Acme United Corp 10-K for FY2020

Acme United Corp (ACU)

10-K 2021-03-31 For: 2020-12-31

Added on April 08, 2026

About this 10-K

Acme United Corp filed this 10-K on March 31, 2021, covering the fiscal year ended December 31, 2020 (FY2020).

Headline figures

Fiscal year ended December 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $164M; up 15.1% from $142.46M a year earlier
Net income: $8.1M; up 46.9% from net income of $5.51M a year earlier
Diluted EPS: $2.31; up 44.4% from $1.60 a year earlier

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☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended: December 31, 2020

	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: 01-07698

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

55 Walls Drive, Fairfield, Connecticut		06824
Address of Principal Executive Offices		Zip Code

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

Large accelerated filer ☐		Accelerated filer ☒

Non-accelerated filer ☐		Smaller Reporting Company ☒

Emerging growth company ☐

	Page
Part I

Item 1. Business	3

Item 1A. Risk Factors	6

Item 1B. Unresolved Staff Comments	13

Item 2. Properties	13

Item 3. Legal Proceedings	13

Item 4. Mine Safety Disclosures	13

Part II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	14

Item 6. Selected Financial Data	14

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

Item 7A. Quantitative and Qualitative Disclosures About Market Risk	19

Item 8. Financial Statements and Supplementary Data	19

Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure	41

Item 9A. Controls and Procedures	41

Item 9B. Other Information	41

Part III	42

Item 10. Directors, Executive Officers and Corporate Governance	42

Item 11. Executive Compensation	43

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	43

Item 13. Certain Relationships and Related Transactions, and Director Independence	44

Item 14. Principal Accounting Fees and Services	44

Part IV

Item 15. Exhibits and Financial Statement Schedules	45

Item 16. Form 10-K Summary	46

Signatures	47

Location	Square Footage	Purpose
Owned
Rocky Mount, NC Vancouver, WA Brooksville, FL	340,000 53,000 42,460	Warehousing and distribution Warehousing and distribution Manufacturing, warehousing and distribution
Solingen, Germany	35,000	Warehousing, distribution and administrative
	470,460
Leased
Fairfield, CT	15,400	Administrative
Bentonville, AK	1,500	Administrative
Marlborough, MA	28,000	Manufacturing, warehousing and distribution
Santa Ana, CA	10,000	Manufacturing, warehousing, and distribution
La Vergne, TN	56,000	Manufacturing, warehousing and distribution
Mount Forest, Ontario, Canada	42,500	Warehousing and distribution
Orangeville, Ontario, Canada	2,850	Administrative
Laval, Quebec, Canada	14,500	Manufacturing, warehousing, distribution and administrative
Hong Kong, China	2,750	Administrative
Guangzhou, China	3,500	Administrative
Ningbo, China	1,800	Administrative
	135,800

Total:	606,260

	For the years ended December 31,
	2020			2019
Net sales	$	164,003,040		$	142,457,342
Cost of goods sold		104,408,326			90,456,484

Gross profit		59,594,714			52,000,858

Selling, general and administrative expenses		48,182,050			43,571,510
Operating income		11,412,664			8,429,348

Non-operating items:
Interest:
Interest expense		(944,363	)		(1,828,408	)
Interest income		24,654			39,896
Interest expense, net		(919,709	)		(1,788,512	)
Other expense		(666,227	)		(97,672	)
Total other expense, net		(1,585,936	)		(1,886,184	)
Income before income tax expense		9,826,728			6,543,164
Income tax expense		1,727,962			1,029,556
Net income	$	8,098,766		$	5,513,608

Earnings per share:
Basic	$	2.42		$	1.65
Diluted	$	2.31		$	1.60

	For the Years Ended
	December 31,
	2020		2019
Net income	$	8,098,766	$	5,513,608
Other comprehensive gain
Foreign currency translation		647,632		45,223
Change in net prior service credit and actuarial gains, net of income tax expense		514,271		143,906
Total other comprehensive income (loss)		1,161,903		189,129
Comprehensive income	$	9,260,669	$	5,702,737

