UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the quarterly period ended March 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT
OF 1934 [NO FEE REQUIRED]
For the transition period from __________ to __________
Commission File No. 1-6720
A. T. CROSS COMPANY
(Exact name of registrant as specified in its charter)
Rhode Island 05-0126220
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
One Albion Road, Lincoln, Rhode Island 02865
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (401) 333-1200
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days. Yes X No______
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of March 31, 1996:
Class A common stock - 14,755,677 shares
Class B common stock - 1,804,800 shares
PART I. FINANCIAL INFORMATION
A. T. CROSS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31 December 31
1996 1995 1995
ASSETS (Thousands of Dollars)
CURRENT ASSETS
Cash and Cash Equivalents $ 20,552 $ 13,645 $ 32,469
Short-Term Investments 30,409 60,924 21,427
Accounts Receivable 27,411 21,877 48,017
Inventories-Note B 37,481 22,234 29,465
Other Current Assets 5,559 6,975 3,765
TOTAL CURRENT ASSETS 121,412 125,655 135,143
PROPERTY, PLANT AND EQUIPMENT 97,440 87,070 95,589
Less Allowances for Depreciation 59,193 52,903 57,352
38,247 34,167 38,237
INTANGIBLES AND OTHER ASSETS 15,837 15,671 15,982
$175,496 $175,493 $189,362
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable, Accrued Expenses and
Other Liabilities $ 18,375 $ 23,360 $ 30,155
Compensation and Related Taxes 4,545 4,831 5,309
Cash Dividends Payable 0 0 2,648
Contributions Payable to Employee
Benefit Plans 10,061 8,310 9,443
Income Taxes Payable 3,981 2,773 4,884
TOTAL CURRENT LIABILITIES 36,962 39,274 52,439
ACCRUED WARRANTY COSTS 5,284 4,984 5,209
SHAREHOLDERS' EQUITY
Common Stock, Par Value $1 Per Share:
Class A, Authorized 40,000,000 Shares;
Issued 15,251,777 Shares and Outstanding
14,755,677 Shares in March 1996, Issued
15,200,302 Shares and Outstanding
14,725,302 Shares in March 1995 and
Issued 15,243,316 Shares and Outstanding
14,747,216 Shares in December 1995 15,252 15,200 15,243
Class B, Authorized 4,000,000 Shares;
Issued and Outstanding 1,804,800 Shares 1,805 1,805 1,805
Additional Paid-In Capital 11,427 10,798 11,320
Retained Earnings 112,401 109,513 110,743
Accumulated Foreign Currency
Translation Adjustment (22) 1,225 216
140,863 138,541 139,327
Treasury Stock, at Cost (7,613) (7,306) (7,613)
TOTAL SHAREHOLDERS' EQUITY 133,250 131,235 131,714
$175,496 $175,493 $189,362
See notes to condensed consolidated financial statements.
A. T. CROSS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED
MARCH 31
1996 1995
(Thousands of Dollars
Except per Share Data)
Net Sales $36,053 $35,407
Cost of Goods Sold 18,153 17,810
Gross Profit 17,900 17,597
Selling, General and Administrative Expenses 14,516 14,453
Research and Development Expenses 646 673
Service and Distribution Costs 911 1,021
Operating Income 1,827 1,450
Interest and Other Income 722 1,036
Income Before Income Taxes 2,549 2,486
Income Taxes 892 932
Net Income $ 1,657 $ 1,554
Net Income Per Share - Note C $0.10 $ 0.09
See notes to condensed consolidated financial statements.
A. T. CROSS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED
MARCH 31
1996 1995
(Thousands of Dollars)
Cash Provided By (Used In):
Operating Activities $ 1,519 $ 7,104
Investing Activities:
Additions to Property, Plant and Equipment (1,857) (2,088)
Purchase of Short-Term Investments (14,659) (4,856)
Sale or Maturity of Short-Term Investments 5,677 263
Net Cash Used In Investing Activities (10,839) (6,681)
Financing Activities:
Cash Dividends Paid (2,648) (2,644)
Other 115 83
Net Cash Used In Financing Activities (2,533) (2,561)
Effect of Exchange Rate Changes on
Cash and Cash Equivalents (64) 93
Decrease in Cash and Cash Equivalents (11,917) (2,045)
Cash and Cash Equivalents at Beginning of Period 32,469 15,690
Cash and Cash Equivalents at End of Period $ 20,552 $ 13,645
See notes to condensed consolidated financial statements.
A. T. CROSS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
NOTE A - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three months ended March 31, 1996 are not necessarily
indicative of the results that may be expected for the year ending December
31, 1996. The Company typically records its highest sales and earnings in
the fourth quarter. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended December 31, 1995.
