,031,000, from $239,514,000 to $202,483,000, or 15%, reflecting a decrease in units shipped.
Previous report
Selling and general expenses for the Housewares/Small Appliance segment decreased $446,000, primarily reflecting lower health and accident expenses of $699,000, product liability costs of $383,000, and insurance costs of $164,000. These decreases were partially offset by higher legal and professional expenses of $567,000 and compensation expenses of $175,000. Defense segment selling and general expenses increased $680,000, primarily due to increased legal and professional expenses of $302,000, increased compensation/payroll costs of $209,000, and increased marketing costs of $121,000. Safety segment selling and general expenses decreased $7,267,000, primarily reflecting the absence of prior year impairment of $7,615,000 of notes receivable and related interest held by Rusoh, Inc., augmented by the bargain purchase gain of $492,000 recognized upon the acquisition of Knox Safety, Inc. See Note P. These were offset in part by increased compensation expenses of $311,000 and legal and professional expenses of $383,000, both largely related to the acquisition of Knox Safety, Inc.
Previous report
Impairment – goodwill and intangible assets increased as a result of impairments of goodwill and technology intangibles in the Safety segment. See Note A (10) and Note A (11) to the Consolidated Financial Statements.
Previous report
Inventories
Previous report
New Housewares/Small Appliance and Safety product introductions are an important part of the Company’s sales. In the case of the Housewares/Small Appliance segment, the introductions are important 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 and have occasionally, in the past, resulted in losses related to obsolete or excess inventory as a result of low or diminishing demand for a product. The Housewares/Small Appliance segment recorded impairments related to such losses of $1,216,000 and $3,613,000 in 2023 and 2022, respectively. The Safety segment recorded impairments of $1,822,000 and $3,090,000 in 2022 and 2021, respectively, largely due to aged Rusoh extinguisher inventory. Fire safety regulations require fire extinguishers to be replaced or torn down every 12 years after the date of manufacture. There were no other obsolescence issues that had a material effect during the current year. In the future should product demand issues arise, the Company may incur losses related to the obsolescence of the related inventory. Inventory risk for the Company’s Defense segment is not deemed to be significant, as products are largely built pursuant to customers’ specific orders.
Previous report
Self-Insured Product Liability & Health Insurance
Previous report
The Company is subject to product liability claims in the normal course of business and is self-insured for health care costs, although it does carry stop loss and other insurance to cover claims once a health care claim reaches a specified threshold. The Company’s insurance coverage varies from policy year to policy year, and there are typically limits on all types of insurance coverage, which also vary from policy year to policy year. Accordingly, the Company records an accrual for known claims and incurred but not reported claims, including an estimate for related legal fees in the Company’s Consolidated Financial Statements. The Company utilizes historical trends and other analysis to assist in determining the appropriate accrual. There are no known claims that would have a material adverse impact on the Company beyond the reserve levels that have been accrued and recorded on the Company’s books and records. An increase in the number or magnitude of claims could have a material impact on the Company’s financial condition and results of operations.
Previous report
Revenues
Previous report
Sales are recorded net of discounts and returns for the Housewares/Small Appliance segment. Sales discounts and returns are key aspects of variable consideration, which is a significant estimate utilized in revenue recognition. Sales returns pertain primarily to warranty returns, returns of seasonal items, and returns of those newly introduced products sold with a return privilege. The calculation of warranty returns is based in large part on historical data, while seasonal and new product returns are primarily developed using customer provided information.
Reworded paragraphs (14)
Previous wording
Other income increased $1,387,000, which was primarily attributable to higher interest earned with higher yields, offset in part by a reduced portfolio of marketable securities.
Current wording
Other income decreased $1,941,000, which was primarily attributable to a reduced portfolio of marketable securities.
Previous wording
Earnings before provision for income taxes decreased $6,515,000 from $32,459,000 to $25,944,000. The provision for income taxes decreased from $6,805,000 to $5,245,000, which resulted in an effective income tax rate of 20% and 21% for the years ended December 31, 2022 and 2021, respectively. Net earnings decreased $4,955,000 from $25,654,000 to $20,699,000.
Current wording
Earnings before provision for income taxes increased $8,239,000 from $42,431,000 to $50,670,000. The provision for income taxes increased from $7,872,000 to $9,210,000, which resulted in an effective income tax rate of 18% and 19% for the years ended December 31, 2024 and 2023, respectively. Net earnings increased $6,901,000 from $34,559,000 to $41,460,000.
