Commission file number 1-13684
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![[f10k2002001.gif]](f10k2002001.gif)
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DIMON Incorporated
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(Exact name of registrant as specified in its charter)
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VIRGINIA
| 54-1746567
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(State or other jurisdiction
| (I.R.S. Employer
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of incorporation or organization)
| Identification No.)
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512 Bridge Street, Danville, Virginia
| 24541
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(Address of principal executive offices)
| (Zip Code)
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Registrant's telephone number, including area code
| (434) 792-7511
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Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class
| Name of Exchange On Which Registered
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Common Stock (no par value)
| New York Stock Exchange
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Common Stock Purchase Rights
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Securities registered pursuant to Section 12(g) of the Act:
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None
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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.
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Yes [X]
| No [ ]
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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. [ ]
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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 August 19, 2002, was approximately $278,766,938. 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.
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As of August 19, 2002, there were 44,640,004 shares of Common Stock outstanding.
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Portions of the registrant's definitive Proxy Statement for its 2002 Annual Meeting of Stockholders to be held October 30, 2002, 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.
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PART
I
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ITEM
1.
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BUSINESS
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==========================================================================================================
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THE
COMPANY
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DIMON
Incorporated (the "Company" or "DIMON") is the second
largest independent leaf tobacco merchant in the world and ships tobacco
to manufacturers of cigarettes and other consumer tobacco products in
approximately 90 countries around the world. The terms "we"
or "our" in this section refer to DIMON Incorporated and its
consolidated subsidiaries.
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BUSINESS
DESCRIPTION
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Product
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The
world's large multinational cigarette manufacturers, with one exception,
rely primarily on independent leaf tobacco merchants such as DIMON 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.
Our revenues primarily comprise sales of processed tobacco and fees
charged for related services to manufacturers of tobacco products around
the world. We do not manufacture cigarettes or other consumer tobacco
products.
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We
deal primarily in flue-cured, burley, and oriental tobaccos that are used
in international brand cigarettes. International brand cigarettes have
gained market share in several major foreign markets including Asia (particularly
the Pacific Rim), Europe and the Middle East in recent years. International
brand cigarettes contain approximately 50% flue-cured, 37% burley and
13% 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, international brand cigarettes represented
more than 60% of worldwide cigarette consumption (excluding China) in
2001, compared to 48% in 1990. As international brand cigarettes
have continued to gain global market share, the demand for export quality
flue-cured, burley and oriental tobacco sourced and processed by us and
our competitors has grown accordingly.
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Several
of the large multinational cigarette manufacturers have expanded their
operations throughout the world, particularly in Asia, 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, we believe that demand will increase 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. We
believe 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 by improving local agronomic practices.
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Geographic
Regions of Operation
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We
have developed an extensive international network through which we purchase,
process and sell tobacco. In addition to our processing facilities
in Virginia and North Carolina, we own or have 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
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-2-
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of
the leading non-U.S. exporters of burley tobacco, and Bulgaria, Greece,
Kyrgyzstan, Macedonia and Turkey, the leading exporters of oriental tobacco.
We also have processing facilities in Germany, Italy, Tanzania and
Thailand. We have historically contracted with third parties for the processing
of tobacco in certain countries including Argentina, Canada, Chile, China,
Congo, Guatemala, India, Indonesia, Spain and certain countries of the
former Soviet Union. In addition, we have 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 and India.
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We purchase tobacco in 40 countries. Although a significant portion of the dollar value of tobacco we purchase is produced in the U.S., the relative importance of tobacco grown overseas to our profitability has increased steadily. During fiscal 2002, approximately 25% of the dollar value of tobacco we purchased was purchased in the U.S. This is a decrease of 17% from the fiscal 2001 U.S. tobacco purchases of approximately 42%, due to the shift to direct contract buying discussed in "Purchasing" below. Approximately 22%, 13% and 4% of the dollar value of tobacco we purchased during fiscal 2002 was purchased in Brazil, Zimbabwe and Malawi, respectively. The remaining 36% was purchased in 36 different countries with no single country ac
counting for more than 4%.
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Through our wholly-owned subsidiary, Compania General de Tabacos de Filipinas S.A. ("CdF"), we are also a leading international dealer in dark tobaccos typically used for cigars and smokeless tobacco products. CdF maintains its administrative and sales headquarters in Barcelona, Spain, and has operations in the major dark tobacco producing countries, including Colombia, Dominican Republic, Indonesia, Northern Brazil, Paraguay and the Philippines.
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Purchasing
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Tobacco is purchased at auction or directly from growers. Traditionally, we have purchased tobacco grown in the United States on auction markets. However, beginning with the 2000 U.S. burley crop and continuing to the 2001 U.S. flue-cured crop, there has been a significant shift by our larger U.S. customers to purchasing directly from growers ("direct contract buying"). With the shift to direct contract buying, we estimate sales and other operating revenues have decreased $200 million to $210 million in fiscal year 2002 from fiscal year 2001. Although we continue to make U.S. purchases at auction, we now purchase the majority of our flue-cured and burley crop requirements through direct contract buying. This shift to direct contract
buying has decreased the number of auction warehouses in the U.S. Some of the former warehouses are now used as receiving points for direct contract buying. Our continued purchases of domestic tobacco on the flue-cured, burley and air-cured auction markets in Florida, Georgia, Kentucky, Maryland, North Carolina, South Carolina, Tennessee and Virginia as well as tobacco received under direct contract buying are shipped to our facilities in North Carolina and Virginia for processing to customer specification. We have continued to earn service revenues for the processing of all such tobaccos for our customers. Our gross profit has not been materially affected by the shift to direct contract buying by our customers, although sales revenues have been reduced and profit margin percentages have increased. Although we believe that we have taken proper actions to operate effectively in the U.S. direct contract buying environment, there are continuing challenges in managing our operating cost b
ase in the United States in light of the continued requirement to field buying personnel in the residual auction markets. See "Management's Discussion and Analysis of Financial Condition and Results of Operations – Factors that May Affect Future Results."
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Other principal auction markets include Canada, Malawi and Zimbabwe. We usually purchase tobacco at those auction markets after receiving specific customer orders or indications of customers' upcoming needs. Our network of tobacco buyers allows us 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.
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In non-auction markets such as Argentina, Brazil, Bulgaria, China, Greece, Guatemala, India, Indonesia, Italy, Mexico, Kyrgyzstan, Spain, Tanzania, Thailand and Turkey, we purchase tobacco directly from growers or from local entities that have arranged for purchase from growers. We often make these direct purchases based upon our projection of the needs of our long-standing customers rather than against specific purchase orders. Our arrangements with growers vary from locale to locale depending on our predictions of future supply and demand, local historical practice and availability of capital.
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-3-
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For
example, in Brazil, we generally contract to purchase a grower's entire
tobacco crop at the market price per grade at the time of harvest based
on the quality of the tobacco delivered. Pursuant to these purchase
contracts, we provide growers with fertilizer and other materials necessary
to grow tobacco and may either directly extend or guarantee Brazilian
rural credit loans to growers to finance the crop. Under longer-term
arrangements with growers, we may also finance or guarantee financing
on growers' construction of curing barns.
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In
addition, our agronomists maintain frequent contact with growers 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, we buy tobacco from local entities
that have purchased tobacco from growers and supervise the processing
of that tobacco by those local entities. We believe that our long-standing
relationships with our customers are vital to our purchasing operations
outside of the auction markets.
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Processing
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We
process tobacco to meet each customer's specifications as to quality,
yield, chemistry, particle size, moisture content and other characteristics.
We process tobacco in 24 facilities located throughout the world.
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, we have located
our processing facilities in proximity to our principal sources of tobacco.
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Upon
arrival at our 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. We also sell a small amount
of processed but unthreshed flue-cured and burley tobacco in loose-leaf
and bundle form to certain customers.
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Processed
flue-cured and burley tobacco is redried to remove excess moisture so
that it can be held in storage by customers or us 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 our 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, our technicians use laboratory test equipment for quality
control to ensure that the product meets all customer specifications.
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From
time to time, we process and store tobacco acquired by various stabilization
cooperatives under the domestic price support program. We 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 our net sales, they result in additional recovery of fixed
costs that may be significant to gross profit. With the shift to
direct contract buying, these revenues may decrease, which may correspondingly
affect gross profit on these sales.
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Customers
and Selling Arrangements
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Customers
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We
ship tobacco to manufacturers of cigarettes and other consumer tobacco
products located in approximately 90 countries around the world. We
ship 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,
we also use sales agents to supplement our selling efforts.
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-4-
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The
consumer tobacco business in most markets is dominated by a relatively
small number of large multinational cigarette manufacturers and by government
controlled entities. Of our 2002, 2001, and 2000 sales and other
operating revenues, approximately 35%, 36%, and 30%, respectively, were
to various tobacco customers which we have been led to believe are owned
by or under common control of Japan Tobacco Inc. or Philip Morris Companies
Inc., each of which contributed in excess of 10% of total sales. No
other customer accounts for more than 10% of our sales. We generally
have maintained relationships with our customers for over sixty years.
In fiscal 2002, we delivered approximately 20% of our tobacco sales
to customers in the U.S., approximately 39% to customers in Europe and
the remainder to customers located in Asia, Africa and elsewhere.
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Selling
Arrangements
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We
typically make most of our 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 us pursuant to orders, but no contractual
obligation exists with respect to tobacco purchased in response to indications.
However, we have done business with most of our customers for many
years and have never experienced a significant failure of customers to
purchase tobacco for which they have given indications.
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We
have three agreements with major customers to process and, with respect
to one customer, purchase and process, a certain portion of each customer's
U.S. tobacco requirements. Generally, the agreements establish a
framework for pricing our services (which generally is negotiated with
respect to crop year, grade of tobacco leaf or type of service provided
based on market prices), but two of these agreements do not provide for
minimum purchases and are terminable upon reasonable notice. None
of the contracts are individually material to our business as a whole,
and we have no other significant supply agreements with our customers.
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Our
normal customer sales terms are either cash against documents, payment
against invoice or customer letter of credit. Most of our sales
throughout the world are denominated in U.S. dollars. While we can
receive payment for tobacco sold after we have processed and shipped it,
most of the larger customers advance payments to us throughout the buying
season as we purchase tobacco for the customers' accounts.
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Competition
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The
leaf tobacco industry is highly competitive. Competition among leaf
tobacco merchants is based primarily on the price charged for products
and services as well as the merchant's ability to meet customer specifications
in the buying, processing and financing of tobacco. In addition,
there is competition in all countries to buy the available leaf tobacco.
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Currently,
there are three major global competitors in the leaf tobacco industry,
including DIMON, and all are dependent upon a few large cigarette manufacturing
customers. Our principal competitors are Universal Corporation and
Standard Commercial Corporation. Of the independent leaf tobacco
merchants, we believe that, based on revenues, we rank second in established
worldwide market share. We further believe that among independent
leaf tobacco merchants, we have the largest or second largest market share
in Argentina, Brazil, Greece, Guatemala, Mexico, Spain, Turkey, the U.S.
and Zimbabwe as well as other countries. Universal's market share
in the U.S. and Africa is considerably greater than ours. The number
of manufacturers has declined in recent years due to consolidation. The
loss of, or a substantial reduction in the services provided to, any one
or more significant customers could have a material adverse effect on
our financial condition or results of operations.
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Seasonality
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The
purchasing and processing activities of our tobacco business are seasonal.
Flue-cured tobacco grown in the U.S. is purchased generally during
the five-month period beginning in July and ending in November. U.S.-grown
burley tobacco is purchased usually from late November through January
or February. Tobacco grown in Brazil is purchased usually from January
through July. Other markets around the world have similar purchasing
periods, although at different times of the year.
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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 generally 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 our fiscal year, the seasonal components of our working capital
reflect primarily the operations related to foreign grown tobacco.
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Research
and Development
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We
routinely cooperate with both our customers and the manufacturers of the
equipment used in our processing facilities to improve processing technologies.
However, no material amounts are expended for research and development,
and we hold no material patents, licenses, franchises, or concessions.
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Employees
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Our
consolidated entities employed about 3,900 persons, excluding seasonal
employees, in our worldwide operations at June 30, 2002. In the
U.S. operations, our consolidated entities employed about 500 employees
at June 30, 2002. During processing periods the seasonal employees
in the U.S. would number approximately 1,000. Most U.S. seasonal
employees are covered by collective bargaining agreements with two local
labor unions. None of our full-time employees are covered by collective
bargaining agreements. In the non-U.S. operations, our consolidated
entities employed about 3,400 persons, excluding 15,000 seasonal employees
at June 30, 2002. We consider our employee relations to be satisfactory.
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Government
Regulation and Environmental Compliance
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See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations - Factors that May Affect Future Results" for
a discussion of government regulation and environmental compliance.
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Financial
Information about Industry Segments, Foreign and Domestic Operations,
and Export Sales
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We
operate in one segment, the tobacco business: the purchasing, processing,
selling and storing of leaf tobacco. Financial information concerning
our reporting is included in Note L to the "Notes to Consolidated
Financial Statements." Information with respect to our working
capital appears in "Management's Discussion and Analysis of Financial
Condition and Results of Operations – Liquidity and Capital Resources."
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-6-
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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None.
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ADDITIONAL INFORMATION - EXECUTIVE OFFICERS OF DIMON
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The names and ages of all executive officers of DIMON, as of June 30, 2002, 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.
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NAME
| AGE
| POSITION
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__________________________________________________________________________________________________________________
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Brian J. Harker
| 52
| President and Chief Executive Officer of DIMON since May 1999; prior thereto President since March 1999; prior thereto Executive Vice President and Chief Financial Officer since October 1996; prior thereto Senior Vice President of DIMON International, Inc., a wholly-owned subsidiary of DIMON.
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James A. Cooley
| 51
| Senior Vice President-Chief Financial Officer of DIMON since February 1999; prior thereto Senior Vice President-Treasurer since September 1997; prior thereto Vice President-Treasurer.
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Steve B. Daniels
| 44
| Senior Vice President-Operations Director of DIMON since October 2001; prior thereto Senior Vice President-Regional Director Latin America/Africa since March 1999; prior thereto Senior Vice President-Regional Executive Latin America since March 1998; prior thereto Senior Vice President-Brazil/South America Region of DIMON International, Inc., a wholly-owned subsidiary of DIMON.
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Larry R. Corbett
| 56
| Senior Vice President-Regional Director North America/Asia of DIMON since March 1999; prior thereto Senior Vice President-Regional Executive North America since March 1998; prior thereto Senior Vice President-North America Region of DIMON International, Inc., a wholly-owned subsidiary of DIMON.
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H. Peyton Green, III
| 53
| Senior Vice President-Sales Director of DIMON since October 2001; prior thereto Senior Vice President-Sales and Marketing since November 1998; prior thereto Senior Vice President-Regional Executive Africa/Asia Region of DIMON International, Inc., a wholly-owned subsidiary of DIMON.
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E. Shelton Griffin
| 55
| Senior Vice President-Sales & Marketing of DIMON since October 2001; prior thereto Senior Vice President-European Sales Director since November 1998; prior thereto Senior Vice President-Sales of DIMON International, Inc., a wholly-owned subsidiary of DIMON.
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Gustav R. Stangl
| 46
| Senior Vice President-Regional Director Europe of DIMON since March 1999; prior thereto Vice President and Managing Director-Oriental Operations of DIMON International, Inc., a wholly-owned subsidiary of DIMON.
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Thomas C. Parrish
| 54
| Senior Vice President-Chief Legal Officer and Secretary of DIMON since October 2001; prior thereto Senior Vice President-Corporate Affairs and Secretary since November 1999; prior thereto Senior Vice President-Corporate Affairs.
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Don C. Hare
| 47
| Vice President-Human Resources of DIMON since January 2001; prior thereto Senior Human Resources Generalist with a range of companies with responsibility for compensation and benefit design as well as organization design and change.
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The information contained in the Proxy Statement under the caption "Election of Directors" is incorporated herein by reference thereto.
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PART
II
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ITEM
5. MARKET FOR THE REGISTRANT'S COMMON
EQUITY AND RELATED
STOCKHOLDER
MATTERS
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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.
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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.
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DIMON
Common Stock
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High
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Low
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Dividends
Declared
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__________________________________________________
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Fiscal
Year 2002
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Fourth
Quarter……......................................……..
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$ 7.94
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$6.35
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$.05
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Third
Quarter……........................................…….
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8.29
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6.35
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.05
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Second
Quarter……......................................…….
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7.50
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5.35
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.05
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First
Quarter…….........................................…….
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10.18
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5.49
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.05
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Fiscal
Year 2001
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Fourth
Quarter……......................................……..
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$11.61
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$6.29
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$.05
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Third
Quarter……........................................…….
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9.25
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4.75
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.05
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Second
Quarter……......................................…….
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5.81
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2.69
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.05
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First
Quarter…….........................................…….
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3.44
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2.19
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.05
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As
of June 30, 2002, there were approximately 6,025 shareholders, including
approximately 5,075 beneficial holders of DIMON Incorporated's Common
Stock. DIMON pays dividends quarterly.
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We
are subject to certain restrictions on our ability to pay dividends. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations – Factors that May Affect Future Results."
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ITEM
6. SELECTED FINANCIAL DATA
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FIVE-YEAR
FINANCIAL STATISTICS
DIMON Incorporated and Subsidiaries
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Years
Ended June 30
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(in
thousands, except per share amounts
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_____________________________________________________________________________________
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and
number of stockholders)
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2002
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2001
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2000
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1999
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1998
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====================================================================================================================================
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Summary
of Operations
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Sales
and other operating revenues……
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$1,259,720
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$1,400,955
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$1,473,630
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$1,815,223
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$2,171,803
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Restructuring
(recovery), asset
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impairment
and merger costs.....…….
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-
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(1,384)
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(211)
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25,932
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-
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Income
(loss) from continuing
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operations
before cumulative
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effect of
accounting changes………...
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27,476
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24,997
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17,988
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(28,378)
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41,829
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Cumulative
effect of accounting
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changes,
net of income taxes…..…….
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-
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(103)
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-
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-
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-
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Income
from discontinued
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operations,
net of income taxes……..
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-
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-
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-
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22,912
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1,820
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___________________________________________________________________________________________________________________________________
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Net
Income (Loss)
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27,476
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24,894
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17,988
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(5,466)
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43,649
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___________________________________________________________________________________________________________________________________
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Per
Share Statistics
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Basic
Earnings Per Share:
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Income
(loss) from continuing
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|
|
|
|
|
|
operations
before cumulative
|
|
|
|
|
|
|
effect of
accounting changes………...
|
$ .62
|
$ .56
|
$ .40
|
$ (.63)
|
$ .94
|
|
Net
income (loss) ............…………...
|
.62
|
.56
|
.40
|
(.12)
|
.98
|
| |
|
|
|
|
|
|
Diluted
Earnings Per Share:
|
|
|
|
|
|
|
Income
(loss) from continuing
|
|
|
|
|
|
|
operations
before cumulative
|
|
|
|
|
|
|
effect of
accounting changes………...
|
.61*
|
.56*
|
.40*
|
(.63)*
|
.94*
|
|
Net
income (loss)…..............………..
|
.61*
|
.56*
|
.40*
|
(.12)*
|
.98*
|
| |
|
|
|
|
|
|
Dividends
paid…....................………...
|
.20
|
.20
|
.20
|
.
40
|
.66
|
|
Book
value….........................…………
|
9.74
|
9.23
|
9.06
|
8.91
|
9.48
|
|
___________________________________________________________________________________________________________________________________
|
| |
|
|
|
|
|
|
Balance
Sheet Data
|
|
|
|
|
|
|
Working
capital (1).................………...
|
$ 429,059
|
$ 172,863
|
$ 433,735
|
$
443,602
|
$
706,384
|
|
Total
assets…........................………….
|
1,277,090
|
1,182,089
|
1,266,749
|
1,479,194
|
1,797,478
|
|
Revolving
Credit Notes and
|
|
|
|
|
|
|
Other
Long-Term Debt (1).....……….
|
328,883
|
128,641
|
400,856
|
458,180
|
673,699
|
|
Convertible
Subordinated
|
|
|
|
|
|
|
Debentures…………………………..
|
73,328
|
73,328
|
73,328
|
73,328
|
123,328
|
|
Stockholders'
equity….............……….
|
434,663
|
411,539
|
403,504
|
396,539
|
421,930
|
|
___________________________________________________________________________________________________________________________________
|
|
Other
Statistics
|
|
|
|
|
|
|
Common
shares outstanding
|
|
|
|
|
|
|
at
year end…......................………….
|
44,640
|
44,575
|
44,525
|
44,525
|
44,525
|
|
Number
of stockholders
|
|
|
|
|
|
|
at
year end (2)…..................………...
|
6,025
|
4,611
|
4,899
|
5,729
|
4,576
|
|
___________________________________________________________________________________________________________________________________
|
|
* For
1998, 1999, 2000, 2001 and 2002, assumed conversion of Convertible Debentures
at the beginning of the period has
an antidilutive effect
on earnings per share.
|
| |
|
(1) Working
capital increased in fiscal 2002 due to the issuance of long-term debt
which was used to refinance both the
current portion
of long-term debt and other short-term debt. See Note F to the "Notes
to Consolidated Financial
Statements."
|
| |
|
(2) Includes
the number of stockholders of record and non-objecting beneficial owners.
|
| |
| |
| |
|
-11-
|
| |
| |
|
ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS
|
| |
| |
| |
|
General
|
|
==========================================================================================================
|
|
We
believe that we are the world's second largest independent purchaser and
processor of leaf tobacco. DIMON was formed through the April 1, 1995
merger of Dibrell Brothers, Incorporated (established in 1873) and Monk-Austin,
Inc. (established in 1907).
|
|
Historically,
in the United States, we have taken ownership of all green tobaccos purchased,
then processed and resold that tobacco to our customers. Concurrent
with the shift from an auction system to a direct contract buying system
in the United States, beginning with the fiscal 2001 U.S. burley crop,
certain U.S. customers began purchasing green tobacco directly from growers.
