<PAGE 1>
Acme United Corporation is one of the largest producers of
shears, scissors, rulers, first aid kits and related products for
consumers, as well as a leading producer of metal disposable
medical scissors, instruments and sterile procedure trays. The
Company's subsidiary in the United Kingdom, Acme United Ltd.,
also manufactures and distributes medical scissors, household
scissors and shears, nail files and other manicure items. The
Canadian subsidiary, Acme United Limited, is one of the largest
marketers of scissors, rulers and general office supplies in
Canada. The German subsidiary, Emil Schlemper GmbH,
manufactures scissors, shears and manicure implements.
<PAGE 2>
ACME UNITED CORPORATION
TO MY FELLOW SHAREHOLDERS:
The year 1997 marked the return to profitability for Acme United,
and we are pleased to report our progress.
During 1997, revenues were $46.3 million compared to $47.5
million in 1996. Revenues from ongoing operations increased 4%,
from $42.8 million to $44.3 million. The Company had net income
of $.2 million compared to a loss of $3.2 million in 1996.
The U.S. Consumer Division increased its revenues by 10%, from
$19.8 million in 1996 to $21.9 million in 1997. This division
had growth in all major product lines. The first aid and
stainless steel scissor categories increased market shares in the
office channel, and made inroads in the mass markets. Acme made
a commitment to a new consumer product development program during
the year, which laid the groundwork for a new generation of
innovative items. We launched a new patented children's scissor
in November 1997, with shipments beginning in 1998.
The Medical Division had revenues of $13.4 million in 1997
compared to $14.4 million in 1996. Acme sold its exclusive
distribution rights to certain wound care products for
approximately $2.0 million in March 1997. This focused our
business on hospital kits and trays which utilize our disposable
instruments. Proceeds were used to extinguish $1.7 million of
debt, and repurchase 64,620 common shares previously held by the
licensor. Revenues from ongoing operations in 1997 were 2%
favorable to revenues in 1996. Acme won a new contract with VHA
for its medical kits and trays, and extended the products covered
under the contract. It began shipments to its joint venture
partner in Japan, where its disposable instruments received
approval from the the Ministry of Health.
In Canada revenues increased to $4.2 million in 1997 from $4.1
million in 1996, an increase of 3%. At year end, Acme acquired
the Canadian Rotex business from Esselte, which is expected to
add $2.0 million in additional revenues in 1998 and leverage our
purchasing power.
The United Kingdom operations had revenues of $4.1 million in
1997, which is comparable to
$3.9 million in 1996. In 1997 most of the manufacturing has been
shifted to our U.S. and German operations, as well as other
suppliers. Headcount was reduced from 51 to 20.
The sales from our ongoing German operation declined $1.0
million, or 27%, from the 1996 level. Excluding the impact of
currency fluctuations, the decline was 15%. However, the
operation has increased its manufacturing output as it has begun
to absorb the majority of the United Kingdom's production.
During 1998, management will focus on bringing sales to historic
levels.
Acme has been investing to upgrade its corporate information
systems and the manufacturing capabilities in our U.S. and German
facilities. The new system conversion in the U.S. was a
challenge in 1997, and is now generating savings. Larry
Buchtmann joined us as Vice President of Manufacturing in March
1998. He formerly held positions in operations, plant
management, engineering, and quality control. We are pleased to
have him join us.
At the board level, Newman Marsilius retired after 42 years. He
was a valuable resource to me, and I will miss his board
presence.
<PAGE 3>
During 1998, we intend to work aggressively to increase sales and
profits. The expanded VHA contract has substantial opportunity,
and our sales force is focused on hospital kit conversions. The
new children's scissor in the Consumer Division has had a strong
early reception, and we are optimistic about the shipments which
begin in April. In Canada, the Rotex acquisition has had a good
start, and business is strong.
The benefits of the plant consolidations, systems conversion, and
new manufacturing equipment are significant. Much more has to be
done in 1998, and we are committed to driving cost of sales and
fixed expenses lower.
During the past three years, we have built a management team
dedicated to delivering value to shareholders. We intend to do
that in 1998.
Thank you for your support.
Sincerely,
/s/ Walter C. Johnsen
- ----------------------------
Walter C. Johnsen,
President and Chief Executive Officer
<PAGE 4>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-4823
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)
Registrant's telephone number, including area code
(203) 332-7330
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
- ------------------- ------------------------
$2.50 par value Common Stock American Stock Exchange
Securities registered pursuant to Section 12 (g) of the Act: None
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 X NO
------- -------
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. (X)
Registrant had 3,369,875 shares outstanding as of March 16, 1998
of its $2.50 par value Common Stock.
The aggregate market value of the voting stock held by non-
affiliates of the registrant as of March 16, 1998 was
approximately $16,849,375.
Documents Incorporated By Reference
(1) Proxy Statement for the annual meeting scheduled for
April 27, 1998 incorporated into 1997 10-K, Part III
<PAGE 5>
PART I
ITEM 1. BUSINESS
GENERAL
Acme United Corporation (together with its subsidiaries the
"Company") was organized as a partnership in l867 and
incorporated in l882 under the laws of the State of Connecticut.
The Company operates two business segments, consumer and medical.
The Company's operations are in the United States, Canada,
England and Germany. Financial information concerning sales,
operating profit and identifiable assets by business segment and
geographic area appears in note 9 of the notes to consolidated
financial statements.
CONSUMER
The Company manufactures and distributes scissors, shears, rulers
and first aid kits for school, office and home use. Acquisitions
of Emil Schlemper GmbH and Co. KG of Solingen, Germany in
January l990, Homeric, Ltd. of Sheffield, England in July l990
and Peter Altenbach and Sohne GmbH of Solingen, Germany in l99l
extended the Company's presence in Europe as a scissor and shear
manufacturer. On May 1, 1996, the Company sold the assets
(excluding accounts receivable) of Peter Altenbach and Sohne
GmbH. The Company continues to be a major manufacturer of
scissors and shears in the United States, England and Germany,
and rulers in the United States; and a distributor of scissors,
shears, rulers and other office products in Canada. In addition
to local competitors in each country, the Company competes with
imported products from China, Taiwan and Korea. The Company also
imports scissors, shears, rulers and other products to supplement
its manufactured products.
Independent manufacturer representatives are primarily used to
sell its line of consumer products with wholesale, contract and
retail stationery distributors, office supply super stores,
school supply distributors, and mass market retailers in the
United States. Foreign operations use a combination of
independent commission agents and an internal sales force.
A seasonal surge in revenues arises from March through July which
is attributed to sales in the educational field, primarily
through school supply distributors and mass market retailers.
Unfilled order backlog at year end 1997 was $2,455,306 as
compared to $1,539,625 in l996.
MEDICAL
The Company entered the medical products field in l965, producing
disposable medical scissors and instruments in bulk for hospital
distributors. In l972, the Company's Medical Products Division
began marketing its own line of products, including ONE TIME
(registered trademark)disposable procedure trays, RESPOSABLE
(registered trademark)stainless steel instruments, and ACU-DYNE
(registered trademark)povidone-iodine germicide packaged in
bottles and flexible packages. New products have been added to
the procedure tray line every year to meet the specialized needs
of hospitals, clinics and convalescent homes.
In l978, wound dressings were introduced by the Company which
today include ACU-DERM (registered trademark) a sterile, non-
absorbent, self-adhering polyurethane dressing and the LYO FOAM
(registered trademark)line, a sterile absorbent polyurethane
dressing. Bandage products were added in January l992 when the
Company acquired the major portion of the U.S. medical products
business of SePro Healthcare, Inc., the U.S. subsidiary of the
Seton Healthcare Group, plc of Oldham, England. The Company
entered into distribution agreements with Seton Healthcare
International Limited for exclusive U.S. rights to an extensive
line of state-of-the-art pressure therapy bandages and
specialized wound dressings. Subsequently, in March 1997, the
Company sold its distribution rights of certain wound care
products to Seton Healthcare International Limited. Under the
agreement, Acme continued to distribute the products for a
portion of 1997.
<PAGE 6>
In October, l992, Acme United acquired the exclusive marketing
and distribution rights in the U.S. for the OPCO Line of I.V.
therapy products for hospitals and the after-care market. The
principal product is the patented I.V. Bubble-- a plastic, see-
through, disposable device which can be inflated to protect the
I.V. catheter and tubing while preventing the patient from
accidentally pulling out the catheter. A second OPCO product is
the I.V. Board, a reusable device which immobilizes the limb,
stabilizes the I.V. site and reduces premature I.V. restarts in
active patients. The Company discontinued the OPCO line in 1995.
In l993, the Royl-Derm line of skin care and wound care products
was launched. The Royl-Derm line of patent-pending skin-care and
wound care products have been known to relieve or eliminate the
pain connected with skin burns, wounds, ulcers and blemishes
often experienced by elderly and bed-ridden patients. However,
simultaneous launching of several competitive brands resulted in
widespread price cutting and saturation sampling, delaying the
acceptance of the Royl-Derm line. The Company discontinued the
Royl-Derm line in 1996.
The Company has a network of medical dealers who distribute its
line of medical products with hospitals, nursing facilities,
other alternate care providers, and certain major buying groups.
Acme's field sales force provides technical assistance and
oversees a network of manufacturer representatives.
Unfilled order backlog at year end 1997 was $313,178, compared to
$649,170 in l996.
OTHER
Environmental Rules and Regulations - Environmental rules and
regulations regarding hazardous waste control and electroplating
effluent have been complied with and the Company believes no
major financial impact is expected to result from current and
future compliance with these rules and regulations.
Employment - As of year end, the Company employed 433 persons,
most of whom are full time and none are covered by union
contracts. Employee relations are considered good and no
foreseeable problems with the work force are evident.
ITEM 2. PROPERTIES
Acme United Corporation is headquartered at 75 Kings Highway
Cutoff, Fairfield, Connecticut in 15,403 square feet of leased
space. The Company owns and leases manufacturing and warehousing
facilities in the United States and England, owns a facility in
Germany, and leases 29,000 square feet of warehousing space in
Canada. All facilities are part of the consumer segment except
for the 60,000 square foot plant leased in Goldsboro, North
Carolina which manufactures products for the medical segment, and
serves as the packaging, warehouse and shipping operation for
both the U.S. medical and consumer segments.
At the start of 1995, manufacturing for the U.S. consumer segment
occurred in three plants. In 1996 all U.S. manufacturing was
consolidated into the 58,000 square foot owned Fremont, North
Carolina plant. The Seneca Falls, New York ruler manufacturing
plant was sold in 1996. The Bridgeport, Connecticut plant was
closed in 1996, and the facility has been partially leased.
Manufacturing for the European consumer segment is presently
being conducted at a 48,000 square foot owned plant in Solingen,
Germany and a 50,000 square foot leased plant in Sheffield,
England.
Management believes that the Company's facilities, whether leased
or owned, are adequate to meet its current needs and should
continue to be adequate for the foreseeable future.
Properties owned by the Company in Fremont, North Carolina and
Solingen, Germany are collateralized by notes and mortgages. The
leased facilities are occupied under leases for terms ranging
from two to five years.
<PAGE 7>
ITEM 3. LEGAL PROCEEDINGS
The Company has been involved in certain environmental matters.
Additionally, the Company has been involved in numerous legal
actions relating to the use of certain latex products, which the
Company distributes, but does not manufacture. The Company is
one of many defendants. Management believes that the ultimate
resolution of such litigation will not have a material adverse
impact on the Company's results of operations, financial position
or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the security holders
of the Company through the solicitation of proxies or otherwise
during the fourth quarter of the fiscal year ended December 31,
1997.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
SECURITY HOLDER MATTERS
The Company's Common Stock is traded on the American Stock
Exchange under the symbol "ACU". The following table sets
forth the high and low sale prices on the American Stock
Exchange for the Common Stock for the periods indicated:
Fiscal Year Ended December 31, 1997 High Low
---- ---
First Quarter 6 4 9/16
Second Quarter 6 3/8 5 1/4
Third Quarter 8 1/8 6
Fourth Quarter 7 7/16 5 11/16
Fiscal Year Ended December 31, 1996
First Quarter 4 1/8 3 1/2
Second Quarter 4 3/8 2 7/8
Third Quarter 4 1/8 3 1/2
Fourth Quarter 5 1/2 3 1/2
As of March 16, 1998 there were approximately 1,700 holders of
record of the Company's Common Stock.
