Acme United(ACU) - 2025 Q2 - Quarterly Report

Part I — Financial Information Item 1: Financial Statements (Unaudited) Unaudited condensed consolidated financial statements show increased net income and improved operating cash flow Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position at specific points in time Balance Sheet Highlights (June 30, 2025 vs. December 31, 2024) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change | | :-------------------------------- | :----------------------------- | :------------------------------- | :----- | | Total Assets | $170,868 | $162,171 | +$8,697 | | Total Liabilities | $57,146 | $55,191 | +$1,955 | | Total Stockholders' Equity | $113,722 | $106,980 | +$6,742 | | Cash and cash equivalents | $3,641 | $6,399 | -$2,758 | | Accounts receivable, net | $36,174 | $28,236 | +$7,938 | | Inventories | $57,309 | $56,254 | +$1,055 | Condensed Consolidated Statements of Operations This section details the company's revenues, expenses, and net income over specific periods Statements of Operations Highlights (Three Months Ended June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (%) | | :-------------------------------- | :------------------ | :------------------ | :--------- | | Net sales | $53,996 | $55,425 | -2.6% | | Gross profit | $22,149 | $22,627 | -2.1% | | Operating income | $6,390 | $6,375 | +0.2% | | Net income | $4,752 | $4,452 | +6.7% | | Basic earnings per share | $1.26 | $1.21 | +4.1% | | Diluted earnings per share | $1.16 | $1.09 | +6.4% | | Dividends declared per share | $0.16 | $0.15 | +6.7% | Statements of Operations Highlights (Six Months Ended June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (%) | | :-------------------------------- | :------------------ | :------------------ | :--------- | | Net sales | $99,954 | $100,382 | -0.4% | | Gross profit | $40,066 | $40,024 | +0.1% | | Operating income | $8,816 | $8,934 | -1.3% | | Net income | $6,404 | $6,089 | +5.2% | | Basic earnings per share | $1.70 | $1.66 | +2.4% | | Diluted earnings per share | $1.57 | $1.47 | +6.8% | | Dividends declared per share | $0.31 | $0.30 | +3.3% | Condensed Consolidated Statements of Comprehensive Income Comprehensive income components are presented, reflecting total non-owner changes in equity Comprehensive Income Highlights (Three & Six Months Ended June 30) | Metric | 3 Months 2025 (in thousands) | 3 Months 2024 (in thousands) | 6 Months 2025 (in thousands) | 6 Months 2024 (in thousands) | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net income | $4,752 | $4,452 | $6,404 | $6,089 | | Foreign currency translation adjustment | $782 | $(105) | $1,043 | $(427) | | Comprehensive income | $5,534 | $4,347 | $7,447 | $5,662 | Condensed Consolidated Statements of Changes in Stockholders' Equity Changes in equity accounts, including net income, distributions, and stock transactions, are outlined Stockholders' Equity Changes (Six Months Ended June 30, 2025) | Item | Amount (in thousands) | | :-------------------------------- | :-------------------- | | Balances, December 31, 2024 | $106,980 | | Net income | $6,404 | | Other comprehensive income | $1,043 | | Stock compensation expense | $787 | | Distributions to shareholders | $(1,171) | | Issuance of common stock | $602 | | Cash settlement of stock options | $(568) | | Net share settlement of stock options | $(355) | | Balances June 30, 2025 | $113,722 | - As of August 1, 2025, the registrant had 3,799,252 shares of its $2.50 par value Common Stock outstanding[3] Condensed Consolidated Statements of Cash Flows This section details cash inflows and outflows from operating, investing, and financing activities Cash Flow Highlights (Six Months Ended June 30) | Cash Flow Activity | 2025 (in thousands) | 2024 (in thousands) | Change | | :-------------------------------- | :------------------ | :------------------ | :----- | | Net cash provided by (used in) operating activities | $2,998 | $(3,270) | +$6,268 | | Net cash used in investing activities | $(2,973) | $(10,992) | +$8,019 | | Net cash (used in) provided by financing activities | $(2,963) | $12,619 | -$15,582 | | Net change in cash and cash equivalents | $(2,758) | $(1,755) | -$1,003 | - The significant improvement in cash provided by operating activities in 2025 was primarily due to changes in accounts receivable and other accrued liabilities[20] - The decrease in cash used in investing activities in 2025 was mainly due to the absence of a major acquisition like Elite First Aid in the prior year[20] Notes to Condensed Consolidated Financial Statements Additional details and explanations for financial statement figures are provided 1. Basis of Presentation Accounting principles and policies used in preparing condensed financial statements are described - The financial statements are condensed and unaudited, including normal, recurring adjustments, and should be read in conjunction with the 2024 Annual Report on Form 10-K[22] - The Company is evaluating the potential impact of new accounting standards: ASU No. 2023-09 (Income Tax Disclosures, effective after Dec 15, 2024) and ASU 2024-03 (Expense Disaggregation Disclosures, effective after Dec 15, 2026)[24][25] 2. Commitment and Contingencies Potential future obligations and uncertain events impacting financial position are disclosed - There are no pending material legal proceedings to which the Company is a party or contemplated by any governmental authority[26] 3. Revenue from Contracts with Customers Revenue recognition policies and disaggregated net sales by product and segment are detailed - The Company recognizes revenue from sales of first aid and medical products and cutting