Page 1 of 31
Page 29 - Exhibit Index
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from_____to_____
Commission file number 0-2734; 1-13684
DIMON INCORPORATED
(Exact name of registrant as specified in its
charter)
VIRGINIA 54-1746567
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
512 Bridge Street
Danville, Virginia 24541
(Address of principal executive (Zip Code)
offices)
(804) 792-7511
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal
year, if changed since last report)
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 the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Outstanding at
Class of Common Stock April 30, 1996
NO par value 42,348,609
<PAGE>
DIMON INCORPORATED
INDEX
PAGE NO.
Part I. Financial Information:
Consolidated Balance Sheet - March 31, 1996
and June 30, 1995. . . . . . . . . . . . . . . . . . . . . . . 3 - 4
Statement of Consolidated Income - Three Months
and Nine Months Ended March 31, 1996
and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Statement of Consolidated Cash Flows - Nine
Months Ended March 31, 1996 and 1995 . . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements. . . . . . . . . . . . 7 - 20
Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . . . .21 - 26
Part II. Other Information . . . . . . . . . . . . . . . . . . .26 - 28
-2-
<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
DIMON Incorporated and Subsidiaries
CONSOLIDATED BALANCE SHEET
(Unaudited)
March 31 June 30
1996 1995
(in thousands) ____________ ___________
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents . . . . . . . . . $ 12,148 $ 42,326
Notes receivable. . . . . . . . . . . . . . 1,134 2,002
Trade receivables, net of allowances. . . . 195,999 182,750
Inventories:
Tobacco. .. . . . . . . . . . . . . . . . 343,484 410,431
Other. . .. . . . . . . . . . . . . . . . 20,429 14,179
Advances on purchases of tobacco. . . . . . 74,470 44,379
Recoverable income taxes. . . . . . . . . . 1,320 2,007
Prepaid expenses. . . . . . . . . . . . . . 13,772 33,045
___________ ___________
Total current assets 662,756 731,119
___________ ___________
Investments and other assets
Equity in net assets of investee companies. 8,287 22,622
Other investments . . . . . . . . . . . . . 4,242 1,749
Notes receivable. . . . . . . . . . . . . . 7,076 6,107
Other. . . .. . . . . . . . . . . . . . . . 24,986 28,147
___________ ___________
44,591 58,625
___________ ___________
Intangible assets
Excess of cost over related net assets of
business acquired . . . . . . . . . . . . 23,743 26,167
Production and supply contracts . . . . . . 36,406 36,340
Pension asset . . . . . . . . . . . . . . . 4,219 4,219
___________ __________
64,368 66,726
___________ ___________
Property, plant, and equipment
Land . . . .. . . . . . . . . . . . . . . . 20,254 19,432
Buildings. .. . . . . . . . . . . . . . . . 141,437 135,808
Machinery and equipment . . . . . . . . . . 166,226 169,181
Allowances for depreciation . . . . . . . . (100,395) (101,372)
___________ ___________
227,522 223,049
___________ ___________
Deferred taxes and other deferred charges. . . . . 12,054 14,089
___________ ___________
$1,011,291 $1,093,608
=========== ===========
-3-
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
DIMON Incorporated and Subsidiaries
CONSOLIDATED BALANCE SHEET
(Unaudited)
March 31 June 30
1996 1995
(in thousands) ____________ ___________
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities
Notes payable to banks. . . . . . . . . . . $ 101,288 $ 233,736
Accounts payable:
Trade. . .. . . . . . . . . . . . . . . . 59,371 56,559
Officers and employees. . . . . . . . . . 26,411 20,714
Other. . .. . . . . . . . . . . . . . . . 40,732 13,173
Advances from customers . . . . . . . . . 76,639 49,224
Accrued expenses. . . . . . . . . . . . . 41,962 57,359
Income taxes. . . . . . . . . . . . . . . 8,609 11,199
Long-term debt current. . . . . . . . . . 8,982 11,558
___________ ___________
Total current liabilities 363,994 453,522
___________ ___________
Long-term debt
Revolving Credit Notes and Other. . . . . 278,440 292,528
Convertible Subordinated Debentures . . . 0 56,370
___________ ___________
278,440 348,898
___________ ___________
Deferred credits:
Income taxes. . . . . . . . . . . . . . . 15,614 10,731
Compensation and other benefits . . . . . 41,467 40,715
___________ ___________
57,081 51,446
___________ ___________
Minority interest in subsidiaries. . . . . . 544 936
___________ ___________
Stockholders' equity
Serial Preferred Stock--without par value:
Mar. 31 Jun. 30
Authorized shares 10,000 10,000
Issued shares -0- -0-
Common Stock--without par value:
Mar. 31 Jun. 30
Authorized shares 125,000 125,000
Issued shares 42,349 38,092 136,693 80,030
Retained earnings . . . . . . . . . . . . . 174,050 157,880
Equity-currency conversions . . . . . . . . 1,774 1,565
Additional minimum pension liability. . . . (1,285) (1,286)
Unrealized gain on investments. . . . . . . 0 617
------------ -----------
311,232 238,806
____________ ____________
$1,011,291 $1,093,608
=========== ===========
-4-
<PAGE>
</TABLE>
<TABLE>
<CAPTION> DIMON Incorporated and Subsidiaries
STATEMENT OF CONSOLIDATED INCOME
Three Months and Six Months Ended March 31, 1996 and 1995
(Unaudited)
1996 1995 1996 1995
(in thousands, Third Third First Nine First Nine
except per share amounts) Quarter Quarter Months Months
________ ________ _________ _________
<S> <C> <C> <C> <C>
Net sales of goods and services . .$573,084 $644,079 $1,663,661 $1,547,534
Cost of goods and services sold . . 515,729 585,759 1,481,128 1,404,544
_________ _________ ___________ ___________
57,355 58,320 182,533 142,990
Selling, administrative and
general expenses . . . . . . . . 36,056 34,009 102,736 94,883
Restructuring. .. . . . . . . . . . 2,750 0 5,568 0
_________ _________ ___________ ___________
Operating Income. . 18,549 24,311 74,229 48,107
Other income:
Interest . . .. . . . . . . . . . 1 ,335 2,207 6,687 6,631
Sundry . . . .. . . . . . . . . . 2,673 2,884 9,854 4,569
_________ _________ ___________ ___________
4,008 5,091 16,541 11,200
Other deductions:
Interest . . .. . . . . . . . . . 10,976 11,884 38,036 34,139
Sundry . . . .. . . . . . . . . . 168 1,183 615 855
_________ _________ ___________ ___________
11,144 13,067 38,651 34,994
Income before income taxes, minority
interest, equity in net income of
investee companies and
extraordinary item. . . . . . . . 11,413 16,335 52,119 24,313
Income taxes . .. . . . . . . . . . 4,565 8,085 20,847 13,157
_________ _________ ___________ ___________
Income before minority interest,
equity in net income of investee
companies and extraordinary item. 6,848 8,250 31,272 11,156
Income applicable to minority
interest . . . . . . . . . . . . . 114 149 242 272
Equity in net income (loss) of
investee companies, net of
income taxes. . . . . . . . . . . (460) (525) (290) (1,121)
_________ _________ ___________ ___________
Income before extraordinary item 6,274 7,576 30,740 9,763
Extraordinary item:
Partial recovery of a previous
extraordinary trade receivable
write-off (net of applicable
income tax expense of $870) . . . 0 0 1,400 0
_________ _________ ___________ ___________
NET INCOME . . .. . . . . . . . . .$ 6,274 $ 7,576 $ 32,140 $ 9,763
Earnings Per Share, primary
Income before extraordinary item. $.16 $.20 $.79 $.26
Extraordinary item. . . . . . . .00 .00 .04 .00
Net Income . .. . . . . . . . . . $.16 $.20 $.83 $.26
Earnings Per Share, assuming
full dilution
Income before extraordinary item. $.16 $.20 $.77 *
Extraordinary item. . . . . . . . .00 .00 .03 *
Net Income . .. . . . . . . . . . $.16 $.20 $.80 *
Average number of shares outstanding:
Primary. . . .. . . . . . . . . . 39,767 38,083 38,739 38,082
Assuming full dilution. . . . . . 42,479 42,293 42,467 42,294
Cash dividends per share. . . . . .. $.135 $.09 $.405 $.27
* Computation of earnings per share is anti-dilutive for first six months of fiscal year 1995.
