Walter Johnsen; Chairman of the Board, Chief Executive Officer; Acme United Corp
Paul Driscoll; Chief Financial Officer, Vice President, Treasurer, Secretary; Acme United Corp
Jeffrey Matthews; Analyst; Ram Partners
Operator
Good, day and welcome to the third quarter 2024 Acme United Earnings conference call. At this time I'd like to turn the call over to your host, Walter Johnsen, Chairman and CEO. Please go ahead, sir.
Walter Johnsen
Good morning. Welcome to the third quarter 2024 earnings conference call for Acme United Corporation. I'm Walter C. Johnsen, Chairman and CEO. With me is Paul Driscoll, our Chief Financial Officer, who will first read our Safe Harbor Statement. Paul?
Paul Driscoll
Forward-looking statements in this conference call including, without limitation, statements related to the company's plans, strategies, objectives, expectations, intentions and adequacy of capital and other 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, including, among others those arising as a result of a challenging global macroeconomic environment characterized by continued high inflation and high interest rates.
In addition, we have experienced supply chain disruptions, we may experience these disruptions in the future. We are also subject to additional risks and uncertainties as described in our periodic filings with the Securities and Exchange Commission and in our current earnings release.
Walter Johnsen
Thank you, Paul. Acme United reported sales for the third quarter of 2024 of $48.2 million, compared to $50.4 million in the same period last year, a decline of 4%. Our net income for the quarter was $2.2 million, compared to $2.1 million in the third quarter of 2024, an increase of 3%. Our earnings per share were $0.54 compared to $0.58 last year.
Our net sales for the quarter without the Cuda and Camillus business increased 4%. As you may recall, we sold this business in November 2023 for $19.8 million. Revenues and earnings of this business are seasonal, with the largest shipments in the third quarter for the hunting season, holiday sales, and promotions. This disproportionately impacted the sales and earnings for the third quarter of 2024.
Revenues of the First Aid business in the US was slightly above last year due to the timing of customer orders and what seemed to be a soft market. The Westcott cutting tool business and DMT sharpeners increased 10% in the quarter, driven by market share gains in the craft channel and the kitchen market. Both businesses have a full pipeline of new products that are being introduced as we speak.
We introduced our latest smart compliance First Aid kits this past September at the National Safety Conference. These items use our patented RFID system to monitor real-time consumption and exploration of the components in our First Aid kits and permit automatic replenishment of refills.
We are excited about the prospects for this next generation product and look forward to seeing its impact on the market next year. To our knowledge, there are no similar products from our competitors.
During the third quarter, we integrated the Elite First Aid product line into our overall product offering. As you know, Elite sells first responder kits that save lives and are at the high end of first aid treatment. We are presenting these items to our First Aid customers in the U.S. and Canada and actively promoting them in the e-commerce channels.
We are now installing two different automation systems for packing First Aid components and lens wipes into multi-count boxes. We've just completed the first stage of new racking and storage in our largest warehouse to increase efficiency and capacity. And we've completed new initiatives to reduce the cost of First Aid boxes and cabinets.
For the remainder of the year, we anticipate continuing to generate strong earnings and cash flow and to continue strengthening our balance sheet. We believe we are very well positioned to continue to make accretive acquisitions.
I will now turn the call to Paul.
Paul Driscoll
Acme's net sales for the third quarter were $48.2 million compared to $50.4 million in 2023, a decrease of 4%. Excluding the impact of the Camillus and Cuda hunting and fishing product lines sold on November 1 of last year, sales for the third quarter of 2024 increased 4%. Sales for the nine months ended September 30, 2024, were $148.5 million compared to $149.6 million in the same period in 2023, a decrease of 1%. Excluding the impact of Camillus and Cuda, sales increased 5%.
Net sales, excluding Camillus and Cuda in the US segment increased 3% in the third quarter excluding Camillus and Cuda sales increased 5% for the nine months and its September 30 due to market share gains with First Aid, Westcott craft products and DMT sharpeners. Net sales, excluding Camillus and Cuda in Europe increased 15% in local currency for the quarter and 10% for the nine months ended September 30. The sales increase for both periods was mainly due to market share gains in the office channel.
Net sales excluding Camillus and Cuda in local currency for Canada decreased 6% in the quarter and were constant for the year to date. Sales of First Aid products were strong, however, there was a decline in sales of school and office products. The gross margin was 38.5% in the third quarter of 2024 compared to 38.7% in 2023.
The gross margin was 39.4% for the first nine months of 2024 compared to 37.3% in 2023. The higher gross margin in the nine months was mainly due to productivity improvements in our manufacturing and distribution facilities.
SG&A expenses for the third quarter of 2024 were $15.6 million, or 32% of sales compared with $15.8 million or 31% of sales for the same period of 2023. SG&A expenses for the first nine months of 2024 were $47 million or 31% of sales compared with $45 million or 30% of sales in 2023.
Interest expense for the third quarter of 2024 was $535,000 compared to $785,000 in third quarter of 2023. The decrease was due to a lower average debt of approximately $15 million. Net income for the third quarter of 2024 was $2.23 million, or $0.54 per diluted share, compared to a net income of $2.15 million or $0.58 per diluted share for the same period of 2023. An increase of 3% in net income and a decrease of 7% in EPS.
