Page 1 of 219
Exhibit Index
on Page 80 through 84
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended June 30, 1997
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
.
Commission File Number 1-13684
DIMON Incorporated
(Exact name of registrant as specified in its charter)
VIRGINIA 54-1746567
(State or other jurisdiction of incorporation) (IRS Employer
Identification No.)
512 Bridge Street, Danville, Virginia 24541
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(804)792-7511
Securities registered pursuant to Section 12(b) of the Act:
Common Stock (no par value)
Common Stock Purchase Rights
Securities registered pursuant to Section 12(g) of the Act:
None
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, and (2) has been
subject to such filing requirements for the past 90 days.
Yes.....X...... No...........
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of Common Stock held by non-affiliates
of the registrant (based upon the closing sale price quoted by The New
York Stock Exchange) on September 2, 1997, was approximately
$991,209,000. In determining this figure, the registrant has assumed
that all of its directors and officers, and all persons known to it to
beneficially own ten percent or more of its Common Stock, are
affiliates. This assumption shall not be deemed conclusive for any
other purpose.
As of September 2, 1997, there were 44,330,849 shares of Common
Stock outstanding.
Portions of the registrant's definitive Proxy Statement for its
1997 Annual Meeting of Stockholders to be held November 14, 1997, to
be filed with the Securities and Exchange Commission pursuant to
Regulation 14A under the Securities Exchange Act of 1934 (the "Proxy
Statement"), are incorporated by reference into Part III of this Form
10-K.
PART I
ITEM 1. BUSINESS
--------
DIMON is the second largest independent leaf tobacco merchant in the
world. The Company acquired Intabex Holdings Worldwide S.A.
("Intabex") on April 1, 1997, and is the successor to Dibrell Brothers,
Incorporated ("Dibrell") and Monk-Austin, Inc. ("Monk-Austin") which
merged on April 1, 1995 (the "Merger"). Principally through the
Intabex Acquisition (the "Intabex Acquisition"), the Company increased
its tobacco-related revenues for the twelve months ended June 30,
1997, by 20%, from $1,770 million to $2,126 million and increased its
market share in the established worldwide leaf tobacco market from
approximately 30% to approximately 37% on a pro forma basis. In
addition, DIMON strengthened its presence in several important tobacco
growing regions, including Brazil, Argentina, Malawi, Thailand and
Zimbabwe. The Company's address is 512 Bridge Street, Danville,
Virginia 24541 and its telephone number is (804) 792-7511. See Note N
to the Company's Consolidated Financial Statements for the year ended
June 30, 1997, for detailed information regarding each of the
Company's business segments.
Tobacco
- -------
The Leaf Tobacco Industry
- -------------------------
The world's large multinational cigarette manufacturers, with one
exception, rely on independent leaf tobacco merchants such as the
Company to supply the majority of their leaf tobacco needs. Leaf
tobacco merchants select, purchase, process, store, pack, ship and, in
certain developing markets, provide agronomy expertise and financing
for growing leaf tobacco. At the present time, there are three major
global leaf tobacco merchants, including the Company. These three
merchants source, process and ship leaf tobacco around the world, for
delivery to manufacturers of cigarettes and other tobacco products.
The Company believes that the leaf tobacco industry is characterized
by the following trends:
Growth of American Blend Cigarettes. American blend cigarettes have
gained market share in several major foreign markets, including Asia
(particularly the Pacific Rim), Europe and the Middle East in recent
years. American blend cigarettes contain approximately 50% flue-cured,
35% burley and 15% oriental tobacco, contain less tar and
nicotine and taste milder than locally produced cigarettes containing
dark and semi-oriental tobacco historically consumed in certain parts
of the world. According to the Tobacco Merchants Association ("TMA"),
American blend cigarette consumption (excluding China) has increased
from 1.7 trillion units in calendar 1990 to 1.9 trillion units in
calendar 1996, an increase of 10.8%. The TMA estimates that worldwide
American blend tobacco consumption (excluding China) will increase an
additional 5.5% to more than 2.0 trillion units by the year 2000. The
TMA also estimates that worldwide American blend cigarette consumption
(excluding China), as a percentage of total consumption, has also
experienced substantial growth, increasing from 47.9% in 1990 to 52.5%
in 1996, and is projected to reach 54.3% by the year 2000. As
American blend cigarettes have continued to gain global market share,
the demand for export quality flue-cured, burley and oriental tobacco
sourced and processed by the three independent leaf tobacco merchants,
including the Company, has grown accordingly.
- -2-
Growth in Foreign Operations of Large Cigarette Manufacturers.
Several of the large multinational cigarette manufacturers have
expanded their operations throughout the world, particularly in
Central and Eastern Europe and the former Soviet Union, in order to
increase their access to and penetration of these markets. As
cigarette manufacturers expand their global operations, the Company
believes there will be increased demand for local sources of leaf
tobacco and local tobacco processing and distribution, primarily due
to the semi-perishable nature of unprocessed leaf tobacco and the
existence of domestic content laws in certain countries. The Company
believes that the international expansion of the large multinational
cigarette manufacturers will cause these manufacturers to place
greater reliance on the services of financially strong leaf tobacco
merchants with the ability to source and process tobacco on a global
basis and to help develop higher quality local sources of tobacco.
Growth in Foreign Sourced Tobacco. In an effort to respond to
cigarette manufacturers' increasing demand for lower cost American
blend cigarette ingredients, the major leaf tobacco merchants have
made significant investments in South America, Africa and Asia, the
principal sources of flue-cured and burley tobacco outside the U.S.
This trend is expected to continue in the foreseeable future as the
quality of foreign grown tobacco continues to improve.
Improved Market Conditions. The global leaf tobacco industry has
recovered from a disruption in demand and reduction in pricing during
1993 and 1994. The disruption of the industry in the U.S. during
these years occurred primarily because of (1) the enactment of the
domestic content 75/25 Rule, (2) a poor quality 1993 flue-cured
tobacco crop in the U.S. and (3) the introduction of legislation in
the summer of 1993 to increase significantly the federal excise tax on
cigarettes that resulted in manufacturers' reluctance to build
inventories. Concurrent with the reduction in demand for
international tobacco related to the 75/25 Rule and lower than
expected initial demand for imported tobacco products in Central and
Eastern Europe and the former Soviet Union, the worldwide price of
tobacco declined due to oversupply attributable to record foreign
tobacco crops. This combination of reduced demand and lower prices
had a negative impact on the financial performance of the leaf tobacco
merchants and resulted in significant increases in uncommitted tobacco
inventories among the merchants.
In recent years, the demand and supply imbalance in the worldwide
tobacco market has improved. Leaf tobacco production outside the U.S.
was curtailed in response to the high levels of uncommitted tobacco
inventories. The 75/25 Rule was repealed due to its violation of GATT
and was replaced by a series of less stringent import quotas. This
resulted in cigarette manufacturers in the U.S. resuming their
purchases of tobacco grown outside the U.S. The combination of lower
levels of tobacco production and increased demand had a positive
impact on worldwide tobacco prices, a corresponding positive impact on
the profitability of the industry, and resulted in significant
reductions in uncommitted tobacco inventories.
Business Strategy
- -----------------
The Company's primary business objective is to capitalize on growth in
worldwide consumption of American blend cigarettes by becoming the
low-cost preferred supplier of leaf tobacco to the large multinational
manufacturers of American blend cigarettes. To achieve this
objective, the Company has implemented a strategy to position itself
to meet the needs of its cigarette manufacturing customers throughout
the world by expanding its global operations directly in the major
tobacco exporting countries and by forming strategic partnerships with
its major customers in countries with emerging tobacco production. As
part of its strategy, the Company acquired Intabex on April 1, 1997.
The Company believes the Intabex Acquisition will further enhance the
Company's global tobacco purchasing capabilities, expand and diversify
its customer base and expand its geographic reach. The Company's
ability to respond to the global expansion and changing needs of the
large multinational cigarette manufacturers is a critical factor in
developing and expanding customer relationships. The principal
components of the Company's business strategy are as follows:
- -3-
Increase the Company's operations in low-cost tobacco growing regions.
To ensure breadth and depth of supply of tobacco, particularly the
tobacco used in American blend cigarettes, the Company has expanded
and plans to continue to expand its operations in South America,
Africa and China, the largest production areas of flue-cured and
burley tobacco outside of the U.S. The April 1, 1997 acquisition of
Intabex and certain assets of Tabex (PVT) Limited in Zimbabwe
substantially expanded the Company's presence in Brazil, Argentina,
Zimbabwe and Malawi, allowing the Company to significantly enhance its
market share in these countries, and established a new presence in
Mozambique, Spain, Sri Lanka, Thailand, Zaire and Zambia. In 1995,
the Company signed an agreement with the China National Tobacco
Corporation to provide additional access to a state-of-the art
processing facility and tobacco sources in the province of Yunnan.
The Company also made acquisitions in 1995 in Bulgaria, Greece and
Turkey, which the Company believes positions DIMON as the largest
worldwide merchant of oriental tobacco. The Company intends to
utilize its agronomy expertise in helping to develop low-cost sources
of American blend quality tobacco and its existing relationships with
the major multinational cigarette manufacturers to gain market share
in these growth regions.
Capitalize on outsourcing trends. The Company anticipates further
outsourcing of leaf tobacco purchasing and processing by cigarette
manufacturers. This outsourcing trend is driven by (1) higher margins
in cigarette production, (2) the increasing sophistication required in
sourcing leaf tobacco on a global basis, and (3) continued
privatization of tobacco and cigarette production operations in other
countries. In 1994, the Company began providing all leaf tobacco
auction buying in the U.S. for R. J. Tobacco Company, Inc. ("RJR"), the
second largest cigarette producer in the U.S. In 1995, the Company
began to purchase and process all of Lorillard Tobacco Company's
("Lorillard") auction market tobacco requirements in the U.S. With the
improved tobacco purchasing capabilities and expanded geographic reach
resulting from the Intabex Acquisition, the Company believes it will
continue to be a major beneficiary of the outsourcing trends in the
tobacco industry.
Improve efficiency and reduce operating costs. The Company realized
substantial operating efficiencies and operating cost reductions
following the Merger and anticipates achieving similar benefits in the
integration of Intabex. In connection with the Merger, the Company
initiated a restructuring plan for its operations. The plan was
designed to eliminate unprofitable locations, consolidate duplicative
processing facilities, reduce the salaried workforce, improve
operating efficiencies and increase regional unit accountability.
This initiative resulted in the recognition of various charges in
fiscal 1996, aggregating $11.8 million, and in fiscal 1995,
aggregating $17.8 million. These initiatives reduced the Company's
annual operating costs and expenses by approximately $25 million in
fiscal 1997. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
In the Intabex Acquisition, the Company acquired facilities in Malawi,
Italy, Germany, Zimbabwe, and the U.S., countries where the Company
already had facilities. By eliminating redundant facilities and
realizing other efficiencies similar to those achieved in the Merger,
the Company anticipates future savings in annual operating costs
relating to the integration in fiscal 1998.
In most major tobacco producing areas, the Company and Intabex had
similar operations, which created opportunities for significant cost
savings. Since the acquisition of Intabex, the Company has completed
the following in connection with its consolidation:
- -4-
- Integration of the African operations of Intabex, including
personnel reductions and consolidation of administrative
offices;
- Integration of the Latin American operations of Intabex,
including personnel reductions, consolidation of
administrative offices, the sale of the manufacturing assets
of a tobacco processing facility to a third party and the
conversion of that facility into a tobacco storage warehouse;
- Integration of North American operations of Intabex including
the consolidation of the former joint venture partnership
Eastern Carolina Leaf Processors, consolidation of
administrative offices and personnel reductions; and
- Integration of Asian operations, consisting primarily of
personnel reductions and consolidation of some administrative
offices.
Expand operations in new markets. During the last decade, several of
the large multinational cigarette manufacturers have expanded their
global operations, particularly into Central and Eastern Europe and
the former Soviet Union, in order to increase their access to and
penetration of new markets. The Company believes this will increase
demand for local sources of leaf tobacco and local tobacco processing
due to the semi-perishable nature of unprocessed tobacco and the
existence of domestic content laws in certain foreign countries. The
Company believes these factors will cause manufacturers to place
greater reliance on the services of financially strong leaf tobacco
merchants with the ability to source and process tobacco on a global
basis and to help develop higher quality local sources of leaf
tobacco. Intabex's presence in emerging tobacco markets provides new
sources of supply for the Company. Intabex brings new sources of
tobacco in the countries of Mozambique, Spain, Sri Lanka, Thailand,
Zaire and Zambia. In addition, the Company believes Intabex's tobacco
operations in the emerging markets of Africa and Asia will
significantly enhance its strength in these low-cost tobacco growing
regions.
Operations
- ----------
The Company has developed an extensive international network through
which it purchases, processes and sells tobacco. In addition to its
processing facilities in Virginia and North Carolina, the Company owns
or has an interest in processing facilities in Brazil and Zimbabwe,
the two most significant non-U.S. exporters of flue-cured tobacco,
Malawi and Mexico, two of the leading non-U.S. exporters of burley
tobacco, and Greece and Turkey, the leading exporters of oriental
tobacco. The Company also has processing facilities in Italy and
Germany. Intabex owned and operated leaf processing facilities in
Argentina, Sri Lanka and Thailand. The Company and Intabex have
historically contracted with third parties for the processing of
tobacco in certain countries. Including Intabex operations, the
Company contracts with third parties for leaf processing in Canada,
Chile, China, Guatemala, India, Mozambique, Spain, Zaire and Zambia
and certain countries of the former Soviet Union. In addition, the
Company has entered into contracts, joint ventures and other
arrangements for the purchase of tobacco grown in substantially all
countries that produce export-quality, flue-cured and burley tobacco,
including Argentina, Canada, China, India and Tanzania.
Purchasing. Prior to the Intabex acquisition, the Company purchased
tobacco in approximately 26 countries, generally at auction or
directly from growers. The Company now purchases tobacco in an
additional six countries and has expanded its purchasing capabilities
significantly in Brazil, Argentina, Malawi, Thailand and Zimbabwe.
Although the majority of the dollar value of tobacco sold by the
Company is produced domestically, the relative importance of tobacco
grown overseas to the Company's profitability has increased steadily.
During fiscal 1997, approximately 57%
- -5-
of the dollar value of tobacco purchased by the Company was purchased
in the U.S. Approximately 17%, 9% and 3% of the dollar value of
tobacco purchased by the Company during fiscal 1997 were purchased in
Brazil, Zimbabwe and Malawi, respectively. The balance of the
Company's tobacco purchases during 1997 were made in other tobacco
growing countries, including Argentina, Bulgaria, Canada, China,
Germany, France, Greece, India, Italy, Mexico, Poland, the former
Soviet Union, Tanzania and Turkey. The Company believes it has access
to a diverse supply of tobacco grown in a number of regions throughout
the world and can respond quickly to factors that may cause
fluctuations in the quality, yield or price of tobacco crops grown in
any one region.
Tobacco generally is purchased at auction or directly from growers.
Tobacco grown in the U.S., Canada, Malawi and Zimbabwe is purchased by
the Company principally on auction markets. The Company purchases
domestic tobacco on the flue-cured, burley and air-cured auction
markets in Florida, Georgia, Kentucky, Maryland, North Carolina, South
Carolina, Tennessee and Virginia for shipment to the Company's
facilities in North Carolina and Virginia for processing to customer
specification. The Company usually purchases tobacco at the auction
markets after receiving specific customer orders or indications of
customers' upcoming needs. The Company's network of more than 100
tobacco buyers allows the Company to cover the major auctions of
flue-cured and burley tobacco throughout the world. These buyers are
experts in differentiating hundreds of grades of tobacco based on
customer specifications and preferences that take into account, among
other factors, the texture, visual appearance and aroma of the
tobacco.
In non-auction markets such as Argentina, Brazil, Greece and Turkey,
the Company purchases tobacco directly from farmers or from local
entities that have arranged for purchase from farmers. These direct
purchases are often made by the Company based upon its projection of
the needs of its long-standing customers rather than against specific
purchase orders. The Company's arrangements with farmers vary from
locale to locale depending on the Company's predictions of future
supply and demand, local historical practice and availability of
capital. For example, in Brazil, the Company generally contracts to
purchase a farmer's entire tobacco crop at the market price at the
time of harvest based on the quality of the tobacco delivered.
Pursuant to these purchase contracts, the Company provides farmers
with fertilizer and other materials necessary to grow tobacco and may
extend loans to farmers to finance the crop. Under longer-term
arrangements with farmers, the Company may also finance farmers'
construction of curing barns. In addition, the Company's agronomists
maintain frequent contact with farmers prior to and during the growing
and curing seasons to provide technical assistance to improve the
quality and yield of the crop. In other non-auction markets, such as
Argentina and India, the Company buys tobacco from local entities that
have purchased tobacco from farmers and supervises the processing of
that tobacco by those local entities. The Company believes that its
long-standing relationships with its customers are vital to its
operations outside of the auction markets.
Processing. The Company processes tobacco to meet each customer's
specifications as to quality, yield, chemistry, particle size,
moisture content and other characteristics. The Company processes
purchased tobacco in 30 facilities located throughout the world, nine
of which were acquired in the Intabex Acquisition. Unprocessed
tobacco is a semi-perishable commodity that generally must be
processed within a relatively short period of time to prevent
fermentation or deterioration in quality. Accordingly, the Company
has located its processing facilities in proximity to its principal
sources of tobacco.
Upon arrival at the Company's processing plants, flue-cured and burley
tobacco is first reclassified according to grade. Most of that
tobacco is then blended to meet customer specifications regarding
color, body and chemistry, threshed to remove the stem from the leaf
and further processed to produce strips of tobacco and sieve out small
scrap. The Company also sells a small amount of processed but
unthreshed flue-cured and burley tobacco in loose-leaf and bundle form
to certain of its customers.
- -6-
Processed flue-cured and burley tobacco is redried to remove excess
moisture so that it can be held in storage by customers or the Company
for long periods of time. After redrying, whole leaves, bundles,
strips or stems are separately packed in cases, bales, cartons or
hogsheads for storage and shipment. Packed flue-cured and burley
tobacco generally is transported in the country of origin by truck or
rail, and exports are moved by ship. Prior to and during processing,
steps are taken to ensure consistent quality of the tobacco, including
the regrading and removal of undesirable leaves, dirt and other
foreign matter. Customer representatives are frequently present at
the Company's facilities to monitor the processing of their particular
orders. Increased consumption of discount and value-priced cigarettes
and competition among leaf merchants have led to improvements in
processing designed to minimize waste and thereby increase yield.
Throughout the processing, Company technicians use laboratory test
equipment for quality control to ensure that the product meets all
customer specifications.
From time to time, the Company processes and stores tobacco acquired
by various stabilization cooperatives under the U.S.'s price support
program. The Company can derive significant revenues from the fees
charged for such services, particularly in years when a substantial
portion of the domestic tobacco crop is acquired by such cooperatives
under the program. While these revenues are not material to the
Company's net sales, they result in additional recovery of fixed cost
which may be significant to gross profit.
Selling. The Company sells its tobacco to manufacturers of cigarettes
and other consumer tobacco products located in about 60 countries
around the world. The Company ships tobacco to international
locations designated by these manufacturers. A majority of the
shipments of tobacco are to factories of these manufacturers that are
located outside the U.S. In certain countries, the Company also uses
sales agents to supplement its selling efforts. Several of these
customers individually account for a significant portion of the
Company sales in a normal year. The loss of any one or more of such
customers could have a materially adverse effect on the tobacco
business of the Company.
The consumer tobacco business in most markets is dominated by a
relatively small number of large multinational cigarette manufacturers
and by government controlled entities. Approximately 41% and 55% of
the Company's consolidated tobacco sales for the years ended June 30,
1997 and 1996, respectively, were contracted to be delivered to 34 (37
in 1996) customers which the Company believes are owned by or under
common control of Philip Morris Companies, Inc. ("Philip Morris") or
RJR (Philip Morris, RJR or Japan tobacco in 1996, with Philip Morris
and RJR accounting for significantly larger portions of the Company's
sales) and each of which contributed in excess of 10% of total tobacco
sales. No other customer accounts for more than 10% of the Company's
sales. See Note N to the Company's Consolidated Financial Statements
for the year ended June 30, 1997. The Company generally has
maintained relationships with its customers for over forty years. In
fiscal 1997, the Company delivered approximately 37% of its tobacco
sales to customers in the U.S., approximately 31% to customers in
Europe and the remainder to customers located in Asia, South America
and elsewhere. The Intabex Acquisition significantly increases the
international presence of the Company.
As of June 30, 1997, the Company's and Intabex's consolidated entities
had tobacco inventories of approximately $583.6 million and
approximately $421.9 million in commitments or indications from
customers for purchases of tobacco. Substantially all of the June 30,
1997, orders are expected to be delivered in fiscal 1998. The level
of purchase commitments for tobacco fluctuates from period to period
and is significant only to the extent it reflects short-term changes
in demand for leaf tobacco. The Company typically makes 80-95% of its
leaf tobacco purchases pursuant to customer orders or supply contracts
or customer indications of anticipated need, with most purchases made
based on indications. Customers are legally bound to purchase tobacco
purchased by the Company pursuant to orders, but no contractual
obligation exists with respect to tobacco purchased in response to
indications. However, the Company has done business with most of its
customers for many years and has never experienced a significant
failure of customers to purchase tobacco for which they have given
indications. Other than the contracts with RJR and Lorillard
described below under " Global Operations United States" and an
agreement between Intabex and Tabacalera S.A. providing that Intabex
will provide a significant portion of Tabacalera's tobacco needs, the
Company has no significant supply agreements with its customers.
- -7-
The Company typically makes sales based on a customer's letter of
credit, by cash against documents or by payment against invoice.
Virtually all of the Company's sales throughout the world are
denominated in U.S. dollars. While payment for tobacco sold by the
Company is usually received after the tobacco has been processed and
shipped, some customers make advances to the Company periodically
throughout the buying season as tobacco is purchased by the Company
for their accounts. Distribution of processed tobacco is made by
delivery from the Company's storage facilities directly to customers,
by truck or rail to customers' storage or manufacturing facilities or
to port for shipping.
Global Operations
- -----------------
United States. The Company owns and operates four processing
facilities in North Carolina and Virginia. The price of tobacco grown
in the U.S. is supported under a government price support program
which also establishes quotas for production. Consequently, U.S.
- -grown tobacco is typically more expensive than tobacco grown
elsewhere. Although domestic tobacco historically has accounted for
the majority of the Company's sales, the Company expects that, because
of this price differential and its generally increasing business
outside of the U.S., sales of flue-cured and burley tobacco grown in
the U.S. and related services will be less significant than in the
past. The Company believes that any short-term decline in its
domestic business should be offset in the short-term by increased
foreign operations.
In late fiscal 1994, Monk-Austin entered into an agreement with RJR to
purchase all of RJR's U.S. auction market tobacco requirements. In
late fiscal 1995, Dibrell entered into an agreement with Lorillard
pursuant to which the Company will purchase and process all of
Lorillard's domestic auction market tobacco requirements. Generally,
the contracts establish a framework for pricing the Company's services
(which generally is negotiated with respect to crop year, grade of
tobacco leaf or type of service provided based on market prices), do
not provide for minimum purchases and are terminable upon reasonable
notice. The Company expects that purchases under these agreements
will account for a substantial portion of its tobacco purchases in the
U.S. in the future.
Brazil. The Company believes it is one of the two largest independent
leaf tobacco merchants in Brazil. The Company exports the majority of
the tobacco that it processes in Brazil to its customers around the
world. In fiscal 1997, the Company derived approximately 21% of its
tobacco revenue from its Brazilian operations.
In fiscal 1996, the Company merged its two wholly-owned subsidiaries,
Tabra and Dibrell do Brazil to form DIMON do Brazil. DIMON do Brazil
has three modern tobacco processing facilities located in the center
of Brazil's tobacco production area. Brazil represents the Company's
most significant foreign operation in virtually all respects,
including purchasing volume, processing and storage capacities and
operating income potential. Through the Merger and resulting
reduction in duplicative functions and facilities the Company reduced
annual operating costs.
Africa. The Company purchases flue-cured and burley tobacco at
auction for customer orders in Zimbabwe and Malawi. The tobacco is
threshed and packed for export at facilities in each country. The
Company exports the majority of the tobacco it processes in Zimbabwe
and Malawi to its customers around the world. In fiscal 1997, the
Company derived approximately 12% of its revenue from its Zimbabwean
and Malawian tobacco operations.
Intabex's business in Africa allows the Company to significantly
increase market share in the established markets of Zimbabwe and
Malawi. The addition of Intabex's business also creates a significant
presence for the Company in South Africa, Tanzania, Zambia,
Mozambique, and Zaire.
In fiscal 1995, the Company combined the former Dibrell and
Monk-Austin operations in Zimbabwe and Malawi to form two
wholly-owned subsidiaries, DIMON Zimbabwe and DIMON Malawi.
Through DIMON Zimbabwe the Company purchases, processes in two
facilities and exports flue-cured and burley tobacco grown in
Zimbabwe. Through DIMON Malawi the Company purchases, processes
in one facility and exports flue-cured and burley tobacco grown
in Malawi.
- -8-
Greece and Turkey. The Company believes it is the largest exporter of
processed oriental tobacco in the world. Greece and Turkey are the
most important producers of oriental tobacco. Through its wholly-owned
subsidiaries, DIMON Hellas Tobacco SA, Georges Allamanis Tobacco
International SA and DIMON Turk Tutun AS, the Company buys, exports
and processes, in two facilities in each country, oriental tobacco
grown in each country.
Other Foreign Operations. The Company also has foreign subsidiaries,
joint ventures and affiliates that purchase and sell tobacco grown in
other countries throughout the world. The Intabex Acquisition
provided the Company a significant presence in the established burley
tobacco market in Thailand, a new presence in Spain and, through a
wholly-owned subsidiary, new business as a supplier of premium cigar
and other dark-air cured tobacco to the resurgent cigar industry. In
addition, the Company owns and operates processing facilities in
Italy, Germany and Mexico.
