Acme United Sets New Earnings Record In Second Quarter 2024

Acme United Corporation (US: ACU – $43.59) had an outstanding second quarter in 2024, with net income reaching $4.5 million, or $1.09 per share. A new all-time second quarter record! In the comparable period last year, the worldwide supplier of innovative safety solutions and cutting technology, had earnings of $3.4 million, or $0.96 per diluted share.

Net sales for the quarter ended June 30, 2024 were $55.4 million compared to $53.3 million in the second quarter of 2023, an increase of 4%. Acme’s net sales for the second quarter were $55.4 million compared to $53.3 million in 2023, an increase of 4%. Excluding the impact of the sale of the Camillus and Cuda* product lines on November 1, 2023, sales for the second quarter of 2024 increased no less than 8%. Another solid achievement.

* Remember that the Camillus and Cuda businesses combined had about $12 million in revenues in 2022, and were sold in November 2023 for $19.8 million. The proceeds were used to pay down debt and to position the company for growth and acquisitions in its core businesses.

The Company’s organic growth of 8% in the second quarter of 2024 was due to market share gains and successful new product introductions. In the first aid products segment, Acme shipped new kits to a large drugstore chain in the United States, broadened its product offerings at a large industrial distributor, and expanded the customer base for its Med-Nap alcohol wipes and lens cleaners.

Also, sales of Westcott cutting tools increased due to gains in the craft market and good back-to-school sales. In addition, the DMT product line continued to benefit from a large rollout of kitchen knife sharpeners to a major mass-market retailer in the United States.

Elite First Aid Contributing to Sales

Also contributing to sales in the second quarter, albeit still modest, was Elite First Aid, Inc. In late May 2024, Acme acquired this leading supplier of tactical, trauma and emergency response products based in Wake Forest, North Carolina for $6.1 million. In 2023, Elite First Aid had revenues of approximately $4.2 million.

The Elite First Aid trauma kits are high-performance kits, which, for example, are used by medics to treat victims of serious accidents. Before the acquisition, Acme didn’t offer this product line, so was ideal to fill in this gap. Elite First Aid has a very well-established product family and a great reputation.

Chairman and CEO Walter C. Johnsen commented, “We are excited about our acquisition of Elite First Aid, which has significantly strengthened our emergency response product line and expanded our customer base. We also intend to offer the Elite First Aid products to our existing customer base in the coming quarters. I am gratified that the expansion of our product line will enhance our ability to help save lives in trauma situations.”

U.S. and European Segments Performing Strong

Acme United reports financial information on three separate business segments: the United States (including Asia), Europe and Canada.

Exact revenues per segment for the second quarter of 2024 will be available in the Company’s 10-Q, which will be filed mid-August. However, Acme announced for each segment the percentage by which revenues increased or decreased compared with last year. Based on those numbers, we provide the following estimate.

	Three Months Ended June 30
Amounts in $000’s	2024	2023
U.S.	47,439	45,200
Canada	4,080	4,376
Europe	3,906	3,760
Estimated sales per segment for the second quarter ended June 30, 2024 (Source: Smallcaps Investment Research) and actual sales per segment for the second quarter ended June 30, 2023 (Source: Company Filing)

For the three months ended June 30, 2024, net sales in the U.S. segment increased 5% compared to the same period in 2023. Excluding Camillus and Cuda, net sales for the second quarter of 2024 increased 10% compared to the second quarter of 2023 mainly due to market share gains in first aid, Westcott craft products and DMT sharpeners. For the six months ended June 30, 2024, net sales in the U.S. segment increased 2% compared to the same period in 2023. Excluding Camillus and Cuda, net sales for the six months increased 6% compared to the same period in 2023.

European net sales for the three months ended June 30, 2024 increased 4% in U.S. dollars and 5% in local currency compared to the second quarter of 2023. Excluding Camillus and Cuda, net sales for the second quarter of 2024 increased 9% compared to the second quarter of 2023. Net sales for the six months ended June 30, 2024 increased 5% in both U.S. dollars and local currency compared to the first half of 2023. Excluding Camillus and Cuda sales for the six months, net sales increased 8% compared to the same period in 2023. The sales increase for both periods was due to market share gains in the office channel.

Net sales in Canada for the three months ended June 30, 2024 decreased 7% in both U.S. dollars and local currency compared to the same period in 2023. Excluding Camillus and Cuda, net sales for the second quarter of 2024 decreased 4% compared to the second quarter of 2023. Net sales for the six months ended June 30, 2024 decreased 7% in both U.S. dollars and local currency compared to the first half of 2023. Excluding Camillus and Cuda, net sales for the six months decreased 2% compared to the same period in 2023. Sales of school and office products have been impacted by a soft economy.

The First Aid Central business subsidiary in Canada has continued to grow through its web activities, cross-selling to multinational distributors and retailers from the US, and successful product placement of Westcott school and office products. The Hawktree acquisition, that was completed in September 2023, has helped expand the first aid product-line in Canada to address injuries from fires, floods and earthquakes, and its performance is exceeding expectations. Acme’s Canadian business recently moved into its new modern 54,000 square foot facility near Montreal.

