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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended June 30, 1996
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to .
Commission File Number 1-13684
DIMON Incorporated
(Exact name of registrant as specified in its charter)
VIRGINIA 54-1746567
(State or other jurisdiction of incorporation) (IRS Employer
Identification No.)
512 Bridge Street, Danville, Virginia 24541
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (804) 792-7511
Securities registered pursuant to Section 12(b) of the Act:
Common Stock (no par value)
Common Stock Purchase Rights
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes.....X...... No...........
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of Common Stock held by non-affiliates of the
registrant (based upon the closing sale price quoted by The New York Stock
Exchange) on August 31, 1996, was approximately $690,839,000. In determining
this figure, the registrant has assumed that all of its directors and officers,
and all persons known to it to beneficially own ten percent or more of its
Common Stock, are affiliates. This assumption shall not be deemed conclusive
for any other purpose.
As of August 31, 1996, there were 42,366,059 shares of Common Stock
outstanding.
Portions of the registrant's definitive Proxy Statement for its 1996
Annual Meeting of Stockholders to be held November 15, 1996, to be filed with
the Securities and Exchange Commission pursuant to Regulation 14A under the
Securities Exchange Act of 1934 (the "Proxy Statement"), are incorporated by
reference into Part III of this Form 10-K.
PART I
ITEM 1. BUSINESS
As used in the following description, unless the context otherwise requires,
the term "Company" refers to DIMON Incorporated and its subsidiaries and
affiliates. Unless otherwise indicated, references to years refer to the
Company's fiscal year ended June 30.
The Company is engaged in two international businesses -- the purchasing,
processing and selling of leaf tobacco, primarily flue-cured, burley and
oriental tobaccos, which are the primary components of American blend
cigarettes, and the purchasing, transporting and selling of fresh-cut flowers
to wholesalers and retailers. The Company believes it is the world's second
largest independent leaf tobacco merchant with an estimated 30% share of the
established worldwide leaf tobacco market. The Company is the successor to
Dibrell Brothers, Incorporated ("Dibrell") and Monk-Austin, Inc. ("Monk-
Austin") which merged in April 1995 ("the "Merger"). The Company was
incorporated in 1995 under the laws of the Commonwealth of Virginia. See Note
M to the Company's Consolidated Financial Statements for the year ended June
30, 1996, included herein as part of Item 8, for detailed financial
information regarding each of the Company's business segments.
Tobacco
The Leaf Tobacco Industry
The world's large multinational cigarette manufacturers, with one exception,
rely on independent leaf tobacco merchants such as the Company to supply the
majority of their leaf tobacco needs. Leaf tobacco merchants select,
purchase, process, store, pack, ship and, in certain developing markets,
provide agronomy expertise and financing for growing leaf tobacco. At the
present time, there are four major global leaf tobacco merchants including the
Company. These four merchants source, process and ship leaf tobacco around
the world, for delivery to manufacturers of cigarettes and other tobacco
products. The Company believes that the leaf tobacco industry is
characterized by the following trends:
Growth of American Blend Cigarettes. As a result of increased demand and
strong brand growth, production of branded American blend cigarettes has
increased based on recent calendar year information. In addition, worldwide
consumption of American blend cigarettes continues to increase even in some
countries where total cigarette consumption is flat or declining. American
blend cigarettes contain less tar and nicotine and taste milder than
cigarettes historically consumed outside of the U.S. Cigarette production in
the U.S. reached record levels in 1995, totaling 741.84 billion units, an
increase of 4.1% over 1994, according to the U.S. Department of Agriculture.
Exports of domestically produced cigarettes in 1995 totaled 35.1% of cigarette
production in the U.S., up from 31.8% in 1994 and 30.9% in 1993. As American
blend cigarettes have continued to gain market share, the demand for export
quality flue-cured, burley and oriental tobaccos sourced and processed by leaf
tobacco merchants has grown accordingly. Although the consumption of
cigarettes increased by 1% in the U.S. in 1995, the consumption of cigarettes
generally has decreased in the U.S. and in some other countries in recent
years, and may continue to decrease in the future. The Company believes that
cigarette consumption in certain other countries, however, including those in
Central and Eastern Europe and the former Soviet Union, has increased.
Growth in Foreign Operations of Large Cigarette Manufacturers. Several of the
large multinational cigarette manufacturers have expanded their operations
throughout the world, particularly in Central and Eastern Europe and the
former Soviet Union, in order to increase their access to and penetration of
these markets. As cigarette manufacturers expand their global operations, the
Company believes there will be increased demand for local sources of leaf
tobacco and local tobacco processing and distribution, primarily due to the
semi-perishable nature of unprocessed leaf tobacco and the existence of
domestic content laws in certain countries. The Company believes
-2-
that the international expansion of the large multinational cigarette
manufacturers will cause these manufacturers to place greater reliance on the
services of financially strong leaf tobacco merchants with the ability to
source and process tobacco on a global basis and to help develop higher
quality local sources of tobacco.
Growth in Foreign Sourced Tobacco. In an effort to respond to cigarette
manufacturers' increasing demand for lower cost American blend cigarette
ingredients, the major leaf tobacco merchants have made significant
investments in South America, Africa and Asia, the principal sources of flue-
cured and burley tobaccos outside the U.S. This trend is expected to continue
in the foreseeable future as the quality of foreign grown tobacco continues to
improve.
Improved Market Conditions. The global leaf tobacco industry is currently
recovering after experiencing a disruption in demand and reduction in pricing
during 1993 and 1994. The disruption of the industry in the U.S. during these
years occurred primarily because of (1) the enactment of legislation requiring
that cigarettes manufactured in the U.S. for domestic consumption and export
contain at least 75% domestically grown tobacco (the "75/25 Rule"), (2) a poor
quality 1993 flue-cured tobacco crop in the U.S. and (3) the introduction of
legislation in the summer of 1993 to increase significantly the federal excise
tax on cigarettes that resulted in manufacturers' reluctance to build
inventories. Concurrent with the reduction in demand for international
tobaccos related to the 75/25 Rule and lower than expected initial demand for
imported tobacco products in Central and Eastern Europe and the former Soviet
Union, the worldwide price of tobacco declined due to oversupply attributable
to record foreign tobacco crops. This combination of reduced demand and lower
prices had a negative impact on the financial performance of the leaf tobacco
merchants and resulted in significant increases in uncommitted tobacco
inventories among the merchants.
In 1994 and 1995, the demand and supply imbalance in the worldwide tobacco
market began to improve. Leaf tobacco production outside the U.S. was
curtailed in response to the high levels of uncommitted tobacco inventories.
The 75/25 Rule was repealed in September, 1995, due to its violation of GATT
and was replaced by a series of less stringent import quotas. This resulted
in cigarette manufacturers in the U.S. resuming their purchases of tobacco
grown outside the U.S. The combination of lower levels of tobacco production
and increased demand had a positive impact on worldwide tobacco prices, a
corresponding positive impact on the profitability of the industry, and
resulted in significant reductions in uncommitted tobacco inventories.
Business Strategy
The Company's primary business objective is to capitalize on growth in
worldwide consumption of American blend cigarettes by becoming the low-cost
preferred supplier of leaf tobacco to the large multinational manufacturers of
American blend cigarettes. To achieve this objective, the Company has
designed a strategy to position itself to meet the needs of its cigarette
manufacturing customers throughout the world by expanding its global
operations directly in the major tobacco exporting countries and by forming
strategic relationships with its major customers in countries with emerging
tobacco production in which such customers have specific needs. The Company's
ability to respond to the global expansion and changing needs of the large
multinational cigarette manufacturers is a critical factor in developing and
expanding customer relationships.
The principal components of the Company's business strategy are as follows:
Increase the Company's operations in low-cost tobacco growing regions. To
ensure breadth and depth of supply of tobacco, particularly the tobaccos used
in American blend cigarettes, the Company has expanded and plans to continue
to expand its operations in South America, Africa and China, the largest
production areas of flue-cured and burley tobaccos outside of the U.S. In
1995, the Company signed an agreement with the China National Tobacco
Corporation to provide additional access to a state-of-the-art processing
facility and tobacco sources in the Yunnan province. The Company also made
acquisitions in 1995 in Greece and Turkey, both of which are key producers of
oriental tobacco. The Company intends to utilize its agronomy expertise in
helping to develop low-cost sources of American blend quality tobaccos and its
existing relationships with the major multinational cigarette manufacturers to
gain market share in these growth regions.
-3-
Capitalize on outsourcing trends. The Company anticipates further outsourcing
of leaf tobacco purchasing and processing by cigarette manufacturers. This
outsourcing trend is driven by (1) higher margins in cigarette production, (2)
the increasing sophistication required in sourcing leaf tobacco on a global
basis, (3) and continued privatization of tobacco and cigarette production
operations in certain countries. In late 1994, the Company began providing
all leaf tobacco auction buying in the U.S. for R. J. Reynolds Tobacco
Company, Inc. ("RJR"), the second largest cigarette producer in the U.S. More
recently, the Company began to purchase and process all of the auction market
tobacco requirements in the U.S. for Lorillard Tobacco Company ("Lorillard"),
a major cigarette producer in the U.S.
Improve efficiency and reduce operating costs. In connection with the Merger,
the Company initiated a restructuring plan for its operations. The plan was
designed to eliminate unprofitable locations, consolidate duplicative
processing facilities, reduce the salaried workforce, improve operating
efficiencies and increase regional unit accountability. This initiative
resulted in the recognition of various after tax charges in 1995 and 1996,
aggregating $17.8 million and $11.8 million, respectively. These are expected
to reduce the Company's annual operating costs and expenses by approximately
$25 million pre-tax in 1997 when the benefits are expected to be fully
realized. Since the Merger, the Company has completed the following in
connection with its restructuring plan:
- Consolidated the former Dibrell and Monk-Austin operations in Brazil to
operate as DIMON do Brazil and sold its 50% interest in a Brazilian
tobacco processing joint venture in November, 1995;
- Combined the former Dibrell and Monk-Austin operations in Malawi at
Centraleaf to operate as DIMON Malawi and dissolved a former Dibrell
joint venture in Malawi;
- Combined the former Dibrell and Monk-Austin operations in Zimbabwe to
operate as DIMON Zimbabwe;
- Revised plans for two factories in China's Yunnan Province to call for a
single plant in the city of Kunming; and
- Closed Monk-Austin's Lake City, South Carolina plant.
Expand operations in new markets. During the last decade, several of the
large multinational cigarette manufacturers have expanded their global
operations, particularly into Central and Eastern Europe and the former Soviet
Union, in order to increase their access to and penetration of new markets.
The Company believes this will increase demand for local sources of leaf
tobacco and local tobacco processing due to the semi-perishable nature of
unprocessed tobacco and the existence of domestic content laws in certain
foreign countries. The Company believes those factors will cause
manufacturers to place greater reliance on the services of financially strong
leaf tobacco merchants with the ability to source and process tobacco on a
global basis and to help develop higher quality local sources of leaf tobacco.
Operations
The Company has developed an extensive international network through which it
purchases, processes and sells tobacco. In addition to its processing
facilities in Virginia and North Carolina, the Company owns or has an interest
in, processing facilities in Brazil and Zimbabwe, the two most significant
non-U.S. exporters of flue-cured tobacco, Malawi and Mexico, two of the
leading non-U.S. exporters of burley tobacco, and Greece and Turkey, the
leading exporters of oriental tobacco. The Company also has processing
facilities in Italy and Germany. In addition, the Company has entered into
contracts, joint ventures and other arrangements for the purchase of tobacco
grown in substantially all countries that produce export-quality, flue-cured
and burley tobaccos, including Argentina, Canada, Chile, Guatemala, India and
Tanzania.
-4-
Purchasing. The Company purchases tobacco in approximately 26 countries.
Although in previous years the majority of the dollar value of tobacco sold by
the Company was produced domestically, the relative importance of tobacco
grown overseas to the Company's profitability has increased steadily. During
1996, approximately 57% of the dollar value of tobacco purchased by the
Company was purchased in the U.S. Approximately 17%, 9% and 3% of the dollar
value of tobacco purchased by the Company during 1996 was purchased in Brazil,
Zimbabwe and Malawi, respectively. The balance of the Company's tobacco
purchases during 1996 were made in other tobacco growing countries, including
Argentina, Bulgaria, Canada, Chile, China, Germany, Guatemala, France, Greece,
India, Italy, Mexico, Poland, the former Soviet Union, Tanzania and Turkey.
The Company believes it has access to a diverse supply of tobacco grown in a
number of regions throughout the world and can respond quickly to factors that
may cause fluctuations in the quality, yield or price of tobacco crops grown
in any one region.
Tobacco generally is purchased at auction or directly from growers. Tobacco
grown in the U.S., Canada, Malawi and Zimbabwe is purchased by the Company
principally on auction markets. The Company purchases domestic tobacco on the
flue-cured, burley and air-cured auction markets in Florida, Georgia,
Kentucky, Maryland, North Carolina, South Carolina, Tennessee and Virginia for
shipment to the Company's facilities in North Carolina and Virginia for
processing to customer specification. The Company usually purchases tobacco
at the auction markets after receiving specific customer orders or indications
of customers' upcoming needs. The Company's network of buyers allows the
Company to cover the major auctions of flue-cured and burley tobaccos
throughout the world. These buyers are experts in differentiating hundreds of
grades of tobacco based on customer specifications and preferences that take
into account, among other factors, the texture, visual appearance and aroma of
the tobacco.
In non-auction markets such as Argentina, Brazil, Greece and Turkey, the
Company purchases tobacco directly from farmers or from local entities that
have arrangements with farmers. These direct purchases are often made by the
Company based upon its projection of the needs of its long-standing customers
rather than against specific purchase orders. The Company's arrangements with
farmers vary from locale to locale depending on the Company's predictions of
future supply and demand, local historical practice and availability of
capital. For example, in Brazil, the Company generally contracts to purchase
a farmer's entire tobacco crop at the market price at the time of harvest
based on the quality of the tobacco delivered. Pursuant to these purchase
contracts, the Company provides farmers with fertilizer and other materials
necessary to grow tobacco and may extend loans to farmers to finance the crop.
Under longer-term arrangements with farmers, the Company may also finance
farmers' construction of curing barns. In addition, the Company's field
representatives maintain frequent contact with farmers prior to and during the
growing and curing seasons to provide technical assistance to improve the
quality and yield of the crop. In other non-auction markets, such as
Argentina and India, the Company buys tobacco from local entities that have
purchased tobacco from farmers and supervises the processing of that tobacco
by those local entities. The Company believes that its long-standing
relationships with its customers are vital to its operations outside of the
auction markets.
Processing. The Company processes tobacco to meet each customer's
specifications as to quality, yield, chemistry, particle size, moisture
content and other characteristics. The Company processes purchased tobacco in
its 17 tobacco 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, the Company has located its processing facilities close
to its principal sources of tobacco.
Upon arrival at the Company's processing plants, flue-cured and burley tobacco
is first reclassified according to grade. Most of that tobacco is then blended
to meet customer specifications regarding color, body and chemistry, threshed
to remove the stem from the leaf and further processed to produce strips of
tobacco and separate out small scrap. The Company also sells a small amount
of processed but unthreshed flue-cured and burley tobacco in loose-leaf and
bundle form to certain of its customers.
-5-
Processed flue-cured and burley tobacco is redried to remove excess moisture
so that it can be held in storage by customers or the Company for long periods
of time. After redrying, whole leaves, bundles, strips or stems are
separately packed in cases, bales, cartons or hogsheads for storage and
shipment. Packed flue-cured and burley tobacco generally is transported in
the country of origin by truck or rail, and exports are moved by ship.
Prior to and during processing, steps are taken to ensure consistent quality
of the tobacco, including the regrading and removal of undesirable leaves,
dirt and other foreign matter. Customer representatives are frequently
present at the Company's facilities to monitor the processing of their
particular orders. Increased customer requirements and competition among leaf
merchants have led to improvements in processing designed to minimize waste
and thereby increase yield. Throughout the processing, Company technicians
use laboratory test equipment for quality control to ensure that the product
meets all customer specifications.
From time to time, the Company processes and stores tobacco acquired by
various stabilization cooperatives under the U.S.'s price support program.
The Company can derive significant revenues from the fees charged for such
services, particularly in years when a substantial portion of the domestic
tobacco crop is acquired by such cooperatives under the program. While these
revenues are not material to the Company's net sales, they result in
additional recovery of fixed cost which may be significant to gross profit.
Selling. The Company sells its tobacco to manufacturers of cigarettes and
other consumer tobacco products located in about 60 countries around the
world. The Company ships tobacco to international locations designated by
these manufacturers. A majority of the shipments of tobacco are to factories
of these manufacturers that are located outside the U.S. In certain
countries, the Company also uses sales agents to supplement its selling
efforts. Several of these customers individually account for a significant
portion of the Company sales in a normal year. The loss of any one or more of
such customers could have a materially adverse effect on the tobacco business
of the Company.
The consumer tobacco business in most markets is dominated by a relatively
small number of large multinational cigarette manufacturers and by government
controlled entities. Approximately 55% and 52% of the Company's consolidated
tobacco sales for 1996 and 1995, respectively, were contracted to be delivered
to 37 customers which the Company believes are owned by or under common
control of Japan Tobacco, Philip Morris or RJR, each of which contributed in
excess of 10% of total tobacco sales, with RJR and Philip Morris accounting
for significantly more sales than Japan Tobacco. No other customer accounts
for more than 10% of the Company's sales. See "-- Global Operations -- United
States" and Note M to the Company's Consolidated Financial Statements for the
year ended June 30, 1996, included herein as part of Item 8. The Company
generally has maintained relationships with its customers for over forty
years. In 1996, the Company delivered approximately 38% of its tobacco sales
to customers in the U.S., approximately 28% to customers in Europe and the
remainder to customers located in Asia, South America and elsewhere.
As of June 30, 1996, the Company's consolidated entities had tobacco
inventories of approximately $315 million and approximately $254 million in
commitments or indications from customers for purchases of tobacco. At June
30, 1995, those entities had tobacco inventories of approximately $410 million
and approximately $256 million in commitments or indications from customers
for purchases of tobacco. Substantially all of the June 30, 1996, commitments
are expected to be delivered in 1997. The level of purchase commitments for
tobacco fluctuates from period to period and is significant only to the extent
it reflects short-term changes in demand for leaf tobacco. The Company makes
85-95% of its leaf tobacco purchases pursuant to customer orders or supply
contracts or customer indications of anticipated need, with most purchases
made based on indications. Customers are legally bound to purchase tobacco
acquired by the Company pursuant to orders, but no contractual obligation
exists with respect to tobacco purchased in response to indications. However,
the Company has done business with most of its customers for many years and
has never experienced a significant failure of customers to purchase tobacco
for which they have given indications. Other than the contracts with RJR and
Lorillard described below under "--Global Operations --United States," the
Company has no significant supply agreements with its customers.
-6-
The Company typically makes sales based on a customer's letter of credit, by
cash against documents or by payment against invoice. Substantially all of
the Company's sales throughout the world are denominated in U.S. dollars.
While payment for tobacco sold by the Company is usually received after the
tobacco has been processed and shipped, some customers make advances to the
Company periodically throughout the buying season as tobacco is purchased by
the Company for their accounts. Distribution of processed tobacco is made by
delivery from the Company's storage facilities directly to customers, by truck
or rail to customers' storage or manufacturing facilities or to port for
shipping.
Global Operations
United States. The Company owns and operates four processing facilities in
North Carolina and Virginia. The price of tobacco grown in the U.S. is
supported under a government price support program which also establishes
quotas for production. Consequently, U.S.-grown tobacco is typically more
expensive than tobacco grown elsewhere. Although domestic tobacco historically
has accounted for a large portion of the Company's sales, the Company expects
that, because of this price differential and its generally increasing business
outside of the U.S., sales of flue-cured and burley tobacco grown in the U.S.
and related services will be less significant than in the past. The Company
believes that any short-term decline in its domestic business should be offset
in the short-term by increased foreign operations.
In late 1994, Monk-Austin entered into an agreement with RJR to purchase all
of RJR's U.S. auction market tobacco requirements. In late 1995, the Company
entered into an agreement with Lorillard pursuant to which the Company will
purchase and process all of Lorillard's domestic auction market tobacco
requirements. Generally, the contracts establish a framework for pricing the
Company's services (which generally is negotiated with respect to crop year,
grade of tobacco leaf or type of service provided based on market prices), do
not provide for minimum purchases and are terminable upon reasonable notice.
The Company expects that purchases under these agreements will account for a
substantial portion of its tobacco purchases in the U.S. in the future.
Brazil. The Company believes it is one of the two largest independent leaf
tobacco merchants in Brazil. The Company exports the majority of the tobacco
that it processes in Brazil to its customers around the world. In 1996, the
Company derived approximately 24% of its tobacco revenue from its Brazilian
operations.
In 1996, the Company merged its two wholly owned subsidiaries, Tabra and
Dibrell do Brazil to form DIMON do Brazil. DIMON do Brazil has three modern
tobacco processing facilities located in the center of Brazil's tobacco
production area. Brazil represents the Company's most significant foreign
operation in virtually all respects, including purchasing volume, processing
and storage capacities and operating income potential. Through the merger and
resulting reduction in duplicative functions and facilities the Company
believes that it will realize certain economies of scale. The Company
believes that these certain economies of scale and savings have been achieved
in 1996 operating results and will be fully reflected in 1997 operating
results.
Zimbabwe and Malawi. The Company exports the majority of the tobacco it
processes in Zimbabwe and Malawi to its customers around the world. In 1996,
the Company derived approximately 12% of its tobacco revenue from its
Zimbabwean and Malawian operations.
In 1995, the Company combined the former Dibrell and Monk-Austin operations in
Zimbabwe and Malawi to form two wholly-owned subsidiaries, DIMON Zimbabwe and
DIMON Malawi. Through DIMON Zimbabwe the Company purchases, processes in two
facilities and exports flue-cured and burley tobacco grown in Zimbabwe.
Through DIMON Malawi the Company purchases, processes in one facility and
exports flue-cured and burley tobacco grown in Malawi.
Greece and Turkey. The Company believes it is the largest exporter of
processed oriental tobacco in the world as a result of the acquisition of
additional oriental tobacco processing facilities in Greece and Turkey.
Greece and Turkey are the most important producers of oriental tobaccos.
Through its wholly-owned subsidiaries, DIMON Hellas Tobacco SA and DIMON Turk
Tutun AS, the Company buys, processes in two facilities in each country and
exports oriental tobacco grown in each country.
-7-
Other Foreign Operations. The Company also has foreign subsidiaries, joint
ventures and affiliates that purchase, process and sell tobacco grown in other
countries throughout the world. In addition, the Company owns and operates
processing facilities in Italy and Germany.
In certain countries, such as China and India, the Company has processing
agreements with other processors to use their facilities under the supervision
of the Company's employees. In several South American countries where the
Company operates, tobacco is bought from the farmers by the processors at
negotiated prices, and it is necessary to prefinance the crop by making
advances of cash or materials to the farmers prior to and during the growing
season.
Competition
The leaf tobacco industry is highly competitive. Competition among dealers in
leaf tobacco is based on the price charged for products and services as well
as the dealers' ability to meet customer specifications in the buying,
processing and financing of tobacco. The Company believes that it is well
positioned to meet this competition, particularly in view of its important
processing facilities in the U.S., Brazil and other major tobacco growing
countries. Among independent tobacco leaf merchants, the principal competitors
are Universal Corporation ("Universal"), Standard Commercial Corporation and
Intabex Holding Worldwide S.A. Of the independent leaf tobacco merchants, the
Company believes that, based on revenues, it ranks second in established
worldwide market share. The Company further believes that among independent
tobacco leaf merchants, it has the largest or second largest market share in
Brazil, Greece, Turkey, the U.S. and Zimbabwe. Universal's market share in
the U.S. and Zimbabwe is considerably greater than that of the Company.