The Company did not pay cash dividends on its Common Stock in
1997 and 1996. The Company presently intends to retain earnings
to finance business improvements. However, management and the
Board of Directors believe it is important for the Company to pay
dividends when a record of consistent earnings has been achieved.
<PAGE 8>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
(All figures in thousands except per share figures)
QUARTERS
--------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C>
1997 1st 2nd 3rd 4th Total
- -------------------------------------------------------------------------------------------
Net Sales $ 10,880 $ 12,854 $ 12,715 $ 9,829 $ 46,278
- -------------------------------------------------------------------------------------------
Cost of Goods Sold 7,700 9,483 9,316 7,651 34,150
- -------------------------------------------------------------------------------------------
Net Income/(Loss) 281 222 186 (486) 203
- -------------------------------------------------------------------------------------------
Net Income/(Loss) Per Share-Basic (A) $ .08 $ .07 $ .06 $ (.15) $ .06
- -------------------------------------------------------------------------------------------
Net Income/(Loss) Per Share-Diluted (A) $ .08 $ .06 $ .05 $ (.15) $ .06
- -------------------------------------------------------------------------------------------
1996
- -------------------------------------------------------------------------------------------
Net Sales $ 12,040 $ 12,782 $ 13,281 $ 9,378 $ 47,481
- -------------------------------------------------------------------------------------------
Cost of Goods Sold 9,122 10,191 9,807 5,916 35,036
- -------------------------------------------------------------------------------------------
Net Income/(Loss) (816) (1,239) (485) (635) (3,175)
- -------------------------------------------------------------------------------------------
Net Income/(Loss) Per Share-Basic (A) $ (.24) $ (.37) $ (.15) $ (.19) $ (.95)
- -------------------------------------------------------------------------------------------
Net Income/(Loss) Per Share-Diluted (A) $ (.24) $ (.37) $ (.15) $ (.19) $ (.95)
- -------------------------------------------------------------------------------------------
</TABLE>
(A) 1997 and 1996 Net Income/(Loss) Per Share reflects the
adoption of SFAS No. 128, "Earnings Per Share". In 1996, the
total Net Income/(Loss) Per Share -Diluted for the year does not
equal the sum of the quarters due to the antidilutive effect for
the fourth quarter. See footnote 11.
<PAGE 9>
<TABLE>
FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA
(All figures in thousands except per share data)
<CAPTION>
<S> <C> <C> <C> <C> <C>
1997 1996 (A) 1995 1994 1993
- ------------------------------------------------------------------------------------------
Net Sales $46,278 $47,481 $52,222 $52,755 $52,339
- ------------------------------------------------------------------------------------------
Other Income 1,213 449 180 235 78
- ------------------------------------------------------------------------------------------
Total 47,491 47,930 52,402 52,990 52,417
- ------------------------------------------------------------------------------------------
Cost and Expenses: Cost of Goods Sold 34,150 35,036 38,801 37,796 38,728
- ------------------------------------------------------------------------------------------
Inventory Valuation Losses - - 3,381 - -
- ------------------------------------------------------------------------------------------
Selling, General and
Administrative Expenses 11,332 12,669 14,397 13,324 13,130
- ------------------------------------------------------------------------------------------
Restructuring & Other Charges 386 1,779 3,136 - -
- ------------------------------------------------------------------------------------------
Interest Expense 1,326 1,537 1,953 1,658 1,554
- ------------------------------------------------------------------------------------------
Income/(Loss) Before Income Tax 297 (3,091) (9,266) 212 (995)
- ------------------------------------------------------------------------------------------
Provision (Benefit) for Income Tax 94 84 (550) 89 (398)
- ------------------------------------------------------------------------------------------
Net Income/(Loss) 203 (3,175) (8,716) 123 (597)
- ------------------------------------------------------------------------------------------
Average Number of Shares Outstanding-
Basic (B) 3,354 3,342 3,338 3,338 3,338
- ------------------------------------------------------------------------------------------
Net Income/(Loss) per Common Share-
Basic (B) $ .06 $ (.95) $ (2.61) $ .04 $ (.18)
- ------------------------------------------------------------------------------------------
Average Number of Shares Outstanding-
Diluted (B) 3,670 3,663 3,620 3,483 3,483
- ------------------------------------------------------------------------------------------
Net Income/(Loss) per Common Share-
Diluted (B) $ .06 $ (.95) $ (2.61) $ .04 $ (.18)
- ------------------------------------------------------------------------------------------
Cash Dividend per Common Share-Basic (B) $ - $ - $ - $ - $ .05
- ------------------------------------------------------------------------------------------
Cash Dividend per Common Share-Diluted (B)$ - $ - $ - $ - $ .05
- ------------------------------------------------------------------------------------------
Total Assets $29,857 $27,251 $37,021 $42,888 $41,963
- ------------------------------------------------------------------------------------------
Total Long Term Debt $11,852 $ 8,444 $14,880 $14,388 $14,718
- ------------------------------------------------------------------------------------------
Total Stockholders' Equity $ 6,294 $ 6,515 $ 9,505 $18,083 $17,999
- ------------------------------------------------------------------------------------------
</TABLE>
(A) 1996 information reflects the divestiture of Altenbach as of
May 1, 1996
(B) Average Number of Shares Outstanding, Net Income/(Loss) per
Common Share and Cash Dividend per Common Share have been
added to reflect the adoption of SFAS No. 128, "Earnings Per
Share". See footnote 11.
<PAGE 10>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Acme United Corporation (the "Company") operates its business in
two principal business segments, consumer and medical. Note 9 to
the consolidated financial statements gives details of the
Company's business segments. The medical segment operates in the
United States and the consumer segment operates in the United
States, Canada, England and Germany.
Consolidated net sales were $46,278,000, $47,481,000, and
$52,222,000 in 1997, 1996 and 1995, respectively. The consumer
segment accounted for 71% , 70% and 69% of those sales in each
respective year. In 1997, approximately 67% of consumer sales
were from U.S. operations, whereas in the prior two years
consumer sales were almost equal for the U.S. and foreign
operations. Medical segment sales approximated 29%, 30%, and 31%
of consolidated net sales in 1997, 1996 and 1995, respectively.
Net income/(loss) was $203,000, $(3,175,000), and $(8,716,000) in
1997, 1996 and 1995, respectively. In 1997, the Company returned
to profitability after incurring significant restructuring and
asset revaluation charges in 1995 and 1996.
On December 8, 1997, the Company purchased the majority of the
inventory of the Rotex Division of Esselte Canada. On March 3,
1997, the Company sold its U.S. marketing rights of certain wound
care products. The transaction resulted in a gain of $846,000
after payment of outstanding debt and writeoff of goodwill,
licensing fees and other costs. A charge of $692,000 was
incurred to writedown certain assets of the Bridgeport,
Connecticut facility and other charges. On May 1, 1996, the
Company sold the assets of its Peter Altenbach & Sohne GmbH
("Altenbach") subsidiary, excluding accounts receivable. The
buyer purchased all fixed assets, inventory and intangible
assets, including the Altenbach tradename. In exchange, the
buyer paid $960,000, assumed all lease obligations, employed
substantially all Altenbach employees and assumed responsibility
for their employee related costs, including pensions. Costs
related to the restructuring of operations in Germany, including
the sale of the assets of the Altenbach operations, were accrued
for in 1995. In the four months of 1996 prior to the
divestiture, Altenbach lost $271,000.
RESULTS OF OPERATIONS 1997 COMPARED WITH 1996
Consolidated net sales in 1997 were $46,278,000 and decreased
$1,203,000, or 3%, from 1996. The consumer segment net sales
decreased $282,000, or 1%, and the medical segment net sales
decreased $921,000, or 6%, as compared with 1996. Consumer net
sales in 1996 included $1,568,000 for the former Altenbach
subsidiary. Excluding Altenbach, consumer sales increased by
$1,286,000, or 4%, as compared with 1996. Of the medical net
sales decline, $1,163,000 was due to the sale of Seton marketing
rights. Excluding Seton, medical net sales increased by
$242,000, or 2%, as compared with 1996.
Consumer segment sales in the U.S. increased $2,038,000, or 10%,
and foreign operations, excluding Altenbach, decreased $752,000.
The U.S. consumer segment increase is mainly attributable to
increased volume resulting from the growth of the first aid kit
and Westcott ruler lines. The foreign consumer segment sales
decrease resulted from volume declines in both European
operations, while Canadian sales increased by 3%. Currency
translation in 1997 resulted in $375,000 of the sales decline.
Gross margin before restructuring related costs in the consumer
segment remained unchanged at 22% for both 1997 and 1996. The
medical business margin remained unchanged at 36% for both 1997
and 1996. The cost of relocating the Bridgeport operation to
North Carolina, severance for manufacturing staff, and the
inefficiencies of maintaining duplicate facilities resulted in
$1,258,000 of restructuring related charges in 1996. Foreign
gross margin declined from 17% in 1996 to 14% in 1997.
Selling, general and administrative expenses were $11,332,000 in
1997 as compared to $12,669,000 in 1996, a decrease of
$1,337,000, or 11%. SG&A for 1996 included $363,000 from the
divested Altenbach subsidiary. The remaining decline resulted
from personnel reductions in the U.S. operations.
Interest expense decreased $211,000, or 14% less than 1996 due to
average borrowings in 1997 being 13% lower than in 1996 and a
slight improvement in the interest rates. The reduction in
average borrowings resulted from the divesture of Altenbach in
1996, extinguishment of Sepro debt in 1997, and improved cash
management.
The provision for income taxes in 1997 was $94,000 as compared to
a provision for income taxes of $84,000 in 1996.
<PAGE 11>
RESULTS OF OPERATIONS 1996 COMPARED WITH 1995
Consolidated net sales in 1996 were $47,481,000 and decreased
$4,742,000, or 9%, from 1995. The consumer segment net sales
decreased $2,757,000, or 8%, and the medical segment net sales
decreased $1,984,000, or 12%, as compared with 1995. Of the
consumer net sales decline, $4,061,000 was due to the divestiture
of Altenbach. Excluding Altenbach, consumer net sales increased
by $1,304,000, or 4%, as compared with 1995.
Consumer segment sales in the U.S. operations increased
$1,706,000, or 9%, and foreign operations, excluding Altenbach,
decreased $402,000. The U.S. consumer segment increase is mainly
attributed to increased volume resulting from the growth of the
first aid kit line and the Westcott ruler line. The foreign
consumer segment sales decrease resulted from volume declines of
4% in both European operations, and Canadian sales decline of 1%.
Medical segment sales declined $1,984,000 in 1996 primarily due
to a volume decline in the low margin custom tray market.
Gross margin before inventory valuation losses and restructuring
related costs improved in the consumer segment from 21% in 1995
to 22% in 1996. The medical business margin remained unchanged
at 36% for both 1996 and 1995. The cost of relocating the
Bridgeport operation to North Carolina, severance for
manufacturing staff, and the inefficiencies of maintaining
duplicate facilities resulted in $1,258,000 of restructuring
related charges in 1996. Foreign operation profit margin fell
from 18% in 1995 to 17% in 1996. This was a result of margin
deterioration in all European operations. Margin in Canada
improved from 21% in 1995 (excluding charge for asset valuation)
to 26% in 1996.
