SEC Filing - Acme United Corporation

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                       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 September 30, 2000

                                       OR

          |_| 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 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.)

1931 BLACK ROCK TURNPIKE, Fairfield, Connecticut                     06432
- ------------------------------------------------                     -----
(Address of principal executive offices)                           (Zip Code)

       Registrant's telephone number, including area code: (203) 332-7330

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 3,507,055 shares outstanding as of November 13, 2000 of its $2.50
par value Common Stock.


                             ACME UNITED CORPORATION

                                                                         Page
                                                                         ----
Part I -- FINANCIAL INFORMATION
  Item 1. Financial Statements
            Condensed Consolidated Balance Sheets.......................   3
            Condensed Consolidated Statements of Operations
               and Comprehensive Income ................................   5
            Condensed Consolidated Statements of Cash Flows.............   6
            Notes to Condensed Consolidated Financial Statements........   7
  Item 2. Management's Discussion and Analysis of Financial Condition
               and Results of Operations................................   9

Part II -- OTHER INFORMATION
  Item 1. Legal Proceedings.............................................  12
  Item 2. Changes in Securities.........................................  12
  Item 3. Defaults Upon Senior Securities...............................  12
  Item 4. Submission of Matters to a Vote of Security Holders...........  12
  Item 5. Other Information.............................................  12
  Item 6. Exhibits and Reports on Form 8-K..............................  12
  Signatures............................................................  13




                          PART I. FINANCIAL INFORMATION

                             ACME UNITED CORPORATION

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)
                (all amounts in thousands, except per share data)


                                                                         September 30  December 31
                                                                             2000          1999
                                                                         ------------  -----------

                                                                                    
ASSETS
Current assets:
  Cash and cash equivalents                                                  $     47     $     88
  Accounts receivable, less allowance                                           7,540        6,702
  Inventories:
     Finished goods                                                             7,464        5,355
     Work in process                                                              851          649
     Raw materials and supplies                                                 1,788        2,294
                                                                           ----------    ---------
                                                                               10,103        8,298
  Prepaid expenses and other current assets                                       685          508
                                                                           ----------    ---------
          Total current assets                                                 18,375       15,596
                                                                           ----------    ---------
Property, plant and equipment:
  Land                                                                            169          191
  Buildings                                                                     1,993        2,048
  Machinery and equipment                                                       7,008        8,616
                                                                           ----------    ---------
                                                                                9,170       10,855
  Less accumulated depreciation                                                 5,874        6,869
                                                                           ----------    ---------
                                                                                3,296        3,986
Other assets                                                                    1,361          992
Goodwill, less accumulated amortization                                           174          193
                                                                           ----------    ---------
            Total assets                                                     $ 23,206     $ 20,767
                                                                           ==========    =========
            See notes to condensed consolidated financial statements





                             ACME UNITED CORPORATION

                CONDENSED CONSOLIDATED BALANCE SHEETS - continued
                                   (UNAUDITED)
                (all amounts in thousands, except per share data)

                                                                         September 30  December 31
                                                                             2000          1999
                                                                         ------------  -----------

                                                                                    
LIABILITIES

Current liabilities:
  Notes payable                                                              $    681     $    691
  Accounts payable                                                              2,549        2,763
  Other accrued liabilities                                                     4,127        3,154
  Current portion of long term debt                                             2,854        2,032
                                                                           ----------    ---------
      Total current liabilities                                                10,211        8,640
  Long term debt, less current portion                                          5,064        5,012
  Other                                                                           199          197
                                                                           ----------    ---------
       Total liabilities                                                       15,474       13,849
                                                                           ----------    ---------

STOCKHOLDERS' EQUITY
  Common stock, par value $2.50:
    Authorized 8,000,000 shares;
    issued 3,612,062 shares,
    including treasury stock                                                    9,030        9,030
  Additional paid-in capital                                                    2,038        2,038
  Retained-earnings deficit                                                    (1,289)      (2,212)
  Accumulated other comprehensive loss-translation adjustment                  (1,399)      (1,290)
  Treasury stock, at cost-105,007 shares                                         (648)        (648)
                                                                           ----------    ---------
      Total stockholders' equity                                                7,732        6,918
                                                                           ----------    ---------
        Total liabilities and stockholders' equity                           $ 23,206     $ 20,767
                                                                           ==========    =========
            See notes to condensed consolidated financial statements





                             ACME UNITED CORPORATION

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                            AND COMPREHENSIVE INCOME
                                   (UNAUDITED)
                (all amounts in thousands, except per share data)

