Page 1 of 51

Index to Schedules and     
Exhibits are at Page 20 and 21

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

# FORM 10-K

|[X] |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2004
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------

or

|[_] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________________ to __________________________
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Commission File Number 1-2451

|NATIONAL PRESTO INDUSTRIES, INC.                      
|------------------------------------------------------
|                                                      
|(Exact name of registrant as specified in its charter)
|                                                      
|Wisconsin                                             
|                                                      
|(State or other jurisdiction of                       
|incorporation or organization)                        
|                                                      
|3925 North Hastings Way                               
|Eau Claire, Wisconsin                                 
|                                                      
|(Address of principal executive offices)              

Registrants telephone number, including area code:  (715) 839-2121

Securities registered pursuant to Section 12(b) of the Act:

|                            
|----------------------------
|$1.00 par value common stock

Securities registered pursuant to Section 12(g) of the Act:
NONE

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.   Yes  X       No

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (229.405 of this chapter) is not contained herein, and will not be contained, to the best of
registrants knowledge, in definitive proxy or any amendment to the Form 10-K    X

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).   Yes  X       No

State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked
price of such common equity, as of the last business day of the registrants most recently completed second fiscal quarter:
$274,466,337.

The number of shares outstanding of each of the registrants classes of
common stock, as of March 4, 2005 was 6,822,841.



---

Page 2 of 51

# PART I

# ITEM 1.   BUSINESS

| | A. | DESCRIPTION OF BUSINESS
| | -- | -----------------------



| | The
business of National Presto Industries, Inc., and its consolidated subsidiaries (the
Company) consists of three business segments. The Housewares/Small Appliance
segment designs, markets and distributes housewares and small electrical appliances,
including pressure cookers and canners, kitchen electrics, and comfort appliances. The
Defense Products segment manufactures precision mechanical and electro-mechanical
assemblies and performs Load, Assemble and Pack (LAP) operations on ordnance related
products for the U.S. government and prime contractors. The Absorbent Products segment
manufactures and sells primarily private label diapers, adult incontinent products and
puppy pads.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 1. Housewares/Small Appliance Segment
Housewares and electrical appliances sold by the Company include pressure cookers and canners; the
Presto Control Master® heat control single thermostatic control line of fry pans in
several sizes, griddles and multi-purpose cookers; deep fryers of various sizes; pizza
ovens, can openers, slicer/shredders; electric heaters; corn poppers (hot air and
microwave); microwave bacon cookers; coffeemakers; electric grills; electric tea kettles;
electric knives; electric knife sharpeners; and timers. Pressure cookers and canners are
available in various sizes and are fabricated of aluminum and, in the case of cookers, of
stainless steel, as well.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | For
the year ended December 31, 2004, approximately 45% of consolidated net sales were
provided by cast products (fry pans, griddles, grills, deep fryers and multi-cookers), and
approximately 21% by noncast/thermal appliances (stamped cookers and canners, stainless
steel cookers, pizza ovens, corn poppers [hot air and microwave], coffeemakers, microwave
bacon cookers, tea kettles, and heaters). For the year ended December 31, 2003,
approximately 52% of consolidated net sales were provided by cast products, and
approximately 29% by noncast/thermal appliances. For the year ended December 31,
2002, approximately 49% of consolidated net sales were provided by cast products, and
approximately 31% by noncast/thermal appliances.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | For
the years ended December 31, 2004, 2003, and 2002, this segment had one customer which
accounted for 10% or more of the companys total consolidated net sales. That
customer was Wal-Mart Stores which accounted for 30% in 2004, 33% in 2003, and 37% in 2002
of consolidated net sales.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Products
are sold directly to retailers throughout the United States and also through independent
distributors. Although the Company has long established relationships with many of its
customers, it does not have long-term supply contracts with them. The loss of, or material
reduction in, business from any of the Companys major customers could adversely
affect the Companys business (see Footnote J in the Notes to Consolidated Financial
Statements).
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company has a sales force of approximately nine employees that sell to and service most
customers. A few selected accounts are handled by manufacturers representatives who
may also sell other product lines. Sales promotional activities are conducted through the
use of television, radio and newspaper advertising. The Companys business is highly
competitive and seasonal, with the normal peak sales period occurring in the fourth
quarter of the year prior to the holiday season. Many companies compete for sales of
housewares and small electrical appliances, some of which are larger than the Company and
others which are smaller. Product competition extends to special product features, product
pricing, marketing programs, warranty provisions, service policies and other factors. New
product introductions are an important part of the Companys sales to offset the
morbidity rate of other products and/or the effect of lowered acceptance of seasonal
products due to weather conditions. New products entail unusual risks. Engineering and
tooling costs are increasingly expensive, as are finished goods that may not have a ready
market or achieve widespread consumer acceptance. High-cost advertising commitments
accompanying such new products or to maintain sales of existing products may not be fully
absorbed by ultimate product sales. Initial production schedules, set in advance of
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



---

Page 3 of 51

| | introduction, carry the possibility of excess unsold inventories. New product
introductions are further subject to delivery delays from supply sources, which can impact
availability for the Companys most active selling periods.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Research
and development costs related to new product development for the years 2004, 2003 and 2002
were absorbed in operations of these years and were not a material element in the
aggregate costs incurred by the Company.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Products
are generally warranted to the original owner to be free from defects in material and
workmanship for a period of one to twelve years from date of purchase. The Company allows
a sixty-day over-the-counter initial return privilege through cooperating dealers.
Products are serviced through independent service providers throughout the United States
and a corporate service repair operation. The Companys service and warranty programs
are competitive with those offered by other manufacturers in the industry.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Prior
to 2002, many of the Companys products were manufactured in plants located in
Jackson, Mississippi and Alamogordo, New Mexico. In 2004, the Company purchased almost all
of its products from non-affiliated companies primarily located in the Orient. (See
Footnote M to the Notes to Consolidated Financial Statements).
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company warehouses and distributes its products from a distribution center located in
Canton, Mississippi. Selective use is made of leased tractors and trailers.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company invests funds not currently required for business activities (see Footnote A (4)
in the Notes to Consolidated Financial Statements). Income from invested funds is included
in Other Income in the accompanying financial statements.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Earnings
from investments may vary significantly from year to year depending on interest yields on
instruments meeting the Companys investment criteria, and the extent to which funds
may be needed for internal growth, acquisitions, newly identified business activities, and
reacquisition of Company stock.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2. Defense Products
Segment
| | ---------------------------

| | AMTEC
Corporation was acquired on February 24, 2001, and manufactures precision mechanical and
electro-mechanical products for the U.S. Department of Defense (DOD) and DOD prime
contractors. AMTECs 70,000 square-foot manufacturing facility, located in
Janesville, Wisconsin, is focused on producing niche market ordnance products (such as
training ammunition, fuzes, firing devices, and initiators). Spectra Technologies LLC, a
subsidiary of AMTEC, was acquired on July 31, 2003, and manufactures explosives and
propellant ordnance-related products for the DOD and other DOD prime contractors.
Spectras 52,000 square-foot facility, located in East Camden, Arkansas, performs
primarily Load, Assemble, and Pack (LAP) type work.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
defense products segment competes for its business primarily on the basis of price,
technical competence, product quality, and manufacturing experience. This segment operates
in a highly competitive environment with many other organizations, some of which are
larger and others that are smaller.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
2004 almost all of the work performed by this segment directly or indirectly for the DOD
was performed on a fixed-price basis. Under fixed-price contracts, the price paid to the
contractor is awarded based on competition at the outset of the contract and therefore is
generally not subject to any adjustments reflecting the actual costs incurred by the
contractor. The defense segments contracts and subcontracts contain the customary
provision permitting termination at any time for the convenience of the government, with
payment for any work completed, associated profit, and inventory/work in process at the
time of termination.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3. Absorbent Products
Segment
The first absorbent products segment business (Presto Absorbent Products, Inc.) was acquired
on November 21, 2001. At that time, Presto Absorbent Products manufactured primarily
private label diapers. On October 6, 2003, the Company purchased the assets of NCN
Hygienic Products, Inc., a Marietta, Georgia company which manufactures adult incontinence
products and training pads for pets,
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



---

Page 4 of 51

| | which are likewise primarily private label products.
The business is capital intensive and substantial investment in new equipment is ongoing
to enable expansion. New equipment is extremely complex and considerable time, typically
in excess of a year, is consumed to secure, install and reach the point at which it
operates efficiently. Once the equipment is operating efficiently, it should provide
substantial additional capacity, which in turn must be utilized if the operation is to be
profitable.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Unlike
the housewares/small appliance business, the absorbent product business is not seasonal.
To the extent there are variations from month to month, that is primarily a function of
customer promotional timing. As private label products tend to emulate branded product as
much as possible, new product development is important, but is largely limited to
providing features similar to those found in national branded product. Research and
development costs are absorbed in operations.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
absorbent product business is very competitive. There are several competitors, most of
which are larger than the company. Product competition is largely based on product
pricing, quality, and features.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Product cost is heavily influenced by commodity costs which include wood pulp, as well as many
petroleum based products, and by equipment operating speed, efficiency, and utilization
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Advertising
is typically the responsibility of the owner of the private label and is thus minimal.
Most sales are currently handled through broker/distributor arrangements. Production for
the most part is done to order.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | For the year ended December 31, 2004, this segment had one customer, Medline Industries
Holdings LP, which accounted for 11% of consolidated net sales.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------

| | B. | OTHER COMMENTS
| | -- | --------------

| | 1. Sources and Availability of Materials
| | ----------------------------------------

| | See
Footnote J in the Notes to the Consolidated Financial Statements.
| | ---------------------------------------------------------------------

| | 2. Trademarks,
Licenses, Franchises and Concessions Held
| | --------------------------------------------------------

| | Patents,
particularly on new products, trademarks and know-how are considered significant. The
Companys current and future success depends upon judicial protection of its
intellectual property rights (patents, trademarks and trade dress). Removal of that
protection would expose the Company to competitors who seek to take advantage of the
Companys innovations and proprietary rights. To date, the Company has vigorously
protected its rights and enjoyed success in all its intellectual property suits.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3. Effects of
Compliance with Environmental and OSHA Regulations
| | ----------------------------------------------------------------

| | In
May 1986, the Companys Eau Claire, Wisconsin, site was placed on the United States
Environmental Protection Agencys (EPA) National Priorities List (NPL) under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA)
because of alleged hazardous waste deposited on the property. At year end 1998, all
remediation projects at the Eau Claire, Wisconsin, site had been installed, were fully
operational, and restoration activities had been completed.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Based
on factors known as of December 31, 2004, it is believed that the Companys existing
environmental accrued liability reserve will be adequate to satisfy on-going remediation
operations and monitoring activities; however, should environmental agencies require
additional studies or remediation projects, it is possible the existing accrual could be
inadequate.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Management
believes that in the absence of any unforeseen future developments, known environmental
matters will not have any material effect on the results of operations or financial
condition of the Company.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 4. Number of Employees of the Company
| | -------------------------------------

| | As
of December 31, 2004, the Company had 551 employees compared to 347 employees at the end
of December 2003.
| | -------------------------------------------------------------------------------------------------------------



---

Page 5 of 51

| | 5. Industry Practices
Related to Working Capital Requirements
| | -------------------------------------------------------------

| | The
major portion of the Companys sales were made with terms of 90 days or shorter.
| | ------------------------------------------------------------------------------------

| | For
the small appliance/housewares segment, inventory levels increase in advance of the
selling period for products that are seasonal, such as pressure canners, heaters, and
major new product introductions. Inventory build-up also occurs to create stock levels
required to support the higher sales that occur in the latter half of each year. Buying
practices of the Companys customers require just-in-time delivery,
necessitating that the Company carry large finished goods inventories.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
multiple stock keeping units inherent in the private label absorbent product business,
combined with the desire to minimize machine changeover to maximize efficiency,
necessitates the carrying of a large finished goods inventory in the absorbent product
segment as well.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 6. Order Backlog
| | ----------------

| | Shipment
of most of the Companys small appliance/housewares and absorbent products occurs
within a relatively short time after receipt of the order and, therefore, there is usually
no substantial order backlog. New product introductions may result in order backlogs that
vary from product to product and as to timing of introduction.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Contract
backlog of the defense segment was approximately $43,000,000 at December 31, 2004, and
$30,000,000 at December 31, 2003. Backlog is defined as the value of funded orders from
the customer less the amount of sales recognized against the funded order. It is
anticipated that the backlog will be performed during a 14 to 18-month period.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | C. | PLANT CLOSINGS
| | -- | --------------

| | See
Footnote M in the Notes to the Consolidated Financial Statements.
| | ---------------------------------------------------------------------

| | D. | ACQUISITIONS
| | -- | ------------

| | See
Footnote L in the Notes to the Consolidated Financial Statements.
| | ---------------------------------------------------------------------

| | E. | AVAILABLE INFORMATION
| | -- | ---------------------

| | The
Company has a web site at www.gopresto.com. The contents of the Companys web
site are not part of, nor are they incorporated by reference into this annual report.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company does not make available on its web site its annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K, or amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Exchange Act because those reports are
already readily available to the public on the SEC web site at www.sec.gov. The Company
does provide paper copies of its annual report free of charge upon request.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# ITEM 2.   PROPERTIES
(Owned Except Where Indicated)

| | The
Companys Eau Claire facility is approximately 470,000 square feet. Presto Absorbent
Products, Inc. utilizes approximately 300,000 square feet of this area. Leases for 38,000
square feet of this area have been entered into with outside tenants. The Companys
corporate office occupies the balance of the space in Eau Claire.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company also has manufacturing facilities in Janesville, Wisconsin; East Camden, Arkansas;
and Marietta, Georgia; and two warehousing facilities which are located in Jackson and
Canton, Mississippi. Manufacturing ceased at the Jackson plant during the fourth quarter
of 2002 since the Company is outsourcing all of its housewares/small appliances. (See Note
M in the Notes to the Consolidated Financial Statements).
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Janesville facility is comprised of approximately 70,000 square feet. The Camden facility
is approximately 52,000 square feet of leased space. The Marietta, Georgia facility
contains 104,000 square feet of leased space.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



