UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
[ ] 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 Number 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
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered:
Class A Common Stock ($1. Par Value) American Stock Exchange
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10K or any
amendment to this Form 10-K. [ X ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of February 29, 1996:
Class A common stock - $199,650,000
(For this purpose all directors have been treated as affiliates).
The number of shares outstanding of each of the issuer's classes of common
stock as of February 29, 1996:
Class A common stock - 14,751,010 shares
Class B common stock - 1,804,800 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual report to shareholders for the year ended December
31, 1995 are incorporated by reference into Parts I, II and IV. Portions
of the definitive proxy statement for the 1996 annual meeting of
shareholders are incorporated by reference into Part III.
PART I
Item 1. BUSINESS
A. T. Cross Company (the "registrant") currently operates predominantly in
one business segment, the manufacture and sale of high quality writing
instruments.
The registrant manufactures fine writing instruments consisting of ball-
point and fountain pens, Selectip roller-ball pens (which also accommodate
a porous point refill), mechanical pencils, desk sets and ball-point
refills. The registrant's writing instruments are offered in a variety of
styles and materials, including the traditional, narrow girth Century line
and the wider girth Townsend line, both fabricated primarily in metal, and
the new Solo and Solo Classic lines introduced in 1995, fabricated in
resin. In addition, the registrant markets certain writing instrument
accessories. The registrant continues to be the leading company in the
United States in fine writing instruments priced from $10 to $50. Products
in this price range include Century, Solo and Solo Classic. The Townsend
collection has given the registrant a notable presence in the $55 to $250
price range of products. In 1996, the Company will introduce another metal
based product, Metropolis, which will retail in the United States from $30
to $90. The registrant emphasizes styling, craftsmanship and quality
control in the design and production of its products. All of the
registrant's writing instruments carry a full warranty of unlimited
duration against mechanical failure. The registrant's writing instruments
are packaged and sold as individual units or in matching sets. The
registrant also sells single and double unit desk sets with bases made of
various materials such as onyx, marble and wood.
The registrant's writing instrument products are distributed throughout the
United States by approximately 39 manufacturer's agents or representatives
to about 7,100 active retail and wholesale accounts. Retail accounts
include gift stores, department stores, jewelers, stationery and office
supply stores, mass merchandisers and catalogue showrooms. The wholesale
accounts distribute the registrant's products to retail outlets which
purchase in smaller quantities.
Advertising specialty representatives market the registrant's writing
instruments in the United States to business and industry. Typically, such
products are engraved or carry the purchaser's name or emblem and are used
for gifts, sales promotions, incentive purposes or advertising. The
registrant also sells its products to United States military post
exchanges, service centers and central buying operations.
Sales of the registrant's writing instrument products outside the United
States during 1995 were made by the registrant and by its wholly-owned
subsidiaries to foreign distributors and to retailers principally in
Canada, Latin America, Europe, Africa, the Middle East, Asia, and the Far
East.
The registrant also markets fine quality leather goods (primarily ladies
handbags) and accessories through its wholly-owned subsidiary, Manetti-
Farrow, Incorporated. Manetti-Farrow is the exclusive wholesale
distributor for Fendi and Echo brands of leather products and fashion
accessories in the United States.
In 1993, the registrant sold its Mark Cross trademark and selected assets
of its wholly-owned subsidiary, Mark Cross, Inc. and discontinued its Mark
Cross retail business. See Note J to the registrant's financial statements
included in its annual report to shareholders for the year ended December
31, 1995 (filed herewith as Exhibit 13 and hereinafter referred to as the
"1995 Annual Report"), which note to such financial statements is
incorporated by reference herein.
Raw Materials:
Most raw materials for production of writing instruments in the United
States are obtained domestically. Some desk set base materials, some
fountain pen nibs and front sections, certain finished caps and barrels,
and some lacquer coating of metal shells are imported from Germany and
France. Complete pencil mechanisms, some porous point refill components
and leads, resin caps and barrels and some fountain pen nibs and front
sections are imported from Japan. Raw materials for production of writing
instruments in Ireland are obtained largely from Ireland, Germany, Japan
and the United States.
Patents and Trademarks:
The registrant, directly and through its subsidiaries, has certain
trademark registrations in the United States and many foreign countries,
including but not limited to, its principal trademark "CROSS", and related
trademarks, and the frustoconical top of its writing instruments. The
principal trademark "CROSS" and related goodwill is of fundamental
importance to the business. The registrant also holds certain United
States and foreign patents covering its desk set units, Townsend series
writing instruments, Solo series writing instruments, Solo Classic series
writing Instruments, Metropolis series writing instruments, Signature
series writing instruments, fountain pens, mechanical pencils, and fountain
pen cartridges, and has filed United States and foreign patent applications
on certain of the foregoing writing instruments and other writing
instruments and related items. While the registrant pursues a practice of
seeking patent protection for novel inventions or designs, the Company's
business is not significantly dependent upon obtaining and maintaining
patents. As discussed above, the registrant sold its Mark Cross trademark
in 1993. However, under the terms of that sale, the registrant retained
the right to use the CROSS trademark in certain non-writing instruments
categories, without challenge by the purchaser of the Mark Cross trademark.
Seasonal Business:
Retail demand for the registrant's products is traditionally highest
immediately prior to Christmas and other gift-giving occasions. However,
seasonal fluctuations have not materially affected continuous production of
writing instrument products.
Working Capital Requirements:
The Company utilizes just-in-time inventory techniques. Inventory balances
tend to be highest in anticipation of new product launches and just before
peak selling seasons. The registrant has offered in the past, and may
offer in the future, extended payment terms to domestic customers who meet
minimum purchase levels at certain points during the year, usually
September through November. See the "Management's Discussion and Analysis
of Financial Condition and Results of Operations" section of the 1995
Annual Report, which section of the 1995 Annual Report is incorporated by
reference herein.
Customers:
The registrant is not dependent for a material part of its business upon
any single customer or a small number of customers.
Backlog of Orders:
The backlog of orders is not a significant factor in the registrant's
business.
Government Contracts:
Sales of the registrant's writing instrument products are made to military
post exchanges and service centers, but no contracts are entered into which
are subject to renegotiation or termination by the United States
Government.
Competition:
The writing instrument field is highly competitive. In particular,
competition is strong with respect to product quality and brand
recognition. There are numerous manufacturers of ball-point, roller-ball
and fountain pens and mechanical pencils in the United States and abroad.
Many of such manufacturers produce lower priced writing instruments than
those produced by the registrant. Although the registrant is a major
producer of ball-point, roller-ball and fountain pens and mechanical
pencils in the $10 to $50 price range, other writing instrument companies
have significantly higher sales volumes from a broader product line or have
greater resources as divisions of larger corporations.
Research and Development:
The registrant had expenditures for research and development of new
products and improvement of existing products of approximately $2,991,000
in 1995, $2,036,000 in 1994, and $2,213,000 in 1993.
Environment:
The registrant believes it is in substantial compliance with all Federal,
State and local environmental laws and regulations. It is believed that
future capital expenditures for environmental control facilities will not
be material.
Employees:
The registrant had approximately 1,300 employees at December 31, 1995, of
which 249 were employed by foreign subsidiaries or branches.
Foreign Operations and Export Sales:
Approximately 42% of the registrant's sales in 1995 were in foreign
markets. The registrant's primary foreign markets are in Europe and the
Far East. Sales of writing instrument products to foreign distributors are
subject to import duties in many countries although sales by the
registrant's wholly-owned manufacturing and distribution facilities in
Ireland into European Common Market countries are duty free. The
operations of the registrant's foreign subsidiaries and branches are
subject to the effects of currency fluctuations, to the availability of
dollar exchange, to exchange control and to other restrictive regulations.
Undistributed earnings of the foreign manufacturing and marketing
subsidiaries prior to Revenue Reconciliation Act of 1993 (i.e., the "1993
Act") generally are not subject to current United States federal income and
state income taxes. However, repatriation to the registrant of the
accumulated earnings of foreign subsidiaries would subject such earnings to
United States federal and state income taxes. It is not the intention of
the registrant to repatriate these earnings. The 1993 Act added Internal
Revenue Code Section 956A which had the effect of subjecting a portion of
current foreign earnings (i.e., earnings generated subsequent to the 1993
Act) to United States federal taxation. See Note F to the registrant's
financial statements included in the 1995 Annual Report, which note to such
financial statements is incorporated by reference herein. See geographic
information and export sales data in Note G to the registrant's financial
statements included in the 1995 Annual Report, which note to such financial
statements is hereby incorporated by reference.
___________________________________________________________________________
See the first paragraph under the "Management's Discussion and Analysis of
Financial Condition and Results of Operations" section of the 1995 Annual
Report incorporated herein by reference. In addition to statements in this
document that may be construed as forward-looking statements, there may be
statements in other documents of the registrant and oral statements by
representatives of the registrant to security analysts or investors that
may be construed as forward-looking statements about the business and new
products, sales and expenses, and operating and capital requirements. Any
such statements are subject to risks that could cause the actual results or
needs to vary materially. These risks are discussed in the section
referred to above.
Item 2. PROPERTIES
The registrant currently occupies approximately 269,000 square feet of
manufacturing, warehouse and office space in its facility in Lincoln, Rhode
Island. The registrant's wholly-owned subsidiary, A. T. Cross Limited,
owns and operates an approximately 64,000 square foot manufacturing plant
in Ballinasloe, County Galway, Ireland. Substantially all of these
facilities, which are well maintained and in good repair, are currently
being utilized in either a manufacturing, distribution or administrative
capacity. The productive capacity of these facilities is sufficient to
meet the registrant's needs for the foreseeable future. The registrant
also owns an approximately 130,000 square foot facility in Lincoln,
formerly the site of the registrant's distribution center and certain
administrative offices, which it is offering for sale, and which currently
is partially rented.
The registrant's operations in Germany, Japan, France, Italy, the United
Kingdom, Spain and Hong Kong, all lease their administrative offices and
warehouse space.
Manetti-Farrow leases administrative office space in New York, New York and
warehouse and office space in Oakland, California.
Item 3. LEGAL PROCEEDINGS
No material legal proceedings are pending by or against the registrant or
any of its subsidiaries which would have a material effect upon the
consolidated business and financial condition.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
See the "Market and Dividend Information" section of the 1995 Annual
Report, which section is incorporated by reference herein.
Item 6. SELECTED FINANCIAL DATA
See the "Five-Year Summary" section of the 1995 Annual Report, which
section is incorporated by reference herein.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
See the "Management's Discussion and Analysis of Financial Condition and
Results of Operations" section of the 1995 Annual Report, which section is
incorporated by reference herein.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the registrant and its
subsidiaries and the report of the independent auditors thereon, set forth
in the 1995 Annual Report, are incorporated herein by reference.
Quarterly Results of Operations in Note K of the registrant's financial
statements included in the 1995 Annual Report are incorporated herein by
reference.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
In addition to the directors and executive officers listed on pages 5 and 6
of the registrant's definitive proxy statement for the 1996 annual meeting
of shareholders, which pages are incorporated by reference herein, the
following are executive officers of the registrant (each of whom serves
until his or her successor is elected and has qualified):
Year in Which
Name Age Title First Held Office
Joseph F. Eastman 59 Vice President-Human Resources 1981
David A. Rogers 47 Vice President-U.S. Marketing
and Sales 1988
Michael El-Hillow 44 Vice President-Finance; Treasurer; 1990
Chief Financial Officer
Donald W. Reilly (1) 37 Corporate Controller 1992
Chief Accounting Officer
Tina C. Benik (2) 36 Vice President-Legal, General 1993
Counsel and Corporate Secretary
Steven T. Henick (3) 53 Vice President- 1993
Worldwide Marketing and Sales
J. John Lawler (4) 58 Vice President- 1993
Worldwide Tax and Duty Free
John T. Ruggieri (5) 39 Vice President- 1993
Corporate Development and Planning
Stephen A. Perreault (6) 48 Vice President-Manufacturing 1995
David J. Arthur (7) 37 Director, Engineering 1995
(1) Prior to becoming Corporate Controller in 1992, Donald W. Reilly was a
senior manager with the auditing firm of Ernst & Young.
(2) Prior to becoming Vice President-Legal, General Counsel and Corporate
Secretary, Tina C. Benik was the general counsel of the registrant from
1989 to 1991 and corporate secretary from 1991 to 1993.
(3) Prior to becoming Vice President-Worldwide Marketing and Sales in
1993, Steven T. Henick held various senior executive positions in large
multi-national consumer goods companies, including Procter & Gamble, Inc.,
Tambrands, Inc., and Del International Incorporated.
(4) Prior to becoming Vice President-Worldwide Tax and Duty Free in 1993,
J. John Lawler was the Vice President International of the registrant.
(5) Prior to becoming Vice President-Corporate Development and Planning in
1993, John T. Ruggieri was the Executive Vice President of the registrant's
wholly-owned subsidiary Mark Cross, Inc.
(6) Prior to becoming Vice President-Engineering in 1995, Stephen A.