In fiscal 2002, we have continued to process these customers' flue-cured
and burley crop tobaccos in our U.S. facilities. As we no longer
take ownership of these tobaccos, we no longer record the tobacco component
of either the revenue associated with its resale or the cost of its purchase.
The absolute value of our gross profit has not been materially affected
by the shift to direct contract buying although sales revenues have been
reduced and the gross margin percentage has increased. As a result
of the significance of the U.S. market change, our consolidated sales
and other operating revenues, cost of sales and gross margin percentages
are not comparable between fiscal 2002 and prior years.
|
|
Our
operating results in fiscal 2001 and 2002 have continued to improve. Significant
factors include improved economic conditions in important non-U.S. markets,
more favorable supply and demand conditions in the tobacco industry overall
and improved operating efficiencies due to our implementation of a number
of cost reduction measures. During fiscal 2001 and 2002, world market
conditions for leaf tobacco slowly, but progressively improved as our
customers' raw material inventories appeared to be reaching equilibrium
with revised production and sales estimates.
|
| |
|
Results
of Operations
|
|
==========================================================================================================
|
|
The
following table expresses items in the Statements of Consolidated Income
and Comprehensive 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 our fiscal year ended June
30.
|
| |
| |
Years
Ended
June 30
|
| |
________________________________________________________
|
| |
2002
|
|
2001
|
|
2000
|
|
|
=========================================================================================================================
|
|
Sales
and other operating revenues….........................………
|
100.0%
|
|
100.0%
|
|
100.0%
|
|
|
Cost
of goods and services….................…………………….
|
83.7
|
|
86.4
|
|
87.3
|
|
|
Selling,
administrative and general expenses….............…….
|
8.7
|
|
7.4
|
|
7.2
|
|
|
Restructuring
recovery…...………………………………….
|
-
|
|
(.1)
|
|
-
|
|
|
Recovery
from litigation settlements........................………..
|
-
|
|
(.3)
|
|
-
|
|
| |
________________________________________________________
|
| |
|
|
|
|
|
|
|
Operating
income…..............................................…………..
|
7.6
|
|
6.6
|
|
5.5
|
|
| |
|
|
|
|
|
|
|
Interest
expense…................................................…………...
|
(3.8)
|
|
(3.8)
|
|
(3.9)
|
|
|
Current
charge derivative financial instruments............…….
|
(.8)
|
|
(.3)
|
|
-
|
|
| |
________________________________________________________
|
| |
|
|
|
|
|
|
|
Income
before income taxes..............………………………
|
3.0
|
|
2.5
|
|
1.6
|
|
| |
|
|
|
|
|
|
|
Income
taxes..........................................………….………..
|
.8
|
|
.7
|
|
.4
|
|
| |
________________________________________________________
|
|
Net
income.................................................………….……..
|
2.2
|
|
1.8
|
|
1.2
|
|
|
_____________________________________________________________________________________________________________________
|
| |
| |
| |
|
-12-
|
| |
| |
|
ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS (Continued)
|
| |
| |
| |
| |
|
Comparison
of the Year Ended June 30, 2002 to the Year Ended June 30, 2001
|
|
==========================================================================================================
|
|
Our
sales and other operating revenues were $1.260 billion, a decrease of
10.1% from $1.401 billion in 2001. The decrease is primarily due
to the shift from auction buying to direct contract buying in the United
States. Sales have also been negatively impacted by decreased demand
for cigar filler tobacco. The decreases have been partially offset
by increases in sales in South America and Europe. In South America,
sales were increased by sales of prior crop tobacco in Argentina and Brazil.
In Europe, an increase in demand for oriental tobaccos resulted
in higher sales.
|
|
Cost
of sales and expenses decreased $150.0 million or 11.4% from $1.314 billion
in 2001 to $1.164 billion in 2002. Gross margin as a percentage
of sales increased from 13.6% in 2001 to 16.3% in 2002. As noted
above, fiscal 2002 cost of sales and gross margin percentages are not
comparable to prior years due to the shift from auction buying to direct
contract buying in the United States.
|
|
Gross
profit increased $14.5 million or 7.6% from $191.0 million in 2001 to
$205.5 million in 2002. Gross profit increases were primarily due
to shipments from Argentina and Brazil carried over from the prior fiscal
year, and increased demand for European oriental tobacco. These
increases in gross profit were partially offset by decreases caused by
lower demand for cigar filler tobacco, and lower gross profits in Africa
due to exchange variations and lower quantities. Pricing of certain
African tobacco was sufficiently increased by exchange variations to offset
lower quantities, leaving sales value largely unchanged, but reducing
gross profit. In the United States decreases in gross profit caused
by lower domestic demand were offset by additional gross profit from sales
of prior crop tobacco. As a result of the economic situation in
Argentina, we recognized $2.9 million in charges primarily in connection
with the devaluation of the Argentine peso. Partially offsetting
these charges were gains of $1.7 million related to the sale of unutilized
Zimbabwe fixed assets. Selling, administrative and general expenses
increased $5.8 million or 5.6% from 2001 to 2002 due primarily to increased
personnel related expenses, and expenses related to improved technology
for information sharing. The increase in personnel related expenses
includes incentive compensation awards that are based on our performance.
|
|
We
recovered $1.4 million of restructuring charges in fiscal 2001. These
recoveries related primarily to sales of fixed assets.
|
|
During
fiscal 2001, a subsidiary in Spain, Compania General de Tabacos de Filipinas
(CdF) settled litigation regarding the alleged breach of contract in CdF's
sale of a building located in Barcelona in 1991. CdF successfully
concluded the lawsuit in February 2001, resulting in income of $3.9 million.
|
|
Interest
expense decreased 10.6% or $5.7 million due to lower average borrowings
as well as lower average rates.
|
|
We
recognized non-cash charges of $10.2 million in 2002 compared to $4.7
million in 2001 from the change in fair value of non-qualifying interest
rate swap instruments as discussed in Note D to the "Notes to Consolidated
Financial Statements."
|
|
The
effective tax rate was 27% in both 2002 and 2001. The effective
tax rate is determined by the distribution of income between taxing jurisdictions.
|
| |
| |
| |
|
-13-
|
| |
| |
|
ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS (Continued)
|
| |
| |
| |
| |
|
Comparison
of the Year Ended June 30, 2001 to the Year Ended June 30, 2000
|
|
==========================================================================================================
|
|
Our
sales and other operating revenues were $1.401 billion, a decrease of
4.9% from $1.474 billion in 2000. The decrease was primarily due
to lower quantities and prices of foreign grown tobacco and lower U.S.
service and processing fees, and was offset partially by higher quantities
and prices for U.S. grown tobacco and higher foreign service and processing
revenues. The decreases due to lower quantities and prices of foreign
grown tobacco were $89.5 million and $9.1 million, respectively. The
increase in revenues from quantities of U.S. grown tobacco was $21.9 million,
net of the decrease in revenues due to the shift to direct contract buying
for certain customers with respect to the burley crop. The increase
in revenues from higher prices of U.S. grown tobacco was $5.7 million.
The decrease in quantities of foreign grown tobacco was primarily
due to the delayed shipments and smaller crop size in South America in
fiscal 2001 and our liquidation of old crop African tobacco in fiscal
2000. The decrease in prices of foreign grown tobacco was primarily
the result of sales of old crop tobacco in Africa and Europe. Service
and processing revenue from U.S. sources decreased $3.7 million primarily
due to lower revenues from the U.S. Flue Cured Stabilization program offset
partially due to changes in customer contracts related to the shift in
the U.S. burley market from an auction system to a direct contract buying
system, which shifts certain sales revenues to processing revenues. Service
and processing revenues from foreign sources increased $1.7 million and
related primarily to fertilizer sales in Brazil.
|
|
Cost
of sales and expenses, before recovery of restructuring and litigation
settlements, decreased $79 million, or 5.7%, from $1.393 billion in 2000
to $1.314 billion in 2001. Most of the decrease is the direct result
of lower sales. Gross profit increased $3.5 million, or 1.9% from
$187.5 million in 2000 to $191.0 million in 2001. Gross margin as
a percentage of sales increased from 12.7% in 2000 to 13.6% in 2001. The
improved gross margin relates to the liquidation of old crop African tobacco
in 2000 and favorable exchange rates in Europe and South America during
2001. Lower selling, general and administrative expenses decreased
cost of sales and expenses $3.1 million primarily due to favorable exchange
variances in Europe, lower travel expenses and lower expenses for rent
and maintenance costs, offset partially by increases in incentive compensation.
|
|
We
recovered $1.4 million of restructuring charges in fiscal 2001 and $0.2
million in fiscal 2000, primarily related to the disposals of fixed assets.
|
|
During
fiscal 2001, a subsidiary in Spain, Compania General de Tabacos de Filipinas
(CdF) settled litigation regarding the alleged breach of contract in CdF's
sale of a building located in Barcelona in 1991. CdF successfully
concluded the lawsuit in February 2001, resulting in income of $3.9 million.
|
|
Interest
expense decreased $4.1 million from $57.7 million in 2000 to $53.6 million
in 2001. A decrease in interest expense of $10.1 million due to
lower average borrowings were partially offset by increases of $6.0 million
due to increases in average interest rates.
|
|
During
the fiscal year ended June 30, 2001 we recognized non-cash charges of
$4.7 million from the change in the fair value of non-qualifying interest
rate swap instruments following the adoption of SFAS No. 133. For
further discussion of the effect of our adoption of SFAS No. 133 see Notes
D and O to the "Notes to Consolidated Financial Statements."
|
|
The
effective tax rate in 2001 was 27% compared to 23% in 2000. The
change in the tax rate is due to changes in the distribution of income
between taxing jurisdictions.
|
| |
| |
|
-14-
|
| |
| |
|
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)
|
2002
|
|
2001
|
|
2000
|
|
|
=========================================================================================================================================
|
|
Cash
and cash equivalents…....................................………….
|
$ 108,991
|
|
$
14,594
|
|
$
27,249
|
|
|
Net
trade receivables…..........................................…………...
|
173,576
|
|
177,733
|
|
222,754
|
|
|
Inventories
and advances on purchases of tobacco….......……
|
478,096
|
|
457,400
|
|
463,801
|
|
|
Total
current assets…............................................……………
|
792,038
|
|
673,279
|
|
753,874
|
|
|
Notes
payable to banks….......................................…………..
|
181,629
|
|
205,823
|
|
198,095
|
|
|
Accounts
payable…..............................................……………
|
76,794
|
|
69,343
|
|
71,554
|
|
|
Total
current liabilities…........................................………….
|
362,979
|
|
500,416
|
|
320,139
|
|
|
Current
ratio…....................................................…………….
|
2.2
to 1
|
|
1.3
to 1
|
|
2.4
to 1
|
|
|
Revolving
Credit Notes and Other Long-Term Debt…....…..
|
7,521
|
|
3,641
|
|
275,856
|
|
|
Convertible
Subordinated Debentures…......................………
|
73,328
|
|
73,328
|
|
73,328
|
|
|
Senior
Notes…....................................................…………….
|
321,362
|
|
125,000
|
|
125,000
|
|
|
Stockholders'
equity…...........................................…………..
|
434,663
|
|
411,539
|
|
403,504
|
|
|
Purchase
of property and equipment…........................……….
|
20,180
|
|
19,061
|
|
11,962
|
|
|
Proceeds
from sale of property and equipment…...........……..
|
5,911
|
|
3,255
|
|
9,559
|
|
|
Depreciation
and amortization…...............................………...
|
41,865
|
|
44,310
|
|
43,986
|
|
|
_______________________________________________________________________________________________________________________________________
|
| |
|
Our
operating profits fluctuate from year to year, primarily due to the effects
of worldwide supply and demand on our inventory positions and other factors.
See "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Factors that May Affect Future Results."
|
|
The
purchasing and processing activities of our business are seasonal. Our
need for capital fluctuates accordingly and, at any one of several seasonal
peaks, our outstanding indebtedness may be significantly greater or less
than at year end. We historically have needed capital in excess
of cash flow from operations to finance inventory and accounts receivable.
We also prefinance tobacco crops in certain foreign countries including
Argentina, Brazil, Greece, Turkey and Indonesia by making cash advances
to growers prior to and during the growing season.
|
|
Our
working capital increased from $173 million at June 30, 2001 to $429 million
at June 30, 2002. Our current ratio was 2.2 to 1 at June 30, 2002
compared to 1.3 to 1 at June 30, 2001. At June 30, 2002, our current
assets had increased $118.8 million and current liabilities had decreased
$137.4 million from June 30, 2001. The $118.8 million increase in
current assets is primarily due to a $94.4 million increase in cash and
a $20.7 million increase in inventories and advances on purchases of tobacco.
Decreases in current liabilities relate primarily to decreases of
$120.9 million in the current portion of long-term debt and $24.2 million
in notes payable to banks, offset partially by an increase of $7.4 million
in accounts payable. The temporary accumulation of cash and the
decreases in the current portion of long-term debt and notes payable to
banks correlate to the $200 million increase in senior note long-term
debt which is described in detail below.
|
|
Cash
flows from operating activities were $67.1 million in 2002 compared to
$149.8 million in 2001 and $177.7 million in 2000. The decrease
from cash flows from operations in 2002 compared to 2001 is primarily
due to decreases of cash provided from customer advances of $72.1 million
and decreases in cash provided by accounts receivable of $25.4 million
partially offset by increases of $23.5 million from changes in deferred
items. The changes in customer advances and accounts receivable
relate primarily to the delay of shipments of tobacco from Brazil from
the fourth quarter of 2001 to the first quarter of 2002. The changes
in deferred items are primarily attributable to the change in the fair
value of non-qualifying interest rate swap instruments and changes in
deferred income taxes.
|
|
The
decrease from cash flows from operations in 2001 compared to 2000 is primarily
due to $141.8 million less cash provided from inventories and advances
on purchases of tobacco in 2001 partially offset by an increase of $74.4
million in cash advanced from customers and a decrease of $31.5 million
in cash used for accounts payable and accrued expenses. The decrease
in cash provided from inventories and advances on purchases in 2001 is
the result of our efforts to lower inventory levels and de-leverage our
balance sheet. The decrease in cash used for accounts payable and
the increase in advances from customers are the result of the delay of
the Brazilian crop and related shipments in 2001.
|
| |
|
-15-
|
| |
|
ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS (Continued)
|
| |
| |
| |
|
Liquidity
and Capital Resources (Continued)
|
|
==========================================================================================================
|
|
Cash
flows used by investing activities were $10.9 million in 2002 and $14.5
million in 2001 compared to cash provided of $3.6 million in 2000. The
decreased cash used in investing activities in 2002 compared to 2001 is
due to higher proceeds from the sale of property and equipment and higher
repayments of notes receivable offset partially by higher purchases of
property and equipment. The decreased cash from investing activities
in 2001 compared to 2000 is primarily due to higher purchases of property
and equipment and lower proceeds from the sale of property and equipment.
|
|
Cash
flows from financing activities provided $36.4 million in 2002 compared
to usage of $147.3 million in 2001 and $172.8 million in 2000. The
provision of cash in 2002 is due to both the $200 million Senior Note
issuance and the $165 million syndicated bank credit facility, which are
described below, offset by repayments related to our previous $250 million
credit facility. The decreased usage in 2001 compared to 2000 is
due to lower net debt repayments.
|
|
At
June 30, 2002, we had seasonally adjusted lines of credit of $450.4 million.
At June 30, 2002, we had borrowed $181.6 million under our $450.4
million lines of credit with a weighted average interest rate of 4.55%.
At June 30, 2002, unused short-term lines of credit amounted to
$210.7 million. Total maximum borrowings, excluding the long-term
credit agreements, during the fiscal year were $509.6 million. At
June 30, 2002, we had $34.0 million of letters of credit outstanding and
an additional $24.1 million of letters of credit lines available.
|
|
We
have summarized in the table below our contractual cash obligations and
other commercial commitments as of June 30, 2002.
|
| |
| |
Payments
/ Expirations by Period
|
| |
_______________________________________________________________________________________________
|
|
Contractual
Obligations and Other Commercial Commitments
|
Total
|
Less
than 1 year
|
1-3
years
|
4-5
years
|
After
5
years
|
|
===============================================================================================================================================
|
|
Long-Term
Debt..............………......…...
|
$398,088
|
$ 584
|
$126,600
|
$73,927
|
$196,977
|
|
Capital
Lease Obligations..................…...
|
6,833
|
858
|
2,418
|
1,426
|
2,131
|
|
Operating
Leases...............……........…...
|
26,103
|
4,633
|
8,846
|
2,400
|
10,224
|
|
Tobacco
Purchase Obligations..………...
|
368,238
|
368,238
|
-
|
-
|
-
|
|
Grower
Financing Guarantees............…..
|
46,230
|
32,185
|
7,130
|
6,915
|
-
|
| |
_______________________________________________________________________________________________
|
|
Total
Contractual Obligations and
|
|
|
|
|
|
|
Other
Commercial Commitments.……
|
$845,492
|
$406,498
|
$144,994
|
$84,668
|
$209,332
|
| |
=============================================================================================
|
| |
|
Long-Term
Debt
|
|
In
October 2001 we commenced a strategic refinancing that expanded our sources
and available amounts of liquidity, extended the average maturity of our
debt portfolio from 3.2 years to 6.4 years, and significantly reduced
our dependence on short-term uncommitted debt facilities.
|
|
On
October 30, 2001 we completed a private issuance of $200 million principal
amount of 9 5/8% Senior Notes due 2011 pursuant to Rule 144A under the
Securities Act of 1933. The financial covenants of the Senior Notes are
substantially similar to those for the existing $125 million principal
amount of 8 7/8% Senior Notes due 2006. The proceeds from the new Note
issuance were used to repay certain existing indebtedness, including all
amounts drawn under our $250 million syndicated credit facility.
|
|
Concurrent
with the completion of the Senior Note issuance, we entered into a derivative
financial instrument to swap the entire $200 million notional amount of
Senior Notes to a floating interest rate equal to LIBOR plus 4.11%, set
six months in arrears. The rate at June 30, 2002 was 6.35%. The
notional amount, maturity, and payment dates of the derivative financial
instrument match those of the Notes. In accordance with Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities," the derivative qualifies for
hedge accounting treatment (see also Notes D and O to the "Notes
to Consolidated Financial Statements").
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-16-
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
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Liquidity and Capital Resources (Continued)
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==========================================================================================================
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In addition, on October 31, 2001, we closed on a three-year $165 million syndicated bank credit facility with a group of six banks. The new syndicated bank credit facility replaced a $250 million two-year facility, which was scheduled to expire June 27, 2002. The financial covenants and other terms and conditions of the new facility are substantially similar to those of the $250 million facility. The new credit facility is subject to certain commitment fees and covenants that, among other things, require us to maintain minimum working capital and tangible net worth amounts, require specific liquidity and long-term solvency ratios, including certain borrowing base restrictions, and restrict acquisitions. We c
ontinuously monitor our compliance with these covenants. The new credit facility's initial term expires on October 31, 2004, and, subject to approval by the lenders, may be extended. The rates of interest are based on our published credit rating and vary according to the type of loan requested by us. 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 (4.75% at June 30, 2002). We pay a commitment fee of 1% 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. Based on forecast working capital needs, we do not anticipate making significant draws on this facility in the near term.
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We have historically financed our operations through a combination of short-term lines of credit, revolving credit arrangements, customer advances, cash from operations and equity and equity-linked securities. At June 30, 2002, we had no material capital expenditure commitments. We believe that these sources of funds will be sufficient to fund our anticipated needs for 2003. There can be no assurance, however, that these sources of capital will be available in the future or, if available, that any such sources will be available on favorable terms.
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Lease Obligations
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Our off-balance sheet financing is not material. We have both capital and operating leases. In accordance with accounting principles generally accepted in the United States, operating leases are not reflected in the accompanying Consolidated Balance Sheet. The operating leases are for land, buildings, automobiles and other equipment; the capital leases are primarily for production machinery and equipment. The capitalized lease obligations are payable through 2009. Operating assets that are of long-term and continuing benefit are generally purchased.
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Tobacco Purchase Obligations and Grower Financing Guarantees
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Tobacco purchase obligations result from contracts with growers, primarily in the United States and Brazil, to buy either specified quantities of tobacco or the grower's total tobacco production. Amounts shown as tobacco purchase obligations are estimates based on projected purchase prices of the future crop tobacco net of advances. Our tobacco purchase obligations do not exceed our projected requirements over the related terms and are in the normal course of business. In certain non-U.S. markets, we provide growers with materials necessary to grow tobacco and may either directly extend or guarantee bank loans to growers to finance the crop. Under longer-term arrangements, we may also finan
ce or guarantee financing on growers' construction of curing barns or other tobacco production assets. We are obligated to repay any guaranteed loan should the grower default. In accordance with accounting principles generally accepted in the United States, tobacco purchase obligations and grower financing guarantees are not reflected in the accompanying Consolidated Balance Sheet.
