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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, 1998
_____TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _____________to_________________.
Commission File Number 1-13684
DIMON Incorporated
________________________________________________
(Exact name of registrant as specified in its charter)
VIRGINIA 54-1746567
_________________________________________________________________________
(State or other jurisdiction of incorporation) (IRS Employer
Identification No.)
512 Bridge Street, Danville, Virginia 24541
_________________________________________________________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (804) 792-7511
--------------
Securities registered pursuant to Section 12(b) of the Act:
Common Stock (no par value)
Common Stock Purchase Rights
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months, and (2) has been
subject to such filing requirements for the past 90 days.
Yes.....X...... No...........
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of Common Stock held by non-affiliates
of the registrant (based upon the closing sale price quoted by The New
York Stock Exchange) on August 28, 1998, was approximately $384,432,000.
In determining this figure, the registrant has assumed that all of its
directors and officers, and all persons known to it to beneficially own
ten percent or more of its Common Stock, are affiliates. This
assumption shall not be deemed conclusive for any other purpose.
As of August 28, 1998, there were 44,525,004 shares of Common Stock
outstanding.
Portions of the registrant's definitive Proxy Statement for its
1998 Annual Meeting of Stockholders to be held November 13, 1998, 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
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DIMON Incorporated ("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 (the "Intabex
Acquisition"), 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 Company increased its market share in the established
worldwide leaf tobacco market from approximately 30% to approximately
35%. 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 O
to the Company's Consolidated Financial Statements for the year ended
June 30, 1998, for detailed information regarding each of the Company's
business segments.
The following discussion may include "forward-looking" statements
within the meaning of the Private Securities Litigation Reform Act of
1995. These forward-looking statements generally are identified by
words such as "expects" or "anticipates" and words of similar effect
and include statements regarding the Company's financial and operating
goals. Actual results may differ materially from those expressed in any
forward-looking statements due to a variety of factors, including those
discussed herein and below under "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Factors That May
Affect Future Results."
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 1997, an
increase of 11.8%. The TMA estimates that worldwide American blend
tobacco consumption (excluding China) will increase an additional 6.4%
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 48.6% in 1990 to 53.8% in 1997, and
is projected to reach 55.5% 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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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 that demand will increase
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.
Recent Market Conditions. The Company believes that the present
uncertainty in the litigation and legislative environments has led
certain of the Company's key U.S. customers to decrease their global
purchase programs significantly. In fiscal 1998, the Company's gross
profit on sales to three of its larger customers, Philip Morris
Companies, Inc., R. J. Reynolds Tobacco Company, Inc. and Lorillard
Tobacco Company, was down $40 million from fiscal 1997. Other customers
have become more opportunistic and have begun taking advantage of the
softer global demand for tobacco. In addition, a surplus of flue-cured
and burley tobacco has led to smaller crop sizes in the U.S. for the
coming year.
However, the Company believes that its reduced sales and profit margin
represent a one-time adjustment in world leaf demand. It has also taken
steps that may mitigate the effect of smaller U.S. crop sizes. In
December 1997, the Company entered into a new extended agreement with R.
J. Reynolds Tobacco Company, Inc. ("RJR") to cover processing, in
addition to purchasing, of RJR's domestic tobacco needs. The Company
has also improved its processing efficiency with the closure of its
Greenville, North Carolina processing plant. All processing for RJR
will be concentrated in the Company's plant in Kinston, North Carolina.
The recent economic crisis in Asia has had an impact on the Company.
Weakness in Asian currencies made it difficult for the Company's Asian
customers to translate local currency sales into U.S. dollar purchases
of leaf tobacco during much of fiscal 1998. Not only did committed
inventories for Asian customers invoice more slowly than anticipated,
but the opportunity to ship lower-cost leaf out of Asia was hampered by
a lack of ocean freight containers, resulting from reduced imports of
other goods to the region. In certain areas, however, such as Thailand
and Korea, where exchange rates maintained some stability, the Company
enjoyed a limited resumption of shipments near the end of fiscal 1998.
The economic crisis has recently spread into Russia and the former
Soviet Union with a resulting delay in some shipments for the first
quarter of fiscal 1999.
Lastly, the 1998 Brazilian tobacco crop was approximately 20% smaller
than the 1997 crop as a result of reduced plantings and the effects of
El Nino. Traditionally, activity in Brazil dominates the Company's
fourth quarter and first quarter financial results. Although smaller
crops have translated into weaker earnings, they have also helped
mitigate the impact of a global surplus of leaf tobacco.
Business Strategy
-----------------
The Company's primary business objective is to capitalize on the growth
in worldwide consumption of American blend cigarettes by becoming the
preferred low-cost supplier of leaf tobacco to the large multinational
manufacturers of American blend cigarettes. The Company's goal is to
maintain a ten percent annual growth rate in total gross profit over the
long term. In measuring growth, the Company focuses on
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gross profit generated by sales volumes and not on total sales dollars
which, due to fluctuations in raw material costs, may not correlate with
profitability. The Company hopes to achieve total gross profit growth
of 60% to 70% over the next five years. In addition, the Company
intends to employ its operating leverage to generate a 15% pre-tax
operating return on its assets used in the business, which would double
the Company's operating income over the next five years. The Company
believes that with an appropriate amount of leverage and careful global
tax planning, it can convert its 15% pre-tax operating return on assets
into a 20% after-tax return on equity. The Company believes that
shortfalls in individual years will be made up by increases in the
following years. The Company's ability to achieve these objectives will
be subject to a variety of factors which may cause actual results to
differ materially from these goals, including those discussed below
under "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Factors that May Affect Future Results."
To achieve these objectives, the Company has implemented a strategy to
position itself to meet the needs of its cigarette manufacturing
customers throughout the world by directly expanding its global
operations 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 that the
Intabex Acquisition has enhanced the Company's global tobacco purchasing
capabilities, expanded and diversified its customer base and expanded
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:
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. During fiscal 1998, the company started
construction of a new processing facility in Tanzania that is expected
to be operational in November, 1998. Tanzania provides a desirable
style of flue-cured tobacco that is different from Malawi and Zimbabwe
and will help mitigate any loss of volume from reduced plantings of
flue-cured tobaccos in Malawi over the next few years. 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 enhance
significantly its sourcing capacity 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. 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 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.
In December 1997, the Company entered into a new extended agreement with
RJR to cover processing, in addition to purchasing of RJR's domestic
tobacco needs. 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.
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Improve efficiency and reduce operating costs. The Company has
consistently sought opportunities to improve efficiencies and reduce
operating costs, particularly in connection with the Merger and the
Intabex Acquisition. 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, aggregating $3.9
million, $11.8 million, and $17.8 million for fiscal 1997, 1996, and
1995, respectively. 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 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:
- Integration of the African operations of Intabex, including
personnel reductions and consolidation of administrative offices,
the redeployment of the assets of a tobacco processing facility
and the conversion of that facility into a tobacco storage
warehouse, and the dissolution of a joint venture;
- Integration of the Latin American operations of Intabex,
including personnel reductions, consolidation of administrative
offices, the redeployment of the assets of a tobacco processing
facility 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 the closure of a tobacco processing
facility; and
- Integration of Asian operations, consisting primarily of
personnel reductions and consolidation of some administrative
offices.
During fiscal 1998, DIMON continued to rationalize its operations
throughout the world by closing plants in Brazil, Zimbabwe, and the
United States. The processing machinery and equipment of the closed
plants in Brazil and Zimbabwe were redeployed to other facilities in
Malawi and Tanzania. The Company also terminated the joint venture in
Malawi, and DIMON now processes its Malawi tobacco in a single facility.
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 such expansion 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.
As mentioned above DIMON expanded its operations in Africa during fiscal
1998 with a new processing facility being constructed in Tanzania.
Additionally, the Company acquired 100 percent interest in Agroexpansion
S.A. with processing facilities in Malpartida, Spain.
In the Oriental tobacco operations, a DIMON wholly owned subsidiary
acquired in June 1997 the remaining 55 percent of the outstanding shares
of George Allamanis Tobacco International S.A. ("G.A.T.I."). Based in
Thessaloniki, Greece, G.A.T.I. is a former joint-venture partner in
which DIMON had previously owned a
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45 percent stake. In July 1997, DIMON acquired 100 percent of the
privately held Bulgarian tobacco company Bulmon. Also, in fiscal 1998,
DIMON acquired two Oriental leaf sourcing operations in the former
Yugoslavian Republic of Macedonia.
Through Compania de Filipinas S.A., a wholly owned subsidiary acquired
with Intabex, DIMON sells premium cigar and other dark air-cured tobacco
to the cigar industry.
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, Macedonia and Turkey, the leading exporters of Oriental tobacco.
The Company also has processing facilities in Germany, Italy, Spain, and
Tanzania. 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, and India.
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 32 countries and has
expanded its purchasing capabilities significantly in Brazil, Argentina,
Malawi, Tanzania, 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 1998, approximately
42% of the dollar value of tobacco purchased by the Company was
purchased in the U.S. Approximately 14%, 9% and 4% of the dollar value
of tobacco purchased by the Company during fiscal 1998 were purchased in
Brazil, Zimbabwe and Malawi, respectively. The balance of the Company's
tobacco purchases during 1998 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, Spain,
Tanzania, 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
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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 over 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.
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
that 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.
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The consumer tobacco business in most markets is dominated by a
relatively small number of large multinational cigarette manufacturers
and by government controlled entities. Of the 1998, 1997, and 1996
sales and other operating revenues, approximately 32%, 42%, and 55%,
respectively, were to various tobacco customers which management has
been led to believe are owned by or under common control of Philip
Morris Companies, Inc. ("Philip Morris") or RJR (Philip Morris, RJR or
Japan Tobacco Company 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 sales. No other customer accounts
for more than 10% of the Company's sales. See Note O to the Company's
Consolidated Financial Statements for the year ended June 30, 1998. The
Company generally has maintained relationships with its customers for
over forty years. In fiscal 1998, the Company delivered approximately
28% of its tobacco sales to customers in the U.S., approximately 37% to
customers in Europe and the remainder to customers located in Asia,
South America and elsewhere.
As of June 30, 1998, the Company's consolidated entities had tobacco
inventories of $588.1 million and had significant commitments or
indications from customers for purchases of tobacco. The Company
expects to deliver substantially all of the June 30, 1998 orders in
fiscal 1999. The level of purchase commitments for tobacco fluctuates
from period to period and is significant only to the extent that it
reflects short-term changes in demand for leaf tobacco. The Company
typically makes 80-85% of its leaf tobacco auction 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.
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 the Company usually receives payment
for tobacco sold after the Company has processed and shipped it, some
customers advance payments to the Company throughout the buying season
as the Company purchases tobacco for the customers' accounts. The
Company distributes processed tobacco directly from its storage
facilities to its customers by truck or rail to its customers' storage
or manufacturing facilities or to port for shipping.
Global Operations
-----------------
United States. The Company owns and operates three processing
facilities in North Carolina and Virginia. A federal program supports
the price of tobacco grown in the U.S. and 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. In December 1997, the
Company entered into a new extended agreement with RJR to cover
processing, in addition to purchasing, of RJR's domestic tobacco needs.
Generally, the contracts establish a
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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 1998, 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 1998, the Company derived
approximately 12% of its revenue from its Zimbabwean and Malawian
tobacco operations.
Intabex's business in Africa allowed 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 one facility and exports flue-cured and burley
tobacco grown in Zimbabwe. Through DIMON Malawi the Company purchases,
processes in one facility and exports flue-cured and burley tobacco
grown in Malawi.
Greece and Turkey. The Company believes that it is one of the largest
exporters 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 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.
-9-
<PAGE>
Competition
-----------
The leaf tobacco industry is highly competitive. Competition among
dealers in leaf tobacco is based on the price charged for products and
services as well as the dealers' ability to meet customer specifications
in the buying, processing and financing of tobacco. The Company
believes that it is well positioned to meet this competition,
particularly in view of its important processing facilities in the U.S.,
Brazil and other major tobacco growing countries. 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. The Company's market share has increased from
approximately 30% to approximately 35%. 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 Argentina, Brazil, Greece, Malawi,
Turkey, the U.S. and Zimbabwe as well as other countries. Universal's
market share in the U.S. and Africa is considerably greater than that of
the Company.
Seasonality
-----------
The purchasing and processing activities of the Company's tobacco
business are seasonal. Flue-cured tobacco grown in the U.S. is
purchased generally during the five-month period beginning in July and
ending in November. U.S.-grown burley tobacco is purchased usually from
late November through January or February. Tobacco grown in Brazil is
purchased usually from January through June and delivered from January
to July. Other markets around the world have similar purchasing
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.
Flowers
-------
The Company's fresh-cut flower operations consisted 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, 1998, the Company's flower operations had revenues of
$391 million and, at June 30, 1998, assets of $103 million.
On August 12, 1998, the Company signed a Stock and Asset Purchase
Agreement with U.S.A. Floral Products, Inc., disposing of the cut
flowers operations. The Company has treated the flower operations as
discontinued. The sale of Florimex, for approximately $90 million in
cash and assumed debt, is expected to generate a pre-tax gain of
approximately $30 million in the first quarter of the fiscal year ended
June 30, 1999.
-10-
<PAGE>
Employees
---------
The Company's consolidated entities employed about 4,000 persons,
excluding seasonal employees, in its worldwide tobacco operations at
June 30, 1998. In the U.S. tobacco operations, the Company's
consolidated entities employed about 750 employees at June 30, 1998.
During processing periods the seasonal employees in the U.S. would
number approximately 1,700. Most U.S. seasonal employees are covered by
collective bargaining agreements with two local 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 3,250 persons, excluding
8,600 seasonal employees at June 30, 1998. The Company's worldwide
consolidated cut flower operation entities employed about 1,300 persons,
excluding seasonal employees. The Company considers its employee
relations to be satisfactory.
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 restrict sharply 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.
In June 1997, representatives of the leading U.S. manufacturers of
consumer tobacco products, several state attorneys general and certain
private plaintiffs entered into an agreement (the "Resolution") to
support the adoption of federal legislation and ancillary undertakings
that would resolve many of the regulatory and litigation issues
affecting the United States' tobacco industry and, thereby, reduce
uncertainties facing the industry and increase stability in business and
capital markets. Such legislation was never enacted.
Instead, in April 1998, the Senate Commerce Committee approved a bill
(the "Commerce Bill") that was substantially different and
significantly more adverse to the domestic tobacco industry than the
proposed Resolution. The Commerce Bill, as approved by the Commerce
Committee, contemplated industry payments in excess of one-half trillion
dollars over the first twenty-five years, provided the United States
Food and Drug Administration ("FDA") with broad regulatory control over
tobacco products, applied, in certain respects, to international sales
of tobacco products, and eliminated virtually all of the provisions of
the proposed Resolution that would limit liability of the tobacco
industry in civil litigation in the United States. In June 1998, the
United States Senate voted to return the Commerce Bill to the Senate
Commerce Committee for further consideration. Other federal tobacco
bills are also under consideration by Congress. The Company cannot
predict whether the Commerce Bill or any other such federal tobacco
legislation will be enacted, the form any such enactment might take or
the extent to which such measures may affect the Company's business.
The leading cigarette manufacturers also face hundreds of lawsuits
brought throughout the United States and, to a much lesser extent, the
world. Such suits have been brought on behalf of (i) individuals and
classes of individuals alleging personal injury and (ii) state and local
governments seeking recovery of health care costs
-11-
<PAGE>
allegedly caused by cigarette smoking, as well as other groups such as
unions, health maintenance organizations, federal and state taxpayers,
Native American tribes and others. Damages claimed in some of the
smoking and health class actions and health care costs recovery cases
range into the billions of dollars. Plaintiffs continue to file more
such suits.
It is not possible to predict the outcome of the litigation pending
against the U.S. cigarette manufacturers. Litigation is subject to many
uncertainties, and it is possible that some of these actions could be
decided unfavorably. An unfavorable outcome or settlement of a pending
smoking and health or health care cost recovery case could encourage the
commencement of additional, similar litigation. Adverse legislative,
regulatory, political and other developments concerning cigarette
smoking and the tobacco industry continue to receive widespread media
attention. These developments may negatively affect the perception of
potential judges and juries with respect to the tobacco industry,
possibly to the detriment of certain pending litigation, and may prompt
the commencement of additional, similar litigation.
