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National Presto Industries, Inc. Recommendation: Accumulate

National Presto Industries, Inc. Recommendation: Accumulate. Presented by Joe Niehaus. National Presto Industries, Inc. (NPK) and its consolidated subsidiaries consists of three well diversified business segments: Housewares/ Small Appliances Defense Products Absorbent Products Market Cap:

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National Presto Industries, Inc. Recommendation: Accumulate

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  1. National Presto Industries, Inc.Recommendation: Accumulate Presented by Joe Niehaus

  2. National Presto Industries, Inc. (NPK) and its consolidated subsidiaries consists of three well diversified business segments: • Housewares/ Small Appliances • Defense Products • Absorbent Products • Market Cap: • $506.6 Million • Share Price 5/1/09: • $73.98 Company Overview

  3. Corporate Governance • Board of Directors • Maryjo Cohen: Chair, President, and CEO • Owns 31% of Common Stock • 2008 Compensation $414,946.00 • Randy Lieble: VP, Secretary, CFO, Treasurer • 2008 Compensation $92,956.00 • Richard Cardozo: Professor Univ. of Minnesota • Patrick Quin: Chair and President Ayres Assoc. • Joseph Stiensen: Accounting and Tax Advisor • Headquartered and Incorporated in Wisconsin

  4. Segment Details: Housewares/Small Appliances • 30.5% of Total Revenues ($136.8 Million) • Main Customers: Wal-Mart (11%), Costco, Target • Benefited from Recession • Little or No Advertising Necessary • Financed Acquisition of Defense and Absorbent Products Segments • Risks: Consumer Discretionary, Commodity Prices, Retailer Bankruptcies (Linens & Things, Mervyns, Circuit City)

  5. Segment Details:Defense Products • 53.3% of Total Revenues ($238.8 Million) • Source of Revenues: 1 of 2 suppliers of 40mm to DOD for Dept. of Army • Currently in 4th year of 5 year DOD contract, 2009 Backlog of $265 Million, $66.9 Million awarded for 2010, Currently bidding for 2011 5 year contract • Continues to streamline production and add production capabilities • Risks: Revenues dependent upon the needs of the DOD 40mm Training Cartridge Non-lethal Sponge Grenade

  6. Segment Details:Absorbent Products • 16.2% of Total Revenues ($72.7 Million) • 2009 Should be first year of positive operating profit, operating loss decreased 56% for FY 2008 • Capital and manufacturing upgrades implemented in 2008 • US adult incontinence market to reach $2.2 Billion by 2012 & worldwide market to reach $11.2 Billion by 2015* • Risks: Commodity Prices (Petroleum), Market Base Consists of Single Buyer, Competition *Global Industry Analysts

  7. Financials

  8. Management Effectiveness • Total Purchase Price of Acquisitions 2001 through 2008: $37 Million • Total Revenues of Acquisitions 2001 through 2008: $945,657 Million

  9. Valuation • Competition: NPK operates in niche markets, no major public competition • Market Cap: $506.6M / Enterprise Value: $360.7M • Current P/E: 11.3, S&P 500 P/E: 14 • Price to Sales (ttm): 1.09 • Price to Book (mrq): 1.57 • 1 year discounted cash flow valuation: • Anticipated 2010 Dividend: $5.96 • Anticipated 2010 Price • Estimated Earnings: $7.27 with a P/E of 12 = $87.24 • $87.24+$5.96 = $93.20/1.11 = $83.96 • $83.96-$73.98 = $9.98 • $9.98/$73.98 = 13.5% HPR • Future cash flows dependent on contract awards and negotiations

  10. Recommendation for Investment • Accumulate: Start picking up shares • Management’s effectiveness is most appealing • Impressive growth without debt • Income Generating • Should benefit from any positive market momentum

  11. Questions?

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