ACU - Earnings call transcript Q3 2017 | Acme United Corporation

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Operator

Good day everyone and welcome to the Acme United Corporation's Third Quarter 2017 Earnings Call.

Just a reminder that today's call is being recorded. And at this time, it's my please to turn the conference over to the Chairman and Chief Executive Officer, Mr. Walter Johnsen. Please go ahead, sir.

Walter Johnsen

morning. Good third conference the United for XXXX Corporation. quarter to call earnings Acme Welcome Walter I'm C. CEO. and Chairman Johnsen, With Driscoll, is read me Paul the will Officer, Safe first who Harbor statement. our Chief Financial Paul?

Paul Driscoll

limitation, involve XXXX. Company's objectives, this in intentions results the Litigation call statements plans, in Commission. such Private and to time and Securities Company; objectives, and the and pursuant Securities growth; Company's time-to-time expectations are intentions plans, Investors Reform including, that without risks manage at of of expectations, to forward-looking and Harbor to the statements the Forward-looking the Exchange strategies, including, change without two, subject Safe of are any operation the uncertainties, strategies, uncertainties its statements the the cautioned ability conference discretion risks the indicated Company's resources other and made from the of three, one, Company's following; are adequacy will plans Act related to and provisions with of be Company's filings limitation at by the affected

Walter Johnsen

United income Acme for quarter Paul. in XXXX. XXXX and year compared compared $X.XX an $XX.X $X.X $X.XX million to sales X%. to net third million in quarter you Thank of million for compared of increase last million XXXX, was $XX.X of $X.X Net the reported to the EPS was

much of but last third to exceed discussed second the not had back As shift quarter our our [indiscernible]. to in of sales we year's enough I XXXX, second from call, school of quarter to the a

a the promotion Camillus we selected with to weak quarter major were fourth at third a year, sales efficient the with flat good last a quarter and three knives, to sales professional product food and in the retailer. in Clauss tools compared XXXX aid the sporting First southeast large shift flooded to holiday were hurricanes. of even

The quarter sales were aid, XX%. business and business Overall, strength areas and Camillus back to growth looks channel with grown of Canada school. and Cuda promotions We've Particular growing revenues in of in forecasted the increased with performance business the and the of our in X% ways. good, online in Westcott impacted international annually our XXXX number past e-commerce fourth Europe office a new for Our in of each excess has our years. first XXX% growing three of importance business.

we in end in both Europe. winning we our open and the are is largest Our what arena for US believe growth

there industry online challenges know you as many wide are with However growth.

and their retail stores divisions, Some of readjusted international our off their teams. spun reallocated strategies shuffled customers of management course inventory, largest time again, and

has from business One major are grow maintain market of retail the our product our all with shares believe shift challenges lines succeeding. stores. across and to We been to we online

shipping more be year handling have the the been expenses logistics, by and seamless initially addressed and also to hiring more demands sales. growth customers. frequent. have online of had due smaller, XXXX shipments our lead We shorter, these higher last people than We the warehousing, during to The to orders times

management warehouse our software make purchase reflect to and efficient. optimized bins installed sizes, pick third We to additional package we our out locations, laid quarter, operations the our upgraded and velocity. our During also more pack

locations. volume in the we North to products the a high During fourth be will installing warehouse to move closer quarter, mezzanine more Carolina Rocky shipping Mountain the

we'll year new optimize to locations efficiency. software installing Next be

than our steps even we Rocky retrospect, more to quickly. improve our important warehouse Carolina these XXXX productivity acquisition expect has In expected. of North We Mountain been in

the absolutely It growth. to in you XX of critical purchased some campus online XXX,XXX foot meeting space of square and may million. has at we bankruptcy As acre out support remember warehouse requirements the been our $X.X

than in less rates operation XXXX. away. new a better purchased lower not in and CSX the that distribution know to we look $XXX site CSX freight we announce when facility valuable forward the much will Warehouse becoming we and area are miles new of more did three speeds million properties the opens when However, intermodal delivery

added years XXXX have row six in a that continue trend. expect and record We sales to

for for However I is below XXXX reasons tracking indicated, net income XXXX.

our XXXX revenues, We to in $XXX $X.X are of million net reducing of million $X.XX. forecast and EPS for income

We pencil we business first have $X yet, sharpeners, forecast Camillus new for but paper in about in committed not trimmers build aid, far XXXX out our so have and million knives.

believe and assets undervalued can acquire to look to we value. add we companies continue We where

the after will guidance of earnings We February will to at Paul. provide XXXX in call turn year-end for I now least XXXX.

