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, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from ____________ to _____________
Commission File Number Q4823
ACME UNITED CORPORATION
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(Exact name of registrant as specified in its charter)
Connecticut 06-0236700
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
75 Kings Highway Cutoff, Fairfield, Connecticut 06430
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(Address of principal executive offices) (Zip Code)
(203) 332-7330
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Registrant's telephone number, including area code
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Former name, former address and former fiscal year,
if changed since last report
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
Registrant had 3,354,750 shares outstanding as of August 12,
1997 of its $ 2.50 par value Common Stock.
PART 1 - FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
ACME UNITED CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(ALL AMOUNTS IN THOUSANDS)
ASSETS
JUNE 30 DECEMBER 31
1997 1996
(UNAUDITED)
----------- -----------
Current Assets:
Cash and cash equivalents $ 272 $ 427
Accounts receivable 9,592 7,007
Inventories:
Finished goods 5,894 4,858
Work in process 2,921 1,911
Raw materials & supplies 4,198 3,654
Prepaid expenses and other current assets 1,487 388
----------- -----------
Total current assets 24,364 18,245
Plant, property and equipment
Land 426 452
Buildings 3,744 3,910
Machinery and equipment 15,132 14,772
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Total plant, property and equipment 19,302 19,134
Less, accumulated depreciation 12,632 12,460
----------- -----------
Net plant, property and equipment 6,670 6,674
Licensing agreements --- 790
Other assets 738 750
Goodwill 539 792
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Total assets $ 32,311 $ 27,251
============ ============
See notes to condensed consolidated financial statements
ACME UNITED CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(ALL AMOUNTS IN THOUSANDS)
June 30 DECEMBER 31
1997 1996
(UNAUDITED)
----------- -----------
LIABILITIES
Current Liabilities:
Accounts payable $ 4,211 $ 2,547
Notes payable due within one year 4,680 5,258
Accrued liabilities:
Restructuring reserve 899 755
Other accrued liabilities 4,327 3,732
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Total current liabilities 14,117 12,292
Long term debt 11,566 8,444
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Total liabilities 25,683 20,736
STOCKHOLDERS' EQUITY
Common stock, par value $2.50:
authorized 4,000,000 shares;
Issued 3,458,870 and 3,434,620,
outstanding 3,347,250 and
3,387,620 respectively 8,647 8,587
Additional paid-in capital 2,216 2,179
Accumulative deficit (2,414) (2,917)
Translation adjustment (1,132) (976)
Treasury stock, 111,620 and 47,000
shares, respectively (689) (358)
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Total stockholders' equity 6,628 6,515
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Total liabilities and stockholders' equity $ 32,311 $ 27,251
============ ============
See notes to condensed consolidated financial statements
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
1997 1996 1997 1996
------------------- --------------------
Net sales $ 12,854 $ 12,782 $ 23,734 $ 24,822
Other income 57 46 942 172
-------- -------- -------- --------
12,911 12,828 24,676 24,994
Costs and expenses:
Cost of goods sold 9,483 10,191 17,183 19,313
Selling, general and 2,845 3,420 5,817 6,742
administrative expense
Interest expense 324 410 606 838
Restructuring & other charges --- --- 530 ---
-------- -------- -------- --------
12,652 14,021 24,136 26,893
Income/(loss) before income taxes 259 (1,193) 540 (1,899)
Provision for income taxes 37 46 37 156
-------- -------- -------- --------
Net income (loss) $ 222 $(1,239) $ 503 $ (2,055)
========= ======== ======== ========
Weighted average common and
dilutive common equivalent shares $ 3,330 3,338 3,349 3,338
========= ======== ======== ========
Net income/(loss) per common share $.07 $(.37) $ .15 (.62)
========= ======== ======== ========
See notes to condensed consolidated financial statements
ACME UNITED CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(ALL AMOUNTS IN THOUSANDS)
SIX MONTHS ENDED JUNE 30
1997 1996
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Cash flows from operating activities:
Net income/(loss) $ 503 $ (2,055)
Adjustments for non-cash transactions:
Depreciation 455 594
Amortization 76 224
Loss on sale of property, plant, and equipment --- 19
(Gain) on disposition of trademarks and
tradename --- (98)
Change in assets and liabilities:
Accounts receivable (2,949) (2,183)
