10-K 1 atx-20121229x10k.htm 10-K b56c572a9ccf4b6

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

 

FORM 10-K

 

ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 29, 2012

 

Commission File Number  1-6720

 

A. T. CROSS COMPANY
(Exact name of registrant as specified in its charter)

 

 

 

 

 

 

Rhode Island
(State or other jurisdiction of incorporation or organization)

05-0126220
(IRS Employer Identification No.)

One Albion Road, Lincoln, Rhode Island
(Address of principal executive offices)

02865
(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)

NASDAQ

Securities registered pursuant to Section 12(g) of the Act:  None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities

Act.

 

Yes

 

X

No

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of

the Act.

 

Yes

 

X

No

 

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 (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

X

Yes

 

 

No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if
any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T
(S 232.405 of this chapter) during the preceding 12 months (or shorter period that the registrant was required to

submit and post such files).

X

Yes

 

 

No

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (S 229.405 of this
chapter) 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 10-K or any amendment to this Form 10-K. [X]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer
or a smaller reporting company in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

X

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

 

Yes

 

X

No

 

 

The aggregate market value of the registrant's voting and non-voting common equity held by non-affiliates as of June 30, 2012, the last business day of the registrant's most recently completed second fiscal quarter was $88.8 million.

The number of shares outstanding of each of the registrant's classes of common stock as of February 23, 2013 was:

Class A common stock     -

 

11,434,775 

 

Shares

Class B common stock     -

 

1,804,800 

 

Shares

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive proxy statement for the 2013 annual meeting of shareholders are incorporated by reference into Part III of this report.


 

 

 

INDEX

8

 

 

 

 

Part I

Page

 

 

 

 

Item 1

Business -----------------------------------------------------------------------------------------------------------

1 - 4

 

 

 

 

 

Item 1A

Risk Factors -------------------------------------------------------------------------------------------------------

4 - 5

 

 

 

 

 

Item 1B

Unresolved Staff Comments -----------------------------------------------------------------------------------

 

 

 

 

 

Item 2

Properties ----------------------------------------------------------------------------------------------------------

 

 

 

 

 

Item 3

Legal Proceedings ------------------------------------------------------------------------------------------------

 

 

 

 

 

Item 4

Mine Safety Disclosures ----------------------------------------------------------------------------------------

 

 

 

 

 

 

Part II

 

 

 

 

 

 

Item 5

Market For Registrant's Common Equity, Related Stockholder Matters

 

 

 

and Issuer Purchases of Equity Securities --------------------------------------------------------------------

7 - 8

 

 

 

 

 

Item 6

Selected Financial Data -----------------------------------------------------------------------------------------

 

 

 

 

 

Item 7

Management's Discussion and Analysis of Financial Condition and

 

 

 

Results of Operations --------------------------------------------------------------------------------------------

9 - 15

 

 

 

 

 

Item 7A

Quantitative and Qualitative Disclosures about Market Risk ---------------------------------------------

15 - 16

 

 

 

 

 

Item 8

Financial Statements and Supplementary Data --------------------------------------------------------------

16 - 37

 

 

 

 

 

Item 9

Changes in and Disagreements with Accountants on Accounting and

 

 

 

Financial Disclosure ---------------------------------------------------------------------------------------------

38 

 

 

 

 

 

Item 9A

Controls and Procedures ----------------------------------------------------------------------------------------

38 

 

 

 

 

 

Item 9B

Other Information ------------------------------------------------------------------------------------------------

38 

 

 

 

 

 

 

Part III

 

 

 

 

 

 

Item 10

Directors, Executive Officers and Corporate Governance -------------------------------------------------

40 

 

 

 

 

 

Item 11

Executive Compensation ----------------------------------------------------------------------------------------

40 

 

 

 

 

 

Item 12

Security Ownership of Certain Beneficial Owners and Management

 

 

 

and Related Stockholder Matters ------------------------------------------------------------------------------

40 

 

 

 

 

 

Item 13

Certain Relationships and Related Transactions, and Director Independence --------------------------

40 

 

 

 

 

 

Item 14

Principal Accounting Fees and Services ----------------------------------------------------------------------

40 

 

 

 

 

 

 

Part IV

 

 

 

 

 

 

Item 15

Exhibits, Financial Statement Schedules ---------------------------------------------------------------------

41 - 42

 

 

 

 

 

 

Signatures --------------------------------------------------------------------------------------------------------

43 

 

 

 

 

 

 

Exhibits

 

 

 

 

 

 

Exhibit 21

A. T. Cross Company Subsidiaries, Branches and Divisions ----------------------------------------------

44 

 

 

 

 

 

Exhibit 23

Consent of Independent Registered Public Accounting Firm ----------------------------------------------

45 

 

 

 

 

 

Exhibit 31.1

Form of 302 Certifications --------------------------------------------------------------------------------------

46 

 

 

 

 

 

Exhibit 31.2

Form of 302 Certifications --------------------------------------------------------------------------------------

47 

 

 

 

 

 

Exhibit 32

Form of 906 Certifications --------------------------------------------------------------------------------------

48 

 

 

 

 


 

PART I

 

 

Item 1

BUSINESS

 

The A.T. Cross Company (the “Company”) has two reportable segments: Cross Accessory Division (“CAD”) and Cross Optical Group (“COG”).  For certain financial information with respect to these segments, see Note K to the Company's consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.

 

Cross Accessory Division

 

We manufacture and market fine quality writing instruments under the Cross® brand consisting of ballpoint pens, fountain pens, Selectip® rolling ball pens 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, CAD manufactures and markets a FranklinCovey line of entry level price point refillable writing instruments.  The Company is an original equipment manufacturer (“OEM”) of writing instruments.  In addition to writing instruments, we also design and market a variety of personal and business accessories including leather goods, reading glasses, desk sets and stationery.  The Company has license agreements with a third party to develop and sell Cross® watches and cufflinks.  The Company launches new pen products and other personal accessories on a bi-annual basis.

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 writing instrument sales occur at suggested retail price points between approximately $22 and $50.  We believe we are a market leader in the United States at these price points.  Products in this price range include: Classic Century®, Calais, Aventura®, Stratford, Cross Contour, Cross Edge, Cross Click, Bailey, Beverly, and selected ATX® writing instruments.  The Cross Townsend®, Sauvage, Cross Sentiment, C-Series, Apogee®, Cross Affinity, Masquerade, Century II, Tech3 and Tech4 lines as well as selected Classic Century and ATX writing instruments provide the Company a presence in the $55 to $300 price range.  Certain Classic Century, Cross Townsend and Special Edition writing instruments are priced over $300.  The Sable, Nile, Revere, Sage and Parasol writing instrument product lines are sold to the Company's self-serve channels of distribution including the office superstore customers.  The FranklinCovey brand provides the Company a presence in the under $10 suggested retail price range for a ballpoint pen.

Cross® leather goods range in price from $40 to $145, reading glasses are priced at $30, watch prices range between $100 and $330, desk sets are priced at $225, cufflinks from $50 to $80 and stationery from $20 to $25.

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

Globally, Cross Accessory Division products are sold at over 10,000 points of distribution in over 80 countries by our direct sales force and manufacturers' agents or representatives.  They are sold in the United States in over 5,500 retailers, directly to consumers via the Company's website, www.cross.com, and at the Cross® retail store.  Sales outside the United States are made to foreign distributors and retailers worldwide by the Company and its wholly-owned subsidiaries.  Retail accounts include: gift stores, department stores, jewelers, stationery, office supply and pen specialty stores, and United States military post exchanges.  Wholesale accounts distribute products to retail outlets in those countries where the Company does not maintain a direct sales force or to those that purchase in small quantities.  Advertising specialty representatives market products to business accounts that are typically engraved or display a name or emblem and are used for gifts, sales promotions, incentives or advertising. 

 

Cross Optical Group

 

The Company's COG segment consists of its wholly-owned subsidiary, Cross Optical Group, Inc., which was formed on January 2, 2010 and is the legal entity of our two sunglass brands: Costa® and Native®.  Costa was acquired in 2003 and Native was purchased in 2008.  This business designs, manufactures and markets premium, high-quality, high-performance polarized sunglasses under these brand names.  Combined, our brands offer sunglasses in more than 88 styles and 25 lens options, most at suggested retail price points between approximately $89 and $279Costa expanded its offerings in 2011 to include prescription sunglasses at suggested retail price points between approximately $300 and $750.  The COG segment also sells apparel and accessory products such as hats, t-shirts, cords, cases and backpacks.

Our sunglass products are sold by employee representatives and manufacturers' agents to approximately 7,600 retail accounts throughout the United States.  Retail accounts include optical and sunglass specialty shops, department stores and sporting goods retailers. 

