Good day, and welcome to the Acme United Corporation's first quarter 2025 financial results conference call. At this time, I'd like to turn the call over to your host, Mr. Walter Johnsen, Chairman and CEO. Please go ahead, sir. Good morning. Welcome to the first quarter 2025 earnings conference call for Acme United Corporation. I'm Walter C. Johnsen, Chairman and CEO. With me is Paul Driscoll, our Chief Financial Officer. We'll first read a safe harbor statement. Paul? Forward-looking statements in this conference call, including without limitation, statements related to the company's plans, strategies, objectives, expectations, intentions, and adequacy of capital and other resources, are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties, including, among others, those arising as a result of a challenging global macroeconomic environment characterized by continued high inflation, high interest rates, and the imposition of new tariffs or changes in existing tariff rates. In addition, we have experienced supply chain disruptions, and we may experience these disruptions in the future. We are also subject to additional risks and uncertainties, as described in our periodic filings with the Securities and Exchange Commission and in our current earnings release. Thank you, Paul. Acme United had a solid quarter in 2025. Our net sales were $46 million compared to $45 million in the first quarter of 2024. Net income for the first quarter of 2025 was $1.7 million compared to $1.6 million last year. Earnings per share increased 5%, from $0.39 to $0.41. Our first-aid business in the first quarter of 2025 increased 14%, which drove our growth. The Westcott cutting tools had a very large initial order of craft products to a major mass-market retailer in the first quarter of last year. Sales of these craft items were strong, and the product family continues to grow. Our DMT sharpeners continued to gain placement in major retailers in the kitchen segment and had strong growth in the quarter. The European business decreased 7% in the first quarter due to a large promotion in 2024 that did not repeat this year. We have broadened the first-aid and medical product line in Europe and begun new distribution in Switzerland and the Netherlands. We plan to strengthen the first-aid sales team in Germany and are preparing for our first sales booth at the MEDICA Show in Düsseldorf in the fall. The Canadian office channel sales were soft, but the first-aid business continued to grow. We have new first-aid distribution in the mass and industrial markets, and we are also increasing the sales team in Canada. Last month, we installed our first robotic systems in our Rocky Mount, North Carolina, plant. This system has four robots that process bulk antiseptic packets for our first-aid product line, orient them for packaging, fold SmartC ompliance boxes, and fill them. This custom-designed machine costs about $650,000, replaces seven employees, and has less than a two-year payback. We have just ordered a second system for our Vancouver, Washington, first-aid plant. Our Spill Magic product line has increased substantially since we purchased the company about five years ago. Its items include bodily fluid and bloodborne pathogen cleanup kits, as well as general materials for removing fluids from spills. We have outgrown our current facility outside Nashville, Tennessee, and are evaluating a new facility to purchase. Our intention is to install automated powder transfer and filling equipment once we own an appropriate site. As you may know, tariffs are paid by the importer on the cost of products. We have focused relentlessly on reducing our internal overhead and worked with some of our customers to ship domestically in full containers. We have generated over $2 million in annual productivity savings from capital projects and our production operations. We are uncertain what the tariff levels will be in the coming months, but we are experienced in dealing with past tariffs and high inflation. Although the tariff uncertainty is uncomfortable, we also view it as an opportunity to gain market share. We have eight plants in the United States that we intend to use to build competitively priced products and a broad network of sources in India, Egypt, Thailand, and other locations. The current environment may create new opportunities for acquisitions. We believe that our strengths in sourcing and manufacturing and strong financial resources could add significant value to potential acquisitions. I will now turn the call to Paul. Acme's net sales for the first quarter of 2025 were $46 million compared to $45 million in 2024, a 2% increase. Net sales in the U.S. segment increased 3% in the quarter, mainly due to higher sales of first-aid and medical products. Sales of school and office products declined due to a first-time craft sale in the first quarter of 2024. Net sales in Europe for the first quarter of 2025 declined 4% in local currency compared to the first quarter of 2024 due to timing. Net sales in Canada for the first quarter of 2025 increased 6% in local currency due to higher sales of first-aid products. The gross margin was 39.0% in the first quarter of 2025 versus 38.7% in the first quarter of 2024. SG&A expenses for the first quarter of 2025 were $15.5 million, or 