Edgar Filing: CROSS A T CO

UNITED STATES

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

(Mark One)

[X]

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

For the quarterly period ended September 29, 2007

[

]

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

For the transition period from __________to __________

Commission File Number 1-6720

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

Rhode Island
(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

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.

Yes

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.

Large accelerated filer

Accelerated filer

Non-accelerated filer

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

Yes

Indicate the number of shares outstanding of each of the issuer's classes of common stock as of
October 27, 2007:

Class A common stock -
Class B common stock -

13,715,324 shares
1,804,800 shares

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

A. T. CROSS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(THOUSANDS OF DOLLARS AND SHARES)			SEPTEMBER 29, 2007		DECEMBER 30, 2006
ASSETS
Current Assets
	Cash and cash equivalents		$ 7,273		$ 11,307
	Accounts receivable, net		25,889		31,990
	Inventories
		Finished goods	24,233		13,807
		Work in process	7,062		4,008
		Raw materials	7,680		7,107
			38,975		24,922
	Deferred income taxes		5,107		5,103
	Other current assets		7,828		5,153
		Total Current Assets	85,072		78,475

Property, Plant and Equipment			107,256		125,842
	Less accumulated depreciation		91,181		103,306
Net Property, Plant and Equipment			16,075		22,536
Goodwill			7,288		7,288
Intangibles, Net			4,284		4,501
Deferred Income Taxes			8,980		6,083
Other Assets			1,695		563
Total Assets			$ 123,394		$ 119,446
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
	Accounts payable and accrued expenses		$ 18,616		$ 20,888
	Accrued compensation and related taxes		5,145		5,012
	Retirement plan obligations		2,269		2,397
	Restructuring liabilities		0		636
	Income taxes payable		0		1,363
		Total Current Liabilities	26,030		30,296
Retirement Plan Obligations			6,744		7,779
Deferred Gain on Sale of Real Estate			4,432		0
Long-Term Debt			3,262		7,100
Other Long-Term Liabilities			2,742		0
Accrued Warranty Costs			1,308		1,308
Commitments and Contingencies (Note M)			-		-
Shareholders' Equity
	Common stock, par value $1 per share:
	Class A - authorized 40,000 shares, 17,115 shares issued and 13,715
		shares outstanding at September 29, 2007, and 16,799 shares
		issued and 13,399 shares outstanding at December 30, 2006	17,115		16,799
	Class B - authorized 4,000 shares, 1,805 shares issued and
		outstanding at September 29, 2007 and December 30, 2006	1,805		1,805
	Additional paid-in capital		19,875		17,345
	Retained earnings		69,142		66,363
	Accumulated other comprehensive loss		(2,747	)	(3,035	)
			105,190		99,277
	Treasury stock, at cost		(26,314	)	(26,314	)
	Total Shareholders' Equity		78,876		72,963
Total Liabilities and Shareholders' Equity			$ 123,394		$ 119,446
See notes to condensed consolidated financial statements.

A. T. CROSS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

(THOUSANDS OF DOLLARS,		THREE MONTHS ENDED				NINE MONTHS ENDED
EXCEPT PER SHARE AMOUNTS)		SEPTEMBER 29, 2007		SEPTEMBER 30, 2006		SEPTEMBER 29, 2007		SEPTEMBER 30, 2006

Net sales		$ 35,114		$ 31,919		$ 104,162		$ 93,990
Cost of goods sold		15,199		14,866		45,421		43,524
Gross Profit		19,915		17,053		58,741		50,466

Selling, general and administrative expenses		15,501		14,627		47,842		42,775
Service and distribution costs		1,526		1,295		4,315		4,111
Research and development expenses		660		563		1,895		1,694
Restructuring charges		(10	)	352		285		1,169
Operating Income		2,238		216		4,404		717

Interest income		71		66		331		197
Interest expense		(103	)	(148	)	(383	)	(366	)
Other income (expense):		65		(61	)	(181	)	13
Interest and Other Income (Expense)		33		(143)		(233	)	(156	)

Income Before Income Taxes		2,271		73		4,171		561

Income tax (benefit) provision		(93	)	(247	)	694		(39	)

Net Income		$ 2,364		$ 320		$ 3,477		$ 600


Net Income Per Share:
Basic		$0.16		$0.02		$0.23		$0.04
Diluted		$0.15		$0.02		$0.22		$0.04

Weighted Average Shares Outstanding:
Denominator for Basic Net Income Per Share		15,044		14,707		14,905		14,697
	Effect of dilutive securities	655		164		609		141
Denominator for Diluted Net Income Per Share		15,699		14,871		15,514		14,838

A. T. CROSS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)

(THOUSANDS OF DOLLARS)			THREE MONTHS ENDED			NINE MONTHS ENDED
			SEPTEMBER 29, 2007		SEPTEMBER 30, 2006	SEPTEMBER 29, 2007		SEPTEMBER 30, 2006

Net Income			$ 2,364		$ 320	$ 3,477		$ 600
Other Comprehensive Income, Net of Tax:
	Minimum pension liability adjustment, net
		of related tax	(68	)	11	(98	)	(76	)
	Foreign currency translation adjustments		195		33	386		381
Comprehensive Income			$ 2,491		$ 364	$ 3,765		$ 905
See notes to condensed consolidated financial statements.

