Acme United Corporation 2004 Annual Report
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n o i t a v o n n I e g d E g n i t t u C 2004 Annual 2004 Annual Report Acme United Corporation Acme United Corporation | 2004 Annual Report Acme United Corporation 1931 Black Rock Turnpike, Fairfield, Connecticut 06825 • 203 332 7330 • www.acmeunited.com 1931 Black Rock Turnpike, Titanium Bonded™ scissors are Officers enhanced with new SoftRib™ handles, continuing our product Walter C. Johnsen Paul G. Driscoll James A. Benkovic innovation strategy. President and Chief Executive Officer Vice President and Senior Vice President — Global Sales Chief Financial Officer, Brian S. Olschan Larry H. Buchtmann Secretary and Treasurer Executive Vice President and Vice President — Operations and Acme United Corporation Chief Operating Officer Technology is one of the largest worldwide suppliers of International Key Management innovative cutting devices, Harry G.Wanless Dennis Liang Willi Engelsberg General Manager, General Manager, Managing Director measuring instruments Acme United Limited (Canada) Acme United (Asia Pacific) Limited Acme United Europe, GmbH and safety products for Anthony G. Poole the school, home, office General Manager and industrial markets. Acme United Europe (UK Division) The company has facilities in the U.S., Canada, Directors England, Germany, Hong Gary D. Penisten Walter C. Johnsen Brian S. Olschan Chairman of the Board President and Chief Executive Officer Executive Vice President and Kong and China. Acme United Corporation Acme United Corporation Chief Operating Officer Acme United Corporation George R. Dunbar Wayne R. Moore President, US Baird Corporation Director and Chairman Emeritus Stevenson E.Ward III President, Dunbar Associates The Producto Machine Company Vice President and Chief Financial Officer Richmond Y. Holden, Jr. Susan H. Murphy Triton Thalassic Technologies, Inc. President and Chief Executive Officer Vice President for Student J.L. Hammett Co. and Academic Services Cornell University Corporate Offices Stock Listing Annual Meeting Acme United Corporation The stock of Acme United Corporation will be held at 11 a.m. on 1931 Black Rock Turnpike is traded on the American Stock Monday, April 25, 2005 at Fairfield, CT 06825 Exchange under the symbol ACU. The American Stock Exchange 203 332 7330 86 Trinity Place, New York, NY 10006 Transfer Agent Counsel Auditors American Stock Transfer Company Brody,Wilkinson and Ober, P.C. Ernst & Young LLP 40 Wall Street, New York, NY 10005 2507 Post Road, Southport, CT 06490 225 Asylum Street, Hartford, CT 06103 Financial Highlights (Amounts in thousands except per share data) 2002 2003 2004 Operating Results Net Sales $ 30,884 $ 34,975 $ 43,381 Net Income 659 1,222 3,238 Net Income Per Share 0.19 0.34 0.85 Financial Positions at December 31 Working Capital $ 8,516 $ 10,777 $ 11,549 Total Assets 17,614 19,743 23,009 Shareholders’ Equity 8,480 10,179 13,982 Total Debt 5,126 4,928 1,476 Less Cash (598) (1,391) (1,930) Net Debt 4,528 3,537 (454) $3,238 $5,126 $4,928 $1,222 $1,476 $659 2002 2003 2004 2002 2003 2004 Total Debt Net Income (dollars in thousands) (dollars in thousands) 2004 Annual Report 1 Letter to Shareholders Acme United had a good year in 2004. Revenues a rich heritage in high-quality cutting instruments increased to $43.4 million in 2004 compared to $35.0 dating to 1877. It was for many years the largest million in 2003. Net income in 2004 was $3.2 million scissor company in the world. When we acquired versus $1.2 million the prior year. Earnings per share the Clauss assets, we redesigned some of its increased to $.85 in 2004 compared to $.34 in 2003. industrial scissors for the sewing, hobby, craft, and floral markets. We updated packaging, expanded The Company’s growth came from excellent the line with Acme products, and created a critical customer acceptance of our new products, additional mass in new market segments. The Clauss purchase sales in the mass market, and the acquisition of strengthened our presence in the industrial Clauss Cutlery. We had particularly strong sales from market, where we now have a broader platform to our proprietary line of titanium scissors. These sell the combined company products. products are coated with a patented composition of titanium nitride and chromium nitride that enhances Acme United’s gross margin improved from 38% to the hardness of the cutting edges. 