Inventory valuation losses of $3,381,000 were recorded in 1995,
primarily as a result of an inventory reduction program
implemented to generate cash in 1996. Severance costs of
$1,039,000 were incurred in 1996 and are included in the
restructuring and other charges.
Selling, general and administrative expenses were $12,669,000 in
1996 as compared to $14,397,000 in 1995, a decrease of
$1,728,000, or 12%. Of the decline, $846,000 was due to a
decrease in U.S. pension expense and $687,000 was a result of the
divestiture of Altenbach. The decrease in pension expense
resulted from the curtailment of the U.S. pension plan in 1995.
Interest expense decreased $416,000, or 21%, over 1995 primarily
as a result of a debt reduction of $4.8 million and an
improvement in the interest rates.
The provision for income taxes in 1996 was $84,000 as compared to
a benefit for income taxes of $550,000 in 1995.
LIQUIDITY AND CAPITAL RESOURCES
Net cash flow (used in) provided by operating activities was
$(3,357,000) in 1997 as compared to $6,245,000 and $909,000 in
1996 and 1995, respectively. Net cash used by operations in 1997
primarily resulted from higher inventory levels partially offset
by an increase in accounts payable.
The Company's working capital, current ratio and long term debt
to equity ratio are as follows:
1997 1996
- ----------------------------------------------------------------
Working Capital $10,017,000 $5,953,000
Current Ratio 1.86 to 1 1.48 to 1
Long Term Debt to Equity 1.88 1.30
Working capital increased $4,064,000 in 1997 as a result of an
increase in inventory levels, a decrease in short term debt, and
higher accounts payable.
Long term debt to equity increased in 1997 due to increased
borrowing to fund working capital requirements.
<PAGE 12>
The U.S. revolving line of credit, renegotiated in 1996 and
1997, is due to expire in May 1999 and the foreign overdraft
arrangements are due to expire at various times in 1998. Based
on maintaining the U.S. revolving line of credit and foreign
overdraft arrangements, current cash balances and cash flow from
operations, the Company believes it can meet capital
expenditure, restructuring and other planned financial
commitments in 1998. Planned capital expenditures in the U.S.
in 1998 for machinery and equipment are expected to exceed
$1,000,000 and focus on process and productivity improvements.
The Company is in the process of making a complete assessment of
the impact of the Year 2000. In the U.S., the Company
implemented a new information system in 1997, which should
address any computer system issues related to the Year 2000.
The Company has established a Year 2000 Task Force to fully
evaluate the company-wide impact of the Year 2000. The task
force is in the process of identifying all issues, and
determining an action plan for testing and validating all
systems. Management believes that the Year 2000 issue will not
materially affect future financial results, or cause reported
financial results not to be necessarily indicative of future
operating results or future financial condition.
<PAGE 13>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
ACME UNITED CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<CAPTION>
<S> <C> <C> <C>
1997 1996 1995
- -----------------------------------------------------------------------------------
Net Sales $ 46,277,514 $ 47,480,587 $ 52,222,210
Other Income 1,213,406 449,275 179,811
- -----------------------------------------------------------------------------------
47,490,920 47,929,862 52,402,021
Costs and Expenses:
Cost of Goods Sold 34,150,257 35,035,868 38,800,804
Inventory Valuation Losses - - 3,381,355
Selling, General and
Administrative Expenses 11,331,687 12,668,207 14,396,927
Interest Expense 1,326,286 1,537,399 1,953,090
Restructuring & Other Charges 385,636 1,779,031 3,136,257
- -----------------------------------------------------------------------------------
47,193,866 51,020,505 61,668,433
- -----------------------------------------------------------------------------------
Income/(Loss) before Income Tax 297,054 (3,090,643) (9,266,412)
Provision (Benefit) for Income Tax
United States 49,800 49,800 (53,535)
Foreign 44,517 34,163 (496,701)
- -----------------------------------------------------------------------------------
94,317 83,963 (550,236)
- -----------------------------------------------------------------------------------
Net Income/(Loss) $ 202,737 $ (3,174,606) $ (8,716,176)
- -----------------------------------------------------------------------------------
Net Income/(Loss) Applicable to
Common Stock - Basic (A) $ .06 $ (.95) $ (2.61)
- -----------------------------------------------------------------------------------
Net Income/(Loss) Applicable to
Common Stock - Diluted (A) $ .06 $ (.95) $ (2.61)
- -----------------------------------------------------------------------------------
</TABLE>
(A) 1997, 1996 and 1995 Earnings Per Share reflects the adoption
of SFAS No. 128, "Earnings Per Share", and is based on a weighted
average number of shares outstanding during the year. See
footnote 11.
<PAGE 14>
<TABLE>
ACME UNITED CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
Number of Additional Retained
Shares of Common Treasury Paid-In Translation Earnings/
Common Stock Stock Stock Capital Adjustment (Deficit)
- ----------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1994 3,337,620 $8,461,550 $(357,631) $2,145,119 $(1,140,241) $8,973,803
Net Loss (8,716,176)
Translation Adjustment 138,429
- ----------------------------------------------------------------------------------------------------------
Balances, December 31, 1995 3,337,620 8,461,550 (357,631) 2,145,119 (1,001,812) 257,627
Net Loss (3,174,606)
Exercise of Stock Options 50,000 125,000 34,375
Translation Adjustment 25,708
- ----------------------------------------------------------------------------------------------------------
Balances, December 31, 1996 3,387,620 8,586,550 (357,631) 2,179,494 (976,104) (2,916,979)
Net Income 202,737
Exercise of Stock Options 39,375 98,438 58,734
Purchase of Treasury Stock (64,620) (331,178)
Translation Adjustment (250,436)
- ----------------------------------------------------------------------------------------------------------
Balances, December 31, 1997 3,362,375 $8,684,988 $(688,809) $2,238,228 $(1,226,540) $(2,714,242)
- ----------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
<PAGE 15>
<TABLE>
ACME UNITED CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<CAPTION>
<S> <C> <C>
ASSETS 1997 1996
- -------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $ 24,706 $ 427,202
Accounts receivable, net 7,445,839 7,006,459
Inventory 14,081,351 10,423,047
Prepaid expenses and other
current assets 176,223 387,930
- -------------------------------------------------------------------
Total current assets 21,728,119 18,244,638
Plant, Property and Equipment:
Land 420,172 451,963
Buildings 3,745,725 3,910,038
Machinery and equipment 15,527,753 14,771,828
- -------------------------------------------------------------------
Total plant, property and equipment 19,693,650 19,133,829
Less, accumulated depreciation 12,928,671 12,460,399
- -------------------------------------------------------------------
Net plant, property and equipment 6,764,979 6,673,430
Goodwill 526,513 792,475
Other assets 837,116 1,540,722
- -------------------------------------------------------------------
Total Assets $29,856,727 $27,251,265
- -------------------------------------------------------------------
<PAGE 16>
LIABILITIES 1997 1996
- -------------------------------------------------------------------
Current Liabilities:
Accounts payable $ 3,524,584 $ 2,546,707
Notes payable 3,726,961 5,257,625
Restructuring reserve 557,688 755,440
Other accrued liabilities 3,901,863 3,732,363
- -------------------------------------------------------------------
Total current liabilities 11,711,096 12,292,135
Long Term Debt 11,852,006 8,443,800
- -------------------------------------------------------------------
Total Liabilities $23,563,102 $20,735,935
- -------------------------------------------------------------------
Commitments and Contingencies (Note 8)
STOCKHOLDERS' EQUITY
Common stock, par value $2.50, authorized
4,000,000 shares, issued 3,473,995 and
3,434,620 shares and outstanding 3,362,375
and 3,387,620 shares in 1997 and 1996,
respectively $ 8,684,988 $ 8,586,550
Treasury Stock, 111,620 and 47,000 shares
at cost in 1997 and 1996, respectively (688,809) (357,631)
Additional paid-in capital 2,238,228 2,179,494
Retained deficit (2,714,242) (2,916,979)
Translation adjustment (1,226,540) (976,104)
- -------------------------------------------------------------------
Total Stockholders' Equity 6,293,625 6,515,330
- -------------------------------------------------------------------
Total Liabilities and
Stockholders' Equity $29,856,727 $27,251,265
- -------------------------------------------------------------------
</TABLE>
See notes to financial statements
<PAGE 17>
<TABLE>
ACME UNITED CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<CAPTION>
<S> <C> <C> <C>
1997 1996 1995
- ------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income/(loss) $ 202,737 $(3,174,606) $(8,716,176)
Adjustments to reconcile net
income/(loss) to net cash
(used)/provided by operating activities
Gain on sale of marketing rights (846,178) - -
Depreciation 979,196 923,031 1,312,521
Amortization 92,480 443,977 565,972
(Decrease) in deferred income taxes - - (675,196)
(Gain)/loss on disposal of assets - 120,259 (19,241)
Restructuring & other charges - - 3,136,257
Inventory valuation losses - - 3,381,355
Change in assets and liabilities
Accounts receivable (709,695) 684,562 824,962
Inventory (4,030,034) 5,352,588 (38,468)
Prepaid expenses and other
current assets (114,580) 2,157,901 70,516
Other assets (196,518) (835,892) 115,299
Accounts payable 1,034,140 (324,665) 636,883
Income taxes payable 34,206 108,913 106,930
Other liabilities 197,281 789,190 207,488
- ------------------------------------------------------------------------------------
Total adjustments (3,559,702) 9,419,864 9,625,278
- ------------------------------------------------------------------------------------
Net cash (used)/provided by operations (3,356,965) 6,245,258 909,102
- ------------------------------------------------------------------------------------
<PAGE 18>
Cash flows from investing activities:
Capital expenditures (1,824,394) (1,068,550) (986,647)
Proceeds from sales of plant,
property and equipment 345,106 484,340 453,616
Proceeds from sale of marketing rights 1,915,178 - -
Proceeds from divestiture of Altenbach - 962,290 -
Divestiture of Altenbach - (3,253,873) -
- ------------------------------------------------------------------------------------
Net cash used for investing activities 435,890 (2,875,793) (533,031)
- ------------------------------------------------------------------------------------
Cash flows from financing activities:
Net borrowings 2,357,178 (3,622,022) (282,440)
Common Stock issued for stock
options exercised 157,172 159,375 -
- ------------------------------------------------------------------------------------
Net cash provided/(used) for
financing activities 2,514,350 (3,462,647) (282,440)
- ------------------------------------------------------------------------------------
Effect of exchange rate changes on cash 4,229 (11,389) (12,338)
- ------------------------------------------------------------------------------------
Net change in cash and cash equivalents (402,496) (104,571) 81,293
Cash and cash equivalents at beginning of year 427,202 531,773 450,480
- ------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 24,706 $ 427,202 $ 531,773
- ------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
<PAGE 19>
Acme United Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Significant Accounting Policies:
a. Nature of Operations - Acme United Corporation is a
multinational corporation which operates in two business
segments, consumer and medical. The consumer segment
operates in the United States, Canada, England and Germany
and the medical segment operates in the United States.
Principal consumer segment products are scissors, shears,
rulers, and first aid kits which are sold primarily to
wholesale, contract and retail stationery distributors,
office supply super stores, school supply distributors and
mass market retailers. Medical segment products are
disposable scissors, instruments and sterile procedure trays
which are sold to hospital supply dealers, certain major
buying groups, and alternate care market dealers. Medical
sales account for approximately one third of the Company's
revenue and medical assets account for about one fourth of
the assets.
b. Management Estimates - The preparation of financial
statements in conformity with generally accepted accounting
principles requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
c. Principles of Consolidation - The consolidated financial
statements include the accounts of the Company and
Subsidiaries, all of which are wholly owned. All
significant intercompany transactions have been eliminated
in the preparation of the consolidated financial statements.
d.Translation of Foreign Currency - The Company translates its
assets and liabilities at rates in effect at the end of the
year. Revenues and expenses are translated at average rates
in effect during the respective years. Translation
adjustments are treated as a separate component of
stockholders' equity. Foreign currency transaction gains
and losses are recognized at the time of settlement of the
underlying purchase transactions and treated as purchasing
variances.
e. Hedging Activity - The Company on occasion purchases foreign
currency contracts and/or options as hedges against foreign
currency fluctuation risk related to specific purchase
commitments. The Company does not engage in foreign
exchange contracts for speculative purposes and accordingly,
the contracts are accounted for as hedges.
f. Cash Equivalents - Investments with an original maturity of
three months or less at the date of purchase are considered
cash equivalents.
g. Inventory Valuation - Inventories are stated at the lower of
average cost (first in, first out basis) or market.
h. Plant, Property and Equipment and Depreciation - All plant,
property and equipment is recorded at cost. The Company
records depreciation for financial reporting purposes using
the straight-line method. The estimated useful lives for
most machinery, equipment and tooling ranges from 3 to 15
years and for buildings from 15 to 40 years.
