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ACME UNITED CORP

ACME UNITED CORPACUEarnings & Financial Report

NYSE · Industrials · Cutlery, Handtools & General Hardware

Acme United Corporation is a supplier of cutting, measuring and safety products for the school, home, office, hardware and industrial markets. The company was organized as a partnership in 1867 and incorporated in 1873 under the laws of the State of Connecticut. It is publicly traded on the NYSE American with symbol ACU.

What changed in ACME UNITED CORP's 10-K — 2023 vs 2024

Top changes in ACME UNITED CORP's 2024 10-K

120 paragraphs added · 111 removed · 89 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

25 edited+7 added−7 removed13 unchanged
In 2021, Clauss was the first to innovate and apply industrial Carbide materials to steel cutting blades, revolutionizing cutting performance and edge-retention for hardware applications. DMT Diamond Machining Technology (DMT) was founded in 1976 by aerospace engineers and is a leader in diamond tools for sharpening knives, scissors, chisels, skis, skates and many other edges.
In 2021, Clauss was the first to innovate and apply industrial Carbide materials to steel cutting blades, significantly improving cutting performance and edge-retention for hardware applications. DMT Diamond Machining Technology (DMT) was founded in 1976 by aerospace engineers and is a leader in diamond tools for sharpening knives, scissors, chisels, skis, skates and many other edges.
As of December 31, 2023, the Company employed 645 people, all of whom are full time and none of whom is covered by union contracts. Employee relations are considered good and the Company is not aware of any material work force issues. Culture and Diversity The Company’s workforce represents nearly all demographics, with diversity in age, race, ethnicity, and gender.
As of December 31, 2024, the Company employed 633 people, all of whom are full time and none of whom is covered by union contracts. Employee relations are considered good and the Company is not aware of any material work force issues. Culture and Diversity The Company’s workforce represents nearly all demographics, with diversity in age, race, ethnicity, and gender.
Total net sales in 2023 were $192 million. The Company was organized as a partnership in l867 and incorporated in l882 under the laws of the State of Connecticut. The Company sources most of its products from suppliers located outside the United States, primarily in Asia.
Total net sales in 2024 were $194 million. The Company was organized as a partnership in l867 and incorporated in l882 under the laws of the State of Connecticut. The Company sources most of its products from suppliers located outside the United States, primarily in Asia.
As of December 31, 2022, the Company had three customers that individually represented 10% or more of total trade receivables, which accounted for 12%, 11%, and 10%. Competition The Company competes with many companies in each market and geographic area.
As of December 31, 2023, the Company had three customers that individually represented 10% or more of total trade receivables, which accounted for 17%, 14%, and 14%. Competition The Company competes with many companies in each market and geographic area.
In 2023, DMT launched a complete product assortment that provides simple sharpening solutions to educate and create enthusiasm surrounding the sharpening category. The EdgeSharp product assortment features an entirely new line of sharpeners that are easy to use while providing a safe sharpening experience.
In 2023, DMT launched a broad assortment of products that provide simple sharpening solutions to the consumer and create enthusiasm surrounding the sharpening category. The EdgeSharp product assortment features an entirely new line of sharpeners that are easy to use while providing a safe sharpening experience.
Product Distribution; Major Customers Independent manufacturer representatives and direct sales are primarily used to sell the Company’s line of consumer products to mass market, e-commerce retailers, industrial distributors, wholesale, contract and retail stationery distributors, office supply super stores, school supply distributors, and hardware chains (including through their websites).
Product Distribution; Major Customers Independent manufacturer representatives and direct sales are primarily used to sell the Company’s line of consumer products to mass market, e-commerce retailers, industrial distributors, wholesale, contract and retail stationery distributors, office supply super stores, school supply distributors, and hardware chains. The Company also sells its products directly to consumers through its own websites.
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 is one of the leading scissor and ruler brands in North America. 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.
The Company provides a range of benefits to its employees and their families, including medical and prescription drug, dental and vision, long-term disability coverage, as well as 401(k) savings and flexible spending accounts.
Compensation and Benefits The Company is committed to providing market-competitive pay and benefits to attract and retain a skilled workforce. The Company provides a range of benefits to its employees and their families, including medical and prescription drug, dental, vision and long-term disability coverage, as well as 401(k) savings and flexible spending accounts.
The Spill Response System provides all the necessary tools to effectively clean up spills, saving time, money and reducing slip & fall accidents in various venues, including grocery, retail, and big box stores; food service & hotel chains; municipal facilities; and industry-specific distributors in the U.S.
The Spill Response System provides all the necessary tools to effectively clean up spills, saving time, money and reducing slip & fall accidents in various venues, including grocery, retail, and big box stores; food service & hotel chains; municipal facilities; and industry-specific distributors in the U.S. 4 First Aid Central First Aid Central has been a provider and manufacturer of a wide variety of first aid kits since 2007.
Med-Nap provides to the Company vertical integration advantages including shorter delivery times, lower total costs, and a U.S. source of supply during unprecedented healthcare challenges. The facilities offer a platform for future product expansion.
Med-Nap Med Nap, at our Brooksville facility, manufactures medical grade products, including alcohol prep pads and benzalkonium chloride antiseptic wipes. Med-Nap provides to the Company vertical integration advantages including shorter delivery times, lower total costs, and a U.S. source of supply during unprecedented healthcare challenges. The facilities offer a platform for future product expansion.
Accounts Receivable 5 As of December 31, 2023, the Company had three customers that represented 10% or more of total trade receivables. Accounts receivables from these three customers were approximately 17%, 14%, and 14% of consolidated accounts receivable.
Accounts Receivable As of December 31, 2024, the Company had three customers each of which represented 10% or more of total trade receivables. Accounts receivables from these three customers were approximately 16%, 15%, and 11% of consolidated accounts receivable.
In recent years, as a result of acquisitions, the amount of first aid and medical products produced in North America has been increasing substantially. The Company assembles its first aid kits at its facilities in Vancouver, WA, Rocky Mount, NC, Keene, NH and Laval, Canada. The components for the first aid kits are primarily sourced from U.S. and international suppliers.
In recent years, as a result of acquisitions, the amount of first aid and medical products produced in North America has been increasing substantially. The components for the first aid kits are sourced from both U.S. and international suppliers.
Historically, the Company’s standard recruiting and hiring initiatives have created a diverse workforce. Our employees reflect the communities in which we are located. We seek to provide opportunities for growth and development at all levels of our organization.
Historically, the Company’s standard recruiting and hiring initiatives have created a diverse workforce. Our employees reflect the communities in which we are located.
The Company also sells its products directly to consumers through its own websites. The Company had two customers in 2023 and 2022, respectively, that individually exceeded 10% of consolidated net sales. Net sales to these two customers were approximately 14% and 12% of consolidated net sales in 2023 and 15% and 10% in 2022.
The Company had two customers in 2024 and 2023, respectively, that individually exceeded 10% of consolidated net sales. Net sales to these two customers were approximately 14% and 13% of consolidated net sales in 2024 and 14% and 12% in 2023.
In addition, the Company has manufacturing facilities in the U.S. at La Vergne, 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.
The Company assembles its first aid kits at its facilities in the following locations: • Vancouver, WA, • Rocky Mount, NC, • Keene, NH • Laval, Canada In addition, the Company has manufacturing facilities in the U.S. as follows: • La Vergne, TN - Spill Magic products • Santa Ana, CA - Spill Magic products • Marlborough, MA - DMT sharpening tools • Brooksville, FL - Med-Nap alcohol and benzalkonium chloride non-alcohol (BZK) wipes.
The Company’s success depends in part on its ability to maintain patent protection for its products, to preserve its proprietary technology and to operate without infringing upon the patents or proprietary rights of others. The Company generally files patent applications in the United States and foreign countries where patent protection for its technology is appropriate and available.
