UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported) July 26, 2006

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

Rhode Island
(State or other jurisdiction
of incorporation)

1-6720
(Commission
File Number)

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

N/A
(Former name or former address if changed since last report.)

Section 2 - Financial Information

Item 2.02 - Results of Operations and Financial Condition.

On July 26, 2006, the registrant issued the following press release announcing financial results for the second quarter and six months ended July 1, 2006:

CONTACTS:

Kevin F. Mahoney
Vice President, Finance and
Chief Financial Officer
401-335-8470

Investor Relations:
Financial Dynamics
Melissa Myron/Rachel Albert
212-850-5600

FOR IMMEDIATE RELEASE

A.T. CROSS COMPANY REPORTS IMPROVED PROFITABILITY FOR BOTH
SECOND QUARTER AND SIX MONTHS

~Optical Segment Sales Grow Nearly 50% in the Quarter~

~Writing Instrument Sales and Gross Margins Improve~

 

Lincoln, RI - July 26, 2006 - A.T. Cross Company (AMEX: ATX) today announced financial results for the second quarter and six months ended July 1, 2006.

Second Quarter Results

Net sales in the second quarter of 2006 were $32.5 million compared to $29.0 million in the second quarter of 2005. Global writing instrument and accessory revenue was $23.6 million, up 2.5% compared to $23.1 million in the same period last year. The Company's optical segment, comprised of Costa Del Mar, had a second quarter net sales increase of 48.6% to $8.9 million compared to $5.9 million in the prior year's quarter.

Gross margin was 54.5% compared to 49.6% last year. The gross margin improvement was primarily attributable to lower costs resulting from the writing instrument segment's manufacturing and distribution initiatives and included a LIFO benefit resulting from lower domestic inventories. Operating expenses, including restructuring charges, were $17.0 million, or 52.4% of net sales in the quarter, versus $15.2 million, or 52.5% of net sales a year ago. The higher spending levels are largely in support of the second quarter sales growth of Costa Del Mar.

Net income for the second quarter was $409,000, or $0.03 per share, compared to a net loss of $463,000, or $0.03 per share, last year.

David G. Whalen, President and Chief Executive Officer of A.T. Cross, stated, "We are pleased with the first half performance of both our business segments. Costa Del Mar's high-quality, well-designed products continue to resonate with a growing number of consumers, as revenue growth of almost 50% surpassed even our own high expectations. Further, the improvement we are seeing in our quality writing instrument financial results stems from the successful execution of our stated strategies to build the Cross brand while reducing our cost structure.

Looking forward, we will continue to focus on initiatives that are designed to generate additional momentum for the Company. In the second half of 2006, we will launch a number of compelling new products in our writing instrument and accessory segment including several million dollars of Cross branded line extensions. Additionally, we will invest in new products and expanded distribution for Costa Del Mar as that brand accelerates through the year."

Six-Month Results

Net sales in the first half of 2006 were $62.1 million compared to $58.6 million in 2005. Global writing instrument and accessory revenue was $47.2 million, down 1.7%, compared to $48.0 million in the same period last year. Costa Del Mar's net sales increased 40.3% to $14.9 million compared to $10.6 million in the first six months of 2005.

Net income for the year to date was $280,000, or $0.02 per share, compared to a net loss of $971,000 or $0.07 per share, last year.

Cash flow from operating activities was approximately $7,000,000 during the current six-month period.

Mr. Whalen concluded, "Cross has delivered a successful first half performance. We are well positioned as we move into the peak season for our writing instrument and accessory business and expect to deliver improved second half and full year results."

Conference Call

The Company's management will host a conference call tomorrow, July 27, 2006, at 9:00 a.m. Eastern Time. A live webcast of the call will be accessible on the Company's website at www.cross.com. The webcast will be archived for 30 days on the site, while a telephone replay of the call will be available beginning at 11:00 a.m. Eastern Time on July 27, 2006 through August 3, 2006 at 1-877-519-4471 or 973-341-3080, pin number 7644943.

About A.T. Cross Company

Building on the rich tradition of its award-winning writing instruments and reputation for innovation and craftsmanship, A.T. Cross Company is a designer and marketer of branded personal and business accessories. Cross provides a range of distinctive products that appeal to a growing market of consumers seeking to enhance their image and facilitate their lifestyle. Cross products, including award-winning quality writing instruments, timepieces, business accessories and Costa Del Mar sunglasses, are distributed in retail and corporate gift channels worldwide. For more information, visit the A.T. Cross web site at www.cross.com and the Costa Del Mar web site at www.costadelmar.com.