and sharpening tools, with performance obligations generally satisfied at the point of shipment or delivery[27][28] Net Sales Disaggregated by Product Category and Segment (Three Months Ended June 30) | Category/Segment | 2025 (in thousands) | 2024 (in thousands) | Change (%) | | :----------------------- | :------------------ | :------------------ | :--------- | | First Aid and Medical | $34,800 | $33,888 | +2.7% | | Cutting and Sharpening | $19,196 | $21,537 | -10.9% | | Total Net Sales | $53,996 | $55,425 | -2.6% | | United States | $44,991 | $47,455 | -5.2% | | Canada | $5,198 | $4,061 | +28.0% | | Europe | $3,807 | $3,909 | -2.6% | Net Sales Disaggregated by Product Category and Segment (Six Months Ended June 30) | Category/Segment | 2025 (in thousands) | 2024 (in thousands) | Change (%) | | :----------------------- | :------------------ | :------------------ | :--------- | | First Aid and Medical | $65,803 | $60,946 | +7.9% | | Cutting and Sharpening | $34,151 | $39,436 | -13.4% | | Total Net Sales | $99,954 | $100,382 | -0.4% | | United States | $84,113 | $85,448 | -1.6% | | Canada | $8,383 | $7,098 | +18.1% | | Europe | $7,458 | $7,836 | -4.9% | 4. Debt and Stockholders' Equity Information on debt obligations and changes in stockholders' equity is provided - The Company's $65 million secured revolving credit facility with HSBC was extended to May 31, 2027, with an interest rate of SOFR plus 1.75%[37] Debt Outstanding (in thousands) | Debt Type | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :-------------- | :---------------- | | Revolving Loan Agreement | $16,375 | $17,641 | | Mortgage payable (net of costs) | $10,107 | $10,305 | - During the six months ended June 30, 2025, the Company issued 25,126 shares of common stock from employee stock options, generating $602,000 in proceeds[39] 5. Segment Information Financial data is disaggregated by operating segments: United States, Canada, and Europe - The Company operates in three reportable segments: United States (including Asian operations), Canada, and Europe, with performance evaluated based on segment revenues and operating income[40][41][42] Segment Operating Income (Three Months Ended June 30, in thousands) | Segment | 2025 | 2024 | Change | | :-------------- | :--- | :--- | :----- | | United States | $5,614 | $5,535 | +$79 | | Canada | $872 | $703 | +$169 | | Europe | $(96) | $137 | -$233 | Segment Operating Income (Six Months Ended June 30, in thousands) | Segment | 2025 | 2024 | Change | | :-------------- | :--- | :--- | :----- | | United States | $7,973 | $7,873 | +$100 | | Canada | $913 | $744 | +$169 | | Europe | $(70) | $317 | -$387 | 6. Stock Based Compensation This note details the expense recognized for stock-based awards granted to employees and directors Stock-Based Compensation Expense (in thousands) | Period | 2025 | 2024 | | :-------------------------------- | :--- | :--- | | Three months ended June 30 | $374 | $433 | | Six months ended June 30 | $787 | $882 | - As of June 30, 2025, unrecognized compensation cost related to non-vested share-based payments totaled approximately $1.49 million, expected to be recognized over a weighted average period of about two years[46] 7. Fair Value Measurements Fair value of financial instruments and other assets and liabilities is presented - The carrying value of the Company's bank debt is a reasonable estimate of fair value. A contingent liability of $500,000 related to the Elite First Aid acquisition is recorded at fair value[47] 8. Leases This note outlines the company's operating lease arrangements, costs, and related cash flows Operating Lease Costs and Cash Flows (in thousands) | Metric | 3 Months 2025 | 3 Months 2024 | 6 Months 2025 | 6 Months 2024 | | :-------------------------------- | :------------ | :------------ | :------------ | :------------ | | Operating lease cost | $484 | $387 | $945 | $729 | | Operating lease - cash flow | $492 | $423 | $956 | $776 | - The weighted-average remaining lease term for operating leases was 6.0 years as of June 30, 2025, with a weighted-average discount rate of 7%[52] 9. Other Accrued Liabilities Accrued liabilities, such as customer rebates, compensation, and dividends payable, are detailed Other Accrued Liabilities (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :-------------- | :---------------- | | Customer rebates | $6,067 | $5,872 | | Accrued compensation | $942 | $2,389 | | Dividend payable | $608 | $563 | | Total | $11,339 | $11,879 | 10. Intangible Assets and Goodwill Information on intangible assets and goodwill, including their carrying values, is provided Intangible Assets and Goodwill (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :-------------- | :---------------- | | Intangible assets, net | $19,111 | $20,323 | | Goodwill | $9,908 | $9,908 | | Total | $29,019 | $30,231 | - The useful lives of identifiable intangible assets range from 5 to 15 years[55] 11. Inventories This note details the composition of inventories, including finished goods, work in process, and materials Inventories (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :-------------- | :---------------- | | Finished goods | $43,076 | $40,074 | | Work in process | $375 | $247 | | Materials and supplies | $13,858 | $15,933 | | Total | $57,309 | $56,254 | - Inventories are stated at the lower of cost or net realizable value, determined by the first-in, first-out method[56] Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, including sales, gross margins, and liquidity position Forward-Looking Information Potential risks and uncertainties affecting future financial results and operations are outlined - The report contains