Q4 2024 Acme United Corp Earnings Call
[music].
Good day and welcome to the Acme, United Corporation's fourth quarter 2024 earnings call at this time I'd like to turn the call over to Walter Johnsen, Chairman and CEO. Please go ahead Sir.
Operator: Good day and welcome to the Acme United Corporation's fourth quarter 2024 earnings call.
Operator: At this time, I'd like to turn the call over to Walter Johnson, chairman and CEO. Please go ahead. Good morning.
Good morning.
Walter Johnson: Welcome to the fourth quarter and year 2024 earnings conference call for Acme United Corporation.
Welcome to the fourth quarter and year 2024 earnings Conference call Correct, United Corporation, I'm, Walter C Johnsen, Chairman and CEO.
Walter Johnson: I'm Walter C. Johnson, Chairman and CEO.
Paul Driscoll: 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, including without limitation, statements related to the company's plans, strategies, objectives, expectations, intentions, and adequacy of capital and other 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 among others, those arising as a result of the challenging global macroeconomic environment characterized by continued high inflation, high interest rates, and the imposition of new tariffs or changes in existing tariff rates.
With me is Paul Driscoll, our Chief Financial Officer, who will first read a safe Harbor statement Paul.
Paul Driscoll: Forward looking statements in this conference call, including without limitation statements relating to the company's plans strategies objectives expectations intentions, and adequacy of capital and other resources are made pursuant to the safe Harbor provisions of the.
Private Securities Litigation Reform Act of 1995 <unk>.
Paul Driscoll: Investors are cautioned that such forward looking statements involve risks and uncertainties, including among others. Those are rising as a result of the challenging global macroeconomic environment characterized by continued high inflation and high interest rates and the imposition of new terrorists or changes in existing tariff rates. In addition, we have experienced.
Paul Driscoll: In addition, we have experienced supply chain disruptions and we may experience these disruptions in the future. We are also subject to additional risks and uncertainties.
Paul Driscoll: Hi chain disruptions.
Paul Driscoll: We may experience these disruptions in the future.
Paul Driscoll: We are also subject to additional risks and uncertainties.
Paul Driscoll: as described in our periodic filings with the Securities and Exchange Commission and in our current earnings release.
Paul Driscoll: As described in our periodic filings with the Securities and Exchange Commission and in our current earnings release.
Walter Johnson: Thank you, Paul. Acme United had a strong year in 2024. We had record net sales of $194.4 million and record EBITDA of $20 million.
Paul Driscoll: Okay.
Paul Acme: Thank you Paul Acme, United had a strong year in 2024, we had record net sales of $194.4 million and record EBITDA of $20 million.
Walter Johnson: You may recall, we sold our Kuta and Kimos hunting and fishing business in November 2023 for $19.8 million. We used the after tax proceeds of approximately $15 million to reduce debt and position the company for sale of CUDA and Camillus representative return of over 100 times our investment. During 2024, we reported net sales growth of 2%, despite the reduction of approximately $9 million in revenues from the businesses we sold. Net revenues adjusted for the sale of CUDA and Kimelos increased 6% during 2020. Our net income in 2024 was $10 million compared to $8.1 million in 2023, an increase of 23%.
Paul Driscoll: You may recall, we sold our cuda and camillus hunting and fishing business in November 2023, with $19.8 million, we use the after tax proceeds of approximately $15 million to reduce debt and position the company for group book.
Paul Acme: The sale of food and Incrementalist represented a return.
Paul Driscoll: 100 times that we're in Augusta.
During 2024, we reported net sales growth of 2%. Despite the reduction of approximately $9 million in revenues from the businesses. We sold net revenues adjusted for the sale of Cuda and Camillus increased 6% during 2024.
Paul Driscoll: Our net income in 2024 was $10 million compared to $8 $1 million in 2023, an increase of 23% we adjusted our expenses to compensate for the lost contribution of the businesses we sold.
Walter Johnson: We adjusted our expenses to compensate for the lost contribution of the businesses we sold and generated productivity savings. This performance was better than we planned. Earnings per share were $2.45 in 2024, compared to $2.23 in 2023, an increase of 10%. Our first aid business had strong performance. Its revenues were approximately $120 million. Refills of components for first aid kits were approximately $30 million and growing. We introduced smart compliance first aid cabinets with RFID technology in 2024, which permit automatic replenishment of refills. This is the annuity segment of our business that builds on our growing installed base of industrial first aid.
Paul Driscoll: It generated productivity savings this performance was better than we planned.
Paul Driscoll: Earnings per share with $2.45 in 2024 compared to $2.23 in 2023, an increase of 10%.
Paul Driscoll: Our first aid business had strong performance its revenues were approximately $120 million.
Paul Driscoll: We feel that the controllers for first aid kits were approximately $30 million and growing.
Paul Driscoll: We introduced our smart compliance first aid cabinets with RFID technology in 2024, which permit automatic replenishment of lethal.
Paul Driscoll: This is the annuity segment of our business that builds on our growing installed base of industrial first aid kits.
Walter Johnson: Automatic Repunishment provides substantial savings to our customers. and captures a high percentage of items needed to keep the kits compliant with OSHA and ANTI-STEM.
Speaker Change: What I'm adequate punishment provide substantial savings to our customers.