                                                                                 Three Months Ended      Nine Months Ended
                                                                                    September 30            September 30
                                                                                --------------------    --------------------
                                                                                  2000         1999       2000         1999
                                                                                --------     --------   --------     --------

                                                                                                          
Revenues:
  Net sales                                                                      $ 8,760      $ 9,751    $27,003      $27,872
  Other income (expense)                                                             (96)          31       (105)         295
                                                                                --------     --------   --------     --------
      Total revenues                                                               8,664        9,782     26,898       28,167
                                                                                --------     --------   --------     --------
Costs and expenses:
  Cost of goods sold                                                               5,612        6,917     17,619       20,363
  Selling, general and administrative expenses                                     2,452        2,561      7,608        7,287
  Interest expense                                                                   273          239        713          844
                                                                                --------     --------   --------     --------
      Total expenses                                                               8,337        9,717     25,940       28,494
                                                                                --------     --------   --------     --------
Income (loss) from continuing operations before income taxes                         327           65        958         (327)
Income taxes                                                                          25          (71)        35          (45)
                                                                                --------     --------   --------     --------
Income (loss) from continuing operations                                             302          136        923         (281)
Discontinued operations:
  Gain on sale of discontinued operations                                              -            -          -        2,101
  Income from discontinued operations                                                  -            -          -          198
                                                                                --------     --------   --------     --------
                                                                                       -            -          -        2,299
                                                                                --------     --------   --------     --------
Net income                                                                           302          136        923        2,018
Other comprehensive (expense) income -
  foreign currency translation                                                       (44)          47       (109)         (31)
                                                                                --------     --------   --------     --------
Comprehensive income                                                             $   258      $   183    $   814      $ 1,987
                                                                                ========     ========   ========     ========
Basic earnings (loss) per share:
  Continuing operations                                                          $  0.09      $  0.04    $  0.26      $ (0.08)
  Discontinued operations                                                              -            -          -         0.68
                                                                                --------     --------   --------     --------
  Net income                                                                     $  0.09      $  0.04    $  0.26      $  0.60
                                                                                ========     ========   ========     ========
Diluted earnings (loss) per share:
  Continuing operations                                                          $  0.08      $  0.04    $  0.25      $ (0.08)
  Discontinued operations                                                              -            -          -         0.68
                                                                                --------     --------   --------     --------
  Net income                                                                     $  0.08      $  0.04    $  0.25      $  0.60
                                                                                ========     ========   ========     ========
Weighted average number of common shares outstanding-
  denominator used for basic per share computations                                3,507        3,377      3,507        3,377
Weighted average number of dilutive stock options
  outstanding                                                                        291            -        133            -

Denominator used for diluted per share computation                                 3,798        3,377      3,640        3,377
                                                                                ========     ========   ========     ========
            See notes to condensed consolidated financial statements





                             ACME UNITED CORPORATION


                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                           (all amounts in thousands)

                                                                                Nine Months Ended
                                                                                   September 30
                                                                               -------------------
                                                                                 2000         1999
                                                                              ---------    ---------

                                                                                       
Operating Activities:
  Net income                                                                    $   923      $ 2,018
  Adjustments to reconcile net income
    to net cash used by operating activities:
    Gain on sale of discontinued operations                                           -       (2,101)
    Depreciation                                                                    473          504
    Amortization                                                                    115           26
    Loss on sale of property, plant, and equipment                                  148          (24)

    Changes in operating assets and liabilities:
    Accounts receivable                                                            (838)      (1,603)
    Inventories                                                                  (1,805)       1,741
    Prepaid expenses and other current assets                                      (177)         270
    Other assets                                                                   (369)        (101)
    Accounts payable                                                               (214)      (1,540)
    Other accrued liabilities                                                       973       (1,936)
                                                                             ----------    ---------
      Net cash used by operating activities                                        (771)      (2,746)
                                                                             ----------    ---------
Investing Activities:
  Capital expenditures                                                             (384)        (412)
  Proceeds from sale of property, plant, and equipment                              286          141
  Proceeds from sale of medical division                                              -        8,156
                                                                             ----------    ---------
      Net cash (used) provided by investing activities                              (98)       7,885
                                                                             ----------    ---------
Financing Activities:
  Net proceeds (payments) on short term borrowing arrangements                    1,311       (5,119)
  Borrowings of long term debt                                                    1,025        2,500
  Payments of long term debt                                                     (1,449)      (2,440)
  Debt issuance costs                                                              (168)         (89)
                                                                             ----------    ---------
      Net cash provided (used) by financing activities                              719       (5,148)
                                                                             ----------    ---------
Effect of exchange rate changes                                                     109          (31)
                                                                             ----------    ---------
Net change in cash and cash equivalents                                             (41)         (40)

