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What changed in NATIONAL PRESTO INDUSTRIES INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of NATIONAL PRESTO INDUSTRIES INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+113 added−111 removedSource: 10-K (2024-03-15) vs 10-K (2023-03-13)

Top changes in NATIONAL PRESTO INDUSTRIES INC's 2023 10-K

113 paragraphs added · 111 removed · 86 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

45 edited+7 added−7 removed32 unchanged
Biggest changeThe Defense segment, which 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 U.S.
Biggest changeIt 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.
Amron, a division of AMTEC, 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.
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 208,000 square feet and is located in Antigo, Wisconsin. Tech Ord, a division of AMTEC, 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.
The Amron manufacturing facility is 208,000 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.
The Company 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.
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.
Under fixed-price contracts, the price paid to the contractor is usually awarded based on competition 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.
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.
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 Company allows a sixty-day over-the-counter initial return privilege through cooperating dealers. Products are serviced through a corporate service repair operation.
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.
Based on factors known as of December 31, 2022, 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.
Based on factors known as of December 31, 2023, 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.
New product introductions are further subject to delivery delays from supply sources, which can impact availability to meet commitments. 6 Table of Contents Research and development costs related to new product development for the years 2022, 2021, and 2020 were expensed in operations of these years.
New product introductions are further subject to delivery delays from supply sources, which can impact availability to meet commitments. 6 Table of Contents Research and development costs related to new product development for the years 2023, 2022, and 2021 were expensed in operations of these years.
Total deliveries for the systems program under the novated DSE 40mm contract were completed in 2018.
Total deliveries for the systems program under the novated DSE, Inc. 40mm contract were completed in 2018.
Spectra Technologies LLC, 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 364,000 square feet of space located in East Camden, Arkansas, dedicated primarily to Load, Assemble and Pack (LAP) type work.
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 364,000 square feet of space located in East Camden, Arkansas, dedicated primarily to LAP type work.
The equity interests of Woodlawn Manufacturing, Ltd., 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 56,500 square feet and is located in Marshall, Texas.
("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 56,500 square feet and is located in Marshall, Texas.
The third is Rely Innovations, Inc., which offers carbon monoxide alarms with large digital displays and an array of voice messages that clearly inform of incipient danger. 1.
The second is Rely Innovations, Inc., which offers carbon monoxide alarms with large digital displays and an array of voice messages that clearly inform of incipient danger. 1.
Order Backlog Shipment of most of the Company's Housewares/Small Appliance products 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.
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.
This segment operates in a highly competitive environment with many other organizations, some of which are larger and others that are smaller. 5 Table of Contents On April 25, 2005, AMTEC Corporation was awarded the high volume, five-year prime contract for management and production of the Army’s 40mm Ammunition System.
This segment operates in a highly competitive environment with many other organizations, some of which are larger and others that are smaller. 5 Table of Contents 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.
During 2022, almost all of the work performed by this segment directly or indirectly for the DOD was performed on a fixed-price basis.
During 2023, almost all of the work performed by this segment directly or indirectly for the DOD was performed on a fixed-price basis.
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 Department of Defense.
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.
The Company's service and warranty programs are competitive with those offered by other manufacturers in the industry. The Company primarily warehouses and distributes its products from distribution centers located in Canton and Jackson, Mississippi. Selective use is made of leased tractors and trailers.
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 Jackson, Mississippi. Selective use is made of leased tractors and trailers.
Defense Segment Each of the segment’s operating companies are subsidiaries of National Defense Corporation. AMTEC Corporation was acquired on February 24, 2001, and manufactures 40mm ammunition, and precision mechanical and electro-mechanical products for the U.S. Department of Defense (DOD) and DOD prime contractors.
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.
Human Capital As of December 31, 2022, the Company and its subsidiaries had 973 employees compared to 895 employees at the end of December 2021. Approximately 192 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, 2025.
Human Capital As of December 31, 2023, the Company and its subsidiaries had 1,007 employees compared to 973 employees at the end of December 2022. Approximately 192 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, 2025.
Housewares/Small Appliance Segment Housewares and electrical appliances sold by the Company 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; air fryers; waffle makers; pizza ovens; slicer/shredders; electric heaters; corn poppers (hot air, oil, and microwave); dehydrators; rice cookers; microwave bacon cookers; egg cookers; coffeemakers and coffeemaker accessories; electric tea kettles; electric knife sharpeners; a line of kitchen gadgets; and timers.
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; air fryers; waffle makers; pizza ovens; slicer/shredders; electric heaters; corn poppers (hot air, oil, and microwave); dehydrators; vacuum sealers; rice cookers; microwave bacon cookers; egg cookers; coffeemakers and coffeemaker accessories; electric knife sharpeners; and timers.
For the year ended December 31, 2022, approximately 11% of consolidated net sales were provided by cast products (griddles, waffle makers, die cast deep fryers, skillets and multi-cookers), and approximately 24% by noncast/thermal appliances (stamped cookers and canners, pizza ovens, corn poppers, coffee makers, microwave bacon cookers, dehydrators, rice cookers, egg cookers, slow cookers, tea kettles, electric stainless steel appliances, non-cast fryers, air fryers and heaters).
For the year ended December 31, 2023, approximately 9% of consolidated net sales were provided by cast products (griddles, waffle makers, die cast deep fryers, skillets and multi-cookers), and approximately 18% by noncast/thermal appliances (stamped cookers and canners, pizza ovens, corn poppers, coffee makers, microwave bacon cookers, dehydrators, rice cookers, egg cookers; slow cookers, electric stainless steel appliances, non-cast fryers, air fryers and heaters).
The contract backlog of the Defense segment was approximately $505,069,000, $460,800,000, and $320,214,000 at December 31, 2022, 2021, and 2020, respectively. Backlog is defined as the value of orders from the customer less the amount of sales recognized against the orders.
The contract backlog of the Defense segment was approximately $564,005,000, $505,069,000, and $460,800,000 at December 31, 2023, 2022, and 2021, respectively. Backlog is defined as the value of orders from the customer less the amount of sales recognized against the orders.
