SEC Form 10-Q filed by Acme United Corporation.

5/7/25 4:00:20 PM ET

$ACU

Industrial Machinery/Components

Consumer Discretionary

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10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: March 31, 2025

☐ 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: 01-07698

ACME UNITED CORPORATION

(Exact Name of Registrant as Specified in Its Charter)


Connecticut		06-0236700
State or Other Jurisdiction of		I.R.S. Employer Identification No.
Incorporation or Organization

1 Waterview Drive, Shelton, Connecticut		06484
Address of Principal Executive Offices		Zip Code

Registrant's telephone number, including area code: (203) 254-6060

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
$2.50 par value Common Stock	ACU	NYSE American

Indicate by check mark whether the registrant (l) 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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (sec. 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act (Check one).


Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐	Smaller Reporting Company	☒

Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(s) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Registrant had 3,790,689 shares of its $2.50 par value Common Stock outstanding as of May 1, 2025.

ACME UNITED CORPORATION

INDEX


		Page Number

Part I — FINANCIAL INFORMATION:		3
Item 1:	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets at March 31, 2025 and December 31, 2024	3
	Condensed Consolidated Statements of Operations for the three months ended March 31, 2025 and 2024	5
	Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2025 and 2024	6
	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2025 and 2024	7
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2025 and 2024	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3:	Quantitative and Qualitative Disclosures about Market Risk	18
Item 4:	Controls and Procedures	18

Part II — OTHER INFORMATION:		19
Item 1:	Legal Proceedings	19
Item 1A:	Risk Factors	19
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	19
Item 3:	Defaults Upon Senior Securities	19
Item 4:	Mine Safety Disclosures	19
Item 5:	Other Information	19
Item 6:	Exhibits	19
Signatures		20

Part I - FINANCIAL INFORMATION

Item 1: Financial Statements

ACME UNITED CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(all amounts in thousands)


	March 31,		December 31,
	2025		2024
	(unaudited)		(Note 1)
ASSETS
Current assets:
Cash and cash equivalents	$	3,446	$	6,399
Accounts receivable, less allowance for credit losses of $503 in 2025 and $494 in 2024		30,814		28,236
Inventories		57,274		56,254
Prepaid expenses and other current assets		5,311		4,571
Total current assets		96,845		95,460
Property, plant and equipment:
Land		2,692		2,688
Buildings		19,494		20,506
Machinery and equipment		39,810		37,368
		61,996		60,562
Less: accumulated depreciation		29,843		28,908
Net property, plant and equipment		32,153		31,654

Operating lease right-of-use asset, net		4,443		4,826
Goodwill		9,908		9,908
Intangible assets, less accumulated amortization		19,690		20,323
Total assets	$	163,039	$	162,171

See Notes to Unaudited Condensed Consolidated Financial Statements.

ACME UNITED CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (continued)

(all amounts in thousands, except par value and share amounts)


	March 31,			December 31,
	2025			2024
	(unaudited)			(Note 1)
LIABILITIES
Current liabilities:
Accounts payable	$	7,433		$	9,005
Operating lease liability - current portion		1,533			1,564
Current portion of mortgage payable		441			437
Other current liabilities		10,662			11,866
Total current liabilities		20,069			22,872
Non-current liabilities:
Long-term debt		20,428			17,606
Mortgage payable, net of current portion		9,769			9,868
Operating lease liability - non-current portion		3,012			3,367
Deferred income taxes		1,465			1,465
Other non-current liabilities		15			13
Total liabilities		54,758			55,191

Commitments and contingencies (see note 2)

STOCKHOLDERS' EQUITY
Common stock, par value $2.50:
authorized 8,000,000 shares;
5,299,370 shares issued and 3,754,498 shares outstanding in 2025 and 2024		13,248			13,248
Additional paid-in capital		17,931			17,981
Retained earnings		95,588			94,498
Treasury stock, at cost - 1,544,872 shares in 2025 and 2024		(15,996	)		(15,996	)
Accumulated other comprehensive loss:
Translation adjustment		(2,490	)		(2,751	)
Total stockholders’ equity		108,281			106,980
Total liabilities and stockholders’ equity	$	163,039		$	162,171

See Notes to Unaudited Condensed Consolidated Financial Statements.

