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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
[ ] 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 Number 1-6720
A. T. CROSS COMPANY
(Exact name of registrant as specified in its charter)
Rhode Island 05-0126220
(State or other jurisdiction of (I.R.S. 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
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered:
Class A Common Stock ($1. Par Value) American Stock Exchange
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of February 28, 1995:
Class A common stock - $192,448,425
(For this purpose all directors have been treated as affiliates).
The number of shares outstanding of each of the issuer's classes of common
stock as of February 28, 1995:
Class A common stock - 14,725,302 shares
Class B common stock - 1,804,800 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual report to shareholders for the year ended December
31, 1994 are incorporated by reference into Parts I, II and IV. Portions
of the definitive proxy statement for the 1995 annual meeting of
shareholders are incorporated by reference into Part III.
PART I
Item 1. BUSINESS
A. T. Cross Company (the "registrant") currently operates predominantly in
one business segment, the manufacture and sale of high quality writing
instruments.
The registrant manufactures high quality writing instruments consisting of
ball-point and fountain pens, Selectip roller-ball pens (which also
accommodate a porous point refill), mechanical pencils, desk sets and ball-
point refills. The registrant's writing instruments are offered in a
traditional, narrow girth as well as a new wider girth line referred to as
the Townsend collection. In addition, the registrant markets writing
instrument accessories. The registrant continues to be one of the leading
competitors in the United States in fine writing instruments priced from
$10 to $50. The Townsend collection has given the registrant a notable
presence in the $55 to $250 price range of products. The registrant is
planning a worldwide introduction of a new lower priced product, Solo, for
the spring of 1995. Solo will have suggested retail prices from $12.50 to
$32.50. The registrant emphasizes styling, craftsmanship and quality
control in the design and production of its products. All of the
registrant's writing instruments carry a full warranty of unlimited
duration against mechanical failure. The registrant's writing instruments
are packaged and sold as individual units or in matching sets. The
registrant also sells single and double unit desk sets with bases made of
various materials such as onyx, marble and wood.
The registrant's writing instrument products are distributed throughout the
United States by approximately 37 manufacturer's agents or representatives
to about 7,500 active retail and wholesale accounts. Retail accounts
include gift stores, department stores, jewelers, stationery and office
supply stores, mass merchandisers and catalogue showrooms. The wholesale
accounts distribute the registrant's products to retail outlets suitable
for products of the type, quality and price range featured by the
registrant.
Advertising specialty representatives market the registrant's writing
instruments in the United States to business and industry. Typically, such
products are engraved or carry the purchaser's name or emblem and are used
for gifts, sales promotions, incentive purposes or advertising. The
registrant also sells its products to United States military post
exchanges, service centers and central buying operations.
Sales of the registrant's writing instrument products outside the United
States during 1994 were made to foreign distributors by the registrant, and
by A. T. Cross Limited ("Limited"), a wholly-owned subsidiary, with
manufacturing facilities at Ballinasloe, County Galway, Ireland.
The registrant has wholly-owned subsidiaries in the United Kingdom, Germany
and Japan, and branches in Spain and France, which distribute its writing
instrument products to retail outlets, as well as to business and industry,
within their respective countries. The registrant also has a branch sales
office in Hong Kong.
The registrant also markets fine quality leather goods (primarily ladies
handbags) and accessories through its wholly-owned subsidiary, Manetti-
Farrow, Incorporated. Manetti-Farrow is the exclusive wholesale
distributor for the Fendi brand of leather products and fashion accessories
in the United States and Canada.
In 1993, the registrant sold its Mark Cross trademark and selected assets
of its wholly-owned subsidiary, Mark Cross, Inc. and discontinued its Mark
Cross retail business. See Note J to the registrant's financial statements
included in its annual report to shareholders for the year ended December
31, 1994 (filed herewith as Exhibit 13 and hereinafter referred to as the
"1994 Annual Report"), which note to such financial statements is
incorporated by reference herein.
Raw Materials:
Most raw materials for production of writing instruments in the United
States are obtained domestically. Brass tubing, brass clip stock, some
desk set base materials, some fountain pen nibs and front sections, and
lacquer coating of metal shells are imported from Germany. Complete pencil
mechanisms, some porous point refill components, resin caps and barrels and
some fountain pen nibs and front sections are imported from Japan. Raw
materials for production of writing instruments in Ireland are obtained
largely from Ireland, Germany, Japan and the United States.
