National Presto Industries(US:NPK)2023-03-13 21:08Sales Performance - For the year ended December 31, 2022, approximately 11% of consolidated net sales were from cast products, while 24% were from noncast/thermal appliances[13]. - Consolidated sales decreased by $34,154,000 (10%) in 2022, with net earnings down by $4,955,000 (19%) to $20,699,000[115]. - Net sales for 2022 were $321,623,000, a decrease of 9.6% from $355,777,000 in 2021[202]. - Housewares/Small Appliance net sales increased by $2,424,000 (2%) to $118,348,000, primarily due to pricing and mix changes[116]. - Defense net sales decreased by $37,031,000 (15%) to $202,483,000, reflecting a decrease in units shipped[116]. - The company’s sales are highly seasonal, with a substantial portion recognized during the holiday selling season, making it sensitive to shifts in consumer spending[63]. Financial Results - Gross profit for 2022 was $55,125,000, down 14.4% from $64,396,000 in 2021[202]. - Operating profit decreased to $22,127,000 in 2022, a decline of 26.4% compared to $30,029,000 in 2021[202]. - Net earnings for 2022 were $20,699,000, representing a 19.1% decrease from $25,654,000 in 2021[202]. - Earnings per share for 2022 were $2.92, down from $3.63 in 2021, reflecting a 19.5% decline[202]. - Total current assets decreased to $326,632,000 in 2022 from $348,053,000 in 2021, a reduction of 6.1%[199]. - Total liabilities increased slightly to $63,795,000 in 2022 from $62,775,000 in 2021[201]. - Cash and cash equivalents at the end of 2022 were $70,711,000, down 35.5% from $109,805,000 at the end of 2021[204]. - The company reported a loss on impairment of $5,295,000 in 2022, with no such losses reported in 2021[202]. - Dividends paid in 2022 totaled $31,826,000, a decrease from $44,083,000 in 2021, reflecting a reduction of 27.8%[204]. - As of December 31, 2022, the total stockholders' equity was $348,052,000, a decrease from $357,623,000 in 2021[205]. Defense Segment - The Defense segment has been awarded multiple contracts for the 40mm Ammunition System, with total deliveries exceeding $671 million under the first contract and $566 million under the second contract[28]. - The maximum ceiling value of the latest 40mm system contract awarded in September 2022 is $826.8 million, with deliveries scheduled to commence in late 2023[28]. - The Defense segment's contracts are primarily fixed-price, which limits adjustments based on actual costs incurred[29]. - The Defense segment's contract backlog was approximately $505.1 million as of December 31, 2022, up from $460.8 million in 2021 and $320.2 million in 2020, indicating a significant increase in demand[52]. - The Company’s U.S. Government contracts are primarily fixed-price, exposing it to risks from cost increases that could adversely affect profits[75]. - All U.S. Government contracts can be terminated by the government, which could lead to recovery of only incurred costs and profits on completed work[76]. Safety Segment - The Safety segment, formed in Q3 2019, includes three startup companies and has resulted in limited revenues due to its early-stage nature[34]. - The Safety segment's products utilize advanced technology, including machine learning and digital sensors, to provide early warnings of potential safety issues[31]. - The Safety segment consists of startup businesses, which may not achieve long-term success[80]. - Regulatory approvals for certain Safety segment products are necessary for commercial sales, and failure to obtain these could negatively impact results[85]. 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 2022, 2021, and 2020[15]. - Research and development costs related to new product development were expensed in operations for the years 2022, 2021, and 2020, highlighting ongoing investment in innovation[36]. - The company’s ability to develop new products is critical for long-term success, but it faces risks related to technological innovations and intellectual property rights[64]. - The Company faces risks in developing new products, including potential intellectual property infringement and the need for significant marketing expenditures[89]. Operational Risks - The Company has no long-term supply contracts with major customers, which poses a risk if significant customers are lost[14]. - The Housewares/Small Appliance segment operates in a highly competitive and price-sensitive environment, with increased costs potentially impacting operating results[14]. - Increased costs for raw materials and transportation could adversely impact operating results if not passed on to customers[82]. - Reliance on suppliers in Asia and Mexico makes the Company vulnerable to supply chain disruptions and foreign business risks[83]. - The company relies heavily on sales to U.S. Government entities, making it vulnerable to changes in the U.S. defense budget and appropriations[71]. - The company does not maintain product recall insurance, which could expose it to significant costs in the event of product recalls or liability claims[67]. Corporate Governance - The Company has adopted a Corporate Code of Conduct applicable to all employees, ensuring ethical standards are maintained[186]. - The executive team includes Maryjo Cohen as President and CEO, with extensive experience since 1976[180]. - The Company intends to disclose any amendments to its Corporate Code of Conduct on its website[186]. - As of December 31, 2022, the Company's internal control over financial reporting was assessed as effective based on COSO criteria[165]. - The independent registered public accounting firm issued an unqualified opinion on the effectiveness of the Company's internal control over financial reporting as of December 31, 2022[171]. - The Company maintained effective internal control over financial reporting in all material respects as of December 31, 2022, according to the audit conducted[170]. - Management excluded Woodlawn Manufacturing from its internal control assessment due to its acquisition in Q4 2022, with Woodlawn's total assets and net income representing approximately 5% and less than 1% of consolidated amounts, respectively[172]. - The audit included understanding internal control, assessing risks, and testing the design and operating effectiveness of controls[174]. - Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting[175]. Cash Flow and Investments - Cash provided by operating activities was $8,768,000 in 2022, down from $34,688,000 in 2021[132]. - Net cash used in investing activities was $16,436,000 in 2022, with $24,683,000 spent on acquiring two businesses[133]. - Cash flows from financing activities in 2022 were impacted by a $1.75 per share decrease in extra dividends paid compared to previous years[135]. - The company intends to maintain its investment strategy focused on safety and short-term liquidity throughout its holdings[140]. - The company has no history of investing in derivative financial instruments and primarily conducts transactions in U.S. dollars[158].