For the year ended December 31, 2021, approximately 13% of consolidated net sales were provided by cast products, and approximately 17% by noncast/thermal appliances. For the year ended December 31, 2020, approximately 14% of consolidated net sales were provided by cast products, and approximately 17% by noncast/thermal appliances.
For the year ended December 31, 2022, approximately 11% of consolidated net sales were provided by cast products, and approximately 24% by noncast/thermal appliances. For the year ended December 31, 2021, approximately 13% of consolidated net sales were provided by cast products, and approximately 17% by noncast/thermal appliances.
Department of Defense 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 to meet potential demand of customers that require delivery with shorter lead times. 6.
Inventory build-up also occurs in the Safety segment both for seasonal products like carbon monoxide alarms and to meet potential demand of customers that require delivery with shorter lead times. 6.
On September 23, 2022, the Army awarded AMTEC, as the sole prime contractor, a fourth five-year 40mm system contract covering FY22-26. The initial award value was $69,800,000, with deliveries scheduled to commence in late 2023. The maximum ceiling value of the contract is $826,800,000.
On September 23, 2022, the Army awarded AMTEC, as the sole prime contractor, a fourth five-year 40mm system contract covering FY22-26. The initial award value was $69,800,000, with deliveries scheduled to commence in 2024.
For the year ended December 31, 2022, this segment had no one customer that accounted for 10% or more of the Company’s consolidated net sales. For the year ended December 31, 2021, Amazon accounted for 10% of consolidated net sales. For the year ended December 31, 2020, Amazon and Wal-mart Stores, Inc. each accounted for 10% of consolidated net sales.
For the year ended December 31, 2023, Amazon.com, Inc. accounted for 11% of the Company’s consolidated net sales. For the year ended December 31, 2022, this segment had no one customer that accounted for 10% or more of the consolidated net sales. For the year ended December 31, 2021, Amazon.com, Inc. accounted for 10% of the consolidated net sales.
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. on July 23, 2019. The segment is comprised of OneEvent Technologies, Inc., Rely Innovations, Inc., and Rusoh, Inc. The latter was previously included in the Company’s Housewares/Small Appliance segment.
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. The segment is currently comprised of OneEvent and Rely Innovations, Inc. ("Rely").
The division manufactures in its 98,000 square foot Clear Lake facility detonators, booster pellets, release cartridges, lead azide, and other military energetic devices and materials. Its major customers include US and foreign government agencies, AMTEC Corporation, and other defense contractors.
Tech Ord manufactures in its 98,000 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.
The Company purchased certain assets and assumed certain liabilities of Knox Safety, Inc. on July 29, 2022, forming Rely Innovations, Inc. Rely leases 4,300 square feet in Chapel Hill, North Carolina and 3,700 square feet in Lisle, Illinois. Established in 2019, Rely designs and sells carbon monoxide detectors for residential use.
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. See Note P to the Company's Consolidated Financial Statements.
New product introductions are an important part of the Company'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.
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.
The segment primarily warehouses and distributes its products from distribution centers located in Canton and Jackson, Mississippi, as well as, Mount Horeb, Wisconsin and a third party warehouse in Grand Prairie, Texas. B. OTHER COMMENTS 1. Sources and Availability of Materials See Note J to the Consolidated Financial Statements. 2.
The segment primarily warehouses and distributes its products from distribution centers located in Canton and Jackson, Mississippi, as well as Mount Horeb and 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.
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.
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.
The loss of either Amazon or Wal-Mart Stores, Inc. as a customer would have a material adverse effect on the segment. 3 Table of Contents Products are sold primarily in the United States and Canada directly to retailers and also through independent distributors.
The loss of Amazon.com, Inc. as a customer would have a material adverse effect on the Company. 3 Table of Contents 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.
OneEvent Technologies, Inc. leases 7,000 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.
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. Sensors measure a variety of environmental data including temperature, smoke, carbon monoxide, humidity, water, motion, and more.
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.
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.
New product introductions are further subject to delivery delays from supply sources, which can impact availability during the Company's most active selling periods. Research and development costs related to new product development for the years 2022, 2021, and 2020 were expensed in operations of these years and were not a material element in the aggregate costs incurred by the Company.
Research and development costs related to new product development for the years 2023, 2022, and 2021 were expensed in operations of these years and were not a material element in the aggregate costs incurred by the Company.
(See Note J to the Consolidated Financial Statements.) The Company has a sales force of seven 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.
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.
The operations of the three businesses that comprise the Safety segment are startup in nature and have resulted in limited revenues. The segment has a sales force of three employees that sell to and service most customers. It also utilizes several manufacturers' representatives who may also sell other product lines.
The segment has a sales force of three 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.
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 Company's customers require "just-in-time" delivery, necessitating that the Company carry large finished goods inventories. 7 Table of Contents The ability to meet U.S.
Inventory build-up also occurs to create stock levels required to support the higher sales that occur in the latter half of each year.
New product introductions may result in order backlogs that vary from product to product and as to timing of introduction. 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.
It is anticipated that the backlog will be produced and shipped during an 18- to 36-month period, after December 31, 2023. 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.
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.
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.
Although the Company 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 Company's major customers could adversely affect the Company's business. The majority of the housewares and electrical appliances are sourced from vendors in the Orient.
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 seven employees that sell to and service most customers.
The first is Rusoh, Inc., which designs and markets the Rusoh® Eliminator® fire extinguisher, the first owner-maintained fire extinguisher. The second is OneEvent Technologies, Inc. It offers systems that provide early warning of conditions that could ultimately lead to significant losses.
The Safety segment, which provides innovative safety technology empowering organizations and individuals to protect what is most important, currently consists of two startup companies. The first is OneEvent Technologies, Inc., which offers systems that provide early warning of conditions that could ultimately lead to significant losses.
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.
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.
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.
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.
Removed
Government and prime contractors; and manufactures detonators, booster pellets, release cartridges, lead azide, other military energetic devices and materials, and assemblies. The Safety segment, which provides innovative safety technology empowering organizations and individuals to protect what is most important, currently consists of three startup companies.
Added
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.
Removed
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.
Added
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.
