# Exhibit 99.5

NATIONAL PRESTO INDUSTRIES, INC.
QUARTERLY REPORT
FOR THE PERIOD ENDED APRIL 2, 2006

(UNAUDITED AND UNREVIEWED)

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NATIONAL PRESTO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
April 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

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NATIONAL PRESTO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Gross profit (loss)
April 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

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

|                                                  | Three 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

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NATIONAL PRESTO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended April 2, 2006 and April 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 provided by (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

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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 April 2, 2006 |               
|External net sales          |               
|Gross profit (loss)         |               
|Operating profit (loss)     |               
|Total assets                |               
|Depreciation                |               
|Capital expenditures        |               
|                           
|Quarter Ended April 3, 2005 |               
|External net sales          |               
|Gross profit (loss)         |               
|Operating profit (loss)     |               
|Total assets                |               
|Depreciation                |               
|Capital expenditures        |               

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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.

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

|                        | (In Thousands)
|----------------------- | --------------
|                        |               
|
|                        |               
|Balance January 1, 2006 |               
|Charges in 2006         |               
|                        |               
|Balance April 2, 2006   |               
|                        |               
|Balance January 1, 2005 |               
|Charges in 2005         |               
|                        |               
|Balance April 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.

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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.

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 is now in the process of selecting a new public accounting firm to handle both
the 1934 Act operating audit and the audit of the pro forma footnote. The firm selected
will also provide guidance on the requisite credentials of the accountant preparing the
footnote as well as the form of the footnote, to increase the likelihood that a clean
opinion can be provided. Grant Thornton had been asked to and agreed to provide that
guidance. At the time of its resignation, the guidance had not been provided.

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. The Companys brief in support of the appeal was
filed on April 7, 2005. 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 affect on the Companys
consolidated financial position, liquidity, or results of operations.

Page 7

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NOTE F  ACCUMULATED
OTHER COMPREHENSIVE INCOME

The $139,000 of accumulated
comprehensive loss at April 2, 2006 reflects the unrealized loss, net of tax, of
available-for-sale marketable security investments. Total comprehensive income was
$1,920,000 and $1,087,000 for the three-month periods ended April 2, 2006 and April 3,
2005, respectively.

NOTE G  ADOPTION OF
NEW ACCOUNTING STANDARDS

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.

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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 will be added to goodwill, is
payable based upon certain earnings targets through December 31, 2010.

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               |           

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                              |                                                  

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.

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The foregoing information for the
periods ended April 2, 2006, and April 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 9

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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 to be 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 First 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 April 2, 2006 and April
3, 2005.

On
a consolidated basis, sales increased by $9,694,000 (27%), gross margins increased by
$144,000 (3%), selling and general expense increased by $126,000 (3%), and other income
increased by $868,000 (74%). Earnings before the provision for income taxes increased by
$886,000 (61%), as did net earnings by $642,000 (50%). Details concerning these changes
can be found in the comments by segment below.

Housewares/small
appliance net sales decreased $1,318,000 from $18,835,000 to $17,517,000, or 7%, largely
the result of a decrease in units shipped. Defense net sales increased by $8,290,000 from
$7,887,000 to $16,177,000, or 105%, largely reflecting the expansion of the defense
segment with the acquisition of Amron, LLC. (See Note I.) Absorbent products net sales
increased by $2,722,000 from $8,637,000 to $11,359,000, or 32%, primarily reflecting
increased sales from the adult incontinence line of products.

Page 10

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Housewares/small
appliance gross profits decreased $276,000 from $3,767,000 (20% of sales) to $3,491,000
(20% of sales) as a result of the reduced volume noted above. Defense gross profits
increased $1,633,000 from $1,968,000 (25% of sales) from the prior years quarter to
$3,601,000 (22% of sales). The dollar increase reflected the increased sales referenced
above, while the percentage decrease reflected a less favorable product mix. Absorbent
products gross profit dropped $1,213,000 to a negative $1,808,000. The decline stemmed
primarily from increased material costs, increased depreciation costs, and cost
inefficiencies of a startup/learning curve nature related to the installation and 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 decreased $157,000, largely attributable to decreases in the
aforementioned accrual. Defense segment selling and general expenses increased by
$251,000, reflecting increased compensation and staffing commensurate with the
segments increased sales and earnings levels and the acquisition of Amron, LLC
during the quarter. (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 $868,000 or 74% due primarily to the receipt and recognition of
approximately $500,000 of insurance proceeds related to a 2004 loss of manufacturing
equipment. Also contributing to the increase were higher interest income of $261,000,
resulting from increased yields on reduced dollars invested (due to the use of funds for
expansion of the defense and absorbent products segments), and royalties.

Earnings
before provision for income taxes increased $886,000 from $1,450,000 to $2,336,000. The
provision for income taxes increased from $174,000 to $418,000, which resulted in an
effective income tax rate increase from 12% to 18% as a result of increased earnings
subject to income tax. Net earnings increased $642,000 from $1,276,000 to $1,918,000, or
50%.

Liquidity and Capital
Resources

Cash
provided by operating activities was $3,508,000 during the first three months of 2006, as
compared to $444,000 used during the first three 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 three months of 2006 was $8,723,000, as
compared to $1,208,000 provided during the first three 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.)

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Cash
flows from financing activities for the first three 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 $27,130,000 to $179,741,000 at April 2, 2006. The Companys
current ratio was 4.9 to 1.0 at April 2, 2006, as compared to 5.1 to 1.0 at December 31,
2005.

As
of April 2, 2006, there were approximately $700,000 of open equipment purchase commitments
to expand the product line in its absorbent products segment. The Company expects to
continue to evaluate acquisition opportunities that align with its business segments and
will make further acquisitions as well as continue to make capital investments in these
segments if the appropriate return on investment is projected.

The
Company has substantial liquidity in the form of cash and short-term maturity marketable
securities to meet all of its anticipated capital requirements, to make dividend payments,
and to fund 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 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.

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.

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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.

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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.

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