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 March 31, 1997
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
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(Exact name of registrant as specified in its charter)
Connecticut 06-0236700
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
75 Kings Highway Cutoff, Fairfield, Connecticut 06430
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(Address of principal executive offices) (Zip Code)
(203) 332-7330
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Registrant's telephone number, including area code
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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 3,330,500 shares outstanding as of May 9,
1997 of its $ 2.50 par value Common Stock.
<PAGE 2>
PART 1 - FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
ACME UNITED CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(ALL AMOUNTS IN THOUSANDS)
<TABLE>
ASSETS
MARCH 31 DECEMBER 31
1997 1996
(UNAUDITED)
----------- -----------
<CAPTION>
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 277 $ 427
Accounts receivable 8,186 7,007
Inventories:
Finished goods 5,550 4,858
Work in process 3,088 1,911
Raw materials & supplies 3,891 3,654
Prepaid expenses and other current assets 706 388
---------- ----------
Total current assets 21,698 18,245
Plant, property and equipment
Land 434 452
Buildings 3,795 3,910
Machinery and equipment 14,769 14,772
---------- ----------
Total plant, property and equipment 18,998 19,134
Less, accumulated depreciation 12,404 12,460
---------- ----------
Net plant, property and equipment 6,594 6,674
Licensing agreements --- 790
Other assets 739 750
Goodwill 542 792
---------- ----------
Total assets $ 29,573 $ 27,251
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements
<PAGE 3>
ACME UNITED CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(ALL AMOUNTS IN THOUSANDS)
<TABLE>
MARCH 31 DECEMBER 31
1997 1996
(UNAUDITED)
----------- -----------
<CAPTION>
<S> <C> <C>
LIABILITIES
Current Liabilities:
Accounts payable $ 4,112 $ 2,547
Notes payable due within one year 4,407 5,258
Accrued liabilities:
Restructuring reserve 1,000 755
Other accrued liabilities 4,016 3,732
---------- ----------
Total current liabilities 13,535 12,292
Long term debt 9,687 8,444
---------- ----------
Total liabilities 23,222 20,736
STOCKHOLDERS' EQUITY
Common stock, par value $2.50:
authorized 4,000,000 shares;
Issued 3,437,120 and 3,434,620,
outstanding 3,325,500 and
3,387,620 respectively 8,593 8,587
Additional paid-in capital 2,182 2,179
Retained earnings (deficit) (2,636) (2,917)
Translation adjustment (1,099) (976)
Treasury stock, 111,620 and 47,000
shares, respectively (689) (358)
---------- ----------
Total stockholders' equity 6,351 6,515
---------- ----------
Total liabilities and stockholders' equity $ 29,573 $ 27,251
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements
<PAGE 4>
ACME UNITED CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
THREE MONTHS ENDED MARCH 31
1997 1996
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<CAPTION>
<S> <C> <C>
Net sales $ 10,880 $ 12,040
Other income 885 126
---------- ----------
11,765 12,166
Costs and expenses:
Cost of goods sold 7,700 9,122
Selling, general and administrative expense 2,972 3,322
Interest expense 282 428
Restructuring & other charges 530 ---
---------- ----------
11,484 12,872
---------- ----------
Income/(loss) before income taxes 281 (706)
Provision for income taxes --- 110
---------- ----------
Net income/(loss) $ 281 $ (816)
=========== ===========
Weighted average common and
dilutive common equivalent shares 3,369 3,338
=========== ===========
Net income/(loss) per common share $.08 ($.24)
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements
<PAGE 5>
ACME UNITED CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(ALL AMOUNTS IN THOUSANDS)
<TABLE>
THREE MONTHS ENDED MARCH 31
1997 1996
----------- -----------
<CAPTION>
<S> <S> <S>
Cash flows from operating activities:
Net income/(loss) $ 281 $ (816)
Adjustments for non-cash transactions:
Depreciation 202 308
Amortization 70 119
Change in assets and liabilities:
Accounts receivable (1,440) (43)
Inventory (2,270) 310
Prepaid expenses and other current assets (210) (68)
Other assets 976 1
Accounts payable 1,602 (641)
Income taxes payable (24) (18)
Other liabilities 695 (3)
------- -------
Total adjustments (399) (35)
------- -------
Net cash used by operations (118) (851)
Cash flows from investing activities:
Capital expenditures (388) (107)
------- -------
Net cash used by investing activities (388) (107)
Cash flows from financing activities:
Net borrowings 678 777
Treasury stock purchased from Seton (330) ---
Common stock issued for stock options exercised 9 ---
------- -------
Net cash provided by financing activities 357 777
Effect exchange rate changes on cash (1) 1
------- -------
Net change in cash and cash equivalents (150) (180)
Cash and cash equivalents at beginning of period 427 532
------- -------
Cash and cash equivalents at end of period $ 277 $ 352
============ =============
</TABLE>
See notes to condensed consolidated financial statements
<PAGE 6>
ACME UNITED CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of Management, the accompanying condensed
consolidated financial statements contain all adjustments
necessary to present fairly the financial position as of
March 31, 1997 and December 31, 1996 and the results of its
operations and cash flows for the three month periods ended
March 31, 1997 and 1996. 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, 1996 for such
disclosures.
