Acme United(ACU) - 2024 Q2 - Quarterly Results

Executive Summary Acme United Corporation reported strong Q2 2024 financial results with increased net income and EPS, driven by strategic acquisitions and market share gains, while also providing CEO insights into performance drivers Second Quarter 2024 Financial Highlights Acme United Corporation reported a 29% increase in net income for Q2 2024, reaching $4.5 million, with diluted EPS up 14% to $1.09. Net sales for the quarter increased 4% to $55.4 million, or 8% excluding the divested hunting and fishing product lines. For the first six months, net income rose 37% to $6.1 million, and diluted EPS increased 18% to $1.47, with net sales up 1% to $100.4 million (5% excluding divested lines) Key Financial Highlights (Q2 & H1 2024 vs 2023) | Metric | Q2 2024 | Q2 2023 | Change (%) | H1 2024 | H1 2023 | Change (%) | | :-------------------------------- | :------ | :------ | :--------- | :------ | :------ | :--------- | | Net Sales (reported) | $55.4M | $53.3M | 4% | $100.4M | $99.2M | 1% | | Net Sales (excl. Camillus/Cuda) | - | - | 8% | - | - | 5% | | Net Income | $4.5M | $3.4M | 29% | $6.1M | $4.4M | 37% | | Diluted EPS | $1.09 | $0.96 | 14% | $1.47 | $1.25 | 18% | Strategic Business Developments The company acquired Elite First Aid, Inc. on May 23, 2024, a leading supplier of tactical, trauma, and emergency response products, which had approximately $4.2 million in revenues in 2023. This acquisition is expected to significantly strengthen the emergency response product line and expand the customer base - Acquired Elite First Aid, Inc. on May 23, 2024, a supplier of tactical, trauma, and emergency response products[2] - Elite First Aid had revenues of approximately $4.2 million in 2023[2] - The acquisition is expected to strengthen the emergency response product line and expand the customer base, with plans to offer Elite First Aid products to existing customers[4] CEO Commentary Chairman and CEO Walter C. Johnsen highlighted strong Q2 sales driven by significant market share gains in first aid and increased revenues for Westcott cutting tools due to growth in the craft market and back-to-school sales. He noted an underlying growth of approximately 8% for the quarter, excluding the divested hunting and fishing lines, and expressed enthusiasm for the Elite First Aid acquisition, which enhances the company's ability to provide life-saving products - Strong Q2 2024 sales driven by significant market share gains in first aid[3] - Revenues of Westcott cutting tools increased due to gains in the craft market and growth in back-to-school sales[3][4] - Underlying growth was approximately 8% in Q2 2024 after accounting for the revenues of the sold hunting and fishing lines[4] Financial Performance Analysis This section provides a detailed analysis of the company's consolidated net sales, net income, EPS, gross margin, segmental performance, and liquidity position for the reported periods Consolidated Net Sales Consolidated net sales for Q2 2024 increased 4% to $55.4 million, and 8% when excluding the Camillus and Cuda product lines sold in November 2023. For the first six months of 2024, net sales grew 1% to $100.4 million, or 5% excluding the divested lines Consolidated Net Sales Performance | Period | 2024 (Reported) | 2023 | YoY Change (Reported) | 2024 (Excl. Camillus/Cuda) | YoY Change (Excl. Camillus/Cuda) | | :----- | :-------------- | :--- | :-------------------- | :------------------------- | :------------------------------- | | Q2 | $55.4M | $53.3M | 4% | - | 8% | | H1 | $100.4M | $99.2M | 1% | - | 5% | Three Months Ended June 30, 2024 This subsection details the consolidated net sales performance for the three months ended June 30, 2024, compared to the prior year Q2 Net Sales | Metric | Q2 2024 | Q2 2023 | Change (%) | | :-------------------------------- | :------ | :------ | :--------- | | Net Sales | $55.4M | $53.3M | 4% | | Net Sales (Excl. Camillus/Cuda) | - | - | 8% | Six Months Ended June 30, 2024 This subsection presents the consolidated net sales performance for the six months ended June 30, 2024, compared to the prior year H1 Net Sales | Metric | H1 2024 | H1 2023 | Change (%) | | :-------------------------------- | :------ | :------ | :--------- | | Net Sales | $100.4M | $99.2M | 1% | | Net Sales (Excl. Camillus/Cuda) | - | - | 5% | Consolidated Net Income and EPS Net income for Q2 2024 increased 29% to $4.5 million, with diluted EPS rising 14% to $1.09. For the six months ended June 30, 2024, net income grew 37% to $6.1 million, and diluted EPS increased 18% to $1.47 Consolidated Net Income and EPS Performance | Metric | Q2 2024 | Q2 2023 | Change (%) | H1 2024 | H1 2023 | Change (%) | | :------------ | :------ | :------ | :--------- | :------ | :------ | :--------- | | Net Income | $4.5M | $3.4M | 29% | $6.1M | $4.4M | 37% | | Diluted EPS | $1.09 | $0.96 | 14% | $1.47 | $1.25 | 18% | Three Months Ended June 30, 2024 This subsection details the consolidated net income and diluted EPS for the three months ended June 30, 2024, compared to the prior year Q2 Net Income and EPS | Metric | Q2 2024 | Q2 2023 | Change (%) | | :------------ | :------ | :------ | :--------- | | Net Income | $4.5M | $3.4M | 29% | | Diluted EPS | $1.09 | $0.96 | 14% | Six Months Ended June 30, 2024 This subsection presents the consolidated net income and diluted EPS for the six months ended June 30, 2024, compared to the prior year H1 Net Income and EPS | Metric | H1 2024 | H1 2023 | Change (%) | | :------------ | :------ | :------ | :--------- | | Net Income | $6.1M | $4.4M | 37% | | Diluted EPS | $1.47 | $1.25 | 18% | Gross Margin Gross margin significantly improved, reaching 40.8% in Q2 2024 compared to 37.5% in Q2 2023. For the six-month period, gross margin was 39.9% versus 36.6% in the prior year, primarily driven by productivity improvements in manufacturing and distribution facilities Gross Margin Performance | Period | 2024 | 2023 | Change (pp) | | :----- | :--- | :--- | :---------- | | Q2 | 40.8% | 37.5% | +3.3 pp | | H1 | 39.9% | 36.6% | +3.3 pp | - Increases in gross margin were primarily due to productivity improvements in the Company's manufacturing and distribution facilities[7] Segmental Sales Performance The U.S. segment saw strong growth, while Europe also performed well, both benefiting from market share gains. Canada, however, experienced a decline due to a soft economy impacting school and office products U.S. Segment This subsection details the U.S. segment's net sales performance, highlighting growth driven by market share gains across multiple product lines U.S. Segment Net Sales Performance | Period | 2024 (Reported) | 2023 | YoY Change (Reported) | 2024 (Excl. Camillus/Cuda) | YoY Change (Excl. Camillus/Cuda) | | :----- | :-------------- | :--- | :-------------------- | :------------------------- | :------------------------------- | | Q2 | +5% | - | 5% | - | 10% | | H1 | +2% | - | 2% | - | 6% | - U.S. net sales increase (excluding Camillus and Cuda) mainly due to market share gains across multiple product lines[4] European Segment This subsection outlines the European segment's net sales performance, noting growth in both USD and local currency due to market share gains in the office channel European Segment Net Sales Performance | Period | 2024 (USD) | 2024 (Local Currency) | 2023 | YoY Change (USD) | YoY Change (Local Currency) | YoY Change (Excl. Camillus/Cuda) | | :----- | :--------- | :-------------------- | :--- | :--------------- | :-------------------------- | :------------------------------- | | Q2 | +4% | +5% | - | 4% | 5% | 9% | | H1 | +5% | +5% | - | 5% | 5% | 8% | - Sales increase for both periods was due to market share gains in the office channel[5] Canadian Segment This subsection presents the Canadian segment's net sales performance, which experienced a decline in both USD and local currency due to a soft economy impacting school and office products Canadian Segment Net Sales Performance | Period | 2024 (USD) | 2024 (Local Currency) | 2023 | YoY Change (USD) | YoY Change (Local Currency) | YoY Change (Excl. Camillus/Cuda) | | :----- | :--------- | :-------------------- | :--- | :--------------- | :-------------------------- | :------------------------------- | | Q2 | -7% | -7% | - | -7% | -7% | -4% | | H1 | -7% | -7% | - | -7% | -7% | -2% | - Sales of school and office products have been impacted by a soft economy[6] Liquidity and Capital Management The company significantly