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Acme United Corporation (AMEX:ACU) Q1 2024 Earnings Call Transcript

Acme United Corporation (AMEX:ACU) Q1 2024 Earnings Call Transcript April 19, 2024

Acme United Corporation beats earnings expectations. Reported EPS is $0.39, expectations were $0.36. ACU isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day, and welcome to the Acme United Corporation First Quarter Earnings Call. At this time, I would like to turn the call over to Walter Johnsen, Chairman and CEO. Please go ahead, sir.

Walter Johnsen: Good morning. Welcome to the first quarter 2024 earnings conference call for Acme United Corporation. I am Walter C. Johnsen, Chairman and CEO. With me is Paul Driscoll, our Chief Financial Officer, who will first read the safe harbor statement. Paul?

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Paul Driscoll: Forward-looking statements in this conference call, including, without limitation, statements related to the company's plans, strategies, objectives, expectations, intentions and adequacy of capital and other 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, including, among others, those arising as a result of a challenging global macroeconomic environment characterized by continued high inflation and high interest rates. In addition, we have experienced supply chain disruptions and we may experience these disruptions in the future. We're also subject to additional risks and uncertainties as described in our periodic filings with the Securities and Exchange Commission and in our current earnings release.

Walter Johnsen: Thank you, Paul. Acme United had a good first quarter of 2024. Net sales were $45 million in 2024 compared to $45.8 million last year. Net income was $1.6 million, an increase of 65%, and earnings per share were $0.39 compared to $0.28 last year, an increase of 39%. Our net sales in the first quarter of 2024 were 2% lower than last year, reflecting the sale of our Camillus and Cuda hunting and fishing business in November 2023 for $19.6 million. As you may remember, this business had approximately $12 million in annual revenues. We reduced expenses to compensate for the lost contribution of the business and focused on the growth of the remaining businesses. We are making progress building the sales momentum of our first aid business as well as our cutting and sharpening tools.

This should become apparent in the coming quarters. We have just begun shipping new first aid kits to a major drug store chain in the United States, expanded our presence at a large hardware chain in the US and Canada and started shipping our Spill Magic products to a large mass market retailer in the United States. Also in the second quarter, our Westcott business has begun shipping new cutting tools to a major mass market retailer as well as new craft items to a prominent retailer in the hobby market. In addition, we've just started shipping new DMT sharpeners for the kitchen to a major mass market retailer. So, we believe we will begin seeing meaningful growth in the second quarter and beyond. Our gross margins in the first quarter of 2024 increased to 38.7% compared to 35.5% last year due to productivity improvements and improved shipping performance.

A close-up of a person wearing protective gloves using a pair of scissors in a workshop.
A close-up of a person wearing protective gloves using a pair of scissors in a workshop.

We have been making investments in new equipment and automation and driving our manufacturing and distribution costs lower. We also continue to be investing to bring more manufacturing in-house. We are adding new alcohol, BZK and hand sanitizer capabilities at our Med-Nap facility in Brooksville, Florida for use in our first aid kits, refills and sales to other customers. Later in this quarter, we will bring onstream a new clean room at the site and begin boxing automation for alcohol prep pads and other products. We expect savings from this work to begin in the third quarter of 2024. We are also installing high-density racking at our largest distribution center in Rocky Mountains, North Carolina. This is expected to increase our capacity and to lower our cost of distribution.

The work is expected to be completed by the fourth quarter of 2024. We are excited about continuing to drive both sales growth and profitability in the coming quarters. I will now turn the call to Paul.

Paul Driscoll: Acme's net sales for the first quarter were $45 million compared to $45.8 million in 2023, a 2% decrease. Excluding the impact of the Camillus and Cuda hunting and fishing product line sold on November 1, 2023, sales for the first quarter of 2024 increased 1%. Net sales, excluding Camillus and Cuda in the US segment, increased 1% in the first quarter. Net sales, excluding Camillus and Cuda in Europe, for the first quarter of 2024 increased 7% in local currency and compared to the first quarter of 2023. Net sales, excluding Camillus and Cuda in Canada, for the first quarter of 2023 increased 1% in local currency. The gross margin was 38.7% in the first quarter of 2024 versus 35.5% in the first quarter of 2023. The higher gross margin was mainly due to the productivity improvement initiatives that began in Q4 of 2022 and lower inbound freight costs.

We experienced the full impact of the productivity initiatives beginning in the second quarter of 2023. SG&A expenses for the first quarter of 2024 were $14.8 million or 33% of net sales compared with $14.1 million or 31% of net sales for the same period of 2023. Interest expense for the first quarter of 2024 was $440,000 compared to $900,000 in the first quarter of 2023. The decrease was due to lower average debt of approximately $28 million. Net income for the first quarter of 2024 was $1.6 million or $0.39 per diluted share compared to net income of $1 million or $0.28 per diluted share for the same period of 2023, an increase of 65% in net income and 39% in earnings per share. The company's bank debt less cash on March 31, 2024 was $32 million compared to $48 million on March 31, 2023.

During the 12-month period, the company paid $2.1 million in dividends and generated $5.4 million in free cash flow. Additionally, the $13 million in net proceeds from the sale of the Camillus and Cuda product lines was used to reduce debt.

Walter Johnsen: Thank you, Paul. I will now open the call to questions.

See also

15 Countries with the Highest Life Expectancy in Asia and

30 Countries that Receive the Most Aid from UNDP.

To continue reading the Q&A session, please click here.