FORM 10-Q. - QUARTERLY REPORT UNDER SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001
[ ] 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 6,835,560 shares of the Issuer's Common Stock outstanding as of the
close of the period covered by this report.
NATIONAL PRESTO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 2001 and December 31, 2000
(Unaudited)
(Dollars in thousands)
2001 2000
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 79,383 $ 79,624
Marketable securities 102,155 143,205
Accounts receivable, net 19,645 10,023
Inventories:
Finished goods $ 32,989 $ 21,056
Work in process 6,903 2,416
Raw materials 7,024 6,968
Supplies 601 47,517 867 31,307
---------- ----------
Prepaid expenses 116 47
---------- ----------
Total current assets 248,816 264,206
PROPERTY, PLANT AND EQUIPMENT: 28,499 26,278
Less allowance for depreciation 15,697 12,802 12,984 13,294
---------- ----------
OTHER ASSETS 14,395 11,207
---------- ----------
$ 276,013 $ 288,707
========== ==========
The accompanying notes are an integral part of the financial statements.
NATIONAL PRESTO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 2001 and December 31, 2000
(Unaudited)
(Dollars in thousands)
2001 2000
--------------------------------------------------------------------------------------------------------------------
LIABILITIES
CURRENT LIABILITIES:
Accounts payable $ 15,124 $ 16,014
Federal and state income taxes 968 3,108
Accrued liabilities 24,875 24,425
---------- ----------
Total current liabilities 40,967 43,547
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 1,013 1,027
Retained earnings 245,392 254,381
---------- ----------
253,846 262,849
Treasury stock, at cost 18,800 17,689
---------- ----------
Total stockholders' equity 235,046 245,160
---------- ----------
$ 276,013 $ 288,707
========== ==========
The accompanying notes are an integral part of the financial statements.
NATIONAL PRESTO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
Three Months and Nine Months ended September 30, 2001 and October 1, 2000
(Unaudited)
(In thousands except per share data) THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
2001 2000 2001 2000
--------------------------------------------------------------------------------- ---------------------------
Net sales $ 26,616 $ 30,668 $ 63,512 $ 69,574
Cost of sales 20,277 20,627 51,145 49,188
-------- -------- -------- --------
Gross profit 6,339 10,041 12,367 20,386
Selling and general expenses 5,569 7,794 14,296 16,490
-------- -------- -------- --------
Operating profit (loss) 770 2,247 (1,929) 3,896
Other income, principally interest 1,846 2,356 6,495 7,594
-------- -------- -------- --------
Earnings before provision for income taxes 2,616 4,603 4,566 11,490
Provision (benefit) for income taxes 479 1,003 (200) 2,024
-------- -------- -------- --------
Net earnings $ 2,137 $ 3,600 $ 4,766 $ 9,466
======== ======== ======== ========
Weighted average shares outstanding:
Basic 6,848 6,979 6,862 7,058
======== ======== ======== ========
Diluted 6,849 6,980 6,863 7,059
======== ======== ======== ========
Net earnings per share:
Basic $ 0.31 $ 0.52 $ 0.69 $ 1.34
======== ======== ======== ========
Diluted $ 0.31 $ 0.52 $ 0.69 $ 1.34
======== ======== ======== ========
Cash dividends declared and paid per common share $ -- $ -- $ 2.00 $ 2.10
======== ======== ======== ========
The accompanying notes are an integral part of the financial statements.
NATIONAL PRESTO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months ended September 30, 2001 and October 1, 2000
(Unaudited)
(Dollars in thousands)
2001 2000
----------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net earnings $ 4,766 $ 9,466
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Provision for amortization and depreciation 2,947 1,870
Other 118 171
Changes in (net of acquisition):
Accounts receivable (7,574) (845)
Inventories (14,556) (18,229)
Prepaid expenses (52) (27)
Accounts payable and accrued liabilities (4,034) (2,401)
Federal and state income taxes (2,140) (3,517)
-------- --------
Net cash used in operating activities (20,525) (13,512)
-------- --------
Cash flows from investing activities (net of acquisition):
Marketable securities purchased (32,594) (40,441)
Marketable securities - maturities and sales 73,644 45,328
Acquisition of property, plant and equipment (2,275) (2,678)
Acquisition of business (3,744) --
Other 251 19
-------- --------
Net cash provided by investing activities 35,282 2,228
-------- --------
Cash flows from financing activities:
Dividends paid (13,755) (14,995)
Purchase of treasury stock (1,302) (8,814)
Other 59 (5)
-------- --------
Net cash used in financing activities (14,998) (23,814)
-------- --------
Net decrease in cash and cash equivalents (241) (35,098)
Cash and cash equivalents at beginning of period 79,624 88,075
-------- --------
Cash and cash equivalents at end of period $ 79,383 $ 52,977
======== ========
The accompanying notes are an integral part of the financial statements.
