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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2008
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
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Commission file number 001-07698
ACME UNITED CORPORATION
(Exact name of registrant as specified in its charter)
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CONNECTICUT 06-0236700
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
60 ROUND HILL ROAD, FAIRFIELD, CONNECTICUT 06824
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 254-6060
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 |_|
Indicate by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of
the Exchange Act (Check one).
Large accelerated filer |_| Accelerated filer |_| Non-accelerated filer |_|
Smaller Reporting Company |X|
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes |_| No |X|
As of October 20, 2008 the registrant had outstanding 3,448,059 shares of its
$2.50 par value Common Stock.
ACME UNITED CORPORATION
Page
----
Part I -- FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of September 30, 2008
and December 31, 2007 ...................................... 3
Condensed Consolidated Statements of Operations for the three
and nine months ended September 30, 2008 and 2007 .......... 5
Condensed Consolidated Statements of Cash Flows for the
nine months ended September 30, 2008 and 2007 .............. 6
Notes to Condensed Consolidated Financial Statements.......... 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 10
Item 3. Quantitative and Qualitative Disclosure About Market Risk....... 13
Item 4T. Controls and Procedures......................................... 13
Part II -- OTHER INFORMATION
Item 1. Legal Proceedings.............................................. 14
Item 1A. Risk Factors................................................... 14
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.... 14
Item 3. Defaults Upon Senior Securities................................ 14
Item 4. Submission of Matters to a Vote of Security Holders............ 14
Item 5. Other Information.............................................. 14
Item 6. Exhibits........................................................ 15
Signatures............................................................... 16
(2)
ACME UNITED CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(all amounts in thousands)
September 30, December 31,
2008 2007
(unaudited) (Note 1)
------------ ------------
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 5,485 $ 4,988
Accounts receivable, less allowance 16,045 12,727
Inventories:
Finished goods 19,376 18,069
Work in process 26 113
Raw materials and supplies 838 753
------------ ------------
20,240 18,935
Prepaid expenses and other current assets 951 1,211
------------ ------------
Total current assets 42,721 37,860
------------ ------------
Property, plant and equipment:
Land 169 175
Buildings 2,976 2,971
Machinery and equipment 7,453 8,050
------------ ------------
10,598 11,196
Less accumulated depreciation 8,196 8,717
------------ ------------
2,402 2,479
Other assets 1,887 1,794
Goodwill 89 89
------------ ------------
Total assets $ 47,099 $ 42,222
============ ============
See notes to condensed consolidated financial statements.
(3)
ACME UNITED CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
(all amounts in thousands)
September 30, December 31,
2008 2007
(unaudited) (Note 1)
------------ ------------
LIABILITIES
- -----------
Current liabilities:
Accounts payable $ 3,734 $ 4,575
Other accrued liabilities 4,472 3,959
------------ ------------
Total current liabilities 8,206 8,534
Long-term debt, less current portion 12,949 10,135
Other 542 507
------------ ------------
Total liabilities 21,697 19,175
STOCKHOLDERS' EQUITY
- --------------------
Common stock, par value $2.50:
authorized 8,000,000 shares;
issued - 4,293,024 shares in 2008
and 4,267,274 shares in 2007 10,731 10,668
Additional paid-in capital 3,838 3,550
Retained earnings 18,025 14,473
Treasury stock, at cost - 787,865 shares
in 2008 and 714,391 shares in 2007 (6,930) (5,930)
Accumulated other comprehensive income:
Translation adjustment 373 921
Unrecognized net pension benefit costs, net
of income taxes (635) (635)
------------ ------------
(262) 286
------------ ------------
Total stockholders' equity 25,402 23,047
------------ ------------
Total liabilities and stockholders' equity $ 47,099 $ 42,222
============ ============
See notes to condensed consolidated financial statements.