---

Page 6 of 51

| | The
Jackson facility contains 283,000 square feet. Modifications to adapt this facility for
warehousing and shipping were completed during 2004. The Company leases a 191,900 square
foot building in Canton, Mississippi which is used primarily for warehousing and
distribution and some activities for product service functions. An additional 72,200
square feet has been leased in adjacent buildings for warehousing.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# ITEM 3.   LEGAL PROCEEDINGS

| | See
Footnote I in the Notes to the Consolidated Financial Statements.
| | ---------------------------------------------------------------------

| | See Item
1.B.3. For information regarding certain environmental matters.
| | ------------------------------------------------------------------------

# ITEM 4.   SUBMISSION OF
MATTERS TO A VOTE OF SECURITY HOLDERS

| | The
Company held its Annual Meeting on October 19, 2004 at which the only item submitted for a
vote was the election of Directors, and all nominees were elected.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
2005 Annual Meeting of Stockholders (the 2005 Annual Meeting) will be held on
October 18, 2005. The proxy statement for this meeting is expected to be mailed on or
about September 2, 2005. Any proposal intended to be presented for action at the 2005
Annual Meeting of Stockholders of the Company by any stockholder of the Company must be
received by the Secretary of the Company at 3925 North Hastings Way, Eau Claire, Wisconsin
54703, no later than May 5, 2005, in order for such proposal to be included in the
Companys proxy statement and proxy relating to the 2005 Annual Meeting. Nothing in
this paragraph shall be deemed to require the Company to include in its proxy statement
and proxy relating to the 2005 Annual Meeting any stockholder proposal which does not meet
all of the requirements for such inclusion at the time in effect.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Pursuant
to Rules 14a-4 and 14a-5(e) of the Securities and Exchange Commission, as amended, which
govern the use by the Company of its discretionary voting authority with respect to
certain shareholder proposals, should the Company receive notice after July 19, 2005, of
any such stockholder proposal which will be circulated independent of the Companys
proxy statement, the persons named in proxies solicited by the Board of Directors of the
Company for its 2005 Annual Meeting may exercise discretionary voting power with respect
to any such proposal.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



---

Page 7 of 51

# PART II

ITEM 5.   MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER
                      
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Record of Dividends
Paid and Market Price of Common Stock

|               | 2004 |  | 2003
|-------------- | ---- |  | ----
|               |      |  |     
|
|               |      |  |     
|
|               |      |  |     
|First Quarter  |      |  | $   
|Second Quarter |      |  |     
|Third Quarter  |      |  |     
|Fourth Quarter |      |  |     
|               |      |  |     
|Full Year      |      |  | $   

Common stock of National Presto
Industries, Inc. is traded on the New York Stock Exchange under the symbol NPK.  As of
March 4, 2005, there were 522 holders of record of the Company's common stock.  This
number does not reflect shareholders who hold their shares in the name of broker dealers
or other nominees.  During the fourth quarter of 2004, the Company did not purchase any
of its equity securities. See Item 12 for information regarding equity compensation plans.

ITEM 6.   SELECTED
FINANCIAL DATA

|                                | (in thousands except per share data)
|------------------------------- | ------------------------------------
|
|                                |                                     
|                                |                                     
|Net sales                       |                                     
|                                |                                     
|Net earnings                    |                                     
|                                |                                     
|Net earnings per share          |                                     
|                                |                                     
|Total assets                    |                                     
|                                |                                     
|Dividends paid per common share |                                     
|applicable to current year      |                                     

|* |  | For 2004 the net effect of the reversal of the LIFO reserve resulted in a net comparative
earnings decline of $2,695,000 or $.40 per share which was in part offset by the absence
of the $1,137,000 ($.17 per share) plant closing charge taken in 2003. The impact of the
pension termination resulted in a net comparative earnings decline of $1,371,000 or $.20
per share. 2003 net earnings reflect after tax charges of $1,137,000 ($.17 per share)
related to plant closing expenses and $817,000 ($.12 per share) related to converting a
defined benefit pension plan into a defined contribution plan, which were more than offset
by the partial reversal of the LIFO reserve stemming from the shut down of domestic
plants, net of tax, $3,122,000 ($.46 per share). 2002 includes $2,843,000  $.42 per
share versus 2001s $4,771,000  $.70 per share for after-tax expenses relating
to plant closings. 2002 earnings also reflect $1,040,000 or $.15 per share after-tax
charge primarily related to the early retirement of long term employees. The 2002 expenses
were largely offset ($3,259,000 or $.48 per share after-tax) by the partial reversal of
the LIFO reserve stemming from the shutdown of the domestic manufacturing plants.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



---

Page 8 of 51

ITEM
7.    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                     
     AND RESULTS OF OPERATIONS

| | Forward-looking
statements in this Managements Discussion and Analysis of Financial Condition and
Results of Operations, elsewhere in this Form 10-K, in the Companys 2004 Annual
Report to Shareholders, in the Proxy Statement for the annual meeting held October 19,
2004, and in the Companys press releases and oral statements made with the approval
of an authorized executive officer are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. There are certain important factors that
could cause results to differ materially from those anticipated by some of the statements
made herein. Investors are cautioned that all forward-looking statements involve risks and
uncertainty. In addition to the factors discussed herein and in the notes to consolidated
financial statements, among the other factors that could cause actual results to differ
materially are the following: consumer spending and debt levels; interest rates;
continuity of relationships with and purchases by major customers; product mix; the
benefit and risk of business acquisitions; competitive pressure on sales and pricing;
increases in material, freight/shipping, or production cost which cannot be recouped in
product pricing; delays or interruptions in shipping, and the efficient start-up and
utilization of capital equipment investments. Additional information concerning these and
other factors is contained in the Companys Securities and Exchange Commission
filings, copies of which are available from the Company without charge.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2004
COMPARED TO 2003
| | ---------------------

| | Readers
are directed to Note N, Business Segments for data on the financial results of
the Companys three business segments for the years ended December 31, 2004 and 2003.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
a consolidated basis, sales were up by $33,212,000 (26%), gross margins by $2,605,000
(7%), and selling and general expense by $2,333,000 (13%). Other income, principally
interest decreased by $649,000 (15%), as did earnings before provision for income taxes by
$377,000 (2%), and net earnings by $36,000. Details concerning these changes can be found
in the comments by segment found below.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Housewares/small
appliance net sales increased $1,914,000 from $104,246,000 to $106,160,000, or 2%,
primarily resulting from an increase in unit volume offset in large part by decreased
pricing, which reflected the competitive nature of the housewares/small appliance
business. Defense net sales increased by $14,539,000 from $9,996,000 to $24,535,000, or
145%, primarily reflecting a unit volume increase resulting from the satisfaction of a
significant portion of the 2003 backlog. Absorbent products net sales increased by
$16,759,000 from $11,502,000 to $28,261,000, or 146%, primarily reflecting the addition of
revenues stemming from the October 2003 acquisition of the assets of NCN Hygienic
Products, Inc. which were in turn augmented by a competitors sudden decision to exit
the adult incontinent business.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Housewares/small
appliance gross profit for 2004 decreased $2,970,000 from $33,619,000 to $30,649,000, or
32% in 2003 versus 29% in 2004 as a percentage of sales. The gross margin decrease was
primarily attributable to a comparatively smaller benefit received in 2004 from the
partial reversal of Manufactured Product LIFO reserve (as discussed in Notes B & M),
offset in part by two elements which were approximately equal  the margin increase
stemming from the increased sales volume and a reduction in the warranty reserve (see Note
A(13)). Defense gross profit increased $4,741,000 from $3,126,000 to $7,867,000, primarily
due to increased volume referenced above. Gross margin was largely unchanged  32% in
2004 versus 31% in 2003. Absorbent products gross profit increased $834,000 from $716,000
to $1,550,000, reflecting the increased volume stated above. Gross margin as a percentage
of sales decreased from 6.2% to 5.5%, largely as a result of the effort to fill orders
created by the above mentioned competitors exit from the business without having the
requisite machine capacity in place to efficiently handle the added volume. As mentioned
in the Liquidity section below, efforts were in process to expand that capacity.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



---

Page 9 of 51

| | Housewares/small
appliance selling and general expenses were relatively unchanged. Defense selling and
general expenses increased $1,626,000 reflecting increased compensation and staffing
commensurate with the defense segments increased sales and earnings levels, and a
full year versus five months of activity at Spectra. Absorbent product selling and general
expenses increased $304,000 primarily reflecting the October 2003 acquisition of assets
noted above.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Fiscal
year 2003 included plant closing charges of $1,834,000 relating to the closing of the
Companys housewares/small appliance manufacturing operations in Jackson,
Mississippi, and Alamogordo, New Mexico (See Note M). Also, in the third quarter of 2003,
the Company announced its decision to terminate its defined benefit pension plan (See Note
G). As a result, the Company recorded a charge of $3,528,000 and $1,317,000 for fiscal
years 2004 and 2003, respectively. Note G also includes information regarding
assumptions used to value the pension plan.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
above items were responsible for the change in operating profit.
| | --------------------------------------------------------------------

| | Other
income, principally interest, decreased $649,000 from $4,234,000 to $3,585,000, primarily
due to a decreased average daily investment balance, stemming from the use of funds for
expansion in the defense and absorbent products segments.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Earnings
before provision for income taxes decreased $377,000 from $23,083,000 to $22,706,000. The
provision for income taxes decreased from $7,606,000 to $7,265,000, which resulted in an
effective income tax rate decrease from 33% to 32% as a result of decreased earnings
subject to tax. Net earnings decreased $36,000 from $15,477,000 to $15,441,000.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2003
COMPARED TO 2002
| | ---------------------

| | Readers
are directed to Note N, Business Segments for data on the financial results of
the Companys three business segments for the years ended December 31, 2003 and 2002.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Housewares/small
appliance net sales decreased $2,841,000 from $107,087,000 to $104,246,000, or 3%. The
decrease reflects a combination of reduced prices and reduced unit volume of
housewares/small appliances. Defense net sales increased by $706,000 from $9,290,000 to
$9,996,000, or 8%. The increase reflects a change in the mix of products shipped 
fewer units with higher per unit pricing. Absorbent products net sales increased by
$3,095,000 from $8,407,000 to $11,502,000, or 37%, primarily reflecting the addition of
approximately three months of revenues stemming from the October acquisition of the assets
of NCN Hygienic Products, Inc.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Housewares/small
appliance gross profit for 2003 increased $8,720,000 from $24,899,000 to $33,619,000, or
23% versus 32% as a percentage of net sales. The gross profit percentage increase is
largely due to the cost reductions stemming from the sourcing of products overseas. The
gross profit for both 2003 and 2002 was also favorably impacted by a partial reversal of
the LIFO inventory reserve (as discussed in Notes B and M) in the amount of $5,035,000 and
$5,256,000 for 2003 and 2002, respectively. Defense gross profit increased for 2003 from
$2,966,000 to $3,126,000, or 32% versus 31% as a percentage of sales, primarily due to
volume. Absorbent products gross profit for 2003 increased $285,000 from $431,000 to
$716,000, primarily because of the addition of the acquisition noted in the previous
paragraph.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Housewares/small
appliance selling and general expenses decreased $2,364,000, partially due to decreased
television advertising expenses and the absence of an early retirement charge recorded in
2002. (See Note G.) Defense selling and general expenses increased $490,000 largely
attributable to moving expenses associated with AMTECs new facility and expenses
related to the purchase of Spectra Technologies LLC. (See Note L.)
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



---

Page 10 of 51

| | Fiscal
years 2003 and 2002 included plant closing charges of $1,834,000 and $4,020,000,
respectively, relating to closing the Companys housewares/small appliance
manufacturing operations in Jackson, Mississippi, and Alamogordo, New Mexico. (See Note
M.) Also, in the third quarter of 2003, the Company announced its decision to terminate
its defined benefit pension plan. (See Note G.) As a result, the Company recorded a charge
of $1,317,000 for fiscal 2003. An additional charge estimated at $3,500,000 will be
recorded in the third quarter of 2004 when the defined benefit pension plan termination is
completed. Note G also includes information regarding the assumptions used to value the
pension plan. The Company anticipates making an expected cash contribution of $1,500,000
to the pension plan in 2004 prior to the settlement of the plan.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Other
income, principally interest, decreased $885,000 from $5,119,000 to $4,234,000, primarily
due to decreased yields on financial instruments partially offset by an increased average
daily investment balance.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Earnings
before provision for income taxes increased $11,569,000 from $11,514,000 to $23,083,000.
The provision for income taxes increased from $2,824,000 to $7,606,000, which resulted in
an effective income tax rate increase from 25% to 33% as a result of increased earnings
subject to tax. Net earnings increased $6,787,000 from $8,690,000 to $15,477,000, or 78%.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | LIQUIDITY
AND CAPITAL RESOURCES
| | -------------------------------

| | Cash
provided by operating activities was $4,806,000 during 2004 compared to $24,797,000 during
the comparable period in the prior year. The principal factors behind the decrease can be
found in the changes in the components of working capital and the pension charge element
within the statement of cash flows.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Cash
used in investing activities was $35,870,000 during 2004 compared to cash provided of
$11,040,000 during 2003. Of note for 2004, was additional cash used for the purchase of
marketable securities, and the purchase of machinery and equipment primarily for the
expansion in the absorbent products and defense segments.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Cash
flows from financing activities for 2004 and 2003 primarily differed as a result of the
$.25 per share extra dividend paid in 2004.
| | ----------------------------------------------------------------------------------------------------------------------------------------

| | As
a result of the foregoing factors, cash and cash equivalents decreased by $39,041,000 to
$104,724,000.
| | ---------------------------------------------------------------------------------------------------------

| | Working
capital decreased by $11,360,000 to $208,772,000 at December 31, 2004, reflecting the
increased support of the activities in the defense and absorbent products segments noted
above. The Companys current ratio was 5.3 to 1.0 at fiscal 2004 year-end, compared
to 5.0 to 1.0 at the end of fiscal 2003.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | As
of December 31, 2004, there were approximately $9,800,000 open equipment purchase
commitments to expand the product line in its absorbent products segment. The Company
expects to continue to evaluate acquisition opportunities that align with its business
segments and will make further acquisitions, as well as continue to make capital
investments in these segments if the appropriate return on investment is projected.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company has substantial liquidity in the form of cash and short-term maturity marketable
securities to meet all of its anticipated capital requirements, to make dividend payments,
and to fund future growth through acquisitions and other means. The Company intends to
continue its investment strategy of safety and short-term liquidity throughout its
investment holdings. The interest rate declines over the past several years coupled with
the reduction in the Companys investment holdings currently has resulted in reduced
levels of interest income for the Company. There can be no assurance when interest rates
will begin to move towards more historically normal levels. The interest rate environment
is a function of national and international monetary policies as well as the growth and
inflation rates of the U.S. and foreign economies, and is not controllable by the Company.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



