Acme United Corporation (ACU) is a leading worldwide supplier of innovative first aid and cutting technology products to the school, home, office, hardware, sporting goods, and industrial markets. With a rich history dating back to 1867, Acme United has established itself as a trusted brand, known for its quality, safety, and customer-centric approach.

Business Overview and History

Acme United was founded in 1867 as a partnership and later incorporated in 1882 in the state of Connecticut. The company started as a manufacturer of office supplies and cutting tools, and has since grown to become a leading worldwide supplier of innovative first aid and medical products, as well as cutting technology. The company's operations are primarily located in the United States, Canada, and Europe, with a focus on product development, marketing, sales, manufacturing, and distribution activities. Acme United's Asian operations, based in Hong Kong and China, handle sourcing, product development, production planning, and quality control.

Over the years, Acme United has strategically expanded its product portfolio and geographic footprint through a series of acquisitions. In 2007, the company acquired First Aid Central, a provider of a wide variety of first aid kits and safety supplies in Canada, allowing Acme United to expand its first aid business into the Canadian market. In 2011, Acme United acquired the assets of Med-Nap, a manufacturer of medical grade products such as alcohol prep pads and antiseptic wipes. This vertical integration provided Acme United with a U.S. source of supply for key components used in its first aid kits. The company later expanded the Med-Nap facility to increase production capabilities.

In 2018 and 2019, Acme United faced challenges when the U.S. government imposed new tariffs on imports from China. The company responded by diversifying its global sourcing, shifting production to other Asian countries as well as expanding its North American manufacturing footprint through strategic acquisitions. This allowed Acme United to mitigate the impact of the tariffs on its business.

In 2024, the company acquired the assets of Elite First Aid, Inc., a leading supplier of tactical, trauma, and emergency response products, further strengthening its first aid and medical offerings. Additionally, in 2023, Acme United divested its Camillus Cutlery and Cuda business lines, allowing the company to focus on its core first aid and cutting product categories.

Financial Snapshot

In the fiscal year 2024, Acme United reported net sales of $194.5 million, a 2% increase from the previous year. Excluding the impact of the divested Camillus and Cuda product lines, the company's net sales grew by 6% in 2024. Net income for the year was $10 million, a 23% increase compared to $8.1 million in 2023. Earnings per share (EPS) grew by 10% to $2.45 in 2024 from $2.23 in the previous year.

The company's financial performance in 2024 exceeded its own expectations, with record sales and EBITDA of $20 million. Operating income increased to $14.1 million, or 7.3% of sales, compared to $13.2 million, or 6.9% of sales, in the prior year. Gross profit margin improved to 39.3% in 2024 from 37.7% in 2023, driven by productivity enhancements in manufacturing and distribution.

For the most recent quarter (Q4 2024), Acme United reported revenue of $45.9 million, representing a 10% year-over-year growth. Net income for the quarter was $1.7 million. The revenue increase in Q4 2024 was mainly due to market share gains across multiple product lines.

Liquidity

The company's financial position remains strong, with a healthy balance sheet. As of December 31, 2024, Acme United had $6.4 million in cash and cash equivalents, and its bank debt, net of cash, stood at $21.5 million. The company's current ratio, a measure of liquidity, was a robust 4.17, indicating its ability to meet short-term obligations. The quick ratio, another measure of liquidity, stood at 1.71.

Acme United's debt-to-equity ratio was 0.31, reflecting a conservative capital structure. The company had access to a $65 million credit line, of which $47.4 million was available, providing ample financial flexibility for future growth initiatives and working capital needs.

Diversified Product Portfolio and Segmentation

Acme United operates in two main product categories: first aid and medical, and cutting and sharpening. The first aid and medical segment includes first aid kits, safety products, and over-the-counter medications, marketed under brands such as First Aid Only, PhysiciansCare, Spill Magic, and Elite. The cutting and sharpening segment includes scissors, knives, paper trimmers, and sharpening tools, sold under the Westcott, Clauss, and DMT brands.

In 2024, the first aid and medical segment accounted for approximately $119 million, or 61%, of the company's total net sales, up from 60% in 2023. The cutting and sharpening segment contributed $75 million, or 39%, of net sales. The company's strategy of diversifying its product portfolio has helped it navigate various market conditions and mitigate risks.

