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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: September 30, 2022

or

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 3,534,729 shares of its $2.50 par value Common Stock outstanding as of November 4, 2022.

1


ACME UNITED CORPORATION

INDEX

 

 

 

Page

Number

 

 

 

Part I — FINANCIAL INFORMATION:

3

Item 1:

Financial Statements (Unaudited)

3

 

Condensed Consolidated Balance Sheets at September 30, 2022 and December 31, 2021

3

 

Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021

5

 

Condensed Consolidated Statements of Comprehensive (Loss) Income for the three and nine months ended September 30, 2022 and 2021

6

 

Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2022 and 2021

7

 

Condensed Consolidated Statements of Cash Flows for the nine months ended September 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

 

2


 

Part I - FINANCIAL INFORMATION

 

Item 1: Financial Statements

 

ACME UNITED CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(all amounts in thousands)

 

 

 

September 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

 

 

(unaudited)

 

 

(Note 1)

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

4,218

 

 

$

4,843

 

Accounts receivable, less allowance of $938 in 2022 and $1,007 in 2021

 

 

40,149

 

 

 

34,221

 

Inventories

 

 

66,210

 

 

 

53,552

 

Prepaid expenses and other current assets

 

 

3,989

 

 

 

2,635

 

Restricted cash

 

 

750

 

 

 

-

 

Total current assets

 

 

115,316

 

 

 

95,251

 

Property, plant and equipment:

 

 

 

 

 

 

 

 

Land

 

 

1,969

 

 

 

1,761

 

Buildings

 

 

16,282

 

 

 

13,456

 

Machinery and equipment

 

 

30,514

 

 

 

29,760

 

 

 

 

48,765

 

 

 

44,977

 

Less: accumulated depreciation

 

 

22,723

 

 

 

20,950

 

   Net property, plant and equipment

 

 

26,042

 

 

 

24,027

 

 

 

 

 

 

 

 

 

 

Operating lease right-of-use asset, net

 

 

2,891

 

 

 

3,130

 

Goodwill

 

 

8,189

 

 

 

4,800

 

Intangible assets, less accumulated amortization

 

 

21,296

 

 

 

17,231

 

Other assets - restricted cash

 

 

750

 

 

 

-

 

Total assets

 

$

174,484

 

 

$

144,439

 

 

 

See Notes to Condensed Consolidated Financial Statements.

3


ACME UNITED CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (continued)

(all amounts in thousands, except par value and share amounts)

 

 

 

 

September 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

 

 

(unaudited)

 

 

(Note 1)

 

LIABILITIES

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

11,771

 

 

$

8,977

 

Operating lease liability - current portion

 

 

1,142

 

 

 

1,000

 

Current portion of mortgage payable

 

 

389

 

 

 

389

 

Other current liabilities

 

 

11,138

 

 

 

9,909

 

Total current liabilities

 

 

24,440

 

 

 

20,275

 

Non-current liabilities:

 

 

 

 

 

 

 

 

Long-term debt

 

 

57,131

 

 

 

33,037

 

Mortgage payable, net of current portion

 

 

10,803

 

 

 

11,081

 

Operating lease liability - non-current portion

 

 

1,949

 

 

 

2,365

 

Other non-current liabilities

 

 

1,180

 

 

 

599

 

Total liabilities

 

 

95,503

 

 

 

67,357

 

 

 

 

 

 

 

 

 

 

Commitments and Contingencies (see note 2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Common stock, par value $2.50:

 

 

 

 

 

 

 

 

authorized 8,000,000 shares;

 

 

 

 

 

 

 

 

   5,079,601 shares issued and 3,534,729 shares outstanding in 2022 and

 

 

 

 

 

 

 

 

        5,065,518 shares issued and 3,520,646 shares outstanding in 2021

 

 

12,690

 

 

 

12,655

 

Additional paid-in capital

 

 

13,058

 

 

 

11,930

 

Retained earnings

 

 

72,060

 

 

 

69,873

 

Treasury stock, at cost - 1,544,872 shares in 2022 and 2021

 

 

(15,996

)

 

 

(15,996

)

Accumulated other comprehensive loss:

 

 

 

 

 

 

 

 

Translation adjustment

 

 

(2,831

)

 

 

(1,380

)

Total stockholders’ equity

 

 

78,981

 

 

 

77,082

 

Total liabilities and stockholders’ equity

 

$

174,484

 

 

$

144,439

 

 

 

 

See Notes to Condensed Consolidated Financial Statements.