(4)
ACME UNITED CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(all amounts in thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
2008 2007 2008 2007
----------- ----------- ----------- -----------
Net sales $ 19,158 $ 17,081 $ 56,135 $ 48,321
Cost of goods sold 11,288 9,700 33,361 27,627
----------- ----------- ----------- -----------
Gross profit 7,870 7,381 22,774 20,694
Selling, general and administrative expenses 5,651 5,229 16,690 14,822
----------- ----------- ----------- -----------
Operating income 2,219 2,152 6,084 5,872
----------- ----------- ----------- -----------
Non-operating items:
Interest expense, net 120 208 306 519
Other (expense) income, net (138) 91 23 77
----------- ----------- ----------- -----------
Total other expense 258 117 283 442
----------- ----------- ----------- -----------
Income before income taxes 1,961 2,035 5,801 5,430
Income tax expense 610 730 1,968 1,954
----------- ----------- ----------- -----------
Net income $ 1,351 $ 1,305 $ 3,833 $ 3,476
=========== =========== =========== ===========
Basic earnings per share $ 0.38 $ 0.37 $ 1.09 $ 0.98
=========== =========== =========== ===========
Diluted earnings per share $ 0.37 $ 0.35 $ 1.05 $ 0.94
=========== =========== =========== ===========
Weighted average number of common shares outstanding-
denominator used for basic per share computations 3,515 3,538 3,517 3,530
Weighted average number of dilutive stock options
outstanding 136 172 137 172
----------- ----------- ----------- -----------
Denominator used for diluted per share computations 3,650 3,710 3,654 3,702
=========== =========== =========== ===========
Dividends declared per share $ 0.04 $ 0.04 $ 0.12 $ 0.12
=========== =========== =========== ===========
See notes to condensed consolidated financial statements.
(5)
ACME UNITED CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(all amounts in thousands)
Nine Months Ended
September 30,
-----------------------------
2008 2007
-------------- --------------
Operating Activities:
Net income $ 3,833 $ 3,476
Adjustments to reconcile net income
to net cash provided (used) by operating activities:
Depreciation 666 604
Amortization 81 34
Stock compensation expense 220 257
Changes in operating assets and liabilities:
Accounts receivable (3,444) (5,077)
Inventories (1,551) (1,336)
Prepaid expenses and other current assets 251 (151)
Accounts payable (799) 1,249
Other accrued liabilities 857 -
-------------- --------------
Total adjustments (3,719) (4,420)
-------------- --------------
Net cash provided (used) by operating activities 114 (944)
-------------- --------------
Investing Activities:
Purchase of property, plant, and equipment (611) (487)
Purchase of patents and trademarks (173) (701)
-------------- --------------
Net cash used by investing activities (784) (1,188)
-------------- --------------
Financing Activities:
Net borrowing of long-term debt 2,760 2,083
Proceeds from issuance of common stock 133 305
Distributions to stockholders (422) (388)
Purchase of treasury stock (1,000) (486)
-------------- --------------
Net cash provided by financing activities 1,471 1,514
-------------- --------------
Effect of exchange rate changes (304) 430
-------------- --------------
Net change in cash and cash equivalents 497 (188)
Cash and cash equivalents at beginning of period 4,988 3,838
-------------- --------------
Cash and cash equivalents at end of period $ 5,485 $ 3,651
============== ==============
See notes to condensed consolidated financial statements.
(6)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 -- Basis of Presentation
In the opinion of management, the accompanying condensed consolidated
financial statements include all adjustments necessary to present fairly the
financial position, results of operations and cash flows of Acme United
Corporation (the "Company"). These adjustments are of a normal, recurring
nature. However, the financial statements do not include all of the disclosures
normally required by accounting principles generally accepted in the United
States of America 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, 2007 for such disclosures. The condensed consolidated balance
sheet as of December 31, 2007 was derived from the audited consolidated balance
sheet as of that date. The results of operations for interim periods are not
necessarily indicative of the results to be expected for the full year. The
information included in this Quarterly Report on Form 10-Q should be read in
conjunction with the Management's Discussion and Analysis of Financial Condition
and Results of Operations and financial statements and notes thereto, included
in the Company's 2007 Annual Report on Form 10-K.
Certain prior year amounts have been reclassified to conform to the current
year presentation.
Note 2 -- Contingencies
The Company is involved from time to time in disputes and other litigation
in the ordinary course of business and may encounter other contingencies, which
may include environmental and other matters. The Company presently believes that
none of these matters, individually or in the aggregate, would be likely to have
a material adverse impact on its financial position, results of operations or
liquidity.
