UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM l0-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission File Number Q4823
ACME UNITED CORPORATION
____________________________________________________________
(Exact name of registrant as specified in its charter)
Connecticut 06-0236700
_______________________________ ___________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
75 Kings Highway Cutoff, Fairfield, Connecticut 06430
_______________________________________________ __________
(Address of principal executive offices) (Zip Code)
(203) 332-7330
__________________________________________________
Registrant's telephone number, including area code
________________________________________________________________________________
Former name, former address and former fiscal year, if changed since last
report
Indicate by check mark whether the registrant (1) 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 [X] No [ ]
Registrant had 3,337,620 shares outstanding as of November 14, 1996 of its
$ 2.50 par value Common Stock.
<PAGE> 2
PART 1 - FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
<TABLE>
ACME UNITED CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(ALL AMOUNTS IN THOUSANDS)
<CAPTION>
September 30 December 31
1996 1995
(Unaudited)
_____________ _____________
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 429 $ 532
Accounts receivable 9,632 8,108
Inventories:
Finished goods 6,075 9,942
Work in process 1,064 3,963
Raw materials & supplies 3,190 4,108
Prepaid expenses and other current assets 465 606
_____________ _____________
Total current assets 20,855 27,259
Plant, Property and Equipment:
Land 454 491
Buildings 3,849 4,237
Machinery and equipment 15,609 15,736
_____________ _____________
Total plant, property and equipment 19,912 20,464
Less, accumulated depreciation 13,311 13,142
_____________ _____________
Net plant, property and equipment 6,601 7,322
Licensing agreements 882 1,170
Other assets 666 452
Goodwill 790 818
_____________ _____________
Total assets $ 29,794 $ 37,021
============= =============
<FN>
See notes to the financial statements
</TABLE>
<PAGE> 3
<TABLE>
ACME UNITED CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(ALL AMOUNTS IN THOUSANDS)
<CAPTION>
September 30 December 31
1996 1995
(Unaudited)
_____________ _____________
LIABILITIES
<S> <C> <C>
Current Liabilities:
Accounts payable $ 1,676 $ 3,193
Notes payable due within one year 3,511 3,650
Restructuring reserve 882 1,198
Other accrued liabilities 3,665 3,243
_____________ _____________
Total current liabilities 9,734 11,284
Long term debt 12,994 14,880
Restructuring reserve 145 1,352
_____________ _____________
Total liabilities 22,873 27,516
STOCKHOLDERS' EQUITY
Common stock, par value $2.50:
authorized 8,000,000 shares;
Issued 3,384,620, outstanding
3,337,620 8,461 8,461
Additional paid-in capital 2,145 2,145
Retained earnings (accumulated deficit) (2,282) 258
Translation adjustment (1,046) (1,002)
Treasury Stock, 47,000 shares (357) (357)
_____________ _____________
Total stockholders' equity 6,921 9,505
_____________ _____________
Total liabilities and stockholders' equity $ 29,794 $ 37,021
============= =============
<FN>
See notes to financial statements
</TABLE>
<PAGE> 4
<TABLE>
ACME UNITED CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
Three months ended Nine months ended
____________________________ ____________________________
September 30 September 30 September 30 September 30
1996 1995 1996 1995
_____________ _____________ _____________ _____________
<S> <C> <C> <C> <C>
Net Sales $ 13,281 $ 13,838 $ 38,103 $ 41,205
Other income 49 14 221 52
_____________ _____________ _____________ _____________
13,330 13,852 38,324 41,257
Costs and expenses:
Cost of goods sold 9,807 10,021 29,120 29,587
Selling, general and
administrative expense 3,700 3,444 10,442 10,176
Interest expense 361 526 1,199 1,479
_____________ _____________ _____________ _____________
13,868 13,991 40,761 41,242
_____________ _____________ _____________ _____________
Income (loss) before income taxes (538) (139) (2,437) 15
Provision (benefit) for income taxes (53) 27 103 8
_____________ _____________ _____________ _____________
Net income (loss) $ (485) $ (166) $ (2,540) $ 7
============= ============= ============= =============
Weighted average common and
dilutive common equivalent shares 3,338 3,338 3,338 3,338
============= ============= ============= =============
Net income (loss) per common share $ (.15) $ (.05) $ (.76) $ .00
============= ============= ============= =============
<FN>
See notes to financial statements
</TABLE>
<PAGE> 5
<TABLE>
ACME UNITED CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(ALL AMOUNTS IN THOUSANDS)
<CAPTION>
Nine months ended
____________________________
September 30 September 30
1996 1995
_____________ _____________
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (2,540) $ 7
Adjustments:
Depreciation 859 1,021
Amortization 330 421
Deferred tax (credits) - (424)
(Gain) on sale of property, plant and equipment (25) (23)
(Gain) on disposition of trademarks and tradename (98) -
