Acme United Corporation

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Acme United Corporation

1931 Black Rock Turnpike
Fairfield, Connecticut 06825
U.S.A.
Telephone: (203) 332-7330
Fax: (203) 332-1588
Web site: http://www.acmeunited.com

Public Company
Incorporated: 1982 as Acme Shear Company
Employees: 90
Sales: $43.4 million (2004)
Stock Exchanges: American
Ticker Symbol: ACU
NAIC: 332211 Cutlery and Flatware (except Precious) Manufacturing

Acme United Corporation is a publicly traded manufacturing company based in Fairfield, Connecticut, that is devoted to production in three product groups: cutting instruments, measuring devices, and safety products. The company has been involved in the manufacture of scissors since the 1800s and continues to make a wide range of scissors for the home, school, and office markets. Other cutting instruments include shears, guillotine and rotary paper trimmers, hobby knives and blades, utility knives, and medical cutting instruments. Acme United measuring devices, such as rulers, tape measures, and math tools, are marketed under the venerable Westcott brand name. Safety products include First Aid kits, biohazard response products, and over-the-counter medication refills. Acme United maintains a major manufacturing plant in North Carolina as well as facilities in Canada, Germany, and Hong Kong. The company's major customers are Staples, Inc., Office Max, and United Stationers, Inc., which, combined, comprise nearly half of Acme United's annual revenues.

Company Roots Date to Civil War Era

The seeds of Acme United were planted in 1867 when German immigrant Leo Renz bought an old grist mill powered by the Beacon Hill Brook in Naugatuck. Here he opened Renz Shear Shop, which specialized in the making of cast iron shears and scissors. Over the next 20 years he grew the business and sold it to his brother, Robert. After his death, his heirs sold the company to a younger relation named Mitchell Renz. He moved the operations to Fairfield in 1880, and two years after that incorporated it as The Acme Shear Company. He was also responsible for bringing the brothers David C. Wheeler and Dwight Wheeler into the business. They bought out Renz, who decided in 1883 to quit New England and try his luck in Florida. Under Wheeler family management, Acme Shear expanded its product lines to include nut crackers and axe blades and later began manufacturing steel shears.

A second generation of the Wheeler family took over management of the company in the form of David Wheeler's son, Dwight C. Wheeler. A third generation, Henry C. Wheeler, joined the business in 1939 after graduating from Yale University. Just two years later, his father died and because the family wanted a Wheeler to head the business, he was made president when just 25 years of age. Although years later he would admit to being too young for the role, he was able to build on the momentum achieved by the previous generations of the Wheeler family, as well as the world-changing events of World War II, so that by 1946 Acme Shear was the world's largest maker of shears and scissors.

Medical Field Entered in 1960s

Henry Wheeler added a new title, chief executive officer, in 1953. Then, in the 1960s, he expanded the company in a number of directions. A scissors' subsidiary, Surmano Ltd., was established in the United Kingdom to sell directly to the European market. Because of increasing demand for disposable medical scissors, Acme Shear became involved in the medical field. In 1965, it introduced a line of disposable medical scissors and surgical instruments, selling them to other companies that packaged them for the hospital market. This business did so well that in 1969 Acme Shear opened a major manufacturing plant in Fremont, North Carolina, one that met government requirements for the production and packaging of medical equipment. The 1960s were also noteworthy because a fourth generation of the Wheeler family became involved as Dwight C. Wheeler II, Henry Wheeler's son, joined the company in 1966. A graduate of the University of Bridgeport with a degree in manufacturing engineering, he worked as an industrial engineer at the Producto Machine Company in Bridgeport before coming to Acme United. The company marked its 100th anniversary in 1967, the same year that Acme United ceased to be a pure family business. Acme Shear conducted an initial public offering of stock, which then began trading on an over-the-counter (OTC) basis.

