Page 1 of 47
Page 28 - 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 December 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 0-25734; 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 offices) Zip Code)
Registrant's telephone number, including area code (804) 792-7511
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 February 4, 1997
NO par value 42,409,775
<PAGE>
DIMON INCORPORATED
INDEX
PAGE NO.
--------
Part I. Financial Information:
Consolidated Balance Sheet - December 31, 1996
and June 30, 1996. . . . . . . . . . . . . . . . . . . . . . . . . 3-4
Statement of Consolidated Income - Three Months and
Six Months Ended December 31, 1996 and 1995. . . . . . . . . . . . 5
Statement of Consolidated Cash Flows - Six
Months Ended December 31, 1996 and 1995. . . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements . . . . . . . . . . . . 7-22
Management's Discussion and Analysis
of Financial Condition and Results of Operations . . . . . . . . .23-25
Part II. Other Information. . . . . . . . . . . . . . . . . . . .26-27
- -2-
<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
DIMON Incorporated and Subsidiaries
CONSOLIDATED BALANCE SHEET
December 31
1996 June 30
(Unaudited) 1996
(in thousands) ____________ __________
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . $ 54,278 $ 53,820
Notes receivable. . . . . . . . . . . . . . . . . . . . . . . . 1,150 1,127
Trade receivables, net of allowances. . . . . . . . . . . . . . 185,802 190,898
Inventories:
Tobacco. . . . . . . . . . . . . . . . . . . . . . . . . . . 556,302 315,476
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,679 18,025
Advances on purchases of tobacco. . . . . . . . . . . . . . . . 93,270 74,709
Recoverable income taxes. . . . . . . . . . . . . . . . . . . . 2,806 1,563
Prepaid expenses and other assets . . . . . . . . . . . . . . . 14,040 13,157
---------------- ----------------
Total current assets. . . . . . . . . . . . . . . . 921,327 668,775
---------------- ----------------
Investments and other assets
Equity in net assets of investee companies. . . . . . . . . . . 9,180 8,268
Other investments . . . . . . . . . . . . . . . . . . . . . . . 2,242 2,987
Notes receivable. . . . . . . . . . . . . . . . . . . . . . . . 7,615 4,078
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,662 19,151
---------------- ----------------
34,699 34,484
---------------- ----------------
Intangible assets
Excess of cost over related net assets of
business acquired. . . . . . . . . . . . . . . . . . . . . . 22,342 23,121
Production and supply contracts . . . . . . . . . . . . . . . . 30,844 33,325
Pension asset . . . . . . . . . . . . . . . . . . . . . . . . . 4,130 4,130
---------------- ----------------
57,316 60,576
---------------- ----------------
Property, plant and equipment
Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,841 19,223
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . 146,913 143,741
Machinery and equipment . . . . . . . . . . . . . . . . . . . . 172,683 160,237
Allowances for depreciation . . . . . . . . . . . . . . . . . . (107,249) (86,426)
---------------- ----------------
231,188 236,775
---------------- ----------------
Deferred taxes and other deferred charges . . . . . . . . . . . . . 20,706 19,404
--------------- ----------------
$1,265,236 $1,020,014
=============== ================
</TABLE>
- -3-
<PAGE>
<TABLE>
<CAPTION>
DIMON Incorporated and Subsidiaries
CONSOLIDATED BALANCE SHEET
December 31
1996 June 30
(Unaudited) 1996
(in thousands) ____________ __________
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable to banks. . . . . . . . . . . . . . . . . . . . . $ 145,583 $ -
Accounts payable:
Trade. . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,621 65,970
Officers and employees . . . . . . . . . . . . . . . . . . . 8,491 24,074
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,010 14,462
Advances from customers . . . . . . . . . . . . . . . . . . . . 172,450 74,153
Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . 39,079 51,797
Income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . 19,990 5,359
Long-term debt current. . . . . . . . . . . . . . . . . . . . . 10,040 10,618
------------------- -------------------
Total current liabilities 468,264 246,433
------------------- -------------------
Long-term debt
Revolving Credit Notes and Other. . . . . . . . . . . . . . . . 267,095 265,871
Senior Notes. . . . . . . . . . . . . . . . . . . . . . . . . . 125,000 125,000
------------------- -----------------
392,095 390,871
------------------- -----------------
Deferred credits:
Income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . 24,634 21,496
Compensation and other benefits . . . . . . . . . . . . . . . . 45,497 44,465
------------------- -----------------
70,131 65,961
------------------- -----------------
Minority interest in subsidiaries . . . . . . . . . . . . . . . . . 497 901
------------------- -----------------
Commitments and contingencies . . . . . . . . . . . . . . . . . . . - -
------------------- -----------------
Stockholders' equity
Preferred Stock--no par value:
Dec. 31 Jun. 30
Authorized shares. . . 10,000 10,000
Issued shares. . . . . - -. . . . . . . . - -
Common Stock--no par value:
Dec. 31 Jun. 30
Authorized shares. . .125,000 125,000
Issued shares. . . . . 42,379 42,366. . . . . . . . 137,163 136,959
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . 197,670 177,419
Equity-currency conversions . . . . . . . . . . . . . . . . . . 788 2,842
Additional minimum pension liability. . . . . . . . . . . . . . (1,372) (1,372)
------------------- -----------------
334,249 315,848
------------------- -----------------
$1,265,236 $1,020,014
==================== =================
</TABLE>
- -4-
<PAGE>
<TABLE>
<CAPTION>
DIMON Incorporated and Subsidiaries
STATEMENT OF CONSOLIDATED INCOME
Three Months and Six Months Ended December 31, 1996 and 1995
(Unaudited)
1997 1996 1997 1996
Second Second First Six First Six
(in thousands, except per share amounts) Quarter Quarter Months Months
------------ ------------ -------------- -----------
<S> <C> <C> <C> <C>
Sales and other operating revenues. . . . . . . . . . . . $771,341 $763,418 $1,182,075 $1,103,110
Cost of goods and services sold . . . . . . . . . . . . 700,717 680,958 1,046,402 965,846
------------ ------------ --------------- --------------
70,624 82,460 135,673 137,264
Selling, administrative and general expenses. . . . . . . 32,044 36,154 62,548 66,680
Restructuring and merger related costs. . . . . . . . . . - 1,320 - 2,818
------------ ------------ --------------- --------------
Operating Income. . . . . . . . . . . . . . . . . . . . . 38,580 44,986 73,125 67,766
Interest expense. . . . . . . . . . . . . . . . . . . . . 11,652 14,046 21,549 27,060
------------ ------------ --------------- --------------
Income before income taxes, minority
interest, equity in net income of
investee companies . . . . . . . . . . . . . . . . . . 26,928 30,940 51,576 40,706
Income taxes. . . . . . . . . . . . . . . . . . . . . . . 10,256 12,571 20,115 16,282
------------ ------------ --------------- -------------
Income before minority interest,
equity in net income of investee
companies. . . . . . . . . . . . . . . . . . . . . . . 16,672 18,369 31,461 24,424
Income applicable to minority interest. . . . . . . . . . 61 124 51 128
Equity in net income of investee
companies, net of income taxes . . . . . . . . . . . . 450 193 916 170
------------ ----------- --------------- -------------
Income before extraordinary item. . . . . . . . . . . . . 17,061 18,438 32,326 24,466
Extraordinary item:
Partial recovery of a previous extraordinary
trade receivable write-off (net of
applicable income tax expense of $870) . . . . . . . . - 1,400 - 1,400
------------ ------------ -------------- -------------
NET INCOME. . . . . . . . . . . . . . . . . . . . . . . . $ 17,061 $ 19,838 $ 32,326 $ 25,866
============ ============ ============== =============
Earnings Per Share, primary
Income before extraordinary item . . . . . . . . . . . $.40 $.48 $.76 $.64
Extraordinary item . . . . . . . . . . . . . . . . . . .00 .04 .00 .04
---- ---- ---- ----
Net Income . . . . . . . . . . . . . . . . . . . . . . $.40 $.52 $.76 $.68
==== ==== ==== ====
Earnings Per Share, assuming full dilution
Income before extraordinary item . . . . . . . . . . . $.40 $.45 $.76 $.61
Extraordinary item . . . . . . . . . . . . . . . . . . .00 .03 .00 .03
---- ---- ---- ----
Net Income . . . . . . . . . . . . . . . . . . . . . . $.40 $.48 $.76 $.64
==== ==== ==== ====
Average number of shares outstanding:
Primary. . . . . . . . . . . . . . . . . . . . . . . . 42,650 38,288 42,591 38,231
Assuming full dilution . . . . . . . . . . . . . . . . 42,816 42,403 42,814 42,403
Cash dividends per share. . . . . . . . . . . . . . . . . $.15 $.135 $.285 $.27
==== ===== ===== ====
</TABLE>
- -5-
<PAGE>
<TABLE>
<CAPTION>
DIMON Incorporated and Subsidiaries
STATEMENT OF CONSOLIDATED CASH FLOWS
Six Months Ended December 31, 1996 and 1995
(Unaudited)
December 31 December 31
1996 1995
(in thousands) ____________ __________
<S> <C> <C>
Operating activities
Net Income. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 32,326 $ 25,866
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization. . . . . . . . . . . . . . . . 16,435 17,113
Deferred items . . . . . . . . . . . . . . . . . . . . . . . 2,189 2,812
Loss (gain) on foreign currency transactions . . . . . . . . 82 (158)
Gain on disposition of fixed assets. . . . . . . . . . . . . (2,687) (798)
Gain on sale of investee . . . . . . . . . . . . . . . . . . - (3,751)
Gain on sale of investment . . . . . . . . . . . . . . . . . - (1,090)
Undistributed earnings of investees. . . . . . . . . . . . . (916) (170)
Income applicable to minority interest . . . . . . . . . . . 51 128
Bad debt expense . . . . . . . . . . . . . . . . . . . . . . 697 497
Decrease (increase) in accounts receivable . . . . . . . . . 6,887 (86,021)
Increase in inventories and advances on
purchases of tobacco . . . . . . . . . . . . . . . . . . . (258,418) (78,650)
Decrease (increase) in recoverable taxes . . . . . . . . . . (1,261) 112
Decrease (increase) in prepaid expenses. . . . . . . . . . . (1,025) 23,281
Decrease in accounts payable
and accrued expenses . . . . . . . . . . . . . . . . . . . (33,376) (5,435)
Increase in advances from customers. . . . . . . . . . . . . 98,163 102,185
Increase in income taxes . . . . . . . . . . . . . . . . . . 14,721 7,659
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . (8) (723)
____________ __________
Net cash provided (used) by operating
activities . . . . . . . . . . . . . . . . . . . . . . . . (126,140) 2,857
____________ __________
Investing activities
Purchase of property and equipment. . . . . . . . . . . . . . . (12,652) (10,618)
Proceeds from sale of property and equipment. . . . . . . . . . 4,691 1,962
Payments received on notes receivable
and receivable from investees. . . . . . . . . . . . . . . . 555 926
Advances for notes receivable . . . . . . . . . . . . . . . . . (805) (328)
Proceeds from or (advances for) other
investments and other assets . . . . . . . . . . . . . . . . (250) 9,768
Purchase of subsidiary. . . . . . . . . . . . . . . . . . . . . - (6,543)
____________ __________
Net cash used by investing
activities . . . . . . . . . . . . . . . . . . . . . . . . (8,461) (4,833)
____________ __________
Financing activities
Repayment of debt . . . . . . . . . . . . . . . . . . . . . . . (197,813) (276,841)
Proceeds from debt. . . . . . . . . . . . . . . . . . . . . . . 344,792 290,257
Proceeds from sale of common stock. . . . . . . . . . . . . . . 205 1,950
Cash dividends paid to DIMON Incorporated
stockholders . . . . . . . . . . . . . . . . . . . . . . . . (12,075) (10,302)
____________ __________
Net cash provided by financing activities . . . . . . . . . . . 135,109 5,064
____________ __________
Effect of exchange rate changes on cash . . . . . . . . . . . . . . (50) 311
____________ __________
Increase in cash and cash equivalents . . . . . . . . . . . . . . . 458 3,399
Cash and cash equivalents at beginning of year. . . . . . . . . . . 53,820 42,326
------------ ------------
Cash and cash equivalents at end of period . . . . . . . . $ 54,278 $ 45,725
============ ============
</TABLE>
- -6-
<PAGE>
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 outstanding December 31,
1995, were converted into Common Stock at the beginning of the
reporting periods thereby increasing the weighted average number
of shares considered outstanding during the periods. Also, all
interest expense on the debentures for the periods is added to
pre-tax income and the hypothetical additional income tax
expense is deducted. The weighted average number of shares
outstanding is 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.