Perreault held various senior executive positions in the jewelry,
cosmetics, and gift manufacturing and distribution companies, including
Weingeroff Enterprises, Inc., Lantis Corporation, Swarovski Jewelry U.S.
Ltd., and Avon Products, Inc.
(7) Prior to becoming Director, Engineering in 1995, David J. Arthur was
the Manager, New Business Development of the registrant. From 1991-1994 Mr.
Arthur was Group Manager, Corporate R&D and Product Line Manager, Composite
Materials Division, at Rogers Corporation.
Item 11. EXECUTIVE COMPENSATION
See pages 7 through 13 of the registrant's definitive proxy statement for
its 1996 annual meeting of shareholders, which pages are incorporated by
reference herein.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
See pages 3 and 4 of the registrant's definitive proxy statement for the
1996 annual meeting of shareholders, which pages are incorporated by
reference herein.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See pages 5 and 6 of the registrant's definitive proxy statement for the
1996 annual meeting of shareholders, which pages are incorporated by
reference herein.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) and (2) - The response to this portion of Item 14 is submitted
as a separate section of this report.
(3) Listing of Exhibits
(3) Restated Articles of Incorporation and By-laws
(incorporated by reference to Exhibit (3) to the
registrant's report on Form 10-K for the year ended
December 31, 1980); Amendment to Restated Articles
of Incorporation, Amendment to By-laws adopted
December 2, 1988 (incorporated by reference to
Exhibit (3) to the registrant's report on Form 10-K
for the year ended December 31, 1989); Amendment to
By-laws adopted February 6, 1992 (incorporated by
reference to Exhibit (3) to the registrant's report on
Form 10-K for the year ended December 31, 1991)
(10.1) A. T. Cross Company Executive Compensation Program
Performance Cash Plan, January 1, 1995 (incorporated by
reference to Exhibit (10.1) to the registrant's report
on Form 10-K for the year ended December 31, 1994)*
(10.2) A. T. Cross Company Executive Compensation Program
Annual Incentive Plan, January 1, 1995 (incorporated by
reference to Exhibit (10.2) to the registrant's report
on Form 10-K for the year ended December 31, 1994)*
(10.3) A. T. Cross Company Non-Qualified Stock Option Plan,
1975 (as amended and restated February 4, 1988, as
amended December 10, 1991, as amended October 21, 1993,
and as further amended and restated December 6, 1994)*
(10.4) A. T. Cross Company Incentive Stock Option Plan, 1981
(as amended February 6, 1992 and as further amended
April 28, 1994) (incorporated by reference to Exhibit
(10.4) to the registrant's report on Form 10-K for the
year ended December 31, 1994)*
(10.5) A. T. Cross Company Deferred Compensation Plan
(incorporated by reference to Exhibit (10.5) to the
registrant's report on Form 10-K for the year ended
December 31, 1994)*
(10.6) A. T. Cross Company Unfunded Excess Benefit Plan (as
amended) (incorporated by reference to Exhibit (10.6)
to the registrant's report on Form 10-K for the year
ended December 31, 1994)*
(10.7) A. T. Cross Company Restricted Stock Plan*
(11) Statement Re: Computation of Per Share Earnings
(13) Annual Report to Shareholders for the year ended
December 31, 1995. Filed only in respect to the
portions incorporated by reference in this Form 10-K.
(21) Subsidiaries - incorporated by reference to the
"Subsidiaries and Branches" section of the registrant's
1995 Annual Report
(23) Consent of Ernst & Young
(27) Financial Data Schedules - filed electronically
(b) No reports on Form 8-K were filed in the fourth quarter of 1995.
(c) Exhibits--See Item (a)(3) above
(d) Financial Statement Schedules--The response to this portion of
Item 14 is submitted as a separate section of this report.
SIGNATURES
Pursuant to the requirements of Section 13 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
By: BRADFORD R. BOSS
Bradford R. Boss
Chairman
Dated: March 29, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated:
Signature Title Date
BRADFORD R. BOSS Chairman & Director March 29, 1996
(Bradford R. Boss)
RUSSELL A. BOSS President & Director March 29, 1996
(Russell A. Boss) (Chief Executive Officer)
JOHN E. BUCKLEY Executive Vice President March 29, 1996
(John E. Buckley) & Director
(Chief Operating Officer)
MICHAEL EL-HILLOW Vice President, Finance March 29, 1996
(Michael El-Hillow) Treasurer
(Chief Financial Officer)
DONALD W. REILLY Corporate Controller March 29, 1996
(Donald W. Reilly) (Chief Accounting Officer)
BERNARD V. BUONANNO, JR. Director March 29, 1996
(Bernard V. Buonanno, Jr.)
H. FREDERICK KRIMENDAHL, II Director March 29, 1996
(H. Frederick Krimendahl, II)
THOMAS C. MCDERMOTT Director March 29, 1996
(Thomas C. McDermott)
TERRENCE MURRAY Director March 29, 1996
(Terrence Murray)
JAMES C. TAPPAN Director March 29, 1996
(James C. Tappan)
EDWIN G. TORRANCE Director March 29, 1996
(Edwin G. Torrance)
ANNUAL REPORT ON FORM 10-K
ITEM 14 (a)(1) and (2), (c) and (d)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
CERTAIN EXHIBITS
FINANCIAL STATEMENT SCHEDULES
YEAR ENDED DECEMBER 31, 1995
A. T. CROSS COMPANY
LINCOLN, RHODE ISLAND
FORM 10-K - ITEM 14(a)(1) and (2)
A. T. CROSS COMPANY AND SUBSIDIARIES
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of A. T. Cross Company and
its subsidiaries, included in the annual report of the registrant to its
shareholders for the year ended December 31, 1995, are incorporated by
reference in Item 8:
Consolidated Balance Sheets - December 31, 1995 and December 31, 1994
Consolidated Statements of Income and Retained Earnings - Years Ended
December 31, 1995, 1994 and 1993
Consolidated Statements of Cash Flows - Years Ended December 31, 1995,
1994 and 1993
Notes to Consolidated Financial Statements - December 31, 1995
The following consolidated financial statement schedule of A. T. Cross
Company and its subsidiaries is included in Item 14(d):
Schedule II - Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions, or the information required
therein has otherwise been disclosed in the consolidated financial
statements referred to above, or are inapplicable, and therefore have been
omitted.
<TABLE>
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
A. T. CROSS COMPANY AND SUBSIDIARIES
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
Additions
(A)
Balance at Charged to Charged to Balance
Beginning Costs and Other Accounts Deductions at End of
DESCRIPTION of Period Expenses Describe Describe Period
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1995
Deducted from asset account:
Allowance for doubtful
accounts $1,828,000 $360,755 $443,755(A) $1,745,000
Year Ended December 31, 1994
Deducted from asset account:
Allowance for doubtful
accounts $1,632,000 $405,592 $209,592(A) $1,828,000
Year Ended December 31, 1993
Deducted from asset account:
Allowance for doubtful
accounts $1,550,000 $422,719 $340,719(A) $1,632,000
(A) Uncollectible accounts written off.
</TABLE>
EXHIBIT 10.3
A. T. CROSS COMPANY
NON-QUALIFIED STOCK OPTION PLAN (1975)
(As amended and restated February 4, 1988,
as amended December 10, 1991, amended October 21, 1993, and
as further amended and restated December 6, 1994)
1. Purpose:
This Non-Qualified Stock Option Plan (herein called the "Non-Qualified
Plan") of A. T. CROSS Company, a Rhode Island corporation with its
principal place of business in Lincoln, Rhode Island (herein called the
"Company"), constitutes the A. T. CROSS Company Non-Qualified Stock Option
Plan (1975) as amended and restated to February 4, 1988, and further
amended by the Board of Directors on December 10, 1991, and as further
amended by the Board of Directors on October 21, 1993, and as further
amended and restated by the Board of Directors to December 6, 1994, and is
designed to provide, through the medium of options for the purchase of
shares of Class A common stock of the Company, additional incentives for
Directors of the Company and key employees of the Company and its
subsidiaries and, by encouraging stock ownership, to increase their
proprietary interest in the progress of the Company. The Non-Qualified
Plan is intended to supplement the Company's Incentive Stock Option Plan
adopted in 1981, as amended and restated.
2. Administration:
a. The Non-Qualified Plan will be administered
by a Compensation Committee appointed by the Board of Directors
from time to time and consisting of not less than two members of
the Board of Directors of the Company who are not full-time
employees of the Company. The Compensation Committee's
interpretation of the terms and provisions hereof shall be final
and conclusive.
b. The Compensation Committee may, in its sole
discretion, subject to the terms and provisions hereof, grant
options to purchase shares of the Company's Class A common stock
and issue shares of such common stock upon the exercise of any such
options so granted.
c. The Board of Directors shall adopt as the
option to be granted hereunder such form of Option Agreement with
such provisions consistent with the Non-Qualified Plan as the Board
of Directors shall deem appropriate.
d. No Director or member of the Compensation
Committee shall be liable for any action or determination made in
good faith under the Non-Qualified Plan.
3. Eligibility:
The Directors of the Company and such key employees of the Company or
of any subsidiary of the Company (as hereinafter defined) as shall have
been designated by the Board from time to time shall be eligible to
participate in the Non-Qualified Plan. For purposes of the Non-Qualified
Plan, a Company shall be deemed to be a "subsidiary" if a majority of its
outstanding shares of voting stock are owned or controlled by the Company.
Key employees (herein collectively called "Employees") shall be those
employees who, together with officers of the Company or any such
subsidiary, are deemed by the Board to be of primary importance in the
operation of the business of the Company or any such subsidiary. The
Compensation Committee may, in its discretion, but subject to the terms and
provisions hereof, from time to time grant options to any or all eligible
Directors and Employees to purchase such number of shares as the
Compensation Committee shall determine.
4. Stock Subject to Options:
a. The maximum number of shares of Class A
common stock which may on or after December 6, 1994 be made the
subject of options under the Non-Qualified Plan is seven hundred
forty-two thousand, three hundred seven (742,307) shares. Of such
number, a maximum of fifty thousand (50,000) shares shall be
eligible for options granted after December 6, 1994 to members of
the Board of Directors of the Company pursuant to paragraph 5,
below.
b. The maximum number of shares which may be
made the subject of option grants to a Director of the Company who
at the time of the grant of such option is a full-time employee of
the Company shall, in any calendar year, not exceed the number of
shares which are the subject of grants to such director during
such calendar year under paragraph 5, below, plus eighty thousand
(80,000) shares."
c. The maximum number of shares fixed in
subparagraphs (a) and (b), above, shall be appropriately adjusted
for stock splits, stock dividends and recapitalizations effected
after the approval of the Non-Qualified Plan by the shareholders of
the Company.
d. The shares of Class A common stock which may
be the subject of option grants hereunder may be either authorized
and unissued shares or issued shares reacquired by the Company and
held in the Company's treasury. Any shares which are made the
subject of an option which is for any reason unexercised prior to
its expiration may again be subjected to an option or options under
the Non-Qualified Plan.
5. Grants to Directors:
On October 1 of each year, or if such day shall not be a trading day
on the American Stock Exchange or such other principal stock exchange on
which the Company's Class A common stock shall be listed for trading at the
time, on the next such trading day, an option for the purchase of shares of
Class A common stock of the Company shall, without further action of the
Board of Directors or the Committee, be granted automatically to each
member of the Board of Directors of the Company. The number of shares
which shall be the subject of an option granted to a Director pursuant to
the foregoing shall be derived by dividing (i) the compensation paid or
payable to such Director for his or her services to the Company in his or
her capacity as Director during the next preceding calendar year by (ii)
the mean between the high and low trading prices, on the American Stock
Exchange or such other principal stock exchange referred to above, for a
share of Class A common stock of the Company on the last business day of
such next preceding calendar year, or if
no shares of such common stock shall have been traded on such day, on the
next previous day on which shares of such common stock shall have been
traded. A Director of the Company who is not a full-time employee of the
Company shall be ineligible to receive options under the Non-Qualified Plan
in addition to those provided for in this paragraph 5.
6. Purchase Price:
a. The purchase price per share with respect to
an option granted hereunder shall be the mean between the high and
the low trading prices of the Company's Class A common stock on
the date that such option is granted, or, if no shares of such
common stock shall have been traded on such date, on the next
previous date on which shares of such common stock shall have been
traded.
7. Term and Exercise of Options:
a. The term of each option shall be ten (10)
years, or such shorter period as may be determined by the
Compensation Committee, from the date of grant of the option,
unless sooner terminated under the provisions of paragraph 10.
Each option shall become vested and exercisable at such time or
times, in installments or otherwise, as may be determined by the
Compensation Committee and set forth in a written agreement
evidencing the grant of such option, provided, that no option
granted to a Director hereunder may be exercised in whole or in
part prior to the first anniversary of the date of such grant. No
option shall be granted after the termination of the Non-Qualified
Plan, but options theretofore granted may be exercised thereafter
in accordance with their terms and the provisions of the Non-
Qualified Plan. Any option granted under the Non-Qualified Plan
may be exercised notwithstanding the fact that the Director or
Employee holds stock options granted under the Company's Incentive
Stock Option Plan or prior non-qualified options granted under the
Non-Qualified Plan.
b. When any shares are purchased, the purchase
price for the number of shares purchased shall be paid in full.
