acme_10q33110.htm
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
 
FORM 10-Q
____________________________________
 
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 2010
 
OR
 
[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ______ to ______
 
__________________
 
Commission file number 001-07698
 
ACME UNITED CORPORATION
(Exact name of registrant as specified in its charter)
__________________
 
CONNECTICUT
06-0236700
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
 
60 ROUND HILL ROAD,  FAIRFIELD, CONNECTICUT
 
06824
(Address of principal executive offices)
(Zip Code)

Registrant’s telephone number, including area code:  (203) 254-6060

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.  Yes  [X]     No  [   ]
 
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one).
Large accelerated filer  [   ]     Accelerated filer  [   ]     Non-accelerated filer  [   ]     Smaller reporting company  [X]
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T ( 232.45 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  [   ]     No  [   ]
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes [   ]     No  [X]
 
As of April 22, 2010 the registrant had outstanding 3,174,109 shares of its $2.50 par value Common Stock.
 

 

ACME UNITED CORPORATION
 
 
Part I — FINANCIAL INFORMATION   Page
 
Item 1. Financial Statements (Unaudited)
   
    Condensed Consolidated Balance Sheets as of March 31, 2010 and December 31, 2009   3
   
Condensed Consolidated Statements of Operations for the three months
ended March 31, 2010 and 2009
  5
   
Condensed Consolidated Statements of Cash Flows for the three months
ended March 31, 2010 and 2009
  6
    Notes to Condensed Consolidated Financial Statements  
7
  Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations   10
  Item 3. Quantitative and Qualitative Disclosure About Market Risk   13
  Item 4T. Controls and Procedures   13
         
Part II — OTHER INFORMATION    
  Item 1.   Legal Proceedings   14
  Item 1A. Risk Factors   14
  Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds    14
  Item 3.   Defaults Upon Senior Securities   14
  Item 4.   Removed and Reserved   14
  Item 5.   Other Information   14
  Item 6.   Exhibits    14
  Signatures    15
 
2


ACME UNITED CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(all amounts in thousands, except share data)
             
   
March 31,
   
December 31,
 
   
2010
   
2009
 
   
(unaudited)
   
(Note 1)
 
             
ASSETS
           
Current assets:
           
  Cash and cash equivalents
  $ 5,468     $ 6,519  
  Accounts receivable, less allowance
    10,230       10,704  
  Inventories:
               
     Finished goods
    17,319       16,337  
     Work in process
    340       97  
     Raw materials and supplies
    838       966  
      18,497       17,400  
  Prepaid expenses and other current assets
    1,229       1,133  
          Total current assets
    35,424       35,756  
Property, plant and equipment:
               
  Land
    162       172  
  Buildings
    2,491       2,558  
  Machinery and equipment
    8,234       8,170  
      10,887       10,900  
  Less accumulated depreciation
    8,838       8,812  
      2,049       2,088  
Note receivable
    1,879       1,891  
Other assets
    2,556       2,574  
            Total assets
  $ 41,908     $ 42,309  
 
See notes to condensed consolidated financial statements.
 
3


ACME UNITED CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
(all amounts in thousands, except share data)
             
   
March 31,
   
December 31,
 
   
2010
   
2009
 
   
(unaudited)
   
(Note 1)
 
LIABILITIES
           
Current liabilities:
           
  Accounts payable
  $ 4,030     $ 3,546  
  Other accrued liabilities
    2,580       3,257  
      Total current liabilities
    6,610       6,803  
  Long-term debt, less current portion
    8,908       9,154  
  Other
    1,815       1,811  
       Total liabilities
    17,333       17,768  
                 
STOCKHOLDERS' EQUITY
               
  Common stock, par value $2.50:
               
authorized 8,000,000 shares;
               
issued - 4,329,274 shares in 2010
               
and 4,313,024 shares in 2009,
               
including treasury stock
    10,823       10,782  
  Additional paid-in capital
    4,274       4,208  
  Retained earnings
    20,613       20,508  
  Treasury stock, at cost - 1,155,165 shares
               
     in 2010 and 2009
    (10,144 )     (10,144 )
  Accumulated other comprehensive income:
               
Minimum pension liability
    (1,134 )     (1,134 )
    Translation adjustment
    143       321  
      (991 )     (813 )
      Total stockholders’ equity
    24,575       24,541  
        Total liabilities and stockholders’ equity
  $ 41,908     $ 42,309  
 
See notes to condensed consolidated financial statements.


