UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 28, 2013


[ ]	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

COSTA INC.
(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.)
24 Albion Road, Lincoln, Rhode Island (Address of principal executive offices)	02865 (Zip Code)

Registrant's telephone number, including area code (401) 335-3400

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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (S232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files).

Yes

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


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 Exchange Act).


	__	Yes	X	No

Indicate the number of shares outstanding of each of the issuer's classes of common stock as of October 26, 2013:

Class A common stock -	11,388,835 shares
Class B common stock -	1,804,800 shares

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

COSTA INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS


(THOUSANDS OF DOLLARS AND SHARES)	SEPTEMBER 28,		DECEMBER 29,
	2013		2012
ASSETS	(UNAUDITED)
Current Assets
Cash and cash equivalents	$	63,876	$	27,120
Short-term investments		292		227
Accounts receivable, gross		12,268		33,510
Allowance for doubtful accounts		(208)		(633)
Accounts receivable, net		12,060		32,877
Inventories		17,900		38,020
Deferred income taxes		2,631		3,417
Other current assets		2,766		8,072
Total Current Assets		99,525		109,733

Property, plant and equipment, gross		10,079		112,901
Accumulated depreciation		(5,750)		(98,525)
Property, Plant and Equipment, Net		4,329		14,376
Goodwill		15,279		15,279
Intangibles, Net		7,828		8,606
Deferred Income Taxes		4,114		11,570
Other Assets		1,031		1,775
Total Assets	$	132,106	$	161,339
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable, accrued expenses and other liabilities	$	5,853	$	26,399
Line of credit		15,000		15,000
Accrued compensation and related taxes		5,378		8,132
Retirement plan obligations		2,360		2,731
Income taxes payable		211		567
Total Current Liabilities		28,802		52,829

Retirement Plan Obligations		18,095		19,808
Other Long-Term Liabilities		1,157		3,624
Commitments and Contingencies (Note L)		-		-
Total Liabilities		48,054		76,261
Shareholders' Equity
Common stock, par value $1 per share:
Class A - authorized 40,000 shares, 19,626 shares issued and 11,386
shares outstanding at September 28, 2013, and 19,177 shares
issued and 11,163 shares outstanding at December 29, 2012		19,626		19,177
Class B - authorized 4,000 shares, 1,805 shares issued and
outstanding at September 28, 2013 and December 29, 2012		1,805		1,805
Additional paid-in capital		36,073		32,309
Retained earnings		95,155		100,666
Accumulated other comprehensive loss		(16,073)		(19,852)
Treasury stock, at cost		(52,534)		(49,027)
Total Shareholders' Equity		84,052		85,078
Total Liabilities and Shareholders' Equity	$	132,106	$	161,339

See notes to condensed consolidated financial statements.

COSTA INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)


(THOUSANDS OF DOLLARS AND SHARES,	THREE MONTHS ENDED				NINE MONTHS ENDED
EXCEPT PER SHARE AMOUNTS)	SEPTEMBER 28,		SEPTEMBER 29,		SEPTEMBER 28,		SEPTEMBER 29,
	2013		2012		2013		2012

Net sales	$	24,569	$	19,449	$	80,824	$	66,952
Cost of goods sold		10,156		7,978		33,187		27,493
Gross Profit		14,413		11,471		47,637		39,459

Selling, general and administrative expenses		12,328		8,722		33,648		27,049
Service and distribution costs		1,519		1,063		4,000		3,225
Research and development expenses		373		255		1,106		813
Operating Income		193		1,431		8,883		8,372

Interest and other expense		(128)		(102)		(404)		(522)
Interest and Other Expense		(128)		(102)		(404)		(522)

Income from Continuing Operations
Before Income Taxes		65		1,329		8,479		7,850
Income tax provision		240		432		3,123		2,597
(Loss) Income from Continuing Operations		(175)		897		5,356		5,253

(Loss) Income from Discontinued Operations,
Net of Tax		(10,064)		1,142		(10,867)		1,985
Net (Loss) Income	$	(10,239)	$	2,039	$	(5,511)	$	7,238


Net (Loss) Income Per Share:
Basic:
Continuing Operations	$	(0.01)	$	0.07	$	0.43	$	0.43
Discontinued Operations		(0.81)		0.09		(0.88)		0.16
Net (Loss) Income Per Share	$	(0.82)	$	0.16	$	(0.45)	$	0.59

Diluted:
Continuing Operations	$	(0.01)	$	0.07	$	0.40	$	0.40
Discontinued Operations		(0.81)		0.08		(0.82)		0.16
Net (Loss) Income Per Share	$	(0.82)	$	0.15	$	(0.42)	$	0.56

Weighted Average Shares Outstanding:
Denominator for Basic Net Income Per Share		12,501		12,729		12,359		12,357
Effect of dilutive securities		-		597		907		621
Denominator for Diluted Net Income Per Share		12,501		13,326		13,266		12,978

See notes to condensed consolidated financial statements.

