National Presto Industries, Inc. Business Information, Profile, and History

Company Perspectives:

It is the company's intention to continually provide innovative new products that meet the needs of today's changing lifestyles as well as a wide selection of basic appliances that reflect the image of quality long associated with the Presto name.

History of National Presto Industries, Inc.

National Presto Industries, Inc., based in Eau Claire, Wisconsin, is a leading manufacturer of pressure cookers and small electric kitchen appliances, including the SaladShooter. An aggressive advertiser, National Presto markets its products mainly through national discount chain stores, such as Wal-Mart, Kmart and Target, which account for nearly 80 percent of sales. Although traded on the New York Stock Exchange, the company is essentially family owned. In the 1990s, chairman Melvin Cohen and his daughter, CEO Maryjo Cohen, controlled more than 30 percent of the stock. The company has struggled with declining sales in recent years and is looking to expand into the government defense business as a way to diversify. In March 2001 Presto acquired Amtec, a small munitions plant.

Early 20th-Century Origins

Best known since the 1970s for its innovative, sometimes quirky kitchen gadgets, National Presto can trace its history to the 1905 founding of the Northwestern Iron and Steel Works in Eau Claire, Wisconsin, which made cement mixers. By 1908, however, the company had settled into manufacturing 50-gallon retorts, or steam pressure cookers, for the canning industry. The company also made 30-gallon retorts for hotel use. In 1915, Presto installed an aluminum foundry for manufacturing ten-gallon pressure cookers for home use.

Two years later, the U.S. Department of Agriculture reported that using steam-pressure cookers was the safest way to eliminate the bacteria that cause botulism when canning low-acid foods, including meats and most kinds of vegetables. Business boomed for Northwestern Iron and Steel, whose pressure cookers, sold under the brand name of National, were already well known among home canners. In 1929, the company further capitalized on its cast-aluminum cookware market niche by changing its name to the National Pressure Cooking Co. By 1930, the company's annual net income had surpassed $1 million on revenues of more than $12 million.

Innovations in Pressure Cooking in the 1930s

By 1935, in the midst of the Great Depression, the National Pressure Cooking Co. was selling 60,000 pressure cookers annually, mostly for home canning by farm households. However, these were still miniature versions of the complex, large-scale commercial retorts the company made. Then in the late 1930s, a company engineer, E.H. Wittenberg, developed an easier sealing mechanism with a rubber gasket clamped between upper and lower handles. Wittenberg's "home-ec seal" meant that pressure cookers, which provided the fastest as well as the safest method of preparing food, could be used for everyday cooking.

In 1939, the company also introduced the first sauce pan-style pressure cooker for home use, which it marketed under the trade name "Presto." The demand for the new Presto cooker, which became virtually synonymous with pressure cooking, was so great that despite a decade of economic depression in the United States, sales had doubled to $2 million by 1940.

Wartime Production Shake-Up

However, in 1941, as the United States prepared to enter World War II, government restrictions on the use of aluminum in domestic products sharply curtailed production. National Pressure Cooker, which had invested heavily to increase its manufacturing capacity, was forced to lay off most of its employees. Everett R. Hamilton, then president and majority owner of the company, managed to land a $3 million government contract to make artillery fuses; but Hamilton died of a heart attack in February 1942, before the conversion to defense work could be completed. An editorial in the Eau Claire Leader noted that Hamilton "had the satisfaction of knowing that it would be only a matter of months before employees laid off by priorities would be back on the job and that perhaps in the not too distant future the National Pressure Cooker company might be Eau Claire's most important industry."

However, despite the defense contract, National Pressure Cooker was reportedly on the verge of bankruptcy by the summer of 1942 and unable to meet its payroll. To save the company, Eau Claire businessman Lewis E. Phillips and his brother Jay, bought a controlling interest in the company from Hamilton's widow. The brothers also owned Ed Phillips and Sons, a wholesale distributor of liquor, tobacco, and candy, with operations in Wisconsin and Minnesota. Lewis Phillips became president of National Pressure Cooker and ultimately managed to right the company by negotiating additional government defense contracts. In fact, National Pressure Cooker eventually received five Army and Navy E Awards for its contribution to the war effort, including about 500,000 "victory pressure canners" at the request of the Department of Agriculture.

