# Exhibit 99.1

# NATIONAL PRESTO INDUSTRIES, INC.

# QUARTERLY REPORT

# FOR THE PERIOD ENDED JULY 2, 2006

# (UNAUDITED AND UNREVIEWED)

---

NATIONAL PRESTO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
July 2, 2006 and December 31, 2005
(Unaudited and Unreviewed)
(Dollars in thousands)

|                                | 2006 |  | 2005
|------------------------------- | ---- |  | ----
|ASSETS                          |      |  |     
|CURRENT ASSETS:                 |      | 
|                               
|Cash and cash equivalents       |      |  |     
|                               
|Marketable securities           |      |  |     
|                               
|Accounts receivable, net        |      |  |     
|                               
|Inventories:                    |      | 
|Finished goods                  |      |  | $   
|                               
|Work in process                 |      |  |     
|                               
|Raw materials                   |      |  |     
|                                |      |  |     
|                               
|Other current assets            |      |  |     
|                                |      |  |     
|                               
|Total current assets            |      |  |     
|                               
|PROPERTY,  PLANT AND EQUIPMENT  |      |  |     
|                               
|Less allowance for depreciation |      |  |     
|                                |      |  |     
|                               
|OTHER ASSETS                    |      |  |     
|                               
|                                |      |  |     
|                                |      |  |     
|                                |      |  |     

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

Page 1

---

NATIONAL PRESTO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Gross profit (loss)
July 2, 2006 and December 31, 2005
(Unaudited and Unreviewed)
(Dollars in thousands)

|                                              | 2006 |  | 2005
|--------------------------------------------- | ---- |  | ----
|LIABILITIES                                   |      |  |     
|CURRENT LIABILITIES:                          |      | 
|Accounts payable                              |      |  |     
|                                             
|Federal and state income taxes                |      |  |     
|                                             
|Accrued liabilities                           |      |  |     
|                                             
|                                              |      |  |     
|Total current liabilities                     |      |  |     
|                                             
|DEFERRED INCOME TAXES                         |      |  |     
|COMMITMENTS AND CONTINGENCIES                 |      |  |     
|                                             
|                                             
|STOCKHOLDERS EQUITY                         
|                                             
|Common stock, $1 par value:                   |      | 
|Authorized: 12,000,000 shares                
|Issued: 7,440,518 shares                      |      |  | $   
|                                             
|Paid-in capital                               |      |  |     
|                                             
|Retained earnings                             |      |  |     
|                                             
|Accumulated other comprehensive income (loss) |      |  |     
|                                              |      |  |     
|                                             
|                                              |      |  |     
|                                             
|Treasury stock, at cost                       |      |  |     
|                                             
|                                              |      |  |     
|Total stockholders equity                    |      |  |     
|                                             
|                                              |      |  |     
|                                              |      |  |     
|                                              |      |  |     

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

Page 2

---

NATIONAL PRESTO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
Three Months and Six Months Ended July 2, 2006 and July 3, 2005
(Unaudited and Unreviewed)
(In thousands except per share data)

|                                                  | Three Months Ended |  | Six Months Ended
|------------------------------------------------- | ------------------ |  | ----------------
|
|Net sales                                         |                    |  | $               
|                                                 
|Cost of sales                                     |                    |  |                 
|                                                 
|                                                  |                    |  |                 
|Gross profit                                      |                    |  |                 
|                                                 
|Selling and general expenses                      |                    |  |                 
|                                                 
|                                                  |                    |  |                 
|Operating profit                                  |                    |  |                 
|                                                 
|Other income                                      |                    |  |                 
|                                                 
|                                                  |                    |  |                 
|Earnings before provision for income taxes        |                    |  |                 
|                                                 
|Income tax provision                              |                    |  |                 
|                                                 
|                                                  |                    |  |                 
|Net earnings                                      |                    |  | $               
|                                                  |                    |  |                 
|                                                 
|Weighted average shares outstanding:              |                    | 
|Basic                                             |                    |  |                 
|                                                  |                    |  |                 
|Diluted                                           |                    |  |                 
|                                                  |                    |  |                 
|                                                 
|Net earnings per share:                          
|Basic                                             |                    |  | $               
|                                                  |                    |  |                 
|Diluted                                           |                    |  | $               
|                                                  |                    |  |                 
|                                                 
|Cash dividends declared and paid per common share |                    |  | $               
|                                                  |                    |  |                 