-5-
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
DIMON Incorporated and Subsidiaries
STATEMENT OF CONSOLIDATED CASH FLOWS
Nine Months Ended March 31, 1996 and 1995
(Unaudited)
March 31 March 31
(in thousands) 1996 1995
<S> <C> <C>
Operating activities
Net Income . . . . . . . . . . . . . . . . . . $ 32,140 $ 9,763
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization. . . . . . . . 24,234 21,891
Deferred items . . . . . . . . . . . . . . . 1,193 1,750
Loss (gain) on foreign currency
transactions . . . . . . . . . . . . . . . (73) 9,835
Gain on disposition of fixed assets. . . . . (1,385) (866)
Gain on sale of investee . . . . . . . . . . (3,751) 0
Gain on sale of investment . . . . . . . . . (1,090) 0
Undistributed earnings of investees. . . . . 290 1,121
Dividends received from investees. . . . . . 289 400
Income applicable to minority interest . . . 242 272
Bad debt expense . . . . . . . . . . . . . . 1,078 1,469
Increase in accounts receivable. . . . . . . (13,994) (16,431)
Decrease in inventories and advances on
purchases of tobacco . . . . . . . . . . . 31,102 68,280
Decrease in recoverable taxes. . . . . . . . 103 3,761
Decrease (increase) in prepaid expenses. . . 12,965 (6,819)
Increase in accounts payable and accrued
expenses . . . . . . . . . . . . . . . . . 34,599 10,695
Increase (decrease) in advances from
customers. . . . . . . . . . . . . . . . . 26,908 (16,286)
Increase in income taxes . . . . . . . . . . 1,590 10,500
Other . .. . . . . . . . . . . . . . . . . . 92 4,402
Net cash provided by operating -------- ---------
activities . . . . . . . . . . . . . . . . 146,532 103,737
-------- ---------
Investing activities
Purchase of property and equipment . . . . . (20,609) (18,845)
Proceeds from sale of property and equipment. 3,273 3,286
Payments received on notes receivable
and receivable from investees. . . . . . . 1,380 18,552
Advances for notes receivable . . . . . . . (7,892) (3,461)
Proceeds from or (advances for) other
investments and other assets . . . . . . . 20,148 (1,039)
Decrease in excess of cost over net
assets of business acquired. . . . . . . . 787 0
Purchase of minority interest in subsidiaries . 0 (484)
Purchase of subsidiary . . . . . . . . . . . (6,543) 0
Net cash used by investing -------- --------
activities . . . . . . . . . . . . . . . (9,456) (1,991)
-------- --------
Financing activities
Repayment of debt. . . . . . . . . . . . . . (218,821) (151,484)
Proceeds from debt . . . . . . . . . . . . . 67,238 106,611
Proceeds from sale of stock. . . . . . . . . 3,287 9
Cash dividends paid to minority stockholders. 0 (237)
Cash dividends paid to DIMON Incorporated
stockholders . . . . . . . . . . . . . . . (15,969) (10,190)
--------- --------
Net cash used by financing activities. . . . (164,265) (55,291)
--------- --------
Effect of exchange rate changes on cash . . . . . (2,989) (2,701)
--------- --------
Increase in cash and cash equivalents . . . . . . (30,178) 43,754
Cash and cash equivalents at beginning of year. . 42,326 12,471
--------- --------
Cash and cash equivalents at end
of period. . . . . . . . . . . . . . . $ 12,148 $ 56,225
========== ==========
-6-
<PAGE>
</TABLE>
DIMON INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. 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 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. Also, all interest
expense on the debentures for the period is added to pre-tax income
and the hypothetical additional income tax expense is deducted.
The weighted average number of shares outstanding is further
increased by common stock equivalents on employee stock options.
2. The accompanying unaudited consolidated financial statements
have been prepared in accordance with the instructions to Form 10-Q
and do not include all of the information and footnotes required
by generally accepted accounting principles for complete
financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included.
3. On April 1, 1995, Dibrell Brothers, Incorporated (Dibrell) and Monk-
Austin, Inc. (Monk-Austin) merged into DIMON Incorporated. The
merger has been accounted for as a pooling of interests and all
prior 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.
4. In June, 1995, the Company provided a restructuring reserve of
$17.9 million pre-tax related primarily to eliminating
duplicative facilities of tobacco operations and a reduction
in the number of employees. During the quarter and nine months
ended March 31, 1996, an additional $2.7 million and $5.6
million, respectively, pre-tax, was provided for restructuring
the tobacco operations in Brazil and corporate departments,
primarily for a reduction in the number of employees, net of
recoveries of $498 thousands relating primarily to accounts
receivable of closed flower locations. As of March 31, 1996,
payments for the nine months of $6.8 million have been
recorded as a reduction of the restructuring reserves.
-7-
<PAGE>
DIMON INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. The results of operations for the three months and nine months
ended March 31, 1996 and 1995 are not necessarily indicative of
the results to be expected for the full year and should not be
relied on as a basis for projecting year end results. The
Company's operations are seasonal and quarterly comparisons are
of little value.
6. For additional information regarding accounting principles and
other financial data, see Notes to Consolidated Financial Statements
in the Annual Report on Form 10-K for the fiscal year
ended June 30, 1995.
7. Certain accounts of the prior periods have been reclassified for
conformity with the financial statements of the current period.
8. On February 9, 1996, the Company called for redemption on March
11, 1996, all of the $54.3 million outstanding Convertible
Subordinated Debentures. As of March 4, 1996, holders of
Debentures had converted 99.85% of the Debentures into 4,035,969
shares of the Company's common stock. The remaining Debentures
were redeemed on March 11, 1996, for $89,188. The Company
funded the redemption price for these Debentures from working
capital. Proforma primary earnings per share as if the
conversion as if it had taken place at the beginning of the
period would have been $.16 and $.80 for the three and nine
months, respectively, or equal to the fully diluted amounts as
disclosed in the statement of consolidated income.
9. On November 7, 1995, DIMON International, Inc., a wholly owned
subsidiary of DIMON Incorporated, completed the sale of its 50%
interest in Rio Grande Tabacalera S.A. (RGT), a Brazilian
processing entity, to an unrelated third party. The Company's
investment was sold for $9,000,000 in cash, recognizing a gain
on the sale of RGT of $3,113,000, net of related taxes of
$630,000.
10. The Company has filed a registration statement with the
Securities and Exchange Commission relating to $125 million
of Senior Notes due 2006. The Company expects that the
offerings of the Notes will be completed in June, 1996.