ACME UNITED CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(all amounts in thousands, except per share amounts)



	Three Months Ended March 31,
	2025			2024
Net sales	$	45,958		$	44,956
Cost of goods sold		28,041			27,560

Gross profit		17,917			17,396

Selling, general and administrative expenses		15,491			14,838
Operating income		2,426			2,558

Non-operating items:
Interest:
Interest expense		426			476
Interest income		(29	)		(33	)
Interest expense, net		397			443
Other income, net		(90	)		(44	)
Income before income tax expense		2,119			2,159
Income tax expense		466			523
Net income	$	1,653		$	1,636

Basic earnings per share	$	0.44		$	0.45

Diluted earnings per share	$	0.41		$	0.39

Weighted average number of common shares outstanding-denominator used for basic per share computations		3,754			3,650
Weighted average number of dilutive stock options outstanding		311			563
Denominator used for diluted per share computations		4,065			4,213

Dividends declared per share	$	0.15		$	0.15

See Notes to Unaudited Condensed Consolidated Financial Statements.

ACME UNITED CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

(all amounts in thousands)


	Three Months Ended
	March 31,
	2025		2024
Net income	$	1,653	$	1,636
Other comprehensive income (loss) :
Foreign currency translation adjustment		261		(322	)
Comprehensive income	$	1,914	$	1,314

See Notes to Unaudited Condensed Consolidated Financial Statements.

ACME UNITED CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(UNAUDITED)

(all amounts in thousands, except share amounts)

For the three months ended March 31, 2024


	Outstanding Shares of Common Stock		Common Stock		Treasury Stock			Additional Paid-In Capital			Accumulated Other Comprehensive Loss			Retained Earnings			Total
Balances, December 31, 2023		3,645,200	$	12,966	$	(15,996	)	$	15,918		$	(1,706	)	$	86,716		$	97,898
Net income															1,636			1,636
Other comprehensive loss												(322	)					(322	)
Stock compensation expense									449									449
Distributions to stockholders															(561	)		(561	)
Issuance of common stock		14,438		36					287									323
Cash settlement of stock options									(296	)								(296	)
Net share settlement of stock options		2,242		6					(41	)								(35	)
Balances March 31, 2024		3,661,880	$	13,008	$	(15,996	)	$	16,317		$	(2,028	)	$	87,791		$	99,092

For the three months ended March 31, 2025


	Outstanding Shares of Common Stock		Common Stock		Treasury Stock			Additional Paid-In Capital			Accumulated Other Comprehensive Loss			Retained Earnings			Total
Balances, December 31, 2024		3,754,498	$	13,248	$	(15,996	)	$	17,981		$	(2,751	)	$	94,498		$	106,980
Net income															1,653			1,653
Other comprehensive income												261						261
Stock compensation expense									413									413
Distributions to stockholders															(563	)		(563	)
Cash settlement of stock options									(463	)								(463	)
Balances March 31, 2025		3,754,498	$	13,248	$	(15,996	)	$	17,931		$	(2,490	)	$	95,588		$	108,281

See Notes to Unaudited Condensed Consolidated Financial Statements.

ACME UNITED CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(all amounts in thousands)


	Three Months Ended
	March 31,
	2025			2024
Cash flows from operating activities:
Net income	$	1,653		$	1,636
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		863			860
Amortization of intangible assets		638			605
Non-cash lease adjustment		(2	)		(12	)
Stock compensation expense		413			449
Provision for credit losses		8			112
Provision for excess and obsolete inventory		140			-
Amortization of deferred financing costs		10			9
Changes in operating assets and liabilities:
Accounts receivable		(2,468	)		(6,774	)
Inventories		(941	)		(1,659	)
Prepaid expenses and other assets		(725	)		(590	)
Accounts payable		(1,798	)		(4,517	)
Other accrued liabilities		(1,128	)		(287	)
Total adjustments		(4,990	)		(11,804	)
Net cash used in operating activities		(3,337	)		(10,168	)

Cash flows from investing activities:
Purchase of property, plant and equipment		(1,353	)		(1,611	)
Net cash used in investing activities		(1,353	)		(1,611	)

Cash flows from financing activities:
Net borrowings of long-term debt		2,816			10,183
Tax withholding on net share settlement of stock options		-			(35	)
Cash settlement of stock options		(463	)		(296	)
Repayments on mortgage		(99	)		(104	)
Proceeds from issuance of common stock		-			323
Distributions to shareholders		(563	)		(561	)
Net cash provided by financing activities		1,691			9,510

Effect of exchange rate changes on cash and cash equivalents		46			(84	)
Net change in cash and cash equivalents		(2,953	)		(2,353	)

Cash and cash equivalents at beginning of period		6,399			5,546

Cash and cash equivalents at end of period	$	3,446		$	3,193

Supplemental cash flow information:
Cash paid for income taxes	$	85		$	9
Cash paid for interest	$	368		$	385

See Notes to Unaudited Condensed Consolidated Financial Statements.

