-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, iAZW8Cj0H4OvmxArR21VkVHMqmhhaTD67EQ1NSvYwhAIyspFWwFH65BTnZMvV23M wXZWhmj+mfSrjq8g3vzPqg== 0000025793-94-000017.txt : 19941117 0000025793-94-000017.hdr.sgml : 19941117 ACCESSION NUMBER: 0000025793-94-000017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941114 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: CROSS A T CO CENTRAL INDEX KEY: 0000025793 STANDARD INDUSTRIAL CLASSIFICATION: 3950 IRS NUMBER: 050126220 STATE OF INCORPORATION: RI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06720 FILM NUMBER: 94559429 BUSINESS ADDRESS: STREET 1: ONE ALBION RD CITY: LINCOLN STATE: RI ZIP: 02865 BUSINESS PHONE: 4013331200 MAIL ADDRESS: STREET 1: ONE ALBION ROAD STREET 2: 50 KENNEDY PLAZA CITY: LINCOLN STATE: RI ZIP: 02865 10-Q 1 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 September 30, 1994 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934 [NO FEE REQUIRED] For the transition period from __________ to __________ Commission File No. 1-6720 A. T. CROSS COMPANY (Exact name of registrant as specified in its charter) Rhode Island 05-0126220 (State or other jurisdiction of (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 September 30, 1994: Class A common stock - 14,966,625 shares Class B common stock - 1,804,800 shares PART I. FINANCIAL INFORMATION A. T. CROSS COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS September 30 December 31 1994 1993 1993 ASSETS (Thousands of Dollars) CURRENT ASSETS Cash and Cash Equivalents $ 25,031 $ 40,684 $ 52,822 Short-Term Investments 49,671 31,981 18,312 Accounts Receivable 30,691 26,074 36,960 Inventories-Note B 16,496 16,393 18,964 Other Current Assets 3,228 5,274 3,068 TOTAL CURRENT ASSETS 125,117 120,406 130,126 PROPERTY, PLANT AND EQUIPMENT 82,352 77,728 77,493 Less Allowances for Depreciation 50,289 46,636 45,363 32,063 31,092 32,130 INTANGIBLES AND OTHER ASSETS 16,680 14,340 16,738 $173,860 $165,838 $178,994 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable, Accrued Expenses and Other Liabilities $ 21,481 $ 15,833 $ 21,243 Compensation and Related Taxes 6,527 5,217 6,647 Cash Dividends Payable 0 0 2,709 Contributions Payable to Employee Benefit Plans 7,685 7,572 8,632 Income Taxes Payable 1,885 (2,741) 995 TOTAL CURRENT LIABILITIES 37,578 25,881 40,226 ACCRUED WARRANTY COSTS 4,834 4,159 4,609 SHAREHOLDERS' EQUITY Common Stock, Par Value $1 Per Share: Class A, Authorized 40,000,000 Shares; Issued 15,191,625 Shares and Outstanding 14,966,625 Shares in 1994, Issued and Outstanding 15,125,982 Shares in September and December, 1993, respectively 15,192 15,126 15,126 Class B, Authorized 4,000,000 Shares; Issued and Outstanding 1,804,800 Shares 1,805 1,805 1,805 Additional Paid-In Capital 10,292 9,279 9,389 Retained Earnings 107,468 109,578 108,162 Accumulated Foreign Currency Translation Adjustment 330 10 (323) 135,087 135,798 134,159 Treasury Stock, at Cost; 225,000 Shares (3,639) - - TOTAL SHAREHOLDERS' EQUITY 131,448 135,798 134,159 $173,860 $165,838 $178,994 A. T. CROSS COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 1994 1993 1994 1993 (Thousands of Dollars Except per Share Data) Net Sales $45,928 $ 40,096 $121,741 $113,865 Cost of Goods Sold 24,322 22,535 64,726 64,932 Gross Profit 21,606 17,561 57,015 48,933 Selling, General and Administrative Expenses 16,496 13,252 46,277 41,962 Service and Distribution Costs 992 1,014 3,172 3,614 Research and Development Expenses 343 553 1,437 1,368 Restructuring Charges-Note E - - - 9,610 Operating Income (Loss) From Continuing Operations 3,775 2,742 6,129 (7,621) Interest and Other Income 1,052 749 2,399 2,022 Income (Loss) From Continuing Operations Before Income Taxes 4,827 3,491 8,528 (5,599) Income Taxes (Benefit) 2,153 1,133 3,804 (2,116) Income (Loss) From Continuing Operations 2,674 2,358 4,724 (3,483) Loss from Discontinued Operations, Less Income Tax Benefit-Note D Loss From Operations - - - (1,500) Loss On Disposal - - - (2,500) Net Income (Loss) $ 2,674 $ 2,358 $ 4,724 $ (7,483) Income (Loss) Per Share:-Note C From Continuing Operations $0.16 $ 0.13 $ 0.28 $(0.21) From Discontinued Operations - - - (0.24) Net Income (Loss) Per Share $0.16 $ 0.13 $ 0.28 $(0.45) Dividends Declared Per Share $0.16 $ 0.16 $ 0.32 $ 0.48 See notes to condensed consolidated financial statements. A. T. CROSS COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30 1994 1993 (Thousands of Dollars) Cash Provided By (Used In): Operating Activities: Net Cash Provided by Continuing Operations $20,209 $ 24,175 Net Cash Used in Discontinued Operations - (201) Net Cash Provided By Operating Activities 20,209 23,974 Investing Activities: Proceeds From Sale of Assets - 5,650 Additions to Property, Plant and Equipment (4,902) (7,450) Additional Acquisition Payment (481) (365) Acquisition of Minority Interest in Subsidiary - (985) Purchase of Short-Term Investments (49,060) (29,199) Sale or Maturity of Short-Term Investments 17,701 40,022 Net Cash Provided By (Used In) Investing Activities (36,742) 7,673 Financing Activities: Cash Dividends Paid (8,128) (13,540) Purchase of Treasury Stock (3,639) - Other 228 190 Net Cash Used in Financing Activities (11,539) (13,350) Effect