In certain countries, such as China and India, the Company has
processing agreements with other processors to use their facilities
under the supervision of the Company's employees. In several South
American countries where the Company operates, tobacco is bought from
the farmers by the processors at negotiated prices, and it is
necessary to prefinance the crop by making advances of cash or
materials to the farmers prior to and during the growing season.
Competition
- -----------
The leaf tobacco industry is highly competitive. Competition among
dealers in leaf tobacco is based on the price charged for products and
services as well as the dealers' ability to meet customer
specifications in the buying, processing and financing of tobacco.
The Company believes that it is well positioned to meet this
competition, particularly in view of its important processing
facilities in the U.S., Brazil and other major tobacco growing
countries. Prior to the Intabex Acquisition, the Company competed
with three major tobacco processors and had significantly less market
share than the world's largest processor. Following the Intabex
Acquisition, the Company's principal competitors are Universal
Corporation ("Universal") and Standard Commercial Corporation and the
Company's market share has increased from approximately 30% to 37% on
a pro forma basis. Of the independent leaf tobacco merchants, the
Company believes that, based on revenues, it ranks second in
established worldwide market share. The Company further believes that
among independent leaf tobacco merchants, it has the largest or second
largest market share in Brazil, Greece, Turkey, the U.S. and Zimbabwe.
Universal's market share in the U.S. is considerably greater than that
of the Company.
Seasonality
- -----------
The purchasing and processing activities of the Company's tobacco
business are seasonal. Flue-cured tobacco grown in the U.S. generally
is purchased during the five-month period beginning in July and ending
in November. U.S.-grown burley tobacco is usually purchased from late
November through January or February. Tobacco grown in Brazil usually
is purchased from January through June and delivered from May to
September. Other markets around the world last for similar periods,
although at different times of the year, and as the importance of
these markets has grown the seasonality in the Company's business has
decreased.
Mature tobacco, prior to being processed and packed, is a semi-perishable
commodity. The production cycle for redrying and packing
is relatively short. For example, flue-cured tobacco in the U.S. is
processed, packed and invoiced within the same five-month period (July
through November) that it is purchased. During this period
inventories of unprocessed tobacco, inventories of redried tobacco and
trade accounts receivable normally reach peak levels in succession.
Current liabilities, particularly advances from customers and short-term
notes payable to banks, normally reach their peak in this period
as a means of financing the seasonal expansion of current assets.
Increasing amounts of U.S.-grown burley and foreign tobacco are now
being processed in periods other than July through November, reducing
the seasonal fluctuations in working capital. At June 30, the end of
the Company's fiscal year, the seasonal components of the Company's
working capital reflect primarily the operations related to foreign
grown tobacco.
- -9-
Flowers
- -------
The Company's fresh-cut flower operations consist of buying flowers
from sources throughout the world and transporting them, normally by
air, to operating units for resale to wholesalers and retailers
through its wholly-owned flowers subsidiary, Florimex. For the fiscal
year ended June 30, 1997, the Company's flower operations produced
approximately 15% of the Company's revenues and at June 30, 1997,
represented approximately 5% of the Company's consolidated assets.
The Company does not view its flowers operations as a core business
and will continue to evaluate its strategic alternatives with respect
to Florimex.
Florimex operates through 67 offices in 19 countries, including
Austria, Canada, Colombia, the Czech Republic, Ecuador, France,
Germany, Italy, Japan, Poland, The Netherlands, Spain, Sweden,
Switzerland, Thailand, the United Kingdom and the U.S. The
activities of certain of these offices are limited to acquiring
flowers in the country of origin, but most are engaged in importation
and distribution. Florimex is also engaged in additional value-added
services through the design and assembly of floral bouquets for sale
to supermarket retailers. Virtually all offices are operated as
corporate profit centers with the general manager receiving a bonus
related to the financial performance of the operation.
Florimex's Dutch exporting operations, Baardse, are headquartered in
Aalsmeer, The Netherlands, inside the premises of the world's largest
flower auction facilities. In addition to the Aalsmeer auction,
Florimex routinely acquires flowers from all principal Dutch flower
auctions. Florimex's Dutch exporting operations sell and ship product
directly to Florimex's fresh-cut flower operations and its
competitors.
Florimex sells to thousands of wholesalers and retailers throughout
Europe, North America and Asia. No customer accounts for a
significant portion of Florimex's sales in a normal year, and the loss
of any one customer or a group of related customers should not have a
material adverse effect on Florimex's business.
Employees
- ---------
The Company's consolidated entities employed about 6,700 persons,
excluding seasonal employees, in its worldwide tobacco operations at
June 30, 1997. In the U.S. tobacco operations the Company's
consolidated entities employed about 900 persons, excluding 1,300
seasonal employees at June 30, 1997. Most seasonal employees are
covered by collective bargaining agreements with several U.S. labor
unions. Most of the full-time employees of the Company are not
covered by collective bargaining agreements. In the non-U.S. tobacco
operations the Company's consolidated entities employed about 5,800
persons, excluding 14,000 seasonal employees at June 30, 1997. The
Company's worldwide consolidated cut flower operation entities employ
about 1,280 persons, excluding seasonal employees. The Company
considers its employee relations to be satisfactory.
- -10-
Government Regulation and Environmental Compliance
- --------------------------------------------------
In recent years, governmental entities in the U.S. at all levels have
taken or have proposed actions that may have the effect of reducing
consumption of cigarettes. These activities have included: (1) the
U.S. Environmental Protection Agency's decision to classify tobacco
environmental smoke as a "Group A" (known human) carcinogen; (2)
restrictions on the use of tobacco products in public places and
places of employment including a proposal by the U.S. Occupational
Safety and Health Administration to ban smoking in the work place; (3)
proposals by the U.S. Food and Drug Administration to sharply restrict
cigarette advertising and promotion and to regulate nicotine as a
drug; (4) increases in tariffs on imported tobacco; (5) proposals to
increase the U.S. excise tax and state taxes on cigarettes; (6) the
policy of the U.S. government to link certain federal grants to the
enforcement of state laws banning the sale of tobacco products to
minors; and (7) recent filings of lawsuits against cigarette
manufacturers by many U.S. states and others seeking reimbursement of
Medicaid and other expenditures claimed to have been made by such
states to treat diseases allegedly caused by cigarette smoking. In
1993, Congress enacted a law (the 75/25 Rule) requiring that all
domestically manufactured cigarettes contain at least 75% domestically
grown tobacco. Although that law was repealed in 1995 and was
replaced with import quotas designed to assist domestic tobacco
growers, the law had the effect of drastically decreasing demand for
foreign tobacco in the domestic production of cigarettes. It is not
possible to predict the extent to which governmental activities might
affect the Company's business.
On June 20, 1997, representatives of the leading U.S. manufacturers of
consumer tobacco products, several state attorneys general and certain
private plaintiffs jointly announced a proposed settlement of certain
significant lawsuits pending against the manufacturers. The proposed
settlement, which must be enacted into federal law to become
effective, is expected to cost the nation's leading cigarette
manufacturers, all of whom are customers of the Company, approximately
$368 billion in cash outlays over the next 25 years. The cigarette
manufacturers have reached separate settlements with Florida,
Mississippi and Texas that would be pre-empted by a federal
settlement. These individual state settlements require the payment of
approximately $15 billion by the cigarette manufacturers. The
cigarette manufacturers subsequently entered into a separate
settlement of a lawsuit brought by the state of Mississippi and agreed
to settle a lawsuit brought by the state of Florida. Cigarette
manufacturers may attempt to recover a portion of these costs by
demanding price and other concessions from suppliers such as the
Company. Such concessions could materially and adversely affect the
Company's margins and its results of operations.
The proposed federal settlement also would permit federal regulation
of cigarette production and would severely curtail advertising of
tobacco products, banning many of the marketing methods currently
utilized by the cigarette industry. The settlement may therefore
materially adversely impact sales of tobacco in the U.S. and,
possibly, overseas. A substantial risk exists that past growth trends
in tobacco sales may not continue and that existing sales may decline
as a result of the proposed settlement. In addition, in response to
the proposed federal settlement, groups representing tobacco farmers
have proposed certain measures, including measures similar to the
75/25 Rule, that could adversely affect the Company's business.
However, it is not possible to predict whether or in what form the
proposed federal settlement or any additional measures will be
approved by Congress and the President or the extent to which any
settlement or such measures may affect the Company's business.
A number of foreign nations also have taken steps to restrict or
prohibit cigarette advertising and promotion, to increase taxes on
cigarettes and to discourage cigarette smoking. In some cases, such
restrictions are more onerous than those in the U.S. For example,
advertising and promotion of cigarettes has been banned or severely
restricted for a number of years in Australia, Canada, Finland,
France, Italy, Singapore and a number of other countries. It is
impossible to predict the extent to which these and any additional
restrictions might affect the Company's business.
- -11-
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS, FOREIGN AND
DOMESTIC OPERATIONS AND EXPORT SALES
As discussed in Item 1, the Company operates in two business segments:
the purchasing, processing and selling of leaf tobacco and the
purchasing and selling of cut flowers. Financial information
concerning segments and geographical operations is included in Note N
to the Notes to Consolidated Financial Statements. Information with
respect to the Company's working capital appears in Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources.
ITEM 2. PROPERTIES
----------
Following is a description of the material properties of the Company:
Corporate
- ---------
The Company's corporate headquarters are located in Danville,
Virginia; the tobacco operations are headquartered in Farmville, North
Carolina, and headquarters for flowers operations are in Nuremberg,
Germany.
Tobacco Facilities
- ------------------
The Company operates each of its tobacco processing plants for seven
to nine months during the year to correspond with the applicable
growing season. While the Company believes its processing facilities
are being efficiently utilized, the Company also believes its domestic
processing facilities and certain foreign processing facilities have
the capacity to process additional volumes of tobacco if required by
customer demand.
The following is a listing of the various material properties used in
the tobacco operations:
AREA IN
LOCATION USE SQUARE FEET
- ----------------------------------------------------------------------
UNITED STATES
DANVILLE, VA FACTORY/STORAGE 1,891,000
GREENVILLE, N.C. FACTORY/STORAGE 809,000
FARMVILLE, N.C. FACTORY/STORAGE 1,020,000
KINSTON, N.C. FACTORY/STORAGE 1,068,000
LAKE CITY, S.C. STORAGE 252,000
SOUTH AMERICA
VERA CRUZ, BRAZIL FACTORY/STORAGE 1,043,000
SANTA CRUZ, BRAZIL FACTORY/STORAGE 1,397,000
VENANCIO AIRES, BRAZIL FACTORY(2)/STORAGE 1,336,000
ZACAPA, GUATEMALA STORAGE 15,000
AFRICA
LILONGWE, MALAWI FACTORY 248,000
HARARE, ZIMBABWE FACTORY(2)/STORAGE 1,226,000
EUROPE
KARLSRUHE, GERMANY FACTORY/STORAGE 320,000
KOTHEN, GERMANY FACTORY/STORAGE 731,000
THESSALONIKI, GREECE FACTORY(2)/STORAGE 410,000
SPARANISE, ITALY FACTORY/STORAGE 466,000
IZMIR, TURKEY FACTORY(2)/STORAGE 854,000
ASIA
LAMPHUN, THAILAND FACTORY/STORAGE 301,000
-12-
Flower Facilities
- -----------------
Florimex has 67 different operating facilities throughout the world.
The owned properties include an international distribution warehouse
in Kelsterbach, Germany (near Frankfurt Airport), with offices and
storages of about 60,000 square feet. In Nuremberg, the headquarters
of Florimex, owned properties include office and storages of about
300,000 square feet. At all Florimex locations there are various
properties, generally located near airports, consisting of owned or
leased offices and storages. The storages at each location include
cooler storages of various sizes to accommodate the needs of
individual locations. The Company's management believes its flower
operation facilities, including office, distribution and warehouse
facilities, are efficiently utilized and are adequate for current and
projected sales levels for the foreseeable future. Baardse, the Dutch
flower exporter, has leased about 110,000 square feet of office and
storage associated with the Aalsmeer auction operation. Aalsmeer has
the largest flower auction facility in The Netherlands. Baardse also
owns greenhouses in Aalsmeer with 125,000 square feet.
All of the above property is owned, except as otherwise indicated, by
the Company, its subsidiaries or investee companies. The Company
believes that the facilities are generally well maintained and in good
operating condition and are suitable and adequate for its purposes at
current and reasonably anticipated future sales levels.
ITEM 3. LEGAL PROCEEDINGS
-----------------
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
None.
-13-
ADDITIONAL INFORMATION - EXECUTIVE OFFICERS OF THE COMPANY
The names and ages of all executive officers of the Company, as of
June 30, 1997, are set forth below. Executive officers serve at the
pleasure of the Board of Directors and are elected at each annual
organizational meeting of the Board.
NAME AGE POSITION
- ------------------------------ --------------------------------------------------------
Claude B. Owen, Jr. 52 Chairman of the Board - Chief Executive Officer of the
Company on October 21, 1994. He also served as Chairman,
Chief Executive Officer and President of Dibrell from
July 1993 until the effective time of the Merger and as
Chairman of the Board and Chief Executive Officer of
Dibrell from February 1990 until July 1993. Mr. Owen
also serves as a director for American National
Bankshares, Inc. and Richfood Holdings, Inc.
Albert C. Monk III 57 President of the Company on October 21, 1994 and
President and Chief Executive Officer of DIMON
International on January 23, 1995. He also served as
Chairman, Chief Executive Officer and President of
Monk-Austin beginning from November 8, 1994 until the
effective time of the Merger, Chief Executive Officer and
President of Monk-Austin since 1992 and President of
Monk-Austin since 1990. Mr. Monk is the first cousin of
Robert T. Monk, Jr., a director of DIMON Incorporated.
Brian J. Harker 47 Executive Vice President and Chief Financial Officer
since October 1, 1996. He also served as Senior Vice
President of DIMON International, Inc. from April 1995 to
October 1996 and as Senior Vice President-Director of
International Operations of Monk-Austin from July 1991 to
April 1995. Prior thereto he served as Vice President of
Monk-Austin.
Richard D. O'Reilly 48 Senior Vice President-Human Resources since May 16, 1995.
From 1989 to 1995, he served as Vice President - Human
Resources at Sweetheart Corporation Company, Chicago,
Illinois.
-14-
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
-----------------------------------------------------
DIMON Incorporated's common stock is traded on the New York Stock
Exchange, under the ticker symbol "DMN". The Common Stock began
trading on the NYSE on April 3, 1995.
The following table sets forth for the periods indicated the high and
low reported sales prices of the Common Stock as reported by the NYSE
and the amount of dividends declared per share for the periods
indicated.
DIMON
Common Stock
Dividends
High Low Declared
Fiscal Year 1997
Fourth Quarter . . . . . . . . . . .$26.75 $19.75 $.15
Third Quarter. . . . . . . . . . . . 26.00 21.75 .15
Second Quarter . . . . . . . . . . . 23.25 17.87 .15
First Quarter. . . . . . . . . . . . 19.87 17.87 .135
Fiscal Year 1996
Fourth Quarter . . . . . . . . . . . 19.50 16.12 .135
Third Quarter. . . . . . . . . . . . 20.87 16.00 .135
Second Quarter . . . . . . . . . . . 18.75 13.75 .135
First Quarter. . . . . . . . . . . . 17.62 14.62 .135
As of June 30, 1997, there were 4,264 shareholders, including
approximately 3,100 beneficial holders of its Common Stock. The
Company pays dividends quarterly.
The Company is subject to certain restrictions on its ability to pay
dividends. See "Managements' Discussion and Analysis of Financial
Condition and Results of Operations -- Restrictions of Dividends."
-15-
ITEM 6. SELECTED FINANCIAL DATA
FIVE-YEAR FINANCIAL STATISTICS
DIMON Incorporated and Subsidiaries
Years Ended June 30
(in thousands, except per share amounts ____________________________________________________________________
and number of stockholers) 1997** 1996 1995 1994 1993
======================================================================================================================
Summary of Operations
Sales and other operating revenues .$2,513,227 $2,167,473 $1,941,188 $1,464,778 $1,706,294
Cost of sales and expenses . . . . . 2,332,457 2,037,702 1,892,166 1,435,016 1,572,479
Restructuring and merger costs . . . 3,864 15,360 25,955 - _
______________________________________________________________________________
Operating income . . . . . . . . . .$ 176,906 $ 114,411 $ 23,067 $ 29,762 $ 133,815
Interest expense . . . . . . . . . . 53,027 46,924 45,231 35,117 38,128
_________________________________________________________________________________
Income (loss) from continuing
operations before income taxes,
minority interest, equity in
net income (loss) of investee
companies, extraordinary
items and cumulative effect
of accounting changes . . . . . . .$ 123,879 $ 67,487 $ (22,164) $ (5,355) $ 95,687
Income taxes . . . . . . . . . . . . (47,108) (26,995) (5,980) (2,767) (31,173)
Income applicable to minority
interest . . . . . . . . . . . . . 124 292 216 466 486
Equity in net income (loss) of
investee companies . . . . . . . . 860 (274) (1,435) 687 1,404
U.S. taxes provided on
investee companies . . . . . . . . (334) (56) (370) (589) (145)
_________________________________________________________________________________
Income (loss) from continuing
operations before
extraordinary items and
cumulative effect of
accounting changes . . . . . . . .$ 77,173 $ 39,870 $ (30,165) $ (8,490) $ 65,287
Extraordinary items:
Partial recovery on Iraqi
receivable, net of tax. . . . . . . - 1,400 - - -
Cumulative effect of accounting
changes:
Postretirement benefit plans,
net of tax. . . . . . . . . . . . - - - - (9,746)
Income taxes. . . . . . . . . . . . - - - - 8,963
_________________________________________________________________________________
Net Income (Loss). . . . . . . . . .$ 77,173 $ 41,270 $ (30,165) $ (8,490) $ 64,504
Per Share Statistics
Primary:
Income (loss) from continuing
operations before
extraordinary items and
cumulative effect of
accounting changes. . . . . . . . $1.79 $1.00 $ (.79) $(.22) $1.76
Extraordinary items . . . . . . . . - .04 - - -
Cumulative effect of
accounting changes. . . . . . . . - - - - (.02)
Net income (loss) . . . . . . . . . 1.79 1.04 (.79) (.22) 1.74
Fully diluted:
Income from continuing
operations before
extraordinary items and
cumulative effect of
accounting changes. . . . . . . . 1.76 .98 * * 1.65
Extraordinary items . . . . - .03 - - -
Cumulative effect of
accounting changes. . . . . . . . - - - - (.02)
Net income. . . . . . . . . . . . . 1.76 1.01 * * 1.63
Dividends paid . . . . . . . . . . . .585 .54 .535 .495 .42
Stockholders' equity . . . . . . . . 9.21 7.46 6.27 7.57 8.32
Return on average stockholders'
equity . . . . . . . . . . . . . . . 21.32% 14.88% -11.45% -2.85% 24.30%
-16-
ITEM 6. SELECTED FINANCIAL DATA
FIVE-YEAR FINANCIAL STATISTICS (continued)
DIMON Incorporated and Subsidiaries
Years Ended June 30
(in thousands, except per share amounts _______________________________________________________________________
and number of stockholers) 1997** 1996 1995 1994 1993
=======================================================================================================================
Balance Sheet Data
Current assets . . . . . . . . . . .$1,371,479 $ 668,775 $ 731,119 $ 685,443 $ 666,454
Current liabilities. . . . . . . . . 671,486 246,433 453,522 467,776 423,854
_________________________________________________________________________________
Working capital. . . . . . . . . . .$ 699,993 $ 422,342 $ 277,597 $ 217,667 $ 242,600
Working capital ratio. . . . . . . . 2.0 to 1 2.7 to 1 1.6 to 1 1.5 to 1 1.6 to 1
Property, plant and
equipment (net) . . . . . . . . . .$ 332,752 $ 236,775 $ 223,049 $ 209,739 $ 189,549
Total assets . . . . . . . . . . . .$1,987,603 $1,020,014 $ 1,093,608 $1,043,816 $ 998,520
Revolving credit notes and
other long-term debt. . . . . . . .$ 702,826 $ 390,871 $ 292,528 $ 188,825 $ 180,270
Convertible Subordinated Debentures $ 123,328 $ - $ 56,370 $ 56,475 $ 56,475
Stockholders' equity . . . . . . . .$ 408,263 $ 315,848 $ 238,806 $ 288,314 $ 308,149
Other Statistics
Weighted average common shares,
primary . . . . . . . . . . . . . . 43,176 39,671 38,100 38,091 37,072
Weighted average common shares,
fully diluted . . . . . . . . . . . 44,482 42,464 42,355 42,297 41,310
Common shares outstanding
at year end . . . . . . . . . . . . 44,312 42,366 38,092 38,069 37,035
Number of stockholders
at year end (1) . . . . . . . . . . 4,357 4,596 4,249 4,940 4,919
Dividends paid . . . . . . . . . . .$ 25,071 $ 21,731 $ 15,570 $ 13,014 $ 9,818
___________________________________________________________________________________________
* Computation of loss per share is anti-dilutive for the years 1995 and 1994.
** See Note B to the consolidated financial statements for a discussion of acquisition.
(1) Includes the number of Stockholders of record and non-objecting beneficial owners.
-17-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
- -------
The Company believes that it is the world's second largest independent
purchaser and processor of leaf tobacco. Approximately 85%, 82% and
80% of the Company's revenues in fiscal 1997, 1996 and 1995,
respectively, were derived from its tobacco operations. The Company's
tobacco operating profits fluctuate from year to year, primarily due
to changes in worldwide supply and demand and government regulations.
See "Factors that May Affect Future Results Variability of Annual
and Quarterly Financial Results."
On April 1, 1997, the Company acquired all the outstanding capital
stock of Intabex. The acquisition of Intabex has been accounted for
under the purchase method of accounting and, accordingly, no
restatement has been made to the Company's historical financial
information. The financial information of the Company will
prospectively include that of Intabex for periods beginning after
March 31, 1997.
On April 1, 1995, Dibrell and Monk-Austin merged into DIMON. The
Merger has been accounted for as a pooling of interests and all
consolidated financial statements have been restated to include the
historical results of operations of both Dibrell and Monk-Austin
including the effects of conforming the accounting policies of the two
former entities. Recorded assets and liabilities have been carried
forward at their historical book values.
The Company's tobacco business is generally conducted in U.S. dollars,
as is the business of the industry as a whole. Accordingly, there is
minimal currency risk related to the sale of tobacco. However, local
country operating costs, including the purchasing and processing costs
for tobacco, are subject to the effects of exchange fluctuations of
the local currency against the U.S. dollar. The Company attempts to
minimize such currency risks by matching the timing of its working
capital borrowing needs against the tobacco purchasing and processing
funds requirements in the individual countries of tobacco origin.
Fluctuations in the value of foreign currencies can significantly
affect the Company's operating results. See "Factors that May Affect
Future Results International Business Risks" and Note O to the
Company's Consolidated Financial Statements for the year ended June
30, 1997.
The remainder of the Company's revenues are derived from purchasing
and selling fresh-cut flowers. Florimex has two principal operations,
importing, exporting and wholesaling fresh-cut flowers, and exporting
fresh-cut flowers purchased primarily from the major flower auctions
in The Netherlands. Approximately 15%, 18% and 20% of the Company's
revenues in fiscal 1997, 1996 and 1995, respectively, were derived
from its flower operations.
In fiscal 1995, the Company initiated a restructuring plan including
both the tobacco and flower businesses. The plan was designed to
eliminate unprofitable locations, consolidate duplicative processing
facilities, reduce the salaried workforce, improve operating
efficiencies and increase regional unit accountability. This
initiative has continued through 1997 and has resulted in the
recognition of various charges. Those charges totaled $2.7 million,
net of tax, in 1997, $11.8 million, net of tax, in 1996 and $17.8
million, net of tax, in 1995.
- -18-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Results of Operations
The following table expresses items in the Statement of Consolidated
Income as a percentage of sales for each of the three most recent
years. Any reference in the table and the following discussion to any
given year is a reference to the Company's fiscal year ended June 30.
Years Ended
_____________________________
1997 1996 1995
================================================================================
Sales and other operating revenues. . . . . . . . 100.0% 100.0% 100.0%
Cost of goods and services and expenses . . . . . 87.4 87.9 90.6
Selling, administrative and general expenses. . . 5.5 6.1 6.9
Restructuring and merger related costs. . . . . . 0.1 0.7 1.3
______________________________
Operating income. . . . . . . . . . . . . . . . . 7.0 5.3 1.2
Interest expense. . . . . . . . . . . . . . . . . (2.1) (2.2) (2.4)
______________________________
Income (loss) before income taxes, minority
interest, equity in net loss of
investee companies . . . . . . . . . . . . 4.9 3.1 (1.2)
Income taxes. . . . . . . . . . . . . . . . . . . 1.8 1.2 0.3
Equity in net loss of investee companies. . . . . - - (0.1)
_____________________________
Net income (loss) . . . . . . . . . . . . . . . . 3.1 1.9 (1.6)
=============================
-19-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Comparison of the Year Ended June 30, 1997 to the Year Ended
June 30, 1996
The Company's sales and other operating revenues were $2.513 billion,
an increase of 16.0% from $2.167 billion in 1996. Sales from tobacco
operations increased 20.1%, from $1.770 billion in 1996 to $2.126
billion in 1997, primarily due to higher prices on tobaccos sold from
North America, South America and Africa, higher volumes in North
America and Asia and additional sales from the subsidiaries of Intabex
Holdings Worldwide S.A. (Intabex) which was acquired April 1, 1997,
partially offset by lower quantities sold from South America. Higher
prices accounted for $13.8 million in North America, $53.6 million in
South America and $65.7 million in Africa of the increase in sales.