ACME UNITED CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. Basis of Presentation

The accompanying condensed consolidated financial statements include all adjustments necessary to present fairly the financial position, results of operations and cash flows of Acme United Corporation (the “Company”). These adjustments are of a normal, recurring nature. However, the financial statements do not include all the disclosures normally required by accounting principles generally accepted in the United States 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, 2024 for such disclosures. The condensed consolidated balance sheet as of December 31, 2024 was derived from the audited consolidated balance sheet as of that date. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the financial statements and notes thereto included in the Company’s 2024 Annual Report on Form 10-K.

The Company has evaluated events and transactions subsequent to March 31, 2025 and through the date these condensed consolidated financial statements were issued.

Recently Issued Accounting Standards

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. ASU No. 2023-09 is effective for annual periods beginning after December 15, 2024. The guidance is to be applied on a prospective basis with the option to apply the standard retrospectively. The Company is currently evaluating the impact of ASU 2023-09.

In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This ASU requires more detailed information about specified categories of expenses (purchases of inventory, employee compensation, depreciation, intangible asset amortization and depletion) included in certain expense captions presented on the face of the income statement. The ASU is effective for fiscal years beginning after December 15, 2026 and for interim periods beginning after December 15, 2027. The ASU may be applied either prospectively to financial statements issued for reporting periods after the effective date of this ASU or retrospectively to all prior periods presented in the financial statements and early adoption is permitted. The Company is currently evaluating the impact of adopting this ASU on our consolidated financial statements and related disclosures.

2. Commitment and Contingencies

There are no pending material legal proceedings to which the Company is a party, or, to the actual knowledge of the Company, contemplated by any governmental authority.

3. Revenue from Contracts with Customers

Nature of Goods and Services

The Company recognizes revenue from the sales of a broad line of products that are grouped into two main categories: (a) first aid and medical; and (b) cutting and sharpening. The first aid and medical category includes first aid kits and refills, over-the-counter medications and a variety of medical products. The cutting and sharpening category includes scissors, knives, paper trimmers, pencil sharpeners and other sharpening tools. Revenue recognition is evaluated through the following five steps: (i) identification of the contract or contracts with a customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price in the contract; and (v) recognition of revenue when or as a performance obligation is satisfied.

When Performance Obligations Are Satisfied

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Revenue is generated by the sale of the Company’s products to its customers. Sales contracts (purchase orders) generally have a single performance obligation that is satisfied at a point in time, upon shipment or delivery, depending on the terms of the underlying contract. Revenue is measured based on the consideration specified in the contract. The amount of consideration we receive and revenue we recognize is impacted by incentives ("customer rebates"), including sales rebates, which are generally tied to sales volume levels, in-store promotional allowances, shared media and customer catalog allowances and other cooperative advertising arrangements; freight allowance programs offered to our customers; and allowance

for returns and discounts. We generally recognize customer rebate costs as a deduction to gross sales at the time that the associated revenue is recognized.

Significant Payment Terms

Payment terms for each customer are dependent on the agreed upon contractual repayment terms. Payment terms typically are between 30 and 90 days and vary depending on the size of the customer and its risk profile to the Company. Some customers receive discounts for early payment.

Product Returns

The Company accepts product returns in the normal course of business. The Company estimates reserves for returns and the related refunds to customers based on historical experience. Reserves for returned merchandise are included as a component of “Accounts receivable” in the condensed consolidated balance sheets.

Practical Expedient Usage and Accounting Policy Elections

For the Company’s contracts that have an original duration of one year or less, the Company uses the practical expedient in ASC 606-10-32-18 applicable to such contracts and does not consider the time value of money in relation to significant financing components. The effect of applying this practical expedient election did not have an impact on the Company’s condensed consolidated financial statements.