During the 1970s, Acme Shear continued its efforts at diversification. In 1970, it became involved in a school product kindred to scissors, rulers, by acquiring Westcott Rule Company, which had been founded in 1872 in Seneca Falls, New York. To better reflect the company's new business mix the 100-year-old Acme Shear name was dropped in June 1971 in favor of Acme United Corporation. The 1970s also saw continued growth in the medical field. In 1972, Acme United acquired One Time Package Products Inc., maker of single-use consumer package products, a deal that allowed Acme United to market its own line of products rather than rely on third parties. The medical products division now offered One Time disposable procedure trays, Reposable stainless steel instruments, and povidone-iodine microbicide, a germicide sold under the ACU-Dyne brand. In the late 1970s, Acme United brought out wound dressings, including a sterile, non-absorbent, self-adhering polyurethane dressing called ACU-Derm and an absorbent version sold under the Lyo Foam name. Also of note during the decade, in 1979 the company's stock graduated from the OTC and began trading on the American Stock Exchange.

Struggles and Successes: 1980s to Mid-1990s

Much of Acme United's growth was due to its thriving medical business, but that would begin to change in the 1980s. The company was overly dependent on a single customer, American Hospital Supply, which by 1983 accounted for $22 million in sales. Then, American Hospital elected to manufacture many of the products themselves. To make the loss of this business even worse, hospitals began to pool their orders so that they were able to demand steeper discounts, thus cutting into Acme United's margins. Moreover, the company faced strong new competition from a United Kingdom medical supplier, Smith & Nephew. Acme United spent much of the 1980s adjusting to these realities, but by the end of the decade was ready to resume expansion.

The company looked overseas to fuel growth. In January 1990, Acme United closed on the $2.8 million acquisition of Emil Schlemper G.m.b.H., a leading West German maker of scissors, shears, manicure products, and surgical instruments. With Schlemper complementing the United Kingdom division, Surmanco, Acme United was now one of the largest manufacturers of cutting instruments in the European Common Market. Several months later, it increased its market share while expanding Surmanco by paying some $900,000 to acquire Homeric Ltd., a Sheffield, England-based maker of scissors, rulers, household shears, and surgical equipment. The next major acquisition was completed in October 1991, when Acme United bought Peter Altenbach and Sons GmbH for approximately $1.9 million. Founded in 1900, Altenbach was Germany's third largest manufacturer of quality knives and scissors, with annual sales of about $7 million. As had been the case with the Schlemper and Homeric acquisitions, Altenbach was expected to become immediately profitable, as Henry Wheeler told the press that Altenbach was "an efficient, well-managed business." Unfortunately for Acme United, that assessment was not accurate. According to the New Haven Register, in a 1995 profile of Acme United, "The Altenbach purchase turned into a disaster as labor problems and poor cost controls drained earnings. Acme moved to restructure the division and cut employment by 30 percent, which proved more costly considering the high severance costs built into German labor laws."

On other fronts during the early 1990s, Acme United offered the Kleen Earth line of "green" scissors and rulers made from recycled plastic and packaged in recycled cardboard. At a cost of $5.4 million in cash and stock, it expanded its medical division in early 1992 by acquiring SePro Healthcare, Inc., the U.S. subsidiary of a United Kingdom firm, Seton Healthcare Group PLC. As a result, Acme United picked up inventory, a New Jersey facility, and exclusive distribution rights to Seton's pressure therapy bandages and specialized wound dressings, as well as an opportunity to distribute Seton's future medical products. Later in 1992, Acme United reached an exclusive marketing and distribution agreement with a New York City company, OPCO Medical Products Ltd., for the OPCO line of patented intravenous therapy products, serving both the hospital and after-care market. These products included a patented IV Bubble, an inflatable item used to keep a catheter from being accidentally dislodged, and an IV board, a companion product that immobilized a limb with a molded arm board and finger support to provide a more stabile intravenous site. Also in 1992, Acme United acquired the exclusive U.S. marketing and distribution rights for the Royal-Derm lines of skin care and wound-care products, designed to increase moisturization and provide pain relief for patients suffering from burns as well as the ulcers and wounds suffered by the bedridden.

Company Perspectives:

We aspire to be the leading supplier of cutting, measuring and safety products to offices, school and homes worldwide.

The problems with Altenbach led to a $468,000 restructuring charge in 1992. In addition, Acme United also encountered problems with the launch of the Royal-Derm and OPCO product lines. Attempts to market the latter failed completely, leading to a $264,000 charge for leftover inventory and licensing rights, while Royal-Derm met with stiff new competition, resulting in price cutting and a $415,000 charge for dated inventory. In an attempt to address Acme United's mounting difficulties, reorganization was begun in January 1994. The company was now divided into three business units: North American consumer products, European consumer products, and U.S. Medical products. Management teams were assigned to each unit and given the authority to make sweeping changes, including headcount reduction and other cost-cutting measures. In addition, 78-year-old Henry Wheeler stepped down as CEO, replaced by his 51-year-old son, Dwight C. Wheeler II. The elder Wheeler retained the chairmanship, however.