Speaker Change: Catches a high percentage of items needed to keep the kids compliant with Osha ANSI standards.
Speaker Change: Yeah.
Walter Johnson: Our Westcott Cutting and DMT sharpening business had excellent performance in 2024. Net revenues in this segment were approximately $75 million, an increase of 10% compared to 2023. We gained share in the Kraft Mart. expanded our distribution of high leverage and proprietary adjustable blade scissors and broadened the family of cutters to open boxes in industrial settings and in homes. We're excited about our new sharpening tools that we successfully introduced in the kitchen and culinary markets and the outstanding growth that we experienced in this category in 2024. Our productivity initiatives resulted in over $2 million in annual savings.
Speaker Change: Our westcott cutting and DMT sharpening business had excellent performance in 2024.
Net revenues in this segment were approximately $75 million, an increase of 10% compared to 2023.
We gained share in the craft market.
Speaker Change: And at our distribution of high leverage a proprietary adjustable blade scissors and broadened the family of cutters to open boxes in industrial settings and homes.
Speaker Change: We are excited about our new sharpening tools that we successfully introduced in the kitchen and culinary markets and the outstanding growth that we experienced in this category in 2024.
Speaker Change: Our productivity initiatives resulted in over $2 million in annual savings.
Walter Johnson: We attacked expenses on many fronts, including reducing the cost of first aid boxes. automating the placement of items into unitized packages, fitting out freight and carrier charges, and installing new software tools to optimize placement of items in our warehouse. We installed new warehouse racking in our largest distribution center. This facility in Rocky Mountain, North Carolina, has over 340,000 square feet on 33 acres of land and has been the backbone of our expansion during the past eight years. The new racking increases our capacity by 30 percent. positions us to handle additional growth.
Speaker Change: We attacked expenses on many fronts, including the reduced reducing the cost of first aid boxes.
Speaker Change: Automation and the placement of items into unitize packages.
Speaker Change: Our trade and carrying charges and install a new software tool to optimize the placement of items in our warehouses.
Speaker Change: We have new warehouse racking and our largest distribution center.
Speaker Change: <unk> and Rocky Mountain North Carolina has over 340000 square feet.
Speaker Change: On 33 acres of land and has been the backbone of our expansion during the past eight years, the new rack and increases our capacity by 30%.
Speaker Change: It positions us to handle additional growth.
Speaker Change: Our businesses in Canada, and Europe also had a good year, we moved into a new facility in Laval, Canada to handle growth in first aid central or.
Walter Johnson: Our businesses in Canada and Europe also had a good year. We moved into a new facility in Laval, Canada, to handle growth in First Aid Central. Our European business made investments to expand in the first aid and medical segment and generated another profitable year.
Speaker Change: Our European business made investments to expand in the first aid and medical segment and generated another profitable year.
Speaker Change: We anticipate that there will be challenges with tariffs in 2025, and we feel we already during the past eight years, we've purchased 10 companies with production facilities in the United States and Canada.
Walter Johnson: We anticipate that there will be challenges with tariffs in 2025, and we feel we are ready. During the past eight years, we have purchased 10 companies with production facilities in the United States and Canada, and worked to diversify our sourcing to many global locations. including Thailand, Egypt, India, and the Philippines.
Speaker Change: Work to diversify our sourcing to many global locations, including Thailand, Egypt, India and the Philippines.
Walter Johnson: We would like to acknowledge Stevenson Ward, who will be retiring from our Board of Directors in April. Steve has been Chair of our Audit Committee, and a valued confidant, colleague, and friend. He leaves us a much stronger company than when he arrived more than 20 years ago.
Speaker Change: We would like to acknowledge Stevenson ward, who will be retiring from our board of directors in April.
Speaker Change: Steve has been chair of our audit Committee.
Speaker Change: And then valued confidant, probably and friend.
Speaker Change: He leaves us a much stronger company than when he arrived more than 20 years ago.
Walter Johnson: I would like to personally say thank you to Steve Ward.
Speaker Change: I would like to personally say, thank you to sniff world.
Paul: As we look into 2025, we're optimistic and confident we have a strong customer base excellent financial strength and a solid book of new business I will now turn the call to Paul.
Walter Johnson: As we look into 2025, we are optimistic and confident. We have a strong customer base, excellent financial strength, and a solid book of new business.
Paul Driscoll: I will now turn the call to Paul. Acme's net sales for the fourth quarter were $45.9 million compared to $41.9 million in 2023, an increase of 10%. Sales for the year ended December 31, 2024 were $194.5 million compared to $191.5 million in 2023, an increase of 2%. Excluding the impact of the Camillus and Kuda hunting and fishing product line sold on November 1, 2023, sales for 2024 increased 6%. Net sales in the U.S. segment increased 12% in the fourth quarter. Excluding Camillus and Kuda sales increased 8% for the year ended December 31, 2024, due to market share gains with First Aid, Westcott, Kraft Products, and DMT Sharper.
Speaker Change: Paul asked.
Speaker Change: Net sales for the fourth quarter were $45 $9 million compared to $41.9 million in 2023.
Speaker Change: An increase of 10% sales for the year ended December 31, 2024 were $194.5 million compared to $191.5 million in 'twenty 'twenty screen increase of 2%.