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-17-
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
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Tax and Repatriation Matters
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==========================================================================================================
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We are subject to income tax laws in each of the countries in which we do business through wholly owned subsidiaries and through affiliates. We make a comprehensive review of the income tax requirements of each of our operations, file appropriate returns and make appropriate income tax planning analyses directed toward the minimization of our 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 corporate levels as well as independent outside advisors in review of the various tax laws and in compliance reporting for
the various operations.
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Dividend distributions are 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. We intend to reinvest such undistributed earnings of foreign subsidiaries indefinitely; accordingly, no provision has been made for U.S. taxes on those earnings. We regularly review the status of the accumulated earnings of each of our U.S. and foreign subsidiaries and reevaluate the aforementioned dividend policy as part of our overall financing plans.
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Critical Accounting Policies and Estimates
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==========================================================================================================
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The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions or conditions.
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Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and potentially result in materially different results under different assumptions and conditions. We believe that our critical accounting policies are those described below.
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Inventories
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Inventories are valued at the lower of cost or market. Inventories are reviewed and adjusted for changes in market value based on assumptions related to future demand and worldwide and local market conditions. If actual demand and market conditions vary from those projected by management, adjustments to lower of cost or market value may be required.
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Income Taxes
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As part of the process of preparing our consolidated financial statements, we are required under the rules of SFAS No. 109, "Accounting for Income Taxes," to estimate income taxes in each of the jurisdictions in which we operate. Accordingly, the process involves estimating actual current tax expense along with assessing temporary differences resulting from differing treatment of items for book and tax purposes. These timing differences result in deferred tax assets and liabilities, which are included in our consolidated balance sheet. We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. We have considered future taxable income and ongoing tax planning strategies in assessin
g the need for the valuation allowance.
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Impairment of Long-Lived Assets and Intangibles
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We review the carrying values of our long-lived assets, including goodwill and identifiable intangibles, whenever events or changes in circumstances indicate that such carrying values may not be recoverable. Unforeseen events and changes in circumstances and market conditions and material differences in the value of intangible assets due to changes in estimates of future cash flows could negatively affect the fair value of our assets and result in an impairment charge. Fair value is the amount at which the asset could be bought or sold in a current transaction between willing parties and may be estimated using a number of techniques, including quoted market prices or valuations by third parties, present value techniques based on estimates of cash flows, or mult
iples of earnings or revenues performance measures. The fair value of the asset could be different using different estimates and assumptions in these valuation techniques.
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-18-
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ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS (Continued)
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Critical
Accounting Policies (Continued)
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==========================================================================================================
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Effective
July 1, 2002, we will adopt Statement of Financial Accounting Standards
No. 142, "Goodwill and Other Intangible Assets," and will be
required to analyze our goodwill for impairment as of July 1, 2002, and
then on an annual basis thereafter.
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Pensions
and Postretirement Healthcare and Life Insurance Benefits
|
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The
valuation of our pension and other postretirement healthcare and life
insurance plans requires the use of assumptions and estimates that are
used to develop actuarial valuations of expenses, assets and liabilities.
These assumptions include discount rates, investment returns, projected
salary increases and benefits and mortality rates. The actuarial assumptions
used in our pension reporting are reviewed annually and compared with
external benchmarks to assure that they accurately account for our future
pension obligations. Changes in assumptions and future investment returns
could potentially have a material impact on our pension expenses and related
funding requirements. See Note K to the "Notes to Consolidated
Financial Statements" for a further discussion of these assumptions
and how a change in certain of these assumptions could affect our earnings.
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Contingencies
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A
contingency is an existing condition, situation, or set of circumstances
involving uncertainty that will ultimately be resolved when one or more
future events occur or fail to occur. Provisions for contingencies
are required to be established when it is probable that the future event
will or will not occur and that its impact can be reasonably estimated.
When we either are not able to make an assessment of an amount or
have determined that the probability of a loss occurring is not likely,
no liability is recorded in the consolidated financial statements for
the contingency. Provisions may be required as circumstances change
with respect to ongoing matters or as new issues emerge.
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The
above listing is not intended to be a comprehensive list of all of our
accounting policies. In many cases, the accounting treatment of a particular
transaction is specifically dictated by generally accepted accounting
principles, with no need for management's judgment in their application.
There are also areas in which management's judgment in selecting any available
alternative would not produce a materially different result. See our consolidated
financial statements and notes thereto, which contain accounting policies
and other disclosures required by generally accepted accounting principles.
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Accounting
Matters
|
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==========================================================================================================
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In
June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities," which provided a
comprehensive and consistent standard for the recognition and measurement
of derivatives and hedging activities. In June 1999, the FASB issued
SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of SFAS No. 133," which
delayed implementation of SFAS No. 133 until years beginning after June
15, 2000. In June 2000, the FASB issued SFAS No. 138, "Accounting
for Certain Derivative Instruments and Certain Hedging Activities,"
which amended SFAS No. 133. Effective July 1, 2000, we adopted SFAS
No. 133 as amended. See Notes D and O to the "Notes to Consolidated
Financial Statements."
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Effective
July 1, 2000, four of our European subsidiaries changed their fiscal year
end from March 31 to June 30. More efficient financial reporting
routines have allowed us to eliminate the traditional fiscal quarter lag
associated with the inclusion of these subsidiaries in our consolidated
financial statements. For the quarter ended September 30, 2000,
income of $284 earned by the affected subsidiaries during the period between
April 1, 2000 and June 30, 2000 has been recognized as the cumulative
effect of an accounting change. See Note O to the "Notes to
Consolidated Financial Statements."
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In
June 2001, the FASB issued SFAS No. 141, "Business Combinations,"
and No. 142, "Goodwill and Other Intangible Assets," effective
for fiscal years beginning after December 15, 2001. Under the new
rules, goodwill and intangible assets deemed to have indefinite lives
will no longer be amortized but will be subject to annual impairment tests
in accordance with the Statements. Other intangible assets will
continue to be amortized over their useful lives.
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-19-
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ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS (Continued)
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Accounting
Matters (Continued)
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==========================================================================================================
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We
intend to apply the new rules of accounting for goodwill and other intangible
assets beginning the first quarter of fiscal 2003. Application of
the non-amortization provisions of the Statement is expected to result
in an increase in net income of approximately $6.2 million ($.14 basic
earnings per share) per year. During fiscal year 2003, we will perform
the first of the required impairment tests of goodwill and indefinite
lived intangible assets as of July 1, 2002. Based on current evaluations,
we do not believe there will be any material impact on our consolidated
financial statements as a result of impairment..
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In
October 2001, FASB issued SFAS No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets." This Statement establishes a single
accounting model for the impairment or disposal of long-lived assets.
As required by SFAS No. 144, we will adopt this new accounting standard
on July 1, 2002. We believe the adoption of SFAS No. 144 will not have
a material impact on our financial statements.
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In
April 2002, FASB issued SFAS No. 145, "Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections."
This statement eliminates an inconsistency between the required
accounting for sale-leaseback transactions and the required accounting
for certain lease modifications that have economic effects that are similar
to sale-leaseback transactions and establishes that gains and losses from
extinguishment of debt should be classified as extraordinary items only
if they meet the criteria of extraordinary. We do not foresee any
material impact as a result of SFAS No. 145.
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In
June 2002, FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." This Statement requires
that a liability for a cost associated with an exit or disposal activity
be recognized when the liability is incurred. SFAS No. 146 also
establishes that fair value is the objective for initial measurement of
the liability. We will adopt this standard by the required December
2002 deadline. We do not believe there will be any material impact
as a result of this statement.
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Factors
that May Affect Future Results
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==========================================================================================================
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The
following important factors, among other things, in some cases have affected,
and in the future could affect, our actual operating and financial results
and could cause our actual results for 2003 and beyond to differ materially
from those expressed in any forward-looking statements made by us. The
terms "we" or "our" in this section refer to DIMON
Incorporated and its consolidated subsidiaries.
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Risks
Relating To Our Operations
|
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==========================================================================================================
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Our
financial results will vary according to growing conditions, customer
indications and other factors, which also reduces your ability to gauge
our performance and increases the risk of an investment in our securities.
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Our
financial results, particularly the quarterly financial results, may be
significantly affected by fluctuations in tobacco growing seasons and
crop sizes. 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 our processing schedule and results
of operations can be significantly altered by these factors.
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Further,
the timing and unpredictability of customer indications, orders and shipments
causes us to keep tobacco in inventory, increases our risk and results
in variations in quarterly and annual financial results. We may
from time to time in the ordinary course of business keep a significant
amount of processed tobacco in inventory for our customers to accommodate
their inventory management and other needs. Sales recognition by
us and our subsidiaries is based on the passage of ownership, usually
with shipment of product. Since individual shipments may represent
significant amounts of revenue, our quarterly and annual financial results
may vary significantly depending on our customers' needs and shipping
instructions. In particular, because significant deliveries of Brazilian
tobacco are made at the end of our 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.
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These
fluctuations result in varying volumes and sales in given periods, which
also reduces your ability to compare our financial results in different
periods or in the same periods in different years.
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-20-
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
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|
Risks Relating To Our Operations (Continued)
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==========================================================================================================
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Our adoption and application of certain standards in financial accounting could cause our annual and quarterly financial results to vary and will reduce your ability to gauge our performance, increasing the risk of an investment in our securities.
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Effective July 1, 2000, we adopted Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities." As a result of adoption of SFAS No. 133, we recognize all derivative financial instruments, such as interest rate swap contracts and foreign exchange contracts, in the consolidated financial statements at fair value regardless of the purpose or intent for holding the instrument. We use forward contracts to mitigate our exposure to changes in foreign currency exchange rates on forecasted transactions. Generally, the effective portion of unrealized gains and losses associated with forward contracts and the intrinsic value of option contracts are deferred as a component of accumulated other c
omprehensive income until the underlying hedge transactions are reported on our consolidated statement of earnings. We have traditionally used interest rate swaps to mitigate our exposure to changes in interest rates related to certain debt agreements. The swaps convert floating-rate debt to fixed-rate debt. Interest rate swaps, to the extent they are effective hedges, are accounted for as cash flow hedges, with the changes in the fair values of these instruments being recorded in accumulated other comprehensive income net of deferred taxes. Changes in the fair values of derivatives not qualifying as hedges are reported in income. As a result of fluctuations in interest rates and volatility in market expectations, the fair market value of interest rate swap instruments can be expected to appreciate or depreciate over time. We plan to continue the practice of economically hedging various components of our debt. However, as a result of SFAS No. 133, certain swap instru
ments have and may continue to create volatility in future reported earnings.
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In addition, we will begin to apply SFAS No. 142, "Goodwill and Other Intangible Assets," as of July 1, 2002 and, as a result, will no longer amortize goodwill and intangible assets, resulting in increased earnings. However, if we determine that there has been a material impairment to goodwill or other intangible assets with indefinite lives, we will recognize the amount of that impairment as a charge to earnings in the applicable reporting period. This could cause variances in our reported earnings in different quarters and years, which may impair your ability to compare results in those periods. See "Management's Discussion and Analysis of Financial Condition and Results of Opera
tions – Accounting Matters" and Notes D and O to the "Notes to Consolidated Financial Statements."
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The shift to direct buying of green tobacco by many of our U.S. customers affects your ability to compare our quarter to quarter or year to year results and could have an adverse effect on our results of operations.
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Comparability of our sales revenues has been affected by the shift to direct contract buying in the United States. Traditionally in the United States, we have taken ownership of all green tobaccos we purchased, then processed and resold that tobacco to our customers. Concurrent with the shift from an auction system to a direct contract buying system in the United States, beginning with the 2000 U.S. burley crop, certain major U.S. customers began purchasing green tobacco directly from the growers. We no longer take ownership of that tobacco and may no longer record revenues associated with its resale. With the shift to direct contract buying, we estimate that our sales and other operating revenues have decreased $200 million to $210 million in fisca
l year 2002 from fiscal year 2001. We expect to continue to earn and record service revenues for the processing of all such tobaccos for our customers. Our gross profit has not been materially affected by the shift to direct contract buying by our customers, although sales revenues have been reduced and our profit margin has improved. Although we expect to purchase the majority of our 2002 flue-cured and burley crop requirements through direct contract buying, we will still need to maintain buying personnel in the residual auction markets, which could affect our ability to manage our costs.
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Our extension of credit to tobacco growers could have an adverse effect on our financial condition.
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We make advances to tobacco growers in many countries to finance their growing of tobacco for sale to us. Crop advances to growers are generally secured by the grower's agreement to deliver green tobacco. In the event of crop failure, recovery of advances could be delayed until deliveries of future crops or indefinitely. The temporary or permanent loss of these advances to growers could have a material adverse effect on our financial condition or results of operations.
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-21-
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
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Risks Relating To Our Operations (Continued)
|
|
==========================================================================================================
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Competition could adversely affect our operating results.
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The leaf tobacco industry is highly competitive. Competition among leaf tobacco merchants is based primarily on the price charged for products and services as well as the firm's ability to meet customer specifications in the buying, processing and financing of tobacco. In addition, there is competition in all countries to buy the available tobacco. There are three major global competitors in the leaf tobacco industry, and they are dependent upon a few large tobacco manufacturing customers. The number of manufacturers has declined in recent years due to consolidation. The loss of, or a substantial reduction in the services provided to, any large or significant customer could have a material adverse effect on our financial condition or results o
f operations.
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Our reliance on a small number of significant customers may adversely affect our results of operations.
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Our customers are manufacturers of cigarette and tobacco products in several countries around the world. Several of these customers individually account for a significant portion of our sales in a normal year. Of our consolidated tobacco sales in 2002, 2001 and 2000, approximately 35%, 36% and 30%, respectively, represented sales to various tobacco customers which we believe are owned by or under common control of Japan Tobacco Inc. or Philip Morris Companies Inc. In addition, tobacco product manufacturers are currently experiencing a period of consolidation, and further consolidation among our customers could decrease such customer's demand for our leaf tobacco or processing services. The loss of any one or more of such customers could have a material ad
verse effect on our financial condition or results of operations.
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We face increased risks of doing business due to the extent of our international operations.
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We do business in over 40 countries, many of which do not have stable economies or governments. Our 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 on repatriation of earnings or proceeds from liquidated assets of foreign subsidiaries. These risks are exacerbated in countries where we have advanced substantial sums or guaranteed local loans or lines of credit in substantial amounts for the purchase of tobacco from growers.
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We have expanded our international operations in areas where the export of tobacco has increased due to increased demand for lower priced tobacco. We have significant investments in our purchasing, processing and exporting operations in Brazil, Malawi, Tanzania, Zimbabwe, Turkey, Italy and Thailand. In particular, we derive significant operating profit from our operations in Brazil and Zimbabwe. In recent years, these countries' economic problems have received wide publicity related to devaluation of the local currency and inflation. While devaluation can affect our purchase costs of tobacco and our processing costs, it has not and is not expected to affect adversely our ability to export t
obacco from these countries.
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Zimbabwe remains in a period of civil unrest in combination with a deteriorating economy. Should the current political situation continue, we could experience disruptions and delays associated with our Zimbabwe operations. The government’s forced land resettlement program has caused disruptions to both tobacco and food farm production in Zimbabwe. The volume of the current year tobacco crop, which was being marketed through auction at June 30, 2002, is estimated to decline by approximately 19% in comparison to the prior year crop. Further volume declines of as much as 40% have been forecast by some industry sources in connection with next year’s tobacco crop. If the politica
l and economic situation in Zimbabwe was to significantly deteriorate, or if tobacco crop volumes were to continue declining at a significant rate, our ability to recover our assets there could be impaired. Our Zimbabwe subsidiary has long-lived assets of approximately $49.4 million as of June 30, 2002.
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Argentina is in a period of political and economic uncertainty. We purchase Argentine tobacco for export. We recognized $2.9 million in charges primarily in connection with the devaluation of the Argentine peso. We do not own any processing assets in Argentina and do not foresee any additional material effects on our operations there. However, we do continue to closely monitor events associated with the instability in Argentina and their possible impact on future results.
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In addition, the September 11, 2001 terrorist attacks on the World Trade Center in New York and the Pentagon in Washington, D.C. and the resulting international war on terrorism, have caused uncertainty and volatility in the U.S. and international economies and financial markets. There can be no assurance that there will not be further terrorists attacks against the United States or U.S. businesses operating abroad. We cannot predict what effect these events, including the retaliatory measures that have been taken, and those that may be taken in the future, may have on global economic conditions, the financial markets, or on our business and results of operations.
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-22-
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
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Risks Relating To Our Operations (Continued)
|
|
==========================================================================================================
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We do business in countries that have tax regimes in which the rules are not clear or not consistently applied. This is especially true with regard to international transfer pricing. We have not had any significant exposure to date as a result of these risks.
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Fluctuations in foreign currency exchange and interest rates could adversely affect our results of operations.
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Our business is generally conducted in U.S. dollars, as is the business of the tobacco industry as a whole. 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. We attempt to minimize such currency risks by matching the timing of our working capital borrowing needs against the tobacco purchasing and processing funds requirements in the currency of the country where the tobacco is grown. Fluctuations in the value of foreign currencies can significantly affect our operating results.
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In addition, the devaluation of foreign currencies, particularly Asian and Eastern European currencies, has resulted and may in the future result in reduced purchasing power from customers in these areas. We may incur a loss of business as a result of the devaluation of these currencies now or in the future.
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Various outstanding interest-bearing instruments are sensitive to changes in interest rates. With respect to our variable-rate debt, a 10 percent change in interest rates would have the effect of increasing or decreasing interest expense by $1.2 million.
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| |
Our indentures and credit agreements contain, and in the future could contain additional, covenants and tests that would limit our ability to take actions or cause us to take actions we may not normally take.
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Our existing indentures and credit agreements contain a number of significant covenants. These covenants will limit our ability to, among other things:
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·
| borrow additional money;
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·
| make capital expenditures and other investments;
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·
| merge, consolidate or dispose of our assets;
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·
| acquire assets in excess of certain dollar amounts; and
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·
| grant liens on our assets.
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Our credit facility and existing indentures require, and any future indenture may require, us to meet certain financial tests. The failure to comply with these covenants and tests would cause a default under those agreements. A default, if not waived, could result in the debt under our credit facility and indentures becoming immediately due and payable and could result in a default or acceleration of our other indebtedness with cross-default provisions. If this occurs, we may not be able to pay our debt or borrow sufficient funds to refinance it. Even if new financing is available, it may not be on terms that are acceptable to us. Complying with these covenants and tests may
cause us to take actions that we otherwise would not take or not take actions that we otherwise would take.
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Provisions in our indentures restrict our ability to make payments, including payments of dividends to our shareholders.
|
Under the terms of the Indentures relating to our 8 7/8% Senior Notes due 2006 and 9 5/8% Senior Notes due 2011, we will not be permitted to make certain payments that are restricted by such Indentures, including cash dividends on our common stock. We generally may make such restricted payments, provided that (1) we are not in default under the Indentures, (2) we are able to incur at least $1.00 of additional indebtedness under a consolidated interest coverage ratio test set forth in the Indentures, and (3) the aggregate amount of the payments to be made is less than the total of (x) $20.0 million, (y) 50% of our consolidated net income for the period from April 1, 1996, through the end of our most recent fiscal quarter and (z) the net cash proceeds from ou
r sale of any equity securities or debt securities that are converted into equity securities. At June 30, 2002 and 2001, we were permitted to make restricted payments, including cash dividends on our common stock, of up to $46.4 million and $36.1 million, respectively.