	Outstanding Shares of Common Stock			Common Stock		Treasury Stock			Additional Paid-In Capital			Accumulated Other Comprehensive Loss			Retained Earnings			Total
Balances, December 31, 2018		3,350,833		$	12,094,413	$	(14,235,190	)	$	8,981,523		$	(2,057,985	)	$	47,549,650		$	52,332,411
Net income																5,513,608			5,513,608
Other comprehensive Income													189,129						189,129
Adoption of ASU 2018-02													(119,014	)		119,014			-
Stock compensation expense										968,467									968,467
Distribution to shareholders																(1,610,852	)		(1,610,852	)
Cash settlement of stock options										(1,687,782	)								(1,687,782	)
Balances, December 31, 2019		3,350,833		$	12,094,413	$	(14,235,190	)	$	8,262,208		$	(1,987,870	)	$	51,571,420		$	55,704,981
Net income																8,098,766			8,098,766
Other comprehensive income													1,161,903						1,161,903
Stock compensation expense										1,259,079									1,259,079
Distribution to shareholders																(1,636,934	)		(1,636,934	)
Issuance of common stock		2,500			6,250					53,504									59,754
Cash settlement of stock options										(1,644,118	)								(1,644,118	)
Purchase of treasury stock		(14,420	)				(286,988	)											(286,988	)
Balances, December 31, 2020		3,338,913		$	12,100,663	$	(14,522,178	)	$	7,930,673		$	(825,967	)	$	58,033,252		$	62,716,443

Asset Category:	2019
Equity Securities		66	%
Fixed Income Securities		32	%
Other Securities / Investments		2	%
Total:		100	%

2019	Level 1		Level 2		Level 3		Total

Money Market Fund	$	31	$	16,763	$	—	$	16,794
Equity Common and Collected Funds		102,030		580,839		—		682,869
Fixed Income Common and Collected Funds		82,670		246,316		—		328,986
Total:	$	184,731	$	843,918	$	—	$	1,028,649

	2020			2019
Assumptions used to determine benefit obligation:
Discount rate		2.74	%		2.74	%
Changes in benefit obligation:
Benefit obligation at beginning of year	$	(1,073,316	)	$	(1,160,930	)
Interest cost		(27,671	)		(41,841	)
Service cost		(30,195	)		(25,000	)
Actuarial loss		(160,884	)		(46,288	)
Benefits and plan expenses paid		203,596			200,743
Curtailments, settlements and special termination benefits		1,088,470			—
Benefit obligation at end of year:	$	—		$	(1,073,316	)

Changes in plan assets:
Fair value of plan assets at beginning of year	$	1,028,649		$	1,013,831
Actual return on plan assets		40,560			201,148
Employer contribution		222,857			14,413
Benefits and plan expenses paid		(203,596	)		(200,743	)
Settlements		(1,088,470	)		—
Fair value of plan assets at end of year		—			1,028,649
Funded status:	$	—		$	(44,667	)

Amounts recognized in accumulated other comprehensive income:
Net actuarial loss	$	—		$	689,398
Prior service cost		—			538
Total:	$	—		$	689,936

	2020			2019
Assumptions used to determine net periodic benefit cost:
Discount rate		2.74	%		3.87	%
Expected return on plan assets		6.00	%		6.00	%
Components of net benefit expense:
Service cost	$	30,195		$	25,000
Interest cost		27,671			41,841
Expected return on plan assets		(40,560	)		(54,330	)
Settlement cost		793,524			—
Amortization of prior service costs		538			544
Amortization of actuarial loss		56,739			90,442
		837,912			78,497
Net periodic benefit cost:	$	868,107		$	103,497

	2020			2019
Balance at beginning of the year	$	689,936		$	881,452
Change in net loss		(617,800	)		(100,530	)
Amortization of actuarial loss		(71,598	)		(90,442	)
Amortization of prior service cost		(538	)		(544	)
Change recognized in other comprehensive income		(689,936	)		(191,516	)
Total recognized in other comprehensive income	$	—		$	689,936

	2020			2019
Current:
Federal	$	880,149		$	(82,673	)
State		159,909			109,593
Foreign		788,314			887,556
Total:	$	1,828,372		$	914,476

Deferred:
Federal	$	(59,801	)	$	92,446
State		(40,609	)		22,634
Total:		(100,410	)		115,080
Total Income Tax Expense:	$	1,727,962		$	1,029,556

	December 31,		December 31,
	2020			2019
ASSETS
Current assets:
Cash and cash equivalents	$	4,167,376	$	6,821,883
Accounts receivable, less allowance		27,173,431		25,484,865
Inventories		50,704,197		39,261,105
Prepaid expenses and other current assets		1,640,904		1,578,248
Total current assets		83,685,908		73,146,101

Property, plant and equipment:
Land		1,770,453		1,420,104
Buildings		12,898,761		10,095,529
Machinery and equipment		24,524,045		19,111,801
Total property, plant and equipment		39,193,259		30,627,434
Less: accumulated depreciation		18,954,352		16,591,890
Net property, plant and equipment		20,238,907		14,035,544