The cigarette manufacturers have reached separate settlements with the
states of Florida, Mississippi, Texas and Minnesota, and an
environmental tobacco smoke personal injury class action brought on
behalf of airline flight attendants. These settlements require the
cigarette manufacturers to make scheduled payments for up to twenty-five
years totaling more than $20 billion. The 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.
Due to the present litigation and legislative environment, 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 legislation 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.
In addition, from time to time, the leaf tobacco industry has been the
subject of government investigations regarding trade practices. In
September 1998, the Company and several of its employees received
subpoenas relating to an investigation by the Antitrust Division of the
United States Department of Justice into certain buying practices
alleged to have occurred in the industry. The Company expects to
cooperate fully with this investigation.
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. On August 12, 1998, the Company
signed a Stock and Asset Purchase Agreement to sell the flower
operations. Financial information concerning tobacco and its
geographical operations is included in Note O 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."
-12-
<PAGE>
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,
and the tobacco operations are headquartered in Farmville, North
Carolina.
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:
<TABLE>
<CAPTION>
AREA IN
LOCATION USE SQUARE FEET
_____________________________________________________________
<S> <C> <C>
UNITED STATES
-------------------
DANVILLE, VA FACTORY/STORAGE 1,891,000
GREENVILLE, N.C. STORAGE 302,000
FARMVILLE, N.C. FACTORY/STORAGE 1,020,000
KINSTON, N.C. FACTORY/STORAGE 1,069,000
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/STORAGE 1,250,000
AFRICA
-----------
LILONGWE, MALAWI FACTORY/STORAGE 809,000
HARARE, ZIMBABWE FACTORY/STORAGE 1,080,000
EUROPE
-----------
KARLSRUHE, GERMANY FACTORY/STORAGE 404,000
GLAUZIG, GERMANY FACTORY/STORAGE 1,276,000
THESSALONIKI, GREECE FACTORY/STORAGE 197,000
SPARANISE, ITALY FACTORY/STORAGE 466,000
IZMIR, TURKEY FACTORY(2)/STORAGE 854,000
ASIA
---------
LAMPHUN, THAILAND FACTORY/STORAGE 103,000
</TABLE>
-13-
<PAGE>
Flower Facilities
-----------------
Florimex had 59 different operating facilities throughout the world.
The owned properties included 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 were various properties,
generally located near airports, consisting of owned or leased offices
and storages. The storages at each location included cooler storages of
various sizes to accommodate the needs of individual locations.
Baardse, the Dutch flower exporter, had leased about 110,000 square feet
of office and storage associated with the Aalsmeer auction operation.
Aalsmeer had the largest flower auction facility in The Netherlands.
Baardse also owned greenhouses in Aalsmeer with 125,000 square feet.
The flower facilities were sold to U.S.A. Floral Products, Inc. on
August 12, 1998, pursuant to the Stock and Asset Purchase Agreement.
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
-----------------
DIMON acquired Intabex, and certain assets of Tabex (Private) Limited,
an affiliate of Intabex, on April 1, 1997, for an initial purchase price
of $264.19 million, consisting of 1.7 million shares of DIMON common
stock, $140 million in ten year, 6.25% subordinated convertible
debentures, convertible at $28.77 a share (the "Convertible
Debentures"), and $86.12 million in cash, as reported on Form 8-K filed
April 16, 1997.
On September 22, 1998, DIMON filed an action in the United States
District Court for the Southern District of New York relating to its
acquisition of Intabex. The purchase agreements for DIMON's acquisition
of Intabex and the Tabex assets provided several purchase price
adjustment mechanisms relating to the pre-acquisition financial
statements of Intabex and the representations, warranties and covenants
of Intabex negotiated by DIMON as part of the acquisition. The Intabex
stock purchase agreement provided for a post-closing adjustment in the
purchase price based upon the net worth of Intabex as of March 31, 1997,
as determined by audited financial statements of Intabex that were
prepared in accordance with certain requirements of the stock purchase
agreement. In August 1997, the Intabex purchase price was adjusted
pursuant to this mechanism and reduced by $18.6 million to $245.6
million. The adjustment was effected by the return of $16.7 million
principal amount of Convertible Debentures plus certain interest
payments that had been made thereon, and $1.9 million in cash. The
adjustment was reflected in the Company's Form 10-Q for the quarter
ended September 30, 1997. At the time of the post-closing settlement,
one of the former Intabex shareholders, Folium, Inc., also agreed to
guarantee the sales price by DIMON of certain tobacco inventory that had
been acquired as part of the Intabex acquisition. That guarantee
resulted in a further payment to DIMON by Folium, Inc. of $7.3 million
in April 1998. Folium, Inc. is controlled by a British Virgin Islands
trust of which A.C.B. Taberer is a potential beneficiary. Mr. Taberer
is a director of and consultant to DIMON and the former Chairman of
Intabex.
In addition to the post-closing audit and purchase price adjustment and
the inventory payments, the former Intabex shareholders also agreed to
indemnify DIMON, up to $90 million, for misrepresentations or breaches
in Intabex's representations, warranties or covenants, including
representations and warranties as to Intabex's financial statements for
periods prior to April 1, 1997. Convertible Debentures in the principal
amount of $90 million (the "Set-Off Debentures") were segregated at the
time of the acquisition to secure any claims by DIMON for
indemnification. DIMON is entitled, subject to the fulfillment of
certain conditions, to set-off against the Set-Off Debentures any such
claims. The amount of the Set-Off Debentures declines from $90 million
in stages, with $15 million principal amount of Set-Off Debentures
continuing to be subject to set-off after October 1, 1998, through July
31, 1999, and $10 million continuing to be subject to set-off from
August 1, 1999 through April 1, 2000. However, the Set-Off Debentures
are not released to the extent that claims are outstanding as of any of
those dates. A DIMON subsidiary in Zimbabwe is entitled to similar
-14-
<PAGE>
indemnification and set-off rights in connection with the Zimbabwe
tobacco assets purchased from Tabex, subject to a maximum
indemnification and set-off of $12 million. Except for certain claims
relating primarily to prior period taxes, claims for purchase price
adjustment or indemnity under the stock purchase agreement generally
must be asserted by DIMON by September 30, 1998.
To allow adequate opportunity for discovery of possible adjustments,
DIMON required that the claims mechanisms under the purchase agreements
operate at least through September 30, 1998, the anticipated completion
of DIMON's second full audit cycle after the acquisition. In connection
with the completion of its analysis of post-closing adjustments, DIMON
has asserted claims for indemnification for the full amount of the Set-
Off Debentures. The claims reflect DIMON's rights for purchase price
adjustment or indemnification under the stock purchase agreement arising
out of, among other matters, inaccuracies or misrepresentations as to
the carrying values of certain assets or income recorded in the Intabex
financial statements for periods prior to the date of acquisition that
were delivered pursuant to the stock purchase agreement or the
understatement or omission of certain liabilities or expenses recorded
in such financial statements. The acquisition was accounted for using
the purchase method of accounting. As a result, the Intabex financial
statements for periods prior to April 1, 1997, are not included in the
Consolidated Financial Statements of DIMON.
Any recovery pursuant to these claims or upon settlement with the former
Intabex shareholders will be earnings accretive to DIMON. Any recovery
will be applied first against $8.1 million in accounts receivable DIMON
has established in its June 30, 1998, financial statements with respect
to certain of these claims. Any balance will be recorded as an
adjustment to the Intabex purchase price and a reduction in the carrying
value of acquired assets, including goodwill, reflected on DIMON's
consolidated balance sheet as of June 30, 1998. A corresponding
reduction in DIMON's interest expense and in the number of shares used
in calculating fully diluted earnings per share would result from any
reduction in principal amount of Set-Off Debentures.
Interest is payable on the Convertible Debentures quarterly. The stock
purchase agreement provides that, absent an agreement among the parties,
DIMON must obtain a court order before setting off its claims under the
stock purchase agreement against the Set-Off Debentures. DIMON has been
advised by counsel representing one of the former Intabex shareholders
that the former shareholders have acknowledged responsibility for $4.8
million of the $8.1 million in claims reflected as receivables in the
June 30, 1998 consolidated financial statements of DIMON, but have not
agreed as to the accrual of interest and specific allocation of
indemnity responsibility among them as to such claims. As to the
balance of DIMON's claims, the former shareholders have advised DIMON
that they do not have sufficient information currently to examine the
claims.
While DIMON intends to pursue further the settlement of these claims, in
view of the amount of the claims, the settlement procedures provided in
the stock purchase agreement, and the continuing accrual of interest on
the Set-Off Debentures, DIMON filed suit in the United States District
Court for the Southern District of New York against the former Intabex
shareholders, Mr. Taberer and certain members of Mr. Taberer's family on
September 22, 1998, seeking a court order with respect to DIMON's claim
for set-off against the Set-Off Debentures, confirmation of DIMON's
contractual remedies under the stock purchase agreement, and related
damages as a result of the former Intabex shareholders' non-compliance
with the stock purchase agreement and the misstatements and omissions
with respect to the acquisition of Intabex. The total of the claims
covered by the lawsuit is $110 million.
During the pendency of the litigation, Mr. Taberer will not participate
in the deliberations of DIMON's Board of Directors with respect to the
pending dispute or any other related matters.
ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
None.
-15-
<PAGE>
ADDITIONAL INFORMATION - EXECUTIVE OFFICERS OF THE COMPANY
The names and ages of all executive officers of the Company, as of June
30, 1998, 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. 53 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 58 President of the Company on October 21, 1994.
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 48 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 49 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>
-16-
<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 1998
Fourth Quarter..........$16.81 $10.50 $.17
Third Quarter............26.31 15.56 .17
Second Quarter...........26.43 23.25 .17
First Quarter............26.50 21.50 .15
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
</TABLE>
As of June 30, 1998, there were 4,576 shareholders, including
approximately 3,413 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 "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Restrictions of Dividends."
-17-
<PAGE>
ITEM 6.SELECTED FINANCIAL DATA (continued)
-----------------------------------
FIVE-YEAR FINANCIAL STATISTICS
DIMON Incorporated and Subsidiaries
<TABLE>
<CAPTION>
Years Ended June 30
(in thousands, except per share amounts___________________________________________________________________________
and number of stockholders) 1998 1997** 1996 1995 1994
==================================================================================================================
<S> <C> <C> <C> <C> <C>
Summary of Operations (1)
Sales and other operating revenues.........$2,171,803 $2,125,739 $1,770,166 $1,555,258 $1,095,722
Cost of sales and expenses 2,032,045 1,955,252 1,648,373 1,503,907 1,068,521
Restructuring and merger costs - 3,864 15,858 25,214 -
______________________________________________________________________
Operating income...........................$ 139,758 $ 166,623 $ 105,935 $ 26,137 $ 27,201
Interest expense........................... 83,769 50,518 43,161 40,799 32,123
______________________________________________________________________
Income (loss) from continuing
operations before income taxes,
equity in net income (loss) of
investee companies, income (loss)
from discontinued operations and
extraordinary item.......................$ 55,989 $ 116,105 $ 62,774 $ (14,662) $ (4,922)
Income taxes............................... (14,725) (44,063) (25,324) (6,988) (1,822)
Equity in net income (loss) of
investee companies, net of
income taxes............................. 565 526 (330) (1,805) 98
______________________________________________________________________
Income (loss) before income (loss)
from discontinued operations
and extraordinary item..................$ 41,829 $ 72,568 $ 37,120 $ (23,455) $ (6,646)
Income (loss) from discontinued
operations, net of income taxes.........$ 1,820 $ 4,605 $ 2,750 $ (6,710) $ (1,844)
Extraordinary item:
Partial recovery on Iraqi
receivable, net of income tax............ - - 1,400 - -
______________________________________________________________________
Net Income (Loss)..........................$ 43,649 $ 77,173 $ 41,270 $ (30,165) $ (8,490)
Per Share Statistics (1)
Basic Earnings Per Share:
Income (loss) before income (loss)
from discontinued operations
and extraordinary item..................$ .94 $ 1.69 $ .93 $ (.61) $ (.17)
Income (loss) from discontinued
operations.............................. .04 .11 .07 (.18) (.05)
Extraordinary item....................... - - .04 - -
Net income (loss)........................ .98 1.80 1.04 (.79) (.22)
</TABLE>
-18-
<PAGE>
ITEM 6.SELECTED FINANCIAL DATA (continued)
-----------------------------------
FIVE-YEAR FINANCIAL STATISTICS
DIMON Incorporated and Subsidiaries
<TABLE>
<CAPTION>
Years Ended June 30
(in thousands, except per share amounts___________________________________________________________________________
and number of stockholders) 1998 1997** 1996 1995 1994
==================================================================================================================
<S> <C> <C> <C> <C> <C>
Diluted Earnings Per Share:
Income before income from
discontinued operations and
extraordinary item......................$ .94 * $ 1.67 $ .92 * *
Income (loss) from discontinued
operations.............................. .04 * .10 .06 - -
Extraordinary item....................... - - .03 - -
Net income...............................$ .98 * $ 1.77 $ 1.01 * *
Dividends paid.............................$ .66 $ .585 $ .54 $ .535 $ .495
Book value.................................$ 9.48 $ 9.21 $ 7.46 $ 6.27 $ 7.57
Return on average stockholders' equity...... 10.52% 21.32% 14.88% -11.45% -2.85%
Balance Sheet Data
Current assets.............................$1,208,890 $1,371,479 $ 668,775 $ 731,119 $ 685,443
Current liabilities........................ 502,506 671,486 246,433 453,522 467,776
______________________________________________________________________
Working capital............................$ 706,384 $ 699,993 $ 422,342 $ 277,597 $ 217,667
Working capital ratio...................... 2.4 to 1 2.0 to 1 2.7 to 1 1.6 to 1 1.5 to 1
Property, plant and
equipment (net)..........................$ 318,100 $ 332,752 $ 236,775 $ 223,049 $ 209,739
Total assets...............................$1,797,478 $1,987,603 $1,020,014 $1,093,608 $1,043,816
Revolving credit notes and
other long-term debt.....................$ 673,699 $ 702,826 $ 390,871 $ 292,528 $ 188,825
Convertible Subordinated Debentures........$ 123,328 $ 123,328 $ - $ 56,370 $ 56,475
Stockholders' equity.......................$ 421,930 $ 408,263 $ 315,848 $ 238,806 $ 288,314
Other Statistics
Weighted average common shares,
basic.................................... 44,473 42,850 39,568 38,070 38,068
Weighted average common shares,
diluted.................................. 44,731 * 44,241 42,414 42,297 42,296
Common shares outstanding
at year end.............................. 44,525 44,312 42,366 38,092 38,069
Number of stockholders
at year end (2).......................... 4,576 4,357 4,596 4,249 4,940
Dividends paid.............................$ 29,354 $ 25,071 $ 21,731 $ 15,570 $ 13,014
______________________________________________________________________
* Computation of loss per share is antidilutive for the years 1995 and 1994. For 1998, assumed conversion of
Convertible Debentures at the beginning of the period has an antidilutive effect on earnings per share.
**See Note C to the consolidated financial statements for a discussion of acquisition.
(1) The Summary of Operations and Earnings Per Share for the years ended 1994 through 1997 have been restated to reflect
the income (loss) from discontinued operations and the adoption in 1998 of SFAS 128, "Earnings per Share."
(2) Includes the number of Stockholders of record and non-objecting beneficial owners.
</TABLE>
-19-
<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. The Company's tobacco
operating profits fluctuate from year to year, primarily due to the
effects of worldwide supply and demand on the Company's inventory
positions 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 was 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 prospectively includes that of Intabex for
periods beginning after March 31, 1997.
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 P to the Company's
Consolidated Financial Statements for the year ended June 30, 1998.
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
continued through 1997 and resulted in the recognition of various
charges. Those charges for continuing operations before tax totaled
$3.9 million in 1997, $15.9 million in 1996 and $25.2 million in 1995.
On August 12, 1998, the Company signed a definitive agreement to sell
the assets of its flower business for approximately $90 million in cash
and assumed debt. As a result of the sale, the flower business has been
reflected as a discontinued operation in the Company's income statements
for all periods presented.