Higher quantities accounted for $33.9 million in North America and
$36.6 million in Asia of the increase in sales. Lower quantities in
South America resulted in a decrease in sales of $67.7 million due to
the higher quantities in the fourth quarter of 1996. The acquisition
of Intabex resulted in a $188.1 million increase in sales.
Sales and other operating revenues for the Company's flower operations
decreased 2.5% from $397.3 million in 1996 to $387.5 million in 1997,
primarily due to unfavorable changes in exchange rates of European
currencies against the U.S. dollar.
Cost of sales and expenses of the Company's tobacco operations before
restructuring and merger related costs increased 18.9% in 1997 from
1996 due primarily to the increase in sales. Operating margin
(operating income) as a percentage of sales increased from 7.8% in
1996 to 8.7% in 1997. Significant increases in margins in South
America were due to efficiencies from restructuring, offset by lower
margins in North America caused by natural disasters which negatively
impacted the 1996 crop.
Operating margin for the Company's flower operations before
restructuring costs increased to 2.7% in 1997 from 2.0% in 1996 due to
exchange rate impacts on costs, the effects of discontinuing lower
margin operations and revised credit policies.
Corporate expenses before restructuring costs decreased $2.3 million
or 14.4% to $13.6 million in 1997 from $15.9 million in 1996, due
primarily to decreases in personnel costs and legal and professional
expenses in 1997 partially offset by increased amortization expense
resulting from goodwill resulting from the acquisition of Intabex.
Restructuring charges in 1997 were $3.9 million for the tobacco
division, primarily due to employee separations. Restructuring
charges in 1996 consisted of $11.5 million for tobacco operations,
$4.4 million for corporate and a $.5 million recovery for flower
operations. 1996 net charges consisted of $15.7 million for employee
separations, a credit of $1.2 million for facility sales and closures
and $.9 million for asset writedowns and other items.
Interest expense increased $6.1 million in 1997 primarily due to
higher average borrowings in financing the acquisition of Intabex,
offset by lower interest rates.
The effective tax rate for 1997 was 38% compared to 40% in 1996. This
decrease is due to the overall blend of the income between taxing
jurisdictions.
The $.9 million increase in equity in net income of investee companies
is primarily due to African investees owned by the newly acquired
subsidiary, Intabex.
- -20-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Comparison of the Year Ended June 30, 1996 to the Year Ended
June 30, 1995
The Company's sales and other operating revenues in 1996 were $2.167
billion, an increase of 11.7% from $1.941 billion in 1995. Sales from
tobacco operations increased 13.8%, from $1.555 billion in 1995 to
$1.770 billion in 1996, primarily due to higher prices on tobacco from
South America and increased quantities sold primarily from Europe and
Africa. The sales from South America increased in the fourth quarter
in 1996 compared to 1995 as demand improved. See "Factors that May
Affect Future Results." The higher tobacco prices from South America
accounted for $102.0 million and increased quantities sold from Europe
and Africa accounted for $85.5 million and $29.4 million,
respectively. The increased sales of tobacco from Europe resulted
from the operations acquired in Greece, Italy and Turkey.
Sales and other operating revenues of flowers increased 2.9%, from
$385.9 million in 1995 to $397.3 million in 1996. The increase in the
Company's sales of flowers was primarily due to the increased export
sales from The Netherlands.
Cost of sales and expenses of the Company's tobacco operations before
restructuring and merger related costs increased 9.2% in 1996 from
1995 due primarily to the 13.8% increase in net sales. The world
oversupply of tobacco, which began in 1993, started to improve in 1995
and further improved in 1996 which, along with early consolidation -
related cost savings, generated the improvement in the tobacco
operating margin (operating income). As a percent of net sales,
operating income, excluding restructuring costs, increased to 7.8% in
1996 compared to 3.9% in 1995.
Cost of sales and expenses of the flower operations before
restructuring costs increased by 0.8% in 1996 from 1995, primarily
due to the sales increase of 2.9%, offset partially by implementing
cost-cutting measures, revising credit policies which decreased bad
debts and the closing of unprofitable operations in 1995. The flower
operating income (loss), excluding restructuring costs, increased from
a (0.1%) loss as a percent of net sales in 1995 to a positive 2.0% of
net sales in 1996, primarily due to increased gross margins of the
export operations in The Netherlands and by decreased costs mentioned
above.
Corporate expenses before restructuring costs increased $4.6 million,
or 40.7%, to $15.9 million in 1996 from $11.3 million in 1995, due
primarily to increased personnel costs and bonuses and legal and
professional expenses in 1996. Some of the increased costs for
personnel relate to reassigning departments to corporate that were
previously in the tobacco operations.
Restructuring charges in 1996 for the tobacco operations and corporate
amounted to $11.5 million and $4.4 million, respectively. The flower
operations had a $.5 million recovery of restructuring costs. The net
charges are comprised of $15.7 million for employee separations, a
credit of $1.2 million for facility sales and closures and $.9 million
for asset writedowns and other items.
Interest expense increased $1.7 million in 1996, primarily due to
higher borrowings because of increased average tobacco purchases and,
to a lesser extent, higher average interest rates.
The effective tax rate for 1996 was 40%. In 1995, the Company had tax
expense in spite of the overall pre-tax loss due to the effects of
foreign tax rates, the mix of income and losses of subsidiaries, the
currency effect in Brazil and non-deductible merger expenses.
The $1.5 million decrease in equity in net loss of investee companies
in 1996 was due primarily to the sale of the investee in Brazil which
had a loss in 1995.
- -21-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Liquidity and Capital Resources
The following table is a summary of items from the Consolidated
Balance Sheet and the Statement of Consolidated Cash Flows.
Years Ended June 30
__________________________________
(in thousands, except for current ratio) 1997 1996 1995
=============================================================================
Cash and cash equivalents. . . . . . . . . $ 107,131 $ 53,820 $ 42,326
Net trade receivables. . . . . . . . . . . 396,156 190,898 182,750
Inventories and advances on
purchases of tobacco . . . . . . . . . . 835,626 408,210 468,989
Total current assets . . . . . . . . . . . 1,371,479 668,775 731,119
Notes payable to banks . . . . . . . . . . 350,263 - 233,736
Accounts payable . . . . . . . . . . . . . 143,927 104,506 90,446
Total current liabilities. . . . . . . . . 671,486 246,433 453,522
Current ratio. . . . . . . . . . . . . . . 2.0 to 1 2.7 to 1 1.6 to 1
Revolving Credit Notes and Other
Long-term Debt . . . . . . . . . . . . . 577,826 265,871 292,528
Convertible Subordinated Debentures. . . . 123,328 - 56,370
Senior Notes . . . . . . . . . . . . . . . 125,000 125,000 -
Stockholders' equity . . . . . . . . . . . 408,263 315,848 238,806
Purchase of property and equipment . . . . 60,860 41,266 35,892
Acquisition of subsidiary,
net of cash acquired . . . . . . . . . . 6,382 (6,543) (13,693)
Proceeds from sale of property
and equipment. . . . . . . . . . . . . . 8,853 8,605 4,877
Depreciation and amortization. . . . . . . 37,191 33,780 31,852
___________________________________
The purchasing and processing activities of the Company's tobacco
business are seasonal. The Company's need for capital fluctuates
accordingly and, at any of several seasonal peaks, the Company's
outstanding indebtedness may be significantly greater or less than at
year end. The Company historically has needed capital in excess of
cash flow from operations to finance inventory and accounts receivable
and, more recently, to finance acquisitions of foreign tobacco
operations and flower operations. The Company also prefinances
tobacco crops in certain foreign countries by making cash advances to
farmers prior to and during the growing season.
The Company's working capital increased from $422.3 million at June
30, 1996 to $700 million at June 30, 1997. The Company's current
ratio was 2.0 to 1 and 2.7 to 1 at June 30, 1997, and June 30, 1996,
respectively. At June 30, 1997, current assets had increased $702.7
million and current liabilities had increased $425.1 million from June
30, 1996. The $702.7 million increase in current assets is primarily
due to the $632.7 million increase in receivables, inventories and
advances on purchases of tobacco. The $425.1 million increase in
current liabilities is primarily due to the $350.3 million increase in
notes payable to banks. The increase in receivables, inventories and
advances on purchases of tobacco are primarily due to the acquisition
of Intabex in 1997. The increase in cash and cash equivalents is
primarily related to the financing activities and the proceeds from
long-term debt.
-22-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Cash flows from operating activities decreased to $25.3 million in
1997 as compared to $179.8 million in 1996 and $6.8 million in 1995,
primarily due to fluctuations in current assets and liabilities. Cash
flows used by investing activities increased $27.9 million, or 183.5%,
to $43.1 million in 1997 as compared to 1996, primarily due to the
purchase of Intabex. Cash flows provided by financing activities
increased $224.1 million in 1997 from 1996 with increased borrowings
to primarily finance increased current assets, whereas in 1996 cash
was used by financing activities as the Company applied $153 million
primarily to reduce debt. Also, see the discussion of refinancing
activities below.
At June 30, 1997, the Company had seasonally adjusted lines of credit
of $1.8 billion, including $1.1 billion uncommitted, unsecured working
capital lines with several banks and $230 million in secured credit
lines of the former Intabex companies, but excluding the long-term
credit agreements of Intabex. At June 30, 1997, the Company had
borrowed $850 million under its $1.8 billion lines of credit with
interest rates ranging from 1.7% to 13.7%. At June 30, 1997, the
unused short-term lines of credit amounted to $790 million, net of
$144 million of letters of credit and guarantees that reduce lines of
credit. Total maximum outstanding short-term borrowings during the
year ended June 30, 1997, were $1.0 billion.
To ensure long-term liquidity, the Company entered into a $500 million
revolving credit facility (the "New Credit Facility") effective June
27, 1997, with a syndicate of banks. The New Credit Facility replaced
the Company's $240 million revolving credit facility (the "Former
Credit Facility"). The Company used the Former Credit Facility to
reclassify $240 million of short-term debt to long-term debt and did
not borrow under it. The Company similarly uses the New Credit
Facility to reclassify $500 million of its short-term debt. The
interest rates available under the New Credit Facility depend on the
type of advance selected and are based either on the agent bank's base
lending rate (which was 8.5% at June 30, 1997, and is adjusted with
changes in interest rates generally) or LIBOR plus 0.70% through
September 30, 1997, and thereafter plus a spread of 0.40% to 1.00%
based on the ratings assigned to the Company's outstanding senior
debt. The New Credit Facility is subject to certain commitment fees
and covenants that among other things require the Company to maintain
minimum working capital and tangible net worth amounts, require
specific liquidity and long-term solvency ratios and restrict
acquisitions. The New Credit Facility terminates on June 27, 2000,
but may be extended thereafter, year to year, upon approval of the
Lenders. As of June 30, 1997, there were no borrowings outstanding
under the New Credit Facility.
The Company has historically financed its operations through a
combination of short-term lines of credit, customer advances, cash
from operations and equity and equity-linked securities. At June 30,
1997, the Company had no material capital expenditure commitments.
The Company believes that these sources of funds combined with the
Senior Notes are sufficient to fund the Company's purchasing needs for
1998.
The Company's off balance sheet financing is not material. Certain
operating leases were acquired with the acquisition of, or have been
added by, several foreign tobacco processing facilities and the flower
subsidiaries. However, most operating assets are of long-term and
continuing benefit and the Company has generally purchased these
assets.
Tax and Repatriation Matters
- ----------------------------
The Company and its subsidiaries are subject to income tax laws in
each of the countries in which it does business through wholly-owned
subsidiaries and through affiliates. The Company makes a
comprehensive review of the income tax requirements of each of its
operations, files appropriate returns and makes appropriate income tax
planning analyses directed toward the minimization of its income tax
obligations in these countries. Appropriate income tax provisions are
determined on an individual subsidiary level and at the corporate
level on both an interim and annual basis. These processes are
followed using an appropriate combination of internal staff at both
the subsidiary and
- -23-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Tax and Repatriation Matters (continued)
- ----------------------------
corporate levels as well as independent outside advisors in review of
the various tax laws and in compliance reporting for the various
operations.
Dividend distributions are regularly made from certain subsidiaries
while the undistributed earnings of certain other foreign subsidiaries
are not subject to additional foreign income taxes nor considered to
be subject to U.S. income taxes unless remitted as dividends. The
Company intends to reinvest such undistributed earnings of certain
foreign subsidiaries indefinitely; accordingly, no provision has been
made for U.S. taxes on those earnings. The Company regularly reviews
the status of the accumulated earnings of each of its U.S. and foreign
subsidiaries and reevaluates the aforementioned dividend policy as
part of its overall financing plans.
Accounting Matters
- ------------------
In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings per Share" which simplifies the earnings per share (EPS)
computation and replaces the presentation of primary EPS with a
presentation of basic EPS. This statement also requires dual
presentation of basic and diluted EPS on the face of the income
statement for entities with a complex capital structure and requires a
reconciliation of the numerator and denominator used for the basic and
diluted EPS computation. This statement will be effective for the
Company's March 31, 1998, interim statements and will require the
restatement of all prior-period earnings per share data presented.
The Company has studied the implications of the statement, and based
on its initial evaluation, does not expect it to have a material
impact on the Company's financial condition or results of operations
upon adoption.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income" which establishes standards for reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. This statement will be effective for
the Company's March 31, 1998, interim statements and will require the
restatement of all prior-periods presented. The Company has studied
the implications of the statement, and based on its initial
evaluation, does not expect it to have a material impact on the
Company's financial condition or results of operations upon adoption.
In June 1997, the FASB issued SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information" which requires that
public business enterprises report certain information about operating
segments in complete sets of financial statements of the enterprise
and in condensed financial statements of interim periods issued to
shareholders. It also requires that public business enterprises
report certain information about their products and services, the
geographic areas in which they operate and their major customers.
This statement is effective for the Company's June 30, 1998, year end
financial statements. The Company has studied the implications of the
statement, and based on its initial evaluation, does not expect it to
have a material impact on the Company's financial condition or results
of operations upon adoption.
Factors that May Affect Future Results
- --------------------------------------
The foregoing discussion contains certain forward-looking statements,
generally identified by phrases such as "the Company expects" or words
of similar effect. The following important factors, among other
things, in some cases have affected, and in the future could affect,
the Company's actual results and could cause the Company's actual
results for 1998 and beyond, to differ materially from those expressed
in any forward-looking statements made by, or on behalf of, the
Company.
-24-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Variability of Annual and Quarterly Financial Results
The comparability of the Company's financial results, particularly the
quarterly financial results, may be significantly affected by
fluctuations in tobacco growing seasons and customer instructions with
regard to the sales of processed tobacco. The cultivation period for
tobacco is dependent upon a number of factors, including the weather
and other natural events, such as hurricanes or tropical storms, and
the Company's processing schedule can be significantly altered by
variations in harvesting periods.
Further, it is not possible to predict with precision the timing of
orders or sales, and the Company may from time to time in the ordinary
course of business keep a significant amount of processed tobacco in
inventory for its customers to accommodate their inventory management
and other needs. Sales recognition by the Company and its
subsidiaries is based on the passage of ownership, usually with
shipment of product. Since individual shipments may represent
significant amounts of revenue, the Company's quarterly and annual
financial results may vary significantly depending on its customers'
needs and shipping instructions. In particular, because most
deliveries of Brazilian tobacco are made at the end of the fourth
fiscal quarter of each year or the beginning of the first quarter of
the following year, significant amounts of sales and operating profits
may shift from fiscal year to fiscal year. See Item 1, "Business --
Tobacco -- Seasonality" and "Business -- Flowers -- Seasonality."
Governmental Intervention and the Proposed Settlement of Tobacco
Litigation
In recent years, governmental entities in the U.S. at all levels have
taken or have proposed actions that may have the effect of reducing
consumption of cigarettes. These activities have included: (1) the
U.S. Environmental Protection Agency's decision to classify tobacco
environmental smoke as a "Group A" (known human) carcinogen; (2)
restrictions on the use of tobacco products in public places and
places of employment including a proposal by the U.S. Occupational
Safety and Health Administration to ban smoking in the work place; (3)
proposals by the U.S. Food and Drug Administration to sharply restrict
cigarette advertising and promotion and to regulate nicotine as a
drug; (4) increases in tariffs on imported tobacco; (5) proposals to
increase the U.S. excise tax and state taxes on cigarettes; (6) the
policy of the U.S. government to link certain federal grants to the
enforcement of state laws banning the sale of tobacco products to
minors; and (7) recent filings of lawsuits against cigarette
manufacturers by many U.S. states and others seeking reimbursement of
Medicaid and other expenditures claimed to have been made by such
states to treat diseases allegedly caused by cigarette smoking. In
1993, Congress enacted a law (the 75/25 Rule) requiring that all
domestically manufactured cigarettes contain at least 75% domestically
grown tobacco. Although that law was repealed in 1995 and was
replaced with import quotas designed to assist domestic tobacco
growers, the law had the effect of drastically decreasing demand for
foreign tobacco in the domestic production of cigarettes. It is not
possible to predict the extent to which governmental activities might
affect the Company's business.
On June 20, 1997, representatives of the leading U.S. manufacturers of
consumer tobacco products, several state attorneys general and certain
private plaintiffs jointly announced a proposed settlement of certain
significant lawsuits pending against the manufacturers. The proposed
settlement, which must be enacted into federal law to become
effective, is expected to cost the nation's leading cigarette
manufacturers, all of whom are customers of the Company, approximately
$368 billion in cash outlays over the next 25 years. The cigarette
manufacturers have reached separate settlements with Florida,
Mississippi and Texas that would be pre-empted by a federal
settlement. These individual state settlements require the payment of
approximately $15 billion by the cigarette manufacturers. Cigarette
manufacturers may attempt to recover a portion of these costs by
demanding price and other concessions from suppliers such as the
Company. Such concessions could materially and adversely affect the
Company's margins and its results of operations.
-25-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
The proposed federal settlement also would permit federal regulation
of cigarette production and would severely curtail advertising of
tobacco products, banning many of the marketing methods currently
utilized by the cigarette industry. The separate Florida settlement
would provide for similar marketing restrictions within that state.
The settlements may therefore materially adversely impact sales of
tobacco in the U.S. and, possibly, overseas. Certain customers have
expressed their uncertainty regarding the impact of the proposed
federal settlement and a substantial risk exists that past growth
trends in tobacco sales may not continue and that existing sales may
decline as a result of the proposed settlements. In addition, in
response to the proposed settlement, groups representing tobacco
farmers have proposed certain measures, including measures similar to
the 75/25 Rule, that could adversely affect the Company's business.
However, it is not possible to predict whether or in what form the
proposed federal settlement or any additional measures will be
approved by Congress and the President or the extent to which any
settlement or such measures may affect the Company's business.
A number of foreign countries have also taken steps to restrict or
prohibit cigarette advertising and promotion, to increase taxes on
cigarettes and to discourage cigarette smoking. In some cases, such
restrictions are more onerous than those in the U.S. For example,
advertising and promotion of cigarettes has been banned or severely
restricted for a number of years in Australia, Canada, Finland,
France, Italy, Singapore and a number of other countries. It is
impossible to predict the extent to which restrictions on advertising
might affect the Company's business.
Smoking and Health Issues
Reports and speculation with respect to the alleged harmful physical
effects of cigarette smoking have been publicized for many years and,
together with restrictions on cigarette advertisements, requirements
that warning statements be placed on cigarette packaging and in
advertising, increased taxes on tobacco products and controls in
certain foreign countries on production and prices, decreased social
acceptance of smoking and increased pressure from anti-smoking groups
have had an ongoing adverse effect on sales of tobacco products. In
addition, litigation is pending against the leading U.S. manufacturers
of consumer tobacco products seeking damages for health problems
alleged to have resulted from the use of tobacco in various forms.
Neither the Company nor, to the Company's knowledge, any other leaf
merchant is a party to this litigation. It is not possible to predict
the outcome of such litigation or what effect adverse developments in
pending or future litigation against manufacturers might have on the
business of the Company.
Reliance on Significant Customers
The Company's customers are manufacturers of cigarette and tobacco
products located in approximately 60 countries around the world.
Several of these customers individually account for a significant
portion of the Company's sales in a normal year, and the loss of any
one or more of such customers could have a material adverse effect on
the Company's results of operations. Approximately 41% and 55% of the
Company's consolidated tobacco sales for 1997 and 1996 were to two and
three companies, respectively. See Note N to the Company's
Consolidated Financial Statements for the year ended June 30, 1997,
included herein.
-26-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Failure to Realize Acquisition Cost Savings and Potential Sales Losses
Although the Company anticipates that it will achieve significant cost
savings related to the integration and rationalization of the
operations of Intabex, these savings may not be achieved in the amount
or as quickly as expected. Further, the Company expects that certain
customers may reduce the combined volume of tobacco purchased through
the Company from volumes previously purchased separately from Intabex
and the Company for reasons unrelated to the Company's products or
performance, such as a desire to manage dependence on any one
supplier. In addition, the Company anticipates that certain of
Intabex's former customers may not be retained and that sales may be
reduced as a result. The Company is unable to predict whether or to
what extent any such reductions may occur.
International Business Risks
The Company's international operations are subject to international
business risks, including unsettled political conditions,
expropriation, import and export restrictions, exchange controls,
inflationary economies and currency risks and risks related to the
restrictions of repatriation of earnings or proceeds from liquidated
assets of foreign subsidiaries. In certain countries, the Company has
advanced substantial sums or guaranteed local loans or lines of credit
in substantial amounts for the purchase of tobacco from growers. Risk
of repayment is normally limited to the tobacco season, and the
maximum exposure occurs within a shorter period.
The Company's tobacco business is generally conducted in U.S. dollars,
as is the business of the industry as a whole. Accordingly, there is
minimal currency risk related to the sale of tobaccos. However, local
country operating costs, including the purchasing and processing costs
for tobaccos, are subject to the effects of exchange fluctuations of
the local currency against the U.S. dollar. The Company attempts to
minimize such currency risks by matching the timing of its working
capital borrowing needs against the tobacco purchasing and processing
funds requirements in the currency of the country of tobacco origin.
Fluctuations in the value of foreign currencies can significantly
affect the Company's operating results. See Note O to the Company's
Consolidated Financial Statements for the year ended June 30, 1997,
included herein.
The Company has expanded its international operations in areas where
the export of tobacco has increased due to increased demand for lower
priced tobacco. In particular, the Company has a significant
concentration of its purchasing, processing and exporting operations
in southern Brazil. In recent years, Brazil's economic problems have
received wide publicity, and that country has taken in the past,
various actions relating to foreign currency exchange controls and
adjustments for devaluation of the currency and inflation. While such
controls generally influence the amount of cash dividends remitted
from Brazil and such adjustments can affect the Company's purchase
costs of tobacco and its processing costs, they have not and are not
expected to adversely affect the Company's ability to export tobacco
from Brazil.
Restrictions on Dividends
Under the terms of the Indenture, dated May 29, 1996, between the
Company and Crestar Bank, as trustee (the "Indenture"), relating to the
Company's 8 7/8% Senior Notes due 2006 (the "Notes"), the Company will
not be permitted to make certain restricted payments, including cash
dividends on Common Stock, under certain circumstances. The Company
generally may make such restricted payments, provided that (1) the
Company is not in default under the Indenture, (2) the Company is able
to incur at least $1.00 of additional indebtedness under a
consolidated interest coverage ratio test set forth in the Indenture,
and (3) the aggregate amount of the payments to be made is less than
the total of (x) $20.0 million, (y) 50% of the Company's consolidated
net income for the period from April 1, 1996, through the end of the
Company's most recent fiscal quarter and (z) the net cash proceeds
from the sale by the Company of any equity securities or debt
securities that are converted into equity securities. At June 30,
1997, the Company was permitted to make restricted payments, including
cash dividends on its Common Stock, of up to $78.0 million.
-27-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
STATEMENT OF CONSOLIDATED INCOME
DIMON Incorporated and Subsidiaries
Years Ended June 30
______________________________________
(in thousands, except per share amounts) 1997 1996 1995
===========================================================================================
Sales and other operating revenues . . . . . . . . . $2,513,227 $2,167,473 $1,941,188
Cost of goods and services sold. . . . . . . . . . . 2,195,333 1,904,992 1,759,364
______________________________________
317,894 262,481 181,824
Selling, administrative and
general expenses . . . . . . . . . . . . . . . . . 137,124 132,710 132,802
Restructuring and merger related costs . . . . . . . 3,864 15,360 25,955
_______________________________________
Operating Income . . . . . . . . . . . . . . . . 176,906 114,411 23,067
Interest Expense. . . . . . . . . . . . . . . . . . 53,027 46,924 45,231
_______________________________________
Income (loss) before income taxes,
minority interest, equity in net
income (loss) of investee companies
and extraordinary item. . . . . . . . . . . . . . 123,879 67,487 (22,164)
Income taxes . . . . . . . . . . . . . . . . . . . . 47,108 26,995 5,980
_______________________________________
Income (loss) before minority interest,
equity in net income of investee companies
and extraordinary item . . . . .. . . . . . . . . 76,771 40,492 (28,144)
Income applicable to minority interest. . . . . . . 124 292 216
Equity in net income (loss) of investee
companies (net of U.S. tax expense) . . . . . . . 526 (330) (1,805)
_______________________________________
Income (loss) before extraordinary item. . . . . . . 77,173 39,870 (30,165)
Extraordinary item:
Partial recovery of Iraqi receivable (net of
income tax expense of $870). . . . . . . . . . . - 1,400 -
_______________________________________
NET INCOME (LOSS) $ 77,173 $ 41,270 $ (30,165)
=======================================
Earnings Per Share, Primary
Income (loss) before extraordinary item . . . . . $1.79 $1.00 $(.79)
Extraordinary item. . . . . . . . . . . . . . . . - .04 -
______________________________________
Net Income (Loss) . . . . . . . . . . . . . . . . $1.79 $1.04 $(.79)
======================================
Earnings Per Share, Assuming Full Dilution
Income before extraordinary item. . . . . . . . . $1.76 $ .98 $ *
Extraordinary item. . . . . . . . . . . . . . . . - .03 -
______________________________________
Net Income. . . . . . . . . . . . . . . . $1.76 $1.01 $ *
======================================
See notes to consolidated financial statements.