A. T. CROSS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

					NINE MONTHS ENDED
(THOUSANDS OF DOLLARS)					SEPTEMBER 29, 2007		SEPTEMBER 30, 2006
CASH (USED IN) PROVIDED BY:
Operating Activities:
	Net Income				$ 3,477		$ 600
	Adjustments to reconcile net income to net cash (used in)
		provided by operating activities:
				Depreciation and amortization	3,926		5,287
				Restructuring charges	285		1,169
				Restructuring charges paid	(921	)	(1,091	)
				Amortization of deferred gain	(304	)	0
				Provision for bad debts	101		202
				Deferred income taxes	(247	)	(315	)
				Provision for accrued warranty costs	343		579
				Warranty costs paid	(343	)	(546	)
				Excess tax benefit from stock-based awards	(330	)	0
				Stock-based compensation	494		352
				Foreign currency transaction gain	(180	)	(72	)

	Changes in operating assets and liabilities:
				Accounts receivable	6,526		8,701
				Inventories	(13,593	)	(13,854	)
				Receivable from Chinese contract manufacturer	0		4,637
				Other assets - net	(2,654	)	178
				Accounts payable and other liabilities - net	(7,422	)	(55	)
			Net Cash (Used in) Provided by Operating Activities		(10,842	)	5,772

Investing Activities:
	Net proceeds from sale of real estate				15,329		0
	Additions to property, plant and equipment				(6,997	)	(3,741	)
	Additions to trademarks and patents				(180	)	(305	)
			Net Cash Provided by (Used in) Investing Activities		8,152		(4,046	)

Financing Activities:
	Excess tax benefit from stock-based awards				330		0
	Repayment of long-term debt				(9,138	)	(6,856	)
	Borrowing on long-term debt agreement				5,300		2,000
	Proceeds from sale of Class A common stock				2,022		40
			Net Cash Used in Financing Activities		(1,486	)	(4,816	)

Effect of exchange rate changes on cash and cash equivalents					142		41

Decrease in Cash and Cash Equivalents					(4,034	)	(3,049	)

Cash and cash equivalents at beginning of period					11,307		11,074

Cash and Cash Equivalents at End of Period					$ 7,273		$ 8,025

Income taxes paid, net					$5,488		$293
Interest paid					$355		$261
See notes to condensed consolidated financial statements.

A. T. CROSS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 29, 2007

(UNAUDITED)

NOTE A - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 29, 2007 are not necessarily indicative of the results that may be expected for the twelve months ending December 29, 2007. The Company has historically recorded its highest sales in the fourth quarter. The Company operates on a 52/53 week fiscal year, ending on the last Saturday closest to December 31, and consists of 13 week fiscal quarters. The following prior year amounts have been reclassified in order to conform to the current year presentation. In the three and nine month periods ending September 30, 2006, $0.3 million and $0.9 million, respectively, was reclassified from selling, general and administrative expenses to service and distribution costs as these expenses were determined to be related to the distribution of product. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 30, 2006.

NOTE B - Sale of Real Estate
On March 2, 2007, the Company sold its manufacturing, warehouse and office facility at One Albion Road, Lincoln, Rhode Island. In conjunction with the transaction, Cross entered into an operating lease for approximately 154,000 square feet of administrative, distribution and manufacturing space through 2017 at its current location in Lincoln, Rhode Island where it continues to house its corporate headquarters. Net proceeds related to the sale were $15.3 million. The $5.3 million gain on the sale was deferred and will be recognized over the life of the lease as a reduction of rent expense.

NOTE C - Income Taxes
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement 109" ("FIN 48"). This statement clarifies the criteria that an individual tax position must satisfy for some or all of the benefits of that position to be recognized in a company's financial statements. FIN 48 prescribes a recognition threshold of more-likely-than-not, and a measurement attribute for all tax positions taken or expected to be taken on a tax return, in order for those tax positions to be recognized in the financial statements.

Effective December 31, 2006, the Company has adopted the provisions of FIN 48. The Company recorded a charge to retained earnings of $0.7 million as a result of the adoption of this standard.

As of December 31, 2006, the Company has provided a liability of $2.1 million for unrecognized tax benefits related to various Federal, state and foreign income tax matters. Of this amount, $1.3 million would impact the Company's effective tax rate, if recognized. The liability as of September 29, 2007 is $2.1 million. Of this amount, $0.7 million would impact the Company's effective tax rate, if recognized. The change in the amount that would impact the rate was primarily related to the recognition of $0.5 million of foreign tax credits that are now available to offset uncertain tax benefits in the open tax years as listed below. The Company does not expect that the amounts of unrecognized tax benefits will change significantly within the next 12 months.

The Company is currently subject to audit by the Internal Revenue Service and some foreign jurisdictions for the calendar years ended 2004, 2005 and 2006. In certain foreign jurisdictions, the Company is currently subject to audit for tax years prior to 2004; this varies depending on the jurisdiction. The Company and its subsidiaries' state income tax returns are subject to audit for the calendar years ended 2003, 2004, 2005 and 2006.

As of December 31, 2006 and September 29, 2007, the Company had accrued $0.4 million of interest and $0.2 million of penalties related to uncertain tax positions. The Company accounts for interest and penalties related to uncertain tax positions as part of its provision for income taxes. The liabilities resulting from the adoption of FIN 48, including tax, interest and penalty, are included in other long-term liabilities on the Company's condensed consolidated balance sheet.

