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|  Wisconsin                                                                             |   |  39-0494170                                       |
|---------------------------------------------------------------------------------------------|--------|--------------------------------------------------------|
|  (State or other jurisdiction of  incorporation or organization)   |   |    (IRS Employer Identification Number) |

| 3925 North Hastings Way  Eau Claire, Wisconsin  |   |   54703-3703 |
|----------------------------------------------------------------|--------|------------------------|
| (Address of principal executive offices)                       |   | (Zip Code)             |

| Title of each class     |   | Name of each exchange on which registered |
|---------------------------------------------|--------|------------------------------------------------|
| $1.00 par value common stock           |   | New York Stock Exchange                        |

| Large accelerated filer   | o | Non-accelerated filer | o      |
|---------------------------|---|-----------------------|--------|
| Smaller reporting company | o | Accelerated filer     | þ |

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

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|           |   | 2010                |   |   | 2009         |   |
|----------------|--------|---------------------|--------|--------|--------------|--------|
|           |   | Applicable          |   |   | Market Price |   |   | Applicable |   |   | Market Price |   |
|           |   | DividendsPaid  |   |   |         |   |   |   |   |   | DividendsPaid |   |   |   |   |   |   |   |
|           |   | per Share           |   |   | High         |   |   | Low |   |   | per Share |   |   | High |   |   | Low |   |
|           |   |                |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |
| First Quarter  |   | $                   | 8.15   |   |         | $      | 130.58 |   |   | $ | 108.11 |   |   | $ | 5.55 |   |   | $ | 80.95 |   |   | $ | 46.60 |   |
| Second Quarter |   |                | -      |   |         |   | 117.99 |   |   |   | 90.61 |   |   |   | - |   |   |   | 85.50 |   |   |   | 60.17 |   |
| Third Quarter  |   |                | -      |   |         |   | 110.35 |   |   |   | 89.50 |   |   |   | - |   |   |   | 87.99 |   |   |   | 72.33 |   |
| Fourth Quarter |   |                | -      |   |         |   | 134.40 |   |   |   | 105.40 |   |   |   | - |   |   |   | 111.85 |   |   |   | 84.26 |   |
|           |   |                |   |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Full Year      |   | $                   | 8.15   |   |         | $      | 134.40 |   |   | $ | 89.50 |   |   | $ | 5.55 |   |   | $ | 111.85 |   |   | $ | 46.60 |   |

|                                                        |   | (In thousands except per share data) |    |
|-------------------------------------------------------------|--------|--------------------------------------|---------|
| For the years ended December 31,                            |   | 2010                                 |    |   | 2009 |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |
| Net sales                                                   |   | $                                    | 479,000 |   |   | $ | 478,468 |   |   | $ | 448,253 |   |   | $ | 421,287 |   |   | $ | 304,587 |   |
|                                                        |   |                                 |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net earnings                                                |   | $                                    | 63,531  |   |   | $ | 62,576 |   |   | $ | 44,183 |   |   | $ | 38,623 |   |   | $ | 27,960 |   |
|                                                        |   |                                 |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net earnings per share - Basic & Diluted                |   | $                                    | 9.26    |   |   | $ | 9.13 |   |   | $ | 6.45 |   |   | $ | 5.65 |   |   | $ | 4.09 |   |
|                                                        |   |                                 |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets                                                |   | $                                    | 415,133 |   |   | $ | 402,405 |   |   | $ | 365,883 |   |   | $ | 374,676 |   |   | $ | 344,976 |   |
|                                                        |   |                                 |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Dividends paid per common share applicable to current year  |   |                                 |    |   |   |   |   |   |   |   |   |   |   |
|       Regular                 |   | $                                    | 1.00    |   |   | $ | 1.00 |   |   | $ | 1.00 |   |   | $ | 0.95 |   |   | $ | 0.92 |   |
|       Extra                   |   |                                 | 7.15    |   |   |   | 4.55 |   |   |   | 3.25 |   |   |   | 2.85 |   |   |   | 1.20 |   |
|          Total |   | $                                    | 8.15    |   |   | $ | 5.55 |   |   | $ | 4.25 |   |   | $ | 3.80 |   |   | $ | 2.12 |   |

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|                                |   | Payments Due By Period (In thousands) |    |
|-------------------------------------|--------|---------------------------------------|---------|
| Contractual Obligations             |   | Total                                 |    |   | Under 1 Year |   |   | 1-3 Years |   |   | 3-5 Years |   |   | More Than5 Years |   |
|                                |   |                                  |    |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating lease obligations         |   | $                                     | 617     |   |   | $ | 301 |   |   | $ | 316 |   |   | $ | 0 |   |   | $ | 0 |   |
| Purchase obligations(1)             |   |                                  | 217,896 |   |   |   | 217,896 |   |   |   | 0 |   |   |   | 0 |   |   |   | 0 |   |
|                                |   |                                  |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Total |   | $                                     | 218,513 |   |   | $ | 218,197 |   |   | $ | 316 |   |   | $ | 0 |   |   | $ | 0 |   |

|   | (1)Purchase obligations includes outstanding purchase orders at December 31, 2010.  Included are purchase orders issued to the Company’s housewares manufacturers in the Orient, 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. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| A.   | The consolidated financial statements of National Presto Industries, Inc. and its subsidiaries and the related Report of Independent Registered Public Accountant can be found on pages F-1 through F-16. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| B.  | Quarterly financial data is contained in Note N to the Consolidated Financial Statements. |
|----------|-------------------------------------------------------------------------------------------|

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|  NAME           |   |  TITLE                                                      |   |  AGE |
|----------------------|--------|------------------------------------------------------------------|--------|-----------|
|                 |   |                                                             |   |      |
| Maryjo Cohen         |   | Chair of the Board, President, And Chief Executive Officer,      |   | 58        |
|                 |   |                                                             |   |      |
| Donald E. Hoeschen   |   | Vice President, Sales                                            |   | 63        |
|                 |   |                                                             |   |      |
| Larry J. Tienor      |   | Vice President, Engineering                                      |   | 62        |
|                 |   |                                                             |   |      |
| Randy F. Lieble      |   | Vice President, Chief Financial Officer, Treasurer, and Director |   | 57        |
|                 |   |                                                             |   |      |
| Douglas J. Frederick |   | Secretary and General Counsel                                    |   | 40        |

----

----

|   |   |   |                                                                                                                     | Form 10-KPage Reference |          |
|--------|--------|--------|--------------------------------------------------------------------------------------------------------------------------|-------------------------|---------------|
|   | 1.     |   |  Consolidated Financial Statements:                                                                                 |                    |          |   |
|   |   |   |                                                                                                                     |                    |          |   |
|   |   |   | a.  Consolidated Balance Sheets - December 31, 2010 and 2009                                                   |                    | F-1 & F-2 |   |
|   |   |   |                                                                                                                     |                    |          |   |
|   |   |   | b.  Consolidated Statements of Earnings - Years ended December 31, 2010, 2009 and 2008               |                    |          | F-3 |   |
|   |   |   |                                                                                                                     |                    |          |   |   |
|   |   |   | c.  Consolidated Statements of Cash Flows - Years ended December 31, 2010, 2009 and 2008                  |                    |          | F-4 |   |
|   |   |   |                                                                                                                     |                    |          |   |   |
|   |   |   | d.  Consolidated Statements of Stockholders' Equity - Years ended December 31, 2010, 2009 and 2008   |                    |          | F-5 |   |
|   |   |   |                                                                                                                     |                    |          |   |   |
|   |   |   | e.  Notes to Consolidated Financial Statements                                                       |                    |          | F-6 |   |
|   |   |   |                                                                                                                     |                    |          |   |   |
|   |   |   | f.   Report of Independent Registered Public Accounting Firm                                    |                    |          | F-17 |   |
|   |   |   |                                                                                                                     |                    |          |   |   |
|   | 2.     |   | Consolidated Financial Statement Schedule:                                                                               |                    |          |   |   |
|   |   |   |                                                                                                                     |                    |          |   |   |
|   |   |   | Schedule II - Valuation and Qualifying Accounts                                                                          |                    |          | F-18 |   |

