NATIONAL PRESTO INDUSTRIES INC

Previous wording

Forward-looking statements in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, elsewhere in this Form 10-Q, in the Company’s 2025 Annual Report to Stockholders, in the Proxy Statement for the annual meeting to be held on May 19, 2026, and in the Company’s press releases and oral statements made with the approval of an authorized executive officer are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. There are certain important factors that could cause results to differ materially from those anticipated by some of the statements made herein. Investors are cautioned that all forward-looking statements involve risks and uncertainty. In addition to the factors discussed herein and in the Notes to Consolidated Financial Statements, among the other factors that could cause actual results to differ materially are the following: consumer spending and debt levels; interest rates; continuity of relationships with and purchases by major customers; product mix; the benefit and risk of business acquisitions; competitive pressure on sales and pricing; development and market acceptance of new products; increases in material, freight/shipping, tariffs, or production cost which cannot be recouped in product pricing; delays or interruptions in shipping or production; shipment of defective product which could result in product liability claims or recalls; work or labor disruptions stemming from a unionized work force; changes in government requirements, military spending, and funding of government contracts, which could result in, among other things, the modification or termination of existing contracts; dependence on subcontractors or vendors to perform as required by contract; the ability of startup businesses to ultimately have the potential to be successful; the efficient start-up and utilization of capital equipment investments; political actions of federal and state governments which could have an impact on everything from the value of the U.S dollar vis-à-vis other currencies to the availability of affordable labor and energy; and security breaches and disruptions to the Company’s information technology systems. Additional information concerning these and other factors is contained in the Company's Securities and Exchange Commission filings.

Current wording

Forward-looking statements in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, elsewhere in this Form 10-Q, in the Company’s 2025 Annual Report to Stockholders, in the Proxy Statement for the annual meeting held on May 19, 2026, and in the Company’s press releases and oral statements made with the approval of an authorized executive officer are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. There are certain important factors that could cause results to differ materially from those anticipated by some of the statements made herein. Investors are cautioned that all forward-looking statements involve risks and uncertainty. In addition to the factors discussed herein and in the Notes to Consolidated Financial Statements, among the other factors that could cause actual results to differ materially are the following: consumer spending and debt levels; interest rates; continuity of relationships with and purchases by major customers; product mix; the benefit and risk of business acquisitions; competitive pressure on sales and pricing; development and market acceptance of new products; increases in material, freight/shipping, tariffs, or production cost which cannot be recouped in product pricing; delays or interruptions in shipping or production; shipment of defective product which could result in product liability claims or recalls; work or labor disruptions stemming from a unionized work force; changes in government requirements, military spending, and funding of government contracts, which could result in, among other things, the modification or termination of existing contracts; dependence on subcontractors or vendors to perform as required by contract; the ability of startup businesses to ultimately have the potential to be successful; the efficient start-up and utilization of capital equipment investments; political actions of federal and state governments which could have an impact on everything from the value of the U.S dollar vis-à-vis other currencies to the availability of affordable labor and energy; and security breaches and disruptions to the Company’s information technology systems. Additional information concerning these and other factors is contained in the Company's Securities and Exchange Commission filings.

Previous wording

Housewares/Small Appliance gross profit decreased $3,823,000 from $1,460,000 to a loss of $2,363,000, primarily reflecting decrease in sales mentioned above, augmented by a less favorable product mix, as well as an increase in costs incident to the startup of the segment’s new warehousing facility of approximately $1,909,000. Defense gross profit increased $3,160,000 from $17,630,000 to $20,790,000, primarily reflecting the increase in sales mentioned above, partially offset by a less favorable mix of products. Due to the startup nature of the businesses in the Safety segment and the resulting limited revenues, gross margins were negative in both years.

Current wording

Notwithstanding the decrease in sales mentioned above, Housewares/Small Appliance gross profit increased $4,228,000 from $480,000 to $4,708,000, primarily reflecting a refund of a portion of the tariffs the segment had paid that the Supreme Court declared unauthorized in its February 2026 decision. By contrast, a portion of the declared unauthorized tariffs were paid during the second quarter of 2025. Tariffs are generally recognized as they are refunded or incurred, reflecting the segment’s LIFO inventory cost valuation method. The balance of the change in gross profit was attributable to an increase in costs incident to the startup of the segment’s new warehousing facility of approximately $450,000. Defense gross profit increased $5,741,000 from $19,200,000 to $24,941,000, primarily reflecting the increase in sales mentioned above. Due to the startup nature of the businesses in the Safety segment and the resulting limited revenues, gross margins were negative in both years.

Previous wording

The $157,000 decrease in other income was attributable to a decrease in interest income on marketable securities of $85,000and an increase in interest expense related to the Company's revolving line of credit of $40,000. Both stem from the increased investments in inventory required to support augmented Defense segment awards.

Current wording

The $284,000 increase in other income was primarily attributable to an increase in interest income on marketable securities of $125,000 and a decrease in interest expense related to the Company's revolving line of credit of $71,000.