Changes in assets and liabilities:
Accounts receivable (1,826) (2,270)
Inventory 6,702 171
Prepaid expenses and other current assets 127 116
Other assets (241) 217
Accounts payable (1,479) (466)
Income taxes payable 92 300
Other liabilities (843) (483)
_____________ _____________
Total adjustments 3,598 (1,420)
_____________ _____________
Net cash provided (used) by operations 1,058 (1,413)
_____________ _____________
Cash flow from investing activities:
Capital expenditures (507) (783)
Proceeds from sales of business and property, plant and equipment 1,108 38
_____________ _____________
Net cash provided (used) by investing activities 601 (745)
_____________ _____________
Cash flows from financing activities:
Net borrowings (1,745) 1,896
_____________ _____________
Net cash (used) provided by financing activities (1,745) 1,896
_____________ _____________
Effect of exchange rate changes on cash (17) (8)
_____________ _____________
Net change in cash and cash equivalents (103) (270)
Cash and cash equivalents at beginning of period 532 450
_____________ _____________
Cash and cash equivalents at end of period $ 429 $ 180
============= =============
<FN>
See notes to financial statements
</TABLE>
<PAGE> 6
ACME UNITED CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of the Company's management, the accompanying condensed
consolidated financial statements contain all adjustments necessary to
present fairly the financial position as of September 30, 1996 and
December 31, 1995, the results of its operations for the three and nine
month periods ended September 30, 1996 and 1995, and cash flows for the
nine months ended September 30, 1996 and 1995. The financial statements
reflect all recurring adjustments but do not include all of the disclosures
normally required by generally accepted accounting principles or those
normally made in the annual Form 10-K filing. Please refer to the
Company's annual report for the year ended December 31, 1995 for such
disclosures.
2. The results of operations for the three and nine month periods ended
September 30, 1996 are not necessarily indicative of the results to be
expected for the full year.
3. Net income (loss) per share is based on the weighted average number of
common shares and dilutive common equivalent shares (common stock options)
outstanding during each period. No effect has been given to stock options
outstanding as no dilutive effect would result from such inclusion.
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Sales
Consolidated net sales for the quarter ended September 30, 1996 were
$13,281,000, compared with $13,838,000 for the same period last year,
a decline of $557,000. Of this decline, $1,393,000 resulted from the
divestiture of the Altenbach business in Germany. Excluding Altenbach
from the prior year, sales increased $836,000 or 7% in the third quarter
of 1996 as compared with the third quarter of 1995. The revenue growth was
due to an increase in the U.S. and Canadian product sales. Net sales were
$38,103,000 for the first nine months of 1996, compared with net sales of
$41,205,000 for the same period of 1995, a decline of $3,102,000. Of this
decline, $2,615,000 was attributed to Altenbach. Excluding Altenbach from
the prior year, sales decreased by $487,000 or 1% for the nine months as
compared with the same period last year.
Domestic Consumer net sales totaled $6,325,000 in the third quarter of 1996,
compared with $5,268,000 in the third quarter of 1995, an increase of 20%.
Solid sales growth was achieved for the first aid and ruler product lines.
Sales for the first aid product line increased by 65% and the ruler product
line by 28% for the third quarter of 1996 as compared with the third quarter
of 1995. For the first nine months of 1996, consumer net sales of $16,214,000
were 8% higher than net sales of $14,995,000 for the same period in 1995.
Net sales of medical products were $3,707,000 in the third quarter of 1996
as compared with $3,992,000 in the third quarter of 1995. Net sales of
medical products were $11,076,000 for the first nine months of 1996 as
compared with $12,498,000 for the first nine months of 1995. The sales
decline in 1996 was primarily the result of a volume decline in the low
margin custom tray market. However, the company has entered into a contract
to supply disposable medical instruments to the Asian market with sales
beginning in the fourth quarter of 1996. Net sales from foreign operations
were $3,547,000 in the third quarter of 1996 as compared with $4,987,000 in
the third quarter of 1995. Excluding Altenbach from the prior year, sales
decreased $47,000 or 1% for the third quarter of 1996 as compared with the
same period of last year. While sales were soft in the United Kingdom and
Germany, the Canadian operation recorded a 10% sales increase over the third
quarter of 1995. Net sales from foreign operations were $11,672,000 for
the first nine months of 1996 compared with $15,195,000 for the similar
period in 1995. Of the decline of $3,523,000, $2,615,000 resulted from the
divestiture of Altenbach.
