A.T. Cross Company Reports Second Quarter Results; Board of Directors Authorizes Review of Strategic Alternatives for CrossPad Product Line.LINCOLN Lincoln, city and district, England Lincoln, city (1991 pop. 79,980) and district, Lincolnshire, E England, in the Parts of Kesteven, on the Witham River. , R.I.--(BUSINESS WIRE)--July 22, 1999-- A.T. Cross Company (ASE-ATX), manufacturer of fine writing instruments and pen computing See gesture recognition and tablet PC. products, today reported sales for the second quarter ended July July: see month. 3, 1999 of $26.8 million, down 22.9% from $34.7 million in the same period of 1998, and a loss from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the of $6.8 million, compared with income from continuing operations of $11,000 one year earlier. The net loss for the quarter was $6.8 million, or 40 cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. , compared with net income of $1.7 million, or 10 cents per share for the 1998 second quarter. Included in the second quarter of 1998 was income from discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. of $1.7 million, or 10 cents per share. For the six months ended July 3, 1999, net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight were $55.3 million, down 16.5% from $66.2 million for the same period of the previous year. The loss from continuing operations was $9.4 million, or 56 cents per share, compared to a loss of $1.3 million, or 8 cents per share for the prior year period. The net loss was $7.9 million, or 47 cents per share, compared with net income of $337,000, or 2 cents per share for the 1998 period. Year to date results include income from discontinued operations of $1.5 million, or 9 cents per share, in 1999 compared to $1.7 million, or 10 cents per share for the same period in 1998. Second quarter writing instrument revenue was $25.8 million, down 9.5% from the 1998 quarter. Domestic writing instrument sales decreased 13.9% to $12.8 million, while foreign sales decreased 4.8% to $13.0 million. For the six months ended July 3, 1999, domestic writing instrument sales decreased 13.7% to $24.8 million, while foreign sales decreased 0.6% to $28.2 million. Pen Computing Group revenue was $928,000 in the second quarter, compared to $6.0 million in the same quarter of a year ago. For the six months ended July 3, 1999, sales of pen computing products were $2.0 million, compared to $8.7 million for the 1998 period. The Pen Computing Group generated a loss before taxes of $8.2 million in the second quarter of 1999, compared to $1.7 million in the 1998 quarter. For the six months, the Pen Computing Group's pre-tax loss was $12.5 million, compared to $3.0 million for the same period of a year ago. As stated in the first quarter release, 1999 PCG PCG phonocardiogram. revenues will be below 1998 levels, and the operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. will be higher than 1998's loss of $9.4 million. "While pleased with the continuing recovery of our Asian writing instrument business in the second quarter, this was offset by disappointing results in Europe due to generally weak economic conditions and a strong dollar," Russell A. Boss, President and Chief Executive Officer, said. "Latin American sales were adversely impacted by distributor changes that were completed in the first half of the year, as well as unstable unstable, adj 1. not firm or fixed in one place; likely to move. 2. capable of undergoing spontaneous change. A nuclide in an unstable state is called radioactive. An atom in an unstable state is called excited. economies in several key markets." "New product development efforts for the U.S. market are continuing. Extensive improvements have been made to our website to provide Cross full e-commerce e-commerce, commerce conducted over the Internet, most often via the World Wide Web. E-commerce can apply to purchases made through the Web or to business-to-business activities such as inventory transfers. capabilities by the end of this month when the site is activated activated a state of being more than usually active. In biological systems this is usually brought about by chemical or electrical means. Commonly said of pharmaceutical and chemical products. . In addition, a new marketing support initiative recently completed was the placement, as a test, of Cross product kiosks in five U.S. shopping malls for the remainder of this year. The kiosks are located in Massachusetts Massachusetts (măsəch  `sĭts), most populous of the New England states of the NE United States. (2), Connecticut Connecticut, state, United StatesConnecticut (kənĕt`ĭkət), southernmost of the New England states of the NE United States. It is bordered by Massachusetts (N), Rhode Island (E), Long Island Sound (S), and New York (W). , Ohio and Minnesota. They are staffed and have all Cross products on display. The higher spending levels to support these new marketing initiatives negatively impacted the operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. of the writing instrument division in the second quarter. We expect these initiatives to help stabilize stabilize See peg. the U.S. writing instrument business over the second half of this year." "We recently completed the acquisition of selected assets of C&J Jewelry jewelry, personal adornments worn for ornament or utility, to show rank or wealth, or to follow superstitious custom or fashion. The most universal forms of jewelry are the necklace, bracelet, ring, pin, and earring. Company, Inc. and are in the process of moving the operation to our Lincoln facility. C&J manufactured writing instruments for a well-known luxury goods retailer. Although not material to 1999 results, we expect this business to contribute to revenue and profitability in the third quarter. This acquisition represents a key step forward in our strategy to leverage core manufacturing capabilities as an OEM (Original Equipment Manufacturer) The rebranding of equipment and selling it. The term initially referred to the company that made the products (the "original" manufacturer), but eventually became widely used to refer to the organization that buys the products and supplier of writing instruments and related components. We are actively investigating other potential OEM opportunities." "The operating results of the Pen Computing Group were negatively impacted by pricing actions taken during the second quarter. In view of continued significant losses, the board of directors today authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: a review of strategic alternatives for the CrossPad product line which include outside funding and/or the possible sale or discontinuance Cessation; ending; giving up. The discontinuance of a lawsuit, also known as a dismissal or a non-suit, is the voluntary or involuntary termination of an action. DISCONTINUANCE, pleading. A chasm or interruption in the pleading. 