Attached files
file | filename |
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EX-31.2 - CERTIFICATION OF CFO PURSUANT TO SECTION 302 - NATIONAL PRESTO INDUSTRIES INC | presto141735_ex31-2.htm |
EX-32.1 - CERTIFICATION OF CEO PURSUANT TO SECTION 906 - NATIONAL PRESTO INDUSTRIES INC | presto141735_ex32-1.htm |
EX-31.1 - CERTIFICATION OF CEO PURSUANT TO SECTION 302 - NATIONAL PRESTO INDUSTRIES INC | presto141735_ex31-1.htm |
EXCEL - IDEA: XBRL DOCUMENT - NATIONAL PRESTO INDUSTRIES INC | Financial_Report.xls |
EX-32.2 - CERTIFICATION OF CFO PURSUANT TO SECTION 906 - NATIONAL PRESTO INDUSTRIES INC | presto141735_ex32-2.htm |
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UNITED STATES |
SECURITIES AND EXCHANGE COMMISSION |
Washington, D.C. 20549 |
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FORM 10-Q |
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x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED March 30, 2014
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____ TO _____
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NATIONAL PRESTO INDUSTRIES, INC. |
(Exact name of registrant as specified in its charter) |
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WISCONSIN |
39-0494170 |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
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3925 NORTH HASTINGS WAY |
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EAU CLAIRE, WISCONSIN |
54703-3703 |
(Address of principal executive offices) |
(Zip Code) |
(Registrants telephone number, including area code) 715-839-2121
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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 o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
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Large accelerated filer |
o |
Accelerated filer |
x |
Non-accelerated filer |
o |
Smaller reporting company |
o |
Indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).
Yes o No x
There were 6,909,333 shares of the Issuers Common Stock outstanding as of May 1, 2014.
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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NATIONAL PRESTO INDUSTRIES, INC. AND SUBSIDIARIES |
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CONDENSED CONSOLIDATED BALANCE SHEETS |
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March 30, 2014 and December 31, 2013 |
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(Unaudited) |
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(Dollars in thousands) |
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2014 |
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2013 |
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ASSETS |
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CURRENT ASSETS: |
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Cash and cash equivalents |
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$ |
7,970 |
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$ |
22,953 |
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Marketable securities |
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27,707 |
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36,404 |
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Accounts receivable, net |
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62,754 |
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84,322 |
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Inventories: |
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Finished goods |
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$ |
36,119 |
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$ |
36,078 |
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Work in process |
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50,084 |
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49,690 |
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Raw materials |
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9,396 |
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6,746 |
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Supplies |
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15 |
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95,614 |
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92,514 |
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Deferred tax assets |
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8,083 |
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8,083 |
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Income tax receivable |
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1,504 |
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213 |
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Other current assets |
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19,609 |
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19,584 |
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Total current assets |
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223,241 |
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264,073 |
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PROPERTY, PLANT AND EQUIPMENT |
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164,193 |
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155,872 |
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Less allowance for depreciation |
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68,574 |
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95,619 |
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66,283 |
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89,589 |
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GOODWILL |
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11,485 |
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11,485 |
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INTANGIBLE ASSETS, net |
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22,254 |
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24,698 |
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NOTE RECEIVABLE |
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3,725 |
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3,695 |
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$ |
356,324 |
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$ |
393,540 |
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The accompanying notes are an integral part of the condensed consolidated financial statements.