Previous wording
On a consolidated basis, sales increased by $19,289,000 (6%), gross profit increased by $12,327,000 (22%), selling and general expense increased by $3,663,000 (14%), intangibles amortization increased by $1,053,000 (181%) and Impairments - goodwill and intangible assets decreased $5,295,000. Other income increased by $3,581,000 (94%), earnings before provision for income taxes increased by $16,487,000 (64%), and net earnings increased by $13,860,000 (67%). Details concerning these changes can be found in the comments, by segment, below.
Current wording
On a consolidated basis, sales increased by $19,289,000 (6%), gross profit increased by $12,327,000 (22%), selling and general expense increased by $3,663,000 (14%), intangibles amortization increased by $1,053,000 (181%) and Impairments - goodwill and intangible assets decreased $5,295,000. Other income increased by $3,581,000 (94%), earnings before provision for income taxes increased by $16,487,000 (64%), and net earnings increased by $13,860,000 (67%). Details concerning these changes can be found, by segment, in the comments below.
Previous wording
Cash provided by operating activities was $8,768,000 during 2022 as compared to $34,688,000 during 2021. The principal factors behind the decrease in cash provided can be found in the changes in the components of working capital within the Consolidated Statements of Cash Flows. Of particular note during 2022 were net earnings of $20,699,000, which included a non-cash loss on impairment of goodwill and intangible assets of $5,295,000 and total non-cash depreciation and amortization expenses of $3,347,000. These were partially offset by a non-cash deferred income tax benefit of $2,311,000 and increases in accounts receivable and inventory levels. Of particular note during 2021 were net earnings of $25,654,000, which included a non-cash provision for doubtful notes and accounts receivable of $7,665,000, total non-cash depreciation and amortization expenses of $2,978,000, a non-cash deferred income tax benefit of $1,612,000, and net decreases in deposits made to vendors included in other assets and current assets and accounts receivable. These were partially offset by an increase in inventory levels and a net decrease in payable and accrual levels.
Current wording
Cash used in operating activities was $53,426,000 during 2024 as compared to $45,389,000 provided by operating activities during 2023. The principal factors behind the increase in cash used can be found in the changes in the components of working capital within the Consolidated Statements of Cash Flows. Of particular note during 2024 was net earnings of $41,460,000, which included total non-cash depreciation and amortization of $5,046,000 and deferred income tax benefit of $4,528,000. This was augmented by decreases in deposits made to vendors (included in other assets and current assets) and a net increase in payable and accrual levels. The combination of these factors was more than offset by increases in inventory and accounts receivable levels. Of particular note during 2023 were net earnings of $34,559,000, which included total non-cash depreciation and amortization of $6,007,000, decreases in accounts receivable levels and deposits made to vendors (included in other assets and current assets), and a net increase in payable and accrual levels. These were partially offset by non-cash deferred income tax benefit of $1,190,000 and an increase in inventory levels.
Previous wording
Net cash used in investing activities was $16,436,000 during 2022 as compared to $32,548,000 provided by investing activities during 2021. During 2022 the Company acquired two businesses for $24,683,000 net of cash acquired, and purchased plant and equipment for $1,030,000. These were partially offset by net sales and maturities of marketable securities of $9,171,000. Of note during 2021 were net sales and maturities of marketable securities of $34,621,000 offset by the purchase of plant and equipment of $2,866,000, which primarily included expenditures to augment the Company's production facilities in the Defense segment.
Current wording
Net cash provided by investing activities was $14,965,000 during 2024 as compared to $447,000 used in investing activities during 2023. Of note during 2024 were net sales and maturities of marketable securities of $21,459,000 and proceeds from a note receivable of $1,037,000. These were partially offset by purchases of plant and equipment of $7,531,000. Of note during 2023 were proceeds from sale of subsidiary of $2,000,000, net purchases of marketable securities of $1,466,000 and purchases of plant and equipment of $1,840,000.
Previous wording
Based on the accounting profession’s 2005 interpretation of cash equivalents under Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 230, the Company’s variable rate demand notes have been classified as marketable securities. This interpretation, which is contrary to the interpretation that the Company’s representative received directly from the FASB (which indicated it would not object to the Company’s classification of variable rate demand notes as cash equivalents), has resulted in a presentation of the Company’s Consolidated Balance Sheets that the Company believes understates the true liquidity of the Company’s income portfolio. As of December 31, 2022 and 2021, $3,638,000 and $25,427,000, respectively, of variable rate demand notes are classified as marketable securities. These notes have structural features that allow the Company to tender them at par plus interest within any 7-day period for cash to the notes’ trustees or remarketers and thus provide the liquidity of cash equivalents.
