Business

The A.T. Cross Company has two reportable business segments: writing instruments and accessories, and optical. The optical segment was established in 2003 with the acquisition of Costa Del Mar Sunglasses, Inc. Fiscal 2001 was the last year in which the Company's Pen Computing Group ("PCG") was considered a segment. For certain financial information with respect to these segments, see Note M to the Company's consolidated financial statements included in Item 8 of this Form 10-K Annual Report. For certain financial information with respect to the acquisition of Costa Del Mar, see Note C to the Company's consolidated financial statements included in Item 8 of this Form 10-K Annual Report.

We manufacture and market fine quality writing instruments under the Cross® brand consisting of: ball-point pens, fountain pens, selectip rolling ball pens, which accommodate various types of refills, and mechanical pencils. We also manufacture and market a variety of refills for most of our product types. In addition to Cross branded writing instruments, we design and market writing instruments sold under the Penatia™ and Omni® by Cross brands and a line of writing instruments sold under the licensed name of Bill Blass®. The Company is an Original Equipment Manufacturer ("OEM") of writing instruments and of digital pens used with Tablet PCs. In addition to writing instruments, we also design and market desk sets. In February 2003, we launched a new line of business accessories, which we designed. They include: pad portfolios, personal digital assistant ("PDA") cases, business card cases, key rings, letter openers and money clips. We also design and market a line of watches, p rimarily for the business gift market. The Company periodically launches new products.

Our writing instruments are offered in a variety of styles and materials at various price points. They are packaged and sold as individual units or in matching sets. The majority of the Company's writing instrument sales occur at suggested retail price points between approximately $10 and $50. We continue to be a market leader in the United States at these price points. Products in this price range include: Classic® Century®, Ion®, Morph®, MicroPen, Radiance, Solo®, Vice™ and selected Century II and ATX® writing instruments. The Cross Matrix®, Cross Townsend®, Morph2 Rollerball and Century II lines provide the Company a presence in the $55 to $300 price range. The Penatia brand provides the Company a presence in the under $10 price range. Watches are priced between $70 and $190, and business accessories are priced between $20 and $110.

The Company emphasizes styling, innovation, craftsmanship and quality control in the design and production of all of its products. All of our Cross branded writing instruments carry a full warranty of unlimited duration against mechanical failure. Our watches are sold with a limited ten-year warranty, and business accessories are sold with a limited one-year warranty.

The Company's products are sold throughout the United States by our direct sales force and manufacturer's agents or representatives to approximately 6,800 active retail and wholesale accounts. Retail accounts include: gift stores, department stores, jewelers, stationery, office supply and pen specialty stores, mass merchandisers, catalogue showrooms, United States military post exchanges, service centers and central buying operations. Our wholesale accounts distribute the Company's products to retail outlets that purchase in smaller quantities. The Company's products are also sold to consumers in the United States, Canada and Hong Kong on the Company's web site: www.cross.com. Advertising specialty representatives market the Company's writing instruments, accessories and watches in the United States to business accounts. Typically, such products are engraved or carry the purchaser's name or emblem and are used for gifts, sales promotions, incentive purposes or advertising.

Sales of the Company's products outside the United States during 2003 were made to foreign distributors and retailers worldwide by the Company and its wholly-owned subsidiaries.

The Company, through its wholly-owned subsidiary Costa Del Mar Sunglasses, Inc., designs, manufactures and markets premium, high-quality, polarized eyewear through its optical segment under the brand name Costa Del Mar. Offered in more than 35 styles and 16 lens options at suggested retail price points between approximately $100 and $300, our eyewear is sold by factory representatives and manufacturer's agents to approximately 3,000 active retail accounts throughout the United States. Retail accounts include optical and sunglass specialty shops, department stores and sporting goods and water-sports retailers. Costa Del Mar sunglasses are sold with a lifetime warranty against defects in materials or workmanship.

Raw Materials

Most raw materials for the production of our writing instruments are obtained in the United States. Some desk set base materials, fountain pen nibs, front sections, refill parts, certain finished caps and barrels, and some lacquer coating of metal shells are imported from Germany, Switzerland and France. Complete pencil mechanisms, certain refill components, leads, resin caps and barrels, some fountain pen nibs, front sections, cap components and certain coated shells are imported from Japan. Some rings, pen mechanisms, and cap components are imported from China.

The majority of component raw materials for the optical segment is imported from specialized manufacturers located in Europe and Japan.

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To maintain the highest level of product quality, we rely on a limited number of domestic and foreign suppliers for certain raw materials and manufacturing technologies. The Company may be adversely affected in the event that these suppliers cease operations or if pricing terms become less favorable. The Company believes, but cannot be assured, that the raw materials currently supplied by these vendors could be obtained from other sources and that the manufacturing technologies could either be developed internally or that suitably similar technologies could be located.

Patents, Licenses and Trademarks

The Company, directly or through its subsidiaries, has certain writing instrument, timepiece, accessory, optical and PCG trademark registrations and/or pending trademark applications in the United States and many foreign countries, including but not limited to its principal trademark "CROSS" and the trademark "COSTA DEL MAR." The principal trademark "CROSS" is of fundamental importance to our business in general and the trademark "COSTA DEL MAR" is of fundamental importance to the optical segment. The Company, directly or through its subsidiaries, holds certain United States and foreign writing instrument patents and/or has filed United States and foreign patent applications including, but not limited to, our desk set units, Cross Townsend series writing instruments, Solo and Radiance series writing instruments, Morph series writing instruments, Ion series writing instruments, Cross Matrix series writing instruments, Verve series writing instruments, Vice seri es writing instruments, Micropen series writing instruments, fountain pens, mechanical pencil mechanisms and ball-point pen mechanisms. The Company, directly or through its subsidiaries, also holds certain United States patents and/or has filed United States and foreign patent applications covering certain timepieces and pen computing products. While we pursue a practice of seeking patent protection for novel inventions or designs, our business is not dependent upon obtaining and maintaining patents.

Seasonal Business

Retail demand for our writing instrument and accessory products is highest prior to Christmas and other gift-giving occasions. The Company historically has generated approximately one third of its annual sales in its fiscal fourth quarter. However, seasonal fluctuations have not materially affected continuous production of writing instrument products.

Costa Del Mar historically has generated its strongest sales in the first half of its fiscal year.

