-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, E5AYkKvQM+8Dy4zMS0pNyyHdL9vpksa/75sJVAcpK7oWXkpdEfOI/Fp1wEqzNDdD x/6bM/Bjf50GQVmnFOHblg== 0001026608-00-000018.txt : 20000516 0001026608-00-000018.hdr.sgml : 20000516 ACCESSION NUMBER: 0001026608-00-000018 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACME UNITED CORP CENTRAL INDEX KEY: 0000002098 STANDARD INDUSTRIAL CLASSIFICATION: CUTLERY, HANDTOOLS & GENERAL HARDWARE [3420] IRS NUMBER: 060236700 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-07698 FILM NUMBER: 633662 BUSINESS ADDRESS: STREET 1: 75 KINGS HIGHWAY CUTOFF CITY: FAIRFIELD STATE: CT ZIP: 06430 BUSINESS PHONE: 2033327330 FORMER COMPANY: FORMER CONFORMED NAME: ACME SHEAR CO DATE OF NAME CHANGE: 19710713 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------- FORM 10-Q ----------------- |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000 OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to ______ ------------------ Commission file number Q4823 ACME UNITED CORPORATION ----------------------- (Exact name of registrant as specified in its charter) CONNECTICUT 06-0236700 ----------- ---------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 75 Kings Highway Cutoff, Fairfield, Connecticut 06430 - ----------------------------------------------- ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (203) 332-7330 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_| Registrant had 3,507,055 shares outstanding as of May 12, 2000 of its $2.50 par value Common Stock. ACME UNITED CORPORATION Page ---- Part I -- FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets....................... 3 Condensed Consolidated Statements of Operations and Comprehensive Income................................... 5 Condensed Consolidated Statements of Cash Flows............. 6 Notes to Condensed Consolidated Financial Statements........ 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................. 9 Part II -- OTHER INFORMATION Item 1. Legal Proceedings............................................. 11 Item 2. Changes in Securities......................................... 11 Item 3. Defaults Upon Senior Securities............................... 11 Item 4. Submission of Matters to a Vote of Security Holders........... 11 Item 5. Other Information............................................. 11 Item 6. Exhibits and Reports on Form 8-K.............................. 11 Signatures............................................................ 12 PART I. FINANCIAL INFORMATION ACME UNITED CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (all amounts in thousands, except per share data) March 31 December 31 2000 1999 ------------ -----------
ASSETS Current Assets: Cash and cash equivalents $ - $ 88 Accounts receivable, less allowance 7,020 6,702 Inventories: Finished goods 5,815 5,355 Work in process 871 649 Raw materials and supplies 2,155 2,294 ---------- --------- 8,841 8,298 Prepaid expenses and other current assets 795 508 ---------- --------- Total current assets 16,657 15,596 ---------- --------- Property, plant and equipment: Land 182 191 Buildings 1,938 2,048 Machinery and equipment 8,438 8,616 ---------- --------- 10,558 10,855 Less accumulated depreciation 6,781 6,869 ---------- --------- 3,777 3,986 Other assets 990 993 Goodwill, less accumulated amortization 188 193 ---------- --------- Total assets $ 21,611 $ 20,767 ========== ========= See notes to condensed consolidated financial statements
ACME UNITED CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS - continued (UNAUDITED) (all amounts in thousands, except per share data) March 31 December 31 2000 1999 ------------ -----------
LIABILITIES Current Liabilities: Notes payable $ 734 $ 691 Accounts payable 2,664 2,763 Other accrued liabilities 3,193 3,154 Current portion of long term debt 2,512 2,032 ---------- --------- Total current liabilities 9,103 8,640 Long term debt, less current portion 5,178 5,012 Other 192 197 ---------- --------- Total liabilities 14,473 13,849 ---------- --------- STOCKHOLDERS' EQUITY Common stock, par value $2.50: Authorized-8,000,000 shares issued-3,612,062 shares, including treasury stock 9,030 9,030 Additional paid-in capital 2,038 2,038 Retained-earnings deficit (2,005) (2,212) Accumulated other comprehensive loss-translation adjustment (1,278) (1,290) Treasury stock, at cost-105,007 shares (648) (648) ---------- --------- Total stockholders' equity 7,138 6,918 ---------- --------- Total liabilities and stockholders' equity $ 21,611 $ 20,767 ========== ========= See notes to condensed consolidated financial statements
ACME UNITED CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED) (all amounts in thousands, except per share data) Three Months Ended March 31 -------------------- 2000 1999 -------- --------