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

Page 3

---

NATIONAL PRESTO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended July 2, 2006 and July 3, 2005
(Unaudited and Unreviewed)
(Dollars in thousands)

Six Months Ended July 2, 2006 and July 3, 2005
(Unaudited and Unreviewed)
(Dollars in thousands)

|                                                    | 2006 |  | 2005
|--------------------------------------------------- | ---- |  | ----
|Cash flows from operating activities:               |      |  |     
|Net earnings                                        |      |  | $   
|Adjustments to reconcile net earnings to net       
|cash provided by operating activities:             
|Provision for depreciation                          |      |  |     
|Other                                               |      |  |     
|Changes in:                                         |      | 
|Accounts receivable                                 |      |  |     
|Inventories                                         |      |  |     
|Other current assets                                |      |  |     
|Accounts payable and accrued liabilities            |      |  |     
|Federal and state income taxes                      |      |  |     
|                                                    |      |  |     
|Net cash used in operating activities               |      |  |     
|                                                    |      |  |     
|                                                   
|Cash flows from investing activities:              
|Marketable securities purchased                     |      |  |     
|Marketable securities  maturities and sales        |      |  |     
|Acquisition of property, plant and equipment        |      |  |     
|Acquisition of businesses, net of cash acquired     |      |  |     
|Sale of property, plant and equipment               |      |  |     
|                                                    |      |  |     
|Net cash provided by (used in) investing activities |      |  |     
|                                                    |      |  |     
|                                                   
|Cash flows from financing activities:               |      | 
|Dividends paid                                      |      |  |     
|Other                                               |      |  |     
|                                                    |      |  |     
|Net cash used in financing activities               |      |  |     
|                                                    |      |  |     
|                                                   
|Net decrease in cash and cash equivalents           |      |  |     
|Cash and cash equivalents at beginning of period    |      |  |     
|                                                    |      |  |     
|Cash and cash equivalents at end of period          |      |  | $   
|                                                    |      |  |     

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

Page 4

---

NATIONAL PRESTO INDUSTRIES, INC., AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED AND UNREVIEWED)

NOTE A  EARNINGS PER SHARE

The Companys basic net earnings per share amounts have been computed by
dividing net earnings by the weighted average number of outstanding common shares. The Companys diluted net earnings per
share is computed by dividing net earnings by the weighted average number of outstanding common shares and common share
equivalents relating to stock options, when dilutive.

NOTE B  BUSINESS SEGMENTS

In the following summary, operating profit (loss) represents earnings (loss)
before other income, principally interest income and income taxes.

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

|                           | (in thousands)
|-------------------------- | --------------
|
|Quarter ended July 2, 2006 |               
|External net sales         |               
|Gross profit (loss)        |               
|Operating profit (loss)    |               
|Total assets               |               
|Depreciation               |               
|Capital expenditures       |               
|                          
|Quarter ended July 3, 2005 |               
|External net sales         |               
|Gross profit (loss)        |               
|Operating profit (loss)    |               
|Total assets               |               
|Depreciation               |               
|Capital expenditures       |               

Page 5

---

|                              | (in thousands)
|----------------------------- | --------------
|
|Six Months ended July 2, 2006 |               
|External net sales            |               
|Gross profit (loss)           |               
|Operating profit (loss)       |               
|Total assets                  |               
|Depreciation                  |               
|Capital expenditures          |               
|                             
|Six Months ended July 3, 2005 |               
|External net sales            |               
|Gross profit (loss)           |               
|Operating profit (loss)       |               
|Total assets                  |               
|Depreciation                  |               
|Capital expenditures          |               

NOTE C  PRODUCT WARRANTY

Company housewares/small appliance products are generally warranted to the
original owner to be free from defects in material and workmanship for a period of 1 to 12 years from date of purchase. The
Company allows a 60-day over-the-counter initial return privilege through cooperating dealers. The Company services its products
through independent service providers throughout the United States and a corporate service repair operation. The Companys
service and warranty programs are competitive with those offered by other manufacturers in the industry. The Company determines
its product warranty liability based on historical percentages which have remained relatively consistent over the years.