----

| Exhibit Number |   | Description                                                                                                                                                                          |
|----------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|           |   |                                                                                                                                                                                 |
| Exhibit 3(i)   |   | Restated Articles of Incorporation – incorporated by reference from Exhibit 3(i) of the Company’s report on Form 10-K/A for the year ended December 31, 2005             |
|           |   |                                                                                                                                                                                 |
| Exhibit 3(ii)  |   | By-Laws - incorporated by reference from Exhibit 3(ii) of the Company's current report on Form 8-K dated July 6, 2007                                                                |
|           |   |                                                                                                                                                                                 |
| Exhibit 9.1    |   | 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 9.2    |   | Voting Trust Agreement Amendment – incorporated by reference from Exhibit 9.2 of the Company’s annual report on Form 10-K for the year ended December 31, 2008           |
|           |   |                                                                                                                                                                                 |
| Exhibit 10.1*  |   | Incentive Compensation Plan – incorporated by reference from Exhibit 10.1 of the Company’s quarterly report on Form 10-Q for the quarter ended July 4, 2010              |
|           |   |                                                                                                                                                                                 |
| Exhibit 10.2*  |   | Form of Restricted Stock Award Agreement – incorporated by reference from Exhibit 10.2 of the Company’s quarterly report on Form 10-Q for the quarter ended July 4, 2010 |
|           |   |                                                                                                                                                                                 |
|           |   | * Compensatory Plans                                                                                                                                                                 |
|           |   |                                                                                                                                                                                 |
| Exhibit 11     |   | Statement Re Computation of Per Share Earnings                                                                                                                                       |
|           |   |                                                                                                                                                                                 |
| Exhibit 21     |   | Subsidiaries of the Registrant                                                                                                                                                       |
|           |   |                                                                                                                                                                                 |
| Exhibit 23.1   |   | Consent of BDO Seidman, 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                                                                               |

----

|                 | NATIONAL PRESTO INDUSTRIES, INC.(registrant) |                                  |
|----------------------|----------------------------------------------|---------------------------------------|
|                 |                                         |                                  |   |
| Date: March 16, 2011 | By:                                          | /S/ Maryjo Cohen                      |   |
|                 |                                         | Maryjo Cohen                          |   |
|                 |                                         | President and Chief Executive Officer |   |
|                 |                                         |                                  |   |

|   |                                                             |   |   |                 |   |
|--------|------------------------------------------------------------------|--------|--------|----------------------|--------|
| By:    | /S/ Richard N. Cardozo        |   | By:    | /S/ Patrick J. Quinn |   |
|   | Richard N. Cardozo                                     |   |   | Patrick J. Quinn     |   |
|   | Director                                               |   |   | Director             |   |

|   |                                                                                                    |   |   |                     |   |
|--------|---------------------------------------------------------------------------------------------------------|--------|--------|--------------------------|--------|
| By:    | /S/ Maryjo Cohen                                                                              |   | By:    | /S/ Joseph G. Stienessen |   |
|   | Maryjo Cohen                                                                        |   |   | Joseph G. Stienessen     |   |
|   | Chair of the Board, President, Chief Executive Officer (Principal Executive Officer), and Director |   |   | Director                 |   |

|   |                                                                                           |   |   |                 |   |
|--------|------------------------------------------------------------------------------------------------|--------|--------|----------------------|--------|
| By:    | /S/ Randy F. Lieble                                                                            |   | By:    | /S/ Patrick J. Quinn |   |
|   | Randy F. Lieble                                                                                |   |   | Patrick J. Quinn     |   |
|   | Vice President, Chief Financial Officer (Principal Financial Officer), Treasurer, and Director |   |   | Director             |   |
|   | Date:  March 16, 2011                                                                |   |   |                 |   |

----

|                                                                           |   |  December 31 |    |
|--------------------------------------------------------------------------------|--------|-------------------|---------|
|                                                                           |   |  2010        |    |   |  2009 |   |
| ASSETS                                                                         |   |              |    |   |   |   |   |   |   |   |   |   |
|                                                                           |   |              |    |   |   |   |   |   |   |   |   |   |
| CURRENT ASSETS:                                                                |   |              |    |   |   |   |   |   |   |   |   |   |
|                                                                           |   |              |    |   |   |   |   |   |   |   |   |   |
|    Cash and cash equivalents                                    |   |              |    |   | $ | 49,719 |   |   |   |   |   | $ | 48,974 |   |
|                                                                           |   |              |    |   |   |   |   |   |   |   |   |   |   |   |
|    Marketable securities                                        |   |              |    |   |   | 101,005 |   |   |   |   |   |   | 118,442 |   |
|                                                                           |   |              |    |   |   |   |   |   |   |   |   |   |   |   |
|    Accounts receivable                                          |   | $                 | 91,642  |   |   |   |   |   |   | $ | 92,826 |   |   |   |   |   |
|                                                                           |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Less allowance for doubtful accounts             |   |              | 527     |   |   |   | 91,115 |   |   |   | 467 |   |   |   | 92,359 |   |
|                                                                           |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Inventories:                                           |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                           |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Finished goods                                   |   |              | 37,144  |   |   |   |   |   |   |   | 30,361 |   |   |   |   |   |
|                                                                           |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Work in process                                  |   |              | 37,040  |   |   |   |   |   |   |   | 31,229 |   |   |   |   |   |
|                                                                           |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Raw materials                                    |   |              | 8,948   |   |   |   | 83,132 |   |   |   | 6,985 |   |   |   | 68,575 |   |
|                                                                           |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Deferred tax assets                                                |   |              |    |   |   |   | 6,268 |   |   |   |   |   |   |   | 6,605 |   |
|                                                                           |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Other current assets                                               |   |              |    |   |   |   | 14,301 |   |   |   |   |   |   |   | 7,117 |   |
|                                                                           |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Total current assets                       |   |              |    |   |   |   | 345,540 |   |   |   |   |   |   |   | 342,072 |   |
|                                                                           |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| PROPERTY, PLANT AND EQUIPMENT:                                                 |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                           |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Land and land improvements                                   |   |              | 1,946   |   |   |   |   |   |   |   | 1,946 |   |   |   |   |   |
|                                                                           |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Buildings                                                    |   |              | 25,527  |   |   |   |   |   |   |   | 21,805 |   |   |   |   |   |
|                                                                           |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|    Machinery and equipment                                      |   |              | 79,626  |   |   |   |   |   |   |   | 71,217 |   |   |   |   |   |
|                                                                           |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                           |   |              | 107,099 |   |   |   |   |   |   |   | 94,968 |   |   |   |   |   |
|                                                                           |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Less allowance for depreciation and amortization |   |              | 48,991  |   |   |   | 58,108 |   |   |   | 46,120 |   |   |   | 48,848 |   |
|                                                                           |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| GOODWILL                                                                       |   |              |    |   |   |   | 11,485 |   |   |   |   |   |   |   | 11,485 |   |
|                                                       |   |              |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                           |   |              |    |   |   | $ | 415,133 |   |   |   |   |   |   | $ | 402,405 |   |