 
ACME UNITED CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(all amounts in thousands, except per share amounts)
             
   
Three Months Ended
 
   
March 31
 
   
2010
   
2009
 
Net sales
  $ 13,121     $ 11,297  
Cost of goods sold
    8,008       7,000  
                 
Gross profit
    5,113       4,297  
                 
Selling, general and administrative expenses
    4,812       4,216  
Operating income
    301       82  
                 
Non-operating items:
               
  Interest:
               
    Interest expense
    52       42  
    Interest income
    (32 )     (35 )
  Interest expense, net
    20       7  
  Other expense, net
    14       12  
Total other expense, net
    34       19  
Income before income taxes
    267       63  
Income tax expense
    53       21  
Net income
  $ 214     $ 42  
                 
Basic earnings per share
  $ 0.07     $ 0.01  
                 
Diluted earnings per share
  $ 0.07     $ 0.01  
                 
Weighted average number of common shares outstanding-
         
  denominator used for basic per share computations
    3,170       3,343  
Weighted average number of dilutive stock options
               
  outstanding
    104       59  
Denominator used for diluted per share computations
    3,274       3,402  
                 
Dividends declared per share
  $ 0.05     $ 0.05  
                 
See notes to condensed consolidated financial statements.
         

5

 
ACME UNITED CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(all amounts in thousands)
             
   
Three Months Ended
 
   
March 31,
 
   
2010
   
2009
 
Operating Activities:
           
  Net income
  $ 214     $ 42  
  Adjustments to reconcile net income
               
      to net cash used by operating activities:
               
        Depreciation
    206       183  
        Amortization
    29       28  
        Stock compensation expense
    77       52  
        Changes in operating assets and liabilities:
               
          Accounts receivable
    448       855  
          Inventories
    (1,208 )     (200 )
          Prepaid expenses and other assets
    (87 )     (109 )
          Accounts payable
    520       (809 )
          Other accrued liabilities
    (653 )     (1,333 )
          Total adjustments
    (668 )     (1,333 )
        Net cash used by operating activities
    (454 )     (1,291 )
                 
Investing Activities:
               
  Purchase of property, plant, and equipment
    (189 )     (275 )
  Purchase of patents and trademarks
    (11 )     (33 )
        Net cash used by investing activities
    (200 )     (308 )
                 
Financing Activities:
               
  (Repayments) borrowing of long-term debt
    (246 )     129  
  Proceeds from issuance of common stock
    30       21  
  Distributions to stockholders
    (158 )     (167 )
  Purchase of treasury stock
    -       (215 )
        Net cash used by financing activities
    (375 )     (232 )
                 
Effect of exchange rate changes
    (22 )     (111 )
Net change in cash and cash equivalents
    (1,051 )     (1,942 )
                 
Cash and cash equivalents at beginning of period
    6,519       5,225  
                 
Cash and cash equivalents at end of period
  $ 5,468     $ 3,283  
                 
See notes to condensed consolidated financial statements.
               

6

 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
(UNAUDITED)
 
Note 1 — Basis of Presentation
 
In the opinion of management, the accompanying condensed consolidated financial statements include all adjustments necessary to present fairly the financial position, results of operations and cash flows of Acme United Corporation (the “Company”).  These adjustments are of a normal, recurring nature.  However, the financial statements do not include all of the disclosures normally required by accounting principles generally accepted in the United States of America or those normally made in the Company's Annual Report on Form 10-K. Please refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2009 for such disclosures.  The condensed consolidated balance sheet as of December 31, 2009 was derived from the audited consolidated balance sheet as of that date.  The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.  The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Management’s Discussion and Analysis of Financial Condition and Results of Operations and financial statements and notes thereto, included in the Company’s 2009 Annual Report on Form 10-K.
 
