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Exhibit Index
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended June 30, 1997
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
.
Commission File Number 1-13684
DIMON Incorporated
(Exact name of registrant as specified in its charter)
VIRGINIA 54-1746567
(State or other jurisdiction of incorporation) (IRS Employer
Identification No.)
512 Bridge Street, Danville, Virginia 24541
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(804)792-7511
Securities registered pursuant to Section 12(b) of the Act:
Common Stock (no par value)
Common Stock Purchase Rights
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months, and (2) has been
subject to such filing requirements for the past 90 days.
Yes.....X...... No...........
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of Common Stock held by non-affiliates
of the registrant (based upon the closing sale price quoted by The New
York Stock Exchange) on September 2, 1997, was approximately
$991,209,000. In determining this figure, the registrant has assumed
that all of its directors and officers, and all persons known to it to
beneficially own ten percent or more of its Common Stock, are
affiliates. This assumption shall not be deemed conclusive for any
other purpose.
As of September 2, 1997, there were 44,330,849 shares of Common
Stock outstanding.
Portions of the registrant's definitive Proxy Statement for its
1997 Annual Meeting of Stockholders to be held November 14, 1997, to
be filed with the Securities and Exchange Commission pursuant to
Regulation 14A under the Securities Exchange Act of 1934 (the "Proxy
Statement"), are incorporated by reference into Part III of this Form
10-K.
<PAGE>
PART I
ITEM 1. BUSINESS
--------
DIMON is the second largest independent leaf tobacco merchant in the
world. The Company acquired Intabex Holdings Worldwide S.A.
("Intabex") on April 1, 1997, and is the successor to Dibrell Brothers,
Incorporated ("Dibrell") and Monk-Austin, Inc. ("Monk-Austin") which
merged on April 1, 1995 (the "Merger"). Principally through the
Intabex Acquisition (the "Intabex Acquisition"), the Company increased
its tobacco-related revenues for the twelve months ended June 30,
1997, by 20%, from $1,770 million to $2,126 million and increased its
market share in the established worldwide leaf tobacco market from
approximately 30% to approximately 37% on a pro forma basis. In
addition, DIMON strengthened its presence in several important tobacco
growing regions, including Brazil, Argentina, Malawi, Thailand and
Zimbabwe. The Company's address is 512 Bridge Street, Danville,
Virginia 24541 and its telephone number is (804) 792-7511. See Note N
to the Company's Consolidated Financial Statements for the year ended
June 30, 1997, for detailed information regarding each of the
Company's business segments.
Tobacco
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The Leaf Tobacco Industry
- -------------------------
The world's large multinational cigarette manufacturers, with one
exception, rely on independent leaf tobacco merchants such as the
Company to supply the majority of their leaf tobacco needs. Leaf
tobacco merchants select, purchase, process, store, pack, ship and, in
certain developing markets, provide agronomy expertise and financing
for growing leaf tobacco. At the present time, there are three major
global leaf tobacco merchants, including the Company. These three
merchants source, process and ship leaf tobacco around the world, for
delivery to manufacturers of cigarettes and other tobacco products.
The Company believes that the leaf tobacco industry is characterized
by the following trends:
Growth of American Blend Cigarettes. American blend cigarettes have
gained market share in several major foreign markets, including Asia
(particularly the Pacific Rim), Europe and the Middle East in recent
years. American blend cigarettes contain approximately 50% flue-cured,
35% burley and 15% oriental tobacco, contain less tar and
nicotine and taste milder than locally produced cigarettes containing
dark and semi-oriental tobacco historically consumed in certain parts
of the world. According to the Tobacco Merchants Association ("TMA"),
American blend cigarette consumption (excluding China) has increased
from 1.7 trillion units in calendar 1990 to 1.9 trillion units in
calendar 1996, an increase of 10.8%. The TMA estimates that worldwide
American blend tobacco consumption (excluding China) will increase an
additional 5.5% to more than 2.0 trillion units by the year 2000. The
TMA also estimates that worldwide American blend cigarette consumption
(excluding China), as a percentage of total consumption, has also
experienced substantial growth, increasing from 47.9% in 1990 to 52.5%
in 1996, and is projected to reach 54.3% by the year 2000. As
American blend cigarettes have continued to gain global market share,
the demand for export quality flue-cured, burley and oriental tobacco
sourced and processed by the three independent leaf tobacco merchants,
including the Company, has grown accordingly.
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<PAGE>
Growth in Foreign Operations of Large Cigarette Manufacturers.
Several of the large multinational cigarette manufacturers have
expanded their operations throughout the world, particularly in
Central and Eastern Europe and the former Soviet Union, in order to
increase their access to and penetration of these markets. As
cigarette manufacturers expand their global operations, the Company
believes there will be increased demand for local sources of leaf
tobacco and local tobacco processing and distribution, primarily due
to the semi-perishable nature of unprocessed leaf tobacco and the
existence of domestic content laws in certain countries. The Company
believes that the international expansion of the large multinational
cigarette manufacturers will cause these manufacturers to place
greater reliance on the services of financially strong leaf tobacco
merchants with the ability to source and process tobacco on a global
basis and to help develop higher quality local sources of tobacco.
Growth in Foreign Sourced Tobacco. In an effort to respond to
cigarette manufacturers' increasing demand for lower cost American
blend cigarette ingredients, the major leaf tobacco merchants have
made significant investments in South America, Africa and Asia, the
principal sources of flue-cured and burley tobacco outside the U.S.
This trend is expected to continue in the foreseeable future as the
quality of foreign grown tobacco continues to improve.
Improved Market Conditions. The global leaf tobacco industry has
recovered from a disruption in demand and reduction in pricing during
1993 and 1994. The disruption of the industry in the U.S. during
these years occurred primarily because of (1) the enactment of the
domestic content 75/25 Rule, (2) a poor quality 1993 flue-cured
tobacco crop in the U.S. and (3) the introduction of legislation in
the summer of 1993 to increase significantly the federal excise tax on
cigarettes that resulted in manufacturers' reluctance to build
inventories. Concurrent with the reduction in demand for
international tobacco related to the 75/25 Rule and lower than
expected initial demand for imported tobacco products in Central and
Eastern Europe and the former Soviet Union, the worldwide price of
tobacco declined due to oversupply attributable to record foreign
tobacco crops. This combination of reduced demand and lower prices
had a negative impact on the financial performance of the leaf tobacco
merchants and resulted in significant increases in uncommitted tobacco
inventories among the merchants.
In recent years, the demand and supply imbalance in the worldwide
tobacco market has improved. Leaf tobacco production outside the U.S.
was curtailed in response to the high levels of uncommitted tobacco
inventories. The 75/25 Rule was repealed due to its violation of GATT
and was replaced by a series of less stringent import quotas. This
resulted in cigarette manufacturers in the U.S. resuming their
purchases of tobacco grown outside the U.S. The combination of lower
levels of tobacco production and increased demand had a positive
impact on worldwide tobacco prices, a corresponding positive impact on
the profitability of the industry, and resulted in significant
reductions in uncommitted tobacco inventories.
Business Strategy
- -----------------
The Company's primary business objective is to capitalize on growth in
worldwide consumption of American blend cigarettes by becoming the
low-cost preferred supplier of leaf tobacco to the large multinational
manufacturers of American blend cigarettes. To achieve this
objective, the Company has implemented a strategy to position itself
to meet the needs of its cigarette manufacturing customers throughout
the world by expanding its global operations directly in the major
tobacco exporting countries and by forming strategic partnerships with
its major customers in countries with emerging tobacco production. As
part of its strategy, the Company acquired Intabex on April 1, 1997.
The Company believes the Intabex Acquisition will further enhance the
Company's global tobacco purchasing capabilities, expand and diversify
its customer base and expand its geographic reach. The Company's
ability to respond to the global expansion and changing needs of the
large multinational cigarette manufacturers is a critical factor in
developing and expanding customer relationships. The principal
components of the Company's business strategy are as follows:
- -3-
<PAGE>
Increase the Company's operations in low-cost tobacco growing regions.
To ensure breadth and depth of supply of tobacco, particularly the
tobacco used in American blend cigarettes, the Company has expanded
and plans to continue to expand its operations in South America,
Africa and China, the largest production areas of flue-cured and
burley tobacco outside of the U.S. The April 1, 1997 acquisition of
Intabex and certain assets of Tabex (PVT) Limited in Zimbabwe
substantially expanded the Company's presence in Brazil, Argentina,
Zimbabwe and Malawi, allowing the Company to significantly enhance its
market share in these countries, and established a new presence in
Mozambique, Spain, Sri Lanka, Thailand, Zaire and Zambia. In 1995,
the Company signed an agreement with the China National Tobacco
Corporation to provide additional access to a state-of-the art
processing facility and tobacco sources in the province of Yunnan.
The Company also made acquisitions in 1995 in Bulgaria, Greece and
Turkey, which the Company believes positions DIMON as the largest
worldwide merchant of oriental tobacco. The Company intends to
utilize its agronomy expertise in helping to develop low-cost sources
of American blend quality tobacco and its existing relationships with
the major multinational cigarette manufacturers to gain market share
in these growth regions.
Capitalize on outsourcing trends. The Company anticipates further
outsourcing of leaf tobacco purchasing and processing by cigarette
manufacturers. This outsourcing trend is driven by (1) higher margins
in cigarette production, (2) the increasing sophistication required in
sourcing leaf tobacco on a global basis, and (3) continued
privatization of tobacco and cigarette production operations in other
countries. In 1994, the Company began providing all leaf tobacco
auction buying in the U.S. for R. J. Tobacco Company, Inc. ("RJR"), the
second largest cigarette producer in the U.S. In 1995, the Company
began to purchase and process all of Lorillard Tobacco Company's
("Lorillard") auction market tobacco requirements in the U.S. With the
improved tobacco purchasing capabilities and expanded geographic reach
resulting from the Intabex Acquisition, the Company believes it will
continue to be a major beneficiary of the outsourcing trends in the
tobacco industry.
Improve efficiency and reduce operating costs. The Company realized
substantial operating efficiencies and operating cost reductions
following the Merger and anticipates achieving similar benefits in the
integration of Intabex. In connection with the Merger, the Company
initiated a restructuring plan for its operations. The plan was
designed to eliminate unprofitable locations, consolidate duplicative
processing facilities, reduce the salaried workforce, improve
operating efficiencies and increase regional unit accountability.
This initiative resulted in the recognition of various charges in
fiscal 1996, aggregating $11.8 million, and in fiscal 1995,
aggregating $17.8 million. These initiatives reduced the Company's
annual operating costs and expenses by approximately $25 million in
fiscal 1997. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
In the Intabex Acquisition, the Company acquired facilities in Malawi,
Italy, Germany, Zimbabwe, and the U.S., countries where the Company
already had facilities. By eliminating redundant facilities and
realizing other efficiencies similar to those achieved in the Merger,
the Company anticipates future savings in annual operating costs
relating to the integration in fiscal 1998.
In most major tobacco producing areas, the Company and Intabex had
similar operations, which created opportunities for significant cost
savings. Since the acquisition of Intabex, the Company has completed
the following in connection with its consolidation:
- -4-
<PAGE>
- Integration of the African operations of Intabex, including
personnel reductions and consolidation of administrative
offices;
- Integration of the Latin American operations of Intabex,
including personnel reductions, consolidation of
administrative offices, the sale of the manufacturing assets
of a tobacco processing facility to a third party and the
conversion of that facility into a tobacco storage warehouse;
- Integration of North American operations of Intabex including
the consolidation of the former joint venture partnership
Eastern Carolina Leaf Processors, consolidation of
administrative offices and personnel reductions; and
- Integration of Asian operations, consisting primarily of
personnel reductions and consolidation of some administrative
offices.
Expand operations in new markets. During the last decade, several of
the large multinational cigarette manufacturers have expanded their
global operations, particularly into Central and Eastern Europe and
the former Soviet Union, in order to increase their access to and
penetration of new markets. The Company believes this will increase
demand for local sources of leaf tobacco and local tobacco processing
due to the semi-perishable nature of unprocessed tobacco and the
existence of domestic content laws in certain foreign countries. The
Company believes these factors will cause manufacturers to place
greater reliance on the services of financially strong leaf tobacco
merchants with the ability to source and process tobacco on a global
basis and to help develop higher quality local sources of leaf
tobacco. Intabex's presence in emerging tobacco markets provides new
sources of supply for the Company. Intabex brings new sources of
tobacco in the countries of Mozambique, Spain, Sri Lanka, Thailand,
Zaire and Zambia. In addition, the Company believes Intabex's tobacco
operations in the emerging markets of Africa and Asia will
significantly enhance its strength in these low-cost tobacco growing
regions.
Operations
- ----------
The Company has developed an extensive international network through
which it purchases, processes and sells tobacco. In addition to its
processing facilities in Virginia and North Carolina, the Company owns
or has an interest in processing facilities in Brazil and Zimbabwe,
the two most significant non-U.S. exporters of flue-cured tobacco,
Malawi and Mexico, two of the leading non-U.S. exporters of burley
tobacco, and Greece and Turkey, the leading exporters of oriental
tobacco. The Company also has processing facilities in Italy and
Germany. Intabex owned and operated leaf processing facilities in
Argentina, Sri Lanka and Thailand. The Company and Intabex have
historically contracted with third parties for the processing of
tobacco in certain countries. Including Intabex operations, the
Company contracts with third parties for leaf processing in Canada,
Chile, China, Guatemala, India, Mozambique, Spain, Zaire and Zambia
and certain countries of the former Soviet Union. In addition, the
Company has entered into contracts, joint ventures and other
arrangements for the purchase of tobacco grown in substantially all
countries that produce export-quality, flue-cured and burley tobacco,
including Argentina, Canada, China, India and Tanzania.
Purchasing. Prior to the Intabex acquisition, the Company purchased
tobacco in approximately 26 countries, generally at auction or
directly from growers. The Company now purchases tobacco in an
additional six countries and has expanded its purchasing capabilities
significantly in Brazil, Argentina, Malawi, Thailand and Zimbabwe.
Although the majority of the dollar value of tobacco sold by the
Company is produced domestically, the relative importance of tobacco
grown overseas to the Company's profitability has increased steadily.
During fiscal 1997, approximately 57%
- -5-
<PAGE>
of the dollar value of tobacco purchased by the Company was purchased
in the U.S. Approximately 17%, 9% and 3% of the dollar value of
tobacco purchased by the Company during fiscal 1997 were purchased in
Brazil, Zimbabwe and Malawi, respectively. The balance of the
Company's tobacco purchases during 1997 were made in other tobacco
growing countries, including Argentina, Bulgaria, Canada, China,
Germany, France, Greece, India, Italy, Mexico, Poland, the former
Soviet Union, Tanzania and Turkey. The Company believes it has access
to a diverse supply of tobacco grown in a number of regions throughout
the world and can respond quickly to factors that may cause
fluctuations in the quality, yield or price of tobacco crops grown in
any one region.
Tobacco generally is purchased at auction or directly from growers.
Tobacco grown in the U.S., Canada, Malawi and Zimbabwe is purchased by
the Company principally on auction markets. The Company purchases
domestic tobacco on the flue-cured, burley and air-cured auction
markets in Florida, Georgia, Kentucky, Maryland, North Carolina, South
Carolina, Tennessee and Virginia for shipment to the Company's
facilities in North Carolina and Virginia for processing to customer
specification. The Company usually purchases tobacco at the auction
markets after receiving specific customer orders or indications of
customers' upcoming needs. The Company's network of more than 100
tobacco buyers allows the Company to cover the major auctions of
flue-cured and burley tobacco throughout the world. These buyers are
experts in differentiating hundreds of grades of tobacco based on
customer specifications and preferences that take into account, among
other factors, the texture, visual appearance and aroma of the
tobacco.
In non-auction markets such as Argentina, Brazil, Greece and Turkey,
the Company purchases tobacco directly from farmers or from local
entities that have arranged for purchase from farmers. These direct
purchases are often made by the Company based upon its projection of
the needs of its long-standing customers rather than against specific
purchase orders. The Company's arrangements with farmers vary from
locale to locale depending on the Company's predictions of future
supply and demand, local historical practice and availability of
capital. For example, in Brazil, the Company generally contracts to
purchase a farmer's entire tobacco crop at the market price at the
time of harvest based on the quality of the tobacco delivered.
Pursuant to these purchase contracts, the Company provides farmers
with fertilizer and other materials necessary to grow tobacco and may
extend loans to farmers to finance the crop. Under longer-term
arrangements with farmers, the Company may also finance farmers'
construction of curing barns. In addition, the Company's agronomists
maintain frequent contact with farmers prior to and during the growing
and curing seasons to provide technical assistance to improve the
quality and yield of the crop. In other non-auction markets, such as
Argentina and India, the Company buys tobacco from local entities that
have purchased tobacco from farmers and supervises the processing of
that tobacco by those local entities. The Company believes that its
long-standing relationships with its customers are vital to its
operations outside of the auction markets.
Processing. The Company processes tobacco to meet each customer's
specifications as to quality, yield, chemistry, particle size,
moisture content and other characteristics. The Company processes
purchased tobacco in 30 facilities located throughout the world, nine
of which were acquired in the Intabex Acquisition. Unprocessed
tobacco is a semi-perishable commodity that generally must be
processed within a relatively short period of time to prevent
fermentation or deterioration in quality. Accordingly, the Company
has located its processing facilities in proximity to its principal
sources of tobacco.
Upon arrival at the Company's processing plants, flue-cured and burley
tobacco is first reclassified according to grade. Most of that
tobacco is then blended to meet customer specifications regarding
color, body and chemistry, threshed to remove the stem from the leaf
and further processed to produce strips of tobacco and sieve out small
scrap. The Company also sells a small amount of processed but
unthreshed flue-cured and burley tobacco in loose-leaf and bundle form
to certain of its customers.
- -6-
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Processed flue-cured and burley tobacco is redried to remove excess
moisture so that it can be held in storage by customers or the Company
for long periods of time. After redrying, whole leaves, bundles,
strips or stems are separately packed in cases, bales, cartons or
hogsheads for storage and shipment. Packed flue-cured and burley
tobacco generally is transported in the country of origin by truck or
rail, and exports are moved by ship. Prior to and during processing,
steps are taken to ensure consistent quality of the tobacco, including
the regrading and removal of undesirable leaves, dirt and other
foreign matter. Customer representatives are frequently present at
the Company's facilities to monitor the processing of their particular
orders. Increased consumption of discount and value-priced cigarettes
and competition among leaf merchants have led to improvements in
processing designed to minimize waste and thereby increase yield.
Throughout the processing, Company technicians use laboratory test
equipment for quality control to ensure that the product meets all
customer specifications.
From time to time, the Company processes and stores tobacco acquired
by various stabilization cooperatives under the U.S.'s price support
program. The Company can derive significant revenues from the fees
charged for such services, particularly in years when a substantial
portion of the domestic tobacco crop is acquired by such cooperatives
under the program. While these revenues are not material to the
Company's net sales, they result in additional recovery of fixed cost
which may be significant to gross profit.
Selling. The Company sells its tobacco to manufacturers of cigarettes
and other consumer tobacco products located in about 60 countries
around the world. The Company ships tobacco to international
locations designated by these manufacturers. A majority of the
shipments of tobacco are to factories of these manufacturers that are
located outside the U.S. In certain countries, the Company also uses
sales agents to supplement its selling efforts. Several of these
customers individually account for a significant portion of the
Company sales in a normal year. The loss of any one or more of such
customers could have a materially adverse effect on the tobacco
business of the Company.
The consumer tobacco business in most markets is dominated by a
relatively small number of large multinational cigarette manufacturers
and by government controlled entities. Approximately 41% and 55% of
the Company's consolidated tobacco sales for the years ended June 30,
1997 and 1996, respectively, were contracted to be delivered to 34 (37
in 1996) customers which the Company believes are owned by or under
common control of Philip Morris Companies, Inc. ("Philip Morris") or
RJR (Philip Morris, RJR or Japan tobacco in 1996, with Philip Morris
and RJR accounting for significantly larger portions of the Company's
sales) and each of which contributed in excess of 10% of total tobacco
sales. No other customer accounts for more than 10% of the Company's
sales. See Note N to the Company's Consolidated Financial Statements
for the year ended June 30, 1997. The Company generally has
maintained relationships with its customers for over forty years. In
fiscal 1997, the Company delivered approximately 37% of its tobacco
sales to customers in the U.S., approximately 31% to customers in
Europe and the remainder to customers located in Asia, South America
and elsewhere. The Intabex Acquisition significantly increases the
international presence of the Company.
As of June 30, 1997, the Company's and Intabex's consolidated entities
had tobacco inventories of approximately $583.6 million and
approximately $421.9 million in commitments or indications from
customers for purchases of tobacco. Substantially all of the June 30,
1997, orders are expected to be delivered in fiscal 1998. The level
of purchase commitments for tobacco fluctuates from period to period
and is significant only to the extent it reflects short-term changes
in demand for leaf tobacco. The Company typically makes 80-95% of its
leaf tobacco purchases pursuant to customer orders or supply contracts
or customer indications of anticipated need, with most purchases made
based on indications. Customers are legally bound to purchase tobacco
purchased by the Company pursuant to orders, but no contractual
obligation exists with respect to tobacco purchased in response to
indications. However, the Company has done business with most of its
customers for many years and has never experienced a significant
failure of customers to purchase tobacco for which they have given
indications. Other than the contracts with RJR and Lorillard
described below under " Global Operations United States" and an
agreement between Intabex and Tabacalera S.A. providing that Intabex
will provide a significant portion of Tabacalera's tobacco needs, the
Company has no significant supply agreements with its customers.
- -7-
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The Company typically makes sales based on a customer's letter of
credit, by cash against documents or by payment against invoice.
Virtually all of the Company's sales throughout the world are
denominated in U.S. dollars. While payment for tobacco sold by the
Company is usually received after the tobacco has been processed and
shipped, some customers make advances to the Company periodically
throughout the buying season as tobacco is purchased by the Company
for their accounts. Distribution of processed tobacco is made by
delivery from the Company's storage facilities directly to customers,
by truck or rail to customers' storage or manufacturing facilities or
to port for shipping.
Global Operations
- -----------------
United States. The Company owns and operates four processing
facilities in North Carolina and Virginia. The price of tobacco grown
in the U.S. is supported under a government price support program
which also establishes quotas for production. Consequently, U.S.
- -grown tobacco is typically more expensive than tobacco grown
elsewhere. Although domestic tobacco historically has accounted for
the majority of the Company's sales, the Company expects that, because
of this price differential and its generally increasing business
outside of the U.S., sales of flue-cured and burley tobacco grown in
the U.S. and related services will be less significant than in the
past. The Company believes that any short-term decline in its
domestic business should be offset in the short-term by increased
foreign operations.
In late fiscal 1994, Monk-Austin entered into an agreement with RJR to
purchase all of RJR's U.S. auction market tobacco requirements. In
late fiscal 1995, Dibrell entered into an agreement with Lorillard
pursuant to which the Company will purchase and process all of
Lorillard's domestic auction market tobacco requirements. Generally,
the contracts establish a framework for pricing the Company's services
(which generally is negotiated with respect to crop year, grade of
tobacco leaf or type of service provided based on market prices), do
not provide for minimum purchases and are terminable upon reasonable
notice. The Company expects that purchases under these agreements
will account for a substantial portion of its tobacco purchases in the
U.S. in the future.
Brazil. The Company believes it is one of the two largest independent
leaf tobacco merchants in Brazil. The Company exports the majority of
the tobacco that it processes in Brazil to its customers around the
world. In fiscal 1997, the Company derived approximately 21% of its
tobacco revenue from its Brazilian operations.
In fiscal 1996, the Company merged its two wholly-owned subsidiaries,
Tabra and Dibrell do Brazil to form DIMON do Brazil. DIMON do Brazil
has three modern tobacco processing facilities located in the center
of Brazil's tobacco production area. Brazil represents the Company's
most significant foreign operation in virtually all respects,
including purchasing volume, processing and storage capacities and
operating income potential. Through the Merger and resulting
reduction in duplicative functions and facilities the Company reduced
annual operating costs.
Africa. The Company purchases flue-cured and burley tobacco at
auction for customer orders in Zimbabwe and Malawi. The tobacco is
threshed and packed for export at facilities in each country. The
Company exports the majority of the tobacco it processes in Zimbabwe
and Malawi to its customers around the world. In fiscal 1997, the
Company derived approximately 12% of its revenue from its Zimbabwean
and Malawian tobacco operations.
Intabex's business in Africa allows the Company to significantly
increase market share in the established markets of Zimbabwe and
Malawi. The addition of Intabex's business also creates a significant
presence for the Company in South Africa, Tanzania, Zambia,
Mozambique, and Zaire.
In fiscal 1995, the Company combined the former Dibrell and
Monk-Austin operations in Zimbabwe and Malawi to form two
wholly-owned subsidiaries, DIMON Zimbabwe and DIMON Malawi.
Through DIMON Zimbabwe the Company purchases, processes in two
facilities and exports flue-cured and burley tobacco grown in
Zimbabwe. Through DIMON Malawi the Company purchases, processes
in one facility and exports flue-cured and burley tobacco grown
in Malawi.
- -8-
<PAGE>
Greece and Turkey. The Company believes it is the largest exporter of
processed oriental tobacco in the world. Greece and Turkey are the
most important producers of oriental tobacco. Through its wholly-owned
subsidiaries, DIMON Hellas Tobacco SA, Georges Allamanis Tobacco
International SA and DIMON Turk Tutun AS, the Company buys, exports
and processes, in two facilities in each country, oriental tobacco
grown in each country.
Other Foreign Operations. The Company also has foreign subsidiaries,
joint ventures and affiliates that purchase and sell tobacco grown in
other countries throughout the world. The Intabex Acquisition
provided the Company a significant presence in the established burley
tobacco market in Thailand, a new presence in Spain and, through a
wholly-owned subsidiary, new business as a supplier of premium cigar
and other dark-air cured tobacco to the resurgent cigar industry. In
addition, the Company owns and operates processing facilities in
Italy, Germany and Mexico.
In certain countries, such as China and India, the Company has
processing agreements with other processors to use their facilities
under the supervision of the Company's employees. In several South
American countries where the Company operates, tobacco is bought from
the farmers by the processors at negotiated prices, and it is
necessary to prefinance the crop by making advances of cash or
materials to the farmers prior to and during the growing season.
Competition
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The leaf tobacco industry is highly competitive. Competition among
dealers in leaf tobacco is based on the price charged for products and
services as well as the dealers' ability to meet customer
specifications in the buying, processing and financing of tobacco.
The Company believes that it is well positioned to meet this
competition, particularly in view of its important processing
facilities in the U.S., Brazil and other major tobacco growing
countries. Prior to the Intabex Acquisition, the Company competed
with three major tobacco processors and had significantly less market
share than the world's largest processor. Following the Intabex
Acquisition, the Company's principal competitors are Universal
Corporation ("Universal") and Standard Commercial Corporation and the
Company's market share has increased from approximately 30% to 37% on
a pro forma basis. Of the independent leaf tobacco merchants, the
Company believes that, based on revenues, it ranks second in
established worldwide market share. The Company further believes that
among independent leaf tobacco merchants, it has the largest or second
largest market share in Brazil, Greece, Turkey, the U.S. and Zimbabwe.
Universal's market share in the U.S. is considerably greater than that
of the Company.
Seasonality
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The purchasing and processing activities of the Company's tobacco
business are seasonal. Flue-cured tobacco grown in the U.S. generally
is purchased during the five-month period beginning in July and ending
in November. U.S.-grown burley tobacco is usually purchased from late
November through January or February. Tobacco grown in Brazil usually
is purchased from January through June and delivered from May to
September. Other markets around the world last for similar periods,
although at different times of the year, and as the importance of
these markets has grown the seasonality in the Company's business has
decreased.
Mature tobacco, prior to being processed and packed, is a semi-perishable
commodity. The production cycle for redrying and packing
is relatively short. For example, flue-cured tobacco in the U.S. is
processed, packed and invoiced within the same five-month period (July
through November) that it is purchased. During this period
inventories of unprocessed tobacco, inventories of redried tobacco and
trade accounts receivable normally reach peak levels in succession.
Current liabilities, particularly advances from customers and short-term
notes payable to banks, normally reach their peak in this period
as a means of financing the seasonal expansion of current assets.
Increasing amounts of U.S.-grown burley and foreign tobacco are now
being processed in periods other than July through November, reducing
the seasonal fluctuations in working capital. At June 30, the end of
the Company's fiscal year, the seasonal components of the Company's
working capital reflect primarily the operations related to foreign
grown tobacco.
- -9-
<PAGE>
Flowers
- -------
The Company's fresh-cut flower operations consist of buying flowers
from sources throughout the world and transporting them, normally by
air, to operating units for resale to wholesalers and retailers
through its wholly-owned flowers subsidiary, Florimex. For the fiscal
year ended June 30, 1997, the Company's flower operations produced
approximately 15% of the Company's revenues and at June 30, 1997,
represented approximately 5% of the Company's consolidated assets.
The Company does not view its flowers operations as a core business
and will continue to evaluate its strategic alternatives with respect
to Florimex.
Florimex operates through 67 offices in 19 countries, including
Austria, Canada, Colombia, the Czech Republic, Ecuador, France,
Germany, Italy, Japan, Poland, The Netherlands, Spain, Sweden,
Switzerland, Thailand, the United Kingdom and the U.S. The
activities of certain of these offices are limited to acquiring
flowers in the country of origin, but most are engaged in importation
and distribution. Florimex is also engaged in additional value-added
services through the design and assembly of floral bouquets for sale
to supermarket retailers. Virtually all offices are operated as
corporate profit centers with the general manager receiving a bonus
related to the financial performance of the operation.
Florimex's Dutch exporting operations, Baardse, are headquartered in
Aalsmeer, The Netherlands, inside the premises of the world's largest
flower auction facilities. In addition to the Aalsmeer auction,
Florimex routinely acquires flowers from all principal Dutch flower
auctions. Florimex's Dutch exporting operations sell and ship product
directly to Florimex's fresh-cut flower operations and its
competitors.
Florimex sells to thousands of wholesalers and retailers throughout
Europe, North America and Asia. No customer accounts for a
significant portion of Florimex's sales in a normal year, and the loss
of any one customer or a group of related customers should not have a
material adverse effect on Florimex's business.
Employees
- ---------
The Company's consolidated entities employed about 6,700 persons,
excluding seasonal employees, in its worldwide tobacco operations at
June 30, 1997. In the U.S. tobacco operations the Company's
consolidated entities employed about 900 persons, excluding 1,300
seasonal employees at June 30, 1997. Most seasonal employees are
covered by collective bargaining agreements with several U.S. labor
unions. Most of the full-time employees of the Company are not
covered by collective bargaining agreements. In the non-U.S. tobacco
operations the Company's consolidated entities employed about 5,800
persons, excluding 14,000 seasonal employees at June 30, 1997. The
Company's worldwide consolidated cut flower operation entities employ
about 1,280 persons, excluding seasonal employees. The Company
considers its employee relations to be satisfactory.
- -10-
<PAGE>
Government Regulation and Environmental Compliance
- --------------------------------------------------
In recent years, governmental entities in the U.S. at all levels have
taken or have proposed actions that may have the effect of reducing
consumption of cigarettes. These activities have included: (1) the
U.S. Environmental Protection Agency's decision to classify tobacco
environmental smoke as a "Group A" (known human) carcinogen; (2)
restrictions on the use of tobacco products in public places and
places of employment including a proposal by the U.S. Occupational
Safety and Health Administration to ban smoking in the work place; (3)
proposals by the U.S. Food and Drug Administration to sharply restrict
cigarette advertising and promotion and to regulate nicotine as a
drug; (4) increases in tariffs on imported tobacco; (5) proposals to
increase the U.S. excise tax and state taxes on cigarettes; (6) the
policy of the U.S. government to link certain federal grants to the
enforcement of state laws banning the sale of tobacco products to
minors; and (7) recent filings of lawsuits against cigarette
manufacturers by many U.S. states and others seeking reimbursement of
Medicaid and other expenditures claimed to have been made by such
states to treat diseases allegedly caused by cigarette smoking. In
1993, Congress enacted a law (the 75/25 Rule) requiring that all
domestically manufactured cigarettes contain at least 75% domestically
grown tobacco. Although that law was repealed in 1995 and was
replaced with import quotas designed to assist domestic tobacco
growers, the law had the effect of drastically decreasing demand for
foreign tobacco in the domestic production of cigarettes. It is not
possible to predict the extent to which governmental activities might
affect the Company's business.
On June 20, 1997, representatives of the leading U.S. manufacturers of
consumer tobacco products, several state attorneys general and certain
private plaintiffs jointly announced a proposed settlement of certain
significant lawsuits pending against the manufacturers. The proposed
settlement, which must be enacted into federal law to become
effective, is expected to cost the nation's leading cigarette
manufacturers, all of whom are customers of the Company, approximately
$368 billion in cash outlays over the next 25 years. The cigarette
manufacturers have reached separate settlements with Florida,
Mississippi and Texas that would be pre-empted by a federal
settlement. These individual state settlements require the payment of
approximately $15 billion by the cigarette manufacturers. The
cigarette manufacturers subsequently entered into a separate
settlement of a lawsuit brought by the state of Mississippi and agreed
to settle a lawsuit brought by the state of Florida. Cigarette
manufacturers may attempt to recover a portion of these costs by
demanding price and other concessions from suppliers such as the
Company. Such concessions could materially and adversely affect the
Company's margins and its results of operations.
The proposed federal settlement also would permit federal regulation
of cigarette production and would severely curtail advertising of
tobacco products, banning many of the marketing methods currently
utilized by the cigarette industry. The settlement may therefore
materially adversely impact sales of tobacco in the U.S. and,
possibly, overseas. A substantial risk exists that past growth trends
in tobacco sales may not continue and that existing sales may decline
as a result of the proposed settlement. In addition, in response to
the proposed federal settlement, groups representing tobacco farmers
have proposed certain measures, including measures similar to the
75/25 Rule, that could adversely affect the Company's business.
However, it is not possible to predict whether or in what form the
proposed federal settlement or any additional measures will be
approved by Congress and the President or the extent to which any
settlement or such measures may affect the Company's business.
A number of foreign nations also have taken steps to restrict or
prohibit cigarette advertising and promotion, to increase taxes on
cigarettes and to discourage cigarette smoking. In some cases, such
restrictions are more onerous than those in the U.S. For example,
advertising and promotion of cigarettes has been banned or severely
restricted for a number of years in Australia, Canada, Finland,
France, Italy, Singapore and a number of other countries. It is
impossible to predict the extent to which these and any additional
restrictions might affect the Company's business.
- -11-
<PAGE>
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS, FOREIGN AND
DOMESTIC OPERATIONS AND EXPORT SALES
As discussed in Item 1, the Company operates in two business segments:
the purchasing, processing and selling of leaf tobacco and the
purchasing and selling of cut flowers. Financial information
concerning segments and geographical operations is included in Note N
to the Notes to Consolidated Financial Statements. Information with
respect to the Company's working capital appears in Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources.
ITEM 2. PROPERTIES
----------
Following is a description of the material properties of the Company:
Corporate
- ---------
The Company's corporate headquarters are located in Danville,
Virginia; the tobacco operations are headquartered in Farmville, North
Carolina, and headquarters for flowers operations are in Nuremberg,
Germany.
Tobacco Facilities
- ------------------
The Company operates each of its tobacco processing plants for seven
to nine months during the year to correspond with the applicable
growing season. While the Company believes its processing facilities
are being efficiently utilized, the Company also believes its domestic
processing facilities and certain foreign processing facilities have
the capacity to process additional volumes of tobacco if required by
customer demand.
The following is a listing of the various material properties used in
the tobacco operations:
AREA IN
LOCATION USE SQUARE FEET
- ----------------------------------------------------------------------
UNITED STATES
DANVILLE, VA FACTORY/STORAGE 1,891,000
GREENVILLE, N.C. FACTORY/STORAGE 809,000
FARMVILLE, N.C. FACTORY/STORAGE 1,020,000
KINSTON, N.C. FACTORY/STORAGE 1,068,000
LAKE CITY, S.C. STORAGE 252,000
SOUTH AMERICA
VERA CRUZ, BRAZIL FACTORY/STORAGE 1,043,000
SANTA CRUZ, BRAZIL FACTORY/STORAGE 1,397,000
VENANCIO AIRES, BRAZIL FACTORY(2)/STORAGE 1,336,000
ZACAPA, GUATEMALA STORAGE 15,000
AFRICA
LILONGWE, MALAWI FACTORY 248,000
HARARE, ZIMBABWE FACTORY(2)/STORAGE 1,226,000
EUROPE
KARLSRUHE, GERMANY FACTORY/STORAGE 320,000
KOTHEN, GERMANY FACTORY/STORAGE 731,000
THESSALONIKI, GREECE FACTORY(2)/STORAGE 410,000
SPARANISE, ITALY FACTORY/STORAGE 466,000
IZMIR, TURKEY FACTORY(2)/STORAGE 854,000
ASIA
LAMPHUN, THAILAND FACTORY/STORAGE 301,000
-12-
<PAGE>
Flower Facilities
- -----------------
Florimex has 67 different operating facilities throughout the world.
The owned properties include an international distribution warehouse
in Kelsterbach, Germany (near Frankfurt Airport), with offices and
storages of about 60,000 square feet. In Nuremberg, the headquarters
of Florimex, owned properties include office and storages of about
300,000 square feet. At all Florimex locations there are various
properties, generally located near airports, consisting of owned or
leased offices and storages. The storages at each location include
cooler storages of various sizes to accommodate the needs of
individual locations. The Company's management believes its flower
operation facilities, including office, distribution and warehouse
facilities, are efficiently utilized and are adequate for current and
projected sales levels for the foreseeable future. Baardse, the Dutch
flower exporter, has leased about 110,000 square feet of office and
storage associated with the Aalsmeer auction operation. Aalsmeer has
the largest flower auction facility in The Netherlands. Baardse also
owns greenhouses in Aalsmeer with 125,000 square feet.
All of the above property is owned, except as otherwise indicated, by
the Company, its subsidiaries or investee companies. The Company
believes that the facilities are generally well maintained and in good
operating condition and are suitable and adequate for its purposes at
current and reasonably anticipated future sales levels.
ITEM 3. LEGAL PROCEEDINGS
-----------------
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
None.
-13-
<PAGE>
ADDITIONAL INFORMATION - EXECUTIVE OFFICERS OF THE COMPANY
The names and ages of all executive officers of the Company, as of
June 30, 1997, are set forth below. Executive officers serve at the
pleasure of the Board of Directors and are elected at each annual
organizational meeting of the Board.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------ --------------------------------------------------------
<S> <C> <C>
Claude B. Owen, Jr. 52 Chairman of the Board - Chief Executive Officer of the
Company on October 21, 1994. He also served as Chairman,
Chief Executive Officer and President of Dibrell from
July 1993 until the effective time of the Merger and as
Chairman of the Board and Chief Executive Officer of
Dibrell from February 1990 until July 1993. Mr. Owen
also serves as a director for American National
Bankshares, Inc. and Richfood Holdings, Inc.
Albert C. Monk III 57 President of the Company on October 21, 1994 and
President and Chief Executive Officer of DIMON
International on January 23, 1995. He also served as
Chairman, Chief Executive Officer and President of
Monk-Austin beginning from November 8, 1994 until the
effective time of the Merger, Chief Executive Officer and
President of Monk-Austin since 1992 and President of
Monk-Austin since 1990. Mr. Monk is the first cousin of
Robert T. Monk, Jr., a director of DIMON Incorporated.
Brian J. Harker 47 Executive Vice President and Chief Financial Officer
since October 1, 1996. He also served as Senior Vice
President of DIMON International, Inc. from April 1995 to
October 1996 and as Senior Vice President-Director of
International Operations of Monk-Austin from July 1991 to
April 1995. Prior thereto he served as Vice President of
Monk-Austin.
Richard D. O'Reilly 48 Senior Vice President-Human Resources since May 16, 1995.
From 1989 to 1995, he served as Vice President - Human
Resources at Sweetheart Corporation Company, Chicago,
Illinois.
</TABLE>
-14-
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
-----------------------------------------------------
DIMON Incorporated's common stock is traded on the New York Stock
Exchange, under the ticker symbol "DMN". The Common Stock began
trading on the NYSE on April 3, 1995.
The following table sets forth for the periods indicated the high and
low reported sales prices of the Common Stock as reported by the NYSE
and the amount of dividends declared per share for the periods
indicated.
<TABLE>
<CAPTION>
DIMON
Common Stock
Dividends
High Low Declared
<S> <C> <C> <C>
Fiscal Year 1997
Fourth Quarter . . . . . . . . . . .$26.75 $19.75 $.15
Third Quarter. . . . . . . . . . . . 26.00 21.75 .15
Second Quarter . . . . . . . . . . . 23.25 17.87 .15
First Quarter. . . . . . . . . . . . 19.87 17.87 .135
Fiscal Year 1996
Fourth Quarter . . . . . . . . . . . 19.50 16.12 .135
Third Quarter. . . . . . . . . . . . 20.87 16.00 .135
Second Quarter . . . . . . . . . . . 18.75 13.75 .135
First Quarter. . . . . . . . . . . . 17.62 14.62 .135
</TABLE>
As of June 30, 1997, there were 4,264 shareholders, including
approximately 3,100 beneficial holders of its Common Stock. The
Company pays dividends quarterly.
The Company is subject to certain restrictions on its ability to pay
dividends. See "Managements' Discussion and Analysis of Financial
Condition and Results of Operations -- Restrictions of Dividends."
-15-
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
FIVE-YEAR FINANCIAL STATISTICS
DIMON Incorporated and Subsidiaries
<TABLE>
<CAPTION>
Years Ended June 30
(in thousands, except per share amounts ____________________________________________________________________
and number of stockholers) 1997** 1996 1995 1994 1993
======================================================================================================================
<S> <C> <C> <C> <C> <C>
Summary of Operations
Sales and other operating revenues .$2,513,227 $2,167,473 $1,941,188 $1,464,778 $1,706,294
Cost of sales and expenses . . . . . 2,332,457 2,037,702 1,892,166 1,435,016 1,572,479
Restructuring and merger costs . . . 3,864 15,360 25,955 - _
______________________________________________________________________________
Operating income . . . . . . . . . .$ 176,906 $ 114,411 $ 23,067 $ 29,762 $ 133,815
Interest expense . . . . . . . . . . 53,027 46,924 45,231 35,117 38,128
_________________________________________________________________________________
Income (loss) from continuing
operations before income taxes,
minority interest, equity in
net income (loss) of investee
companies, extraordinary
items and cumulative effect
of accounting changes . . . . . . .$ 123,879 $ 67,487 $ (22,164) $ (5,355) $ 95,687
Income taxes . . . . . . . . . . . . (47,108) (26,995) (5,980) (2,767) (31,173)
Income applicable to minority
interest . . . . . . . . . . . . . 124 292 216 466 486
Equity in net income (loss) of
investee companies . . . . . . . . 860 (274) (1,435) 687 1,404
U.S. taxes provided on
investee companies . . . . . . . . (334) (56) (370) (589) (145)
_________________________________________________________________________________
Income (loss) from continuing
operations before
extraordinary items and
cumulative effect of
accounting changes . . . . . . . .$ 77,173 $ 39,870 $ (30,165) $ (8,490) $ 65,287
Extraordinary items:
Partial recovery on Iraqi
receivable, net of tax. . . . . . . - 1,400 - - -
Cumulative effect of accounting
changes:
Postretirement benefit plans,
net of tax. . . . . . . . . . . . - - - - (9,746)
Income taxes. . . . . . . . . . . . - - - - 8,963
_________________________________________________________________________________
Net Income (Loss). . . . . . . . . .$ 77,173 $ 41,270 $ (30,165) $ (8,490) $ 64,504
Per Share Statistics
Primary:
Income (loss) from continuing
operations before
extraordinary items and
cumulative effect of
accounting changes. . . . . . . . $1.79 $1.00 $ (.79) $(.22) $1.76
Extraordinary items . . . . . . . . - .04 - - -
Cumulative effect of
accounting changes. . . . . . . . - - - - (.02)
Net income (loss) . . . . . . . . . 1.79 1.04 (.79) (.22) 1.74
Fully diluted:
Income from continuing
operations before
extraordinary items and
cumulative effect of
accounting changes. . . . . . . . 1.76 .98 * * 1.65
Extraordinary items . . . . - .03 - - -
Cumulative effect of
accounting changes. . . . . . . . - - - - (.02)
Net income. . . . . . . . . . . . . 1.76 1.01 * * 1.63
Dividends paid . . . . . . . . . . . .585 .54 .535 .495 .42
Stockholders' equity . . . . . . . . 9.21 7.46 6.27 7.57 8.32
Return on average stockholders'
equity . . . . . . . . . . . . . . . 21.32% 14.88% -11.45% -2.85% 24.30%
</TABLE>
-16-
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
FIVE-YEAR FINANCIAL STATISTICS (continued)
DIMON Incorporated and Subsidiaries
<TABLE>
<CAPTION>
Years Ended June 30
(in thousands, except per share amounts _______________________________________________________________________
and number of stockholers) 1997** 1996 1995 1994 1993
=======================================================================================================================
<S> <C> <C> <C> <C> <C>
Balance Sheet Data
Current assets . . . . . . . . . . .$1,371,479 $ 668,775 $ 731,119 $ 685,443 $ 666,454
Current liabilities. . . . . . . . . 671,486 246,433 453,522 467,776 423,854
_________________________________________________________________________________
Working capital. . . . . . . . . . .$ 699,993 $ 422,342 $ 277,597 $ 217,667 $ 242,600
Working capital ratio. . . . . . . . 2.0 to 1 2.7 to 1 1.6 to 1 1.5 to 1 1.6 to 1
Property, plant and
equipment (net) . . . . . . . . . .$ 332,752 $ 236,775 $ 223,049 $ 209,739 $ 189,549
Total assets . . . . . . . . . . . .$1,987,603 $1,020,014 $ 1,093,608 $1,043,816 $ 998,520
Revolving credit notes and
other long-term debt. . . . . . . .$ 702,826 $ 390,871 $ 292,528 $ 188,825 $ 180,270
Convertible Subordinated Debentures $ 123,328 $ - $ 56,370 $ 56,475 $ 56,475
Stockholders' equity . . . . . . . .$ 408,263 $ 315,848 $ 238,806 $ 288,314 $ 308,149
Other Statistics
Weighted average common shares,
primary . . . . . . . . . . . . . . 43,176 39,671 38,100 38,091 37,072
Weighted average common shares,
fully diluted . . . . . . . . . . . 44,482 42,464 42,355 42,297 41,310
Common shares outstanding
at year end . . . . . . . . . . . . 44,312 42,366 38,092 38,069 37,035
Number of stockholders
at year end (1) . . . . . . . . . . 4,357 4,596 4,249 4,940 4,919
Dividends paid . . . . . . . . . . .$ 25,071 $ 21,731 $ 15,570 $ 13,014 $ 9,818
___________________________________________________________________________________________
* Computation of loss per share is anti-dilutive for the years 1995 and 1994.