 

4


 

ACME UNITED CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(all amounts in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net sales

 

$

49,744

 

 

$

47,923

 

 

$

149,849

 

 

$

136,295

 

Cost of goods sold

 

 

33,819

 

 

 

30,918

 

 

 

100,374

 

 

 

87,550

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

15,925

 

 

 

17,005

 

 

 

49,475

 

 

 

48,745

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

14,972

 

 

 

14,044

 

 

 

43,176

 

 

 

39,028

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

953

 

 

 

2,961

 

 

 

6,299

 

 

 

9,717

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-operating items:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

722

 

 

 

230

 

 

 

1,459

 

 

 

682

 

Interest income

 

 

(8

)

 

 

(2

)

 

 

(16

)

 

 

(11

)

Interest expense, net

 

 

714

 

 

 

228

 

 

 

1,443

 

 

 

671

 

PPP loan forgiveness

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(3,508

)

Other expense, net

 

 

209

 

 

 

68

 

 

 

354

 

 

 

213

 

Total other expense (income), net

 

 

209

 

 

 

68

 

 

 

354

 

 

 

(3,295

)

Income before income tax expense

 

 

30

 

 

 

2,665

 

 

 

4,502

 

 

 

12,341

 

Income tax (benefit) expense

 

 

(34

)

 

 

619

 

 

 

870

 

 

 

1,019

 

Net income

 

$

64

 

 

$

2,046

 

 

$

3,632

 

 

$

11,322

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

$

0.02

 

 

$

0.58

 

 

$

1.03

 

 

$

3.28

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share

 

$

0.02

 

 

$

0.50

 

 

$

0.96

 

 

$

2.85

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding-denominator used for basic

   per share computations

 

 

3,530

 

 

 

3,542

 

 

 

3,525

 

 

 

3,449

 

Weighted average number of dilutive stock options outstanding

 

 

162

 

 

 

516

 

 

 

256

 

 

 

520

 

Denominator used for diluted per share computations

 

 

3,692

 

 

 

4,058

 

 

 

3,781

 

 

 

3,969

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per share

 

$

0.14

 

 

$

0.13

 

 

$

0.41

 

 

$

0.39

 

 

 

 

See Notes to Condensed Consolidated Financial Statements.

5


ACME UNITED CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(UNAUDITED)

(all amounts in thousands)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net income

 

$

64

 

 

$

2,046

 

 

$

3,632

 

 

$

11,322

 

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

(904

)

 

 

(310

)

 

 

(1,451

)

 

 

(330

)

Comprehensive (loss) income

 

$

(840

)

 

$

1,736

 

 

$

2,181

 

 

$

10,992

 

 

See Notes to Condensed Consolidated Financial Statements.

6


ACME UNITED CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(UNAUDITED)

(all amounts in thousands, except share amounts)

 

 

 

    

For the three months ended September 30, 2021

 

 

Outstanding Shares of Common Stock

 

 

Common Stock

 

 

Treasury

Stock

 

 

Additional Paid-In Capital

 

 

Accumulated

Other Comprehensive Loss

 

 

Retained Earnings

 

 

Total

 

Balances, June 30, 2021

 

3,529,208

 

 

$

12,576

 

 

$

(14,522

)

 

$

10,829

 

 

$

(846

)

 

$

66,415

 

 

 

74,452

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,046

 

 

 

2,046

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(310

)

 

 

 

 

 

 

(310

)

Stock compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

455

 

 

 

 

 

 

 

 

 

 

 

455

 

Distributions to shareholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(463

)

 

 

(463

)

Issuance of common stock

 

30,479

 

 

 

77

 

 

 

 

 

 

 

291

 

 

 

 

 

 

 

 

 

 

 

368

 

Balances September 30, 2021

 

3,559,687

 

 

$

12,653

 

 

$

(14,522

)

 

$

11,575

 

 

$

(1,156

)

 

$

67,998

 

 

$

76,548

 

 

 

For the three months ended September 30, 2022

 

 

Outstanding Shares of Common Stock

 

 

Common Stock

 

 

Treasury

Stock

 

 

Additional Paid-In Capital

 

 

Accumulated

Other Comprehensive Loss

 

 

Retained Earnings

 

 

Total

 