Paul Driscoll

and of this nine both or office for of sales of XXXX. million Canada year. local ended the for XX.X% were were Sales September Net of versus compared the for warehouse the cost. quarter for and share same well quarter and sales XXXX quarter million of were for third per million to and quarter increase period sales the higher second periods sales $X.X period XX% in September sales percentage $X.XX compared same months The lower XXXX third nine million to X% the ended September to in quarter XXXX. less compared costs due Net increase the to the of decrease nine XX, per as the Net year-to-date. increase nine ended September year. months the the increased net channels products. of sales $X.XX months $X.XX additional sales of $X.X million as or back of $XX.X Magic expenses in in was to million the XXXX The was share Year-to-date was for sales quarter and was per Spill of to share for increased in in the sharpening the compared a the gross that quarter period in or currency the X% were or SG&A million did income and mostly first a XXXX. per of bank due of for SG&A XXXX, period unfavorable sales months in sales in $XX of million for income Net promotion mix on in or XX. was increased XX% higher result debt an million segment was third due an Net DMT last net for for X% new not or sales US nine approximately X%. sporting in XXXX with a XX. $XXX.X local compared an selling quarter Company's same nine $XX the $XX.X XX% the quarter sales were to quarter to of business, as personnel. XXXX XXXX. the XXXX variable XXXX, was XX.X of The $X.X for the first in and to diluted in income was XX% for of million or compared third the constant school or $XX.X for Europe XX% XX.X% million comparable X.X XXXX. currency repeat the $XX.X diluted XX, $X.XX cash in $XX.X $X.X September months diluted million as in compared share on million diluted impacted X%. Acme's for the months by customers million of Gross margin large soft third the goods a XXXX to primarily sales XX, margin

During assets Magic million in the $X.X XX-month $X.X for purchased and period, Acme million the Spill dividends. paid of

generated X%. in business our company by or free the succeeded existing Additionally, in $X.X million $X.X flow. million cash We in reducing inventory

in million $X approximately generate in free to expect XXXX. We cash flow

Walter Johnsen

you, Thank I Paul. open the now will to call questions.

Operator

Andrew to at we'll And D.A. Instructions] first go Davidson. Burns [Operator

Andrew Burns

Thanks and commentary for the details. the

for On school, there terms you hurricanes, full-year guidance different timing maybe the back revision to those $X that revision? are most million in down your of the a $X of which million of shipments. to lot parts moving prioritize of buckets coming ones in terms in there's Could meaningful

Walter Johnsen

softer we'd And we forecast to were in back for soft. in fishing, And to about online. the we a a where concerned we today found can fact your just then very fishing. when gets And the strong And online short. imagine been but the we looking not June just particularly people into did we've are anticipated. you because us. their back of were and they're big the in was clearly hurricane very, keys leaving. school aren't flooded such it been boats or I are quarter, in situation coming, was to when are hard expected we The they when that never they what have but impacted impact third sales in the that's And house segment, it's The than out school hurricane they but Houston, believe pulling

there's a was up the back Christmas of and the about lost promotions concerned particularly that's that during we fishing churn quarter. the season primarily because other I'm school. for Now than season it to But not fourth coming good the time in weaker that number

Andrew Burns

you I you of that you delivering structural as side. being sell expectations your terms that through was versus a that look any was through even revenue. there in weakness if mentioned sort opportunity selling on into And versus capacity constrain at that sell that converted meet at the sales, look in online or and did and revenue it selling. the And to conversely as destocking and didn't be brick terms the mortar, of headwind know could you there's occurring of

Walter Johnsen

superstores our will It's than customers in the past really very, the expected. to tell but I in air structural inventory I were than the to flood we customers. of are into up to largest one their weekend it appropriate is because is is hard was fashion numbers have that we Carolina when area Relative demand And doing pressure are think that that. the an online North in are properly What solve, having in the changes Monday say so very and These continuing we will enough people destocking. orders to product place. freight, where know flux any the reducing just the securing they're And forecast. you that been market have business that with had grow. we weaker the some on that retailers such well, the there without among perhaps large and bigger online they're shares back Well, puts there very But superstores rest was inventory. shows online our in that and other our and office And they difficult tell maybe flux couldn't it's than challenges tremendous the to the our staffed. both we've but are school

Andrew Burns

headwind the then I'll you but this more looking the And the back online either need margin of relates your jump to tailwind it your timeline shifts as sort the and is near-term headwinds distributions structurally term the performance just to that do do optimizing profile. one think and view to longer queue, as in the or What margin online and at you online shift. needs

