-----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, PI284I1pKIOMf3/IKQ6+/Fv49qRDIY1YG5XhVCsDUnzWfoDilwXmaMXJ0qpyJt5n BtQwytxrb179aS3xHwsdgQ== 0000025793-97-000004.txt : 19970515 0000025793-97-000004.hdr.sgml : 19970515 ACCESSION NUMBER: 0000025793-97-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 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: 97603796 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 [NO FEE REQUIRED] For the quarterly period ended March 31, 1997 [ ] 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, 1997: Class A common stock - 14,691,679 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 1997 1996 1996 ASSETS (Thousands of Dollars) CURRENT ASSETS Cash and Cash Equivalents $ 22,881 $ 20,552 $ 16,171 Short-Term Investments 27,395 30,409 27,290 Accounts Receivable 27,062 27,411 44,970 Inventories-Note B 27,107 37,481 26,174 Other Current Assets 5,289 5,559 4,767 TOTAL CURRENT ASSETS 109,734 121,412 119,372 PROPERTY, PLANT AND EQUIPMENT 105,958 97,440 104,459 Less Allowances for Depreciation 65,981 59,193 64,134 39,977 38,247 40,325 INTANGIBLES AND OTHER ASSETS 15,360 15,837 15,494 $165,071 $175,496 $175,191 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable, Accrued Expenses and Other Liabilities $ 17,280 $ 18,375 $ 21,653 Note Payable to Bank 0 0 6,000 Compensation and Related Taxes 3,153 4,545 2,783 Cash Dividends Payable 0 0 2,639 Contributions Payable to Employee Benefit Plans 8,872 10,061 8,228 Income Taxes Payable 2,991 3,981 1,588 TOTAL CURRENT LIABILITIES 32,296 36,962 42,891 ACCRUED WARRANTY COSTS 5,584 5,284 5,509 SHAREHOLDERS' EQUITY Common Stock, Par Value $1 Per Share: Class A, Authorized 40,000,000 Shares; Issued 15,288,042 Shares and Outstanding 14,691,679 Shares in March 1997, Issued 15,251,777 Shares and Outstanding 14,755,677 Shares in March 1996 and Issued 15,282,412 Shares and Outstanding 14,686,049 Shares in December 1996 15,288 15,252 15,282 Class B, Authorized 4,000,000 Shares; Issued and Outstanding 1,804,800 Shares 1,805 1,805 1,805 Additional Paid-In Capital 11,900 11,427 11,838 Retained Earnings 107,587 112,401 106,781 Accumulated Foreign Currency Translation Adjustment (495) (22) (21) 136,085 140,863 135,685 Treasury Stock, at Cost (8,894) (7,613) (8,894) TOTAL SHAREHOLDERS' EQUITY 127,191 133,250 126,791 $165,071 $175,496 $175,191 See notes to condensed consolidated financial statements. A. T. CROSS COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME THREE MONTHS ENDED MARCH 31 1997 1996 (Thousands of Dollars Except per Share Data) Net Sales $36,796 $36,053 Cost of Goods Sold 19,090 18,153 Gross Profit 17,706 17,900 Selling, General and Administrative Expenses 15,132 14,516 Research and Development Expenses 942 646 Service and Distribution Costs 852 911 Operating Income 780 1,827 Interest and Other Income 460 722 Income Before Income Taxes 1,240 2,549 Income Taxes 434 892 Net Income $ 806 $ 1,657 Net Income Per Share - Note C $0.05 $0.10 See notes to condensed consolidated financial statements. A. T. CROSS COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS THREE MONTHS ENDED MARCH 31 1997 1996 (Thousands of Dollars) Cash Provided By (Used In): Operating Activities $ 17,164 $ 1,519 Investing Activities: Additions to Property, Plant and Equipment (1,515) (1,857) Purchase of Short-Term Investments (1,205) (14,659) Sale or Maturity of Short-Term Investments 1,100 5,677 Net Cash Used In Investing Activities (1,620) (10,839) Financing Activities: Cash Dividends Paid (2,639) (2,648) Repayment of Bank Borrowings (6,000) 0 Other 68 115 Net Cash Used In Financing Activities (8,571) (2,533) Effect of Exchange Rate Changes on Cash and Cash Equivalents (263) (64) Increase/(Decrease) in Cash and Cash Equivalents 6,710 (11,917) Cash and Cash Equivalents at Beginning of Period 16,171 32,469 Cash and Cash Equivalents at End of Period $ 22,881 $ 20,552 See notes to condensed consolidated financial statements. A. T. CROSS COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 1997 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, 1997, are not necessarily indicative of the results that may be expected for the year ending December 31, 1997. 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, 1996. NOTE B - Inventories The components of inventory at March 31, 1997 and December 31, 1996 were as follows: March 31 December 31 1997 1996 Finished goods $15,157 $14,226 Work in process 5,408 5,449 Raw materials 6,542 6,499 $27,107 $26,174 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 16,494,602 and 16,555,892 for the first quarter ended March 31, 1997 and 1996, 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. In March 1997, the Financial Accounting Standards Board released Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per Share", which the Company will adopt in the fourth quarter of 1997. Had SFAS No. 128 been effective for the quarters ended March 31, 1997 and 1996, reported earnings per share would have been unchanged. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION Results of Operations Net sales for the first quarter ended March 31, 1997 increased 2.1% compared to the first quarter of 1996. Foreign writing instrument sales of $19.0 million improved 9.6% over 1996, while domestic writing instrument sales of $14.7 million were 5.3% lower than last year. Leather sales by the Company's Manetti-Farrow subsidiary were down 2.9% from the prior year. Internationally, sales improved in most major foreign countries as the Company continues to increase brand awareness and distribution in countries where its products are less established. In particular, sales to Latin America and Canada improved significantly, as did sales to Europe and the Middle East. The improvement in Canadian sales is the result of a change in the method of distribution in this market, from sales to a distributor to direct sales to Canadian retail customers. The 1997 increase is magnified since Canadian sales deteriorated in the first quarter of 1996 due to the financial difficulties experienced by the Company's distributor at that time. Sales to Europe and the Middle East continued to improve due to the Company's on-going efforts to develop this lucrative quality writing instrument market. Although actual sales in Yen improved over last year, reported Japanese sales in dollars were lower this quarter due to further weakening of the Yen. The Company believes that the decline in domestic sales, entirely in the Retail Division, was the result of low consumer awareness of the Company's newer product lines. Somewhat offsetting the overall decline in retail sales were the strong business and institutional sales by the Special Markets Division in the quarter. The gross profit margin for the first quarter of 1997 was 48.1%, down slightly from last year's gross margin of 49.6%. The decline in margin was largely attributable to changes in product mix and promotional sales of certain discontinued products, and unfavorable foreign exchange. Selling, general and administrative expenses for the first quarter of 1997 were 4.2% higher than last year, partly due to higher expenses associated with selling directly to customers in Canada instead of through a distributor, and to the continued growth in key European markets. The higher expenses in 1997 include the cost of operating the Company's recently established subsidiary in Italy. Research and development expenses, which exceeded the 1996 first quarter by $296,000, or 45.8%, included expenditures associated with certain new writing instrument products and the development of the Pen Computing Group line of products. Interest and other income decreased 36.3% for the first three months of 1997 primarily due to lower interest income. This decrease was due mostly to lower average investable funds in the first quarter of 1997 offset by slightly higher interest rates. The effective income tax rate for the first quarter of 1997 was 35.0%, unchanged from the first quarter of 1996. Liquidity and Sources of Capital Cash, cash equivalents and short-term investments (i.e., "cash")increased $6.8 million from December 31, 1996 to $50.3 million at March 31, 1997. Cash available for domestic operations approximated $12.5 million while cash held off-shore approximated $37.8 million at March 31, 1997. Accounts receivable decreased since the end of 1996 by $17.9 million to $27.1 million as cash was collected in January 1997 from customers who took advantage of the 1996 extended dating program that allowed domestic customers to defer payments on certain 1996 purchases. This program was similar to extended dating programs that have been offered in past years. 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, 1997. A $6.0 million balance on the Fleet line as of December 31, 1996 was paid off during the first quarter. Inventory of $27.1 million increased $0.9 million since December 31, 1996. Since the end of March 1996, inventory levels have been reduced in excess of $10 million. This decrease was the result of inventory reduction efforts undertaken in the second half of 1996. 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 three months ended March 31, 1997. 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 13, 1997 By: JOHN E. BUCKLEY John E. Buckley Executive Vice President Chief Operating Officer Date: May 13, 1997 By: JOHN T. RUGGIERI John T. Ruggieri Senior Vice President 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 MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1996 MAR-31-1997 50,276 0 28,592 1,530 27,107 109,734 105,958 65,981 165,071 32,296 0 0 0 17,093 110,098 165,071 36,796 37,325 19,090 0 16,917 9 69 1,240 434 806 0 0 0 806 .05 .05
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