-20-
<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
______________________________________
1998 1997* 1996*
======================================
<S> <C> <C> <C>
Sales and other operating revenues.............. 100.0% 100.0% 100.0%
Cost of goods and services and expenses......... 88.0 87.1 87.7
Selling, administrative and general expenses.... 5.5 4.85 .5
Restructuring and merger related costs.......... - .2 .9
______________________________________
Operating income................................ 6.5 7.9 5.9
Interest expense................................ (3.9) (2.4) (2.4)
______________________________________
Income from continuing operations
before income taxes and income from
discontinued operations....................... 2.6 5.5 3.5
Income taxes.................................... (.7) (2.1) (1.4)
Income from discontinued operations............. .1 .2 .2
______________________________________
Net income...................................... 2.0 3.6 2.3
======================================
* Restated for discontinued operations.
</TABLE>
-21-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
-------------------------------------------------
Comparison of the Year Ended June 30, 1998 to the Year Ended
June 30, 1997
The Company's sales and other operating revenues from continuing
operations were $2.172 billion, an increase of 2.2% from $2.126 billion
in 1997, primarily due to higher volumes of foreign grown tobacco,
offset partially by lower volumes from the United States and lower
prices on foreign grown tobaccos. Higher volumes of foreign grown
tobacco accounted for increases of $296.3 million. Increases in
quantities were principally from South America and Europe. The volume
of foreign grown tobacco has increased 27.5% over the prior fiscal year
primarily due to the inclusion of a full year of Intabex. Lower volumes
in the United States resulted in a $150.6 million decrease in sales, and
lower prices of foreign grown tobacco resulted in a $106.3 million
decrease in sales. The volume of U.S. grown tobacco has decreased
16.7% from the prior fiscal year. The decrease in quantities of U.S.
grown tobacco are primarily the result of decreased orders from domestic
cigarette manufacturers due to uncertainties surrounding settlement of
tobacco legislation and potentially higher excise taxes on cigarettes
sold in the U.S. The decrease in prices of foreign grown tobacco were
primarily due to product mix and decreases in purchase prices of
tobacco. The Company has also been negatively impacted by devaluation
of currencies in certain Asian countries which has resulted in
delay or cancellation of some shipments of tobacco. The Company
believes that the risks of further delays in shipments and the
realization of lower average prices could continue in future periods.
The cost of sales and expenses from continuing operations before
restructuring and merger related costs increased 3.9% from $1.955
billion in 1997 to $2.032 billion in 1998. Operating margin
(operating income) as a percentage of sales before restructuring
decreased from 8.1% in 1997 to 6.5% in 1998. The decrease in operating
margins was due primarily to $10 million in excess costs associated with
start-up operations in Tanzania and $6.9 million in inventory
writedowns. There were also increases in personnel and professional
expenses of $10.8 million and depreciation and amortization of $6.3
million. Amortization expense related to the Intabex acquisition
increased from $.9 million in 1997 to $4.0 million for a full year in
1998.
Restructuring charges in fiscal 1997 were $3.9 million and related
principally to employee separations.
Interest expense in 1998 increased $33.3 million, of which approximately
$44 million was due to higher average borrowings, offset partially by an
approximate $11 million decrease due to lower average rates.
The effective tax rate for 1998 was 26.3% compared to 38% in 1997. The
decrease in rate was due to changes in the distribution of income
between tax jurisdictions.
Income from discontinued operations, net of tax, has decreased $2.8
million, primarily due to a $3 million pre-tax charge in connection with
the reorganization of the Company's German flower operations.
-22-
<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 $2.126 billion, an
increase of 20.1% from $1.770 billion in 1996, 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. These increases were 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 higher quantities in the
fourth quarter of 1996. The acquisition of Intabex resulted in a $188.1
million increase in sales.
Cost of sales and expenses from continuing operations before
restructuring and merger related costs increased 18.6% in 1997 from 1996
primarily due to the increase in sales and increased amortization
expense resulting from goodwill on the acquisition of Intabex, offset by
decreases in personnel costs and legal and professional expenses.
Restructuring charges in 1997 were $3.9 million and were primarily due
to employee separations. Restructuring charges for 1996 were $15.9
million and consisted of $15.7 million for employee separations, a
credit of $.7 million for facility sales and closures and $.9 million
for asset writedowns and other items.
Interest expense increased $7.4 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.
Income from discontinued operations increased $1.9 million due to
favorable exchange rate impacts on costs, the effects of discontinuing
lower margin operations and revised credit policies.
-23-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
-------------------------------------------------
Liquidity and Capital Resources
-------------------------------
The following table is a summary of items from the Consolidated Balance
Sheet and the Statement of Consolidated Cash Flows.
<TABLE>
<CAPTION>
Years Ended June 30
_________________________________________
(in thousands, except for current ratio) 1998 1997* 1996*
___________________________________________________________________________________________
<S> <C> <C> <C>
Cash and cash equivalents.......................$ 18,729 $ 107,131 $ 53,820
Net trade receivables........................... 319,295 396,156 190,898
Inventories and advances on
purchases of tobacco.......................... 804,817 835,626 408,210
Total current assets............................ 1,208,890 1,371,479 668,775
Notes payable to banks.......................... 282,470 350,263 -
Accounts payable................................ 96,483 143,927 104,506
Total current liabilities....................... 502,506 671,486 246,433
Current ratio................................... 2.4 to 1 2.0 to 1 2.7 to 1
Revolving Credit Notes and Other
Long-term Debt................................ 548,699 577,826 265,871
Convertible Subordinated Debentures............. 123,328 123,328 -
Senior Notes.................................... 125,000 125,000 125,000
Stockholders' equity............................ 421,930 408,263 315,848
Purchase of property and equipment.............. 61,168 60,860 41,266
Acquisition of subsidiary,
net of cash acquired.......................... - 6,382 (6,543)
Proceeds from sale of property
and equipment................................. 24,597 8,853 8,605
Depreciation and amortization................... 43,476 37,191 33,780
___________________________________________
* Not restated for discontinued operations
</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 including Argentina, Brazil, Dominican
Republic, Indonesia and Tanzania by making cash advances to farmers
prior to and during the growing season.
The Company's working capital increased from $700 million at June 30,
1997, to $706 million at June 30, 1998. The Company's current ratio was
2.4 to 1 and 2.0 to 1 at June 30, 1998, and June 30, 1997, respectively.
At June 30, 1998, current assets had decreased $162.6 million and
current liabilities had decreased $169.0 million from June 30, 1997.
The $162.6 million decrease in current assets is primarily due to the
$165.3 million combined decrease in cash and cash equivalents and
receivables. The $169 million decrease in current liabilities is
primarily due to the $154.5 million combined decrease in notes payable
to banks, accounts payable, advances from customers and income taxes.
The decrease in receivables is primarily due to timing of sales in
fiscal 1998 compared to fiscal 1997. The decrease in cash and cash
equivalents is primarily related to the financing activities and the
repayment of debt.
Although inventories and advances on purchases of tobacco have decreased
by $30.8 million compared to 1997, the amounts continue to be high
relative to current sales levels and require increased debt.
Uncommitted inventories for 1998 and 1997 are higher than in previous
years and present continuing financial risk to the Company.
-24-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
-------------------------------------------------
Cash flows from operating activities increased to $57.3 million in 1998
as compared to $25.3 million in 1997 and $179.8 million in 1996. The
increase in 1998 and the decrease in 1997 in cash provided by operating
activities were due to fluctuations in current assets and liabilities,
offset partially by the changes in net income. Cash flows used by
investing activities decreased $6.1 million, or 14.1%, to $37.1 million
in 1998 as compared to 1997, primarily due to proceeds from the sale of
property and equipment. In 1998 $108.3 million was used by financing
activities primarily due to net debt repayments. In 1997 financing
activities provided $71.1 million primarily due to net additional
borrowings. 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, 1998, the Company had seasonally adjusted lines of credit of
$1.3 billion. At June 30, 1998, the Company had borrowed $642 million
under its $1.3 billion lines of credit with interest rates ranging from
6.0% to 12.8%. At June 30, 1998, the unused short-term lines of credit
amounted to $663 million. Total maximum outstanding short-term
borrowings during the year ended June 30, 1998, were $678 million. At
June 30, 1998, the Company has $94.1 million of letters of credit
outstanding and an additional $62.2 million of letters of credit lines
available.
To ensure long-term liquidity, DIMON entered into a $500 million New
Credit Facility, effective June 27, 1997, with 20 banks which replaced
DIMON's $240 million existing credit facility. The Company had $140
million of borrowings under this agreement at June 30, 1998. The
Company uses the New Credit Facility to classify $360 million of working
capital loans to Revolving Credit Notes at June 30, 1998. It is the
Company's intent to finance at least $500 million 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
Company continuously monitors its compliance with these covenants. The
New Credit Facility's initial term expires on June 27, 2000, and subject
to 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, 1998). 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.
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, 1998,
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 anticipated needs for 1999.
There can be no assurance, however, that other alternative sources of
capital will be available in the future or, if available, that any such
alternative sources will be available on favorable terms. Reliance on
available credit presents financial risk to the Company going forward.
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. 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
-25-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
-------------------------------------------------
the corporate level on both an interim and annual basis. These
processes are followed using an appropriate combination of internal
staff at both the subsidiary and corporate levels as well as independent
outside advisors in review of the various tax laws and in compliance
reporting for the various operations.
Dividend distributions are regularly made from certain subsidiaries
while the undistributed earnings of certain other foreign subsidiaries
are not subject to additional foreign income taxes nor considered to be
subject to U.S. income taxes unless remitted as dividends. The Company
intends to reinvest such undistributed earnings of certain foreign
subsidiaries indefinitely; accordingly, no provision has been made for
U.S. taxes on those earnings. The Company regularly reviews the status
of the accumulated earnings of each of its U.S. and foreign subsidiaries
and reevaluates the aforementioned dividend policy as part of its
overall financing plans.
Accounting Matters
------------------
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("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 September 30, 1998, interim financial
statements and will require the restatement of all prior-periods
presented. The Company does not expect this statement 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, 1999, year end financial
statements. The Company does not expect this statement to have a
material impact on the Company's financial condition or results of
operations upon adoption.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits" which revises and
standardizes the disclosure requirements for pensions and postretirement
benefits. SFAS 132 will also require additional information on changes
in benefit obligations and fair values of plan assets. This statement
is effective for the Company's June 30, 1999, year end financial
statements. The Company does not expect this statement to have a
material impact on the Company's financial position or results of
operations upon adoption.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" which provides a comprehensive and
consistent standard for the recognition and measurement of derivatives
and hedging activities. This statement will be effective for the
Company's September 30, 1999, interim financial statements. The Company
does not expect this statement to have a material impact on the
Company's financial position 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 1999 and beyond to differ materially from those expressed in any
forward-looking statements made by, or on behalf of, the Company.
-26-
<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.
Governmental Intervention, Litigation 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.
In June 1997, representatives of the leading U.S. manufacturers of
consumer tobacco products, several state attorneys general and certain
private plaintiffs entered into an agreement (the "Resolution") to
support the adoption of federal legislation and ancillary undertakings
that would resolve many of the regulatory and litigation issues
affecting the United States' tobacco industry and, thereby, reduce
uncertainties facing the industry and increase stability in business and
capital markets. Such legislation was never enacted.
Instead, in April 1998, the Senate Commerce Committee approved a bill
(the "Commerce Bill") that was substantially different and
significantly more adverse to the domestic tobacco industry than the
proposed Resolution. The Commerce Bill, as approved by the Commerce
Committee, contemplated industry payments in excess of one-half trillion
dollars over the first twenty-five years, provided the United States
Food and Drug Administration ("FDA") with broad regulatory control over
tobacco products, applied, in certain respects, to international sales
of tobacco products, and eliminated virtually all of the provisions of
the proposed Resolution that would limit liability of the tobacco
industry in civil litigation in the United States. In June 1998, the
United States Senate voted to return the Commerce Bill to the Senate
Commerce Committee
-27-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
-------------------------------------------------
for further consideration. Other federal tobacco bills are also under
consideration by Congress. The Company cannot predict whether the
Commerce Bill or any other such federal tobacco legislation will be
enacted, the form any such enactment might take or the extent to which
such measures may affect the Company's business.
The leading cigarette manufacturers also face hundreds of lawsuits
brought throughout the United States and, to a much lesser extent, the
world. Such suits have been brought on behalf of (i) individuals and
classes of individuals alleging personal injury and (ii) state and local
governments seeking recovery of health care costs allegedly caused by
cigarette smoking, as well as other groups such as unions, health
maintenance organizations, federal and state taxpayers, Native American
tribes and others. Damages claimed in some of the smoking and health
class actions and health care costs recovery cases range into the
billions of dollars. Plaintiffs continue to file more such suits.
It is not possible to predict the outcome of the litigation pending
against the U.S. cigarette manufacturers. Litigation is subject to many
uncertainties, and it is possible that some of these actions could be
decided unfavorably. An unfavorable outcome or settlement of a pending
smoking and health or health care cost recovery case could encourage the
commencement of additional, similar litigation. Adverse legislative,
regulatory, political and other developments concerning cigarette
smoking and the tobacco industry continue to receive widespread media
attention. These developments may negatively affect the perception of
potential judges and juries with respect to the tobacco industry,
possibly to the detriment of certain pending litigation, and may prompt
the commencement of additional, similar litigation.
The cigarette manufacturers have reached separate settlements with the
states of Florida, Mississippi, Texas and Minnesota, and an
environmental tobacco smoke personal injury class action brought on
behalf of airline flight attendants. These settlements require the
cigarette manufacturers to make scheduled payments for up to twenty-five
years totaling more than $20 billion. The 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.
Due to the present litigation and legislative environment, 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 legislation 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.
-28-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
-------------------------------------------------
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 32% and 42% of the
Company's consolidated tobacco sales for 1998 and 1997 were to two
companies. See Note O to the Company's Consolidated Financial
Statements for the year ended June 30, 1998, included herein.
International Business Risks
The Company's international operations are subject to international
business risks, including unsettled political conditions, expropriation,
import and export restrictions, exchange controls, inflationary
economies and currency risks and risks related to the restrictions of
repatriation of earnings or proceeds from liquidated assets of foreign
subsidiaries. In certain countries, the Company has advanced
substantial sums or guaranteed local loans or lines of credit in
substantial amounts for the purchase of tobacco from growers. Risk of
repayment is normally limited to the tobacco season, and the maximum
exposure occurs within a shorter period.
The Company's tobacco business is generally conducted in U.S. dollars,
as is the business of the industry as a whole. Accordingly, there is
minimal currency risk related to the sale of tobaccos. However, local
country operating costs, including the purchasing and processing costs
for tobaccos, are subject to the effects of exchange fluctuations of the
local currency against the U.S. dollar. The Company attempts to
minimize such currency risks by matching the timing of its working
capital borrowing needs against the tobacco purchasing and processing
funds requirements in the currency of the country of tobacco origin.
Fluctuations in the value of foreign currencies can significantly affect
the Company's operating results. See Note P to the Company's
Consolidated Financial Statements for the year ended June 30, 1998,
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 significant investments in its
purchasing, processing and exporting operations in southern Brazil,
Indonesia, Thailand and the African countries of Malawi, Tanzania and
Zimbabwe. In recent years, these countries' economic problems have
received wide publicity related to devaluation of the local currency and
inflation. While devaluation 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 these
countries.
-29-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
-------------------------------------------------
Asian Customers
The Company has significant sales to Asian customers, particularly in
Japan and Korea. As noted previously, tobacco sales are denominated
primarily in U.S. dollars. However, the devaluation of certain Asian
currencies has resulted in reduced orders from certain Asian customers.
The Company continuously evaluates the credit risk of its customers.
However, the Company may incur a loss of business as a result of the
devaluation of Asian currencies.
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, 1998 and 1997, the Company was
permitted to make restricted payments, including cash dividends on its
Common Stock, of up to $73.5 million and $78.0 million, respectively.
Year 2000 Issue
DIMON has recognized the importance of early preparation and planning
for the upcoming millennium change. The Company's Y2K project began in
1996 and is presently being managed by a project office that coordinates
the efforts of operations around the world. The key objectives of the
project have been clearly stated: compliance and readiness at every
location well in advance of January 1, 2000, leading to business
continuity and undisturbed customer service.