Note 3 -- Pension
Components of net periodic pension cost are as follows:
Three Months Ended September 30, Nine Months Ended September 30,
---------------------------------- ----------------------------------
2008 2007 2008 2007
---------------- ---------------- ---------------- ----------------
Components of net periodic benefit cost:
Interest cost $ 41,611 $ 47,500 $ 131,611 $ 142,500
Service cost 3,750 7,500 18,750 22,500
Expected return on plan assets (39,428) (57,500) (151,928) (172,500)
Amortization of prior service costs 1,959 2,250 6,459 6,750
Amortization of actuarial gain 15,983 22,000 53,483 66,000
------------------------------------------------------------------------
$ 23,875 $ 21,750 $ 58,375 $ 65,250
------------------------------------------------------------------------
Note 4 -- Long Term Debt
On June 23, 2008, the Company modified its revolving loan agreement (the
"Modified Loan Agreement") with Wachovia Bank. The amendments include (a) an
increase in the maximum borrowing amount from $15 million to $20 million; (b) an
extension of the maturity date of the loan from June 30, 2009 to June 30, 2010;
(c) a decrease in the interest rate to LIBOR plus 7/8% (from LIBOR plus 1.0%);
and (d) the modification of certain covenant restrictions. Funds borrowed under
the Modified Loan Agreement are primarily used for working capital, general
operating expenses, share repurchases and certain other purposes.
At September 30, 2008 and December 31, 2007, the Company had outstanding
borrowings under the Modified Loan Agreement of $12,910,000 and $10,098,000,
respectively. Based on the scheduled maturity date, the Company has classified
all of such borrowings at September 30, 2008 as long-term liabilities.
(7)
Note 5 -- Shareholder's Equity
During the first nine months of 2008, the Company issued a total of 25,750
shares of common stock upon the exercise of outstanding stock options and
received aggregate proceeds of $132,818. During the same period, the Company
also repurchased 73,474 shares of common stock for treasury. These shares were
purchased at fair value, with a total cost to the Company of $1,000,410.
Note 6 -- Segment Information
The Company reports financial information based on the organization
structure used by management for making operating and investment decisions and
for assessing performance. The Company's reportable business segments consist of
(1) the United States; (2) Canada and (3) Europe. The Company's Asian operations
are closely linked to those of the U.S. operating segment; accordingly,
management reviews the financial results of both on a consolidated basis, and
the results of the Asian operations have been aggregated with the results of the
United States operating segment to form one reportable segment called the
"United States operating segment". The determination of reportable segments is
based on the guidance set forth in SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information". Each reportable business segment derives
its revenue from the sales of cutting devices, measuring instruments and safety
products for school, office, home and industrial use.
The chief operating decision maker evaluates the performance of each
operating segment based on segment revenues and operating income. Segment
amounts are presented after converting to U.S. dollars and consolidating
eliminations.
Financial data by business segment:
(in thousands)
Three months ended Nine months ended
September 30, September 30,
------------------------------ -------------------------------
2008 2007 2008 2007
-------------- -------------- -------------- --------------
Sales to external customers:
United States $ 15,117 $ 13,221 $ 44,053 $ 37,137
Canada 1,906 1,890 6,592 6,386
Europe 2,136 1,970 5,490 4,798
-------------- -------------- -------------- --------------
Consolidated $ 19,159 $ 17,081 $ 56,135 $ 48,321
============== ============== ============== ==============
Operating income (loss):
United States $ 2,107 $ 2,112 $ 5,741 $ 5,707
Canada 183 103 762 562
Europe (71) (63) (419) (397)
-------------- -------------- -------------- --------------
Consolidated 2,219 2,152 6,084 5,872
Interest expense, net 120 208 306 519
Other (expense) income, net (138) 91 23 77
-------------- -------------- -------------- --------------
Consolidated income before taxes $ 1,961 $ 2,035 $ 5,801 $ 5,430
============== ============== ============== ==============
(8)
Assets by business segment:
September 30, December 31,
2008 2007
------------ --------------
United States $ 34,379 $ 28,350
Canada 6,902 7,886
Europe 5,818 5,986
------------ --------------
Consolidated $ 47,099 $ 42,222
------------ --------------
Note 7 - Stock Based Compensation
The Company recognizes share-based compensation in accordance with the
provisions of Statement of Financial Accounting Standards No. 123R, "Share-Based
Payment" ("SFAS 123R"). Share-based compensation expense was $53,606 and $73,551
for the quarters ended September 30, 2008 and September 30, 2007, respectively.