** See Note B to the consolidated financial statements for a discussion of acquisition.
(1) Includes the number of Stockholders of record and non-objecting beneficial owners.
</TABLE>
-17-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
- -------
The Company believes that it is the world's second largest independent
purchaser and processor of leaf tobacco. Approximately 85%, 82% and
80% of the Company's revenues in fiscal 1997, 1996 and 1995,
respectively, were derived from its tobacco operations. The Company's
tobacco operating profits fluctuate from year to year, primarily due
to changes in worldwide supply and demand and government regulations.
See "Factors that May Affect Future Results Variability of Annual
and Quarterly Financial Results."
On April 1, 1997, the Company acquired all the outstanding capital
stock of Intabex. The acquisition of Intabex has been accounted for
under the purchase method of accounting and, accordingly, no
restatement has been made to the Company's historical financial
information. The financial information of the Company will
prospectively include that of Intabex for periods beginning after
March 31, 1997.
On April 1, 1995, Dibrell and Monk-Austin merged into DIMON. The
Merger has been accounted for as a pooling of interests and all
consolidated financial statements have been restated to include the
historical results of operations of both Dibrell and Monk-Austin
including the effects of conforming the accounting policies of the two
former entities. Recorded assets and liabilities have been carried
forward at their historical book values.
The Company's tobacco business is generally conducted in U.S. dollars,
as is the business of the industry as a whole. Accordingly, there is
minimal currency risk related to the sale of tobacco. However, local
country operating costs, including the purchasing and processing costs
for tobacco, are subject to the effects of exchange fluctuations of
the local currency against the U.S. dollar. The Company attempts to
minimize such currency risks by matching the timing of its working
capital borrowing needs against the tobacco purchasing and processing
funds requirements in the individual countries of tobacco origin.
Fluctuations in the value of foreign currencies can significantly
affect the Company's operating results. See "Factors that May Affect
Future Results International Business Risks" and Note O to the
Company's Consolidated Financial Statements for the year ended June
30, 1997.
The remainder of the Company's revenues are derived from purchasing
and selling fresh-cut flowers. Florimex has two principal operations,
importing, exporting and wholesaling fresh-cut flowers, and exporting
fresh-cut flowers purchased primarily from the major flower auctions
in The Netherlands. Approximately 15%, 18% and 20% of the Company's
revenues in fiscal 1997, 1996 and 1995, respectively, were derived
from its flower operations.
In fiscal 1995, the Company initiated a restructuring plan including
both the tobacco and flower businesses. The plan was designed to
eliminate unprofitable locations, consolidate duplicative processing
facilities, reduce the salaried workforce, improve operating
efficiencies and increase regional unit accountability. This
initiative has continued through 1997 and has resulted in the
recognition of various charges. Those charges totaled $2.7 million,
net of tax, in 1997, $11.8 million, net of tax, in 1996 and $17.8
million, net of tax, in 1995.
- -18-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Results of Operations
The following table expresses items in the Statement of Consolidated
Income as a percentage of sales for each of the three most recent
years. Any reference in the table and the following discussion to any
given year is a reference to the Company's fiscal year ended June 30.
<TABLE>
<CAPTION>
Years Ended
_____________________________
1997 1996 1995
================================================================================
<S> <C> <C> <C>
Sales and other operating revenues. . . . . . . . 100.0% 100.0% 100.0%
Cost of goods and services and expenses . . . . . 87.4 87.9 90.6
Selling, administrative and general expenses. . . 5.5 6.1 6.9
Restructuring and merger related costs. . . . . . 0.1 0.7 1.3
______________________________
Operating income. . . . . . . . . . . . . . . . . 7.0 5.3 1.2
Interest expense. . . . . . . . . . . . . . . . . (2.1) (2.2) (2.4)
______________________________
Income (loss) before income taxes, minority
interest, equity in net loss of
investee companies . . . . . . . . . . . . 4.9 3.1 (1.2)
Income taxes. . . . . . . . . . . . . . . . . . . 1.8 1.2 0.3
Equity in net loss of investee companies. . . . . - - (0.1)
_____________________________
Net income (loss) . . . . . . . . . . . . . . . . 3.1 1.9 (1.6)
=============================
</TABLE>
-19-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Comparison of the Year Ended June 30, 1997 to the Year Ended
June 30, 1996
The Company's sales and other operating revenues were $2.513 billion,
an increase of 16.0% from $2.167 billion in 1996. Sales from tobacco
operations increased 20.1%, from $1.770 billion in 1996 to $2.126
billion in 1997, primarily due to higher prices on tobaccos sold from
North America, South America and Africa, higher volumes in North
America and Asia and additional sales from the subsidiaries of Intabex
Holdings Worldwide S.A. (Intabex) which was acquired April 1, 1997,
partially offset by lower quantities sold from South America. Higher
prices accounted for $13.8 million in North America, $53.6 million in
South America and $65.7 million in Africa of the increase in sales.
Higher quantities accounted for $33.9 million in North America and
$36.6 million in Asia of the increase in sales. Lower quantities in
South America resulted in a decrease in sales of $67.7 million due to
the higher quantities in the fourth quarter of 1996. The acquisition
of Intabex resulted in a $188.1 million increase in sales.
Sales and other operating revenues for the Company's flower operations
decreased 2.5% from $397.3 million in 1996 to $387.5 million in 1997,
primarily due to unfavorable changes in exchange rates of European
currencies against the U.S. dollar.
Cost of sales and expenses of the Company's tobacco operations before
restructuring and merger related costs increased 18.9% in 1997 from
1996 due primarily to the increase in sales. Operating margin
(operating income) as a percentage of sales increased from 7.8% in
1996 to 8.7% in 1997. Significant increases in margins in South
America were due to efficiencies from restructuring, offset by lower
margins in North America caused by natural disasters which negatively
impacted the 1996 crop.
Operating margin for the Company's flower operations before
restructuring costs increased to 2.7% in 1997 from 2.0% in 1996 due to
exchange rate impacts on costs, the effects of discontinuing lower
margin operations and revised credit policies.
Corporate expenses before restructuring costs decreased $2.3 million
or 14.4% to $13.6 million in 1997 from $15.9 million in 1996, due
primarily to decreases in personnel costs and legal and professional
expenses in 1997 partially offset by increased amortization expense
resulting from goodwill resulting from the acquisition of Intabex.
Restructuring charges in 1997 were $3.9 million for the tobacco
division, primarily due to employee separations. Restructuring
charges in 1996 consisted of $11.5 million for tobacco operations,
$4.4 million for corporate and a $.5 million recovery for flower
operations. 1996 net charges consisted of $15.7 million for employee
separations, a credit of $1.2 million for facility sales and closures
and $.9 million for asset writedowns and other items.
Interest expense increased $6.1 million in 1997 primarily due to
higher average borrowings in financing the acquisition of Intabex,
offset by lower interest rates.
The effective tax rate for 1997 was 38% compared to 40% in 1996. This
decrease is due to the overall blend of the income between taxing
jurisdictions.
The $.9 million increase in equity in net income of investee companies
is primarily due to African investees owned by the newly acquired
subsidiary, Intabex.
- -20-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Comparison of the Year Ended June 30, 1996 to the Year Ended
June 30, 1995
The Company's sales and other operating revenues in 1996 were $2.167
billion, an increase of 11.7% from $1.941 billion in 1995. Sales from
tobacco operations increased 13.8%, from $1.555 billion in 1995 to
$1.770 billion in 1996, primarily due to higher prices on tobacco from
South America and increased quantities sold primarily from Europe and
Africa. The sales from South America increased in the fourth quarter
in 1996 compared to 1995 as demand improved. See "Factors that May
Affect Future Results." The higher tobacco prices from South America
accounted for $102.0 million and increased quantities sold from Europe
and Africa accounted for $85.5 million and $29.4 million,
respectively. The increased sales of tobacco from Europe resulted
from the operations acquired in Greece, Italy and Turkey.
Sales and other operating revenues of flowers increased 2.9%, from
$385.9 million in 1995 to $397.3 million in 1996. The increase in the
Company's sales of flowers was primarily due to the increased export
sales from The Netherlands.
Cost of sales and expenses of the Company's tobacco operations before
restructuring and merger related costs increased 9.2% in 1996 from
1995 due primarily to the 13.8% increase in net sales. The world
oversupply of tobacco, which began in 1993, started to improve in 1995
and further improved in 1996 which, along with early consolidation -
related cost savings, generated the improvement in the tobacco
operating margin (operating income). As a percent of net sales,
operating income, excluding restructuring costs, increased to 7.8% in
1996 compared to 3.9% in 1995.
Cost of sales and expenses of the flower operations before
restructuring costs increased by 0.8% in 1996 from 1995, primarily
due to the sales increase of 2.9%, offset partially by implementing
cost-cutting measures, revising credit policies which decreased bad
debts and the closing of unprofitable operations in 1995. The flower
operating income (loss), excluding restructuring costs, increased from
a (0.1%) loss as a percent of net sales in 1995 to a positive 2.0% of
net sales in 1996, primarily due to increased gross margins of the
export operations in The Netherlands and by decreased costs mentioned
above.
Corporate expenses before restructuring costs increased $4.6 million,
or 40.7%, to $15.9 million in 1996 from $11.3 million in 1995, due
primarily to increased personnel costs and bonuses and legal and
professional expenses in 1996. Some of the increased costs for
personnel relate to reassigning departments to corporate that were
previously in the tobacco operations.
Restructuring charges in 1996 for the tobacco operations and corporate
amounted to $11.5 million and $4.4 million, respectively. The flower
operations had a $.5 million recovery of restructuring costs. The net
charges are comprised of $15.7 million for employee separations, a
credit of $1.2 million for facility sales and closures and $.9 million
for asset writedowns and other items.
Interest expense increased $1.7 million in 1996, primarily due to
higher borrowings because of increased average tobacco purchases and,
to a lesser extent, higher average interest rates.
The effective tax rate for 1996 was 40%. In 1995, the Company had tax
expense in spite of the overall pre-tax loss due to the effects of
foreign tax rates, the mix of income and losses of subsidiaries, the
currency effect in Brazil and non-deductible merger expenses.
The $1.5 million decrease in equity in net loss of investee companies
in 1996 was due primarily to the sale of the investee in Brazil which
had a loss in 1995.
- -21-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Liquidity and Capital Resources
The following table is a summary of items from the Consolidated
Balance Sheet and the Statement of Consolidated Cash Flows.
<TABLE>
<CAPTION>
Years Ended June 30
__________________________________
(in thousands, except for current ratio) 1997 1996 1995
=============================================================================
<S> <C> <C> <C>
Cash and cash equivalents. . . . . . . . . $ 107,131 $ 53,820 $ 42,326
Net trade receivables. . . . . . . . . . . 396,156 190,898 182,750
Inventories and advances on
purchases of tobacco . . . . . . . . . . 835,626 408,210 468,989
Total current assets . . . . . . . . . . . 1,371,479 668,775 731,119
Notes payable to banks . . . . . . . . . . 350,263 - 233,736
Accounts payable . . . . . . . . . . . . . 143,927 104,506 90,446
Total current liabilities. . . . . . . . . 671,486 246,433 453,522
Current ratio. . . . . . . . . . . . . . . 2.0 to 1 2.7 to 1 1.6 to 1
Revolving Credit Notes and Other
Long-term Debt . . . . . . . . . . . . . 577,826 265,871 292,528
Convertible Subordinated Debentures. . . . 123,328 - 56,370
Senior Notes . . . . . . . . . . . . . . . 125,000 125,000 -
Stockholders' equity . . . . . . . . . . . 408,263 315,848 238,806
Purchase of property and equipment . . . . 60,860 41,266 35,892
Acquisition of subsidiary,
net of cash acquired . . . . . . . . . . 6,382 (6,543) (13,693)
Proceeds from sale of property
and equipment. . . . . . . . . . . . . . 8,853 8,605 4,877
Depreciation and amortization. . . . . . . 37,191 33,780 31,852
___________________________________
</TABLE>
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 less than at
year end. The Company historically has needed capital in excess of
cash flow from operations to finance inventory and accounts receivable
and, more recently, to finance acquisitions of foreign tobacco
operations and flower operations. The Company also prefinances
tobacco crops in certain foreign countries by making cash advances to
farmers prior to and during the growing season.
The Company's working capital increased from $422.3 million at June
30, 1996 to $700 million at June 30, 1997. The Company's current
ratio was 2.0 to 1 and 2.7 to 1 at June 30, 1997, and June 30, 1996,
respectively. At June 30, 1997, current assets had increased $702.7
million and current liabilities had increased $425.1 million from June
30, 1996. The $702.7 million increase in current assets is primarily
due to the $632.7 million increase in receivables, inventories and
advances on purchases of tobacco. The $425.1 million increase in
current liabilities is primarily due to the $350.3 million increase in
notes payable to banks. The increase in receivables, inventories and
advances on purchases of tobacco are primarily due to the acquisition
of Intabex in 1997. The increase in cash and cash equivalents is
primarily related to the financing activities and the proceeds from
long-term debt.
-22-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Cash flows from operating activities decreased to $25.3 million in
1997 as compared to $179.8 million in 1996 and $6.8 million in 1995,
primarily due to fluctuations in current assets and liabilities. Cash
flows used by investing activities increased $27.9 million, or 183.5%,
to $43.1 million in 1997 as compared to 1996, primarily due to the
purchase of Intabex. Cash flows provided by financing activities
increased $224.1 million in 1997 from 1996 with increased borrowings
to primarily finance increased current assets, whereas in 1996 cash
was used by financing activities as the Company applied $153 million
primarily to reduce debt. Also, see the discussion of refinancing
activities below.
At June 30, 1997, the Company had seasonally adjusted lines of credit
of $1.8 billion, including $1.1 billion uncommitted, unsecured working
capital lines with several banks and $230 million in secured credit
lines of the former Intabex companies, but excluding the long-term
credit agreements of Intabex. At June 30, 1997, the Company had
borrowed $850 million under its $1.8 billion lines of credit with
interest rates ranging from 1.7% to 13.7%. At June 30, 1997, the
unused short-term lines of credit amounted to $790 million, net of
$144 million of letters of credit and guarantees that reduce lines of
credit. Total maximum outstanding short-term borrowings during the
year ended June 30, 1997, were $1.0 billion.
To ensure long-term liquidity, the Company entered into a $500 million
revolving credit facility (the "New Credit Facility") effective June
27, 1997, with a syndicate of banks. The New Credit Facility replaced
the Company's $240 million revolving credit facility (the "Former
Credit Facility"). The Company used the Former Credit Facility to
reclassify $240 million of short-term debt to long-term debt and did
not borrow under it. The Company similarly uses the New Credit
Facility to reclassify $500 million of its short-term debt. The
interest rates available under the New Credit Facility depend on the
type of advance selected and are based either on the agent bank's base
lending rate (which was 8.5% at June 30, 1997, and is adjusted with
changes in interest rates generally) or LIBOR plus 0.70% through
September 30, 1997, and thereafter plus a spread of 0.40% to 1.00%
based on the ratings assigned to the Company's outstanding senior
debt. The New Credit Facility is subject to certain commitment fees
and covenants that among other things require the Company to maintain
minimum working capital and tangible net worth amounts, require
specific liquidity and long-term solvency ratios and restrict
acquisitions. The New Credit Facility terminates on June 27, 2000,
but may be extended thereafter, year to year, upon approval of the
Lenders. As of June 30, 1997, there were no borrowings outstanding
under the New 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 June 30,
1997, the Company had no material capital expenditure commitments.
The Company believes that these sources of funds combined with the
Senior Notes are sufficient to fund the Company's purchasing needs for
1998.
The Company's off balance sheet financing is not material. Certain
operating leases were acquired with the acquisition of, or have been
added by, several foreign tobacco processing facilities and the flower
subsidiaries. However, most operating assets are of long-term and
continuing benefit and the Company has generally purchased these
assets.
Tax and Repatriation Matters
- ----------------------------
The Company and its subsidiaries are subject to income tax laws in
each of the countries in which it does business through wholly-owned
subsidiaries and through affiliates. The Company makes a
comprehensive review of the income tax requirements of each of its
operations, files appropriate returns and makes appropriate income tax
planning analyses directed toward the minimization of its income tax
obligations in these countries. Appropriate income tax provisions are
determined on an individual subsidiary level and at the corporate
level on both an interim and annual basis. These processes are
followed using an appropriate combination of internal staff at both
the subsidiary and
- -23-<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Tax and Repatriation Matters (continued)
- ----------------------------
corporate levels as well as independent outside advisors in review of
the various tax laws and in compliance reporting for the various
operations.
Dividend distributions are regularly made from certain subsidiaries
while the undistributed earnings of certain other foreign subsidiaries
are not subject to additional foreign income taxes nor considered to
be subject to U.S. income taxes unless remitted as dividends. The
Company intends to reinvest such undistributed earnings of certain
foreign subsidiaries indefinitely; accordingly, no provision has been
made for U.S. taxes on those earnings. The Company regularly reviews
the status of the accumulated earnings of each of its U.S. and foreign
subsidiaries and reevaluates the aforementioned dividend policy as
part of its overall financing plans.
Accounting Matters
- ------------------
In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings per Share" which simplifies the earnings per share (EPS)
computation and replaces the presentation of primary EPS with a
presentation of basic EPS. This statement also requires dual
presentation of basic and diluted EPS on the face of the income
statement for entities with a complex capital structure and requires a
reconciliation of the numerator and denominator used for the basic and
diluted EPS computation. This statement will be effective for the
Company's March 31, 1998, interim statements and will require the
restatement of all prior-period earnings per share data presented.
The Company has studied the implications of the statement, and based
on its initial evaluation, does not expect it to have a material
impact on the Company's financial condition or results of operations
upon adoption.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income" which establishes standards for reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. This statement will be effective for
the Company's March 31, 1998, interim statements and will require the
restatement of all prior-periods presented. The Company has studied
the implications of the statement, and based on its initial
evaluation, does not expect it to have a material impact on the
Company's financial condition or results of operations upon adoption.
In June 1997, the FASB issued SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information" which requires that
public business enterprises report certain information about operating
segments in complete sets of financial statements of the enterprise
and in condensed financial statements of interim periods issued to
shareholders. It also requires that public business enterprises
report certain information about their products and services, the
geographic areas in which they operate and their major customers.
This statement is effective for the Company's June 30, 1998, year end
financial statements. The Company has studied the implications of the
statement, and based on its initial evaluation, does not expect it to
have a material impact on the Company's financial condition or results
of operations upon adoption.
Factors that May Affect Future Results
- --------------------------------------
The foregoing discussion contains certain forward-looking statements,
generally identified by phrases such as "the Company expects" or words
of similar effect. The following important factors, among other
things, in some cases have affected, and in the future could affect,
the Company's actual results and could cause the Company's actual
results for 1998 and beyond, to differ materially from those expressed
in any forward-looking statements made by, or on behalf of, the
Company.
-24-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Variability of Annual and Quarterly Financial Results
The comparability of the Company's financial results, particularly the
quarterly financial results, may be significantly affected by
fluctuations in tobacco growing seasons and customer instructions with
regard to the sales of processed tobacco. The cultivation period for
tobacco is dependent upon a number of factors, including the weather
and other natural events, such as hurricanes or tropical storms, and
the Company's processing schedule can be significantly altered by
variations in harvesting periods.
Further, it is not possible to predict with precision the timing of
orders or sales, and the Company may from time to time in the ordinary
course of business keep a significant amount of processed tobacco in
inventory for its customers to accommodate their inventory management
and other needs. Sales recognition by the Company and its
subsidiaries is based on the passage of ownership, usually with
shipment of product. Since individual shipments may represent
significant amounts of revenue, the Company's quarterly and annual
financial results may vary significantly depending on its customers'
needs and shipping instructions. In particular, because most
deliveries of Brazilian tobacco are made at the end of the fourth
fiscal quarter of each year or the beginning of the first quarter of
the following year, significant amounts of sales and operating profits
may shift from fiscal year to fiscal year. See Item 1, "Business --
Tobacco -- Seasonality" and "Business -- Flowers -- Seasonality."
Governmental Intervention and the Proposed Settlement of Tobacco
Litigation
In recent years, governmental entities in the U.S. at all levels have
taken or have proposed actions that may have the effect of reducing
consumption of cigarettes. These activities have included: (1) the
U.S. Environmental Protection Agency's decision to classify tobacco
environmental smoke as a "Group A" (known human) carcinogen; (2)
restrictions on the use of tobacco products in public places and
places of employment including a proposal by the U.S. Occupational
Safety and Health Administration to ban smoking in the work place; (3)
proposals by the U.S. Food and Drug Administration to sharply restrict
cigarette advertising and promotion and to regulate nicotine as a
drug; (4) increases in tariffs on imported tobacco; (5) proposals to
increase the U.S. excise tax and state taxes on cigarettes; (6) the
policy of the U.S. government to link certain federal grants to the
enforcement of state laws banning the sale of tobacco products to
minors; and (7) recent filings of lawsuits against cigarette
manufacturers by many U.S. states and others seeking reimbursement of
Medicaid and other expenditures claimed to have been made by such
states to treat diseases allegedly caused by cigarette smoking. In
1993, Congress enacted a law (the 75/25 Rule) requiring that all
domestically manufactured cigarettes contain at least 75% domestically
grown tobacco. Although that law was repealed in 1995 and was
replaced with import quotas designed to assist domestic tobacco
growers, the law had the effect of drastically decreasing demand for
foreign tobacco in the domestic production of cigarettes. It is not
possible to predict the extent to which governmental activities might
affect the Company's business.
On June 20, 1997, representatives of the leading U.S. manufacturers of
consumer tobacco products, several state attorneys general and certain
private plaintiffs jointly announced a proposed settlement of certain
significant lawsuits pending against the manufacturers. The proposed
settlement, which must be enacted into federal law to become
effective, is expected to cost the nation's leading cigarette
manufacturers, all of whom are customers of the Company, approximately
$368 billion in cash outlays over the next 25 years. The cigarette
manufacturers have reached separate settlements with Florida,
Mississippi and Texas that would be pre-empted by a federal
settlement. These individual state settlements require the payment of
approximately $15 billion by the cigarette manufacturers. Cigarette
manufacturers may attempt to recover a portion of these costs by
demanding price and other concessions from suppliers such as the
Company. Such concessions could materially and adversely affect the
Company's margins and its results of operations.
-25-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
The proposed federal settlement also would permit federal regulation
of cigarette production and would severely curtail advertising of
tobacco products, banning many of the marketing methods currently
utilized by the cigarette industry. The separate Florida settlement
would provide for similar marketing restrictions within that state.
The settlements may therefore materially adversely impact sales of
tobacco in the U.S. and, possibly, overseas. Certain customers have
expressed their uncertainty regarding the impact of the proposed
federal settlement and a substantial risk exists that past growth
trends in tobacco sales may not continue and that existing sales may
decline as a result of the proposed settlements. In addition, in
response to the proposed settlement, groups representing tobacco
farmers have proposed certain measures, including measures similar to
the 75/25 Rule, that could adversely affect the Company's business.
However, it is not possible to predict whether or in what form the
proposed federal settlement or any additional measures will be
approved by Congress and the President or the extent to which any
settlement or such measures may affect the Company's business.
A number of foreign countries have also taken steps to restrict or
prohibit cigarette advertising and promotion, to increase taxes on
cigarettes and to discourage cigarette smoking. In some cases, such
restrictions are more onerous than those in the U.S. For example,
advertising and promotion of cigarettes has been banned or severely
restricted for a number of years in Australia, Canada, Finland,
France, Italy, Singapore and a number of other countries. It is
impossible to predict the extent to which restrictions on advertising
might affect the Company's business.
Smoking and Health Issues
Reports and speculation with respect to the alleged harmful physical
effects of cigarette smoking have been publicized for many years and,
together with restrictions on cigarette advertisements, requirements
that warning statements be placed on cigarette packaging and in
advertising, increased taxes on tobacco products and controls in
certain foreign countries on production and prices, decreased social
acceptance of smoking and increased pressure from anti-smoking groups
have had an ongoing adverse effect on sales of tobacco products. In
addition, litigation is pending against the leading U.S. manufacturers
of consumer tobacco products seeking damages for health problems
alleged to have resulted from the use of tobacco in various forms.
Neither the Company nor, to the Company's knowledge, any other leaf
merchant is a party to this litigation. It is not possible to predict
the outcome of such litigation or what effect adverse developments in
pending or future litigation against manufacturers might have on the
business of the Company.
Reliance on Significant Customers
The Company's customers are manufacturers of cigarette and tobacco
products located in approximately 60 countries around the world.
Several of these customers individually account for a significant
portion of the Company's sales in a normal year, and the loss of any
one or more of such customers could have a material adverse effect on
the Company's results of operations. Approximately 41% and 55% of the
Company's consolidated tobacco sales for 1997 and 1996 were to two and
three companies, respectively. See Note N to the Company's
Consolidated Financial Statements for the year ended June 30, 1997,
included herein.
-26-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Failure to Realize Acquisition Cost Savings and Potential Sales Losses
Although the Company anticipates that it will achieve significant cost
savings related to the integration and rationalization of the
operations of Intabex, these savings may not be achieved in the amount
or as quickly as expected. Further, the Company expects that certain
customers may reduce the combined volume of tobacco purchased through
the Company from volumes previously purchased separately from Intabex
and the Company for reasons unrelated to the Company's products or
performance, such as a desire to manage dependence on any one
supplier. In addition, the Company anticipates that certain of
Intabex's former customers may not be retained and that sales may be
reduced as a result. The Company is unable to predict whether or to
what extent any such reductions may occur.
International Business Risks
The Company's international operations are subject to international
business risks, including unsettled political conditions,
expropriation, import and export restrictions, exchange controls,
inflationary economies and currency risks and risks related to the
restrictions of repatriation of earnings or proceeds from liquidated
assets of foreign subsidiaries. In certain countries, the Company has
advanced substantial sums or guaranteed local loans or lines of credit
in substantial amounts for the purchase of tobacco from growers. Risk
of repayment is normally limited to the tobacco season, and the
maximum exposure occurs within a shorter period.
The Company's tobacco business is generally conducted in U.S. dollars,
as is the business of the industry as a whole. Accordingly, there is
minimal currency risk related to the sale of tobaccos. However, local
country operating costs, including the purchasing and processing costs
for tobaccos, are subject to the effects of exchange fluctuations of
the local currency against the U.S. dollar. The Company attempts to
minimize such currency risks by matching the timing of its working
capital borrowing needs against the tobacco purchasing and processing
funds requirements in the currency of the country of tobacco origin.
Fluctuations in the value of foreign currencies can significantly
affect the Company's operating results. See Note O to the Company's
Consolidated Financial Statements for the year ended June 30, 1997,
included herein.
The Company has expanded its international operations in areas where
the export of tobacco has increased due to increased demand for lower
priced tobacco. In particular, the Company has a significant
concentration of its purchasing, processing and exporting operations
in southern Brazil. In recent years, Brazil's economic problems have
received wide publicity, and that country has taken in the past,
various actions relating to foreign currency exchange controls and
adjustments for devaluation of the currency and inflation. While such
controls generally influence the amount of cash dividends remitted
from Brazil and such adjustments can affect the Company's purchase
costs of tobacco and its processing costs, they have not and are not
expected to adversely affect the Company's ability to export tobacco
from Brazil.
Restrictions on Dividends
Under the terms of the Indenture, dated May 29, 1996, between the
Company and Crestar Bank, as trustee (the "Indenture"), relating to the
Company's 8 7/8% Senior Notes due 2006 (the "Notes"), the Company will
not be permitted to make certain restricted payments, including cash
dividends on Common Stock, under certain circumstances. The Company
generally may make such restricted payments, provided that (1) the
Company is not in default under the Indenture, (2) the Company is able
to incur at least $1.00 of additional indebtedness under a
consolidated interest coverage ratio test set forth in the Indenture,
and (3) the aggregate amount of the payments to be made is less than
the total of (x) $20.0 million, (y) 50% of the Company's consolidated
net income for the period from April 1, 1996, through the end of the
Company's most recent fiscal quarter and (z) the net cash proceeds
from the sale by the Company of any equity securities or debt
securities that are converted into equity securities. At June 30,
1997, the Company was permitted to make restricted payments, including
cash dividends on its Common Stock, of up to $78.0 million.
-27-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
STATEMENT OF CONSOLIDATED INCOME
DIMON Incorporated and Subsidiaries
<TABLE>
<CAPTION>
Years Ended June 30
______________________________________
(in thousands, except per share amounts) 1997 1996 1995
===========================================================================================
<S> <C> <C> <C>
Sales and other operating revenues . . . . . . . . . $2,513,227 $2,167,473 $1,941,188
Cost of goods and services sold. . . . . . . . . . . 2,195,333 1,904,992 1,759,364
______________________________________
317,894 262,481 181,824
Selling, administrative and
general expenses . . . . . . . . . . . . . . . . . 137,124 132,710 132,802
Restructuring and merger related costs . . . . . . . 3,864 15,360 25,955
_______________________________________
Operating Income . . . . . . . . . . . . . . . . 176,906 114,411 23,067
Interest Expense. . . . . . . . . . . . . . . . . . 53,027 46,924 45,231
_______________________________________
Income (loss) before income taxes,
minority interest, equity in net
income (loss) of investee companies
and extraordinary item. . . . . . . . . . . . . . 123,879 67,487 (22,164)
Income taxes . . . . . . . . . . . . . . . . . . . . 47,108 26,995 5,980
_______________________________________
Income (loss) before minority interest,
equity in net income of investee companies
and extraordinary item . . . . .. . . . . . . . . 76,771 40,492 (28,144)
Income applicable to minority interest. . . . . . . 124 292 216
Equity in net income (loss) of investee
companies (net of U.S. tax expense) . . . . . . . 526 (330) (1,805)
_______________________________________
Income (loss) before extraordinary item. . . . . . . 77,173 39,870 (30,165)
Extraordinary item:
Partial recovery of Iraqi receivable (net of
income tax expense of $870). . . . . . . . . . . - 1,400 -
_______________________________________
NET INCOME (LOSS) $ 77,173 $ 41,270 $ (30,165)
=======================================
Earnings Per Share, Primary
Income (loss) before extraordinary item . . . . . $1.79 $1.00 $(.79)
Extraordinary item. . . . . . . . . . . . . . . . - .04 -
______________________________________
Net Income (Loss) . . . . . . . . . . . . . . . . $1.79 $1.04 $(.79)
======================================
Earnings Per Share, Assuming Full Dilution
Income before extraordinary item. . . . . . . . . $1.76 $ .98 $ *
Extraordinary item. . . . . . . . . . . . . . . . - .03 -
______________________________________
Net Income. . . . . . . . . . . . . . . . $1.76 $1.01 $ *
======================================
See notes to consolidated financial statements.
* Computation of loss per share is anti-dilutive for the year 1995.
</TABLE>
-28-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
CONSOLIDATED BALANCE SHEET
DIMON Incorporated and Subsidiaries
<TABLE>
<CAPTION>
June 30
___________________________
(in thousands) 1997 1996
=====================================================================================
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents . . . . . . . . . . . . . . $ 107,131 $ 53,820
Notes receivable. . . . . . . . . . . . . . . . . . . 6,797 1,127
Trade receivables, net of allowances
(1997 - $5,902, 1996 - $6,558). . . . . . . . . . . 396,156 190,898
Inventories:
Tobacco . . . . . . . . . . . . . . . . . . . . . . 583,579 315,476
Other . . . . . . . . . . . . . . . . . . . . . . . 25,282 18,025
Advances on purchases of tobacco. . . . . . . . . . . 226,765 74,709
Recoverable income taxes. . . . . . . . . . . . . . . 3,051 1,563
Prepaid expenses and other assets . . . . . . . . . . 22,718 13,157
___________________________
Total current assets. . . . . . . . 1,371,479 668,775
___________________________
Investments and other assets
Equity in net assets of investee companies . . . . . . 9,326 8,268
Other investments. . . . . . . . . . . . . . . . . . . 12,293 2,987
Notes receivable . . . . . . . . . . . . . . . . . . . 12,738 4,078
Other. . . . . . . . . . . . . . . . . . . . . . . . . 15,803 19,151
___________________________
50,160 34,484
Intangible assets
Excess of cost over related net assets
of businesses acquired . . . . . . . . . . . . . 180,435 23,121
Production and supply contracts. . . . . . . . . . . . 26,681 33,325
Pension asset. . . . . . . . . . . . . . . . . . . . . 3,348 4,130
___________________________
210,464 60,576
___________________________
Property, plant and equipment
Land. . . . . . . . . . . . . . . . . . . . . . . . . 31,082 19,223
Buildings . . . . . . . . . . . . . . . . . . . . . . 196,887 143,741
Machinery and equipment . . . . . . . . . . . . . . . 231,705 160,237
Allowances for depreciation . . . . . . . . . . . . . (126,922) (86,426)
___________________________
332,752 236,775
___________________________
Deferred taxes and other deferred charges . . . . . . . . 22,748 19,404
___________________________
$1,987,603 $1,020,014
===========================
</TABLE>
-29-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
CONSOLIDATED BALANCE SHEET
DIMON Incorporated and Subsidiaries
<TABLE>
<CAPTION>
June 30
___________________________
(in thousands) 1997 1996
=====================================================================================
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable to banks and others. .. . . . . . . . . $ 350,263 $ -
Accounts payable:
Trade. . . . . . . . . . . . .. . . . . . . . . . . 108,283 65,970
Officers and employees . . . .. . . . . . . . . . . 13,441 24,074
Other. . . . . . . . . . . . .. . . . . . . . . . . 22,203 14,462
Advances from customers. . . . . . .. . . . . . . . . 69,787 74,153
Accrued expenses . . . . . . . . . .. . . . . . . . . 66,141 51,797
Income taxes . . . . . . . . . . . .. . . . . . . . . 25,146 5,359
Long-term debt current . . . . . . .. . . . . . . . . 16,222 10,618
___________________________
Total current liabilities . . . . . . 671,486 246,433
___________________________
Long-term debt
Revolving Credit Notes and Other. . . . . . . . . . . 577,826 265,871
Convertible Subordinated Debentures . . . . . . . . . 123,328 -
Senior Notes . . . . . . . . .. . . . . . . . . . . . 125,000 125,000
___________________________
826,154 390,871
___________________________
Deferred credits
Income taxes . . . . . . . . .. . . . . . . . . . . . 36,630 21,496
Compensation and other benefits . . . . . . . . . . . 44,072 44,465
___________________________
80,702 65,961
___________________________
Minority interest in subsidiaries . . . . . . . . . . . . 998 901
___________________________
Commitments and contingencies. . . . . . . . . . . . . . - -
___________________________
Stockholders' equity
Preferred Stock - no par value:. . . . 1997 1996
Authorized shares . . . . . . . . . . 10,000 10,000
Issued shares . . . . . . . . . . . . - - - -
Common Stock - no par value: . . . . . 1997 1996
Authorized shares . . . . . . . . . . 125,000 125,000
Issued shares . . . . . . . . . . . . 44,312 42,366 178,939 136,959
Retained earnings . . . . . . . . . . . . . . . . . . 229,521 177,419
Equity-currency conversions . . . . . . . . . . . . . . 670 2,842
Additional minimum pension liability . . . . . . . . . (867) (1,372)
___________________________
408,263 315,848
___________________________
$1,987,603 $1,020,014
===========================
See notes to consolidated financial statements
</TABLE>
-30-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
STATEMENT OF STOCKHOLDERS' EQUITY
DIMON Incorporated and Subsidiaries
<TABLE>
<CAPTION>
Additional
Equity- Minimum Unrealized Total
(in thousands, Common Retained Currency Pension Gain (Loss) On Stockholders'
except per share amounts) Stock Earnings Conversions Liability Investments Equity
===============================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1994 . . . $ 79,861 $203,615 $6,471 $(1,374) $ (259) $288,314
Net loss for the year. . . . (30,165) (30,165)
Cash dividends - $0.41
per share . . . . . . . . (15,570) (15,570)
Conversion of foreign
currency financial
statements . . . . . . . . (4,906) (4,906)
Reduction in minimum
pension liability. . . . . 88 88
Stock options exercised. . . 67 67
Unrealized gain on
investments. . . . . . . . 876 876
Conversion of 7 3/4%
Convertible
Debentures to
Common Stock . . . . . . 102 102
_____________________________________________________________________________
Balance, June 30, 1995 . . . $ 80,030 $157,880 $1,565 $(1,286) $ 617 $238,806
Net income for the year. . . 41,270 41,270
Cash dividends - $0.54
per share. . . . . . . . . (21,731) (21,731)
Conversion of foreign
currency financial
statements . . . . . . . . 1,277 1,277
Addition to the minimum
pension liability (86) (86)
Stock options exercised. . . 1,564 1,564
Realized gain on
investments . . . . . . . (617) (617)
Conversion of 7 3/4%
Convertible
Debentures to
Common Stock . . . . . . 55,365 55,365
________________________________________________________________________________________
Balance, June 30, 1996 . . . $136,959 $177,419 $2,842 $(1,372) $ - $315,848
Net income for the year. . . 77,173 77,173
Cash dividends - $0.585
per share. . . . . . . . . (25,071) (25,071)
Conversion of foreign
currency financial
statements . . . . . . . . (2,172) (2,172)
Reduction in the minimum
pension liability. . . . . 505 505
Stock options exercised. . . 3,910 3,910
Shares issued in purchase
of Intabex . . . . . . . . 38,070 38,070
_____________________________________________________________________________
Balance, June 30, 1997 . . . $178,939 $229,521 $ 670 $ (867) $ - $408,263
=============================================================================
See notes to consolidated financial statements
</TABLE>
-31-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
STATEMENT OF CONSOLIDATED CASH FLOWS
DIMON Incorporated and Subsidiaries
<TABLE>
<CAPTION>
Years Ended June 30
__________________________________
(in thousands) 1997 1996 1995
==========================================================================================
<S> <C> <C> <C>
Operating activities
Net Income (Loss). . . . . . . . . . . . . . . .$ 77,173 $ 41,270 $ (30,165)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization. . . . . . . . . 37,191 33,780 31,852
Deferred items . . . . . . . . . . . . . . . . 9,440 5,851 (620)
Loss (gain) on foreign currency transactions . 526 (368) 570
Gain on disposition of fixed assets. . . . . . (3,697) (2,415) (1,819)
Gain on sale of investee . . . . . . . . . . . - (3,751) -
Gain on sale of investment . . . . . . . . . . - (1,090) -
Undistributed (earnings) loss of investees . . (526) 330 1,805
Dividends received from investees. . . . . . . - 1,465 478
Income applicable to minority interest . . . . 124 292 216
Bad debt expense . . . . . . . . . . . . . . . 89 1,043 3,820
Decrease (increase) in accounts receivable . . (92,943) (12,644) 52,520
Decrease in inventories and advances
on purchases of tobacco. . . . . . . . . . . 49,673 64,438 2,156
Decrease (increase) in recoverable taxes . . . (1,497) 444 4,293
Decrease (increase) in prepaid expenses. . . . 12,450 17,257 (3,581)
Increase (decrease) in accounts payable
and accrued expenses . . . . . . . . . . . . (81,055) 14,811 (58,163)
Increase (decrease) in advances
from customers . . . . . . . . . . . . . . . (5,724) 25,116 (3,028)
Increase (decrease) in income taxes. . . . . . 23,381 (6,117) 6,075
Other. . . . . . . . . . . . . . . . . . . . . 694 92 404
________________________________
Net cash provided by operating activities 25,299 179,804 6,813
________________________________
Investing activities
Purchase of property and equipment. . . . . . . (60,860) (41,266) (27,036)
Proceeds from sale of property and equipment. . 8,853 8,605 4,877
Payments on notes receivable and receivables
from investees. . . . . . . . . . . . . . . . 2,348 1,132 27,541
Issuance of notes receivable. . . . . . . . . . (12,869) (1,572) (6,329)
Proceeds from or (advances) for other
investments and other assets. . . . . . . . . 13,109 24,422 4,067
Purchase of minority interest in subsidiaries . (118) - (507)
Acquisition of subsidiary, net of cash acquired 6,382 (6,543) (13,693)
_______________________________
Net cash used by investing activities . . (43,155) (15,222) (11,080)
_______________________________
Financing activities
Repayment of debt . . . . . . . . . . . . . . . (738,003) (830,863) (927,022)
Proceeds from debt. . . . . . . . . . . . . . . 830,679 698,207 978,366
Cash dividends paid to DIMON Incorporated
stockholders. . . . . . . . . . . . . . . . . (25,071) (21,731) (15,570)
Cash dividends paid to minority stockholders. . (379) (169) (237)
Proceeds from sale of common stock. . . . . . . 3,910 1,552 169
_______________________________
Net cash provided (used) by
financing activities . . . . . . . . . 71,136 (153,004) 35,706
_______________________________
Effect of exchange rate changes on cash . . . . . . . . . 31 (84) (1,584)
_______________________________
Increase (decrease) in cash and cash equivalents. . . . . 53,311 11,494 29,855
Cash and cash equivalents at beginning of year. . . . . . 53,820 42,326 12,471
_______________________________
Cash and cash equivalents at end of year. $ 107,131 $ 53,820 $ 42,326
===============================
Other information:
Cash paid during the year:
Interest . . . . . . . . . . . . . . . . . . . $ 48,935 $ 43,361 $ 46,768
Income taxes . . . . . . . . . . . . . . . . . 25,919 21,075 18,917
Non-cash investing and financing activities:
Conversion of debt to equity . . . . . . . . . - 55,365 102
Purchase of Intabex. . . . . . . . . . . . . . 161,398 - -
See notes to consolidated financial statements
</TABLE>
-32-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note A - Significant Accounting Policies
- ----------------------------------------
The accounts of the Company and its consolidated subsidiaries are
included in the consolidated financial statements after elimination of
significant intercompany accounts and transactions. Certain foreign
consolidated subsidiaries of the Company have fiscal year ends of
March 31 and May 31 to facilitate reporting of consolidated accounts.
The Company accounts for its investments in certain investee companies
(ownership 20% - 50%) under the equity method of accounting.
Investments in certain other foreign investees and subsidiaries which
are combined with other investments are stated at cost or less than
cost since the Company does not exercise significant influence over
financial or operating policies and because of restrictions imposed on
the transfer of earnings and other economic uncertainties.
Sales recognition is based on the passage of ownership, usually
with shipment of product.
Cash equivalents are defined as temporary investments of cash
with maturities of less than 90 days.
