What changed in this filing

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Item 1. Business

2022-03-30 compared with 2021-03-31 · 38 added, 46 removed, 79 unchanged (52% of the section changed)

Acme United Corporation, a Connecticut corporation (together, with its subsidiaries, the "Company"), is a leading worldwide supplier of innovative first aid and safety solutions and cutting technology to the school, home, office, hardware, sporting goods and industrial markets.

Its principal products sold across all segments are first aid kits, and safety related products, scissors, shears, knives, rulers, pencil sharpeners and sharpening tools.

The Company sells its products primarily to wholesale, contract and retail stationery distributors, office supply superstores, mass market and e-commerce retailers, industrial distributors, sporting goods stores, hardware chains and wholesale florists.

Acme United Corporation, a Connecticut corporation (together, with its subsidiaries, the "Company"), is a leading worldwide supplier of innovative first aid and medical products and cutting technology to the school, home, office, hardware, sporting goods and industrial markets.

Its principal products sold across all segments are first aid kits, and medical products, scissors, shears, knives, rulers, pencil sharpeners and sharpening tools.

The Company sells its products primarily to mass market and e-commerce retailers, industrial distributors, wholesale, contract and retail stationery distributors, office supply superstores, sporting goods stores, and hardware chains.

The Company's operations are in the United States, Canada, Europe (located in Germany) and Asia (located in Hong Kong and China).

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The Company sources most of its products from suppliers located outside the United States, primarily in Asia.

The Company assembles its first aid kits at its facilities in Vancouver, WA and Rocky Mount, NC.

The Company assembles its first aid kits at its facilities in Vancouver, WA, Rocky Mount, NC and Laval, Canada.

The components for the first aid kits are primarily sourced from U.S.

In addition, the Company has manufacturing facilities in the U.S.

at Smyrna, TN and Santa Ana, CA for Spill Magic absorbent products, Marlborough, MA for DMT sharpening tools, and Brooksville, FL for Med-Nap alcohol and BZK wipes.

at Smyrna, TN and Santa Ana, CA for Spill Magic absorbent products, Marlborough, MA for DMT sharpening tools, and Brooksville, FL for Med-Nap alcohol and benzalkonium chloride non-alcohol (BZK) wipes.

Recent accomplishments and initiatives

The Company’s key business accomplishments and initiatives include the following elements:

Eleven years of consecutive sales growth averaging 10%;

Diversification of Product Lines – D uring the past five years, sales of first aid and safety products have grown to almost 50% of total sales.

As a result, our reliance on sales of school and office products has declined, although such sales have remained steady;

Growth of eCommerce Sales – In 2020, sales in the eCommerce channel grew substantially and Amazon has become the Company’s second largest customer.

The Company has taken a number of actions to support our growth in eCommerce, including the modification of its principal distribution center by upgrading its warehouse layout, installing a mezzanine to handle small packages, and installing new warehouse management software;

S uccessful acquisition of two businesses in our first aid and safety space in 2020.

The acquisition and successful integration of the business and assets of First Aid Central, a Montreal-based supplier of first aid kits and safety supplies acquired in January 2020;

The acquisition of the business and assets of Med-Nap LLC, a Florida-based manufacturer of antiseptic prep pad and towelette solutions in December 2020;

Successful Response to Pandemic – Commencing in 2020, the Company has taken decisive actions to respond to the unprecedented uncertainty and disruption caused by the pandemic.

As a result, the Company has been able to continue to meet the needs of its customers in 2020 without interruption.

Twelve years of consecutive sales growth averaging 10%;

Diversification of Product Lines – D uring the past six years, sales of first aid and medical products have grown to over 50% of total sales.

As a result, our reliance on sales of school and office products has declined, although such sales have also increased;

S uccessful integration of two first aid and safety acquisitions made in 2020, First Aid Central, a Montreal-based supplier of first aid kits and safety, and Med-Nap LLC, a Florida-based manufacturer of antiseptic prep pad and towelette solutions.

I n addition, we have significantly expanded the production, distribution capacities, and product lines of the two acquired businesses.

Implementation of a new warehouse management system that will lead to improve efficiencies in 2022.

