Hubble-Bubble, Steam and Trouble in Wisconsin
from Spring 2000
by Antonio Ramirez
When a group of stock analysts accused National Presto Industries last year of underperformance and shortchanging shareholders, the company was quick to cry foul. A year later, the maker of pressure cookers and other kitchen gear is still simmering. “What did we do to merit this?” demands James F. Bartl, executive vice president and a member of the board.
Not that the 95-year-old outfit, headquartered in Eau Claire, Wisconsin, seems to care too much about what shareholders think. Back in 1996, the New York Common Retirement Fund complained about low returns on its National Presto investments. It got a letter back that said, “We would be fully sympathetic with a decision on your part to seek better returns elsewhere.”
Such aloofness to stockholder concerns helps explain the informal investigation that the Securities and Exchange Commission is conducting into National Presto. A 1999 report by the New York Society of Securities Analysts also undoubtedly fired up the SEC. It castigated National Presto because:
- For a decade, it has held 80% of its assets in cash, cash equivalents, or securities;
- It is governed by a board controlled by insiders, with a father-and-daughter team in the two top spots;
- It performs poorly in comparison to the market and does little to develop or grow the business; and
- It rejects attempts by investors to take matters up with management.
Mark Nurse, a Chase Personal Asset Management analyst, wrote in the report: “The problem at National Presto is the underutilization of assets. The company is cash rich, with over $200 million on the balance sheet and no debt.” But, he said, the company utilizes only 14% of the total assets in its housewares business, investing the rest primarily in tax-exempt securities. As a result, “more than 80% of the company’s assets are earning less than 5%.”
The analyst group invited Maryjo Cohen, who succeeded her father Melvin as CEO (he’s still chairman), to cooperate in the study. She refused. But National Presto offered that hanging on to cash is part of its long-term plan to escape complete dependence upon the “beleaguered small-appliance business.”
No one faults National Presto for wanting to bail out of an industry where Wal-Mart and Kmart dictate pricing levels; in fact, the company has actually fared better than the analyst study suggests. Even so, National Presto hasn’t developed a hit since 1988’s fabled Salad Shooter, and its stock has sat out the market’s boom. Critics say its annual $2 dividend is made possible only by investment dividends. Timothy Vick, editor of Today’s Value Investor, says National Presto operates “a bond fund in disguise.”
Obviously, the resolute six-member board likes things the way they are. The directors met only twice in 1998 and three times in 1999. At last year’s annual meeting, proposed stockholder reforms, including a resolution calling for a majority of independent directors, were voted down overwhelmingly. Bartl points out that the Cohen family controls 29% of the stock and that all the resolutions would have lost even without their votes.
Gary Lutin, a New York City investment banker and a co-sponsor of the analyst study, has urged disgruntled shareholders to take legal action against the company. One who did is Kenneth Steiner, a New York pension fund stockholder and son of shareholder activist William Steiner. His suit charges that the company is violating the law because it is not registered as an investment company.
Steiner’s case is pending in Wisconsin’s circuit court. National Presto has filed a brief to have it dismissed. After that, says Bartl, the company will sue Steiner for filing a frivolous suit.
