Acme United Corporation Price & Performance (ACU)

Thank you, Paul. Acme United had a strong year in 2020 we had record net sales of $194,400,000 and record EBITDA of $20,000,000 You may recall, we sold our Arcuda and Kimono Hunting and Fishing business in November 2023, from $19,800,000 used the after tax proceeds of approximately $15,000,000 to reduce debt and position the company for growth. The sale of Kuda and Camelot's representative return of over 100 times our investment. During 2024, we reported net sales growth of 2%, despite the reduction of approximately $9,000,000 in revenues from the businesses we sold. Net revenues adjusted for the sale of Kuda and Kymilus increased [indiscernible] During 2024. Our net income in 2024 was $10,000,000 compared to $8,100,000 in 2023, an increase of 23%. We adjusted our expenses to compensate for the loss contribution of the businesses we sold and generated productivity savings.

Earnings per share were $2.45 in 2024, compared to $2.23 in 2023 an increase of 10%. Our first aid business had strong performance. Its revenues were approximately $120,000,000 Refills of components for first aid kits were approximately $30,000,000 and growing. We introduced smart compliance first aid cabinets with RFID technology in 2024. Which permit automatic replenishment of refills. This is the annuity segment of our business. That builds on our growing installed base of industrial first aid kits. Automatically punishment provides substantial savings to our customers. And captures a high percentage of items needed to keep the kits compliant with OSHA and ANSI standards. Our Westcott cutting and DMC sharpening business excellent performance in 2024. Net revenues in this segment were approximately $75,000,000 an increase of 10% compared to 2023.

We gained share in the craft market. Expanded our distribution of high leverage and proprietary adjustable blade scissors and broadened the family of cutters to open boxes in industrial settings and then homes. We are excited about our new sharpening tools that we successfully and culinary markets and the outstanding growth that we experienced in this category in 2024. Our productivity initiatives resulted in over $2,000,000 in annual [indiscernible] We attacked expenses on many fronts. Including reducing the cost of first aid boxes, automating the placement of items into unitized packages, bidding out freight and carrier charges, and installing new software tools to optimize placement. Of items in our warehouses. [indiscernible] racking in our largest distribution center. This facility in Rocky Mount, North Carolina has over 340,000 square feet on 33 acres of land and has been the backbone of our expansion during the past eight years. The new racking increases our capacity by 30% and positions us to handle additional growth. Our businesses in Canada and Europe also had a good year. We moved into a new facility in Laval, Canada to handle growth in First Aid Central. Our European business made investments to expand in the First Aid and Medical segment, and generated another profitable year.

We anticipate that there will be challenges with tariffs in 2025 and we feel we are ready. During the past eight years, we have purchased 10 companies with production facilities The United States and Canada, and work to diversify our sourcing to many global locations [indiscernible] Thailand, Egypt, [indiscernible] And The Philippines. We would like to acknowledge Stevenson Ward, who will be retiring from our Board of Directors in April. Steve has been Chair of our Audit Committee and a valued confidant colleague and friend. He leaves us a much stronger company than when he arrived more than twenty years ago. I would like to firstly say thank you to Steve Ward. As we look into 2025, we are optimistic and confident. We have a strong customer base excellent financials and a solid book of new business. I will now turn the call to Paul.

Paul? Acme's net sales for the fourth quarter were $45,900,000 compared to $41,900,000 in 2023, increase of 10%. Sales for the year ended December 31, 2024 were $194,500,000 compared to $191,500,000 in 2023, an increase of 2%. Excluding the impact of the Camillus and Coote hunting and Fishing product lines sold on 11/01/2023, sales for 2024 increased 6%. Net sales in The U. S. Segment increased 12% in the fourth quarter, Excluding Camillus and Cuda sales increased 8% for the year ended 12/31/2024, due to market share gains with First Aid, Westcott kraft products and DMT sharpeners. Net sales in Europe declined 1% in local currency for the quarter sales for the year. Ended 12/31/2024, excluding Camillus and Kuda. Increased 8% compared to 2023. The sales increase for the year was mainly due to market share gains in the office channel. Net sales in Canada were constant local currency for the quarter. Sales for the year ended 12/31/2024 excluding Camel Secuda increased 1% compared to 2023. Sales of first aid products were strong however, there was a gross margin was 38.7% in the fourth quarter of twenty twenty four compared to 39.1% in 2023. The gross margin for the year was 93% compared to 37.7% in 2023.