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

|                                             | (in thousands)
|-------------------------------------------- | --------------
|
|Beginning balance January 1                  |               
|Accruals during the period                   |               
|Charges / payments made under the warranties |               
|                                             |               
|Balance end of period                        |               
|                                             |               

NOTE D  PLANT CLOSING

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

Page 6

---

The following table summarizes the plant closing accrual activities for the
periods presented:

|                        | (in thousands)
|----------------------- | --------------
|
|Balance January 1, 2006 |               
|Charges in 2006         |               
|                        |               
|Balance July 2, 2006    |               
|                        |               
|                       
|Balance January 1, 2005 |               
|Charges in 2005         |               
|                        |               
|Balance July 3, 2005    |               
|                        |               

The remaining employee termination benefits are for health care costs for
workers who accepted early retirement at the time of the plant closing and will be extinguished over approximately the next two
years.

NOTE E  COMMITMENTS AND CONTINGENCIES

In July 2002, the Securities and Exchange Commission (SEC) filed a lawsuit in
the federal district court in Chicago, Illinois, against National Presto Industries, Inc. alleging the Company operated as an
unregistered investment company from 1994 through 2002. The case does not involve fraud, deceptive practices, or questionable
accounting methods. During the fourth quarter of 2005, the federal district judge granted the SECs motion for summary
judgment and ordered the Company to register under the Investment Company Act. The Company filed the requisite notice of
registration, indicating that the Company did not believe that it met the statutory definition of an investment company and as
such, the filing was being made pursuant to the courts order, rather than the terms and requirements of the Act. It also
indicated that it would shortly be filing an application to deregister. That application was subsequently filed in January 2006.
Timing of the SEC staffs review of the application for deregistration is not known at this time. In April 2006, the SEC staff formally advised Prestos counsel that it would
not object if the Company filed operating company financial statements under the 1934 Act for the period ended December 31, 2005,
so long as that filing was supplemented via footnote with audited pro forma financial statement information consistent with
investment company reporting requirements pursuant to Article 6 of Regulation S-X and Form N-CSR. The SEC staff further advised
that, if audited pro forma financial information was not available at the filing deadline, unaudited/incomplete investment company
financial data should be supplied as an intermediate step, but stated its view that if the Company provided unaudited/incomplete
financial statements, the Company would not be deemed by the SEC staff to have met its disclosure obligations under the federal
securities laws. The Company has not supplemented its 1934 Act financial statements with unaudited/incomplete financial data upon
advice of counsel. In order to provide an audited footnote, the Company needed to enter into an additional separate audit engagement with a public accounting firm. Presto had been informed that no reputable accounting firm would accept the investment
company financial statements that Presto was currently able to prepare as the basis for an audit engagement. The preparation of
such statements raises many substantive and methodological questions for which the regulations and current accounting literature
provide no clear answers.

Page 7

---

In April, 2006, after receiving letters from the SEC arising from the absence
of the footnote from the Companys 10-K and annual report, the Companys 1934 Act auditors, Grant Thornton, withdrew its
opinions pertaining to the year ended December 31, 2005 and shortly thereafter resigned. The Company has tentatively selected a new public
accounting firm to handle both the 1934 Act operating audit and the audit of the pro forma footnote. The accounting firm has
informed the Company that the firm will require further guidance and clarification from the SEC staff on matters pertaining to the
audits as a condition to the firms acceptance of the audit engagement. The Company is in the process of seeking that
guidance and clarification. Registrant is thus currently not in a position to state when the pro forma footnote will be available.
For additional details on this matter see the Registrants Form 8-K/A filings dated April 25, 2006 and May 11, 2006.