* Computation of loss per share is anti-dilutive for the year 1995.
-28-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
CONSOLIDATED BALANCE SHEET
DIMON Incorporated and Subsidiaries
June 30
___________________________
(in thousands) 1997 1996
=====================================================================================
ASSETS
Current assets
Cash and cash equivalents . . . . . . . . . . . . . . $ 107,131 $ 53,820
Notes receivable. . . . . . . . . . . . . . . . . . . 6,797 1,127
Trade receivables, net of allowances
(1997 - $5,902, 1996 - $6,558). . . . . . . . . . . 396,156 190,898
Inventories:
Tobacco . . . . . . . . . . . . . . . . . . . . . . 583,579 315,476
Other . . . . . . . . . . . . . . . . . . . . . . . 25,282 18,025
Advances on purchases of tobacco. . . . . . . . . . . 226,765 74,709
Recoverable income taxes. . . . . . . . . . . . . . . 3,051 1,563
Prepaid expenses and other assets . . . . . . . . . . 22,718 13,157
___________________________
Total current assets. . . . . . . . 1,371,479 668,775
___________________________
Investments and other assets
Equity in net assets of investee companies . . . . . . 9,326 8,268
Other investments. . . . . . . . . . . . . . . . . . . 12,293 2,987
Notes receivable . . . . . . . . . . . . . . . . . . . 12,738 4,078
Other. . . . . . . . . . . . . . . . . . . . . . . . . 15,803 19,151
___________________________
50,160 34,484
Intangible assets
Excess of cost over related net assets
of businesses acquired . . . . . . . . . . . . . 180,435 23,121
Production and supply contracts. . . . . . . . . . . . 26,681 33,325
Pension asset. . . . . . . . . . . . . . . . . . . . . 3,348 4,130
___________________________
210,464 60,576
___________________________
Property, plant and equipment
Land. . . . . . . . . . . . . . . . . . . . . . . . . 31,082 19,223
Buildings . . . . . . . . . . . . . . . . . . . . . . 196,887 143,741
Machinery and equipment . . . . . . . . . . . . . . . 231,705 160,237
Allowances for depreciation . . . . . . . . . . . . . (126,922) (86,426)
___________________________
332,752 236,775
___________________________
Deferred taxes and other deferred charges . . . . . . . . 22,748 19,404
___________________________
$1,987,603 $1,020,014
===========================
-29-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
CONSOLIDATED BALANCE SHEET
DIMON Incorporated and Subsidiaries
June 30
___________________________
(in thousands) 1997 1996
=====================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable to banks and others. .. . . . . . . . . $ 350,263 $ -
Accounts payable:
Trade. . . . . . . . . . . . .. . . . . . . . . . . 108,283 65,970
Officers and employees . . . .. . . . . . . . . . . 13,441 24,074
Other. . . . . . . . . . . . .. . . . . . . . . . . 22,203 14,462
Advances from customers. . . . . . .. . . . . . . . . 69,787 74,153
Accrued expenses . . . . . . . . . .. . . . . . . . . 66,141 51,797
Income taxes . . . . . . . . . . . .. . . . . . . . . 25,146 5,359
Long-term debt current . . . . . . .. . . . . . . . . 16,222 10,618
___________________________
Total current liabilities . . . . . . 671,486 246,433
___________________________
Long-term debt
Revolving Credit Notes and Other. . . . . . . . . . . 577,826 265,871
Convertible Subordinated Debentures . . . . . . . . . 123,328 -
Senior Notes . . . . . . . . .. . . . . . . . . . . . 125,000 125,000
___________________________
826,154 390,871
___________________________
Deferred credits
Income taxes . . . . . . . . .. . . . . . . . . . . . 36,630 21,496
Compensation and other benefits . . . . . . . . . . . 44,072 44,465
___________________________
80,702 65,961
___________________________
Minority interest in subsidiaries . . . . . . . . . . . . 998 901
___________________________
Commitments and contingencies. . . . . . . . . . . . . . - -
___________________________
Stockholders' equity
Preferred Stock - no par value:. . . . 1997 1996
Authorized shares . . . . . . . . . . 10,000 10,000
Issued shares . . . . . . . . . . . . - - - -
Common Stock - no par value: . . . . . 1997 1996
Authorized shares . . . . . . . . . . 125,000 125,000
Issued shares . . . . . . . . . . . . 44,312 42,366 178,939 136,959
Retained earnings . . . . . . . . . . . . . . . . . . 229,521 177,419
Equity-currency conversions . . . . . . . . . . . . . . 670 2,842
Additional minimum pension liability . . . . . . . . . (867) (1,372)
___________________________
408,263 315,848
___________________________
$1,987,603 $1,020,014
===========================
See notes to consolidated financial statements
-30-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
STATEMENT OF STOCKHOLDERS' EQUITY
DIMON Incorporated and Subsidiaries
Additional
Equity- Minimum Unrealized Total
(in thousands, Common Retained Currency Pension Gain (Loss) On Stockholders'
except per share amounts) Stock Earnings Conversions Liability Investments Equity
===============================================================================================================
Balance, June 30, 1994 . . . $ 79,861 $203,615 $6,471 $(1,374) $ (259) $288,314
Net loss for the year. . . . (30,165) (30,165)
Cash dividends - $0.41
per share . . . . . . . . (15,570) (15,570)
Conversion of foreign
currency financial
statements . . . . . . . . (4,906) (4,906)
Reduction in minimum
pension liability. . . . . 88 88
Stock options exercised. . . 67 67
Unrealized gain on
investments. . . . . . . . 876 876
Conversion of 7 3/4%
Convertible
Debentures to
Common Stock . . . . . . 102 102
_____________________________________________________________________________
Balance, June 30, 1995 . . . $ 80,030 $157,880 $1,565 $(1,286) $ 617 $238,806
Net income for the year. . . 41,270 41,270
Cash dividends - $0.54
per share. . . . . . . . . (21,731) (21,731)
Conversion of foreign
currency financial
statements . . . . . . . . 1,277 1,277
Addition to the minimum
pension liability (86) (86)
Stock options exercised. . . 1,564 1,564
Realized gain on
investments . . . . . . . (617) (617)
Conversion of 7 3/4%
Convertible
Debentures to
Common Stock . . . . . . 55,365 55,365
________________________________________________________________________________________
Balance, June 30, 1996 . . . $136,959 $177,419 $2,842 $(1,372) $ - $315,848
Net income for the year. . . 77,173 77,173
Cash dividends - $0.585
per share. . . . . . . . . (25,071) (25,071)
Conversion of foreign
currency financial
statements . . . . . . . . (2,172) (2,172)
Reduction in the minimum
pension liability. . . . . 505 505
Stock options exercised. . . 3,910 3,910
Shares issued in purchase
of Intabex . . . . . . . . 38,070 38,070
_____________________________________________________________________________
Balance, June 30, 1997 . . . $178,939 $229,521 $ 670 $ (867) $ - $408,263
=============================================================================
See notes to consolidated financial statements
-31-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
STATEMENT OF CONSOLIDATED CASH FLOWS
DIMON Incorporated and Subsidiaries
Years Ended June 30
__________________________________
(in thousands) 1997 1996 1995
==========================================================================================
Operating activities
Net Income (Loss). . . . . . . . . . . . . . . .$ 77,173 $ 41,270 $ (30,165)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization. . . . . . . . . 37,191 33,780 31,852
Deferred items . . . . . . . . . . . . . . . . 9,440 5,851 (620)
Loss (gain) on foreign currency transactions . 526 (368) 570
Gain on disposition of fixed assets. . . . . . (3,697) (2,415) (1,819)
Gain on sale of investee . . . . . . . . . . . - (3,751) -
Gain on sale of investment . . . . . . . . . . - (1,090) -
Undistributed (earnings) loss of investees . . (526) 330 1,805
Dividends received from investees. . . . . . . - 1,465 478
Income applicable to minority interest . . . . 124 292 216
Bad debt expense . . . . . . . . . . . . . . . 89 1,043 3,820
Decrease (increase) in accounts receivable . . (92,943) (12,644) 52,520
Decrease in inventories and advances
on purchases of tobacco. . . . . . . . . . . 49,673 64,438 2,156
Decrease (increase) in recoverable taxes . . . (1,497) 444 4,293
Decrease (increase) in prepaid expenses. . . . 12,450 17,257 (3,581)
Increase (decrease) in accounts payable
and accrued expenses . . . . . . . . . . . . (81,055) 14,811 (58,163)
Increase (decrease) in advances
from customers . . . . . . . . . . . . . . . (5,724) 25,116 (3,028)
Increase (decrease) in income taxes. . . . . . 23,381 (6,117) 6,075
Other. . . . . . . . . . . . . . . . . . . . . 694 92 404
________________________________
Net cash provided by operating activities 25,299 179,804 6,813
________________________________
Investing activities
Purchase of property and equipment. . . . . . . (60,860) (41,266) (27,036)
Proceeds from sale of property and equipment. . 8,853 8,605 4,877
Payments on notes receivable and receivables
from investees. . . . . . . . . . . . . . . . 2,348 1,132 27,541
Issuance of notes receivable. . . . . . . . . . (12,869) (1,572) (6,329)
Proceeds from or (advances) for other
investments and other assets. . . . . . . . . 13,109 24,422 4,067
Purchase of minority interest in subsidiaries . (118) - (507)
Acquisition of subsidiary, net of cash acquired 6,382 (6,543) (13,693)
_______________________________
Net cash used by investing activities . . (43,155) (15,222) (11,080)
_______________________________
Financing activities
Repayment of debt . . . . . . . . . . . . . . . (738,003) (830,863) (927,022)
Proceeds from debt. . . . . . . . . . . . . . . 830,679 698,207 978,366
Cash dividends paid to DIMON Incorporated
stockholders. . . . . . . . . . . . . . . . . (25,071) (21,731) (15,570)
Cash dividends paid to minority stockholders. . (379) (169) (237)
Proceeds from sale of common stock. . . . . . . 3,910 1,552 169
_______________________________
Net cash provided (used) by
financing activities . . . . . . . . . 71,136 (153,004) 35,706
_______________________________
Effect of exchange rate changes on cash . . . . . . . . . 31 (84) (1,584)
_______________________________
Increase (decrease) in cash and cash equivalents. . . . . 53,311 11,494 29,855
Cash and cash equivalents at beginning of year. . . . . . 53,820 42,326 12,471
_______________________________
Cash and cash equivalents at end of year. $ 107,131 $ 53,820 $ 42,326
===============================
Other information:
Cash paid during the year:
Interest . . . . . . . . . . . . . . . . . . . $ 48,935 $ 43,361 $ 46,768
Income taxes . . . . . . . . . . . . . . . . . 25,919 21,075 18,917
Non-cash investing and financing activities:
Conversion of debt to equity . . . . . . . . . - 55,365 102
Purchase of Intabex. . . . . . . . . . . . . . 161,398 - -
See notes to consolidated financial statements
-32-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note A - Significant Accounting Policies
- ----------------------------------------
The accounts of the Company and its consolidated subsidiaries are
included in the consolidated financial statements after elimination of
significant intercompany accounts and transactions. Certain foreign
consolidated subsidiaries of the Company have fiscal year ends of
March 31 and May 31 to facilitate reporting of consolidated accounts.
The Company accounts for its investments in certain investee companies
(ownership 20% - 50%) under the equity method of accounting.
Investments in certain other foreign investees and subsidiaries which
are combined with other investments are stated at cost or less than
cost since the Company does not exercise significant influence over
financial or operating policies and because of restrictions imposed on
the transfer of earnings and other economic uncertainties.
Sales recognition is based on the passage of ownership, usually
with shipment of product.
Cash equivalents are defined as temporary investments of cash
with maturities of less than 90 days.
Inventories are valued at the lower of cost or market. Inventory
valuation provisions included in cost of goods and services sold
totaled $9.2 million for 1995. Costs of tobacco inventories are
generally determined by the average cost method while costs of other
inventories are generally determined by the first-in, first-out
method. Substantially all of the tobacco inventory represents
finished goods. Interest and other carrying charges on the
inventories are expensed in the period in which they are incurred.
Equity in net assets of investee companies includes excess of
equity over cost in the amount of $346 ($4,075 at June 30, 1996) and
is being amortized on a straight-line basis over ten years.
Excess of cost over related net assets of businesses acquired is
being amortized on a straight-line basis over periods ranging from 10
to 40 years. The accumulated amortization at June 30, 1997, is
$11,115 ($5,300 at June 30, 1996).
The carrying value of intangible assets is periodically reviewed
by the Company based on the expected future undiscounted operating
cash flows of the related business unit. Based upon its most recent
analysis, the Company believes that no material impairment of
intangible assets exists at June 30, 1997.
Supply contracts include the cost allocated to two ten-year
tobacco supply agreements with R. J. Reynolds Tobacco Company (RJR)
pursuant to which the Company will supply RJR and its affiliates with
specified quantities of its required tobaccos. Each contract is being
amortized over the quantities shipped or the contract period,
whichever is sooner. The accumulated amortization at June 30, 1997,
is $22,700 ($18,900 at June 30, 1996).
Production contracts include the cost allocated to contracts
associated with farmers for the future supply of their annual tobacco
production. The production contracts are being amortized primarily on
a straight-line basis over ten years. The accumulated amortization at
June 30, 1997, is $16,155 ($13,311 at June 30, 1996).
Property, plant and equipment is accounted for on the basis of
cost. Provisions for depreciation are computed on a straight-line
basis at annual rates calculated to amortize the cost of depreciable
properties over their estimated useful lives. Buildings and machinery
and equipment are depreciated over ranges of 20 to 40 years and over
five to ten years, respectively. The consolidated financial
statements do not include fully depreciated assets.
The Company provides deferred income taxes on temporary
differences arising from tax loss carryforwards, employee benefit
accruals, depreciation, deferred compensation and undistributed
earnings of consolidated subsidiaries and unconsolidated affiliates
not permanently reinvested.
Primary earnings per share are computed by dividing earnings by
the weighted average number of shares outstanding plus any common
stock equivalents during each period. The fully diluted earnings per
share calculation assumes that all of the outstanding Convertible
Subordinated Debentures outstanding during the periods presented were
converted into Common Stock at the beginning of the reporting period,
or as of the date of issue, thereby increasing the weighted average
number of shares considered outstanding during each period and
reducing the after-tax interest expense. The weighted average number
of shares outstanding are further increased by common stock
equivalents on employee stock options.
The Company carried its equity security investments at fair value
as Prepaid expenses and other assets with any change from the average
cost basis being reflected in stockholders' equity net of the tax
benefit. These securities were sold in 1996.
-33-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note A - Significant Accounting Policies (continued)
- ----------------------------------------
In February 1997, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards ("SFAS")
No. 128, "Earnings per Share" which simplifies the earnings per share
(EPS) computation and replaces the presentation of primary EPS with a
presentation of basic EPS. This statement also requires dual
presentation of basic and diluted EPS on the face of the income
statement for entities with a complex capital structure and requires a
reconciliation of the numerator and denominator used for the basic and
diluted EPS computation. This statement will be effective for the
Company's March 31, 1998, interim statements and will require the
restatement of all prior-period earnings per share data presented.
The Company has studied the implications of the statement, and based
on its initial evaluation, does not expect it to have a material
impact on the Company's financial condition or results of operations
upon adoption.
In June 1997, the FASB issued SFAS No. 130, "Reporting
Comprehensive Income" which establishes standards for reporting and
display of comprehensive income and its components in a full set of
general-purpose financial statements. This statement will be
effective for the Company's March 31, 1998, interim statements and
will require the restatement of all prior-periods presented. The
Company has studied the implications of the statement, and based on
its initial evaluation, does not expect it to have a material impact
on the Company's financial condition or results of operations upon
adoption.
In June 1997, the FASB issued SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information" which requires that
public business enterprises report certain information about
operating segments in complete sets of financial statements of the
enterprise and in condensed financial statements of interim periods
issued to shareholders. It also requires that public business
enterprises report certain information about their products and
services, the geographic areas in which they operate and their major
customers. This statement is effective for the Company's June 30, 1998,
year end financial statements. The Company has studied the
implications of the statement, and based on its initial evaluation,
does not expect it to have a material impact on the Company's financial
condition or results of operations upon adoption.
Certain prior year amounts have been reclassified to conform to
the current year presentation.
Note B - Merger and Acquisitions
- --------------------------------
Merger
On October 23, 1994, Dibrell and Monk-Austin announced execution of a
definitive Agreement and Plan of Reorganization pursuant to which the
businesses of Dibrell and Monk-Austin would be combined. At special
meetings on March 31, 1995, the shareholders of both Dibrell and
Monk-Austin approved the Agreement and related combination. As a result,
Dibrell and Monk-Austin were merged into DIMON Incorporated ("DIMON")
and each share of Dibrell Common Stock outstanding at the merger date
was converted to 1.5 shares, and each share of Monk-Austin Common
Stock outstanding at the merger date was converted into 1.0 share of
DIMON Common Stock, resulting in 38.069 million total outstanding
shares at April 1, 1995, the effective date of the merger. In
connection with the merger, the Company incurred legal, accounting and
financial consultants costs of $8.1 million in 1995.
The merger qualifies as a tax free reorganization and was
accounted for as a pooling of interests. Accordingly, the Company's
financial statements have been restated to include the results of both
Dibrell and Monk-Austin for all periods presented. Recorded assets
and liabilities have been carried forward to the combined company at
their historical book values.
Combined and separate results of Dibrell and Monk-Austin during
the periods preceding the merger were as follows:
Dibrell Monk-Austin Adjustment Combined
=================================================================================================
Nine months ended March 31, 1995 (unaudited)
Sales and other operating revenues. . .$ 819,459 $739,415 $ (140) $1,558,734
Net income (loss) . . . . . . . . . . . 6,090 (6,152) 9,829 9,767
=================================================================================================
-34-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note B - Merger and Acquisitions (continued)
- ---------------------------------
Acquisitions
The combined financial results presented above include
adjustments made to conform accounting policies of the two companies.
The significant adjustments impacting net income for conformity relate
to the accounting for income taxes, the treatment of grower advances
in Brazil, foreign currency transaction gains and losses and certain
other inventory costing policies. All other adjustments are
reclassifications to conform financial statement presentation.
Intercompany transactions between the two companies for the periods
presented were not material.
On April 1, 1995, the Company acquired the businesses of
Austro-Hellenique De Tabac S.A. (Hellas) and Austro-Turk Tutun A.S.
(Austro-Turk) for cash of $13,372 and assumption of liabilities of
$3,821. Hellas and Austro-Turk have tobacco buying, processing and
selling operations in Greece and Turkey, respectively. This acquisition
has been accounted for as a purchase. The excess of cost over businesses
acquired of $17,193 is being amortized over a ten-year period.
The following pro forma information has been prepared assuming
that this acquisition had taken place at the beginning of the period.
The pro forma information includes adjustments to give effect to
amortization of goodwill and interest expense on acquisition debt,
together with related income tax effects.
Year ended June 30, 1995
(unaudited)
=============================================================================
Sales and other operating revenues . . . . . . . . . . . . . $1,965
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . (37)
Loss per share, primary. . . . . . . . . . . . . . . . . . . (.96)
On April 1, 1997, DIMON Incorporated acquired all the outstanding
capital stock and other rights of Intabex Holdings Worldwide S.A.
(Intabex), a privately-owned Luxembourg holding company. Intabex
maintains coordination and service offices in Wokingham, England. In
addition, Intabex owns and operates leaf tobacco buying, processing,
and exporting operations in principal tobacco markets around the world
including the United States, Brazil, Argentina, Malawi, Italy and
Thailand. An Intabex subsidiary, Compania de Filipinas (CdF), is one
of the two major suppliers of premium cigar leaf and other dark air-cured
tobaccos to the resurgent cigar industry in the United States
and Europe. Separately, a Zimbabwe company that is a wholly-owned
subsidiary of DIMON acquired certain tobacco assets from an Intabex
affiliated company in Zimbabwe. Intabex is a major supplier of
Zimbabwean and other African grown tobacco to the cigarette industry.
The transaction was accounted for as a purchase, and accordingly,
the consolidated financial statements of DIMON include the results of
operations of Intabex from the date of acquisition. The $245.58
million aggregate purchase price for Intabex, the Zimbabwe assets and
other rights acquired, consisted of 1.70 million shares of DIMON
common stock, $123.3 million in 10-year, 6.25 percent subordinated
debentures convertible into 4.287 million DIMON shares at $28.77 per
share, and $84.21 million in cash. The final purchase price reflects
a reduction of $18.6 million for certain adjustments that were
comtemplated by the purchase agreement. The source of cash was working
capital of DIMON.
Intabex's former shareholders, Folium, Inc., Tabacalera, S.A. and
Leaf Management Investments Ltd., have agreed to indemnify DIMON
against certain liabilities in connection with the acquisition of
Intabex, subject to a maximum of $90 million. DIMON may set off any
such liabilities against $90 million of the debentures held by Folium
and Tabacalera. The amount of debentures subject to set-off declines
in stages, with $15 million subject to set-off after October 1, 1998,
through July 31, 1999, and $10 million subject to set-off from August
1, 1999, through April 1, 2000, subject to extension with respect to
outstanding claims. A DIMON subsidiary in Zimbabwe is entitled to
similar indemnification and set-off rights in connection with the
Zimbabwe tobacco assets purchased, subject to a maximum of $12
million. The purchase price has been preliminarily allocated based on
estimated fair values of assets acquired and liabilities assumed at
the date of acquisition. This preliminary allocation resulted in an
excess of purchase price over net assets acquired of $159 million,
which is being amortized on a straight-line basis over 40 years.
-35-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note B - Merger and Acquisitions (continued)
-----------------------
The following unaudited pro forma information presents a summary
of consolidated results of operations of the Company and the acquired
business as if the acquisition had occurred July 1, 1996 or 1995.
Years Ended June 30
1997 1996
--------- -----------
Revenue. . . . . . . . . . . . . . .$3,160,215 $2,733,538
Income before extraordinary
items. . . . . . . . . . . . . . . 66,792 44,941
Net Income . . . . . . . . . . . . . 66,792 46,341
Earnings per share, primary. . . . . 1.49 1.12
Earnings per share, fully diluted. . 1.46 1.09
The unaudited pro forma results have been prepared for
comparative purposes only and include certain adjustments, such as
additional amortization expense as a result of goodwill and other
intangible assets, and an increased interest expense on acquisition
debt. They do not purport to be indicative of the results of
operations which actually would have resulted had the combination been
in effect on July 1, 1996 or 1995, or of future results of operations
of the consolidated entities.
In conjunction with this acquisition, the Company capitalized
$9.2 million, net of $3.7 million of tax, to cover the anticipated
costs of combining the acquired tobacco business with existing tobacco
operations of DIMON. The capitalized amounts relate primarily to
severance and closure of certain duplicative administrative, warehouse
and plant facilities acquired from Intabex. Of the capitalized
amounts, $7.0 million relates to severance and other costs associated
with employee separations and $2.2 million relates to costs of planned
facility closures. As these amounts are paid out in cash, the Company
will reduce an accrual established for their expenditure.
Note C - Restructuring and Merger Related Costs
--------------------------------------
In 1995, the Company commenced various activities to restructure its
worldwide operations. The following tables set forth the Company's
restructuring provisions provided and changes in the related reserves
for 1995, 1996 and 1997. The reserve balances are included in accrued
expenses and deferred compensation and other benefits.
Facilities
Employee Closure
Separations Costs Other Total
=================================================================================
Provision for restructuring - 1995. . . . $12,593 $ 2,848 $2,416 $17,857
Reduced by:
Cash payments . . . . . . . . . . . (76) (223) (205) (504)
Asset writedowns . . . . . .. . . . - (1,493) (2,211) (3,704)
______________________________________
Reserve balances at June 30, 1995 . . . . $12,517 $ 1,132 $ - $13,649
Provision for restructuring - 1996. . . . 15,699 (1,244) 905 15,360
Increased (reduced) by:
Cash (payments) receipts . . . . . (8,150) 4,719 (75) (3,506)
Asset writedowns and sales . . . . - (4,212) (330) (4,542)
______________________________________
Reserve balances at June 30, 1996 . . . . $20,066 $ 395 $ 500 $20,961
Provision for restructuring - 1997. . . . 2,864 - 1,000 3,864
Increased (reduced) by:
Cash (payments) receipts . . . . . (9,487) (100) - (9,587)
Asset writedowns and sales. . . . . (694) (270) (500) (1,464)
Reserve balances at June 30, 1997 . . . . $12,749 $ 25 $1,000 $13,774
======================================
-36-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note C - Restructuring and Merger Related Costs (continued)
--------------------------------------
The 1995 restructuring provision included approximately $2.6
million for the closing of certain unprofitable flower facilities and
related severance costs. The remaining 1995 restructuring provision
of $15.2 million addressed rationalization of the tobacco operations
through elimination of duplicative facilities and reduction of
personnel.
The 1996 restructuring provision of $15.4 million was primarily
for additional severance costs. During the year ended June 30, 1996,
the Company severed a total of 367 employees most of which were
involuntarily separated. The severed employees were primarily in the
tobacco division and worked in various departments throughout the
Company.
During the year ended June 30, 1997, additional restructuring
charges were accrued in the amount of $3.9 million, of which $2.9
million relates to additional severance costs and $1 million relates
to a reduction of capitalized idle plant expense. Remaining cash
outlays associated with employee separations are expected to total
$7.9 million, of which $3.3 million will be expended in 1998.
