Acme United Reports Solid 2011 Numbers and Expects Sizeable Growth in 2012

The Westcott Scissor Mouse

The Westcott Scissor Mouse is expected to contribute $1.5 million in sales in 2012.

Acme United (ACU – $10.06) released solid growth numbers for the fourth quarter and full year 2011. The Company managed to increase its net sales with 16%, from $63.1 million in fiscal year 2010 to $73.3 million in 2011. This growth was also reflected in the bottom line. Net income for the year ended December 31, 2011, was $2,811,000, or $.91 per diluted share, compared with $2,573,000, or $.81 per diluted share last year, a 9% increase in net income and a 12% increase in diluted earnings per share.

For 2012, Acme United expects to again expand its revenues to between $80 and $85 million, or an increase of between 9 and 16 percent. Especially Camillus knives, the new Scissor Mouse, the Westcott paper trimmers and Pac-Kit should contribute to the growth.

Fourth Quarter and Full Year 2011 Results

During the fourth quarter, ended December 31, 2011, Acme sold $15.8 million worth of products, compared to $13.4 million in the comparable period of 2010, an increase of 19%. Net income was $266,000, or $.09 per diluted share, for the fourth quarter of 2011, compared with $181,000 or $.06 per diluted share, for the same period last year. An increase of 49% in net income and 50% in diluted earnings per share.

Equally important, is that growth was noted in most product categories and in all segments. Sales in the U.S. segment, for example, increased by 22% in the fourth quarter and by 20% in 2011. This growth was driven by higher sales of iPoint pencil sharpeners, non-stick scissors and first aid products.

In Canada, sales were flat for the fourth quarter, but were 10% higher for the full year, mainly due to the introduction of the Clauss gardening tools.

And in the European segment, net sales for the fourth quarter of 2011 increased 10% compared to the same period last year. Unfortunately, sales for the full year decreased by 2% compared to 2010. A slight loss of about $120,000 was recorded in Europe in 2011, although it might have been profitable when the large knives order from a mass market customer had been recorded in the 4th quarter of 2011 instead of the first quarter of 2012.

 
Three Months Ended December 31
Twelve Months Ended December 31
Amounts in $000’s
2011
2010
2011
2010
Net Sales
15,836
13,360
73,302
63,149
Cost of Goods Sold
10,143
8,316
46,977
39,784
S, G & A Expenses
5,171
4,968
22,040
20,385
Income From Operations
522
76
4,285
2,980
Total Other Income (Expense)
(69)
72
(259)
(69)
Pre-Tax Income
453
148
4,026
2,911
Income Tax Expense (benefit)
187
(33)
1,215*
338*
Net Income
266
181
2,811
2,573
Earnings Per Share
0.09
0.06
0.91
0.81
Shares Out. – Diluted
3,125
3,121
3,100
3,194
Most important income statement data for the quarters and twelve months ending December 31, 2011 and December 31, 2010. Source: Company Press Release

* Note that the tax rate for fiscal year 2011 was 30% compared with only 12% in 2010. The extraordinary low tax rate in 2010 was due to a tax benefit associated with the Company’s donation of land to the City of Bridgeport, CT.

Gross margins in 2011 slightly declined to 36% compared to 37% for 2010. The decline was primarily due to the addition of the Pac-Kit line of products, which have lower gross margins than most of the Company’s other products. Mr. Johnsen, Acme United’s Chairman and CEO, noted during the fourth quarter conference call that Pac-Kit margins were around 27% when it was acquired on February 28, 2011. Currently, they’re already in the 30s and moving towards Acme’s average thanks to the combined PhysiciansCare/Pac-Kit buying power.

Preparing for 2012 Growth

Acme United expects revenues to come in at between $80 to $85 million for 2012, which is an increase of between 9 and 16 percent compared with 2011.

Camillus knives has received orders from several mass market retailers for its regular line of knives and the Les Stroud signature series. First shipments are commencing this month. Moreover, new products like the Westcott Scissor Mouse and paper trimmers along with the increased distribution of Pac-Kit products to mass market clients are also expected to be big contributors to the growth.

In order to deal with the growth, Acme is hiring more staff, it’s negotiating to expand its line of credit and the Company is adding capacity in its Chinese production factories.

Conclusion

Acme United’s results hardly ever disappoint. The Company had a good year in 2011 with some solid top and bottom line growth. Additionally, it has projected a sizeable revenue increase for this year.

Next to rising revenues and earnings, increased distribution and new product introductions, Acme United’s growth story is also supported by a 7 cents quarterly dividend, which at today’s share price is an annual yield of almost 3%. Buy Recommendation.

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