Speaker Change: Excluding the impacts of the Camillus and cuda hunting and fishing product lines sold on November one 2023 sales for 'twenty 'twenty four increased 6% net sales in the U S segment increased 12% in the fourth quarter, excluding Camillus and cuda sales increased 8%.
Speaker Change: For the year ended December 31, 2024, due to market share and get market share gains with first aid wescott craft products and DMT sharpener.
Paul Driscoll: Net sales in Europe declined 1% of the local currency for the quarter, sales for the year ended December 31, 2024, excluding Kumils and Kuda. increased 8% compared to 2023. The sales increase for the year is mainly due to market share gains in the office channel. Net sales in Canada were constant and low concurrency for the quarter. Sales for the year ended December 31, 2024, excluding Camilo Secunda, increased 1% compared to 2023. Sales of first aid products were strong, however, there was a decline in sales of school and office products. The gross margin was 38.7% in the fourth quarter of 2024 compared to 39.1% in 2023.
Speaker Change: Net sales in Europe declined 1% in local currency for the quarter sales for the year ended December 31, 'twenty 'twenty, four excluding camillus and cuda.
Speaker Change: Increased 8% compared to 2023, the sales increase for the year was mainly due to market share gains in the office channel net sales in Canada were constant local currency for the quarter sales.
Speaker Change: Sales for the year ended December 31, 2024, excluding camillus and cuda increased 1% compared to 2023 sales.
Sales of first aid products were strong. However, however, there was a decline in sales of school and office products. The gross margin was 38, 7% in the fourth quarter of 'twenty 'twenty four compared to 79, 1%.
Speaker Change: In 2023, the gross margin for the year was 39, 3% compared to 37, 7% in 2023.
Paul Driscoll: The gross margin for the year was 39.3% compared to 37.7% in 2023. The higher gross margin for the year was mainly due to productivity improvement initiatives in our manufacturing distribution facilities. SG&A expenses for the fourth quarter of 2024 were $15.5 million, or 34% of sales compared with $14.3 million or 34% of sales for the same period of 2023. SG&A expenses for the 12 months of 2024 were $62 million or 32% of sales compared with $59 million or 31% of sales in 2023. Interest expense for the year went from $3 million in 2023 to $1.9 million in 2024 due to a decline in the average debt of approximately $16 million.
Speaker Change: The higher gross margin for the year was mainly due to productivity.
Speaker Change: Proven initiatives in our manufacturing and distribution facilities.
Speaker Change: SG&A expenses for the fourth quarter of 'twenty, 'twenty, four was $15 $5 million or 34% of sales compared with.
Speaker Change: $14 $3 million or 34% of sales for the same period of 2023 SG&A expenses for the 12 months of <unk>.
Speaker Change: 'twenty 'twenty, four was $62 million or 32% of sales compared with $59 billion or 31% of sales in 2023 intra.
Speaker Change: Interest expense for the year went from $3 million in 2023 to $1 $9 million in 2024 due to a decline in the average churn of approximately $16 million.
Paul Driscoll: Net income for the fourth quarter, 2024, was $1.7 million, or 41 cents per diluted share. after excluding the $9.6 million gain on the sale of the Camillus Incuda product line. in the fourth quarter of 2023. This compares to $1.6 million or $0.40 per diluted share in Q4 2023, an increase of 9% in net income and 3% in diluted earnings per share. Net income for the year ended December 31, 2024 was $10 million or $2.45 per diluted share. After excluding the gain on the sale of Camils and Cuda, this compares to $8.1 million or $2.23 per diluted share in 2023, an increase of 23% in net income and 10% in diluted earnings per share.
Net income for the fourth quarter 2024, it was $1.7 million or 41 cents per diluted share.
Speaker Change: After excluding the $9.6 million gain on the sale of the Camillus and cuda product lines.
Speaker Change: In the fourth quarter of 2023. This compares to 1.55.
Speaker Change: $5 6 million or 40 cents per diluted share in Q4, 2023, an increase of 9% of net income and 3% and diluted earnings per share net income for the year ended December 31, 2024, it was $10 million or $2.45 per diluted share.
Speaker Change: After excluding the gain on the sale of Cumulus included this compares to $8 $1 million or $2.23 per diluted share in 2023, an increase of 23% of net income in 'twenty and 10% in diluted earnings per share.
Paul Driscoll: The company's bank debt less cash on December 31, 2024 was $21.5 million compared to $19 million on December 31, 2023. During the 12-month period, we purchased the assets of Elise First Aid, for $6.1 million.
Speaker Change: Company's bank debt less cash on December 31, 2024 was $21 $5 million compared to $19 million.
Speaker Change: <unk> 31 2023.
Speaker Change: During the 12 month period, we purchased the assets of at least first aid.
Speaker Change: Score of $6 $1 million.
Paul Driscoll: paid $2.2 million in dividends and generated approximately $5 million in free cash flow.
Speaker Change: Paid 2.2 million in dividends and generated approximately $5 million in free cash flow.
Speaker Change: Thank you Paul I will now open the call to questions.
Walter Johnson: Thank you, Paul. I will now open the call to questions. Great, thank you.
Speaker Change: Great. Thank you at this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
Operator: At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.
