Good day. Welcome to the Acme United second quarter 2026 financial results conference call. At this time, I'd like to turn the call over to your host, Walter Johnsen, Chairman and CEO. Please go ahead, sir. Good morning. Welcome to the second quarter 2026 earnings conference call for Acme United Corporation. I am Walter C. Johnsen, Chairman and CEO. With me is Paul Driscoll, our Chief Financial Officer, who will 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 made progress during the second quarter of 2026. Our net sales increased from $54 million to $63 million, an increase of 16%. Net income increased from $4.8 million to $5.1 million, and earnings per share increased 5% to $1.22. As you may remember, we acquired MyMedic in January 2026. This addition to the Acme United family sells high-quality first aid kits designed to save lives. It extends the reach of our product line from simple retail kits to advanced ones with chest seals, tourniquets, and tools to clear airways. MyMedic today sells mostly directly to consumers and is seasonal. It has high gross margins and also high advertising and marketing costs. Net sales in 2025 were $19 million. MyMedic sales in the second quarter were approximately $4.3 million, with break-even operations as expected. We are working to increase the core direct-to-consumer business, as well as expand the product offering to retail. At the same time, we are addressing the product cost through our strong Asian sourcing team, consolidating freight with other Acme United shipments to reduce costs, and eliminating duplicate corporate functions. The intention is to have strong profits for My Medic during all quarters, with particular strength in the fourth quarter. This will take time, but we are realizing savings already. Our core businesses performed well in the second quarter. In the U.S., net sales of first aid and medical products increased 10%, with growth in particular at mass market retailers. Other strong contributors in the quarter were the Safety Made promotional first aid business, Med-Nap antiseptic wipes, and Spill Magic cleanup products. Also, in the U.S., the Westcott Cutting Tools business increased 8% during the second quarter. As you may remember, our retail business last year was hurt by tariffs and cost uncertainty, and many of our customers canceled their seasonal promotions. This has recovered, and we are seeing a resumption of growth. Our Canadian business increased 3%, driven by industrial, retail, and online sales of our first aid business. In Europe, net sales increased 19%, with strong growth of our Westcott Cutting Tools. Gross margins in the quarter increased for the overall business from 41% to 42.6% due to high margins at My Medic. Without My Medic, gross margins in the U.S. declined approximately 100 basis points due to the cost of high tariffs that were capitalized in our inventory and are now being sold. This is an improvement from the first quarter, and we anticipate continued gross margin expansion as these products are sold in the coming quarters. When the war with Iran began, we placed orders for approximately $10 million of extra inventory to buffer potential product shortages and cost increases. We continue to maintain this extra level of stock and are positioned to address issues should they arise. As we look to the coming quarters, we see continued growth of the first aid and medical business, resumption of promotional retail activity with our Westcott Cutting Tools, improving profitability at My Medic, and strengthening of our gross margins as high-tariff products are replaced by lower-cost ones. I will now turn the call to Paul. Acme's net sales for the second quarter were $62.7 million compared to $54 million in 2025, an increase of 16%. Excluding My Medic, sales increased 8%. Sales for the six months ended June 30th, 2026 were $115 million compared to $100 million in the same period in 2025, an increase of 15%. Excluding My Medic, sales increased 7%. Net sales in the U.S. segment increased 17% in the quarter. Excluding My Medic, sales increased 8%. Sales increased 15% for the six months ended June 30th. Excluding My Medic, sales increased 6%. The increases for both periods were driven by higher sales across all product lines. Net sales in Europe for both the second quarter and six months of 2026 increased 19% in local currency compared to 2025, partly due to the new line of cutting and sharpening tools. The base business also had a good performance with a sales increase of 12%. Net sales in local currency for Canada increased 3% in the quarter and 6% for the year-to-date, mainly due to higher sales of first aid products. The gross margin was 42.6% in the second quarter of 2026 compared to 41% in 2025. The gross margin was 41.3% for the first six months of 2026 compared to 40.1% in 2025. The gross margin as a percentage of sales increase for both periods was mostly due to the favorable mix from higher margin direct-to-consumer My Medic products. SG&A expenses for the second quarter of 2026 were $19.9 million or 32% of sales compared with $15.8 million or 29% of sales for the same period of 2025. SG&A expenses for the first six months of 2026 were $38.9 million or 34% of sales compared with $31.3 million or 31% of sales in 2025. The higher SG&A was primarily due to the addition of the My Medic business. The higher percentage of sales was due to the higher amount of advertising needed for the direct-to-consumer My Medic business. Net income for the second quarter of 2026 was $5.1 million or $1.22 per diluted share compared to a net income of $4.8 million or $1.16 per diluted share for the same period of 