Share-based compensation expense was $219,869 and $257,308 for the nine months
ended September 30, 2008 and September 30, 2007, respectively. During the three
and nine months ended September 30, 2008, the Company issued 68,000 and 80,500
options with a weighted average fair value of $3.86 and $3.62, respectively.
During the nine months ended September 30, 2007, the Company issued 97,750
options with a weighted average fair value of $4.96. The Company did not issue
stock options during the three months ended September 30, 2007. The assumptions
used to value option grants for the three and nine months ended September 30,
2008 and September 30, 2007 are as follows:
Three months ended Nine months ended
September 30, September 30,
---------------------------- --------------------------------
2008 2007 2008 2007
---------------------------- --------------------------------
Expected life in years 5 NA 5 5
Interest rate 3.30% NA 2.95 - 3.30% 4.51 - 5.18%
Volatility 0.29 NA 0.29 - .31 .32
Dividend yield 1.2% NA 1.2% 1.1%
As of September 30, 2008, there was a total of $541,400 of unrecognized
compensation cost related to non-vested share -based payments granted to the
Company's employees. The remaining unamortized expense is expected to be
recognized over a weighted average period of approximately 2.5 years.
Note 8 - Comprehensive Income
Comprehensive income for the three and nine months ended September 30, 2008
and September 30, 2007 consisted of the following:
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ -------------------------------
Sales to external customers: 2008 2007 2008 2007
-------------- -------------- -------------- --------------
Net income $ 1,351 $ 1,305 $ 3,833 $ 3,476
Other comprehensive (loss) / income -
Foreign currency translation (532) 660 (548) 1,192
-------------- -------------- -------------- --------------
Comprehensive income $ 819 $ 1,965 $ 3,285 $ 4,668
============== ============== ============== ==============
(9)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 2. - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Forward-Looking Information
The Company may from time to time make written or oral "forward-looking
statements" including statements contained in this report and in other
communications by the Company, which are made in good faith by the Company
pursuant to the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995.
These forward-looking statements include statements of the Company's plans,
objectives, expectations, estimates and intentions, which are subject to change
based on various important factors (some of which are beyond the Company's
control). The following factors, in addition to others not listed, could cause
the Company's actual results to differ materially from those expressed in
forward looking statements: the strength of the domestic and local economies in
which the Company conducts operations, the impact of current uncertainties in
global economic conditions and the ongoing financial crisis affecting the
domestic and foreign banking system and financial markets, including the impact
on the Company's suppliers and customers, changes in client needs and consumer
spending habits, the impact of competition and technological change on the
Company, the Company's ability to manage its growth effectively, including its
ability to successfully integrate any business which it might acquire, and
currency fluctuations. All forward-looking statements in this report are based
upon information available to the Company on the date of this report. The
Company undertakes no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information, future
events, or otherwise, except as required by law.
Critical Accounting Policies
There have been no material changes to our critical accounting policies and
estimates from the information provided in Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations", included in our
Annual Report on Form 10-K for the fiscal year ended December 31, 2007.
Results of Operations
Net Sales
Consolidated net sales for the three months ended September 30, 2008 were
$19,158,000 compared with $17,081,000 in the same period in 2007, a 12% increase
(11% at constant currency). Consolidated net sales for the nine months ended
September 30, 2008 were $56,135,000, compared with $48,321,000 for the same
period in 2007, a 16% increase (14% at constant currency). Net sales for the
three and nine months ended September 30, 2008 in the U.S. segment increased 14%
and 19%, respectively, as compared to the similar periods in 2007, primarily as
a result of market share gains in all channels of distribution and market
acceptance of new anti-microbial school scissors, rulers, and math kits and
iPoint pencil sharpeners. Net sales in Canada for the three and nine months
ended September 30, 2008 increased by 1% and 3% in U.S. dollars, as compared to
the similar periods in 2007, but declined 0% and 5% in local currency, primarily
due to soft demand in the overall office products market. European net sales for
the three and nine months ended September 30, 2008 increased 8% and 14% in U.S.
dollars, as compared to the similar periods in 2007. In local currency, European
net sales declined 2% for the three months ended September 30, 2008 and
increased 1% for the nine months ended September 30, 2008, as compared to the
similar periods in 2007.