Inventory (2,778) 3,541
Prepaid expenses and other current assets (983) 260
Other assets 976 157
Accounts payable 1,700 (448)
Income taxes payable 7 (18)
Other liabilities 910 (1,257)
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Total adjustments (2,586) 791
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Net cash used by operations (2,083) (1,264)
Cash flows from investing activities:
Capital expenditures (922) (294)
Proceeds from sales of business and property,
plant and equipment 165 1,061
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Net cash (used) provided by investing activities (757) 767
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Cash flows from financing activities:
Net borrowings 2,917 96
Treasury stock purchased (330) ---
Common stock issued for stock options exercised 96 ---
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Net cash provided by financing activities 2,683 96
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Effect of exchange rate changes on cash 2 (17)
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Net change in cash and cash equivalents (155) (418)
Cash and cash equivalents at beginning of period 427 532
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Cash and cash equivalents at end of period $ 272 $ 114
============= ============
See notes to condensed consolidated financial statements
ACME UNITED CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of management, the accompanying condensed
consolidated financial statements contain all adjustments
necessary to present fairly the financial position as of June 30,
1997 and December 31, 1996, the results of its operations for the
three and six month periods ended June 30, 1997 and 1996, and cash
flows for the six months ended June 30, 1997 and 1996. The
financial statements reflect all recurring adjustments but do not
include all of the disclosures normally required by generally
accepted accounting principles or those normally made in the
annual Form 10-K filing. Please refer to the Company's annual
report for year ended December 31, 1996 for such disclosures.
2. The results of operations for the three and six months ended
June 30, 1997 are not necessarily indicative of the results to be
expected for the full year.
3. Net income/(loss) per share is based on the weighted average
number of common shares and dilutive common equivalent shares
(common stock options) outstanding using the treasury stock
method. In February 1997, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS 128"). The Company will adopt SFAS
128 for the year ending December 31, 1997 in accordance with the
provisions of SFAS 128. Such adoption is not expected to have a
significant impact on the Company's earnings per share.
4. At June 30, 1996 the Company was in default of one of the
provisions of its Canadian subsidiary's line of credit and
obtained a waiver of such default from the lender.
5. In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income," and Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise
and Related Information." Both Statements are effective for the
Company's year ending December 31, 1998. The Company is currently
evaluating the impact of these statements on its financial
reporting practices.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
RESULTS OF OPERATIONS
Net Sales
Consolidated net sales for the quarter ended June 30, 1997 were
$12,854,000, compared to $12,782,000 for the same period last
year, an increase of $72,000. Net Sales in 1996 included
$237,000 for the former Altenbach subsidiary. Excluding
Altenbach, sales increased by $309,000, or 2.5%, in the second
quarter of 1997 compared with the second quarter of 1996.
Net sales were $23,734,000 for the first half of 1997, compared
with net sales of $24,822,000 for the first half of 1996. Net
sales in 1996 included $1,568,000 for the former Altenbach
subsidiary. Excluding Altenbach, sales increased $480,000, or 2%
in the first half of 1997 compared with the first half of 1996.
For the first half of 1997 compared with the same period in 1996,
Consumer product sales, excluding Altenbach, increased by 3% and
Medical Product sales remained at the same level.
Consumer Products net sales of $9,342,000 in the second quarter
of 1997 increased $444,000, or 5%, compared with $8,898,000,
excluding Altenbach, in the second quarter of 1996. Excluding
the impact of currency translation, sales would have increased
6%. Revenues in the U.S. market grew 13%. Medical Products net
sales of $3,512,000 in the second quarter of 1997 decreased
$135,000, or 4%, compared with $3,647,000 in the second quarter
of 1996. The revenue decline was due to the sale of the Seton
product line announced in March of 1997.
