Record Earnings In Third Quarter and Solid Outlook for Acme United

Acme United Corporation (US: ACU – $40.25) broke its third quarter earnings record that it had established last year. The Company’s net income for the third quarter of 2024 was $2.23 million, or $0.54 per diluted share, compared to a net income of $2.15 million or $0.58 per diluted share for the same period of 2023. An increase of 3% in net income.

Net sales for the quarter ended September 30, 2024 were $48.2 million compared to $50.4 million in the third quarter of 2023, a decrease of 4%. Excluding the impact of the Camillus and Cuda hunting and fishing product lines sold on November 1, 2023*, net sales for the third quarter of 2024 increased 4% compared to the third quarter of 2023.

* 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.

Also note that sales of this the Camillus and Cuda lines were seasonal, with the largest shipments in the third quarter because of the hunting season, holiday sales, and promotions. So all in all, sales this year held up quite well compared to last year when Camillus and Cuda were still included in the numbers.

Chairman and CEO of Acme United Walter C. Johnsen said, “After a strong performance in the first half of 2024, sales of first aid products in the U.S. were soft in the third quarter due to customer timing and market conditions. Sales of our Westcott cutting tools and DMT sharpeners continued to be strong in the quarter, with increased placement in large mass market accounts.”

On top of the outstanding earnings in the third quarter, the Company anticipates to generate strong earnings and cash flow for the remainder of the year. Moreover, thanks to its strengthening balance sheet, it is very well positioned to continue to make accretive acquisitions.

Third Quarter and Nine Months Financials

Sales for the nine months ended September 30, 2024 were $148.5 million compared to $149.6 million in the same period in 2023, a decrease of 1%. Excluding the impact of Camillus and Cuda, sales increased 5%.

Net income for the first nine months ended September 30, 2024, was $8.3 million or $2.03 per diluted share compared to $6.6 million or $1.83 per dilute share in the comparable period last year, increases of 26% and 11%.

	Three Months Ended September 30		Nine Months Ended September 30
Amounts in $000’s	2024	2023	2024	2023
Net Sales	48,166	50,384	148,547	149,559
Cost of Goods Sold	29,602	30,881	89,960	93,752
S, G & A Expenses	15,638	15,846	46,728	44,711
Income From Operations	2,926	3,657	11,859	11,096
Interest Expense	535	784	1,517	2,517
Other Income (Expense)	17	(55)	90	(9)
Pre-Tax Income	2,408	2,818	10,432	8,569
Income Tax Expense (benefit)	182	666	2,117	1,984
Net Income	2,226	2,152	8,315	6,585
Earnings Per Share – Diluted	.54	0.58	2.26	1.85
Shares Out. – Diluted	4,104	3,721	4,087	3,597
Selected income statement data for the quarters and nine months ended September 30, 2024 and September 30, 2023. Source: Company Press Release

Gross margin was 38.5% in the three months ended September 30, 2024 versus 38.7% in the comparable period last year. Gross margin was 39.4% for the nine-month period ended September 30, 2024 compared to 37.3% for the same period in 2023. The increase in the nine-month period was primarily due to productivity improvements in the Company’s manufacturing and distribution facilities.

SG&A expenses for the third quarter of 2024 were $15.6 million, or 32% of sales compared with $15.8 million or 31% of sales for the same period of 2023. SG&A expenses for the first nine months of 2024 were $47 million or 31% of sales compared with $45 million or 30% of sales in 2023.

Interest expense for the third quarter of 2024 was $535,000 compared to $785,000 in third quarter of 2023. The decrease was due to a lower average debt of approximately $15 million.

Amounts in $000’s	September 30, 2024	September 30, 2023
Cash and Cash Equivalents	5,702	5,567
Accounts Receivable	31,349	33,855
Inventories	55,990	54,575
Total Current Assets	98,774	98,526
Property and Equipment	30,892	27,708
Total Assets	165,473	156,269
Accounts Payable	7,008	9,976
Other Accrued Liabilities	13,403	13,873
Total Current Liabilities	22,394	25,429
Bank Debt	22,018	32,934
Total Liabilities	59,156	70,363
Total Stockholder Equity	106,317	85,906
Selected balance sheet data for the quarters ended September 30, 2024 and September 30, 2023. Source: Company Press Release

The Company’s bank debt less cash improved significantly. On September 30, 2024 it was $27 million compared to $38 million on September 30, 2023. During the twelve-month period ended September 30, 2024, the Company paid approximately $6.1 million for the acquisition of the assets of Elite First Aid Inc., distributed $2.2 million in dividends on its common stock and generated approximately $6.2 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.

