Q4 2021 Acme United Corp Earnings Call
[music].
Please standby we're about to begin.
Good day and welcome to the Acme United Corporation hosted fourth quarter 2021 earnings Conference call.
At this time I would like to turn the conference over to Mr. Walter Johnsen, Chairman and CEO . Please go ahead Sir.
Good morning, welcome to the fourth quarter and year end 2021 earnings call for Acme United Corporation.
I am Walter C Johnsen, Chairman and CEO with me is Paul Driscoll, Our Chief Financial Officer, who will first read a safe Harbor statement call forward looking statements in this conference call, including without limitation statements related to the Companys plans strategies objectives expectations intentions and adequacy.
Your resources.
Are made pursuant to the safe Harbor provisions.
The private Securities Litigation Reform Act of 90 to 95 investors are cautioned that such forward looking statements involve risks and uncertainties such as among others. Those arising as a result of the effects of the COVID-19 pandemic, including the ongoing economic downturn and the other risks and uncertainties described.
<unk> and our periodic filings with the Securities and Exchange Commission.
And in our current earnings release.
Thank you Paul.
United had a strong year in 2021.
Our team delivered its 12 consecutive year of record sales with earnings reaching an all time high.
We integrated the first aid central and <unk> acquisitions installed new warehouse management software in our largest distribution center and strengthened our balance sheet.
Sales for the year were $182 million compared to $164 million in 2021, an increase of 11%.
Our net income was $10 1 million versus $8 $1 million in the prior year up 25%.
Our earnings per share increased 11% to $2 57.
Versus $2 31 in 2020.
We gained in most of our key markets, including Westcott first aid only.
Camillus and DMT and Cuda.
Our Canadian and European subsidiaries had record sales.
We successfully managed the tight balance between raising the selling prices of our products and managing underlying costs.
Some of the increases included product costs due to inflation in China and higher cost of shipping containers.
We increased wages at our factories and distribution sides to attract and keep our workers, but we also had inefficiencies due to testing quarantine and illness.
The U S currency declines in global markets, increasing our costs.
Our team in Canada successfully integrated first aid central which we acquired in 2020.
This substantially grow their ecommerce business attracted new English and French speaking customers and converted business from our office and industrial customers in Canada and the U S.
They did an outstanding job.
The med <unk> business, which we acquired in December 2020.
New factors alcohol wipes and prep pads in Brooksville, Florida.
During 2021, it was successfully integrated into the Acme United Enterprise software.
And quality control and regulatory programs.
We installed new equipment for additional capacity.
Brought in new customers with our consumer and medical markets and began developing the next generation of products for use in our first aid kits and for outside sales.
We have sold new warehouse management software at our Rocky Mount North Carolina facility. As you May know this site has 345000 square feet of warehouse manufacturing and office space on 33 acres, the new software increase the accuracy of bin locations.
Units of measure and product packaging specifications, it improved picking and shipping and enhanced our capabilities for small parcels.
Accordingly, it provided the backbone to expand to our other locations and to be enhanced as our business grows.
The company improved its balance sheet during 2021, it obtained a fixed rate mortgage of $11 8 million on its plants in Rocky Mount North Carolina in Vancouver, Washington.
With a rate of three 8%.
And a term of seven years.
The new mortgage replaced variable rate debt.
The U S. Small business administration also forgave our $3 5 million dollar Paycheck protection program loan, which enhanced our equity.
I want to thank our associates at Acme, United for delivering outstanding performance in 2021.
It was a tough task and they delivered.
As we look to 2022, we anticipate continued challenges with inflation.
Product availability and uncertainty.
However, our business is strong and we are projecting substantial growth.
We will not be providing guidance at this time, but we believe our revenues will exceed 200 $200 million in 2022, I will now turn the call to Paul.
Acme's net sales for the fourth quarter were $45 8 million.
Compared to $49 million in 2020, an increase of 12% sales for the year ended December 31, 2021, or $182 million compared to $164 million in 2020, an increase of 11%.
Net sales in the U S segment increased 11% in the quarter and 9% for the year ended December 31 the.
The sales increase for both periods was mainly due to market share gains.
First aid and medical products as well as higher sales of Westcott craft products net sales for Europe increased 15% in local currency for both the fourth quarter and the year ended December 31.
The sales increase for both periods was primarily due to sales growth in the ecommerce channel across all product lines and market share gains in Westcott School and office products net sales in local currency for Canada increased 17% in the quarter and 22% of the year the sales increase.
