UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number: Q-4823
ACME UNITED CORPORATION
______________________________________________________________________________
(Exact name of registrant as specified in its charter.)
CONNECTICUT 06-0236700
_______________________________ ___________________
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
75 KINGS HIGHWAY CUTOFF, FAIRFIELD, CT 06430
________________________________________ __________
(Address of principal executive offices) (Zip Code)
(203) 332-7330
___________________________________________________
Registrant's telephone number, including area code:
______________________________________________________________________________
Former name, former address and former fiscal year, if changed since last
report
Indicate by check mark whether the registrant(1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES [X] NO [ ]
Registrant had 3,337,620 shares outstanding as of May 15, 1996 of its $2.50
par value Common Stock.
2
PART 1 - FINANCIAL INFORMATION
ITEM 1 - CONDENSED FINANCIAL STATEMENTS
ACME UNITED CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(ALL AMOUNTS IN THOUSANDS)
MARCH 31 DECEMBER 31
1996 1995
(UNAUDITED)
____________ ____________
ASSETS
Current Assets:
Cash and cash equivalents $ 352 $ 532
Accounts receivable 7,914 8,108
Inventories:
Finished goods 9,844 9,942
Work in process 3,707 3,963
Raw materials & supplies 4,038 4,108
Prepaid expenses and other current assets 875 606
____________ ____________
Total current assets 26,730 27,259
Plant, property and equipment
Land 484 491
Buildings 4,195 4,237
Machinery and equipment 15,634 15,736
____________ ____________
Total plant, property and equipment 20,313 20,464
Less, accumulated depreciation 13,281 13,142
____________ ____________
Net plant, property and equipment 7,032 7,322
Licensing agreements 1,074 1,170
Other assets 437 452
Goodwill 807 818
____________ ____________
Total assets $ 36,080 $ 37,021
============ ============
See notes to condensed consolidated financial statements
3
ACME UNITED CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(ALL AMOUNTS IN THOUSANDS)
MARCH 31 DECEMBER 31
1996 1995
(UNAUDITED)
____________ ____________
LIABILITIES
Current Liabilities:
Accounts payable $ 2,529 $ 3,193
Notes payable due within one year 3,750 3,650
Accrued liabilities:
Restructuring reserve 1,198 1,198
Other accrued liabilities 3,191 3,243
____________ ____________
Total current liabilities 10,668 11,284
Long term debt 15,402 14,880
Restructuring reserve 1,352 1,352
____________ ____________
Total liabilities 27,422 27,516
STOCKHOLDERS' EQUITY
Common stock, par value $2.50: authorized 4,000,000 shares;
issued 3,384,620, outstanding
3,337,620 8,461 8,461
Additional paid-in capital 2,145 2,145
Retained earnings (558) 258
Translation adjustment (1,033) (1,002)
Treasury stock, 47,000 shares (357) (357)
____________ ____________
Total stockholders' equity 8,658 9,505
____________ ____________
Total liabilities and stockholders' equity $ 36,080 $ 37,021
============ ============
See notes to condensed consolidated financial statements
4
ACME UNITED CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(ALL AMOUNTS IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS)
THREE MONTHS ENDED MARCH 31
1996 1995
____________ ____________
Net sales $ 12,040 $ 12,897
Other income 126 23
____________ ____________
12,166 12,920
Costs and Expenses:
Cost of goods sold 9,122 9,276
Selling, general and administrative expense 3,322 3,344
Interest expense 428 457
____________ ____________
12,872 13,077
____________ ____________
Loss before income taxes (706) (157)
Provision (benefit) for income taxes 110 (89)
____________ ____________
Net loss $ (816) $ (68)
============ ============
Weighted average common and
dilutive common equivalent shares 3,338 3,354
============ ============
Loss per common share $ (.24) $ (.02)
============ ============
See notes to condensed consolidated financial statements
5
ACME UNITED CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(ALL AMOUNTS IN THOUSANDS)
THREE MONTHS ENDED MARCH 31
1996 1995
____________ ____________
Cash flows from operating activities:
Net loss $ (816) $ (68)
Adjustments for non-cash transactions:
Depreciation 308 350
Amortization 119 140
Deferred tax (credits) - (176)
Change in assets and liabilities:
Accounts receivable (43) 189
Inventory 310 (1,589)
Prepaid expenses and other current assets (68) (47)
Other assets 1 (22)
Accounts payable (641) 841