----

| (Dollars in thousands except share and per share data)                                |   |   |              |   |   |   |       |   |   |   |    |   |   |
|---------------------------------------------------------------------------------------|--------|--------|-------------------|--------|--------|--------|------------|--------|--------|--------|---------|--------|--------|
|                                                                                  |   |   |  December 31 |   |
|                                                                                  |   |   |  2010        |   |   |   |  2009 |   |
| LIABILITIES                                                                           |   |   |              |   |   |   |       |   |   |   |    |   |   |   |   |   |
|                                                                                  |   |   |              |   |   |   |       |   |   |   |    |   |   |   |   |   |
| CURRENT LIABILITIES:                                                                  |   |   |              |   |   |   |       |   |   |   |    |   |   |   |   |   |
|                                                                                  |   |   |              |   |   |   |       |   |   |   |    |   |   |   |   |   |
|   Accounts payable                                                          |   |   |              |   |   | $      | 44,298     |   |   |   |    |   |   | $ | 37,903 |   |
|                                                                                  |   |   |              |   |   |   |       |   |   |   |    |   |   |   |   |   |
|   Federal and state income taxes                                            |   |   |              |   |   |   | 5,859      |   |   |   |    |   |   |   | 6,291 |   |
|                                                                                  |   |   |              |   |   |   |       |   |   |   |    |   |   |   |   |   |
|   Accrued liabilities                                                       |   |   |              |   |   |   | 16,572     |   |   |   |    |   |   |   | 16,859 |   |
|                                                                                  |   |   |              |   |   |   |       |   |   |   |    |   |   |   |   |   |
| Total current liabilities                                                             |   |   |              |   |   |   | 66,729     |   |   |   |    |   |   |   | 61,053 |   |
|                                                                                  |   |   |              |   |   |   |       |   |   |   |    |   |   |   |   |   |
| DEFERRED INCOME TAXES                                                                 |   |   |              |   |   |   | 4,467      |   |   |   |    |   |   |   | 5,480 |   |
|                                                                                  |   |   |              |   |   |   |       |   |   |   |    |   |   |   |   |   |
| COMMITMENTS AND CONTINGENCIES                                                         |   |   |              |   |   |   |       |   |   |   |    |   |   |   |   |   |
|                                                                                  |   |   |              |   |   |   |       |   |   |   |    |   |   |   |   |   |
| STOCKHOLDERS' EQUITY                                                                  |   |   |              |   |   |   |       |   |   |   |    |   |   |   |   |   |
|                                                                                  |   |   |              |   |   |   |       |   |   |   |    |   |   |   |   |   |
| Common stock, $1 par value:                                                           |   |   |              |   |   |   |       |   |   |   |    |   |   |   |   |   |
|       Authorized: 12,000,000 shares at December         |   |   |              |   |   |   |       |   |   |   |    |   |   |   |   |   |
|      31, 2010 and 2009                                       |   |   |              |   |   |   |       |   |   |   |    |   |   |   |   |   |
|       Issued: 7,440,518 shares at December 31,          |   |   |              |   |   |   |       |   |   |   |    |   |   |   |   |   |
|      2010 and 2009                                           |   |   |              |   |   |   |       |   |   |   |    |   |   |   |   |   |
|        Outstanding: 6,865,150 and 6,857,540 shares |   |   |              |   |   |   |       |   |   |   |    |   |   |
|        at December 31, 2010 and 2009, respectively |   | $      | 7,441             |   |   |   |       |   |   | $      | 7,441   |   |   |   |   |   |
|                                                                                  |   |   |              |   |   |   |       |   |   |   |    |   |   |   |   |   |
|   Paid-in capital                                                           |   |   | 2,738             |   |   |   |       |   |   |   | 2,037   |   |   |   |   |   |
|                                                                                  |   |   |              |   |   |   |       |   |   |   |    |   |   |   |   |   |
|   Retained earnings                                                         |   |   | 351,571           |   |   |   |       |   |   |   | 343,930 |   |   |   |   |   |
|                                                                                  |   |   |              |   |   |   |       |   |   |   |    |   |   |   |   |   |
|   Accumulated other comprehensive income                                    |   |   | 129               |   |   |   |       |   |   |   | 643     |   |   |   |   |   |
|                                                                                  |   |   |              |   |   |   |       |   |   |   |    |   |   |   |   |   |
|                                                                                  |   |   | 361,879           |   |   |   |       |   |   |   | 354,051 |   |   |   |   |   |
|                                                                                  |   |   |              |   |   |   |       |   |   |   |    |   |   |   |   |   |
|   Treasury stock, at cost, 575,368 and 582,978 shares                       |   |   |              |   |   |   |       |   |   |   |    |   |   |
|  at December 31, 2010 and 2009, respectively                                     |   |   | 17,942            |   |   |   |       |   |   |   | 18,179  |   |   |   |   |   |
|                                                                                  |   |   |              |   |   |   |       |   |   |   |    |   |   |   |   |   |
|    Total stockholders' equity                                          |   |   |              |   |   |   | 343,937    |   |   |   |    |   |   |   | 335,872 |   |
|                                                                                  |   |   |              |   |   |   |       |   |   |   |    |   |   |   |   |   |
|                                                                                  |   |   |              |   |   | $      | 415,133    |   |   |   |    |   |   | $ | 402,405 |   |

----

| For the years ended December 31,            |   | 2010   |    |   | 2009   |   |    | 2008   |   |
|---------------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|
| Net sales                                   |   | $      | 479,000 |   |   | $      | 478,468 |   |   | $ | 448,253 |   |
|                                        |   |   |    |   |   |   |    |   |   |   |   |   |
| Cost of sales                               |   |   | 365,426 |   |   |   | 368,376 |   |   |   | 368,013 |   |
|                                        |   |   |    |   |   |   |    |   |   |   |   |   |
| Gross profit                                |   |   | 113,574 |   |   |   | 110,092 |   |   |   | 80,240 |   |
|                                        |   |   |    |   |   |   |    |   |   |   |   |   |
| Selling and general expenses                |   |   | 16,492  |   |   |   | 18,745  |   |   |   | 16,959 |   |
|                                        |   |   |    |   |   |   |    |   |   |   |   |   |
| Operating profit                            |   |   | 97,082  |   |   |   | 91,347  |   |   |   | 63,281 |   |
|                                        |   |   |    |   |   |   |    |   |   |   |   |   |
| Other income, principally interest          |   |   | 2,273   |   |   |   | 3,050   |   |   |   | 4,270 |   |
|                                        |   |   |    |   |   |   |    |   |   |   |   |   |
| Earnings before provision for income taxes  |   |   | 99,355  |   |   |   | 94,397  |   |   |   | 67,551 |   |
|                                        |   |   |    |   |   |   |    |   |   |   |   |   |
| Provision for income taxes                  |   |   | 35,824  |   |   |   | 31,821  |   |   |   | 23,368 |   |
|                                        |   |   |    |   |   |   |    |   |   |   |   |   |
|    Net earnings              |   | $      | 63,531  |   |   | $      | 62,576  |   |   | $ | 44,183 |   |
|                                        |   |   |    |   |   |   |    |   |   |   |   |   |
| Weighted average common shares outstanding: |   |   |    |   |   |   |    |   |   |   |   |   |
| Basic                                       |   |   | 6,862   |   |   |   | 6,854   |   |   |   | 6,845 |   |
| Diluted                                     |   |   | 6,864   |   |   |   | 6,854   |   |   |   | 6,845 |   |
|                                        |   |   |    |   |   |   |    |   |   |   |   |   |
| Net earnings per share:                     |   |   |    |   |   |   |    |   |   |   |   |   |
| Basic                                       |   | $      | 9.26    |   |   | $      | 9.13    |   |   | $ | 6.45 |   |
| Diluted                                     |   | $      | 9.26    |   |   | $      | 9.13    |   |   | $ | 6.45 |   |

----

|                                                                                                        |   |  In Thousands |
|-------------------------------------------------------------------------------------------------------------|--------|--------------------|
| For the years ended December 31,                                                                            |   | 2010               |   |   | 2009 |   |   | 2008 |   |
|                                                                                                        |   |               |   |   |   |   |   |   |   |
| Cash flows from operating activities:                                                                       |   |               |   |   |   |   |   |   |   |
|   Net earnings                                                                                    |   | $                  | 63,531 |   |   | $ | 62,576 |   |   | $ | 44,183 |   |
|   Adjustments to reconcile net earnings to net cash                                               |   |               |   |   |   |   |   |   |   |   |   |   |
|   provided by (used in) operating activities:                                                     |   |               |   |   |   |   |   |   |   |   |   |   |
|   Provision for depreciation                                                                           |   |               | 8,637 |   |   |   | 8,738 |   |   |   | 8,794 |   |
|   Deferred income taxes                                                                           |   |               | (399 | ) |   |   | (33 | ) |   |   | 1,060 |   |
|   Other                                                                                           |   |               | (790 | ) |   |   | 682 |   |   |   | 1,059 |   |
|   Changes in operating accounts:                                                                  |   |               |   |   |   |   |   |   |   |   |   |   |
|      Accounts receivable, net                                                      |   |               | 1,244 |   |   |   | (16,765 | ) |   |   | 12,324 |   |
|      Inventories                                                                   |   |               | (14,557 | ) |   |   | 3,145 |   |   |   | (6,235 | ) |
|      Other current assets                                                          |   |               | (5,604 | ) |   |   | (5,362 | ) |   |   | (346 | ) |
|      Accounts payable and accrued liabilities                                      |   |               | 6,138 |   |   |   | 7,090 |   |   |   | (23,308 | ) |
|      Federal and state income taxes                                                |   |               | (432 | ) |   |   | 2,074 |   |   |   | (2,203 | ) |
|            Net cash provided by operating activities |   |               | 57,768 |   |   |   | 62,145 |   |   |   | 35,328 |   |
|                                                                                                        |   |               |   |   |   |   |   |   |   |   |   |   |
| Cash flows from investing activities:                                                                       |   |               |   |   |   |   |   |   |   |   |   |   |
|   Marketable securities purchased                                                                 |   |               | (45,464 | ) |   |   | (78,486 | ) |   |   | (138,113 | ) |
|   Marketable securities - maturities and sales                                                    |   |               | 62,109 |   |   |   | 81,426 |   |   |   | 134,009 |   |
|   Acquisition of property, plant and equipment                                                    |   |               | (17,972 | ) |   |   | (3,337 | ) |   |   | (4,370 | ) |
|   Sale of property, plant and equipment                                                           |   |               | 1,365 |   |   |   | 71 |   |   |   | - |   |
|   Other                                                                                           |   |               | (1,580 | ) |   |   | 228 |   |   |   | - |   |
|            Net cash used in investing activities     |   |               | (1,542 | ) |   |   | (98 | ) |   |   | (8,474 | ) |
|                                                                                                        |   |               |   |   |   |   |   |   |   |   |   |   |
| Cash flows from financing activities:                                                                       |   |               |   |   |   |   |   |   |   |   |   |   |
|   Dividends paid                                                                                  |   |               | (55,889 | ) |   |   | (38,008 | ) |   |   | (29,067 | ) |
|   Other                                                                                           |   |               | 408 |   |   |   | 243 |   |   |   | 190 |   |
|            Net cash used in financing activities     |   |               | (55,481 | ) |   |   | (37,765 | ) |   |   | (28,877 | ) |
|                                                                                                        |   |               |   |   |   |   |   |   |   |   |   |   |
| Net increase (decrease) in cash and cash equivalents                                                        |   |               | 745 |   |   |   | 24,282 |   |   |   | (2,023 | ) |
| Cash and cash equivalents at beginning of year                                                              |   |               | 48,974 |   |   |   | 24,692 |   |   |   | 26,715 |   |
| Cash and cash equivalents at end of year                                                                    |   | $                  | 49,719 |   |   | $ | 48,974 |   |   | $ | 24,692 |   |
|                                                                                                        |   |               |   |   |   |   |   |   |   |   |   |   |
| Supplemental disclosures of cash flow information:                                                          |   |               |   |   |   |   |   |   |   |   |   |   |
| Cash paid during the year for:                                                                              |   |               |   |   |   |   |   |   |   |   |   |   |
|    Income taxes                                                                              |   | $                  | 36,479 |   |   | $ | 30,663 |   |   | $ | 23,930 |   |