Costa and Native sunglasses are sold with a lifetime warranty against manufacturer’s defects in materials and workmanship.

1

 


 

Raw Materials

 

The Company's CAD segment obtains raw materials for use in writing instruments from both domestic and foreign suppliers.  Metal and plastic pen parts are obtained from the United States (“U.S.”), China, Germany, Japan, India, Malaysia, and Switzerland.  Coated parts are procured from the U.S. and China.  Ink is procured from the U.S., Germany, China and Japan.

The majority of component materials for the COG segment are imported from highly specialized manufacturers located in Europe and Asia.

To maintain the highest level of product quality, the Company relies 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 and optical 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 “FRUSTO-CONICAL DESIGN” on the top of its writing instruments, and the trademarks COSTA DEL MAR” and “NATIVE.”  The principal trademark “CROSS” is of fundamental importance to the CAD segment and the trademarks “COSTA DEL MAR”, “COSTA” and “NATIVE” are of fundamental importance to the COG 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 covering products including, but not limited to, Cross Townsend, Edge, Tech4 and the Company's ball-point pen mechanism.  While the Company pursues a practice of seeking patent protection for novel inventions or designs, the business is not dependent upon obtaining and maintaining patents.

 

Seasonal Business

 

The CAD segment has historically generated its highest sales in the second half of the year, approximately one-third in the fourth quarter.  The COG segment has historically generated its highest sales in the first half of the year, approximately one-third in the second quarter.

 

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.

 

Customers

 

The Company is not dependent upon any single customer for more than 5% of its consolidated revenues.

 

Backlog of Orders

 

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

 

2

 


 

Competition

 

The global non-disposable writing instrument market is estimated to be approximately $2 billion at retail.  It is competitive, in particular with respect to product quality, brand recognition and price.  There are numerous manufacturers of ballpoint, rolling ball and fountain pens, and mechanical pencils in the U.S. 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 ballpoint, rolling ball and fountain pens, and mechanical pencils in the $22 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 in the design and production of all of its products.

The plano sunglass market in the U.S. is estimated to be $3.5 billion at retail.  The Company's COG segment under the brand names Costa and Native compete in the premium-priced ($50+ retail) sunglass market segment, which is estimated to be $2.4 billion at retail.  The prescription sunglass market segment is estimated to be approximately $5.0 billion at retail.  Many other sunglass companies also compete in these segments.

See also the “Risk Factors” in Item 1A of this Annual Report on Form 10-K.

 

Research and Development

 

The Company had expenditures for research and development of new products and improvement of existing products of approximately $2.7 million, $2.7 million and $2.8 million in 2012, 2011 and 2010, respectively.  For additional discussion, see “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of this Annual Report on Form 10-K.

 

Environment

 

The Company believes it is in 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 L to the Company's consolidated financial statements in Item 8 of this Annual Report on Form 10-K.

 

Employees

 

The Company had approximately 1,030 employees worldwide at December 29, 2012, none of which were subject to collective bargaining agreements.

 

International Operations and Export Sales

 

Approximately 38% of the Company's sales in 2012 were in foreign markets.  The primary foreign markets are in Europe and Asia.  Sales of the Company's 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 U.S. dollar exchange, exchange control and other restrictive regulations.  Undistributed earnings of our foreign subsidiaries generally are not subject to current U.S. Federal and state income taxes, as such earnings are considered permanently reinvested in the growth of business outside the U.S.  The Company manufactures almost all of its core writing instruments in China.  See Note J and Note K to the Company's consolidated financial statements in Item 8 of this Annual Report on Form 10-K.  For the effect of foreign sales on the Company's results of operations, see “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of this Annual Report on Form 10-K.

 

Availability of Securities and Exchange Commission Filings

 

The Company's website address is www.cross.com.  The Company makes available free of charge, through the Investor Relations section of its website, its 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”).  Information on the Company's website is not incorporated into this Annual Report.

 

3

 


 

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 December 29, 2012 and their principal positions:

 

 

 

 

 

NAME

AGE

TITLE

YEAR IN WHICH
FIRST HELD OFFICE

David G. Whalen

(1)

55

President and Chief Executive Officer

1999

Kevin F. Mahoney

(2)

53

Senior Vice President, Finance and
Chief Financial Officer

2005

Gary S. Simpson

(3)

61

Corporate Controller, Chief Accounting Officer

1997

Charles S. Mellen

(4)

49

President, Cross Accessory Division

2005

Tina C. Benik

(5)

53

Vice President, Legal and Human Resources;
Corporate Secretary

1993

Joseph V. Bassi

(6)

60

Finance Director

1997

Charles R. MacDonald

(7)

59

President, Cross Optical Group, Inc.

2003

 

 

(1)

Prior to becoming President and Chief Executive Officer in 1999, David G. Whalen was President, North America of Ray-Ban Sun Optics, a division of the Luxottica Group S.p.A., from 1997 to 1999.

(2)

Prior to becoming Senior Vice President, Finance and Chief Financial Officer in 2009, Kevin F. Mahoney was Vice President, Finance and Chief Financial Officer from 2005 to 2009.  From 2004 to 2005, Mr. Mahoney was Director, Corporate Development at the Raytheon Company, and from 1984 to 2004, Mr. Mahoney was with Deloitte & Touche LLP, most recently serving as Partner.

(3)

Prior to becoming Corporate Controller in 1997, Gary S. Simpson was the Controller, Lincoln Operations from 1992 to 1997.

(4)

Prior to becoming President, Cross Accessory Division in 2007, Charles S. Mellen was Senior Vice President, Global Marketing and Sales from 2006 to 2007 and Vice President, Global Marketing from 2005 to 2006.  From 1996 to 2004, Mr. Mellen was Vice President of Marketing at Tumi, Inc.

(5)

Prior to becoming Vice President, Legal and Human Resources; Corporate Secretary in 2000, Tina C. Benik was Vice President, Legal, General Counsel and Corporate Secretary from 1993 to 2000.

(6)

Prior to becoming Finance Director in 1997, Joseph V. Bassi was Manager, Financial Planning from 1996 to 1997 and Manager, Budgeting and Financial Planning from 1987 to 1996.

(7)

Prior to becoming President, Cross Optical Group, Inc. in 2010, Charles R. MacDonald was President, Cross Optical Group and Costa Del Mar Sunglasses, Inc. from 2007 to 2010.  From 2003 to 2007, he was Vice President, A.T. Cross Optical Division and President, Costa Del Mar Sunglasses, Inc.  From 1996 to 2002, Mr. MacDonald was President of Outlook Eyewear Company, a division of the Luxottica Group S.p.A.

 

 

 

 

 

Item 1A

RISK FACTORS

 

The following section describes certain of the more prominent risks and uncertainties inherent in our operations.  The risks and uncertainties below are those that we currently consider material; however, this section does not intend to discuss all possible risks and uncertainties that a company like Cross with broad international operations could experience.  We are susceptible to macroeconomic downturns in the United States or abroad that may affect the general economic climate and the performance of our customers.  Similarly, the price of our securities is subject to volatility due to fluctuations in general market conditions, differences in our results of operations from estimates and projections generated by the investment community, and other factors beyond our control.  Further, there could be other risks and uncertainties that are not presently known to us or that may become more significant to us.  These Risk Factors should be read in conjunction with the factors discussed elsewhere in this and other of our filings with the SEC and in materials incorporated by reference in these filings.  We undertake no obligation to correct or update any forward-looking statements or statements of risk related thereto for any reason.

 

4

 


 

We depend on the success of new products.  Our ability to sustain profitability and growth in sales depends largely on consumer acceptance of numerous new products recently introduced and planned for introduction.  Further, consumer preferences are continuously changing.  The markets in which we sell are highly competitive, and there is no assurance that consumer acceptance will be realized to the degree necessary to generate continued growth in our sales and earnings.

 

Our global manufacturing, sales and distribution operations make us susceptible to the risks of overseas operations.  We have sales offices and certain operations in  ten  countries and we have distributors worldwide.  In 2012, approximately 38% of our revenue came from sales to locations outside the United States.  We may be adversely affected in the event that global economic uncertainty erodes consumer confidence and purchasing.  Most of our products are manufactured overseas.  Operating internationally exposes us to changes in export controls and other laws or regulations, as well as the general political and economic conditions, security risks, natural disasters, health conditions and possible disruptions in transportation networks, of the various countries in which we operate, which could result in an adverse effect on our business and results of operations in such countries.

