UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the quarterly period ended March 31, 1994
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT
OF 1934 [NO FEE REQUIRED]
For the transition period from __________to __________
Commission File No. 1-6720
A. T. CROSS COMPANY
(Exact name of registrant as specified in its charter)
Rhode Island 05-0126220
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One Albion Road, Lincoln, Rhode Island 02865
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (401) 333-1200
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, and (2) has been subject to such
filing requirements for the past 90 days. Yes X No______
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of March 31, 1994:
Class A common stock - 15,179,467 shares
Class B common stock - 1,804,800 shares
PART I. FINANCIAL INFORMATION
A. T. CROSS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31 December 31
1994 1993 1993
ASSETS (Thousands of Dollars)
CURRENT ASSETS
Cash and Cash Equivalents $ 73,906 $ 28,683 $ 52,822
Short-Term Investments 7,882 45,622 18,312
Accounts Receivable 22,197 21,729 36,960
Inventories 22,601 32,348 18,964
Other Current Assets 3,287 3,967 3,068
TOTAL CURRENT ASSETS 129,873 132,349 130,126
PROPERTY, PLANT AND EQUIPMENT 78,346 86,921 77,493
Less Allowances for Depreciation 46,998 46,944 45,363
31,348 39,977 32,130
INTANGIBLES AND OTHER ASSETS 16,745 10,741 16,738
$177,966 $183,067 $178,994
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable, Accrued Expenses and
Other Liabilities $ 21,590 $ 16,953 $ 21,243
Compensation and Related Taxes 5,500 4,378 6,647
Cash Dividends Payable 0 0 2,709
Contributions Payable to Employee
Benefit Plans 8,584 6,517 8,632
Income Taxes Payable 884 110 995
TOTAL CURRENT LIABILITIES 36,558 27,958 40,226
ACCRUED WARRANTY COSTS 4,684 4,059 4,609
SHAREHOLDERS' EQUITY
Common Stock, Par Value $1 Per Share:
Class A, Authorized 40,000,000 Shares;
Issued and Outstanding 15,179,467 Shares
in 1994, 15,120,454 and 15,125,982 Shares
in March and December, 1993, respectively 15,179 15,120 15,126
Class B, Authorized 4,000,000 Shares;
Issued and Outstanding 1,804,800 Shares 1,805 1,805 1,805
Capital in Excess of Par Value 10,138 9,205 9,389
Retained Earnings 109,523 125,359 108,162
Accumulated Foreign Currency
Translation Adjustment 79 (439) (323)
136,724 151,050 134,159
$177,966 $183,067 $178,994
A. T. CROSS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED
MARCH 31
1994 1993
(Thousand of Dollars
Except per Share Data)
Net Sales $35,193 $36,475
Cost of Goods Sold 18,507 21,203
16,686 15,272
Selling, General and Administrative Expenses 13,296 12,575
Service and Distribution Costs 1,105 1,447
Research and Development Expenses 468 560
1,817 690
Interest and Other Income 587 726
Income from Continuing Operations
Before Income Taxes 2,404 1,416
Income Taxes 1,043 471
Income from Continuing Operations 1,361 945
Loss from Discontinued Operations - (772)
Net Income $ 1,361 $ 173
Income (Loss) Per Share: - Note B
From Continuing Operations $0.08 $ 0.06
From Discontinued Operations - (0.05)
Net Income Per Share $0.08 $ 0.01
See notes to condensed consolidated financial statements.
A. T. CROSS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED
MARCH 31
1994 1993
(Thousand of Dollars)
Cash Provided By (Used In):
Operating Activities:
Net Cash Provided by Continuing Operations $14,157 $ 15,500
Net Cash Provided by Discontinued Operations - 908
Net Cash Provided By Operating Activities 14,157 16,408
Investing Activities:
Additions to Property, Plant and Equipment (863) (1,801)
Additional Acquisition Payment (69) (52)
Purchase of Short-Term Investments (3,077) (23,629)
Sale or Maturity of Short-Term Investments 13,508 20,811
Net Cash Provided By (Used In)
Investing Activities 9,499 (4,671)
Financing Activities:
Cash Dividends Paid (2,709) (5,414)
Other 62 109
Net Cash Used in Financing Activities (2,647) (5,305)
Effect of Exchange Rate Changes on
Cash and Cash Equivalents 75 (155)
Increase in Cash and Cash Equivalents 21,084 6,277
Cash and Cash Equivalents at Beginning of Period 52,822 22,406
Cash and Cash Equivalents at End of Period $73,906 $ 28,683
See notes to condensed consolidated financial statements.