Income taxes payable (18) (35)
Other liabilities (3) (122)
____________ ____________
Total adjustments (35) (471)
____________ ____________
Net cash used by operations (851) (539)
____________ ____________
Cash flows from investing activities:
Capital expenditures (107) (246)
____________ ____________
Net cash used by investing activities (107) (246)
____________ ____________
Cash flows from financing activities:
Net borrowings 777 994
____________ ____________
Net cash provided by financing activities 777 994
____________ ____________
Effect of exchange rate changes on cash 1 1
____________ ____________
Net change in cash and cash equivalents (180) 210
Cash and cash equivalents at beginning of period 532 451
____________ ____________
Cash and cash equivalents at end of period $ 352 $ 661
============ ============
See notes to condensed consolidated financial statements
6
ACME UNITED CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of Management, the accompanying consolidated
financial statements contain all adjustments necessary to present
fairly the financial position as of March 31, 1996 and December
31, 1995 and the results of its operations for the three month
periods ended March 31, 1996 and March 31, 1995 and changes in
the cash flows for the three months then ended. The financial
statements reflect all recurring adjustments but do not include
all of the disclosures normally required by generally accepted
accounting principles or those normally made in the annual Form
10-K filing. Please refer to the Company's annual report for
year ended December 31, 1995 for such disclosures.
2. The results of operations for the three months ended March
31, 1996 are not necessarily indicative of the results to be
expected for the full year.
3. Net loss per share is based on the weighted average number of
common shares outstanding during the year.
4. On May 1, 1996 the Company's Peter Altenbach and Son GmbH subsidiary
received 1,475,000 German marks, or $960,000, and release from
all lease obligations in exchange for its fixed assets, inventory
and intangible assets, including company name. The buyer has
employed substantially all Altenbach employees and has assumed
responsibility for their employee benefits, including pensions. The
loss is not expected to have a significant impact on the Company's
earnings as the exit costs related to the restructuring of German
operations was accrued for in 1995.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Sales for the quarter ended March 31, 1996 were $12,040,000 compared with
$12,897,000 for the same quarter last year, a 7% decrease. The Company
reported a net loss of $816,000 compared with a $68,000 loss in 1995. On a
per share basis the Company lost $ .24 compared with a $ .02 loss in 1995.
The gross margin for the quarter was $2,937,000 or 24.4% of sales compared
to $3,621,000 or 28.1% of sales in 1995.
The Company's German subsidiaries and the U.S. Medical Division were the major
contributors to the decline in sales. Germany reported a $597,000 or 21%
decline, of which the Altenbach subsidiary, which was sold on May 1,
accounted for approximately 40% of the decrease. Our other German
subsidiary, Emil Schlemper, also reported a decline in sales as a result of
several of its large customers deferring placing orders until late in the
second quarter. The U.S. Medical Division continues to report declining
sales. For the quarter ended March 31, 1996 sales decreased 14% or $626,000.
The Division continues to feel the effects of consolidations among hospital
buying groups, Medicare reimbursement policy changes and increased competition
in the wound care market. Management hopes to reverse this trend by
performing market research studies, adopting aggressive pricing structures and
the use of consultants who have experience in the group buying area.
The Company's U.S. Consumer Division reported a 5% or $210,000 increase in
sales, principally due to the sale of excess inventory. The sales of the
English and Canadian subsidiaries were flat.
For the quarter the Company also reported reduced profit margins of 24.4% in
1996 compared to 28.1% in 1995. With the exception of our Canadian
subsidiary, all locations showed a decrease in profit margins. This loss of
margin is due to the effect of excess manufacturing capacity. The Company is
in the process of consolidating the Bridgeport, Connecticut and Fremont,
North Carolina facilities. The consolidation should be completed by the end
of the second quarter.
