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Acme United Corporation (NYSEMKT:ACU)

Singular Research Annual “Best of the Uncovereds” Conference Transcript

September 10, 2009 2:00 pm ET

Executives

Joe Lambert -- Singular Research

Walter Johnsen -- Chairman and CEO

Joseph Lambert

Well, this is Joe Lambert with Singular Research. We are going to start our next presentation. And our next presentation is going to be Acme United Corporation, symbol "ACU." Our analyst, Jeremy Hellman has this to say in his latest updated report. He says Q2 results slightly trailed our estimate as ACU continues to battle through the weak economic environment. He says that – he reiterates a (inaudible) and our $12 target as we believe business has bottomed while potential upside exists due to reduced customer inventories. Our analyst has a price target of $12 on the stock.

And with that, I would like to introduce Walter Johnsen. Thank you, Walter.

Walter Johnsen

Thank you. I'd like to thank Singular Research for inviting Acme United to present today. I would like to, in particular, thank all the shareholders who've been so supportive during the past year. I am very proud of the results as we've weathered through pretty difficult times very profitably and looking forward now to showing new potential investors what we might be doing in the coming year.

Acme is one of the leading market shares in cutting, measuring and safety. And by cutting we mean knives, scissors, paper trimmers, pencil sharpeners. Those areas seem like mundane products, but as we go through and talk about the technology that we apply to these products, I believe you'll begin to understand the tremendous leverage that we feel this company has.

In the Measuring area, the Westcott brand is the ruler that you have in your desk. The company has been making Westcott rulers for many, many, many years. The old wooden ruler with the weathervane and the brass edge was the forerunner of items today that are plastic, wood, steel, aluminum and many of the materials.

And in the Safety area, we're one of the leading suppliers of first-aid kits. You'll find these items particularly in the office superstores where we then access the customers across the broad industrial and office space. Our customer base includes the "who is who" retailers and industrial distributors globally.

We spend a lot of time innovating products. We define our innovation rate as revenues from products introduced within the past 36 months, and so, for the company last year that approached 30% of revenues. That's a number that we're very, very proud of. And it gives our sales people the opportunity to say – when a customer asks what's new, let me show you. And I did that just yesterday in one of our customer presentations.

We've got a 3-year new product pipeline, but frankly it is only limited by our imagination and the ability to bring the product into the market. And these aren't innovations that relate to either color or texture, a lot more substantial than that. So we'll show you some of them.

And finally, over the past seven years we have had demonstrated and sustained growth. This year in 2009, it was the first time in many, many years where we had a decline, and frankly part of that was due to inventory reductions of our customers, part of it was due to a decline in demand, and I think we are starting to see that bottom out and we'll go on now from there.

Acme has been recognized by Forbes, BusinessWeek, Fortune over the past several years. BusinessWeek had us in the 100 Best Small Companies in 2007. Fortune had us recognized as the Small Business Top 100 Fastest Growing Public Companies for 3 years in a row, 2005, '06 and '07. Forbes in the Top 200 Best Small Companies in 2005 and 2007. One that I am perhaps most proud of is the Office Products International "Vendor of the Year" in 2005 where we competed against a "who is who" of office products companies, including Hewlett-Packard, Brother, 3M, and we were the "Vendor of the Year."

Our brand includes Clauss, which is the industrial and high-quality professional line, mostly for cutting; Westcott, which is the product for school, home and office, the Westcott ruler that we mentioned earlier and the Westcott scissors, which you probably have on your desk as well; and PhysiciansCare is the first-aid and safety products that again are showing mostly in the office superstores.

This is the summary of net sales from 2004 to 2008. We frankly had a plan for 2009 of achieving 100 million in sales. We fell way short of that and it was because of a – the inventory by our customers, as well as, frankly, a drop in demand. But we feel that unlike earlier in the year when customers were not making decisions for new products and new programs, that dynamics has changed, we see it everyday right now in the business where we're looking for – what we put in the planner grounds [ph] next year, what will we do to increase the business with these customers, and it's a very, very different feel than only 6 months ago.

So, while 2009 will be down and the fourth quarter – the third quarter will be down, we see perhaps some pickup in the fourth quarter and we're quite optimistic for 2009.

Our EBITDA has been a consistent high number relative to our sales. And the reason for that is because we're very heavy in intellectual assets and not very heavy on physical assets. For example, we produce our scissors – and we'll make about 95 million pairs of scissors this year in factories – in China and Taiwan, in Italy and in Germany, all of which we don't own, and so we don't have the plant and equipment cost that we would have had a number of years ago.

