Quarterly Report (10-q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: June 30, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from: to

Commission file number: 01-07698

ACME UNITED CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

Connecticut		06-0236700
State or Other Jurisdiction of		I.R.S. Employer Identification No.
Incorporation or Organization

1 Waterview Drive, Shelton, Connecticut		06484
Address of Principal Executive Offices		Zip Code

Registrant's telephone number, including area code: (203) 254-6060

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
$2.50 par value Common Stock	ACU	NYSE American

Indicate by check mark whether the registrant (l) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (sec. 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act (Check one).

Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐	Smaller Reporting Company	☒

Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(s) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 USC. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☒ No ☐

Registrant had 3,525,002 shares of its $2.50 par value Common Stock outstanding as of August 5, 2022.

ACME UNITED CORPORATION

INDEX

		Page Number

Part I — FINANCIAL INFORMATION:		3
Item 1:	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets at June 30, 2022 and December 31, 2021	3
	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2022 and 2021	5
	Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2022 and 2021	6
	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, 2022 and 2021	7
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021	9
	Notes to Condensed Consolidated Financial Statements	10
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3:	Quantitative and Qualitative Disclosures about Market Risk	21
Item 4:	Controls and Procedures	21

Part II — OTHER INFORMATION:		22
Item 1:	Legal Proceedings	22
Item 1A:	Risk Factors	22
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	22
Item 3:	Defaults Upon Senior Securities	22
Item 4:	Mine Safety Disclosures	22
Item 5:	Other Information	22
Item 6:	Exhibits	22
Signatures		23

Part I - FINANCIAL INFORMATION

Item 1: Financial Statements

ACME UNITED CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(all amounts in thousands)

	June 30,		December 31,
	2022		2021
	(unaudited)		(Note 1)
ASSETS
Current assets:
Cash and cash equivalents	$	1,760	$	4,843
Accounts receivable, less allowance of $922 in 2022 and $1,007 in 2021		46,991		34,221
Inventories		65,039		53,552
Prepaid expenses and other current assets		3,647		2,635
Total current assets		117,437		95,251
Property, plant and equipment:
Land		1,977		1,761
Buildings		16,088		13,456
Machinery and equipment		30,493		29,760
		48,558		44,977
Less: accumulated depreciation		22,281		20,950
Net property, plant and equipment		26,277		24,027

Operating lease right-of-use asset, net		2,787		3,130
Goodwill		8,189		4,800
Intangible assets, less accumulated amortization		21,625		17,231
Other assets - restricted cash		1,500		-
Total assets	$	177,815	$	144,439

See Notes to Condensed Consolidated Financial Statements.

ACME UNITED CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (continued)

(all amounts in thousands, except share amounts)

	June 30,			December 31,
	2022			2021
	(unaudited)			(Note 1)
LIABILITIES
Current liabilities:
Accounts payable	$	21,421		$	8,977
Operating lease liability - current portion		1,080			1,000
Current portion of mortgage payable		389			389
Other accrued liabilities		10,129			9,909
Total current liabilities		33,019			20,275
Non-current liabilities:
Long-term debt		50,263			33,037
Mortgage payable, net of current portion		10,897			11,081
Operating lease liability - non-current portion		1,944			2,365
Other non-current liabilities		1,869			599
Total liabilities		97,992			67,357

Commitments and Contingencies (see note 2)

STOCKHOLDERS' EQUITY
Common stock, par value $2.50:
authorized 8,000,000 shares;
5,066,245 shares issued and 3,521,373 shares outstanding in 2022 and
5,065,518 shares issued and 3,520,646 shares outstanding in 2022 and 2021		12,657			12,655
Additional paid-in capital		12,598			11,930
Retained earnings		72,491			69,873
Treasury stock, at cost - 1,544,872 shares in 2022 and 2021		(15,996	)		(15,996	)
Accumulated other comprehensive loss:
Translation adjustment		(1,927	)		(1,380	)
Total stockholders’ equity		79,823			77,082
Total liabilities and stockholders’ equity	$	177,815		$	144,439

See Notes to Condensed Consolidated Financial Statements.

ACME UNITED CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(all amounts in thousands, except per share amounts)


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Net sales	$	56,773		$	44,847		$	100,106		$	88,372
Cost of goods sold		38,225			28,694			66,590			56,632

Gross profit		18,548			16,153			33,516			31,740

Selling, general and administrative expenses		14,572			12,364			28,169			24,983

Operating income		3,976			3,789			5,347			6,757

Non-operating items:
Interest:
Interest expense		428			226			737			452
Interest income		(5	)		(3	)		(8	)		(9	)
Interest expense, net		423			223			729			443
PPP loan forgiveness		-			(3,508	)		-			(3,508	)
Other expense (income), net		148			68			147			145
Total other expense (income), net		148			(3,440	)		147			(3,363	)
Income before income tax expense		3,405			7,006			4,471			9,677
Income tax expense (benefit)		667			(224	)		903			400
Net income	$	2,738		$	7,230		$	3,568		$	9,277

Basic earnings per share	$	0.78		$	2.16		$	1.01		$	2.72

Diluted earnings per share	$	0.71		$	1.82		$	0.93		$	2.34

Weighted average number of common shares outstanding-denominator used for basic per share computations		3,521			3,347			3,521			3,410
Weighted average number of dilutive stock options outstanding		320			617			323			551
Denominator used for diluted per share computations		3,841			3,964			3,844			3,961

Dividends declared per share	$	0.14		$	0.13		$	0.27		$	0.26

See Notes to Condensed Consolidated Financial Statements.

