A.T. Cross Co. Q3 Consolidated Sales Increase 11%

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 company’s 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 year’s 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 year’s 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.”

Balance Sheet

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 company’s long term debt increased to $21.7 million versus $3.3 million at this time last year, due primarily to the Native acquisition.

Guidance

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)
(unaudited)
                         
       
Three Months Ended Nine Months Ended
September 27, September 29, September 27, September 29,
2008 2007 2008 2007
 
Net sales $ 38,974 $ 35,114 $ 118,439 $ 104,162
Cost of goods sold   16,741   15,199   51,862   45,421
Gross Profit 22,233 19,915 66,577 58,741

Selling, general and administrative expenses

17,161 15,501 52,559 47,842
Service and distribution costs 1,783 1,526 5,301 4,315
Research and development expenses 605 660 1,817 1,895
Restructuring charges   219   (10)   219   285
Operating Income 2,465 2,238 6,681 4,404
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 $ 1,760 $ 2,364 $ 4,235 $ 3,477
 
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:
Basic   14,999   15,044   15,023   14,905
Diluted   15,335   15,699   15,411   15,514

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A.T. Cross Co. Q3 Consolidated Sales Increase 11%

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 company’s 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 year’s 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 year’s 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.

“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,” said
President and CEO David G. Whalen. “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.”

He 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.”

Balance Sheet

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 company’s long
term debt increased to $21.7 million versus $3.3 million at this time
last year, due primarily to the Native acquisition.

Guidance

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)
(unaudited)
Three Months Ended Nine Months Ended
September 27, September 29, September 27, September 29,
2008 2007 2008 2007
Net sales $ 38,974 $ 35,114 $ 118,439 $ 104,162
Cost of goods sold 16,741 15,199 51,862 45,421
Gross Profit 22,233 19,915 66,577 58,741

Selling, general and administrative expenses

17,161 15,501 52,559 47,842
Service and distribution costs 1,783 1,526 5,301 4,315
Research and development expenses 605 660 1,817 1,895
Restructuring charges 219 (10) 219 285
Operating Income 2,465 2,238 6,681 4,404
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 $ 1,760 $ 2,364 $ 4,235 $ 3,477
Net Income per Share:
Basic $ 0.12 $ 0.16 $ 0.28 $ 0.23
Diluted $ 0.11 $ 0.15 $ 0.27 $ 0.22

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