Intellectual Property The Company owns many patents and trademarks that are important to its business. The Company’s success depends in part on its ability to maintain patent protection for its products, to preserve its proprietary technology and to operate without infringing upon the patents or proprietary rights of others.
Creating and fostering inclusive work environments and teams allow us to create an engaging and welcoming culture for our employees, which we believe positively affects the quality of our products and the experience we deliver to our customers. Compensation and Benefits The Company is committed to providing market-competitive pay and benefits to attract and retain great talent.
We seek to provide opportunities for growth and development at all levels of our organization. 6 Creating and fostering inclusive work environments and teams allow us to create an engaging and welcoming culture for our employees, which we believe positively affects the quality of our products and the experience we deliver to our customers.
PhysiciansCare The PhysiciansCare brand offers a variety of portable eyewash solutions and over-the counter medications, including the active ingredients aspirin, acetaminophen and ibuprofen. Spill Magic Spill Magic is a leader in bodily fluid and spill clean-up solutions with a lightweight, absorbent powder that quickly encapsulates a spill.
Spill Magic Spill Magic is a leader in bodily fluid and spill clean-up solutions with a lightweight, absorbent powder that quickly encapsulates a spill.
The first aid and medical category includes first aid and safety products (First Aid Only®, PhysiciansCare®, Pac-Kit®, Spill Magic®, First Aid Central®, Med-Nap and Safety Made brands). The cutting and sharpening categories include school, home and office products (Westcott® brand), and hardware, industrial and sporting goods products (Clauss® and DMT® brands).
Principal Products The Company markets and sells under two main product categories: i) first aid and medical; and ii) cutting and sharpening. The first aid and medical category includes first aid and safety products (First Aid Only®, PhysiciansCare®, Pac-Kit®, Spill Magic®, First Aid Central®, Med-Nap, Safety Made and Elite brands).
Safety Made Safety Made is a leading manufacturer of first aid kits for the promotional products industry. 4 CUTTING, SHARPENING AND MEASURING School, Home and Office Westcott Westcott, with a history of quality dating back to 1872, provides innovative cutting and measuring products for the school, home and office as well as industrial safety cutting.
CUTTING AND SHARPENING School, Home and Office Westcott Westcott, with a history of quality dating back to 1872, provides innovative cutting and measuring products for the school, home and office as well as industrial safety cutting. Principal products under the Westcott brand include scissors, rulers, pencil sharpeners, paper trimmers, safety cutters, lettering products, glue guns and other craft products.
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. Our next generation SmartCompliance Complete ™ offers a modular system that addresses first aid, bloodborne pathogen, bleed control, eyewash and OTC medication requirements for the most challenging workplace environments.
Our next generation SmartCompliance Complete ™ offers a modular system that addresses first aid, bloodborne pathogen, bleed control, eyewash and OTC medication requirements for the most challenging workplace environments. PhysiciansCare The PhysiciansCare brand offers a variety of portable eyewash solutions and over-the counter medications, including the active ingredients aspirin, acetaminophen and ibuprofen.
The Company also considers its trademarks important to the success of its business. The more significant trademarks include Westcott, Clauss, PhysiciansCare, First Aid Only, DMT, Pac-Kit, Spill Magic and First Aid Central. Patents and trademarks are amortized over their estimated useful lives. The weighted average amortization period remaining for intangible assets at December 31, 2023 was 8 years.
Patents and trademarks are amortized over their estimated useful lives. The weighted average amortization period remaining for intangible assets at December 31, 2024 was 8 years.
FIRST AID AND MEDICAL First Aid and Medical First Aid Only 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 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.
Today, DMT continues to innovate its sharpening assortment with sharpening solutions for the home consumer while continuing to provide the very best in professional sharpening solutions. Intellectual Property The Company owns many patents and trademarks that are important to its business.
Today, DMT continues to innovate its sharpening assortment with sharpening solutions for the home consumer while continuing to provide the very best in professional sharpening 5 solutions. In 2024, we expanded into the home and culinary markets with a wide variety of tools, including versatile countertop pull-through sharpeners.
Recent accomplishments and initiatives In 2023, the Company’s key business accomplishments and initiatives included the following: • Sales Growth – Average annual growth rate over ten years of 8%. • Reduction in Debt – Net debt decreased from $55 million at December 31, 2022 to $19 million at December 31, 2023, a reduction of $36 million. • First Aid Acquisition – On September 27, 2023, the Company acquired the assets of Hawktree Solutions.
Recent Accomplishments and Initiatives Quantitative Achievements In 2024, the Company’s key financial accomplishments included the following: • Sales Growth – Continued strong average annual growth rate, 7% over ten years (2015 - 2024). • Strong Financial Position – In recent years the Company has significantly reduced bank debt to provide at December 31, 2024, approximately $47 million of availability under its $65 million credit facility.
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Inc., a supplier of first aid survival kits and medical supplies based in Laval, Quebec, Canada. The Company successfully integrated the assets and business in the fourth quarter of 2023. • Divestiture – On November 1, 2023, the Company sold its Camillus and Cuda hunting and fishing product lines for $19.8 million.
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This strong liquidity will allow the Company to fund acquisitions and growth. • Dividend Increase - Increase in the quarterly dividend from $.02 per share in 2004 to $.15 per share in 2024 – an eight-fold increase.
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The transaction enables Acme United to increase focus on its primary product lines and allowed the Company to pay down approximately $15 million of bank debt.
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Business and Operational Milestones and Achievements 3 • Diversification of Product Lines – – During the past eight years, sales of first aid and medical products have grown to approximately 61% of total sales. As a result, we have broadened our customer and revenue base.
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The sale also increased net income by $9.6 million. • Increase In United States and Canadian Sourcing – The last eight acquisitions by the Company have consisted of manufacturing businesses in United States and Canada. • Reduction of Inventory – Commencing in 2023, the Company successfully completed its previously announced inventory reduction program of $5 million. • Cost Reduction Initiatives – In 2023, the Company completed a series of cost reduction initiatives announced at the end of 2022 that are generating approximately $6.5 million in annual savings, a $1.5 million increase over the original annual target of $5 million.
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In addition, our sales of school, home, craft and office products increased 10% in 2024, partly due to the introduction of new products. • First Aid Acquisition – On May 23, 2024, the Company acquired the assets of Elite First Aid, Inc., a leading supplier of tactical, trauma and emergency response products.
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These initiatives included the implementation of a wide range of productivity improvements in our manufacturing and distribution facilities and a reduction of SG&A expenses and other costs. 3 Principal Products The Company markets and sells under two main product categories: i) first aid and medical; and ii) cutting and sharpening.
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The Company successfully completed the integration of the assets and business in the fourth quarter of 2024. • Markets/Products – In 2024 we: ▪ Introduced first aid SmartCabinet 2.0 with patented RFID technology that automates the requisition process and helps end users to maintain OSHA compliance. ▪ Expanded in the craft market by providing advanced cutting tools which are used to create precise and unique designs. ▪ Expanded into the home and culinary markets with a wide variety of DMT sharpening tools, including versatile countertop pull-through sharpeners. • Cost Reduction Initiatives – In 2024, the Company implemented a variety of productivity enhancements across our manufacturing and distribution facilities, along with a reduction in SG&A expenses and other costs, leading to approximately $2 million in ongoing annual savings. • Capacity Expansion - In 2024, the Company installed a new storage racking system in our 340,000 square foot Rocky Mount, NC distribution center, resulting in a 30% capacity increase.
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First Aid Central First Aid Central has been a provider and manufacturer of a wide variety of first aid kits since 2007.
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The cutting and sharpening categories include school, home and office products (Westcott® brand), and hardware, industrial and sporting goods products (Clauss® and DMT® brands). FIRST AID AND MEDICAL First Aid Only The First Aid Only brand offers first aid and medical products that meet regulatory requirements for a broad range of industries.
