Q2 2020 Acme United Corp Earnings Call
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Good day and welcome to the Acme United Corporation Second quarter 2020 earnings Conference call.
At this time of light truck conference over to Walter Johnsen, Chairman and Chief Executive Officer. Please go ahead Sir.
Good morning, welcome to the second quarter 2000, <unk> earnings Conference call.
Corporation.
Ultra C. Johnsen, chairman and CEO.
Yes, Paul Johnston, our Chief Financial Officer first read the Safe Harbor statement.
Okay.
Forward looking statements.
This conference call, including without limitation statements related to these plans strategies objectives expectations intentions and adequacy of resources are made pursuant to the safe Harbor provisions of the private.
Securities Litigation Reform Act like 90 Park. Congratulations are cautioned that such forward looking statements involve risks and uncertainties such as among others.
Right.
Good day expects to be closing 19 and damage.
Given the ongoing economic.
Downturn and the other worsening certainty.
In our periodic filings with the Securities and Exchange Commission and debt and in our core earnings release.
Okay.
Good performance in the second quarter 2020.
Sales were 44 million.
Increase of 9% over this time last year.
Our net income was $3.2 million an increase of 20%.
Earnings per share were 92 cents compared to 77 cents in the second quarter last year, a 19% increase.
With that many challenges during the quarter.
Customers, whose business suits plummeted, because the sportswear closed what people were afraid to shop in them.
You got waters.
Canceled or delayed for cutting tools.
Certainly and we offered school in retail markets.
We anticipate bankruptcies that customers will not be able to recover in the months ahead.
What sorts of the supply raw materials components in finished goods across all our product once worked various times closed for shipments were delayed.
This was particularly true without production in China, which closed during Chinese new year, then they closed due to the Corona bars, we had intense catch your production or would you discovered that the virus that migrated to the U.S. in Europe and delays, it's the bandwidth delayed.
Well, it's well first aid kits were in high demand cost.
Chris dramatically for blogs isolation gallons procedure Basques alcohol wife's hand, sanitizer disposable from offers and many other items that are used in our first aid kits.
Our factories and distribution centers in the United States, Canada, and Europe operated under adverse conditions.
We prioritize safety with matched hand, sanitizer wasn't available for wall gold production workers. He conducted right you'll do cleaning of older facilities.
Well, we are flexible barriers between operators in our kids hockey ones and trade extra incentive bonuses to old truck mine workers, we checked temperatures of our employees daily and paid them to stay home. They were not well we had planned shutdowns chipsets for Corona virus and cleaning.
And Tracy you know platts sleep produced and shipped at all of those facilities on the West Coast wouldn't East coast slots were down and then to be reversed when whats codes kladstrup job ran overtime weekends, we shipped as fast as we could despite higher costs.
Populations that our eight clients warehouses continue under these adverse conditions and we see no end until the pandemic leases.
Oh selves, Oh genes and sales market in sourcing quality control and engineering.
I've often worked remotely well managed remote locations.
I'm not ideal function.
We plan to continue in the smoke.
At the end of the first quarter, we expected sales to many of our traditional watch taught customers to fall dramatically.
They did.
So the office superstores wholesale as an independent office deals somebody did in the United States in your largest wholesalers UK filed for bankruptcy.
The largest school distributor in United States was taken over by its creditors.
You're more back which is the next six months.
So far we've shifted sales devoted major accounts receivable issues.
We were pleased by the strength of our online and that and that's market sales.
Well it sells for our once isn't fishing product lines.
<unk> stores began to reopen in June we began to see more orders from the office segment.
The overall sales of whats called according to its camillus knives into the fishing clubs in the U.S. increased 4% during the second quarter compared to last year, demonstrating the size of those entre seen shift in buying.
Patterns.
Perfect and safety business increased 16% during the quarter much of the growth was due to market share gains in the mass market ecommerce and home improvement channels.
We estimate that we had surge demand due to the coolness coal that bar was approximately $1.5 million during the quarter.
We are preparing new products, where our customers that focus on safety.
During the second quarter, we introduced personal protection kids that have gloves, sanitizers NAV swipes into bombers use an office in schools dominates its own planes and many other locations.
The initial demand has been good and we began and plan to begin shipping in the third quarter.
We have been increasing our inventory that key components in finished goods across all product lines in preparation for potential supply chain disruptions during the coming quarters.
We worry about the split of cold with wireless in Europe.
And United States States, which could disrupt production and shipments.
So you'll be seeing increases of inventory in the coming quarters.
We prepare for disruptions, we hope do not occur.
He may change that were entire workforce and hope to continue to do so in some cases, we will open window, where competitors were not.
Gained market share develop new products improved content on a online sites.
Good to our efforts to drive online search and possible for business.
Bumble and grateful for the work Archie lives to.
And we believe we're positioned coming forward and these tremendously uncertain times, well now turn the call to ball.
[laughter] Acmes net salesmen second quarter was $44 million compared to $40.2 million nicely in 2019, and an increase of 9%.
