- Earnings call transcript Q3 2022

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Operator

Good day, and welcome to the Acme United Third Quarter Earnings Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] I would now like to turn the conference over to Mr. Walter Johnsen, Chairman and CEO. Please go ahead, sir.

Walter Johnsen

afternoon. Good C. Walter I'm CEO. and Chairman Johnsen, With me will Financial who our Paul read a Driscoll, first Chief Safe Officer, is Harbor statement. Paul?

Paul Driscoll

this of company's XXXX. cautioned the risks statements expectations, the Private Forward-looking related Investors to and the arising resources are earnings result and involve current uncertainties release. in our uncertainties conference Litigation as including periodic provisions without pandemic, pursuant Securities among such including, statements the our of Commission with filings Harbor limitation, and downturn, of are to those made the others, effects the and forward-looking as, and risks Reform described plans, economic COVID-XX that intentions, objectives, in Securities such Safe and Exchange the strategies, adequacy the of a call, statements ongoing Act of other

Walter Johnsen

Thank you, Paul.

third were increase year, sales of net million Our X%. last of quarter the million to an compared in $XX.X XXXX $XX.X

per million supply income was of had net Our XX%, avoid the revenue purchasing second was to by growth to $X.XX. which XXXX, forward earnings $XX,XXX $X.XX customers our quarter we due of disruptions. to $X compared to believe In we chain and share compared were

of shipments also had $X problems had million, which delayed million We catch-up by the quarter. $X.X to first been in chain supply

to a the demurrage, to us XXXX million, We chain issues moving For supply for the $XXX months year-to-date, of first incur revenues decline XXXX costs. and $XXX extraordinary have freight $XXX six of revenues earlier have anticipate guidance revenues forward. million The range increased lumpy, but from and in shipping, caused been million. XX% to our from slight

Los We to we longer approximately drivers though to from rapidly, cost of access a demurrage container and fuel ports them. deliver Angeles extra to year. fees total, at this than the due prior inability $XX,XXX of costs double than problems. know, to high approximately truck paid million A at freight contracted was caused shortage incurred may of stayed the the to Shanghai $X.X the ports' array In our you more the and increased due this because containers to expenses As goods increase. abnormally the peaking deliver to even

Our quarter, are product as costs which million, There chain the expense we This anticipate third quarter. the included expensing freight quarter next cost million supply of and extra and resulted two first inbound in the million we our is $XXX,XXX $X.X costs $X.X the $X.X in the of inventory second of over approximately them in XXXX, in sold. remains in quarters.

Fortunately, the fallen across supply less Pacific have chain has container improved. to to substantially cost the a $XX,XXX. issues than The ship

largely the We productivity chain incurring and extensive expenses, reduced us. are are costs. in $X.X selling million demurrage has labor cost-saving and extra shortage fees behind ports driver from costs an product the supply and annually believe $XXX,XXX We lower not cost including savings implemented We've initiatives, stabilized. the in in $XXX,XXX

production purchased and new at our business Magic. facility have to gain to equipment Spill expand new We at Med-Nap

more. to to improvements in $X productivity generate continue these savings and expect We over and savings we add cost million

supply in Some XXXX. a we a reduced total pre-tax Taking They of anticipated and the in all but went. back, like $X this many had savings other are to flow earnings. step have start quarter, unexpected of came in million issues companies, that chain

beyond However, we that. see

strong first business and excellent revenues with recurring resales. medical aid have an We from

runway the placements markets We retail continued and XXXX, growth. have for new for and industrial in a

scissors which market share global users. largest school, benefits from home of the have and craft, industrial We office, the shears, and

same in opportunities. also and we in major environment at has continue to craft opened have e-commerce. The new gained are mass We placement difficult retailers gain XXXX we in market

by sales and with about purchasing of in The million to example, we intellectual $X.X for September, annual about revenues $XXX,XXX safety property the EBITDA. forecast this made over its be of small inventory are of of took For a $XXX,XXX. competitor

small, in a represents has million productivity Although kind the it arise. for mostly may have place been we the and and $X XXXX platform cost growth savings of that plan In summary, opportunistic that implemented. situations