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Med-Nap 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 non-alcohol wipes, various antiseptic wipes, castile soap, and lens cleaning wipes.
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Safety Made Safety Made is a leading manufacturer of first aid kits for the promotional products industry. Elite First Aid Elite is a leading supplier of tactical, trauma and emergency response products.
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Principal products under the Westcott brand include scissors, rulers, pencil sharpeners, paper trimmers, safety cutters, lettering products, glue guns and other craft products. Westcott is one of the leading scissor and ruler brands in North America.
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The Company generally files patent applications in the United States and foreign countries where patent protection for its technology is appropriate and available. The Company also considers its trademarks important to the success of its business. The more significant trademarks include Westcott, Clauss, PhysiciansCare, First Aid Only, DMT, Pac-Kit, Spill Magic and First Aid Central.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

30 edited+10 added−9 removed106 unchanged
Industry and Operational Risks 6 The Company is subject to a number of significant operational risks that might cause the Company’s actual results to vary materially from its forecasts, targets or projections, including: • failing to achieve planned revenue and profit growth in each of the Company's business segments; • changes in customer requirements and in the volume of sales to principal customers; • the ability of the Company to anticipate timing of orders and shipments particularly in the e-commerce area; • reliance on third party distributors; • emergence of new competitors or consolidation of existing competitors; and • industry demand fluctuations.
Industry and Operational Risks The Company is subject to a number of significant operational risks that might cause the Company’s actual results to vary materially from its forecasts, targets or projections, including: • failing to achieve planned revenue and profit growth in each of the Company's business segments; • changes in customer requirements and in the volume of sales to principal customers; • the ability of the Company to anticipate timing of orders and shipments particularly in the e-commerce area; • reliance on third party distributors; • emergence of new competitors or consolidation of existing competitors; and • industry demand fluctuations.
In addition, new regulations may be enacted in the U.S. or abroad that may require the Company to incur additional personnel-related, environmental or other costs on an ongoing basis, significantly restrict the Company’s ability to sell certain products, or incur fines or penalties for noncompliance, any of which could adversely affect the Company’s results of operations.
In addition, new regulations may be enacted in the U.S. or 13 abroad that may require the Company to incur additional personnel-related, environmental or other costs on an ongoing basis, significantly restrict the Company’s ability to sell certain products, or incur fines or penalties for noncompliance, any of which could adversely affect the Company’s results of operations.
Changes in interest rates could adversely affect us . We have exposure to increases in interest rates under our revolving credit loan agreement with HSBC Bank, N.A. which presently bears interest at SOFR + 1.60%. The economy has been experiencing inflation since 2021. In response to significant and prolonged increases in inflation, the U.S.
Changes in interest rates could adversely affect us . We have exposure to increases in interest rates under our revolving credit loan agreement with HSBC Bank, N.A. which presently bears interest at SOFR + 1.70%. The economy has been experiencing inflation since 2021. In response to significant and prolonged increases in inflation, the U.S.
Dollar. If the Chinese Renminbi continues to increase with respect to the U.S. Dollar in the future, the Company may experience cost increases on such purchases, and this can adversely impact profitability. The Company may not be successful at implementing customer pricing or other actions in an effort to mitigate the related effects of the product cost increases.
Dollar. If the Chinese Renminbi increases with respect to the U.S. Dollar in the future, the Company may experience cost increases on such purchases, and this can adversely impact profitability. The Company may not be successful at implementing customer pricing or other actions in an effort to mitigate the related effects of the product cost increases.
The Company’s management believes that, under current conditions, the Company’s current cash and cash equivalents, cash generated by operations, together with the borrowing availability under its revolving loan agreement with HSBC Bank N.A., will be sufficient to fund planned 10 operations for the next twelve months from the issuance date of this report.
The Company’s management believes that, under current conditions, the Company’s current cash and cash equivalents, cash generated by operations, together with the borrowing availability under its revolving loan agreement with HSBC Bank N.A., will be sufficient to fund planned 11 operations for the next twelve months from the issuance date of this report.
Loss of a major customer could result in a decrease in the Company’s future sales and earnings. Sales of our products are primarily concentrated in a few major customers including commercial retailers, office product superstores, and mass market distributors. The Company had two customers in 2023 and 2022, that individually exceeded 10% of consolidated net sales.
Loss of a major customer could result in a decrease in the Company’s future sales and earnings. Sales of our products are primarily concentrated in a few major customers including commercial retailers, office product superstores, and mass market distributors. The Company had two customers in 2024 and 2023, that individually exceeded 10% of consolidated net sales.
This may result from extraordinary cash expenses, actual expenses exceeding contemplated costs, funding of capital expenditures, increases in reserves or lack of available capital. We may also suspend the payment of dividends or our stock repurchase program if the Board deems such action to be in the best interests of our shareholders.
This may result from extraordinary cash expenses, actual expenses exceeding contemplated costs, funding of capital expenditures, increases in reserves or lack of available capital. We may also suspend the payment of dividends or our stock repurchase program if the Board deems such action to be in the best interests of our stockholders.
In addition, the Company might have to write off inventories that are considered obsolete based upon changes in customer demand, product design changes, or new product 8 introductions, which eliminate demand for existing products. Historically, the Company has not had to materially write down or write off product inventories.
In addition, the Company might have to write off inventories that are considered obsolete based upon changes in customer demand, product design changes, or new product 9 introductions, which eliminate demand for existing products. Historically, the Company has not had to materially write down or write off product inventories.
If we do not have sufficient fulfillment capacity or experience a 7 problem fulfilling orders in a timely manner, our customers may experience delays in receiving their purchases, which could harm our reputation and our relationship with our customers.
If we do not have sufficient fulfillment capacity or experience a 8 problem fulfilling orders in a timely manner, our customers may experience delays in receiving their purchases, which could harm our reputation and our relationship with our customers.
In addition, any uncertainty could have a variety of negative effects on the Company, such as reduction in revenues, increased costs, lower gross margin percentages, increased allowances for doubtful accounts and/or write-offs of accounts receivable and could otherwise have material adverse effects on our business, results of operations, financial condition and cash flows.
In addition, any uncertainty could have a variety of negative effects on the Company, such as reduction in revenues, increased costs, lower gross margin percentages, increased allowances for credit losses and/or write-offs of accounts receivable and could otherwise have material adverse effects on our business, results of operations, financial condition and cash flows.
If our remedial measures are insufficient to address the material weakness, or if additional material weaknesses or significant deficiencies in our internal control are discovered or occur in the future, our ability to report our financial condition and results of operations in a timely and accurate manner may be materially adversely affected and investor confidence in the Company may be negatively impacted.
If our remedial measures are insufficient to address the material weakness or if another material weakness or significant deficiencies in our internal control are discovered or occur in the future, our ability to report our financial condition and results of operations in a timely and accurate manner may be materially adversely affected and investor confidence in the Company may be negatively impacted.
These factors include: • Changes generally in political, regulatory or economic conditions in the countries in which we conduct business; • Trade protection measures in favor of local producers of competing products, including government subsidies, tax benefits, changes in local tax rates, trade actions (such as anti-dumping proceedings) and other measures giving local producers a competitive advantage over the Company; • Changes in foreign currency exchange rates which could adversely affect our competitive position, selling prices and manufacturing costs, and therefore the demand for our products in a particular market; and • The effects of any future pandemics in foreign countries. 13 These risks could affect the cost of manufacturing and selling our products, our pricing, sales volume, and ultimately our financial performance.