Removed
Sensors measure a variety of environmental data including temperature, smoke, carbon monoxide, humidity, water, motion, and more.
Added
On March 31, 2023, May 26, 2023, and September 25, 2023, the Army awarded AMTEC option awards totaling $137,400,000 under year two (Army's FY 2023) of AMTEC's current five-year 40mm system contract. Deliveries are scheduled to begin in 2024. The maximum ceiling value of the contract is $826,800,000.
Removed
Rusoh, Inc. rents 8,000 square feet of office space located in the Company’s Eau Claire, Wisconsin facility. Formed in 2012, Rusoh designs and markets the Rusoh® Eliminator® fire extinguisher. The fire extinguisher is an owner-maintained, multipurpose, reloadable, dry chemical fire extinguisher and is the first portable owner-maintained fire extinguisher.
Added
In November of 2023, the Company divested itself of a subsidiary, Rusoh, Inc., that was previously included in this segment. See Note L of the Consolidated Financial Statements. OneEvent leases 7,000 square feet in Mount Horeb, Wisconsin.
Removed
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) certification is a prerequisite to sales, and the process for securing certification is both expensive and time consuming. For fire extinguishers, it typically takes in excess of a year.
Added
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. The operations of the two current businesses that comprise the Safety segment are startup in nature and have resulted in limited revenues.
Removed
Patents, Trademarks, and Licenses Patents, trademarks and know-how are important to the Company’s segments.
Added
Initial production schedules, set in advance of introduction, carry the possibility of excess unsold inventories.
Removed
It is anticipated that the backlog will be produced and shipped during an 18- to 36-month period, after December 31, 2022. Shipments in the Safety segment typically occur within a relatively short time after receipt of an order, and thus there is usually no long-term backlog of orders.
Added
Buying practices of the segment's customers require "just-in-time" delivery, necessitating that the segment carry large finished goods inventories. 7 Table of Contents The ability to meet United States DOD demands also necessitates the carrying of large inventories in the Defense segment.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

10 edited+5 added−3 removed60 unchanged
Biggest changeCOVID-19 or Other Pandemics, Epidemics, or Similar Public Health Crises Risks: The Company may be negatively impacted by the fear of exposure to, or actual effects of, pandemics and epidemics or similar public health crises.
Biggest changeHealth Epidemics, Pandemics, or Similar Public Health Crises Risks: The Company faces a wide variety of risks related to health epidemics, pandemics and similar outbreaks, especially of infectious diseases.
Any failure by Congress to appropriate additional funds to any program in which the Company participates, or any contract modification as a result of funding changes, could materially delay or terminate the program. This could have a material adverse effect on the results of the Company’s operations.
Any failure by Congress to appropriate additional funds to any program in which the Company participates, or any contract modification as a result of funding changes, could materially delay or terminate the program. This could have a material adverse effect on the Company’s results of operations.
The loss or significant reduction of a major program in which the Company participates could have a material adverse effect on the results of operations. A decline in or a redirection of the U.S. defense budget could result in a material decrease in the Defense segment sales and earnings. Government contracts are primarily dependent upon the U.S. defense budget.
The loss or significant reduction of a major program in which the Company participates could have a material adverse effect on the Company's results of operations. A decline in or a redirection of the U.S. defense budget could result in a material decrease in the Defense segment sales and earnings. Government contracts are primarily dependent upon the U.S. defense budget.
Government budget deficits, administration priorities, U.S. national security strategies, a change in spending priorities, and continued reduction of military operations around the world. Any significant decline or redirection of U.S. military expenditures could result in a decrease to the Company’s sales and earnings. 10 Table of Contents U.S. Government contracts are also dependent on the continuing availability of Congressional appropriations.
Government budget deficits, administration priorities, U.S. national security strategies, a change in spending priorities, and reduction of military operations around the world. Any significant decline or redirection of U.S. military expenditures could result in a material decrease to the Company’s sales and earnings. 10 Table of Contents U.S. Government contracts are also dependent on the continuing availability of Congressional appropriations.
The inability of the Company to maintain software and hardware that can connect to the wireless infrastructure, failure of the wireless infrastructure, or the availability of cloud based data storage, could have a material adverse effect on the efficacy of the segment’s products and in turn on its operating results. 12 Table of Contents The segment may not be successful in developing and introducing new and improved products.
The inability of the Company to maintain software and hardware that can connect to the wireless infrastructure, failure of the wireless infrastructure, or the unavailability of cloud based data storage, could have a material adverse effect on the efficacy of the segment’s products and in turn on its operating results. 12 Table of Contents The segment may not be successful in developing and introducing new and improved products.
The development and introduction of new products is very important to the Company’s long-term success. The ability to develop new products is affected by, among other things, whether the Company can develop and fund technological innovations and successfully anticipate customer needs and preferences, meet Underwriters Laboratories requirements and avoid infringing on the intellectual property rights of others.
The development and introduction of new products is very important to the Company’s long-term success. The ability to develop new products is affected by, among other things, whether the Company can develop and fund technological innovations and successfully anticipate customer needs and preferences, meet Underwriters Laboratories or ETL requirements and avoid infringing on the intellectual property rights of others.
A security breach of such systems could result in interruptions of the Company’s operations, negatively impact relations with customers or employees, and expose the Company to liability and litigation, any one of which could have a negative impact on the Company’s business, results of operations or financial condition.
A security breach of such systems could result in interruptions of the Company’s operations, negatively impact relations with customers or employees, and expose the Company to fines and penalties, liability and litigation, any one of which could have a negative impact on the Company’s business, results of operations or financial condition.
If the Company does not achieve the anticipated benefits of its acquisitions as rapidly or to the extent anticipated by management, or if others do not perceive the same benefits of the acquisition as the Company does, there could be a material, adverse effect on the Company’s business, financial condition or results of operations.
If the Company does not achieve the anticipated benefits of its acquisitions as rapidly or to the extent anticipated by management, there could be a material, adverse effect on the Company’s business, financial condition or results of operations.
During recent years, the Company’s sales were augmented by increased defense spending, including supplemental appropriations for operations in Iraq and Afghanistan, areas from which the U.S. has withdrawn. Currently, they are being augmented by the Ukraine Security Assistance Initiative. Future defense budgets could be negatively affected by several factors, including U.S.
