Acme United Achieves Record Third Quarter Sales
After achieving the best quarterly sales and earnings numbers in its entire history in the previous quarter, Acme United (ACU – $15.02) now set a new third quarter sales record for the period ending September 30, 2013. Strong sales of back-to-school products such as titanium kids scissors and stainless scissors contributed to the success. Also sales of our first aid kits to both the office and industrial markets were at record levels. Moreover, Clauss industrial tools and Camillus knives had an excellent quarter.
The fourth quarter of 2013 looks strong as well. Camillus knives sales for hunting and Christmas time gifts should be solid, along with new hazard protection kits, and mass market promotions in Europe.
Acme is providing guidance for fiscal year 2013 of about $90 million, which indicates that fourth quarter revenues will be close to $22 million, or an increase of approximately 12.5% compared with the fourth quarter of 2012.
Record Third Quarter Sales
Acme’s net sales for the third quarter were $22.1 million compared to $20.4 million in the same period in 2012, an increase of 9%. Net income for the third quarter was $959,000, or $.29 per diluted share, compared to $798,000 or $.26 per diluted share for the comparable period in 2012, an increase of 20% in net income and 12% in diluted earnings per share.
Sales for the nine months ending September 30, 2013 were $68.2 million compared to $64.8 million in the same period in 2012, an increase of 5%. Net income for the nine months ended September 30, 2013 was $3,479,000, or $1.07 per diluted share, compared to $3,118,000, or $1.00 per diluted share in the comparable period last year, a 12% increase in net income and 7% in diluted earnings per share.
| Three Months Ended September 30 | Nine Months Ended September 30 | |||
| Amounts in $000’s | 2013 | 2012 | 2013 | 2012 |
| Net Sales | 22,135 | 20,363 | 68,198 | 64,835 |
| Cost of Goods Sold | 14,195 | 12,937 | 43,749 | 41,644 |
| S, G & A Expenses | 6,531 | 6,067 | 19,334 | 18,296 |
| Income From Operations | 1,409 | 1,359 | 5,115 | 4,895 |
| Total Other Expense | 86 | 91 | 257 | 293 |
| Pre-Tax Income | 1,323 | 1,269 | 4,858 | 4,602 |
| Income Tax Expense | 364 | 471 | 1,379 | 1,484 |
| Net Income | 959 | 798 | 3,479 | 3,118 |
| Earnings Per Share | 0.29 | 0.26 | 1.07 | 1.00 |
| Shares Out. – Diluted | 3,325 | 3,133 | 3,244 | 3,132 |
| Most important income statement data for the quarters and nine months ending September 30, 2013 and September 30, 2012. Source: Company Press Release | ||||
Gross margins were 36% for the three and nine months ended September 30, 2013 and 2012, respectively.
| Amounts in $000’s | 09/30/13 | 09/30/12 |
| Cash and Cash Equivalents | 11,809 | 10,105 |
| Accounts Receivable | 17,488 | 16,058 |
| Inventories | 29,280 | 29,992 |
| Total Current Assets | 60,461 | 58,066 |
| Total Assets | 70,737 | 67,660 |
| | | |
| Accounts Payable | 5,016 | 6,513 |
| Other Current Liabilities | 5,244 | 5,296 |
| Total Current Liabilities | 10,260 | 11,809 |
| Bank Debt | 25,031 | 24,321 |
| Total Liabilities | 36,285 | 37,282 |
| Total Stockholder Equity | 34,452 | 30,378 |
| Most important balance sheet data for the quarters ending September 30, 2013 and September 30, 2012. Source: Company Press Release | ||
As for the Company’s balance sheet, Acme’s bank debt less cash and cash equivalents on September 30, 2013 was $13.2 million compared to $14.2 million on September 30, 2012. The decrease of $1 million can be explained by the fact that during the 12 month period ended September 30, 2013, Acme purchased the new distribution facility in North Carolina for $2.8 million and paid $900,000 in dividends on its common stock. Additionally, on August 21, 2013 the Company received $1.7 million from early repayment of a mortgage receivable and during the 12 month period the Company also generated $3 million in cash flow from operations.
Solid US and European Segments
Acme United reports financial information on three separate business segments: the United States (including Asia), Canada and Europe. During the third quarter of 2013, net sales increased 11% in the US segment compared with the same period in 2012. This was mainly due to increased Camillus knives, back-to-school and first aid kits sales.
In Canada, net sales decreased 15% in local currency for the three months ended September 30, 2013 compared to the same period in 2012. This is the second quarter in a row in which Canadian sales decline due to a slow office channel market resulting from continued weakness in the Canadian economy. However, Acme is seeing a reversal as orders are picking up in the current quarter.
Additionally, orders were received from several Canadian chains for the Scotts Miracle-Gro lawn and gardening tools. And also Camillus and Clauss are making inroads with some major distributors, which makes the Company hopeful for 2014.
European net sales for the three months ended September 30, 2013 were up 19% in local currency, compared to the same period last year mainly thanks to higher sales to mass market retailers. Acme expects to realize more mass market sales in the current quarter.
Also in Europe, Camillus knives are being introduced. A Scandinavian and German distributor have already been signed up. First shipments start this quarter.
Outlook
The Company is optimistic for the current and following quarters. It foresees additional growth with Camillus, especially during the upcoming Christmas and hunting season. It will ship a large order of first aid hazard protection kits in this quarter. And in Europe more mass market sales are lined up. All of this should give fourth quarter sales a boost. Acme expects it to be about equal to the third quarter, which would be the first time in the Company’s history.
Acme is also working hard to upgrade its new Rocky Mount warehouse facility it bought late August.
At this moment Acme leases a 116,000 square feet warehouse in North Carolina and owns a 58,000 square feet warehouse in the same state. The intention is to move out of the leased warehouse by January 1, 2014 and out of the owned facility by March 1, 2014. As the new building is 340,000 square feet, it will still provide lots of space for additional growth after the move.
Acme acquired the facility for $2.8 million and it will spend approximately $1.2 million on the refurbishment of the building and additional equipment. Until they move out of the current warehouses, there will be duplicate operating costs. Together with the moving expenses, these costs will amount to approximately $160,000 in the fourth quarter of this year, and about $80,000 in the first quarter of 2014.
Conclusion
Acme continues to break sales records. Also for the fourth quarter solid results are expected. For the entire year, Acme expects to reach $90 million in sales and earnings per share of $1.20 to $1.22.
The trend of Acme United’s results becoming less seasonal is starting to show more and more. Traditionally sales used to peak in the second quarter due to the seasonal nature of the back-to-school market. And although the second quarter remains Acme’s strongest, the other quarters are showing additional growth.
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