Acme United Corp (ACU) Reports Record Q3 Earnings and Significant Debt Reduction
Acme United Corp (ACU) reported a 1% increase in net sales for Q3 2023, reaching $50.4 million.
Net income for Q3 2023 was $2.2 million, a significant increase from $64,000 in Q3 2022.
ACU's diluted earnings per share for Q3 2023 stood at $0.58, compared to $0.02 in the same period last year.
The company reduced its bank debt by 41% over the past 12 months, paying down $26 million.
Acme United Corp (ACU) released its earnings report on October 23, 2023, revealing a record third-quarter performance. The company reported net sales of $50.4 million for Q3 2023, marking a 1% increase from $49.7 million in Q3 2022. Despite a slight decrease in net sales for the nine months ended September 30, 2023, ACU's net income saw a significant increase.
Financial Highlights
ACU's net income for Q3 2023 was $2.2 million, or $0.58 per diluted share, a substantial increase from $64,000, or $0.02 per diluted share, in Q3 2022. For the nine months ended September 30, 2023, net income stood at $6.6 million, or $1.83 per diluted share, compared to $3.6 million, or $0.96 per diluted share, in the same period in 2022. This represents an 82% increase in net income and a 91% increase in diluted earnings per share.
Chairman and CEO Walter C. Johnsen said, I am pleased that sales at the end of the third quarter rebounded after more than a year of customer inventory reductions. In-bound shipping costs declined to historical levels. We successfully implemented a productivity plan which is resulting in $5 million of annual savings. In addition, we continued to aggressively reduce inventory. The Company paid down $26 million, or 41%, of its bank debt during the past 12 months.
Acquisition and Future Growth
In September, ACU acquired Hawktree Solutions, Inc., a company with an exclusive license for first aid, safety, and survival products with the Canadian Red Cross. This acquisition is expected to expand ACU's product line and open additional opportunities in the Canadian market. The business will operate from ACU's facilities near Montreal and is expected to be accretive starting in Q4 2023.
Financial Statements Summary
ACU's gross margin for Q3 2023 was 38.7%, up from 32.0% in Q3 2022. This increase was primarily due to productivity improvements in the companys manufacturing and distribution facilities, as well as lower in-bound freight costs. The company's bank debt less cash as of September 30, 2023, was $38 million, a significant reduction from $64 million as of September 30, 2022.
For the nine months ended September 30, 2023, ACU generated approximately $27 million in free cash flow, including a reduction in inventory of $12 million. This financial performance demonstrates ACU's strong financial position and its ability to generate substantial cash flow.
This article first appeared on GuruFocus.