The purchase price may be paid in cash (including personal check)
or by the delivery to the Company of other shares of Class A common
stock of the Company already owned by the individual exercising the
option, or by any combination of cash and such shares. Shares so
delivered will be credited against the purchase price in an amount
equal to their fair market value on the date of delivery, and their
fair market value shall be deemed to be the mean between the high
and low trading prices of the Company's Class A common stock on the
date of delivery or, if no shares of such common stock shall have
traded on such date, on the next previous date on which shares of
such common stock shall have been traded.
c. Until payment in full and the issuance of
stock certificates, an Employee or Director shall have no right to
vote or receive dividends or any other rights as a stockholder with
respect to shares which he has an option to purchase. No
adjustment will be made for dividend or other rights for which the
record date is prior to the date the stock certificate is issued.
8. Issuance of Stock:
Shares of stock will be issued and certificates therefor will be
delivered to a Director or an Employee upon his making payment for shares
for which he has exercised his option to purchase, but less than five (5)
shares will not be issued.
9. Transferability of Options.
Options under the Non-Qualified Plan shall not be transferable other
than by will or by the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Internal Revenue Code
of 1986, as amended, or Title I of the Employee Retirement Income Security
Act, or the rules thereunder, and are exercisable during the lifetime of
the grantee only by such grantee.
10. Termination of Employment and Death:
If the employment of an Employee (including an Employee who is also a
Director) holding options under the Non-Qualified Plan shall terminate, or
if the office of a Director who is not a full-time employee of the Company
or a subsidiary shall terminate, in either case for any reason whatsoever
(including retirement, resignation, dismissal, or death), the options of
such Employee or Director under the Non-Qualified Plan shall end
automatically six (6) months after the date of such termination, unless
sooner ended by their term. Prior to the expiration of such six (6) month
period, during the term of such options, such Director or Employee (or his
executor or administrator in the event of his death during such period)
shall have the right to exercise such options to purchase the shares of
stock which are subject thereto.
11. Readjustment of Stock or Recapitalization:
Upon any recapitalization or readjustment of the Company's capital
stock whereby the character of the present Class A common stock shall be
changed, appropriate adjustments shall be made so that the stock to be
purchased under the Non-Qualified Plan shall be the equivalent of the
present Class A common stock of the Company, after such readjustment or
recapitalization. In the event of a subdivision or combination of the
shares of Class A common stock of the Company, the number of shares that
may be optioned and sold to Directors and Employees under the Non-Qualified
Plan will be proportionately increased or decreased and the price will be
proportionately adjusted by the Board of Directors and, in case of
reclassification or other change in the shares of Class A common stock of
the Company, such action will be taken as in the opinion of the Board of
Directors will be appropriate under the circumstances. Accordingly, in
such cases the maximum number of authorized but unissued shares, or shares
purchased by the Company and held as treasury stock, to be covered by the
Non-Qualified Plan may be increased by the Board of Directors without
stockholder or any other action.
12. Term of the Non-Qualified Plan.
The Non-Qualified Plan shall become effective on the date of its
adoption by the Board of Directors, subject to approval by the
stockholders, and shall continue in effect until terminated under paragraph
13. The powers of the Board of Directors shall continue in effect after
the termination of the Non-Qualified Plan, until exercise or expiration of
all options then outstanding.
13. Amendment and Termination:
The Board of Directors at any time may amend, suspend or terminate the
Non-Qualified Plan. No action of the Board, however, may without the
consent of the holder alter or impair any option previously granted under
the Non-Qualified Plan (except pursuant to paragraph 11). In addition, no
action of the Board may, unless duly approved by both the Class A and Class
B common stockholders voting as a single class: (i) increase the maximum
number of shares which may be optioned and sold under the Non-Qualified
Plan (except pursuant to paragraph 11); (ii) change the option price
(except pursuant to paragraph 11); or (iii) permit granting options for a
period longer than herein provided. The provisions of paragraph 5 shall
not be amended more than once every six months, other than to comport with
changes in the Internal Revenue Code, the Employee Retirement Income
Security Act, or the rules thereunder.
14. Obligation of the Company to Issue Shares:
Notwithstanding any other provision of the Non-Qualified Plan the
Company shall not be obligated to issue any shares pursuant to any stock
option unless or until:
a. the shares with respect to which the option
is being exercised have been registered under the Securities Act of
1933, as amended, or are exempt from such registration in the
opinion of the Company's counsel;
b. the prior approval of such sale or issuance
has been obtained from any state regulatory body having
jurisdiction;
c. in the event the stock has been listed on any
stock exchange, the shares with respect to which the option is
being exercised have been duly listed on such exchange in
accordance with the procedures specified therefor;
d. the Company has in its possession an amount
required to be withheld under provisions of the Internal Revenue
Code on account of the exercise of such option as more particularly
set forth in paragraph 15 of the Non-Qualified Plan.
15. Withholding of Taxes Upon Exercise:
Pursuant to the provisions of the Internal Revenue Code and
regulations thereunder, the holder of a non-qualified stock option realizes
ordinary taxable income ("realized income") at the time of exercise of the
option measured by the difference between the exercise price and the fair
market value of the purchased shares at the time of exercise. Such
regulations also provide that the Company must withhold and pay over
directly to the Internal Revenue Service a specified percentage of such
realized income. The Company may withhold such amount (as varied from time
to time by the Internal Revenue Code or regulations thereunder) from any
salary, bonus, compensation or other property due or belonging to the
holder as a condition precedent to issuing any shares of stock on account
of the exercise of any option granted hereunder.
EXHIBIT 10.7
A. T. CROSS COMPANY
RESTRICTED STOCK PLAN
This A. T. Cross Company Restricted Stock Plan (the "Plan") is adopted
by A. T. Cross Company, a Rhode Island corporation (the "Company"), for the
purpose of providing restricted stock awards in payment of certain bonuses
earned under the A.T. Cross Company Annual Incentive Plan.
1. Definitions. For purposes of the Plan, the following terms shall
have the meanings set forth below:
"Board" means the Board of Directors of A. T. Cross Company.
"Change in Control" means (i) a change in the beneficial ownership (as
defined in Rule 16a-1(a)(2)) of more than 50% of the Class B Common Stock
of the Company, (ii) approval by Company stockholders of a consolidation, a
merger in which the Company will not be the surviving corporation, or the
sale of substantially all of the Company's assets.
"Class B Common Stock" means the Class B Common Stock, $1.00 par value
of the Company.
"Committee" means the Compensation Committee of the Board or a
substitute committee appointed by the Board of the Company, consisting of
at least two directors, each of whom is a "disinterested person", as
defined in Rule 16b-3, with respect to the Plan.
"Common Shares" means the Class A Common Stock, $1.00 par value, of
the Company.
"Disability" means a determination by the Committee that a Participant
is unable to perform the duties required of the Participant by the Company
as a result of physical or mental impairment.
"Market Price" means the average of the highest and lowest price of
the Company's Common Shares as reported by the American Stock Exchange.
"OIBT" for any period means the audited operating income before taxes
of the Company's writing instrument division for such period.
"Participant" means an employee who receives an award of Restricted
Shares under the Plan as determined by the Committee.
"Restricted Period" means the period commencing with the award of
Restricted Shares and terminating in accordance with the provisions of
Paragraph 7 or Paragraph 9 hereof.
"Restricted Shares" means Common Shares which are awarded subject to
the restrictions described in Paragraph 7 hereof.
"Rule 16a-1(a)(2)" means Rule 16a-1(a)(2) promulgated by the
Securities and Exchange Commission under Section 16(a) of the Securities
Exchange Act of 1934.
"Rule 16b-3" means Rule 16b-3 promulgated by the Securities and
Exchange Commission under Section 16(b) of the Securities Exchange Act of
1934.
2. Administration. The Plan shall be administered by the Committee.
The Committee may establish, subject to the provisions of the Plan, such
rules and regulations as it deems necessary for the proper administration
of the Plan, and make such determinations and take such actions in
connection therewith or in relation to the Plan as it deems necessary or
advisable, consistent with the Plan.
3. Eligibility. Employees of the Company who are eligible to
participate in the Annual Incentive Plan shall be eligible to participate
in the Plan as determined by the Committee.
4. Shares Subject to the Plan. The Common Shares to be issued as
Restricted Shares under the Plan may be either authorized but unissued
shares or treasury shares. The aggregate number of Common Shares of the
Company which may be issued under the Plan shall not exceed 60,000 shares;
subject, however, to the adjustment provided in Paragraph 11 in the event
of stock splits, stock dividends, exchanges of shares or the like occurring
after the effective date of the Plan. No Restricted Shares may be issued
under the Plan which could cause such maximum limit to be exceeded.
5. Awards of Restricted Shares. Awards of Restricted Shares pursuant
to the Plan shall be made to eligible employees in full or partial payment
of bonuses earned under the Annual Incentive Plan as determined by the
Committee. The number of Restricted Shares awarded in the case of any
bonus shall be equal to the cash value of the bonus earned under the Annual
Incentive Plan which is to be paid in Restricted Shares divided by the
Market Price on the last trading day of the fiscal year for which the bonus
was earned. Fractional shares shall be paid in cash.
Each award of Restricted Shares shall be embodied in a "Restricted
Share Agreement" signed by the Participant and the Company and providing
that the Restricted Shares shall be subject to the provisions of the Plan
and containing such other provisions as the Committee may prescribe not
inconsistent with the Plan.
6. Rights and Obligations with Respect to Stock. Upon the award of
Restricted Shares pursuant to the Plan, there shall be issued in the name
of each Participant a certificate or certificates representing the
Restricted Shares awarded, and the Participant shall thereupon be a
stockholder and have all the rights of a stockholder with respect to such
shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such shares; provided however,
that such Restricted Shares, and any new, additional or different
securities the Participant may become entitled to receive with respect to
such Restricted Shares by virtue of a stock split, dividend or any other
change in the corporate or capital structure of the Company, shall be
subject to the restrictions described in Paragraph 7 hereof. Certificates
for Restricted Shares shall be held by the Company on behalf of a
Participant until the termination of the Restricted Period as provided in
Paragraph 7(b) or Paragraph 9 hereof.
7. Specific Restrictions. All Restricted Shares held by a
Participant shall be subject to the following restrictions:
(a) During the Restricted Period, the shares may not be sold,
exchanged, transferred, pledged, hypothecated, or otherwise disposed of by
the Participant other than by will or the laws of descent and distribution.
(b) If OIBT for the fiscal year immediately preceding the fiscal year
in which an award of Restricted Shares is made is less than $25,000,000,
the Restricted Period shall terminate with respect to one-half of such
award at the end of the fiscal year for which OIBT equals or exceeds
$25,000,000; the Restricted Period for the remaining one-half of the
Restricted Shares will terminate at the end of the fiscal year for which
OIBT is equal to or greater than two times OIBT for the calendar year 1994.
If OIBT for the fiscal year immediately preceding the fiscal year in which
an award of Restricted Shares is made is equal to or greater than
$25,000,000, the Restricted Period shall terminate at the end of the fiscal
year for which OIBT is equal to or greater than two times OIBT for the
fiscal year 1994. If OIBT is not at least two times the 1994 OIBT by the
end of the 1999 fiscal year, any remaining Restricted Shares will be
forfeited by the Participant and revert to the Company.
(c) Upon the termination of the Restricted Period with respect to
Restricted Shares, such shares shall no longer be considered Restricted
Shares and shall be delivered to the Participant or the Participant's
permitted assigns as soon as reasonably practicable following the
determination by the Committee that such termination is in accordance with
the terms of the Plan.
(d) Restricted Shares awarded by the Committee under the Plan shall
be issued only in full compliance with all applicable securities laws,
including laws, rules and regulations of the Securities and Exchange
Commission and applicable state Blue Sky laws. With respect thereto, the
Committee may impose such conditions on transfer, restrictions and
limitations as it may deem necessary and appropriate to assure compliance
with such applicable securities laws.
8. Termination of Employment During Restricted Period. Unless the
Committee determines otherwise at the time of award or any time subsequent
thereto, if a Participant's employment with the Company is terminated
during the Restricted Period other than by reason of death or Disability,
the Participant shall thereupon forfeit all Restricted Shares and all
rights with respect thereto shall terminate.
Unless the Committee shall otherwise determine at the time of award or
any time subsequent thereto, if a Participant's employment with the Company
is terminated during the Restricted Period because of death or Disability,
the restrictions contained in Paragraph 7(a) hereof shall terminate as
provided in Paragraph 7 (b) hereof.
9. Change in Control. Unless the Committee in its sole discretion
shall determine otherwise, upon a Change in Control, all Restricted Periods
shall end, and the restrictions applicable to all previous awards of
Restricted Shares shall terminate.
10. Section 83(b) Elections. A Participant who files an election
with the Internal Revenue Service to include the fair market value of any
Restricted Shares in gross income during a Restricted Period shall promptly
furnish the Company with a copy of such election together with the amount
of any federal, state, local or other taxes required to be withheld to
enable the Company to claim an income tax deduction with respect to such
election.