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-23-
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
|
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| |
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Risks Relating to the Tobacco Industry
|
|
==========================================================================================================
|
Reductions in demand for consumer tobacco products could adversely affect our results of operations.
|
The tobacco industry, both in the United States and abroad, continues to face a number of issues that may reduce the consumption of cigarettes and adversely affect our business, sales volume, results of operations, cash flows and financial condition.
|
These issues, some of which are more fully discussed below, include:
|
| |
·
| governmental actions seeking to ascribe to tobacco product manufacturers liability for adverse health effects associated with smoking and exposure to environmental tobacco smoke;
| |
·
| smoking and health litigation against tobacco product manufacturers;
| |
·
| possible tax increases on consumer tobacco products;
| |
·
| current and potential actions by state attorneys general to enforce the terms of the Master Settlement Agreement ("MSA") between state governments in the United States and tobacco product manufacturers;
| |
·
| governmental and private bans and restrictions on smoking;
| |
·
| actual and proposed price controls and restrictions on imports in certain jurisdictions outside the United States;
| |
·
| restrictions on tobacco product manufacturing, marketing, advertising and sales;
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·
| the diminishing social acceptance of smoking;
| |
·
| increased pressure from anti-smoking groups; and
| |
·
| other tobacco product legislation that may be considered by Congress, the states and other countries.
| |
Tobacco product manufacturer litigation may reduce demand for our services.
|
Our primary customers, the leading cigarette manufacturers, face thousands of lawsuits brought throughout the United States and, to a lesser extent, the rest of the world. The effects of the lawsuits on our customers could reduce their demand for tobacco from us. These lawsuits have been brought by plaintiffs, including (1) individuals and classes of individuals alleging personal injury, (2) governments (including governmental and quasi-governmental entities in the United States and abroad) seeking recovery of health care costs allegedly caused by cigarette smoking, and (3) other groups seeking recovery of health care expenditures allegedly caused by cigarette smoking, including third-party health care payors, such as unions and health maintenance org
anizations. Damages claimed in some of the smoking and health cases range into the billions of dollars. In September 1999, the United States Department of Justice filed a lawsuit against the leading cigarette manufacturers, seeking to recover billions of dollars. Additional plaintiffs continue to file lawsuits.
|
There have been several jury verdicts in tobacco product litigation during the past three years. For example, in July 2000, the jury in the Engle smoking and health class action in Florida returned a verdict against the cigarette manufacturer defendants for approximately $145 billion in punitive damages. The Engle case is being appealed. More recently, a California jury in an individual smoker case returned a verdict against Philip Morris Incorporated for $3 billion in punitive damages. The judge in the case reduced the award to $100 million. Philip Morris Incorporated has filed an appeal in this case.
|
In November 1998, certain United States tobacco product manufacturers entered into the MSA with 46 states, the District of Columbia, the Commonwealth of Puerto Rico, Guam, the United States Virgin Islands, American Samoa and the Northern Marianas to settle asserted and unasserted health care cost recovery and other claims. These manufacturers had previously settled similar claims brought by Mississippi, Florida, Texas and Minnesota and an environmental tobacco smoke and health class action brought on behalf of airline flight attendants. The MSA has received final judicial approval in all 52 settling jurisdictions.
|
| |
-24-
|
| |
| |
|
ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS (Continued)
|
| |
| |
| |
|
Risks
Relating to the Tobacco Industry (Continued)
|
|
==========================================================================================================
|
|
Key
provisions of the MSA are as follows:
|
| |
|
·
|
payments
of approximately $206 billion over 25 years from the cigarette manufacturers
to the states;
|
|
|
·
|
marketing
and advertising restrictions, including bans on cartoon characters, point-of-sale
advertising, billboards, bus and taxi placards and sponsorships of most
sporting events by brand names;
|
|
|
·
|
disbanding
the Tobacco Institute, the Council for Tobacco Research and the Council
for Indoor Air Research;
|
|
|
·
|
eliminating
vending machine sales and requiring that all tobacco products be behind
a counter; and
|
|
|
·
|
making
payments of $1.7 billion for educational efforts about the dangers of
smoking and to discourage youth smoking.
|
|
|
The
MSA and other state settlement agreements include provisions relating
to advertising and marketing restrictions, public disclosure of industry
documents, limitations on challenges to tobacco product control and underage
use laws, lobbying activities and other provisions.
|
|
It
is not possible to predict the outcome of the litigation pending against
the U.S. cigarette manufacturers, or the extent to which these actions
might adversely affect our customers, their demand for our product and
our business generally. Unfavorable outcomes in pending cases could
encourage the commencement of additional litigation. Adverse legislative,
regulatory, political and other developments concerning cigarette smoking
and the tobacco product industry continue to receive widespread media
attention. These developments may negatively affect the perception
of potential judges and juries with respect to the tobacco product industry,
possibly affecting the outcome of litigation. Although we are not
a party to the litigation against the tobacco product manufacturers, the
Master Settlement Agreement or the State Settlement Agreements, determinations
that are adverse to the manufacturers could adversely affect their purchases
as our customers.
|
| |
|
Legislative
and regulatory initiatives could reduce consumption of consumer tobacco
products and demand for our services.
|
|
In
recent years, members of Congress have introduced legislation, some of
which has been the subject of hearings or floor debate, that would subject
cigarettes to various regulations under the Department of Health and Human
Services or regulation under the Consumer Products Safety Act, establish
anti-smoking educational campaigns or anti-smoking programs, or provide
additional funding for governmental anti-smoking activities, further restrict
the advertising of cigarettes, including requiring additional warnings
on packages and in advertising, provide that the Federal Cigarette Labeling
and Advertising Act and the Smoking Education Act could not be used as
a defense against liability under state statutory or common law, allow
state and local governments to restrict the sale and distribution of cigarettes,
and eliminate or reduce the tax deductibility of tobacco product advertising.
It is not possible to determine the outcome of these regulatory
initiatives, or to predict what, if any, other foreign or domestic governmental
legislation or regulations will be adopted relating to the manufacturing,
advertising, sale or use of cigarettes, or to the tobacco industry generally.
However, if any or all of the foregoing were to be implemented,
our business, volume, results of operations, cash flows and financial
condition could be materially adversely affected.
|
|
Reports
with respect to the harmful physical effects of cigarette smoking have
been publicized for many years, and the sale, promotion and use of cigarettes
continue to be subject to increasing governmental regulation. Since
1964, the Surgeon General of the United States and the Secretary of Health
and Human Services have released a number of reports linking cigarette
smoking with a broad range of health hazards, including various types
of cancer, coronary heart disease and chronic lung disease, and recommending
various governmental measures to reduce the incidence of smoking. The
1988, 1990, 1992 and 1994 reports focus upon the "addictive"
nature of cigarettes, the effects of smoking cessation, the decrease in
smoking in the United States, the economic and regulatory aspects of smoking
in the Western Hemisphere, and cigarette smoking by adolescents, particularly
the "addictive" nature of cigarette smoking in adolescence.
|
| |
|
-25-
|
| |
| |
|
ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS (Continued)
|
| |
| |
| |
|
Risks
Relating to the Tobacco Industry (Continued)
|
|
==========================================================================================================
|
|
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 United States. 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 other countries. Further, the World Health Organization and
its member states are negotiating a proposed Framework Convention for
Tobacco Control, which would require signatory nations to enact legislation
that would require, among other things, specific actions to prevent youth
smoking; restrict or prohibit tobacco product marketing; inform the public
about the health consequences of smoking and the benefits of quitting;
regulate the content of tobacco products; impose new package warning requirements
including the use of pictorial or graphic images; eliminate cigarette
smuggling and counterfeit cigarettes; restrict smoking in public places;
increase and harmonize cigarette excise taxes; abolish duty-free tobacco
sales; and permit and encourage litigation against tobacco product manufacturers.
It is impossible to predict the extent to which these and any additional
restrictions might affect our business.
|
|
In
addition, from time to time, the leaf tobacco industry has been the subject
of government investigations regarding trade practices. In September
1998, we and several of our employees received subpoenas relating to an
investigation by the Antitrust Division of the United States Department
of Justice into certain buying practices alleged to have occurred in the
industry. We have received notice that this investigation has been
concluded without any action taken against us. In addition, we are
currently defending a class action brought on behalf of U.S. tobacco growers
alleging that cigarette manufacturers and certain leaf tobacco merchants
violated U.S. antitrust laws by bid-rigging at tobacco auctions and conspiring
to undermine the tobacco quota and price support program. See Note
N to the "Notes to Consolidated Financial Statements."
|
|
Due
to the present litigation, regulatory and legislative environment, a substantial
risk exists that past growth trends in tobacco product sales may not continue
and that existing sales may decline. It is not possible to predict
the extent to which any of these issues may affect our business.
|
| |
| |
|
ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE
ABOUT
MARKET
RISK
|
| |
|
The
information required by this item, to the extent applicable, is included
in "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Risk Relating To Our Operations" above and
in Note D to the "Notes to Consolidated Financial Statements."
|
| |
| |
| |
|
-26-
|
| |
|
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
|
STATEMENTS OF CONSOLIDATED INCOME AND COMPREHENSIVE INCOME
DIMON Incorporated and Subsidiaries
|
| |
Years
Ended June 30
|
| |
_____________________________________________________
|
(in thousands, except per share data)
| 2002
| 2001
| 2000
|
|
==============================================================================================================================
|
Sales and other operating revenues…................................………..
| $1,259,720
| $1,400,955
| $1,473,630
|
Cost of goods and services sold…....................................………...
| 1,054,255
| 1,209,931
| 1,286,128
|
| |
_____________________________________________________
|
| | 205,465
| 191,024
| 187,502
|
Selling, administrative and general expenses…....................……
| 109,363
| 103,537
| 106,657
|
Restructuring recovery..........…………………………………….
| -
| (1,384)
| (211)
|
Recovery from litigation settlements...............................…………
| -
| (3,923)
| -
|
| |
_____________________________________________________
|
| | Operating Income…................................................…………..
| 96,102
| 92,794
| 81,056
|
Interest expense…......................................................……………
| 47,877
| 53,574
| 57,704
|
Current charge derivative financial instruments.............…………
| 10,202
| 4,680
| -
|
| |
_____________________________________________________
|
Income before income taxes, equity in net
| | | |
| | income (loss) of investee companies and
| 38,023
| 34,540
| 23,352
|
| | cumulative effect of accounting changes……………………..
| | | |
Income taxes…...............................................……………………
| 10,202
| 9,272
| 5,381
|
| |
_____________________________________________________
|
Income before equity in net income (loss) of investee
| | | |
| | companies and cumulative effect of accounting changes…….
| 27,821
| 25,268
| 17,971
|
Equity in net income (loss) of investee companies (net
| | | |
| | of income taxes)…...................................................………….
| (345)
| (271)
| 17
|
| | |
_____________________________________________________
|
Income before cumulative effect of accounting changes…………
| 27,476
| 24,997
| 17,988
|
| | | | | |
Cumulative effect of accounting changes, net of income taxes:
| | | |
| | Reporting period of subsidiaries…..............…….........……….
| -
| 284
| -
|
| | Derivative financial instruments….....................……….……..
| -
| (387)
| -
|
| |
_____________________________________________________
|
NET INCOME….............................................………….………..
| $ 27, 476
| $ 24,894
| $ 17,988
|
| | |
===================================================
|
Other Comprehensive Income:
| | | |
| | Net Income…................................................…………………
| $ 27,476
| $ 24,894
| $ 17,988
|
| | Equity Currency Conversion Adjustment…...…….………….
| 1,105
| (2,776)
| (2,576)
|
| | Additional Minimum Pension
| | | |
| | | Liability Adjustment ……………………….………….….
| (1,204)
| (478)
| 456
|
| | Reclassification of Derivative Financial
| | | |
| | | Instruments into Earnings ..………………….………….…
| 4,192
| -
| -
|
| | Derivative Financial Instruments Adjustment….……………..
| -
| (4,828)
| -
|
| | |
_____________________________________________________
|
TOTAL COMPREHENSIVE INCOME…...............…………….
| $ 31, 569
| $ 16,812
| $ 15,868
|
| |
===================================================
|
Basic Earnings Per Share
| | | |
| | Income before cumulative effect of accounting changes………
| $.62
| $.56
| $.40
|
| | Cumulative effect of accounting changes..........……....………
| -
| -
| -
|
| | |
_____________________________________________________
|
| | Net Income…................................................………………….
| $.62
| $.56
| $.40
|
| | |
===================================================
|
Diluted Earnings Per Share
| | | |
| | Income before cumulative effect of accounting changes………
| $.61*
| $.56*
| $.40*
|
| | Cumulative effect of accounting changes.…….............………
| -
| -
| -
|
| | |
_____________________________________________________
|
| | Net Income…............………...................................…………..
| $.61*
| $.56*
| $.40*
|
| | |
===================================================
|
|
_____________________________________________________________________________________________________________________________
|
See notes to consolidated financial statements
|
* Assumed conversion of Convertible Debentures at the beginning of the period has an antidilutive
effect on earnings per share.
|
-27-
|
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
|
| |
CONSOLIDATED BALANCE SHEET
DIMON Incorporated and Subsidiaries
|
| |
| |
June
30
| |
| |
______________________________________________
| |
(in thousands)
| 2002
| | 2001
| |
|
==============================================================================================================================
|
ASSETS
| | | | |
Current assets
| | | | |
Cash and cash equivalents…...........................................………….
| $ 108,991
| | $ 14,594
| |
Notes receivable…......................................................……………..
| 4,400
| | 4,991
| |
Trade receivables (net of allowances of $1,935 in
| | | | |
2002 and $1,230 in 2001)…....................................……………..
| 173,576
| | 177,733
| |
Inventories:
| | | | |
Tobacco…..............................................................………………
| 391,112
| | 398,236
| |
Other….................................................................……………….
| 19,215
| | 18,354
| |
Advances on purchases of tobacco…................................………...
| 67,769
| | 40,810
| |
Current deferred and recoverable income taxes….................……..
| 9,736
| | 4,816
| |
Prepaid expenses and other assets….................................………..
| 17,239
| | 13,745
| |
| |
______________________________________________
| |
Total current assets…..........................................………………
| 792,038
| | 673,279
| |
| |
______________________________________________
| |
| | | |
Investments and other assets
| | | | |
Equity in net assets of investee companies….......................………
| 1,072
| | 2,358
| |
Other investments…....................................................…………….
| 1,941
| | 2,970
| |
Notes receivable…......................................................…………….
| 5,354
| | 8,795
| |
Other…....................................................................……………….
| 24,566
| | 24,613
| |
| |
______________________________________________
| |
| | 32,933
| | 38,736
| |
| |
______________________________________________
| |
| | | |
Intangible assets
| | | | |
Goodwill……………………………………………………………
| 151,772
| | 158,945
| |
Production and supply contracts…...................................…………
| 3,938
| | 7,085
| |
Pension asset…..........................................................……………...
| 1,664
| | 938
| |
| |
______________________________________________
| |
| | 157,374
| | 166,968
| |
| |
______________________________________________
| |
Property, plant and equipment
| | | | |
Land…....................................................................………………..
| 18,676
| | 19,127
| |
Buildings…...............................................................………………
| 178,987
| | 181,641
| |
Machinery and equipment…...........................................………….
| 210,769
| | 208,618
| |
Allowances for depreciation…........................................………….
| (151,148)
| | (139,078)
| |
| |
______________________________________________
| |
| | 257,284
| | 270,308
| |
| |
______________________________________________
| |
| | | | | |
Deferred taxes and other deferred charges…..........................………
| 37,461
| | 32,798
| |
| |
______________________________________________
| |
| | $1,277,090
| | $1,182,089
| |
| | | | | |
|
______________________________________________________________________________________________________________________________
|
| |
| |
| |
| |
| |
| |
| |
-28-
|
| |
|
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA (Continued)
|
| |
|
CONSOLIDATED
BALANCE SHEET
DIMON Incorporated and Subsidiaries
|
| |
| |
June
30
|
|
| |
______________________________________________
|
|
|
(in
thousands)
|
2002
|
|
2001
|
|
|
==============================================================================================================================
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
Notes
payable to banks…...............................................…………...
|
$ 181,629
|
|
$ 205,823
|
|
|
Accounts
payable:
|
|
|
|
|
|
Trade….................................................................……………….
|
55,277
|
|
51,511
|
|
|
Officers
and employees…...........................................…………..
|
13,553
|
|
10,030
|
|
|
Other….................................................................……………….
|
7,964
|
|
7,802
|
|
|
Advances
from customers…...........................................…………..
|
67,616
|
|
72,612
|
|
|
Accrued
expenses….....................................................…………….
|
24,797
|
|
22,306
|
|
|
Income
taxes…...........................................................……………..
|
11,015
|
|
8,325
|
|
|
Long-term
debt current…..............................................……………
|
1,128
|
|
122,007
|
|
| |
______________________________________________
|
|
|
Total
current liabilities…..........................................…………..
|
362,979
|
|
500,416
|
|
| |
______________________________________________
|
|
|
Long-term
debt
|
|
|
|
|
|
Revolving
Credit Notes and Other….................................………...
|
7,521
|
|
3,641
|
|
|
Convertible
Subordinated Debentures….............................……….
|
73,328
|
|
73,328
|
|
|
Senior
Notes (Net of Fair Value Adjustment
|
|
|
|
|
|
of
($3,638) in 2002 and $0 in 2001) ……………………………..
|
321,362
|
|
125,000
|
|
| |
______________________________________________
|
|
| |
402,211
|
|
201,969
|
|
| |
______________________________________________
|
|
| |
|
|
|
Deferred
credits:
|
|
|
|
|
|
Income
taxes…...........................................................……………...
|
9,243
|
|
6,380
|
|
|
Compensation
and other…...................................………………….
|
67,205
|
|
60,825
|
|
| |
______________________________________________
|
|
| |
76,448
|
|
67,205
|
|
| |
______________________________________________
|
|
|
Minority
interest in subsidiaries….......................................…………
|
789
|
|
960
|
|
| |
______________________________________________
|
|
| |
|
|
|
|
|
Commitments
and contingencies…......................................………...
|
-
|
|
-
|
|
| |
______________________________________________
|
|
| |
|
|
|
Stockholders'
equity
|
2002
|
|
2001
|
|
|
|
|
|
|
Preferred
Stock—no par value:
|
|
|
|
|
|
|
|
|
|
Authorized
shares….................……..
|
10,000
|
|
10,000
|
|
|
|
|
|
|
Issued
shares….......................………
|
-
|
|
-
|
|
-
|
|
-
|
|
|
Common
Stock—no par value:
|
2002
|
|
2001
|
|
|
|
|
|
|
Authorized
shares….................……..
|
125,000
|
|
125,000
|
|
|
|
|
|
|
Issued
shares….......................………
|
44,640
|
|
44,575
|
|
182,768
|
|
182,284
|
|
|
Retained
earnings…..................................................………………
|
264,148
|
|
245,601
|
|
|
Accumulated
other comprehensive income…....................……….
|
(12,253)
|
|
(16,346)
|
|
| |
______________________________________________
|
|
| |
434,663
|
|
411,539
|
|
| |
______________________________________________
|
|
| |
$1,277,090
|
|
$1,182,089
|
|
|
______________________________________________________________________________________________________________________________
|
| |
|
|
See
notes to consolidated financial statements
|
| |
| |
|
-29-
|
| |
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
|
| |
STATEMENT OF STOCKHOLDERS' EQUITY
DIMON Incorporated and Subsidiaries
|
| |
| | Accumulated
Other Comprehensive Income
| |
| |
______________________________________________
| |
|
(in thousands,
except per share amounts)
|
Common
Stock
|
Retained
Earnings
|
Equity
Currency
Conversions
|
Additional
Minimum
Pension
Liability
|
Derivative Financial Instruments
|
Total
Stockholders'
Equity
|
|
==============================================================================================================================
|
| | |
Balance, June 30, 1999….…
| $182,143
| $220,540
| $ (5,112)
| $(1,032)
| $ -
| $396,539
|
Net income for the year……
| | 17,988
| | | | 17,988
|
Cash dividends - $.20
| | | | | | |
| | per share…..............…….
| | (8,903)
| | | | (8,903)
|
Conversion of foreign
| | | | | | |
| | currency financial
| | | | | | |
| | statements….............…...
| | | (2,576)
| | | (2,576)
|
Adjustment in the minimum
| | | | | | |
| | pension liability…......….
| | | | 456
| | 456
|
| | |
____________________________________________________________________________________________
|
| | |
Balance, June 30, 2000….…
| $182,143
| $229,625
| $ (7,688)
| $ (576)
| $ -
| $403,504
|
Net income for the year……
| | 24,894
| | | | 24,894
|
Cash dividends - $.20
| | | | | | |
| | per share…..............…….
| | (8,918)
| | | | (8,918)
|
Issue of 50,000 shares of
| | | | | | |
| | restricted stock………….
| 141
| | | | | 141
|
Conversion of foreign
| | | | | | |
| | currency financial
| | | | | | |
| | statements….............…...
| | | (2,776)
| | | (2,776)
|
Adjustment in the minimum
| | | | | | |
| | pension liability…......….
| | | | (478)
| | (478)
|
Adjustment in derivative
| | | | | | |
| | financial instruments…...
| | | | | (4,828)
| (4,828)
|
| | |
____________________________________________________________________________________________
|
| | |
Balance, June 30, 2001….…
| $182,284
| $245,601
| $ (10,464)
| $(1,054)
| $(4,828)
| $411,539
|
Net income for the year……
| | 27,476
| | | | 27,476
|
Cash dividends - $.20
| | | | | | |
| | per share…..............…….
| | (8,929)
| | | | (8,929)
|
Issue of 65,000 shares of
| | | | | | |
| | restricted stock………….
| 484
| | | | | 484
|
Conversion of foreign
| | | | | | |
| | currency financial
| | | | | | |
| | statements….............…...
| | | 1,105
| | | 1,105
|
Adjustment in the minimum
| | | | | | |
| | pension liability…......….
| | | | (1,204)
| | (1,204)
|
Reclassification of
| | | | | | |
| | derivative financial
| | | | | | |
| | instruments
| | | | | | |
| | into earnings….………...
| | | | | 4,192
| 4,192
|
| | |
____________________________________________________________________________________________
|
Balance, June 30, 2002…….
| $182,768
| $264,148
| $ (9,359)
| $(2,258)
| $ (636)
| $434,663
|
|
______________________________________________________________________________________________________________________________
|
| |
See notes to consolidated financial statements
|
| |
| |
| |
-30-
|
| |
| |
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA (Continued)
|
|
| |
|
|
| |
STATEMENT
OF CONSOLIDATED CASH FLOWS
|
|
| |
DIMON
Incorporated and Subsidiaries
|
|
| |
|
|
| |
|
|
| |
|
Years
Ended June 30
|
|
| |
|
____________________________________________________
|
|
| |
(in
thousands)
|
2002
|
2001
|
2000
|
|
| |
========================================================================================================================================
|
|
| |
Operating
activities
|
|
|
|
|
| |
Net
Income…...........................................…………………....