45% due to an increasing percentage from revenues of new products. We also improved productivity due Mass market sales increased due to new school to higher volumes, careful review of costs, and scissors, a wonderful array of rulers and math tools, relentless attention to detail. Despite the improved and acceptance of our professional sewing tools. We gross margins, we believe Acme United is one of the broadened our mass market reach in Canada, lowest-cost suppliers in the world. Taiwan, Mexico, the UK, and Germany, and began selling from Hong Kong to global accounts. Our management team continued to invest in new products during 2004. We introduced a patented We purchased selected inventory and brands of rotary trimmer for digital photography, announced Clauss Cutlery for $454,000 in May 2004. Clauss has the second generation of titanium scissors with Acme United’s global executive team met in December 2004 to plan strategy. From left:Walter Johnsen, President & Chief Executive Officer; Willi Engelsberg, Managing Director, Acme United Europe, GmbH 2 Acme United Corporation improved cutting performance, and extended a Our management team and our employees are branded line of over-the-counter medicines. The responsible for the results achieved in 2004. We Westcott ruler and measuring line was completely announced the promotion of James Benkovic to updated, with patented composite products rolling Senior Vice President of Global Sales, and Willi out to the mass market and office superstores in 2005. Engelsberg to Managing Director of Acme United Europe. Larry Buchtmann, our Vice President of Innovation is a key part of the Acme United Manufacturing, was appointed Vice President of strategy. We continue to invest in our next Operations and Technology to better leverage his generation products, and will begin to update and contributions. I would like to thank all our extend the Clauss line during 2005. Our North employees for a strong effort in 2004, and to American and European paper trimmers will be encourage them to reach further and work faster redesigned to address unmet user needs, and our than they ever have before. proprietary titanium coatings will be further developed for specific tasks and tools. The new Thank you for your support. product pipeline is increasingly large, and we are optimistic about its future contribution. Sincerely, The Company’s financial strength improved during 2004. Our debt less cash was $3.5 million at the end of 2003. At the end of 2004 our cash exceeded debt Walter C. Johnsen by approximately $500,000. We initiated an $.08 per President and CEO share dividend, and repurchased 48,000 shares at an average cost of $5.20 per share. Tony Poole, General Manager, Acme United Europe (UK Division); Fred Rohtheut, Director of Sales, Acme United Europe, GmbH 2004 Annual Report 3 A Note on Innovation Consumer insight, creativity and speed to market consumers around the world. They were produced are the core of the innovation process at Acme in Asia, using Acme United’s proprietary physical United. Our products represent the culmination of vapor deposition technology. in-depth consumer understanding, global design and efficient manufacturing scale-up. Acme Our customers understand the power of Acme United’s patented titanium bonding process has United innovation. The Company continues to revolutionized the market for cutting products with work closely with retail partners to drive sales stronger, more durable blades. Consumer interest with products that are thoughtfully designed in the benefits of performance-enhanced cutting and carefully produced to meet the evolving needs products at affordable prices led to the launch of of customers. our first Titanium Bonded™ scissors in 2002. The products were designed Consumer Insight in Europe and tested with The innovation process begins with understanding consumer needs and how they relate to our New Westcott® products. We follow a disciplined approach that rulers combine takes us into homes, offices and classrooms to energized colors and soft texture listen and observe end users to identify to create a opportunities. Market research of cutting products new wave in for sewing and quilting generated numerous school and office products. concepts for new products, such as our new SoftRib™ handles that combine comfort and precision cutting. The research also generated new insights into how consumers want to shop for From left: Brian Olschan, Executive Vice President & Chief Operating Officer; Harry Wanless, General Manager, Acme United Ltd. (Canada) 4 Acme United Corporation Traditional measuring tools become trend- cutting products. The research was shared with key setting devices with our bold retailers resulting in more effective merchandising designs and techniques and a new generation of cutting tactile features. products currently in development. Our retail partners expect Acme United to not only bring innovative products but solutions as well to grow sales and profits. Global Design Our approach to design follows intensive immersion into how consumers use our products. We match needs to the We define the design objectives, focusing on trends we are monitoring performance, convenience and value. The greatest in color, material and texture, looking innovations are often simple performance for new and exciting ways to delight the improvements delivered at affordable prices. Our senses. Our SmoothGrip™ products combine a product development team continually searches velvet soft texture with brilliantly translucent the world for the best industrial designers and colors for a look and feel that truly exceeds engineers. Designing products for global expectations for office and school stationery acceptance requires translating consumer needs products.