2025, an increase of 6% in net income and 5% in earnings per share. Net income for the first six months ended June 30th, 2026 was $6 million or $1.46 per diluted share compared to $6.4 million or $1.57 per diluted share in the comparable period last year, decreases of 6% and 7%. The decline in year-to-date net income was mostly due to the impact of higher tariffs in the first quarter. The higher tariff spending commenced in June of 2025. The costs were capitalized into inventory, and we started to realize the full impact to earnings as the high-cost products were sold in the first quarter of 2026. The impact was lower in the second quarter, and we expect the impact to lessen over the next two quarters as the tariff rate declined in November 2025 and again in February 2026. To the balance sheet. Net debt increased from $22.8 million at June 30th, 2025 to $27.3 million at June 30th, 2026. During the 12-month period ended June 30th, 2026, we paid $14 million for the acquisition of the assets of My Medic, distributed approximately $2.4 million in dividends, and purchased a cutting and sharpening line of products in Germany for $1.6 million. We generated approximately $15 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 Timothy Call with Capital Management Corporation. Your line is live. Congratulations on another strong quarter. Thanks, Tim. You've built a long-term track record of sales and earnings growth, the current trajectory looks great. You have many other promising growth initiatives other than what you mentioned today, such as Spill Magic capacity expansion and increased throughput at Med-Nap, and long-term plant certification to expand sales to large new customers like government and hospital systems. Well, thank you, Tim think those are long-term initiatives? Yeah. Those are long-term initiatives. As people may remember, we bought a plant about a year ago in Tennessee for $6 million. It was a.. 12-acre site and 78,000 sq ft just for Spill Magic growth. we were constrained in the site that we were in, which we're leasing. We've moved into that facility. Paul, what are year-to-date sales growth at Spill Magic? It's like 40%- I think. 35%? Yeah, it's actually like 30%. Right. Yeah. It's really screaming. The best part of that is we're putting in automation into the facility that's unlike any of its competitors. Because it's a permanent facility, we can do the proper installation for a long-term growth plan. There's one example. Another which is possible, is the Med-Nap business in Florida, which makes alcohol prep pads and BZK wipes. We've been investing a great deal in that facility, and working to upgrade our regulatory compliance to possibly be able to address the U.S. hospital market. I would say that's, at this stage, a challenge, but the certification work is progressing well, and we should be done with it by year-end. The My Medic business, in general, has grown about a third this year. That's very exciting. We've also been working for a long time on generation after generation of our smart compliance software, which does automatic replenishment in our first aid kits or industrial first aid kits. That next generation, which automatically scans the contents of a first aid box, then generates replenishment orders through the internet, that is now in final stages and is about to be going out to early distributors. It could be a big growth segment. We'll see. Of course, we're looking at acquisitions, and we've got work to be doing at My Medic, a lot of work. The operating leverage that we hope should start to become apparent in the fourth quarter and then into the first. One of the big areas is the retail distribution, which My Medic really didn't have, and we are very strong in that. We're making presentations now to large mass market retailers and industrial distributors. I think that's quite promising. We'll see how that works in the coming quarters. We're excited about the place we're at now, and we're expecting some pretty good performance going forward. Thank you, Tim. Sure. Healthcare tends to grow a little bit faster than cutting tools. Do you have an idea of what percentage of the base healthcare is now or should be at year-end? Healthcare is about 70% of the revenues right now. I have to tell you, the Westcott business is coming back solidly. Last year was hard because the promotions were all canceled due to uncertainty from tariffs and pricing, and our retailers just couldn't bring in new items when they didn't know the cost of the existing ones. This year is very different. We've got a full book of promotional activity from back to school and into the fourth quarter, first quarter. Westcott has legs again, and we're really pleased with that. Congratulations. Thank you. Our next question comes from Georgy Vashchenko with Freedom Capital Markets. Your line is live. Thank you. Walter, Paul, good afternoon, congratulations on an excellent quarter. The results were very impressive. Thank you. I have two questions on gross margin. First, gross margin reached a record level this quarter. Could you help us understand the key drivers behind the improvement? Specifically, how much of this expansion was attributable to the My Medic acquisition? My second question is on tariffs. You mentioned that tariffs created some headwinds on margins during the quarter. Should we expect the additional gross margin expansion as those headwinds being increased? Thank you. Sure. Well, thank you very much. Actually, both questions are quite intertwined. What you're referring to is our gross margin improvement, and part of that has come, of course, because My Medic has bigger gross margins