NATIONAL PRESTO INDUSTRIES INC (NPK) Business

ITEM 1.  BUSINESS



A.  DESCRIPTION OF BUSINESS



The business of National Presto Industries, Inc. (the “Company" or “National Presto”) consists of three business segments. For a further discussion of the Company’s business, the segments in which it operates, and financial information about the segments, please refer to Note L to the Consolidated Financial Statements. The Housewares/Small Appliance segment designs, markets and distributes housewares and small electrical appliances, including pressure cookers and canners, kitchen electrics, and comfort appliances that enrich the lives of consumers by making life easier, more productive and more enjoyable. The Defense segment protects the lives of the citizens of our nation, as well as the citizens of our nation’s allies, by providing our warfighters with reliable products. It 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 empowering organizations and individuals to protect what is most important. The segment's startup company, Rely Innovations, Inc., offers smoke, carbon monoxide (CO), and combo smoke/CO alarms with an array of voice messages in English and Spanish that clearly inform of incipient danger. The CO alarms have large digital displays as well. The segment also markets an economy line of carbon monoxide and smoke alarms and a PFAS-Free Foam commercial fire extinguisher.



1. Housewares/Small Appliance Segment

Housewares and electrical appliances sold by the segment include pressure cookers and canners; the Presto Control Master® heat control line of skillets in several sizes, griddles, woks and multi-purpose cookers; slow cookers; deep fryers of various sizes; waffle makers; pizza ovens; slicer/shredders; electric heaters; corn poppers (hot air, oil, and microwave); dehydrators; vacuum sealers; microwave bacon cookers; coffeemakers and coffeemaker accessories; electric knife sharpeners; and timers. Pressure cookers and canners are available in a range of sizes, in stovetop and digital forms, and are made from aluminum and/or stainless steel.



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. For the year ended December 31, 2025, this segment had no customers that accounted for 10% of the Company’s consolidated net sales. For the years ended December 31, 2024 and 2023, Amazon.com, Inc. accounted for 10% and 11%, respectively, of the Company’s consolidated net sales.  The loss of Amazon.com, Inc. as a customer would have a material adverse effect on the Company.



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Products are sold primarily in the United States and Canada directly to retailers and also through independent distributors. Although the segment has long established relationships with many of its customers, it does not have long-term supply contracts with them. The loss of, or material reduction in, sales to any of the segment's major customers could adversely affect the segment's business. The majority of the housewares and electrical appliances are sourced from vendors in the Orient. (See Note J to the Consolidated Financial Statements.)



The segment has a sales force of six employees that sell to and service most customers. A few selected accounts are handled by manufacturers' representatives who may also sell other product lines. Sales promotional activities have been conducted primarily through the use of in store promotions and digital advertising. The business is seasonal, with the normal peak sales period occurring in the fourth quarter of the year prior to the holiday season. This segment operates in a highly competitive and extremely price sensitive environment. Increased costs that cannot be fully absorbed into the price of products or passed along in the form of price increases to the retail customer can have a significant adverse impact on operating results. Several companies compete for sales of housewares and small electrical appliances, some of which are larger than the Company’s segment and others which are smaller. In addition, some customers maintain their own private label, as well as purchase brokered product directly from the Orient. Product competition extends to special product features, product pricing, product quality, marketing programs, warranty provisions, service policies and other factors. New product introductions are an important part of the segment's sales to offset the morbidity rate of other products and/or the effect of lowered acceptance of seasonal products due to weather conditions. New products entail unusual risks. Engineering and tooling costs are increasingly expensive, as are finished goods that may not have a ready market or achieve widespread consumer acceptance. High-cost advertising commitments which may accompany such new products or may be required to maintain sales of existing products may not be fully absorbed by ultimate product sales. Initial production schedules, set in advance of introduction, carry the possibility of excess unsold inventories. New product introductions are further subject to delivery delays from supply sources, which can impact availability during the segment's most active selling periods.



Research and development costs related to new product development for the years 2025, 2024, and 2023 were expensed in operations of these years and were not a material element in the aggregate costs incurred by the Company.



Products are generally warranted to the original owner to be free from defects in material and workmanship for a period of one to twelve years from date of purchase, depending on the product. The segment allows a sixty-day over-the-counter initial return privilege through cooperating dealers. Products are serviced through a corporate service repair operation. The segment's service and warranty programs are competitive with those offered by other manufacturers in the industry.



The segment primarily warehouses and distributes its products from distribution centers located in Canton and Nettleton, Mississippi. Selective use is made of leased tractors and trailers.



The Company invests funds not currently required for business activities (see Note A(6) to the Consolidated Financial Statements). Income from invested funds is included in Other Income in the accompanying Consolidated Statements of Comprehensive Income.