During recent years, the Company’s sales were augmented by increased defense spending, including supplemental appropriations for operations in Iraq and Afghanistan, areas from which the U.S. has withdrawn. More recently, they have been augmented by the Ukraine Security Assistance Initiative. Future defense budgets could be negatively affected by several factors, including U.S.
Some of the Company's systems have in the past experienced security breaches, and, although to the best of the Company's knowledge as of the date of this filing, the breaches did not have a material adverse effect on its operating results or financial condition, there can be no assurance the Company will not experience material effects from security breaches in the future.
Some of the Company's systems have in the past experienced security breaches; however, to the best of the Company's knowledge as of the date of this filing, the breaches did not have a material adverse effect on its operating results or financial condition.
Removed
In response to a public health crisis, national, state and local authorities have implemented a variety of measures intended to limit the spread of a disease, such as travel restrictions, social distancing or imposing quarantine and isolation measures on the population. They may implement other measures.
Added
The Company is also subject to increasing government, customer, and other cyber and security requirements, including disclosure obligations.
Removed
The impacts of a public health crisis may include, but are not limited to: Significant reductions in demand or significant volatility in demand for the Company's products, which may be caused by, among other things, the temporary inability of consumers to purchase the products due to illness, self-quarantine, travel restrictions, financial hardship, restrictions that limit access to or close customer stores, shifts in demand away from one or more of the Company's more discretionary or higher priced products to lower priced commodity products, or the inability to meet heightened demand stemming from programs like the CARES Act that provide substantial additional purchasing power to consumers; Inability to meet the Company's customers' needs and achieve cost targets due to disruptions in distribution capabilities or the supply chain caused by the loss or disruption of essential manufacturing and supply elements such as raw materials or other finished products or components, restricted transportation or increased freight costs, reduced workforce, or other manufacturing sources and distribution processes; Failure of third parties on which the Company relies, including suppliers, customers, distributors, commercial banks, and external business partners, to meet their obligations to the Company, or significant disruptions in their ability to do so, which may be caused by their own financial or operational difficulties and may adversely impact the Company's operations; Significant changes in the political environment in which the Company manufactures, sells, or distributes products, including quarantines, governmental authority actions, closures or other restrictions that limit or close operating and manufacturing or distribution facilities, restrict employees' ability to travel or perform necessary business functions, or otherwise prevent external business partners, suppliers, or customers from sufficiently staffing operations, including operations necessary for the production, distribution, sale, and support of the Company's products, which could adversely impact the Company's results; Massive government indebtedness resulting from its injection of money into the economy that could result in spiraling inflation, which could in turn affect the Company's liquidity, and could also result in decreases in U.S. and foreign defense budgets, which in turn could have a negative impact on the Company's sales and earnings; Delays or limits in the ability of the U.S.
Added
There can be no assurance the Company will not experience material effects from security breaches in the future.
Removed
Government and other customers to perform, including making timely payments and awards to the Company, negotiating contracts and agreeing to appropriate costs for recovery, performing quality inspections, supporting testing, accepting delivery, approving security clearances (for individuals and facilities), and providing necessary personnel, equipment and facilities; or A prolonged period of generating lower cash from operations that could adversely affect both the Company's financial condition and the achievement of its strategic objectives. 13
Added
As cyber threats develop and grow, the Company may need to make significant further investments to protect data and its infrastructure, including the implementation of new computer systems or upgrades to existing systems, deployment of additional personnel and protection-related technologies, engagement of third-party consultants, and training employees. See Item 1C CYBERSECURITY for a further discussion.
Added
A global health crisis like the COVID-19 pandemic has contributed to business slowdowns or shutdowns, labor shortages, supply chain challenges, changes in government spending and requirements, regulatory challenges, reductions in demand for products and services, inflationary pressures and market volatility, If a health epidemic, pandemic or similar outbreak were to occur or worsen, the Company will likely experience broad and varied impacts, including potentially to its workforce and supply chain, inflationary pressures and increased costs (which may or may not be fully recoverable or insured), contracting, production and/or distribution delays, market volatility and other financial impacts.
Added
If any or all of these items were to occur, the Company could experience material adverse impacts on its business, financial condition, results of operations and/or cash flows. 13

Item 2. Properties

Properties — owned and leased real estate

2 edited+1 added−0 removed5 unchanged
Biggest changeITEM 2. PROPERTIES (Owned Except Where Indicated) The Company's Eau Claire facility is approximately 522,000 square feet, of which approximately 354,000 square feet is leased to Drylock Technologies, Ltd. Rusoh, Inc. rents approximately 8,000 square feet of the Eau Claire facility. The Company's corporate office occupies the balance of the space in Eau Claire.
Biggest changeITEM 2. PROPERTIES (Owned Except Where Indicated) The Company's Eau Claire facility is approximately 522,000 square feet, of which approximately 354,000 square feet is leased to Drylock Technologies, Ltd. Rely Innovations, Inc. rents approximately 8,000 square feet of the Eau Claire facility. The Company's corporate office occupies the balance of the space in Eau Claire.
The Company's Safety segment leases space in Mount Horeb, Wisconsin; Chapel Hill, North Carolina; and Lisle, Illinois. OneEvent Technologies, Inc. leases approximately 7,000 square feet for its operations in Mount Horeb and Rely Innovations, Inc. leases approximately 4,300 and 3,700 square feet for its operations in Chapel Hill, North Carolina and Lisle, Illinois, respectively.
The Company's Safety segment leases space in Mount Horeb, Wisconsin; Chapel Hill, North Carolina; and Lisle, Illinois. OneEvent Technologies, Inc. leases approximately 7,000 square feet for its operations in Mount Horeb and Rely Innovations, Inc. leases approximately 4,300 and 5,600 square feet for its operations in Chapel Hill, North Carolina and Lisle, Illinois, respectively.