In connection with the merger, the Company incurred legal,
accounting and financial consultants costs of $8.1 million and
commenced various activities to restructure its worldwide
operations. 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 six months ended December 31, 1995, an additional $2.8
million, pre-tax, was provided for restructuring the tobacco
operations primarily in Brazil for a reduction in the number of
employees. Other provisions subsequent to December 31, 1995
increased the 1996 fiscal year restructuring provision to $15.4
million which was primarily for additional severance costs.
During the year ended June 30, 1996, the Company severed a total
of 367 employees in connection with restructuring. The
severed employees were primarily in the tobacco division and
worked in various departments throughout the Company. At June
30, 1996, the remaining cash outlays associated with employee
separations were 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.
During the six months ended December 31, 1996,the Company paid
out $5.6 million, principally for employee separations.
4. 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 had taken place at the beginning of the period would
have been $.48 and $.64 for the three and six months ended
December 31, 1995, equal to the fully diluted amounts as
disclosed in the statement of consolidated income.
- -7-
<PAGE>
DIMON INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. In the fourth quarter of fiscal 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.
6. The results of operations for the three months and six months
ended December 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. 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, 1996.
7. On May 29, 1996, the Company issued $125 million in 8 7/8%
Senior Notes (the "Notes") due 2006. The notes are general
unsecured obligations of the Company and rank equally in right
of payment with all other unsubordinated indebtedness. DIMON
International, Inc. and Florimex Worldwide, Inc.(collectively,
the "Guarantors"), wholly owned subsidiaries of the Company,
have 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
December 31, 1996
(Unaudited)
(in thousands) DIMON
Incorporated Guarantors Non-Guarantors Eliminations Total
<S> <C> <C> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents $ (569) $ 1,448 $ 52,804 $ 595 a $ 54,278
Notes receivable - 420 35,188 (34,458)b 1,150
Trade receivables, net of allowances 36,858 129,504 153,449 (134,009)b 185,802
Inventories:
Tobacco - 326,781 231,125 (1,604)b 556,302
Other 63 1,299 12,317 - 13,679
Advances on purchases of tobacco 227,258 59,401 57,264 (250,653)b 93,270
Recoverable income taxes - 84 2,722 - 2,806
Prepaid expenses and other assets 3,579 2,600 7,872 (11)b 14,040
------------ ------------ ------------ ------------- --------------
Total current assets 267,189 521,537 552,741 (420,140) 921,327
------------- ------------ ------------ -------------- ---------------
Investments and other assets
Equity in net assets of investee
companies - 2,739 6,441 - 9,180
Consolidated subsidiaries 347,595 354,687 59,555 (761,837)b -
Other investments 1 2,117 5,131 (5,007)b 2,242
Notes receivable - 706 6,909 - 7,615
Other 139 3,930 11,593 - 15,662
------------ ------------- ------------- ------------- ---------------
347,735 364,179 89,629 (766,844) 34,699
------------- -------------- ------------- ------------- ---------------
Intangible assets
Excess of cost over related net assets
of business acquired 369 11,194 10,779 - 22,342
Production and supply contracts - 23,548 7,296 - 30,844
Pension asset 3,042 1,088 - - 4,130
------------ ------------ -------------- ------------- -------------
3,411 35,830 18,075 - 57,316
------------ ------------- -------------- ------------- --------------
Property, plant and equipment
Land 1,771 1,909 15,161 - 18,841
Buildings 4,751 25,495 116,667 - 146,913
Machinery and equipment 5,129 51,232 116,322 - 172,683
Allowances for depreciation (5,323) (30,155) (71,771) - (107,249)
------------ ------------ ------------- -------------- ---------------
6,328 48,481 176,379 - 231,188
------------ ------------ ------------- -------------- ---------------
Deferred taxes and other deferred charges 20,566 - 140 - 20,706
------------ ------------ ------------- -------------- ---------------
Total assets $645,229 $970,027 $836,964 $(1,186,984) $1,265,236
============ ============ ============= ============= ===============
a. To correct for cash transfers made by DIMON Incorporated to an entity which reports on an earlier period.
b. Inter-company eliminations.
</TABLE>
- -9-
<PAGE>
<TABLE>
<CAPTION>
DIMON Incorporated and Subsidiaries
Supplemental Combining Balance Sheet
December 31, 1996
(Unaudited)
(in thousands) DIMON
Incorporated Guarantors Non-Guarantors Eliminations Total
Current Liabilities
<S> <C> <C> <C> <C> <C>
Notes payable to banks $ - $ 11,325 $254,918 $ (120,660)b $ 145,583
Accounts payable:
Trade 202 390,797 55,319 (385,697)b 60,621
Officers and employees 3,645 1,498 3,348 - 8,491
Other 4,229 1,866 7,465 (1,550)b 12,010
Advances from customers (84) 162,292 21,279 (11,037)b 172,450
Accrued expenses 2,453 7,540 29,086 - 39,079
Income taxes (10,967)c 3,876 27,081 - 19,990
Long-term debt current 4,286 296 6,912 (1,454) 10,040
-------------- ---------- ------------- ---------------- ---------------
Total current liabilities 3,764 579,490 405,408 (520,398) 468,264
-------------- ---------- ------------- ---------------- ---------------
Long-term debt
Revolving Credit Notes and Other 146,372 698 20,397 99,628 b 267,095
Senior Notes 125,000 - - - 125,000
-------------- ---------- ------------- ---------------- ---------------
271,372 698 20,397 99,628 392,095
-------------- ---------- ------------- ---------------- ---------------
Deferred Credits
Income taxes 6,198 1,398 17,038 - 24,634
Compensation and other benefits 29,646 538 15,313 - 45,497
------------- ---------- ------------- ---------------- ---------------
35,844 1,936 32,351 - 70,131
-------------- ---------- ------------- ---------------- ---------------
Minority interest in subsidiaries - - 497 - 497
-------------- ---------- ------------- ---------------- ---------------
Stockholders' equity
Common stock 137,163 144,690 199,408 (344,098)b 137,163
Retained earnings 197,670 240,370 178,101 (418,471)b 197,670
Equity-currency conversions 788 2,843 802 (3,645)b 788
Additional minimum pension liability - - - - -
Unrealized gain on investments (1,372) - - - (1,372)
-------------- ---------- ------------- ---------------- --------------
334,249 387,903 378,311 (766,214)b 334,249
-------------- ---------- ------------- ---------------- --------------
Total liabilities and equity $645,229 $970,027 $836,964 $(1,186,984) $1,265,236
============== ========= ========= ============= ===========
b. Inter-company eliminations.
c. Current deferred tax on reserves for restructuring and unallocated, estimated tax payments.
</TABLE>
- -10-
<PAGE>
<TABLE>
<CAPTION>
DIMON Incorporated and Subsidiaries
Supplemental Combining Statement of Income
Three Months Ended December 31, 1996
(Unaudited)
(in thousands) DIMON
Incorporated Guarantors Non-Guarantors Eliminations Total
<S> <C> <C> <C> <C> <C>
Sales and other operating revenues $ 5,442 $ 587,146 $ 383,111 $(204,358)a $771,341
Cost of goods and services sold 6,114 552,917 327,532 (185,846)a 700,717
------------- ------------- ------------- --------------- -------------
(672) 34,229 55,579 (18,512) 70,624
Selling, administrative and general expenses 3,406 21,069 19,209 (11,640)a,b 32,044
------------ ------------- ------------ --------------- -------------
Operating income (4,078) 13,160 36,370 (6,872) 38,580
Interest Expense (210) 6,011 12,723 (6,872)a 11,652
------------ ------------- ------------ --------------- -------------
Income (loss) before income taxes, minority
interest and equity in net income of
investee companies (3,868) 7,149 23,647 - 26,928
Income taxes (benefits) (2,137) 2,774 9,619 - 10,256
------------- ------------- ------------- --------------- ------------
Income (loss) before minority interest,
equity in net income of investee
companies (1,731) 4,375 14,028 - 16,672
Income applicable to minority interest - - 61 - 61
Equity in net income (loss) of investee
companies, net of income taxes - 523 (73) - 450
Equity in net income of subsidiaries 18,792 13,894 - (32,686) -
Extraordinary items - - - - -
------------ ------------ ------------ --------------- ------------
NET INCOME $ 17,061 $ 18,792 $ 13,894 $(32,686) $ 17,061
============ ============ ============ =============== ============
a. Inter-company eliminations.
b. Royalty expense in SG&A and Royalty income in Sales and other operating revenues for Consolidated Entities.
</TABLE>
- -11-
<PAGE>
<TABLE>
<CAPTION>
DIMON Incorporated and Subsidiaries
Supplemental Combining Statement of Income
Six Months Ended December 31, 1996
(Unaudited)
(in thousands) DIMON
Incorporated Guarantors Non-Guarantors Eliminations Total
<S> <C> <C> <C> <C> <C>
Sales and other operating revenues $ 8,827 $ 807,232 $ 647,244 $(281,228)a $1,182,075
Cost of goods and services sold 6,161 756,662 538,367 (254,788)a 1,046,402
------------- ------------- ------------- --------------- -------------
2,666 50,570 108,877 (26,440) 135,673
Selling, administrative and general expenses 6,656 34,037 36,330 (14,475)a,b 62,548
------------ ------------- ------------ --------------- -------------
Operating income (3,990) 16,533 72,547 (11,965) 73,125
Interest Expense 3,762 9,873 19,879 (11,965)a 21,549
------------ ------------- ------------ --------------- -------------
Income (loss) before income taxes, minority
interest and equity in net income of
investee companies (7,752) 6,660 52,668 - 51,576
Income taxes (benefits) (3,690) 2,578 21,227 - 20,115
------------- ------------- ------------- --------------- ------------
Income (loss) before minority interest,
equity in net income of investee
companies (4,062) 4,082 31,441 - 31,461
Income applicable to minority interest - - 51 - 51
Equity in net income (loss) of investee
companies, net of income taxes - 603 313 - 916
Equity in net income of subsidiaries 36,388 31,703 - (68,091) -
Extraordinary items - - - - -
------------ ------------ ------------ --------------- ------------
NET INCOME (LOSS) $ 32,326 $ 36,388 $ 31,703 $(68,091) $ 32,326
============ ============ ============ =============== =============
a. Inter-company eliminations.
b Royalty expense in SG&A and Royalty income in Sales and other operating revenues for Consolidated Entities.