New Leadership and Challenges: Mid-1990s–2000s

After Acme United appeared to hit bottom in 1993, the company showed some improvement in 1994, when it barely returned to profitability, before experiencing a disappointing setback the following year. The company's stock, which had been trading in the neighborhood of $25 during the 1980s, slumped to around $3, leading to increasing pressure from shareholders to make major changes in management. In November 1995, Dwight Wheeler was replaced as CEO by Walter C. Johnson, who had been hired earlier in the year to head the medical products division. Johnson had previously served as vice-chairman of Marshall Products Inc., an Illinois medical supply distributor whose revenues he had helped to double in four years before it was sold to a Japanese company. Johnson was also named to the Acme United board of directors, where at the age of 44 he was considerably younger than his colleagues, whose average age was 66.

After losing more than $8.7 million on sales of $52.2 million in 1995, Acme United initiated a cost reduction program in 1996. The Westcott plant in Seneca Falls, closed in 1995, was sold in 1996. The company's Bridgeport, Connecticut, plant was also shut down in 1996, with all production moved to Acme United's more modern, lower cost, facilities in North Carolina. Altenbach was also sold off in May 1996. As planned, Acme United also began reducing its inventory company-wide in order to free up money for investment in the company. Moreover, Johnson shook up his management team. All four of his direct reports, along with five other senior managers, were terminated in 1996. The company lost another $3.2 million in 1996, much of which was the result of restructuring charges, but it also saw revenues dip to $47.5 million, with the medical products unit experiencing a 12 percent drop in business and European sales that, excluding Altenbach, was off by 4 percent.

Acme United expanded its North American office products business in 1997 by acquiring the Rotex Division of Esselte Canada. Also in 1997, Acme United sold the marketing rights for Seton Healthcare products for $2 million, a harbinger of what was to come, as Johnson decided to focus the company's attention on consumer products. Less than two years later, in March 1999, Acme United sold its medical unit for $8.2 million to Medical Action Industries, a Long Island-based supplier of medical and disposable surgical products. Also in March 1999, Henry Wheeler died, some 60 years after first joining the company.

Although the loss of the medical division significantly lowered the company's total revenues, Acme United slowly returned to profitability, posting net income of $1.1 million in 2000 after losing $156,000 from continuing operations in 1999 and $1.7 million in 1998. The company shied away from low margin products, concentrating instead on value-added products, such as the Tagit! line of student scissors, rulers, staplers, and staple removers introduced in 2000. In addition, the company made inroads into the office market by achieving greater penetration with such retailers as Staples and Office Max. Sales improved to $36.2 million in 2001, a 5 percent improvement over the previous year, and net income grew to $1.3 million.

Poor economic conditions caused another setback in 2002, leading to the restructuring of the European unit, with the operations of the United Kingdom plant transferred to Germany. Acme United also increased its focus on core products and regained some momentum in 2003, during which sales increased 13 percent over the previous year to $35 million and net income increased 85 percent to $1.2 million. A new titanium scissor line performed well enough to warrant the application of the technology to new products, such as paper trimmers. In addition, in 2003 Acme United opened a Hong Kong subsidiary.

With business once again on an upswing, Acme United was in a position to grow externally. In June 2004, it acquired Clauss Cutlery from Alco Industries. Almost as old as Acme United, Clauss, founded in Fremont, Ohio, in 1877, was once the world's largest scissor manufacturers. Its scissors and cutting tools now primarily served the floral market as well as such industrial customers as auto, textile, food processing, and electronics, providing Acme United with a solid platform on which to expand into other areas of the cutting trade. The company's turnaround under Johnson's leadership appeared complete when the results for 2004 were released in March 2005. Acme United experienced a 24 percent increase in sales to $43.4 million, while net income grew to $3.2 million. With sales showing improvement in all markets, Acme United was well positioned to now enjoy sustained growth.