of Exchange Rate Changes on Cash and Cash Equivalents 280 (19) Increase (Decrease)in Cash and Cash Equivalents (27,792) 18,278 Cash and Cash Equivalents at Beginning of Period 52,822 22,406 Cash and Cash Equivalents at End of Period $25,031 $ 40,684 See notes to condensed consolidated financial statements. A. T. CROSS COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 1994 NOTE A - Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. In the three and nine month periods ended September 30, 1993, the Company used the gross profit method to determine approximately half of its interim inventories. Operating results for the three and nine month periods ended September 30, 1994 are not necessarily indicative of the results that may be expected for the year ending December 31, 1994. The Company typically records its highest sales and earnings in the fourth quarter. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1993. NOTE B - Inventories The components of inventory at September 30, 1994 and December 31, 1993 were as follows: September 30 December 31 1994 1993 Raw materials $ 3,857 $ 4,223 Work in process 2,247 3,004 Finished products 10,392 11,737 $16,496 $18,964 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 16,852,929 and 16,937,083 for the third quarter and nine months ended September 30, 1994, respectively and 16,929,371 and 16,926,276 for the third quarter and nine months ended September 30, 1993, respectively. Common stock equivalents related to outstanding stock options have not been included in the calculations of earnings per share because the result is not dilutive. NOTE D - Discontinued Operations On June 30, 1993, the Company completed the sale of the Mark Cross trademark and selected assets of its wholly owned subsidiary Mark Cross, Inc. and discontinued its retail business. The Company recorded an after- tax loss of $ $4,000,000 in the nine month period ended September 30, 1993 in connection with the operation and disposal of this discontinued operation. NOTE E - Restructuring and Other Charges In the second quarter of 1993, the Company recorded a $9.6 million restructuring charge ($6.2 million after-tax) in connection with consolidating its production and distribution facilities, restructuring its corporate organization and the discontinuance of certain product lines. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Third Quarter 1994 Compared to Third Quarter 1993 Net sales for the third quarter ended September 30, 1994 increased by $5.8 million or 14.5% from the third quarter of 1993. Domestic sales were 15.1% higher than last year while foreign sales were 13.4% improved over the same period in 1993. The higher domestic sales this quarter reflect the continued favorable consumer response to many of the Company's new products and marketing initiatives. The new wider girth Townsend line has not only created new excitement at the prestige end of the high priced writing instrument line, but has also stimulated interest in the traditional narrow girth Century products. A new low cost resin based writing instrument was launched during the quarter. This new line, designated Solo, is targeted at the high volume, low cost Mass Merchandisers. The increase in foreign sales was due, in part, to working closely with foreign distributors to enhance the image of the Cross brand, several new product introductions and an aggressive promotional campaign. Gross profit margins for the third quarter of 1994 were 47.0%, compared to 43.8% for the same quarter of 1993. The gross margin improvement was due, in part, to lower average costs this year as compared to the same period in 1993, as a result of the widespread changes to the manufacturing process that were put in place over the last two years. Additionally, a price increase of approximately 4.0%, effective July 1, 1994, had a favorable affect on the quarter to quarter gross margins. Selling, general and administrative expenses increased 24.5% over last year's third quarter as a result of increased promotional spending in support of the greater number of new product and packaging initiatives launched this year. Service and distribution expenses were essentially equal to last year's levels and research and development expenses were approximately 38% less than the third quarter of 1993 due to the timing of expenditures for new product development. Interest and other income improved over 1993 by 40.5% as a result of slightly higher interest income and gains on disposal of fixed assets. The effective tax rate on income from continuing operations for the third quarter of 1994 was 44.6% as compared to 32.5% for the third quarter of 1993. The tax rate for 1994 was higher than 1993's rate due to changes in the U.S. tax laws that have 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 effective income tax rate differs from the U.S. statutory rate of 35% principally because of the effect of the limited benefits generated from certain foreign operations sustaining losses. Results of Operations Nine Months Ended September 30, 1994 Compared to September 30, 1993 Net sales for the nine months ended September 30, 1994 were $121.7 million, or 6.9% higher than the same period in 