COSTA INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)


(THOUSANDS OF DOLLARS)	THREE MONTHS ENDED				NINE MONTHS ENDED
	SEPTEMBER 28,		SEPTEMBER 29,		SEPTEMBER 28,		SEPTEMBER 29,
	2013		2012		2013		2012

Net (Loss) Income	$	(10,239)	$	2,039	$	(5,511)	$	7,238

Other Comprehensive (Loss) Income:
Foreign currency translation adjustments		2,858		311		2,046		391
Unrealized gain on interest rate swap, net of tax		9		13		57		28
Pension liability adjustment, net of tax		-		(20)		1,676		10
Comprehensive (Loss) Income	$	(7,372)	$	2,343	$	(1,732)	$	7,667

See notes to condensed consolidated financial statements.

COSTA INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)


(THOUSANDS OF DOLLARS)	NINE MONTHS ENDED
	SEPTEMBER 28,		SEPTEMBER 29,
	2013		2012
Cash (Used in) Provided by Operating Activities:
Net (Loss) Income	$	(5,511)	$	7,238
Adjustments to reconcile net (loss) income to net cash (used in)
provided by operating activities:
Depreciation		3,608		3,813
Amortization		534		554
Amortization of deferred gain		(2,216)		(391)
Loss on sale of assets		2,053		-
Provision for bad debts		234		(177)
Deferred income taxes		5,455		(320)
Stock-based compensation and directors' fees		4,790		1,076
Excess tax benefit from stock-based awards		(2,755)		(644)
Unrealized gain on short-term investments		-		(10)
Unrealized (gain) loss on foreign exchange contracts		-		137
Unrealized foreign currency transaction gain		(108)		(71)
Changes in operating assets and liabilities:
Accounts receivable		6,351		337
Inventories		(10,405)		(2,668)
Other assets		1,081		895
Accounts payable		(6,463)		(1,727)
Other liabilities		(4,382)		(3,890)
Net Cash (Used in) Provided by Operating Activities		(7,734)		4,152
Cash Provided by (Used in) Investing Activities:
Purchases of short-term investments		(128)		(23,042)
Sales of short-term investments		63		22,826
Proceeds from the sale of Assets		50,424		-
Additions to property, plant and equipment		(4,046)		(4,203)
Additions to trademarks and patents		(173)		(265)
Net Cash Provided by (Used in) Investing Activities		46,140		(4,684)
Cash Used in Financing Activities:
Borrowing on long-term debt		-		3,000
Repayment of long-term debt		-		(7,221)
Excess tax benefit from stock-based awards		2,755		644
Repurchase of share-based awards to satisfy tax withholdings		(1,162)		-
Proceeds from sale of Class A common stock, net		90		320
Purchase of treasury stock		(3,113)		(2,198)
Net Cash Used in Financing Activities		(1,430)		(5,455)
Effect of exchange rate changes on cash and cash equivalents		(220)		595
Increase (Decrease) in Cash and Cash Equivalents		36,756		(5,392)
Cash and cash equivalents at beginning of period		27,120		25,991
Cash and Cash Equivalents at End of Period	$	63,876	$	20,599

SUPPLEMENTAL INFORMATION
Income taxes paid, net	$	1,236	$	1,490
Interest paid	$	322	$	371

See notes to condensed consolidated financial statements.

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 ("US GAAP") 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 US GAAP for financial statements. The preparation of financial statements requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. In the opinion of the Company's management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of items of a normal and recurring nature) necessary to present fairly the financial position as of September 28, 2013, the results of operations and comprehensive income (loss) for the three-month and nine-month periods ended September 28, 2013 and September 29, 2012, and the cash flows for the nine-month periods ended September 28, 2013 and September 29, 2012. The results of operations for the nine-month period ended September 28, 2013 are not necessarily indicative of the results to be expected for the full year. The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. Subsequent events have been evaluated to the date of issuance of these financial statements. These financial statements should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 29, 2012, which includes consolidated financial statements and notes thereto for the years ended December 29, 2012, December 31, 2011 and January 1, 2011. The Company operates on a 52/53 week fiscal year, ending on the Saturday closest to December 31, and consists of 13 week fiscal quarters.

Subsequent to the September 6, 2013 divestiture of the Cross Accessory Division (“CAD”), the A. T. Cross Company renamed itself Costa Inc. (“the Company”). Costa Inc. trades on the NASDAQ stock exchange under the ticker symbol ATX. The Company now operates as one segment in the competitive sunglass business. The Company designs, manufactures and markets high-quality, high-performance polarized sunglasses under the brand names Costa and Native. The Company typically records its highest sales and operating income in the second quarter of the fiscal year.