</TABLE>
- -12-
<PAGE>
<TABLE>
<CAPTION>
DIMON Incorporated and Subsidiaries
Supplemental Combining Statement of Cash Flows
Six Months Ended December 31, 1996
(Unaudited)
(in thousands) DIMON
Incorporated Guarantors Non-Guarantors Eliminations Total
<S> <C> <C> <C> <C> <C>
Operating activities
Net Income $32,326 $36,388 $31,703 $(68,091)a $32,326
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,289 5,589 9,557 - 16,435
Deferred items 211 (432) 2,410 - 2,189
Loss on foreign currency transactions - 56 26 - 82
Loss (gain) on disposition of fixed assets 44 (1,459) (1,272) - (2,687)
Undistributed earnings of
investees/subsidiaries (36,388) (32,306) (313) 68,091 a (916)
Income applicable to minority interest - - 51 - 51
Bad debt expense - - 697 - 697
Decrease (increase) in accounts
receivable (10,096) 48,829 11,023 (42,869)a 6,887
Decrease (increase) in inventories and
advances on purchases of tobacco (58,656) (303,464) 23,124 80,578 a (258,418)
Increase in recoverable taxes - (84) (1,177) - (1,261)
Decrease (increase) in prepaid
expenses 532 (1,605) 37 11 a (1,025)
Increase (decrease) in accounts payable
and accrued expenses (12,487) 114,870 (55,832) (79,927)a (33,376)
Increase (decrease) in advances from
customers (3,464) 112,563 (51,884) 40,948 a 98,163
Increase in income taxes 1,522 794 12,128 277 a 14,721
Other - (1) (7) - (8)
-------------- -------------- ------------ ------------- --------------
Net cash used by operating activities (85,167) (20,262) (19,729) (982) (126,140)
-------------- -------------- ------------ ------------- --------------
Investing activities
Purchase of property and equipment (112) (3,111) (9,429) - (12,652)
Proceeds from sale of property and
equipment 4 1,544 3,143 - 4,691
Payments on notes receivable and
receivable from investees - 330 225 - 555
Advances on notes receivable - - (1,298) 493 a (805)
Proceeds from or (advances) for other
investments and other assets (1,663) 14,814 (16,456) 3,055 (250)
-------------- -------------- ------------ ------------- --------------
Net cash provided (used) by investing
activities (1,771) 13,577 (23,815) 3,548 (8,461)
-------------- -------------- ------------ ------------- --------------
a. Inter-company eliminations
</TABLE>
- -13-
<PAGE>
<TABLE>
<CAPTION>
DIMON Incorporated and Subsidiaries
Supplemental Combining Statement of Cash Flows (Continued)
Six Months Ended December 31, 1996
(Unaudited)
(in thousands) DIMON
Incorporated Guarantors Non-Guarantors Eliminations Total
<S> <C> <C> <C> <C> <C>
Financing activities
Repayment of debt $(109,150) $ (424) $(88,239) $ - $(197,813)
Proceeds from debt 206,666 - 138,517 (391)a 344,792
Proceeds from sale of common stock 205 - - - 205
Cash dividends paid to DIMON Incorporated
stockholders (12,075) 1,663 - (1,663)a (12,075)
-------------- -------------- ------------ ------------- --------------
Net cash provided (used) by financing
activities 85,646 1,239 50,278 (2,054) 135,109
-------------- -------------- ------------ ------------- --------------
Effect of exchange rate changes on cash - - (50) - (50)
-------------- -------------- ------------ ------------- --------------
Increase (decrease) in cash and cash
equivalents (1,292) (5,446) 6,684 512 458
Cash and cash equivalents at beginning of
year 723 6,894 46,120 83 53,820
-------------- -------------- ------------ ------------- --------------
Cash and cash equivalents at end of
period $ (569) $ 1,448 $52,804 $ 595 $54,278
============== ============== ============ ============= =============
a. Inter-company eliminations
</TABLE>
- -14-
<PAGE>
<TABLE>
<CAPTION>
DIMON Incorporated and Subsidiaries
Supplemental Combining Balance Sheet
June 30, 1996
(in thousands) DIMON
Incorporated Guarantors Non-Guarantors Eliminations Total
Assets
<S> <C> <C> <C> <C> <C>
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 and other assets 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
-------------- ------------- -------------- ------------- ---------------
Total assets $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.
</TABLE>
- -15-
<PAGE>
<TABLE>
<CAPTION>
DIMON Incorporated and Subsidiaries
Supplemental Combining Balance Sheet
June 30, 1996
(in thousands) DIMON
Incorporated Guarantors Non-Guarantors Eliminations Total
Current Liabilities
<S> <C> <C> <C> <C> <C>
Notes payable to banks $ - $ - $ - $ - $ -
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 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
-------------- ------------- ------------- --------------- ---------------
Total liabilities and equity $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.
</TABLE>
- -16-
<PAGE>
<TABLE>
<CAPTION>
DIMON Incorporated and Subsidiaries
Supplemental Combining Statement of Income
Three Months Ended December 31, 1995
(Unaudited)
(in thousands) DIMON
Incorporated Guarantors Non-Guarantors Eliminations Total
<S> <C> <C> <C> <C> <C>
Sales and other operating revenues $ 9,247 $ 591,723 $ 340,923 $ (178,475)a,c $ 763,418
Cost of goods and services sold (2,801)b 558,455 283,977 (158,673)a 680,958
------------- ------------ -------------- ------------------- ------------
12,048 33,268 56,946 (19,802) 82,460
Selling, administrative and general 5,212 19,389 19,262 (7,709)a,c 36,154
Restructuring and merger related costs 597 630 93 - 1,320
------------- ------------ -------------- ------------------- ------------
Operating income 6,239 13,249 37,591 12,093 44,986
Interest expense 8,414 10,127 7,598 (12,093)a 14,046
------------- ------------ -------------- ------------------- ------------
Income (loss) before income taxes,
minority interest, equity in net
income of investee companies and
extraordinary item (2,175) 3,122 29,993 - 30,940
Income taxes (benefits) (887) 1,212 12,246 - 12,571
------------- ------------ -------------- ------------------- ------------
Income (loss) before income taxes,
minority interest, equity in net
income of investee companies and
extraordinary item (1,288) 1,910 17,747 - 18,369
Income applicable to minority interest - - 124 - 124
Equity in net income (loss) of investee
companies, net of income taxes - 329 (136) - 193
Equity in net income of subsidiaries 21,126 17,488 - (38,614)a -
------------- ------------ -------------- ------------------- ------------
Income before extraordinary item 19,838 19,727 17,487 (38,614) 18,438
Extraordinary item:
Partial recovery of a previous
extraordinary trade receivable
write-off (net of applicable
income tax expense of $870) - 1,400 - - 1,400
------------- ------------ -------------- ------------------- ------------
NET INCOME $ 19,838 $ 21,127 $ 17,487 $ (38,614) $ 19,838
============== =========== ============== ================== ============
a. Inter-company eliminations.
b. Change in reserves for inter-company profit in ending inventory.
c. Royalty expense in SG&A and Royalty income in Sales and other operating revenues for Consolidated Entities.
</TABLE>
- -17-
<PAGE>
<TABLE>
<CAPTION>
DIMON Incorporated and Subsidiaries
Supplemental Combining Statement of Income
Six Months Ended December 31, 1995
(Unaudited)
(in thousands) DIMON
Incorporated Guarantors Non-Guarantors Eliminations Total
<S> <C> <C> <C> <C> <C>
Sales and other operating revenues $ 16,093 $ 809,639 $ 553,875 $ (276,497)a,c $1,103,110
Cost of goods and services sold (5,070)d 758,976 457,101 (245,161)a 965,846
--------------- ------------ -------------- ------------------- -------------
21,163 50,663 96,774 (31,336) 137,264
Selling, administrative and general 8,518 31,301 37,367 (10,506)a,e 66,680
Restructuring and merger related costs 597 630 1,591 - 2,818
--------------- ------------ --------------- ------------------- -------------
Operating income 12,048 18,732 57,816 (20,830) 67,766
Interest expense 15,053 17,457 15,380 (20,830)a 27,060
--------------- ------------ --------------- ------------------- -------------
Income (loss) before income taxes,
minority interest, equity in net
income of investee companies and
extraordinary item (3,005) 1,275 42,436 - 40,706
Income taxes (benefits) (1,202) 510 16,974 - 16,282
--------------- ------------ --------------- ------------------- -------------
Income (loss) before income taxes,
minority interest, equity in net
income of investee companies and
extraordinary item (1,803) 765 25,462 - 24,424
Income applicable to minority interest - - 128 - 128
Equity in net income (loss) of investee
companies, net of income taxes - 443 (273) - 170
Equity in net income of subsidiaries 27,669 25,061 - (52,730)a -
--------------- ------------ --------------- ------------------- -------------
Income before extraordinary item 25,866 26,269 25,061 (52,730) 24,466
Extraordinary item:
Partial recovery of a previous
extraordinary trade receivable
write-off (net of applicable
income tax expense of $870) - 1,400 - - 1,400
--------------- ------------ --------------- ------------------- -------------
NET INCOME $ 25,866 $ 27,669 $ 25,061 $ (52,730) $ 25,866
=============== ============ =============== =================== =============
a. Inter-company eliminations.
d. Change in reserves for inter-company profit in ending inventory.
e. Royalty expense in SG&A and Royalty income in Sales and other operating revenues for Consolidated Entities.
</TABLE>
- -18-
<PAGE>
<TABLE>
<CAPTION>
DIMON Incorporated and Subsidiaries
Supplemental Combining Statement of Cash Flows
Six Months Ended December 31, 1995
(Unaudited)
(in thousands) DIMON
Incorporated Guarantors Non-Guarantors Eliminations Total
<S> <C> <C> <C> <C> <C>
Operating activities
Net Income $ 25,866 $ 27,669 $ 25,061 $ (52,730)a $ 25,866
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,146 5,461 10,506 - 17,113
Deferred items 625 175 2,012 - 2,812
Loss (gain) on foreign currency
transactions 46 (51) (153) - (158)
Gain on disposition of fixed assets (14) (58) (726) - (798)
Gain on sale of investee - - (3,751) - (3,751)
Gain on sale of investment - - (1,090) - (1,090)
Undistributed earnings of
investees/subsidiaries (27,669) (25,504) 273 52,730 a (170)
Income applicable to minority interest - - 128 - 128
Bad debt expense - (10) 507 - 497
Decrease (increase) in accounts
receivable (14,560) (23,632) (63,972) 16,143 a (86,021)
Decrease (increase) in inventories and
advances on purchases of tobacco 28,460 28,663 (139,094) 3,321 a (78,650)
Decrease in recoverable taxes - - 112 - 112
Decrease (increase) in prepaid expenses 9,167 (539) 14,653 - 23,281
Increase (decrease) in accounts
payable and accrued expenses (5,915) 331,141 (53,695) (276,966)a (5,435)
Increase (decrease) in advances
from customers 115 (328,280) 190,853 239,497 a 102,185
Increase (decrease) in income
taxes (2,713) 937 9,435 - 7,659
Other - - (723) - (723)
------------- ------------- --------------- --------------- -------------
Net cash provided (used) by
operating activities 14,554 15,972 (9,664) (18,005) 2,857
------------- ------------- --------------- --------------- -------------
Investing activities
Purchase of property and equipment (65) (2,566) (7,987) - (10,618)
Proceeds from sale of property
and equipment 14 80 1,868 - 1,962
Payments on notes receivable and
receivable from investees - 50 876 - 926
Issuance of notes receivable - (160) 10,208 (10,376)a (328)
Advances for other investments
and other assets 5,599 (212) 10,984 (6,603)a 9,768
Purchase of minority interest
in subsidiaries - - - - -
Purchase of subsidiary - (6,543) - - (6,543)
------------- ------------- --------------- --------------- -------------
Net cash provided (used) by
investing activities 5,548 (9,351) 15,949 (16,979) (4,833)
------------- ------------- --------------- --------------- -------------
</TABLE>
- -19-
<PAGE>
<TABLE>
<CAPTION>
DIMON Incorporated and Subsidiaries
Supplemental Combining Statement of Cash Flows (Continued)
Six Months Ended December 31, 1995
(Unaudited)
(in thousands) DIMON
Incorporated Guarantors Non-Guarantors Eliminations Total
<S> <C> <C> <C> <C> <C>
Financing activities
Repayment of debt $ (199,128) $ (570) $ (77,143) $ - $(276,841)
Proceeds from debt 185,743 - 96,395 8,119 a 290,257
Proceeds from sale of stock 1,950 - - - 1,950
Cash dividends paid to DIMON Incorporated
stockholders (10,302) - - - (10,302)
------------- -------------- --------------- --------------- -------------
Net cash provided (used) by financing
activities (21,737) (570) 19,252 8,119 5,064
Effect of exchange rate changes on cash - - 311 - 311
------------- -------------- --------------- --------------- -------------
Increase (decrease) in cash and cash
equivalents (1,635) 6,051 25,848 (26,865) 3,399
Cash and cash equivalents at beginning
of year 1,328 1,879 12,254 26,865 a 42,326
------------- -------------- --------------- --------------- -------------
Cash and cash equivalents at end
of period $ (307) $ 7,930 $ 38,102 $ - $ 45,725
============= ============== =============== ============== =============
a. Inter-company eliminations.
