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1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
September 30,
For the fiscal year ended 1996 Commission file number 0-2655
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DIXON TICONDEROGA COMPANY
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(Exact name of Company as specified in its charter)
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 September 30, 1996.
Transition Report Pursuant to Section 13 or 15(d) of the Securities
- --- Exchange Act of 1934 (No Fee Required) For the transaction period from
__________ to __________.
Delaware 23-0973760
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
195 International Parkway, Heathrow, FL 32746
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (407) 829-9000
Title of each class Name of each exchange on which registered
Common Stock, $1.00 par value American Stock Exchange
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Company was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Based on the closing sales price on December 3, 1996, the aggregate market
value of the voting stock held by non-affiliates of the Company was
$15,380,904.
Indicate the number of shares outstanding of each of the Registrant's classes
of common stock, as of December 3, 1996: 3,293,778 shares of common stock,
$1.00 Par Value.
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 Form 10-K or any
amendment to this Form 10-K. [ ]
Documents Incorporated by Reference:
Proxy statement to security holders incorporated into Part III for the fiscal
year ended September 30, 1996.
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PART I
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ITEM 1. BUSINESS
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NEW DEVELOPMENTS AND BUSINESS STRATEGIES
Dixon Ticonderoga Company (hereinafter the "Company") accomplished
many strategic objectives during 1996. The Company reorganized and
strengthened its management ranks into its two core business groups, as
revenues grew to $106.7 million from $95.6 million in 1995. In addition,
these businesses earned approximately $10 million in operating income for
the second consecutive year. The Company also continued its efforts to
improve its customer service capabilities by opening a dedicated central
distribution center in Shelbyville, Tennessee, and through further
technology enhancements.
Corporate activities included the recapitalization of the Company's
debt, including nearly $70 million of new financing. The new arrangements
provide significantly more working capital to support the aforementioned
growth of the Company's Consumer and Industrial Groups. Moreover, in 1996
the Company completed and relocated its corporate headquarters to its new
facility in Heathrow, Florida.
Despite the success experienced in 1996, the results from operations
were adversely affected by certain unusual items. The Company provided
approximately $2 million ($1.44 million after tax) towards the final
settlement of its long-standing Dixon Venture lawsuit, based upon the
decision rendered by the Court in April 1996. In addition, an extraordinary
charge of $282,000 was incurred in connection with the early retirement of
certain long-term debt as part of the recapitalization described above.
Further information regarding these matters is included elsewhere in the
Annual Report on Form 10-K.
3
INDUSTRY SEGMENTS
In 1996, the Company redefined its principal business segments to
reflect its current management structure and strategic objectives. The
Company has two principal continuing business segments: its Consumer Group
and Industrial Group. These segments, and the primary operations of each,
are as follows:
BUSINESS SEGMENTS OPERATIONS
Consumer Group Manufacture and sale of writing and drawing
pencils, pens, artist materials, felt tip
markers, industrial markers, lumber crayons,
typewriter correction materials and allied
products.
Industrial Group Manufacture and sale to industry of processed
natural and synthetic bulk graphite, graphite
oil, solvent and water-based lubricants, as
well as colloidal graphitic suspensions
(Graphite and Lubricants division); clay and
graphite stopper heads, firebrick,
non-graphitic refractory kiln furniture and
furnace linings (Refractories division).
Financial information regarding net revenues, operating profits and
identifiable assets related to the Company's industry segments for the years
ended September 30, 1996, 1995, and 1994, is contained in Note 11 to
Consolidated Financial Statements.
The Company's international operations are subject to certain risks
inherent in carrying on business abroad, including the risk of currency
fluctuations, currency remittance restrictions and unfavorable political
conditions. It is the Company's opinion that there are presently no material
political risks involved in doing business in the foreign countries (i.e.
Mexico, Canada and Europe) in which its operations are being conducted.
CONSUMER GROUP
The Company manufactures its leading brand TICONDEROGA and a full line
of pencils in Versailles, Missouri. The Company also manufactures and markets
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advertising specialty pencils, pens and markers through its promotional
products division.
The Company is also the producer of WEAREVER writing products at its
facility in Deer Lake, Pennsylvania. In addition to the WEAREVER and Dixon
lines of pens, the Company also manufactures and markets its Prang and
Ticonderoga lines of markers, mechanical pencils, and allied products at
this facility.
The Company also manufactures in Sandusky, Ohio (mainly for wholesale
school suppliers and retailers) PRANG, COLORART, and other well known
brands of wax crayons, chalks, dry and liquid tempera, water colors and art
materials. This division also manufactures special markers for industrial
use and paper-wrapped pencils, all of which are marketed and sold, together
with the products manufactured by the Versailles and Deer Lake operations, by
the U.S. Consumer Products group.
Under an agreement with Warner Bros. Consumer Products, the Company also
manufactures and markets in the U.S. and Canada a complete product line of
pencils, pens, crayons, chalks, markers, paints, art kits and related items
featuring the famous Looney Tunes characters. (See Note 12 to Consolidated
Financial Statements.)
Dixon Ticonderoga Inc., a wholly-owned subsidiary with a distribution
center in Newmarket, Ontario, and a manufacturing plant in Acton Vale,
Quebec, Canada, is engaged in the sale in Canada of black and color writing
and drawing pencils, pens, lumber crayons, correction materials, erasers,
rubber bands and allied products. It also distributes certain of the school
product lines. The Acton Vale plant also produces eraser products and
correction materials for distribution by the U.S. Consumer Products group.
5
Dixon Ticonderoga de Mexico, Inc., S.A. de C.V., a majority-owned
subsidiary (50.1%) of Dixon Ticonderoga Inc., is engaged in the manufacture
and sale in Mexico of black and color writing and drawing pencils, typewriter
correction materials, lumber crayons and allied products. This subsidiary
also manufactures and sells in Mexico certain products of the type
manufactured at the Sandusky facility, as well as marker products
manufactured at the Deer Lake facility.
Dixon Europe, Limited, a wholly-owned subsidiary of the Company is
engaged in the distribution of many Dixon Consumer Products in the United
Kingdom and other European countries.
INDUSTRIAL GROUP
Through its Graphite and Lubricants division, Dixon manufactures and
sells processed natural and synthetic graphite, graphite oil, solvent and
water-based lubricants as well as colloidal graphitic suspensions. The
American Graphite location in Manchester Township, New Jersey, and the
Southwestern Graphite location in Burnet, Texas, process and sell graphite to
industrial customers, and are engaged in the processing and blending of
various grades of foreign and domestic graphites for use in the manufacture
and sale of related products.
The New Castle Refractories division, with plants located in Ohio,
Pennsylvania and West Virginia, manufactures various types of non-graphitic
refractory kiln furniture used by the ceramic and glass industries;
firebrick, various types and designs of non-graphitic refractory special
shapes for ferrous and nonferrous metal industries; refractory shapes for
furnace linings and industrial furnace construction; various grades of
insulating firebrick and graphite stopper heads.
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REAL ESTATE OPERATIONS (Discontinued Operations)
The Company previously developed Bryn Mawr Ocean Towers (three
nine-story towers) on North Hutchinson Island, Florida, which were sold as
condominiums. Pursuant to a formal plan and agreement dated September 29,
1995, the Company disposed of the remaining property dedicated to this
project and has ceased any further real estate activities. This segment is
therefore treated as "Discontinued Operations." (See Note 10 to Consolidated
Financial Statements.)
DISTRIBUTION
Consumer products manufactured at the Sandusky, Ohio; Deer Lake,
Pennsylvania; and Versailles, Missouri plants are distributed nationally
through wholesale, commercial and retail stationers, school supply houses,
industrial supply houses, blueprint and reproduction supply firms, art
material distributors and retailers. In 1996, the Company opened a central
distribution center in Shelbyville, Tennessee, to enhance service levels,
especially with respect to large retail customers. The consumer products
manufactured at the Canadian and Mexican plants are distributed nationally in
these countries through wholesalers, distributors, school supply houses and
retailers.
The industrial products manufactured at the various plants are sold by
direct sales, manufacturers' representatives and industrial distributors in
North America. In addition, these products are sold worldwide, principally
in Central and South America, Europe, the Philippines and Japan.
RAW MATERIALS
Graphite, which can be considered a strategic raw material for the
Company's business, is sold by the Company in bulk and as a component, and is
used in the manufacture of refractory products, lubricants and leads for
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wood-cased pencils. Graphite is purchased from Brazil, Madagascar, India,
Mexico, People's Republic of China, Sri Lanka, West Germany and Zimbabwe.
There were no significant raw material shortages of any consequence during
1996 nor any anticipated for future periods.
TRADEMARKS, PATENTS AND COPYRIGHTS
The Company owns a large number of trademarks, patents and copyrights in
each industry segment related to products manufactured and marketed by it,
which have been secured over many years. These have been of value in the
growth of the business and should continue to be of value in the future.
However, in the opinion of the Company, its business generally is not
dependent upon the protection of any patent or patent application or the
expiration of any patent.
SEASONAL ASPECTS OF THE BUSINESS
The Consumer Group reflects greater portions (approximately 65% in 1996)
of its sales in the third and fourth fiscal quarters of the year due to
shipments of school orders to its distribution network. This practice, which
is standard for this industry, usually causes the Company to incur additional
bank borrowings during the period between shipment and payment.