Inventory levels increased slightly from $54.5 million last year to $55.9 million on September 30 this year. It is expected that inventory will more or less remain where it is today.

Strong Performance in Europe

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

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

	Three Months Ended September 30
Amounts in $000’s	2024	2023
U.S.	41,151	43,688
Canada	3,277	3,305
Europe	3,738	3,391
Estimated sales per segment for the third quarter ended September 30, 2024 (Source: Smallcaps Investment Research) and actual sales per segment for the third quarter ended September 30, 2023 (Source: Company Filing)

For the three months ended September 30, 2024, net sales in the U.S. segment decreased 6% compared to the same period in 2023. Excluding Camillus and Cuda, net sales for the third quarter of 2024 increased 3% compared to the third quarter of 2023. For the nine months ended September 30, 2024, net sales in the U.S. segment decreased 1% compared to the same period in 2023. Excluding Camillus and Cuda, net sales for the nine months increased 5% compared to the same period in 2023. The sales increase for the nine-month period was due to market share gains with First Aid, Westcott craft products and DMT sharpeners.

European net sales for the three months ended September 30, 2024 increased 10% in both U.S. dollars and local currency compared to the third quarter of 2023. Excluding Camillus and Cuda, net sales for the third quarter of 2024 increased no less than 15% compared to the third quarter of 2023. Net sales for the nine months ended September 30, 2024 increased 6% in both U.S. dollars and local currency compared to the first nine months of 2023. Excluding Camillus and Cuda, net sales for the nine months increased 10% 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 September 30, 2024 decreased 1% in U.S. dollars but increased 2% in local currency compared to the same period in 2023. Excluding Camillus and Cuda, net sales for the third quarter of 2024 increased 6% compared to the third quarter of 2023. Net sales for the nine months ended September 30, 2024 decreased 5% in U.S. dollars and 4% in local currency compared to the first nine months of 2023. Excluding Camillus and Cuda, net sales for the nine months were constant compared to the same period in 2023. Sales of first aid products were strong, however sales of school and office products continued to be adversely impacted by a soft economy.

Conclusion

In addition to the record breaking third quarter, Acme’s management also indicated that the fourth quarter has started well. Moreover, the Company is winning new business for 2025 in its Westcott and first aid businesses, as well as DMT sharpeners.

In first aid, for example, Acme recently introduced the latest generation of Smart Compliance first aid cabinets at the National Safety Conference. What makes these cabinets so special is that they have patented automatic replenishment capabilities, which monitor real-time consumption of the components and permit automatic ordering of refills.

These first aid units not only facilitate compliance with OSHA, ANSI, and other regulations, but also remove the hassle of manually checking the expiration and quantity of components. We are excited about the prospects for this next generation product and look forward to seeing its impact on the market next year. There are no similar products from competitors on the market today.

During the past quarter, the Company also integrated the Elite First Aid product line into its overall product offering. Elite First Aid, which was acquired by Acme late May of this year, is a prominent supplier of first aid and tactical medical kits for a variety of markets, including military, law enforcement, and emergency services.

Acme sales team is actively presenting these items to its first aid customers in the U.S. and Canada and is promoting them in the e-commerce channels. Elite generated revenues of approximately $4.2 million in 2023, and we expect to see a solid boost of that number in 2025.

A final growth driver that we want to highlight are Westcott’s tools for the craft market. Although this was a small part of the business, it has grown quite well the past few months because several well-known accounts in the crafts market have started selling the Westcott tools. The number of products offered in this area will likely be expanded by Westcott, and lots more growth is expected in 2025. Smallcaps Recommendation: BUY.

Smallcaps.us Advice: Buy	Price Target: $61.71	Latest Company Report (pdf)
For important disclosures, please read our disclaimer.