Earnings call transcript Q1 2023

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Operator

Good day, and welcome to the Acme United Corporation First Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

At this time, I would like to turn the call over to Mr. CEO. and Chairman Johnsen, Walter Please go sir. ahead,

Walter Johnsen

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

Paul?

Paul Driscoll

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

and that including, a Investors forward-looking global continued rates. are cautioned such a and of others, statements macroeconomic as involve arising inflation risks characterized by interest high uncertainties, those environment challenging among high result

including and the risks COVID-XX the from In current addition, Exchange our those to also described we resulting release. in Commission we and disruptions filings in experience periodic have pandemic, supply future. chain We're uncertainties as additional subject with disruptions, the and experienced earnings and may chain Securities our supply

Walter Johnsen

you, progress United first the made in Acme XXXX. of quarter Thank Paul.

last sales million compared of $XXX,XXX XXXX, Earnings $X.XX versus increase were million were increase or income share an $XXX,XXX $X.XX to per $XX.X in an X%. $XX.X XX% a versus increase. XX%. net was of Our Net year,

improvement The sales important quarter reductions first results performance. by mark our customers. in Net in United's Acme an increased inventory despite ongoing

from XXXX benefited The income SG&A SG&A up, expense in to operating improvement. the margins and productivity evident. are margins becoming first increased in gross With we our Our down, reductions up began gross in that quarter. XX% sales

understocked some the programs. And making progress rightsized, are are reducing items. anticipate their continue, back-to-school that others kinds item. with our customer these We reduction now on that of actions particularly inventory believe customers We depending some are and to are with

customers believe their also have our we the quarter. that third inventory efforts reduction essentially by completed will However,

XX, quickly be XXXX, been We've customer not by from during reductions XX, and levels position March XXXX. also reduce a approximately to We anticipate reduced been reducing December to has too XXXX in United not million meet $X is to further Acme inventory. careful forecast. our that stock demand to

seeing are improvements Mountain, productivity, at North Rocky our major Carolina. We warehouse in particularly in

management recall, difficulties we and we with two installed implementation. took you XXXX, seeing new we years, are warehouse may software It in As had efficiencies. now but

air-conditioned We improved turnover We to also we workforce have to less new our continue to environment and experience leadership. and wages due stability, higher will and improvements of automation. see believe due workforce

Shenzhen of due Los the the containers Ukraine China last expenses ports the Beach shipping of and Shanghai of behind Rotterdam XXXX, first cost Angeles, clogged. over largely abnormal $X overwhelmed XXXX XXXX. from in and These We are to million and and spiked closed were quarter of in quarter first of began; Long $XXX,XXX The In COVID; ports incurred us. and year. the in war the in expenses

of At in end approximately March and XXXX, $XX the we interest. variable million X% debt had

North Washington mortgages of and fixed rates X.X%. properties million approximately now of at We Carolina Mount, also Rocky our had Vancouver, at $XX

and rates capital interest inventory debt by of back lowering reduction addressing are We rising efforts, earnings. the scale spending impact through

acquisitions. We this to are stronger to year, last and look look at not in XXXX performance we providing time, but for guidance we than forward continue potential

now to will I turn the call Paul.

Paul Driscoll

currency, quarter to X% X% of reductions. in quarter first in to mainly due in in sales sales to of declined for customer increased local the due quarter currency Europe XXXX compared in X% the the the net mainly in $XX.X first quarter, higher local for compared to Canada sales first sales of and of U.S. medical first million segment for XXXX. XXXX. declined the $XX.X were Net Acme's in million the products. sales XXXX quarter aid first inventory Net Net

of quarter productivity first in the quarter in XX.X% initiatives of mainly improvement was to XXXX. was QX XX.X% that higher XXXX in versus due margin of XXXX. the gross first the margin began The gross The

SG&A compared with of profit and for of SG&A million for sales XX.X% XXXX net the to expenses and the in higher margin XX% $XX.X first a percentage sales period of or quarter net quarter the same or as million gross were sales. due increased XXXX. spending of $XX.X Operating improved first sales XX.X% lower of

quarter entirely the Interest $XXX,XXX XXXX. first first $XXX,XXX expense the XXXX to almost higher in The rates. increase interest quarter due was for of compared to of was

interest Our was XXXX. XXXX X.X% overall of the compared quarter X.X% the of rate quarter average first first to in for

share was of $XXX,XXX period XXXX Net for XX% diluted and net income the per share income net diluted first the or earnings increase income of of $X.XX in per an XX% share. to XXXX, per $X.XX or compared for in quarter $XXX,XXX of same

The Company's was XXXX. XX, cash million less XXXX XX, March to bank million compared debt on March on $XX $XX

$X.X XX-month December paid the million. we Safety in flow, including and million free $X.X XXXX. inventory of $XX paid for reduction XX, acquisition period, During of million of dividends $X in debt declined from million an million approximately Made, the the generated assets Net cash $XX

Walter Johnsen

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

Operator

first from Singular Jim Marrone of Our line comes Research. question Please question. proceed your with Instructions] the with [Operator

Jim Marrone

what that to with have Very nice quarter. I hearing I'd questions. couple regards clients. like suppose I is the of to you're one from a first ask

regards to curious to said just a I'm little there's space. it back-to-office. are -- to A thoughts your in because the and that themselves lot be of just of back-to-office commercial like uptick about is seems But of with a under back-to-school you REITs trouble, pressure. with I it think it's So the an space bit seems actually finding the under result regards

ask of could provide you bit second question that. on after perhaps that, I'll color my a just little and if then So,