Added
As of December 31, 2023, facility expansion plans were in progress for 2024 at several of the Defense segment’s operating locations in anticipation of additional awards.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+0 added−1 removed0 unchanged
Biggest changeOn February 17, 2022, the Company’s Board of Directors announced a regular dividend of $1.00 per share, plus an extra dividend of $3.00. The dividend will be payable on March 15, 2023 to the stockholders of record as of March 1, 2023.
Biggest changeITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Record of Purchases of Equity Securities None within the fourth quarter of the year ended December 31, 2023. On February 16, 2024, the Company’s Board of Directors announced a regular dividend of $1.00 per share, plus an extra dividend of $3.50.
The line graph and related information set forth under the heading “Performance Graph” in the Company’s 2022 Annual Report is incorporated by reference. 15 Table of Contents
The line graph and related information set forth under the heading “Performance Graph” in the Company’s 2023 Annual Report is incorporated by reference. 15 Table of Contents
During the fourth quarter of 2022, the Company did not purchase any of its equity securities. The information under the heading “Equity Compensation Plan Information,” in the Company’s Proxy Statement for its 2023 Annual Meeting of Stockholders, is incorporated by reference.
This number does not reflect stockholders who hold their shares in the name of broker dealers or other nominees. During the fourth quarter of 2023, the Company did not purchase any of its equity securities. The information under the heading “Equity Compensation Plan Information,” in the Company’s Proxy Statement for its 2024 Annual Meeting of Stockholders, is incorporated by reference.
The common stock of National Presto Industries, Inc. is traded on the New York Stock Exchange under the symbol “NPK”. As of March 1, 2023, there were 235 holders of record of the Company’s common stock. This number does not reflect stockholders who hold their shares in the name of broker dealers or other nominees.
The dividend is payable on March 15, 2024 to the stockholders of record as of March 1, 2024. The common stock of National Presto Industries, Inc. is traded on the New York Stock Exchange under the symbol “NPK”. As of March 1, 2024, there were 217 holders of record of the Company’s common stock.
Removed
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Record of Purchases of Equity Securities Month Total Shares Purchased Average Price Paid per Share Shares Purchased as Part of Publicly Announced Plan or Program Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs Feb. 28 - Apr. 4, 2022 510 * $ 79.62 N/A N/A Total 510 $ 79.62 * Under the Incentive Compensation Plan approved by stockholders on May 18, 2010 and the 2017 Incentive Compensation Plan approved by shareholders on May 16, 2017, the Company has the right to withhold shares from vested restricted stock grants to be delivered to grantees to satisfy all or a portion of federal, state, local, or foreign tax withholding requirements.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

25 edited+14 added−14 removed42 unchanged
Biggest changeThe write-down of inventory and materials of $5,247,000 at Rusoh, Inc. to reflect realizable values contributed to the comparative decrease in gross margin of $4,938,000. Selling and general expenses for the Housewares/Small Appliance segment decreased $1,230,000, primarily reflecting the absence of prior year marketing production and media costs of $2,200,000 and lower product liability costs of $364,000.
Biggest changeThis increase in operating losses was offset by the absence of the prior year's write-downs of inventory and materials to reflect realizable values of $1,822,000, leading to the comparative increase in gross margin of $517,000. 16 Table of Contents Selling and general expenses for the Housewares/Small Appliance segment increased $355,000, primarily reflecting increased compensation/payroll costs of $503,000, and changes to accrual levels, which included increased bad debt reserves of $285,000 and decreased legal and professional fees of $534,000.
Of particular note during 2021 were net earnings of $25,654,000, which included a non-cash provision for doubtful notes and accounts receivable of $7,665,000, total non-cash depreciation and amortization expenses of $2,978,000, a non-cash deferred income tax benefit of $1,612,000, and a net decreases in deposits made to vendors included in other assets and current assets and accounts receivable.
Of particular note during 2021 were net earnings of $25,654,000, which included a non-cash provision for doubtful notes and accounts receivable of $7,665,000, total non-cash depreciation and amortization expenses of $2,978,000, a non-cash deferred income tax benefit of $1,612,000, and net decreases in deposits made to vendors included in other assets and current assets and accounts receivable.
This interpretation, which is contrary to the interpretation that the Company’s representative received directly from the FASB (which indicated it would not object to the Company’s classification of variable rate demand notes as cash equivalents), has resulted in a presentation of the Company’s Consolidated Balance Sheets that the Company believes understates the true liquidity of the Company’s income portfolio.
This interpretation, which is contrary to the interpretation that the Company’s representative received directly from the FASB (which indicated it would not object to the Company’s classification of variable rate demand notes as cash equivalents), has resulted in a presentation of the Company’s Consolidated Balance Sheets that the Company believes understates the true liquidity of the Company’s income portfolio.
A reduction in the amount of write-downs of inventory and materials at Rusoh, Inc. to reflect realizable values contributed to the comparative increase in gross margin of $1,848,000. 16 Table of Contents Selling and general expenses for the Housewares/Small Appliance segment decreased $446,000, primarily reflecting lower health and accident expenses of $699,000, product liability costs of $383,000, and insurance costs of $164,000.
A reduction in the amount of write-downs of inventory and materials at Rusoh, Inc. to reflect realizable values contributed to the comparative increase in gross margin of $1,848,000. Selling and general expenses for the Housewares/Small Appliance segment decreased $446,000, primarily reflecting lower health and accident expenses of $699,000, product liability costs of $383,000, and insurance costs of $164,000.
Forward-looking statements in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, elsewhere in this Form 10-K, in the Company’s 2022 Annual Report to Shareholders, in the Proxy Statement for the annual meeting to be held May 16, 2023, and in the Company’s 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.
Forward-looking statements in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, elsewhere in this Form 10-K, in the Company’s 2023 Annual Report to Shareholders, in the Proxy Statement for the annual meeting to be held May 21, 2024, and in the Company’s 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.
Other income increased $1,387,000, which was primarily attributable to higher interest earned with higher yields, offset in part by a reduced portfolio of marketable securities. Earnings before provision for income taxes decreased $6,515,000 from $32,459,000 to $25,944,000.
Other income increased $1,387,000, which was primarily attributable to higher interest earned with higher yields, offset in part by a reduced portfolio of marketable securities. 18 Table of Contents Earnings before provision for income taxes decreased $6,515,000 from $32,459,000 to $25,944,000.