Working Capital Requirements

Writing instrument and sunglass inventory balances tend to be highest in anticipation of new product launches and before peak selling seasons. The Company offers, and may offer in the future, extended payment terms, primarily to domestic retail writing instrument customers, at certain points during the year, usually September through November. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 of this Form 10-K Annual Report.

Customers

The Company is not dependent upon any single customer for more than 10% of its consolidated revenues. The Company is dependent, however, on three large office supply accounts, Staples, Inc., OfficeMax, Inc. and Office Depot, Inc., for a significant portion of its revenue. In 2003, sales to this group were approximately 17% of consolidated revenues. The loss of one or more of these customers could have a material adverse effect on the Company. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 of this Form 10-K Annual Report.

Backlog of Orders

The backlog of orders is not a significant factor in the Company's business.

Government Contracts

Sales of the Company's writing instrument products are made to military post exchanges and service centers, but the Company does not enter into any contracts that are subject to renegotiation or termination by the United States government.

Competition

The writing instrument industry is competitive, in particular with respect to product quality and brand recognition. There are numerous manufacturers of ball-point, rolling ball and fountain pens, and mechanical pencils in the United States and abroad. Many of these manufacturers produce lower priced writing instruments than those produced by the Company. Although the Company is a major producer of ball-point, rolling ball and fountain pens, and mechanical pencils in the $10 to $50 price range, other writing instrument companies have significantly higher sales volumes from a broader product line across a wider range of prices or have greater resources as divisions of larger corporations. The Company emphasizes styling, innovation, craftsmanship and quality control in the design and production of all of its products. All of the Company's Cross branded writing instruments carry a full warranty of unlimited duration against mechanical failure.

The sunglass market in the United States is estimated to be $1.2 billion at wholesale. The Company's optical segment under the brand name Costa Del Mar competes in the premium-priced ($50+ retail) sunglass market segment, which is estimated to be from $800 million to $900 million at wholesale. Several other sun wear companies also compete in the premium segment. Costa Del Mar sunglasses are sold with a lifetime warranty against defects in materials or workmanship.

See also the "Risks and Uncertainties; Forward-Looking Statements" section of "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 of this Form 10-K Annual Report.

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Research and Development

The Company had expenditures for research and development of new products and improvement of existing products of approximately $1.9 million in 2003, $2.2 million in 2002 and $2 million in 2001. For additional discussion, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 of this Form 10-K Annual Report.

Environment

The Company believes it is in substantial compliance with all Federal, state and local environmental laws and regulations. The Company believes that future capital expenditures for environmental control facilities will not be material. See Item 3 "Legal Proceedings" and Note P to the Company's consolidated financial statements in Item 8 of this Form 10-K Annual Report.

Employees

The Company had approximately 863 employees at January 3, 2004.

International Operations and Export Sales

Approximately 49% of the Company's sales in 2003 were in foreign markets. The primary foreign markets are in Europe and Asia. Sales of writing instrument and accessory products to foreign distributors are subject to import duties in many countries. The operations of the Company's foreign subsidiaries and branches are subject to the effects of currency fluctuations, the availability of United States dollar exchange, exchange control and other restrictive regulations. Undistributed earnings of our foreign manufacturing and marketing subsidiaries generally are not subject to current United States Federal and state income taxes. However, repatriation to the Company of the accumulated earnings of foreign subsidiaries would subject such earnings to United States Federal and state income taxes. See Note K and Note M to the Company's consolidated financial statements in Item 8 of this Form 10-K Annual Report. For the effect of foreign sales on the Company's resul ts of operations, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 of this Form 10-K Annual Report.

Availability of Securities and Exchange Commission Filings

The Company's web site address is www.cross.com. The Company makes available free of charge, through the Investor Relations section of our web site, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports as soon as reasonably practicable after such materials have been electronically filed with or furnished to the Securities and Exchange Commission ("SEC"). The Company includes its web site address in this Annual Report on Form 10-K only as an inactive textual reference and does not intend it to be an active link to its web site.

Executive Officers of the Company

The following are the executive officers of the Company (each of whom serves until his or her successor is elected and has qualified), their respective ages as of January 3, 2004 and their principle positions:

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The Company currently owns and occupies approximately 269,000 square feet of manufacturing, warehouse and office space in Lincoln, Rhode Island. This facility, which is well maintained and in good repair, is utilized in a manufacturing, distribution and administrative capacity. The production capacity of this facility is sufficient to meet the Company's needs for the foreseeable future.

The Company leases administrative facilities and/or warehouse space for its operations in France, the United Kingdom, The Netherlands, Spain, Germany, Japan, Taiwan, Hong Kong, Singapore, Lincoln, Rhode Island, Miami and Ormond Beach, Florida.

On or about April 21, 2000, the Company, certain officers and directors of the Company and others were named as defendants in an action filed in the United States District Court for the District of Rhode Island. The suit, which is brought by a purchaser of the Company's Class A common stock, alleges that the defendants violated Federal securities laws by making material misstatements and omissions in the Company's public filings and statements relating to the Company's former PCG business. The suit seeks class action status including all purchasers of the Company's Class A common stock between September 17, 1997 and April 22, 1999. The damages sought are unspecified.

On June 30, 2000, the Company filed a Motion to Dismiss the action in the United States District Court in Rhode Island. The United States District Court for the District of Rhode Island granted the Company's Motion to Dismiss in June 2001. In July 2001, the Plaintiff filed an appeal with the First Circuit Court of Appeals. The appeal was before the First Circuit Court of Appeals. Oral argument was held February 8, 2002.

On March 20, 2002, the Court of Appeals for the First Circuit issued a judgment affirming the dismissal of all claims asserted against the W. Russell Boss Jr. Trust A, W. Russell Boss Jr. Trust B and W. Russell Boss Jr. Trust C and reversing the District Court's dismissal of the Section 10(b) and 20(a) claims asserted against the Company and the named individual defendants. The Court of Appeals' ruling was limited to a finding that the plaintiff's complaint had satisfied the pleading requirements of the Private Securities Litigation Reform Act of 1995; the Court did not opine on the merits of plaintiff's claims. The Company maintains that the claims are without merit and will continue to vigorously contest the litigation.