</TABLE>
- -20-
<PAGE>
DIMON INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. a. 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 are 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 are 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 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.
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.
d. 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.
- -21-
<PAGE>
DIMON INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>
DECEMBER 31, 1996
DEBIT(CREDIT)
(Unaudited)
DIMON Non-
Incorporated Guarantors Guarantors
<S> <C> <C> <C>
Accounts Receivable $ 36,802 $ 18,223 $ 79,638
Advances on Purchases 227,258 47,167 14,071
Accounts Payable Trade 0 (372,409) (16,259)
Advances from Customers 84 (1,878) (9,279)
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996
DEBIT(CREDIT)
DIMON Non-
Incorporated Guarantors Guarantors
<S> <C> <C> <C>
Accounts Receivable $ 26,761 $ 120,661 $ 54,267
Advances on Purchases 168,616 16,886 18,963
Accounts Payable Trade (70) (272,781) (40,033)
Advances from Customers (3,380) (37) (52,256)
</TABLE>
- -22-
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(in thousands)
Three Months Ended December 31, 1996 Compared to Three Months Ended
December 31, 1995:
Net sales and other operating revenues increased $7,923, or 1%, for
the three months ended December 31, 1996, from the same period in
1995. The increase in tobacco sales of $8,520, or 1.3%, was
primarily due to higher average prices of foreign and U.S. grown
tobacco, partially offset by decreased quantities of foreign grown
tobacco. Average prices increased due primarily to increases in
prices of tobacco purchased. Increased average prices of foreign and
U.S. grown tobacco of $35,794 and $9,573, respectively, offset by
decreased quantities of foreign grown tobacco of $36,641. The
foreign grown sales prices increased primarily in Africa and South
America. The foreign tobacco sales volume decreased primarily in
South America due to increased volumes sold in 1995 of carryover
tobacco from prior year crops. Flower sales decreased $597, or .6%,
including an approximate $5,600 decrease due to the effect of
applying U.S. dollar exchange rates. Also, extraordinary severe
winter weather in Europe during late December negatively affected
Christmas and New Years holiday sales, particularly in Germany, which
impacted volume and profitability.
Cost of sales and expenses for the period ended December 31, 1996,
were $732,761, an increase of $15,649, or 2.2% from $717,112, before
the $1,320 charge for restructuring costs, for the three months ended
December 31, 1995. Cost of sales and expenses of the tobacco
operations increased $18,330, or 3.0%, primarily due to increased
sales and increased costs when compared to prior crop year sales.
The gross profit for the tobacco operations decreased $11,722, or
16.6%, due primarily to sales in 1995 of prior year crops from
South America which carried a higher gross margin and a $3,657 gain
in 1995 on the sale of the Company's investee in Brazil. The gross
margin percentage decreased from 10.8% to 8.9%. Cost of sales and
expenses for the Company's flower segment decreased $1,073, or 1%,
primarily due to decreased sales and decreased expenses in Europe.
The gross margin for the flowers operations decreased $113 primarily
due to decreased margins in Europe partially offset with increased
margins in Baardse. Corporate expenses decreased $1,608 due to
decreased personnel costs.
The effective income tax rate decreased from 40.6% in fiscal year
1996 to 38.1% in fiscal year 1997 based on estimates of taxable
income projected for each year.
Equity in net income of the tobacco investee companies increased $257
from the same period last year. The increase is primarily due to
decreased losses from the Company's investee in Brazil, which was
sold in November 1995.
- -23-
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
(in thousands)
Six Months Ended December 31, 1996 Compared to Six Months Ended
December 31, 1995:
Net sales and other operating revenues increased $78,965, or 7.2%,
for the six months ended December 31, 1996, from the same period in
1995. The increase in tobacco sales of $70,196, or 7.6%, was due
primarily to higher average prices of foreign grown tobacco and
increased quantities sold of U.S. tobacco, offset partially by
decreased quantities of foreign grown tobacco. Higher average prices
of foreign grown tobacco and increased quantities of U.S. tobacco
accounted for $77,505 and $23,161, respectively, of the increase,
offset by decreased quantities of foreign grown tobacco of $20,631.
The balance of the change was due to decreased revenues from
services. The foreign grown sales prices increased primarily in
Africa and South America. The foreign grown sales volume decreased
primarily in South America due to increased volumes sold in 1995 of
carryover tobacco from prior year crops, offset partially by
increased volumes of virtually all other foreign origins. The
increase in flower sales of $8,769, or 4.8%, was due primarily to the
European operations and Baardse including an approximate $9,500
decrease due to the effect of applying U.S. dollar exchange rates.
Cost of sales and expenses, for the period ended December 31, 1996,
were $1,108,950, an increase of $76,424, or 7.4%, from $1,032,526,
before the $2,818 charge for restructuring costs, from the same
period in 1995. Cost of sales and expenses of the tobacco operations
increased $70,957, or 8.4%, primarily due to increased sales. The
gross profit for the tobacco operations decreased $2,649, or 2.2%,
primarily due to decreased margins in the U.S. and South America,
offset partially by increased margins in Africa and Asia. The
decreased gross profit related to South America is due primarily to
sales in 1995 of prior year crops which carried a higher gross
margin and a $3,657 gain in 1995 on the sale of the Company's
investee in Brazil. The gross margin percentage for tobacco
operations decreased from 12.9% to 11.7%. Cost of sales and expenses
for the flower operations increased $7,015, or 3.9%, primarily due to
increased sales. The gross margin for the flower operations increased
$1,058, or 5.7%, and the gross margin percentage for the flower
operation increased slightly from 10.3% to 10.4%, both due primarily
to the Baardse operations. Corporate expenses decreased $1,548, or
18.9%, due primarily to decreased personnel costs.
The effective tax rate decreased from 40.0% in 1995 to 39.0% in 1996
based on estimates of taxable income projected for each year.
Equity in net income of the tobacco investee companies increased $746
from the same period last year. The increase is due to decreased
losses from the Company's investee in Brazil, which was sold in
November 1995, and increased income on the investees in Greece and
the U.S.
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<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
(in thousands)
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 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.
Reflecting the seasonal increase in the tobacco operations, DIMON's
working capital increased from $422,342 at June 30, 1996 to
$453,063 at December 31, 1996. The current ratio of 2.7 to 1 at
June 30, 1996 decreased to 2.0 to 1 at December 31, 1996. At
December 31, 1996, current assets increased $252,552, or 38%, and
current liabilities increased $221,831, or 90%, from June 30, 1996.
Current assets increased primarily due to increases in tobacco
inventories of $240,826 and Advances on purchases of tobacco.
Current liabilities increased primarily due to increases in Notes
payable to banks of $145,583 and Advances from customers of
$98,297.
Cash flows used in operating activities decreased $128,997 to
$126,140 for the six months ended December 31, 1996 over the same
period last year, due primarily to increases in Inventories and
Advances from customers and decreases in Accounts payable and
Accrued expenses offset by decreases in Accounts receivable. Cash
flows used in investing activities decreased $3,628 reflecting the
1995 purchase of a subsidiary and advances for other investments
and other assets. Cash flows provided by financing activities
increased $130,045 to $135,109 primarily due to net increased
borrowings.
At December 31, 1996, DIMON had seasonally adjusted lines of credit
of $946,344, excluding the long-term credit agreements. These
lines bear interest at rates ranging from 5.5% to 12.9%. At
December 31, 1996, unused lines of credit amounted to $406,197 net
of $155,093 of letters of credit and guarantees that reduce lines
of credit. Total maximum outstanding short-term borrowings during
the six months ended December 31, 1996 were $547,136.
The Company uses its $240 million Revolving Credit Facility to
reclassify $240 million of its short-term debt. The interest rates
available under the Revolving 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 December 31, 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
Revolving 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 Revolving Credit Facility terminates on March
15, 1998, but may be extended thereafter, year to year, upon
approval of the Lenders. As of December 31, 1996, there were no
borrowings outstanding under the Revolving Credit Facility.
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
December 31, 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 and capital needs for fiscal 1997.
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<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits 10 - Employment Agreement dated January 3, 1997,
with Brian J. Harker
11 - Computation of Earnings Per Common Share
27 - Financial Data Schedule
(b) Reports on Form 8-K - None
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this amendment to be signed on its
behalf by the undersigned thereunto duly authorized.
DIMON INCORPORATED
/s/ Jerry L. Parker
Jerry L. Parker
Vice President - Controller
(Principal Accounting Officer)
Date February 14, 1997
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<PAGE>
EXHIBIT INDEX
-------------------------
Exhibit Page No.
- ------- --------
10 Employment Agreement dated January 3, 1997,
with Brian J. Harker 29-45
11 Computation of Earnings Per Common Share 46
27 Financial Data Schedule 47
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<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), made and
entered into on the _3rd_ of _January_, 1997, to be effective as
of the 1st day of October, 1996, by and between DIMON INCORPORATED, a
Virginia Corporation (the "Company"), and BRIAN J. HARKER (the
"Executive").
R E C I T A L S:
The Company and its affiliates are engaged in two business
segments -- the business of purchasing, processing, storing and selling
leaf tobacco (the "Tobacco Business"), and the business of distributing
fresh cut flowers. The Executive is experienced in, and knowledgeable
concerning, all aspects of the Tobacco Business. The Executive has
heretofore been employed by DIMON International, Inc. ("DIMON
International"), a wholly-owned subsidiary of the Company, as its
Senior Vice President and Director of International Operations pursuant
to the terms of an Employment Agreement by and between the Executive
and DIMON International dated October 18, 1994 and effective as of July
1, 1994 (the "Predecessor Agreement"). The Company desires to employ
the Executive as Executive Vice-President and Chief Financial Officer,
and the Executive desires to be employed by the Company in that
capacity. Furthermore, the Company desires to provide for the
Executive certain disability, death, severance and supplemental
retirement benefits in addition to those provided by the employee
benefit plans of the Company. The Company and the Executive desire to
amend and restate the Predecessor Agreement in order to reflect the
terms of their new understanding and to provide for the Executive's
employment by the Company pursuant to the terms of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations herein and the compensation the Company agrees herein to
pay the Executive, and of other good and valuable consideration, the
receipt of which is hereby acknowledged, the Company and the Executive
agree as follows:
ARTICLE 1. EMPLOYMENT OF EXECUTIVE. Subject to the terms
and conditions set forth in this Agreement, the Company hereby employs
the Executive and the Executive hereby accepts such employment for the
period stated in ARTICLE 3 of this Agreement.
ARTICLE 2. POSITION, RESPONSIBILITIES AND DUTIES.
2.1 Position and Responsibilities. During the Term (as
defined in Section 3.1), the Executive shall serve as Executive
Vice-President and Chief Financial Officer of the Company on the
conditions herein provided. The Executive shall provide such executive
services in the management of the Company's business not inconsistent
with his position and the provisions of Section 2.2 as shall be
assigned to him from time to time by the Board of Directors of the
Company (the "Board") or by such officers of the Company as may be
senior in authority to the Executive.
