ACME UNITED CORP

Previous wording

These risks and uncertainties 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, including the impact on the Company’s suppliers and customers; (iii) the continuing adverse impact of inflation, including product costs, and interest rates; (iv) potential adverse effects on the Company, its customers, and suppliers resulting from the wars in Ukraine and the Middle East; (v) additional disruptions in the Company’s supply chains, whether caused by pandemics, natural disasters, including trucker shortages, port closures or otherwise; (vi) labor related costs the Company has and may continue to incur, including costs of acquiring and training new employees and rising wages and benefits; (vii) currency fluctuations including, for example, the fluctuation of the dollar against the euro; (viii) the Company’s ability to effectively manage its inventory in a rapidly changing business environment; (ix) changes in client needs and consumer spending habits; (x) the impact of competition; (xi) the impact of technological changes including, specifically, the growth of online marketing and sales activity; (xii) the Company’s ability to manage its growth effectively, including its ability to successfully integrate any business it might acquire; (xiii) 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 (xiv) other risks and uncertainties indicated from time to time in the Company’s filings with the Securities and Exchange Commission.

Current wording

These risks and uncertainties 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, including the impact on the Company’s suppliers and customers; (iii) the continuing adverse impact of inflation, including product costs, transportation costs and interest rates; (iv) potential adverse effects on the Company, its customers, and suppliers resulting from the wars in Ukraine and the Middle East; (v) additional disruptions in the Company’s supply chains, whether caused by pandemics, natural disasters, including trucker shortages, port closures or otherwise; (vi) labor related costs the Company has and may continue to incur, including costs of acquiring and training new employees and rising wages and benefits; (vii) currency fluctuations including, for example, the fluctuation of the dollar against the euro; (viii) the Company’s ability to effectively manage its inventory in a rapidly changing business environment; (ix) changes in client needs and consumer spending habits; (x) the impact of competition; (xi) the impact of technological changes including, specifically, the growth of online marketing and sales activity; (xii) the Company’s ability to manage its growth effectively, including its ability to successfully integrate any business it might acquire; (xiii) 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 (xiv) other risks and uncertainties indicated from time to time in the Company’s filings with the Securities and Exchange Commission.

Previous wording

Consolidated net sales for the three months ended March 31, 2024 were $44,956,000 compared to $45,838,000 the same period in 2023, a decrease of 1%. Excluding the impact of the Camillus and Cuda hunting and fishing product lines sold on November 1, 2023, sales for the three months ended March 31, 2024 increased 1%.

Current wording

Consolidated net sales for the three months ended June 30, 2024 were $55,425,000 compared to $53,336,000 in the same period in 2023, an increase of 4%. Excluding the impact of the Camillus and Cuda hunting and fishing product lines sold on November 1, 2023, sales for the second quarter of 2024 increased 8%, compared to the same period in 2023. Net sales for the six months ended June 30, 2024 were $100,382,000 compared to $99,175,000 in the same period in 2023, an increase of 1%. Excluding Camillus and Cuda, sales for the six months ended June 30, 2024 increased 5% compared to the same period in 2023.

Previous wording

Net sales in the U.S. for the three months ended March 31, 2024 decreased 2% compared to the same period in 2023. Excluding the impact of the sale of the Camillus and Cuda product lines, sales in the U.S. segment increased 1% for the three months ended March 31, 2024 compared to the same period in 2023.

Current wording

Net sales in the U.S. for the three months ended June 30, 2024 increased 5% compared to the same period in 2023. Excluding the impact of Camillus and Cuda, net sales for the second quarter of 2024 increased 9% compared to the same period of 2023. The increase in net sales was primarily related to market share gains across multiple product lines. Net sales for the six months ended June 30, 2024 increased 2% compared to the same period in 2023. Excluding the impact of Camillus and Cuda, net sales for the six months ended June 30, 2024 increased 6% compared to the same period of 2023.

Previous wording

European net sales for the three months ended March 31, 2024 increased 5% in U.S. dollars (4% in local currency) compared to the same period in 2023. Excluding the impact of the sale of the Camillus and Cuda product lines, sales in the European segment increased 7% in local currency for the three months ended March 31, 2024 compared to the same period in 2023.

