National Presto Industries Inc (NPK)

National Presto Industries, Inc. operates through three business segments: Housewares/Small Appliance, Defense, and Safety. The Housewares/Small Appliance segment designs, markets, and distributes housewares and small electrical appliances, including pressure cookers and canners, kitchen electrics, and comfort appliances. The Defense segment manufactures 40mm ammunition, precision mechanical and electro-mechanical assemblies, medium caliber cartridge cases and metal parts, performs Load, Assemble and Pack (LAP) operations on ordnance-related products primarily for the United States Government and prime contractors, and manufactures detonators, booster pellets, release cartridges, lead azide, other military energetic devices and materials, and assemblies. The Safety segment provides innovative safety technology, offering smoke, carbon monoxide (CO), and combo smoke/CO alarms with voice messages in English and Spanish, CO alarms with large digital displays, an economy line of carbon monoxide and smoke alarms, and a PFAS-Free Foam commercial fire extinguisher. The industry is highly competitive and extremely price sensitive, with competition based on product features, pricing, quality, marketing programs, warranty provisions, and service policies.

The Housewares/Small Appliance segment operates in a highly competitive environment with several companies, some larger and some smaller than the Company, and customers maintain their own private labels and purchase brokered product directly from the Orient. The Defense segment competes primarily on the basis of technical competence, product quality, manufacturing experience, and price, with many other organizations, some larger and some smaller. The Safety segment competes on product features, pricing, quality, marketing programs, service policies, and other factors. The Company believes the Presto trademark is material to its business.

The Company generates revenue through three business segments. The Housewares/Small Appliance segment sells products primarily in the United States and Canada directly to retailers and through independent distributors, with no long-term supply contracts. The Defense segment performs work almost entirely on a fixed-price basis for the U.S. Government and its prime contractors, with contracts subject to termination for convenience. The Safety segment, which is startup in nature, has resulted in limited revenues. The Company invests funds not currently required for business activities, and income from invested funds is included in Other Income.

For the year ended December 31, 2025, approximately 9% of consolidated net sales were provided by cast products (griddles, waffle makers, die cast deep fryers, skillets and multi-cookers), and approximately 9% by noncast/thermal appliances (stamped cookers and canners, pizza ovens, corn poppers, coffee makers, microwave bacon cookers, dehydrators, slow cookers, electric stainless steel appliances, non-cast fryers, air fryers and heaters). For the year ended December 31, 2024, approximately 10% of consolidated net sales were provided by cast products, and approximately 15% by noncast/thermal appliances. For the year ended December 31, 2023, approximately 9% of consolidated net sales were provided by cast products, and approximately 18% by noncast/thermal appliances. The Housewares/Small Appliance segment had no customers that accounted for 10% of the Company's consolidated net sales in 2025, while Amazon.com, Inc. accounted for 10% and 11% in 2024 and 2023, respectively. The Defense segment's backlog was approximately $1,747,809,000 ¹ at December 31, 2025, $1,085,612,000 ² at December 31, 2024, and $564,005,000 ³ at December 31, 2023, anticipated to be produced and shipped during an 18- to 42-month period after December 31, 2025. The Safety segment's startup company, Rely Innovations, Inc., offers smoke, CO, and combo smoke/CO alarms, an economy line of alarms, and a PFAS-Free Foam commercial fire extinguisher.

The Defense segment's AMTEC subsidiary was awarded a fourth five-year 40mm system contract covering FY22-26 requirements on September 23, 2022, with the value of awards to date approximately $965,000,000 ⁴ for FY22 through FY25, deliveries commencing in 2024 and scheduled to complete in 2030, and the maximum ceiling value of the contract at $1,413,000,000 ⁵. On May 13, 2024, the Army awarded AMTEC a five-year IDIQ contract for production of the 40mm M918E2 TP-DNT cartridge, with the value of awards to date approximately $256,000,000 ⁶, deliveries commencing in 2025 and scheduled to complete in 2027, and the maximum ceiling value of the IDIQ contract at $818,900,000 ⁷. During the first quarter of 2025, the Company made deposits totaling $2,701,000 ⁸ with a vendor in its Housewares/Small Appliances segment, and on May 29, 2025, the vendor filed for bankruptcy protection, leading the Company to record an impairment of the full deposit during the second quarter of 2025. The Company purchased a Nettleton facility on January 23, 2025, which is approximately 507,000 square feet ⁹ and will be used principally in warehousing, distribution, and product service functions. The Canton facility, containing 255,000 square feet ¹⁰, was sold on February 10, 2026 and subsequently leased back under a short term lease agreement. The Company divested the stock of Rusoh, Inc. on November 14, 2023 and certain assets of OneEvent related to its refrigeration monitoring business on July 31, 2025. On February 27, 2026, the Board of Directors announced a regular dividend of $1.00 ¹¹ per share.