Post-War Diversification

The company resumed production of cookware after the war, introducing a 16-quart canner and a four-quart Presto sauce pan pressure cooker in 1945. The company also acquired the Century Metalcraft Association in Los Angeles, which gave it access to West Coast markets, and the Lakeside Aluminum Co. in Menomonie, Wisconsin.

In 1946, the National Pressure Cooker Co. also formed a subsidiary, the Martin Motors Division, to manufacture outboard motors developed by George W. Martin, a former professional outboard racing champion. The Aluminator, National Pressure Cooker's company newspaper, touted Martin's innovative design, noting that "this type of motor once in use would give a great new thrill, and unlimited pleasure, to the vast throng of outdoor living people who find so much peace and relaxation on the many waterways of America." A year later, the company moved its outboard motor operations and its research and development operations to a 348-acre former government ordnance site near Eau Claire that it had purchased from the War Assets Administration for $350,000. The site became known as Presto, Wisconsin.

However, National Pressure Cooker faced stiff competition in the postwar leisure boating market from Outboard Marine and Manufacturing, the Illinois-based company later known as the Outboard Marine Corporation, which made both the popular Johnson and Evinrude-brand outboard motors. In 1948, Outboard Marine and Manufacturing introduced the first outboard motor with a separate fuel tank and a shift lever that allowed the operator to select forward, reverse, or neutral. Outboard Marine also began manufacturing fiberglass motorboats that were sold through the same network of dealers and distributors that handled Evinrude and Johnson motors. In the early 1950s, National Pressure Cooker filed a complaint with the Federal Trade Commission alleging that Outboard Marine and Manufacturing was pressuring dealers not to carry its Martin outboard motors. The company liquidated the Martin Motor Division in 1954, before the case was resolved.

In 1949, the company also introduced its first electric appliance, a steam iron with the Presto brand name that could use tap water instead of distilled water. By 1950, National Pressure Cooker had introduced the Presto Automatic Dixie-Fryer, a thermostat-controlled deep fryer for home use that presaged many of the company's later innovations. In a "Talk of the Town" column in a November 1950 New Yorker magazine, company spokesman Russell Bloomberg remarked on the versatility of the deep-fryer: "The Fryer fills a much needed want for Mrs. Housewife. It does the same work as the expensive commercial kettle. It can take very mediocre leftovers, such as cold mash potatoes and chicken wings, and convert them into delicious croquettes. With it you can glorify corn-meal mush by frying it along with ten per-cent ground-up leftover cheese. Mrs. Housewife can use the fat over and over again, with no interchange of taste. I spent a month frying doughnuts in it eight hours a day, just to determine the absorption of fat. Its entertaining possibilities are endless. Suppose your husband, after a fishing trip, brings home a tiny trout. You can cook it with bread crumbs."

As the company began introducing more consumer products under the Presto brand name, including an automatic coffee maker, the stockholders voted at the 1953 annual meeting to change the corporate name to National Presto Industries, Inc.

Defense Contracts in the 1950s and 1960s

A few months after changing its name to emphasize its consumer products, National Presto announced that it had signed a multimillion-dollar contract with the U.S. government to produce artillery shells. The company immediately began converting its Eau Claire manufacturing facilities, including the former ordnance plant purchased at the end of World War II, to defense work. The company also announced that its consumer-products division would move to Jackson, Mississippi, where the Century Manufacturing Company subsidiary was building a new facility.

In 1955, National Presto expanded its defense work to include airplane components for the U.S. Air Force. At the time, the company employed about 2,000 defense workers in Eau Claire and about 650 consumer-products workers in Mississippi. In a press release, Phillips noted that the "new contract represents a diversification of our Eau Claire production, and if all concerned extend their full support, this new contract should aid not only in increasing local employment generally, but in stabilizing our employment at a higher level."

However, by 1958, the government had cut back sharply on orders for artillery shells, and employment at Presto in Eau Claire had fallen to about 500. Moreover, National Presto's remaining defense workers went out on strike for 60 days in the summer of 1958. When the strike ended, Phillips issued a warning: "The future of this company in Eau Claire and hence the security of our jobs here, is now almost wholly dependent upon defense contracts awarded by the U.S. Government."

Phillips' concern was borne out a year later. In 1959, the Army Ordnance Corps abruptly cancelled its contract with National Presto for artillery shells. In a tersely worded statement, Phillips announced, "This cancellation is indeed an unfortunate turn of events for Presto and its manufacturing employees here at Eau Claire. With little or no notice, this Government decision has forced us completely out of the manufacturing business here in Eau Claire."