----

|                                                         |   | (In thousands except share and per share data)    |   |
|--------------------------------------------------------------|--------|---------------------------------------------------|--------|
|                                                         |   | For the years ended December 31, 2010, 2009, 2008 |   |
|                                                         |   |                                              |   |   |   |   |   |   |   |   | Accumulated |   |   |   |   |   |   |   |
|                                                         |   | Common                                            |   |   | Paid-in |   |   | Retained |   |   | Comprehensive |   |   | Treasury |   |   |   |   |
|                                                         |   | Stock                                             |   |   | Capital |   |   | Earnings |   |   | Income (Loss) |   |   | Stock |   |   | Total |   |
| Balance December 31, 2007                                    |   | $                                                 | 7,441  |   |   | $ | 1,496 |   |   | $ | 304,246 |   |   | $ | 176 |   |   | $ | (18,748 | ) |   | $ | 294,611 |   |
|                                                         |   |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net earnings                                                 |   |                                              |   |   |   |   |   |   |   |   | 44,183 |   |   |   |   |   |   |   |   |   |   |   | 44,183 |   |
|                                                         |   |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unrealized gain on available-for-sale securities, net of tax |   |                                              |   |   |   |   |   |   |   |   |   |   |   |   | 360 |   |   |   |   |   |   |   | 360 |   |
|                                                         |   |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total comprehensive income                                   |   |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 44,543 |   |
|                                                         |   |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Dividends paid, $4.25 per share                              |   |                                              |   |   |   |   |   |   |   |   | (29,067 | ) |   |   |   |   |   |   |   |   |   |   | (29,067 | ) |
|                                                         |   |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                                                        |   |                                              |   |   |   |   | 239 |   |   |   |   |   |   |   |   |   |   |   | 279 |   |   |   | 518 |   |
|                                                         |   |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance December 31, 2008                                    |   |                                              | 7,441  |   |   |   | 1,735 |   |   |   | 319,362 |   |   |   | 536 |   |   |   | (18,469 | ) |   |   | 310,605 |   |
|                                                         |   |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net earnings                                                 |   |                                              |   |   |   |   |   |   |   |   | 62,576 |   |   |   |   |   |   |   |   |   |   |   | 62,576 |   |
|                                                         |   |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unrealized gain on available-for-sale securities, net of tax |   |                                              |   |   |   |   |   |   |   |   |   |   |   |   | 107 |   |   |   |   |   |   |   | 107 |   |
|                                                         |   |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total comprehensive income                                   |   |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 62,683 |   |
|                                                         |   |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Dividends paid, $5.55 per share                              |   |                                              |   |   |   |   |   |   |   |   | (38,008 | ) |   |   |   |   |   |   |   |   |   |   | (38,008 | ) |
|                                                         |   |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                                                        |   |                                              |   |   |   |   | 302 |   |   |   |   |   |   |   |   |   |   |   | 290 |   |   |   | 592 |   |
|                                                         |   |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance December 31, 2009                                    |   |                                              | 7,441  |   |   |   | 2,037 |   |   |   | 343,930 |   |   |   | 643 |   |   |   | (18,179 | ) |   |   | 335,872 |   |
|                                                         |   |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net earnings                                                 |   |                                              |   |   |   |   |   |   |   |   | 63,531 |   |   |   |   |   |   |   |   |   |   |   | 63,531 |   |
|                                                         |   |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unrealized gain on available-for-sale securities, net of tax |   |                                              |   |   |   |   |   |   |   |   |   |   |   |   | (514 | ) |   |   |   |   |   |   | (514 | ) |
|                                                         |   |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total comprehensive income                                   |   |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 63,017 |   |
|                                                         |   |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Dividends paid, $8.15 per share                              |   |                                              |   |   |   |   |   |   |   |   | (55,889 | ) |   |   |   |   |   |   |   |   |   |   | (55,889 | ) |
|                                                         |   |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other                                                        |   |                                              |   |   |   |   | 701 |   |   |   | (1 | ) |   |   |   |   |   |   | 237 |   |   |   | 937 |   |
|                                                         |   |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance December 31, 2010                                    |   | $                                                 | 7,441  |   |   | $ | 2,738 |   |   | $ | 351,571 |   |   | $ | 129 |   |   | $ | (17,942 | ) |   | $ | 343,937 |   |

----

| (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.  For a further discussion of the Company's business and the segments in which it operates, please refer to Note L. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| (4)   | FAIR VALUE OF FINANCIAL INSTRUMENTS:  The Company utilizes the methods of fair value as described in Financial Accounting Standard Board (“FASB”) Accounting Standard Codification (“ASC”) 820, Fair Value Measurements and Disclosures to value its financial assets and liabilities. ASC 820 utilizes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. The carrying amount for cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities approximates fair value due to the immediate or short-term maturity of these financial instruments. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5)   | 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 certificates of deposit.  The Company deposits its cash in high quality financial institutions. The balances, at times, may exceed federally insured limits.  Certificates of deposits are reported at par value, and money market funds are reported at fair value determined using quoted prices in active markets for identical securities (Level 1, as defined by FASB ASC 820).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 $2,788,000 and $6,161,000 at December 31, 2010 and 2009, respectively, are included as reductions of cash and cash equivalents or bank overdrafts in accounts payable, as appropriate.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.  Highly liquid, tax exempt variable rate demand notes with put options exercisable in three months or less are classified as marketable securities.  Also included are certificates of deposit.At December 31, 2010 and 2009, 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.  All of the Company’s marketable securities are classified as Level 2, as defined by FASB ASC 820, with fair values determined using significant other observable inputs, which include quoted prices in markets that are not active, quoted prices of similar securities, recently executed transactions, broker quotations, and other inputs that are observable.  There were no transfers into or out of Level 2 during 2010. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                        |   |
|-----------------------------|--------|
|                        |   | (In thousands) |   |
|                        |   | MARKETABLE SECURITIES |   |
|                        |   | Amortized Cost |   |   | Fair Value |   |   | Gross Unrealized Gains |   |   | Gross UnrealizedLosses |   |
| December 31, 2010           |   |   |   |   |   |   |   |   |   |   |   |   |
| Tax-exempt Municipal Bonds  |   | $ | 62,339 |   |   | $ | 62,537 |   |   | $ | 354 |   |   | $ | 156 |   |
| Variable Rate Demand Notes  |   |   |  37,779 |   |   |   |  37,779 |   |   |   |  0 |   |   |   |  0 |   |
| Certificates of Deposit     |   |   | 689 |   |   |   | 689 |   |   |   | 0 |   |   |   | 0 |   |
| Total Marketable Securities |   | $ | 100,807 |   |   | $ | 101,005 |   |   | $ | 354 |   |   | $ | 156 |   |
|                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| December 31, 2009           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tax-exempt Municipal Bonds  |   | $ | 71,440 |   |   | $ | 72,430 |   |   | $ | 1,015 |   |   | $ | 25 |   |
| Variable Rate Demand Notes  |   |   |  43,314 |   |   |   |  43,314 |   |   |   |  0 |   |   |   |  0 |   |
| Certificates of Deposit     |   |   | 2,698 |   |   |   | 2,698 |   |   |   | 0 |   |   |   | 0 |   |
| Total Marketable Securities |   | $ | 117,452 |   |   | $ | 118,442 |   |   | $ | 1,015 |   |   | $ | 25 |   |