The Industrial Group has no material seasonal aspects.
COMPETITION
Both of the Company's industry segments are engaged in a highly
competitive business with a number of competitors, some of whom are larger
and have greater resources than the Company. Important to the Company's
market position are the quality and performance of its products, its
marketing and distribution systems, and the reputation developed over the
many years that the Company has been in business.
8
RESEARCH AND DEVELOPMENT
The Company employs approximately 17 full-time professional employees in
the area of quality control and product development. The Company has
established a centralized research and development laboratory in its
Sandusky, Ohio facility. For accounting purposes, research and development
expenses in any year presented in the accompanying Consolidated Financial
Statements do not represent more than 1% of revenues.
EMPLOYEES
The total number of persons employed by the Company was approximately
1,240 of which 796 were employed in the United States.
9
ITEM 2. PROPERTIES
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The following properties of the Company are owned in fee and are
collateralized or pledged under the Company's loan agreement with a
consortium of lenders (First Union Capital Corporation as agent), except for
the Heathrow, Florida, property, which is subject to a separate mortgage
agreement. See Notes 3 and 4 to Consolidated Financial Statements. Most of
the buildings are of steel frame and masonry or concrete construction.
SQUARE FEET
LOCATION OF FLOOR SPACE
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Heathrow, Florida (Corporate Headquarters) 33,000
Sandusky, Ohio (Consumer) 276,000
Manchester Township, New Jersey (American
Graphite) (Graphite and Lubricants division) 76,000
Near Burnet, Texas (Southwestern Graphite)
(Graphite and Lubricants division) 97,000
New Castle, Pennsylvania (Refractories division) 131,000
Newell, West Virginia (Refractories division) 45,000
Massillon, Ohio (Refractories division) 113,000
Zoar, Ohio (Refractories division) 65,000
Acton Vale, Quebec, Canada (Dixon
Ticonderoga Inc.) (Consumer) 32,000
Tlalnepantla, D.F., Mexico (Dixon Ticonderoga de Mexico,
S.A. de C.V.) (Consumer) 55,000
Versailles, Missouri (Consumer) 120,000
Shelbyville, Tennessee (Consumer) 94,000
Deer Lake, Pennsylvania (Consumer) 150,000
The Company also owns a non-operating graphite mine near Burnet, Texas,
included with land at historical cost in the consolidated balance sheets.
10
ITEM 3. LEGAL PROCEEDINGS
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In March 1986, The Dixon Venture ("Venture") (an unrelated company)
filed a civil action in the New Jersey Superior Court seeking recovery of
damages and costs allegedly incurred by Venture in connection with the clean-
up of industrial property acquired from the Company in Jersey City, New
Jersey in February, 1984. Venture's claims were brought pursuant to the New
Jersey Environmental Clean-up Responsibility Act ("ECRA"), an environmental
remedial statute dealing with the transfer of industrial property.
On April 24, 1996, a decision was rendered by the Superior Court of New
Jersey in Hudson County finding the Company responsible for $1.94 million in
certain environmental clean-up costs relating to this matter. Including pre-
judgment interest on the damage award, it is estimated that the Company's
exposure will not exceed approximately $3.3 million. The Company continues
to evaluate pursuing other responsible parties for indemnification and/or
contribution to the payment of this claim (including its insurance carriers
and a legal malpractice action against its former attorneys) and is in the
process of preparing and filing an appeal. As a result of the judgment, the
Company increased its liability accrued for this matter to $3.3 million
during fiscal 1996.
Also see Note 12 to Consolidated Financial Statements.
ITEM 4. SUBMISSION ON MATTERS TO VOTE OF SECURITY HOLDERS
- ----------------------------------------------------------
None.
11
PART II
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ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK
AND RELATED SECURITY HOLDER MATTERS
-----------------------------------
Dixon Ticonderoga Company common stock is traded on the American Stock
Exchange. The following table sets forth the low and high per share prices
as per the American Stock Exchange closing prices for the applicable quarter.
FISCAL FISCAL
QUARTER ENDING 1996 1995
-------------- ------ ------
LOW HIGH LOW HIGH
--- ---- --- ----
December 31 5.50 9.88 7.38 9.88
March 31 6.38 7.75 8.50 11.13
June 30 6.00 7.50 7.13 8.88
September 30 6.50 8.13 7.25 8.38
Since fiscal 1990, the Board of Directors has suspended payment of
dividends. The Board will continue to review the Company's future
performance and determine the dividend policy on a quarter-to-quarter basis.
The Company's debt agreements restrict the amount of dividends which can be
paid in the future. (See Notes 3 and 4 to Consolidated Financial Statements).
The number of record holders of the Company's common stock at
December 3, 1996, was 448.
12
ITEM 6. SELECTED FINANCIAL DATA
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DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
FOR THE FIVE YEARS ENDED SEPTEMBER 30, 1996
(in thousands, except per share amounts)
1996 1995 1994 1993 1992
REVENUES $106,696 $95,565 $91,932 $82,138 $81,740
======== ======= ======= ======= =======
INCOME FROM
CONTINUING OPERATIONS $ 1,168 $ 1,658 $ 3,417 $ 476 $ 437
LOSS FROM
DISCONTINUED OPERATIONS - (595) (116) (146) (179)
EXTRAORDINARY ITEM (282) - - - -
CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE - - - 235 -
-------- ------- ------- ------ -------
NET INCOME $ 886 $ 1,063 $ 3,301 $ 565 $ 258
======== ======= ======= ====== =======
EARNINGS (LOSS) PER
COMMON SHARE:
CONTINUING OPERATIONS $ .36 $ .52 $ 1.10 $ .15 $ .14
DISCONTINUED OPERATIONS - (.19) (.04) (.04) (.06)
EXTRAORDINARY ITEM (.09) - - - -
CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE - - - .07 -
-------- ------- ------- ------- ------
NET INCOME $ .27 $ .33 $ 1.06 $ .18 $ .08
======== ======= ======= ======= =======
TOTAL ASSETS $ 77,848 $70,158 $68,852 $63,946 $61,981
======== ======= ======= ======= =======
LONG-TERM DEBT $ 25,119 $14,541 $19,141 $18,279 $23,083
======== ======= ======= ======= =======
DIVIDENDS PER
COMMON SHARE $ - $ - $ - $ - $ -
======== ======= ======= ======= =======
13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
-------------------------------------------------
RESULTS OF OPERATIONS
1996 vs. 1995
Income from continuing operations before income taxes, minority interest
and extraordinary items decreased $1,014,000 in 1996. In 1996 and 1995 there
were provisions of $2,039,000 and $1,530,000, respectively, for litigation
settlements and legal costs related to several lawsuits (see Item 3 and Note
12 to Consolidated Financial Statements). Foreign Consumer operating profits
decreased $962,000 primarily due to provisions for doubtful accounts
receivable (of approximately $500,000) in Mexico, as well as 1995 foreign
currency gains of over $500,000. Also in 1996, there were additional
distribution and promotional costs incurred by U.S. Consumer to service the
mass retail and mega-store markets.
1995 vs. 1994
Income from continuing operations before income taxes and minority
interest decreased $1,000,000 in 1995. Included in 1995 are provisions of
$1,530,000 for litigation settlements and legal costs related to several
lawsuits (see Item 3 and Note 12 to Consolidated Financial Statements). In
1994, there was a gain on sale of subsidiary stock and other assets of
$2,313,000 relating primarily to the sale of stock in our Mexico subsidiary
(see Note 8 to Consolidated Financial Statements). Net corporate expenses
decreased $690,000 in 1995, while interest expense decreased $678,000. The
interest expense reduction was principally due to the Mexican subsidiary's
low borrowing position subsequent to the aforementioned sale of stock.
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1994 vs. 1993:
The improvement in income before income taxes amounted to $3,946,000 in
1994. The increase in gain on sale of subsidiary stock and other assets of
$1,942,000 is primarily due to the sale of the stock in the Mexico subsidiary
(see Note 8 to Consolidated Financial Statements). Increased revenue in the
Consumer Group (primarily due to volume) led to better manufacturing
efficiencies. New products and more aggressive marketing, particularly in
the retail market, contributed to this volume increase. Industrial Group
revenue improved principally due to Refractory division increases in volume
and more favorable mix contributing to higher profitability. The interest
expense increase was due primarily to higher average rates of interest in
1994.
Discontinued Operations:
The 1995 loss from discontinued operations of the real estate segment
represents a net operating loss of $175,000 (net of a tax benefit of
$104,000) and a loss on disposal of $420,000 (net of a tax benefit of
$250,000). Net operating losses of the real estate segment was $116,000 in
1994.
Extraordinary Item:
The 1996 extraordinary charge of $282,303 represents costs associated
with the early retirement of the Company's 10.59% Senior Subordinated Notes,
due 1999. See Note 4 to Consolidated Financial Statements.
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REVENUES
Overall 1996 revenues increased $11,131,000 over the prior year. The
changes by segment are as follows:
Increase % Increase (Decrease)
(Decrease) Total Volume Price/Mix
---------- ------------------------
Consumer U.S. $8,223,000 15 14 1
Consumer Foreign 3,082,000 19 19 -
Industrial (174,000) (1) - (1)
Consumer revenues in the United States increased primarily in the commercial
office supply mega-stores and mass retail markets. The increase in Foreign
Consumer revenue included increases of $1,100,000 in Canada and $1,960,000 in
Mexico. In the prior year, Mexico revenue was depressed because of the
devaluation of the Mexican peso that occurred in early fiscal 1995. This
year's revenue decreased $1,700,000 in Mexico due to the decline of the peso
value compared to the U.S. dollar. This decline was offset by increased peso
selling prices.