National Presto shut down its defense operations in Eau Claire in 1960, but contracted with the government to maintain the manufacturing equipment in a state of semi-readiness. The tide would soon turn again as the company resumed production of artillery shells in 1964, as U.S. ground troops were being sent to Vietnam. Between 1966 and 1975, National Presto produced more than 92 million 105-millimeter artillery shells. It also produced two million eight-inch artillery shells between 1967 and 1971. At the height of U.S. involvement in Southeast Asia, employment at the defense plant in Eau Claire reached 3,000, a figure that fell off dramatically after the United States withdrew from Vietnam in 1973. The defense plant was again closed in 1980, two years after Phillips' death, but the government continued to contract with National Presto to keep the plant on stand-by through the 1990s. Defense requirements were eventually ceased in 1993, and in the mid-1990s, the company was planning on how best to dispose of the special purpose manufacturing equipment.

Lewis Phillips served as company president until 1960 and chairperson until 1966. An important contributor to his community, he created the Presto Foundation and L.E. Phillips Charities. Upon his death in 1978, Phillips was memorialized in Eau Claire by the numerous educational and health-care facilities that bore his name.

Focus on Consumer Products

While the company's success in defense production through military contracts was erratic, the postwar economy was ripe for new consumer product introductions, as American housewives in particular were encouraged to purchase appliances that would make their lives easier. During the 1950s, Presto's consumer products division had introduced the first in a line of immersible electric cooking appliances. The cookware, including an electric skillet, griddle, and coffee maker, featured a removable "Master Control" heat unit, allowing the appliance to be washed safely in water. Over the next dozen years, National Presto also introduced popular models of toasters, egg cookers, hair dryers, and electric toothbrushes. A second manufacturing plant for consumer products was built in Alamogordo, New Mexico, in 1971.

In the mid-1970s, National Presto began introducing kitchen appliances designed for a changing American lifestyle. In 1974 the company produced the PrestoBurger, an electric hamburger cooker that broiled a single patty of meat in less than three minutes. The PrestoBurger was followed by the electric Hot Dogger in 1975, and the Fry Baby, a single-serving, deep fat fryer, in 1976. As Melvin S. Cohen, National Presto's chairman, told Forbes in 1977, "we were the first in our industry to recognize a fundamental change in American society." Cohen referred to demographic changes, noting that "the Census Bureau says 51% of all U.S. households now consist of singles and doubles, not the traditional family group. They have informal, casual lifestyles and money to spend. Yet everybody designs appliances for that old, traditional 5.8-member family. Well, we started designing for singles and doubles."

The company continued to expand its product line. Cohen told the Wisconsin Business Journal in 1984: "Our life-blood is new products. And we must constantly be turning them out and developing new ones. We also recognize that to some extent they're in the nature of yo-yos—that they'll be faddish in nature, they'll enjoy a brief popularity and then virtually disappear from the scene, either by virtue of loss of consumer interest or because it is so widely copied it is no longer attractive." While National Presto was unable to guarantee that every one of its products would catch on with consumers—for example, an electric, vibrating hairbrush was a flop—it aggressively tried to defend its successes from copycat competition through patents and litigation.

Competition in the Late 1980s and 1990s

In 1988, National Presto introduced the SaladShooter, an electric slicer/shredder. Hamilton Beach Corp. and Black & Decker Corp. introduced similar products the same year. National Presto, which had patented the mechanical features of its SaladShooter, filed suit against both competitors. Two years later, Hamilton Beach settled by agreeing to destroy its remaining inventory and withdrawing from the slicer/shredder market. In 1992, a federal district court jury found Black & Decker guilty of infringing on National Presto's patent and awarded the company $2.35 million in damages. In 1995, the decision went to the U.S. Court of Appeals, where justices upheld the lower court's finding of patent infringement.

In 1991, National Presto introduced the Tater Twister potato peeler. The same year, the West Bend Co. introduced a similar product. The two companies sued each other, and again National Presto prevailed. In 1993, a federal jury found West Bend guilty of patent infringement and awarded National Presto $230,000 in damages. Indeed, National Presto was becoming a formidable name in the industry. Also in 1993, the Dazey Corp. agreed to withdraw from the deep-fryer market after being sued by National Presto. In the company's 1994 annual report, management noted: "Hopefully, this Company's competitors are now convinced that it will not brook copying, and will aggressively seek injunctive and/or damages relief when infringements occur."