On the other hand, we spend a lot of money on development of new products and in our marketing and sales efforts, all of which are expensed. The net is we generate a high return on equity, we would generate a high return on assets and a very solid cash flow.

So the net income over the past 5 years has grown from 3.2 million to 4.4 million fully taxed. It will be down again in 2009. However, 2009 will be solidly profitable, and part of that was because we did the logical things. We cut back on our salaries. We cut back on travel. We continue to spend heavily in development. We looked at line item by line item, and some of them seemed pretty silly, but they turned out to be quite large for us large for us, at least in a relative sense.

Let me give you a very simple example, fax lines. We don't use faxes much anymore, and yet we found that we had fax lines into many, many offices globally. Well, we don't have fax lines any more. For each one of them (inaudible) per month and is not needed. And it's funny when you look through and you look at your expenses, how things become obvious, because you're really looking. We saved well over a million to maybe $1-1/2 million this year in SG&A, and I'm proud to say that a lot of that is (inaudible).

Earnings per share over the 5-year period grew from 85 cents to a $1.24. Again, we won't have that kind of earnings this year, but we're looking forward to next year the redemption of growth.

This customer base is very, very difficult to achieve and it is really a kind of base that gives us the potential to sell a great number of our products. For example, Staples, we sell – most of the scissors, Staples sells throughout the world, most of the rulers that they sell, most of the first aid kits. We work very carefully with them.

Wal-Mart; another powerful company – that we might sell some scissors in the selling area, but then we might also sell it into the office channel or into the school area, or perhaps in the kitchen area or go over to Sam's Club. There's a lot of revenue potential in these big customers, and we are only in our view scratching the surface.

So as we introduce new products, the leveraging of our customers is critical to achieving the growth that we hope we will attain. These are industrial accounts. When we bought Clauss in 2004, we added customers such as Grainger, MSC, McMaster Carr, Fastenal and these wholesalers supply most of the industrial base in the U.S.

It allows us to take a lot of the development that we previously did in the consumer market, particularly in coatings and then enhanced the performance and packaging of the products and sell them in to the industrial distributors.

I don't think any of us are surprised to hear that the base in the industrial market is down given the problems with the auto industry and many industrial companies in the U.S. Nevertheless, this segment has doubled for us over the past 5 years, and we are continuing to make inroads.

On the left is the retail packaging that we do for – for our Westcott line, and you can see that there's a segmentation on the left, in this case non-stick scissors, titanium scissors, anti-microbial products, recycled and all-purpose items. But we don't just sell them on retail, we're also into all of the – nearly all of the catalogs in the office channels, as well as the e-commerce segment. For example Staples Online or SP Richards Online. We have the kinds of items that and even a printer on e-commerce. And we work very hard to get the search optimized for these products.

Innovation is what's driving the growth, the customers, give us the leverage to grow. Here is an example, in 2002, we introduced a titanium-bonded scissor that was the first that has ever been introduced. We had optimized the composition of the material so that we had a very, very hard scissor, one that was, as we tested it, three to eight times harder than regular stainless steel.

And we were able to do that and generate tremendous leverage, because of the volume that we could spread that innovation over. The products on the left, the scissor looks very similar to one which became the best-selling scissor in the world and that was our titanium scissor.

Now, what we are showing here is one that was newly introduced with a different technology. This was a non-stick, titanium-bonded scissor and the examples are using it to cut tape, to prune flowers, tars and saps, for glues in crafts, in industrial area for Velcro.

The non-stick is something that we worked very hard on to the past 2-1/2 years both in our operations in Germany, as well as in China, and the research labs at two leading universities. And the patents that we have applied for this nano-ceramic material, we think will be fundamental as we leverage non-stick coating technology across many, many different cutting materials and cutting products.

You can picture for example, placing the non-stick titanium on pencil sharpener. Now, that's a pretty silly market perhaps, but it isn't. Composite pencils today jam pencil sharpeners, colored pencils jams them, kids put crayons in them.

And we've now introduced a non-stick titanium pencil sharpener that we think is just off the chart. And you will see the leverage in that when we talk later about where they go into places like Costco or Office Depot or Staples, it's quite large.