2.2 Duties. In addition to having the responsibilities
described in Section 2.1, during the Term, the Executive shall also
serve, if elected, as an officer and director of the Company or of any
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<PAGE>
subsidiary or affiliate of the Company. During the Term and except for
illness, reasonable vacation periods, and reasonable leaves of absence,
the Executive shall devote his full business time, attention, skill,
energies and efforts to the faithful performance of his duties
hereunder and to the business and affairs of the Company and any
subsidiary or affiliate of the Company and shall not during the Term be
employed in any other business activity, whether or not such activity
is pursued for gain, profit or other pecuniary advantage; provided,
however, that (i) with the approval of the Board, the Executive may
serve, or continue to serve, on the boards of directors of, and hold
any other offices or positions in, companies or organizations, which,
in the Board's judgment, will not present any conflict of interest with
the Company or any of its subsidiaries or affiliates or divisions, or
materially affect the performance of the Executive's duties pursuant to
this Agreement and (ii) the Executive shall not be prevented from
investing his personal assets in any business which does not compete
with the Company or with any subsidiary or affiliate of the Company,
where the form or manner of such investment will not require
substantial services on the part of the Executive in the operation of
the business in which such investment is made. Notwithstanding the
foregoing, the duties of the Executive (i) shall not be expanded
without the Executive's prior approval and (ii) shall not require him
to relocate his residence from Danville, Virginia, and shall not make
it impractical for him to continue to reside there or cause him to
reside away from there for extended periods of time.
ARTICLE 3. TERM.
3.1 Term of Employment. The term of the Executive's
employment (the "Initial Term") under this Agreement shall commence
effective as of October 1, 1996, and shall continue until the earliest
to occur of the following dates (the "Termination Date"): (i)
September 30, 1999 (except as otherwise provided in this Section 3.1);
(ii) the last day of the Employment Year (as defined in this Section
3.1) in which the Executive attains the age of sixty (60); (iii) the
date of death of the Executive; (iv) the date coinciding with the end
of one hundred eighty (180) days of continuous "Total Disability" of
the Executive (as defined in Section 7.4); (v) the specified date of
termination under the Notice Exception (as defined in Section 3.2);
(vi) the date of termination under the Cause Exception (as defined in
Section 3.3) determined pursuant to Section 3.5; or (vii) the date the
Executive terminates his employment for Good Reason (as defined in
Section 3.4) determined pursuant to Section 3.5. In the event that the
Initial Term shall expire on account of the terminating event described
in subparagraph (i) of this Section 3.1, then, notwithstanding the
provisions of subparagraph (i) of this Section 3.1, the Initial Term
shall be extended automatically, without any further action by the
Company or the Executive, for successive one-year periods (each, an
"Extension Period") following the expiration of the Initial Term (by
reason of the terminating event described in subparagraph (i) of this
Section 3.1) or any succeeding one-year Extension Period (except as
otherwise provided in this Section 3.1). If either party hereto
desires for the Term to expire at the end of the Initial Term or at the
end of any succeeding one-year Extension Period, such party shall give
written notice of such desire to the other party no later than August 1
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<PAGE>
of the Employment Year (as defined in this Section 3.1) in which the
Initial Term will expire or August 1 of any succeeding one-year
Extension Period. All references herein to the term of the Executive's
employment (the "Term") shall refer to the Initial Term and shall
include any Extension Period. Each twelve-month period beginning
October 1 during the Term is referred to herein as an "Employment
Year."
3.2 Termination by Giving Notice. If either party hereto
desires to terminate the Executive's employment prior to the expiration
of the Term, such party shall give not less than sixty (60) days
written notice of such desire to the other party specifying the date of
termination (the "Notice Exception"). Notwithstanding the foregoing,
the Notice Exception shall not be effected by the Company while the
Executive is Totally Disabled as provided in ARTICLE 7.
3.3 Termination for Cause; Automatic Termination. Subject
to the requirements of Section 3.5 of this Agreement, the Company shall
at all times have the right to discharge the Executive for cause. For
purposes of this Agreement, for cause shall be limited to one or more
of the following: (i) habitual intoxication by the Executive while
performing his duties under this Agreement; (ii) theft or embezzlement;
(iii) alcoholism; (iv) drug addiction; (v) conviction of a felony; or
(vi) willful, flagrant, deliberate and repeated infractions of material
published policies and regulations of the Company of which the
Executive has actual knowledge (the "Cause Exception").
Notwithstanding the foregoing, if the Company desires to discharge the
Executive for the reason described in subparagraph (vi) of this Section
3.3 (a "Policy Infraction"), it shall give notice to the Executive as
provided in Section 3.5 and the Executive shall have thirty (30) days
after notice has been given to him in which to cure the Policy
Infraction. If the Policy Infraction is timely cured by the Executive,
the Company's notice shall become null and void. For purposes of this
Agreement, for cause shall not include the Executive's Total Disability
(as defined in Section 7.4).
3.4 Good Reason. Subject to the requirements of Section
3.5 of this Agreement, the Executive may terminate his employment at
any time for Good Reason (as defined in this Section 3.4). If the
Executive desires to terminate his employment for Good Reason, he shall
give notice to the Company as provided in Section 3.5. For purposes of
this Section 3.4, "Good Reason" shall mean any of the following:
(a) The Executive's resignation from the Company's
employment on account of the failure by the Board or any officer of the
Company as may be senior in authority to the Executive to reelect or
reappoint the Executive to a responsible executive position in the
Company and the Executive then elects to leave the Company's employment
within six (6) months of such failure to so reelect or reappoint the
Executive;
(b) The Executive's resignation from the Company's
employment on account of a material modification by the Board or any
officer of the Company as may be senior in authority to the Executive
of the duties, functions and responsibilities of the Executive as
Executive Vice-President and Chief Financial Officer without his
consent within six (6) months of such modification; or
(c) The Executive's resignation from the Company's
employment on account of any material breach of a provision of this
Agreement by the Company, which breach is not cured within thirty (30)
days after notice has been given to the Company by the Executive.
Without limiting the generality of the foregoing sentence, the Company
shall be in material breach of its obligations hereunder if, for
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<PAGE>
example, the Company shall not permit the Executive to exercise such
responsibilities as are consistent with the Executive's position and
are of such a nature as are usually associated with such offices of a
corporation engaged in substantially the same business as the Company,
or the Executive shall at any time be required to report to anyone
other than directly to the Board or any officer of the Company as may
be senior in authority to the Executive, or the Company causes the
Executive to relocate his residence from Danville, Virginia, or makes
it impractical for him to continue to reside there or causes him to
reside away from there for extended periods of time, or the Company
shall fail to make a payment when due to the Executive.
Notwithstanding the foregoing, if the Executive desires to terminate
his employment for Good Reason as defined in this Section 3.4(c), he
shall give notice to the Company as provided in Section 3.5 and the
Company shall have thirty (30) days after notice has been given to it
in which to cure the reason for the Executive's desire to terminate his
employment for Good Reason. If the reason for the Executive's desire
to terminate his employment for Good Reason as defined in this Section
3.4(c) is timely cured by the Company, the Executive's notice shall
become null and void.
3.5 Notice of Termination. Any termination by the Company
under the Cause Exception or by the Executive for Good Reason shall be
communicated by Notice of Termination to the other party hereto. For
purposes of Sections 3.3 and 3.4, a "Notice of Termination" means a
written notice which (i) indicates the specific termination provision
in this Agreement relied upon, (ii) sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and (iii)
sets forth the Termination Date. If the Executive's employment is
terminated by reason of one of the events described in subparagraph
(vi) of Section 3.3 or Section 3.4(c), the Termination Date shall be
not less than thirty (30) days nor more than forty-five (45) days after
the receipt of the Notice of Termination by the Executive or the
Company. If the Executive's employment is terminated by reason of one
of the events described in subparagraphs (i), (ii), (iii), (iv) or (v)
of Section 3.3, Section 3.4(a) or Section 3.4(b), the Termination Date
shall be not more than fifteen (15) days after the receipt of the
Notice of Termination by the Executive or the Company.
3.6 Rights of Executive Upon Termination of Employment.
(a) Following the date the Term expires on account of one of
the terminating events described in subparagraphs (i), (ii), or (vii)
of Section 3.1, or the Company's exercise of the Notice Exception as
provided in subparagraph (v) of Section 3.1, the rights of the
Executive shall be as provided in ARTICLES 4, 5, 6, 9, 10, 12, 13, 14,
15, 16, 18 and 26.
(b) Following the date the Term expires on account of the
Executive's death as provided in subparagraph (iii) of Section 3.1, the
rights of the Executive's personal representative and designated
beneficiary (as determined pursuant to ARTICLE 16) shall be as provided
in ARTICLES 4, 5, 8, 10, 12, 14, 15, 16, 18 and 26.
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<PAGE>
(c) Following the date the Term expires on account of the
Executive's Total Disability as provided in subparagraph (iv) of
Section 3.1, the rights of the Executive shall be as provided in
ARTICLES 4, 5, 7, 9, 10, 12, 13, 14, 15, 16, 18 and 26.
(d) Following the date the Term expires on account of the
Executive's exercise of the Notice Exception as provided in
subparagraph (v) of Section 3.1, or the date the Executive is
terminated for cause as provided in subparagraph (vi) of Section 3.1,
the rights of the Executive shall be as provided in ARTICLES 4, 5, 9,
10, 12, 13, 14, 15, 16, 18 and 26.
ARTICLE 4. COMPENSATION.
4.1 Base Salary. For all services rendered by the Executive
during the Term, including without limitation, services as an
executive, officer, director (except fees and reimbursements to which
all members of the Board, or a subsidiary or affiliate of the Company,
are generally entitled) or member of any committee of the Company or of
any subsidiary, affiliate, or division thereof, the Company shall pay
the Executive as compensation a base annual salary (the "Base Salary"),
payable in appropriate installments to conform with regular payroll
dates for salaried personnel of the Company. Effective as of October
1,1996, the annual rate of the Executive's Base Salary shall be
$250,000 (the "Annual Base Salary Rate"). The Executive's Annual Base
Salary Rate shall be automatically increased on July 1 of each
Employment Year to reflect increases in the cost of living (as
hereinafter described). In no event, however, shall the Executive's
Annual Base Salary Rate under this Agreement ever be less than
$250,000. In addition to any cost of living increase in the
Executive's Annual Base Salary Rate, the Board may, in its sole
discretion, increase the Executive's Annual Base Salary Rate based on
his performance. The amount of any annual automatic cost of living
increase in the Executive's Annual Base Salary Rate shall be determined
by multiplying the most recent Annual Base Salary Rate times a fraction
whose numerator shall be the Consumer Price Index (the "CPI") [All
Urban Consumers, South Region Average (1982-84 = 100); All Items,
Bureau of Labor Statistics of The United States Department of Labor],
for the month of May next preceding the July 1 of the current
Employment Year, and whose denominator shall be the CPI for the month
of May next preceding the July 1 of the Employment Year immediately
prior to the current Employment Year. If the quotient obtained in the
foregoing fraction shall be a number less than one (1), the Annual Base
Salary Rate shall be equal to the Annual Base Salary Rate in effect on
June 30 of the current Employment Year. In the event (i) the CPI
ceases to use the 1982-84 average of 100 as the base of calculation, or
(ii) a substantial change is made in the quality or quantity of the
items utilized in determining the CPI, or (iii) the publishing of the
CPI shall be discontinued for any reason, the United States Department
of Labor shall be requested to furnish a new index comparable to the
CPI, together with the information which will make possible the
conversion of such new index to replace the CPI for the purposes of
computing the Annual Base Salary Rate as provided for herein. If for
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<PAGE>
any reason the United States Department of Labor does not furnish such
an index and information, the parties hereto shall thereafter accept
and use, as determined by the Board, such other index or comparable
statistics to measure the cost of living as shall be computed and
published by (i) an agency of the United States Government, (ii) a
reasonable financial periodical or (iii) a recognized authority
mutually selected by the Company and the Executive.
