Acme United Corp (NYSE MKT:ACU) Q3 2019 Earnings Conference Call - Final Transcript

Oct 18, 2019 • 12:00 pm ET

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Acme United Corp (NYSE MKT:ACU) Q3 2019 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

Thank you. [Operator Instructions] We'll take our first question from Jeffrey Matthews of Ram Partners.

Analyst
Jeffrey Matthews

Hi Walter, thanks and congratulations. Solid cash flow, it is nice to see the balance sheet with some dry powder.

Executive
Walter C. Johnsen

It is very powerful because we've basically recharged our balance sheet without going to any outside capital.

Analyst
Jeffrey Matthews

Yeah. I'm not going to switch around for what you might be looking for. I really want to get to China and find out your perspective because you've been so early on the changes going on in China from labor cost perspective and looking at other places to outsource and bringing product back into the US, what do you see there now and how do you see the landscape for Acme's supply chain over the next five years?

Executive
Walter C. Johnsen

Well, I just returned from three weeks in China and Taiwan and Hong Kong. And I can tell you that the suppliers that we work with in all of those places are very supportive of our business. And many of them are independent businessman. And between getting some concessions on our cost of sales because of the Chinese currency weakening and their willingness to reduce margins, We are in a position to be able to respond very effectively and have been to some of the tariff issues and to our customer demands. So we are in a -- I feel we're in a very strong position with that. Some of the customers, some of the suppliers in China are looking to move some of their operations to places nearby China for example Myanmar or Pakistan or Thailand. And we will probably shift some of the supply with them and that's avoiding tariffs, but it's also diversifying our supply base. The basic business in China is still very, very competitive. And when I say that we think we were among the lowest cost producers of some of our products like scissors in the world and that continues to get owned [Phonetic] better and better. So even our labor is going up and for some of the sourcing, we think we're best positioned globally.

Other areas, there is some opportunities. Some of the first aid items we are now sourcing in other parts of the world and stepping that up. We are sourcing a little bit more in India. And I think that's healthy for the company's risk profile, but the net of this is during the past 12 months, we've just putting together what looks like our 9th record year of sales and as you can see with the gross margins, we've been able to maintain them and maybe able to increase them. So I'm quite optimistic as we're looking forward and again the independent businessman that we're working with in China are absolutely in tune with us as we look to move some production to other places where maybe the tariffs aren't this large. And then that would become a competitive advantage for us.

Analyst
Jeffrey Matthews

Great, thanks so much.

Executive
Walter C. Johnsen

Thank you.

Operator
Operator

Thank