In June 2002 the United States Environmental Protection Agency ("EPA") served the Company with a Notice of Potential Liability and Request for Information regarding the J.M. Mills Landfill, which is part of the Peterson/Puritan Superfund site in Cumberland, Rhode Island. The Notice also requests that the Company pay past and future costs associated with the site. To date, approximately sixty entities have received Notice Letters from the EPA relative to the site. The Company filed its response in October 2002.

The Company is also named as one of approximately sixty defendants in a contribution suit brought by CCL/Unilever relating to the J.M. Mills Landfill site. These complaints allege that the Company is liable under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") for contribution for past and future costs incurred at the site. Past and future costs, excluding the required remedy, are currently estimated at $5 million to $7 million. No discovery has been taken to date.

The Company is involved in various other litigation and legal matters that have arisen in the ordinary course of business. To its knowledge, management believes that the ultimate resolution of any of those existing matters will not have a material adverse effect on the Company's consolidated financial position or results of operations.

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Not applicable.

Market Information

The Company's Class A common stock is traded on the American Stock Exchange (symbol: ATX). There is no established trading market for the Company's Class B common stock. At January 3, 2004, there were approximately 1,380 shareholders of record of the Company's Class A common stock and 2 shareholders of record of the Company's Class B common stock. The weighted average numbers of total shares outstanding was 15,080,115 and 15,895,312 during 2003 and 2002, respectively. High and low stock prices of Class A common stock for the last two years were:

Dividend Information

The Company has not paid dividends to its stockholders since 1998 and does not plan to pay cash dividends in the foreseeable future. The Company intends to retain earnings, if any, to finance the growth of the Company.

Unregistered Sales of Securities

None.

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Results of Operations

Overview

A.T. Cross Company has been a manufacturer and marketer of fine quality writing instruments for 157 years. Sold primarily under the Cross brand, ball-point, fountain and selectip rolling ball pens and mechanical pencils are offered in a variety of styles and finishes. The Company also offers writing instrument accessories including refills and desk sets.

The Company has been operating in a difficult economic environment in a mature and competitive category. Fiscal 2003 represented the third consecutive year in which the Company's core writing instrument and accessory segment reported a decline in sales. Several years ago, the Company challenged itself to build upon its unique attributes in order to develop a vibrant, diversified and modern company poised for sustainable growth and long-term profitability. Such attributes include a strong brand name, 157-year heritage, reputation for quality and craftsmanship, global distribution network and strong balance sheet. The Company has established several strategic initiatives to build upon these attributes and overcome its challenges including: becoming an innovative leader in the fine writing category, extending the Cross brand into new categories, developing avenues for diversification and streamlining its operating structure.

The Company is competing vigorously to build its position as the category leader in terms of product innovation, marketing and merchandising. For the fourth consecutive year, at least 20% of writing instrument and accessory revenue was derived from new products. In 2003, these included Metal Ion, Vice, Vapor™ and Platinum Townsend. They represent the new generation of Cross, - sleek, innovative design fused with traditional functionality and craftsmanship. The Company's new product strategy has led it to explore the under $10 segment of the writing instrument and after-market refill market under the brand name Penatia™. The Company's sales force is organized around three major geographic regions; the Americas, Asia and Europe, Middle East and Africa ("EMEA"). Within each of these regions, the Company uses a combination of direct sales force, manufacturers' representatives or distributors. A switch to a direct sales force on the east coast of the United States in mid-2003 improved result s over the balance of the year. The execution of 2003 holiday product and marketing programs developed with several of our national accounts in the United States also proved successful. As global economies recover, we are benefiting from our efforts as evidenced by broad based revenue growth in the fourth quarter of 2003. We expect this positive momentum to continue into 2004.

Consumer surveys have confirmed that the Cross brand has not only strong awareness but, more importantly, consumers associate the Cross name with quality and style. The strong awareness of our name and the positive attributes associated with our brand supported the extension of the Cross brand into related personal accessory categories. Importantly, we wanted to move to categories that would allow us to further utilize our existing sourcing infrastructure and global distribution network. Our priority for all of our brand extensions is to incorporate the quality, design and craftsmanship that consumers enjoy from Cross fine writing instruments. We have done this with our Cross branded accessories, which currently include items such as business card holders, money clips and day planners. Of the eleven business accessory products launched in 2003, five were high performers including the portfolios, the business card case and the small metal items. The balance of the product offerings will be adjusted a s 2004 progresses. Our watch line, launched in 2002, was sold primarily through our business gift channel. In 2003, watches and business accessories comprised approximately 3% of net sales. This result represents a good start toward our goals of diversifying our revenue base and mining complementary revenue streams to drive growth. We have developed a foothold in these categories and look forward to further strengthening our presence in 2004.

The April 2003 acquisition of Costa Del Mar Sunglasses, Inc., a designer, manufacturer and marketer of high-quality polarized sunglasses, was a major step in our ongoing evolution into a leading designer and marketer of branded personal and business accessories. It marks our entry into an entirely new product category that will serve to diversify our business as well as provide an avenue for future sales growth. In addition to being a growing and profitable company, Costa Del Mar upholds our commitment to delivering our consumers exceptional product innovation and quality. In addition, several key members of the Cross senior management team have strong backgrounds in the optical business. We intend to provide the resources to maximize the growth of Costa Del Mar by layering its products into our extensive global distribution network and providing additional design, marketing and product development expertise. Currently, Costa Del Mar is sold primarily in the southeastern United States. We see great opportunity to expand the brand's reach. Since acquiring Costa Del Mar, we have benefited from revenue diversification and incremental top and bottom line growth that we will look to build upon throughout 2004. The Company continues to look for appropriate acquisitions that will add to top and bottom line growth.