Cash and cash equivalents at beginning of period                                     88           40
                                                                             ----------    ---------
Cash and cash equivalents at end of period                                      $    47      $     -
                                                                             ==========    =========
            See notes to condensed consolidated financial statements



              Notes to CONDENSED CONSOLIDATED Financial Statements

                                   (Unaudited)

Note 1 -- Basis of Presentation

     In the  opinion of  management,  the  accompanying  condensed  consolidated
financial  statements  contain all  adjustments  necessary to present fairly the
financial position, results of operations and cash flows. However, the financial
statements do not include all of the disclosures  normally required by generally
accepted  accounting  principles or those normally made in the Company's  annual
report on Form 10-K.  Please refer to the  Company's  annual report on Form 10-K
for the  year  ended  December  31,  1999 for such  disclosures.  The  condensed
consolidated  balance sheet as of December 31, 1999 was derived from the audited
consolidated  balance sheet as of that date.  The results of operations  for the
three and nine months ended September 30, 2000 are not necessarily indicative of
the results to be expected for the full year.

     The Company has reclassified certain amounts in prior periods to conform to
the current presentation.


Note 2 -- Discontinued Operations

     On March 22, 1999 the Company sold its medical business  including customer
lists, inventory, and certain equipment for approximately $8,156,000 realizing a
gain of $2,101,000.  The condensed  consolidated statement of operations for the
nine months ended September 30, 1999 relating to the medical business follows:

               Net sales                     $ 5,630,000
               Costs and expenses              5,432,000
                                             -----------
               Income from operations        $   198,000
                                             ===========
               Earnings per share            $      0.06
                                             ===========

     Income taxes related to the medical business were not material.


Note 3 -- Contingencies

     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.  The Company has been
released from the majority of the lawsuits. While five lawsuits remain, they are
still in preliminary stages and it has not been determined whether the Company's
products were involved.  Based on information  available,  the Company  believes
that there will not be a material adverse impact on financial position,  results
of operations, or liquidity, from environmental and product liabilities,  either
individually or in aggregate.



         Notes to CONDENSED CONSOLIDATED Financial Statements- continued

                                   (Unaudited)

Note 4 -- Debt and Liquidity

     The Company  has  short-term  lines of credit for its foreign  subsidiaries
which are renewable at various times  throughout the year. The aggregate  amount
available  under these lines is $1,029,000 of which  $681,000 is  outstanding at
September 30, 2000.

     Long term debt consisted of the following:

          (all amounts in thousands)

                                                 September 30       December 31
                                                     2000              1999
                                                 ------------       -----------
      Notes payable to banks:
        North American.......................      $   7,214         $   5,225
        Other................................            704             1,819
                                                   ----------        ----------
                                                       7,918             7,044
      Less current portion                             2,854             2,032
                                                   ----------        ----------
                                                   $   5,064         $   5,012
                                                   ==========        ==========

     On January  19,  2000,  the  Company  entered  into a loan  agreement  (the
Agreement)  with a bank to refinance  debt.  Under the Agreement the Company may
borrow up to $11,500,000 through January 19, 2003 (the maturity date) based on a
formula which applies  specific  percentages to balances of accounts  receivable
and inventories.  Throughout the next twelve months, the Company expects to have
a minimum of $4.4 million  outstanding  under this arrangement as such,  amounts
borrowed in excess of $4.4 million are classified as part of the current portion
of long term debt.  Under the  Agreement,  the Company  borrowed  an  additional
$325,000  which is payable in monthly  installments  of $5,417,  plus  interest,
through November 1, 2002 and a final installment of $65,822, plus interest,  due
December 1, 2002.  Amounts  outstanding  under the  Agreement  bear  interest at
varying  rates as provided for in the  Agreement.  As of September  30, 2000 the
North  American  operations  had $1.6 million in excess  availability  under the
Agreement.

    On August 7, 2000 the Company  entered  into an interest  rate swap with the
bank  effectively  fixing the  interest  rate at 10.18% for $3.5 million of debt
through the Agreement's maturity date.