4.2 Bonus. As of the date of this Agreement, the Company
sponsors for the benefit of its senior executives the DIMON Cash Bonus
Plan (the "Cash Bonus Plan"). In addition to the Base Salary provided
for in Section 4.1 and the Deferred Benefit provided for in Section
6.1, the Executive shall be entitled to such bonus or bonuses, if any,
as may be awarded to the Executive from time to time under the Cash
Bonus Plan (or any successor or replacement bonus plan or arrangement)
(the "Awarded Bonus"). The Awarded Bonus shall be payable in the
manner specified in the Cash Bonus Plan (or the successor or
replacement bonus plan or arrangement, as the case may be).
ARTICLE 5. REIMBURSEMENT OF EXPENSES, OFFICE AND SECRETARIAL
ASSISTANCE. The Company recognizes that the Executive will incur, from
time to time, expenses for the benefit of the Company and in
furtherance of the Company's business, including, but not limited to,
expenses for entertainment, travel and other business expenses
consistent with the Company's past practices. During the Term and any
Compensation Continuance Period (as defined in ARTICLE 12), the
Executive will be reimbursed for his reasonable expenses incurred for
the benefit of the Company in accordance with the general policy of the
Company as adopted from time to time by the Board. To receive such
reimbursement, the Executive must present to the Company an itemized
accounting, in such detail as the Company may reasonably request, of
such expenditures. The Company further agrees to furnish the Executive
during the Term and any Compensation Continuance Period (as defined in
ARTICLE 12) with an office and such secretarial assistance as shall be
suitable to the character of the Executive's position with the Company
and adequate for the performance of his duties hereunder. In the event
of the termination of the Executive's employment for any reason, the
Company shall reimburse the Executive (or in the event of death, his
personal representative) for expenses incurred by the Executive on
behalf of the Company prior to the Termination Date to the extent such
expenses have not been previously reimbursed by the Company.
ARTICLE 6. SPECIAL SUPPLEMENTAL RETIREMENT BENEFIT; SPECIAL
HEALTH CARE BENEFIT.
6.1 Special Supplemental Retirement Benefit. In addition to
the other benefits provided for in this Agreement, upon the expiration
of the Term for any reason that would entitle the Executive to receive
the Severance Benefit (as defined in Section 12.3), the Executive shall
be entitled to receive a special supplemental annual retirement benefit
(the "Deferred Benefit") equal to fifty percent (50%) of his Average
Annualized Base Salary (as defined in this Section 6.1). The Deferred
Benefit shall be payable for six (6) years in approximately equal
monthly installments commencing on the first day of the month next
following the end of the Severance Period (as defined in Section 12.3),
and continuing for seventy-one (71) consecutive calendar months
thereafter. The Deferred Benefit payments shall be paid in accordance
with the payroll schedule for salaried personnel of the Company. For
purposes of this Agreement, the "Average Annualized Base Salary" of the
Executive shall mean the average of his Annualized Base Salary (as
defined in this Section 6.1) for the three (3) most recent consecutive
Employment Years completed under this Agreement as of the Termination
Date. If the Executive has not completed three (3) consecutive
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<PAGE>
Employment Years under this Agreement as of the Termination Date, the
Average Annualized Base Salary shall mean the average of the
Executive's Annualized Base Salary for the number of Employment Years
completed under this Agreement as of the Termination Date. If the
Termination Date occurs in the Executive's first Employment Year, the
Average Annualized Base Salary shall be $250,000. For purposes of this
Agreement, the Executive's "Annualized Base Salary" for an Employment
Year shall be the amount of Base Salary actually received by the
Executive during that Employment Year.
6.2 Special Health Care Benefit. In addition to the other
benefits provided for in this Agreement, upon the expiration of the
Term for any reason that would entitle the Executive to receive the
Severance Benefit (as defined in Section 12.3), the Executive shall be
entitled for the period commencing on the Termination Date and ending
on the earlier of (i) the date of the Executive's death or (ii) the
expiration of the Severance Period (as defined in Section 12.3) (the
"Coverage Period") to participate in any group health plan or program
(whether insured or self-insured, or any combination thereof) provided
by the Company for the benefit of its active employees (the "Company
Plan"). The Company, consistent with sound business practices, shall
use its best efforts to provide the Executive with coverage for the
Executive and his spouse under the Company Plan during the Coverage
Period (and any period thereafter to the extent required by applicable
state and federal law), including, if necessary, amending the
applicable provisions of the Company Plan and negotiating the addition
of any necessary riders to any group health insurance contract. If the
amount of the premium charged for coverage of the Executive and his
spouse under the Company Plan shall exceed the amount of the premium
charged an active employee participating in the Company Plan with
respect to coverage under the Company Plan for the active employee and
his spouse (or, the active employee and his family, in the event the
Company Plan does not offer employee and spouse only coverage) (the
"Maximum Premium Charge"), the amount of the premium charged for
coverage of the Executive and his spouse under the Company Plan in
excess of the Maximum Premium Charge shall be paid by the Company. In
addition, regardless of the Executive's years of service with the
Company as of the Termination Date, the Company shall pay the Maximum
Premium Charge with respect to coverage of the Executive and his spouse
to the extent of the highest premium paid by the Company for other
active employees and their spouses (or families, as the case may be).
The portion of the Maximum Premium Charge not paid by the Company, if
any, shall be paid by the Executive. In the event the Company is
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<PAGE>
unable for whatever reason to provide the Executive with coverage under
the Company Plan, the Company, consistent with sound business
practices, shall use its best efforts to provide the Executive with an
individual policy of health insurance providing coverage for the
Executive and his spouse (the "Individual Policy") during the Coverage
Period. If the amount of the premium charged for the Individual Policy
shall exceed the Maximum Premium Charge, the amount of the premium
charged for the Individual Policy in excess of the Maximum Premium
Charge shall be paid by the Company. In addition, regardless of the
Executive's years of service with the Company as of the Termination
Date, the Company shall pay the Maximum Premium Charge with respect to
the Individual Policy to the extent of the highest premium paid by the
Company for other active employees and their spouses (or families, as
the case may be) under the Company Plan. The portion of the Maximum
Premium Charge with respect to the Individual Policy not paid by the
Company, if any, shall by paid by the Executive. The coverage to be
provided to the Executive pursuant to this ARTICLE 6 (whether under the
Company Plan or the Individual Policy) shall consist of coverage which,
as of the time the coverage is being provided, is identical (or, with
respect to an Individual Policy, substantially identical) to the
coverage provided under the Company Plan to active employees and their
dependents. Notwithstanding the foregoing, the Company shall
coordinate coverage for the Executive under this ARTICLE 6 with any
applicable federal or state government programs (e.g., Medicare or
Medicaid) when the Executive is eligible to begin receiving benefits
under such program. Any premiums required to be paid for coverage of
the Executive under such government programs shall be paid by the
Executive.
ARTICLE 7. DISABILITY BENEFITS.
7.1 Commencement of Total Disability. If the Executive
suffers a "Total Disability" (as defined in Section 7.4), he shall be
deemed totally disabled ("Totally Disabled") for purposes of this
Agreement as of the date such Total Disability commenced.
7.2 Benefits Payable Upon Total Disability. In the event of
the Total Disability of the Executive, the Company shall continue to
pay the Executive his Base Salary during the Disability Period (as
defined in this Section 7.2); provided, however, that if the Term shall
otherwise expire during the Disability Period pursuant to the
provisions of ARTICLE 3, the Company shall cease paying the Executive
his Base Salary under this Section 7.2 as of the Termination Date, and
the remaining provisions of this Agreement shall apply. In the event
that the Executive's Total Disability continues for a period of one
hundred eighty (180) days (measured from the date the Executive became
Totally Disabled), the Term shall automatically expire, as provided in
subparagraph (iv) of Section 3.1, at the end of such one hundred eighty
day period (the "Disability Period"). If the Term shall expire on
account of the Executive's Total Disability, the Company shall pay to
the Executive an annual disability benefit (the "Disability Benefit")
equal to fifty percent (50%) of his Average Annualized Base Salary (as
defined in Section 6.1). The annual disability benefit shall be
payable to the Executive for five (5) years in approximately equal
monthly installments on the first day of each calendar month commencing
with the calendar month next following the month in which the Term
expires on account of the Executive's Total Disability and continuing
for fifty-nine (59) consecutive calendar months thereafter. The
Disability Benefit payments shall be paid in accordance with the
payroll schedule for salaried personnel of the Company.
7.3 Cessation of Disability. Notwithstanding the provisions
of Section 7.2, if prior to the end of the Disability Period, the
Executive's Total Disability shall have ceased under the definition of
Total Disability set forth in Section 7.4 and he shall have commenced
to perform his regular duties hereunder, the following special
provisions shall apply: (i) this Agreement shall continue in full
force and effect (except as otherwise provided in ARTICLE 3); and (ii)
the Executive shall be entitled to resume his employment under this
Agreement and to receive thereafter compensation in accordance with
ARTICLE 4 as though he had not been Totally Disabled; provided,
however, that unless the Executive shall perform his regular duties
hereunder for a continuous period of at least sixty (60) days following
a period of Total Disability before he again becomes Totally Disabled,
he shall not be entitled to start a new Disability Period, but instead
must continue under the remaining portion of the original Disability
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<PAGE>
Period. In this event, the resumption of the original Disability
Period shall commence on the date such Total Disability resumed.
7.4 Definition of Total Disability. For purposes of this
Agreement, "Total Disability" shall mean the permanent and total
inability, by reason of physical or mental infirmity, or both, of the
Executive to perform his regular and customary duties with the Company
in a satisfactory manner. The total and irrevocable loss of the sight
of both eyes, or of the use of both hands, or of both feet, or of one
hand and one foot, or of speech or hearing shall be considered Total
Disability. The determination of the existence or nonexistence of
Total Disability shall be made by the Board, pursuant to a medical
examination by a medical doctor licensed to practice medicine in the
state of Virginia selected or approved by the Board.
ARTICLE 8. DEATH BENEFIT. Upon the expiration of the Term
on account of the Executive's death (as provided in subparagraph (iii)
of Section 3.1), the Company shall pay to the Executive's designated
beneficiary (as determined pursuant to ARTICLE 16) an annual death
benefit (the "Death Benefit") equal to twenty-five percent (25%) of the
Executive's Average Annualized Base Salary (as defined in Section 6.1).
The Death Benefit shall be payable to the Executive's designated
beneficiary for four (4) years in approximately equal monthly
installments on the first day of each calendar month commencing with
the calendar month next following the month in which the Term expires
on account of the Executive's death and continuing for forty-seven (47)
consecutive calendar months thereafter.
ARTICLE 9. DEATH FOLLOWING COMMENCEMENT OF PAYMENTS. Upon
the expiration of the Term under circumstances entitling the Executive
to receive payments pursuant to Section 6.1 or ARTICLES 7 or 12, and if
he shall die prior to receiving any or all of the monthly installments
to which he is due hereunder, then such remaining monthly installments
shall be payable to his designated beneficiary (as determined pursuant
to ARTICLE 16).
ARTICLE 10. OTHER EMPLOYEE BENEFITS. The Executive shall be
entitled to participate in any and all retirement, health, disability,
life insurance, long-term disability insurance, nonqualified deferred
compensation and tax-qualified retirement plans or any other plans or
benefits offered by the Company to its executives generally, if and to
the extent the Executive is eligible to participate in accordance with
the terms and provisions of any such plan or benefit program. Nothing
in this ARTICLE 10 is intended, or shall be construed, to require the
Company to institute any particular plan, program or benefit. Benefits
payable pursuant to this Agreement shall be in addition to benefits
payable to the Executive under all other employee benefit plans or
programs of the Company.
ARTICLE 11. VACATION AND SICK LEAVE. The Executive shall be
entitled to reasonable periods of vacation and sick leave during each
Employment Year, commensurate with his position and in accordance with
established Company policy. The Executive shall continue to receive
his Base Salary during the time of his vacation and sick leave.