2
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NATIONAL PRESTO INDUSTRIES, INC. AND SUBSIDIARIES |
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CONDENSED CONSOLIDATED BALANCE SHEETS |
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March 30, 2014 and December 31, 2013 |
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(Unaudited) |
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(Dollars in thousands) |
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2014 |
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2013 |
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LIABILITIES AND STOCKHOLDERS EQUITY |
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LIABILITIES |
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CURRENT LIABILITIES: |
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Accounts payable |
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$ |
31,573 |
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$ |
38,323 |
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Accrued liabilities |
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15,266 |
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15,907 |
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Total current liabilities |
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46,839 |
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54,230 |
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DEFERRED INCOME TAXES |
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6,761 |
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6,759 |
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COMMITMENTS AND CONTINGENCIES |
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STOCKHOLDERS EQUITY |
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Common stock, $1 par value: |
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Authorized: 12,000,000 shares |
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Issued: 7,440,518 shares |
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$ |
7,441 |
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$ |
7,441 |
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Paid-in capital |
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5,287 |
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4,998 |
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Retained earnings |
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306,631 |
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336,895 |
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Accumulated other comprehensive income |
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12 |
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8 |
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319,371 |
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349,342 |
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Treasury stock, at cost |
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16,647 |
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16,791 |
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Total stockholders equity |
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302,724 |
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332,551 |
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$ |
356,324 |
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$ |
393,540 |
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The accompanying notes are an integral part of the condensed consolidated financial statements.
3
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NATIONAL PRESTO INDUSTRIES, INC. AND SUBSIDIARIES |
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
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Three Months Ended March 30, 2014 and March 31, 2013 |
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(Unaudited) |
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(In thousands except per share data) |
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Three Months Ended |
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2014 |
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2013 |
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Net sales |
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$ |
86,554 |
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$ |
83,190 |
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Cost of sales |
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70,834 |
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66,981 |
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Gross profit |
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15,720 |
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16,209 |
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Selling and general expenses |
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6,295 |
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5,684 |
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Intangibles amortization |
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2,443 |
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167 |
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Operating profit |
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6,982 |
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10,358 |
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Other income |
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164 |
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208 |
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Earnings before provision for income taxes |
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7,146 |
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10,566 |
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Income tax provision |
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2,456 |
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3,712 |
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Net earnings |
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$ |
4,690 |
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$ |
6,854 |
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Weighted average shares outstanding: |
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Basic and diluted |
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6,921 |
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6,903 |
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Net earnings per share: |
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Basic and diluted |
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$ |
0.68 |
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$ |
0.99 |
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Comprehensive income: |
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Net earnings |
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$ |
4,690 |
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$ |
6,854 |
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Other comprehensive income, net of tax: |
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Unrealized gain on available-for-sale securities |
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4 |
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8 |
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Comprehensive income |
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$ |
4,694 |
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$ |
6,862 |
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Cash dividends declared and paid per common share* |
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$ |
5.05 |
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$ |
0.00 |
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* An accelerated payment was made in late December 2012 of the annual 2013 dividend. The acceleration was occasioned by the uncertainty over the federal income tax rates that would be in effect for 2013. In contrast, the annual 2014 dividend payment was made during the first quarter of 2014. |
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The accompanying notes are an integral part of the condensed consolidated financial statements.
4
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NATIONAL PRESTO INDUSTRIES, INC. AND SUBSIDIARIES |
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CONSOLIDATED STATEMENTS OF CASH FLOWS |
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Three Months Ended March 30, 2014 and March 31, 2013 |
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(Unaudited) |
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(Dollars in thousands) |
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2014 |
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2013 |
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Cash flows from operating activities: |
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Net earnings |
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$ |
4,690 |
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$ |
6,854 |
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Adjustments to reconcile net earnings to net cash provided by operating activities, net of acquisition related assets: |
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Provision for depreciation |
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2,337 |
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2,114 |
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Intangibles amortization |
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2,443 |
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167 |
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Provision for doubtful accounts |
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180 |
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56 |
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Other |
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32 |
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109 |
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Changes in: |
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Accounts receivable |
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22,886 |
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25,914 |
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Inventories |
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1,597 |
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(13,513 |
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Other current assets |
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3 |
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(6,835 |
) |
Accounts payable and accrued liabilities |
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(8,402 |
) |
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(5,088 |
) |
Federal and state income taxes |
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(1,293 |
) |
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1,043 |
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Net cash provided by operating activities |
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24,473 |
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10,821 |
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Cash flows from investing activities: |
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Marketable securities purchased |
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(1,208 |
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(1,709 |
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Marketable securities - maturities and sales |
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9,912 |
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2,264 |
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Acquisition of property, plant and equipment |
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(3,868 |
) |
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(5,769 |
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Acquisition of businesses, net of cash acquired |
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(10,000 |
) |
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Sale of property, plant and equipment |
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300 |
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3 |
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Net cash used in investing activities |
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(4,864 |
) |
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(5,211 |
) |
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Cash flows from financing activities: |
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Dividends paid |
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(34,954 |
) |
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Other |
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362 |
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Net cash used in financing activities |
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(34,592 |
) |
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Net increase (decrease) in cash and cash equivalents |
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(14,983 |
) |
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5,610 |
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Cash and cash equivalents at beginning of period |
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22,953 |
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|
37,437 |
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Cash and cash equivalents at end of period |
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$ |
7,970 |
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$ |
43,047 |
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The accompanying notes are an integral part of the condensed consolidated financial statements.
