Acme United(ACU) - 2023 Q4 - Annual Results

Earnings Release Highlights Acme United reported varied Q4 and FY 2023 financial results, marked by strategic divestitures, significant debt reduction, and improved gross margins, with anticipated growth in 2024 Fourth Quarter 2023 Financial Performance Acme United's Q4 2023 net sales decreased 5% to $41.9 million, while net income significantly improved to $11.2 million ($2.87 diluted EPS) including divestiture gains Q4 2023 Net Sales Performance | Metric | Q4 2023 ($M) | Q4 2022 ($M) | Change (%) | | :----- | :----------- | :----------- | :--------- | | Net Sales | 41.9 | 44.1 | -5% | | Net Sales (excl. divestiture) | N/A | N/A | -1% | Q4 2023 Net Income & EPS Performance | Metric | Q4 2023 (incl. divestiture) | Q4 2023 (excl. divestiture) | Q4 2022 | | :----- | :-------------------------- | :-------------------------- | :-------- | | Net Income ($M) | 11.2 | 1.6 | (0.6) | | Diluted EPS | $2.87 | $0.40 | ($0.17) | Full Year 2023 Financial Performance Full year 2023 net sales decreased 1% to $191.5 million, with net income reaching $17.8 million ($4.86 diluted EPS) including divestiture gains FY 2023 Net Sales Performance | Metric | FY 2023 ($M) | FY 2022 ($M) | Change (%) | | :----- | :----------- | :----------- | :--------- | | Net Sales | 191.5 | 194.0 | -1% | FY 2023 Net Income & EPS Performance | Metric | FY 2023 (incl. divestiture) | FY 2023 (excl. divestiture) | FY 2022 | | :----- | :-------------------------- | :-------------------------- | :-------- | | Net Income ($M) | 17.8 | 8.2 | 3.0 | | Diluted EPS | $4.86 | $2.23 | $0.82 | Strategic Achievements and Operational Improvements Acme United achieved significant strategic milestones in 2023, including a $19.8 million divestiture, $13 million debt reduction, $6.5 million in cost savings, and record $24 million free cash flow - Divestiture of Camillus and Cuda product lines for $19.8 million, resulting in an after-tax gain of approximately $9.6 million and reducing debt by $13 million[2][5] - Successfully completed a $5 million inventory reduction program[5][7] - Implemented cost reduction and productivity initiatives, generating approximately $6.5 million in savings, exceeding the initial target of $5 million[5] - Achieved a record $24 million in free cash flow[5][7] - Gained market share in the first aid and medical business and introduced new craft and industrial cutting tools[5] 2024 Outlook and Future Strategy The company anticipates 2024 growth from new first aid customers and cutting tool placements, while actively pursuing accretive acquisitions - Anticipates growth in 2024 from new first aid customers, additional placement of cutting tools in craft and mass markets, and new DMT sharpener business[5] - Plans to continue seeking accretive acquisitions, supported by a strong balance sheet[5] Segmental Net Sales Performance This section details the net sales performance across U.S., European, and Canadian segments, highlighting regional trends and contributing factors U.S. Segment Sales U.S. net sales decreased 6% in Q4 2023 and 1% for the full year, primarily due to customer inventory reductions U.S. Segment Net Sales Performance | Period | Change (YoY) | Change (YoY, excl. divestiture) | Primary Reason (FY) | | :----- | :----------- | :------------------------------ | :------------------ | | Q4 2023 | -6% | -2% | N/A | | FY 2023 | -1% | Constant | Customer inventory reductions | European Segment Sales European net sales declined 8% in USD for Q4 2023 and 4% for the full year, primarily due to a soft economy European Segment Net Sales Performance | Period | Change (USD YoY) | Change (Local Currency YoY) | Primary Reason | | :----- | :--------------- | :-------------------------- | :------------- | | Q4 2023 | -8% | -13% | Soft economy | | FY 2023 | -4% | -6% | Soft economy | Canadian Segment Sales Canadian net sales increased 11% in USD for Q4 2023 and 1% for the full year, driven by higher first aid product sales Canadian Segment Net Sales Performance | Period | Change (USD YoY) | Change (Local Currency YoY) | Primary Reason | | :----- | :--------------- | :-------------------------- | :------------- | | Q4 2023 | +11% | +12% | Higher first aid sales | | FY 2023 | +1% | +5% | Higher first aid sales | Financial Position and Key Metrics This section analyzes Acme United's gross margin, debt levels, and cash flow, highlighting improvements and key financial movements Gross Margin Gross margin significantly improved to 39.1% in Q4 2023 and 37.7% for the full year, driven by productivity and lower freight costs Gross Margin Performance | Period | Gross Margin 2023 | Gross Margin 2022 | Change (pp) | Primary Reasons | | :----- | :---------------- | :---------------- | :---------- | :-------------- | | Q4 | 39.1% | 