Revenues in 1995 increased $3,632,000 over the prior year. The changes
by segment are as follows:
Increase % Increase (Decrease)
(Decrease) Total Volume Price/Mix
---------- ------------------------
Consumer U.S. $4,624,000 9 8 1
Consumer Foreign (2,198,000) (13) (9) (4)
Industrial 1,206,000 5 4 1
U.S. Consumer revenue volume increases were primarily in the office supply
mega-store market. The decrease in Foreign Consumer revenue was primarily
due to the majority-owned subsidiary in Mexico. Revenue in Mexico decreased
$5,200,000 due to the decline of the peso value compared to the U.S. dollar.
This decrease was partially offset by increased peso selling prices.
Industrial revenue increased primarily due to higher volume in the Refractory
division.
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Overall 1994 revenues increased $9,795,000 over the prior year. The
increases and decreases by segment are as follows:
Increase % Increase (Decrease)
(Decrease) Total Volume Price/Mix
---------- ------------------------
Consumer U.S. $6,347,000 15 14 1
Consumer Foreign 1,807,000 11 12 (1)
Industrial 1,641,000 7 3 4
The increase in U.S. Consumer Products volume was in both the commercial and
mass retail markets and was enhanced by new product introductions. Foreign
revenue increase was primarily by our subsidiary in Mexico. However, the
foreign revenue increase is after revenue reductions in Canada and Mexico of
$470,000 and $450,000, respectively, due to the decline of their local
currency value (as compared with the U.S. dollar). Industrial revenue
increased due principally to improved Refractory division product mix and
higher volume.
OPERATING PROFITS
There was a decrease of $582,000 in operating profits by segment in
1996. Foreign Consumer operating profits decreased $962,000 primarily due to
provisions for doubtful accounts receivable (of approximately $500,000) in
Mexico, as well as 1995 foreign currency gains of over $500,000. U.S.
Consumer operating profits increased $367,000. This increase was due to the
U.S. Consumer revenue growth. However, additional distribution and
promotional costs incurred to service the U.S. Consumer retail and mega-store
markets partially offset revenue growth.
Operating profits increased $1,476,000 in 1995. Foreign operations
increased $984,000. Our Canadian subsidiary increase of $396,000 reflected
higher revenues and a stable year with respect to that country's currency.
The increase in Mexico was primarily due to increased shipments to the U.S.
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and related plant efficiencies and currency gains. Industrial Group revenues
increased $350,000 on higher Refractories division volume. U.S. Consumer
operating profits were relatively flat. U.S. Consumer revenue and gross
profit increases were offset by increased selling and distribution costs,
primarily incurred to service the office supply mega-store markets.
In 1994, operating profits by segment increased $2,718,000. Consumer
increased $2,132,000 on significantly higher revenues. A decrease in the
value of the local currency in Mexico was offset by price increases and
volume. Industrial increased $500,000 on higher volume and favorable product
mix of the Refractories division.
MINORITY INTEREST
Minority interest represents 49.9% of the net income of the consolidated
subsidiary, Dixon Ticonderoga de Mexico, S.A. de C.V. ($920,000 and
$1,151,000 in 1996 and 1995, respectively), equivalent to the extent of the
investment of the minority shareholders. As described in Note 8 to
Consolidated Financial Statements, this minority interest was created by an
initial public offering in September 1994. Accordingly, 1994 minority
interest of $11,000 only reflects the portion of net income earned in the
latter part of September 1994.
EFFECT OF CERTAIN NEW ACCOUNTING PRONOUNCEMENTS
As discussed in Note 1 to Consolidated Financial Statements, the
Financial Accounting Standards Board (FASB) issued Statement No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of." This statement, which must be adopted by the Company no
later than fiscal 1997, establishes accounting standards with respect to the
impairment of long-lived assets. Its adoption is not expected
18
to materially affect the future results of operations or financial position
of the Company.
In 1995, the FASB also issued Statement No. 123, "Accounting for Stock-
Based Compensation." The statement (effective for the Company in fiscal
1997) would provide certain specific disclosures regarding the value of stock
option grants made in fiscal 1996 and thereafter. The Company does not
expect to adopt the compensation recognition provision of the Statement, and,
accordingly, it is not expected to affect the future results of operations or
financial position of the Company.
19
LIQUIDITY AND CAPITAL RESOURCES
The Company's financial condition has benefited from its recent
operating success and the completion of major financing initiatives. Cash
flows from operating activities in 1996 improved by approximately $1.3
million over the prior year, due principally to more strict inventory control
practices. Inventory levels were reduced in excess of $1 million, despite an
increase in sales of 16%, in the Company's Consumer Group. In comparison,
Consumer inventory levels increased 15% in 1995. This significant
improvement in inventory management was offset by an increase in accounts
receivable due to higher revenues. Company revenues for the fourth quarter
increased 21% in 1996. As is the case historically, cyclical short-term
borrowings (see below) financed peak mid-year increases in accounts
receivable and inventories.
The Company's investing activities included approximately $4 million in
purchases of property and equipment in 1996. This higher level of purchases
as compared with prior years is attributable to the construction of the
Company's new corporate headquarters facility in Heathrow, Florida.
Expenditures to complete this building project approximated $2.2 million in
1996 (with a total project cost of approximately $3.6 million). The
construction costs were ultimately financed through a permanent $2.73 million
mortgage arrangement. (See Note 4 to Consolidated Financial Statements).
The Company also intends to finance certain strategic manufacturing equipment
(in the amount of $2.8 million) under a long-term lease arrangement
commencing in late 1996. Generally, all other major capital projects are
discretionary in nature and thus no material purchase commitments exist.
Other capital expenditures will include customary projects, and will continue
to be funded from operations and existing financing arrangements.
20
The Company completed major refinancing activities during 1996. In July
1996, the Company entered into new financing arrangements with a consortium
of lenders (First Union Commercial Corporation as agent) to provide
additional working capital. The new loan and security agreement provides for
a total of $48 million in financing. This includes a revolving line of
credit facility in the amount of $40 million which bears interest at either
the prime rate, plus 0.5%, or the prevailing LIBOR rate plus 2.5%.
Borrowings under the revolving credit facility are based upon eligible
accounts receivable and inventories of the Company's U.S. and Canada
operations, as defined. The financing agreement also includes a term loan in
the amount of $7.75 million. The term loan bears interest at the same rate,
and is payable in varying monthly installments through 2001. The Company
previously executed certain interest rate "swap" agreements which effectively
fix the rate of interest on approximately $13 million of this debt at 8.75%
to 8.87%.
These new financing arrangements are collateralized by the tangible and
intangible assets of the U.S. and Canada operations (including accounts
receivable, inventories, property, plant and equipment, patents and
trademarks) and a pledge of the capital stock of the Company's subsidiaries.
The loan and security agreement contains provisions pertaining to the
maintenance of certain financial ratios and annual capital expenditure
levels, as well as restrictions as to payment of cash dividends. The Company
is presently in compliance with all such provisions. These new arrangements
provide up to $10 million in additional financing as compared with the
Company's previous primary lender agreement. At September 30, 1996, the
Company had approximately $27 million of unused lines of credit available
under this new financing arrangement.
21
In September 1996, the Company also completed the private placement of
$16.5 million of new 12% Senior Subordinated Notes, due 2003. The net
proceeds were used to retire early the remaining $7 million of the Company's
prior issue of Senior Subordinated Notes due 1999, and to reduce short-term
borrowings, thus providing additional working capital. This transaction also
reduced the Company's annual debt service obligations by approximately $3.3
million through 1998. The Company executed a reverse interest rate "swap"
agreement which converts $10 million of the notes to a floating rate of
interest (approximately 10.6% at September 30, 1996). In connection with the
private placement, the Company issued to noteholders warrants to purchase
300,000 shares of Company stock at its market value of $7.24 per share. The
note agreement contains provisions which limit the payment of dividends and
require the maintenance of certain financial covenants and ratios, with which
the Company is presently in compliance.
Refer to Notes 3 and 4 to Consolidated Financial Statements for further
description of the aforementioned new financing arrangements.
The new and existing sources of financing and cash expected to be
generated from future operations will, in management's opinion, be sufficient
to fulfill all current and anticipated requirements of the Company's ongoing
business and to meet all of its obligations.
22
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ---------------------------------------------------
DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
PAGE
Report of Independent Accountants 23
Consolidated Balance Sheets as of
September 30, 1996 and 1995 24-25
Consolidated Statements of Operations For the Years
Ended September 30, 1996, 1995 and 1994 26
Consolidated Statements of Shareholders' Equity
For the Years Ended September 30, 1996, 1995 and 1994 27
Consolidated Statements of Cash Flows For the Years
Ended September 30, 1996, 1995 and 1994 28-29
Notes to Consolidated Financial Statements 30-45
Schedule For the Years Ended
September 30, 1996, 1995, and 1994:
II. Valuation and Qualifying Accounts 46
Consent of Independent Accountants 47
Information required by other schedules called for under Regulation S-X
is either not applicable or is included in the Consolidated Financial
Statements or Notes thereto.