We confident will Paul. chain beyond the move the much a are supply we better turn call XXXX. I'll to issues year in that to now

Paul Driscoll

due for of and for for XXXX. were The of most SG&A The million increased $XX XX, XXXX decline the first increased XX%. Net Also, in of our $XX were the X%. dollars. to Westcott Canada quarter $XX.X in of third third X% compared to Acme's euro was of million periods Net was an expenses of Sales mainly period third months due of XX% for of for of revaluing Europe US weaker quarter same period XXXX XX% $XXX,XXX ended sales to of net compared the customers certain $XXX.X sales Included XXXX increased inventory XX% local payables currency $XX.X compared for segment in the nine in XXXX. higher currency, the to for XX. the compared in third the of transportation share to both in aid Net for online months third decline was the year-to-date was third foreign for periods and in quarter expense XX% in XXXX first higher products. XXXX increased quarter. rates. in $X.X interest in of the business. in depreciation primarily grew period XX% XXXX. quarter chain purchase September in first Sales million to to freight was anticipation for for XXXX. the the an for X% XX, sales the in $XX XXXX delays. the products in local and ended compared contributing sales XX increase other XX%, Interest and for purchases of ended both where gross was expense medical The the Sales in mainly and in were nine a Interest the in year-to-date. X% debt ended expenses months dollar was $XXX,XXX, costs in the were in currencies to for in in goods. quarter, Gross in months and increase new the same an $XX we quarter periods customers Europe or the sales sales margin increase in the supply US business, channel. ocean with XX.X% X% Canada, of $XXX.X XXXX, XX.X% of SG&A million September for or quarter related second in the of quarter nine XXXX of sales for margin exchange office to for due products XXXX. in $XXX,XXX XX% increase to the million sales, or sales with months were related due September nine higher or to million our same compared of The higher million of the making mainly loss market were million, million was European XX% of the compared large by quarter due expense sales XXXX, quarter both September nine to the sales imported aided $XXX,XXX and gains the XXXX. third and compared US $XXX,XXX, impacted to of

or the X.X%, overall for months diluted quarter the same of interest share net the million The Our of X.X%, X% ended XXXX. for rate diluted average interest X% XXXX was nine per overall nine income XX Net months per to three share. $X.XX for the in $X.X in diluted XXXX. months for the for rate third was average months $X.XX for XXXX XX, to compared the or income was September XXXX. ended $X.XX income the XXXX, same $XX,XXX share, was period Net to in of for $X per September nine or compared period million compared

$X.X months expense. forgiveness million results XX, $XX were in XX, XX, three cash XXXX ended income million $X.X September or on months of September $X.XX exceptional nine chain The higher debt The the by $XX September the million, costs PPP interest and per to XXXX. of impact the was loan share net nine Excluding the diluted was and company's on compared XXXX. impacted less supply million

Safety During $XX the million the and Made $X.X XX-month spent million repurchased for stock. in dividends acquisition, common we period, paid million of $X.X

increased stock to inventory approximately purchasing the impact million, period, of the that related chain growth potential offset During COVID-XX. disruptions business, safety anticipated supply due cost to higher in to additional $XX and primarily

$X decline to inventory expect We by million by year-end. approximately

Walter Johnsen

questions. you, Paul. Question-and-Answer open I call the will Session to Thank now

Operator

you. Thank

ahead. will We Please Sakai Instructions] will And [Operator with Singular come our now question begin Chris Research. go question-and-answer the first from session.