Per ASC 606-10-25-18B, the Company has elected to account for shipping and handling activities that occur after the customer has obtained control as a fulfillment activity instead of a performance obligation. Furthermore, shipping and handling activities performed before transfer of control of the product also do not constitute a separate and distinct performance obligation. The effect of applying this practical expedient election did not have an impact on the Company’s condensed consolidated financial statements.

The Company has elected to exclude from the transaction price those amounts which relate to sales and other taxes that are assessed by governmental authorities and that are imposed on and concurrent with a specific revenue-producing transaction and collected by the Company from a customer.

Applying the practical expedient in ASC 340-40-25-4, Other Assets and Deferred Costs, the Company recognizes the incremental costs of obtaining contracts as an expense when incurred. These costs are included in “Selling, general and administrative expenses.”

Disaggregation of Revenues

The following table represents external net sales disaggregated by product category, by segment (amounts in thousands):

For the three months ended March 31, 2025


	United States		Canada		Europe		Total
First Aid and Medical	$	28,164	$	2,514	$	325	$	31,003
Cutting and Sharpening		10,958		671		3,326		14,955
Total Net Sales	$	39,122	$	3,185	$	3,651	$	45,958

For the three months ended March 31, 2024


	United States		Canada		Europe		Total
First Aid and Medical	$	24,609	$	2,191	$	258	$	27,058
Cutting and Sharpening		13,382		848		3,668		17,898
Total Net Sales	$	37,991	$	3,039	$	3,926	$	44,956

4. Debt and Stockholders’ Equity

Long-term debt consists of (i) borrowings under the Company’s revolving loan agreement with HSBC Bank, N.A.(“HSBC”) and (ii) amounts outstanding under the fixed rate mortgage on the Company’s manufacturing and distribution facilities in Rocky Mount, NC and Vancouver, WA. The revolving loan agreement provides for borrowings of up to $65 million at an interest rate of Secured Overnight Financing Rate (“SOFR”) plus a margin of +1.75%; interest is payable monthly. The credit facility has an expiration date of May 31, 2026. The Company must pay a facility fee, payable quarterly, in an amount equal to one eighth of one percent (.125%) per annum of the average daily unused portion of the revolving credit line. The facility is intended to provide liquidity for growth, acquisitions, dividends, share repurchases, and other operating activities. Under the revolving loan agreement, the Company is required to maintain a specific ratio of funded debt to EBITDA, a fixed charge coverage ratio and must have annual net income greater than $0, measured as of the end of each fiscal year. As of March 31, 2025, the Company was in compliance with the covenants under the revolving loan agreement as then in effect.

As of March 31, 2025 and December 31, 2024, the Company had outstanding borrowings of $20,457,000 and $17,641,000, excluding deferred financing costs of $29,000 and $35,000 respectively, under the Company’s revolving loan agreement with HSBC.

The Company’s manufacturing and distribution facilities in Rocky Mount, NC and Vancouver, WA were financed by a fixed rate mortgage with HSBC at a fixed interest rate of 3.8%. The Company entered into the agreement on December 1, 2021. Commencing on January 1, 2022, payments of principal and interest are due monthly, with all amounts outstanding due on maturity on December 1, 2031. As of March 31, 2025 and December 31, 2024, long-term debt related to the mortgage consisted of the following (amounts in ‘000’s):


	March 31, 2025			December 31, 2024

Mortgage payable - HSBC Bank N.A.	$	10,311		$	10,410
Less debt issuance costs		(101	)		(105	)
		10,210			10,305
Less current maturities		441			437
Long-term mortgage payable less current maturities	$	9,769		$	9,868

During the three months ended March 31, 2025, the Company paid approximately $463,000 to optionees who had elected a net cash settlement of certain of their respective options.

5. Segment Information

The Company aligns its businesses into three reportable business segments based on geographical location. This segment structure reflects (i) the manner in which the Chief Operating Decision Maker (“CODM”), who is the Company’s Chief Executive Officer, regularly assesses information for decision-making purposes, including the allocation of resources, and (ii) how the Company operates its businesses, assesses performance, and communicates results and strategy, among other items, to the Board and its stockholders.

The Company’s reportable business segments consist of: (1) United States; (2) Canada; and (3) Europe. As described below, the activities of the Company’s Asian operations are closely linked to those of the U.S. operations; accordingly, the Company’s CODM reviews the financial results of both on a consolidated basis, and the results of the Asian operations have been aggregated with the results of the United States operations to form one reportable segment called the “United States segment” or “U.S. segment”. Each reportable segment derives its revenue from the sales of i) first aid and medical products and ii) cutting and sharpening tools to school, home, office, hardware, sporting and industrial markets.