23
REPORT OF INDEPENDENT ACCOUNTANTS
Shareholders and Board of Directors of
Dixon Ticonderoga Company
We have audited the accompanying consolidated financial statements and
the financial statement schedule of Dixon Ticonderoga Company and
subsidiaries as listed in the index on page 22 of this Form 10-K. These
financial statements and the financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and the financial statement schedule
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Dixon Ticonderoga Company and subsidiaries at September 30, 1996 and 1995,
and the consolidated results of their operations and cash flows for each of
the three years in the period ended September 30, 1996, in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedule referred to above, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Orlando, Florida
November 27, 1996
24
DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 AND 1995
ASSETS 1996 1995
------ ---- ----
CURRENT ASSETS:
Cash and cash equivalents $ 2,597,032 $ 1,513,622
Receivables, less allowance for
doubtful accounts of $1,352,411
in 1996 and $796,715 in 1995 23,442,889 18,202,541
Inventories 31,460,934 32,638,385
Assets held for sale 94,937 436,306
Other current assets 2,949,859 2,254,101
----------- -----------
Total current assets 60,545,651 55,044,955
----------- -----------
PROPERTY, PLANT AND EQUIPMENT:
Land and buildings 15,711,724 12,908,945
Machinery and equipment 16,537,994 16,986,408
Furniture and fixtures 917,222 902,043
----------- -----------
33,166,940 30,797,396
Less accumulated depreciation (17,730,505) (17,229,617)
----------- -----------
15,436,435 13,567,779
----------- -----------
OTHER ASSETS 1,866,054 1,545,110
----------- -----------
$77,848,140 $70,157,844
=========== ===========
25
LIABILITIES AND
SHAREHOLDERS' EQUITY 1996 1995
-------------------- ---- ----
CURRENT LIABILITIES:
Notes payable $14,159,143 $17,877,665
Current maturities of long-term debt 1,613,773 4,587,016
Accounts payable 5,461,348 5,280,884
Accrued liabilities 10,934,838 8,388,309
----------- -----------
Total current liabilities 32,169,102 36,133,874
----------- -----------
LONG-TERM DEBT 25,119,305 14,540,884
----------- -----------
DEFERRED INCOME TAXES AND OTHER 1,051,171 1,177,288
----------- -----------
MINORITY INTEREST 3,517,006 3,073,375
----------- -----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, par $1, authorized
100,000 shares, none issued -- --
Common stock, par $1, authorized
8,000,000 shares, issued 3,537,211
shares in 1996 and 3,448,466
shares in 1995 3,537,211 3,448,466
Capital in excess of par value 2,489,674 2,166,329
Retained earnings 13,526,520 12,640,762
Cumulative translation adjustment (2,669,031) (2,087,354)
----------- -----------
16,884,374 16,168,203
Less treasury stock, at cost
(243,433 shares in 1996; 255,147
shares in 1995) (892,818) (935,780)
----------- -----------
15,991,556 15,232,423
----------- -----------
$77,848,140 $70,157,844
=========== ===========
The accompanying notes are an integral part
of the consolidated financial statements.
26
DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
1996 1995 1994
---- ---- ----
REVENUES $106,695,874 $95,565,000 $91,932,479
------------ ----------- -----------
COSTS AND EXPENSES:
Cost of goods sold 70,343,837 62,193,918 62,246,254
Selling and
administrative expenses 27,955,760 24,241,328 22,721,878
------------ ----------- -----------
98,299,597 86,435,246 84,968,132
------------ ----------- -----------
OPERATING INCOME 8,396,277 9,129,754 6,964,347
------------ ----------- -----------
INTEREST EXPENSE (3,423,650) (3,652,824) (4,330,581)
PROVISIONS FOR LITIGATION
SETTLEMENTS AND RELATED COSTS (2,039,000) (1,530,377) --
GAIN ON SALE OF SUBSIDIARY
STOCK AND OTHER ASSETS -- -- 2,313,470
------------ ----------- -----------
(5,462,650) (5,183,201) (2,017,111)
------------ ----------- -----------
INCOME FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES
AND MINORITY INTEREST 2,933,627 3,946,553 4,947,236
INCOME TAXES 845,044 1,137,897 1,518,053
------------ ----------- -----------
2,088,583 2,808,656 3,429,183
MINORITY INTEREST 920,522 1,150,690 11,469
------------ ----------- -----------
INCOME FROM CONTINUING OPERATIONS 1,168,061 1,657,966 3,417,714
DISCONTINUED OPERATIONS -- (594,923) (116,481)
EXTRAORDINARY ITEM (282,303) -- --
------------ ----------- -----------
NET INCOME $ 885,758 $ 1,063,043 $ 3,301,233
============ =========== ===========
EARNINGS (LOSS) PER
COMMON SHARE:
Continuing operations .36 $ .52 $ 1.10
Discontinued operations -- (.19) (.04)
Extraordinary item (.09) -- --
----------- ---------- ----------
Net income $ .27 $ .33 $ 1.06
=========== ========== ==========
The accompanying notes are an integral part
of the consolidated financial statements.
27
DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
Common Capital in Cumulative
Stock $1 Excess of Retained Translation Treasury
Par Value Par Value Earnings Adjustment Stock
--------- --------- -------- ------------ --------
BALANCE, September 30, 1993 $ 3,376,835 $ 1,769,171 $ 8,276,486 $ (627,419) $(1,007,043)
Net income 3,301,233
Cumulative translation adjustment 95,964
Employee stock options exercised 48,038 253,958
Employee Stock Purchase Plan
(9,305 shares) 19,510 34,131
----------- ----------- ---------- ----------- -----------
BALANCE, September 30, 1994 $ 3,424,873 $ 2,042,639 $11,577,719 $ (531,455) $ (972,912)
Net income 1,063,043
Cumulative translation adjustment (1,555,899)
Employee stock options exercised 23,593 91,985
Employee Stock Purchase Plan
(10,123 shares) 31,705 37,132
----------- ----------- ---------- ----------- -----------
BALANCE, September 30, 1995 $ 3,448,466 $ 2,166,329 $12,640,762 $(2,087,354) $ (935,780)
Net income 885,758
Cumulative translation adjustment (581,677)
Employee stock options exercised 88,745 295,368
Employee Stock Purchase Plan
(11,714 shares) 21,977 42,962
----------- ----------- ---------- ----------- -----------
BALANCE, September 30, 1996 $ 3,537,211 $ 2,489,674 $13,526,520 $(2,669,031) $ (892,818)
=========== =========== =========== =========== ===========
The accompanying notes are an integral part
of the consolidated financial statements.
28
DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
1996 1995 1994
---- ---- ----
Cash flows from
operating activities:
Income from continuing
operations $1,168,061 $1,657,966 $3,417,714
Loss from discontinued
operations -- (594,923) (116,481)
Loss from extraordinary item (282,303) -- --
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 2,361,081 2,379,728 2,502,451
Gain on sale of subsidiary stock
and other assets -- -- (2,313,470)
Deferred taxes (900,298) 83,802 (19,111)
Income attributable to
minority interest 920,522 1,150,690 11,469
(Income) loss attributable
to currency translation (201) (511,424) 110,830
Changes in assets [(increase)
decrease] and liabilities
[increase(decrease)]:
Receivables, net (5,649,182) 194,045 (3,053,682)
Inventories 632,502 (4,929,306) (698,187)
Other current assets 122,595 147,739 (260,203)
Accounts payable and accrued
liabilities 3,176,740 (21,632) 3,270,750
Other assets (530,503) 114,006 (331,606)
---------- ---------- ----------
Net cash provided by (used in)
operating activities 1,019,014 (329,309) 2,520,474
---------- ---------- ----------
Cash flows from
investing activities:
Purchases of plant and equipment (4,090,295) (3,007,547) (1,842,331)
Proceeds from sale of assets -- -- 573,708
Proceeds from sale of
subsidiary stock -- -- 5,734,723
---------- ---------- ----------
Net cash provided by (used in)
investing activities (4,090,295) (3,007,547) 4,466,100
29
1996 1995 1994
---- ---- ----
Cash flows from
financing activities:
Principal additions to Senior
Subordinated Notes 16,500,000 -- --
Principal reductions of Senior
Subordinated Notes (10,350,000) (3,325,000) (3,325,000)
Proceeds from additions to
long-term debt 2,725,000 -- 9,666,667
Proceeds from additions to
notes payable -- 8,040,299 7,937,368
Principal reductions of
long-term debt (1,222,847) (1,131,276) (5,980,120)
Principal reductions of
notes payable (3,718,522) -- (14,248,878)
Other non-current liabilities (1,949) (109,626) 113,341
Employee Stock Purchase Plan 70,939 68,837 53,641
Exercise of stock options 384,113 115,578 301,996
---------- ---------- ----------
Net cash provided by (used in)
financing activities 4,386,734 3,658,812 (5,480,985)
---------- ---------- ----------
Effect of exchange rate changes
on cash (232,043) (631,098) (14,866)
---------- ---------- ----------
Net increase (decrease) in cash
and cash equivalents 1,083,410 (309,142) 1,490,723
Cash and cash equivalents,
beginning of year 1,513,622 1,822,764 332,041
---------- ---------- ----------
Cash and cash equivalents,
end of year $ 2,597,032 $ 1,513,622 $ 1,822,764
=========== =========== ===========
Supplemental Disclosures:
Cash paid during the year for:
Interest (net of amount capitalized) $3,545,106 $ 3,697,023 $ 4,282,857
Income taxes 972,403 1,616,427 400,411
The accompanying notes are an integral part
of the consolidated financial statements.
