Acme United Corporation - New Leadership and Challenges: Mid-1990s–2000s
New Leadership and Challenges: Mid-1990s–2000s
After Acme United appeared to hit bottom in 1993, the company showed some improvement in 1994, when it barely returned to profitability, before experiencing a disappointing setback the following year. The company's stock, which had been trading in the neighborhood of $25 during the 1980s, slumped to around $3, leading to increasing pressure from shareholders to make major changes in management. In November 1995, Dwight Wheeler was replaced as CEO by Walter C. Johnson, who had been hired earlier in the year to head the medical products division. Johnson had previously served as vice-chairman of Marshall Products Inc., an Illinois medical supply distributor whose revenues he had helped to double in four years before it was sold to a Japanese company. Johnson was also named to the Acme United board of directors, where at the age of 44 he was considerably younger than his colleagues, whose average age was 66.
After losing more than $8.7 million on sales of $52.2 million in 1995, Acme United initiated a cost reduction program in 1996. The Westcott plant in Seneca Falls, closed in 1995, was sold in 1996. The company's Bridgeport, Connecticut, plant was also shut down in 1996, with all production moved to Acme United's more modern, lower cost, facilities in North Carolina. Altenbach was also sold off in May 1996. As planned, Acme United also began reducing its inventory company-wide in order to free up money for investment in the company. Moreover, Johnson shook up his management team. All four of his direct reports, along with five other senior managers, were terminated in 1996. The company lost another $3.2 million in 1996, much of which was the result of restructuring charges, but it also saw revenues dip to $47.5 million, with the medical products unit experiencing a 12 percent drop in business and European sales that, excluding Altenbach, was off by 4 percent.
Acme United expanded its North American office products business in 1997 by acquiring the Rotex Division of Esselte Canada. Also in 1997, Acme United sold the marketing rights for Seton Healthcare products for $2 million, a harbinger of what was to come, as Johnson decided to focus the company's attention on consumer products. Less than two years later, in March 1999, Acme United sold its medical unit for $8.2 million to Medical Action Industries, a Long Island-based supplier of medical and disposable surgical products. Also in March 1999, Henry Wheeler died, some 60 years after first joining the company.
Although the loss of the medical division significantly lowered the company's total revenues, Acme United slowly returned to profitability, posting net income of $1.1 million in 2000 after losing $156,000 from continuing operations in 1999 and $1.7 million in 1998. The company shied away from low margin products, concentrating instead on value-added products, such as the Tagit! line of student scissors, rulers, staplers, and staple removers introduced in 2000. In addition, the company made inroads into the office market by achieving greater penetration with such retailers as Staples and Office Max. Sales improved to $36.2 million in 2001, a 5 percent improvement over the previous year, and net income grew to $1.3 million.
Poor economic conditions caused another setback in 2002, leading to the restructuring of the European unit, with the operations of the United Kingdom plant transferred to Germany. Acme United also increased its focus on core products and regained some momentum in 2003, during which sales increased 13 percent over the previous year to $35 million and net income increased 85 percent to $1.2 million. A new titanium scissor line performed well enough to warrant the application of the technology to new products, such as paper trimmers. In addition, in 2003 Acme United opened a Hong Kong subsidiary.
With business once again on an upswing, Acme United was in a position to grow externally. In June 2004, it acquired Clauss Cutlery from Alco Industries. Almost as old as Acme United, Clauss, founded in Fremont, Ohio, in 1877, was once the world's largest scissor manufacturers. Its scissors and cutting tools now primarily served the floral market as well as such industrial customers as auto, textile, food processing, and electronics, providing Acme United with a solid platform on which to expand into other areas of the cutting trade. The company's turnaround under Johnson's leadership appeared complete when the results for 2004 were released in March 2005. Acme United experienced a 24 percent increase in sales to $43.4 million, while net income grew to $3.2 million. With sales showing improvement in all markets, Acme United was well positioned to now enjoy sustained growth.
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