The Company has evaluated events and transactions subsequent to March 31, 2010 and through the date these consolidated financial statements were included in this Form 10-Q and filed with the SEC.
 
Note 2 — Contingencies
 
The Company is involved from time to time in disputes and other litigation in the ordinary course of business and may encounter other contingencies, which may include environmental and other matters.  The Company presently believes that none of these matters, individually or in the aggregate, would be likely to have a material adverse impact on its financial position, results of operations or liquidity, as set forth in these financial statements.

In December 2008, the Company sold property it owned in Bridgeport, Connecticut to B&E Juices, Inc. for $2.5 million, of which $2.0 million is secured by a mortgage on the property.  The property consists of approximately four acres of land and 48,000 sq. feet of warehouse space.  The property was the site of the original Acme United scissor factory which opened in 1887 and was closed in 1996.
 
Under the terms of the sale agreement, and as required by the Connecticut Transfer Act, the Company is required to remediate any environmental contamination on the property. During 2008, the Company hired an independent environmental consulting firm to conduct environmental studies in order to identify the extent of the environmental contamination on the property and to develop a remediation plan. As a result of those studies and the estimates prepared by the independent environmental consulting firm, the Company recorded an undiscounted liability of approximately $1.8 million related to the remediation of the property. This accrual includes the costs of required investigation, remedial activities, and post-remediation operating and maintenance.

Remediation work on the project began in the third quarter of 2009 and a major portion of the work has been completed. At March 31, 2010, the Company had approximately $670,000 remaining in its accrual for environmental remediation, of which approximately $350,000 was classified as a current liability at that date. The Company expects to pay approximately $200,000 in the quarter ending June 30, 2010 for the ongoing remediation and monitoring work on the site.

In addition to the remediation work, the Company, with the assistance of its independent environmental consulting firm, must continue to monitor contaminant levels on the property to ensure they comply with set governmental standards. The Company expects that the monitoring period could last a minimum of three years from the completion of the remediation work.

In connection with the remediation work completed in the third quarter of 2009, the environmental study was updated by the independent environmental consulting firm. The results of this study produced a remedial action plan with a more narrow scope which allowed the Company, along with its environmental consulting firm, to refine the original project plan resulting in a new estimate of costs to complete the project. The change in estimated costs resulted in a benefit of approximately $460,000 which the Company recorded as other non-operating income during the three months ended September 30, 2009.

7

 
The change in the accrual for environmental remediation for the three months ended March 31, 2010 follows (in thousands):

Balance at
December 31, 2009
Payments
Balance at
March 31, 2010
     
$  681
$  (11)
$  670
     

Also, as part of the sale, the Company has provided the buyer with a mortgage of $2.0 million at six percent interest. The mortgage is payable in monthly installments with the outstanding balance due in full, one year after remediation  and monitoring on the property have been completed. It is estimated that the remediation project will be completed within five years from the date of the sale.

Note 3 — Pension

Components of net periodic pension cost are as follows (in thousands):
 
   
Three Months Ended
 
   
March 31
   
March 31
 
   
2010
   
2009
 
             
Components of net periodic benefit cost:
           
Interest cost
  $ 31     $ 38  
Service cost
    6       6  
Expected return on plan assets
    (24 )     (24 )
Amortization of prior service costs
    2       2  
Amortization of actuarial loss
    39       42  
    $ 54     $ 65  
 
The Company’s funding policy with respect to its qualified plan is to contribute at least the minimum amount required by applicable laws and regulations. In 2010, the Company is required to contribute approximately $250,000.  During the first three months of 2010, the Company contributed approximately $41,000 to the plan. Remaining contributions to the plan will be made as required during the year.

