Acme United’s Third Quarter Aided by… First Aid

Pac-Kit first aid kit

Pac-Kit, continues to excel expectations as it contributed $1.6 million in sales during the third quarter.

Acme United (ACU – $9.42) performed strongly during the third quarter ended September 30, 2011. The Company recorded sales of $19 million, compared to $16.1 million in the third quarter of 2010, an increase of 18%. For the third quarter of 2011, net income was $682,000, or $.22 per diluted share, compared with $612,000 or $.19 per diluted share, for the comparable period last year, an increase of 11% in net income and 16% in diluted earnings per share.

Third Quarter And Nine Months 2011 Performance

Revenues were especially supported by high demand in the first aid products category. A hurricane preparedness kit from PhysiciansCare, Acme United’s first aid brand for the industrial market, sold extremely well and is on re-order at this moment.

Also Pac-Kit, which mainly sells first aid kits and which was acquired in February 2011, contributed $1.6 million in sales during the third quarter. An unexpected advantage of the Pac-Kit acquisition is that PhysiciansCare is able to introduce its products to Pac-Kit’s existing customers. For example, PhysiciansCare shears are now sold to a Pac-Kit customer in the transportation market. Moreover, combined PhysiciansCare/Pac-Kit buying and sourcing capabilities have lead to better products and lower prices with suppliers.

Third quarter numbers were also positively impacted by strong back to school sales. In particular non-stick scissors and iPoint pencil sharpeners sold very well in the United States and Canada.

In Europe, sales slightly decreased due to the timing of orders from mass market customers. These orders are expected to occur in the fourth quarter of 2011. The European segment did manage to become profitable thanks to cost savings it implemented a year ago.

For the first nine months of fiscal year 2011, sales reached $57.5 million, up 15% compared with the first nine months of 2010. Net income and diluted earnings per share rose 6% and 11% respectively for the first nine months of 2011 versus 2010 (see income statement details in table below).

 
Three Months Ended
September 30
Six Months Ended
September 30
Amounts in $000’s
2011
2010
2011
2010
Net Sales
19,036
16,083
57,466
49,789
Cost of Goods Sold
12,396
10,426
36,835
31,468
S, G & A Expenses
5,520
5,000
16,868
15,418
Income From Operations
1,120
657
3,763
2,903
Other Income (Expense)
(90)
(44)
(189)
(141)
Pre-Tax Income
1,030
613
3,574
2,762
Income Tax Expense
348
1
1,029
371
Net Income
682
612
2,545
2,391
Earnings Per Share
0.22
0.19
0.82
0.74
Shares Out. – Diluted
3,120
3,192
3,105
3,218
Most important income statement data for the quarters and nine months ending September 30, 2011 and September 30, 2010. Source: Company Filings.

Notice that the tax rate for the first nine months of 2011 was 29%, compared to 13% in the same period of 2010. This was due to approximately $300,000 tax benefits associated with the Company’s donation of land to the City of Bridgeport, CT in the fourth quarter of 2009.

Fourth Quarter and 2012 Outlook

In Europe, a large order for a Christmas promotion is expected, but hasn’t come through yet. Winning the order would immediately mean a solid profitable quarter for that segment. Furthermore, the Company expects continued growth in the Asia Pacific region and more cross-selling opportunities between Pac-Kit and PhysiciansCare.

2012 appears to become an exceptional strong year as well. Acme will introduce products with even better non-stick coatings. Furthermore, the Company has several new products lined up like a new utility knife and a brand new iPoint pencil sharpener for high performance markets like offices.

Conclusion

Previous guidance numbers for fiscal year 2011 of $70 to $75 million in sales and $1.00 to $1.05 earnings per share, are well within reach, but actual results will depend on Christmas season sales. Overall, Acme United will have had a strong year with solid growth in a tough environment.

Mainly thanks to it’s investments in high quality, innovative products, the Company is opening up new distribution channels and is gaining market share worldwide.

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