NOTE B - Inventory
The Company’s inventories are valued at the lower of cost or market. Cost is determined using the first in, first out method. The components of inventory are as follows:


(THOUSANDS OF DOLLARS)	SEPTEMBER 28,		DECEMBER 29,
	2013		2012
Finished goods	$	8,779	$	26,182
Work in process		23		3,512
Raw materials		9,098		8,326
	$	17,900	$	38,020

NOTE C - Income Taxes from Continuing Operations
In the first nine months of 2013 the effective tax rate from continuing operations was 36.8%. In the first nine months of 2012 the effective tax rate from continuing operations was 33.1%.

NOTE D – Discontinued Operations

On September 6, 2013, the Company completed the sale of its Cross Accessory Division to a newly-formed affiliate of Clarion Capital Partners, LLC (the "Purchaser"). In accordance with the agreement, dated July 13,

2013, the Purchaser assumed substantially all of the liabilities associated with the CAD Business, except those related to the U.S. defined benefit pension plan, certain pre-closing environmental matters and certain other liabilities, which were retained by the Company. Under the terms of the Asset Purchase Agreement the purchase price is subject to a post-closing adjustment for the final working capital sold.

The operating results of CAD, prior to the sale are reported within (loss) income from discontinued operations, net of tax, in the consolidated statement of income. The assets and liabilities sold with the business are listed below.

The following table sets forth summary information relating to Cross Accessory Division:


	THREE MONTHS ENDED				NINE MONTHS ENDED
(THOUSANDS OF DOLLARS)	SEPTEMBER 28,		SEPTEMBER 29,		SEPTEMBER 28,		SEPTEMBER 29,
	2013		2012		2013		2012

Net Sales	$	12,447	$	23,946	$	54,096	$	67,196

Operating (loss) income before income taxes		(3,295)		1,170		(3,605)		2,203

Loss on disposal of assets		(185)		-		(185)		-
Income tax provision on discontinued operations		6,584		28		7,077		218
(Loss) Income from Discontinued Operations	$	(10,064)	$	1,142	$	(10,867)	$	1,985

There was $2.9 million of cumulative translation losses which were reclassified from accumulated other comprehensive income to the income statement as part of the loss from discontinued operations.

The CAD assets and liabilities that were sold represent those reported as the CAD segment of the Company’s financial statements and were as follows:


(THOUSANDS OF DOLLARS)
Accounts Receivable	$	13,499
Inventory		29,982
PP&E		10,448
Other Assets		6,493
Accounts payable, accrued expenses and other		(14,495)
Other Liabilities		(988)
Net Assets	$	44,939

NOTE E - Warranty Costs

Costa and Native 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 repair department, unit sales and the number of units that are eventually returned for warranty repair. The current portion of accrued warranty costs was $0.2 million at September 28, 2013 and December 29, 2012, and was recorded in accounts payable, 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 28,		SEPTEMBER 29,		SEPTEMBER 28,		SEPTEMBER 29,
	2013		2012		2013		2012
Accrued Warranty Costs - Beginning of Period	$	1,728	$	1,887	$	1,712	$	1,892
Warranty costs paid		(106)		(67)		(369)		(205)
Warranty costs accrued		255		28		534		161
Warranty liability sold		(1,249)		-		(1,249)		-
Accrued Warranty Costs - End of Period	$	628	$	1,848	$	628	$	1,848

NOTE F - Line of Credit
The Company maintains a $40 million revolving line of credit with Bank of America, N.A. (the “Bank”). Under the line of credit agreement, the Bank agreed to make loans to the Company in an aggregate amount not to exceed $40 million, including up to $10 million equivalent in Eurocurrency loans denominated in pounds sterling or Euro (“Eurocurrency Loans”) and up to $30 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 $7.5 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 and reborrowed without penalty. This credit facility has a maturity date of and amounts outstanding have to be paid by December 31, 2013.

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 plus an applicable margin. 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 1.75% and 2.25%, and the applicable margin for federal funds or the Bank's prime rate will be an amount between 0.25% and 0.75%, which 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 requires the Company to maintain a maximum ratio of consolidated funded indebtedness to consolidated adjusted EBITDA over any four-quarter period. The agreement requires the Company to maintain a minimum consolidated tangible net worth, computed at each year end, a maximum level of capital expenditures, each of which is calculated in accordance with the agreement. Amounts due under the credit agreement are guaranteed by certain domestic subsidiaries of the Company. Amounts due are also secured by a pledge of the assets of the Company and those of certain of its domestic subsidiaries.

At September 28, 2013, the outstanding balance of the Company's line of credit was $15.0 million, bearing an interest rate of approximately 2.0%, and the unused and available portion, according to the terms of the agreement, was $25.0 million. At December 29, 2012, the outstanding balance of the Company's line of credit was $15.0 million, bearing an interest rate of approximately 2.0%, and the unused and available portion, according to the terms of the agreement, was $25.0 million.