The higher gross margin for the year was mainly due to productivity improvement initiatives in our manufacturing distribution facilities. SG and A expenses for the fourth quarter of twenty twenty four were $15,500,000 or 34% of sales compared with $14,300,000 or 34% of sales for the same period of 2023. SG and A expenses for the twelve months 2024 was $62,000,000 or 32% of sales, compared with $59,000,000,000 or 31% of sales in 2023. Interest expense for the year went from $3,000,000 in 2023 to $1,900,000 in 2024, due to a decline in the average debt of approximately $16,000,000 Net income for the fourth quarter twenty twenty four was $1,700,000 or $41 per diluted share. After excluding the $9,600,000 gain, on the sale of the Camillus Inukuta product lines, in the fourth quarter twenty twenty three, this compares to $1,556,000 or $0.4 per diluted share in Q4 twenty twenty three, an increase of 9% and net income 3% in diluted earnings per share Net income for the year ended December 31, 2024 was $10,000,000 or $2.45 per diluted share after excluding the gain on the sale of Camillus Incuda, this compares to $8,100,000 or $2.23 per diluted share in 2023, an increase of 23% of net income and and 10% in diluted earnings per share.

The company's bank debt less cash on 12/31/2024 $21,500,000 compared to $19,000,000 on 12/31/2023. During the twelve month period, we purchased the assets of a lease first aid for $6,100,000 paid $2,200,000 in dividends and generated approximately $5,000,000 in free cash flow.

Thank you, Paul. I'll now open the call to questions. Great. Thank you. At this time, we will be conducting a Our first question is from Jim Rohn from Singular Research. Please go ahead. Good afternoon, gentlemen. I have two questions. Both of them are related to the tariffs. With my first question, in your prepared remarks, you said that your company is is ready for the upcoming tariffs. And you kind of alluded to the fact that you're ready based on expansion with respect to acquisitions over the few years. So I just was hoping that maybe you can just put a little bit more clarity to those prepared comments. And related to that, How do you plan on attacking or or being prepared for [indiscernible] the tariffs of The U. S. Is going to impose as well as the retaliatory tariffs Do you plan on your operations in Canada like selling from within and avoiding cross border shipments as well as within The U. S. Or do you plan to continue cross border trade. So I'm just curious, I'm looking forward to hearing your comments on that.

That's really very helpful. Question, Jim. The first part is the preparation. So over the past eight years, we've purchased manufacturing sites Vancouver, Washington, that was first aid only. That's one of our major first aid production sites. Where we make first aid products. Wilson make first aid products in Rocky Mount, North Carolina We bought Still Magic, which makes Still Cleanup Powder. And in the medical area, we use that powder for blood borne pathogen kits, and bodily fluid cleanup kits. That production is in Santa Ana and Nashville, Tennessee. We bought Med Now which makes alcohol prep pads. BZK wipes, Calamine Lotion, and sanitizers and other items, triple antibiotic wipes, That's in Brooksville, Florida and we're working on an expansion there all domestic production. What we did Asian business, a dual sourcing strategy in places like Egypt, which has a broad cotton industry. You may think of Egyptian cotton or linen as an example. So gauze, tape and is very competitive with China. So we've moved quite a bit of production into Egypt as well as into China.

In the case of some of our production that's currently in China, We're moving pieces of it from the previous Trump tariffs into Thailand and The Philippines.

The first production of Thai paper cutters as an example with a certificate of awards made in Thailand was in December of twenty twenty four. That's going to be followed by many, many other items. We do a lot of production today in India, and that's been as part of the diversification out of So as you look at first the preparation, it's been something we've been responding to over the past eight years. And we are very broadly diversified compared to where we had been. Now specifically, the retaliatory tariffs and the Question of how we address those Our subsidiaries are set up so that for example in Canada, our first aid central business produces first aid kits in Canada.