 

Incorrect forecasts of consumer demand could adversely affect our results of operations.  The Company manufactures product based on forecasts of consumer demand.  These forecasts are based on multiple assumptions.  If we inaccurately forecast consumer demand we may hold inadequate, excess or obsolete inventory that would reduce our profit margins and adversely affect our results of operations and financial condition.  Goodwill and other indefinite-lived intangible assets impairment analyses rely on forecasted cash flows resulting from our expectations of consumer demand.  Failure to meet these forecasts could result in an impairment of goodwill or other indefinite-lived intangible assets, which would impact results of operations.

 

Our success depends on our ability to retain and recruit a sufficient number of qualified employees in a competitive environment.  Our success depends, in part, on our retention and recruitment of skilled personnel, including technical, distribution, sourcing, marketing, sales, management and staff personnel.  There can be no assurance that we will be able to successfully retain and recruit the key personnel that we need.

 

Our dependence on certain suppliers may leave us temporarily without adequate access to raw materials or products.    To maintain the highest level of product quality, we rely on a limited number of domestic and foreign suppliers for certain raw materials, manufacturing technologies and certain finished products.  We may be adversely affected in the event that these suppliers cease operations or if pricing terms become less favorable.  We believe, but cannot guarantee, that we could obtain the raw materials currently supplied by these vendors from other sources and that we could either develop the manufacturing technologies internally or locate suitably similar technologies.  If we are unable to replace a key supplier we may face delays in delivering finished products according to our customers' demands, which could have an adverse effect on our financial performance.

 

Overseas manufacturing makes us dependent upon the performance of our overseas partners.  As a result of our manufacturing initiative, we manufacture most of our finished products in China.  Our manufacturing operations in China are supported by a local partner from whom Cross leases the building housing Cross' physical plant.

 

Unfavorable resolution of pending or future litigation matters could prove costly to us.  In 2002, the Company received a so-called notice letter under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") from the Federal Environmental Protection Agency (“EPA”) alleging that the Company is a Potentially Responsible Party (“PRP”) in one Superfund case.  The Company has reached settlement of the case and paid a settlement amount of approximately $0.2 million in 2010.  The EPA is expected to select a remedy for the Site in 2013.  At that time, the EPA will initiate an administrative process (the "Special Notice Process") pursuant to CERCLA whereby the EPA will request that those entities that the EPA contends arranged for the disposal of hazardous materials at the Site (the PRPs), undertake the selected remedy at the Site.  The EPA contends that the Company is a PRP at the Site.  During the Special Notice Process, the Company and the other PRPs will engage in negotiations with the EPA regarding the remedy, and among themselves regarding the contribution of each PRP to overall remediation costs.  Neither the cost of the remedy nor the identity of all PRPs is known at this time.  Therefore it is not possible to assess the outcome of the Special Notice Process as it may relate to the Company's contribution to remediation costs.    If we were required to fully fund the remediation of a site, the statutory framework would allow us to pursue rights to contribution from other PRPs.

We are involved from time to time in litigation matters.  An unfavorable resolution of pending litigation could have a material adverse effect on our financial condition.  Litigation may result in substantial costs and expenses and significantly divert the attention of our management regardless of the outcome.  There can be no assurance that we will be able to achieve a favorable settlement of pending litigation or obtain a favorable resolution of litigation if it is not settled.  In addition, current and future litigation, governmental proceedings or environmental matters could lead to increased costs or interruptions of our normal business operations.

5

 


 

 

 

 

Item 1B

UNRESOLVED STAFF COMMENTS

 

Not applicable.

 

 

 

 

Item 2

PROPERTIES

 

The Company leases its Lincoln, Rhode Island corporate headquarters, housing corporate offices and CAD segment administrative and retail facilities.  Our leased facility in Dong Guan City, China houses the CAD segment's manufacturing operations and the segment also leases administrative and/or warehouse facilities for its operations in the United Kingdom, France, Japan, Hong Kong, Taiwan, Singapore and China.  In addition, the CAD segment leases a  retail facility in the United Kingdom.

The Company's COG segment leases administrative and/or warehouse facilities in Florida and Colorado.

 

 

Item 3

LEGAL PROCEEDINGS

 

The Company was named as one of approximately ninety defendants in a contribution suit brought by CCL/Unilever relating to the J.M. Mills Landfill Site (the “Site”), which is part of the Peterson/Puritan Superfund Site in Cumberland, Rhode Island.  These complaints alleged that the Company was liable under CERCLA for contribution for Site investigation costs.  The Company has reached settlement of the case and paid a settlement amount of approximately $0.2 million in 2010.

The EPA is expected to select a remedy for the Site in 2013.   At that time, the EPA will initiate an administrative process (the "Special Notice Process") pursuant to CERCLA whereby the EPA will request that those entities that the EPA contends arranged for the disposal of hazardous materials at the Site (the PRPs), undertake the selected remedy at the Site.  The EPA contends that the Company is a PRP at the Site.  During the Special Notice Process, the Company and the other PRPs will engage in negotiations with the EPA regarding the remedy, and among themselves regarding the contribution of each PRP to overall remediation costs.  Neither the cost of the remedy nor the identity of all PRPs is known at this time.  Therefore it is not possible to assess the outcome of the Special Notice Process as it may relate to the Company's contribution to remediation costs. 

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.

 

 

Item 4

MINE SAFETY DISCLOSURES

 

Not applicable.

6

 


 

PART II

 

 

 

 

Item 5

MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

 

Market Information

 

The Company's Class A common stock is traded on NASDAQ (symbol: ATX).  There is no established trading market for the Company's Class B common stock.  At December 29, 2012, there were approximately 1,000 shareholders of record of the Company's Class A common stock and two shareholders of record of the Company's Class B common stock.  The weighted average numbers of total shares outstanding was 12,334,775 and 12,194,712 during 2012 and 2011, respectively.

 

Market Price of and Dividends on the Registrant's Common Equity and Related Shareholder Matters

 

High and low sales prices of Class A common stock for the last two years were:

 

 

 

 

 

 

 

 

 

 

 

2012

 

2011

 

QUARTER

HIGH

LOW

 

QUARTER

HIGH

LOW

 

First

$
12.35 

 

$8.00

 

First

$
11.29 

 

$8.50

 

Second

$
12.46 

 

$9.24

 

Second

$
12.85 

 

$9.53

 

Third

$
10.91 

 

$9.37

 

Third

$
16.20 

 

$8.85

 

Fourth

$
10.90 

 

$8.38

 

Fourth

$
13.17 

 

$9.44

 

The Company intends to retain earnings to finance the growth of the Company.

 

Performance Graph

 

The following graph compares the performance of the Company's Class A common stock to the Russell 2000 Index (as the Company's peer group index), the NYSE MKT Composite and the NASDAQ Composite over the Company's last five years.  The graph assumes that the value of the investment in the Company's Class A common stock and each index was $100 at December 31, 2007 and that all dividends were reinvested.

 

COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
among the A.T. Cross Company, the Russell 2000 Index
the NYSE Amex Composite and the NASDAQ Composite

performance graph 2012.JPG

7

 


 

 

 

 

 

 

 

 

 

Company/Index/Composite

2007 
2008 
2009 
2010 
2011 
2012 

A.T. Cross Company

100.00 
27.86 
52.40 
96.69 
113.03 
108.02 

Russell 2000

100.00 
66.21 
84.20 
106.82 
102.36 
119.09 

NYSE Amex Composite

100.00 
62.15 
82.82 
104.10 
112.59 
121.01 

NASDAQ Composite

100.00 
59.10 
82.19 
97.23 
98.85 
110.91 

 

The Company has chosen the Russell Group 2000 as a meaningful peer group against which to compare its performance.  The Russell Group 2000 represents a broad based group of small capitalization stocks and is generally believed to be indicative of market performance for small capitalization companies.

 

Issuer Purchases of Equity Securities

 

 

 

 

 

 

 

 

 

 

TOTAL NUMBER OF SHARES PURCHASED

 

AVERAGE PRICE PAID PER SHARE

 

TOTAL NUMBER OF SHARES PURCHASED AS PART OF PUBLICLY ANNOUNCED PLANS OR PROGRAMS

 

MAXIMUM NUMBER OF SHARES THAT MAY YET BE PURCHASED UNDER THE PLANS OR PROGRAMS

September 30, 2012 - October 27, 2012

50,164 

 

$9.93

 

50,164 

 

705,473

October 28, 2012 - November 24, 2012

55,998 

 

$9.33

 

55,998 

 

649,475

November 25, 2012 - December 29, 2012

79,941 

 

$10.03

 

79,941 

 

569,534

Total

186,103 

 

$9.79

 

186,103 

 

 

 

In 2008, the Company's Board of Directors authorized a plan to purchase up to 1.0 million shares of Cross Class A common stock, depending on market conditions.  On February 22, 2012, the Company’s Board of Directors authorized a 0.7 million share increase to the 2008 program.  Cumulatively, through December 29, 2012, the Company purchased approximately  1.1 million shares of stock under this plan for approximately $7.6 million at an average price per share of $6.71.  In 2012, the Company purchased a total of approximately 0.4  million shares under this plan for approximately $4.0 million at an average price per share of $10.04.