Walter Johnsen

at opportunities. a to things had the and to products review past warehousing they our over equipment, the will our issues the a software, be week we we've place in of are while in Board we putting - And It added months. be impact within full posted six Meeting a and Acme things, we're new they last locations. are Well shipping as lot the logistics going all to the mezzanine and positive next These the executed. will at have

ongoing an an me example. give this issue is you because However, let

we're last because another in year. I'm better that will working we is and making suppliers. forecast substantially sales lot million which you you're through online we're so that confident working planning right it, do Our And adds level up be be reason will now. that range the in with every that we faster from the distribution that at be are and believe good of in $XX supply showing the but growth trying a complexity be will is chain to XXXX? are probably we can it this The that we anticipate somewhere how single putting even on We the now. we our forecast work improvements and be decisions. short-term there for factories product Asia anticipated shorten year, put but in of week have pressures excess of Do have on And that I But customer getting, kind news XXX% we this That's if we haven't the the demands sell. business margins opportunities because chain. yet aspect get continue incredible inefficiencies in is to of improvement as these this we're also to place. that the XXX% right what reasonably our probably the of

Operator

at to Singular [Operator Instructions] We'll Briggs Research. Jeffrey next go

Jeffrey Briggs

online the So I again related the to is sales. have question

First that about about you're websites film Since online branch My that. when packet how and shipments of or the sure Amazon customers. like it's that like and it and then talking is sales you're through assumption just that is Do sales distribution in separate that all to you directly category I want including small direct to like talking sales your selling online Where that. stuff a to and I are because make people directly a say include say that. various sale. understand fulfilling to we're more sales, that things of that you you online like of the other defining selling

Walter Johnsen

presence. ones But some online are Amazon and driving customers two of that major The then less retailers Those walmart.com of have the what's of of both have walmart.com. the that are amazo.com big that's between got we we've this. online course, and significant course

Jeffrey Briggs

fulfilling guys individual to orders you those with yourself you Amazon or centers do are actually distribution work fulfill. So, like

Walter Johnsen

do the items. at we stocking maybe fulfillment they be a and typically to to And point we're another to, retailer say depending both. smaller some want not the high gets retailers going are have then on they they're going And for their us buy. might online or shipping if Well, stocking, but who they item then that velocity

Jeffrey Briggs

So and if Amazon like it? of of selling shipping actually you then them, example other some individual packing but products, not your is they for one stock on they're guys ones if stocking are orders

Walter Johnsen

And another backstopping. as [Technical have Amazon a we're attractive but ourselves, be do. Difficulty] Perhaps, to we retailer than might to got another but it it going we opposed at do we also price have prefer whose to retailer more

Jeffrey Briggs

But to you're items actually like individual a that doing that for like down customer… granularity. Like

Walter Johnsen

for so yeah, orders filling the shipping answer minimum but is, and were small are forth, There we orders.

Jeffrey Briggs

just your Have guys you the say have is your items stock it you do guys are still then looked centers, holding on them. this and in, would something… then aren't you fulfillment into, and stuff the come that in you this, know, you shipping individual stocking into own and they is and would stock, the that question be filling those actually film guys major looked orders online that. retailers So a not themselves those you when it But - packages like would

Walter Johnsen

Well evaluated we haven't that.

don't I don't - really So it. I know about much

Jeffrey Briggs

actually later also of know like date. that you same just on guys that I to lines, your may website things the you view follow - on at up with also a that individual kind But along and sales I like that.

on, it you you and So say final when compare can that if how it's a Camillus whether if whatever, selling you there customer does a or something is fulfillment margin wholesale. the are the ordering and stuff, include costs discuss? direct shipping that to website all Is

Walter Johnsen

we'll handling and and that Well, level, be wholesaler. able and model, shipped there and pellets at we very, I'm will break down to a the shipping have, the not minimum simple to to profitable back time imagine aren't That days we going which it's high are had but if you through very change. margin to had we it there But a can the orders. is then

Operator

at to Jeffrey And to we'll next go Partners. Ram next Matthews

Jeffrey Matthews

would that's time, if would I faster on to over also sounds I - it how have know, grow need your don't to more accounts and wondering and this pay question it need and adapt? that receivable shift think shrink, like I didn't stock but another or because my because inventories hand. if you online online your question. on I'm wonder not tends but have balance I the - your you quarter, capital does to is, happen structure follow-up your to sheet

