SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended..September 29, 1996..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... There were 7,352,266 shares of the Issuer's Common Stock outstanding as of the close of the period covered by this report. * 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 . . . <TABLE> <CAPTION> NATIONAL PRESTO INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS September 29, 1996 and December 31, 1995 (Unaudited) (Dollars in thousands) 1996 1995 - -------------------------------------------------------------------------------------------- ASSETS CURRENT ASSETS: <S> <C> <C> <C> <C> Cash and cash equivalents $ 85,336 $ 91,448 Marketable securities 122,763 112,583 Accounts receivable, net 16,357 38,116 Inventories: Finished goods $ 18,348 $ 14,787 Work in process 2,330 2,397 Raw materials 5,057 7,359 Supplies 1,276 27,011 1,062 25,605 -------- -------- Prepaid expenses 1,094 1,753 -------- -------- Total current assets 252,561 269,505 PROPERTY, PLANT AND EQUIPMENT: 19,230 16,646 Less allowance for depreciation 10,688 8,542 9,337 7,309 -------- -------- OTHER ASSETS 8,113 8,113 -------- -------- $269,216 $284,927 ======== ======== The accompanying notes are an integral part of the financial statements. NATIONAL PRESTO INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS September 29, 1996 and December 31, 1995 (Unaudited) (Dollars in thousands) 1996 1995 - -------------------------------------------------------------------------------------------- LIABILITIES CURRENT LIABILITIES: Accounts payable $ 9,343 $ 13,717 Federal and state income taxes 506 5,224 Accrued liabilities 20,271 19,245 -------- -------- Total current liabilities 30,120 38,186 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 896 848 Retained earnings 233,084 240,797 -------- -------- 241,421 249,086 Treasury Stock, at cost 2,325 2,345 -------- -------- Total stockholders' equity 239,096 246,741 -------- -------- $269,216 $284,927 ======== ======== The accompanying notes are an integral part of the financial statements. </TABLE> <TABLE> <CAPTION> National Presto Industries, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF EARNINGS Three Months and Nine Months ended September 29, 1996 and October 1, 1995 (Unaudited) (In thousands except per share data) THREE MONTHS ENDED NINE MONTHS ENDED -------------------- ------------------ 1996 1995 1996 1995 - ----------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> Net Sales $ 23,001 $ 29,039 $ 57,080 $ 62,883 Cost of Sales 16,065 19,348 42,169 43,503 ------------------- ------------------- Gross profit 6,936 9,691 14,911 19,380 Selling and general expenses 5,512 7,196 13,666 15,922 ------------------- ------------------- Operating profit 1,424 2,495 1,245 3,458 Other income, principally interest 2,005 2,140 6,530 6,787 Other, principally litigation judgment -- 2,316 -- 2,316 Interest expense -- (251) -- (516) ------------------- ------------------- Earnings before provision for income taxes 3,429 6,700 7,775 12,045 Provision for income taxes: Federal 532 1,568 669 1,836 State 76 335 119 368 ------------------- ------------------- Net earnings $ 2,821 $ 4,797 $ 6,987 $ 9,841 =================== =================== Weighted average common shares outstanding 7,352 7,346 7,352 7,346 =================== =================== Net earnings per common share outstanding $ 0.38 $ 0.65 $ 0.95 $ 1.35 =================== =================== Cash dividends declared and paid per common share: Regular $ -- $ -- $ 2.00 $ 1.95 Extra $ -- $ -- -- 0.20 ------------------- ------------------- $ -- $ -- $ 2.00 $ 2.15 =================== =================== The accompanying notes are an integral part of the financial statements. </TABLE> <TABLE> <CAPTION> NATIONAL PRESTO INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Nine Months ended September 29, 1996 and October 1, 1995 (Unaudited) (In thousands) 1996 1995 - -------------------------------------------------------------------------------------- <S> <C> <C> Cash flows from operating activities: Net earnings $ 6,987 $ 9,841 Adjustments to reconcile net earnings to cash flows from operating activities: Provision for depreciation 1,367 1,048 Stock compensation expense 401(k) 47 56 Early retirement of debt 534 Changes in: Accounts receivable 21,759 7,549 Inventories (1,406) (18,312) Prepaid expenses 659 759 Accounts payable and accrued liabilities (3,348) (3,341) Federal and state income taxes (4,718) (5,119) --------- --------- Total 21,347 (6,985) --------- --------- Cash flows from investing activities: Marketable securities purchased (85,607) (85,219) Marketable securities - maturities and sales 75,427 96,363 Acquisition of property, plant