-----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, EUdR1rZTycugU2+9bg6RL0WlT92+Y7eBWbuvc+JEJVo11/8CqfqE27CUhMJscSFK 1s3calr5y1nnS8neBqCZBw== 0000025793-96-000008.txt : 19961118 0000025793-96-000008.hdr.sgml : 19961118 ACCESSION NUMBER: 0000025793-96-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 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: 96665581 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, 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 September 30, 1996: Class A common stock - 14,686,312 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 1996 1995 1995 ASSETS (Thousands of Dollars) CURRENT ASSETS Cash and Cash Equivalents $ 12,555 $ 26,198 $ 32,469 Short-Term Investments 31,947 31,587 21,427 Accounts Receivable 33,737 29,931 48,017 Inventories-Note B 37,350 25,486 29,465 Other Current Assets 7,022 6,811 3,765 TOTAL CURRENT ASSETS 122,611 120,013 135,143 PROPERTY, PLANT AND EQUIPMENT 101,689 92,076 95,589 Less Allowances for Depreciation 62,971 56,437 57,352 38,718 35,639 38,237 INTANGIBLES AND OTHER ASSETS 15,678 15,494 15,982 $177,007 $171,146 $189,362 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable, Accrued Expenses and Other Liabilities $ 19,353 $ 17,279 $ 30,155 Note Payable to Bank 6,000 0 0 Compensation and Related Taxes 5,549 6,961 5,309 Cash Dividends Payable 0 0 2,648 Contributions Payable to Employee Benefit Plans 9,059 8,682 9,443 Income Taxes Payable 2,170 3,678 4,884 TOTAL CURRENT LIABILITIES 42,131 36,600 52,439 ACCRUED WARRANTY COSTS 5,434 5,134 5,209 SHAREHOLDERS' EQUITY Common Stock, Par Value $1 Per Share: Class A, Authorized 40,000,000 Shares; Issued 15,282,412 Shares and Outstanding 14,686,312 Shares in September 1996, Issued 15,208,250 Shares and Outstanding 14,717,650 Shares in September 1995 and Issued 15,243,316 Shares and Outstanding 14,747,216 Shares in December 1995 15,282 15,208 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 11,838 10,903 11,320 Retained Earnings 109,524 108,621 110,743 Accumulated Foreign Currency Translation Adjustment (117) 410 216 138,332 136,947 139,327 Treasury Stock, at Cost (8,890) (7,535) (7,613) TOTAL SHAREHOLDERS' EQUITY 129,442 129,412 131,714 $177,007 $171,146 $189,362 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 1996 1995 1996 1995 (Thousands of Dollars Except per Share Data) Net Sales $43,053 $44,859 $120,630 $125,149 Cost of Goods Sold 22,789 23,199 62,730 64,224 Gross Profit 20,264 21,660 57,900 60,925 Selling, General and Administrative Expenses 16,346 16,540 48,505 48,976 Research and Development Expenses 725 794 1,928 2,152 Service and Distribution Expenses 1,086 959 2,925 3,073 Operating Income 2,107 3,367 4,542 6,724 Interest and Other Income 386 1,035 1,722 2,799 Income Before Income Taxes 2,493 4,402 6,264 9,523 Income Taxes 872 1,651 2,192 3,571 Net Income $ 1,621 $ 2,751 $ 4,072 $ 5,952 Net Income Per Share - Note C $0.10 $0.17 $0.25 $0.36 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 1996 1995 (Thousands of Dollars) Cash Provided By (Used In): Operating Activities $ 5,813 $ 726 Investing Activities: Additions to Property, Plant and Equipment (6,026) (7,052) Purchase of Short-Term Investments (30,494) (37,867) Sale or Maturity of Short-Term Investments 19,974 62,611 Net Cash Provided By (Used In) Investing Activities (16,546) 17,692 Financing Activities: Cash Dividends Paid (7,939) (7,932) Purchase of Treasury Stock (1,277) (229) Other 332 195 Net Cash Used in Financing Activities (8,884) (7,966) Effect of Exchange Rate Changes on Cash and Cash Equivalents (297) 56 Increase (Decrease)in Cash and Cash Equivalents (19,914) 10,508 Cash and Cash Equivalents at Beginning of Period 32,469 15,690 Cash and Cash Equivalents at End of Period $ 12,555 $ 26,198 See notes to condensed consolidated financial statements. A. T. CROSS COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 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 nine month periods ended September 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 September 30, 1996 and December 31, 1995 were as follows: September 30 December 31 1996 1995 Finished goods $19,776 $14,499 Work in process 7,549 7,837 Raw materials 10,025 7,129 $37,350 $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 16,508,235 and 16,545,194 for the third quarter and nine months ended September 30, 1996, respectively and 16,521,489 and 16,526,798 for the third quarter and nine months ended September 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 Third Quarter 1996 Compared to Third Quarter 1995 Net sales for the third quarter ended September 30, 1996 decreased 4.0% compared to the third quarter of 1995. Domestic writing instrument sales of $23.3 million were 5.3% lower than last year, while foreign sales of $16.9 million improved 5.1% over 1995. Underlying the decline in domestic writing instrument sales was a sharp reduction, almost 35%, in sales to mass market retailers. The Company's Century and Solo product lines were the most negatively affected by the fall off in business to this distribution channel. Sales of the Company's new Metropolis and Solo Classic lines, particularly to the office mega stores as well as to department, gift and jewelry stores (i.e., the "carriage trade"), helped to partially offset the Century and Solo decreases. Leather sales were also down for the quarter, $1.3 million or 31.7%, due to the lack of availability of newer, more popularly priced styles of Fendi products. 