than our regular business. They spend it on, and it shows up in SG&A. They spend it in advertising. When you dig underneath, as I pointed out in my portion of this call, in the U.S., margins this quarter were reduced by about 100 basis points due to tariffs. Paul, what was the number in the first quarter? About 2%? Is that ballpark? It was probably like 150 basis points. Okay. Most of the increase in gross margin as a percentage of sales is due to the mix of My Medic. Yeah, by far it is. As we're looking forward, the impact of tariffs, because they've been reduced and that inventory is being sold, we're getting expansion. If we reduce our normal gross margin by 1%, you can picture that as we go through the rest of the year, we will recover that 1%. Relative to other costs, there are certainly other costs. Freight has increased, you can imagine with both bunker fuel for bringing product across the ocean as well as online freight delivery here in the U.S. and in Europe, the cost of fuel to run the trucks is up. There are other costs, the dollar has weakened against the Chinese currency in the past year. For the items that we import from China, that's a headwind. The net of it all is we've got that pretty much thought through, both in the pricing of our products, as we pointed out, there's about $10 million of inventory that is either here or is on the way that's been purchased shortly, like within days of the start of the Arab war. It's got locked in excellent pricing. Thank you. This is very helpful. Thank you. Our next question is from Jim Marrone with Singular Research. Your line is now live. Yeah, good afternoon, gentlemen. I'd like to say good quarter as well, given the backdrop of a tougher environment. With regards to a tougher environment, I'm trying to get a sense, are you hearing anything about the consumer appetite? Maybe with regards to the My Medic, is the consumer appetite still going to be just as strong as it was in the past quarters? Are you going to start to find that the consumers, either on the industrial or on the retail end, a little bit more discerning? We're hearing from even the grocers that the basket is getting smaller, I guess as a result of rising fuel costs and other inflationary items, that consumers are a little more discretionary in their spending. How does that relate to both My Medic? Jim, that's a very good question. Consumers only have a certain amount to spend, and maybe they get a wage increase each year, but after taxes, that's a small amount. Clearly, for example, in the Northeast, where you have to heat your homes, an increase in fuel cost is expensive. Of course, for cars, it's expensive. There have been price increases. You would think that the consumer would be more cautious. With regard to My Medic, so far, those sales are right on plan, and we're not seeing weakness. As demonstrated by the growth of both Westcott and our first aid business, our customer base is buying. In the overall, you have to be aware that the individual consumer is being pressed, but we're not seeing it yet. I think we would have seen some, especially, for example, in Europe. Europe just had a record quarter, both in sales and in earnings, yet the Europeans are facing every bit of the inflation that the U.S. is, plus their cost of oil has gone even higher. Yet our business is robust there. Right. Are they looking at that as more as an essential item rather than a discretionary item? Or do you have a competitive advantage over your competitors that they're choosing your product over the others? What is the driver behind that? Oh, yeah. Well, there's clear drivers why people buy our products. First, in the Westcott area, we were the pioneer in coatings, titanium coatings, non-stick coatings, that deliver, honestly, the best performance in the class, and they have for many years, and it's all utility patents. When you buy a Westcott item, and it's a titanium item, for example, it's the best there is. Because we're the largest in the world, yeah, we have world-class pricing. You've got innovation in the Westcott area, and you've got cost. In first aid, we've got a strong marketing team building around addressing injuries and saving lives. That marketing team is coming out with products that frankly, totally differentiate from the competitors, many of whom are selling things in old white boxes or in metal cases. We've also got a strong sourcing team for components in Asia. It's multi-office, multi-country. Our competitors don't have that, and that's why we win at places like Walmart and at Grainger and at Fastenal. There we've also got, I think, I probably know, the lowest costs in the world. Right. Okay. Thank you. I appreciate that answer. You also touched upon it, and I'm going to bring it up again just with regards to the cutting tools. The retailers are already coming out with back to school. There's already been headlines with regards to parents being a little bit more discretionary on back-to-school budgets. Are you hearing anything with regards to that end as far as the back-to-school sales? Through June, by the time June happens, the second quarter, we've shipped a chunk of the back to school because the retailers are then taking delivery, setting it into the planograms, or they're putting them up online. Through June, it's a record for us. Just flat out record. We've got a good backlog in the third quarter, which would be the rest of back to school. For us, I'm not seeing that. Again, perhaps they're trading down on some of the items within the basket of what they buy, to buy less expensive items. I know that, for example, our dollar store sales have been