Maintenance and repairs or minor renewals are charged to
operations as incurred. Major renewals and betterments are
capitalized. The carrying amounts of assets sold or
otherwise disposed of and the related allowance for
depreciation have been eliminated from the accounts in the
year of disposal and the resulting gain or loss has been
recorded in operations. Assets which are expected to have
no substantial salvage value are written off against
applicable depreciation reserves at the expiration of their
useful lives.
i. Deferred Income Taxes - The Company accounts for income
taxes under the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes"
(SFAS 109). SFAS 109 requires recognition of deferred tax
liabilities and assets for the expected future tax
consequences of events that have been included in the
financial statements. Under this method, deferred tax
liabilities and assets are determined based on the
difference between the financial statement and tax bases of
assets and liabilities using the currently enacted tax
rates.
j. Research and Development - Research and development costs
($385,000 in 1997, $47,277 in 1996 and $91,251 in 1995) are
included in the cost of goods sold caption on the
consolidated statements of income (loss).
k. Goodwill and Other Assets - Goodwill represents the excess
cost of investments over the net asset values at acquisition
and is being amortized on a straight line basis over periods
ranging from 3 to 40 years. Accumulated amortization
aggregated $292,125 and $261,600 at December 31, 1997 and
1996, respectively.
<PAGE 20>
Other assets, at cost, include license agreements, a
covenant not to compete and other fees associated with the
Sepro acquisition. These assets were written-off in 1997
upon the sale of the U.S. marketing rights of certain wound
care products. These assets were being amortized on a
straight line basis from 3 to 7 years. Accumulated
amortization aggregated $2,431,186 at December 31, 1996.
The Company continually reevaluates the propriety of the
carrying amounts of goodwill and other assets as well as the
amortization period to determine whether current events and
circumstances warrant adjustments to the carrying value and
estimates of useful lives. The Company believes that no
significant impairment of goodwill has occurred and that no
reduction of the estimated useful lives is warranted.
l. Accounts Receivable - Accounts Receivable are shown less
allowance for doubtful accounts of $252,079 in 1997 and
$197,755 in 1996.
m. Accounting Standards - In 1998, the Company will adopt
Statement of Financial Accounting Standards No. 130, No.
131, and No. 132 "Reporting Comprehensive Income," ("SFAS
130"), "Disclosures about Segments of an Enterprise and
Related Information," ("SFAS 131"), and "Employers'
Disclosures about Pensions and Other Postretirement
Benefits," ("SFAS 132"), all of which are effective for
fiscal years beginning after December 15, 1997.
SFAS 130 requires an enterprise to classify items of other
comprehensive income by their nature in a financial
statement and display the accumulated balance of other
comprehensive income separately from retained earnings and
additional paid-in capital. The Company will adopt SFAS 130
effective the first quarter ended March 31, 1998. There
will be no effect on the Company's consolidated financial
position, results of operations, or cash flows.
SFAS 131 requires that a public business enterprise report
financial and descriptive information about its reportable
operating segments. SFAS 131 is based on the management
approach to segment reporting and includes requirements to
report selected segment information quarterly and to include
entitywide disclosures about products and services, major
customers, and the countries in which the entity holds
material assets and reports revenues. The Company will
adopt SFAS 131 effective for the year ended December 31,
1998. There will be no effect on the Company's consolidated
financial position, results of operations, or cash flows.
SFAS 132 revises employers' disclosures about pension and
other postretirement benefit plans. The Company will adopt
SFAS 132 effective for the year ended December 31, 1998.
There will be no effect on the Company's consolidated
financial position, results of operations, or cash flows.
2. Inventory:
Inventory consisted of the following balances on December 31 which are
net of a $281,318 and $480,924 inventory reserve in 1997 and 1996,
respectively.
1997 1996
- -------------------------------------------------------------
Finished goods $ 7,658,012 $ 4,857,763
Work in process 1,229,079 1,910,880
Raw materials and supplies 5,194,260 3,654,404
- -------------------------------------------------------------
Total $ 14,081,351 $ 10,423,047
- -------------------------------------------------------------
3. Other Assets:
Other assets consisted of the following balances on December 31:
1997 1996
- -------------------------------------------------------------
License agreements $ - $ 790,185
Prepaid pension costs 768,876 698,502
Other 68,240 52,035
- -------------------------------------------------------------
Total $ 837,116 $ 1,540,722
- -------------------------------------------------------------
<PAGE 21>
4. Other Accrued Liabilities:
Other accrued liabilities consisted of the following balances
on December 31:
1997 1996
- -------------------------------------------------------------
Pension $ 242,476 $ 277,401
Vendor Rebates 1,078,692 1,231,812
Other 2,580,695 2,223,150
- -------------------------------------------------------------
Total $ 3,901,863 $ 3,732,363
- -------------------------------------------------------------
5. Pension and Profit Sharing:
The Company has a pension plan covering substantially all U.S.
employees and separate plans for the foreign subsidiaries'
employees. The pension expense for 1997, 1996 and 1995, which
is included in selling, general and administrative expenses,
amounted to $12,195, $90,607 and $1,008,511, respectively.
U.S. employees, hired prior to July 1, 1993, are covered by a
funded, defined benefit pension plan. The benefits are based on
years of service and the average compensation of the highest
three consecutive years during the last ten years of employment.
Pension (income)/expense for U.S. employees was $ (70,374),
$(16,350), and $829,738 in 1997, 1996 and 1995, respectively.
In December 1995, the Company's Board of Directors approved an
amendment to the U.S. pension plan ceasing all future benefit
accruals as of February 1, 1996, without terminating the pension
plan. Accordingly, this action was accounted for as a
curtailment under the provisions of Statement of Financial
Accounting Standards No. 88 "Employers' Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans
and for Termination Benefits," and resulted in a curtailment
loss of $299,183 in 1995. Plan assets and liabilities and
prepaid pension costs shown reflect the effect of this
curtailment loss.
Pension coverage for employees of the Company's foreign
subsidiaries vary by country and the Company's funding policy
varies in line with local commercial, actuarial and taxation
practices. The Company has not adopted the provisions of
Statement of Financial Accounting Standards No. 87 "Accounting
for Pensions" for its foreign pension plans. However, it has
been determined that the impact on total consolidated assets,
liabilities and net income is not significant as a result of
not adopting Statement of Financial Accounting Standards No.
87. Foreign subsidiaries' pension expense for 1997, 1996 and
1995 was $82,569, $106,957, and $178,773, respectively.
Net periodic pension cost of the U.S. pension plan for 1997, 1996
and 1995 included the following components:
1997 1996 1995
- -----------------------------------------------------------------
Service cost - benefit earned
during the period $ - $ - $297,659
Interest cost on projected
benefit obligation 376,622 329,189 474,096
Actual return on assets (954,022) (590,930) (334,058)
Curtailment loss - - 299,183
Net amortization and deferral 507,026 245,391 92,858
- -----------------------------------------------------------------
Net pension (income)/expense $(70,374) $(16,350) $829,738
- -----------------------------------------------------------------
<PAGE 22>
Assumptions used in the accounting for pension expense were:
1997 1996 1995
- --------------------------------------------------------------
Discount rate 7.0% 7.0% 7.0%
Average wage increase N/A N/A 5.5%
Expected long-term rate of
return on plan assets 8.5% 7.0% 8.0%
- --------------------------------------------------------------
The discount rate is the estimated rate at which the obligation
for pension benefits could effectively be settled. The average
wage increase assumption in 1995 reflected the Company's best
estimate of the future compensation levels of the individual
employees covered by the plans. The expected long-term rate of
return on plan assets reflects the average rate of earnings that
the Company estimates will be generated on the assets of the
plan. The Company has revised the expected long-term rate of
return on plan assets to more accurately reflect anticipated plan
performance.
The funded status of the Company's U.S. plan as of December 31,
1997 and 1996 is as follows:
1997 1996
- -----------------------------------------------------------
Actuarial present value of
benefit obligations:
Vested benefit obligation $ 5,240,043 $ 5,150,147
Accumulated benefit obligation 5,306,010 5,270,640
Projected benefit obligation 5,306,010 5,270,640
Plan assets at fair value,
primarily equity securities 5,911,452 5,509,999
Projected benefit obligation 5,306,010 5,270,640
- -----------------------------------------------------------
Plan assets in excess of
projected benefit obligation 605,442 239,359
Adjustments:
Unrecognized loss from past
experience 163,434 459,143
- -----------------------------------------------------------
Prepaid pension costs at
December 31 $ 768,876 $ 698,502
- -----------------------------------------------------------
The Company also has a qualified, non-contributory profit sharing
plan covering substantially all U.S. employees. Amounts are
contributed annually to provide retirement or other benefits for
employees, and contributions are calculated under a formula based
on income before income taxes and gains or losses on investments,
less a fixed return on a capital base (as defined). Based on the
formula, no contribution was required for 1995. In lieu of
contributing to the U.S. defined benefit pension plan, a specific
contribution to the profit sharing plan amounting to 2% of wages
will be accrued annually commencing in 1996. The 1997
contribution of $105,000 will be paid in 1998. The 1996
contribution of $108,498 was paid in 1997.
<PAGE 23>
6. Income Taxes:
The current and deferred income tax provisions (benefits) are as
follows:
1997 1996 1995
- --------------------------------------------------------------------
Current:
Federal $ - $ - $ 9,103
State 49,800 49,800 35,262
Foreign 44,517 34,163 80,595
- --------------------------------------------------------------------
$ 94,317 $ 83,963 $ 124,960
- --------------------------------------------------------------------
Deferred:
Federal $ - $ - $ (88,810)
State - - (9,090)
Foreign - - (577,296)
- --------------------------------------------------------------------
- - (675,196)
- --------------------------------------------------------------------
$ 94,317 $ 83,963 $(550,236)
- --------------------------------------------------------------------
The State tax provision is comprised of the minimum capital tax
and other franchise taxes related to the jurisdictions in
which the Company's manufacturing plants reside.
The U.S. and foreign income (loss) before income taxes are as follows:
1997 1996 1995
- ----------------------------------------------------------------------
U.S. income/(loss) $ 769,399 $(2,216,565) $(4,735,350)
Foreign loss (472,345) (874,078) (4,531,062)
- ----------------------------------------------------------------------
$ 297,054 $(3,090,643) $(9,266,412)
- ----------------------------------------------------------------------
The provision (benefit) for income taxes is different from that
which would be computed by applying the United States statutory
income tax rate to income (loss) before income taxes. The
following schedule reconciles the income tax provision (benefit)
computed at the United States statutory rate to the actual
tax provision (benefit) reported.