Patents and Trademarks:
The registrant, directly and through its subsidiaries, has certain
trademark registrations in the United States and many foreign countries,
including but not limited to, its principal trademark "CROSS", and related
designs, and the frustoconical top of its writing instruments. The
principal trademark "CROSS" and related goodwill is of fundamental
importance to the business. The registrant also holds certain United
States and foreign patents covering its desk units, Townsend series writing
instruments, Signature series writing instruments, fountain pens,
mechanical pencils, and fountain pen cartridges, and has filed United
States and foreign patent applications on certain of the foregoing writing
instruments and other writing instruments and related items. While the
registrant pursues a practice of seeking patent protection for novel
inventions, the Company's business is not significantly dependent upon
obtaining and maintaining patents. As discussed above, the registrant sold
its Mark Cross trademark in 1993. However, under the terms of that sale,
the registrant retained the right to use the CROSS trademark in certain non-
writing instruments categories.
Seasonal Business:
Retail demand for the registrant's products is traditionally highest
immediately prior to Christmas and other gift-giving occasions. However,
seasonal fluctuations have not materially affected continuous production of
writing instrument products.
Working Capital Requirements:
The Company utilizes just-in-time inventory techniques which help to keep
inventory balances relatively constant throughout the year. The registrant
has offered in the past, and may offer in the future, extended payment
terms to domestic customers who meet minimum purchase levels at certain
points during the year, usually September through November. See the
"management's discussion and analysis of financial condition and results of
operations" section of the 1994 Annual Report, which section of the 1994
Annual Report is incorporated by reference herein.
Customers:
The registrant is not dependent for a material part of its business upon
any single customer or a small number of customers.
Backlog of Orders:
The backlog of orders is not a significant factor in the registrant's
business.
Government Contracts:
Sales of the registrant's writing instrument products are made to military
post exchanges and service centers, but no contracts are entered into which
are subject to renegotiation or termination by the United States
Government.
Competition:
The writing instrument field is highly competitive. In particular,
competition is strong with respect to product quality and brand
recognition. There are numerous manufacturers of ball-point, roller-ball
and fountain pens and mechanical pencils in the United States and abroad.
Many of such manufacturers produce lower priced writing instruments than
those produced by the registrant. Although the registrant is a major
producer of ball-point, roller-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 or have
greater resources as divisions of larger corporations.
Research and Development:
The registrant had expenditures for research and development of new
products and improvement of existing products of approximately $2,036,000
in 1994, $2,213,000 in 1993, and $1,236,000 in 1992.
Environment:
The registrant believes it is in substantial compliance with all Federal,
State and local environmental laws and regulations. It is believed that
future capital expenditures for environmental control facilities will not
be material.
Employees:
The registrant had approximately 1,200 employees at December 31, 1994, of
which 253 were employed by foreign subsidiaries or branches.
Foreign Operations and Export Sales:
Approximately 39% of the registrant's sales in 1994 were in foreign
markets. The registrant's primary foreign markets are in Europe and the
Far East. Sales of writing instrument products to foreign distributors are
subject to import duties in many countries although sales from Limited into
European Common Market countries are duty free. The operations of the
registrant's foreign subsidiaries and branches are subject to the effects
of currency revaluations and devaluations, to the availability of dollar
exchange, to exchange control and to other restrictive regulations.
Undistributed earnings of the foreign manufacturing and marketing
subsidiaries generally are not subject to current United States federal
income and state income taxes. However, repatriation to the registrant of
the accumulated earnings of foreign subsidiaries would subject such
earnings to United States federal and state income taxes. It is not the
intention of the registrant to repatriate these earnings. The Revenue
Reconciliation Act of 1993 added Internal Revenue Code Section 956A which
had the effect of subjecting a portion of current foreign earnings to
United States federal taxation. See Note F to the registrant's financial
statements included in the 1994 Annual Report, which note to such financial
statements is incorporated by reference herein. See geographic information
and export sales data in Note G to the registrant's financial statements
included in the 1994 Annual Report, which note to such financial statements
is hereby incorporated by reference.
Item 2. PROPERTIES
The registrant currently occupies approximately 269,000 square feet of
manufacturing, warehouse and office space in its facility in Lincoln, Rhode
Island. Limited owns and operates an approximately 64,000 square foot
manufacturing plant in Ballinasloe, County Galway, Ireland. Substantially
all of these facilities, which are well maintained and in good repair, are
currently being utilized in either a manufacturing, distribution or
administrative capacity. The productive capacity of these facilities is
sufficient to meet the registrant's needs for the foreseeable future.
The registrant also owns an approximately 130,000 square foot facility in
Lincoln, formerly the site of the registrant's distribution center and
certain administrative offices, which it is offering for sale.
The registrant's marketing subsidiary in Spain owns its administrative
office and warehouse space. The marketing operations in Germany, Japan,
France and the United Kingdom, and the branch office in Hong Kong all lease
their administrative offices and warehouse space.
