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National Presto Industries, Inc. (NPK)
:NPK
US Market
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National Presto (NPK) Risk Factors

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Public companies are required to disclose risks that can affect the business and impact the stock. These disclosures are known as “Risk Factors”. Companies disclose these risks in their yearly (Form 10-K), quarterly earnings (Form 10-Q), or “foreign private issuer” reports (Form 20-F). Risk factors show the challenges a company faces. Investors can consider the worst-case scenarios before making an investment. TipRanks’ Risk Analysis categorizes risks based on proprietary classification algorithms and machine learning.

National Presto disclosed 18 risk factors in its most recent earnings report. National Presto reported the most risks in the “Production” category.

Risk Overview Q4, 2023

Risk Distribution
18Risks
39% Production
28% Ability to Sell
17% Tech & Innovation
11% Legal & Regulatory
6% Macro & Political
0% Finance & Corporate
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
This chart displays the stock's most recent risk distribution according to category. TipRanks has identified 6 major categories: Finance & corporate, legal & regulatory, macro & political, production, tech & innovation, and ability to sell.

Risk Change Over Time

2020
Q4
S&P500 Average
Sector Average
Risks removed
Risks added
Risks changed
National Presto Risk Factors
New Risk (0)
Risk Changed (0)
Risk Removed (0)
No changes from previous report
The chart shows the number of risks a company has disclosed. You can compare this to the sector average or S&P 500 average.

The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.

Risk Highlights Q4, 2023

Main Risk Category
Production
With 7 Risks
Production
With 7 Risks
Number of Disclosed Risks
18
No changes from last report
S&P 500 Average: 31
18
No changes from last report
S&P 500 Average: 31
Recent Changes
0Risks added
0Risks removed
0Risks changed
Since Dec 2023
0Risks added
0Risks removed
0Risks changed
Since Dec 2023
Number of Risk Changed
0
No changes from last report
S&P 500 Average: 3
0
No changes from last report
S&P 500 Average: 3
See the risk highlights of National Presto in the last period.

Risk Word Cloud

The most common phrases about risk factors from the most recent report. Larger texts indicate more widely used phrases.