NOTE D - Restructuring Charges
In 2003, the Company announced a corporate restructuring program of its Cross accessory division segment designed to increase its competitiveness in the global marketplace by reducing operating costs and freeing additional capital for product development and diversification as well as marketing and brand development. As part of this program, a number of writing instrument manufacturing departments have been and continue to be moved offshore. As of September 29, 2007, approximately 181 manufacturing positions in Lincoln, Rhode Island had been eliminated as a result of this program. In addition, approximately 80 global non-manufacturing positions were eliminated through 2004 as part of the program to consolidate and reduce administrative expenses. This restructuring program was complete as of September 29, 2007. The Company incurred $7.9 million in restructuring charges over the life of this program. Of this, approximately $5.2 million was for severance and related expenses and $2.7 million was for professional fees and other.

The following is a tabular presentation of the restructuring liabilities related to this plan:

(THOUSANDS OF DOLLARS)		SEVERANCE & RELATED EXPENSES		PROFESSIONAL FEES & OTHER		TOTAL
Balances at December 30, 2006		$ 636		$ 0		$ 636
	Restructuring charges incurred	0		152		152
	Cash payments	(417	)	(152	)	(569	)
Balances at March 31, 2007		219		0		219
	Restructuring charges incurred	0		143		143
	Cash payments	(119	)	(143	)	(262	)
Balances at June 30, 2007		100		0		100
	Restructuring charges incurred	(10	)	0		(10	)
	Cash payments	(90	)	0		(90	)
Balances at September 29, 2007		$ 0		$ 0		$ 0

NOTE E - Segment Information
The Company has two reportable business segments: Cross Accessory Division ("CAD"), formerly referred to as the Writing Instruments and Accessories ("WI&A") segment, and the Cross Optical Group ("COG"). The Company evaluates segment performance based upon profit or loss before income taxes. Following is the segment information for the Company for the three and nine month periods ended September 29, 2007 and September 30, 2006:

(THOUSANDS OF DOLLARS)		THREE MONTHS ENDED				NINE MONTHS ENDED
		SEPTEMBER 29, 2007		SEPTEMBER 30, 2006		SEPTEMBER 29, 2007		SEPTEMBER 30, 2006
Revenues from External Customers:
	CAD	$ 26,289		$ 25,310		$ 74,888		$ 72,526
	COG	8,825		6,609		29,274		21,464
Total		$ 35,114		$ 31,919		$104,162		$ 93,990
Depreciation and Amortization:
	CAD	$ 1,332		$ 1,690		$ 3,615		$ 5,072
	COG	104		82		311		215
Total		$ 1,436		$ 1,772		$ 3,926		$ 5,287
Segment (Loss) Profit:
	CAD	$ 789		$ ( 478	)	$ (1,158	)	$ ( 2,928	)
	COG	1,482		551		5,329		3,489
Total		$ 2,271		$ 73		$ 4,171		$ 561
Restructuring Charges:
	CAD	$ (10	)	$ 352		$ 285		$ 1,169
	COG	0		0		0		0
Total		$ (10	)	$ 352		$ 285		$ 1,169

		SEPTEMBER 29, 2007				DECEMBER 30, 2006
Segment Assets:
	CAD	$ 103,854				$ 99,967
	COG	19,540				19,479
	Total	$ 123,394				$ 119,446
Goodwill:
	CAD	$ 3,944				$ 3,944
	COG	3,344				3,344
	Total	$ 7,288				$ 7,288

NOTE F - Warranty Costs
The Company's Cross branded writing instruments are sold with a full warranty of unlimited duration against mechanical failure. Accessories are sold with a one-year warranty against mechanical failure and defects in workmanship, and timepieces are warranted to the original owner to be free from defects in material and workmanship for a period of ten years. Costa Del Mar sunglasses are sold with a lifetime warranty against defects in materials and workmanship. Estimated warranty costs are accrued at the time of sale. The most significant factors in the estimation of warranty cost liabilities include the operating efficiency and related cost of the service department, unit sales and the number of units that are eventually returned for warranty repair. The current portions of accrued warranty costs were $0.4 million at September 29, 2007 and December 30, 2006, and were recorded in accrued expenses and other liabilities. The following chart reflects the activity in aggregate accrued warranty costs:

(THOUSANDS OF DOLLARS)		THREE MONTHS ENDED				NINE MONTHS ENDED
		SEPTEMBER 29, 2007		SEPTEMBER 30, 2006		SEPTEMBER 29, 2007		SEPTEMBER 30, 2006
Accrued Warranty Costs - beginning of period		$1,736		$ 1,941		$1,736		$ 1,919
	Warranty costs paid	(149	)	( 220	)	(343	)	( 546	)
	Warranty costs accrued	149		231		343		579
Accrued Warranty Costs - end of period		$1,736		$ 1,952		$1,736		$ 1,952

NOTE G - Stock-Based Compensation

Omnibus Incentive Plan (the "OI Plan")

The Company's OI Plan permits the Compensation Committee of the Board of Directors of the Company to grant various long-term incentive awards, generally equity based, to officers and key employees from one pool of reserved shares. The OI Plan provides for grants of awards, including but not limited to, Incentive Stock Options, at an exercise price not less than the fair market value on the date of grant (except in the case of a shareholder possessing more than 10% of the total combined voting power of all classes of Company stock, in which case the exercise price shall not be less than 110% of the fair market value on the date of grant) and Non-Qualified Stock Options, at an exercise price determined by the Compensation Committee; Stock Appreciation Rights, which are rights to receive an amount equal to the increase, between the date of grant and the date of exercise, in the fair market value of the number of shares of common stock subject to the Stock Appreciation Right; shares of Non-Vested Equity Shares, which are common shares that have certain conditions attached to them that must be satisfied in order to have unencumbered rights to the shares; and Performance Awards, which are awards in common shares or cash. The OI Plan has no definite expiration date but may be terminated by the Board of Directors at any time. Incentive Stock Options may not be granted for a term longer than ten years from the date of grant (five years in the case of a shareholder possessing more than 10% of the total combined voting power of all classes of Company stock). At September 29, 2007, there were 1,731,368 shares reserved and 380,118 shares available to be issued under the OI Plan. The Company has made no share-based payments other than those authorized by the OI Plan.

