-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, T9Lz3Fzf7zWw2VGInic/IES3IVPJkmLYCO0LRrwQRfNWs+YXxwOp3FdsJVKVpusK SHkgfYUsmIGTXdBB2EUSJA== 0000025793-95-000012.txt : 19951119 0000025793-95-000012.hdr.sgml : 19951119 ACCESSION NUMBER: 0000025793-95-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951113 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: CROSS A T CO CENTRAL INDEX KEY: 0000025793 STANDARD INDUSTRIAL CLASSIFICATION: PENS, PENCILS & OTHER ARTISTS' MATERIALS [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: 95590461 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, 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 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, 1995: Class A common stock - 14,717,650 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 1995 1994 1994 ASSETS (Thousands of Dollars) CURRENT ASSETS Cash and Cash Equivalents $ 26,198 $ 25,031 $ 15,690 Short-Term Investments 31,587 49,671 56,331 Accounts Receivable 29,931 30,691 37,436 Inventories-Note B 25,486 16,496 16,725 Other Current Assets 6,811 3,228 4,545 TOTAL CURRENT ASSETS 120,013 125,117 130,727 PROPERTY, PLANT AND EQUIPMENT 92,076 82,352 84,979 Less Allowances for Depreciation 56,437 50,289 51,029 35,639 32,063 33,950 INTANGIBLES AND OTHER ASSETS 15,494 16,680 15,692 $171,146 $173,860 $180,369 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable, Accrued Expenses and Other Liabilities $ 17,279 $ 21,481 $ 26,599 Compensation and Related Taxes 6,961 6,527 5,158 Cash Dividends Payable 0 0 2,644 Contributions Payable to Employee Benefit Plans 8,682 7,685 8,055 Income Taxes Payable 3,678 1,885 4,302 TOTAL CURRENT LIABILITIES 36,600 37,578 46,758 ACCRUED WARRANTY COSTS 5,134 4,834 4,909 SHAREHOLDERS' EQUITY Common Stock, Par Value $1 Per Share: Class A, Authorized 40,000,000 Shares; Issued 15,208,250 Shares and Outstanding 14,717,650 Shares in September 1995, Issued 15,191,625 Shares and Outstanding 14,966,625 Shares in September 1994 and Issued 15,194,293 Shares and Outstanding 14,719,293 Shares in December 1994 15,208 15,192 15,194 Class B, Authorized 4,000,000 Shares; Issued and Outstanding 1,804,800 Shares 1,805 1,805 1,805 Additional Paid-In Capital 10,903 10,292 10,722 Retained Earnings 108,621 107,468 107,959 Accumulated Foreign Currency Translation Adjustment 410 330 328 136,947 135,087 136,008 Treasury Stock, at Cost (7,535) (3,639) (7,306) TOTAL SHAREHOLDERS' EQUITY 129,412 131,448 128,702 $171,146 $173,860 $180,369 See notes to condensed consolidated financial statements. A. T. CROSS COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 1995 1994 1995 1994 (Thousands of Dollars Except per Share Data) Net Sales $44,859 $45,928 $125,149 $121,741 Cost of Goods Sold 23,199 24,322 64,224 64,726 Gross Profit 21,660 21,606 60,925 57,015 Selling, General and Administrative Expenses 16,540 16,496 48,976 46,277 Service and Distribution Costs 959 992 3,073 3,172 Research and Development Expenses 748 343 2,015 1,437 Operating Income 3,413 3,775 6,861 6,129 Interest and Other Income 989 1,052 2,662 2,399 Income Before Income Taxes 4,402 4,827 9,523 8,528 Income Taxes 1,651 2,153 3,571 3,804 Net Income $ 2,751 $ 2,674 $ 5,952 $ 4,724 Net Income Per Share - Note C $0.17 $0.16 $0.36 $0.28 Dividends Declared Per Share $0.16 $ 0.16 $0.32 $ 0.32 See notes to condensed consolidated financial statements. A. T. CROSS COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30 1995 1994 (Thousands of Dollars) Cash Provided By (Used In): Operating Activities $ 726 $ 20,210 Investing Activities: Additions to Property, Plant and Equipment (7,052) (4,902) Additional Acquisition Payment 0 (481) Purchase of Short-Term Investments (37,867) (49,060) Sale or Maturity of Short-Term Investments 62,611 17,701 Net Cash Provided By (Used In)Investing Activities 17,692 (36,742) Financing Activities: Cash Dividends Paid (7,932) (8,128) Purchase of Treasury Stock (229) (3,639) Other 195 228 Net Cash Used in Financing Activities (7,966) (11,539) Effect of Exchange Rate Changes on Cash and Cash Equivalents 56 280 Increase (Decrease)in Cash and Cash Equivalents 10,508 (27,791) Cash and Cash Equivalents at Beginning of Period 15,690 52,822 Cash and Cash Equivalents at End of Period $ 26,198 $ 25,031 See notes to condensed consolidated financial statements. A. T. CROSS COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 1995 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 and nine month periods ended September 30, 1995 are not necessarily indicative of the results that may be expected for the year ending December 31, 1995. 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, 1994. NOTE B - Inventories The components of inventory at September 30, 1995 and December 31, 1994 were as follows: September 30 December 31 1995 1994 Finished goods $ 13,582 $ 9,612 Work in process 7,491 2,832 Raw materials 4,413 4,281 $ 25,486 $16,725 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 16,521,489 and 16,526,798 for the third quarter and nine months ended September 30, 1995, respectively and 16,852,929 and 16,937,083 for the third quarter and nine months ended September 30, 1994, 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 OPERATIONS Results of Operations Third Quarter 1995 Compared to Third Quarter 1994 Net sales for the third quarter ended September 30, 1995 decreased by $1.1 million or 2.3% from the third quarter of 1994. Domestic sales were 8.8% lower than last year, while foreign sales were 11.8% improved over the same period in 1994. The lower domestic sales this quarter are due to the delay in introducing the Company's new low-priced Solo line and to a change in the ordering patterns of certain larger domestic customers. The Company had planned to introduce Solo early in the second quarter to take advantage of the major spring gift giving occasions but the product was not available until the end of the second quarter. This delay negatively impacted the momentum of the launch of this new product during a key selling period, resulting in lower sales in both the second and third quarters. The change in customer ordering patterns was influenced in part by a change in the Company's annual holiday season program which offers extended payment