Here is an iPoint pencil sharpener. About 3 years ago, we entered the pencil sharpener market. In the U.S., it's about a $100 million category at our selling price. We've now gained approximately 10% of the market. We've done that very quickly. We are moving with aggressive plans across the board to all of our school and office customers.

We are bringing things like titanium, which enhances the life of these cutting blades, according to our test about four times longer than traditional pencil sharpeners. We've also put the non-stick in other ones. The specific line that you're seeing is selling at Costco globally right now, and it's selling well, we are delighted with it.

This looks like a traditional utility knife, but it's not. This SpeedPak has 10-blade cartridge that goes into the body of the utility knife. The cartridges, they are titanium coated, so they last longer. And you never touch the blade as you open and close the utility knife, when the blade is no longer necessary, it's discarded. The next one in the cartridge is then loaded into the knife and it's a very safe product.

It allows tradesmen to take a number of different blades those for roofing, those for carpet, those for sheetrock and each of these cartridges can be interchangeably put in and taken out without having the entire blades used up. Right now that product is at Home Depot, is at Grainger, is at MSC, Northern Tools, Staples, and Jo-Ann Fabrics and its distribution very quickly is growing.

This is a fairly large category. It's one that you can picture as we begin to work on the blades enhancing the performance of those blades, perhaps with a non-stick coating, for example, in tarts and zaps [ph]. It might have something with a stronger coating than we currently have and we're working on some like that.

Also, this channel, you'll notice, for example, Home Depot, this was a new channel for us, and to be able to sell scissors and rulers and safety items into that large retailer presents a pretty good opportunity for us and we're working on it presently.

We looked at adding antimicrobial properties to our items. Again when you think about innovation, these are the kinds of things that are different than what's on the market. On the left are pencil sharpeners. Again, they don't look like the traditional ones, but they work very well and they sell very well. And in 3 years time, again, coming to about 10% of the market, it shows the power of that.

The antimicrobial material is called Microban. We licensed that and we have a global license for cutting and safety items. In Europe, we put Microban on manicure items that are selling to companies like Schlecker, which has 18,000 stores. We put it on to scissors, kid scissors, office shears and you can see them in the upper right.

At the lower right is a paper trimmer that's foldable with antimicrobial properties. That's currently at Sam's. And if you look at the lower end, hard hats and goggles, again, these are safety items that we sell into that base and with an antimicrobial feature to it, particularly as you enter plants and you're given a hard hat or you're given a goggle – pair of goggles, these makes sense and they've got national distribution.

Several years ago we bought the Camillus brand of knives in a bankruptcy auction, and then we relaunched the brand last May with a whole new set of products. The one on the right in the package has a titanium carbonitride coated. And what we've did in order to achieve that performance is we put a carbon source in our PVD coating chamber and were able to get almost a diamond like hardness that came out.

And while we make claims of 10 times harder than stainless with this coating, in fact the lab tests are showing far greater hardness. We intend to be taking this product and putting it on our tool line. And again, that would be in the Clauss items that are going into places like Home Depot or Granger or McMaster-Carr where you get real performance.

On the left is an assortment of Camillus knives that will be hitting the market in September, and it's just the beginning of what we think will be an exciting growth prospect for us. Prior to acquiring Camillus, it was an $18 million business. We had no sales last year because we bought it and we were assimilating what we wanted to do in designing the products. So we're finding excellent brand recognition with the brand and a receptive customer base. So we're looking forward to next year's growth.

These are some emergency group preparedness items, but again are mostly going into the office superstores. But increasingly we're making sales approaches across our entire customer base. And you can see they are segmented by burn and protection trauma, eye care, fluid silk.

There is a new kit that we introduced for H1N1 protection, and that's in production right now and it will hopefully not be used broadly. But in the event that it is we're prepared to support our customer base and it will be carried by companies like Staples and Office Depot, perhaps OfficeMax, so forth.

This is the growth drivers. First in the school and office scissors, rulers and math kits, there is a whole new arrangement of them. In the scissor area, again, with the non-stick coatings, the rulers with the antimicrobial materials, the math kits antimicrobial designed color.

The iPoint pencil sharpeners with the non-stick blade, they are now in the market – at least being shown in the market. We think they are a step function above what's currently there. Its $100 million business and we've gained 10% in 3 years. We think there is a lot of runway. In fact, we are working right now on a presentation as we speak.