5
NATIONAL PRESTO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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NOTE A BASIS OF PRESENTATION |
The consolidated interim financial statements included herein are unaudited and have been prepared by the Company pursuant to the rules and regulations of the United States Securities and Exchange Commission (SEC). In the opinion of management of the Company, the consolidated interim financial statements reflect all the adjustments which were of a normal recurring nature necessary for a fair presentation of the results of the interim periods. The condensed consolidated balance sheet as of December 31, 2013 is summarized from consolidated financial statements, but does not include all the disclosures contained therein and should be read in conjunction with the 2013 Annual Report on Form 10-K. Interim results for the period are not indicative of those for the year. |
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NOTE B RECLASSIFICATIONS |
Certain reclassifications have been made to the prior periods financial statements to conform to the current periods financial statement presentation. These reclassifications did not affect net earnings or stockholders equity as previously reported. |
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NOTE C EARNINGS PER SHARE |
Basic earnings per share is based on the weighted average number of common shares and participating securities outstanding during the period. Diluted earnings per share also includes the dilutive effect of additional potential common shares issuable. Unvested stock awards, which contain non-forfeitable rights to dividends whether paid or unpaid (participating securities), are included in the number of shares outstanding for both basic and diluted earnings per share calculations. |
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NOTE D BUSINESS SEGMENTS |
In the following summary, operating profit represents earnings before other income, principally interest income and income taxes. The Companys segments operate discretely from each other with no shared manufacturing facilities. Costs associated with corporate activities (such as cash and marketable securities management) and the assets associated with such activities are included within the Housewares/Small Appliances segment for all periods presented. |
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(in thousands) |
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Housewares |
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Defense |
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Absorbent |
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Total |
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||||
Quarter ended March 30, 2014 |
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External net sales |
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$ |
19,363 |
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$ |
48,289 |
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$ |
18,902 |
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$ |
86,554 |
|
Gross profit |
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|
3,789 |
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|
11,305 |
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|
626 |
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|
15,720 |
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Operating profit |
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|
944 |
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|
6,027 |
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|
11 |
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|
6,982 |
|
Total assets |
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|
125,828 |
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|
164,334 |
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|
66,162 |
|
|
356,324 |
|
Depreciation and amortization |
|
|
242 |
|
|
3,108 |
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|
1,431 |
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|
4,781 |
|
Capital expenditures |
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|
164 |
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|
602 |
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|
3,102 |
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|
3,868 |
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|
|
|
|
|
|
|
|
|
|
|
Quarter ended March 31, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
External net sales |
|
$ |
24,889 |
|
$ |
38,951 |
|
$ |
19,350 |
|
$ |
83,190 |
|
Gross profit |
|
|
4,457 |
|
|
10,066 |
|
|
1,686 |
|
|
16,209 |
|
Operating profit |
|
|
1,558 |
|
|
7,665 |
|
|
1,135 |
|
|
10,358 |
|
Total assets |
|
|
188,776 |
|
|
108,200 |
|
|
59,955 |
|
|
356,931 |
|
Depreciation and amortization |
|
|
282 |
|
|
681 |
|
|
1,318 |
|
|
2,281 |
|
Capital expenditures |
|
|
114 |
|
|
1,583 |
|
|
4,072 |
|
|
5,769 |
|
6
|
NOTE E - FAIR VALUE OF FINANCIAL INSTRUMENTS |
The Company utilizes the methods of fair value as described in Financial Accounting Standard Board (FASB) Accounting Standard Codification (ASC) 820, Fair Value Measurements and Disclosures, to value its financial assets and liabilities. ASC 820 utilizes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. |
The carrying amount for cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities approximates fair value due to the immediate or short-term maturity of these financial instruments.