---

Page 11 of 51

| | DEFENSE
SEGMENT BACKLOG
| | -----------------------

| | The
Companys defense segment contract backlog was approximately $43,000,000 at December
31, 2004, and $30,000,000 at December 31, 2003. Backlog is defined as the value of funded
orders from the customer less the amount of sales recognized against the funded order. It
is anticipated that the backlog will be performed during a 14 to 18-month period.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | CONTRACTUAL
OBLIGATIONS
| | -----------------------

| | The
below table discloses a summary of the Companys specified contractual obligations at
December 31, 2004:
| | ------------------------------------------------------------------------------------------------------------

Payments Due By
Period

| | Contractual Obligations |  | Total |   | Under 1 Year |  | 1-3 Years |            | 3-5 Years |   | More Than
5 Years
| | ----------------------- |  | ----- | - | ------------ |  | --------- | ---------- | --------- | - | -----------------
| |                         |  |       |   |              |  |           |            |           |   |                  
| | Lease Obligations       |  |       | $ | 2,559,000    |  | $         | 701,000    |           | $ | 607,000          
| | Purchase obligations(1) |  |       |   | 32,100,000   |  |           | 32,100,000 |           |   |                 
| | Earn-out payments(2)    |  |       |   | 3,810,000    |  |           | 1,250,000  |           |   |                 
| |                         |  |       |   |              |  |           |            |           |   |                  
| | Total                   |  |       | $ | 38,469,000   |  | $         | 34,051,000 |           | $ | 607,000          
| |                         |  |       |   |              |  |           |            |           |   |                  

| |  | (1) |  | Purchase
obligations includes outstanding purchase orders at December 31, 2004. Included are
purchase orders issued to the Companys housewares manufacturers in the Orient, to
equipment manufacturers of absorbent products machinery, and to material suppliers in the
defense and absorbent products segment. The Company can cancel or change many of these
purchase orders, but may incur costs if its supplier cannot use the material to
manufacture the Companys products in other applications or return the material to
their supplier. As a result, the actual amount the Company is obligated to pay cannot be
estimated.
| |  | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (2) |  | The
Company has agreed to make certain earn-out payments dependent upon the future earnings
performance of companies acquired. The expected payments noted above were based upon the
anticipated future levels of earnings of the acquired companies.
| |  | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | CRITICAL
ACCOUNTING POLICIES
| | ----------------------------

| | The
preparation of the consolidated financial statements in accordance with accounting
principles generally accepted in the United States requires management to make certain
estimates and assumptions that affect the amount of reported assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated financial
statements and revenues and expenses during the periods reported. Actual results may
differ from those estimates. The Company reviewed the development and selection of the
critical accounting policies and believes the following are the most critical accounting
policies that could have an effect on the Companys reported results. These critical
accounting policies and estimates have been reviewed with the Audit Committee of the Board
of Directors.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Inventories
| | -----------

| | New
housewares/small appliance product introductions are an important part of the
Companys sales to offset the morbidity rate of other housewares/small appliance
products and/or the effect of lowered acceptance of seasonal products due to weather
conditions. New products entail unusual risks and have occasionally in the past resulted
in losses related to obsolete inventory as a result of low or diminishing demand for a
product. The Company did not have any major new product introduction or morbidity issues
in the current year and, accordingly, did not record a reserve for obsolete product. In
the future should product demand issues arise, the Company may incur losses related to the
obsolescence of the related inventory.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Insurance
| | ---------

| | The
Company is subject to product liability claims in the normal course of business and is
self-insured for health care costs. The Company insures for product liability claims, and
retains a self-insured retention insurance accrual in the Companys financial
statements. The Company utilizes historical trends and other analysis to assist in
determining the appropriate accrual. An increase in the number or magnitude of claims
could have a material impact on the Companys financial condition.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



---

Page 12 of 51

| | Environmental
| | -------------

| | In
May 1986, the Companys Eau Claire, Wisconsin site was placed on the United States
Environmental Protection Agencys National Priorities List under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 because of hazardous waste
deposited on the property. By December 31, 1998, all remediation projects had been
installed, were fully operational, and restoration activities had been completed and
accrued liabilities established for the expected cost of the activity. The Company
believes its accrued liability reserve will be adequate to satisfy ongoing remediation
operations and monitoring activities; however, should environmental agencies require
additional studies or remediation projects, it is possible the existing accrual could be
inadequate. The Companys current environmental liability is based upon estimates of
the future costs to maintain and operate remediation projects and monitor their results
based upon historical costs incurred for such activities.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | NEW
ACCOUNTING PRONOUNCEMENTS
| | -----------------------------

| | Please
refer to Note A (14) for information related to the future effect of adopting new
accounting pronouncements on the Companys consolidated financial statements.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

# ITEM 7A.    QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

| | The
Companys interest income on cash equivalents and marketable securities is affected
by changes in interest rates in the United States. Cash equivalents include money market
funds and 7-day variable rate demand notes which are highly liquid instruments with
interest rates set every 7 days that can be tendered to the remarketer upon 7 days notice
for payment of principal and accrued interest amounts. The 7 day tender feature of these
variable rate demand notes are further supported by an irrevocable letter of credit from
highly rated U.S. banks. To the extent a bond is not remarketed at par plus accrued
interest, the difference is drawn from the banks letter of credit. The
Companys investments are held primarily in fixed and variable rate municipal bonds
with an average life of less than one year. Accordingly, changes in interest rates have
not had a material effect on the Company, and the Company does not anticipate that future
exposure to interest rate market risk will be material. The Company uses sensitivity
analysis to determine its exposure to changes in interest rates.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company has no history of, and does not anticipate in the future, investing in derivative
financial instruments. Most transactions with international customers are entered into in
U.S. dollars, precluding the need for foreign currency cash flow hedges. The
Companys manufacturing contracts with its foreign suppliers contain provisions to
share the impact of fluctuations in the exchange rate between the U.S. dollar and the Hong
Kong dollar above and below a fixed range contained in the contracts. All transactions
with the foreign suppliers were within the exchange rate range specified in the contracts
during 2004, 2003 and 2002.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# ITEM 8.    FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA

| | A. | The consolidated financial statements of National Presto Industries, Inc. and
                    its subsidiaries and the related Reports of Independent Certified Public
                    Accountants are contained on pages F-1 through F-19 of this report.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | B. | Quarterly financial data is contained in Note P in Notes to Consolidated
                    Financial Statements.
| | -- | ------------------------------------------------------------------------------------------------------------------

# ITEM
9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
                   
FINANCIAL DISCLOSURE.

| | None
| | ----



---

Page 13 of 51

# ITEM 9A.    CONTROLS AND
PROCEDURES

| | The
Companys management, including the Chief Executive Officer and Chief Financial
Officer, have conducted an evaluation of the effectiveness of the design and operation of
the Companys disclosure controls and procedures pursuant to Rule 13a-15 under the
Securities Exchange Act of 1934 (the 1934 Act) as of December 31, 2004. Based
on that evaluation, the Companys Chief Executive Officer and Chief Financial Officer
concluded that the Companys disclosure controls and procedures are effective in
ensuring that information required to be disclosed by the Company in the reports it files
or submits under the 1934 Act is recorded, processed, summarized, and reported within the
time periods specified in accordance with the SECs rules and forms.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | There
have been no significant changes in internal controls over financial reporting during the
quarter ended December 31, 2004 that have materially affected, or are reasonably likely to
materially affect, the Companys internal control over financial reporting.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# MANAGEMENTS
ASSESSMENT OF INTERNAL CONTROL OVER FINANCIAL REPORTING

| | The
management of National Presto Industries, Inc. (NPI) is responsible for establishing and
maintaining adequate internal control over financial reporting as defined in Rule
13a-15(f) and 15d-15(f) under the Securities and Exchange Act of 1934. NPIs internal
control system was designed to provide reasonable assurance to the Companys
management and Board of Directors regarding the preparation and fair presentation of
published financial statements.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | All
internal control systems, no matter how well designed, have inherent limitations.
Therefore, even those systems determined to be effective can provide only reasonable
assurance with respect to financial statement preparation and presentation.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | NPI
management assessed the effectiveness of the Companys internal control over
financial reporting as of December 31, 2004. In making this assessment, it used the
criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO) in Internal Control  Integrated Framework. Based on our assessment we
believe that, as of December 31, 2004, the Companys internal control over financial
reporting is effective based on those criteria.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | NPIs
independent auditors have issued an audit report on our assessment of the Companys
internal control over financial reporting. This report appears below.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

# REPORT OF INDEPENDENT
REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRM

| | Stockholders
and Board of Directors National Presto Industries, Inc.
| | --------------------------------------------------------------------

| | We
have audited managements assessment, included in the accompanying management report
included in Item 9 of this Form 10-K, that National Presto Industries, Inc. and
subsidiaries (a Wisconsin Corporation) maintained effective internal control over
financial reporting as of December 31, 2004, based on control criteria established in
Internal Control  Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). National Presto Industries, Inc. and
subsidiaries management is responsible for maintaining effective internal control
over financial reporting and for its assessment of the effectiveness of internal control
over financial reporting. Our responsibility is to express an opinion on managements
assessment and an opinion on the effectiveness of the companys internal control over
financial reporting based on our audit.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | We
conducted our audit in accordance with the statements of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over
financial reporting was maintained in all material respects. Our audit included obtaining
an understanding of internal control over financial reporting, evaluating
managements assessment, testing and evaluating the design and operating
effectiveness of internal control, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for
our opinions.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



---

Page 14 of 51

| | A
companys internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted
accounting principles. A companys internal control over financial reporting includes
those policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the companys assets that could have
a material effect on the financial statements.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Because
of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
our opinion, managements assessment that National Presto Industries, Inc. and
subsidiaries maintained effective internal control over financial reporting as of December
31, 2004, is fairly stated, in all material respects, based on the control criteria
established in Internal Control  Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO). Also in our opinion,
National Presto Industries, Inc. and subsidiaries maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2004, based on
control criteria established in Internal Control  Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | We
have also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheets of National Presto
Industries, Inc. and subsidiaries as of December 31, 2004 and 2003, and the related
consolidated statements of earnings, stockholders equity, and cash flows for each of
the three years in the period ended December 31, 2004 and our report dated March 10, 2004
expressed an unqualified opinion on those financial statements.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | /s/ GRANT THORNTON LLP
Minneapolis, Minnesota 
March 10, 2005
| | -------------------------------------------------------------

# ITEM 9B.    OTHER
INFORMATION

| | None
| | ----



---

Page 15 of 51

# PART III

# ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

| | INFORMATION CONCERNING DIRECTORS
The following table provides information as to the directors of the Company.
| | -------------------------------------------------------------------------------------------------------------

|Director           |  | Age |  | Principal Occupation; Business Experience Past 5 Years |  | DirectorSince                                            |  |  | Directors Term To Expire
|------------------ |  | --- |  | ------------------------------------------------------ |  | -------------------------------------------------------- |  |  | -------------------------
|                   |  |     |  |                                                        |  |                                                          |  |  |                          
|James F. Bartl     |  |     |  | 64                                                     |  | Executive Vice President and Secretary of the Company    |  |  | 1995                     
|                   |  |     |  |                                                        |  |                                                          |  |  |                          
|Michael J. OMeara |  |     |  | 54                                                     |  | Chairman of the Board and Director, Peoples National    |  |  | 1996                     
|                   |  |     |  |                                                        |  | Bank, Eau Claire, Wisconsin                              |  | 
|                   |  |     |  |                                                        |  |                                                          |  |  |                          
|Melvin S. Cohen    |  |     |  | 87                                                     |  | Chairman Emeritus of the Board of the Company; Prior to  |  |  | 1949                     
|                   |  |     |  |                                                        |  | January 1, 2002, Chairman                                |  | 
|                   |  |     |  |                                                        |  |                                                          |  |  |                          
|Maryjo Cohen       |  |     |  | 52                                                     |  | Chairperson of the Board, President and Chief Executive  |  |  | 1988                     
|                   |  |     |  |                                                        |  | Officer of the Company(1)                                |  | 
|                   |  |     |  |                                                        |  |                                                          |  |  |                          
|Richard N. Cardozo |  |     |  | 69                                                     |  | Adjunct Professor, University of Miami; Professor        |  |  | 1998                     
|                   |  |     |  |                                                        |  | Emeritus, Carlson School of Management, University of    |  | 
|                   |  |     |  |                                                        |  | Minnesota                                                |  | 
|                   |  |     |  |                                                        |  |                                                          |  |  |                          
|Patrick J. Quinn   |  |     |  | 55                                                     |  | Chairman and President, Ayres Associates; prior to April |  |  | 2001                     
|                   |  |     |  |                                                        |  | 28, 2000, Executive Vice President                       |  | 

| | (1) | Ms. Cohen is the daughter of Mr. Cohen.
| | --- | ---------------------------------------

| | The
Company has Audit, Compensation, and Nominating/Corporate Governance Committees consisting
of Messrs. OMeara, Cardozo, and Quinn. The Company has not appointed an Audit
Committee financial expert since none of its current directors qualify as such, but plans
to seek a qualified director in the near future..
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Directors
of the Company, other than those that are executive officers of the Company, receive
annual compensation of $25,000. This amount includes $1,000 for each Board meeting and
$500 for each committee meeting attended. Executive officers are not compensated for
services as Board members.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



