ACU - Earnings call transcript Q3 2019 | Acme United Corporation

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Operator

Good day, and welcome to the Acme United Corporation’s Third Quarter 2019 Earnings Conference Call. At this time, I would like to turn the conference over to Walter Johnsen, Chairman and Chief Executive Officer. Please go ahead sir.

Walter Johnsen

Good morning. Welcome to the third quarter 2019 earnings conference call for Acme United Corporation. C. Walter I’m CEO. and Johnsen, Chairman With me will Financial who our Paul read a Driscoll, first Chief safe Officer, is harbor statement. Paul?

Paul Driscoll

this company’s XXXX. expectations, the Private Forward-looking related to the resources in conference Litigation provisions without pursuant including statements of harbor limitation, are to made the and Reform plans, intentions objectives, Securities safe strategies, adequacy of call, statements Act of

and two, limitation company’s plans, to the forward-looking the cautioned and involve risks the manage filings and expectations without Exchange that with strategies, including operation company’s the from such risks of at statements are ability and affected growth; change indicated will other the the are company; to three, Securities be one, Investors uncertainties, following: company’s time subject at plans intentions objectives, its and and any of Commission. company’s the by in the uncertainties results discretion time-to-time

Walter Johnsen

a of of Acme Paul. quarter – strong you, quarter third United Thank had XXXX.

an of over Our sales increase X% were XXXX. million, $XX

Our million, net an XX%. income increase of was $X.X

earnings compared increase. were our last aid in performance and $X.XX $X.XX U.S. first the to share had excellent XX% safety We a business. year, Our per from

first provide employers, particularly demonstrates to that items sales. which safety products offering. had easy increase value aid how manage The SmartCompliance sales the employers track and kits, strong much fast, comprehensive requisition Our to we are

growth of our many and large with starting began had industrial customers. new We distributors several industrial

had continued and performance e-commerce replenishment Westcott as demonstrates first The business categories generate products Our office the the this with back-to-school of with we software results, retailers. and to strength in which school solid sales business SafetyHub our with encouraging expanded business potential aid exceptional online is and refill a future.

market. with had the also We growth substantial mass

business. was office past our about The trends decreasing market I’ve but that in reflecting talked overall proportion quarters, it in of U.S. a weaker than is year, the last superstore

good Our Clauss sharpening product Camillus had DMT industrial fishing, and lines performance. hunting, Cuda cutting

our of business, is production we’ve increased which our recall, recently may DMT you helping diamond to the capability As growth. propel sharpening

to was had quarter. a business international due business and sales back-to-school, increased record strong Our our excellent. European In Canada, a

are We and products share online generating Europe office the in with gaining market all excellent market customers. sales in

been have instituted year that a ago. savings cost we from program We the benefiting

recall, across reduced our targets these the U.S. you headcount by and reach ERP with set, efficiency $X implementing Consistent As improved our total our shipping we cost savings annually. million may all about software operations, lowered market. we to

and are continue We targets formulating for opportunities to cost-saving XXXX. identify new

million nearly $XX.X debt million to net during the months $XX has million. from Our declined past $XX.X XX

with and this new performance, next it and for We pleased capital are growth acquisition. provides very perhaps our

potential calls, U.S. updated I have for the As now always particularly guidance that in the income and to we on earnings have see could sourcing in for capabilities we the quickly quarter, Based mentioned lookout on and what add Canada $X.X have for million where candidates, million $XXX XXXX value. per are distribution past our net we we and fourth the share. in $X.XX sales, in

to turn the Paul call Driscoll. I will Paul? now

Paul Driscoll

segment first months $XX.X ended million the increased in to XXXX, X%. in aid nine XX. months the sales period increase nine strong. for to Net XXXX, quarter in Sales the quarter million for of were in compared XXXX, $XXX XX, X%. and the were $XXX products an for September $XX and same sales in safety increase of third Acme’s an net U.S. million were million compared X% X% the September of ended the Sales

and into in of sales softness some superstores. However, of school there some office the was products

as currency for increased The channel both office gross Net and for the the The XXXX. ended in of The XX. in Net customers third XXXX margin in XX% increase gross the approximately sales higher was XX% well nine local currency in Canada sales and of sharpening new sales but year-to-date XX% in to quarter declined margin quarter months for as in year’s primarily year-to-date local period. sales Europe to products. the X% was was for DMT September due quarter for compared the last increased XX% both X% periods XX%

compared the of or XXXX. period the SG&A XXXX XX% for million were compared $XX.X of or or expenses XXXX sales $XX.X XXXX. first with XX% for million expenses or million were sales the of with XX% of for months same third $XX.X million XX% nine in quarter sales of of of $XX.X sales SG&A

income diluted share third for XXXX, diluted $XXX,XXX and XXXX for the income of per to increases or same or net of $X.XX per of XX% the $X.XX XX%. compared share Net quarter of XXXX million first per Net was $X.X XX% and income XX%. September XX, $X.XX last the or compared the $X.XX million, diluted period diluted was share of to year, nine months period $X in or ended per $X.X increases comparable million share, for

