<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Judiciary Plaza, 450 Fifth Street, N.W.
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED DECEMBER 31, 1994 COMMISSION FILE NO. O-2655
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DIXON TICONDEROGA COMPANY
- - - - - -----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 23-0973760
- - - - - --------------------------------- ----------------------------------
(State or other jurisdiction I.R.S. Employer
of incorporation or organization) Identification No.
2600 Maitland Center Parkway, Suite 200, Maitland, FL 32751
- - - - - ----------------------------------------------------------------------------
(Address of principal executive offices) Zip Code
(407) 875-9000
Registrant's telephone number, including area code: ----------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.
Class Outstanding as of December 31, 1994
- - - - - ---------------------------- -----------------------------------------
Common Stock $1 par value 3,169,103
<PAGE> 2
DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
------------------------------------------
INDEX
-----
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Information
Consolidated Balance Sheets --
December 31, 1994 and September 30, 1994 3-4
Consolidated Statements of Operations --
For The Three Months Ended
December 31, 1994 and 1993 5
Consolidated Statements of Cash Flows --
For The Three Months Ended December 31, 1994
and 1993 6-7
Notes to Consolidated Financial Statements 8-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-12
PART II. OTHER INFORMATION - Not applicable.
Signatures 13
<PAGE> 3
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, September 30,
1994 1994
------------ -------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,942,821 $ 1,822,764
Receivables, less allowance for
doubtful accounts of $461,450
at December 31, 1994 and $564,905
at September 30, 1994 16,528,262 20,335,421
Inventories 28,984,851 28,881,083
Assets held for sale 252,042 256,947
Other current assets 2,001,954 1,924,754
----------- -----------
Total current assets 49,709,930 53,220,969
----------- -----------
CONDOMINIUMS UNDER DEVELOPMENT 783,944 773,067
----------- -----------
PROPERTY, PLANT and EQUIPMENT:
Land and buildings 11,091,155 11,867,046
Machinery and equipment 16,969,536 18,983,203
Furniture and fixtures 1,033,678 843,316
----------- -----------
29,094,369 31,693,565
Less accumulated depreciation (16,492,526) (18,308,662)
----------- -----------
12,601,843 13,384,903
OTHER ASSETS 1,501,675 1,473,059
----------- -----------
$64,597,392 $68,851,998
=========== ===========
<PAGE> 4
<CAPTION>
December 31, September 30,
1994 1994
------------ -------------
<S> <C> <C>
CURRENT LIABILITIES:
Notes payable $10,552,223 $11,054,169
Current maturities of long-term debt 4,431,213 4,431,570
Accounts payable 5,705,613 5,258,085
Accrued liabilities 6,607,141 8,626,772
----------- -----------
Total current liabilities 27,296,190 29,370,596
----------- -----------
LONG-TERM DEBT 18,872,190 19,140,668
----------- -----------
OTHER NONCURRENT LIABILITIES 181,852 233,818
----------- -----------
DEFERRED INCOME TAXES 972,290 1,144,799
----------- -----------
MINORITY INTEREST 2,599,907 3,421,253
----------- -----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, par $1 authorized
100,000 shares, none issued - -
Common stock, par $1, authorized
8,000,000 shares; issued 3,434,373
shares as of December 31, 1994 and
3,424,873 as of September 30, 1994 3,434,373 3,424,873
Capital in excess of par value 2,081,077 2,042,639
Retained earnings 11,879,675 11,577,719
Cumulative translation adjustment (1,747,250) (531,455)
----------- -----------
15,647,875 16,513,776
Less - treasury stock, at cost
(265,270 shares) (972,912) (972,912)
----------- -----------
14,674,963 15,540,864
----------- -----------
$64,597,392 $68,851,998
=========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
<PAGE> 5
<TABLE>
<CAPTION>
DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED
DECEMBER 31,
1994 1993
-------- --------
<S> <C> <C>
REVENUES $21,393,351 $18,564,736
----------- -----------
COST AND EXPENSES:
Cost of goods sold 14,473,452 13,043,809
Selling and
administrative expenses 5,575,746 4,568,751
----------- -----------
20,049,198 17,612,560
----------- -----------
OPERATING INCOME 1,344,153 952,176
INTEREST EXPENSE 756,080 918,777
----------- -----------
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST 588,073 33,399
INCOME TAXES 228,336 6,168
----------- -----------