Stock Options

Stock Option activity during the nine month period ended September 29, 2007 was as follows:

Stock Option Plan:		OPTIONS		WEIGHTED AVERAGE PRICE PER SHARE
Outstanding at December 30, 2006		1,659,724		$ 6.17
	Restricted Stock Grants	-		-
	Director Retainers	-		-
	Exercised	( 283,744	)	7.06
	Cancelled	( 21,250	)	9.76
Outstanding at September 29, 2007		1,354,730		$ 5.92

No stock options were granted in the nine month periods ended September 29, 2007 and September 30, 2006. At September 29, 2007, the intrinsic value of the Stock Options outstanding and exercisable was approximately $6.9 million and $6.8 million, respectively, based upon a stock price of $11.02. Compensation expense recognized for Stock Options under the OI Plan amounted to $10,000 and $15,000 for three month periods ended September 29, 2007 and September 30, 2006, respectively and $30,000 and $44,000 for the nine month periods ended September 29, 2007 and September 30, 2006, respectively. As of September 29, 2007, $17,000 of total unrecognized compensation cost related to Stock Options is expected to be recognized over a weighted-average 5 months. The following chart contains summary information about the Stock Options outstanding at September 29, 2007:

	OPTIONS OUTSTANDING			OPTIONS EXERCISABLE
RANGE OF EXERCISE PRICES	NUMBER OUTSTANDING	WEIGHTED AVERAGE REMAINING YEARS OF CONTRACTUAL LIFE	WEIGHTED AVERAGE EXERCISE PRICE	NUMBER EXERCISABLE	WEIGHTED AVERAGE EXERCISE PRICE
$ 4.34 - $ 4.50	22,087	3.81	$ 4.39	18,753	$ 4.37
$ 4.56 - $ 4.56	500,000	2.13	$ 4.56	500,000	$ 4.56
$ 4.69 - $ 5.23	174,550	4.36	$ 5.12	154,550	$ 5.10
$ 5.26 - $ 6.06	146,157	2.85	$ 5.79	146,157	$ 5.79
$ 6.16 - $ 6.20	36,500	5.37	$ 6.17	36,500	$ 6.17
$ 6.94 - $ 6.94	5,940	1.01	$ 6.94	5,940	$ 6.94
$ 7.11 - $ 7.11	224,700	4.82	$ 7.11	224,700	$ 7.11
$ 7.63 - $ 7.63	170,300	3.82	$ 7.63	170,300	$ 7.63
$ 9.69 - $ 9.69	3,480	0.01	$ 9.69	3,480	$ 9.69
$ 9.97 - $ 9.97	71,016	0.20	$ 9.97	71,016	$ 9.97
$ 4.34 - $ 9.97	1,354,730	3.16	$ 5.92	1,331,396	$ 5.94

The fair value of each stock option granted under the Company's OI Plan was estimated on the date of grant using the Black-Scholes option-pricing model. It should be noted that the option-pricing model used was designed to value readily tradable stock options with relatively short lives. The options granted to employees are not tradable and have contractual lives of up to ten years unless employment is terminated. However, management believes that the assumptions used and the model applied to value the awards yield a reasonable estimate of the fair value of the grants made under the circumstances.

Non-Vested Equity Shares

At September 29, 2007, there were 473,000 shares of Non-Vested Equity Shares outstanding under the OI Plan. Compensation expense recognized for Non-Vested Equity Shares under the OI Plan amounted to $0.1 million and $0.1 million for the three months ended September 29, 2007 and September 30, 2006, respectively, and $0.4 million and $0.3 million for the nine months ended September 29, 2007 and September 30, 2006, respectively. In the first nine months of 2007, 25,000 Non-Vested Equity Shares were issued. The weighted average fair value per share of Non-Vested Equity Shares granted during nine months ended September 29, 2007 was $8.98. As of September 29, 2007, $1.3 million of total unrecognized compensation cost related to Non-Vested Equity Shares is expected to be recognized over a weighted-average 13 months.

Employee Stock Purchase Plan

The Company also has an Employee Stock Purchase Plan (the "ESP Plan"), allowing eligible employees, other than officers and directors, to purchase shares of the Company's Class A common stock at 10% less than the mean between the high and low prices of the stock on the date of purchase. A maximum of 320,000 shares is available under the ESP Plan, and the aggregate numbers of shares reserved and available for purchase under the ESP Plan were 89,384 and 91,144 at September 29, 2007 and September 30, 2006, respectively. Compensation expense recognized for the ESP Plan under the OI Plan amounted to $1,760 and $1,925 for the nine months ended September 29, 2007 and September 30, 2006, respectively.