A. T. CROSS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1994
NOTE A - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. In the
first quarter of 1993, the Company used the gross profit method to
determine approximately half of its interim inventories. Operating results
for the three months ended March 31, 1994 are not necessarily indicative of
the results that may be expected for the year ending December 31, 1994.
The Company typically records its highest sales and earnings in the fourth
quarter. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's annual report on
Form 10-K for the year ended December 31, 1993.
NOTE B - Net Income Per Share
Net income per share has been determined based upon the weighted average
number of Class A and Class B common shares outstanding of 16,935,455 and
16,923,187 for the first quarter ended March 31, 1994 and 1993,
respectively. Common stock equivalents related to outstanding stock
options have not been included in the calculations of earnings per share
because the result is not dilutive.
NOTE C - Discontinued Operations
On June 30, 1993, the Company completed the sale of the Mark Cross
trademark and selected assets of its wholly owned subsidiary Mark Cross,
Inc. and discontinued its retail business. The Company recorded a $772,000
after tax loss in the first quarter of 1993 in connection with this
discontinued operation.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
Results of Operations
Net sales for the first quarter ended March 31, 1994 decreased by $1.3
million or 3.5% from the first quarter of 1993. Domestic sales were 21.6%
less than last year but foreign sales were 30.7% higher than 1993.
Domestic sales, which include leather sales, were unfavorably affected by
inventory reduction programs of certain major customers. The foreign sales
increase is attributable in part to the introduction of the new wide-girth
Townsend line and the positive impact this product has had on the
traditional Century line. Foreign sales to the Far East markets were very
strong as the over-stocked inventory condition that affected many of the
company's foreign distributors has been brought under control and these
customers are better prepared to replenish inventory levels.
The gross profit margin for the first quarter of 1994 was 47.4%, as
compared to 41.9% in 1993. The improvement in margins was largely the
result of lower average costs this quarter as compared to 1993. These
lower costs were the result of the manufacturing changes that were put in
place over the last two years. Prices were not increased this year and are
comparable to prices in the first quarter of last year.
Selling, general and administrative expenses increased 5.7% to $13.3
million in the first quarter of 1994 as a result of planned increases in
advertising expenditures in support of the expanded Townsend product line.
Service and Distribution costs in the first quarter were 23.6% below the
same period in 1993, partially due to timing but also indicative of the
cost savings generated by consolidating the distribution function.
Research and Development expenses were 16.4% lower than the first quarter
of 1993 due to the timing of new product development projects this year as
compared to last. Research and development costs for all of 1994 are
expected to exceed 1993 by approximately 50%.
The effective tax rate for the first quarter of 1994 was 43.4% as compared
to 33.3% for the first quarter of last year. Changes in U.S. tax laws have
caused an increase in the effective tax rate for the Company as income
earned by the company's subsidiary in Ireland will now be taxed at the
higher U.S. rate as compared to a 10% effective rate last year. The
effective income tax rate differs from the U.S. statutory rate of 35%
principally because of the effect of the limited benefits generated from
certain foreign operations sustaining losses.
Liquidity and Sources of Capital
Cash, cash equivalents and short-term investments increased $10.7 million
from December 31, 1993 to $81.8 million at March 31, 1994. Most of this
increase, and the corresponding decrease in accounts receivable, resulted
from cash collected in January 1994 from customers who took advantage of
the 1993 promotion that allowed qualifying domestic customers to defer
payments on their 1993 purchases. Cash available for domestic operations
approximated $28.2 million while cash held off-shore approximated $53.6
million. The Company has available a $50 million line of credit with Fleet
National Bank which provides an additional source of working capital on a
short term basis. No funds were borrowed under this line in either the
first quarter of 1994 or 1993.
On April 28, 1994, the Board of Directors of the Company authorized the
repurchase of up to 1,000,000 shares of its outstanding class A common
stock, with the price and timing of purchases to be at the discretion of
management.
PART II. OTHER INFORMATION
No reports have been filed on Form 8-K pursuant to item 6(b) and no other
items are applicable for three months ended March 31, 1994.
SIGNATURES
Pursuant to the requirement 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.
A. T. CROSS COMPANY
Date: May 11, 1994 By:JOHN E. BUCKLEY
John E. Buckley
Executive Vice President
Chief Operating Officer
Date: May 11, 1994 By: MICHAEL EL-HILLOW
Michael El-Hillow
Vice President, Finance, Treasurer
Chief Financial Officer
Page 6