34% of net sales compared with $14.8 million, or 33% of net sales for the same period of 2024. Net income for the first quarter of 2025 was $1.65 million, or $0.41 per diluted share, compared to net income of $1.63 million, or $0.39 per diluted share for the same period of 2024, an increase of 1% in net income and 5% in earnings per share. The company's bank debt less cash on March 31, 2025, was $27 million compared to $32 million on March 31, 2024. During the 12-month period, we purchased the assets of Elite First Aid for $6.1 million, paid $2.2 million in dividends, and generated approximately $12 million in free cash flow. Thank you, Paul. I will now open the call to questions. Thank you. At this time, we'll be conducting a question-and-answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from Jim Marrone with Singular Research. Please proceed with your question. Yes, thank you for taking my call. My first question is with regards to acquisitions, and the second will be with regards to tariffs. With regards to the acquisitions, you mentioned in your prepared comments that you're looking at making an acquisition in the near future. I'm just curious whether it would be a geographic one or with regards to product line. Should it be product line, will it be focused on medical kits and cutting tools, or would you be expanding into other products unrelated to what you currently have? I'll ask a question with regards to tariffs after your answer to acquisitions. Okay. Thank you for that question. Regarding the acquisition strategy, we have two major businesses: the cutting tool business and, of course, first-aid. Either one of them are great places to add acquisitions. We have been working very hard in the space, and as you can imagine, there are ways to expand there, both with our competitors horizontally as well as companies that supply components that go into our first-aid kits. Geographically, we're looking at North America in either of those product lines. Let me go on a little bit about why this is a special time for us. First, we have large market shares in both of our businesses. We have not only the ability to have leverage on our suppliers, but also we have a good pulse of the market globally. Secondly, if these tariffs hold, they will put substantial working capital pressure on our competitors as they buy inventory at a higher price to replace what they sold, as well as as they replace receivables with a higher level of receivables because you priced out a higher product. Some of our competitors don't have balance sheets to sustain that, and we do. As we're looking at the acquisition area, we can see our competitors having substantially harder margin pressure than perhaps we will, and they will have a more difficult time financing their ongoing businesses. We're looking aggressively in both areas. Jim, you want to ask the second question on tariffs? Yeah, I can. Before I do that, just with regards to the acquisition, do you anticipate attractive valuations on the offers that you've looked at as a result of these headwinds? If so, what kind of EV-to-EBITDA kind of multiples would you be looking at? First, we pay fair prices. I don't expect us to be finding great bargains, but you never know. Relative to how we value a company, that really depends a lot on what value added we bring to the situation. As you know, some of our best deals have had no sales at all. For example, Camillus Knives company, which we bought out of bankruptcy, and we sold it for 100 times. It is not really a formula based on valuation, but clearly we pay fair prices in the market, and that would continue. Great. Thank you for that. With regards to the tariffs, though, you said there was a lot of tariff uncertainty. Are you looking at it from the supply side as far as what you're buying products at, or are you looking at it in terms of your sales and any potential headwind from that? Also, aside from the tariffs, there may be some recessionary headwinds, and do you anticipate that impacting your business at all? Let me just address the tariffs in a broader sense. Right now, anything that we look at buying in China has a 145% tariff. A week ago, the tariff was less. Three weeks ago, it was 20%. We do not know what the tariffs will be three weeks from now for China. That is the biggest manufacturer in the world for everybody. You can imagine many customers, including ourselves, are postponing delivery of product until we get clarity on what duty we pay. If we, for example, import product from China today, we pay a 145% tariff. If the tariff drops to 30%, we are still stuck with the 145% we paid right now. Companies, all the major mass market retailers, do a lot of direct importing from China. They are paying the duties. They are doing the same thing we are. We're operating on the inventory that we have today, by and large, and what we're producing in the U.S. and Canada. We're being very cautious about how fast we ship that product because we don't want to get caught paying a high tariff, which perhaps drops. At some point, we'll have to say, "Pencils down. We're paying the tariff, and we bring product in." That would be a more sizable price increase. When I talk about uncertainty, what I'm talking about is the price you pay for the product and the ultimate price you pay that you charge the consumer. We're trying to be smart about that to pass the best value we can to that consumer. Great. Are you looking at alternative sources to the sourcing from China? Is there any options with regards to U.S.