Risk Factors Full Breakdown - Total Risks 18

Production
Total Risks: 7/18 (39%)Above Sector Average
Manufacturing1 | 5.6%
Manufacturing - Risk 1
Product recalls or lawsuits relating to defective products could have an adverse effect on the Company, as could the imposition of industry sustainability standards.
As distributors of consumer products in the United States, the Company is subject to the Consumer Products Safety Act, which empowers the U.S. Consumer Products Safety Commission to exclude from the market products that are found to be unsafe or hazardous.  Under certain circumstances, the U.S. Consumer Products Safety Commission could require the Company to repair, replace or refund the purchase price of one or more of its products, or the Company may voluntarily do so. Any repurchase or recall of products could be costly and damage the Company's reputation, as well as subject it to a sizable penalty that the Commission is empowered to impose.  If the Company removed products from the market, its reputation or brands could be tarnished and it might have large quantities of finished products that could not be sold. The Company could also face exposure to product liability claims if one of its products were alleged to have caused property damage, bodily injury or other adverse effects. It is self-insured to specified levels of those claims and maintains product liability insurance for claims above the self-insured levels. The Company may not be able to maintain such insurance on acceptable terms, if at all, in the future.  In addition, product liability claims may exceed the amount of insurance coverage.  Moreover, many states do not allow insurance companies to provide coverage of punitive damages, in the event such damages were imposed.  Additionally, the Company does not maintain product recall insurance.  As a result, product recalls or product liability claims could have a material adverse effect on the Company's business, results of operations and financial condition. The portable appliance and floor care companies' industry association has a framework for a sustainability standard for the industry, but has yet to develop specific guidelines for implementation.  When and if developed, the standards will do nothing for the environment, but will entail the addition of significant bureaucracy and outside certification fees.  As such, compliance will be burdensome and expensive.
Supply Chain3 | 16.7%
Supply Chain - Risk 1
Reliance on third-party suppliers in Asia makes this segment vulnerable to supply interruptions and foreign business risks.
The majority of the housewares/small appliance products are manufactured by a handful of third-party suppliers in Asia, primarily in the People's Republic of China.  The Company's ability to continue to select and develop relationships with reliable vendors who provide timely deliveries of quality parts and products will impact its success in meeting customer demand.  Most products are procured on a "purchase order" basis.  As a result, the Company may be subject to unexpected changes in pricing or supply of products.  There is no assurance that it could quickly or effectively replace any of its vendors if the need arose.  Any significant failure to obtain products on a timely basis at an affordable cost or any significant delays or interruptions of supply may disrupt customer relationships and have a material adverse effect on the Company's business. International manufacturing is subject to significant risks, including, among others, labor unrest, adverse social, political and economic conditions, interruptions in international shipments, tariffs and other trade barriers, legal and regulatory constraints and fluctuations in currency exchange rates.  Although China currently enjoys "most favored nation" trading status with the United States, the U.S. Government has in the past proposed to revoke that status and to impose higher tariffs on products imported from China, which could have a material adverse effect on the Company's business.    Currently, it maintains penalty tariffs on some imports and in the past has threatened to impose a penalty tariff on all products.  The latter, if imposed, would have a material adverse effect on the Company's business. ?
Supply Chain - Risk 2
Failure of the Company's subcontractors to perform their contractual obligations could materially and adversely impact contract performance.
Key components and services are provided by third party subcontractors, several of which the segment is required to work with by government edict.  Under the contract, the segment is responsible for the performance of those subcontractors, many of which it does not control.  There is a risk that the Company may have disputes with its subcontractors, including disputes regarding the quality and timeliness of work performed by subcontractors.  A failure by one or more of the Company's subcontractors to satisfactorily provide on a timely basis the agreed-upon supplies or perform the agreed-upon services may materially and adversely impact the Company's ability to perform its obligations as the prime contractor.
Supply Chain - Risk 3
Reliance on third-party suppliers in Asia and Mexico makes this segment vulnerable to supply interruptions and foreign business risks.