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


(THOUSANDS OF DOLLARS)	THREE MONTHS ENDED				NINE MONTHS ENDED
	SEPTEMBER 28,		SEPTEMBER 29,		SEPTEMBER 28,		SEPTEMBER 29,
	2013		2012		2013		2012
Service cost	$	59	$	12	$	176	$	37
Interest cost		500		561		1,500		1,681
Expected return on plan assets		(709)		(578)		(2,128)		(1,732)
Amortization of unrecognized loss		449		287		1,349		863
Amortization of prior service cost		3		3		9		9
Net Periodic Benefit Cost	$	302	$	285	$	906	$	858

The Company contributed $1.8 million to its defined benefit pension plans in the first nine months of 2013. The Company expects to contribute a total of $2.3 million to its defined benefit pension plans in 2013. Additionally, the Company expects to contribute $0.6 million to its defined contribution retirement plans in 2013.

In the second quarter of 2013, the Company settled a defined benefit pension plan that covered certain employees of its former manufacturing facility in Ireland. The Company incurred approximately $1.4 million in non-cash charges that are included in discontinued operations.

NOTE H - Goodwill and Other Intangible Assets

Goodwill and indefinite-lived intangible assets are not amortized but are 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 assessments annually during the fourth quarter or on an interim basis if potential impairment indicators arise. The fair value of the reporting unit's goodwill is determined using established income and market valuation approaches and the fair value of other indefinite-lived intangible assets, consisting of two trade names, is determined using a forward relief from royalty method. For further discussion about impairment analysis, see the "Impairment Analysis" section of Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations," included in our Form 10-K for the fiscal year ended December 29, 2012.

At September 28, 2013 and December 29, 2012, the approximate $15.3 million carrying value of goodwill, $11.9 million of which is expected to be tax deductible. Other intangibles consisted of the following:


(THOUSANDS OF DOLLARS)	SEPTEMBER 28, 2013						DECEMBER 29, 2012
	GROSS CARRYING AMOUNT		ACCUMULATED AMORTIZATION		OTHER INTANGIBLES, NET		GROSS CARRYING AMOUNT		ACCUMULATED AMORTIZATION		OTHER INTANGIBLES, NET
Amortized:
Trademarks	$	250	$	160	$	90	$	9,542	$	9,163	$	379
Patents		323		165		158		3,642		3,334		308
Customer relationships		3,170		2,490		680		3,170		2,151		1,019
	$	3,743	$	2,815	$	928	$	16,354	$	14,648	$	1,706
Not Amortized:
Trade names						6,900						6,900
Intangibles, Net					$	7,828					$	8,606

Amortization expense for the three and nine month periods ended September 28, 2013 was approximately $0.1 million and $0.5 million, respectively. The estimated future amortization expense for other intangibles remaining as of September 28, 2013 is as follows:


(THOUSANDS OF DOLLARS)	2013	2014	2015	2016	2017	THEREAFTER
	$ 158	$ 518	$ 165	$ 47	$ 38	$ 2

NOTE I - Financial Instruments
The Company is exposed to market risks arising from adverse changes in foreign exchange and interest rates. In the normal course of business, the Company manages these risks through a variety of strategies, including the use of derivatives. Certain derivatives are designated as cash flow hedges and qualify for hedge accounting treatment, while others do not qualify and are marked to market through earnings. Gains or losses from derivatives used to manage foreign exchange are classified as selling, general and administrative expenses.

For cash flow hedges, changes in fair value are deferred in accumulated other comprehensive loss within shareholders' equity until the underlying hedged item is recognized in net income. For fair value hedges, changes in fair value are recognized immediately in earnings, consistent with the underlying hedged item. Hedging transactions are limited to an underlying exposure. As a result, any change in the value of the derivative instruments would be substantially offset by an opposite change in the value of the underlying hedged items. Hedging ineffectiveness and a net earnings impact occur when the change in the value of the hedge does not offset the change in the value of the underlying hedged item. Ineffectiveness of the Company's hedges is not material. If the derivative instrument is terminated, the Company continues to defer the related gain or loss and include it as a component of the cost of the underlying hedged item. Upon determination that the underlying hedged item will not be part of an actual transaction, the Company recognizes the related gain or loss in the statement of income immediately.

The Company also uses derivatives that do not qualify for hedge accounting treatment. The Company accounts for such derivatives at market value with the resulting gains and losses reflected in the statements of income.

The Company enters into arrangements with one financial institution that it believes is creditworthy and generally settles such arrangements on a net basis. In addition, the Company performs a quarterly assessment of counterparty credit risk, including a review of credit ratings, credit default swap rates and potential nonperformance of the counterparty. Based on the most recent quarterly assessment of counterparty credit risk, the Company considers this risk to be low.

Foreign Exchange
The Company enters into derivatives, primarily forward foreign exchange contracts with terms of no more than one year, to manage risk associated with exposure to certain foreign currency denominated balance sheet positions, primarily intercompany accounts receivable. Gains or losses resulting from the translation of certain foreign currency balance sheet positions are recognized in the statement of operations as incurred. Foreign currency derivatives had a total notional value of $0 as of September 28, 2013 and $24.6 million as of December 29, 2012. Gains and losses on the derivatives were generally offset by changes in U.S. dollar value of the underlying hedged items.