doing very, very well. We're also very strong at Walmart, and that's doing well. Again, that's delivering value. We seem to be running a little bit counter to what you would think. I appreciate that, Walter. Thank you for that visibility. Just one last question. With regards to the Canada segment, that just seems to be the one that's really struggling the most with just a 1% increase in revenue and single digits with regards to the bottom line. Is that a result just of a struggling Canadian economy, or is it tariff-related? What do you see going forward with this renegotiation of CUSMA? What's the driver behind the Canadian segment? Is it the economy? Is it tariffs? What's going on with that one? There's two parts. There's the First Aid Central business, which is doing very, very well. That's our first aid business. We've just moved into another new facility. That's the third move in four years because we keep growing. This is a fabulous new facility outside of Montreal. The first aid side is strong. The Westcott side is weaker. There it seems to be hit more by the economy and also just it's sort of sluggish in Canada. It's growth, but it's not much. Actually, in the third quarter, they seem to have done a little bit better, but it's a small part of the overall company, and we're certainly cheering for our Canadian colleagues. The impact of tariffs in Canada versus the U.S. probably impacts their shopping selections in total. Relative to our products, we ship in Canada with Canadian items, there's no tariff impact. Great. Thank you for that answer, Walter. Thank you. As a reminder, if you'd like to ask a question, please press star one on your telephone keypad. One moment please, while we poll for questions. Our next question comes from Richard Dearnley with Longport Partners. Your line is now live. Thank you. Good morning. The My Medic business, being a direct-to-consumer business, I'm surprised that emergency response and trauma and so on, but do emergency responding, does the local fire department order direct? I'm surprised it's a DTC business. That's where it started, it's built a half million social media followers, which is a very big number. We've got videos coming out at least twice a week, new videos with either training or education on how to use things or new product introductions or success stories. So you've got a following of people that are using the products. Long-term, there are parts of the country, I'm not saying this is My Medic, but in general, where there are less hospitals, there are less clinics, there are less doctors. This direct-to-consumer is a way to train, it's a way to deliver products directly to a consumer because maybe it's in a rural area. Right. We do sell some My Medic items to fire departments and police departments and ambulances, but that will probably be a much bigger chunk as our sales force starts to do that. That's the Acme United sales force. Right. They're not currently buying it. This is mostly direct-to-consumer today. The exciting thing is, we know we can get it placed elsewhere, because they've done the hard work, which is just world-class products. That's the challenge. That's what we're working on. Is their seasonality strong in the fourth quarter because the people have a budget and spend it or lose it? No. These are individuals. They're doing it for gifts. You've got Amazon Black Friday. Right. It's just- Oh. ..holiday sales, hunting. It's all being rolled into that fourth quarter. Right. There's a bit of an impact of the FSA spending at the end of the year, like to your point, but mostly it's just holiday spending. Oh. Mm-hmm. I see. Like what Walter said. Is the seasonality such that the fourth quarter is 25%-30% larger than the other quarters? Oh, I think they're driving given then. It's probably 35, anyway. It's probably like 35% of the sales of the fourth quarter of the year, I mean. Of the year, right. Okay, great. Thank you. Thank you, Richard. Our next question comes from Jake Patterson with Talanta Investment Group. Your line is now live. Hey, guys. Just a quick one. I know you said Westcott was up 8% during the quarter. I was curious if you had any data that could break out pricing versus actual volume. I was under the impression that you guys had, I think, close to a double-digit price increase. If you only get 8%, it would imply units down a little bit. Just given kind of what last year looked like versus this year, it hadn't seemed like that would make sense, so. Most of it was volume. Most of it's volume. Most of it is volume. Yeah. Okay. If you pass price last year, I guess that should have been flowing through your numbers, like first quarter being down 2%. I was just curious, that's pretty much all volume in there? Yeah, it's volume. Yeah. The price increases can't be applied directly to each product evenly. For example, if in the back-to-school items, they may be more price sensitive, maybe there's not much of a price increase on those, and others that are more specialty get bigger price increases. This second quarter it was volume. Again, you can picture the retailers are putting new promotions in place. You're moving more. That's the really exciting thing that we didn't have at all last year. Yeah, no, that's definitely good to hear. Awesome. Yep, that's it for me. I appreciate it. Thank you. Sure. We have reached the end of the question and answer session. I'd now like to turn the call back over to management for any closing remarks. Thank you. If there are no further questions, this call is complete, and I'd like to thank you for joining us. Goodbye. This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.