In 2021, the Company took several steps that significantly improved its capital position, including:

Entering into a new mortgage agreement with HSBC Bank in December 2021 covering its properties in Vancouver, Washington and Rocky Mount, North Carolina.

The mortgage is $11.6 million with a fixed rate of 3.8%.

During this time of increasing inflation, the Company has been able to fix the interest rate on $11.6 million of its capitalization.

The new facility also has the effect of increasing capacity under our revolving line of credit to fund growth and potential acquisitions.

In June 2021, the Company’s Paycheck Protection Program (PPP) loan of $3,580,047 was fully forgiven by the Small Business Administration, after management had successfully navigated the SBA’s extensive approval process.

Commencing in 2020 and continuing through the present, Executive management has taken decisive actions to respond to the unprecedented business and operational uncertainties and disruption caused by the pandemic.

These actions included:

taking steps to protect our global workforce, including travel restrictions, work-from-home requirements and preventative measures at our sites;

shifting its sales force to focus on eCommerce and retailers that it believed would be most able to serve its customers during the pandemic;

also enhancing eCommerce content and search;

procuring large quantities of first aid products and components to meet the surge in demand for such products resulting from the pandemic;

adding additional inventory across its product lines and proactively managing its supply chains to minimize the impact of disruptions and potential disruptions and to ensure supply chain continuity;

Taking steps beginning in 2020 to protect our global workforce, including travel restrictions, work-from-home requirements and preventative measures at our sites, and subsequently taking additional actions in response to changing circumstances.

Increasing inventory across its product lines by approximately 40% through the 21-month period ending December 31, 2021, to ensure adequacy of product availability.

Proactively managing its supply chains to minimize the impact of actual and potential disruptions and to ensure supply chain continuity.

Managing increases in the Company’s costs, labor shortages and other operational challenges.

Managing through macroeconomic uncertainty created by the pandemic by preserving the Company’s liquidity, engaging in cash preservation initiatives, and cost control measures.

Environmental Footprint - The Company continued in 2020 to take steps to improve its environmental footprint.

It increased its efforts to use recycled cardboard, plastic, and steel in its products and has succeeded in reducing the use of cardboard and plastic packaging.

In 2020, the Company commenced the installation of new software to reduce the size and usage of boxes for shipping, which not only saves packing material but also improves the efficiency of the delivery system.

On December 16, 2020, the Company purchased the assets of Med-Nap LLC., located in Brooksville, Florida.

Med-Nap is a leading manufacturer of alcohol prep pads, alcohol wipes, benzalkonium chloride wipes (BZK), antiseptic wipes, castile soap, and lens cleaning products.

The Company purchased Med-Nap assets for $9.3 million in cash using funds borrowed under its revolving credit facility with HSBC Bank, N.A.

On January 7, 2020, the Company purchased the assets of First Aid Central, located in Laval, Quebec, Canada.

The First Aid Central line of first aid kits, refills, and safety products to a broad range of industries and end users.

Its products meet federal Health Canada and provincial regulatory requirements.

The Company purchased First Aid Central assets for $2.1 million in cash using funds borrowed under its revolving credit facility with HSBC Bank, N.A.

Additional information concerning the acquisition of Med-Nap, LLC and First Aid Central assets is set forth in Note 17 – Business Combinations, in the Notes to Consolidated Financial Statements in this report.

Principal Products

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The cutting, sharpening and measuring category includes school, home and office products (Westcott® brand), and hardware, industrial and sporting goods products (Clauss®, Camillus®, Cuda® and DMT® brands).

FIRST AID AND SAFETY

First Aid and Safety

FIRST AID AND MEDICAL

First Aid and Medical

First Aid Only

The First Aid Only brand offers first aid and safety solutions that meet regulatory requirements for a broad range of industries.

The Smart Compliance® first aid system is an effective solution for maintaining OSHA compliance.

The Company’s SafetyHub App technology digitizes the replenishment process for a broad range of Safety products and provides data analytics to manage costs.

The First Aid Only brand offers first aid and medical products that meet regulatory requirements for a broad range of industries.

The Smart Compliance® first aid system is an effective solution for maintaining compliance with ANSI standards.

The Company’s SafetyHub App technology digitizes the replenishment process for a broad range of first aid components and provides data analytics to manage costs.