359,737 27,231
MINORITY INTEREST 57,782 -
----------- -----------
NET INCOME $ 301,955 $ 27,231
=========== ===========
EARNINGS PER COMMON SHARE $ .10 $ .01
=========== ===========
WEIGHTED AVERAGE SHARES
OUTSTANDING 3,164,820 3,102,260
=========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
<PAGE> 6
<TABLE>
<CAPTION>
DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1994 AND 1993
1994 1993
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 301,955 $ 27,231
Adjustment to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 655,380 598,977
Deferred taxes (157,335) 93,992
Income attributable to
minority interest 57,782 -
Changes in assets and liabilities:
Receivables, net 3,310,229 2,942,032
Inventories (1,064,076) (549,045)
Other current assets (175,247) (534,758)
Accounts payable and accrued liabilities (1,261,100) (2,034,150)
Condominiums (10,877) 120,712
Other assets (204,193) (224,379)
---------- ----------
Net cash provided by operations 1,452,518 440,612
---------- ----------
Cash flows from investing activities:
Purchases of plant and equipment, net (193,872) (369,323)
Proceeds from sale of assets - 459,883
---------- ----------
Net cash provided by (used in)
investing activities (193,872) 90,560
---------- ----------
Cash flows from financing activities:
Principal reductions of long-term
debt and notes payable (770,781) (645,874)
Other non-current liabilities (24,218) 19,115
Exercise of stock options 47,938 -
---------- ----------
Net cash used in financing activities (747,061) (626,759)
---------- ----------
Effect of exchange rate changes on cash (391,528) 25,462
---------- ----------
<PAGE> 7
Net increase (decrease) in cash 120,057 (70,125)
Cash and cash equivalents,
beginning of period 1,822,764 332,041
---------- ----------
Cash and cash equivalents,
end of period $1,942,821 $ 261,916
========== ==========
Supplemental Disclosures:
Cash paid during the period:
Interest (net of amount capitalized) $ 430,464 $ 483,794
Income taxes 955,667 71,614
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
<PAGE> 8
DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation
---------------------
The condensed consolidated financial statements included herein have been
prepared by the Registrant, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Registrant believes that the disclosures are adequate to make the information
presented not misleading. It is suggested that these financial statements be
read in conjunction with the financial statements and the notes thereto
included in the Registrant's latest annual report on Forms 10-K and 10-K/A.
In the opinion of the Registrant, all adjustments (solely of a normal
recurring nature) necessary to present fairly the financial position of the
Dixon Ticonderoga Company and subsidiaries as of December 31, 1994 and the
results of their operations and cash flows for the three months ended
December 31, 1994 and 1993, have been included. The results of operations
for such interim periods are not necessarily indicative of the results for
the entire year.
Translation of Foreign Currencies
---------------------------------
In accordance with Statement of Financial Accounting Standard No. 52, results
of operations of the Mexico, Canada and U.K. subsidiaries are translated
using average exchange rates during the period. Assets and liabilities are
translated into U.S. dollars at current exchange rates with the gain or loss
being recorded in shareholders' equity (and minority interest in the case of
the Mexico subsidiary). Prior to fiscal 1995, the subsidiary in Mexico was
deemed as operating in a highly inflationary economy, and thus translations
were determined using a combination of current and historical rates and
recorded in the statement of operations.
2. INVENTORIES:
Since amounts for inventories under the LIFO method are based on annual
determinations of quantities and costs as of the end of the fiscal year, the
inventories at December 31, 1994 (for which the LIFO method of accounting are
used) are based on certain estimates relating to quantities and costs as of
year end.
<PAGE> 9
Inventories consist of (in thousands):
<TABLE>
<CAPTION>
December 31, September 30,
1994 1994
------------ -------------
<S> <C> <C>
Raw materials $11,815 $12,273
Work in process 4,787 4,494
Finished goods 12,383 12,114
------- -------
$28,985 $28,881
======= =======
</TABLE>
3. SALE OF ASSETS:
In October 1993, the Registrant sold idle property in Westampton, New Jersey,
generating net proceeds of $460,000, which approximated its net book value.
