Acme United Reports 27% Net Sales Increase for Second Quarter of 2022

Rhea-AI Summary

Acme United Corporation (ACU) reported net sales of $56.8 million for Q2 2022, a 27% increase from $44.8 million in Q2 2021. However, net income plummeted by 62% to $2.7 million, attributed to the prior year’s PPP loan forgiveness and a tax credit. Year-to-date sales also rose by 13% to $100.1 million, while net income for the first half decreased by 62% to $3.6 million. The company acquired Live Safely Products for $11 million, enhancing its product offerings. Despite challenges, Acme United aims for $200 million in revenue for 2022 and increased its credit facility by $15 million.

Positive

• Net sales increased 27% year-over-year in Q2 2022.
• Acquisition of Live Safely Products enhances product range.
• Increased credit facility by $15 million to support growth.

Negative

• Net income decreased 62% in Q2 2022 compared to the same period last year.
• Gross margin declined from 36% to 33% due to cost pressures.
• Current bank debt increased to $59.8 million from $39.3 million.

Adjusted Earnings Remain Constant Year over Year

SHELTON, Conn., July 22, 2022 (GLOBE NEWSWIRE) -- Acme United Corporation (NYSE American: ACU) today announced that net sales for the quarter ended June 30, 2022, were $56.8 million compared to $44.8 million in the second quarter of 2021, an increase of 27%. Net sales for the six months ended June 30, 2022, were $100.1 million, compared to $88.4 million in the same period in 2021, an increase of 13%.

Net income was $2.7 million, or $0.71 per diluted share, for the quarter ended June 30, 2022, compared to $7.2 million or $1.82 per diluted share, for the same period in 2021, a decrease of 62% in net income and 61% in diluted earnings per share. The decreases result from the impact in the second quarter of 2021 of the forgiveness of the Company’s PPP loan in the amount of $3.5 million and a non-recurring tax credit of $0.9 million related to stock-based compensation expense. Excluding the impact of the PPP loan forgiveness and the tax credit, the Company’s adjusted net income for the second quarter of 2021 was $2.8 million, or $0.71 per diluted share. Accordingly, net income for the quarter ended June 30, 2022, decreased 3% compared to the adjusted net income for the second quarter of 2021, while diluted earnings per share remained constant.

Net income for the six months ended June 30, 2022, was $3.6 million, or $0.93 per diluted share, compared to $9.3 million, or $2.34 per diluted share, for the same period in 2021, a decrease of 62% in net income and 60% in diluted earnings per share. Excluding the impact of the PPP loan forgiveness and the tax credit referred to above, the Company’s adjusted net income for the six months ended June 30, 2021, was $4.9 million, or $1.23 per diluted share. Accordingly, net income for the six months ended June 30, 2022, decreased 27% compared to the adjusted net income for the same period in 2021, while diluted earnings per share decreased 25%. The declines compared to adjusted net income and adjusted diluted earnings per share in 2021 were mainly due to lower gross margins as a percentage of sales in the respective periods.

On June 1, 2022, the Company acquired the assets of Live Safely Products, LLC (d/b/a “Safety Made”), for approximately $11 million, including $1.5 million which is contingent upon meeting certain financial targets. Safety Made, a leading manufacturer of first aid kits for the promotional products industry and based in Keane, NH, had revenues in 2021 of approximately $4.9 million and EBITDA of approximately $1.2 million.

Chairman and CEO Walter C. Johnsen said, “Acme United had record sales in the second quarter as our team successfully addressed unprecedented economic and operational challenges, including challenges resulting from quarantines, demurrage fees, port failures, a lack of drivers, the terrible war in Ukraine, the dramatic weakening of the euro, and the highest inflation in the U.S. in 40 years. Nevertheless, we delivered to our customers.”

Mr. Johnsen continued, “We are now seeing some improvement in our supply chain, and we intend to reduce our inventory gradually over the coming quarters. While the overall operating environment remains challenging, we continue to target revenues of approximately $200 million in 2022. We continue to drive internal growth while seeking to identify potential acquisitions. In the second quarter, we also increased our credit facility with HSBC by $15 million, to $65 million. The increase will further support our growth initiatives.”

For the three months ended June 30, 2022, net sales in the U.S. segment increased 33% compared to the same period in 2021 due to a combination of higher sales prices, increased volume, and the carryover of orders from our first quarter of 2022 which were unfilled because of supply chain disruptions. For the six months ended June 30, 2022, net sales in the U.S. segment increased 16% compared to the same period in 2021. The growth was primarily attributable to strong sales of first aid products and Westcott school and office products.

European net sales for the three months ended June 30, 2022, decreased 1% in U.S. dollars but increased 12% in local currency compared to the second quarter of 2021. Net sales for the six months ended June 30, 2022, decreased 2% in U.S. dollars but increased 7% in local currency compared to the first half of 2021. The growth in the three and six months was mainly due to new customers in the office channel.