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Earnings from investments may vary significantly from year to year depending on interest yields on instruments meeting the Company's investment criteria, and the extent to which funds may be needed for internal growth, acquisitions, newly identified business activities, and reacquisition of Company stock.





2. Defense Segment

Each of the segment’s operating companies are subsidiaries of National Defense Corporation.

AMTEC Corporation ("AMTEC") was acquired on February 24, 2001, and manufactures 40mm ammunition, and precision mechanical and electro-mechanical products for the United States Department of Defense (DOD) and DOD prime contractors. AMTEC’s 131,000 square foot manufacturing facility located in Janesville, Wisconsin, is focused on producing niche market ordnance products (such as training ammunition, fuzes, firing devices, and initiators). AMTEC is also the prime contractor for the 40mm ammunition system to the DOD (more fully described below).



Spectra Technologies LLC ("Spectra"), a subsidiary of AMTEC, was acquired on July 31, 2003, and is engaged in the manufacture and delivery of munitions and ordnance-related products for the DOD and DOD prime contractors. Spectra maintains 384,000 square feet of space located in East Camden, Arkansas, dedicated primarily to LAP type work.



Amron, a division of AMTEC ("Amron"), holds the assets that were purchased from Amron LLC on January 30, 2006. Amron manufactures cartridge cases used in medium caliber ammunition (20mm, 25mm, 30mm, 40mm, and 50mm) primarily for the DOD and DOD prime contractors, which includes the 40mm systems program previously mentioned and referenced below. The Amron manufacturing facility is 212,000 square feet and is located in Antigo, Wisconsin.



Tech Ord, a division of AMTEC ("Tech Ord"), holds the assets formerly owned by Chemring Energetic Devices, Inc.’s business located in Clear Lake, South Dakota and all of the real property previously owned by Technical Ordnance Realty, LLC. These assets were acquired on January 24, 2014. Tech Ord manufactures in its 124,000 square foot Clear Lake facility detonators, booster pellets, release cartridges, lead azide, and other military energetic devices and materials. Its major customers include United States and foreign government agencies, AMTEC, and other defense contractors.

The equity interests of Woodlawn Manufacturing, Ltd. ("Woodlawn"), a subsidiary of National Defense Corporation and its newly formed subsidiary, Woodlawn Manufacturing LLC, were acquired on October 26, 2022. Woodlawn is engaged in the manufacture of metal parts and assemblies primarily for the DOD and DOD prime contractors. The Woodlawn manufacturing facility is 77,000 square feet and is located in Marshall, Texas.

 

The Defense segment competes for its business primarily on the basis of technical competence, product quality, manufacturing experience, and price. This segment operates in a highly competitive environment with many other organizations, some of which are larger and others that are smaller.



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On April 25, 2005, AMTEC was awarded the high volume, five-year prime contract for management and production of the United States Army’s (the "Army") 40mm Ammunition System.  The Army selected AMTEC as one of two prime contractors responsible for supplying all requirements for 40mm practice and tactical ammunition for a period of five years, with AMTEC receiving the majority share of the business.  Deliveries under the contract exceeded $671,000,000, with final deliveries completed in 2013.  On February 18, 2010, the Army awarded AMTEC a second five-year contract for the management and production of the 40mm Ammunition System.  As in the original five-year contract, AMTEC was awarded the majority share of the 40mm requirement. Deliveries under this contract exceeded $566,000,000, with the final deliveries completed in 2018.  In addition, as part of an acquisition of a group of assets from DSE, Inc., a 40mm competitor, which was completed on November 7, 2013, AMTEC acquired through a novation agreement an additional $188,000,000, representing the remaining undelivered portion of the award that had been given to AMTEC’s competitor under the second five-year contract mentioned above. Total deliveries for the systems program under the novated DSE, Inc. 40mm contract were completed in 2018.  AMTEC submitted its bid for a third contract, and although the FY15 (Army’s fiscal year beginning October 1, 2014) bid request was subsequently cancelled, the 40mm program requirements remained and were subsequently awarded to AMTEC as the Army’s FY16 40mm requirements in a single award valued at $84,750,000. Final deliveries for the FY16 contract were completed in 2019. On August 30, 2017, the Army awarded AMTEC, as the sole prime contractor, a third five-year 40mm system contract covering FY17-21 requirements. The value of awards for the FY17 through FY21 requirements is approximately $539,600,000, with deliveries scheduled to complete in 2026. On September 23, 2022, the Army awarded AMTEC, as the sole prime contractor, a fourth five-year 40mm system contract covering FY22-26 requirements. The value of awards to date is approximately $965,000,000 for FY22 through FY25, with deliveries commencing in 2024 and scheduled to complete in 2030. One award year (FY26) remains, with the maximum ceiling value of the contract at $1,413,000,000. Actual annual and cumulative dollar volume with the Army over the course of the contract will be dependent upon military requirements and funding, as well as government procurement regulations and other factors controlled by the Army and the DOD.