A major portion of the safety products are manufactured by a handful of third-party suppliers, some of which are in Asia, primarily in the People's Republic of China, and some in Mexico.  The Company's ability to continue to select and develop relationships with reliable vendors who provide timely deliveries of quality parts and products will impact its success in meeting customer demand.  Most products are procured on a "purchase order" basis.  As a result, the Company may be subject to unexpected changes in pricing or supply of products.  There is no assurance that it could quickly or effectively replace any of its vendors if the need arose.  Any significant failure to obtain products on a timely basis at an affordable cost or any significant delays or interruptions of supply may disrupt customer relationships and have a material adverse effect on the Company's business. In addition, international manufacturing is subject to significant risks, including, among others, labor unrest, adverse social, political and economic conditions, interruptions in international shipments, tariffs and other trade barriers, legal and regulatory constraints and fluctuations in currency exchange rates. Although China currently enjoys "most favored nation" trading status with the United States, the U.S. Government has in the past proposed to revoke that status and to impose higher tariffs on products imported from China, which could have a material adverse effect on the Company's business.    Currently, it maintains a penalty tariff on some imports and in the past has threatened to impose a penalty tariff on all products.  The latter, if imposed, would have a material adverse effect on the Company's business. ??
Costs3 | 16.7%
Costs - Risk 1
Increases in the costs for raw materials, energy, transportation and other necessary supplies could adversely affect the results of the Company's operations.
The Company's suppliers purchase significant amounts of metals, plastics, and energy to manufacture the Company's products.  Also, the cost of fuel has a major impact on transportation costs as do intermodal shipping rates.  Any increased costs that cannot be fully absorbed or passed along in the form of price increases to the retail customer can have a material adverse impact on the Company's operating results.
Costs - Risk 2
The Company may not be able to react to increases in its costs due to the nature of its U.S. Government contracts.
Substantially all of the Company's U.S. Government contracts are fixed-price.  Under fixed-price contracts, the Company agrees to perform the work for a fixed price, subject to limited escalation provisions on specified raw materials.  Thus it bears the risk that any increases or unexpected costs may reduce profits or potentially cause losses on the contract, which could have a material adverse effect on results of operations and financial condition.  That risk is potentially compounded by the political actions under consideration by federal and state governments, including climate change and labor regulations, which could have an impact if enacted or promulgated on the availability of affordable labor, energy and ultimately, materials, as the effects of the legislation/regulation ripple throughout the economy. In addition, products are accepted by test firing samples from a production lot.  Lots typically constitute a sizable amount of product.  Should a sample not fire as required by the specifications, the cost to rework or scrap the entire lot could be substantial.
Costs - Risk 3
The Company's U.S. Government contracts are subject to termination.
All of the Company's U.S. Government contracts can be terminated by the U.S. Government either for its convenience or if the Company defaults by failing to perform under the contract.  Performance failure can occur from a myriad of factors, which include late shipments due to the inability to secure requisite raw materials or components or strikes or other labor unrest, equipment failures or quality issues, which result in products that do not meet specifications, etc.  Termination for convenience provisions provide only for recovery of costs incurred and profit on the work completed prior to termination.  Termination for default provisions provide for the contractor to be liable for excess costs incurred by the U.S. Government in procuring undelivered items from another source.  If a termination provision is exercised, it could have a material adverse effect on the Company's business, results of operations and financial condition.
Ability to Sell
Total Risks: 5/18 (28%)Above Sector Average
Demand4 | 22.2%
Demand - Risk 1
The Housewares/Small Appliance segment is dependent on key customers, and any significant decline in business from one or more of its key customers could adversely affect the segment's operating results.
Although the Company has a long-established relationship with its major customers, it does not have any long-term supply agreements or guaranties of minimum purchases.  As a result, the customers may fail to place anticipated orders, change planned quantities, delay purchases, or change product assortments for reasons beyond the Company's control, which could prove detrimental to the segment's operating results.
Demand - Risk 2
The sales for this segment are highly seasonal and dependent upon the United States retail markets and consumer spending.
Traditionally, this segment has recognized a substantial portion of its sales during the holiday selling season.  Any downturn in the general economy, shift in consumer spending away from its housewares/small appliances, or further deterioration in the financial health of its customer base could adversely affect sales and operating results.
Demand - Risk 3
The housewares/small appliance industry continues to consolidate, which could ultimately impede the Company's ability to secure product placement at key customers.
Over the past decade, the housewares/small appliance industry has undergone significant consolidation, and, as a result, the industry primarily consists of a limited number of larger companies.  Larger companies do enjoy a competitive advantage in terms of the ability to offer a larger assortment of product to any one customer.  As a result, the Company may find it more difficult or lose the ability to place its products with its customers.
Demand - Risk 4
The Safety segment is comprised of businesses that are startup in nature.
The operations that comprise the Safety segment are startup in nature, and like most startups may not ultimately have the potential to be successful.