Walter Johnsen

the office the for in -- channel good and Sure. quarter was Well, first reasonably us.

about supplies back-to-school year. is bought X.X number be year. tends North a with customers quarter the heavy happens. little We or very America more a of what children products But that pretty general, because works the in less in back-to-school We'll business are second million a they overstocking to of the retail concerned our in with in some last see stable

a two places. and But may home requiring office, good. buying. purchased days The rest, more back at may individuals maybe because be has at sales it where at We still different week actual least, get going us, for and reasonably supplies, been is are office to working it's Amazon the the the channel

levels, we're worked fairly just haven't seeing see an to Where have is I shortly. their coming and to ago, and inventory some through end retailers would a they softness some sometime overstocked normal quite that year all

Jim Marrone

acquisitions. Great. And my second is regards to with question

product or looking XXXX Or what or we terms footprint? to do would cutting will just Is make? acquisition type you are a it of beyond? product in scissors you to lines? you And color tools at it and it it be that little it acquisition geographical the of sometime you're first can it completely give if line, an of different? going to And in kit? future. Are is Or within great. If be a just So that to to that, is mentioned is be looking looking that aid something something expand the near bit a

Walter Johnsen

capacity produce way general, you tends to already in competitors as some to space. or in be good same product in and space perhaps Sure. pretty warehouse to gain a are Well, market the share the that buying

those So good are acquisitions.

aid be than our Now which looking in business the integrating also first vertically first we half might more at kits. of aid now, is area,

might similar We might acquisition, more wipes to go to that a and kits then So be capability where that Med-Nap that prep company the which be integrate. and vertically made way. bought our us which we pads, alcohol into give looking

In ago. a base and it you aid but half we a step was case, a was our Or wasn't the competitor, bought medical items, personalization remember away may Made year within direct that the of that first about products. it in that knowledge of Safety but and

what normally So, expect. and I that would be would think you that, would I see

I be by -- in Relative buy wouldn't space, to it transformative we already means. a acquisition but be where acquisitions, any wouldn't might Canada, geographic a something geographic -- the just mean have we that distribution

pretty new We steady have of a flow possibilities.

will doing, new least the our year, acquisitions work lot the a systems we're looking things the guess my space to back of half is been getting transaction. sometime been past year, would in place, position space, they've And we their in have be where completed. those of another Therefore, on integrating a growing existing take for out in at to the start last of

Of very it's course, opportunistic.

Jim Marrone

XX% Great. or a you in Are to there any are price or a you Is looking XX%? at target order look that EV range to range? And to XXx you is or find the... there particular number XX% at particular looking XX% to a under EBITDA or something at

Walter Johnsen

where accretive. to and you how our In market it that way. We in we some But don't cases at are the pay some they're synergies really adding very at value we we're adding it really, base cases, shareholder value quickly. No, look truly as prices. look

the or we be first medical the So multiples, aid channel, they office very -- but and area, whether it's area different in competitive. each would in have case, the in

Operator

with the next proceed with Richard Partners. of Dearnley [Operator Longport Instructions] Our question. comes question Please from your line

Richard Dearnley

and first was What aid Westcott, Clauss, the of cetera? mix et

Paul Driscoll

in first the was XX% quarter. aid first

Richard Dearnley

Okay. And do you year? was last have what that

Paul Driscoll

was It was XX%. think it I --

Richard Dearnley

And good How inventory. the then over-inventory -- could right. Westcott in is first discussion and -- there a was aid? you back-to-office back-to-school That situation and sounds what's of

Walter Johnsen

kits a purchased one some big a deal needed, that ago been customers first and have time aid purchased great inventory through. work took that some to also there've more of Well, than retailer they online year

So, aid it's are The they -- is of expiration with course, tend kits, first similar. there be difference, dates. to

they to probably if so, overstock, risk that some want wouldn't product they're taking they do. And

where So, obsolescence. have they Westcott, is our -- it lower family doesn't tend than product to keep just much

Richard Dearnley

expiration, No right?

Walter Johnsen

Right.

Richard Dearnley

sales medical looks had it that Corp usage looks good Hospital -- and channel is pretty so though so and strong. Because on, usage as a

Okay.

Walter Johnsen

is. it think I

Operator

next Cabot. the with Please Moors proceed with Our & question. of from line question Michael your comes Wasserman

Michael Wasserman

reactive Walter, here? how from Company rates than north would the south interest rather headed

Walter Johnsen

as you year, seen pointed it past rates double and certainly mean profitable, drive double well down. in And we've went about still pay quickly Mike, debt the we're paid from out, the and to could X.X% debt, that and I can interest interest quickly up higher, interest. And go we're we Well, to the rate. as may we the working Paul X.X%, you very more as

Michael Wasserman

Okay.

overly additional... not about you're So concerned possible

Walter Johnsen

think operate, how in and is this to There and how not than had and I'm I more we're now. system responds. banks the debt stresses relative think offset But that improvement operate the how globally, board businesses for financial the level right free a each margin us, seeing kind other the across of consumer have are trade-offs concerned the because we've trade. I of

Operator

in the queue. further for Johnsen back to There Mr. the remarks. I'd like closing no to are call over questions hand

Walter Johnsen

complete. second with you very call thank us. speaking to look is for no like joining the questions, With you further after -- and forward We'd we this to quarter much

Goodbye.

Operator

teleconference. today's for you conclude does Thank Ladies your this and gentlemen, participation.

your disconnect lines have time, may You wonderful and day. a at this

Acme United (ACU) 21 Apr 232023 Q1 Earnings call transcript