DIMON International, Inc. and Florimex Worldwide,
Inc.(collectively, the "Guarantors"), wholly owned
subsidiaries of the Company, will fully and unconditionally
guaranteed on a joint and several basis the Company's
obligations to pay principal, premium and interest relative
to the Notes. 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:
-8-
<PAGE>
<TABLE>
<CAPTION>
DIMON Incorporated and Subsidiaries
Supplemental Combining Balance Sheet
March 31, 1995
(in thousands) DIMON
Incorporated Guarantors Non-Guarantors Eliminations Total
Current assets ________________ ______________ ________________ _______________ _____________
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 109,571 $ (73,452) d $ 20,105 $ 1 b $ 56,225
Notes receivable 15 492 911 0 1,418
Trade receivables, net of allowances 142,803 120,731 81,913 (169,826) a 175,621
Inventories:
Tobacco (2,548) c 122,812 177,310 (1,850) a 295,724
Other 0 446 8,939 0 9,385
Advances on purchases of tobacco 48,024 62,868 31,849 (83,433) a 59,308
Recoverable income taxes 0 0 3,076 0 3,076
Prepaid expenses 4,875 5,531 13,572 0 23,978
________________ ________________ ________________ _______________ _____________
Total current assets 302,740 239,428 337,675 (255,108) 624,735
________________ ________________ ________________ _______________ _____________
Investments and other assets
Equity in net assets of investee companies 0 2,422 31,225 0 33,647
Consolidated subsidiaries 285,179 244,422 5,007 (534,608) a 0
Other investments 12,492 60 4 0 12,556
Notes receivable 49 571 12,669 0 13,289
Other 433 10,742 12,213 0 23,388
________________ ________________ ________________ _______________ _____________
298,153 258,217 61,118 (534,608) 82,880
________________ ________________ ________________ _______________ _____________
Intangible assets
Excess of cost over related net assets
of business acquire 390 1,862 9,635 0 11,887
Production and supply contracts 0 27,934 9,600 0 37,534
Pension asset 2,458 0 0 0 2,458
________________ ________________ ________________ _______________ _____________
2,848 29,796 19,235 0 51,879
________________ ________________ ________________ _______________ _____________
Property, plant and equipment
Land 1,771 1,475 16,213 0 19,459
Buildings 5,015 25,194 101,405 0 131,614
Machinery and equipment 5,204 54,553 104,131 0 163,888
Allowances for depreciation (2,122) (42,795) (54,713) 0 (99,630)
________________ ________________ ________________ _______________ _____________
9,868 38,427 167,036 0 215,331
________________ ________________ ________________ _______________ _____________
Deferred taxes and other deferred charges 8,050 4,524 57 0 12,631
________________ ________________ ________________ _______________ _____________
Total assets $ 621,659 $ 570,392 $ 585,121 $ (789,716) $ 987,456
================ ================ ================== =============== =============
a. Inter-company eliminations, including profit in inventories.
b. To adjust for cash transfers made by DIMON Incorporated
to an entity which reports on an earlier period.
c. Reserve for inter-company profit in ending inventories.
d. Book overdraft within consolidated cash management program.
-9-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DIMON Incorporated and Subsidiaries
Supplemental Combining Balance Sheet
March 31, 1995
(in thousands) DIMON
Incorporated Guarantors Non-Guarantors Eliminations Total
Current Liabilities ________________ _______________ ________________ _______________ ______________
<S> <C> <C> <C> <C> <C>
Notes payable $ 90,900 $ 10,000 $ 115,531 $ 0 $ 216,431
Accounts payable:
Trade 4,962 50,027 63,421 (44,937) a 73,473
Officers and employees 15,075 259 3,446 0 18,780
Other 245 391 13,669 (417) a 13,888
Advances from customers 52 200,792 41,739 (200,602) a 41,981
Accrued expenses 1,743 13,463 15,061 (6,783) a 23,484
Income taxes (9,411)e 10,048 15,321 0 15,958
Long-term debt current 5,057 0 12,506 0 17,563
________________ _______________ ________________ _______________ ______________
Total current liabilities 108,623 284,980 280,694 (252,739) 421,558
_________________ _______________ ________________ _______________ ______________
Long-term debt
Revolving Credit Notes and Other 153,800 3,195 27,118 0 184,113
Convertible Subordinated Debentures 56,475 0 0 0 56,475
________________ _______________ ________________ _______________ ______________
210,275 3,195 27,118 0 240,588
________________ _______________ ________________ _______________ ______________
Deferred Credits
Income taxes 95 (1,975) 11,240 0 9,360
Compensation and other benefits 19,437 7,122 5,148 0 31,707
________________ _______________ ________________ _______________ ______________
19,532 5,147 16,388 0 41,067
________________ _______________ ________________ _______________ ______________
Minority interest in subsidiaries 0 0 1,014 0 1,014
________________ _______________ ________________ _______________ _____________
Stockholders' equity
Common stock 79,870 108,528 150,488 (259,016)a 79,870
Retained earnings 202,952 163,925 106,886 (270,811)a 202,952
Equity-currency conversions 637 2,126 42 (2,168)a 637
Unrealized loss on investments 1,144 2,491 2,491 (4,982)a 1,144
Additional minimum pension liability (1,374) 0 0 0 (1,374)
________________ _______________ ________________ _______________ ______________
283,229 277,070 259,907 (536,977) 283,229
________________ _______________ ________________ _______________ ______________
Total liabilities and equity $ 621,659 $ 570,392 $ 585,121 $ (789,716) $ 987,456
================ =============== ================= =============== ==============
a. Inter-company eliminations.
e. Current deferred tax on reserves and unallocated estimated tax payments.
-10-
</TABLE>
<PAGE>
<TABLE>
<CAPTION> DIMON Incorporated and Subsidiaries
Supplemental Combining Statement of Income
Nine Months Ended March 31, 1995
(in thousands) DIMON
Incorporated Guarantors Non-Guarantors Eliminations Total
______________ ______________ _______________ _________________ _____________
<S> <C> <C> <C> <C> <C>
Net sales of goods and services $ 33 $ 1,092,975 $ 495,445 $ (40,919) a $ 1,547,534
Cost of goods and services sold 746 f 1,021,103 423,614 (40,919) a 1,404,544
________________ _______________ ________________ _______________ ______________
(713) 71,872 71,831 0 142,990
Selling, administrative and general 8,564 46,186 40,133 0 94,883
________________ _______________ ________________ _______________ ______________
(9,277) 25,686 31,698 0 48,107
Other income:
Interest 18,735 9,534 1,025 (22,663) a 6,631
Sundry 64 2,642 1,863 0 4,569
________________ _______________ ________________ _______________ ______________
18,799 12,176 2,888 (22,663) 11,200
Other deductions:
Interest 15,062 27,345 14,395 (22,663) a 34,139
Sundry 2 35 818 0 855
________________ _______________ ________________ _______________ ______________
15,064 27,380 15,213 (22,663) 34,994
Income (loss) before income taxes,
minority interest and equity in net
income of investee company (5,542) 10,482 19,373 0 24,313
Income taxes (2,999) 5,674 10,482 0 13,157
________________ _______________ ________________ _______________ ______________
Income (loss) before minority interest
and equity in net income of
investee companies (2,543) 4,808 8,891 0 11,156
Income applicable to minority interest 0 0 272 0 272
Equity in net income (loss) of investee
companies, net of income taxes 65 271 (1,457) 0 (1,121)
Equity in net income of subsidiaries 12,241 7,162 0 (19,403) a 0
________________ _______________ ________________ _______________ ______________
NET INCOME $ 9,763 $ 12,241 $ 7,162 $ (19,403) $ 9,763
================ =============== ================ ================ ==============
a. Inter-company eliminations
f. Change in reserves for inter-company profit in ending inventory.
