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 APRIL 4, 1999
[ ] 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 7,361,995 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
April 4, 1999 and December 31, 1998
(Unaudited)
(Dollars in thousands)
1999 1998
- --------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 78,380 $114,565
Marketable securities 148,989 126,666
Accounts receivable, net 11,503 15,840
Inventories:
Finished goods $ 7,027 $ 7,407
Work in process 2,661 1,822
Raw materials 4,019 5,860
Supplies 993 14,700 884 15,973
-------- --------
Prepaid expenses 208 257
-------- --------
Total current assets 253,780 273,301
PROPERTY, PLANT AND EQUIPMENT: 22,557 21,975
Less allowance for depreciation 11,793 10,764 11,411 10,564
-------- --------
OTHER ASSETS 10,897 10,897
-------- --------
$275,441 $294,762
======== ========
The accompanying notes are an integral part of the financial statements.
NATIONAL PRESTO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
April 4, 1999 and December 31, 1998
(Unaudited)
(Dollars in thousands)
1999 1998
- -------------------------------------------------------------------------------------------------------------
LIABILITIES
CURRENT LIABILITIES:
Accounts payable $ 7,358 $ 11,447
Federal and state income taxes 3,126 6,216
Accrued liabilities 21,901 22,694
-------- --------
Total current liabilities 32,385 40,357
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 1,014 990
Retained earnings 236,675 248,115
-------- --------
245,130 256,546
Treasury stock, at cost 2,074 2,141
-------- --------
Total stockholders' equity 243,056 254,405
-------- --------
$275,441 $294,762
======== ========
The accompanying notes are an integral part of the financial statements.
NATIONAL PRESTO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
Three Months ended April 4, 1999 and April 5, 1998
(Unaudited)
(In thousands except per share data) THREE MONTHS ENDED
------------------
1999 1998
- ---------------------------------------------------------------------------------
Net sales $ 21,610 $ 18,965
Cost of sales 15,436 14,043
----------- -----------
Gross profit 6,174 4,922
Selling and general expenses 4,511 4,232
----------- -----------
Operating profit 1,663 690
Other income, principally interest 2,377 2,469
----------- -----------
Earnings before provision for income taxes 4,040 3,159
Provision for income taxes 760 349
----------- -----------
Net earnings $ 3,280 $ 2,810
=========== ===========
Weighted average shares outstanding:
Basic 7,360 7,355
=========== ===========
Diluted 7,361 7,356
=========== ===========
Net earnings per share:
Basic $ 0.45 $ 0.38
=========== ===========
Diluted $ 0.45 $ 0.38
=========== ===========
Cash dividends declared and paid per common share $ 2.00 $ 2.00
=========== ===========
The accompanying notes are an integral part of the financial statements.
NATIONAL PRESTO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months ended April 4, 1999 and April 5, 1998
(Unaudited)
(Dollars in thousands)
1999 1998
- ------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net earnings $ 3,280 $ 2,810
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Provision for depreciation 533 519
Stock compensation expense 66 54
Changes in:
Accounts receivable 4,337 10,839
Inventories 1,273 316
Prepaid expenses 49 (333)
Accounts payable and accrued liabilities (4,882) (7,021)
Federal and state income taxes (3,090) (1,951)
----------- -----------
Net cash provided by operating activities 1,566 5,233
----------- -----------
Cash flows from investing activities:
Marketable securities purchased (52,402) (33,140)
Marketable securities - maturities and sales 30,079 46,057
Acquisition of property, plant and equipment (841) (526)
Other 108 --
----------- -----------
Net cash provided by (used in) investing activities (23,056) 12,391
----------- -----------
Cash flows from financing activities:
Dividends paid (14,719) (14,710)
Other 24 25
----------- -----------
Net cash used in financing activities (14,695) (14,685)
----------- -----------
Net increase (decrease) in cash and cash equivalents (36,185) 2,939
Cash and cash equivalents at beginning of period 114,565 91,639
----------- -----------
Cash and cash equivalents at end of period $ 78,380 $ 94,578
=========== ===========
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.