The Company has filed a notice of appeal from the federal district
judges decision to the United States Circuit Court of Appeals for the 7th Circuit. Because the appeal was from a summary
judgment rather than a trial decision, the findings of the lower court will be reviewed afresh (de novo) by three judges at the
appellate level. Both the Companys and the SECs briefs have been filed. Oral argument is scheduled for September 20,
2006. Although management believes that its position will be upheld on appeal, it can not predict either when the matter will be
resolved or what the final outcome will be.

During the process of the appeal and the SECs consideration of its
deregistration application, the Company plans to continue to provide its shareholders and the investment community with operating
company financial information prepared in a fashion that is consistent with its historical filings, so that investors will have a
meaningful way to monitor the Companys performance.

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

NOTE F  ACCUMULATED OTHER COMPREHENSIVE INCOME

The $105,000 of accumulated comprehensive loss at July 2, 2006 reflects the
unrealized loss, net of tax, of available-for-sale marketable security investments. Total comprehensive income was $3,648,000 and
$1,591,000 for the three-month periods ended July 2, 2006 and July 3, 2005, respectively, and $5,568,000 and $2,678,000 for the
six-month periods ended July 2, 2006 and July 3, 2005, respectively.

NOTE G  RECENT ACCOUNTING PRONOUNCEMENTS

In June 2006, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48). FIN 48 clarifies the accounting for
uncertainty in income taxes recognized in an enterprises financial statements in accordance with FASB Statement No. 109,
Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides
guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN
48 will be effective beginning in 2007. The Company is currently assessing the impact, if any, that the adoption of this
Interpretation will have on its financial statements.

Page 8

---

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

In December 2004, the FASB issued SFAS 123R, Share-Based Payment.
This revised standard addresses the accounting for share-based payment transactions in which a company receives employee services
in exchange for either equity instruments of the company or that are based on the fair value of the companys equity
instruments or that may be settled by the issuance of such equity instruments. Under the new standard, companies will no longer be
able to account for share-based compensation transactions using the intrinsic method in accordance with APB 25. Instead, companies
will be required to account for such transactions using a fair-value method and recognize the expense in the consolidated
statement of income. SFAS 123R will be effective for all interim and annual periods beginning January 1, 2006. The Company intends
to apply the modified prospective method and estimates the adoption of this standard will not have a material impact on the
Companys operating results.

NOTE H  INCOME TAXES

On October 22, 2004, Congress passed the American Jobs Creation Act of 2004
(the Act). The Act provides a deduction for income from qualified domestic production activities, which will be phased in from
2005 through 2010, as well as other tax implications. The domestic production deduction will be accounted for as a special
deduction and as such, will have no effect on deferred tax assets and liabilities existing at the date of enactment. The Act did
not have a material effect on 2005, and management does not expect the provisions of Act to have a material impact on the 2006
financial statements.

NOTE I  BUSINESS ACQUISITION

On January 30, 2006, the Company purchased the assets of Amron, LLC, an
Antigo, Wisconsin defense manufacturer of cartridge cases used in medium caliber (20-40mm) ammunition. The acquisition enhances
the Companys position as a viable competitive force in medium caliber ammunition programs of the U.S. Department of Army.
The purchase price was $24,209,000, consisting of a $16,209,000 payment at closing and an $8,000,000 earn-out amount, which is
payable based upon certain earnings targets through December 31, 2010. The earn-out will be added to goodwill.