The Company's CODM evaluates the performance of each operating segment based on segment revenues and operating income. Segment revenues are defined as total revenues, excluding inter-segment revenue. Segment operating earnings are defined as segment revenues, less cost of goods sold and operating expenses. Assets are reviewed by the CODM on a consolidated basis and therefore are not presented by reportable business segment.

The following table sets forth certain financial data by segment for the three months ended March 31, 2025 and 2024:


For the three months ended March 31, 2025
(amounts in 000's)
	United States		Canada		Europe		Total
Net Sales	$	39,122	$	3,185	$	3,651	$	45,958
Less: Segment cost of sales		23,700		1,985		2,356		28,041
Less: Segment selling, general, and administrative expenses		13,063		1,159		1,269		15,491
Segment operating income	$	2,359	$	41	$	26	$	2,426
Interest expense								(426	)
Interest income								29
Other income, net								90
Income before income taxes							$	2,119
Assets		143,808		9,713		9,518		163,039
Additions to property, plant and equipment		1,334		18		1		1,353
Depreciation and amortization		1,444		44		12		1,501


For the three months ended March 31, 2024
(amounts in 000's)
	United States		Canada		Europe		Total
Net Sales	$	37,991	$	3,039	$	3,926	$	44,956
Less: Segment cost of sales		22,977		2,004		2,579		27,560
Less: Segment selling, general, and administrative expenses		12,675		996		1,167		14,838
Segment operating income	$	2,339	$	39	$	180	$	2,558
Interest expense								(476	)
Interest income								33
Other income, net								44
Income before income taxes							$	2,159
Assets		139,228		11,094		9,059		159,381
Additions to property, plant and equipment		1,484		79		48		1,611
Depreciation and amortization		1,343		109		13		1,465

6. Stock Based Compensation

The Company recognizes share-based compensation at the fair value of the equity instrument on the grant date. Compensation expense is recognized over the required service period, which is generally the vesting period of the equity instrument. Share-based compensation expense was approximately $413,000 for the three months ended March 31, 2025 compared to approximately $449,000 for the three months ended March 31, 2024.

As of March 31, 2025, there was a total of $1,850,026 of unrecognized compensation cost, adjusted for estimated forfeitures, related to non-vested share-based payments granted to the Company’s employees. As of that date, the remaining unamortized expense was expected to be recognized over a weighted average period of approximately two years.

7. Fair Value Measurements

The carrying value of the Company’s bank debt is a reasonable estimate of fair value because of the nature of its payment terms and maturity. The Company’s contingent liability related to the acquisition of Elite First Aid is recorded at its fair value of $500,000 which is recorded in other non-current liabilities on the condensed consolidated balance sheet as of March 31, 2025.

8. Leases

The Company has operating leases for office and warehouse space and equipment under various arrangements which provide the right to use the underlying asset and require lease payments for the lease term. The Company’s lease portfolio consists of operating leases which expire at various dates through 2029.

Certain of the Company’s lease arrangements contain renewal provisions, exercisable at the Company's option. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company determines if an arrangement is an operating lease at inception. Leases with an initial term of 12 months or less are not recorded on the balance sheet. All other leases are recorded on the balance sheet with right-of-use (“ROU”) assets representing the right to use the underlying asset for the lease term and lease liabilities representing the obligation to make lease payments arising from the lease.

Operating lease cost was $0.5 million for the three months ended March 31, 2025, of which $0.1 million was included in cost of goods sold and $0.4 million was included in selling, general and administrative expenses.

Information related to leases (in thousands):


	Three Months Ended		Three Months Ended
Operating cash flow information:	March 31, 2025		March 31, 2024
Operating lease cost	$	461	$	343
Operating lease - cash flow	$	464	$	369

Non-cash activity:
ROU assets obtained in exchange for lease liabilities	$	-	$	3,818


	March 31, 2025			March 31, 2024
Weighted-average remaining lease term	3.5 years			2.0 years
Weighted-average discount rate		7	%		5	%

Future minimum lease payments under non-cancelable leases as of March 31, 2025:


2025 (remaining)		1,409
2026		1,299
2027		1,023
2028		1,046
2029		361
Total future minimum lease payments	$	5,138
Less: imputed interest		(593	)
Present value of lease liabilities - current		1,533
Present value of lease liabilities - non-current	$	3,012

9. Other Accrued Liabilities

Other current and non-current accrued liabilities consisted of (in thousands):


	March 31,		December 31,
	2025		2024
Customer rebates	$	4,977	$	5,872
Contingent liability - Elite		500		500
Accrued compensation		1,649		2,389
Dividend payable		563		563
Income tax payable		24		230
Other		2,964		2,325
Total:	$	10,677	$	11,879

10. Intangible Assets and Goodwill

The Company’s intangible assets and goodwill consisted of (in thousands):



	March 31,			December 31,
	2025			2024
Tradename	$	11,268		$	11,268
Customer list		21,114			21,114
Non-compete		1,667			1,667
Patents		2,272			2,272
Subtotal		36,321			36,321
Less: Accumulated amortization		16,556			15,918
Translation adjustments		(75	)		(80	)
Intangible assets	$	19,690		$	20,323
Goodwill	$	9,908		$	9,908
Total:	$	29,598		$	30,231

The useful lives of the identifiable intangible assets range from 5 years to 15 years.

11. Inventories

Inventories consisted of (in thousands):



	March 31,		December 31,
	2025		2024
Finished goods	$	42,380	$	40,074
Work in process		407		247
Materials and supplies		14,487		15,933
	$	57,274	$	56,254

Inventories are stated at the lower of cost or net realizable value, determined by the first-in, first-out method.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Information

The Company may from time to time make written or oral “forward-looking statements” including statements contained in this report and in other communications by the Company, which are made in good faith pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on our beliefs as well as assumptions made by and information currently available to us. When used in this document, words like “may,” “might,” “will,” “except,” “anticipate,” “believe,” “potential,” and similar expressions are intended to identify forward-looking statements. Actual results could differ materially from our current expectations.

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 that may impact the Company’s business, operations and financial results.

These risks and uncertainties include, without limitation, the following: (i) The impact on the demand for certain of the Company’s products and its competitive position of the new 145% tariff on the goods sourced from China and other current and future changes in tariffs by the U.S. government (ii) changes in the Company’s plans, strategies, objectives, expectations and intentions, which may be made at any time at the discretion of the Company; (iii) the impact of uncertainties in global economic conditions, including the impact on the Company’s suppliers and customers; (iv) the continuing adverse impact of inflation, including product costs, transportation costs and interest rates; (v) potential adverse effects on the Company, its customers, and suppliers resulting from the wars in Ukraine and the Middle East; (vi) additional disruptions in the Company’s supply chains, whether caused by pandemics, natural disasters, including trucker shortages, port closures, port strikes or otherwise; (vii) labor related costs the Company has and may continue to incur, including costs of acquiring and training new employees and rising wages and benefits; (viii) changes in client needs and consumer spending habits; (ix) currency fluctuations; (x) the Company’s ability to effectively manage its inventory in a rapidly changing business environment; (xi) the impact of competition; (xii) the impact of technological changes including, specifically, the growth of online marketing and sales activity; (xiii) the Company’s ability to manage its growth effectively, including its ability to successfully integrate any business it might acquire; ; and (xiv) other risks and uncertainties indicated from time to time in the Company’s filings with the Securities and Exchange Commission.

For a more detailed discussion of these and other factors affecting the Company, see the Risk Factors described in Item 1A included in the Company’s Annual Report on Form 10-K for the fiscal year December 31, 2024 and below under “Financial Condition”. All forward-looking statements in this report are based upon information available to the Company on the date of this report. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by law.

Critical Accounting Estimates

There have been no material changes to the Company’s critical accounting estimates as previously reported in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

Results of Operations

Traditionally, the Company’s sales and profits 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 Westcott back-to-school market.

Net sales

Consolidated net sales for the three months ended March 31, 2025 were $45,958,000 compared to $44,956,000 in the same period in 2024, an increase of 2%.

Net sales in the U.S. for the three months ended March 31, 2025 increased 3% compared to the same period in 2024. The increase in net sales for the three months ended March 31, 2025 was primarily due to higher sales of first aid and medical products partially offset by lower sales of school and office products. The lower sales of school and office products was primarily due to a large initial order of craft products to a major mass market retailer that took place in the first quarter of 2024.