-based supply lines and addressing it that way? Sure. Remember that we have eight plants in the United States. We're making a lot of products here, and we're getting busier here. That's why we're expanding Spill Magic in Tennessee. That's why we're increasing our automation in the U.S., both in Rocky Mount and in Vancouver, Washington. One major source for us, at least, is we're a domestic producer. The second is many of the factories in China are moving production to locations like Vietnam, Thailand, Cambodia. We've been participating with that for some time. Although there are tariffs now, and we don't know the certainty of where they'll be, in December, we began shipping some items out of Thailand that formerly were made in China. We've shifted other products to India. We've got a robust sourcing, but you can't move overnight. The tariff regime that has gone in place in two weeks means, although there's room to expand over six months, there's not much room to change in two days. I hope that helps a little bit. It does, Walter. Thank you for that clarity. Good order. Thanks. Thank you. Our next question comes from Jeffrey Matthews with RAM Partners. Please proceed with your question. Thanks very much. I have three questions, Walter. The first is on guidance. You haven't talked about the year ahead financially. At the LD Micro conference last week, you did talk, I think it was $3 million of inventory that you wisely bought ahead when the current administration was elected. I assume you're on LIFO, so does that mean if you have to start ordering stuff from China, you're going to take a big hit in the near term on your cost of goods sold? Or is there just no clarity at all right now to make any kind of comment on that? We're on FIFO, first of all. Oh, okay. Yeah. I do not expect a big hit. We do have, when we start, that inventory that we brought in as a safety stock, and it is one that was very good to have done. You eventually run through your inventory, and you do eventually have to buy at a higher price, and you have to match your pricing to your costs. We have been modeling that very, very carefully. We have gone through the first two tariff increases that occurred, and that is the first 20%. We are now implementing those increases. The big one, to 145% for China, we have not. We are trying to be smart with it. As far as guidance, I think even Walmart pulled off guidance because you have to have a stability of your cost base to be able to forecast what your sales are going to be. I think that will occur, but it hasn't occurred yet. Remember, this is the 17th, and I think it was April 2nd when Liberation Day was announced. It has been two weeks of chaos and a lot of modeling. What we've done is we haven't pushed through a price increase. We've kept our head, and we've watched as things have unfolded. We will begin to be announcing the next round of price increases, which will probably come pretty much matching the increased costs. Got it. Okay. Thanks on that. A follow-up on the acquisition side. In the past, you've been very opportunistic, and I can't think of a company with a better track record, frankly. Maybe Berkshire Hathaway, if you exclude Precision Castp arts, but you've had just a terrific track record on acquisitions. Could there be a larger, more transformative deal in this environment for you than you've typically done, or do you think it's going to look more like the opportunistic, smaller tuck-in or new product line acquisitions that you've done in the past? That's an interesting question because what we've been doing opportunistically is when something fits well and the pricing is good, we've acted. If it was a larger company, we have the wherewithal to do that, and it's scalable. The team certainly knows how to execute the due diligence and the implementation of these transactions. I certainly have an open mind to a larger deal. There's a good flow of things. What I'm finding is when we call today for this list of companies that we've had over 15 years, we're getting a pretty favorable response as far as, "Yeah, let's figure out what might make sense." There's change here. As I pointed out, the difficulty is you've got to price right, and you've got to buy right in a quickly changing environment. I can tell you none of us has slept very well for the last two weeks. Yeah. Yep. I can appreciate that. My third and final question, sort of to follow up on the whole tariff thing and what you've been going through the last couple of weeks, there's an idea that the Wall Street Journal talked about, which is that the administration is trying big picture to isolate China. They are trying to get other consuming countries to, or, well, anybody out there to work more with the U.S. and less with China as a way of isolating China. Given how you've always talked in the past about how efficient their manufacturing base is, how easy it is to source products, how easy it is to develop products there, it seems to me that's a very long proposition. I just wonder what your take on that idea is, that