Previous wording

Earnings before provision for income taxes decreased $1,195,000 from $9,808,000 to $8,613,000. The provision for income taxes decreased from $2,198,000 to $1,987,000, which resulted in an effective income tax rate of 23% and 22% for the quarters ended April 5, 2026 and March 30, 2025, respectively. Net earnings decreased $984,000 from $7,610,000 to $6,626,000, or 13%.

Current wording

Earnings before provision for income taxes increased $13,602,000 from $6,613,000 to $20,215,000. The provision for income taxes increased from $1,461,000 to $4,353,000, which resulted in an effective income tax rate of 22% for both quarters ended July 5, 2026 and June 29, 2025. Net earnings increased $10,710,000 from $5,152000 to $15,862,000, or 208%.

Previous wording

The Company reports its operations on a fiscal quarter basis in which each quarter contains approximately thirteen weeks and ends on a Sunday, with the exception of the fourth quarter, which ends on December 31. Occasionally, the end dates of the fiscal quarters are adjusted to account for differences that accumulate between the end of the fiscal year and the end of the subsequent first quarter. One such adjustment occurred during the quarter ended April 5, 2026. As compared to the prior year's first quarter, the current quarter includes six additional days.

Current wording

The Company reports its operations on a fiscal quarter basis in which each quarter contains approximately thirteen weeks and ends on a Sunday, with the exception of the fourth quarter, which ends on December 31. Occasionally, the end dates of the fiscal quarters are adjusted to account for differences that accumulate between the end of the fiscal year and the end of the subsequent first quarter. One such adjustment occurred during the quarter ended April 5, 2026.

Previous wording

On a consolidated basis, net sales increased by $15,010,000 (15%), gross profit decreased by $633,000 (4%), selling and general expenses increased by $2,078,000 (24%), gain on sale of property, plant and equipment increased $1,707,000, and amortization increased by $34,000. Other income decreased by $157,000 (21%), earnings before provision for income taxes decreased by $1,195,000 (12%), and net earnings decreased by $984,000 (13%). Details concerning these changes can be found in the comments by segment below.

Current wording

On a consolidated basis, net sales increased by $41,157,000 (18%), gross profit increased by $9,368,000 (26%), selling and general expenses increased by $1,380,000 (8%), gain on sale of property, plant and equipment increased $1,707,000, impairment of vendor deposit decreased $2,701,000, and amortization increased by $116,000 (15%). Other income increased by $127,000 (10%), earnings before provision for income taxes increased by $12,407,000 (76%), and net earnings increased by $9,726,000 (76%). Details concerning these changes can be found in the comments by segment below.

Previous wording

Housewares/Small Appliance net sales decreased by $3,428,000 from $21,926,000 to $18,498,000, or 16%, which was attributable to a decrease in units shipped, approximately 40% of which was offset by increases in pricing. The decrease in units shipped was due in large part to startup issues at the segment’s new warehousing facility and a resulting inability to ship during a portion of the quarter. Defense net sales increased by $18,634,000 from $80,938,000 to $99,572,000 or 23%, primarily reflecting an increase in shipments from the segment's backlog.

Current wording

Housewares/Small Appliance net sales decreased by $4,691,000 from $42,272,000 to $37,581,000, or 11%, which was attributable to a decrease in units shipped, approximately 45% of which was offset by increases in pricing. The decrease in units shipped was due in large part to startup issues at the segment’s new warehousing facility and a resulting inability to ship during a portion of the first quarter. Defense net sales increased by $45,778,000 from $180,751,000 to $226,529,000 or 25%, primarily reflecting an increase in shipments from the segment's backlog.

Previous wording

Selling and general expenses for the Housewares/Small Appliance segment increased $185,000, primarily reflecting increased cost accruals for health care of $656,000 and legal and professional of $286,000, and increased compensation costs of $191,000. These were offset by an increased allocation of corporate overhead to the Defense segment of $928,000. Selling and general expenses for the Defense segment increased $2,037,000, primarily attributable to increases in the allocation of corporate overhead of $928,000 and personnel costs of $618,000, and a write off of a note receivable of $208,000. Selling and general expenses for the Safety segment decreased $145,000, primarily reflecting reduced personnel costs of $87,000, and legal and professional costs of $78,000.

Current wording

Selling and general expenses for the Housewares/Small Appliance segment decreased $1,199,000, primarily reflecting the increased allocation of corporate overhead to the Defense segment of $1,569,000 and decreased accruals for self-insurance of $114,000, partially offset by increased compensation of $327,000 and legal and professional costs of $159,000. Selling and general expenses for the Defense segment increased $2,825,000, primarily attributable to increases in the allocation of corporate overhead of $1,569,000, personnel costs of $704,000, repairs and maintenance costs of $137,000, and a write off of a note receivable of $208,000. Selling and general expenses for the Safety segment decreased $246,000, primarily reflecting reduced personnel costs of $192,000 and legal and professional costs of $74,000.

Previous wording

The gain on sale of property, plant and equipment stemmed from the February 10, 2026 sale of the Company’s warehousing facility in Canton, Mississippi that mainly served the Housewares/Small Appliance segment. Subsequent to the sale, the Company entered into a short-term lease agreement with the buyer, as it completes warehousing operations transfer to the new warehousing facility in Nettleton, Mississippi.

