-----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, PCXulNz3K1WWz5Ey9w54PAwWOU/FxWkP7PSDsRedo7wbA1UD9LkPbGSw/yDuis1C Ve6sioScRB3D5QHLJKX92g== 0000025793-96-000007.txt : 19960814 0000025793-96-000007.hdr.sgml : 19960814 ACCESSION NUMBER: 0000025793-96-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960813 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: 96610526 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 June 30, 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 June 30, 1996: Class A common stock - 14,762,344 shares Class B common stock - 1,804,800 shares PART I. FINANCIAL INFORMATION A. T. CROSS COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS June 30 December 31 1996 1995 1995 ASSETS (Thousands of Dollars) CURRENT ASSETS Cash and Cash Equivalents $ 18,986 $ 28,369 $ 32,469 Short-Term Investments 31,989 33,256 21,427 Accounts Receivable 27,572 26,684 48,017 Inventories-Note B 38,327 25,117 29,465 Other Current Assets 7,868 6,191 3,765 TOTAL CURRENT ASSETS 124,742 119,617 135,143 PROPERTY, PLANT AND EQUIPMENT 99,844 89,279 95,589 Less Allowances for Depreciation 61,064 54,787 57,352 38,780 34,492 38,237 INTANGIBLES AND OTHER ASSETS 15,758 15,663 15,982 $179,280 $169,772 $189,362 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable, Accrued Expenses and Other Liabilities $ 18,894 $ 19,089 $30,155 Note Payable to Bank 7,100 0 0 Compensation and Related Taxes 5,550 5,750 5,309 Cash Dividends Payable 0 0 2,648 Contributions Payable to Employee Benefit Plans 9,578 8,007 9,443 Income Taxes Payable 1,398 1,824 4,884 TOTAL CURRENT LIABILITIES 42,520 34,670 52,439 ACCRUED WARRANTY COSTS 5,359 5,059 5,209 SHAREHOLDERS' EQUITY Common Stock, Par Value $1 Per Share: Class A, Authorized 40,000,000 Shares; Issued 15,258,444 Shares and Outstanding 14,762,344 Shares in June 1996, Issued 15,202,636 Shares and Outstanding 14,717,036 Shares in June 1995 and Issued 15,243,316 Shares and Outstanding 14,747,216 Shares in December 1995 15,258 15,203 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 11,504 10,827 11,320 Retained Earnings 110,542 108,514 110,743 Accumulated Foreign Currency Translation Adjustment (95) 1,157 216 139,014 137,506 139,327 Treasury Stock, at Cost (7,613) (7,463) (7,613) TOTAL SHAREHOLDERS' EQUITY 131,401 130,043 131,714 $179,280 $169,772 $189,362 See notes to condensed consolidated financial statements. A. T. CROSS COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 1996 1995 1996 1995 (Thousands of Dollars Except per Share Data) Net Sales $41,524 $44,883 $77,577 $80,290 Cost of Goods Sold 21,788 23,215 39,941 41,025 Gross Profit 19,736 21,668 37,636 39,265 Selling, General and Administrative Expenses 17,643 17,983 32,159 32,436 Research and Development Expenses 557 685 1,203 1,358 Service and Distribution Costs 928 1,093 1,839 2,114 Operating Income 608 1,907 2,435 3,357 Interest and Other Income 614 728 1,336 1,764 Income Before Income Taxes 1,222 2,635 3,771 5,121 Income Taxes 428 988 1 320 1,920 Net Income $ 794 $ 1,647 $ 2,451 $ 3,201 Net Income Per Share - Note C $0.05 $0.10 $0.15 $ 0.19 Dividends Declared Per Share $0.16 $ 0.16 $0.16 $ 0.16 See notes to condensed consolidated financial statements. A. T. CROSS COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED JUNE 30 1996 1995 (Thousands of Dollars) Cash Provided By (Used In): Operating Activities $ 6,714 $ (1,291) Investing Activities: Additions to Property, Plant and Equipment (4,236) (4,118) Purchase of Short-Term Investments (30,032) (34,812) Sale or Maturity of Short-Term Investments 19,470 57,887 Net Cash Provided By (Used In) Investing Activities (14,798) 18,957 Financing Activities: Cash Dividends Paid (5,300) (5,289) Purchase of Treasury Stock 0 (157) Other 199 114 Net Cash Used In Financing Activities (5,101) (5,332) Effect of Exchange Rate Changes on Cash and Cash Equivalents (298) 345 Increase (Decrease) in Cash and Cash Equivalents (13,483) 12,679 Cash and Cash Equivalents at Beginning of Period 32,469 15,690 Cash and Cash Equivalents at End of Period $ 18,986 $ 28,369 See notes to condensed consolidated financial statements. A. T. CROSS COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS June 