Seasonality
The purchasing and processing activities of the Company's tobacco business are
seasonal. Flue-cured tobacco grown in the U.S. generally is purchased during
the five-month period beginning in July and ending in November. U.S.-grown
burley tobacco is usually purchased from late November through January or
February. Tobacco grown in Brazil usually is purchased from January through
June. Other markets around the world last for similar periods, although at
different times of the year, and as the importance of these markets has grown,
seasonal fluctuations in the Company's results of operations have decreased.
Mature tobacco, prior to being processed and packed, is a semi-perishable
commodity. The production cycle for redrying and packing is relatively short.
For example, flue-cured tobacco in the U.S. is 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 the Company's fiscal year, the
seasonal components of the Company's working capital reflect primarily the
operations related to foreign grown tobacco.
-8-
Flowers
Operations
The Company's fresh-cut flower operations consist of buying flowers from
sources throughout the world and transporting them, normally by air, to
operating units for resale to wholesalers and retailers through its wholly-
owned flowers subsidiary, Florimex Worldwide, Inc. ("Florimex"). For the year
ended June 30, 1996, the Company's flower operations produced approximately
18% of the Company's revenues and represented approximately 10% of the
Company's consolidated assets at year end.
Florimex operates through 57 offices in 17 countries, including Austria,
Canada, Colombia, the Czech Republic, Ecuador, France, Germany, Italy, Japan,
Poland, The Netherlands, Spain, Sweden, Switzerland, Thailand, the United
Kingdom and the U.S. The activities of certain of these offices are limited
to acquiring flowers in the country of origin, but most are engaged in
importation and distribution. Florimex is also engaged in additional value-
added services through the design and assembly of floral bouquets for sale to
supermarket retailers. Virtually all offices are operated as corporate profit
centers with the general manager receiving a bonus related to the financial
performance of the operation. In a limited number of cases, the local general
manager owns a minority share of the unit's equity and participates in
dividend distributions.
Florimex's Dutch exporting operations, Baardse, are headquartered in Aalsmeer,
The Netherlands, inside the premises of the world's largest flower auction
facilities. In addition to the Aalsmeer auction, Florimex routinely acquires
flowers from all principal Dutch flower auctions. Florimex's Dutch exporting
operations sell and ship product directly to Florimex's fresh-cut flower
operations and its competitors.
Business Strategy
The Company's business strategy for Florimex is to increase profitability by
increasing sales volume within its established distribution system,
rationalizing its cost structure and reducing credit losses. The Company
believes that its extensive global network, with buying capacity in all major
flower production markets and broad based distribution arrangements in the
world's primary wholesale and retail flower markets, gives it substantial
competitive advantages.
The principal components of Florimex's business strategy are as follows:
Expansion of Sales; New Distribution Channels. Florimex expects to increase
its sales by focusing on areas of growing per capita consumption of flowers,
particularly in non-traditional flower consumption markets in Europe and North
America. To accomplish this objective, Florimex has recently (1) restructured
its operations in North America to concentrate on (a) the growing channels of
supermarkets and mass merchant retailers and (b) bouquet sales in the U.S. and
(2) concentrated on sales in Europe, particularly eastern Germany and the
Czech Republic.
Rationalize operations. Florimex has realized substantial cost savings by
reducing personnel, streamlining administrative functions globally and by
eliminating unprofitable operations.
Reduce credit losses. As the timely collection of trade accounts receivable
has traditionally represented a considerable business risk to Florimex's
flower operations, trade accounts receivable reporting and credit
authorization procedures have been entirely revised. These revisions include
(1) the implementation of centralized credit reporting procedures, (2) an
overall reassessment of customer credits, (3) the culling of customer listings
for the various Florimex companies in order to concentrate on higher margin
accounts, (4) requiring bi-monthly updates to the head office on outstanding
balances, and, (5) the creation of a prompt response program for customers who
begin to evidence slow payer characteristics. These revised policies and
procedures reduced bad debt expenses for 1996 by 75% compared to the average
for the previous five years.
-9-
Sources of Supply
Florimex acquires its fresh-cut flowers from more than 300 suppliers located
in more than 50 countries on five continents. Its primary sources of supply
include The Netherlands (via the Dutch auction system), Kenya (via a renewable
exclusive supplier contract effective since 1976), Columbia, Ecuador and
Thailand. Florimex purchased $40.9 million, or 13.9%, of its total purchases
in 1996 ($33.7 million, or 11.5% in 1995) from its Dutch exporting operations
on terms similar to those offered to independent parties. Florimex annually
buys approximately 30% of the flower crop grown on independent supplier farms
in Kenya. Florimex believes that its existing sources of supply are adequate
at current sales levels. Florimex also believes that its close relationships
with commercial and cargo airlines give it a competitive advantage by
permitting it to transport its products around the world expeditiously and
cost effectively.
Customers and Market Potential
Florimex sells to thousands of wholesalers and retailers throughout Europe,
North America and Asia. No customer accounts for a significant portion of
Florimex's sales in a normal year, and the loss of any one customer or a group
of related customers should not have a material adverse effect on Florimex's
business.
Industry statistics indicate that the annual retail sales of fresh-cut flowers
in the U.S., the largest single flower market in the world, exceed $6.5
billion. While the routine purchase of flowers is a tradition in the mature
European market, the U.S. market is growing and offers an opportunity for
significant penetration. The primary market growth in the U.S. is occurring
among supermarkets. During 1995, the Company substantially redirected its
U.S. flower resources to serve this important group of customers.
Competition
Competition within the fresh-cut flower distribution industry is based on
adequate and reliable supplies of competitively priced, fresh, good quality
flowers. Prices quoted to wholesalers are volatile and often change several
times a day. Credit terms are also important. Major competitors are numerous
and vary according to market. However, no cut-flower operation, including
Florimex, has more than a small share of the worldwide market. Competition is
therefore intense. Based on its long-standing sources of supply and well-
developed purchasing and distribution facilities, Florimex believes that it
competes effectively.
Seasonality
Sales of fresh-cut flowers are seasonal and are significantly affected by peak
holiday demand. Generally the June through August months have low sales
levels, with sales increasing through the fall and Christmas season. Special
days, such as Valentine's Day and Mother's Day, generally result in material
sales increases in February through May.
Employees
The Company's consolidated entities employ about 2,800 persons, excluding
seasonal employees, in its worldwide tobacco operations. In the U.S. tobacco
operations the Company's consolidated entities employ about 900 persons,
excluding 1,200 seasonal employees. Most seasonal employees are covered by
collective bargaining agreements with several U.S. labor unions. In the non-
U.S. tobacco operations the Company's consolidated entities employ about 1,900
persons, excluding 6,650 seasonal employees. The Company's worldwide
consolidated cut flower operation entities employ about 1,300 persons,
excluding seasonal employees. The Company considers its employee relations to
be satisfactory.
-10-
Government Regulation, Environmental Matters and Other Matters
See " Managements' Discussion and Analysis of Financial Condition and Results
of Operations -- Factors that May Affect Future Results" for a discussion of
government regulation, environmental compliance and other matters that may
affect the Company's business.
-11-
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS, FOREIGN AND
DOMESTIC OPERATIONS AND EXPORT SALES
As discussed in Item 1, the Company operates in two business segments: the
purchasing, processing and selling of leaf tobacco and the purchasing and
selling of cut flowers. Financial information concerning segments and
geographical operations is included in Note M to the Notes to Consolidated
Financial Statements. Information with respect to the Company's working
capital appears in Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources.
ITEM 2. PROPERTIES
Following is a description of the material properties of the Company:
Corporate
The Company's corporate headquarters are located in Danville, Virginia; the
tobacco operations are headquartered in Farmville, North Carolina, and
headquarters for flowers operations are in Nuremberg, Germany.
Tobacco Facilities
The Company operates each of its tobacco processing plants for seven to nine
months during the year to correspond with the applicable growing season.
While the Company believes its processing facilities are being efficiently
utilized, the Company also believes its domestic processing facilities and
certain foreign processing facilities have the capacity to process additional
volumes of tobacco if required by customer demand.
The following is a listing of the various properties used in the tobacco
operations:
AREA IN
LOCATION USE SQUARE FEET
UNITED STATES
DANVILLE, VA FACTORY/STORAGE 2,017,000
KENBRIDGE, VA STORAGE (LEASED) 1,665,000
GREENVILLE, N.C. FACTORY/STORAGE 969,000
FARMVILLE, N.C. FACTORY/STORAGE 1,136,000
KINSTON, N.C. FACTORY/STORAGE 1,149,000
LAKE CITY, S.C. STORAGE 252,000
SOUTH AMERICA
VERA CRUZ, BRAZIL FACTORY/STORAGE 1,617,000
SANTA CRUZ, BRAZIL FACTORY/STORAGE 1,693,000
VENANCIO AIRES, BRAZIL FACTORY/STORAGE 848,000
ZACAPA, GUATEMALA STORAGE 15,000
AFRICA
LILONGWE, MALAWI FACTORY 248,000
HARARE, ZIMBABWE FACTORY(2)/STORAGE 1,222,000
EUROPE
KARLSRUHE, GERMANY FACTORY/STORAGE 320,000
THESSALONIKI, GREECE FACTORY(2)/STORAGE 651,000
SPARANISE, ITALY FACTORY/STORAGE 541,000
IZMIR, TURKEY FACTORY(2)/STORAGE 290,000
-12-
Flower Facilities
Florimex has 57 different operating facilities throughout the world. The
owned properties include an international distribution warehouse in
Kelsterbach, Germany (near Frankfurt Airport), with offices and storages of
about 60,000 square feet. In Nuremberg, the headquarters of Florimex, owned
properties include office and storages of about 300,000 square feet. At all
Florimex locations there are various properties, generally located near
airports, consisting of owned or leased offices and storages. The storages at
each location include cooler storages of various sizes to accommodate the
needs of individual locations. The Company's management believes its flower
operation facilities, including office, distribution and warehouse facilities,
are efficiently utilized and are adequate for current and projected sales
levels for the foreseeable future. Baardse, the Dutch flower exporter, has
leased about 110,000 square feet of office and storage associated with the
Aalsmeer auction operation. Aalsmeer has the largest flower auction facility
in The Netherlands. Baardse also owns greenhouses in Aalsmeer with 125,000
square feet.
All of the above property is owned, except as otherwise indicated, by the
Company, its subsidiaries or investee companies. The Company believes that
the facilities are generally well maintained and in good operating condition
and are suitable and adequate for its purposes at current and reasonably
anticipated future sales levels.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
-13-
ADDITIONAL INFORMATION - EXECUTIVE OFFICERS OF THE COMPANY
The names and ages of all executive officers of the Company, as of June 30,
1996, 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. Mr. John M. Hines and Mr. Thomas H. Faucett retired effective June
30, 1996. On August 26, 1996, Mr. Brian J. Harker, currently Senior Vice
President of DIMON International, Inc., was elected Executive Vice President
and Chief Financial Officer of DIMON Incorporated effective October 1, 1996.
NAME AGE POSITION
Claude B. Owen, Jr. 51 Chairman of the Board - Chief Executive Officer of the
Company on October 21, 1994. He also served as Chairman,
Chief
Executive Officer and President of Dibrell from July 1993
until the effective time of the Merger and as Chairman of the
Board and Chief Executive Officer of Dibrell from February
1990
until July 1993. Mr. Owen also serves as a director for
American National Bankshares, Inc. and Richfood Holdings,
Inc.
Albert C. Monk III 56 President of the Company on October 21, 1994 and President
and Chief Executive Officer of DIMON International on January
23, 1995. He also served as Chairman, Chief Executive Officer
and President of Monk-Austin beginning from November 8, 1994
until the effective time of the Merger, Chief Executive
Officer and President of Monk-Austin since 1992 and President
of Monk-Austin since 1990. Mr. Monk is the first cousin of
Robert T. Monk, Jr., a director of DIMON Incorporated.
John M. Hines 56 Executive Vice President of the Company on February 22,
1995. He retired from the Company effective June 30, 1996 but
will continue to serve as a consultant to the Company for two
years. He also served as Executive Vice President and Chief
Financial Officer of Monk-Austin from 1990 to the effective
time of the Merger.
Thomas H. Faucett 55 Chief Financial Officer of the Company since January 23,
1995; with Dibrell Brothers, Inc. Mr. Faucett was Senior
Vice President - Chief Financial Officer beginning in
October, 1985; and was a Director beginning in 1986.
-14-
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
DIMON Incorporated's common stock is traded on the New York Stock Exchange,
under the ticker symbol "DMN". The Common Stock began trading on the NYSE on
April 3, 1995.
The following table sets forth for the periods indicated the high and low
reported sales prices of the Common Stock as reported by the NYSE and the high
and low bid prices as reported by Nasdaq and the amount of dividends declared
per share for the periods indicated.
DIMON
Common Stock
Dividends
High Low Declared (1)
Fiscal Year 1996
Fourth Quarter. . . . . . . . . . . $19 1 / 2 $16 1/8 $.135
Third Quarter . . . . . . . . . . . 20 7 / 8 16 .135
Second Quarter. . . . . . . . . . . 18 3 / 4 13 3 / 4 .135
First Quarter . . . . . . . . . . . 17 5 / 8 14 5 / 8 .135
Fiscal Year 1995
Fourth Quarter. . . . . . . . . . . 18 5 / 8 14 .135
Dibrell Monk-Austin
Common Stock (2) Common Stock (4)
High-Low (3) High-Low
Third Quarter . . . . . . $14 2 / 3 - 10 2 / 3 $13 1 / 4 - 11 5 / 8 $.133
Second Quarter. . . . . . 14 5 / 6 - 13 15 - 12 7 / 8 .133
First Quarter . . . . . . 13 - 9 1/4 15 - 12 1 / 4 .133
______________________________________
(1) Dividends declared through the third quarter of 1995 reflect the
dividend policy of Dibrell which is being continued by DIMON. Monk-Austin
paid no dividends.
(2) Prior to April 1, 1995, Dibrell common stock was traded on The Nasdaq
National Market.
(3) Adjusted to reflect the issuance of 1.5 shares of DIMON Common Stock
for each share of Dibrell common stock in the Merger.
(4) Prior to April 1, 1995, Monk-Austin common stock was traded on the
NYSE.
As of June 30, 1996, there were 4,596 shareholders, including approximately
3,300 beneficial holders of its Common Stock. The Company pays dividends
quarterly.
The Company is subject to certain restrictions on its ability to pay
dividends. See "Managements' Discussion and Analysis of Financial Condition
and Results of Operations -- Restrictions of Dividends."
-15-
ITEM 6. SELECTED FINANCIAL DATA
FIVE-YEAR FINANCIAL STATISTICS
__________________________________________________________________________________________________________
DIMON Incorporated and Subsidiaries
Years Ended June 30
(in thousands, except per share amounts) 1996 1995 1994 1993 1992
__________________________________________________________________________________________________________
Summary of Operations
Sales and other operating revenues .$2,167,473 $1,941,188 $1,464,778 $1,706,294 $1,712,567
Cost of sales and expenses . . . . . 2,037,702 1,892,166 1,435,016 1,572,479 1,595,431
Restructuring and merger costs . . . 15,360 25,955 - - -
______________________________________________________________________
Operating income. . . . . . . . . . $ 114,411 $ 23,067 $ 29,762 $ 133,815 $ 117,136
Interest expense. . . . . . . . . . 46,924 45,231 35,117 38,128 42,837
______________________________________________________________________
Income (loss) from continuing
operations before income taxes,
minority interest, equity in
net income (loss) of investee
companies, extraordinary
items and cumulative effect
of accounting changes. . . . . . .$ 67,487 $ (22,164) $ (5,355) $ 95,687 $ 74,299
Income taxes. . . . . . . . . . . . (26,995) (5,980) (2,767) (31,173) (23,590)
Income (loss) applicable to
minority interest. . . . . . . . . 292 216 466 486 214
Equity in net income (loss) of
investee companies . . . . . . . . (274) (1,435) 687 1,404 5,112
U.S. taxes provided on
investee companies . . . . . . . . (56) (370) (589) (145) -
_______________________________________________________________________
Income (loss) from continuing
operations before
extraordinary items and
cumulative effect of
accounting changes . . . . . . . . $ 39,870 $ (30,165) $ (8,490) $ 65,287 $ 55,607
Extraordinary items:
Partial recovery of (loss) on
Iraqi receivable, net of tax . . . 1,400 - - - (3,637)
Reduction of foreign
income tax arising from
utilization of prior
years' operating losses. . . . . - - - - 6,210
Cumulative effect of accounting changes:
Postretirement benefit plans,
net of tax. . . . . . . . . . . . - - - (9,746) -
Income taxes. . . . . . . . . . . . - - - 8,963 -
_______________________________________________________________________
Net Income (Loss). . . . . . . . . . $ 41,270 $ (30,165) $ (8,490) $ 64,504 $ 58,180
Per Share Statistics
Primary:
Income (loss) from continuing
operations before
extraordinary items and
cumulative effect of
accounting changes. . . . . . . . $ 1.00 $ (.79) $ (0.22) $ 1.76 $ 1.57
Extraordinary items . . . . . . . . .04 - - - 0.07
Cumulative effect of
accounting changes. . . . . . . . - - - (0.02) -
Net income (loss) . . . . . . . . . 1.04 (.79) (0.22) 1.74 1.64
Fully diluted:
Income (loss) from continuing
operations before
extraordinary items and
cumulative effect of
accounting changes. . . . . . . . .98 * * 1.65 1.40
Extraordinary items . . . . . . . . .03 - - - 0.07
Cumulative effect of
accounting changes. . . . . . . . - - - (0.02) -
Net income (loss) . . . . . . . . . 1.01 * * 1.63 1.47
Dividends paid (1) . . . . . . . . . 0.54 0.535 0.495 0.42 0.34
Stockholders' equity . . . . . . . . 7.46 6.27 7.57 8.32 6.28
Return on average stockholders'
equity . . . . . . . . . . . . . . . 14.88% -11.45% -2.85% 24.30% 29.46%
-16-
ITEM 6. SELECTED FINANCIAL DATA (continued)
FIVE-YEAR FINANCIAL STATISTICS (continued)
______________________________________________________________________________________________________________
DIMON Incorporated and Subsidiaries
Years Ended June 30
(in thousands, except per share amount) 1996 1995 1994 1993 1992
______________________________________________________________________________________________________________
Balance Sheet Data
Current assets . . . . . . . . . . .$ 668,775 $ 731,119 $ 685,443 $ 666,454 $ 654,447
Current liabilities. . . . . . . . . 246,433 453,522 467,776 423,854 436,042
______________________________________________________________________
Working capital. . . . . . . . . . .$ 422,342 $ 277,597 $ 217,667 $ 242,600 $ 218,405
Working capital ratio. . . . . . . . 2.7 to 1 1.6 to 1 1.5 to 1 1.6 to 1 1.5 to 1
Property, plant and
equipment (net) . . . . . . . . . .$ 236,775 $ 223,049 $ 209,739 $ 189,549 $ 163,665
Total assets . . . . . . . . . . . .$1,020,014 $ 1,093,608 $1,043,816 $ 998,520 $ 940,266
Revolving credit notes and
other long-term debt. . . . . . . .$ 390,871 $ 292,528 $ 188,825 $ 180,270 $ 199,494
Convertible Subordinated
Debentures . . . . . . . . . . . .$ - $ 56,370 $ 56,475 $ 56,475 $ 56,900
Stockholders' equity . . . . . . . .$ 315,848 $ 238,806 $ 288,314 $ 308,149 $ 222,962
Other Statistics
Weighted average common shares,-
primary . . . . . . . . . . . . . . 39,671 38,100 38,091 37,072 35,354
Weighted average common shares,
fully diluted . . . . . . . . . . . 42,464 42,355 42,297 41,310 39,626
Common shares outstanding
at year end . . . . . . . . . . . . 42,366 38,092 38,069 37,035 35,351
Number of stockholders
at year end (2) . . . . . . . . . . 4,596 4,249 4,940 4,919 3,770
Dividends paid . . . . . . . . . . .$ 21,731 $ 15,570 $ 13,014 $ 9,818 $ 8,629
________________________________________________________________________
* Computation of loss per share is anti-dilutive for the years 1995 and 1994.
(1) Dividends declared through the third quarter of 1995 reflect the
dividend policy of Dibrell which is being continued by DIMON.
(2) Includes the number of Shareholders of record and non-objecting
beneficial owners.
-17-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Unless otherwise indicated, references to years refer to the Company's fiscal
year ended June 30.
General
The Company is engaged in two business segments: the purchasing, processing
and selling of leaf tobacco and the purchasing and selling of fresh-cut
flowers.
The Company believes that it is the world's second largest independent
purchaser and processor of leaf tobacco. Approximately 82% and 80% of the
Company's revenues in 1996 and 1995, respectively, were derived from its
tobacco operations.
The Company's tobacco business is generally conducted in U.S. dollars, as is
the business of the industry as a whole. Accordingly, there is minimal
currency risk related to the sale of tobaccos. However, local country
operating costs, including the purchasing and processing costs for tobaccos,
are subject to the effects of exchange fluctuations of the local currency
against the U.S. dollar. The Company attempts to minimize such currency risks
by matching the timing of its working capital borrowing needs against the
tobacco purchasing and processing funds requirements in the individual
countries of tobacco origin. Fluctuations in the value of foreign currencies
can significantly affect the Company's operating results. In particular, the
Company has a significant concentration of its purchasing, processing and
exporting operations in southern Brazil. In recent years, Brazil's economic
problems have received wide publicity, and that country has taken and is
expected to continue to take various actions relating to foreign currency
exchange controls and adjustments for devaluation of the currency and
inflation. While such controls generally influence the amount of cash
dividends remitted from Brazil and such adjustments can affect the Company's
processing costs, they have not and are not expected to adversely affect the
Company's ability to export tobacco from Brazil. See Note N to the Company's
Consolidated Financial Statements for the year ended June 30, 1996, included
herein.
On April 1, 1995, Dibrell and Monk-Austin merged into DIMON. The Merger has
been accounted for as a pooling of interests and all consolidated financial
statements have been restated to include the historical results of operations
of both Dibrell and Monk-Austin, including the effects of conforming the
accounting policies of the two former entities. Recorded assets and
liabilities have been carried forward at their historical book values.
In connection with the Merger, the Company initiated a restructuring plan
including both the tobacco and flower businesses. The global consolidation
and rationalization program was successfully concluded during 1996. The plan
was designed to eliminate unprofitable locations, consolidate duplicative
processing facilities, reduce the salaried workforce, improve operating
efficiencies and increase regional unit accountability. This initiative
resulted in the recognition of various after tax charges in 1995 and 1996,
aggregating $17.8 million, and $11.8 million, respectively. These charges are
expected to reduce the Company's annual operating costs and expenses by
approximately $25 million pre-tax in 1997 when the benefits are expected to be
fully realized.
In fiscal 1996, following the completion of the Merger, the Company
implemented the Refinancing Plan (the "Refinancing Plan"), which was designed
to reduce its financial leverage, decrease its reliance on short-term
uncommitted lines of credit and diversify its sources of debt financing. The
Refinancing Plan consisted of the following three components:
-18-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
- The call for redemption in March 1996 of the Company's approximately
$54.3 million principal balance of the 7 3/4% Debentures due 2006
(the "7 3/4% Debentures");
- The sale of $125 million 8 7/8% Senior Notes due 2006 (the "Notes"),
completed on May 29, 1996; and
- The execution of a $240 million Credit Agreement, dated as of March 15,
1996 (the "New Credit Facility"), replacing the Company's $250 million
credit facility (the "Former Credit Facility").
The Company has used the net proceeds from the offering of the Notes to reduce
the level of borrowings under the Company's uncommitted unsecured short-term
lines of credit. The Company has historically financed its operations through
a combination of short-term lines of credit, customer advances, cash from
operations and equity and equity-linked securities. As the Company increased
in size and scope, it became increasingly dependent on uncommitted short-term
lines of credit. The Company now believes that it is prudent to finance a
larger percentage of its working capital with longer term, more permanent
capital. The Company believes that the longer maturity of the Notes, combined
with the reduced financial leverage resulting from the conversion of the
7 3/4% Debentures and the less restrictive terms of the New Credit Facility,
will give the Company increased financial flexibility.