2. of the CrossPad line." "Unrelated to the CrossPad platform, our Pen Computing Group is proceeding with several well-known partners on the development of a pen-based scanning application, the NetPen, that utilizes the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the for reference and e-commerce capabilities. We have completed a business plan for the Cross NetPen and are currently in the process of contacting potential investors for the NetPen product platform. NetPen is a pen-based scanning application that will scan and store specifically coded data found in a variety of print media. Cross has reached an exclusive agreement with NeoMedia Technologies, Inc. (NASDAQ-NEOM) to bundle their NeoLink(TM) software with the Cross NetPen to provide a very efficient information retrieval information retrieval Recovery of information, especially in a database stored in a computer. Two main approaches are matching words in the query against the database index (keyword searching) and traversing the database using hypertext or hypermedia links. system. The codes provide access to Internet addresses There are two kinds of addresses that are widely used on the Internet. One is a person's e-mail address, and the other is the address of a Web site, which is known as a URL. Following is an explanation of Internet e-mail addresses only. For more on URLs, see URL and Internet domain name. by allowing the user of the NetPen to quickly download To receive a file transmitted over a network. In any communications session, "download" means receive, and "upload" means send. The download/upload often implies a big/little scenario, in which data is being downloaded from the "big" server into the "little" user's computer. the information to a personal computer and directly link to the previously scanned web sites without the need for search engines or complex URLs. The NetPen can store up to 100 codes. We will have a much better indication on the potential for this product by year-end." "A board committee is continuing its search for a new CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. , considering both internal and external candidates. Our goal is to have someone in place by year-end." A.T. Cross Company is a major international manufacturer of fine writing instruments and also manufactures pen computing products. The company eliminated its quarterly cash dividend on common stock as of December 8, 1998. Statements contained in this release that are not historical facts are forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. made pursuant to the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. In addition, words such as "believes," "anticipates," "expects," and similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to risks and uncertainties, including but not limited to risks associated with consumer acceptance of the Company's new product lines, consumer reaction to the Company's advertising and promotions, the Company's strategic initiatives, customer and consumer support for such initiatives, the inherent uncertainty of foreign markets, the impact of new distribution methods and channels and the integration of newly acquired businesses. Additional discussions of factors that could cause actual results to differ materially from management's expectations is contained in the Company's filings under the Securities Exchange Act of 1934. -0-
A. T. CROSS COMPANY
CONSOLIDATED SUMMARY OF OPERATIONS
(in thousands, unaudited)
Three Months Ended Six Months Ended
July 3, June 30, July 3, June 30,
1999 1998 1999 1998
----------------------------------------------------------------------
Net sales $ 26,762 $ 34,693 $ 55,281 $ 66,218
Cost of goods sold 16,526 17,757 33,096 34,887
--------------------------------------------
Gross Profit 10,236 16,936 22,185 31,331
Selling, general and
administrative expenses 17,990 15,701 32,581 30,824
Research and development
expenses 816 1,220 1,349 2,226
Service and distribution
costs 926 856 1,836 1,628
--------------------------------------------
Operating Loss (9,496) (841) (13,581) (3,347)
Interest and other income 368 856 914 1,411
--------------------------------------------
Income (Loss) From
Continuing Operations
Before Income Taxes (9,128) 15 (12,667) (1,936)
Income taxes (benefit) (2,374) 4 (3,294) (620)
--------------------------------------------
Income (Loss) From
Continuing Operations (6,754) 11 (9,373) (1,316)
Income from discontinued
operations
(net of income taxes) 0 1,653 1,496 1,653
============================================
Net Income (Loss) (6,754) $ 1,664 $ (7,877) $ 337
============================================
Basic and diluted
earnings
(loss) per share:
Continuing operations $ (0.40) $ 0.00 $ (0.56) $ (0.08)
Discontinued operations 0.00 0.10 0.09 0.10
--------------------------------------------
============================================
Net Income (Loss) Per
Share $ (0.40) $ 0.10 $ (0.47) $ 0.02
============================================
Weighted average shares
outstanding 16,655 16,523 16,606 16,515
============================================
Segment Data
Net Sales:
Quality Writing
Instruments $ 25,797 $ 28,512 $ 53,049 $ 57,190
Pen Computing
Products 928 6,048 2,007 8,697
Timepieces 37 133 225 331
$ 26,762 $ 34,693 $ 55,281 $ 66,218
Income (Loss) From
Continuing Operations
Before Income Taxes
Quality Writing
Instruments $ (915) $ 2,025 $ 43 $ 1,717
Pen Computing
Products (8,213) (1,659) (12,508) (2,988)
Timepieces 0 (351) (202) (665)
$ (9,128) $ 15 $ (12,667) $ (1,936)
A. T. CROSS COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, unaudited)
July 3, June 30,
-----------------------------
Assets 1999 1998
-----------------------------
Cash and short-term investments $ 35,740 $ 49,177
Accounts receivable 17,078 20,977
Inventories 21,049 26,846
Other current assets 8,634 7,494
-----------------------------
Total Current Assets 82,501 104,494
Property, plant and equipment, net 38,020 38,687
Intangibles and other assets 11,813 9,312
-----------------------------
=============================
Total Assets $ 132,334 $ 152,493
=============================
Liabilities and Shareholders' Equity
Current liabilities 30,523 34,389
Accrued warranty costs 5,821 5,971
Shareholders' equity 95,990 112,133
-----------------------------
=============================
Total Liabilities and Shareholders'
Equity $ 132,334 $ 152,493
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