1997 1996 1995
- ----------------------------------------------------------------------
Federal income tax at 34%
statutory rate $ 100,999 $(1,050,819) $(3,150,580)
State and local taxes, net
of federal income tax effect 32,868 32,415 (72,500)
Foreign income taxes (19,473) (123,355) (675,600)
Deferred tax asset valuation 117,666 716,177 2,788,900
Repatriated earnings of
foreign subsidiary - 353,136 410,100
Permanent differences (584) 20,436 188,500
All other items, net (137,159) 135,973 (39,056)
- ----------------------------------------------------------------------
Provision (benefit) for
income taxes $ 94,317 $ 83,963 $ (550,236)
- ----------------------------------------------------------------------
Total income taxes paid,
net of refunds $ 13,267 $ 20,676 $ 66,683
- ----------------------------------------------------------------------
<PAGE 24>
The significant sources of deferred tax liabilities and assets as
of December 31 are as follows:
1997 1996
- --------------------------------------------------------------
Deferred tax liabilities:
Property, plant and equipment $ 275,719 $ 987,803
Pension plans 305,244 256,811
Other 55,762 59,722
- --------------------------------------------------------------
Total deferred tax
liabilities $ 636,725 $ 1,304,336
- --------------------------------------------------------------
Deferred tax assets:
Reserves and allowances $ 844,402 $ 1,099,301
Tax basis operating loss
carryforwards 3,084,142 3,048,347
Intangible assets (9,344) 541,830
Other 340,268 119,935
- --------------------------------------------------------------
Total deferred tax assets $ 4,259,468 $ 4,809,413
- --------------------------------------------------------------
Net deferred tax asset
before valuation allowance $(3,622,743) $(3,505,077)
- --------------------------------------------------------------
Valuation Allowance 3,622,743 3,505,077
- --------------------------------------------------------------
Net deferred tax liability $ - $ -
- --------------------------------------------------------------
The Company provides deferred taxes on foreign subsidiary
earnings which are not considered permanently reinvested.
Earnings permanently reinvested would become taxable upon the
sale or liquidation of a foreign subsidiary or upon the
remittance of dividends. $2,153,000 and $2,592,000 of foreign
subsidiary earnings are considered permanently reinvested as of
December 31, 1997 and 1996, respectively, and the amount of
deferred taxes cannot be reasonably determined.
SFAS 109 requires that a valuation allowance be recorded
against tax assets which the Company has not determined to be
more likely than not realizable at this time. Realization of
the Company's tax assets, other than those which will be
realized by future reversals of existing taxable temporary
differences, is entirely dependent on future earnings. Due to
the uncertain nature of their realization based on past
performance and carry forward expiration dates, the Company has
established a full valuation allowance against these tax
assets. The need for this valuation allowance is subject to
periodic review, and if the allowance is reduced, the tax
benefit will be recorded in future operations as a reduction of
the Company's tax expense.
At December 31, 1997, the Company has tax operating loss
carryforwards aggregating $7,063,000 of which $3,463,000 relate
to U.S. Federal income taxes and expires from 2011 through
2013, and $3,600,000 relate to foreign operations. Foreign tax
operating loss carryforwards can be carried forward
indefinitely.
<PAGE 25>
7. Notes Payable and Long Term Debt:
Notes Payable consisted of the following:
1997 1996
- ------------------------------------------------------------
Overdraft arrangements (C) $ 2,538,296 $ 3,092,022
Current portion of long
term debt 1,188,665 2,165,603
- ------------------------------------------------------------
$ 3,726,961 $ 5,257,625
- ------------------------------------------------------------
Long Term Debt consisted of the following:
1997 1996
- ------------------------------------------------------------
Revolving Credit (A) $10,914,800 $ 6,700,000
Term Loan (B) 600,000 -
Mortgage Note (D) 166,860 292,230
Note Payable (E) 174,322 249,766
Note Payable (F) 167,489 289,038
Note Payable (G) 1,001,160 1,298,800
Note Payable (Note 14) - 1,737,744
Other Obligations 16,040 41,825
- ------------------------------------------------------------
$13,040,671 $10,609,403
Less, current portion 1,188,665 2,165,603
- ------------------------------------------------------------
$11,852,006 $ 8,443,800
- ------------------------------------------------------------
(A) On March 7, 1996, the Company's revolving line of credit
was renegotiated with the availability determined using an
asset-based formula. The maximum availability of the
credit line is $13,000,000, reducing to a $9,000,000
curtailment during the last 60 days of each calendar year.
The actual amount available is based on a core availability
of $2,250,000 plus 80% of eligible receivables, varying
percentages of eligible inventory and $750,000 over
formula which expired on October 31, 1996. On March 19,
1997, the Company renegotiated a modification to the
agreement which allowed for additional availability of
$750,000 from March 19, 1997 until May 31, 1997, and
$500,000 for June and July of 1997. On August 22, 1997,
the Company entered into an agreement to extend the
maturity date on the revolving line of credit from May 1998
to May 1999, and the interest rate was reduced from prime
plus 1/2% to prime plus 1/4%. Effective January 1, 1998, the
interest will be reduced to prime. On December 8, 1997,
the Company entered into an agreement to provide for a
Temporary Additional Availability Advance not to exceed
$900,000 for the Company to fund payments required under
the Asset Sales Agreement between the Company and the Rotex
Canada Office Products Division of Esselte, Inc. ("Rotex").
The Company as of December 31, 1997 had borrowed $564,800
against this agreement. The line's collateral was modified
to include the inventory associated with the Asset Sales
Agreement with Rotex. In addition, the year end
curtailment requirement for the Company's 1997 fiscal year
was removed from the agreement. Principal repayment is due
in May 1999 and interest is at prime plus 1/4%. The prime
interest rate at December 31, 1997 was 8.5%. The line is
collateralized by all U.S. assets (except real estate in
Bridgeport, Connecticut) including the inventory associated
with the Asset Sales Agreement with Rotex, and requires an
annual fee of 1/4% of the line. The agreement contains
convenants, some of which were modified in 1997, which
restrict, among other things, additional borrowings,
expenditures for fixed assets, the payment of dividends,
and the acquisition of the Company's capital stock. As of
December 31, 1997, the Company was $292,957 above their
general facility. As a result, the Company was in
violation of the terms of their line of credit relating to
this overdraft. On February 12, 1998, a modification to
the agreement provided an additional overdraft facility of
$1,000,000 through August 5, 1998, subsequently curing this
violation.
(B) On August 22, 1997, the Company entered into a $2,000,000
equipment loan agreement. This loan has a maturity of May
1999 and bears an interest rate of prime plus 1/2%. The
loan will be utilized to finance up to 80% of the net
purchase price of manufacturing equipment for the Company's
North Carolina facility.
(C) The Company has overdraft facilities for its foreign
operations with various foreign banks. At December 31,
1997, the company had lines of credit for Canadian dollar
(C$) 2,000,000 ($1,398,400), British pound (L) 540,000
($891,432) and German marks (DM) 800,000 ($444,960).
Unused amounts available were C$ 483,702 ($338,204),
British pound (L) 12,247 ($20,217). At December 31, 1997, the
Company was German Marks (DM) 291,128 ($161,925) overdrawn
on its line of credit, which was settled in January of
1998. The lines have interest rates ranging from local
prime to local prime plus 3 1/4%. On December 31, 1996,
the Company was in violation of one of its covenants
relating to its Canadian overdraft facility. In March
1997, this violation was waived by the Bank and the
covenants were renegotiated.
<PAGE 26>
(D) Mortgage note payable for (DM) 300,000 to a foreign bank is
collateralized by real estate. Annual principal payment is
(DM) 150,000 through 1999 and the interest rate is 8.85%,
payable quarterly.
(E) Note payable for (DM) 313,416 to a foreign bank is
collateralized by the accumulated funds of an employee
sponsored life/survivorship insurance program offered for
the benefit of the employees. Repayment is required only
as funds are needed to pay benefits under the insurance
contract. The Company has classified the debt as long
term, except for $10,972 that will be due under the
contract in 1998.
(F) Note payable for (DM) 301,130 to a foreign bank is
collateralized by inventory, accounts receivable, machinery
and equipment and real estate. Principal is payable in
monthly installments ending October 1999 and the annual
interest rate is 9.85%.
(G) Note payable for (DM) 1,800,000 to a foreign bank is a one
year term loan collateralized by accounts receivable,
inventory, machinery and equipment and real estate.
Principal is payable in full in October 1998 and the annual
interest rate is 6.25%. The Company expects to renew this
note in 1998.
Annual maturities of debt, excluding the long term portion of
Note (E), in each of the next five years are approximately as
follows:
- -------------------------
1998 $ 1,188,665
1999 $ 11,688,656
2000 $ -
2001 $ -
2002 $ -
- -------------------------
Interest payments were approximately $1,306,694 in 1997,
$1,537,399 in 1996 and $1,951,700 in 1995.
The weighted average interest rate for short term borrowings was
8.0% and 7.2% at December 31, 1997 and 1996, respectively.
8. Commitments and Contingencies:
The Company leases certain office, manufacturing and warehouse
facilities and various equipment under non-cancelable operating
leases. Total rental expense was $613,000 in 1997, $626,000 in
1996, and $943,000 in 1995. Minimum annual rental commitments
under non-cancelable leases with initial or remaining terms of 1
year or more are as follows:
- --------------------------
1998 $ 630,000
1999 $ 584,000
2000 $ 125,000
2001 $ 39,000
2002 $ 25,000
Later $ -
- --------------------------
The Company has purchased $181,000 of forward exchange contracts
to hedge future purchases through June 15, 1998. Any gain or
loss in these contracts is deferred until settlement date of the
transaction being hedged. The deferred gain or loss as of
December 31, 1997 and 1996 is not significant.
The Company has been involved in certain environmental matters.
Additionally, the Company has been involved in numerous legal
actions relating to the use of certain latex products, which the
Company distributes, but does not manufacture. The Company is
one of many defendants. Based on information available, the
Company does not expect a significant impact on the financial
position, future operations or cash flows of the Company,
relating to these matters.
<PAGE 27>
The Company is in the process of making a complete assessment of
the impact of the Year 2000. In the U.S., the Company
implemented a new information system in 1997, which should
address any computer system issues related to the Year 2000. The
Company has established a Year 2000 Task Force to fully evaluate
the company-wide impact of the Year 2000. The Task Force is in
the process of identifying all issues, and determining an action
plan for testing and validating all systems. Management believes
that the Year 2000 issue will not materially affect future
financial results, or cause reported financial results not be be
necessarily indicative of future operating results or future
financial condition.
9. Business Segment and Geographic Data:
The Company operates principally in two business segments.
Operations in the medical segment involve the production and sale
of metal disposable medical scissors, instruments, and sterile
procedure trays for hospitals and the alternate care markets.
Operations in the consumer segment involve the production and
sale of scissors, shears, rulers and first aid kits for school,
office or home use. Intersegment sales and transfers between
geographic areas are not significant. Operating profit is total
sales less expenses other than general corporate expenses,
interest expense and income taxes. Identifiable assets by
business segment and geographic areas are those assets that are
used in the Company's operations in each business segment and
geographic area. Corporate assets are principally cash,
leasehold improvements and office equipment.