There's very little cross border shipping, there is some. For example, we make BZK wipes in Brooksville, Florida and MedDap. We ship them into Canada because there's a drastic shortage of those items in Canada. And even if there was a retaliatory tariff, the availability of BZK whites is something that we have that most our competitors do not. And that would be continue to be a plus.

But the actual production, the sourcing in China it's all in our Toronto location, or Montreal location and our warehouse in Mount Forest. So it's really separate. In the case of Europe, it's similar. Our European business is a subsidiary that deals directly with China and they have [indiscernible] It's different than in The U. S. We don't ship from The U. S. To Europe. It goes to [indiscernible] resources in China Our first aid production is done there as well as well as the other locations. So I'm not really too concerned about retaliatory tariffs. I think we're positioned to be able to respond to those very easily. Because we're whole within those locations. [indiscernible] the when tariffs happen, We do a couple of things.

First, we work with our suppliers to figure out ways to reduce cost. And they tend to respond to that. Second, we have an ongoing productivity program I mentioned $2,000,000 last year. So every year you expect productivity in your factories and your suppliers have similar goals. Third, we do regular price increases for inflation. And that covers part of the cost of tariffs. And frankly, if there's a tariff that's so big, like two or three, well, we're the largest scissor maker globally. So there's no one that can replace the volumes that we have. [indiscernible] In the case of our First Aid, we're the leading brand in North America. And again, with a very diversified sourcing base, Finally, if the tariffs were to be very, very high globally, we have the capability in our first aid business to bring it back gradually into pieces of The U. S. And vertically integrate further. So It's not perfect. But we're prepared.

Yes, that's great. Great insight. Thank you. However, here's my follow-up. And right, it's not perfect, but you're prepared. So can you perhaps just [indiscernible] like if the tariffs were to be imposed like where exactly will your business get hit the most? Will it be based on the input prices becoming higher and you're going to have to pay higher input prices, Or will it be based on the sales where you're going to be having to sell at higher price points as a result of the tariff? Can you give us a sense of where the biggest hit is going to be and that's going to play out?

Well, it's a dynamic situation right now because tariffs there's an extra 10% that was just announced for implementation. Next week. And for China. So with that, as an example, First, it's on your cost, not your selling price. Right, because you're importing. We pay the tariff. We will be working with our suppliers to adjust their costs We will adjust maybe the mix of some products We will be getting productivity And there is a price increase that will go with inflation and we've already announced those and they're happening. So it's a mix. But generally, when we're done, we try to be pretty close to margin breakeven being sensitive to that we're giving real value to our Right.

And what about on the other end, on the sales side? So like how much of an impact can you imagine having to sell with regards to the goods that are shipped cross border as far as the price points of your selling prices being higher as a result of the tariffs? Can you get a sense of how much impact that could possibly be? Well, again, it just depends on the rest of the supply chain. But we've already put a price increase. Remember, there is inflation So you've got that covering on your selling price. And there may be a pickup in a little bit of that But then maybe the customer trades to a different item. And we work with them to keep the utility of what they're buying comparable and they don't actually get a price increase. They have a substitution. So it's not quite so simple. And I know the press says, well, you got a 10% ten percent selling price increase. It doesn't work that way.

Okay, great. Thank you for the insight, gentlemen.

Thanks, Jim.

And our next question here is from Jeffrey Matthews from Ramb Partners.

Thank you. And that was a great answer, Walter. And leads into my question, which is also about tariffs, but more broadly we have an economic policy that's kind of run out of the White House now and it sort of depends on what side of the bed the President got up on.

And an advantage you don't have is that if you're a very large company like Apple or Amazon, and you can pay $1,000,000 to for his President's inauguration committee.

You now have a seat at the table And he's going to be your friend.

