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 . . .June 30, 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 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 June 30, 1996 and December 31, 1995 (Unaudited) (Dollars in thousands) 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> ASSETS CURRENT ASSETS: Cash and cash equivalents $ 85,654 $ 91,448 Marketable securities 113,538 112,583 Accounts receivable, net 18,525 38,116 Inventories: Finished goods $ 17,347 $ 14,787 Work in process 2,678 2,397 Raw materials 6,345 7,359 Supplies 1,232 27,602 1,062 25,605 ------------- ------------- Prepaid expenses 1,107 1,753 ------------- ------------- Total current assets 246,426 269,505 PROPERTY, PLANT AND EQUIPMENT: 18,587 16,646 Less allowance for depreciation 10,173 8,414 9,337 7,309 ------------- ------------- OTHER ASSETS 8,113 8,113 ------------- ------------- $262,953 $284,927 ============= ============= The accompanying notes are an integral part of the financial statements. </TABLE> <TABLE> <CAPTION> NATIONAL PRESTO INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS June 30, 1996 and December 31, 1995 (Unaudited) (Dollars in thousands) 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> LIABILITIES CURRENT LIABILITIES: Accounts payable $ 7,007 $ 13,717 Federal and state income taxes 553 5,224 Accrued liabilities 19,126 19,245 ------------- ------------- Total current liabilities 26,686 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 894 848 Retained earnings 230,263 240,797 ------------- ------------- 238,598 249,086 Treasury Stock, at cost 2,331 2,345 ------------- ------------- Total stockholders' equity 236,267 246,741 ------------- ------------- $262,953 $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 Six Months ended June 30, 1996 and July 2, 1995 (Unaudited) (In thousands except per share data) THREE MONTHS ENDED SIX MONTHS ENDED 1996 1995 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> Net Sales $ 16,970 $ 15,882 $ 34,079 $ 33,844 Cost of Sales 12,632 11,400 26,104 24,155 -------------------------- -------------------------- Gross profit 4,338 4,482 7,975 9,689 Selling and general expenses 3,880 3,948 8,154 8,726 -------------------------- -------------------------- Operating profit (loss) 458 534 (179) 963 Other income, principally interest 1,992 2,265 4,525 4,647 Interest expense - (128) - (265) -------------------------- -------------------------- Earnings before provision for income taxes 2,450 2,671 4,346 5,345 Provision for income taxes: Federal 172 157 137 268 State 42 17 43 33 -------------------------- -------------------------- Net earnings $ 2,236 $ 2,497 $ 4,166 $ 5,044 ========================== ========================== Weighted average common and common equivalent shares outstanding 7,352 7,461 7,352 7,461 ========================== ========================== Net earnings per common and common equivalent shares outstanding $ 0.31 $ 0.35 $ 0.57 $ 0.70 ========================== ========================== Cash dividends declared and paid per common share: Regular $ - $ - $ 2.00 $ 1.95 Extra $ - $ - - 0.20 -------------------------- -------------------------- $ - $ - $ 2.00 $ 2.15 ========================== ========================== </TABLE> The accompanying notes are an integral part of the financial statements. <TABLE> <CAPTION> NATIONAL PRESTO INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months ended June 30, 1996 and July 2, 1995 (Unaudited) (In thousands) 1996 1995 - --------------------------------------------------------------------------------------------------------------- <S> <C> <C> Cash flows from operating activities: Net earnings $ 4,166 $ 5,044 Adjustments to reconcile net earnings to cash flows from operating activities: Provision for depreciation 852 680 Stock compensation expense 401(k) 22 49 Changes in: Accounts receivable 19,591 20,590 Inventories (1,997) (9,121) Prepaid expenses 646 664 Accounts payable and accrued liabilities (6,829) (8,217) Federal and state income taxes (4,671) (6,529) ------------- ------------- Total 11,780 3,160 ------------- ------------- Cash flows from investing activities: Marketable securities purchased (42,414) (31,921) Marketable securities - maturities and sales 41,459 43,680 Acquisition of property, plant and equipment (1,964) (2,072) Change in other assets 7 9 ------------- ------------- Total (2,912) 9,696 ------------- ------------- Cash flows from financing activities: Treasury stock transactions 39 23 Dividends paid (14,701) (15,777) ------------- ------------- Total (14,662) (15,754) ------------- ------------- Change in cash and cash equivalents (5,794) (2,898) Cash and cash equivalents at beginning of period 91,448 109,444 ------------- ------------- Cash and cash equivalents at end of period $ 85,654 $106,546 ============= ============= 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, and in 1995 included common equivalent shares assuming conversion of the convertible debenture. 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 Army entered into an agreement with the Company 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 June 30, 1996, and July 2, 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 Second Quarter 1996 and 1995 Net sales increased by $1,088,000 from $15,882,000 to $16,970,000, primarily due to new product introductions. Gross margins as a percentage of sales decreased from 28% to 26%, primarily due 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 lower level of invested funds. Earnings before provision for income taxes decreased $221,000 from $2,671,000 to $2,450,000. The provision for income taxes increased from $174,000 to $214,000, and the effective income tax rate increased from 7% to 9%, as a result of a larger proportion of earnings subject to tax. Net earnings decreased $261,000 from $2,497,000 to $2,236,000, or 10%. 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 Six Months 1996 and 1995 Net sales increased by $235,000 from $33,844,000 to $34,079,000, primarily due to new product introductions. Gross profit as a percentage of sales decreased from 29% to 23%, primarily due to a combination of a less favorable product mix and less favorable manufacturing variances. The accrual for unexpended advertising costs discussed in the Second Quarter comparison also applies to the first six 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 recognition of income from concluded legal matters ($476,000). Earnings before provision for income taxes decreased $999,000 from $5,345,000 to $4,346,000, or 19%. The effective income tax rate decreased from 6% to 4%, as a result of decreased earnings subject to tax. Net earnings decreased $878,000 from $5,044,000 to $4,166,000, or 17%. 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: July 30, 1996 /S/ M. J. COHEN -------------- --------------- M. J. Cohen, President (Chief Executive, Operating and Financial Officer) Date: July 30, 1996 /S/ R. F. LIEBLE ------------- ---------------- R. F. Lieble, Treasurer