|
NOTE F - CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES |
The Company considers all highly liquid marketable securities with an original maturity of three months or less to be cash equivalents. Cash equivalents include money market funds. The Company deposits its cash in high quality financial institutions. The balances, at times, may exceed federally insured limits. Money market funds are reported at fair value determined using quoted prices in active markets for identical securities (Level 1, as defined by FASB ASC 820). |
The Company has classified all marketable securities as available-for-sale which requires the securities to be reported at fair value, with unrealized gains and losses, net of tax, reported as a separate component of stockholders equity. Highly liquid, tax-exempt variable rate demand notes with put options exercisable in three months or less are classified as marketable securities.
At March 30, 2014 and December 31, 2013, cost for marketable securities was determined using the specific identification method. A summary of the amortized costs and fair values of the Companys marketable securities at the end of the periods presented is shown in the following table. All of the Companys marketable securities are classified as Level 2, as defined by FASB ASC 820, with fair values determined using significant other observable inputs, which include quoted prices in markets that are not active, quoted prices of similar securities, recently executed transactions, broker quotations, and other inputs that are observable. There were no transfers into or out of Level 2 during the three months ended March 30, 2014.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Thousands) |
|
||||||||||
|
|
MARKETABLE SECURITIES |
|
||||||||||
|
|
Amortized |
|
Fair Value |
|
Gross |
|
Gross |
|
||||
March 30, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax-exempt Municipal Bonds |
|
$ |
15,000 |
|
$ |
15,018 |
|
$ |
21 |
|
$ |
3 |
|
Variable Rate Demand Notes |
|
|
12,689 |
|
|
12,689 |
|
|
|
|
|
|
|
Total Marketable Securities |
|
$ |
27,689 |
|
$ |
27,707 |
|
$ |
21 |
|
$ |
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax-exempt Municipal Bonds |
|
$ |
20,813 |
|
$ |
20,825 |
|
$ |
18 |
|
$ |
6 |
|
Variable Rate Demand Notes |
|
|
15,579 |
|
|
15,579 |
|
|
|
|
|
|
|
Total Marketable Securities |
|
$ |
36,392 |
|
$ |
36,404 |
|
$ |
18 |
|
$ |
6 |
|
7
Proceeds from maturities and sales of available-for-sale securities totaled $9,912,000 and $2,264,000 for the three month periods ended March 30, 2014 and March 31, 2013, respectively. There were no gross gains or losses related to sales of marketable securities during the same periods. Net unrealized gains included in other comprehensive income, were $7,000 and $12,000 before taxes for the three month periods ended March 30, 2014 and March 31, 2013, respectively. No unrealized gains or losses were reclassified out of accumulated other comprehensive income during the same periods.
The contractual maturities of the marketable securities held at March 30, 2014 are as follows: $12,773,000 within one year; $3,330,000 beyond one year to five years; $4,822,000 beyond five years to ten years, and $6,782,000 beyond ten years. All of the instruments in the beyond five year ranges are variable rate demand notes which can be tendered for cash at par plus interest within seven days. Despite the stated contractual maturity date, to the extent a tender is not honored, the notes become immediately due and payable.