The acquisition was accounted for as a purchase with all assets recorded at
fair market value. The excess of the purchase price over the net tangible assets has been recorded as goodwill and is included as
part of the Companys defense products segment. Based upon the purchase price and fair value of the assets acquired, the
following represents the allocation of the aggregate purchase price to the acquired net assets of Amron, LLC. The Company is in
the process of obtaining third-party valuations of certain assets; thus, the allocation of the purchase price is subject to
refinement.

|                                  | (in 000s)
|--------------------------------- | ----------
|Receivables                       |           
|Inventory                         |           
|Fixed Assets                      |           
|Goodwill                          |           
|                                  |           
|Total Assets Acquired             |           
|Less: Current Liabilities Assumed |           
|                                  |           
|Net Assets Acquired               |           
|                                  |           

Page 9

---

The results of operations for the Company include those of Amron, LLC as of
the date of closing. The following pro forma condensed consolidated results of operations have been prepared as if the acquisition
of Amron had occurred as of January 1, 2005.

|                                     | (unaudited)(in thousands, except per share data)
|------------------------------------ | ------------------------------------------------
|
|Net Revenues                         |                                                 
|Net Income                           |                                                 
|Net Income per Share:               
|Basic                                |                                                 
|Diluted                              |                                                 
|Weighted Average Shares Outstanding: |                                                 
|Basic                                |                                                 
|Diluted                              |                                                 
|                                    
|
|
|Net Revenues                         |                                                 
|Net Income                           |                                                 
|Net Income per Share:               
|Basic                                |                                                 
|Diluted                              |                                                 
|Weighted Average Shares Outstanding: |                                                 
|Basic                                |                                                 
|Diluted                              |                                                 

The unaudited pro forma condensed consolidated results of operations are not
necessarily indicative of results that would have occurred had the acquisition occurred as of January 1, 2005, nor are they
necessarily indicative of the results that may occur in the future.

---

The foregoing information for the periods ended July 2, 2006, and July 3,
2005, is unaudited and not reviewed by a public accountant; however, in the opinion of management of the Registrant, it reflects
all the adjustments, which were of a normal recurring nature, necessary for a fair statement of the results for the interim
periods. The condensed consolidated balance sheet as of December 31, 2005, is summarized from consolidated financial statements,
but does not include all the disclosures contained therein and should be read in conjunction with the 2005 Annual Report. Interim
results for the period are not indicative of those for the year.

Page 10

---

ITEM 2.   MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-looking statements in
this Managements Discussion and Analysis of Financial Condition and Results of Operations, elsewhere in this document, in
the Companys 2005 Annual Report to Shareholders, in the Proxy Statement for the annual meeting held May 16, 2006, and in the
Companys press releases and oral statements made with the approval of an authorized executive officer are made pursuant to
the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. There are certain important factors that could
cause results to differ materially from those anticipated by some of the statements made herein. Investors are cautioned that all
forward-looking statements involve risks and uncertainty. In addition to the factors discussed herein and in the notes to
consolidated financial statements, among the other factors that could cause actual results to differ materially are the following:
consumer spending and debt levels; interest rates; continuity of relationships with and purchases by major customers; product mix;
the benefit and risk of business acquisitions; competitive pressure on sales and pricing; increases in material, freight/shipping,
or production cost which cannot be recouped in product pricing; delays or interruptions in shipping; cut backs by the US
government in defense spending, and the efficient start-up and utilization of capital equipment investments. Additional
information concerning those and other factors is contained in the Companys Securities and Exchange Commission filings,
copies of which are available from the Company without charge. The Company does not undertake any obligation to publicly update or
revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Comparison Second Quarter 2006 and 2005

Readers are directed to Note
B, Business Segments for data on the financial results of the Companys three business segments for the Quarters
ended July 2, 2006 and July 3, 2005.

On a consolidated basis,
sales increased by $23,345,000 (67%), gross margins increased by $3,980,000 (81%), selling and general expense increased by
$878,000 (21%), and other income increased by $172,000 (15%). Earnings before the provision for income taxes increased by
$3,274,000 (173%), as did net earnings by $2,040,000 (130%). Details concerning these changes can be found in the comments by
segment below.

Housewares/small appliance
net sales increased $1,718,000 from $16,521,000 to $18,239,000, or 10%, largely the result of an increase in units shipped.
Defense net sales increased by $18,622,000 from $8,963,000 to $27,585,000, or 208%, with approximately 50% of the increase
attributable to the expansion of the defense segment with the acquisition of Amron, LLC (see Note I) and the remaining increase
largely stemming from sales related to the US Department of the Army 40mm Systems program. Absorbent products net sales increased
by $3,005,000 from $9,185,000 to $12,190,000, or 33%, primarily reflecting increased sales from the adult incontinence line of
products.