While we made progress throughout the year, we were faced with difficult choices along the way. To ensure a strong future for Cross, we evaluated all of the options available to us. As we did so, it became clear that in order to remain competitive in the challenging and ever-changing global marketplace it was necessary to change the way we do business. Our Cross into the Future' corporate restructuring program that we announced in July 2003, which involves streamlining our operations and sourcing certain products overseas, is designed to reduce our cost structure. The funds we generate will be used to invest in growing our businesses while at the same time generating an appropriate level of profitability. Our corporate reorganization program has two components: administrative and manufacturing. On the administrative side, we have streamlined our North American non-manufacturing operations and shifted resources to our marketing and selling functions. On the manufacturing side, we are keenly aware th at our consumers look to Cross for the highest-quality writing instruments in the world. Our number one priority is and will always be maintaining our strict quality standards. As such, our transition to an overseas sourcing model will be a very deliberate and gradual process with the first products scheduled to move offshore

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during the second half of 2004. Any further outsourcing will be dependent on our complete satisfaction that all product meets the high-quality standards that consumers expect from Cross. We believe these actions are necessary to preserve Cross's ability to remain a competitive, profitable company. We look forward to our 'Cross into the Future' program providing a more efficient operating structure that will allow us to focus more intensely on building and growing our portfolio of market-leading branded accessories. For an analysis of the corporate restructuring program, see Note E to the Company's consolidated financial statements in Item 8 of this Form 10-K Annual Report.

Reconciliation of Generally Accepted Accounting Principles ("GAAP") and Comparable Basis Net Income and Earnings Per Share

In fiscal 2003 and 2002 there were a number of one-time events. The following table provides a reconciliation of GAAP and comparable-basis net income and earnings per share for fiscal 2003 and 2002:

These non-GAAP results are among the indicators management uses as a basis for evaluating financial performance as well as for forecasting future fiscal periods. For these reasons, management believes that these non-GAAP measures can be useful to the reader of these financial statements and footnotes. This presentation of non-GAAP information is not meant to be considered in isolation or as a substitute for net income and earnings per share prepared in accordance with GAAP.

Comparison of Fiscal 2003 with Fiscal 2002

Consolidated net sales were $125.3 million in fiscal 2003, an increase of $7.9 million, or 6.8%, compared to fiscal 2002. Writing instrument and accessory ("WI&A") net sales of $116.5 million were less than the prior year by approximately $831,000, or 0.7%. Sales from the optical segment, established in April of 2003 with the acquisition of Costa Del Mar Sunglasses, Inc, were $8.8 million in 2003. The effect of foreign exchange was favorable to consolidated full year sales results by approximately $4.6 million, or 4 percentage points.

The following chart details net sales performance by segment and operating unit:

Writing instrument and accessory revenues in the Americas region of $61 million declined $2.1 million, or 3.3%, compared to fiscal 2002. Domestic writing instrument net sales of $51.2 million decreased $2.2 million, or 4.1%, while international Americas writing instrument net sales of $9.8 million were about flat compared to fiscal 2002. Domestic writing instrument volume for the full year was adversely affected by continued weak economic conditions. These adverse conditions affected both the retail, primarily carriage trade accounts, and business gift divisions, which were below 2002 sales levels by 4.1% and 4%, respectively. This poor performance at retail was somewhat offset by improved performance at certain national accounts, where holiday programs put in place proved successful, and the mid-2003 establishment of a direct retail sales force on the east coast. The Company expects that economic conditions, which improved in the fourth quarter of 2003, will cont inue to improve into fiscal 2004, and that its 2004 holiday programs will be as successful as the programs implemented in 2003.

Writing instruments and accessory sales in the EMEA and Asia regions of $51.1, up 2.5% for the year, were favorably affected by foreign exchange as the weaker United States dollar versus the euro, yen and pound sterling resulted in higher translated United States dollar sales. Foreign exchange was favorable to EMEA and Asia sales results by approximately 8.8 percentage points for the full year.

Writing instrument and accessory revenues in the EMEA region of $34.4 million increased $910,000, or 2.7%, compared to fiscal 2002. Retail and business gift sales improved over the prior year by 0.7% and 4%, respectively, due entirely to the favorable effects of foreign exchange. Excluding these favorable effects, EMEA revenues would have been down 8.4% year on year. This decline is attributable to the poor economic conditions in this region and the direct effects of the war in the Middle East. It is unknown at this time if the economies in this region will improve sufficiently to result in constant dollar sales increases in 2004.

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Writing instrument and accessory revenues in Asia of $16.7 million increased $329,000, or 2%, compared to fiscal 2002. Business gift sales, which make up approximately 40% of the regions sales, were up 5% over fiscal 2002 while retail sales were essentially flat. The effects of favorable foreign exchange added approximately 4 percentage points to the full year sales improvement. The Asia region, which had been adversely affected by the outbreak of the SARS virus primarily during the first half of the year, improved 17.7% in the last six months of 2003 compared to the last six months of 2002. This was due, in part, to pent up demand in the first half of fiscal 2003 and favorable foreign exchange, which comprised 3.6 percentage points of the sales increase. The Company expects that economic conditions, which improved in the second half of 2003, will continue to improve into fiscal 2004

OEM sales of writing instruments and digital pens of $4.4 million was essentially even with fiscal 2002.

Consolidated gross profit margins of 52.7% in fiscal 2003 were lower than fiscal 2002 by 0.1 percentage points:

Writing instrument and accessory margins in fiscal 2003 were 52.4%, or 0.4 percentage points, less than fiscal 2002. They were adversely affected by changes in product mix to lower margined writing instruments. This unfavorable shift was somewhat offset by lower levels of manufacturing overhead and variances for the year. The optical segment's gross margin for fiscal 2003 had a small but favorable effect on the consolidated gross margin for the year.

Consolidated selling, general and administrative ("SG&A") expenses of approximately $56.5 million were $4 million, or 7.7%, higher than in fiscal 2002 and were 45.1% of net sales in fiscal 2003 compared to SG&A expenses of $52.4 million, or 44.7% of net sales, in fiscal 2002. SG&A expenses for WI&A of approximately $52.3 million were about equal to fiscal 2002. SG&A expenses for the optical segment of $4.2 million in fiscal 2003 were all incremental to fiscal 2002. The effect of foreign exchange in the WI&A segment resulted in approximately $2.1 million of higher SG&A expenses, which was offset by savings resulting from the Company's restructuring program and expense reductions initiated prior to the implementation of the restructuring program in response to lower sales volume in the first half of 2003.

Service and distribution ("S&D") expenses of $3.8 million were $2.3 million higher than fiscal 2002. This increase was almost entirely due to an approximate $2.2 million favorable pre-tax adjustment to the Company's accrued warranty costs that was recorded in the fourth quarter of fiscal 2002.