Note 4 — Long Term Debt and Shareholders Equity

The Company’s revolving loan agreement, as amended, provides for borrowings up to $18 million, with all principal amounts outstanding thereunder required to be repaid in a single amount on February 1, 2012. In addition, the Company’s revolving loan agreement requires monthly interest payments.  As of March 31, 2010 and December 31, 2009, the Company had outstanding borrowings of $8,908,000 and $9,154,000, respectively, under the revolving loan agreement.

During the first three months of 2010, the Company issued 16,250 shares of common stock and received proceeds of $29,875 upon the exercise of outstanding stock options.
 
Note 5— Segment Information

The Company reports financial information based on the organizational structure used by management for making operating and investment decisions and for assessing performance. The Company’s reportable business segments consist of: (1) United States; (2) Canada and (3) Europe. The activities of the Company’s Asian operations are closely linked to those of the U.S. operations; accordingly, management reviews the financial results of both on a consolidated basis, and the results of the Asian operations have been aggregated with the results of the United States operations to form one reportable segment called the “United States” “business” or “operating segment”. Each reportable segment derives its revenue from the sales of cutting devices, measuring instruments and safety products for school, office, home, hardware and industrial use.
 
8

 
The chief operating decision maker evaluates the performance of each operating segment based on segment revenues and operating income. Segment amounts are presented after converting to U.S. dollars and consolidating eliminations.
 

 
Financial data by segment (in thousands):
 
   
Three months ended
March 31
 
 
 
2010
   
2009
 
Sales to external customers:            
United States
  $ 9,628     $ 8,484  
Canada
    1,570       1,293  
Europe
    1,923       1,520  
Consolidated
  $ 13,121     $ 11,297  
                 
Operating income:
               
United States
  $ 378     $ 342  
Canada
    70       (12 )
Europe
    (147 )     (248 )
Consolidated
  $ 301     $ 82  
                 
Interest expense, net
    20       7  
Other expense, net
    14       12  
Consolidated income before taxes
  $ 267     $ 63  
                 
                 
   
March 31
   
December 31
 
 
    2010       2009  
Assets by segment                
United States
  $ 31,257     $ 31,377  
Canada
    5,239       5,606  
Europe
    5,412       5,326  
Consolidated
  $ 41,908     $ 42,309  
 
 
Note 6 – Stock Based Compensation
 
The Company recognizes share-based compensation at fair value of the equity instrument on the grant date.  Compensation expense is recognized over the required service period.   Share-based compensation expense was $77,100 and $52,000 for the quarters ended March 31, 2010 and March 31, 2009, respectively. During the three months ended March 31, 2010, the Company issued 70,000 options with a weighted average fair value of $2.86.  The Company did not issue options during the three months ended March 31, 2009. As of March 31, 2010, there was $637,625 of unrecognized compensation cost, adjusted for estimated forfeitures, related to non-vested share –based payments granted to the Company’s employees.
 
Note 7 – Comprehensive Income / (Loss)

Comprehensive income for the three months ended March 31, 2010 and 2009 consisted of the following (in thousands):
 
9

 
   
Three Months Ended
 
   
March 31
 
   
2010
   
2009
 
             
Net income
  $ 214     $ 42  
Other comprehensive (loss) / income -
               
  Foreign currency translation
    (126 )     (366 )
Comprehensive income / (loss)
  $ 88     $ (324 )
 
Note 8 – Fair Value Measurements

The carrying value of the Company’s bank debt and note receivable approximates fair value. Fair value was determined using a discounted cash flow analysis.
 
 MANAGEMENT’S DISCUSSION AND ANALYSIS OF
 
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
Item 2.  – Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
Forward-Looking Information

The Company may from time to time make written or oral “forward-looking statements” including statements contained in this report and in other communications by the Company, which are made in good faith by the Company pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements include statements of the Company’s plans, objectives, expectations, estimates and intentions, which are subject to change based on various important factors (some of which are beyond the Company’s control). The following factors, in addition to others not listed, could cause the Company’s actual results to differ materially from those expressed in forward looking statements: the strength of the domestic and local economies in which the Company conducts operations, the impact of current uncertainties in global economic conditions and the ongoing financial crisis affecting the domestic and foreign banking system and financial markets, including the impact of the Company’s supplier and customers, changes in client needs and consumer spending habits, the impact of competition and technological change on the Company, the Company’s ability to manage its growth effectively, including its ability to successfully integrate any business which it might acquire, and currency fluctuations. A more detailed discussion of risk factors is set forth in Item 1A, “Risk Factors”, included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009.  All forward-looking statements in this report are based upon information available to the Company on the date of this report.  The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by law.