These factors include: • Changes generally in political, regulatory or economic conditions in the countries in which we conduct business; • Trade protection measures in favor of local producers of competing products, including government subsidies, tax benefits, changes in local tax rates, trade actions (such as anti-dumping proceedings) and other measures giving local producers a competitive advantage over the Company; • Changes in foreign currency exchange rates which could adversely affect our competitive position, selling prices and manufacturing costs, and therefore the demand for our products in a particular market; and • The effects of any future pandemics in foreign countries.
Our business has experienced significant historical growth both internally and through acquisitions through the years including through the acquisitions of Safety Made in 2022 and Hawktree in 2023. We expect our business to continue to grow organically and seek to grow through strategic acquisitions both domestically and internationally. This growth places significant demands on management and operational systems.
Our business has experienced significant historical growth both internally and through acquisitions through the years including through the acquisitions of Hawktree in 2023 and Elite First Aid in 2024. We expect our business to continue to grow organically and seek to grow through strategic acquisitions both domestically and internationally. This growth places significant demands on management and operational systems.
The Company’s inability to meet its staffing requirements in the future could adversely affect its results of operations. Execution or the lack thereof, of our e-commerce business may reduce our operating results. Our e-commerce business constituted approximately 18% of our net sales in 2023.
The Company’s inability to meet its staffing requirements in the future could adversely affect its results of operations. Execution or the lack thereof, of our e-commerce business may reduce our operating results.
Net sales to those customers were approximately 14% and 12% in 2023 and 15% and 10% in 2022, respectively. The Company had three customers in 2023 that individually exceeded 10% of consolidated accounts receivable. Accounts receivable to those customers were approximately 17%, 14%, and 14%.
Net sales to those customers were approximately 14% and 13% in 2024 and 14% and 12% in 2023, respectively. The Company had three customers in 2024 that individually exceeded 10% of consolidated accounts receivable. Accounts receivable to those customers were approximately 16%, 15%, and 11%.
In 2022, the Company had receivables to these customers of approximately 12%, 11%, and 10%, respectively. The Company anticipates that a limited number of customers may account for a substantial portion of its total net revenues for the foreseeable future.
In 2023, the Company had receivables to these customers of approximately 17%, 14%, and 14%, respectively. The Company anticipates that a limited number of customers may account for a substantial portion of its total net revenues for the foreseeable future.
The Company’s manufacturing and distribution facilities in Rocky Mount, NC and Vancouver, WA were financed by a fixed rate mortgage with HSBC Bank, N.A. of which $10,823,033 was outstanding as of December 31, 2023. Our substantial indebtedness, combined with our other financial obligations and contractual commitments, could have significant consequences for our business.
The Company’s manufacturing and distribution facilities in Rocky Mount, NC and Vancouver, WA were financed by a fixed rate mortgage with HSBC Bank, N.A. of which $10,409,797 was outstanding as of December 31, 2024. Our indebtedness if it were to increase substantially, combined with our other financial obligations and contractual commitments, could have significant consequences for our business.
Although the Company maintains product liability insurance coverage, potential product liability claims are subject to a deductible or could be excluded under the terms of the policy. Historically, the Company has not experienced any material product liability claims or regulatory actions.
Although the Company maintains product liability insurance coverage, potential product liability claims are subject to a deductible or could be excluded under the terms of the policy. Historically, the Company has not experienced any material product liability claims or regulatory actions. The Company’s businesses and operations are subject to regulation in the U.S. and abroad.
The Company’s businesses and operations are subject to regulation in the U.S. and abroad. 12 Changes in laws, regulations and related interpretations may alter the environment in which the Company does business. This includes changes in environmental, data privacy, competitive and product-related laws, as well as changes in accounting standards, taxation and other regulations.
Changes in laws, regulations and related interpretations may alter the environment in which the Company does business. This includes changes in environmental, data privacy, competitive and product-related laws, as well as changes in accounting standards, taxation and other regulations.
It is not possible to predict the extent and duration of the military conflict, sanctions, and any associated market disruptions, which could have a material adverse effect on our business, financial position, results of operations and cash flows. 11 We have identified a material weakness in our internal control over financial reporting which could, if not remediated, result in material misstatements in our financial statements.
It is not possible to predict the extent and duration of the military conflict, sanctions, and any associated market disruptions, which could have a material adverse effect on our business, financial position, results of operations and cash flows.
Thus, our common stock is less liquid than the stock of companies with broader public ownership, and, as a result, the trading price for shares of our common stock may be more volatile.
There were approximately 3,289,572 shares of our common stock held by non-affiliates as of December 31, 2024. Thus, our common stock is less liquid than the stock of companies with broader public ownership, and, as a result, the trading price for shares of our common stock may be more volatile.
In connection with the preparation of our annual report for the year ended December 31, 2023, we identified a material weakness related to the Company’s information technology general controls (ITGCs).
A material weakness in our internal control over financial reporting which could, if not remediated, result in material misstatements in our financial statements. 12 In connection with the preparation of our annual report for the year ended December 31, 2024, we identified a material weakness related to the Company’s information technology general controls (ITGCs).
We expect to continue to experience inflationary pressure on our cost structure, and price increases may not be sufficient to offset cost increases or may result in sales volume declines.
These risks, in turn, could have a material adverse effect on our business results of operations and financial condition. We expect to continue to experience inflationary pressure on our cost structure, and price increases may not be sufficient to offset cost increases or may result in sales volume declines.
The Company’s Asia vendors are located primarily in China, which subjects the Company to various risks within the region including regulatory, political, economic and foreign currency changes.
Reliance on foreign suppliers could adversely affect the Company’s business. 14 The Company sources its products from suppliers located in Asia, Europe and the United States. The Company’s Asia vendors are located primarily in China, which subjects the Company to various risks within the region including regulatory, political, economic and foreign currency changes.
The Company may not have sufficient resources to make the investments that may be necessary to anticipate those changing needs and the Company may not anticipate, identify, develop and market products successfully or otherwise be successful in maintaining its competitive position.
The Company’s success will depend in part on its ability to anticipate and offer products that appeal to the changing needs and preferences of our customers in the various market categories in which it competes. 10 The Company may not have sufficient resources to make the investments that may be necessary to anticipate those changing needs and the Company may not anticipate, identify, develop and market products successfully or otherwise be successful in maintaining its competitive position.
Because our common stock is thinly traded, its market price may fluctuate significantly more than the stock market in general or the stock prices of other companies listed on major stock exchanges. There were approximately 3,185,316 shares of our common stock held by non-affiliates as of December 31, 2023.
Our shares of common stock are thinly traded and our stock price may be volatile. Because our common stock is thinly traded, its market price may fluctuate significantly more than the stock market in general or the stock prices of other companies listed on major stock exchanges.
At December 31, 2023, a total of 160,365 shares may be purchased in the future under the repurchase program which the Company announced in 2019. 14 Our shares of common stock are thinly traded and our stock price may be volatile.
If we do not pay dividends or decrease the amount of dividends we pay, the price of our common stock would likely decrease. At December 31, 2024, a total of 160,365 shares may be purchased in the future under the repurchase program which the Company announced in 2019.
Although the Company has recently reduced its indebtedness, we continue to have a substantial amount of indebtedness, which could adversely affect our financial condition and ability to operate our business. As of December 31, 2023, $13,164,358 was outstanding and $51,835,642 was available for borrowing under the Company’s revolving credit facility.
Although the Company has recently reduced its indebtedness, we continue to borrow under our bank line of credit, which could adversely affect our financial condition and ability to operate our business. As of December 31, 2024, excluding net deferred financing costs of $34,983, $17,640,550 was outstanding and $47,359,450 was available for borrowing under the Company’s revolving credit facility.
The actions deemed taken are subject to continued review, supported by monitoring and testing by management as well as audit committee oversight.
In response to the material weakness, the Company removed the privileged access and will further limit users with privileged access as discussed in Item 9A, Controls and Procedures, in this Annual Report. The actions deemed taken are subject to continued review, supported by monitoring and testing by management as well as audit committee oversight.