forward-looking statements subject to risks and uncertainties, including tariffs, global economic conditions, inflation, geopolitical conflicts, supply chain disruptions, labor costs, and competition[58][59][60] Critical Accounting Estimates No material changes to critical accounting estimates from the prior annual report are confirmed - There have been no material changes to the Company's critical accounting estimates as reported in the 2024 Annual Report on Form 10-K[62] Results of Operations Financial performance, including sales, gross profit, and expenses, is analyzed - Consolidated net sales decreased 3% to $53,996,000 for the three months ended June 30, 2025, and slightly decreased to $99,954,000 for the six months ended June 30, 2025, compared to the prior year periods[64] - U.S. net sales decreased 5% for the three months and 2% for the six months, primarily due to cancelled back-to-school orders from high tariffs and a large prior-year order not repeating[65] - Canadian net sales increased 28% for the three months and 18% for the six months, driven by strong first aid product sales[66] - European net sales decreased 3% for the three months and 5% for the six months, mainly due to delayed customer shipments and a non-repeating promotion from the prior year[67] - Gross profit margin improved slightly to 41.0% for the three months and 40.1% for the six months ended June 30, 2025, compared to 40.8% and 39.9% in 2024, respectively[68] - Selling, general and administrative expenses decreased by $493,000 for the three months due to cost reductions, but increased by $160,000 for the six months[69] - Net interest expense decreased by $138,000 for the three months and $184,000 for the six months, attributed to lower average outstanding borrowings and interest rates[74] - The effective income tax rate decreased to 22% for both the three and six months ended June 30, 2025, from 24% in the prior year periods[76] Financial Condition This section assesses the company's liquidity, capital resources, and overall financial stability Liquidity and Capital Resources Highlights | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Working capital (in thousands) | $77,867 | $72,588 | | Current ratio | 4.32 | 4.17 | | Long term debt to equity ratio | 22.9% | 25.7% | | Average days sales outstanding | 52 days | 54 days | - Total debt outstanding under the revolving credit facility decreased by approximately $1.3 million during the first six months of 2025, with $48.6 million available for borrowing as of June 30, 2025[79] - The Company acquired Elite First Aid, Inc. in May 2024 for approximately $7.1 million, with a $500,000 contingent payment tied to revenue milestones[81] - The Company faces risks from global trade policies, tariffs (especially on Chinese goods), geopolitical tensions, and inflation, which could increase costs and disrupt supply chains[82][83][84] - Management believes that cash generated from operating activities and available funds under its revolving loan agreement will be sufficient to finance operations for the next twelve months[85] Item 3: Quantitative and Qualitative Disclosures about Market Risk Absence of applicable quantitative and qualitative disclosures about market risk is confirmed - The Company has no applicable quantitative and qualitative disclosures about market risk[86] Item 4: Controls and Procedures Disclosure controls were ineffective due to ITGC material weakness; remediation is expected by year-end - Disclosure controls and procedures were deemed ineffective as of June 30, 2025, due to a material weakness in ITGCs concerning logical security and privileged access management for a financially relevant system[86] - Remediation efforts include removing privileged access for one individual and further limiting privileged access to ensure proper segregation of duties[87] - Management expects the material weakness to be remediated by December 31, 2025, pending sufficient operating time and testing of the controls[88] Part II — Other Information Item 1 — Legal Proceedings This section confirms no material legal proceedings are pending or contemplated against the company - No material legal proceedings are pending or contemplated against the Company[91] Item 1A — Risk Factors Comprehensive risk factors are detailed in the company's 2024 Annual Report on Form 10-K - Risk factors are detailed in Part I, Item 1A of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024[91] Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds occurred during the period - There were no unregistered sales of equity securities or use of proceeds[91] Item 3 — Defaults Upon Senior Securities This section confirms that no defaults upon senior securities were reported by the company - There were no defaults upon senior securities[91] Item 4 — Mine Safety Disclosures This section indicates that mine safety disclosures are not applicable to the company's operations - Mine Safety Disclosures are not applicable to the Company[91] Item 5 — Other Information This section confirms that no additional information is reported for the current period - No other information is reported in this section[92] Item 6 — Exhibits Exhibits to Form 10-Q, including SOX certifications and Inline XBRL files, are listed - Exhibits include certifications by Walter C. Johnsen and Paul G. Driscoll (Exhibits 31.1, 31.2, 32.1, 32.2) and Inline XBRL documents (Exhibits 101.INS, 101.SCH, 104)[92] Signatures The report was officially signed by the Chairman, CEO, and CFO on August 6, 2025 - The report was signed by Walter C. Johnsen, Chairman of the Board and CEO, and Paul G. Driscoll, VP and CFO, on August 6, 2025[95]