For both periods was primarily due to sales growth of first aid products. The gross margin was 35, 1% in the fourth quarter of 2021 compared to 36, 8% in 2020.
The decline was primarily due to cost inflation pressures higher transportation costs and labor costs.
Price increases partially offset the cost increases gross margin for the year ended December 31, 2021 was 35, 6% compared to 36, 3% for 2020.
SG&A expenses for the fourth quarter of 2021 were $13 million or 28, 4% of sales compared with $12 $2 million or 29.7.
7% of sales for the same period of 2020.
SG&A expenses for the year ended December 31, 2021 were $52 million or 28, 6% of sales compared with $48 million.
Or 49, 4% of sales in 2020.
Net income for the fourth quarter, 2021 was $2 3 million or 60 cents per diluted share compared to a net income of $2 million or <unk> 54 cents per diluted share for the same period of 2020.
An increase of 14% of net income and 11% and earnings per share net income excluding the impact of the pp P loan forgiveness for the year ended December 31, 2021 was $10 1 million.
Our $2 57 per diluted share compared to $8 $1 million or $2 to $2 31 per diluted share in the comparable period last year, an increase of 25% of net income and 11% and earnings per share the company's debt less cash on December .
31, 2021 was $39 $7 million compared to $41.3 million on December 31, 2020. During the 12 month period ended December 31, 2021, the company distributed $1 8 million in dividends repurchased one $5 million of.
Common stock and received forgiveness for the PPP loan of $3 $5 million.
Thank you Paul I will now open the call to questions.
Thank you ladies and gentlemen, thank you have a question or comment it is star one on your telephone keypad.
And that is star one for any questions. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.
Pause for just a moment to give everyone an opportunity to signal.
Okay.
Our first question comes from Chris Sakai of singular research. Your line is open. Please go ahead.
Okay.
Hi, Walter I'm I'm on for Jim Moroney today.
Just had a question regarding supply chain issues are you seeing many.
Any disruption in your supply chain.
And all your inventory level are you comfortable with your inventory levels.
Chris that's a very good question.
Supply chain continues to be a very difficult problem.
<unk>.
You may know in many of our investors do know that we actively increased our inventory by about 30% 18 months ago.
And that additional inventory has allowed us to meet the kinds of sales performance that.
We're generating however.
The <unk>.
Supply chain continues to expand out.
Your risk of Miscalculating.
Eight months out is high.
<unk>.
Fortunately, we make products that are in demand and the items that we buy are pretty generic.
<unk>.
Can be easily sold within our organization, but.
The supply chain is a problem. We're also in the midst of a.
A conflict that is disrupting ship.
Shipping and.
Sure.
We're dealing with that as well.
Im very comfortable that our inventory levels will be able to support the growth that we're projecting for this year.
And we're working very hard to meet our customer expectations.
And we're doing that.
But this is not an easy task.
Okay, Great and just wanted to ask about I know you mentioned the conflict.
Is that the Russia, Ukraine War and I want to ask.
How is that affecting your business if at all.
Well, yes, the conflict I was referring to is the.
We're in.
The Ukraine.
And I.
I find it very very disturbing to watch the.
Flight of the people that are.
Being harmed right now.
Relative to.
Impact on Acme, United is very very insignificant.
We through our European business, we do about 40000 euro a year of sales into Russia. So it's very insignificant.
But.
You can imagine the chips are being diverted in various places to avoid conflict and.
I just read that.
Some of the major shipping lines are now diverting.
Vessels away from Russia, and putting them in service elsewhere in the world that actually helps some supply chain issues that we're facing.
But.
The conflict is just.
Terrible thing that's happening right now.
Right, Okay, well thanks for your answer.
Thank you Chris.
And as a reminder, ladies and gentlemen that with star one for any questions or comments.
We will go next to Richard Dearnley at Mont Park Partners. Your line is open. Please go ahead.
Morning.
Could you sort of frame price increases relative to their cost increases.
And then are you seeing any price resistance yet.
Well we are.
It's a complicated.
Question.
And part of the complication is there are so many price increases or cost increases whether that's.
The cost of shipping containers.
The impact of Covid in China, which is.
Hurting delivery to the ports the.
Congestion in the U S ports, you may know that.
We.
<unk>.
The U S administration that tried to eliminate some of the congestion in the.
L a and long beach ports and.