Selling, advertising and administrative costs, excluding severance and other
termination costs incurred in 1996, decreased 6% compared to the same period
in 1995. These costs were incurred by the Company as it continues to reshape
itself for the future. The Company is continuing to strive for cost
reductions in this area.
LIQUIDITY AND CAPITAL RESOURCES
The Company has placed major emphasis on the reduction of inventory, debt and
interest expense. During the first quarter, the outstanding debt in the U.S.
increased approximately $600,000. This increase is the result of the
seasonality impact of the school products market. However, this increase in
the U.S. is approximately $1,000,000 less than the increase in the first
quarter of 1995.
All future debt reduction, along with normal payments for taxes and capital
expenditures are expected to be funded by inventory reduction and cash
generated from operations.
8
In the U.S. the Company has a $13,000,000 revolving line of credit which
expires in May 1998. The revolving line is an asset-based agreement with
various percentages applied to inventory, receivables and fixed assets.
Currently the Company has an available line of $10,868,000 with $510,000
unused. As we convert inventory to receivables our available line will
increase, as receivables allow for a higher borrowing base. Our foreign
subsidiaries have overdraft arrangements which expire at various times during
1996.
On May 1, 1996, the Company sold all the assets of its Altenbach subsidiary,
excluding accounts receivable, to a German based group. The buyer purchased
all fixed assets, inventory and intangible assets, including the Altenbach
name. In exchange the buyer paid $960,000, assumed all lease obligations,
employed substantially all Altenbach employees and assumed responsibility for
their employee related social costs, including pensions. The loss on the sale
is estimated to be between $1,600,000 and $1,900,000. This loss is not
expected to have a significant impact on the Company's earnings as the exit
costs related to the restructuring of German operations was accrued for in
1995.
The Company's working capital, current ratio and long term debt to an equity
ratio are as follows:
March 1996 December 1995
_____________ _____________
Working Capital $16,062,000 $15,976,000
Current Ratio 2.51 to 1 2.42 to 1
Long Term Debt
to Equity Ratio 1.78 1.57
9
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS.
A. The Annual Meeting was held on April 22, 1996.
B. The following individuals were elected Directors at the Meeting and
comprise the entire board.
Votes For Votes Withheld
______________ ______________
David W. Clark, Jr. 2,901,693 261,864
George R. Dunbar 2,901,493 262,064
Walter C. Johnsen 2,905,447 258,110
Newman M. Marsilius 2,905,447 258,110
Wayne R. Moore 2,901,270 262,287
Gary D. Penisten 2,901,693 261,864
James L. L. Tullis 2,905,447 258,110
Dwight C. Wheeler 2,861,089 302,468
Henry C. Wheeler 2,862,756 300,801
C. The Amendment to the 1992 Amended and Restated Stock Option Plan was
approved with 2,076,565 shares voting for the Plan, 910,277 shares
voting against the Plan, 97,696 votes withheld and 79,019 shares not
voted.
D. The 1996 Non-Employee Director Stock Option Plan was approved with
2,275,403 shares voting for the Plan, 710,896 shares voting against
the Plan, 98,239 votes withheld and 79,019 not voted.
E. The Amendment to the Certificate of Incorporation to increase the
number of authorized shares of Common Stock from 4,000,000 to
8,000,000 was approved with 2,378,804 shares voting for, 670,424
shares voting against and 114,329 votes withheld.
F. Coopers & Lybrand L.L.P. was appointed as Auditors for the Company for
the year 1996 with 3,025,006 shares voting for the appointment, 44,109
shares voting against the appointment and 94,442 votes withheld.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
A. No Form 8-K was filed by the Company during the three months ended
March 31, 1996.
10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ACME UNITED CORPORATION
____________________________
(Registrant)
Date: May 15, 1996 /s/ Walter C. Johnsen
____________________________
Walter C. Johnsen
President, Chief Executive
Officer and Chief Financial
Officer
Date: May 15, 1996 /s/ Richard L. Windt
____________________________
Richard L. Windt
Controller
5
3-MOS
DEC-31-1996
MAR-31-1996
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7950671
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196076
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9102778
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0
0
0
(816079)
(.24)
(.24)