Research and development ("R&D") expenses of approximately $1.9 million were $247,000 lower than fiscal 2002. WI&A segment R&D expense was $1.9 million, $268,000, or 12.2%, lower than fiscal 2002, due to lower developmental expenditures for digital pen products.

Restructuring charges of $2.4 million were recorded in the Company's WI&A segment in fiscal 2003. These charges were related to the corporate restructuring program announced in July 2003. As a result of the restructuring program, the Company expects to realize SG&A savings of $4 million to $5 million annually beginning in fiscal 2004. It is estimated that approximately $1 million of operating expense savings were realized in fiscal 2003. For an analysis of the corporate restructuring program, see Note E to the Company's consolidated financial statements in Item 8 of this Form 10-K Annual Report.

A $989,000 gain on disposition of asset held for sale was recorded in fiscal 2003 as a result of the 2003 sale of the Company's former manufacturing and distribution facility in Ireland, which was closed in 2001 and placed for sale.

There was no environmental remediation expense recorded in fiscal 2003 compared to the $179,000 reduction recorded in fiscal 2002 due to a change in the estimated cost of environmental remediation for the Company's facility in Ireland. This facility was sold in 2003 and the remaining approximate $450,000 liability was reversed and included in the gain on disposition of asset held for sale as the purchaser of this facility assumed responsibility for its environmental remediation.

Interest and other income (expense) for fiscal 2003 was expense of $66,000 as compared to income of $734,000 in fiscal 2002. WI&A segment interest and other income (expense) was expense of $59,000 and optical segment interest and other income (expense) was expense of $7,000.

Consolidated interest income in fiscal 2003 was $37,000, or 6.6%, lower than interest income in 2002 as interest rates and average invested funds were lower than the prior year, partially offset by $156,000 of interest received in 2003 from the Spanish government for the settlement of a value added tax claim. Other income (expense) was an expense of $592,000 in 2003 compared to other income in 2002 of $171,000. Other expense in 2003 includes $260,000 more interest expense compared to 2002 due to the additional level of borrowings and an unrealized loss on trading securities of $105,000 compared to an unrealized gain of $149,000 in 2002.

In fiscal 2003, the Company recorded an income tax provision of $441,000 on approximately $2.2 million of income from continuing operations. The effective tax rate was 19.9% as compared to 26.5% in fiscal 2002. This decrease in tax rate was primarily due to a favorable shift in the mix of foreign and United States sourced income as well as higher than expected export tax benefits. The Company expects that the tax rate in future years to be more in line with the Federal statutory rate. For an

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analysis of income taxes from continuing operations, see Note K to the Company's consolidated financial statements in Item 8 of this Form 10-K Annual Report.

As a result of the foregoing, the consolidated net income in fiscal 2003 was $1.8 million ($0.12 earnings per share, basic and diluted) as compared to the fiscal 2002 net income of $4.9 million ($0.31 earnings per share, basic and diluted).

Comparison of Fiscal 2002 with Fiscal 2001

Consolidated net sales were $117.3 million in fiscal 2002, a decrease of $6.2 million, or 5%, compared to fiscal 2001. Writing instrument net sales of $117.3 million in 2002 were less than 2001 by approximately $3.7 million, or 3.1%. Domestic writing instrument net sales of $57.8 million decreased $200,000, or 0.4%, and international writing instrument net sales of $59.5 million decreased $3.5 million, or 5.5%, compared to fiscal 2001. PCG segment sales were approximately $2.5 million in fiscal 2001. The following chart details net sales performance by segment and operating unit:

Domestic writing instrument volume was adversely affected by a slowdown in consumer holiday spending and lower sales to the office supply superstores in the fourth quarter of fiscal 2002. Unlike past years, the superstores did not aggressively promote either Cross or the fine writing category with off-shelf holiday gift displays. As a result, sales through the Company's retail division decreased 2.7% as compared to fiscal 2001. Sales of business gift products by the Company's special markets division decreased approximately 9.3%, as continued economic uncertainty had an unfavorable impact on the corporate gift market. Writing instrument OEM revenue increased $1.9 million from fiscal 2001, as the Company added two new customers during fiscal 2002 and sharply increased sales to an existing account. OEM revenue from the sale of digital pens was $442,000 in fiscal 2002.

International writing instrument sales for fiscal 2002 continued to be adversely affected by the weaker Asian economy, as sales in Asia of $16.4 million were lower by 11.6%, as compared to fiscal 2001. Sales in Japan, our largest Asian subsidiary, were down approximately 19% from fiscal 2001, as unfavorable economic conditions resulted in significantly lower corporate gift division sales. In addition, unfavorable exchange rates, particularly the weaker weighted average yen exchange rate, adversely affected sales in Asia by approximately two percentage points. Sales in the EMEA markets of $33.5 million were 3% less than 2001. An approximate 11% decline in the EMEA corporate gift business was offset by higher retail sales reflecting: the favorable effects of new product launches, new in-store merchandising and a stronger euro exchange rate, which had an approximate five percentage point favorable effect on EMEA sales. Sales in Canada were flat compared to fiscal 2001, whereas sales in Latin America wer e down 5.6% compared to the fiscal 2001.

Consolidated gross profit margins of 52.8% in fiscal 2002 were unchanged from fiscal 2001. Writing instrument margins in fiscal 2002 were 52.8%, or 2.3 percentage points, less than fiscal 2001. Writing instrument margins declined, in part, due to the effect of product mix. Margins in 2002 were also unfavorably affected by higher manufacturing related depreciation, health insurance and pension expense. In addition, gross margins were unfavorably affected by relatively fixed manufacturing overhead and manufacturing variances combined with the lower sales volume in fiscal 2002 compared to fiscal 2001. PCG segment margins were negative in fiscal 2001.

Consolidated SG&A expenses of approximately $52.4 million in fiscal 2002 were 3.6% higher than fiscal 2001 and were 44.7% of net sales in fiscal 2002 as compared to $50.6 million, or 41%, in fiscal 2001. SG&A expenses for WI&A of approximately $52.4 million were 5.8% higher than fiscal 2001. Marketing and selling expenses increased approximately $2.4 million, or 8.1%, compared to fiscal 2001, as the Company supported new product launches and targeted advertising and promotions. WI&A general and administrative expenses increased 2.2%, due largely to increases in depreciation and pension expense during fiscal 2002. In addition, the Company incurred approximately $340,000 of due diligence expenses in fiscal 2002 related to a review of a strategic acquisition target, which the Company decided not to pursue. Somewhat offsetting these increases, the Company reduced the fiscal 2002 allowance for doubtful accounts related to its domestic operations by approximately $435,000, as detailed analy sis of aged receivables and write-off history indicated that an adjustment was required. PCG segment SG&A expenses in fiscal 2001 were approximately $1 million.