In 1996, DIMON also initiated a corporate technology strategy (the
"Vision" project) to upgrade its computer infrastructure and systems
throughout the world. The primary focus of this project was to improve
the capture and use of key information across the Company. A secondary
benefit of the initiative has been the rapid replacement of non-Y2K
compliant equipment and systems with new, Y2K compatible products and
code.
To date, DIMON has spent $2.4 million on the Vision project with an
additional $1.1 million budgeted through June 1999, on application
software. The completion of this project and the implementation of a
third party accounting application at one international site will result
in all of DIMON's core systems being client / server based and fully Y2K
compliant. In addition, an estimated $2.5 million has been spent over
the past two years on the upgrading of network and computer equipment
across all locations. This effort will continue throughout the fiscal
year ending June 30, 1999, with $1 million targeted to complete the Y2K
hardware remediation process throughout the Company.
The Company's critical applications include its manufacturing, inventory
and financial systems at each location. Assessments, remediation and
testing efforts are presently ongoing at all Company sites. Progress
on each site's project plan is tracked by the local entity and
communicated back on a routine basis to the project office. Although it
is impossible to account for every task to be performed and issue that
will be encountered within a project plan, DIMON's Year 2000 project is
presently on schedule with a target date for corporate readiness set for
mid-1999. As part of each location's preparation, contingency plans are
being developed for all critical business processes. Should any of
these processes be impacted as a result of system, equipment or
business-partner failure, action plans will be in place by January 1,
2000, to address the situation.
-30-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
-------------------------------------------------
DIMON has communicated and will continue to communicate with its
suppliers, financial institutions, customers and other key business
partners on their Y2K efforts and in the coordination of testing systems
that electronically link the Company with these businesses. There can
be no assurance that these business partners will be fully compliant or
that problems they may encounter will have no adverse effect on their
ongoing operations. Risk is minimized however with the fact that
DIMON's business is positioned near the beginning of the tobacco supply
chain, with little dependence on technology among its primary suppliers.
As a processor of leaf tobacco, DIMON owns and manages several
processing facilities. The Company is in the process of evaluating the
impact, if any, Year 2000 will have on the operation of these facilities
and all other non-information related technology used throughout the
Company.
No company can provide complete assurance that they have been able to
identify all Year 2000 issues prior to the problems manifesting
themselves. It is the opinion of DIMON management that the Company is
taking adequate and appropriate action to address Year 2000 issues and
does not expect the financial impact of being Year 2000 compliant to be
material to the Company's consolidated financial position, results of
operations or cash flows.
The EURO
A future foreign exchange consideration for the Company is the
introduction of a single European currency, the "Euro," which will
occur on January 1, 1999. The Euro will replace eleven local country
currencies during the transition period from 1999 through 2002.
Although the new currency will not actually be printed until 2002, the
exchange rate of the affected currencies will be permanently fixed
against the Euro on January 1, 1999.
The underlying intent of this change is to create a strong, hard
currency for the European Union that will be a competitor to the U.S.
dollar for international trading and financial transactions. The Euro
will eliminate cross-border exchange risk within the adopting countries
and may significantly reduce many foreign exchange exposures for multi-
national companies.
The Company will be required to modify certain accounting systems to
record both the Euro and the local currency and has begun a
comprehensive implementation plan to deal with the conversion. The
Company has studied the implications of the overall Euro conversion and
does not expect it to have a material impact on the Company's financial
condition or results of operations upon adoption.
-31-
<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) 1998 1997 1996
=========================================================================================
<S> <C> <C> <C>
Sales and other operating revenues..............$2,171,803 $2,125,739 $1,770,166
Cost of goods and services sold................. 1,911,843 1,851,547 1,551,692
_________________________________________
259,960 274,192 218,474
Selling, administrative and general expenses.... 120,202 103,705 96,681
Restructuring and merger related costs.......... - 3,864 15,858
_________________________________________
Operating Income.............................. 139,758 166,623 105,935
Interest Expense................................ 83,769 50,518 43,161
_________________________________________
Income from continuing operations
before income taxes, equity in net
income (loss) of investee companies,
income from discontinued operations
and extraordinary item........................ 55,989 116,105 62,774
Income taxes.................................... 14,725 44,063 25,324
__________________________________________
Income from continuing operations before
equity in net income (loss) of investee
companies, income from discontinued
operations and extraordinary item............. 41,264 72,042 37,450
Equity in net income (loss) of
investee companies (net of income taxes)...... 565 526 (330)
__________________________________________
Income from continuing operations
before income from discontinued
operations and extraordinary item............. 41,829 72,568 37,120
Income from discontinued operations,
net of income taxes........................... 1,820 4,605 2,750
Extraordinary item:
Partial recovery of Iraqi
receivable (net of income tax
expense of $870)............................ - - 1,400
__________________________________________
NET INCOME $ 43,649 $ 77,173 $ 41,270
==========================================
Basic Earnings Per Share
Income from continuing operations
before income from discontinued
operations and extraordinary item.......... $.94 $1.69 $ .93
Income from discontinued operations.......... .04 .11 .07
Extraordinary item........................... - - .04
__________________________________________
Net Income.................................... $.98 $1.80 $1.04
==========================================
Diluted Earnings Per Share
Income from continuing operations
before income from discontinued
operations and extraordinary item.......... $.94 $1.67 $ .92
Income from discontinued operations.......... .04 .10 .06
Extraordinary item........................... - - .03
__________________________________________
Net Income.................................... $.98 $1.77 $1.01
==========================================
See notes to consolidated financial statements
</TABLE>
-32-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
CONSOLIDATED BALANCE SHEET
DIMON Incorporated and Subsidiaries
<TABLE>
<CAPTION>
June 30
__________________________
(in thousands) 1998 1997
===========================================================================
<S> <C> <C>
ASSETS
Current assets,
Cash and cash equivalents......................$ 18,729 $ 107,131
Notes receivable............................... 5,600 6,797
Trade receivables, net of allowances
(1998 - $2,799, 1997 - $5,902)................ 319,295 396,156
Inventories:
Tobacco....................................... 588,143 583,579
Other......................................... 24,483 25,282
Advances on purchases of tobacco............... 192,191 226,765
Recoverable income taxes....................... 2,748 3,051
Prepaid expenses and other assets.............. 24,794 22,718
Net assets of discontinued operations.......... 32,907 -
__________________________
Total current assets....... 1,208,890 1,371,479
__________________________
Investments and other assets
Equity in net assets of investee companies..... 6,022 9,326
Other investments.............................. 9,896 12,293
Notes receivable............................... 9,313 12,738
Other.......................................... 13,796 15,803
__________________________
39,027 50,160
__________________________
Intangible assets
Excess of cost over related net assets
of businesses acquired........................ 179,589 180,435
Production and supply contracts................ 26,442 26,681
Pension asset.................................. 3,555 3,348
__________________________
209,586 210,464
__________________________
Property, plant and equipment
Land........................................... 20,085 31,082
Buildings...................................... 174,310 196,887
Machinery and equipment........................ 237,368 231,705
Allowances for depreciation.................... (113,663) (126,922)
___________________________
318,100 332,752
___________________________
Deferred taxes and other deferred charges........ 21,875 22,748
___________________________
$1,797,478 $1,987,603
===========================
</TABLE>
-33-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
CONSOLIDATED BALANCE SHEET
DIMON Incorporated and Subsidiaries
<TABLE>
<CAPTION>
June 30
__________________________
(in thousands) 1998 1997
===========================================================================
<S> <C> <C>
Current liabilities
Notes payable to banks and others..............$ 282,470 $ 350,263
Accounts payable:
Trade......................................... 80,994 108,283
Officers and employees........................ 7,664 13,441
Other......................................... 7,825 22,203
Advances from customers........................ 50,521 69,787
Accrued expenses............................... 57,294 66,141
Income taxes................................... 5,150 25,146
Long-term debt current......................... 10,588 16,222
_____________________________
Total current liabilities.... 502,506 671,486
_____________________________
Long-term debt
Revolving Credit Notes and Other............... 548,699 577,826
Convertible Subordinated Debentures............ 123,328 123,328
Senior Notes................................... 125,000 125,000
____________________________
797,027 826,154
____________________________
Deferred credits
Income taxes................................... 36,723 36,630
Compensation and other benefits................ 38,812 44,072
____________________________
75,535 80,702
____________________________
Minority interest in subsidiaries................ 480 998
____________________________
Commitments and contingencies.................... - -
____________________________
Stockholders' equity
Preferred Stock - no par value: 1998 1997
------ ------
Authorized shares.......... 10,000 10,000
Issued shares.............. - - - -
Common Stock - no par value: 1998 1997
------ ------
Authorized shares.......... 125,000 125,000
Issued shares.............. 44,525 44,312 182,143 178,939
Retained earnings.............................. 243,816 229,521
Equity-currency conversions.................... (2,664) 670
Additional minimum pension liability........... (1,365) (867)
___________________________
421,930 408,263
___________________________
$1,797,478 $1,987,603
===========================
See notes to consolidated financial statements
</TABLE>
-34-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
STATEMENT OF STOCKHOLDERS' EQUITY
DIMON Incorporated and Subsidiaries
<TABLE>
<CAPTION>
Additional
Equity- Minimum Unrealized Total
(in thousands, Common Retained Currency Pension Gain (Loss) On Stockholders'
except per share amounts) Stock Earnings Conversions Liability Investments Equity
=================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1995.....$ 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
Net income for the year.... 43,649 43,649
Cash dividends - $0.66
per share................ (29,354) (29,354)
Conversion of foreign
currency financial
statements............... (3,334) (3,334)
Reduction in the minimum
pension liability........ (498) (498)
Stock options exercised.... 3,204 3,204
______________________________________________________________________________________
Balance, June 30, 1998...$182,143 $243,816 $ (2,664) $ (1,365) $ - $421,930
======================================================================================
See notes to consolidated financial statements
</TABLE>
-35-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
STATEMENT OF CONSOLIDATED CASH FLOWS
DIMON Incorporated and Subsidiaries
<TABLE>
<CAPTION>
Years Ended June 30
______________________________________
(in thousands) 1998 1997 1996
========================================================================================
<S> <C> <C> <C>
Operating activities
Net Income.....................................$ 43,649 $ 77,173 $ 41,270
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization................. 43,476 37,191 33,780
Deferred items................................ 59 9,440 5,851
Loss (gain) on foreign currency transactions.. (221) 3,655 (2,341)
Gain on disposition of fixed assets........... (1,394) (3,697) (2,415)
Gain on sale of investee ..................... - - (3,751)
Gain on sale of investment.................... - - (1,090)
Changes in discontinued operations............ (6,540) - -
Undistributed (earnings) loss of investees.... (564) (526) 330
Dividends received from investees............. 608 - 1,465
Income applicable to minority interest........ - 124 292
Bad debt expense.............................. 274 89 1,043
Decrease (increase) in accounts receivable.... 35,992 (96,072) (10,671)
Decrease in inventories and advances
on purchases of tobacco..................... 48,427 49,673 64,438
Decrease (increase) in recoverable taxes...... (952) (1,497) 444
Decrease (increase) in prepaid expenses....... (3,872) 12,450 17,257
Increase (decrease) in accounts
payable and accrued expenses................ (58,297) (81,055) 14,811
Increase (decrease) in advances from
customers................................... (23,801) (5,724) 25,116
Increase (decrease) in income taxes........... (19,069) 23,381 (6,117)
Other......................................... (438) 694 92
________________________________________
Net cash provided by operating activities... 57,337 25,299 179,804
________________________________________
Investing activities
Purchase of property and equipment............. (61,168) (60,860) (41,266)
Proceeds from sale of property and equipment... 24,597 8,853 8,605
Payments on notes receivable and
receivables from investees................... 5,270 2,348 1,132
Issuance of notes receivable................... (1,427) (12,869) (1,572)
Proceeds from or (advances) for
other investments and other assets........... (2,133) 13,109 24,422
Purchase of minority interest in subsidiaries.. - (118) -
Acquisition of subsidiary, net of cash acquired - 6,382 (6,543)
Purchase of remaining interest in investee..... (2,200) - -
______________________________________
Net cash used by investing activities....... (37,061) (43,155) (15,222)
______________________________________
Financing activities
Net change in short-term borrowings............ (69,941) (13,431) (229,403)
Repayment of debt.............................. (18,098) (162,833) (28,767)
Proceeds from debt............................. 5,932 268,940 125,514
Cash dividends paid to DIMON Incorporated
stockholders................................. (29,354) (25,071) (21,731)
Cash dividends paid to minority stockholders... - (379) (169)
Proceeds from sale of common stock............. 3,204 3,910 1,552
_______________________________________
Net cash provided (used) by
financing activities...................... (108,257) 71,136 (153,004)
_______________________________________
</TABLE>
- -36-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
STATEMENT OF CONSOLIDATED CASH FLOWS (continued)
DIMON Incorporated and Subsidiaries
<TABLE>
<CAPTION>
Years Ended June 30
______________________________________
(in thousands) 1998 1997 1996
========================================================================================
<S> <C> <C> <C>
Effect of exchange rate changes on cash..........$ (448) $ 31 $ (84)
_______________________________________
Increase (decrease) in cash and
cash equivalents............................... (88,429) 53,311 11,494
Increase in cash from consolidation
of investee.................................... 27 - -
Cash and cash equivalents at
beginning of year.............................. 107,131 53,820 42,326
_______________________________________
Cash and cash equivalents at end of year....$ 18,729 $ 107,131 $ 53,820
=======================================
Other information:
Cash paid during the year:
Interest......................................$ 85,667 $ 48,935 $ 43,361
Income taxes.................................. 18,252 25,919 21,075
Non-cash investing and financing activities:
Conversion of debt to equity.................. - - 55,365
Purchase of Intabex........................... - 161,398 -
See notes to consolidated financial statements
</TABLE>
-37-
<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 that are
combined with other investments are stated at cost or less than cost
because 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
$16,900 for 1998. 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.
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, 1998, is $12,175
($11,115 at June 30, 1997, which included $5,178 related to Florimex
entities).
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, 1998.
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, 1998, is $26,500 ($22,700 at
June 30, 1997).
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, 1998, is $18,155 ($16,155 at June 30, 1997).
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.
Basic earnings per share are computed by dividing earnings by the
weighted average number of common shares outstanding. The 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.
-38-
<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 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 September 30, 1998, interim statements and will
require the restatement of all prior-periods presented. The Company
does not expect this statement 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
will be effective for the Company's June 30, 1999 year end and for
interim periods thereafter. The Company does not expect this statement
to have a material impact on the Company's financial condition or
results of operations upon adoption.
In February 1998, the FASB issued SFAS No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits," which
revises and standardizes the disclosure requirements for pensions and
postretirement benefits. SFAS 132 will also require additional
information on changes in benefit obligations and fair values of plan
assets. This statement is effective for the Company's June 30, 1999,
year end financial statements. The Company does not expect this
statement to have a material impact on the Company's financial position
or results of operations upon adoption.
In June 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," which provides a
comprehensive and consistent standard for the recognition and
measurement of derivatives and hedging activities. This statement will
be effective for the Company's September 30, 1999, interim financial
statements. The Company does not expect this statement to have a
material impact on the Company's financial position or results of
operations upon adoption.
Certain prior year amounts have been reclassified to conform to the
current year presentation.