NOTE H - Line of Credit
The Company has a secured revolving line of credit with Bank of America, N.A. Under this line of credit agreement, the bank agreed to make loans to the Company in an aggregate amount not to exceed $20 million, including up to $5 million equivalent in Eurocurrency loans denominated in pounds sterling or Euro ("Eurocurrency Loans") and up to $15 million of other committed loans to the Company ("Committed Loans") at any time. As part of the aggregate availability, the bank may also issue up to $3 million in letters of credit. Subject to the limits on availability and the other terms and conditions of this credit agreement, amounts may be borrowed, repaid without penalty and reborrowed by the Company. This credit facility matures and amounts outstanding must be paid on December 31, 2008.

The interest rate for the Committed Loans will be, at the Company's option, either (i) the London Interbank Offered Rate ("LIBOR") plus an applicable margin or (ii) the higher of the federal funds rate plus 50 basis points or the bank's prime rate. The interest rate for any Eurocurrency Loans will be an interest settlement rate for deposits in pounds sterling or Euro plus an applicable margin. The applicable margin for LIBOR and Eurocurrency loans will be an amount between 1.50% and 2.25%, which amount will vary from time to time based upon the Company's consolidated leverage ratio.

Under the line of credit agreement, the Company has agreed to comply with certain affirmative and negative covenants. The most restrictive covenant restricts the Company from declaring cash dividends on its common stock. The agreement requires the Company to maintain a minimum consolidated tangible net worth, a minimum ratio of adjusted EBITDA to required debt service payments, and a maximum ratio of debt to consolidated EBITDA over any four-quarter period, each of which is calculated in accordance with the agreement. Amounts due under the credit agreement are guaranteed by certain of the domestic and foreign subsidiaries of the Company. Amounts due are also secured by a pledge of the assets of the Company and certain of its domestic subsidiaries. The Company is in compliance with all loan covenants.

At September 29, 2007, the outstanding balance of the Company's line of credit was $3.3 million, bearing an interest rate of approximately 7.75%, and the unused and available portion, according to the terms of the amended agreement, was $16.7 million. At December 30, 2006, the outstanding balance of the Company's line of credit was $7.1 million, bearing an interest rate of approximately 8.25%, and the unused and available portion, according to the terms of the amended agreement, was $12.9 million.

NOTE I - Financial Instruments
In 2003, the Company entered into an interest rate swap agreement with an initial notional amount of $9 million and a term of five years. This swap fixes the interest rate on a portion of the Company's line of credit at 4.15%. Amounts paid or received under this swap agreement are recorded as adjustments to interest expense. The net unrealized gain (loss) is recorded in interest and other (expense) income in the consolidated statements of operations. At September 29, 2007, the notional value of the interest rate swap was $3.3 million.

The fair value of forward foreign exchange contracts, based on quoted spot exchange rates, are reported in other current assets or accrued expenses and other liabilities. The fair value of cash and cash equivalents approximates the recorded amounts, due to the short period of time to maturity. The carrying amount of long-term debt approximates fair value as a result of the variable interest rate. The fair value of the swap agreement, based upon quoted market prices, was $26,000 and $78,000 at September 29, 2007 and December 30, 2006, respectively, and was reported in other current assets.

NOTE J - Employee Benefit Plans
The following table illustrates the components of net periodic benefit cost:

(THOUSANDS OF DOLLARS)	THREE MONTHS ENDED				NINE MONTHS ENDED
	SEPTEMBER 29, 2007		SEPTEMBER 30, 2006		SEPTEMBER 29, 2007		SEPTEMBER 30, 2006
Service cost	$ 17		$ 112		$ 50		$ 336
Interest cost	555		565		1,664		1,696
Expected return on plan assets	(599	)	( 560	)	(1,797	)	( 1,682	)
Amortization of unrecognized loss	-		26		-		77
Amortization of prior service cost	2		2		8		7
Net Periodic Benefit Cost	(25	)	145		(75	)	434
Curtailment gain	-		-		-		(283	)
*Total Expense*	$ (25	)	$ 145		$ (75	)	$ 151

On March 30, 2006, the Company's Board of Directors voted to freeze the Company's non-contributory defined benefit pension plan effective May 20, 2006. The Board also approved enhancements to the Company's existing defined contribution retirement plan retroactive to January 1, 2006. Additionally, the Company will provide enhanced transitional benefits for a period of three years to employees close to normal retirement age. The Company expects to contribute $1.3 million to its defined benefit pension plan, $1.2 million to its defined contribution retirement plan and $0.1 million to its excess benefit plan in 2007.

NOTE K- Goodwill and Other Intangible Assets
In accordance with Statement of Financial Accounting Standard ("SFAS") No. 142, "Goodwill and Other Intangible Assets," goodwill is accounted for using an impairment-only approach. Goodwill is tested for impairment annually or when an event occurs or circumstances change that would indicate an impairment is possible. Patents and trademarks are amortized on a straight-line basis over five years and are evaluated for impairment using the methodology described in SFAS No. 142. The most recent required annual impairment tests for all segments were performed on November 27, 2006 and the Company concluded that goodwill was not impaired. The Company also reviewed its indefinite lived intangible assets and concluded that under SFAS No. 142 they were unimpaired. Other intangibles consisted of the following:

(THOUSANDS OF DOLLARS)
		SEPTEMBER 29, 2007			DECEMBER 30, 2006
		GROSS CARRYING AMOUNT	ACCUMULATED AMORTIZATION	OTHER INTANGIBLES, NET	GROSS CARRYING AMOUNT	ACCUMULATED AMORTIZATION	OTHER INTANGIBLES, NET
Amortized:
	Trademarks	$ 7,979	$ 7,375	$ 604	$ 8,378	$ 7,667	$ 711
	Patents	3,015	2,735	280	2,985	2,595	390
		$ 10,994	$ 10,110	884	$ 11,363	$ 10,262	1,101
Not Amortized:
	Trade name			3,400			3,400
Total Other Intangibles, Net				$4,284			$ 4,501