|
$ 27,476
|
$ 24,894
|
$ 17,988
|
|
| |
Adjustments
to reconcile net income
|
|
|
|
|
| |
to
net cash provided by operating activities:
|
|
|
|
|
| |
Depreciation
and amortization…....................................….
|
41,865
|
44,310
|
43,986
|
|
| |
Restructuring
recovery…......……………………………..
|
-
|
(1,384)
|
(211)
|
|
| |
Recovery
from litigation settlement…............................….
|
-
|
(3,923)
|
-
|
|
| |
Deferred
items................................................................….
|
8,822
|
(14,675)
|
(605)
|
|
| |
Loss
(gain) on foreign currency transactions….............….
|
4,411
|
3,621
|
(554)
|
|
| |
Loss
(gain) on disposition of fixed assets…..................….
|
(902)
|
230
|
(300)
|
|
| |
Bad
debt expense…........................................................….
|
477
|
70
|
534
|
|
| |
Decrease
in accounts receivable…................………….…..
|
8,048
|
33,467
|
30,931
|
|
| |
Decrease
(increase) in inventories and advances
|
|
|
|
|
| |
on
purchases of tobacco…............................................….
|
(17,108)
|
(1,464)
|
140,355
|
|
| |
Decrease
(increase) in current deferred
|
|
|
|
|
| |
and
recoverable taxes…...……………………………….
|
(4,856)
|
5,068
|
40
|
|
| |
Decrease
(increase) in prepaid expenses.........................….
|
(5,673)
|
(4,376)
|
3,442
|
|
| |
Increase
(decrease) in accounts payable and
|
|
|
|
|
| |
accrued
expenses….……………………………………..
|
9,363
|
(4,823)
|
(36,414)
|
|
| |
Increase
(decrease) in advances from customers………….
|
(6,796)
|
65,312
|
(9,081)
|
|
| |
Increase
(decrease) in income taxes…...........................…..
|
1,608
|
3,730
|
(12,450)
|
|
| |
Other…...........................................................................…..
|
362
|
(213)
|
56
|
|
| |
|
____________________________________________________
|
|
| |
Net
cash provided by operating activities…...............…..
|
67,097
|
149,844
|
177,717
|
|
| |
|
____________________________________________________
|
|
| |
|
|
|
| |
Investing
activities
|
|
|
|
|
| |
Purchase
of property and equipment…..............................….
|
(20,180)
|
(19,061)
|
(11,962)
|
|
| |
Proceeds
from sale of property and equipment…..............….
|
5,911
|
3,255
|
9,559
|
|
| |
Payments
received on notes receivable and
|
|
|
|
|
| |
receivable
from investees…..........................................…..
|
5,442
|
4,014
|
10,636
|
|
| |
Issuance
of notes receivables………………………………..
|
(1,884)
|
(2,694)
|
(9,385)
|
|
| |
Other…………………………………………………………
|
(199)
|
27
|
4,768
|
|
| |
|
____________________________________________________
|
|
| |
Net
cash provided (used) by investing activities…......……
|
(10,910)
|
(14,459)
|
3,616
|
|
| |
_______________________________________________________________________________________________________________________________________
|
|
| |
|
|
| |
See
notes to consolidated financial statements
|
|
| |
|
|
| |
|
|
| |
-31-
|
|
| |
|
|
| |
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA (Continued)
|
|
| |
|
|
| |
STATEMENT
OF CONSOLIDATED CASH FLOWS (Continued)
|
|
| |
DIMON
Incorporated and Subsidiaries
|
|
| |
|
|
| |
|
|
| |
|
Years
Ended June 30
|
|
| |
|
____________________________________________________
|
|
| |
(in
thousands)
|
2002
|
2001
|
2000
|
|
| |
========================================================================================================================================
|
|
| |
Financing
activities
|
|
|
|
|
| |
Net
change in short-term borrowings…............................…..
|
$ (30,129)
|
$ (14,134)
|
$(202,981)
|
|
| |
Proceeds
from long-term borrowings….............................….
|
266,253
|
146,584
|
444,248
|
|
| |
Repayment
of long-term borrowings…..............................….
|
(183,251)
|
(270,813)
|
(405,175)
|
|
| |
Debt
issuance cost………………...…..............................…..
|
(7,566)
|
-
|
-
|
|
| |
Cash
dividends paid to DIMON Incorporated stockholders...
|
(8,929)
|
(8,918)
|
(8,903)
|
|
| |
|
____________________________________________________
|
|
| |
Net
cash provided (used) by financing activities.................
|
36,378
|
(147,281)
|
(172,811)
|
|
| |
|
____________________________________________________
|
|
| |
Effect
of exchange rate changes on cash…............................…
|
1,832
|
(759)
|
(2,724)
|
|
| |
|
____________________________________________________
|
|
| |
Increase
(decrease) in cash and cash equivalents…...........……
|
94,397
|
(12,655)
|
5,798
|
|
| |
Cash
and cash equivalents at beginning of year….............……
|
14,594
|
27,249
|
21,451
|
|
| |
|
____________________________________________________
|
|
| |
Cash
and cash equivalents at end of year…..........……....
|
$ 108,991
|
$ 14,594
|
$ 27,249
|
|
| |
|
==================================================
|
|
| |
|
|
|
|
|
| |
Other
information:
|
|
|
|
|
| |
Cash
paid during the year:
|
|
|
|
|
| |
Interest…........................................................…………….
|
$ 42,049
|
$ 51,603
|
$ 61,816
|
|
| |
Income
taxes….................................................……………
|
12,301
|
14,609
|
15,460
|
|
| |
_______________________________________________________________________________________________________________________________________
|
|
| |
|
|
| |
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
|
|
Consolidation
|
|
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 under the equity
method of accounting.
|
| |
|
Revenue
Recognition
|
|
Sales
recognition is based on the passage of ownership, usually with shipment
of product.
|
| |
|
Cash
and Cash Equivalents
|
|
Cash
equivalents are defined as temporary investments of cash with maturities
of less than 90 days.
|
| |
|
Inventories
|
|
Inventories
are valued at the lower of cost or market. Inventories are reviewed and
adjusted for changes in market value based on assumptions related to future
demand and worldwide and local market conditions. If actual demand and
market conditions vary from those projected by management, adjustments
to lower of cost or market value may be required.
|
|
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. Tobacco inventory is substantially finished goods.
Interest and other carrying charges on the inventories are expensed
in the period in which they are incurred.
|
| |
|
Intangible
Assets
|
|
Goodwill
has been amortized on a straight-line basis over periods ranging from
10 to 40 years through June 30, 2002. The accumulated amortization
at June 30, 2002, is $36,973 ($29,468 at June 30, 2001).
|
|
Production
contracts include the cost allocated to contracts associated with growers
for the future supply of their annual tobacco production. The production
contracts are being amortized primarily on a straight-line basis over
ten years. Reductions in accumulated amortization as of June 30,
2002 for production contracts that became fully amortized during the year
totaled $28,000. The accumulated amortization on production contracts
at June 30, 2002 is $4,609 ($29,463 at June 30, 2001).
|
|
Effective
July 1, 2002, the Company will adopt Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets" and
will be required to analyze its goodwill for impairment as of July 1,
2002, and then on an annual basis thereafter.
|
| |
|
Property,
Plant and Equipment
|
|
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, machinery and equipment and technological
equipment are depreciated over ranges of 20 to 40 years, 5 to 10 years
and 3 to 5 years, respectively. The consolidated financial statements
do not include fully depreciated assets.
|
|
The
carrying value of long-lived assets is periodically reviewed for impairment,
including a determination of whether events or circumstances have changed
that may indicate that an impairment of value exists, based upon an assessment
of future operations. If an evaluation is required, the projected
future undiscounted operating cash flows of the related business unit
is compared to the carrying value of the long-lived assets to determine
if a writedown to fair value is required. The Company believes that
no impairment of long-lived assets existed at June 30, 2002. The
Company also evaluates the remaining useful lives to determine whether
events and circumstances warrant revised estimates of such lives. Depreciation
expense for 2002, 2001 and 2000 was $29,654, $28,513 and $27,301, respectively.
|
| |
| |
|
-33-
|
| |
|
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA (Continued)
|
| |
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DIMON Incorporated and Subsidiaries
(in thousands)
|
| |
| |
| |
|
Note
A – Significant Accounting Policies (Continued)
|
|
Income
Taxes
|
|
The
Company accounts for income taxes in accordance with SFAS No. 109, "Accounting
for Income Taxes." Under SFAS No. 109, deferred tax assets
and liabilities are determined based on the difference between the financial
statements and tax bases of assets and liabilities, using enacted tax
rates in effect for the year in which the differences are expected to
reverse.
|
| |
|
Accounting
Pronouncements
|
|
In
June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities," which provided a
comprehensive and consistent standard for the recognition and measurement
of derivatives and hedging activities. In June 1999, the FASB issued
SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities – Deferral of the Effective Date of SFAS No. 133,"
which delayed implementation of SFAS No. 133 until years beginning after
June 15, 2000. In June 2000, the FASB issued SFAS No. 138, "Accounting
for Certain Derivative Instruments and Certain Hedging Activities,"
which amended SFAS No. 133. Effective July 1, 2000, the Company
adopted SFAS No. 133 as amended. See Notes D and O to the "Notes
to Consolidated Financial Statements."
|
|
Effective
July 1, 2000, four of the Company's European subsidiaries changed their
fiscal year end from March 31 to June 30. More efficient financial
reporting routines have allowed the Company to eliminate the traditional
fiscal quarter lag associated with the inclusion of these subsidiaries
in its consolidated financial statements. For the quarter ended
September 30, 2000, income of $284 earned by the affected subsidiaries
during the period between April 1, 2000 and June 30, 2000 has been recognized
as the cumulative effect of an accounting change. See Note O to
the "Notes to Consolidated Financial Statements."
|
|
In
June 2001, the FASB issued SFAS No. 141, "Business Combinations,"
and No. 142, "Goodwill and Other Intangible Assets," effective
for fiscal years beginning after December 15, 2001. Under the new
rules, goodwill and intangible assets deemed to have indefinite lives
will no longer be amortized but will be subject to annual impairment tests
in accordance with the Statements. Other intangible assets will
continue to be amortized over their useful lives.
|
|
The
Company intends to apply the new rules of accounting for goodwill and
other intangible assets beginning the first quarter of fiscal 2003. Application
of the non-amortization provisions of the Statement is expected to result
in an increase in net income of approximately $6.2 million ($.14 basic
earnings per share) per year. During fiscal year 2003, the Company
will perform the first of the required impairment tests of goodwill and
indefinite lived intangible assets as of July 1, 2002. Based on current
evaluations, the Company does not believe there will be any material impact
on its consolidated financial statements as a result of impairment.
|
|
In
October 2001, FASB issued SFAS No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets." This Statement establishes a single
accounting model for the impairment or disposal of long-lived assets.
As required by SFAS No. 144, the Company will adopt this new accounting
standard on July 1, 2002. The Company believes the adoption of SFAS No.
144 will not have a material impact on its financial statements.
|
|
In
April 2002, FASB issued SFAS No. 145, "Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections."
This statement eliminates an inconsistency between the required
accounting for sale-leaseback transactions and the required accounting
for certain lease modifications that have economic effects that are similar
to sale-leaseback transactions and establishes that gains and losses from
extinguishment of debt should be classified as extraordinary items only
if they meet the criteria of extraordinary. The Company does not
foresee any material impact as a result of SFAS No. 145.
|
|
In
June 2002, FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." This Statement requires
that a liability for a cost associated with an exit or disposal activity
be recognized when the liability is incurred. SFAS No. 146 also
establishes that fair value is the objective for initial measurement of
the liability. The Company will adopt this standard by the required
December 2002 deadline. The Company does not believe there will
be any material impact as a result of this statement.
|
| |
| |
| |
|
-34-
|
| |
| |
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
|
| |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DIMON Incorporated and Subsidiaries
(in thousands)
|
| |
| |
| |
Note A – Significant Accounting Policies (Continued)
|
Earnings Per Share
|
Basic earnings per share are computed by dividing earnings by the weighted average number of common shares outstanding. The 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 and restricted shares outstanding.
|
| |
DIMON and Subsidiaries Computation of Earnings Per Common Share
|
| |
Years
Ended June 30
|
| |
___________________________________________________
|
(in thousands, except per share data)
| 2002
| 2001
| 2000
|
|
==============================================================================================================================
|
BASIC EARNINGS
|
Income before cumulative effect of accounting changes.....................
| $27,476
|
$24,997
| $17,988
|
Cumulative effect of accounting changes............................………….
| -
| (103)
| -
|
| |
___________________________________________________
|
Net Income………………………………………………………...…
| $27,476
| $24,894
| $17,988
|
| |
=================================================
|
SHARES
| | | |
Weighted Average Number of Shares Outstanding…................…….
| 44,525
| 44,525
| 44,525
|
| |
=================================================
|
| | |
BASIC EARNINGS PER SHARE
| | | |
Income before cumulative effect of accounting changes.....................
| $.62
| $.56
| $.40
|
Cumulative effect of accounting changes............................….. …….
| -
| -
| -
|
| ______
| ______
| ______
|
Net Income…………………………………………………………...
| $.62
| $.56
| $.40
|
| | =====
| =====
| =====
|
| | | | |
DILUTED EARNINGS
| | | |
Income before cumulative effect of accounting changes.....................
| $27,476
| $24,997
| $17,988
|
Add after tax interest expense applicable to 6 ¼%
| | | |
Convertible Debentures issued April 1, 1997…........………………
| - *
| - *
| - *
|
| |
___________________________________________________
|
Income before cumulative effect of accounting changes.....................
| 27,476
| 24,997
| 17,988
|
Cumulative effect of accounting changes............................………….
| -
| (103)
| -
|
| |
___________________________________________________
|
Net Income as Adjusted….......................................………………….
| $27,476 *
| $24,894 *
| $17,988 *
|
| |
=================================================
|
SHARES
| |
Weighted average number of common shares outstanding….......…...
| 44,525
| 44,525
| 44,525
|
Restricted shares issued (2002 and 2001) and shares
| | | |
applicable to stock options, net of shares assumed to
| | | |
be purchased from proceeds at average market price………………
| 522
| 313
| -
|
Assuming conversion of 6 ¼% Convertible
| | | |
Debentures at the beginning of the period…..............……………...
| - *
| - *
| - *
|
| |
___________________________________________________
|
Average Number of Shares Outstanding…............................………..
| 45,047 *
| 44,838 *
| 44,525 *
|
| |
=================================================
|
| |
-35-
|
| |
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
|
| |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DIMON Incorporated and Subsidiaries
(in thousands)
|
| |
| |
| |
Note A – Significant Accounting Policies (Continued)
|
DIMON and Subsidiaries Computation of Earnings Per Common Share
|
| |
Years
Ended June 30
|
| |
___________________________________________________
|
(in thousands, except per share data)
| 2002
| 2001
| 2000
|
|
===================================================================================================================================
|
DILUTED EARNINGS PER SHARE
| | | |
Income before cumulative effect of accounting changes.....................
| $.61 *
| $.56 *
| $.40 *
|
Cumulative effect of accounting changes............................………….
| -
| -
| -
|
| | ______
| ______
| ______
|
Net Income as Adjusted…................................……….......………….
| $.61 *
| $.56 *
| $.40 *
|
|
____________________________________________________________________________________________________________________________________
|
| |
* Assumed conversion of Convertible Debentures at the beginning of the period has an antidilutive effect on
earnings per share.
|
| |
Reclassifications
|
Certain prior year amounts have been reclassified to conform to the current year presentation.
|
| |
Note B – Restructuring and Asset Impairment Costs
|
In 1995, the Company commenced various activities to restructure its worldwide operations and accrued certain reserves in connection with this restructuring plan. The reserve balance at June 30, 2002, 2001 and 2000 is $4,406, $5,216 and $5,661, respectively, and is included in accrued expenses and deferred compensation and other. The balance relates to employee separations and decreased by $810 in 2002, $445 in 2001 and $1,146 in 2000 due to cash payments.
|
During 1999, the Company made a writedown for impairment of $10,120 for assets identified as available-for-sale in accordance with SFAS No. 121, "Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed of." The market value of the assets written down was approximately $24,240. The Company has recovered no restructuring charges in fiscal 2002 and $1,384 and $211 in fiscal 2001 and 2000, respectively, primarily related to the disposals of fixed assets. Of the original $24,240, no assets remain available for sale at June 30, 2002.
|
| |
Note C – Investee Companies and Related Parties
|
The combined summarized information for investee companies follows:
|
| | 2002
| 2001
| 2000
|
|
===================================================================================================================================
|
Current assets…..............................…………………………………….
| $4,093
| $4,388
| $3,274
|
Non-current assets…..............................……………………………….
| 1,295
| 1,732
| 1,999
|
Current liabilities…..............................………………………………...
| 3,137
| 2,673
| 522
|
Non-current liabilities…..............................……………………………
| 18
| 23
| 38
|
Interest of other shareholders…..............................……………………
| 833
| 1,189
| 1,537
|
Net sales…..............................…………………………………………
| 6,248
| 4,018
| 5,718
|
Gross profit…..............................………………………………………
| 590
| 947
| 1,393
|
Net loss…..............................……………………………………..……
| (207)
| (421)
| (140)
|
|
____________________________________________________________________________________________________________________________________
|
| |
Balances with related parties, primarily unconsolidated, affiliated companies, are as follows:
|
| | 2002
| 2001
| 2000
|
|
===================================================================================================================================
|
Trade receivables…................................................…………………….
| $2,597
| $3,301
| $10,081
|
Advances on purchases of tobacco…...........................……………...…
| (112)
| 13
| (146)
|
Trade payables and advances from customers…..............……………..
| 1,518
| 1,836
| 2,631
|
Other income: Interest….........................................………………...…
| 81
| 145
| 578
|
Net sales…..........................................................………………………
| -
| 64
| 522
|
Purchases of tobacco…...........................................…………………....
| 2,584
| 6,542
| 47,441
|
|
____________________________________________________________________________________________________________________________________
|
| |
-36-
|
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
|
| |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DIMON Incorporated and Subsidiaries
(in thousands)
|
| |
| |
| |
Note C – Investee Companies and Related Parties (Continued)
|
During fiscal 2002, 2001 and 2000, the Company paid $2.8 million, $2.4 million and $1.9 million, respectively, in leasing arrangements for storage facilities and equipment. The primary owners of the lessor are current and former employees of a subsidiary of the Company in Zimbabwe.
|
| |
Note D – Derivative and Other Financial Instruments
|
The carrying value and estimated fair value of the Company's long-term debt are $403,339 and $402,977, respectively, as of June 30, 2002 and $203,976 and $193,562, respectively, as of June 30, 2001.
|
Effective July 1, 2000, the Company adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." As a result of adoption of SFAS No. 133, the Company recognizes all derivative financial instruments, such as interest rate swap contracts and foreign exchange contracts, in the consolidated financial statements at fair value regardless of the purpose or intent for holding the instrument. Changes in the fair value of derivative financial instruments are either recognized periodically in income or in shareholders' equity as a component of comprehensive income depending on whether the derivative financial instrument qualifies for hedge accounting, and if so, whether it qu
alifies as a fair value hedge or cash flow hedge. Generally, changes in fair values of derivatives accounted for as fair value hedges are recorded in income along with the portions of the changes in the fair values of the hedged items that relate to the hedged risk(s). Changes in fair values of derivatives accounted for as cash flow hedges, to the extent they are effective as hedges, are recorded in other comprehensive income net of deferred taxes. Changes in fair values of derivatives not qualifying as hedges are reported in income.
|
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.
|
During the fiscal year ended June 30, 2002, accumulated other comprehensive income increased by $4,192, net of deferred taxes of $2,112 due to the reclassification of net losses on derivative instruments to earnings. Of this amount, $994, net of taxes of $535, was reclassified into earnings as a result of the discontinuance of a cash flow hedge that had been deemed effective. The remaining $3,198 was reclassified into earnings, primarily as cost of goods and services sold, due to the fulfillment of transactions. During the fiscal year ended June 30, 2001, accumulated other comprehensive income decreased by $4,828, net of deferred taxes of $2,423, related specifically to accumulated unrealized
net losses on forward contracts and interest rate swap agreements accounted for as cash flow hedges.
|
Concurrent with the private issuance of $200 million principal amount of 9 5/8% Senior Notes on October 30, 2001, discussed in Note F to the "Notes to Consolidated Financial Statements," the Company entered into a derivative financial instrument to swap the entire $200 million notional amount of Senior Notes to a floating interest rate. This swap is accounted for as a fair value hedge with the change in the fair value of the 9 5/8% Senior Notes, as well as the change in the fair value of the derivative financial instrument being recognized in earnings during the current period. As of June 30, 2002 the fair value of the derivative financial instrument decreased the Senior Notes liability by $3
,638 with an increase to the corresponding liability included in Deferred Credits – Compensation and Other.
|
SFAS No. 133 eliminates special hedge accounting if the swap agreements do not meet certain criteria, thus requiring the Company to reflect all changes in their fair value in its current earnings. For the fiscal years ended June 30, 2002 and 2001, the Company recognized non-cash charges of $10,202 and $4,680, respectively, from the change in the fair value of these interest rate swap agreements.