30
DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Business:
Dixon Ticonderoga Company is a diversified manufacturer and marketer of
writing and art products as well as a producer of graphite, lubricant
and refractory products. Its largest principal customers are school
products distributors, mass merchandisers and industrial manufacturers,
although none account for over 6% of revenues.
Estimates:
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 dates of the
financial statements, and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those
estimates.
Principles of consolidation:
The consolidated financial statements include the accounts of Dixon
Ticonderoga Company and all of its subsidiaries (the "Company"). All
significant intercompany transactions and balances have been eliminated
in consolidation. Minority interest represents the minority
shareholders' proportionate share of the equity of the Company's Mexico
subsidiary (49.9%).
Translation of foreign currencies:
In accordance with Financial Accounting Standards Board (FASB) Statement
No. 52, results from Canada, Mexico and United Kingdom operations are
translated using average exchange rates during the period. Assets and
liabilities denominated in local currency are translated into U.S.
dollars at current exchange rates with the gain or loss being recorded
in shareholders' equity. Gains and losses from foreign currency
transactions are included in the Consolidated Statement of Operations.
Cash and cash equivalents:
Cash and cash equivalents include investment instruments with a maturity
of three months or less at time of purchase.
31
Inventories:
Inventories are stated at the lower of cost or market. Certain
inventories amounting to $16,253,000 and $15,250,000, at September 30,
1996 and 1995, respectively, are stated on the last-in, first-out (LIFO)
method of determining inventory costs. Under the first-in, first-out
(FIFO) method of accounting, these inventories would be $958,000 and
$1,282,000 higher at September 30, 1996 and 1995, respectively. All
other inventories are accounted for using the FIFO method.
All inventories that are stated on the LIFO method were acquired in 1983
as a result of an acquisition. This acquisition was treated as a
purchase and accordingly, inventory was recorded at its fair market
value for financial accounting purposes. As a result, the financial
accounting basis for the LIFO inventories exceeds the LIFO tax basis by
approximately $1,276,000 and $1,339,000 at September 30, 1996 and 1995,
respectively.
Inventories consist of (in thousands):
September 30,
1996 1995
---------------------
Raw material $ 12,538 $ 12,450
Work in process 4,268 4,462
Finished goods 14,655 15,726
-------- --------
$ 31,461 $ 32,638
======== ========
Assets held for sale:
Assets held for sale represent idled and other assets specifically
identified for sale within the next fiscal year. The assets are stated
at their aggregate net book value which does not exceed estimated net
realizable value.
Property, plant and equipment:
Property, plant and equipment are stated at cost. During 1996,
capitalized interest (reflected in land and buildings) amounted to
$120,443. Depreciation is provided principally on a straight-line basis
over the estimated useful lives of the respective assets.
When assets are sold or retired, their cost and related accumulated
depreciation are removed from the accounts. Any gain or loss is
included in income.
32
Income taxes:
The Company recognizes deferred tax assets and liabilities for future
tax consequences of events that have been included in the financial
statements or tax returns. Under this method, amounts for deferred tax
assets and liabilities are determined based on the differences between
the financial statement and tax bases of assets and liabilities using
enacted tax rates. Valuation allowances are established when necessary
to reduce deferred tax assets to the amount expected to be realized.
Income tax expense is the tax payable for the period and the change
during the period in deferred tax assets and liabilities.
Accounting for long-lived assets:
The FASB recently issued Statement No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of." This statement, which must be adopted by the Company no later than
fiscal 1997, establishes accounting standards with respect to the
impairment of long-lived assets. Its adoption is not expected to
materially affect the future results of operations or financial position
of the Company.
Reclassifications:
Certain prior year amounts have been reclassified to conform with the
current year classifications.
(2) ACCRUED LIABILITIES:
The major components of accrued liabilities are as follows (in
thousands):
September 30,
1996 1995
-----------------------
Salaries and wages $ 2,012 $ 1,707
Employee benefit plans 769 797
Income taxes 1,572 1,173
Other 6,582 4,711
-------- --------
$ 10,935 $ 8,388
======== ========
(3) NOTES PAYABLE:
In July 1996, the Company entered into new financing arrangements with
a consortium of lenders to provide additional working capital. The new
loan and security agreement provides for a total of $48 million in
financing through July 1999. This includes a revolving line of credit
facility in the amount of $40 million which bears interest at either the
prime rate (8.25% at September 30, 1996), plus 0.5%, or the prevailing
LIBOR rate (approximately 5.5% at September 30, 1996) plus 2.5%.
Borrowings under the revolving credit facility ($13,016,000 as of
September 30, 1996) are based upon eligible accounts receivable and
inventories of the Company's U.S. and Canada operations, as defined. In
addition, the financing agreement also includes a term loan in the
33
amount of $7.75 million (see Note 4). In 1995, the Company executed an
interest rate "swap" agreement which effectively fixes the rate of
interest on approximately $5 million of the revolver debt at 8.87% for
five years. The carrying value of borrowings under the revolving credit
facility is a reasonable estimate of fair value as interest rates are
based on prevailing market rates.
These new financing arrangements are collateralized by the tangible and
intangible assets of the U.S. and Canada operations (including accounts
receivable, inventories, property, plant and equipment, patents and
trademarks) and a pledge of the capital stock of the Company's
subsidiaries. The loan and security agreement contains provisions
pertaining to the maintenance of certain financial ratios and annual
capital expenditure levels, as well as restrictions as to payment of
cash dividends. As of September 30, 1996, the Company is presently in
compliance with all such provisions. These new arrangements provide up
to $10 million in additional financing as compared with the Company's
previous primary lender agreement. At September 30, 1996, the Company
had approximately $27 million of unused lines of credit available under
this new financing arrangement. A fee of 0.25% is paid on the unused
portion of the revolving credit facility.
The weighted average interest rate of the Company's outstanding notes
payable (including foreign borrowings) was 8.6%, 9.4% and 12.9% as of
September 30, 1996, 1995 and 1994, respectively.
(4) LONG-TERM DEBT:
Long-term debt consists of the following (in thousands):
September 30,
1996 1995
------------------
12% Senior Subordinated Notes $ 16,500 $ --
10.59% Senior Subordinated Notes -- 10,350
Bank term loan 7,500 8,667
Building mortgage 2,717 --
Other 16 111
-------- -------
26,733 19,128
Less-current maturities (1,614) (4,587)
-------- -------
$ 25,119 $ 14,541
======== ========
In September 1996, the Company completed the private placement of $16.5
million of new 12% Senior Subordinated Notes, due 2003. The net
proceeds were used to retire early the remaining $7 million of the
Company's prior issue of 10.59% Senior Subordinated Notes due 1999, to
reduce short-term borrowings and to provide additional working capital.
This transaction also reduced the Company's annual debt service
obligations by approximately $3.3 million through 1998. The Company
executed a reverse interest rate "swap" agreement which converts $10
million of the notes to a floating rate of interest (approximately 10.6%
at September 30, 1996). In connection with the private placement,
34
the Company issued to noteholders warrants to purchase 300,000 shares
of Company stock at its market value of $7.24 per share. The note
agreement contains provisions which limit the payment of dividends and
require the maintenance of certain financial covenants and ratios. As
of September 30, 1996, the Company is in compliance with all such
provisions.
In connection with the early retirement of the 10.59% Senior
Subordinated Notes, the Company incurred a loss on early
extinquishment of debt of $448,303 ($282,303, after tax), presented as
an extraordinary item in the accompanying consolidated financial
statements.
The loan and security agreement with the Company's primary lender (see
Note 3) also includes a term loan in the amount of $7.75 million.
Interest on the term loan is payable monthly at either the bank's prime
rate (8.25% at September 30, 1995) plus 0.5% or the prevailing LIBOR
rate (approximately 5.5% at September 30, 1995) plus 2.5%. In 1995, the
Company executed an interest rate "swap" agreement which effectively
fixes the term loan rate at 8.75% through its maturity. The term loan
is payable in varying monthly installments through May 2001.
In addition, in 1996 the Company entered into a mortgage agreement with
respect to its corporate headquarters building in Heathrow, Florida.
The mortgage (in the original amount of $2.73 million) is for a period
of 15 years and bears interest at 8.1%.
Carrying values of the Senior Subordinated Notes, the bank term loan and
the building mortgage are reasonable estimates of fair value as interest
rates are based on prevailing market rates.