|   | Proceeds from sales of marketable securities totaled $62,109,000 in 2010, $81,426,000 in 2009, and $134,009,000 in 2008.  Gross gains related to sales of marketable securities totaled $0, $0, and $118,000, in 2010, 2009 and 2008, respectively.  There were no gross losses related to sales of marketable securities in 2010, 2009, or 2008.  Net unrealized gains (losses) are reported as a separate component of accumulated other comprehensive income and were gains of $198,000, $990,000 and $825,000 before taxes at December 31, 2010, 2009, and 2008, respectively. Unrealized gains of $0, $0, and $74,000 were reclassified out of accumulated other comprehensive income (loss) during the years ended December 31, 2010, 2009, and 2008, respectively.The contractual maturities of the marketable securities held at December 31, 2010 are as follows: $29,348,000 within one year; $35,839,000 beyond one year to five years; $16,251,000 beyond five years to ten years, and $19,567,000 beyond ten years. All of the instruments in the beyond five year ranges, with the exception of $8,867,000 of tax-exempt municipal bonds with maturities between five and seven years, are variable rate demand notes which as noted above can be tendered for cash at par plus interest within seven days.  Despite the stated contractual maturity date, to the extent a tender is not honored, the notes become immediately due and payable. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6)   | 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 to 60 days.  The Company does not accrue interest on past due accounts receivable.  Receivables are written off only after all collection attempts have failed and are based on individual credit evaluation and the specific circumstances of the customer.  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 customer's ability to pay, and prevailing economic conditions. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (7)   | 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.  Inventories for the 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. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (8)   | 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.  Straight-line depreciation is provided in amounts sufficient to relate the costs of depreciable assets to operations over their service lives which are estimated at 15 to 40 years for buildings, 3 to 10 years for machinery and equipment, and 15 to 20 years for land improvements.  The Company reviews long lived assets consisting principally of property, plant, and equipment, for impairment when material events and changes in circumstances indicate the carrying value may not be recoverable. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (9)   | GOODWILL:  The Company recognizes the excess cost of an acquired entity over the net amount assigned to the fair value of assets acquired and liabilities assumed as goodwill. Goodwill is tested for impairment on an annual basis at the start of the fourth quarter and between annual tests whenever an impairment is indicated, such as the occurrence of an event that would more likely than not reduce the fair value of the reporting unit below its carrying amount.  Impairment losses are recognized whenever the implied fair value of goodwill is less than its carrying value.  No goodwill impairments were recognized during 2010, 2009, or 2008.  The Company's goodwill as of December 31, 2010 and 2009 was $11,485,000 relating entirely to its Defense Products segment, which had zero cumulative impairment charges at December 31, 2010.  The Absorbent Products segment value of goodwill was $0, with cumulative impairment charges of $4,648,000, at both December 31, 2010 and 2009. The Company's annual impairment testing dates were October 4, 2010, October 5, 2009, and September 29, 2008.  For the Defense segment, no impairment was indicated.  The Company has no recorded intangible assets, other than goodwill. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (10)   | REVENUE RECOGNITION: For all of its segments, the Company recognizes revenue when product is shipped or title passes pursuant to customers' orders, the price is fixed and collection is reasonably assured.  For the Housewares/Small appliance segment, the Company provides for its 60-day over-the-counter return privilege and warranties at the time of shipment. Net sales for this segment are calculated by deducting early payment discounts and cooperative advertising from gross sales.  The Company records cooperative advertising when revenue is recognized.  See Note A(11) for a description of the Company’s policy for sales returns. |
|------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (11)   |  SALES & RETURNS: Sales are recorded net of estimated discounts and returns.  The latter pertain primarily to warranty returns, returns of seasonal items, and returns of those newly introduced products sold with a return privilege.  The calculation of warranty returns is based in large part on historical data, while seasonal and new product returns are primarily developed using customer provided information. |
|------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (12)   |  SHIPPING AND HANDLING COSTS:  In accordance with FASB ASC 605-45, Revenue Recognition, the Company includes shipping and handling revenues in net sales and shipping costs in cost of sales. |
|------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (13)   |  ADVERTISING:  The Company's policy is to expense advertising as incurred for the year and include it in selling and general expenses.  Advertising expense was $9,000, $237,000, and $4,000 in 2010, 2009, and 2008, respectively. |
|------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (14)   | ACCUMULATED OTHER COMPREHENSIVE INCOME:  The $129,000 and $643,000 of accumulated comprehensive income at December 31, 2010 and 2009, respectively, relate to the unrealized gain on the Company's available-for-sale marketable security investments.  These amounts are recorded net of tax effect of $69,000 and $346,000 for 2010 and 2009, respectively. |
|------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (15)   | PRODUCT WARRANTY:  The Company’s Housewares/Small Appliance segment’s 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 60-day over-the-counter initial return privilege through cooperating dealers.  The Company services its products through 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 estimates its product warranty liability based on historical percentages which have remained relatively consistent over the years. |
|------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | The product warranty liability is included in accounts payable on the balance sheet.  The following table shows the changes in product warranty liability for the period: |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                         |   | (In thousands)         |   |
|----------------------------------------------|--------|------------------------|--------|
|                                         |   | Year Ended December 31 |   |
|                                         |   | 2010                   |   |   | 2009 |   |
| Beginning balance January 1                  |   | $                      | 405    |   |   | $ | 308 |   |
|                                         |   |                   |   |   |   |   |   |   |
| Accruals during the period                   |   |                   | 353    |   |   |   | 802 |   |
|                                         |   |                   |   |   |   |   |   |   |
| Charges / payments made under the warranties |   |                   | (432   | ) |   |   | (705 | ) |
|                                         |   |                   |   |   |   |   |   |   |
| Balance December 31                          |   | $                      | 326    |   |   | $ | 405 |   |

| (16)   |  STOCK-BASED COMPENSATION:  The Company accounts for stock-based compensation in accordance with ASC 718, Compensation — Stock Compensation.  Under the fair value recognition provisions of ASC 718, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense ratably over the requisite service period, net of estimated forfeitures. As more fully described in Note F, the Company awards non-vested restricted stock to employees and executive officers. |
|------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (17)   |  INCOME TAXES:  Deferred income tax assets and liabilities are recognized for the differences between the financial and income tax reporting bases of assets and liabilities based on enacted tax rates and laws.  The deferred income tax provision or benefit generally reflects the net change in deferred income tax assets and liabilities during the year.  The current income tax provision reflects the tax consequences of revenues and expenses currently taxable or deductible on various income tax returns for the year reported.  Income tax contingencies are accounted for in accordance with FASB ASC 740, Income Taxes.  See Note H for summaries of the provision, the effective tax rates, and the tax effects of the cumulative temporary differences resulting in deferred tax assets and liabilities. |
|------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (18)   |  RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS: In January 2010, the FASB issued Accounting Standards Update (“ASU”) No. 2010-06, Fair Value Measurements and Disclosures (Topic 820) – Improving Disclosures about Fair Value Measurements, to provide amendments to Subtopic 820-10 that require new disclosures about transfers into and out of Level 1 and Level 2 of the fair value hierarchy and separate disclosures about purchases, sales, issuances, and settlements relating to Level 3 measurements.  Specifically, for assets and liabilities that are measured at fair value on a recurring basis in periods after initial recognition (e.g., trading securities), this ASU requires: separate disclosure of the amount of significant transfers between Levels 1 and 2 and a description of the reasons for the transfers; and separate information about purchases, sales, issuances, and settlements, on a gross basis, in the reconciliation of Level 3 fair value measurements valued using significant unobservable inputs.  ASU 2010-06 clarifies existing disclosures as follows: |
|------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ASU 2010-06 is effective for interim and annual reporting periods beginning after December 15, 2009, except for the separate disclosures about purchases, sales, issuance and settlements in the roll forward of activity in Level 3 fair value measurements.  Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years.  In the period of initial adoption, entities will not be required to provide the amended disclosures for any previous periods presented for comparative purposes.  However, comparative disclosures are required for periods ending after initial adoption.  Early adoption is permitted.  Except for the separate disclosures about purchases, sales, issuance and settlements in the roll forward of activity in Level 3 fair value measurements, the Company adopted ASU 2010-06 during the first quarter of 2010, which did not have a material effect on the Company’s consolidated financial statements. The Company does not expect the adoption of the remaining provisions of ASU 2010-06 to have a material effect on the Company’s consolidated financial statements. |
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----

