National Presto Industries(NPK) - 2019 Q4 - Annual Report

Financial Performance - The Company sold substantially all assets of its subsidiary Presto Absorbent Products, Inc. for $68,448,000, with an additional $4,000,000 expected from delayed asset sales[9]. - For the year ended December 31, 2019, approximately 14% of consolidated net sales were from cast products, while 17% were from noncast/thermal appliances[11]. - Wal-Mart Stores, Inc. accounted for 12% of consolidated net sales in 2019, highlighting the risk of losing a major customer[13]. - The company had a total of 919 employees as of December 31, 2019, down from 949 employees at the end of December 2018[43]. - The company’s inventory levels increase in advance of seasonal selling periods, particularly for products like pressure canners and heaters[45]. - The company’s environmental liability reserve is believed to be adequate for ongoing remediation operations, but additional studies could require more funds[41]. - The company’s environmental liability reserve is believed to be adequate for ongoing remediation operations, with no material effect anticipated on financial results[42]. Defense Segment - The Defense segment's contracts with the U.S. Department of Defense included a five-year contract valued at over $671,000,000 for the management and production of the Army's 40mm Ammunition System[26]. - The Defense segment's work for the DOD was primarily performed on a fixed-price basis, limiting adjustments based on actual costs incurred[30]. - The Defense segment's contract backlog was approximately $310,385,000 as of December 31, 2019, compared to $333,592,000 in 2018 and $308,173,000 in 2017, indicating a slight decrease in backlog year-over-year[49]. - Deliveries under the Army's 40mm Ammunition System contracts exceeded $671,000,000 and $566,000,000 for the first and second five-year contracts, respectively, with a third contract valued at $84,750,000 awarded for FY16[26][29]. - The Defense segment operates under fixed-price contracts, which are generally not subject to adjustments based on actual costs incurred, except for limited escalation clauses[30]. Safety Segment - The Company formed the Safety segment in Q3 2019 through the acquisition of OneEvent Technologies, Inc., which utilizes cloud-based technology for predictive alerts[31]. - OneEvent Technologies' system can detect anomalies in refrigeration cycles, providing alerts days or weeks in advance of potential malfunctions[32]. - The Safety segment operates with a sales force of 4 employees, indicating a lean operational structure[34]. - The Safety segment was formed in Q3 2019 with the acquisition of OneEvent Technologies, Inc., which focuses on cloud-based monitoring systems for environmental data[31][32]. - The Safety segment's operations are startup in nature, resulting in limited revenues and a small sales force of 4 employees[34]. Research and Development - Research and development costs for new product development were not a material element in the aggregate costs incurred by the Company for the years 2019, 2018, and 2017[15]. - Research and development costs for new product development were expensed in operations for the years 2019, 2018, and 2017, but were not a material element in the aggregate costs incurred by the company[15]. - Research and development costs for new product development were expensed in operations for the years 2019, 2018, and 2017, indicating ongoing investment in innovation despite limited revenues[36]. Competitive Environment - The company operates in a highly competitive environment for housewares and small appliances, with significant price sensitivity affecting operating results[14]. - New product introductions are subject to delivery delays from supply sources, impacting availability during peak selling periods[36]. - The company primarily warehouses and distributes products from distribution centers in Canton and Jackson, Mississippi, utilizing leased tractors and trailers[37]. - The company holds numerous patents and trademarks, with the Presto® trademark considered material to its business[39].