Remaining amounts relate primarily to the pension plan charge and
other deferred compensation, which will be made as required for
funding appropriate pension and other payments in future years.
Note D - Investee Companies and Related Parties
--------------------------------------
The combined summarized information for investee companies follows:
1997 1996 1995
=============================================================================
Current assets . . . . . . . . . . . . . . $61,887 $13,069 $ 84,635
Non-current assets . . . . . . . . . . . . 13,684 29,087 57,344
Current liabilities. . . . . . . . . . . . 56,933 14,631 84,244
Non-current liabilities. . . . . . . . . . 866 2,446 3,130
Interest of other shareholders . . . . . . 8,100 12,733 31,982
Net sales. . . . . . . . . . . . . . . . . 44,294 42,388 120,183
Gross profit . . . . . . . . . . . . . . . 9,276 8,771 9,953
Net income (loss). . . . . . . . . . . . . 1,014 594 (1,395)
__________________________________
The above changes from 1996 relate primarily to the Company's
purchase of Intabex Holdings Worldwide S.A. Also, as a result of the
purchase, two investee companies are now being accounted for as
consolidated entities. The above changes from 1995 relate primarily
to the Company selling its interest in a Brazilian investee, Rio
Grande Tabacalera S.A.
Balances with related parties, primarily unconsolidated,
affiliated companies, are as follows:
1997 1996 1995
============================================================================
Trade receivables . . . . . . . . . . . .$ 16,352 $23,904 $ 21,258
Advances on purchases of tobacco. . . . . 101,540 32,786 9,716
Notes receivable. . . . . . . . . . . . . 4,190 - 4,169
Trade payables and advances
from customers. . . . . . . . . . . . . 7,405 6,844 1,556
Other income: Interest . . . . . . . . . 917 581 1,376
Net sales . . . . . . . . . . . . . . . . 12,274 6,673 12,907
Purchases of tobacco. . . . . . . . . . . 80,389 61,549 73,474
__________________________________
-37-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note E - Financial Instruments
----------------------
The estimated fair value of the Company's financial instruments at
June 30, 1997 is provided in the following table:
Carrying Fair
Amount Value
___________________________________________________________________________
Senior Notes. . . . . . . . . . . . . . . . . . . . $125,000 $132,031
Convertible Subordinated Debentures . . . . . . . . 123,328 135,661
Other Long-Term Debt and Capitalized Leases . . . . 94,048 89,417
Interest rate swap agreements modify the interest
characteristics of a portion of the Company's debt. The differential
to be paid or received is accrued as interest rates change and
recognized as an adjustment to interest expense in the statement of
consolidated income. The related accrued receivable or payable is
included in other assets or liabilities. The fair values of the swap
agreements are not recognized in the financial statements.
The counterparties to these contractual arrangements are a
diverse group of major financial institutions with which the Company
also has other financial relationships. The Company is exposed to
credit loss in the event of non-performance
by these counterparties. If a counterparty fails to meet the terms of
a swap agreement, the Company's exposure is limited to the net amount
that would have been received, if any, over the agreement's remaining
life. The Company does not anticipate non-performance by the other
parties, given their high-credit ratings and no material loss would be
expected from non-performance by any one of such counterparties.
Interest rate swap agreements with an aggregate notional
principal balance of $200,142 ($125,000 fixed to floating and $75,142
floating to fixed) and expiring at various dates through May 23, 2001,
had a negative value of $3 at June 30, 1997.
In the normal course of business, the Company is a party to
financial instruments with off balance sheet risk such as letters of
credit and guarantees. Management does not expect any material losses
to result from these instruments.
The fair value estimates presented herein are based on
information available to management at June 30, 1997, and were
determined using quoted market prices and the discounted value of
future cash flows.
Note F - Short-Term Borrowing Arrangements
---------------------------------
The Company has lines of credit arrangements with several banks under
which the Company may borrow up to a total of $1,783,889 ($897,523 at
June 30, 1996), excluding all long-term credit agreements. These
lines bear interest at rates ranging from 1.7% to 13.7% at June 30,
1997. Unused lines of credit at June 30, 1997, amounted to $789,913
($521,145 at June 30, 1996), net of $143,713 of available letters of
credit and guarantees that reduce lines of credit. There were no
compensating balance agreements at June 30, 1997, or 1996.
-38-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note G - Long-Term Debt
---------------
Such debt is comprised of:
1997 1996
_____________________ ____________________
Maturing Maturing Maturing Maturing
within after within after
One Year One Year One Year One Year
==========================================================================================
Senior Notes. . . . . . . . . . . . . . . . $ - $125,000 $ - $125,000
Convertible Subordinated Debentures. . . . . - 123,328 - -
Revolving Credit Notes . . . . . . . . . . . - 500,000 - 231,676
Other Long-Term Debt . . . . . . . . . . . . 15,307 77,249 9,279 32,994
_____________________________________________
$15,307 $825,577 $ 9,279 $389,670
Capitalized Lease Obligations. . . . . . . . 915 577 1,339 1,201
_____________________________________________
$16,222 $826,154 $10,618 $390,871
=============================================
Payments of the debt are scheduled as follows:
Convertible Revolving Other
Senior Subordinated Credit Long-Term
Notes Debentures Notes Debt Total
=======================================================================================
1998 . . . . . . . . . $ - $ - $ - $ 15,307 $ 15,307
1999 . . . . . . . . . - - - 15,970 15,970
2000 . . . . . . . . . - - 500,000 11,481 511,481
2001 . . . . . . . . . - - - 9,926 9,926
2002 . . . . . . . . . - - - 32,192 32,192
2003 . . . . . . . . . - - - 1,740 1,740
Later years. . . . . . 125,000 123,328 - 5,940 254,268
_______________________________________________________________
$125,000 $123,328 $500,000 $ 92,556 $840,884
===============================================================
On May 29, 1996, the Company issued $125 million in 8 7/8%
Senior Notes (the "Notes") due 2006. The Notes are general unsecured
obligations of the Company and will rank equally in right of payment
with all other unsubordinated indebtedness (including the New Credit
Facility, discussed below) of the Company. The Company used the net
proceeds to repay certain existing short-term indebtedness and for
other corporate purposes. On or after June 1, 2001, the Company may
redeem the Notes in whole or in part, at established redemption
prices, plus accrued and unpaid interest, if any, to the date of
redemption. There are no sinking fund requirements for the Notes.
The Notes are subject to certain covenants that among other things,
require specific liquidity and long-term solvency ratios and, under
certain circumstances, restrict payment of dividends by the Company.
The Company generally may make such restricted payments, provided that
(1) the Company is not in default under the Indenture, (2) the Company
is able to incur at least $1.00 of additional indebtedness under a
consolidated interest coverage ratio test set forth in the Indenture,
and (3) the aggregate amount of the payments to be made is less than
the total of (x) $20.0 million, (y) 50% of the Company's consolidated
net income for the period from April 1, 1996, through the end of the
Company's most recent fiscal quarter and (z) the net cash proceeds
from the sale by the Company of any equity securities or debt
securities that are converted into equity securities. At June 30,
1997, the Company was permitted to make restricted payments, including
cash dividends on its Common Stock, of up to $78.0 million.
On April 1, 1997, in connection with the Intabex acquisition
(the "Debentures"), DIMON Incorporated issued $123.3 million of 6 1/4%
Convertible Subordinated Debentures due on March 31, 2007. The
Debentures are convertible into approximately 4.29 million shares of
the Company's Common Stock at conversion price of $28.77 per share at
any time prior to maturity. The Debentures are subordinated in right
of payment to all existing and future senior indebtedness, as defined,
of the Company, and do not have a cross-default provision. The
Debentures are redeemable at the option of the Company under certain
circumstances on or after April 1, 2000. As discussed in Note B,
Intabex's former shareholders have indemnified DIMON against certain
liabilities in connection with the acquisition of Intabex. DIMON may
set off any such indemnified liabilities against $90 million of the
Debentures. The amount of Debentures subject to set-off declines in
stages, as discussed in Note B.
-39-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note G - Long-Term Debt (continued)
--------------
To ensure long-term liquidity, DIMON entered into a $500 million
New Credit Facility, effective June 27, 1997, with 20 banks which
replaces DIMON's $240 million Former Credit Facility. The Company had
no borrowings under these agreements at either June 30, 1997 or 1996.
However, the Company has used these facilities to classify $500,000
($231,676 at June 30, 1996) of working capital loans to Revolving
Credit Notes. It is the Company's intent to finance at least $500,000
on a long-term basis. The New Credit Facility is subject to certain
commitment fees and covenants that among other things require DIMON to
maintain minimum working capital and tangible net worth amounts,
require specific liquidity and long-term solvency ratios and restrict
acquisitions. The New Credit Facility's initial term is to June 27,
2000, and pending approval by the lenders, may be extended. The rates
of interest are based upon the type of loan requested by the Company.
During the life of the agreement, the interest rate could be the prime
rate or the LIBOR rate adjusted. The primary advance rate is the
agent bank's base lending rate (8.50% at June 30, 1997). The Company
pays a commitment fee of 1/4% per annum on any unused portion of the
facility. Decisions relative to repayments and reborrowings are made
based on circumstances then existing, including management's judgment
as to the most effective utilization of funds.
Other long-term debt consists of obligations of DIMON
Incorporated, Florimex and the tobacco operations in Africa, Germany
and Spain, and is payable at interest rates varying from 4.85% to
11.7%.
Note H - Long-Term Leases
----------------
The Company, primarily through Florimex, has both capital and
operating leases. The capital leases are for land, buildings,
automobiles and trucks; the operating leases are for office equipment.
The capitalized lease obligations are payable through 1999. Interest
rates are imputed at 7.0% to 10.7%. Amortization is included in
depreciation expense. Minimum future obligations and capitalized
amounts are as follows:
Capital Operating
Leases Leases
===============================================================================
1998. . . . . . . . . . . . . . . . . . . . . . .$ 915 $ 4,777
1999. . . . . . . . . . . . . . . . . . . . . . . 491 3,575
2000. . . . . . . . . . . . . . . . . . . . . . . 79 2,314
2001. . . . . . . . . . . . . . . . . . . . . . . 7 1,621
2002. . . . . . . . . . . . . . . . . . . . . . . - 1,262
Later years . . . . . . . . . . . . . . . . . . . - 738
___________________________
$1,492 $14,287
Less amount representing interest and
deposits . . . . . . . . . . . . . . . . . . . 71
______
Present value of net minimum lease payments . . $1,421
Less current portion of obligations
under capital leases. . . . . . . . . . . . . 725
______
Long-term obligations under capital leases . . .$ 696
======
Capitalized amounts:
Machinery and equipment,
primarily vehicles . . . . . . . . . .$2,949
Accumulated amortization . . . . . . . .(1,728)
_______
$ 1,221
=======
-40-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note I - Preferred Stock
---------------
The Board of Directors is authorized to issue shares of Preferred
Stock in series with variations as to the number of shares in any
series. The Board of Directors also is authorized to establish the
rights and privileges of such shares issued including dividend and
voting rights. At June 30, 1997, no shares had been issued.
Note J - Stock Incentive Plan
--------------------
At the 1995 Special Meeting of Stockholders, the DIMON Incorporated
Omnibus Stock Incentive Plan (the Incentive Plan) and the DIMON
Incorporated Non-Employee Directors Stock Option Plan (the Directors
Plan) were approved. Also, as a result of the merger, options granted
under previous plans were assumed by DIMON.
The Incentive Plan authorizes the issuance of up to 2 million
shares of common stock (subject to increase annually by 3% of the
number of shares of common stock issued during such year, other than
pursuant to the Incentive Plan). The Incentive Plan authorizes the
issuance of various stock incentives to key employees of the Company
or any subsidiary, including nonqualified or incentive stock options,
stock appreciation rights and shares of restricted stock.
Stock options granted under the Incentive Plan allow for the
purchase of common stock at prices determined at the time the option
is granted by a committee composed of independent directors (the
Committee). Stock appreciation rights (SARs) may be granted under the
Incentive Plan in relation to option grants or independently of option
grants. SARs generally entitle the participant to receive in cash the
excess of the fair market value of a share of common stock on the date
of exercise over the value of the SAR at the date of grant.
Restricted stock is common stock that is both nontransferable and
forfeitable unless and until certain conditions are satisfied. As of
June 30, 1997 no restricted stock has been awarded under the Incentive
Plan. No awards may be granted under the Incentive Plan after
February 8, 2005.
The options and SARs become exercisable on various dates as
originally determined for the grants assumed by DIMON. Under the
Incentive Plan, the Committee will determine the dates that the
options and SARs become exercisable.
A separate Directors' Plan authorizes automatic annual grants to
purchase one thousand shares to each non-employee director. Any 1997
grants will be awarded at the meeting of the DIMON Board following the
1997 annual meeting of the shareholders of DIMON. The option price
will be equal to the fair market value of DIMON common stock on the
date of grant. The maximum number of shares to be issued under the
Directors Plan is 50 thousand shares. Options granted under the
Directors' Plan are immediately exercisable. Options to purchase
thirteen thousand shares had been granted as of June 30, 1997.
The Company has elected to treat the costs of SARs as
compensation charges to the income statement with quarterly
adjustments for market price fluctuations. All other options are
treated as equivalent shares outstanding. There was a $2,142 charge
to income in 1997, a $473 charge to income in 1996, and an $680 charge
to income in 1995 arising from adjustments in fair market values of
the SARs.
In October, 1995, the Financial Accounting Standards Board
issued SFAS No. 123 which established financial accounting and
reporting standards for stock-based employees compensation plans.
SFAS No. 123 encourages companies to adopt a fair value based method
of accounting for such plans but continues to allow the use of the
intrinsic value method prescribed by Accounting Principles Board (APB)
Opinion No. 25. The Company has elected to continue to account for
stock-based compensation in accordance with APB No. 25. If the
Company had elected to recognize compensation cost based on the fair
value of the options granted at grant date as prescribed by SFAS No.
123, net income and earnings per share based on fair value would have
been reduced to the unaudited pro forma amounts indicated in the table
below (in thousands, except per share data):
Year Ended June 30
1997 1996
===========================
Net income as reported. . . . . $77,173 $41,270
Net income Pro Forma. . . . . . 76,185 40,859
Earnings per share,
primary as reported . . . . . 1.79 1.04
Earnings per share,
primary Pro Forma . . . . . . 1.77 1.03
-41-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note J - Stock Incentive Plan (continued)
--------------------
Information with respect to options and SARs follows:
Year Ended June 30
_________________________
1997 1996 1995
==================================================================================
Options and SARs outstanding at beginning of year . . . 1,804 1,540 1,354
Options and SARs granted. . . . . . . . . . . . . . . . 436 403 231
Options and SARs exercised. . . . . . . . . . . . . . . (263) (130) (5)
Options and SARs cancelled. . . . . . . . . . . . . . . (123) (9) (40)
________________________
Options and SARs outstanding at end of year. . . . . . 1,854 1,804 1,540
========================
SARs included as outstanding at end of year . . . . . . 407 528 498
========================
Options available for future grants at end of year. . . 269 337 500
========================
Options and SARs exercisable at end of year . . . . . . 833 1,023 926
========================
Option and SAR market prices per share:
Date of grant $18.13 $17.00 $11.50
20.88 15.38 16.50
Exercised (at lowest and highest market prices) 19.00- 11.33- 14.42-
26.75 20.75 18.25
Cancelled (at lowest and highest market prices) 19.25- 17.00 11.50-
26.50 13.87
Weighted average option exercise price information for the years
1997, 1996 and 1995 follows:
1997 1996 1995
________________________________________________________________
Outstanding at July 1. . . . . . . $16.46 $16.32 $17.16
Granted during the year. . . . . . $18.17 $16.98 $11.50
Exercised during the year. . . . . $23.97 $19.81 $17.76
Outstanding at June 30 . . . . . . $16.87 $16.46 $16.32
Exercisable at June 30 . . . . . . $17.53 $17.19 $16.73
Option groups outstanding at June 30, 1997 and related weighted average
price and life information follows:
Grant Options Options Exercise Remaining
Date Outstanding Exercisable Price Life (Years)
_______________________________________________________________________
8/21/91 . . . . . 237 237 $14.42 4
8/27/92 . . . . . 236 236 $22.00 5
8/26/93 . . . . . 220 197 $16.67 6
8/25/94 . . . . . 210 - $11.50 7
4/1/95 . . . . . 150 150 $16.50 8
8/24/95 . . . . . 366 - $17.00 8
11/17/95 . . . . . 6 6 $15.38 8
8/22/96 . . . . . 422 - $18.13 9
11/15/96 . . . . . 7 7 $20.88 9
_______ _______
1,854 833
======= =======
-42-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note J - Stock Incentive Plan (continued)
--------------------
The weighted average fair value at date of grant for options
granted during 1997 and 1996 was $7.30 and $5.80 per option,
respectively. The fair value of options at date of grant was
estimated using the Black-Scholes model with the following weighted
average assumptions:
Black-Scholes Assumptions 1997 1996
________________________________________________________
Expected Life in years . . . . . . . 10 10
Interest Rate. . . . . . . . . . . . 6.90% 7.00%
Volatility . . . . . . . . . . . . . 33% 96%
Dividend Yield . . . . . . . . . . . 3.1% 3.2%
Note K - Retained Earnings
-----------------
Consolidated retained earnings included $1,314 at June 30, 1997
($4,490 at June 30, 1996) for the Company's share of undistributed net
income of investee companies accounted for on the equity method.
Note L - Income Taxes
------------
Consolidated retained earnings at June 30, 1997 and 1996 include
undistributed earnings of $175,910 and $145,773 respectively, of
certain foreign consolidated subsidiaries which are not subject to
additional foreign income taxes nor considered to be subject to United
States income taxes unless remitted as dividends. The Company intends
to reinvest these undistributed earnings indefinitely; accordingly, no
provision has been made for United States taxes on such earnings.
At June 30, 1997, the Company has net operating tax loss
carryforwards of approximately $99,420 for income tax purposes that
expire in 1998 and thereafter. Those carryforwards relate primarily
to state taxes for U.S. entities and to foreign taxes on Baardse and
various Florimex entities.
The components of income (loss) before income taxes, minority
interest, equity in net income or less of investee companies and
extraordinary items, consisted of the following:
1997 1996 1995
=========================================================================
U.S. . . . . . . . . . . . . . .$ 9,775 $ 6,301 $(28,293)
Foreign. . . . . . . . . . . . . 114,104 61,186 6,129
_________________________________________
$123,879 $67,487 $(22,164)
=========================================
-43-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note L - Income Taxes (continued)
------------
The details of the amount shown for income taxes in the
Statement of Consolidated Income follow:
1997 1996 1995
===========================================================================
Current
Federal. . . . . . . . . . . . . $ 4,434 $ 7,676 $ 4,967
State. . . . . . . . . . . . . . 61 424 73
Foreign. . . . . . . . . . . . . 37,805 12,633 9,719
__________________________________________
$42,300 $20,733 $14,759
__________________________________________
Deferred
Federal. . . . . . . . . . . . . $ 465 $(3,181) $(6,622)
State. . . . . . . . . . . . . . 85 (854) (810)
Foreign. . . . . . . . . . . . . 4,258 10,297 (1,347)
___________________________________________
$ 4,808 $ 6,262 $(8,779)
___________________________________________
Total. . . . . . . . . . . . . . $47,108 $26,995 $ 5,980
===========================================
The reasons for the difference between income tax expense based
on income or (loss) before income taxes, minority interest, equity in
net income or loss of investee companies and extraordinary item and
the amount computed by applying the statutory Federal income tax rate
to such income are as follows:
Pre-tax Income
_______________________________
1997 1996 1995
============================================================================
Computed "expected" tax expense (benefit). $43,358 $23,620 $(7,757)
State income taxes, net of Federal
income tax benefit.. . . . . . . . . . - (280) (530)
Effect of foreign income taxes . . . . . . . 5,618 (1,060) 6,962
U.S. taxes on foreign income,
net of tax credits . . . . . . . . . . 934 1,270 1,440
Operating loss carryforwards, net. . . . . .(2,795) 2,262 1,942
Tax benefits derived from Foreign
Sales Corporations . . . . . . . . . .(1,624) (1,633) (887)
Non-deductible merger expenses . . . . . . . - - 1,583
Permanently non-deductible expenses. . . . . 1,617 1,034 2,103
Other. . . . . . . . . . . . . . . . . . . . - 1,782 1,124
________________________________
Actual tax expense.. . . . . . . . . . . . $47,108 $26,995 $ 5,980
================================
-44-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note L - Income Taxes (continued)
------------
The long-term deferred tax liabilities (assets) are comprised
of the following:
1997 1996
========================================================================
Deferred tax liabilities:
Fixed assets. . . . . . . . . . . . . . $ 16,610 $11,797
Foreign taxes . . . . . . . . . . . . . 10,581 8,672
Other . . . . . . . . . . . . . . . . . 9,439 1,027
__________________________
Gross deferred tax liabilities. . . . . . . . . 36,630 21,496
__________________________
Deferred tax assets:
Tax loss carryforwards . . . . . . . . . (14,387) (16,571)
Postretirement and other benefits. . . . (10,178) (10,317)
Currently non-deductible expenses. . . . (2,780) (4,384)
Other. . . . . . . . . . . . . . . . . . (4,977) (892)
__________________________
Gross deferred tax assets . . . . . . . . . . . (32,322) (32,164)
Valuation allowance . . . . . . . . . . . . . . 13,730 16,571
__________________________
Net deferred tax assets . . . . . . . . . . . . (18,592) (15,593)
__________________________
Net deferred tax liability. . . . . . . . . . . $18,038 $ 5,903
==========================
The net change in the valuation allowance for deferred tax
assets was a decrease of $2,841 and relates primarily to the
utilization of tax loss carryforwards for which no benefit had been
recognized in prior years.
Note M - Employee Benefits
-----------------
Retirement Benefits
In 1995, the Company assumed the defined Benefit Pension Plan (the
Retirement Plan) and an Excess Benefit Plan of the former Dibrell.
The Retirement Plan provides retirement benefits for substantially
all of the former Dibrell's U.S. salaried personnel based on years of
service rendered and compensation during the last five years of
employment. The Company maintains an Excess Benefit Plan that
provides individuals who participate in the Retirement Plan the
difference between the benefits they could potentially accrue under
the Retirement Plan and the benefits actually paid as limited by
regulations imposed by the Internal Revenue Code. The Company funds
these plans in amounts consistent with the funding requirements of
Federal Law and Regulations.
Certain non-U.S. plans are sponsored by certain Florimex
subsidiaries located in Italy, Austria and Germany. These plans
cover substantially all of their full-time employees. Additional
non-U.S. plans sponsored by certain tobacco subsidiaries cover
substantially all of their full-time employees located in Greece,
Italy, The Netherlands, Turkey and Zimbabwe.
-45-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note M - Employee Benefits (continued)
-----------------
Net pension cost included the following components:
1997 1996 1995
==============================================================================================
Service cost - benefits earned during the year. . . . . $ 2,111 $ 1,402 $ 1,528
Interest cost on projected benefit obligation . . . . . 3,821 4,286 4,040
Return on assets - actual . . . . . . . . . . . . . . . (3,413) (6,174) (4,596)
Amortization of transition asset at July, 1986. . . . . (303) (268) (268)
Amortization of prior service costs . . . . . . . . . . 558 659 704
Amortization of unrecognized loss(gain) . . . . . . . . (303) 3,004 1,778
______________________________________
Net pension cost before effect of curtailment . . . . . 2,471 2,909 3,186
Effect of curtailment . . . . . . . . . . .. . . . . . - (698) -
______________________________________
Net pension cost . . . . . . . . . . . . . . . . . . . $ 2,471 $ 2,211 $ 3,186
======================================
The funded status of the plans at June 30 was as follows:
1997 1996
=================================================================================
Actuarial present value of accumulated
benefit obligation
Vested . . . . . . . . . . . . . . . . . . . . . . . $45,372 $46,893
Nonvested. . . . . . . . . . . . . . . . . . . . . . 600 484
_______________________
45,972 47,377
Benefits attributable to projected
salary increases . . . . . . . . . . . . . . . . . . 4,009 9,560
_______________________
49,981 56,937
Plan assets at fair value . . . . . . . . . . . . . . . 44,457 41,045
_______________________
Projected benefit obligation in excess
of plan assets. . . . . . . . . . . . . . . . . . . . 5,524 15,892
Unamortized transition asset . . . . . . . . . . . . . 1,784 1,792
Unrecognized prior service costs. . . . . . . . . . . . (5,352) (6,817)
Unrecognized net gain (loss). . . . . . . . . . . . . . 10,426 4,108
Adjustment required to recognize minimum
liability . . . . . . . . . . . . . . . . . . . . . . 4,215 5,502
_______________________
Net pension liability . . . . . . . . . . . . . . . . . $16,597 $20,477
=======================
For the U.S. plans, projected benefit obligations were determined
using assumed discount rates of 8% for the Retirement Plan for all
three years and 8% for the Excess Benefit Plan for all three years.
Assumed compensation increases were 4% for 1997, 7% for 1996 and 6.5%
for 1995 for the Retirement Plan and 4% for 1997 and 5% for 1996 and
1995 for the Excess Benefit Plan. The assumed long-term rate of return
on plan assets for all three years was 9% for the Retirement Plan and
8% for all three years for the Excess Benefit Plan. Plan assets
consist principally of common stock and fixed income securities. For
non-U.S. plans, discount rates and assumed compensation increases are
in accordance with locally accepted practice. No assumed long-term
rate of return is made for non-U.S. plan assets as these plans are
generally not funded.
-46-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note M - Employee Benefits (continued)
-----------------
The Company also sponsors a 401-k savings plan for most of its
salaried employees located in the United States. The Company's
contributions to the plan were $546 in 1997, $481 in 1996, and $652 in
1995.