Aggregate maturities of long-term debt are as follows (in thousands):
1997 $ 1,614
1998 1,662
1999 1,782
2000 1,791
2001 6,746
Thereafter 13,138
-------
$26,733
=======
35
(5) INCOME TAXES:
The components of net deferred tax liability recognized in the
accompanying consolidated balance sheet are as follows (in thousands):
1996 1995
------- -------
U.S. current deferred tax assets
(included in other current assets) $ 1,884 $ 1,267
Foreign current deferred tax liability
(included in accrued liabilities) (758) (1,071)
U.S. and foreign, noncurrent deferred
tax liability (included in deferred
income taxes and other) (1,017) (1,155)
------- -------
Net deferred tax asset (liability) $ 109 $ (959)
======= =======
Deferred tax assets:
Vacation pay $ 193 $ 168
Accrued pension 175 147
Accrued legal 983 381
Accrued environmental costs 135 151
Accounts receivable 224 216
Other 111 --
Foreign net operating loss carryforward 504 492
Valuation allowance (504) (492)
------- -------
Total deferred tax assets 1,821 1,063
------- -------
Deferred tax liabilities:
Inventories (549) (786)
Depreciation (461) (464)
Property, plant and equipment (502) (525)
Foreign dividend income (200) (200)
Other -- (47)
------- -------
Total deferred tax liability (1,712) (2,022)
------- -------
Net deferred tax asset (liability) $ 109 $ (959)
======= =======
It is the policy of the Company to accrue deferred income taxes on
temporary differences related to the financial statement carrying
amounts and tax bases of investments in foreign subsidiaries which are
expected to reverse in the foreseeable future. Certain undistributed
earnings of foreign subsidiaries that are essentially permanent in
duration and not expected to reverse in the foreseeable future
approximate $8,600,000 as of September 30, 1996. The determination of
the unrecognized deferred tax liability for such temporary differences
is not practicable.
36
The provision for income taxes (benefit) from continuing operations is
comprised of the following (in thousands):
1996 1995 1994
---- ---- ----
Current:
U.S. Federal $ 910 $ 795 $ 76
State 13 44 70
Foreign 822 215 1,391
------ ------ ------
$1,745 $1,054 $1,537
------ ------ ------
Deferred:
U.S. Federal (740) (612) 88
Foreign (160) 696 (107)
------ ------ ------
(900) 84 (19)
------ ------ ------
$ 845 $1,138 $1,518
====== ====== ======
Foreign deferred tax provision (benefit) is comprised principally of
temporary differences related to Mexico asset purchases. U.S. deferred
benefit in 1996 and 1995 results primarily from expenses accrued but not
deductible for taxes.
The Company has net operating loss carryforwards for its United Kingdom
subsidiary of approximately $2,000,000 without an expiration date.
The differences between the provision for income taxes on continuing
operations computed at the U.S. statutory federal income tax rate and
the provision in the consolidated financial statements are as follows
(in thousands):
1996 1995 1994
---- ---- ----
Amount computed using statutory rate $ 997 $1,342 $1,682
Foreign income (327) (329) (203)
State taxes, net of federal benefit 9 29 46
Permanent differences 126 104 154
Difference between tax and book
basis of subsidiary stock - - 386
Utilization of NOL valuation
allowance - - (400)
NOL from utilization of
foreign tax credits - - (113)
Others 40 (8) (34)
------ ------ ------
Provision for income taxes $ 845 $1,138 $1,518
====== ====== ======
37
Permanent differences result primarily from intercompany net income that
is eliminated from the consolidated statements of operations but are
taxed in various jurisdictions.
(6) EMPLOYEE BENEFIT PLANS:
The Company maintains several defined benefit pension plans covering
substantially all union employees. The benefits are based upon fixed
dollar amounts per years of service. The assets of the various plans
(principally corporate stocks and bonds, insurance contracts and cash
equivalents) are managed by independent trustees. The policy of the
Company and its subsidiaries is to fund the minimum annual contributions
required by applicable regulations.
The following table sets forth the plans' funded status (accumulated
benefits exceed assets in all plans) at September 30, 1996 and 1995 (in
thousands):
September 30,
1996 1995
--------------
Actuarial present value of:
Accumulated benefit obligation $(3,530) $(3,366)
======= =======
Projected benefit obligation $(3,530) $(3,366)
Plan assets at market value 2,277 2,030
------- -------
Projected benefit obligation in excess
of plan assets (1,253) (1,336)
Unrecognized net gain from past
experience different from assumptions 474 441
Unrecognized net obligation being
recognized over periods from
10 to 16 years 762 800
------- -------
Pension liability $ (17) $ (95)
======= =======
Net periodic pension costs include the following components (in
thousands):
1996 1995 1994
---- ---- ----
Service costs - benefits earned during period $ 124 $ 100 $ 99
Interest cost on projected benefit obligation 222 184 179
Actual (return) loss on plan assets (167) (150) 28
Net amortization and deferral 155 155 (44)
----- ----- -----
Net periodic pension cost $ 334 $ 289 $ 262
===== ===== =====
38
In determining the projected benefit obligation, the assumed discount
rates ranged from 4.5% to 7.5% for 1996, 6.0% to 7.5% for 1995, and 4.5%
to 7.5% for 1994. The expected long-term rates of return on assets used
in determining net periodic pension cost ranged from 7.5% to 8.5% for
1996, 7.5% to 8.5% for 1995, and 7.5% to 9% for 1994. There are no
assumed rates of increase in compensation expense in any year, as
benefits are fixed and do not vary with compensation levels.
The Company also maintains a defined-contribution plan (401K) for all
non-union domestic employees who meet minimum service requirements, as
well as a supplemental deferred contribution plan for certain executives.
Company contributions under the plans consist of a basic 3% of the
compensation of participants for the plan year, and for those
participants who elected to make voluntary contributions to the plan,
matching contributions up to an additional 4%, as specified in the plan.
Charges to operations for these plans for the years ended September 30,
1996, 1995 and 1994 were $586,000, $552,000, and $479,000, respectively.
In fiscal 1994, the Company adopted FASB Statement No. 106 "Employers
Accounting for Postretirement Benefits Other Than Pensions". This
statement generally requires the accrual of health care benefits and
other postretirement benefits over the course of the employees' active
service. For substantially all current employees, there are no
postretirement benefits provided, except for pension plans. The current
expenses and the effect of adopting the new statement are not material.
(7) SHAREHOLDERS' EQUITY:
The Company provides an employee stock purchase plan under which 100,000
shares of its common stock can be issued. Among the terms of this plan,
eligible employees may purchase through payroll deductions shares of the
Company's common stock up to 10% of their compensation at the lower of
85% of the fair market value of the stock on the first or last day of the
plan year (May 1 and April 30). On May 1, 1996, 1995, and 1994, 11,714,
10,123, and 9,305 shares, respectively, were issued under this plan. At
September 30, 1996, there are 19,689 shares available for future
purchases under the plan.
In addition, the Company has granted options to key employees, under the
1979 and 1988 Dixon Ticonderoga Company Executive Stock Plans to purchase
shares of its common stock at the market price on the date of grant.
Options under the 1979 Plan (as amended) become exercisable one year
after date of grant and were exercisable during a period not to exceed
ten years from date of grant. All remaining options under the 1979 Plan
were exercised during 1996. Under the 1988 Plan (as amended) options
vest 25% after one year; 25% after two years; and 50% after three years,
and remain exercisable for a period of three years from the date of
vesting. All options expire three months after termination of
employment. At September 30, 1996, there were 287,192 options
exercisable and 231,390 shares available for future grants under the
Plans. The following table summarizes the combined stock options
activity for 1996, 1995 and 1994:
39
1996 1995 1994
---- ---- ----
Number of Option Number of Option Number of Option
Shares Price Shares Price Shares Price
---------------- ---------------- ----------------
Options outstanding 74,026 $4.20 74,026 $4.20 94,213 $4.20
beginning of year 52,333 4.75 75,302 4.75 103,152 4.75
1,500 5.13 2,000 5.13 2,000 5.13
42,375 7.75 43,000 7.75 46,000 7.75
2,000 6.13 2,000 6.13
99,000 8.63
Options exercised (74,026) 4.20 (20,187) 4.20
(14,069) 4.75 (22,969) 4.75 (27,850) 4.75
(500) 5.13
(125) 7.75
Options granted 2,000 6.13
94,000 6.75
17,000 7.13
2,000 8.13
100,000 8.63
Options expired (1,447) 4.75
or canceled (1,500) 5.13
(500) 7.75 (3,000) 7.75
(2,000) 8.13
(2,000) 8.63 (1,000) 8.63
(2,000) 6.75
------- ------- -------
287,192 271,234 196,328
In 1995, the FASB issued Statement No. 123, "Accounting for Stock-Based
Compensation." The statement (effective for the Company in fiscal 1997)
provides for certain specific disclosures regarding the value of stock
option grants made in fiscal 1996 and thereafter. The Company does not
expect to adopt the compensation recognition provision of the Statement,
and, accordingly, it is not expected to affect the future results of
operations or financial position of the Company. The specific
disclosures required by the Statement have not been calculated at this
time.
In March 1995, the Company declared a dividend distribution of one
Preferred Stock Purchase Right on each share of Company common stock.
Each Right will entitle the holder to buy one-thousandth of a share of
a new series of preferred stock at a price of $30.00 per share. The
Rights will be exercisable only if a person or group (other than the
Company's chairman, Gino N. Pala, and his family members) acquires 20%
or more of the outstanding shares of common stock of the Company or
announces a tender offer following which it would hold 30% or more of
such outstanding common stock. The Rights entitle the holders other
than the acquiring person to purchase Company common stock having a
market value of two times the exercise prices of the Right. If,
40
following the acquisition by a person or group of 20% or more of the
Company's outstanding shares of common stock, the Company were acquired
in a merger or other business combination, each Right would be exercisable
for that number of the acquiring company's shares of common stock having
a market value of two times the exercise prices of the Right.
