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 costs 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 from MyMedic 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 United States, 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 clean-up products.

Also in the United States, the Westcott cutting tools business increased 8% during the second quarter. As you may remember, our retail business last year was hurt by tariff and cost uncertainty, and many of our customers cancelled 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% -- 42.6% due to high margins at MyMedic.

Without MyMedic, gross margins in the United States declined approximately 100 basis points due to the costs 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 continued 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 MyMedic, 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 MyMedic, 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 MyMedic, sales increased 7%.

Net sales in the U.S. segment increased 17% in the quarter.

Excluding MyMedic, sales increased 8%. Sales increased 15% for the six months ended June 30th.

Excluding MyMedic, 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.

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 MyMedic 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 MyMedic business. The higher percentage of sales was due to the higher amount of advertising needed for the direct-to-consumer MyMedic business.

Net income for the second quarter of 2026 was $5.1 million or $1.22 per diluted share compared to 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.

However, the costs were capitalized into inventory, and we've 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.

Now 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 MyMedic, distributed approximately $2.4 million in dividends, and purchased the cutting and sharpening line of products in Germany for $1.6 million. Additionally, we generated approximately $15 million in free cash flow.

Thank you, Paul. I will now open the call to questions.

Congratulations on another strong quarter.

Thanks, Tim.

You've built a long-term track record of sales and earnings growth, and 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.

Do you

think those long-term initiatives -- yeah? Thank you, Tim.

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 square feet just for Spill Magic growth. We were constrained in the site that we were in, which we were leasing.

We've moved into that facility and, Paul, what are year-to-date sales growth at Spill Magic? It's 40%, 35%?

It's approximately 30%, right.

It's been just really screaming. The best part of that is we're putting in automation into that 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. Where 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 MyMedic 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 SmartCompliance software, which does automatic replenishment in our first aid kits, our industrial first aid kits. That next generation, which automatically scans the contents of a first aid box and then generates replenishment orders through the internet, 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.

We've got work to be doing at MyMedic, 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 MyMedic 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.

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?

It's about

healthcare is about 70% of the revenues right now. I have to tell you the Westcott business is coming back solidly.

They're really Last year was hard because the promotions were all cancelled due to uncertainty from tariffs and pricing. Retailers just couldn't bring in new items when they didn't know the costs of the existing ones.

This year is very different. We've got a full book of promotional activity, for back to school and into the fourth quarter, first quarter.

Westcott has legs again, and we're really pleased with that.

Congratulations.

Thank you.

Thank you. Walter, Paul, good afternoon and congratulations on an excellent quarter.

The results were very impressive. I have two questions on gross margin.

First, gross margins reached record levels this quarter. Could you help us understand the key drivers behind the improvement, specifically how much of this expansion was attributable to the MyMedic acquisition?

My second question is on tariffs. You mentioned that tariffs created some headwinds for margins during the quarter.

Should we expect additional gross margin expansion as those headwinds begin to ease? Thank you.

Sure. Thank you very much.

Actually, both questions are quite intertwined, and what you're referring to is our gross margin improvement. Part of that has come, of course, because MyMedic 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 the my portion of this call, in the United States, margins this quarter were reduced by about 100 basis points due to tariffs.

Paul, what was the number in the first quarter, about 2%? Was that ballpark?

It was yeah, it was probably 150 basis points. Most of the increase in margin gross margin as percentage of sales is due to the mix of MyMedic.

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've reduced our normal gross margin by 1%, you can picture 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, and you can imagine with both bunker fuel for bringing product across the ocean as well as online freight delivery here in the United States and in Europe, the cost of fuel to run the trucks is up. There are other costs, and 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 where we've got that pretty much thought through both in the pricing of our products, and as we've pointed out, there's about $10 million of inventory that is either here or is on the way that's been purchased shortly, within days of the start of the Iran war, it's got locked in excellent pricing.

Thank you. This is very helpful.

Thank you.

Good afternoon, gentlemen. Good quarter as 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 MyMedic, are the consumer appetite still going to be just as strong as it was in the past quarters, or are you going to start to find that the consumers either on the industrial on the retail end a little bit more discerning?

We're hearing from even the grocers, that the baskets 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 MyMedic, are they looking at-- Jim.

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, that's an increase in the 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 MyMedic, 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, and the Europeans are facing every bit of the inflation that the US is plus their cost of oil has gone even higher, and yet our business is robust there.

Right. Are they looking at that 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. There's clear drivers why people buy our products.

First in the Westcott area, we were the pioneer in coatings that 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, you're getting, 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 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, and 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, and it's multi-office, multi-country.

Our competitors don't have that. 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.

It's, 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 back the back-to-school sales? We just

through June where we, 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 towards 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 the 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?

How What's the driver behind the Canadian segment? Is 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 United States probably impacts their shopping selections in total, but relative to our products, we ship in Canada with Canadian items, and so there's no tariff impact.

Great. Thank you for that answer, Walter.

Thank you.

Thank you. Good morning.

The the MyMedic business being a direct-to-consumer business, I'm I'm surprised that, emergency response and trauma and so on that it it's do emergency responding, does the local fire department order direct or I'm I'm surprised it's a DTC business.

That's where it started, and 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.

We've got a following of people that are using the products. Long term there are parts of the country, and I'm not saying this is MyMedic's, 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, and it's a way to deliver products directly to a consumer because maybe it's in a rural area. We do sell some MyMedic 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. 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 we're working on.

Is there 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,

you've got

it's just holiday sales, hunting. It's all being rolled into that fourth quarter.

There's a bit of an impact of the FSA spending at the end of the year, to your point, but mostly it's just holiday spending.

Oh, mm-hmm. Nice.

What Walter said, and

Is the seasonality such that the fourth quarter is 25%, 30% larger than the other quarters?

Oh, yeah, Dick, I haven't even

It's probably like 35% anyway.

It's probably like 35% of the sales are the fourth quarter of the year.

Of the year, right. Great.

Thank you.

Thank you, Dick.

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 bring break out pricing versus actual volume. Does on the impression that you guys had, I think, close to a double-digit price increase, if you only grew 8%, that would imply units down a little bit.

Just given kind of what last year looked like versus this year, that didn't seem like that would make sense. So

Most of it was volume. Okay.

In the U.S., yeah.

Okay. If you pass price last year, I guess does that should have been flowing through your numbers, first quarter being down 2%?

Kind of just curious, that's pretty much all volume in there?

It's volume. 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 and so maybe there's not much of a price increase on those, and others that are more specialty get bigger price increases. What the second quarter was really it was volume.

Again, you can picture the retailers are putting new promotions in place. You're moving more, and that's the really exciting thing that we didn't have at all last year.

No, that's definitely good to hear. Awesome.

Yep, that's it for me. Appreciate it.

Thank you. Sure.

Thank you. If there are no further questions, this call is complete, and I'd like to thank you for joining us.

Goodbye.