1993. Domestic sales of $75.9 million were 1.3% above last year's volume while foreign sales were up 20.3% over the same period in 1993. Domestic sales rebounded strongly in the third quarter as many customers that had been reducing inventory levels earlier in the year, responded positively to the many new products and packaging initiatives offered by the Company. Internationally, sales remained strong in the Asia/Pacific Rim, Latin America, and Canadian markets as the Company's new wide-girth Townsend line was expanded and has helped to bring renewed excitement and vitality to the entire range of Cross products. Gross profit margins for the first nine months of 1994 were 46.8%, an improvement of 3.8PP as compared to the 43.0% margin for the same period last year. The gross margin improvement was due in part to the price increase implemented on July 1, 1994 and to the lower average costs this year as compared to the same period in 1993. As noted above, the lower costs are the result of numerous manufacturing initiatives implemented over the past several years. In comparison to last year, the improvement in gross margins experienced during the first nine months of 1994 is greater than the expected improvement in the fourth quarter or the full year. Selling, general and administrative expenses for the nine months ended September 30, were 10.3% higher than the same period for 1993. The increase was due primarily to the higher level of marketing expenditures in support of the improved sales, as well as the timing of expenditures combined with the effects of general inflation increases. Service and distribution costs are 12.2% lower than last year and reflect the lower costs resulting from the consolidation of the manufacturing and distribution functions from two locations into one. Included in the nine month results for 1993 was a $9.6 million restructuring charge. The charge was comprised of a provision for loss on the sale of the Company's distribution center, costs of consolidating manufacturing operations in connection with cost-reducing manufacturing initiatives, expenses associated with an early retirement program and employee separation program, and a provision for inventory write-downs for certain discontinued product lines. Interest and other income increased by 18.6% for the nine months of 1994 due to higher interest income as a result of higher levels of investments and slightly higher interest rates and from gains recorded on disposal of certain of the Company's fixed assets. The effective tax rate on income/(loss) from continuing operations for the nine months ended September 30, 1994 was 44.6% as compared to the 37.8% credit for the 1993 nine month period. As mentioned in the third quarter discussion above, the higher 1994 rate as compared to 1993 was due primarily to changes in U.S. tax laws relating to certain U.S. companies with international operations. Liquidity and Sources of Capital Cash, cash equivalents and short-term investments increased $3.6 million from December 31, 1993 to $74.7 million at September 30, 1994. There was a substantial increase in cash, and a corresponding decrease in accounts receivable, as a result of cash collected in January 1994 from customers who took advantage of the 1993 special holiday promotion. This promotion, which allowed qualifying domestic customers to defer payments on their 1993 purchases, was similar to the programs that have been offered in past years. A comparable program has been offered this year, and it is expected that accounts receivable will increase during the last quarter of the year as well. Offsetting this increase was a cash outflow of $3.6 million for the repurchase of Treasury stock(see below). Cash available for domestic operations approximated $19 million while cash held off-shore approximated $56 million. The Company has available a $50 million line of credit with Fleet National Bank which provides an additional source of working capital on a short term basis. No funds were borrowed under this line of credit in 1993 or through the first nine months of 1994. Management expects to borrow not more than $5,000,000 under this line in the fourth quarter of 1994. On April 28, 1994, the Company's Board of Directors authorized a repurchase of up to 1,000,000 shares of its outstanding Class A common stock, the timing and price to be at the discretion of management. As of September 30, 1994, 225,000 shares had been repurchased at a cost of approximately $3,600,000. 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 nine months ended September 30, 1994. SIGNATURES Pursuant to the requirement of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. A. T. CROSS COMPANY Date: November 14, 1994 By: JOHN E. BUCKLEY John E. Buckley Executive Vice President Chief Operating Officer Date: November 14, 1994 By: MICHAEL EL-HILLOW Michael El-Hillow Vice President, Finance, Treasurer Chief Financial Officer EX-27 2
5 1,000 9-MOS DEC-31-1993 JAN-01-1994 SEP-30-1994 74,702 0 32,179 1,488 16,496 3,228 82,352 50,289 173,860 37,578 0 16,997 0 0 114,451 173,860 45,928 46,980 24,322 24,322 17,831 0 0 4,827 2,153 2,674 0 0 0 2,674 .16 .16
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