The likelihood of such occurrences and their potential effect on the Company vary from country to country and are unpredictable. Reliance on foreign suppliers could adversely affect the Company’s business. The Company sources its products from suppliers located in Asia, Europe and the United States.
These risks could affect the cost of manufacturing and selling our products, our pricing, sales volume, and ultimately our financial performance. The likelihood of such occurrences and their potential effect on the Company vary from country to country and are unpredictable.
Removed
The Company’s success will depend in part on its ability to anticipate 9 and offer products that appeal to the changing needs and preferences of our customers in the various market categories in which it competes.
Added
Changes in United States and foreign laws and policies governing international trade, export controls, manufacturing, and investment in the jurisdictions where we currently source or sell products, and any negative consequences resulting from such changes, could materially affect our business.
Removed
We have identified a material weakness in our internal control over financial reporting, as described below.
Added
Over the last seven years, the United States has undertaken a series of actions to increase tariffs on certain goods imported into the United States. In response to prior tariffs, certain governments imposed retaliatory tariffs on various goods, and in response to new or increased United States 7 tariffs, have threatened to similarly retaliate.
Removed
The material weakness identified is a result of ITGCs that were not designed and operating effectively to ensure IT program and data changes affecting the Company's financial IT applications and underlying accounting records are identified and tested.
Added
Prior tariffs have increased the cost of certain of our products to customers, particularly products for the school and office markets that are manufactured for us in China.
Removed
Business process controls (automated and manual) that are dependent on the affected ITGCs were also deemed to be ineffective because they could have been adversely impacted. We are in the process of implementing database change management and auditing software, as well as designing and implementing associated management review procedures.
Added
Historically, we have mitigated and will continue our efforts to mitigate the impact of tariffs by negotiations with suppliers and customers, passing price increases on to our customers, and diversifying our sources of products and materials. However, there can be no assurance that our mitigation actions will continue to be effective.
Removed
Changes in trade policies, including the imposition of tariffs and their enforcement, may have a material adverse impact on our business, results of operations, and outlook. In the past, the United States levied tariffs on the import of some products from China, which is an important source of many of the Company’s products.
Added
Specifically, the state of tariffs and other trade measures between the United States and China remains in flux. Starting in 2018, the United States and China engaged in an escalating imposition of tariffs and trade restrictions on each other’s products. The two countries signed a preliminary trade agreement in early 2020.
Removed
In order to offset the impact of to these tariffs, the Company has implemented price increases on the affected products. Tariff levels may be further increased and the types of products subject to tariffs may be expanded.
Added
However, in February 2025, the United States imposed additional tariffs on imports of Chinese-origin goods, and China announced retaliatory tariffs and additional trade restrictions on United States goods. In addition, in February 2025, the United States imposed new tariffs on Canada and Mexico and has threatened member countries of the European Union with tariffs.
Removed
Although the Company intends to continue to pass additional price increases on to our customers, such tariff-related developments could have a negative impact on customer demand and adversely affect our business, financial condition and results of operations.
Added
Canada and Mexico subsequently have announced retaliatory tariffs on certain U.S. goods.
Removed
In addition, we might have to modify our current business practices, including potentially sourcing from alternative vendors, which could result in inefficiencies and delays in production and cause the Company to incur additional costs.
Added
The impact that these and any other trade measures will have on our business and financial results is difficult to predict, particularly because trade is a current focus of the new United States administration and it is not possible to know the amount, scope, and nature of any additional tariffs or other trade measures the United States will adopt and how trading partners will respond to the administration’s future and present actions.
Removed
If we do not pay dividends or decrease the amount of dividends we pay, the price of our common stock would likely decrease.
Added
Any new or continued trade disputes or increased tensions between the United States and other countries, and any governmental actions, including further increases of existing tariffs or the imposition of new tariffs, may continue to adversely impact demand for our products, increase our costs, and disrupt our supply chain.
Added
As reported in this annual report, the material weakness identified as a result of ITGCs that were not designed and operating effectively related to logical security and privileged access management for a financially relevant system.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Reporting We have a communication process for incidents based on their severity as outlined in our incident response plan and pursuant to various regulatory and contractual obligations. When a high risk incident or potential high risk incident is detected by our Security Operation Center or otherwise, executive leadership is immediately informed.
Reporting 16 We have a communication process for incidents based on their severity as outlined in our incident response plan and pursuant to various regulatory and contractual obligations. When a high risk incident or potential high risk incident is detected by our Security Operation Center or otherwise, executive leadership is immediately informed.
Item 1C. Cybersecurity We understand the critical importance of cybersecurity and proactively manage vulnerabilities to ensure the confidentiality, integrity, and availability of our information assets. While we have not experienced any material risks from cybersecurity incidents to date, we recognize the evolving threat landscape and maintain a vigorous security posture.
Item 1C. Cybersecurity We understand the critical importance of cybersecurity and proactively manage vulnerabilities to ensure the confidentiality, integrity, and availability of our information assets. While we have not experienced any material risks from cybersecurity incidents to date, we recognize the 15 evolving threat landscape and maintain a vigorous security posture.
The cybersecurity audit committee is notified, and the Chief Information Officer, in consultation with our Security Operation Center submits a detailed report to senior management. For moderate risk incidents, there is prompt notification, and a detailed report would be prepared and submitted. If a cybersecurity incident is deemed material, it will be reported promptly under SEC rules.
The cybersecurity audit group is notified, and the Chief Information Officer, in consultation with our Security Operation Center submits a detailed report to senior management. For moderate risk incidents, there is prompt notification, and a detailed report would be prepared and submitted. If a cybersecurity incident is deemed material, it will be reported promptly under SEC rules.
The Company’s Chief Information Officer has specific tactical & strategic responsibilities in overseeing technology infrastructure and cybersecurity. 16
The Company’s Chief Information Officer has specific tactical & strategic responsibilities in overseeing technology infrastructure and cybersecurity. 17
Management and Board of Director Oversight of Cybersecurity Threats The Company's Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, and Chief Information Officer that comprise our cybersecurity audit committee, as well as the Board of Directors has responsibility for the oversight of cybersecurity threats and incidents and reviews the Company’s programs and policies on an annual basis.
Management and Board of Director Oversight of Cybersecurity Threats The Company's Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, and Chief Information Officer that comprise our cybersecurity audit group, as well as the Board of Directors has responsibility for the oversight of cybersecurity threats and incidents and reviews the Company’s programs and policies no less than three times annually.
We maintain a comprehensive incident response plan with clearly defined roles and responsibilities. In the event of an incident, the plan prescribes notification procedures, containment measures, eradication steps, and recovery processes. We also conduct annual reviews to ensure the plan's effectiveness.
We maintain a comprehensive incident response plan with clearly defined roles and responsibilities. In the event of an incident, the plan prescribes notification procedures, containment measures, eradication steps, and recovery processes. Based on Cybersecurity Infrastructure Security Agency (CISA) modeling, we conduct annual Tabletop exercises with the help of third party specialists.
Additionally, as in prior years, this year we will perform vulnerability assessments and penetration testing through third party providers for an objective assessment. Third-Party Service Providers 15 We consider security related factors when choosing and working with third-party providers and have established processes to oversee and manage risks associated with third-party service providers.
Our German operations have similar risk management and strategy, which in 2025 they plan to further develop and strengthen. Third-Party Service Providers We consider security related factors when choosing and working with third-party providers and have established processes to oversee and manage risks associated with third-party service providers.
Based on Cybersecurity Infrastructure Security Agency (CISA) modeling, we are currently planning our 1 st Tabletop exercise of 2024 with the help of third-party specialists, which is expected to be completed in the second quarter of 2024. Our Tabletop exercises include cybersecurity-based scenarios that incorporate various cyber threat categories including ransomware, insider threats, phishing, and physical disasters.