Page 11

---

Housewares/small appliance
gross profits increased $536,000 from $3,478,000 (21% of sales) to $4,014,000 (22% of sales), reflecting the increased sales
volume mentioned above. Defense gross profits increased $4,077,000 from $1,950,000 (22% of sales) from the prior years
quarter to $6,027,000 (22% of sales). The dollar increase likewise reflected the increased sales referenced above. Absorbent
products gross profit dropped $633,000 to a negative $1,130,000. The decline stemmed primarily from increased material costs,
increased depreciation costs, and cost inefficiencies of a startup/learning curve nature related to the ramp-up of new
state-of-the-art machinery.

The Company accrues for
unexpended selling and advertising costs, primarily for housewares/small appliances, budgeted for the year against each
quarters sales. Selling and advertising charges included in selling expense in each quarter represent that percentage of the
annual sales and advertising budget associated with that quarters shipments. Revisions to this budget result in periodic
changes to the accrued liability for committed selling and advertising expenditures. Housewares/small appliance selling and
general expenses were relatively flat. Defense segment selling and general expenses increased by $1,007,000, reflecting increased
compensation and staffing commensurate with the segments increased sales and earnings levels and the addition of Amron, LLC.
(See Note I.) Absorbent segment selling and general expenses were relatively flat.

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

Other income increased
$172,000 or 15%. The Company realized higher interest income from increased yields despite the fact that there were reduced
dollars invested (due to the use of funds for expansion of the defense and absorbent products segments).

Earnings before provision for
income taxes increased $3,274,000 from $1,889,000 to $5,163,000. The provision for income taxes increased from $315,000 to
$1,549,000, which resulted in an effective income tax rate increase from 17% to 30% as a result of increased earnings subject to
income tax. Net earnings increased $2,040,000 from $1,574,000 to $3,614,000, or 130%.

Comparison of First Six Months 2006 and 2005

Readers are directed to Note
B, Business Segments for data on the financial results of the Companys three business segments for the Six
Months ended July 2, 2006 and July 3, 2005.

On a consolidated basis,
sales increased by $33,039,000 (47%), gross margins increased by $4,124,000 (41%), selling and general expense increased by
$1,004,000 (11%), and other income, principally interest, increased by $1,040,000 (44%). Earnings before the provision for income
taxes increased by $4,160,000 (125%), as did net earnings by $2,682,000 (94%). Details concerning these changes can be found in
the comments by segment below.

Page 12

---

Housewares/small appliance
net sales increased $400,000 from $35,356,000 to $35,756,000, or 1%, largely the result of an increase in units shipped. Defense
net sales increased by $26,912,000 from $16,850,000 to $43,762,000, or 160%, with approximately 60% of the increase attributable
to the expansion of the defense segment with the acquisition of Amron, LLC (see Note I) and the remaining increase largely
stemming from sales related to the US Department of the Army 40mm Systems program. Absorbent products net sales increased by
$5,727,000 from $17,822,000 to $23,549,000, or 32%, primarily reflecting increased sales from the adult incontinence line of
products.

Housewares/small appliance
gross profits increased nominally by $260,000 from $7,245,000 (21% of sales) to $7,505,000 (21% of sales). Defense gross profits
increased $5,710,000 from $3,918,000 (23% of sales) from the prior period to $9,628,000 (22% of sales). The dollar increase
reflected the increased sales referenced above. Absorbent products gross profit dropped $1,846,000 to a negative $2,938,000. The
decline stemmed primarily from increased material costs, increased depreciation costs, and cost inefficiencies of a
startup/learning curve nature related to the ramp-up of new state-of-the-art machinery.