reduced its bank debt less cash to $33.1 million as of June 30, 2024, from $47.5 million a year prior. This improvement was supported by $8.5 million in free cash flow generation and approximately $13.0 million in net proceeds from the sale of the Camillus and Cuda product lines. During the period, the company also invested $6.1 million in the Elite First Aid acquisition and distributed $2.1 million in common stock dividends Bank Debt Less Cash | Date | Amount | | :---------------- | :------- | | June 30, 2024 | $33.1M | | June 30, 2023 | $47.5M | - Generated approximately $8.5 million in free cash flow during the twelve-month period ended June 30, 2024[8] - Realized net proceeds of approximately $13.0 million from the sale of the Camillus and Cuda product lines[8] - Paid approximately $6.1 million for the acquisition of Elite First Aid Inc. and distributed $2.1 million in dividends on common stock[8] Company Information This section provides an overview of Acme United Corporation, its market position, key brands, and details regarding the recent conference call for quarterly results About Acme United Corporation Acme United Corporation is a global leader in innovative safety solutions and cutting technology, serving school, home, office, hardware, sporting goods, and industrial markets. Its portfolio includes prominent brands such as First Aid Only®, Westcott®, and Elite First Aid - Acme United Corporation is a leading worldwide supplier of innovative safety solutions and cutting technology[9] - Serves the school, home, office, hardware, sporting goods, and industrial markets[9] - Leading brands include First Aid Only®, First Aid Central®, PhysiciansCare®, Pac-Kit®, Spill Magic®, Westcott®, Clauss®, DMT®, Med-Nap and Elite First Aid[9] Conference Call Details Acme United held a conference call on Friday, July 19, 2024, at 12:00 p.m. ET to discuss its quarterly results, with details provided for dial-in and webcast access - Acme United held a conference call to discuss its quarterly results on Friday, July 19, 2024, at 12:00 p.m. ET[8] - Dial-in: 877-407-0784 (U.S.), 201-689-8560 (International); Confirmation code: 13747775[8] - Live webcast accessible through the Investor Relations section of www.acmeunited.com, with a replay available under Audio Archives[8] Forward-Looking Statements and Risk Factors This section outlines the company's forward-looking statements and the various risk factors that could materially impact future financial results and operational performance Forward-Looking Statements and Risk Factors The report includes forward-looking statements made under the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. Key risks include global economic conditions, inflation, interest rates, geopolitical conflicts, supply chain disruptions, labor costs, currency fluctuations, inventory management, changes in consumer habits, competition, technological changes, integration of acquisitions, and international trade policies - The Company may make written or oral "forward-looking statements" pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995[10][12] - Actual results could differ materially from current expectations due to various risks and uncertainties[12] - Key risks and uncertainties include[13] - Changes in the Company's plans, strategies, objectives, expectations, and intentions[13] - Impact of uncertainties in global economic conditions, inflation, and interest rates[13] - Potential adverse effects from conflicts in Ukraine and the Middle East, and additional supply chain disruptions[13] - Labor-related costs, currency fluctuations, and the Company's ability to effectively manage inventory[13] - Changes in client needs and consumer spending habits, impact of competition, and technological changes[13] - Ability to manage growth effectively, including integrating acquisitions, and international trade policies[13] Condensed Consolidated Financial Statements This section provides the unaudited condensed consolidated financial statements, including statements of income for three and six months, and balance sheets, offering a detailed view of the company's financial position and performance Condensed Consolidated Statements of Income (Three Months) This section presents