Revenues: Net sales $ 8,041 $ 7,911 Other income 18 177 -------- -------- Total revenues 8,059 8,088 -------- -------- Costs and expenses: Cost of goods sold 5,222 6,052 Selling, general and administrative expenses 2,424 2,234 Interest expense 206 358 -------- -------- Total expenses 7,852 8,644 -------- -------- Income (loss) from continuing operations before income taxes 207 (556) Income taxes - (14) -------- -------- Income (loss) from continuing operations 207 (542) Discontinued operations: Gain on sale of discontinued operations - 2,101 Income from discontinued operations - 198 -------- -------- - 2,299 -------- -------- Net income 207 1,757 Other comprehensive income (expense) - foreign currency translation 12 (71) -------- -------- Comprehensive income $ 219 $ 1,686 ======== ======== Earnings (loss) per share: Continuing operations $ 0.06 $ (0.16) Discontinued operations - 0.68 -------- -------- Net income $ 0.06 $ 0.52 ======== ======== Diluted earnings (loss) per share: Continuing operations $ 0.06 $ (0.16) Discontinued operations - 0.68 Net income $ 0.06 $ 0.52 ======== ======== Weighted average number of common shares outstanding- denominator used for per share computations 3,507 3,377 Weighted average number of dilutive stock options outstanding 183 -------- -------- Denominator for diluted per share computation 3,690 3,377 ======== ======== See notes to condensed consolidated financial statements
ACME UNITED CORPORATION CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) (all amounts in thousands) Three Months Ended March 31 ------------------- 2000 1999 --------- ---------
Operating Activities: Net income $ 207 $ 1,757 Adjustments to reconcile net income to net cash provided (used) by operating activities: Gain on sale of discontinued operations - (2,101) Depreciation 208 236 Amortization 5 3 Gain on disposal of property, plant, and equipment (12) - Changes in operating assets and liabilities: Accounts receivable (318) (624) Inventories (543) 1,743 Prepaid expenses and other current assets (287) 140 Other assets 3 (14) Accounts payable (99) (800) Other accrued liabilities 39 (1,209) ---------- --------- Net cash used by operating activities (796) (869) ---------- --------- Investing Activities: Capital expenditures (70) (242) Proceeds from sale of property, plant, and equipment 60 - Proceeds from sale of medical division - 7,156 ---------- --------- Net cash (used) provided by investing activities (10) 6,914 ---------- --------- Financing Activities: Net proceeds (payments) on short term borrowing arrangements 1,262 (7,321) Borrowings of long term debt 325 1,786 Payments of long term debt (870) - ---------- --------- Net cash provided (used) by financing activities 717 (5,535) ---------- --------- Effect of exchange rate changes on cash 1 (1) ---------- --------- Net change in cash and cash equivalents (88) 509 Cash and cash equivalents at beginning of period 88 40 ---------- --------- Cash and cash equivalents at end of period $ (0) $ 549 ========== ========= See notes to condensed consolidated financial statements
Notes to CONDENSED CONSOLIDATED Financial Statements (Unaudited) Note 1 -- Basis of Presentation In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments necessary to present fairly the financial position, results of operations and cash flows. However, the financial statements do not include all of the disclosures normally required by generally accepted accounting principles or those normally made in the Company's annual report on Form 10-K. Please refer to the Company's annual report on Form 10-K for the year ended December 31, 1999 for such disclosures. The condensed consolidated balance sheet as of December 31, 1999 was derived from the audited consolidated balance sheet as of that date. The results of operations for the three months ended March 31,2000 are not necessarily indicative of the results to be expected for the full year. Note 2 -- Discontinued Operations On March 22, 1999 the Company sold its medical business including customer lists, inventory, and certain equipment for approximately $8,156,000 realizing a gain of $2,101,000. The condensed consolidated statement of operations for the three months ended March 31, 1999 relating to the medical business follows: Net sales $ 2,101,000 Costs and expenses 1,903,000 ----------- Income from operations $ 198,000 =========== Earnings per share $ 0.06 =========== Income taxes related to the medical business were not material. Note 3 -- Contingencies The Company has been involved in certain environmental matters. Additionally, the Company has been involved in numerous legal actions relating to the use of certain latex products, which the Company distributes, but does not manufacture. The Company is one of many defendants. The Company has been released from the majority of the lawsuits. While five lawsuits remain, they are still in preliminary stages and it has not been determined whether the Company's products were involved. Based on information available, the Company believes that there will not be a material adverse impact on financial position, results of operations, or liquidity, from environmental and product liabilities, either individually or in aggregate. Notes to CONDENSED CONSOLIDATED Financial Statements- continued (Unaudited) Note 4 -- Debt and Liquidity The Company has short-term lines of credit for its foreign subsidiaries which are renewable at various times throughout the remainder of 2000. The aggregate amount available under these lines is $1,029,000 of which $734,000 is outstanding at March 31, 2000. Long term debt consisted of the following: (all amounts in thousands) March 31 December 31 2000 1999 ------------ ----------- Notes payable: U.S. and Canada arrangements........... $ 6,795 $ 5,225 Other.................................. 