11. Share Adjustments. In the event there is any change in the
Company's Common Shares resulting from stock splits, stock dividends,
combinations or exchanges of shares, or other similar capital adjustments,
equitable proportionate adjustments shall automatically be made without
further action by the Committee in (i) the number of shares available for
award under the Plan, and (ii) the number of Restricted Shares then held
for the accounts of Participants under the Plan.
12. Amendment or Termination. The Committee may terminate this Plan
at any time, and may amend the Plan at any time or from time to time;
provided, however, that any amendment that would increase the aggregate
number of shares that may be issued under the Plan, materially increase the
benefits accruing to employees under the Plan, or materially modify the
requirements as to eligibility for participation in the Plan shall be
subject to the approval of the Company stockholders to the extent required
by Rule 16b-3, or other applicable laws or any other governing rules or
regulations, except that any such increase or modification that may result
from adjustments authorized by Paragraph 11 hereof shall not require such
approval. If the Plan is terminated, any Restricted Shares shall continue
to be subject to the terms of this Plan for the duration of the Restricted
Period.
13. Tax Withholding. Any award of Restricted Shares hereunder shall
provide appropriate arrangements for the satisfaction by the Company and
Participant of all federal, state, local or other income, excise or
employment taxes or tax withholding requirements applicable to the receipt
of Restricted Shares as determined by the Committee.
14. No Effect on Employment Status. The fact that an employee has
been granted Restricted Shares under this Plan shall not limit or otherwise
qualify the right of the Company to terminate the employee's employment at
any time.
15. Effective Date of the Plan. The Plan shall become effective upon
the approval of the Plan by the Company's Board and the holders of the
Class B Common Stock.
16. Rhode Island Law to Govern. This Plan shall be construed and
administered in accordance with and governed by the laws of the State of
Rhode Island.
IN WITNESS WHEREOF, the Company has caused this Restricted Stock Plan
to be executed by its duly authorized officer as of this 27th day of April,
1995.
A. T. CROSS COMPANY
By:_/s/ John E. Buckley_____________________
Title: Executive Vice President and
Chief Operating Officer
EXHIBIT 11--STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
A. T. CROSS COMPANY AND SUBSIDIARIES
Year Ended December 31
1995 1994 1993
Earnings (loss) per common share:
Weighted average shares outstanding 16,528,876 16,872,505 16,927,411
Net income (loss) $13,365,353 $10,533,922 $(3,480,926)
Per share amount * $0.81 $ 0.62 $(0.21)
Primary:
Weighted average shares outstanding 16,528,876 16,872,505 16,927,411
Dilutive stock options--based on the
treasury stock method using average
market price 77,320 78,315 -
TOTAL 16,606,196 16,950,820 16,927,411
Net income (loss) $13,365,353 $10,533,922 $(3,480,926)
Per share amount $0.80 $ 0.62 $(0.21)
Fully diluted:
Weighted average shares outstanding 16,528,876 16,872,505 16,927,411
Dilutive stock options--based on the
treasury stock method using the market
price at the end of each quarter,
if higher than average market price 77,659 78,477 -
TOTAL 16,606,535 16,950,982 16,927,411
Net income (loss) $13,365,353 $10,533,922 $(3,480,926)
Per share amount $ 0.80 $ 0.62 $(0.21)
* Stock options are not included in the computation of per share earnings
as the effect is not material.
A. T. CROSS 1995 ANNUAL REPORT
150 Years of Excellence
A.T. CROSS COMPANY PROFILE
The A. T. Cross Company is a major international manufacturer of fine
writing instruments which are sold to the consumer market through fine
stores worldwide, and to the business gift market via a network of
companies specializing in recognition and awards programs. Cross presently
markets five lines of writing instruments: CenturyRegistration Mark, Cross
TownsendRegistration Mark, soloRegistration Mark, Solo classicRegistration
Mark, and Metropolistrademark. Each series is designed to meet the
preferences and tastes of a particular audience. Each offers distinctive
styles, appointments and finishes - from precious metals to composite resin
- - and is priced to meet specific market requirements. Cross also produces
desk sets which feature bases crafted from walnut, onyx, cherry and marble.
Leather and gift business is conducted by Manetti-Farrow, Incorporated.
Based in New York City, this wholly-owned subsidiary of the A .T. Cross
Company distributes Fendi and Echo brand leather products and fashion
accessories in the U.S. under exclusive agreements.
Five-Year Summary, Market & Dividend Information - page 1
Shareholders' Letter - pages 2-3
Cross Highlights - pages 4-9
Financial Highlights - page 10
Consolidated Balance Sheets - page 11
Consolidated Statements of Income & Retained Earnings - page 12
Consolidated Statements of Cash Flows - page 13
Notes to Consolidated Financial Statements - pages 14-20
Report of Ernst & Young - page 21
Management's Discussion & Analysis - pages 21-24
Corporate Information - Inside Back Cover
For our one hundred and fiftieth anniversary, we've created our very first
limited edition collection. Shown on our cover, this design features a
striking engraved flamestitch pattern accented by inlaid barrel bands and a
distinctive ball clip. Faithfully recreated from a popular design of the
1930's in a fountain pen, ball-point pen, and pencil.
<TABLE>
Five-Year Summary
A.T. Cross Company & Subsidiaries
(Thousands of Dollars) 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Operations:
Net Sales From Continuing Operations $191,090 $177,136 $164,606 $187,130 $205,248
Income From Continuing Operations
Before Income Taxes 20,253 19,016 1,618 19,012 31,964
Income Taxes 6,888 8,482 1,099 6,239 9,200
Income From Continuing Operations 13,365 10,534 519 12,773 22,764
Loss From Discontinued Operations - - (4,000) (1,955) (1,577)
Net Income (Loss) 13,365 10,534 (3,481) 10,818 21,187
Cash Dividends Declared 10,581 10,738 13,544 21,648 21,589
Capital Expenditures 10,839 7,662 8,494 4,603 7,094
Depreciation 6,578 5,899 5,495 5,000 5,032
(Thousands of Dollars)
Financial Position:
Current Assets 135,143 130,727 130,126 143,632 156,906
Current Liabilities 52,439 46,758 40,226 39,831 42,700
Total Assets 189,362 180,369 178,994 194,455 207,635
Working Capital 82,704 83,969 89,900 103,801 114,206
Net Property, Plant and Equipment 38,237 33,950 32,130 40,162 40,594
Shareholders' Equity (Net Worth) 131,714 128,702 134,160 150,616 161,174
(Dollars)
Per Share Data:
Net Income (Loss):
From Continuing Operations 0.81 0.62 0.03 0.76 1.35
From Discontinued Operations - - (0.24) (0.12) (0.09)
Total 0.81 0.62 (0.21) 0.64 1.26
Cash Dividends Declared 0.64 0.64 0.80 1.28 1.28
Shareholders' Equity (Book Value) 7.96 7.79 7.92 8.90 9.55
See notes I and J to consolidated financial statements.
</TABLE>
<TABLE>
Market & Dividend Information
The Company's Class A common stock is traded on the American Stock
Exchange. At December 31, 1995, there were approximately 2,000 shareholders
of record of the Company's Class A common stock and 2 shareholders of
record of Class B common stock. The weighted average numbers of shares
outstanding were 16,528,876 and 16,872,505 during 1995 and 1994,
respectively. High and low stock prices and dividends for the last two
years were:
Cash Cash
Dividends Dividends
Quarter High Low Declared Quarter High Low Declared
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1995 1994
First 15 1/4 13 1/8 $.00 First 15 7/8 13 3/8 $.00
Second 17 1/4 14 1/4 .16 Second 17 5/8 15 1/8 .16
Third 17 1/4 14 1/2 .16 Third 16 7/8 15 1/2 .16
Fourth 16 7/8 14 .32* Fourth 17 1/8 12 3/4 .32*
*One half paid in the fourth quarter and balance paid in the subsequent
year first quarter.
</TABLE>
To the Shareholders of
A.T. Cross Company
Entering 1996, our 150th anniversary, we are pleased to report that the
A.T. Cross Company is well positioned to continue the growth in sales and
earnings experienced over the last two years. We currently have the
broadest product offering in the Company's history, with a major new
product launch scheduled for the second quarter of 1996.
Sales for 1995 were $191.1 million and net income was $13.4
million, or 81 cents per share, compared with sales of $177.1 million and
net income of $10.5 million, or 62 cents per share for 1994. Writing
instrument sales were $175.6 million, an increase of 8.5% over 1994. Our
domestic writing instrument sales were $95.3 million, up 2.6% and foreign
sales were $80.3 million, an increase of 16.6%. Manetti-Farrow sales were
$15.5 million, essentially unchanged from the prior year.
As recently as 1993, Cross had only one viable product line,
Century - the cornerstone of our Company's success and growth and a product
we have sold since the 1940's. While the writing instrument market changed
dramatically during the late 1980's, Cross did not - and our operating
results suffered as a result. Beginning in 1993, Cross embraced the
philosophy of bringing ongoing excitement and innovation to our market
place through new product offerings and new marketing programs. Since then,
we have added four new product lines - Townsend, Solo, Solo Classic, and
Metropolis. Each of these lines is aimed at a different market, consumer,
and distribution channel.
Century, our slim-line metal product, represents Cross writing
instruments in the minds of virtually all retailers and consumers who are
aware of the Cross brand and is arguably the most successful quality
writing instrument in history. Its appeal has declined in recent years in
the U.S. because of the longevity of the product line and new products made
available by our competition. Internationally, Century's position varies
among regions and countries; but in general, the product line is not mature
and continues to offer growth potential. By introducing new metal and
lacquer finishes, Century will meet the needs of consumers who desire a
traditional classic slim-line quality writing instrument.
Townsend was introduced in 1993 to meet the demand for increasingly
popular wide-girth writing instruments. Patterned after the traditional
Century line, it is offered in a variety of colorful and unique finishes
such as marbleized lacquers, titanium and most recently, lapis lazuli.
Townsend has positioned Cross in the upper end of the quality writing
instrument market and has bolstered Cross's value and image. In the U.S.,
this upscale image is being reinforced by strong marketing efforts to
carriage trade accounts, strengthening our relationship with these
retailers and regaining strategic distribution within department stores and
jewelry stores.
Solo and Solo Classic represent Cross's first major resin-based
product. Solo, offered in vibrant colors and black appointments, appeals to
a younger, more casual audience desiring a wide-girth writing instrument at
a reasonable price. The acceptance of this line has been slow, but we are
currently developing plans to increase its visibility and distribution.
Solo Classic, with its more traditional colors and gold
electroplated appointments, is targeted to the consumer who wants an
elegant looking resin-based writing instrument at a reasonable price. While
full retail distribution of this product line will not be achieved until
mid-1996, preliminary feedback is that both the trade and the consumer are
quite receptive to this product line.
Metropolis is a new collection of writing instruments combining
polished lacquered caps and fluted-metal barrels designed in a contemporary
style, including the fountain pen's nib, which has an engraved sky-scraper
silhouette. Metropolis is designed to appeal to progressive professionals -
youthful, creative doers and thinkers. With its more contemporary look and
feel, Metropolis writing instruments will significantly expand our audience
for Cross products. We had a positive limited introduction of the ball-
point pen in late 1995 with an expanded launch, in all four writing
technologies, scheduled for the second quarter of 1996.
On a geographic basis, the U.S. remains our largest market. Our new
products allow us to segment the domestic market by demographics and
distribution channels, thereby leveraging Cross's strong position as the
nation's number one manufacturer of quality writing instruments. Our
objective is not just to maintain, but to increase, at least moderately,
our sizable U.S. market share.
Meanwhile, Cross writing instrument sales outside the U.S. are
growing vigorously, despite erratic economic performance in many parts of
the world. Last year our foreign sales rose to nearly 46% of total writing
instrument sales. Our new product lines, each of which includes a fountain
pen, are creating excitement abroad. We expect them to continue to support
strong expansion by Cross into potentially large foreign markets.
While the last two years have seen a resumption in sales and
earnings growth, we have also used this time to stabilize our business and
begin to develop the flow of new products that will bring us continued
growth in the future. With five distinct product lines, all different, yet
carrying the valuable lifetime mechanical guarantee of Cross, we are now
positioned to attract consumers at various ages and income levels in all
major markets worldwide.
All Cross employees are to be commended for their contributions to
our renewed growth over the past two years. Their efforts have resulted in
tremendous improvements in our production, engraving, marketing and
information systems areas.
Thank you for your support and continued interest in our Company.
As 1996 unfolds, we look forward to reporting the impact of our many new
products.