-39-
<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)
----------------------------------------
DIMON and Subsidiaries Computation of Earnings Per Common Share
<TABLE>
<CAPTION> YEAR ENDED JUNE 30
______________________________________
(in thousands, except per share data) 1998 1997 (1) 1996 (1)
========================================================================================
<S> <C> <C> <C>
BASIC EARNINGS
--------------
Income from continuing operations
before income from discontinued
operations and extraordinary item.............$41,829 $72,568 $37,120
Income from discontinued operations............. 1,820 4,605 2,750
Extraordinary item.............................. - - 1,400
-------- -------- --------
Net Income......................................$43,649 $77,173 $41,270
======== ======== ========
SHARES
------
Weighted Average Number of
Shares Outstanding............................ 44,473 42,850 39,568
======== ======== ========
BASIC EARNINGS PER SHARE
------------------------
Income from continuing operations
before income from discontinued
operations and extraordinary item............. $.94 $1.69 $ .93
Income from discontinued operations............. .04 .11 .07
Extraordinary item.............................. - - .04
-------- -------- --------
Net Income...................................... $ .98 $1.80 $1.04
======== ======== ========
DILUTED EARNINGS
----------------
Income from continuing operations before
income from discontinued operations
and extraordinary item.......................$41,829 $72,568 $37,120
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......................... - * 1,151 1,765
-------- -------- --------
Income from continuing operations before
income from discontinued operations and
extraordinary item............................ 41,829 73,719 38,885
Income from discontinued operations............. 1,820 4,605 2,750
Extraordinary item ............................. - - 1,400
-------- -------- --------
Net Income as Adjusted..........................$43,649 * $78,324 $43,035
======== ======== ========
SHARES
------
Weighted average number of common
shares outstanding............................ 44,473 42,850 39,568
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........... 258 323 104
Assuming conversion of 6 1/4% Convertible
Debentures in 1997 and 7 3/4%
convertible debentures in 1996 at
the beginning of the period................... - * 1,068 2,742
-------- -------- --------
Average Number of Shares Outstanding............ 44,731 * 44,241 42,414
======== ======== ========
</TABLE>
-40-
<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)
----------------------------------------
DIMON and Subsidiaries Computation of Earnings Per Common Share
(continued)
<TABLE>
<CAPTION> YEAR ENDED JUNE 30
______________________________________
(in thousands, except per share data) 1998 1997 (1) 1996 (1)
========================================================================================
<S> <C> <C> <C>
DILUTED EARNINGS PER SHARE
Income from continuing operations before
income from discontinued operations and
extraordinary item............................ $.94 * $1.67 $ .92
Income from discontinued operations............. .04 * .10 .06
Extraordinary item.............................. - - .03
--------- -------- --------
Net Income as Adjusted.......................... $.98 * $1.77 $1.01
======== ======== ========
(1) 1997 and 1996 have been restated for discontinued operations and the
adoption in 1998 of SFAS No. 128, "Earnings per share."
* Assumed conversion of Convertible Debentures at the beginning of the period has an antidilutive
effect on earnings per share.
</TABLE>
-41-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note B - Discontinued Operations
--------------------------------
On August 12, 1998, the Company reached a definitive agreement to sell
the net assets of the flower operations for approximately $66 million in
cash and the assumption of $24 million of the debt of Florimex
Worldwide. The Company expects to record a pre-tax gain of
approximately $30 million in the first quarter of the year ending June
30, 1999. Net assets of $32.9 million relating to the sale have been
segregated on the June 30, 1998 Consolidated Balance Sheet.
The results of operations for all years presented have been restated
for the discontinued flower operations.
Net Assets of Discontinued Operations:
<TABLE>
<CAPTION>
June 30,
1998
==============================================================
<S> <C>
Assets
Cash and cash equivalents.......................$ 3,262
Receivables..................................... 35,515
Inventories..................................... 3,921
Recoverable income taxes........................ 350
Prepaid expenses and other...................... 5,470
Intangible assets............................... 17,419
Property, plant and equipment, net.............. 37,335
---------
Total Assets................................. 103,272
=========
Liabilities
Notes payable to banks and others............... 10,539
Accounts payable and accruals................... 35,166
Income taxes payable............................ 1,431
Long-term debt.................................. 17,110
Deferred taxes and other........................ 5,661
Minority interest............................... 458
---------
Total Liabilities............................ 70,365
---------
Net Assets of Discontinued Operations........$ 32,907
========
</TABLE>
Summary of Operating Results of Discontinued Operations:
<TABLE>
<CAPTION>
1998 1997 1996
=========================================================================================
<S> <C> <C> <C>
Sales and other operating revenues...................$391,560 $387,488 $397,307
Cost of goods and services sold...................... 351,517 343,786 353,300
Restructuring and merger costs....................... - - (498)
Selling, administrative and general expenses......... 33,856 33,419 36,029
_________ _________ ________
Operating Income................................. 6,187 10,283 8,476
Interest expense..................................... 1,909 2,509 3,763
_________ _________ ________
Income before income taxes and minority interest..... 4,278 7,774 4,713
Income taxes......................................... 2,358 3,045 1,671
Income applicable to minority interest............... 100 124 292
_________ _________ ________
Income from discontinued operations.................$ 1,820 $ 4,605 $ 2,750
========= ========= =========
</TABLE>
-42-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note C - Acquisition
--------------------
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 owned
and operated leaf tobacco buying, processing, and exporting operations
in principal tobacco markets around the world including the United
States, Brazil, Argentina, Malawi, Italy and Thailand. A former 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
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 contemplated by the
purchase agreement. The source of cash was working capital of DIMON.
As part of the Stock Purchase Agreement, Intabex's former
shareholders, Folium, Inc., Tabacalera, S.A. and Leaf Management
Investments Ltd., have indemnified DIMON against claims arising from
breaches of representations and warranties made by the former
shareholders in connection with the acquisition of Intabex, subject to a
maximum of $90 million. DIMON may, subject to fulfillment of certain
conditions in the agreement, set off any such claims 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 Company has presented to the former Intabex shareholders claims
under the indemnity provision of the stock purchase agreement
aggregating $11.1 million. The claims and their impact on the financial
statements are discussed below.
Two claims are for liabilities (for advances on tobacco sales and
commissions payable) improperly unrecorded on the Intabex March 1997
balance sheet which were settled by DIMON after the acquisition. The
Company has recorded a receivable from the former Intabex shareholders
in the amount of approximately $4.8 million for these items.
A third claim is for approximately $3.3 million and relates to
approximately 85 separate matters. A portion of these 85 separate
matters relates to liabilities which were unrecorded on the Intabex
March 1997 balance sheet and were settled by DIMON after the
acquisition. A portion of these matters relates to current assets which
were recorded on the Intabex March 1997 balance sheet but which have not
been realized by DIMON. The Company has recorded a receivable from the
former Intabex shareholders for the entire amount of this claim.
The fourth claim relates to property in the Philippines for which
DIMON believes it does not have clear title. DIMON does not have
physical access to the property which has been seized by parties related
to the minority shareholders of the Philippines' subsidiary. The
Company recorded the property during purchase accounting at fair value
for $3.0 million, which approximated net book value on the Intabex March
1997 balance sheet. Except for depreciation expense, DIMON has not
adjusted the net book value of this property.
DIMON believes that the claims identified above are covered by the
indemnities of the purchase agreement. DIMON anticipates either a cash
settlement of the claims from the former Intabex shareholders or other
satisfactory resolution including set off of debentures. The
receivables recorded have the effect of reducing the purchase price and
goodwill.
-43-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note C - Acquisition (continued)
--------------------
DIMON is also discussing with the former Intabex shareholders other
matters which may give rise to indemnification under the stock purchase
agreement for amounts in the range of the maximum amount provided for
indemnification and set-off against the debentures in the Intabex stock
purchase agreement.
The purchase price has been allocated based on
estimated fair values of assets acquired and liabilities assumed at the
date of acquisition. This allocation resulted in an excess of purchase
price over net assets acquired of $167 million, which is being amortized
on a straight-line basis over 40 years.
Unaudited pro forma information of consolidated results of
operations of the Company and the acquired business as if the
acquisition had occurred July 1, 1996, has not been presented given the
uncertainty of the impact of claims under the provisions of the Stock
Purchase Agreement discussed above.
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 related to severance and other costs associated with employee
separations and $2.2 million related to costs of planned facility
closures. As these amounts are paid out in cash, the Company will
reduce an accrual established for their expenditure. During 1998, the
Company utilized $2.1 million of the reserves for severance and $1.6
million of the reserves for facility closures. The Company expects the
remaining reserves to be paid out in fiscal 1999.
-44-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note D - 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 1996, 1997 and 1998. 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>
Reserve balances at July 1, 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 other............ - (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
Reduced by:
Cash payments........................ (9,487) (100) - (9,587)
Asset writedowns and other........... (694) (270) (500) (1,464)
_________________________________________________________
Reserve balances at June 30, 1997.........$12,749 $ 25 $ 1,000 $13,774
Increased (reduced) by:
Cash payments........................ (3,631) (25) - (3,656)
Asset writedowns and other........... 749 - (1,000) (251)
________________________________________________________
Reserve balances at June 30, 1998.........$ 9,867 $ - $ - $ 9,867
====================================================================
</TABLE>
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.
The 1997 restructuring provision included additional restructuring
charges 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 $5.0 million, of which
approximately $1.0 million will be expended in 1999. 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.
-45-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note E - Investee Companies and Related Parties
-----------------------------------------------
The combined summarized information for investee companies follows:
<TABLE>
<CAPTION>
1998 1997 1996
===================================================================================
<S> <C> <C> <C>
Current assets.............................$11,340 $61,887 $13,069
Non-current assets......................... 10,147 13,684 29,087
Current liabilities........................ 9,934 56,933 14,631
Non-current liabilities.................... 755 866 2,446
Interest of other shareholders............. 4,776 8,100 12,733
Net sales.................................. 22,290 44,294 42,388
Gross profit............................... 5,734 9,276 8,771
Net income................................. 1,362 1,014 594
________________________________________
</TABLE>
The above changes from 1997 relate to the sale of certain
investees of Intabex, and the changes from 1996 relate primarily to the
Company's purchase of Intabex. Also, as a result of the purchase, two
investee companies are now being accounted for as consolidated entities.
Balances with related parties, primarily unconsolidated, affiliated
companies, are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
========================================================================================
<S> <C> <C> <C>
Trade receivables...............................$46,944 $ 16,352 $23,904
Advances on purchases of tobacco................ 92,416 101,540 32,786
Notes receivable................................ 3,767 4,190 -
Trade payables and advances from customers...... 17,719 7,405 6,844
Other income: Interest......................... 756 917 581
Net sales....................................... 11,036 12,274 6,673
Purchases of tobacco............................ 76,352 80,389 61,549
__________________________________________
</TABLE>
Note F - Financial Instruments
------------------------------
The estimated fair value of the Company's financial instruments at June
30, 1998 is provided in the following table:
<TABLE>
<CAPTION>
Carrying Fair
Amount Value
______________________________________________________________________________
<S> <C> <C>
Senior Notes........................................$125,000 $123,750
Convertible Subordinated Debentures................. 123,328 102,979
Other Long-Term Debt................................ 59,287 58,165
</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.
-46-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note F - Financial Instruments (continued)
------------------------------
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 $322,571 ($125,000 fixed to floating and $197,571 floating to
fixed) and expiring at various dates through July 16, 2002, had a
positive value of $504 at June 30, 1998.
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, 1998, and were determined using
quoted market prices and the discounted value of future cash flows.
Note G - 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 $1,305,479 ($1,783,889 at
June 30, 1997), excluding all long-term credit agreements. These lines
bear interest at rates ranging from 5.99% to 12.83% at June 30, 1998.
Unused lines of credit at June 30, 1998, amounted to $663,009 ($789,913
at June 30, 1997), net of $156,379 of available letters of credit lines.
There were no compensating balance agreements at June 30, 1998 or 1997.
Note H - Long-Term Debt
-----------------------
Such debt is comprised of:
<TABLE>
<CAPTION>
1998 1997
________________________ _______________________
Maturing Maturing Maturing Maturing
within after within after
One Year One Year One Year One Year
===============================================================================================
<S> <C> <C> <C> <C>
Senior Notes............................$ - $125,000 $ - $125,000
Convertible Subordinated Debentures..... - 123,328 - 123,328
Revolving Credit Notes.................. - 500,000 - 500,000
Other Long-Term Debt.................... 10,492 48,661 15,307 77,249
________________________________________________________
$10,492 $796,989 $15,307 $825,577
Capitalized Lease Obligations........... 96 38 915 577
________________________________________________________
$10,588 $797,027 $16,222 $826,154
===============================================================================================
</TABLE>
-47-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note H - Long-Term Debt (continued)
-----------------------
Payments of the debt are scheduled as follows:
<TABLE>
<CAPTION>
Convertible Revolving Other
Senior Subordinated Credit Long-Term
Notes Debentures Notes Debt Total
===========================================================================
<S> <C> <C> <C> <C> <C>
1999............$ - $ - $ - $10,492 $ 10,492
2000............ - - 500,000 9,543 509,543
2001............ - - - 6,288 6,288
2002............ - - - 30,868 30,868
2003............ - - - 1,400 1,400
2004............ - - - 60 60
Later years..... 125,000 123,328 - 502 248,830
__________________________________________________________
$125,000 $123,328 $500,000 $59,153 $807,481
===========================================================================
</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, 1998, the Company was permitted to make restricted payments,
including cash dividends on its Common Stock, of up to $73.5 million.
On April 1, 1997, in connection with the Intabex acquisition, DIMON
Incorporated issued $123.3 million of 6 1/4% Convertible Subordinated
Debentures due on March 31, 2007 (the "Debentures"). The Debentures are
convertible into approximately 4.29 million shares of the Company's
Common Stock at a 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 C, 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
C.
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
$140 million borrowings under these agreements on June 30, 1998 (-0- in
1997). However, the Company has used these facilities to classify $360
million ($500 million at June 30, 1997) of working capital loans to
Revolving Credit Notes. It is the Company's intent to finance at least
-48-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note H - Long-Term Debt (continued)
-----------------------
$500 million on a long-term basis. The New Credit Facility is subject
to certain commitment fees and covenants that, among other things,
require DIMON to maintain minimum working capital and tangible net
worth amounts, require specific liquidity and long-term solvency
ratios and restrict acquisitions. The New Credit Facility's initial
term is to June 27, 2000, and pending approval by the lenders, may be
extended. The rates of interest are based upon the type of loan
requested by the Company. During the life of the agreement, the
interest rate could be the prime rate or the LIBOR rate adjusted. The
primary advance rate is the agent bank's base lending rate (8.50% at
June 30, 1998). The Company pays a commitment fee of 1/4% per annum on
any unused portion of the facility. Decisions relative to repayments
and reborrowings are made based on circumstances then existing,
including management's judgment as to the most effective utilization of
funds.
Other long-term debt consists of obligations of DIMON Incorporated
and the tobacco operations in Asia, Africa, Germany and Spain, and is
payable at interest rates varying from 4.85% to 9.6%.
Note I - Long-Term Leases
-------------------------
The Company has both capital and operating leases. The operating leases
are for land, buildings, automobiles and other equipment; the capital
leases are for machinery and equipment. The capitalized lease
obligations are payable through 2000. Interest rates are imputed at
9.6% to 13.0%. Amortization is included in depreciation expense.
Minimum future obligations and capitalized amounts are as follows:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
===============================================================================
<S> <C> <C>
1999...................................................$ 96 $ 3,362
2000................................................... 38 3,166
2001................................................... - 3,106
2002................................................... - 2,377
2003................................................... - 1,270
Later years ........................................... - 17,184
_________________________
$ 134 $30,465
Less amount representing interest and deposits......... -
________
Present value of net minimum lease payments............$ 134
Less current portion of obligations
under capital leases................................. 96
________
Long-term obligations under capital leases.............$ 38
========
Capitalized amounts:
Machinery and equipment, primarily vehicles..........$ 322
Accumulated amortization............................. (102)
_______
$ 220
=======
</TABLE>
Note J - 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, 1998, no shares had been issued.
-49-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note K - 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.
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, 1998
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 1998
grants will be awarded at the meeting of the DIMON Board following the
1998 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 20 thousand shares had
been granted as of June 30, 1998.