- --------------------------------------------------------------------------------
The foregoing information for the periods ended April 4, 1999, and April 5,
1998, 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, 1998, is summarized from audited
consolidated financial statements, but does not include all the disclosures
contained therein and should be read in conjunction with the 1998 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 First Quarter 1999 and 1998
Net sales increased by $2,645,000 from $18,965,000 to $21,610,000 due
primarily to increased unit volume.
Gross margins as a percentage of sales increased from 26% to 29% due
largely to 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.
Earnings before provision for income taxes increased $881,000 from
$3,159,000 to $4,040,000. The provision for income taxes increased from $349,000
to $760,000 and the effective income tax rate increased from 11% to 19%, as a
result of increased earnings subject to tax. Net earnings increased $470,000
from $2,810,000 to $3,280,000, or 17% and earnings per share increased from $.38
to $.45.
The Company maintains adequate liquidity for all of its anticipated
capital requirements. As of quarter-end, there were no material capital
commitments outstanding.
YEAR 2000
The year 2000 (Y2K) issue is the result of computer programs using a
two-digit format to indicate the year in any date. Computer systems with such
software will be unable to interpret dates beyond the year 1999, thus causing
computer errors which could lead to disruptions in operations. In 1997 the
Company began the work necessary to address its Y2K exposure and focused
primarily on two areas:
Internal Systems: During 1997 the Company began upgrading or replacing
its affected programs or systems to become Y2K compliant, and this effort was
completed prior to March 31, 1999. Additionally, the Company is in the process
of conducting full scale year 2000 et seq. simulations of mission critical
systems to verify the efficacy of the upgrades and replacements. Those
simulations should be completed by September 30, 1999. The conversion costs have
been expensed as incurred, and are not considered material. At this time the
Company believes it is unnecessary to adopt a contingency plan.
External (Supplier) Systems: The Company has contacted suppliers of
products and services to assess whether the suppliers are Y2K compliant or to
monitor their progress toward Y2K compliance. The vast majority of the Company's
key suppliers have responded that they either are or will be Y2K compliant prior
to the year 2000. However, there can be no absolute assurance that suppliers and
others will timely resolve their own Y2K compliance issues. Additionally, a
small number of the Company's suppliers have provided inadequate responses as to
their Y2K readiness, and as a result the Company is implementing a contingency
plan to address potential interruption of supplied products or services. The
contingency plan includes use of alternate suppliers and / or stockpiling of
certain supplied items. Costs to-date for the external compliance program have
also been immaterial.
The potential effect of the year 2000 issue on the Company and its
business partners will not be fully determinable until the year 2000 and
thereafter. Not withstanding the Company's efforts described above, if year 2000
modifications are not properly completed either by the Company or entities with
whom the Company conducts business, the Company's revenues and financial
condition could be adversely impacted.
Item 7A.
QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
The Company's interest income is affected by changes in the general
level of U.S. interest rates. Changes in U.S. interest rates could affect the
interest earned on the Company's cash equivalents and investments. Currently,
changes in U.S. interest rates would not have a material affect on the interest
earned on the Company's cash equivalents and investments, as these investments
are primarily municipal bonds. A majority of these bonds earn a fixed rate of
interest while the remaining portion earn interest at a variable rate. The
Company uses sensitivity analysis to determine it's exposure to changes in
interest rates. The Company does not anticipate that exposure to interest rate
market risk will have a material impact on the Company due to the nature of the
Company's investments.
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
July 6, 1997
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
Exhibit 27 - Financial Data Schedule
(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: May 5, 1999 /S/ M. J. Cohen
-----------------------------------------
M. J. Cohen, President
(Principal operating officer)
Date: May 5, 1999 /S/ R. F. Lieble
-----------------------------------------
R. F. Lieble, Treasurer
(Principal accounting officer)
National Presto Industries, Inc.
Exhibit Index
Exhibit
Number Exhibit Description
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11 Computation of Earnings per Share
27 Financial Data Schedule