The remainder of the Company's revenues are derived from purchasing and
selling fresh-cut flowers. Florimex has two principal operations, importing,
exporting and wholesaling fresh-cut flowers and exporting fresh-cut flowers
purchased primarily from the major flower auctions in The Netherlands.
Approximately 18% of the Company's 1996 revenues were derived from its flower
operations.
Results of Operations
The following table expresses items in the Statement of Consolidated Income as
a percentage of sales for each of the three most recent years. Any reference
in the table and the following discussion to any given year is a reference to
the Company's fiscal year ended June 30.
Years Ended
_____________________________________
1996 1995 1994
____________________________________________________________________________________
Sales and other operating revenues. . . . . 100.0% 100.0% 100.0%
Cost of goods and services and expenses . . 87.9 90.6 90.0
Selling, administrative and general
expenses. . . . . . . . . . . . . . . . . 6.1 6.9 8.0
Restructuring and merger related costs. . . 0.7 1.3 -
_______________________________________
Operating income. . . . . . . . . . . . . . 5.3 1.2 2.0
Interest expense. . . . . . . . . . . . . . (2.2) (2.4) (2.4)
_______________________________________
Income (loss) before income taxes, minority
interest, equity in net loss of
investee companies . . . . . . . . . . . 3.1 (1.2) (0.4)
Income taxes. . . . . . . . . . . . . . . . 1.2 0.3 0.2
Equity in net loss of investee companies. . - (0.1) -
_______________________________________
Net income (loss) . . . . . . . . . . . . . 1.9 (1.6) (0.6)
=======================================
-19-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Comparison of the Year Ended June 30, 1996 to the Year Ended June 30, 1995
The Company's sales and other operating revenues in 1996 were $2.167 billion,
an increase of 11.7% from $1.941 billion in 1995. Sales from tobacco
operations increased 13.8%, from $1.555 billion in 1995 to $1.770 billion in
1996, primarily due to higher prices on tobacco from South America and
increased quantities sold primarily from Europe and Africa. The sales from
South America increased in the fourth quarter in 1996 compared to 1995 as
demand improved, but the amount is not expected to reduce sales in 1997. See
"--Factors that May Affect Future Results." The higher tobacco prices from
South America accounted for $102.0 million and increased quantities sold from
Europe and Africa accounted for $85.5 million and $29.4 million, respectively.
The increased sales of tobacco from Europe resulted from the operations
acquired in Greece, Italy and Turkey.
Sales and other operating revenues of flowers increased 2.9%, from $385.9
million in 1995 to $397.3 million in 1996. The increase in the Company's sales
of flowers was primarily due to the increased export sales from The
Netherlands.
Cost of sales and expenses of the Company's tobacco operations before
restructuring and merger related costs increased 9.2% in 1996 from 1995 due
primarily to the 13.8% increase in net sales. The world oversupply of
tobacco, which began in 1993, started to improve in 1995 and further improved
in 1996 which, along with early consolidation -related cost savings, generated
the improvement in the tobacco operating margin (operating income). As a
percent of net sales, operating income, excluding restructuring costs,
increased to 7.8% in 1996 compared to 3.9% in 1995.
Cost of sales and expenses of the flower operations before restructuring costs
increased by 0.8% in 1996 from 1995 primarily due to the sales increase of
2.9% offset partially by implementing cost-cutting measures, revising credit
policies which decreased bad debts and the closing of unprofitable operations
in 1995. The flower operating income (loss) excluding restructuring costs,
increased from a (0.1%) loss as a percent of net sales in 1995 to a positive
2.0% of net sales in 1996, primarily due to increased gross margins of the
export operations in The Netherlands and by decreased costs mentioned above.
Corporate expenses before restructuring costs increased $4.6 million, or
40.7%, to $15.9 million in 1996 from $11.3 million in 1995, due primarily to
increased personnel costs and bonuses and legal and professional expenses in
1996. Some of the increased costs for personnel relate to reassigning
departments to corporate that were previously in the tobacco operations.
Restructuring charges in 1996 for the tobacco operations and corporate
amounted to $11.5 million and $4.4 million, respectively. The flower
operations had a $.5 million recovery of restructuring costs. The net charges
are comprised of $15.7 million for employee separations, a credit of $1.2
million for facility sales and closures and $.9 million for asset writedowns
and other items.
Interest expense increased $1.7 million in 1996 primarily due to higher
borrowings because of increased average tobacco purchases and, to a lesser
extent, higher average interest rates.
The effective tax rate for 1996 was 40%. In 1995, the Company had tax expense
in spite of the overall pre-tax loss due to the effects of foreign tax rates,
the mix of income and losses of subsidiaries, the currency effect in Brazil
and non-deductible merger expenses.
The $1.5 million decrease in equity in net loss of investee companies in 1996
was due primarily to the sale of the investee in Brazil which had a loss in
1995.
-20-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Comparison of the Year Ended June 30, 1995 to the Year Ended June 30, 1994
The Company's sales and other operating revenues in 1995 were $1.941 billion,
an increase of 32.5% from $1.465 billion in 1994. Sales from tobacco
operations increased 41.9%, from $1.096 billion in 1994 to $1.555 billion in
1995, primarily due to higher prices and increased sales quantities sold
primarily from the U.S. and Brazil. The higher tobacco prices and increased
sales quantities sold from the U.S. accounted for $88.1 million and $248.5
million, respectively, while the increased sales quantities sold from Brazil
accounted for substantially all of the increase from Brazil. The Company's
increase in net sales of U.S. tobacco was primarily attributable to the
Company's 1994 agreement to purchase the U.S. tobacco needs for R. J. Reynolds
Tobacco Company, Inc. The increased sales of tobacco from Brazil resulted
from the sales of uncommitted stocks from prior year crops.
Sales and other operating revenues of flowers increased 4.6%, from $369.1
million in 1994 to $385.9 million in 1995. The increase in the Company's sales
of flowers was primarily due to the favorable effect of applying U.S. dollar
exchange rates to European operations, but these favorable effects were
partially offset by decreased sales of certain North American operations that
were closed during the year. The application of exchange rates increased
sales by $35.5 million and the closing of operations decreased sales by $15.7
million.
Cost of sales and expenses of the Company's tobacco operations increased 40.6%
in 1995 from 1994, due primarily to the 41.9% increase in sales. The world
oversupply of tobacco, which began in 1993, started to improve in 1995 as
indicated by the improvement in the tobacco operating margin (operating
income), before restructuring and merger related costs. As a percent of
sales, operating income increased to 3.9% in 1995 compared to 3.0% in 1994.
However, sales prices continued to be negatively affected by the oversupply,
causing the Company to reduce the carrying amount of its tobacco inventory at
year end by $9.2 million, reflecting the revaluation of that inventory at the
lower of its cost or market value.
Cost of sales and expenses of the flower operations increased by 5.4% in 1995
from 1994, primarily due to the sales increase of 4.6% and increased bad debts
associated with flower operations now closed and other costs, inclusive of
restructuring costs. The flower operating income (loss) decreased from 0.7%
of net sales in 1994 to (0.1%) of net sales in 1995, primarily due to
decreased gross margins of both the U.S. operations that were closed and the
Baardse operations and by increased costs mentioned above.
Corporate expenses increased $5.6 million, or 97.7%, to $11.3 million in 1995
from $5.7 million in 1994, due primarily to increased personnel costs and
legal and professional expenses in 1995 and reversals of prior accruals in
1994 for stock appreciation rights and certain stock options. Some of the
increased costs for personnel relate to reassigning departments to corporate
that were previously in the tobacco operations.
Restructuring charges for the tobacco and flower operations amounted to $15.2
million and $2.6 million, respectively. The charges are comprised of $12.6
million for employee separations, $2.8 million for facility closures, $2.4
million for asset writedowns and other items. In addition the Company
incurred $8.1 million for merger related charges for legal, accounting and
financial advisors.
Interest expense increased $10.1 million in 1995, primarily due to higher
borrowings because of increased average tobacco inventories and, to a lesser
extent, higher average interest rates.
The Company had tax expense in spite of the overall pre-tax loss in 1995, due
to the effects of foreign tax rates, the mix of income and losses of
subsidiaries, the currency effect in Brazil and non-deductible merger
expenses.
-21-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
The $1.9 million decrease in equity in net income of investee companies in
1995 was due primarily to the devaluations of the local currency for the
Company's investee with operations in Zimbabwe and decreased earnings for the
operations in Malawi and Brazil.
Liquidity and Capital Resources
The following table is a summary of items from the Consolidated Balance Sheet
and the Statement of Consolidated Cash Flows.
Year Ended June 30
_____________________________________________
(in thousands, except for current ratio) 1996 1995 1994
________________________________________________________________________________________
Cash and cash equivalents. . . . . . . $ 53,820 $ 42,326 $ 12,471
Net trade receivables. . . . . . . . . 190,898 182,750 164,314
Inventories and advances on purchases
of tobacco . . . . . . . . . . . . . 408,210 468,989 469,015
Total current assets . . . . . . . . . 668,775 731,119 685,443
Notes payable to banks . . . . . . . . - 233,736 255,607
Accounts payable . . . . . . . . . . . 104,506 90,446 112,310
Total current liabilities. . . . . . . 246,433 453,522 467,776
Current ratio. . . . . . . . . . . . . 2.7 to 1 1.6 to 1 1.5 to 1
Revolving Credit Notes and Other
Long-term Debt . . . . . . . . . . . 265,871 292,528 188,825
Convertible Subordinated Debentures. . - 56,370 56,475
Senior Notes . . . . . . . . . . . . . 125,000 - -
Stockholders' equity . . . . . . . . . 315,848 238,806 288,314
Purchase of property and equipment . . 41,266 35,892 32,382
Proceeds from sale of property and
equipment. . . . . . . . . . . . . . 8,605 4,877 5,991
Depreciation and amortization. . . . . 33,780 31,852 28,862
The purchasing and processing activities of the Company's tobacco business are
seasonal. The Company's need for capital fluctuates accordingly and, at any
of several seasonal peaks, the Company's outstanding indebtedness may be
significantly greater or lesser than at year end. The Company historically
has needed capital in excess of cash flow from operations to finance inventory
and accounts receivable and, more recently, to finance acquisitions of foreign
tobacco operations and flower operations. The Company also prefinances
tobacco crops in certain foreign countries by making cash advances to farmers
prior to and during the growing season.
The Company's working capital increased from $277.6 million at June 30, 1995
to $422.3 million at June 30, 1996. The Company's current ratio was 2.7 to 1
and 1.6 to 1 at June 30, 1996, and June 30, 1995, respectively. At June 30,
1996, current assets had decreased $62.3 million, or 8.5%, and current
liabilities had decreased $207.1 million, or 45.7%, from June 30, 1995. The
$62.3 million decrease in current assets is primarily due to the $60.8 million
decrease in inventories and advances on purchases of tobacco. The $207.1
million decrease in current liabilities is primarily due to the $233.7 million
decrease in notes payable to banks, primarily as a result of cash generated
from operations and the issuance of the Senior Notes, offset partially by a
$24.9 million increase in advances from customers. The increase in cash and
cash equivalents is primarily related to the financing activities and the
proceeds from long-term debt. The increase in receivables reflects the
increase in sales during the fourth quarter by the tobacco division. The
increase in accounts payable is due primarily to timing of inventory
purchases, and the decrease in notes payable is due to increased long-term
debt.
-22-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Cash flows from operating activities increased to $179.8 million in 1996 as
compared to $6.8 million in 1995 and $37.2 million in 1994 which was
consistent with the net losses incurred in those periods. Cash flows used by
investing activities increased $.7 million, or 4.9%, to $15.2 million in 1996
as compared to 1995, primarily due to the decrease in payments on notes
receivable and amounts due from investees and for the increase in proceeds
from other investments and other assets. Cash flows used by investing
activities decreased $39.6 million, or 73.2%, to $14.5 million in 1995 as
compared to 1994, primarily due to the increase in payments on notes
receivable and amounts due from investees for the same period and the
reduction in issuance of notes receivable. The 1995 purchase of subsidiaries
was offset by the Company's 1994 purchase of shares of another company. Cash
was used by financing activities in 1996 as the Company applied $153 million
to reduce debt whereas in 1995 and 1994, financing activities provided $35.7
million and $14.7 million, respectively. This shift reflects the greatly
improved operations in 1996. Also, see the discussion of refinancing
activities below.
At June 30, 1996, the Company had seasonally adjusted lines of credit of
$1.137 billion, including $897 million uncommitted, unsecured working capital
lines with several banks. At June 30, 1996, the Company had borrowed $232
million under its $897 million lines of credit with interest rates ranging
from 5.8% to 8.0%. At June 30, 1996, the unused short-term lines of credit
amounted to $521 million, net of $144 million of letters of credit and
guarantees that reduce lines of credit. Total maximum outstanding borrowings
during the year ended June 30, 1996, were $724 million.
To ensure long-term liquidity, the Company entered into the $240 million New
Credit Facility effective March 15, 1996. The New Credit Facility replaced
the Company's $250 million Former Credit Facility. The Company used the
Former Credit Facility to reclassify $250 million of short-term debt to long-
term debt and did not borrow under it. The Company similarly uses the New
Credit Facility to reclassify $232 million of its short-term debt. The
interest rates available under the New Credit Facility depend on the type of
advance selected and are based either on the agent bank's base lending rate
(which was 8.25% at June 30, 1996, and is adjusted with changes in interest
rates generally) or LIBOR plus 0.75%, through March 15, 1997, and thereafter
plus a spread of 0.45% to 1.25% based on the ratings assigned to the Company's
outstanding senior debt or on its consolidated interest coverage ratio. The
New Credit Facility is subject to certain commitment fees and covenants that
among other things require the Company to maintain minimum working capital and
tangible net worth amounts, require specific liquidity and long-term solvency
ratios and restrict acquisitions and, under certain circumstances, payment of
dividends by the Company. The New Credit Facility terminates on March 15,
1998, but may be extended thereafter, year to year, upon approval of the
Lenders. As of June 30, 1996, there were no borrowings outstanding under the
New Credit Facility.
On February 9, 1996, the Company called all of the 7 3/4% Debentures for
redemption on March 11, 1996. As of March 4, 1996, holders of Debentures had
converted approximately 99.85% of the Debentures into 4,035,969 shares of
Common Stock. The remaining Debentures were redeemed on March 11, 1996, for
$89,188. The Company funded the redemption price for these Debentures and
expenses of the redemption from working capital.
The Company has historically financed its operations through a combination of
short-term lines of credit, customer advances, cash from operations and equity
and equity-linked securities. At June 30, 1996, the Company had no material
capital expenditure commitments. The Company believes that these sources of
funds combined with the Senior Notes are sufficient to fund the Company's
purchasing needs for 1997.
The Company's off balance sheet financing is not material. Certain operating
leases were acquired with the acquisition of, or have been added by, several
foreign tobacco processing facilities and the flower subsidiaries. However,
most operating assets are of long-term and continuing benefit and the Company
has generally purchased these assets.
-23-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Tax and Repatriation Matters
The Company and its subsidiaries are subject to income tax laws in each of the
countries in which it does business through wholly-owned subsidiaries and
through affiliates. The Company makes a comprehensive review of the income
tax requirements of each of its operations, files appropriate returns and
makes appropriate income tax planning analyses directed toward the
minimization of its income tax obligations in these countries. Appropriate
income tax provisions are determined on an individual subsidiary level and at
the corporate level on both an interim and annual basis. These processes are
followed using an appropriate combination of internal staff at both the
subsidiary and corporate levels as well as independent outside advisors in
review of the various tax laws and in compliance reporting for the various
operations.
Dividend distributions are regularly made from certain subsidiaries while the
undistributed earnings of certain other foreign subsidiaries are not subject
to additional foreign income taxes nor considered to be subject to U.S. income
taxes unless remitted as dividends. The Company intends to reinvest such
undistributed earnings of certain foreign subsidiaries indefinitely;
accordingly, no provision has been made for U.S. taxes on those earnings. The
Company regularly reviews the status of the accumulated earnings of each of
its U.S. and foreign subsidiaries and reevaluates the aforementioned dividend
policy as part of its overall financing plans.
Accounting Matters
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of." The
Company is required to adopt the new method of accounting for long-lived
assets no later than the first quarter of 1997. The Company believes that its
adoption of SFAS No. 121 will not have a material impact on its financial
position.
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 123 "Accounting for Stock-Based
Compensation," which will be effective for the first quarter of 1997. SFAS No.
123 defines a fair value based method of accounting for stock-based
compensation and requires certain disclosures to be made by entities electing
not to adopt this method. The Company expects to implement in 1997 the
disclosure only provisions, as permitted by SFAS No. 123.
Factors that May Affect Future Results
The foregoing discussion contains certain forward-looking statements,
generally identified by phrases such as "the Company expects" or words of
similar effect. The following important factors, among other things, in some
cases have affected, and in the future could affect, the Company's actual
results and could cause the Company's actual results for 1997 and beyond, to
differ materially from those expressed in any forward-looking statements made
by, or on behalf of, the Company.
Variability of Annual and Quarterly Financial Results
The comparability of the Company's financial results, particularly the
quarterly financial results, may be significantly affected by fluctuations in
tobacco growing seasons and customer instructions with regard to the sales of
processed tobacco. The cultivation period for tobacco is dependent upon a
number of factors, including the weather and other natural events, such as
hurricanes or tropical storms, and the Company's processing schedule can be
significantly altered by variations in harvesting periods.
-24-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Further, it is not possible to predict with precision the timing of orders or
sales, and the Company may from time to time in the ordinary course of
business keep a significant amount of processed tobacco in inventory for its
customers to accommodate their inventory management and other needs. Sales
recognition by the Company and its subsidiaries is based on the passage of
ownership, usually with shipment of product. Since individual shipments may
represent significant amounts of revenue, the Company's quarterly and annual
financial results may vary significantly depending on its customers' needs and
shipping instructions. In particular, because most deliveries of Brazilian
tobacco are made at the end of the fourth fiscal quarter of each year or the
beginning of the first quarter of the following year, significant amounts of
sales and operating profits may shift from fiscal year to fiscal year. See
Item 1, "Business Tobacco Seasonality" and "Business Flowers
Seasonality."
Governmental Intervention, Environmental Matters and Other Matters
In recent years, governmental entities in the U.S. at all levels have taken or
have proposed actions that may have the effect of reducing consumption of
cigarettes. These activities have included: (1) the U.S. Environmental
Protection Agency's decision to classify tobacco environmental smoke as a
"Group A" (known human) carcinogen; (2) restrictions on the use of tobacco
products in public places and places of employment including a proposal by the
U.S. Occupational Safety and Health Administration to ban smoking in the work
place; (3) proposals by the U.S. Food and Drug Administration to regulate
nicotine as a drug and sharply restrict cigarette advertising and promotion,
including the proposed regulations announced in August, 1996 that would (x)
prohibit cigarette brand name sponsorship at athletic, musical, cultural and
other events, (y) prohibit the sale of nontobacco products featuring cigarette
brand names or logos and (z) prohibit the offering of promotional gifts or
other items to cigarette purchasers; (4) increases in tariffs on imported
tobacco; (5) proposals to increase the U.S. excise tax on cigarettes (6) the
recently announced policy of the U.S. government to link certain federal
grants to the enforcement of state laws banning the sale of tobacco products
to minors and (7) recent filings of lawsuits against cigarette manufacturers
by several U.S. states seeking reimbursement of Medicaid and other
expenditures by such states claimed to have been made to treat diseases
allegedly caused by cigarette smoking. It is not possible to predict the
extent to which governmental activities might affect the Company's business.
In 1993, Congress enacted a law requiring that all domestically manufactured
cigarettes contain at least 75% domestically grown tobacco. Although that law
was repealed in 1995 and was replaced with import quotas designed to assist
domestic tobacco growers, the law had the temporary effect of drastically
decreasing demand for foreign tobacco in the domestic production of
cigarettes. It is not possible to predict the extent to which future
governmental activities might affect the Company's business.
A number of foreign countries have also taken steps to restrict or prohibit
cigarette advertising and promotion, to increase taxes on cigarettes and to
discourage cigarette smoking. In some cases, such restrictions are more
onerous than those in the U.S. For example, advertising and promotion of
cigarettes has been banned or severely restricted for a number of years in
Australia, Canada, Finland, France, Italy, Singapore and a number of other
countries. It is impossible to predict the extent to which restrictions on
advertising might affect the Company's business.
Smoking and Health Issues
Reports and speculation with respect to the alleged harmful physical effects
of cigarette smoking have been publicized for many years and, together with
restrictions on cigarette advertisements, requirements that warning statements
be placed on cigarette packaging and in advertising, increased taxes on
tobacco products and controls in certain foreign countries on production and
prices, decreased social acceptance of smoking and increased pressure from
anti-smoking groups have had an ongoing adverse effect on sales of tobacco
products. In addition, litigation is pending against the
-25-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
leading U.S. manufacturers of consumer tobacco products seeking damages for
health problems alleged to have resulted from the use of tobacco in various
forms. Neither the Company nor, to the Company's knowledge, any other leaf
merchants is a party to this litigation. It is not possible to predict the
outcome of such litigation or what effect adverse developments in pending or
future litigation against manufacturers might have on the business of the
Company.
Reliance on Significant Customers
The Company's customers are manufacturers of cigarette and tobacco products
located in approximately 60 countries around the world. Several of these
customers individually account for a significant portion of the Company's
sales in a normal year, and the loss of any one or more of such customers
could have a material adverse effect on the Company's results of operations.
Approximately 55% and 52% of the Company's consolidated tobacco sales for 1996
and 1995 were to three companies. See Note M to the Company's Consolidated
Financial Statements for the year ended June 30, 1996, included herein.
International Business Risks
The Company's international operations are subject to international business
risks, including unsettled political conditions, expropriation, import and
export restrictions, exchange controls, inflationary economies and currency
risks and risks related to the restrictions of repatriation of earnings or
proceeds from liquidated assets of foreign subsidiaries. In certain countries,
the Company has advanced substantial sums or guaranteed local loans or lines
of credit in substantial amounts for the purchase of tobacco from growers.
Risk of repayment is normally limited to the tobacco season, and the maximum
exposure occurs within a shorter period.
The Company's tobacco business is generally conducted in U.S. dollars, as is
the business of the industry as a whole. Accordingly, there is minimal
currency risk related to the sale of tobaccos. However, local country
operating costs, including the purchasing and processing costs for tobaccos,
are subject to the effects of exchange fluctuations of the local currency
against the U.S. dollar. The Company attempts to minimize such currency risks
by matching the timing of its working capital borrowing needs against the
tobacco purchasing and processing funds requirements in the currency of the
country of tobacco origin. Fluctuations in the value of foreign currencies can
significantly affect the Company's operating results. See Note N to the
Company's Consolidated Financial Statements for the year ended June 30, 1996,
included herein.
The Company has expanded its international operations in areas where the
export of tobacco has increased due to increased demand for lower-priced
tobacco. In particular, the Company has a significant concentration of its
purchasing, processing and exporting operations in southern Brazil. In recent
years, Brazil's economic problems have received wide publicity, and that
country has taken in the past, various actions relating to foreign currency
exchange controls and adjustments for devaluation of the currency and
inflation. While such controls generally influence the amount of cash
dividends remitted from Brazil and such adjustments can affect the Company's
purchases costs of tobacco and its processing costs, they have not and are
not expected to adversely affect the Company's ability to export tobacco from
Brazil. However, the Company's sales and operating profits from South America
decreased significantly in fiscal 1994. While sales recovered in 1995 and
1996, operating profits did not recover to the same extent, due partly to
Brazil's monetary policy adopted in July 1994. This policy, along with the
weakened U.S. dollar, caused the dollar cost of the 1995 and 1996 Brazilian
crops to increase by 40% over the cost of the 1994 crop. As a result, even
though the worldwide oversupply of tobacco has been reduced and uncertainties
in the U.S. import market related to government regulation have eased,
operating profits from the Company's South American sales have not recovered
to the levels they reached in 1993.