Speaker Change: Price start to remove yourself from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Operator: One moment please, I'll pull it for you.
Speaker Change: One moment please poll for questions.
Jim Round: Our first question is from Jim round from singular research. Please go ahead.
Jim Marrone: Our first question is from Jim Marrone from Singular Research. Please go ahead. Good afternoon, gentlemen. I have two questions. Both of them are related to the tariffs. With my first question, in your prepared remarks, you said that your company is ready for the upcoming tariffs, and you kind of alluded to the fact that you're ready based on expansion with respect to acquisitions over the few years. So I just was hoping that maybe you can just put a little bit more clarity to those prepared comments. And related to that, how do you plan on attacking or being prepared for tariffs, both the tariffs that the U.S.
Speaker Change: Good afternoon, gentlemen, I have two questions. Both of them are related to the tariffs are with my first question in your prepared remarks, you said that your company is he's ready for the upcoming tariffs and you kind of alluded to the fact that youre ready based on.
Speaker Change: On expansion.
Speaker Change: With respect to acquisitions over the few years.
Speaker Change: So I just was hoping that maybe you can just put a little bit more clarity since those prepared comments.
Speaker Change: And related to that.
Speaker Change: You know how do you plan on.
Speaker Change: Attacking or or being prepared for <unk>.
Speaker Change: Both the tariffs of the U S is going to impose as well as the retaliatory tariffs do you plan on.
Jim Marrone: is going to impose, as well as the retaliatory tariffs. Do you plan on... You know, your operations in Canada, like selling from within and avoiding cross-border shipments as well as within the U.S., or do you plan to continue cross-border trade? So I'm just curious, I'm looking forward to hearing your comments on that.
Speaker Change: You know your operations in Canada like selling from within.
Speaker Change: Avoiding cross cross border shipments.
As well as within the U S or do you plan to continue cross border.
Speaker Change: Great. So just.
Speaker Change: Just curious.
Speaker Change: Looking forward to hearing your comments on that.
Walter Johnson: That's really a very helpful question, Jim. The first part is the preparation. So over the past eight years, we've purchased manufacturing sites, Vancouver, Washington, that was first aid only. That's one of our major first aid production sites where we make first aid products. We also make first aid products in Rocky Mountain, North Carolina. We bought Spill Magic, which makes spill cleanup powder. And in the medical area, we use that powder for bloodborne pathogen kits and bodily fluid cleanup kits. That production is in Santa Ana, California, and Nashville, Tennessee. We bought MedNap, which makes an alcohol prep tag.
Jim Round: Oh, well, that's really very helpful. A question Jim the first part is the preparation.
So over the past eight.
Jim Round: Eight years with purchased manufacturing sites Vancouver, Washington that was first aid only that's one of our major first aid production sites.
Jim Round: We make first aid products.
Jim Round: Can make first aid products in Rocky Mount North Carolina, We bought spill magic, which makes a spill cleanup powder and in the medical area, we use that powder for blood borne pathogen kits.
Jim Round: And bodily fluid cleanup kits.
Jim Round: That production is in Santa Ana, California, and Nashville, Tennessee, We bought med now, which makes that alcohol prep pads D Z K wives, calamine, lotion hand, sanitizers and other items triple antibiotic whites.
Walter Johnson: BZK wipes, calamine lotion, hand sanitizers, and other items, triple antibiotic wipes. That's in Brooksville, Florida, and we're working on an expansion there, all domestic production.
Jim Round: That's and Brooksville, Florida, and we're working on an expansion there all domestic production.
Walter Johnson: What we did in our Asian business is... a dual sourcing strategy in places like Egypt, which has a broad Cotton Industry. You may think of Egyptian cotton or Egyptian linen as an example. So gauze, tape, and it's very competitive with China. So we've moved quite a bit of production into Egypt, as well as into China. Um, in the case of, uh, some of our production that's currently in China, we're moving pieces of it from the previous Trump tariffs, um, into Thailand and the Philippines. The first production of Thai Paper Cutters, as an example, with a certificate of origin made in Thailand, was in December 2024.
Jim Round: What we did in our Asian business is.
Jim Round: A dual sourcing strategy.
Jim Round: In places like Egypt, which has a broad.
Jim Round: The cotton industry, you may think of Egyptian cotton or Egyptian linen that as an example, so GARS tape and it's very competitive with China. So we've moved quite a bit of production into Egypt as well as into China.
Jim Round: In the case of some of our production.
Jim Round: It's currently in China, we're moving pieces of it from the previous Trump tariffs into Thailand, and the Philippines.
Jim Round: The first production the Thai.
Jim Round: Paper cutters as an example, where the certificate awards made in Thailand.
Jim Round: Was in December 2020 for that's gonna be followed by many many other items, we do a lot of production today in India.
Walter Johnson: That's going to be followed by many, many other items. We do a lot of production today in India, and that's been as part of the diversification out of China. So, as you look at, first, the preparation. It's been something we've been responding to over the past eight years, and we are very broadly diversified compared to where we had been.
Jim Round: And that's been a part of the diversification out of China.
Jim Round: So as you look at first the preparation.
Jim Round: It's been something we've been responding to over the past eight years, and we are very broadly diversified compared to where we had been.