There is a recycled family of scissors, rulers, math kits and paper trimmers that are particularly interesting because we've figured out how to take traditional recycle material and change the color. Normally, a recycled product is black, and you do that because the plastics come in from many different sources and you add pigments to get black, so you get system [ph] black color. We've figured out a way to not do that, and so we're getting brightly colored school and office supplies that are recycled and colorful [ph].

And finally, the SpeedPak utility knives with the cartridge blades, we think it's a big runway. We've now got the whole of this month, next month, next 3 months. Popular Mechanics is running a full page ad on SpeedPak and specifically referring to Home Depot. We think that the legs there are meaningful.

When we leverage our technologies, this is more than the size of Acme. The patented titanium nitride coatings are utility patents and they are broad. They cut – they cover many, many cutting applications. And so, as we start looking at where do we expand our business, we look at our customer base, we look at things that cut, we think how can we add innovation, and we go sell it.

The proprietary non-stick coatings again are mostly aimed at the cutting area, but they don't have to be. I'll give you a silly example. Somebody came up to me and said, can you make me snow shovel where the snows actually falls off the shovel? Well, the fact is with our non-stick coating we could do that and I'm sure we will. We could put it on a lawnmower so that you didn't have the grass cuttings holding.

The non-stick coating that we have also prevents rust underneath it and it's been shockingly good at that. Shockingly good because we didn't expect that kind of outcome, but again it's a nanoceramic. It was done with a lot of research, and the utility patents that we applied for we believe will give us a whole new technical base. The antimicrobial products, school and office products are out there, and actually they are doing very well, especially with the H1N1 concerns today.

And finally, the enhanced titanium carbonitride tools, those are the ones where we put a carbon source in the PVD chambers and came out with a diamond-like coating. Again, there were a host of utility patents that we applied for there.

We believe the industrial and hardware channels, Home Depot, Grainger, McMaster-Carr, Lowe's, Fred Meyer among others, gives us a growth factor that is perhaps as big as what are currently – our company currently does in sales. So it takes some time.

But nearly all the cutting items that we sell in the office and school channels, with a more industrialized base of product designs can be sold into the industrial and hardware channels. And we are finding success, that's probably being led most by the SpeedPak.

We are also following the globals, Wal-Mart, Office Depot, Staples as example as their footprint moves globally. We find it very easy end efficient to be able to ship from our Asian base to meet the direct import needs of these customers anywhere in the world.

And net-net is, we are continuing to execute these revenue drivers. We have tightened expenses in this (inaudible). We'll continue to generate ongoing profits. We have high liquidity. We throw up a lot of cash. We repurchased in the past year about 7% of our company's stock. We also raised the dividend last November at a time when the world was thinking there would be no future office channel. And we are opportunistically looking for acquisition opportunity.

I would like to thank you and now open it to questions. Yes.

Question-and-Answer Session

Unidentified Participant

(inaudible).

Walter Johnsen

Yes. We are making about...

Joseph Lambert

Repeat the question.

Walter Johnsen

The question was, is Acme United still making great rulers? And the fact is, we do. And in this back-to-school, we sold millions of them. In fact, I have no idea even where they can build this and sold many of them. But we are one of the largest in the world. Yes.

Unidentified Participant

(inaudible).

Walter Johnsen

The question was, last year we introduced something called Wild Ones. And these were all sorts of kid's scissors in the shapes of giraffe and alligators and ladybugs and it really sold. So because they did, we did it again this year. But specifically, on what are we doing to the product line, that's a little bit more than a funny shape or color.

We have announced that we'll have a non-stick kid's scissor for arts and crafts and for schools available this time during – during this back-to-school in 2010. And we are currently working very aggressively to scale up production at a price that we think could change the way schools use these products. So that's really exciting and again it's leveraging the technology. Yes.

Unidentified Participant

(inaudible).

Walter Johnsen

The answer is – the question was...

Unidentified Participant

(inaudible).

Walter Johnsen

Can the – the question was, can our small scissors be used to trim mustache? We have a business in Germany that sells manicure items as well as mustache scissors. We haven't yet tried to put the non-stick coating on those blades, but I think it's a heck of a good idea. And the answer is, I'm sure it will work. We have distribution with – among the biggest drug chains in Europe, not in the U.S. to be able to sell these. I'm going to go back tomorrow and we'll take a look at it, great idea. Yes?