Intangible assets, less accumulated amortization		18,721,423		15,792,738
Goodwill		4,799,829		4,696,370
Operating lease right-of-use asset, net		2,421,669		2,989,272
Other assets		-		88,828
Total assets	$	129,867,736	$	110,748,853

LIABILITIES
Current liabilities:
Accounts payable	$	7,601,123	$	6,692,692
Operating lease liability - current portion		872,908		1,047,498
Current portion of mortgage payable		266,667		266,667
Other accrued liabilities		11,460,024		8,576,248
Total current liabilities		20,200,722		16,583,105
Long-term debt		38,767,167		33,240,407
Long-term debt-PPP Loan		3,508,047		-
Mortgage payable, net of current portion		2,911,111		3,177,778
Operating lease liability - non-current portion		1,654,025		1,960,996
Deferred income taxes		110,221		49,284
Other non-current liabilities		-		32,302
Total liabilities		67,151,293		55,043,872

STOCKHOLDERS' EQUITY

	For the years ended December 31,
	2020			2019
Operating activities:
Net income	$	8,098,766		$	5,513,608
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation		2,427,557			2,181,060
Amortization		1,324,423			1,251,662
Stock compensation expense		1,259,079			968,467
Deferred income taxes		60,937			162,637
Non-cash lease expense		86,042			19,222
Provision for doubtful accounts		778,869			290,128
Pension settlement		526,857			—
Changes in operating assets and liabilities
Accounts receivable		(2,028,341	)		(784,562	)
Inventories		(10,049,513	)		2,089,861
Prepaid expenses and other current assets		159,078			666,070
Accounts payable		460,179			(1,525,060	)
Other accrued liabilities		2,617,103			3,869,138
Total adjustments		(2,377,730	)		9,188,623
Net cash provided by operating activities		5,721,036			14,702,231

Investing activities:
Purchase of property, plant and equipment		(2,569,174	)		(1,680,479	)
Acquisition of Med-Nap		(9,307,518	)		—
Acquisition of First Aid Central		(2,075,210	)		—
Net cash used by investing activities		(13,951,902	)		(1,680,479	)

Financing activities:
Net borrowings (repayments) of long-term debt		5,526,760			(7,042,708	)
Proceeds from PPP Loan		3,508,047			—
Repayments on mortgage		(266,667	)		(266,667	)
Distributions to stockholders		(1,604,706	)		(1,608,956	)
Cash settlement of stock options		(1,644,118	)		(1,687,782	)
Purchase of treasury stock		(286,988	)		—
Issuance of common stock		58,754			—
Net cash provided by (used in) financing activities		5,291,082			(10,606,113	)
Effect of exchange rate changes		285,277			(2,799	)
Net (decrease) increase in cash and cash equivalents		(2,654,507	)		2,412,841
Cash and cash equivalents at beginning of year		6,821,883			4,409,042
Cash and cash equivalents at end of year	$	4,167,376		$	6,821,883

	December 31,
	2020		2019
Finished goods	$	40,287,710	$	32,899,114
Work in process		67,208		274,158
Materials and supplies		10,349,279		6,087,833
Inventories:	$	50,704,197	$	39,261,105

	December 31,
	2020		2019
First Aid Only Tradename	$	3,410,000	$	3,410,000
First Aid Only Customer List		5,500,010		5,500,010
DMT Trademarks		1,387,000		1,387,000
DMT Customer List		1,369,000		1,369,000
DMT Non-Compete		183,000		183,000
Slice License Agreement		379,921		379,921
Patents		2,271,980		2,271,980
Trademarks		663,698		663,698
Pac-Kit Tradename, Customer List		1,500,000		1,500,000
Spill Magic Customer List		3,965,000		3,965,000
Spill Magic Trademarks		1,034,000		1,034,000
Spill Magic Non-Compete		67,111		67,111
C-Thru Customer List		1,050,000		1,050,000
FAC		1,332,963		-
Med-Nap		2,920,145		-
Subtotal		27,033,828		22,780,720
Less: Accumulated Amortization		8,312,405		6,987,982
Intangible Assets	$	18,721,423	$	15,792,738
Goodwill	$	4,799,829	$	4,696,370
Total:	$	23,521,252	$	20,489,108

	2020		2019
United States	$	4,524,432	$	800,796
Foreign		5,302,296		5,742,368
Total:	$	9,826,728	$	6,543,164