Inventories are valued at the lower of cost or market. Inventory
valuation provisions included in cost of goods and services sold
totaled $9.2 million for 1995. Costs of tobacco inventories are
generally determined by the average cost method while costs of other
inventories are generally determined by the first-in, first-out
method. Substantially all of the tobacco inventory represents
finished goods. Interest and other carrying charges on the
inventories are expensed in the period in which they are incurred.
Equity in net assets of investee companies includes excess of
equity over cost in the amount of $346 ($4,075 at June 30, 1996) and
is being amortized on a straight-line basis over ten years.
Excess of cost over related net assets of businesses acquired is
being amortized on a straight-line basis over periods ranging from 10
to 40 years. The accumulated amortization at June 30, 1997, is
$11,115 ($5,300 at June 30, 1996).
The carrying value of intangible assets is periodically reviewed
by the Company based on the expected future undiscounted operating
cash flows of the related business unit. Based upon its most recent
analysis, the Company believes that no material impairment of
intangible assets exists at June 30, 1997.
Supply contracts include the cost allocated to two ten-year
tobacco supply agreements with R. J. Reynolds Tobacco Company (RJR)
pursuant to which the Company will supply RJR and its affiliates with
specified quantities of its required tobaccos. Each contract is being
amortized over the quantities shipped or the contract period,
whichever is sooner. The accumulated amortization at June 30, 1997,
is $22,700 ($18,900 at June 30, 1996).
Production contracts include the cost allocated to contracts
associated with farmers for the future supply of their annual tobacco
production. The production contracts are being amortized primarily on
a straight-line basis over ten years. The accumulated amortization at
June 30, 1997, is $16,155 ($13,311 at June 30, 1996).
Property, plant and equipment is accounted for on the basis of
cost. Provisions for depreciation are computed on a straight-line
basis at annual rates calculated to amortize the cost of depreciable
properties over their estimated useful lives. Buildings and machinery
and equipment are depreciated over ranges of 20 to 40 years and over
five to ten years, respectively. The consolidated financial
statements do not include fully depreciated assets.
The Company provides deferred income taxes on temporary
differences arising from tax loss carryforwards, employee benefit
accruals, depreciation, deferred compensation and undistributed
earnings of consolidated subsidiaries and unconsolidated affiliates
not permanently reinvested.
Primary earnings per share are computed by dividing earnings by
the weighted average number of shares outstanding plus any common
stock equivalents during each period. The fully diluted earnings per
share calculation assumes that all of the outstanding Convertible
Subordinated Debentures outstanding during the periods presented were
converted into Common Stock at the beginning of the reporting period,
or as of the date of issue, thereby increasing the weighted average
number of shares considered outstanding during each period and
reducing the after-tax interest expense. The weighted average number
of shares outstanding are further increased by common stock
equivalents on employee stock options.
The Company carried its equity security investments at fair value
as Prepaid expenses and other assets with any change from the average
cost basis being reflected in stockholders' equity net of the tax
benefit. These securities were sold in 1996.
-33-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note A - Significant Accounting Policies (continued)
- ----------------------------------------
In February 1997, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards ("SFAS")
No. 128, "Earnings per Share" which simplifies the earnings per share
(EPS) computation and replaces the presentation of primary EPS with a
presentation of basic EPS. This statement also requires dual
presentation of basic and diluted EPS on the face of the income
statement for entities with a complex capital structure and requires a
reconciliation of the numerator and denominator used for the basic and
diluted EPS computation. This statement will be effective for the
Company's March 31, 1998, interim statements and will require the
restatement of all prior-period earnings per share data presented.
The Company has studied the implications of the statement, and based
on its initial evaluation, does not expect it to have a material
impact on the Company's financial condition or results of operations
upon adoption.
In June 1997, the FASB issued SFAS No. 130, "Reporting
Comprehensive Income" which establishes standards for reporting and
display of comprehensive income and its components in a full set of
general-purpose financial statements. This statement will be
effective for the Company's March 31, 1998, interim statements and
will require the restatement of all prior-periods presented. The
Company has studied the implications of the statement, and based on
its initial evaluation, does not expect it to have a material impact
on the Company's financial condition or results of operations upon
adoption.
In June 1997, the FASB issued SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information" which requires that
public business enterprises report certain information about
operating segments in complete sets of financial statements of the
enterprise and in condensed financial statements of interim periods
issued to shareholders. It also requires that public business
enterprises report certain information about their products and
services, the geographic areas in which they operate and their major
customers. This statement is effective for the Company's June 30, 1998,
year end financial statements. The Company has studied the
implications of the statement, and based on its initial evaluation,
does not expect it to have a material impact on the Company's financial
condition or results of operations upon adoption.
Certain prior year amounts have been reclassified to conform to
the current year presentation.
Note B - Merger and Acquisitions
- --------------------------------
Merger
On October 23, 1994, Dibrell and Monk-Austin announced execution of a
definitive Agreement and Plan of Reorganization pursuant to which the
businesses of Dibrell and Monk-Austin would be combined. At special
meetings on March 31, 1995, the shareholders of both Dibrell and
Monk-Austin approved the Agreement and related combination. As a result,
Dibrell and Monk-Austin were merged into DIMON Incorporated ("DIMON")
and each share of Dibrell Common Stock outstanding at the merger date
was converted to 1.5 shares, and each share of Monk-Austin Common
Stock outstanding at the merger date was converted into 1.0 share of
DIMON Common Stock, resulting in 38.069 million total outstanding
shares at April 1, 1995, the effective date of the merger. In
connection with the merger, the Company incurred legal, accounting and
financial consultants costs of $8.1 million in 1995.
The merger qualifies as a tax free reorganization and was
accounted for as a pooling of interests. Accordingly, the Company's
financial statements have been restated to include the results of both
Dibrell and Monk-Austin for all periods presented. Recorded assets
and liabilities have been carried forward to the combined company at
their historical book values.
Combined and separate results of Dibrell and Monk-Austin during
the periods preceding the merger were as follows:
<TABLE>
<CAPTION>
Dibrell Monk-Austin Adjustment Combined
=================================================================================================
<S> <C> <C> <C> <C>
Nine months ended March 31, 1995 (unaudited)
Sales and other operating revenues. . .$ 819,459 $739,415 $ (140) $1,558,734
Net income (loss) . . . . . . . . . . . 6,090 (6,152) 9,829 9,767
=================================================================================================
</TABLE>
-34-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note B - Merger and Acquisitions (continued)
- ---------------------------------
Acquisitions
The combined financial results presented above include
adjustments made to conform accounting policies of the two companies.
The significant adjustments impacting net income for conformity relate
to the accounting for income taxes, the treatment of grower advances
in Brazil, foreign currency transaction gains and losses and certain
other inventory costing policies. All other adjustments are
reclassifications to conform financial statement presentation.
Intercompany transactions between the two companies for the periods
presented were not material.
On April 1, 1995, the Company acquired the businesses of
Austro-Hellenique De Tabac S.A. (Hellas) and Austro-Turk Tutun A.S.
(Austro-Turk) for cash of $13,372 and assumption of liabilities of
$3,821. Hellas and Austro-Turk have tobacco buying, processing and
selling operations in Greece and Turkey, respectively. This acquisition
has been accounted for as a purchase. The excess of cost over businesses
acquired of $17,193 is being amortized over a ten-year period.
The following pro forma information has been prepared assuming
that this acquisition had taken place at the beginning of the period.
The pro forma information includes adjustments to give effect to
amortization of goodwill and interest expense on acquisition debt,
together with related income tax effects.
<TABLE>
<CAPTION>
Year ended June 30, 1995
(unaudited)
=============================================================================
<S> <C>
Sales and other operating revenues . . . . . . . . . . . . . $1,965
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . (37)
Loss per share, primary. . . . . . . . . . . . . . . . . . . (.96)
</TABLE>
On April 1, 1997, DIMON Incorporated acquired all the outstanding
capital stock and other rights of Intabex Holdings Worldwide S.A.
(Intabex), a privately-owned Luxembourg holding company. Intabex
maintains coordination and service offices in Wokingham, England. In
addition, Intabex owns and operates leaf tobacco buying, processing,
and exporting operations in principal tobacco markets around the world
including the United States, Brazil, Argentina, Malawi, Italy and
Thailand. An Intabex subsidiary, Compania de Filipinas (CdF), is one
of the two major suppliers of premium cigar leaf and other dark air-cured
tobaccos to the resurgent cigar industry in the United States
and Europe. Separately, a Zimbabwe company that is a wholly-owned
subsidiary of DIMON acquired certain tobacco assets from an Intabex
affiliated company in Zimbabwe. Intabex is a major supplier of
Zimbabwean and other African grown tobacco to the cigarette industry.
The transaction was accounted for as a purchase, and accordingly,
the consolidated financial statements of DIMON include the results of
operations of Intabex from the date of acquisition. The $245.58
million aggregate purchase price for Intabex, the Zimbabwe assets and
other rights acquired, consisted of 1.70 million shares of DIMON
common stock, $123.3 million in 10-year, 6.25 percent subordinated
debentures convertible into 4.287 million DIMON shares at $28.77 per
share, and $84.21 million in cash. The final purchase price reflects
a reduction of $18.6 million for certain adjustments that were
comtemplated by the purchase agreement. The source of cash was working
capital of DIMON.
Intabex's former shareholders, Folium, Inc., Tabacalera, S.A. and
Leaf Management Investments Ltd., have agreed to indemnify DIMON
against certain liabilities in connection with the acquisition of
Intabex, subject to a maximum of $90 million. DIMON may set off any
such liabilities against $90 million of the debentures held by Folium
and Tabacalera. The amount of debentures subject to set-off declines
in stages, with $15 million subject to set-off after October 1, 1998,
through July 31, 1999, and $10 million subject to set-off from August
1, 1999, through April 1, 2000, subject to extension with respect to
outstanding claims. A DIMON subsidiary in Zimbabwe is entitled to
similar indemnification and set-off rights in connection with the
Zimbabwe tobacco assets purchased, subject to a maximum of $12
million. The purchase price has been preliminarily allocated based on
estimated fair values of assets acquired and liabilities assumed at
the date of acquisition. This preliminary allocation resulted in an
excess of purchase price over net assets acquired of $159 million,
which is being amortized on a straight-line basis over 40 years.
-35-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note B - Merger and Acquisitions (continued)
-----------------------
The following unaudited pro forma information presents a summary
of consolidated results of operations of the Company and the acquired
business as if the acquisition had occurred July 1, 1996 or 1995.
<TABLE>
<CAPTION>
Years Ended June 30
1997 1996
--------- -----------
<S> <C> <C>
Revenue. . . . . . . . . . . . . . .$3,160,215 $2,733,538
Income before extraordinary
items. . . . . . . . . . . . . . . 66,792 44,941
Net Income . . . . . . . . . . . . . 66,792 46,341
Earnings per share, primary. . . . . 1.49 1.12
Earnings per share, fully diluted. . 1.46 1.09
</TABLE>
The unaudited pro forma results have been prepared for
comparative purposes only and include certain adjustments, such as
additional amortization expense as a result of goodwill and other
intangible assets, and an increased interest expense on acquisition
debt. They do not purport to be indicative of the results of
operations which actually would have resulted had the combination been
in effect on July 1, 1996 or 1995, or of future results of operations
of the consolidated entities.
In conjunction with this acquisition, the Company capitalized
$9.2 million, net of $3.7 million of tax, to cover the anticipated
costs of combining the acquired tobacco business with existing tobacco
operations of DIMON. The capitalized amounts relate primarily to
severance and closure of certain duplicative administrative, warehouse
and plant facilities acquired from Intabex. Of the capitalized
amounts, $7.0 million relates to severance and other costs associated
with employee separations and $2.2 million relates to costs of planned
facility closures. As these amounts are paid out in cash, the Company
will reduce an accrual established for their expenditure.
Note C - Restructuring and Merger Related Costs
--------------------------------------
In 1995, the Company commenced various activities to restructure its
worldwide operations. The following tables set forth the Company's
restructuring provisions provided and changes in the related reserves
for 1995, 1996 and 1997. The reserve balances are included in accrued
expenses and deferred compensation and other benefits.
<TABLE>
<CAPTION>
Facilities
Employee Closure
Separations Costs Other Total
=================================================================================
<S> <C> <C> <C> <C>
Provision for restructuring - 1995. . . . $12,593 $ 2,848 $2,416 $17,857
Reduced by:
Cash payments . . . . . . . . . . . (76) (223) (205) (504)
Asset writedowns . . . . . .. . . . - (1,493) (2,211) (3,704)
______________________________________
Reserve balances at June 30, 1995 . . . . $12,517 $ 1,132 $ - $13,649
Provision for restructuring - 1996. . . . 15,699 (1,244) 905 15,360
Increased (reduced) by:
Cash (payments) receipts . . . . . (8,150) 4,719 (75) (3,506)
Asset writedowns and sales . . . . - (4,212) (330) (4,542)
______________________________________
Reserve balances at June 30, 1996 . . . . $20,066 $ 395 $ 500 $20,961
Provision for restructuring - 1997. . . . 2,864 - 1,000 3,864
Increased (reduced) by:
Cash (payments) receipts . . . . . (9,487) (100) - (9,587)
Asset writedowns and sales. . . . . (694) (270) (500) (1,464)
Reserve balances at June 30, 1997 . . . . $12,749 $ 25 $1,000 $13,774
======================================
</TABLE>
-36-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note C - Restructuring and Merger Related Costs (continued)
--------------------------------------
The 1995 restructuring provision included approximately $2.6
million for the closing of certain unprofitable flower facilities and
related severance costs. The remaining 1995 restructuring provision
of $15.2 million addressed rationalization of the tobacco operations
through elimination of duplicative facilities and reduction of
personnel.
The 1996 restructuring provision of $15.4 million was primarily
for additional severance costs. During the year ended June 30, 1996,
the Company severed a total of 367 employees most of which were
involuntarily separated. The severed employees were primarily in the
tobacco division and worked in various departments throughout the
Company.
During the year ended June 30, 1997, additional restructuring
charges were accrued in the amount of $3.9 million, of which $2.9
million relates to additional severance costs and $1 million relates
to a reduction of capitalized idle plant expense. Remaining cash
outlays associated with employee separations are expected to total
$7.9 million, of which $3.3 million will be expended in 1998.
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.
Note D - Investee Companies and Related Parties
--------------------------------------
The combined summarized information for investee companies follows:
<TABLE>
<CAPTION>
1997 1996 1995
=============================================================================
<S> <C> <C> <C>
Current assets . . . . . . . . . . . . . . $61,887 $13,069 $ 84,635
Non-current assets . . . . . . . . . . . . 13,684 29,087 57,344
Current liabilities. . . . . . . . . . . . 56,933 14,631 84,244
Non-current liabilities. . . . . . . . . . 866 2,446 3,130
Interest of other shareholders . . . . . . 8,100 12,733 31,982
Net sales. . . . . . . . . . . . . . . . . 44,294 42,388 120,183
Gross profit . . . . . . . . . . . . . . . 9,276 8,771 9,953
Net income (loss). . . . . . . . . . . . . 1,014 594 (1,395)
__________________________________
</TABLE>
The above changes from 1996 relate primarily to the Company's
purchase of Intabex Holdings Worldwide S.A. Also, as a result of the
purchase, two investee companies are now being accounted for as
consolidated entities. The above changes from 1995 relate primarily
to the Company selling its interest in a Brazilian investee, Rio
Grande Tabacalera S.A.
Balances with related parties, primarily unconsolidated,
affiliated companies, are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
============================================================================
<S> <C> <C> <C>
Trade receivables . . . . . . . . . . . .$ 16,352 $23,904 $ 21,258
Advances on purchases of tobacco. . . . . 101,540 32,786 9,716
Notes receivable. . . . . . . . . . . . . 4,190 - 4,169
Trade payables and advances
from customers. . . . . . . . . . . . . 7,405 6,844 1,556
Other income: Interest . . . . . . . . . 917 581 1,376
Net sales . . . . . . . . . . . . . . . . 12,274 6,673 12,907
Purchases of tobacco. . . . . . . . . . . 80,389 61,549 73,474
__________________________________
</TABLE>
-37-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note E - Financial Instruments
----------------------
The estimated fair value of the Company's financial instruments at
June 30, 1997 is provided in the following table:
<TABLE>
<CAPTION>
Carrying Fair
Amount Value
___________________________________________________________________________
<S> <C> <C>
Senior Notes. . . . . . . . . . . . . . . . . . . . $125,000 $132,031
Convertible Subordinated Debentures . . . . . . . . 123,328 135,661
Other Long-Term Debt and Capitalized Leases . . . . 94,048 89,417
</TABLE>
Interest rate swap agreements modify the interest
characteristics of a portion of the Company's debt. The differential
to be paid or received is accrued as interest rates change and
recognized as an adjustment to interest expense in the statement of
consolidated income. The related accrued receivable or payable is
included in other assets or liabilities. The fair values of the swap
agreements are not recognized in the financial statements.
The counterparties to these contractual arrangements are a
diverse group of major financial institutions with which the Company
also has other financial relationships. The Company is exposed to
credit loss in the event of non-performance
by these counterparties. If a counterparty fails to meet the terms of
a swap agreement, the Company's exposure is limited to the net amount
that would have been received, if any, over the agreement's remaining
life. The Company does not anticipate non-performance by the other
parties, given their high-credit ratings and no material loss would be
expected from non-performance by any one of such counterparties.
Interest rate swap agreements with an aggregate notional
principal balance of $200,142 ($125,000 fixed to floating and $75,142
floating to fixed) and expiring at various dates through May 23, 2001,
had a negative value of $3 at June 30, 1997.
In the normal course of business, the Company is a party to
financial instruments with off balance sheet risk such as letters of
credit and guarantees. Management does not expect any material losses
to result from these instruments.
The fair value estimates presented herein are based on
information available to management at June 30, 1997, and were
determined using quoted market prices and the discounted value of
future cash flows.
Note F - Short-Term Borrowing Arrangements
---------------------------------
The Company has lines of credit arrangements with several banks under
which the Company may borrow up to a total of $1,783,889 ($897,523 at
June 30, 1996), excluding all long-term credit agreements. These
lines bear interest at rates ranging from 1.7% to 13.7% at June 30,
1997. Unused lines of credit at June 30, 1997, amounted to $789,913
($521,145 at June 30, 1996), net of $143,713 of available letters of
credit and guarantees that reduce lines of credit. There were no
compensating balance agreements at June 30, 1997, or 1996.
-38-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note G - Long-Term Debt
---------------
Such debt is comprised of:
<TABLE>
<CAPTION>
1997 1996
_____________________ ____________________
Maturing Maturing Maturing Maturing
within after within after
One Year One Year One Year One Year
==========================================================================================
<S> <C> <C> <C> <C>
Senior Notes. . . . . . . . . . . . . . . . $ - $125,000 $ - $125,000
Convertible Subordinated Debentures. . . . . - 123,328 - -
Revolving Credit Notes . . . . . . . . . . . - 500,000 - 231,676
Other Long-Term Debt . . . . . . . . . . . . 15,307 77,249 9,279 32,994
_____________________________________________
$15,307 $825,577 $ 9,279 $389,670
Capitalized Lease Obligations. . . . . . . . 915 577 1,339 1,201
_____________________________________________
$16,222 $826,154 $10,618 $390,871
=============================================
</TABLE>
Payments of the debt are scheduled as follows:
<TABLE>
<CAPTION>
Convertible Revolving Other
Senior Subordinated Credit Long-Term
Notes Debentures Notes Debt Total
=======================================================================================
<S> <C> <C> <C> <C> <C>
1998 . . . . . . . . . $ - $ - $ - $ 15,307 $ 15,307
1999 . . . . . . . . . - - - 15,970 15,970
2000 . . . . . . . . . - - 500,000 11,481 511,481
2001 . . . . . . . . . - - - 9,926 9,926
2002 . . . . . . . . . - - - 32,192 32,192
2003 . . . . . . . . . - - - 1,740 1,740
Later years. . . . . . 125,000 123,328 - 5,940 254,268
_______________________________________________________________
$125,000 $123,328 $500,000 $ 92,556 $840,884
===============================================================
</TABLE>
On May 29, 1996, the Company issued $125 million in 8 7/8%
Senior Notes (the "Notes") due 2006. The Notes are general unsecured
obligations of the Company and will rank equally in right of payment
with all other unsubordinated indebtedness (including the New Credit
Facility, discussed below) of the Company. The Company used the net
proceeds to repay certain existing short-term indebtedness and for
other corporate purposes. On or after June 1, 2001, the Company may
redeem the Notes in whole or in part, at established redemption
prices, plus accrued and unpaid interest, if any, to the date of
redemption. There are no sinking fund requirements for the Notes.
The Notes are subject to certain covenants that among other things,
require specific liquidity and long-term solvency ratios and, under
certain circumstances, restrict payment of dividends by the Company.
The Company generally may make such restricted payments, provided that
(1) the Company is not in default under the Indenture, (2) the Company
is able to incur at least $1.00 of additional indebtedness under a
consolidated interest coverage ratio test set forth in the Indenture,
and (3) the aggregate amount of the payments to be made is less than
the total of (x) $20.0 million, (y) 50% of the Company's consolidated
net income for the period from April 1, 1996, through the end of the
Company's most recent fiscal quarter and (z) the net cash proceeds
from the sale by the Company of any equity securities or debt
securities that are converted into equity securities. At June 30,
1997, the Company was permitted to make restricted payments, including
cash dividends on its Common Stock, of up to $78.0 million.
On April 1, 1997, in connection with the Intabex acquisition
(the "Debentures"), DIMON Incorporated issued $123.3 million of 6 1/4%
Convertible Subordinated Debentures due on March 31, 2007. The
Debentures are convertible into approximately 4.29 million shares of
the Company's Common Stock at conversion price of $28.77 per share at
any time prior to maturity. The Debentures are subordinated in right
of payment to all existing and future senior indebtedness, as defined,
of the Company, and do not have a cross-default provision. The
Debentures are redeemable at the option of the Company under certain
circumstances on or after April 1, 2000. As discussed in Note B,
Intabex's former shareholders have indemnified DIMON against certain
liabilities in connection with the acquisition of Intabex. DIMON may
set off any such indemnified liabilities against $90 million of the
Debentures. The amount of Debentures subject to set-off declines in
stages, as discussed in Note B.
-39-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note G - Long-Term Debt (continued)
--------------
To ensure long-term liquidity, DIMON entered into a $500 million
New Credit Facility, effective June 27, 1997, with 20 banks which
replaces DIMON's $240 million Former Credit Facility. The Company had
no borrowings under these agreements at either June 30, 1997 or 1996.
However, the Company has used these facilities to classify $500,000
($231,676 at June 30, 1996) of working capital loans to Revolving
Credit Notes. It is the Company's intent to finance at least $500,000
on a long-term basis. The New Credit Facility is subject to certain
commitment fees and covenants that among other things require DIMON to
maintain minimum working capital and tangible net worth amounts,
require specific liquidity and long-term solvency ratios and restrict
acquisitions. The New Credit Facility's initial term is to June 27,
2000, and pending approval by the lenders, may be extended. The rates
of interest are based upon the type of loan requested by the Company.
During the life of the agreement, the interest rate could be the prime
rate or the LIBOR rate adjusted. The primary advance rate is the
agent bank's base lending rate (8.50% at June 30, 1997). The Company
pays a commitment fee of 1/4% per annum on any unused portion of the
facility. Decisions relative to repayments and reborrowings are made
based on circumstances then existing, including management's judgment
as to the most effective utilization of funds.
Other long-term debt consists of obligations of DIMON
Incorporated, Florimex and the tobacco operations in Africa, Germany
and Spain, and is payable at interest rates varying from 4.85% to
11.7%.
Note H - Long-Term Leases
----------------
The Company, primarily through Florimex, has both capital and
operating leases. The capital leases are for land, buildings,
automobiles and trucks; the operating leases are for office equipment.
The capitalized lease obligations are payable through 1999. Interest
rates are imputed at 7.0% to 10.7%. Amortization is included in
depreciation expense. Minimum future obligations and capitalized
amounts are as follows:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
===============================================================================
<S> <C> <C>
1998. . . . . . . . . . . . . . . . . . . . . . .$ 915 $ 4,777
1999. . . . . . . . . . . . . . . . . . . . . . . 491 3,575
2000. . . . . . . . . . . . . . . . . . . . . . . 79 2,314
2001. . . . . . . . . . . . . . . . . . . . . . . 7 1,621
2002. . . . . . . . . . . . . . . . . . . . . . . - 1,262
Later years . . . . . . . . . . . . . . . . . . . - 738
___________________________
$1,492 $14,287
Less amount representing interest and
deposits . . . . . . . . . . . . . . . . . . . 71
______
Present value of net minimum lease payments . . $1,421
Less current portion of obligations
under capital leases. . . . . . . . . . . . . 725
______
Long-term obligations under capital leases . . .$ 696
======
Capitalized amounts:
Machinery and equipment,
primarily vehicles . . . . . . . . . .$2,949
Accumulated amortization . . . . . . . .(1,728)
_______
$ 1,221
=======
</TABLE>
-40-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note I - Preferred Stock
---------------
The Board of Directors is authorized to issue shares of Preferred
Stock in series with variations as to the number of shares in any
series. The Board of Directors also is authorized to establish the
rights and privileges of such shares issued including dividend and
voting rights. At June 30, 1997, no shares had been issued.
Note J - Stock Incentive Plan
--------------------
At the 1995 Special Meeting of Stockholders, the DIMON Incorporated
Omnibus Stock Incentive Plan (the Incentive Plan) and the DIMON
Incorporated Non-Employee Directors Stock Option Plan (the Directors
Plan) were approved. Also, as a result of the merger, options granted
under previous plans were assumed by DIMON.
The Incentive Plan authorizes the issuance of up to 2 million
shares of common stock (subject to increase annually by 3% of the
number of shares of common stock issued during such year, other than
pursuant to the Incentive Plan). The Incentive Plan authorizes the
issuance of various stock incentives to key employees of the Company
or any subsidiary, including nonqualified or incentive stock options,
stock appreciation rights and shares of restricted stock.
Stock options granted under the Incentive Plan allow for the
purchase of common stock at prices determined at the time the option
is granted by a committee composed of independent directors (the
Committee). Stock appreciation rights (SARs) may be granted under the
Incentive Plan in relation to option grants or independently of option
grants. SARs generally entitle the participant to receive in cash the
excess of the fair market value of a share of common stock on the date
of exercise over the value of the SAR at the date of grant.
Restricted stock is common stock that is both nontransferable and
forfeitable unless and until certain conditions are satisfied. As of
June 30, 1997 no restricted stock has been awarded under the Incentive
Plan. No awards may be granted under the Incentive Plan after
February 8, 2005.
The options and SARs become exercisable on various dates as
originally determined for the grants assumed by DIMON. Under the
Incentive Plan, the Committee will determine the dates that the
options and SARs become exercisable.
A separate Directors' Plan authorizes automatic annual grants to
purchase one thousand shares to each non-employee director. Any 1997
grants will be awarded at the meeting of the DIMON Board following the
1997 annual meeting of the shareholders of DIMON. The option price
will be equal to the fair market value of DIMON common stock on the
date of grant. The maximum number of shares to be issued under the
Directors Plan is 50 thousand shares. Options granted under the
Directors' Plan are immediately exercisable. Options to purchase
thirteen thousand shares had been granted as of June 30, 1997.
The Company has elected to treat the costs of SARs as
compensation charges to the income statement with quarterly
adjustments for market price fluctuations. All other options are
treated as equivalent shares outstanding. There was a $2,142 charge
to income in 1997, a $473 charge to income in 1996, and an $680 charge
to income in 1995 arising from adjustments in fair market values of
the SARs.
In October, 1995, the Financial Accounting Standards Board
issued SFAS No. 123 which established financial accounting and
reporting standards for stock-based employees compensation plans.
SFAS No. 123 encourages companies to adopt a fair value based method
of accounting for such plans but continues to allow the use of the
intrinsic value method prescribed by Accounting Principles Board (APB)
Opinion No. 25. The Company has elected to continue to account for
stock-based compensation in accordance with APB No. 25. If the
Company had elected to recognize compensation cost based on the fair
value of the options granted at grant date as prescribed by SFAS No.
123, net income and earnings per share based on fair value would have
been reduced to the unaudited pro forma amounts indicated in the table
below (in thousands, except per share data):
<TABLE>
<CAPTION>
Year Ended June 30
1997 1996
===========================
<S> <C> <C>
Net income as reported. . . . . $77,173 $41,270
Net income Pro Forma. . . . . . 76,185 40,859
Earnings per share,
primary as reported . . . . . 1.79 1.04
Earnings per share,
primary Pro Forma . . . . . . 1.77 1.03
</TABLE>
-41-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note J - Stock Incentive Plan (continued)
--------------------
Information with respect to options and SARs follows:
<TABLE>
<CAPTION>
Year Ended June 30
_________________________
1997 1996 1995
==================================================================================
<S> <C> <C> <C>
Options and SARs outstanding at beginning of year . . . 1,804 1,540 1,354
Options and SARs granted. . . . . . . . . . . . . . . . 436 403 231
Options and SARs exercised. . . . . . . . . . . . . . . (263) (130) (5)
Options and SARs cancelled. . . . . . . . . . . . . . . (123) (9) (40)
________________________
Options and SARs outstanding at end of year. . . . . . 1,854 1,804 1,540
========================
SARs included as outstanding at end of year . . . . . . 407 528 498
========================
Options available for future grants at end of year. . . 269 337 500
========================
Options and SARs exercisable at end of year . . . . . . 833 1,023 926
========================
Option and SAR market prices per share:
Date of grant $18.13 $17.00 $11.50
20.88 15.38 16.50
Exercised (at lowest and highest market prices) 19.00- 11.33- 14.42-
26.75 20.75 18.25
Cancelled (at lowest and highest market prices) 19.25- 17.00 11.50-
26.50 13.87
</TABLE>
Weighted average option exercise price information for the years
1997, 1996 and 1995 follows:
<TABLE>
<CAPTION>
1997 1996 1995
________________________________________________________________
<S> <C> <C> <C>
Outstanding at July 1. . . . . . . $16.46 $16.32 $17.16
Granted during the year. . . . . . $18.17 $16.98 $11.50
Exercised during the year. . . . . $23.97 $19.81 $17.76
Outstanding at June 30 . . . . . . $16.87 $16.46 $16.32
Exercisable at June 30 . . . . . . $17.53 $17.19 $16.73
</TABLE>
Option groups outstanding at June 30, 1997 and related weighted average
price and life information follows:
<TABLE>
<CAPTION>
Grant Options Options Exercise Remaining
Date Outstanding Exercisable Price Life (Years)
_______________________________________________________________________
<S> <C> <C> <C> <C>
8/21/91 . . . . . 237 237 $14.42 4
8/27/92 . . . . . 236 236 $22.00 5
8/26/93 . . . . . 220 197 $16.67 6
8/25/94 . . . . . 210 - $11.50 7
4/1/95 . . . . . 150 150 $16.50 8
8/24/95 . . . . . 366 - $17.00 8
11/17/95 . . . . . 6 6 $15.38 8
8/22/96 . . . . . 422 - $18.13 9
11/15/96 . . . . . 7 7 $20.88 9
_______ _______
1,854 833
======= =======
</TABLE>
-42-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note J - Stock Incentive Plan (continued)
--------------------
The weighted average fair value at date of grant for options
granted during 1997 and 1996 was $7.30 and $5.80 per option,
respectively. The fair value of options at date of grant was
estimated using the Black-Scholes model with the following weighted
average assumptions:
<TABLE>
<CAPTION>
Black-Scholes Assumptions 1997 1996
________________________________________________________
<S> <C> <C>
Expected Life in years . . . . . . . 10 10
Interest Rate. . . . . . . . . . . . 6.90% 7.00%
Volatility . . . . . . . . . . . . . 33% 96%
Dividend Yield . . . . . . . . . . . 3.1% 3.2%
</TABLE>
Note K - Retained Earnings
-----------------
Consolidated retained earnings included $1,314 at June 30, 1997
($4,490 at June 30, 1996) for the Company's share of undistributed net
income of investee companies accounted for on the equity method.
Note L - Income Taxes
------------
Consolidated retained earnings at June 30, 1997 and 1996 include
undistributed earnings of $175,910 and $145,773 respectively, of
certain foreign consolidated subsidiaries which are not subject to
additional foreign income taxes nor considered to be subject to United
States income taxes unless remitted as dividends. The Company intends
to reinvest these undistributed earnings indefinitely; accordingly, no
provision has been made for United States taxes on such earnings.
At June 30, 1997, the Company has net operating tax loss
carryforwards of approximately $99,420 for income tax purposes that
expire in 1998 and thereafter. Those carryforwards relate primarily
to state taxes for U.S. entities and to foreign taxes on Baardse and
various Florimex entities.
The components of income (loss) before income taxes, minority
interest, equity in net income or less of investee companies and
extraordinary items, consisted of the following:
<TABLE>
<CAPTION>
1997 1996 1995
=========================================================================
<S> <C> <C> <C>
U.S. . . . . . . . . . . . . . .$ 9,775 $ 6,301 $(28,293)
Foreign. . . . . . . . . . . . . 114,104 61,186 6,129
_________________________________________
$123,879 $67,487 $(22,164)
=========================================
</TABLE>
-43-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note L - Income Taxes (continued)
------------
The details of the amount shown for income taxes in the
Statement of Consolidated Income follow:
<TABLE>
<CAPTION>
1997 1996 1995
===========================================================================
<S> <C> <C> <C>
Current
Federal. . . . . . . . . . . . . $ 4,434 $ 7,676 $ 4,967
State. . . . . . . . . . . . . . 61 424 73
Foreign. . . . . . . . . . . . . 37,805 12,633 9,719
__________________________________________
$42,300 $20,733 $14,759
__________________________________________
Deferred
Federal. . . . . . . . . . . . . $ 465 $(3,181) $(6,622)
State. . . . . . . . . . . . . . 85 (854) (810)
Foreign. . . . . . . . . . . . . 4,258 10,297 (1,347)
___________________________________________
$ 4,808 $ 6,262 $(8,779)
___________________________________________
Total. . . . . . . . . . . . . . $47,108 $26,995 $ 5,980
===========================================
</TABLE>
The reasons for the difference between income tax expense based
on income or (loss) before income taxes, minority interest, equity in
net income or loss of investee companies and extraordinary item and
the amount computed by applying the statutory Federal income tax rate
to such income are as follows:
<TABLE>
<CAPTION>
Pre-tax Income
_______________________________
1997 1996 1995
============================================================================
<S> <C> <C> <C>
Computed "expected" tax expense (benefit). $43,358 $23,620 $(7,757)
State income taxes, net of Federal
income tax benefit.. . . . . . . . . . - (280) (530)
Effect of foreign income taxes . . . . . . . 5,618 (1,060) 6,962
U.S. taxes on foreign income,
net of tax credits . . . . . . . . . . 934 1,270 1,440
Operating loss carryforwards, net. . . . . .(2,795) 2,262 1,942
Tax benefits derived from Foreign
Sales Corporations . . . . . . . . . .(1,624) (1,633) (887)
Non-deductible merger expenses . . . . . . . - - 1,583
Permanently non-deductible expenses. . . . . 1,617 1,034 2,103
Other. . . . . . . . . . . . . . . . . . . . - 1,782 1,124
________________________________
Actual tax expense.. . . . . . . . . . . . $47,108 $26,995 $ 5,980
================================
</TABLE>
-44-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note L - Income Taxes (continued)
------------
The long-term deferred tax liabilities (assets) are comprised
of the following:
<TABLE>
<CAPTION>
1997 1996
========================================================================
<S> <C> <C>
Deferred tax liabilities:
Fixed assets. . . . . . . . . . . . . . $ 16,610 $11,797
Foreign taxes . . . . . . . . . . . . . 10,581 8,672
Other . . . . . . . . . . . . . . . . . 9,439 1,027
__________________________
Gross deferred tax liabilities. . . . . . . . . 36,630 21,496
__________________________
Deferred tax assets:
Tax loss carryforwards . . . . . . . . . (14,387) (16,571)
Postretirement and other benefits. . . . (10,178) (10,317)
Currently non-deductible expenses. . . . (2,780) (4,384)
Other. . . . . . . . . . . . . . . . . . (4,977) (892)
__________________________
Gross deferred tax assets . . . . . . . . . . . (32,322) (32,164)
Valuation allowance . . . . . . . . . . . . . . 13,730 16,571
__________________________
Net deferred tax assets . . . . . . . . . . . . (18,592) (15,593)
__________________________
Net deferred tax liability. . . . . . . . . . . $18,038 $ 5,903
==========================
</TABLE>
The net change in the valuation allowance for deferred tax
assets was a decrease of $2,841 and relates primarily to the
utilization of tax loss carryforwards for which no benefit had been
recognized in prior years.
Note M - Employee Benefits
-----------------
Retirement Benefits
In 1995, the Company assumed the defined Benefit Pension Plan (the
Retirement Plan) and an Excess Benefit Plan of the former Dibrell.
The Retirement Plan provides retirement benefits for substantially
all of the former Dibrell's U.S. salaried personnel based on years of
service rendered and compensation during the last five years of
employment. The Company maintains an Excess Benefit Plan that
provides individuals who participate in the Retirement Plan the
difference between the benefits they could potentially accrue under
the Retirement Plan and the benefits actually paid as limited by
regulations imposed by the Internal Revenue Code. The Company funds
these plans in amounts consistent with the funding requirements of
Federal Law and Regulations.
Certain non-U.S. plans are sponsored by certain Florimex
subsidiaries located in Italy, Austria and Germany. These plans
cover substantially all of their full-time employees. Additional
non-U.S. plans sponsored by certain tobacco subsidiaries cover
substantially all of their full-time employees located in Greece,
Italy, The Netherlands, Turkey and Zimbabwe.
-45-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note M - Employee Benefits (continued)
-----------------
Net pension cost included the following components:
<TABLE>
<CAPTION>
1997 1996 1995
==============================================================================================
<S> <C> <C> <C>
Service cost - benefits earned during the year. . . . . $ 2,111 $ 1,402 $ 1,528
Interest cost on projected benefit obligation . . . . . 3,821 4,286 4,040
Return on assets - actual . . . . . . . . . . . . . . . (3,413) (6,174) (4,596)
Amortization of transition asset at July, 1986. . . . . (303) (268) (268)
Amortization of prior service costs . . . . . . . . . . 558 659 704
Amortization of unrecognized loss(gain) . . . . . . . . (303) 3,004 1,778
______________________________________
Net pension cost before effect of curtailment . . . . . 2,471 2,909 3,186
Effect of curtailment . . . . . . . . . . .. . . . . . - (698) -
______________________________________
Net pension cost . . . . . . . . . . . . . . . . . . . $ 2,471 $ 2,211 $ 3,186
======================================
</TABLE>
The funded status of the plans at June 30 was as follows:
<TABLE>
<CAPTION>
1997 1996
=================================================================================
<S> <C> <C>
Actuarial present value of accumulated
benefit obligation
Vested . . . . . . . . . . . . . . . . . . . . . . . $45,372 $46,893
Nonvested. . . . . . . . . . . . . . . . . . . . . . 600 484
_______________________
45,972 47,377
Benefits attributable to projected
salary increases . . . . . . . . . . . . . . . . . . 4,009 9,560
_______________________
49,981 56,937
Plan assets at fair value . . . . . . . . . . . . . . . 44,457 41,045
_______________________
Projected benefit obligation in excess
of plan assets. . . . . . . . . . . . . . . . . . . . 5,524 15,892
Unamortized transition asset . . . . . . . . . . . . . 1,784 1,792
Unrecognized prior service costs. . . . . . . . . . . . (5,352) (6,817)
Unrecognized net gain (loss). . . . . . . . . . . . . . 10,426 4,108
Adjustment required to recognize minimum
liability . . . . . . . . . . . . . . . . . . . . . . 4,215 5,502
_______________________
Net pension liability . . . . . . . . . . . . . . . . . $16,597 $20,477
=======================
</TABLE>
For the U.S. plans, projected benefit obligations were determined
using assumed discount rates of 8% for the Retirement Plan for all
three years and 8% for the Excess Benefit Plan for all three years.
Assumed compensation increases were 4% for 1997, 7% for 1996 and 6.5%
for 1995 for the Retirement Plan and 4% for 1997 and 5% for 1996 and
1995 for the Excess Benefit Plan. The assumed long-term rate of return
on plan assets for all three years was 9% for the Retirement Plan and
8% for all three years for the Excess Benefit Plan. Plan assets
consist principally of common stock and fixed income securities. For
non-U.S. plans, discount rates and assumed compensation increases are
in accordance with locally accepted practice. No assumed long-term
rate of return is made for non-U.S. plan assets as these plans are
generally not funded.
-46-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note M - Employee Benefits (continued)
-----------------
The Company also sponsors a 401-k savings plan for most of its
salaried employees located in the United States. The Company's
contributions to the plan were $546 in 1997, $481 in 1996, and $652 in
1995.
The Company has a Profit-Sharing Plan for substantially all of
the salaried employees meeting certain eligibility requirements who
were employed by Monk-Austin. This Profit-Sharing Plan is in lieu of
a defined benefit pension plan. Profit-Sharing Plan contributions are
discretionary and totaled $1,043 in 1995. There were no contributions
in 1997 and 1996.
The Company adopted a Cash Balance Plan on July 1, 1996, that
combines the Retirement Plan of the former Dibrell and the Profit-
Sharing Plan of the former Monk-Austin. The adoption increased the
present value of the accumulated benefit obligation by $2,353,
decreased the benefits attributable to projected salary increases by
$2,493 and decreased net pension cost by $403 for 1997.
Postretirement Health and Life Insurance Benefits
The Company provides certain health and life insurance benefits to
retired employees (and their eligible dependents) who meet specified
age and service requirements. Plan assets consist of paid-up life
insurance policies on certain current retirees. The Company retains
the right, subject to existing agreements, to modify or eliminate the
medical benefits.
The benefit obligation was determined using an assumed discount
rate of 8.0% for all three years and an assumed rate of increase in
health care costs, also known as the health care cost trend rate, of
8% for 1997, 11.5% for 1996 and 13.0% for 1995. This trend rate is
assumed to decrease gradually to 5.5% by 2002. The assumed long-term
rate of return on plan assets was 5.5% for 1997 and 1996 and 5.4% for
1995. Based on current estimates, increasing the health care cost
trend rate by one percentage point would increase the benefit
obligation by approximately $458.
The following table presents the plan's funded status at June 30
reconciled with amounts recognized in the Company's balance sheet:
<TABLE>
<CAPTION>
1997 1996
============================================================================
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees . . . . . . . . . . . . . . . . . . . . . . $ 8,339 $12,373
Fully eligible active plan participants. . . . . . . 903 2,077
Other active plan participants . . . . . . . . . . . 3,539 5,377
Plan assets at fair value . . . . . . . . . . . . . . (65) (62)
__________ _______
Accumulated postretirement benefit obligation
in excess of plan assets . . . . . . . . . . . . . . 12,716 19,765
Unrecognized prior service cost . . . . . . . . . . . 3,020 (170)
Unrecognized net gain . . . . . . . . . . . . . . . . 3,973 456
__________ _______
Accrued postretirement benefit cost . . . . . . . . . $ 19,709 $20,051
========== =======
</TABLE>
-47-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note M - Employee Benefits (continued)
-----------------
Net periodic postretirement benefit cost included the following
components:
<TABLE>
<CAPTION>
1997 1996 1995
=============================================================================
<S> <C> <C> <C>
Service cost. . . . . . . . . . . . . . . . . . $ 315 $ 420 $ 395
Interest cost . . . . . . . . . . . . . . . . . 1,093 1,502 1,348
Actual return on plan assets. . . . . . . . . . (3) 16 7
Amortization of unrecognized amounts. . . . . . (423) - -
______ ______ _______
Net periodic postretirement benefit cost. . . . $ 982 $1,938 $ 1,750
======= ======= ==================
</TABLE>
The Company continues to evaluate ways to better manage these
benefits and control the costs. Any changes in the plan or revisions
to assumptions that affect the amount of expected future benefits may
have a significant effect on the amount of the reported obligation and
annual expense.
Employees in operations located in certain foreign countries are
covered by various foreign postretirement life insurance benefit
arrangements. For these foreign plans, the cash-basis cost of
benefits charged to income was not material in 1997, 1996 and 1995.
Note N - Geographic Area Data, Export Sales and Other Information
--------------------------------------------------------
The following description and tables present the Company's tobacco and
flower operations in different geographic areas in conformity with the
Statement of Financial Accounting Standards No. 14, "Financial
Reporting for Segments of a Business Enterprise" (SFAS 14).
Geographic area information for tobacco operations as to net sales and
operating profit is based on the origin of the product sold, and
identifiable assets are classified based on the origination of the
product. Turkish tobacco is included in other origin. Geographic
area information for flower operations as to net sales and operating
profit is based on the point of sale, and identifiable assets are
classified based on the point of sale. Corporate assets consist
primarily of those related to cost investments. Export sales are
defined as foreign sales of United States origin.