Housewares/Small Appliance gross profit increased $7,039,000 from $9,974,000 (9% of sales) in 2021 to $17,013,000 (14% of sales) in 2022, primarily reflecting the changes in pricing and mix mentioned above, augmented by decreased ocean cargo and inland freight costs, partially offset by the decrease in unit shipments, as well as adjustments related to obsolete or excess inventory levels of $3,613,000, and decreases in standard unit costs of $3,108,000 that were not offset by decreases in the segment's LIFO inventory reserve.
Housewares/Small Appliance gross profit increased $7,448,000 from $9,974,000 (9% of sales) in 2021 to $17,422,000 (15% of sales) in 2022, primarily reflecting the changes in pricing and mix mentioned above, augmented by decreased ocean cargo and inland freight costs, partially offset by the decrease in unit shipments, as well as adjustments related to obsolete or excess inventory levels of $3,613,000, and decreases in standard unit costs of $3,108,000 that were not offset by decreases in the segment's LIFO inventory reserve.
Lease obligations are described in Note M - Leases to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K. 2021 COMPARED TO 2020 Cash provided by operating activities was $34,688,000 during 2021 as compared to $40,973,000 during 2020.
Lease obligations are described in Note M - Leases to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K. 2022 COMPARED TO 2021 Cash provided by operating activities was $8,768,000 during 2022 as compared to $34,688,000 during 2021.
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. During 2022, the Housewares/Small Appliance segment recorded an impairment related to such losses of $3,613,000.
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. The Housewares/Small Appliance segment recorded impairments related to such losses of $1,216,000 and $3,613,000 in 2023 and 2022, respectively.
Purchase obligations include outstanding purchase orders issued to the Company's Housewares and Safety segments' manufacturers in the Orient and to material suppliers and contractors in the Defense segment, and as of December 31, 2022 amounted to approximately $277,378,000.
Purchase obligations include outstanding purchase orders issued to the Company's Housewares and Safety segments' manufacturers in the Orient and to material suppliers and contractors in the Defense segment, and as of December 31, 2023 amounted to approximately $343,580,000.
The provision for income taxes decreased from $6,805,000 to $5,245,000, which resulted in an effective income tax rate of 20% and 21% for the years ended December 31, 2022 and 2021, respectively.
The provision for income taxes decreased from $6,805,000 to $5,245,000, which resulted in an effective income tax rate of 20% and 21% for the years ended December 31, 2022 and 2021, respectively. Net earnings decreased $4,955,000 from $25,654,000 to $20,699,000.
LIQUIDITY AND CAPITAL RESOURCES 2022 COMPARED TO 2021 Cash provided by operating activities was $8,768,000 during 2022 as compared to $34,688,000 during 2021. The principal factors behind the decrease in cash provided can be found in the changes in the components of working capital within the Consolidated Statements of Cash Flows.
LIQUIDITY AND CAPITAL RESOURCES 2023 COMPARED TO 2022 Cash provided by operating activities was $45,389,000 during 2023 as compared to $8,768,000 during 2022. The principal factors behind the increase in cash provided can be found in the changes in the components of working capital within the Consolidated Statements of Cash Flows.
As of December 31, 2021 and 2020, $25,427,000 and $25,968,000, respectively, of variable rate demand notes are classified as marketable securities. These notes have structural features that allow the Company to tender them at par plus interest within any 7-day period for cash to the notes’ trustees or remarketers and thus provide the liquidity of cash equivalents.
As of December 31, 2023 and 2022, $5,123,000 and $3,638,000, respectively, of variable rate demand notes are classified as marketable securities. These notes have structural features that allow the Company to tender them at par plus interest within any 7-day period for cash to the notes’ trustees or remarketers and thus provide the liquidity of cash equivalents.
The Company’s current ratio was 6.6 to 1.0 at December 31, 2021 and 6.5 to 1.0 at December 31, 2020. 20 Table of Contents DEFENSE SEGMENT BACKLOG The Company’s Defense segment contract backlog was approximately $505,069,000 at December 31, 2022, and $460,800,000 at December 31, 2021.
The Company’s current ratio was 6.1 to 1.0 at December 31, 2022 and 6.6 to 1.0 at December 31, 2021. 20 Table of Contents DEFENSE SEGMENT BACKLOG The Company’s Defense segment contract backlog was approximately $564,005,000 at December 31, 2023, and $505,069,000 at December 31, 2022.
As a result of the foregoing factors, cash and cash equivalents decreased in 2022 by $39,094,000 to $70,711,000. 19 Table of Contents Working capital decreased by $21,903,000 to $272,991,000 at December 31, 2022 for the reasons stated above. The Company’s current ratio was 6.1 to 1.0 at December 31, 2022 and 6.6 to 1.0 at December 31, 2021.
As a result of the foregoing factors, cash and cash equivalents decreased in 2022 by $39,094,000 to $70,711,000. Working capital decreased by $21,903,000 to $272,991,000 at December 31, 2022 for the reasons stated above.
Net earnings decreased $4,955,000 from $25,654,000 to $20,699,000. 17 Table of Contents 2021 COMPARED TO 2020 Readers are directed to Note L, “Business Segments,” to the Company’s Consolidated Financial Statements for data on the financial results of the Company’s two business segments for the years ended December 31, 2021 and 2020.
Net earnings increased $13,860,000 from $20,699,000 to $34,559,000. 17 Table of Contents 2022 COMPARED TO 2021 Readers are directed to Note L, “Business Segments,” to the Company’s Consolidated Financial Statements for data on the financial results of the Company’s three business segments for the years ended December 31, 2022 and 2021.
Based on the accounting profession’s 2005 interpretation of cash equivalents under Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 230, the Company’s variable rate demand notes have been classified as marketable securities.
These were partially offset by net sales and maturities of marketable securities of $9,171,000. Based on the accounting profession’s 2005 interpretation of cash equivalents under Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 230, the Company’s variable rate demand notes have been classified as marketable securities.