-11-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DIMON Incorporated and Subsidiaries
Supplemental Combining Statement of Cash Flows
Nine Months Ended March 31, 1995
DIMON
(in thousands) Incorporated Guarantors Non-Guarantors Eliminations Total
Operating Activities _______________ _______________ ________________ ________________ ______________
<S> <C> <C> <C> <C> <C>
Net Income (Loss) $ 9,763 $ 12,241 $ 7,162 $ (19,403) a $ 9,763
Adjustments to reconcile net
income (loss) to net cash
provided by operating activities
Depreciation and amortization 80 8,526 13,285 0 21,891
Deferred items (410) 1,556 604 0 1,750
Loss (gain) on foreign currency
transactions (57) 12 9,880 0 9,835
Gain on disposition of fixed assets 0 (279) (587) 0 (866)
Undistributed earnings of
investees/subsidiaries (12,306) (7,433) 1,457 19,403 a 1,121
Dividends received from Investee 0 0 400 0 400
Income applicable to minority interest 0 0 272 0 272
Bad debt expense 0 (30) 1,499 0 1,469
Decrease (increase) in accounts
receivable 151,167 20,080 (46,093) (141,585)a (16,431)
Decrease (increase) in inventories and
advances on purchases of tobacco (1,455) 11,099 42,276 16,360 a 68,280
Decrease in recoverable taxes 1,666 0 2,095 0 3,761
Decrease (increase) in prepaid expenses (3,883) (1,280) (1,656) 0 (6,819)
Increase (decrease) in accounts payable
and accrued expenses (3,727) (90,202) (8,886) 113,510 a 10,695
Increase (decrease) in advances from
customers (885) (70,193) 39,451 15,341 a (16,286)
Increase (decrease) in income taxes (4,501) 7,874 7,127 0 10,500
Other 195 725 3,482 0 4,402
_______________ _______________ _______________ ________________ ______________
Net cash provided (used) by
operating activities 135,647 (107,304) 71,768 3,626 103,737
_______________ _______________ _______________ ________________ ______________
Investing Activities
Purchase of property and equipment (74) (6,082) (12,689) 0 (18,845)
Proceeds from sale of property
and equipment 0 805 2,481 0 3,286
Payments on notes receivable and
receivable from investees 11 2,083 16,458 0 18,552
Increase in notes receivable and
receivable from investees 0 (1,056) (2,405) 0 (3,461)
Proceeds from or (advances) for other
investments and other assets 364 6,912 (4,637) (3,678)a (1,039)
Purchase of minority interest
in subsidiaries 0 0 (484) 0 (484)
_______________ _______________ ________________ ________________ ______________
Net cash provided (used) by
investing activities $ 301 $ 2,662 $ (1,276) $ (3,678) $ (1,991)
_______________ _______________ ________________ ________________ ______________
Financing Activities
Repayment of debt $ (26,486) $ (10,690) $ (114,308) $ 0 $ (151,484)
Proceeds from debt 4,000 40,000 62,611 0 106,611
Cash dividends paid to DIMON
Incorporated stockholders (10,190) 0 0 0 (10,190)
Cash dividends paid to minority
stockholders 0 0 (237) 0 (237)
Proceeds from sale of common stock 9 0 0 0 9
_______________ _______________ ________________ ________________ ______________
Net cash provided (used) by
financing activities (32,667) 29,310 (51,934) 0 (55,291)
_______________ _______________ ________________ ________________ ______________
Effect of exchange rate changes on cash 0 0 (2,701) 0 (2,701)
_______________ _______________ ________________ ________________ ______________
Increase (decrease) in cash and
Cash equivalents 103,281 (75,332) 15,857 (52) a 43,754
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 period $ 109,571 $ (73,452) $ 20,105 $ 1 $ 56,225
=============== ============== =============== ================= =============
a. Intercompany eliminations.
-12-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DIMON Incorporated and Subsidiaries
Supplemental Combining Statement of Income
Three Months Ended March 31, 1995
(in thousands) DIMON
Incorporated Guarantors Non-Guarantors Eliminations Total
______________ ______________ _______________ _________________ _____________
<S> <C> <C> <C> <C> <C>
Net sales of goods and services $ 11 $ 477,189 $ 178,188 $ (11,309) a $ 644,079
Cost of goods and services sold (5,106)f 450,423 151,751 (11,309) a 585,759
________________ _______________ ________________ _______________ ______________
5,117 26,766 26,437 0 58,320
Selling, administrative and general 915 16,780 16,314 0 34,009
________________ _______________ ________________ _______________ ______________
4,202 9,986 10,123 0 24,311
Other income:
Interest 8,324 5,896 (256) (11,757) a 2,207
Sundry (79) 1,674 1,289 0 2,884
________________ _______________ ________________ _______________ ______________
8,245 7,570 1,033 (11,757) 5,091
Other deductions:
Interest 6,915 12,782 3,944 (11,757) a 11,884
Sundry 1 17 1,165 0 1,183
________________ _______________ ________________ _______________ ______________
6,916 12,799 5,109 (11,757) 13,067
Income (loss) before income taxes,
minority interest and equity in net
income of investee company 5,531 4,757 6,047 0 16,335
Income taxes 4,044 2,033 2,008 0 8,085
________________ _______________ ________________ _______________ ______________
Income (loss) before minority interest
and equity in net income of
investee companies 1,487 2,724 4,039 0 8,250
Income applicable to minority interest 0 0 149 0 a 149
Equity in net income (loss) of investee
companies, net of income taxes 44 (323) (246) 0 a (525)
Equity in net income of subsidiaries 6,045 3,644 0 (9,689) a 0
________________ _______________ ________________ _______________ ______________
NET INCOME $ 7,576 $ 6,045 $ 3,644 $ (9,689) $ 7,576
================ =============== ================ ================ ==============
a. Inter-company eliminations
f. Change in reserves for inter-company profit in ending inventory.
-13-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DIMON Incorporated and Subsidiaries
Supplemental Combining Balance Sheet
March 31, 1996
(in thousands) DIMON
Incorporated Guarantors Non-Guarantors Eliminations Total
Current assets ________________ ________________ _______________ ________________ _____________
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 2,580 $ 4,966 $ 20,285 $ (15,683) b $ 12,148
Notes receivable 35 489 26,343 (25,733) a 1,134
Trade receivables, net of allowances 22,963 170,028 154,202 (151,194) a 195,999
Inventories:
Tobacco 0 85,310 258,174 0 343,484
Other 47 1,729 18,653 0 20,429
Advances on purchases of tobacco 168,076 31,743 50,468 (175,817) 74,470
Recoverable income taxes 0 0 1,320 0 1,320
Prepaid expenses 2,133 1,113 10,526 0 13,772
________________ ________________ _______________ ________________ _____________
Total current assets 195,834 295,378 539,971 (368,427) 662,756
________________ ________________ _______________ ________________ _____________
Investments and other assets
Equity in net assets of
investee companies 0 6,032 2,255 0 8,287
Consolidated subsidiaries 294,540 306,046 5,007 (605,593) a 0
Other investments 1 3,810 431 0 4,242
Notes receivable 74 910 6,092 0 7,076
Other 291 4,690 20,005 0 24,986
________________ ________________ _______________ _________________ ______________
294,906 321,488 33,790 (605,593) 44,591
________________ ________________ _______________ ________________ ______________
Intangible assets
Excess of cost over related net assets
of business acquire 378 8,548 14,817 0 23,743
Production and supply contracts 0 27,408 8,998 0 36,406
Pension asset 3,131 1,088 0 0 4,219
________________ ________________ _______________ ________________ _____________
3,509 37,044 23,815 0 64,368
________________ ________________ _______________ ________________ _____________
Property, plant and equipment
Land 1,771 1,925 16,558 0 20,254
Buildings 4,740 25,761 110,936 0 141,437
Machinery and equipment 5,039 49,411 111,776 0 166,226
Allowances for depreciation (4,632) (31,464) (64,299) 0 (100,395)
________________ ________________ _______________ ________________ _____________
6,918 45,633 174,971 0 227,522
________________ ________________ _______________ ________________ _____________
Deferred taxes and other
deferred charges 11,821 0 233 0 12,054
________________ ________________ _______________ ________________ _____________
Total assets $ 512,988 $ 699,543 $ 772,780 $(974,020) $1,011,291
================ ================ =============== ================ =============
a. Inter-company eliminations.
b. To adjust for cash transfers made by DIMON Incorporated
to an entity which reports on an earlier period.