4. ACCOUNTING FOR INCOME TAXES:
The difference between income taxes calculated at the U.S statutory federal
income tax rate and the provision in the condensed consolidated financial
statements is primarily due to the net effect of utilization of U.S. net
operating loss carryforwards, foreign and state income taxes and other
permanent items.
5. CONTINGENCIES:
The Registrant, in the normal conduct of its business, is a party in certain
litigation. In the opinion of management (after taking into account
accruals), the ultimate outcome of this litigation will not materially affect
the Company's future results of operations or financial position. Included
in this litigation is a claim against the Company under New Jersey's
Environmental Clean-up Responsibility Act, by a 1984 purchaser of industrial
property from the Company. The Company has evaluated the merits of the case
and believes the outcome will not be material to the future results of
operations as well as the financial position of the Company.
The Registrant is aware of several environmental matters related to certain
facilities purchased or to be sold. The Registrant assesses the extent of
these matters on an ongoing basis. In the opinion of management (after
taking into account accruals), the resolution of these matters will not
materially affect the Company's future results of operations or financial
position.
In conjunction with the sale of a discontinued business in a previous year,
the Registrant guaranteed a loan to the buyer. The loan balance is
approximately $375,000 as of December 31, 1994. In the opinion of
management, the guarantee will not ultimately have any material effect on the
Company's future results of operations or financial condition.
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
REVENUES for the quarter ended December 31, 1994 increased $2,828,000 from
the same quarter last year. The changes by segment are as follows:
<TABLE>
<CAPTION>
Increase % Increase (Decrease)
---------------------
(Decrease) Total Volume Price/Mix
---------- ----- ------ ---------
<S> <C> <C> <C> <C>
Consumer U.S. $2,053,000 19 13 6
Consumer Foreign (73,000) (4) (9) (5)
Graphite & Lubricants 331,000 13 18 (5)
Refractory 644,000 27 30 (3)
Real Estate and Other (133,000) - - -
</TABLE>
Revenue in Canada and Mexico decreased $38,000 (or 2%) and $61,000 (or 7%),
respectively, due to the decline of their local currencies' value compared to
the U.S. dollar.
While the recent devaluation of the Mexican peso did not have a materially
adverse effect on first quarter revenues and profit in Mexico, it is expected
to result in lower Mexico domestic sales in the second fiscal quarter, as
consumer products manufacturers are raising prices to offset the devaluation
of the peso. The effect of any decrease or postponement in Mexico domestic
sales will be mitigated by increased sales to the U.S. of certain products
manufactured by the Company in Mexico, as these products will be imported at
lower cost (in terms of U.S. dollars).
Revenues decreased $4,722,000 from the prior quarter ended September 30,
1994, as follows:
<TABLE>
<CAPTION>
Increase % Increase (Decrease)
---------------------
(Decrease) Total Volume Price/Mix
---------- ----- ------ ---------
<S> <C> <C> <C> <C>
Consumer U.S. $(1,616,000) (11) (13) 2
Consumer Foreign (2,842,000) (55) (50) (5)
Graphite & Lubricants (250,000) (8) (11) 3
Refractory (11,000) - 2 (2)
Real Estate & Other (3,000) - - -
</TABLE>
The decreases in Foreign and U.S. Consumer Products reflect the seasonality
of the demand for their products. The prior quarter historically results in
a higher percentage of annual revenues (approximately 28% as compared to 22%
this quarter) due to seasonal school and mass market orders.
<PAGE> 11
OPERATING INCOME increased $392,000 over the same period last year. All
segments, except real estate and other, showed increases on higher revenues
and improved profit margins.
Operating income decreased $1,086,000 from the prior quarter due primarily to
the aforementioned seasonality that historically generates higher revenues
and related operating income in the last quarter of the fiscal year.
INTEREST EXPENSE decreased $163,000 from the same period last year and
$596,000 from the prior quarter due to lower borrowings in both the U.S. and
Mexico which more than offset increases in variable rates tied to the U.S.
prime rate.
INCOME TAXES increased $222,000 over the same period last year as a result of
higher pre-tax income.