Interest Rates
In 2010, the Company entered into a forward interest rate swap agreement with an initial notional amount of $15.0 million and a term of three years. This swap effectively fixed the interest rate on a portion of the Company’s line of credit at approximately 1.2%. The item being hedged was the first interest payment to be made on $15.0 million of principal expected to occur each month beginning March 31, 2011. The Company measures hedge ineffectiveness using the “hypothetical” derivative method. This swap was designated a cash flow hedge and the effect of the mark-to-market valuation is recorded as an adjustment, net of tax, to accumulated other comprehensive loss. The interest rate swap expired July 28, 2013.

Fair Value Measurements
The fair value framework requires the categorization of assets and liabilities into three levels based upon the assumptions (inputs) used to price the assets or liabilities. Level 1 provides the most reliable measure of fair value, whereas Level 3 generally requires significant management judgment. The three levels are defined as follows:

Level 1	Unadjusted quoted prices in active markets for identical assets and liabilities.
Level 2	Observable inputs other than those included in Level 1. For example, quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets.
Level 3	Unobservable inputs reflecting management's own assumptions about the inputs used in pricing the asset or liability.

The fair values of our financial assets and liabilities are categorized as follows:


(THOUSANDS OF DOLLARS)	SEPTEMBER 28,								DECEMBER 29,
	2013								2012
	LEVEL 1		LEVEL 2		LEVEL 3		TOTAL		LEVEL 1		LEVEL 2		LEVEL 3		TOTAL
Assets:
Money market funds (A)	$	56,002	$	-	$	-	$	56,002	$	705	$	-	$	-	$	705
Short-term investments (B)		292		-		-		292		227		-		-		227
Derivatives not designated as
hedging instruments:
Foreign exchange contracts (C)		-		-		-		-		-		257		-		257
	$	56,294	$	-	$	-	$	56,294	$	932	$	257	$	-	$	1,189


(THOUSANDS OF DOLLARS)	SEPTEMBER 28,								DECEMBER 29,
	2013								2012
	LEVEL 1		LEVEL 2		LEVEL 3		TOTAL		LEVEL 1		LEVEL 2		LEVEL 3		TOTAL
Liabilities
Derivatives designated as
hedging instruments:
Interest rate swaps (D)	$	-	$	-	$	-	$	-	$	-	$	87	$	-	$	87
Derivatives not designated as
hedging instruments:
Foreign exchange contracts (C)		-		-		-		-		-		157		-		157
	$	-	$	-	$	-	$	-	$	-	$	244	$	-	$	244

(A) Value is based on quoted market prices of identical instruments, fair value is included in cash and cash equivalents

(B) Value is based on quoted market prices of identical instruments

(C) Value is based on the present value of the forward rates less the contract rate multiplied by the notional amount, fair value is included in other current assets or accounts payable, accrued expenses and other liabilities

(D) Value is derived from a discounted cash flow analysis based on the terms of the contract and the interest rate curve, fair value is included in accounts payable, accrued expenses and other liabilities

Accounts receivable are recorded at net realizable value, which approximates fair value. Accounts payable, included in accounts payable, accrued expenses and other current liabilities, are recorded at historical cost, which approximates fair value due to the short-term nature of the liabilities. Line of credit is recorded at historical cost, which approximates fair value since the interest rate varies with prevailing market rates similar to level 2 categorized items.

The effective portion of the pre-tax gains (losses) on our derivative instruments for the three and nine month periods ended September 28, 2013 and September 29, 2012 are categorized in the following table:


(THOUSANDS OF DOLLARS)	THREE MONTHS ENDED				NINE MONTHS ENDED
	SEPTEMBER 28,		SEPTEMBER 29,		SEPTEMBER 28,		SEPTEMBER 29,
	2013		2012		2013		2012
Fair Value / Non-designated Hedges:
Foreign exchange contracts (A)	$	(8)	$	(31)	$	-	$	(137)
Cash Flow Hedges:
Effective portion recognized in other
comprehensive income:
Interest rate swaps	$	14	$	57	$	162	$	152
Effective portion reclassified from other
comprehensive income:
Interest rate swaps (B)	$	(14)	$	(36)	$	(88)	$	(108)


(A)	Included in discontinued operations
(B)	Included in interest expense

NOTE J - Short-Term Investments
At September 28, 2013, the Company had short-term investments of $0.3 million classified as trading securities. Realized and unrealized gains or losses on these short-term investments are included in other income. The amount of unrealized gain on these short-term investments was not material at September 28, 2013.

NOTE K - New Accounting Pronouncements
In September 2011, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) which simplified how companies test goodwill for impairment. The ASU permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in the goodwill accounting standard. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The Company adopted this pronouncement in 2012. In July 2012, the FASB issued an ASU which expanded the scope of this valuation testing methodology to include all indefinite-lived assets and is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. We do not expect this ASU to have a material effect on our financial position, results of operations or cash flows.

