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The data in Table 1 reveal that approximately 70% of National Presto’s total assets were either held in cash and cash equivalents or marketable securities (low yield municipal bonds), at year-end 2001 and 2002. Therefore, National Presto may look more like an investment company than a manufacturer. On the other hand, their liquid assets alone backed National Presto’s share price. ...
Acquisitions present challenges that in some cases prevent firms from achieving anticipated benefits, and the prices of the present mergers were apparently too costly for National Presto. ...
National Presto
For Fiscal Year 2001 2002
(all dollar amounts in Millions ($)
Sales Revenue $120. ... 00%
The net income for National Presto increased 50% from the year-end of 2001 to the year-end of 2002. ...
Also, there can be tax advantages claimed by utilizing a “last in first out” (LIFO) inventory basis, which National Presto uses. ... National Presto should consider acquisition opportunities to become more important to their retailer as they are being criticized during the 1990s for not using their substantial liquid assets to acquire other house-wares firms. ... Other house-ware manufacturers have used licensing agreements and other strategic alliances to acquire brand names, diversify product lines, and boost sales, however, National Presto had not made their first acquisition until 2001, and had not made another for the past twenty years.
National Presto lost business to the two retailers, Wal-Mart and Target, simply because they were trying to compete on price. ... In any case, National Presto may be able to use the leverage they gain to bring back the business they lost. ...
In late February 2001, National Presto made its first acquisition in over 20 years. ... According to National Presto, the purchase “will provide an excellent foundation for the acquisition of other defense companies as the firm re-establishes its presence within the defense industry.”
In November 2001, National Presto also formed a wholly owned subsidiary to purchase machinery that had been used by RMED International in the manufacture of disposable diapers. RMED had been leasing part of National Presto’s Wisconsin factory as its (RMED’s) sole manufacturing site. ... 7 million, equal to the current value of RMED’s liabilities assumed and discharged by National Presto. However, RMED contracted to purchase from National Presto a few specialized lines that RMED itself continues to sell to health food stores, in catalogues, and over the Web.
It seems that in this case, National Presto may once again “look more like an investment company than a manufacturer” because RMED maintains the production rights of their core competency, while National Presto assumes their debt or liabilities at a cost to RMED. In addition, it appears that National Presto may now also have established a partnership with RMED though National Presto owns all the property, plant and equipment, and thus a great majority of the liability.
The terms of the above acquisitions are certainly not clear from the information provided in the case. In either case, the purchase prices are disclosed, however, the exact terms of the payments are uncertain. ... In the case of each company, it would be advantageous to consider information gained from their cash flow statements, income statement, and any existing or outstanding business and/or labor agreements. ...
Looking back at the information provided on Table 1 of the Case Study, the current ratios of National Presto and two of its competitors, Applica and Salton, are provided for years 1997 and 2001-2002. In 1997, the differences between the company’s current ratios were the greatest, and at that time, one could most likely see that National Presto had too many liquid assets, however they also had no short-term or long-term debt. ...
Current Ratio Comparison
1997 2001 2002
National Presto 6. ... 00%
For the sake of being competitive and conducting good business with retailers as well as maintaining legitimate governance, I believe shareholders could benefit from forcing National Presto to restructure its assets to make additional acquisitions, partnerships, or licensing agreements for the purpose of growth and diversity.
Approximate Word count = 3174
Approximate Pages = 12.7
(250 words per page double spaced)
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