Jim Round:
Walter Johnson: Now, specifically, uh, the retaliatory tariffs and the question of how we address those. Our subsidiaries are set up so that, for example, in Canada, a first aid central business produces first aid kits in Canada. There's very little cross-border shipping. There is some. For example, we make DZK wipes in Brooksville, Florida and MedNap. We ship them into Canada because there's a drastic shortage of those items in Canada. Even if there was a retaliatory tariff, The availability of these EK wipes is something that we have that most of our competitors do not. and that would continue to be a plus.
Jim Round: Now specifically.
Jim Round:
Jim Round: The retaliatory tariffs and the question of.
Jim Round: How we address those subsidiaries are set up so that for example in Canada. Our first aid central business produces first aid kits in Canada.
Jim Round: Very little cross border.
Jim Round: The shipping there is some cause example, we make D Z K wipes in Brooksville, Florida, and med that we ship them into Canada, because there's a drastic shortage of those items in Canada.
Jim Round: And even if there was a a retaliatory tariff.
Jim Round: The availability of Buzzi K wipes is something that we have that most of our competitors do not.
Jim Round: And that would be a continue to be a plus but.
Walter Johnson: But the actual production, the sourcing in China, it's all in our Toronto. location, our Montreal location, and our warehouse in Mount Forest. So it's really separate.
Jim Round: The actual production the sourcing in China, it's all in our Toronto.
Jim Round: Location, or Montreal location, and our warehouse and a mouth for us. So it's really separate in the case of Europe, It's similar or European business is a subsidiary that deals directly with China and they have with these tariffs there it's different than in the U S. We don't ship from the U S.
Walter Johnson: In the case of Europe, it's similar. Our European business is a subsidiary that deals directly with China, and they have tariffs there. It's different than in the U.S. We don't ship from the U.S. to Europe. It goes directly from the sources in China. Our first aid production is done there as well, as well as the other locations. So I'm not really. I'm too concerned about retaliatory tariffs. I think we're positioned to be able to respond to those very easily because we're a hole within those locations.
Jim Round: In Europe. It goes directly from the sources in China. Our first aid production is done there as well as well as the other locations so I'm not really.
Jim Round: I'm too concerned about retaliatory tariffs.
Jim Round: We're positioned to be able to.
Jim Round: Respond to those.
Jim Round: Very easily because were.
Whole within those locations.
Walter Johnson: Now, when tariffs happened... We do a couple of. First, we work with our suppliers to figure out ways to reduce cost, and they tend to respond to that. Second, we have an ongoing productivity program. I mentioned $2 million last year. So every year you expect productivity in your factories, and your suppliers have similar goals. Third, we do regular price increases for inflation, and that covers part of the cost of tariffs. And frankly, if there's a tariff that's so big, like two or three, well, we're the largest scissor maker globally. So there's no one that can replace the volumes that we have.
Jim Round: Now.
Jim Round: <unk>.
Jim Round: When tariffs happen.
Jim Round: Yeah.
Jim Round: We do a couple of things.
Jim Round: We work with our suppliers to figure out ways to reduce costs and they tend to respond to that second we have an ongoing productivity program I mentioned $2 million last year. So every year you expect productivity in your factories and your suppliers have similar goals third.
Jim Round: We do regular price increases for inflation and that covers part of the cost of tariffs and frankly, if there's a tariff that so big like two or three well, we're the largest scissor maker globally.
Jim Round: So there's no one that can be close to the volumes that we have.
Walter Johnson: This is Pricing Power, Emily's leading brand. In the case of our first aid, we're the leading brand in North America. And again, we're a very diversified sourcing brand. Finally, if the tariffs were to be very, very high globally, we have the capability in our first aid business to bring it back gradually into pieces of the U.S. and vertically integrate further. It's not perfect, but we're prepared.
Jim Round: There's pricing power and we have a leading brand in the case of our first aid with a leading brand in North America, and again with a very diversified sourcing base.
Jim Round: Finally, if the tariffs were to be very very high globally, we have the capability in our first aid business to bring it back gradually into pieces of the U S and vertically integrate further.
Jim Round: So.
It's not perfect but.
Jim Round: We're prepared.
Jim Marrone: Yeah, that's great. Great insight. Thank you for that clarity.
Speaker Change: Yeah, that's great great insight, thank you for that clarity.
Jim Marrone: However, here's my follow-up. Right, it's not perfect, but you're prepared. So can you perhaps just comment, like if the tariffs were to be imposed, like where exactly will your business get hit the most? Will it be based on the input prices becoming higher and you're going to have to pay higher input prices? Or will it be based on the sales where you're going to be having to sell at higher price points as a result of the tariff? Can you give us a sense of where the biggest hits going to be and how that's going to play out?
Speaker Change: Oh Wow, Here's my follow up and right, it's not perfect, but your prepared.
Speaker Change: So can you, perhaps just comment Mike.
Speaker Change: If the tariffs were to be imposed like where exactly will your business get hit.
Speaker Change: But the most well.
Speaker Change: <unk>.
Speaker Change: Based on the input prices are becoming higher and then I have to pay higher input prices or well I E.
Speaker Change: On the sales, where you're gonna be happening having to sell at higher price points are the result of the tariffs can you give us a sense of them.