Information on the Company's Operations by Business Segments:
(All Figures in Thousands) 1997 1996 1995
- ------------------------------------------------------------------------
Sales:
Consumer $ 32,843 $ 33,125 $ 35,882
Medical 13,435 14,356 16,340
- ------------------------------------------------------------------------
Total $ 46,278 $ 47,481 $ 52,222
- ------------------------------------------------------------------------
Operating Profit (Loss): *
Consumer $ 1,813 $ 106 $ (4,325)
Medical 2,204 1,569 394
- ------------------------------------------------------------------------
Total 4,017 1,675 (3,931)
- ------------------------------------------------------------------------
General corporate expenses 2,394(A) 3,229 3,382
Interest expense 1,326 1,537 1,953
- ------------------------------------------------------------------------
Income/(loss) before income tax $ 297 $ (3,091) $ (9,266)
- ------------------------------------------------------------------------
<PAGE 28>
(All Figures in Thousands) 1997 1996 1995
- ------------------------------------------------------------------------
Identifiable Assets:
Consumer $ 22,230 $ 20,278 $ 27,676
Medical 5,869 6,059 8,160
Corporate 1,758 914 1,185
- ------------------------------------------------------------------------
Total $ 29,857 $ 27,251 $ 37,021
- ------------------------------------------------------------------------
(A) 1997 includes Gain on Sale of Marketing Rights of $846,000
Medical Consumer Corporate Total
- ---------------------------------------------------------------------------
* 1997 Operating profit (loss)
includes the following:
Restructuring & other charges $ - $ 386 $ - $ 386
- ---------------------------------------------------------------------------
* 1996 Operating profit (loss)
included the following:
Restructuring & other charges $ 95 $ 1,058 $ 626 $1,779
- ---------------------------------------------------------------------------
* 1995 Operating profit (loss)
included the following:
Restructuring & other charges $ 235 $ 2,901 $ - $3,136
Asset Valuation Adjustment 981 2,584 - 3,565
- ---------------------------------------------------------------------------
$ 1,216 $ 5,485 $ - $6,701
- ---------------------------------------------------------------------------
(All Figures in Thousands) 1997 1996 1995
- ----------------------------------------------------------------
Depreciation Expenses:
Consumer $ 694 $ 708 $ 1,069
Medical 194 154 181
Corporate 91 61 63
Amortization Expenses:
Consumer $ 20 $ 14 $ 14
Medical 72 430 552
Corporate - - -
Capital Expenditures:
Consumer $ 1,009 $ 971 $ 436
Medical 539 90 272
Corporate 276 8 279
<PAGE 29>
INFORMATION ON THE COMPANY'S OPERATIONS AND
ASSET BY GEOGRAPHIC AREA:
(All Figures in Thousands) 1997 1996 1995
- ------------------------------------------------------------------
Sales:
United States $ 35,310 $ 34,193 $ 34,471
Canada 4,235 4,103 4,155
England 4,067 3,942 4,130
Germany 2,666 5,243 9,466
- ------------------------------------------------------------------
Total $ 46,278 $ 47,481 $ 52,222
- ------------------------------------------------------------------
Operating Profit (Loss): *
United States $ 3,979 $ 2,020 $ (131)
Canada 239 248 (211)
England (175) (260) (974)
Germany (26) (333) (2,615)
- ------------------------------------------------------------------
Total 4,017 1,675 (3,931)
- ------------------------------------------------------------------
General corporate expenses 2,394 3,229 3,382
Interest expense 1,326 1,537 1,953
- ------------------------------------------------------------------
Income/(loss) before income tax $ 297 $ (3,091) $ (9,266)
- ------------------------------------------------------------------
Identifiable Assets:
United States $ 19,895 $ 16,274 $ 20,777
Canada 2,839 2,697 3,581
England 2,531 3,292 3,660
Germany 2,834 4,074 7,818
Corporate 1,758 914 1,185
- ------------------------------------------------------------------
Total $ 29,857 $ 27,251 $ 37,021
- ------------------------------------------------------------------
<PAGE 30>
<TABLE>
* 1997 Operating * 1996 Operating * 1995 Operating
profit (loss) profit (loss) profit (loss)
includes the included the included the
following: following: following:
Restructuring & Restructuring & Restructuring & Asset Valuation
Other Charges Other Charges Other Charges Adjustments Total
--------------- --------------- --------------- --------------- ------
<CAPTION>
<S> <C> <C> <C> <C> <C>
United
States $ 386 $1,580 $ 798 $2,272 $3,070
Canada - - - 299 299
England - 177 221 643 864
Germany - 22 2,117 351 2,468
--------------- ---------------- --------------- --------------- ------
$ 386 $1,779 $ 3,136 $3,565 $6,701
--------------- ---------------- --------------- --------------- ------
</TABLE>
10. Stock Option Plans:
The 1988 Stock Option Plan was amended and restated on February
25, 1992. The Board of Directors adopted a series of
amendments to the Plan which were approved at the 1992 Annual
Meeting. The principal changes adopted were an increase in the
aggregate number of shares of common stock available under the
Plan from 100,000 shares to 300,000 shares and provisions for
the issuance of options as Incentive Stock Options under the
provision of Section 422 of the Internal Revenue Code. Options
granted prior to the amendment are nonqualified stock options
and are included in the 300,000 shares. Incentive Stock
Options and nonqualified stock options may be granted under the
amended Plan. In January, 1996 the Board of Directors adopted
an amendment to the Plan that was approved at the 1996 Annual
Meeting, increasing the aggregate number of Common Stock shares
available under the Plan from 300,000 shares to 400,000 shares.
Under the Company's Amended and Restated Stock Option Plan,
officers and key employees may be granted options, each of
which allows for the purchase of common stock at a price of not
less than 100% of fair market value at the date of grant.
Generally, each option granted under the Plan on or prior to
June 24, 1996 vests immediately or within a year and is for a
term not in excess of ten years from the date of grant.
Generally, each option granted after June 24, 1996 shall vest
over a four year period and shall be for a term not in excess
of ten years from the date of grant. No option may be granted
under the Plan after the tenth anniversary of the adoption of
the Plan.
In January 1996, the Board of Directors adopted a Non-Employee
Director Stock Option Plan that was approved at the 1996 Annual
Meeting. The Plan authorized 50,000 common stock shares. An
option to purchase 10,000 shares of common stock shall be
granted to each new Director elected on April 22, 1996 or
thereafter. Further, under the original plan, Directors who
were elected prior to the 1996 Annual Meeting would be granted
options to purchase 2,500 shares of common stock of the Company
up to a maximum of 10,000 shares upon meeting certain financial
goals. The exercise price with respect to an option awarded
under the Plan will be 100% of the fair market value of the
common stock as of the date of grant. In February 1997, the
Board of Directors adopted an Amendment to the Plan, which was
approved by the shareholders at the 1997 Annual Meeting,
increasing the aggregate number of common stock shares
available under the Plan from 50,000 to 60,000 shares, amending
the criteria for granting options and renaming the Plan to Non-
Salaried Director Stock Option Plan. The criteria for granting
options was amended to grant options for 10,000 common stock
shares to non-salaried Directors first elected to the Board
prior to the 1996 Annual Meeting after being elected at the
1997 Annual Meeting with the vesting of option shares occurring
over a four year period.
A summary of changes in options issued under the two Plans is as
follows:
1997 1996(A) 1995
- --------------------------------------------------------------------------
Shares under option and exercisable at
the beginning of the year 301,500 250,000 151,000
Options granted 66,000 159,500 155,000
Options canceled (9,375) (58,000) (56,000)
Options exercised (39,375) (50,000) -
- --------------------------------------------------------------------------
Shares under option and exercisable at
the end of year 318,750 301,500 250,000
- --------------------------------------------------------------------------
Options available for future grants
at the end of the year 51,875 108,500 50,000
- --------------------------------------------------------------------------
Average price of options granted $ 5.81 $ 3.92 $ 3.63
Average price of options canceled $ 4.52 $ 4.35 $ 3.74
Average price of options exercised $ 3.99 $ 3.19 $ -
Average price of options exercisable $ 4.23 $ 3.87 $ 3.81
- --------------------------------------------------------------------------
(A) 1996 Presentation restated to include both Plans
<PAGE 31>
As of December 31, 1997, the exercise price of stock options
outstanding ranged from $3.625 to $7.25. The weighted average
remaining contractual life of these outstanding stock options
is 8 years.
The Company applies APB Opinion No. 25, "Accounting for Stock
Issued to Employees," and related interpretations in accounting
for its stock option plans and has adopted the fair value
disclosure provision of SFAS No. 123, "Accounting for Stock-
Based Compensation." Accordingly, no compensation cost has
been recognized for its plans.
Had compensation cost for the Company's Stock Option Plans been
determined consistent with SFAS No. 123, the Company would have
expensed $20,804 in 1997 and $143,585 in 1996. The Company's
net income/loss per share would have been:
1997 1996
- -------------------------------------------------------------
Net income/loss:
As reported $ 202,737 $(3,174,606)
Pro forma under SFAS No. 123 $ 181,933 $(3,318,191)
Net income/loss per share:
As reported $ .06 $ (.95)
Pro forma under SFAS No. 123 $ .05 $ (.99)
Because the SFAS No. 123 method of accounting has not been
applied to options granted prior to January 1, 1995, the
resulting compensation cost may not be representative of that
to be expected in future years. The weighted average fair
value at date of grant for options granted during 1997 and 1996
is $2.52 and $1.61 per option, respectively.
The fair value of options at date of grant was estimated using
the Black-Scholes model with the following weighted average
assumptions:
1997 1996
- --------------------------------------------------------
Expected Life (years) 5 5
Interest Rate 6.65% 5.91%
Volatility 36.4% 34.7%
Dividend Yield 0% 0%
<PAGE 32>
11. Earnings Per Share
The Company has adopted SFAS No. 128, "Earnings Per Share" in
determining the effect of dilutive potential common shares
outstanding. The treasury share method is used to reflect the
dilutive effect of outstanding stock options. Unexercised stock
options were not included in the calculation of Diluted Earnings
Per Share for certain periods because their effect would be
antidilutive. For such periods, Basic and Diluted Earnings Per
Share have been presented the same and the number of such
unexercised options has been disclosed.
<TABLE>
For the Year Ended
------------------
1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C>
Basic Earnings Per Share
Computation
Numerator: Net Income/(Loss) $ 202,737 $(3,174,606) $(8,716,176) $ 123,498 $ (597,245)
Denominator:
Average number of common
shares outstanding 3,353,581 3,342,278 3,337,620 3,337,620 3,337,620
- -------------------------------------------------------------------------------------------------
Basic Earnings Per Share $ .06 $ (.95) $ (2.61) $ .04 $ (.18)
=================================================================================================
Diluted Earnings Per Share
Computation
Numerator: Net Income/(Loss) $ 202,737 $(3,174,606) $(8,716,176) $ 123,498 $ (597,245)
Denominator:
Average number of common
shares outstanding 3,353,581 3,342,278 3,337,620 3,337,620 3,337,620
Average number of stock
options outstanding 316,079 320,415 282,055 145,000 145,000
- -------------------------------------------------------------------------------------------------
Total Shares 3,669,660 3,662,693 3,619,675 3,482,620 3,482,620
- -------------------------------------------------------------------------------------------------
Diluted Earnings Per Share $ .06 $ (.95) $ (2.61) $ .04 $ (.18)
=================================================================================================
</TABLE>
<TABLE>
Quarters
--------
1996 1st 2nd 3rd 4th Total
- -----------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C>
Basic Earnings Per Share
Computation
Numerator: Net Loss $ (816,079) $(1,238,827) $ (485,318) $ (634,382) $(3,174,606)
Denominator:
Average number of common
shares outstanding 3,337,620 3,337,620 3,337,620 3,356,098 3,342,278
- ------------------------------------------------------------------------------------------------
Basic Earnings Per Share $ (.24) $ (.37) $ (.15) $ (.19) $ (.95)
================================================================================================
Diluted Earnings Per Share
Computation
Numerator: Net Loss $ (816,079) $(1,238,827) $ (485,318) $ (634,382) $(3,174,606)
Denominator:
Average number of common
shares outstanding 3,337,620 3,337,620 3,337,620 3,356,098 3,342,278
Average number of stock
options outstanding 303,703 315,374 338,565 323,783 320,415
- ------------------------------------------------------------------------------------------------
Total Shares 3,641,323 3,652,994 3,676,185 3,679,881 3,662,693
- ------------------------------------------------------------------------------------------------
Diluted Earnings Per Share $ (.24) $ (.37) $ (.15) $ (.19) $ (.95)
================================================================================================
</TABLE>
<PAGE 33>
<TABLE>
Quarters
--------
1997 1st 2nd 3rd 4th Total
- -----------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C>
Basic Earnings Per Share
Computation
Numerator: Net Income/(Loss) $ 280,985 $ 222,271 $ 185,900 $ (486,419) $ 202,737
Denominator:
Average number of common
shares outstanding 3,368,837 3,329,734 3,353,504 3,362,321 3,353,581
- ------------------------------------------------------------------------------------------------
Basic Earnings Per Share $ .08 $ .07 $ .06 $ (.15) $ .06
================================================================================================
Diluted Earnings Per Share
Computation
Numerator: Net Income/(Loss) $ 280,985 $ 222,271 $ 185,900 $ (486,419) $ 202,737
Denominator:
Average number of common
shares outstanding 3,368,837 3,329,734 3,353,504 3,362,321 3,353,581
Average number of stock
options outstanding 298,522 329,975 316,837 318,750 316,079
- ------------------------------------------------------------------------------------------------
Total Shares 3,667,359 3,659,709 3,670,341 3,681,071 3,669,660
- ------------------------------------------------------------------------------------------------
Diluted Earnings Per Share $ .08 $ .06 $ .05 $ (.15) $ .06 (A)
================================================================================================
</TABLE>
(A) The total for the year does not equal the sum of the quarters
due to the antidilutive effect for the fourth quarter.