Balances, June 30, 2022

 

3,521,373

 

 

$

12,657

 

 

$

(15,996

)

 

$

12,598

 

 

$

(1,927

)

 

$

72,491

 

 

$

79,823

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

64

 

 

 

64

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(904

)

 

 

 

 

 

 

(904

)

Stock compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

637

 

 

 

 

 

 

 

 

 

 

 

637

 

Distributions to shareholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(495

)

 

 

(495

)

Issuance of common stock

 

5,239

 

 

 

13

 

 

 

 

 

 

 

55

 

 

 

 

 

 

 

 

 

 

 

68

 

Net share settlement of stock options

 

8,117

 

 

 

20

 

 

 

 

 

 

 

(232

)

 

 

 

 

 

 

 

 

 

 

(212

)

Balances September 30, 2022

 

3,534,729

 

 

$

12,690

 

 

$

(15,996

)

 

$

13,058

 

 

$

(2,831

)

 

$

72,060

 

 

$

78,981

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the nine months ended September 30, 2021  

     

 

 

Outstanding

Shares of

Common

Stock

 

 

Common

Stock

 

 

Treasury

Stock

 

 

Additional

Paid-In

Capital

 

 

Accumulated

Other

Comprehensive

Loss

 

 

Retained

Earnings

 

 

Total

 

Balances, January 1, 2021

 

 

3,338,913

 

 

$

12,101

 

 

$

(14,522

)

 

$

7,931

 

 

$

(826

)

 

$

58,033

 

 

$

62,717

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,322

 

 

 

11,322

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(330

)

 

 

 

 

 

 

(330

)

Stock compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,341

 

 

 

 

 

 

 

 

 

 

 

1,341

 

Distributions to shareholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,357

)

 

 

(1,357

)

Issuance of common stock

 

 

220,774

 

 

 

552

 

 

 

 

 

 

 

2,514

 

 

 

 

 

 

 

 

 

 

 

3,066

 

Cash settlement of stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(211

)

 

 

 

 

 

 

 

 

 

 

(211

)

Balances September 30, 2021

 

 

3,559,687

 

 

$

12,653

 

 

$

(14,522

)

 

$

11,575

 

 

$

(1,156

)

 

$

67,998

 

 

$

76,548

 

 

 

 

 

 

 

7


 

 

 

 

For the nine months ended September 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,632

 

 

 

3,632

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,451

)

 

 

 

 

 

 

(1,451

)

Stock compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,405

 

 

 

 

 

 

 

 

 

 

 

1,405

 

Distributions to shareholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,445

)

 

 

(1,445

)

Issuance of common stock

 

 

5,966

 

 

 

15

 

 

 

 

 

 

 

63

 

 

 

 

 

 

 

 

 

 

 

78

 

Cash settlement of stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(108

)

 

 

 

 

 

 

 

 

 

 

(108

)

Net share settlement of stock options

 

 

8,117

 

 

 

20

 

 

 

 

 

 

 

(232

)

 

 

 

 

 

 

 

 

 

 

(212

)

Balances September 30, 2022

 

 

3,534,729

 

 

$

12,690

 

 

$

(15,996

)

 

$

13,058

 

 

$

(2,831

)

 

$

72,060

 

 

$

78,981

 

 

See Notes to Condensed Consolidated Financial Statements.

8


ACME UNITED CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(all amounts in thousands)

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

3,632

 

 

$

11,322

 

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

2,006

 

 

 

1,809

 

Amortization of intangible assets

 

 

1,298

 

 

 

1,111

 

Non-cash lease expense

 

 

-

 

 

 

170

 

Stock compensation expense

 

 

1,405

 

 

 

1,341

 

Provision for bad debt

 

 

75

 

 

 

79

 

PPP loan forgiveness

 

 

-

 

 

 

(3,508

)

Amortization of deferred financing costs

 

 

11

 

 

 

-

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(5,836

)

 

 

(9,060

)

Inventories

 

 

(12,807

)

 

 

1,678

 

Prepaid expenses and other assets

 

 

(1,393

)

 

 

(859

)

Accounts payable

 

 

3,048

 

 

 

(959

)

Other accrued liabilities

 

 

954

 

 

 

(145

)

Total adjustments

 

 

(11,239

)

 

 

(8,343

)

Net cash (used in) provided by operating activities

 

 

(7,607

)

 

 

2,979