Vacation and sick leave not taken during the applicable Employment Year
cannot be accumulated and taken during a subsequent Employment Year nor
will the Executive be paid for vacation and sick leave not taken.
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<PAGE>
ARTICLE 12. TERMINATION COMPENSATION.
12.1 Monthly Compensation. Upon the expiration of the Term
for any reason, the Executive shall be entitled to continue to receive
his Base Salary through the last day of the month in which the
Termination Date occurs (the "Termination Month").
12.2 Compensation Continuance. In addition to the
compensation provided for in Section 12.1, upon the termination of the
Executive's employment by the Company's exercise of the Notice
Exception or by the Executive for Good Reason, the Executive (or in the
event of his subsequent death, his designated beneficiary) shall be
entitled to continue to receive during the remainder of the Term
following the last day of the Termination Month (the "Compensation
Continuance Period"), (i) the Base Salary (as increased each year to
reflect increases in the cost of living) that he would have received
pursuant to Section 4.1 during the Compensation Continuance Period if
the Term had not expired, and (ii) the Awarded Bonus (if any) that he
would have received pursuant to Section 4.2 during the Compensation
Continuance Period if the Term had not expired. In the event of the
Executive's death during the Compensation Continuance Period, such
death shall not be deemed the expiration of the Term for purposes of
determining the end of the Compensation Continuance Period, and the
Executive's designated beneficiary (as determined pursuant to ARTICLE
16) shall be entitled to receive payments under this Section 12.2
during the remainder of the Compensation Continuance Period. During
the Compensation Continuance Period, the Executive shall (i) subject to
the provisions of ARTICLE 6, continue to participate in all employee
benefit plans or programs of the Company (as described in ARTICLE 10),
and (ii) be available at reasonable times to provide consulting
services to the Company.
12.3 Special Severance Benefit. In addition to the
compensation provided for in Sections 12.1 and 12.2, upon the
expiration of the Term on account of the Executive's attainment of age
sixty (60), or upon the termination of the Executive's employment by
the Company's exercise of the Notice Exception, or by the Executive for
Good Reason, or by the Company's giving notice which would cause the
Term to expire at the end of the Initial Term or at the end of any
succeeding Extension Period, the Executive (or in the event of his
subsequent death, his designated beneficiary) shall be entitled to a
special severance benefit (the "Severance Benefit") equal to the sum of
his Annualized Base Salary and Awarded Bonus (if any) for the
Employment Year immediately prior to the Employment Year in which the
Term expires, provided that if the Term expires during the Employment
Year ending September 30, 1997, the Annualized Base Salary for purposes
of determining the Severance Benefit shall include the amount of the
Base Salary the Executive would have received during the Employment
Year had the Term not expired prior to September 30, 1997. The
Severance Benefit shall be payable for one (1) year in approximately
equal monthly installments commencing on the first day of the month
next following the expiration of the Compensation Continuance Period
(or the last day of the Termination Month, as the case may be), and
continuing for eleven (11) consecutive calendar months thereafter (the
"Severance Period"). The Severance Benefit payments shall be paid in
accordance with the payroll schedule for salaried personnel of the
Company.
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<PAGE>
See ARTICLE 6 for additional benefits the Executive may be entitled to
receive following receipt of the compensation provided for in this
ARTICLE 12.
ARTICLE 13. POST-TERMINATION OBLIGATIONS. All payments and
benefits to the Executive under this Agreement shall be subject to the
Executive's compliance with the following provisions during the Term
and following the termination of the Executive's employment:
13.1 Assistance in Litigation. The Executive shall, upon
reasonable notice, furnish such information and assistance to the
Company as may reasonably be required by the Company in connection with
any litigation in which it is, or may become, a party, and which arises
out of facts and circumstances known to the Executive. The Company
shall promptly reimburse the Executive for his out-of-pocket expenses
incurred in connection with the fulfillment of his obligations under
this Section 13.1.
13.2 Confidential Information. The Executive shall not
disclose or reveal to any unauthorized person any trade secret or other
confidential information relating to the Company, its subsidiaries or
affiliates, or to any businesses operated by them, and the Executive
confirms that such information constitutes the exclusive property of
the Company; provided, however, that the foregoing shall not prohibit
the Executive from disclosing such information to the extent necessary
or desirable in connection with obtaining financing for the Company (or
furnishing such information under any agreements, documents or
instruments under which such financing may have been obtained) or
otherwise disclosing such information to third parties or governmental
agencies in furtherance of the interests of the Company; or as may be
required by law.
13.3 Noncompetition. The Executive shall not: (i) during
the Term and for the one-year period following the expiration of the
Term, without the prior written consent of the Company, engage directly
or indirectly, as a licensee, owner, manager, consultant, officer,
employee, director, investor or otherwise, in any business in
competition with the Company, within the state of Virginia; or (ii)
usurp for his own benefit any corporate opportunity under consideration
by the Company during his employment, unless the Company shall have
finally decided not to take advantage of such corporate opportunity.
The restrictions of part (i) of this Section 13.3 shall not apply if
the employment of the Executive is terminated by the Company's exercise
of the Notice Exception or by the Executive for Good Reason, and shall
further not apply to a passive investment by the Executive constituting
ownership of less than five percent (5%) of the equity of any entity
engaged in any business described in part (i) of this Section 13.3.
The Executive acknowledges that the possible restrictions on his
activities which may occur as a result of his performance of his
obligations under this Section 13.3 are required for the reasonable
protection of the Company.
13.4 Failure to Comply. In the event that the Executive
shall fail to comply with any provision of this ARTICLE 13, and such
failure shall continue for ten (10) days following delivery of notice
thereof by the Company to the Executive, all rights hereunder of the
Executive and any person claiming under or through him shall thereupon
terminate and no person shall be entitled thereafter to receive any
payments or benefits hereunder (except for benefits under employee
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<PAGE>
benefit plans or programs as provided in ARTICLE 10 which have been
earned or otherwise fixed or determined to be payable prior to such
termination). In addition to the foregoing, in the event of a breach
or threatened breach by the Executive of the provisions of this ARTICLE
13, the Company shall have and may exercise any and all other rights
and remedies available to the Company at law or otherwise, including
but not limited to obtaining an injunction from a court of competent
jurisdiction enjoining and restraining the Executive from committing
such violation, and the Executive hereby consents to the issuance of
such injunction.
ARTICLE 14. ADDITIONAL PAYMENTS BY COMPANY. In the event
that any amount required to be paid or distributed to the Executive
pursuant to this Agreement shall constitute a parachute payment within
the meaning of Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code"), and the aggregate of such parachute payments and
any other amounts otherwise required to be paid or distributed to the
Executive by the Company shall cause the Executive to be subject to the
excise tax on excess parachute payments under Section 4999 of the Code
(the "Excise Tax"), or any successor or similar provision thereof, the
Company shall pay to the Executive an additional amount (the "Gross-Up
Payment") such that the net amount the Executive shall receive after
the payment of any Excise Tax, shall equal the amount which he would
have received if the Excise Tax had not been imposed. The Gross-Up
Payment shall be the sum of the following:
(a) The rate of the Excise Tax multiplied by the amount of
the excess parachute payments;
(b) Any federal income tax, social security tax,
unemployment tax or Excise Tax imposed upon the Executive as a result
of the Gross-Up Payment required to be made under this ARTICLE 14; and
(c) Any state income or other tax imposed upon the Executive
as a result of the Gross-Up Payment required to be made under this
ARTICLE 14.
For purposes of determining the amount of the Gross-Up
Payment, the Executive shall be deemed to pay federal income taxes at
the highest marginal rate of federal income taxation for individuals in
the calendar year in which the Excise Tax is required to be paid. In
addition, the Executive shall be deemed to pay state income taxes at a
rate determined in accordance with the following formula:
( 1 - (highest marginal rate of federal income taxation for
individuals)) x (highest marginal rate of Virginia income taxes for
individuals in the calendar year in which the Excise Tax is required to
be paid).
In the event the Executive is subject to the provisions of Section 68
of the Code, the combined federal and state income tax rate determined
above shall be adjusted to reflect any loss in the federal deduction
for state income taxes on the Gross-Up Payment.
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<PAGE>
The Gross-Up Payment shall be made not later than the fifth
(5th) day, or as soon thereafter as the Company deems practicable,
following the date the Executive becomes subject to payment of the
Excise Tax; provided, however, that if the amount of such payment
cannot be finally determined on or before such day, the Company shall
pay to the Executive on such day an estimate, as determined in good
faith by the Company, of the minimum amount of such payment and shall
pay the remainder of such payment (together with interest at the rate
provided under Section 1274(b)(2)(B) of the Code) as soon as the amount
can be determined but no later than the thirtieth (30th) day after the
date the Executive becomes subject to the payment of the Excise Tax.
In the event the amount of the estimated payment exceeds the amount
subsequently determined to have been due, such excess shall constitute
a loan by the Company to the Executive, payable on the fifth (5th) day
after demand by the Company (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code).
In the event that the Excise Tax is subsequently determined
to be less than the amount taken into account hereunder at the time the
Gross-Up Payment is made, the Executive shall repay to the Company at
the time that the amount of such reduction in Excise Tax is finally
determined, the portion of the Gross-Up Payment attributable to such
reduction (plus the portion of the Gross-Up Payment attributable to the
Excise Tax, federal and state taxes imposed on the Gross-Up Payment
being repaid by the Executive, if such repayment results in a reduction
in Excise Tax and/or a federal or state tax deduction) plus interest on
the amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at the
time the Gross-Up Payment is made, (including by reason of any payment
the existence or amount of which cannot be determined at the time of
the Gross-Up Payment), the Company shall make an additional Gross-Up
Payment in respect of such excess (plus any interest payable with
respect to such excess) at the time that the amount of such excess is
finally determined.
ARTICLE 15. ATTORNEYS' FEES. In the event that the
Executive incurs any attorneys' fees in protecting or enforcing his
rights under this Agreement or under any employee benefit plans or
programs sponsored by the Company in which the Executive is a
participant, the Company shall reimburse the Executive for such
reasonable attorneys' fees and for any other reasonable expenses
related thereto. Such reimbursement shall be made within thirty (30)
days following final resolution of the dispute or occurrence giving
rise to such fees and expenses.
ARTICLE 16. BENEFICIARY. The Executive shall name one or
more primary beneficiaries and one or more contingent beneficiaries,
who shall be entitled to receive any death benefit payable under
ARTICLE 8 or any benefits payable under ARTICLE 9 due to the
Executive's death following commencement of payments under Section 6.1
or ARTICLES 7 or 12, which beneficiary or beneficiaries shall be
subject to change from time to time by notice in writing to the Board.
A beneficiary may be a trust, an individual or the Executive's estate.
If the Executive fails to designate a beneficiary, primary or
contingent, then and in such event, such benefit shall be paid to the
surviving spouse of the Executive or, if he shall leave no surviving
spouse, then to the Executive's estate. If a named beneficiary
entitled to receive any death benefit is not living or in existence at
the death of the Executive or dies prior to asserting a written claim
for any such death benefit, then and in any such event, such death
benefit shall be paid to the other primary beneficiary or beneficiaries
named by the Executive who shall then be living or in existence, if
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<PAGE>
any, otherwise to the contingent beneficiary or beneficiaries named by
the Executive who shall then be living or in existence, if any; but if
there are no primary or contingent beneficiaries then living or in
existence, such benefit shall be paid to the surviving spouse of the
Executive or, if he shall leave no surviving spouse, then to the
Executive's estate. If a named beneficiary is receiving or is entitled
to receive payments of any such death benefit and dies before receiving
all of the payments due him, any remaining benefits shall be paid to
the other primary beneficiary or beneficiaries named by the Executive
who shall then be living or in existence, if any, otherwise to the
contingent beneficiary or beneficiaries named by the Executive who
shall then be living or in existence, if any; but if there are no
primary or contingent beneficiaries then living or in existence, the
balance shall be paid to the estate of the beneficiary who was last
receiving the payments.