---

Page 16 of 51

| | IDENTIFICATION
OF EXECUTIVE OFFICERS
| | ------------------------------------

| | The
following information is provided with regard to the executive officers of the registrant:
(All terms of office are for one year or until their respective successors are duly
elected.)
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|NAME               |  | TITLE |                               | AGE
|------------------ |  | ----- | ----------------------------- | ---
|                   |  |       |                               |    
|Maryjo Cohen       |  |       | Chairperson of the Board,     |    
|                   |  |       | President and Chief Executive |    
|                   |  |       | Officer                       |    
|                   |  |       |                               |    
|James F. Bartl     |  |       | Executive Vice President      |    
|                   |  |       | and Secretary                 |    
|                   |  |       |                               |    
|Neil L. Brown      |  |       | Vice President, Manufacturing |    
|                   |  |       | and Purchasing                |    
|                   |  |       |                               |    
|Donald E. Hoeschen |  |       | Vice President, Sales         |    
|                   |  |       |                               |    
|Larry Tienor       |  |       | Vice President, Engineering   |    
|                   |  |       |                               |    
|Randy Lieble       |  |       | Vice President, Treasurer and |    
|                   |  |       | Chief Financial Officer       |    

| | Ms. Cohen became Chairperson of the Board on January 1, 2002. Prior to that date
                    she had been elected Treasurer in September 1983, to the additional positions of
                    Vice President in May 1986, President in May 1989 and Chief Executive Officer in
                    May 1994. She has been associated with the registrant since 1976. Prior to
                    becoming an officer, she was Associate Resident Counsel and Assistant to the
                    Treasurer.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Mr. Bartl was elected Secretary in May 1978 and the additional position of
                    Executive Vice President in November 1998. He has been associated with the
                    registrant since 1969. Prior to becoming an officer, he was Resident Counsel and
                    Director of Industrial Relations, the latter position he continues to hold.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Mr. Brown was elected Vice President in November 1997. He has been associated with
                    the registrant since 1966. Prior to becoming an officer, he was Director of
                    Manufacturing.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Mr. Hoeschen was elected Vice President in May 1997. He has been associated with
                    the registrant since 1971. Prior to becoming an officer, he was Director of
                    Sales.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Mr.
                     Tienor was elected Vice President in November 2003. He has been associated with
                    the registrant since 1971. Prior to becoming an officer, he was Director of
                    Engineering.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Mr.
                     Lieble was elected Vice President in October 2004. Prior to that date he had
                    been elected Treasurer in November 1995 and the additional position of Chief
                    Financial Officer in November 1999. He has been associated with the registrant
                    since 1977. Prior to becoming an officer, he was Manager of Investments and
                    Government Contracts.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | CODE OF ETHICS
| | --------------

| | The
Company has adopted a code of business conduct and ethics which is posted on its web site
at www.gopresto.com.
| | ------------------------------------------------------------------------------------------------------------------



---

Page 17 of 51

| | SECTION
16 (A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
| | --------------------------------------------------------

| | Based
upon a review of Forms 3, 4 and 5 and any amendments thereto pursuant to Section 16 of the
Securities and Exchange Act of 1934, the Company believes all such forms were filed on a
timely basis by reporting persons during the fiscal year ended December 31, 2004.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# ITEM 11.    EXECUTIVE
COMPENSATION

| | SUMMARY
OF CASH AND CERTAIN OTHER COMPENSATION
| | ----------------------------------------------

| | The
following table provides certain summary information concerning annual compensation paid
by the Company to the Companys chief executive officer and each of the four highest
paid executive officers whose salary and bonus exceeded $100,000 for the fiscal year ended
December 31, 2004.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | SUMMARY COMPENSATION/PENSION ACCRUED BENEFIT TABLE
| | --------------------------------------------------

|Name and Principal Position          |  | Year |      | Salary |  | Bonus |        | 401 (K) Plan(1)
|------------------------------------ |  | ---- | ---- | ------ |  | ----- | ------ | ---------------
|                                     |  |      |      |        |  |       |        |                
|Maryjo Cohen                         |  |      | 2004 |        |  | $     | 64,000 |                
|Chairperson of the Board, President, |  |      | 2003 |        |  |       | 64,000 |                
|Chief Executive Officer and Director |  |      | 2002 |        |  |       | 64,000 |                
|                                     |  |      |      |        |  |       |        |                
|James F. Bartl                       |  |      | 2004 |        |  | $     | 44,600 |                
|Executive Vice President, Secretary, |  |      | 2003 |        |  |       | 44,600 |                
|and Director                         |  |      | 2002 |        |  |       | 44,600 |                
|                                     |  |      |      |        |  |       |        |                
|Donald E. Hoeschen                   |  |      | 2004 |        |  | $     | 41,370 |                
|Vice President-Sales                 |  |      | 2003 |        |  |       | 41,370 |                
|                                     |  |      | 2002 |        |  |       | 41,370 |                
|                                     |  |      |      |        |  |       |        |                
|Randy F. Lieble                      |  |      | 2004 |        |  | $     | 40,000 |                
|Vice President, Treasurer            |  |      | 2003 |        |  |       | 40,000 |                
|and Chief Financial Officer          |  |      | 2002 |        |  |       | 40,000 |                
|                                     |  |      |      |        |  |       |        |                
|Lawrence J. Tienor                   |  |      | 2004 |        |  | $     | 37,790 |                
|Vice President-Engineering           |  |      | 2003 |        |  |       | 37,790 |                
|                                     |  |      | 2002 |        |  |       | 37,790 |                

|(1) | The amounts shown in this column are matching contributions made by the Company.
          Beginning As of January 1, 2004, the Company increased its annual contribution
          to the defined contribution plan due to the termination of the defined benefit
          pension plan as of December 31, 2003.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



---

Page 18 of 51

| | AGGREGATE
OPTION EXERCISE IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
| | -------------------------------------------------------------------------------

|                   | SharesAcquired OnExercise (#) |  | ValueRealized ($) |  | Number of SecuritiesUnderlying UnexercisedOptions AtFiscal Year-End (#) |     | Value of UnexercisedIn-The-Money OptionsAt Fiscal Year-End ($)
|------------------ | ----------------------------- |  | ----------------- |  | ----------------------------------------------------------------------- | --- | --------------------------------------------------------------
|
|Donald E. Hoeschen |                               |  | -0-               |  |                                                                         | -0- |                                                               
|                   |                               |  |                   |  |                                                                         |     |                                                               
|Randy F. Lieble    |                               |  | -0-               |  |                                                                         | -0- |                                                               

| | COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
| | -----------------------------------------------------------

| | Members
of the Board of Directors in cooperation with the Compensation Committee determine the
compensation of the executive officers of the Company. This includes the compensation of
those executive officers who also serve as directors, namely, Maryjo Cohen, Chairperson of
the Board, President, and Chief Executive Officer, and James F. Bartl, Executive Vice
President and Secretary. Ms. Cohen and Mr. Bartl do not participate in any decisions
regarding their own compensation.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Executive
officers of the Company, including Ms. Cohen and Mr. Bartl, also serve as directors and
executive officers of the Companys subsidiaries.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------



---

Page 19 of 51

ITEM
12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
             RELATED STOCKHOLDER
MATTERS.

# VOTING SECURITIES AND
PRINCIPAL HOLDERS THEREOF

The following table sets forth
information provided to the Company as to beneficial ownership of the Companys
common stock, as of February 28, 2005 by (i) the only shareholders known to the Company to
hold 5% or more of such stock, (ii) each of the directors and executives of the Company
named in the Summary Compensation/Pension Accrued Benefit Table, and (iii) all directors
and officers as a group. Unless otherwise indicated, all shares represent sole voting and
investment power.

|Beneficial Owner                      |  | Amount and Natureof Beneficial Ownership |  | Percent ofCommon Stock
|------------------------------------- |  | ---------------------------------------- |  | ----------------------
|                                      |  |                                          |  |                       
|Maryjo Cohen                          |  |                                          |  | 1,958,788             
|3925 N. Hastings Way                  |  |                                         
|Eau Claire, WI 54703                  |  |                                         
|                                      |  |                                          |  |                       
|Melvin S. Cohen                       |  |                                          |  | 398,314               
|3925 N. Hastings Way                  |  |                                         
|Eau Claire, WI 54703                  |  |                                         
|                                      |  |                                          |  |                       
|Barclays Global Investors             |  |                                          |  | 342,032               
|45 Freemont Street                    |  |                                         
|San Francisco, CA 94105               |  |                                         
|                                      |  |                                          |  |                       
|Dimensional Fund Advisors, Inc.       |  |                                          |  | 384,708               
|1299 Ocean Avenue                     |  |                                         
|Santa Monica, CA 90401                |  |                                         
|                                      |  |                                          |  |                       
|Gabelli Asset Management, Inc.        |  |                                          |  | 360,167               
|One Corporate Center                  |  |                                         
|Rye, NY 10580                         |  |                                         
|                                      |  |                                          |  |                       
|Royce & Associates, LLC               |  |                                          |  | 730,700               
|1414 Avenue of the Americas           |  |                                         
|New York, NY 10019                    |  |                                         
|                                      |  |                                          |  |                       
|James F. Bartl                        |  |                                          |  | 16,379                
|Donald E. Hoeschen                    |  |                                          |  | 1,128                 
|Randy F. Lieble                       |  |                                          |  | 1,401                 
|Lawrence J. Tienor                    |  |                                          |  | 713                   
|Michael J. O'Meara                    |  |                                          |  | 100                   
|Richard N. Cardozo                    |  |                                          |  |                      
|Patrick J. Quinn                      |  |                                          |  | 200                   
|All officers and directors as a group |  |                                          |  | 2,090,078             
|(10 persons)                          |  |                                         

|(1) |  | (Includes
108,875 shares owned by the L. E. Phillips Family Foundation, Inc. (the Phillips
Foundation), a private charitable foundation of which the named person is an officer
and/or director and as such exercises shared voting and investment powers.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Includes
1,669,664 shares held in a voting trust described in the section below captioned
Voting Trust Agreement, for which Ms. Cohen has sole voting power, and 179,054
shares owned by private charitable foundations (other than the Phillips Foundation) and
family member trusts of which Ms. Cohen is a co-trustee, officer or director, and as such
exercises shared voting and investment powers.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | Includes
298,439 shares owned by charitable trusts and private charitable foundations (other than
the Phillips Foundation) of which Mr. Cohen is a co-trustee, officer or director, and as
such exercises shared voting and investment powers. Does not include shares held in a
voting trust described in the section below captioned Voting Trust Agreement,
for which Mr. Cohen holds voting trust certificates. Pursuant to the voting trust, Mr.
Cohen does not have the power to vote or dispose of such shares.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) |  | Based on February 2005
Schedule 13-G filing with the Securities and Exchange Commission.
|--- |  | ----------------------------------------------------------------------------------------

|(5) |  | Based on
February 2005 Schedule 13-D filing with the Securities and Exchange Commission.
|--- |  | ----------------------------------------------------------------------------------------

|(6) |  | Represents less than 1% of the outstanding shares of common stock of the
Company.
|--- |  | ---------------------------------------------------------------------------------

|(7) |  | Includes options for
750 shares currently exercisable by three officers under the National Presto Industries,
Inc. 1988 Stock Option Plan.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------



---

Page 20 of 51

| | The
information contained in the foregoing footnotes is for explanatory purposes only, and the
persons named in the foregoing table disclaim beneficial ownership of shares owned or held
in trust for any other person, including family members, trusts, or other entities with
which they may be associated. Stock ownership information contained in this Form 10-K was
obtained from the Companys shareholder records, filings with governmental
authorities, or from the named directors and officers.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | VOTING
TRUST AGREEMENT
| | ----------------------

| | Maryjo
Cohen and Melvin Cohen, and eight other persons comprising extended family members and
related trusts, have entered into a voting trust agreement with respect to the voting of
an aggregate of 1,669,664 shares of common stock of the Company. The voting trust
agreement will terminate on December 4, 2009, unless sooner terminated by the voting
trustee or unanimous written consent of all the parties to the voting trust agreement, or
unless extended by unanimous written consent by all parties to the agreement. The voting
trustee under the agreement is Maryjo Cohen. Under the agreement, the voting trustee
exercises all rights to vote the shares subject to the voting trust.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | EQUITY
COMPENSATION PLAN INFORMATION
| | ------------------------------------

| | The
following table sets forth information with respect to the Companys equity
compensation plans as of December 31, 2004.
| | ---------------------------------------------------------------------------------------------------------------------------

|              |  | (a) |                                                                                              | (b) |  | (c)                                                                         
|------------- |  | --- | -------------------------------------------------------------------------------------------- | --- |  | ----------------------------------------------------------------------------
|              |  |     |                                                                                             
|Plan category |  |     | Number of securities to be issued upon exercise 
of outstanding options, warrants and rights |     |  | Weighted-average exercise price of outstanding 
options, warrants and rights
|              |  |     |                                                                                              |    

|                                       |  |  | 
|-------------------------------------- |  |  | 
|Equity compensation plans approved by  |  |  | 
|security holders                       |  |  | 
|                                       |  |  | 
|Equity compensation plans not approved |  | 
|by security holders                    |  |  | 
|                                       |  |  | 
|                                       |  |  | 
|Total                                  |  |  | 
|                                       |  |  | 

# ITEM 13.    CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS

| | Melvin
S. Cohen, Chairman Emeritus of the Company, was paid $30,000 for consultation services in
2004. During the year, Mr. Cohen was consulted on a variety of matters based upon his
executive experience and knowledge of the Companys operations.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



---

Page 21 of 51

# ITEM 14.    PRINCIPAL
ACCOUNTANT FEES AND SERVICES

| | Grant
Thornton LLP, Certified Public Accountants, was the independent registered public
accounting firm for the Company for the fiscal years ended December 31, 2003 and 2004.
They have been selected by the Audit Committee to be the independent registered public
accounting firm for the Company during the fiscal year ending December 31, 2005. The Audit
Committee meets with representatives of Grant Thornton LLP to review their comments and
plans for future audits.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
following fees have been incurred by the Company:
| | -----------------------------------------------------

|                             |  | Audit Fees (1) |   | Audit(2) Related Fees |  | Tax Fees(3) |        | All Other Fees (4)
|---------------------------- |  | -------------- | - | --------------------- |  | ----------- | ------ | ------------------
|                             |  |                |   |                       |  |             |       
|Year ended December 31, 2003 |  |                | $ | 77,000                |  | $           | 25,000 |                   
|                             |  |                |   |                       |  |             |       
|Year ended December 31, 2004 |  |                |   | 267,000               |  |             | 11,000 |                   

| |  | (1) |  | Includes
audit fee for financial statement audits, 10Q reviews, Sarbanes-Oxley 404 controls work
and related expenses.
| |  | --- |  | ----------------------------------------------------------------------------------------------------------------------

| |  | (2) |  | Audit
related fees include fees for consultation related to new accounting standards, questions
related to SEC filings and other accounting research.
| |  | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (3) |  | Tax
fees consist of review of Federal and State income tax returns, and advice related to
various tax matters.
| |  | --- |  | --------------------------------------------------------------------------------------------------------------

| |  | (4) |  | There
were no other fees.
| |  | --- |  | -------------------------

| | Grant
Thornton LLP did not provide any financial information, design or implementation services
for the Company during fiscal years ended December 31, 2003 and 2004.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
accordance with the Audit Committee charter, the Committee must review and, in its sole
discretion, pre-approve the independent auditors annual engagement letter and all
audit, audit-related, tax and other permissible services proposed to be provided by the
independent auditor in accordance with the applicable NYSE listing standards and SEC
rules, and the fees for such services.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