 

 

Item 6

SELECTED FINANCIAL DATA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2012

 

2011

 

2010

 

2009

 

2008*

OPERATIONS:  (THOUSANDS OF DOLLARS)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Sales

 

$

180,508 

 

$

174,637 

 

$

158,312 

 

$

141,764 

 

$

160,146 

Operating Income

 

 

13,274 

 

 

12,046 

 

 

9,070 

 

 

845 

 

 

1,203 

Net Income (Loss)

 

 

9,148 

 

 

8,310 

 

 

6,208 

 

 

1,559 

 

 

(1,032)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PER SHARE DATA: (DOLLARS)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income (Loss) Per Share

Basic

 

0.74 

 

 

0.68 

 

 

0.49 

 

 

0.11 

 

 

(0.07)

 

Diluted

 

0.70 

 

 

0.64 

 

 

0.48 

 

 

0.11 

 

 

(0.07)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FINANCIAL POSITION: (THOUSANDS OF DOLLARS)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Assets

 

 

161,339 

 

 

155,415 

 

 

146,720 

 

 

141,279 

 

 

146,515 

Long-Term Retirement Plan Obligations

 

 

19,808 

 

 

22,636 

 

 

16,274 

 

 

14,726 

 

 

14,681 

Long-Term Debt, Less Current Maturities

 

 

 -

 

 

21,221 

 

 

19,221 

 

 

19,721 

 

 

21,721 

Other Long-Term Liabilities

 

 

1,929 

 

 

1,855 

 

 

2,111 

 

 

2,672 

 

 

4,447 

Shareholders' Equity

 

 

85,078 

 

 

77,653 

 

 

74,559 

 

 

73,709 

 

 

76,216 

 

 

* Included in 2008 is a $3.9 million charge to operating income and net income for an impairment of goodwill.

8

 


 

 

 

 

Item 7

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Results of Operations

 

Overview

 

A.T. Cross Company (“the Company”) is a designer and marketer of branded personal accessories including writing instruments, reading glasses, personal and business accessories and sunglasses.

The Company operates in competitive categories.  The Company has challenged itself to build upon its unique attributes in order to develop a vibrant, diversified and forward-looking company poised for sustainable growth and long-term profit.  Such attributes include: strong brand names, an over 160 year heritage, a reputation for quality and craftsmanship, a global distribution network, and a strong balance sheet.  The Company 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, streamlining its CAD operating structure and seeking additional brand assets to add scale.  COG has provided the business with an avenue of diversification and added two new brands to the Company’s portfolio: Costa and Native.  These brands uphold the Company’s reputation as an innovative leader with award-winning high-quality products.  Details on how the Company's two business segments are achieving these initiatives are presented below.

In February 2013, the Company announced that it is exploring strategic alternatives for its Cross Accessory Division.  The Company has not made a decision to pursue any specific transaction or any other strategic alternative, and there is no set timetable for the strategic review process.

 

Cross Accessory Division (“CAD”)

 

The Company has been a manufacturer and marketer of fine quality writing instruments since 1846.  Sold primarily under the Cross brand, ballpoint, fountain and Selectip rolling ball pens and mechanical pencils are offered in a variety of styles and finishesCross also manufactures and markets a line of FranklinCovey entry level price point refillable writing instruments.  Also under the Cross brand, CAD offers a variety of personal and business accessories including leather goods, reading glasses, desk sets and stationery.  The Company has license agreements with a third party to develop and sell Cross watches and cufflinks.

CAD is competing vigorously to build its position in terms of product innovation, marketing and merchandising.  To this end, a number of initiatives, many of which are described below, have been implemented.  In 2012, approximately 9% of CAD revenue was derived from new products launched into the marketplace.  In 2012, CAD launched several new writing instrument product lines:  Cross Click, Tech4, Sauvage Forever Pearl, Special Edition Year of the Snake, a Disney Anniversary pen as well as the addition of a stylus feature to our Tech3 multifunction pen.  The Company also launched several gift sets for its office superstore customers for the 2012 holiday season.

In 2012, all leather goods, reading glasses, watches, desk sets, cufflinks and stationery represented approximately 7% of CAD sales.  The Company's stationery collection expanded in 2012 with the addition of several new fashionable styles and colors.

In addition to bringing new products to market in 2012, Cross expanded the global self-serve program.  The Company rolled out over 300 new fixtures featuring a range of reading glasses, stationery and writing instruments.

The Cross brand has strong consumer awareness and, more importantly, consumers associate the Cross name with innovation, quality and style.  The strong awareness of our name and the positive attributes associated with our brand support the extension of the Cross brand into related personal accessory categories.  CAD has moved into categories that allow us to further utilize our existing sourcing infrastructure and global distribution network.  A 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 developed a foothold in these categories and look forward to further strengthening our presence in select categories in 2013.

 

Cross Optical Group (“COG”)

 

The Company's COG segment consists of its wholly-owned subsidiary, Cross Optical Group, Inc.  This business designs, manufactures and markets high-quality, high-performance polarized sunglasses under the brand names Costa and Native.

Founded in Florida in 1983, the Costa brand has developed a superior reputation for its advanced polarized lens technology and functional frame design.  Costa upholds the Company's commitment to delivering exceptional product, innovation and quality to consumers.  Costa's lenses are renowned for their clarity; the patented 580 lens technology is considered by many to be one of the best performing sunglass lens in the marketplace.  In 2011, Costa entered into the

9

 


 

prescription sunglass business.  Costa’s core market has traditionally been the saltwater fishing enthusiast in the southeastern United States.  As such, Costa has a long-term commitment to conservation initiatives that protect and sustain vital fisheries.  Costa has expanded its marketing efforts to reach consumers beyond its core market by developing consumer awareness in other fishing categories,  geographies and demographics.  Costa sponsors related lifestyle activities such as Kenny Chesney concert tours and sells limited edition Kenny Chesney sunglasses.  Costa's collection features a broad range of styles that appeal to a wide consumer demographic.  The brand is expanding geographically in both domestic and international markets.

Native, which was founded in 1994, also specializes in polarized sunglasses.  Native products are feature-rich and are priced from $89 to $139.  The collection consists primarily of high-performance sport wraps that are designed for mountain and trail enthusiasts who are active in the “human powered sports” such as biking, running and climbing.  Native frames are very light weight and known for their exceptional fit, features sought after by professional athletes and active sport enthusiasts alike.  Native’s Odyssey series, launched in 2012, features the N3 lens; one of the most advanced polarized lenses on the market.

The creation of the Cross Optical Group has proven to be very successful.  As a result, the Company is benefiting from revenue diversification and a substantial contribution to the bottom line.

 

Comparison of Fiscal 2012 with Fiscal 2011

 

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

 

 

 

 

 

 

 

 

 

(THOUSANDS OF DOLLARS)

FISCAL 2012

 

FISCAL 2011

 

PERCENTAGE CHANGE

CAD

$

97,222 

 

$

102,131 

 

(4.8)%

COG

 

83,286 

 

 

72,506 

 

14.9%

Consolidated Net Sales

$

180,508 

 

$

174,637 

 

3.4%

 

Consolidated net sales were $180.5 million in 2012 compared to $174.6 million in 2011.  The effect of foreign exchange was unfavorable to consolidated 2012 sales results by approximately $1.1 million, or 0.6 percentage point. 

CAD sales increases in the America and Asia regions were offset by declines in Europe.  The effect of foreign exchange was unfavorable to CAD 2012 sales results by approximately $1.1 million, or 1.0 percentage point.

COG sales in 2012 were driven by growth of the Costa brand.  The increase in Costa sales was due to new product launches, expanded distribution, an increase in revenue from repairs, apparel and accessories as well as the 2011 introduction of Costa Rx prescription sunglassesNative sales were lower due to supply chain issues.