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 back-to-school market.
(10)
Gross Profit
Gross profit for the three months ended September 30, 2008 was $7,870,000
(41.1% of net sales) compared to $7,381,000 (43.2% of net sales) for the same
period in 2007. Gross profit for the nine months ended September 30, 2008 was
$22,774,000 (40.6% of net sales) compared to $20,694,000 (42.8% of net sales) in
the same period in 2007. The gross margin declines for the three and nine months
ended September 30, 2008 were primarily due to increased costs of material,
labor and energy, as well as the appreciation of the Chinese currency against
the U.S. dollar. Also, during the second and third quarters of 2008 the Company
gained additional market share in the highly competitive back to school market
which reduced gross margins due to the highly competitive nature of that market.
Selling, General and Administrative Expenses
Selling, general and administrative ("SG&A") expenses for the three months
ended September 30, 2008 were $5,650,000 (29.5% of net sales) compared with
$5,229,000 (30.6% of net sales) for the same period of 2007, an increase of
$421,000. SG&A expenses for the nine months ended September 30, 2008 were
$16,690,000 (29.7% of net sales) compared with $14,822,000 (30.7% of net sales)
in the comparable period of 2007, an increase of $1,868,000. SG&A expenses
increased for the three and nine months ended September 30, 2008 primarily as a
result of the addition of sales, marketing, logistics and quality control
personnel as well as incrementally higher freight costs and sales commissions
associated with higher sales.
Operating Income
Operating income for the three months ended September 30, 2008 was
$2,219,000 compared with $2,152,000 in the same period of 2007, an increase of
$33,000 or 1.5%. Operating income for the nine months ended September 30, 2008
was $6,084,000 compared to $5,872,000 in the same period of 2007.
Interest Expense
Interest expense for the three months ended September 30, 2008 was
$120,000, compared with $208,000 for the same period of 2007, an $88,000
decrease. Interest expense for the nine months ended September 30, 2008 was
$306,000, as compared to $519,000 for the same period in 2007, a $213,000
decrease. The decrease in interest expense for both the three and nine months
ended September 30, 2008 was primarily the result of lower interest rates under
the Company's revolving credit facility, partially offset by a higher average
outstanding debt balance.
Other (Expense) Income, Net
Net other expense was $138,000 in the three months ended September 30,
2008, as compared to other income of $91,000 in the same period of 2007. Net
other income was $23,000 in the first nine months of 2008, compared to $77,000
in the first nine months of 2007. The change in other (expense) income, net for
the three months ended September 30, 2008 was primarily due to losses from
foreign currency transactions. The decrease in other (expense) income, net for
the nine months ended September 30, 2008 was primarily related to lower gains
from foreign currency transactions.
Income Taxes
The effective tax rate for the three months ended September 30, 2008 was
31%, compared to 36% in the same period of 2007. The effective tax rate for the
nine months ended September 30, 2008 was 34% compared to 36% in the same period
of 2007. The decrease in the effective tax rate for the three and nine months
ended September 30, 2008 is primarily related to a higher proportion of earnings
in a foreign tax jurisdiction with a lower tax rate.
(11)
Financial Condition
Liquidity and Capital Resources
The Company's working capital, current ratio and long-term debt to equity ratio
follow:
(000's omitted from dollar amounts) September 30, 2008 December 31, 2007
------------------ -----------------
Working capital $ 34,515 $ 29,326
Current ratio 5.21 4.44
Long term debt to equity ratio 51.0% 44.0%
During the first nine months of 2008, total debt outstanding under the Company's
Modified Loan Agreement, (referred to below) increased by $2,812,000 compared to
total debt at December 31, 2007, principally due to an increase in borrowings
for inventory and accounts receivables for the back to school season as well as
share repurchases, partially offset by earnings. As of September 30, 2008,
$12,910,000 was outstanding and $7,090,000 was available for borrowing under the
Modified Loan Agreement.