|
NOTE G COMMITMENTS AND CONTINGENCIES |
The Company is involved in largely routine litigation incidental to its business. Management believes the ultimate outcome of the litigation will not have a material effect on the Companys consolidated financial position, liquidity, or results of operations. |
|
NOTE H BUSINESS ACQUISITION |
On January 24, 2014, AMTEC Corporation, a wholly-owned subsidiary of the Company, purchased substantially all of the assets of Chemring Energetic Devices, Inc.s business located in Clear Lake, South Dakota, and all of the real property owned by Technical Ordnance Realty, LLC. The Clear Lake facility is a manufacturer of detonators, booster pellets, release cartridges, lead azide, and other military energetic devices and materials. Its major customers include U.S. and foreign government agencies, AMTEC Corporation, and other defense contractors. The acquisition of the Clear Lake facility will serve to complement the Defense segments existing line of products. The total consideration transferred was $10,534,000, consisting of $10,000,000 of cash paid at closing, and an additional cash payment of $534,000, which was made subsequent to March 30, 2014. |
The acquisition was accounted for under the acquisition method of accounting with the Company treated as the acquiring entity. Accordingly, the consideration paid by the Company to complete the acquisition has been recorded to the assets acquired and liabilities assumed based upon their estimated fair values as of the date of acquisition. The carrying values for current assets and liabilities were deemed to approximate their fair values due to the short-term nature of these assets and liabilities. The following table shows the amounts recorded as of the acquisition date.
|
|
|
|
|
|
|
(in thousands) |
|
|
|
|
|
|
|
Receivables |
|
$ |
1,498 |
|
Inventory |
|
|
4,697 |
|
Other current assets |
|
|
28 |
|
Property, plant and equipment |
|
|
4,800 |
|
Total assets acquired |
|
|
11,023 |
|
Less: Current liabilities assumed |
|
|
489 |
|
Net assets acquired |
|
$ |
10,534 |
|
The amounts shown above represent the preliminary fair values assigned to the assets acquired and liabilities assumed at the acquisition date and are subject to change as the valuation process is not complete. Final determination of the fair values may result in adjustments to the amounts presented. The Company expects to finalize the accounting for the acquisition during the second quarter of 2014. The amount shown above for receivables represents the gross accounts receivable from the sales of goods, net of an allowance for doubtful accounts of $20,000.
8
The Companys results of operations includes revenue of $2,015,000 and earnings of $155,000 of the acquired facility since the date of acquisition. The following pro forma condensed consolidated results of operations has been prepared as if the acquisition had occurred as of January 1, 2013.
|
|
|
|
|
|
|
|
|
|
(unaudited) |
|
||||
|
|
(in thousands, except per share data) |
|
||||
|
|
Quarter Ended |
|
Quarter Ended |
|
||
|
|
|
|
|
|
|
|
Net sales |
|
$ |
87,189 |
|
$ |
87,321 |
|
Net earnings |
|
|
4,410 |
|
|
6,982 |
|
|
|
|
|
|
|
|
|
Net earnings per share (basic and diluted) |
|
$ |
0.64 |
|
$ |
1.01 |
|
Weighted average shares outstanding (basic and diluted) |
|
|
6,921 |
|
|
6,903 |
|
The unaudited pro forma financial information presented above is not intended to represent or be indicative of what would have occurred if the transactions had taken place on the dates presented and is not indicative of what the Companys actual results of operations would have been had the acquisitions been completed at the beginning of the periods indicated above. Further, the pro forma combined results do not reflect one-time costs to fully merge and operate the combined organization more efficiently, or anticipated synergies expected to result from the combination and should not be relied upon as being indicative of the future results that the Company will experience.
9
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-looking statements in this Managements Discussion and Analysis of Financial Condition and Results of Operations, elsewhere in this Form 10-Q, in the Companys 2013 Annual Report to Shareholders, in the Proxy Statement for the annual meeting to be held May 20, 2014, and in the Companys 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; increases in material, freight/shipping, or production cost which cannot be recouped in product pricing; delays or interruptions in shipping or production from machine issues; work or labor disruptions stemming from a unionized work force; changes in government requirements and funding of government contracts; failure of subcontractors or vendors to perform as required by contract; the efficient start-up and utilization of capital equipment investments; and 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. Additional information concerning these and other factors is contained in the Companys Securities and Exchange Commission filings.
Comparison of First Quarter 2014 and 2013
Readers are directed to Note D to the Consolidated Financial Statements, Business Segments, for data on the financial results of the Companys three business segments for the quarters ended March 30, 2014 and March 31, 2013.