The following chart details gross profit margins for both segments as well as the consolidated gross profit margins:

 

 

 

 

 

 

 

 

 

 

 

FISCAL 2012

 

 

FISCAL 2011

 

PERCENTAGE POINT CHANGE

CAD

 

52.3%

 

 

53.2%

 

(0.9)

COG

 

58.2%

 

 

58.9%

 

(0.7)

Consolidated Gross Profit Margins

 

55.0%

 

 

55.6%

 

(0.6)

 

Consolidated selling, general and administrative (“SG&A”) expenses were approximately $75.2 million, 0.9% higher than 2011.  SG&A expenses were 41.6% of sales in 2012 compared to 42.6% of sales in 2011.  SG&A expenses for the CAD segment were approximately $45.3 million, or 46.5% of sales, compared to $47.2 million, or 46.2% of sales, in 2011Foreign currency exchange gains (losses) that are included in the CAD segment SG&A expenses approximated $0.3 million in fiscal 2012  and ($1.7) million in 2011COG segment SG&A expenses of $29.9 million, were 9.8% higher than 2011 primarily due to higher selling expenses related to the sales volume increase.

Research and development (“R&D”) expenses were approximately $2.7 million in 2012 and 2011.  R&D expenses were approximately 2% of sales in 2012 and 2011.

Interest expense was $0.5 million and $0.7 million in 2012 and 2011, respectively.  Lower interest expense in 2012 was due to lower average borrowings.

In 2012, the Company's effective tax rate was 28.3% compared to the Federal tax rate of 35.0%.  This difference was due to the effect of income sourced from lower taxed foreign jurisdictions.  The income tax expense was also favorably impacted by the recognition of $0.3 million of tax benefits, the realization of which was previously considered uncertain.  For an analysis of income taxes, see Note J to the Company's consolidated financial statements in Item 8 of this Annual Report on Form 10-K.

As a result of the foregoing, consolidated net income in fiscal 2012 was $9.1 million ($0.74 basic and $0.70 diluted net income per share) compared to fiscal 2011 net income of $8.3 million ($0.68 basic and $0.64 diluted net income per share).

10

 


 

Comparison of Fiscal 2011 with Fiscal 2010

 

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

 

 

 

 

 

 

 

 

 

(THOUSANDS OF DOLLARS)

FISCAL 2011

 

FISCAL 2010

 

PERCENTAGE CHANGE

CAD

$

102,131 

 

$

97,776 

 

4.5%

COG

 

72,506 

 

 

60,536 

 

19.8%

Consolidated Net Sales

$

174,637 

 

$

158,312 

 

10.3%

 

Consolidated net sales were $174.6 million in 2011 compared to $158.3 million in 2010.  The effect of foreign exchange was favorable to consolidated 2011 sales results by approximately $2.4 million, or 1.5 percentage points. 

CAD sales benefitted from the economic recovery as every region reported higher sales performance from a year ago.  The effect of foreign exchange was favorable to CAD 2011 sales results by approximately $2.4 million, or 2.4 percentage points.

COG sales in 2011 were primarily driven by growth of the Costa brand.  The increase in Costa sales was due to new product launches aimed to appeal to a non-fishing demographic, expanded distribution, an increase in revenue from repairs, apparel and accessories as well as the 2011 introduction of Costa Rx prescription sunglasses.  Native brand sales also increased from the prior year.

The following chart details gross profit margins for both segments as well as the consolidated gross profit margins:

 

 

 

 

 

 

 

 

 

 

 

FISCAL 2011

 

 

FISCAL 2010

 

PERCENTAGE POINT CHANGE

CAD

 

53.2%

 

 

53.7%

 

(0.5)

COG

 

58.9%

 

 

59.1%

 

(0.2)

Consolidated Gross Profit Margins

 

55.6%

 

 

55.7%

 

(0.1)

 

Consolidated selling, general and administrative (“SG&A”) expenses were approximately $74.4 million, 8.2% higher than 2010.  SG&A expenses were 42.6% of sales in 2011 compared to 43.5% of sales in 2010.  SG&A expenses for the CAD segment were approximately $47.2 million, or 46.2% of sales, compared to $45.7 million, or 46.7% of sales, in 2010Foreign currency exchange losses that are included in the CAD segment SG&A expenses approximated $1.7 million and $1.2 million in fiscal 2011 and 2010, respectively.  COG segment SG&A expenses of $27.2 million, were 17.7% higher than 2010 primarily due to higher selling and marketing expenses related to the sales volume increase.

Research and development (“R&D”) expenses were approximately $2.7 million in 2011 and $2.8 million in 2010.  R&D expenses were approximately 2% of sales in 2011 and 2010.

Interest expense was $0.7 million and $1.0 million in 2011 and 2010, respectively.  Lower interest expense in 2011 was due to lower interest rates.

Other (expense) income was expense of $0.2 million and $0.3 million in 2011 and 2010, respectively.

In 2011, the Company's effective tax rate was 25.5% compared to the Federal tax rate of 35.0%.  This difference was due to the effect of income sourced from lower taxed foreign jurisdictions.  For fiscal years 2008 through 2010, the Company’s earnings in China were subject to a tax rate of 12.5%, which is half the statutory tax rate.  Beginning in 2011, earnings in China are subject to the full statutory rate of 25%.  The income tax expense was also favorably impacted by the recognition of $0.2 million of tax benefits, the realization of which was previously considered uncertain.  For an analysis of income taxes, see Note J to the Company's consolidated financial statements in Item 8 of this Annual Report on Form 10-K.

As a result of the foregoing, consolidated net income in fiscal 2011 was $8.3 million ($0.68 basic and $0.64 diluted net income per share) compared to fiscal 2010 net income of $6.2 million ($0.49 basic and $0.48 diluted net income per share).

 

Liquidity and Capital Resources

 

Historically, the Company's sources of liquidity and capital resources have been its cash and cash equivalents (“cash”), short term investments, cash generated from operations and amounts available under the Company's line of credit.  These sources have been sufficient in the past to support the Company's routine operating requirements, capital projects, contributions to the retirement plans, stock repurchase programs and debt service.  The Company expects its future cash needs in 2013 will be met by these historical sources of liquidity and capital.

Cash provided by operating activities was $16.9 million for fiscal 2012 reflecting continued positive cash generation from operations.  The Company was able to fund financing and investing activities described below and end 2012 with a cash and short-term investments balance of $27.3 million at December 29, 2012,  up $1.4 million from December 31, 2011.

Total inventory was $38.0 million at December 29, 2012, an increase of $1.5 million since December 31, 2011.  CAD inventory decreased $1.6 million and COG inventory increased $3.1 million.  The primary reason for the decrease in CAD inventory was strict inventory control due to declining CAD sales.  COG’s increase was due to increased levels of Native inventory and higher projected first quarter 2013 sales.

11

 


 

The Company made cash contributions in 2012 of approximately $5.8 million to its defined benefit pension plans, $2.5 million of which was an additional voluntary contribution.  The Company expects to contribute $2.1 million to its defined benefit pension plans in 2013The Company expects to meet or exceed its minimum funding requirements for its defined benefit plans in future years.  The Company anticipates these future funding requirements to be between $2.1 million and $3.1 million per year.  Additionally, the Company made cash contributions in 2012 of approximately $0.7 million to its defined contribution retirement plans and expects to contribute $0.9 million to its defined contribution retirement plans in 2013

Cash used in investing activities of $6.2 million principally reflects additions to property, plant and equipment of approximately $5.6 million.  In fiscal 2013, the Company expects capital expenditures to be approximately $8.0 million.

Cash provided by financing activities for the fiscal 2012 principally reflects the repayment of $6.2 million on the Company's credit facility and the acquisition of treasury shares under the Company's stock buyback program.  In 2008, the Company's Board of Directors authorized a plan to purchase up to 1.0 million shares of Cross Class A common stock, depending on market conditions.  On February 22, 2012, the Company’s Board of Directors authorized a 0.7 million share increase to the 2008 program.    Cumulatively, through December 29, 2012, the Company purchased approximately 1.1 million shares of stock under this plan for approximately $7.6 million at an average price per share of $6.71.  In 2012, the Company purchased a total of approximately 0.4 million shares under this plan for approximately $4.0 million at an average price per share of $10.04.

The Company expects fiscal 2013 research and development expenses to be approximately $3.0 million.