Speaker Change: We're the biggest hits gonna be and and how that's going to play out. Thanks.
Well, it's a dynamic.
Walter Johnson: Well, it's a dynamic situation right now because tariffs, you know, there's an extra 10% that was just announced. for implementation next week, and for China. So with that, as an example. First, it's on your cost, not your selling. because you're importing. We pay the tariff. We will be working with our suppliers to adjust. their costs. We will adjust maybe the mix of some products. We will be getting productivity. And there is a price increase that will. We go with inflation, and we've already announced those, and they're happening. So it's a mix. But generally, when we're done, we try to be pretty close to margin break even.
Speaker Change: Situation right now because tariffs you know, there's an extra 10% that was just announced.
For implementation.
Speaker Change: Next week.
Speaker Change: And for China, So with that as an example.
Speaker Change: First is on your cost not your selling price right because you're importing we pay the tariff we will be working with our suppliers to adjust.
Speaker Change: Just of their costs, we will adjust maybe the mix of some products, we will be getting productivity.
Speaker Change: And then there is a price increase that will.
Speaker Change: Go with inflation.
Speaker Change: We've already announced those and they're they're happening so it's a mix but.
Speaker Change: Generally when we're done.
Speaker Change: We tried to be pretty close to margin breakeven.
Walter Johnson: being sensitive to be that we're giving real value to our customers.
Speaker Change: Being sensitive to be that we are giving a real value to our customers.
Speaker Change: Right and what about on the other end on the sales side. So.
Jim Marrone: Right, and what about on the other end, on the sales side? Like, how much of an impact can you imagine having to sell with regards to the goods that are shipped cross-border as far as, you know, the price points of your selling prices being higher as a result of the tariffs? nigger sense of how much impact that could possibly be. again, it just depends on the rest of the supply chain. But we've already put a price increase. Remember, there is inflation. So you've got that covering on your selling price. And there may be a pickup in a little bit of that.
Speaker Change: Like how much of an impact can you imagine.
Speaker Change: Having to sell with regards to the goods that are shipped cross border as far as the pie.
Speaker Change: Points of your of your selling prices being higher as a result of the tariffs.
Speaker Change: You got a sense of how much impact that could possibly be.
Speaker Change: So again it just depends on the rest of the supply chain, but we've already put a price increase remember there is inflation. So you've got that covering on your selling price and then may be a pick up in a little bit with that.
Walter Johnson: But then maybe the customer trades to a different item. And we work with them to keep the utility of what they're buying comparable and they don't actually get a price increase, they have a substitution. So it's not quite so simple. And I know the says, well, you got a 10% increase in 10% selling price increase doesn't work that way.
Speaker Change: But then maybe the customer trades to a different item and we work with them to keep the.
Speaker Change: The utility of what Theyre buying comparable and they don't actually get a price increase they have a substitution. So it's not quite so simple and I know the press says well you've got a 10% increase in 10% selling prices increase doesn't work that way.
Speaker Change: Okay, great. Thank you for the insight Jonathan.
Walter Johnson: Okay, great. Thank you for the insight, John. Thanks, Jim.
Jim Round: Thanks, Jim.
Jim Round: As a reminder, if you'd like to ask a question. It is star one.
Operator: As a reminder, if you'd like to ask a question, it is star 1.
Jim Round: And our next question here is from Jeffrey Matthews from Ram Partners. Please go ahead.
Jeffrey Matthews: And our next question here is from Jeffrey Matthews. From RAND Partners, please go ahead. Thank you, and that was a great answer, Walter, and leads into my question, which is also about tariffs, but more broadly. We have an economic policy that kind of run out of the White House now, and it sort of depends on what side of the bed the president got up on. an advantage that What you don't have is that if you're a very large company like Apple or Amazon and you can pay a million dollars for his president's inauguration committee, you now have a seat at the table.
Thank you and that was a great answer Walter and leads into my question, which is also about tariffs, but more broadly.
Jim Round: Where we have an economic policy.
Jim Round: Kind of run out of the White house, now and it sort of depends on what side of the bed.
Jim Round: The president got up on.
Jim Round: And.
Jim Round: An advantage that.
Jim Round: You don't have is.
Jim Round: Is that if you're a very large company like Apple or Amazon and you can pay a million dollars to two for.
Jim Round: His President's inauguration committee you would now have a seat at the table.
Walter Johnson: and he's going to be your friend and my question is Does the small manufacturer, who could get run over depending on where the tariffs are applied, does the small manufacturer have a voice at the table here? Well, we really do not have a voice at the table. And you're absolutely right. We're not Apple. On the other hand, within our market segments, we're very big. You know, whether that's in the cutting area where we have. a large share in the world. or in the Scissors, or in the first day when we're major in North America, we do have pricing power, and we do have negotiating power with our suppliers.
Jim Round: And he's going to be your friend.
Jim Round: And my question is.
Jim Round: Does the small manufacturer, who could who could get run over.
Jim Round: Depending on where.
Jim Round: Where the tariffs are applied.
Speaker Change: There's a small manufacturer have a voice at the table here.
Speaker Change: Well, we really do not have a voice at the table.
Speaker Change: The.
Speaker Change: And you're absolutely right, we're not Apple and then the other.
Speaker Change: Hand within our market segments were very big.