These were partially offset by an increase in inventory levels and a net decrease in payable and accrual levels. Of particular note during 2020 were net earnings of $46,958,000, which included total non-cash depreciation and amortization expenses of $3,005,000; a non-cash deferred income tax benefit of $1,718,000 and a net increase in payable and accrual levels.
These were partially offset by non-cash deferred income tax benefit of $1,190,000 and an increase in inventory levels. Of particular note during 2022 were net earnings of $20,699,000, which included a non-cash loss on impairment of goodwill and intangible assets of $5,295,000 and total non-cash depreciation and amortization expenses of $3,347,000.
In addition, due to fire safety regulations, commercial extinguishers have a limited shelf life, which is based on the date of production. The Safety segment recorded impairments of $1,807,000 and $3,090,000 in 2022 and 2021, respectively, in recognition of that fact. There were no other obsolescence issues that had a material effect during the current year.
The Safety segment recorded impairments of $1,822,000 and $3,090,000 in 2022 and 2021, respectively, largely due to aged Rusoh extinguisher inventory. Fire safety regulations require fire extinguishers to be replaced or torn down every 12 years after the date of manufacture. There were no other obsolescence issues that had a material effect during the current year.
Of particular note during 2021 were net earnings of $25,654,000, which included a non-cash provision for doubtful notes and accounts receivable of $7,665,000, total non-cash depreciation and amortization expenses of $2,978,000, a non-cash deferred income tax benefit of $1,612,000, and decreases in deposits made to vendors included in other assets and current assets and accounts receivable.
Of particular note during 2023 were net earnings of $34,559,000, which included total non-cash depreciation and amortization of $6,007,000, decreases in accounts receivable levels and deposits made to vendors (included in other assets and current assets), and a net increase in payable and accrual levels.
Cash flows from financing activities for 2021 and 2020 were essentially flat and primarily relate to the annual dividend payments. Cash flows for both years also reflected the proceeds from the sale of treasury stock to a Company sponsored retirement plan. As a result of the foregoing factors, cash and cash equivalents increased in 2021 by $23,769,000 to $109,805,000.
Cash flows from financing activities for 2023 and 2022 primarily differed as a result of the $0.50 per share decrease in the extra dividend paid during these years. Cash flows for both years also reflected the proceeds from the sale of treasury stock to a Company sponsored retirement plan.
Risk Factors” titled “The COVID-19 or Other Pandemics, Epidemics or Similar Public Health Crises Risks” included in this Form 10-K for year ended December 31, 2022. 2022 COMPARED TO 2021 Readers are directed to Note L, “Business Segments,” to the Company’s Consolidated Financial Statements for data on the financial results of the Company’s three business segments for the years ended December 31, 2022 and 2021.
Additional information concerning these and other factors is contained in the Company's Securities and Exchange Commission filings. 2023 COMPARED TO 2022 Readers are directed to Note L, “Business Segments,” to the Company’s Consolidated Financial Statements for data on the financial results of the Company’s three business segments for the years ended December 31, 2023 and 2022.
The provision for income taxes from continuing operations decreased from $13,030,000 to $6,805,000, which resulted in an effective income tax rate of 21% and 22% for the years ended December 31, 2021 and 2020, respectively. Earnings from continuing operations and net earnings decreased $21,304,000 from $46,958,000 to $25,654,000.
The provision for income taxes increased from $5,245,000 to $7,872,000, which resulted in an effective income tax rate of 19% and 20% for the years ended December 31, 2023 and 2022, respectively.
Other income decreased $1,362,000, which was primarily attributable to lower interest earned of $1,255,000 with lower yields on a reduced portfolio of marketable securities. 18 Table of Contents Earnings from continuing operations before provision for income taxes decreased $27,529,000 from $59,988,000 to $32,459,000.
Other income increased $3,581,000, which was primarily attributable to higher interest earned with higher yields, partially offset by a reduced portfolio of marketable securities. Earnings before provision for income taxes increased $16,487,000 from $25,944,000 to $42,431,000.
These were partially offset by an increase in inventory levels; deposits made to vendors included in other assets and current assets; and an increase in accounts receivable levels. Net cash provided by investing activities was $32,548,000 during 2021 as compared to $7,155,000 during 2020.
These were partially offset by a non-cash deferred income tax benefit of $2,311,000 and increases in accounts receivable and inventory levels. Net cash used in investing activities was $447,000 during 2023 as compared to $16,436,000 during 2022.
Removed
Additional information concerning these and other factors is contained in the Company's Securities and Exchange Commission filings. COVID-19 DISCLOSURE All of the Company’s businesses were deemed essential and as a result, all operated during the COVID-19 shutdowns.
Added
On a consolidated basis, sales increased by $19,289,000 (6%), gross profit increased by $12,327,000 (22%), selling and general expense increased by $3,663,000 (14%), intangibles amortization increased by $1,053,000 (181%) and Impairments - goodwill and intangible assets decreased $5,295,000.
Removed
Distribution systems of customers that survived the shutdowns are largely intact as most key retail customers' outlets have been open since third quarter 2020. Most customer offices are now open, although some may not reopen until 2023. Trade shows, albeit with reduced attendance, have resumed. Material, components, and finished goods continue to be delayed due to the supply chain congestion.
Added
Other income increased by $3,581,000 (94%), earnings before provision for income taxes increased by $16,487,000 (64%), and net earnings increased by $13,860,000 (67%). Details concerning these changes can be found in the comments, by segment, below. Net sales of the Housewares/Small Appliance segment decreased by $20,729,000, from $118,347,000 to $97,619,000, or 18%.
Removed
As a result of government COVID-19 policies, material, transportation and labor costs have materially increased. Labor shortages continue. Due to the Company's historical conservative practices, it has no debt and has adequate balances to fund its operations. For historical information about the impact of the government responses to COVID-19, please see “Item 1A.
Added
Approximately 30% of which was attributable to a decrease pricing with the balance due to changes in units shipped and mix. Net sales of the Defense segment increased by $39,220,000, from $202,483,000 to $241,703,000, or 19%, reflecting an increase in units shipped.
