Acme United(ACU) - 2025 Q1 - Quarterly Report

Financial Performance - Net sales for Q1 2025 increased to $45,958,000, up 2.2% from $44,956,000 in Q1 2024[14] - Gross profit for Q1 2025 was $17,917,000, representing a 3.0% increase compared to $17,396,000 in Q1 2024[14] - Net income for Q1 2025 was $1,653,000, slightly up from $1,636,000 in Q1 2024, resulting in basic earnings per share of $0.44[14][15] - Operating income for Q1 2025 was $2,426,000, compared to $2,558,000 in Q1 2024, indicating a decrease of 5.2%[14] - The company reported a comprehensive income of $1,914,000 for Q1 2025, compared to $1,314,000 in Q1 2024[15] - Consolidated net sales for the three months ended March 31, 2025, were $45,958,000, an increase of 2% compared to $44,956,000 in the same period in 2024[65] - Gross profit for the three months ended March 31, 2025, was $17,917,000, representing 39.0% of net sales, compared to $17,396,000 (38.7% of net sales) in the same period in 2024[69] - Selling, general and administrative expenses for the three months ended March 31, 2025, were $15,491,000 (33.7% of net sales), an increase of $653,000 from $14,838,000 (33.0% of net sales) in the same period in 2024[70] - Interest expense, net for the three months ended March 31, 2025, was $397,000, a decrease of $46,000 from $443,000 in the same period of 2024[73] - The effective income tax rate for the three months ended March 31, 2025, was 22%, down from 24% in the same period in 2024[75] Assets and Liabilities - Total current assets as of March 31, 2025, were $96,845,000, a marginal increase from $95,460,000 as of December 31, 2024[8] - Total liabilities decreased to $54,758,000 as of March 31, 2025, down from $55,191,000 as of December 31, 2024[11] - Long-term debt increased to $20,428,000 as of March 31, 2025, up from $17,606,000 as of December 31, 2024[11] - The Company’s total assets as of March 31, 2025, were $163,039,000, an increase from $159,381,000 as of March 31, 2024[45] - The Company’s mortgage payable to HSBC Bank N.A. was $10,311,000 as of March 31, 2025, slightly down from $10,410,000 as of December 31, 2024[40] Cash Flow and Working Capital - Cash and cash equivalents at the end of Q1 2025 were $3,446,000, down from $6,399,000 at the beginning of the period[19] - Working capital increased approximately $4.2 million during the first three months of 2025, with a current ratio of 4.83 compared to 4.17 at December 31, 2024[76][77] - Cash generated from operating activities and available funds under the revolving loan agreement are expected to be sufficient to finance operations over the next twelve months[83] Segment Performance - The segment operating income for the United States was $2,359,000 for the three months ended March 31, 2025, compared to $2,339,000 for the same period in 2024, reflecting a slight increase of 0.9%[45] - The Company’s segment revenues for the United States, Canada, and Europe for the three months ended March 31, 2025, were $39,122,000, $3,185,000, and $3,651,000, respectively[45] Shareholder Information - The company declared dividends of $0.15 per share for both Q1 2025 and Q1 2024[14] Compensation and Expenses - The Company recognized share-based compensation expense of approximately $413,000 for the three months ended March 31, 2025, down from $449,000 in the same period of 2024, a decrease of about 8%[46] - The Company reported a total of $1,850,026 in unrecognized compensation cost related to non-vested share-based payments as of March 31, 2025, expected to be recognized over a weighted average period of approximately two years[47] Debt and Interest - Long-term debt as of March 31, 2025, included $20,457,000 under the revolving loan agreement and $10,210,000 related to the fixed-rate mortgage, totaling $30,667,000[39][40] - Interest expense for the Company was $426,000 for the three months ended March 31, 2025, compared to $476,000 for the same period in 2024, indicating a decrease of approximately 10.5%[45] Operational Challenges - A significant portion of the products and components are sourced from suppliers in China, with potential tariff impacts increasing costs and demand uncertainty[82] - The company expects to mitigate tariff impacts through strategic sourcing adjustments, price adjustments, and supply chain diversification[82] Internal Controls - As of March 31, 2025, the company's disclosure controls and procedures were deemed ineffective due to a material weakness identified in IT general controls[85] - Changes to internal control over financial reporting have been implemented to address the identified material weakness, including limiting privileged access[86] - The remediation of the material weakness is expected to be completed by December 31, 2025[87] Lease Obligations - Total future minimum lease payments as of March 31, 2025, were $5,138,000, with a present value of lease liabilities of $1,533,000 (current) and $3,012,000 (non-current)[52] Acquisitions - The Company acquired the assets of Elite First Aid, Inc for approximately $7.1 million, with $1.0 million subject to holdbacks based on revenue milestones and indemnification claims[81] Inventory Management - Inventory turnover was 2.1 at March 31, 2025, with total inventories amounting to $57,274,000 compared to $56,254,000 at December 31, 2024[76][56]