-26-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Restrictions on Dividends
Under the terms of an Indenture, dated May 29, 1996, between the Company and
Crestar Bank, as trustee, relating to the Notes (the "Indenture"), the Company
will not be permitted to make certain restricted payments, including cash
dividends on its Common Stock, under certain circumstances. The Company
generally may make such restricted payments, provided, that (1) the Company is
not in default under the Indenture, (2) the Company is able to incur at least
$1.00 of additional indebtedness under a consolidated interest coverage ratio
test set forth in the Indenture, and (3) the aggregate amount of the payments
to be made is less than the total of (x) $20.0 million, (y) 50% of the
Company's net income (as defined) 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. As of June 30, 1996,
the Company was permitted to make restricted payments, including cash
dividends on its Common Stock, of up to $23.2 million.
-27-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
STATEMENT OF CONSOLIDATED INCOME
DIMON Incorporated and Subsidiaries
Years Ended June 30
(in thousands, except per share amounts) 1996 1995 1994
__________________________________________________________________________________________
Sales and other operating revenues . . . . . . . . . $2,167,473 $1,941,188 $1,464,778
Cost of goods and services sold. . . . . . . . . . . 1,904,992 1,759,364 1,317,705
_____________________________________
262,481 181,824 147,073
Selling, administrative and general expenses. . . . . 132,710 132,802 117,311
Restructuring and merger related costs. . . . . . . . 15,360 25,955 -
_____________________________________
Operating Income. . . . . . . . . . . . . . . . . 114,411 23,067 29,762
_____________________________________
Interest Expense . . . . . . . . . . . . . . . . . . 46,924 45,231 35,117
_____________________________________
Income (loss) before income taxes, minority interest,
equity in net income (loss) of investee companies
and extraordinary item . . . . . . . . . . . . . . 67,487 (22,164) (5,355)
Income taxes. . . . . . . . . . . . . . . . . . . . . 26,995 5,980 2,767
_____________________________________
Income (loss) before minority interest, equity in
net income (loss) of investee companies and
extraordinary item . . . . . . . . . . . . . . . . 40,492 (28,144) (8,122)
Income applicable to minority interest. . . . . . . . 292 216 466
Equity in net income (loss) of investee companies
(net of U.S. tax expense) .. . . . . . . . . . . . (330) (1,805) 98
_____________________________________
Income (loss) before extraordinary item . . . . . . . 39,870 (30,165) (8,490)
Extraordinary item:
Partial recovery of Iraqi receivable (net of
income tax expense of $870). . . . . . . . . . . . 1,400 - -
_____________________________________
NET INCOME (LOSS) $ 41,270 $ (30,165) $ (8,490)
=====================================
Earnings Per Share, Primary
Income (loss) before extraordinary item. . . . . . $1.00 $(.79) $(.22)
Extraordinary item . . . . . . . . . . . . . . . . .04 - -
____________________________________
Net Income (Loss). . . . . . . . . . . . . . . . . $1.04 $(.79) $(.22)
====================================
Earnings Per Share, Assuming Full Dilution
Income before extraordinary item . . . . . . . . . $ .98 $ * $ *
Extraordinary item . . . . . . . . . . . . . . . . .03 - -
_____________________________________
Net Income . . . . . . . . . . . . . . . . . . . . $1.01 $ * $ *
=====================================
See notes to consolidated financial statements
* Computation of loss per share is anti-dilutive for the years 1995 and 1994.
-28-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
CONSOLIDATED BALANCE SHEET
DIMON Incorporated and Subsidiaries
June 30
(in thousands) 1996 1995
____________________________________________________________________________________________
ASSETS
Current assets
Cash and cash equivalents . . . . . . . . . . . $ 53,820 $ 42,326
Notes receivable. . . . . . . . . . . . . . . . 1,127 2,002
Trade receivables, net of allowances
(1996 - $6,558, 1995 - $8,823). . . . . . . . 190,898 182,750
Inventories:
Tobacco . . . . . . . . . . . . . . . . . . . 315,476 410,431
Other . . . . . . . . . . . . . . . . . . . . 18,025 14,179
Advances on purchases of tobacco. . . . . . . . 74,709 44,379
Recoverable income taxes. . . . . . . . . . . . 1,563 2,007
Prepaid expenses and other assets . . . . . . . 13,157 33,045
________________________________
Total current assets . . . . 668,775 731,119
________________________________
Investments and other assets
Equity in net assets of investee companies . . . . . . 8,268 22,622
Other investments. . . . . . . . . . . . . . . . . . . 2,987 1,749
Notes receivable . . . . . . . . . . . . . . . . . . . 4,078 6,107
Other. . . . . . . . . . . . . . . . . . . . . . . . . 19,151 28,147
_______________________________
34,484 58,625
________________________________
Intangible assets
Excess of cost over related net assets
of businesses acquired . . . . . . . . . . . . . 23,121 26,167
Production and supply contracts. . . . . . . . . . . . 33,325 36,340
Pension asset. . . . . . . . . . . . . . . . . . . . . 4,130 4,219
________________________________
60,576 66,726
________________________________
Property, plant and equipment
Land . . . . . . . . . . . . . . . . . . . . . . . . 19,223 19,432
Buildings . . . . . . . . . . . . . . . . . . . . . . 143,741 135,808
Machinery and equipment . . . . . . . . . . . . . . . 160,237 169,181
Allowances for depreciation . . . . . . . . . . . . . (86,426) (101,372)
_________________________________
236,775 223,049
_________________________________
Deferred taxes and other deferred charges . . . . . . . . 19,404 14,089
_________________________________
$1,020,014 $1,093,608
=================================
-29-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
CONSOLIDATED BALANCE SHEET
DIMON Incorporated and Subsidiaries
1996 1995
______________________________________________________________________________________________
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable to banks . . . . . . . . . . . . . . . $ - $ 233,736
Accounts payable:
Trade. . . . . . . . . . . . . . . . . . . . . 65,970 56,559
Officers and employees . . . . . . . . . . . . 24,074 20,714
Other. . . . . . . . . . . . . . . . . . . . . 14,462 13,173
Advances from customers. . . . . . . . . . . . . . . 74,153 49,224
Accrued expenses . . . . . . . . . . . . . . . . . . 51,797 57,359
Income taxes . . . . . . . . . . . . . . . . . . . . 5,359 11,199
Long-term debt current . . . . . . . . . . . . . . . 10,618 11,558
___________________________________
Total current liabilities. . . . . . 246,433 453,522
___________________________________
Long-term debt
Revolving Credit Notes and Other. . . . . . . . . . 265,871 292,528
Convertible Subordinated Debentures . . . . . . . . - 56,370
Senior Notes. . . . . . . . . . . . . . . . . . . . 125,000 -
___________________________________
390,871 348,898
___________________________________
Deferred credits
Income taxes. . . . . . . . . . . . . . . . . . . . 21,496 10,731
Compensation and other benefits . . . . . . . . . . 44,465 40,715
__________________________________
65,961 51,446
__________________________________
Minority interest in subsidiaries . . . . . . . . . . . 901 936
__________________________________
Commitments and contingencies . . . . . . . . . . . . . - -
__________________________________
Stockholders' equity
Preferred Stock - no par value:
1996 1995
Authorized shares. . . . . . 10,000 10,000
Issued shares. . . . . . . . - - - -
Common Stock - no par value:. 1996 1995
Authorized shares. . . . . .125,000 125,000
Issued shares. . . . . . . . 42,366 38,092 136,959 80,030
Retained earnings . . . . . . . . . . . . . . . 177,419 157,880
Equity - currency conversions. . . . . . . . . . 2,842 1,565
Additional minimum pension liability . . . . . . (1,372) (1,286)
Unrealized gain on investments . . . . . . . . . - 617
_________________________________
315,848 238,806
_________________________________
$1,020,014 $1,093,608
=================================
See notes to consolidated financial statements
-30-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
STATEMENT OF STOCKHOLDERS' EQUITY
DIMON Incorporated and Subsidiaries
Additional Unrealized
(in thousands, Equity Minimum Gain Total
except per share Common Retained Currency Pension (Loss) On Stockholders'
amounts) Stock Earnings Conversions Liability Investments Equity
___________________________________________________________________________________________________________
Balance, June 30, 1993 . . . $ 79,833 $225,119 $3,477 $ (280) $ - $308,149
Net loss for the year. . . . (8,490) (8,490)
Cash dividends - $0.34
per share . . . . . (13,014) (13,014)
Conversion of foreign
currency financial
statements. . . . . 2,994 2,994
Addition to the minimum
pension liability . (1,094) (1,094)
Stock options exercised. . . 28 28
Unrealized loss on
investments . . . . (259) (259)
_____________________________________________________________________________________________
Balance, June 30, 1994 . . . $ 79,861 $203,615 $6,471 $(1,374) $ (259) $288,314
Net loss for the year. . . . (30,165) (30,165)
Cash dividends - $0.41
per share . . . . . (15,570) (15,570)
Conversion of foreign
currency financial
statements. . . . . (4,906) (4,906)
Reduction in minimum
pension liability . 88 88
Stock options exercised. . . 67 67
Unrealized gain on
investments . . . . 876 876
Conversion of 7 3/4%
Convertible
Debentures to
Common Stock. . . 102 102
________________________________________________________________________________________________
Balance, June 30, 1995 . . . $ 80,030 $157,880 $1,565 $(1,286) $ 617 $238,806
Net income for the year. . . 41,270 41,270
Cash dividends - $0.54
per share . . . . . (21,731) (21,731)
Conversion of foreign
currency financial
statements. . . . . 1,277 1,277
Addition to the minimum
pension liability . (86) (86)
Stock options exercised. . . 1,564 1,564
Realized gain on
investments . . . . (617) (617)
Conversion of 7 3/4%
Convertible
Debentures to
Common Stock. . . 55,365 55,365
________________________________________________________________________________________________
Balance,
June 30, 1996 . . . $136,959 $177,419 $2,842 $(1,372) $ - $315,848
================================================================================================
See notes to consolidated financial statements
-31-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
STATEMENT OF CONSOLIDATED CASH FLOW
DIMON Incorporated and Subsidiaries
Years Ended June 30
(in thousands) 1996 1995 1994
__________________________________________________________________________________________
Operating activities
Net Income (Loss). . . . . . . . . . . . . . . .$ 41,270 $ (30,165) $ (8,490)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization. . . . . . . . . 33,780 31,852 28,862
Deferred items . . . . . . . . . . . . . . . . 5,851 (620) 565
Loss (gain) on foreign currency transactions . (368) 570 (1,179)
Gain on disposition of fixed assets. . . . . . (2,415) (1,819) (1,624)
Gain on sale of investee . . . . . . . . . . . (3,751) - -
Gain on sale of investment . . . . . . . . . . (1,090) - -
Undistributed (earnings) loss of investees . . 330 1,805 (99)
Dividends received from investees. . . . . . . 1,465 478 577
Income applicable to minority interest . . . . 292 216 466
Bad debt expense . . . . . . . . . . . . . . . 1,043 3,820 4,681
Gain on disposal of operations . . . . . . . . - - (1,792)
Decrease (increase) in accounts receivable . . (12,644) 52,520 31,454
Decrease (increase) in inventories and
advances on purchases of tobacco . . . . . . 64,438 2,156 (16,512)
Decrease in recoverable taxes. . . . . . . . . 444 4,293 1,351
Decrease (increase) in prepaid expenses. . . . 17,257 (3,581) (2,056)
Increase (decrease) in accounts payable
and accrued expenses . . . . . . . . . . . . 14,811 (58,163) 9,730
Increase (decrease) in advances from
customers. . . . . . . . . . . . . . . . . . 25,116 (3,028) 4,951
Increase (decrease) in income taxes. . . . . . (6,117) 6,075 (8,744)
Other. . . . . . . . . . . . . . . . . . . . . 92 404 (4,983)
__________________________________
Net cash provided by operating activities 179,804 6,813 37,158
__________________________________
Investing activities
Purchase of property and equipment. . . . . . . (41,266) (27,036) (32,382)
Proceeds from sale of property and equipment. . 8,605 4,877 5,991
Payments on notes receivable and receivables
from investees. . . . . . . . . . . . . . . . 1,132 27,541 4,477
Issuance of notes receivable. . . . . . . . . . (1,572) (6,329) (18,385)
Proceeds from or (advances) for other
investments and other assets . . . . . . . . 24,422 4,067 (194)
Purchase of minority interest in subsidiaries . - (507) -
Purchase of subsidiaries, $8,236,
1996 and $8,856, 1995 for property
and equipment . . . . . . . . . . . . . . . . (6,543) (17,123) -
Purchase of shares of Standard
Commercial Corporation. . . . . . . . . . . . - - (13,408)
Other . . . . . . . . . . . . . . . . . . . . . - - (194)
__________________________________
Net cash used by investing activities . . (15,222) (14,510) (54,095)
__________________________________
Financing activities
Repayment of debt . . . . . . . . . . . . . . . (830,863) (927,022) (279,304)
Proceeds from debt. . . . . . . . . . . . . . . 698,207 978,366 307,246
Cash dividends paid to DIMON
Incorporated stockholders . . . . . . . . . . (21,731) (15,570) (13,014)
Cash dividends paid to minority stockholders. . (169) (237) (285)
Proceeds from sale of common stock. . . . . . . 1,552 169 28
___________________________________
Net cash provided (used) by
financing activities . . . . . . . . . . (153,004) 35,706 14,671
___________________________________
Effect of exchange rate changes on cash . . . . . . . . . (84) (1,584) (1,662)
___________________________________
Increase (decrease) in cash and cash equivalents. . . . . 11,494 26,425 (3,928)
Increase in cash from purchased subsidiaries. . . . . . . - 3,430 -
Cash and cash equivalents at beginning of year. . . . . . 42,326 12,471 16,399
____________________________________
Cash and cash equivalents at end of year. $ 53,820 $ 42,326 $ 12,471
====================================
Other information:
Cash paid during the year:
Interest . . . . . . . . . . . . . . . . . . . $ 43,361 $ 46,768 $ 34,965
Income taxes . . . . . . . . . . . . . . . . . 21,075 18,917 12,627
Non-cash investing and financing activities:
Conversion of debt to equity . . . . . . . . . 55,365 102 -
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 - Merger and Significant Accounting Policies
Merger
On October 23, 1994, Dibrell and Monk-Austin announced execution of a
definitive Agreement and Plan of Reorganization pursuant to which the
businesses of Dibrell and Monk-Austin would be combined. At special meetings
on March 31, 1995, the shareholders of both Dibrell and Monk-Austin approved
the Agreement and related combination. As a result, Dibrell and Monk-Austin
were merged into DIMON Incorporated ("DIMON") and each share of Dibrell Common
Stock outstanding at the merger date was converted to 1.5 shares, and each
share of Monk-Austin Common Stock outstanding at the merger date was converted
into 1.0 share of DIMON Common Stock, resulting in 38.069 million total
outstanding shares at April 1, 1995, the effective date of the merger.
The merger qualifies as a tax free reorganization and was accounted for as
a pooling of interests. Accordingly, the Company's financial statements have
been restated to include the results of both Dibrell and Monk-Austin for all
periods presented. Recorded assets and liabilities have been carried forward
to the combined company at their historical book values.
Combined and separate results of Dibrell and Monk-Austin during the
periods preceding the merger were as follows:
Dibrell Monk-Austin Adjustment Combined
_____________________________________________________________________________________________________________
Nine months ended March 31, 1995
(unaudited)
Sales and other operating revenues . . .$819,459 $739,415 $ (140) $1,558,734
Net income (loss). . . . . . . . . . . . 6,090 (6,152) 9,829 9,767
_____________________________________________________________________________________________________________
Fiscal year ended June 30, 1994
Sales and other operating revenues . . .$928,470 $534,600 $ 1,708 $1,464,778
Net income (loss). . . . . . . . . . . . (9,144) 930 (276) (8,490)
_____________________________________________________________________________________________________________
The combined financial results presented above include adjustments made to
conform accounting policies of the two companies. The significant adjustments
impacting net income for conformity relate to the accounting for income taxes,
the treatment of grower advances in Brazil, foreign currency transaction gains
and losses and certain other inventory costing policies. All other
adjustments are reclassifications to conform financial statement presentation.
Intercompany transactions between the two companies for the periods presented
were not material.
Significant Accounting Policies
The accounts of the Company and its consolidated subsidiaries are included in
the consolidated financial statements after elimination of significant
intercompany accounts and transactions. Certain foreign consolidated
subsidiaries of the Company have fiscal year ends of March 31 and May 31 to
facilitate reporting of consolidated accounts. The Company accounts for its
investments in certain investee companies (ownership 20% - 50%) under the
equity method of accounting. Investments in certain other foreign investees
and subsidiaries which are combined with other investments are stated at cost
or less than cost since the Company does not exercise significant influence
over financial or operating policies and because of restrictions imposed on
the transfer of earnings and other economic uncertainties.
Sales recognition is based on the passage of ownership, usually with
shipment of product.
Cash equivalents are defined as temporary investments of cash with
maturities of less than 90 days.
Inventories are valued at the lower of cost or market. Inventory
valuation provisions included in cost of goods and services sold totaled $9.2
million and $40.9 million for 1995 and 1994, respectively. Costs of tobacco
inventories are generally determined by the average cost method while costs of
other inventories are generally determined by the first-in, first-out method.
Substantially all of the tobacco inventory represents finished goods.
Interest and other carrying charges on the inventories are expensed in the
period in which they are incurred.
-33-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note A - Merger and Significant Accounting Policies (continued)
Equity in net assets of investee companies includes excess of equity over
cost in the amount of $4,075 ($2,244 at June 30, 1995) and is being amortized
on a straight-line basis over ten years.
Excess of cost over related net assets of businesses acquired is being
amortized on a straight-line basis over periods ranging from 10 to 40 years.
The accumulated amortization at June 30, 1996, is $5,300 ($4,283 at June 30,
1995).
Supply contracts include the cost allocated to two ten-year tobacco supply
agreements with R. J. Reynolds Tobacco Company (RJR) pursuant to which the
Company will supply RJR and its affiliates with specified quantities of its
required tobaccos. Each contract is being amortized over the quantities
shipped or the contract period, whichever is sooner. The accumulated
amortization at June 30, 1996, is $18,900 ($15,129 at June 30, 1995).
Production contracts include the cost allocated to contracts associated
with farmers for the future supply of their annual tobacco production. The
production contracts are being amortized primarily on a straight-line basis
over ten years. The accumulated amortization at June 30, 1996, is $13,311
($9,931 at June 30, 1995).
Property, plant and equipment is accounted for on the basis of cost.
Provisions for depreciation are computed on a straight-line basis at annual
rates calculated to amortize the cost of depreciable properties over their
estimated useful lives. Buildings and machinery and equipment are depreciated
over ranges of 20 to 40 years and over five to ten years, respectively. The
consolidated financial statements do not include fully depreciated assets.
The Company provides deferred income taxes on temporary differences
arising from tax loss carryforwards, employee benefit accruals, depreciation,
deferred compensation and undistributed earnings of consolidated subsidiaries
and unconsolidated affiliates not permanently reinvested.
Primary earnings per share are computed by dividing earnings by the
weighted average number of shares outstanding plus any common stock
equivalents during each period. The fully diluted earnings per share
calculation assumes that all of the outstanding Convertible Subordinated
Debentures were converted into Common Stock at the beginning of the reporting
period thereby increasing the weighted average number of shares considered
outstanding during each period and reducing the after-tax interest expense.
The weighted average number of shares outstanding are further increased by
common stock equivalents on employee stock options.
The Company carried its equity security investments at fair value as
Prepaid expenses and other assets with any change from the average cost basis
being reflected in stockholders' equity net of the tax benefit. These
securities were sold in 1996.
In March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of."
The Company is required to adopt the new method of accounting for long-lived
assets no later than the first quarter of 1997. The Company believes that its
adoption of SFAS No. 121 will not have a material impact on its financial
position.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 123 "Accounting for Stock-Based
Compensation," which will be effective for the first quarter of the Company's
1997 statements. SFAS No. 123 defines a fair value based method of accounting
for stock-based compensation and requires certain disclosures to be made by
entities electing not to adopt this method. The Company expects to implement
in 1997 the disclosure only provisions, as permitted by SFAS No. 123.
In the fourth quarter of 1996 the Company reclassified Other income into
Sales and other operating revenues. The Company also reclassified Sundry
deductions into Cost of goods sold. Both Other income and Sundry deductions
are not material and the reclassification does not affect Net income. Prior
year accounts have been reclassified for conformity within the financial
statements.
-34-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note B - Restructuring and Merger Related Costs
In connection with the April, 1995, merger of Dibrell and Monk-Austin, the
Company incurred legal, accounting and financial consultants costs of $8.1
million in 1995 and commenced various activities to restructure its worldwide
operations.
The following tables set forth the Company's restructuring provisions
provided and changes in the related reserves for 1995 and 1996. The reserve
balances are included in accrued expenses and deferred compensation and other
benefits.
Facilities
Employee Closure
Separations Costs Other Total
__________________________________________________________________________________________
Provision for restructuring - 1995. $12,593 $ 2,848 $2,416 $17,857
Reduced by:
Cash payments. . . . . . . . . . . (76) (223) (205) (504)
Asset writedowns . . . . . . . . . - (1,493) (2,211) (3,704)
______________________________________________________________
Reserve balances at June 30, 1995 . . $12,517 $ 1,132 $ - $13,649
Provision for restructuring - 1996. . 15,699 (1,244) 905 15,360
Increased (reduced) by:
Cash (payments) receipts. . . . . (8,150) 4,719 (75) (3,506)
Asset writedowns and sales. . . . - (4,212) (330) (4,542)
Reserve balances at June 30, 1996 . . $20,066 $ 395 $ 500 $20,961
______________________________________________________________
The 1995 restructuring provision included approximately $2.6 million for
the closing of certain unprofitable flower facilities and related severance
costs. The remaining 1995 restructuring provision of $15.2 million addressed
rationalization of the tobacco operations through elimination of duplicative
facilities and reduction of personnel. The 1996 restructuring provision of
$15.4 million was primarily for additional severance costs. During the year
ended June 30, 1996, the Company severed a total of 367 employees most of
which were involuntarily separated. The severed employees were primarily in
the tobacco division and worked in various departments throughout the Company.
Remaining cash outlays associated with employee separations are expected to
total $15.2 million, of which $10.8 million will be expended in 1997.
Remaining amounts relate primarily to the pension plan charge and other
deferred compensation, which will be made as required for funding appropriate
pension and other payments in future years. No additional restructuring
charges are anticipated.
Note C - Investee Companies, Related Parties and Acquisitions
The combined summarized information for investee companies is approximately as
follows:
1996 1995 1994
________________________________________________________________________
Current assets. . . . . . . . . . . .$13,069 $ 84,635 $110,531
Non-current assets. . . . . . . . . . 29,087 57,344 67,066
Current liabilities . . . . . . . . . 14,631 84,244 99,649
Non-current liabilities . . . . . . . 2,446 3,130 6,275
Interest of other shareholders. . . . 12,733 31,982 37,953
Net sales . . . . . . . . . . . . . . 42,388 120,183 146,731
Gross profit. . . . . . . . . . . . . 8,771 9,953 22,506
Net income (loss) . . . . . . . . . . 594 (1,395) 2,609
___________________________________
The above changes from 1995 relate primarily to the Company selling its
interest in a Brazilian investee, Rio Grande Tabacalera S.A.