Unidentified Participant

Walter, on the west – Westcott side of the business, have you seen your end – which one of the end market of maybe these three categories, you've got kind of a retail market, you've got a school market, you know in what market you kind of you've got rebound coming so that you know with more quickly than the other ones going into the flaw here. Could you talk about you know revenue starting to creep back up again in the fourth quarter, third quarter being a little weak. So I am assuming you didn't see the back-to-school sales that you expected...

Walter Johnsen

The question was of our markets; school, office, industrial, what are we seeing strengthening, because I mentioned that there seem to be some bottoming out and strengthening? And now further part of the question was, I mentioned that the third quarter looked to continue to be soft, so what was back-to-school like?

Well, let me first address back-to-school. Back-to-school was not good across the board for ourselves or most of the people that we sell to, and that doesn't mean it was a disaster. It means it didn't meet our expectations. And I think part of that was a trading down of some of the products to lower cost commodities. Whether the customer did it, the end-user customer, or in the case of a Wal-Mart, they made the decision for the customer. So you would sell the same item for less. It was some of that going on. It was also the back-to-school leftover from a year ago products would have been first to be used this year for sales, so there were some destocking for back-to-school we believe.

But having said that, back-to-school while wasn't what we wanted, was not a disaster. Where we are seeing some movement is in the traditional office area. We're not seeing tremendous job creation, that's certainly not driving it, but we're seeing movement from the customers who are placing orders for new items, the new (inaudible) for next year. And one of our retailers is absolutely delighted with what the non-stick did to their category. It was a premium product that drove the revenue base across the board in the cutting items. So as we bring the non-stick broader into the retail market, we believe we're going to be seeing some growth there.

We're also on the pencil sharpeners, because we've got today only about a 10% market share, there's a lot of upside and what we're doing in reviews right now, we believe we'll be successful in driving growth and those would be starting in say January. Fourth quarter of last year was down 15% in sales, so we think with some Camillus knives being sold and the SpeedPak utility knives now in the market and selling some of the new business that we gained during the year. By the fourth quarter – it is hard just to forecast, we think that's where we might be able to either reach or achieve the revenue base from last year and then frankly, I don't think we'll look back. Next question? Yes.

Unidentified Participant

(inaudible).

Walter Johnsen

Question was how dependent is Acme on the currency, that's particularly with the Chinese RMB? And it's a very good question, because it's the one that we can control somewhat, but not entirely. There are ways to hedge the RMB. We don't do that. We do have a substantial inventory not for hedging purposes but because our customers are finding it difficult to forecast accurately and so what we have in stock delivered and we're holding is in fact a hedge and gives you time to adjust pricing.

During the past three years the RMB to the dollar has appreciated about 20%, and we were able to pass through some of those basics of those costs. We were able to work carefully with our suppliers to drive out cost and frankly we had some of it hit our margin. At this point, we're not seeing a strengthening of the RMB and it appears that the Chinese government is trying to encourage export again and so in fact it's probably not their interest to be adjusting the – their currency higher, but it is a risk and it's one, with time we can manage, but in the short term it could be problems if it appreciates quickly. Next question? Yes.

Unidentified Participant

(inaudible).

Walter Johnsen

Yes. The Clauss brand and products that are associated with Clauss. Oh! The question was relative to the brand that Acme has Clauss, PhysiciansCare and Westcott what are the approximate revenue breakdowns. The PhysiciansCare revenues are approximately 13 million, the Clauss brand is about 10 million including some items that might not actually be under the Clauss brand but in fact are attributable to the products and the remainder would be Westcott. So Westcott is the driver, Clauss and PhysiciansCare both have truly good growth potential we think. Yes?

Unidentified Participant

(inaudible).

Walter Johnsen

The question is that are we making first aid kits anymore. Yes, and there is a whole new line of first aid kits that are now available in the office channel and they are segmented by burns, trauma also spill containment, a whole lot of different minor segments as well as the traditional small, large and industrial size first aid kits. We also have introduced an H1N1 full protection kit that will be shipped in the next month or two. And that's really to help in the event that there is a – an unfortunate breakout that we need these for. Yes?

Unidentified Participant

(inaudible).

Walter Johnsen

The question was relative to our sales to Home Depot, what's the status? Home Depot became a customer for the first time around March of this year it's selling first the SpeedPak utility knife. And at this point those products are shipped throughout the entire chain and we are doing a 4-month promotion with Popular Mechanics, driving sales to Home Depot. Very potential. First, it's difficult to break into sales a big chain, but the potential once you've done that is they're going to add your scissors, your tins, your knives and so many of the other items that we carried throughout the Clauss line and that is obviously an area that we intend to be working on. Yes.