they could isolate China and sort of win this battle. I really don't want to get into philosophy on that. What I can tell you is the Chinese are very efficient. They're very hardworking. I happen to enjoy being in China, and I'll be there in June meeting with many of our factories. The things that are going on that we read about in the U.S. press is only half the story. I would just suggest that the administration maybe take a lighter hand and look at the value China brings to the world because it's a lot. Interesting. Thanks, Walter. Thanks, Paul. Congratulations and good luck. As shareholders, we appreciate the hard work. Thank you. Thanks. Our next question comes from Jake Patterson with Talanta Investment Group. Please proceed with your question. Hey, guys. Really just curious on the cutting revenue being down a decent bit this quarter. I know you guys mentioned you had a big benefit from last year, but even if I look at last year's number and adjust out the divestments, that business was only up like 2.5%. Just trying to kind of compare that to your comments from the last two calls about being pretty excited for Westcott in 2025, a new distribution, a big year ahead, and kind of curious to see if that is still the case. Jake, it's hard to call going into where we are right now. The consumer will be impacted by increased prices. Now, scissors are, as an example, and that's our biggest line in Westcott, are not particularly expensive. What might be an increase in our cost when it gets to retail is a couple of dollars. It is not huge, but the consumer will be impacted overall because some things will go up a lot. I would suggest things like cars, refrigerators, capital goods, and they'll be stressed. There is also uncertainty because there will be some layoffs, and there have been some layoffs with the strategy the administration's doing. When you back out and you say, "Westcott grew 2.5% last year," that is about right. It grows at 2%-4%, and then the first- aid grows at 8%-12%. This quarter was 14%. We did have a large promotion last year with a mass market retailer. It was very successful. The products are still in the planograms. They're adding to them. The craft area continues to be a growth segment for us. We had a bankruptcy at the end of the year with Jo-Ann Fabrics. Those customers are shopping elsewhere, and we're trying to address them. The mix going forward, I would expect Westcott to get hit harder than first- aid and our medical side just because the consumer is going to be more stressed with the tariffs, especially if it's 145%. If that holds for China, again, it's the biggest manufacturer in the world. You just don't jump to Vietnam, which doesn't have that many people anyway. I mean, it's just impossible. I hope that helped a little bit. Yeah. No, it definitely does. Definitely does. I guess one more quick one, I guess. Pivoting to the first- aid business, I know you guys said you had a lot of trials for the new automatic refill kits, and it was not in your 2025 forecast. I'm assuming that might be impacted a little bit too, but just wondering if there's anything you can share on the progress there, what your customers are saying. Our customers, we were at a trade show this month that was very successful, and it was one of the items that we had a great deal of interest in with some pretty big customers. It takes time to get these to actually occur, and it's not in any forecasts. We think for those listening, what Jake is talking about is our SmartC ompliance latest version of first- aid. It's an industrial first- aid kit with a scanner that can tell when the components are either obsolete, missing, or about to need to be reordered. It's automatic replenishment. The latest generation can be hardwired into a customer's system and automatically tell the safety manager it's time to reorder. It can go to the distributor or us, whoever the customer wants, to actually get the replenishment orders. It saves about a third to a half what they would normally spend for refills in a year. That is a lot. It is a very exciting product, and we think it is going to have a lot of legs, but it is not in any forecast. We will see. As we get things to actually happen, Jake, I would love to talk about it. Right now, just be aware we have introduced it. Cool. All right. That's all from me. Appreciate it. Thank you. Our next question comes from Richard Dearnley with Longport Partners. Please proceed with your question. Good morning. Just to play off Jeff's question about China policy, it looks like the administration wants to the art of the deal, make a deal, be in the press, thump your chest, etc. There was just an announcement that they're close to a deal with the EU on the news very recently. It would seem logical to set China up as the bad guy and then make a deal. I realize that's just a random observation, but do you have any thoughts about that? I mean, as you say, they supply the world and bring a lot of value to the world and are probably not going to go away. China is really integral to the world, and I think we're looking at this very lopsided. One of the things that I know being in the business we're in, when COVID happened and the world needed gloves and masks and personal protection equipment, China met it all. They supplied them flawlessly again and again and again. They expanded in a way that it was inconceivable. They do a lot of good things. I really am not in a position to figure out the strategy of the administration. If I did, I'd probably figure out how to price the product. We don't know that either. I don't know their strategy. Right. I understand. The uptick in first- aid, how much of that increase do you think is longer-term organic versus first- aid was pretty flattish through 2024? Has an easy compares. 