Net income for the first nine months ended September 30, 2024, was $8.3 million or $2.03 per diluted share compared to $6.6 million or $1.83 per dilute share in the comparable period last year, increases of 26% and 11%.
The company's bank debt less cash on September 30, 2024, was $27 million compared to $38 million on September 30, 2023. During a 12-month period, we purchased the assets of Elite First Aid for $6.1 million, paid $2.2 million in dividends, and generated $6.2 million in free cash flow. Additionally, the $13 million of net proceeds from the sale of the Camillus and Cuda product lines was used to reduce debt.
Walter Johnsen
Thank you. Rob, I will now open the call to questions.
Operator
Thank you. At this time, we'll be conducting a question-and-answer session. (Operator Instructions)
Jeffrey Matthews, Ram Partners.
Jeffrey Matthews
Thank you. Walter, I'm driving, I hope you can hear me.
Walter Johnsen
Yes, you're coming in clearly.
Jeffrey Matthews
Okay, great. I'm a little surprised that you haven't inserted into your risk factors the potential for these massive tariffs Trump is talking about on China if he is elected president. I just wonder what your plan might be if he does get elected and tariffs like that might go through. Is there anything you can do proactively or do you just sort of sit there and take whatever they offer?
Walter Johnsen
I think that's a really good question, Jeff. So I just got back from almost a month in China, visiting our suppliers, our four offices, our factories. And there's several things that are going on. First in the Westcott area, our factories are moving operations with us into Malaysia, Vietnam, Thailand, and the Philippines. And these are countries that is very easy to get a Chinese visa. They welcome the Chinese. They use the Belt and Road system to access sand grower materials to these countries.
And so, with the items that we're currently doing, which are the ones that have 25% tariffs as we speak, and that's rulers, paper trimmers, pencil sharpeners in the Westcott family. By December of this year, some of these will now be produced in places like Thailand and the Philippines.
The wonderful thing about that is, we're using our existing suppliers and our existing offices, and they're going into countries that are very familiar to everyone in the community. Large Chinese population, very, very receptive to Chinese investment. And so, with the Westcott items we're moving those in that direction.
Now, with the First Aid area, it's slightly different. The US is highly dependent on China for most of its medical supplies. So listen to that really carefully. Putting tariffs on that would be very, very difficult to do for cancer drugs, antibiotics, [PPE], blood pressure [pills], it's -- the hospitals would come to a halt. So it's highly unlikely, in my view, that the 60% tariffs are even remotely going to be real, but it's a negotiating point.
We have moved our sourcing heavily into a number of other places. India, for First Aid, some of the lotions and creams. We've built a large production facility in Florida at Mednap, which makes alcohol wipes, typically antibiotic wipes, all of which go in the kits.
We do a lot of production in Egypt for bandages, a mix of bandages. And so, it's a pretty diverse group and we have two manufacturing plants in the US that are doing First Aid kits, First Aid only in Vancouver, Washington, and a Rocky Mountain, North Carolina facility.
So we've got flexibility, I think, in both areas. We're assuming that there'll be more tariffs and we're working with that. And I think it's actually an opportunity because we're on the ground actively doing this vis-a-vis perhaps others that don't have the scale or the knowledge to be able to do it.
Jeffrey Matthews
That's very reassuring, and I should have known you'd been thinking a few steps ahead, and I appreciate that. The general softening that you saw, where did that come from, and is it -- I'm wondering if it relates to these new ordering methods. You've got the automatic replenishment. Was there anything to that, or is it more general economic softening that you saw?
Walter Johnsen
So one large customer is a distributor into the food service industry. Its orders really weakened in September. Another one is the largest industrial distributor in the United States. Maybe the world probably. Its orders softened. These are industrial distributors. The largest online retailer in the world was soft in the third quarter and very strong in the second. It was a timing thing, and it's come back strong now.
But I think it's really the industrial market in the US which seems to be soggy. And so when we sell industrial First Aid kits, at least where it was in the third quarter. It was not what we expected.
Having said that, there's an awful lot of business coming in right now for perhaps not good reasons, but it relates to two hurricanes and a replenishment of a massive amount of First Aid supplies into Florida, North Carolina and so forth. With the Westcott business, which was strong, it was totally market share gains and we're cracking in a substantial way in the craft market.
Paul and I spent the morning with our team going over the backlog of business and new business opportunities for next year in Westcott and it's pretty exciting and surprising actually, because we tend to think of it as the slower growing part of the business, but in fact it is outshining First Aid at least in the third quarter and it looks pretty darn solid for Q4.
Jeffrey Matthews
Okay. That's interesting. I appreciate that. Walter, thanks very much, and congratulations and good luck.
Walter Johnsen
Thank you, Jeff.
Operator
(Operator Instructions) There are no questions at this time. At this point, I'd like to turn the call back over to Walter Johnsen for closing comments.
Walter Johnsen
Well, if there are no further questions, then this call is complete. We look forward to updating you again after the fourth quarter. Goodbye.
Operator
This concludes today's conference. You may disconnect your lines at this time and we thank you for your participation.