On a consolidated basis, sales increased by $115,296,000 ¹² (30%), gross profit increased by $1,759,000 ¹³ (2%), selling and general expense increased by $4,030,000 ¹⁴ (13%), impairment of vendor deposit increased $2,701,000 ¹⁵, and other income decreased by $3,579,000 ¹⁶ (66%). Earnings before provision for income taxes decreased by $8,551,000 ¹⁷ (17%), and net earnings decreased by $8,376,000 ¹⁸ (20%). Net sales of the Housewares/Small Appliance segment decreased by $7,195,000 ¹⁹ (7%), from $102,799,000 ²⁰ to $95,604,000 ²¹. Net sales of the Defense segment increased by $121,912,000 ²² (43%), from $284,025,000 ²³ to $405,937,000 ²⁴. Safety segment sales increased $579,000 ²⁵ to $1,983,000 ²⁶. Gross profit of the Housewares/Small Appliance segment decreased $17,889,000 ²⁷ from $25,478,000 ²⁸ (25% of sales) in 2024 to $7,589,000 ²⁹ (8% of sales) in 2025. Defense gross profit increased $19,471,000 ³⁰ from $58,173,000 ³¹ (21% of sales) in 2024 to $77,644,000 ³² (19% of sales) in 2025. Net earnings decreased $8,376,000 ³³ from $41,460,000 ³⁴ to $33,084,000 ³⁵.

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 Defense segment's contract backlog of approximately $1,747,809,000 ³⁶ at December 31, 2025, anticipated to be produced and shipped during an 18- to 42-month period, represents a significant growth vector, with the fourth five-year 40mm system contract covering FY22-26 requirements having a maximum ceiling value of $1,413,000,000 ³⁷ and the IDIQ contract for the M918E2 TP-DNT cartridge having a maximum ceiling value of $818,900,000 ³⁸. The Company plans for the newly purchased Nettleton facility, approximately 507,000 square feet ³⁹, to replace its two existing warehousing facilities in Canton and Jackson, Mississippi, supporting operational efficiency.

The Housewares/Small Appliance segment faces margin pressure from tariffs that went into effect on goods deemed to have been shipped from the Orient after January 31, 2025, which are generally treated as period costs and expensed as incurred, reflecting the segment's LIFO inventory cost valuation method. Relocation costs of the segment's distribution center from Canton to Nettleton, Mississippi reduced gross profit by approximately $1,261,000 ⁴⁰.

The Company's principal commitments consist of purchase and lease obligations. As of December 31, 2025, purchase orders amounted to approximately $602,558,000 ⁴¹. The Company can cancel or change many of these purchase orders, but may incur costs if its supplier cannot use the material for other applications or return the material to their supplier. The Company has sufficient liquidity in the form of cash and cash equivalents and marketable securities and credit facilities to meet all of its anticipated capital requirements, to make dividend payments, and to fund future growth through acquisitions and other means.

During 2025, purchases of property, plant and equipment were $27,034,000 ⁴², compared to $7,531,000 ⁴³ in 2024. The regular dividend was $1.00 ⁴⁴ per share in both 2025 and 2024, while the extra dividend was $3.50 ⁴⁵ per share in 2024 with no extra dividend payment during 2025. On February 27, 2026, the Board of Directors announced a regular dividend of $1.00 ⁴⁶ per share.

The Housewares/Small Appliance segment faces headwinds from increased costs for raw materials, energy, transportation, and other necessary supplies that cannot be fully absorbed or passed along in price increases. The majority of housewares/small appliance products are manufactured by a handful of third-party suppliers in Asia, primarily in the People's Republic of China, making the segment vulnerable to supply interruptions and foreign business risks, including tariffs. An increase of tariffs on products imported from China would have a material adverse effect on the Company's business. The segment is also dependent on key customers without long-term supply agreements, and sales are highly seasonal with a substantial portion recognized during the holiday selling season.