-35-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note C - Investee Companies, Related Parties and Acquitions (continued)
Balances with related parties, primarily unconsolidated, affiliated
companies, are as follows:
1996 1995 1994
___________________________________________________________________________
Trade receivables . . . . . . . . .$23,904 $ 21,258 $ 10,968
Advances on purchases of tobacco. . 32,786 9,716 38,557
Notes receivable. . . . . . . . . . - 4,169 10,425
Trade payables. . . . . . . . . . . 6,844 1,556 7,555
Other income: Interest . . . . . . 581 1,376 1,299
Net sales . . . . . . . . . . . . . 6,673 12,907 16,257
Purchases of tobacco. . . . . . . . 61,549 73,474 76,321
________________________________________
On April 1, 1995 the Company acquired the businesses of Austro-Hellenique
De Tabac S.A. (Hellas) and Austro-Turk Tutun A.S. (Austro-Turk) for cash of
$13,372 and assumption of liabilities of $3,821. Hellas and Austro-Turk have
tobacco buying, processing and selling operations in Greece and Turkey,
respectively. This acquisition has been accounted for as a purchase. The
excess of cost over businesses acquired of $17,193 is being amortized over a
ten-year period.
The following pro forma information has been prepared assuming that this
acquisition had taken place at the beginning of the period. The pro forma
information includes adjustments to give effect to amortization of goodwill
and interest expense on acquisition debt, together with related income tax
effects.
Year ended June 30, 1995
(unaudited)
Sales and other operating revenues . . . . . . . . . . . . .$1,965,437
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . (36,577)
Loss per share, primary. . . . . . . . . . . . . . . . . . . (.96)
Note D - Financial Instruments
The estimated fair value of the Company's financial instruments at June 30,
1996 is provided in the following table:
Carrying Fair
Amount Value
_______________________________________________________________________
Senior Notes . . . . . . . . . . . . . . . . .$125,000 $124,531
Other Long-Term Debt and Capitalized Leases. . 44,813 42,561
Interest rate swap agreements with an aggregate notional principal balance
of $202,714 ($125,000 fixed to floating and $77,214 floating to fixed) and
expiring at various dates through May 23, 2001, had a negative value of $435
at June 30, 1996.
In the normal course of business, the Company is a party to financial
instruments with off balance sheet risk such as letters of credit and
guarantees. Management does not expect any material losses to result from
these instruments.
The fair value estimates presented herein are based on information
available to management at June 30, 1996, and were determined using market
information and other commonly accepted valuation methodologies.
Note E - Short-Term Borrowing Arrangements
The Company has lines of credit arrangements with several banks under which
the Company may borrow up to a total of $897,523 ($876,181 at June 30, 1995),
excluding all long-term credit agreements. These lines bear interest at rates
ranging from 5.8% to 8.0% at June 30, 1996. Unused lines of credit at June
30, 1996, amounted to $521,145 ($508,947 at June 30, 1995), net of $144,701 of
available letters of credit and guarantees that reduce lines of credit. There
were no compensating balance agreements at June 30, 1996, or 1995.
-36-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note F - Long-Term Debt
Such debt is comprised of:
1996 1995
__________________________________________________________________________
Maturing Maturing Maturing Maturing
within after within after
One Year One Year One Year One Year
__________________________________________________________________________
Senior Notes . . . . . . .$ - $125,000 $ - $ -
Convertible Subordinated
Debentures . . . . . . . - - - 56,370
Revolving Credit Notes . . - 231,676 - 250,000
Other Long-Term Debt . . . 9,279 32,994 9,679 40,772
________________________________________________
$ 9,279 $389,670 $ 9,679 $347,142
Capitalized Lease
Obligations . . . . . . 1,339 1,201 1,879 1,756
________________________________________________
$10,618 $390,871 $11,558 $348,898
================================================
Payments of the debt are scheduled as follows:
Revolving Other
Senior Credit Long-Term
Notes Notes Debt Total
_________________________________________________________________________
1998 . . . . . . . . . . .$ - $231,676 $ 7,839 $239,515
1999 . . . . . . . . . . . - - 7,724 7,724
2000 . . . . . . . . . . . - - 6,318 6,318
2001 . . . . . . . . . . . - - 2,010 2,010
2002 . . . . . . . . . . . - - 1,708 1,708
2003 . . . . . . . . . . . - - 1,500 1,500
Later years. . . . . . . . 125,000 - 5,895 130,895
________________________________________________
$125,000 $231,676 $32,994 $389,670
=================================================
On May 29, 1996, the Company issued $125 million in 8 7/8% Senior Notes
(the "Notes") due 2006. The Notes are general unsecured obligations of the
Company and will rank equally in right of payment with all other
unsubordinated indebtedness (including the New Credit Facility) of the
Company. On or after June 1, 2001, the Company may redeem the Notes in whole
or in part, at established redemption prices, plus accrued and unpaid
interest, if any, to the date of redemption. There are no sinking fund
requirements for the Notes. The Notes are subject to certain covenants that
among other things, require specific liquidity and long-term solvency ratios
and, under certain circumstances, restrict payment of dividends by the
Company. The Company used the net proceeds to repay certain existing short-
term indebtedness and for other corporate purposes.
To ensure long-term liquidity, DIMON entered into a $240 million New
Credit Facility with 13 banks which replaces DIMON's $250 million Former
Credit Facility. The Company had no borrowings under these agreements at
either June 30, 1996 or 1995. However, the Company has used these facilities
to classify $231,676 ($250,000 at June 30, 1995) of working capital loans to
Revolving Credit Notes. It is the Company's intent to finance at least
$231,676 on a long-term basis. The New Credit Facility is subject to certain
commitment fees and covenants that among other things require DIMON to
maintain minimum working capital and tangible net worth amounts, require
specific liquidity and long-term solvency ratios and restrict acquisitions
and, under certain circumstances, payment of dividends by the Company. The
New Credit Facility's initial term is to March 15, 1998, and, pending approval
by the lenders, may be extended. The rates of interest are based upon the
type of loan requested by the Company. During the life of the agreement, the
interest rate could be the prime rate or the LIBOR rate adjusted. The primary
advance rate is the agent bank's base lending rate (8.25% at June 30, 1996).
The Company pays a commitment fee of 1/4% per annum on any unused portion of
the facility. Decisions relative to repayments and reborrowings are made
based on circumstances then existing, including management's judgment as to
the most effective utilization of funds.
-37-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note F - Long-Term Debt (continued)
Other long-term debt consists of obligations of DIMON Incorporated,
Florimex and the tobacco operations in Africa and Italy, and is payable at
interest rates varying from 4.85% to 12.0%.
On February 9, 1996, the Company called all of the outstanding 7 3/4%
Convertible Subordinated Debentures for redemption on March 11, 1996. The
debenture call by the Company resulted in a reduction of debt of $54,312, the
issuance of approximately 4.036 million shares of the Company's Common Stock
valued at $53,375, $89 in cash being paid to debenture holders and $848 net
for the reduction of deferred charges offset by increased interest expense.
The Company funded the redemption price for these Debentures and expenses of
the redemption from working capital.
Note G - Long-Term Leases
The Company, primarily through Florimex, has both capital and operating
leases. The capital leases are for land, buildings, automobiles and trucks;
the operating leases are for office equipment. The capitalized lease
obligations are payable through 1999. Interest rates are imputed at 7.0% to
10.7%. Amortization is included in depreciation expense. Minimum future
obligations and capitalized amounts are as follows:
Capital Operating
Leases Leases
_____________________________________________________________________________
1997 . . . . . . . . . . . . . . . . . . . . . $ 1,481 $ 4,161
1998 . . . . . . . . . . . . . . . . . . . . . 916 3,308
1999 . . . . . . . . . . . . . . . . . . . . . 299 2,506
2000 . . . . . . . . . . . . . . . . . . . . . 33 1,631
2001 . . . . . . . . . . . . . . . . . . . . . - 1,304
Later years . . . . . . . . . . . . . . . . . - 1,707
_________________________
$ 2,729 $14,617
Less amount representing interest
and deposits . . . . . . . . . . . . . . . . 189
______
Present value of net minimum lease payments. . $ 2,540
Less current portion of obligations
under capital leases . . . . . . . . . . . . 1,339
______
Long-term obligations under capital leases . . $ 1,201
======
Capitalized amounts
Machinery and equipment, primarily vehicles. $ 4,648
Accumulated amortization . . . . . . . . . . (2,187)
_______
$ 2,461
=======
-38-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note H - Preferred Stock/Capital 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, 1996, no
shares had been issued.
The Company called all of its outstanding 7 3/4% Convertible Subordinated
Debentures due 2006 (the "Debentures") for redemption on March 11, 1996 (the
"Redemption Date"). Also, see Note F to the Notes to Consolidated Financial
Statements.
Note I - Stock Incentive Plan
At the 1995 Special Meeting of Stockholders the DIMON Incorporated Omnibus
Stock Incentive Plan (the Incentive Plan) and the DIMON Incorporated Non-
Employee Directors Stock Option Plan (the Directors Plan) were approved.
Also, as a result of the merger, options granted under previous plans were
assumed by DIMON.
The Incentive Plan authorizes the issuance of up to 2 million shares of
common stock (subject to increase annually by 3% of the number of shares of
common stock issued during such year, other than pursuant to the Incentive
Plan). The Incentive Plan authorizes the issuance of various stock incentives
to key employees of the Company or any subsidiary, including nonqualified or
incentive stock options, stock appreciation rights and shares of restricted
stock.
Stock options granted under the Incentive Plan allow for the purchase of
common stock at prices determined at the time the option is granted by a
committee composed of independent directors. 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. No options or SARs may be
granted and no restricted stock may be awarded under the Incentive Plan after
February 8, 2005.
The options and SARs become exercisable on various dates as originally
determined for the grants assumed by DIMON. Under the Incentive Plan, the
committee will determine the dates that the options and SARs become
exercisable.
A separate Directors' Plan authorizes automatic annual grants to purchase
one thousand shares to each non-employee director. Any 1996 grants will be
awarded at the meeting of the DIMON Board following the 1996 annual meeting of
the shareholders of DIMON. The option price will be equal to the fair market
value of DIMON Common Stock on the date of grant. The maximum number of
shares to be issued under the Directors Stock Plan is 50 thousand shares.
Options granted under the Directors' Stock Plan are immediately exercisable.
Options to purchase six thousand shares had been granted as of June 30, 1996.
The Company has elected to treat the costs of SARs as compensation charges
to the income statement with quarterly adjustments for market price
fluctuations. All other options are treated as equivalent shares outstanding.
There was a $473 charge to income in 1996, a $680 charge to income in 1995,
and an $974 credit to income in 1994 arising from adjustments in fair market
values of the SARs.
-39-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note I - Stock Incentive Plan (continued)
Information with respect to options and SARs follows:
Year Ended June 30
_____________________________________
1996 1995 1994
__________________________________________________________________________________
Options outstanding at
beginning of year . . . . . . . . . . 1,540 1,354 1,074
Options and SARs granted. . . . . . . . 403 231 299
Options exercised . . . . . . . . . . . (130) (5) (12)
Options cancelled . . . . . . . . . . . (9) (40) (7)
__________________________________________
Options outstanding at end of year. . . 1,804 1,540 1,354
==========================================
SARs included as outstanding
at end of year. . . . . . . . . . . . 528 498 415
==========================================
Options available for future grants
at end of year. . . . . . . . . . . . 337 500 1,665
==========================================
Options and SARs exercisable at
end of year . . . . . . . . . . . . . 1,023 926 392
==========================================
Option and SAR market prices per share:
Date of grant. . . . . . . . . . . . . $17.00 $11.50 $16.67
15.38
Exercised (at lowest and highest
market prices) . . . . . . . . . . . 11.33- 14.42- 18.23-
20.75 18.25 20.67
Cancelled (at lowest and highest
market prices) . . . . . . . . . . . 17.00 11.50- 10.00
13.87
Note J - Retained Earnings
Consolidated retained earnings included $4,490 at June 30, 1996 ($4,860 at
June 30, 1995) for the Company's share of undistributed net income of investee
companies accounted for on the equity method.
Note K - Income Taxes
Consolidated retained earnings at June 30, 1996 and 1995 include undistributed
earnings of $145,773 and $127,792 respectively, of certain foreign
consolidated subsidiaries which are not subject to additional foreign income
taxes nor considered to be subject to United States income taxes unless
remitted as dividends. The Company intends to reinvest these undistributed
earnings indefinitely; accordingly, no provision has been made for United
States taxes on such earnings.
At June 30, 1996, the Company has net operating tax loss carryforwards of
approximately $78,772 for income tax purposes that expire in 1997 and
thereafter. Those carryforwards relate primarily to state taxes for U.S.
entities and to foreign taxes on Baardse and various Florimex entities.
-40-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note K - Income Taxes (continued)
The components of income (loss) before income taxes, minority interest,
equity in net income of investee companies and cumulative effect of accounting
changes, consisted of the following:
1996 1995 1994
____________________________________________________________________________
U.S.. . . . . . . . . . . $ 6,301 $(28,293) $(1,837)
Foreign . . . . . . . . . 61,186 6,129 (3,518)
_________________________________________________
$67,487 $(22,164) $(5,355)
=================================================
The details of the amount shown for income taxes in the Statement of
Consolidated Income follow:
1996 1995 1994
__________________________________________________________________________
Current
Federal . . . . . . . . . $ 7,676 $ 4,967 $ 2,721
State . . . . . . . . . . 424 73 469
Foreign . . . . . . . . . 12,633 9,719 109
________________________________________________
$20,733 $14,759 $ 3,299
________________________________________________
Deferred
Federal . . . . . . . . . $(3,181) $(6,622) $(2,417)
State . . . . . . . . . . (854) (810) (546)
Foreign . . . . . . . . . 10,297 (1,347) 2,431
________________________________________________
$ 6,262 $(8,779) $ (532)
________________________________________________
Total . . . . . . . . . . $26,995 $ 5,980 $ 2,767
================================================
-41-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note K - Income Taxes (continued)
The reasons for the difference between income tax expense based on income
or (loss) before income taxes, minority interest and equity in net income of
investee companies and the amount computed by applying the statutory Federal
income tax rate to such income, are as follows:
Pre-tax Income
______________________________________
1996 1995 1994
______________________________________
Computed "expected" tax expense (benefit) . $23,620 $(7,757) $(1,784)
State income taxes, net of Federal
income tax benefit. . . . . . . . . . . . (280) (530) (77)
Effect of foreign income taxes . . . . . . (1,060) 6,962 2,324
U.S. taxes on foreign income,
net of tax credits . . . . . . . . . . . 1,270 1,440 524
Operating loss carryforwards, net. . . . . 2,262 1,942 1,896
Tax benefits derived from Foreign
Sales Corporations. . . . . . . . . . . . (1,633) (887) (1,169)
Meals and entertainment. . . . . . . . . . 379 316 200
Non-deductible merger expenses . . . . . . - 1,583 -
Nondeductible amortization of goodwill . . 655 1,787 799
Other. . . . . . . . . . . . . . . . . . . 1,782 1,124 54
______________________________________
Actual tax expense.. . . . . . . . . . . . $26,995 $ 5,980 $ 2,767
======================================
-42-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note K - Income Taxes (continued)
The long-term deferred tax liabilities (assets) are comprised of the
following:
1996 1995
______________________________________________________________________________
Deferred tax liabilities:
Fixed assets. . . . . . . . . . . . . . . . . .$11,797 $13,825
Foreign taxes . . . . . . . . . . . . . . . . . 8,672 1,637
Other . . . . . . . . . . . . . . . . . . . . . 1,027 -
__________________________
Gross deferred tax liabilities . . . . . . . . . . . 21,496 15,462
__________________________
Deferred tax assets:
Tax loss carryforwards. . . . . . . . . . . . .(16,571) (12,618)
Postretirement and other benefits . . . . . . .(10,317) (9,041)
Currently non-deductible expenses . . . . . . . (4,384) (2,594)
Foreign tax credit. . . . . . . . . . . . . . . - (2,000)
Other . . . . . . . . . . . . . . . . . . . . . (892) (1,333)
__________________________
Gross deferred tax assets. . . . . . . . . . . . . . (32,164) (27,586)
Valuation allowance. . . . . . . . . . . . . . . . . 16,571 12,414
__________________________
Net deferred tax assets. . . . . . . . . . . . . . . (15,593) (15,172)
__________________________
Net deferred tax liability . . . . . . . . . . . . .$ 5,903 $ 290
========================
The net change in the valuation allowance for deferred tax assets was an
increase of $4,157 and relates primarily to the increase in tax loss
carryforwards for which no benefit can be currently recognized.
Note L - Employee Benefits
Retirement Benefits
In 1995, the Company assumed the defined Benefit Pension Plan (the Retirement
Plan) and an Excess Benefit Plan of the former Dibrell. The Retirement Plan
provides retirement benefits for substantially all of the former Dibrell's
U.S. salaried personnel based on years of service rendered and compensation
during the last five years of employment. The Company maintains an Excess
Benefit Plan that provides individuals who participate in the Retirement Plan
the difference between the benefits they could potentially accrue under the
Retirement Plan and the benefits actually paid as limited by regulations
imposed by the Internal Revenue Code. The Company funds these plans in
amounts consistent with the funding requirements of Federal Law and
Regulations.
Certain non-U.S. plans are sponsored by certain Florimex subsidiaries
located in Italy, Austria and Germany. These plans cover substantially all of
their full-time employees. Additional non-U.S. plans sponsored by certain
tobacco subsidiaries cover substantially all of their full-time employees
located in Greece, Italy, The Netherlands, Turkey and Zimbabwe.
-43-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note L - Employee Benefits (continued)
Net pension cost included the following components:
1996 1995 1994
__________________________________________________________________________________
Service cost - benefits earned during the year . .$ 1,402 $ 1,528 $ 1,270
Interest cost on projected benefit obligation. . . 4,286 4,040 3,612
Return on assets - actual. . . . . . . . . . . . . (6,174) (4,596) (357)
Amortization of transition asset at July, 1986 . . (268) (268) (273)
Amortization of prior service costs. . . . . . . . 659 704 488
Amortization of unrecognized loss(gain). . . . . . 3,004 1,778 (2,537)
_______________________________
Net pension cost before effect of curtailment. . . 2,909 3,186 2,203
Effect of curtailment . . . . . . . . . . . . . . (698) - -
_______________________________
Net pension cost. . . . . . . . . . . . . . . . .$ 2,211 $ 3,186 $ 2,203
===============================
The funded status of the plans at June 30 was as follows:
1996 1995
_________________________________________________________________________
Actuarial present value of accumulated
benefit obligation
Vested . . . . . . . . . . . . . . . . . . . . . $46,893 $41,935
Nonvested. . . . . . . . . . . . . . . . . . . . 484 576
_______________________
47,377 42,511
Benefits attributable to projected
salary increases . . . . . . . . . . . . . . . . 9,560 12,077
_______________________
56,937 54,588
Plan assets at fair value. . . . . . . . . . . . . 41,045 37,141
_______________________
Projected benefit obligation in excess of
plan assets. . . . . . . . . . . . . . . . . . . 15,892 17,447
Unamortized transition asset . . . . . . . . . . 1,792 2,020
Unrecognized prior service costs . . . . . . . . . (6,817) (7,728)
Unrecognized net gain (loss) . . . . . . . . . . . 4,108 (1,797)
Adjustment required to recognize
minimum liability. . . . . . . . . . . . . . . . 5,502 5,505
______________________
Net pension liability. . . . . . . . . . . . . . . $20,477 $15,447
======================
For the U.S. plans, projected benefit obligations were determined using
assumed discount rates of 8% for the Retirement Plan for all three years and
8% for the Excess Benefit Plan for all three years. Assumed compensation
increases were 7% for 1996 and 6.5% for 1995 and 1994 for the Retirement Plan
and 5% for 1996 and 1995 and 4% for 1994 for the Excess Benefit Plan. The
assumed long-term rate of return on plan assets for all three years was 9% for
the Retirement Plan and 8% for 1996 and 1995 and 10% for 1994 for the Excess
Benefit Plan. Plan assets consist principally of common stock and fixed
income securities. For non-U.S. plans, discount rates and assumed
compensation increases are in accordance with locally accepted practice. No
assumed long-term rate of return is made for non-U.S. plan assets as these
plans are generally not funded.
-44-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note L - Employee Benefits (continued)
The Company also sponsors a 401-K savings plan for most of its salaried
employees located in the United States. The Company's contributions to the
plan were $481 in 1996, $652 in 1995, and $648 in 1994.
The Company has a Profit-Sharing Plan for substantially all of the
salaried employees meeting certain eligibility requirements who were employed
by Monk-Austin. This Profit Sharing Plan is in lieu of a defined benefit
pension plan. Profit-Sharing Plan contributions are discretionary and totaled
$1,043 in 1995, and $1,416 in 1994. There were no contributions in 1996.
The Company adopted a Cash Balance Plan on July 1, 1996, that combines the
Retirement Plan of the former Dibrell and the Profit-Sharing Plan of the
former Monk-Austin. The adoption is estimated to increase the present value
of the accumulated benefit obligation by $2,300, decrease the benefits
attributable to projected salary increases by $1,800 and increase net pension
cost by $600.
Postretirement Health and Life Insurance Benefits
The Company provides certain health and life insurance benefits to retired
employees (and their eligible dependents) who meet specified age and service
requirements. Plan assets consist of paid up life insurance policies on
certain current retirees. The Company retains the right, subject to existing
agreements, to modify or eliminate the medical benefits.
The benefit obligation was determined using an assumed discount rate of
8.0% for all three years and an assumed rate of increase in health care costs,
also known as the health care cost trend rate, of 11.5% for 1996 and 13.0% for
1995 and 1994. This trend rate is assumed to decrease gradually to 5.5% by
2007. The assumed long-term rate of return on plan assets was 5.5% for 1996
and 5.4% for 1995 and 1994. Based on current estimates, increasing the health
care cost trend rate by one percentage point would increase the benefit
obligation by approximately $1.7 million.
The following table presents the plan's funded status at June 30
reconciled with amounts recognized in the Company's balance sheet:
1996 1995
_________________________________________________________________________________
Accumulated postretirement benefit obligation:
Retirees . . . . . . . . . . . . . . . . . . . $12,373 $11,104
Fully eligible active plan participants. . . . 2,077 2,937
Other active plan participants . . . . . . . . 5,377 4,118
Plan assets at fair value. . . . . . . . . . . . (62) (159)
_________ ________
Accumulated postretirement benefit
obligation in excess of plan assets. . . . . . 19,765 18,000
Unrecognized prior service cost. . . . . . . . . (170) (191)
Unrecognized net gain. . . . . . . . . . . . . . 456 1,237
________ ________
Accrued postretirement benefit cost. . . . . . . $20,051 $19,046
========= ========
-45-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note L - Employee Benefits (continued)
Net periodic postretirement benefit cost included the following
components:
1996 1995 1994
_____________________________________________________________________________
Service cost . . . . . . . . . . . . . . . $ 420 $ 395 $ 361
Interest cost. . . . . . . . . . . . . . . 1,502 1,348 1,338
Actual return on plan assets . . . . . . . 16 7 (17)
______ ______ ______
Net periodic postretirement benefit cost . $1,938 $1,750 $1,682
====== ====== ======
The Company continues to evaluate ways in which it can better manage these
benefits and control the costs. Any changes in the plan or revisions to
assumptions that affect the amount of expected future benefits may have a
significant effect on the amount of the reported obligation and annual
expense.
Employees in operations located in certain foreign countries are covered
by various foreign postretirement life insurance benefit arrangements. For
these foreign plans, the cash-basis cost of benefits charged to income was not
material in 1996, 1995 and 1994.
Note M - Geographic Area Data, Export Sales and Other Information
The following description and tables present the Company's tobacco and flower
operations in different geographic areas in conformity with the Statement of
Financial Accounting Standards No. 14, "Financial Reporting for Segments of a
Business Enterprise" (SFAS 14). Geographic area information for tobacco
operations as to net sales and operating profit is based on the origin of the
product sold, and identifiable assets are classified based on the origination
of the product. Turkish tobacco is included in other origin. Geographic area
information for flower operations as to net sales and operating profit is
based on the point of sale, and identifiable assets are classified based on
the point of sale. Corporate assets consist primarily of those related to cost
investments. Export sales are defined as foreign sales of United States
origin.