S&D expenses of $1.5 million were 61.4% less than fiscal 2001. An approximate $2.2 million pre-tax adjustment was recorded as a reduction to accrued warranty costs in the fourth quarter of fiscal 2002. This adjustment was required, due to a change in estimate to reflect significantly lower cost trends, measured over a period of years, among several factors that impact the Company's cost to service the warranty. The most significant factors included: the operating efficiency and related cost of the service department, writing instrument unit sales, the number of units that are eventually returned for warranty repair and, more recently, a five dollar shipping and handling fee that was established in 2000 for all warranty claims. This fee had the twofold impact of reducing service department costs and contributing to the recent trend of fewer units being returned for warranty repair.

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R&D expenses of approximately $2.2 million were 9.5% higher than fiscal 2001. WI&A research and development expenditures of approximately $2.2 million were 27.1% higher than fiscal 2001, due to the inclusion of approximately $437,000 of development efforts of digital pen products. PCG segment R&D expenses were approximately $276,000 in fiscal 2001.

In fiscal 2002, the environmental remediation reserve, established in fiscal 2000 for the Company's property in Ireland, was reduced by approximately $179,000 based upon updated remediation cost estimates provided by the Company's environmental consultant. In fiscal 2001, approximately $412,000 of the environmental remediation reserve was reversed based upon remediation cost estimates provided by the Company's environmental consultant. The accrued liability for remediation in Ireland was approximately $464,000 at December 28, 2002.

There was no restructuring and loss on impairment of assets charge in fiscal 2002 compared to $857,000 in fiscal 2001, of which, approximately $862,000 related to the impairment of PCG assets, as certain long-lived assets were written off. In addition, in fiscal 2001, the Company recorded a $5,000 favorable change in the estimated liabilities of the restructuring plan. See Note E to the Company's consolidated financial statements in Item 8 of this Form 10-K Annual Report.

Interest and other income (expense) for fiscal 2002 was income of $734,000 compared to an expense of $5.7 million in fiscal 2001. The expense in 2001 was almost entirely due to activities relating to the Company's investments in internet companies, when the Company recorded losses of approximately $6.3 million, due to other than temporary declines in value of its DigitalConvergence.:Com Inc. investment and NeoMedia Technologies, Inc. marketable securities. Interest income in fiscal 2002 was approximately $305,000, or 35%, lower than interest income in fiscal 2001, as interest rates were lower.

In fiscal 2002, the Company recorded an income tax provision of $1.8 million on approximately $6.7 million of income from continuing operations. The effective tax rate was 26.5% compared to 63.7% in fiscal 2001. The decrease in tax rate was primarily due to greater than expected benefits from operating loss carryforwards as well as the effect of foreign tax credits and export sales in fiscal 2002. In addition, fiscal 2001 losses on internet investments, which utilized offshore funds, unfavorably impacted the 2001 tax rate. For an analysis of income taxes from continuing operations, see Note K to the Company's consolidated financial statements in Item 8 of this Form 10-K Annual Report.

Consolidated net income in fiscal 2002 was $4.9 million ($0.31 earnings per share, basic and diluted) compared to the fiscal 2001 net income of $980,000 ($0.06 earnings per share, basic and diluted). Income from continuing operations in fiscal 2002 was $4.9 million ($0.31 earnings per share, basic and diluted) compared to the fiscal 2001 income from continuing operations of $922,000 ($0.06 earnings per share, basic and diluted).

Liquidity and Capital Resources

Historically, the Company's sources of liquidity and capital resources have been its cash, cash equivalents and short-term investments ("cash"), cash generated from operations and amounts available under the Company's $25 million line of credit. These sources have been sufficient in the past to support the Company's routine operating requirements, capital projects, restructuring, defined benefit retirement plan contributions, stock repurchase programs and debt service. The Company does not expect its future cash needs to increase to the extent that these historical sources of liquidity and capital will not be sufficient to meet its needs.

The Company's cash balance of $16.2 million at the end of fiscal 2003 declined $1.8 million from the prior year, a result of many factors, the most significant of which are described in this section.

Accounts receivable increased approximately $5 million from the prior year. This was due, in part, to the acquisition of Costa Del Mar, which added approximately $1.5 million of accounts receivable to the Company's balance sheet. A portion of the increase was also due to the weaker United States dollar versus the euro, pound sterling and yen, as foreign currency denominated accounts receivable translated into more United States dollars at the end of 2003 than they did at the end of 2002. In addition, higher domestic writing instruments accounts receivable resulted from the higher fourth quarter sales in fiscal 2003 as compared to the same period of 2002. The Company offers a dating program, primarily to its domestic retail writing instrument customers, whereby they may either delay payment on certain third and fourth quarter purchases until January of the next year or earn a greater discount if payment is made earlier; therefore, the cash level tends to be lower at the end of the year when accounts re ceivable are generally higher.

Total inventory of approximately $16.1 million increased by $2.6 million as compared to fiscal 2002. This was largely due to the acquisition of Costa Del Mar, which added approximately $1.7 million of inventory to the Company's balance sheet. The balance of the increase was due to increased safety stock levels on selected products that were planned in conjunction with the manufacturing transition.

Additions to property, plant and equipment were approximately $4.1 million in fiscal 2003 as compared to $5.3 million in fiscal 2002. In fiscal 2004, the Company expects capital expenditures will be higher than in 2003 and more in line with 2002. Depreciation expense is expected to approximate that of 2003.

In fiscal 2001, the Company's Board of Directors authorized the repurchase of up to 10% of the Company's outstanding Class A common stock. This plan was completed in October 2002. A total of 1,499,967 shares was purchased under this plan for approximately $10.2 million at an average price per share of $6.78. On October 23, 2002, the Company's Board of Directors authorized a new plan to repurchase up to an additional 10% of the outstanding Class A common stock. Under this new plan, the Company plans to purchase approximately 1.4 million shares of stock on the open market, subject to regulatory considerations, from time to time, depending on market conditions. In 2003, the Company repurchased 494,500 shares for approximately $2.6 million at an average price per share of $5.28. At January 3, 2004, the Company had repurchased 674,500 shares under this new plan for approximately $3.7 million at an average price per share of $5.49.