Net sales in Canada for the three months ended June 30, 2022, decreased 3% in U.S. dollars and were constant in local currency compared to the same period in 2021. Net sales for the six months ended June 30, 2022, increased 2% in U.S. dollars and 4% in local currency compared to the first half of 2021.

Gross margin was 33% in the three months ended June 30, 2022, versus 36% in the comparable period last year. Gross margin was 34% for the six month period ended June 30, 2022, compared to 36% for the same period of 2021. The declines in the three and the six months ending June 30, 2022, were primarily due to product cost inflation pressures as well as higher transportation and labor costs. Price increases partially offset the cost increases.

Operating income increased 5% in the three months ended June 30, 2022, compared to the same period in 2021.

The Company’s bank debt less cash as of June 30, 2022, was $59.8 million compared to $39.3 million on June 30, 2021. During the twelve-month period ended June 30, 2022, the Company paid approximately $11 million for the acquisition of the assets of Live Safely Products, LLC, distributed $1.8 million in dividends on its common stock, and repurchased $1.5 million of common stock. We increased inventory during the twelve-month period by approximately $15 million to anticipate our continued growth and to be positioned to offset the impact of potential supply chain interruptions related to COVID-19. The increase also reflected higher product costs.

Conference Call and Webcast Information
Acme United will hold a conference call to discuss its quarterly results, which will be broadcast on Friday, July 22, 2022, at 12:00 p.m. EDT. To listen or participate in a question and answer session, dial 888-220-8474. International callers may dial 646-828-8193. The confirmation code is 8849680. You may access the live webcast of the conference call through the Investor Relations section of the Company’s website, www.acmeunited.com. A replay may be accessed under Investor Relations, Audio Archives.

About Acme United
ACME UNITED CORPORATION is a leading worldwide supplier of innovative safety solutions and cutting technology to the school, home, office, hardware, sporting goods and industrial markets. Its leading brands include First Aid Only®, First Aid Central®, PhysiciansCare®, Pac-Kit®, Spill Magic®, Westcott®, Clauss®, Camillus®, Cuda®, DMT®, Med-Nap and Safety Made. For more information, visit www.acmeunited.com.

Forward Looking Statements
The Company may from time to time make written or oral “forward-looking statements” including statements contained in this report and in other communications by the Company, which are made in good faith pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on our beliefs as well as assumptions made by and information currently available to us. When used in this document, words like “may,” “might,” “will,” “except,” “anticipate,” “believe,” “potential,” and similar expressions are intended to identify forward-looking statements. Actual results could differ materially from our current expectations.

Forward-looking statements in this report, including without limitation, statements related to the Company’s plans, strategies, objectives, expectations, intentions and adequacy of resources, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties that may impact the Company’s business, operations and financial results, including those risks and uncertainties resulting from the global COVID-19 pandemic, future waves of COVID-19, including through the Delta and Omicron variants and any new variant strains of the underlying virus; any future pandemics; the continuing effectiveness, global availability, and public acceptance of existing vaccines; the effectiveness, availability, and public acceptance of vaccines against variant strains of potential new viruses; and the heightened impact the pandemic has on many of the risks described herein, including, without limitation, risks relating to disruptions in our supply chain, and labor shortages, any of which could materially adversely impact the Company’s ability to manufacture, source or distribute its products, both domestically and internationally.

These risks and uncertainties further include, without limitation, the following: (i) changes in the Company’s plans, strategies, objectives, expectations and intentions, which may be made at any time at the discretion of the Company; (ii) the impact of uncertainties in global economic conditions, whether caused by COVID-19 or otherwise, including the impact on the Company’s suppliers and customers; (iii) additional disruptions in the Company’s supply chains, whether caused by COVID-19 or otherwise; (iv) labor shortages and related costs the Company has and may continue to incur, including costs of acquiring and training new employees and rising wages and benefits; (v) the continuing adverse impact of cost inflation; (vi) the Company’s ability to effectively manage its inventory in a rapidly changing business environment, including the additional inventory the Company acquired in anticipation of supply chain disruptions and uncertainties; (vii) changes in client needs and consumer spending habits; (viii) the impact of competition; (ix) the impact of technological changes including, specifically, the growth of online marketing and sales activity; (x) the Company’s ability to manage its growth effectively, including its ability to successfully integrate any business it might acquire; (xi) currency fluctuations; (xii) international trade policies and their impact on demand for our products and our competitive position, including the imposition of new tariffs or changes in existing tariff rates; and (xiii) other risks and uncertainties indicated from time to time in the Company’s filings with the Securities and Exchange Commission.