Cordially yours,
Russell A. Boss Bradford R. Boss
President Chairman
February 13, 1996
Elegant designs, intricate craftsmanship and innovative genius have been
the hallmark of the A. T. Cross Company since it was founded by Richard
Cross and Edward Bradbury. They created cases to hold pencils and fountain
pen nibs, offering delicate metalwork and beautiful detailing that
reflected their training in the art of jewelry making. When Richard's son,
Alonzo Townsend Cross, joined the firm, he began to look for ways to
improve existing writing instruments. Fountain pens were fragile and messy,
and did not have interior ink supplies. Pencils were easier to use and
strong enough to create carbon copies, but they left an original that was
erasable. In 1877, Alonzo Cross was granted his first patent for a
stylographic pen with an ink reservoir and a pencil-like tip - a design
that would prove popular with business. Many more patents followed. By
1885, Alonzo Cross was advertising "every pen fully guaranteed." That
promise was to become part of the Cross tradition of excellence.
[CAPTION]
Vintage Cross writing instruments, left to right: sterling silver pencil,
1860-1880; rolled-motif sterling silver telescopic pencil, 1880-1910;
engraved thin sterling silver pencil, 1860-1880; engine-turned, rolled-gold
pencil case, 1890-1915; vulcanized rubber stylographic pen, 1876-1884;
engine-turned, rolled-gold telescopic pencil with black enamel bands, 1916-
1935; rolled-gold, magazine clutch pencil, 1914-1942; jade green marbled
pyroxylin pencil with rolled-gold fittings, 1923-1935; blue pyroxylin
pencil with rolled-gold fittings, 1927-1935; engine-turned, rolled-gold
Cross Coronet pencil, 1946-1957; engine-turned, rolled-gold Cross Zip
pencil and hand-engraved reel, 1950-1957; engine-turned, rolled-gold plate
pencil with clip and aluminum frustro-conical top and point section 1940-
1952; sterling silver ruler and chrome nail novelty pencils, 1890-1910.
The ball-point pen that is synonymous with the name A. T. Cross was
first produced in 1952. By that time, there had been major changes at the
Company, which had been purchased by Walter Russell Boss, Sr. in 1916.
While he guided the cross pencil company through the great depression, his
sons Ellery and Russell displayed a talent for design and marketing,
respectively. In 1935, the Company introduced a conical-topped, slim-bodied
pencil that anticipated the Cross silhouette. During the late 1940's, the
company produced pencil mechanisms, while working to create the propel-
repel ball-point pen. When introduced in 1952, the ball-point pen and its
matching mechanical pencil were aggressively marketed to businesses through
a new special markets division. In 1964, Russ became president and set the
foundation for the tremendous growth that the Company would experience over
the next two decades. In 1971, with Russ, Chairman of the Board, and his
sons Brad and Ron, President and Vice President/Treasurer, respectively,
the Company sold its initial public offering of stock.
[CAPTION]
Since its introduction, the Century line of fine writing instruments, with
its unique, slim profile has been recognized the world over. Today's
Century line includes ball-point pen, mechanical pencil, Rolling Ball
SelectipRegistration MarkPen, introduced in 1979, and fountain pen,
introduced in Europe in 1982. Cross writing instruments, left to right:
Women's Burgundy 0.5mm pencil; Pedrara Onyx double desk set with our 10
karat gold filled, ball-point pen; 10 karat gold filled, ball-point pen and
0.5mm pencil; MedalistRegistration Mark Rolling Ball Selectip Pen,
featuring a die-struck Cross emblem; Classic BlackRegistration MarkRolling
Ball Selectip Pen, featuring a die-struck Cross emblem; Lustrous Chrome
ball-point pen featuring a die-struck Cross emblem; Women's Blue ball-point
pen and 0.5mm pencil set in its attractive Pen Purse.
In the 1970's, Cross began a global expansion, opening a manufacturing
facility in Ballinasloe, Republic of Ireland and then sales offices in
Europe and Asia. In the States, new writing technologies were developed
- - the felt-tip and the rolling-ball selectipRegistration Mark pen. A
woman's line was added and new epoxy shades created. 1985 marked the end
of an era with Russ's retirement. His sons, Brad and Ron, continued as
Chairman and President, respectively. Competition in the field grew, and
Cross responded with cellular manufacturing, a state of the art information
system, and extensive marketing and customer research. In 1993, the wider
girth Townsend series was launched, with overwhelming success. Solo and
Solo Classic, the Company's first resin-based products, followed in 1994.
Today, on the 150th anniversary of A. T. Cross, the Company is both strong
and vibrant. With the introduction of the new metropolis design we find
ourselves with five distinctive lines of writing instruments, each one
carrying the time-honored Cross name.
[CAPTION]
Shown left to right. Our Cross Townsend series of wider girth writing
instruments - a Rolling Ball Selectip Pen in marbled green lacquer with 22
karat gold electroplate appointments, a fountain pen in lapis lazuli and a
Medalist Rolling Ball Selectip Pen. In our Solo series of wide diameter,
composite resin-based writing instruments - a blue Solo Classic fountain
pen with 22 karat gold electroplate appointments and a die-struck Cross
emblem, and a bright red Solo Rolling Ball Selectip Pen with black matte
accents. In our Century line - a 14 karat gold filled ball-point pen. In
the new Metropolis series - a blue lacquer and chrome fountain pen, and a
black lacquer and 23 karat gold electroplate ball-point pen. All Cross
writing instruments come with an unquestioned lifetime mechanical
guarantee.
Financial Highlights
A.T. Cross Company & Subsidiaries{graphs}
Net Sales (millions of dollars)
'95 191,090
'94 177,136
'93 164,606
'92 187,130
'91 205,248
Net Income (Loss) (millions of dollars)
'95 13,365
'94 10,534
'93 ( 3,481)
'92 10,818
'91 21,187
Net Income (Loss) per share (dollars)
'95 0.81
'94 0.62
'93 (0.21)
'92 0.64
'91 1.26
Cash, Cash Equivalents
& Short-Term Investments (millions of dollars)
'95 53,896
'94 72,021
'93 71,134
'92 65,210
'91 65,930
Working Capital (millions of dollars)
'95 82,704
'94 83,969
'93 89,900
'92 103,801
'91 114,206
Shareholders' Equity Book Value Per Share (dollars)
'95 7.96
'94 7.79
'93 7.92
'92 8.90
'91 9.55
<TABLE>
Consolidated Balance Sheets
A.T. Cross Company & Subsidiaries
December 31
1995 1994
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 32,469,549 $ 15,689,564
Short-term investments 21,426,585 56,331,324
Accounts receivable, less allowances for doubtful accounts of
$1,745,000 in 1995 and $1,828,000 in 1994 48,017,341 37,435,562
Inventories - Note B:
Finished goods 14,499,263 9,612,598
Work in process 7,837,532 2,831,720
Raw materials 7,128,544 4,280,690
29,465,339 16,725,008
Other current assets 3,764,664 4,545,636
Total Current Assets 135,143,478 130,727,094
Property, Plant and Equipment
Land and land improvements 1,256,426 1,269,185
Buildings 16,359,227 15,162,030
Machinery and equipment 77,973,736 68,547,378
95,589,389 84,978,593
Less allowances for depreciation 57,352,065 51,028,995
Net Property, Plant and Equipment 38,237,324 33,949,598
Intangibles and Other Assets 15,981,397 15,692,413
$189,362,199 $180,369,105
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable $ 12,275,420 $ 8,872,850
Accrued compensation and related taxes 5,308,445 5,158,039
Accrued expenses and other liabilities 17,879,607 17,726,537
Cash dividends payable 2,648,323 2,643,855
Contributions payable to employee benefit plans 9,443,292 8,055,367
Income taxes payable 4,883,640 4,301,670
Total Current Liabilities 52,438,727 46,758,318
Accrued Warranty Costs 5,209,000 4,909,000
Shareholders' Equity - Notes C and D:
Common stock, par value $1 per share: Class A - authorized
40,000,000 shares, 15,243,316 shares issued and 14,747,216
shares outstanding in 1995, and 15,194,293 shares issued
and 14,719,293 shares outstanding in 1994 15,243,316 15,194,293
Class B - authorized 4,000,000 shares, issued and outstanding
1,804,800 shares 1,804,800 1,804,800
Additional paid-in capital 11,319,614 10,721,412
Retained earnings 110,743,135 107,958,596
Accumulated foreign currency translation adjustment 215,950 328,423
139,326,815 136,007,524
Treasury stock, at cost, 496,100 shares in 1995 and
475,000 shares in 1994 (7,612,343) (7,305,737)
Total Shareholders' Equity 131,714,472 128,701,787
$189,362,199 $180,369,105
See notes to consolidated financial statements.
</TABLE>
<TABLE>
Consolidated Statements of Income & Retained Earnings
A.T. Cross Company & Subsidiaries
Year Ended December 31
1995 1994 1993
<S> <C> <C> <C>
Revenues
Net sales $191,090,409 $177,135,770 $164,606,391
Interest and other income 3,617,193 3,943,234 2,516,161
194,707,602 181,079,004 167,122,552
Costs and Expenses
Cost of goods sold 94,422,106 88,691,081 84,392,881
Selling, general and
administrative expenses 72,553,706 66,794,430 62,846,578
Service and distribution costs 4,487,692 4,542,003 5,042,168
Research and development expenses 2,990,745 2,035,568 2,212,851
Restructuring charges - Note I - - 11,010,000
174,454,249 162,063,082 165,504,478
Income from Continuing Operations
Before Income Taxes 20,253,353 19,015,922 1,618,074
Provision for income taxes - Note F 6,888,000 8,482,000 1,099,000
Income From Continuing Operations 13,365,353 10,533,922 519,074
Discontinued Operations, Less Income Tax Benefit - Note J
Loss from operations - - (1,500,000)
Loss on disposal - - (2,500,000)
Loss from Discontinued Operations - - (4,000,000)
Net Income (Loss) 13,365,353 10,533,922 (3,480,926)
Retained earnings at beginning of year 107,958,596 108,162,260 125,186,939
121,323,949 118,696,182 121,706,013
Cash dividends declared (per share: $0.64 in 1995,
$0.64 in 1994, and $0.80 in 1993)-Note C 10,580,814 10,737,586 13,543,753
Retained Earnings at End of Year $110,743,135 $107,958,596 $108,162,260
Income (Loss) Per Share:
From Continuing Operations $0.81 $0.62 $0.03
From Discontinued Operations - - (0.24)
Net Income (Loss) Per Share $0.81 $0.62 ($0.21)
See notes to consolidated financial statements.
</TABLE>
<TABLE>
Consolidated Statements of Cash Flows
A.T. Cross Company & Subsidiaries
Year Ended December 31
1995 1994 1993
<S> <C> <C> <C>
Cash Provided by (Used in):
Operating Activities:
Income from continuing operations $ 13,365,353 $ 10,533,922 $ 519,074
Adjustments to reconcile income from continuing
operations to net cash provided by operating activities:
Depreciation and amortization 7,012,931 6,346,690 6,184,774
Provision for losses on accounts receivable 360,755 405,592 422,719
Deferred income taxes (287,000) 458,000 (2,365,000)
Provision for warranty costs 1,050,103 1,195,595 1,454,029
Provision for write-down of fixed assets - - 3,500,000
Changes in operating assets and liabilities:
Accounts receivable (11,141,399) (6,806) 1,236,622
Inventories (12,855,331) 2,643,810 9,695,628
Other assets-net 773,518 (1,143,887) (1,542,327)
Accounts payable 3,354,448 4,733,123 (1,220,084)
Other liabilities-net 2,153,170 2,663,867 7,087,033
Warranty costs paid (750,103) (895,595) (854,029)
Foreign currency transaction (gain) loss (194,763) (82,495) 165,544
Net Cash Provided by Continuing Operations 2,841,682 26,851,816 24,283,983
Discontinued operations:
Loss from discontinued operations - - (4,000,000)
Changes in operating assets and liabilities - - 4,656,906
Net Cash Provided by Discontinued Operations - - 656,906
Net Cash Provided by Operating Activities 2,841,682 26,851,816 24,940,889
Investing Activities:
Proceeds from sales of assets of Mark Cross - - 7,023,000
Additions to property, plant and equipment (10,839,460) (7,662,300) (8,493,669)
Additional acquisition payment - (687,086) (520,485)
Acquisition of minority interest in subsidiary - - (985,211)
Purchase of short-term investments (42,638,815) (86,088,263) (32,749,856)
Sale or maturity of short-term investments 77,543,554 48,068,902 57,241,963
Net Cash Provided by (Used in)
Investing Activities 24,065,279 (46,368,747) 21,515,742
Financing Activities:
Cash dividends paid (10,576,346) (10,802,656) (16,248,949)
Proceeds from sale of Class A common stock 647,225 262,033 189,631
Purchase of treasury stock (306,606) (7,305,737) -
Net Cash Used in Financing Activities (10,235,727) (17,846,360) (16,059,318)
Effect of exchange rate changes on cash and
cash equivalents 108,751 230,490 18,675
Increase (decrease) in cash and cash equivalents 16,779,985 (37,132,801) 30,415,988
Cash and cash equivalents at beginning of year 15,689,564 52,822,365 22,406,377
Cash and Cash Equivalents at End of Year $ 32,469,549 $ 15,689,564 $ 52,822,365
See notes to consolidated financial statements.