On May 13, 2024, the Army awarded AMTEC a five-year Indefinite Delivery Indefinite Quantity (IDIQ) contract for production of the 40mm M918E2 High Velocity Target Practice - Day/Night/Thermal (TP-DNT) cartridge. The M918E2 TP-DNT Cartridge allows the warfighters to train as they fight by delivering a projectile whose impact signature can be seen day or night, by unaided eye, and through current thermal and night vision sights. The value of awards to date is approximately $256,000,000, with deliveries commencing in 2025 and scheduled to complete in 2027. The maximum ceiling value of the IDIQ contract is $818,900,000. Actual annual and cumulative dollar volume with the Army over the course of the contract will be dependent upon military requirements and funding, as well as government procurement regulations and other factors controlled by the Army and the DOD.



During 2025, almost all of the work performed by this segment directly or indirectly for the DOD was performed on a fixed-price basis. Under fixed-price contracts, the price paid to the contractor is usually awarded based on competition or negotiation at the outset of the contract and therefore is generally not subject to adjustments reflecting the actual costs incurred by the contractor, with the exception of some limited escalation clauses, which on the 2017 and 2022 contracts apply to only three materials – steel, aluminum and zinc. The Defense segment’s contracts and subcontracts contain the customary provision permitting termination at any time for the convenience of the government, with payment for any work completed, associated profit and inventory/work in progress at the time of termination. The segment’s business does not tend to be seasonal.



3. Safety Segment

The Safety segment was formed in the third quarter of 2019 with the purchase of substantially all of the assets of OneEvent Technologies, Inc. ("OneEvent") on July 23, 2019, and was combined with Rusoh, Inc., which had previously been included in the Housewares/Small Appliance segment. The Safety segment is currently comprised of Rely Innovations, Inc. ("Rely"). To focus the direction of the segment's business, 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. The OneEvent intellectual property, however, has been retained. See Note L of the Consolidated Financial Statements.



OneEvent leases 4,300 square feet in Mount Horeb, Wisconsin. Established in 2014, OneEvent’s cloud-based learning and analytics engine utilizes a series of sensing devices integrated with a cellular gateway to predict and alert in a timely fashion so that the customer has an opportunity to prevent a loss.  As noted above, the certain assets of the business were divested in 2025.

The Company purchased certain assets and assumed certain liabilities of Knox Safety, Inc. on July 29, 2022, forming Rely. Rely leases 4,300 square feet in Chapel Hill, North Carolina and 5,600 square feet in Lisle, Illinois. Established in 2019, Knox Safety designed and sold carbon monoxide detectors for residential use.



Rusoh, Inc. was formed in 2012, to design and market an owner-maintained, multipurpose, reloadable, dry chemical fire extinguisher and was the first portable owner-maintained fire extinguisher. As noted above, the business was divested in 2023.



The operations of the current business that comprises the Safety segment are startup in nature and have resulted in limited revenues. The segment has a sales force of two employees that sell to and service most customers.  It also utilizes a few manufacturers' representatives who may also sell other product lines.  Product competition extends to product features, product pricing, product quality, marketing programs, service policies and other factors.  New product introductions are an important part of the segment's sales to enhance its product offerings.  New products entail unusual risks.  Engineering and tooling costs are increasingly expensive, as are finished goods that may not have a ready market or achieve widespread commercial acceptance.  Securing Underwriters Laboratories (UL) and ETL certifications is a prerequisite to sales, and the process for securing certification is both expensive and time consuming.  Fully tooled products are required prior to the performance of most tests.  High-cost advertising commitments which may accompany such products may not be fully absorbed by ultimate product sales.  Initial production schedules, set in advance of introduction, carry the possibility of excess unsold inventories.  New product introductions are further subject to delivery delays from supply sources, which can impact availability to meet commitments.



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Research and development costs related to new product development for the years 2025, 2024, and 2023 were expensed in operations of these years.



The segment primarily warehouses and distributes its products from distribution centers located in Canton and Nettleton, Mississippi, as well as Eau Claire, Wisconsin.



B.  OTHER COMMENTS



1. Sources and Availability of Materials

See Note J to the Consolidated Financial Statements.



2. Patents, Trademarks, and Licenses

Patents, trademarks and know-how are important to the Company’s segments. Although the Company’s current and future success does not materially depend upon the judicial protection of its intellectual property rights (patents, trademarks, trade dress copyrights and trade secrets), removal of that protection would expose the Company to competitors who seek to take advantage of the Company's innovations and proprietary rights. The Company’s segments hold numerous patents, trademarks, and copyrights registered in the United States and foreign countries related to various products and methods. The Company believes its business is not dependent upon any individual patent, copyright or license, but that the Presto® trademark is material to its business.