and equipment (2,600) (3,429) --------- --------- Total (12,780) 7,715 --------- --------- Cash flows from financing activities: Net change in short-term debt -- 8,300 Payment of long-term debt -- (5,103) Treasury stock transactions 21 22 Dividends paid (14,700) (15,777) --------- --------- Total (14,679) (12,558) --------- --------- Change in cash and cash equivalents (6,112) (11,828) Cash and cash equivalents at beginning of period 91,448 109,444 --------- --------- Cash and cash equivalents at end of period $ 85,336 $ 97,616 ========= ========= The accompanying notes are an integral part of the financial statements. </TABLE> NATIONAL PRESTO INDUSTRIES, INC., AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A Earnings per share are computed using the weighted average common shares outstanding during each period. In 1995, earnings for calculation of the per share data are adjusted to reflect addback of interest expense on the convertible debenture. NOTE B Update to Footnote L to the 1995 Annual Report -- During the second quarter, the Company entered into an agreement with the Army obligating the additional $15,000,000 in environmental restoration funds for the Eau Claire, Wisconsin, site. As of this filing, the Company has been reimbursed from these funds for the $10,300,000 in environmental costs it had previously advanced. - -------------------------------------------------------------------------------- The foregoing information for the periods ended September 29, 1996, and October 1, 1995, 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, 1995, is summarized from audited consolidated financial statements, but does not include all the disclosures contained therein and should be read in conjunction with the 1995 Annual Report. Interim results for the period are not indicative of those for the year. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Comparison Third Quarter 1996 and 1995 Net sales decreased by $6,038,000 from $29,039,000 to $23,001,000, primarily due to decreased unit volume. Gross margins as a percentage of sales decreased from 33% to 30%, due primarily to a less favorable product mix . 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. Other income decreased from the 1995 level primarily as a result of lower interest income stemming from reduced yields on a higher level of invested funds. The other, principally litigation judgment shown in 1995, was in largest part a nonoperational receipt of $2.85 million in damages and interest resulting from the Court of Appeals for the Federal Circuit decision that Black & Decker infringed Presto's patent on its SaladShooter(R) electric slicer/shredder. It was offset in part by the cost of retiring a convertible debenture issued in January 1981. Earnings before provision for income taxes decreased $3,271,000 from $6,700,000 to $3,429,000. The provision for income taxes decreased from $1,903,000 to $608,000, and the effective income tax rate decreased from 28% to 18%, as a result of a smaller proportion of earnings subject to tax. Net earnings decreased $1,976,000 from $4,797,000 to $2,821,000, or 41%. The Company maintains adequate liquidity for all of its anticipated capital requirements. As of quarter-end, there were no material capital commitments outstanding. Comparison of the First Nine Months 1996 and 1995 Net sales decreased by $5,803,000 from $62,883,000 to $57,080,000, primarily due to decreased unit volume. Gross profit as a percentage of sales decreased from 31% to 26%, primarily due to a less favorable product mix . The accrual for unexpended advertising costs discussed in the Third Quarter comparison also applies to the first nine months. Other income decreased from the 1995 level primarily as a result of lower interest income stemming from reduced yields on a lower level of invested funds, offset in part by the first quarter 1996 recognition of income from concluded legal matters ($476,000). Earnings before provision for income taxes decreased $4,270,000 from $12,045,000 to $7,775,000, or 36%. The effective income tax rate decreased from 18% to 10%, as a result of decreased earnings subject to tax. Net earnings decreased $2,854,000 from $9,841,000 to $6,987,000, or 29%. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibit 11 - Statement Regarding Computation of Per Share Earnings (b) There were no reports on Form 8-K filed during the quarter for which this report is filed. 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 1, 1996 /S/ M. J. COHEN ---------------- ------------------------------ M. J. Cohen, President Date: November 1, 1996 /S/ R. F. LIEBLE ---------------- ----------------------------- R. F. Lieble, Treasurer (Principal accounting officer)