	2020			2019
Federal income taxes at 21% statutory rate	$	1,864,097		$	1,365,124
State and local taxes, net of federal income tax effect		89,842			109,593
Permanent items		(99,877	)		(137,051	)
Foreign tax rate difference		(126,100	)		(209,216	)
Change in deferred income tax valuation allowance		—			(98,894	)
Provision for income taxes:	$	1,727,962		$	1,029,556

	2020		2019
Deferred income tax liabilities:
Plant, property and equipment	$	1,556,398	$	1,022,898
		1,556,398		1,022,898
Deferred income tax assets:
Asset valuations		992,101		604,755
Pension		—		81,561
Other		454,076		287,298
		1,446,177		973,614
Net deferred income tax liability:	$	110,221	$	49,284

	United States		Canada		Europe		Total
Cutting, Sharpening and Measuring	$	65,805	$	6,434	$	11,843	$	84,082
First Aid and Safety		74,386		4,552		983		79,921
Total Net Sales	$	140,191	$	10,986	$	12,826	$	164,003

For the twelve months ended December 31, 2019
(amounts in 000's)
	United States		Canada		Europe		Total
Cutting, Sharpening and Measuring	$	63,189	$	6,678	$	10,062	$	79,929
First Aid and Safety		62,528		—		—		62,528
Total Net Sales	$	125,717	$	6,678	$	10,062	$	142,457

Year Ended December 31, 2020
	United States		Canada		Europe		Consolidated
Net sales	$	140,191	$	10,986	$	12,826	$	164,003
Operating income		8,872		1,332		1,209		11,413
Assets		113,831		7,432		8,605		129,868
Additions to property, plant and equipment		2,386		34		149		2,569
Depreciation and amortization		3,668		95		78		3,841

Year Ended December 31, 2019
	United States		Canada		Europe		Consolidated
Net sales	$	125,717	$	6,678	$	10,062	$	142,457
Operating income		7,199		771		459		8,429
Assets		98,577		6,168		6,003		110,749
Additions to property, plant and equipment		1,646		2		32		1,680
Depreciation and amortization		3,347		16		70		3,433

	2020		2019
Total operating income	$	11,413	$	8,429
Interest expense, net		920		1,789
Other expense		666		97
Consolidated income before taxes	$	9,827	$	6,543

Revenues	2020		2019
United States	$	138,921	$	124,059
International:
Canada		10,986		6,678
Europe		12,826		10,062
Other		1,270		1,658
Total International	$	25,082	$	18,398
Total Revenues	$	164,003	$	142,457

	2020			2019
Options outstanding at the beginning of the year		1,363,694			1,434,280
Options granted		280,750			120,000
Options forfeited		(9,125	)		(26,500	)
Options exercised		(147,394	)		(164,086	)
Options outstanding at the end of the year		1,487,925			1,363,694
Options exercisable at the end of the year		985,475			932,094
Common stock available for future grants at the end of the year		104,372			44,875
Weighted average exercise price per share:
Granted	$	23.05		$	19.88
Forfeited		21.72			23.29
Exercised		14.51			10.54
Outstanding		20.26			19.08
Exercisable		18.99			17.50

Options Outstanding						Options Exercisable
Range of Exercise Prices	Number Outstanding		Weighted- Average Remaining Contractual Life (Years)	Weighted- Average Exercise Price		Number Exercisable		Weighted- Average Exercise Price
$9.26 to $16.08		290,200	2	$	12.39		290,200	$	12.39
$16.09 to $21.35		282,000	6		18.41		204,500		17.95
$21.36 to $22.86		350,375	7		22.14		261,375		21.97
$22.87 to $23.97		255,450	9		23.17		11,350		23.94
$23.98 to $28.20		309,900	7		24.80		218,050		24.94
		1,487,925					985,475

	2020	2019
Expected life in years	6	5 - 6
Interest rate	.30 - 1.63%	1.52 - 2.39%
Volatility	.358 - .384	.358 - .375
Dividend yield	2.0 - 2.2%	2.0 - 2.2%

	2020		2019
Numerator:
Net income	$	8,098,766	$	5,513,608
Denominator:
Denominator for basic earnings per share:
Weighted average shares outstanding		3,342,630		3,351,731
Effect of diluted employee stock options		166,867		100,892
Denominator for dilutive earnings per share		3,509,497		3,452,623
Basic earnings per share	$	2.42	$	1.65
Diluted earnings per share	$	2.31	$	1.60