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.
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The foregoing information for the periods ended September 30, 2001, and October
1, 2000, 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, 2000, is summarized from
audited consolidated financial statements, but does not include all the
disclosures contained therein and should be read in conjunction with the 2000
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
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.
Comparison Third Quarter 2001 and 2000
Net sales decreased by $4,052,000 from $30,668,000 to $26,616,000 or
13%, resulting from the combination of the shipment of fewer units and
discounted prices.
Gross profit for 2001 decreased $3,702,000 from $10,041,000 to
$6,339,000 or 33% versus 24% as a percentage of net sales. The reduction of
gross profit percentage reflected increased discounts to retailers and the
inability to pass on increased costs offset in part by more favorable
manufacturing efficiencies experienced at the Company's manufacturing
facilities.
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, principally interest, decreased from the 2000 level as a
result of a lower level of invested funds and a lower rate of return on the
Company's portfolio of short-term marketable securities.
Earnings before provision for income taxes decreased $1,987,000 from
$4,603,000 to $2,616,000. The provision for income taxes decreased from
$1,003,000 to $479,000, which resulted in an effective income tax rate decrease
from 22% to 18%, as the result of decreased earnings subject to tax. Net
earnings decreased $1,463,000 from $3,600,000 to $2,137,000, or 41%.
The Company maintains adequate liquidity for all of its anticipated
capital requirements and dividend payments. As of quarter-end, there were no
material capital commitments outstanding.
Comparison First Nine Months 2001 and 2000
Net sales decreased by $6,062,000 from $69,574,000 to $63,512,000 due
primarily to decreased unit volume.
Gross profit for 2001 decreased $8,019,000 from $20,386,000 to
$12,367,000 or 29% versus 20% as a percentage of net sales. The reduction of
gross profit percentage reflected the inability to pass on increased cost and
less favorable manufacturing efficiencies experienced 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 2000 level as a
result of a lower level of invested funds and a lower rate of return on the
Company's portfolio of short-term marketable securities.
Earnings before provision for income taxes decreased $6,924,000 from
$11,490,000 to $4,566,000. The provision for income taxes decreased from
$2,024,000 of expense to a benefit of $200,000, which resulted in an effective
income tax rate decrease from 18% to a taxable benefit of 4%, as a result of the
tax benefit generated from the operating loss being greater than the taxes due
on investment income. Net earnings decreased $4,700,000 from $9,466,000 to
$4,766,000, or 50%.
2
Item 7A.
QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's interest income on cash equivalents and investments is
affected by changes in interest rates in the United States. The Company's
investments are held primarily in municipal bonds, a majority of which earn a
fixed rate of interest, while the remaining bonds earn a variable interest rate.
The Company uses sensitivity analysis to determine its exposure to changes in
interest rates. Through September 30, 2001, changes in these rates have not had
a material effect on the Company, and the Company does not anticipate that
future exposure to interest rate market risk will be material.
The Company has no history of, and does not anticipate in the future,
investing in derivative financial instruments. Most transactions with
international customers are entered into in U.S. dollars, precluding the need
for foreign currency hedges. Any transactions that are currently entered into in
foreign currency are not deemed material to the financial statements. Thus, the
exposure to foreign exchange market risk is not material.
PART II - OTHER INFORMATION
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 October 3, 1999
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
(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: October 30, 2001 /S/ M. J. Cohen
-----------------------------------------
M. J. Cohen, President
(Principal operating officer)
Date: October 30, 2001 /S/ R. F. Lieble
-----------------------------------------
R. F. Lieble, Chief Financial Officer and
Treasurer (Principal accounting officer)
National Presto Industries, Inc.
Exhibit Index
Exhibit
Number Exhibit Description
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11 Computation of Earnings per Share