And the result of that is you don't see the ships offshore anymore, but they're traveling at about a third slower speed from China and so they are.
On the water.
Just moving slower, but the actual problems.
Continuing in the West coast ports, a change in the past several months has been because the east coast ports had.
Better delivery.
Schedules.
They got overwhelmed.
So the vessels went through the Panama Canal and went to long Beach, Savannah, and Charleston, and now they too are plugged up.
And so you've got cost pressures in many places as we work on price increases we're working on.
What we think are appropriate increases bearing in mind that you want value for your customers and ultimately delivery of value is what we do for a living.
The.
The pressures that we see are continuing.
We're seeing.
Potentially.
Inflation in the U S of about 10% annually versus seven and a half which was reported in January and Thats a direct result.
The price of oil and how that gets into.
Plastics, how it gets into the cost of fuel both for the delivery of vessels the vessels coming from all over the world.
As well as outbound freight so it's a very complicated pricing model and what we're doing is the best we can estimating the costs and passing those through appropriately to our customers.
And.
So so far youre, not I mean everyone's sort of stuck in the same boat so.
The general thinking is that there is little.
Our resistance to raising prices, because we'll just raise our prices.
But I.
I was wondering if anyone is starting to talk about.
But that's too high.
Now youre, probably exempt from that even with the price of oil.
105 or wherever it fixed today.
This is.
Going to stop in the short term in the very short term anyway.
Well, that's exactly right there was a lot of price pressure and it's continuing and it is increasing.
<unk>.
It's across the board so most of our products sell for under $25 in retail so theyre not likely to face the same kind of consumer resistance that for example, a refrigerator or.
Our used car market.
Right.
Yeah, Okay. Thank you.
Thank you.
Okay.
And one final reminder, again star one if you had a question or comment.
And I currently have no other questions holding gentleman I will turn the conference back to you for any additional or closing comments.
Well. Thank you very much again I would like to thank our team for the work. They did this year in 2021 and with outstanding It was with an awful lot of focus.
Really.
Difficult and unrelenting.
Pressure to get things done and we did it.
There are no further questions. This call is complete and we look forward to speaking to you again in the first quarter.
In April .
So much for joining us goodbye.
Ladies and gentlemen that concludes today's call. We thank you for your participation you may disconnect at this time.
[music].
[music].
Good day and welcome to the Acme United Corporation hosted fourth quarter 2021 earnings Conference call. At this time I would like to turn the conference over to Mr. Walter Johnsen, Chairman and CEO . Please go ahead Sir.
Good morning, welcome to the fourth quarter and year end 2021 earnings call for Acme, United Corporation, I Am Walter C. Johnsen, Chairman and CEO with me is Paul Driscoll, Our Chief Financial Officer, who will first read a safe Harbor statement Paul forward looking statements in this conference call.
<unk> without limitation statements related to the Companys plans strategies objectives expectations intentions, and adequacy of resources are made pursuant to the safe Harbor provisions.
The private Securities Litigation Reform Act of 90 to 95 investors are cautioned that such forward looking statements.
The risks and uncertainties such as among others those arising as a result of the effects of the <unk>.
COVID-19 pandemic, including the ongoing economic downturn and the other risks and uncertainties described in our periodic filings with the Securities and Exchange Commission and in our current earnings release.
Paul.
Acme United had a strong year in 2021.
Our team delivered its 12 consecutive year of record sales with earnings reaching an all time high.
We integrated the first aid central in Med Napa acquisitions installed new warehouse management software in our largest distribution center and strengthened our balance sheet.
Sales for the year were $182 million.
Compared to a $164 million in 2021, an increase of 11%.
Our net income was $10 1 million versus $8 $1 million in the prior year up 25%.
Our earnings per share increased 11% to $2 57.
Versus $2 31 in 2020.
We gained in most of our key markets, including Westcott first aid only <unk>.
Camillus and DMT and Cuda.
Our Canadian and European subsidiaries had record sales.
We successfully managed the tight balance between raising the selling prices of our products and managing underlying costs.
Some of the increases included product costs due to inflation in China and higher cost of shipping containers.
We increased wages at our factories and distribution sides to attract and keep our workers, but we also had inefficiencies due to testing quarantine and illness.
The U S currency declines in global markets, increasing our costs.
Our team in Canada successfully integrated first aid central which we acquired in 2020.
The substantially grow their ecommerce business attracted new English and French speaking customers and converted business from our office and industrial customers in Canada and the U S. They.
