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Cross to sell home office
(Providence Journal, The (RI) (KRT) Via Thomson Dialog NewsEdge) Apr. 28--LINCOLN -- A.T. Cross announced yesterday that it will put its corporate headquarters up for sale and stop contributing to its employees' pension plan after a report of its financial loss.
The pen and pencil manufacturer reported a first-quarter net loss of $100,000, or 1 cent per share. During the same period last year, the company reported a net loss of $500,000, or 3 cents per share.
The company, which is in the final stages of moving its manufacturing operations to China, intends to lease back a portion of the 250,000-square-foot building off Route 116 for its office headquarters, according to a statement.
The company, which held its annual shareholders' meeting yesterday, announced the plans along with its first-quarter loss after the stock market closed.
Neither the company's president and chief executive officer, David G. Whalen, nor its chief financial officer, Kevin F. Mahoney, could be reached after the news was released.
Cross, which has operated in Rhode Island for more than 150 years, employs about 250 people in Lincoln, less than half the number it had there three years ago. The company has about 700 employees worldwide.
The company has been struggling to remain profitable in an era of disposable pens. Cross suffered three consecutive years of losses, from 1998 through 2000 before posting small profits in 2001, 2002 and 2003. The company reported another net loss in 2004.
Last year, the company reported net income of $384,000, but sales of its core writing instruments and accessories declined for the fifth consecutive year.
During the first quarter of this year, the company reported that net sales remained flat, at $29.6 million, about the same as the first quarter of last year. Global writing-instrument and accessory revenue was $23.6 million, down from $24.9 million during the same period last year.
The company touted the performance of its sunglasses maker, Costa Del Mar, which reported that net sales rose to $6 million, compared with $4.6 million in the first quarter of last year.
Costa Del Mar last year generated a 30-percent increase in sales and nearly doubled its operating income, Whalen said in a statement.
As of May 20, the company said, it will freeze its pension plan, which the company provides for "substantially all" its domestic employees. To partially offset the impact of the move, the board has agreed to improve employees' 401(k) plan and provide three years of "enhanced transitional benefits to employees that are nearing retirement age," the company reported. The changes are expected to save the company $1.2 million this year.
The company did not say how much money it expected to reap from the sale of its corporate headquarters building. The company's balance sheet statement listed property, plant and equipment worth nearly $21.2 million as of April 1.
The company also reported that it awarded Whalen a compensation package last year of $536,800, according to the annual proxy statement. That included a salary of $480,500, a bonus of $50,000 and $6,300 in contributions to his 401(k), according to the proxy.
Yesterday, at the meeting, Whalen told about 80 shareholders that the company last year made "solid progress" toward achieving its goals of reinvigorating the Cross brand, reducing costs and becoming a larger competitor in the marketplace.
Cross is targeting market segments where it can grow: accessories and "pen aficionados," Whalen said, as images of the company's new, younger target-market flashed on a screen.
The company, which used to cater primarily to middle-aged businessmen, is aggressively courting a new, younger generation with trendy reading glasses, flower-print fountain pens and a line of colorful leather totes and briefcases.
The effort is consistent with the company's "goal of becoming a branded lifestyle company," Whalen said. "Our direction is correct, and our result will be profitable."
A glassy high-rise building with the Cross name and logo flashed on the screen: the company's new manufacturing operation in China. The building, which is being leased, is the centerpiece of Cross' plan to reduce overhead.
"It's hard to change," Whalen said, "but our employees have done it."
Cross is moving all of its manufacturing operations to China by the end of this year. Once completed, the move is expected to save the company about $5 million a year, said Whalen.
The new manufacturing plant in China will begin operating with 200 to 300 employees beginning on June 1, Stephen A. Perrault, vice president of operations, said after yesterday's meeting. The plant will scale up its operations slowly, he said.
The company's stock price yesterday closed unchanged, at $5.64 per share.
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