UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM l0-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission File Number Q4823
ACME UNITED CORPORATION
____________________________________________________________
(Exact name of registrant as specified in its charter)
Connecticut 06-0236700
_______________________________ ___________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
75 Kings Highway Cutoff, Fairfield, Connecticut 06430
_______________________________________________ __________
(Address of principal executive offices) (Zip Code)
(203) 332-7330
__________________________________________________
Registrant's telephone number, including area code
_______________________________________________________________________________
Former name, former address and former fiscal year, if changed since last
report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
Registrant had 3,337,620 shares outstanding as of August 13, 1996 of its
$ 2.50 par value Common Stock.
2
PART 1 - FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
ACME UNITED CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(ALL AMOUNTS IN THOUSANDS)
June 30 December 31
1996 1995
(Unaudited)
_____________ _____________
ASSETS
Current Assets:
Cash and cash equivalents $ 114 $ 532
Accounts receivable 9,933 8,108
Inventories:
Finished goods 7,472 9,942
Work in process 2,483 3,963
Raw materials & supplies 3,526 4,108
Prepaid expenses and other current assets 421 606
_____________ _____________
Total current assets 23,949 27,259
Plant, Property and Equipment:
Land 454 491
Buildings 3,849 4,237
Machinery and equipment 15,373 15,736
_____________ _____________
Total plant, property and equipment 19,676 20,464
Less, accumulated depreciation 13,027 13,142
_____________ _____________
Net plant, property and equipment 6,649 7,322
Licensing agreements 980 1,170
Other assets 280 452
Goodwill 798 818
_____________ _____________
Total assets $ 32,656 $ 37,021
============= =============
See notes to financial statements
3
ACME UNITED CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(ALL AMOUNTS IN THOUSANDS)
June 30 December 31
1996 1995
(Unaudited)
_____________ _____________
LIABILITIES
Current Liabilities:
Accounts payable $ 2,704 $ 3,193
Notes payable due within one year 4,248 3,650
Restructuring reserve 1,124 1,198
Other accrued liabilities 2,950 3,243
_____________ _____________
Total current liabilities 11,026 11,284
Long term debt 14,092 14,880
Restructuring reserve 145 1,352
_____________ _____________
Total liabilities 25,263 27,516
STOCKHOLDERS' EQUITY
Common stock, par value $2.50:
authorized 8,000,000 shares;
Issued 3,384,620, outstanding
3,337,620 8,461 8,461
Additional paid-in capital 2,145 2,145
Retained earnings (accumulated deficit) (1,797) 258
Translation adjustment (1,059) (1,002)
Treasury Stock, 47,000 shares (357) (357)
_____________ _____________
Total stockholders' equity 7,393 9,505
_____________ _____________
Total liabilities and stockholders' equity $ 32,656 $ 37,021
============= =============
See notes to financial statements
4
ACME UNITED CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(ALL AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three months ended Six months ended
__________________________ _________________________
June 30 June 30 June 30 June 30
1996 1995 1996 1995
____________ ____________ ____________ ____________
Net Sales $ 12,782 $ 14,470 $ 24,822 $ 27,368
Other income 46 15 172 38
____________ ____________ ____________ ____________
12,828 14,485 24,994 27,406
Costs and expenses:
Cost of goods sold 10,191 10,290 19,313 19,566
Selling, general and
administrative expense 3,420 3,387 6,742 6,732
Interest expense 410 496 838 953
____________ ____________ ____________ ____________
14,021 14,173 26,893 27,251
____________ ____________ ____________ ____________
Income (loss) before income taxes (1,193) 312 (1,899) 155
Provision (benefit) for income taxes 46 70 156 (19)
____________ ____________ ____________ ____________
Net income (loss) $ (1,239) $ 242 $ (2,055) $ 174
============ ============ ============ ============
Weighted average common and
dilutive common equivalent shares 3,338 3,355 3,338 3,359
============ ============ ============ ============
Net income (loss) per common share $ (.37) $ .07 $ (.62) $ .05
============ ============ ============ ============
See notes to financial statements
5
ACME UNITED CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(ALL AMOUNTS IN THOUSANDS)
Six months ended
__________________________
June 30 June 30
1996 1995
____________ ____________
Cash flows from operating activities:
Net income (loss) $ (2,055) $ 174
Adjustments:
Depreciation 594 706
Amortization 224 281
Deferred tax (credits) - (256)