NOTE B - Inventories
The components of inventory at March 31, 1996 and December 31, 1995 were as
follows:
March 31 December 31
1996 1995
Finished goods $ 19,676 $ 14,499
Work in process 9,267 7,837
Raw materials 8,538 7,129
$ 37,481 $ 29,465
NOTE C - Net Income Per Share
Net income per share has been determined based upon the weighted average
number of Class A and Class B common shares outstanding of 16,555,892 and
16,527,823 for the first quarter ended March 31, 1996 and 1995,
respectively. Common stock equivalents related to outstanding stock options
have not been included in the calculations of earnings per share because
the result is not dilutive.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
Results of Operations
Net sales for the first quarter ended March 31, 1996 increased 1.8%
compared to the first quarter of 1995. Domestic writing instrument sales
of $15.6 million were 4.7% greater than last year, while foreign sales of
$17.3 million improved 2.1% over 1995. Contributing to the increase in
both domestic and foreign writing instrument sales is the growing
popularity of the Townsend line, a wider-girth writing instrument, and the
initial favorable response to Solo Classic, a lower priced line of writing
instruments introduced for the first time in 1995. Domestic sales also
benefited from the March launch of the new Metropolis line, a contemporary
styled product featuring polished lacquered caps and fluted-metal barrels,
offered generally in the upper price range of the Company's well
established Century line. The foreign sales increase is partly
attributable to the launch of the redesigned Century line in Europe, the
Middle East and Africa, as well as to strong sales of Townsend and Solo
Classic. Leather sales were $3.2 million, down 11.7% from last year as
major retailers were balancing first quarter inventories in response to low
1995 holiday sell-through. A 1996 price increase had a favorable effect on
sales as well.
The gross profit margin for the first quarter of 1996 was 49.6%, about even
with 1995. Selling, general and administrative expenses for the first
quarter of 1996 were also about even with the prior year. Research and
Development expenses were 4.0% lower than the same period of 1995 due to
the timing of projects under development. Service and Distribution costs
were 10.8% less than last year. This was due largely to timing of
expenditures and, to a lesser extent, to somewhat lower costs of product
repairs under the Company's warranty.
Interest and other income decreased 30.3% for the first three months of
1996 due to lower interest income. Both average investable funds and
interest rates were lower than in the first quarter of 1995.
The effective income tax rate for the first quarter of 1996 was 35.0% as
compared to 37.5% for the same period last year, primarily due to
relatively higher domestic sourced income compared to foreign sourced
income in 1996.
Liquidity and Sources of Capital
Cash, cash equivalents and short-term investments decreased $2.9 million
from December 31, 1995 to $51.0 million at March 31, 1996. Accounts
receivable decreased from year-end by $20.6 million to $27.4 million as
cash was collected in January 1996 from customers who took advantage of the
1995 promotion that allowed qualifying domestic customers to defer payments
on certain 1995 purchases. This promotion was similar to programs that
have been offered in past years. Cash available for domestic operations
approximated $3.0 million while cash held off-shore approximated $48.0
million. The Company has available a $50 million line of credit with Fleet
National Bank which provides an additional source of working capital on a
short-term basis. The Company also has available a $7 million multi-
currency credit arrangement with a bank to meet short-term foreign currency
needs. There were no outstanding amounts under either agreement as of
March 31, 1996 or December 31, 1995.
Inventory of $37.5 million increased $8.0 million since December 31, 1995.
The higher inventory is the result of new product introductions and
expanded packaging variations. 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, more of the materials used in the Company's newer
products are foreign sourced and require longer lead times, resulting in
the need for higher inventory levels of these materials.
PART II. OTHER INFORMATION
Item 6. No reports have been filed on Form 8-K pursuant to item 6(b) and no
other items are applicable for three months ended March 31, 1996.
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
A. T. CROSS COMPANY
Date: May 14, 1996 By: JOHN E. BUCKLEY
John E. Buckley
Executive Vice President
Chief Operating Officer
Date: May 14, 1996 By: MICHAEL EL-HILLOW
Michael El-Hillow
Vice President, Finance, Treasurer
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS INCLUDED IN A. T. CROSS COMPANY FORM 10-Q FOR THE QUARTERLY PERIOD
ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1996
<CASH> 50,961
<SECURITIES> 0
<RECEIVABLES> 29,280
<ALLOWANCES> 1,869
<INVENTORY> 37,481
<CURRENT-ASSETS> 121,412
<PP&E> 97,440
<DEPRECIATION> 59,193
<TOTAL-ASSETS> 175,496
<CURRENT-LIABILITIES> 36,962
<BONDS> 0
0
0
<COMMON> 17,057
<OTHER-SE> 116,193
<TOTAL-LIABILITY-AND-EQUITY> 175,496
<SALES> 36,053
<TOTAL-REVENUES> 36,779
<CGS> 18,153
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 16,032
<LOSS-PROVISION> 41
<INTEREST-EXPENSE> 4
<INCOME-PRETAX> 2,549
<INCOME-TAX> 892
<INCOME-CONTINUING> 1,657
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,657
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