Unidentified Participant

(inaudible).

Walter Johnsen

The question was regarding the Camillus knife. What is the distribution compared to what it was? When we bought Camillus, we bought it online at an – on an online auction for $186,000 plus the buyers premium. We bought all the intellectual property and we then sorted out what we wanted, we sold about half and we recovered about half of our investment. And then we redid the line.

So it had no revenues when we purchased it. But what we discovered and we somewhat knew what we've discovered was this is a very, very strong knife brand. It was the oldest, it is the oldest knife company in United States. They made the Boy Scout knives and Cub Scout knives for many, many years. The Camillus bayonets were used to during World War I, II, Vietnam, Korea definitely World War II alone there were 15 million bayonets. When people are in law enforcement or frankly the lot of the people that are working right now in the sporting goods. They know this brand either from the today the Boy Scouts or Cub Scouts or they know the brand from their time in the service.

So what we are finding is Camillus has about eight times as many hits on its Web sides as Westcott, it's shocking. And where we are taking the product first is to the sporting goods towards U.K. [ph]; I'm not going to say which one but names like the Cabela's or Westcott [ph] shops, or Meltons [ph], some of the big knife distributors.

We are also showing it to the hardware distributor, such as Lowe's and ACE Hardware. In addition, we are showing it to retailers like Wal-Mart, Target. So I'm not sure where that distribution is going to go, it is different than when it was really for the military, because we don't have a military business. And although I think we may do that someday, I want to be very, very careful how we do it and make sure it's done properly. Other questions?

Unidentified Participant

(inaudible) Walter.

Joseph Lambert

I'm going to open that lines for WebEx. Although we haven't had any questions so far today, but let's just see if anybody does or maybe the one we get. OK. All the lines are unmuted on the WebEx. I, Walter Johnsen, I Chairman and CEO of Acme United. And if you'd like to ask any questions (inaudible). All right. If there are no questions, I would like to thank Walter Johnsen – yes, sure, one more question, go ahead.

Unidentified Participant

Thank you (inaudible).

Unidentified

Yes. We're good.

Unidentified Participant

Can you talk about – a little bit about the competition that you face and how has it changed you know over the...

Walter Johnsen

The question was, could I speak about the competition that Acme United faces and how it has changed over the past several years? During our strategic planning session in August, we took a specific look at that and it was interesting. Not surprisingly, I guess our competitors have narrowed, so there are a less of them and they tend to be bigger. For example, in the scissor area, they used to be 30 or 40 small scissor companies and ourselves and Fiskars. Today, it's ourselves and Fiskars as the prime primary competitors in the space.

In rulers, there were a number of smaller ones, we bought the base ruler business and combined it with Westcott. We bought the Rotex business in Canada and combined it with Westcott. So we were one of the consolidators there and today, it's really ourselves, a little bit of Fiskars, but it's a couple of small companies. Mostly, there is not many left.

In the first aid area, the big one is Johnson & Johnson, and they sell excellent products. We tend to be a little bit quicker moving on innovation. We tend to have a better value we believe than they do. And relative to our strength which is the office channel we dominated. However, in the mass market, it's much more difficult because Johnson & Johnson has a wonderful consumer brand. Yes.

Unidentified Participant

(inaudible).

Walter Johnsen

Yes. The reason we say that with a high degree of confidence is because we have one of the largest market shares in our scissor business and the ruler business, and we felt that the biggest and most competitive customers on earth was that with Wal-Mart and Staples and we sold almost all their products. We know because that we're more apprising. Yes.

Unidentified Participant

(inaudible).

Walter Johnsen

The distribution process is huge. The question was, how big of a role does our distribution play in our competitive advantage. And the answer to that is it's huge. It's very difficult to break into towards new customers, but it's also even within segments, when we've been doing these products for a number of years and we've got patents and patents and patents and products with world customers, newcomers need to have something more than just a knock off product and we believe our pricing is at global levels, so we're not getting it from under cutting them. Distribution is very important.

Joseph Lambert

At that point in time, I'd like to mention that Walter will be in Madison I for a breakout session to go into more detail if you have anymore and you know where that is down there and let's give him a round of applause. Thank you very much.

Walter Johnsen

Thank you very much.

Joseph Lambert

We'll start in just a moment with our next presentation. It will give me a moment to queue it up.

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