On June 23, 2008, the Company modified its revolving loan agreement (the
"Modified Loan Agreement") with Wachovia Bank. The Modified Loan Agreement
amends certain provisions of the original revolving loan agreement. The
amendments include (a) an increase in the maximum borrowing amount from $15
million to $20 million; (b) an extension of the maturity date of the loan from
June 30, 2009 to June 30, 2010; (c) a decrease in the interest rate to LIBOR
plus 7/8% (from LIBOR plus 1.0%) and (d) modification of certain covenant
restrictions. Funds borrowed under the Modified Loan Agreement are used for
working capital, general operating expenses, share repurchases and certain other
purposes.
Cash expected to be generated from operating activities, together with funds
available under the Modified Loan Agreement are expected, under current
conditions, to be sufficient to finance the Company's planned operations over
the next twelve months. However, the recent financial crisis affecting the
domestic and foreign banking systems and financial markets, and the going
concern threats to investment banks and other financial institutions have
resulted in a tightening in the credit markets, a low level of liquidity in many
financial markets, and extreme volatility in fixed income, credit and equity
markets. There could be a number of follow on effects from the credit crisis on
the Company's business, including weakening or insolvency of key suppliers
resulting in product delays; inability of customers to obtain credit to finance
purchases of our products and/or customer insolvencies.
Recently Issued Accounting Standards
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements"
("SFAS No. 157"). SFAS No. 157 defines fair value, establishes a framework for
measuring fair value under Generally Accepted Accounting Principles (GAAP) and
establishes a hierarchy that categorizes and prioritizes the sources to be used
to estimate fair value. SFAS No. 157 also expands financial statement
disclosures about fair value measurements. On February 12, 2008, the FASB issued
FASB Staff Position (FSP) 157-2 which delayed the effective date of SFAS No. 157
for one year, for all non-financial assets and non-financial liabilities, except
those that are recognized or disclosed at fair value in the financial statements
on a recurring basis (at least annually). SFAS No. 157 and FSP 157-2 are
effective for financial statements issued for fiscal years beginning after
November 15, 2007. We will elect a partial deferral of SFAS No. 157 under the
provisions of FSP 157-2 related to the measurement of fair value used when
evaluating long-lived assets for impairment and valuing asset retirement
obligations. The impact of partially adopting SFAS No. 157 effective January 1,
2008 was not material to our financial statements.
In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities," ("SFAS No. 159") which provides
companies with an option to report selected financial assets and liabilities at
fair value in an attempt to reduce both complexity in accounting for financial
instruments and the volatility in earnings caused by measuring related assets
and liabilities differently. This statement is effective as of the beginning of
an entity's first fiscal year beginning after November 15, 2007. The Company
chose not to adopt these fair value provisions.
(12)
Item 3. Quantitative and Qualitative Disclosure About Market Risk
There are no material changes in market risks as disclosed in the Company's
Annual Report on Form 10-K for the year ended December 31, 2007.
Item 4T. Controls and Procedures
(a) Evaluation of Internal Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer have reviewed and
evaluated the effectiveness of our disclosure controls and procedures, which
included inquiries made to certain other of our employees. Based on their
evaluation, our Chief Executive Officer and Chief Financial Officer have each
concluded that, as of September 30, 2008, our disclosure controls and procedures
were effective and sufficient to ensure that we record, process, summarize and
report information required to be disclosed by us in our periodic reports filed
under the Securities and Exchange Commission's rules and forms.
(b) Changes in Internal Control over Financial Reporting
During the quarter ended September 30, 2008, there were no changes in our
internal control over financial reporting that materially affected, or was
reasonably likely to materially affect, this control.
(13)
PART II. OTHER INFORMATION
Item 1 -- Legal Proceedings
The Company is involved from time to time in disputes and other litigation
in the ordinary course of business, including certain environmental and other
matters. The Company presently believes that none of these matters, individually
or in the aggregate, would be likely to have a material adverse impact on its
financial position, results of operations, or liquidity.
Item 1A - Risk Factors
See Risk Factors set forth in Part I, Item 1A of the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2007 and the
discussion in Item 1, above, under "Financial Condition - Liquidity and Capital
resources.