Our Tabletop exercises include cybersecurity-based scenarios that incorporate various cyber threat categories including ransomware, insider threats, phishing, and physical disasters. Additionally, as in prior years, in 2025 we will perform vulnerability assessments and penetration testing through third party providers for an objective assessment.
Added
We partner with third party specialists in the role of Virtual Information Security Officer (VISO), with biweekly meetings to review current state, develop security strategies, access risk management, and develop policies and procedures over our information security program.
Added
In 2024, we initiated a data governance program aimed at securing enterprise data through internal processes, defined roles, metrics, & compliance standards.
Added
In the 1st quarter of 2025, we expect to complete the implementation of a robust Privileged Access Management (PAM) solution, an identity security solution that helps protect against cyberthreats through monitoring, detecting, and preventing unauthorized privileged access to critical resources. The Risk Management, Strategy and Incident Response described above applies to our North American and Asian operations.
Added
In line with internal processes, access to internal resources by third-party consultants is subject to Privileged Access Management (PAM). We apply the principles of zero trust, wherein privileges are granted to only that which is required, restricting unauthorized access.

Item 2. Properties

Properties — owned and leased real estate

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Pr operties Location Square Footage Purpose Owned Rocky Mount, NC Vancouver, WA Brooksville, FL 340,000 53,000 42,460 Warehousing, manufacturing and distribution Warehousing, manufacturing and distribution Warehousing, manufacturing and distribution Keene, NH 11,000 Warehousing, manufacturing and distribution Solingen, Germany 35,000 Warehousing, distribution and administrative 481,460 Leased Shelton, CT 34,200 Administrative Bentonville, AK 1,500 Administrative Marlborough, MA 28,000 Manufacturing, warehousing and distribution Santa Ana, CA 10,000 Manufacturing, warehousing, and distribution La Vergne, TN 56,000 Manufacturing, warehousing and distribution Mount Forest, Ontario, Canada 42,500 Warehousing and distribution Orangeville, Ontario, Canada 2,850 Administrative Laval, Quebec, Canada 24,100 Manufacturing, warehousing, distribution and administrative Hong Kong, China 2,750 Administrative Guangzhou, China 3,500 Administrative Ningbo, China 1,800 Administrative 207,200 Total: 688,660 The Company’s facilities located in the United States and China are utilized by all of its segments.
Pr operties Location Square Footage Purpose Owned Rocky Mount, NC Vancouver, WA Brooksville, FL 340,000 53,000 42,460 Warehousing, manufacturing and distribution Warehousing, manufacturing and distribution Warehousing, manufacturing and distribution Keene, NH 11,000 Warehousing, manufacturing and distribution Solingen, Germany 35,000 Warehousing, distribution and administrative 481,460 Leased Shelton, CT 34,200 Administrative Bentonville, AK 1,500 Administrative Marlborough, MA 28,000 Manufacturing, warehousing and distribution Santa Ana, CA 10,000 Manufacturing, warehousing, and distribution La Vergne, TN 56,000 Manufacturing, warehousing and distribution Mount Forest, Ontario, Canada 20,000 Warehousing and distribution Orangeville, Ontario, Canada 2,850 Administrative Laval, Quebec, Canada 42,860 Manufacturing, warehousing, distribution and administrative Hong Kong, China 2,750 Administrative Guangzhou, China 3,500 Administrative Ningbo, China 1,800 Administrative 203,460 Total: 684,920 The Company’s facilities located in the United States and China are utilized by all of its segments.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Item 3. Legal Proceedings There are no pending material legal proceedings to which the Company is a party or, to the actual knowledge of the Company, contemplated by any governmental agency. Item 4. Mine Saf ety Disclosures Not applicable. 17 PART II
Item 3. Legal Proceedings There are no pending material legal proceedings to which the Company is a party or, to the actual knowledge of the Company, contemplated by any governmental agency. Item 4. Mine Saf ety Disclosures Not applicable. 18 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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During the twelve months ended December 31, 2023, the Company did not repurchase any of its shares of Common Stock. As of December 31, 2023, a total of 160,365 shares may be purchased under the repurchase program announced in 2019. The 2019 program does not have an expiration date. Item 6. R eserved 18
During the twelve months ended December 31, 2024, the Company did not repurchase any of its shares of Common Stock. As of December 31, 2024, a total of 160,365 shares may be purchased under the repurchase program announced in 2019. The 2019 program does not have an expiration date. Item 6. R eserved 19

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

23 edited+10 added−6 removed12 unchanged
These risks and uncertainties include, without limitation, the following: (i) changes in the Company’s plans, strategies, objectives, expectations and intentions, which may be made at any time at the discretion of the Company; (ii) the impact of uncertainties in global economic conditions, including the impact on the Company’s suppliers and customers; (iii) the continuing adverse impact of inflation, including product costs, and interest rates; (iv) potential adverse effects on the Company, its customers, and suppliers resulting from the conflicts in Ukraine and the Middle East; (v) additional disruptions in the Company’s supply chains, whether caused by pandemics, natural disasters, or otherwise, including trucker shortages, port closures and delays, and delays with container ships themselves; (vi) labor related costs the Company has and may continue to incur, including costs of acquiring and training new employees and rising wages and benefits; (vii) currency fluctuations; (viii) the Company’s ability to effectively manage its inventory in a rapidly changing business environment; (ix) changes in client needs and consumer spending habits; (x) the impact of competition; (xi) the impact of technological changes including, specifically, the growth of online marketing and sales activity; (xii) the Company’s ability to manage its growth effectively, including its ability to successfully integrate any business it might acquire; (xiii) international trade policies and their impact on demand for our products and our competitive position, including the imposition of new tariffs or changes in existing tariff rates; and (xiv) other risks and uncertainties indicated from time to time in the Company’s filings with the Securities and Exchange Commission.
These risks and uncertainties include, without limitation, the following: (i) changes in the Company’s plans, strategies, objectives, expectations and intentions, which may be made at any time at the discretion of the Company; (ii) the impact of uncertainties in global economic conditions, including the impact on the Company’s suppliers and customers; (iii) international trade policies and their impact on demand for our products and our competitive position, including the imposition of new tariffs or changes in existing tariff rates by the United States and retaliatory actions by other governments; (iv) the continuing adverse impact of inflation, including product costs, and interest rates; (v) potential adverse effects on the Company, its customers, and suppliers resulting from the conflicts in Ukraine and the Middle East; (vi) additional disruptions in the Company’s supply chains, whether caused by pandemics, natural disasters, or otherwise, including trucker shortages, port closures and delays, and delays with container ships themselves; (vii) labor related costs the Company has and may continue to incur, including costs of acquiring and training new employees and rising wages and benefits; (viii) currency fluctuations; (ix) the Company’s ability to effectively manage its inventory in a rapidly changing business environment; (x) changes in client needs and consumer spending habits; (xi) the impact of competition; (xii) the impact of technological changes including, specifically, the growth of online marketing and sales activity; (xiii) the Company’s ability to manage its growth effectively, including its ability to successfully integrate any business it might acquire; and (xiv) other risks and uncertainties indicated from time to time in the Company’s filings with the Securities and Exchange Commission.
For a more detailed discussion of these and other factors affecting the Company, see the Risk Factors described in Item 1A included in this Annual Report on Form 10-K for the fiscal year December 31, 2023 and below under “Financial Condition”.
For a more detailed discussion of these and other factors affecting the Company, see the Risk Factors described in Item 1A included in this Annual Report on Form 10-K for the fiscal year December 31, 2024 and below under “Financial Condition”.
Inventory turnover calculated using a twelve-month average inventory balance, was 2.1 at December 31, 2023 as compared to 2.0 at December 31, 2022. The reserve for slow moving and obsolete inventory was $1,338,211 at December 31, 2023 compared to $1,720,350 at December 31, 2022.