---

Page 22 of 51

# PART IV

# ITEM 15.    EXHIBITS AND
FINANCIAL STATEMENT SCHEDULES

| |  | (a) | Documents filed as part of this Form 10-K:
| |  | --- | ------------------------------------------

| |  |  |  |  |  | Form 10-K
| |  |  |  |  |  | ---------

| |  |  |  |  |  | Page Reference
| |  |  |  |  |  | --------------

| |  |  | 1. | Consolidated Financial Statements:
| |  |  | -- | ----------------------------------

| |  |  |  | a. | Consolidated Balance Sheets  December 31, 2004 and 2003 | F-1 & F-2
| |  |  |  | -- | -------------------------------------------------------- | ---------

| |  |  |  | b. | Consolidated Statements of Earnings 
Years ended December 31, 2004, 2003 and 2002 | F-3
| |  |  |  | -- | ---------------------------------------------------------------------------------- | ---

| |  |  |  | c. | Consolidated Statements of Cash Flows 
Years ended December 31, 2004, 2003 and 2002 | F-4
| |  |  |  | -- | ------------------------------------------------------------------------------------ | ---

| |  |  |  | d. | Consolidated Statements of Stockholders Equity  
Years ended December 31, 2004, 2003 and 2002 | F-5
| |  |  |  | -- | ----------------------------------------------------------------------------------------------- | ---

| |  |  |  | e. | Notes to Consolidated Financial Statements | F-6 thru F-18
| |  |  |  | -- | ------------------------------------------ | -------------

| |  |  |  | f. | Report of Independent Registered Certified
 Public Accounting Firm | F-19
| |  |  |  | -- | ------------------------------------------------------------------ | ----

| |  |  | 2. | Consolidated Financial Statement Schedules:Schedule II  Valuation and Qualifying Accounts | F-20
| |  |  | -- | ------------------------------------------------------------------------------------------ | ----

| |  | (b) | Exhibits:
| |  | --- | ---------

| |  |  |  | Exhibit Number | Description
| |  |  |  | -------------- | -----------

| |  |  |  | Exhibit 3 (i) |  |  | Restated Articles of Incorporation  incorporated by reference from
Exhibit 3 (i) of the Companys quarterly report on Form 10-Q for the quarter ended
July 6, 1997
| |  |  |  | ------------- | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  |  | (ii) |  |  | By-Laws  incorporated by reference from Exhibit 3 (ii) of the
          Companys quarterly report on Form 10-Q for the quarter ended October 3,
          1999
| |  |  |  | ---- | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  |  | Exhibit 9 |  |  | Voting Trust Agreement  incorporated by reference from Exhibit 9 of the
Companys quarterly report on Form 10-Q for the quarter ended July 6, 1997
| |  |  |  | --------- | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  |  | Exhibit 10.1 |  |  | 1988 Stock Option Plan  incorporated by reference from Exhibit 10.1 of
the Companys quarterly report on Form 10-Q for the Quarter ended July 6, 1997
| |  |  |  | ------------ | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  |  | Exhibit 10.2 |  |  | Form of Incentive Stock Option Agreement under the 1988 Stock Option Plan
 Incorporated by reference from Exhibit 10.2 of the Companys quarterly report
on Form 10-Q for the Quarter ended July 6, 1997
| |  |  |  | ------------ | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  |  | Exhibit 11 |  |  | Statement Re Computation of Per Share Earnings
| |  |  |  | ---------- | - |  | ----------------------------------------------

| |  |  |  | Exhibit 21 |  |  | Parent and Subsidiaries
| |  |  |  | ---------- | - |  | -----------------------



---

Page 23 of 51

| |  |  |  | Exhibit 23.1 |  |  | Consent of Grant Thornton LLP
| |  |  |  | ------------ | - |  | -----------------------------

| |  |  |  | Exhibit 31.1 |  |  | Certification of the Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
| |  |  |  | ------------ | - |  | -------------------------------------------------------------------------------------------------------

| |  |  |  | Exhibit 31.2 |  |  | Certification of the Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
| |  |  |  | ------------ | - |  | -------------------------------------------------------------------------------------------------------

| |  |  |  | Exhibit 32.1 |  |  | Certification of the Chief Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
| |  |  |  | ------------ | - |  | -------------------------------------------------------------------------------------------------------

| |  |  |  | Exhibit 32.2 |  |  | Certification of the Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
| |  |  |  | ------------ | - |  | -------------------------------------------------------------------------------------------------------

| |  |  | (c) | Schedules: |  |  | 
| |  |  | --- | ---------- |  |  | 

| |  |  |  | Reference is made to Item 15(a)(2).
| |  |  |  | -----------------------------------



---

Page 24 of 51

# SIGNATURES

Pursuant to the Requirements of
Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

# NATIONAL PRESTO INDUSTRIES, INC.

(registrant)

| | By: /S/ Randy F. Lieble                                                                                 
| | --------------------------------------------------------------------------------------------------------
| | Randy F. Lieble
      Vice President, Treasurerand Chief Financial Officer(Principal Accounting Officer)

|By: /S/ Richard N. Cardozo | By:      /S/ Melvin S. Cohen
|-------------------------- | ----------------------------
|Richard N. Cardozo         | Melvin S. Cohen             
|Director                   | Director                    

|By:      /S/ Patrick J. Quinn | By:      /S/ James F. Bartl                                                                                                      
|----------------------------- | ---------------------------------------------------------------------------------------------------------------------------------
|Patrick J. Quinn              | James F. Bartl                                                                                                                   
|Director                      | Executive Vice President,
                                                                                 Secretary and Director

|By:      /S/ Michael J. O'Meara | By:      /S/ Maryjo Cohen                                                                                                                                                                                                                                                
|------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Michael J. O'Meara              | Maryjo Cohen                                                                                                                                                                                                                                                             
|Director                        | Chairperson of the Board, President,
                                                                                 Chief Executive Officer and Director
                                                                                 (Principal Executive Officer)

Date: March 10, 2005



---

Page 25 of 51

F-1

NATIONAL PRESTO
INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS (In thousands)

|                                     | December 31, 2004 |  | December 31, 2003
|------------------------------------ | ----------------- |  | -----------------
|                                     |                   |  |                  
|ASSETS                               |                   |  |                  
|                                     |                   |  |                  
|CURRENT ASSETS:                      |                   | 
|                                     |                   |  |                  
|Cash and cash equivalents            |                   |  |                  
|                                     |                   |  |                  
|Marketable securities                |                   |  |                  
|                                     |                   |  |                  
|Accounts receivable                  |                   |  | $                
|                                     |                   |  |                  
|Less allowance for doubtful accounts |                   |  |                  
|                                     |                   |  |                  
|                                     |                   |  |                  
|Inventories:                         |                   | 
|                                     |                   |  |                  
|Finished goods                       |                   |  |                  
|                                     |                   |  |                  
|Work in process                      |                   |  |                  
|                                     |                   |  |                  
|Raw materials                        |                   |  |                  
|                                     |                   |  |                  
|                                     |                   |  |                  
|Other current assets                 |                   |  |                  
|                                     |                   |  |                  
|                                     |                   |  |                  
|Total current assets                 |                   |  |                  
|                                     |                   |  |                  
|PROPERTY, PLANT AND EQUIPMENT:       |                   | 
|                                     |                   |  |                  
|Land and land improvements           |                   |  |                  
|                                     |                   |  |                  
|Buildings                            |                   |  |                  
|                                     |                   |  |                  
|Machinery and equipment              |                   |  |                  
|                                     |                   |  |                  
|                                     |                   |  |                  
|                                     |                   |  |                  
|                                     |                   |  |                  
|Less allowance for depreciation      |                   |  |                  
|                                     |                   |  |                  
|                                     |                   |  |                  
|OTHER ASSETS                         |                   |  |                  
|                                     |                   |  |                  
|                                     |                   |  |                  
|                                     |                   |  |                  

The accompanying notes are an
integral part of the financial statements.



---

Page 26 of 51

F-2

NATIONAL PRESTO
INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS (In thousands except share and per
share data)

|                                                                                   | December 31, 2004 |  | December 31, 2003
|---------------------------------------------------------------------------------- | ----------------- |  | -----------------
|                                                                                   |                   |  |                  
|LIABILITIES                                                                        |                   |  |                  
|                                                                                   |                   |  |                  
|CURRENT LIABILITIES:                                                               |                   | 
|                                                                                   |                   |  |                  
|Accounts payable                                                                   |                   |  |                  
|                                                                                   |                   |  |                  
|Federal and state income taxes                                                     |                   |  |                  
|                                                                                   |                   |  |                  
|Accrued liabilities                                                                |                   |  |                  
|                                                                                   |                   |  |                  
|                                                                                   |                   |  |                  
|Total current liabilities                                                          |                   |  |                  
|                                                                                   |                   |  |                  
|DEFERRED INCOME TAXES                                                              |                   |  |                  
|COMMITMENTS AND CONTINGENCIES                                                      |                   |  |                  
|                                                                                   |                   |  |                  
|STOCKHOLDERS EQUITY                                                               |                   | 
|                                                                                   |                   |  |                  
|Common stock, $1 par value                                                         |                   | 
|Authorized:  12,000,000 shares                                                     |                   | 
|Issued: 7,440,518 shares                                                           |                   |  | $                
|                                                                                   |                   |  |                  
|Paid-in capital                                                                    |                   |  |                  
|                                                                                   |                   |  |                  
|Retained earnings                                                                  |                   |  |                  
|                                                                                   |                   |  |                  
|Accumulated other comprehensive income (loss)                                      |                   |  |                  
|                                                                                   |                   |  |                  
|                                                                                   |                   |  |                  
|                                                                                   |                   |  |                  
|                                                                                   |                   |  |                  
|Treasury stock, at cost, 617,267 shares in 2004 and 
       622,365 shares in 2003 |                   | 
|                                                                                   |                   |  |                  
|                                                                                   |                   |  |                  
|                                                                                   |                   |  |                  
|Total stockholders equity                                                         |                   |  |                  
|                                                                                   |                   |  |                  
|                                                                                   |                   |  |                  
|                                                                                   |                   |  |                  
|                                                                                   |                   |  |                  

The accompanying notes are an
integral part of the financial statements.



---

Page 27 of 51

F-3

NATIONAL PRESTO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS (In thousands except per share data)

|For the years ended December 31,           | 2004 | 2003 | 2002
|------------------------------------------ | ---- | ---- | ----
|                                           |      |      |     
|                                           |      |      |     
|Net sales                                  |      |      | $   
|                                           |      |      |     
|Cost of sales                              |      |      |     
|                                           |      |      |     
|                                           |      |      |     
|Gross profit                               |      |      |     
|                                           |      |      |     
|Selling and general expenses               |      |      |     
|                                           |      |      |     
|Plant closing costs                        |      |      |     
|                                           |      |      |     
|Pension plan termination expense           |      |      |     
|                                           |      |      |     
|                                           |      |      |     
|Operating profit                           |      |      |     
|                                           |      |      |     
|Other income, principally interest         |      |      |     
|                                           |      |      |     
|                                           |      |      |     
|Earnings before provision for income taxes |      |      |     
|                                           |      |      |     
|Provision for income taxes                 |      |      |     
|                                           |      |      |     
|                                           |      |      |     
|Net earnings                               |      |      | $   
|                                           |      |      |     
|                                           |      |      |     
|Weighted average shares outstanding:       |      |     
|Basic                                      |      |      |     
|                                           |      |      |     
|Diluted                                    |      |      |     
|                                           |      |      |     
|                                           |      |      |     
|Net earnings per share:                    |      |     
|Basic                                      |      |      | $   
|                                           |      |      |     
|Diluted                                    |      |      | $   
|                                           |      |      |     

The accompanying notes are an
integral part of the financial statements



---

Page 28 of 51

F-4

NATIONAL PRESTO
INDUSTRIES, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                     | In Thousands
|---------------------------------------------------- | ------------
|                                                     |             
|
|                                                     |             
|Cash flows from operating activities:                |             
|Net earnings                                         |             
|Adjustments to reconcile net earnings to net cash    |             
|provided by (used in) operating activities:          |             
|Provision for depreciation                           |             
|Deferred income taxes                                |             
|Pension charges                                      |             
|Plant closing and asset impairment charges           |             
|Other                                                |             
|Changes in:                                          |             
|Accounts receivable                                  |             
|Inventories                                          |             
|Prepaid expenses                                     |             
|Accounts payable and accrued liabilities             |             
|Federal and state income taxes                       |             
|                                                     |             
|Net cash provided by operating activities            |             
|                                                     |             
|                                                     |             
|Cash flows from investing activities:                |             
|Marketable securities purchased                      |             
|Marketable securities  maturities and sales         |             
|Acquisition of property, plant and equipment         |             
|Acquisition of businesses                            |             
|Sale of property, plant, and equipment               |             
|Other                                                |             
|                                                     |             
|Net cash provided by (used in) investing activities  |             
|                                                     |             
|                                                     |             
|Cash flows from financing activities:                |             
|Dividends paid                                       |             
|Purchase of treasury stock                           |             
|                                                     |             
|Net cash used in financing activities                |             
|                                                     |             
|                                                     |             
|Net increase (decrease) in cash and cash equivalents |             
|Cash and cash equivalents at beginning of year       |             
|                                                     |             
|Cash and cash equivalents at end of year             |             
|                                                     |             
|                                                     |             
|Supplemental disclosures of cash flow information:   |             
|Cash paid during the year for:                       |             
|Income taxes                                         |             
|                                                     |             

Supplemental disclosure of non-cash
investing and financing activities:

| | As
of December 31, 2004, 2003, and 2002, the unrealized gain on available for sale
securities, net of tax was $93, $600, and $667.
| | ----------------------------------------------------------------------------------------------------------------------------------

The accompanying notes are an
integral part of the financial statements.