14% looks good, but it's against easy numbers. Any feeling on that? I never found numbers to be easy, to be honest. Where we are right now, honestly, Dick, where we are right now to be talking about, is it up 14, 13, 12? It could be up 25. Part of it is where we price. So much right now in the remainder of the year is what we price off the tariffs. Then you have organic growth underneath that. We've been saying for many years, first- aid grows 8%-12%, and that's probably what I would stick to. There's going to be this year, there will be, if these tariffs hold, there will be price increases, and there will be growth because of that in addition to the underlying organic. That'll be with Westcott as well. Again, you've got a trade-off on some demand slide, and we've modeled that internally. There are a lot of assumptions. Good. Thank you. Yep. Our next question comes from Peter Mork with Mork Capital Management. Please proceed with your question. Hey, Walter. Jake already got my question. I was going to follow up just on the SmartC ompliance, and it sounds like things are going well. It'll be interesting to get just kind of that install base, any color you guys could give as the year progresses. I think that'd be good. Maybe as a second question, just the DMT pull-through sharpeners, first off, we've got both models. We like them at our house where those things really do work. Are you looking to expand more into the kitchen with DMT, or what's kind of your thoughts around that product? For those that don't know, what we did in the past year was take the DMT sharpening stones made in Marlboro, Massachusetts. They're arguably the best in the world with the dispersion of diamonds and the flatness of the stones. We put them in a patented sharpener. When you run the knife through it, the stones automatically adjust to the angle of the cutting edge of the blade. It is accurate, and it really works. The product is now being sold in Europe. It is being sold at a number of major mass market retailers in the kitchen area in the U.S., and we're expanding off of that. Relative to going further into the kitchen area, I don't see us going into forks and spoons and plates, but we could easily be putting higher-end and more stylish products on the market to some of the higher-end retailers and also industrial grade. I think within that arena, it's a very fertile area, and we're growing nicely in it and gaining market share. It's still small, but it's an exciting piece for us. As you point out, Peter, it really does work. Yeah, definitely does. Thank you both, and great quarter. Thank you. Our next question comes from Steve Chick with Sebis Garden Capital. Please proceed with your question. Hey. Thanks. Walter, if anybody can navigate through this environment, I think it's you guys. I had a question on front-loading and with some of the inventory that you bought in advance. I think you said it was $3 million. I'm wondering if you're seeing any activity from your customers thinking along the same lines, maybe as we're coming into, whereas we're in April here. Are you seeing customers trying to buy kind of in advance of maybe the cost increases now? As you can imagine, the customers that have placed orders with us, we're going to fill first. There is a schedule for that. These are placed well in advance, and we're prepared to supply them. There have been examples where some customers have wanted to buy, for example, all of our items in one area. We just can't do that because if we do it, then we're not supplying the customers who've worked with us long-term and given us advanced orders. It is a very careful balance. We want to solve everybody's problem, but we also have customers with standing orders that have got to have priority. Throttling back sales may sound like an unusual situation, but until we reprice the book, we have to. Does that make sense to you, Steve? Yeah, I think so. Can you just remind us of your inventory? What roughly is what percentage is sourced from China? We import about 40% from China. Okay. All right. Okay. Thank you. Good luck. Thanks. Thank you. If you'd like to ask a question, please press star one on your telephone keypad. One moment please while we poll for questions. There are no further questions, and we've reached the end of the question-and-answer session. I would now like to turn the call back over to Walter Johnsen for closing comments. I'd like to thank all of you for joining us. This really is a complicated time, and we are going to do well with it. I'm confident of that, but it's rocky. I want to thank you for attending this call, and we look forward to updating you in the coming quarters as it moves forward. Not as it unravels. Just joking. Have a good day. Goodbye. This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.