Tobacco
The Company is principally engaged in the tobacco business. Through its
wholly-owned subsidiary, DIMON International, Inc. ("DIMON International").
DIMON International and its U.S. tobacco subsidiaries buy leaf tobacco on the
auction markets in Florida, Georgia, South Carolina, North Carolina, Virginia,
Kentucky, Tennessee and Maryland for its customers. This tobacco is shipped
to plants located in Virginia and North Carolina where it is processed, packed
in hogsheads or cases and then stored until ordered shipped by its customers.
DIMON International and its tobacco subsidiaries also are engaged in buying,
processing and exporting tobacco grown in Argentina, Brazil, China, Greece,
Guatemala, India, Italy, Malawi, Mexico, Tanzania, Turkey, Zimbabwe and other
areas which is sold on the world markets. DIMON International's investee
companies are located in Greece, Zimbabwe and the United States.
The disaggregation of entities necessary for geographic area data may
require the use of estimation techniques for operating profit. The
identifiable assets presentation does not take into account the seasonal
aspects of the tobacco business, particularly the seasonal peak in South
America.
Flowers
The Company imports, exports and distributes cut flowers through the Florimex
group, which operates through 57 offices on six continents.
-46-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note M - Geographic Area Data, Export Sales and Other Information (continued)
Sales and Operating
Other Profit
Operating As Defined By Identifiable
Revenues SFAS 14 Assets
_______________________________________________________________________________________
1996
Tobacco
United States. . . . . . . . . . .$ 854,853 $ 47,428 $ 106,615
South America. . . . . . . . . . . 524,886 57,038 442,471
Asia . . . . . . . . . . . . . . . 43,023 1,372 34,567
Africa . . . . . . . . . . . . . . 208,898 9,695 170,712
Other . . . . . . . . . . . . . . 138,506 10,756 114,213
Worldwide supply contract. . . . . - - 9,171
________________________________________
$1,770,166 $126,289 $ 877,749
___________________________________________
Flowers
Europe . . . . . . . . . . . . . .$ 334,104 $ 5,532 $ 85,418
United States. . . . . . . . . . . 20,797 579 6,552
Other. . . . . . . . . . . . . . . 42,406 2,365 7,035
___________________________________________
$ 397,307 $ 8,476 $ 99,005
___________________________________________
$2,167,473 $134,765 (1) $ 976,754
===========
Corporate. . . . . . . . . . . . . (20,354)(1) 34,992
Equity in net assets of
investee companies and
related advances: Tobacco . . . - 8,268
___________
$1,020,014
__________ ===========
Operating profit
before interest expense. . . . . $114,411
Interest expense . . . . . . . . . (46,924)
__________
Income before income taxes, minority
interest, equity in net assets of
investee companies and
extraordinary item. . . . . $ 67,487
===========================================
(1) Includes restructuring expenses (recoveries) of $431, Tobacco -
United States; $9,308, South America; $330, Africa; $1,369, Other; $(498),
Flowers - United States; and $4,420, Corporate.
Europe Far East Other Total
_______________________________________________________________________________________
Export sales of U.S. origin . $159,763 $193,613 $54,886 $408,262
=========================================================
Tobacco Flowers Total
________________________________________________________________________________________
Depreciation and amortization. . . . . .$26,802 $6,978 $33,780
=================================================
Capital expenditures. . . . .. . . . . .$35,444 $5,822 $41,266
=================================================
Equity in net loss of investee
companies. . . . . . . . . . . . . . .$ (330) $ - $ (330)
=================================================
-47-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note M - Geographic Area Data, Export Sales and Other Information (continued)
Sales and Operating
Other Profit (Loss)
Operating As Defined By Identifiable
Revenues SFAS 14 Assets
_________________________________________________________________________________________
1995
Tobacco
United States. . . . . . . . . . .$ 883,294 $ 19,137 $ 119,889
South America. . . . . . . . . . . 446,102 17,249 455,526
Asia . . . . . . . . . . . . . . . 28,111 (3,222) 40,850
Africa . . . . . . . . . . . . . . 162,562 2,926 150,736
Other . . . . . . . . . . . . . . 35,189 1,375 74,180
Worldwide supply contract. . . . . - - 10,770
_________________________________________
$1,555,258 $ 37,465 $ 851,951
____________________________________________
Flowers
Europe . . . . . . . . . . . . . .$ 326,702 $ 1,970 $ 98,835
United States. . . . . . . . . . . 24,439 (5,698) 6,722
Other. . . . . . . . . . . . . . . 34,789 658 4,976
____________________________________________
$ 385,930 $ (3,070) $ 110,533
____________________________________________
$1,941,188 $ 34,395(1) $ 962,484
===========
Corporate. . . . . . . . . . . . . (11,328) 108,502
Equity in net assets of
investee companies and
related advances: Tobacco . . . - 22,622
___________
$1,093,608
__________ ===========
Operating profit
before interest expense. . . . . $ 23,067
Interest expense . . . . . . . . . (45,231)
__________
Income (loss) before income
taxes, minority interest
and equity in net assets
of investee companies. . . . . $(22,164)
============================================
(1) Includes restructuring expenses of $22,295, Tobacco - United
States; $107, South America; $76, Africa; $855, Other; $741, Flowers - Europe;
and $1,881, United States.
Europe Far East Other Total
____________________________________________________________________________________
Export sales of U.S. origin . $174,649 $260,310 $23,891 $458,850
======================================================
Tobacco Flowers Total
_______________________________________________________________________________________
Depreciation and amortization. . . . . .$24,034 $7,818 $31,852
===============================================
Capital expenditures. . . . .. . . . . .$29,033 $6,859 $35,892
===============================================
Equity in net income of
investee companies. . . . . . . . . .$ 1,805 $ - $ 1,805
===============================================
-48-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note M - Geographic Area Data, Export Sales and Other Information (continued)
Sales and Operating
Other Profit (Loss)
Operating As Defined By Identifiable
Revenues SFAS 14 Assets
__________________________________________________________________________________________
1994
Tobacco
United States. . . . . . . . . . .$ 548,735 $ 16,370 $ 268,910
South America. . . . . . . . . . . 285,158 1,631 448,428
Asia . . . . . . . . . . . . . . . 34,473 (845) 13,177
Africa . . . . . . . . . . . . . . 161,338 13,584 105,611
Other . . . . . . . . . . . . . . 66,018 2,192 40,993
Worldwide supply contract. . . . . - - 12,000
_____________________________________________
$1,095,722 $ 32,932 $ 889,119
_____________________________________________
Flowers
Europe . . . . . . . . . . . . . .$ 295,615 $ 3,984 $ 89,241
United States. . . . . . . . . . . 42,304 (2,104) 10,290
Other. . . . . . . . . . . . . . . 31,137 681 3,409
_____________________________________________
$ 369,056 $ 2,561 $ 102,940
_____________________________________________
$1,464,778 $ 35,493 $ 992,059
===========
Corporate. . . . . . . . . . . . . (5,731) 17,350
Equity in net assets of
investee companies and
related advances: Tobacco . . . - 34,407
___________
$1,043,816
_________ ===========
Operating profit
before interest expense. . . . . $ 29,762
Interest expense . . . . . . . . . (35,117)
_________
Income (loss) before income
taxes, minority interest and
equity in net assets of
investee companies. . . . . . . . $ (5,355)
===============================================
Europe Far East Other Total
_____________________________________________________________________________________________
Export sales of U.S. origin . $119,650 $239,881 $9,511 $369,042
===============================================================
Tobacco Flowers Total
_________________________________________________________________________________________
Depreciation and amortization. . . . . .$21,871 $ 6,991 $28,862
================================================
Capital expenditures. . . . .. . . . . .$22,354 $10,028 $32,382
================================================
Equity in net income
of investee companies. . . . . . . . .$ 98 $ - $ 98
================================================
-49-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note M - Geographic Area Data, Export Sales and Other Information (continued)
Of the 1996, 1995 and 1994 tobacco sales and other operating revenues,
approximately 55%, 52% and 43%, respectively, were to various tobacco
customers which management has reason to believe are now owned by or under the
common control of three companies (two companies in 1994), each of which
accounted for more than 10% of net sales. At June 30, 1996, there was
approximately $43.8 million due from the three major tobacco customers and
included in Trade receivables.
The following table summarizes the net sales made to each customer for the
periods indicated:
1996 1995 1994
Customer A . . . . . . . . . . . . . . . . . . . . $474,787 $317,110 $238,370
Customer B . . . . . . . . . . . . . . . . . . . . 336,989 279,257 -
Customer C . . . . . . . . . . . . . . . . . . . . 170,167 214,622 231,852
________ ________ ________
Total . . . . . . . . . . . . . . . . . . . $981,943 $810,989 $470,222
======= ======== =======
No customers in the flower operation accounted for more than 10% of
flower sales.
Note N - Foreign Currency Translation
The financial statements of foreign entities included in the consolidated
financial statements have been translated to U.S. dollars in accordance with
FASB Statement No. 52, "Foreign Currency Translation." Under that Statement,
all asset and liability accounts are translated at the current exchange rate,
and income statement items are translated at the average exchange rate for
each quarter; resulting translation adjustments, net of deferred taxes, are
made directly to a separate component of stockholders' equity. Transaction
adjustments, however, are made in the Statement of Consolidated Income. These
include realized exchange adjustments relating to assets and liabilities
denominated in foreign currencies. Financial statements of entities located
in highly inflationary economies are remeasured in U.S. dollars. The
remeasurement of and subsequent transaction adjustments are also made in the
Statement of Consolidated Income.
For 1996, the transaction adjustments netted to a gain of $368. The
transaction adjustments netted to a loss of $570 and a gain of $1,179 for
1995 and 1994, respectively, and were primarily related to the Company's
Brazilian operations.
-50-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note O - Contingencies and Other Information
On August 29, 1996, the Company received notices from Brazilian tax
authorities of proposed adjustments to income taxes for the calendar year 1992
based on the Company's recalculation of monetary correction as allowed under
Law 8200. The approximate proposed adjustment claims additional tax,
including penalties and interest, through August 29, 1996, of $23,474, before
related tax benefits for all assessed interest. In 1993, the Company received
notices from Brazilian tax authorities of proposed adjustments to the income
tax returns of the Company's entities located in Brazil for the calendar years
ending 1988 through 1992. The approximate proposed adjustments claim
additional tax, including penalties and interest through June 30, 1996, of
$41,577, before related tax benefits for all assessed interest. The Company
believes that it has properly reported its income and paid its taxes in Brazil
in accordance with applicable laws and intends to contest the proposed
adjustments vigorously. The Company expects that the ultimate resolution of
these matters will not have a material adverse effect on the Company's
consolidated balance sheet or results of operations.
Consistent with the 1994 plan to liquidate Korean American Tobacco, a 49%
owned affiliate, the Company is involved in legal negotiations related to the
final settlement and liquidating dividend. While the ultimate results of
these negotiations cannot be determined, management does not expect that the
outcome will have a material adverse effect on the Company's consolidated
balance sheet or results of operations.
The Company and certain subsidiaries have available letters of credit of
$195,304 at June 30, 1996, of which $144,701 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 $8,324. There
was approximately $527 outstanding under these guarantees at June 30, 1996.
The Company's subsidiaries have guaranteed certain loans made by Brazilian
banks to local farmers. There was approximately $32,398 outstanding under
these guarantees at June 30, 1996.
The Company enters into forward exchange contracts to hedge certain
foreign currency transactions for periods consistent with the terms of the
underlying transactions. While the forward contracts affect the Company's
results of operations, they do so only in connection with the underlying
transactions. As a result, they do not subject the Company to risk from
exchange rate movements, because gains and losses on these contracts offset
losses and gains on the transactions being hedged. At June 30, 1996, the
Company had $1.4 million ($1 million in 1995) of U.S. dollar/Deutschmark
exchange contracts outstanding, all of which were in Deutschmarks. The
forward exchange contracts generally have maturities that do not exceed 44
days at June 30, 1996.
The Company's other off balance sheet risks are not material.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. These estimates may change with future events.
-51-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note P - Selected Quarterly Financial Data (Unaudited)
Summarized quarterly financial information is as follows:
Per Share of
In Thousands Common Stock
_______________________________________ ____________
Sales and
Other Net Net
Operating Gross Income Income
Revenues (1) Profit (1) (Loss) (Loss)(3)
_____________________________________________________________________________________
1996 Fiscal Year . . . . . . .$2,167,473 $262,481 $ 41,270 $ 1.01
Fourth Quarter. . . . . . 487,271 64,022 (2) 9,130 (2) .21 (2)
Third Quarter . . . . . . 577,092 61,195 6,274 .16
Second Quarter. . . . . . 763,418 82,460 19,838 .48
First Quarter . . . . . . 339,692 54,804 6,028 (4) .16 (4)
1995 Fiscal Year . . . . . . .$1,941,188 $181,824 $(30,165) $(0.79)
Fourth Quarter. . . . . . 382,454 28,489 (2) (39,928) (2) (1.05) (2)
Third Quarter . . . . . . 649,170 62,228 7,576 0.20
Second Quarter. . . . . . 634,796 56,206 3,709 0.10
First Quarter . . . . . . 274,768 34,901 (1,522) (0.04)
____________________________________________
(1) In the fourth quarter of 1996 the Company has reclassified Other income
into Sales and other operating revenues. The Company has also reclassified
Sundry deductions into Cost of goods sold. Both Other income and Sundry
deductions are not material and the reclassification does not affect Net
income.
Previously reported Net sales and Gross margin were as follows:
Net Sales Gross Profit
_____________________________
1996 Third Quarter . . $ 573,084 $ 57,355
Second Quarter. . 755,228 74,319
First Quarter . . 335,349 50,859
1995 Fiscal Year . . . $1,927,749 $170,233
Fourth Quarter. . 380,215 27,243
Third Quarter . . 644,079 58,320
Second Quarter. . 631,503 52,628
First Quarter . . 271,952 32,042
(2) In the fourth quarter of 1996 the Company recorded a $15.4
million charge related to restructuring costs. In the fourth quarter of 1995
the Company recorded charges of $9.2 million and $26.0 million related to the
valuation of certain inventories and restructuring and merger related costs,
respectively.
(3) Fully diluted amounts are anti-dilutive for 1995.
(4) In the first quarter of 1996, the Company recorded $1,400 (net of
$870 tax), or $.03 per share, as an extraordinary item for the partial
recovery of an Iraqi receivable.
-52-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note Q -- Supplemental Guarantor Information
DIMON International, Inc. and Florimex Worldwide, Inc. (collectively, the
"Guarantors"), wholly owned subsidiaries of DIMON Incorporated, have fully and
unconditionally guaranteed on a joint and several basis DIMON Incorporated's
obligations to pay principal, premium and interest relative to the $125
million Senior Notes due 2006. Management has determined that separate, full
financial statements of the Guarantors would not be material to investors and
such financial statements are not provided. Supplemental combining financial
information of the Guarantors is presented below:
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Statement of Income
Year Ended June 30, 1996
(in thousands)
DIMON Non-
Incorporated Guarantors Guarantors Eliminations
Total
Sales and other operating revenues . . . . . .$ 26,003 $1,418,433 $1,236,781 $(513,744)a
$2,167,473
Cost of goods and services sold. . . . . . . . (5,067) 1,329,424 1,030,612 (449,977)a
1,904,992
________ ___________ __________
____________ ___________
31,070 89,009 206,169 (63,767)
262,481
Selling, administrative and general. . . . . . 13,059 69,794 78,962
(29,105)a,b 132,710
Restructuring and merger
related cost . . . . . . . . . . . . . . . . 4,420 1,429 9,511 -
15,360
________ ________ ________ __________
___________
13,591 17,786 117,696 (34,662)
114,411
Interest Expense . . . . . . . . . . . . . . . 24,764 28,916 27,906 (34,662)a
46,924
________ ___________ __________ __________
___________
Income (loss) before income taxes,
minority interest and equity in
net income (loss) of investee
companies, equity in net income
of subsidiaries and
extraordinary item . . . . . . . . . . . . . (11,173) (11,130) 89,790 -
67,487
Income taxes (benefits). . . . . . . . . . . . (2,516) (2,352) 31,863 -
26,995
________ _________ __________ _________
____________
Income (loss) before minority interest,
equity in net income (loss) of
investee companies, equity in net
income of subsidiaries and
extraordinary item . . . . . . . . . . . . . (8,657) (8,778) 57,927 -
40,492
Income applicable to minority
interest . . . . . . . . . . . . . . . . . . - - 292 -
292
Equity in net income (loss) of investee
companies, net of income taxes . . . . . . . - 98 (428) -
(330)
Equity in net income of
subsidiaries . . . . . . . . . . . . . . . . 49,927 57,207 - (107,134)a
-
Extraordinary item . . . . . . . . . . . . . . - 1,400 - -
1,400
________ ___________ ________ ____________
____________
NET INCOME . . . . . . . . . . . . . . . . . . $41,270 $ 49,927 $57,207 $(107,134)
$ 41,270
======== =========== ========= ============
============
a. Inter-company eliminations.
b. Royalty expense in SG&A and Royalty income in Other Income for
Consolidated Entities.
-53-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note Q -- Supplemental Guarantor Information (continued)
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Balance Sheet
June 30, 1996
(in thousands)
DIMON Non-
Incorporated Guarantors Guarantors Eliminations
Total
ASSETS
Current assets
Cash and cash equivalents . . . . . $ 723 $6,894 $ 46,120 $ 83 a
$ 53,820
Notes receivable . . . . . . . . . . - 475 19,347 (18,695)b
1,127
Trade receivables, net of
allowances. . . . . . . . . . . . 26,762 178,390 162,624 (176,878)b
190,898
Inventories:
Tobacco . . . . . . . . . . . . . - 54,729 260,747 -
315,476
Other . . . . . . . . . . . . . . 49 1,174 16,802 -
18,025
Advances on purchases of tobacco . . 168,616 28,113 49,659 (171,679)b
74,709
Recoverable income taxes . . . . . . - - 1,563 -
1,563
Prepaid expenses . . . . . . . . . . 4,190 979 7,988 -
13,157
_________ _______ __________ ___________
___________
Total current assets 200,340 270,754 564,850 (367,169)
668,775
_________ ________ __________ ___________
___________
Investments and other assets
Equity in net assets of
investee companies. . . . . . . . - 5,884 2,384 -
8,268
Consolidated subsidiaries. . . . . . 288,533 336,667 21,230 (646,430)b
-
Other investments. . . . . . . . . . 23,067 2,861 9,337 (32,278)b
2,987
Notes receivable . . . . . . . . . . 139 3,965 (26) -
4,078
Other. . . . . . . . . . . . . . . . - 981 18,170 -
19,151
_________ _________ _________ ___________
___________
311,739 350,358 51,095 (678,708)
34,484
_________ _________ _________ ___________
___________
Intangible assets
Excess of cost over related net
assets of business acquired . . . 375 8,281 14,465 -
23,121
Production and supply contracts. . . - 25,960 7,365 -
33,325
Pension asset. . . . . . . . . . . . 3,042 1,088 - -
4,130
_________ _________ _________ __________
___________
3,417 35,329 21,830 -
60,576
_________ _________ __________ __________
___________
Property, plant and equipment
Land . . . . . . . . . . . . . . . . 1,770 1,925 15,528 -
19,223
Buildings. . . . . . . . . . . . . . 4,739 25,568 113,434 -
143,741
Machinery and equipment. . . . . . . 5,271 48,858 106,108 -
160,237
Allowances for depreciation. . . . . (4,883) (26,877) (54,666) -
(86,426)
_________ _________ _________ __________
___________
6,897 49,474 180,404 -
236,775
_________ _________ ________ ___________
___________
Deferred taxes and other
deferred charges . . . . . . . . . . 19,259 - 145 -
19,404
_________ __________ __________ ____________
__________
$541,652 $705,915 $818,324 $(1,045,877)
$1,020,014
========= ========== ========== ===========
==========
a. To adjust for cash transfers made by DIMON Incorporated to an entity
which reports on an earlier period.
b. Inter-company eliminations.
-54-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note Q -- Supplemental Guarantor Information (continued)
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Balance Sheet
June 30, 1996
(in thousands)
DIMON
Incorporated Guarantors Non-Guarantors Eliminations
Total
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable. . . . . . . . . $ - $ - $ - $ -
$ -
Accounts payable:
Trade . . . . . . . . . . . . 1,423 281,706 86,216 (303,375)b
65,970
Officers and employees. . . . 14,427 2,263 7,384 -
24,074
Other . . . . . . . . . . . . 4,749 1,554 8,159 -
14,462
Advances from customers. . . . . 3,380 49,729 73,029 (51,985)b
74,153
Accrued expenses . . . . . . . . 2,418 13,941 35,438 -
51,797
Income taxes . . . . . . . . . . (12,489)c 3,083 15,042 (277)b
5,359
Long-term debt current . . . . . 4,286 350 5,982 -
10,618
_________ ___________ _______ __________
_________
Total current liabilities . 18,194 352,626 231,250 (355,637)
246,433
_________ ____________ _______ __________
_________
Long-term debt
Revolving Credit Notes
and Other . . . . . . . . . . 48,856 1,068 226,717 (10,770)b
265,871
Senior Notes . . . . . . . . . . 125,000 - - -
125,000
__________ _____________ ________ __________
_________
173,856 1,068 226,717 (10,770)
390,871
Deferred Credits
Income taxes . . . . . . . . . . 6,198 (6,259) 21,557 -
21,496
Compensation and other
benefits . . . . . . . . . . . 27,556 8,629 8,280 -
44,465
__________ __________ _________ __________
_________
33,754 2,370 29,837 -
65,961
Minority interest in
subsidiaries . . . . . . . . . . - - 901 -
901
__________ __________ ________ __________
_________
Stockholders' equity
Common stock/Paid-in-capital . . 136,959 143,026 180,366 (323,392)b
136,959
Retained earnings. . . . . . . . 177,419 203,982 146,398 (350,380)b
177,419
Equity-currency conversions. . . 2,842 2,843 2,855 (5,698)b
2,842
Additional minimum pension
liability. . . . . . . . . . . (1,372) - - -
(1,372)
Unrealized gain on investments . - - - -
-
__________ ________ _________ ___________
__________
315,848 349,851 329,619 (679,470)
315,848
__________ _________ _________ _____________
__________
$541,652 $705,915 $818,324 $(1,045,877)
$1,020,014
========== ========== ======== =============
===========
b. Inter-company eliminations.
c. Current deferred tax on reserves for restructuring and unallocated
estimated tax payments.