The estimated future amortization expense for other intangibles remaining as of September 29, 2007 was as follows:

(THOUSANDS OF DOLLARS)	2007		2008		2009		2010		2011
	$ 116		$ 370		$ 242		$ 120		$ 36

NOTE L - Recent Accounting Pronouncements
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements," ("SFAS No. 157") which clarifies the definition of fair value, describes methods used to appropriately measure fair value, and expands fair value disclosure requirements. SFAS No. 157 applies under other accounting pronouncements that currently require or permit fair value measurements. SFAS No. 157 is effective for the Company beginning December 30, 2007, and the Company will apply the provisions of SFAS No. 157 prospectively as of that date. The Company is in the process of determining the impact, if any, the adoption of SFAS No. 157 may have on its consolidated financial statements and related disclosures when it becomes effective in 2008.

In February 2007, the FASB issued SFAS 159, "The Fair Value Option for Financial Assets and Financial Liabilities, Including an amendment of SFAS 115," which permits companies to choose to measure many financial instruments and certain other items at fair value. SFAS 159 is effective for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The Company is currently evaluating the effect SFAS 159 will have, if any, on our consolidated financial position and results of operations.

NOTE M - Commitments and Contingencies
The Company is 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 allege that the Company is liable under CERCLA for contribution for past and future site investigation costs incurred at the Site. Past and future site investigation costs (excluding the required remedy) are currently estimated at $7 million. Based upon our investigation to date, there does not appear to be evidence to support a finding that the Company arranged for the disposal of hazardous substances at this Site. No formal discovery has been taken to date. At September 29, 2007, the Company had not established a liability for any environmental remediation relating to the J.M. Mills Landfill Site, as its potential liability, if any, is currently not estimable.

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, results of operations and cash flows.

NOTE N - Correction of Reported Comprehensive Income for the year ended December 30, 2006
The Company incorrectly included a transition adjustment of $0.3 million related to the adoption of SFAS No. 158, "Accounting for Defined Benefit Pension and Other Postretirement Plans" in Comprehensive Income within our Consolidated Statements of Comprehensive Income (Loss) for the year ended December 30, 2006 as reported in the Company's annual report on Form 10-K for the year then ended. We will correct this error when we file our 2007 annual report on Form 10-K, decreasing previously reported comprehensive income within our Consolidated Statements of Comprehensive Income (Loss) for the year ended December 30, 2006 from the previously reported $5.0 million to $4.7 million as restated.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

A.T. Cross Company is a designer and marketer of branded personal accessories including writing instruments, watches, precision reading glasses, personal and business accessories and sunglasses. The Company has two reportable business segments: the Cross Accessory Division ("CAD") and the Cross Optical Group ("COG").

The Company has been a manufacturer and marketer of fine quality writing instruments since 1846. Sold primarily under the Cross brand, ball-point, fountain and selectip rolling ball pens and mechanical pencils are offered in a variety of styles and finishes. Also under the Cross brand, the Company offers a line of watches, reading glasses and a variety of personal and business accessories. The Company offers a lower priced line of writing instruments and after-market refills under the brand name Penatia. We also offer writing instruments under licensed brands such as Bill Blass.

The Company established an optical segment with the 2003 acquisition of Costa Del Mar Sunglasses, Inc, a designer, manufacturer and marketer of high-quality polarized sunglasses.

In the third quarter of 2007, the Company reported net income of $2.4 million, or $0.16 per basic share and $0.15 per diluted share, compared to net income of $0.3 million, or $0.02 per share basic and diluted, in the third quarter of 2006. In the nine months ended September 29, 2007, the Company reported net income of $3.5 million, or $0.23 per share basic and $0.22 diluted, compared to net income of $0.6 million, or $0.04 per share basic and diluted, in the nine months ended September 30, 2006. The improved results in the third quarter and first nine months of 2007 were due to higher sales and improved gross margins in both segments.

Results of Operations Third Quarter 2007 Compared to Third Quarter 2006

The following chart details net sales performance:

(THOUSANDS OF DOLLARS)		THREE MONTHS ENDED		PERCENTAGE
		SEPTEMBER 29, 2007	SEPTEMBER 30, 2006	CHANGE
Cross Accessory Division:
	Americas	$ 11,823	$ 12,810	7.7%
	Europe, Middle East and Africa	9,303	7,876	18.1%
	Asia	4,692	3,986	17.7%
	Other	471	638	(26.2)%
	Sub-total	26,289	25,310	3.9%
Cross Optical Group		8,825	6,609	33.5%
	Consolidated Net Sales	$ 35,114	$ 31,919	10.0%

The effect of foreign exchange was favorable to consolidated third quarter 2007 sales results by approximately $0.6 million, or 2.3 percentage points.

The Americas revenue declined 7.7% in the quarter. This was the result of declines in two of our major US wholesale distribution channels Carriage Trade and Business Gift. The Carriage Trade was impacted by the reduction in purchases from a large account as it transitions to a private label strategy. The Business Gift channel was affected by organizational changes as we upgraded the sales team, which resulted in three territories being open for most of the third quarter. Two are now filled and we expect the Business Gift channel to return to normal growth rates. Somewhat offsetting this were increases in Latin America of 3.0% and Direct to Consumer of 35%.