Current wording

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

Previous wording

Gross profit for the three months ended March 31, 2024 was $17,396,000 (38.7% of net sales) compared to $16,281,000 (35.5% of net sales) in the same period in 2023. The increase in gross profit for the three months ended March 31, 2024 was primarily due to the impact of productivity improvements in the Company's manufacturing and distribution facilities implemented late in 2022 and lower inbound freight costs.

Current wording

Gross profit for the three months ended June 30, 2024 was $22,627,000 (40.8% of net sales) compared to $20,022,000 (37.5% of net sales) in the same period in 2023. Gross profit for the six months ended June 30, 2024 was $40,024,000 (39.9% of net sales) compared to $36,303,000 (36.6% of net sales) in the same period in 2023. The increases in gross profit for the three and six months ended June 30, 2024 were primarily due to productivity improvements in the Company's manufacturing and distribution facilities.

Previous wording

Selling, general and administrative ("SG&A") expenses for the three months ended March 31, 2024 were $14,838,000 (33.0% of net sales) compared with $14,093,000 (30.7% of net sales) in the same period in 2023, an increase of $745,000. The increase in SG&A expenses for the three months ended March 31, 2024 was primarily related to higher personnel related expenses.

Current wording

Selling, general and administrative ("SG&A") expenses for the three months ended June 30, 2024 were $16,252,000 (29.3% of net sales) compared with $14,772,000 (27.7% of net sales) in the same period in 2023, an increase of $1,480,000. SG&A expenses for the six months ended June 30, 2024 were $31,090,000 (31.0% of net sales) compared with $28,865,000 (29.1% of net sales) in the same period in 2023, an increase of $2,225,000. The increases in SG&A expenses for the three and six months ended June 30, 2024 were primarily related to higher personnel related expenses.

Previous wording

Operating income in the U.S. segment increased by $558,000 for the three months ended March 31, 2024, compared to the same period in 2023. The increase in operating income for the three months ended March 31, 2024 was primarily due to productivity improvements at our manufacturing and distribution facilities, cost savings initiatives which included lowering SG&A expenses, as well as lower in-bound freight costs.

Current wording

Operating income in the U.S. segment increased by $1,284,000 for the three months ended June 30, 2024 compared to the same period in 2023. Operating income in the U.S. segment increased by $1,842,000 for the six months ended June 30, 2024 compared to the same period in 2023. The increases in operating income for the three and six months ended June 30, 2024 were primarily due to higher net sales and productivity improvements at our manufacturing and distribution facilities.

Previous wording

Operating income in the Canadian segment decreased by $178,000 for the three months ended March 31, 2024, compared to the same period in 2023. The decrease in operating income was primarily due to lower sales of cutting, sharpening and measuring products.

Current wording

Operating income in the Canadian segment decreased by $39,000 and $216,000 for the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023. The decreases in operating income were primarily due to lower net sales of cutting, sharpening and measuring products.

Previous wording

Operating income in the European segment decreased by $10,000 for the three months ended March 31, 2024, compared to the same period in 2023.

Current wording

Operating income in the European segment decreased by $120,000 and $130,000 for the three and six months ended June 30, 2024, respectively, compared to the same periods in 2023.

Previous wording

Interest expense, net for the three months ended March 31, 2024 was $443,000 compared with $902,000 in the same period of 2023, a $459,000 decrease. The decrease in interest expense for the three months ended March 31, 2024 resulted from a lower average outstanding debt under the Company’s revolving loan agreement.

Current wording

Interest expense, net for the three months ended June 30, 2024 was $539,000 compared with $832,000 in the same period of 2023, a $293,000 decrease. Interest expense, net for the six months ended June 30, 2024 was $982,000 compared with $1,734,000 in the same period of 2023, a $752,000 decrease. The decreases in interest expense for the three and six months ended June 30, 2024 resulted from lower average outstanding borrowings.

Previous wording

Other income, net was $44,000 in the three months ended March 31, 2024 compared to $23,000 in the same period of 2023.

Current wording

Other expense, net was $28,000 in the three months ended June 30, 2024 compared to $23,000 in the same period of 2023. Other expense, net in the six months ended June 30, 2024 was $72,000 compared to $46,000 in the same period of 2023.

Previous wording

During the first three months of 2024, working capital increased approximately $10.6 million. Inventory increased approximately $1.3 million during this three-month period. Inventory turnover, calculated using a twelve-month average inventory balance, was 2.1 at March 31, 2024 and December 31, 2023. Receivables increased approximately $6.7 million at March 31, 2024 compared to December 31, 2023. The average number of days sales outstanding in accounts receivable was 55 days at March 31, 2024 and December 31, 2023. Accounts payable and other current liabilities decreased by approximately $4.7 million at March 31, 2024 compared to December 31, 2023.