In February 2013, the FASB issued ASU 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” to amend Accounting Standards Codification Topic 220, “Comprehensive Income”. The amendment requires an entity to provide information about the amounts reclassified out of other comprehensive income by component. Entities are also required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under US GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under US GAAP to be reclassified in their entirety to net income, an entity is required to cross reference to other disclosures required under US GAAP that provide additional details about those amounts. ASU 2013-02 is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2012. The Company has applied the requirements of ASU 2013-02 in the first quarter of 2013.

NOTE L - Commitments and Contingencies
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 the Comprehensive Environmental Response, Compensation and Liability Act ("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 Company expects that the Federal Environmental Protection Agency ("EPA") will select a remedy for the Site in 2014. 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 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Overview
A. T. Cross Company was a designer and marketer of branded personal accessories including writing instruments, reading glasses, personal and business accessories and sunglasses.

On September 6, 2013, the Company completed the sale of its Cross Accessory Division (“CAD”) to a newly formed affiliate of Clarion Capital Partners, LLC (the “Purchaser”). The Purchaser assumed substantially all of the liabilities associated with the CAD business, other than those related to the U.S. defined benefit pension plan and certain pre-closing environmental matters and certain other liabilities. The consolidated statements of income included present the former CAD as a Discontinued Operation.

Subsequent to the September 6, 2013 divestiture, the A. T. Cross Company renamed itself Costa Inc. (“the Company”). Costa Inc. trades on the NASDAQ stock exchange under the ticker symbol ATX.

The Company operates as one segment in the competitive sunglass business. The Company designs, manufactures and markets high-quality, high-performance polarized sunglasses under the brand names Costa and Native. The Company typically records its highest sales and operating income in the second quarter of the fiscal year.

Results of Operations Third Quarter 2013 Compared to Third Quarter 2012

Sales by Costa Inc., the former Cross Optical Group, increased by 26.3% during the third quarter of 2013 to $24.6 million compared to $19.4 million in the third quarter of 2012.

Gross margins in the third quarter of 2013 were 58.6%, compared to 59.0% in the third quarter of 2012.

Operating income in the third quarter of 2013 decreased to $0.2 million, compared to $1.4 million in the third quarter of 2012. Included in the 2013 third quarter results for continuing operations was approximately $2.1 million of non-cash compensation expense associated with equity awards that vested upon the sale of the Cross Accessory Division.

Net loss from continuing operations for the third quarter of 2013 was a loss of $0.2 million or $0.01 per basic share compared to net income from continuing operations of $0.9 million, or $0.07 per basic and diluted share in the third quarter of 2012.

Net loss from discontinued operations, net of tax, for the third quarter of 2013 was $10.1 million, or $0.81 per basic share, compared to net income from discontinued operations, net of tax, of $1.1 million, or $0.09 per basic share and $0.08 per diluted share in the third quarter of 2012. Loss from discontinued operations primarily includes the operating results of the former Cross Accessories Division through the date of the disposition, the loss on sale of the CAD business as well as certain tax related items associated with the divestiture.

Net loss for the third quarter of 2013 was $10.2 million, or $0.82 per basic share, compared to net income of $2.0 million, or $0.16 per basic share and $0.15 per diluted share, in the third quarter of 2012.

Results of Operations First Nine Months 2013 Compared to First Nine Months 2012

Sales by Costa Inc., the former Cross Optical Group, increased by 20.7% during the nine months ended September 28, 2013 to $80.8 million compared to $67.0 million for the same period of 2012.

Gross margins during the nine month 2013 period were 58.9%, similar to the same period in 2012.

Operating income during the nine month 2013 period was $8.9 million, compared to $8.4 million for the same period in 2012. Included in the nine month 2013 period for continuing operations was approximately $2.1 million of non-cash compensation expense associated with equity awards that vested upon the sale of the Cross Accessory Division.

Net income from continuing operations for the nine month 2013 period was $5.4 million, or $0.43 per basic share and $0.40 per diluted share, compared to net income of $5.3 million, or $0.43 per basic share and $0.40 per diluted share, for the same period in 2012.

Net loss from discontinued operations, net of tax, for the nine month 2013 period was $10.9 million, or $0.88 per basic share, compared to net income from discontinued operations, net of tax, of $2.0 million, or $0.16 per basic and diluted share for the same period in 2012. Loss from discontinued operations primarily includes the operating results of the former Cross Accessories Division through the date of the disposition, the loss on sale of the CAD business as well as certain tax related items associated with the divestiture.

Net loss for the nine month 2013 period was $5.5 million, or $0.45 per basic share and $0.42 per diluted share, compared to net income of $7.2 million, or $0.59 per basic share and $0.56 per diluted share, for the same period in 2012.

Liquidity and Sources of Capital

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.