Walter Johnsen

of growth is and simple. in certain components. will Well, unit. out then in ship that aid quite you particularly reason segments, the components And have XXX these the those of first clearly and grow the kit is we're will stock, because not aid XX as the first one anywhere anticipating inventory can't It's between of if

components. by bag one but you a going kit, ship first aid can have or and don't You don't the you or substitute, to have key not large, sometimes of you're if eyewash for a

lot Asia, of in Westcott and there. extra put inventory. lead emphasis higher to on components adding you've inventory and putting the velocity we're So products where in of clearly, you've got a we a more Camillus some In from long cycle a and lines, are bringing got little the

to. there be enough be have may You It carry America time. to going to going be Friday is Black and active What in it's delivery. trucks to from be so between I'm Christmas that hearing that to are is to all going going the products not Amazon

it's exciting So complicated. are you've opportunities, wow, to these inventory. for but And got plan

our do the overall thing, on of credit accounts the size. or Amazon small any relative coming orders to to some big few of we card although On in that of of fulfillment, receivables, it say same going for of Most ones they or still that kind And orders. are an the actually Walmart.com do. very is typically our have have our other terms

accounts up. expect our to very is see in So area and much. moving of we in the out, category. I aid all change that first to and I online where can actually produce business, receivable inventory don't responsive get do that turns also DMT In

So in lead cycle something responsive, we're Asia, really working Asia the that's on I us and being right it's that but right. helps am with now that long in why

Jeffrey Matthews

the Does that America? Right. and you've that chain And about got working that. to back those bringing hard involve production supply you're more then really talked of to along lines, shorten on you

Walter Johnsen

we parts, so in be we back very, safety Asia, can because suppliers a be production. see that that currently in that for as very that put No. responsive their commonality facilities that costs more mean It happening orders of relative own, also have of are bringing to available - they I that's It doesn't. things can It might for but own mean shipment. our the and some we to stock don't done, but are of more we're hold there don't There US reason the things in. US attractive, may

Jeffrey Matthews

I that supply home need the Mount you online that Rocky talked all and finally a orders purchase Okay. you with given these this on and not? And about in then similar Coast, something to Do kind issues have and just slam a lot hindsight. run or chain and West was of everything grand

Walter Johnsen

is it's right which There's substantial state a to we and of First being be Vancouver, have excess Only Portland have team and very, there of of fair capacity Aid used now. the it's if facility to, amount very We Portland. is people being for doing Washington, in warehousing although facility outside a wanted done Port not around a nice there, we there warehouse of expansion, the a that, expansion

So we but fine our might is footprint now. right look I think at that,

Operator

We'll at Dearnley go Partners. next Richard Longport to

Richard Dearnley

Does mentioned just compliance that the aid You quarters of for been me of first kit a component replacement the I whatnot? so now, guess, And tell a being basically now. business flat. saturated the factories that and business. it's has flat and couple with the trucks

Walter Johnsen

and business long growing is are American that's would well happened, good that up. we hurricanes think were soft And Dick. will that Red occurring extraordinary, Cross think but like And and be as I also business is very first with kind for and all, would aid expected sales new that what don't FEMA I believe. orders first a business aid very, I in this, winning No. from and but very active. quarter draw the those that at September the very, nicely be well. aid it's that conclusion picking the us I we're don't Fourth as term in of one But but first we that as know

Richard Dearnley

the have this business will And that because point. where, from people at think complied come compliance growth pretty I much long would term

Walter Johnsen

got and billion being And the, by we've Oh, and not yeah. that the received Well, others. VANs gives to gaining area well now the Fastenal Staples XX in that's of I million. right Grainger VAN It's at segment are XX%. all. and saturated It's about $X at distributors a using app unique very on we're typically to and fulfillment America we're to XX% guess, that's [ph] their products, substantial industrial the business, like which industry in sitting very, savings order get

Richard Dearnley

Walmart Okay. sites a Walmart.com was - site the paper and Cuda, a Camillus today for Lord And in site. site on about then their considered cetera. Taylor Have Amazons yesterday et on Walmart you putting or

Walter Johnsen

read is, on just marketing idea, I the the good didn't it's answer are know, to familiar I And maybe, that. but our just to it. but doing get back not Well, Maybe, happy a it. be I I'd with of don't article. am you some people

Richard Dearnley

quarter, feel if feel any you G&K, now themselves. Cintas - quarter, that that you going did to will G&K's revenue run supply Did going fourth first happen to acquired that is they're or off, assuming

Walter Johnsen

to of the you're into I want asking, don't really kind Dick, to get customers. detail relative

Richard Dearnley

causing the next down, And down percent generally over margins online been or the think you've margins being generally step business running. year you do the a XX-ish is gross two the from

Paul Driscoll

reason is of the And the sales. included because that's happening which are of the and Yes. cost warehouse in efficiencies,

Richard Dearnley

you - decline for most quarter? the does the to - for that third quarter third is of And account mentioned

Paul Driscoll

Yes.