Current wording

The gain on sale of property, plant and equipment stemmed from the February 10, 2026 sale of the Company’s warehousing facility in Canton, Mississippi that mainly served the Housewares/Small Appliance segment. Subsequent to the sale, the Company entered into a short-term lease agreement with the buyer, as it completes its warehousing operations transfer to the new warehousing facility in Nettleton, Mississippi.

Previous wording

Net cash provided by operating activities was $31,347,000 during the first three months of 2026 as compared to $12,460,000 during the first three months of 2025. The principal factors contributing to the change can be found in the changes in the components of working capital within the Consolidated Statements of Cash Flows. Of particular note during the first three months of 2026 were net earnings of $6,626,000, which included the non-cash depreciation and amortization expenses of $1,294,000 and book gain on the sale of property plant and equipment of $1,707,000. Contributing to the cash provided was a decrease in accounts receivable stemming from cash collections on customer sales, partially offset by a decrease in payable and accrual levels and increases in inventories and deposits made to vendors included in other current assets. Of particular note during the first three months of 2025 were net earnings of $7,610,000, which included non-cash depreciation and amortization expenses of $1,220,000. Contributing to the cash provided were a decrease in accounts receivable levels stemming from cash collections on customer sales and increases in payable and accrual levels. These were partially offset by increases in inventory levels and deposits made to vendors included in other current assets.

Current wording

Net cash provided by operating activities was $44,144,000 during the first six months of 2026 as compared to $1,542,000 during the first six months of 2025. The principal factors contributing to the change can be found in the changes in the components of working capital within the Consolidated Statements of Cash Flows. Of particular note during the first six months of 2026 were net earnings of $22,488,000, which included the non-cash depreciation and amortization expenses of $2,980,000 and book gain on the sale of property plant and equipment of $1,707,000. Contributing to the cash provided were a decrease in accounts receivable stemming from cash collections on customer sales and an increase in payable and accrual levels, partially offset by increases in inventory levels and deposits made to vendors included in other current assets. Of particular note during the first six months of 2025 were net earnings of $12,762,000, which included the non-cash impairment of a vendor deposit of $2,701,000 and depreciation and amortization expenses of $2,460,000. Contributing to the cash provided was a decrease in accounts receivable levels stemming from cash collections on customer sales. These were partially offset by a decrease in payable and accrual levels and increases in inventory levels and deposits made to vendors included in other current assets.

Previous wording

Net cash provided by investing activities was $2,560,000 for the first three months of 2026, while net cash used in investing activities was $22,083,000 for the first three months of 2025. Significant factors contributing to the change were purchases of property, plant and equipment of $1,950,000 in 2026, as opposed to $22,983,000 in 2025, and proceeds from the sale of property. plant and equipment of $4,510,000 in 2026.

Current wording

Net cash used in investing activities was $933,000 for the first six months of 2026, and $23,062,000 for the first six months of 2025. Significant factors contributing to the change were purchases of property, plant and equipment of $5,449,000 in 2026, as opposed to $25,449,000 in 2025, and proceeds from the sale of property, plant and equipment of $4,510,000 in 2026. Also contributing to the change were net maturities and sales of marketable securities of $6,000 in 2026, in contrast to $1,983,000 in 2025.

Previous wording

Net cash used in financing activities was $30,671,000 for the first three months of 2026, as compared to $7,022,000 cash used in financing activities for the first three months of 2025. The change primarily relates to net payments on the Company's line of credit in 2026 of $23,624,000, as opposed to $0 in 2025. Cash flows for both three month periods also reflected the payment of the $1.00 per share regular dividend and the proceeds from the sale of treasury stock to a Company sponsored retirement plan. During 2026 and 2025, the Company incurred interest expense of $44,000 and $4,000 related to its line of credit, respectively.

Current wording

Net cash used in financing activities was $30,671,000 for the first six months of 2026, as compared to $5,614,000 cash provided by financing activities for the first six months of 2025. The change primarily relates to net payments on the Company's line of credit in 2026 of $23,624,000, as opposed to net proceeds from the line of credit of $12,636,000 in 2025. Cash flows for both six month periods also reflected the payment of the $1.00 per share regular dividend and the proceeds from the sale of treasury stock to a Company sponsored retirement plan. During 2026 and 2025, the Company incurred interest expense of $44,000 and $75,000 related to its line of credit, respectively.

Previous wording

Working capital decreased by $2,179,000 during the first three months of 2026 to $310,257,000 at April 5, 2026 for the reasons stated above. The Company's current ratio was 5.9 to 1.0 and 4.2 to 1.0 at April 5, 2026 and December 31, 2025, respectively.

Current wording

Working capital increased by $16,500,000 during the first six months of 2026 to $324,611,000 at July 5, 2026 for the reasons stated above. The Company's current ratio was 5.2 to 1.0 and 4.2 to 1.0 at July 5, 2026 and December 31, 2025, respectively.