31.9% | +7.2 pp | Productivity, lower freight | | FY | 37.7% | 32.8% | +4.9 pp | Productivity, lower freight | Debt and Cash Flow Acme United significantly reduced bank debt to $19.0 million, generated $24.0 million in free cash flow, and received $13.0 million from asset sales Debt and Cash Flow Highlights | Metric | Dec 31, 2023 ($M) | Dec 31, 2022 ($M) | Change ($M) | | :----- | :---------------- | :---------------- | :---------- | | Bank Debt less Cash | 19.0 | 55.0 | -36.0 | - Generated approximately $24.0 million in free cash flow, including a $5.0 million inventory reduction[7] - Received approximately $13.0 million in net proceeds from the sale of Camillus and Cuda product lines[7] - Paid $2.0 million in dividends on common stock during FY 2023[7] Company Information This section provides an overview of Acme United Corporation's business, market presence, key brands, and details regarding its recent conference call About Acme United Corporation Acme United Corporation is a global supplier of innovative safety solutions and cutting technology across diverse markets and brands - Leading worldwide supplier of innovative safety solutions and cutting technology[9] - Serves school, home, office, hardware, sporting goods, and industrial markets[9] - Key brands include First Aid Only®, First Aid Central®, PhysiciansCare®, Pac-Kit®, Spill Magic®, Westcott®, Clauss®, DMT®, Med-Nap and Safety Made[9] Conference Call and Webcast A conference call and webcast were held on March 1, 2024, to discuss quarterly results, with replay information available - Conference call held on March 1, 2024, at 12:00 p.m. ET[8] - Webcast replay available under Investor Relations, Audio Archives on www.acmeunited.com[8](index=8&type=chunk) Forward-Looking Statements and Risk Factors This section outlines the forward-looking statements and various risk factors that could materially affect the company's future business, operations, and financial results Forward-Looking Statements and Risk Factors Details Forward-looking statements are subject to various risks and uncertainties, including global economic conditions, supply chain disruptions, and geopolitical conflicts, which could materially impact results - Forward-looking statements are subject to risks and uncertainties that may impact business, operations, and financial results[11][12] - Risks include global economic conditions, inflation, interest rates, geopolitical conflicts (Ukraine, Middle East), supply chain disruptions, labor costs, currency fluctuations, inventory management, changes in client needs and consumer spending, competition, technological changes (online marketing), ability to manage growth and integrate acquisitions, and international trade policies (tariffs)[13][14] Condensed Consolidated Financial Statements This section presents the condensed consolidated statements of operations for quarterly and annual periods, along with the condensed consolidated balance sheets Condensed Consolidated Statements of Operations (Three Months Ended December 31) This section details the condensed consolidated statements of operations for Q4 2023 and 2022, including net sales, gross profit, and net income Condensed Consolidated Statements of Operations (Q4) | Metric (000's) | Q4 2023 | Q4 2022 | | :------------- | :------ | :------ | | Net sales | $41,942 | $44,104 | | Cost of goods sold | $25,538 | $30,021 | | Gross profit | $16,404 | $14,083 | | Operating income (loss) | $2,093 | ($27) | | Gain on sale of assets | $12,551 | - | | Net income (loss) | $11,208 | ($597) | | Diluted EPS | $2.87 | ($0.17) | Condensed Consolidated Statements of Operations (Year Ended December 31) This section presents the condensed consolidated statements of operations for the full years 2023 and 2022, detailing net sales, gross profit, and net income Condensed Consolidated Statements of Operations (Full Year) | Metric (000's) | FY 2023 | FY 2022 | | :------------- | :------ | :------ | | Net sales | $191,501 | $193,962 | | Cost of goods sold | $119,291 | $130,403 | | Gross profit | $72,210 | $63,559 | | Operating income | $13,188 | $6,274 | | Gain on sale assets | $12,551 | - | | Net income | $17,793 | $3,035 | | Diluted EPS | $4.86 | $0.82 | Condensed Consolidated Balance Sheets This section presents the condensed consolidated balance sheets as of December 31, 2023, and 2022, detailing assets, liabilities, and equity Condensed Consolidated Balance Sheets | Metric (000's) | Dec 31, 2023 | Dec 31, 2022 | | :------------- | :----------- | :----------- | | Total current assets | $92,024 | $105,600 | | Total assets | $149,241 | $164,377 | | Total current liabilities | $26,012 | $22,127 | | Long term debt | $13,105 | $49,916 | | Total liabilities | $51,343 | $85,347 | | Total stockholders' equity | $97,898 | $79,030 |