Tobacco
The Company is principally engaged in the tobacco business. Through
its wholly-owned subsidiary, DIMON International, Inc. ("DIMON
International"), DIMON International and its U.S. tobacco subsidiaries
and affiliates buy leaf tobacco on the auction markets in Florida,
Georgia, South Carolina, North Carolina, Virginia, Kentucky, Tennessee
and Maryland for its customers. This tobacco is shipped to plants
located in Virginia and North Carolina where it is processed, packed
in hogsheads or cases and then stored until ordered shipped by its
customers. DIMON International and its tobacco subsidiaries and
affiliates also are engaged in buying, processing and exporting
tobacco grown in Argentina, Brazil, China, Greece, Guatemala, India,
Italy, Malawi, Mexico, Tanzania, Thailand, Turkey, Zimbabwe and other
areas which is sold on the world markets. The Company's investee
companies are located in Colombia, Greece, Malawi, Philippines and
Spain.
The disaggregation of entities necessary for geographic area data
may require the use of estimation techniques for operating profit.
The identifiable assets presentation does not take into account the
seasonal aspects of the tobacco business, particularly the seasonal
peak in South America.
Flowers
The Company imports, exports and distributes cut flowers through the
Florimex group, which operates through 67 offices on six continents.
-48-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note N - Geographic Area Data, Export Sales and Other Information(continued)
--------------------------------------------------------
<TABLE>
<CAPTION>
Sales and Operating
Other Profit
Operating As Defined By Identifiable
Revenues SFAS 14 Assets
======================================================================================================================
<S> <C> <C> <C>
1997
Tobacco
United States. . . . . . . . . . .$ 941,894 $ 31,009 $ 195,368
South America. . . . . . . . . . . 566,094 97,109 621,821
Asia . . . . . . . . . . . . . . . 111,175 13,590 140,418
Africa . . . . . . . . . . . . . . 309,831 17,183 433,315
Other . . . . . . . . . . . . . . 196,745 21,376 349,114
Worldwide supply contract. . . . . - - 7,571
_______________________________________
$2,125,739 $180,267 (1) $1,747,607
_______________________________________
Flowers
Europe . . . . . . . . . . . . . .$ 321,846 $ 9,489 $ 46,421
United States. . . . . . . . . . . 21,440 92 35,599
Other. . . . . . . . . . . . . . . 44,202 702 6,232
_______________________________________
$ 387,488 $ 10,283 $ 88,252
_______________________________________
$2,513,227 $190,550 $1,835,859
===========
Corporate. . . . . . . . . . . . . (13,644) 142,418
Equity in net assets of
investee companies and
related advances: Tobacco . . . - 9,326
___________
$1,987,603
__________ ===========
Operating profit
before interest expense. . . . . $176,906
Interest expense . . . . . . . . . (53,027)
__________
Income before income taxes, minority
interest, equity in net assets of
investee companies and
extraordinary item. . . . . . . $123,879
=======================================
(1) Includes restructuring expenses for tobacco operations: $1,940, United States;
$1,040, South America; $884, Other.
<S> <C> <C> <C> <C>
Europe Far East Other Total
======================================================================================
Export sales of U.S. origin . . $142,979 $161,978 $22,049 $327,006
======================================================
<S> <C> <C> <C>
Tobacco Flowers Total
======================================================================================
Depreciation and amortization .. . . . . .$30,477 $6,714 $37,191
============================================
Capital expenditures. . . . . .. . . . . .$54,792 $6,068 $60,860
============================================
Equity in net income of
investee companies. . . . . . . . . . . .$ 526 $ - $ 526
============================================
</TABLE>
-49-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note N - Geographic Area Data, Export Sales and Other Information (continued)
--------------------------------------------------------
<TABLE>
<CAPTION>
Sales and Operating
Other Profit
Operating As Defined By Identifiable
Revenues SFAS 14 Assets
======================================================================================
<S> <C> <C> <C>
1996
Tobacco
United States. . . . . . . . . . .$ 854,853 $ 47,428 $ 106,615
South America. . . . . . . . . . . 524,886 57,038 442,471
Asia . . . . . . . . . . . . . . . 43,023 1,372 34,567
Africa . . . . . . . . . . . . . . 208,898 9,695 170,712
Other . . . . . . . . . . . . . . 138,506 10,756 114,213
Worldwide supply contract. . . . . - - 9,171
_______________________________________
$1,770,166 $126,289 $ 877,749
_______________________________________
Flowers
Europe . . . . . . . . . . . . . .$ 334,104 $ 5,532 $ 85,418
United States. . . . . . . . . . . 20,797 579 6,552
Other. . . . . . . . . . . . . . . 42,406 2,365 7,035
_______________________________________
$ 397,307 $ 8,476 $ 99,005
_______________________________________
$2,167,473 $134,765 (1) $ 976,754
===========
Corporate. . . . . . . . . . . . . (20,354)(1) 34,992
Equity in net assets of
investee companies and
related advances: Tobacco . . . - 8,268
___________
$1,020,014
__________ ===========
Operating profit
before interest expense. . . . . $114,411
Interest expense . . . . . . . . . (46,924)
__________
Income before income taxes, minority
interest, equity in net assets of
investee companies and
extraordinary item. . . . . . . $ 67,487
=======================================
(1) Includes restructuring expenses (recoveries) of Tobacco - $431, United States;
$9,308, South America; $330, Africa; $1,369, Other; $(498), Flowers - United States;
and $4,420, Corporate.
<S> <C> <C> <C> <C>
Europe Far East Other Total
======================================================================================
Export sales of U.S. origin . . $159,763 $193,613 $54,886 $408,262
======================================================
<S> <C> <C> <C>
Tobacco Flowers Total
======================================================================================
Depreciation and amortization .. . . . . .$26,802 $6,978 $33,780
============================================
Capital expenditures. . . . . .. . . . . .$35,444 $5,822 $41,266
============================================
Equity in net loss of
investee companies . . . . . .. . . . . $ (330) $ - $ (330)
============================================
</TABLE>
-50-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note N - Geographic Area Data, Export Sales and Other Information (continued)
--------------------------------------------------------
<TABLE>
<CAPTION>
Sales and Operating
Other Profit (Loss)
Operating As Defined By Identifiable
Revenues SFAS 14 Assets
======================================================================================
<S> <C> <C> <C>
1995
Tobacco
United States. . . . . . . . . . .$ 883,294 $ 19,137 $ 119,889
South America. . . . . . . . . . . 446,102 17,249 455,526
Asia . . . . . . . . . . . . . . . 28,111 (3,222) 40,850
Africa . . . . . . . . . . . . . . 162,562 2,926 150,736
Other . . . . . . . . . . . . . . 35,189 1,375 74,180
Worldwide supply contract. . . . . - - 10,770
_______________________________________
$1,555,258 $ 37,465 $ 851,951
_______________________________________
Flowers
Europe . . . . . . . . . . . . . .$ 326,702 $ 1,970 $ 98,835
United States. . . . . . . . . . . 24,439 (5,698) 6,722
Other. . . . . . . . . . . . . . . 34,789 658 4,976
_______________________________________
$ 385,930 $ (3,070) $ 110,533
_______________________________________
$1,941,188 $ 34,395(1) $ 962,484
===========
Corporate. . . . . . . . . . . . . (11,328) 108,502
Equity in net assets of
investee companies and
related advances: Tobacco . . . - 22,622
___________
$1,093,608
__________ ===========
Operating profit
before interest expense. . . . . $ 23,067
Interest expense . . . . . . . . . (45,231)
__________
Income (loss) before income taxes, minority
interest and equity in net assets of
investee companies. . . . . . . $(22,164)
=========================
(1) Includes restructuring expenses of Tobacco - $22,295, United States; $107, South America;
$76, Africa; $855, Other; $741, Flowers - Europe; and $1,881, United States.
<S> <C> <C> <C> <C>
Europe Far East Other Total
======================================================================================
Export sales of U.S. origin . . $174,649 $260,310 $23,891 $458,850
======================================================
<S> <C> <C> <C>
Tobacco Flowers Total
======================================================================================
Depreciation and amortization .. . . . . .$24,034 $7,818 $31,852
============================================
Capital expenditures. . . . . .. . . . . .$29,033 $6,859 $35,892
============================================
Equity in net income
of investee companies. . . . . . . . .$ 1,805 $ - $ 1,805
============================================
</TABLE>
-51-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note N - Geographic Area Data, Export Sales and Other Information
--------------------------------------------------------
(continued)
------------
Of the 1997, 1996 and 1995 tobacco sales and other operating
revenues, approximately 41%, 55% and 52%, respectively, were to
various tobacco customers which management has reason to believe are
now owned by or under the common control of two companies (three
companies in 1996 and 1995), each of which accounted for more than 10%
of net sales. At June 30, 1997, there was approximately $63.1 million
due from the two major tobacco customers and included in Trade
receivables.
The following table summarizes the net sales made to each
customer for the periods indicated:
<TABLE>
1997 1996 1995
==================================================================================
<S> <C> <C> <C>
Customer A . . . . . . . . . . . . . . . . . . . .$467,333 $474,787 $317,110
Customer B . . . . . . . . . . . . . . . . . . . . 400,097 336,989 279,257
Customer C . . . . . . . . . . . . . . . . . . . . - 170,167 214,622
________________________________
Total. . . . . . . . . . . . . . . . . . . . . . .$867,430 $981,943 $810,989
================================
</TABLE>
No customers in the flower operation accounted for more than 10%
of flower sales.
Note O - Foreign Currency Translation
----------------------------
The financial statements of foreign entities included in the
consolidated financial statements have been translated to U.S. dollars
in accordance with FASB Statement No. 52, "Foreign Currency
Translation." Under that Statement, all asset and liability accounts
are translated at the current exchange rate, and income statement
items are translated at the average exchange rate for each quarter;
resulting translation adjustments, net of deferred taxes, are made
directly to a separate component of stockholders' equity. Transaction
adjustments, however, are made in the Statement of Consolidated
Income. These include realized exchange adjustments relating to
assets and liabilities denominated in foreign currencies. Financial
statements of entities located in highly inflationary economies are
remeasured in U.S. dollars. The remeasurement of and subsequent
transaction adjustments are also made in the Statement of Consolidated
Income.
For 1997, the transaction adjustments netted to a loss of $526.
The transaction adjustments netted to a gain of $368 and a loss of
$570 for 1996 and 1995, respectively, and were primarily related to
the Company's Brazilian operations.
-52-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note P - Contingencies and Other Information
-----------------------------------
On August 29, 1996, the Company received notices from Brazilian tax
authorities of proposed adjustments to income taxes for the calendar
year 1992 based on the Company's recalculation of monetary correction
as allowed under Law 8200. The approximate proposed adjustment claims
additional tax, including penalties and interest, through June 30,
1997, of $24,112, before related tax benefits for all assessed
interest. In 1993, the Company received notices from Brazilian tax
authorities of proposed adjustments to the income tax returns of the
Company's entities located in Brazil for the calendar years ending
1988 through 1992. The approximate proposed adjustments claim
additional tax, including penalties and interest through June 30,
1997, of $31,835, before related tax benefits for all assessed
interest. The Company believes that it has properly reported its
income and paid its taxes in Brazil in accordance with applicable laws
and intends to contest the proposed adjustments vigorously. The
Company expects that the ultimate resolution of these matters will not
have a material adverse effect on the Company's consolidated balance
sheet or results of operations.
The Company and certain subsidiaries have available letters of
credit of $261,709 at June 30, 1997, of which $143,713 was
outstanding. These letters of credit represent, generally,
performance guarantees issued in connection with purchases and sales
of domestic and foreign tobacco.
The Company is guarantor as to certain lines and letters of
credit of affiliated companies in an amount not to exceed
approximately $18,476. There was approximately $6,199 outstanding
under these guarantees at June 30, 1997.
The Company's subsidiaries have guaranteed certain loans made by
Brazilian banks to local farmers. There was approximately $39,567
outstanding under these guarantees at June 30, 1997.
The Company enters into forward exchange contracts to hedge
certain foreign currency transactions for periods consistent with the
terms of the underlying transactions. While the forward contracts
affect the Company's results of operations, they do so only in
connection with the underlying transactions. As a result, they do not
subject the Company to risk from exchange rate movements, because
gains and losses on these contracts offset losses and gains on the
transactions being hedged. At June 30, 1997, the Company had $1.2
million ($1.4 million in 1996) of U.S. dollar/Deutschmark exchange
contracts outstanding, all of which were in Deutschmarks. The forward
exchange contracts generally have maturities that do not exceed 18
days at June 30, 1997.
The Company's other off balance sheet risks are not material.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. These estimates
may change with future events.
-53-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note Q - Selected Quarterly Financial Data (Unaudited)
---------------------------------
Summarized quarterly financial information is as follows:
<TABLE>
<CAPTION>
Per Share of
In Thousands Common Stock
______________________________________ _____________
Sales and Other
Operating Gross Net Net
Revenues (1) Profit (1) Income Income*
======================================================================================
<S> <C> <C> <C> <C>
1997 Fiscal Year. . . . . . . .$2,513,227 $317,894 $ 77,173 $ 1.76
Fourth Quarter. . . . . . 663,006 112,727 26,030 0.55
Third Quarter . . . . . . 668,146 69,494 18,817 0.44
Second Quarter. . . . . . 771,341 70,624 17,061 0.40
First Quarter . . . . . . 410,734 65,049 15,265 0.36
__________________________________________________
1996 Fiscal Year . . . . . . . $2,167,473 $262,481 $ 41,270 $ 1.01
Fourth Quarter. . . . . . 487,271 64,022 (2) 9,130 (2) .21 (2)
Third Quarter . . . . . . 577,092 61,195 6,274 .16
Second Quarter. . . . . . 763,418 82,460 19,838 .48
First Quarter . . . . . . 339,692 54,804 6,028 (3) .16 (3)
__________________________________________________
(1) In the fourth quarter of 1996 the Company has reclassified Other income into Sales and
other operating revenues. The Company has also reclassified Sundry deductions into Cost
of goods sold. Both Other income and Sundry deductions are not material and the
reclassification does not affect Net income.
</TABLE>
Previously reported Net sales and Gross margin were as follows:
<TABLE>
<CAPTION>
Net Sales Gross Profit
=====================================================
<S> <C> <C>
1996 Third Quarter . . $573,084 $ 57,355
Second Quarter. . 755,228 74,319
First Quarter . . 335,349 50,859
(2) In the fourth quarter of 1996 the Company recorded a $15.4 million charge related
to restructuring costs.
(3) In the first quarter of 1996, the Company recorded $1,400 (net of $870 tax), or
$.03 per share, as an extraordinary item for the partial recovery of an Iraqi
receivable.
* Net Income for 1997 does not add to total due to rounding.
</TABLE>
-54-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note R - Supplemental Guarantor Information
----------------------------------
DIMON International, Inc. and Florimex Worldwide, Inc. (collectively, the
"Guarantors"), wholly-owned subsidiaries of DIMON Incorporated, have fully
and unconditionally guaranteed on a joint and several basis DIMON
Incorporated's obligations to pay principal, premium and interest relative
to the $125 million Senior Notes due 2006. Management has determined that
separate, full financial statements of the Guarantors would not be material
to investors and such financial statements are not provided. Supplemental
combining financial information of the Guarantors is presented below:
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Statement of Income
Year Ended June 30, 1997
(in thousands)
<TABLE>
<CAPTION>
DIMON Non-
Incorporated Guarantors Guarantors Eliminations Total
------------ ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales and other operating
revenues . . . . . . . . . . . . . $15,684 $1,486,104 $1,543,659 $(532,220)a $2,513,227
Cost of goods and services sold. . . 20 1,396,213 1,281,139 (482,039)a 2,195,333
________ ___________ ___________ ____________ ___________
15,664 89,891 262,520 (50,181) 317,894
Selling, administrative and
general expenses . . . . . . . . 13,644 63,427 88,879 (28,826)a,b 137,124
Restructuring and merger
related cost . . . . . . . . . . - 961 2,903 - 3,864
________ ___________ ___________ ____________ ___________
2,020 25,503 170,738 (21,355) 176,906
Interest Expense . . . . . . . . . 21,932 17,945 34,934 (21,784)a 53,027
________ ___________ ___________ ____________ ___________
Income (loss) before income taxes,
minority interest and equity in
net income (loss) of investee
companies, equity in net income
(loss) of subsidiaries and
extraordinary item . . . . . . . (19,912) 7,558 135,804 429 a 123,879
Income taxes (benefits). . . . . . (2,877) 2,869 47,116 - 47,108
________ ___________ ___________ ____________ ___________
Income (loss) before minority
interest, equity in net income
(loss) of investee companies,
equity in net income (loss)
of subsidiaries and
extraordinary item . . . . . . . (17,035) 4,689 88,688 429 76,771
Income applicable to minority
interest . . . . . . . . . . . . - - 124 - 124
Equity in net income (loss) of
investee companies, net of
income taxes . . . . . . . . . . - 372 730 (576)a 526
Equity in net income of
subsidiaries . . . . . . . . . . 94,208 89,147 (147) (183,208)a -
Extraordinary item . . . . . . . . - - - - -
________ ___________ ___________ ____________ ___________
NET INCOME . . . . . . . . . . . . $77,173 $ 94,208 $ 89,147 $(183,355) $ 77,173
======== =========== =========== ============ ===========
a. Inter-company eliminations.
b. Royalty expense in SG&A and Royalty income in Other Income for Consolidated Entities.
</TABLE>
-55-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note R - Supplemental Guarantor Information (continued)
----------------------------------
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Balance Sheet
June 30, 1997
(in thousands)
<TABLE>
<CAPTION>
DIMON Non-
Incorporated Guarantors Guarantors Eliminations Total
------------ ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents . $ (198) $17,455 $ 103,615 $ (13,741)a $ 107,131
Notes receivable. . . . . . - 416 52,130 (45,749)b 6,797
Trade receivables, net of
allowances . . . . . . . 17,559 92,954 465,752 (180,109)b 396,156
Inventories:
Tobacco. . . . . . . . . - 44,905 538,783 (109)b 583,579
Other. . . . . . . . . . 70 1,137 24,075 - 25,282
Advances on purchases
of tobacco. . . . . . . . 243,640 180,948 174,156 (371,979)b 226,765
Recoverable income taxes. . - - 3,051 - 3,051
Prepaid expenses. . . . . . 2,197 2,715 17,806 - 22,718
__________ ___________ ___________ ____________ ___________
Total current assets 263,268 340,530 1,379,368 (611,687) 1,371,479
__________ ___________ ___________ ____________ ___________
Investments and other assets
Equity in net assets of
investee companies. . . . . . - 2,832 6,494 - 9,326
Consolidated subsidiaries. . . . 396,525 411,817 135,356 (943,698)b -
Other investments. . . . . . . . 1 2,617 14,682 (5,007)b 12,293
Notes receivable . . . . . . . . - 660 12,078 - 12,738
Other. . . . . . . . . . . . . . 76,077 3,042 12,622 (75,938)b 15,803
__________ ___________ ___________ ____________ ___________
472,603 420,968 181,232 (1,024,643) 50,160
__________ ___________ ___________ ____________ ___________
Intangible assets
Excess of cost over related net
assets of businesses acquired . . 152,870 10,346 17,219 - 180,435
Production and supply contracts. . . - 21,053 5,628 - 26,681
Pension asset. . . . . . . . . . . . 3,348 - - - 3,348
__________ ___________ ___________ ____________ ___________
156,218 31,399 22,847 - 210,464
__________ ___________ ___________ ____________ ___________
Property, plant and equipment
Land . . 1,771 1,816 27,495 - 31,082
Buildings. . . . . . . . . . . . 4,281 25,871 166,735 - 196,887
Machinery and equipment. . . . . 4,959 60,109 166,637 - 231,705
Allowances for depreciation. . . (5,380) (33,751) (87,791) - (126,922)
__________ ___________ ___________ ____________ ___________
5,631 54,045 273,076 - 332,752
__________ ___________ ___________ ____________ ___________
Deferred taxes and other
deferred charges . . . . . . . . 22,295 - 453 - 22,748
__________ ___________ ___________ ____________ ___________
$920,015 $846,942 $1,856,976 $(1,636,330) $1,987,603
========== =========== =========== ============ ===========
a. To adjust for cash transfers made by DIMON Incorporated to an entity which reports on an
earlier period.
b. Inter-company eliminations.
</TABLE>
-56-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note R - Supplemental Guarantor Information (continued)
----------------------------------
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Balance Sheet
June 30, 1997
(in thousands)
<TABLE>
<CAPTION>
DIMON Non-
Incorporated Guarantors Guarantors Eliminations Total
------------ ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable. . . . . . . . . . $ - $37,835 $ 409,530 $ (97,102)b $ 350,263
Accounts payable:
Trade . . . . . . . . . . . . 238 333,028 255,852 (480,835)b 108,283
Officers and employees. . . . 4,760 989 7,692 - 13,441
Other . . . . . . . . . . . . 2,963 133 18,568 539 b 22,203
Advances from customers. . . . . (18,063) 21,456 102,241 (35,847)b 69,787
Accrued expenses . . . . . . . . 2,181 5,344 58,616 - 66,141
Income taxes . . . . . . . . . . (4,282)c 5,397 24,031 - 25,146
Long-term debt current . . . . . 4,581 - 11,641 - 16,222
__________ ___________ ___________ ____________ ___________
Total current liabilities . (7,622) 404,182 888,171 (613,245) 671,486
__________ ___________ ___________ ____________ ___________
Long-term debt
Revolving Credit Notes
and Other. . . . . . . . . . . 233,772 - 344,054 - 577,826
Convertible Subordinated
Debentures. . . . . . . . . . 123,328 - - - 123,328
Senior Notes. . . . . . . . . . 125,000 - - - 125,000
__________ ___________ ___________ ____________ ___________
482,100 - 344,054 - 826,154
Deferred credits
Income taxes . . . . . . . . . . 6,624 (6,572) 36,578 - 36,630
Compensation and other benefits. . 30,650 5,957 7,465 - 44,072
__________ ___________ ___________ ____________ ___________
37,274 (615) 44,043 - 80,702
Minority interest in subsidiaries. . . - - 527 471 b 998
__________ ___________ ___________ ____________ ___________
Stockholders' equity
Common stock/Paid-in-capital . . 178,939 144,690 342,577 (487,267)b 178,939
Retained earnings. . . . . . . . 229,521 298,190 235,545 (533,735)b 229,521
Equity-currency conversions. . . 670 495 2,276 (2,771)b 670
Additional minimum pension
liability. . . . . . . . . . . (867) - - - (867)
Treasury stock . . . . . . . . . - - (217) 217 b -
__________ ___________ ___________ ____________ ___________
408,263 443,375 580,181 (1,023,556) 408,263
__________ ___________ ___________ ____________ ___________
$920,015 $846,942 $1,856,976 $(1,636,330) $1,987,603
========== =========== =========== ============= ===========
b. Inter-company eliminations.
c. Current deferred tax on reserves for restructuring and unallocated estimated tax payments.
</TABLE>
-57-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note R - Supplemental Guarantor Information (continued)
----------------------------------
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Statement of Cash Flows
Year Ended June 30, 1997
(in thousands)
<TABLE>
<CAPTION>
DIMON Non-
Incorporated Guarantors Guarantors Eliminations Total
------------ ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Operating activities
Net Income (Loss). . . . . . . . $ 77,173 $ 94,208 $89,147 $(183,355)a $ 77,173
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities
Depreciation and amortization. . 3,414 11,834 21,943 - 37,191
Deferred items . . . . . . . . . 854 (2,985) 11,571 - 9,440
Loss (gain) on foreign currency
transactions . . . . . . . . - 147 379 - 526
Gain on disposition of fixed
assets . . . . . . . . . . . 11 (1,674) (2,034) - (3,697)
Undistributed (earnings) loss of
investees/subsidiaries . . . (94,208) (89,519) (583) 183,784 a (526)
Income applicable to minority
interest . . . . . . . . . . - - 124 - 124
Bad debt expense . . . . . . . - - 89 - 89
Decrease (increase) in accounts
receivable . . . . . . . . . 9,203 85,273 (205,920) 18,501 a (92,943)
Decrease (increase) in inventories
and advances on purchases of
tobacco. . . . . . . . . . . (76,134) (143,110) 68,508 200,409 a 49,673
Decrease in recoverable taxes. . - - (1,497) - (1,497)
Decrease (increase) in
prepaid expenses . . . . . . 1,645 (1,727) 12,532 - 12,450
Increase (decrease) in accounts
payable and accrued expenses . (12,874) 41,217 67,523 (176,921)a (81,055)
Increase (decrease) in advances
from customers . . . . . . . (21,443) (28,272) 27,853 16,138 a (5,724)
Increase (decrease) in income
taxes. . . . . . . . . . . . 8,207 2,314 12,583 277 a 23,381
Other . . . . . . . . . . . - 36 658 - 694
__________ ___________ ___________ ____________ ___________
Net cash provided (used) by
operating activities. . (104,152) (32,258) 102,876 58,833 25,299
__________ ___________ ___________ ____________ ___________
Investing activities
Purchase of property and equipment . (158) (12,271) (48,431) - (60,860)
Proceeds from sale of property
and equipment. . . . . . . . . 208 1,877 6,768 - 8,853
Payments on notes receivable and
receivable from investees . - - 2,348 - 2,348
Advances of notes receivable. - 380 (25,033) 11,784 a (12,869)
Proceeds from or (advances) for
other investments and
other assets. . . . . . . . (1,662) 15,539 (2,659) 1,891 a 13,109
Purchase of minority interest in
subsidiaries. . . . . . . . - (118) - - (118)
Acquisition of subsidiary, net
of cash acquired. . . . . . (59,208) - 65,590 - 6,382
__________ ___________ ___________ ____________ ___________
Net cash provided (used) by
investing activities. . (60,820) 5,407 (1,417) 13,675 (43,155)
__________ ___________ ___________ ____________ ___________
</TABLE>
-58-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note R - Supplemental Guarantor Information (continued)
----------------------------------
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Statement of Cash Flows
Year Ended June 30, 1997
(in thousands)
<TABLE>
<CAPTION>
DIMON Non-
Incorporated Guarantors Guarantors Eliminations Total
------------ ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Financing activities
Repayment of debt . . . . . $(279,203) $ (424) $(458,376) $ - $(738,003)
Proceeds from debt. . . . . 464,415 37,836 414,760 (86,332)a 830,679
Cash dividends paid to DIMON
Incorporated stockholders (25,071) - - - (25,071)
Cash dividends paid to minority
stockholders. . . . . . . - - (379) - (379)
Proceeds from sale of common stock. 3,910 - - - 3,910
__________ ___________ ___________ ____________ ___________
Net cash provided (used) by
financing activities. . 164,051 37,412 (43,995) (86,332) 71,136
__________ ___________ ___________ ____________ ___________
Effect of exchange rate
changes on cash . . . . . . - - 31 - 31
__________ ___________ ___________ ____________ ___________
Increase (decrease) in cash and
cash equivalents. . . . . . (921) 10,561 57,495 (13,824) 53,311
Cash and cash equivalents at
beginning of year . . . . . 723 6,894 46,120 83 a 53,820
__________ ___________ ___________ ____________ ___________
Cash and cash equivalents
at end of year. . . . $ (198) $17,455 $103,615 $(13,741) $107,131
========== =========== =========== ============ ==========
a. Inter-company eliminations.
</TABLE>
-59-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note R - Supplemental Guarantor Information (continued)
----------------------------------
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Statement of Income
Year Ended June 30, 1996
(in thousands)
<TABLE>
<CAPTION>
DIMON Non-
Incorporated Guarantors Guarantors Eliminations Total
------------ ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales and other operating revenues . $ 26,003 $1,418,433 $1,236,781 $(513,744)a $2,167,473
Cost of goods and services sold. . . (5,067) 1,329,424 1,030,612 (449,977)a 1,904,992
__________ _____________ ___________ ____________ ___________
31,070 89,009 206,169 (63,767) 262,481
Selling, administrative and
expenses general . . . . . . . . 13,059 69,794 78,962 (29,105)a,b 132,710
Restructuring and merger
related cost . . . . . . . . . . 4,420 1,429 9,511 - 15,360
__________ _____________ ____________ ____________ ___________
13,591 17,786 117,696 (34,662) 114,411
Interest Expense . . . . . . . . . 24,764 28,916 27,906 (34,662)a 46,924
________ _____________ ___________ ____________ ___________
Income (loss) before income taxes,
minority interest and equity in
net income (loss) of investee
companies, equity in net income
(loss) of subsidiaries and
extraordinary item . . . . . . . (11,173) (11,130) 89,790 - 67,487
Income taxes (benefits). . . . . . (2,516) (2,352) 31,863 - 26,995
__________ _____________ ___________ ____________ ___________
Income (loss) before minority interest,
equity in net income (loss) of
investee companies, equity in net
income (loss) of subsidiaries and
extraordinary item . . . . . . . (8,657) (8,778) 57,927 - 40,492
Income applicable to minority
interest . . . . . . . . . . . . - - 292 - 292
Equity in net income (loss) of investee
companies, net of income taxes . . . - 98 (428) - (330)
Equity in net income of
subsidiaries . . . . . . . . 49,927 57,207 - (107,134)a -
Extraordinary item - 1,400 - - 1,400
__________ _____________ ___________ ____________ ___________
NET INCOME . . . . . . . . . . . . $41,270 $ 49,927 $57,207 $(107,134) $ 41,270
========== ============= =========== ============ ============
a. Inter-company eliminations.
b. Royalty expense in SG&A and Royalty income in Other Income for Consolidated Entities.
</TABLE>
-60-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note R - Supplemental Guarantor Information (continued)
----------------------------------
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Balance Sheet
June 30, 1996
(in thousands)
<TABLE>
<CAPTION>
DIMON Non-
Incorporated Guarantors Guarantors Eliminations Total
------------ ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents . $ 723 $6,894 $ 46,120 $ 83 a $ 53,820
Notes receivable. . . . . . - 475 19,347 (18,695)b 1,127
Trade receivables, net of
allowances . . . . . . . 26,762 178,390 162,624 (176,878)b 190,898
Inventories:
Tobacco. . . . . . . . . - 54,729 260,747 - 315,476
Other. . . . . . . . . . 49 1,174 16,802 - 18,025
Advances on purchases
of tobacco. . . . . . . . 168,616 28,113 49,659 (171,679)b 74,709
Recoverable income taxes. . - - 1,563 - 1,563
Prepaid expenses. . . . . . 4,190 979 7,988 - 13,157
__________ ___________ ___________ ____________ ___________
Total current assets 200,340 270,754 564,850 (367,169) 668,775
__________ ___________ ___________ ____________ ___________
Investments and other assets
Equity in net assets of
investee companies. . . . . . - 5,884 2,384 - 8,268
Consolidated subsidiaries. . . . 288,533 336,667 21,230 (646,430)b -
Other investments. . . . . . . . 23,067 2,861 9,337 (32,278)b 2,987
Notes receivable . . . . . . . . 139 3,965 (26) - 4,078
Other. . . . . . . . . . . . . . - 981 18,170 - 19,151
__________ ___________ ___________ ____________ ___________
311,739 350,358 51,095 (678,708) 34,484
__________ ___________ ___________ ____________ ___________
Intangible assets
Excess of cost over related net
assets of businesses acquired . . 375 8,281 14,465 - 23,121
Production and supply contracts. . . - 25,960 7,365 - 33,325
Pension asset. . . . . . . . . . . . 3,042 1,088 - - 4,130
__________ ___________ ___________ ____________ ___________
3,417 35,329 21,830 - 60,576
__________ ___________ ___________ ____________ ___________
Property, plant and equipment
Land . . 1,770 1,925 15,528 - 19,223
Buildings. . . . . . . . . . . . 4,739 25,568 113,434 - 143,741
Machinery and equipment. . . . . 5,271 48,858 106,108 - 160,237
Allowances for depreciation. . . (4,883) (26,877) (54,666) - (86,426)
__________ ___________ ___________ ____________ ___________
6,897 49,474 180,404 - 236,775
__________ ___________ ___________ ____________ ___________
Deferred taxes and other
deferred charges . . . . . . . . 19,259 - 145 - 19,404
__________ ___________ ___________ ____________ ___________
$541,652 $705,915 $818,324 $(1,045,877) $1,020,014
========== ============ =========== ============ ===========
a. To adjust for cash transfers made by DIMON Incorporated to an entity which reports on an
earlier period.
b. Inter-company eliminations.
</TABLE>
-61-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note R - Supplemental Guarantor Information (continued)
----------------------------------
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Balance Sheet
June 30, 1996
(in thousands)
<TABLE>
<CAPTION>
DIMON Non-
Incorporated Guarantors Guarantors Eliminations Total
<S> <C> <C> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable. . . . . . . . . $ - $ - $ - $ - $ -
Accounts payable:
Trade . . . . . . . . . . . . 1,423 281,706 86,216 (303,375)b 65,970
Officers and employees. . . . 14,427 2,263 7,384 - 24,074
Other . . . . . . . . . . . . 4,749 1,554 8,159 - 14,462
Advances from customers. . . . . 3,380 49,729 73,029 (51,985)b 74,153
Accrued expenses . . . . . . . . 2,418 13,941 35,438 - 51,797
Income taxes . . . . . . . . . . (12,489)c 3,083 15,042 (277)b 5,359
Long-term debt current . . . 4,286 350 5,982 - 10,618
__________ ___________ ___________ ____________ ___________
Total current liabilities . . 18,194 352,626 231,250 (355,637) 246,433
__________ ___________ ___________ ____________ ___________
Long-term debt
Revolving Credit Notes and Other . 48,856 1,068 226,717 (10,770)b 265,871
Senior Notes . . . . . . . . . . .125,000 - - - 125,000
__________ ___________ ___________ ____________ ___________
173,856 1,068 226,717 (10,770) 390,871
Deferred credits
Income taxes . . . . . . . . . . . 6,198 (6,259) 21,557 - 21,496
Compensation and other benefits. . 27,556 8,629 8,280 - 44,465
__________ ___________ ___________ ____________ ___________
33,754 2,370 29,837 - 65,961
Minority interest in subsidiaries. . - - 901 - 901
__________ ___________ ___________ ____________ ___________
Stockholders' equity
Common stock/Paid-in-capital . . 136,959 143,026 180,366 (323,392)b 136,959
Retained earnings. . . . . . . . 177,419 203,982 146,398 (350,380)b 177,419
Equity-currency conversions. . . 2,842 2,843 2,855 (5,698)b 2,842
Additional minimum pension
liability. . . . . . . . . . . (1,372) - - - (1,372)
Unrealized gain on investments . - - - - -
__________ ___________ ___________ ____________ ___________
315,848 349,851 329,619 (679,470) 315,848
__________ ___________ ___________ ____________ ___________
$541,652 $705,915 $818,324 $(1,045,877) $1,020,014
========== =========== =========== ============ ==========
b. Inter-company eliminations.
c. Current deferred tax on reserves for restructuring and unallocated estimated tax payments.
</TABLE>
-62-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note R - Supplemental Guarantor Information (continued)
----------------------------------
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Statement of Cash Flows
Year Ended June 30, 1996
(in thousands)
<TABLE>
<CAPTION>
DIMON Non-
Incorporated Guarantors Guarantors Eliminations Total
<S> <C> <C> <C> <C> <C>
Operating activities
Net Income (Loss). . . . . . . . $ 41,270 $49,927 $57,207 $(107,134)a $41,270
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities
Depreciation and amortization. . 2,326 10,826 20,628 - 33,780
Deferred items . . . . . . . . (3,335) 2,437 6,749 - 5,851
Loss (gain) on foreign currency
transactions . . . . . . . . 46 (69) (345) - (368)
Gain on disposition of fixed
assets . . . . . . . . . . . (14) (1,098) (1,303) - (2,415)
Gain on sale of investee . . . - - (3,751) - (3,751)
Gain on sale of investment . . - - (1,090) - (1,090)
Undistributed (earnings) loss of
investees/subsidiaries . . . (49,927) (57,305) 428 107,134 a 330
Dividends received from investee . - 1,100 365 - 1,465
Income applicable to minority
interest . . . . . . . . . . - - 292 - 292
Bad debt expense . . . . . . . - (10) 1,053 - 1,043
Decrease (increase) in accounts
receivable . . . . . . . . . 123,123 (12,826) (43,527) (79,414)a (12,644)
Decrease (increase) in inventories
and advances on purchases of
tobacco. . . . . . . . . . . 6,938 91,721 28,682 (62,903)a 64,438
Decrease in recoverable taxes. . . - - 444 - 444
Decrease (increase) in
prepaid expenses . . . . . . 7,052 (313) 10,518 - 17,257
Increase (decrease) in accounts
payable and accrued expenses . . 5,212 133,597 (32,157) (91,841)a 14,811
Increase (decrease) in advances
from customers . . . . . . . (499) (194,582) 13,721 206,476 a 25,116
Increase (decrease) in income
taxes. . . . . . . . . . . . (2,239) (4,306) 705 (277)a (6,117)
Other. . . . . . . . . . . . . 56 230 (194) - 92
__________ ___________ ___________ ____________ ___________
Net cash provided (used) by
operating activities. . . 130,009 19,329 58,425 (27,959) 179,804
__________ ___________ ___________ ____________ ___________
Investing activities
Purchase of property
and equipment . . . . . . . . (436) (5,363) (35,467) - (41,266)
Proceeds from sale of property
and equipment. . . . . . . . . 14 4,784 3,807 - 8,605
Payments on notes receivable and
receivable from investees . . 30,034 870 228 (30,000)a 1,132
Advances of notes receivable. . (83) (350) (19,834) 18,695 a (1,572)
Proceeds from or (advances) for
other investments and
other assets. . . . . . . . . 5,232 24,634 1,304 (6,748)a 24,422
Acquisition of subsidiary, net of
cash acquired . . . . . . . . - (6,543) - - (6,543)
__________ ___________ ___________ ____________ ___________
Net cash provided (used) by
investing activities. . . 34,761 18,032 (49,962) (18,053) (15,222)
__________ ___________ ___________ ____________ ___________
</TABLE>
-63-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note R - Supplemental Guarantor Information (continued)
----------------------------------
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Statement of Cash Flows
Year Ended June 30, 1996
(in thousands)
<TABLE>
<CAPTION>
DIMON Non-
Incorporated Guarantors Guarantors Eliminations Total
<S> <C> <C> <C> <C> <C>
Financing activities
Repayment of debt . . . . . . (622,367) (32,346) (206,150) 30,000 a (830,863)
Proceeds from debt. . . . . . 477,171 - 231,806 (10,770)a 698,207
Cash dividends paid to DIMON
Incorporated stockholders . (21,731) - - - (21,731)
Cash dividends paid to minority
stockholders. . . . . . . . - - (169) - (169)
Proceeds from sale of
common stock. . . . . . . . 1,552 - - - 1,552
__________ ___________ ___________ ____________ ___________
Net cash provided (used) by
financing activities. . (165,375) (32,346) 25,487 19,230 (153,004)
__________ ___________ ___________ ____________ ___________
Effect of exchange rate
changes on cash . . . . . . . - - (84) - (84)
__________ ___________ ___________ ____________ ___________
Increase (decrease) in cash and
cash equivalents. . . . . . . (605) 5,015 33,866 (26,782) 11,494
Cash and cash equivalents at
beginning of year . . . . . . 1,328 1,879 12,254 26,865 42,326
__________ ___________ ___________ ____________ ___________
Cash and cash equivalents
at end of year .. . . . $ 723 $ 6,894 $ 46,120 $ 83 $ 53,820
========= =========== ============= ==========
a. Inter-company eliminations.
</TABLE>
-64-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note R - Supplemental Guarantor Information (continued)
----------------------------------
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Statement of Income
Year Ended June 30, 1995
(in thousands)
<TABLE>
<CAPTION>
DIMON Non-
Incorporated Guarantors Guarantors Eliminations Total
<S> <C> <C> <C> <C> <C>
Sales and other operating revenues . $ 10,541 $1,259,125 $849,723 $ (178,201)a $1,941,188
Cost of goods and services sold. . . . 3,340 b 1,159,613 733,538 (137,127)a 1,759,364
__________ _____________ ___________ ____________ ___________
7,201 99,512 116,185 (41,074) 181,824
Selling, administrative and
general expenses . . . . . . . 13,936 51,073 80,692 (12,899)a,c 132,802
Restructuring and merger related
costs. . . . . . . . . . . . . 16,891 9,487 (423) - 25,955
__________ _____________ ___________ ____________ ___________
(23,626) 38,952 35,916 (28,175) 23,067
__________ _____________ ___________ ____________ ___________
Interest Expense . . . . . . . . 11,882 33,824 27,700 (28,175)a 45,231
__________ _____________ ___________ ____________ ___________
Income (loss) before income taxes,
minority interest, equity in
net income (loss) of investee
companies, and equity in net
income (loss) of subsidiaries. . . (35,508) 5,128 8,216 - (22,164)
Income taxes (benefits). . . . . . (8,567) 3,767 10,780 - 5,980
__________ _____________ ___________ ____________ ___________
Income (loss) before minority
interest, equity in net income
(loss) of investee companies
and equity in net income
(loss) of subsidiaries . . . . . (26,941) 1,361 (2,564) - (28,144)
Income applicable to minority
interest . . . . . . . . . . . . - - 216 - 216
Equity in net income (loss) of
investee companies, net of
income taxes . . . . . . . . . . - 348 (2,153) - (1,805)
Equity in net loss of
subsidiaries . . . . . . . . . . (3,224) (4,933) - 8,157 a -
__________ _____________ ___________ ____________ ___________
NET LOSS . . . . . . . . . . . . . $(30,165) $ (3,224) $ (4,933) $ 8,157 $ (30,165)
========== ============== ============ ============ ===========
a. Inter-company eliminations.
b. Reserve for inter-company profit in ending inventories
c. Royalty expense in SG&A and Royalty income in Other Income for Consolidated Entities.
</TABLE>
-65-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note R - Supplemental Guarantor Information (continued)
----------------------------------
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Statement of Cash Flows
Year Ended June 30, 1995
(in thousands)
<TABLE>
<CAPTION>
DIMON Non-
Incorporated Guarantors Guarantors Eliminations Total
<S> <C> <C> <C> <C> <C>
Operating activities
Net Income (Loss). . . . . . . . $ (30,165) $ (3,224) $ (4,933) $ 8,157 a $(30,165)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities
Depreciation and amortization. . . 607 10,372 20,873 - 31,852
Deferred items . . . . . . . . . . 3,922 (3,130) (1,412) - (620)
Loss (gain) on foreign currency
transactions . . . . . . . . . . (55) 81 544 - 570
Gain on disposition of
fixed assets . . . . . . . . . . - (280) (1,539) - (1,819)
Undistributed (earnings) loss of
investees/subsidiaries . . . 3,224 4,585 2,153 (8,157)a 1,805
Dividends received from investees. . - 400 78 - 478
Income applicable to minority
interest . . . . . . . . . . - - 216 - 216
Bad debt expense . . . . . . . - (30) 3,850 - 3,820
Decrease (increase) in accounts
receivable . . . . . . . . . (102,713) (33,329) 97,941 90,621 a 52,520
Decrease (increase) in inventories
and advances on purchases of
tobacco. . . . . . . . . . . 97,253 823 (261,577) 165,657 a 2,156
Decrease in recoverable taxes. . . 1,666 - 2,627 - 4,293
Decrease (increase) in
prepaid expenses . . . . . . (8,718) 1,420 3,717 - (3,581)
Increase (decrease) in accounts
payable and accrued expenses . . 5,224 7,736 (25,238) (45,885)a (58,163)
Increase (decrease) in advances
from customers . . . . . . . . . (918) (15,652) 201,799 (188,257)a (3,028)
Increase (decrease) in income
taxes. . . . . . . . . . . . . . (2,817) 7,135 1,757 - 6,075
Other . . . . . . . . . . .. . . . 269 - 135 - 404
__________ ___________ ___________ ____________ ___________
Net cash provided (used) by
operating activities. . . . . (33,221) (23,093) 40,991 22,136 6,813
__________ ___________ ___________ ____________ ___________
Investing activities
Purchase of property and
equipment . . . . . . . . . . . . (117) (10,966) (15,953) - (27,036)
Proceeds from sale of property
and equipment. . . . . . . . . - 838 4,039 - 4,877
Payments on notes receivable and
receivable from investees. . . 15 3,516 24,010 - 27,541
Issuance of notes receivable . . (30,000) (2,829) (3,500) 30,000 a (6,329)
Proceeds from or (advances) for
other investments and
other assets . . . . . . . . . 5,865 (9,075) 2,601 4,676 a 4,067
Purchase of minority interest
in subsidiaries. . . . . . . . - - (507) - (507)
Acquisition of subsidiary, net of
cash acquired. . . . . . . . . - (13,693) - - (13,693)
__________ ___________ ___________ ____________ ___________
Net cash provided (used) by
investing activities . . . (24,237) (32,209) 10,690 34,676 (11,080)
__________ ___________ ___________ ____________ ___________
</TABLE>
-66-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note R - Supplemental Guarantor Information (continued)
----------------------------------
DIMON INCORPORATED AND SUBSIDIARIES
Supplemental Combining Statement of Cash Flows
Year Ended June 30, 1995
(in thousands)
<TABLE>
<CAPTION>
DIMON Non-
Incorporated Guarantors Guarantors Eliminations Total
<S> <C> <C> <C> <C> <C>
Financing activities
Repayment of debt . . . . . . (641,100) (4,699) (281,223) - (927,022)
Proceeds from debt. . . . . . 708,995 60,000 239,371 (30,000)a 978,366
Cash dividends paid to DIMON
Incorporated stockholders . (15,568) - (2) - (15,570)
Cash dividends paid to minority
stockholders. . . . . . . . - - (237) - (237)
Proceeds from sale of common stock 169 - - - 169
__________ ___________ ___________ ____________ ___________
Net cash provided (used) by
financing activities. . 52,496 55,301 (42,091) (30,000) 35,706
__________ ___________ ___________ ____________ ___________
Effect of exchange rate
changes on cash . . . . . . . - - (1,584) - (1,584)
__________ ___________ ___________ ____________ ___________
Increase (decrease) in cash and
cash equivalents. . . . . . . (4,962) (1) 8,006 26,812 29,855
Cash and cash equivalents at
beginning of year . . . . . . 6,290 1,880 4,248 53 a 12,471
__________ ___________ ___________ ____________ ___________
Cash and cash equivalents
at end of year. . . . . $ 1,328 $ 1,879 $ 12,254 $ 26,865 $ 42,326
========== =========== =========== ============ ===========
a. Inter-company eliminations.