Presto Under Pressure

By the end of 1996, Presto was a small company sitting on a large amount of money, much to the criticism of leading financial analysts. The company had assets of $285.4 million, of which $228 million was in cash, cash equivalents, and marketable securities. Like many companies that go public, National Presto remained under the control of its guiding family members, primarily Lewis Phillip and later, his son-in-law, Melvin Cohen. By 1997, Cohen had been with National Presto for 53 years, starting out as a service manager. He married into the Phillips family, became president of the company in 1954, and later its chairman. His daughter, Maryjo Cohen, took over as the CEO in 1994, and between them, they controlled 30 percent of Presto's stock. Chairman Cohen's conservative views on acquisitions kept the company from pursuing other manufacturing and expansion opportunities. In fact, Presto had a reputation for holding on to its cash reserves for so long, it was said to be "the bank that makes SaladShooter as a sideline." However, CEO Maryjo Cohen defended the company's practice of shying away from acquisitions. In a 1997 article for Milwaukee Journal Sentinel, Cohen noted that she didn't think the shareholders were unhappy as Presto was still paying dividends despite sagging sales, and that her company was not one for the investor who wanted a quick run-up in value. At the time of the interview, the company was trading for about $40 a share, down from its high of $82 in 1992.

New products have always been the lifeblood of the company. But without a truly innovative product to add to its current stable of cookers, shooters, and poppers, sales of Presto's small kitchen appliances started to decline, from a high of $128 million in 1992 to $106 million in 1996. Presto needed to find a new product that would ignite sales and assure shareholders that the company was on the right track. To brainstorm ideas, the company used a committee made up of representatives from the manufacturing, sales, and engineering departments, as well as the Cohens. They also actively solicit new product ideas from the public through the company's web site, www.gopresto.com. On its web page, called the "Online Inventor's Kit," Presto walks would-be inventors through the process of submitting product ideas to Presto, which includes completing a nondisclosure form. No data is available as to the number of submissions for new ideas the web page has generated, but as the Internet becomes the way the world, it no doubt will help Presto to stay on top of food and lifestyle trends.

The huge reservoir of cash reserves did allow Presto to weather product failures and slow retail sales. For most of the 1990s, the company had little to cheer about. Besides limited product introductions, Presto had to contend with costly patent infringement litigation, increased competition from other manufacturers and the negative effects of new inventory practices at retailers such as Kmart and Wal-Mart. Presto also lost its government contract in 1992 to maintain its Eau Claire plant in a state of readiness for ammunition manufacturing. Any one of these things might have toppled a less financially secure company, but Presto survived it all.

Still, it was not easy for Cohen to see his company stumble, and he let his displeasure of Presto's performance be known in the 1995 annual report, which featured a flock of sheep on its cover. The caption read: "The trouble with following the herd is stepping in what it leaves behind." The following year Presto found itself behind the pack again, primarily because of two notable product flops. The first, an oversized toaster that would accommodate tall slices of bread created by at-home breadmaking machines, did not even make it to retailers' shelves. Its relatively expensive price kept retailers from ordering it, fearing their customers would not want to shell out more dough for a newfangled toaster. The other product to fizzle that year was the Matchless outdoor barbecue grill. This electric grill seemed like a good option for apartment and condo dwellers, many of whom could not have gas or charcoal grills on their decks. But again price soured sales. Retailing for about $200, it could not compete against other small grills on the market.

Cooking for a New Millenium

For the Christmas season of 1997, the company pinned its hopes on the SaladShooter Mixer Too, a combination vegetable slicer and hand mixer, retailing at about $25. But it was not until the end of the decade and a phenomenon known as "Y2K" that business started to heat up again for Presto.

Sales of pressure cookers took off as the much-publicized Y2K millennium computer bug triggered fears about computer crashes and the breakdown of modern society. (The change of years from 1999 to 2000 was supposed to cause massive computer system failure because many older systems tracked the year by only the last two digits, thereby leaving open the possibility of miscalculating 2000 as 1900 and throwing credit expiration dates, loan due dates, inventories, and many more systems into chaos.) Many people had a renewed interest in canning and preserving foods as a way to survive any calamity Y2K might bring.

