A.T. Cross saw consolidated sales for the third quarter ended Sept. 27, 2008 increase 11% to $39.0 million compared to $35.1 million in the third quarter of 2007. The companys optical segment, which now includes the Native Eyewear business, had a third quarter sales increase of 39.8% to $12.3 million, compared to the same period last year. This increase was driven both by continued strong growth for the Costa Del Mar brand as well as the contribution from Native Eyewear.
Gross margin in the third quarter of 57.0% increased 30 basis points as compared to 56.7% in last years third quarter. Operating expenses, including $0.2 million of restructuring charges in the current quarter, were $19.8 million, or 50.7% of sales in the quarter, versus $17.7 million, or 50.3% of sales for the same period a year ago. Operating income in the third quarter was $2.5 million versus $2.2 million in the third quarter of last year.
Net income for the third quarter was $1.8 million, or 11 cents per diluted share, compared to $2.4 million, or 15 cents per diluted share, last year. The income tax provisions for both quarters were favorably impacted by the recognition of tax benefits, the realization of which was previously considered uncertain. These tax benefits favorably impacted the current quarter results by 2 cents per share and the prior years third quarter results by 6 cents per share. Therefore, excluding these one-time favorable income tax adjustments in both years, the company earned 9 cents per diluted share in both third quarters.
David G. Whalen, president and CEO of A.T. Cross said, “We were pleased with our performance in the third quarter as both divisions reported improved revenue results in what has developed into a very difficult retail market. We believe that this performance is a result of the power of our brands and the ongoing improvements we are making to our operating model. During 2008, we have grown our accessories and writing instrument business, lowered our cost structure, grown our optical businesses, and successfully leveraged our recent acquisition.”
Whalen continued, “Our third quarter came in generally as we expected, however we began to see lower than anticipated revenue in the Cross Accessory Division (CAD) in late September as the marketplace began to brace for a difficult holiday season. While we believe we are well positioned, that new trend appears to be continuing and, coupled with a strengthening U.S. dollar, we have adopted a more cautious view of the CAD business during its peak holiday season. Therefore, we are revising our full year EPS guidance from 49 cents to 51 cents to 40 cents to 45 cents, before any restructuring charges.”
At the end of the third quarter A.T. Cross had cash and cash equivalents of $14.0 million versus $7.3 million at this time last year. Inventory at the end of the quarter was $32.3 million versus the year-ago level of $39 million. The company has achieved a net reduction of inventory even with the addition of $1.3 million of inventory for the Native business. The reduction was due to an $8.2 million improvement in the inventory position of the Cross Accessory Division. The companys long term debt increased to $21.7 million versus $3.3 million at this time last year, due primarily to the Native acquisition.
The company stated that it is now targeting full year net sales growth of 6% to 8% and full year 2008 earnings per share in the range of 40 cents to 45 cents, before charges for restructuring.
|A. T. CROSS COMPANY|
|CONSOLIDATED SUMMARY OF OPERATIONS|
|(in thousands, except per share amounts)|
|Three Months Ended||Nine Months Ended|
|September 27,||September 29,||September 27,||September 29,|
|Cost of goods sold||16,741||15,199||51,862||45,421|
Selling, general and administrative expenses
|Service and distribution costs||1,783||1,526||5,301||4,315|
|Research and development expenses||605||660||1,817||1,895|
|Interest and other (expense) income||(243)||33||(612)||(233)|
|Income Before Income Taxes||2,222||2,271||6,069||4,171|
|Income tax provision (benefit)||462||(93)||1,834||694|
|Net Income per Share:|
|Basic||$ 0.12||$ 0.16||$ 0.28||$ 0.23|
|Diluted||$ 0.11||$ 0.15||$ 0.27||$ 0.22|
|Weighted Average Shares Outstanding:|