-14-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DIMON Incorporated and Subsidiaries
Supplemental Combining Balance Sheet
March 31, 1996
(in thousands) DIMON
Incorporated Guarantors Non-Guarantors Eliminations Total
Current Liabilities ________________ _______________ ________________ _______________ ______________
<S> <C> <C> <C> <C> <C>
Notes payable $ 0 $ 350 $ 102,863 $ (1,925) $ 101,288
Accounts payable:
Trade 808 303,576 75,644 (320,657) a 59,371
Officers and employees 14,174 6,298 5,939 0 26,411
Other 898 1,280 38,554 0 40,732
Advances from customers 3,450 69,024 48,919 (44,754) a 76,639
Accrued expenses 1,555 6,032 34,390 (15) a 41,962
Income taxes (13,550) e 3,385 18,774 0 8,609
Long-term debt current 4,286 0 4,696 0 8,982
_________________ _______________ ________________ _______________ ______________
Total current liabilities 11,621 389,945 329,779 (367,351) 363,994
_________________ _______________ ________________ _______________ ______________
Long-term debt
Revolving Credit Notes and Other 162,386 1,068 114,986 0 278,440
Convertible Subordinated Debentures 0 0 0 0 0
_________________ _______________ ________________ _______________ ______________
162,386 1,068 114,986 0 278,440
_________________ _______________ ________________ _______________ ______________
Deferred Credits
Income taxes 1,547 (4,538) 18,605 0 15,614
Compensation and other benefits 26,517 7,790 7,160 0 41,467
_________________ _______________ ________________ _______________ ______________
28,064 3,252 25,765 0 57,081
_________________ _______________ ________________ _______________ ______________
Minority interest in subsidiaries (315) 0 859 0 544
_________________ _______________ ________________ _______________ ______________
Stockholders' equity
Common stock 136,693 110,689 179,518 (290,207) a 136,693
Retained earnings 174,050 188,261 122,334 (310,595) a 174,050
Equity-currency conversions 1,774 6,328 156 (6,484) a 1,774
Unrealized loss on investments 0 0 (617) 617 a 0
Additional minimum pension
liability (1,285) 0 0 0 (1,285)
_________________ _______________ ________________ _______________ ______________
311,232 305,278 301,391 (606,669) 311,232
_________________ _______________ ________________ _______________ ______________
Total liabilities and
equity $ 512,988 $ 699,543 $ 772,780 $ (974,020) $ 1,011,291
================= =============== =============== =============== ==============
a. Inter-company eliminations.
e. Current deferred tax on reserves and unallocated estimated tax payments.
-15-
</TABLE>
<PAGE>
<TABLE>
<CAPTION> DIMON Incorporated and Subsidiaries
Supplemental Combining Statement of Income
Nine Months Ended March 31, 1996
(in thousands) DIMON
Incorporated Guarantors Non-Guarantors Eliminations Total
______________ ______________ _______________ _________________ _____________
<S> <C> <C> <C> <C> <C>
Net sales of goods and services $ 34 $1,195,251 $ 777,232 $ (308,856) a $1,663,661
Cost of goods and services sold (5,116) f 1,123,897 671,203 (308,856) a 1,481,128
________________ _______________ ________________ _______________ ______________
5,150 71,354 106,029 0 182,533
Selling, administrative and general 8,491 55,787 44,954 (6,496) a 102,736
Restructuring 2,097 1,000 2,471 0 5,568
________________ _______________ ________________ _______________ ______________
(5,438) 14,567 58,604 6,496 74,229
Other income:
Interest 22,015 6,570 6,393 (28,291) a 6,687
Sundry 222 2,372 13,756 (6,496) a 9,854
________________ _______________ ________________ _______________ ______________
22,237 8,942 20,149 (34,787) 16,541
Other deductions:
Interest 20,193 24,410 21,724 (28,291) a 38,036
Sundry 50 (2) 567 0 615
________________ _______________ ________________ _______________ ______________
20,243 24,408 22,291 (28,291) 38,651
Income (loss) before income taxes,
minority interest and equity in net
income of investee company (3,444) (899) 56,462 0 52,119
Income taxes (1,378) (360) 22,585 0 20,847
________________ _______________ ________________ _______________ ______________
Income (loss) before minority interest
and equity in net income of
investee companies (2,066) (539) 33,877 0 31,272
Income applicable to minority interest 0 0 242 0 242
Equity in net income (loss) of investee
companies, net of income taxes 0 202 (492) 0 (290)
Equity in net income of subsidiaries 34,206 33,143 0 (67,349) 0
Extraordinary item: Partial recovery
of a previous extraordinary trade
receivable write-off (net of
applicable income tax expense
of $870) 0 1,400 0 0 1,400
________________ _______________ ________________ _______________ ______________
NET INCOME $ 32,140 $ 34,206 $ 33,143 $ (67,349) $ 32,140
================= =============== ================ =============== ==============
a. Inter-company eliminations
f. Change in reserves for inter-company profit in ending inventory.
-16-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DIMON Incorporated and Subsidiaries
Supplemental Combining Statement of Cash Flows
Nine Months Ended March 31, 1996
DIMON
(in thousands) Incorporated Guarantors Non-Guarantors Eliminations Total
Operating Activities _______________ _______________ ________________ ________________ ______________
<S> <C> <C> <C> <C> <C>
Net Income (Loss) $ 32,140 $ 34,206 $ 33,143 $ (67,349) a $ 32,140
Adjustments to reconcile net
income to net cash provided
by operating activities
Depreciation and amortization 1,730 8,048 14,456 0 24,234
Deferred items (533) 265 1,461 0 1,193
Loss (gain) on foreign currency
transactions 46 (65) (54) 0 (73)
Gain on disposition of fixed assets (14) (227) (1,144) 0 (1,385)
Gain on sale of investee 0 0 (3,751) 0 (3,751)
Gain on sale of investment 0 0 (1,090) 0 (1,090)
Undistributed earnings of
investees/subsidiaries (34,205) (33,346) 492 67,349 a 290
Dividends received from Investee 0 0 289 0 289
Income applicable to minority
interest 0 0 242 0 242
Bad debt expense 0 (10) 1,088 0 1,078
Decrease (increase) in accounts
receivable 132,233 (42,334) 1,204 (105,097) a (13,994)
Decrease (increase) in inventories
and advances on purchases of
tobacco 40,031 182,069 (132,513) (58,765) a 31,102
Decrease in recoverable taxes 0 0 103 0 103
Decrease (increase) in prepaid
expenses 8,003 (473) 5,435 0 12,965
Increase (decrease) in accounts
payable and accrued expenses (8,877) 211,262 (58,647) (109,139) a 34,599
Increase (decrease) in advances
from customers (429) (339,322) 152,952 213,707 a 26,908
Increase (decrease) in income
taxes (3,156) 318 4,428 0 1,590
Other 0 13 79 0 92
_______________ _______________ ________________ ________________ _____________
Net cash provided (used) by
operating activities 167,249 20,404 18,173 (59,294) 146,532
_______________ _______________ ________________ ________________ ______________
Investing Activities
Purchase of property
and equipment (111) (5,048) (15,450) 0 (20,609)
Proceeds from sale of property
and equipment 14 320 2,939 0 3,273
Payments on notes receivable and
receivable from investees 34 827 519 0 1,380
Advances for notes receivable (83) (358) (3,184) (4,286) a (7,892)
Proceeds from or (advances) for other
investments and other assets 5,600 (9,820) 28,449 (4,081) a 20,148
Decrease in excess of cost over
Net assets of business acquired 0 1,514 (727) 0 787
Purchase of subsidiaries 0 (6,543) 0 0 (6,543)
_______________ _______________ ________________ ________________ ______________
Net cash provided (used) by
investing activities $ 5,454 $ (19,108) $ 12,546 $ (8,348) $ (9,456)
_______________ _______________ ________________ ________________ ______________
Financing Activities
Repayment of debt $(183,968) $ (1,769) $ (61,159) $ 28,075 a $(218,821)
Proceeds from debt 25,243 0 41,995 0 67,238
Proceeds from sale of stock 3,287 0 0 0 3,287
Cash dividends paid to DIMON
Incorporated stockholders (16,013) 0 44 0 (15,969)
_______________ _______________ ________________ ________________ ______________
Net cash provided (used) by
financing activities (171,451) (1,769) (19,120) 28,075 (164,265)
_______________ _______________ ________________ ________________ ______________
Effect of exchange rate
changes on cash 0 3,560 (3,568) (2,981) a (2,989)
Increase (decrease) in cash and
Cash equivalents 1,252 3,087 8,031 (42,548) (30,178)
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 $ 2,580 $ 4,966 $ 20,285 $(15,683) $ 12,148
=============== =============== ================ =============== ==============
a. Intercompany eliminations.