And my question is, does the small manufacturer who could get run over depending on where the tariffs are applied, Does the small manufacturer have a voice at the table here? Well, we really do not have a voice at the table. [indiscernible] And you're absolutely right, we're not Apple. On the other hand, within our market segments, we're very big. Whether that's in the cutting area where we have the largest share in the or in the scissors. Or in the first day, we were major in North America. We do have pricing power. So well and we do have negotiating power with our suppliers, [indiscernible] we are clearly not influencing policy. And So we're responding. We also, as you can imagine, purchased inventory in advance of these tariffs, so that we have time to adjust our pricing mix and product mix to meet what might come forward. But you're absolutely right. We do not have a seat at the table. Okay.

But you're flexible and and your responses and your you've got your eyes wide open and would have expected no less, but I appreciate that answer.

My follow-up is my follow-up is the Canadian acquisition you made of the Red Cross out of bankruptcy, That I forget how long ago that was, but could you give an update on how that is playing out and [indiscernible] it's developing relative to your expectations at this time? Yes.

So for those who may not remember, we bought a company called Hawktree Solutions at a bankruptcy last September Well, this is September 2023. And they had been supplying first aid kits to the Canadian Red Cross and to other customers in Canada. When COVID happened, they started to supply gloves and other PPE items to the Canadian government. And they ballooned in sales which was terrific. And then they financed themselves with quite a bit of debt. For continued growth than COVID ended And the debt was called and the company went bankrupt So we bought that business for about $1,000,000 and it had inventory of about CAD1.3 million. So we bought it below its cost of inventory. We have built that to about $2,500,000 to $3,000,000 business right now. Profitably we've renewed the contract with the Canadian Red Cross We're introducing the Elite First Aid first responder bags to the Canadian market through it's all First Aid Central today, but it's through the customer base that Elite had And we've use the inventory very effectively. So it's a part of the business and it's been a good Acquisition.

Terrific. Thanks, Walter. Good luck.

Thank you. Next question here is from Richard Dearnley from Longport Partners.

Please go ahead.

Good morning.

Paul, why did you stop releasing the European sales numbers.

I didn't know I did stop releasing European sales numbers. Yes, yes. U. S. And Canada, but no Europe. No, I did mention Europe. I know I did. You mean in this call or on the In the press release, I'm pretty sure they're in the press release.

I already Okay. It's in front of Acme. It's in there. [indiscernible] Well, Walgreens, Paul, if Westcott was $75,000,000 for the year and up 10%. That would That would suggest a $7,000,000 increase in sales. Sales, the $194,000,000 was up $3,000,000 Does that are you telling me that first aid was down for the year? No. First Aid was up approximately 5%.

Included in the $191,500,000 last year was $9,000,000 of Camillus and Cuda. So Westcott was up 10% and first day was up 5%.

But we don't have the $9,000,000 of Camillus Right. Okay. So when I say Westcott and DME.

Right. And the the $30,000,000 of refills I thought refills were around 40,000,000 Well, I think in net sales, I believe it's $30,000,000 When we look at what's going out [indiscernible] we're looking at gross sales and that has rebates in it and things and that's what we measure. So, I may have said 40 at one point, because that's what I see. But then when they net it out for reporting, it might be down to 30%, but it's something like that. Okay.

Okay. Thank you. Thanks so much. Thanks, Dick.

Next question here is from [indiscernible] one question on the SG and A. I think second quarter you guys mentioned you expected it to decline [indiscernible] picked up a good bit here in the fourth quarter. So just kind of curious if that is still a fair assumption going forward?

The assumption being it's somewhere between 3132%.

That's probably right.

Yes, yes, that's right. Okay. Well, you said I think you said a little below 31%. So I was kind of that was right.

Somewhere in that range.

Okay. And then I guess like the uptick this year, is there anything you could call out specifically like growth investments or anything? It's well, it was up by one percentage point on net sales that's just it's mostly in inflationary reasons and typical wage increases So other than that, there's not much there.

Okay. Cool. Appreciate it. There are no further questions at this time. Like to turn the floor back over to Mr. Johnson for any closing comments.

Well, if there are no further questions, this call is complete. Thank you for joining us. We look forward to discussing our first quarter of twenty twenty five with you in April. Goodbye.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you again for your participation.