Speaker Change: Whether that's in the cutting area, where we have the.
Speaker Change: A large share in the world.
Or in the scissors or in the first.
Speaker Change: Major in North America.
Speaker Change: We do have pricing power, so well and we do have negotiating power with our suppliers, but we are clearly not influencing policy.
Walter Johnson: But we are clearly not influencing policy. So we're responding. We also, as you can imagine, have purchased inventory in advance of these tariffs so that we have time to adjust our pricing mix and product mix to meet what might come forward. But you're absolutely right. We do not have a seat at the table.
Speaker Change: And.
Speaker Change: So we're responding we also as you can imagine.
Speaker Change: Purchased inventory in advance of these tariffs so that we have time to adjust them.
Speaker Change: Our pricing mix and product mix to meet what might come forward.
Speaker Change: Okay.
Speaker Change: But you're absolutely right, we do not have a seat at the table okay.
Walter Johnson: But but you're flexible and and and you're responsive and you're You've got your eyes wide open, and I would have expected no less, but I appreciate that.
Speaker Change: But to your flexible and and your responses than you are.
Speaker Change: You've got your eyes wide open and I would've expected no less but I appreciate that answer.
Speaker Change: My follow up is my follow up is that the Canadian acquisition, you made that the Red cross out of bankruptcy.
Walter Johnson: My follow-up is the Canadian acquisition you made of the Red Cross out of bankruptcy. That, I forget how long ago that was, but could you give an update on kind of how that is playing out and how that How it's developing relative to your expectations at the time. Yeah, so for those who may not remember, we bought a company called Hawktree Solutions out of bankruptcy last September. Well, this was September 2023. And they had been supplying first aid kits to the Canadian Red Cross. and to other customers in Canada. When COVID happened, they started to supply gloves and other PPE items to the Canadian government.
Speaker Change: That I forget how long ago that was but could you give an update on kind of how that is playing out.
Speaker Change: How's that.
Speaker Change: How it is developing relative to your expectations at this time.
Speaker Change: Yeah. So for those who may not remember we bought a company called Hawk tree solutions out of bankruptcy last September.
Speaker Change: As of September 2023.
Speaker Change: And.
Speaker Change: They had been supplying first aid kits to the Canadian Red Cross.
Speaker Change: And two other customers and in Canada.
Speaker Change: When COVID-19 happened they started to supply gloves, and other PPE items to the Canadian government and they ballooned in cells.
Walter Johnson: And they ballooned in sales, which was terrific. And then they financed themselves with quite a bit of debt for continued growth, then COVID ended. and the debt was called and the company went bankrupt. So we bought that business for about $1 million Canadian and it had inventory of about 1.3 million. So we bought it below its cost of inventory. We have built that to about a $2.5 to $3 million business right now, profitably. We've renewed the contract with the Canadian Red Cross. We're introducing the Elite First Aid First Responder bags to the Canadian market through, it's all First Aid Central today, but it's through the customer base that Elite had.
Speaker Change: Which was terrific and then they finance.
Speaker Change: Themselves with quite a bit of debt.
Speaker Change: <unk> growth then Covid ended.
Speaker Change: And the debt.
That was called and the company went bankrupt so we bought.
Speaker Change: That business for about $1 million Canadian.
Speaker Change: And it was it had inventory of about $1.3 million.
Speaker Change: So we bought it below its.
Speaker Change: Cost of inventory.
Speaker Change: We have built that to about a two and a half to $3 million of business right now profitably, we renewed the contract with the Canadian Red Cross, we're introducing elite first aid first responder bags to the Canadian market through.
Speaker Change: It's all first aid central today, but it's through the customer base that the elite had.
Walter Johnson: And we've use the inventory very effectively. So it's a part of the business and it's a it's been a good acquisition. Terrific.
Speaker Change: We've.
Speaker Change: Use the inventory very effectively so it's.
Speaker Change: A part of the business and it's a it's been a good acquisition.
Speaker Change: Terrific. Thanks, Walter Good luck. Thank.
Walter Johnson: Thanks, Walter. Good luck. Thank you.
Speaker Change: Thank you.
Speaker Change: Yeah.
Speaker Change: Once again as a reminder, if you'd like to ask a question. It is star one.
Operator: Once again, as a reminder, if you'd like to ask a question, it is Star 1.
Richard Dearnley: Next question here is from Richard Dearnley from Longport Partners, please go ahead.
Speaker Change: Next question here is from Richard Dearnley from <unk> Partners. Please go ahead.
Speaker Change: Hi, good morning.
Paul Driscoll: Good morning. Paul, why did you stop releasing the European sales number? I didn't know I did stop releasing European sales numbers. Oh, yeah, you have US and Canada, but no Europe. No, I did mention Europe. I know I did. You mean in this call or on the... in the press release. I'm pretty sure they're in the press release. Yeah, they're in the press release. I read it. Well, okay. It's in front of me. It's in there. Oh, gosh. Okay. Sorry about that. Sorry.
Speaker Change: Oh Wow why didn't you.
Speaker Change: Stop.
Speaker Change: No.
Speaker Change: Releasing the European sales numbers.
Speaker Change: I didn't know I did stop releasing European sales numbers.
Speaker Change: Yeah, Yeah, I do I sit in Canada, but no no Europe.