12. Restructuring and Other Charges:
In December 1995, the Company implemented a restructuring plan
primarily designed to decrease production costs and inventory
levels in the consumer segment by consolidating manufacturing
facilities in the United States and Germany. A pretax charge
of $3,136,000 was recorded in 1995 which resulted from lease
termination costs of $1,466,000, employee termination costs of
$683,000, adjustments in the carrying value of production
assets and idle real estate of $749,000, and other costs of
$238,000 The employee termination costs were in anticipation
of the elimination of nearly seventy positions, mostly
production employees. The restructuring plan was substantially
complete by the end of 1996.
During 1996, the original restructuring plan, which called for
the consolidation of certain European operations, was amended
to include the divestiture of the Altenbach subsidiary. The
transaction was completed on May 1, 1996 and the restructuring
reserve of $2,117,000 established at December 31, 1995 was
adequate to cover the loss on the sale.
In the United States, the consolidation of the Bridgeport,
Connecticut and North Carolina facilities was completed in
1996. Additional severance charges were incurred as the
Company reorganized its senior and middle management
organization. These steps resulted in a reduction of ninety-
five positions in 1996.
In 1997, the Company reorganized its Medical Sales Division and
completed its previously mentioned restructuring plan.
Additional reserves were established to write-down certain
assets of the Bridgeport facility.
The remaining accrual balance of $558,000 is adequate to cover
currently planned remaining restructuring activities.
<TABLE>
Restructuring Reserve
(Dollars in thousands) 1997 1996 1995
<CAPTION>
<S> <C> <C> <C>
- ---------------------------------------------------------------------------
Balance, beginning of year $ 755 $ 2,550 $ -
- ---------------------------------------------------------------------------
Charges to Operations:
Severance Costs - 1,039 683
Lease Termination - - 1,466
Exit Costs (144) 58 -
Asset Valuation - - 749
Manufacturing Relocation - 290 -
Inventory Reduction and
Other Charges - 392 238
Asset Write-down 530 - -
- ---------------------------------------------------------------------------
Total Charges to Operations 386 1,779 3,136
- ---------------------------------------------------------------------------
<PAGE 34>
Costs incurred:
Divestiture of Altenbach - 1,892 -
Severance Costs 340 1,000 -
Exit Costs 130 - -
Asset Valuation - - 586
Manufacturing Relocation 38 290 -
Inventory Reduction and Idle
Capacity 75 392 -
- ---------------------------------------------------------------------------
Total costs incurred 583 3,574 586
- ---------------------------------------------------------------------------
Balance, end of year $ 558 $ 755 $ 2,550
- ---------------------------------------------------------------------------
Cash Expenditures $ 583 $ 1,795 $ -
- ---------------------------------------------------------------------------
Number of Employee Terminations
due to Restructuring Activities 22 95 -
- ---------------------------------------------------------------------------
</TABLE>
13. Divestiture of Peter Altenbach & Sohne GmbH:
On May 1, 1996, the Company sold the assets of its Peter
Altenbach & Sohne GmbH subsidiary, excluding accounts
receivable. The buyer purchased all fixed assets, inventory and
intangible assets, including the Altenbach tradename. In
exchange, the buyer paid $960,000, assumed all lease
obligations, employed substantially all Altenbach employees and
assumed responsibility for their employee related costs,
including pensions. Costs related to the restructuring of
operations in Germany, including the loss from the sale of the
assets of the Altenbach operations, were accrued for in 1995.
In the four months of 1996 prior to the divestiture, Altenbach
lost $271,000.
14. Sale of Marketing Rights:
On March 3, 1997, the Company sold its U.S. marketing rights of
certain wound care products to Seton Healthcare International
Limited of Oldham, U.K. The sale price was approximately $2.0
million, and the proceeds were used to pay off $1.7 million of
debt, and repurchase 64,620 shares of the Company's common
stock. The transaction resulted in a gain of $846,000, which is
reported as Other Income on the Consolidated Statements of
Income (Loss).
15. Purchase of Inventory from Rotex Division of Esselte Canada:
On December 8, 1997, the Company purchased the majority of the
inventory of the Rotex Division of Esselte Canada. This
inventory was purchased for $967,000 with a debt financing of
$564,800, and assumed liabilities of $402,200. This represents
an expansion of Acme's office products business in Canada where
Acme distributes a broad range of office products to most of the
major distributors and retail chains in Canada.
<PAGE 35>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Acme United
Corporation:
We have audited the accompanying consolidated balance sheets of
Acme United Corporation and Subsidiaries as of
December 31, 1997 and 1996, and the related consolidated
statements of income (loss), stockholders' equity and cash
flows for each of the three years in the period ended December
31, 1997. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Acme United Corporation and Subsidiaries as
of December 31, 1997 and 1996, and the consolidated results
of their operations and their cash flows for each of the three
years in the period ended December 31, 1997, in conformity
with generally accepted accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
- --------------------------------
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
March 19, 1998
<PAGE 36>
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
On March 2, 1998 a decision was made by mutual agreement that
Coopers & Lybrand L.L.P. would not be engaged as independent
accountants for the year 1998 and would no longer serve in that
capacity at the completion of the audit of the Company's
financial statements for the fiscal year ended December 31, 1997.
The decision was approved by the Company's Audit Committee.
There were no disagreements between the Company and Coopers &
Lybrand L.L.P. on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or
procedure during the years ended December 31, 1997 and 1996 and
any interim periods within such years. The accountant's report
on the Company's financial statements for the two years ended
December 31, 1997 and 1996 have not contained an adverse opinion
or a disclaimer of opinion, nor have they been qualified or
modified in any respect. A Form 8-K was filed on March 6, 1998.
PART III
Item 10. Directors and Executive Officers of the Registrant
The following table sets forth certain information with respect
to the directors and executive officers of the Company. All
directors of the Company hold office until the next annual
meeting of the shareholders or until their successors have been
elected and qualified. Executive officers are elected to the
Board of Directors to hold office until their successors are
elected and qualified.
Name Age Position Held with Company
- ------------------- --- -----------------------------------
Walter C. Johnsen 47 President, Chief Executive Officer
and Director
Gary D. Penisten 66 Chairman of the Board and Director
Brian S. Olschan 41 Senior Vice President-Sales and
Marketing
Cheryl L. Kendall 45 Vice President-Chief Financial
Officer, Secretary and Treasurer
David W. Clark, Jr. 60 Director
George R. Dunbar 74 Director
Newman M. Marsilius 80 Director not standing for reelection
Wayne R. Moore 67 Director
James L.L. Tullis 50 Director
Henry C. Wheeler 81 Director
Walter C. Johnsen has served as director since 1995 and as
President and Chief Executive Officer since November 30, 1995.
Prior to that he was Executive Vice President since January 24,
1995. He also was Chief Financial Officer from March 26, 1996
until June 30, 1996. Before joining the Company he was Vice
Chairman and Principal of Marshall Products, Inc., a medical
supply distributor.
Gary D. Penisten has served as director since 1994 and Chairman
of the Board since February 27, 1996. He is a Director of D. E.
Foster & Partners L.P., an executive search firm. From 1977 to
1988, he was Senior Vice President of Finance, Chief Financial
Officer and a Director of Sterling Drug Inc. in New York City.
Brian S. Olschan has served as Senior Vice President-Sales and
Marketing since September 10, 1996. From 1991 to 1996, he was
employed by General Cable Corporation in various executive
positions including Vice President and General Manager of the
Cordset and Assembly Business from 1994-1996.
Cheryl L. Kendall, CPA, has served as Vice President-Chief
Financial Officer since July 1, 1996, and has also served as
Secretary and Treasurer since September 24, 1996. She was Chief
Financial Officer of Collegiate Marketing, Inc. from 1995-1996,
and has held treasury, corporate planning, and accounting
positions at Joyce International, Inc. (1988-1995) and
Westinghouse Electric Corporation (1974-1987).
David W. Clark, Jr. has served as director since 1980. He is
Managing Director of Pryor & Clark Company, an investment
company. From July 1988 to June 1992, Mr. Clark was President of
Corcap, Inc. which was spun out of Lydall, Inc. in July 1988.
Mr. Clark joined Lydall in 1982 as Vice President-Treasurer and
Director. He became Executive Vice President in 1977 and
President in 1986. Until July of 1992, Mr. Clark was also
Chairman of the Board of CompuDyne Corporation of which he
remains a Director. He is also a Director of Checkpoint Systems,
Inc., Thorofare, NJ and SSC Technologies, Bloomfield,
Connecticut.
<PAGE 37>
George R. Dunbar has served as director since 1977. He is
President of Dunbar Associates, a municipal management consulting
firm. He was Former Chief Administrative Officer for the City of
Bridgeport and served as President (1972-1987) of the Bryant
Electric division of Westinghouse Electric Corporation,
manufacturer of electrical distribution and utilization products,
Bridgeport, Connecticut. Mr. Dunbar is also a Director of
People's Bank, Bridgeport, Connecticut.
Newman M. Marsilius has served as director since 1956. He was
Chairman of the Board (1978 - 1986) of The Producto Machine
Company, manufacturer of special machine tools and tooling
products, Bridgeport, Connecticut. He is not standing for
reelection.
Wayne R. Moore has served as director since 1976. He is
presently a Director and Chairman Emeritus of The Producto
Machine Company, manufacturer of machine tools, special machines,
and tool die and mold components. He was Chairman of the Board
of The Producto Machine Company and of Moore Tool Company,
manufacturer of machine tools, measuring machines and metrology
products. Mr. Moore was Chairman of the Association for
Manufacturing Technology/U.S. Machine Tool Builders (1985-1986)
and Committee Member of U.S. Eximbank (1984).
James L.L. Tullis has served as director since 1996. He is
Chairman and Chief Executive Officer of Tullis-Dickerson &
Company, Inc., Greenwich, Connecticut, a venture capital firm.
He has been a securities analyst researching the health care
industry at Putnam Funds and Morgan Stanley and Company, Inc. He
also was a Senior Vice President at E.F. Hutton and Company. He
is a Director of Physician Sales & Service, Inc. and American
Consolidated Laboratories, Inc.
Henry C. Wheeler has served as director since 1941. He is now
Chairman Emeritus after serving as Chairman through November 29,
1995 and President, Treasurer and Chief Executive Officer from
1941 to December 20, 1994.
Item 11. Executive Compensation
(Refer to Proxy Statement pages 6-10)
Item 12. Security Ownership of Certain Beneficial Owners and
Management
(Refer to Proxy Statement pages 1-2)
Item 13. Certain Relationships and Related Transactions
(None)
<PAGE 38>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
(a) Documents filed as part of this report:
1. Financial Statements
Page(s)
Consolidated Balance Sheets 15-16
Consolidated Statements of Income (Loss) 13
Consolidated Statements of Changes in Stockholders' Equity 14
Consolidated Statements of Cash Flows 17-18
Notes to Consolidated Financial Statements 19-34
Report of Independent Accountants 35
2. Financial Statement Schedules
Schedule II 40
Schedules other than those listed above have been omitted
because the required information is contained in the
financial statements and notes thereto, or because such
schedules are not required or applicable.
