All Acme United Brands Show Excellent Growth in 2012

Acme united sales and earnings growth between 2009 and 2012

Acme United's impressive sales (left hand scale) and earnings growth in fiscal years 2009 through 2012. All numbers in millions USD. Source: Company Filings and Press Release.

Acme United (ACU – $12.42) reported strong revenues and earnings for its fourth quarter and full year 2012. Net sales for the year ended December 31, 2012 were $84.4 million, compared to $73.3 million in 2011, an increase of 15%. Net income in fiscal year 2012 was $3,549,000, or $1.13 per diluted share, compared with $2,811,000, or $.91 per diluted share last year, a 26% increase in net income and a 24% increase in diluted earnings per share.

For the fourth quarter of 2012, revenues reached $19.5 million, up 23% compared with sales of $15.8 million in the fourth quarter of 2011. Net income for the fourth quarter of 2012, was $431,000, or $.14 per diluted share, compared with $266,000 or $.09 per diluted share in the same period in 2011, an increase of 62% in net income and 56% in diluted earnings per share.

Acme United expects to grow its revenues to between $90 and $95 million in 2013, an increase of between 7 and 13 percent. As for its earnings, the Company gave an estimate of between $1.20 and $1.25 per share for 2013. Based on the current amount of shares outstanding, those numbers translate into earnings of between $3.81 million and $3.97 million for the full year. A conservative estimate, but since it’s still early in the year, that’s understandable.

Acme United is doing very well. Demand and distribution of the Company’s wide range of products continue to grow. Thanks to these solid results, Acme United’s stock finished the week at $12.42, very close to its highest level since 2008 and up 23% versus a year ago.

Growth in All Brands and Segments

Although the Company’s financials speak for themselves, it’s also very important to note that Acme’s success is attributable to growth in all of its brands and segments.

In 2012, Westcott, for example, gained market share in the school and mass markets with higher sales of scissors, shears, iPoint pencil sharpeners and TrimAir paper trimmers. C-Thru Ruler, which was acquired in June of 2012 and successfully integrated in Westcott, contributed $1.7 in sales last year.

Thanks to Camillus’ increased distribution, the Les Stroud knife family did very well. Clauss introduced new non-stick shears for professional users and started distributing high performance cutting tools to several major US hardware chains.

At the same time, the first-aid products and medications of Pac-Kit and PhysiciansCare showed excellent growth as they won new contracts in the industrial and mass market channels.

 
Three Months Ended December 31
Twelve Months Ended December 31
Amounts in $000’s
2012
2011
2012
2011
Net Sales
19,534
15,836
84,370
73,302
Cost of Goods Sold
12,979
10,143
54,623
46,977
S, G & A Expenses
6,090
5,171
24,386
22,040
Income From Operations
465
522
5,361
4,285
Other Income (Expense)
(69)
(69)
(364)
(259)
Pre-Tax Income
396
453
4,997
4,026
Income Tax Expense (benefit)
(35)
187
1,448
1,215
Net Income
431
266
3,549
2,811
Earnings Per Share
0.14
0.09
1.14
0.91
Shares Out. – Diluted
3,175
3,125
3,133
3,100
Most important income statement data for the quarters and twelve months ending December 31, 2012 and December 31, 2011. Source: Company Press Release

Acme United reports financial information for three separate business segments: the United States, Canada and Europe.

In the U.S. segment, sales for the fourth quarter and full year of 2012 increased 27% and 20%, respectively, compared to the same periods in 2011. The increase can be attributed to higher sales of pencil sharpeners, paper trimmers, Camillus knives, first aid kits and new sales resulting from the C-Thru Ruler acquisition. In Canada, sales in the fourth quarter increased 10% in U.S. dollars (7% in local currency) and were 3% higher in U.S. dollars (5% in local currency) for the full year, mainly due to the introduction of Camillus knives.

In Europe finally, sales in the last three months of the year climbed 16% in U.S. dollars (25% in local currency) compared to the same period last year and decreased 1% in U.S. dollars (up 9% in local currency) for the full year. The increased sales in Europe for both periods were primarily due to higher sales in the mass market channel.

Mr. Johnsen, the Company’s Chairman and CEO, added during Thursday’s conference call that the European segment in 2012, for the first time in many years, was profitable. This is especially a nice achievement, knowing that Acme lost Schlecker – its biggest European customer – in 2012 because it went out of business.

The Company’s gross margins were slightly down. In the fourth quarter of 2012 they reached 33.6% versus 35.9% in the same period last year. For the full year, gross margins were 35.2%, compared with 35.9% in 2011. Also note that Acme United donated $135,000 of products to the Kids In Need Foundation. Excluding the impact of the donation, gross margins would have been 34.2% and 35.4% for the quarter and year ended December 31, 2012, respectively.

Balance Sheet

Two items stand out in Acme’s balance sheet below. First, the increase in inventories, which is now $30.3 million compared with $24.5 million a year ago. This is nothing to worry about as it’s just a logical process for any Company who’s sales increase.

Secondly, bank debt that went from $17.6 million in 2011 to $24.3 million now. Next to the higher inventory, this increase is explained by the purchase of the C-Thru Ruler Company for approximately $1.5 million in June, the purchase of 43,000 shares of Acme’s common stock for treasury for a total of about $440,000 and approximately $1.1 million, which was paid in dividends to shareholders.

Amounts in $000’s
12/31/12
12/31/11
Cash and Cash Equivalents
9,750
7,853
Accounts Receivable
16,442
12,904
Inventories
30,292
24,495
Total Current Assets
58,409
46,522
Other Assets
5,364
4,428
Total Assets
67,828
55,222
 
 
 
Accounts Payable
6,480
4,935
Other Current Liabilities
5,250
3,770
Total Current Liabilities
11,730
8,705
Long Term Debt
24,320
17,568
Total Liabilities
36,962
27,447
Total Stockholder Equity
30,866
27,775
Most important balance sheet data for the periods ending December 31, 2012 and December 31, 2011. Source: Company Press Release

Conclusion

We’ve written this before, but every time we research how the Company improved its results, we find that product innovation and attention to customer needs is what really makes Acme grow and prosper.

The Company has several patents that form a platform from which a whole number of products are manufactured for many different applications.

Acme United’s patents for non-stick coatings for example. A non-stick coating already existed on pots and pans, but Acme applied it on scissors and it became a big success. The Company expanded its non-stick application to its Westcott iPoint pencil sharpener. The impact was even bigger with the sharpener becoming Acme’s best selling product, available at numerous chains. Next, a line of Clauss lawn & garden products like pruners, snips and floral knives were equipped with non-stick coated blades.

And most recently, a family of Clauss non-stick putty knives was introduced. Its coating again prevents the tools from rusting, which is very common in a wet environment, and it allows easier application of the putty. The tools were launched at Home Depot and are selling very well.

This is just one example of an innovation which led to the improvement of many everyday products. The Company has an on-going goal of generating 30% of its sales from products developed in the last 3 years. Therefore, the Company works with new, often proprietary, materials and adds new user-friendly features to existing tools.

2013 looks very promising for Acme United. About 30 new Camillus knives will be introduced, of which several new Les Stroud knives. Also, new survival kits will be launched shortly under the Les Stroud name. C-Thru’s distribution will be broadened and Clauss gardening tools may also see a sharp increase in sales.

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