	Foreign currency translation adjustment			Net prior service credit and actuarial losses			Total
Balances, January 1, 2019	$	(1,518,822	)	$	(539,163	)	$	(2,057,985	)
Change in net prior service credit and actuarial losses, net of tax		—			143,906			143,906
Adoption of ASU 2018-02		—			(119,014	)		(119,014	)
Translation adjustment		45,223			—			45,223
Balances, December 31, 2019	$	(1,473,599	)	$	(514,271	)	$	(1,987,870	)
Change in net prior service credit and actuarial losses, net of tax		—			514,271			514,271
Translation adjustment		647,632			—			647,632
Balances, December 31, 2020	$	(825,967	)	$	—		$	(825,967	)

	December 31, 2020
Weighted-average remaining lease term	4.0 years
Weighted-average discount rate		5	%

2021	$	916
2022		690
2023		569
2024		309
2025		220
Thereafter		75
Total future minimum lease payments	$	2,779
Less : imputed interest		(252	)
Less : present value of lease liabilities - current		(873	)
Present value of lease liabilities - non-current	$	1,654

Assets:
Inventory	$	591
Prepaid expense	25
Land & buildings		1,800
Equipment		4,195
Goodwill	149
Intangible assets		2,882
Total assets	$	9,642
Accounts payable	336
Total considerations	$	9,308

Name	Age	Position Held with Company
Walter C. Johnsen	70	Chairman of the Board and Chief Executive Officer
Brian S. Olschan	64	President, Chief Operating Officer and Director
Paul G. Driscoll	60	Vice President, Chief Financial Officer, Secretary and Treasurer
Rex L. Davidson	71	Director
Richmond Y. Holden, Jr.	67	Director
Susan H. Murphy Brian K. Barker	69 61	Director Director
Stevenson E. Ward III	75	Director

Exhibit No.		Identification of Exhibit

3(i)		Re-Stated Certificate of Incorporation July 1, 2005 (2)

3(ii)		Bylaws (4)

4		Specimen of Common Stock certificate (18) (p)

4(vi)		Description of Common Stock

10.3		2002 Acme United Employee Stock Option Plan as amended (12)

10.4		Severance Pay Plan dated September 28, 2004* (15)

10.5(a)		Salary Continuation Plan dated September 28, 2004, as amended (3)*

10.6(a)		2005 Non-Salaried Director Stock Option Plan, amended (6)

10.6(b)		Amendment to the 2005 Non-Salaried Director Stock Option Plan (12)

10.7		2017 Non-Salaried Director Stock Option Plan (9)

10.8		Deferred Compensation Plan dated October 2, 2007* (16)

10.9(a)		2012 Acme United Employee Stock Option Plan (11)

10.9(b)		Amendment to the 2012 Acme United Employee Stock Option Plan* (12)

10.10(a)		Revolving Loan Agreement with HSBC, dated April 5, 2012 (13)

10.10(b)		Amendment No. 1 to Revolving Loan Agreement with HSBC Dated (14)

10.10(c)		Amended and restated secured revolving note (14)

10.10(d)		Amendment No. 2 to Revolving Loan Agreement with HSBC dated October 2013 (15)

10.10(e)		Amendment No. 4 to Revolving Loan Agreement with HSBC dated May 6, 2016 (12)

10.10(f)		Second amended and restated secured revolving note (12)

10.10(g)		Amendment No. 5 to Revolving Loan Agreement with HSBC dated January 2017 (16)

10.10(h)		Amendment No. 6 to Revolving Loan Agreement with HSBC dated March 2018

10.11		Change in Control Plan as amended dated February 24, 2011* (17)

21		Subsidiaries of the Registrant

23.1		Consent of Marcum LLP, Independent Registered Public Accounting Firm


31.1		Certification of Walter Johnsen pursuant to Rule 13a-14(a) and 15d-14(a) and Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Paul Driscoll pursuant to Rule 13a-14(a) and 15d-14(a) and Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification of Walter Johnsen pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		Certification of Paul Driscoll pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Signatures:		Titles:

/s/ Walter C. Johnsen
Walter C. Johnsen		Chairman and Chief Executive Officer

/s/ Brian S. Olschan
Brian S. Olschan		President, Chief Operating Officer and Director

/s/ Paul G. Driscoll
Paul G. Driscoll		Vice President, Chief Financial Officer, Secretary and Treasurer

/s/ Rex Davidson
Rex Davidson		Director

/s/ Richmond Y. Holden, Jr.
Richmond Y. Holden, Jr.		Director

/s/ Susan H. Murphy
Susan H. Murphy		Director

/s/ Stevenson E. Ward III
Stevenson E. Ward III		Director

/s/ Brian K. Barker
Brian K. Barker		Director