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The Company's working capital was $40.8 million at the end of fiscal 2003, an increase of $3 million from fiscal 2002, and its current ratio at the end of fiscal 2003 and 2002 was 2.1:1 and 2.2:1, respectively. Operating cash flow from continuing operations was $2.1 million in fiscal 2003 as compared to $7.2 million in fiscal 2002. This decline was largely due to the effect of higher accounts receivable at the end of 2003 compared to the end of 2002, lower income from continuing operations in 2003 compared to 2002 and the restructuring charges that were paid in 2003.

The Company maintains a $25 million unsecured line of credit with a bank. This agreement, which was renegotiated in 2003, requires the Company to meet certain covenants. The most restrictive covenant is that over the three fiscal years from 2003 through 2005 the Company cannot incur extraordinary charges, as defined by the bank, such as restructuring charges, in excess of approximately $6.5 million. There is also a restriction on the Company's ability to grant a security interest in its assets. Any amounts borrowed under this agreement are payable on demand. Under this agreement, the Company has the option to borrow at either the bank's prime lending rate or at one percent per annum in excess of the London Interbank Offering Rate ("LIBOR"). In fiscal 2003, the Company borrowed approximately $10 million on this line of credit to finance the acquisition of Costa Del Mar at closing. Of this amount, $9 million was converted into long-term debt. The unused and available portion of the Company's $25 mil lion unsecured line of credit was $21.8 million at January 3, 2004.

In fiscal 2003, approximately $1.5 million of restructuring charges were paid related to the restructuring plan initiated in fiscal 2000. At January 3, 2004, total restructuring charges paid to date were approximately $15.5 million. The remaining approximate $83,000 obligation for restructuring is expected to be paid in 2004. The total cash portion of this restructuring plan is expected to be approximately $15.5 million.

In fiscal 2003 approximately $1.6 million was paid as a result of the corporate restructuring program initiated in July 2003. The total cost of this restructuring program is expected to be approximately $6.5 million incurred over the life of the program, assuming full implementation, which is expected to take several years. The total cash portion of this restructuring program is expected to be approximately $6.5 million. As a result of this reorganization program, the Company expects to realize general and administrative savings of approximately $4 million to $5 million annually beginning in 2004 and, assuming the manufacturing plan is fully implemented, the Company expects to realize manufacturing cost savings of approximately $5 million to $7 million annually.

In February 2004, the Company and the Town of Lincoln, Rhode Island settled a dispute regarding the assessed value used to determine taxes on the Company's properties for the years 1994 through 2003. The settlement included a $682,000 refund and $401,000 of interest. The Company will receive credits of $583,000 in real estate taxes payable and a $500,000 cash payment to be made no later than July 1, 2004. The entire amount is expected to be realized in 2004.

The Company will make a cash contribution of approximately $1 million to its defined benefit retirement plan in 2004.

The Company expects fiscal 2004 research and development expenses to be slightly lower than fiscal 2003.

The Company believes that existing cash and funds from operations, supplemented, as appropriate, by the Company's short-term borrowing arrangements, will be adequate to finance its foreseeable operating and capital requirements, service its long-term debt and the remaining requirements of the restructuring and stock repurchase plans. Should operating cash flows in 2004 not materialize as projected, the Company has a number of planned alternatives to ensure that it will have sufficient cash to meet its operating needs. These alternatives include implementation of strict cost controls on discretionary spending and delaying non-critical research and development, capital projects and completion of the stock repurchase plan.

At the end of fiscal 2003, cash available for domestic operations amounted to approximately $3.1 million, and cash held offshore for international operations amounted to approximately $13.1 million. At the end of fiscal 1999, the Company determined that approximately $15 million in undistributed foreign earnings were no longer considered to be invested indefinitely and recorded a provision for deferred taxes of approximately $5.3 million. This represented the estimated tax associated with these undistributed earnings. As of January 3, 2004, approximately $13 million of these earnings had been repatriated to the United States. At present, management believes that the unremitted foreign earnings for which deferred taxes have not been provided will continue to be permanently invested in the growth of business outside the United States; hence, no additional deferred taxes were recorded in fiscal 2003.

Contractual Obligations and Commercial Commitments

The Company leases office and warehouse space and certain equipment under non-cancelable operating leases that expire through 2008. Future minimum lease payments under all non-cancelable leases and other contractual obligations at January 3, 2004 were approximately:

Off Balance Sheet Arrangements

Not Applicable.

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New Accounting Pronouncements

For a description of new accounting pronouncements that affect the Company and the status of the Company's implementation thereof, see the "New Accounting Pronouncements" section of Note A to the Company's consolidated financial statements in Item 8 of this Form 10-K Annual Report. None are expected to have a material impact on the Company's consolidated financial position or results of operations.

Impact of Inflation and Changing Prices

The Company's operations are subject to the effects of general inflation as well as fluctuations in foreign currencies. Policies and programs are in place to manage the potential risks in these areas. The Company has generally been successful in controlling cost increases due to general inflation. The Company continues to review its number of suppliers in order to obtain lower costs and higher quality on many of its materials and purchased components. Steps taken in conjunction with restructuring efforts have reduced operating costs in its manufacturing operations.

The Company normally enters into foreign currency exchange contracts to economically hedge that portion of its net financial position exposed to foreign currency fluctuations.

The Company has adopted accounting practices that tend to reflect current costs in its consolidated statements of income. A portion of total inventories at the end of fiscal years 2003, 2002 and 2001 was accounted for using the last-in, first-out ("LIFO") valuation method. Normally under this method, the cost of goods sold reported in the financial statements approximates current costs, thus reducing distortions in reported income, due to the effect of changing prices.

Critical Accounting Policies

The Company applies certain accounting policies requiring management's estimates in determining reported results, see Note A "Significant Accounting Policies" to the Company's consolidated financial statements in Item 8 of this Form 10-K Annual Report. The most critical accounting policies, requiring significant management judgement, are as follows:

Revenue recognition requires estimates of product returns, term discounts and rebates at the time revenue is recognized. These estimates are based on historical experience. Should these estimates change, there could be a material effect on revenue recognized.