Loss (Gain) on sale of property, plant and equipment 19 (6)
(Gain) on disposition of trademarks and tradename (98) -
Changes in assets and liabilities:
Accounts receivable (2,183) (2,609)
Inventory 3,541 (1,248)
Prepaid expenses and other current assets 260 145
Other assets 157 46
Accounts payable (448) 60
Income taxes payable (18) 133
Other liabilities (1,257) (162)
____________ ____________
Total adjustments 791 (2,910)
____________ ____________
Net cash used by operations (1,264) (2,736)
____________ ____________
Cash flow from investing activities:
Capital expenditures (294) (538)
Proceeds from sales of business and property, plant and equipment 1,061 6
____________ ____________
Net cash provided (used) by investing activities 767 (532)
____________ ____________
Cash flows from financing activities:
Net borrowings 96 3,160
____________ ____________
Net cash provided by financing activities 96 3,160
____________ ____________
Effect of exchange rate changes on cash (17) 11
____________ ____________
Net change in cash and cash equivalents (418) (97)
Cash and cash equivalents at beginning of period 532 450
____________ ____________
Cash and cash equivalents at end of period $ 114 $ 353
============ ============
See notes to financial statements
6
ACME UNITED CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of the Company's management, the accompanying condensed
consolidated financial statements contain all adjustments necessary to
present fairly the financial position as of June 30, 1996 and
December 31, 1995, the results of its operations for the three and six
month periods ended June 30, 1996 and 1995, and cash flows for the six
months ended June 30, 1996 and 1995. The financial statements reflect
all recurring adjustments but do not include all of the disclosures
normally required by generally accepted accounting principles or those
normally made in the annual Form 10-K filing. Please refer to the
Company's annual report for the year ended December 31, 1995 for such
disclosures.
2. The results of operations for the three and six month periods ended
June 30, 1996 are not necessarily indicative of the results to be
expected for the full year.
3. Net income (loss) per share is based on the weighted average number
of common shares and dilutive common equivalent shares (common stock
options) outstandingduring each period. No effect has been given to
stock options outstanding as no dilutive effect would result from such
inclusion.
4. On May 1, 1996, the Company sold all assets of its 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 social costs, including pensions. This transaction is not
expected to have an impact on the Company's earnings as the costs related
to the restructuring of operations in Germany, including the sale of the
assets of the Altenbach operations, were accrued for in 1995.
5. At June 30, 1996 the Company was in default of one of the provisions of
its domestic revolving credit line and obtained a waiver of such default
from the lender.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Sales
Consolidated net sales for the quarter ended June 30, 1996 were $12,782,000,
compared with $14,470,000 for the same period last year, a decline of
$1,688,000. Of this decline, $975,000 resulted from the divestiture of the
Altenbach business in Germany. Net sales were $24,822,000 for the first half
of 1996, compared with net sales of $27,368,000 for the same period of 1995,
a decline of $2,546,000. Of this decline, $1,221,000 was attributed to
Altenbach.
Domestic Consumer net sales totaled $5,425,000 in the second quarter of 1996,
compared with $5,474,000 in the second quarter of 1995, a decline of 1%.
Solid sales growth was achieved for the first aid product line. Ordering
delays and highly competitive bid pricing resulted in direct school sales
below last year's level. For the first six months of 1996, consumer net
sales of $9,889,000 were 2% higher than net sales of $9,727,000 for the
similar period in 1995. Net sales of medical products of $3,648,000 in the
second quarter of 1996 compares with $4,159,000 in the second quarter of
1995. Net sales of medical products of $7,369,000 for the first half of 1996
compares with $8,506,000 for the first half of 1995. The sales decline in
1996 was primarily the result of a volume decline in the low margin custom
tray market. Net sales from foreign operations were $4,058,000 in the second
quarter of 1996 as compared with $5,515,000 in the second quarter of 1995.
Of the decline of $1,457,000, $975,000 resulted from the divestiture of
Altenbach. Net sales from foreign operations were $8,125,000 for the first
half of 1996 compared with $10,209,000 for the first half of 1995. Of the
decline of $2,084,000, $1,221,000 resulted from the divestiture of Altenbach.