</TABLE>
-67-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note R - Supplemental Guarantor Information (continued)
----------------------------------
DIMON INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(in thousands)
(1) Each of the Guarantors, the Company's wholly-owned
subsidiaries, DIMON International, Inc. and Florimex
Worldwide Inc., have fully and unconditionally guaranteed on
a joint and several basis the performance and punctual
payment when due, whether at stated maturity, by
acceleration or otherwise, of all of the Company's
obligations under the Notes and the related indenture,
including its obligations to pay principal, premium, if any,
and interest with respect to the Notes. The obligations of
each Guarantor is limited to the maximum amount which, after
giving effect to all other contingent and fixed liabilities
of such Guarantor and after giving effect to any collections
from or payments made by or on behalf of any other Guarantor
in respect of the obligations of such other Guarantor under
its Guarantee or pursuant to its contribution obligations
under the Indenture, can be guaranteed by the relevant
Guarantor without resulting in the obligations of such
Guarantor under its Guarantee constituting a fraudulent
conveyance or fraudulent transfer under applicable federal
or state law. Each of the Guarantees is a guarantee of
payment and not collection. Each Guarantor that makes a
payment or distribution under a Guarantee shall be entitled
to a contribution from each other Guarantor in an amount pro
rata, based on the assets less liabilities of each Guarantor
determined in accordance with generally accepted accounting
principles (GAAP). The Company is not be restricted from
selling or otherwise disposing of any of the Guarantors
other than DIMON International, Inc. provided that the
proceeds of any such sale are applied as required by the
Indenture.
Florimex Worldwide, Inc. is the primary holding and operating
company in the U.S. and represents the lead company for the
flowers segment. The cut flowers operations consist of buying
flowers from sources throughout the world and transporting them,
normally by air, to operating units for resale to wholesalers
and retailers.
DIMON Incorporated and DIMON International, Inc. are the primary
holding companies. DIMON International, Inc. is the primary
operating company in the U.S. and represents the lead company
in the Tobacco division whose operations consist primarily of
selecting, buying, processing, packing, shipping, storing and
financing tobacco.
Management has determined that separate, full financial
statements of the Guarantors would not be material to investors
and such financial statements are not provided.
(2) DIMON Incorporated and each of the Guarantors have
accounted for their respective subsidiaries on the equity
basis.
(3) Certain reclassifications were made to conform all of the
financial information to the financial presentation on
a consolidated basis. The principal eliminating entries
eliminate investments in subsidiaries and intercompany
balances.
-68-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note R - Supplemental Guarantor Information (continued)
----------------------------------
DIMON INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(in thousands)
(4) Included in the above balance sheets are certain related party
balances among borrower, the guarantors and non-guarantors. Due
to the Company's world-wide operations, related party activity
is included in most balance sheet accounts. The tables below
set forth the significant intercompany balances for each of the
periods presented.
<TABLE>
<CAPTION>
June 30, 1997
Debit (Credit)
DIMON
Incorporated Guarantors Non-Guarantors
============================================================================================
<S> <C> <C> <C>
Accounts Receivable. . . . . . . . . . . $ 14,493 $ 11,439 $ 170,529
Advances on Purchases. . . . . . . . . . 243,640 174,860 55,019
Accounts Payable . . . . . . . . . . . . (61) (321,440) (158,995)
Advances from Customers. . . . . . . . . 18,063 (32) (60,944)
</TABLE>
<TABLE>
<CAPTION>
June 30, 1996
Debit (Credit)
DIMON
Incorporated Guarantors Non-Guarantors
============================================================================================
<S> <C> <C> <C>
Accounts Receivable. . . . . . . . . . . $26,761 $120,661 $54,267
Advances on Purchases. . . . . . . . . . 168,616 16,886 18,963
Accounts Payable . . . . . . . . . . . . (70) (272,781) (40,033)
Advances from Customers. . . . . . . . . (3,380) (37) (52,256)
</TABLE>
-69-
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE-
Inapplicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information contained in the Proxy Statement under the caption
"Election of Directors" is incorporated herein by reference thereto.
See "Additional Information - Executive Officers of the Company" at the
end of Part I above for information about the executive officers of
the Company.
ITEM 11. EXECUTIVE COMPENSATION AND TRANSACTIONS
The information contained in the Proxy Statement under the caption
"Compensation of Executive Officers and Directors" is incorporated
herein by reference thereto.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information contained in the Proxy Statement under the caption
"Stock Ownership" is incorporated herein by reference thereto.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained in the Proxy Statement under the caption
"Stock Ownership" is reported herein by reference thereto.
-70-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(a) (1) and (2)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
Consolidated Balance Sheet--June 30, 1997 and 1996
Statement of Consolidated Income--Years ended June 30, 1997,
1996 and 1995
Statement of Consolidated Cash Flows--Years ended June 30, 1997,
1996 and 1995
Statement of Stockholders' Equity--Years ended June 30, 1997,
1996 and 1995
Notes to Consolidated Financial Statements
Financial Statement Schedules:
Schedule II Valuation and Qualifying Accounts
Report of Price Waterhouse LLP
(b) Current Reports on Form 8-K
Form 8-K, filed February 24, 1997.
Form 8-K, filed April 16, 1997.
Form 8-K/A, filed June 16, 1997, amending Current Report
on Form 8-K, filed April 16, 1997.
-71-
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K (continued)
<TABLE>
<CAPTION>
(3) Exhibits
The following documents are filed as exhibits to this Form 10-K
pursuant to Item 601 of Regulation S-K:
<S> <C> <C>
3.01 Amended and Restated Articles of Incorporation of DIMON Incorporated
(incorporated by reference to Appendix VII to DIMON Incorporated's Joint
Proxy Statement filed pursuant to Rule 424(b) in connection with DIMON
Incorporated's Registration Statement on Form S-4 (form 33-89780))
3.02 Amended and Restated By-Laws, as amended, of DIMON Incorporated
(incorporated by reference to Exhibit 3.2 to DIMON Incorporated's
Registration Statement on Form S-4 (file 33-89780))
4.01 Specimen of Common Stock Certificate (incorporated herein by reference
to Exhibit 4.1 to DIMON Incorporated's Registration Statement on Form S-4
(file 33-89780))
4.02 Article III of the Amended and Restated Articles of Incorporation of DIMON
Incorporated (filed as Exhibit 3.01)
4.03 Article III of the Amended and Restated By-Laws of DIMON Incorporated
(filed as Exhibit 3.02)
4.04 Rights Agreement, dated as of March 31, 1995, between DIMON
Incorporated and First Union National Bank of North Carolina, as Rights
Agent (incorporated by reference to Exhibit 4 to DIMON Incorporated
Current Report on Form 8-K, dated April 1, 1995)
4.05 Indenture, dated May 29, 1996 among DIMON Incorporated as issuer,
DIMON International, Inc. and Florimex Worldwide, Inc. as guarantors
and Crestar Bank, as trustee (incorporated by reference to Exhibit 4.05 to
DIMON Incorporated's Annual Report on Form 10-K for the year ended
June 30, 1996)
10.01 DIMON Incorporated Omnibus Stock Incentive Plan (incorporated
herein by reference to Exhibit 10.1 to DIMON Incorporated's Registration
Statement on Form S-4 (file No. 33-89780))
10.02 DIMON Incorporated Non-Employee Directors' Stock Option Plan
(incorporated herein by reference to Exhibit 10.2 to DIMON Incorporated's
Registration Statement on Form S-4 (file No. 33-89780))
10.03 Dibrell Brothers, Incorporated 1994 Omnibus Stock Incentive Plan
(incorporated by reference to Exhibit 10.6 to Dibrell Brothers, Incorporated's
Annual Report on Form 10-K for the fiscal year ended June 30, 1994)
</TABLE>
-72-
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K (continued)
<TABLE>
<CAPTION>
(3) Exhibits (continued)
<S> <C> <C>
10.04 Form of Interpretive letter, dated January 11, 1995, under the Dibrell Brothers,
Incorporated 1994 Omnibus Stock Incentive Plan delivered by Dibrell Brothers,
Incorporated to Claude B. Owen, Jr., T. H. Faucett, T. W. Oakes, L. N. Dibrell,
III and H. P. Green (incorporated by reference to Exhibit 10.6 to Dibrell Brothers,
Incorporated's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1994)
10.05 Dibrell Brothers, Incorporated Retirement Plan (Excess Benefit Plan)
(incorporated herein by reference to Exhibit 10.4 to Dibrell Brothers,
Incorporated's Annual Report on Form 10-K for the year ended June 30, 1987)
10.06 Dibrell Brothers, Incorporated Pension Equalization Plan (Benefit Assurance
Plan) (incorporated herein by reference to Exhibit 10.13 to Dibrell Brothers,
Incorporated's Annual Report on Form 10-K for the year ended June 30, 1991)
10.07 Long-Term Stock Investment Plan for Key Employees of Monk-Austin, Inc.
(incorporated by reference to Exhibit 10.5 of Monk-Austin, Inc.'s Registration
Statement on S-1 (File No. 33-51842))
10.08 Form of 1995 Declaration of Amendment to Long-Term Stock Investment
Plan for Key Employees of Monk-Austin, Inc. (incorporated herein by reference
to Exhibit 10.8 to DIMON Incorporated's Registration Statement on Form S-4
(File No. 33-89780))
10.09 Employment Agreement, dated October 18, 1994, between Monk-Austin
International, Inc. and Albert C. Monk, III (incorporated by reference to
Exhibit 10.1 to Monk-Austin, Inc.'s Quarterly Report on Form 10-Q for the
quarter ended December 31, 1994)
10.10 Employment Agreement, dated as of December 21, 1994, effective as of
November 1, 1994, by and between Dibrell Brothers, Incorporated and
Claude B. Owen, Jr. (incorporated by reference to Exhibit 10.1 to Dibrell
Brothers, Incorporated's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1994)
10.11 Employment Agreement, dated as of December 21, 1994, effective as of
November 1, 1994, by and between Dibrell Brothers, Incorporated and
L. N. Dibrell, III (incorporated by reference to Exhibit 10.1 to Dibrell
Brothers, Incorporated's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1994)
</TABLE>
-73-
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K (continued)
<TABLE>
<CAPTION>
(3) Exhibits (continued)
<S> <C> <C>
10.12 $500,000,000 Credit Agreement dated as of June 27, 1997 among the
Company, the lenders named therein, NationsBank, N.A. as administrative agent,
First Union National Bank, as documentation agent and Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland," New York
Branch and Societe Generale as co-agents (the "Credit Agreement")
(incorporated by reference to Exhibit 10.1 to DIMON Incorporated's
Registration Statement on Form S-3 (No. 333-33267))
10.13 Consulting Agreement dated April 22, 1996 between DIMON Incorporated
and John M. Hines (incorporated by reference to Exhibit 10.29 to DIMON
Incorporated's Registration Statement on Form S-1 (No. 333-1288))
10.14 Guaranty Agreement, dated as of June 27, 1997 by DIMON
International, Inc. and Florimex Worldwide, Inc. of the
obligations of the Company under the Credit Agreement
(incorporated by reference to Exhibit 10.3 to DIMON
Incorporated's Registration Statement on Form S-3
(No. 333-33267))
10.15 Form of Note in connection with Credit Agreement (incorporated by
reference to Exhibit 10.2 to DIMON Incorporated's Registration
Statement on Form S-3 (No. 333-33267))
10.16 Purchase Agreement by and among DIMON Incorporated, Austria
Tabakwerke AG, Austria Tabak Einkaufs-Und Handelorganisation
GesmbH and Austro-Hellenique S.A. De Tabac Et De Batiment, dated
April 13, 1995 (incorporated by reference to Exhibit 10.1 to DIMON
Incorporated's Current Report on Form 8-K, dated June 7, 1995)
10.17 Stock Purchase Agreement, dated as of February 14, 1997, among
DIMON Incorporated, Intabex Holdings Worldwide S.A., Folium Inc.,
Leaf Management Investments Ltd. and Tabacalera S.A. (incorporated by
reference herein to Exhibit 10.1 to DIMON Incorporated's Current Report
on Form 8-K dated April 16, 1997)
10.18 Indenture, dated as of April 1, 1997, by DIMON Incorporated to LaSalle
National Bank, relating to $140 Million of 6 1/4% Convertible
Subordinated Debentures due March 31, 2007 (incorporated by reference
herein to Exhibit 10.2 to DIMON Incorporated's Current Report on
Form 8-K dated April 16, 1997)
10.19 Non-Competition Agreements, dated as of April 1, 1997, by and between
Intabex S.A. (Zug) and Folium Inc. (incorporated by reference herein to
Exhibit 10.3 and 10.7 to DIMON Incorporated's Current Report on
Form 8-K dated April 16, 1997)
</TABLE>
-74-
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K (continued)
<TABLE>
<CAPTION>
(3) Exhibits (continued)
<S> <C> <C>
10.20 Registration Rights Agreement, dated as of April 1, 1997, by and between
DIMON Incorporated, Tabacalera S.A., Folium Inc. and Leaf Management
Investments Ltd. (incorporated by reference herein to Exhibit 10.4 to
DIMON Incorporated's Current Report on Form 8-K dated April 16, 1997)
10.21 Consulting Agreement, dated April 1, 1997, by and between Intabex S.A.
(Zug) and Anthony C.B. Taberer (incorporated by reference herein to
Exhibit 10.5) to DIMON Incorporated's Current Report on Form 8-K dated
April 16, 1997)
10.22 Asset Purchase Agreement, dated as of February 14, 1997, by and between
Dibrell Brothers Zimbabwe (Private) Limited and Tabex (Private) Limited
(incorporated by reference herein to Exhibit 10.6 to DIMON Incorporated's
Current Report on Form 8-K dated April 16, 1997)
10.23 Employment Agreement dated January 3, 1997, with Brian J. Harker
(incorporated by reference to Exhibit 10 to DIMON Incorporated's
Quarterly Report on Form 10-Q dated February 14, 1997)
10.24 DIMON Incorporated Cash Balance Plan effective July 1, 1996
(filed herewith)
10.25 DIMON Incorporated Supplemental Retirement Plan effective
January 1, 1997 (filed herewith).
11 Computation of Earnings per Common Share (filed herewith)
21 List of Subsidiaries (filed herewith)
23.1 Consent of Price Waterhouse LLP (filed herewith)
23.2 Consent of Price Waterhouse LLP (filed herewith)
27 Financial Data Schedule (filed herewith)
(d) Financial Statement Schedules:
Schedule II, Valuation and Qualifying Accounts, appears on the following pages. The
consolidated financial statement schedules listed in Item 14(a) appear on the following
pages. All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the related
instructions or are not applicable and, therefore, have been omitted.
</TABLE>
-75-
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
DIMON INCORPORATED AND SUBSIDIARIES
PERIODS ENDED JUNE 30
__________________________________________________________________________________________________________________________________
: COL. A : COL. B : COL. C : COL. D : COL. E :
: : : ADDITIONS : : :
: : Balance at : (1) : (2) : : Balance at :
: DESCRIPTION : Beginning : Charged to : Charged to : Deductions : End of :
: : of Period : Costs : Other Accounts : -Describe : Period :
: : : and : -Describe : : :
: : : Expenses : : : :
:__________________________________:___________________:_________________:____________________:_________________:__________________:
<S> <C> <C> <C> <C> <C>
Year ended June 30, 1995
Deducted from asset accounts:
Allowance for doubtful accounts $ 9,972,568 $3,820,054 $ - $4,969,283 (A) $ 8,823,339
Other investments 417,958 - (1,034,819) - (616,861)(B)
___________ __________ ____________ __________ ___________
Total $10,390,526 $3,820,054 $(1,034,819) $4,969,283 $ 8,206,478
=========== ========== =========== =========== ===========
Year ended June 30, 1996
Deducted from asset accounts:
Allowance for doubtful accounts $ 8,823,339 $1,042,911 $ - $3,308,099 (A) $ 6,558,151
Other Investments (616,861) - 616,861 - -
___________ __________ ___________ __________ ___________
Total $ 8,206,478 $1,042,911 $ 616,861 $3,308,099 $ 6,558,151
=========== ========== =========== ========== ==========
Year ended June 30, 1997
Deducted from asset accounts:
Allowance for doubtful accounts $ 6,558,151 $ 88,892 $ - $ 744,744 (A) $ 5,902,299
Other investments - - - - -
___________ __________ ____________ __________ ___________
Total $ 6,558,151 $ 88,892 $ - (A) $ 744,744 $ 5,902,299
=========== ========== =========== ========== ===========
(A) CURRENCY TRANSLATION AND DIRECT WRITE-OFF.
(B) NET UNREALIZED LOSS (GAIN) BEFORE TAX ON LONG-TERM MARKETABLE EQUITY SECURITIES RECORDED IN STOCKHOLDERS' EQUITY.
</TABLE>
-76-
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders of DIMON Incorporated
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income, of changes in stockholders'
equity and of cash flows present fairly, in all material respects, the
financial position of DIMON Incorporated and its subsidiaries at June
30, 1997 and 1996, and the results of their operations and their cash
flows for each of the three years in the period ended June 30, 1997,
in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide
a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Charlotte, North Carolina
September 15, 1997
-77-
<PAGE>
Report of Independent Accountants
on Financial Statement Schedule
To the Board of Directors of DIMON Incorporated
Our audits of the consolidated financial statements referred to in our
report dated September 15, 1997 appearing in this Annual Report on
Form 10-K also included an audit of the Financial Statement Schedule
listed in Item 14(a) of this Form 10-K. In our opinion, this
Financial Statement Schedule presents fairly, in all material
respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Charlotte, North Carolina
September 15, 1997
-78-
<PAGE>
<TABLE>
<CAPTION>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized on September 22, 1997.
DIMON INCORPORATED (Registrant) /s/ Claude B. Owen, Jr.
By ____________________________________
Claude B. Owen, Jr.
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1934, this report has been signed below by
the following persons on behalf of the registrant and in the capacities indicated on
September 22, 1997.
<S> <C>
/s/ Claude B. Owen, Jr. /s/ Norman A. Scher
__________________________________ __________________________________
Claude B. Owen, Jr. Norman A. Scher
Chairman of the Board and Director of DIMON Incorporated
Chief Executive Officer of DIMON
Incorporated
/s/ Henry F. Frigon
/s/ Joseph L. Lanier, Jr. ____________________________________
__________________________________ Henry F. Frigon
Joseph L. Lanier, Jr. Director of DIMON Incorporated
Director of DIMON Incorporated
/s/ John M. Hines
/s/ Louis N. Dibrell, III ____________________________________
__________________________________ John M. Hines
Louis N. Dibrell, III Director of DIMON Incorporated
Director of DIMON Incorporated
/s/ R. Stuart Dickson
/s/ Albert C. Monk III ____________________________________
__________________________________ R. Stuart Dickson
Albert C. Monk III Director of DIMON Incorporated
Director and President of DIMON
Incorporated
/s/ William R. Slee
/s/ Robert T. Monk, Jr. ___________________________________
__________________________________ William R. Slee
Robert T. Monk, Jr. Director of DIMON Incorporated
Director of DIMON Incorporated
/s/ Anthony C. B. Taberer
/s/ Thomas F. Keller ___________________________________
__________________________________ Anthony C. B. Taberer
Thomas F. Keller Director of DIMON Incorporated
Director of DIMON Incorporated
/s/ Jerry L. Parker
_________________________________
/s/ James E. Johnson, Jr. Jerry L. Parker
__________________________________ Vice President-Controller (Principal
James E. Johnson, Jr. Accounting Officer) of DIMON
Director of DIMON Incorporated Incorporated
</TABLE>
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<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page No.
<S> <C> <C> <C>
3.01 Amended and Restated Articles of Incorporation of
DIMON Incorporated (incorporated by reference to
Appendix VII to DIMON Incorporated's Joint
Proxy Statement filed pursuant to Rule 424(b) in
connection with DIMON Incorporated's Registration
Statement on Form S-4 (form 33-89780))
3.02 Amended and Restated By-Laws, as amended, of
DIMON Incorporated (incorporated by reference to
Exhibit 3.2 to DIMON Incorporated's
Registration Statement on Form S-4 (file 33-89780))
4.01 Specimen of Common Stock Certificate (incorporated
herein by reference to Exhibit 4.1 to DIMON Incorporated's
Registration Statement on Form S-4 (file 33-89780))
4.02 Article III of the Amended and Restated Articles of
Incorporation of DIMON Incorporated
(filed as Exhibit 3.01)
4.03 Article III of the Amended and Restated By-Laws
of DIMON Incorporated (filed as Exhibit 3.02)
4.04 Rights Agreement, dated as of March 31, 1995,
between DIMON Incorporated and First Union National
Bank of North Carolina, as Rights Agent (incorporated
by reference to Exhibit 4 to DIMON Incorporated
Current Report on Form 8-K, dated April 1, 1995)
4.05 Indenture, dated May 29, 1996 among DIMON
Incorporated as issuer, DIMON International, Inc. and
Florimex Worldwide, Inc. as guarantors and Crestar
Bank, as trustee (incorporated by reference to Exhibit
4.05 to DIMON Incorporated's Annual Report on
Form 10-K for the year ended June 30, 1996)
10.01 DIMON Incorporated Omnibus Stock Incentive Plan
(incorporated herein by reference to Exhibit 10.1 to
DIMON Incorporated's Registration
Statement on Form S-4 (file No. 33-89780))
10.02 DIMON Incorporated Non-Employee Directors'
Stock Option Plan (incorporated herein by reference
to Exhibit 10.2 to DIMON Incorporated's
Registration Statement on Form S-4
(file No. 33-89780))
</TABLE>
-80-
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page No.
<S> <C> <C> <C>
10.03 Dibrell Brothers, Incorporated 1994 Omnibus Stock
Incentive Plan (incorporated by reference to Exhibit 10.6
to Dibrell Brothers, Incorporated's Annual Report on
Form 10-K for the fiscal year ended June 30, 1994)
10.04 Form of Interpretive letter, dated January 11, 1995, under
the Dibrell Brothers, Incorporated 1994 Omnibus Stock
Incentive Plan delivered by Dibrell Brothers, Incorporated
to Claude B. Owen, Jr., T. H. Faucett, T. W. Oakes,
L. N. Dibrell, III and H. P. Green (incorporated by reference
to Exhibit 10.6 to Dibrell Brothers, Incorporated's Quarterly
Report on Form 10-Q for the quarter ended
December 31, 1994)
10.05 Dibrell Brothers, Incorporated Retirement Plan (Excess
Benefit Plan) (incorporated herein by reference to Exhibit
10.4 to Dibrell Brothers, Incorporated's Annual Report on
Form 10-K for the year ended June 30, 1987)
10.06 Dibrell Brothers, Incorporated Pension Equalization Plan
(Benefit Assurance Plan) (incorporated herein by reference
to Exhibit 10.13 to Dibrell Brothers, Incorporated's Annual
Report on Form 10-K for the year ended June 30, 1991)
10.07 Long-Term Stock Investment Plan for Key Employees of
Monk-Austin, Inc. (incorporated by reference to
Exhibit 10.5 of Monk-Austin, Inc.'s Registration
Statement on S-1 (File No. 33-51842))
10.08 Form of 1995 Declaration of Amendment to Long-Term
Stock Investment Plan for Key Employees of
Monk-Austin, Inc. (incorporated herein by reference
to Exhibit 10.8 to DIMON Incorporated's Registration
Statement on Form S-4 (File No. 33-89780))
10.09 Employment Agreement, dated October 18, 1994,
between Monk-Austin International, Inc. and
Albert C. Monk, III (incorporated by reference to
Exhibit 10.1 to Monk-Austin, Inc.'s Quarterly Report
on Form 10-Q for the quarter ended
December 31, 1994)
10.10 Employment Agreement, dated as of December 21, 1994,
effective as of November 1, 1994, by and between Dibrell
Brothers, Incorporated and Claude B. Owen, Jr.
(incorporated by reference to Exhibit 10.1 to Dibrell
Brothers, Incorporated's Quarterly Report on Form 10-Q
for the quarter ended December 31, 1994)
</TABLE>
-81-
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page No.
<S> <C> <C> <C>
10.11 Employment Agreement, dated as of December 21,
1994, effective as of November 1, 1994, by and
between Dibrell Brothers, Incorporated and
L. N. Dibrell, III (incorporated by reference to
Exhibit 10.1 to Dibrell Brothers, Incorporated's
Quarterly Report on Form 10-Q for the quarter
ended December 31, 1994)
10.12 $500,000,000 Credit Agreement dated as of
June 27, 1997 among the Company, the lenders named
therein, NationsBank, N.A. as administrative agent, First
Union National Bank, as documentation agent and
Cooperatieve Centrale Raiffeisen-Boerenleenbank
B.A., "Rabobank Nederland," New York Branch and
Societe Generale as co-agents (the "Credit Agreement")
(incorporated by reference to Exhibit 10.1 to DIMON
Incorporated's Registration Statement on Form S-3
(No. 333-33267))
10.13 Consulting Agreement dated April 22, 1996 between
DIMON Incorporated and John M. Hines (incorporated
by reference to Exhibit 10.29 to DIMON Incorporated's
Registration Statement on Form S-1 (No. 333-1288))
10.14 Guaranty Agreement, dated as of June 27, 1997 by
DIMON International, Inc. and Florimex Worldwide, Inc.
of the obligations of the Company under the Credit
Agreement (incorporated by reference to Exhibit 10.3
to DIMON Incorporated's Registration Statement on
Form S-3 (No. 333-33267))
10.15 Form of Note in connection with Credit Agreement
(incorporated by reference to Exhibit 10.2 to DIMON
Incorporated's Registration Statement on Form S-3
(No. 333-33267))
10.16 Purchase Agreement by and among DIMON
Incorporated, Austria Tabakwerke AG, Austria
Tabak Einkaufs-Und Handelorganisation GesmbH
and Austro-Hellenique S.A. De Tabac Et De
Batiment, dated April 13, 1995 (incorporated by
reference to Exhibit 10.1 to DIMON Incorporated's
Current Report on Form 8-K, dated June 7, 1995)
</TABLE>
- 82 -
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page No.
<S> <C> <C> <C>
10.17 Stock Purchase Agreement, dated as of
February 14, 1997, among DIMON Incorporated,
Intabex Holdings Worldwide S.A., Folium Inc.,
Leaf Management Investments Ltd. and
Tabacalera S.A. (incorporated by reference herein
to Exhibit 10.1 to DIMON Incorporated's
Current Report on Form 8-K dated
April 16, 1997)
10.18 Indenture, dated as of April 1, 1997, by DIMON
Incorporated to LaSalle National Bank, relating to
$140 Million of 6 1/4% Convertible Subordinated
Debentures due March 31, 2007 (incorporated by
reference herein to Exhibit 10.2 to DIMON
Incorporated's Current Report on Form 8-K dated
April 16, 1997)
10.19 Non-Competition Agreements, dated as of
April 1, 1997, by and between Intabex S.A. (Zug)
and Folium Inc. (incorporated by reference herein
to Exhibit 10.3 and 10.7 to DIMON Incorporated's
Current Report on Form 8-K dated April 16, 1997)
10.20 Registration Rights Agreement, dated as of
April 1, 1997, by and between DIMON Incorporated,
Tabacalera S.A., Folium Inc. and Leaf Management
Investments Ltd. (incorporated by reference herein
to Exhibit 10.4 to DIMON Incorporated's Current
Report on Form 8-K dated April 16, 1997)
10.21 Consulting Agreement, dated April 1, 1997, by
and between Intabex S.A. (Zug) and Anthony
C.B. Taberer (incorporated by reference herein to
Exhibit 10.5) to DIMON Incorporated's Current
Report on Form 8-K dated April 16, 1997)
10.22 Asset Purchase Agreement, dated as of
February 14, 1997, by and between Dibrell Brothers
Zimbabwe (Private) Limited and Tabex (Private)
Limited (incorporated by reference herein to
Exhibit 10.6 to DIMON Incorporated's Current
Report on Form 8-K dated April 16, 1997)
10.23 Employment Agreement dated January 3, 1997,
with Brian J. Harker (incorporated by reference to
Exhibit 10 to DIMON Incorporated's Quarterly
Report on Form 10-Q dated February 14, 1997)
</TABLE>
-83-
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page No.
<S> <C> <C> <C>
10.24 DIMON Incorporated Cash Balance Plan 85 - 195
effective July 1, 1996 (filed herewith)
10.25 DIMON Incorporated Supplemental Retirement Plan 196 - 214
effective January 1, 1997 (filed herewith).
11 Computation of Earnings per Common Share 215
(filed herewith)
21 List of Subsidiaries (filed herewith) 216
23.1 Consent of Price Waterhouse LLP 217
(filed herewith)
23.2 Consent of Price Waterhouse LLP 218
(filed herewith)
27 Financial Data Schedule (filed herewith) 219
</TABLE>
- 84 -
<PAGE>
Exhibit 10.24
DIMON INCORPORATED
CASH BALANCE PLAN
Amended and Restated
Effective July 1, 1996
- -85-
<PAGE>
DIMON INCORPORATED CASH BALANCE PLAN
Table of Contents
Page
ARTICLE 1 DEFINITIONS......................................... 1
1.1 Account............................................. 1
1.2 Account Balance..................................... 1
1.3 Accrued Benefit..................................... 1
1.4 Actuarial Equivalent................................ 2
1.5 Beginning Account Balance........................... 3
1.6 Benefit Commencement Date........................... 3
1.7 Board............................................... 3
1.8 Cash Balance Account................................ 3
1.9 Code................................................ 3
1.10 Committee........................................... 4
1.11 Company............................................. 4
1.12 Compensation........................................ 4
1.13 Controlled Group.................................... 4
1.14 Dibrell Plan........................................ 5
1.15 Disability.......................................... 5
1.16 Early Retirement Date............................... 5
1.17 Effective Date...................................... 6
1.18 Employee............................................ 6
1.19 Employer............................................ 6
1.20 Employment.......................................... 7
1.21 Employment Date..................................... 7
1.22 ERISA............................................... 7
1.23 Fiduciary........................................... 7
1.24 Five-Year Break..................................... 7
1.25 Hours of Service.................................... 7
1.26 Interest Credit..................................... 10
1.27 Interest Credit Percentage.......................... 11
1.28 Investment Manager.................................. 11
1.29 Leased Employee..................................... 11
1.30 Military Leave...................................... 12
1.31 Monk-Austin Plan.................................... 12
1.32 Normal Retirement Age............................... 12
1.33 Normal Retirement Date.............................. 13
1.34 One-Year Break...................................... 13
i
- -86-
<PAGE>
<PAGE>
Page
1.35 Participant......................................... 13
1.36 Plan................................................ 13
1.37 Plan Administrator.................................. 13
1.38 Plan Year........................................... 13
1.39 Qualified Domestic Relations Order.................. 13
1.40 Retirement Credit................................... 15
1.41 Retirement Credit Percentage........................ 15
1.42 Spouse or Surviving Spouse.......................... 15
1.43 Termination Date.................................... 16
1.44 Trust (or Trust Fund)............................... 16
1.45 Trustee............................................. 16
1.46 Uniformed Service................................... 16
1.47 USERRA.............................................. 16
1.48 Years of Service.................................... 17
ARTICLE 2 ELIGIBILITY......................................... 19
2.1 Eligibility......................................... 19
2.2 Participation Upon Reemployment..................... 20
2.3 Adoption of Plan by Controlled Group Member......... 21
2.4 Leased Employees.................................... 21
ARTICLE 3 CASH BALANCE ACCOUNTS............................... 23
3.1 Allocations to Cash Balance Account................. 23
3.2 Vesting............................................. 26
3.3 Disability Benefit.................................. 26
3.4 Reemployment........................................ 28
ARTICLE 4 PAYMENT ON ACCOUNT BALANCES......................... 30
4.1 Payment Dates....................................... 30
4.2 Automatic Form of Payment........................... 32
4.3 Election of Optional Form of Payment................ 36
4.4 Description of Forms of Payment..................... 37
4.5 Effect of Death on Forms of Payment................. 40
4.6 Designation of Beneficiaries........................ 41
4.7 Payment to Participant's Representative............. 42
4.8 Unclaimed Benefits.................................. 43
4.9 Required Distribution Rules......................... 43
ii
- -87-
<PAGE>
<PAGE>
Page
ARTICLE 5 PRERETIREMENT DEATH BENEFITS........................ 44
5.1 Married Vested Participants......................... 44
5.2 Unmarried Participant or Nonvested Participant...... 45
ARTICLE 6 LIMITATIONS ON BENEFIT AMOUNTS...................... 46
6.1 Code Section 415 Limits............................. 46
6.2 Restrictions on Benefits Payable to the 25
Highest-Paid Participants........................... 55
6.3 Top-Heavy Rules..................................... 56
ARTICLE 7 CONTRIBUTIONS....................................... 63
7.1 Employer Contributions.............................. 63
7.2 Participant Contributions........................... 63
7.3 Return of Contributions to the Employers............ 63
7.4 Actuarial Gains..................................... 64
ARTICLE 8 AMENDMENT, TERMINATION, MERGER...................... 65
8.1 Amendment........................................... 65
8.2 Termination of the Plan............................. 66
8.3 Merger.............................................. 68
ARTICLE 9 APPOINTMENTS AND ALLOCATION OF FIDUCIARY
RESPONSIBILITY...................................... 69
9.1 Named Fiduciary..................................... 69
9.2 Plan Administrator.................................. 69
9.3 Investment and Administrative Committee............. 69
9.4 Actuary............................................. 69
9.5 Accountant.......................................... 70
9.6 Allocations of Fiduciary Responsibility............. 70
9.7 General............................................. 71
9.8 Fiduciary Discretion................................ 71
ARTICLE 10 PLAN ADMINISTRATION............................... 73
10.1 General............................................. 73
10.2 Disclosure.......................................... 74
iii
- -88-
<PAGE>
<PAGE>
Page
10.3 Annual Accountings.................................. 75
10.4 Actuarial Services and Certification................ 75
10.5 Funding Policy...................................... 76
10.6 Expenses - Compensation............................. 76
10.7 Directions to Trustee............................... 77
10.8 Claims Procedure.................................... 77
ARTICLE 11 THE INVESTMENT AND ADMINISTRATIVE COMMITTEE....... 79
11.1 Committee........................................... 79
11.2 Meetings - Actions.................................. 79
11.3 Powers of Committee................................. 80
11.4 Agents and Counsel.................................. 81
11.5 Compensation........................................ 81
11.6 Officers............................................ 82
11.7 Rules and Regulations............................... 82
ARTICLE 12 MISCELLANEOUS..................................... 83
12.1 Headings............................................ 83
12.2 Construction........................................ 83
12.3 Qualification for Continued Tax-Exempt Status....... 83
12.4 Nonalienation....................................... 83
12.5 No Employment Rights................................ 84
12.6 No Enlargement of Rights............................ 84
12.7 Single Employer Plan................................ 84
12.8 Exclusive Purpose................................... 84
12.9 Errors and Omissions................................ 85
Addendum A History of Revised Plan Provisions
Addendum B Required Distribution Rules
iv
- -89-
<PAGE>
<PAGE>
DIMON INCORPORATED CASH BALANCE PLAN
INTRODUCTION
Dimon Incorporated, formerly Dibrell Brothers, Incorporated (the
Company), hereby amends and restates the Retirement Plan for
Employees of Dibrell Brothers and Subsidiary Companies (the
Dibrell Plan), as set forth in this document, effective July 1,
1996. The Company initially adopted the Dibrell Plan February 1,
1951, and has always maintained the Plan as a qualified
retirement plan. Until the 1989 Plan Year, the Company also
maintained the Dibrell Brothers Incorporated Savings and Profit
Sharing Plan as a floor-offset arrangement. Effective January 1,
1989, the Company eliminated the offset for the profit sharing
plan.
This restatement converts the Dibrell Plan to a cash balance plan
and renames it the Dimon Incorporated Cash Balance Plan (the
Plan). The Plan continues to be a defined benefit retirement
plan, with nominal account balances. The Plan is designed to
comply with all qualification requirements that apply to cash
balance plans under Sections 401(a) and 501(a) of the Internal
Revenue Code of 1986, as amended (the Code), and with all
applicable provisions of the Employee Retirement Income Security
Act of 1974, as amended (ERISA).
The provisions of this amended and restated Plan supersede the
Dibrell Plan for all eligible employees who are employed by the
Company on or after July 1, 1996. Each participant in the Plan
will have a bookkeeping account, the balance of which is equal to
his accrued benefit as of the date of determination. Each Dimon
employee who participated in the Dibrell Plan will have a
- -90-
<PAGE>
<PAGE>
beginning account balance in this Plan equal to the lump-sum
present value of his benefit accrued under the Dibrell Plan as of
June 30, 1996, based on the actuarial assumptions in effect on
June 30, 1996. Each Dimon employee who was a participant in the
Monk-Austin Profit Sharing Plan on June 30, 1995, will have a
beginning account balance equal to an amount calculated by a
special formula set forth in this Plan.
The history of revised Dibrell Plan provisions is set forth in
Addendum A, to the extent that the historical provisions can
affect any Participant's benefits under this Plan. The required
distribution rules under Code section 401(a)(9) are set forth in
Addendum B. The Addenda are integral parts of the Plan.
The rights of any employee who participated in the Dibrell Plan
and terminated before July 1, 1996, will be determined under the
terms of the Dibrell Plan as in effect on the date such employee
terminated.
- -91-
<PAGE>
<PAGE>
ARTICLE 1
DEFINITIONS
As used in the Plan, the following words and phrases and any
derivatives thereof will have the meanings set forth below unless
the context clearly indicates otherwise. Definitions of other
words and phrases applicable to the limitations on benefit
amounts are set forth in Article 6. Section references indicate
sections of the Plan unless otherwise stated. The masculine
pronoun includes the feminine, and the singular number includes
the plural and the plural the singular, whenever applicable.
1.1 Account. The Participant's Cash Balance Account (See Plan
sections 1.8 and 3.1).
1.2 Account Balance. The balance in the Participant's Cash
Balance Account, calculated under Plan section 3.1 by
totaling his Beginning Account Balance (if any), plus the
sum of the annual Retirement Credits allocated to his
Account, plus the sum of the annual Interest Credits
allocated to his Account.
1.3 Accrued Benefit. The annual benefit payable as of the
Participant's Normal Retirement Date as a five years certain
1
- -92-
<PAGE>
<PAGE>
and life annuity (the normal form), which is the Actuarial
Equivalent of his Account Balance projected to his Normal
Retirement Date using the Interest Credit Percentage in
effect as of the date of determination, and annuitized using
the Actuarial Equivalent factors described in Plan section
1.4(b). If the Accrued Benefit is paid prior to the
Participant's Normal Retirement Date, the Plan will convert
the annuity payable as of the Participant's Normal
Retirement Date to an immediate five years certain and life
annuity payable as of such early commencement date, using
the Actuarial Equivalent factors described in Plan section
1.4(b).
1.4 Actuarial Equivalent. Effective July 1, 1996, a benefit of
equal value computed on the following bases:
(a) Annuity Forms of Payment. The 1971 TPF&C Forecast
Mortality Table, with a one-year setback for
Participants and a five-year setback for beneficiaries,
and interest at the rate of 6 percent compounded
annually, except that the Committee will use the lump
sum conversion factors set forth in subsection (b) to
value the five years certain and life annuity (the
normal form).
(b) Lump Sum Payments. The applicable mortality table and
the applicable interest rate established by the
Internal Revenue Service under Code section 417(e)(3)
as in effect for the month of November preceding the
Plan Year in which the payment is made.
The Actuarial Equivalent factors in effect before June 30,
1996, are set forth in Addendum A.
2
- -93-
<PAGE>
<PAGE>
1.5 Beginning Account Balance. The amount credited as of July
1, 1996, to the Cash Balance Account of each Participant who
is eligible for a Beginning Account Balance under Plan
section 3.1(a).
1.6 Benefit Commencement Date. The first day of the first month
for which a benefit is payable as an annuity to the
Participant under Articles 3 and 4, or to his Surviving
Spouse under Article 5. If the benefit is payable in a lump
sum, the Benefit Commencement Date is the date when the
Trustee issues the payment, and the Plan will use the
interest rate in effect determined under Plan section 1.4(b)
as of the first day of the Plan Year in which payment is
made. A Participant's Benefit Commencement Date is
determined subject to the procedures set forth in Plan
section 4.2.
1.7 Board. The Board of Directors of the Company.
1.8 Cash Balance Account. The bookkeeping account used to
record the Participant's Account Balance.
1.9 Code. The Internal Revenue Code of 1986 as amended from
time to time, and regulations and rulings issued under the
Code.
3
- -94-
<PAGE>
<PAGE>
1.10 Committee. The Investment and Administrative Committee,
which will have primary responsibility for administering the
Plan under Article 11.
1.11 Company. Dimon Incorporated, a Virginia corporation, or its
successor or assign which adopts the Plan.
1.12 Compensation.
(a) For Accrued Benefit and Nondiscrimination Testing. The
taxable earnings paid in cash by the Employer to the
Participant and reported on his Form W-2 for the
calendar year, excluding commissions and extra pay for
temporary foreign service, plus amounts deferred under
Code sections 401(k) and 125 pursuant to the
Participant's salary reduction agreement. This
definition of Compensation will be used to determine
key employee status under Plan section 6.3(a).
(b) Statutory Cap. Each Participant's Compensation taken
into account for all purposes under the Plan will be
limited to $150,000 (as indexed under Code section
401(a)(17)).
1.13 Controlled Group. The Company and
(a) a member of a controlled group of corporations as
4
- -95-
<PAGE>
<PAGE>
defined in Code section 1563(a), determined without
regard to Code section 1563(a)(4) and 1563(e)(3)(C), of
which an Employer is a member according to Code
section 414(b);
(b) an unincorporated trade or business that is under
common control with an Employer as determined according
to Code section 414(c);
(c) a member of an affiliated service group of which an
Employer is a member according to Code section 414(m);
or
(d) any entity required to be aggregated according to Code
section 414(o).
1.14 Dibrell Plan. For convenient reference to benefits that
accrued before the July 1, 1996, Effective Date of the Plan
(which benefits are the Beginning Account Balances in this
Plan), this document refers to the Plan as it existed before
that date as the Dibrell Plan, which was formally named the
Retirement Plan for Employees of Dibrell Brothers and
Subsidiary Companies.
1.15 Disability. A physical or mental incapacity which qualifies
the Participant for benefits under a long-term disability
plan maintained by his Employer. The term Disabled
Participant is used to refer to the Participant who has
incurred a Disability and has not recovered.
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1.16 Early Retirement Date. The first day of the month on or
after the date when the Participant has both reached age 55
and completed 10 Years of Service.
1.17 Effective Date. February 1, 1951, is the initial Effective
Date. July 1, 1996, is the Effective Date of this
amendment, restatement, and conversion to the cash balance
formula. The Effective Date for each Employer is the
effective date of its adoption of the Plan.