XX, was September company’s on on $XX $XX compared cash The million million, debt to XXXX, bank September XXXX. XX, less

XX-month in and growing the During dividends, or buybacks to free flow. X% X%. business the were $X.X $XX in million We stock paid on reduce we million spent cash able by inventory while period, million million $X.X generated $X.X

in expect end with the year. $X free cash to generate of We net million to and $X XXXX debt million flow $XX approximately to million for

Walter Johnsen

open the We’ll Thank questions. call now to you, Paul.

Operator

RAM We’ll Partners. Matthews of take first our Thank you. from Instructions] Jeffrey [Operator question

Jeffrey Matthews

Hi Walter congratulations. thanks and

Walter Johnsen

Jeff. Thanks

Jeffrey Matthews

On see it’s the there, balance to the powder. sheet with some nice flow cash dry

Walter Johnsen

going any powerful was recharged balance capital. without to we’ve because outside That very basically sheet our

Jeffrey Matthews

to early been China looking to for get switch changes landscape cost next around – the looking your how from not for. what U.S., And into perspective out you China five there and I’m to see really Yes. the be what I the so on places chain now? Acme’s because and find to and bringing want in the might do on, outsource you you years? at going going perspective you’ve other product do see labor supply a over back for

Walter Johnsen

weakening with the Kong. Hong and and in supportive of that of And of independent very Well, weeks our business, all are are them Taiwan I those I places work tell in three can you from businessmen. and many we just that returned China because And suppliers reduce position our the of margins, have effectively, be the tariff issues concessions very and and of sales demands. and some been, to a currency to respond Chinese getting on of some to able in we’re customer to willingness cost our their between

So we’re – a that. strong position I with very feel we’re in

And or Some to of China their of Thailand. probably in that’s very example, we very, products the in it’s tariffs, some say or lowest-cost the China, I we some our them. that, And will move some Pakistan for customers places continues and shift get competitive. the avoiding in And also suppliers but looking of our – of the still some are Myanmar better with of diversifying think operations China basic And we supply base. when scissors owned supply better. among to business the to were nearby is of that world. like The producers

So for there’s even up opportunities. going though best labor some is globally. sourcing, Other the of areas, and we’re we some positioned think

first data now that up. the we’re parts items, of sourcing of other in world Some the and stepping

healthy putting and you in we’ve record past the maintain ninth maybe We’re risk our India. sourcing a XX see this been able the them And bit together able sales. during increase company’s of But to little were gross months, profile. the And margins, for just I year them. of think we to looks is can net what with more like that’s the

the advantage as maybe I’m again, other in forward. tune to So businessmen China us look And tariffs production optimistic as Then quite will we’re are that for a some in we’re competitive where as places working large. independent looking that move we the become absolutely with with us. to aren’t

Jeffrey Matthews

Great, much. thanks so

Walter Johnsen

you. Thank

Operator

you. Thank

Our next from Capital question of Tim Management comes Call Corporation.

Tim Call

on a congratulations great Hello, quarter.

Walter Johnsen

Thank you’re you, mute. Tim. Tim,

Tim Call

a Sorry, on congratulations great quarter.

Walter Johnsen

you. Thank

Tim Call

is the interest rise. rates your now. interest Falling Reserve so still lowering fast, Federal you have expense And

to would soon to rates we interest start falling – start you? So expense expect interest for falling

Walter Johnsen

Absolutely.

X.XX%, the we’ve well, the LIBOR dropped. and rates First, plus reduction got has so – in LIBOR

potentially. is debt Second, our down now

got So while higher at meaningfully quarters. interest this dropping be we’ve that stage, can you expect the coming to during expense

Tim Call

again quarter. great on a Congratulations

Walter Johnsen

you, Thank Tim.