Sales for the six months ended June Thirtyth, 2024, $79.8 million compared to $71.6 million in the same period.
In 2019, an increase of 1% net sales in the U.S. segment increased 10% in both the quarter and a six months ended June thirtyth.
Sales increase mainly came from first aid safety products, primarily in market share gains and to a lesser extent gains from cope with 19 related surge demand net sales for Europe increased 6% in local currency for the quarter and 12% for the six months ended June Thirtyth sales increase for both.
Average was primarily due to.
Increased sales of Westcott in Camillus products in the ecommerce channel as well as higher sales of DMT sharpening products.
Net sales in local currency for Canada, excluding first stage central decreased 42% in the quarter.
25% for the year to date and sales of walk its products have declined due the office in store closings as as a result to cope with 19, including first say central selves, Canada sales increased 11% on a quarter and 35% year to date.
The gross margin was 36.5% in the second quarter 2020 compared to 36.7%.
2019, the your day gross margin was 37.1% for both 2019 or 20 next <unk> expenses for the second quarter, 2000, $24.7 million or 26% of sales compared with $11 million were 27% of sales.
For the same period 2019.
<unk> expenses for the first six months of 2020 or $23.2 million or 29% sales compared with $21.8 million or 31% of sales in 2019.
Net income for the second quarter of 2020.
$3.2 million or 92 cents per diluted share compared to net income of $2.7 million or 77 cents per diluted share for the same period of 2019, an increase of 20% to 20% of net income and 19% in earnings per share.
Net income for the first six months ended June Thirtyth 2020 was 4.4 $4.5 million or dollar 28 per diluted share compared to $3.5 million or dollar one per diluted share an uncomfortable period last year increases of 29% and 27 push.
The companys debt less cash on June Thirtyth 2020 was.
$37.3 million compared to $41 million on June Thirtyth 2019. During a 12 month period, you paid 2.1 million.
Dollars for the first aid central acquisition spend $1.6 million on dividends and generated $9 million in free cash flow.
I will turn call over to Walter.
Uh huh.
Are there any further questions.
At this time, we'll take our questions. If he would like to ask a question. Please press star one on the telephone keypad.
Anything else Speakerphone. Please mention your function has turned off the lightest im not trying to take on that.
Again that if star one for question.
Well go first to town Hall, and capital Management Corporation.
Solutions on a great quarter again.
Thank you goodbye.
Do you expect a interest expense to continue to rapidly decline because of Europe.
Solid cash flow generation.
We are increasing or.
Inventory right now in preparation for I don't know bought.
But its kogut border spreading throughout work trying to old for disclosed.
Sure.
[laughter].
Who knows so we are buying an extra quarter of inventory level top selling products right now.
Preparation to be covered for the next six months and that's an unusual step, but we have the balance sheet to do it then they bought a 2% interest the chances are interest expense will not decline on the other hand, if we don't need that inventory then we'll be filling it all in the.
The first quarter next year.
Do you expect the healthcare sales.
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And if it in the future because the economy opens back up.
In areas like food service hotels office retailers watching that that's a very good point, Jim Yes, I'm right now a first aid cells.
[noise].
Areas not increase in particularly to the major distributors that sell into the food service market that decline and that was that begins to the open I would expect or distributors than to be rebuilding stock and frankly in prison Celsius purchases from us.
Last year Q2 hundred and stuff.
A lot of puncture resistance gloves, do you think there and it's selling opportunities for similar items and hunting industrial or health care.
Well.
We really don't so much into the hospitals, so our gloves and that's the good news into the workplaces.
And then homes and offices, where typically you're not dealing with.
Needles.
But more importantly, I don't think we could get the gloves, even if we wanted them.
Because there are shortages throughout the entire supply chain.
I'm sure we can sell them up.
Well in this environment I'm glad to see that you have a robust inventory level type the handle whatever comes thank you for a we're lucky to have a balance sheet could be able to do it and we do have that balance sheet. So we're using it.
Well good job. Thank you.
Thank you.
Well go next to Jeffrey Matthews that ran Gardner.
[noise] I walk or how are you.
Good thanks.
I.
Your work you bring going through the last.
Three mark.
Sure that's it's a.
Relations.
All of you did.
And my question is little bit longer term, if you can kind of.
Pick your head up from our from all these fire drills.
Going through the last few mark.
Is there anything about that its course you too.
I think a little differently about Oh.
Your mother company or where the company's going over the next five years or is it just your your playbook is.
You're going to keep you're going to stick to [laughter].
Well there obviously, we've learned that we can do a lot more remotely.
No disadvantages to that as everybody on this call knows.
Okay.
I'll get a main so good we've been able to Google and give a number of on long haul every day.
Mhm.
I like so some of that will continue.
I hope to be able to be problem, and I know or two and sells the bugs, we traveled to customers and suppliers, what would like and supply those.
International operations.
So we will see Love's travel in the shorter term.