They did an outstanding job.
The <unk> business, which we acquired in December 2020.
You factor is alcohol wipes and prep pads Brooksville, Florida.
During 2021, it was successfully integrated into the Acme United Enterprise software.
And quality control and regulatory programs.
We installed new equipment for additional capacity.
Brought in new customers with our consumer and medical markets and began developing the next generation of products for use in our first aid kits and for outside sales.
We have sold new warehouse management software at our Rocky Mount North Carolina facility. As you May know this site has 345000 square feet of warehouse manufacturing and office space on 33 acres, the new software increase the accuracy of bin locations.
Units of measure and product packaging specifications, it improved picking and shipping and enhanced our capabilities for small parcels.
Accordingly, it provided the backbone to expand to our other locations and to be enhanced as our business grows.
The company improved its balance sheet during 2021, it obtained a fixed rate mortgage of $11 8 million on its plants in Rocky Mount North Carolina, and Vancouver, Washington.
With a rate of three 8% and a term of seven years.
The new mortgage replaced variable rate debt.
The U S small business administration also forgave, our $3 5 million dollar paycheck.
Protection program loan, which enhanced our equity.
I want to thank our associates at Acme, United for delivering outstanding performance in 2021.
It was a tough task and they delivered.
As we look to 2022.
We anticipate continued challenges with inflation product availability and uncertainty.
However, our business is strong and we are projecting substantial growth.
We will not be providing guidance at this time, but we believe our revenues will exceed 200 $200 million in 2022.
I'll now turn the call to Paul.
Acme's net sales for the fourth quarter were $45 $8 million.
Compared to $40 $9 million in 2020, an increase of 12% sales for the year ended December 31, 2021, or $182 million compared to $164 million in 2020, an increase of 11%.
Net sales in the U S segment increased 11% in the quarter and 9% for the year ended December 31.
The sales increase for both periods was mainly due to market share gains in first aid and medical products as well as higher sales of Westcott craft products net sales for Europe increased 15% in local currency for both the fourth quarter and the year ended December 31.
The sales increase for both periods was primarily due to sales growth in the ecommerce channel across all product clients and market share gains in Westcott School and office products net sales in local currency for Canada increased 17% in the quarter and 22% of the year the sales increase.
For both periods was primarily due to sales growth of first aid products gross margin was 35, 1% in the fourth quarter of 2021 compared to 36, 8% in 2020.
The decline was primarily due to cost inflation pressures higher transportation costs and labor costs.
Price increases partially offset the cost increases the gross margin for the year ended December 31, 2021 was 35, 6% compared to 36, 3% for 2020.
SG&A expenses for the fourth quarter of 2021 were $13 million or 28, 4% of sales compared with $12 $2 million or 29 seven.
7% of sales for the same period of 2020.
SG&A expenses for the year ended December 31, 2021 were $52 million or 28, 6% of sales compared with $48 million.
Or 49, 4% of sales in 2020.
Net income for the fourth quarter, 2021 was $2 3 million or 60 cents per diluted share compared to a net income of $2 million or <unk> 54 cents per diluted share for the same period of 2020.
An increase of 14% of net income and 11% and earnings per share net income excluding the impact of the pp P loan forgiveness for the year ended December 31, 2021 was $10 1 million.
Our $2 57 per diluted share compared to $8 1 million or $2 to $2 31 per diluted share in the comparable period last year, an increase of 25% of net income and 11% and earnings per share the company's debt less cash on December .
31, 2021 was $39 7 million compared to 41 three.
$3 million on December 31, 2020, turning to 12 month period ended December 31, 2021, the company distributed $1 8 million in dividends.
Purchased one $5 million of <unk>.
Common stock and received forgiveness for the PPP loan of $3 $5 million.
Thank you Paul I will now open the call to questions.
Thank you ladies and gentlemen, if you have a question or comment it is star one on your telephone keypad again that is star one for any questions. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.
Pause for just a moment to give everyone an opportunity to signal.
Okay.
Our first question comes from Chris Sakai of singular research. Your line is open. Please go ahead.
Hi, Walter I'm on for Jim Moroney today.
Just had a question regarding supply chain issues are you seeing.
Any disruption in your supply chain.
And are your.
Tori level.
Are you comfortable with your inventory levels.
Chris that's a very good question.
Supply chain continues to be a very difficult problem.
You may know in many of our investors do know that we actively increased our inventory by about 30% 18 months ago.