Item 2 -- Unregistered Sales of Equity Securities and Use of Proceeds
(c) On October 4, 2005, the Company announced a stock repurchase program of up
to 150,000 shares. In addition, on January 23, 2008, the Company announced
a new stock repurchase program of up to 150,000 shares. These programs do
not have an expiration date. The following table discloses the total shares
repurchased under these programs for the quarter ended September 30, 2008:
Total Number of
shares Purchased Maximum Number
as Part of Publicly of Shares that may
Total Number of Average Price Paid Announced yet be Purchased
Period Shares Purchased per Share Programs Under the Programs
- -------------------------------------------------------------------------------------------------------
July 100 $ 13.27 117,700 182,300
August 10,400 13.38 128,100 171,900
September 5,774 12.66 133,874 166,126
-----------------------------------------------------------------------------------------
Total 16,274 $ 13.76 133,874 166,126
Item 3 -- Defaults Upon Senior Securities
None.
Item 4 -- Submission of Matters to a Vote of Security Holders
None.
Item 5 -- Other Information
None.
(14)
Item 6 -- Exhibits
Documents filed as part of this report.
Exhibit 31.1 Certification of Walter C. Johnsen pursuant to Section
302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.2 Certification of Paul G. Driscoll pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
Exhibit 32.1 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 32.2 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(15)
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
Chairman of the Board and
Chief Executive Officer
Dated: October 29, 2008
By /s/ PAUL G. DRISCOLL
------------------------------
Paul G. Driscoll
Vice President and
Chief Financial Officer
Dated: October 29, 2008
(16)
Exhibit 31.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, WALTER C. JOHNSEN, certify that:
I have reviewed this Quarterly Report on Form 10-Q of Acme United
Corporation;
Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
By /s/ WALTER C. JOHNSEN
------------------------------
Walter C. Johnsen
Chairman of the Board and
Chief Executive Officer
Dated: October 29, 2008
Exhibit 31.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, PAUL G. DRISCOLL, certify that:
I have reviewed this Quarterly Report on Form 10-Q of Acme United
Corporation;
Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
By /s/ PAUL G. DRISCOLL
------------------------------
Paul G. Driscoll
Vice President and
Chief Financial Officer
Dated: October 29, 2008
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned officer of Acme United Corporation (the "Company") hereby
certifies to my knowledge that the Company's quarterly report on Form 10-Q for
the quarterly period ended September 30, 2008 (the "Report"), as filed with the
Securities and Exchange Commission on the date hereof, fully complies with the
requirements of section 13(a) or 15(d), as applicable, of the Securities
Exchange Act of 1934, as amended, and that the information contained in the
Report fairly presents, in all material respects, the financial condition and
results of operations of the Company. This certification is provided solely
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, and shall not be deemed to be a part of the Report
or "filed" for any purpose whatsoever.
By /s/ WALTER C. JOHNSEN
------------------------------
Walter C. Johnsen
Chairman of the Board and
Chief Executive Officer
Dated: October 29, 2008
A signed original of this written statement required by Section 906, or other
document authenticating, acknowledging, or otherwise adopting the signature that
appears in typed form within the electronic version of this written statement
required by Section 906, has been provided to Acme United Corporation and will
be retained by Acme United Corporation and furnished to the Securities and
Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned officer of Acme United Corporation (the "Company") hereby
certifies to my knowledge that the Company's quarterly report on Form 10-Q for
the quarterly period ended September 30, 2008 (the "Report"), as filed with the
Securities and Exchange Commission on the date hereof, fully complies with the
requirements of section 13(a) or 15(d), as applicable, of the Securities
Exchange Act of 1934, as amended, and that the information contained in the
Report fairly presents, in all material respects, the financial condition and
results of operations of the Company. This certification is provided solely
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, and shall not be deemed a part of the Report or
"filed" for any purpose whatsoever.
By /s/ PAUL G. DRISCOLL
------------------------------
Paul G. Driscoll
Vice President and
Chief Financial Officer
Dated: October 29, 2008
A signed original of this written statement required by Section 906, or other
document authenticating, acknowledging, or otherwise adopting the signature that
appears in typed form within the electronic version of this written statement
required by Section 906, has been provided to Acme United Corporation and will
be retained by Acme United Corporation and furnished to the Securities and
Exchange Commission or its staff upon request.