The Company has a $40 million secured line of credit with a bank.  This credit facility matures on July 28, 2013.    The Company intends to secure a new credit facility prior to July 28, 2013.    Under the current agreement, the Company has the option to borrow at various interest rates depending upon the type of borrowings made and the Company's consolidated leverage ratio.  At December 29, 2012, the Company had $15.0 million outstanding on this line of credit, bearing interest at a rate of 2.0% and the unused and available portion was $25.0 million.  The Company was in compliance with its various debt covenants as of December 29, 2012.  The agreement requires the Company to maintain a minimum consolidated tangible net worth, computed at each year end, a maximum level of capital expenditures and a minimum ratio of adjusted EBITDA to required debt service payments over any four-quarter period, each of which is calculated in accordance with the agreement:

 

 

 

 

 

 

COVENANT
DESCRIPTION

 

COVENANT
REQUIREMENT

 

CALCULATED COMPANY
VALUE DECEMBER 29, 2012

Consolidated Tangible Net Worth

 

Cannot be less than $37.5 million plus 50% of Net Income for fiscal years after 2010, or $46.2 million

 

$61.2 million

Capital Expenditures

 

Cannot exceed the greater of $10 million
in a year or $10 million plus the prior
year $10 million cap less expenditures

 

$6 million

Consolidated Leverage Ratio

 

Cannot exceed 2.75 to 1

 

0.71:1

The Company believes that existing cash and cash provided by operations, supplemented as appropriate by the Company's borrowing arrangements, will be adequate to finance its foreseeable operating and capital requirements, the stock repurchase plans and contributions to the retirement plans.  Should operating cash flows in 2013 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 2012, cash and short-term investments available for domestic operations was approximately $17.3 million and cash available for international operations was approximately $10.0 million.

 

Contractual Obligations and Commercial Commitments

 

Interest rate swap agreements effectively fix the interest rate on a portion of the Company's line of credit at 1.2%.

The Company leases manufacturing, office and warehouse space and certain equipment under non-cancelable operating leases.  All leases expire prior to the end of 2026.  Future minimum lease payments under all non-cancelable leases, including renewal options the Company believes it will exercise, and other contractual obligations at December 29, 2012 were approximately:

12

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(THOUSANDS OF DOLLARS)

TOTAL

 

LESS THAN 1 YEAR

 

1 TO 3 YEARS

 

3 TO 5 YEARS

 

MORE THAN 5 YEARS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Line of Credit, Including Interest *

$

15,171 

 

$

15,171 

 

$

 -

 

$

 -

 

$

 -

Operating Leases

 

27,279 

 

 

3,758 

 

 

8,581 

 

 

2,959 

 

 

11,981 

Uncertain Tax Liabilities

 

464 

 

 

21 

 

 

298 

 

 

88 

 

 

57 

Pension Plan Obligations **

 

21,485 

 

 

2,139 

 

 

8,316 

 

 

4,978 

 

 

6,052 

Purchase Obligations

 

5,123 

 

 

4,396 

 

 

727 

 

 

 -

 

 

 -

Total

$

69,522 

 

$

25,485 

 

$

17,922 

 

$

8,025 

 

$

18,090 

 

 

 

*

Interest on the line of credit was calculated using the interest rate as of December 29, 2012 over the remaining life of the note.

**

The Company expects to meet or exceed its minimum funding requirements for its defined benefit retirement plans in future years.  Though there is uncertainty as to the exact amount and timing of these payments, the Company anticipates the future funding requirements to be between $2.1 million and $3.1 million per year.

 

 

Off Balance Sheet Arrangements

 

The Company has no material off balance sheet arrangements.

 

Impact of Inflation and Changing Prices

 

The Company's two operating segments 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 suppliers in order to obtain lower costs and higher quality on many of its raw materials and purchased components.

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

 

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 Annual Report on Form 10-K.  None are expected to have a material impact on the Company's consolidated financial position, results of operations or cash flows.

 

Critical Accounting Policies and Estimates

 

Management's discussion and analysis of financial condition, results of operations and cash flows are based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States.  The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, as well as related disclosures of contingent liabilities.  We evaluate our policies and estimates on an ongoing basis, including those related to tax contingencies, inventory adjustments, warranty reserves, retirement obligations, impairment of assets and revenue recognition.  Management bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates under different assumptions or conditions.

We have identified the following policies as critical to an understanding of our results of operations and financial condition.  This is not a comprehensive list of our accounting policies.  In many cases, the accounting treatment of a particular transaction is specifically dictated by generally accepted accounting principles, with no need for management's judgment in its application.  There are also areas in which management's judgment in selecting any available alternative would not produce a materially different result.  For further discussion of our accounting policies, see Note A “Significant Accounting Policies” to the Company's consolidated financial statements in Item 8 of this Annual Report on Form 10-K.

 

13

 


 

Inventory Methods and Realizable Value.  Our global inventories are carried at the lower of cost or market, which requires us to estimate adjustments for both obsolescence and the market value we can expect to receive for our on hand inventory.  Since we are required to produce our product with sufficient lead time to satisfy global distribution and expected demand during seasonal peak periods, we are subject to the risks of consumer acceptance of the products we have produced.  We assess our need for obsolescence and market value adjustments based on a variety of factors including historical demand, future marketing plans and alternative uses for raw material and work-in-process.

 

Warranty Reserves.  CAD's Cross-branded writing instruments are sold with a full warranty of unlimited duration against mechanical failure.  Costa and Native sunglasses are sold with a lifetime warranty against defects in materials and workmanship.  In establishing the accrual for warranty costs, management analyzes trends of several factors, measured over a period of several years that impact the Company's cost to service the warranties.  The most significant factors include: the operating costs of the service department, 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.

 

Retirement Obligations.  Two critical assumptions, the discount rate and the expected return on plan assets, are important elements of pension 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 decreased our discount rates to 3.73% in 2012 from 4.21% in 2011 on domestic plans and to 3.3% in 2012 from 4.7% in 2011 on foreign plans, to reflect market interest rate conditions.  To determine the expected long-term rate of return on the plan assets, we consider the current and 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 7.8% in 2012 and 2011 for domestic plans, and 2.7% in 2012 and 3.8% in 2011 for foreign plans. 

 

Impairment of Long-Lived Assets.    Goodwill and other indefinite-lived intangible assets are not amortized but subject to annual impairment tests; more frequently if events or circumstances occur that would indicate a potential decline in their fair value.  The Company performs the assessment annually during the fourth quarter and on an interim basis if potential impairment indicators arise.  The Company has identified two reporting units, consisting of the CAD and COG segments.  In 2012 and 2011, all goodwill and indefinite-lived intangibles were held by the COG segment.

In 2011, the Company determined the fair value of the COG reporting unit’s goodwill using established income and market valuation approaches.  The test resulted in a fair value of 139% in excess of the reporting units carrying value, including the goodwill.  In 2012, under Accounting Standards Update (“ASU”) No 2011-08, “Testing Goodwill for Impairment,” the Company performed a qualitative assessment to determine if further impairment testing was necessary.  This qualitative assessment is intended to determine whether it is more likely than not (having a likelihood of more than 50%) that the fair value is less than its carry amount.  In making its assessment, the Company considered a number of factors, such as macro-economic conditions, industry and market considerations, cost factors, segment financial performance, entity-specific events and share price.  Based upon the above factors, it is considered more likely than not (having a likelihood of more than 50%) that the fair value of the COG reporting unit is more than its carrying value.  Therefore based on the qualitative assessment, goodwill was not considered impaired as of November 24, 2012.

The Company determined the fair value of the COG reporting unit’s indefinite-lived intangible assets, consisting of two trade names, “Costa” ($3.4 million carrying value) and “Native” ($3.5 million carrying value), using a forward-looking relief from royalty model.  The significant assumptions used in the forward-looking relief from royalty method include: revenue growth, royalty rates and discount rate.  The Company performed a sensitivity analysis on the significant assumptions and has determined that a change in its assumptions, as follows, would not impact its conclusion regarding the fair value of the Costa trade name: reduce projected revenue growth rates by 10%, reduce projected royalty rate by 5.0% or increase the discount rate by 100 basis points.  The Native trade name is more sensitive to changes in the assumptions underlying the relief from royalty method, particularly projected revenue growth rates.  In order to recover the asset in full, a five year average growth rate of 10% needs to be achieved.  Each 100 basis point reduction in the assumed growth rate would result in an impairment of approximately $0.1 million.  The Company has determined that indefinite-lived intangibles were recoverable as of December 29, 2012.

 

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

 

14

 


 

For additional information regarding management's estimates, see “Risk Factors” in Item 1A of this Annual Report on Form 10-K and “Forward-Looking Statements” below.

 

Forward-Looking Statements

 

This Annual Report on Form 10-K includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “propose,” “should,” “will” and similar terms and phrases are used in this Annual Report on Form 10-K to identify forward-looking statements, including but not limited to the performance of Cross branded writing instruments, readers and personal accessory products; consumers’ willingness to continue to participate in the writing instrument category; consumers’ willingness to continue to engage in Costa’s prescription sunglass program and to respond favorably to Native’s N3 lens technology; the planned geographic and demographic expansion of Costa and Native; statements related to the introduction of new products; statements related to sales growth in our CAD business via cross.com and expansion of our licensing efforts; the availability of necessary raw materials and manufacturing technologies at favorable pricing terms; anticipated compliance with laws and regulations (including but not limited to environmental laws); and anticipated sufficiency of available working capital.  These statements relate to analyses and other information based on forecasts of future results and estimates of amounts not yet determinable.  These statements also relate to our future prospects, developments and business strategies.