Chris Sakai

Marrone. Jim for in I'm hi. Yes,

headcount had your in in this to Just going next a and regarding how the question year? SG&A, quarter reduction is affect

Walter Johnsen

around our September. Well, and – we've headcount SG&A, the trimmed the in middle in was of that done

And severance going so while we payments, there's that's done. still generate forward, savings. And

Chris Sakai

noticed, hedges for international rate Thanks for any And their United fluctuations. Okay. lot a there's that. exchange have exchange of currency I Does Acme sales? rate

Walter Johnsen

we customer sometimes euro happened beyond against kinds in in would that of contract order. for. forward will the declines We anything large lock-in normally orders purchase But were this for the that have hedged case,

the of in relates increases really not rates which to both in frankly, and Of were course, substantial Ukraine, war the this US hedgeable.

Chris Sakai

about much of the for or obsolescence, is this that. can inventory provide color -- Okay. any increase Thanks -- any what And there? there finally, worry for inventory, how you in

Walter Johnsen

Sure. much change year-to-year. that from are Most too inventory of our don't items

very, school products very are Our consistent.

carefully in have but Our first there's office those some products products keep dates, expiration are -- aid managed. area, that we to tend the

without much of it's in they're it's an item. comfortable where where or general, we're clothing excess there. So the items that pretty like are inventory we not quite semiconductors, And changes but with fashion stable These proprietary, have. there's or electronics inventory designs. In a rapid not

Chris Sakai

Okay. Thanks, Walter.

Walter Johnsen

Chris. Thank you,

Operator

[Operator ahead. Dearnley come Longport next will Please with Partners. from Richard Instructions] Our question go

Richard Dearnley

Good morning. Good afternoon.

Walter Johnsen

Dick. afternoon, Good

Richard Dearnley

are guess, what's I -- that And if had XX%. what your of units? proportion What inventories up price? is a

Paul Driscoll

the So put Dick, in place that for evenly cost we increase would supply stock disruptions. it's the approximately growth, and safety between what for chain potential we split

Richard Dearnley

No.

three? even So it between would about be the

Paul Driscoll

Correct.

Richard Dearnley

down was the what And out in is would what, Great in EEC knows and mention dollars turmoil in they're Britain you of expecting it or... who -- only recession are -- not with them seem like a the X% to

Walter Johnsen

that's gas. business in of oil Well, due and lot are our part, part currency. to some is of weakness and their a softness They it's In inflation European the sales. in having facing

uncomfortable passing with environment our got that are high. lease price that that increases -- easy It's in they've through very there extreme quarter slightly an that up. Europe. So in are pressure. And We've seen are they're the last not sales people were it's because the products under

very but a So environment hasn't in it's it Europe. tough fallen a been off cliff,

Richard Dearnley

the $X seem costs? XXXX, It of the that would million, sure supply that decrease of chain million would... cost for I estimated way. independent mean $X is I The

Walter Johnsen

an that with. and The answer cost they're They're yes. $X.X just expenses -- is $X were The million ran The to savings that done are both additional were additive. one, through we million. the

Richard Dearnley

And get a cliff, wherever that chain, off as assuming is. percentage Right. of X.X the that if will, you'd of would supply it a the seem demand things other get normalize, you on -- fall back doesn't of like you'd back reasonable side,

Walter Johnsen

lot that's a inflation. accurate, there's Well, but environment, in overall the of

on So we've counting we're got of true cost although now $XX,XXX. that in it's well some are our that that numbers, not under containers the

are low them XXX. as as of $X, Some

there, pick US. Asia, and some savings but So the inflation you Europe up there's still throughout would

in the freight lot case, a cost in favor, will of we our really of hope. a combination it's pressures. So working this be But

Richard Dearnley

got Right. Slide unit medical product of that -- up costs are down I cost solely -- bullet trying say And to or because decreases what your by business went the about the defense. new point -- on opening in intrigued there and your and... you Is opportunities was you the -- then X,

Walter Johnsen

any don't alcohol I is the presentation. general, alcohol business, you're prep-pads. I looking this -- the in have because wipes what Dick, at exactly we think know we're But where Well, and in Med-Nap slide in don't to what referring making slides we're

be absolutely competitive compelling world We to market. the are cost the in down and driving

because just military because So lowest medical not we we're get when but cost producer. business, US made, that we're or it's the

the in a helps putting of we're to drive some that does equipment costs of those down. automation, And lot which there

Richard Dearnley

Great.