On a consolidated basis, sales increased by $3,364,000 (4%), gross profit decreased by $489,000 (3%), selling and general expenses increased by $611,000 (11%), intangibles amortization increased by $2,276,000 (1,363%) and other income decreased by $44,000 (21%). Earnings before the provision for income taxes decreased by $3,420,000 (32%), as did net earnings by $2,164,000 (32%). Details concerning these changes can be found in the comments by segment below.
Housewares/Small Appliance net sales decreased by $5,526,000 from $24,889,000 to $19,363,000, or 22%, primarily reflecting a decrease in shipments. Defense net sales increased by $9,338,000 from $38,951,000 to $48,289,000, or 24%, primarily related to shipments from the backlog acquired during the 2013 acquisition of assets from DSE, Inc., the segments 40MM ammunition competitor. The asset acquisition is described in Note Q to the Companys 2013 Consolidated Financial Statements on Form 10-K. This increase was partially offset by a decline in the manufacture and shipment of cartridge cases at the segments Amron division, as a result of U.S. defense cutbacks. Absorbent Products net sales decreased by $448,000 from $19,350,000 to $18,902,000, or 2%, and was primarily attributable to a reduction of shipments to the segments once major customer (which opened its own facility in late 2011), largely offset by increased shipments to other customers.
Housewares/Small Appliance gross profit decreased $668,000 from $4,457,000 to $3,789,000, or 15%, primarily reflecting the decrease in sales mentioned above, approximately 37% of which was offset by an adjustment to the warranty accrual. Defense gross profit increased $1,239,000 from $10,066,000 to $11,305,000, or 12%, primarily attributable to the increase in sales mentioned above. Absorbent Products gross profit decreased $1,060,000 from $1,686,000 to $626,000, primarily reflecting the decrease in sales mentioned above, increased material costs, and the absence of the prior years insurance settlement of $553,000.
10
Selling and general expenses for the Housewares/Small Appliance and the Absorbent Products segments were essentially flat. Defense segment selling and general expenses increased by $601,000, primarily reflecting increased employee compensation and benefit costs, an increase in bad debt reserves, and ongoing operational costs associated with the acquisition of substantially all of the assets from Chemring Energetic Devices, Inc.s business located in Clear Lake, South Dakota and the real property owned by Technical Ordnance Realty, LLC. The acquisition is more fully described in Note H to the Consolidated Financial Statements included in Part I of this Form 10-Q.
Intangibles amortization increased by $2,276,000, primarily reflecting the write down of the customer contract intangible of $21,690,000, corresponding to the quarters shipment of a portion of the backlog acquired from DSE, Inc., one of the Companys competitors in the Defense segment mentioned above.
The above items were responsible for the change in operating profit.
Earnings before provision for income taxes decreased $3,420,000 from $10,566,000 to $7,146,000. The provision for income taxes decreased from $3,712,000 to $2,456,000, primarily reflecting a decrease in taxable earnings. Net earnings decreased $2,164,000 from $6,854,000 to $4,690,000, or 32%.
Liquidity and Capital Resources
Net cash provided by operating activities was $24,473,000 and $10,821,000 for the three months ended March 30, 2014 and March 31, 2013, respectively. The principal factors contributing to the increase 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 2014 were net earnings of $4,690,000; a decrease in accounts receivable levels stemming from cash collections on customer sales; a decrease in inventory levels; partially offset by a decrease in payable and accrual levels. Of particular note during the first three months of 2013 were net earnings of $6,854,000; a decrease in accounts receivable levels stemming from cash collections on customer sales, partially offset by increases in inventory levels and deposits made with raw material suppliers included in other current assets; and a net decrease in payable and accrual levels.
Net cash used in investing activities was $4,864,000 during the first three months of 2014 compared to $5,211,000 used in investing activities during the first three months of 2013. The change in investing activity cash flow is primarily attributable to the acquisition of substantially all of the assets from Chemring Energetic Devices, Inc.s business located in Clear Lake, South Dakota and the real property owned by Technical Ordnance Realty, LLC mentioned above; an increase in net proceeds from marketable securities activity; and a decrease in the acquisition of property, plant, and equipment.