---

Page 29 of 51

F-5

NATIONAL PRESTO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

(In thousands except share and per
share data) For the years ended December 31, 2004, 2003, 2002

|                                           |  | 
|------------------------------------------ |  | 
|
|                                           |  | 
|Balance January 1, 2002                    |  | 
|                                           |  | 
|Net earnings                               |  | 
|                                           |  | 
|Unrealized gain on available for sale      |  | 
|securities, net of tax                     |  | 
|                                           |  | 
|Unrealized loss on net periodic pension    |  | 
|cost, net of tax                           |  | 
|                                           |  | 
|                                           |  | 
|Total other comprehensive income           |  | 
|                                           |  | 
|Dividends paid, $.92 per share             |  | 
|                                           |  | 
|Purchase of treasury stock  100 shares    |  | 
|                                           |  | 
|Other                                      |  | 
|                                           |  | 
|                                           |  | 
|Balance December 31, 2002                  |  | 
|                                           |  | 
|Net earnings                               |  | 
|                                           |  | 
|Unrealized loss on available for sale      |  | 
|securities, net of tax                     |  | 
|                                           |  | 
|Unrealized loss on net periodic            |  | 
|pension cost, net of tax                   |  | 
|                                           |  | 
|                                           |  | 
|Total other comprehensive income           |  | 
|                                           |  | 
|Dividends paid, $.92 per share             |  | 
|                                           |  | 
|Purchase of treasury stock  16,300 shares |  | 
|                                           |  | 
|Other                                      |  | 
|                                           |  | 
|                                           |  | 
|Balance December 31, 2003                  |  | 
|                                           |  | 
|Net earnings                               |  | 
|                                           |  | 
|Unrealized loss on available for sale      |  | 
|securities, net of tax                     |  | 
|                                           |  | 
|Unrealized loss on net periodic            |  | 
|pension cost, net of tax                   |  | 
|                                           |  | 
|                                           |  | 
|Total other comprehensive income           |  | 
|                                           |  | 
|Dividends paid, $1.17 per share            |  | 
|                                           |  | 
|Other                                      |  | 
|                                           |  | 
|                                           |  | 
|Balance December 31, 2004                  |  | 
|                                           |  | 

The accompanying notes are an
integral part of the financial statements.



---

Page 30 of 51F-6

# NATIONAL PRESTO INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

|A. |  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
|-- |  | -------------------------------------------

| | (1) |  | USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL
STATEMENTS:   In preparation of the Companys consolidated financial statements in conformity with accounting
principles generally accepted in the United States, management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities and related revenues and expenses. Actual results could differ from the estimates used
by management.
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) |  | PRINCIPLES OF CONSOLIDATION:   The consolidated
financial statements include the accounts of National Presto Industries, Inc. and its subsidiaries, all of which are wholly-owned.
All material intercompany accounts and transactions are eliminated.
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) |  | RECLASSIFICATIONS:   Certain reclassifications have
been made to the prior periods financial statements to conform with the 2004 financial statement presentation. These
reclassifications did not affect net earnings or stockholders equity as previously reported.
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (4) |  | CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES:
| | --- |  | -------------------------------------------------

| | Cash and Cash Equivalents:   The Company
considers all highly liquid marketable securities with an original maturity of three months or less to be cash equivalents. Cash
equivalents include money market funds and highly-liquid, tax exempt, variable rate demand notes with put options exercisable in
three months or less.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The Companys cash management policy provides for its bank
disbursement accounts to be reimbursed on a daily basis. Checks issued but not presented to the bank for payment of $3,305,000 and
$821,000 at December 31, 2004 and 2003, are included as reductions of cash and cash equivalents.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Marketable Securities:   The Company has
classified all marketable securities as available-for-sale which requires the securities to be reported at fair value, with
unrealized gains and losses, net of tax, reported as a separate component of stockholders equity.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | At December 31, 2004 and 2003, cost for marketable securities was
determined using the specific identification method. A summary of the amortized costs and fair values of the Companys
marketable securities at December 31 is shown in the following table:
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                            | MARKETABLE SECURITIES
|--------------------------- | ---------------------
|
|December 31, 2004           |                      
|Tax exempt                  |                      
|government bonds            |                      
|Equity securities           |                      
|                            |                      
|Total marketable securities |                      
|                            |                      
|                           
|December 31, 2003           |                      
|Tax exempt                  |                      
|government bonds            |                      
|Equity securities           |                      
|                            |                      
|Total marketable securities |                      
|                            |                      

| | Proceeds from maturities and sales of marketable securities
totaled $40,903,000 in 2004, $40,714,000 in 2003, and $60,651,000 in 2002. Gross gains related to sales of marketable securities
totaled $0, $0, and $16,000 in 2004, 2003, and 2002. Gross losses related to sales of marketable securities were $0, $0, and
$231,000 in 2004, 2003 and 2002. Net unrealized gains and losses are reported as a separate component of accumulated other
comprehensive income and were gains of $142,000, $924,000 and $1,027,000 before taxes at December 31, 2004, 2003, and 2002.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

Page 31 of 51F-7

| | The contractual maturities of the marketable securities held at
December 31, 2004 are $48,018,000 in 2005, $16,443,000 in 2006, $7,581,000 in 2007, $2,833,000 beyond 2007 and $1,221,000 with
indeterminate maturities.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (5) |  | ACCOUNTS RECEIVABLE:   The Companys accounts
receivable are related to sales of products. Credit is extended based on prior experience with the customer and evaluation of
customers financial condition. Accounts receivable are primarily due within 30 days. The allowance for doubtful accounts
represents an estimate of amounts considered uncollectible and is determined based on the Companys historical collection
experience, adverse situations that may affect the customers ability to pay, and prevailing economic conditions.
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (6) |  | INVENTORIES:   Housewares/small appliance segment
inventories are stated at the lower of cost or market with cost being determined principally on the last-in, first-out (LIFO)
method. Inventory for defense and absorbent products segments are stated at the lower of cost or market with cost being determined
on the first-in-first-out (FIFO) method.
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (7) |  | PROPERTY, PLANT AND EQUIPMENT:   Property, plant
and equipment are stated at cost. For machinery and equipment, all amounts which are fully depreciated have been eliminated from
both the asset and allowance accounts. Depreciation is provided in amounts sufficient to relate the costs of depreciable assets to
operations over their service lives which are estimated at fifteen to forty years for buildings and three to ten years for
machinery and equipment.
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (8) |  | GOODWILL:   The Company recognizes the excess cost
of an acquired entity over the net amount assigned to assets acquired and liabilities assumed as goodwill. Goodwill is tested for
impairment on an annual basis and between annual tests whenever an impairment is indicated. Impairment losses will be recognized
whenever the implied fair value of goodwill is less than its carrying value. The Companys goodwill as of December 31, 2004,
2003 and 2002, was $3,556,000, $3,406,000 and $3,406,000 relating to its defense products segment. In addition, at December 31,
2004 and 2003 goodwill of $3,398,000 and $2,148,000 related to its absorbent products segment.
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | No impairment was indicated when the Company performed its annual
impairment test on October 4, 2004. The Company has no unamortized intangible assets, other than goodwill.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (9) |  | REVENUE RECOGNITION:   The Company recognizes
revenue when product is shipped or title passes. The Company provides for its 60-day over-the-counter return privilege and
warranties at the time of shipment for small appliance sales. Net sales is arrived at by deducting early payment discounts and
cooperative advertising from gross sales.
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (10) |  | ADVERTISING:   The Companys policy is to
expense advertising as incurred for the year. Advertising expense was $3,665,000, $4,768,000 and $5,789,000 in 2004, 2003 and
2002.
| | ---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (11) |  | STOCK OPTIONS:   The intrinsic value method is used
for valuing stock options issued. The pro forma effect on earnings of accounting for stock options using the fair value method is
not material. See Note F.
| | ---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (12) |  | ACCUMULATED OTHER COMPREHENSIVE INCOME:   At
December 31, 2004, the $93,000 of accumulated comprehensive income relates to the unrealized gain on the Companys
available-for-sales marketable security investments. At December 31, 2003, the accumulated comprehensive loss includes an
additional net periodic pension liability related to the Companys defined benefit pension plan offset in part by an
unrealizable gain on the Companys available-for-sale marketable security investments. This amount is recorded net of tax
effect.
| | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (13) |  | PRODUCT WARRANTY:   Company housewares/small
appliance products are generally warranted to the original owner to be free from defects in material and workmanship for a period
of 1 to 12 years from date of purchase. The Company allows a sixty-day over-the-counter initial return privilege through
cooperating dealers. The Company services its products through independent service providers throughout the United States and a
corporate service repair operation. The Companys service and warranty programs are competitive with those offered by other
manufacturers in the industry. The Company determines its product
| | ---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

Page 32 of 51F-8

| | warranty liability based on historical percentages which have
remained relatively consistent over the years. As shown in the table below, during 2004 warranty expense decreased compared to the
prior year primarily due to improved quality of product sourced from the Orient.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The following table shows the
changes in product warranty liability for the period:
| | -----------------------------------------------------------------------------------

|                                             | (In Thousands)
|-------------------------------------------- | --------------
|
|Beginning balance January 1,                 |               
|                                            
|Accruals during the period                   |               
|                                            
|Charges / payments made under the warranties |               
|                                             |               
|                                            
|Balance December 31                          |               
|                                             |               

| | (14) |  | RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:   In
December 2003, The Financial Accounting Standards Board (FASB) revised and reissued Statement of Financial Accounting Standards
No. 132, Employers Disclosures about Pensions and Other Postretirement Benefits (SFAS 132(R)). This statement
retains all of the disclosures that are required by the original FASB Statement 132, Employers Disclosures about
Pensions and Other Postretirement Benefits, and includes several additional disclosures. It also requires certain
disclosures about pension and other postretirement benefit plans in interim financial statements. The annual disclosures in SFAS
132(R) were adopted in fiscal year ended December 31, 2003. The interim disclosure provisions of SFAS 132(R) were adopted in the
first quarter of fiscal 2004.
| | ---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In November 2004, the FASB issued SFAS151, Inventory
Costs. The provisions of this statement become effective for the Company in fiscal 2006. SFAS 151 amends the existing
guidance on the recognition of inventory costs to clarify the accounting for abnormal amounts of idle expense, freight, handling
costs, and wasted material (spoilage). Existing rules indicate that under some circumstances, items such as idle facility expense,
excessive spoilage, double freight, and rehandling costs may be so abnormal as to require treatment as current period charges.
SFAS 151 requires that those items be recognized as current period charges regardless of whether they meet the criterion of
so abnormal. In addition, SFAS 151 requires that allocation of fixed production overheads to the costs of conversion
be based on the normal capacity of the production facilities. The adoption of this Statement is not expected to have a material
impact on the valuation of inventory or operating results.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In December 2004, the FASB issued SFAS 123R, Share-Based
Payment. This revised standard addresses the accounting for share-based payment transactions in which a company receives
employee services in exchange for either equity instruments of the company or that are based on the fair value of the
companys equity instruments or that may be settled by the issuance of such equity instruments. Under the new standard,
companies will no longer be able to account for share-based compensation transactions using the intrinsic method in accordance
with APB 25. Instead, companies will be required to account for such transactions using a fair-value method and recognize the
expense in the consolidated statement of income. SFAS 123R will be effective for all interim and annual periods beginning after
June 15, 2005. The Company will adopt this standard July 4, 2005 (beginning of third quarter) and it is not expected to have a
material impact on its operating results.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In December 2004, the FASB issued SFAS 153, Exchanges of
Nonmonetary Assets. This statement addresses the fair value concepts contained in Opinion 29, Accounting for
Nonmonetary Transactions which included certain exceptions to the concept that exchanges of similar productive assets should
be recorded at the carrying value of the asset relinquished. SFAS 153 eliminates that exception and replaces it with a general
exception for exchanges of nonmonetary assets that lack commercial substance. Only nonmonetary exchanges in which an entitys
future cash flows are expected to significantly change as a result of the exchange will be considered to have commercial
substance. SFAS 153 must be applied to nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. The
adoption of this Statement is not expected to have a material impact on our operating results.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

Page 33 of 51F-9

|B. |  | INVENTORIES:
|-- |  | ------------

| | The amount of inventories valued on the LIFO basis was $14,848,000
and $14,058,000 as of December 31, 2004 and 2003, and consists of housewares/small appliance finished goods. Under LIFO,
inventories are valued at approximately $0 and $688,000 below current cost determined on a first-in, first-out (FIFO) basis at
December 31, 2004 and 2003. The significant reduction in the amount of LIFO inventory below current cost from 2003 to 2004 is
attributable to the Companys decision to outsource manufacturing of its housewares/small appliances. See Note M for further
information related to the effect of this decision on inventory valuation. The Company uses the LIFO method of inventory
accounting to improve the matching of costs and revenues for the housewares/small appliance segment.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The following table demonstrates the effect if LIFO inventories
had been valued at current cost determined on a FIFO basis.
| | ---------------------------------------------------------------------------------------------------------------------------

|     | Increase (Decrease)
|---- | -------------------
|
|2004 |                    
|2003 |                    
|2002 |                    

| | This information is provided for comparison with companies using
the FIFO basis.
| | --------------------------------------------------------------------------------

| | Inventory for defense, absorbent products and raw materials of the
housewares/small appliance segment are valued under the first-in-first-out method and total $19,279,000 and $10,580,000 at
December 31, 2004 and 2003. The 2004 FIFO total is comprised of $2,784,000 of finished goods, $8,798,000 of work in process, and
$7,697,000 of raw material and supplies. At December 31, 2003 FIFO total was comprised of $2,899,000 of finished goods, $4,490,000
of work in process, and $3,191,000 of raw material and supplies.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|C. |  | ACCRUED LIABILITIES:
|-- |  | --------------------

| | At December 31, 2004 accrued liabilities consisted of payroll
$4,201,000, insurance $15,947,000, environmental $2,011,000, plant closing costs $530,000 and other $1,795,000. At December 31,
2003 accrued liabilities consisted of payroll $2,213,000, insurance $16,015,000, environmental $2,287,000, plant closing costs
$685,000, employee termination $836,000, minimum pension liability $3,310,000 and other $2,775,000.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The Company is subject to product liability claims in the normal
course of business and is self-insured for health care costs. The Company insures for product liability claims, and retains a
self-insured retention insurance accrual in the Companys financial statements. The Company utilizes historical trends and
other analysis to assist in determining the appropriate accrual. An increase in the number or magnitude of claims could have a
material impact on the Companys financial condition.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|D. |  | TREASURY STOCK:
|-- |  | ---------------

| | As of December 31, 2004, the Company has authority from the Board
of Directors to reacquire an additional 504,600 shares. Under this authority, during 2004 and 2003, 0 and 16,300 shares were
reacquired. Treasury shares have been used for the exercise of stock options and as contributions to the Companys 401(k)
plan.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|E. |  | NET EARNINGS PER SHARE:
|-- |  | -----------------------

| | Basic net earnings per share amounts have been computed by
dividing net earnings by the weighted average number of outstanding common shares. Diluted net earnings per share is computed by
dividing net earnings by the weighted average number of outstanding common shares and common share equivalents relating to stock
options, when dilutive. Options to purchase 3,750 and 6,250 shares of common stock with a weighted average exercise price of
$39.29 and $39.36 were outstanding at December 31, 2003 and 2002, but were excluded from the computation of common share
equivalents because their exercise prices were greater than the average market price of the common shares.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|F. |  | STOCK OPTION PLAN:
|-- |  | ------------------

| | The National Presto Industries, Inc. Stock Option Plan reserves
100,000 shares of common stock for key employees. Stock options for 2,000 shares at a weighted average exercise price of $39.11
per share were outstanding at December 31, 2004. Stock options for 3,750 shares at a weighted average exercise price of $39.29 per
share were outstanding at December 31, 2003. There were 1,000 shares exercisable at $39.11 at
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