|   | The amount of inventories valued on the LIFO basis was $35,095,000 and $26,860,000 as of December 31, 2010 and 2009, respectively, and consists of housewares/small appliance finished goods.  Under LIFO, inventories are valued at approximately $4,205,000 and $2,355,000 below current cost determined on a first-in, first-out (FIFO) basis at December 31, 2010 and 2009, respectively.  During the years ended December 31, 2010, 2009, and 2008, $601,000, $892,000, and $0, respectively, of a LIFO layer was liquidated.  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 describes that which would have occurred if LIFO inventories had been valued at current cost determined on a FIFO basis: |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Increase (Decrease) – (In thousands, except per share data) |   |
|-------------------------------------------------------------------|--------|
| Year                                                              |   | Cost of Sales |   |   | Net Earnings |   |   | Earnings Per Share |   |
| 2010                                                              |   | $ | (1,850 | ) |   | $ | 1,169 |   |   | $ | 0.17 |   |
| 2009                                                              |   | $ | 2,082 |   |   | $ | (1,357 | ) |   | $ | (0.20 | ) |
| 2008                                                              |   | $ | (2,018 | ) |   | $ | 1,297 |   |   | $ | 0.19 |   |

|   | 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 segments are valued under the first-in, first-out method and total $48,037,000 and $41,715,000 at December 31, 2010 and 2009, respectively.  The December 31, 2010 FIFO total is comprised of $2,049,000 of finished goods, $37,040,000 of work in process, and $8,948,000 of raw material and supplies.  At December 31, 2009 the FIFO total was comprised of $3,501,000 of finished goods, $31,229,000 of work in process, and $6,985,000 of raw material and supplies. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | At December 31, 2010, accrued liabilities consisted of payroll $6,536,000, product liability $6,448,000, environmental $2,535,000, and other $1,053,000.  At December 31, 2009, accrued liabilities consisted of payroll $7,179,000, product liability $6,064,000, environmental $2,580,000, and other $1,036,000.  The Company is self-insured for health care costs, although it does carry stop loss and other insurance to cover health care claims once they reach a specified threshold. The Company is also subject to product liability claims in the normal course of business.  It is partly self-insured for product liability claims, and therefore records an accrual for known claims and incurred but unreported claims in the Company’s consolidated 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 and results of operations. The Company's policy is to accrue for legal fees expected to be incurred in connection with loss contingencies. See Note K for a discussion of environmental remediation liabilities. |
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|   | As of December 31, 2010, the Company has authority from the Board of Directors to reacquire an additional 504,600 shares.  No shares were reacquired in 2010, 2009, or 2008.   Treasury shares have been used for stock based compensation and to fund a portion of the Company's 401(k) contributions. |
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|   | 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 the potential issuance of common shares, when dilutive.  Dilutive shares outstanding during 2010, 2009, and 2008 were 2,000, 0, and 0, respectively. |
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|   | The Company, from time to time, enters into separate non-vested share-based payment arrangements with employees and executive officers under the Incentive Compensation Plan approved by stockholders on May 18, 2010, which authorized 50,000 shares to be available for grants.  The Compensation Committee of the Company’s Board of Directors approves stock-based compensation awards for all employees and executive officers of the Company.  The Company grants restricted stock that is subject to continued employment and vesting conditions, but has dividend and voting rights, and uses the fair-market value of the Company’s common stock on the grant date to measure the fair value of the awards.  The fair value of restricted stock is recognized as expense ratably over the requisite serviced period, net of estimated forfeitures.  The Company does not capitalize stock-based compensation costs.During 2010, the Company granted 3,328 shares of restricted stock to seven employees and executive officers of the Company.  The restricted stock vests on specified dates in 2015 and 2016, subject to the recipients’ continued employment or service through each applicable vesting date.The Company recognized pre-tax compensation expense in the consolidated statements of earnings related to stock-based compensation of $3,000, $0, and $0 in 2010, 2009, and 2008, respectively.  Certain accrued bonuses as of December 31, 2009 were converted to restricted stock awards during 2010.  The fair value of the awards on the 2010 grant date was $238,000, which approximates the amount that was included in selling and general expense in the consolidated statement of earnings for 2009 when the bonuses were accrued.As of December 31, 2010, there was approximately $123,000 of unrecognized compensation cost related to the restricted stock awards that is expected to be recognized over a period of 5.2 years.  There were no shares of restricted stock that vested during 2010, 2009, or 2008.The following table summarizes the activity for non-vested restricted stock: |
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|                              |   | 2010   |   |
|-----------------------------------|--------|--------|--------|
|                              |   | Shares |   |   | Weighted Average Fair Value at Grant Date |   |
| Non-vested at beginning of period |   |   | 0      |   |   |   | 0.00 |   |
| Granted                           |   |   | 3,328  |   |   | $ | 109.38 |   |
| Non-vested at end of period       |   |   | 3,328  |   |   | $ | 109.38 |   |

|   | Pension Plan: Prior to 2009, the Company contributed to a union-sponsored, multi-employer pension plan on behalf of union employees of the Amron division of its AMTEC subsidiary in accordance with the applicable union labor agreement. In December 2008, the union membership voted in favor of a withdrawal from the plan, and an amendment was made to the labor agreement authorizing the withdrawal. In December 2008, the Company permanently ceased to be obligated to contribute to the multi-employer pension plan, and instead agreed to contribute to a Company 401(k) Plan.  (See 401(k) Plan below.)In a letter dated March 30, 2009, the pension plan provided Amron with documentation stating that the cost to withdraw from the plan was $238,509.  In April 2009, a payment representing the settlement of the withdrawal liability was made in the same amount.  However, should all participants in the plan withdraw before the end of 2010, some portion of the plan liability could be reallocated to AMTEC. If that were to occur, AMTEC might be assessed retroactively for an additional withdrawal charge.  No notice of such a withdrawal has been received.  The amount of a potential additional withdrawal charge, if any, cannot be currently estimated.  The Company charged the cost of the withdrawal to operations in 2008.The Company's contributions to the union pension plan were $0, $272,000, and $402,000 during the years ended December 31, 2010, 2009, and 2008, respectively.401(k) Plan: The Company sponsors a 401(k) retirement plan that covers substantially all non-union employees. Historically, 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 began to match, 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 related cash dividends, totaled $904,000 in 2010, $592,000 in 2009, and $517,000 in 2008. In addition, the Company made cash contributions of $667,000 in 2010, $634,000 in 2009, and $604,000 in 2008 to the 401(k) Plan.  The Company also contributed $370,000, $472,000, and $0 to the 401(k) retirement plan covering its union employees at the Amron Division of the AMTEC subsidiary during the years ended December 31, 2010, 2009, and 2008, respectively. |
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|   | The following table summarizes the provision for income taxes: |
|--------|----------------------------------------------------------------|

|                |   | For Years Ended December 31 (in thousands) |   |
|---------------------|--------|--------------------------------------------|--------|
|                |   | 2010                                       |   |   | 2009 |   |   | 2008 |   |
| Current:            |   |                                       |   |   |   |   |   |   |   |
|  Federal       |   | $                                          | 30,317 |   |   | $ | 29,267 |   |   | $ | 20,213 |   |
|  State         |   |                                       | 5,905  |   |   |   | 2,383 |   |   |   | 2,205 |   |
|                |   |                                       | 36,222 |   |   |   | 31,650 |   |   |   | 22,418 |   |
| Deferred:           |   |                                       |   |   |   |   |   |   |   |   |   |   |
|  Federal       |   |                                       | (996   | ) |   |   | (34 | ) |   |   | 973 |   |
|  State         |   |                                       | 598    |   |   |   | 205 |   |   |   | (23 | ) |
|                |   |                                       | (398   | ) |   |   | 171 |   |   |   | 950 |   |
| Total tax provision |   | $                                          | 35,824 |   |   | $ | 31,821 |   |   | $ | 23,368 |   |

|   | 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: |
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|                              |   | Percent of Pre-tax Income |   |
|-----------------------------------|--------|---------------------------|--------|
|                              |   | 2010                      |   |   | 2009 |   |   | 2008 |   |
| Statutory rate                    |   |                      | 35.0   | % |   |   | 35.0 | % |   |   | 35.0 | % |
| State tax, net of federal benefit |   |                      | 4.6    | % |   |   | 1.8 | % |   |   | 2.1 | % |
| Tax exempt interest and dividends |   |                      | (0.7   | %) |   |   | (1.1 | %) |   |   | (2.0 | %) |
| Other                             |   |                      | (2.8   | %) |   |   | (2.0 | %) |   |   | (0.5 | %) |
| Effective rate                    |   |                      | 36.1   | % |   |   | 33.7 | % |   |   | 34.6 | % |