30, 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 and six month periods ended June 30, 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 June 30, 1996 and December 31, 1995 were as follows: June 30 December 31 1996 1995 Finished goods $20,002 $14,499 Work in process 8,767 7,837 Raw materials 9,558 7,129 $38,327 $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 16,561,264 and 16,558,579 for the second quarter and six months ended June 30, 1996, respectively and 16,531,149 and 16,529,497 for the second quarter and six months ended June 30, 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 Second Quarter 1996 Compared to Second Quarter 1995 Net sales for the second quarter ended June 30, 1996 decreased 7.5% compared to the second quarter of 1995. Domestic sales of $22.4 million were 17.0% lower than last year, while foreign sales of $19.1 million improved 7.0% over 1995. The decline in Domestic writing instrument sales was primarily caused by lower sales of the Company's Century and Solo lines to certain mass market retailers as these retailers attempt to balance inventory levels with expected consumer demand. Leather sales were also down for the quarter due to lower purchases from a major customer. The overall decline in domestic sales was offset somewhat by the continued success of Townsend and Solo Classic and by the 1996 launch of the new Metropolis line, a contemporary styled product featuring polished lacquered caps and fluted-metal barrels, offered generally in the middle to upper price range of the Century line. The foreign sales increase is attributable to the launch of the Century Restage line in Europe, the Middle East and Africa, as well as to strong sales of Townsend and Solo Classic. A 1996 price increase in certain lines had a slightly favorable effect on both domestic and foreign sales as well, while the stronger dollar in 1996 unfavorably affected foreign sales in comparison to the second quarter of 1995. The gross profit margin for the second quarter of 1996 decreased slightly to 47.5%, compared to 48.3% for the second quarter of 1995, due primarily to product mix and lower sales. Selling, general and administrative expenses for the second quarter of 1996 were down 1.9% from the prior year resulting from cost containment efforts taken as a result of lower than expected sales. Research and Development expenses were 18.7% lower than the same period of 1995 due to the timing of projects under development. Service and Distribution costs were 15.1% less than last year due in part to lower costs of product repairs under the Company's warranty, and to overall lower sales. Interest and other income decreased 15.7% for the second quarter of 1996 due to lower interest income resulting from both lower average investable funds and lower interest rates than in the second quarter of 1995. The effective income tax rate for the second quarter of 1996 was 35.0%, lower than the 37.5% rate for the same period last year, but more in line with the full year 1995 rate of 34.0%. The change in the rate in the 1996 compared to the 1995 second quarter was primarily due to relative changes in the levels of domestic and foreign income comprising total income. Results of Operations Six Months Ended June 30, 1996 Compared to June 30, 1995 Net sales for the six months ended June 30, 1996 were $77.6 million, or 3.4% lower than the same period in 1995. Domestic sales of $41.2 million were 9.5% lower, while foreign sales of $36.4 million were up 4.6% over the same period in 1995. For the most part, the factors affecting sales results for the second quarter had a similar affect on year-to-date sales: Lower Century and Solo sales were offset somewhat by the continued success of the higher-priced, wider-girth Townsend line and the early positive results for Metropolis, Solo Classic and Century Restage. A 1996 price increase had a slightly favorable effect on sales as well. Although foreign sales increased, they were unfavorably affected by a stronger U. S. dollar in the first six months of 1996 compared to the same period last year. Gross profit margins for the first six months of 1996 were 48.5%, as compared to 48.9% for the same period