Solid Third Quarter Results and Outlook for Acme United Corporation

Acme United (ACU – $11.87) had good sales and earnings for the third quarter ended September 30, 2012. In fact, these were the Company’s highest third quarter numbers in its most recent history.

Net sales for the quarter reached $20.4 million, compared with $19.0 million in the same period last year, an increase of 7%. Net income for the third quarter of 2012 was $798,000, or $.26 per share, up 17% compared with $682,000, or $.22 per share, in the third quarter of 2011.

For the fourth quarter, sales are expected to remain strong, thanks to increased demand for Westcott iPoint pencil sharpeners, Clauss tools and Camillus knives. Also 2013 looks very promising, as Acme’s management foresees sales between $90 and $95 million for the year.

	Three Months Ended September 30		Nine Months Ended September 30
Amounts in $000’s	2012	2011	2012	2011
Net Sales	20,363	19,036	64,835	57,466
Cost of Goods Sold	12,937	12,396	41,644	36,835
S, G & A Expenses	6,067	6,640	18,296	16,868
Income From Operations	1,359	1,120	4,895	3,763
Other Income (Expense)	(90)	(90)	(293)	(189)
Pre-Tax Income	1,269	1,030	4,602	3,574
Income Tax Expense	471	348	1,484	1,029
Net Income	798	682	3,118	2,545
Earnings Per Share	0.26	0.22	1.00	0.82
Shares Out. – Diluted	3,133	3,120	3,132	3,105
Most important income statement data for the third quarter and nine months ending September 30, 2012 and September 30, 2011. Source: Company Press Release

North America Solid, Europe Slow

Acme United groups its operations into three reportable segments based on its geographical organization and structure: United States (including Asia), Canada and Europe. In 2011, third quarter sales per segment were: U.S. $15.02 million, Canada $1.83 million and Europe $2.19 million. Exact sales per segment weren’t made available yet for the third quarter of 2012.

Net sales for the third quarter of 2012 in the U.S. segment increased 11% compared to the same period in 2011. This was mainly due to higher Camillus knives sales as the hunting season has commenced and the Les Stroud knives started shipping, and also thanks to a good contribution from C-Thru Ruler, which was acquired in June of this year. Noteworthy, is that Walter Johnsen, Acme United’s Chairman and CEO, mentioned during the conference call that C-Thru Ruler sales already reached about $900,000 in the third quarter, while $2 million was targeted for the entire year.

Moreover, revenues of iPoint pencil sharpeners, paper trimmers and first aid kits were higher as well during the third quarter.

Net sales in Canada for the three months ended September 30, 2012 increased 19% compared to the same period in 2011 thanks to increased sales of Camillus knives.

In Europe however, sales for the third quarter decreased 25% compared with last year, because of the recent liquidation of Schlecker, a German retailer where Acme mainly sold manicure products. The Company is very hopeful though that increased attention to European mass market retailers, like Lidl and Aldi, will offset most of the lost Schlecker business.

Gross margins were 36% in the third quarter of 2012 versus 35% in the comparable period last year. Gross margins were 36% for the nine months ended September 30, 2012 and 2011, respectively.

Balance Sheet

Amounts in $000’s	09/30/12	09/30/11
Cash and Cash Equivalents	10,105	6,270
Accounts Receivable	16,058	16,661
Inventories	29,992	22,804
Total Current Assets	58,066	46,810
Total Assets	67,660	55,344
Accounts Payable	6,513	4,435
Other Current Liabilities	5,295	3,869
Total Current Liabilities	11,808	8,304
Bank Debt	24,321	18,106
Total Liabilities	37,282	27,783
Total Stockholder Equity	30,378	27,561
Most important balance sheet data for the quarters ending September 30, 2012 and September 30, 2011. Source: Company Press Release

The Company’s bank debt less cash and cash equivalents on September 30, 2012 was $14.2 million compared to $11.9 million on September 30, 2011. The higher bank debt is attributable to the C-Thru Ruler acquisition, for which Acme paid approximately $1.5 million, and an increase in inventory, which is a logical result when achieving higher sales levels. Additionally, during the 12 month period ended September 30, 2012, Acme purchased 40,560 shares of its common stock for treasury for a total of approximately $400,000 and paid approximately $800,000 in dividends on its common stock.

Conclusion

Acme United’s third quarter results, along with its short to medium term outlook, make us happy. All brands are performing very well. As a result, the Company’s management has already indicated that the fourth quarter will be strong.

Its recent C-Thru Ruler acquisition is already performing better than expected and other takeovers may be in the pipeline.

New products continue to be introduced. The Westcott Scissor Mouse, for example, looks like a computer mouse, but is used to cut paper. There’s a little tab under the tool that grabs and cuts the paper. It’s mainly used in arts and crafts markets to cut any lightweight papers and is expected to contribute nicely to sales in the coming quarters.

Finally, Acme gains broader distribution. As retail chains realize that the Company’s products sell well, they’re happy to make space on their shelves.

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