1.18 Employee. An individual who is employed by an Employer and
for whom the Employer withholds payroll taxes; provided that
(a) any individual who is scheduled to work fewer than five
months per year, or fewer than 20 hours per week, will be
excluded unless he actually earns 1,000 Hours of Service
during a Plan Year or during the first 12 months of his
employment; (b) any individual who is a member of a
collective bargaining unit for whom retirement benefits were
the subject of good-faith bargaining will be excluded,
unless coverage under the Plan has been or is extended to
such individuals through the collective bargaining process;
(c) Leased Employees will be excluded; (d) independent
contractors will not be treated as Employees; and (e) any
individual who is covered by an employment agreement that
precludes his participation will be excluded.
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<PAGE>
1.19 Employer. The Company and each Controlled Group member
which adopts and participates in the Plan, and each
Employer's successor or assign which adopts the Plan.
1.20 Employment. The period during which an Employee is employed
by an Employer, beginning on the Employer's Effective Date,
or on an earlier date for purposes of calculating his Years
of Service to the extent described in the Employer's
Addendum.
1.21 Employment Date. The date on which the Employee earned his
first Hour of Service with his Employer; provided that the
Employment Date of the nonvested Employee who resumed
Employment after he incurred a Five-Year Break will be the
date on which he earned his first Hour of Service after he
resumed Employment.
1.22 ERISA. The Employee Retirement Income Security Act of 1974,
as amended from time to time, and regulations and rulings
issued under ERISA.
1.23 Fiduciary. A person or entity as defined in ERISA section
3(21).
1.24 Five-Year Break. Five consecutive One-Year Breaks, which
will cause the nonvested Participant to lose his pre-break
Years of Service.
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1.25 Hours of Service.
(a) Periods of Credit. Hours of Service will be credited
for the following:
(1) Working Hours. Each hour for which the Employee
is paid or entitled to payment of Compensation by
an Employer for the performance of duties.
(2) Nonworking Hours. Each hour for which the
Employee is paid or is entitled to payment of
Compensation by an Employer on account of a period
of time during which no duties are performed due
to vacation, holiday, illness, incapacity, layoff,
jury duty, military duty, or leave of absence,
whether or not his Employment has terminated.
(3) Back Pay. Each hour for which back pay, without
regard to mitigation of damages, is either awarded
or agreed to by the Employer.
(b) Periods of No Credit. Hours of Service will not be
credited for the following:
(1) Nonpayment. Periods during which the Employee is
neither paid nor entitled to payment of
Compensation.
(2) Limited Number. Hours in excess of 501 in a
single continuous period during which no duties
are performed.
(3) Statutory Payments. Hours for which payment is
made or due under a plan maintained solely for the
purpose of complying with workers' compensation,
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<PAGE>
unemployment compensation, or disability insurance
laws.
(4) Back Pay. Back pay where credit has already been
given for the hours to which the back pay relates.
(5) Medical Expenses. A payment which solely
reimburses an Employee for medical or medically
related expenses incurred by him.
(c) Crediting Hours of Service - General Rule. Hours of
Service will be credited to the period in which the
duties to which they relate are performed, or the
period when no duties are performed, as applicable.
The Plan will use payroll records to determine Hours of
Service for each Employee for whom the Employer records
actual hours worked. For the Employee for whom the
Employer does not record actual hours worked, the Plan
will credit 190 Hours of Service for each month in
which he earns at least one Hour of Service.
(d) Crediting Hours of Service - Special Rules. Hours of
Service will be credited for the following types of
leaves under the following special rules:
(1) Parental Leave. Solely for purposes of
determining whether a One-Year Break has occurred,
the Plan will treat as Hours of Service periods
during which an Employee is absent from work by
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<PAGE>
reason of pregnancy, child birth, child adoption,
and/or child care immediately following birth or
adoption. The number of Hours of Service credited
to the Employee will be the number of hours that
would have been credited if the absence had not
occurred, or if such number cannot be determined,
then eight Hours of Service will be credited for
each day of the absence, provided that the total
number of such Hours of Service will not exceed
501. Such Hours of Service will be credited to
the Plan Year in which the absence begins only if
that credit is necessary to avoid a One-Year Break
in that Plan Year; otherwise, credit will be given
in the immediately following Plan Year. No credit
will be given under this subsection unless the
Employee timely provides to the Committee all
information reasonably required to establish (A)
that the absence is for a reason described in this
subsection, and (B) the number of days of absence
attributable to such reason.
(2) Military Leave. In calculating a Participant's
Hours of Service for purposes of determining the
nonforfeitability of a Participant's Accrued
Benefit, eligibility to participate and benefit
accrual purposes, a Participant shall be deemed to
have earned a number of Hours of Service equal to
the product of (A) the number of calendar months
(or a fraction thereof) that the Participant was
absent from employment with his Employer due to
Military Leave, and (B) the average Hours of
Service per month the Participant earned during
the 12-month period immediately preceding the
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<PAGE>
Military Leave (or, if shorter, the period of the
Participant's employment with his Employer
immediately preceding the Military Leave).
(3) Authorized Leave of Absence. Solely for purposes
of determining whether a Participant has earned
501 Hours of Service and of determining the
nonforfeitability of a Participant's Accrued
Benefit and Eligibility to participate, the Plan
will give him credit for eight hours for each day
of his leave granted under the Family and Medical
Leave Act.
1.26 Interest Credit. The amount credited to the Participant's
Cash Balance Account as of the last day of each Plan Year,
which amount is calculated by multiplying his year-end
Account Balance by the Interest Credit Percentage for the
Plan Year, as described in Plan section 3.1(c).
1.27 Interest Credit Percentage. The interest rate used to
calculate Interest Credits for each Plan Year, which rate is
determined as of the first day of the Plan Year and is based
on the average rate paid on 12-month Treasury Bills during
the month of November in the preceding year, plus one
percent, as described in Plan section 3.1(c).
1.28 Investment Manager. A person or entity, other than the
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<PAGE>
Trustee or a Named Fiduciary, that has the power to acquire
and dispose of Plan assets and that is either
(a) an investment advisor registered under the Investment
Advisors Act of 1940;
(b) a bank as defined in the Investment Advisors Act of
1940; or
(c) an insurance company qualified to manage assets of
retirement plans or perform similar functions under the
laws of more than one state;
and that acknowledges in writing that it is a Fiduciary with
respect to the Plan.
1.29 Leased Employee. Any person (other than an employee of an
Employer) who pursuant to an agreement between an Employer
and any other entity that is not a member of the Employer's
Controlled Group ("leasing organization") has performed
services for an Employer, on a substantially full-time basis
for a period of at least one year, and such services are of
a type historically performed by employees in the business
field of an Employer. Effective for Plan Years beginning on
and after January 1, 1997, the phrase "of a type
historically performed by employees in the business field of
an Employer" at the end of the preceding sentence is
replaced by the phrase "under the primary direction or
control of an Employer." Contributions or benefits provided
a Leased Employee by the leasing organization which are
attributable to services performed for an Employer shall be
treated as provided by an Employer.
1.30 Military Leave. The performance of duty on a voluntary or
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<PAGE>
involuntary basis in a Uniformed Service under competent
authority and includes active duty, active duty for
training, initial active duty for training, inactive duty
training, full-time National Guard duty, a period for which
a person is absent from a position of employment for the
purpose of an examination to determine the fitness of the
person to perform such duty, and any other absence
qualifying as "service in the uniformed services" within the
meaning of USERRA. Notwithstanding the foregoing, Military
Leave does not include service in a Uniformed Service that
terminates as a result of separation of the Participant from
such Uniformed Service under other than honorable
conditions, as set forth in USERRA.
1.31 Monk-Austin Plan. The Monk-Austin Profit Sharing Plan.
1.32 Normal Retirement Age. The Participant's 65th birthday.
1.33 Normal Retirement Date. The first day of the month or after
the Participant's 65th birthday.
1.34 One-Year Break. A Plan Year during which the Participant
fails to earn at least 501 Hours of Service.
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1.35 Participant. An Employee participating in the Plan under
Plan section 2.1; provided that the term Participant is
sometimes used to include vested terminated and retired
Participants who have Account Balances. Where the context
indicates, the term Participant includes persons claiming
benefits accrued by a Participant.
1.36 Plan. The Dimon Incorporated Cash Balance Plan, as amended
from time to time and as set forth in this document, which
was named Retirement Plan for Employees of Dibrell Brothers
and Subsidiary Companies until the July 1, 1996, Effective
Date of this restatement.
1.37 Plan Administrator. The Committee is the Plan
Administrator.
1.38 Plan Year. The calendar year.
1.39 Qualified Domestic Relations Order. A judgment, decree,
order, or approval of a property settlement agreement
entered on or after January 1, 1985, that
(a) relates to the provision of child support, alimony
payments, or marital property rights to an Alternate
Payee;
(b) is made pursuant to a state domestic relations or
community property law;
(c) creates or recognizes the right of, or assigns the
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<PAGE>
right to, an Alternate Payee to receive all or a
portion of the benefit payable with respect to the
Participant under this Plan;
(d) clearly specifies (1) the name and last known mailing
address (if available) of the Participant and the name
and mailing address of each Alternate Payee, unless the
Plan Administrator has reason to know the address
independently of the Order; (2) the amount or
percentage of the Participant's benefits to be paid by
the Plan to each Alternate Payee or the manner in which
such amount or percentage is to be determined; (3) the
number of payments or period to which the Order
applies; and (4) each plan to which the Order applies;
(e) does not require the Plan to provide any type or form
of benefit, or any option, not otherwise provided under
the Plan;
(f) does not require the Plan to provide increased benefits
(that is, does not provide for the payment of benefits
in excess of the actuarial equivalent of the benefits
to which the Participant would be entitled in the
absence of the Order); and
(g) does not require the payment of benefits to an
Alternate Payee that are required to be paid to another
Alternate Payee under another order determined
previously to be a Qualified Domestic Relations Order.
A domestic relations order entered before January 1, 1985,
is a Qualified Domestic Relations Order if payment of Plan
benefits pursuant to that order have begun by January 1,
1985, regardless of whether the order satisfies the
requirements of Code section 414(p), and even if payments
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<PAGE>
have not begun by January 1, 1985, pursuant to such an
order, it may still be treated as a Qualified Domestic
Relations Order even though it does not satisfy the
requirements of Code section 414(p).
For purposes of this Plan section, Alternate Payee means a
Participant's Spouse, former Spouse, child, or other
dependent who is recognized by a Qualified Domestic
Relations Order as having a right to receive all or a
portion of the benefits payable under the Plan with respect
to the Participant.
1.40 Retirement Credit. The amount credited for each Plan Year
to the Cash Balance Account of each eligible Participant,
under the formula described in Plan section 3.1(b).
1.41 Retirement Credit Percentage. A percentage based on the sum
of the Participant's attained age and Years of Service
earned as of the applicable date, as set forth in the table
in Plan section 3.1(b).
1.42 Spouse or Surviving Spouse. The individual to whom the
Participant is legally married as of the earlier of his date
of death or his Benefit Commencement Date. To the extent
provided in a Qualified Domestic Relations Order, a former
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<PAGE>
spouse will be treated as the Participant's Spouse or
Surviving Spouse for purposes of the survivor annuity
requirements.
1.43 Termination Date. The date the Employee ends his Employment
for any reason.
1.44 Trust (or Trust Fund). The fund maintained under the trust
agreement executed between the Company and the Trustee, as
amended from time to time, which is an integral part of this
Plan.
1.45 Trustee. Such individuals or entities as may be appointed
by the Board to hold the assets of the Trust Fund pursuant
to the terms of a trust agreement.
1.46 Uniformed Service. The Armed Forces; the Army National
Guard and the Air National Guard when engaged in active duty
for training, inactive duty training, or full-time National
Guard duty; the commissioned corps of the Public Health
Service; and any other category of persons designated by the
President of the United States in time of war or emergency.
1.47 USERRA. The Uniformed Services Employment and Reemployment
Rights Act of 1994.
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<PAGE>
1.48 Years of Service. An Employee will be credited with one-
twelfth of a Year of Service for each calendar month during
which he is employed by an Employer. A period of employment
with an Employer begins on the date on which the Employee
commences employment (or the date on which he is reemployed)
with an Employer and ends on the date of this termination of
employment for any reason. The crediting of Years of
Service is subject to the following rules:
(a) Seasonal and Part-Time Employees. An Employee who is
scheduled to work fewer than five months per year or
fewer than 20 hours per week will be credited with a
Year of Service for each Plan Year in which the
Employee earns at least 1,000 Hours of Service.
(b) Service With a Controlled Group Member. Each Employee
will receive vesting and eligibility credit for Years
of Service for the period of his employment with any
Controlled Group member, whether or not it has adopted
the Plan, beginning on the later of the date he began
employment or the date the member became part of the
Controlled Group.
(c) Service Before an Employer Adopted the Plan. The
Committee will determine any Years of Service to be
credited for periods of employment with an Employer
before it adopted the Plan, to the extent credit is not
required under subsection (a).
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<PAGE>
(d) Service with Monk-Austin. Each Employee will receive
vesting, and eligibility and benefit accrual credit for
Years of Service for the period of his service with
Monk-Austin before the Company acquired that Employer,
equal to the number of years of vesting credit he had
earned under the Monk-Austin Plan as of the acquisition
date.
(e) Employment Before a Five-Year Break. The nonvested
Participant who incurs a Five-Year Break will lose all
his credit for Years of Service earned before his Five-
Year Break. The vested Participant will retain all his
credit for Years of Service regardless of the number of
his One-Year Breaks.
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<PAGE>
ARTICLE 2
ELIGIBILITY
2.1 Eligibility. Each Employee who participated in either the
Dibrell Plan or the Monk-Austin Plan as of June 30, 1996,
and each Employee who was hired between July 1 and December
31, 1995, will become a Participant in this Plan as of July
1, 1996, provided that he is an Employee as of that date.
Each other Employee will begin participating in the Plan as
of the first January 1 or July 1 after he has completed six
months of Employment and, in the case of an Employee who is
scheduled to work fewer than five months per year (a
"seasonal Employee") or fewer than 20 hours per week (a
"part-time Employee"), also completed 1,000 Hours of Service
during either an Employment anniversary year or a Plan Year.
If a seasonal Employee or a part-time Employee did not
complete 1,000 Hours of Service during his first six months
of Employment but did complete 1,000 Hours of Service during
his first 12 months of Employment or during his first
completed Plan Year, his participation will be retroactive
to the first January 1 or July 1 after he completed six
months of Employment. For purposes of eligibility,
Employees will receive credit for periods of service with
any Controlled Group member while it was in the Controlled
Group.
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2.2 Participation Upon Reemployment.
(a) Vested Participants. The vested terminated Participant
who resumes Employment at any time will resume
participation as of the date he resumes Employment and
will retain his pre-break Years of Service.
(b) Nonvested Participants.
(1) Before Five-Year Break. The nonvested terminated
Participant who resumes Employment before he
incurs a Five-Year Break will resume participation
as of the date he resumes Employment, and will
retain his pre-break Years of Service.
(2) After Five-Year Break. The nonvested terminated
Participant who resumes Employment after he has
incurred a Five-Year Break will not retain his
pre-break Years of Service and will be treated as
a new Employee under Plan section 2.1.
(c) Nonparticipating Employees.
(1) Before Five-Year Break. The nonparticipating
terminated Employee who resumes Employment before
he incurs a Five-Year Break will retain credit for
his Years of Service earned before his Termination
Date. If he met the eligibility requirements
under Plan section 2.1 as of his Termination Date,
he will begin participating as of the date he
resumes Employment. Otherwise, he will begin
participating as of the January 1 or July 1
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<PAGE>
following the date when he has met the eligibility
requirements taking into account his pre-break
Employment.
(2) After Five-Year Break. The nonparticipating
terminated Employee who resumes Employment after
he has incurred a Five-Year Break will not receive
credit for his previous Employment for any purpose
under the Plan and will be treated as a new
Employee under Plan section 2.1.
(d) Reemployment Following Military Leave. A Participant
who is reemployed after an absence from employment due
to Military Leave and whose reemployment satisfies the
conditions required under USERRA shall be treated as
not having incurred a Break in Service as a result of a
period or periods of Military Leave.
2.3 Adoption of Plan by Controlled Group Member. A Controlled
Group member may adopt the Plan by appropriate action of its
board of directors or authorized officer(s) or
representatives(s), subject to approval by the Board.
2.4 Leased Employees. Leased Employees will be treated as
Employees to the extent required under Code section 414(n)
(6) (A), but will not be eligible to participate in this
Plan. However, if an individual who is a Leased Employee
becomes an Employee, he will receive credit for eligibility
to begin participating under Plan section 2.1 and credit for
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<PAGE>
<PAGE>
vesting under Plan section 3.2 for the period when he worked
as a Leased Employee, unless (a) the Leased Employee was
covered by a money purchase plan sponsored by the leasing
organization, with 10 percent contributions and immediate
participation and vesting, and (b) Leased Employees
constitute no more than 20 percent of the Controlled Group's
non-highly compensated employees (as defined in Code section
414(q)).
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ARTICLE 3
CASH BALANCE ACCOUNTS
3.1 Allocations to Cash Balance Account. A Cash Balance Account
will be established for each active and inactive Participant
to which the following amounts will be credited.
(a) Beginning Account Balance. As of July 1, 1996, a
Beginning Account Balance for each eligible Participant
will be credited in the following amount.
(1) Dibrell Plan Participants. Each Participant who
participated in the Dibrell Plan before July 1,
1996 will have a Beginning Account Balance in an
amount equal to the Actuarial Equivalent lump-sum
value (as defined in Plan section 1.4(b)) (as of
July 1, 1996) of his accrued benefit under the
Dibrell Plan calculated under the provisions of
that Plan as in effect on June 30, 1996.
(2) Monk-Austin Plan Participants. Each Participant
who participated in the Monk-Austin Plan will have
a Beginning Account Balance in an amount equal to
one year's Retirement Credits, calculated by
multiplying the Participant's Compensation earned
from July 1, 1995, through June 30, 1996, by his
Retirement Credit Percentage determined as of June
30, 1996.
(3) Certain New Hires. Each Participant whose
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<PAGE>
Employment Date occurred between April 1, 1995,
and June 30, 1995, and who was excluded from
participation in the Dibrell Plan, will have a
Beginning Account Balance in an amount equal to
one-half year's Retirement Credits, calculated by
multiplying his Compensation earned from January
1, 1996 through June 30, 1996, by his Retirement
Credit Percentage determined as of June 30, 1996.
(b) Annual Retirement Credits. Each Participant will be
credited with Retirement Credits based on his full and
partial Years of Service determined as of his date of
termination pursuant to Plan section 1.48. In his
final year of Employment, the Participant who has met
the requirements for early retirement set forth in Plan
sections 1.16 and 4.1(b) will receive a Retirement
Credit based on his Compensation earned for the Plan
Year. For Plan Years beginning on or after January 1,
1996, the Cash Balance Account of each eligible
Participant will be credited with an amount calculated
by multiplying his Compensation for the Plan Year by
his Retirement Credit Percentage. Each Participant's
Retirement Credit Percentage is based on his attained
age and Years of Service earned as of the last day of
the Plan Year, or as of his Early Retirement Date if
applicable, as set forth below:
Total of Age and Retirement
Years of Service Credit Percentage
Less than 40 3.5%
40-49 4.0%
50-59 5.0%
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Total of Age and Retirement
Years of Service Credit Percentage
60-69 6.0%
70-79 7.0%
80 or more 8.0%
However, the Committee will credit the Beginning
Account Balances under subsection (a) by determining
the Retirement Credit Percentages as of June 30, 1996.
For the 1996 Plan Year, a Participant's Retirement
Credit will be calculated by multiplying his
Compensation earned from July 1, 1996, through December
31, 1996 (or his earlier Termination Date), by his
Retirement Credit Percentage determined as of December
31, 1996.
(c) Interest Credits. The Interest Credit Percentage for
each Plan Year as of first day of the Plan Year will be
based on the average rate paid on 12-month Treasury
Bills during the month of November in the preceding
Plan Year, plus one percent. Each active and inactive
Participant's Cash Balance Account will receive an
Interest Credit as of the last day of each Plan Year,
calculated by multiplying his Account Balance as of
that date (determined before crediting any Retirement
Credits for the Plan Year) by the Interest Credit
Percentage for that Plan Year. For the Participant
whose Benefit Commencement Date occurs on any date
during the Plan Year other than the last day of the
Plan Year, a pro-rated Interest Credit in an amount
equal to the product of the Account Balance as of that
date multiplied by the Interest Credit Percentage for
the Plan Year, and with that product multiplied by the
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ratio of whole months expired in the Plan Year over 12
will be credited to such Participant's Cash Balance
Account.
(d) Termination of Allocations. No Participant will be
credited with Retirement Credits or Interest Credits
after his Benefit Commencement Date.
(e) Statement of Account Balances. As soon as practicable
after the end of each Plan Year, the Committee will
provide to each Participant or Beneficiary (including
any Surviving Spouse or Alternate Payee) for whom a
Cash Balance Account is maintained, a statement showing
all credits to and debits from the Account, and the
current Account Balance. The Committee may provide
statements more frequently than annually, as it
considers appropriate.
3.2 Vesting. Each Participant who was fully vested in his
benefit under either the Dibrell Plan or the Monk-Austin
Plan as of July 1, 1996, the Effective Date of this amended
and restated Plan, will be fully vested in his Account
Balance under this Plan. Each other Participant will become
fully vested in his Account Balance as of the date he
completes five Years of Service, taking into account any
credit he may have under Plan section 1.41 for Employment
before the Effective Date of this amended and restated Plan.
3.3 Disability Benefit.
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(a) Continued Credits. The Participant who terminates
active Employment because of a Disability will continue
to be credited with Retirement Credits and Interest
Credits for each Plan Year that his Disability
continues, until the earlier of his recovery date, date
of death, Early Retirement Date if he elects to receive
or begin receiving his Account Balance prior to his
Normal Retirement Date, or his Normal Retirement Date.
His Retirement Credits for each Plan Year that his
Disability continues will be based on his Compensation
for the last full Plan Year of his active Employment,
and on his Retirement Credit Percentage determined
under Plan section 3.1(b) as of his last day of active
Employment. He will continue to receive credit for
Years of Service during his period of Disability for
purposes of vesting.
(b) Recovery. If the Disabled Participant recovers before
his Normal Retirement Date and submits a good-faith
application to resume active Employment within 30 days
after his recovery date, he will be entitled to the
Retirement Credits he earned during his period of
Disability even if his Employer fails to rehire him and
his recovery date will be his Termination Date. If the
Disabled Participant recovers and fails to submit a
good-faith application to resume active Employment
within 30 days after his recovery date, he will not be
entitled to Retirement Credits for the period of his
Disability, and his last day of active Employment will
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be his Termination Date. A Disabled Participant who
recovers before he has earned at least five Years of
Service will not be entitled to receive any benefit
under the Plan unless he resumes Employment and becomes
vested in his Account Balance.
(c) Payment Date. As soon as the Disabled Participant
reaches his Early Retirement Date, he may elect to
receive or begin receiving a benefit based on his
Account Balance as of his Early Retirement Date. If he
does not elect early payment, the Plan will pay, or
begin paying, his Account Balance as of his Normal
Retirement Date. He will not be credited with any
Retirement Credits or Interest Credits after his
Benefit Commencement Date.
3.4 Reemployment.
(a) Reemployment Before Receipt of Benefits. The Account
Balance of the Participant who terminates or retires
and resumes Employment before he receives any payment,
will be the sum of his Retirement Credits and Interest
Credits earned before and after his break in
Employment.
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(b) Reemployment After Receipt of Benefits.
(1) Lump Sum Payment. If a Participant terminates
active Employment for any reason, receives a cash-
out of his Accrued Benefit and then resumes
Employment, the Committee will take his pre-break
Years of Service into account in calculating his
Retirement Credit Percentage credited to him
following his reemployment for purposes of any
subsequent Retirement Credits to his Account
Balance. He will be fully vested in the credits
he receives after he resumes Employment.
(2) After Receipt of Monthly Payments. If a
Participant terminates or retires, receives
monthly annuity payments, and then resumes
Employment for at least 40 Hours of Service per
month, the Plan will suspend his payments and will
provide him the suspension-of-benefit notice
described in Plan section 4.1(c) within one month
after he resumes Employment. The Plan will resume
his payments as of his subsequent retirement date,
based on his Accrued Benefit as of that date minus
an amount equal to the Actuarial Equivalent value
of the annuity payments he previously received.
(c) USERRA Benefits. A Participant who is reemployed by an
Employer after a period of Military Leave and whose
reemployment satisfies the provisions of USERRA shall
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be entitled to Retirement Credits and Interest Credits
for each Plan Year while such Participant is on
Military Leave. For purposes of determining a
Participant's Accrued Benefit, such a Participant's
Compensation while on Military Leave shall be
determined as either (A) the Compensation the
Participant would have received during the period of
Military Leave had the Participant not incurred
Military Leave, determined based on the Compensation
the Participant would have received from the Employer
but for the absence during Military Leave, or (B) if
the Compensation the Participant would have received
during the period of Military Leave is not reasonably
certain, the Participant's average Compensation during
the 12-month period immediately preceding the Military
Leave (or, if shorter, the period of employment
immediately preceding the Military Leave).
31
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<PAGE>
<PAGE>
ARTICLE 4
PAYMENT ON ACCOUNT BALANCES
4.1 Payment Dates. Vested Account Balances will be paid as of
the following dates, in the form of payment that applies
under Plan section 4.2 or 4.4.
(a) Termination Before Retirement. Any Participant who is
vested in his Account Balance may terminate Employment
and elect to receive immediate payment of his Accrued
Benefit. The Participant whose Termination Date occurs
before he has met the requirements for early
retirement, set forth in subsection (b), may not elect
an annuity other than the automatic form annuity
described in Plan section 4.2. If the terminated
Participant does not elect earlier payment, his Accrued
Benefit will be paid on (or beginning on) his Normal
Retirement Date, under Plan section 4.2 or 4.4 as
applicable. However, if the present value of the
Participant's Accrued Benefit does not exceed $3,500,
he will receive a lump-sum payment equal to the present
value of his Accrued Benefit as soon as practicable
after his Termination Date.
(b) Early Retirement. The Participant whose Termination
Date occurs after he has both reached age 55 and
completed 10 Years of Service will be credited with a
Retirement Credit for the Plan Year in which his
Termination Date occurs, based on his Compensation for
the Plan Year. The Participant who has reached his
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- -123-
<PAGE>
<PAGE>
Early Retirement Date and elects early payment may
elect either a lump sum or any annuity form described
in Plan section 4.2 or 4.4. However, if the present
value of the Participant's Accrued Benefit does not
exceed $3,500, he will receive a payment equal to the
present value of his Accrued Benefit as soon as
practicable after his Early Retirement Date. See
Addendum A for the early retirement provisions that
apply to the Beginning Account Balances of Participants
who participated in the Dibrell Plan before July 1,
1996.
(c) Normal Retirement. Each Participant's Normal
Retirement Age is his 65th birthday, and his Normal
Retirement Date is the first day of the month on or
after his 65th birthday, whether or not he actually
retires on that date. If he is not already vested, he
will become fully vested in his Cash Balance Account on
his 65th birthday. If the Participant has terminated
or retired and has not elected earlier payment, the
Plan will pay his Accrued Benefit either as an annuity
beginning as of his Normal Retirement Date, or as a
lump sum on that date, according to his election under
Plan section 4.2 or 4.4.
(d) Delayed Retirement. The Plan will suspend payment for
the Participant who continues Employment after his
Normal Retirement Date until the first day of the month
on or after the date when he actually retires. He will
continue to receive Retirement Credits and Interest
Credits under Plan section 3.1 until he retires. The
Committee will provide to each Participant who delays
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- -124-
<PAGE>
<PAGE>
retirement, no later than one month after his Normal
Retirement Date, a written notice containing (1) a
statement that he will not receive any benefit payments
until he actually retires, but will receive an
Actuarial Equivalent increase in his Account Balance
for any month between his Normal Retirement Date and
his actual retirement date when he earns fewer than 40
Hours of Service, and for any month of active
Employment after the calendar year in which he reaches
age 70/ with an offset for the value of his continued
accruals; (2) an explanation that his benefit payments
are being suspended because he is continuing to earn
Compensation; (3) a general description of this
provision for delayed retirement and a photocopy of
this Plan section; (4) a statement that applicable
Department of Labor Regulations may be found in Section
2530.203-3 of the Code of Federal Regulations; and (5)
a statement that the Participant may seek review of his
benefit suspension by invoking the claims procedures
described in Plan section 10.8.
(e) Disability. The Disabled Participant may elect to
receive his Accrued Benefit at any time after he
reaches his Early Retirement Date. If he does not
elect earlier payment, he will receive payment on, or
beginning on, his Normal Retirement Date.
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- -125-
<PAGE>
<PAGE>
4.2 Automatic Form of Payment.
(a) Five Years Certain and Life Annuity. The automatic
form of benefit payable to the unmarried Participant
will be the five years certain and life annuity
described in Plan section 4.4(a). The Participant may
elect any optional form described in Plan section 4.4.
(b) Qualified Joint and Survivor Annuity. The automatic
form of benefit payable to the married Participant will
be the Qualified Joint and Survivor Annuity, which is
the 50 percent joint and survivor annuity described in
Plan section 4.4(b) with the Participant's Spouse as
the contingent annuitant. After the death of the
Participant whose benefit was subject to the Code
section 415 limitation described in Plan section 6.1,
the Plan will calculate the amount payable to the
Surviving Spouse on the basis of the amount the
Participant would have received if his benefit had not
been subject to that limitation, but will not pay the
Surviving Spouse a benefit that exceeds 100 percent of
the amount the Participant had received. The
Participant may elect any optional form described in
Plan section 4.4 but only if he has his Spouse's
written consent obtained under the procedures described
in this Plan section. However, the Participant may
elect to receive the 75 percent or 100 percent joint
and survivor annuity with his Spouse as his contingent
annuitant, and he will not be required to have his
Spouse's consent to make the election. See Addendum A
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- -126-
<PAGE>
<PAGE>
for Participants who terminated before August 23, 1984.
(c) Explanation of the Automatic Form Annuity.
(1) On his Information Date, a Participant will be
notified in writing by first class mail or
personal delivery of (A) a description of the
terms and conditions of the Joint and Survivor
Annuity, (B) the circumstances under which the
Qualified Joint and Survivor Annuity will be
effective, (C) the Participant's right to make,
and the effect of, a decision to revoke the
Qualified Joint and Survivor Annuity or the normal
form of benefit and elect an optional form of
benefit payment, (D) a general description of the
eligibility conditions and material features of
the optional forms of benefits under the Plan, (E)
the rights of a Participant's Spouse, if any,
under paragraph (2), (F) the Participant's right
to make, and the effect of, a revocation of any
election, (G) a general description of the
financial effect of selecting an optional form of
benefit payment and (H) sufficient additional
information explaining the relative values of the
optional forms of benefits under the Plan. After
his Information Date, a Participant must consent
in writing to a distribution pursuant to Plan
section 4.2 which begins on his Benefit
Commencement Date.
(2) Except as provided in the following sentences, a
Participant's Benefit Commencement Date is a date
that is at least 30 days and not more than 90 days
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- -127-
<PAGE>
<PAGE>
after his Information Date. The period in which a
Participant may make an election or revocation
with respect to the form in which benefits may be
paid hereunder shall be made during the period
beginning with his Information Date and ending on
his Benefit Commencement Date. In no event,
however, shall a Participant have less than 30
days following the date the general information
regarding optional forms of benefit called for in
paragraph (1) above is delivered or mailed (first
class mail, postage prepaid) to him in which to
make his election. The preceding sentences to the
contrary notwithstanding, A Participant may
affirmatively elect to waive the minimum 30-day
period, provided that he (A) receives adequate
information describing his right to a 30-day
election period and (B) may revoke such
affirmative election under the later of his
Benefit Commencement Date or the expiration of the
seven-day period that begins with his Information
Date. A Participant whose Annuity Starting Date
is before his Information Date may not commence
distributions under the Plan until the expiration
of the seven-day period that begins with his
Information Date.
(3) If the Participant is married and if he elects or
has elected a form of payment other than a
Qualified Joint and Survivor Annuity, his election
of an optional form of benefit payment is not
37
- -128-
<PAGE>
<PAGE>
effective unless the Participant's Spouse consents
in writing to the election and to the specific
non-Spouse beneficiaries named in such election.
The election must designate a specific
beneficiary, including any class of beneficiaries,
which may not be changed without spousal consent
(or the Spouse expressly permits designations by
the Participant without further spousal consent).
The Spouse's consent must acknowledge the effect
of the Participant's election and must be
witnessed by a Plan representative or notary
public. A consent that permits designations by
the Participant without any requirement of further
consent by such Spouse must acknowledge that the
Spouse has the right to limit consent to a
specific beneficiary, and a specific form of
benefit, where applicable, and that the Spouse
voluntarily elects to relinquish either or both of
such rights. In addition, a Participant's waiver
of the Qualified Joint and Survivor Annuity shall
not be effective unless the election designates a
form of benefit which may not be changed without
spousal consent (or the Spouse expressly permits
designations by the Participant without any
further spousal consent). However, the consent of
a Spouse will not be required if the Participant
establishes to the satisfaction of the Plan
Administrator that such written consent cannot be
obtained because there is no Spouse or because the
Spouse cannot be located. Any consent under this
38
- -129-
<PAGE>
<PAGE>
subsection is valid only with respect to the
Spouse who signed the consent. Any evidence that
the consent of a Spouse cannot be obtained is
valid only with respect to that designated Spouse.
4.3 Election of Optional Form of Payment. Subject to the
restrictions described in section 4.2, the Participant who
is entitled to elect an optional form of payment may elect,
or revoke a previous election and make a new election,
within the 90-day period ending on his Benefit Commencement
Date, to receive his benefits in one of the forms described
in Plan section 4.4. Each election must be in writing on a
form prescribed by the Committee. The Participant may not
elect any option with a non-Spouse beneficiary unless the
present value of the payments expected to be made to the
Participant complies with the incidental death benefit rule
under Code section 401(a)(9)(G).
4.4 Description of Forms of Payment. The value of each of the
following annuity forms of payment will be the Actuarial
Equivalent of the Participant's Accrued Benefit, and each
form of annuity payment will be the Actuarial Equivalent of
the benefit that would be payable to the Participant as a
five years certain and life annuity.
(a) Single Life Annuity. The single life annuity is an
increased monthly benefit that begins on the
Participant's Benefit Commencement Date and is payable
throughout his lifetime, ending with the last payment
39
- -130-
<PAGE>
<PAGE>
due on the first day of the month in which his death
occurs.
(b) Joint and Survivor Annuity. The joint and survivor
annuity is a reduced monthly benefit beginning on the
Participant's Benefit Commencement Date and payable
throughout his lifetime, with either 50 percent, 75
percent or 100 percent of that monthly amount
continuing for life to his contingent annuitant,
beginning on the first day of the month following the
Participant's date of death.
(c) Five Years Certain and Life Annuity. The five years
certain and life annuity is an unreduced monthly
benefit beginning on the Participant's Benefit
Commencement Date and payable throughout his lifetime,
ending with the last payment due on the first day of
the month in which his death occurs; provided that if
the Participant dies within the five-year period
following his Benefit Commencement Date, payments will
continue to his beneficiary for the remainder of the
five-year period. If the beneficiary dies within the
five-year period and there is no surviving contingent
beneficiary, then the Actuarial Equivalent of any
remaining monthly payments will be paid in a lump sum
to the beneficiary's estate.
(d) Ten Years Certain and Life Annuity. The ten years
certain and life annuity is a reduced monthly benefit
beginning on the Participant's Benefit Commencement
Date and payable throughout his lifetime, ending with
the last payment due on the first day of the month in
which his death occurs; provided that if the
40
- -131-
<PAGE>
<PAGE>
Participant dies within the 10-year period following
his Benefit Commencement Date, payments will continue
to his beneficiary for the remainder of the 10-year
period. If the beneficiary dies within the 10-year
period and there is no surviving contingent
beneficiary, then the Actuarial Equivalent of any
remaining monthly payments will be paid in a lump sum
to the beneficiary's estate.
(e) Lump Sum Payment.
(1) Over $3,500. If the present value of the
terminated or retired Participant's Accrued
Benefit is greater than $3,500, he may elect to
receive a single sum payment, with Spousal consent
if he is married. The Plan will offer this form
of payment regardless of age, and will
simultaneously offer to the Participant or
Surviving Spouse (but not to any other
beneficiary) an immediate annuity in the automatic
form, or if the Participant has reached his Early
Retirement Date under the Plan, will offer all
annuity forms provided under the Plan.
(2) Not Over $3,500. If the present value of the
Participant's Accrued Benefit is not over $3,500,
the Committee will make a lump sum payment to him
as soon as practicable after his Termination Date.
(3) Nonvested Participant. Regardless of the present
value of his Accrued Benefit, the Committee will
41
- -132-
<PAGE>
<PAGE>
treat each nonvested Participant as having
received a constructive cash-out of his entire
Accrued Benefit as of his Termination Date, and if
he resumes Employment before he incurs a Five-Year
Break will treat him has having repaid his
constructive cash-out as of the date he resumes
Employment.
(4) Direct Rollover of Lump Sum Payments. The
Participant who receives a lump sum payment may
instruct the Committee to roll over all or part of
his lump sum payment to another qualified
retirement plan or to an individual retirement
account (IRA). The Participant must timely
provide in writing all information required to
effect the rollover. If the lump sum payment is
greater than $3,500, the Spouse's consent will be
required. A Surviving Spouse or Alternate Payee
under a Qualified Domestic Relations Order who
receives a lump sum payment may instruct the
Committee to roll over all or part of the payment
to an IRA, and must timely provide in writing all
information required to effect the rollover. The
Committee will provide timely notice of the right
to make a direct rollover. However, lump sum
payments less than $200, and minimum annual
amounts required to be paid under Plan section
4.6, will not be eligible for direct rollover.
4.5 Effect of Death on Forms of Payment.
(a) Death of Spouse or Beneficiary Before Benefit
42
- -133-
<PAGE>
<PAGE>
Commencement Date. If the Participant's benefit is
payable in any form with a survivor benefit and his
Spouse or designated beneficiary dies before his
Benefit Commencement Date, the survivor form of payment
will not become effective, and he will instead receive
his retirement benefit as a five years certain and life
annuity unless he properly elects another form before
his Benefit Commencement Date.
(b) Death of Participant Before Benefit Commencement Date.
If the Participant's benefit is payable in any form
with a survivor benefit and he dies before his Benefit
Commencement Date, his Spouse or other beneficiary will
not be entitled to any benefits under any such form.
His Surviving Spouse will be entitled only to the
preretirement death benefit payable under Article 5.
(c) Death of Spouse or Beneficiary After Benefit
Commencement Date. If the Participant's benefit has
begun in any form with a survivor benefit and his
Spouse or other beneficiary dies before he does, he
will continue to receive his benefit in the form
elected as of his Benefit Commencement Date.
(d) Death of Participant After Benefit Commencement Date.
If the Participant dies after his Benefit Commencement
Date, no death benefit will be payable except to the
extent provided under the form of benefit he was
receiving as of the date of his death.
4.6 Designation of Beneficiaries.
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- -134-
<PAGE>
<PAGE>
(a) Procedure. Each Participant, with the written consent
of his Spouse if required under Plan section 4.2, may
designate one or more beneficiary(s) to receive any
benefits which may be payable in the event of his
death. The Participant may revoke or change his
designation from time to time by filing the proper form
with the Committee, and each change will revoke all his
prior designations. To be effective, each designation,
revocation or change must be made in writing on a form
provided by the Committee and must be signed and filed
with the Committee before the earlier of the
Participant's Benefit Commencement Date or date of
death; provided that the Participant who receives the
five-years or ten-years certain and life annuity may
change his beneficiary at any time before his death.
Unless the Spouse has executed a general consent under
Plan section 4.2(d), the married Participant must
obtain his Spouse's written consent each time he
changes his designation of beneficiary. The
Participant who elects a joint and survivor annuity
form of payment may designate only a single primary
beneficiary. The Participant who elects the five-years
or ten-years certain and life annuity may name one or
more primary beneficiaries and one or more contingent
beneficiaries, and must state the percentage payable to
each.
(b) Payment to Minor or Incompetent Beneficiaries. In the
event the deceased Participant's beneficiary is a
minor, or is legally incompetent, or cannot be located
after reasonable effort, the Committee will make
44
- -135-
<PAGE>
<PAGE>
payment to the court appointed guardian or
representative of such beneficiary, or to a trust
established for the benefit of such beneficiary, as
applicable.
(c) Judicial Determination. In the event the Committee
considers it necessary, it may have a court of
applicable jurisdiction determine to whom payments
should be made, in which event all expenses incurred in
obtaining the determination may be charged against the
payee.
4.7 Payment to Participant's Representative. If the Participant
is incompetent to handle his affairs on his Benefit
Commencement Date or thereafter, or cannot be located after
reasonable effort, the Committee will make payment(s) to his
court-appointed personal representative, or if none is
appointed the Committee may in its discretion make payments
to his next-of-kin; provided that the Committee may request
a court of competent jurisdiction to determine the payee, in
which event all expenses incurred in obtaining the
determination may be charged against the payee. Such
payments, to the extent made, shall be a complete discharge
of any liability for such payments under the Plan.
4.8 Unclaimed Benefits. In the event the Committee cannot
locate any person entitled to receive the Participant's
vested Accrued Benefit, with reasonable effort and after a
45
- -136-
<PAGE>
<PAGE>
period of five years, his Accrued Benefit will be forfeited
but will be reinstated within 60 days after he is located,
as required under Treasury Regulation section 1.401(a)-14(d)
or any other applicable law. The Committee will pay any
required retroactive payment in a single sum without any
adjustment for interest.
4.9 Required Distribution Rules. The required distribution
rules under Code section 401(a)(9) are set forth in Addendum
B.
46
- -137-
<PAGE>
<PAGE>
ARTICLE 5
PRERETIREMENT DEATH BENEFITS
5.1 Married Vested Participants. The Surviving Spouse of the
vested Participant who dies before his Benefit Commencement
Date will receive the qualified preretirement death benefit
described in this Plan section. See Addendum A for
Participants who terminated before August 23, 1984.
(a) Coverage for Surviving Spouse Only. The preretirement
death benefit coverage will become effective on the
later of (1) the date the Participant becomes vested,
or (2) the date he becomes married. The coverage will
remain in effect until the earlier of (1) the date the
Participant becomes unmarried for any reason, (2) the
Participant's date of death, or (3) the Participant's
Benefit Commencement Date. The coverage will remain in
effect whether or not the Participant continues in
Employment. The Plan will provide the death benefit
without any charge for the cost of coverage and without
reduction in the benefit payable to the Participant or
Surviving Spouse to account for the cost of coverage.
(b) Amount of Spouse's Preretirement Death Benefit. The
Surviving Spouse of the Participant who dies before his
Benefit Commencement Date will receive a survivor
benefit equal to the greater of (i) the Actuarial
Equivalent value equal to one-half the amount that
would have been payable to the Participant as a 50
47
- -138-
<PAGE>
<PAGE>
percent joint and survivor annuity as of his Normal
Retirement Date (determined without regard to the Code
section 415 limitations described in Plan section 6.1),
based on his Accrued Benefit as of his date of death or
(ii) the value of his Account Balance as of his date of
death. If the survivor benefit has a present value not
over $3,500, the Committee will pay the entire benefit
to the Surviving Spouse in a lump sum payment as soon
as practicable after the Participant's death, and will
not obtain the Spouse's consent to the payment. If the
Actuarial Equivalent present value is over $3,500, the
Surviving Spouse may elect to receive a lump sum
payment in an amount equal to the greater of the
present value of his Accrued Benefit or his Account
Balance, or to begin receiving annuity payments, as of
the first day of any month following the Participant's
date of death. If the Spouse does not elect earlier
payment, the Benefit Commencement Date for the survivor
benefit will be the Participant's Normal Retirement
Date. The Plan will make annuity payments as of the
first day of each month, with the last payment due on
the first day of the month in which the Spouse's death
occurs.
5.2 Unmarried Participant or Nonvested Participant. The
Participant who either does not have a Surviving Spouse, or
is not vested on his date of death, will not have any
preretirement death benefit coverage under the Plan.
48
- -139-
<PAGE>
<PAGE>
ARTICLE 6
LIMITATIONS ON BENEFIT AMOUNTS
6.1 Code Section 415 Limits. In no event will the annual
benefits payable to any Participant exceed the Code Section
415 Limit described in this Plan section.
(a) Applicable Definitions. For purposes of this Plan
section, the following terms will have the meanings set
forth below.
(1) Adjusted Accrued Benefit. The Participant's
Accrued Benefit after the adjustments described in
subsection (b), which is the amount to which the
Code Section 415 Limit will be applied.