Sales & Marketing1 | 5.6%
Sales & Marketing - Risk 1
The Company relies primarily on sales to U.S. Government entities, and the failure to procure or the loss of a significant contract or contracts could have a material adverse effect on its results of operations.
As the Company's sales in the Defense segment are primarily to the U.S. Government and its prime contractors, it depends heavily on the contracts underlying these programs.  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.
Tech & Innovation
Total Risks: 3/18 (17%)Above Sector Average
Innovation / R&D2 | 11.1%
Innovation / R&D - Risk 1
The Company may not be successful in developing and introducing new and improved consumer products.
The development and introduction of new housewares/small appliance 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 consumer needs and preferences, as well as the intellectual property rights of others.  The introduction of new products may require substantial expenditures for advertising and marketing to gain marketplace recognition or to license intellectual property. There is no guarantee that the Company will be aware of all relevant intellectual property in the industry and may be subject to claims of infringement, which could preclude it from producing and selling a product. Likewise, there is no guarantee that the Company will be successful in developing products necessary to compete effectively in the industry or that it will be successful in advertising, marketing and selling any new products.
Innovation / R&D - Risk 2
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 or ETL requirements and avoid infringing on the intellectual property rights of others.  The introduction of new products may require substantial expenditures for advertising and marketing to gain marketplace recognition or to license intellectual property. There is no guarantee that the Company will be aware of all relevant intellectual property in the industry and may be subject to claims of infringement, which could preclude it from producing and selling a product. Likewise, there is no guarantee that the Company will be successful in developing products necessary to compete effectively in the industry or that it will be successful in advertising, marketing and selling any new products.
Technology1 | 5.6%
Technology - Risk 1
Various products in the Safety segment are reliant upon up-to-date software, hardware, and the wireless communications infrastructure.
The effective operation of various products in the Safety segment depend on software that utilizes data obtained wirelessly via telecommunication network infrastructure.  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. ?
Legal & Regulatory
Total Risks: 2/18 (11%)Below Sector Average
Regulation2 | 11.1%
Regulation - Risk 1
Regulatory constraints and authorities having jurisdiction has impeded and may continue to impede sales of certain of the segment's products.
The commercial sales of certain of the Safety segment's products are dependent on the approval of officials that oversee fire safety at state and local levels for use of the products in areas under their jurisdiction.  The inability to obtain the approval of these officials has had and may continue to have an adverse impact on the segment's operating results.
Regulation - Risk 2
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.
U.S. government contractors must comply with numerous significant procurement regulations and specific legal requirements, including a vast array of federal, state, and local laws, regulations, contract terms and requirements related to the defense industry and the Company's products and businesses.  These laws and regulations include, but are not limited to, the Federal Acquisition Regulation (FAR) and Department of Defense FAR Supplement, Truthful Cost or Pricing Data Act, International Traffic in Arms Regulations/Arms Export Control Act, DOD 4145.26-M, and Bureau of Alcohol, Tobacco, Firearms and Explosives orders, rules and regulations.  Although customary in government contracting, these regulations and legal requirements increase the Company's performance and compliance costs and risks.  New laws, regulations or procurement requirements or changes to current ones (for example, regulations related to cybersecurity and related certification requirements, specialty metals, and conflict minerals) can significantly increase the Company's costs and risks and reduce profitability.  Non-compliance with the laws, regulations, contract terms and processes to which the Company is subject could affect its ability to compete and have a material adverse effect on the Company's financial position, results of operations and/or cash flows.
Macro & Political
Total Risks: 1/18 (6%)Below Sector Average
Economy & Political Environment1 | 5.6%
Economy & Political Environment - Risk 1
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.  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. 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. U.S. Government contracts are also dependent on the continuing availability of Congressional appropriations. Congress usually appropriates funds for a given program on a fiscal year basis even though contract performance may take more than one year.  As a result, at the outset of a major program, the contract is usually incrementally funded, and additional monies are normally committed to the contract by the procuring agency only as Congress makes appropriations for future fiscal years.  In addition, most U.S. Government contracts are subject to modification if funding is changed.  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.
See a full breakdown of risk according to category and subcategory. The list starts with the category with the most risk. Click on subcategories to read relevant extracts from the most recent report.