Inventory turnover, calculated using a twelve-month average inventory balance, was 2.1 at December 31, 2024 as compared to 2.1 at December 31, 2023. The reserve for slow moving and obsolete inventory was $1,254,121 at December 31, 2024 compared to $1,338,211 at December 31, 2023.
We do not anticipate material increases in the allowance for slow moving and obsolete inventory in the ordinary course of business during 2024. Receivables decreased by approximately $6.4 million at December 31, 2023 compared to December 31, 2022. The average number of days sales outstanding in accounts receivable was 55 days in 2023 compared to 62 days in 2022.
We do not anticipate material increases in the allowance for slow moving and obsolete inventory in the ordinary course of business during 2025. Receivables increased by approximately $2.0 million at December 31, 2024 compared to December 31, 2023. The average number of days sales outstanding in accounts receivable was 54 days in 2024 compared to 55 days in 2023.
Recently Issued Accounting Standards In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 requires additional categories of information about federal, state and foreign income taxes to be included in effective tax rate 21 reconciliation disclosure. Additionally, the newly added categories also apply to the income taxes paid disclosure.
Recently Issued Accounting Standards Standards not yet Adopted In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 requires additional categories of information about federal, state and foreign income taxes to be included in effective tax rate reconciliation disclosure.
At closing, GSM Holdings paid $18.3 million to the Company; the balance of the purchase price, $1.5 million, is subject to a 12-month holdback as a non-exclusive source of recovery primarily to satisfy indemnification claims under the Asset Purchase Agreement.
The purchase price for the assets was $19.8 million. At closing, GSM Holdings paid $18.3 million to the Company; the balance of the purchase price, $1.5 million, was subject to a 12-month holdback as a non-exclusive source of recovery primarily to satisfy indemnification claims under the Asset Purchase Agreement. The Company received payment of the $1.5 million in November 2024.
The decrease in total other income (expense), net was due to the gain on the sale of the Camillus and Cuda business. The pre-tax gain was approximately $12,551,000. Income Tax Expense Income tax expense was $4,941,444 in 2023, resulting in an effective tax rate of 22% compared to $627,679, in 2022, an effective tax rate of 17%.
The decrease in total other income, net was due to the gain on the sale of the Camillus and Cuda business in 2023. The pre-tax gain was approximately $12,564,153. Income Tax Expense Income tax expense was $2,270,058 in 2024, resulting in an effective tax rate of 18% compared to $4,941,444 in 2023, an effective tax rate of 22%.
Selling, General and Administrative Selling, general and administrative (“SG&A”) expenses were $59,021,618 in 2023 compared with $57,285,483 in 2022, an increase of $1,736,135, or 3.0%. SG&A expenses were 30.8% of net sales in 2023 compared to 29.5% in 2022. The increase in SG&A expenses was primarily due to higher personnel related costs.
Selling, General and Administrative Selling, general and administrative (“SG&A”) expenses were $62,210,882 in 2024 compared with $59,021,618 in 2023, an increase of $3,189,264, or 5.4%. SG&A expenses were 32.0% of net sales in 2024 compared to 30.8% in 2023. The increase in SG&A expenses was primarily due to higher personnel related costs.
Results of Operations 2023 Compared with 2022 Traditionally, the Company’s sales and profits are stronger in the second and third quarters and weaker in the first and fourth quarters of the fiscal year, due to the seasonal nature of the Westcott back-to-school market. 19 Net Sales In 2023, sales decreased by $2,461,410, or 1%, to $191,500,947 compared to $193,962,357 in 2022.
Results of Operations 2024 Compared with 2023 Traditionally, the Company’s sales and profits are stronger in the second and third quarters and weaker in the first and fourth quarters of the fiscal year, due to the seasonal nature of the Westcott back-to-school market. 20 Net Sales In 2024, sales increased by $2,989,044, or 2%, to $194,489,991 compared to $191,500,947 in 2023.
On November 1, 2023, the Company sold the assets of its Camillus Cutlery and Cuda business lines (the “Business”) to GSM Holdings, Inc., a Delaware corporation (“GSM Holdings”), pursuant to an Asset Purchase Agreement entered into on the same date. The purchase price for the Business was $19.8 million.
Elite First Aid is a leading supplier of tactical, trauma and emergency medical products. On November 1, 2023, the Company sold the assets of its Camillus Cutlery and Cuda business lines (the “Business”) to GSM Holdings, Inc., a Delaware corporation (“GSM Holdings”), pursuant to an Asset Purchase Agreement entered into on the same date.
Under the revolving loan agreement, the Company is required to maintain specific amounts of funded debt to EBITDA, a fixed charge coverage ratio and must have annual net income greater than $0, measured as of the end of each fiscal year. On November 8, 2022, the revolving loan agreement was amended to increase the ratio of funded debt to EBITDA.
The facility is intended to provide liquidity for growth, acquisitions, dividends, share repurchases, and other business activities. Under the revolving loan agreement, the Company is required to maintain specific amounts of funded debt to EBITDA, a fixed charge coverage ratio and must have annual net income greater than $0, measured as of the end of each fiscal year.
Gross Profit Gross profit was $72,210,235 (37.7% of net sales) in 2023 compared to $63,558,785 (32.8% of net sales) in 2022. The increase was primarily due to productivity improvements in the Company's manufacturing and distribution facilities, as well as lower in-bound freight costs.
Gross Profit Gross profit was $76,350,824 (39.3% of net sales) in 2024 compared to $72,210,235 (37.7% of net sales) in 2023. The increase was primarily due to productivity improvements in the Company's manufacturing and distribution facilities.
The Company entered into the agreement on December 1, 2021. Payments of principal and interest are due monthly, with all amounts outstanding due on maturity on December 1, 2031. The outstanding principal on December 31, 2023, was $10,823,033.
The Company entered into the agreement on December 1, 2021. Payments of principal and interest are due monthly, with all amounts outstanding due on maturity on December 1, 2031. The outstanding principal on December 31, 2024, was $10,409,797. On May 23, 2024, the Company acquired the assets of Elite First Aid, Inc ("Elite First Aid") for approximately $7.1 million.
The Company must pay a facility fee, payable quarterly, in an amount equal to one eighth of one percent (.125%) per annum of the average daily unused portion of the revolving credit line. The facility is intended to provide liquidity for growth, acquisitions, dividends, share repurchases, and other business activities.
The credit facility has an expiration date of May 31, 2026. The Company must pay a facility fee, payable quarterly, in an amount equal to one eighth of one percent (.125%) per annum of the average daily unused portion of the revolving credit line.
Operating Income Operating income was $13,188,617 in 2023 compared with $6,273,302 in 2022, an increase of $6,915,315. Operating income in the U.S. segment increased in 2023 by approximately $6,694,000 compared to 2022, primarily due to productivity improvements in the Company's manufacturing and distribution facilities, a reduction of SG&A expenses, as well as lower in-bound freight costs.
Operating Income Operating income was $14,139,942 in 2024 compared with $13,188,617 in 2023, an increase of $951,325. Operating income in the U.S. segment increased in 2024 by approximately $1,768,000 compared to 2023, primarily due to productivity improvements in the Company's manufacturing and distribution facilities.
Capital expenditures during 2023 and 2022 were $4,673,717 and $4,304,264, respectively, which were, in part, financed with borrowings under the Company’s revolving credit facility. The Company implemented a series of cost reduction initiatives that generated over $6.5 million in savings in 2023.
Capital expenditures during 2024 and 2023 were $7,148,648 and $4,673,717, respectively, which were, in part, financed with borrowings under the Company’s revolving credit facility.