895 1,819 ---------- ---------- 7,691 7,044 Less current portion 2,512 2,032 ---------- ---------- $ 5,178 $ 5,012 ========== ========== On January 19, 2000, the Company entered into a loan agreement (the Agreement) with a bank to refinance debt. Under the Agreement the Company may borrow up to $11,500,000 through January 19, 2003 (the maturity date) based on a formula which applies specific percentages to balances of accounts receivable and inventories. Throughout 2000, the Company expects to have a minimum of $4.4 million outstanding under this arrangement. Under the Agreement, the Company borrowed an additional $325,000 which is payable in monthly installments of $5,417, plus interest, from February 1, 2000 through November 1, 2002 and a final installment of $140,822, plus interest, due December 1, 2002. Amounts outstanding under the Agreement bear interest at varying rates as provided for in the Agreement. Under a separate loan agreement with another bank which was amended January 19, 2000, the Company will repay $500,000, principal amount, of outstanding debt at that date in monthly installments of $13,889, plus interest at the prime rate, as defined, plus 2.5%, commencing February 1, 2000 through January 1, 2003. The Company, among other things, is restricted with respect to dividends, additional borrowings, investments, mergers, distributions, and property and equipment acquisitions. Further, the Company is required to maintain specific amounts of tangible net worth, as defined, commencing January 19, 2000, and a specified debt service coverage ratio, as defined, and a fixed charge coverage ratio, as defined, commencing March 31, 2000. The Company was in compliance with all covenants as of March 31, 2000 and believes these financial covenants will be met for the remainder of the term of the loan. Cash generated from operating activities, together with funds available under the Agreement, is expected, under current conditions, to be sufficient to finance the Company's planned operations in 2000. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS For the Three Months Ended March 31, 2000 Results of Operations Net Sales Traditionally, the Company's sales are stronger in the second and third quarters, and weaker in the first and fourth quarters of the fiscal year due to the seasonal nature of the business specific to the back-to-school season. Consolidated net sales for the quarter ended March 31, 2000 were $8,041,000 compared with $7,911,000 for 1999, or 2% higher. Beginning in the first quarter of 2000, the Company is classifying outgoing freight expense as selling expense. Such expenses were previously classified as a component of net sales. Outgoing freight expense for the quarter ended March 31, 1999 of $341,000 has been reclassified to conform with the current period presentation. Domestic sales increased 6% to $5,319,000. Sales to all major customers were ahead of last year's levels and enhanced inventory management reduced the backlog from $569,000 in 1999 to $85,000 in 2000 which added to the sales growth. International sales were 7% below 1999 levels. Strong sales growth in England was more than offset by weakness in Canada and Germany. A product rationalization of low margin products were the main reason for the decline in Canada. Also adding to the reduction in sales was a 9% negative foreign exchange decline in the German Mark. Gross Profit The gross profit for the first quarter of 2000 was $2,819,000 (35% of net sales) compared to $1,859,000 (23% of net sales) for the first quarter of 1999. Resourcing of scissor products to Asia coupled with aggressive purchasing practices and improved manufacturing efficiencies in the USA were the main reasons for the improved gross margins. Selling, General and Administrative Expenses Selling, general and administrative ("SG&A") expenses for the first quarter of 2000 were $2,424,000 (30.1% of net sales) compared with $2,234,000 (28.2% of net sales) for the same period of 1999, an increase of $189,000. Net Income (Loss) Net income from continuing operations for the first quarter of 2000 is $207,000, or 6 cents per share (basic and diluted) compared to a net loss of $542,000, or 16 cents per share (basic and diluted). Net income for the first quarter of 1999 was $1,757,000 or 52 cents per share (basic and diluted). The first quarter of 1999 included a $2,101,000 gain on the sale of the medical business. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS-Continued For the Three Months Ended March 31, 2000 Financial Condition Liquidity and Capital Resources The Company's working capital, current ratio and long term debt to equity ratio follow: March 31, 2000 December 31, 1999 ------------------ ------------------ Working capital..................... $7,554,000 $6,956,481 Current ratio....................... 1.83 to 1 1.81 to 1 Long-term debt to equity ratio...... .73 .72 During the first three months of 2000, total debt increased by $653,000 compared to total debt at December 31, 1999. On January 19, 2000, the Company entered into a loan agreement (the Agreement) with a bank to refinance debt. Under the Agreement the Company may borrow up to $11,500,000 through January 19, 2003 (the maturity date) based on a formula which applies specific percentages to balances of accounts receivable and inventories. Throughout 2000, the Company expects to have a minimum of $4.4 million outstanding under this arrangement. Under the Agreement, the Company borrowed an additional $325,000 which is payable in monthly installments of $5,417, plus interest, from February 1, 2000 through November 1, 2002 and a final installment of $140,822, plus interest, due December 1, 2002. Amounts outstanding under the Agreement bear interest at varying rates as provided for in the Agreement. Under a separate loan agreement with another bank which was amended January 19, 2000, the Company will repay $500,000, principal amount, of outstanding debt at that date in monthly installments of $13,889, plus interest at the prime rate, as defined, plus 2.5%, commencing February 1, 2000 through January 1, 2003. The Company, among other things, is restricted with respect to dividends, additional borrowings, investments, mergers, distributions, and property and equipment acquisitions. Further, the Company is required to maintain specific amounts of tangible net worth, as defined, commencing January 19, 2000, and a specified debt service coverage ratio, as defined, and a fixed charge coverage ratio, as defined, commencing March 31, 2000. The Company believes these financial covenants will be met. Capital expenditures for the next 12 months are not expected to be material and are expected to be financed by cash provided by investing activities and future operating activities. Safe Harbor for Forward-looking Statements Forward-looking statements in this report, including without limitation, statements related to the Company's plans, strategies, objectives, expectations, intentions and adequacy of 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 without limitation the following: (i) the Company's plans, strategies, objectives, expectations and intentions are subject to change at any time at the discretion of the Company; (ii) the Company's plans and results of operations will be affected by the Company's ability to manage its growth and inventory; (iii) other risks and uncertainties indicated from time to time in the Company's filings with the Securities and Exchange Commission. PART II. OTHER INFORMATION Item 1 -- Legal Proceedings None. Item 2 -- Changes in Securities None. Item 3 -- Defaults Upon Senior Securities None. Item 4 -- Submission of Matters to a Vote of Security Holders A. The Annual Meeting was held on April 24, 2000. B. The following individuals were elected Directors at the Meeting and comprise the entire Board. Votes for Votes against Votes withheld --------- ------------- -------------- George R. Dunbar 2,763,328 151,821 591,906 Richard Y. Holden, Jr. 2,763,468 151,681 591,906 Walter C. Johnsen 2,813,402 101,747 591,906 Wayne R. Moore 2,763,394 151,755 591,906 Brian Olschan 2,763,468 151,681 591,906 Gary D. Penisten 2,813,394 101,755 591,906 C. An amendment to the Employee Stock Option Plan was approved. Votes for Votes against Votes withheld --------- ------------- -------------- 2,520,007 111,786 875,262 Item 5 -- Other Information None. Item 6 -- Exhibits and Reports on Form 8-K None. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ACME UNITED CORPORATION By /s/ WALTER C. JOHNSEN ------------------------------ Walter C. Johnsen President and Chief Executive Officer Dated: May 12, 2000 By /s/ RONALD P. DAVANZO ------------------------------ Ronald P. Davanzo Vice President and Chief Financial Officer Dated: May 12, 2000 EX-27 2
5 This schedule contains summary financial information extracted from the Condensed Consolidated Balance Sheet and Condensed Consolidated Statement of Operations and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS DEC-31-2000 MAR-31-2000 0 0 0 0 8,841 0 10,558 6,781 21,611 9,103 0 0 0 9,030 (1,892) 21,611 8,041 8,059 5,222 7,852 0 0 206 207 0 207 0 0 0 207 .06 .06
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