|
At June 30, 2002, the Company expects to reclassify approximately $636 of net losses on derivative instruments, net of deferred taxes of $310, from accumulated other comprehensive income to earnings during the next twelve months due to the actual fulfillment of forecasted transactions. The Company is hedging its exposure to the variability of future cash flows for forecasted transactions over various time periods not exceeding ten years.
|
The fair value estimates presented herein are based on information available to management and were determined using quoted market prices and the discounted value of future cash flows.
|
| |
| |
| |
-37-
|
| |
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
|
| |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DIMON Incorporated and Subsidiaries
(in thousands)
|
| |
| |
| |
Note E – Short-Term Borrowing Arrangements
|
Excluding all long-term credit agreements, the Company has lines of credit arrangements with a number of banks under which the Company may borrow up to a total of $450,412 at June 30, 2002 ($532,510 at June 30, 2001). These lines bear interest at a weighted average rate of 4.55% for the year ending June 30, 2002. Unused lines of credit at June 30, 2002, amounted to $210,696 ($268,709 at June 30, 2001), net of $58,087 of available letters of credit lines. Certain non-U.S. borrowings of approximately $19,671 have inventories of approximately $19,250 as collateral. There were no compensating balance agreements at June 30, 2002 or 2001.
|
| |
Note F – Long-Term Debt
|
Such debt is comprised of:
|
| | 2002
| | 2001
|
| | ____________________________
| | _________________________
|
| | Maturing
within
One Year
| Maturing
after
One Year
| | Maturing
within
One Year
| Maturing
after
One Year
|
======================================================================================================
|
Senior Notes (Net of Fair Value Adjustment
| | | | | |
of ($3,638) in 2002 and $0 in 2001)………….
| $ -
| $321,362
| | $ -
| $125,000
|
Convertible Subordinated Debentures…..………
| -
| 73,328
| | -
| 73,328
|
Revolving Credit Notes……………….….……..
| -
| -
| | 120,000
| -
|
Other Long-Term Debt…...................…………..
| 584
| 2,814
| | 1,883
| 3,477
|
| | ________________________________________________________________
|
| | $ 584
| $397,504
| | $121,883
| $201,805
|
Capitalized Lease Obligations…...........…………
| 544
| 4,707
| | 124
| 164
|
| | ________________________________________________________________
|
| | $ 1,128
| $402,211
| | $122,007
| $201,969
|
___________________________________________________________________________________________________________________
|
| |
Payments of the debt are scheduled as follows:
|
| | Senior
Notes
| Convertible
Subordinated
Debentures
| Revolving
Credit
Notes
| Other
Long-Term
Debt
| Total
|
========================================================================================================
|
2003…….................…….
| $ -
| $ -
| $ -
| $ 584
| $ 584
|
2004…….................…….
| -
| -
| -
| 629
| 629
|
2005…….................…….
| -
| -
| -
| 580
| 580
|
2006…….................…….
| 125,000
| -
| -
| 392
| 125,392
|
2007…….................…….
| -
| 73,328
| -
| 364
| 73,692
|
2008…….................…….
| -
| -
| -
| 235
| 235
|
Later years…….........……
| 196,362
| -
| -
| 614
| 196,976
|
| | _______________________________________________________________________________________
|
| | $321,362
| $73,328
| $ -
| $3,398
| $398,088
|
___________________________________________________________________________________________________________________
|
| |
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 rank equally in right of payment with all other unsubordinated indebtedness (including the $165 million 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 N
otes 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
|
| |
-38-
|
| |
|
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA (Continued)
|
| |
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DIMON Incorporated and Subsidiaries
(in thousands)
|
| |
| |
|
Note
F – Long-Term Debt (Continued)
|
|
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) $20,000, (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, 2002, the
Company was permitted to make restricted payments, including cash dividends
on its Common Stock, of up to $46,410.
|
|
On
April 1, 1997, DIMON Incorporated issued $73,328 of 6¼% Convertible
Subordinated Debentures due on March 31, 2007 (the "Debentures"),
net of the cancellation of $50,000 in fiscal 1999 settlement of the Intabex
litigation. The Debentures are convertible into approximately 2,549
shares of the Company's Common Stock at a 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.
|
|
On
October 30, 2001, the Company completed a private issuance of $200 million
principal amount of 9 5/8% Senior Notes due 2011 pursuant to Rule 144A
under the Securities Act of 1933. The financial covenants of the
Senior Notes are substantially similar to those for the existing $125
million principal amount of 8 7/8% Senior Notes due 2006. The proceeds
from the new Note issuance were used to repay certain existing indebtedness
of the Company, including all amounts drawn under the Company's $250 million
syndicated credit facility.
|
|
Concurrent
with the completion of the Senior Note issuance, the Company entered into
a derivative financial instrument to swap the entire $200 million notional
amount of Senior Notes to a floating interest rate equal to LIBOR plus
4.11%, set six months in arrears. The rate at June 30, 2002 was 6.35%.
The notional amount, maturity, and payment dates of the derivative financial
instrument match those of the Notes. In accordance with Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities," the derivative qualifies for
hedge accounting treatment, as discussed in Note D to the "Notes
to Consolidated Financial Statements."
|
|
In
addition, on October 31, 2001, the Company closed on a three-year $165
million syndicated bank credit facility with a group of six banks. The
new syndicated bank credit facility replaced a $250 million two-year facility,
which was scheduled to expire June 27, 2002. The financial covenants and
other terms and conditions of the new facility are substantially similar
to those of the $250 million facility. 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, including
certain borrowing base restrictions, and restrict acquisitions. The Company
continuously monitors its compliance with these covenants. The new credit
facility's initial term expires on October 31, 2004, and, subject to approval
by the lenders, may be extended. The rates of interest are based on the
Company's published credit rating and vary according to 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 (4.75% at June 30, 2002). The
Company pays a commitment fee of 1% per annum on any unused portion of
the facility.
|
|
Other
long-term debt consists of obligations of DIMON Incorporated and the tobacco
operations in Brazil, Italy and Macedonia, and is payable at interest
rates varying from 2.50% to 12.75%.
|
| |
| |
| |
|
-39-
|
| |
| |
|
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA (Continued)
|
| |
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DIMON Incorporated and Subsidiaries
(in thousands)
|
| |
| |
| |
|
Note
G – Long-Term Leases
|
|
The
Company has both capital and operating leases. The operating leases
are for land, buildings, automobiles and other equipment; the capital
leases are primarily for production machinery and equipment. The
capitalized lease obligations are payable through 2009. Interest
rates are imputed at 4.625% to 12.50%. Amortization is included
in depreciation expense. Minimum future obligations and capitalized
amounts are as follows:
|
| |
| |
Capital
Leases
|
Operating
Leases
|
|
===========================================================================================================================================
|
|
2003………....................................................................………………………………
|
$ 858
|
$ 4,633
|
|
2004………....................................................................………………………………
|
842
|
3,946
|
|
2005………....................................................................………………………………
|
815
|
3,630
|
|
2006………....................................................................………………………………
|
761
|
1,270
|
|
2007………....................................................................………………………………
|
713
|
1,279
|
|
Remaining…………………………………………………………………………….
|
2,844
|
11,345
|
| |
____________________________________________
|
| |
$6,833
|
$26,103
|
| |
|
=======
|
|
Less
amount representing interest and deposits……….................……………………
|
1,607
|
|
| |
______
|
|
|
Present
value of net minimum lease payments………..................……………………
|
$5,226
|
|
|
Less
current portion of obligations under capital leases……….......………………….
|
482
|
|
| |
______
|
|
|
Long-term
obligations under capital leases………......................…………………….
|
$4,744
|
|
| |
======
|
|
|
Capitalized
amounts:
|
|
|
|
Buildings………...............……………………………………………………………
|
$ 81
|
|
|
Machinery
and equipment, primarily vehicles………...............…………………….
|
5,199
|
|
|
Accumulated
amortization……….......................................…………………………
|
(445)
|
|
| |
______
|
|
| |
$4,835
|
|
| |
=======
|
|
|
Note
H – 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, 2002, no shares had been issued.
|
| |
| |
| |
|
-40-
|
| |
| |
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
|
| |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DIMON Incorporated and Subsidiaries
(in thousands)
|
| |
| |
| |
Note I – Stock Incentive Plan
|
The Incentive Plan authorizes the issuance of up to a total of 4.266 million shares of common stock. This amount is 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 or shares issued in the event of a stock dividend, stock split, subdivision or combination or other similar change in the capital structure of the Company, or any other event that, in the judgment of the Executive Compensation Committee (the "Committee"), necessitates adjustment of the maximum number of shares available. The Incentive Plan authorizes the issuance of various stock incentives to any employee of the Company or any subsidiary and any member of the Board that the Committee determines ha
s contributed to the profits or growth of the Company or its affiliates, including nonqualified or incentive stock options, stock appreciation rights, shares of restricted stock, performance shares and incentive awards.
|
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 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. On August 23, 2001 and August 24, 2000, the Committee awarded 65 thousand shares
and 50 thousand shares, respectively, of restricted stock to selected executive officers. The shares pay dividends and have ordinary voting rights but are forfeitable if employment terminates before the three-year vesting period. As of June 30, 2002, 115 thousand shares of restricted stock had been awarded under the Incentive Plan. Performance shares granted under the Incentive Plan are an award, stated with respect to a specified number of shares of common stock that entitles the holder to receive shares of common stock, cash or a combination of both. As of June 30, 2002, no performance shares had been awarded under the Incentive Plan. Incentive awards granted under the Incentive Plan allow for selected individuals to receive cash payments upon attainment of stated performance objectives determined by the Committee. No awards may be granted under the Incentive Plan, as amended, after February 8, 2015.
|
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.
|
At the 1998 Annual Stockholders' Meeting, shareholders approved the DIMON Incorporated Directors' Stock Plan (the "Directors' Plan"), which replaced the existing Nonemployee Directors' Stock Option Plan effective January 1, 1999. The Directors' Plan is administered by the Executive Committee of the Board of Directors, with all grants approved by the Board. The Directors' Plan authorizes the grant of common stock, performance shares and options to purchase common stock to any director who is not an employee of the Company (or any subsidiary) and any person who provides services to the Company (or any subsidiary) in a capacity other than as an employee if the Executive Committee, with the approval of
the Board, determines that such person has contributed significantly or can be expected to contribute significantly to the profits or growth of the Company. 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 70 thousand shares. Options granted under the Directors' Plan are immediately exercisable. As of June 30, 2002, options to purchase 60 thousand shares had been granted and were outstanding under the Directors' Plan and options to purchase 24 thousand shares had been granted and were outstanding under the Nonemployee Directors' Stock Option Plan.
|
The Company accounts for 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 $218 credit to income in 2002, $807 charge to income in 2001 and no change to income in 2000 arising from adjustments in fair market values of the SARs.
|
As permitted by SFAS No. 123 "Accounting for Stock-Based Compensation," 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 per share amounts 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). These pro forma amounts may not be representative of future disclosures because the estimated fair value of the stock options is amortized to expense over the vesting period, and additional options
may be granted in future years.
|
| |
-41-
|
| |
|
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA (Continued)
|
| |
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DIMON Incorporated and Subsidiaries
(in thousands)
|
| |
| |
|
Note
I – Stock Incentive Plan (Continued)
|
| |
2002
|
2001
|
2000
|
|
==========================================================================================================================
|
|
Net
income as reported……...................……………………….
|
$27,476
|
$24,894
|
$17,988
|
|
Net
income Pro Forma……....................……………………….
|
26,734
|
24,486
|
16,445
|
|
Earnings
per share, basic as reported……..........……………….
|
.62
|
.56
|
.40
|
|
Earnings
per share, basic Pro Forma……..........………………..
|
.60
|
.55
|
.37
|
|
_________________________________________________________________________________________________________________
|
| |
|
Information
with respect to options and SARs follows:
|
| |
| |
2002
|
2001
|
2000
|
|
============================================================================================================================
|
|
Options
and SARs outstanding at beginning of year……..……
|
3,253
|
2,818
|
2,705
|
|
Options
and SARs granted……................................………….
|
670
|
664
|
231
|
|
Options
and SARs exercised……..............................…………
|
-
|
-
|
-
|
|
Options
and SARs cancelled……..............................…………
|
(207)
|
(229)
|
(118)
|
| |
______________________________________________________
|
|
Options
and SARs outstanding at end of year…….........………
|
3,716
|
3,253
|
2,818
|
| |
______________________________________________________
|
|
SARs
included as outstanding at end of year……...........………
|
637
|
537
|
494
|
| |
______________________________________________________
|
|
Options
available for future grants at end of year…….....………
|
1,377
|
1,905
|
2,390
|
| |
______________________________________________________
|
|
Options
and SARs exercisable at end of year…….........………..
|
2,277
|
1,825
|
1,584
|
| |
______________________________________________________
|
|
Option
and SAR market prices per share:
|
|
|
|
|
Date
of grant
|
(at
lowest market price)……..........………..
|
$ 7.44
|
$ 2.81
|
$
3.94
|
|
|
(at
highest market price)……..........……….
|
7.44
|
6.00
|
4.63
|
|
Exercised
|
(at
lowest market price)……...........……….
|
-
|
-
|
-
|
| |
(at
highest market price)……..........……….
|
-
|
-
|
-
|
|
Cancelled
|
(at
lowest market price)……...........……….
|
2.81
|
4.63
|
4.63
|
| |
(at
highest market price)……..........………
|
22.31
|
22.31
|
23.38
|
|
_____________________________________________________________________________________________________________________________
|
| |
|
Weighted
average option exercise price information for the years 2002, 2001 and
2000 follows:
|
| |
| |
2002
|
2001
|
2000
|
|
============================================================================================================================
|
|
Outstanding
at July 1…….......................................…………..
|
$12.03
|
$14.63
|
$15.40
|
|
Granted
during the year……...................................…………..
|
7.44
|
2.86
|
4.62
|
|
Exercised
during the year…….................................………….
|
-
|
-
|
-
|
|
Outstanding
at June 30…….....................................………….
|
11.08
|
12.03
|
14.63
|
|
Exercisable
at June 30…….....................................…………..
|
14.93
|
17.47
|
16.83
|
|
_____________________________________________________________________________________________________________________________
|
| |
| |
| |
|
-42-
|
| |
|
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA (Continued)
|
| |
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DIMON Incorporated and Subsidiaries
(in thousands)
|
| |
| |
|
Note
I – Stock Incentive Plan (Continued)
|
|
Option
groups outstanding at June 30, 2002 and related weighted average price
and life information follows:
|
| |
| |
Grant
Date
|
Options
Outstanding
|
Options
Exercisable
|
Exercise
Price
|
Remaining
Life
(Years)
|
|
=====================================================================================================================================================
|
| |
1992……................………………..
|
150
|
150
|
$22.00
|
-
|
| |
1993……................………………..
|
131
|
131
|
16.67
|
1
|
| |
1994……................………………..
|
137
|
137
|
11.50
|
2
|
| |
1995……................………………..
|
446
|
446
|
16.82
|
3
|
| |
1996……................………………..
|
335
|
335
|
18.17
|
4
|
| |
1997……................………………..
|
356
|
356
|
22.33
|
5
|
| |
1998……................………………..
|
387
|
387
|
9.24
|
6
|
| |
1999……................………………..
|
456
|
255
|
5.11
|
7
|
| |
2000……................………………..
|
647
|
35
|
2.81
|
8
|
| |
2001……................………………..
|
671
|
45
|
7.42
|
9
|
| |
|
_______
|
_______
|
|
|
| |
|
3,716
|
2,277
|
|
|
|
__________________________________________________________________________________________________________________________________________________________
|
| |
|
|
|
The
weighted average fair value at date of grant for options granted during
2002 and 2001 was $3.26 and $.73 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
|
2002
|
|
2001
|
|
|
==============================================================================================================================================
|
| |
Expected
Life in Years……......................…………
|
7
|
|
10
|
|
| |
Interest
Rate……..................................…………….
|
4.62%
|
|
5.87%
|
|
| |
Volatility……......................................……………..
|
63.10%
|
|
45.92%
|
|
| |
Dividend
Yield……...............................……………
|
2.69%
|
|
7.05%
|
|
|
_____________________________________________________________________________________________________________________________
|
| |
| |
| |
| |
|
-43-
|
| |
|
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA (Continued)
|
| |
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DIMON Incorporated and Subsidiaries
(in thousands)
|
| |
| |
|
Note
J – Income Taxes
|
|
The
components of income before income taxes and equity in net income (loss)
of investee companies consisted of the following:
|
| |
| |
2002
|
2001
|
2000
|
|
==========================================================================================================================
|
|
U.S.
…….......................................................…………………
|
$(46,095)
|
$(20,552)
|
$(38,205)
|
|
Foreign……....................................................……………….
|
84,118
|
55,092
|
61,557
|
| |
____________________________________________
|
| |
$ 38,023
|
$ 34,540
|
$ 23,352
|
|
_____________________________________________________________________________________________________________________________
|
| |
| |
|
The
details of the amount shown for income taxes in the Statements of Consolidated
Income and Comprehensive Income follow:
|
| |
| |
2002
|
2001
|
2000
|
|
==========================================================================================================================
|
|
Current
|
|
|
|
|
Federal……....................................................………………..
|
$ 688
|
$ -
|
$ -
|
|
State…….......................................................…………………
|
-
|
-
|
-
|
|
Foreign……...................................................………………..
|
9,524
|
11,386
|
7,592
|
| |
_____________________________________________________
|
| |
$ 10,212
|
$ 11,386
|
$ 7,592
|
| |
_____________________________________________________
|
|
Deferred
|
|
|
|
|
Federal……....................................................………………..
|
$ (505)
|
$ 3,074
|
$ 12,326
|
|
State…….......................................................…………………
|
-
|
(160)
|
756
|
|
Foreign……....................................................……………….
|
495
|
(5,028)
|
(15,293)
|
| |
_____________________________________________________
|
| |
$ (10)
|
$ (2,114)
|
$ (2,211)
|
| |
_____________________________________________________
|
| |
|
|
Total…….......................................................………………..
|
$ 10,202
|
$ 9,272
|
$ 5,381
|
|
_____________________________________________________________________________________________________________________________
|
| |
|
The
reasons for the difference between income tax expense based on income
before income taxes and equity in net income (loss) of investee companies
and the amount computed by applying the statutory Federal income tax rate
to such income are as follows:
|
| |
| |
2002
|
2001
|
2000
|
|
==========================================================================================================================
|
|
Computed
"expected" tax expense……....................…………
|
$ 13,308
|
$12,089
|
$ 8,173
|
|
Effect
of foreign income taxes…….........................…………
|
(9,121)
|
(9,613)
|
(14,537)
|
|
U.S.
taxes on foreign income, net of tax credits……...………
|
7,207
|
8,027
|
13,426
|
|
Change
in valuation allowance………………………………
|
3,201
|
(3,000)
|
(7,030)
|
|
Permanent
items……..........................................…………….
|
(4,393)
|
1,769
|
5,349
|
| |
__________________________________________
|
|
Actual
tax expense…...........................………………………
|
$ 10,202
|
$ 9,272
|
$ 5,381
|
|
_____________________________________________________________________________________________________________________________
|
| |
| |
| |
|
-44-
|
| |
|
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA (Continued)
|
| |
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DIMON Incorporated and Subsidiaries
(in thousands)
|
| |
| |
|
Note
J – Income Taxes (Continued)
|
|
The
deferred tax liabilities (assets) are comprised of the following:
|
| |
| |
2002
|
2001
|
|
==================================================================================================================
|
|
Deferred
tax liabilities:
|
|
|
| |
Foreign
taxes…….....................................................…………………
|
$ 4,393
|
$ 2,760
|
| |
Installment
sales……..................................................………………..
|
824
|
295
|
| |
Fixed
assets……......................................................…………………..
|
14,434
|
19,299
|
| |
|
_____________________________________
|
|
Total
deferred tax liabilities……...............................……………………...
|
$ 19,651
|
$ 22,354
|
| |
_____________________________________
|
| |
|
|
Deferred
tax assets:
|
|
|
| |
Reserves
and accruals….............................................…………………
|
$ (6,400)
|
$ (4,325)
|
| |
Restructuring
accruals……..............................………………………..
|
(1,726)
|
(2,050)
|
| |
Tax
credits……..............................................……………….………...
|
(20,351)
|
(14,476)
|
| |
Tax
loss carryforwards…….........................................………………..
|
(22,524)
|
(29,763)
|
| |
Derivative
transactions…………………………………………………
|
(6,328)
|
(3,870)
|
| |
Postretirement
and other benefits……..............................…………….
|
(11,854)
|
(14,575)
|
| |
Other……..............................................................…………………….
|
(5,428)
|
(8,042)
|
| |
|
____________________________________
|
| |
|
|
|
Gross
deferred tax assets……………………………………………………
|
(74,611)
|
(77,101)
|
|
Valuation
allowance…….................................................………………….
|
30,696
|
27,495
|
| |
_____________________________________
|
|
Total
deferred tax assets……………………………………………………
|
$(43,915)
|
$(49,606)
|
| |
_____________________________________
|
|
Net
deferred tax asset……........................…………………………………
|
$(24,264)
|
$(27,252)
|
| |
=================================
|
|
___________________________________________________________________________________________________________________
|
| |
|
Consolidated
retained earnings at June 30, 2002 include undistributed earnings of $254,375
from certain foreign consolidated subsidiaries which are not subject to
additional foreign income taxes nor considered to be subject to U.S. income
taxes unless remitted as dividends. The Company considers these
undistributed earnings to be permanently reinvested abroad, and accordingly,
has made no provision for U.S. taxes on such earnings. It is not practicable
to estimate the income tax liability that might be incurred if such earnings
were remitted to the United States; however, foreign tax credits available
under present law would substantially offset the amount of U.S. taxes
payable.
|
|
At
June 30, 2002, the Company has net operating tax loss carryforwards of
approximately $50,032 from foreign operations and $108,957 from U.S. operations
for state income tax purposes that expire in 2003 and thereafter.
|
|
The
net change in the valuation allowance results from a change in management's
judgment about the ability to realize the deferred tax assets in future
years.
|
| |
| |
| |
|
-45-
|
| |
|
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA (Continued)
|
| |
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DIMON Incorporated and Subsidiaries
(in thousands)
|
| |
| |
|
Note
K – Employee Benefits
|
|
Retirement
Benefits
|
|
The
Company adopted a Cash Balance Plan on July 1, 1996, that combined the
retirement plan of the former Dibrell Defined Benefit Pension Plan and
the profit-sharing plan of the former Monk-Austin. The Cash Balance
Plan provides retirement benefits for substantially all U.S. salaried
personnel based on years of service rendered, age and compensation.