Critical Accounting Policies
 
There have been no material changes to the Company’s critical accounting policies and estimates from the information provided in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009.
 
Results of Operations
 
Net Sales
 
Consolidated net sales for the three months ended March 31, 2010 were $13,121,000, compared with $11,297,000 in the same period in 2009, a 16% increase (13% in local currency). Net sales in the U.S increased 13% principally due to increased sales of new products, including the iPoint pencil sharpener, proprietary non-stick scissors and the SpeedPak utility knife. During the first quarter, the Company also added a number of new customers including major hardware and industrial accounts.  Net sales in the Canadian operating segment increased 21% (2% in local currency).  Net sales in Europe increased by 27% in U.S. dollars (20% in local currency) primarily due to new business in the mass market channel and growth in the office product channel.

10

 
Traditionally, the Company’s sales are stronger in the second and third quarters and weaker in the first and fourth quarters of the fiscal year, due to the seasonal nature of the back-to-school market.
 
Gross Profit
 
Gross profit for the three months ended March 31, 2010 was $5,113,000 (39% of net sales), compared to $4,297,000 (38% of net sales) for the same period in 2009, an increase of 19%.  The increase in gross profit as a percentage of sales for the first quarter was principally due to the leverage of fixed costs over higher sales, a stronger Canadian dollar which reduces the cost of goods in the Canadian operating segment and a favorable product mix in Europe.
 
Selling, General and Administrative Expenses
 
Selling, general and administrative ("SG&A") expenses for the three months ended March 31, 2010 were $4,812,000 (36.7% of net sales), compared with $4,216,000 (37.3% of net sales) for the same period of 2009, an increase of $596,000. The increase in SG&A expenses for the three months ended March 31, 2010, compared to the same period in 2009, was primarily due to higher freight and commission costs which resulted from higher sales. In addition, the Company began to scale-back on certain temporary cost reduction programs implemented in the first quarter of 2009.
 
Operating Income
 
Operating income for the three months ended March 31, 2010 was $301,000, compared with $82,000 in the same period of 2009, an increase of $219,000. Operating income in the U.S. and Canadian segments increased by $36,000 and $82,000, respectively in the first quarter of 2010, compared to the same period of 2009. The operating loss in Europe decreased by approximately $100,000 in the first quarter of 2010 compared to the same period in 2009. The improvement in operating income in all three of the Company’s operating segments is principally due to higher sales and gross profits.
 
Interest Expense, net
 
Interest expense, net for the three months ended March 31, 2010 was $20,000, compared with $7,000 for the same period of 2009, an increase of $13,000.  The increase in interest expense, net during the first three months of 2010 over the comparable period in 2009 was primarily the result of higher average interest rates on the Company’s debt outstanding under its revolving credit facility.
 
Other income (expense), net
 
Net other expense, consisting primarily of foreign currency transaction losses, was $14,000 in the first quarter of 2010, compared to $12,000 in the first quarter of 2009.
 
Income Taxes
 
The effective tax rate in the first quarter of 2010 was 20%, compared to 33% in the first quarter of 2009.  The decrease in the effective tax rate for the three months ended March 31, 2010 was primarily the result of higher proportion of earnings in a foreign tax jurisdiction with a lower tax rate.
 