     On August 22, 2000 the Company  entered into a separate loan agreement with
another bank to refinance a mortgage on an owned property in North Carolina. The
Company will repay  $700,000,  principal  amount,  amortized  over 20 years,  in
monthly  installments  of $830,  plus  interest at the Federal Home Loan Bank of
Seattle  fixed  advanced  rate,  plus  3.0%  through  August 1, 2020 and a final
installment of $500,800,  plus interest, due on August 1, 2020. A portion of the
proceeds from this loan was used to repay amounts borrowed under the Agreement.

     The Company,  among other things,  is restricted with respect to dividends,
additional borrowings,  investments,  mergers,  distributions,  and property and
equipment  acquisitions.  Further,  the Company is required to maintain specific
amounts of tangible net worth,  and a specified debt service coverage ratio, and
a fixed charge  coverage  ratio,  all as defined.  The Company was in compliance
with all  covenants  as of or through  September  30,  2000 and  believes  these
financial covenants will be met for the remainder of the term of the loan.

    Cash expected to be generated from operating activities, together with funds
available  under the Agreement,  is expected,  under current  conditions,  to be
sufficient to finance the Company's planned operations over the next year.


                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

                  For the Nine Months Ended September 30, 2000


Results of Operations

   Net Sales

     Traditionally,  the  Company's  sales are  stronger in the second and third
quarters,  and weaker in the first and fourth quarters of the fiscal year due to
the  seasonal  nature of the  business  specific to the  back-to-school  season.
Consolidated  net sales for the quarter ended September 30, 2000 were $8,760,000
compared with  $9,751,000 for 1999.  Beginning in the first quarter of 2000, the
Company  is  classifying  outgoing  freight  expense as  selling  expense.  Such
expenses  were  previously  classified  as a  component  of net sales.  Outgoing
freight  expense for the quarter  ended  September 30, 1999 of $231,000 has been
reclassified to conform with the current period presentation.  Net sales for the
first nine months of 2000 were $27,003,000 compared with $27,872,000 for 1999, a
3% decrease.

     Domestic sales were down 20% in the third quarter of 2000 compared with the
same period in 1999,  and down 6% for the first nine months of 2000  compared to
1999. Lower sales to office  superstores and wholesalers  coupled with a decline
in the very price  competitive  bid business  resulted in reduced  sales in this
segment year over year.

     International  sales for the  third  quarter  of 2000  were 16% above  1999
levels.  Strong sales growth in England and Canada  offset  weakness in Germany.
For the first nine months of 2000,  international  sales  increased 3% over 1999
levels.


   Gross Profit

     The gross profit for the third quarter of 2000 was $3,148,000 (35.9% of net
sales)  compared  to  $2,620,000  (27.6% of net sales) for the third  quarter of
1999.  The gross margin was 34.7% for the first nine months of 2000 versus 26.4%
in the same period of 1999.  Resourcing of scissor products to Asia coupled with
aggressive purchasing practices and improved  manufacturing  efficiencies in the
USA were the main reasons for the improved gross margins.


   Selling, General and Administrative Expenses

     Selling, general and administrative ("SG&A") expenses for the third quarter
of 2000 were $2,452,000  (28.0% of net sales) compared with $2,561,000 (26.3% of
net sales) for the same period of 1999, an increase of $109,000. SG&A were 28.2%
of net sales for the first nine months of 2000  versus  26.1% in the same period
of 1999.


   Income (Loss)

     Net income for the third quarter of 2000 is $302,000,  or 9 cents per share
(basic), 8 cents per share (diluted) compared to a net income of $136,000,  or 4
cents per share (basic and diluted) for the same period of 1999. Net income from
continuing  operations  for the first nine months of 2000 was $923,000  versus a
net loss of $281,000 for the same period of 1999.



                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
             FINANCIAL CONDITION AND RESULTS OF OPERATIONS-Continued

                  For the Nine Months Ended September 30, 2000

Financial Condition

   Liquidity and Capital Resources

     The Company's  working capital,  current ratio and long term debt to equity
ratio follow:

                                      September 30, 2000      December 31, 1999
                                      ------------------     ------------------

   Working capital...................       $8,164,000            $6,956,000
   Current ratio.....................        1.80 to 1             1.81 to 1
   Long term debt to equity ratio....              .65                   .72



     During the first nine  months of 2000,  total debt  increased  by  $874,000
compared to total debt at December 31, 1999 as a result of additional borrowings
to fund higher inventory  levels and higher accounts  receivable due to seasonal
sales volume.