Removed
On a consolidated basis, sales increased by $3,150,000 (1%), gross profit decreased by $20,526,000 (24%), selling and general expense increased by $5,648,000 (20%), and intangibles amortization decreased by $7,000 (3%). Other income decreased by $1,362,000 (36%), earnings from continuing operations before provision for income taxes decreased by $27,529,000 (46%), and earnings from continuing operations decreased by $21,304,000 (45%).
Added
In addition, as Woodlawn Manufacturing, Ltd. was acquired during the fourth quarter of 2022 (see Note P to the Company's Consolidated Financial Statements), 2023 was the first full year that its operations were reflected in the segment's sales.
Removed
Details concerning these changes can be found in the comments by segment below. Housewares/Small Appliance net sales decreased by $1,721,000, from $117,645,000 to $115,924,000, or 2%, primarily due to a decrease in shipments, approximately 54% of which was offset by an increase in prices.
Added
Gross profit of the Housewares/Small Appliance segment increased $2,445,000 from $17,422,000 (15% of sales) in 2022 to $19,867,000 (20% of sales) in 2023, primarily reflecting the absence of the levels of inventory adjustments made in the prior year.
Removed
The decrease was further offset by the partial reversal of prior year charges for estimated refunds related to a product recall, which had a year over year favorable effect of $3,603,000. Defense net sales increased by $4,869,000, from $234,645,000 to $239,514,000, or 2%, reflecting an increase in units shipped.
Added
Those adjustments related to obsolete or excess inventory adjustments of $3,613,000, and decrease in standard unit costs of $3,108,000 that were not offset by decreases in the segment's LIFO inventory reserve. Decreased ocean cargo and inland freight costs and a more favorable U.S. Dollar-RMB exchange rate affected margins to a lesser degree.
Removed
Housewares/Small Appliance gross profit decreased $14,232,000 from $24,206,000 (21% of sales) in 2020 to $9,974,000 (9% of sales) in 2021, primarily due to increased ocean cargo and product costs and the decreased sales mentioned above, partially offset by the partial reversal of prior year charges for estimated refunds related to a product recall, which had a year over year favorable comparable impact of $4,923,000.
Added
These elements were partially offset by the changes in pricing and unit shipments mentioned above. Defense gross profit increased $9,365,000 from $42,638,000 (21% of sales) in 2022 to $52,003,000 (22% of sales) in 2023, primarily reflecting the increase in sales mentioned above, and comparatively more efficient operations.
Removed
Defense gross profit decreased $1,356,000 from $62,561,000 (27% of sales) to $61,205,000 (26% of sales), primarily reflecting the increase in sales mentioned above offset by a less favorable mix and inefficiencies from labor shortages and delays in securing materials.
Added
Due to the startup nature of the businesses in the Safety segment, gross margins were negative in both years. Fiscal year 2023 included a full year of operations of Rely Innovations, Inc., which was acquired in July of 2022. See Note P.
Removed
The segment's results were also unfavorably impacted by storm damage that led to the shutdown of one of its lines for several months. Due to the startup nature of both businesses in the Safety segment, gross margins were negative in both years.
Added
Defense segment selling and general expenses increased $1,606,000, primarily due to increased compensation/payroll costs of $724,000, insurance settlement/deductible costs of $538,000 and a full year of selling and general expenses of Woodlawn Manufacturing, Ltd., which was acquired, during the fourth quarter of 2022. The increase in Woodlawn's selling and general expenses was $405,000.
Removed
These decreases were partially offset by higher health and accident and legal and professional expenses of $314,000 and $259,000, respectively and higher insurance costs of $449,000. Defense segment selling and general expenses increased $354,000, approximately a third of which relates to higher health and accident costs with the balance related to miscellaneous general and administrative costs.
Added
Safety segment selling and general expenses increased $1,702,000, primarily reflecting increased compensation/payroll costs of $1,420,000 and the absence of the prior year bargain purchase gain of $492,000 recognized upon the acquisition of Knox Safety, Inc., partially offset by the gain on the sale of Rusoh, Inc. of $351,000. See Notes L and P to the Company's Consolidated Financial Statements.
Removed
Safety segment selling and general expenses increased $6,640,000, primarily reflecting Rusoh, Inc.'s, impairment of notes receivable and the related interest of $7,615,000 offset in part by reduced compensation/payroll costs of $422,000 and professional expenses of $517,000. The above items were responsible for the change in operating profit from continuing operations.
Added
Intangibles amortization increased as a result of the acquisition of contracts/customer relationship and intellectual property intangibles in the acquisitions of Knox Safety, Inc. and Woodlawn Manufacturing, Ltd. See Note P to the Company's Consolidated Financial Statements.
Removed
During 2021 the Company had net sales and maturities of marketable securities of $34,621,000 offset by the purchase of plant and equipment of $2,866,000, which primarily included expenditures to augment the Company’s production facilities in the Defense segment.
Added
Impairment - goodwill and intangible assets decreased as a result of the absence of the prior year's impairment of goodwill and technology intangibles in the Safety segment. See Note A(10) and Note A(11) to the Consolidated Financial Statements. The above items were responsible for the change in operating profit from continuing operations.
Removed
Of note during 2020 were net sales and maturities of marketable securities of $9,776,000 offset by the purchase of plant and equipment of $2,621,000, which primarily included expenditures to augment the Company's production facilities in the Defense segment.
Added
Of note during 2023 were proceeds from sale of subsidiary of $2,000,000, net purchases of marketable securities of $1,466,000 and purchases of plant and equipment of $1,840,000. During 2022 the Company acquired two businesses for $24,683,000 net of cash acquired and purchased plant and equipment for $1,030,000.
Removed
Working capital decreased by $7,478,000 to $294,894,000 at December 31, 2021 for the reasons stated above.
Added
As a result of the foregoing factors, cash and cash equivalents increased in 2023 by $16,946,000 to $87,657,000. 19 Table of Contents Working capital increased by $15,100,000 to $288,091,000 at December 31, 2023 for the reasons stated above. The Company’s current ratio was 5.0 to 1.0 at December 31, 2023 and 6.1 to 1.0 at December 31, 2022.

Other NPK 10-K year-over-year comparisons