The accrual for unexpended
advertising costs discussed in the Second Quarter comparison also applies to the first six months. Housewares/small appliance
selling and general expenses decreased $299,000, largely attributable to decreases in the aforementioned accrual and in legal and
professional expenses. Defense segment selling and general expenses increased by $1,258,000, reflecting increased compensation and
staffing commensurate with the segments increased sales and earnings levels. Absorbent segment selling and general expenses
were relatively flat.

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

Other income increased
$1,040,000 or 44% as a result of higher interest income of $372,000 resulting from increased yields on reduced dollars invested
(due to the use of funds for expansion of the defense and absorbent products segments) and the receipt and recognition of
approximately $500,000 of insurance proceeds related to a 2004 loss of manufacturing equipment.

Earnings before provision for
income taxes increased $4,160,000 from $3,339,000 to $7,499,000. The provision for income taxes increased from $489,000 to
$1,967,000, which resulted in an effective income tax rate increase from 15% to 26% as a result of increased earnings subject to
tax. Net earnings increased $2,682,000 from $2,850,000 to $5,532,000, or 94%.

Liquidity and Capital Resources

Cash used in operating
activities was $8,122,000 during the first six months of 2006, as compared to $7,035,000 used during the first six months of 2005.
The principal factors behind the increase in cash used can be found in the changes in the components of working capital within the
Consolidated Statement of Cash Flows.

Net cash used in investing
activities during the first six months of 2006 was $6,663,000, as compared to $1,925,000 provided during the first six months of
2005. The change is attributable primarily to the acquisition of Amron, LLC which occurred during the first quarter of 2006. (See
Note I.)

Page 13

---

Cash flows from financing
activities for the first six months of 2006 and 2005 primarily differed as a result of the $.45 per share increase in the extra
dividend paid during those periods.

Working capital decreased by
$22,061,000 to $184,810,000 at July 2, 2006. The Companys current ratio was 4.4 to 1.0 at July 2, 2006, as compared to 5.1
to 1.0 at December 31, 2005.

As of July 2, 2006, there
were approximately $4,360,000 and $680,000 of open equipment/facilities purchase commitments to expand the product lines in the
defense and absorbent products segments, respectively. The Company expects to continue to evaluate acquisition opportunities that
align with its business segments and will make further acquisitions as well as continue to make capital investments in these
segments if the appropriate return on investment is projected.

The Company has substantial
liquidity in the form of cash and short-term maturity marketable securities to meet all of its anticipated capital requirements,
to make dividend payments, and to fund growth through acquisitions and other means. The company intends to continue its investment
strategy of safety and short-term liquidity throughout its investment holdings. The interest rate environment is a function of
national and international monetary policies as well as the growth and inflation rates of the U.S. and foreign economies and is
not controllable by the Company.

The Company may have
additional plant closing costs stemming from its 2001-2002 plant closing (see Note D) but is not aware of any such costs. However,
plant closing activities of this nature are unique and infrequent for the Company; therefore, these activities possess inherent
risk that errors in the estimation process could occur. Subject to the foregoing estimation risk, no major plant closing related
expenses are expected in 2006.

CRITICAL ACCOUNTING POLICIES

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

Page 14

---

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

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

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

NEW ACCOUNTING PRONOUNCEMENTS

Please refer to Note G for information related to the effect of adopting new
accounting pronouncements on the Companys consolidated financial statements.

# ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

Page 15

---

The Company has no history
of, and does not anticipate in the future, investing in derivative financial instruments. Most transactions with international
customers are entered into in U.S. dollars, precluding the need for foreign currency cash flow hedges. The Companys
manufacturing contracts with its foreign suppliers contain provisions to share the impact of fluctuations in the exchange rate
between the U.S. dollar and the Hong Kong dollar above and below a fixed range contained in the contracts. All transactions with
the foreign suppliers were within the exchange rate range specified in the contracts during 2006, 2005, and 2004. There is no
similar provision applicable to the Chinese Yuan which until 2005 had been tied to the U.S. Dollar. To the extent there are
further revaluations of the Yuan vis-à-vis the U.S. Dollar, the cost of products secured via purchase orders issued
subsequent to the revaluation may be affected.

Page 16

---