Foreign exchange was favorable to the Europe, Middle East and Africa ("EMEA") sales results by approximately $0.6 million, or 7.5 percentage points compared to last year's third quarter.

Foreign exchange had a minimal impact on third quarter sales in Asia compared to the third quarter last year.

The COG segment sales increase in the third quarter of 2007 compared to the third quarter of 2006 was due to the effect of a number of new product launches and expanded distribution.

Consolidated third quarter 2007 gross margin of 56.7% improved 330 basis points from the third quarter 2006 gross margin of 53.4%. CAD segment gross margin in the third quarter of 2007 was 56.7%, an increase of 400 basis points from the 52.7% third quarter 2006 gross margin. This improvement was due largely to the lower manufacturing costs as a result of the transition of writing instrument manufacturing to China. COG segment gross margin in the third quarter of 2007 was 56.7%, a 40 basis point increase from the third quarter of 2006. This was due primarily to higher new product margins.

Selling, general and administrative ("SG&A") expenses were $15.5 million, or 44.1% of sales, in the third quarter of 2007: 6.0% higher than the $14.6 million , or 45.8% of sales in the third quarter of 2006. Foreign exchange comprised approximately $0.3 million, or 1.7%, of the increase. CAD segment SG&A was 4.8% higher in the third quarter of 2007 compared to 2006 largely due to higher planned sales and marketing expenses, administrative expenses associated with the new China facility and occupancy costs for the formerly owned Lincoln facility. COG segment SG&A increased 11.2% in the third quarter of 2007 due in part to higher planned marketing expenses.

The tax rate on earnings in the third quarter of 2007 was 31.3% versus 55.4% in the third quarter of 2006. The third quarter 2007 rate reflected a reduction in the full year estimated tax rate from 36.5% at the end of June 2007 to 33.7% at the end of September 2007. The third quarter 2006 rate reflected an increase in the full year estimated tax rate from 36.9% at the end of June 2006 to 39.3% at the end of September 2006. The Company reduced its tax provision in the third quarter of 2007 to recognize foreign tax credits now available to offset uncertain tax benefits. In addition, the tax provisions for both the third quarter of 2007 and 2006 reflected favorable adjustments to record the differences between the prior years' provision versus the actual tax returns. These adjustments favorably impacted results by $0.06 per share in the first nine months of 2007, $0.04 of which is attributable to the foreign tax credits, and $0.02 per share in the first nine months of 2006.

Results of Operations Nine Months Ended September 29, 2007 Compared to Nine Months Ended September 30, 2006

The following chart details net sales performance:

(THOUSANDS OF DOLLARS)		NINE MONTHS ENDED		PERCENTAGE
		SEPTEMBER 29, 2007	SEPTEMBER 30, 2006	CHANGE
Cross Accessory Division:
	Americas	$ 32,235	$ 34,004	(5.2)%
	Europe, Middle East and Africa	26,317	23,027	14.3%
	Asia	14,264	13,648	4.5%
	Other	2,072	1,847	12.2%
	Sub-total	74,888	72,526	3.3%
Cross Optical Group		29,274	21,464	36.4%
	Consolidated Net Sales	$ 104,162	$ 93,990	10.8%

The effect of foreign exchange was favorable to consolidated year-to-date 2007 sales results by approximately $1.5 million, or 1.6 percentage points.

The Americas region revenue declined 5.2% from the prior year period as both domestic Retail and Business Gift division's sales were lower by 9.0% from the prior year nine month period. Somewhat offsetting this were increases in Canada, 43.1%, and Latin America, 4.4%.

Excluding the favorable effects of foreign exchange, EMEA sales improved by 7.0%, due in part to growth in both retail and corporate gift divisions in the U.K.

Excluding foreign exchange, Asian markets sales improved 5.8% for the 2007 nine month period compared to the first nine months of 2006.

The revenue increase in the COG segment in the first nine months of 2007 compared to the first nine months of 2006 was the result of new product launches and expanded distribution.

Consolidated gross margin for the first nine months of 2007 of 56.4% improved 270 basis points from the first nine months of 2006 gross margin of 53.7%. CAD segment gross margin in the first nine months of 2007 was 55.8%, an increase of 320 basis points from the first nine months of 2006 gross margin of 52.6%. This improvement was due largely to the lower manufacturing costs as a result of the transition of writing instrument manufacturing to China. COG segment gross margin in the first nine months of 2007 was 57.9%, a 60 basis points increase from the first nine months of 2006. This was due primarily to higher new product margins.

SG&A expenses of $47.8 million in the first nine months of 2007 were 11.8% higher than the first nine months of 2006. CAD SG&A was 7.0% higher in the first nine months of 2007 compared to the first nine months of 2006 largely due to higher sales and marketing expenses, administrative expenses associated with the new China facility and occupancy costs for the formerly owned Lincoln facility. COG segment SG&A increased 34.1% in the first nine months of 2007 due primarily to higher selling and marketing expenses related to the higher nine months sales volume.

The Company recorded $0.3 million of pre-tax restructuring charges in the first nine months of 2007 compared to $1.2 million in the first nine months of 2006.

Interest and other expense was expense of $0.2 million and $0.2 million in the first nine months of 2007 and 2006, respectively. Included in the first nine months of 2007 is approximately $0.2 million of expense related to the mark-to-market of share units of Company stock held in a deferred compensation plan.