(2) Code Section 415 Limit. For each Participant, the
lesser of:
(A) Dollar Limit. $90,000 (as indexed to the CPI
as of the first day of each Limitation Year
beginning in 1988), with the indexed limit
for each Limitation Year applied to benefits
in pay status.
(B) Percentage Limit. 100 percent of his average
Compensation as defined below for the three
consecutive calendar years when his
Compensation was highest.
(C) Other. Such other limitations as may be set
forth in Treasury Regulations from time to
time.
(3) Compensation. For purposes of his Code Section
49
- -140-
<PAGE>
<PAGE>
415 Limit, the Participant's Compensation includes
all amounts received from the Employer for his
performance of services and reported as taxable
income on his Form W-2, within the meaning of
Treasury Regulation section 1.415-2(d); and which
amount includes salary reduction amounts under
Code sections 125 and 401(k) effective January 1,
1988.
(4) Controlled Group. The Company and each member of
the group of corporations or entities connected
with the Company through common ownership of stock
having more than 50 percent of the total combined
voting power of all classes of stock entitled to
vote, or more than 50 percent of the total value
of shares of all classes of stock, within the
meaning of Code sections 414(b) and (c). For
purposes of the Code Section 415 Limit, all
Controlled Group members will be considered to be
a single Employer.
(5) Limitation Year. The Plan Year.
(6) Social Security Retirement Age. The age used as
the Participant's retirement age under Section
216(l) (4) of the Social Security Act. Each
Participant's Social Security Retirement Age will
be the following age which relates to his year of
birth:
Year of Birth Social Security Retirement Age
Before 1938 65 years
1938-1954 66 years
After 1954 67 years
50
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<PAGE>
<PAGE>
(b) Calculation of the Adjusted Accrued Benefit. Before
application of the Code Section 415 Limit, each
Participant's Accrued Benefit will be adjusted as
follows:
(1) Aggregation of Benefits. If the Participant has
participated in any other qualified defined
benefit plan maintained by an Employer, his
accrued benefit under each such plan will be
aggregated with his Accrued Benefit under this
Plan. If the Participant has participated in any
qualified defined contribution plan maintained by
an Employer, his Accrued Benefit will be subject
to the combined plan limits described in
subsection (d).
(2) Other Factors. The calculation of the
Participant's Adjusted Accrued Benefit will
include any other relevant provision in the Plan,
or requirement of law, in effect from time to
time.
(3) Adjusted Accrued Benefit. The product will be the
Participant's Adjusted Accrued Benefit for
purposes of applying the Code Section 415 Limit.
(c) Adjustments to the Code Section 415 Limits. The
Participant's Code Section 415 Limit, which will be
applied to reduce his Adjusted Accrued Benefit if
necessary, will be adjusted by any of the following
51
- -142-
<PAGE>
<PAGE>
circumstances which apply to him.
(1) Grandfathered Code Section 415 Limit. For
benefits the Participant accrued under any
qualified plan maintained by an Employer before
the 1987 Plan Year, his Code Section 415 Limit
will not be less than the following amount(s):
(A) Pre-1983 Accrued Benefit. If before 1983 the
Participant had participated in one or more
qualified defined benefit plans to which an
Employer contributed, his Code Section 415
Limit will not be reduced to an amount less
than his aggregate accrued benefit under such
plan(s) as of the last day of the 1982
limitation year under such plan(s).
(B) Pre-1987 Accrued Benefit. If before 1987 the
Participant had participated in one or more
qualified defined benefit plans to which an
Employer contributed, his Code Section 415
Limit will not be reduced to an amount less
than his aggregate accrued benefit under such
plan(s) as of the last day of the 1986
limitation year under such plan(s).
(2) Form of Payment. The Code Section 415 Limit
applies to benefits payable at the Participant's
Social Security Retirement Age in the form of the
single life annuity or the spousal 50 percent, 75
percent or 100 percent joint and survivor annuity.
52
- -143-
<PAGE>
<PAGE>
If benefits are paid in any other form, the Code
Section 415 Limit will be reduced by the Actuarial
Equivalent factor for that form of payment, using
the greater of the interest rate used to calculate
forms of payment under Plan section 1.4, or five
percent.
(3) Reduced Limit for Early Retirement. If the
Participant begins benefit payments before his
Social Security Retirement Age, his Dollar Limit
will be reduced as follows:
(A) After Age 62. If the Participant's benefit
payments begin on or after the date he
reaches age 62 but before the date when he
reaches Social Security Retirement Age, the
Dollar Limit will be reduced by an amount
equal to 5/9 of one percent for each of the
first 36 months that his Benefit Commencement
Date precedes his Social Security Retirement
Age (6-2/3 percent per year), and 5/12 of one
percent for each additional month that his
Benefit Commencement Date precedes his Social
Security Retirement Age (five percent per
year).
(B) Before Age 62. If the Participant's benefit
payments begin before the date he reaches age
62, the Dollar Limit will be further reduced
by the lesser of the following factors: (i)
the ratio of the Plan's early retirement
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- -144-
<PAGE>
<PAGE>
factor as of his Benefit Commencement Date,
over the Plan's early retirement factor at
age 62, or (ii) an Actuarial Equivalent
reduction from age 62 to his age as of his
Benefit Commencement Date, using the
applicable mortality table and a five percent
interest rate.
(4) Increased Limit for Late Retirement. The Plan
does not actuarially increase the benefits payable
to Participants who retire after they reach Social
Security Retirement Age until the first day of the
calendar year after the year in which the active
Participant reaches age 70/. Accordingly, the
Dollar Limit does not increase after Social
Security Retirement Age, except for the period of
active Employment beginning on the first day of
the calendar year after the year in which the
active Participant reaches age 70/. For that
period, the Dollar Limit will be increased by the
Actuarial Equivalent factors set forth in Plan
section 1.4(b).
(5) Reduced Limit for Fewer Than 10 Years of
Participation.
(A) Dollar Limit. The Dollar Limit for the
Participant who has fewer than 10 years of
participation in the Plan will be computed by
multiplying $90,000 (as adjusted) by a
fraction, the numerator of which is the
number of his whole and partial years of
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participation and the denominator of which is
10.
(B) Percentage Limit. The Percentage Limit for
the Participant who has earned fewer than 10
Years of Service will be computed by
multiplying the amount of his average
Compensation for his three highest years by a
fraction, the numerator of which is the
number of his whole and partial Years of
Service and the denominator of which is 10.
(6) Special Rules for an Adjusted Accrued Benefit Not
in Excess of $10.000. If the Participant's
Adjusted Accrued Benefit is not greater than
$10,000, the full amount may be paid whether or
not that amount exceeds his Percentage Limit, but
only if (A) his annual benefit has not exceeded
$10,000 in any previous Plan Year, and (B) he has
never participated in a defined contribution plan
maintained by an Employer. However, if the
Participant has fewer than 10 Years of Service,
then his Adjusted Accrued Benefit will be limited
by $10,000 multiplied by a fraction, the numerator
of which is the number of his whole and partial
Years of Service and the denominator of which is
10, and he will receive this reduced amount. If
he elects a form of payment other than the single
life annuity or spousal survivor annuity, his
Adjusted Accrued Benefit will not be reduced by
the Actuarial Equivalent factor for his elected
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form of payment.
(d) Combined Plan Limits. If an Employee is a Participant
at any time in both this Plan and any qualified defined
contribution plan maintained by the Employer, and the
sum of his Defined Benefit Fraction and his Defined
Contribution Fraction is greater than 1.0, his benefit
under this Plan will be reduced so that the sum of the
fractions does not exceed 1.0.
(1) Defined Benefit Fraction. The Participant's
Defined Benefit Fraction for any Plan Year is a
fraction, the numerator of which is his projected
annual benefit under this Plan determined as of
the last day of the Plan Year and the denominator
of which is the lesser of:
(A) 1.25 multiplied by $90,000 (as adjusted) and
the product multiplied by the ratio of the
Participant's Years of Service (not greater
than 10) over 10; or
(B) 1.4 multiplied by his average Compensation
for the three consecutive calendar years when
his Compensation was highest.
(2) Defined Contribution Fraction. Beginning in 1987,
the Annual Addition includes all amounts allocated
to the Participant's account(s) dollar-for-dollar,
but his Annual Additions for previous Plan Years
will not be recalculated to include amounts that
were excludable under Code section 415 as it
existed before 1987. The Participant's Defined
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Contribution Fraction for any Plan Year is a
fraction, the numerator of which is the sum of the
Annual Additions to his account(s) for the Plan
Year and all previous Plan Years during his
Employment, and the denominator of which is the
sum of the lesser of the following amounts for the
Plan Year and all previous Plan Years during his
Employment:
(A) 1.25 multiplied by $30,000 (as adjusted to
the CPI beginning as of the date when the
Dollar Limit is adjusted up to $120,000), or
(B) 1.4 multiplied by 25 percent of his
Compensation for the Plan Year.
Alternatively, the Committee may authorize the use
of any method permitted by Treasury Regulations
from time to time to compute the Defined
Contribution Fraction.
(3) Transition Rule for Computing the Defined
Contribution Fraction. To compute each
Participant's Defined Contribution Fraction for
Plan Years ending after 1982, the Committee may
authorize the use of a denominator for all Plan
Years ending before 1983, in an amount equal to
the product of (A) the amount of the denominator
for the Plan Year ending in 1982 under Code
section 415 as it then existed, multiplied by (B)
the transition fraction which is a fraction, the
numerator of which is the lesser of (i) $51,875,
or (ii) 1.4, multiplied by 25 percent of the
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Participant's Compensation for the Plan Year
ending in 1981, and the denominator of which is
the lesser of (i) $41,500, or (ii) 25 percent of
the Participant's Compensation for the Plan Year
ending in 1981.
(e) Combining of Plans. For purposes of applying the
limitations described in this Plan section, all defined
benefit plans maintained by any Employer (whether or
not terminated) will be treated as one defined benefit
plan, and all defined contribution plans maintained by
any Employer (whether or not terminated) will be
treated as one defined contribution plan; provided that
the Percentage Limit will be applied separately to each
defined benefit plan and will be applied under each
plan by using the same period of consecutive calendar
years (not more than three) as the period when the
Participant's Compensation was greatest.
(f) Compliance With Code section 415. The intent of this
Plan section is that the maximum benefit payable to
each Participant will be exactly equal to the maximum
amount permitted under Code section 415. If there is
any discrepancy between this Plan section and Code
section 415, then Code section 415 will prevail.
6.2 Restrictions on Benefits Payable to the 25 Highest-Paid
Participants.
(a) Restricted Participants. In each Plan Year, the total
number of Participants whose benefit payments are
restricted under this Plan section is limited to the 25
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highly compensated employees and former employees
(within the meaning of Code section 414(q)) with the
greatest Compensation in the current or any prior Plan
Year (the Restricted Participants).
(b) Restricted Amount. For each Plan Year, the amount of
benefits payable to each Restricted Participant will be
limited to the annual amount that would be payable in
the single life annuity form that is the Actuarial
Equivalent of the Participant's Accrued Benefit and, if
so, the Participant's other benefits (as described in
Treasury Regulation section 1.401(a)(4)-5(6)(3)(iii)),
unless either:
(1) the value of Plan assets remaining after payment
to the Restricted Participant is at least 110
percent of the value of current liabilities, or
(2) the value of benefits paid to the Restricted
Participant is less than one percent of the value
of current liabilities.
(c) Security for Restricted Amount. In lieu of the
restrictions described in this Plan section and to the
extent permitted by applicable law, the Plan may permit
each restricted Participant to provide security for any
payments which exceed the annual amount that would have
been payable as a single life annuity.
(d) Restriction Upon Plan Termination. In the event the
Plan terminates, the benefits payable to the restricted
Participants will be limited to an amount that is not
discriminatory under Code section 401(a)(4).
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6.3 Top-Heavy Rules.
(a) Applicable Definitions. For purposes of this Plan
section, the following terms will have the meanings set
forth below.
(1) Aggregation Group.
(A) Required Aggregation Group. Each of the
following qualified plans of the Controlled
Group is required to be aggregated for
purposes of determining top-heavy status: (i)
each plan in which a Key Employee is a
participant, and (ii) each other plan which
enables any plan with Key Employee
participants to meet the requirements of Code
section 401(a)(4) or 410.
(B) Permissive Aggregation Group. Qualified
plans of the Controlled Group which are
required to be aggregated, plus such plans
which are not part of the Required
Aggregation Group but which satisfy the
requirements of Code sections 401(a)(4) and
410 when considered together with the
Required Aggregation Group.
(2) Determination Date. For each Plan Year, the last
day of the preceding Plan Year.
(3) Key Employee. Any Employee or former Employee
covered under the Plan who is, or at any time
during the Plan Year in which occurs the
Determination Date or any of the four preceding
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Plan Years, has been either:
(A) one of the top 10 highest-paid owners of any
Employer or other Controlled Group member,
who both (i) owns more than a 1/2 percent
interest in value of the Employer or other
Controlled Group Member, and (ii) earns more
than $30,000 Compensation as indexed under
Code section 415(d),
(B) a five-percent owner of an Employer or other
Controlled Group member,
(C) a one-percent owner of an Employer or other
Controlled Group member having Compensation
of more than $150,000, or
(D) an officer (a high-level policy-making
executive) who received more than $45,000
Compensation as indexed under Code section
415(d), provided that the maximum number of
officers will be the lesser of (i) 50, or
(ii) the greater of three or 10 percent of
the total number of Employees.
(4) Non-Key Employee. An Employee who is not a Key
Employee.
(5) Top-Heavy Average Annual Compensation. The
Participant's average aggregate Compensation over
the five consecutive calendar years (or actual
number of consecutive years if fewer than five)
after 1983 during which his Compensation was
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highest, excluding any Compensation earned after
the last Plan Year in which the Plan is top-heavy.
(6) Top-Heavy Group. An Aggregation Group in which
the sum of (A) the present value of cumulative
Accrued Benefits for Key Employees under all
defined benefit plans included in the group, and
(B) the aggregate account balances of Key
Employees under all defined contribution plans
included in the group, exceeds 60 percent of a
similar sum determined for all Employees.
(b) Determination of Top-Heavy Status. The determination
of top-heavy status for any Plan Year will be based on
the actuarial valuation made as of the first day of the
Plan Year in which the Determination Date occurs. If
benefits under all the Controlled Group plans accrue at
the same rate, that accrual rate may be used; otherwise
the present value of all Accrued Benefits will be
determined by use of the fractional rule described in
Code section 411(b)(1)(C). The Plan will be treated as
top-heavy for the tested Plan Year under the following
rules:
(1) 60-Percent Rule. The Plan will be treated as top-
heavy if the Actuarial Equivalent of the
cumulative Accrued Benefits for Key Employees
exceeds 60 percent of the Actuarial Equivalent of
the cumulative Accrued Benefits for all Employees,
with the Actuarial Equivalent of Accrued Benefits
as determined under Code section 416(g).
(2) Top-Heavy Group Rule. The Plan will be treated as
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top-heavy if it is part of a Top-Heavy Group,
provided that the Plan will not be considered top-
heavy in any Plan Year in which the Plan is part
of a Required or Permissive Aggregation Group that
is not top-heavy.
(c) Plan Operation During Top-Heavy Status.
Notwithstanding any other provision of the Plan, the
following provisions will apply to Participants for any
Plan Year in which the Plan is top-heavy:
(1) Minimum Benefit. The Accrued Benefit of each
active Non-Key Employee Participant will not be
less than the lesser of (A) two percent of his
Top-Heavy Average Annual Compensation multiplied
by the number of his Years of Service, not in
excess of 10, during the Plan Years in which the
Plan is top-heavy; or (B) 20 percent of his Top-
Heavy Annual Compensation. The Participant will
accrue this minimum benefit for each of his Years
of Service earned while the Plan is top-heavy,
regardless of the level of his Compensation during
the Plan Year, or whether he remains in Employment
until the last day of the Plan Year. If the
Employee also participates in a defined
contribution plan maintained by an Employer, this
Plan will provide the top-heavy minimum benefit.
(2) Minimum Vesting. The Account Balance of each
Participant who earns any Hours of Service after
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the Plan becomes top-heavy will become vested
under the following schedule:
Years of Service Vested Percentage
Fewer than 2 0%
2 20%
3 40%
4 60%
5 80%
6 100%
(3) Effect on Aggregate Defined Benefit and Defined
Contribution Limits. For the purpose of
calculating the denominators of the Defined
Benefit Fraction and Defined Contribution Fraction
under Plan section 6.1(d), 1.0 will be substituted
for 1.25 each place it appears, and the dollar
amount $51,875 will be reduced to $41,500;
provided that such substitutions will not be
required if:
(A) the Actuarial Equivalent of the cumulative
Accrued Benefits for Key Employees does not
exceed 90 percent of the cumulative Accrued
Benefits for all Employees as determined
under Code section 416(g), and
(B) the minimum benefit described in subsection
(c)(1) is calculated by substituting three
percent for two percent, and 30 percent for
20 percent;
and provided further that such substitution will be
suspended for any Employee or former Employee so long
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as he receives no benefit accruals under this Plan or
any other qualified plan maintained by a Controlled
Group employer.
(d) Plan Operation After Change in Top-Heavy Status. If
the Plan is top-heavy in a Plan Year and ceases to be
top-heavy in a subsequent Plan Year, the following
provisions will apply:
(1) Accrued Benefit. The Participant's Accrued
Benefit in each subsequent Plan Year will not be
less than the minimum Accrued Benefit described in
Plan section 6.3(c)(1), computed as of the end of
the most recent Plan Year in which the Plan was
top-heavy.
(2) Vested Percentage. The Participant who became
partially vested under the schedule set forth in
Plan section 6.3(c)(2) before the end of the last
Plan Year in which the Plan was top-heavy, will
continue to have the vested percentage of his
Account Balance which he has as of that date but
will not have any additional vested percentage
until he has completed five Years of Service;
provided that the Participant who has completed at
least three Years of Service before the end of the
last Plan Year in which the Plan was top-heavy may
elect to continue to have the vested percentage of
his Account Balance determined under that vesting
schedule instead of the five-year cliff vesting
schedule described in Plan section 3.4(a)(2).
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(e) Cash-Out and Repayment. The Participant who becomes
partially vested under Plan section 6.3(c)(2),
terminates Employment and receives a cash-out of the
vested portion of his Account Balance under Plan
section 4.5 and then resumes Employment, will be
permitted to repay the amount of his cash-out plus
interest at the interest rate prescribed under by Code
section 411(a)(7)(C) as in effect on the date of his
repayment; provided that full repayment must be made no
later than the earlier of (1) the fifth anniversary of
the date he resumes Employment, or (2) the occurrence
of a Five-Year Break. After timely repayment of his
cash-out with all accrued interest, the Participant's
Years of Service accrued before and after his period of
absence will be aggregated.
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ARTICLE 7
CONTRIBUTIONS
7.1 Employer Contributions. The Employers will make
contributions in the amounts determined by the Committee to
be necessary to provide benefits under the Plan, based on
the recommendations of the Plan's actuary. Employer
contributions will be irrevocable and will be used only for
the benefit of Participants and beneficiaries, except as
provided in Plan sections 7.3 and 8.2.
The Company reserves the right to establish and to change
from time to time the method for funding benefits, either
through the use of one or more trust agreements or one or
more group annuity contracts or other forms of insurance
contracts.
7.2 Participant Contributions. Participants will neither be
required nor permitted to make contributions to the Plan.
7.3 Return of Contributions to the Employers. Contributions
will be returned to the affected Employer(s) under the
following circumstances:
(a) Mistake of Fact. Any contribution made by mistake of
fact will be returned to the affected Employer(s)
within one year after the contribution is made.
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(b) Nondeductible. All contributions are conditioned upon
their deductibility under Code section 404 and will be
returned to the affected Employer(s) within one year
after any disallowance.
7.4 Actuarial Gains. Forfeitures arising from any cause
whatsoever will not be applied to increase the benefits any
Participant would otherwise receive at any time before
termination of the Plan, but will be applied to reduce
Employer contributions for the current or subsequent Plan
Years.
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ARTICLE 8
AMENDMENT, TERMINATION, MERGER
8.1 Amendment.
(a) Procedure. The Board shall have the right by action
documented in writing to modify, alter or amend the
Plan or the Trust Agreement in whole or in part by a
majority vote of its members at a meeting, by unanimous
consent in lieu of a meeting or in any other manner
permissible under applicable state law. In addition,
the Board may delegate to an appropriate officer, or
officers of Dimon Incorporated, or committee, all or
part of the authority to amend the Plan or the Trust
Agreement. The duties, powers and liabilities of the
Trustee hereunder shall not be increased without
written consent of the Board.
(b) Prohibited Amendments. No amendment will be permitted
which would have any of the following effects:
(1) Exclusive Benefit. No amendment will permit any
part of the Trust Fund to be used for purposes
other than the exclusive benefit of Participants.
(2) Nonreversion. No amendment will revest in any
Employer any portion of the Trust Fund except such
amount as may remain after termination of the Plan
and satisfaction of all liabilities.
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(3) No Cutback. No amendment will eliminate any
optional form of benefit described in Plan section
4.4 with respect to benefits accrued before the
amendment.
(4) Early Retirement Subsidy. No amendment will
eliminate or reduce any retirement subsidy or
retirement-type subsidy with respect to benefits
accrued before the amendment, for Participants who
either before or after the amendment meet the
requirements for the subsidy.
(c) Limited to Active Participants. Except as specifically
stated in the amendment, no amendment will apply to any
Employee whose Termination Date occurred before the
effective date of the amendment.
8.2 Termination of the Plan.
(a) Right to Terminate. While the Company expects to
continue the Plan indefinitely, the continuance of the
Plan is not assumed as a contractual obligation. The
Company reserves the right to discontinue its
contributions to the Plan and to terminate the Plan at
any time by action of its Board of Directors in
accordance with the procedures set forth in Plan
section 8.1(a).
(b) Full Vesting. In the event of termination or partial
termination, the Account Balance of each affected
Participant, to the extent funded, will become fully
vested as of the termination date. For purposes of
accelerated vesting, affected Participants will include
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only those who are in active Employment as of the Plan
termination date. All nonvested Participants who
terminated Employment before the Plan termination date
will be considered to have received constructive cash-
outs of their entire Account Balances under Plan
section 4.4.
(c) Provision for Benefits Upon Plan Termination. In the
event of termination, subject to Board approval the
Committee may in its discretion act as follows:
(1) Maintain the Trust. The Committee may continue
the Trust for so long as it considers advisable
and so long as permitted by law, either through
the existing trust agreement(s), or through
successor funding media.
(2) Terminate the Trust. The Committee may terminate
the Trust, pay all expenses, and direct the
payment of the benefits as allocated under
subsection (d), either in the form of lump-sum
distributions, installment payments, annuity
contracts, transfer to another qualified plan, or
any other form selected by the Committee, to the
extent not prohibited by law.
(d) Allocation of Assets. Upon termination, the Committee
will allocate the assets that remain after payment of
all Plan expenses, to Participants and to persons
claiming under Participants, as provided in ERISA
section 4044.
(e) Surplus Reversion. Any assets that remain after all
benefits under the Plan have been allocated will be
returned to the affected Employer(s).
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8.3 Merger. In the event of any merger or consolidation of the
Plan with any other plan, or the transfer of assets or
liabilities by the Plan to another plan, each Participant
will be entitled to receive a benefit immediately after the
merger, consolidation or transfer, if the Plan then
terminated, which is equal to or greater than the benefit he
would have been entitled to receive immediately before the
merger, consolidation, or transfer if the Plan had then
terminated.
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ARTICLE 9
APPOINTMENTS AND ALLOCATION OF FIDUCIARY RESPONSIBILITY
9.1 Named Fiduciary. Dimon Incorporated is hereby designated
and appointed the Named Fiduciary of the Plan.
9.2 Plan Administrator. Dimon Incorporated is hereby designated
and appointed Plan Administrator of the Plan.
9.3 Investment and Administrative Committee. The Board shall
appoint an Investment and Administrative Committee which
shall be comprised at least three persons and which shall
serve pursuant to the provisions of Article 11. The Board
shall have the power to remove a member of the Committee at
its discretion. In the event of a removal or if for any
other reason there are less than three members of the
Committee serving at any time, the Board shall as soon as
practicable appoint a new member or members so that there
shall be a minimum of three members.
9.4 Actuary. The Committee shall designate as actuary for the
Plan a person, actuarial firm or insurance company which
maintains on its staff at least one person recognized by the
Secretaries of Labor and Treasury as an enrolled actuary.
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Such entity shall be engaged by the Plan Administrator on
behalf of all Participants to perform valuations and provide
such actuarial certifications and render such other services
as may be necessary or desirable.
9.5 Accountant. To the extent required by law, the Committee
shall designate as accountant for the Plan a person or a
firm which maintains on its staff at least one person
recognized by the Secretaries of Labor and Treasury as an
independent qualified public accountant. Such entity shall
be engaged by the Plan Administrator to perform (to the
extent required by law) in accordance with generally
accepted accounting principles such examination of the
financial statements and other books and records of the Plan
as it deems necessary to enable it to form and render an
opinion as to whether the financial statements and schedules
required by law to be included in the annual report of the
Plan are presented fairly and in conformity with generally
accepted accounting principles applied on a basis consistent
with that of the preceding year and to render such other
opinions and perform such other services with regard to the
Plan as may be necessary or desirable.
9.6 Allocations of Fiduciary Responsibility. The Named
Fiduciary shall have the power to allocate fiduciary
responsibilities among other fiduciaries and to designate
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fiduciaries and nonfiduciaries to carry out fiduciary
responsibilities in order to provide for the orderly
operation and administration of the Plan. Any allocation,
delegation or other assignment of duties with regard to the
Plan previously made is hereby confirmed and shall continue
until such time as it is revoked, modified or altered by the
Named Fiduciary. The Named Fiduciary may permit any person
or entity to whom any authority or control has been granted
to further allocate, delegate or assign any or all such
duties to such other person or entity as the Named Fiduciary
may specify. To the extent allowed by law, each fiduciary's
responsibility is limited to the duties allocated as
designated thereto.
9.7 General.
(a) A person or entity serving as a fiduciary to the Plan
may employ one or more persons to render advice with
regard to his fiduciary responsibilities hereunder.
(b) If the fiduciary is serving as such without
compensation, reasonable expenses incurred by such
fiduciary may be reimbursed by the Company or, at the
discretion of the Company, from the Trust Fund.
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9.8 Fiduciary Discretion. In discharging the duties assigned to
it under the Plan, each fiduciary has the discretion to
interpret the Plan; adopt, amend and rescind rules and
regulations pertaining to their duties under the Plan; and
to make all other determinations necessary or advisable for
the discharge of their duties under the Plan. Each
fiduciaries' discretionary authority is absolute and
exclusive if exercised in a uniform and nondiscriminatory
manner with respect to similarly situated individuals. The
express grant in the Plan of any specific power to a
fiduciary with respect to any duty assigned to it under the
Plan must not be construed as limiting any power or
authority of the fiduciary to discharge its duties. A
fiduciary's decision is final and conclusive unless it is
established that the fiduciary's decision constituted an
abuse of its discretion.
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ARTICLE 10
PLAN ADMINISTRATION
10.1 General.
(a) The Plan Administrator shall be responsible for the
operation and administration of the Plan, except to the
extent its duties are allocated to or assumed by other
fiduciaries hereunder.
(b) The Plan Administrator shall establish rules and
procedures to be followed by the Participants,
beneficiaries and contingent annuitants in filing
applications for benefits and for furnishing and
verifying proofs necessary to establish age, Years of
Service, Hours of Service, Compensation and any other
matters required in order to establish their rights to
benefits under the terms of the Plan.
(c) The Plan Administrator shall supply such full and
timely information on all matters relating to the Plan
as (1) the Actuary, (2) the Accountant, (3) the
Committee and (4) the Trustee may require for the
effective discharge of their respective duties.
(d) It shall be the duty of the Plan Administrator to
handle the day-to-day operations of the Plan,
including: the enrollment of Participants; the
distribution of booklets, notices and other information
regarding the Plan; maintaining beneficiary designation
forms; explaining the optional forms of benefit payouts
which may be elected by a Participant under the Plan;
forwarding the option election forms executed by
Participants to the Trustee and communicating all other
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matters relating to participation and entitlement to
benefits to (1) the Actuary, (2) the Accountant, (3)
the Committee and (4) the Trustee as may be necessary
to enable them to discharge their duties under the
Plan. The Plan Administrator shall carry out these
duties in a uniform, equitable and nondiscriminatory
manner with regard to all Participants or beneficiaries
under similar circumstances.
10.2 Disclosure.
(a) The Plan Administrator shall see that descriptions of
the Plan are prepared for filing with the Department of
Labor and shall make available to Participants and
beneficiaries receiving benefits under the Plan a
summary of the Plan at such place and at such times as
may be required by Federal statutes and regulations
issued thereunder.
(b) The Plan Administrator shall arrange for the
preparation and filing of such annual reports,
including financial statements of the Plan's assets and
liabilities, schedules, receipts and disbursements and
changes in financial position in such form, at such
place and at such times as may be required by Federal
statutes and regulations. The Plan Administrator shall
furnish annually to all Participants and beneficiaries
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receiving benefits under the Plan a copy of a summary
of the financial statement of the Plan's assets and
liabilities and schedules of receipts and disbursements
and such other material as is necessary to fairly
summarize the latest annual report at such times as may
be required by Federal statutes and regulations.
(c) The Plan Administrator shall make available copies of
the Plan, copies of any contracts relating to the Plan,
descriptions of the Plan, and annual reports at its
principal office for examination by any Participant and
beneficiary receiving benefits under the Plan.
(d) Upon written request of any Participant or beneficiary
receiving benefits under the Plan, the Plan
Administrator shall furnish him a copy of the latest
updated summary Plan description, latest annual report
and a copy of the Plan. The Plan Administrator may
make a reasonable charge for the costs of furnishing
such copies.
10.3 Annual Accountings. To the extent required by law, the Plan
Administrator shall engage, on behalf of all Participants,
the independent qualified public accountant designated by
the Board, to certify and render an opinion that the
financial statements and schedules prepared in conjunction
with the Plan are presented fairly and are in conformity
with generally accepted accounting principles consistently
applied.
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10.4 Actuarial Services and Certification. The Plan
Administrator shall engage the Actuary designated by the
Committee to perform periodic actuarial valuations of the
Plan to determine the amount of contributions necessary to
maintain the Plan on an actuarially sound basis and in
compliance with the minimum funding standards in effect from
time to time. An actuarial valuation of the Plan shall be
made at least annually and annual certification of actuarial
soundness shall be made as required by law. The Plan
Administrator shall provide, or cause the Actuary to
provide, the Trustee with a copy of the results of each
actuarial valuation and annual actuarial certification. The
Committee shall approve, in consultation with the Actuary,
interest and mortality tables to be used to determine
Actuarial Equivalents under the Plan.
10.5 Funding Policy. The Committee in consultation with the
Actuary shall establish a funding policy and method to carry
out the objectives of the Plan. To formulate and maintain
such policy, the Committee and the Actuary shall consult at
least annually and more frequently, if necessary, to review
the short- and long-range financial needs of the Plan, the
anticipated level of annual contributions and any material
changes thereto occurring between actuarial valuations. The
results of such annual consultations shall be documented by
the Committee or its designee and circulated annually in
writing among the Committee and the Actuary.
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<PAGE>
10.6 Expenses - Compensation. Although it is not required to do
so, it is Dimon Incorporated's present intention to pay the
reasonable expenses incurred in the administration of the
Plan. However, in its discretion and as permitted by ERISA,
Dimon Incorporated may direct that such expenses shall be
paid by the Trustee out of the Trust Fund. In no event,
however, shall any Employee of the Company be entitled to
compensation for his services with respect to the Plan other
than his normal compensation received as an Employee and the
reimbursement of his expenses incurred with respect to the
Plan.
10.7 Directions to Trustee. All directions from the Committee to
the Trustee shall be in writing from the Chairman of the
Committee or such other persons as may be appointed in
writing by the Committee. A Trustee shall rely on
directions from such persons and shall act in accordance
therewith, unless a Trustee knows or should know that the
directions constitute a breach of such person's or its own
obligations under the Plan.
10.8 Claims Procedure.
(a) All claims for benefits under the Plan shall be
submitted to the Plan Administrator or such person as
he may designate in writing, who shall have the initial
responsibility for determining the eligibility of any
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<PAGE>
Participant or beneficiary for benefits. All claims
for benefits shall be made in writing and shall set
forth the facts which such Participant or beneficiary
believes to be sufficient to entitle him to the benefit
claimed. The Plan Administrator may adopt forms for
the submission of claims for benefits in which case all
claims for benefits shall be filed on such forms.
(b) On receipt of a claim, the Plan Administrator must
respond in writing within 90 days. If necessary, the
Plan Administrator's first notice must indicate any
special circumstances requiring an extension of time
for the Plan Administrator's decision. The extension
notice must indicate the date by which the Plan
Administrator expects to give a decision. An extension
of time for processing may not exceed 90 days after the
end of the initial 90 day period.
(c) In the event a claim for benefits is denied or if the
claimant has had no response to such claim within 60
days of its submission (in which case the claim for
benefits shall be deemed to have been denied), the
claimant or his duly authorized representative, at the
claimant's sole expense, may appeal the denial to the
Committee within 60 days of the receipt of written
notice of denial or 60 days from the date such claim is
deemed to be denied. In pursuing such appeal said
claimant or his duly authorized representative,
(1) may request in writing that the Committee review
the denial;
(2) may review pertinent documents; and
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<PAGE>
(3) may submit issues and comments in writing.
(d) The decision on review shall be made within 60 days or
within such longer time period as the claimant or his
representative may request, but not later than 120 days
after receipt of a request for review. The decision on
review shall be made in writing and shall include
specific reasons for the decision, written in a manner
calculated to be understood by the claimant and contain
specific references to the provisions of the Plan on
which such decision is based.
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<PAGE>
ARTICLE 11
THE INVESTMENT AND ADMINISTRATIVE COMMITTEE
11.1 Committee. The Investment and Administrative Committee
shall consist of not less than three persons appointed by
the Board pursuant to Plan section 9.3. Any member of the
Committee may resign by giving notice in writing to the
Board at any time or may be removed at any time and for any
reason by the Board.
11.2 Meetings - Actions.
(a) Except as otherwise specifically provided herein, all
acts and decisions of the Committee shall be on the
concurrence of a majority of the members. Any decision
shall be evidenced in writing and signed by a majority
of the members.
(b) The Committee may delegate to any of its members or to
the secretary of the Committee authority to sign any
documents on its behalf, or to perform solely
ministerial acts, but such person shall not exercise
any discretion over matters delegated to him without
obtaining the concurrence of a majority of the members.
If at any time there shall be less than three members
of the Committee, the remaining member or members shall
have authority to act as the Committee. All acts and
determinations of the Committee shall be duly recorded
by the secretary thereof and all such records, together
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with such other documents as may be necessary, shall be
preserved by the secretary. Such records and documents
shall at all times be open for inspection and for the
purpose of making copies by any person designated by
Chesapeake Corporation. The Committee shall provide
such information as needed by (1) the Plan
Administrator, (2) the Actuary, (3) the Accountant, (4
the Trustee, and (5) other persons providing services
to the Plan for the effective discharge of their
duties.
11.3 Powers of Committee.
(a) The Committee shall have all duties specifically
allocated to it hereunder or which are delegated to it
by the Plan Administrator and shall have all necessary
powers to carry out these duties. The Committee shall
have the power to construe the Plan and to determine
all questions that arise hereunder. The Committee
shall be responsible for establishing a funding policy,
appointing and removing investment managers and
trustees, appointing, removing and contracting with
insurance companies and actuaries, establishing an
investment policy and reviewing investment performance.
In exercising its duties hereunder, the Committee
shall at all times act in a uniform, equitable and
nondiscriminatory manner in construing provisions of
the Plan as they relate to Participants and
beneficiaries in similar circumstances.
Notwithstanding its powers granted hereunder, the
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<PAGE>
Committee shall have no power to modify in any way any
provision of the Plan.
(b) The Company shall indemnify and save harmless each and
all of the members of the Committee from the effects
and consequences of their acts, omissions and conduct
in their official capacity, except to the extent that
such effects and consequences shall result from their
own willful misconduct or gross negligence.
(c) A member of the Committee who is also a Participant of
the Plan shall abstain from any action which directly
affects him as a Participant. In the event of an
abstention, matters shall be decided by the remaining
members of the Committee. Nothing herein, however,
shall prevent any member of the Committee who is also a
Participant of the Plan or beneficiary from receiving
any benefit to which he may be entitled, so long as the
benefit is computed and paid on a basis that is
consistently applied to all other Participants and
beneficiaries.
11.4 Agents and Counsel. The Committee may engage agents to
assist it in its duties, and may consult with counsel, who
may be counsel for the Company, with respect to the meaning
or construction of this document and its obligations
hereunder, or with respect to any action, proceeding, or
question of law related thereto.
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<PAGE>
11.5 Compensation. The Company shall pay the reasonable expenses
incurred by the Committee in carrying out its duties and
responsibilities under the Plan, including reasonable legal
and accounting expenses. Should the Company fail to pay
these expenses, they shall be paid by the Trustee out of the
Fund. The Company agrees to supply such stenographic or
office help as may be necessary to assist the members of the
Committee in the performance of their duties and responsi-
bilities.
11.6 Officers. The Committee shall select a member to serve as
chairman of the Committee and the chairman may appoint a
secretary to keep such records as may be necessary of the
acts of the Committee. The secretary may, but need not, be
a member of the Committee. The secretary may perform any
and all purely ministerial acts which may be delegated to
him by the Committee.
11.7 Rules and Regulations. The Committee may formulate rules
and regulations not inconsistent with the purposes of the
Plan as it may deem necessary to enable it to carry out its
duties hereunder.
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<PAGE>
ARTICLE 12
MISCELLANEOUS
12.1 Headings. The headings and subheadings in this Plan have
been inserted for convenient reference, and to the extent
any heading or subheading conflicts with the text, the text
will govern.
12.2 Construction. The Plan will be construed in accordance with
the laws of the State of Virginia, except to the extent such
laws are preempted by ERISA and the Code.
12.3 Qualification for Continued Tax-Exempt Status.
Notwithstanding any other provision of the Plan, the spin-
off, amendment and restatement of the Plan is adopted on the
condition that it will be approved by the Internal Revenue
Service as meeting the requirements of the Code and ERISA
for tax-exempt status, and in the event continued
qualification is denied and cannot be obtained by revisions
satisfactory to the Committee, this amendment and
restatement will be null and void.
12.4 Nonalienation. No benefits payable under the Plan will be
subject to the claim or legal process of any creditor of any
Participant or beneficiary, and no Participant or
beneficiary will alienate, transfer, anticipate or assign
any benefits under the Plan, except that distributions will
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<PAGE>
be made pursuant to (a) Qualified Domestic Relations Orders,
(b) judgments resulting from federal tax assessments, and
(c) as otherwise required by law.
12.5 No Employment Rights. Participation in the Plan will not
give any Employee the right to be retained in the employ of
any Employer, or upon termination any right or interest in
the Plan except as provided in the Plan.
12.6 No Enlargement of Rights. No person will have any right to
or interest in any portion of the Plan except as
specifically provided in the Plan.
12.7 Single Employer Plan. All assets of the Plan will be
available to provide the benefits payable to all
Participants and beneficiaries.
12.8 Exclusive Purpose. This Plan has been created for the
exclusive purpose of providing benefits to Participants and
their beneficiaries and defraying reasonable expenses of
administering the Plan. The Plan shall be interpreted in a
manner consistent with applicable provisions of the Code and
of ERISA. Except as permitted by law, under no
circumstances shall any funds contributed to this Plan, any
assets of this Plan held under any Trust Agreement or income
attributable to such assets, revert to or be used or enjoyed
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<PAGE>
by an Employer, nor shall any such funds, assets or income
ever be used or diverted to purposes other than the
exclusive benefit of Participants or their beneficiaries.
12.9 Errors and Omissions. Individuals and entities charged with
the administration of the Plan must see that it is
administered in accordance with the terms of the Plan as
long as the Plan does not conflict with the Code or ERISA.
If an innocent error or omission is discovered in the Plan's
operation or administration, and the Plan Administrator
determines that it would cost more to correct the error than
is warranted, and if the Plan Administrator determines that
the error did not result in discrimination in operation or
cause a qualification or excise-tax problem, then, to the
extent that an adjustment will not, in the judgment of the
Plan Administrator, result in discrimination in operation,
the Plan Administrator may authorize any equitable
adjustment it deems necessary or desirable to correct the
error or omission, including but not limited to the
authorization of additional Employer contributions designed,
in a manner consistent with the goodwill intended to be
engendered by the Plan, to put Participants in the same
relative position they would have enjoyed if there had been
no error or omission. Any contribution made pursuant to
this section is an additional discretionary contribution.
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<PAGE>
IN WITNESS WHEREOF, Dimon Incorporated has caused the Dimon
Incorporated Cash Balance Plan to be executed by its duly
authorized officers this 7th day of February, 1997, to be
effective as of July 1, 1996.
DIMON INCORPORATED
By: John O. Hunnicutt
Title: VP of Administration/Secretary
ATTEST
Debra Slaughter
Corporate Seal:
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<PAGE>
<PAGE>
DIMON INCORPORATED CASH BALANCE PLAN
ADDENDUM A
HISTORY OF REVISED PLAN PROVISIONS
The following are provisions which have been in effect during the
stated periods of the Plan's existence, but which may affect the
amount of or entitlement to benefits of a Participant, or
beneficiary of a Participant, whose Termination Date occurs after
the effective date of the 1996 amendment, restatement and
conversion to a cash balance plan.
ARTICLE I
DEFINITIONS
1.1 Accrued Benefit.
(a) Employee-Derived Accrued Benefit. The portion of
the Participant's Accrued Benefit derived from his
own Employee Contributions (as defined in Addendum A
section 1.5) is determined as follows:
(1) Termination Before Normal Retirement. As of
the date the Participant terminates Employment,
the Plan will calculate the value of his
Employee Contribution as accumulated with
interest under Addendum A section 1.5 through
his Termination Date, and project it to his
Normal Retirement Date by using (A) the PBGC
schedule of immediate and graded deferred
interest rates in effect on the first day of
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the Plan Year in which the Termination Date
occurs, and (B) no assumption for mortality.
The Plan will convert the projected Employee
Contribution to a single life annuity, using
the PBGC immediate interest rate in effect on
the first day of the Plan Year in which the
Termination Date occurs, and the Plan's
mortality assumptions for determining an
Actuarial Equivalent lump sum value as set
forth in Addendum A section 1.2.
(2) Termination On or After Normal Retirement. If
the Participant terminates his Employment on or
after his Normal Retirement Date, the Plan will
convert his Employee Contribution as
accumulated with interest under Addendum A
section 1.5 to his Termination Date, to a
single life annuity using the PBGC immediate
interest rate in effect on the first day of the
Plan Year in which his Termination Date occurs,
and the Plan's mortality assumptions for
determining an Actuarial Equivalent lump sum
value.
(b) Employer-Derived Accrued Benefit. The portion of
the Participant's Accrued Benefit derived from
Employer contributions is an amount equal to the
retirement benefit which he has earned under the
formula set forth in Plan section 3.1 in excess of
his Employee-Derived Accrued Benefit, based on his
Final Average Earnings and Covered Compensation as
of the date of determination. The Accrued Benefit
is calculated as if it will be paid on the
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Participants Normal Retirement Date in the form of a
single life annuity.
(c) Minimum Benefit. The Participant's total Accrued
Benefit will never be less than his Employee-Derived
Accrued Benefit.
1.2 Actuarial Equivalent. Before July 1, 1996, lump sum
values were computed on the basis of (a) the 1971 TPF&C
Forecast Mortality Table with a one-year setback for
Participants and a five-year setback for beneficiaries,
and (b) the PBGC schedule of immediate and graded
deferred rates in effect on the first day of the Plan
Year in which the lump sum was paid, and the five years
certain and life annuity was computed on the basis of the
annuity factors described in Plan section 1.4(a).
1.3 Break in Service. A Break in Service incurred by a
nonvested terminated Participant has always been governed
by the rule in effect as of his Termination Date. No
Participant has been entitled to have his vesting service
determined under a more generous Break in Service rule
which became effective after his Termination Date, unless
he resumed Employment before he incurred a Break in
Service under the old rule and earned at least one Hour
of Service after the effective date of the new rule.
(a) Before the 1976 Plan Year. A Break in Service will
be determined under the terms of the Plan prior to
the 1976 Plan Year.
(b) 1976 - 1984 Plan Years. A Break in Service was a
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<PAGE>
period of consecutive whole One-Year Breaks equal to
or greater than the number of Years of Service the
nonvested terminated Participant had earned as of
his Termination Date.