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 $2,816 credit to income in 1998, a $2,142
charge to income in 1997, and a $473 charge to income in 1996 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
1998 1997
=======================================================================
<S> <C> <C>
Net income as reported.........................$43,649 $77,173
Net income Pro Forma........................... 41,603 76,185
Earnings per share, basic as reported.......... .98 1.80
Earnings per share, basic Pro Forma............ .93 1.77
</TABLE>
-50-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note K- Stock Incentive Plan (continued)
----------------------------
Information with respect to options and SARs follows:
<TABLE>
<CAPTION>
Year Ended June 30
___________________________
1998 1997 1996
=====================================================================================
<S> <C> <C> <C>
Options and SARs outstanding at beginning of year......... 1,854 1,804 1,540
Options and SARs granted.................................. 455 436 403
Options and SARs exercised................................ (237) (263) (130)
Options and SARs cancelled................................ (33) (123) (9)
____________________________
Options and SARs outstanding at end of year.............. 2,039 1,854 1,804
============================
SARs included as outstanding at end of year............... 417 407 528
============================
Options available for future grants at end of year........ 857 822 337
============================
Options and SARs exercisable at end of year............... 830 833 1,023
============================
Option and SAR market prices per share:
Date of grant (at lowest market price).................$22.31 $18.13 $17.00
(at highest market price)...................... 23.38 20.88 15.38
Exercised (at lowest market price)..................... 21.25 19.00 11.33
(at highest market price)...................... 26.38 26.75 20.75
Cancelled (at lowest market price)..................... 11.25 19.25 17.00
(at highest market price)...................... 25.94 26.50 17.00
</TABLE>
Weighted average option exercise price information for the years
1998, 1997 and 1996 follows:
<TABLE>
<CAPTION>
1998 1997 1996
_________________________________________________________________________
<S> <C> <C> <C>
Outstanding at July 1................. $16.87 $16.46 $16.32
Granted during the year............... $22.33 $18.17 $16.98
Exercised during the year............. $25.10 $23.97 $19.81
Outstanding at June 30................ $18.16 $16.87 $16.46
Exercisable at June 30................ $16.52 $17.53 $17.19
</TABLE>
-51-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note K - Stock Incentive Plan (continued)
-----------------------------
Option groups outstanding at June 30, 1998 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............ 137 137 $14.42 3
8/27/92............ 199 199 $22.00 4
8/26/93............ 175 175 $16.67 5
8/25/94............ 159 159 $11.50 6
4/1/95............ 140 140 $16.50 7
8/24/95............ 356 - $17.00 7
11/17/95............ 6 6 $15.38 7
8/22/96............ 412 - $18.13 8
11/15/96............ 7 7 $20.88 8
8/21/97............ 441 - $22.31 9
11/14/97............ 7 7 $23.38 9
______ _______
2,039 830
====== =======
</TABLE>
The weighted average fair value at date of grant for options
granted during 1998 and 1997 was $10.07 and $7.30 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 1998 1997
_________________________________________________________________
<S> <C> <C>
Expected Life in Years................ 10 10
Interest Rate......................... 6.49% 6.90%
Volatility............................ 31% 33%
Dividend Yield........................ 2.7% 3.1%
</TABLE>
Note L - Retained Earnings
--------------------------
Consolidated retained earnings included $873 at June 30, 1998 ($1,314 at
June 30,1997) for the Company's share of undistributed net income of
investee companies accounted for under the equity method.
Note M - Income Taxes
---------------------
Consolidated retained earnings at June 30, 1998 and 1997 include
undistributed earnings of $261,452 and $175,910 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, 1998, the Company has net operating tax loss
carryforwards of approximately $125,601 for income tax purposes that
expire in 1999 and thereafter. The components of income from continuing
operations before income taxes, minority interest, and equity in net
income of investee companies consisted of the following:
-52-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note M - Income Taxes (continued)
---------------------
<TABLE>
<CAPTION>
Note M - Income Taxes (continued)
1998 1997 1996
=================================================================
<S> <C> <C> <C>
U.S.....................$(51,109) $ 9,902 $ 6,303
Foreign................. 107,098 106,203 56,471
_________________________________________
$ 55,989 $116,105 $62,774
========================================
</TABLE>
The details of the amount shown for income taxes in the Statement
of Consolidated Income follow:
<TABLE>
<CAPTION>
1998 1997 1996
===================================================================
<S> <C> <C> <C>
Current
Federal...................$ 2,531 $ 4,566 $ 8,936
State..................... - - 402
Foreign................... 12,499 37,694 10,744
_________________________________________
$15,030 $42,260 $20,082
_________________________________________
Deferred
Federal...................$(8,945) $ 384 $(3,972)
State..................... (1,494) 85 (854)
Foreign................... 10,134 1,334 10,068
_________________________________________
$ (305) $ 1,803 $ 5,242
_________________________________________
Total.....................$14,725 $44,063 $25,324
==================================================================
</TABLE>
The reasons for the difference between income tax expense based on
income before income taxes, minority interest, and equity in net income
of investee companies and the amount computed by applying the statutory
Federal income tax rate to such income are as follows:
<TABLE>
<CAPTION>
Pre-tax Income
____________________________________
1998 1997 1996
=============================================================================================
<S> <C> <C> <C>
Computed "expected" tax expense..........................$19,596 $40,637 $21,971
State income taxes, net of Federal income tax benefit.... - - (294)
Effect of foreign income taxes........................... (9,009) 5,261 (1,524)
U.S. taxes on foreign income, net of tax credits......... 7,003 958 1,270
Operating loss carryforwards, net........................ 1,152 (2,779) 2,395
Tax benefits derived from Foreign Sales Corporations..... (1,504) (1,624) (1,633)
Permanent Items.......................................... (2,513) 1,610 999
Other.................................................... - - 2,140
___________________________________
Actual tax expense.......................................$14,725 $44,063 $25,324
===================================
</TABLE>
-53-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note M - Income Taxes (continued)
---------------------
The long-term deferred tax liabilities (assets) are comprised of the
following:
<TABLE>
<CAPTION>
1998 1997
===============================================================
<S> <C> <C>
Deferred tax liabilities:
Fixed assets...........................$ 13,254 $ 16,610
Foreign taxes.......................... 15,311 10,581
Other.................................. 4,921 9,439
_____________________
Gross deferred tax liabilities........... 33,486 36,630
_____________________
Deferred tax assets:
Tax loss carryforwards................. (13,149) (14,387)
Postretirement and other benefits...... (10,726) (10,178)
Currently non-deductible expenses...... (3,072) (2,780)
Other.................................. (1,305) (4,977)
_____________________
Gross deferred tax assets................ (28,252) (32,322)
Valuation allowance...................... 13,073 13,730
_____________________
Net deferred tax assets.................. (15,179) (18,592)
_____________________
Net deferred tax liability...............$ 18,307 $ 18,038
=====================
</TABLE>
The net change in the valuation allowance for deferred tax assets
was a decrease of $657 and relates primarily to the utilization of tax
loss carryforwards for which no benefit had been recognized in prior
years.
Note N - Employee Benefits
--------------------------
Retirement Benefits
For 1996, the Company maintained the Defined Benefit Pension Plan (the
Retirement Plan) and an Excess Benefit Plan of the former Dibrell. The
Retirement Plan provides retirement benefits for substantially all of
the former Dibrell's U.S. salaried personnel based on years of service
rendered and compensation during the last five years of employment. The
Company maintains an Excess Benefit Plan that provides individuals who
participate in the Retirement Plan the difference between the benefits
they could potentially accrue under the Retirement Plan and the benefits
actually paid as limited by regulations imposed by the Internal Revenue
Code. The Company funds these plans in amounts consistent with the
funding requirements of Federal Law and Regulations.
Additional non-U.S. plans sponsored by certain tobacco subsidiaries
cover substantially all of their full-time employees located in Greece,
Italy, The Netherlands, Turkey and Zimbabwe.
-54-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note N - Employee Benefits (continued)
--------------------------
Retirement Benefits (continued)
Net pension cost for continuing operations included the following
components:
<TABLE>
<CAPTION>
1998 1997 1996
======================================================================================
<S> <C> <C> <C>
Service cost - benefits earned during the year........$ 2,565 $ 1,928 $ 1,239
Interest cost on projected benefit obligation......... 3,913 3,550 3,996
Return on assets - actual............................. (9,420) (3,413) (6,174)
Amortization of transition asset at July, 1986........ (304) (303) (269)
Amortization of prior service costs................... 622 550 651
Amortization of unrecognized loss (gain).............. (372) (336) 2,966
Deferred asset gain................................... 5,573 - -
________________________________
Net pension cost before effect of curtailment......... 2,577 1,976 2,409
Effect of curtailment ................................ - - (698)
________________________________
Net pension cost......................................$ 2,577 $ 1,976 $ 1,711
================================
</TABLE>
The funded status of the plans at June 30 was as follows:
<TABLE>
<CAPTION>
1998 1997
================================================================================
<S> <C> <C>
Actuarial present value of accumulated benefit obligation
Vested..................................................$47,982 $45,372
Nonvested............................................... 1,377 600
______________________
49,359 45,972
Benefits attributable to projected salary increases....... 4,221 4,009
______________________
53,580 49,981
Plan assets at fair value................................. 52,524 44,457
______________________
Projected benefit obligation in excess of plan assets..... 1,056 5,524
Unamortized transition asset ............................ 1,489 1,784
Unrecognized prior service costs.......................... (7,181) (5,352)
Unrecognized net gain..................................... 11,039 10,426
Adjustment required to recognize minimum liability........ 7,344 4,215
_______________________
Net pension liability.....................................$13,747 $16,597
=======================
</TABLE>
For the U.S. plans, projected benefit obligations for the Retirement
Plan and the Excess Benefit Plan were determined using assumed discount
rates of 7.25% for 1998 and 8% for 1997 and 1996. Assumed compensation
increases were 4% for 1998 and 1997 and 7% for 1996 for the Retirement
Plan and 4% for 1998 and 1997 and 5% for 1996 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.
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 $588 in 1998, $546 in 1997, and $481 in
1996.
-55-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note N - Employee Benefits (continued)
--------------------------
Retirement Benefits (continued)
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 was in lieu of a
defined benefit pension plan. Profit-Sharing Plan contributions are
discretionary. 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 Defined Benefit
Pension Plan 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 U.S. 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 7.25% for 1998 and 8% for 1997 and 1996 and an assumed rate of
increase in health care costs, also known as the health care cost trend
rate, of 7.5% for 1998, 8% for 1997 and 11.5% for 1996. 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 all three years. Based on
current estimates, increasing the health care cost trend rate by one
percentage point would increase the benefit obligation by approximately
$553.
The following table presents the plan's funded status at June 30
reconciled with amounts recognized in the Company's balance sheet:
<TABLE>
<CAPTION>
1998 1997
=================================================================================
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees................................................$ 8,377 $ 8,339
Fully eligible active plan participants................. 1,031 903
Other active plan participants.......................... 4,737 3,539
Plan assets at fair value................................. (69) (65)
________________________
Accumulated postretirement benefit obligation
in excess of plan assets................................ 14,076 12,716
Unrecognized prior service cost........................... 2,766 3,020
Unrecognized net gain..................................... 2,929 3,973
_________________________
Accrued postretirement benefit cost.......................$19,771 $19,709
=========================
</TABLE>
Net periodic postretirement benefit cost included the following
components:
<TABLE>
<CAPTION>
1998 1997 1996
==============================================================================
<S> <C> <C> <C>
Service cost.................................$ 340 $ 315 $ 420
Interest cost................................ 1,025 1,093 1,502
Actual return on plan assets................. (4) (3) 16
Amortization of unrecognized amounts......... (411) (423) -
_________________________________
Net periodic postretirement benefit cost.....$ 950 $ 982 $1,938
=================================
</TABLE>
-56-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note N - Employee Benefits (continued)
--------------------------
Postretirement Health and Life Insurance Benefits (continued)
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. There are no postretirement health benefits due to
coverage ceasing at retirement or coverage continuing through a national
health system. For these foreign plans, the cash-basis cost of benefits
charged to income was not material in 1998, 1997 and 1996.
Note O - Geographic Area Data, Export Sales and Other Information
-----------------------------------------------------------------
The following description and tables present the Company's tobacco
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. Corporate assets consist primarily of those
related to cost investments. Export sales are defined as foreign sales
of United States origin. The flower operations are restated as
discontinued operations for 1998, 1997 and 1996.
The Company is principally engaged in the tobacco business. The
Company buys 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 is also 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 and Malawi.
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.
-57-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note O - 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>
1998
Tobacco
United States............................$ 806,603 $ 34,171 $ 205,912
South America............................ 542,934 83,550 459,289
Asia..................................... 158,471 20,049 90,546
Africa................................... 326,102 (2,700) 363,192
Other ................................... 337,693 20,039 585,434
Worldwide supply contract................ - - 5,971
____________________________________________
$2,171,803 $155,109 $1,710,344
============
Corporate................................ (15,351) 48,206
Net assets of discontinued operation..... 32,907
Equity in net assets of
investee companies and
related advances: Tobacco.............. 6,022
___________
$1,797,479
__________ ===========
Operating profit
before interest expense................. $139,758
Interest expense........................ (83,769)
__________
Income from continuing operations
before income taxes, equity in net
income (loss) of investee companies,
income from discontinued operations
and extraordinary item................. $ 55,989
=====================================================================================
</TABLE>
<TABLE>
<CAPTION>
Europe Far East Other Total
___________________________________________________________________________________
<S> <C> <C> <C> <C>
Export sales of U.S. origin.........$137,089 $205,073 $19,880 $362,042
===============================================
</TABLE>
<TABLE>
<CAPTION>
Tobacco
____________________________________________________________________________________
<S> <C>
Depreciation and amortization..............................................$ 43,476
=========
Capital expenditures.......................................................$ 61,168
=========
Equity in net income of investee companies.................................$ 565
=========
</TABLE>
-58-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note O - 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
===========
Corporate................................ (13,644) 142,418
Assets of discontinued operation 88,252
Equity in net assets of
investee companies and
related advances: Tobacco.............. 9,326
___________
$1,987,603
___________ ===========
Operating profit
before interest expense................. $166,623
Interest expense......................... (50,518)
__________
Income from continuing operations
before income taxes, equity in
net income (loss) of investee
companies, income from
discontinued operations
and extraordinary item............. $116,105
======================================================================================
(1) Includes restructuring expenses for tobacco operations: $1,940, United States;
$1,040, South America; $884, Other.
</TABLE>
<TABLE>
<CAPTION>
Europe Far East Other Total
____________________________________________________________________________________
<S> <C> <C> <C> <C>
Export sales of U.S. origin.........$142,979 $161,978 $22,049 $327,006
================================================
</TABLE>
<TABLE>
<CAPTION>
Tobacco
____________________________________________________________________________________
<S> <C>
Depreciation and amortization..............................................$ 30,477
=========
Capital expenditures.......................................................$ 54,792
=========
Equity in net income of investee companies.................................$ 526
=========
</TABLE>
-59-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note O - 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 (1) $ 877,749
===========
Corporate................................ (20,354)(1) 34,992
Assets of discontinued operation......... 99,005
Equity in net assets of
investee companies and
related advances: Tobacco.............. 8,268
___________
$1,020,014
__________ ===========
Operating profit
before interest expense................. $105,935
Interest expense......................... (43,161)
__________
Income from continuing operations
before income taxes, equity in
net income (loss) of investee companies,
income from discontinued operations and
extraordinary item...................... $ 62,774
=======================================================================================
(1) Includes restructuring expenses for tobacco operations: $431,United States;
$9,308, South America; $330, Africa; $1,369, Other; and $4,420, Corporate.
</TABLE>
<TABLE>
<CAPTION>
Europe Far East Other Total
______________________________________________________________________________________
<S> <C> <C> <C> <C>
Export sales of U.S. origin...........$159,763 $193,613 $54,886 $408,262
================================================
</TABLE>
<TABLE>
<CAPTION>
Tobacco
____________________________________________________________________________________
<S> <C>
Depreciation and amortization..............................................$ 26,802
=========
Capital expenditures.......................................................$ 35,444
=========
Equity in net income of investee companies.................................$ (330)
=========
</TABLE>
-60-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note O - Geographic Area Data, Export Sales and Other Information
-----------------------------------------------------------------
(continued)
Of the 1998, 1997 and 1996 tobacco sales and other operating
revenues, approximately 32%, 42% and 55%, 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), each of which accounted for more than 10% of net sales. At
June 30, 1998, there was approximately $30.4 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>
<CAPTION>
1998 1997 1996
===============================================================================
<S> <C> <C> <C>
Customer A..................................$437,231 $484,841 $474,787
Customer B.................................. 269,356 401,396 336,989
Customer C.................................. - - 170,167
____________________________________
Total.......................................$706,587 $886,237 $981,943
====================================
</TABLE>
Note P - 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 1998, the transaction gain was $221 related primarily to gains
in Thailand, Malawi and Zimbabwe, offset partially by losses in Brazil
and Greece. The transaction adjustment in 1997 was a gain of $3,655
related primarily to Brazil. In 1996 the transaction adjustment was
$2,341 related primarily to Zimbabwe.