-55-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note Q -- Supplemental Guarantor Information (continued)
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Statement of Cash Flows
Year Ended June 30, 1996
(in thousands)
DIMON
Incorporated Guarantors Non-Guarantors Eliminations Total
Operating Activities
Net Income (Loss). . . . . . . . $ 41,270 $49,927 $57,207 $(107,134)a $41,270
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities
Depreciation and amortization. . . 2,326 10,826 20,628 - 33,780
Deferred items . . . . . . . . (3,335) 2,437 6,749 - 5,851
Loss (gain) on foreign currency
transactions . . . . . . . . 46 (69) (345) - (368)
Gain on disposition of fixed
assets . . . . . . . . . . . (14) (1,098) (1,303) - (2,415)
Gain on sale of investee . . . . . . - - (3,751) - (3,751)
Gain on sale of investment . . . . . - - (1,090) - (1,090)
Undistributed (earnings) loss of
investees/subsidiaries . . . . . (49,927) (57,305) 428 107,134 a 330
Dividends received from investee . - 1,100 365 - 1,465
Income applicable to minority
interest . . . . . . . . . . - - 292 - 292
Bad debt expense . . . . . . . - (10) 1,053 - 1,043
Decrease (increase) in accounts
receivable . . . . . . . . . 123,123 (12,826) (43,527) (79,414)a (12,644)
Decrease (increase) in inventories
and advances on purchases of
tobacco. . . . . . . . . . . 6,938 91,721 28,682 (62,903)a 64,438
Decrease in recoverable taxes. . - - 444 - 444
Decrease (increase) in
prepaid expenses . . . . . . 7,052 (313) 10,518 - 17,257
Increase (decrease) in accounts
payable and accrued expenses . 5,212 133,597 (32,157) (91,841)a 14,811
Increase (decrease) in advances
from customers . . . . . . . (499) (194,582) 13,721 206,476 a 25,116
Increase (decrease) in income
taxes. . . . . . . . . . . . (2,239) (4,306) 705 (277)a (6,117)
Other. . . . . . . . . . . . . 56 230 (194) - 92
________ ________ ________ __________ _________
Net cash provided (used) by
operating activities. 130,009 19,329 58,425 (27,959) 179,804
________ ________ ________ __________ _________
Investing Activities
Purchase of property and
equipment . . . . . . . . . . (436) (5,363) (35,467) - (41,266)
Proceeds from sale of property
and equipment. . . . . . . . . 14 4,784 3,807 - 8,605
Payments on notes receivable and
receivable from investees . . 30,034 870 228 (30,000)a 1,132
Advances of notes receivable. . (83) (350) (19,834) 18,695 a (1,572)
Proceeds from or (advances) for
other investments and
other assets . . . . . . . . 5,232 24,634 1,304 (6,748)a 24,422
Purchase of subsidiary, $8,236 for
property and equipment. . . . - (6,543) - - (6,543)
________ ________ ________ _________ _________
Net cash provided (used) by
investing activities. . . 34,761 18,032 (49,962) (18,053) (15,222)
________ ________ _________ _________ _________
-56-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note Q -- Supplemental Guarantor Information (continued)
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Statement of Cash Flows
Year Ended June 30, 1996
(in thousands)
DIMON
Incorporated Guarantors Non-Guarantors Eliminations Total
Financing Activities
Repayment of debt. . . . . . . (622,367) (32,346) (206,150) 30,000 a
(830,863)
Proceeds from debt . . . . . . 477,171 - 231,806 (10,770)a
698,207
Cash dividends paid to DIMON
Incorporated stockholders (21,731) - - -
(21,731)
Cash dividends paid to minority
stockholders . . . . . . . . - - (169) -
(169)
Proceeds from sale of common stock . 1,552 - - -
1,552
________ _________ ________ _________
_________
Net cash provided (used) by
financing activities. (165,375) (32,346) 25,487 19,230
(153,004)
________ ________ _________ _________
_________
Effect of exchange rate
changes on cash. . . . - - (84) -
(84)
________ ________ _________ _________
_________
Increase (decrease) in cash and
cash equivalents . . . (605) 5,015 33,866 (26,782)
11,494
Cash and cash equivalents at
beginning of year. . . 1,328 1,879 12,254 26,865
42,326
_________ __________ __________ ___________
__________
Cash and cash equivalents
at end of period $ 723 $ 6,894 $ 46,120 $ 83 $
53,820
=========== ========== ========== ==========
==========
a. Inter-company eliminations.
-57-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note Q -- Supplemental Guarantor Information (continued)
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Statement of Income
Year Ended June 30, 1995
(in thousands)
DIMON
Incorporated Guarantors Non-Guarantors Eliminations
Total
Sales and other operating revenues . . . $ 10,541 $1,259,125 $849,723 $ (178,201)a
$1,941,188
Cost of goods and services sold. . . . . 3,340 b 1,159,613 733,538 (137,127)a
1,759,364
________ ___________ ________ ___________
___________
7,201 99,512 116,185 (41,074)
181,824
Selling, administrative and general. . . 13,936 51,073 80,692 (12,899)a,c
132,802
Restructuring and merger related
costs. . . . . . . . . . . . . 16,891 9,487 (423) -
25,955
________ ___________ ________ ___________
___________
(23,626) 38,952 35,916 (28,175)
23,067
________ ___________ ________ ___________
___________
Interest Expense . . . . . . . . 11,882 33,824 27,700 (28,175)a
45,231
________ ___________ ________ ___________
___________
Income (loss) before income taxes,
minority interest, equity in
net income (loss) of investee
companies, and equity in net
loss of subsidiaries . . . . . . (35,508) 5,128 8,216 -
(22,164)
Income taxes (benefits). . . . . . (8,567) 3,767 10,780 -
5,980
________ ___________ ________ ___________
___________
Income (loss) before minority
interest, equity in net income
(loss) of investee companies
and equity in net loss of
subsidiaries . . . . . . . . . . (26,941) 1,361 (2,564) -
(28,144)
Income applicable to minority
interest . . . . . . . . . . . . - - 216 -
216
Equity in net income (loss) of
investee companies, net of
income taxes . . . . . . . . . . - 348 (2,153) -
(1,805)
Equity in net loss of
subsidiaries . . . . . . . . . . (3,224) (4,933) - 8,157 a
-
________ _____________ _________ ___________
___________
NET LOSS . . . . . . . . . . . . . $(30,165) $ (3,224) $ (4,933) $ 8,157 $
(30,165)
========= ============ ========= ===========
===========
a. Inter-company eliminations.
b. Reserve for inter-company profit in ending inventories
c. Royalty expense in SG&A and Royalty income in Other Income for
Consolidated Entities.
-58-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note Q -- Supplemental Guarantor Information (continued)
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Balance Sheet
June 30, 1995
(in thousands)
DIMON
Incorporated Guarantors Non-Guarantors Eliminations
Total
ASSETS
Current assets
Cash and cash equivalents. . . . . . $ 1,328 $ 1,879 $ 12,254 $ 26,865 d $
42,326
Notes receivable . . . . . . . 30,015 851 1,136 (30,000)a
2,002
Trade receivables, net of
allowances . . . . . . . . . 150,127 164,866 124,048 (256,291)a
182,750
Inventories:
Tobacco . . . . . . . . . . (5,116) b 103,294 312,253 -
410,431
Other . . . . . . . . . . . . 25 2,240 11,914 -
14,179
Advances on purchases of
tobacco . . . . . . . . . . . 183,504 70,009 25,448 (234,582)a
44,379
Recoverable income taxes . . . . - - 2,007 -
2,007
Prepaid expenses . . . . . . . . 12,499 667 19,879 -
33,045
_________ ________ _________ ___________
___________
Total current assets. . . . . 372,382 343,806 508,939 (494,008)
731,119
_________ ________ _________ ____________
___________
Investments and other assets
Equity in net assets of investee
companies . . . . . . . . . . - 2,555 20,067 -
22,622
Consolidated subsidiaries. . . . . 266,381 243,970 5,007 (515,358)a
-
Other investments. . . . . . . . 965 366 418 -
1,749
Notes receivable . . . . . . . . 45 1,016 5,046 -
6,107
Other. . . . . . . . . . . . . . 292 13,410 14,445 -
28,147
_________ ________ ________ _________
___________
267,683 261,317 44,983 (515,358)
58,625
_________ ________ ________ __________
___________
Intangible assets
Excess of cost over related net
assets of business acquired. . . . . 388 15,209 10,570 -
26,167
Production and supply contracts. . . . - 28,340 8,000 -
36,340
Pension asset. . . . . . . . . . 3,131 1,088 - -
4,219
_________ ________ _______ __________
___________
3,519 44,637 18,570 -
66,726
_________ ________ ________ __________
___________
Property, plant and equipment
Land . . . . . . . . . . . . . . 1,770 1,573 16,089 -
19,432
Buildings. . . . . . . . . . . . 4,998 21,127 109,683 -
135,808
Machinery and equipment. . . . . 5,187 44,335 119,659 -
169,181
Allowances for depreciation. . . (4,167) (25,293) (71,912) -
(101,372)
_________ ________ ________ __________
___________
7,788 41,742 173,519 -
223,049
_________ ________ ________ __________
___________
Deferred taxes and other
deferred charges . . . . . . . . 10,076 4,557 (544) -
14,089
_________ ________ __________ __________
___________
$661,448 $696,059 $745,467 $(1,009,366)
$1,093,608
========= ======== ======== ============
===========
a. Inter-company eliminations.
b. Reserve for inter-company profit in ending inventories.
d. To adjust for cash transfers made by DIMON Incorporated to an entity
which reports on an earlier period.
-59-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note Q -- Supplemental Guarantor Information (continued)
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Balance Sheet
June 30, 1995
(in thousands)
DIMON
Incorporated Guarantors Non-Guarantors Eliminations
Total
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable. . . . . . . . . $ 54,400 $ 30,000 $179,336 $ (30,000)a $
233,736
Accounts payable:
Trade . . . . . . . . . . . 4,367 149,566 111,036 (208,410)a
56,559
Officers and employees. . . 14,643 27 6,044 -
20,714
Other . . . . . . . . . . . 144 426 12,603 -
13,173
Advances from customers. . . . 3,880 228,057 75,748 (258,461)a
49,224
Accrued expenses . . . . . . . 4,509 13,815 42,158 (3,123)a
57,359
Income taxes . . . . . . . . . (10,744)e 3,672 18,271 -
11,199
Long-term debt current . . . . 4,714 628 6,216 -
11,558
________ ________ ________ ____________
___________
Total current liabilities . 75,913 426,191 451,412 (499,994)
453,522
________ ________ ________ ____________
___________
Long-term debt
Revolving Credit Notes
and Other . . . . . . . . . 264,143 2,559 25,826 -
292,528
Convertible Subordinated
Debentures. . . . . . . . . 56,370 - - -
56,370
________ ________ ________ ____________
___________
320,513 2,559 25,826 -
348,898
________ ________ ________ ____________
___________
Deferred Credits
Income taxes . . . . . . . . 70 19 10,642 -
10,731
Compensation and other
benefits . . . . . . . . . 26,146 7,642 6,927 -
40,715
________ ________ ________ ___________
___________
26,216 7,661 17,569 -
51,446
________ ________ ________ ____________
___________
Minority interest in
subsidiaries. . . . . . - - 936 -
936
________ ________ ________ ____________
___________
Stockholders' equity
Common stock . . . . 80,030 108,780 152,609 (261,389)a
80,030
Retained earnings. . 157,880 148,455 94,791 (243,246)a
157,880
Equity-currency conversions. . 1,565 1,796 1,707 (3,503)a
1,565
Additional minimum pension
liability. . . . . (1,286) - - -
(1,286)
Unrealized gain on investments . 617 617 617 (1,234)a
617
________ ________ ________ ____________
___________
238,806 259,648 249,724 (509,372)
238,806
________ ________ ________ ____________
___________
$661,448 $696,059 $745,467 $(1,009,366)
$1,093,608
======== ======== ======== ============
===========
a. Inter-company eliminations.
e. Current deferred tax on reserves and unallocated, estimated tax
payments.
-60-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note Q -- Supplemental Guarantor Information (continued)
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Statement of Cash Flows
Year Ended June 30, 1995
(in thousands)
DIMON
Incorporated Guarantors Non-Guarantors Eliminations
Total
Operating Activities
Net Income (Loss). . . . . . . . $ (30,165) $ (3,224) $ (4,933) $ 8,157 a
$(30,165)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities
Depreciation and amortization. . 607 10,372 20,873 -
31,852
Deferred items . . . . . . . . 3,922 (3,130) (1,412) -
(620)
Loss (gain) on foreign currency
transactions . . . . . . . . (55) 81 544 -
570
Gain on disposition of
fixed assets . . . . . . . . - (280) (1,539) -
(1,819)
Undistributed (earnings) loss of
investees/subsidiaries . . . . . 3,224 4,585 2,153 (8,157)a
1,805
Dividends received from investees. - 400 78 -
478
Income applicable to minority
interest . . . . . . . . . . - - 216 -
216
Bad debt expense . . . . . . . - (30) 3,850 -
3,820
Decrease (increase) in accounts
receivable . . . . . . . . . (102,713) (33,329) 97,941 90,621 a
52,520
Decrease (increase) in inventories
and advances on purchases of
tobacco. . . . . . . . . . . 97,253 823 (261,577) 165,657 a
2,156
Decrease in recoverable taxes. . . 1,666 - 2,627 -
4,293
Decrease (increase) in
prepaid expenses . . . . . . (8,718) 1,420 3,717 -
(3,581)
Increase (decrease) in accounts
payable and accrued expenses . . 5,224 7,736 (25,238) (45,885)a
(58,163)
Increase (decrease) in advances
from customers . . . . . . . (918) (15,652) 201,799 (188,257)a
(3,028)
Increase (decrease) in income
taxes. . . . . . . . . . . . (2,817) 7,135 1,757 -
6,075
Other. . . . . . . . . . . . . 269 - 135 -
404
__________ __________ __________ ___________
__________
Net cash provided (used) by
operating activities. (33,221) (23,093) 40,991 22,136
6,813
__________ __________ __________ ___________
__________
Investing Activities
Purchase of property and
equipment . . . . . . . . . . (117) (10,966) (15,953) -
(27,036)
Proceeds from sale of property
and equipment. . . . . . . . . - 838 4,039 -
4,877
Payments on notes receivable and
receivable from investees. . . 15 3,516 24,010 -
27,541
Issuance of notes receivable . . (30,000) (2,829) (3,500) 30,000 a
(6,329)
Proceeds from or (advances) for
other investments and
other assets . . . . . . . . . 5,865 (9,075) 2,601 4,676 a
4,067
Purchase of minority interest
in subsidiaries. . . . . . . . - - (507) -
(507)
Purchase of subsidiary, $8,856 for
property and equipment . . . . . . - (17,123) - -
(17,123)
__________ __________ __________ ___________
__________
Net cash provided (used) by
investing activities . . . . (24,237) (35,639) 10,690 34,676
(14,510)
__________ __________ __________ ___________
__________
-61-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note Q -- Supplemental Guarantor Information (continued)
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Statement of Cash Flows
Year Ended June 30, 1995
(in thousands)
DIMON
Incorporated Guarantors Non-Guarantors Eliminations
Total
Financing Activities
Repayment of debt. . . (641,100) (4,699) (281,223) -
(927,022)
Proceeds from debt . . 708,995 60,000 239,371 (30,000)a
978,366
Cash dividends paid to DIMON
Incorporated stockholders . (15,568) - (2) -
(15,570)
Cash dividends paid to minority
stockholders . . . . - - (237) -
(237)
Proceeds from sale of
common stock . . . . 169 - - -
169
_________ ___________ _________ _________
_________
Net cash provided (used) by
financing activities. . 52,496 55,301 (42,091) (30,000)
35,706
_________ ____________ ________ _________
_________
Effect of exchange rate
changes on cash. . . . - - (1,584) -
(1,584)
_________ ____________ ________ _________
__________
Increase (decrease) in cash and
cash equivalents . . . (4,962) (3,431) 8,006 26,812
26,425
Increase in cash from purchased
subsidiaries . . . . . - 3,430 - -
3,430
Cash and cash equivalents at
beginning of year. . . 6,290 1,880 4,248 53 a
12,471
_________ ____________ ___________ __________
_________
Cash and cash equivalents
at end of year . $ 1,328 $ 1,879 $ 12,254 $ 26,865 $
42,326
========= ============ =========== =========
=========
a. Inter-company eliminations.
-62-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note Q -- Supplemental Guarantor Information (continued)
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Statement of Income
June 30, 1994
(in thousands)
DIMON
Incorporated Guarantors Non-Guarantors Eliminations
Total
Sales and other operating
revenues . . . . . . $ 8,579 $901,702 $723,174 $ (168,677)a
$1,464,778
Cost of goods and services
sold . . . . . . . . 5,517 833,767 628,829 (150,408)a
1,317,705
_______ _________ _________ ____________
___________
3,062 67,935 94,345 (18,269)
147,073
Selling, administrative and
general. . . . . . . . 6,148 51,368 69,051 (9,256)a
117,311
_________ _________ _________ _____________
___________
(3,086) 16,567 25,294 (9,013)
29,762
Interest Expense . . . . 4,568 13,879 25,683 (9,013)a
35,117
_________ _________ _________ _____________
___________
Income (loss) before income taxes,
minority interest, equity in
net income (loss) of investee
companies and equity in net
loss of subsidiaries . . (7,654) 2,688 (389) -
(5,355)
Income taxes (benefits). . (1,999) 3,067 1,699 -
2,767
_________ _________ _________ _____________
___________
Income (loss) before minority
interest, equity in net
income (loss) of investee
companies and equity in net
income (loss) of
subsidiaries . . . . . . . (5,655) (379) (2,088) -
(8,122)
Income applicable to minority
interest . . . . . . . . . - - 466 -
466
Equity in net income (loss) of investee
companies, net of
income taxes . . . . . . . (265) (109) 472 -
98
Equity in net loss of
subsidiaries . . . . . . . (2,570) (2,082) - 4,652 a
-
_________ _________ _________ ___________
___________
NET LOSS . . . . . . . . . . $ (8,490) $ (2,570) $ (2,082) $ 4,652 $
(8,490)
========= ========= ========= ==========
===========
a. Inter-company eliminations, including profit in inventory.
-63-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note Q -- Supplemental Guarantor Information (continued)
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Statement of Cash Flows
Year Ended June 30, 1994
(in thousands)
DIMON
Incorporated Guarantors Non-Guarantors Eliminations
Total
Operating Activities
Net Income (Loss). . . . . $ (8,490) $ (2,570) $ (2,082) $ 4,652 a $
(8,490)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities
Depreciation and
amortization. . . (416) 10,508 18,770 -
28,862
Deferred items . . 672 (4,461) 4,354 -
565
Loss (gain) on foreign currency
transactions . . 80 120 (1,379) -
(1,179)
Gain on disposition of
fixed assets. . . - (447) (1,177) -
(1,624)
Gain on disposal of
operations . . - (1,792) - -
(1,792)
Undistributed earnings of
investees/subsidiaries. 2,835 2,190 (472) (4,652)a
(99)
Dividends received from
investees. . . . - - 577 -
577
Income applicable to minority
interest . . . . - - 466 -
466
Bad debt expense . (3) - 4,684 -
4,681
Decrease (increase) in accounts
receivable. . . . (5,838) 6,356 123,701 (92,765)a
31,454
Decrease (increase) in
inventories and advances on
purchases of tobacco. . 60,215 4,301 (149,953) 68,925 a
(16,512)
Decrease (increase) in
recoverable taxes . . . (1,472) - 2,823 -
1,351
Decrease (increase) in prepaid
expenses . . . . (273) (217) (1,566) -
(2,056)
Increase (decrease) in accounts
payable and accrued
expenses . . 5,280 22,090 (8,738) (8,902)a
9,730
Increase (decrease) in
advances from customers 937 (101,502) 65,659 39,857 a
4,951
Increase (decrease) in income
taxes. . . . . . (8,373) 4,154 (4,525) -
(8,744)
Other. . . . . . . (281) - (4,702) -
(4,983)
________ ________ ________ ________
________
Net cash provided (used) by
operating activities. 44,873 (61,270) 46,440 7,115
37,158
________ ________ ________ ________
________
Investing Activities
Purchase of property and
equipment. . . . . (234) (9,897) (22,251) -
(32,382)
Proceeds from sale of property
and equipment. . . - 2,023 3,968 -
5,991
Payments received on notes
receivable and receivable
from investees . . - 7,162 6,092 (8,777)a
4,477
Advances for notes receivable. . (75) - (18,310) -
(18,385)
Proceeds from or advances for
investees, other investments
and other assets . (11,082) (5,389) 13,677 2,600 a
(194)
Purchase of shares of Standard
Commercial Corporation. . (13,408) - - -
(13,408)
Other. . . . . . . . 69 - (263) -
(194)
________ ________ ________ ________
________
Net cash provided (used) by investing
activities . . . (24,730) (6,101) (17,087) (6,177)
(54,095)
________ ________ ________ ________
________
-64-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note Q -- Supplemental Guarantor Information (continued)
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Statement of Cash Flows
Year Ended June 30, 1994
(in thousands)
DIMON
Incorporated Guarantors Non-Guarantors Eliminations
Total
Financing Activities
Repayment of debt. . $ (35,016) $ (17,770) $(226,518) $ -
$(279,304)
Proceeds from debt . 16,605 85,403 205,238 -
307,246
Cash dividends paid to DIMON
Incorporated stockholders . (13,014) - - -
(13,014)
Cash dividends paid to minority
stockholders . . . - - (285) -
(285)
Proceeds from sale of common
stock. . . . . . . 28 - - -
28
________ ________ ________ ________
________
Effect of exchange rate changes
Net cash provided (used) by
financing activities . . . (31,397) 67,633 (21,565) -
14,671
________ ________ ________ ________
________
Effect of exchange rate changes
on cash. . . . . . . - - (1,662) -
(1,662)
________ ________ ________ ________
________
Increase (decrease) in cash and
cash equivalents . . (11,254) 262 6,126 938
(3,928)
Cash and cash equivalents at
beginning of year. . 17,544 1,618 (1,878) (885)a
16,399
________ ________ ________ ________
________
Cash and cash equivalents
at end of year $ 6,290 $ 1,880 $ 4,248 $ 53 $
12,471
=============== ========= ========== ========
=========
a. Inter-company eliminations, including profit in inventory.
-65-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note Q -- Supplemental Guarantor Information (continued)
DIMON INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(in thousands)
(1) Each of the Guarantors, the Company's wholly-owned subsidiaries,
DIMON International, Inc. and Florimex Worldwide Inc., have
fully and unconditionally guaranteed on a joint and several
basis the performance and punctual payment when due, whether
at stated maturity, by acceleration or otherwise, of all of the
Company's obligations under the Notes and the related
indenture, including its obligations to pay principal, premium,
if any, and interest with respect to the Notes. The obligations
of each Guarantor is limited to the maximum amount which,
after giving effect to all other contingent and fixed
liabilities of such Guarantor and after giving effect to any
collections from or payments made by or on behalf of any other
Guarantor in respect of the obligations of such other
Guarantor under its Guarantee or pursuant to its contribution
obligations under the Indenture, can be guaranteed by the
relevant Guarantor without resulting in the obligations of
such Guarantor under its Guarantee constituting a fraudulent
conveyance or fraudulent transfer under applicable federal or
state law. Each of the Guarantees is a guarantee of payment
and not collection. Each Guarantor that makes a payment or
distribution under a Guarantee shall be entitled to a
contribution from each other Guarantor in an amount pro rata,
based on the assets less liabilities of each Guarantor
determined in accordance with generally accepted accounting
principles (GAAP). The Company is not be restricted from
selling or otherwise disposing of any of the Guarantors other
than DIMON International, Inc. provided that the proceeds of
any such sale are applied as required by the Indenture.
Florimex Worldwide, Inc. is the primary holding and operating
company in the U.S. and represents the lead company for the
flowers segment. The cut flowers operations consist of buying
flowers from sources throughout the world and transporting
them, normally by air, to operating units for resale to
wholesalers and retailers.
DIMON International, Inc. is the primary holding and operating
company in the U.S. and represents the lead company in the
Tobacco division whose operations consist primarily of
selecting, buying, processing, packing, shipping, storing and
financing tobacco.
Management has determined that separate, full financial
statements of the Guarantors would not be material to
investors and such financial statements are not provided.
(2) DIMON Incorporated and each of the Guarantors have accounted
for their respective subsidiaries on the equity basis.
(3) Certain reclassifications were made to conform all of the
financial information to the financial presentation on a
consolidated basis. The principal eliminating entries
eliminate investments in subsidiaries and intercompany
balances.
-66-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note Q -- Supplemental Guarantor Information (continued)
DIMON INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(in thousands)
(4) Included in the above balance sheets are certain related party
balances among borrower, the guarantors and non-guarantors. Due to the
Company's world-wide operations, related party activity is included in
most balance sheet accounts. The tables below set forth the significant
intercompany balances for each of the periods presented.