Net sales in Canada for the three months ended March 31, 2025 increased 5% in U.S. dollars and 12% in local currency compared to the same period in 2024. Sales of first aid products were strong, however sales of school and office products declined due to a continuing soft economy.

European net sales for the three months ended March 31, 2025 decreased 7% in U.S. dollars and 4% in local currency compared to the same period in 2024. The decrease in net sales for the three months ended March 31, 2025 was primarily due to a large promotion in the first quarter of 2024 that did not repeat this year.

Gross profit

Gross profit for the three months ended March 31, 2025 was $17,917,000 (39.0% of net sales) compared to $17,396,000 (38.7% of net sales) in the same period in 2024. The increase in gross profit for the three months ended March 31, 2025 was primarily due to higher sales.

Selling, general and administrative expenses

Selling, general and administrative ("SG&A") expenses for the three months ended March 31, 2025 were $15,491,000 (33.7% of net sales) compared with $14,838,000 (33.0% of net sales) in the same period in 2024, an increase of $653,000. The increase in SG&A expenses for the three months ended March 31, 2025 was primarily related to higher personnel related expenses.

Operating income

Operating income for the three months ended March 31, 2025 was $2,426,000 compared with $2,558,000 in the same period of 2024.

Operating income in the U.S. segment increased by $20,000 for the three months ended March 31, 2025 compared to the same period in 2024.

Operating income in the Canadian segment increased by $2,000 for the three months ended March 31, 2025 compared to the same period in 2024.

Operating income in the European segment decreased by $154,000 for the three months ended March 31, 2025, compared to the same period in 2024. The decrease in operating income for the three months ended March 31, 2025 was primarily due to lower sales.

Interest expense, net

Interest expense, net for the three months ended March 31, 2025 was $397,000 compared with $443,000 in the same period of 2024, a $46,000 decrease. The decrease in interest expense for the three months ended March 31, 2025 resulted from lower average outstanding borrowings as well as lower average interest rates on the debt outstanding.

Other income, net

Other income, net was $90,000 in the three months ended March 31, 2025 compared to $44,000 in the same period of 2024.

Income taxes

The effective income tax rate for the three months ended March 31, 2025 was 22% compared to 24% in the same period of 2024.

Financial Condition

Liquidity and Capital Resources

During the first three months of 2025, working capital increased approximately $4.2 million. Inventory turnover, calculated using a twelve-month average inventory balance, was 2.1 at March 31, 2025 and December 31, 2024. Receivables increased approximately $2.6 million at March 31, 2025 compared to December 31, 2024. The average number of days sales outstanding in accounts receivable was 53 days at March 31, 2025 compared to 54 days at December 31, 2024. Accounts payable and other current liabilities decreased by approximately $2.8 million at March 31, 2025 compared to December 31, 2024.

The Company's working capital, current ratio and long-term debt to equity ratio are as follows (dollar amounts in thousands):



	March 31,			December 31,
	2025			2024
Working capital	$	76,776		$	72,588
Current ratio		4.83			4.17
Long term debt to equity ratio		27.9	%		25.7	%

Long-term debt consists of (i) borrowings under the Company’s revolving loan agreement with HSBC Bank, N.A. and (ii) amounts outstanding under the fixed rate mortgage on the Company’s manufacturing and distribution facilities in Rocky Mount, NC and Vancouver, WA. The revolving loan agreement provides for borrowings of up to $65 million, at an interest rate of SOFR plus 1.75%; interest is payable monthly. The loan agreement has an expiration date of May 31, 2026. The Company must pay a facility fee, payable quarterly, in an amount equal to one eighth of one percent (.125%) per annum of the average daily unused portion of the revolving credit line. The facility is intended to provide liquidity for growth, share repurchases, dividends, acquisitions, and other business activities. Under the revolving loan agreement, the Company is required to maintain specific amounts of funded debt to EBITDA, a fixed charge coverage ratio and must have annual net income greater than $0, measured as of the end of each fiscal year. As of March 31, 2025, the Company was in compliance with the covenants under the revolving loan agreement as then in effect.

During the first three months of 2025, total debt outstanding under the Company’s revolving credit facility increased by approximately $2.8 million, compared to total debt thereunder at December 31, 2024. As of March 31, 2025, $20,457,000 was outstanding and $44,543,000 was available for borrowing under the Company’s credit facility.