The Company may redeem the Rights at one cent per Right at any time
until ten days following the occurrence of an event that causes the
Rights to become exercisable for common stock. The Rights expire in ten
years.
(8) GAIN ON SALE OF SUBSIDIARY STOCK AND OTHER ASSETS:
In September 1994, the Company completed an initial public offering of
the stock of its wholly-owned subsidiary, Dixon Ticonderoga de Mexico,
S.A. de C.V. ("Dixon Mexico"). The underwriter for the offering was
Casa de Bolsa Prime, S.A. de C.V. The offering represented 49.9% of the
shares of Dixon Mexico and was placed in the new Mexican Intermediate
Market. A total of 16,627,760 shares were sold at a per-share price of
N$1.35 (new pesos) in a mixed offering. Of this amount, 4,163,605
shares (or approximately 25%) were sold in a primary offering with the
net proceeds going to Dixon Mexico for working capital and/or the
reduction of cyclical bank borrowings. The balance (12,464,155 shares
or approximately 75%) represented a secondary offering of shares owned
by the Company with the net proceeds going to reduce U.S. debt.
The net proceeds (after underwriting commissions and related expenses)
were approximately N$5 million from the primary offering and N$16
million from the secondary offering (or U.S. $1.4 million and U.S. $4.7
million, respectively). Proceeds from the offering (after taxes of
approximately U.S. $1.0 million) reduced the Company's consolidated debt
(net of cash balances) by approximately U.S. $5 million. The net after-
tax gain from the transaction was approximately U.S. $1.6 million. (The
gain on sale of company-owned shares was approximately U.S. $970,000 and
on the sale of new shares in the subsidiary was U.S. $630,000).
The Underwriting Agreement between the Company, Dixon Mexico and Casa de
Bolsa Prime, S.A. de C.V., provided for a firm offering of shares as
described above at the per-share price of N$1.35, less underwriting
commissions of 5%, plus other customary expenses. Prior to the
offering, there were no relationships between Casa de Bolsa Prime, S.A.
de C.V. and either the Company or Dixon Mexico.
After the successful completion of the offering, the Company maintained
50.1% controlling ownership of Dixon Mexico and five of nine seats on
its board of directors. The remaining four seats on the Dixon Mexico
board of directors will be held by designees of Casa de Bolsa Prime,
S.A. de C.V. or other investors having a minimum of 10% ownership in
Dixon Mexico.
To protect the continuing business relationships between the Company and
Dixon Mexico and ensure the continuity of management planning,
development and administration of the operation, the Company executed a
trademark license agreement and various other business agreements with
Dixon Mexico.
41
The trademark license agreement is for a minimum term of ten years. All
other agreements are for a minimum term of five years. In return for
the rights, services and assistance provided by the Company under these
agreements, Dixon Mexico will pay to the Company a total fee of 1.5% of
its total monthly sales.
Also in fiscal 1994, the Company sold idle property in Westampton, New
Jersey, generating net proceeds of $460,000 (which approximated its net
book value), as well as certain idle equipment. In addition, the
Company expensed approximately $300,000 to provide for contingencies
related to a previous sale of property.
(9) EARNINGS PER COMMON SHARE:
Earnings per common share have been computed based upon the total
weighted average number of common shares outstanding (3,233,684,
3,180,626, and 3,114,538 in 1996, 1995 and 1994, respectively).
(10) DISCONTINUED OPERATIONS:
Pursuant to a 1995 formal plan and agreement, the Company transferred
the remaining property and its developmental rights dedicated to the
Bryn Mawr Ocean Towers Condominium project to its Association.
Discontinued operations in 1995 reflect a loss on disposal of $420,000
(net of a tax benefit of $250,000).
The Real Estate segment has been accounted for as a discontinued
operation as of September 30, 1995, and, accordingly, its operating
results are reported in this manner in all years presented in the
accompanying Consolidated Financial Statements and related data.
Revenues of the Real Estate segment were $135,000 in 1994. There were
no revenues in 1995. Net real estate operating losses were $279,000 and
$126,000 in 1995 and 1994, respectively. Related income tax benefits
were $104,000 and $10,000 in 1995 and 1994, respectively.
42
(11) LINE OF BUSINESS REPORTING:
In 1996, the Company redefined its principal business segments to
reflect its current management structure and strategic objectives.
Accordingly, certain prior year amounts have been reclassified to
conform with the related current year presentation.
The Company has two principal business segments -- its Consumer Group
and Industrial Group. The following information sets forth certain data
pertaining to each line of business as of September 30, 1996, 1995 and
1994, and for the years then ended (in thousands).
Consumer Industrial Total
Group Group Company
-------- ---------- -------
Net
revenues:
1996 $81,756 $24,940 $106,696
1995 $70,451 $25,114 $ 95,565
1994 $68,025 $23,908 $ 91,933
Operating
profits:
1996 $ 6,082 $ 3,707 $ 9,789
1995 $ 6,677 $ 3,694 $ 10,371
1994 $ 5,554 $ 3,341 $ 8,895
Certain corporate expenses have been allocated based upon respective
segment sales. Interest expense was $3,424, $3,653 and $4,330;
litigation settlements and related costs were $2,039 in 1996 and $1,530
in 1995; general corporate expenses were $1,393, $1,241 and $1,931 in
1996, 1995 and 1994 respectively; gains on sales of assets were $2,313
in 1994, resulting in income from continuing operations before income
taxes of $2,934, $3,947, and $4,947 in 1996, 1995 and 1994,
respectively.
Consumer Industrial Total
Group Group Company
-------- ---------- -------
Identifiable
assets:
1996 $59,115 $13,417 $ 72,532
1995 $51,373 $13,801 $ 65,174
1994 $51,090 $13,555 $ 64,645
43
Corporate assets were $5,316, $4,984, and $3,423, at September 30, 1996,
1995 and 1994, respectively. Assets of discontinued operations were
$783 at September 30, 1994.
Consumer Industrial Total
Group Group Company
-------- ---------- -------
Depreciation and
amortization:
1996 $ 1,296 $ 441 $ 1,737
1995 $ 1,347 $ 456 $ 1,803
1994 $ 1,578 $ 437 $ 2,015
Expenditures for
plant and equipment:
1996 $ 1,250 $ 585 $ 1,835
1995 $ 1,029 $ 461 $ 1,490
1994 $ 898 $ 704 $ 1,602
Corporate depreciation and amortization were $624, $577, and $487 for
the years ended September 30, 1996, 1995 and 1994, respectively.
Corporate expenditures for equipment were $2,418, $1,601, and $389 in
1996, 1995 and 1994, respectively.
Foreign operations (Consumer Group):
Operating Identifiable
Revenues Profits Assets
-------- --------- ------------
1996:
Canada $ 8,715 $ 670 $ 6,277
Mexico 9,544 1,946 8,906
United Kingdom 873 (45) 635
1995:
Canada $ 7,623 $ 576 $ 6,839
Mexico 7,588 2,997 8,085
United Kingdom 839 (40) 648
1994:
Canada $ 7,087 $ 180 $ 4,433
Mexico 10,551 2,431 10,475
United Kingdom 617 (62) 483
44
(12) COMMITMENTS AND CONTINGENCIES:
Under an agreement with Warner Bros. Consumer Products, the Company
manufactures and markets in the U.S. and Canada a complete line of
products featuring the famous Looney Tunes characters. Under the
terms of the agreement, the Company has the right to market and sell
all types of pencils, pens, crayons, chalks, markers, paints, art kits
and related items. Through fiscal 1996, the Company has exceeded its
minimum obligation under the agreement and currently pays a royalty of
10% on all related sales.
In 1995, the Company entered into employment agreements with two
executives which provide for the continuation of salary (currently
aggregating $31,700 per month) and related employee benefits for a
period of 24 months following their termination of employment under
certain changes in control of the Company. In addition, all options
held by the executives would become immediately exercisable upon the
date of termination and remain exercisable for 90 days thereafter.
The Company, in the normal course of business, is party in certain
litigation. Ongoing litigation includes a claim under New Jersey's
Environmental Clean-Up Responsibility Act (ECRA) by a 1984 purchaser
of industrial property from the Company. On April 24, 1996, a
decision was rendered by the Superior Court of New Jersey in Hudson
County finding the Company responsible for $1.94 million in certain
environmental clean-up costs relating to this matter. Including pre-
judgment interest on the damage award, it is estimated that the
Company's exposure will not exceed approximately $3.3 million. The
Company continues to evaluate pursuing other responsible parties for
indemnification and/or contribution to the payment of this claim
(including its insurance carriers and a legal malpractice action
against its former attorneys) and is in the process of preparing and
filing an appeal. As a result of the judgment, a provision of
approximately $2 million ($1.44 million, net of tax or 45 cents per
share) has been recorded in 1996. In 1995, the Company provided
approximately $1.5 million in total ($960,000 net of tax or 30 cents
per share) for settlement and related legal costs associated with
three separate lawsuits, including the aforementioned ECRA claim.