June 30, 1996
Debit(Credit)
DIMON
Incorporated Guarantors Non-Guarantors
Accounts Receivable . . . . . . . . . . $26,761 $120,661 $54,267
Advances on Purchases . . . . . . . . . 168,616 16,886 18,963
Accounts Payable. . . . . . . . . . . . (70) (272,781) (40,033)
Advances from Customers . . . . . . . . (3,380) (37) (52,256)
June 30, 1995
Debit(Credit)
DIMON
Incorporated Guarantors Non-Guarantors
Accounts Receivable . . . . . . . . . . $ 150,153 $ 104,676 $ 20,284
Advances on Purchases . . . . . . . . . 183,503 64,284 (3,108)
Accounts Payable. . . . . . . . . . . . (780) (138,137) (69,487)
Advances from Customers . . . . . . . . (3,879) (201,229) (57,605)
-67-
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE-
Inapplicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information contained in the Proxy Statement under the caption "Election
of Directors" is incorporated herein by reference thereto. See "Additional
Information - Executive Officers of the Company" at the end of Part I above
for information about the executive officers of the Company.
ITEM 11. EXECUTIVE COMPENSATION AND TRANSACTIONS
The information contained in the Proxy Statement under the caption
"Compensation of Executive Officers and Directors" is incorporated herein by
reference thereto.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information contained in the Proxy Statement under the caption "Stock
Ownership" is incorporated herein by reference thereto.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained in the Proxy Statement under the caption "Stock
Ownership" is reported herein by reference thereto.
-68-
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(a) (1) and (2)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
Consolidated Balance Sheet--June 30, 1996 and 1995
Statement of Consolidated Income--Years ended June 30, 1996, 1995 and 1994
Statement of Consolidated Cash Flows--Years ended June 30, 1996, 1995 and
1994
Statement of Stockholders' Equity--Years ended June 30, 1996, 1995 and
1994
Notes to Consolidated Financial Statements
Financial Statement Schedules:
Schedule II Valuation and Qualifying Accounts
Report of Price Waterhouse LLP
Report of Ernst & Young LLP
(b) Current Reports on Form 8-K
Form 8-K/A2, filed April 3, 1996, amending Current Report
on Form 8-K/A, filed August 21, 1995.
Form 8-K/A2, filed May 8, 1996, amending Current Report
on Form 8-K/A1, filed January 16, 1996.
Form 8-K/A3, filed May 8, 1996, amends Current Report
on Form 8-K/A2 filed April 3, 1996.
-69-
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K (continued)
(3) Exhibits
The following documents are filed as exhibits to this Form 10-K
pursuant to Item 601 of Regulation S-K:
3.01 Amended and Restated Articles of Incorporation of DIMON
Incorporated (incorporated by reference to Appendix VII
to DIMON Incorporated's Joint Proxy Statement filed
pursuant to Rule 424(b) in connection with DIMON
Incorporated's Registration Statement on Form S-4
(form 33-89780))
3.02 Amended and Restated By-Laws as amended of DIMON
Incorporated (incorporated by reference to
Exhibit 3.2 to DIMON Incorporated's Registration
Statement on Form S-4 (file 33-89780))
4.01 Specimen of Common Stock Certificate (incorporated
herein by reference to Exhibit 4.1 to DIMON Incorporated's
Registration Statement on Form S-4 (file 33-89780))
4.02 Article III of the Amended and Restated Articles of
Incorporation of DIMON Incorporated (filed as
Exhibit 3.01)
4.03 Article III of the Amended and Restated By-Laws of DIMON
Incorporated (filed as Exhibit 3.02)
4.04 Rights Agreement, dated as of March 31, 1995, between
DIMON Incorporated and First Union National Bank of
North Carolina, as Rights Agent (incorporated by
reference to Exhibit 4 to DIMON Incorporated Current
Report on Form 8-K, dated April 1, 1995)
4.05 Indenture, dated May 29, 1996 among DIMON
Incorporated as issuer, DIMON International, Inc. and
Florimex Worldwide, Inc. as guarantors and Crestar Bank,
as trustee (filed herewith)
10.01 DIMON Incorporated Omnibus Stock Incentive Plan
(incorporated herein by reference to Exhibit 10.1 to DIMON
Incorporated's Registration Statement on Form S-4 (file
No. 33-89780))
10.02 DIMON Incorporated Non-Employee Directors' Stock Option
Plan (incorporated herein by reference to Exhibit 10.2 to
DIMON Incorporated's Registration Statement on Form S-4
(file No. 33-89780))
10.03 Dibrell Brothers, Incorporated 1994 Omnibus Stock
Incentive Plan (incorporated by reference to Exhibit
10.6 to Dibrell Brothers, Incorporated's Annual Report
on Form 10-K for the year ended June 30, 1994)
10.04 Form of Interpretive Letter, dated January 11, 1995, under
the Dibrell Brothers, Incorporated 1994 Omnibus Stock
Incentive Plan delivered by Dibrell Brothers, Incorporated
to Claude B. Owen, Jr., T. H. Faucett, T. W. Oakes,
L. N. Dibrell, III and H. P. Green (incorporated by
reference to Exhibit 10.6 to Dibrell Brothers,
Incorporated's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1994)
-70-
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K (continued)
(3) Exhibits (continued)
10.05 Dibrell Brothers, Incorporated Retirement Plan (Excess
Benefit Plan) (incorporated herein by reference to
Exhibit 10.4 to Dibrell Brothers, Incorporated's Annual
Report on Form 10-K for the year ended June 30, 1987)
10.06 Dibrell Brothers, Incorporated Pension Equalization Plan
(Benefit Assurance Plan) (incorporated herein by reference
to Exhibit 10.13 to Dibrell Brothers, Incorporated's
Annual Report on Form 10-K for the year ended June 30,
1991)
10.07 Long-Term Stock Investment Plan for Key Employees of
Monk-Austin, Inc. (incorporated by reference to Exhibit
10.5 of Monk-Austin, Inc.'s Registration Statement on
S-1 (File No. 33-51842))
10.08 Form of 1995 Declaration of Amendment to Long-Term Stock
Investment Plan for Key Employees of Monk-Austin, Inc.
(incorporated herein by reference to Exhibit 10.8 to
DIMON Incorporated's Registration Statement on Form S-4
(File No. 33-89780))
10.09 Employment Agreement, dated October 18, 1994, between
Monk-Austin International, Inc. and Albert C. Monk III
(incorporated by reference to Exhibit 10.1 to
Monk-Austin, Inc.'s Quarterly Report on Form 10-Q for
the quarter ended December 31, 1994)
10.10 Employment Agreement, dated October 18, 1994, between
Monk-Austin International, Inc. and John M. Hines
(incorporated by reference to Exhibit 10.2 to
Monk-Austin, Inc.'s Quarterly Report on Form 10-Q for
the quarter ended December 31, 1994)
10.11 Employment Agreement, dated October 18, 1994, between
Monk-Austin International, Inc. and Robert T. Monk, Jr.
(incorporated by reference to Exhibit 10.3 to
Monk-Austin, Inc.'s Quarterly Report on Form 10-Q for
the quarter ended December 31, 1994)
10.12 Employment Agreement, dated October 18, 1994, between
Monk-Austin International, Inc. and Brian J. Harker
(incorporated by reference to Exhibit 10.4 to
Monk-Austin, Inc.'s Quarterly Report on Form 10-Q for
the quarter ended December 31, 1994)
10.13 Employment Agreement, dated as of December 21, 1994,
effective as of November 1, 1994, by and between Dibrell
Brothers, Incorporated and Claude B. Owen, Jr. (incorporated
by reference to Exhibit 10.1 to Dibrell Brothers,
Incorporated's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1994)
-71-
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K (continued)
(3) Exhibits (continued)
10.14 Employment Agreement, dated as of December 21, 1994,
effective as of November 1, 1994, by and between Dibrell
Brothers, Incorporated and L. N. Dibrell, III (incorporated
by reference to Exhibit 10.4 to Dibrell Brothers,
Incorporated's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1994)
10.15 Credit Agreement dated as of March 15, 1996 among the
Company, Nationsbank, N.A. as administrative agent,
First Union National Bank of Virginia, Bank of America
National Trust and Savings Association as Co-Agent and
lenders therein (incorporated by reference to Exhibit 10.26
to DIMON Incorporated's Registration Statement on Form
S-1 (No. 333-1288))
10.16 Consulting Agreement dated April 22, 1996 between
DIMON Incorporated and John M. Hines (incorporated by
reference to Exhibit 10.29 to DIMON Incorporated's
Registration Statement on Form S-1 (No. 333-1288))
10.17 Guaranty Agreement, dated as of March 15, 1996
of DIMON Incorporated and Florimex Worldwide, Inc.
(incorporated by reference to Exhibit 10.27 to DIMON
Incorporated's Registration Statement on Form S-1
(No. 333-1288))
10.18 Form of Note in connection with Credit Agreement
(incorporated by reference to Exhibit 10.28 to DIMON
Incorporated's Registration Statement on Form S-1
(No. 333-1288))
10.19 Second Amendment dated April 22, 1996, to Employment
Agreement, dated October 18, 1994, between Monk-Austin
International, Inc. and John M. Hines (incorporated by
reference to Exhibit 10.30 to DIMON Incorporated's
Registration Statement on Form S-1 (No. 333-1288))
10.20 Purchase Agreement by and among DIMON Incorporated,
Austria Tabakwerke AG, Austria Tabak Einkaufs-Und
Handelorganisation GesmbH and Austro-Hellenique S.A.
De Tabac Et De Batiment, dated April 13, 1995
(incorporated by reference to Exhibit 10.1 to DIMON
Incorporated's Current Report on Form 8-K, dated
June 7, 1995)
10.21 Separation Agreement dated May 30, 1996, between
DIMON Incorporated and T. H. Faucett (filed herewith)
-72-
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K (continued)
(3) Exhibits (continued)
11 Computation of Earnings per Common Share (filed herewith)
21 List of Subsidiaries (filed herewith)
23.1 Consent of Price Waterhouse LLP (filed herewith)
23.2 Consent of Ernst & Young LLP (filed herewith)
27 Financial Data Schedule (filed herewith)
(d) Financial Statement Schedules:
Schedule II, Valuation and Qualifying Accounts, appears on the
following pages. The consolidated financial statement schedules
listed in Item 14(a) appear on the following pages. All other
schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not
required under the related instructions or are not applicable and,
therefore, have been omitted.
-73-
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
DIMON INCORPORATED AND SUBSIDIARIES
PERIODS ENDED JUNE 30
:______________________________:_________________:_______________:__________________:_______________:_________________:
: COL. A : COL. B : COL. C : : COL. D :
COL. E :
: : : ADDITIONS : :
:
: : Balance at : (1) : (2) : :
Balance at :
: DESCRIPTION : Beginning : Charged to : Charged to : Deductions :
End of :
: : of Period : Costs : Other Accounts : -Describe :
Period :
: : : and : -Describe : :
:
: : : Expenses : : :
:
:______________________________:_________________:_______________:__________________:_______________:_________________:
Year ended June 30, 1996
Deducted from asset accounts:
Allowance for doubtful
accounts $ 8,823,339 $1,042,911 $ - $3,308,099 (A) $
6,558,151
Other investments (616,861) - 616,861 -
-
___________ __________ ____________ __________
___________
Total $ 8,206,478 $1,042,911 $ 616,861 $3,308,099 $
6,558,151
=========== ========== =========== ==========
===========
Year ended June 30, 1995
Deducted from asset accounts:
Allowance for doubtful
accounts $ 9,972,568 $3,820,054 $ - $4,969,283 (A) $
8,823,339
Other investments 417,958 - (1,034,819) -
(616,861)(B)
___________ __________ ____________ __________
___________
Total $10,390,526 $3,820,054 $(1,034,819) $4,969,283 $
8,206,478
=========== ========== =========== ===========
===========
Year ended June 30, 1994
Deducted from asset accounts:
Allowance for doubtful
accounts $10,211,471 $3,633,649 $ - $3,872,552 (A) $
9,972,568
Other Investments - - 417,958 -
417,958 (B)
___________ __________ ___________ __________
___________
Total $10,211,471 $3,633,649 $ 417,958 $3,872,552
$10,390,526
=========== ========== =========== ==========
==========
(A) CURRENCY TRANSLATION AND DIRECT WRITE-OFF.
(B) NET UNREALIZED LOSS (GAIN) BEFORE TAX ON LONG-TERM MARKETABLE EQUITY SECURITIES RECORDED IN
STOCKHOLDERS' EQUITY.
-74-
Report of Independent Accountants
To the Board of Directors and Shareholders of DIMON Incorporated
In our opinion, based upon our audits and the report of other auditors, the
accompanying consolidated balance sheets and the related consolidated
statements of income, of changes in stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of DIMON
Incorporated and its subsidiaries at June 30, 1996 and 1995, and the results
of their operations and their cash flows for each of the three years in the
period ended June 30, 1996, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We did not audit the financial
statements of Dibrell Brothers, Incorporated, which statements reflect total
Sales and other operating revenues of $928,470,334 for the year ended June 30,
1994. Those statements were audited by other auditors whose report thereon
has been furnished to us, and our opinion expressed herein, insofar as it
relates to the amounts included for Dibrell Brothers, Incorporated is based
solely on the report of the other auditors. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits and the report
of the other auditors provide a reasonable basis for the opinion expressed
above.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Raleigh, North Carolina
August 22, 1996, except as to Note O, which is as of August 29, 1996
-75-
Report of Independent Accountants
on Financial Statement Schedule
To the Board of Directors and Shareholders of DIMON Incorporated
Our audits of the consolidated financial statements referred to in our report
dated August 22, 1996, except as to Note O, which is as of August 29, 1996,
appearing in the 1996 Annual Report to Shareholders of DIMON Incorporated
(which report and consolidated financial statements are incorporated by
reference in this Annual Report on Form 10-K) also included an audit of the
Financial Statement Schedule listed in Item 14(a) of this Form 10-K. In our
opinion, this Financial Statement Schedule presents fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Raleigh, North Carolina
August 22, 1996, except as to Note O, which is as of August 29, 1996
-76-
Report of Independent Auditors
Shareholders and Board of Directors
Dibrell Brothers, Incorporated
We have audited the consolidated statements of income, stockholders' equity,
and cash flows of Dibrell Brothers, Incorporated and subsidiaries for the year
ended June 30, 1994. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated results of operations and cash flows
of Dibrell Brothers, Incorporated and subsidiaries for the year ended June 30,
1994, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Ernst & Young LLP
Winston-Salem, North Carolina
August 26, 1994
-77-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized on September 19, 1996.
DIMON INCORPORATED (Registrant)
/s/ Claude B. Owen, Jr.
By ______________________________
Claude B. Owen, Jr.
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities indicated on September 19, 1996.
/s/ Claude B. Owen, Jr. /s/ Albert C. Monk III
__________________________________ __________________________________
Claude B. Owen, Jr. Albert C. Monk III
Chairman of the Board and Director and President of DIMON
Chief Executive Officer of DIMON Incorporated
Incorporated
/s/ R. Stuart Dickson
/s/ Thomas F. Keller ____________________________________
__________________________________ R. Stuart Dickson
Thomas F. Keller Director of DIMON Incorporated
Director of DIMON Incorporated
/s/ Willie G. Barker, Jr.
/s/ James E. Johnson, Jr. ____________________________________
__________________________________ Willie G. Barker, Jr.
James E. Johnson, Jr. Director of DIMON Incorporated
Director of DIMON Incorporated
/s/ Jerry L. Parker
/s/ Joseph L. Lanier, Jr. ____________________________________
__________________________________ Jerry L. Parker
Joseph L. Lanier, Jr. Vice President-Controller (Principal
Director of DIMON Incorporated Accounting Officer) of DIMON
Incorporated
/s/ Norman A. Scher
__________________________________ /s/ Robert T. Monk, Jr.
Norman A. Scher __________________________________
Director of DIMON Incorporated Robert T. Monk, Jr.
Director of DIMON Incorporated
/s/ Henry F. Frigon
__________________________________ /s/ Louis N. Dibrell, III
Henry F. Frigon __________________________________
Director of DIMON Incorporated Louis N. Dibrell, III
Director of DIMON Incorporated
/s/ John M. Hines
__________________________________
John M. Hines
Director of DIMON Incorporated
-78-
EXHIBIT INDEX
Exhibit Page No.
3.01 Amended and Restated Articles of incorporated by reference
Incorporation of DIMON (see page 70)
Incorporated
3.02 Amended and Restated By-Laws as incorporated by reference
amended of DIMON Incorporated (see page 70)
4.01 Specimen of Common Stock incorporated by reference
Certificate (see page 70)
4.02 Article III of the Amended and Restated incorporated by reference
Articles of Incorporation of DIMON (see page 70)
Incorporated (filed as Exhibit 3.10)
4.03 Article III of the Amended and Restated incorporated by reference
By-Laws of DIMON Incorporated (see page 70)
(filed as Exhibit 3.20)
4.04 Rights Agreement, dated as of March 31, incorporated by reference
1995, between DIMON Incorporated and (see page 70)
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 83 - 205
Incorporated as issuer, DIMON International, Inc.
and Florimex Worldwide, Inc. as guarantors and
Crestar Bank, as trustee (filed herewith)
10.01 DIMON Incorporated Omnibus Stock incorporated by reference
Incentive Plan (incorporated herein (see page 70)
by reference to Exhibit 10.1 to DIMON
Incorporated's Registration Statement
on Form S-4 (file No. 33-89780))
10.02 DIMON Incorporated Non-Employee incorporated by reference
Directors' Stock Option Plan (see page 70)
(incorporated herein by reference
to Exhibit 10.2 to DIMON
Incorporated's Registration Statement
on Form S-4 (file No. 33-89780))
10.03 Dibrell Brothers, Incorporated 1994 incorporated by reference
Omnibus Stock Incentive Plan (see page 70)
(incorporated by reference to
Exhibit 10.6 to Dibrell Brothers,
Incorporated's Annual Report on
Form 10-K for the fiscal year
ended June 30, 1994)
-79-
EXHIBIT INDEX
Exhibit Page No.
10.04 Form of Interpretive letter, dated incorporated by reference
January 11, 1995, under the Dibrell (see page 70)
Brothers, Incorporated 1994 Omnibus
Stock Incentive Plan delivered by
Dibrell Brothers, Incorporated to
Claude B. Owen, Jr., T. H. Faucett,
T. W. Oakes, L. N. Dibrell, III
and H. P. Green (incorporated by
reference to Exhibit 10.6 to
Dibrell Brothers, Incorporated's
Quarterly Report on Form 10-Q
for the quarter ended December 31, 1994)
10.05 Dibrell Brothers, Incorporated incorporated by reference
Retirement Plan (Excess Benefit (see page 71)
Plan) (incorporated herein by
reference to Exhibit 10.4 to
Dibrell Brothers, Incorporated's
Annual Report on Form 10-K for
the year ended June 30, 1987)
10.06 Dibrell Brothers, Incorporated incorporated by reference
Pension Equalization Plan (see page 71)
(Benefit Assurance Plan)
(incorporated herein by reference
to Exhibit 10.13 to Dibrell
Brothers, Incorporated's Annual
Report on Form 10-K for the year
ended June 30, 1991)
10.07 Long-Term Stock Investment Plan incorporated by reference
for Key Employees of Monk-Austin, (see page 71)
Inc. (incorporated by reference
to Exhibit 10.5 of Monk-Austin,
Inc.'s Registration Statement on
S-1 (File No. 33-51842))
10.08 Form of 1995 Declaration of incorporated by reference
Amendment to Long-Term Stock (see page 71)
Investment Plan for Key Employees
of Monk-Austin, Inc. (incorporated
herein by reference to Exhibit
10.8 to DIMON Incorporated's
Registration Statement on Form S-4
(File No. 33-89780))
10.09 Employment Agreement, dated incorporated by reference
October 18, 1994, between Monk-Austin (see page 71)
International, Inc. and
Albert C. Monk, III (incorporated by
reference to Exhibit 10.1 to
Monk-Austin, Inc.'s Quarterly Report
on Form 10-Q for the quarter ended
December 31, 1994)
10.10 Employment Agreement, dated incorporated by reference
October 18, 1994, between Monk-Austin (see page 71)
International, Inc. and
John M. Hines (incorporated by
reference to Exhibit 10.1 to
Monk-Austin, Inc.'s Quarterly Report
on Form 10-Q for the quarter ended
December 31, 1994)
-80-
EXHIBIT INDEX
Exhibit Page No.
10.11 Employment Agreement, dated incorporated by reference
October 18, 1994, between Monk-Austin (see page 71)
International, Inc. and
Robert T. Monk, Jr. (incorporated by
reference to Exhibit 10.1 to
Monk-Austin, Inc.'s Quarterly Report
on Form 10-Q for the quarter ended
December 31, 1994)
10.12 Employment Agreement, dated incorporated by reference
October 18, 1994, between (see page 71)
Monk-Austin International, Inc.
and Brian J. Harker (incorporated by
reference to Exhibit 10.4 to
Monk-Austin, Inc.'s Quarterly Report
on Form 10-Q for the quarter ended
December 31, 1994)
10.13 Employment Agreement, dated as of incorporated by reference
December 21, 1994, effective as (see page 71)
of November 1, 1994, by and between
Dibrell Brothers, Incorporated and
Claude B. Owen, Jr. (incorporated
by reference to Exhibit 10.1 to
Dibrell Brothers, Incorporated's
Quarterly Report on Form 10-Q for
the quarter ended December 31, 1994)
10.14 Employment Agreement, dated as of incorporated by reference
December 21, 1994, effective as (see page 72)
of November 1, 1994, by and between
Dibrell Brothers, Incorporated and
L. N. Dibrell, III (incorporated
by reference to Exhibit 10.1 to
Dibrell Brothers, Incorporated's
Quarterly Report on Form 10-Q for
the quarter ended December 31, 1994)
10.15 Credit Agreement dated as of March 15, 1996 incorporated by reference
among the Company, Nationsbank, N.A. as (see page 72)
administrative agent, First Union National Bank
of Virginia, Bank of America National Trust and
Savings Association as Co-Agent and lenders
therein (incorporated by reference to Exhibit
10.26 to DIMON Incorporated's Registration
Statement on Form S-1 (No. 333-1288))
-81-
EXHIBIT INDEX
Exhibit Page No.
10.16 Consulting Agreement dated April 22, 1996 between incorporated by reference
DIMON Incorporated and John M. Hines (see page 72)
(incorporated by reference to Exhibit 10.29 to
DIMON Incorporated's Registration
Statement on Form S-1 (No. 333-1288))
10.17 Guaranty Agreement, dated as of March 15, 1996 incorporated by reference
of DIMON Incorporated and Florimex Worldwide, (see page 72)
Inc. (incorporated by reference to Exhibit
10.27 to DIMON Incorporated's Registration
Statement on Form S-1 (No. 333-1288))
10.18 Form of Note in connection with Credit Agreement incorporated by reference
(incorporated by reference to Exhibit (see page 72)
10.28 to DIMON Incorporated's Registration
Statement on Form S-1 (No. 333-1288))
10.19 Second Amendment dated April 22, 1996, to incorporated by reference
Employment Agreement, dated October 18, 1994, (see page 72)
between Monk-Austin International, Inc. and
John M. Hines (incorporated by reference to
Exhibit 10.30 to DIMON Incorporated's Registration
Statement on Form S-1 (No. 333-1288))
10.20 Purchase Agreement by and among DIMON incorporated by reference
Incorporated, Austria Tabakwerke AG, Austria (see page 72)
Tabak Einkaufs-Und Handelorganisation GesmbH
and Austro-Hellenique S.A. De Tabac Et De Batiment,
dated April 13, 1995 (incorporated by reference to
Exhibit 10.1 to DIMON Incorporated's Current Report
on Form 8-K, dated June 7, 1995)
10.21 Separation Agreement dated May 30, 1996, between 206-211
DIMON Incorporated and T. H. Faucett
(filed herewith)
11 Computation of Earnings per Common Share 212
21 List of Subsidiaries 213
23.1 Consents of Price Waterhouse LLP 214
23.2 Consents of Ernst & Young LLP 215
27 Financial Data Schedule 216
-82-