The Company also maintains an Excess Benefit Plan that provides
individuals who participated in the former Dibrell Defined Benefit Pension
Plan the difference between the benefits they could have potentially accrued
under the Defined Benefit Pension Plan and the benefits that would have
actually been 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.
|
|
Additional
non-U.S. plans sponsored by certain subsidiaries cover substantially all
of the full-time employees located in Germany, Greece, Italy and Turkey.
Plans covering employees located in Greece and Turkey have measurement
dates of April 1. All other plans, domestic and foreign, have measurement
dates of July 1.
|
|
A
reconciliation of benefit obligations, plan assets and funded status of
the plans at June 30 was as follows:
|
| |
| |
2002
|
2001
|
|
==================================================================================================================
|
|
Change
in Benefit Obligation
|
|
|
| |
Benefit
obligation, beginning………...............................…………
|
$
56,809
|
$
56,990
|
| |
Service
cost………....................................................……………..
|
1,912
|
1,799
|
| |
Interest
cost………....................................................……………..
|
4,235
|
4,224
|
| |
Actuarial
loss (gain)….............................…………………………
|
2,975
|
(1,109)
|
| |
Benefits
paid………...................................................…………….
|
(5,683)
|
(5,095)
|
| |
|
____________________________________
|
| |
Benefit
obligation, ending………...................................…………
|
$
60,248
|
$
56,809
|
| |
|
================================
|
| |
|
|
| |
|
|
|
Change
in Plan Assets
|
|
|
| |
Fair
value of plan assets, beginning……….......................……….
|
$
43,174
|
$
46,464
|
| |
Actual
return on plan assets……….................................…………
|
(2,950)
|
685
|
| |
Company
contribution…………………………………………….
|
1,656
|
1,120
|
| |
Benefits
paid………...................................................…………….
|
(5,929)
|
(5,095)
|
| |
____________________________________
|
| |
Fair
value of plan assets, ending………...........................………..
|
$
35,951
|
$
43,174
|
| |
================================
|
| |
|
Funded
status of plan………..............................................……………
|
$(24,297)
|
$(13,635)
|
|
Unrecognized
actuarial loss (gain)….............................………………
|
331
|
(8,818)
|
|
Unrecognized
prior service cost………..................................…………
|
3,088
|
2,589
|
|
Unrecognized
net transition obligation………..........................……….
|
(218)
|
(566)
|
| |
____________________________________
|
| |
Net
amount recognized……….......................................…………
|
$(21,096)
|
$(20,430)
|
| |
================================
|
| |
| |
| |
|
-46-
|
| |
| |
2002
|
2001
|
2000
|
|
|
==================================================================================================================
|
|
Service
cost………..........................................………….
|
$ 1,912
|
$ 1,799
|
$
1,865
|
|
|
Interest
expense……….....................................…………
|
4,235
|
4,224
|
4,224
|
|
|
Expected
return on plan assets………...................………
|
(3,625)
|
(3,824)
|
(4,055)
|
|
|
Amortization
of prior service cost………...............…….
|
283
|
291
|
498
|
|
|
Amortization
of transition amount………...............……
|
(348)
|
(311)
|
(311)
|
|
|
Actuarial
gain……...............................…………………
|
(225)
|
(449)
|
(486)
|
|
| |
_______________________________________________
|
|
|
Net
periodic pension cost……….........................……….
|
$ 2,232
|
$ 1,730
|
$ 1,735
|
|
|
___________________________________________________________________________________________________________________
|
| |
|
For
the U.S. plans, benefit obligations for the Retirement Plan and the Excess
Benefit Plan were determined using assumed discount rates of 7.25% for
2002, 7.75% for 2001 and 8% for 2000. Assumed compensation increases
were 4% for 2002, 2001 and 2000 for the Retirement Plan and 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. 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.
|
|
The
projected benefit obligation and accumulated benefit obligation for those
plans in which the accumulated benefit obligation was in excess of plan
assets were $24,785 and $21,135, respectively, for 2002 and $18,722 and
$16,711, respectively, for 2001. These plans hold no assets.
|
|
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 $396 in 2002, $405 in 2001 and $407 in 2000.
|
| |
|
Postretirement
Health and Life Insurance Benefits
|
|
The
Company provides certain health and life insurance benefits to retired
U.S. 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.
|
| |
| |
| |
| |
|
-47-
|
| |
|
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA (Continued)
|
| |
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DIMON Incorporated and Subsidiaries
(in thousands)
|
| |
| |
|
Note
K – Employee Benefits (Continued)
|
|
Postretirement
Health and Life Insurance Benefits (Continued)
|
|
A
reconciliation of benefit obligations, plan assets and funded status of
the plans at June 30 was as follows:
|
| |
| |
2002
|
2001
|
|
==================================================================================================================
|
|
Change
in Benefit Obligation
|
|
|
| |
Benefit
obligation, beginning………................................………..
|
$
13,729
|
$
14,017
|
| |
Service
cost………....................................................……………..
|
199
|
284
|
| |
Interest
cost………....................................................……………..
|
1,004
|
1,210
|
| |
Actuarial
loss……….........................................…………………..
|
2,065
|
341
|
| |
Benefits
paid………...................................................…………….
|
(2,494)
|
(2,123)
|
| |
|
__________________________________
|
| |
Benefit
obligation, ending………...................................…………
|
$
14,503
|
$
13,729
|
| |
|
===============================
|
|
Change
in Plan Assets
|
|
|
| |
Fair
value of plan assets, beginning………........................………
|
$
174
|
$
201
|
| |
Actual
return on plan assets……….................................…………
|
38
|
(139)
|
| |
Company
contribution……………………………………………
|
178
|
450
|
| |
Benefits
paid………...................................................…………….
|
(295)
|
(338)
|
| |
__________________________________
|
| |
Fair
value of plan assets, ending………...........................………..
|
$
95
|
$
174
|
| |
===============================
|
|
Funded
status of plan………..............................................……………
|
$(14,408)
|
$(13,555)
|
|
Unrecognized
actuarial gain (loss)…............................……………….
|
261
|
(2,746)
|
|
Unrecognized
prior service cost……….................................…………
|
(2,540)
|
(1,706)
|
| |
__________________________________
|
| |
Net
amount recognized………......................................…………..
|
$(16,687)
|
$(18,007)
|
| |
===============================
|
|
Amounts
Recognized in the Consolidated Balance Sheet Consist of:
|
|
|
| |
Prepaid
benefit cost………...........................................…………..
|
$ -
|
$ -
|
| |
Accrued
benefit liability………......................................…………
|
(16,687)
|
(18,007)
|
| |
Intangible
asset………................................................……………
|
-
|
-
|
| |
Accumulated
other comprehensive income…….................………
|
-
|
-
|
| |
__________________________________
|
| |
Net
amount recognized……….......................................………….
|
$(16,687)
|
$(18,007)
|
|
__________________________________________________________________________________________________________________
|
| |
|
For
measurement purposes, an 8.5% annual rate of increase in the per capita
cost of covered health care benefits was assumed for 2002. The rate
was assumed to decrease gradually to 5.0% by the year 2009.
|
| |
| |
| |
|
-48-
|
| |
| |
2002
|
2001
|
2000
|
|
==================================================================================================================
|
|
Service
cost…….............................................………….
|
$
199
|
$
284
|
$
263
|
|
Interest
expense……........................................…………
|
1,004
|
1,210
|
1,069
|
|
Expected
return on plan assets……......................……...
|
(10)
|
(2)
|
(5)
|
|
Amortization
of prior service cost……..................…….
|
(308)
|
(217)
|
(217)
|
|
Actuarial
(gain)/loss……..................................………..
|
(33)
|
(113)
|
598
|
| |
_________________________________________________
|
|
Net
pension cost…….......................................…………
|
$
852
|
$
1,162
|
$1,708
|
|
__________________________________________________________________________________________________________________
|
| |
|
Assumed
health care cost trend rates have a significant effect on the amounts
reported for the health care plans. A one-percentage-point change
in assumed health care cost trend rates would have the following effects:
|
| |
| |
1-Percentage-
Point Increase
|
1-Percentage-
Point Decrease
|
|
==================================================================================================================
|
|
Effect
on total of service and interest cost components…...........……
|
$
44
|
$
(38)
|
|
Effect
on postretirement benefit obligation….........................………
|
424
|
(380)
|
|
___________________________________________________________________________________________________________________
|
| |
|
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. There
are no postretirement health benefits due to coverage ceasing at retirement
or coverage continuing through a national health system. For these
foreign plans, the cost of benefits charged to income was not material
in 2002, 2001 and 2000.
|
| |
|
Note
L – Segment Information
|
|
The
Company operates in one segment, the tobacco business: purchasing,
processing, selling and storing leaf tobacco. The Company purchases
tobacco in 40 countries and ships tobacco to approximately 90 countries.
|
|
Geographic
information as to sales and other operating revenues is based on the destination
of the product sold. Long-lived assets are classified based on the
location of the asset.
|
| |
| |
| |
|
-49-
|
| |
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)
|
| |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DIMON Incorporated and Subsidiaries
(in thousands)
|
| |
| |
Note L – Segment Information (Continued)
|
| | 2002
| 2001
| 2000
|
|
==================================================================================================================
|
Sales and Other Operating Revenues:
| | | |
| | United States….........................................…………
| $ 248,620
| $ 437,256
| $ 416,290
|
| | Germany...........................................……………….
| 186,480
| 208,218
| 210,018
|
| | Other…..................................................…………...
| 824,620
| 755,481
| 847,322
|
| | | _________________________________________________________
|
| | | $1,259,720
| $1,400,955
| $1,473,630
|
| | ==================================================
|
| | | | |
Sales and Other Operating Revenues to Major Customers:
|
| | Of the 2002, 2001 and 2000 sales and other operating revenues, approximately 35%, 36% and 30%, respectively, were to various tobacco companies which management has reason to believe are now owned by or under the common control of two companies. (The following table summarizes the net sales to each customer for the periods indicated: )
| |
| |
Customer A…................................................…………..
| $ 166,675
| $ 251,929
| $ 227,068
|
Customer B…................................................…………..
| 275,487
| 248,078
| 212,377
|
| | ________________________________________________________
|
| | $ 442,162
| $ 500,007
| $ 439,445
|
| | ==================================================
|
| |
Long-Lived Assets:
| | | |
| | United States….......................................…………..
| $ 44,599
| $ 56,516
| $ 52,392
|
| | Brazil…................................................…………….
| 38,979
| 38,985
| 43,771
|
| | Malawi.................................................…………….
| 28,107
| 29,721
| 32,103
|
| | Tanzania.............................................……………...
| 24,470
| 26,391
| 28,493
|
| | Zimbabwe.............................................……………
| 49,418
| 52,382
| 53,885
|
| | South America.......................................…………...
| 1,970
| 2,388
| 2,968
|
| | Europe…..............................................…………….
| 42,805
| 41,200
| 34,456
|
| | Asia……..............................................…………….
| 7,306
| 7,316
| 8,150
|
| | Other…...............................................……………..
| 19,630
| 15,409
| 20,998
|
| | | _________________________________________________________
|
| | Long-Lived Assets…............……...
| $257,284
| $270,308
| $277,216
|
___________________________________________________________________________________________________________________
|
| |
Note M – 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 SFAS 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 are made directly to a separate component of stockholders' equity. Transaction adjustments, however, are made in the Statements of Consolidated Income and Comprehensive Income. These include realized exchange adjustments relating to assets and liabilities denominated in foreign currencies. Financial statements of entit
ies located in highly inflationary economies are remeasured in U.S. dollars. The remeasurement of and subsequent transaction adjustments are also made in the Statements of Consolidated Income and Comprehensive Income.
|
The transaction gains or (losses) for 2002, 2001 and 2000 were $(4,411), $(3,620), and $554, respectively.
|
| |
| |
| |
| |
-50-
|
| |
|
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA (Continued)
|
| |
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DIMON Incorporated and Subsidiaries
(in thousands)
|
| |
| |
| |
|
Note
N - Contingencies and Other Information
|
|
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. In August
1996, the Company also received notices of adjustments from Brazilian
tax authorities proposing adjustments to the income taxes for calendar
year 1992 based on the Company's recalculation of monetary correction
as allowed under Law 8200. The company successfully defeated many
of the proposed adjustments in litigation and settled the other issues
under REFIS and Tax Amnesty programs. As of June 30, 2002,
tax, penalties and interest relating to still unresolved issues is approximately
$3,600, before related tax benefits for future deductions, and deduction
of interest if the Company failed to prevail on these issues.
|
|
In
February 2002, the Company received a report, not an assessment, from
the tax authorities in Germany regarding the taxable gain from the sale
of its flower operations, Florimex, in September 1998. The report
concluded the values of the real estate located in Germany were greater
than those arrived at with the buyer of the flower operation by approximately
$8,000. The proposed adjustment to income tax is $4,000. The
Company has challenged these finding with valuations that support the
values used in the original filings and is currently discussing the issue
with the tax officials in Germany.
|
|
The
Company believes it has properly reported its income and paid its taxes
in Brazil and Germany in accordance with applicable laws and intends to
vigorously contest the proposed adjustments. The Company expects
the ultimate resolution of these matters will not have a material adverse
effect on the Company's consolidated balance sheet or results of operations.
|
|
On
April 3, 2002, the United States District Court for the Middle District
of North Carolina issued an opinion and order certifying a class in Deloach,
et al. v. Philip Morris Companies Inc., et al., a lawsuit pending
in the United States District Court for the Middle District of North Carolina
(Case No. 00-CV-1235) (the "Deloach Suit"). As certified,
the class consists of persons who, at any time from February 1996 to the
present, held a quota to grow or produced and sold U.S. flue-cured
and burley tobacco. The plaintiffs allege that the defendants, which include
cigarette manufacturers and leaf tobacco dealers, including the Company,
violated the antitrust laws by conspiring to rig bids at auction and undermine
the federal government quota and price support program. The plaintiffs
seek injunctive relief, treble damages in an unspecified amount, pre-
and post-judgment interest, attorneys' fees and costs of litigation. The
Company will defend the suit vigorously. Because the suit is still
in its initial stages, the Company cannot estimate the amount or range
of loss that could result if the suit is resolved in a manner unfavorable
to the Company.
|
|
The
Directorate General for Competition (DGCOMP) of the European Commission
(EC) is conducting an administrative investigation into certain tobacco
buying practices alleged to have occurred within the leaf tobacco industry
in Spain and Italy. The Company believes that the DGCOMP may be conducting
similar investigations in other countries. The Company's subsidiaries
in Spain (Agroexpansion) and Italy (DIMON Italia) are cooperating with
the DGCOMP. Based on the Company's understanding of the facts pertaining
to the activities of Spanish and Italian tobacco processors, including
Agroexpansion and DIMON Italia, respectively, the Company believes there
have been infringements of EU law. Agroexpansion and DIMON Italia
believe that there are mitigating circumstances in the structure and traditional
operation of tobacco production and processing in these markets. The
EC is not expected to issue a ruling (Statement of Objection) concerning
either of these investigations until the fall of 2002 at the earliest.
The Company expects that administrative penalties will be assessed,
and those penalties could be material to the Company's earnings. However,
the Company is not able to make an assessment of the amount of any such
penalties at this time. The Company understands that the cooperation
of its subsidiaries with the DGCOMP during its investigations could result
in a reduction of the amount of penalties imposed.
|
| |
| |
| |
|
-51-
|
| |
|
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA (Continued)
|
| |
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DIMON Incorporated and Subsidiaries
(in thousands)
|
| |
| |
| |
|
Note
N - Contingencies and Other Information (Continued)
|
|
The
Company and certain subsidiaries had available letters of credit of $58,087
at June 30, 2002, of which $34,010 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 $3,552. There
were no amounts outstanding under these guarantees at June 30, 2002.
|
|
The
Company's foreign subsidiaries have guaranteed certain loans made by Brazilian
banks to local growers. There was approximately $32.5 million outstanding
under these guarantees at June 30, 2002.
|
|
The
Company's other off balance sheet risks are not material.
|
|
The
Company's subsidiary in Spain, Compania General de Tabacos de Filipinas
(CdF), was the plaintiff in a lawsuit regarding the alleged breach of
contract in CdF's sale of a building located in Barcelona in 1991. CdF
successfully concluded the lawsuit in February, 2001, and the Company
realized a gain of $3,923.
|
|
On
August 21, 2001, the Company's subsidiary in Brazil won a claim related
to certain excise taxes ("IPI credit bonus") for the years 1983
through 1990 and is now pursuing collection. The collection procedures
are not clear and the total realization process could potentially be over
many years. The Company is unable to estimate the realizable value
of this claim as of June 30, 2002.
|
|
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.
|
| |
|
Note
O - Cumulative Effect of Changes in Accounting Principles
|
|
Reporting
Period of Subsidiaries
Effective
July 1, 2000, four of the Company's European subsidiaries changed their
fiscal year end from March 31 to June 30. More efficient financial
reporting routines have allowed the Company to eliminate the traditional
fiscal quarter lag associated with the inclusion of these subsidiaries
in its consolidated financial statements. For the quarter ended
September 30, 2000, income of $284 earned by the affected subsidiaries
during the period between April 1, 2000 and June 30, 2000 has been recognized
as the cumulative effect of an accounting change. The Company has
two remaining subsidiaries with fiscal year ends of March 31 and May 31.
|
| |
|
Derivative
Financial Instruments
|
|
Effective
July 1, 2000, the Company adopted SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." In accordance with the
transition provisions of SFAS No. 133, the Company recorded a cumulative
effect loss adjustment of $100, net of applicable taxes of $37, in other
comprehensive income to recognize the fair value of all derivatives designated
as cash-flow hedging instruments. Also, in accordance with the transition
provisions, the Company recorded as the cumulative effect of an accounting
change a $387 loss, net of applicable taxes of $191, in the statement
of operations, for the unrealized fair market value depreciation of certain
interest rate swap instruments not designated as hedges.
|
| |
| |
| |
|
-52-
|
| |
|
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA (Continued)
|
| |
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DIMON Incorporated and Subsidiaries
(in thousands)
|
| |
| |
|
Note
P - Selected Quarterly Financial Data (Unaudited)
|
|
Summarized
quarterly financial information is as follows:
|
| |
| |
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
|
Fiscal
Year
|
|
|
=============================================================================================================================
|
|
2002
|
|
|
|
|
|
|
|
|
|
|
|
Sales
and Other Operating
|
|
|
|
|
|
|
|
|
|
|
|
Revenue.....................……………
|
$288,721
|
|
$376,363
|
|
$257,065
|
|
$337,571
|
|
$1,259,720
|
|
|
Gross
Profit....................………..…
|
52,612
|
|
47,596
|
|
39,360
|
|
65,897
|
|
205,465
|
|
|
Net
Income ……………………….
|
3,918
|
|
6,201
|
|
4,690
|
|
12,667
|
|
27,476
|
|
|
Per
Share of Common Stock:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
Earnings………………….…
|
.09
|
|
.14
|
|
.11
|
|
.28
|
|
.62
|
|
|
Diluted
Earnings........………….….
|
.09
|
*
|
.14
|
*
|
.10
|
*
|
.28
|
|
.61
|
*
|
|
Cash
Dividends per Share...………
|
.05
|
|
.05
|
|
.05
|
|
.05
|
|
.20
|
|
|
Market
Price
|
-
High...………
|
10.18
|
|
7.50
|
|
8.29
|
|
7.94
|
|
10.18
|
|
|
|
-
Low...………
|
5.49
|
|
5.35
|
|
6.35
|
|
6.35
|
|
5.35
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
2001
|
|
|
|
|
|
|
|
|
|
|
|
Sales
and Other Operating
|
|
|
|
|
|
|
|
|
|
|
|
Revenue.....................…………..
|
$198,901
|
|
$512,172
|
|
$399,079
|
|
$290,803
|
|
$1,400,955
|
|
|
Gross
Profit....................………….
