Acme United returned to earnings growth in the second quarter of 2026, with net sales up 16% to $62.7 million (up 8% excluding the newly acquired My Medic), net income up 6% to $5.1 million and diluted EPS up 5% to $1.22. Gross margin reached a record 42.6% from 41.0%, driven mainly by My Medic's higher-margin direct-to-consumer mix, while the tariff drag on core U.S. margins narrowed to about 100 basis points from roughly 150 in the first quarter. The core businesses performed well — U.S. first aid and medical up 10% (strength at mass-market retailers), U.S. Westcott cutting tools up 8% on resuming promotions and mostly volume, and Europe up 19% — while Canada lagged at 3% on a sluggish economy. My Medic contributed about $4.3 million at break-even and remained on plan with no consumer weakness, and healthcare now represents roughly 70% of revenue. Year-to-date, however, net income was still down 6% to $6.0 million because of the heavy first-quarter tariff impact, and SG&A rose to 32% of sales on My Medic advertising, with net debt at $27.3 million. Management expects core margins to keep recovering as high-tariff inventory is replaced by lower-cost product, My Medic operating leverage to emerge in the seasonally strong fourth quarter and into 2027 as retail distribution builds, Westcott to keep growing on a full promotional calendar, and Med-Nap hospital certification to be completed by year-end — while maintaining about $10 million of buffer inventory against geopolitical disruption from the war in Iran.
Good morning. Welcome to the second quarter 2026 earnings conference call for Acme United Corporation. I am Walter C. Johnsen, Chairman and CEO. With me is Paul Driscoll, our Chief Financial Officer, who will first read a safe harbor statement. Paul?
Forward-looking statements in this conference call, including, without limitation, statements related to the company's plans, strategies, objectives, expectations, intentions, and adequacy of capital and other resources, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties, including, among others, those arising as a result of a challenging global macroeconomic environment characterized by continued high inflation, high interest rates, and the imposition of new tariffs or changes in existing tariff rates
. In addition, we have experienced supply chain disruptions, and we may experience these disruptions in the future. We are also subject to additional risks and uncertainties as described in our periodic filings with the Securities and Exchange Commission and in our current earnings release.
Thank you, Paul. Acme United made progress during the second quarter of 2026. Our net sales increased from $54 million to $63 million, an increase of 16%. Net income increased from $4.8 million to $5.1 million, and earnings per share increased 5% to $1.22. As you may remember, we acquired MyMedic in January 2026. This addition to the Acme United family sells high-quality first aid kits designed to save lives. It extends the reach of our product line from simple retail kits to advanced ones with chest seals, tourniquets, and tools to clear airways. MyMedic today sells mostly directly to consumers and is seasonal. It has high gross margins and also high advertising and marketing costs. Net sales in 2025 were $19 million. MyMedic sales in the second quarter were approximately $4.3 million, with break-even operations as expected.
We are working to increase the core direct-to-consumer business, as well as expand the product offering to retail. At the same time, we are addressing the product cost through our strong Asian sourcing team, consolidating freight with other Acme United shipments to reduce costs, and eliminating duplicate corporate functions. The intention is to have strong profits for My Medic during all quarters, with particular strength in the fourth quarter. This will take time, but we are realizing savings already. Our core businesses performed well in the second quarter. In the U.S., net sales of first aid and medical products increased 10%, with growth in particular at mass market retailers. Other strong contributors in the quarter were the Safety Made promotional first aid business, Med-Nap antiseptic wipes, and Spill Magic cleanup products. Also, in the U.S., the Westcott Cutting Tools business increased 8% during the second quarter.
As you may remember, our retail business last year was hurt by tariffs and cost uncertainty, and many of our customers canceled their seasonal promotions. This has recovered, and we are seeing a resumption of growth. Our Canadian business increased 3%, driven by industrial, retail, and online sales of our first aid business. In Europe, net sales increased 19%, with strong growth of our Westcott Cutting Tools. Gross margins in the quarter increased for the overall business from 41% to 42.6% due to high margins at My Medic. Without My Medic, gross margins in the U.S. declined approximately 100 basis points due to the cost of high tariffs that were capitalized in our inventory and are now being sold. This is an improvement from the first quarter, and we anticipate continued gross margin expansion as these products are sold in the coming quarters.
When the war with Iran began, we placed orders for approximately $10 million of extra inventory to buffer potential product shortages and cost increases. We continue to maintain this extra level of stock and are positioned to address issues should they arise. As we look to the coming quarters, we see continued growth of the first aid and medical business, resumption of promotional retail activity with our Westcott Cutting Tools, improving profitability at My Medic, and strengthening of our gross margins as high-tariff products are replaced by lower-cost ones. I will now turn the call to Paul.
Acme's net sales for the second quarter were $62.7 million compared to $54 million in 2025, an increase of 16%. Excluding My Medic, sales increased 8%. Sales for the six months ended June 30th, 2026 were $115 million compared to $100 million in the same period in 2025, an increase of 15%. Excluding My Medic, sales increased 7%. Net sales in the U.S. segment increased 17% in the quarter. Excluding My Medic, sales increased 8%. Sales increased 15% for the six months ended June 30th. Excluding My Medic, sales increased 6%.
The increases for both periods were driven by higher sales across all product lines. Net sales in Europe for both the second quarter and six months of 2026 increased 19% in local currency compared to 2025, partly due to the new line of cutting and sharpening tools. The base business also had a good performance with a sales increase of 12%.
Net sales in local currency for Canada increased 3% in the quarter and 6% for the year-to-date, mainly due to higher sales of first aid products. The gross margin was 42.6% in the second quarter of 2026 compared to 41% in 2025. The gross margin was 41.3% for the first six months of 2026 compared to 40.1% in 2025. The gross margin as a percentage of sales increase for both periods was mostly due to the favorable mix from higher margin direct-to-consumer My Medic products. SG&A expenses for the second quarter of 2026 were $19.9 million or 32% of sales compared with $15.8 million or 29% of sales for the same period of 2025. SG&A expenses for the first six months of 2026 were $38.9 million or 34% of sales compared with $31.3 million or 31% of sales in 2025.
The higher SG&A was primarily due to the addition of the My Medic business. The higher percentage of sales was due to the higher amount of advertising needed for the direct-to-consumer My Medic business. Net income for the second quarter of 2026 was $5.1 million or $1.22 per diluted share compared to a net income of $4.8 million or $1.16 per diluted share for the same period of 2025, an increase of 6% in net income and 5% in earnings per share. Net income for the first six months ended June 30th, 2026 was $6 million or $1.46 per diluted share compared to $6.4 million or $1.57 per diluted share in the comparable period last year, decreases of 6% and 7%. The decline in year-to-date net income was mostly due to the impact of higher tariffs in the first quarter. The higher tariff spending commenced in June of 2025.
The costs were capitalized into inventory, and we started to realize the full impact to earnings as the high-cost products were sold in the first quarter of 2026. The impact was lower in the second quarter, and we expect the impact to lessen over the next two quarters as the tariff rate declined in November 2025 and again in February 2026. To the balance sheet. Net debt increased from $22.8 million at June 30th, 2025 to $27.3 million at June 30th, 2026. During the 12-month period ended June 30th, 2026, we paid $14 million for the acquisition of the assets of My Medic, distributed approximately $2.4 million in dividends, and purchased a cutting and sharpening line of products in Germany for $1.6 million. We generated approximately $15 million in free cash flow.
Thank you, Paul. I will now open the call to questions.