Current wording
Based on the accounting profession’s 2005 interpretation of cash equivalents under Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 230, the Company’s variable rate demand notes have been classified as marketable securities. This interpretation, which is contrary to the interpretation that the Company’s representative received directly from the FASB (which indicated it would not object to the Company’s classification of variable rate demand notes as cash equivalents), has resulted in a presentation of the Company’s Consolidated Balance Sheets that the Company believes understates the true liquidity of the Company’s income portfolio. As of December 31, 2024, there were no variable rate demand notes classified as marketable securities. As of December 31, 2023, $5,123,000 of variable rate demand notes are classified as marketable securities. These notes have structural features that allow the Company to tender them at par plus interest within any 7-day period for cash to the notes’ trustees or remarketers and thus provide the liquidity of cash equivalents.
Previous wording
Cash flows from financing activities for 2022 and 2021 primarily differed as a result of the $1.75 per share decrease in the extra dividend paid during these years. Cash flows for both years also reflected the proceeds from the sale of treasury stock to a Company sponsored retirement plan.
Current wording
Cash flows from financing activities for 2024 and 2023 primarily differed as a result of the $0.50 per share increase in the extra dividend paid during these years. Cash flows for both years also reflected the proceeds from the sale of treasury stock to a Company sponsored retirement plan. In addition, the Company drew on and repaid its line of credit during 2024, incurring interest expense of $2,000.
Previous wording
As a result of the foregoing factors, cash and cash equivalents decreased in 2022 by $39,094,000 to $70,711,000.
Current wording
As a result of the foregoing factors, cash and cash equivalents decreased in 2024 by $69,994,000 to $17,663,000.
Previous wording
Working capital decreased by $21,903,000 to $272,991,000 at December 31, 2022 for the reasons stated above. The Company’s current ratio was 6.1 to 1.0 at December 31, 2022 and 6.6 to 1.0 at December 31, 2021.
Current wording
Working capital increased by $4,134,000 to $292,225,000 at December 31, 2024 for the reasons stated above. The Company’s current ratio was 4.9 to 1.0 at December 31, 2024 and 5.0 to 1.0 at December 31, 2023.
Previous wording
The Company has substantial liquidity in the form of cash and cash equivalents and marketable securities to meet all of its anticipated capital requirements, to make dividend payments, and to fund future growth through acquisitions and other means. The bulk of its marketable securities are invested in the variable rate demand notes described above, in municipal bonds that are pre-refunded with escrowed U.S. Treasuries, and certificates of deposit. The Company intends to continue its investment strategy of safety and short-term liquidity throughout its investment holdings.
Current wording
The Company has sufficient liquidity in the form of cash and cash equivalents and marketable securities and credit facilities to meet all of its anticipated capital requirements, to make dividend payments, and to fund future growth through acquisitions and other means. The bulk of its marketable securities have been invested in the variable rate demand notes described above, in municipal bonds that are pre-refunded with escrowed U.S. Treasuries, and certificates of deposit. The Company intends to continue its investment strategy of safety and short-term liquidity throughout its investment holdings.
Previous wording
The Company's principal commitments consist of purchase and lease obligations. Purchase obligations include outstanding purchase orders issued to the Company's Housewares and Safety segments' manufacturers in the Orient and to material suppliers and contractors in the Defense segment, and as of December 31, 2023 amounted to approximately $343,580,000. The Company can cancel or change many of these purchase orders, but may incur costs if its supplier cannot use the material to manufacture the Company's or other customers' products in other applications or return the material to their supplier. As a result, the actual amount the Company is obligated to pay cannot be reasonably estimated. Lease obligations are described in Note M - Leases to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.
Current wording
The Company's principal commitments consist of purchase and lease obligations. Purchase obligations include outstanding purchase orders issued to the Company's Housewares and Safety segments' manufacturers in the Orient and to material suppliers and contractors in the Defense segment, and as of December 31, 2024 amounted to approximately $346,143,000. The Company can cancel or change many of these purchase orders, but may incur costs if its supplier cannot use the material to manufacture the Company's or other customers' products in other applications or return the material to their supplier. As a result, the actual amount the Company is obligated to pay cannot be reasonably estimated. Lease obligations are described in Note M - Leases to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.
Previous wording
The Company’s Defense segment contract backlog was approximately $564,005,000 at December 31, 2023, and $505,069,000 at December 31, 2022. Backlog is defined as the value of orders from the customer less the amount of sales recognized against the orders. It is anticipated that the backlog will be produced and shipped during an 18- to 36-month period.