FAQ

What are “Risk Factors”?
Risk factors are any situations or occurrences that could make investing in a company risky.
    The Securities and Exchange Commission (SEC) requires that publicly traded companies disclose their most significant risk factors. This is so that potential investors can consider any risks before they make an investment.
      They also offer companies protection, as a company can use risk factors as liability protection. This could happen if a company underperforms and investors take legal action as a result.
        It is worth noting that smaller companies, that is those with a public float of under $75 million on the last business day, do not have to include risk factors in their 10-K and 10-Q forms, although some may choose to do so.
          How do companies disclose their risk factors?
          Publicly traded companies initially disclose their risk factors to the SEC through their S-1 filings as part of the IPO process.
            Additionally, companies must provide a complete list of risk factors in their Annual Reports (Form 10-K) or (Form 20-F) for “foreign private issuers”.
              Quarterly Reports also include a section on risk factors (Form 10-Q) where companies are only required to update any changes since the previous report.
                According to the SEC, risk factors should be reported concisely, logically and in “plain English” so investors can understand them.
                  How can I use TipRanks risk factors in my stock research?
                  Use the Risk Factors tab to get data about the risk factors of any company in which you are considering investing.
                    You can easily see the most significant risks a company is facing. Additionally, you can find out which risk factors a company has added, removed or adjusted since its previous disclosure. You can also see how a company’s risk factors compare to others in its sector.
                      Without reading company reports or participating in conference calls, you would most likely not have access to this sort of information, which is usually not included in press releases or other public announcements.
                        A simplified analysis of risk factors is unique to TipRanks.
                          What are all the risk factor categories?
                          TipRanks has identified 6 major categories of risk factors and a number of subcategories for each. You can see how these categories are broken down in the list below.
                          1. Financial & Corporate
                          • Accounting & Financial Operations - risks related to accounting loss, value of intangible assets, financial statements, value of intangible assets, financial reporting, estimates, guidance, company profitability, dividends, fluctuating results.
                          • Share Price & Shareholder Rights – risks related to things that impact share prices and the rights of shareholders, including analyst ratings, major shareholder activity, trade volatility, liquidity of shares, anti-takeover provisions, international listing, dual listing.
                          • Debt & Financing – risks related to debt, funding, financing and interest rates, financial investments.
                          • Corporate Activity and Growth – risks related to restructuring, M&As, joint ventures, execution of corporate strategy, strategic alliances.
                          2. Legal & Regulatory
                          • Litigation and Legal Liabilities – risks related to litigation/ lawsuits against the company.
                          • Regulation – risks related to compliance, GDPR, and new legislation.
                          • Environmental / Social – risks related to environmental regulation and to data privacy.
                          • Taxation & Government Incentives – risks related to taxation and changes in government incentives.
                          3. Production
                          • Costs – risks related to costs of production including commodity prices, future contracts, inventory.
                          • Supply Chain – risks related to the company’s suppliers.
                          • Manufacturing – risks related to the company’s manufacturing process including product quality and product recalls.
                          • Human Capital – risks related to recruitment, training and retention of key employees, employee relationships & unions labor disputes, pension, and post retirement benefits, medical, health and welfare benefits, employee misconduct, employee litigation.
                          4. Technology & Innovation
                          • Innovation / R&D – risks related to innovation and new product development.
                          • Technology – risks related to the company’s reliance on technology.
                          • Cyber Security – risks related to securing the company’s digital assets and from cyber attacks.
                          • Trade Secrets & Patents – risks related to the company’s ability to protect its intellectual property and to infringement claims against the company as well as piracy and unlicensed copying.
                          5. Ability to Sell
                          • Demand – risks related to the demand of the company’s goods and services including seasonality, reliance on key customers.
                          • Competition – risks related to the company’s competition including substitutes.
                          • Sales & Marketing – risks related to sales, marketing, and distribution channels, pricing, and market penetration.
                          • Brand & Reputation – risks related to the company’s brand and reputation.
                          6. Macro & Political
                          • Economy & Political Environment – risks related to changes in economic and political conditions.
                          • Natural and Human Disruptions – risks related to catastrophes, floods, storms, terror, earthquakes, coronavirus pandemic/COVID-19.
                          • International Operations – risks related to the global nature of the company.
                          • Capital Markets – risks related to exchange rates and trade, cryptocurrency.
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