CONTACT:        
Paul G. Driscoll        
Acme United Corporation        
1 Waterview Drive         
Shelton, CT 06484
Phone: (203) 254-6060 

ACME UNITED CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
SECOND QUARTER REPORT 2022
(Unaudited)
		Three Months Ended				Three Months Ended
Amounts in 000's except per share data		June 30, 2022				June 30, 2021
Net sales	$	56,773			$	44,847
Cost of goods sold		38,225				28,694
Gross profit		18,548				16,153
Selling, general, and administrative expenses		14,572				12,364
Operating income		3,976				3,789
Interest expense		(428	)			(226	)
Interest income		5				3
Interest expense, net		(423	)			(223	)
PPP Loan forgiveness						3,508
Other expense, net		(148	)			(68	)
Total other (expense) income , net		(148	)			3,440
Income before income tax expense		3,405				7,006
Income tax expense (benefit)		666				(224	)
Net income	$	2,739			$	7,230
Shares outstanding - Basic		3,521				3,347
Shares outstanding - Diluted		3,842				3,964
Earnings per share - Basic	$	0.78			$	2.16
Earnings per share - Diluted		0.71				1.82
Reconciliation to reported Net Income (GAAP)
Net income as reported (GAAP)		2,739				7,230
PPP Loan Forgiveness		-				(3,508	)
Tax credit on stock options		-				(900	)
Net income as adjusted		2,739				2,822
Adjusted Earnings per share - Basic	$	0.78			$	0.84
Adjusted earnings per share - Diluted		0.71				0.71
ACME UNITED CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
SECOND QUARTER REPORT 2022 (cont.)
(Unaudited)
		Six Months Ended				Six Months Ended
Amounts in 000's except per share data		June 30, 2022				June 30, 2021
Net sales	$	100,106			$	88,372
Cost of goods sold		66,590				56,632
Gross profit		33,515				31,740
Selling, general, and administrative expenses		28,169				24,983
Operating income		5,347				6,757
Interest expense		(737	)			(452	)
Interest income		8				9
Interest expense, net		(729	)			(443	)
PPP Loan forgiveness						3,508
Other expense, net		(147	)			(145	)
Total other (expense) income , net		(147	)			3,363
Income before income tax expense		4,471				9,677
Income tax expense		903				400
Net income	$	3,568			$	9,277
Shares outstanding - Basic		3,521				3,410
Shares outstanding - Diluted		3,845				3,961
Earnings per share - Basic	$	1.01			$	2.72
Earnings per share - Diluted		0.93				2.34
Reconciliation to reported Net Income (GAAP)
Net income as reported (GAAP)		3,568				9,277
PPP Loan Forgiveness		-				(3,508	)
Tax credit on stock options		-				(900	)
Net income as adjusted		3,568				4,869
Adjusted Earnings per share - Basic	$	1.01			$	1.43
Adjusted earnings per share - Diluted		0.93				1.23
ACME UNITED CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
SECOND QUARTER REPORT 2022
(Unaudited)
Amounts in 000's		June 30, 2022				June 30, 2021
Assets:
Current assets:
Cash and cash equivalents	$	1,760			$	3,240
Accounts receivable, net		46,991				36,270
Inventories		65,039				48,691
Prepaid expenses and other current assets		3,663				2,233
Total current assets		117,453				90,434
Property, plant and equipment, net		26,277				22,408
Operating lease right of use asset		2,787				3,476
Intangible assets, less accumulated amortization		30,028				22,820
Total assets	$	176,545			$	139,138
Liabilities and stockholders' equity:
Current liabilities:
Accounts payable	$	21,421			$	8,021
Operating lease liability - short term		1,080				919
Mortgage payable - short term		389				267
Other accrued liabilities		10,333				10,374
Total current liabilities		33,223				19,581
Long term debt		50,263				39,550
Mortgage payable - long term		10,897				2,952
Operating lease liability - long term		1,944				2,589
Other non-current liabilities		396				14
Total liabilities		96,723				64,686
Total stockholders' equity		79,822				74,452
Total liabilities and stockholders' equity	$	176,545			$	139,138

FAQ

What were Acme United's net sales for Q2 2022?

Acme United reported net sales of $56.8 million for Q2 2022, a 27% increase compared to Q2 2021.

How much did Acme United's net income decrease in Q2 2022?

Net income for Q2 2022 decreased by 62% to $2.7 million compared to $7.2 million in Q2 2021.

What is Acme United's revenue target for 2022?

Acme United aims for approximately $200 million in revenue for 2022.

What major acquisition did Acme United make recently?

Acme United acquired Live Safely Products for about $11 million.

What were the gross margins for Acme United in Q2 2022?

Gross margins for Q2 2022 were 33%, down from 36% in Q2 2021.