The Company has a Profit-Sharing Plan for substantially all of
the salaried employees meeting certain eligibility requirements who
were employed by Monk-Austin. This Profit-Sharing Plan is in lieu of
a defined benefit pension plan. Profit-Sharing Plan contributions are
discretionary and totaled $1,043 in 1995. There were no contributions
in 1997 and 1996.
The Company adopted a Cash Balance Plan on July 1, 1996, that
combines the Retirement Plan of the former Dibrell and the Profit-
Sharing Plan of the former Monk-Austin. The adoption increased the
present value of the accumulated benefit obligation by $2,353,
decreased the benefits attributable to projected salary increases by
$2,493 and decreased net pension cost by $403 for 1997.
Postretirement Health and Life Insurance Benefits
The Company provides certain health and life insurance benefits to
retired employees (and their eligible dependents) who meet specified
age and service requirements. Plan assets consist of paid-up life
insurance policies on certain current retirees. The Company retains
the right, subject to existing agreements, to modify or eliminate the
medical benefits.
The benefit obligation was determined using an assumed discount
rate of 8.0% for all three years and an assumed rate of increase in
health care costs, also known as the health care cost trend rate, of
8% for 1997, 11.5% for 1996 and 13.0% for 1995. This trend rate is
assumed to decrease gradually to 5.5% by 2002. The assumed long-term
rate of return on plan assets was 5.5% for 1997 and 1996 and 5.4% for
1995. Based on current estimates, increasing the health care cost
trend rate by one percentage point would increase the benefit
obligation by approximately $458.
The following table presents the plan's funded status at June 30
reconciled with amounts recognized in the Company's balance sheet:
1997 1996
============================================================================
Accumulated postretirement benefit obligation:
Retirees . . . . . . . . . . . . . . . . . . . . . . $ 8,339 $12,373
Fully eligible active plan participants. . . . . . . 903 2,077
Other active plan participants . . . . . . . . . . . 3,539 5,377
Plan assets at fair value . . . . . . . . . . . . . . (65) (62)
__________ _______
Accumulated postretirement benefit obligation
in excess of plan assets . . . . . . . . . . . . . . 12,716 19,765
Unrecognized prior service cost . . . . . . . . . . . 3,020 (170)
Unrecognized net gain . . . . . . . . . . . . . . . . 3,973 456
__________ _______
Accrued postretirement benefit cost . . . . . . . . . $ 19,709 $20,051
========== =======
-47-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note M - Employee Benefits (continued)
-----------------
Net periodic postretirement benefit cost included the following
components:
1997 1996 1995
=============================================================================
Service cost. . . . . . . . . . . . . . . . . . $ 315 $ 420 $ 395
Interest cost . . . . . . . . . . . . . . . . . 1,093 1,502 1,348
Actual return on plan assets. . . . . . . . . . (3) 16 7
Amortization of unrecognized amounts. . . . . . (423) - -
______ ______ _______
Net periodic postretirement benefit cost. . . . $ 982 $1,938 $ 1,750
======= ======= ==================
The Company continues to evaluate ways to better manage these
benefits and control the costs. Any changes in the plan or revisions
to assumptions that affect the amount of expected future benefits may
have a significant effect on the amount of the reported obligation and
annual expense.
Employees in operations located in certain foreign countries are
covered by various foreign postretirement life insurance benefit
arrangements. For these foreign plans, the cash-basis cost of
benefits charged to income was not material in 1997, 1996 and 1995.
Note N - Geographic Area Data, Export Sales and Other Information
--------------------------------------------------------
The following description and tables present the Company's tobacco and
flower operations in different geographic areas in conformity with the
Statement of Financial Accounting Standards No. 14, "Financial
Reporting for Segments of a Business Enterprise" (SFAS 14).
Geographic area information for tobacco operations as to net sales and
operating profit is based on the origin of the product sold, and
identifiable assets are classified based on the origination of the
product. Turkish tobacco is included in other origin. Geographic
area information for flower operations as to net sales and operating
profit is based on the point of sale, and identifiable assets are
classified based on the point of sale. Corporate assets consist
primarily of those related to cost investments. Export sales are
defined as foreign sales of United States origin.
Tobacco
The Company is principally engaged in the tobacco business. Through
its wholly-owned subsidiary, DIMON International, Inc. ("DIMON
International"), DIMON International and its U.S. tobacco subsidiaries
and affiliates buy leaf tobacco on the auction markets in Florida,
Georgia, South Carolina, North Carolina, Virginia, Kentucky, Tennessee
and Maryland for its customers. This tobacco is shipped to plants
located in Virginia and North Carolina where it is processed, packed
in hogsheads or cases and then stored until ordered shipped by its
customers. DIMON International and its tobacco subsidiaries and
affiliates also are engaged in buying, processing and exporting
tobacco grown in Argentina, Brazil, China, Greece, Guatemala, India,
Italy, Malawi, Mexico, Tanzania, Thailand, Turkey, Zimbabwe and other
areas which is sold on the world markets. The Company's investee
companies are located in Colombia, Greece, Malawi, Philippines and
Spain.
The disaggregation of entities necessary for geographic area data
may require the use of estimation techniques for operating profit.
The identifiable assets presentation does not take into account the
seasonal aspects of the tobacco business, particularly the seasonal
peak in South America.
Flowers
The Company imports, exports and distributes cut flowers through the
Florimex group, which operates through 67 offices on six continents.
-48-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note N - Geographic Area Data, Export Sales and Other Information(continued)
--------------------------------------------------------
Sales and Operating
Other Profit
Operating As Defined By Identifiable
Revenues SFAS 14 Assets
======================================================================================================================
1997
Tobacco
United States. . . . . . . . . . .$ 941,894 $ 31,009 $ 195,368
South America. . . . . . . . . . . 566,094 97,109 621,821
Asia . . . . . . . . . . . . . . . 111,175 13,590 140,418
Africa . . . . . . . . . . . . . . 309,831 17,183 433,315
Other . . . . . . . . . . . . . . 196,745 21,376 349,114
Worldwide supply contract. . . . . - - 7,571
_______________________________________
$2,125,739 $180,267 (1) $1,747,607
_______________________________________
Flowers
Europe . . . . . . . . . . . . . .$ 321,846 $ 9,489 $ 46,421
United States. . . . . . . . . . . 21,440 92 35,599
Other. . . . . . . . . . . . . . . 44,202 702 6,232
_______________________________________
$ 387,488 $ 10,283 $ 88,252
_______________________________________
$2,513,227 $190,550 $1,835,859
===========
Corporate. . . . . . . . . . . . . (13,644) 142,418
Equity in net assets of
investee companies and
related advances: Tobacco . . . - 9,326
___________
$1,987,603
__________ ===========
Operating profit
before interest expense. . . . . $176,906
Interest expense . . . . . . . . . (53,027)
__________
Income before income taxes, minority
interest, equity in net assets of
investee companies and
extraordinary item. . . . . . . $123,879
=======================================
(1) Includes restructuring expenses for tobacco operations: $1,940, United States;
$1,040, South America; $884, Other.
Europe Far East Other Total
======================================================================================
Export sales of U.S. origin . . $142,979 $161,978 $22,049 $327,006
======================================================
Tobacco Flowers Total
======================================================================================
Depreciation and amortization .. . . . . .$30,477 $6,714 $37,191
============================================
Capital expenditures. . . . . .. . . . . .$54,792 $6,068 $60,860
============================================
Equity in net income of
investee companies. . . . . . . . . . . .$ 526 $ - $ 526
============================================
-49-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note N - Geographic Area Data, Export Sales and Other Information (continued)
--------------------------------------------------------
Sales and Operating
Other Profit
Operating As Defined By Identifiable
Revenues SFAS 14 Assets
======================================================================================
1996
Tobacco
United States. . . . . . . . . . .$ 854,853 $ 47,428 $ 106,615
South America. . . . . . . . . . . 524,886 57,038 442,471
Asia . . . . . . . . . . . . . . . 43,023 1,372 34,567
Africa . . . . . . . . . . . . . . 208,898 9,695 170,712
Other . . . . . . . . . . . . . . 138,506 10,756 114,213
Worldwide supply contract. . . . . - - 9,171
_______________________________________
$1,770,166 $126,289 $ 877,749
_______________________________________
Flowers
Europe . . . . . . . . . . . . . .$ 334,104 $ 5,532 $ 85,418
United States. . . . . . . . . . . 20,797 579 6,552
Other. . . . . . . . . . . . . . . 42,406 2,365 7,035
_______________________________________
$ 397,307 $ 8,476 $ 99,005
_______________________________________
$2,167,473 $134,765 (1) $ 976,754
===========
Corporate. . . . . . . . . . . . . (20,354)(1) 34,992
Equity in net assets of
investee companies and
related advances: Tobacco . . . - 8,268
___________
$1,020,014
__________ ===========
Operating profit
before interest expense. . . . . $114,411
Interest expense . . . . . . . . . (46,924)
__________
Income before income taxes, minority
interest, equity in net assets of
investee companies and
extraordinary item. . . . . . . $ 67,487
=======================================
(1) Includes restructuring expenses (recoveries) of Tobacco - $431, United States;
$9,308, South America; $330, Africa; $1,369, Other; $(498), Flowers - United States;
and $4,420, Corporate.
Europe Far East Other Total
======================================================================================
Export sales of U.S. origin . . $159,763 $193,613 $54,886 $408,262
======================================================
Tobacco Flowers Total
======================================================================================
Depreciation and amortization .. . . . . .$26,802 $6,978 $33,780
============================================
Capital expenditures. . . . . .. . . . . .$35,444 $5,822 $41,266
============================================
Equity in net loss of
investee companies . . . . . .. . . . . $ (330) $ - $ (330)
============================================
-50-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note N - Geographic Area Data, Export Sales and Other Information (continued)
--------------------------------------------------------
Sales and Operating
Other Profit (Loss)
Operating As Defined By Identifiable
Revenues SFAS 14 Assets
======================================================================================
1995
Tobacco
United States. . . . . . . . . . .$ 883,294 $ 19,137 $ 119,889
South America. . . . . . . . . . . 446,102 17,249 455,526
Asia . . . . . . . . . . . . . . . 28,111 (3,222) 40,850
Africa . . . . . . . . . . . . . . 162,562 2,926 150,736
Other . . . . . . . . . . . . . . 35,189 1,375 74,180
Worldwide supply contract. . . . . - - 10,770
_______________________________________
$1,555,258 $ 37,465 $ 851,951
_______________________________________
Flowers
Europe . . . . . . . . . . . . . .$ 326,702 $ 1,970 $ 98,835
United States. . . . . . . . . . . 24,439 (5,698) 6,722
Other. . . . . . . . . . . . . . . 34,789 658 4,976
_______________________________________
$ 385,930 $ (3,070) $ 110,533
_______________________________________
$1,941,188 $ 34,395(1) $ 962,484
===========
Corporate. . . . . . . . . . . . . (11,328) 108,502
Equity in net assets of
investee companies and
related advances: Tobacco . . . - 22,622
___________
$1,093,608
__________ ===========
Operating profit
before interest expense. . . . . $ 23,067
Interest expense . . . . . . . . . (45,231)
__________
Income (loss) before income taxes, minority
interest and equity in net assets of
investee companies. . . . . . . $(22,164)
=========================
(1) Includes restructuring expenses of Tobacco - $22,295, United States; $107, South America;
$76, Africa; $855, Other; $741, Flowers - Europe; and $1,881, United States.
Europe Far East Other Total
======================================================================================
Export sales of U.S. origin . . $174,649 $260,310 $23,891 $458,850
======================================================
Tobacco Flowers Total
======================================================================================
Depreciation and amortization .. . . . . .$24,034 $7,818 $31,852
============================================
Capital expenditures. . . . . .. . . . . .$29,033 $6,859 $35,892
============================================
Equity in net income
of investee companies. . . . . . . . .$ 1,805 $ - $ 1,805
============================================
-51-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note N - Geographic Area Data, Export Sales and Other Information
--------------------------------------------------------
(continued)
------------
Of the 1997, 1996 and 1995 tobacco sales and other operating
revenues, approximately 41%, 55% and 52%, respectively, were to
various tobacco customers which management has reason to believe are
now owned by or under the common control of two companies (three
companies in 1996 and 1995), each of which accounted for more than 10%
of net sales. At June 30, 1997, there was approximately $63.1 million
due from the two major tobacco customers and included in Trade
receivables.
The following table summarizes the net sales made to each
customer for the periods indicated:
1997 1996 1995
==================================================================================
Customer A . . . . . . . . . . . . . . . . . . . .$467,333 $474,787 $317,110
Customer B . . . . . . . . . . . . . . . . . . . . 400,097 336,989 279,257
Customer C . . . . . . . . . . . . . . . . . . . . - 170,167 214,622
________________________________
Total. . . . . . . . . . . . . . . . . . . . . . .$867,430 $981,943 $810,989
================================
No customers in the flower operation accounted for more than 10%
of flower sales.
Note O - Foreign Currency Translation
----------------------------
The financial statements of foreign entities included in the
consolidated financial statements have been translated to U.S. dollars
in accordance with FASB Statement No. 52, "Foreign Currency
Translation." Under that Statement, all asset and liability accounts
are translated at the current exchange rate, and income statement
items are translated at the average exchange rate for each quarter;
resulting translation adjustments, net of deferred taxes, are made
directly to a separate component of stockholders' equity. Transaction
adjustments, however, are made in the Statement of Consolidated
Income. These include realized exchange adjustments relating to
assets and liabilities denominated in foreign currencies. Financial
statements of entities located in highly inflationary economies are
remeasured in U.S. dollars. The remeasurement of and subsequent
transaction adjustments are also made in the Statement of Consolidated
Income.
For 1997, the transaction adjustments netted to a loss of $526.
The transaction adjustments netted to a gain of $368 and a loss of
$570 for 1996 and 1995, respectively, and were primarily related to
the Company's Brazilian operations.
-52-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note P - Contingencies and Other Information
-----------------------------------
On August 29, 1996, the Company received notices from Brazilian tax
authorities of proposed adjustments to income taxes for the calendar
year 1992 based on the Company's recalculation of monetary correction
as allowed under Law 8200. The approximate proposed adjustment claims
additional tax, including penalties and interest, through June 30,
1997, of $24,112, before related tax benefits for all assessed
interest. In 1993, the Company received notices from Brazilian tax
authorities of proposed adjustments to the income tax returns of the
Company's entities located in Brazil for the calendar years ending
1988 through 1992. The approximate proposed adjustments claim
additional tax, including penalties and interest through June 30,
1997, of $31,835, before related tax benefits for all assessed
interest. The Company believes that it has properly reported its
income and paid its taxes in Brazil in accordance with applicable laws
and intends to contest the proposed adjustments vigorously. The
Company expects that the ultimate resolution of these matters will not
have a material adverse effect on the Company's consolidated balance
sheet or results of operations.
The Company and certain subsidiaries have available letters of
credit of $261,709 at June 30, 1997, of which $143,713 was
outstanding. These letters of credit represent, generally,
performance guarantees issued in connection with purchases and sales
of domestic and foreign tobacco.
The Company is guarantor as to certain lines and letters of
credit of affiliated companies in an amount not to exceed
approximately $18,476. There was approximately $6,199 outstanding
under these guarantees at June 30, 1997.
The Company's subsidiaries have guaranteed certain loans made by
Brazilian banks to local farmers. There was approximately $39,567
outstanding under these guarantees at June 30, 1997.
The Company enters into forward exchange contracts to hedge
certain foreign currency transactions for periods consistent with the
terms of the underlying transactions. While the forward contracts
affect the Company's results of operations, they do so only in
connection with the underlying transactions. As a result, they do not
subject the Company to risk from exchange rate movements, because
gains and losses on these contracts offset losses and gains on the
transactions being hedged. At June 30, 1997, the Company had $1.2
million ($1.4 million in 1996) of U.S. dollar/Deutschmark exchange
contracts outstanding, all of which were in Deutschmarks. The forward
exchange contracts generally have maturities that do not exceed 18
days at June 30, 1997.
The Company's other off balance sheet risks are not material.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. These estimates
may change with future events.
-53-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note Q - Selected Quarterly Financial Data (Unaudited)
---------------------------------
Summarized quarterly financial information is as follows:
Per Share of
In Thousands Common Stock
______________________________________ _____________
Sales and Other
Operating Gross Net Net
Revenues (1) Profit (1) Income Income*
======================================================================================
1997 Fiscal Year. . . . . . . .$2,513,227 $317,894 $ 77,173 $ 1.76
Fourth Quarter. . . . . . 663,006 112,727 26,030 0.55
Third Quarter . . . . . . 668,146 69,494 18,817 0.44
Second Quarter. . . . . . 771,341 70,624 17,061 0.40
First Quarter . . . . . . 410,734 65,049 15,265 0.36
__________________________________________________
1996 Fiscal Year . . . . . . . $2,167,473 $262,481 $ 41,270 $ 1.01
Fourth Quarter. . . . . . 487,271 64,022 (2) 9,130 (2) .21 (2)
Third Quarter . . . . . . 577,092 61,195 6,274 .16
Second Quarter. . . . . . 763,418 82,460 19,838 .48
First Quarter . . . . . . 339,692 54,804 6,028 (3) .16 (3)
__________________________________________________
(1) In the fourth quarter of 1996 the Company has reclassified Other income into Sales and
other operating revenues. The Company has also reclassified Sundry deductions into Cost
of goods sold. Both Other income and Sundry deductions are not material and the
reclassification does not affect Net income.
Previously reported Net sales and Gross margin were as follows:
Net Sales Gross Profit
=====================================================
1996 Third Quarter . . $573,084 $ 57,355
Second Quarter. . 755,228 74,319
First Quarter . . 335,349 50,859
(2) In the fourth quarter of 1996 the Company recorded a $15.4 million charge related
to restructuring costs.
(3) In the first quarter of 1996, the Company recorded $1,400 (net of $870 tax), or
$.03 per share, as an extraordinary item for the partial recovery of an Iraqi
receivable.
* Net Income for 1997 does not add to total due to rounding.
-54-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note R - Supplemental Guarantor Information
----------------------------------
DIMON International, Inc. and Florimex Worldwide, Inc. (collectively, the
"Guarantors"), wholly-owned subsidiaries of DIMON Incorporated, have fully
and unconditionally guaranteed on a joint and several basis DIMON
Incorporated's obligations to pay principal, premium and interest relative
to the $125 million Senior Notes due 2006. Management has determined that
separate, full financial statements of the Guarantors would not be material
to investors and such financial statements are not provided. Supplemental
combining financial information of the Guarantors is presented below:
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Statement of Income
Year Ended June 30, 1997
(in thousands)
DIMON Non-
Incorporated Guarantors Guarantors Eliminations Total
------------ ---------- ---------- ------------ ------------
Sales and other operating
revenues . . . . . . . . . . . . . $15,684 $1,486,104 $1,543,659 $(532,220)a $2,513,227
Cost of goods and services sold. . . 20 1,396,213 1,281,139 (482,039)a 2,195,333
________ ___________ ___________ ____________ ___________
15,664 89,891 262,520 (50,181) 317,894
Selling, administrative and
general expenses . . . . . . . . 13,644 63,427 88,879 (28,826)a,b 137,124
Restructuring and merger
related cost . . . . . . . . . . - 961 2,903 - 3,864
________ ___________ ___________ ____________ ___________
2,020 25,503 170,738 (21,355) 176,906
Interest Expense . . . . . . . . . 21,932 17,945 34,934 (21,784)a 53,027
________ ___________ ___________ ____________ ___________
Income (loss) before income taxes,
minority interest and equity in
net income (loss) of investee
companies, equity in net income
(loss) of subsidiaries and
extraordinary item . . . . . . . (19,912) 7,558 135,804 429 a 123,879
Income taxes (benefits). . . . . . (2,877) 2,869 47,116 - 47,108
________ ___________ ___________ ____________ ___________
Income (loss) before minority
interest, equity in net income
(loss) of investee companies,
equity in net income (loss)
of subsidiaries and
extraordinary item . . . . . . . (17,035) 4,689 88,688 429 76,771
Income applicable to minority
interest . . . . . . . . . . . . - - 124 - 124
Equity in net income (loss) of
investee companies, net of
income taxes . . . . . . . . . . - 372 730 (576)a 526
Equity in net income of
subsidiaries . . . . . . . . . . 94,208 89,147 (147) (183,208)a -
Extraordinary item . . . . . . . . - - - - -
________ ___________ ___________ ____________ ___________
NET INCOME . . . . . . . . . . . . $77,173 $ 94,208 $ 89,147 $(183,355) $ 77,173
======== =========== =========== ============ ===========
a. Inter-company eliminations.
b. Royalty expense in SG&A and Royalty income in Other Income for Consolidated Entities.
-55-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note R - Supplemental Guarantor Information (continued)
----------------------------------
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Balance Sheet
June 30, 1997
(in thousands)
DIMON Non-
Incorporated Guarantors Guarantors Eliminations Total
------------ ---------- ---------- ------------ ------------
ASSETS
Current assets
Cash and cash equivalents . $ (198) $17,455 $ 103,615 $ (13,741)a $ 107,131
Notes receivable. . . . . . - 416 52,130 (45,749)b 6,797
Trade receivables, net of
allowances . . . . . . . 17,559 92,954 465,752 (180,109)b 396,156
Inventories:
Tobacco. . . . . . . . . - 44,905 538,783 (109)b 583,579
Other. . . . . . . . . . 70 1,137 24,075 - 25,282
Advances on purchases
of tobacco. . . . . . . . 243,640 180,948 174,156 (371,979)b 226,765
Recoverable income taxes. . - - 3,051 - 3,051
Prepaid expenses. . . . . . 2,197 2,715 17,806 - 22,718
__________ ___________ ___________ ____________ ___________
Total current assets 263,268 340,530 1,379,368 (611,687) 1,371,479
__________ ___________ ___________ ____________ ___________
Investments and other assets
Equity in net assets of
investee companies. . . . . . - 2,832 6,494 - 9,326
Consolidated subsidiaries. . . . 396,525 411,817 135,356 (943,698)b -
Other investments. . . . . . . . 1 2,617 14,682 (5,007)b 12,293
Notes receivable . . . . . . . . - 660 12,078 - 12,738
Other. . . . . . . . . . . . . . 76,077 3,042 12,622 (75,938)b 15,803
__________ ___________ ___________ ____________ ___________
472,603 420,968 181,232 (1,024,643) 50,160
__________ ___________ ___________ ____________ ___________
Intangible assets
Excess of cost over related net
assets of businesses acquired . . 152,870 10,346 17,219 - 180,435
Production and supply contracts. . . - 21,053 5,628 - 26,681
Pension asset. . . . . . . . . . . . 3,348 - - - 3,348
__________ ___________ ___________ ____________ ___________
156,218 31,399 22,847 - 210,464
__________ ___________ ___________ ____________ ___________
Property, plant and equipment
Land . . 1,771 1,816 27,495 - 31,082
Buildings. . . . . . . . . . . . 4,281 25,871 166,735 - 196,887
Machinery and equipment. . . . . 4,959 60,109 166,637 - 231,705
Allowances for depreciation. . . (5,380) (33,751) (87,791) - (126,922)
__________ ___________ ___________ ____________ ___________
5,631 54,045 273,076 - 332,752
__________ ___________ ___________ ____________ ___________
Deferred taxes and other
deferred charges . . . . . . . . 22,295 - 453 - 22,748
__________ ___________ ___________ ____________ ___________
$920,015 $846,942 $1,856,976 $(1,636,330) $1,987,603
========== =========== =========== ============ ===========
a. To adjust for cash transfers made by DIMON Incorporated to an entity which reports on an
earlier period.
b. Inter-company eliminations.
-56-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note R - Supplemental Guarantor Information (continued)
----------------------------------
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Balance Sheet
June 30, 1997
(in thousands)
DIMON Non-
Incorporated Guarantors Guarantors Eliminations Total
------------ ---------- ---------- ------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable. . . . . . . . . . $ - $37,835 $ 409,530 $ (97,102)b $ 350,263
Accounts payable:
Trade . . . . . . . . . . . . 238 333,028 255,852 (480,835)b 108,283
Officers and employees. . . . 4,760 989 7,692 - 13,441
Other . . . . . . . . . . . . 2,963 133 18,568 539 b 22,203
Advances from customers. . . . . (18,063) 21,456 102,241 (35,847)b 69,787
Accrued expenses . . . . . . . . 2,181 5,344 58,616 - 66,141
Income taxes . . . . . . . . . . (4,282)c 5,397 24,031 - 25,146
Long-term debt current . . . . . 4,581 - 11,641 - 16,222
__________ ___________ ___________ ____________ ___________
Total current liabilities . (7,622) 404,182 888,171 (613,245) 671,486
__________ ___________ ___________ ____________ ___________
Long-term debt
Revolving Credit Notes
and Other. . . . . . . . . . . 233,772 - 344,054 - 577,826
Convertible Subordinated
Debentures. . . . . . . . . . 123,328 - - - 123,328
Senior Notes. . . . . . . . . . 125,000 - - - 125,000
__________ ___________ ___________ ____________ ___________
482,100 - 344,054 - 826,154
Deferred credits
Income taxes . . . . . . . . . . 6,624 (6,572) 36,578 - 36,630
Compensation and other benefits. . 30,650 5,957 7,465 - 44,072
__________ ___________ ___________ ____________ ___________
37,274 (615) 44,043 - 80,702
Minority interest in subsidiaries. . . - - 527 471 b 998
__________ ___________ ___________ ____________ ___________
Stockholders' equity
Common stock/Paid-in-capital . . 178,939 144,690 342,577 (487,267)b 178,939
Retained earnings. . . . . . . . 229,521 298,190 235,545 (533,735)b 229,521
Equity-currency conversions. . . 670 495 2,276 (2,771)b 670
Additional minimum pension
liability. . . . . . . . . . . (867) - - - (867)
Treasury stock . . . . . . . . . - - (217) 217 b -
__________ ___________ ___________ ____________ ___________
408,263 443,375 580,181 (1,023,556) 408,263
__________ ___________ ___________ ____________ ___________
$920,015 $846,942 $1,856,976 $(1,636,330) $1,987,603
========== =========== =========== ============= ===========
b. Inter-company eliminations.
c. Current deferred tax on reserves for restructuring and unallocated estimated tax payments.