The Company’s manufacturing and distribution facilities in Rocky Mount, NC and Vancouver, WA were financed by a fixed rate mortgage with HSBC Bank, N.A. at a rate of 3.8%. The Company entered into the agreement on December 1, 2021. Payments of principal and interest are due monthly, with all amounts outstanding due on maturity on December 1, 2031. At March 31, 2025, there was approximately $10.3 million outstanding on the mortgage.

On May 23, 2024, the Company acquired the assets of Elite First Aid, Inc ("Elite First Aid") for approximately $7.1 million of which $1.0 million is subject to holdbacks as follows: (a) $500,000, the payment of which is contingent upon certain revenue milestones during an consecutive 12-month period from May 31, 2024 to December 31, 2025; and (b) $500,000, which is subject to a 13 month holdback as a non-exclusive source of recovery primarily to satisfy certain types of indemnification claims under the Asset Purchase Agreement. Based in Wake Forest, NC, Elite First Aid is a leading supplier of tactical, trauma and emergency medical products.

A significant portion of the products we sell (and components used in our products) are sourced from suppliers located in China. The United States government has imposed, and may continue to impose or adjust, significant tariffs on a range of Chinese goods. These tariffs have increased our costs of goods sold and could further escalate depending on changes in trade policy, negotiations, or retaliatory measures by China. The indirect impact on demand for our products as a result of these developments has become more uncertain. The Company expects to mitigate the potential impact on our business and operations through strategic sourcing adjustments, price adjustments and supply chain diversification, but there can be no assurance that such efforts will be successful or sufficient. While the impact on our operations to date have not been significant, any further increases of existing tariffs, the imposition of new tariffs, the potential modifications to existing trade agreements and other restrictions on free trade may adversely impact demand for our products, increase our costs, and disrupt our supply chain. These risks, in turn, could have a material adverse effect on our business, results of operations, and financial condition.

The Company believes that cash generated from operating activities, together with funds available under its revolving loan agreement, will, under current conditions, be sufficient to finance the Company’s operations over the next twelve months from the filing of this report.

Item 3: Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

Item 4: Controls and Procedures

(a) Evaluation of Internal Controls and Procedures

Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of March 31, 2025. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures were not effective as of March 31, 2025 as a result of an identified material weakness. As described in the Company's Form 10-K for the year ended December 31, 2024, the Company’s information technology general controls (ITGCs) related to logical security and privileged access management for a financially relevant system were ineffective. The Company implemented changes to its Internal Controls Over Financial Reporting, as described in Item 4(b) below. Except as described below, there were no changes in the Company’s internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

(b) Changes in Internal Control over Financial Reporting

In response to the material weakness identified above, the Company has implemented changes to its internal control over financial reporting. The changes included removing the privileged access for the one individual identified as well as further limiting user with privileged access to ensure proper segregation of duties.

Management believes that, as a result of these changes, the material weakness, as described above, will be remediated. However, due to the nature of the material weakness, it will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We expect that the remediation of this material weakness will be completed as of December 31, 2025.

PART II. OTHER INFORMATION

Item 1 — Legal Proceedings

There are no pending material legal proceedings to which the registrant is a party, or, to the actual knowledge of the Company, contemplated by any governmental authority.

Item 1A — Risk Factors

See Risk Factors set forth in Part I, Item 1A of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3 — Defaults upon Senior Securities

None.

Item 4 — Mine Safety Disclosures

Not applicable.

Item 5 — Other Information

None.

Item 6 — Exhibits

Documents filed as part of this report:




Exhibit 31.1		Certification of Walter C. Johnsen pursuant to 18 U.S.C. Section 1350, as adopted pursuant Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 31.2		Certification of Paul G. Driscoll pursuant to 18 U.S.C. Section 1350, as adopted pursuant Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 32.1		Certification of Walter C. Johnsen pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 32.2		Certification of Paul G. Driscoll pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS		Inline XBRL Instance Document.
101.SCH		Inline XBRL Taxonomy Extension Schema Document.
104		The cover page for the Company’s Quarterly Report on Form 10-Q has been formatted in Inline XBRL and contained in Exhibit 101

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
	Chairman of the Board and
	Chief Executive Officer

Dated: May 7, 2025


By	/s/ Paul G. Driscoll
	Paul G. Driscoll
	Vice President and
	Chief Financial Officer

Dated: Mary 7, 2025

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SEC Form 10-Q filed by Acme United Corporation.

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