The Defense segment relies primarily on sales to U.S. Government entities, and a decline in or redirection of the U.S. defense budget could result in a material decrease in sales and earnings. Substantially all of the Company's U.S. Government contracts are fixed-price, subject to limited escalation provisions on steel, aluminum, and zinc, meaning the Company bears the risk that any increases or unexpected costs may reduce profits or potentially cause losses. All U.S. Government contracts can be terminated by the U.S. Government either for its convenience or if the Company defaults.

Management's discussion emphasizes that on a consolidated basis, sales increased by $115,296,000 ⁴⁷ (30%), while net earnings decreased by $8,376,000 ⁴⁸ (20%) from $41,460,000 ⁴⁹ to $33,084,000 ⁵⁰. The decrease in net earnings was driven by a $17,889,000 ⁵¹ decline in Housewares/Small Appliance gross profit due to tariffs and relocation costs, a $2,701,000 ⁵² impairment of a vendor deposit, and a $3,579,000 ⁵³ decrease in other income, partially offset by a $19,471,000 ⁵⁴ increase in Defense gross profit. Management highlights the Defense segment's contract backlog of approximately $1,747,809,000 ⁵⁵ at December 31, 2025, and states that the Company expects to continue to evaluate acquisition opportunities and make capital investments. The strategic priorities emphasized are supporting the Defense segment's augmented awards, managing the impact of tariffs on the Housewares/Small Appliance segment, and transitioning warehousing functions to the new Nettleton facility.

Total net sales for the year ended December 31, 2025 were $503,524,000 ⁵⁶, compared to $388,228,000 ⁵⁷ for 2024. Net earnings were $33,084,000 ⁵⁸ for 2025, compared to $41,460,000 ⁵⁹ for 2024. Diluted earnings per share were $4.65 ⁶⁰ for 2025, compared to $5.83 ⁶¹ for 2024. Operating profit from continuing operations was $37,951,000 ⁶² for 2025, compared to $44,530,000 ⁶³ for 2024. Gross profit was $85,233,000 ⁶⁴ for 2025, compared to $83,474,000 ⁶⁵ for 2024. The effective income tax rate was 22% ⁶⁶ for 2025 and 18% ⁶⁷ for 2024. Cash and cash equivalents were $3,252,000 ⁶⁸ at December 31, 2025, compared to $17,663,000 ⁶⁹ at December 31, 2024. Working capital was $308,112,000 ⁷⁰ at December 31, 2025, compared to $292,225,000 ⁷¹ at December 31, 2024. The current ratio was 4.2 to 1.0 ⁷² at December 31, 2025 and 4.9 to 1.0 ⁷³ at December 31, 2024. The Company had no outstanding balance on its line of credit at December 31, 2025, with net proceeds from the line of credit of $23,624,000 ⁷⁴ during 2025. Interest expense related to the line of credit was $832,000 ⁷⁵ in 2025 and $2,000 ⁷⁶ in 2024. The Housewares/Small Appliance segment reported net sales of $95,604,000 ⁷⁷ and gross profit of $7,589,000 ⁷⁸ (8% of sales) in 2025. The Defense segment reported net sales of $405,937,000 ⁷⁹ and gross profit of $77,644,000 ⁸⁰ (19% of sales) in 2025. The Safety segment reported net sales of $1,983,000 ⁸¹ in 2025.

The Company faces material risks from its reliance on third-party suppliers in Asia for the majority of housewares/small appliance products, as an increase of tariffs on products imported from China would have a material adverse effect on the business. The Defense segment's reliance on fixed-price U.S. Government contracts exposes the Company to cost increases that cannot be passed along, with limited escalation provisions applying only to steel, aluminum, and zinc, and the risk that test firing failures could require substantial rework or scrap costs for entire production lots. The loss of Amazon.com, Inc. as a customer, which accounted for 10% and 11% of consolidated net sales in 2024 and 2023 respectively, would have a material adverse effect. The Safety segment's startup businesses may not ultimately have the potential to be successful. The Company experienced a cybersecurity incident on March 1, 2025 that temporarily impacted operations, and there can be no assurance the Company will not experience material effects from security breaches in the future.