terms to certain qualifying domestic customers. Unlike 1994, the revised program did not require that customers accept shipment by the end of September in order to qualify for extended payment terms. Similar to the U.S., foreign sales of the wider-girth Townsend line remained strong and, along with the Solo introduction, made up a large part of the quarter to quarter foreign sales increase. The weaker U.S. dollar in the third quarter of 1995 as compared to the third quarter of 1994 also contributed to the foreign sales increase. Gross profit margins for the third quarter of 1995 were 48.3%, compared to 47.0% for the third quarter of 1994. The gross margin improvement was due largely to favorable changes in product mix compared to the same period in 1994. Selling, general and administrative expenses of $16.5 million in the third quarter were even with the prior year. Research and development expenses were up over last year by 118.1% mainly as a result of the Company's emphasis on new product development. Interest and other income was 6.0% lower than 1994 due largely to lower non- recurring other income this period. Interest income alone was 13.3% improved as a result of higher average yields, offset by lower average investments. The effective tax rate on income for the third quarter of 1995 was 37.5% as compared to 44.6% for the third quarter of 1994. The Company implemented a reorganization of certain of its European Operations at the end of 1994 to reflect a change in its operating philosophy in that market which lowered the Company's overall effective corporate income tax rate. Results of Operations Nine Months Ended September 30, 1995 Compared to September 30, 1994 Net sales for the nine months ended September 30, 1995 were $125.1 million, or 2.8% higher than the same period in 1994. Domestic sales of $74.2 million were 2.2% lower, but foreign sales were up 11.1% over the same period in 1994. As discussed above, the decline in domestic sales was primarily due to the delay in the first half of the year in introducing the new lower-priced Solo line and to a significant change in the ordering patterns of certain larger domestic customers. New products and packaging variations of the existing products continue to be well received. The wider-girth Townsend line continues to perform well in the United States. Impulse packaging of the Century writing instruments has helped to renew interest in this older line. The increase in foreign sales was also the result of the continuing strong performance of Townsend, as well as the introduction of the Solo and Solo Classic lines. In addition, foreign results were favorably affected by a weaker U. S. dollar in the first nine months of 1995 compared to the same period last year. Gross profit margins for the nine months of 1995 were 48.7%, as compared to 46.8% for the same period in 1994. The gross margin improvement was largely due to favorable changes in product mix this year as compared to 1994 and the affect of the mid-year 1994 price increase. Selling, general and administrative expenses for the nine months ended September 30 were 5.8% higher than the same period for 1994. The increase was due primarily to higher marketing support expenditures combined with the effect of the weaker U.S. dollar on the results of foreign operations. Research and Development expenses were up over last year by 40.2% mainly as a result of the new product development efforts. Interest and other income increased by 11.0% for the first nine months of 1995 largely due to higher interest income as average rates are slightly higher than last year. The effective tax rate on income for the nine months ended September 30, 1995 was 37.5% as compared to 44.6% for the same period in 1994. As mentioned in the third quarter discussion above, the lower 1995 rate compared to the 1994 rate was primarily due to a restructuring of the Company's European operations. Liquidity and Sources of Capital Cash, cash equivalents and short-term investments decreased $14.2 million from December 31, 1994 to $57.8 million at September 30, 1995. Cash available for domestic operations approximated $5.6 million while cash held off-shore approximated $52.2 million. Contributing to the decrease in cash was the increase in inventory and the repayment of $2.0 million in short- term loans which were outstanding at the end of 1994. The Company has a $50 million line of credit with Fleet National Bank which provides an additional source of working capital on a short term basis. Accounts receivable decreased $7.5 million from December 31, 1994 due to collections in 1995 from customers who took advantage of the 1994 special holiday promotion which, similar to previous years, allowed qualifying domestic customers to defer payments on their 1994 purchases. The increase in inventory since December 31, 1994 is in support of new product introductions. As the Company continues to expand its product lines, it is probable that it will also need to maintain inventories at a higher level than it has had over the last several years. 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. Cash from operations in 1995 is approximately $19 million less through the first nine months of 1995 compared to the same period of 1994 due largely to the increase in inventory combined with lower accounts payable and the repayment of the short-term borrowing discussed above. Through September 1995 the Company has repurchased 490,600 shares of its common stock at a cost of $7.5 million. The Company is authorized to repurchase up to one million shares at management's discretion. 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 the nine months ended September 30, 1995. 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 13, 1995 By: JOHN E. BUCKLEY John E. Buckley Executive Vice President Chief Operating Officer Date: November 13, 1995 By: MICHAEL EL-HILLOW Michael El-Hillow Vice President, Finance, Treasurer Chief Financial Officer EX-27 2
5 1,000 9-MOS DEC-31-1994 SEP-30-1995 3,189 54,596 31,722 1,791 25,486 120,013 92,076 56,437 171,146 36,600 0 17,013 0 0 112,399 171,146 125,149 127,942 64,224 0 53,889 175 131 9,523 3,571 5,952 0 0 0 5,952 .36 .36
-----END PRIVACY-ENHANCED MESSAGE-----