Page 34 of 51F-10

| | December 31, 2004 and 1,000 shares exercisable at $39.29 at
December 31, 2003. The pro forma effect of accounting for stock options using the fair value method is not material.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|G. |  | RETIREMENT PLANS:
|-- |  | -----------------

| | Pension Plans:
| | --------------

| | During fiscal 2004, National Presto Industries, Inc. terminated
its defined benefit pension plan and settled the benefit obligation through lump sum distributions and the purchase of
nonparticipating annuity contracts. The effect of the settlement was a charge of $3,528,000.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | National Presto Industries, Inc. amended its defined benefit
pension plan to freeze benefit accruals effective December 31, 2003. The amendment eliminated the accrual of future defined
benefits for all employees, resulting in a curtailment. The effect of the curtailment was a charge of $1,317,000.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The company offered an early retirement window of enhanced
retirement benefits in its pension plan during 2002. The special termination benefit cost associated with this window was
$737,000.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The combination of the early retirement window and a concurrent
layoff, which were part of the same restructuring plan, resulted in a curtailment. The effect of the curtailment was a charge of
$58,000 in 2002.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The amount of lump sum benefits paid from the plan during 2002
triggered a settlement. The effect of the settlement was a charge of $882,000.
| | ---------------------------------------------------------------------------------------------------------------------------------------------

| | The Company had pension plans which covered the majority of
employees. Pension benefits were based on an employees years of service and compensation near the end of those years of
service. The Companys funding policy has been to contribute such amounts as necessary, computed on an actuarial basis, to
provide the plans with assets sufficient to meet the benefits to be paid to plan members.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                               | (In Thousands)Pension Benefits
|---------------------------------------------- | ------------------------------
|
|Net periodic cost:                             |                               
|Service cost                                   |                               
|Interest cost                                  |                               
|Expected return on assets                      |                               
|Amortization of transition amount              |                               
|Amortization of prior service cost             |                               
|Actuarial loss                                 |                               
|Settlement charge                              |                               
|Curtailment charge                             |                               
|                                               |                               
|Net periodic benefit cost                      |                               
|                                               |                               
|                                              
|Change in benefit obligation:                  |                               
|Benefit obligation at beginning of year        |                               
|Service cost                                   |                               
|Interest cost                                  |                               
|Plan amendments                                |                               
|Curtailment gain                               |                               
|Actuarial loss                                 |                               
|Settlement                                     |                               
|Benefits and expenses paid                     |                               
|                                               |                               
|Benefit obligation at end of year              |                               
|                                               |                               
|                                              
|Change in plan assets:                         |                               
|Fair value of plan assets at beginning of year |                               
|Employer contributions                         |                               
|Actual return on plan assets                   |                               
|Settlement                                     |                               
|Benefits and expenses paid                     |                               
|                                               |                               
|Fair value of plan assets at end of year       |                               
|                                               |                               

---

Page 35 of 51F-11

The Companys pension plan
actual asset allocations were as follows at December 31:

|                  | TargetAllocation |  |     | Percentage of Plan AssetsAt Year End
|----------------- | ---------------- |  | --- | ------------------------------------
|
|Asset category:   |                  |  |     |                                     
|Equity securities |                  |  | N/A |                                     
|Debt securities   |                  |  | N/A |                                     
|Other (cash)      |                  |  | N/A |                                     
|                  |                  |  |     |                                     
|Total             |                  |  |     |                                     
|                  |                  |  |     |                                     

| | National Prestos investment strategy with respect to pension
plan assets changed with the decision to freeze benefit accruals and terminate the pension plan effective December 31, 2003. The
investment strategy in effect for 2004 was to convert the equity and debt positions to cash prior to the targeted distribution
date in the third quarter of 2004.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The expected rate of return on plan assets assumption was based on
a multi-year stochastic simulation of projected returns, taking into account the plans target asset allocation and
reasonable expectations of future economic conditions. The simulation model incorporated the capital market conditions prevailing
at the starting date of the projection, as well as a wide range of plausible scenarios of future capital market performance.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                       | (In Thousands)
|-------------------------------------- | --------------
|
|Reconciliation of funded status:       |               
|Funded status                          |               
|Unrecognized actuarial loss            |               
|                                       |               
|Prepaid benefit                        |               
|                                       |               
|Statement of financial position:       |               
|Prepaid benefit cost                   |               
|Additional minimum liability           |               
|Accumulated other comprehensive income |               
|                                       |               
|Recognized amount                      |               
|                                       |               

| | At the end of 2004 and 2003, the projected benefit obligation,
accumulated benefit obligation and fair value of plan assets for pension plans with a projected benefit obligation in excess of
plan assets, and pension plans with an accumulated benefit obligation in excess of plan assets, were are follows:
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                               | (In Thousands)
|------------------------------ | --------------
|
|December 31,                  
|Projected benefit obligation   |               
|Accumulated benefit obligation |               
|Fair value of plan assets      |               

The Companys accumulated benefit obligation of $11,572,000 at December
31, 2003 exceeded the fair value of the plans assets at December 31, 2003. This caused the Company to recognize an
additional minimum liability in the fourth quarter of 2003 of $3,310,000. There was no unrecognized prior service cost at December
31, 2003. The difference between the additional minimum liability and the intangible asset represents a net loss not yet
recognized as net periodic pension cost and is recorded net of tax in other comprehensive income as an unrealized loss on net
periodic pension cost.

---

Page 36 of 51F-12

| | Weighted-average assumptions used to determine net periodic
cost for the years ended December 31:
| | -------------------------------------------------------------------------------------------------

|                               | 2004 |  | 2003 |      | 2002
|------------------------------ | ---- |  | ---- | ---- | ----
|Discount rate                  |      |  |      | 6.00 | %   
|Expected return on plan assets |      |  |      | 6.50 | %   
|Rate of compensation increase  |      |  |      | N/A  |     

| | Weighted-average assumptions used to determine benefit
obligation as of December 31:
| | ------------------------------------------------------------------------------------

|                              | 2004 |  | 2003 |     | 
|----------------------------- | ---- |  | ---- | --- | 
|Discount rate                 |      |  |      | N/A | 
|Rate of compensation increase |      |  |      | N/A | 

| | 401(k) Plan:
| | ------------

| | The Company sponsors a 401(k) retirement plan that covers
substantially all employees. The Company matched up to 50% of the first 4% of salary contributed by employees to the plan. This
matching contribution was made with common stock. Starting in 2004, the Company matched in cash, an additional 50% of the first 4%
of salary contributed by employees plus 3% of total compensation for certain employees. Contributions made from the treasury
stock, including the Companys cash dividends, totaled $240,000 in 2004, $192,000 in 2003, and $213,000 in 2002. In addition,
for 2004 the Company contributed $404,000 of cash to the 401(k) plan.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|H. |  | INCOME TAXES:
|-- |  | -------------

| | The following table summarizes the provision for income taxes:
| | --------------------------------------------------------------

|                    | (In Thousands)
|------------------- | --------------
|
|Current:            |               
|Federal             |               
|State               |               
|                    |               
|                    |               
|                    |               
|Deferred:           |               
|Federal             |               
|State               |               
|                    |               
|                    |               
|                    |               
|Total tax provision |               
|                    |               

| | The effective rate of the provision for income taxes as shown in
the consolidated statements of earnings differs from the applicable statutory federal income tax rate for the following reasons:
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                    | Percent of Pre-tax Income
|------------------- | -------------------------
|
|Statutory rate      |                          
|State tax           |                          
|Tax exempt interest |                          
|Other               |                          
|                    |                          
|Effective rate      |                          
|                    |                          

---

Page 37 of 51F-13

Deferred tax assets and liabilities are recorded based on the differences
between the tax basis of assets and liabilities and their carrying amounts for financial reporting purposes. The tax effects of
the cumulative temporary differences resulting in deferred tax assets and liabilities as follows at December 31:

|                                         | (In Thousands)
|---------------------------------------- | --------------
|
|Short-Term Deferred Tax Assets           |               
|Insurance                                |               
|Environmental                            |               
|Deferred Compensation                    |               
|Plant Closing                            |               
|Vacation                                 |               
|Inventory Costs                          |               
|Other                                    |               
|                                         |               
|                                         |               
|Short-Term Deferred Tax Liability        |               
|Pension                                  |               
|                                         |               
|Net Short-Term Deferred Tax Asset        |               
|                                         |               
|Long-Term Deferred Tax Asset             |               
|Depreciation                             |               
|Long-Term Deferred Tax Liability         |               
|Depreciation                             |               
|                                         |               
|Long-Term Deferred Tax Asset (Liability) |               
|                                         |               

| | On October 22, 2004, congress passed the American Jobs Creation
Act of 2004 (the Act). The Act provides a deduction for income from qualified domestic production activities, which will be phased
in from 2005 through 2010, as well as other tax implications. The domestic production deduction will be accounted for as a special
deduction and as such, will have no effect on deferred tax assets and liabilities existing at the date of enactment. It is not
currently possible to predict what impact this Act will have on future earnings.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|I. |  | COMMITMENTS AND CONTINGENCIES:
|-- |  | ------------------------------

| | On July 16, 2002, the Securities and Exchange Commission filed a
lawsuit against National Presto Industries, Inc. alleging the Company operated as an unregistered investment company. The case
does not involve fraud, deceptive practices, or questionable accounting methods, and the Company plans to vigorously defend
itself. If unsuccessful, the Company may have to reallocate invested assets which will result in reduced yields, or it might be
required to register as an investment company. In the latter situation, it would be prohibited from engaging in business in
interstate commerce until registration occurred. The obligations upon registration are many and could include: 1) possible
imposition of significant additional reporting requirements (a burden which would not be imposed upon its competitors); 2)
potential regard in the market as a closed-end mutual fund which could result in a trading price sharply discounted from net asset
value; 3) possible limitations on the use of capital and earnings which could inhibit or terminate commercial business growth.
Management is unable to make a meaningful estimate of the overall impact on the Companys operations, if any, that would
result from an unfavorable final determination of this matter.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In addition, the Company is involved in other routine litigation
incidental to its business. Management believes the ultimate outcome of this litigation will not have a material affect on the
Companys consolidated financial position, liquidity, or results of operations.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|J. |  | CONCENTRATIONS:
|-- |  | ---------------

| | For the year ended December 31, 2004, one customer accounted for
30% and another customer accounted for 11% of net sales. One customer accounted for 33% of net sales for the year ended December
31, 2003. One customer accounted for 37% of net sales for the year ended December 31, 2002. The preceding concentrations related
to housewares/small appliance and absorbent product sales for 2004. For 2003 and 2002 they only pertain to housewares/small
appliance sales.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

Page 38 of 51F-14

| | The Company sources its housewares/small appliances from vendors
in the Orient and as a result risks deliveries from the Orient being disrupted by labor or supply problems at the vendors, or
transportation delays. As a consequence, products may not be available in sufficient quantities during the prime selling period.
The Company has made and will continue to make every reasonable effort to prevent these problems; however, there is no assurance
that its efforts will be totally effective. In addition, the Companys manufacturing contracts with its foreign suppliers
contain provisions to share the impact of fluctuations in the exchange rate between the U.S. dollar and the Hong Kong dollar above
and below a fixed range contained in the contracts. All transactions with the foreign suppliers were within the exchange rate
range specified in the contracts during 2004, 2003 and 2002.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The Companys defense segment manufactures products primarily
for the U.S. Department of Defense (DOD) and other DOD prime contractors. As a consequence, this segments future business
essentially depends on the product needs and governmental funding of the DOD. During 2004 almost all of the work performed by this
segment directly or indirectly for the DOD was performed on a fixed-price basis. Under fixed-price contracts, the price paid to
the contractor is awarded based on competition at the outset of the contract and therefore is generally not subject to any
adjustments reflecting the actual costs incurred by the contractor. The defense segments contracts and subcontracts contain
the customary provision permitting termination at any time for the convenience of the government, with payment for any work
completed, associated profit, and inventory/work in process at the time of termination.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|K. |  | ENVIRONMENTAL:
|-- |  | --------------

| | As of December 31, 1998, all remediation projects required at the
Companys Eau Claire, Wisconsin, site had been installed, were fully operational, and restoration activities had been
completed. Based on factors known as of December 31, 2004, it is believed that the Companys existing environmental accrued
liability reserve will be adequate to satisfy on-going remediation operations and monitoring activities; however, should
environmental agencies require additional studies or remediation projects, it is possible that the existing accrual could be
inadequate. Management believes that in the absence of any unforeseen future developments, known environmental matters will not
have any material affect on the results of operations or financial condition of the Company.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|L. |  | BUSINESS ACQUISITIONS:
|-- |  | ----------------------

| | On July 31, 2003, the Company finalized the acquisition of Spectra
Technologies LLC of East Camden, Arkansas. Spectra is a start-up company engaged in the manufacture, distribution, and delivery of
munitions and ordnance-related products. Payment of the purchase price will be made in the form of a cumulative earn-out over a
period of time commencing as of the closing and ending on December 31, 2007. The earn-out will be 40% of the first $6.4 million of
net income of Spectra and 20% of net income in excess of $6.4 million. Earn-out payments of $330,000 were earned in 2004 and
included in Selling and General Expense.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On October 6, 2003, the Company purchased the assets of NCN
Hygienic Products, Inc., a Marietta, Georgia, manufacturer of adult incontinence products and training pads for pets. The
acquisition was accounted for as a purchase with all assets recorded at fair market value. The excess of the purchase price over
the net tangible assets has been recorded as goodwill and is included as part of the Companys absorbent products segment.
Based upon the purchase price and fair value of the assets acquired, the following represents the allocation of the aggregate
purchase price to the acquired net assets of NCN Hygienic Products, Inc.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                     | (in thousands)
|-------------------- | --------------
|Receivables          |               
|Inventory            |               
|Fixed assets         |               
|Goodwill             |               
|                     |               
|Total purchase price |               
|                     |               

| | An
earn-out amount of $1,250,000 will be paid as a result of 2004 earnings and was added to
goodwill at December 31, 2004. An additional earn-out amount of up to $1,250,000 will be
paid based upon certain earnings targets through December 31, 2005.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