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 relatively 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 against most other currencies in 1996 unfavorably affected foreign sales in comparison to the third quarter of 1995. The gross profit margin for the third quarter of 1996 decreased to 47.1%, compared to 48.3% for the third quarter of 1995, due primarily to product mix and lower sales. Selling, general and administrative expenses for the third quarter of 1996 were down 1.2% from the prior year resulting from cost containment efforts taken as a result of lower than expected sales. Research and Development expenses were 8.7% lower than the same period of 1995, due to postponing certain projects in light of the lower sales results, while service and distribution costs were higher than last year by $127,000 or 13.2%. Interest and other income decreased 62.7% for the third quarter of 1996 due to lower interest income resulting from both lower average investable funds and lower interest rates than in the third quarter of 1995. In addition, interest income in 1995 included approximately $200,000 of interest income on a state income tax refund claim, while other income included approximately $100,000 relating to the sale of a building. The effective income tax rate for the third 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 third quarter was primarily due to relative changes in the levels of domestic and foreign income comprising total income. Results of Operations Nine Months Ended September 30, 1996 Compared to September 30, 1995 Net sales for the nine months ended September 30, 1996 were $120.6 million, or 3.6% lower than the same period in 1995. Domestic sales of $67.3 million were 9.4% lower, while foreign writing instrument sales of $53.3 million were up 4.8% over the same period in 1995. Similar to the third quarter, year-to-date sales to mass market retailers declined significantly from the prior year, almost 43%, which contributed to the decline in the Century and Solo product lines. Further contributing to lower Century sales was a decline of almost 9% in sales to advertising specialty counselors, supplied by the Company's Special Markets division. Lower sales to mass market retailers was offset to a large extent by higher sales to office supply stores and the Carriage Trade, driven by the introduction of the new Metropolis and Solo Classic lines. 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 relatively strong sales of Townsend and Solo Classic. A 1996 price increase had a slightly favorable effect on both domestic and foreign sales as well. Although foreign sales increased, they were unfavorably affected by a stronger U. S. dollar in the first nine months of 1996 compared to the same period last year. Gross profit margins for the first nine months of 1996 were 48.0%, as compared to 48.7% for the same period in 1995, due primarily to product mix and lower sales. Selling, general and administrative expenses for the nine months ended September 30 were 1.0% lower than the same period for 1995. Research and development expenses were down from last year by 10.4% while Service and Distribution expenses decreased 4.8%. The factors affecting the quarterly results in these areas, discussed above, also are applicable to the nine month results. Interest and other income decreased by 38.5% for the first nine months of 1996 primarily due to lower interest income as average investable funds and interest rates were lower than last year. In addition, as mentioned in the third quarter discussion above, interest income in 1995 included approximately $200,000 of interest income on a state income tax refund claim, while other income included approximately $100,000 relating to the sale of a building. The effective tax rate on income for the nine months ended September 30, 1996 was 35.0% as compared to 37.5% for the 1995 nine month period and 34.0% for the full year 1995. As mentioned in the third quarter discussion above, the lower 1996 rate as compared to the nine month September 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 $9.4 million from December 31, 1995 to $44.5 million at September 30, 1996. Accounts receivable decreased from year-end by $14.3 million to $33.7 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 $6.1 million while cash held off-shore approximated $38.4 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 September 30, 1996 there was $6.0 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 September 30, 1996 and 1995 and December 31, 1995. Inventory of $37.4 million increased $7.9 million since December 31, 1995. The higher inventory is partially attributable to a build up of certain new products in order to meet expected high demand in the fourth quarter. Also contributing to higher inventories is the overall expansion in product offerings and packaging variations. In addition, 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. Changes in other current assets and in accounts payable, accrued expenses and other liabilities are primarily due to timing of payments. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K No reports have been filed on Form 8-K pursuant to item 6(b) and no other items are applicable for the three months ended September 30, 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: November 14, 1996 By: JOHN E. BUCKLEY John E. Buckley Executive Vice President Chief Operating Officer Date: November 14, 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 SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1995 SEP-30-1996 44,502 0 35,537 1,800 37,350 122,611 101,689 62,971 177,007 42,131 0 0 0 17,087 112,355 177,007 120,630 122,511 62,730 0 53,228 130 159 6,264 2,192 4,072 0 0 0 4,072 0.25 0.25
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