ACME UNITED CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

(all amounts in thousands)

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2022			2021		2022			2021
Net income	$	2,738		$	7,230	$	3,568		$	9,277
Other comprehensive (loss) income :
Foreign currency translation adjustment		(574	)		168		(547	)		(20	)
Comprehensive income	$	2,164		$	7,398	$	3,021		$	9,257

See Notes to Condensed Consolidated Financial Statements.

ACME UNITED CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(UNAUDITED)

(all amounts in thousands, except share amounts)

For the three months ended June 30, 2021

	Outstanding Shares of Common Stock		Common Stock		Treasury Stock			Additional Paid-In Capital			Accumulated Other Comprehensive (Loss) Gain			Retained Earnings			Total
Balances, March 31, 2021		3,356,614	$	12,145	$	(14,522	)	$	8,375		$	(1,014	)	$	59,643			64,627
Net income															7,230			7,230
Other comprehensive income												168						168
Stock compensation expense									580									580
Distributions to shareholders															(458	)		(458	)
Issuance of common stock		172,594		431					2,085									2,516
Cash settlement of stock options									(211	)								(211	)
Balances June 30, 2021		3,529,208	$	12,576	$	(14,522	)	$	10,829		$	(846	)	$	66,415		$	74,452

For the three months ended June 30, 2022

	Outstanding Shares of Common Stock		Common Stock		Treasury Stock			Additional Paid-In Capital		Accumulated Other Comprehensive (Loss) Gain			Retained Earnings			Total
Balances, March 31, 2022		3,520,646	$	12,655	$	(15,996	)	$	12,222	$	(1,353	)	$	70,245		$	77,773
Net income														2,738			2,738
Other comprehensive loss											(574	)					(574	)
Stock compensation expense									368								368
Distributions to shareholders														(492	)		(492	)
Issuance of common stock		727		2					8								10
Balances June 30, 2022		3,521,373	$	12,657	$	(15,996	)	$	12,598	$	(1,927	)	$	72,491		$	79,823

For the six months ended June 30, 2021

	Outstanding Shares of Common Stock		Common Stock		Treasury Stock			Additional Paid-In Capital			Accumulated Other Comprehensive Loss			Retained Earnings			Total
Balances, December 31, 2020		3,338,913	$	12,101	$	(14,522	)	$	7,931		$	(826	)	$	58,033		$	62,717
Net income															9,277			9,277
Other comprehensive income												(20	)					(20	)
Stock compensation expense									886									886
Distributions to shareholders															(895	)		(895	)
Issuance of common stock		190,295		475					2,223									2,698
Cash settlement of stock options									(211	)								(211	)
Balances June 30, 2021		3,529,208	$	12,576	$	(14,522	)	$	10,829		$	(846	)	$	66,415		$	74,452

For the six months ended June 30, 2022

	Outstanding Shares of Common Stock		Common Stock		Treasury Stock			Additional Paid-In Capital			Accumulated Other Comprehensive Loss			Retained Earnings			Total
Balances, December 31, 2021		3,520,646	$	12,655	$	(15,996	)	$	11,930		$	(1,380	)	$	69,873		$	77,082
Net income															3,568			3,568
Other comprehensive loss												(547	)					(547	)
Stock compensation expense									768									768
Distributions to shareholders															(950	)		(950	)
Issuance of common stock		727		2					8									10
Cash settlement of stock options									(108	)								(108	)
Balances June 30, 2022		3,521,373	$	12,657	$	(15,996	)	$	12,598		$	(1,927	)	$	72,491		$	79,823

See Notes to Condensed Consolidated Financial Statements.

ACME UNITED CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(all amounts in thousands)

	Six Months Ended
	June 30,
	2022			2021
Cash flows from operating activities:
Net income	$	3,568		$	9,277
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation		1,339			1,176
Amortization of intangible assets		744			742
Non-cash lease expense		-			43
Stock compensation expense		768			886
Provision for bad debt		50			54
PPP loan forgiveness		-			(3,508	)
Amortization of deferred financing costs		8			-
Changes in operating assets and liabilities:
Accounts receivable		(12,468	)		(9,072	)
Inventories		(11,021	)		2,007
Prepaid expenses and other assets		(991	)		(593	)
Accounts payable		12,651			346
Other accrued liabilities		182			(1,215	)
Total adjustments		(8,739	)		(9,134	)
Net cash (used in) provided by operating activities		(5,171	)		143

Cash flows from investing activities:
Purchase of property, plant and equipment

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