(c) 1985 - 1988 Plan Years. A Break in Service was a
period of consecutive whole or partial One-Year
Breaks incurred by the nonvested terminated
Participant, which equaled or exceeded the greater
of five or the number of his whole and partial pre-
break Years of Service.
(d) After the 1988 Plan Year. A Break in Service is
five consecutive One-Year Breaks incurred by the
nonvested terminated Participant, regardless of the
number of his pre-break Years of Service.
1.4 Compensation.
(a) Statutory Cap. Before the 1994 Plan Year, each
Participant's Compensation taken into account for
all purposes under the Plan was limited to $200,000
(as indexed under Code section 401(a)(17)).
(b) Family Aggregation. For purposes of applying the
statutory cap for Plan Years 1989-1996, the Plan
will aggregate the Compensation of (1) each Employee
who either is a five-percent owner or is among the
10 highest-paid Employees, and (2) his Spouse and/or
his lineal descendants who have not reached age 19
as of the last day of the Plan Year. The Committee
will allocate the statutory cap among the members of
any Family Unit in proportion to each member's
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<PAGE>
actual Compensation. The Plan will not prorate the
statutory cap on Compensation for any Participant
who participates in the Plan for less than a full
Plan Year.
1.5. Employee Contribution.
(a) Interest Accruals. The Participant's Employee
Contribution is the amount of the aggregate
contributions he made to the Plan through December
31, 1988, accumulated with interest at the rates of:
(1) the rate under the Plan in effect before 1976,
(2) 5 percent per annum for Plan Years 1976 - 1981,
(3) 8 percent per annum for Plan Years 1982 - 1987,
and
(4) a rate equal to 120 percent of the federal
midterm rate as in effect for January of each
year for Plan Year.
Interest is compounded annually from the date of
each contribution until the Termination Date. After
the Participants Termination Date, his Employee
Contribution will equal the Actuarial Equivalent
value of his Employee-Derived Accrued Benefit, as
defined above in Addendum A section 1.3(a), but
calculated by using no mortality assumption.
(b) Vesting. The Participant will be vested in 100
percent of his Employee Contribution at all times.
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<PAGE>
(c) Ceased After 1988. After the 1988 Plan Year,
Participants are neither required nor permitted to
make any contribution to the Plan.
(d) Withdrawal. A vested Participant may not elect to
withdraw his Employee Contribution at any time.
(e) Repayment. The Participant who terminates
Employment and withdraws his Employee Contribution
and then resumes Employment before he incurs a Five-
Year Break, will be permitted to repay the amount of
his Employee Contribution plus interest at the rate
of five percent compounded annually for Plan Years
before 1988 and a rate equal to 120 percent of the
federal midterm rate as in effect for January of
each year in Plan Years beginning in 1988; provided
that full repayment must be made no later than the
earlier of (1) the fifth anniversary of the date he
resumes Employment, or (2) the fifth anniversary of
his withdrawal date. After timely repayment of his
Employee Contribution with all accrued interest, the
Participant's Employee-Derived Accrued Benefit will
be restored. The nonvested terminated Participant
who resumes Employment after he incurs a Five-Year
Break will not be permitted to repay his Employee
Contribution.
ARTICLE 2
RETIREMENT DATES AND BENEFITS
2.1 Accrued Benefits under the Dibrell Plan.
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(a) Early Retirement Benefit. Before July 1, 1996, the
Dibrell Plan's requirements for early retirement
were age 55 and 10 Years of Service. The Accrued
Benefit was reduced for early payment by an amount
equal to six percent for each of the first five
years, and four percent for each of the next five
years, by which the Participant's Benefit
Commencement Date preceded his Normal Retirement
Date. If a Participant retired after reaching age
62 and completing 40 Years of Service, his Accrued
Benefit was not reduced for early payment. These
early retirement factors will be applied to the
Beginning Account Balance of each Participant who
participated in the Dibrell Plan and who receives
payment under this Plan between his Early Retirement
Date and his Normal Retirement Date.
(b) Normal Retirement Benefit. Before July 1, 1996, the
Participant's normal retirement benefit was a
monthly benefit in an amount equal to 1/12 of 1.1
percent of his final average earnings multiplied by
his Years of Service. For this purpose, his final
average earnings was the annual average of his
Compensation for the five consecutive calendar years
(or actual number if fewer than five) during his
last 10 consecutive calendar years of Employment (or
actual number if fewer than 10) which produced the
highest average.
2.2 Vesting.
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<PAGE>
(a) Before the 1976 Plan Year. The Participant who
terminated Employment before 1976, and was not
vested under the Plan as it existed on his
Termination Date, is not eligible to receive any
benefits under this Plan.
(b) 1976 - 1988 Plan Years. The Participant was vested
in 100 percent of his Accrued Benefit after he
completed 10 Years of Service or reached Normal
Retirement Age.
(c) After the 1988 Plan Year. The Participant will be
vested in 100 percent of his Accrued Benefit after
he completes five Years of Service or reaches Normal
Retirement Age.
ARTICLE 3
PAYMENT OF BENEFITS
3.1 Normal Form of Payment.
(a) Vested Participant Who Terminated Employment Before
August 23, 1984. Each vested Participant who earned
at least one Hour of Service after the 1975 Plan
Year but no Hours of Service on or after August 23,
1984, (the effective date of the Retirement Equity
Act) and who has a Spouse on his Benefit
Commencement Date, will receive his retirement
benefits in the form of the 50 percent joint and
survivor annuity with his Spouse as his joint
annuitant, unless he elects another form of payment.
The Participant will not be required to have his
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<PAGE>
Spouse's consent to elect another form of payment.
(b) Vested Participant Who Terminated Employment Before
the 1976 Plan Year. Each vested Participant who
earned no Hours of Service after the 1975 Plan Year,
and whose Benefit Commencement Date occurs after the
1984 Plan Year, will receive his retirement benefits
in the form of the five years certain and life
annuity unless he elects another form of benefit.
The Participant will not be required to have his
Spouse's consent to receive any form of payment
available under the Plan.
3.2 Death Benefits - Married Vested Participant Who
Terminated Employment Before the Effective Date of the
Retirement Equity Act on August 23, 1984. The Plan will
provide the qualified preretirement death benefit
described in Plan section 5.1 to the Surviving Spouse of
each married active or terminated vested Participant who
dies on or after August 23, 1984 and before his Benefit
Commencement Date, including the Surviving Spouse of any
Participant who (1) earned at least one Hour of Service
after the 1975 Plan Year, (2) earned no Hours of Service
on or after August 23, 1984 but was alive and had not
begun receiving benefits as of that date, and (3) has at
least 10 Years of Service.
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<PAGE>
DIMON INCORPORATED CASH BALANCE PLAN
ADDENDUM B
REQUIRED DISTRIBUTION RULES
1.1 Commencement of Benefits
(a) General Rules
(1) This Plan section is intended to describe the
requirements of the Code for the timing and
amount of benefits to be paid under the Plan if
a Participant is otherwise eligible for a
benefit. This Plan section does not entitle a
Participant to a benefit under the Plan.
(2) Subject to Plan sections 4.2 and 4.3, the
requirements of this Plan section shall apply
to any distribution of a Participant's interest
and will take precedence over any inconsistent
provisions of the Plan.
(3) All distributions required under Article 4
shall be determined and made in accordance with
Code section 401(a)(9) and regulations promul-
gated thereunder including the minimum
incidental death benefit rules of Proposed
Treasury Regulation section 1.401(a)(9)-2.
(4) The entire interest of a person must be or must
begin to be distributed not later than his
Required Beginning Date.
(b) Distribution Periods. As of the Participant's
Required Beginning Date, distributions, if not made
in a single-sum, may only be made over one of the
following periods (or a combination thereof):
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<PAGE>
(1) the life of the Participant,
(2) the life of the Participant and a Beneficiary,
(3) a period certain not extending beyond the life
expectancy of the Participant, or
(4) a period certain not extending beyond the joint
and last survivor expectancy of the Participant
and a Beneficiary.
1.2. Death Distributions
(a) If the Participant dies after distribution of his
interest has begun, the remaining portion of such
interest will continue to be distributed at least as
rapidly as under the method of distribution being
used prior to the Participant's death.
(b) If the Participant dies before distribution of his
interest begins, distribution of the Participant's
entire interest shall be completed by December 31 of
the calendar year containing the fifth anniversary
of the Participant's death except to the extent that
an election is made to receive distributions in
accordance with (1) or (2) below:
(1) If any portion of the Participant's interest is
payable to a Beneficiary, distributions may be
made over the life or over a period certain not
greater than the life expectancy of the Benefi-
ciary commencing on or before December 31 of
the calendar year immediately following the
calendar year in which the Participant died.
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(2) If the Beneficiary is the Participant's
Surviving Spouse, the date distributions are
required to begin in accordance with (1) above
shall not be earlier than the later of (i)
December 31 of the calendar year immediately
following the calendar year in which the
Participant died and (ii) December 31 of the
calendar year in which the Participant would
have attained age seventy and one-half.
If the Participant has not made an election pursuant
to this paragraph by the time of his death, the
Participant's Beneficiary must elect the method of
distribution no later than the earlier of (i)
December 31 of the calendar year in which distribu-
tions would be required to begin under this Plan
section, or (ii) December 31 of the calendar year
which contains the fifth anniversary of the death of
the Participant. If the Participant has no Benefi-
ciary, or if the Beneficiary does not elect a method
of distribution, distribution of the Participant's
entire interest must be completed by December 31 of
the calendar year containing the fifth anniversary
of the Participant's death.
(c) For purposes of subsection (b)(2) above, if the
Surviving Spouse dies after the Participant, but
before payments to such Spouse begin, the provisions
of subsection (b)(2), with the exception of
paragraph (A), shall be applied as if the Surviving
Spouse were the Participant.
(d) For purposes of this subsection, any amount paid to
a child of the Participant will be treated as if it
had been paid to the Surviving Spouse if the amount
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becomes payable to the Surviving Spouse when the
child reaches the age of majority.
(e) For purposes of this subsection, distribution of a
Participant's interest is considered to begin on the
Participant's Required Beginning Date (or if
subsection (b)(3) above is applicable, the date
distribution is required to begin to the Surviving
Spouse pursuant to subsection (b)(2) above). If
distribution in the form of an annuity irrevocably
commences to the Participant before the Required
Beginning Date, the date distribution is considered
to begin is the date distribution actually
commences.
1.3. Required Beginning Date means the April 1st of the
calendar year next following the calendar year in which a
Participant attains age 70/. Effective January 1, 1997,
a Participant's distribution generally must be made or
commenced on or before April 1 of the calendar year
following the later of (a) the calendar year in which he
separate from service; or (b) the calendar year in which
he attains age 70/. Notwithstanding the preceding, the
entire interest of a Participant, who is a five-percent
owner (as defined in Code section 416(i)(1)), of any
Controlled Group Member must be made or commenced not
later than April 1 of the calendar year following the
calendar year in which he attains age 70 1/2.
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Exhibit 10.25
DIMON INCORPORATED
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Effective January 1, 1997
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<PAGE>
INTRODUCTION ...................... 1
ARTICLE I Definitions
1.01. Accounting Firm .............. 2
1.02. Administrator ............... 2
1.03. Affiliate ................. 2
1.04. Board ................... 2
1.05. Cash Balance Plan ............. 2
1.06. Capped Parachute Payments ......... 2
1.07. Change in Control ............. 2
1.08. Code ................... 3
1.09. Committee ................. 3
1.10. Compensation ............... 3
1.11. Competes ................. 3
1.12. Control Change Date ............ 3
1.13. Corporation ................ 3
1.14. Credited Compensation ........... 3
1.15. Employee ................. 3
1.16. Executive ................. 3
1.17. Fiscal Year ................ 4
1.18. Joint and Survivor Annuity ........ 4
1.19. Net After-Tax Amount ........... 4
1.20. Normal Retirement Allowance ........ 4
1.21. Normal Retirement Date .......... 4
1.22. Offset Amount ............... 4
1.23. Parachute Payment ............. 4
1.24. Participant ................ 5
1.25. Pension Equalization Plan ......... 5
1.26. Plan ................... 5
1.27. Retirement, Retire or Retires ....... 5
1.28. Spouse .................. 5
1.29. Surviving Spouse ............. 5
1.30. Years of Service ............. 5
ARTICLE II Participation
2.01. Beginning Participation .......... 6
2.02. Change in Status ............. 6
i
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<PAGE>
ARTICLE III Retirement Allowances
3.01. Normal Retirement Allowance ........ 7
ARTICLE IV Vesting
4.01. Normal Vesting .............. 8
4.02. Change in Control ............. 8
4.03. Competition ................ 8
ARTICLE V Administration of the Plan
5.01. Generally ................. 9
5.02. Indemnification .............. 9
5.03. Determining Benefits ........... 9
5.04. Cooperation. ............... 9
5.05. Claims .................. 10
5.06. Review of Claims ............. 10
5.07. Delegation of Committee Responsibilities . 11
ARTICLE VI Termination, Amendment or
Modification of Plan
6.01. Reservation of Rights ........... 12
6.02. Limitation on Actions ........... 12
6.03. Effect of Termination ........... 12
ARTICLE VII Miscellaneous
7.01. Limitation on Benefits .......... 13
7.02. Unfunded Plan ............... 14
7.03. Other Benefits and Agreements ....... 15
7.04. Restrictions on Transfer of Benefits ... 15
7.05. No Guarantee of Employment ........ 15
7.06. Successors ................ 15
7.07. Construction ............... 15
7.08. Governing Law ............... 16
ii
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<PAGE>
<PAGE>
DIMON INCORPORATED
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
INTRODUCTION
The Board of Directors of DIMON Incorporated (the
Corporation) determined that the adoption of the DIMON
Incorporated Supplemental Executive Retirement Plan (the Plan)
should assist it in attracting and retaining those employees
whose judgment, abilities and experience will contribute to
its continued progress and success. The Board of Directors
also determined that the Plan should further those objectives
by providing retirement and related benefits that supplement
the amounts payable under the deferred compensation plans and
arrangements currently maintained by the Corporation.
The Plan is effective January 1, 1997. The Plan is
intended to provide an unfunded supplemental retirement
benefit to a select group of management and highly compensated
employees as such terms are used in sections 201, 301, and 501
of the Employee Retirement Income Security Act of 1974. The
Plan must be interpreted and administered in a manner that is
consistent with that intent.
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<PAGE>
ARTICLE I
Definitions
1.011. Accounting Firm means the accounting firm most recently
approved by the Corporation's shareholders as the
Corporation's auditor; provided, however, that if such
accounting firm declines to undertake the determinations
assigned to it under this Agreement, then the "Accounting
Firm" shall mean such other accounting firm designated by the
Corporation.
1.012. Administrator means the Committee and any delegate of
the Committee appointed in accordance with Section 5.07.
1.013. Affiliate means any corporation which, when considered
with the Corporation, would constitute a controlled group of
corporations within the meaning of Code section 1563(a)
determined without reference to Code sections 1563(a)(4) and
1563(e)(3)(C) and any entity, whether or not incorporated,
which would be under common control with the Corporation
within the meaning of Code section 414(c).
1.014. Board means the Board of Directors of the Corporation.
1.015. Cash Balance Plan means the DIMON Incorporated Cash
Balance Plan, and any successor thereto.
1.016. Capped Parachute Payments means the largest amount of
Parachute Payments that may be paid to the Participant without
liability under Code section 4999.
1.017. Change in Control means that (i) any "person" (as such
term is used in Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended) becomes the beneficial
owner, directly or indirectly, of securities of the
Corporation representing more than 30% of the aggregate voting
power of all classes of the Corporation's voting securities on
a fully diluted basis, after giving effect to the conversion
of all outstanding warrants, options and other securities of
the Corporation convertible into or exercisable for voting
securities of the Corporation (whether or not such securities
are then exercisable); (ii) the shareholders of the
Corporation approve (A) a plan of merger, consolidation or
share exchange between the Corporation and an entity other
than a direct or indirect wholly-owned subsidiary of the
Corporation or (B) a proposal with respect to the sale, lease,
exchange or other disposal of all, or substantially all, of
the Corporation's property; or (iii) during any period of two
consecutive years (which period may be deemed to begin prior
to the date of this agreement), individuals who at the
beginning of such period constituted the Board, together with
any new members of the Board whose election by the Board or
2
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<PAGE>
<PAGE>
whose nomination for election by the shareholders of the
Corporation was approved by a majority of the members of the
Board then still in office who either were directors at the
beginning of such period or whose election or nomination for
election was previously so approved, cease for any reason to
constitute a majority of the Board.
1.018. Code means the Internal Revenue Code of 1986, as
amended, or any successor thereto, as in effect at the
relevant time.
1.019. Committee means a committee of the Board appointed to
administer the Plan.
1.10. Compensation means the taxable earnings paid in cash by
the Company to the Participant, excluding commissions and
extra pay for temporary foreign service, plus amounts deferred
under Code sections 401(k) and 125 pursuant to the
Participant's salary reduction agreement.
1.11. Competes means that Participant, either directly or
indirectly, either as principal, agent, employee, employer,
owner, stockholder (owning more than 5% of the value of a
corporation's outstanding stock), partner, contractor,
consultant or in any other individual or representative
capacity, engages in the business of a tobacco or flower
dealer, importer or exporter or any other business in which
the Corporation or an Affiliate is engaged at such time. If
any provision of the preceding sentence or Section 4.03 is
ever deemed to exceed the time, geographic area, or activity
limitations permitted by applicable law, the Corporation and
Participant (by virtue of his participation in the Plan),
agree that such provisions must be and are reformed to the
maximum time, geographic area and activity limitations
permitted by applicable law, and expressly authorize a court
having jurisdiction to reform the provisions to the maximum
time, geographic area and activity limitations permitted by
applicable law.
1.12. Control Change Date means the date on which all of the
events necessary for a Change in Control have occurred.
1.13. Corporation means DIMON Incorporated and any successor
corporation.
1.14. Credited Compensation means fifty percent (50%) of the
average of the Compensation paid to the Executive during the
three Fiscal Years occurring during the last ten Fiscal Years
that the Participant was employed by the Company that yields
the highest number.
1.15. Employee means a person who is an employee of the
Corporation or an Affiliate.
1.16. Executive means an Employee who is compensated at Grade
23.
- -201- 3
<PAGE>
<PAGE>
1.17. Fiscal Year means the Corporation's taxable year for
Federal income tax purposes.
1.18. Joint and Survivor Annuity means an annuity for the
life of the Participant with a survivor annuity for the life
of the Spouse which is equal to fifty percent (50%) of the
amount payable during the joint lives of the Participant and
Spouse and which is the actuarial equivalent (using the
actuarial assumptions and methods applicable to the Cash
Balance Plan) of an annuity for the life of the Participant.
1.19. Net After-Tax Amount means the amount of any Parachute
Payments or Capped Parachute Payments, as applicable, net of
taxes imposed under Code sections 1, 3101(b) and 4999 and any
State or local income taxes applicable to the Participant as
in effect on the date of the first payment under this Plan
after a Control Change Date. The determination of the Net
After Tax Amount shall be made using the highest combined
effective rate imposed by the foregoing taxes on income of the
same character as the Parachute Payments or Capped Parachute
Payments, as applicable, in effect for the year in which the
determination is made.
1.20. Normal Retirement Allowance means the benefit described
in Section 3.01.
1.21. Normal Retirement Date means the first day of the month
coincident with or next following a Participant's retirement
from the Corporation or an Affiliate after attaining age 65.
1.22. Offset Amount means the sum of the monthly benefits, if
any, payable to or on behalf of a Participant under the Cash
Balance Plan, the DIMON Incorporated Savings and Profit
Sharing Plan, the Pension Equalization Plan, or any employment
agreement between the Company (or any Affiliate or predecessor
thereof) and the Participant, or any other supplemental
executive retirement plan maintained by the Corporation or an
Affiliate and any other benefit plan maintained by the
Corporation or an Affiliate, other than a plan qualified under
Code section 401(k). For purposes of Section 3.01(a), the
Offset Amount shall be determined as a single life annuity (in
the case of a Participant who is not legally married on the
date he Retires) and shall be determined as the amount payable
to the Participant during his lifetime under a Joint and
Survivor Annuity (in the case of a Participant who is legally
married on the date he Retires). For purposes of Section
3.01(b), the Offset Amount shall be determined as the amount
payable to the Surviving Spouse after the Participant's death
under a Joint and Survivor Annuity. The Offset Amount shall
be determined using the actuarial assumptions and methods
applicable to the Cash Balance Plan and assuming a benefit
commencement date as of the date that Participant Retires.
1.23. Parachute Payment means a payment that is described in
Code section 280G(b)(2) (without regard to whether the
4
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<PAGE>
<PAGE>
aggregate present value of such payments exceeds the limit
prescribed by Code section 280G(b)(2)(A)(ii)). The amount of
any Parachute Payment shall be determined in accordance with
Code section 280G and the regulations promulgated thereunder,
or, in the absence of final regulations, the proposed
regulations promulgated under Code section 280G.
1.24. Participant means an Executive who satisfies the
requirements of Article II.
1.25. Pension Equalization Plan means the Dibrell Brothers,
Incorporated Pension Equalization Plan, and any successor
thereto.
1.26. Plan means the DIMON Incorporated Supplemental
Executive Retirement Plan.
1.27. Retirement, Retire or Retires means the termination of
a Participant's employment with the Company or an Affiliate
that occurs on or after the Participant's Normal Retirement
Date.
1.28. Spouse means the person to whom the Participant is
legally married on the date the Participant Retires.
1.29. Surviving Spouse means the person to whom the
Participant is legally married on the date the Participant
Retires and who survives the Participant.
1.30. Years of Service is defined in Section 1.41 of the Cash
Balance Plan.
5
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<PAGE>
<PAGE>
ARTICLE II
Participation
1.021. Beginning Participation
An Executive shall become a Participant in the Plan as
of the date that his participation is approved in writing by a
resolution adopted by the Administrator. An Employee who is
not an Executive shall become a Participant in the Plan as of
the date that his participation is approved in writing by a
resolution adopted by the Administrator. As a condition of,
and in consideration for, participation in the Plan, an
Executive or Employee must agree in writing (on a form
acceptable to the Administrator), that he will not Compete
with the Corporation or an Affiliate before a Control Change
Date and that he accepts and agrees to be bound by the terms
of Section 4.03.
1.022. Change in Status
A Participant shall cease to be a Participant in the
Plan as of the date that his designation as a Participant is
revoked or rescinded in writing by a resolution adopted by the
Administrator, on the date that he ceases to be an Employee
unless, as of that date, he is entitled to receive a benefit
under the Plan in accordance with Article IV or on the date
prescribed by Section 4.03.
6
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<PAGE>
<PAGE>
ARTICLE III
Retirement Allowances
1.031. Normal Retirement Allowance
(a) Subject to the requirements and limitations of
Article IV and Section 7.01, a Participant who Retires shall
be entitled to receive his Normal Retirement Allowance under
the Plan. The Normal Retirement Allowance is a monthly
benefit which shall be equal to the difference between (i) and
(ii) below where
(i) = The Participant's Credited Compensation
(determined as of his Normal Retirement Date) divided
by twelve (12), and
(ii) = Offset Amount.
The Normal Retirement Allowance shall be payable in accordance
with the payroll practices of the Corporation and its
Affiliates, commencing as of the date the Participant Retires
and ending with the payment for the month in which the
Participant dies. Payments of the Normal Retirement Allowance
shall be reduced in accordance with income and employment tax
withholding requirements.
(b) A monthly allowance shall be paid to the
Participant's Surviving Spouse, if any, commencing with the
month following the month in which the Participant dies and
ending with the payment for the month in which the Surviving
Spouse dies. Such benefit shall be equal to the difference
between (i) and (ii) below where
(i) = One-half (/) of the Participant's Credited
Compensation (determined as of his Normal Retirement
Date) divided by twelve (12), and
(ii) = Offset Amount.
The preceding sentences to the contrary notwithstanding, no
benefit shall be payable under this Section 3.01(b) unless
Participant Retires and becomes eligible to receive his Normal
Retirement Allowance under Section 3.01(a).
7
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<PAGE>
<PAGE>
ARTICLE IV
Vesting
1.041. Normal Vesting
No benefit will be payable to a Participant or
Surviving Spouse under the Plan unless the Participant, while
an employee of the Corporation or an Affiliate, attains age
sixty (60) and the sum of the Participant's age and the number
of Years of Service credited to the Participant equal eighty
(80).
1.042. Change in Control
Notwithstanding Section 4.01, any Participant who is a
Participant on a Control Change Date shall be entitled to
benefit payments in accordance with Article III.
1.043. Competition
Notwithstanding Sections 4.01 and 4.02, a Participant
shall cease to be a Participant on, and no benefits shall be
payable under the Plan to a Participant or the Participant's
Surviving Spouse after, the date that Participant engages in
conduct that Competes with the Corporation or an Affiliate.
The preceding sentence shall not apply on or after a Control
Change Date.
8
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<PAGE>
<PAGE>
ARTICLE V
Administration of the Plan
1.051. Generally
The Plan shall be administered by the Administrator.
Subject to the provisions of the Plan, the Administrator may
adopt such rules and regulations as may be necessary to carry
out the purposes of the Plan. The Administrator's discretion
to perform or consent to any act or to interpret the Plan is
exclusive and shall be final and conclusive if all similarly
situated Participants are treated in a consistent manner.
1.052. Indemnification
The Corporation shall indemnify and save harmless the
Administrator against any and all expenses and liabilities
arising out of the administration of the Plan, excepting only
expenses and liabilities arising out of his own willful mis-
conduct. Expenses against which the Administrator shall be
indemnified hereunder shall include without limitation, the
amount of any settlement or judgment, costs, counsel fees, and
related charges reasonably incurred in connection with a claim
asserted, or a proceeding brought or settlement of a claim.
The foregoing right of indemnification shall be in addition to
any other rights to which the Administrator may be entitled.
1.053. Determining Benefits
In addition to the powers hereinabove specified, the
Administrator shall have the power to compute and certify the
amount and kind of benefits from time to time payable to or on
behalf of Participants under the Plan, to authorize all
disbursements for such purposes, and to determine whether a
Participant or Surviving Spouse is entitled to a benefit under
the Plan.
1.054. Cooperation.
To enable the Administrator to perform its functions,
the Corporation and its Affiliates shall supply full and
timely information to the Administrator on all matters
relating to the compensation of all Participants, their
retirement, death or other reason for termination of
employment, and such other pertinent facts as the
Administrator may require.
9
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<PAGE>
<PAGE>
1.055. Claims
It is not necessary to file a claim in order to receive
Plan benefits.
On receipt of a claim for Plan benefits, the
Administrator must respond in writing within ninety days. If
necessary, the Administrator's first notice must indicate any
special circumstances requiring an extension of time for the
Administrator's decision. The extension notice must indicate
the date by which the Administrator expects to render a deci-
sion; an extension of time for processing may not exceed
ninety days after the end of the initial period.
If a claim is wholly or partially denied, the
Administrator must give written notice within the time
provided in the preceding paragraph. An adverse notice must
specify each reason for denial. There must be specific
reference to provisions of the Plan or related documents on
which the denial is based. If additional material or
information is necessary for the claimant to perfect the
claim, it must be described and there must be an explanation
of why that material or information is necessary. Adverse
notice must disclose appropriate information about the steps
that the claimant must take if he wishes to submit the claim
for review. If notice that a claim has been denied is not
furnished within the time required in the preceding paragraph,
the claim is deemed denied.
The full value of a payment made according to the
provisions of the Plan satisfies that much of the claim and
all related claims under the Plan against the Administrator
and the Corporation and its Affiliates, each of whom, as a
condition to a payment from it or directed by it, may require
the Participant, Surviving Spouse, or legal representative to
execute a receipt and release of the claim in a form
determined by the person requesting the receipt and release.
1.056. Review of Claims
The Committee must review a claimant's proper written
request for review of a denied claim. The Committee must
receive the written request before sixty-one days after the
claimant's receipt of notice that a claim has been denied
according to the preceding Plan Section. The claimant and an
authorized representative are entitled to be present and heard
if any hearing is used as part of the review.
The Committee must determine whether there will be a
hearing. Before any hearing, the claimant or a duly
authorized representative may review all Plan documents and
other papers that affect the claim and may submit issues and
10
- -208-
<PAGE>
<PAGE>
comments in writing. The Committee must schedule any hearing
to give sufficient time for this review and submission, giving
notice of the schedule and deadlines for submissions.
The Committee must advise the claimant in writing of
the final determination after review. The decision on review
must be written in a manner calculated to be understood by the
claimant, and it must include specific reasons for the
decision and specific references to the pertinent provisions
of the Plan or related documents on which the decisions is
based. Except as otherwise provided in this Section, the
written advice must be rendered within sixty days after the
request for review is received, unless special circumstances
require an extension of time for processing. If an extension
is necessary, the decision must be rendered as soon as
possible but no later than 120 days after receipt of the
request for review. If the Committee has regularly scheduled
meetings at least quarterly, the following rules govern the
time for the decision after review. If the claimant's written
request for review is received more than thirty days before a
Committee meeting, the decision of the Committee must be
rendered at the next meeting after the request for review is
received. If the claimant's written request for review is
received thirty days or less before a Committee meeting, the
decision of the Committee must be rendered at the Committee's
second meeting after the request for review has been received.
If special circumstances (such as the need to hold a hearing)
require an extension of time for processing, the decision of
the Committee must be rendered not later than the Committee's
third meeting after the request for review has been received.
If an extension of time for review is required, written notice
of the extension must be furnished to the claimant before the
extension begins. If notice that a claim has been denied on
review is not received by the claimant within the time
required in this paragraph, the claim is deemed denied on
review.
1.057. Delegation of Committee Responsibilities
The Committee, in its discretion, may delegate to one
or more officers of the Corporation or an Affiliate all or
part of the Committee's authority and duties under the Plan;
provided, however, that the Committee may not delegate its
authority or duties under Article II, Article VI or Section
5.06. The Committee may revoke or amend the terms of a
delegation in accordance with the preceding sentence but such
action shall not invalidate any prior actions of the
Committee's delegate or delegates that were consistent with
the terms of the Plan and the prior delegation.
11
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<PAGE>
<PAGE>
ARTICLE VI
Termination, Amendment or Modification of Plan
1.061. Reservation of Rights
Except as otherwise specifically provided, the
Corporation reserves the right to terminate, amend or modify
this Plan wholly or partially at any time and from time to
time. Such right to terminate, amend or modify the Plan shall
be exercised by the Committee or its delegate.
Notwithstanding the preceding, with respect to an affected
Participant, the Plan may not be amended, modified or
terminated after a Change in Control unless the affected
Participant agrees to such amendment, modification or
termination in writing.
1.062. Limitation on Actions
The rights of the Corporation set forth in the
preceding Section are subject to the condition that except as
provided in Section 4.03, the Committee or its delegate shall
take no action to terminate the Plan or decrease the benefit
that would become payable or is payable, as the case may be,
with respect to a Participant or his Surviving Spouse after a
Control Change Date or after the Participant has satisfied the
requirements of Section 4.01.
1.063. Effect of Termination
Except as otherwise provided in this Article VI, upon
the termination of this Plan by the Committee, the Plan shall
be of no further force or effect, and neither the Corporation
or its Affiliates or the Administrator nor the Participant or
his Surviving Spouse shall have any further obligation or
right under this Plan. Likewise, except as otherwise provided
in this Article VI, the rights of any individual who was a
Participant and who ceases to be a Participant shall be
forfeited on the date that the individual ceases to be a
Participant.
12
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<PAGE>
<PAGE>
ARTICLE VII
Miscellaneous
1.071. Limitation on Benefits
(a) If any benefits payable under this Plan and any
other payments that the Participant is entitled to receive
under other plans and agreements constitute Parachute Payments
that are subject to the "golden parachute" rules of Code
section 280G and the excise tax of Code section 4999, the
Parachute Payments shall be reduced if, and only to the extent
that, a reduction will allow the Participant to receive a
greater Net After Tax Amount than he would receive absent a
reduction. The remaining provisions of this Section describe
how that intent will be effectuated.
(b) The Accounting Firm will first determine the
amount of any Parachute Payments that are payable to the
Participant. The Accounting Firm will also determine the Net
After Tax Amount attributable to the Participant's total
Parachute Payments.
(c) The Accounting Firm will next determine the
amount of the Participant's Capped Parachute Payments.
Thereafter, the Accounting Firm will determine the Net After
Tax Amount attributable to the Participant's Capped Parachute
Payments.
(d) The Participant will receive the total Parachute
Payments unless the Accounting Firm determines that the Capped
Parachute Payments will yield the Participant a higher Net
After Tax Amount, in which case the Participant will receive
the Capped Parachute Payments. If the Participant will
receive the Capped Parachute Payments, the Participant's total
Parachute Payments will be adjusted by first reducing the
amount payable under other plans and agreements (with the
reductions first coming from cash benefits and then from
noncash benefits). The Accounting Firm will notify the
Participant and the Corporation if it determines that the
Parachute Payments must be reduced to the Capped Parachute
Payments and will send the Participant and the Corporation a
copy of its detailed calculations supporting that
determination.
(e) As a result of any uncertainty in the
application of Code sections 280G and 4999 at the time that
the Accounting Firm makes its determinations under this
Section, it is possible that amounts will have been paid or
distributed to the Participant that should not have been paid
or distributed under this Section 7.01 ("Overpayments"), or
13
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<PAGE>
<PAGE>
that additional amounts should be paid or distributed to the
Participant under this Section 7.01 ("Underpayments"). If the
Accounting Firm determines, based on either controlling
precedent, substantial authority or the assertion of a
deficiency by the Internal Revenue Service against the
Participant or the Corporation, which assertion the Accounting
Firm believes has a high probability of success, that an
Overpayment has been made, that Overpayment will be treated
for all purposes as a loan ab initio that the Participant must
repay to the Corporation together with interest at the
applicable federal rate under Code section 7872(f)(2);
provided, however, that no loan will be deemed to have been
made and no amount will be payable by the Participant to the
Corporation unless, and only to the extent that, the deemed
loan and payment would either reduce the amount on which the
Participant is subject to tax under Code section 4999 or
generate a refund of tax imposed under Code section 4999. If
the Accounting Firm determines, based upon controlling
precedent or substantial authority, that an Underpayment has
occurred, the Accounting Firm will notify the Participant and
the Corporation of that determination and the amount of that
Underpayment will be paid to the Participant promptly by the
Corporation.
(f) All determinations made by the Accounting Firm
under this Section 7.01 are binding on the Participant and the
Corporation and must be made within sixty days after the
Participant's termination of employment with the Corporation
and its Affiliates unless reasonable cause requires an
extension of time. The Accounting Firm must provide the
Participant and the Corporation written notice of any required
extension before the end of the sixty-day period; but the
Accounting Firm must make its determinations under this
Section 7.01 as soon as possible and not later than nine
months after the Participant's termination of employment with
the Corporation and its Affiliates.
1.072. Unfunded Plan
The Corporation and its Affiliates have only a
contractual obligation to make payments of the benefits
described in the Plan. All benefits are to be satisfied
solely out of the general corporate assets of the Corporation
and its Affiliates which shall remain subject to the claims of
its creditors. No assets of the Corporation or its
Affiliates will be segregated or committed to the satisfaction
of its obligations to any Participant or Surviving Spouse
under this Plan. If the Corporation or an Affiliate, in its
sole discretion, elects to purchase life insurance on the life
of a Participant in connection with the Plan, the Participant
<PAGE>
must submit to a physical examination, if required by the
insurer, and otherwise cooperate in the issuance of such
policy or his rights under the Plan will be forfeited. The
Corporation may establish a trust, the assets of which shall
remain subject to the claims of creditors of the Corporation
and Affiliates, in anticipation of the Corporation's
obligations under the Plan. If not previously established,
such trust shall be established as of a Control Change Date
and the Corporation (or its successor) shall contribute assets
to such trust at least equal to the present value of
Participants' benefits (whether or not vested and determined
using the actuarial assumptions and methods applicable to the
14
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<PAGE>
Cash Balance Plan) and maintain such funded status until all
obligations owed by the Plan to Participants and their
Surviving Spouses have been paid in full.
1.073. Other Benefits and Agreements
The benefits, if any, provided for a Participant or a
Surviving Spouse under the Plan are in addition to any other
benefits available to such persons under any other plan or
program of the Corporation for its employees, and, except as
may otherwise be expressly provided for, the Plan shall
supplement and shall not supersede, modify or amend any other
plan or program of the Corporation or an Affiliate in which a
Participant is participating.
1.074. Restrictions on Transfer of Benefits
No right or benefit under the Plan shall be subject to
anticipation, alienation, sale, assignment, pledge,
encumbrance or charge, and any attempt to do so shall be void.
No right or benefit hereunder shall in any manner be liable
for or subject to the debts, contracts, liabilities, or torts
of the person entitled to such benefit. If any Participant or
his Surviving Spouse should become bankrupt or attempt to
anticipate, alienate, sell, assign, pledge, encumber or charge
any right to a benefit hereunder, then such right or benefit,
in the discretion of the Administrator, shall cease and
terminate, and, in such event, the Administrator may hold or
apply all or part of the benefit of such Participant or
Surviving Spouse in such manner and in such portion as the
Administrator may deem proper.
1.075. No Guarantee of Employment
The Plan does not in any way limit the right of the
Corporation or an Affiliate at any time and for any reason to
terminate the Participant's employment or such Participant's
status as an officer of the Corporation or an Affiliate. In
no event shall the Plan by its terms or implications con-
stitute an employment contract of any nature whatsoever
between the Corporation or an Affiliate and a Participant.
1.076. Successors
The Plan shall be binding upon the Corporation and its
successors and assigns; subject to the powers set forth in
Article VI, and upon a Participant and his Surviving Spouse
and either of their assigns, heirs, executors and
administrators.
15
- -213-
<PAGE>
<PAGE>
1.077. Construction
Headings are given for ease of reference and must be
disregarded in interpreting the Plan. Masculine pronouns
wherever used shall include feminine pronouns and the use of
the singular shall include the plural.
1.078. Governing Law
This Plan shall be governed by the laws of the
Commonwealth of Virginia (other than its choice-of-laws
provisions) except to the extent that the laws of the
Commonwealth of Virginia are preempted by the laws of the
United States.
As evidence of its adoption of the Plan, DIMON
Incorporated has caused this instrument to be signed by its
duly authorized officer this 14th day of July, 1997.
DIMON INCORPORATED
By /s/ John O. Hunnicutt
Title: VP of Administration/Secretary
16
- -214-
<PAGE>
<TABLE>
<CAPTION>
Exhibit 11
DIMON and Subsidiaries
Computation of Earnings Per Common Share
YEAR ENDED JUNE 30
________________________________________________
(in thousands, except per share data) 1997 1996 1995
======================================================================================================================
<S> <C> <C> <C>
PRIMARY
EARNINGS
Income (loss) before extraordinary item $77,173 $ 39,870 $(30,165)
Extraordinary item 0 1,400 -
_______ _________ _________
Net Income (Loss) $77,173 $ 41,270 $(30,165)
======= ========= =========
SHARES
Weighted average number of common shares outstanding 42,850 39,560 38,070
Shares applicable to stock options, net of shares assumed
to be purchased from proceeds at average market price 326 111 30
_______ _________ _________
Average Number of Shares Outstanding 43,176 39,671 38,100
======= ========= =========
EARNINGS PER SHARE
Income (loss) before extraordinary item $1.79 $1.00 $(.79)
Extraordinary item .00 .04 -
_______ _________ _________
Net Income (Loss) $1.79 $1.04 $(.79)
======= ========= =========
ASSUMING FULL DILUTION
EARNINGS
Income (loss) before extraordinary item $ 77,173 $ 39,870 $(30,165)
Add after tax interest expense applicable to 6 1/4%
Convertible Debentures issued April 1, 1997
for 1997 and 7 3/4% convertible debentures issued
June 3, 1993 for 1996 and 1995 1,151 1,765 2,674
_______ _________ _________
Income (loss) before extraordinary item 78,324 41,635 (27,491)
Extraordinary item - 1,400 -
_______ _________ _________
Net Income (Loss) as Adjusted $ 78,324 $ 43,035 $(27,491)
======= ========= =========
SHARES
Weighted average number of common shares outstanding 42,850 39,560 38,070
Shares applicable to stock options, net of shares assumed
to be purchased from proceeds at the greater of average
market price or ending market price 564 162 83
Assuming conversion of 6 1/4% Convertible Debentures in
1997 and 7 3/4% convertible debentures in 1996 and 1995
at the beginning of each period 1,068 2,742 4,202
_______ _________ _________
Average Number of Shares Outstanding 44,482 42,464 42,355
======= ========= =========
EARNINGS PER SHARE
Income (loss) before extraordinary $1.76 $ .98 $(.65)
Extraordinary item .00 .03 -
_______ _________ _________
Net Income (Loss) as Adjusted $1.76 $1.01 $(.65)
======= ========= =========
</TABLE>
-215-
<PAGE>
<TABLE>
<CAPTION>
Exhibit 21
SUBSIDIARIES OF REGISTRANT (at June 30, 1997)
JURISDICTION PERCENTAGE OF VOTING
IN WHICH SECURITIES OWNED
NAME ORGANIZED BY REGISTRANT BY AFFILIA
=====================================================================================
<S> <C> <C>
DIMON International, Inc. (A) North Carolina 100.00%
DIMON International Tabak B.V. (A) The Netherlands 100.00% (B)
DIMON International A.G. (A) Switzerland 100.00% (B)
DIMON Do Brasil Tabacos Ltda. (A) Brazil 100.00% (B)
Mashonaland Tobacco Holdings
(PVT) Ltd. (A) Zimbabwe 100.00% (B)
Kin-Farm, Inc. (A) North Carolina 100.00% (B)
Monk-Austin VI (FSC) (A) Virgin Islands 100.00% (B)
Florimex Worldwide, Inc. (A) Virginia 100.00%
DIMON GmbH (A) Germany 100.00% (C)
Florimex
Verwaltungsgesellschaft mbH (A) Germany 100.00% (D)
Florimex Worldwide (A) The Netherlands 100.00% (C)
Baardse B.V. (A) The Netherlands 100.00% (C)
Intabex Holdings Worldwide S.A. (A) Luxembourg 100.00% (E)
Olima Holdings AG (A) Switzerland 100.00% (F)
DIMON International Tabak S.A. (A) Switzerland 100.00% (G)
Compania de Filipinus (A) Spain 100.00% (F)
Yardiner S.A. (A) Uruguay 100.00% (H)
CdF International (A) Uruguay 100.00% (I)
(A) Included in the Consolidated Financial Statements
(B) Owned by DIMON International, Inc.
(C) Owned by Florimex Worldwide, Inc.
(D) Owned by DIMON GmbH
(E) Owned by DIMON Incorporated
(F) Owned by Intabex Holdings Worldwide S.A.
(G) Owned by Olima Holdings AG
(H) Owned by Compania de Filipinas S.A.
(I) Owned by Yardiner S.A.
</TABLE>
-216-
<PAGE>
Exhibit 23.1
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the
Registration Statements on Form S-8 (No.'s 33-93172, 33-91364,
33-93162, 33-93174, 33-93170 and 33-93168) of DIMON Incorporated of
our report dated September 15, 1997 appearing in this Annual Report on
Form 10-K. We also consent to the incorporation by reference of our
report on the Financial Statement Schedule, which appears in this Form
10-K.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Charlotte, North Carolina
September 26, 1997
-217-
<PAGE>
Exhibit 23.2
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3
(No. 333-33267) of DIMON Incorporated of our report dated
September 15, 1997 appearing in this Annual Report on Form 10-K.
We also consent to the incorporation by reference of our report on the
Financial Statement Schedule, which appears in this Annual Report on
Form 10-K.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Charlotte, North Carolina
September 26, 1997
-218-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 107,131
<SECURITIES> 0
<RECEIVABLES> 396,156
<ALLOWANCES> 5,902
<INVENTORY> 608,861
<CURRENT-ASSETS> 1,371,479
<PP&E> 459,674
<DEPRECIATION> (126,922)
<TOTAL-ASSETS> 1,987,603
<CURRENT-LIABILITIES> 671,486
<BONDS> 826,154
<COMMON> 178,939
0
0
<OTHER-SE> 229,324
<TOTAL-LIABILITY-AND-EQUITY> 1,987,603
<SALES> 2,513,227
<TOTAL-REVENUES> 2,513,227
<CGS> 2,195,333
<TOTAL-COSTS> 2,195,333
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 89
<INTEREST-EXPENSE> 53,027
<INCOME-PRETAX> 123,879
<INCOME-TAX> 47,108
<INCOME-CONTINUING> 77,173
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 77,173
<EPS-PRIMARY> 1.79
<EPS-DILUTED> 1.76
<PAGE>
</TABLE>