Operational Highlights and Initiatives

Acme United has consistently invested in innovation and productivity enhancements to drive growth and profitability. In 2024, the company introduced its SmartCompliance first aid cabinets, which utilize RFID technology to automate the replenishment process and help customers maintain OSHA compliance. This innovative offering has been well-received by the market and is expected to contribute to the company's recurring revenue stream.

Additionally, Acme United has focused on expanding its presence in the craft and culinary markets, introducing new cutting and sharpening tools that cater to these growing segments. The company's DMT brand, known for its diamond sharpening tools, has experienced strong growth in the home and kitchen markets, further diversifying Acme United's revenue streams.

Operational efficiency has also been a key priority for Acme United. In 2024, the company implemented various cost-saving initiatives, including productivity enhancements in its manufacturing and distribution facilities, resulting in approximately $2 million in ongoing annual savings. This focus on operational excellence has helped the company maintain its competitiveness and profitability.

Geographic Diversification and Exposure

Acme United's operations are diversified across North America and Europe. The company operates in three reportable business segments based on geographic location: United States, Canada, and Europe. In 2024, the United States segment accounted for 85% of the company's net sales, while Canada and Europe contributed 7% and 8%, respectively.

The United States segment, which includes the company's Asian operations, is the largest contributor to Acme's overall revenue. In 2024, this segment generated $166.2 million in net sales, up 2% from the prior year. The increase was driven by market share gains across multiple product lines. First aid and safety products accounted for $109.1 million, or 66%, of the US segment's net sales, while the cutting and sharpening category generated $57 million, or 34%, of US segment sales.

The Canadian segment reported net sales of $13.3 million in 2024, a 5% decrease from 2023 in USD terms and a 3% decrease in local currency. While sales of first aid products were strong, the segment continued to be adversely impacted by softer demand for school and office products. The cutting and sharpening category contributed $4.4 million, or 33%, to Canadian segment sales, while first aid and safety products made up the remaining $8.9 million, or 67%.

The European segment achieved net sales of $15.1 million in 2024, a 5% increase compared to the prior year in both USD and local currency. This growth was driven by market share gains in the office channel. Cutting and sharpening tools generated $13.8 million, or 92%, of European segment revenue, while first aid and safety products accounted for the remaining $1.2 million, or 8%.

The company's global footprint and diversified manufacturing and sourcing capabilities have helped it navigate various trade and geopolitical challenges, such as tariffs and supply chain disruptions. Over the past eight years, Acme United has diversified its manufacturing and sourcing, with production facilities in the US, Canada, and Asia, which has helped mitigate the impact of tariffs.

Risks and Challenges

While Acme United has demonstrated resilience and adaptability, the company faces several risks and challenges common to the consumer discretionary industry. These include intense competition, fluctuations in consumer demand, the impact of macroeconomic conditions, and exposure to global supply chain disruptions and tariffs.

The company's reliance on third-party distributors and retailers, as well as its concentration of sales with a few major customers, also present potential risks. Acme United's ability to manage these risks through diversification, operational excellence, and strong customer relationships will be crucial to its long-term success.

Outlook and Conclusion

Acme United's performance in 2024, marked by record net sales and profitability, underscores the company's strength and agility in navigating a challenging environment. Its diversified product portfolio, focus on innovation, and commitment to operational efficiency have positioned the company for continued growth and success.

Looking ahead, Acme United remains cautiously optimistic about 2025, with a solid book of new business and a strong customer base. While the company did not provide specific numerical guidance for 2025, management expressed confidence in their ability to handle potential challenges, including tariffs, based on their actions over the past eight years to diversify sourcing and manufacturing locations.

The company's ongoing investments in first aid solutions, cutting-edge sharpening tools, and strategic acquisitions are expected to drive future growth and solidify its position as a leading player in the consumer discretionary landscape. The recent acquisition of Elite First Aid and the successful integration of this business in the fourth quarter of 2024 further demonstrate Acme United's commitment to expanding its product offerings and market presence.

As Acme United continues to execute its strategic initiatives and adapt to evolving market dynamics, the company's proven track record and robust financial position make it a compelling investment opportunity for long-term-oriented investors seeking exposure to the consumer discretionary sector. With a strong balance sheet, ample liquidity, and a focus on innovation and operational excellence, Acme United is well-positioned to navigate future challenges and capitalize on growth opportunities in its core markets.