Current wording

During the first six months of 2024, working capital increased approximately $12.1 million. As a result of the acquisition of Elite First Aid, Inc., inventory increased approximately $1.1 million during the six-month period. Inventory turnover, calculated using a twelve-month average inventory balance, was 2.1 at June 30, 2024 compared to 2.0 at December 31, 2023. Receivables increased approximately $13.8 million at June 30, 2024 compared to December 31, 2023. The average number of days sales outstanding in accounts receivable was 54 days at June 30, 2024 compared to 55 days at December 31, 2023. Accounts payable and other current liabilities increased by approximately $1.5 million at June 30, 2024 compared to December 31, 2023.

Previous wording

Long-term debt consists of (i) borrowings under the Company’s revolving loan agreement with HSBC Bank, N.A. and (ii) amounts outstanding under the fixed rate mortgage on the Company’s manufacturing and distribution facilities in Rocky Mount, NC and Vancouver, WA. The revolving loan agreement provides for borrowings of up to $65 million, at an interest rate of SOFR plus 1.75%; interest is payable monthly. The loan agreement has an expiration date of May 31, 2026. The Company must pay a facility fee, payable quarterly, in an amount equal to one eighth of one percent (.125%) per annum of the average daily unused portion of the revolving credit line. The facility is intended to provide liquidity for growth, share repurchases, dividends, acquisitions, and other business activities. Under the revolving loan agreement, the Company is required to maintain a specific ratio of funded debt to EBITDA, a fixed charge coverage ratio and must have annual net income greater than $0, measured as of the end of each fiscal year. As of March 31, 2024, the Company was in compliance with the covenants under the revolving loan agreement as then in effect.

Current wording

Long-term debt consists of (i) borrowings under the Company’s revolving loan agreement with HSBC Bank, N.A. and (ii) amounts outstanding under the fixed rate mortgage on the Company’s manufacturing and distribution facilities in Rocky Mount, NC and Vancouver, WA. The revolving loan agreement provides for borrowings of up to $65 million, at an interest rate of SOFR plus 1.75%; interest is payable monthly. The loan agreement has an expiration date of May 31, 2026. The Company must pay a facility fee, payable quarterly, in an amount equal to one eighth of one percent (.125%) per annum of the average daily unused portion of the revolving credit line. The facility is intended to provide liquidity for growth, share repurchases, dividends, acquisitions, and other business activities. Under the revolving loan agreement, the Company is required to maintain specific amounts of funded debt to EBITDA, a fixed charge coverage ratio and must have annual net income greater than $0, measured as of the end of each fiscal year. As of June 30, 2024, the Company was in compliance with the covenants under the revolving loan agreement as then in effect.

Previous wording

During the first three months of 2024, total debt outstanding under the Company’s revolving credit facility increased by approximately $10.1 million, compared to total debt thereunder at December 31, 2023. As of March 31, 2024, $23,347,000 was outstanding and $41,653,000 was available for borrowing under the Company’s credit facility.

Current wording

During the first six months of 2024, total debt outstanding under the Company’s revolving credit facility increased by approximately $13.3 million, compared to total debt thereunder at December 31, 2023. As of June 30, 2024, $26,466,000 was outstanding and $38,534,000 was available for borrowing under the Company’s credit facility.

Previous wording

The Company’s manufacturing and distribution facilities in Rocky Mount, NC and Vancouver, WA were financed by a fixed rate mortgage with HSBC Bank, N.A. at a fixed interest rate of 3.8%. The Company entered into the agreement on December 1, 2021. Payments of principal and interest are due monthly, with all amounts outstanding due on maturity on December 1, 2031. At March 31, 2024, there was approximately $10.6 million outstanding on the mortgage.

Current wording

The Company’s manufacturing and distribution facilities in Rocky Mount, NC and Vancouver, WA were financed by a fixed rate mortgage with HSBC Bank, N.A. at a rate of 3.8%. The Company entered into the agreement on December 1, 2021. Payments of principal and interest are due monthly, with all amounts outstanding due on maturity on December 1, 2031. At June 30, 2024, there was approximately $10.5 million outstanding on the mortgage.