Okay. Thank you.

Walter Johnsen

you. Thank

Operator

Company. & The next Sidoti go question will with ahead. come from Peter Sidoti Please

Peter Sidoti

gentlemen. afternoon Good

Walter Johnsen

Hello Peter.

Peter Sidoti

on the cash Just question be handle positive assume cash like expect flow cash you that next you Can this turning nine flow spending using operations. looks just what a into start year and would needs? me year. to and in capital you first year next working from been about year what but a give months, capital your spend for would It I you've this quick

Walter Johnsen

that handle you Paul, Yeah. don't one? why

Paul Driscoll

most inventory, And inventory. to fact, inventory. to of has been cash Well, the flow in from grow expecting reduce going operations towards not we're

has from that we're hopefully is expenditure, to a But be forward around negative similar at going is reducing inventory, somewhat generate been it whereas, which probably big inventory. drain, So pace. a going forward. cash year, averaging going Capital been change positive continue to $X going a will million flow the be -- will it's

Peter Sidoti

And generate cash, that put as you you it will use? to how

Walter Johnsen

you the can down that debt. tell I thing paying Well, is first

Paul Driscoll

pay Yeah, debt. down we'll

Walter Johnsen

then for Yes, and getting acquisition. next positioned the

Peter Sidoti

you Thank Okay. very much.

Walter Johnsen

Peter. Thanks

Operator

[Operator Instructions] Our come Ram next ahead. go Partners. with will Jeffrey Matthews from question Please

Jeffrey Matthews

Walter. Hi,

Walter Johnsen

Hi, Jeff.

Jeffrey Matthews

in you'd Where You were the calls the CEOs versus US really, now well, to of general to global chain, worst be? versus it one and where ago. and first in you was several the chain, it of like highlight disruption the supply that things supply the see do

Walter Johnsen

for in not course, companies the the population majority Western with vaccinated that been people for vast is wildcard, of from Well, particular, -- that has vaccines. China, import of the

So could for come into is it's gets China now, difficult cautious is in businessmen. serious that spread still to again normal to the the be possibly fear and it's -- way. China pretty it still weather cold continuing a as Right

they cautious not right Chinese well, the because population now anticipating COVID, all in we the and exposure If the come inventory of from that. the So very will so, that that have about I'm seriously very that then sick rightly handy. has. are get

I China produce. supply I the of see while would available being maybe chain risk If Western population. certainly to in now, be stay factories vaccinators' right That's used think the the vaccines, biggest they now. availability for not healthy, right

They've some the there's like substantially. in months East the still Beach, six But and containers move many to vastly ports, Coast As them the price those shipping, in Many LA and of containerships. pretty places. -- of the ports across far now years, ocean are from more has the themselves And wrong last more overcapacity months the Long has for dropped are normal. as there's now but much two an different still been six than to them. West of building Coast back or the ago. there's, congestion

Jeffrey Matthews

Thanks All and good right. luck. Great.

Walter Johnsen

you. Thank

Operator

Walter turn would to the This session. over for Johnsen closing ahead, question-and-answer concludes remarks. I any back our like go sir. Mr. conference Please to

Walter Johnsen

I'd for the like thank you to joining call today.

did I'm we have former for forward very of we've and Just conference coordinator, fired organization the And the not the schedule of joining as I look to seeing we've a of aside, and Q&A to speaking forward some happy you LD look an number previous so used next a the that now we seeing goodbye. that at week. the years, competent have a and them. End got you And conference conference us, at you coordinator, quarter. Micro also end Thank for of fourth to again some and

Operator

Thank The conference you today's has concluded. now presentation. attending for

disconnect. may now You

Walter Johnsen

Bye-bye.

Acme United (ACU) 21 Oct 222022 Q3 Earnings call transcript