-57-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note R - Supplemental Guarantor Information (continued)
----------------------------------
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Statement of Cash Flows
Year Ended June 30, 1997
(in thousands)
DIMON Non-
Incorporated Guarantors Guarantors Eliminations Total
------------ ---------- ---------- ------------ ------------
Operating activities
Net Income (Loss). . . . . . . . $ 77,173 $ 94,208 $89,147 $(183,355)a $ 77,173
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities
Depreciation and amortization. . 3,414 11,834 21,943 - 37,191
Deferred items . . . . . . . . . 854 (2,985) 11,571 - 9,440
Loss (gain) on foreign currency
transactions . . . . . . . . - 147 379 - 526
Gain on disposition of fixed
assets . . . . . . . . . . . 11 (1,674) (2,034) - (3,697)
Undistributed (earnings) loss of
investees/subsidiaries . . . (94,208) (89,519) (583) 183,784 a (526)
Income applicable to minority
interest . . . . . . . . . . - - 124 - 124
Bad debt expense . . . . . . . - - 89 - 89
Decrease (increase) in accounts
receivable . . . . . . . . . 9,203 85,273 (205,920) 18,501 a (92,943)
Decrease (increase) in inventories
and advances on purchases of
tobacco. . . . . . . . . . . (76,134) (143,110) 68,508 200,409 a 49,673
Decrease in recoverable taxes. . - - (1,497) - (1,497)
Decrease (increase) in
prepaid expenses . . . . . . 1,645 (1,727) 12,532 - 12,450
Increase (decrease) in accounts
payable and accrued expenses . (12,874) 41,217 67,523 (176,921)a (81,055)
Increase (decrease) in advances
from customers . . . . . . . (21,443) (28,272) 27,853 16,138 a (5,724)
Increase (decrease) in income
taxes. . . . . . . . . . . . 8,207 2,314 12,583 277 a 23,381
Other . . . . . . . . . . . - 36 658 - 694
__________ ___________ ___________ ____________ ___________
Net cash provided (used) by
operating activities. . (104,152) (32,258) 102,876 58,833 25,299
__________ ___________ ___________ ____________ ___________
Investing activities
Purchase of property and equipment . (158) (12,271) (48,431) - (60,860)
Proceeds from sale of property
and equipment. . . . . . . . . 208 1,877 6,768 - 8,853
Payments on notes receivable and
receivable from investees . - - 2,348 - 2,348
Advances of notes receivable. - 380 (25,033) 11,784 a (12,869)
Proceeds from or (advances) for
other investments and
other assets. . . . . . . . (1,662) 15,539 (2,659) 1,891 a 13,109
Purchase of minority interest in
subsidiaries. . . . . . . . - (118) - - (118)
Acquisition of subsidiary, net
of cash acquired. . . . . . (59,208) - 65,590 - 6,382
__________ ___________ ___________ ____________ ___________
Net cash provided (used) by
investing activities. . (60,820) 5,407 (1,417) 13,675 (43,155)
__________ ___________ ___________ ____________ ___________
-58-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note R - Supplemental Guarantor Information (continued)
----------------------------------
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Statement of Cash Flows
Year Ended June 30, 1997
(in thousands)
DIMON Non-
Incorporated Guarantors Guarantors Eliminations Total
------------ ---------- ---------- ------------ ------------
Financing activities
Repayment of debt . . . . . $(279,203) $ (424) $(458,376) $ - $(738,003)
Proceeds from debt. . . . . 464,415 37,836 414,760 (86,332)a 830,679
Cash dividends paid to DIMON
Incorporated stockholders (25,071) - - - (25,071)
Cash dividends paid to minority
stockholders. . . . . . . - - (379) - (379)
Proceeds from sale of common stock. 3,910 - - - 3,910
__________ ___________ ___________ ____________ ___________
Net cash provided (used) by
financing activities. . 164,051 37,412 (43,995) (86,332) 71,136
__________ ___________ ___________ ____________ ___________
Effect of exchange rate
changes on cash . . . . . . - - 31 - 31
__________ ___________ ___________ ____________ ___________
Increase (decrease) in cash and
cash equivalents. . . . . . (921) 10,561 57,495 (13,824) 53,311
Cash and cash equivalents at
beginning of year . . . . . 723 6,894 46,120 83 a 53,820
__________ ___________ ___________ ____________ ___________
Cash and cash equivalents
at end of year. . . . $ (198) $17,455 $103,615 $(13,741) $107,131
========== =========== =========== ============ ==========
a. Inter-company eliminations.
-59-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note R - Supplemental Guarantor Information (continued)
----------------------------------
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Statement of Income
Year Ended June 30, 1996
(in thousands)
DIMON Non-
Incorporated Guarantors Guarantors Eliminations Total
------------ ---------- ---------- ------------ ------------
Sales and other operating revenues . $ 26,003 $1,418,433 $1,236,781 $(513,744)a $2,167,473
Cost of goods and services sold. . . (5,067) 1,329,424 1,030,612 (449,977)a 1,904,992
__________ _____________ ___________ ____________ ___________
31,070 89,009 206,169 (63,767) 262,481
Selling, administrative and
expenses general . . . . . . . . 13,059 69,794 78,962 (29,105)a,b 132,710
Restructuring and merger
related cost . . . . . . . . . . 4,420 1,429 9,511 - 15,360
__________ _____________ ____________ ____________ ___________
13,591 17,786 117,696 (34,662) 114,411
Interest Expense . . . . . . . . . 24,764 28,916 27,906 (34,662)a 46,924
________ _____________ ___________ ____________ ___________
Income (loss) before income taxes,
minority interest and equity in
net income (loss) of investee
companies, equity in net income
(loss) of subsidiaries and
extraordinary item . . . . . . . (11,173) (11,130) 89,790 - 67,487
Income taxes (benefits). . . . . . (2,516) (2,352) 31,863 - 26,995
__________ _____________ ___________ ____________ ___________
Income (loss) before minority interest,
equity in net income (loss) of
investee companies, equity in net
income (loss) of subsidiaries and
extraordinary item . . . . . . . (8,657) (8,778) 57,927 - 40,492
Income applicable to minority
interest . . . . . . . . . . . . - - 292 - 292
Equity in net income (loss) of investee
companies, net of income taxes . . . - 98 (428) - (330)
Equity in net income of
subsidiaries . . . . . . . . 49,927 57,207 - (107,134)a -
Extraordinary item - 1,400 - - 1,400
__________ _____________ ___________ ____________ ___________
NET INCOME . . . . . . . . . . . . $41,270 $ 49,927 $57,207 $(107,134) $ 41,270
========== ============= =========== ============ ============
a. Inter-company eliminations.
b. Royalty expense in SG&A and Royalty income in Other Income for Consolidated Entities.
-60-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note R - Supplemental Guarantor Information (continued)
----------------------------------
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Balance Sheet
June 30, 1996
(in thousands)
DIMON Non-
Incorporated Guarantors Guarantors Eliminations Total
------------ ---------- ---------- ------------ ------------
ASSETS
Current assets
Cash and cash equivalents . $ 723 $6,894 $ 46,120 $ 83 a $ 53,820
Notes receivable. . . . . . - 475 19,347 (18,695)b 1,127
Trade receivables, net of
allowances . . . . . . . 26,762 178,390 162,624 (176,878)b 190,898
Inventories:
Tobacco. . . . . . . . . - 54,729 260,747 - 315,476
Other. . . . . . . . . . 49 1,174 16,802 - 18,025
Advances on purchases
of tobacco. . . . . . . . 168,616 28,113 49,659 (171,679)b 74,709
Recoverable income taxes. . - - 1,563 - 1,563
Prepaid expenses. . . . . . 4,190 979 7,988 - 13,157
__________ ___________ ___________ ____________ ___________
Total current assets 200,340 270,754 564,850 (367,169) 668,775
__________ ___________ ___________ ____________ ___________
Investments and other assets
Equity in net assets of
investee companies. . . . . . - 5,884 2,384 - 8,268
Consolidated subsidiaries. . . . 288,533 336,667 21,230 (646,430)b -
Other investments. . . . . . . . 23,067 2,861 9,337 (32,278)b 2,987
Notes receivable . . . . . . . . 139 3,965 (26) - 4,078
Other. . . . . . . . . . . . . . - 981 18,170 - 19,151
__________ ___________ ___________ ____________ ___________
311,739 350,358 51,095 (678,708) 34,484
__________ ___________ ___________ ____________ ___________
Intangible assets
Excess of cost over related net
assets of businesses acquired . . 375 8,281 14,465 - 23,121
Production and supply contracts. . . - 25,960 7,365 - 33,325
Pension asset. . . . . . . . . . . . 3,042 1,088 - - 4,130
__________ ___________ ___________ ____________ ___________
3,417 35,329 21,830 - 60,576
__________ ___________ ___________ ____________ ___________
Property, plant and equipment
Land . . 1,770 1,925 15,528 - 19,223
Buildings. . . . . . . . . . . . 4,739 25,568 113,434 - 143,741
Machinery and equipment. . . . . 5,271 48,858 106,108 - 160,237
Allowances for depreciation. . . (4,883) (26,877) (54,666) - (86,426)
__________ ___________ ___________ ____________ ___________
6,897 49,474 180,404 - 236,775
__________ ___________ ___________ ____________ ___________
Deferred taxes and other
deferred charges . . . . . . . . 19,259 - 145 - 19,404
__________ ___________ ___________ ____________ ___________
$541,652 $705,915 $818,324 $(1,045,877) $1,020,014
========== ============ =========== ============ ===========
a. To adjust for cash transfers made by DIMON Incorporated to an entity which reports on an
earlier period.
b. Inter-company eliminations.
-61-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note R - Supplemental Guarantor Information (continued)
----------------------------------
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Balance Sheet
June 30, 1996
(in thousands)
DIMON Non-
Incorporated Guarantors Guarantors Eliminations Total
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable. . . . . . . . . $ - $ - $ - $ - $ -
Accounts payable:
Trade . . . . . . . . . . . . 1,423 281,706 86,216 (303,375)b 65,970
Officers and employees. . . . 14,427 2,263 7,384 - 24,074
Other . . . . . . . . . . . . 4,749 1,554 8,159 - 14,462
Advances from customers. . . . . 3,380 49,729 73,029 (51,985)b 74,153
Accrued expenses . . . . . . . . 2,418 13,941 35,438 - 51,797
Income taxes . . . . . . . . . . (12,489)c 3,083 15,042 (277)b 5,359
Long-term debt current . . . 4,286 350 5,982 - 10,618
__________ ___________ ___________ ____________ ___________
Total current liabilities . . 18,194 352,626 231,250 (355,637) 246,433
__________ ___________ ___________ ____________ ___________
Long-term debt
Revolving Credit Notes and Other . 48,856 1,068 226,717 (10,770)b 265,871
Senior Notes . . . . . . . . . . .125,000 - - - 125,000
__________ ___________ ___________ ____________ ___________
173,856 1,068 226,717 (10,770) 390,871
Deferred credits
Income taxes . . . . . . . . . . . 6,198 (6,259) 21,557 - 21,496
Compensation and other benefits. . 27,556 8,629 8,280 - 44,465
__________ ___________ ___________ ____________ ___________
33,754 2,370 29,837 - 65,961
Minority interest in subsidiaries. . - - 901 - 901
__________ ___________ ___________ ____________ ___________
Stockholders' equity
Common stock/Paid-in-capital . . 136,959 143,026 180,366 (323,392)b 136,959
Retained earnings. . . . . . . . 177,419 203,982 146,398 (350,380)b 177,419
Equity-currency conversions. . . 2,842 2,843 2,855 (5,698)b 2,842
Additional minimum pension
liability. . . . . . . . . . . (1,372) - - - (1,372)
Unrealized gain on investments . - - - - -
__________ ___________ ___________ ____________ ___________
315,848 349,851 329,619 (679,470) 315,848
__________ ___________ ___________ ____________ ___________
$541,652 $705,915 $818,324 $(1,045,877) $1,020,014
========== =========== =========== ============ ==========
b. Inter-company eliminations.
c. Current deferred tax on reserves for restructuring and unallocated estimated tax payments.
-62-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note R - Supplemental Guarantor Information (continued)
----------------------------------
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Statement of Cash Flows
Year Ended June 30, 1996
(in thousands)
DIMON Non-
Incorporated Guarantors Guarantors Eliminations Total
Operating activities
Net Income (Loss). . . . . . . . $ 41,270 $49,927 $57,207 $(107,134)a $41,270
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities
Depreciation and amortization. . 2,326 10,826 20,628 - 33,780
Deferred items . . . . . . . . (3,335) 2,437 6,749 - 5,851
Loss (gain) on foreign currency
transactions . . . . . . . . 46 (69) (345) - (368)
Gain on disposition of fixed
assets . . . . . . . . . . . (14) (1,098) (1,303) - (2,415)
Gain on sale of investee . . . - - (3,751) - (3,751)
Gain on sale of investment . . - - (1,090) - (1,090)
Undistributed (earnings) loss of
investees/subsidiaries . . . (49,927) (57,305) 428 107,134 a 330
Dividends received from investee . - 1,100 365 - 1,465
Income applicable to minority
interest . . . . . . . . . . - - 292 - 292
Bad debt expense . . . . . . . - (10) 1,053 - 1,043
Decrease (increase) in accounts
receivable . . . . . . . . . 123,123 (12,826) (43,527) (79,414)a (12,644)
Decrease (increase) in inventories
and advances on purchases of
tobacco. . . . . . . . . . . 6,938 91,721 28,682 (62,903)a 64,438
Decrease in recoverable taxes. . . - - 444 - 444
Decrease (increase) in
prepaid expenses . . . . . . 7,052 (313) 10,518 - 17,257
Increase (decrease) in accounts
payable and accrued expenses . . 5,212 133,597 (32,157) (91,841)a 14,811
Increase (decrease) in advances
from customers . . . . . . . (499) (194,582) 13,721 206,476 a 25,116
Increase (decrease) in income
taxes. . . . . . . . . . . . (2,239) (4,306) 705 (277)a (6,117)
Other. . . . . . . . . . . . . 56 230 (194) - 92
__________ ___________ ___________ ____________ ___________
Net cash provided (used) by
operating activities. . . 130,009 19,329 58,425 (27,959) 179,804
__________ ___________ ___________ ____________ ___________
Investing activities
Purchase of property
and equipment . . . . . . . . (436) (5,363) (35,467) - (41,266)
Proceeds from sale of property
and equipment. . . . . . . . . 14 4,784 3,807 - 8,605
Payments on notes receivable and
receivable from investees . . 30,034 870 228 (30,000)a 1,132
Advances of notes receivable. . (83) (350) (19,834) 18,695 a (1,572)
Proceeds from or (advances) for
other investments and
other assets. . . . . . . . . 5,232 24,634 1,304 (6,748)a 24,422
Acquisition of subsidiary, net of
cash acquired . . . . . . . . - (6,543) - - (6,543)
__________ ___________ ___________ ____________ ___________
Net cash provided (used) by
investing activities. . . 34,761 18,032 (49,962) (18,053) (15,222)
__________ ___________ ___________ ____________ ___________
-63-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note R - Supplemental Guarantor Information (continued)
----------------------------------
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Statement of Cash Flows
Year Ended June 30, 1996
(in thousands)
DIMON Non-
Incorporated Guarantors Guarantors Eliminations Total
Financing activities
Repayment of debt . . . . . . (622,367) (32,346) (206,150) 30,000 a (830,863)
Proceeds from debt. . . . . . 477,171 - 231,806 (10,770)a 698,207
Cash dividends paid to DIMON
Incorporated stockholders . (21,731) - - - (21,731)
Cash dividends paid to minority
stockholders. . . . . . . . - - (169) - (169)
Proceeds from sale of
common stock. . . . . . . . 1,552 - - - 1,552
__________ ___________ ___________ ____________ ___________
Net cash provided (used) by
financing activities. . (165,375) (32,346) 25,487 19,230 (153,004)
__________ ___________ ___________ ____________ ___________
Effect of exchange rate
changes on cash . . . . . . . - - (84) - (84)
__________ ___________ ___________ ____________ ___________
Increase (decrease) in cash and
cash equivalents. . . . . . . (605) 5,015 33,866 (26,782) 11,494
Cash and cash equivalents at
beginning of year . . . . . . 1,328 1,879 12,254 26,865 42,326
__________ ___________ ___________ ____________ ___________
Cash and cash equivalents
at end of year .. . . . $ 723 $ 6,894 $ 46,120 $ 83 $ 53,820
========= =========== ============= ==========
a. Inter-company eliminations.
-64-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note R - Supplemental Guarantor Information (continued)
----------------------------------
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Statement of Income
Year Ended June 30, 1995
(in thousands)
DIMON Non-
Incorporated Guarantors Guarantors Eliminations Total
Sales and other operating revenues . $ 10,541 $1,259,125 $849,723 $ (178,201)a $1,941,188
Cost of goods and services sold. . . . 3,340 b 1,159,613 733,538 (137,127)a 1,759,364
__________ _____________ ___________ ____________ ___________
7,201 99,512 116,185 (41,074) 181,824
Selling, administrative and
general expenses . . . . . . . 13,936 51,073 80,692 (12,899)a,c 132,802
Restructuring and merger related
costs. . . . . . . . . . . . . 16,891 9,487 (423) - 25,955
__________ _____________ ___________ ____________ ___________
(23,626) 38,952 35,916 (28,175) 23,067
__________ _____________ ___________ ____________ ___________
Interest Expense . . . . . . . . 11,882 33,824 27,700 (28,175)a 45,231
__________ _____________ ___________ ____________ ___________
Income (loss) before income taxes,
minority interest, equity in
net income (loss) of investee
companies, and equity in net
income (loss) of subsidiaries. . . (35,508) 5,128 8,216 - (22,164)
Income taxes (benefits). . . . . . (8,567) 3,767 10,780 - 5,980
__________ _____________ ___________ ____________ ___________
Income (loss) before minority
interest, equity in net income
(loss) of investee companies
and equity in net income
(loss) of subsidiaries . . . . . (26,941) 1,361 (2,564) - (28,144)
Income applicable to minority
interest . . . . . . . . . . . . - - 216 - 216
Equity in net income (loss) of
investee companies, net of
income taxes . . . . . . . . . . - 348 (2,153) - (1,805)
Equity in net loss of
subsidiaries . . . . . . . . . . (3,224) (4,933) - 8,157 a -
__________ _____________ ___________ ____________ ___________
NET LOSS . . . . . . . . . . . . . $(30,165) $ (3,224) $ (4,933) $ 8,157 $ (30,165)
========== ============== ============ ============ ===========
a. Inter-company eliminations.
b. Reserve for inter-company profit in ending inventories
c. Royalty expense in SG&A and Royalty income in Other Income for Consolidated Entities.
-65-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note R - Supplemental Guarantor Information (continued)
----------------------------------
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Statement of Cash Flows
Year Ended June 30, 1995
(in thousands)
DIMON Non-
Incorporated Guarantors Guarantors Eliminations Total
Operating activities
Net Income (Loss). . . . . . . . $ (30,165) $ (3,224) $ (4,933) $ 8,157 a $(30,165)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities
Depreciation and amortization. . . 607 10,372 20,873 - 31,852
Deferred items . . . . . . . . . . 3,922 (3,130) (1,412) - (620)
Loss (gain) on foreign currency
transactions . . . . . . . . . . (55) 81 544 - 570
Gain on disposition of
fixed assets . . . . . . . . . . - (280) (1,539) - (1,819)
Undistributed (earnings) loss of
investees/subsidiaries . . . 3,224 4,585 2,153 (8,157)a 1,805
Dividends received from investees. . - 400 78 - 478
Income applicable to minority
interest . . . . . . . . . . - - 216 - 216
Bad debt expense . . . . . . . - (30) 3,850 - 3,820
Decrease (increase) in accounts
receivable . . . . . . . . . (102,713) (33,329) 97,941 90,621 a 52,520
Decrease (increase) in inventories
and advances on purchases of
tobacco. . . . . . . . . . . 97,253 823 (261,577) 165,657 a 2,156
Decrease in recoverable taxes. . . 1,666 - 2,627 - 4,293
Decrease (increase) in
prepaid expenses . . . . . . (8,718) 1,420 3,717 - (3,581)
Increase (decrease) in accounts
payable and accrued expenses . . 5,224 7,736 (25,238) (45,885)a (58,163)
Increase (decrease) in advances
from customers . . . . . . . . . (918) (15,652) 201,799 (188,257)a (3,028)
Increase (decrease) in income
taxes. . . . . . . . . . . . . . (2,817) 7,135 1,757 - 6,075
Other . . . . . . . . . . .. . . . 269 - 135 - 404
__________ ___________ ___________ ____________ ___________
Net cash provided (used) by
operating activities. . . . . (33,221) (23,093) 40,991 22,136 6,813
__________ ___________ ___________ ____________ ___________
Investing activities
Purchase of property and
equipment . . . . . . . . . . . . (117) (10,966) (15,953) - (27,036)
Proceeds from sale of property
and equipment. . . . . . . . . - 838 4,039 - 4,877
Payments on notes receivable and
receivable from investees. . . 15 3,516 24,010 - 27,541
Issuance of notes receivable . . (30,000) (2,829) (3,500) 30,000 a (6,329)
Proceeds from or (advances) for
other investments and
other assets . . . . . . . . . 5,865 (9,075) 2,601 4,676 a 4,067
Purchase of minority interest
in subsidiaries. . . . . . . . - - (507) - (507)
Acquisition of subsidiary, net of
cash acquired. . . . . . . . . - (13,693) - - (13,693)
__________ ___________ ___________ ____________ ___________
Net cash provided (used) by
investing activities . . . (24,237) (32,209) 10,690 34,676 (11,080)
__________ ___________ ___________ ____________ ___________
-66-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note R - Supplemental Guarantor Information (continued)
----------------------------------
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Statement of Cash Flows
Year Ended June 30, 1995
(in thousands)
DIMON Non-
Incorporated Guarantors Guarantors Eliminations Total
Financing activities
Repayment of debt . . . . . . (641,100) (4,699) (281,223) - (927,022)
Proceeds from debt. . . . . . 708,995 60,000 239,371 (30,000)a 978,366
Cash dividends paid to DIMON
Incorporated stockholders . (15,568) - (2) - (15,570)
Cash dividends paid to minority
stockholders. . . . . . . . - - (237) - (237)
Proceeds from sale of common stock 169 - - - 169
__________ ___________ ___________ ____________ ___________
Net cash provided (used) by
financing activities. . 52,496 55,301 (42,091) (30,000) 35,706
__________ ___________ ___________ ____________ ___________
Effect of exchange rate
changes on cash . . . . . . . - - (1,584) - (1,584)
__________ ___________ ___________ ____________ ___________
Increase (decrease) in cash and
cash equivalents. . . . . . . (4,962) (1) 8,006 26,812 29,855
Cash and cash equivalents at
beginning of year . . . . . . 6,290 1,880 4,248 53 a 12,471
__________ ___________ ___________ ____________ ___________
Cash and cash equivalents
at end of year. . . . . $ 1,328 $ 1,879 $ 12,254 $ 26,865 $ 42,326
========== =========== =========== ============ ===========
a. Inter-company eliminations.
-67-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note R - Supplemental Guarantor Information (continued)
----------------------------------
DIMON INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(in thousands)
(1) Each of the Guarantors, the Company's wholly-owned
subsidiaries, DIMON International, Inc. and Florimex
Worldwide Inc., have fully and unconditionally guaranteed on
a joint and several basis the performance and punctual
payment when due, whether at stated maturity, by
acceleration or otherwise, of all of the Company's
obligations under the Notes and the related indenture,
including its obligations to pay principal, premium, if any,
and interest with respect to the Notes. The obligations of
each Guarantor is limited to the maximum amount which, after
giving effect to all other contingent and fixed liabilities
of such Guarantor and after giving effect to any collections
from or payments made by or on behalf of any other Guarantor
in respect of the obligations of such other Guarantor under
its Guarantee or pursuant to its contribution obligations
under the Indenture, can be guaranteed by the relevant
Guarantor without resulting in the obligations of such
Guarantor under its Guarantee constituting a fraudulent
conveyance or fraudulent transfer under applicable federal
or state law. Each of the Guarantees is a guarantee of
payment and not collection. Each Guarantor that makes a
payment or distribution under a Guarantee shall be entitled
to a contribution from each other Guarantor in an amount pro
rata, based on the assets less liabilities of each Guarantor
determined in accordance with generally accepted accounting
principles (GAAP). The Company is not be restricted from
selling or otherwise disposing of any of the Guarantors
other than DIMON International, Inc. provided that the
proceeds of any such sale are applied as required by the
Indenture.
Florimex Worldwide, Inc. is the primary holding and operating
company in the U.S. and represents the lead company for the
flowers segment. The cut flowers operations consist of buying
flowers from sources throughout the world and transporting them,
normally by air, to operating units for resale to wholesalers
and retailers.
DIMON Incorporated and DIMON International, Inc. are the primary
holding companies. DIMON International, Inc. is the primary
operating company in the U.S. and represents the lead company
in the Tobacco division whose operations consist primarily of
selecting, buying, processing, packing, shipping, storing and
financing tobacco.
Management has determined that separate, full financial
statements of the Guarantors would not be material to investors
and such financial statements are not provided.
(2) DIMON Incorporated and each of the Guarantors have
accounted for their respective subsidiaries on the equity
basis.
(3) Certain reclassifications were made to conform all of the
financial information to the financial presentation on
a consolidated basis. The principal eliminating entries
eliminate investments in subsidiaries and intercompany
balances.