These forward-looking statements are made based on management's expectations and beliefs concerning future events affecting the Company and are subject to uncertainties and factors relating to the Company's operations and business environment, all of which are difficult to predict and many of which are beyond our control.  These uncertainties and factors could cause our actual results to differ materially from those matters expressed in or implied by these forward-looking statements.  For a discussion of risks and uncertainties associated with these forward-looking statements, see “Risk Factors” in Item 1A of this Annual Report on Form 10-K. 

Forward-looking statements speak only as of the date the statements are made.  You should not put undue reliance on any forward-looking statements.  The Company assumes no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws.  If the Company does update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.  Additional information concerning these and other risks and uncertainties is contained in our other periodic filings with the SEC.

 

 

Item 7A

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Current economic conditions and market disruptions may adversely affect the Company's business and results of operations.  Financial markets throughout the world have been experiencing extreme disruption in recent months, including, among other things, volatility in security prices, diminished liquidity and credit availability, rating downgrades and declining valuations of certain investments, failure and potential failures of major financial institutions and unprecedented government support of financial institutions.  These developments and the related general economic downturn may adversely impact the Company's business and financial condition in a number of ways, including impacts beyond those typically associated with other recent downturns in the U.S. and foreign economies.  The current tightening of credit in financial markets and the general economic downturn may adversely affect the ability of Cross' customers, suppliers, and channel partners (e.g., distributors) to obtain financing for purchases and operations.  The tightening could result in a decrease in demand for the Company's products, negatively impact Cross' ability to collect its accounts receivable on a timely basis, result in additional reserves for uncollectible accounts receivable being required, and in the event of a contraction in Cross' sales, could require additional reserves for inventory obsolescence.

Foreign currency exchange rates and fluctuations in those rates may affect the Company's ability to realize projected growth rates in its sales and earnings.  The Company derives approximately 38% of its revenues from outside the United States.  The Company's ability to realize projected growth rates in sales and earnings could be adversely affected if the U.S. dollar strengthens significantly against foreign currencies.  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.  Most of these contracts are short-term, generally expire in one to three months and a 5% change in exchange rates would not subject the Company to material market risk.  Although the Company has programs in place to manage foreign currency exchange risk on certain foreign currency denominated balance sheet positions, and on a portion of certain foreign currency denominated cash flows, significant volatility and fluctuations in the rates of exchange for the U.S. dollar against currencies such as the Euro, the British Pound, the Chinese Renminbi and the Japanese Yen could adversely affect the Company's financial position and results of operations.

15

 


 

The Company maintains a $40 million secured line of credit with a bank.  Under this agreement, the Company has the option to borrow at various interest rates depending upon the type of borrowings made and the Company's consolidated leverage ratio.  The Company believes that changes in interest rates would not be material to its operations, due to its anticipated level of borrowings.  There was $15.0 million and $21.2 million outstanding under the Company's line of credit at December 29, 2012 and December 31, 2011, respectively.

The Company entered into interest rate swap agreements that effectively fix the interest rate on a portion of its line of credit at 1.2% per annum.  At December 29, 2012, the notional value of the interest rate swap was $15.0 million.

 

 

 

 

 

 

 

Item 8

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

INDEX

 

 

 

 

 

PAGE

 

 

Report of Independent Registered Public Accounting Firm -----------------------------------------------------

17

Consolidated Financial Statements of the A.T. Cross Company:

 

 

 

 

 

Consolidated Balance Sheets as of December 29, 2012,  December 31, 2011 -------------------------------

18

 

Consolidated Statements of Income for the Years Ended

 

 

 

December 29, 2012,  December 31, 2011 and January 1, 2011 ---------------------------------------------

19

 

Consolidated Statements of Comprehensive Income for the Years Ended

 

 

 

December 29, 2012,  December 31, 2011 and January 1, 2011 ---------------------------------------------

19

 

Consolidated Statements of Changes in Shareholders' Equity for the Years Ended

 

 

 

December 29, 2012,  December 31, 2011 and January 1, 2011 ---------------------------------------------

20

 

Consolidated Statements of Cash Flows for the Years Ended

 

 

 

December 29, 2012,  December 31, 2011 and January 1, 2011 ---------------------------------------------

21

 

Notes to Consolidated Financial Statements -----------------------------------------------------------------

22 - 37

 

 

 

16

 


 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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 (the “Company”) as of December 29, 2012 and December 31, 2011, and the related consolidated statements of income, comprehensive income,  changes in shareholders' equity, and cash flows for each of the three years in the period ended December 29, 2012.  These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  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 also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 December 29, 2012 and December 31, 2011, and the results of its operations and its cash flows for each of the three years in the period ended December 29, 2012, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of December 29, 2012, based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 13, 2013 expressed an unqualified opinion on the Company's internal control over financial reporting.

 

 

 

 

JPDTSignature.JPG

 

DELOITTE & TOUCHE LLP
Boston, Massachusetts
March 13, 2013

17

 


 

CONSOLIDATED BALANCE SHEETS
A.T. CROSS COMPANY & SUBSIDIARIES

 

 

 

 

 

 

 

 

(THOUSANDS OF DOLLARS AND SHARES)

DECEMBER 29, 2012

 

DECEMBER 31, 2011

ASSETS

 

 

 

 

 

Current Assets

 

 

 

 

 

Cash and cash equivalents

$

27,120 

 

$

25,991 

Short-term investments

 

227 

 

 

 -

Accounts receivable, net

 

32,877 

 

 

29,110 

Inventories

 

38,020 

 

 

36,482 

Deferred income taxes

 

3,417 

 

 

4,206 

Other current assets

 

8,072 

 

 

7,954 

Total Current Assets

 

109,733 

 

 

103,743 

 

 

 

 

 

 

Property, Plant and Equipment, Net

 

14,376 

 

 

13,706 

Goodwill

 

15,279 

 

 

15,279 

Intangibles, Net

 

8,606 

 

 

9,002 

Deferred Income Taxes

 

11,570 

 

 

11,115 

Other Assets

 

1,775 

 

 

2,570 

Total Assets

$

161,339 

 

$

155,415 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

Current Liabilities

 

 

 

 

 

Line of credit

$

15,000 

 

$

 -

Accounts payable

 

14,489 

 

 

8,237 

Accrued compensation and related taxes

 

8,132 

 

 

7,509 

Accrued expenses and other liabilities

 

11,910 

 

 

10,868 

Retirement plan obligations

 

2,731 

 

 

2,508 

Income taxes payable

 

567 

 

 

712 

Total Current Liabilities

 

52,829 

 

 

29,834 

 

 

 

 

 

 

Long-Term Debt

 

 -

 

 

21,221 

Retirement Plan Obligations

 

19,808 

 

 

22,636 

Deferred Gain on Sale of Real Estate

 

1,695 

 

 

2,216 

Other Long-Term Liabilities

 

662 

 

 

464 

Accrued Warranty Costs

 

1,267 

 

 

1,391 

Commitments and Contingencies (Note L)

 

 -

 

 

 -

Total Liabilities

 

76,261 

 

 

77,762 

Shareholders' Equity

 

 

 

 

 

Common stock, par value $1 per share:

 

 

 

 

 

Class A - authorized 40,000 shares, 19,177 shares issued and

 

 

 

 

 

11,163 shares outstanding at December 29, 2012, and 18,713

 

 

 

 

 

shares issued and 11,133 shares outstanding at December 31, 2011

 

19,177 

 

 

18,713 

Class B - authorized 4,000 shares, 1,805 shares issued and

 

 

 

 

 

outstanding at December 29, 2012 and December 31, 2011

 

1,805 

 

 

1,805 

Additional paid-in capital

 

32,309 

 

 

29,178 

Retained earnings

 

100,666 

 

 

91,518 

Accumulated other comprehensive loss

 

(19,852)

 

 

(18,718)

Treasury stock, at cost, 8,014 shares in 2012 and 7,580 shares in 2011

 

(49,027)

 

 

(44,843)

Total Shareholders' Equity

 

85,078 

 

 

77,653 

Total Liabilities and Shareholders' Equity

$

161,339 

 

$

155,415 

 

See notes to consolidated financial statements.