Current wording
The Company’s Defense segment contract backlog was approximately $1,085,612,000 at December 31, 2024, and $564,005,000 at December 31, 2023. Backlog is defined as the value of orders from the customer less the amount of sales recognized against the orders. It is anticipated that the backlog will be produced and shipped during an 18- to 42-month period.
Previous wording
The Company's critical accounting policies are those that materially affect its Consolidated Financial Statements and involve difficult, subjective, or complex judgments by management. The Company reviewed the development and selection of the critical accounting policies and believes the following are the most critical accounting policies that could have an effect on the Company’s reported results as they involve the use of significant estimates and assumptions as described above. These critical accounting policies and estimates have been reviewed with the Audit Committee of the Board of Directors. See Note A - Summary of Significant Accounting Policies to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for more detailed information regarding the Company's critical accounting policies.
Current wording
The Company's critical accounting policies are those that materially affect its Consolidated Financial Statements and involve difficult, subjective, or complex judgments by management. The Company reviewed the development and selection of the critical accounting policies and believes the following is the most critical accounting policy that could have a material effect on the Company’s reported results as it involves the use of significant estimates and assumptions as described above. This critical accounting policy and estimate have been reviewed with the Audit Committee of the Board of Directors. See Note A - Summary of Significant Accounting Policies to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for more detailed information regarding the Company's critical accounting policies.
Previous wording
The Company recognizes the excess cost of acquired entities over the net amount assigned to the fair value of assets acquired and liabilities assumed as goodwill. Goodwill is tested for impairment on an annual basis at the start of the fourth quarter and between annual tests whenever an impairment is indicated. The impairment test for goodwill requires the determination of fair value of the reporting unit. The Company uses multiples of earnings before interest, taxes, depreciation, and amortization ("EBITDA"), sales, and discounted cash flow models, which are described above, to determine the reporting unit's fair value, as appropriate.
Current wording
The Company recognizes the excess cost of acquired entities over the net amount assigned to the fair value of assets acquired and liabilities assumed as goodwill. Goodwill is tested for impairment on an annual basis at the start of the fourth quarter and between annual tests whenever an impairment is indicated. The impairment test for goodwill requires the determination of fair value of the reporting unit. The Company uses multiples of earnings before interest, taxes, depreciation, and amortization ("EBITDA"), sales, and discounted cash flow models, which are described above, to determine the reporting unit's fair value, as appropriate. The Company also utilizes qualitative analyses to assess goodwill impairment.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Gross profit of the Housewares/Small Appliance segment increased $5,611,000 from $19,867,000 (20% of sales) in 2023 to $25,478,000 (25% of sales) in 2024, primarily reflecting the increase in sales mentioned above, augmented by an improved product mix and a favorable LIFO inventory adjustment. Defense gross profit increased $6,170,000 from $52,003,000 (22% of sales) in 2023 to $58,173,000 (21% of sales) in 2024, primarily reflecting the increase in sales mentioned above. Due to the startup nature of the businesses in the Safety segment, gross margins were negative in both years. The comparative decrease in gross margins of $667,000 were primarily due to increased product development and testing.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
Housewares/Small Appliance gross profit increased $7,448,000 from $9,974,000 (9% of sales) in 2021 to $17,422,000 (15% of sales) in 2022, primarily reflecting the changes in pricing and mix mentioned above, augmented by decreased ocean cargo and inland freight costs, partially offset by the decrease in unit shipments, as well as adjustments related to obsolete or excess inventory levels of $3,613,000, and decreases in standard unit costs of $3,108,000 that were not offset by decreases in the segment's LIFO inventory reserve. Defense gross profit decreased $18,567,000 from $61,205,000 (26% of sales) to $42,638,000 (21% of sales), primarily reflecting the decrease in sales mentioned above, a less favorable mix, inefficiencies from labor shortages, delays in securing materials and other supply chain issues. Due to the startup nature of the businesses in the Safety segment, gross margins were negative in both years. A reduction in the amount of write-downs of inventory and materials at Rusoh, Inc. to reflect realizable values contributed to the comparative increase in gross margin of $1,848,000.
Previous report — wording carried elsewhere
Intangibles amortization increased as a result of the acquisition of contracts/customer relationship and intellectual property intangibles in the acquisitions of Knox Safety, Inc. and Woodlawn Manufacturing, Ltd. See Note P to the Consolidated Financial Statements.