-68-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note R - Supplemental Guarantor Information (continued)
----------------------------------
DIMON INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(in thousands)
(4) Included in the above balance sheets are certain related party
balances among borrower, the guarantors and non-guarantors. Due
to the Company's world-wide operations, related party activity
is included in most balance sheet accounts. The tables below
set forth the significant intercompany balances for each of the
periods presented.
June 30, 1997
Debit (Credit)
DIMON
Incorporated Guarantors Non-Guarantors
============================================================================================
Accounts Receivable. . . . . . . . . . . $ 14,493 $ 11,439 $ 170,529
Advances on Purchases. . . . . . . . . . 243,640 174,860 55,019
Accounts Payable . . . . . . . . . . . . (61) (321,440) (158,995)
Advances from Customers. . . . . . . . . 18,063 (32) (60,944)
June 30, 1996
Debit (Credit)
DIMON
Incorporated Guarantors Non-Guarantors
============================================================================================
Accounts Receivable. . . . . . . . . . . $26,761 $120,661 $54,267
Advances on Purchases. . . . . . . . . . 168,616 16,886 18,963
Accounts Payable . . . . . . . . . . . . (70) (272,781) (40,033)
Advances from Customers. . . . . . . . . (3,380) (37) (52,256)
-69-
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE-
Inapplicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information contained in the Proxy Statement under the caption
"Election of Directors" is incorporated herein by reference thereto.
See "Additional Information - Executive Officers of the Company" at the
end of Part I above for information about the executive officers of
the Company.
ITEM 11. EXECUTIVE COMPENSATION AND TRANSACTIONS
The information contained in the Proxy Statement under the caption
"Compensation of Executive Officers and Directors" is incorporated
herein by reference thereto.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information contained in the Proxy Statement under the caption
"Stock Ownership" is incorporated herein by reference thereto.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained in the Proxy Statement under the caption
"Stock Ownership" is reported herein by reference thereto.
-70-
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(a) (1) and (2)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
Consolidated Balance Sheet--June 30, 1997 and 1996
Statement of Consolidated Income--Years ended June 30, 1997,
1996 and 1995
Statement of Consolidated Cash Flows--Years ended June 30, 1997,
1996 and 1995
Statement of Stockholders' Equity--Years ended June 30, 1997,
1996 and 1995
Notes to Consolidated Financial Statements
Financial Statement Schedules:
Schedule II Valuation and Qualifying Accounts
Report of Price Waterhouse LLP
(b) Current Reports on Form 8-K
Form 8-K, filed February 24, 1997.
Form 8-K, filed April 16, 1997.
Form 8-K/A, filed June 16, 1997, amending Current Report
on Form 8-K, filed April 16, 1997.
-71-
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K (continued)
(3) Exhibits
The following documents are filed as exhibits to this Form 10-K
pursuant to Item 601 of Regulation S-K:
3.01 Amended and Restated Articles of Incorporation of DIMON Incorporated
(incorporated by reference to Appendix VII to DIMON Incorporated's Joint
Proxy Statement filed pursuant to Rule 424(b) in connection with DIMON
Incorporated's Registration Statement on Form S-4 (form 33-89780))
3.02 Amended and Restated By-Laws, as amended, of DIMON Incorporated
(incorporated by reference to Exhibit 3.2 to DIMON Incorporated's
Registration Statement on Form S-4 (file 33-89780))
4.01 Specimen of Common Stock Certificate (incorporated herein by reference
to Exhibit 4.1 to DIMON Incorporated's Registration Statement on Form S-4
(file 33-89780))
4.02 Article III of the Amended and Restated Articles of Incorporation of DIMON
Incorporated (filed as Exhibit 3.01)
4.03 Article III of the Amended and Restated By-Laws of DIMON Incorporated
(filed as Exhibit 3.02)
4.04 Rights Agreement, dated as of March 31, 1995, between DIMON
Incorporated and First Union National Bank of North Carolina, as Rights
Agent (incorporated by reference to Exhibit 4 to DIMON Incorporated
Current Report on Form 8-K, dated April 1, 1995)
4.05 Indenture, dated May 29, 1996 among DIMON Incorporated as issuer,
DIMON International, Inc. and Florimex Worldwide, Inc. as guarantors
and Crestar Bank, as trustee (incorporated by reference to Exhibit 4.05 to
DIMON Incorporated's Annual Report on Form 10-K for the year ended
June 30, 1996)
10.01 DIMON Incorporated Omnibus Stock Incentive Plan (incorporated
herein by reference to Exhibit 10.1 to DIMON Incorporated's Registration
Statement on Form S-4 (file No. 33-89780))
10.02 DIMON Incorporated Non-Employee Directors' Stock Option Plan
(incorporated herein by reference to Exhibit 10.2 to DIMON Incorporated's
Registration Statement on Form S-4 (file No. 33-89780))
10.03 Dibrell Brothers, Incorporated 1994 Omnibus Stock Incentive Plan
(incorporated by reference to Exhibit 10.6 to Dibrell Brothers, Incorporated's
Annual Report on Form 10-K for the fiscal year ended June 30, 1994)
-72-
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K (continued)
(3) Exhibits (continued)
10.04 Form of Interpretive letter, dated January 11, 1995, under the Dibrell Brothers,
Incorporated 1994 Omnibus Stock Incentive Plan delivered by Dibrell Brothers,
Incorporated to Claude B. Owen, Jr., T. H. Faucett, T. W. Oakes, L. N. Dibrell,
III and H. P. Green (incorporated by reference to Exhibit 10.6 to Dibrell Brothers,
Incorporated's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1994)
10.05 Dibrell Brothers, Incorporated Retirement Plan (Excess Benefit Plan)
(incorporated herein by reference to Exhibit 10.4 to Dibrell Brothers,
Incorporated's Annual Report on Form 10-K for the year ended June 30, 1987)
10.06 Dibrell Brothers, Incorporated Pension Equalization Plan (Benefit Assurance
Plan) (incorporated herein by reference to Exhibit 10.13 to Dibrell Brothers,
Incorporated's Annual Report on Form 10-K for the year ended June 30, 1991)
10.07 Long-Term Stock Investment Plan for Key Employees of Monk-Austin, Inc.
(incorporated by reference to Exhibit 10.5 of Monk-Austin, Inc.'s Registration
Statement on S-1 (File No. 33-51842))
10.08 Form of 1995 Declaration of Amendment to Long-Term Stock Investment
Plan for Key Employees of Monk-Austin, Inc. (incorporated herein by reference
to Exhibit 10.8 to DIMON Incorporated's Registration Statement on Form S-4
(File No. 33-89780))
10.09 Employment Agreement, dated October 18, 1994, between Monk-Austin
International, Inc. and Albert C. Monk, III (incorporated by reference to
Exhibit 10.1 to Monk-Austin, Inc.'s Quarterly Report on Form 10-Q for the
quarter ended December 31, 1994)
10.10 Employment Agreement, dated as of December 21, 1994, effective as of
November 1, 1994, by and between Dibrell Brothers, Incorporated and
Claude B. Owen, Jr. (incorporated by reference to Exhibit 10.1 to Dibrell
Brothers, Incorporated's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1994)
10.11 Employment Agreement, dated as of December 21, 1994, effective as of
November 1, 1994, by and between Dibrell Brothers, Incorporated and
L. N. Dibrell, III (incorporated by reference to Exhibit 10.1 to Dibrell
Brothers, Incorporated's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1994)
-73-
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K (continued)
(3) Exhibits (continued)
10.12 $500,000,000 Credit Agreement dated as of June 27, 1997 among the
Company, the lenders named therein, NationsBank, N.A. as administrative agent,
First Union National Bank, as documentation agent and Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland," New York
Branch and Societe Generale as co-agents (the "Credit Agreement")
(incorporated by reference to Exhibit 10.1 to DIMON Incorporated's
Registration Statement on Form S-3 (No. 333-33267))
10.13 Consulting Agreement dated April 22, 1996 between DIMON Incorporated
and John M. Hines (incorporated by reference to Exhibit 10.29 to DIMON
Incorporated's Registration Statement on Form S-1 (No. 333-1288))
10.14 Guaranty Agreement, dated as of June 27, 1997 by DIMON
International, Inc. and Florimex Worldwide, Inc. of the
obligations of the Company under the Credit Agreement
(incorporated by reference to Exhibit 10.3 to DIMON
Incorporated's Registration Statement on Form S-3
(No. 333-33267))
10.15 Form of Note in connection with Credit Agreement (incorporated by
reference to Exhibit 10.2 to DIMON Incorporated's Registration
Statement on Form S-3 (No. 333-33267))
10.16 Purchase Agreement by and among DIMON Incorporated, Austria
Tabakwerke AG, Austria Tabak Einkaufs-Und Handelorganisation
GesmbH and Austro-Hellenique S.A. De Tabac Et De Batiment, dated
April 13, 1995 (incorporated by reference to Exhibit 10.1 to DIMON
Incorporated's Current Report on Form 8-K, dated June 7, 1995)
10.17 Stock Purchase Agreement, dated as of February 14, 1997, among
DIMON Incorporated, Intabex Holdings Worldwide S.A., Folium Inc.,
Leaf Management Investments Ltd. and Tabacalera S.A. (incorporated by
reference herein to Exhibit 10.1 to DIMON Incorporated's Current Report
on Form 8-K dated April 16, 1997)
10.18 Indenture, dated as of April 1, 1997, by DIMON Incorporated to LaSalle
National Bank, relating to $140 Million of 6 1/4% Convertible
Subordinated Debentures due March 31, 2007 (incorporated by reference
herein to Exhibit 10.2 to DIMON Incorporated's Current Report on
Form 8-K dated April 16, 1997)
10.19 Non-Competition Agreements, dated as of April 1, 1997, by and between
Intabex S.A. (Zug) and Folium Inc. (incorporated by reference herein to
Exhibit 10.3 and 10.7 to DIMON Incorporated's Current Report on
Form 8-K dated April 16, 1997)
-74-
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K (continued)
(3) Exhibits (continued)
10.20 Registration Rights Agreement, dated as of April 1, 1997, by and between
DIMON Incorporated, Tabacalera S.A., Folium Inc. and Leaf Management
Investments Ltd. (incorporated by reference herein to Exhibit 10.4 to
DIMON Incorporated's Current Report on Form 8-K dated April 16, 1997)
10.21 Consulting Agreement, dated April 1, 1997, by and between Intabex S.A.
(Zug) and Anthony C.B. Taberer (incorporated by reference herein to
Exhibit 10.5) to DIMON Incorporated's Current Report on Form 8-K dated
April 16, 1997)
10.22 Asset Purchase Agreement, dated as of February 14, 1997, by and between
Dibrell Brothers Zimbabwe (Private) Limited and Tabex (Private) Limited
(incorporated by reference herein to Exhibit 10.6 to DIMON Incorporated's
Current Report on Form 8-K dated April 16, 1997)
10.23 Employment Agreement dated January 3, 1997, with Brian J. Harker
(incorporated by reference to Exhibit 10 to DIMON Incorporated's
Quarterly Report on Form 10-Q dated February 14, 1997)
10.24 DIMON Incorporated Cash Balance Plan effective July 1, 1996
(filed herewith)
10.25 DIMON Incorporated Supplemental Retirement Plan effective
January 1, 1997 (filed herewith).
11 Computation of Earnings per Common Share (filed herewith)
21 List of Subsidiaries (filed herewith)
23.1 Consent of Price Waterhouse LLP (filed herewith)
23.2 Consent of Price Waterhouse LLP (filed herewith)
27 Financial Data Schedule (filed herewith)
(d) Financial Statement Schedules:
Schedule II, Valuation and Qualifying Accounts, appears on the following pages. The
consolidated financial statement schedules listed in Item 14(a) appear on the following
pages. All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the related
instructions or are not applicable and, therefore, have been omitted.
-75-
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
DIMON INCORPORATED AND SUBSIDIARIES
PERIODS ENDED JUNE 30
__________________________________________________________________________________________________________________________________
: COL. A : COL. B : COL. C : COL. D : COL. E :
: : : ADDITIONS : : :
: : Balance at : (1) : (2) : : Balance at :
: DESCRIPTION : Beginning : Charged to : Charged to : Deductions : End of :
: : of Period : Costs : Other Accounts : -Describe : Period :
: : : and : -Describe : : :
: : : Expenses : : : :
:__________________________________:___________________:_________________:____________________:_________________:__________________:
Year ended June 30, 1995
Deducted from asset accounts:
Allowance for doubtful accounts $ 9,972,568 $3,820,054 $ - $4,969,283 (A) $ 8,823,339
Other investments 417,958 - (1,034,819) - (616,861)(B)
___________ __________ ____________ __________ ___________
Total $10,390,526 $3,820,054 $(1,034,819) $4,969,283 $ 8,206,478
=========== ========== =========== =========== ===========
Year ended June 30, 1996
Deducted from asset accounts:
Allowance for doubtful accounts $ 8,823,339 $1,042,911 $ - $3,308,099 (A) $ 6,558,151
Other Investments (616,861) - 616,861 - -
___________ __________ ___________ __________ ___________
Total $ 8,206,478 $1,042,911 $ 616,861 $3,308,099 $ 6,558,151
=========== ========== =========== ========== ==========
Year ended June 30, 1997
Deducted from asset accounts:
Allowance for doubtful accounts $ 6,558,151 $ 88,892 $ - $ 744,744 (A) $ 5,902,299
Other investments - - - - -
___________ __________ ____________ __________ ___________
Total $ 6,558,151 $ 88,892 $ - (A) $ 744,744 $ 5,902,299
=========== ========== =========== ========== ===========
(A) CURRENCY TRANSLATION AND DIRECT WRITE-OFF.
(B) NET UNREALIZED LOSS (GAIN) BEFORE TAX ON LONG-TERM MARKETABLE EQUITY SECURITIES RECORDED IN STOCKHOLDERS' EQUITY.
-76-
Report of Independent Accountants
To the Board of Directors and Shareholders of DIMON Incorporated
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income, of changes in stockholders'
equity and of cash flows present fairly, in all material respects, the
financial position of DIMON Incorporated and its subsidiaries at June
30, 1997 and 1996, and the results of their operations and their cash
flows for each of the three years in the period ended June 30, 1997,
in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide
a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Charlotte, North Carolina
September 15, 1997
-77-
Report of Independent Accountants
on Financial Statement Schedule
To the Board of Directors of DIMON Incorporated
Our audits of the consolidated financial statements referred to in our
report dated September 15, 1997 appearing in this Annual Report on
Form 10-K also included an audit of the Financial Statement Schedule
listed in Item 14(a) of this Form 10-K. In our opinion, this
Financial Statement Schedule presents fairly, in all material
respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Charlotte, North Carolina
September 15, 1997
-78-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 on September 22, 1997.
DIMON INCORPORATED (Registrant) /s/ Claude B. Owen, Jr.
By ____________________________________
Claude B. Owen, Jr.
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1934, this report has been signed below by
the following persons on behalf of the registrant and in the capacities indicated on
September 22, 1997.
/s/ Claude B. Owen, Jr. /s/ Norman A. Scher
__________________________________ __________________________________
Claude B. Owen, Jr. Norman A. Scher
Chairman of the Board and Director of DIMON Incorporated
Chief Executive Officer of DIMON
Incorporated
/s/ Henry F. Frigon
/s/ Joseph L. Lanier, Jr. ____________________________________
__________________________________ Henry F. Frigon
Joseph L. Lanier, Jr. Director of DIMON Incorporated
Director of DIMON Incorporated
/s/ John M. Hines
/s/ Louis N. Dibrell, III ____________________________________
__________________________________ John M. Hines
Louis N. Dibrell, III Director of DIMON Incorporated
Director of DIMON Incorporated
/s/ R. Stuart Dickson
/s/ Albert C. Monk III ____________________________________
__________________________________ R. Stuart Dickson
Albert C. Monk III Director of DIMON Incorporated
Director and President of DIMON
Incorporated
/s/ William R. Slee
/s/ Robert T. Monk, Jr. ___________________________________
__________________________________ William R. Slee
Robert T. Monk, Jr. Director of DIMON Incorporated
Director of DIMON Incorporated
/s/ Anthony C. B. Taberer
/s/ Thomas F. Keller ___________________________________
__________________________________ Anthony C. B. Taberer
Thomas F. Keller Director of DIMON Incorporated
Director of DIMON Incorporated
/s/ Jerry L. Parker
_________________________________
/s/ James E. Johnson, Jr. Jerry L. Parker
__________________________________ Vice President-Controller (Principal
James E. Johnson, Jr. Accounting Officer) of DIMON
Director of DIMON Incorporated Incorporated
-79-
EXHIBIT INDEX
Exhibit Page No.
3.01 Amended and Restated Articles of Incorporation of
DIMON Incorporated (incorporated by reference to
Appendix VII to DIMON Incorporated's Joint
Proxy Statement filed pursuant to Rule 424(b) in
connection with DIMON Incorporated's Registration
Statement on Form S-4 (form 33-89780))
3.02 Amended and Restated By-Laws, as amended, of
DIMON Incorporated (incorporated by reference to
Exhibit 3.2 to DIMON Incorporated's
Registration Statement on Form S-4 (file 33-89780))
4.01 Specimen of Common Stock Certificate (incorporated
herein by reference to Exhibit 4.1 to DIMON Incorporated's
Registration Statement on Form S-4 (file 33-89780))
4.02 Article III of the Amended and Restated Articles of
Incorporation of DIMON Incorporated
(filed as Exhibit 3.01)
4.03 Article III of the Amended and Restated By-Laws
of DIMON Incorporated (filed as Exhibit 3.02)
4.04 Rights Agreement, dated as of March 31, 1995,
between DIMON Incorporated and First Union National
Bank of North Carolina, as Rights Agent (incorporated
by reference to Exhibit 4 to DIMON Incorporated
Current Report on Form 8-K, dated April 1, 1995)
4.05 Indenture, dated May 29, 1996 among DIMON
Incorporated as issuer, DIMON International, Inc. and
Florimex Worldwide, Inc. as guarantors and Crestar
Bank, as trustee (incorporated by reference to Exhibit
4.05 to DIMON Incorporated's Annual Report on
Form 10-K for the year ended June 30, 1996)
10.01 DIMON Incorporated Omnibus Stock Incentive Plan
(incorporated herein by reference to Exhibit 10.1 to
DIMON Incorporated's Registration
Statement on Form S-4 (file No. 33-89780))
10.02 DIMON Incorporated Non-Employee Directors'
Stock Option Plan (incorporated herein by reference
to Exhibit 10.2 to DIMON Incorporated's
Registration Statement on Form S-4
(file No. 33-89780))
-80-
EXHIBIT INDEX
Exhibit Page No.
10.03 Dibrell Brothers, Incorporated 1994 Omnibus Stock
Incentive Plan (incorporated by reference to Exhibit 10.6
to Dibrell Brothers, Incorporated's Annual Report on
Form 10-K for the fiscal year ended June 30, 1994)
10.04 Form of Interpretive letter, dated January 11, 1995, under
the Dibrell Brothers, Incorporated 1994 Omnibus Stock
Incentive Plan delivered by Dibrell Brothers, Incorporated
to Claude B. Owen, Jr., T. H. Faucett, T. W. Oakes,
L. N. Dibrell, III and H. P. Green (incorporated by reference
to Exhibit 10.6 to Dibrell Brothers, Incorporated's Quarterly
Report on Form 10-Q for the quarter ended
December 31, 1994)
10.05 Dibrell Brothers, Incorporated Retirement Plan (Excess
Benefit Plan) (incorporated herein by reference to Exhibit
10.4 to Dibrell Brothers, Incorporated's Annual Report on
Form 10-K for the year ended June 30, 1987)
10.06 Dibrell Brothers, Incorporated Pension Equalization Plan
(Benefit Assurance Plan) (incorporated herein by reference
to Exhibit 10.13 to Dibrell Brothers, Incorporated's Annual
Report on Form 10-K for the year ended June 30, 1991)
10.07 Long-Term Stock Investment Plan for Key Employees of
Monk-Austin, Inc. (incorporated by reference to
Exhibit 10.5 of Monk-Austin, Inc.'s Registration
Statement on S-1 (File No. 33-51842))
10.08 Form of 1995 Declaration of Amendment to Long-Term
Stock Investment Plan for Key Employees of
Monk-Austin, Inc. (incorporated herein by reference
to Exhibit 10.8 to DIMON Incorporated's Registration
Statement on Form S-4 (File No. 33-89780))
10.09 Employment Agreement, dated October 18, 1994,
between Monk-Austin International, Inc. and
Albert C. Monk, III (incorporated by reference to
Exhibit 10.1 to Monk-Austin, Inc.'s Quarterly Report
on Form 10-Q for the quarter ended
December 31, 1994)
10.10 Employment Agreement, dated as of December 21, 1994,
effective as of November 1, 1994, by and between Dibrell
Brothers, Incorporated and Claude B. Owen, Jr.
(incorporated by reference to Exhibit 10.1 to Dibrell
Brothers, Incorporated's Quarterly Report on Form 10-Q
for the quarter ended December 31, 1994)
-81-
EXHIBIT INDEX
Exhibit Page No.
10.11 Employment Agreement, dated as of December 21,
1994, effective as of November 1, 1994, by and
between Dibrell Brothers, Incorporated and
L. N. Dibrell, III (incorporated by reference to
Exhibit 10.1 to Dibrell Brothers, Incorporated's
Quarterly Report on Form 10-Q for the quarter
ended December 31, 1994)
10.12 $500,000,000 Credit Agreement dated as of
June 27, 1997 among the Company, the lenders named
therein, NationsBank, N.A. as administrative agent, First
Union National Bank, as documentation agent and
Cooperatieve Centrale Raiffeisen-Boerenleenbank
B.A., "Rabobank Nederland," New York Branch and
Societe Generale as co-agents (the "Credit Agreement")
(incorporated by reference to Exhibit 10.1 to DIMON
Incorporated's Registration Statement on Form S-3
(No. 333-33267))
10.13 Consulting Agreement dated April 22, 1996 between
DIMON Incorporated and John M. Hines (incorporated
by reference to Exhibit 10.29 to DIMON Incorporated's
Registration Statement on Form S-1 (No. 333-1288))
10.14 Guaranty Agreement, dated as of June 27, 1997 by
DIMON International, Inc. and Florimex Worldwide, Inc.
of the obligations of the Company under the Credit
Agreement (incorporated by reference to Exhibit 10.3
to DIMON Incorporated's Registration Statement on
Form S-3 (No. 333-33267))
10.15 Form of Note in connection with Credit Agreement
(incorporated by reference to Exhibit 10.2 to DIMON
Incorporated's Registration Statement on Form S-3
(No. 333-33267))
10.16 Purchase Agreement by and among DIMON
Incorporated, Austria Tabakwerke AG, Austria
Tabak Einkaufs-Und Handelorganisation GesmbH
and Austro-Hellenique S.A. De Tabac Et De
Batiment, dated April 13, 1995 (incorporated by
reference to Exhibit 10.1 to DIMON Incorporated's
Current Report on Form 8-K, dated June 7, 1995)
- 82 -
EXHIBIT INDEX
Exhibit Page No.
10.17 Stock Purchase Agreement, dated as of
February 14, 1997, among DIMON Incorporated,
Intabex Holdings Worldwide S.A., Folium Inc.,
Leaf Management Investments Ltd. and
Tabacalera S.A. (incorporated by reference herein
to Exhibit 10.1 to DIMON Incorporated's
Current Report on Form 8-K dated
April 16, 1997)
10.18 Indenture, dated as of April 1, 1997, by DIMON
Incorporated to LaSalle National Bank, relating to
$140 Million of 6 1/4% Convertible Subordinated
Debentures due March 31, 2007 (incorporated by
reference herein to Exhibit 10.2 to DIMON
Incorporated's Current Report on Form 8-K dated
April 16, 1997)
10.19 Non-Competition Agreements, dated as of
April 1, 1997, by and between Intabex S.A. (Zug)
and Folium Inc. (incorporated by reference herein
to Exhibit 10.3 and 10.7 to DIMON Incorporated's
Current Report on Form 8-K dated April 16, 1997)
10.20 Registration Rights Agreement, dated as of
April 1, 1997, by and between DIMON Incorporated,
Tabacalera S.A., Folium Inc. and Leaf Management
Investments Ltd. (incorporated by reference herein
to Exhibit 10.4 to DIMON Incorporated's Current
Report on Form 8-K dated April 16, 1997)
10.21 Consulting Agreement, dated April 1, 1997, by
and between Intabex S.A. (Zug) and Anthony
C.B. Taberer (incorporated by reference herein to
Exhibit 10.5) to DIMON Incorporated's Current
Report on Form 8-K dated April 16, 1997)
10.22 Asset Purchase Agreement, dated as of
February 14, 1997, by and between Dibrell Brothers
Zimbabwe (Private) Limited and Tabex (Private)
Limited (incorporated by reference herein to
Exhibit 10.6 to DIMON Incorporated's Current
Report on Form 8-K dated April 16, 1997)
10.23 Employment Agreement dated January 3, 1997,
with Brian J. Harker (incorporated by reference to
Exhibit 10 to DIMON Incorporated's Quarterly
Report on Form 10-Q dated February 14, 1997)
-83-
EXHIBIT INDEX
Exhibit Page No.
10.24 DIMON Incorporated Cash Balance Plan 85 - 195
effective July 1, 1996 (filed herewith)
10.25 DIMON Incorporated Supplemental Retirement Plan 196 - 214
effective January 1, 1997 (filed herewith).
11 Computation of Earnings per Common Share 215
(filed herewith)
21 List of Subsidiaries (filed herewith) 216
23.1 Consent of Price Waterhouse LLP 217
(filed herewith)
23.2 Consent of Price Waterhouse LLP 218
(filed herewith)
27 Financial Data Schedule (filed herewith) 219
- 84 -