Cash flows from financing activities for the first three months of 2014 and 2013 primarily differed as a result of an accelerated payment made in late December 2012 of the annual 2013 dividend. The acceleration was occasioned by the uncertainty over the federal income tax rates that would be in effect in 2013. In contrast, the annual 2014 dividend payment was made during the first quarter of 2014.
Working capital decreased by $33,441,000 during the first three months of 2014 to $176,402,000 at March 30, 2014 for the reasons stated above. The Companys current ratio was 4.8 to 1.0 at March 30, 2014 and 4.9 to 1.0 at December 31, 2013.
The Company expects to continue to evaluate acquisition opportunities that align with its business segments and will make further acquisitions, as well as continue to make capital investments in these segments per existing authorized projects and for additional projects if the appropriate return on investment is projected.
The Company has substantial liquidity in the form of cash and cash equivalents and marketable securities to meet all of its anticipated capital requirements, to make dividend payments, and to fund future growth through acquisitions and other means. The bulk of its marketable securities are invested in the tax exempt variable rate demand notes described above and in municipal bonds that are pre-refunded with escrowed U.S. Treasuries. The Company intends to continue its investment strategy of safety and short-term liquidity throughout its investment holdings.
11
Critical Accounting Policies
The preparation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States requires management to make certain estimates and assumptions that affect the amount of reported assets and liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and revenues and expenses during the periods reported. Actual results may differ from those estimates. The Company reviewed the development and selection of the critical accounting policies and believes the following are the most critical accounting policies that could have an effect on the Companys reported results. These critical accounting policies and estimates have been reviewed with the Audit Committee of the Board of Directors.
Inventories
New Housewares/Small Appliance product introductions are an important part of
the Companys sales to offset the morbidity rate of other Housewares/Small
Appliance products and/or the effect of lowered acceptance of seasonal products
due to weather conditions. New products entail unusual risks and have occasionally
in the past resulted in losses related to obsolete or excess inventory as a
result of low or diminishing demand for a product. There were no such
obsolescence issues that had a material effect during the current period, and
accordingly, the Company did not record a reserve for obsolete product. In the
future should product demand issues arise, the Company may incur losses related
to the obsolescence of the related inventory. Inventory risk for the Companys
other segments is not deemed to be significant, as products are largely built
pursuant to customers specific orders.
Self-Insured Product Liability and Health Insurance
The Company is subject to product liability claims in
the normal course of business and is self-insured for health care costs, although
it does carry stop loss and other insurance to cover claims once a health care
claim reachs a specified threshold. The Companys insurance coverage varies
from policy year to policy year, and there are typically limits on all types of
insurance coverage, which also vary from policy year to policy year.
Accordingly, the Company records an accrual for known claims and incurred but
not reported claims, including an estimate for related legal fees in the
Companys consolidated financial statements. The Company utilizes historical
trends and other analysis to assist in determining the appropriate accrual.
There are no known claims that would have a material adverse impact on the
Company beyond the reserve levels that have been accrued and recorded on the
Companys books and records. An increase in the number or magnitude of claims
could have a material impact on the Companys financial condition and results
of operations.
Sales and Returns
Sales are recorded net of discounts and returns. The latter pertain primarily
to warranty returns, returns of seasonal items, and returns of those newly
introduced products sold with a return privilege. The calculation of warranty
returns is based in large part on historical data, while seasonal and new
product returns are primarily developed using customer provided information.
12
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Companys interest income on cash equivalents and marketable securities is affected by changes in interest rates in the United States. Cash equivalents primarily consist of money market funds. Based on the accounting professions interpretation of cash equivalents under FASB ASC Topic 230, the Companys seven-day variable rate demand notes are classified as marketable securities rather than as cash equivalents. The demand notes are highly liquid instruments with interest rates set every 7 days that can be tendered to the trustee or remarketer upon seven days notice for payment of principal and accrued interest amounts. The seven-day tender feature of these variable rate demand notes is further supported by an irrevocable letter of credit from highly rated U.S. banks. To the extent a bond is not remarketed at par plus accrued interest, the difference is drawn from the banks letter of credit. The Company has had no issues tendering these notes to the trustees or remarketers. Other than a failure of a major U.S. bank, there are no risks of which the Company is aware that relate to these notes in the current market. The balance of the Companys investments is held primarily in fixed and variable rate municipal bonds with a weighted average life of 0.8 years. Accordingly, changes in interest 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 uses sensitivity analysis to determine its exposure to changes in interest rates.