Gross Profit Margin
For the second quarter of 1996, the Company reported a reduced gross profit
margin of 20.3% compared to 28.9% in the same quarter of 1995. The gross
profit margin for the first half of 1996 was 22.2% compared with a 28.5%
gross profit margin for the first half of 1995. The loss of margin was due
to the effects of excess manufacturing capacity, related restructuring costs,
and the reduction in production in order to get inventory levels more in line
with the sales volume. Restructuring costs associated with closing the
Bridgeport manufacturing and warehouse operations accounted for $608,000 of
the gross profit margin decline in the second quarter of 1996 and $1,062,000
of the decline in the first half of 1996. The manufacturing plant closure
was completed four months ahead of schedule, accelerating charges into the
first half of the year. The product lines were transferred to a lower cost
and more efficient facility in Fremont, North Carolina, where production is
now starting. The closing of the Bridgeport warehouse was announced in the
second quarter of 1996. Effective September 9, 1996 the Bridgeport facility,
which currently has 37 employees, will be closed in order to further reduce
costs and improve efficiency.
8
Net Income
A net loss of $1,239,000, or 37 cents per share, for the second quarter of
1996 compared with a net profit of $242,000, or seven cents per share, for
the second quarter of 1995. For the first half of 1996, the net loss was
$2,055,000, or 62 cents per share. This compares with net income of
$174,000, or five cents per share, for the first half of 1995. The second
quarter loss included $124,000 of severance costs, $608,000 of restructuring
costs associated with closing the Bridgeport, Connecticut manufacturing and
warehouse operations, and $51,000 of loss incurred by the Altenbach operation.
The first half loss included $289,000 of severance costs, $1,062,000 of
restructuring costs, and $271,000 of loss incurred by the Altenbach operation.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased by $33,000 and $10,000
for the three and six month period ended June, 30 1996 as compared with the
same period in 1995. Severance costs amounted to $126,000 and $289,000 for
the three and six month periods ended June 30, 1996, respectively. Excluding
these severance charges, the Company reduced its selling, general and
administrative costs by $279,000 or 4.1% for the six month period ended
June 30, 1996.
Interest Expense
Interest expense decreased by $86,000 and $115,000 for the three and six
month periods ended June 30, 1996 as compared with 1995, which is
attributable to lower average bank borrowings.
Provision for Income Taxes
The provision for income taxes for the three and six month periods ended June
30, 1996 was $46,000 and $156,000 as compared to $70,000 and ($19,000) for
1995. The consolidated effective tax rates are based on income (loss) before
taxes in the various countries of operation and the statutory rates and laws
in effect.
Liquidity and Capital Commitments
The Company has placed major emphasis on the reduction of inventory, debt and
interest expense. Company-wide debt as of June 30, 1996 has decreased by
$3,856,000 from June 30, 1995. Of the decrease, $1,512,000 was in the U.S.
All future debt reduction, along with normal payments for taxes and capital
expenditures, is expected to be funded by inventory reduction and cash
generated from operations.
In the U.S., the Company has a $13,000,000 revolving line of credit which
expires in May 1998. The revolving line is an asset-based agreement with
various percentages applied to inventory, receivables and fixed assets. At
June 30, 1996 the Company had an available line of $12,192,000 with
$1,834,000 unused. The Company's foreign subsidiaries have overdraft
arrangements which expire at various times during 1996.
9
The Company's working capital, current ratio and long term debt to equity
ratio are as follows:
June 30, 1996 December 31, 1995
_________________ _________________
Working capital $12,923,000 $15,975,000
Current ratio 2.17 to 1 2.42 to 1
Long term debt to equity ratio 1.91 1.57
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) No Form 8-K was filed by the Company during the three months ended
June 30, 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: August 13, 1996 /s/ Cheryl Kendall
________________________________________
Cheryl Kendall
Vice President - Chief Financial Officer
Date: August 13, 1996 /s/ Richard L. Windt
________________________________________
Richard L. Windt
Vice President - Corporate Controller
5
3-MOS
DEC-31-1996
JUN-30-1996
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