Operator

Mork next Mork take We’ll from you. Thank Management. Michael question our of Capital

Michael Mork

to you, other One you Hi. reiterate mentioned, great that’s rates. lower quarter. as just was going help Yes, the interest again, thing guys,

at negatives, potentially wind and positives, in any looking in face, your giving the will back the be be wind your XXXX? what what without little Just year exact XXXX, a the could projections, at

Walter Johnsen

positive, their – in very a Things that think question, their as of superstores insightful Mike. our we’re to I they businesses. stabilizing That’s office stabilize with the some

as think we with got automatic our continue I SafetyHub, So in particularly gain I office and opportunities which growth products area. we’ve a the our substantial to floor of see business, is safety replenishment. first the implementation the aid there with fairly

SafetyHub So kit, a is first every new you time refill of capturing SmartCompliance the aid business. the an increasing percentage place

is And $XX control move every every actually going opportunity have an as that’s feel – get X.XX be The we debt savings we’re million our to year. that, to is decline be places that for our favor. The in and tariffs, building. it’s Well, was may and tariff. annuity of us, an And an next be in point of if in – been. going I products have to rates, as There a it $XXX,XXX. that’s and means don’t some that point average for $XXX,XXX. we it’s interest less to X% every So of

product have line gaining of family We’re but a we the it, gaining – and openers growing. introduced is that it’s introducing box positioning, is

that’s ceramic-based. that will building the that pencils. are that for sharpening, secular, declines business with That’s year. ruler bit. in well. pencil not fishing, for it’s us, business big distribution DMT next business for is than sharpener on. decline The And we’re the centers working percentage throughout other the us, the this of working that areas And And a a all hunting, that’s points some that world. few boxes are a these There’s the opening but little will be declines and probably that, But less

that I is look the a which pretty growth. we for platform then of year’s upsides, next office the next stabilizing as and channel, good happening, is into So year, think

Michael Mork

I And good. so there’s don’t always acquisition. course, unless acquisitions the your you accretive, recharged sounds an of of they’re That know do good. And balance with potential that’s sheet,

Walter Johnsen

driving enough financing can’t only by you’re right. year, profits generating doing down the emphasize without Well, flow, because cash did. and it. getting basically a I past but And not done inventory the small We’ve in the we that

recharged – opportunities. haven’t are plenty we’ve we there So of and

Michael Mork

sounds good. Yes, very Congratulations.

Walter Johnsen

you. Thank

Operator

Lark question from Thank you. We’ll our take with Percoco Stephen Research. next

Stephen Percoco

pretty last quarter. a a when the had a is talk bigger year’s year’s you about that. from have of benefit wonder working benefits, anywhere And looking you in fourth like as quarter. assuming capital little I fourth could bit benefit good you much if this I’m near had Looks in you quarter won’t so Thanks. at

appreciate could that, you I’d If it. confirm

Walter Johnsen

Paul. that Okay. to I will turn

Paul Driscoll

timing that suggest You’re the projecting as was would the $X and prior XX a fourth we that. free in for much have for because big right the benefit. of the reduction about that a but already the flow And why wouldn’t quarter a we’re cash And cash benefit cash the of – million that’s got so fact started part that strong a the million months year. the flow for of we’re quarter. fourth $XX year XXXX, and still very we there’s mainly the with not inventory we flow have That’s

Stephen Percoco

continue you’ll your year, down quarter. this be assuming CapEx bigger and on. XXXX? outlook money the fourth in the the Also, of maybe What’s items are Okay. some you that can will CapEx in And if identify I’m spending that, for that

Walter Johnsen

annually…. suggest CapEx million depreciation, which about a be about would to I Well, as our over the our little same is will that $X you

Paul Driscoll

to actually think I $X it’s million be closer No. to next going probably year.

next projects year it it to It’s $X.X was was, not undergoing million. going probably be I that But year, this particularly million. $X.X year. Last think, year, some It’s was same low. this low. the We’re –

Walter Johnsen

Steve, for it’s we when us substantial And putting Well, to one during very – are believe implemented. in for powerful distribution with our is our we’re management warehouse next that the that on that XX And We area some major growth be true. that is business. software positions center working it months. efficiencies online

that our that But reasonably So good normal has over and piece, and is above spending. Paul it I at is payback. guess looking a

Stephen Percoco

other have, I at look numbers, you million your you words, cost haven’t But And dropped the $X that if $X you’ve of benefit the completed reduction gotten full the program. Okay. hasn’t line. bottom suggests that mentioned straight that question In final million that. to you it the

continuing little some I you higher those there because have like talk been wonder those been looks continue $X in under that you’ve it a already the if what and assuming offsets that million could So costs. kept you bit going achieved. about whether your and forward belt it’s I’m but see will have

give those will on do line? could If getting Will it. better? worse I’d continue? offsets some appreciate is they’re down color if Do question that, costs, see And the you so in the they there, you us get the them potentially