11

 
Financial Condition
 
Liquidity and Capital Resources
 
During the first three months of 2010, working capital remained essentially constant compared to December 31, 2009. Inventory increased by approximately $1.1 million at March 31, 2010 compared to December 31, 2009. The increase was principally due to the buildup in advance of the back to school season. Inventory turnover, calculated using a twelve month average inventory balance, remained constant at 1.9 at March 31, 2010 and December 31, 2009.  Receivables decreased by approximately $500,000 at March 31, 2010 compared to December 31, 2009. The average number of days sales outstanding in accounts receivable was 60 days at March 31, 2010 compared to 61 days at December 31, 2009.
 
The Company's working capital, current ratio and long-term debt to equity ratio follow:
 
    March 31, 2010     December 31, 2009  
             
Working capital
  $ 28,813,974     $ 28,952,854  
Current ratio
    5.36       5.26  
Long term debt to equity ratio
    36.2 %     37.4 %
 
During the first three months of 2010, total debt outstanding under the Company’s recently modified credit facility, decreased by $246,000 compared to total debt at December 31, 2009. As of March 31, 2010, $8,908,000 was outstanding and $9,092,000 was available for borrowing under the Company’s credit facility.
 
On January 26, 2010, the Company modified its revolving loan agreement with Wachovia Bank; the amendments include (a) a decrease in the maximum borrowing amount from $20 million to $18 million; (b) an extension of the maturity date of the loan from June 30, 2010 to February 1, 2012; (c) an increase in the interest rate to LIBOR plus 2% (from LIBOR plus 7/8%) and (d) modification of certain covenant restrictions.  Funds borrowed under the credit facility may be used for working capital, general operating expenses, share repurchases and certain other purposes.

As discussed in Note 2, at March 31, 2010 the Company had approximately $670,000 remaining in its accrual for environmental remediation, with approximately $350,000 classified as a current liability. The Company intends to use cash flow from operations or borrowings under its revolving credit facility to pay for these costs. The Company does not believe that payment of such remediation costs will have a material adverse affect on the Company’s ability to implement its business plan. In addition, the Company has provided the buyer with a $2.0 million mortgage at 6 percent interest. Payments on the mortgage are due monthly and will also help fund the remediation.

Cash expected to be generated from operating activities, together with funds available under the Company’s revolving credit facility are expected, under current conditions, to be sufficient to finance the Company’s planned operations over the next twelve months.
 
12


MANAGEMENT’S DISCUSSION AND ANALYSIS OF
 
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-Continued

 
Item 3. Quantitative and Qualitative Disclosure About Market Risk
 
Not applicable for smaller reporting companies.
 
 
Item 4T. Controls and Procedures
 
(a)  
Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of March 31, 2010. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective.

(b)  
Changes in Internal Control over Financial Reporting

During the quarter ended March 31, 2010, there were no changes in the Company’s internal control over financial reporting that materially affected, or was reasonably likely to materially affect, our internal control over financial reporting.


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PART II.  OTHER INFORMATION
 
Item 1 — Legal Proceedings
 
The Company is involved from time to time in disputes and other litigation in the ordinary course of business, including certain environmental and other matters.  The Company presently believes that none of these matters, individually or in the aggregate, would be likely to have a material adverse impact on its financial position, results of operations, or liquidity.
 
Item 1A – Risk Factors
 
See Risk Factors set forth in Part I, Item 1A of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2009.
 
Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds
 
None.
 
Item 3.  — Defaults Upon Senior Securities
 
None.
 
Item 4 — Removed and Reserved
 
None.
 
Item 5 — Other Information
 
None.
 
 
Item 6 — Exhibits
 
Documents filed as part of this report.
 
Exhibit 31.1 Certification of Walter C. Johnsen pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
Exhibit 31.2 Certification of Paul G. Driscoll pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
Exhibit 32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
Exhibit 32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 

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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
ACME UNITED CORPORATION
 
By /s/  Walter C. Johnsen    
   Walter C. Johnsen    
   Chairman of the Board and    
   Chief Executive Officer    
       
Dated:  May 10, 2010
   
       
       
       
       
By /s/  Paul G. Driscoll    
  Paul G. Driscoll    
  Vice President and    
   Chief Financial Officer    
       
Dated:  May 10, 2010    
       
       
 
 
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