The tax rate on earnings in the first nine months of 2007 was 33.7% compared to 39.3% in the first nine months of 2006. In addition, in the first nine months of 2007 the Company reduced its tax provision primarily to recognize foreign tax credits now available to offset uncertain tax benefits. The tax provisions for both 2007 and 2006 reflected favorable adjustments to record the differences between the prior years' provision versus the actual tax returns filed. These favorable tax benefits impacted results by $0.05 per share in the first nine months of 2007 and. $0.02 per share in the first nine months of 2006.

Liquidity and Sources of Capital

The Company's sources of liquidity and capital resources are its cash and cash equivalents ("cash"), 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, restructuring, contributions to the retirement plans and debt service. The Company expects its future cash needs in 2007 will be met by these sources of liquidity and capital.

The Company's cash balance of $7.3 million at September 29, 2007 decreased $4.0 million from December 30, 2006, a result of many factors, the most significant of which are described in this section.

On March 2, 2007, the Company sold its manufacturing, warehouse and office facility at One Albion Road, Lincoln, Rhode Island. In conjunction with the transaction, Cross agreed to lease back approximately 154,000 square feet of administrative, distribution and manufacturing space through 2017 at its current location in Lincoln, Rhode Island where it will continue to house its corporate headquarters. Gross proceeds related to the sale were $15.8 million. The $5.3 million gain on the sale was deferred and will be recognized over the life of the lease as a reduction of rent expense.

Accounts receivable decreased since the end of fiscal 2006 by approximately $6.1 million to $25.9 million. CAD accounts receivable decreased $6.1 million while the COG segment accounts receivable were even with year end 2006.

Inventory was $39.0 million at September 29, 2007, an increase of $14.1 million since December 30, 2006. CAD inventory increased $13.9 million while COG sunglass inventory levels increased $0.2 million from year end 2006. The increase in CAD segment inventory was due largely to the longer supply chain resulting from manufacturing in China, increased stock levels to support the fourth quarter holiday program sales and the increase associated with the Cross brand line extensions.

The Company maintains a $20 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 agreement requires the Company to maintain a minimum consolidated tangible net worth, a minimum ratio of adjusted EBITDA to required debt service payments, and a maximum ratio of debt to consolidated EBITDA over any four-quarter period, each of which is calculated in accordance with the agreement. The unused and available portion of this line of credit was $16.7 million at September 29, 2007. In the first nine months of 2007, the Company borrowed approximately $5.3 million and repaid approximately $9.1 million on its secured line of credit agreement.

In the first nine months of 2007 approximately $0.3 million was paid as a result of the corporate restructuring program initiated in July 2003. This program was complete at September 29, 2007. The Company incurred $7.9 million in restructuring charges over the life of this program. The amount paid since the inception of this program through September 29, 2007 was approximately $7.9 million. As a result of the restructuring program, the Company realized general and administrative savings, most of which have been reinvested in developing and launching new products and implementing our direct-to-consumer strategies.

The Company expects to contribute $1.3 million to its defined benefit pension plan, $1.2 million to its defined contribution retirement plan and $0.1 million to its excess benefit plan in 2007.

The Company believes that existing cash and funds from operations, supplemented as appropriate by the Company's borrowing arrangements, will be adequate to finance its next twelve months operating and capital requirements, contributions to the retirement plans and stock repurchases. The Company has not repurchased any stock since fiscal 2005. Should operating cash flows in 2007 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 and capital projects.

At September 29, 2007, cash available for domestic operations was approximately $3.0 million, while cash held offshore was approximately $4.3 million.

Forward-Looking Statements

Statements contained herein that are not historical fact are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. In addition, words such as "believes," "anticipates," "expects," "will" and similar expressions are intended to identify forward-looking statements, including but not limited to statements related to the availability of sources of cash; anticipated performance of the business gift channel in the United States; anticipated compliance with laws and regulations (including but not limited to environmental laws); and anticipated sufficiency of available working capital. The Company cautions that a number of important factors could cause the Company's actual results for fiscal 2007 and beyond to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Company. Forward-looking statements involve a number of risks and uncertainties. For a discussion of certain of other of those risks, see "Risk Factors" in Item 1A of the Company's 2006 Annual Report on Form 10-K.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Refer to the Company's Annual Report on Form 10-K for the fiscal year ended December 30, 2006 for a complete discussion of the Company's market risk. There have been no material changes to the market risk information included in the Company's 2006 Annual Report on Form 10-K.

ITEM 4T. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act) as of September 29, 2007. Based on this evaluation, our chief executive officer and chief financial officer concluded that as of the end of the third quarter 2007, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

No change in the Company's internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) occurred during the third quarter of 2007, that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS

Refer to Item 3 in the Company's Form 10-K Annual Report for the fiscal year ended December 30, 2006 for a complete discussion of the Company's legal proceedings. No material developments have occurred in the Legal Proceedings described in such Item 3.

ITEM 1A. RISK FACTORS

Refer to Item 1A in the Company's Form 10-K Annual Report for the fiscal year ended December 30, 2006 for a complete discussion of the risk factors which could materially affect the Company's business, financial condition or future results.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS

Exhibit 31 Certification

Exhibit 32 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

SIGNATURES

Pursuant to the requirement 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

Date: November 13, 2007	By: DAVID G. WHALEN David G. Whalen Chief Executive Officer

Date: November 13, 2007	By: KEVIN F. MAHONEY Kevin F. Mahoney Vice President, Finance and Chief Financial Officer