And that additional inventory has allowed us to meet the kinds of sales performance that we're generating however.
The <unk>.
Supply chain continues to expand out.
Your risk of Miscalculating.
<unk> eight months out is high.
Fortunately, we make products that are in demand and the items that we buy are pretty.
Generic.
And that can be easily sold within our organization.
<unk>.
The the supply chain is a problem. We're also in the midst of a.
A conflict.
Is disrupting.
<unk> and <unk>.
We're dealing with that as well.
I'm very comfortable that our inventory levels will be able to support the growth that we're projecting for this year.
And we're working very hard to meet our customer expectations.
And we're doing that.
But this is not an easy task.
Okay, Great and just wanted to ask about I know you mentioned the conflict.
Is that the Russia, Ukraine War and I want to ask.
How is that affecting your business if at all.
Well, yes, the conflict I was referring to is the.
We're in.
The Ukraine.
And the <unk>.
Find it very very disturbing to watch the.
<unk> of the people that are.
Being harmed right now.
Relative to.
Impact on Acme, United is very very insignificant.
We through our European business, we do about 40000 euro a year of sales into Russia. So it's very insignificant.
But.
You can imagine the chips are being diverted in various places to avoid conflict and.
I just read that.
Some of the major shipping lines are now diverting vessels away from Russia, and putting them in service elsewhere in the world that actually helps some supply chain issues that we're facing.
But.
The conflict is just <unk>.
Terrible thing that's happening right now.
Right, Okay, well thanks for your answer.
Thank you Chris.
And as a reminder, ladies and gentlemen that with star one for any questions or comments.
We'll go next to Richard Dearnley at Mont Park Partners. Your line is open. Please go ahead.
Good morning.
Could you sort of frame price increases relative to their cost increases.
And then are you seeing any price resistance yet.
Well we are.
It's a complicated.
A question <expletive> .
And part of the complication is there are so many price increases or cost increases whether thats.
The cost of shipping containers.
The impact of Covid in China, which is hurting delivery to the ports the.
Congestion in the U S ports you may know.
Net.
We.
The U S administration that tried to eliminate some of the congestion in the.
L a and long beach ports.
And the result of that is you don't see the ships offshore anymore, but they're traveling at about a third slower speed from China and so they are.
On the water.
Just moving slower, but the actual problems.
Our continuing in the West coast ports, a change in the past several months has been because the east coast ports had.
<unk>.
Better delivery.
Schedules.
Got overwhelmed.
The vessels went through the Panama Canal and went to long Beach, Savannah, and Charleston, and now they too are plugged up.
And so you've got cost pressures in many places as we.
Work on price increases we're working on.
What we think are appropriate increases bearing in mind that you want value for your customers and ultimately delivery of value is what we do for a living.
The.
The pressures that we see are continuing.
We are seeing.
Potentially.
Inflation in the U S of about 10% annually versus seven and a half which was reported in January and Thats. A direct result of the price of oil and how that gets into <unk>.
Plastics, how it gets into the cost of fuel both for the delivery of vessels the vessels coming from all over the world.
As well as outbound freight so it's a very complicated pricing model and what we're doing is the best we can estimating the costs and passing those through appropriately to our customers.
And.
So so far youre not.
Everyone sort of stuck in the same boat so.
General thinking is that there is little resistance to raising prices because we'll just raise our prices.
But I.
I was wondering if if anyone is starting to talk about.
But that's too high.
Now youre, probably exempt from that even with the price of oil.
105 or wherever it fixed today.
This is.
Going to stop in the short term in the very short term anyway.
Yes.
Well, that's exactly right there was a lot of price pressure and it's continuing and it's increasing.
And.
It's across the board so most of our products sell for under $25 in retail so theyre not likely to face the same kind of consumer resistance that for example, a refrigerator or.
Our used car market.
Right.
Okay. Thank you.
Thank you.
Okay.
And one final reminder, again star one if you had a question or comment.
And I currently have no other questions holding gentleman I will turn the conference back to you for any additional or closing comments.
Well. Thank you very much again I would like to thank our team for the work. They did this year did in 2021 outstanding It was with an awful lot of focus.
Really.
Difficult and unrelenting.
Pressure to get things done and we did it.
There are no further questions. This call is complete and we look forward to speaking to you again in the first quarter.
In April thank you so much for joining us goodbye.
Ladies and gentlemen that concludes today's call. We thank you for your participation you may disconnect at this time.