</TABLE>
Notes to Consolidated Financial Statements
A.T. Cross Company & Subsidiaries
December 31, 1995
Note A - Significant Accounting Policies
Principles of consolidation: The consolidated financial statements include
the accounts of the Company and all of its subsidiaries. Upon
consolidation, all material intercompany accounts and transactions are
eliminated. The preparation of financial statements in conformity with
generally accepted accounting principles requires the use of management
estimates.
Cash equivalents and short-term investments:
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents. Short-term
investments are stated at cost, which approximates market, and consist of
interest bearing investments with a maturity of greater than three months
when purchased. Cash equivalents and short-term investments are placed only
with high-credit quality financial institutions. At December 31, 1995,
approximately 66% of the Company's cash, cash equivalents and short-term
investments were placed with one financial institution.
Short-term investments at December 31, 1995 and 1994 include time
deposits, certificates of deposit and certain municipal bonds ("Held-to-
Maturity" securities) and other municipal bonds ("Trading" securities)
which have a maturity greater than three months. The Company has the
positive intent and ability to hold its "Held-to-Maturity" securities until
maturity and has stated these investments at cost which approximates
market. Trading securities are stated at fair market value.
Inventories: Substantially all domestic inventories are priced at the lower
of last-in, first-out cost or market. The remaining inventories are priced
at the lower of first-in, first-out cost or market.
Properties, equipment and related depreciation: Property, plant and
equipment are stated on the basis of cost. Provisions for depreciation are
computed using a combination of accelerated and straight-line methods which
are intended to amortize the cost of such assets over their estimated
useful lives.
Foreign currency translation: The Company has a program in place to manage
foreign currency risk. As part of that program, the Company has entered
into foreign currency exchange contracts to hedge anticipated foreign
currency transactions or commitments, primarily purchases of materials and
products from foreign suppliers, and certain foreign currency denominated
balance sheet positions. The terms of the contracts generally correspond
with the dates of the anticipated foreign currency transactions. Realized
and unrealized gains and losses on those contracts intended to hedge
specific foreign currency transactions or commitments are deferred and
accounted for as part of the transaction, while gains and losses on other
contracts are included in net income. At December 31, 1995, the Company
held forward exchange contracts approximating $4,734,000. The fair value of
these contracts, which hedge commitments becoming due at various times
through August 1996, approximated $4,870,000, based on the December 31,
1995 market prices of comparable instruments.
Foreign currency exchange gains (losses) are included in selling,
general and administrative expenses and approximated $88,000, $189,000 and
$(230,000) in 1995, 1994 and 1993, respectively.
Industry segment and nature of operations: The Company predominately
operates in one industry segment, writing instruments, and sells to
retailers and wholesale distributors throughout the world, principally in
North America, Europe and the Far East/Asia.
Advertising costs: The costs of advertising are charged to expense as
incurred and amounted to $22,245,000, $20,718,000 and $18,145,000 for the
years ended December 31, 1995, 1994 and 1993, respectively.
Warranty costs: The Company's writing instruments are sold with a full
warranty of unlimited duration against mechanical failure. Estimated
warranty costs are accrued at the time of sale. Discretionary product
repair and replacement costs, not related to mechanical failure, are
classified as marketing costs.
Net income (loss) per share: Net income (loss) per share is computed based
upon the weighted average number of shares of Class A and Class B common
stock outstanding during the year (16,528,876, 16,872,505 and 16,927,411 in
1995, 1994 and 1993, respectively). The exercise of outstanding stock
options would not result in a material dilution of net income per share.
Note B - Inventories
Domestic inventories approximating $19,245,000 and $9,107,000 at December
31, 1995 and 1994, respectively, are priced at the lower of last-in, first-
out (LIFO) cost or market. The remaining inventories are priced at the
lower of first-in, first-out cost or market.
If the first-in, first-out method of inventory valuation had been
used by the Company for those inventories priced using the last-in, first-
out method, inventories would have been approximately $12,907,000 and
$13,196,000 higher than reported at December 31, 1995 and 1994,
respectively.
Note B - Inventories (continued)
During 1993 inventory quantities were reduced resulting in the liquidation
of LIFO inventory quantities carried at lower costs prevailing in prior
years as compared with the cost of current purchases. The effect of this
liquidation was to increase net income by approximately $719,000 or $0.04
per share. The Company believes the LIFO method of inventory valuation
ordinarily results in a more appropriate matching of its revenues to their
related costs since current costs are included in costs of goods sold and
distortions in reported income due to the effect of changing prices are
reduced.
<TABLE>
Note C - Common Stock
The Class A and Class B common stock are identical, except for differences
with respect to certain voting rights. They are entitled to share equally
in dividends that may be declared by the Board of Directors and, upon
liquidation, to share ratably in any assets which remain available for
distribution on the Class A and Class B common stock. Holders of Class A
common stock are entitled to elect one-third of the number of directors.
Changes in Class A common stock and additional paid-in capital are
shown below (there were no changes in Class B common stock):
Class A Common Stock
Number Additional
of Paid-In
Shares Amount Capital
<S> <C> <C> <C>
Balances at January 1, 1993 15,114,328 $15,114,328 $ 9,101,785
Stock option activity 3,400 3,400 155,100
Stock purchase plan 8,254 8,254 132,877
Balances at December 31, 1993 15,125,982 15,125,982 9,389,762
Stock option activity 10,753 10,753 523,766
Stock purchase plan 8,636 8,636 116,860
Issued to profit sharing trust 48,922 48,922 691,024
Balances at December 31, 1994 15,194,293 15,194,293 10,721,412
Stock option activity 40,984 40,984 484,808
Stock purchase plan 8,039 8,039 113,394
Balances at December 31, 1995 15,243,316 $15,243,316 $11,319,614
</TABLE>
Note D - Stock Option and Stock Purchase Plans
The Company has an incentive stock option plan and a non-qualified stock
option plan under which options to purchase shares of Class A common stock
may be granted to key employees. Options to purchase Class A shares may
also be granted under the non-qualified plan to members of the Company's
Board of Directors.
Under the incentive plan, the option price is the mean between the
high and low prices of the stock on the date that the option is granted.
Under its present terms, the plan will expire in 1998. The term of each
option is ten years or such shorter period as may be determined by the
Board of Directors.
Prior to 1995, the non-qualified stock option plan had an option
price of 10% less than the mean between the high and low prices of the
stock on the date the option was granted. Compensation expense relating to
non-qualified stock options amounted to $399,000 in 1994 and $110,000 in
1993. In 1995, the Company's shareholders approved amendments to the non-
qualified stock option plan to increase the number of shares of Class A
common stock reserved for issuance by 675,000, and to provide that the
option price shall be the mean between the high and low price on the date
of grant. The plan has no definite expiration date, but may be terminated
by the Board of Directors. The term of each option is ten years or such
shorter period as may be determined by the Board of Directors.
<TABLE>
Note D - Stock Option and Stock Purchase Plans (continued)
Stock option activity during the two years ended December 31, 1995 was as
follows:
Price Shares
Options Per Share Reserved
<S> <C> <C> <C>
Incentive Stock Option Plan:
Outstanding at January 1, 1994 405,470 $12.63 to $36.69 610,390
Granted 117,750 $13.88 to $15.44 -
Exercised (2,250) $12.63 to $13.88 (2,250)
Canceled (59,850) $12.63 to $36.69 -
Outstanding at December 31, 1994 461,120 $12.63 to $36.69 608,140
Granted 32,250 $15.75 -
Exercised (3,334) $15.44 (3,334)
Canceled (62,149) $13.88 to $36.69 -
Outstanding at December 31, 1995 427,887 $12.63 to $36.69 604,806
Approximately 385,000 options outstanding were exercisable at December 31,
1995 and 378,000 were exercisable at December 31, 1994.
Non-Qualified Stock Option Plan:
Outstanding at January 1, 1994 589,719 $11.38 to $33.02 795,300
Granted 176,860 $12.49 to $14.91 -
Exercised (8,503) $11.76 to $13.89 (8,503)
Canceled (53,069) $11.76 to $32.23 -
Outstanding at December 31, 1994 705,007 $11.38 to $33.02 786,797
Addition to shares reserved 675,000
Granted 677,226 $15.19 to $16.75 -
Exercised (37,650) $11.38 to $14.85 (37,650)
Canceled (83,993) $12.09 to $32.23 -
Outstanding at December 31, 1995 1,260,590 $11.38 to $33.02 1,424,147
Approximately 629,000 options were exercisable at December 31, 1995 and
approximately 546,000 options were exercisable at December 31, 1994.
</TABLE>
The Company also has an employee stock purchase plan allowing eligible
employees, other than officers and directors, to purchase shares of the
Company's Class A common stock at 10% less than the mean between the high
and low prices of the stock on the date of purchase. A maximum of 320,000
shares is available under the plan and the aggregate number of shares
reserved was 153,677 and 161,716 at December 31, 1995 and 1994,
respectively.
Note E- Employee Benefit Plans
The Company has a noncontributory defined benefit pension plan, a savings
plan and a noncontributory profit sharing plan which cover substantially
all domestic employees. Employees of non-U.S. subsidiaries generally
receive retirement benefits from company sponsored defined benefit or
defined contribution plans or from statutory plans administered by
governmental agencies in their countries. The Company does not provide its
employees any post-retirement benefits other than those described above.
Benefits under the defined benefit plans are based on the employee's
years of service and compensation, as defined. The Company's funding policy
is consistent with applicable local laws and regulations.
The savings plan, established under Section 401(k) of the Internal
Revenue Code, allows participants to contribute up to 10% of their annual
compensation. The Company will contribute 50% of the participant's
contribution, to a maximum of 3% of the participant's salary and bonus.
The Company's annual accrual and contribution for both the savings
plan and profit sharing retirement trust will not exceed the maximum amount
deductible for such year for federal income tax purposes.
<TABLE>
Note E - Employee Benefit Plans (continued)
The following table sets forth the defined benefit plans' combined funded
status and amounts recognized in the Company's consolidated balance sheet
at December 31 of each year:
1995 1994 1993
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation including vested
benefits of $16,331,000 in 1995, $12,297,000
in 1994, and $11,155,000 in 1993 $ 16,877,000 $ 12,667,000 $ 11,720,000
Projected benefit obligation $(23,023,000) $(18,383,000) $(17,204,000)
Plan assets at fair value (marketable securities
and short-term cash investments) 18,553,000 14,847,000 11,652,000
Projected benefit obligation
in excess of plan assets (4,470,000) (3,536,000) (5,552,000)
Unrecognized net gain (1,316,000) (1,296,000) (651,000)
Unrecognized prior service cost 174,000 161,000 130,000
Unrecognized net transition obligation,
net of amortization 421,000 327,000 233,000
Accrued pension cost included in contributions
payable to employee benefit plans $ (5,191,000) $(4,344,000) $ (5,840,000)
The principal assumptions used in computing
the above amounts are as follows:
Weighted average discount rate 7.00% 8.00% 7.00%
Increase in future compensation 4.00% 5.00% 4.50%
Expected long-term return on plan assets 9.00% 8.00% 9.00%
Expenses for each of the employee benefit plans
are as follows:
Service cost-benefits earned during the year $1,316,000 $ 1,519,000 $1,263,000
Interest cost on projected benefit obligation 1,590,000 1,389,000 1,244,000
Actual return on plan assets (3,278,000) 131,000 (635,000)
Net amortization and deferral 1,893,000 (1,185,000) (327,000)
Net pension cost of defined benefit plans 1,521,000 1,854,000 1,545,000
Savings plan 686,000 621,000 641,000
Profit sharing plan 1,000,000 1,000,000 750,000
Total $3,207,000 $ 3,475,000 $2,936,000
The expense for the profit sharing plan in 1993 represents the approximate market value of Class A
common stock which the Company contributed to the plan in 1994.