Also helping sales was the cache pressure cookers had suddenly acquired with the upscale twenty-something crowd. Flush with dot.com cash, many young professionals were looking to spend less time cooking, yet have all the accoutrements of a well-stocked, gourmet kitchen. Presto answered that call by revamping a number of its pressure cooker units. Don Hoeschen, vice president of sales for National Presto, noted in a 1999 article for HFN, a trade journal for small appliance manufactures, that buyers of pressure cookers were interested in more user-friendly features. He wrote, "Generation X wants better-quality, highstyle units. We've addressed that with the buffet handles rather than the stick handles ... and it's been very successful." Presto saw its sales increase 13.9 percent the first quarter of 1999 to $21.6 million. Earnings grew 16.7 percent to $3.2 million. By the end of the year, Presto posted its annual sales at $114.7 million, a 7 percent increase over 1998.

As the new millenium unfolded, and the world order remained intact, Presto again faced problems in the marketplace and on Wall Street. In May of 2000, it was revealed that Wal-Mart, its largest customer, would drastically cut its purchases of Presto products the following year. The decision was due to Wal-Mart's desire to convert some of its small appliance stock to private-label products purchased from offshore manufactures. Even so, Presto remained optimistic and told shareholders that it hoped to offset the loss with its latest innovation, the Pizzazz revolving pizza oven. This oven, which cooks frozen pizzas in a flash, was touted as ideal for families on the run. Unfortunately, holiday sales of the oven were much lower than expected. Presto executives blamed slow sales on its 15- and 30-second TV ads, explaining that consumers may not have believed their claims of the oven's cooking speed. They also pointed a finger at a softening economy, theorizing that the $89.99 asking price might be tough for some to swallow. However, the company has no plans to pull back from its push of the product, believing there is indeed a market for it.

Presto was dealt another blow at the same time when Target announced that it too would start buying some of its small appliances directly from offshore manufacturers. The loss was estimated to affect about 8 percent of Presto's business with Target. The news was not good on Wall Street. By February 2001, the company was trading at approximately $30 a share, a new low. Worse, Presto was under investigation by the Securities and Exchange Commission, which wanted to know if the company's huge cash reserve made it subject to reporting requirements of the Investment Company Act of 1940.

Presto did find some good news in 2001. In March it purchased Amtec, a small munitions plant. Chairman Melvin Cohen, now in his 80s, explained that the decision to buy Amtec, a privately held manufacturer with about 100 employees, was the first step towards getting back into the defense business. He still feared that in the event of a war, Presto would not be able to make its appliances, as was the case during World War II. With a stake in government defense work, Cohen believes Presto will remain viable and sees this line of business as a way to diversify and expand.

Principal Subsidiaries:Presto Manufacturing Co.; Presto Products Manufacturing Inc.; Jackson Sales and Storage Co.; Canton Sales & Storage Co.; National Holding Investment Co.; National Defense Corp.

Principal Competitors:Sunbeam Products, Inc.; Salton, Inc.; Mirro.

Chronology

• Key Dates:
• 1905: The company begins in Eau Claire, Wisconsin, under the name Northwestern Iron and Steel Works.
• 1915: An aluminum foundry is installed for the specific purpose of manufacturing large-size pressure canners for home use.
• 1917: The company name is changed to National Pressure Cooker Company.
• 1939: The first sauce pan-style pressure cooker is introduced and given the trade name "Presto."
• 1942: Brothers Lewis and Jay Phillips buy controlling interest in the company, which is on the verge of bankruptcy since it had to shut down most of its home appliance manufacturing because of the war.
• 1949: Postwar, the company's sales heat up with the introduction of its first electric steam iron.
• 1953: The company changes its name to National Presto Industries, Inc., in recognition of its increasing diversification into portable electric housewares.
• 1958: National Presto introduces the world's first automatic, submersible stainless steel coffee maker.
• 1969: The company begins trading on the New York Stock Exchange.
• 1978: National Presto introduces its hot air PopCornNow machine, capitalizing on Americans' more healthful eating habits.
• 1988: The company brings the enormously popular SaladShooter to market.
• 1992: National Presto wins its suit against Black & Decker Household Products for patent infringement.
• 2000: The Pizzazz Pizza Oven is introduced as the company's next great invention for the kitchen.
• 2001: National Presto purchases Amtec Corporation, a munitions production company.