2. The results of operations for the three months ended
March 31, 1997 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 using
the treasury stock method. In February 1997, the Financial
Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, "Earnings Per Share" ("SFAS
128"). The Company will adopt SFAS 128 for the year ending
December 31, 1997 in accordance with the provisions of SFAS
128. Such adoption is not expected to have a significant
impact on the Company's earnings per share.
4. On March 3, 1997, the Company entered into an agreement
with Seton Healthcare International Limited and Sepro
Healthcare, Inc. ("Seton") to sell its U.S. marketing rights
of certain wound care products to Seton. The agreement
returned the marketing rights to Seton as of March 3, 1997.
However, for the transition period of March 3, 1997 until
June 30, 1997, Acme will continue to distribute the Seton
products. On June 30, 1997, all Seton product inventory in
the possession of Acme will be sold to Seton at actual cost.
The transaction resulted in a gain of $849,000 after
payments of outstanding debt and write-off of goodwill,
licensing fees, and other costs.
<PAGE 7>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
RESULTS OF OPERATIONS
Net Sales
Consolidated net sales for the quarter ended March 31, 1997
were $10,880,000, compared to $12,040,000 for the same period
last year, a decline of $1,160,000. Of this decline,
$1,324,000 resulted from the divestiture of the Altenbach
business in Germany. Excluding Altenbach from the prior year,
sales increased $164,000 or 2% in the first quarter of 1997 as
compared to the first quarter of 1996.
Domestic consumer net sales totaled $4,575,000 in the first
quarter of 1997, compared to $4,405,000 in the first quarter
of 1996, an increase of 4%. The sales growth was in the first
aid and ruler product lines. Net sales of medical products
were $3,814,000 in the first quarter of 1997 compared to
$3,721,000 in the first quarter of 1996. The 2.5% sales
growth was due to shipments to the international market. Net
sales from foreign operations were $2,491,000 in the first
quarter of 1997 compared to $3,914,000 in the first quarter of
1996. Excluding Altenbach from the prior year, sales
decreased by $99,000, or 4% for the first quarter of 1997
compared to the same period of last year. The sales decline
was due to the impact of currency translation, fewer shipping
days, and a soft European market.
Gross Profit Margin
For the quarter the Company reported an improved profit margin
of 29.2% in 1997 compared to 24.2% in 1996. The profit margin
in the first quarter of 1996 excluding Altenbach was 26.1%.
The profit margin improved 10% in U.S. operations and 8% in
foreign operations excluding Altenbach. The improvement in
the U.S. operations was due to the consolidation of all U.S.
manufacturing into the North Carolina facilities, and the
resulting increased plant utilization.
Selling, General and Administrative Expenses
Selling, general and administrative expenses of $2,972,000 for
the first quarter of 1997 decreased $350,000, or 11%, as
compared with the first quarter of 1996. Of the decline,
$288,000 resulted from the divestiture of Altenbach.
The improvement resulted from savings related to the
reorganization of the executive management and medical sales
force of $225,000 which was partially offset by additional
charges of $162,000 in the first quarter of 1997.
Provision for Income Taxes
The Company has tax operating loss carryforwards in the United
States, England and Germany. The tax provision amounting to
$0 and $110,000 for the first quarter of 1997 and 1996,
respectively, includes minimum state and local tax obligations
net of the benefit of net operating losses utilized.