</TABLE>
<TABLE>
Note F - Income Taxes
The provision (benefit) for income taxes consists of the following:
1995 1994 1993
<S> <C> <C> <C>
Currently Payable:
Federal $6,673,000 $5,349,000 $ 657,000
State 414,000 637,000 276,000
Foreign 88,000 1,717,000 161,000
7,175,000 7,703,000 1,094,000
Deferred:
Federal (236,000) 857,000 (1,912,000)
State (60,000) 93,000 (304,000)
Foreign 9,000 (171,000) 18,000
(287,000) 779,000 (2,198,000)
Total $6,888,000 $8,482,000 $(1,104,000)
Income tax (benefit) included in:
Continuing operations $6,888,000 $8,482,000 $ 1,099,000
Discontinued operations - - (2,203,000)
Total $6,888,000 $8,482,000 $(1,104,000)
The reconciliation of income taxes computed at the statutory federal income
tax rate to the provision for income taxes from continuing operations is as
follows:
Statutory federal income tax $7,089,000 $6,656,000 $ 550,000
State income tax expense, less federal
tax benefit 230,000 475,000 81,000
Foreign operations 170,000 1,779,000 643,000
Benefit of Foreign Sales Corporation (575,000) (553,000) (300,000)
Miscellaneous (26,000) 125,000 125,000
Provision for income taxes $6,888,000 8,482,000 $ 1,099,000
</TABLE>
<TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31 are presented below:
1995 1994
<S> <C> <C>
Deferred Tax Assets:
Accounts receivable $ 516,000 $ 515,000
Additional costs inventoried for tax purposes
and inventory reserves not deductible for tax
purposes 1,465,000 1,802,000
Excess benefit plan 874,000 654,000
Accrued warranty costs 2,021,000 1,905,000
Accrued pension costs 1,215,000 1,049,000
Intangible assets 575,000 535,000
Net operating loss carryforward 1,325,000 1,334,000
Other 636,000 605,000
8,627,000 8,399,000
Less: valuation allowance (1,325,000) (1,334,000)
Total deferred tax assets 7,302,000 7,065,000
Deferred Tax Liabilities:
Plant and equipment, principally due to
differences in depreciation (174,000) (321,000)
Other (97,000) -
Total deferred tax liabilities (271,000) (321,000)
Net deferred tax asset $ 7,031,000 $ 6,744,000
</TABLE>
Note F - Income Taxes (continued)
The Company's wholly-owned subsidiary, A. T. Cross Limited ("ATCL") is not
subject to the Republic of Ireland statutory income tax rate. Through 2010,
ATCL is subject to the 10% rate on profits from sales of Irish manufactured
goods, as defined. This lower tax rate reduced income tax expense and
increased net income by approximately $625,000 ($0.04 per share) in 1995,
$1,692,000 ($0.10 per share) in 1994, and $879,000 ($0.05 per share) in
1993. Beginning in 1994, the earnings of ATCL are subject to taxation in
the United States pursuant to anti-deferral legislation. This had the
effect of decreasing net income by approximately $549,000 ($0.03 per share)
in 1995 and $1,375,000 ($0.08 per share) in 1994.
Undistributed earnings of foreign subsidiaries amounted to
approximately $70,089,000 and $71,666,000 (including approximately $46
million in 1995 and $54 million in 1994 of cash, cash equivalents and short-
term investments). These earnings could become subject to additional tax if
they are remitted as dividends, if foreign earnings are lent to the Company
or a U.S. affiliate, or if the Company should sell its stock in the
subsidiaries. Since it is generally the intention of the Company to invest
the undistributed earnings of foreign subsidiaries in the growth of
business outside the United States, deferred income taxes have not been
provided on such earnings. The amount of additional taxes that might be
payable on the foreign earnings approximates $21,700,000.
At December 31, 1995, net operating loss carryforwards for certain
foreign subsidiaries were approximately $3,389,000 for tax purposes. These
losses begin to expire in 1997.
Income taxes paid in 1995, 1994 and 1993 were approximately
$7,275,000, $4,533,000 and $2,115,000, respectively.
<TABLE>
Note G - Geographic Information
The following table sets forth geographic information
for the Company:
1995 1994 1993
<S> <C> <C> <C>
Sales to unaffiliated customers:
United States $138,749,427 $132,177,946 $122,518,640
Europe and Far East 52,340,982 44,957,824 42,087,751
Total $191,090,409 $177,135,770 $164,606,391
Income (loss) from continuing operations
before income taxes:
United States $ 15,507,613 $ 14,314,316 $ 2,089,882
Europe and Far East 4,745,740 4,701,606 (471,808)
Total $ 20,253,353 $ 19,015,922 $ 1,618,074
Identifiable assets:
United States $106,934,644 $ 96,145,653 $ 95,431,780
Europe and Far East 82,427,555 84,223,452 83,562,478
Total $189,362,199 $180,369,105 $178,994,258
</TABLE>
Identifiable assets outside the United States include cash, cash
equivalents and short-term investments of $46,259,000, $54,178,000 and
$53,613,000 at December 31, 1995, 1994 and 1993, respectively. United
States sales to unaffiliated customers include export sales of
approximately $27,972,000, $23,950,000 and $16,105,000 in 1995, 1994 and
1993, respectively.
Note H - Line of Credit
The Company has an unsecured line of credit agreement with a bank under
which it may borrow up to $50,000,000. Any amounts borrowed under the
agreement will be payable on demand and will bear interest at one half of
one percent (1/2 of 1%) per annum in excess of the London Interbank
Offering Rate (LIBOR). The agreement is cancelable at any time by the
Company or the bank. The highest amount borrowed at any time during the
year was $4,700,000, however, no amount was outstanding at the end of 1995.
Note H - Line of Credit (continued)
The Company also has a multi-currency credit arrangement with a bank under
which it may borrow up to the equivalent of 7,000,000 U.S. dollars to meet
short-term foreign currency needs. This agreement is on an "offering
basis", in that the terms and conditions of any transaction shall be
mutually agreed upon at the time of each specific transaction. There were
no amounts outstanding under this agreement at any time in 1995.
Note I - Restructuring and Other Charges
The Company recorded restructuring charges of $11,010,000 in 1993 in
connection with the consolidation of production and distribution facilities
and the reduction of excess manufacturing capacity ($4,600,000); the
worldwide reduction of personnel and corporate reorganization ($3,810,000);
and the discontinuation of certain product lines ($2,600,000).
Assets held for sale, including the Company's distribution center in
Lincoln, R.I., are classified in Intangibles and Other Assets in the
balance sheet at December 31, 1995. Substantially all other aspects of the
restructuring were completed in 1994 as planned.
Note J - 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.
<TABLE>
The following table sets forth summary information relating to Mark
Cross:
<S> <C>
Six Months
Ended
June 30, 1993
Net sales $ 5,257,470
Costs and expenses 7,577,836
Operating loss before income tax benefit (2,320,366)
Income tax benefit relating to operations 820,366
Operating loss (1,500,000)
Loss on disposal before income taxes (3,882,634)
Income tax benefit relating to loss on disposal 1,382,634
Loss on disposal (2,500,000)
Loss from discontinued operations $(4,000,000)
</TABLE>
<TABLE>
Note K - Quarterly Results of Operations (Unaudited)
The following is a tabulation of the unaudited quarterly results of
operations for the years ended December 31, 1995 and 1994:
(thousands of dollars, except per share data)
March 31 June 30 September 30 December 31
<S> <C> <C> <C> <C>
1995:
Net sales $35,407 $44,883 $44,859 $65,941
Gross profit 17,597 21,668 21,660 35,743
Net income 1,554 1,647 2,751 7,413
Net income per share 0.09 0.10 0.17 0.45
1994:
Net sales $35,193 $40,620 $45,928 $55,395
Gross profit 16,686 18,723 21,606 31,430
Net income 1,361 689 2,674 5,810
Net income per share 0.08 0.04 0.16 0.34
Report of Ernst & Young LLP
Independent Auditors
To the Shareholders of
A.T. Cross Company:
We have audited the accompanying consolidated balance sheets of A.T.
Cross Company and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of income and retained earnings, and cash
flows for each of the three years in the period ended December 31, 1995.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
A.T. Cross Company and subsidiaries at December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Providence, Rhode Island
January 30, 1996
Management's Discussion and Analysis
of Financial Condition and Results of Operations
This section, as well as other portions of this document, includes certain
statements which are or may be construed as forward looking about the
Company's business and new products, sales and expenses, and operating and
capital requirements. Any such statements are subject to risks that could
cause the actual results or needs to vary materially. These risks are
discussed in this document and in the Company's 10-K for its fiscal year
ended December 31, 1995 filed with the Securities and Exchange Commission.
Results of Operations
Comparison of 1995 With 1994
Consolidated net sales increased 7.9% in 1995 compared to 1994. Overall,
the increase is attributable to the favorable consumer response to the
Company's new product offerings.
Domestic net sales increased by $2.5 million, or 2.4%, while foreign
net sales, including export sales from the United States, were $11.4
million, or 16.6%, improved over the prior year. United States export sales
increased $4.0 million or 16.8% over 1994. The higher domestic sales are
largely the result of new products launched this year, in particular the
new Solo and Solo Classic lines, and the growing success of the Townsend
line, the Company's highest priced product line. While overall domestic
unit volume increased 6.2%, most of this increase was derived from Solo
which earns lower
average selling prices than many of the Company's traditional products.
Aggressive promotional pricing on certain older products helped maintain
unit volume for those items. Domestic sales in 1995 benefited somewhat from
a modest mid-year price increase on selected products.
While foreign sales increased in nearly every major market, European
sales increased dramatically (20.9%), followed closely by Asia and the Far
East (15.0%). The Company has aggressively pursued opportunities to
increase its market share in these areas of the world. In addition to new
product offerings and promotions which have stimulated international
consumer recognition of and demand for Cross products, over the last
several years the Company has devoted significant effort toward identifying
and replacing poor
performing international distributors, and has worked more closely with its
distributors to improve the merchandising and promotion of the Cross brand.
International sales have benefited further by higher marketing support
expenditures, consistent with the Company's efforts to increase market
share in key foreign markets. Overall, favorable foreign exchange rates
against the lower dollar, particularly in Japan, added to the improvement
in sales.
The overall consolidated gross margin increased to 50.6% in 1995 from
49.9% in 1994. As cost controls have been effective at keeping production
cost increases consistent with general inflation, the higher sales and
production volume have had a direct and positive impact on the Company's
worldwide margins.
Selling, general and administrative expenses increased $5.8 million
(8.6%) in 1995 compared to 1994, and were 38.0% of net sales in 1995, as
compared to 37.7% in 1994. The increase was due in part to higher marketing
support expenses of $1.5 million, as well as higher personnel costs
principally in the sales and marketing areas. Some of the personnel costs,
and certain other administrative costs, are attributable to the
establishment of a European Headquarters facility in Paris, France,
organized in connection with the Company's efforts to maximize its growth
opportunities in the lucrative European writing instruments market. The
weaker dollar also contributed to higher expenses in 1995. Research and
development expenses increased $1.0 million or 46.9% from a year ago,
reflecting the Company's commitment to developing new products and
improving processes and technologies. Service and distribution costs were
1.2% lower than 1994 due to ongoing cost reduction efforts in this area.
Interest and other income decreased $0.3 million (8.3%) from 1994.
Interest income was higher due to higher interest rates earned on lower
average invested funds, and to interest earned on a state income tax refund
claim. The higher interest income was offset by lower other income
resulting from certain non-recurring gains recorded in the prior year.
Income before income taxes improved $1.2 million or 6.5% over 1994.
The effective income tax rate in 1995 was 34.0% as compared to the
1994 rate of 44.6%. The Company implemented a reorganization of certain of
its European operations at the end of 1994 to reflect a change of functions
performed by both its manufacturing and distribution affiliates, and to
more closely align the responsibilities of management in each area to their
operational objectives. These operational changes had the effect of more
closely conforming the Company's effective tax rate with its historical tax
rate of 31% (average effective tax rate from 1988 to 1992).
The Company expects its effective tax rate in 1996 to be approximately 35%.
Comparison of 1994 with 1993
Consolidated net sales increased 7.6% in 1994 compared to 1993. The
increase was primarily the result of an approximate 1.0% increase in unit
sales combined with higher average unit selling prices, due both to a
favorable change in product mix and to an approximate 4.0% mid-year price
increase.
Domestic sales increased by $1.8 million, or 1.7%, while foreign
sales were $10.7 million, or 18.4%, improved over the prior year. The
higher 1994 domestic sales reflected the favorable consumer response to
many of the Company's new products and marketing initiatives. The Townsend
line, the Company's wide-girth product, created new excitement at the
prestige end of the high priced writing instrument line. The use of impulse
packaging had a positive effect on the Century line. The increase in
foreign sales was due, in part, to working closely with foreign
distributors to enhance the image of the Cross brand, particularly at the
point-of-sale, as well as several new product introductions, aggressive
promotional campaigns and an increase in advertising.
Foreign sales included United States export sales which increased
48.7% over 1993, due partially to significant growth in the Company's Asian
market, and also to a transfer to the United States of certain markets
which were previously supplied from the Company's Irish manufacturing
plant. Consequently, sales supplied from the Company's Irish manufacturing
plant declined 6.8% since 1993. In addition to Asia, growth in the
Company's European market was also particularly strong. Overall, favorable
foreign exchange rates against the dollar in the Company's key foreign
markets added to the improvement in sales.
The overall consolidated gross margin increased from 48.7% in 1993 to
49.9% in 1994. The increase over the prior year was due, in part, to the
mid-year price increase mentioned earlier, and higher production.
Selling, general and administrative expenses increased $3.9 million
(6.3%) in 1994 compared to 1993. The increases were primarily due to higher
marketing support expenses of $2.6 million combined with higher personnel
costs. The weaker dollar also contributed to higher 1994 expenses. Research
and development expenses decreased 8.0% from the previous year due
principally to the timing of product development expenses and the use of
contracted suppliers for certain components of the new Solo line. Although
research and development expenses were lower in 1994 than in 1993, the
Company remains committed to its product development efforts, as evidenced
by the significant increase in 1995. Service and distribution costs were
9.9% lower than the prior year as a result of the closure in 1993 of the
Company's separate distribution operation and the consolidation of its
distribution operations into its Lincoln manufacturing facility.
Interest and other income increased $1.4 million (56.7%) from 1993.