in 1995 due primarily to product mix and lower sales. Selling, general and administrative expenses for the six months ended June 30 were 0.9% lower than the same period for 1995. Research and Development expenses were down from last year by 11.4% while Service and Distribution expenses decreased 13.0%. The factors affecting the quarterly results in these areas, discussed above, also are applicable to the six month results. Interest and other income decreased by 24.3% for the first six months of 1996 primarily due to lower interest income as average investable funds and interest rates were lower than last year. The effective tax rate on income for the six months ended June 30, 1996 was 35.0% as compared to 37.5% for the 1995 six month period and 34.0% for the full year 1995. As mentioned in the second quarter discussion above, the lower 1996 rate as compared to the six month June 30, 1995 rate was due to relative changes in the levels of domestic and foreign income comprising total income. 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 June 30, 1996. Accounts receivable decreased from year-end by $20.4 million to $27.6 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 $3.4 million while cash held off-shore approximated $47.6 million. The Company has available a $50 million line of credit with Fleet National Bank which provides an additional source of working capital on a short-term basis. At June 30, 1996 there was $7.1 million outstanding under this line. 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 this agreement as of June 30, 1996 and 1995 and December 31, 1995. Inventory of $38.3 million increased $8.9 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 4. Submission of Matters to a Vote of Security Holders The Company held its annual meeting on April 25, 1996 at its corporate headquarters in Lincoln, Rhode Island. The following are the matters submitted to a vote of the shareholders: a. Number of Directors The proposition to fix the total number of directors at nine, of which three shall be Class A directors and six shall be Class B directors. Approved by the vote of 12,164,437 Class A shares in favor, 340,073 against, 26,455 abstaining, and by the vote of 1,804,800 Class B shares in favor and none against. b. Election of Directors The following directors were elected by the Class A shareholders: For Withheld Terrence Murray 11,948,109 582,856 James C. Tappan 12,115,356 415,609 Thomas C. McDermott 12,123,956 407,009 The following directors were elected by the unanimous vote of 1,804,800 Class B shares: Bradford R. Boss Russell A. Boss John E. Buckley Bernard V. Buonanno, Jr. H. Frederick Krimendahl, II Edwin G. Torrance Item 6. Exhibits and Reports on Form 8-K A report on Form 8-K dated July 16, 1996 was filed by the Company, stating that a change in the Company's independent certifying accountants had occurred due to the dismissal of Ernst & Young LLP. The report noted that Ernst & Young LLP did not issue any adverse or qualified opinions on the Company's financial statements for the preceding two fiscal years, nor did any disagreement arise prior to the dismissal of Ernst & Young LLP which, if not resolved, would have required a comment in connection with its report. The Company also reported it has retained Deloitte & Touche LLP as its new independent certifying accountants. Holders of all Class B shares approved by unanimous consent vote dated July 16, 1996 the appointment of Deloitte & Touche as independent auditors for the year ending December 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: August 13, 1996 By: JOHN E. BUCKLEY John E. Buckley Executive Vice President Chief Operating Officer Date: August 13, 1996 By: MICHAEL EL-HILLOW Michael El-Hillow Vice President, Finance, Treasurer Chief Financial Officer EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL STATEMENTS INCLUDED IN A. T. CROSS COMPANY FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1995 JUN-30-1996 50,975 0 29,423 1,851 38,327 124,742 99,844 61,064 179,280 42,520 0 0 0 17,063 114,338 179,280 77,577 78,947 39,941 0 35,110 91 34 3,771 1,320 2,451 0 0 0 2,451 .15 .15
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