<PAGE 8>
Net Income
The Company reported a net income for the first quarter of
1997 of $281,000, or $.08 per share, compared to a loss in the
first quarter of 1996 of $816,000, or $.24 loss per share.
Acme sold its U.S. marketing rights of certain wound care
products to Seton Healthcare International Limited in the
first quarter of 1997. The sale resulted in a gain of
$849,000 after payment of outstanding debt and write-off of
goodwill, licensing fees, and other costs. A charge of
$692,000 was incurred to write-down certain assets of the
Bridgeport, Connecticut facility, and other charges.
Liquidity and Capital Resources
During the first quarter of 1997, the total debt increased by
$392,000 as compared to debt at December 31, 1996. Debt of
$1,737,000 was paid down in the first quarter of 1997 as part
of the Seton transaction. Total debt excluding Seton
increased by $2,129,000 due to the seasonality of the school
products market.
All future debt reduction and capital expenditures are
expected to be funded by cash generated from operations.
In the U.S. the Company has a $13,000,000 revolving line of
credit which reduces to $9,000,000 during the last 60 days of
each calendar year and expires in May 1998. The revolving
line is an asset-based agreement with various percentages
applied to inventory, receivables and fixed assets. Currently
the Company has an available line of $9,482,000 with $522,000
unused. On March 19, 1997, the Company negotiated a
modification to the agreement which allows for additional
availability for the period of March 19, 1997 until July 31,
1997. In March of 1997, the Company renegotiated covenants
relating to its Canadian overdraft facility. The foreign
subsidiaries have overdraft arrangements which expire at
various times during 1997.
The Company's working capital, current ratio and long term
debt to equity ratio are as follows:
March 31, 1997 December 31, 1996
---------------- ------------------
Working capital $ 8,163,000 $5,953,000
Current ratio 1.60 to 1 1.48 to 1
Long term debt to equity ratio 1.53 1.30
<PAGE 9>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
none
ITEM 2. CHANGES IN SECURITIES
none
ITEM 3. DEFAULT UPON SENIOR SECURITIES
none
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting was held on April 28, 1997.
(b) The following individuals were elected Directors at
the meeting and comprise the entire Board.
Votes Votes
for against
--------- ---------
David W. Clark, Jr. 2,962,749 9,400
George R. Dunbar 2,962,167 9,982
Walter C. Johnsen 2,962,799 9,350
Newman M. Marsilius 2,962,217 9,932
Wayne R. Moore 2,962,249 9,900
Gary D. Penisten 2,962,749 9,400
James L. L. Tullis 2,962,799 9,350
Henry C. Wheeler 2,948,834 23,315
(c) The Amendment to the 1996 Non-Employee Director Stock
Option Plan was approved with 2,770,738 shares voting
for the Plan, 103,250 shares voting against the Plan,
98,161 votes withheld and zero shares not voted.
(d) Coopers & Lybrand L.L.P. was appointed as Auditors for
the Company for the year 1997 with 2,865,601 shares
voting for the appointment, 15,549 shares voting against
the appointment and 90,999 votes withheld.
ITEM 5. OTHER INFORMATION
none
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
A. Form 8-K was filed by the Company on March 18, 1997.
<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: May 9, 1997 /s/ Cheryl L. Kendall
---------------------------
Cheryl L. Kendall
Vice President and Chief
Financial Officer
Date: May 9, 1997 /s/ Richard L. Windt
---------------------------
Richard L. Windt
Vice President/Corporate
Controller
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Consolidated Balance Sheet and Condensed Consolidated Statement of
Operations and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 277
<SECURITIES> 0
<RECEIVABLES> 8,403
<ALLOWANCES> 217
<INVENTORY> 12,529
<CURRENT-ASSETS> 21,698
<PP&E> 18,998
<DEPRECIATION> 12,404
<TOTAL-ASSETS> 29,573
<CURRENT-LIABILITIES> 13,535
<BONDS> 0
0
0
<COMMON> 8,593
<OTHER-SE> (2,242)
<TOTAL-LIABILITY-AND-EQUITY> 29,573
<SALES> 10,880
<TOTAL-REVENUES> 11,765
<CGS> 7,700
<TOTAL-COSTS> 11,202
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 282
<INCOME-PRETAX> 281
<INCOME-TAX> 0
<INCOME-CONTINUING> 281
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 281
<EPS-PRIMARY> .08
<EPS-DILUTED> 0
</TABLE>