-17-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DIMON Incorporated and Subsidiaries
Supplemental Combining Statement of Income
Three Months Ended March 31, 1996
(in thousands) DIMON
Incorporated Guarantors Non-Guarantors Eliminations Total
______________ ______________ _______________ _________________ _____________
<S> <C> <C> <C> <C> <C>
Net sales of goods and services $ 11 $ 391,744 $ 240,463 $ (59,134) a $ 573,084
Cost of goods and services sold 0 364,921 214,503 (63,695) a 515,729
________________ _______________ ________________ _______________ ______________
11 26,823 25,960 4,561 57,355
Selling, administrative and general (27) g 24,486 7,587 4,010 a 36,056
Restructuring 1,500 370 880 0 2,750
________________ _______________ ________________ _______________ ______________
(1,462) 1,967 17,493 551 18,549
Other income:
Interest 5,962 1,195 1,639 (7,461) a 1,335
Sundry 205 1,615 1,404 (551) a 2,673
________________ _______________ ________________ _______________ ______________
6,167 2,810 3,043 (8,012) 4,008
Other deductions:
Interest 5,140 6,953 6,344 (7,461) a 10,976
Sundry 4 (2) 166 0 168
________________ _______________ ________________ _______________ ______________
5,144 6,951 6,510 (7,461) 11,144
Income (loss) before income taxes,
minority interest and equity in net
income of investee company (439) (2,174) 14,026 0 11,413
Income taxes (176) (870) 5,611 0 4,565
________________ _______________ ________________ _______________ ______________
Income (loss) before minority interest
and equity in net income of
investee companies (263) (1,304) 8,415 0 6,848
Income applicable to minority interest 0 0 114 0 114
Equity in net loss of investee
companies, net of income taxes 0 (241) (219) 0 (460)
Equity in net income of subsidiaries 6,537 8,082 0 (14,619) a 0
________________ _______________ ________________ _______________ ______________
NET INCOME $ 6,274 $ 6,537 $ 8,082 $ (14,619) $ 6,274
================ =============== ================ =============== ==============
a. Inter-company eliminations
g. Invoiced services to affiliates.
-18-
</TABLE>
<PAGE>
DIM0N INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. (a) Each of the Guarantors, the Company's wholly-owned
subsidiaries, DIMON International, Inc. and Florimex
Worldwide Inc., will fully and unconditionally
guarantee 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 will be
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 will be 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 will 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, storage and financing tobacco.
-19-
<PAGE>
DIMON INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(b) DIMON Incorporated and each of the Guarantors has
accounted for their respective subsidiaries on the
equity basis.
(c) 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.
<TABLE>
<CAPTION>
March 31, 1995
Debit(Credit)
DIMON Non-
Incorporated Guarantors Guarantors
------------ ---------- ----------
<S> <C> <C> <C>
Accounts Receivable $142,803 $ 73,098 $ 45,433
Advances on Purchases 48,024 39,222 (3,812)
Accounts Payable (3,787) (39,891) (1,165)
Advances from Customers - (162,816) (37,786)
</TABLE>
<TABLE>
<CAPTION>
March 31,1996
Debit(Credit)
DIMON Non-
Incorporated Guarantors Guarantors
------------ ---------- ----------
<S> <C> <C> <C>
Accounts Receivable $ 22,940 $ 69,092 $ 70,678
Advances on Purchases 168,076 22,451 29,996
Accounts Payable (572) (294,488) (28,783)
Advances from Customers (3,450) - (44,915)
</TABLE>
-20-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations:
Three Months Ended March 31, 1996 Compared to Three Months Ended March 31, 1995:
Net sales of goods and services for the three month period ended March 31, 1996
were $573.1 million, a decrease of 11.0% from $644.1 million for the three month
period ended March 31, 1995. Net sales from tobacco operations decreased 14.4%
to $456.6 million in the three month period ended March 31, 1996 from $533.3
million in the corresponding period in 1995. The decrease in tobacco sales
was primarily due to lower average prices and decreases in quantities for U.S.
grown tobacco and decreases in average prices for foreign grown tobacco,
partially offset by increases in revenue from services. Lower average
prices and decreased quantities for U.S. tobacco and lower average prices for
foreign grown tobacco accounted for $51.2 million, $44.0 million and $17.0
million, respectively, of the decrease in tobacco revenues. Lower prices and
quantities of U.S. tobacco were primarily due to the smaller U.S. burley crop
resulting from adverse growing conditions in 1996. These decreases were
partially offset by a $33.7 million increase in revenue for services, which
primarily related to processing for Lorillard Tobacco Company pursuant to an
agreement entered into in late fiscal 1995. The decreased sales from Brazil
were almost entirely offset by increased sales from Greece, Italy and Turkey.
Brazilian sales in the three months ended March 31, 1996 were lower than in
the corresponding period in 1995 due to aggressive actions in 1995 to reduce
excess inventories accumulated due to the enactment of domestic content
legislation in the U.S., which was repealed in 1995.
Net sales from flower operations increased 5.1%, to $116.5 million in the
three month period ended March 31, 1996 from $110.8 million for the three
month period ended March 31, 1995. This increase in flower sales was
primarily due to increased sales of Baardse.
Cost of sales and expenses, including selling, general and administrative
expenses and restructuring and merger related costs for the three month period
ended March 31, 1996 were $554.5 million, a decrease of 10.5% from $619.8
million for the three month period ended March 31, 1995. This decrease is
net of $2.8 million in restructuring charges in the three month period ended
March 31, 1996. Cost of sales and expenses for the tobacco operations
decreased 13.9% in the three month period ended March 31, 1996 over the
corresponding period in 1995, primarily due to the lower net sales of tobacco
in the period. The gross profit for the tobacco operations decreased 5.0% for
the three month period ended March 31, 1996 over the corresponding period in
1995, primarily due to decreased sales of tobacco from Brazil, offset partially
by increased sales and gross profits on tobacco from Europe. The Company's
-21-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
gross margin for tobacco operations improved to 9.8% for the three month period
ended March 31, 1996 from 8.8% for the corresponding period in 1995, due to
higher gross margins in the South American and European tobacco operations.