Gross Profit Margin
For the third quarter of 1996, the Company reported a reduced gross profit
margin of 26.2% compared to 27.6% in the same quarter of 1995. The gross
profit margin for the first nine months of 1996 was 23.6% compared with a
28.2% gross profit margin for the same period in 1995. The loss of margin
was due to the effects of excess manufacturing capacity, related restructuring
costs, and the reduction in production in order to bring inventory levels
more in line with the current sales volume.
<PAGE> 8
Net Income
A net loss of $ 485,000, or 15 cents per share, for the third quarter of 1996
compared with a net loss of $166,000, or five cents per share, for the third
quarter of 1995. For the first nine months of 1996, the net loss was
$2,540,000, or 76 cents per share. This compares with net income of $7,000
for the first nine months of 1995. Excluding the severance and restructuring
costs, the company realized a profit on a continuing business basis for the
third quarter of 1996 of $194,000 or six cents per share. The third quarter
loss included $580,000 of severance costs and $99,000 of restructuring costs.
The nine month loss included $869,000 of severance costs, $926,000 of
restructuring costs, and $271,000 of loss incurred by the Altenbach
operation. On a continuing business basis (excluding Altenbach, severance
and restructuring costs), the net loss for the nine months of 1996 was
$474,000 or 14 cents per share.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased by $256,000 and
$266,000 for the three and nine month periods ended September 30, 1996
as compared with the same periods in 1995. Severance costs amounted to
$580,000 and $869,000 for the three and nine month periods ended
September 30, 1996, respectively. Excluding these severance charges,
the Company reduced its selling, general and administrative costs by
$324,000 or 9% for the quarter ended September 30, 1996, and $603,000
or 6% for the nine month period ended September 30, 1996 as compared with
the same periods in 1995.
Interest Expense
Interest expense decreased by $165,000 and $280,000 for the three and nine
month periods ended September 30, 1996, respectively, as compared with 1995,
which is attributable to lower average bank borrowings.
Provision for Income Taxes
The provision (benefit) for income taxes for the three and nine month
periods ended September 30, 1996 was ($53,000) and $103,000 as compared to
$27,000 and $8,000 for 1995. The consolidated effective tax rates are based
on income (loss) before taxes in the various countries of operation and the
statutory rates and laws in effect.
Liquidity and Capital Commitments
The Company has placed major emphasis on the reduction of inventory, debt and
interest expense. Company-wide debt as of September 30, 1996 has decreased
by $4,261,000 or 21% from September 30, 1995. Company-wide inventory levels
as of September 30, 1996 have decreased by $8,445,000 or 45% from
September 30, 1995 (excluding Altenbach)
All future debt reduction, along with normal payments for taxes and capital
expenditures, is expected to be funded by inventory reduction and cash
generated from operations.
<PAGE> 9
In the U.S., the Company has a $13,000,000 revolving line of credit which
expires in May 1998. The revolving line is an asset-based agreement with
various percentages applied to inventory, receivables and fixed assets.
At September 30, 1996 the Company had an available line of $11,107,000
with $1,207,000 unused. The Company's foreign subsidiaries have overdraft
arrangements which expire at various times during 1996.
The Company's working capital, current ratio and long term debt to equity
ratio are as follows:
September 30, 1996 December 31, 1995
__________________ _________________
Working capital $11,121,000 $15,975,000
Current ratio 2.14 to 1 2.42 to 1
Long term debt to equity ratio 1.88 1.57
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) No Form 8-K was filed by the Company during the three months ended
September 30, 1996.
<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
________________________________________
ACME UNITED CORPORATION
(Registrant)
Date: November 14, 1996 ________________________________________
Cheryl Kendall
Vice President - Chief Financial Officer
Date: November 14, 1996 ________________________________________
Richard L. Windt
Vice President - Corporate Controller
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 428795
<SECURITIES> 0
<RECEIVABLES> 9499527
<ALLOWANCES> 215742
<INVENTORY> 10328842
<CURRENT-ASSETS> 20854897
<PP&E> 11911275
<DEPRECIATION> 13310600
<TOTAL-ASSETS> 29793571
<CURRENT-LIABILITIES> 9734382
<BONDS> 12993504
0
0
<COMMON> 8461550
<OTHER-SE> (1540865)
<TOTAL-LIABILITY-AND-EQUITY> 29793571
<SALES> 13280786
<TOTAL-REVENUES> 13329649
<CGS> 9708472
<TOTAL-COSTS> 9708472
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 36302
<INTEREST-EXPENSE> 360795
<INCOME-PRETAX> (538312)
<INCOME-TAX> (52994)
<INCOME-CONTINUING> (485318)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (485318)
<EPS-PRIMARY> (.15)
<EPS-DILUTED> (.15)
</TABLE>