The Company's cash and short-term investment balance of $64.2 million at September 28, 2013 increased $36.8 million from December 29, 2012. The most significant factors affecting the Company's cash balance are discussed in this section.

The sale of the Cross Accessory Division in the third quarter generated $50.4 million of net cash for the Company. The changes to cash discussed below exclude the impact the sale of net assets.

Inventory was $17.9 million at September 28, 2013, as Costa Inc. inventory levels increased by $4.9 million from year end 2012. The increase in Costa Inc. inventory is to support higher anticipated sales volumes.

Accounts payable, accrued expenses and other liabilities was $11.2 million. Costa Inc. accounts payable, accrued expenses and other liabilities decreased by $4.1 million from year end.

The Company has a $40 million secured line of credit with a bank. At September 28 2013, this credit facility had a maturity date of and amounts outstanding had to be paid by December 31, 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 September 28, 2013, the outstanding balance of the Company's line of credit was $15.0 million, bearing an interest rate of approximately 2.0%, and the unused and available portion, according to the terms of the agreement, was $25.0 million. At December 29, 2012, the outstanding balance of the Company's line of credit was $15.0 million, bearing an interest rate of approximately 2.0%, and the unused and available portion, according to the terms of the agreement, was $25.0 million. The Company was in compliance with its various debt covenants as of September 28, 2013. 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:

x
Covenant Description	Covenant Requirement	Calculated Company Value September 28, 2013
Consolidated Tangible Net Worth	Cannot be less than $37.5 million plus 50% of Net Income For Fiscal Years after 2010, or $48.5 million	$60.9 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	$4.2 million
Consolidated Leverage Ratio	Cannot exceed 2.75 to 1	0.74:1

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 plan and contributions to the retirement plans.

All cash as of September 28, 2013, was available for domestic use.

Critical Accounting Policies

There have been no changes to our critical accounting policies and estimates from the information provided in Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations," included in our Form 10-K for the fiscal year ended December 29, 2012.

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," “intends,” "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 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 2013 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 2012 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 29, 2012 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 2012 Annual Report on Form 10-K.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer have evaluated our disclosure controls and procedures as of September 28, 2013 and have concluded that these disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities and Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. These disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the first nine months of 2013 that have materially affected, or are reasonably likely to materially affect, our 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 29, 2012 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 29, 2012 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.

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
June 30, 2013 - July 27, 2013	-		-	493,646
July 28, 2013 - August 24, 2013	-		-	493,646
August 25, 2013 - September 28, 2013	-		-	493,646
	-		-

In 2008, the Company's Board of Directors authorized management to repurchase up to 1.0 million shares of the Company's outstanding Class A common stock, depending on market conditions. On February 22, 2012, the Company’s Board of Directors authorized a 700,000 share increase to the 2008 program. Cumulatively, through September 28, 2013, the Company purchased approximately 1.2 million shares under this plan for approximately $8.5 million at an average price per share of $7.07.

Item 3. Defaults Upon Senior Securities.

None

Item 4. Mine Safety Disclosures

None

Item 5. Other Information.

Section 5 – Corporate Governance and Management

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers

Executive Agreements

On February 21, 2013 certain Named Executive Officers (“NEOs”) of the Company entered into Amended and Restated Executive Agreements with the Company. Due to these Amended and Restated Executive Agreements the NEOs qualify for certain benefits in the event of termination of such executive’s employment. The amount of compensation payable to each NEO is dependent on the nature of the termination. Payments that may be made in cases of voluntary termination, early retirement, involuntary termination, termination following a change in control and in the event of disability or death of the executive are discussed below. The actual amounts to be paid out upon termination or change in control can only be determined at the time of such executive’s separation from the Company.

Term

The agreements shall continue in effect until three years following the date of the agreements and will automatically renew for an addition year on each anniversary of thereof unless otherwise terminated.

Payments Made Upon Termination

Regardless of the nature of a NEO’s termination, he or she may be entitled to receive benefits accrued and compensation earned during his or her term of employment. Such amounts may include:

·	non-equity incentive compensation earned during the fiscal year in the same manner as other employee participants;

·	vested outstanding equity grants in the same manner as other employee participants;

·	extension of exercise period for vested stock options if executive is age 62 or older in the same manner as other employee participants;

·	vested amounts contributed by the Company under the 401(k) plan in the same manner as other employee participants, the related Excess Plan and the nonqualified deferred compensation program;

·	unused and accrued vacation pay in the same manner as other employee participants; and

·	amounts accrued and vested through the Company Qualified Pension Plan in the same manner as other employee participants, and the related Excess Plan.

Payments Made Upon Death or Disability

In the event of the death or disability of an NEO, in addition to the applicable benefits listed under the headings “Payments Made Upon Termination” and “Payments Made Upon Retirement” above, the NEO or his or her estate may receive benefits under the Company’s disability plan or payments under the Company’s life insurance plan, as appropriate and in the same manner as other employee participants.