Gross Profit Margin
For the second quarter the Company reported an improved profit
margin of 26.2% in 1997 compared to 20.3% in 1996. The profit
margin in the second quarter of 1996 excluding Altenbach was
20.9%. The gross profit margin for the first half of 1997 was
27.6% compared with a gross profit margin for the first half of
1996 of 22.2%. The significant improvement was in the U.S.
operations and resulted from increased plant utilization, after
the consolidation of all U.S. manufacturing into the North
Carolina facilities.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased by
$575,000 and $925,000 for the three and six month periods ended
June 30, 1997 as compared with the same periods in 1996.
Excluding Altenbach from the 1996 expenses, the decrease for the
first half of 1997 compared with 1996 was $561,000 or 9%. The
first half of 1996 included $289,000 of severance costs.
Provision for Income Taxes
The Company has tax operating loss carryforwards in the United
States, England and Germany. The tax provision for the three
and six month periods ended June 30, 1997 was $37,000
compared with $46,000 and $156,000 for 1996. The tax provision
includes minimum state and local tax obligations net of the
benefit of net operating losses utilized.
Net Income
The Company reported a net income for the second quarter of 1997
of $222,000, or $ .07 per share, compared to a loss in the second
quarter of 1996 of $1,239,000, or $ .37 loss per share. For the
first half of 1997, the net income was $503,000, or 15 cents per
share. This compares with a net loss of $2,055,000 or 62 cents
per share, for the first half of 1996.
Acme sold its U.S. marketing rights of certain wound care
products to Seton Healthcare International Limited in the first
quarter of 1997. The sale resulted in a gain of $849,000 after
payment of outstanding debt and write-off of goodwill, licensing
fees, and other costs. A charge of $692,000 was incurred in the
first quarter of 1997 to write-down certain assets of the
Bridgeport, Connecticut facility, and other charges.
Liquidity and Capital Resources
During the first half of 1997, the total debt increased by
$2,544,000 as compared to debt at December 31, 1996. Debt of
$1,737,000 was paid down in the first quarter of 1997 as part of
the Seton sale. Total debt, excluding Seton, increased by
$4,281,000 due to the seasonality of the school products market.
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.
In the U.S. the Company has a $13,000,000 revolving line of
credit which reduces to $9,000,000 during the last 60 days of
each calendar year and expires in May 1998. The revolving line
is an asset-based agreement with various percentages applied to
inventory, receivables and fixed assets. Currently the Company
has an available line of $11,349,000 with $236,000 unused. The
foreign subsidiaries have overdraft arrangements which expire at
various times during 1997.
The Company's working capital, current ratio and long term debt
to equity ratio are as follows:
June 30, 1997 December 31, 1996
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Working capital $10,247,000 $ 5,953,000
Current ratio 1.73 to 1 1.48 to 1
Long term debt to
equity ratio 1.75 1.30
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
none
ITEM 2. CHANGES IN SECURITIES
none
ITEM 3. DEFAULT UPON SENIOR SECURITIES
none
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
none
ITEM 5. OTHER INFORMATION
none
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, 1997.
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 12, 1997 /s/ Cheryl L. Kendall
-----------------------------
Cheryl L. Kendall
Vice President and
Chief Financial Officer
Date: August 12, 1997 /s/ Richard L. Windt
-----------------------------
Richard L. Windt
Vice President/Corporate
Controller
5
1,000
6-MOS
DEC-31-1997
JUN-30-1997
272
0
9,826
234
13,013
24,364
19,302
12,632
32,311
14,117
0
0
0
8,647
(2,019)
32,311
23,734
24,676
17,183
23,530
0
0
606
540
37
503
0
0
0
503
.15
0