Cost of sales and expenses for the flower operations increased 3.2% in the
three month period ended March 31, 1996 over the corresponding period in 1995.
The Company's gross margin for flower operations improved to 10.9% for the
three month period ended March 31, 1996 from 10.2% for the corresponding
period in 1995, due to higher margins at Baardse.
Corporate expenses increased $2.0 million, or 78.2%, for the three month
period ended March 31, 1996 from the corresponding period in 1995, primarily
due to restructuring charges and increased personnel costs.
Other income, interest and sundry, decreased $1.1 million, or 21.2%, for the
three month period ended March 31, 1996 from the corresponding period in 1995.
Interest income decreased $.9 million due to decreased interest income on
advances on purchases of tobacco.
Other deductions, primarily interest expense, decreased $1.9 million, or 14.7%,
for the three month period ended March 31, 1996 from the corresponding period in
1995. Interest expense decreased $.9 million, due to decreased average interest
rates and lower average short-term borrowings. Sundry deductions decreased $.9
million due to decreased exchange losses on non-operational assets in Africa and
Brazil.
The effective tax rate decreased to 40.0% for the three month period ended March
31, 1996 from 49.4% for the corresponding period in 1995, based on estimates of
taxable income projected for each year. The higher effective tax rate in 1995
was due to tax and monetary regulations in Brazil.
Equity in net loss of the tobacco investee companies decreased slightly for the
three month period ended March 31, 1996 from the corresponding period in 1995.
The loss of $433,000 due to the sale of a Brazilian investee in fiscal year
1996 was almost totally offset by the income of $383,000 due to the sales of
an investee in Malawi in fiscal year 1995.
-22-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Nine Months Ended March 31, 1996 Compared to Nine Months Ended March 31, 1995:
Net sales of goods and services for the nine month period ended March 31, 1996
were $1.664 billion, an increase of 7.5% from $1.548 billion for the nine month
period ended March 31, 1995. Net sales from tobacco operations increased 8.3%,
to $1.367 billion in the nine month period ended March 31, 1996 from $1.261
billion in the corresponding period in 1995. The increase in tobacco sales
was due to higher average prices and increased quantities of foreign grown
tobacco and increased service revenues from U.S. tobacco, partially offset by
lower average prices for U.S. grown tobacco. The increase in average prices
for foreign grown tobacco, increased quantities of foreign grown tobacco, and
increased service revenues accounted for $78.2 million, $47.1 million, and
$42.7 million of the increase in tobacco revenues, respectively, offset by a
$67.6 million decrease due to lower average prices for U.S. grown tobacco.
The increased foreign tobacco sales were primarily the result of higher
tobacco sales in Africa and Europe.
Net sales from flower operations increased 3.8%, from $286.1 million in the
nine month period ended March 31, 1995 to $296.9 million for the nine month
period ended March 31, 1996. This increase in flower sales was primarily due
to the effects of applying U.S. dollar exchange rates to the European flower
operations.
Cost of sales and expenses, including selling, general and administrative
expenses and restructuring and merger related costs for the nine month
period ended March 31, 1996 were $1.589 billion, an increase of 6.0% from
$1.499 billion for the nine month period ended March 31, 1995. This increase
included $5.6 million in restructuring charges in the nine month period ended
March 31, 1996. Cost of sales and expenses for the tobacco operations
increased 6.6% in the nine month period ended March 31, 1996 over the
corresponding period in 1995, primarily due to the higher net sales in the
period of tobacco grown in Africa and Europe. The gross profit for the
tobacco operations increased 31.2% for the nine month period ended March 31,
1996 over the corresponding period in 1995, primarily due to increased sales
and gross margins on the operations in Europe and increased gross margins for
the operations in South America and Africa. The Company's gross margin for
tobacco operations improved to 11.1% for the nine month period ended March 31,
1996 from 9.2% for the corresponding period in 1995, due to higher gross
margins in the U.S. and Brazilian tobacco operations.
Cost of sales and expenses for the flower operations increased 1.9% in the
nine month period ended March 31, 1996 over the corresponding period in 1995
primarily due to increased sales. The Company's gross margin for flower
operations improved to 10.3% for the nine month period ended March 31, 1996
-23-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
from 9.5% for the corresponding period in 1995, due to lower costs in the
European flower operations.
Corporate expenses increased $5.4 million, or 68.0%, for the nine month period
ended March 31, 1996 from the corresponding period in 1995, primarily due to
increased bonuses accrued, professional expenses, and costs related to
revolving credit facilities and restructuring costs related to severance
which will reduce the number of employees on the corporate staff.
Other income, interest and sundry, increased $5.3 million, or 47.7%, for the
nine month period ended March 31, 1996 from the corresponding period in 1995,
primarily due to the increase in sundry income. The increase in sundry
income is primarily due to the tobacco operations and the $3.7 million gain
on the sale of its 50% interest in an unconsolidated Brazilian affiliate.
Other deductions, primarily interest expense, increased $3.7 million, or
10.5%, for the nine month period ended March 31, 1996 from the corresponding
period in 1995. Interest expense increased $3.9 million, primarily due to
increased average short-term borrowings.
The effective tax rate decreased to 40.0% for the nine month period ended
March 31, 1996 from 54.1% for the corresponding period in 1995, based on
estimates of taxable income projected for each year. The higher effective
tax rate in 1995 was due to tax and monetary regulations in Brazil.
Equity in net loss of the tobacco investee companies decreased $.8 million,
or 74.1%, for the nine month period ended March 31, 1996 from the
corresponding period in 1995. The decrease is primarily due to the Company's
investee in Brazil which was sold during fiscal 1996.
Financial Condition:
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
-24-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
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 $298.8 million at March 31, 1996. The current ratio
of 1.6 to 1 at June 30, 1995 increased to 1.8 to 1 at March 31, 1996 as
current liabilities decreased at a higher percentage than the percentage
decrease of current assets. The decreases in the individual components of
current assets and current liabilities reflect a seasonal decrease in the
level of tobacco operations. Current assets decreased primarily due to the
decreases in tobacco inventories of $66.9 million and in Prepaid expenses of
$19.3 million, partially offset by increases in Trade receivables of $13.2
million and Advances on purchase of tobacco of $30.1 million. Current
liabilities decreased primarily due to the decrease in Notes payable to
banks of $132.4 million, partially offset by increases in Accounts payable
other of $27.6 million and in Advances from customers of $27.4 million.
Tobacco inventories decreased due primarily to the seasonal decrease in the
operations in the U.S.
Cash and cash equivalents decreased to $12.1 million at March 31, 1996. Cash
flows provided by operating activities increased $42.8 million to $146.5 million
in the nine months ended March 31, 1996 over the same period last year,
primarily due to decreased advances from customers, increased accounts payable
and increased net income, offset partially by decreased inventories and
advances on purchases of tobacco as a result of the increased sales. Cash
flows used by investing activities increased $7.5 million to $9.5 million
primarily due to decreased payments on notes receivable and receivables from
investees and the purchase of subsidiary, offset partially by increased
proceeds from advances. Cash flows used by financing activities increased
$109.0 million to $164.3 million due primarily to the increased repayment of
debt and by the decreased proceeds from debt.
At March 31, 1996, the Company had seasonally adjusted lines of credit of
$876.4 million, excluding long-term credit agreements. At March 31, 1996,
unused lines of credit amounted to $613.2 million, net of $162.0 million of
letters of credit and guarantees that reduce lines of credit. Total maximum
outstanding borrowings during the nine months ended March 31, 1996, were
$745.4 million.