Page 39 of 51F-15

| | The
following unaudited pro forma condensed consolidated results of operations have been
prepared as if the acquisition of NCN Hygienic, Inc. has occurred as of January 1, 2002:
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                     | (in thousands, except per share data)
|------------------------------------ | -------------------------------------
|
|                                     |                                      
|
|                                     |                                      
|Net revenues                         |                                      
|Net income                           |                                      
|Net income per share:                |                                      
|Basic                                |                                      
|Diluted                              |                                      
|Weighted average shares outstanding: |                                      
|Basic                                |                                      
|Diluted                              |                                      

| | The
unaudited pro forma condensed consolidated results of operations are not necessarily
indicative of results that would have occurred had the acquisition occurred as of January
1, 2002, nor are they necessarily indicative of the results that may occur in the future.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|M. |  | PLANT CLOSING:
|-- |  | --------------

| | In
November 2001, the Company announced that continued erosion of product pricing resulted in
its decision to cease manufacturing housewares/small appliances in its U.S. plants, close
those facilities, and purchase products from the Orient. This transition from U.S. plant
production to the Orient was completed during late 2002. The Company closed its
manufacturing facilities in Alamogordo, New Mexico, during the third quarter of 2002 and
donated the facility to the Otero County Economic Development Council during the fourth
quarter of 2004. The Company effectively closed its Jackson, Mississippi plant during the
fourth quarter of 2002 and has modified this plant to serve as a warehousing and shipping
facility.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | As
a result of the Companys transition from U.S. plant production to Orient sourcing,
the Company recorded charges in 2004, 2003 and 2002, which are summarized in the table
below.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                          | Employee
Termination
Benefits |  | Inventory
Writedown |            | Other
Exit
Cost |   | Total     
|------------------------- | ----------------------------- |  | ------------------- | ---------- | --------------- | - | ----------
|                          |                               |  |                     |            |                 |   |           
|January 1, 2002           |                               |  | $                   | 637,000    |                 | $ | 880,000   
|Additions in 2002         |                               |  |                     | 4,654,000  |                 |   |          
|Charges in 2002           |                               |  |                     | (2,156,000 | )               |   | (1,445,000
|Changes in estimates      |                               |  |                     | (987,000   | )               |   | 565,000   
|                          |                               |  |                     |            |                 |   |           
|Balance December 31, 2002 |                               |  |                     | 2,148,000  |                 |   |          
|                          |                               |  |                     |            |                 |   |           
|Additions in 2003         |                               |  |                     | 81,000     |                 |   | 322,000   
|Charges in 2003           |                               |  |                     | (1,393,000 | )               |   | (322,000  
|                          |                               |  |                     |            |                 |   |           
|Balance December 31, 2003 |                               |  |                     | 836,000    |                 |   |          
|                          |                               |  |                     |            |                 |   |           
|Charges in 2004           |                               |  |                     | (464,000   | )               |   |          
|Changes in estimates      |                               |  |                     | 98,000     |                 |   |          
|                          |                               |  |                     |            |                 |   |           
|Balance December 31, 2004 |                               |  | $                   | 470,000    |                 |   |          
|                          |                               |  |                     |            |                 |   |           

| | A
change in estimates was recorded during the fourth quarter of 2004, increasing the
employee termination benefit accrual and decreasing other exit costs. The estimated
changes were primarily due to higher than expected health care costs associated with
employee termination benefits offset by lower than expected costs associated with the
shutdown activities. The remaining employee termination benefits are for health care costs
for workers who accepted early retirement at the time of the plant closing and will be
extinguished over, approximately, the next three years.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

Page 40 of 51F-16

| | During
the fourth quarter of 2003, the Company recorded a charge of $1,834,000 which included
$81,000 for health care costs associated with early retirement, $322,000 for write-off of
raw material, $1,233,000 for other exit costs, and $198,000 additional impairment of
machinery and equipment. The additions to the plant closing accrual were primarily due to
lower than expected inventory liquidation proceeds and higher than expected costs
associated with the shutdown of the Jackson, Mississippi, manufacturing facility and
disposition efforts associated with the Alamogordo, New Mexico, manufacturing facility.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
the first quarter of 2002, the Company recorded a charge of $3,953,000 related to
involuntary termination benefits. In the fourth quarter of 2002, the Company recorded an
additional charge of $701,000 associated with additional employees identified by the
Company for early retirement and termination as a result of plant closing activities. The
total plant closing charge for 2002 was $.42 per share, net of tax, and amounted to
$4,585,000, of which $565,000 related to the write-down of inventory which was recorded in
cost of sales and $52,000 of additional machinery and equipment impairment. A change in
estimates was recorded in the fourth quarter of 2002, decreasing the employee termination
benefit accrual and increasing the inventory write-down and other exit cost accruals. The
estimated changes were primarily due to lower than expected health care costs associated
with employee termination benefits and higher than expected costs associated with the
shutdown of U.S. plant manufacturing activities.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
total outsourcing of all Company housewares/small appliance product manufacturing resulted
in the creation of a new LIFO inventory category for the outsourced products. The previous
LIFO inventory reserve of approximately $11,000,000 (Manufactured LIFO Reserve), which was
associated with the manufactured housewares/small appliance inventories prior to plant
closings, has been realized as this inventory category was sold. During 2004, 2003 and
2002, the Company recognized approximately $700,000, $5,000,000 and $5,300,000 (or $.06,
$.46 and $.48 per share, net of tax) reduction in cost of goods sold resulting from the
liquidation of the Manufactured LIFO Reserve.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|N. |  | BUSINESS SEGMENTS:
|-- |  | ------------------

| | The
Company operates in three business segments. The Company identifies its segments based on
the Companys organization structure, which is primarily by principal products. The
principal product groups are housewares/small appliances, defense products, and absorbent
products.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
housewares/small appliances segment designs, markets and distributes housewares and small
appliances. These products are sold directly to retail outlets throughout the United
States and also through independent distributors. As more fully described in Note M, the
Company has exited U.S. manufacturing during 2001 and 2002 and now primarily sources its
housewares/small appliance products from nonaffiliated companies located in the Orient.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
defense segment was started in February 2001 with the acquisition of AMTEC Corporation
which manufactures precision mechanical and electro-mechanical assemblies for the U.S.
government and prime contractors. AMTECs manufacturing plant is located in
Janesville, Wisconsin. During 2003, this segment was expanded with the acquisition of
Spectra Technologies LLC of East Camden, Arkansas. This facility performs Load, Assemble
and Pack (LAP) operations on ordnance-related products for the U.S. government and prime
contractors.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
absorbent products segment was started on November 19, 2001, with the acquisition of
certain assets from RMED International, Inc. Following this acquisition, Presto Absorbent
Products, Inc. was formed. This company manufactures diapers and starting in 2004, adult
incontinence products at the Companys facilities in Eau Claire, Wisconsin. The
products are sold to retail outlets, distributors, and other absorbent product
manufacturers. During 2003, this segment was expanded with the purchase of the assets of
NCN Hygienic Products, Inc., a Marietta, Georgia, manufacturer of adult incontinence
products and training pads for pets.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

Page 41 of 51F-17

| | In
the following summary, operating profit represents earnings before other income,
principally interest income and income taxes.
| | ---------------------------------------------------------------------------------------------------------------------------------

| | The
Companys segments operate discretely from each other with no shared manufacturing
facilities. Costs associated with corporate activities (such as cash and marketable
securities management) are included within the housewares/small appliances segment for all
periods presented.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                              | (In Thousands)
|----------------------------- | --------------
|                              |               
|
|                              |               
|Year ended December 31, 2004  |               
|External net sales            |               
|Gross profit                  |               
|Operating profit              |               
|Total assets                  |               
|Depreciation and amortization |               
|Capital expenditures          |               
|                              |               
|Year ended December 31, 2003  |               
|External net sales            |               
|Gross profit                  |               
|Operating profit              |               
|Total assets                  |               
|Depreciation and amortization |               
|Capital expenditures          |               
|                              |               
|Year ended December 31, 2002  |               
|External net sales            |               
|Gross profit                  |               
|Operating profit (loss)       |               
|Total assets                  |               
|Depreciation and amortization |               
|Capital expenditures          |               

| | (1) |  | The
operating profit in small appliances is after recording a charge for plant closing costs
of $1,834,000 in 2003 and $4,585,000 in 2002 which is more fully described in Note M.
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) |  | Net
sales in 2003 include five months sales of $250,000 related to the acquisition of Spectra
Technologies LLC described in Note L.
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------

| | (3) |  | Net
sales in 2003 include three months sales of $2,900,000 related to the acquisition of the
assets from NCN Hygienic Products, Inc. described in Note L.
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------

| | (4) |  | The
Companys Manufacturing LIFO Reserve recognized $700,000 in 2004, $5,000,000 in 2003
and $5,300,000 in 2002 which is more fully described in Note M.
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------

| | (5) |  | The
operating profit is after recording pension charges of $3,528,000 in 2004, $1,317,000 in
2003, and $1,677,000 in 2002 which is more fully described in Note G.
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

Page 42 of 51F-18

|O. |  | OPERATING LEASES
|-- |  | ----------------

| | The
Company leases office, manufacturing, and warehouse facilities under noncancelable
operating leases. Rent expense was approximately $737,000 and $321,000 for the years ended
December 31, 2004 and 2003. Future minimum annual rental commitments are as follows:
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Years ending December 31: |  | 
|------------------------- |  | 
|                          |  | 
|2005                      |  | 
|2006                      |  | 
|2007                      |  | 
|2008                      |  | 
|2009                      |  | 
|Thereafter                |  | 
|                          |  | 
|                          |  | 
|                          |  | 

|P. |  | INTERIM FINANCIAL
INFORMATION (UNAUDITED):
|-- |  | ------------------------------------------

The
following represents unaudited financial information for 2004 and 2003:

|       |  | (In Thousands)
|------ |  | --------------
|       | 
|
|       |  |               
|2004   |  |               
|First  |  |               
|Second |  |               
|Third  |  |               
|Fourth |  |               
|       |  |               
|Total  |  |               
|       |  |               
|       |  |               
|2003   |  |               
|First  |  |               
|Second |  |               
|Third  |  |               
|Fourth |  |               
|       |  |               
|Total  |  |               
|       |  |               

| | As
shown above, fourth quarter sales are significantly impacted by the holiday driven
seasonality of the housewares/small appliance segment. This segment builds inventory
during the second and third quarters to meet the sales demands of the fourth quarter. The
other segments are non-seasonal.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
the fourth quarter of 2003, the Company recorded plant closing costs and changes in
estimates related to plant closing activities of $1,834,000 and a reduction in costs of
goods sold of $1,796,000 resulting from the sale of products accounted for under the LIFO
method which had been manufactured in the Companys U.S. manufacturing plants which
were closed in 2002. (See Note M)
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

Page 43 of 51F-19

# REPORT OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRM

Stockholders and Board of Directors
National Presto Industries, Inc.

We have audited the
accompanying consolidated balance sheets of National Presto Industries, Inc. and subsidiaries (a Wisconsin Corporation) as of
December 31, 2004 and 2003, and the related consolidated statements of earnings, stockholders equity, and cash flows for
each of the three years in the period ended December 31, 2004. These financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in
accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the
consolidated financial statements referred to above present fairly, in all material respects, the financial position of National
Presto Industries, Inc. and subsidiaries as of December 31, 2004 and 2003, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2004 in conformity with accounting principles generally
accepted in the United States of America.

Our audits were conducted for
the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. The Schedule II 
valuation and qualifying accounts and reserves of National Presto Industries, Inc. and subsidiaries is presented for purposes of
additional analysis and is not a required part of the basic consolidated financial statements. This schedule has been subjected to
the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, is fairly stated
in all material respects in relation to the basic consolidated financial statements taken as a whole.

We also have audited, in
accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of National
Presto Industries, Inc. and subsidiaries internal control over financial reporting as of December 31, 2004, based on
Internal Control  Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO) and our report dated March 10, 2005 expressed an unqualified opinion on the effectiveness of National Presto Industries,
Inc. and subsidiaries internal control over financial reporting.

/S/   Grant Thornton LLP
Minneapolis, Minnesota
March 10, 2005

---

Page 44 of 51F-20

NATIONAL PRESTO INDUSTRIES, INC. AND SUBSIDIARIES

SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS

For the Years Ended December 31, 2004, 2003 and 2002

|                                 | (In Thousands)
|-------------------------------- | --------------
|                                 |               
|
|                                 |               
|
|                                 |               
|Deducted from assets:            |               
|Allowance for doubtful accounts: |               
|                                 |               
|Year ended December 31, 2004     |               
|                                 |               
|                                 |               
|Year ended December 31, 2003     |               
|                                 |               
|                                 |               
|Year ended December 31, 2002     |               
|                                 |               

Notes:

(A)   Amounts charged (credited) to selling and general expenses

(B)   Principally bad debts written off, net of recoveries