Manetti-Farrow leases administrative office space in New York, New York and
warehouse and office space in Oakland, California.
Item 3. LEGAL PROCEEDINGS
No material legal proceedings are pending by or against the registrant or
any of its subsidiaries which would have a material effect upon their
earnings or financial condition.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
See the "Market and Dividend Information" section of the 1994 Annual
Report, which section is incorporated by reference herein.
Item 6. SELECTED FINANCIAL DATA
See the "Five-Year Summary" section of the 1994 Annual Report, which
section is incorporated by reference herein.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
See the "management's discussion and analysis of financial condition and
results of operations" section of the 1994 Annual Report, which section is
incorporated by reference herein.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the registrant and its
subsidiaries and the report of the independent auditors thereon, set forth
in the 1994 Annual Report, are incorporated herein by reference.
Quarterly Results of Operations in Note K of the registrant's financial
statements included in the 1994 Annual Report are incorporated herein by
reference.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
In addition to the directors and officers listed on pages 5 and 6 of the
registrant's definitive proxy statement for the 1995 annual meeting of
shareholders, which pages are incorporated by reference herein, the
following are executive officers of the registrant (each of whom serves
until his or her successor is elected and has qualified):
Year in Which
Name Age Title First Held Office
Joseph F. Eastman 58 Vice President-Human Resources 1981
David A. Rogers 46 Vice President-U.S. Sales 1988
Michael El-Hillow(1) 43 Vice President-Finance; Treasurer; 1990
Chief Financial Officer
Donald W. Reilly (2) 36 Corporate Controller 1992
Chief Accounting Officer
Tina C. Benik (3) 35 Vice President-Legal, General 1993
Counsel and Corporate Secretary
Richard M. Feldt (4) 43 Vice President-Operations 1993
Steven T. Henick (5) 52 Vice President- 1993
Worldwide Marketing and Sales
J. John Lawler (6) 57 Vice President- 1993
Worldwide Tax and Duty Free
John T. Ruggieri (7) 38 Vice-President- 1993
Corporate Development and Planning
(1) Prior to becoming Vice President-Finance, Treasurer and Chief
Financial Officer in 1990, Michael El-Hillow was a partner with the
auditing firm of Ernst & Young.
(2) Prior to becoming Corporate Controller in 1992, Donald W. Reilly was a
senior manager with the auditing firm of Ernst & Young.
(3) Prior to becoming Vice President-Legal, General Counsel and Corporate
Secretary, Tina C. Benik was the general counsel of the registrant from
1989 to 1991 and corporate secretary from 1991 to 1993.
(4) Prior to becoming Vice President-Operations in 1993, Richard M. Feldt
was Vice-President-Manufacturing of the registrant. Prior to his
appointment as Vice-President-Manufacturing, Mr. Feldt held various
executive positions with Eastman Kodak Company.
(5) Prior to becoming Vice-President-Worldwide Marketing and Sales in
1993, Steven T. Henick held various senior executive positions in large
multi-national consumer goods companies, including Procter & Gamble, Inc.,
Tambrands, Inc., and Del International Incorporated.
(6) Prior to becoming Vice-President-Worldwide Tax and Duty Free in 1993,
J. John Lawler was the Vice President International of the registrant.
(7) Prior to becoming Vice President-Corporate Development and Planning in
1993, John T. Ruggieri was the Executive Vice President of the registrant's
wholly-owned subsidiary Mark Cross, Inc..
Item 11. EXECUTIVE COMPENSATION
See pages 7 through 19 of the registrant's definitive proxy statement for
its 1995 annual meeting of shareholders, which pages are incorporated by
reference herein.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
See pages 3 and 4 of the registrant's definitive proxy statement for the
1995 annual meeting of shareholders, which pages are incorporated by
reference herein.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See pages 5 and 6 of the registrant's definitive proxy statement for the
1995 annual meeting of shareholders, which pages are incorporated by
reference herein.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) and (2) - The response to this portion of Item 14 is submitted
as a separate section of this report.
(3) Listing of Exhibits
(3) Restated Articles of Incorporation and By-laws
(incorporated by reference to Exhibit (3) to the
registrant's report on Form 10-K for the year ended
December 31, 1980); Amendment to Restated Articles
of Incorporation, Amendment to By-laws adopted
December 2, 1988 (incorporated by reference to
Exhibit (3) to the registrant's report on Form 10-K
for the year ended December 31, 1989); Amendment to
By-laws adopted February 6, 1992 (incorporated by
reference to Exhibit (3) to the registrant's report
on Form 10-K for the year ended December 31, 1991).