Speaker Change: I did mentioned in Europe, I know I just.
Speaker Change: Oh, you mean in the call.
Speaker Change: Call around the alright.
Speaker Change: In the press release.
Speaker Change: I'm pretty sure there in the press release.
Speaker Change: Well, Okay, I mean I sit in front of me it's in there.
Speaker Change: Oh gosh, okay, sorry about that.
Speaker Change: Alright.
Paul Driscoll: that, uh, well, Walter and Paul, if, if Westcott was 75 million for the year and up 10%, That would suggest, you know, a $7 million increase in sales. you know, sales of the 194 was up 3 million. Does that, you know, are you telling me that first aid was down for the year? No, first aid was up approximately 5%. Included in the 191.5 million last year was $9 million of Camillus and Cuda. So Westcott was up 10% and first aid was up 5%. But we don't have the $9 million of Camillus and Cuda. So when I say Westcott, NPM.
Speaker Change: Well Walter and Paul.
Speaker Change: So what Scott was 75 million.
Speaker Change: For the year and up 10%.
Speaker Change: That would that would suggest you know $7 million increase in sales.
Speaker Change: Hmm.
Speaker Change: Sales are the 194 was up $3 million does that.
Speaker Change: Telling me that first stage was down for the year No firsthand was was up approximately 5%.
Speaker Change: Included in the $191 5 million last year was $9 million of Camillus and cuda So westcott.
Speaker Change: 10% and and first day was up 5%.
Speaker Change: We we don't have the $9 million of Camillus and cuda.
Speaker Change: Right, Okay, So when I say west coast of India.
Speaker Change: Right and.
Paul Driscoll: Right. And the 30 million of refills, I thought refills were around 40 million. Well, I think in net sales, I believe it's $30 million. When we look at what's going out the door, we're looking at growth sales, and that has rebates in it and things, and that's what we measure. So I may have said 40 at one point, because that's what I see, but then when they net it out for reporting, it might be down to 30, but it's something like that.
Speaker Change: The.
Speaker Change: 30 million of Refills, I I thought refills were around $40 million.
Speaker Change: Well I think in net sales I believe its $30 million.
Uh huh.
Speaker Change: What do you look at what's going out the door.
Speaker Change: We were looking at gross sales.
Speaker Change: And that has rebates and things and that's what we measure. So I may have said 40 at one point because that's what I see but then when they netted out for reporting it might be down to 30, but it's something like that.
Speaker Change: Okay.
Paul Driscoll: Okay.
Speaker Change: Okay. Thank.
Paul Driscoll: Thank you.
Speaker Change: Thank you.
Thanks, so much.
Paul Driscoll: Thanks so much.
Speaker Change: Okay.
Speaker Change: Next question here is from Jake Patterson from Atlanta Investment Group. Please go ahead.
Jake Patterson: Next question here is from Jake Patterson from Talanta Investment Group, please go ahead. Hey, just one question on the SG&A. Second quarter, you guys mentioned you expected it to decline as a percent of sales a little below 31%. It picked up a good bit here in the fourth quarter, so I'm just kind of curious if that is still a fair assumption going forward. The assumption being it's somewhere between 31 and 32 percent. That's probably right. Yeah, yeah, that's right. Okay, well you said, I think you said a little below 31, so I was kind of, that was what I was thinking.
Jake Patterson: Hey, just one question on the SG&A I think second quarter, you guys mentioned you expected it to decline as a percent of sales a little below 31%.
Jake Patterson: Picked up a good bit here in the fourth quarter. So just kind of was curious at that.
Jake Patterson: So a fair assumption going forward.
Jake Patterson: The assumption being that somewhere between 31 and 32% that's probably right yeah, Yeah, that's right.
Speaker Change: Okay, well you said I think you said a little below 31. So it was kind of that was the right way.
Paul Driscoll: interested in. It's somewhere in that range.
Jake Patterson: Interesting and it's somewhere in that range.
Paul Driscoll: Okay, and then I guess like the uptick this year, is there anything you could call out specifically, like growth investments or anything? Well, it was up by one percentage point on net sales, and that's just, it's mostly inflationary reasons and typical, you know, wage increases, so other than that, there's not much there. Okay, cool. Appreciate it.
Okay, and then I guess like the uptick this year is there anything you can call out specifically like growth investments or anything.
It's well it wasn't it was up by one percentage point on net sales and <unk>.
And that's just it's mostly an inflationary reasons and.
Jake Patterson: Typical wage increases so other than that there's not much there.
Jake Patterson: Okay I appreciate it.
Jake Patterson: Yeah.
Speaker Change: There are no further questions at this time I'd like to turn the floor back over to Mr. Johnson for any closing comments.
Operator: There are no further questions at this time.
Walter Johnson: I'd like to turn it forward back over to Mr. Johnson for any closing comments. Well, if there are no further questions, this call is complete. Thank you for joining us. We look forward to discussing our first quarter of 2025 with you in April. Goodbye.
Mr. Johnson: Well if there are no further questions. This call is complete thank you for joining US we look forward to discussing our first quarter of 2025.
Speaker Change: You in April.
Speaker Change: Goodbye.
Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you again for your participation.
Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you again for your participation.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Uh huh.
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