Inventory is valued at the lower of cost or market value, requiring management to establish inventory reserves based upon estimated selling prices for the Company's product. Should these estimates change, there could be a material effect on inventory reserves.

Allowances for doubtful accounts receivable require management to estimate the collectability of accounts receivable. Should these estimates change, there could be a material effect on allowances for doubtful accounts.

The Company's Cross branded writing instruments are sold with a full warranty of unlimited duration against mechanical failure. In establishing the accrual for warranty costs, management analyzes trends, measured over a period of several years, of several factors that impact the Company's cost to service the warranty. The most significant factors include: the operating costs of the service department, writing instrument unit sales, the number of units that are returned for warranty repair and the cost of product repairs. The estimates affecting the warranty reserve are updated annually. In 2002, there was a significant adjustment that lowered the reserve by approximately $2.2 million.

The Company's pension benefits are calculated using actuarial concepts, within the framework of Statement of Financial Accounting Standard ("SFAS") No. 87 "Employer's Accounting for Pensions." Two critical assumptions, the discount rate and the expected return on plan assets, are important elements of expense and liability measurement. We evaluate these critical assumptions annually. Other assumptions involve demographic factors such as retirement, mortality, turnover and rate of compensation increases. The discount rate enables us to state expected future cash flow as a present value on the measurement date. The guideline for setting this rate is a high-quality long-term corporate bond rate. A lower discount rate increases the present value of benefit obligations and increases pension expense. We reduced our discount rate to 6.25 % in 2003 from 6.5% in 2002 to reflect market interest rate conditions. To determine the expected long-term rate of return on the plan assets, we consider the current an d expected asset allocation, as well as historical and expected returns on each plan asset class. A lower expected rate of return on pension plan assets will increase pension expense. Our long-term expected return on plan assets was 8.5% in both 2003 and 2002.

The Company tests goodwill for impairment at least annually. The Company completed its impairment testing as of December 1, 2003 and determined that goodwill was not impaired. Management's estimates of fair values, projections of future cash flows and other factors are significant factors in testing goodwill for impairment. If these estimates or projections change in the future, the Company may be required to record an impairment charge.

Management believes that the degree to which actual results differ from these estimates could have a material effect on the Company's consolidated financial position or results of operations.

For additional information regarding management's estimates, see the "Risks and Uncertainties; Forward-Looking Statements" section of "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 of this Form 10-K Annual Report.

Risks and Uncertainties; Forward-Looking Statements

Statements contained herein that are not historical fact are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. In addition, words such as "believes," "anticipates,"

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"expects," "will" and similar expressions are intended to identify forward-looking statements, including but not limited to statements related to innovation of the Company's new products and programs; extensions of the Cross brand beyond writing instruments; benefits of a streamlined operation; diversification of the business beyond writing instruments; anticipated compliance with laws and regulations (including but not limited to environmental laws); anticipated increases in healthcare and other employee benefit plan costs; anticipated availability of the unsecured line of credit; anticipated sufficiency of available working capital; the anticipated level of research and development costs; and the expectation that unremitted foreign earnings for which taxes have not been provided will continue to be permanently invested. The Company cautions that a number of important factors could cause the Company's actual results for fiscal 2004 and beyond to differ materially from those expressed in any forward-look ing statements made by, or on behalf of, the Company. Forward-looking statements involve a number of risks and uncertainties.

The following section describes certain of the more prominent risks and uncertainties inherent in the Company's operations. However, this section does not intend to discuss all possible risks and uncertainties to which the Company is subjected, nor can it be assumed necessarily that there are no other risks and uncertainties that may be more significant to the Company. The Company undertakes no obligation to correct or update any forward-looking statements for any reason.

The Company is exposed to changes in interest rates and foreign currency exchange, primarily in its investments, line of credit and foreign currency transactions.

The Company's short-term investment portfolio consists primarily of high-grade investments, with the majority maturing in less than five years. A hypothetical 10% adverse change in current average interest rates for these investments would not have a material impact on the Company's pre-tax earnings.

The Company maintains a $25 million unsecured line of credit with a bank. Any amounts borrowed under this agreement are payable on demand. Under this agreement, the Company has the option to borrow at either the bank's prime lending rate or at one percent per annum in excess of LIBOR. The Company believes that changes in interest rates would not be material to its operations, due to its level of borrowings.

There was $3.2 million and $1 million outstanding under the Company's line of credit at January 3, 2004 and December 28, 2002, respectively.

The Company entered into an interest rate swap agreement that effectively fixes the interest rate on its long-term debt at 4.15% per annum.

The Company's foreign exchange exposure is generated primarily from its international operating subsidiaries. The Company seeks to minimize the impact of foreign currency fluctuations by hedging certain foreign currency denominated balance sheet positions with foreign currency forward exchange contracts and/or options. Most of these contracts are short-term, generally expire in one to three months and do not subject the Company to material market risk. The Company does not enter into foreign currency exchange transactions for speculative purposes.

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Independent Auditors' Report

To the Board of Directors and Shareholders of
A.T. Cross Company
Lincoln, Rhode Island

We have audited the accompanying consolidated balance sheets of A.T. Cross Company and subsidiaries (collectively, the "Company") as of January 3, 2004 and December 28, 2002, and the related consolidated statements of income, comprehensive income, changes in shareholders' equity, and cash flows for each of the three fiscal years in the period ended January 3, 2004. Our audits also included the financial statement schedule listed at Item 15D. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of January 3, 2004 and December 28, 2002, and the results of its operations and its cash flows for each of the three fiscal years in the period ended January 3, 2004, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

Boston, Massachusetts
February 20, 2004

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CONSOLIDATED BALANCE SHEETS
A.T. CROSS COMPANY & SUBSIDIARIES

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CONSOLIDATED STATEMENTS OF INCOME
A.T. CROSS COMPANY & SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
A.T. CROSS COMPANY & SUBSIDIARIES

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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
A.T. CROSS COMPANY & SUBSIDIARIES

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CONSOLIDATED STATEMENTS OF CASH FLOWS
A.T. CROSS COMPANY & SUBSIDIARIES