|   | 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.  A valuation allowance for deferred tax assets was deemed necessary at December 31, 2008 for certain state attribute carryforwards.  The net increase (decrease) in the valuation allowance during 2010, 2009, and 2008 was $0, ($709,000), and $111,000, respectively.  The tax effects of the cumulative temporary differences resulting in deferred tax assets and liabilities are as follows at December 31: |
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|                                    |   | (In thousands) |   |
|-----------------------------------------|--------|----------------|--------|
|                                    |   | 2010           |   |   | 2009 |   |
| Deferred tax assets                     |   |           |   |   |   |   |
| Insurance (primarily product liability) |   | $              | 2,713  |   |   | $ | 2,398 |   |
| Goodwill                                |   |           | 1,321  |   |   |   | 1,799 |   |
| Environmental                           |   |           | 993    |   |   |   | 1,022 |   |
| Vacation                                |   |           | 885    |   |   |   | 871 |   |
| State attribute carryforwards           |   |           | 0      |   |   |   | 420 |   |
| Other                                   |   |           | 356    |   |   |   | 95 |   |
| Total deferred tax assets               |   |           | 6,268  |   |   |   | 6,605 |   |
|                                    |   |           |   |   |   |   |   |   |
| Deferred tax liabilities                |   |           |   |   |   |   |   |   |
| Depreciation                            |   | $              | 4,398  |   |   | $ | 5,134 |   |
| Other                                   |   |           | 69     |   |   |   | 346 |   |
| Net deferred tax liabilities            |   | $              | 4,467  |   |   | $ | 5,480 |   |
|                                    |   |           |   |   |   |   |   |   |
| Net deferred tax assets                 |   | $              | 1,801  |   |   | $ | 1,125 |   |

|   | The Company establishes tax reserves in accordance with FASB ASC 740, Income Taxes.  As of December 31, 2010, the carrying amount of the Company’s gross unrecognized tax benefits was $418,000 which, if recognized, would affect the Company’s effective income tax rate.  The Company cannot estimate when the unrecognized tax benefits will be settled. |
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|   | The following is a reconciliation of the Company’s unrecognized tax benefits for the years ended December 31, 2010 and 2009: |
|--------|------------------------------------------------------------------------------------------------------------------------------------|

|                                                          |   | (In thousands) |   |
|---------------------------------------------------------------|--------|----------------|--------|
|                                                          |   | 2010           |   |   | 2009 |   |
| Balance at January 1                                          |   | $              | 1,447  |   |   | $ | 1,143 |   |
| Additions for tax positions taken related to the current year |   |           | 75     |   |   |   | 205 |   |
| Additions for tax positions taken related to prior years      |   |           | 0      |   |   |   | 99 |   |
| Reductions for tax positions taken related to prior years     |   |           | (111   | ) |   |   | 0 |   |
| Settlements                                                   |   |           | (993   | ) |   |   | 0 |   |
| Balance at December 31                                        |   | $              | 418    |   |   | $ | 1,447 |   |

|   | It is the Company’s practice to include interest and penalties in tax expense.  During the years ended December 31, 2010 and 2009, the Company accrued approximately $37,000 and $72,000 in interest, respectively.The Company is subject to U.S. federal income tax as well as income taxes of multiple states.  The Company is currently under audit by a single state for the tax years 2002 through 2005. For all other states in which it does business, the Company is subject to state audit statutes. |
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|   | The Company is involved in routine litigation incidental to its business.  Management believes the ultimate outcome of this litigation will not have a material effect on the Company's consolidated financial position, liquidity, or results of operations. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | In the Housewares/Small Appliance segment, one customer accounted for 11% of consolidated net sales for each of the three years ended December 31, 2010, 2009, and 2008.  In the Absorbent Products segment, one customer accounted for 11%, 12% and 12% of consolidated net sales for the years ended December 31, 2010, 2009, and 2008, respectively.The Company sources most of 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.  Should such problems or delays materialize, products might 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 2010, 2009, and 2008.  There is no similar provision applicable to the Chinese Yuan, which until 2005 had been tied to the U.S. dollar, but which has since been allowed to float and has appreciated in value.  To date, any material impact from the change in the value of the currency has been to the cost of products secured via purchase orders issued subsequent to the currency value change.  Foreign translation gains/losses are immaterial to the financial statements for all years presented.The Company's Defense segment manufactures products primarily for the U.S. Department of Defense (DOD) and DOD prime contractors.  As a consequence, this segment's future business essentially depends on the product needs and governmental funding of the DOD.  During 2010, 2009, and 2008, 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, with the exception of limited escalation provisions on specific materials, is generally not subject to any adjustments reflecting the actual costs incurred by the contractor. In addition, with the award of the 40mm systems contract, key components and services are provided by third party subcontractors, several of which the segment is required to work with by government edict.   Under the contract, the segment is responsible for the performance of those subcontractors, many of which it does not control.  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.  Materials used in the Defense segment are available from multiple sources.  As of December 31, 2010, 214 employees of Amron, or 20% of the Company’s total workforce, are members of the United Steel Workers union.  The contract between Amron and the union is effective through February 28, 2015.Raw materials for the Absorbent Products segment are commodities that are typically available from multiple sources. |
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|   | 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.  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.  In addition, the Company is a member of a group of companies that may have disposed of waste into an Eau Claire area landfill in the 1960s and 1970s.  After the landfill was closed, elevated volatile organic compounds were discovered in the groundwater.  Remediation plans were established, and the costs associated with remediation and monitoring at the landfill are split evenly between the group and the City of Eau Claire.  As of December 31, 2010, there does not appear to be exposure related to this site that would have a material impact on the operations or financial condition of the Company.Based on factors known as of December 31, 2010, it is believed that the Company's existing environmental accrued liability reserve will be adequate to satisfy on-going remediation operations and monitoring activities both on- and off-site; however, should environmental agencies require additional studies, extended monitoring, 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 effect on the results of operations or financial condition of the Company.  The Company’s environmental accrued liability on an undiscounted basis was $2,535,000 and $2,580,000 as of December 31, 2010 and 2009, respectively, and is included in accrued liabilities on the balance sheet.Expected future payments for environmental matters are as follows: |
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|                      |   | (In thousands) |   |
|---------------------------|--------|----------------|--------|
| Years Ending December 31: |   |           |   |
|   2011          |   | $              | 390    |   |
|   2012          |   |           | 326    |   |
|   2013          |   |           | 311    |   |
|   2014          |   |           | 237    |   |
|   2015          |   |           | 222    |   |
|   Thereafter    |   |           | 1,049  |   |
|                      |   | $              | 2,535  |   |

|   | 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.  Sales for all three segments are primarily to customers in North America.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 Canada and also through independent distributors.  As more fully described in Note J, the Company primarily sources its Housewares/Small Appliance products from nonaffiliated suppliers located in the Orient.  Sales are seasonal, with the normal peak sales period occurring in the fourth quarter of the year prior to the holiday season.The Defense Segment was started in February 2001 with the acquisition of AMTEC Corporation, which manufactures precision mechanical and electromechanical assemblies for the U.S. government and prime contractors.  During 2005, and again during 2010, AMTEC Corporation was one of two prime contractors selected by the Army to supply all requirements for the 40mm family of practice and tactical ammunition cartridges for a period of five years.  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 segment was further augmented with the acquisition of certain assets of Amron, LLC of Antigo, Wisconsin during 2006.  This facility primarily manufactures cartridge cases used in medium caliber (20-40mm) ammunition. |
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----

