A.T. Cross: Earnings News Release Released by Strategic IR, Inc. 530 Fifth Avenue, NY 10036 (212) 391-4868 For Immediate Release A.T. Cross Company Reports 1998 Third Quarter Results Lincoln, R.I., October 20, 1998 - A.T. Cross Company (ASE-ATX.A), manufacturer of fine writing instruments and pen computing products, today reported sales for the third quarter ended September 30, 1998 of $33.9 million, down 7.6% from $36.6 million in the same period of 1997, and a net loss of $4.4 million, or 27 cents per share, compared with a net loss of $588,000, or 4 cents per share, one year earlier, Russell A. Boss, president and chief executive officer, reported. For the nine months ended September 30, 1998, net sales were $100.1 million, down 1.3% from $101.4 million for the same period of the previous year. The net loss for the nine months ended September 30, 1998 was $4.1 million, or 25 cents per share, compared with a net loss of $4.7 million, or 29 cents per share for the same period a year ago. Results for the nine months ended September 30, 1998, included income from discontinued operations of $1.7 million, or 10 cents per share. For the nine months ended September 30, 1997, the company recorded a loss from discontinued operations of $2.3 million, or 14 cents per share. Sales of pen computing products, which are presently sold only in the United States, were $7.2 million in the third quarter, representing 34% of total domestic revenue. For the nine months ended September 30, 1998, pen computing revenue was $15.8 million, which represented 27% of total U.S. revenue. Pen computing sales in the third quarter and nine months ended September 30, 1997 were $644,000 and $761,000, respectively. "We were very pleased to achieve our distribution goal of 3,000 doors for pen computing products in the third quarter. In addition, we successfully launched CrossPad XP in late September. CrossPad XP features a redesigned CrossWriterII digital pen and the latest upgrade of IBM Ink Manager software to enhance note management. The CrossPad XP, which holds a standard 6"x9" notepad, was a logical product line extension for consumers who prefer to take notes with a smaller pad. Both the CrossPad and CrossPad XP will be supported with an extensive advertising and promotion campaign during the fourth quarter." "We were also very pleased with IBM's recent announcement of a software developers' kit that will enable companies to create forms and applications for use with the CrossPad and CrossPad XP. Developers can utilize this tool kit to create customized forms for specific industries, such as legal, medical, insurance, finance, government and transportation," said Mr. Boss. The Pen Computing Group generated a pre-tax operating loss of $2.3 million in the third quarter of 1998 and approximately $5.3 million for the nine months ended September 30, 1998 due to expense levels required to establish Cross in this arena. Total writing instrument sales for the third quarter were $26.3 million, down 26.7% from the 1997 quarter. Domestic writing instrument sales decreased 36.0% to $13.5 million, while foreign sales decreased 13.3% to $12.8 million, due to economic conditions in the Asian markets. For the nine months ended September 30, 1998, domestic writing instrument sales decreased 18.1% to $42.3 million, while foreign sales decreased 15.8 % to $41.1 million, once again, attributed to declining Asian revenue. "Growth in Europe and Canada was encouraging during the third quarter. We believe the domestic quality writing instrument business continues to be a challenge for most companies in the industry. Poor sell-through during the Father's Day and graduation gift seasons has resulted in retailers working off higher than normal inventories. Strict expense controls are continuing in the writing instrument business." "The test of Cross timepieces continues with an enhanced product offering and advertising campaign," said Mr. Boss. "Because of a disappointing third quarter and consumer uncertainty heading into the fourth quarter, it now appears that the combined losses of the pen computing and timepiece businesses will exceed the expected profitable results of the writing instrument business; therefore, we do not expect 1998 to be profitable on a consolidated basis," Mr. Boss said. A.T. Cross Company is a major international manufacturer of fine writing instruments. The company also manufactures pen computing products and is testing designs and distribution of Cross timepieces. For information at A.T. Cross contact: John T. Ruggieri, Senior Vice President and Chief Financial Officer (401) 333-1200 jruggieri@cross.com This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (including but not limited to statements relating to the introduction of Cross timepieces, writing instruments and pen computing products, the effect of advertising and promotional campaigns, the ongoing effect of cost controls and the continued growth in certain foreign markets). These forward-looking statements are subject to risks and uncertainties, including but not limited to risks associated with consumer acceptance of the Company's new product lines, consumer reaction to the Company's advertising and promotions, the Company's strategic initiatives, customer and consumer support for such initiatives and the inherent uncertainty of foreign markets. Additional discussions of factors that could cause actual results to differ materially from management's expectations is contained in the Company's filings under the Securities Exchange Act of 1934. (Financial information follows) A.T. Cross Company CONSOLIDATED SUMMARY OF OPERATIONS (in thousands, except per share amounts) (unaudited) Three Months Ended Nine Months Ended September 30 September 30 1998 1997 1998 1997 Net Sales $33,852 $36,626 $100,070 $101,438 Cost of goods sold 19,002 19,084 53,889 53,449 Gross Profit 14,850 17,542 46,181 47,989 Selling, general and administrative expenses 20,072 17,397 50,896 47,991 Research and development 1,146 555 3,372 2,317 Service and distribution costs 805 990 2,433 2,784 Operating Loss (7,173) (1,400) (10,520) (5,103) Interest and other income 678 495 2,089 1,378 Loss From Continuing Operations Before Income Taxes (6,495) (905) (8,431) (3,725) Income tax benefit (2,078) (317) (2,698) (1,304) Loss From Continuing Operations (4,417) (588) (5,733) (2,421) Income (Loss) from discontinued operations(net of income taxes) 0 0 1,653 (2,321) Net Loss $(4,417) $(588) $(4,080) $(4,742) Basic and diluted earnings (loss) per share: Continuing operations $(0.27) $(0.04) $(0.35) $(0.15) Discontinued operations 0.00 0.00 0.10 (0.14) Net Loss Per Share $(0.27) $(0.04) $(0.25) $(0.29) Weighted average shares outstanding 16,548 16,500 16,530 16,496 CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts) (unaudited) September 30 1998 1997 Assets Cash and short-term investments $41,859 $45,062 Accounts receivable 25,155 26,111 Inventories 32,128 25,520 Other current assets 9,046 10,772 Total Current Assets 108,188 107,465 Property, plant and equipment, net 38,026 39,907 Intangibles and other assets 9,314 8,308 Total Assets $155,528 $155,680 Liabilities and Shareholders' Equity Current liabilities $42,659 $32,220 Accrued warranty costs 6,046 5,734 Shareholders' equity (per share $6.46 and $7.13) 106,823 117,726 Total Liabilities and Shareholders' Equity $155,528 $155,680 For information at A.T. Cross contact: John T. Ruggieri Senior Vice President / Chief Financial Officer (401) 333-1200 jruggieri@cross.com Ends.