DIMON began implementation of a refinancing plan during the quarter designed
to reduce its leverage, reduce its dependence on short-term lines of credit
and diversify its sources of debt financing (the "Refinancing Plan"). As
described more fully below, as of March 31, 1996, the Company had
completed: (I) the call for redemption and subsequent conversion into
-25-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
common stock of substantially all of its $54.3 million 7 3/4% Convertible
Subordinated Debentures due 2006 and (ii) the execution of a new $240
million revolving credit facility to replace its existing facility. The
Company expects to refinance a portion of its current short-term borrowings
with long-term debt in May 1996.
To ensure long-term liquidity, the Company entered into a $240 million credit
facility (the "New Credit Facility") on March 15, 1996. The New Credit
Facility replaced the Company's $250 million former credit facility (the
"Former Credit Facility"). The Company did not borrow under the Former
Credit Facility, but used it to reclassify $250 million of short-term debt
to long-term debt. The Company generally uses the New Credit Facility to
reclassify similarly $240 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 March 25, 1996) and is adjusted with changes in interest rates generally
or LIBOR plus .75%, through March 15, 1997, and thereafter plus a spread of
.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 March 31, 1996, there were no borrowings outstanding under
the New Credit Facility.
On February 9, 1996, the Company called for redemption on March 11, 1996, all
of the Company's $54.3 million of 7 3/4% Convertible Subordinated Debentures
due 2006 (the "Debentures"). 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 it operations through a combination of
short-term lines of credit, customer advances, cash from operations and equity
and equity-linked securities. At March 31, 1996, the Company had no material
capital expenditure commitments. The Company believes that these sources of
funds combined with the Refinancing Plan are sufficient to fund the Company's
purchasing needs for the foreseeable future, including the remainder of fiscal
1996 and fiscal 1997.
-26-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Restructuring Charges and Expenditures:
As a result of the April 1995 merger of Dibrell Brothers, Incorporated and
Monk-Austin, Inc., the Company provided in fiscal year 1995 $17.9 million to
complete the combination and rationalization of operations. Additional
restructuring charges of $5 million to $10 million were anticipated during
fiscal 1996. A total of $5.6 million in such charges have been taken in the
first nine months of fiscal 1996, including $1.3 million relating to cost
reductions in the U.S. headquarters of DIMON International and the
consolidation of tobacco operations in Brazil and $1.5 million relating to
cost reductions at the corporate headquarters. Based on revised estimates
of headcount reductions in Brazil and additional initiatives in other areas,
the Company now expects that total restructuring charges during fiscal 1996
will be between $12 and $15 million. Cash expenditures against these reserves
are occurring as planned.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed with this Report:
11 Computation of Earnings per Common Share
27 Financial Data Schedule
(b) The Company filed the following Current Reports on Form
8-K during the quarter ended March 31, 1996:
(I) Form 8-K/A1, filed January 16, 1996, amending a Form
8-K dated November 7, 1995, reporting the
Company's disposition of its 50% interest in Rio
Grande Tabacalera S.A. The Form 8-KA/1 was filed to
include under Item 7(b) the following financial
statements:
Pro Forma Consolidated Balance Sheet as of
September 30, 1995
Pro Forma Consolidated Statement of Operations for
the Year Ended June 30, 1995
Pro Forma Condensed Consolidated Statement of
Operations for the Three Month Period Ended
September 30, 1995
Notes to Pro Forma Consolidated Financial Statements
-27-
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
DIMON INCORPORATED
Date May 8, 1996 /s/ Jerry L. Parker
Jerry L. Parker
Vice President -
Controller
(Principal Accounting
Officer)
-28-
<PAGE>
DIMON INCORPORATED
EXHIBIT INDEX
Description Page No.
11 - Computation of Earnings (Loss) 30
Per Common Share
27 - Financial Data Schedule 31
-29-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11
DIMON INCORPORATED AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
Three and Nine Months Ended March 31, 1996 and 1995
1996 1995 1996 1995
(in thousands, Third Third First Nine First Nine
except per share amounts) Quarter Quarter Months Months
------- ------- ------- -------
<S> <C> <C> <C> <C>
Primary Earnings
Income before extraordinary
Item . . . . . . . . . . . . $ 6,274 $ 7,576 $30,740 $ 9,763
Extraordinary item . . . . . 0 0 1,400 0
------- ------- ------- -------
Net Income . . . . . . . . . $ 6,274 $ 7,576 $32,140 $ 9,763
======= ======= ======= =======
Shares
Weighted average number of
common shares outstanding. 39,583 38,068 38,633 38,068
Shares applicable to stock
options, net of shares
assumed to be purchased
from proceeds at
average market price . . . 184 15 106 14
------- ------- ------- -------
Average Number of Shares
Outstanding. . . . . . . . 39,767 38,083 38,739 38,082
======= ======= ======= =======
Earnings per Share
Income before extraordinary
item. . . . . . . . . . . . $.16 $.20 $.79 $.26
Extraordinary item . . . . . . .00 .00 .04 .00
------- ------- ------- -------
Net Income . . . . . . . . . . $.16 .20 .83 .26
======= ======= ======= =======
Assuming Full Dilution Earnings
Income before extraordinary
item . . . . . . . . . . . $ 6,274 $ 7,576 $30,740 $ 9,763
Extraordinary item . . . . . 0 0 1,400 0
------- ------- ------- -------
Net Income . . . . . . . . . $ 6,274 $ 7,576 $32,140 $ 9,763
======= ======= ======= =======
Add after tax interest expense
applicable to 7 3/4%
Convertible Debentures
issued June 3, 1991. . . . 452 669 1,765 2,005
------- ------- ------- -------
Adjusted Net Income. . . . . $ 6,726 $ 8,245 $33,905 $11,768
======= ======= ======= =======
Shares
Weighted average number of
common shares outstanding. 39,583 38,068 38,633 38,068
Shares applicable to stock
options, net of shares
assumed to be purchased
from proceeds at
ending market price. . . . 184 23 184 23
Assuming conversion of 7 3/4%
Convertible Debentures
at beginning of period. . 2,712 4,202 3,650 4,203
------- ------- ------- -------
Average Number of Shares
Outstanding. . . . . . . . 42,479 42,293 42,467 42,294
======= ======= ======= =======
Earnings Per Share
Income as adjusted before
extraordinary items. . . . $.16 $.20 $.77 $.28
Extraordinary items. . . . . .00 .00 .03 .00
------- ------- ------- -------
Net Income as Adjusted . . . $.16 $.20 $.80 $.28
======= ======= ======= =======
-30-
<PAGE>
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<CURRENCY> U.S. DOLLAR
<EXCHANGE-RATE> 1
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> MAR-31-1996
<PERIOD-TYPE> 9-MOS
<CASH> 12,148
<SECURITIES> 0
<RECEIVABLES> 205,868
<ALLOWANCES> 8,735
<INVENTORY> 363,913
<CURRENT-ASSETS> 662,756
<PP&E> 327,917
<DEPRECIATION> 100,395
<TOTAL-ASSETS> 1,011,291
<CURRENT-LIABILITIES> 363,994
<BONDS> 278,440
<COMMON> 136,693
0
0
<OTHER-SE> 174,539
<TOTAL-LIABILITY-AND-EQUITY> 1,011,291
<SALES> 1,663,661
<TOTAL-REVENUES> 1,663,661
<CGS> 1,481,128
<TOTAL-COSTS> 1,481,128
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,078
<INTEREST-EXPENSE> 38,036
<INCOME-PRETAX> 52,119
<INCOME-TAX> 20,847
<INCOME-CONTINUING> 30,740
<DISCONTINUED> 0
<EXTRAORDINARY> 1,400
<CHANGES> 0
<NET-INCOME> 32,140
<EPS-PRIMARY> 0.83
<EPS-DILUTED> 0.80
<PAGE>
</TABLE>