Statements contained in this release that are not historical facts are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 (including statements relating to the Company's direct to consumer initiatives, including direct mail catalogs, the Company's shop-in-shop initiative, the Company's new merchandising and branding efforts, the impact of new writing instrument products, and the anticipated continued performance of Costa Del Mar). 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 the uncertainty of foreign markets, consumers' and retailers' reaction to the Company's existing and new writing instrument products, retailers' support for the Company's merchandising initiatives, the continued expansion of Costa Del Mar, and the potential impact of increasing energy prices, and are not guarantees since there are inherent difficulties in predicting future results. Actual results could differ materially from those expressed or implied in the forward-looking statements. The information contained in this document is as of July 26, 2006. The Company assumes no obligation to update any forward-looking statements contained in this document as a result of new information or future events or developments. Additional discussion 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.

(tables to follow)

 

A. T. CROSS COMPANY

CONSOLIDATED SUMMARY OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)

Three Months Ended

Six Months Ended

July 1, 2006

July 2, 2005

July 1, 2006

July 2, 2005

Net sales

$32,509

$29,041

$62,071

$58,600

Cost of goods sold

14,777

14,641

28,658

29,272

Gross Profit

17,732

14,400

33,413

29,328

Selling, general and administrative expenses

14,901

13,791

28,755

27,957

Service and distribution costs

1,302

709

2,209

1,583

Research and development expenses

598

447

1,131

856

Restructuring charges

239

286

817

502

Operating Income (Loss)

692

( 833

)

501

( 1,570

)

Interest and other income (expense)

14

( 19

)

( 13

)

( 75

)

Income (Loss) Before Income Taxes

706

( 852

)

488

( 1,645

)

Income tax provision (benefit)

297

( 389

)

208

( 674

)

Net Income (Loss)

$ 409

$ ( 463

)

$ 280

$ ( 971

)

Basic and diluted net income (loss) per share

$0.03

$( 0.03

)

$0.02

$( 0.07

)

Weighted average shares outstanding

14,699

14,705

14,692

14,736

Three Months Ended

Six Months Ended

July 1, 2006

July 2, 2005

July 1, 2006

July 2, 2005

Segment Data:

Writing Instruments & Accessories

Net Sales

$23,646

$23,077

$47,216

$48,009

Operating Loss

( 1,326

)

( 2,086

)

( 2,439

)

( 3,306

)

Interest and Other Income (Expense)

15

( 17

)

( 11

)

( 68

)

Loss Before Income Taxes

( 1,311

)

( 2,103

)

( 2,450

)

( 3,374

)

Segment Data:

Optical

Net Sales

$ 8,863

$ 5,964

$14,855

$10,591

Operating Income

2,018

1,253

2,940

1,736

Interest and Other Expense

( 1

)

( 2

)

( 2

)

( 7

)

Income Before Income Taxes

2,017

1,251

2,938

1,729

Three Months Ended

Six Months Ended

July 1, 2006

July 2, 2005

July 1, 2006

July 2, 2005

Writing Instruments & Accessories Sales Data:

Americas

$11,246

$11,151

$20,881

$21,718

Europe, Middle East and Africa

7,455

7,001

15,151

15,172

Asia Pacific

4,275

4,129

9,662

9,643

Other

670

796

1,522

1,476

Total Net Sales

$23,646

$23,077

$47,216

$48,009

 

 

A. T. CROSS COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, unaudited)

July 1, 2006

July 2, 2005

Assets

Cash, cash equivalents and short-term investments

$ 10,592

$ 12,224

Accounts receivable

22,432

21,036

Inventories

22,962

19,034

Deferred income taxes

6,346

5,385

Receivable from Chinese contract manufacturer

208

3,015

Other current assets

4,661

6,721

Total Current Assets

67,201

67,415

Property, plant and equipment, net

20,642

22,743

Goodwill

7,288

7,288

Intangibles and other assets

5,265

5,234

Deferred income taxes

5,058

3,730

Total Assets

$105,454

$106,410

Liabilities and Shareholders' Equity

Line of credit

$ 0

$ 3,400

Current maturities of long-term debt

0

1,350

Retirement plan obligations

2,056

1,635

Other current liabilities

18,849

16,779

Total Current Liabilities

20,905

23,164

Retirement plan obligations

10,137

8,826

Long-term debt, less current maturities

4,950

4,837

Accrued warranty costs

1,478

1,646

Shareholders' equity

67,984

67,937

Total Liabilities and Shareholders' Equity

$105,454

$106,410

For information at A. T. Cross contact:

Kevin F. Mahoney

Vice President, Finance and Chief Financial Officer

(401) 335-8470

kmahoney@cross.com

4890-2Q-06

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

A. T. CROSS COMPANY
(Registrant)

Date: July 26, 2006

KEVIN F. MAHONEY
(Kevin F. Mahoney)
Vice President, Finance
Chief Financial Officer