Walter Johnsen

million that. So than been the more probably has achieved, $X and

and make However, we years, paid employees two haven’t compensated. our to want bonuses properly we in sure are that

because offset has bonuses of that’s to hopefully an continue been we the P&L, results. that delivering which, pay as that So we that achieved. future, to continues course, good, million people the our drive $X those solid to But

Stephen Percoco

Okay. don’t up. show The bonuses – bonuses your

increase the think months been so. have in nine I or have other There not? offsets, the there some

Walter Johnsen

We accrue them during the No. year.

Stephen Percoco

Okay.

So offset all bonuses. would of the be in

Walter Johnsen

much. Pretty Yes.

Stephen Percoco

Okay. right. All you. Thank

Walter Johnsen

Sure. Thank you.

Operator

Thank you.

next Richard Partners. Longport from We of question will Dearnley our take

Richard Dearnley

has Could – how you first talk morning. Good direct in going? the the to sales aid about move been

Walter Johnsen

Okay.

accountable now our be There own first direct several for to moving period reps the responsible we’re guys. So year, $X sales years, where been because the manufacturers’ aid sales we’ve a ran sales that back from performance a we we’re sales. we the getting we of the the And reps been been train reps who safety the had larger in and with – the for the guys manufacturers the manufacturers’ very what that’s area. They’ve kits in and you’re was during would right going last did part growth direct SmartCompliance where plus well. putting part And direct scaled system duplicate and savings we team. talking getting million in strong now away as about had we of past is

So it’s working.

Richard Dearnley

talk – that the is aid the first sales? the of at Could the could out was mix total? break versus Westcott you you about your then also business aid And refill Great. first moment what in

Walter Johnsen

to Paul. one I’ll turn over that

Paul Driscoll

the was sales. total approximately of First aid XX%

Richard Dearnley

And for the that what months? was nine

Paul Driscoll

It’s similar. pretty

Richard Dearnley

Okay. that of And then the refill XX%? part

Paul Driscoll

Refill...

Walter Johnsen

kit, I fairly install to aid have you that amount about in granular, an can get same a you Dick. refills you be one think don’t first aid follows that it. kit year. want sales of that generates as But certain historically, a annuity I first the And

the they’re on Now on environment safe is being depending varies where that the been. that’s it’s how average, But of experience used in. that

[indiscernible]. sales a important and the So so follows. that overall the business part the of and a And refill the direct annuity those part out why is then there it’s is important. very force box got that’s – Hit the you’ve

Richard Dearnley

more cares reps the the follow-on sales direct Right, the than and force the sales about part did.

Walter Johnsen

Sure.

Richard Dearnley

Great.

Okay, thank you.

Walter Johnsen

Thank you.

Operator

will We from Jeffrey Partners. take [Operator RAM next Instructions] Matthews question your of

Jeffrey Matthews

want to follow-up the I Walter, environment. acquisition on Hi,

Or a you something with intuitive What environment? it You to your online that’s get place? of the sellers chasing know function of do opportunities, is is smaller lot of businesses. making do providing done your Is tend a in of I made is place comment it opportunities, But relationships that on much infrastructure you kind going given to in things the money think? opportunistic. it there are and in you’ve function you a the opportunities? how equity of And I and there that’s what’s lots deals. are not really know private

Walter Johnsen

for contacting most self-generated. companies all of of have the all – not been been the of last XX years. companies them, we’ve the And we’ve that So companies acquired

companies appropriate So like are either that be And existing that we them there we out a to with, at or adjacencies compete are our for would looks see trade business it shows. us. step there

XX-year database of a that. there’s So

of in opportunities, market been. these lot they say the typically haven’t and a And so I when there’s aren’t out

lot a there’s So of opportunities.

Jeffrey Matthews

All luck. right. Good Great.

Walter Johnsen

you. Thank

Paul Driscoll

Thanks.

Operator

queue. you. are questions time, Thank no at this And there in

Walter Johnsen

strategies are this XXXX time, into also successful to Okay. further our updating bringing we At you the XXXX. with for give is Well, growth results. to year look a no if Good-bye. close complete. perusing some We you we’ll call insights there’s that questions, full and forward

Operator

and This ladies concludes conference today’s you, call. gentlemen. Thank

now disconnect. You may

Acme United (ACU) 18 Oct 192019 Q3 Earnings call transcript