Note Q - 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, 1998,
of $21,277, 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, 1998, of $9,042 before related
tax benefits for all assessed interest. During fiscal year ended June
30, 1998, the Company had $22,793 of assessments reversed in its favor.
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 $156,379 at June 30, 1998, of which $94,148 was outstanding.
These letters of credit represent, generally, performance guarantees
issued in connection with purchases and sales of domestic and foreign
tobacco.
-61-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note Q - Contingencies and Other Information (continued)
--------------------------------------------
The Company is guarantor as to certain lines and letters of credit
of affiliated companies in an amount not to exceed approximately
$15,715. There was approximately $12,089 outstanding under these
guarantees at June 30, 1998.
The Company's foreign subsidiaries have guaranteed certain loans
made by Brazilian banks to local farmers. There was approximately
$32,677 outstanding under these guarantees at June 30, 1998.
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, 1998, the Company has forward exchange contracts to purchase
Deutschmarks and Pesetas in the first quarter of fiscal 1999 with
notional amounts totaling $5,100. The exchange rate exposure of these
forward contracts is immaterial. Additionally, the Company entered into
a forward exchange contract to purchase pounds sterling as needed on a
monthly basis throughout fiscal 1999 to fund the operations of the
administrative office in Camberley, U.K. The Company believes that
the exchange rate exposure of this contract is immaterial.
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.
Note R - Selected Quarterly Financial Data (Unaudited)
-------------------------------------------------------
Summarized quarterly financial information is as follows:
<TABLE>
<CAPTION>
Diluted Earnings
Per Share of
In Thousands Common Stock
_________________________________________________________________ ________________
Sales and Other Income from Income (loss)
Operating Gross Continuing from Discontinued Net
Revenues Profit Operations Operations Income (1)
_________________________________________________________________________________________ ________________
<S> <C> <C> <C> <C> <C>
1998 Fiscal Year..........$2,171,803 $259,960 $41,829 $ 1,820 $.98 *
Fourth Quarter....... 513,070 57,029 2,128 (511) .04 *
Third Quarter........ 627,721 61,228 8,274 2,368 .24
Second Quarter....... 591,827 58,802 10,580 359 .25
First Quarter........ 439,185 82,901 20,847 (396) .44
_______________________________________________________________
1997 Fiscal Year..........$2,125,739 $274,192 $72,568 $ 4,605 $1.77
Fourth Quarter....... 572,493 100,864 22,853 3,177 .56
Third Quarter........ 561,371 57,371 17,385 1,432 .44
Second Quarter....... 664,032 59,085 15,934 1,127 .40
First Quarter........ 327,843 56,872 16,396 (1,131) .36
_______________________________________________________________
(1) Does not add due to rounding.
* Assumed conversion of Convertible Debentures at the beginning of each period has an
antidilutive effect on earnings per share.
</TABLE>
-62-
<PAGE>
ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
-------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIMON Incorporated and Subsidiaries
(in thousands)
Note S - SUPPLEMENTAL GUARANTOR INFORMATION
-------------------------------------------
Effective March 31, 1998, DIMON International, Inc. and Florimex
Worldwide, Inc., wholly owned subsidiaries of the Company, were merged
with and into the Company. The mergers were permitted under the
Indenture, dated May 29, 1996, governing the Company's 8 7/8% Senior
Notes due 2006 (the "Notes") and had the effect of eliminating the
guarantees of the Notes made by these subsidiaries. Effective with its
interim financial statements for the quarter ended March 31, 1998, the
Company has discontinued providing separate financial information with
respect to these subsidiaries in the notes to its financial statements.
-63-
<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.
-64-
<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
--------------------------------------------------------------
Statement of Consolidated Income--Years ended June 30, 1998, 1997 and
1996
Consolidated Balance Sheet--June 30, 1998 and 1997
Statement of Stockholders' Equity--Years ended June 30, 1998, 1997
and 1996
Statement of Consolidated Cash Flows--Years ended June 30, 1998, 1997
and 1996
Notes to Consolidated Financial Statements
Financial Statement Schedules:
Schedule II - Valuation and Qualifying Accounts
Report of PricewaterhouseCoopers LLP
(b) Current Reports on Form 8-K
On September 23, 1998, the Company filed a Form 8-K/A2 amending Item
7 of the Form 8-K filed on April 16, 1997, and amended by Form 8-K/A1
on June 16, 1997, relating to the acquisition of Intabex.
-65-
<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>
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 (file 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>
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<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K (continued)
----------------------------------------------------
<TABLE>
<CAPTION>
(3) Exhibits (continued)
---------------
<S> <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>
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<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K (continued)
----------------------------------------------------
<TABLE>
<CAPTION>
(3) Exhibits (continued)
---------------
<S> <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 Amendment No. 1 dated May 6, 1998 to the $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 Raiffaisen-Boerenleenbank B.A.,
"Rabobank Nederland," New York Branch and Societe Generale
as co-agents (incorporated by reference to Exhibit 10 to
DIMON Incorporated's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1998)
10.14 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))
10.15 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)
10.16 Indenture, dated as of April 1, 1997, by DIMON Incorporated to LaSalle
National Bank, relating to 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)
10.17 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)
10.18 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)
</TABLE>
-68-
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K (continued)
----------------------------------------------------
<TABLE>
<CAPTION>
(3) Exhibits (continued)
---------------
<S> <C>
10.19 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)
10.20 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)
10.21 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)
10.22 Amended DIMON Incorporated Supplemental Retirement
Plan dated July 30, 1998 and effective January 1, 1997
(filed herewith)
10.23 Stock and Asset Purchase Agreement between DIMON Incorporated,
Florimex Worldwide GmbH and U.S.A. Floral Products, Inc.,
Dated August 12, 1998 (filed herewith)
21 List of Subsidiaries (filed herewith)
23.1 Consent of PricewaterhouseCoopers LLP (filed herewith)
23.2 Consent of PricewaterhouseCoopers 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>
-69-
<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, 1996
Deducted from asset accounts:
Allowance for doubtful accounts $ 8,823,339 $1,042,911(B) $ - $3,308,099(A) $ 6,558,151
Other Investments (616,861) - 616,861 - -
___________ __________ ___________ __________ ___________
Total $ 8,206,478 $1,042,911 $ 616,861(A) $3,308,099 $ 6,558,151
=========== ========== =========== ========== ==========
Year ended June 30, 1997
Deducted from asset accounts:
Allowance for doubtful accounts $ 6,558,151 $ 88,892(B) $ - $ 744,744(A) $ 5,902,299
Other investments - - - - -
___________ __________ ____________ __________ ___________
Total $ 6,558,151 $ 88,892 $ - $ 744,744 $ 5,902,299
=========== ========== =========== ========== ===========
Year ended June 30, 1998:
Deducted from asset accounts:
Allowance for doubtful accounts $ 5,902,299 $ 5,604 $ - $3,108,682(C) $ 2,799,221
Other Investments - - - - -
___________ __________ ___________ __________ ___________
Total $ 5,902,299 $ 5,604 $ - $3,108,682 $ 2,799,221
=========== ========== =========== ========== ===========
(A) CURRENCY TRANSLATION AND DIRECT WRITE-OFF.
(B) INCLUDING DISCONTINUED OPERATING.
(C) CURRENCY TRANSLATION AND DIRECT WRITE-OFF, NET OF DISCONTINUED OPERATIONS.
</TABLE>
-70-
<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, 1998 and 1997, and the results of their operations and their cash
flows for each of the three years in the period ended June 30, 1998, 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/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Charlotte, North Carolina
September 3, 1998
-71-
<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 3, 1998 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/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Charlotte, North Carolina
September 3, 1998
-72-
<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, 1998.
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, 1998.
<S> <C> <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/ 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
__________________________________ Senior Vice President-Controller
(Principal Accounting Officer) of DIMON
James E. Johnson, Jr. Incorporated
Director of DIMON Incorporated
</TABLE>
-73-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
-------------
Exhibit Page No.
------- --------
<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 (file 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>
-74-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
-------------
Exhibit Page No.
------- --------
<S> <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)
</TABLE>
-75-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
-------------
Exhibit Page No.
------- --------
<S> <C> <C>
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)
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 Amendment No. 1 dated May 6, 1998 to the $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 Raiffaisen-Boerenleenbank B.A.,
"Rabobank Nederland," New York Branch and Societe Generale
as co-agents (incorporated by reference to Exhibit 10 to
DIMON Incorporated's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1998)
10.14 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))
10.15 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)
</TABLE>
-76-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
-------------
Exhibit Page No.
------- --------
<S> <C> <C>
10.16 Indenture, dated as of April 1, 1997, by DIMON
Incorporated to LaSalle National Bank, relating to
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)
10.17 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)
10.18 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)
10.19 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)
10.20 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)
10.21 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)
10.22 Amended DIMON Incorporated Supplemental Retirement 79 - 100
Plan dated July 30, 1998 and effective January 1, 1997
(filed herewith)
</TABLE>
-77-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
Exhibit Page No.
<S> <C> <C>
10.23 Stock and Asset Purchase Agreement between DIMON 101 - 141
Incorporated, Florimex Worldwide GmbH and U.S.A.
Floral Products, Inc., Dated August 12, 1998
(filed herewith)
21 List of Subsidiaries (filed herewith) 142
23.1 Consent of PricewaterhouseCoopers LLP 143
(filed herewith)
23.2 Consent of PricewaterhouseCoopers LLP 144
(filed herewith)
27 Financial Data Schedule (filed herewith) 145
</TABLE>
-78-
<PAGE>
EXHIBIT 10.22
DIMON INCORPORATED
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
- -79-
<PAGE>
EFFECTIVE JANUARY 1, 1997
ARTICLE I DEFINITIONS....................................1
1.01. Accounting Firm......................................1
1.02. Administrator........................................1
1.03. Affiliate............................................1
1.04. Board................................................1
1.05. Cash Balance Plan....................................1
1.06. Capped Parachute Payments............................1
1.07. Change in Control....................................1
1.08. Code.................................................2
1.09. Committee............................................2
1.10. Compensation.........................................2
1.11. Competes.............................................2
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..........................................3
1.18. Foreign Social Security Benefit......................3
1.19. Joint and Survivor Annuity...........................4
1.20. Net After-Tax Amount................................4
1.21. Normal Retirement Allowance..........................4
1.22. Normal Retirement Date...............................4
1.23. Offset Amount........................................4
1.24. Parachute Payment....................................5
1.25. Participant..........................................5
1.26. Pension Equalization Plan............................5
1.27. Plan.................................................5
1.28. Profit Sharing Account...............................5
1.29. Retirement, Retire or Retires........................6
1.30. Spouse...............................................6
1.31. Surviving Spouse.....................................6
1.32. Years of Service.....................................6
ARTICLE II PARTICIPATION.................................7
2.01. Beginning Participation..............................7
2.02. Change in Status.....................................7
ARTICLE III RETIREMENT ALLOWANCES........................8
3.01. Normal Retirement Allowance..........................8
3.02. Pre-Retirement Death Benefit.........................8
ARTICLE IV VESTING......................................10
4.01. Normal Vesting......................................10
4.02. Change in Control...................................10
4.03. Competition.........................................10
ARTICLE V ADMINISTRATION OF THE PLAN....................11
5.01. Generally...........................................11
5.02. Indemnification.....................................11
5.03. Determining Benefits................................11
5.04. Cooperation.........................................11
5.05. Claims..............................................12
5.06. Review of Claims....................................12
5.07. Delegation of Committee Responsibilities............14
- -80-
<PAGE>
ARTICLE VI TERMINATION, AMENDMENT OR MODIFICATION OF PLAN15
6.01. Reservation of Rights...............................15
6.02. Limitation on Actions...............................15
6.03. Effect of Termination...............................15
ARTICLE VII MISCELLANEOUS...............................16
7.01. Limitation on Benefits..............................16
7.02. Unfunded Plan.......................................18
7.03. Other Benefits and Agreements.......................18
7.04. Restrictions on Transfer of Benefits................18
7.05. No Guarantee of Employment..........................19
7.06. Successors..........................................19
7.07. Construction........................................19
7.08. Governing Law.......................................19
- -81-
<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.
- -82-
<PAGE>
ARTICLE I
DEFINITIONS
-----------
1.01. Accounting Firm
---------------
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.
1.02. Administrator
-------------
Administrator means the Committee and any delegate of
the Committee appointed in accordance with Section 5.07.
1.03. Affiliate
---------
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).
1.04. Board
-----
Board means the Board of Directors of the
Corporation.
1.05. Cash Balance Plan
-----------------
Cash Balance Plan means the DIMON Incorporated Cash
Balance Plan, and any successor thereto.
1.06. Capped Parachute Payments
-------------------------
Capped Parachute Payments means the largest amount of
Parachute Payments that may be paid to the Participant
without liability under Code section 4999.
1.07. Change in Control
-----------------
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
1
- -83-
<PAGE>
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 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.
1.08. Code
----
Code means the Internal Revenue Code of 1986, as
amended, or any successor thereto, as in effect at the
relevant time.
1.09. Committee
---------
Committee means a committee of the Board appointed to
administer the Plan.
1.10. Compensation
------------
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
--------
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
2
- -84-
<PAGE>
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
-------------------
Control Change Date means the date on which all of
the events necessary for a Change in Control have
occurred.
1.13. Corporation
-----------
Corporation means DIMON Incorporated and any
successor corporation.
1.14. Credited Compensation
---------------------
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
--------
Employee means a person who is an employee of the
Corporation or an Affiliate.
1.16. Executive
---------
Executive means an Employee who is compensated at
Grade 23 or above.
1.17. Fiscal Year
-----------
Fiscal Year means the Corporation's taxable year for
Federal income tax purposes.
1.18. Foreign Social Security Benefit
-------------------------------
Foreign Social Security Benefit means the excess, if
any of (a) the benefit payable to a Participant at normal
retirement age under a retirement program maintained or
established by a foreign government over (b) the benefit
that would have been payable to the Participant at normal
retirement age under the United States Social Security
program had the Participant been covered by such program.
1.19. Joint and Survivor Annuity
--------------------------
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.
3
- -85-
<PAGE>
1.20. Net After-Tax Amount
---------------------
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.
1.21. Normal Retirement Allowance
---------------------------
Normal Retirement Allowance means the benefit
described in Section 3.01, 3.02.
1.22. Normal Retirement Date
----------------------
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.
1.23. Offset Amount
-------------
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 Pension Equalization Plan, the
Profit Sharing Account, the Foreign Social Security
Benefit 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
4
- -86-
<PAGE>
Corporation or an Affiliate, except to the extent that
such plan provides a benefit attributable to a
Participant's elective deferrals 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 Sections 3.01(b) and 3.02, 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.
1.24. Parachute Payment
-----------------
Parachute Payment means a payment that is described
in Code section 280G(b)(2) (without regard to whether the
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.
1.25. Participant
-----------
Participant means an Executive who satisfies the
requirements of Article II.
1.26. Pension Equalization Plan
-------------------------
Pension Equalization Plan means the Dibrell Brothers,
Incorporated Pension Equalization Plan, and any successor
thereto.
1.27. Plan
----
Plan means the DIMON Incorporated Supplemental
Executive Retirement Plan.
1.28. Profit Sharing Account
----------------------
Profit Sharing Account means, as of any date, a
Participant's March 31, 1998 profit sharing account
balance in the DIMON International Profit Sharing Plan as
adjusted for gains and losses as if such March 31, 1998
account balance had been invested in the Stable Value Fund
of the DIMON Incorporated Savings and Profit Sharing Plan
or such successor fund as may be designated by the
Administrator.
1.29. Retirement, Retire or Retires
-----------------------------
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.
1.30. Spouse
------
Spouse means the person to whom the Participant is
legally married on the date the Participant Retires.
1.31. Surviving Spouse
----------------
Surviving Spouse means the person to whom the
Participant is legally married on the date the Participant
Retires and who survives the Participant.