Operator

[Operator Andrew we'll Burns. back to Instructions] go And

Andrew Burns

Thanks.

Just some quick follow-ups.

slated the wanted of incremental if the of replacing programs that's commentary flat, X new incremental XXXX new are to definition terms that's and program. old all the programs so just for not of million the in was the sort 'XX of committed if new business rest regarding that's and meaning, that understand or, that, business, In

Paul Driscoll

incremental. Yes. what before it just That's exactly it's have is. didn't that and business we It's

Andrew Burns

see And the possible smart the believe the forward? is it and couple a Okay. to clarification. going compliant going of for Thanks just follow-up cadence boxes characterize question, new what trend over the on, into I you earlier the then there just last this quarters of system,

Paul Driscoll

it's pulling It's first the when be a and year, compliance growth. it Smart We're business' you seeing, aid at is, look good. the good entire for business growing. that's we'll

Operator

go back And Partners. also Matthews Jeffrey Ram we'll at to

Jeffrey Matthews

are doesn't developing. I over wonder One pretty where follow-ups. Two as like sound and as is if dramatic how Walter. Hi, to shift US, is looked time? - It but the on Europe, good. to in there is, it's that the online business over handle you that your going how European

Walter Johnsen

in Europe of teams is Well, but the as in the particular same be are teams as the quickly in US, where several as Amazon well is in Europe us. both one US together, this in It's our But to impact our for US not business making online growing impact. the our magnitude The us year. very the and by years. will or behind Canada. overall It's customer Amazon appears Europe two to be an number number working

Jeffrey Matthews

Do completely guys more, have you is over same? sort the there more there risk buck of of big it is going or

Walter Johnsen

earlier done managers of already The product changes over the business, They've commentary and maybe changes manager strategies, years. superstores and in and to from past that. management, shifting my in flux isn't that's in in world. that product place then another few - about changes there been one in inventory a changes that's The international

Jeffrey Matthews

Right.

know forecasts a spending know. And any Okay. and I look of would have I but haven't then CapEx of on next I like you because year, don't just just doing, the technology you my this is XXXX but made for all you're it's what be to for sense higher does other assume going do - question CapEx, year, whether

Walter Johnsen

you Paul, don't address why that?

Paul Driscoll

some CapEx year, purchasers X.X we're the had That last expecting So this DMT significant equipment to upgrading be especially million compares this for year. business. million. $X.X year, We to manufacturing some

to similar For point, it'd I this at think this year, acquisitions barring year. next any be impact, would

Operator

Chick go Steve to And at Companies. we'll Yucaipa next

Steve Chick

pretty level clarify just I for earnings. in of growth I a implies for quarter. actually a rates on If even and I the good my the growth guidance year have topline, bigger the XX% for to math right, it's fourth know wanted

of to so and into of the the that is And kind quarter? the where fourth come coming today that to seeing with you wondering strength that's you're kind could if really trend speak I'm if from and going consistent

Walter Johnsen

are good strong of and show Steve, coming We've The that that growth a knives confident Yeah. forecast on is XX% We're way fourth promotions the excess you quarter we're tell in can in We in fishing line am things in as excess business. $X million Black promotions online well for first I to and is business Cuda of else with the major as with earnings. a there? quarter of some of the growth aid out substantially that went tools aid retailer missing? point, got math that. new is had some And this sizable from at of that's a a bunch here. sales. in this that top There more the does Camillus shift seeing what in and fourth We've right got I now. moving in of a month. retailers. into done you've of pretty new Friday what now Paul, first Paul, online

Paul Driscoll

think all there. captured I you it

Walter Johnsen

Yeah. have that's there's identifiable quarter. buildup a high But in fourth confidence so we the and a

Steve Chick

I can my and the good helps on That if Thanks. Okay. get and then year the quarter specifically, math right. hear just rate to it's and the, Paul, what tax you're assuming for

Paul Driscoll

the around year. expecting and we're at for point, year, this approximately I that think I the at we're XX% think for

Operator

gentlemen, additional back additional to turn over the program I'll or are there no questions at time. concluding remarks. any And this for you

Walter Johnsen

on us further thank for is results, including online have look operations and to our joining the and Well, in so, this and sales way year-end updates no Goodbye fine to good sharing call accommodate the our tuning you day. complete. we'll and growth We of February. a forward do questions that we're

Operator

conference. conclude us gentlemen, again, today's thank today. that you and ladies once for does Again, And joining

Acme United (ACU) 20 Oct 172017 Q3 Earnings call transcript