(10.1) A. T. Cross Company Executive Compensation Program
Performance Cash Plan, January 1, 1995
(10.2) A. T. Cross Company Executive Compensation Program
Annual Incentive Plan, January 1, 1995
(10.3) A. T. Cross Company Non-Qualified Stock Option Plan,
1975 (as amended and restated February 4, 1988, as
amended December 10, 1991, and as further amended
October 21, 1993)
(10.4) A. T. Cross Company Incentive Stock Option Plan, 1981
(as amended February 6, 1992 and as further amended
April 28, 1994)
(10.5) A. T. Cross Company Deferred Compensation Plan
(10.6) A. T. Cross Company Unfunded Excess Benefit Plan
(as amended)
(11) Statement Re: Computation of Per Share Earnings
(13) Annual Report to Security Holders for the year ended
December 31, 1994. This is submitted only in respect
to the portion incorporated by reference in this
Form 10-K.
(21) Subsidiaries - incorporated by reference to the
"Subsidiaries and Branches" section of the
registrant's 1994 Annual Report
(23) Consent of Ernst & Young
(27) Financial Data Schedules - filed electronically
(b) No reports on Form 8-K were filed in the fourth quarter of 1994.
(c) Exhibits--See Item (a)(3) above
(d) Financial Statement Schedules--The response to this portion of
Item 14 is submitted as a separate section of this report.
SIGNATURES
Pursuant to the requirements of Section 13 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
By: BRADFORD R. BOSS
Bradford R. Boss
Chairman
Dated: March 24, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated:
Signature Title Date
BRADFORD R. BOSS Chairman & Director March 24, 1995
(Bradford R. Boss)
RUSSELL A. BOSS President & Director March 24, 1995
(Russell A. Boss) (Chief Executive Officer)
JOHN E. BUCKLEY Executive Vice President March 24, 1995
(John E. Buckley) & Director
(Chief Operating Officer)
MICHAEL EL-HILLOW Vice President, Finance March 24, 1995
(Michael El-Hillow) Treasurer
(Chief Financial Officer)
DONALD W. REILLY Corporate Controller March 24, 1995
(Donald W. Reilly) (Chief Accounting Officer)
EDWARD M. WATSON Director March 24, 1995
(Edward M. Watson)
BERNARD V. BUONANNO, JR. Director March 24, 1995
(Bernard V. Buonanno, Jr.)
H. FREDERICK KRIMENDAHL, II Director March 24, 1995
(H. Frederick Krimendahl, II)
THOMAS C. MCDERMOTT Director March 24, 1995
(Thomas C. McDermott)
TERRENCE MURRAY Director March 24, 1995
(Terrence Murray)
JAMES C. TAPPAN Director March 24, 1995
(James C. Tappan)
ANNUAL REPORT ON FORM 10-K
ITEM 14 (a)(1) and (2), (c) and (d)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
CERTAIN EXHIBITS
FINANCIAL STATEMENT SCHEDULES
YEAR ENDED DECEMBER 31, 1994
A. T. CROSS COMPANY
LINCOLN, RHODE ISLAND
FORM 10-K - ITEM 14(a)(1) and (2)
A. T. CROSS COMPANY AND SUBSIDIARIES
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of A. T. Cross Company and
its subsidiaries, included in the annual report of the registrant to its
shareholders for the year ended December 31, 1994, are incorporated by
reference in Item 8:
Consolidated Balance Sheets - December 31, 1994 and December 31, 1993
Consolidated Statements of Income and Retained Earnings - Years Ended
December 31, 1994, 1993 and 1992
Consolidated Statements of Cash Flows - Years Ended December 31, 1994,
1993 and 1992
Notes to Consolidated Financial Statements - December 31, 1994
The following consolidated financial statement schedule of A. T. Cross
Company and its subsidiaries is included in Item 14(d):
Schedule II - Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions, or the information required
therein has otherwise been disclosed in the consolidated financial
statements referred to above, or are inapplicable, and therefore have been
omitted.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
A. T. CROSS COMPANY AND SUBSIDIARIES
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
Additions
(A)
Balance at Charged to Charged to Balance
Beginning Costs and Other Accounts Deductions at End of
DESCRIPTION of Period Expenses Describe Describe Period
Year Ended December 31, 1994
Deducted from asset account:
Allowance for doubtful
accounts $1,632,000 $405,592 $209,592(A) $1,828,000
Year Ended December 31, 1993
Deducted from asset account:
Allowance for doubtful
accounts $1,550,000 $422,719 $340,719(A) $1,632,000
Year Ended December 31, 1992
Deducted from asset account:
Allowance for doubtful
accounts $1,657,000 $312,733 $419,733(A) $1,550,000
(A) Uncollectible accounts written off.