Or losses consideration is another area that we're evaluating right now we may in the future funding I will having more work at home Todd.
I'm sure, we'll have a social distancing into offices, we mainly what space not loves I'm not sure, but what I know the.
This is not something that.
We'll just be forgot my kids similar to the way Mana love them changed so you approached airports and how you once the security I think will be somewhat sounds good chips and changes relative to.
Hygiene and distance and.
That's up yet.
In the products that will develop in going forward will be more attuned to what you need in the workplace ending losses.
To provider I believe.
Hi, Jim it's a environment, that's little bit different than four states a little bit some new products. There also.
What's probably a product family we have a line of gets you microbial said loses rules and flow truck youve been left fits and so forth. We emphasized goes on <unk>.
Reintroducing them for that stewards jobs.
[noise] self throughout all inside of a lot of category. So those are.
With rushed.
All that he told them no and I think we're seeing some stronger sales with them, but also for what we see more.
And then fishing area or that they've been new entrance, particularly the official where we've had done a good growth in the quarter I'm surprised that but it's truly topic.
But.
Participants on because about I think we've got Oh.
A number of opportunities to.
New product.
Yes.
[noise] [laughter] dogs.
[noise] well supply chain.
We've been diversifying or they sort of.
Components and other products without the last two years, what are the biggest diversification because we're buying.
Our first day operations in.
Vancouver, Washington, expanding Roddick, Rocky Mount North Carolina, the purchase of the Unsi Mall ball mouse. The two plants that we have the steel magic wand and set the out of California.
Other than well Smyrna, Tennessee, and all of these were very important collaguard diversification. In addition, we've gotten components now for from places like Egypt, a they'll be hadn't done two years ago, we're moving more into Malaysia.
Did you do more in India.
The chart as a very important partner still.
And I anticipate that to continue.
Great. Thanks, a lot law firms actually every month.
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Thank you Jeff.
Well move next to Robert Adler, a private investor.
Hi, good afternoon water.
Regarding the Canadian.
Thanks have you already begun to integrate the domestic.
The United product line into that.
The sales report the today show [laughter], the them or not.
<unk>.
Yeah.
Well above those different very good question, one we bought first aid only in January.
Well I know any reason to do that would be was to bring in or part of course they category.
Into our Canadian business, and we haven't been able to do it because of money money restrictions in that market and so by.
Bogs posted central it gave us the ability to bring them maybe about its versions of many of our products.
Well, we close body job yours.
Blade.
March one of its a good bye.
Yeah, we've done online.
Amazing at all.
And Labelle Saturday I was.
Looking to pull out in production.
There are plenty of opportunities, particularly with our customer base in Canada deployed both customers and bring in product to them. A we're doing that now you haven't seen too much of the results yet, but we will be sitting with a and so.
But acquisition were very strategic im, hoping or Canadian business.
Well into the first aid segment, which is so important in the west of the company I loved upstate accomplished.
Fortunately also the Canadian business is starting to rebound because the stores seem to be a more open and what seeing orders so I.
Okay.
Well, it's hard to say the works you go but for calendar <unk>.
Appears that way at this stage.
So the 4 million plus it you've gotten in sales for the first half of the year Oh God essentially represents the Canadian business as it as it was bought rather than it was all of combining the two companies.
In the product line.
That's correct. Okay. That's that's what I wanted to thank you welcome.
Sure.
Well go next to Ralph Marash person Manhattan Company.
Hi, Walter.
Firewall.
Thanks, with all the uncertainty about whether schools are going to reopen for.
So many of them or not.
What's your thinking about school supply purchases.
Well I am getting more confident and believe I'm, saying is we had.
Good growth.
No school area in the second quarter.
That was a very himself on certain area as we're looking and we're in now this third quarter.
We're finding that Oh school supply business, not only hold them, but with the online business increasing no. The schools may not close, but we still have.
Coordinate million students in each of the grades but love to get educated.
And they get supplies are so well make harm that we're not getting them from some.
About current customers.
Maybe purchasing on Amazon or buying at Walmart or other places, which offer customers. So the shift within the property was is occurring but I.
But we will have a.
Pretty normal back to school.
Maybe just that they're studying in a different place.
But theyre using the supplies and that's what I believe and what we're seeing right now in the quarter.
And you mentioned anti Microbials, so if I remember correctly it introduced in the past and it probably wasn't slow grower benefit.
Currently or is that something more in the future.
Well it was very are an okay product line and number of years ago.
Today, all of our retail customers are quite interested in it.
And Fortunately, we are tooled up they've got the formula is.
In place.
So we're producing anti microbial items now and for the customers that want them and we expect that to be a continued vector against some of our competitors' products.
Good thank you very much Walter.
Thank you.
And at this time there are no further questions in the key all Kinda conference back over to management for any concluding remarks.
Thank you very much cheaper or no further questions on this call is complete and we look forward to updating you again after the third quarter Goodbye.
And that does conclude today's conference again, thank you for your participation.
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