Implementation of said additions are subject to quantitative thresholds. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. The Company is currently evaluating the impact of adopting ASU 2023-09. Item 7A. Quantitative and Qualitat ive Disclosures about Market Risk As a smaller reporting company, the Company is not required to provide this information.
Additionally, the newly added categories also apply to the income taxes paid disclosure. Implementation of said additions are subject to quantitative thresholds. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. The Company is currently evaluating the impact of adopting ASU 2023-09.
The higher effective tax rate in 2023 was due to a higher proportion of earnings in jurisdictions with a higher tax rate. Off-Balance Sheet Transactions The Company did not engage in any off-balance sheet transactions during 2023. 20 Liquidity and Capital Resources During 2023, working capital decreased by approximately $17.4 million compared to December 31, 2022.
Off-Balance Sheet Transactions The Company did not engage in any off-balance sheet transactions during 2024. 21 Liquidity and Capital Resources During 2024, working capital increased by approximately $6.6 million compared to December 31, 2023. Inventory increased by approximately $0.8 million, or 1%.
The Company used the proceeds from the sale of its Camillus and Cuda business to pay down the outstanding debt. The Company’s manufacturing and distribution facilities in Rocky Mount, NC and Vancouver, WA were financed by a fixed rate mortgage with HSBC Bank, N.A. at a fixed interest rate of 3.8%.
As of December 31, 2024, $17,640,550 was outstanding, and $47,359,450 was available for borrowing under the Company’s revolving credit facility. The Company’s manufacturing and distribution facilities in Rocky Mount, NC and Vancouver, WA were financed by a fixed rate mortgage with HSBC Bank, N.A. at a fixed interest rate of 3.8%.
The decrease was primarily due to weak economic conditions in Europe. Net sales in Canada for the year ended December 31, 2023, increased 1% in U.S. dollars (5% in local currency) compared to the same period in 2022. The increase in sales is primarily due to higher sales of first aid products.
The sales increase for the year was due to market share gains across multiple product lines. European net sales for the year ended December 31, 2024, increased 5% in both U.S. dollars and local currency, compared with the same period in 2023.
The revolving loan agreement provides for borrowings of up to $65 million at an interest rate of SOFR plus 1.75%; interest is payable monthly. The credit facility has an expiration date of May 31, 2026.
The revolving loan agreement provides for borrowings of up to $65 million at an interest rate that ranges from SOFR +1.70% up to a high of SOFR + 2.45% on a basis that varies quarterly with the funded debt to EBITDA ratio. The current interest rate is SOFR plus 1.70%; interest is payable monthly.
At December 31, 2023, total debt outstanding under the Company’s revolving credit facility decreased by approximately $36.8 million compared to total debt outstanding at December 31, 2022. As of December 31, 2023, $13,164,358 was outstanding and $51,835,642 was available for borrowing under the Company’s revolving credit facility.
As of December 31, 2024, the Company was in compliance with the covenants under the revolving loan agreement as then in effect. At December 31, 2024, total debt outstanding under the Company’s revolving credit facility increased by approximately $4.5 million compared to total debt outstanding at December 31, 2023.
The U.S. segment sales decreased by 1% in 2023 compared to 2022. The decline in net sales is primarily due to customer reductions of inventory in the first half of 2023. European net sales for the year ended December 31, 2023, decreased 4% in U.S. dollars (6% in local currency), compared with the same period in 2022.
Excluding Camillus and Cuda, net sales for the year ended December 31, 2024 increased 8% compared to the same period in 2023 due to market share gains in the office channel. Net sales in Canada for the year ended December 31, 2024, decreased 5% in U.S. dollars (3% in local currency) compared to the same period in 2023.
Removed
Operating income in the European segment increased by $491,000 compared to 2022 primarily due to a stronger Euro against the U.S. dollar and lower inbound freight costs. . Operating income in Canada decreased in 2023 by approximately $270,000 compared to 2022. Interest Expense, net Net interest expense for 2023 was $2,977,164, compared with $2,364,461 for 2022, an increase of $612,703.
Added
Excluding the impact of the hunting and fishing product lines sold on November 1, 2023, net sales for 2024 increased 6% compared to 2023. The U.S. segment sales increased by 2% in 2024 compared to 2023. Excluding Camillus and Cuda, net sales for the year ended December 31, 2024 increased 7% compared to the same period in 2023.
Removed
The increase in net interest expense resulted from a higher average interest rate on the outstanding debt. The weighted average interest rate in 2023 was 6.5% compared to 3.8% in 2022. Other Income (Expense), net Other income was $41,002 in 2023 compared to other expense of $246,396 in 2022.
Added
Excluding Camillus and Cuda, net sales for the year ended December 31, 2024 increased 1% compared to the same period in 2023. Sales of first aid products were strong, however sales of school and office products continued to be adversely impacted by a soft economy.
Removed
Inventory decreased by approximately $7.9 million, or 12%. The decline in inventory was due to planned reductions as the risk of supply chain disruptions has diminished. The Company expects that changes in inventory levels will continue to be consistent with changes in sales, including the seasonal impact on the Company's revenue stream.
Added
Operating income in the European segment decreased by $648,000 compared to 2023 primarily due to planned increases in headcount to support growth in the business. Operating income in Canada decreased in 2024 by approximately $168,000 compared to 2023. The decrease in operating income was primarily due to lower net sales of school and office products.
Removed
The increase was in effect for four quarters commencing in the third quarter of 2022 and ending with the three months ended June 30, 2023. The increase for those four quarters ranged from a low of 4.75 to 1 to a high of 5.75 to 1.
Added
Interest Expense, net Net interest expense for 2024 was $1,942,643 compared with $2,977,164 for 2023, a decrease of $1,034,521. The decrease in net interest expense resulted from a lower average debt outstanding under the revolving loan agreement of approximately $16 million. Total Other Income, net Total other income, net was $95,110 in 2024 compared to $12,523,151 in 2023.
Removed
The amendment also modified the interest rate from SOFR +1.75% to range from SOFR +1.60% up to a high of SOFR + 2.35% on a basis that varies quarterly with the funded debt to EBITDA ratio. As of December 31, 2023, the Company was in compliance with the covenants under the revolving loan agreement as then in effect.
Added
The lower effective tax rate in 2024 was due to a higher proportion of earnings in jurisdictions with a lower tax rate. Also in 2024, the Company recorded a tax credit of approximately $600,000 related to employee exercise of stock options, compared to $385,000 in 2023.
Removed
These initiatives have included the implementation of a wide range of productivity improvements in our manufacturing and distribution facilities and a reduction of SG&A expenses and other costs.
Added
Standards Adopted In November 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which amends ASC 280.
Added
The intent 22 of ASU 2023-07 is to improve the disclosures around a public entity’s reportable segments and address requests from investors for additional, more detailed information about a reportable segment’s expenses by requiring entities to disclose on an annual and interim basis: (i) significant segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of segment profit or loss and (ii) an amount for other segment items by reportable segment and a description of its composition, which represents the difference between segment revenue less segment expenses disclosed under the significant expense principle and each reported measure of segment profit or loss.
Added
Furthermore, entities will be required to: (i) provide all annual disclosures about a segment’s profit or loss and assets currently required under ASC 280 on an interim basis as well, (ii) clarify that an entity is not precluded from reporting additional measures of a segment’s profit or loss that are used by the CODM in assessing segment performance and deciding how to allocate resources, and (iii) disclose the title and position of the CODM and an explanation of how the CODM uses the reported measures of segment profit or loss in assessing segment performance and deciding how to allocate resources.
Added
ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. As part of this Annual Report, the Company adopted ASU 2023-07, which was applied retrospectively to all prior periods presented.
Added
Refer to Note 10 to our consolidated financial statements herein for further details regarding this adoption. Item 7A. Quantitative and Qualitat ive Disclosures about Market Risk As a smaller reporting company, the Company is not required to provide this information.

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