3. Effects of Compliance with Environmental and Other Regulations

In May 1986, the Company's Eau Claire, Wisconsin site was placed on the United States Environmental Protection Agency's (EPA) National Priorities List (NPL) under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA) because of hazardous waste deposited on the property. At year end 1998, all remediation projects at the Eau Claire, Wisconsin site had been installed, were fully operational, and restoration activities had been completed.



Based on factors known as of December 31, 2025, it is believed that the Company's environmental liability reserve will be adequate to satisfy on-going remediation operations and monitoring activities; however, should environmental agencies require additional studies or remediation projects, it is possible the existing accrual could be inadequate.



Management believes that in the absence of any unforeseen future developments, known environmental matters will not have any material effect on the results of operations or financial condition of the Company.

Like other manufacturers, the Company is subject to a broad range of federal, state, local and foreign laws and requirements, including those concerning air emissions, discharges into waterways, and the generation, handling, storage, transportation, treatment and disposal of hazardous substances and waste materials, as well as the remediation of contamination associated with releases of hazardous substances at the Company’s facilities and off-site disposal locations, workplace safety and equal employment opportunities. These laws and regulations are constantly changing, and it is impossible to predict with accuracy the effect that changes to such laws and regulations may have on the Company in the future. Like other industrial concerns, the Company’s manufacturing operations entail the risk of noncompliance, and there can be no assurance that the Company will not incur material costs or other liabilities as a result thereof.

The Company is also subject to various other federal, state, and local laws affecting its business, as well as a variety of regulations relating to such matters as working conditions, equal employment opportunities, and product safety. These regulations stem from regulatory bodies or laws such as the US Consumer Product Safety Commission, the US Food and Drug Administration, California’s Safe Drinking Water and Toxic Enforcement Act of 1986 (Proposition 65), the US Department of Transportation, and authorities having jurisdiction for fire safety and refrigeration equipment. The Company believes it is currently in material compliance with all such applicable laws and regulations.

In addition, U.S. Government contractors are subject to extensive laws and regulations specific to the defense industry, several of which are delineated in Item 1A Risk Factors under the heading “U.S. Government contractors are subject to extensive laws and regulations applicable to the defense industry and the Company could be adversely affected by changes in and compliance with such laws and regulations, or any negative findings by the U.S. government regarding the Company’s compliance with them.”



4. Human Capital

As of December 31, 2025, the Company and its subsidiaries had 1,200 employees compared to 1,126 employees at the end of December 2024.



Approximately 179 employees of Amron are members of the United Steel Workers union. The most recent contract between Amron and the union is effective through February 28, 2030.

The Company provides its employees with competitive salaries and bonuses, opportunities for equity ownership, opportunities for continued learning and growth and a robust employment package that promotes well-being across all aspects of their lives, including health care, retirement planning and paid time off.



5. Industry Practices Related to Working Capital Requirements

The major portion of the Company's sales are made with terms of 60 days or shorter.



For the Housewares/Small Appliance segment, inventory levels increase in advance of the selling period for products that are seasonal, such as pressure canners, heaters, and major new product introductions. Inventory build-up also occurs to create stock levels required to support the higher sales that occur in the latter half of each year. Buying practices of the segment's customers require "just-in-time" delivery, necessitating that the segment carry large finished goods inventories.

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The ability to meet United States DOD demands also necessitates the carrying of large inventories in the Defense segment.



Inventory build-up also occurs in the Safety segment both for seasonal products like carbon monoxide alarms and smoke alarms, and to meet potential demand of customers that require delivery with shorter lead times.



6. Order Backlog

Shipment of most products of the Housewares/Small Appliance and Safety segments occurs within a relatively short time after receipt of the order and, therefore, there is usually no substantial order backlog.  New product introductions may result in order backlogs that vary from product to product and as to timing of introduction.



The contract backlog of the Defense segment was approximately $1,747,809,000, $1,085,612,000, and $564,005,000 at December 31, 2025, 2024, and 2023, respectively. Backlog is defined as the value of orders from the customer less the amount of sales recognized against the orders. It is anticipated that the backlog will be produced and shipped during an 18- to 42-month period, after December 31, 2025.



C.  AVAILABLE INFORMATION



The Company has a web site at www.gopresto.com. The contents of the Company's web site are not part of, nor are they incorporated by reference into, this annual report.

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The Company makes available on its web site its annual reports on Form 10-K or 10-K/A and, beginning with its second quarter filing in 2011, quarterly reports on Form 10-Q or 10-Q/A. It does not provide its current reports on Form 8-K or amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act on its website. The Company does not do so because these and all other reports it files with the SEC are readily available to the public on the SEC web site at www.sec.gov and can be located with ease using the link provided on the Company’s website. Upon request, the Company provides paper copies of its annual report free of charge.