LIQUIDITY AND CAPITAL RESOURCES
The financial condition of the Company improved dramatically in fiscal 1994
and the first quarter of fiscal 1995, principally due to its recent operating
success and the completion of major financing initiatives. Cash flows from
operating activities in the first quarter of fiscal 1995 were approximately
$1.5 million (as compared with $441,000 in the prior fiscal year) despite
higher working capital requirements to support increasing business segments.
While accounts receivable have increased on higher consolidated revenues, the
Company managed to maintain its strong collection practices which have
reduced average days outstanding under normal terms. Inventory levels only
increased slightly during the period. As is the case historically, increased
collections on accounts receivable under special terms contributed to lower
cyclical borrowing levels in the first quarter (reduced by $771,000).
Investing activities included approximately $200,000 in purchases of property
and equipment (approximately $170,000 less than the prior year quarter).
Generally, all major capital projects are discretionary in nature and thus no
material purchase commitments exist. The Company anticipates its capital
expenditures to accelerate during the year and approximate $2 million, less
than its annual depreciation expense. These expenditures will include
strategic manufacturing equipment purchases as well as customary projects,
and will continue to be funded from operations and existing financing
arrangements.
In 1994, the Company successfully completed major financing arrangements, in
the amount of $35 million, which refinanced certain short-term obligations
and provided additional working capital. The arrangements provide up to $10
million in additional financing and permits the Company to meet all current
debt obligations. The related credit agreement provides for the maintenance
of certain financial covenants and ratios, with which the Company is
presently in compliance. The Registrant presently has approximately $15
million of unused lines of credit available under this new financing
agreement.
<PAGE> 12
The Company also has $13.7 million of Senior Subordinated Notes outstanding
with several insurance companies. The note agreement, as amended, provides
for the payment of approximately $3.3 million annually, commencing August
1994. This agreement also provides for the maintenance of certain financial
covenants and ratios, with which the Company is presently in compliance. The
new revolving credit agreement described above provides for the August 1994
and 1995 subordinated note payments of $3.3 million each. The Company
intends to satisfy future subordinated note payments in 1996 and later from
funds provided by operations and/or an infusion of new equity.
In addition to these ongoing efforts, management believes that additional
cash flows can be generated through the sale of certain remaining idle
assets. The new and existing sources of financing, financing strategies
discussed above and cash expected to be generated from future operations
will, in management's opinion, be sufficient to fulfill all current and
anticipated requirements of the Company's ongoing businesses. Moreover, any
contemplated future sale of Company assets will contribute to lower borrowing
levels, without any anticipated material negative impact upon operating
results.
<PAGE> 13
PART II. OTHER INFORMATION
Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DIXON TICONDEROGA COMPANY
Dated: February 13, 1995 By: /s/ Gino N. Pala
----------------------------
Gino N. Pala
Chairman of the Board,
President, Chief Executive
Officer and Director
Dated: February 13, 1995 By: /s/ Richard A. Asta
----------------------------
Richard A. Asta
Executive Vice President of
Finance and Chief Financial
Officer
Dated: February 13, 1995 By: /s/ John Adornetto
----------------------------
John Adornetto
Vice President/Corporate
Controller and Chief
Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheets, the Consolidated Statement of Operations and the
Consolidated Statement of Cash Flows, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> DEC-31-1994
<CASH> 1,942,821
<SECURITIES> 0
<RECEIVABLES> 16,989,712
<ALLOWANCES> 461,450
<INVENTORY> 28,984,851
<CURRENT-ASSETS> 49,709,930
<PP&E> 29,094,369
<DEPRECIATION> 16,492,526
<TOTAL-ASSETS> 64,597,392
<CURRENT-LIABILITIES> 27,296,190
<BONDS> 0
<COMMON> 3,434,373
0
0
<OTHER-SE> 11,240,590
<TOTAL-LIABILITY-AND-EQUITY> 64,597,392
<SALES> 21,393,351
<TOTAL-REVENUES> 21,393,351
<CGS> 14,473,452
<TOTAL-COSTS> 14,473,452
<OTHER-EXPENSES> 5,575,746
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 756,080
<INCOME-PRETAX> 588,073
<INCOME-TAX> 228,336
<INCOME-CONTINUING> 301,955
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 301,955
<EPS-PRIMARY> .10
<EPS-DILUTED> 0
</TABLE>