the unaudited condensed consolidated statements of income for the three months ended June 30, 2024, and 2023, detailing net sales, cost of goods sold, gross profit, operating expenses, and net income Condensed Consolidated Statements of Income (Three Months Ended June 30) | Metric | June 30, 2024 | June 30, 2023 | | :------------------------------------- | :------------ | :------------ | | Net sales (in thousands) | $55,425 | $55,336 | | Cost of goods sold (in thousands) | 32,798 | 33,314 | | Gross profit (in thousands) | 22,627 | 20,022 | | Selling, general, and administrative expenses (in thousands) | 16,252 | 14,772 | | Operating income (in thousands) | 6,375 | 5,250 | | Interest expense, net (in thousands) | 539 | 832 | | Other income, net (in thousands) | (28) | (23) | | Income before income tax expense (in thousands) | 5,864 | 4,441 | | Income tax expense (in thousands) | 1,412 | 998 | | Net income (in thousands) | $4,452 | $3,443 | | Earnings per share - Basic | $1.21 | $0.97 | | Earnings per share - Diluted | $1.09 | $0.96 | | Shares outstanding - Basic | 3,679 | 3,555 | | Shares outstanding - Diluted | 4,088 | 3,591 | Condensed Consolidated Statements of Income (Six Months) This section provides the unaudited condensed consolidated statements of income for the six months ended June 30, 2024, and 2023, offering a half-year view of the company's financial performance Condensed Consolidated Statements of Income (Six Months Ended June 30) | Metric | June 30, 2024 | June 30, 2023 | | :------------------------------------- | :------------ | :------------ | | Net sales (in thousands) | $100,382 | $99,175 | | Cost of goods sold (in thousands) | 60,358 | 62,872 | | Gross profit (in thousands) | 40,024 | 36,303 | | Selling, general, and administrative expenses (in thousands) | 31,090 | 28,865 | | Operating income (in thousands) | 8,934 | 7,438 | | Interest expense, net (in thousands) | 982 | 1,734 | | Other income, net (in thousands) | (72) | (46) | | Income before income tax expense (in thousands) | 8,024 | 5,750 | | Income tax expense (in thousands) | 1,935 | 1,318 | | Net income (in thousands) | $6,089 | $4,432 | | Shares outstanding - Basic | 3,664 | 3,548 | | Shares outstanding - Diluted | 4,143 | 3,548 | | Earnings per share - Basic | $1.66 | $1.25 | | Earnings per share - Diluted | $1.47 | $1.25 | Condensed Consolidated Balance Sheets This section presents the unaudited condensed consolidated balance sheets as of June 30, 2024, and June 30, 2023, outlining the company's assets, liabilities, and stockholders' equity Condensed Consolidated Balance Sheets (Amounts in thousands) | Assets | June 30, 2024 | June 30, 2023 | | :------------------------------------ | :------------ | :------------ | | Current assets: | | | | Cash and cash equivalents (in thousands) | $3,791 | $3,401 | | Accounts receivable, net (in thousands) | 40,074 | 39,796 | | Inventories (in thousands) | 56,621 | 55,944 | | Prepaid expenses and other current assets (in thousands) | 5,662 | 4,330 | | Total current assets (in thousands) | 106,148 | 103,471 | | Property, plant and equipment, net (in thousands) | 30,570 | 27,263 | | Operating lease right of use asset (in thousands) | 5,176 | 2,374 | | Intangible assets, less accumulated amortization (in thousands) | 31,647 | 27,969 | | Other assets (in thousands) | - | 750 | | Total assets (in thousands) | $173,541 | $161,827 | | Liabilities and stockholders' equity: | | | | Current liabilities: | | | | Accounts payable (in thousands) | $10,319 | $10,724 | | Operating lease liability - short term (in thousands) | 1,589 | 1,122 | | Mortgage payable - short term (in thousands) | 429 | 411 | | Other accrued liabilities (in thousands) | 15,656 | 13,013 | | Total current liabilities (in thousands) | 27,992 | 25,271 | | Long term debt (in thousands) | 26,419 | 39,979 | | Mortgage payable - long term (in thousands) | 10,073 | 10,485 | | Operating lease liability - long term (in thousands) | 3,684 | 1,407 | | Other non-current liabilities (in thousands) | 1,415 | 1,033 | | Total liabilities (in thousands) | 69,583 | 78,175 | | Total stockholders' equity (in thousands) | 103,958 | 83,652 | | Total liabilities and stockholders' equity (in thousands) | $173,541 | $161,827 |