Financials & Balance Sheet

Net sales for the six months ended June 30, 2024 were $100.4 million, compared to $99.2 million in the same period in 2023, an increase of 1%. Excluding the impact of Camillus and Cuda, net sales for the six months increased 5% compared to the same period in 2023.

Net income for the six months ended June 30, 2024 was $6.1 million, or $1.47 per diluted share, compared to $4.4 million, or $1.25 per diluted share, for the same period in 2023, an increase of 37% in net income and 18% in diluted earnings per share.

The gross margin was 40.8% in the second quarter of 2024 compared to 37.5% in 2023. The gross margin was 39.9%, for the first six months of 2024 compared to 36.6% in 2023. The increases in both periods were primarily due to productivity improvements in the Company’s manufacturing and distribution facilities.

	Three Months Ended June 30		Six Months Ended June 30
Amounts in $000’s	2024	2023	2024	2023
Net Sales	55,425	53,336	100,382	99,175
Cost of Goods Sold	32,798	33,314	60,358	62,872
S, G & A Expenses	16,252	14,772	31,090	28,865
Income From Operations	6,375	5,250	8,934	7,438
Interest Expense	539	832	982	1,734
Other Expense (Income)	(28)	(23)	(72)	(46)
Pre-Tax Income	5,864	4,441	8,024	5,750
Income Tax Expense (Benefit)	1,412	998	1,935	1,318
Net Income	4,452	3,443	6,089	4,432
Earnings Per Share	1.09	0.96	1.47	1.25
Shares Out. – Diluted	4,088	3,591	4,143	3,548
Selected income statement data for the quarters and six months ended June 30, 2024 and June 30, 2023. Source: Company Press Release

SG&A expenses for the second quarter of 2024 was $16.3 million, or 29% of sales compared with $14.8 million, or 28% of sales for the same period of 2023. SG&A expenses for the first six months of 2024 were $31 million or 31% of sales compared with $29 million or 29% of sales in 2023.

Interest expense for the second quarter of 2024 was $540,000 compared to $830,000 in the second quarter of 2023. The decrease was due to lower average debt of approximately $18 million.

Amounts in $000’s	June 30, 2024	June 30, 2023
Cash and Cash Equivalents	3,791	3,401
Accounts Receivable	40,074	39,796
Inventories	56,621	55,944
Total Current Assets	106,148	103,471
Property and Equipment	30,570	27,263
Total Assets	173,541	161,846
Accounts Payable	10,319	10,724
Other Accrued Liabilities	15,656	13,013
Total Current Liabilities	27,992	25,341
Bank Debt	26,419	39,979
Mortgage Payable – Long Term	10,073	10,485
Total Liabilities	69,583	78,195
Total Stockholder Equity	103,958	83,651
Selected balance sheet data for the quarters ended June 30, 2024 and June 30, 2023. Source: Company Press Release

The Company’s bank debt less cash as of June 30, 2024 was $33.1 million compared to $47.5 million as of June 30, 2023. During the twelve-month period ended June 30, 2024, the Company paid approximately $6.1 million for the acquisition of the assets of Elite First Aid Inc., distributed $2.1 million in dividends on its common stock and generated approximately $8.5 million in free cash flow.

Additionally, the Company realized net proceeds from the sale of the Camillus and Cuda product lines of approximately $13.0 million, which were used to reduce debt.

Outlook

Overall, Acme United’s second quarter showed robust growth and progress, underpinned by effective cost management and market expansion efforts.

As for the rest of the year and beyond, the Company expects to realize more growth, keep a close eye on costs and improve its margins. As such, the Company has been making significant investments in new equipment and automation to drive its manufacturing and distribution costs lower.

At its Med-Nap facility in Brooksville, Florida, for example, Acme is adding a new machine to expand its production of semi-solid solutions, such as hand sanitizers, antibiotic wipes and so forth. The total cost of the machine is about $850,000, but the products can both be used in Acme’s own first aid kits, as well as sold to third parties.

Also in the first aid area, a new clean room will come online this month. This will allow the automation of the boxing of lens wipes and alcohol prep pads. The machine is close to a one million dollar investment, but is expected to generate cost savings of about $400,000 to $500,000 annually.

Again in first aid, Acme will be taking delivery of a new machine in November that will automate filling first aid kits. To the Company’s knowledge, this is a first in the industry, and could as such be a game changer in the market. The cost of the machine is estimated to be around $700,000 with annual savings amounting to that same number.

At the Spill Magic plant in Smyrna, Tennessee an $800,000 investment was recently completed to automate the packaging of the material that goes into the Spill Magic products. Savings are already being generated from this new equipment.

Finally, at the Company’s 345,000 square foot distribution center in Rocky Mount, North Carolina high-density racking are being installed. When completed, expected in fourth quarter of 2024, it will increase capacity by about 25% and improve the efficiency of picking orders. This is the first step in further pick by wire efficiencies. Smallcaps Recommendation: BUY.

Smallcaps.us Advice: Buy	Price Target: $59.86	Latest Company Report (pdf)
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