Interest income was higher due to higher interest rates earned on higher
average invested funds. Other income included certain minor non-recurring
gains.
The effective income tax rate in 1994 was 44.6% as compared to the
1993 rate of 67.9% on income from continuing operations. The 1994 rate was
higher than the Company's historical tax rate of 31% (average effective tax
rate from 1988 to 1992) due to changes in U.S. tax laws which resulted in
the taxation of income earned by the Company's subsidiary in Ireland at the
higher U.S. rate as compared to the 10% effective rate in 1993. The tax
rate for 1993 was unusually high due to the effect of operating losses
sustained by the Company's foreign subsidiaries for which no current income
tax benefit was available on the low level of 1993 pretax income from
continuing operations. The Company completed a reorganization at the end of
1994 which resulted in a lower effective tax rate of 34.0% for 1995.
Liquidity and Capital Resources
Cash, cash equivalents and short-term investments (i.e., cash) decreased
$18.1 million in total in 1995 to $53.9 million. Higher inventories and
accounts receivable at the end of the year contributed significantly to the
lower cash generated from operating activities of $2.8 million, as compared
to $26.9 million in 1994. Cash was further reduced by expenditures for
additions to fixed assets and cash dividends. Accounts receivable increased
$10.6 million primarily due to the higher sales volume in the last months
of the year as compared to the same months of 1994, as well as to the
higher number of domestic customers who elected to take advantage of the
Company's extended payment terms. The Company ordinarily offers domestic
retail customers a program whereby they may either delay payment on certain
third and fourth quarter purchases until January of the next year, or may
earn a greater discount on these purchases if payment is made earlier. As a
result, the Company's cash level is lowest at the end of the year when
accounts receivable is at its highest. Inventory increased $12.7 million
primarily as a result of new products and packaging alternatives. It is the
Company's intention to meet certain stringent inventory turnover ratios
once the new products have established themselves in the market place and
the ordering patterns become more predictable. Also, proportionately more
materials are foreign sourced, particularly materials used in some of the
Company's newer products, and lead times for these materials are
necessarily longer than for domestic sourced materials, resulting in the
need for higher inventory levels for these materials.
Additions to property, plant and equipment were $10.8 million in
1995, compared to $7.7 million in 1994. The 1995 additions included tooling
and equipment costs for new products under development and scheduled for
launch in 1996, particularly Metropolis, ongoing improvements and upgrades
to manufacturing equipment and facilities, and the continued expansion of
the Company-wide integrated information systems network. The Company
expects capital expenditures will approximate $10.0 million in 1996, as
compared with expected depreciation expense of approximately $7.5 million.
The Company's working capital was $82.7 million at the end of 1995, a
decrease of $1.3 million from 1994, and its current ratio declined slightly
to 2.58:1 at the end of 1995 from 2.80:1 at the end of 1994. The Company
has a $50.0 million bank line of credit to meet any temporary cash flow
shortages that may arise. The highest amount borrowed against this line at
any time during the year was $4.7 million. The Company also has a multi-
currency credit arrangement under which it may borrow up to the equivalent
of 7.0 million U.S. dollars to
meet short-term foreign currency needs. At the end of 1995 there were no
outstanding amounts under either credit arrangement. The Company believes
that funds from operations and existing cash, cash equivalents and short-
term investments supplemented, as appropriate, by the Company's existing
short-term borrowing arrangements, will be adequate to finance its
foreseeable operating and capital requirements.
At the end of 1995, cash available for domestic operations amounted
to $7.6 million while cash held offshore for use in international
operations amounted to $46.3 million. If in the future the Company
determines that the cash held offshore is not necessary for international
operations, it may repatriate such cash for use in domestic operations.
However, repatriated offshore funds will be subject to additional federal
and state income taxes of approximately 32% of the remitted amounts.
Impact of Inflation and Changing Prices
The Company's operations are subject to the effects of general inflation as
well as fluctuations in foreign currencies. In addition, the Company is
exposed to volatility in the price of gold and silver as those precious
metals are used in the manufacture of its products. The potential risks in
these areas are each managed proactively. The Company has generally been
successful in controlling cost increases due to precious metal fluctuations
and due to general inflation. For example, in recent years the Company
completed a restructuring program designed, in part, to reduce worldwide
product costs by streamlining the manufacturing process and converting to a
just-in-time mode of operation, and to eliminate excess manufacturing
capacity. In addition, a new integrated business system has been
implemented to help monitor and control costs more effectively.
Because of volatility in both the gold bullion and foreign currency
markets, the Company has followed the practice of making advance
commitments for approximately one year's projected requirements for its
gold needs and for a portion of its foreign currency needs. In addition,
the Company normally enters into foreign currency forward exchange
contracts to hedge that portion of its net financial position that is
exposed to foreign currency fluctuations. As noted above, the Company has a
multi-currency credit arrangement which may help the Company meet some of
its foreign currency needs and may serve as an additional tool for hedging
assets and liabilities exposed to foreign currency fluctuations.
The Company has adopted accounting practices which tend to reflect
current costs in its income statement. Approximately 65%, 54% and 55% of
total inventories at the end of 1995, 1994 and 1993, respectively, were
accounted for using the last-in, first-out (LIFO) valuation method.
Normally under this method, the cost of goods sold reported in the
financial statements approximates current costs and, thus, helps reduce
distortions in reported income due to the effect of changing prices.
Depreciation expense is based on historical costs and, therefore, is
lower than if based on the current cost of productive capacity. However,
the Company uses accelerated depreciation methods for most assets, thereby
reducing operating income by a greater amount than would be the case if the
more generally used straight-line method was employed. Assets acquired in
prior years will, of course, be replaced at higher costs, but this will
take place over many years. These new assets will result in higher
depreciation charges, but in many cases, due to technological improvements,
there quite likely will be operating cost savings as well.
Risks and Uncertainties
New Products: The Company's ability to sustain its recent rate of growth in
sales depends largely on consumer acceptance of various new products
recently introduced and planned for introduction in the coming months.
While the Company is optimistic about the prospects of favorable consumer
reaction to these new products, the market in which the Company sells is
highly competitive, and there is no assurance that such consumer acceptance
will be realized to the degree necessary to sustain the Company's growth.
Dependence on Certain Suppliers: To maintain the highest level of product
quality, the Company relies on a limited number of domestic and foreign
suppliers for certain raw materials and manufacturing technologies. The
Company may be adversely affected in the event that these suppliers cease
operations, or if pricing terms become less favorable. The Company
believes, but cannot be assured, that the raw materials currently supplied
by these vendors could be obtained from other sources and that the
manufacturing technologies could be developed internally or that suitably
similar technologies could be located.
twenty-fourBoard of Directors
Bradford R. Boss
Chairman of the Board
Class B Director.1,4
Russell A. Boss
President and Chief Executive Officer
Class B Director.1,4
John E. Buckley
Executive Vice President
Chief Operating Officer
Class B Director. 1,4
Bernard V. Buonanno, Jr.
Partner, Edwards & Angell,
Providence, Rhode Island
Class B Director. 3
H. Frederick Krimendahl, II
Limited Partner,
The Goldman Sachs Group, L.P.,
New York, New York
Class B Director. 3
Thomas C. McDermott
President and Chief Executive Officer,
Goulds Pumps, Inc.,
Fairport, New York
Class A Director. 2
Terrence Murray
Chairman, President and
Chief Executive Officer,
Fleet Financial Group, Inc.,
Boston, Massachusetts
Class A Director. 3
James C. Tappan
President, Tappan Capital Partners,
Hobe Sound, Florida
Class A Director. 2
Edwin G. Torrance
Partner,
Hinckley, Allen & Snyder,
Providence, Rhode Island
Class B Director. 2
Corporate Officers
Bradford R. Boss
Chairman of the Board
Russell A. Boss
President
Chief Executive Officer
John E. Buckley
Executive Vice President
Chief Operating Officer
David J. Arthur
Director, Engineering
Tina C. Benik
Vice President, Legal
General Counsel and Corporate Secretary
Joseph F. Eastman
Vice President, Human Resources
Michael El-Hillow
Vice President, Finance
Treasurer, Chief Financial Officer
Steven T. Henick
Vice President, Worldwide
Marketing and Sales
J. John Lawler
Vice President, Worldwide
Tax and Duty Free
Stephen A. Perreault
Vice President, Manufacturing
Donald W. Reilly
Corporate Controller
David A. Rogers
Vice President, U.S.
Marketing and Sales
John T. Ruggieri
Vice President, Corporate
Development and Planning
Corporate Information
Corporate Headquarters
A.T. Cross Company
One Albion Road
Lincoln, Rhode Island 02865 U.S.A.
Tel. (401) 333-1200
Fax (401) 334-2861
Subsidiaries and Branches
ATX Marketing Company,
Lincoln, Rhode Island
ATX International, Inc.,
Wilmington, Delaware
A.T. Cross Export Company Limited,
St. Thomas, Virgin Islands
A.T. Cross Limited,
Ballinasloe, Republic of Ireland
A.T. Cross Distribution,
Ballinasloe, Republic of Ireland
ATX Ireland, Limited,
Ballinasloe, Republic of Ireland
A.T. Cross Italia, S.r.l.
Milan, Italy
A.T. Cross Company,
French Branch
Paris, France
A.T. Cross Company,
Hong Kong Branch
HongKong
A.T. Cross (U.K.) Limited,
Luton, Bedfordshire, England
A.T. Cross (Europe), Limited,
Luton, Bedfordshire, England
A.T. Cross Company,
Spanish Branch
Malaga, Spain
A.T. Cross Deutschland GmbH,
Mainz, Federal Republic of Germany
Cross Company of Japan, Limited,
Tokyo, Japan
Manetti-Farrow, Incorporated,
New York, New York
Annual Meeting
The Annual Meeting of Shareholders
of A.T. Cross Company will be held on
Thursday, April 25, 1996 at 10:00 a.m.
at the offices of the Company,
One Albion Road,
Lincoln, Rhode Island 02865.
Legal Counsel
Hinckley, Allen & Snyder,
Providence, Rhode Island 02903
Auditors
Ernst & Young LLP,
Providence, Rhode Island 02903
Stock Symbol
American Stock Exchange Symbol: ATX.A
Transfer Agent and Registrar
Fleet National Bank of Rhode Island,
Providence, Rhode Island 02903
10-K Report
A copy of the Company's report to the
Securities and Exchange Commission on
Form 10-K will be furnished free of charge to
any security holder upon written request to the
Vice President, Finance, at One Albion Road,
Lincoln, Rhode Island 02865.
Board Committees: 1. Executive; 2. Audit; 3. Compensation;
4. Employee Benefits.Printed in the U.S.A. on recycled paper.
</TABLE>
Exhibit 23
Consent of Independent Auditors
We consent to the incorporation by reference in this Annual Report (Form 10-
K) of A. T. Cross Company of our report dated January 30, 1996, included in
the 1995 Annual Report to Shareholders of A. T. Cross Company.
Our audits also included the financial statement schedule of A. T. Cross
Company listed in Item 14. This schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on
our audits. In our opinion, the financial statement schedule referred to
above, when considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the information set
forth therein.
We also consent to the incorporation by reference in Post-Effective
Amendment Number 6 to Registration Statement Number 2-54429 on Form S-8,
Post-Effective Amendment Number 9 to Registration Statement Number 2-42388
on Form S-8, Registration Statement Number 33-23709 on Form S-8,
Registration Statement number 33-23710 on Form S-8, Registration Statement
Number 33-54176 on Form S-8, Registration Statement Number 33-64729 on Form
S-8, and Registration Statement Number 33-64731 on Form S-8 of our report
dated January 30, 1996, with respect to the consolidated financial
statements incorporated herein by reference, and our report included in the
preceding paragraph with respect to the financial statement schedule
included in this Annual Report (Form 10-K) of A. T. Cross Company.
ERNST & YOUNG LLP
Providence, Rhode Island
March 26, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FINANCIAL STATEMENTS INCLUDED IN THE A. T. CROSS COMPANY ANNUAL REPORT
TO SECURITY HOLDERS FOR THE YEAR ENDED DECEMBER 31, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 53,896,134
<SECURITIES> 0
<RECEIVABLES> 49,762,341
<ALLOWANCES> 1,745,000
<INVENTORY> 29,465,339
<CURRENT-ASSETS> 135,143,478
<PP&E> 95,589,389
<DEPRECIATION> 57,352,065
<TOTAL-ASSETS> 189,362,199
<CURRENT-LIABILITIES> 52,438,727
<BONDS> 0
0
0
<COMMON> 17,048,116
<OTHER-SE> 114,666,356
<TOTAL-LIABILITY-AND-EQUITY> 189,362,199
<SALES> 191,090,409
<TOTAL-REVENUES> 194,882,103
<CGS> 94,422,106
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 79,671,388
<LOSS-PROVISION> 360,755
<INTEREST-EXPENSE> 174,501
<INCOME-PRETAX> 20,253,353
<INCOME-TAX> 6,888,000
<INCOME-CONTINUING> 13,365,353
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,365,353
<EPS-PRIMARY> 0.81
<EPS-DILUTED> 0.80
</TABLE>