ARTICLE 17. DECISIONS BY COMPANY; FACILITY OF PAYMENT. Any
powers granted to the Board hereunder may be exercised by a committee,
appointed by the Board, and such committee, if appointed, shall have
general responsibility for the administration and interpretation of
this Agreement. Subject to and to the extent not inconsistent with the
provisions of ARTICLE 16, if the Board or the committee shall find that
any person to whom any amount is or was payable hereunder is unable to
care for his affairs because of illness or accident, or is a minor, or
has died, then the Board or the committee, if it so elects, may direct
that any payment due him or his estate (unless a prior claim therefore
has been made by a duly appointed legal representative) or any part
thereof be paid or applied for the benefit of such person or to or for
the benefit of his spouse, children or other dependents, an institution
maintaining or having custody of such person, any other person deemed
by the Board or committee to be a proper recipient on behalf of such
person otherwise entitled to payment, or any of them, in such manner
and proportion as the Board or committee may deem proper. Any such
payment shall be in complete discharge of the liability of the Company
therefor.
ARTICLE 18. INDEMNIFICATION. The Company shall indemnify
the Executive during his employment and thereafter to the maximum
extent permitted by applicable law for any and all liability of the
Executive arising out of, or in connection with, his employment by the
Company or membership on the Board; provided, that in no event shall
such indemnity of the Executive at any time during the period of his
employment by the Company be less than the maximum indemnity provided
by the Company at any time during such period to any other officer or
director under and indemnification insurance policy or the bylaws or
charter of the Company or by agreement.
ARTICLE 19. SOURCE OF PAYMENTS; NO TRUST. The obligations
of the Company to make payments hereunder shall constitute a liability
of the Company to the Executive. Such payments shall be from the
general funds of the Company, and the Company shall not be required to
establish or maintain any special or separate fund, or otherwise to
segregate assets to assure that such payments shall be made, and
neither the Executive nor his designated beneficiary shall have any
interest in any particular asset of the Company by reason of its
obligations hereunder. Nothing contained in this Agreement shall
create or be construed as creating a trust of any kind or any other
fiduciary relationship between the Company and the Executive or any
other person. To the extent that any person acquires a right to
receive payments from the Company hereunder, such right shall be no
greater than the right of an unsecured creditor of the Company.
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<PAGE>
ARTICLE 20. SEVERABILITY. All agreements and covenants
contained herein are severable, and in the event any of them shall be
held to be invalid by any competent court, this Agreement shall be
interpreted as if such invalid agreements or covenants were not
contained herein.
ARTICLE 21. ASSIGNMENT PROHIBITED. This Agreement is
personal to each of the parties hereto, and neither party may assign
nor delegate any of his or its rights or obligations hereunder without
first obtaining the written consent of the other party; provided,
however, that nothing in this ARTICLE 21 shall preclude (i) the
Executive from designating a beneficiary to receive any benefit payable
under this Agreement upon his death or (ii) the executors,
administrators, or other legal representatives of the Executive or his
estate from assigning any rights under this Agreement to the person or
persons entitled thereto.
ARTICLE 22. NO ATTACHMENT. Except as otherwise provided in
this Agreement or required by applicable law, no right to receive
payments under this Agreement shall be subject to anticipation,
commutation, alienation, sale, assignment, encumbrance, charge, pledge
or hypothecation or to execution, attachment, levy, or similar process
or assignment by operation of law, and any attempt, voluntary or
involuntary, to effect any such action shall be null, void and of no
effect.
ARTICLE 23. HEADINGS. The headings of articles, paragraphs
and sections herein are included solely for convenience of reference
and shall not control the meaning or interpretation of any of the
provisions of this Agreement.
ARTICLE 24. GOVERNING LAW. The parties intend that this
Agreement and the performance hereunder and all suits and special
proceedings hereunder shall be construed in accordance with and under
and pursuant to the laws of the State of Virginia and that in any
action, special proceeding or other proceeding that may be brought
arising out of, in connection with, or by reason of this Agreement, the
laws of the State of Virginia shall be applicable and shall govern to
the exclusion of the law of any other forum, without regard to the
jurisdiction in which any action or special proceeding may be
instituted.
ARTICLE 25. BINDING EFFECT. This Agreement shall be binding
upon, and inure to the benefit of, the Executive and his heirs,
executors, administrators and legal representatives and the Company and
its permitted successors and assigns.
ARTICLE 26. MERGER OR CONSOLIDATION. The Company will not
consolidate or merge into or with another corporation, or transfer all
or substantially all of its assets to another corporation (the
"Successor Corporation") unless the Successor Corporation shall assume
this Agreement, and upon such assumption, the Executive and the
Successor Corporation shall become obligated to perform the terms and
conditions of this Agreement.
ARTICLE 27. COUNTERPARTS. This Agreement may be executed
simultaneously in one or more counterparts, each of which shall be
deemed an original but all of which together shall constitute one and
the same instrument.
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<PAGE>
ARTICLE 28. ENTIRE AGREEMENT. This Agreement expresses the
whole and entire agreement between the parties with reference to the
employment of the Executive and, as of the effective date hereof,
supersedes and replaces any prior employment agreement, understanding
or arrangement (whether written or oral) between the Company and the
Executive. Each of the parties hereto has relied on his or its own
judgment in entering into this Agreement.
ARTICLE 29. NOTICES. All notices, requests and other
communications to any party under this Agreement shall be in writing
(including telefacsimile transmission or similar writing) and shall be
given to such party at its address or telefacsimile number set forth
below or such other address or telefacsimile number as such party may
hereafter specify for the purpose by notice to the other party:
(a) If to the Executive:
Brian J. Harker
c/o DIMON Incorporated
512 Bridge Street
P.O. Box 681
Danville, Virginia 24543-0681
(b) If to the Company:
DIMON Incorporated
512 Bridge Street
P.O. Box 681
Danville, Virginia 24543-0681
Fax Number: (804) 791-0180
Each such notice, request or other communication shall be effective (i)
if given by mail, 72 hours after such communication is deposited in the
mails with first class postage prepaid, addressed as aforesaid or (ii)
if given by any other means, when delivered at the address specified in
this ARTICLE 29.
ARTICLE 30. MODIFICATION OF AGREEMENT. No waiver or
modification of this Agreement or of any covenant, condition, or
limitation herein contained shall be valid unless in writing and duly
executed by the party to be charged therewith. No evidence of any
waiver or modification shall be offered or received in evidence at any
proceeding, arbitration, or litigation between the parties hereto
arising out of or affecting this Agreement, or the rights or
obligations of the parties hereunder, unless such waiver or
modification is in writing, duly executed as aforesaid. The parties
further agree that the provisions of this ARTICLE 30 may not be waived
except as herein set forth.
ARTICLE 31. TAXES. To the extent required by applicable
law, the Company shall deduct and withhold all necessary Social
Security taxes and all necessary federal and state withholding taxes
and any other similar sums required by law to be withheld from any
payments made pursuant to the terms of this Agreement.
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<PAGE>
ARTICLE 32. RECITALS. The Recitals to this Agreement are
incorporated herein and shall constitute an integral part of this
Agreement.
ARTICLE 33. EFFECT OF PRIOR AGREEMENTS. This agreement
expresses the whole and entire agreement between the parties with
reference to the employment of the Executive and supersedes and
replaces any prior employment agreement (including, without limitation,
the Predecessor Agreement), understanding or arrangement (whether
written or oral) between the Company and the Executive. Each of the
parties hereto has relied on his or its own judgment in entering into
this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
on the day and year first above written.
EXECUTIVE
/s/ Brian J. Harker
_______________________________(SEAL)
Brian J. Harker
WITNESS:
/s/ Richard D. O'Reilly
DIMON INCORPORATED
By: /s/ Claude B. Owen, Jr.
Chairman and Chief Executive Officer
Attest:
/s/ J. O. Hunnicutt
___________________________________
Secretary/Asst. Secretary
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<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11
DIMON INCORPORATED AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
SIX MONTHS ENDED DECEMBER 31, 1996 AND 1995
1997 1996 1997 1996
Second Second First Six First Six
(in thousands, except per share amounts) Quarter Quarrter Months Months
<S> <C> <C> <C> <C>
Primary
Earnings
Income before extraordinary
Item . . . . . . . . . . . . . . . . . . . . . . .$17,061 $18,438 $32,326 $24,466
Extraordinary item. . . . . . . . . . . . . . . . . . . . - 1,400 - 1,400
Net Income. . . . . . . . . . . . . . . . . . . . . . . .$17,061 $19,838 $32,326 $25,866
Shares
Weighted average number of
common shares outstanding . . . . . . . . . . . . . 42,370 38,230 42,368 38,164
Shares
applicable to stock options,
net of shares assumed to be
purchased from proceeds at
average market price. . . . . . . . . . . . . . . . 280 58 223 67
Average Number of Shares
Outstanding . . . . . . . . . . . . . . . . . . . . 42,650 38,288 42,591 38,231
Earnings per Share
Income before extraordinary
item. . . . . . . . . . . . . . . . . . . . . . . . $.40 $.48 $.76 $.64
Extraordinary item. . . . . . . . . . . . . . . . . . . . .00 .04 .00 .04
Net Income. . . . . . . . . . . . . . . . . . . . . . . . $.40 $.52 $.76 $.68
Assuming Full Dilution Earnings
Income before extraordinary
item. . . . . . . . . . . . . . . . . . . . . . . .$17,061 $18,438 $32,326 $24,466
Extraordinary item. . . . . . . . . . . . . . . . . . . . - 1,400 - 1,400
Net Income. . . . . . . . . . . . . . . . . . . . . . . .$17,061 $19,838 $32,326 $25,866
Add after tax interest expense
applicable to 7 3/4%
Convertible Debentures
issued June 3, 1993 . . . . . . . . . . . . . . . . - 644 - 1,313
Adjusted Net Income . . . . . . . . . . . . . . . . . . .$17,061 $20,482 $32,326 $27,179
Shares
Weighted average number of
common shares outstanding . . . . . . . . . . . . . 42,370 38,230 42,368 38,164
Shares applicable to stock options,
net of shares assumed to be
purchased from proceeds at
ending market price . . . . . . . . . . . . . . . . 446 127 446 127
Assuming conversion of 7 3/4%
Convertible Debentures
at beginning of period. . . . . . . . . . . . . . . - 4,046 - 4,112
Average Number of Shares
Outstanding . . . . . . . . . . . . . . . . . . . . 42,816 42,403 42,814 42,403
Earnings Per Share
Income as adjusted before
extraordinary items . . . . . . . . . . . . . . . . $.40 $.45 $.76 $.61
Extraordinary items . . . . . . . . . . . . . . . . . . . .00 .03 .00 .03
Net Income as Adjusted. . . . . . . . . . . . . . . . . . $.40 $.48 $.76 $.64
- -46-
</TABLE>
<PAGE>
<TABLE> <S> <C>
<CAPTION>
EXHIBIT 27
<S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 54,278
<SECURITIES> 0
<RECEIVABLES> 185,802
<ALLOWANCES> (5,480)
<INVENTORY> 569,981
<CURRENT-ASSETS> 921,327
<PP&E> 338,437
<DEPRECIATION> (107,249)
<TOTAL-ASSETS> 1,265,236
<CURRENT-LIABILITIES> 468,264
<BONDS> 392,095
<COMMON> 137,163
0
0
<OTHER-SE> 197,086
<TOTAL-LIABILITY-AND-EQUITY> 1,265,236
<SALES> 1,182,075
<TOTAL-REVENUES> 1,182,075
<CGS> 1,046,402
<TOTAL-COSTS> 1,046,402
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 697
<INTEREST-EXPENSE> 21,549
<INCOME-PRETAX> 51,576
<INCOME-TAX> 20,115
<INCOME-CONTINUING> 32,326
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,326
<EPS-PRIMARY> .76
<EPS-DILUTED> .76
<PAGE>
</TABLE>