The Company has evaluated the merits of other litigation and believes
their outcome will not have a further material effect on the Company's
future results of operations or financial position.
The Company is aware of several environmental matters related to
certain facilities purchased or to be sold. The Registrant assesses
the extent of these matters on an ongoing basis. In the opinion of
management (after taking into account accruals), the resolution of
these matters will not materially affect the Company's future results
of operations or financial position.
45
(13) SUMMARY OF QUARTERLY FINANCIAL INFORMATION (UNAUDITED) (In Thousands,
Except Per Share Data):
1996: First Second Third Fourth
Revenues $20,946 $20,622 $33,170 $31,958
Operating income 980 1,016 3,680 2,720
Income (loss) before taxes
and minority interest 365 (1,814)* 2,759 1,624
Minority interest (114) (127) (348) (332)
Extraordinary item -- -- -- (282)
Net income (loss) 151 (1,254)* 1,417 572
Earnings (loss) per share .05 (.39)* .44 .17
1995: First Second Third Fourth
Revenues $21,393 $19,371 $28,446 $26,355
Operating income 1,373 1,623 3,181 2,953
Income before taxes
and minority interest 618 784 2,185 360*
Minority interest (58) (332) (154) (607)
Discontinued operations (20) (30) (100) (445)
Net income (loss) 302 140 1,185 (564)*
Earnings (loss) per share .10 .04 .37 (.18)*
* Reflects provision for litigation settlements and related costs as
described in Note 12.
(14) SUBSEQUENT EVENT:
On November 22, 1996, the Company's New Castle Refractories Division
entered into an agreement to perpetually license certain silicon
carbide refractory brick technology from Carborundum Corporation.
Under the terms of the perpetual license agreement, the Company is
obligated to pay a fixed sum of $450,000 with payments made through
2001 or earlier, if certain stipulated sales levels are reached.
The Company also executed related agreements to, at its option,
purchase manufactured product or specific equipment from Carborundum
Corporation.
46
DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
Deductions
Balance at Additions From Balance
Beginning Charged Reserves at Close
Description of Period to Income (1) of Period
----------- ---------- --------- ---------- ---------
ALLOWANCE FOR DOUBTFUL
ACCOUNTS:
Year Ended
September 30, 1996 $ 796,715 $ 977,965 $ 422,269 $1,352,411
========= ========= ========= ==========
Year ended
September 30, 1995 $ 564,905 $ 421,850 $ 190,040 $ 796,715
========= ========= ========= ==========
Year ended
September 30, 1994 $ 610,427 $ 198,647 $ 244,169 $ 564,905
========= ========= ========= ==========
(1) Write-off of accounts considered to be uncollectible (net of
recoveries).
47
CONSENT OF INDEPENDENT ACCOUNTANTS
Shareholders and Board of Directors of
Dixon Ticonderoga Company
We consent to the incorporation by reference into the previously
filed registration statements of Dixon Ticonderoga Company on Form S-8
(File Nos. 33-20054 and 33-23380) of our report, dated November 27, 1996,
on our audit of the consolidated financial statements and financial
statement schedule of Dixon Ticonderoga Company and subsidiaries as of
September 30, 1996, 1995 and 1994, and for the years then ended, which
report is included in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Orlando, Florida
December 19, 1996
PAGE> 48
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURES
- ---------------------------------------------------------------------
None.
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
- ---------------------------------------------------------
Information required under this Item with respect to Directors will be
contained in the Company's 1996 Proxy Statement, pursuant to Regulation 14A,
which is incorporated herein by reference.
The following table sets forth the names and ages of the Company's
Executive Officers, together with all positions and offices held with the
Company by such Executive Officers. All Executive Officers are subject to
re-election or re-appointment by the Board of Directors at the first
Directors' Meeting succeeding the next Annual Meeting of shareholders.
Name Age Title
---- --- -----
Gino N. Pala 68 Chairman of the Board since February
(Father-in-law of 1989; President and Chief Executive
Richard F. Joyce) Officer since July 1985; prior thereto
President and Co-chief Executive
Officer since 1978.
Richard A. Asta 40 Executive Vice President of Finance
and Chief Financial Officer since
February 1991; prior thereto Senior
Vice President - Finance and Chief
Financial Officer since March 1990.
Richard F. Joyce 41 Vice Chairman of the Board since
(Son-in-law of January 1990; President and Chief
Gino N. Pala) Operating Officer, Consumer Group,
since March, 1996; Executive Vice
President and Chief Legal Executive
since February 1991; prior thereto
Corporate Counsel since July 1990.
49
Leonard D. Dahlberg, Jr. 45 Executive Vice President, Industrial
Group, since March 1996; prior thereto
Executive Vice President of
Manufacturing/Consumer Products
Division since August 1995; prior
thereto Senior Vice President of
Manufacturing since February 1993;
prior thereto Vice President of
Manufacturing since March 1990.
Kenneth A. Baer 50 Vice President and Treasurer since
January 1991; prior thereto Treasurer
since November 1985.
Laura Van Camp 45 Corporate Secretary since January
1986; prior thereto secretary to
President and Chief Executive Officer
since February 1982.
John Adornetto 55 Vice President and Corporate
Controller since January 1991; prior
thereto Corporate Controller since
September 1978.
Richard H. D'Antonio 48 Senior Vice President and Chief
Information Officer since March 1996;
prior thereto Vice President of
Information Services since October
1993; prior thereto Principal of RHD
Management Consulting since May 1990.
ITEM 11. EXECUTIVE COMPENSATION
- --------------------------------
Information required under this Item will be contained in the Company's
1996 Proxy Statement which is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
- --------------------------------------------------
Information required under this Item will be contained in the Company's
1996 Proxy Statement which is incorporated herein by reference.
50
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
Information required under this Item will be contained in the Company's
1996 Proxy Statement which is incorporated herein by reference.
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K
- -------------------------------------------------------------------------
(a) Documents filed as part of this report:
1. Financial statements
See index under Item 8. Financial Statements and Supplementary Data.
2. Exhibits
The following exhibits are required to be filed as part of this Annual
Report on Form 10-K:
(3) Amended and Restated Bylaws
(10)a. First Modification of Amended and Restated Revolving Credit
Loan and Security Agreement by and among Dixon Ticonderoga
Company, Dixon Ticonderoga, Inc., First Union Commercial
Corporation, First National Bank of Boston and National Bank
of Canada
(10)b. 12.00% Senior Subordinated Notes, Due 2003, Note and Warrant
Purchase Agreement
(10)c. 12.00% Senior Subordinated Notes, Due 2003, Common Stock
Purchase Warrant Agreement
(10)d. License and Technological Agreement between Carborundum
Corporation and New Castle Refractories Company, a division
of Dixon Ticonderoga Company
(10)e. Equipment Option and Purchase Agreement between Carborundum
Corporation and New Castle Refractories Company, a division
of Dixon Ticonderoga Company
(10)f. Product Purchase Agreement between Carborundum Corporation
and New Castle Refractories Company, a division of Dixon
Ticonderoga Company
(21) Subsidiaries of the Company
(27) Financial Data Schedule
(b) Reports on Form 8-K:
None.
51
SIGNATURES
Pursuant to the requirements of Section 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this Annual Report on Form
10-K to be signed on its behalf by the undersigned, thereunto duly
authorized.
DIXON TICONDEROGA COMPANY
/s/ Gino N. Pala
---------------------------
Gino N. Pala, President and
Chief Executive Officer
Pursuant to the Securities Exchange Act of 1934, this Annual Report on
Form 10-K has been signed below by the following persons on behalf of the
Company in the capacities indicated.
/s/ Gino N. Pala Chairman of Board, President, Chief
- -------------------------- Executive Officer and Director
Gino N. Pala
/s/ Richard F. Joyce Vice Chairman, Executive Vice President/
- -------------------------- Corporate Counsel and Director
Richard F. Joyce
/s/ Richard A. Asta Executive Vice President of Finance and
- -------------------------- Chief Financial Officer
Richard A. Asta
/s/ Bobby Brantley Director
- --------------------------
Bobby Brantley
/s/ John E. Ramondo Director
- --------------------------
John E. Ramondo
/s/ Joseph R. Sadowski Director
- --------------------------
Joseph R. Sadowski
/s/ Philip M. Shasteen Director
- --------------------------
Philip M. Shasteen
/s/ Samuel B. Casey, Jr. Director
- --------------------------
Samuel B. Casey, Jr.
/s/ Ben Berzin, Jr. Director
- --------------------------
Ben Berzin, Jr.
52
DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
EXHIBIT (21)
TO
1996 ANNUAL REPORT ON FORM 10-K
SUBSIDIARIES OF THE COMPANY
All of the Company's subsidiaries as of September 30, 1996, are listed
below. All subsidiaries are included in the consolidated financial
statements of the Company.
State Or Percentage of
Jurisdiction Voting
Of Organization Securities Owned
Bryn Mawr Ocean Resorts, Inc. (a) Florida 100%
Dixon Ticonderoga, Inc. Ontario, Canada 100%
Dixon Ticonderoga Company
de Mexico, S.A. de C.V.
(subsidiary of Dixon
Ticonderoga, Inc.) Mexico 50.1%
Ticonderoga Graphite Inc. (a) New York 100%
Dixon Europe, Limited United Kingdom 100%
(a) Inactive