     On January  19,  2000,  the  Company  entered  into a loan  agreement  (the
Agreement)  with a bank to refinance  debt.  Under the Agreement the Company may
borrow up to $11,500,000 through January 19, 2003 (the maturity date) based on a
formula which applies  specific  percentages to balances of accounts  receivable
and inventories.  Throughout the next twelve months, the Company expects to have
a minimum of $4.4 million  outstanding  under this arrangement as such,  amounts
borrowed in excess of $4.4 million are classified as part of the current portion
of long term debt.  Under the  Agreement,  the Company  borrowed  an  additional
$325,000  which is payable in monthly  installments  of $5,417,  plus  interest,
through November 1, 2002 and a final installment of $65,822, plus interest,  due
December 1, 2002.  Amounts  outstanding  under the  Agreement  bear  interest at
varying  rates as provided for in the  Agreement.  As of September  30, 2000 the
North  American  operations  had $1.6 million in excess  availability  under the
Agreement.

     On August 7, 2000 the Company  entered into an interest  rate swap with the
bank  effectively  fixing the  interest  rate at 10.18% for $3.5 million of debt
through the Agreement's maturity date.

     On August 22, 2000 the Company  entered into a separate loan agreement with
another bank to refinance a mortgage on an owned property in North Carolina. The
Company will repay  $700,000,  principal  amount,  amortized  over 20 years,  in
monthly  installments  of $830,  plus  interest at the Federal Home Loan Bank of
Seattle  fixed  advanced  rate,  plus  3.0%  through  August 1, 2020 and a final
installment of $500,800,  plus interest, due on August 1, 2020. A portion of the
proceeds from this loan was used to repay amounts borrowed under the Agreement.

     The Company,  among other things,  is restricted with respect to dividends,
additional borrowings,  investments,  mergers,  distributions,  and property and
equipment  acquisitions.  Further,  the Company is required to maintain specific
amounts of tangible net worth,  and a specified debt service coverage ratio, and
a fixed charge  coverage  ratio,  all as defined.  The Company was in compliance
with all  covenants  as of or through  September  30,  2000 and  believes  these
financial covenants will be met for the remainder of the term of the loan.

     Capital expenditures for the next 12 months are not expected to be material
and are  expected to be financed by cash  provided by investing  activities  and
future operating activities.


                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
             FINANCIAL CONDITION AND RESULTS OF OPERATIONS-Continued

                  For the Nine Months Ended September 30, 2000

Safe Harbor for Forward-looking Statements

     Forward-looking  statements in this report,  including without  limitation,
statements related to the Company's plans, strategies, objectives, expectations,
intentions  and  adequacy  of  resources,  are made  pursuant to the safe harbor
provisions of the Private  Securities  litigation Reform Act of 1995.  Investors
are  cautioned   that  such   forward-looking   statements   involve  risks  and
uncertainties  including  without  limitation the  following:  (i) the Company's
plans, strategies, objectives, expectations and intentions are subject to change
at any time at the  discretion  of the  Company;  (ii) the  Company's  plans and
results of operations  will be affected by the  Company's  ability to manage its
growth and inventory; (iii) other risks and uncertainties indicated from time to
time in the Company's filings with the Securities and Exchange Commission.


                           PART II. OTHER INFORMATION


Item 1 -- Legal Proceedings

     None.


Item 2 -- Changes in Securities

     None.


Item 3 -- Defaults 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

     None.



                                   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

By          /s/ WALTER C. JOHNSEN
         ------------------------------
                Walter C. Johnsen
                 President and
             Chief Executive Officer

Dated:  November 13, 2000

By          /s/ RONALD P. DAVANZO
         ------------------------------
                Ronald P. Davanzo
               Vice President and
             Chief Financial Officer

Dated:  November 13, 2000

  


                     5

     This schedule  contains summary  financial  information  extracted from the
Condensed Consolidated Balance Sheet and the Condensed Consolidated Statement of
Operations  and is qualified  in its  entirety by  reference  to such  financial
statements.

                                   1,000

                             
                   9-MOS
                              DEC-31-2000
                                   SEP-30-2000
                                         47
                                   0
                                  7,635
                                   94
                                    10,103
                               18,375
                                         9,170
                                 5,874
                                 23,206
                          10,210
                                        0
                          0
                                    0
                                       9,030
                                     (1,298)
                   23,206
                                        27,003
                               26,898
                                          17,619
                                  25,976
                               0
                               0
                             713
                                958
                                   35
                            923
                                 0
                                0
                                      0
                                   923
                                  .26
                                  .25