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 cash flow hedges. As the majority of the Housewares/Small Appliance segments suppliers are located in China, periodic changes in the U.S. dollar and Chinese Renminbi (RMB) exchange rates do have an impact on that segments product costs. It is anticipated that any potential material impact from fluctuations in the exchange rate will be to the cost of products secured via purchase orders issued subsequent to the revaluation.
ITEM 4. CONTROLS AND PROCEDURES
The Companys management, including the Chief Executive Officer and Chief Financial Officer, have conducted an evaluation of the effectiveness of the design and operation of the Companys disclosure controls and procedures pursuant to Rule 13a-15 of the Securities Exchange Act of 1934 (the 1934 Act) as of March 30, 2014. The Companys Chief Executive Officer and Chief Financial Officer have concluded that the Companys disclosure controls and procedures were effective as of that date.
There were no changes to internal controls over financial reporting during the quarter ended March 30, 2014 that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.
13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
See Note G to the Consolidated Financial Statements set forth under Part I - Item 1 above.
Item 6. Exhibits
|
|
|
|
Exhibit 3(i) |
Restated Articles of Incorporation - incorporated by reference from Exhibit 3 (i) of the Companys annual report on Form 10-K for the year ended December 31, 2005 |
|
Exhibit 3(ii) |
By-Laws - incorporated by reference from Exhibit 3 (ii) of the Companys current report on Form 8-K dated July 6, 2007 |
|
Exhibit 9.1 |
Voting Trust Agreement - incorporated by reference from Exhibit 9 of the Companys quarterly report on Form 10-Q for the quarter ended July 6, 1997 |
|
Exhibit 9.2 |
Voting Trust Agreement Amendment - incorporated by reference from Exhibit 9.2 of the Companys annual report on Form 10-K for the year ended December 31, 2008 |
|
Exhibit 10.1 |
Incentive Compensation Plan - incorporated by reference from Exhibit 10.1 of the Companys quarterly report on Form 10-Q for the quarter ended July 4, 2010 |
|
Exhibit 10.2 |
Form of Restricted Stock Award Agreement - incorporated by reference from Exhibit 10.2 of the Companys quarterly report on Form 10-Q for the quarter ended July 4, 2010 |
|
Exhibit 31.1 |
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
Exhibit 31.2 |
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
Exhibit 32.1 |
Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
Exhibit 32.2 |
Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
Exhibit 101 |
The following financial information from National Presto Industries, Inc.s Quarterly Report on Form 10-Q for the period ended March 30, 2014, formatted in eXtensible Business Reporting Language (XBRL): (i) Condensed Consolidated Balance Sheets, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Statements of Cash Flows, and (iv) Notes to Consolidated Financial Statements.* |
*The XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.
14
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. |
|
|
|
/s/ Maryjo Cohen |
|
Maryjo Cohen, Chair of the Board, |
|
President, Chief Executive Officer |
|
(Principal Executive Officer), Director |
|
|
|
/s/ Randy F. Lieble |
|
Randy F. Lieble, Director, Vice President, |
|
Chief Financial Officer (Principal |
|
Financial Officer), Treasurer |
|
|
|
Date: May 9, 2014 |
15
National Presto Industries, Inc.
Exhibit Index
|
|
Exhibit |
Exhibit Description |
31.1 |
Chief Executive Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
31.2 |
Chief Financial Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
32.1 |
Chief Executive Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
32.2 |
Chief Financial Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
101 |
The following financial information from National Presto Industries, Inc.s Quarterly Report on Form 10-Q for the period ended March 30, 2014, formatted in eXtensible Business Reporting Language (XBRL): (i) Condensed Consolidated Balance Sheets, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Statements of Cash Flows, and (iv) Notes to Consolidated Financial Statements.* |
*The XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.
16