|
36,830
|
|
53,198
|
|
40,224
|
|
60,772
|
|
191,024
|
|
|
Net
Income (Loss) before
|
|
|
|
|
|
|
|
|
|
|
|
cumulative
effect of
|
|
|
|
|
|
|
|
|
|
|
|
accounting
changes……………..
|
(1,982)
|
|
8,721
|
|
2,683
|
|
15,575
|
|
24,997
|
|
|
Per
Share of Common Stock:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
Earnings…………………….
|
(.05)
|
|
.20
|
|
.06
|
|
.35
|
|
.56
|
|
|
Diluted
Earnings (1)........………….
|
(.05)
|
*
|
.20
|
*
|
.06
|
*
|
.34
|
|
.56
|
*
|
|
Cash
Dividends per Share...………
|
.05
|
|
.05
|
|
.05
|
|
.05
|
|
.20
|
|
|
Market
Price
|
-
High...………
|
3.44
|
|
5.81
|
|
9.25
|
|
11.61
|
|
11.61
|
|
|
|
-
Low...………
|
2.19
|
|
2.69
|
|
4.75
|
|
6.29
|
|
2.19
|
|
|
____________________________________________________________________________________________________________________
|
| |
|
(1)
|
Does
not add due to rounding.
|
|
*
|
Assumed
conversion of Convertible Debentures at the beginning of each period has
an antidilutive effect on earnings per share.
|
| |
| |
| |
| |
|
-53-
|
| |
| |
| |
| |
| |
|
ITEM
9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON
ACCOUNTING
AND FINANCIAL DISCLOSURE-
|
| |
|
The
Company's Board of Directors engaged Ernst & Young LLP as the Company's
independent accountants, effective May 11, 2001. DIMON's former independent
accountants, PricewaterhouseCoopers LLP, were dismissed effective May
11, 2001.
|
|
The
report issued by PricewaterhouseCoopers LLP on the Company's financial
statements for fiscal year 2000, preceding the dismissal did not contain
any adverse opinion or a disclaimer of opinion, or any qualification or
modification as to uncertainty, audit scope or accounting principles.
|
|
The
decisions to dismiss PricewaterhouseCoopers LLP and engage Ernst &
Young LLP were recommended by the Audit Committee of the Board of Directors
and approved by the full Board of Directors.
|
|
During
the Company's fiscal year 2000, prior to May 11, 2001, and through May
11, 2001, there were no disagreements with PricewaterhouseCoopers LLP
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which, if not resolved to
the satisfaction of PricewaterhouseCoopers LLP, would have caused PricewaterhouseCoopers
LLP to make reference to the subject matter of the disagreement in connection
with its reports.
|
| |
| |
|
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 of Certain Beneficial Owners and Management" is incorporated
herein by reference thereto.
|
| |
| |
|
ITEM
13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
|
|
The
information contained in the Proxy Statement under the caption "Compensation
of Executive Officers and Directors – Employment and Consulting Agreements"
is incorporated herein by reference.
|
| |
| |
| |
|
-54-
|
| |
| |
| |
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
|
| | |
| | Statements of Consolidated Income and Comprehensive Income --Years
|
| | ended June 30, 2002, 2001 and 2000
|
| | Consolidated Balance Sheet--June 30, 2002 and 2001
|
| | Statement of Stockholders' Equity--Years ended June 30, 2002, 2001 and 2000
|
| | Statement of Consolidated Cash Flows--Years ended June 30, 2002, 2001 and 2000
|
| | Notes to Consolidated Financial Statements
|
| | |
| | Financial Statement Schedules:
|
| | Schedule II - Valuation and Qualifying Accounts
|
| | Report of Ernst & Young LLP
|
| | Report of PricewaterhouseCoopers LLP
|
| | |
(b)
| Current Reports on Form 8-K
| -
| October 15, 2001 - Item 5 and 7, DIMON Announces Private Offering of Senior Notes
|
| | | -
| October 30, 2001 - Item 5 and 7, DIMON Announces Successful Refinancing Transactions Issues $200 Million of Ten-Year 9 5/8% Senior Notes Obtains Commitments for $165 Million Three-Year Syndicated Bank Credit Facility
|
| | | -
| December 10, 2001 - Item 5 and 7, DIMON Announces Exchange Offer For 9 5/8% Senior Notes Due 2011
|
| | | -
| January 14, 2002 - Item 5 and 7, DIMON Announces Extension of Exchange Offer For 9⅝% Senior Notes Due 2011
|
| | | -
| January 17, 2002 - Item 5, DIMON Announces European Commission (EC) investigation of certain buying practices within Spain
|
| | | -
| January 25, 2002 - Item 5 and 7, DIMON Announces Completion of Exchange Offer For 9⅝% Senior Notes Due 2011
|
| | | -
| February 6, 2002 - Item 7, DIMON Continues Strong Year-to-Date Earnings Performance in Second Quarter Raises Fiscal Year Earnings Guidance and Item 9, Regulation FD Disclosure
|
| | | -
| February 20, 2002 - Item 5 and 7, DIMON Announces Quarterly Dividend
|
| | | -
| April 9, 2002 - Item 5, DIMON Announces Deloach, et al. v. Philip Morris Companies Inc., et al., a class action suit pending
|
| | | -
| April 19, 2002 - Item 5, DIMON Announces Administrative Investigation by Directorate General for Competition (DGCOMP) of the European Commission (EC) relative to activities of the Spanish tobacco processors
|
| | | -
| May 8, 2002 -- Item 7, DIMON’s Third Quarter Continues Strong Year-to-Date Earnings Performance Confirms Fiscal Year Earnings Guidance and Item 9, Regulation FD Disclosure
|
| | | -
| May 28, 2002 - Item 5 and 7, DIMON Names Hans B. Amell to Board of Directors and Announces Quarterly Dividend
|
| | | -
| August 19, 2002 - Item 7, DIMON’s Earnings for Fiscal Year 2002 Increase 43% Earnings Performance is Expected to Continue in 2003 and Item 9, Regulation FD Disclosure
|
| |
-55-
|
| |
| |
| |
| |
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K (Continued)
|
| |
(c)
| 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 (file 33-89780))
|
| | | |
| | 3.02
| Amended and Restated Bylaws, as amended, of DIMON Incorporated effective February 20, 2001 (incorporated by reference to Exhibit 3 to DIMON Incorporated's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001)
|
| | | |
| | 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)
|
| | | |
| | 4.06
| Indenture, dated October 30, 2001, between DIMON Incorporated as issuer, and SunTrust Bank as trustee (incorporated by reference to Exhibit 4.1 to DIMON Incorporated's Form 10-Q filed for the quarterly period ended September 30, 2001)
|
| | |
| | 10.01
| DIMON Incorporated Omnibus Stock Incentive Plan (1995) (incorporated herein by reference to Exhibit 10.1 to DIMON Incorporated's Registration Statement on Form S-4 (file No. 33-89780))
|
| | | |
| | 10.02
| 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)
|
| | | |
| | 10.03
| 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)
|
| | | |
| | 10.04
| Early Retirement Agreement, dated May 17, 1999, between DIMON Incorporated and Claude B. Owen, Jr. (incorporated by reference to Exhibit 10.13 to DIMON Incorporated's Annual Report on Form 10-K for the year ended June 30, 1999)
|
| |
| |
| |
| |
-56-
|
| |
| |
| |
| |
| |
|
ITEM
14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS
ON
FORM 8-K (Continued)
|
| |
|
(c)
|
Exhibits
|
| |
|
|
| |
10.05
|
Indenture,
dated as of April 1, 1997, by DIMON Incorporated to LaSalle National Bank,
relating to 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)
|
| |
|
|
| |
10.06
|
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)
|
| |
|
|
| |
10.07
|
First
Amendment to Employment Agreement, dated April 22, 1999, between DIMON
Incorporated and Brian J. Harker (incorporated by reference to Exhibit
10.22 to DIMON Incorporated's Annual Report on Form 10-K for the year
ended June 30, 1999)
|
| |
|
|
| |
10.08
|
Employment
Agreement, dated July 1, 1994, between Monk-Austin International, Inc.
and Larry R. Corbett (incorporated by reference to Exhibit 10.7 to Monk-Austin,
Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31,
1994) (incorporated by reference to Exhibit 10.23 to DIMON Incorporated's
Annual Report on Form 10-K for the year ended June 30, 1999)
|
| |
|
| |
10.09
|
Amendment
to Employment Agreement, dated August 10, 1995, between DIMON International,
Inc. and Larry R. Corbett (incorporated by reference to Exhibit 10.24
to DIMON Incorporated's Annual Report on Form 10-K for the year ended
June 30, 1999)
|
| |
|
|
| |
10.10
|
Amended
DIMON Incorporated Supplemental Retirement Plan dated July 30, 1998 and
effective January 1, 1997 (incorporated by reference to Exhibit 10.22
to DIMON Incorporated's Annual Report on Form 10-K for the year ended
June 30, 1998)
|
| |
|
|
| |
10.11
|
DIMON
Incorporated Directors' Stock Plan (incorporated by reference to Exhibit
10.28 to DIMON Incorporated's Annual Report on Form 10-K for the year
ended June 30, 1999)
|
| |
|
|
| |
10.12
|
Settlement
Agreement, dated May 24, 1999, between DIMON Incorporated and Tabex (Private)
Limited, Folium Inc., Blair Investments (Private) Limited, Tabacalera
S.A., Anthony C. B. Taberer, Paul A.B. Taberer, and Charles M.B. Taberer
(incorporated by reference to Exhibit 10.29 to DIMON Incorporated's Annual
Report on Form 10-K for the year ended June 30, 1999)
|
| |
|
|
| |
10.13
|
Amended
1995 DIMON Incorporated Omnibus Stock Incentive Plan, adopted at the Annual
Meeting of Shareholders on November 12, 1999 (incorporated by reference
to Exhibit 10.23 to DIMON Incorporated's Annual Report on Form 10-K for
the year ended June 30, 2000)
|
| |
|
|
| |
10.14
|
Credit
Agreement dated as of October 31, 2001, among DIMON Incorporated, First
Union National Bank as Lender and Administrative Agent and Deutsche Bank
AG – Amsterdam Branch, ING Bank – London Branch, Natexis Banque
Populaires and SunTrust Bank (incorporated by reference to Exhibit 10.1
to DIMON Incorporated's Form 10-Q filed for the quarterly period ended
September 30, 2001)
|
| |
| |
| |
|
-57-
|
| |
| |
| |
| |
| |
| |
| |
| |
| |
|
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
|
|
|
| |
|
____________________________
|
|
|
| |
|
(1)
|
(2)
|
|
|
|
DESCRIPTION
|
Balance
at
Beginning
of Period
|
Charged
to
Costs and
Expenses
|
Charged
to
Other Accounts
-Describe
|
Deductions
-Describe
|
Balance
at
End of
Period
|
|
___________________________________________________________________________________________________________________
|
|
Year
ended June 30, 2000
|
|
|
|
|
|
|
Deducted
from asset accounts:
|
|
|
|
|
|
|
Allowance
for doubtful accounts
|
$8,220,966
|
$
533,678
|
$ -
|
$1,490,664(A)
|
$7,263,980
|
| |
___________
|
__________
|
_______________
|
______________
|
___________
|
|
Total
|
$8,220,966
|
$
533,678
|
$ -
|
$1,490,664
|
$7,263,980
|
| |
=========
|
=========
|
=============
|
============
|
=========
|
|
___________________________________________________________________________________________________________________
|
|
Year
ended June 30, 2001
|
|
|
|
|
|
|
Deducted
from asset accounts:
|
|
|
|
|
|
|
Allowance
for doubtful accounts
|
$7,263,980
|
$
70,348
|
$ -
|
$6,103,961(B)
|
$1,230,367
|
| |
___________
|
__________
|
_______________
|
______________
|
___________
|
|
Total
|
$7,263,980
|
$
70,348
|
$ -
|
$6,103,961
|
$1,230,367
|
| |
=========
|
=========
|
=============
|
============
|
=========
|
|
___________________________________________________________________________________________________________________
|
|
Year
ended June 30, 2002
|
|
|
|
|
|
|
Deducted
from asset accounts:
|
|
|
|
|
|
|
Allowance
for doubtful accounts
|
$1,230,367
|
$
982,794
|
$ -
|
$ 277,967(A)
|
$1,935,194
|
| |
___________
|
__________
|
_______________
|
______________
|
___________
|
|
Total
|
$1,230,367
|
$
982,794
|
$ -
|
$ 277,967
|
$1,935,194
|
| |
=========
|
=========
|
=============
|
============
|
=========
|
|
___________________________________________________________________________________________________________________
|
| |
|
(A)
|
Currency
translation and direct write-off.
|
|
(B)
|
Currency
translation and direct write-off, $2,840,467; recovery from litigation
settlement, $3,263,494.
|
| |
|
|
Certain
prior year amounts have been reclassified to conform to the current year
presentation.
|
| |
| |
|
-59-
|
| |
| |
| |
| |
| |
|
Report
of Independent Accountants
|
| |
| |
| |
|
To
the Board of Directors and Shareholders of DIMON Incorporated
|
| |
| |
|
We
have audited the accompanying consolidated balance sheets of DIMON Incorporated
and subsidiaries as of June 30, 2002 and 2001, and the related consolidated
statements of income and comprehensive income, stockholders’ equity
and cash flows for the years then ended. Our audits also included
the financial statement schedule listed in the Index at Item 14 (a). These
financial statements and schedule are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
|
| |
|
We
conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform
the audits 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 audits provide 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 DIMON
Incorporated and subsidiaries at June 30, 2002 and 2001, and the consolidated
results of their operations and their cash flows for the years then ended,
in conformity with accounting principles generally accepted in the United
States. Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set
forth therein.
|
| |
|
As
discussed in Note O to the financial statements, in 2001 the Company changed
its consolidated reporting period for four European subsidiaries and also
changed its method of accounting for derivative financial instruments.
|
| |
| |
|
/s/
Ernst & Young LLP
|
|
Ernst
& Young LLP
|
|
Greensboro,
North Carolina
|
|
August
16, 2002
|
| |
| |
| |
| |
|
-60-
|
| |
| |
| |
| |
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 August 29, 2002.
|
| |
DIMON INCORPORATED (Registrant)
|
| |
| | /s/ Brian J. Harker
By________________________________________________
Brian J. Harker
President 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 August 29, 2002.
|
| |
/s/ Brian J. Harker
By________________________________________________
Brian J. Harker
President and Chief Executive Officer,
Director of DIMON Incorporated
| /s/ James E. Johnson, Jr.
By________________________________________________
James E. Johnson, Jr.
Director of DIMON Incorporated
|
| | |
/s/ Steve B. Daniels
By________________________________________________
Steve B. Daniels
Senior Vice President-Operations Director
of DIMON Incorporated
| /s/ Norman A. Scher
By________________________________________________
Norman A. Scher
Director of DIMON Incorporated
|
| | |
/s/ James A. Cooley
By________________________________________________
James A. Cooley
Senior Vice President-Chief Financial Officer
of DIMON Incorporated
| /s/ John M. Hines
By________________________________________________
John M. Hines
Director of DIMON Incorporated
|
| | |
/s/ Joseph L. Lanier, Jr.
By________________________________________________
Joseph L. Lanier, Jr.
Non-Executive Chairman of the
Board of DIMON Incorporated
| /s/ R. Stuart Dickson
By________________________________________________
R. Stuart Dickson
Director of DIMON Incorporated
|
| | |
/s/ Albert C. Monk III
By________________________________________________
Albert C. Monk III
Director of DIMON Incorporated
| /s/ Martin R. Wade III
By________________________________________________
Martin R. Wade III
Director of DIMON Incorporated
|
| | |
/s/ Thomas F. Keller
By________________________________________________
Thomas F. Keller
Director of DIMON Incorporated
| /s/ Hans B. Amell
By________________________________________________
Hans B. Amell
Director of DIMON Incorporated
|
| | |
/s/ Henry F. Frigon
By________________________________________________
Henry F. Frigon
Director of DIMON Incorporated
| /s/ Thomas G. Reynolds
By________________________________________________
Thomas G. Reynolds
Vice President-Controller (Principal
Accounting Officer) of DIMON
Incorporated
|
| | |
| | |
-62-
|
| |
| |
| |
| |
|
EXHIBIT
INDEX
|
| |
|
Exhibits
|
|
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 (file 33-89780))
|
|
| |
|
|
|
| |
|
|
|
|
3.02
|
|
Amended
and Restated Bylaws, as amended, of DIMON Incorporated effective February
20, 2001 (incorporated by reference to Exhibit 3 to DIMON Incorporated's
Quarterly Report on Form 10-Q for the quarter ended March 31, 2001)
|
|
| |
|
|
|
|
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)
|
|
| |
|
|
|
|
4.06
|
|
Indenture,
dated October 30, 2001, between DIMON Incorporated as issuer, and SunTrust
Bank as trustee (incorporated by reference to Exhibit 4.1 to DIMON Incorporated's
Form 10-Q filed for the quarterly period ended September 30, 2001)
|
|
| |
|
|
|
|
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
|
|
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)
|
|
| |
| |
| |
|
-63-
|
| |
| |
| |
| |
|
EXHIBIT
INDEX
|
| |
|
Exhibits
|
(Continued)
|
Page
No.
|
| |
|
|
|
10.03
|
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)
|
|
| |
|
|
|
10.04
|
Early
Retirement Agreement, dated May 17, 1999, between DIMON Incorporated and
Claude B. Owen, Jr. (incorporated by reference to Exhibit 10.13 to DIMON
Incorporated's Annual Report on Form 10-K for the year ended June 30,
1999)
|
|
| |
|
|
|
10.05
|
Indenture,
dated as of April 1, 1997, by DIMON Incorporated to LaSalle National Bank,
relating to 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)
|
|
| |
|
|
|
10.06
|
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)
|
|
| |
|
|
|
10.07
|
First
Amendment to Employment Agreement, dated April 22, 1999, between DIMON
Incorporated and Brian J. Harker (incorporated by reference to Exhibit
10.22 to DIMON Incorporated's Annual Report on Form 10-K for the year
ended June 30, 1999)
|
|
| |
|
|
|
10.08
|
Employment
Agreement, dated July 1, 1994, between Monk-Austin International, Inc.
and Larry R. Corbett (incorporated by reference to Exhibit 10.7 to Monk-Austin,
Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31,
1994) (incorporated by reference to Exhibit 10.23 to DIMON Incorporated's
Annual Report on Form 10-K for the year ended June 30, 1999)
|
|
| |
|
|
|
10.09
|
Amendment
to Employment Agreement, dated August 10, 1995, between DIMON International,
Inc. and Larry R. Corbett (incorporated by reference to Exhibit 10.24
to DIMON Incorporated's Annual Report on Form 10-K for the year ended
June 30, 1999)
|
|
| |
|
|
|
10.10
|
Amended
DIMON Incorporated Supplemental Retirement Plan dated July 30, 1998 and
effective January 1, 1997 (incorporated by reference to Exhibit 10.22
to DIMON Incorporated's Annual Report on Form 10-K for the year ended
June 30, 1998)
|
|
| |
|
|
|
10.11
|
DIMON
Incorporated Directors' Stock Plan (incorporated by reference to Exhibit
10.28 to DIMON Incorporated's Annual Report on Form 10-K for the year
ended June 30, 1999)
|
|
| |
| |
| |
| |
|
-64-
|
| |
| |
| |
| |
|
EXHIBIT
INDEX
|
| |
|
Exhibits
|
(Continued)
|
Page
No.
|
| |
|
|
|
10.12
|
Settlement
Agreement, dated May 24, 1999, between DIMON Incorporated and Tabex (Private)
Limited, Folium Inc., Blair Investments (Private) Limited, Tabacalera
S.A., Anthony C. B. Taberer, Paul A.B. Taberer, and Charles M.B. Taberer
(incorporated by reference to Exhibit 10.29 to DIMON Incorporated's Annual
Report on Form 10-K for the year ended June 30, 1999)
|
|
| |
|
|
|
10.13
|
Amended
1995 DIMON Incorporated Omnibus Stock Incentive Plan, adopted at the Annual
Meeting of Shareholders on November 12, 1999 (incorporated by reference
to Exhibit 10.23 to DIMON Incorporated's Annual Report on Form 10-K for
the year ended June 30, 2000)
|
|
| |
|
|
|
10.14
|
Credit
Agreement dated as of October 31, 2001, among DIMON Incorporated, First
Union National Bank as Lender and Administrative Agent and Deutsche Bank
AG – Amsterdam Branch, ING Bank – London Branch, Natexis Banque
Populaires and SunTrust Bank (incorporated by reference to Exhibit 10.1
to DIMON Incorporated's Form 10-Q filed for the quarterly period ended
September 30, 2001)
|
|
| |
|
|
|
12
|
Ratio
of Earnings to Fixed Charges (filed herewith)
|
66
|
| |
|
|
|
21
|
List
of Subsidiaries (filed herewith)
|
67
- 68
|
| |
|
|
|
23.1
|
Consent
of Ernst & Young LLP (filed herewith)
|
69
|
| |
|
|
|
23.2
|
Consent
of PricewaterhouseCoopers LLP (filed herewith)
|
70
|
| |
|
|
| |
| |
| |
|
-65-
|
| |