|   | The Absorbent Product segment was started on November 19, 2001 with the acquisition of certain assets from RMED International, Inc, forming Presto Absorbent Products, Inc.  This company manufactured diapers. Starting in 2004, the company began making adult incontinence products at the Company's facilities in Eau Claire, Wisconsin.  The products are sold to 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 dogs.  The Company has since decided to close the Georgia facility and consolidate the absorbent products manufacturing in the Eau Claire, Wisconsin facility.  It no longer manufactures dog pads.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) and the assets associated with such activities are included within the Housewares/Small Appliances segment for all periods presented. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                          |   | (in thousands) |    |
|-------------------------------|--------|----------------|---------|
|                          |   | Housewares /   |    |   |   |   |   |   |   |   |   |   |
|                          |   | Small          |    |   | Defense |   |   | Absorbent |   |   |   |   |
|                          |   | Appliances     |    |   | Products |   |   | Products |   |   | Total |   |
| Year ended December 31, 2010  |   |           |    |   |   |   |   |   |   |   |   |   |
| External net sales            |   | $              | 157,474 |   |   | $ | 240,762 |   |   | $ | 80,764 |   |   | $ | 479,000 |   |
| Gross profit                  |   |           | 37,032  |   |   |   | 68,071 |   |   |   | 8,471 |   |   |   | 113,574 |   |
| Operating profit              |   |           | 27,558  |   |   |   | 61,443 |   |   |   | 8,081 |   |   |   | 97,082 |   |
| Total assets                  |   |           | 256,945 |   |   |   | 106,487 |   |   |   | 51,701 |   |   |   | 415,133 |   |
| Depreciation and amortization |   |           | 926     |   |   |   | 3,650 |   |   |   | 4,061 |   |   |   | 8,637 |   |
| Capital expenditures          |   |           | 1,117   |   |   |   | 3,473 |   |   |   | 13,382 |   |   |   | 17,972 |   |
|                          |   |           |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Year ended December 31, 2009  |   |           |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| External net sales            |   | $              | 150,016 |   |   | $ | 253,789 |   |   | $ | 74,663 |   |   | $ | 478,468 |   |
| Gross profit                  |   |           | 40,336  |   |   |   | 61,866 |   |   |   | 7,890 |   |   |   | 110,092 |   |
| Operating profit              |   |           | 30,290  |   |   |   | 54,823 |   |   |   | 6,234 |   |   |   | 91,347 |   |
| Total assets                  |   |           | 260,854 |   |   |   | 107,907 |   |   |   | 33,644 |   |   |   | 402,405 |   |
| Depreciation and amortization |   |           | 925     |   |   |   | 3,570 |   |   |   | 4,243 |   |   |   | 8,738 |   |
| Capital expenditures          |   |           | 1,240   |   |   |   | 1,275 |   |   |   | 822 |   |   |   | 3,337 |   |
|                          |   |           |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Year ended December 31, 2008  |   |           |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| External net sales            |   | $              | 136,840 |   |   | $ | 238,752 |   |   | $ | 72,661 |   |   | $ | 448,253 |   |
| Gross profit (loss)           |   |           | 30,323  |   |   |   | 50,232 |   |   |   | (315 | ) |   |   | 80,240 |   |
| Operating profit (loss)       |   |           | 20,896  |   |   |   | 43,550 |   |   |   | (1,165 | ) |   |   | 63,281 |   |
| Total assets                  |   |           | 218,783 |   |   |   | 106,837 |   |   |   | 40,263 |   |   |   | 365,883 |   |
| Depreciation and amortization |   |           | 792     |   |   |   | 3,211 |   |   |   | 4,791 |   |   |   | 8,794 |   |
| Capital expenditures          |   |           | 788     |   |   |   | 2,603 |   |   |   | 979 |   |   |   | 4,370 |   |

----

|   | The Company leases office, manufacturing, and warehouse facilities and equipment under noncancelable operating leases, many of which contain renewal options ranging from one to five years.  Rent expense was approximately $771,000, $836,000, and $1,133,000 for the years ended December 31, 2010, 2009, and 2008, respectively.  Future minimum annual rental payments required under operating leases are as follows: |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Years ending December 31: |   | (In thousands) |   |
|---------------------------|--------|----------------|--------|
|   2011          |   | $              | 301    |   |
|   2012          |   |           | 173    |   |
|   2013          |   |           | 143    |   |
|   2014          |   |           | 0      |   |
|   2015          |   |           | 0      |   |
|                      |   | $              | 617    |   |

|   | The following represents quarterly unaudited financial information for 2010 and 2009: |
|--------|---------------------------------------------------------------------------------------|

|                                      |   | (In thousands) |    |   | Earnings per Share   |   |    | Earnings per Share   |   |
|-------------------------------------------|--------|----------------|---------|--------|--------------------------------|--------|---------|--------------------------------|--------|
| Quarter                                   |   | Net Sales      |    |   | Gross Profit                   |   |    | Net Earnings                   |   |   | (Basic) |   |   | (Diluted) |   |
|                                      |   |           |    |   |                           |   |    |                           |   |   |   |   |   |   |   |
| 2010                                      |   |           |    |   |                           |   |    |                           |   |   |   |   |   |   |   |
|    First                   |   | $              | 106,400 |   |                           | $      | 24,587  |                           |   | $ | 13,199 |   |   | $ | 1.92 |   |   | $ | 1.92 |   |
|    Second                  |   |           | 117,075 |   |                           |   | 26,517  |                           |   |   | 14,975 |   |   | $ | 2.18 |   |   | $ | 2.18 |   |
|    Third                   |   |           | 113,547 |   |                           |   | 24,363  |                           |   |   | 13,213 |   |   | $ | 1.93 |   |   | $ | 1.92 |   |
|    Fourth                  |   |           | 141,978 |   |                           |   | 38,107  |                           |   |   | 22,144 |   |   | $ | 3.23 |   |   | $ | 3.24 |   |
|       Total |   | $              | 479,000 |   |                           | $      | 113,574 |                           |   | $ | 63,531 |   |   | $ | 9.26 |   |   | $ | 9.26 |   |
|                                      |   |           |    |   |                           |   |    |                           |   |   |   |   |   |   |   |   |   |   |   |   |
| 2009                                      |   |           |    |   |                           |   |    |                           |   |   |   |   |   |   |   |   |   |   |   |   |
|    First                   |   | $              | 107,926 |   |                           | $      | 19,658  |                           |   | $ | 10,854 |   |   | $ | 1.58 |   |   | $ | 1.58 |   |
|    Second                  |   |           | 103,161 |   |                           |   | 24,364  |                           |   |   | 13,346 |   |   | $ | 1.95 |   |   | $ | 1.95 |   |
|    Third                   |   |           | 116,392 |   |                           |   | 28,944  |                           |   |   | 16,705 |   |   | $ | 2.44 |   |   | $ | 2.44 |   |
|    Fourth                  |   |           | 150,989 |   |                           |   | 37,126  |                           |   |   | 21,671 |   |   | $ | 3.16 |   |   | $ | 3.16 |   |
|       Total |   | $              | 478,468 |   |                           | $      | 110,092 |                           |   | $ | 62,576 |   |   | $ | 9.13 |   |   | $ | 9.13 |   |

|   | As shown above, fourth quarter sales are significantly impacted by the holiday driven seasonality of the Housewares/Small Appliance segment.  This segment purchases inventory during the first three quarters to meet the sales demand of the fourth quarter.  The other segments are typically non-seasonal. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The Company maintains an unsecured line of credit for short term operating cash needs. The line of credit is renewed each year at the end of the third quarter. As of December 31, 2010 and 2009, the line of credit limit was set at $5,000,000, with $0 outstanding on both dates. The interest rate on the line of credit is reset monthly to the London Inter-Bank Offered Rate (LIBOR) plus one half of one percent. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | On February 18, 2011, the Company’s Board of Directors announced a regular dividend of $1.00 per share, plus an extra dividend of $7.25.  On March 15, 2011, a payment of $56,665,000 was made to the shareholders of record as of March 4, 2011. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|                                                                |   |  (In thousands)                 |   |
|---------------------------------------------------------------------|--------|--------------------------------------|--------|
|   Column ADescription                                          |   | Column BBalance atBeginningof Period |   |   | Column CAdditions (A) |   |   | Column DDeductions (B) |   |   | Column EBalance atEndof Period |   |
|                                                                |   |                                 |   |   |   |   |   |   |   |   |   |   |
| Deducted from assets:                                               |   |                                 |   |   |   |   |   |   |   |   |   |   |
|    Allowance for doubtful accounts:                  |   |                                 |   |   |   |   |   |   |   |   |   |   |
|                                                                |   |                                 |   |   |   |   |   |   |   |   |   |   |
|       Year ended December 31, 2010    |   | $                                    | 467    |   |   | $ | 50 |   |   | $ | (10 | ) |   | $ | 527 |   |
|                                                                |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Year ended December 31, 2009    |   | $                                    | 480    |   |   | $ | - |   |   | $ | 13 |   |   | $ | 467 |   |
|                                                                |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Year ended December 31, 2008    |   | $                                    | 703    |   |   | $ | 253 |   |   | $ | 476 |   |   | $ | 480 |   |
|                                                                |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Notes:                                                              |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (A) Amounts charged (credited) to selling and general expenses |   |                                 |   |   |   |
|                                                                |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (B) Principally bad debts written off, net of recoveries       |   |                                 |   |   |   |   |   |   |   |

|                       |   |  (In thousands)                 |   |
|----------------------------|--------|--------------------------------------|--------|
|   Column ADescription |   | Column BBalance atBeginningof Period |   |   | Column CAdditions |   |   | Column DDeductions |   |   | Column EBalance atEndof Period |   |
|                       |   |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

| Valuation allowance for deferred tax assets                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|       Year ended December 31, 2010 |   | $      | -      |   |   | $      | -      |   |   | $      | -      |   |   | $      | -      |   |
|                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Year ended December 31, 2009 |   | $      | 709    |   |   | $      | -      |   |   | $      | 709    |   |   | $      | -      |   |
|                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Year ended December 31, 2008 |   | $      | 598    |   |   | $      | 111    |   |   | $      | -      |   |   | $      | 709    |   |