3. Exhibits
Exhibit 11 - Income/(Loss) Per Share Computation 41
Exhibit 21 - Parents and Subsidiaries 42
Exhibit 23 - Consent of Independent Accountants 42
The following basic documents are contained in S-1
Registration Statement No. 230682 filed with the
Commission on November 7, 1968 and amended by Substantive
Amendment No. 1 on December 31, 1968 and by No. 2 on
January 31, 1969:
Certificate of Organization of Registrant
Amendment to Certificate of Incorporation of
Registrant dated September 24, 1968
Proof of Common Stock Certificates
The following basic documents were filed with Form 10-K for 1971:
Amendment to Certificate of Incorporation of
Registrant dated April 27, 1971
Amendment to Certificate of Incorporation dated
June 29, 1971
Proof of Common Stock Certificate
Proof of Preferred Stock Certificate
(b) No Form 8-K was filed by the Company during the quarter
ended December 31, 1997.
A Form 8-K was filed by the Company on March 6, 1998.
<PAGE 39>
Report of Independent Accountants
To the Board of Directors and Stockholders of Acme United
Corporation:
Our report on the consolidated financial statements of Acme
United Corporation and Subsidiaries is included on page 35
of this Form 10-K. In connection with our audits of such
financial statements, we have also audited the related financial
statement schedule included on page 40 of this Form 10-K.
In our opinion, the financial statement schedule referred to
above, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material
respects, the information required to be included therein.
/s/ COOPERS & LYBRAND L.L.P.
- --------------------------------
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
March 19, 1998
<PAGE 40>
SCHEDULE II
Acme United Corporation and Subsidiaries
VALUATION AND QUALIFYING ACCOUNTS
For the years ended December 31, 1997, 1996 and 1995
<TABLE>
Balance at Charged to
Beginning of Costs and Deductions and Balance at
Period Expenses Other Adjustments End of Period
- ---------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C>
1997
Restructuring Reserve $ 755,440 $ 385,636 $ 583,388 $ 557,688
Inventory Reserves 480,924 - 199,606 281,318
Allowance for Doubtful Accounts 197,755 155,622 101,298 252,079
- --------------------------------------------------------------------------------------------
$1,434,119 $ 541,258 $ 884,292 $1,091,085
- --------------------------------------------------------------------------------------------
1996
Restructuring Reserve $2,549,500(A) $ 309,193 $2,103,253 $ 755,440
Inventory Reserves 3,611,355 121,966 3,252,397 480,924
Allowance for Doubtful Accounts 132,593 134,014 68,852 197,755
- --------------------------------------------------------------------------------------------
$6,293,448 $ 565,173 $5,424,502 $1,434,119
- --------------------------------------------------------------------------------------------
1995
Restructuring Reserve $ - $2,549,500(A) - $2,549,500(A)
Inventory Reserves 230,000 3,381,355(B) - 3,611,355
Allowance for Doubtful Accounts 197,822 116,321 181,550 132,593
- --------------------------------------------------------------------------------------------
$ 427,822 $6,047,176 $ 181,550 $6,293,448
- --------------------------------------------------------------------------------------------
(A) Excludes $586,550 asset valuation charges relating to
production assets
(B) Represents the 1995 Inventory Valuation Loss that is
separately disclosed in the Consolidated Statements of Income
(Loss)
<PAGE 41>
EXHIBIT 11
(For Exhibit to Form 10-K, 1997)
ACME UNITED CORPORATION AND SUBSIDIARIES
INCOME/(LOSS) PER SHARE COMPUTATION
BASIC AND DILUTED
BASIC
- -----
1993 Net Loss $ (597,245) / 3,337,620 Shares = $(.18) Per Share
1994 Net Income $ 123,498 / 3,337,620 Shares = $.04 Per Share
1995 Net Loss $(8,716,176) / 3,337,620 Shares = $(2.61) Per Share
1996 Net Loss $(3,174,606) / 3,342,278 Shares = $(.95) Per Share
1997 Net Income $ 202,737 / 3,353,581 Shares = $ .06 Per Share
DILUTED (A)
- -----------
1993 Net Loss $ (597,245) / 3,482,620 Shares = $(.18) Per Share
1994 Net Income $ 123,498 / 3,482,620 Shares = $.04 Per Share
1995 Net Loss $(8,716,176) / 3,619,675 Shares = $(2.61) Per Share
1996 Net Loss $(3,174,606) / 3,662,693 Shares = $(.95) Per Share
1997 Net Income $ 202,737 / 3,669,660 Shares = $.06 Per Share
(A) This calculation reflects the adoption of SFAS No. 128,
"Earnings Per Share". See footnote 11.
<PAGE 42>
EXHIBIT 21
(For Exhibit to Form 10-K, 1997)
PARENTS AND SUBSIDIARIES
The Company was organized as a partnership in 1867 and
incorporated in 1882 under the laws of the State of Connecticut
as The Acme Shear Company. The corporate name was changed to
Acme United Corporation in 1971.
There is no parent of the registrant.
Registrant has the following subsidiaries, all of which are
totally held:
Name State or Country of Incorporation
- ---- ---------------------------------
Acme United Limited Canada
Acme United, Ltd. England
Emil Schlemper GmbH Germany
Westcott Ruler Company, Inc. New York
The Acme Shear Company Connecticut
Only Acme United Limited (Canada), Acme United, Ltd. (England)
and Emil Schlemper GmbH are active and included in the
consolidated financial statements.
EXHIBIT 23
(For Exhibit to Form 10-K, 1997)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the
registration statement of Acme United Corporation and
Subsidiaries on Form S-8 (File No. 33-98918) of our reports
dated March 19, 1998, on our audits of the consolidated
financial statements and financial statement schedule of Acme
United Corporation and Subsidiaries as of December 31, 1997 and
1996, and for the three years in the period ended December 31,
1997, which reports are included in this Annual Report on Form
10-K.
/s/ COOPERS & LYBRAND L.L.P.
- ---------------------------------
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
March 19, 1998
<PAGE 43>
Pursuant to the requirements of Section 13 or 15(d) 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, on March 19, 1998.
ACME UNITED CORPORATION
(Registrant)
Signatures Titles
/s/ Walter C. Johsen
- ---------------------------
Walter C. Johnsen Chief Executive Officer and Director
/s/ Gary D. Penisten
- ---------------------------
Gary D. Penisten Chairman of the Board and Director
/s/ Cheryl L. Kendall
- ---------------------------
Cheryl L. Kendall Vice President-Chief Financial Officer,
Secretary and Treasurer
/s/ Richard L. Windt
- ---------------------------
Richard L. Windt Vice President - Corporate Controller
(Chief Accounting Officer)
/s/ David W. Clark, Jr.
- ---------------------------
David W. Clark, Jr. Director
/s/ George R. Dunar
- ---------------------------
George R. Dunbar Director
/s/ Newman M. Marsilius
- ---------------------------
Newman M. Marsilius Director
/s/ Wayne R. Moore
- ---------------------------
Wayne R. Moore Director
/s/ James L.L. Tullis
- ---------------------------
James L.L. Tullis Director
/s/ Henry C. Wheeler
- ---------------------------
Henry C. Wheeler Director
<PAGE 44>
OFFICERS
Walter C. Johnsen
President and Chief Executive
Officer
Gary D. Penisten
Chairman of the Board
Brian S. Olschan
Senior Vice President-Sales and
Marketing
Cheryl L. Kendall
Vice President-Chief Financial
Officer, Secretary and Treasurer
James A. Benkovic
Vice President-Consumer Sales
David N. Buck
Vice President-Medical Sales
Richard L. Windt
Vice President-Corporate Controller
FOREIGN KEY MANAGEMENT
James A. Brownrigg
General Manager
Acme United Limited
(Canada)
Wolfgang M. Lange
Managing Director
Emil Schlemper GmbH
(Germany)
Kenneth T. McCabe
Managing Director
Acme United Ltd.
(England)
DIRECTORS
David W. Clark, Jr.
Managing Director
Pryor & Clark Company
Hartford, Connecticut
President (1988-1992)
Corcap, Inc.
George R. Dunbar
President
Dunbar Associates
Monroe, Connecticut
President (1972-1987)
Bryant Electric Division
Westinghouse Electric Corporation
Walter C. Johnsen
President and Chief Executive Officer
Acme United Corporation
Newman M. Marsilius
Chairman of the Board (1978-1986)
The Producto Machine Company
Bridgeport, Connecticut
Wayne R. Moore
Director and Chairman Emeritus
The Producto Machine Company
Bridgeport, Connecticut
Gary D. Penisten
Chairman of the Board
Acme United Corporation
James L.L. Tullis
Chairman and Chief Executive Officer
Tullis-Dickerson & Company, Inc.
Greenwich, Connecticut
Henry C. Wheeler
Chairman of the Board (Retired)
Acme United Corporation
CORPORATE OFFICES
Acme United Corporation
75 Kings Highway Cutoff
Fairfield, Connecticut 06430
(203) 332-7330
TRANSFER AGENTS
American Stock Transfer Company
40 Wall Street
New York, N.Y. 10005
STOCK LISTING
The stock of Acme United Corporation is
traded on the
American Stock Exchange under the
symbol ACU.
COUNSEL
Marsh, Day & Calhoun
Southport, Connecticut
AUDITORS
Coopers & Lybrand, L.L.P.
Hartford, Connecticut
ANNUAL MEETING
will be held at 11 a.m., Monday,
April 27, 1998 at The American Stock
Exchange, 86 Trinity Place,
New York, New York
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEETS AND CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS OF ACME UNITED CORPORATION AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
EPS-DILUTED HAS BEEN RESTATED FOR THE PERIODS ENDING SEPTEMBER 30, JUNE 30
AND MARCH 31, 1997 TO REFLECT THE ADOPTION OF SFAS NO. 128, "EARNINGS PER
SHARE".
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 9-MOS 6-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-END> DEC-31-1997 SEP-30-1997 JUN-30-1997 MAR-31-1997
<CASH> 25 82 272 277
<SECURITIES> 0 0 0 0
<RECEIVABLES> 7,698 10,390 9,826 8,403
<ALLOWANCES> 252 241 234 217
<INVENTORY> 14,081 12,593 13,013 12,529
<CURRENT-ASSETS> 21,728 23,512 24,364 21,698
<PP&E> 19,694 19,387 19,302 18,998
<DEPRECIATION> 12,929 12,700 12,632 12,404
<TOTAL-ASSETS> 29,857 31,466 32,311 27,573
<CURRENT-LIABILITIES> 11,711 12,358 14,117 13,535
<BONDS> 0 0 0 0
0 0 0 0
0 0 0 0
<COMMON> 8,685 8,672 8,647 8,593
<OTHER-SE> (2,391) (1,845) (2,019) (2,242)
<TOTAL-LIABILITY-AND-EQUITY> 29,857 31,466 32,311 29,573
<SALES> 46,278 36,449 23,734 10,880
<TOTAL-REVENUES> 47,491 37,495 24,676 11,765
<CGS> 34,150 26,499 17,183 7,700
<TOTAL-COSTS> 45,868 35,711 23,530 11,202
<OTHER-EXPENSES> 0 0 0 0
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 1,326 960 606 282
<INCOME-PRETAX> 297 764 540 281
<INCOME-TAX> 94 75 37 0
<INCOME-CONTINUING> 203 689 503 281
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 203 689 503 281
<EPS-PRIMARY> .06 .21 .15 .08
<EPS-DILUTED> .06 .19 .14 .08
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