18

 


 

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

 

 

 

 

 

 

 

 

 

 

 

(THOUSANDS OF DOLLARS AND SHARES,

YEARS ENDED

EXCEPT PER SHARE AMOUNTS)

DECEMBER 29, 2012

 

DECEMBER 31, 2011

 

JANUARY 1, 2011

 

 

 

 

 

 

 

 

 

Net sales

$

180,508 

 

$

174,637 

 

$

158,312 

Cost of goods sold

 

81,198 

 

 

77,613 

 

 

70,090 

Gross Profit

 

99,310 

 

 

97,024 

 

 

88,222 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

75,154 

 

 

74,451 

 

 

68,817 

Service and distribution costs

 

8,174 

 

 

7,830 

 

 

7,524 

Research and development expenses

 

2,708 

 

 

2,697 

 

 

2,811 

Operating Income

 

13,274 

 

 

12,046 

 

 

9,070 

 

 

 

 

 

 

 

 

 

Interest income

 

16 

 

 

12 

 

 

25 

Interest expense

 

(525)

 

 

(661)

 

 

(975)

Other expense

 

(6)

 

 

(248)

 

 

(270)

Interest and Other Expense

 

(515)

 

 

(897)

 

 

(1,220)

 

 

 

 

 

 

 

 

 

Income Before Income Taxes

 

12,759 

 

 

11,149 

 

 

7,850 

 

 

 

 

 

 

 

 

 

Income tax provision

 

3,611 

 

 

2,839 

 

 

1,642 

Net Income

$

9,148 

 

$

8,310 

 

$

6,208 

 

 

 

 

 

 

 

 

 

Net Income Per Share:

 

 

 

 

 

 

 

 

Basic

 

$
0.74 

 

 

$
0.68 

 

 

$
0.49 

Diluted

 

$
0.70 

 

 

$
0.64 

 

 

$
0.48 

 

 

 

 

 

 

 

 

 

Weighted Average Shares Outstanding:

 

 

 

 

 

 

 

 

Denominator for Basic Net Income Per Share

 

12,335 

 

 

12,195 

 

 

12,686 

Effect of dilutive securities

 

714 

 

 

810 

 

 

379 

Denominator for Diluted Net Income Per Share

 

13,049 

 

 

13,005 

 

 

13,065 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

(THOUSANDS OF DOLLARS)

YEARS ENDED

 

DECEMBER 29, 2012

 

DECEMBER 31, 2011

 

JANUARY 1, 2011

 

 

 

 

 

 

 

 

 

Net Income

$

9,148 

 

$

8,310 

 

$

6,208 

Other Comprehensive Income (Loss):

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 -

 

 

(143)

 

 

(302)

Unrealized gain on interest rate swap, net of tax

 

 

 

 

 

 

 

 

provision of  ($29), ($5) and ($125)

 

53 

 

 

 

 

232 

Pension liability adjustment, net of tax benefit of

 

 

 

 

 

 

 

 

$637, $3,193 and $877

 

(1,187)

 

 

(5,925)

 

 

(1,591)

Comprehensive Income

$

8,014 

 

$

2,251 

 

$

4,547 

 

See notes to consolidated financial statements.

19

 


 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(THOUSANDS OF DOLLARS AND SHARES)

COMMON STOCK

 

 

 

 

 

 

 

 

 

 

SHARES &

 

 

 

OTHER

 

 

 

TOTAL

 

DOLLAR AMOUNT

ADDITIONAL

 

 

COMPRE-

TREASURY

SHARE-

 

AT $1 PAR VALUE

PAID-IN

RETAINED

HENSIVE

STOCK

HOLDERS'

 

CLASS A

 

CLASS B

CAPITAL

EARNINGS

LOSS

SHARES

AMOUNT

EQUITY

Balances at January 2, 2010

$

17,660 

 

$

1,805 

$

23,574 

$

77,000 

$

(10,998)
5,806 

$

(35,332)

$

73,709 

Purchase of treasury stock

 

 

 

 

 

 

 

 

 

 

 

43 

 

(267)

 

(267)

Purchase of treasury stock from related party

 

 

 

 

 

 

 

 

 

 

 

1,371 

 

(5,612)

 

(5,612)

Grant of restricted stock for future services

 

725 

 

 

 

 

(725)

 

 

 

 

 

 

 

 

 -

Cancellation of restricted stock

 

 

 

 

 

 

1,037 

 

 

 

 

104 

 

(1,037)

 

 -

Stock option activity, net of settlements

 

18 

 

 

 

 

(94)

 

 

 

 

 

 

 

 

(76)

Tax provision on stock-based awards

 

 

 

 

 

 

70 

 

 

 

 

 

 

 

 

70 

Stock purchase plan

 

 

 

 

 

15 

 

 

 

 

 

 

 

 

19 

Non-cash stock-based directors' fees

 

32 

 

 

 

 

121 

 

 

 

 

 

 

 

 

153 

Amortization of stock-based compensation

 

 

 

 

 

 

1,077 

 

 

 

 

 

 

 

 

1,077 

Stock option expense 

 

 

 

 

 

 

939 

 

 

 

 

 

 

 

 

939 

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

(302)

 

 

 

 

(302)

Pension liability adjustment

 

 

 

 

 

 

 

 

 

 

(1,591)

 

 

 

 

(1,591)

Unrealized gain on interest rate swap

 

 

 

 

 

 

 

 

 

 

232 

 

 

 

 

232 

Net Income

 

 

 

 

 

 

 

 

6,208 

 

 

 

 

 

 

6,208 

Balances at January 1, 2011

$

18,439 

 

$

1,805 

$

26,014 

$

83,208 

$

(12,659)
7,324 

$

(42,248)

$

74,559 

Purchase of treasury stock

 

 

 

 

 

 

 

 

 

 

 

158 

 

(1,619)

 

(1,619)

Grant of restricted stock for future services

 

154 

 

 

 

 

(154)

 

 

 

 

 

 

 

 

 -

Cancellation of restricted stock

 

 

 

 

 

 

976 

 

 

 

 

98 

 

(976)

 

 -

Stock option activity, net of settlements

 

98 

 

 

 

 

(375)

 

 

 

 

 

 

 

 

(277)

Tax provision on stock-based awards

 

 

 

 

 

 

830 

 

 

 

 

 

 

 

 

830 

Stock purchase plan

 

 

 

 

 

16 

 

 

 

 

 

 

 

 

17 

Non-cash stock-based directors' fees

 

13 

 

 

 

 

137 

 

 

 

 

 

 

 

 

150 

Stock awards

 

 

 

 

 

75 

 

 

 

 

 

 

 

 

83 

Amortization of stock-based compensation

 

 

 

 

 

 

1,330 

 

 

 

 

 

 

 

 

1,330 

Stock option expense 

 

 

 

 

 

 

329 

 

 

 

 

 

 

 

 

329 

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

(143)

 

 

 

 

(143)

Pension liability adjustment

 

 

 

 

 

 

 

 

 

 

(5,925)

 

 

 

 

(5,925)

Unrealized gain on interest rate swap

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income

 

 

 

 

 

 

 

 

8,310 

 

 

 

 

 

 

8,310 

Balances at December 31, 2011

$

18,713 

 

$

1,805 

$

29,178 

$

91,518 

$

(18,718)
7,580 

$

(44,843)

$

77,653 

Purchase of treasury stock

 

 

 

 

 

 

 

 

 

 

 

400 

 

(4,022)

 

(4,022)

Grant of restricted stock for future services

 

344 

 

 

 

 

(344)

 

 

 

 

 

 

 

 

 -

Cancellation of restricted stock

 

 

 

 

 

 

162 

 

 

 

 

34 

 

(162)

 

 -

Stock option activity, net of settlements

 

100 

 

 

 

 

221 

 

 

 

 

 

 

 

 

321 

Tax provision on stock-based awards

 

 

 

 

 

 

653 

 

 

 

 

 

 

 

 

653 

Stock purchase plan

 

 

 

 

 

21 

 

 

 

 

 

 

 

 

23 

Non-cash stock-based directors' fees

 

18 

 

 

 

 

162 

 

 

 

 

 

 

 

 

180 

Amortization of stock-based compensation

 

 

 

 

 

 

2,138 

 

 

 

 

 

 

 

 

2,138 

Stock option expense 

 

 

 

 

 

 

118 

 

 

 

 

 

 

 

 

118 

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 -

 

 

 

 

 -

Pension liability adjustment

 

 

 

 

 

 

 

 

 

 

(1,187)

 

 

 

 

(1,187)

Unrealized gain on interest rate swap

 

 

 

 

 

 

 

 

 

 

53 

 

 

 

 

53 

Net Income

 

 

 

 

 

 

 

 

9,148 

 

 

 

 

 

 

9,148 

Balances at December 29, 2012

$

19,1