Payments Made Upon Involuntary Termination Without Cause

In the event of an involuntary termination without cause, in addition to the items identified above under the heading “Payments Made Upon Termination” above, each of the NEOs (other than Mr. Whalen) will receive a severance payment equal to 1.0 times the executive’s base salary, and Mr. Whalen will receive a severance payment equal to 2.0 times his base salary and target bonus under the annual incentive plan (75% of his base salary).

Payments Made Upon a Change in Control

The Company has a Change in Control Severance Program (the “Program”). Pursuant to this Program, if an executive’s employment is actually or constructively terminated following a change in control (other than termination by the Company for cause), in addition to the items identified above under the heading “Payments Made Upon Involuntary Termination Without Cause”, the named executives may receive the following payments and benefits.

With the exception of Mr. Whalen, each of the NEOs actually or constructively terminated in the 24 month period following a change in control will receive:

·	Severance payment equal to 1.5 times the executive’s base salary;

·	an amount equal to 1.5 times the executive’s target bonus under the annual incentive plan;

·	in certain circumstances, an amount as described in the Company’s 2012 Proxy Statement under the heading “Post-Termination Compensation” which represents excise tax charged to the NEO as a result of any change in control payments; and

·	any unvested stock options held by the executive will vest and become exercisable, and any restrictions on restricted stock grants held by the executive will lapse.

If actively or constructively terminated following, or under certain circumstances in the time period immediately preceding, a change in control, Mr. Whalen will receive:

·	a severance payment equal to 3.0 times his base salary;

·	an amount equal to 3.0 times his target bonus under the annual incentive plan (75% of base salary);

·	an amount as described in the Company’s 2012 Proxy Statement under the heading “Post-Termination Compensation” which represents excise tax charged to Mr. Whalen as a result of any change in control payments; and

·	Professional outplacement services for a minimum period of 18 months; and

·	any unvested stock options held by Mr. Whalen will vest and become exercisable, and any restrictions on restricted stock grants held by Mr. Whalen will lapse.

Change in Control is defined within the agreements. Refer to Exhibits 99.1, 99.2, 99.3, and 99.4.

Prior Executive Agreements

Prior to entering into the Amended and Restated Executive Agreements described above, David Whalen, Charles MacDonald, Kevin Mahoney, and Tina Benik entered into Executive Agreements with the Company, attached hereto as Exhibits 99.6, 99.7, 99.8, and 99.9.

Director Indemnification Agreement

The Company has entered into Indemnification Agreements with the members of its outside Board of Directors. The agreement protects the Director against certain risks associated with their role as a Director of the Company. The form of that agreement is attached as Exhibit 99.5.

Letter Agreements

Tina Benik, a NEO, entered into a Retention Letter with the Company on February 26, 2013 and a Letter Agreement with the Company on August 8, 2013. Such agreements are attached hereto as Exhibits 99.10 and 9.11, respectively.

Item 5.03 Amendment to the Articles of Incorporation or Bylaws; Change in Fiscal Year

On September 11, 2013, the Company filed an amendment to its Articles of Incorporation to change its name from A.T. Cross Company to Costa Inc. A copy of the Amendment is located at Exhibit 3.

Item 6. Exhibits.


Exhibit 3	Amendment to the Articles of Incorporation of the Company, filed September 11, 2013
Exhibit 10	Asset Purchase Agreement
Exhibit 31.1	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.2	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 99.1	Amended and Restated Executive Agreement by and between the Company and David G. Whalen, dated February 21, 2013
Exhibit 99.2	Amended and Restated Executive Agreement by and between the Company and Charles R. MacDonald, dated February 21, 2013
Exhibit 99.3	Amended and Restated Executive Agreement by and between the Company and Kevin F. Mahoney, dated February 21, 2013
Exhibit 99.4	Amended and Restated Executive Agreement by and between the Company and Tina C. Benik, dated February 21, 2013
Exhibit 99.5	Form of Director Indemnification Agreement
Exhibit 99.6	Executive Agreement by and between the Company and David G. Whalen, dated January 1, 2012
Exhibit 99.7	Executive Agreement by and between the Company and Charles R. MacDonald, August 15, 2011
Exhibit 99.8	Executive Agreement by and between the Company and Kevin F. Mahoney, dated August 15, 2011
Exhibit 99.9	Executive Agreement by and between the Company and Tina C. Benik, dated August 17, 2011
Exhibit 99.10	Retention Letter by and between the Company and Tina C. Benik, dated February 26, 2013
Exhibit 99.11	Letter Agreement by and between the Company and Tina C. Benik, dated August 8, 2013
Exhibit 101	Interactive XBRL Data Files

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.


	COSTA INC.

Date: November 7, 2013	By: DAVID G. WHALEN
	David G. Whalen
	Chief Executive Officer

Date: November 7, 2013	By: KEVIN F. MAHONEY
	Kevin F. Mahoney
	Senior Vice President, Finance and
	Chief Financial Officer

COSTA INC 10-Q