In 2019, we introduced our next generation SmartCompliance Complete ™ which offers a modular system that addresses first aid, bloodborne pathogen, bleed control, eyewash and OTC medication requirements for the most challenging workplace environments.

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First Aid Central

First Aid Central has been a trusted provider and manufacturer of a wide variety of first aid kits and safety supplies since 2007.

They assist Canadian businesses to stay compliant with federal & provincial first aid and safety regulations through their wide variety of first aid kits, refills, and safety supplies, including CPR kits, burn kits and automotive & emergency survival Kits.

Med-Nap manufactures critical FDA regulated components found in first aid kits and used by healthcare facilities, including alcohol prep pads, alcohol wipes, benzalkonium chloride wipes (BZK), various antiseptic wipes, castile soap, and lens cleaning wipes.

First Aid Central has been a trusted provider and manufacturer of a wide variety of first aid kits since 2007.

Med-Nap, an Acme United brand since 2020, manufactures critical FDA regulated components found in first aid kits and used by healthcare facilities, including alcohol prep pads, alcohol wipes, benzalkonium chloride non-alcohol wipes, various antiseptic wipes, castile soap, and lens cleaning wipes.

Med-Nap provides to the Company vertical integration advantages including shorter delivery times, lower total costs, and a secure U.S.

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Many of the Westcott branded cutting products contain patented titanium bonding and proprietary non-stick coatings, making the blades more than three times harder than stainless steel as well as reducing friction and corrosion.

Westcott continues to build on its cutting line with an expanded assortment of the Saber and ceramic safety knives, allowing its customers to remain safer on the job.

Also in the cutting line, Westcott has recently introduced the Glide technology scissor with its low friction fulcrum and adjustable tension.

Westcott also continued to innovate in the glue gun category-launching a cordless lithium-ion glue gun which heats up in 20 seconds and has a 30-minute run time.

Westcott continues to expand their catalog of craft items with patented new technologies, handle designs and construction that has driven Westcott to be a leader in fun, fashionable and functional solutions for students and adults.

In addition, Westcott continues to build on its

cutting line with an expanded assortment of ceramic safety knives which include new features, allowing its customers to remain safer on the job.

Hardware, Industrial and Sporting Goods

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Many of the Clauss products are enhanced with the Company’s patented titanium and proprietary non-stick coatings.

In 2021, Clauss was the first to innovate and apply industrial Titanium Carbide infused blades which has revolutionized cutting performance and edge-retention for hardware and industrial based cutting applications.

Since 1876 Camillus has been supplying innovative and high-quality knives.

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Many of the knives are enhanced with titanium carbonitride coatings to increase the hardness of the blade of up to 10 times that of untreated stainless steel.

In 2021 Camillus continued its innovative path in creating outdoor tools that serve its customers with multifunction features, which allow outdoor enthusiasts to carry less tools.

The Cuda line of fishing tools and knives was launched in 2014.

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Major Customers

Independent manufacturer representatives and direct sales are primarily used to sell the Company’s line of consumer products to wholesale, contract and retail stationery distributors, office supply super stores, school supply distributors, industrial distributors, wholesale florists, mass market and ecommerce retailers and hardware chains (including through their websites).

Independent manufacturer representatives and direct sales are primarily used to sell the Company’s line of consumer products to mass market, ecommerce retailers, industrial distributors, wholesale, contract and retail stationery distributors, office supply super stores, school supply distributors, and hardware chains (including through their websites).

The Company also sells a limited selection of its products directly to consumers through its own websites.

The Company had two customers in 2020 and one customer in 2019 that individually exceeded 10% of consolidated net sales.

Net sales to these two customers were approximately 18% and 13% of consolidated net sales in 2020 and 17% in 2019.

The Company had two customers in 2021 and 2020, respectively, that individually exceeded 10% of consolidated net sales.

Net sales to these two customers were approximately 17% and 11% of consolidated net sales in 2021 and 18% and 12% in 2020.

The Company competes with many companies in each market and geographic area.

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The major competitors in the cutting category are 3M and Fiskars Corporation.

The major competitor in the pencil sharpener category are Bostitch and Elmers.

The major competitors in the first aid and safety category are Honeywell and Cintas.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business