5
- -87-
<PAGE>
1.32. Years of Service
----------------
Years of Service is defined in Section 1.41 of the
Cash Balance Plan.
6
- -88-
<PAGE>
ARTICLE II
PARTICIPATION
-------------
2.01. 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.
2.02. 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.
7
- -89-
<PAGE>
ARTICLE III
RETIREMENT ALLOWANCES
3.01. 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 (1/2) 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).
3.02. Pre-Retirement Death Benefit
----------------------------
A monthly allowance shall be paid to the Participant's
Surviving Spouse, if any, commencing with the later of
the month in which the Participant would have attained
age sixty (60) and 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 with such difference multiplied by
(iii) below where
8
- -90-
<PAGE>
(i) = One-half (1/2) of the Participant's Credited
Compensation (determined as of his date of death)
divided by twelve (12), and
(ii) = Offset Amount, and
(iii) = A fraction, the numerator of which is the
sum of the Participant's age at death and his Years
of Service (but such total shall not exceed 80) and
the denominator of which is 80.
The preceding sentences to the contrary notwithstanding,
no benefit shall be payable under this Section 3.02 unless
Participant dies after attaining age fifty (50) but before
becoming eligible to receive his Normal Retirement
Allowance under Section 3.01(a).
9
- -91-
<PAGE>
ARTICLE IV
VESTING
4.01. 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).
4.02. 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.
4.03. 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.
10
- -92-
<PAGE>
ARTICLE V
ADMINISTRATION OF THE PLAN
--------------------------
5.01. 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.
5.02. 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
misconduct. 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.
5.03. 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.
5.04. 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.
11
- -93-
<PAGE>
5.05. 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 decision; 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.
5.06. 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 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
12
- -94-
<PAGE>
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.
5.07. 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.
13
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<PAGE>
ARTICLE VI
TERMINATION, AMENDMENT OR MODIFICATION OF PLAN
----------------------------------------------
6.01. 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.
6.02. 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.
6.03. 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.
14
- -96-
<PAGE>
ARTICLE VII
MISCELLANEOUS
-------------
7.01. 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'
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 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
15
- -97-
<PAGE>
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.
7.02. 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 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 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.
16
- -98-
<PAGE>
7.03. 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.
7.04. 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.
7.05. 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 constitute an employment contract of any
nature whatsoever between the Corporation or an
Affiliate and a Participant.
7.06. 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.
17
- -99-
<PAGE>
7.07. 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.
7.08. 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 30 day of July, 1998.
DIMON INCORPORATED
By: /s/ J. O. Hunnicutt
Title: V.P. Administration
-18-
- -100-
<PAGE>
<PAGE>
EXHIBIT 10.23
STOCK AND ASSET PURCHASE AGREEMENT
between
DIMON Incorporated,
FLORIMEX Worldwide GmbH
and
U.S.A. Floral Products, Inc.
August 12, 1998
- -101-
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS...........................................1
Section 1.01. Definitions.................................1
ARTICLE II PURCHASE AND SALE AND CLOSING........................7
-----------------------------
Section 2.01. Purchase and Sale of Stock and Assets.......7
Section 2.02. Purchase Price..............................7
Section 2.03. Closing.....................................7
Section 2.04. Sellers' Deliveries at Closing..............8
Section 2.05. Buyers' Deliveries at Closing...............8
Section 2.06. Mutual Deliveries at Closing................8
ARTICLE III ADJUSTMENT OF PURCHASE PRICE........................9
----------------------------
Section 3.01. Delivery of Florimex Financial Statement....9
Section 3.02. Final Florimex Financial Statement and
Dispute Resolution..........................8
Section 3.03. Final Florimex Financial Statement
Resulting From Dispute Resolution..........10
Section 3.04. Post Closing Adjustment....................10
ARTICLE IV [intentionally omitted]..............................9
ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER.............10
----------------------------------------
Section 5.01. Corporate Existence of Sellers.............10
Section 5.02. Authorization; Enforceability..............11
Section 5.03. No Violation or Conflict by the Sellers....11
Section 5.04. Title to Stock.............................10
Section 5.05. Organization of Companies..................11
Section 5.06. Capitalization of Companies................11
Section 5.07. No Violation or Conflict by Companies......12
Section 5.08. Interim Florimex Financial Statement/No
Material Changes...........................11
Section 5.09. Taxes......................................12
Section 5.10. Personal Property..........................12
Section 5.11. Real Property..............................13
i
- -102-
<PAGE>
Section 5.12. Material Contracts.........................14
Section 5.13. Insurance..................................13
Section 5.14. Intellectual Property......................14
Section 5.15. Employment Relations.......................16
Section 5.16. No Litigation..............................14
Section 5.17. Books and Records..........................15
Section 5.18. No Broker..................................15
Section 5.19. Software...................................15
Section 5.20. Environmental Compliance, Cleanup,
Permits and Licenses.......................16
Section 5.21. Companies in Liquidation...................16
Section 5.22. Assets; Condition..........................16
Section 5.23. Employee Matters...........................16
Section 5.24. No Other Representations...................17
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER.............17
---------------------------------------
Section 6.01. Corporate Existence of Buyers..............17
Section 6.02. Authorization; Enforceability..............17
Section 6.03. No Violation or Conflict...................20
Section 6.04. No Broker..................................18
Section 6.05. Purchase for Investment....................18
Section 6.06. Investigation by Buyers....................18
Section 6.07. No Litigation..............................19
Section 6.08. International Operations...................19
Section 6.09. No Other Representations...................19
ARTICLE VII COVENANTS OF SELLERS...............................19
--------------------
Section 7.01. Conduct of Business of the Companies.......19
Section 7.02. Compliance with Law........................21
Section 7.03. Regulatory and Other Approvals.............21
Section 7.04. Investigation by Buyers....................21
Section 7.05. Resignations...............................22
ARTICLE VIII COVENANTS OF BUYERS...............................22
-------------------
Section 8.01. Compliance with Law........................22
Section 8.02. Regulatory and Other Approvals.............22
ii
- -103-
<PAGE>
ARTICLE IX OTHER COVENANTS AND AGREEMENTS OF BUYERS AND
--------------------------------------------
SELLERS...................................................22
-------
Section 9.01. Release of Guarantees......................22
Section 9.02. Employment Employee Benefit Plan and
Other Matters..............................23
Section 9.03. Settlement of Inter-Company Accounts.......23
Section 9.04. Fulfillment of Conditions..................23
Section 9.05. Profit and Loss Allocation.................23
ARTICLE X CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYERS........24
---------------------------------------------
Section 10.01. Performance...............................24
Section 10.02. Proceedings and Examinations..............24
Section 10.03. No Actions................................24
Section 10.04. Representations and Warranties............24
Section 10.05. Deliveries................................24
Section 10.06. Regulatory Consents and Approvals.........24
Section 10.07. Third Party Consents......................25
Section 10.08. Additional Certificates...................25
ARTICLE XI CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS......25
----------------------------------------------
Section 11.01. Performance...............................25
Section 11.02. Proceedings and Examinations..............25
Section 11.03. No Actions................................25
Section 11.04. Representations and Warranties............25
Section 11.05. Deliveries................................26
Section 11.06. Regulatory Consents and Approvals.........26
Section 11.07. Third Party Consents......................26
Section 11.08. Other Agreements..........................26
Section 11.09. Additional Certificates...................26
ARTICLE XII INDEMNITIES AND ADDITIONAL COVENANTS...............26
------------------------------------
Section 12.01. Sellers' Indemnity........................26
Section 12.02. Buyers' Obligation in Respect of
Companies in Liquidation.............................27
Section 12.03. Indemnity Amounts to be Computed on
After-Tax Basis...........................27
ARTICLE XIII MISCELLANEOUS.....................................28
-------------
Section 13.01. Governing Law and Jurisdiction............28
Section 13.02. Notices...................................28
iii
- -104-
<PAGE>
Section 13.03. Entire Agreement..........................29
Section 13.04. Expenses..................................29
Section 13.05. Public Announcements......................29
Section 13.06. Confidentiality...........................29
Section 13.07. Further Assurances; Post-Closing
Cooperation...............................30
Section 13.08. Waiver....................................30
Section 13.09. Amendment.................................31
Section 13.10. No Third Party Beneficiary................31
Section 13.11. No Assignment; Binding Effect.............31
Section 13.12. Headings..................................31
Section 13.13. Invalid Provisions........................31
Section 13.14. Counterparts..............................31
Section 13.15. Waiver of Jury Trial......................31
Section 13.16. Specific Performance......................31
Section 13.17. Termination...............................32
iv
- -105-
<PAGE>
LIST OF ANNEXES AND SCHEDULES
-----------------------------
ANNEXES
Annex I : List of USA Floral and its subsidiaries, setting
forth the portion of the Stock of each Company to
be purchased by each Buyer and the respective
portion of the Purchase Price to be allocated to
that portion of the Stock.
Annex II : List of Wholly Owned Companies.
Annex III : List of Companies in Liquidation.
Annex IV : List of Non-Wholly Owned Companies, showing
ownership percentages held by DIMON or Florimex
Germany.
Annex V : List setting forth the portion of the Purchase
Price to be issued by the Buyers to each Seller
respectively.
SCHEDULES
Schedule 1.01(a) : Adjustments to EBITDA
Schedule 1.01(b) : Expenses, charges or provisions associated
with the restructuring of Florimex Germany and
the Companies.
Schedule 2.04(c)(i) : Bill of Sale and Assignment and
Assumption Agreement relating to Assets and
Liabilities of DIMON.
Schedule 2.04(c)(ii): Bill of Sale and Assignment and
Assumption Agreement relating to Assets and
Liabilities of Florimex Germany.
Schedule 2.06 : Tax Cooperation Agreement
Schedule 5.03 : Exceptions to Sellers' "No Violation or
Conflict" - representation.
Schedule 5.06 : Exceptions to Sellers' "Capitalization of
Companies" - representation.
Schedule 5.07 : Exceptions to Sellers' "No Violation or
Conflict by Companies" - representation.
Schedule 5.08 : Interim Florimex Financial Statement.
v
- -106-
<PAGE>
Schedule 5.09 : Exceptions to Sellers' Taxes representation.
Schedule 5.10 : Exceptions to Sellers' "Personal Property" -
representation.
Schedule 5.11 : List of real property, including any Liens in
respect thereof, the Sellers' or Companies'
indebtedness secured by a Lien on real
property, and setting forth any pending or
threatened condemnation proceedings which
would impair the use of the buildings,
structures or appurtenances situated on the
real property.
Schedule 5.12 : Exceptions to Sellers' "Material Contracts"
- representation.
Schedule 5.13 : List of material insurance policies of the
Companies.
Schedule 5.14(a) : List of the Material Intellectual Property,
including listing of any registrations or
filings and restrictions in ownership, and
pending or threatened proceedings, litigation
or other adverse claims in respect of the
Material Intellectual Property.
Schedule 5.14(b) : List of material license agreements.
Schedule 5.16 : Exceptions to Sellers' "No Litigation" -
representation.
Schedule 5.17 : Exceptions to Sellers' "Books and Records" -
representation.
Schedule 5.18 : Exceptions to Sellers' "No Broker" -
representation.
Schedule 5.19(a) : The Software.
Schedule 5.19(b) : Exceptions to Sellers' "Year 2000" -
representation.
Schedule 5.19(c) : Exceptions to Sellers' "Software Title" -
representation.
Schedule 5.20 : Exceptions to "Environmental" -
representation.
Schedule 5.23(a) : The Employees.
Schedule 5.23(c) : Exceptions to Sellers "Financial Obligations
to Employee" -representation.
Schedule 5.23(d) : The Key Employees.
Schedule 5.23(e) : Exceptions to Sellers' "Financial
Obligations to Key Employees" -
representation.
vi
- -107-
<PAGE>
Schedule 6.03 : Exceptions to Buyers' "No Violation or
Conflict" - representation.
Schedule 6.04 : Exceptions to Buyers' "No Broker"-
representation.
Schedule 6.07 : Exceptions to USA Floral's "No Litigation" -
representation.
Schedule 7.01(d) : Budgetary projections as referred to in
Section 7.01(d).
Schedule 9.01 : Details of guarantees provided by DIMON and
Florimex Germany to Companies.
Schedule 9.02 : Handling of certain employment and Employee
Benefit Plan matters.
Schedule 9.03 : Post Closing Settlement of Inter Company
Accounts
Schedule 10.04 : Sellers' Closing Certificate.
Schedule 10.07 : Buyers' list of third party consents to be
obtained.
Schedule 11.04 : Buyers' Closing Certificate.
Schedule 11.07 : Sellers' list of third party consents to be
obtained.
vii
- -108-
<PAGE>
STOCK AND ASSET PURCHASE AGREEMENT
THIS STOCK AND ASSET PURCHASE AGREEMENT, dated as of August 12, 1998,
is made and entered into by and between DIMON Incorporated, a corporation
organized under the Laws of Virginia, and Florimex Worldwide GmbH, a company
organized under the Laws of Germany (jointly, the "Sellers"), and U.S.A.
Floral Products, Inc., a corporation organized under the Laws of Delaware,
(jointly with its designated German subsidiary, the "Buyers"). Capitalized
terms not otherwise defined herein shall have the meanings set forth in
Article I.
WHEREAS, the Sellers own the Stock and desire to sell the Stock to the
Buyers, and the Buyers desire to purchase the Stock from the Sellers, all
upon the terms and subject to the conditions hereinafter set forth; and
WHEREAS, the Sellers own the Assets and are subject to the Liabilities
and desire to sell the Assets and transfer the Liabilities to the Buyers,
and the Buyers desire to purchase the Assets and assume the Liabilities from
the Sellers, all upon the terms and subject to the conditions hereinafter
set forth;
NOW, THEREFORE, in consideration of the mutual covenants, conditions
and agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which hereby are acknowledged,
the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
-----------
Section 1.01. Definitions. When used in this Agreement, the
following terms shall have the meanings indicated below:
"Accountants" means PricewaterhouseCoopers LLP, as the Sellers'
independent public accountants, or such other firm of independent
public accountants conducting the audit of the Florimex Financial
Statement on behalf of the Sellers in accordance with applicable Laws
and GAAP.
"Affiliate" means any Person that directly, or indirectly through
one or more intermediaries, controls or is controlled by or is under
common control with the Person specified. For purposes of this
definition, control of a Person means the power, direct or indirect,
to direct or cause the direction of the management and policies of
such Person whether by Contract or otherwise and, in any event and
without limitation of the previous sentence, any Person owning more
than fifty (50%) of the voting securities of a second Person shall
be deemed to control that second Person.
1
- -109-
<PAGE>
"Agreement" means this Stock Purchase Agreement, together with the
Annexes and Schedules attached hereto, as the same may be amended from
time to time in accordance with the terms hereof.
"Assets" means all of the assets listed on the schedules attached
to Schedules 2.04(c)(i) and (ii) hereto.
"Buyers" means USA Floral and the subsidiaries of USA Floral
listed on Annex I to this Agreement, each with respect to the portion
of the Stock or Assets of the Companies or Company and the portion of
the Purchase Price as set forth on Annex I.
"Closing" means the closing of the transactions contemplated by
Article II.
"Closing Date" means September 30, 1998, or such later date as the
Parties may agree in writing.
"Companies" means the Wholly Owned Companies, the Non-Wholly Owned
Companies and the Companies in Liquidation.
"Companies in Liquidation" means the companies listed on Annex III
hereto.
"Confidentiality Agreement" means the Confidentiality Agreement
dated October 21, 1997 between the Buyers and the Sellers.
"Contract" means any contract, agreement, lease, evidence of
indebtedness, mortgage, indenture, security agreement or other contract.
"Corporate Documents" mean, with respect to a company organized
under the Laws of Germany, the Deed of Incorporation and the Articles
of Association thereof and, with respect to any other entity, such
documents as are equivalent to the Deed of Incorporation and the
Articles of Association.
"DIMON" means DIMON Incorporated, a corporation organized under
the Laws of the Commonwealth of Virginia.
"EBITDA" means earnings before interest expense, interest income
from third-party financial institutions, taxes based on income,
depreciation and amortization. For purposes of this Agreement: (i)
EBITDA shall be computed in accordance with GAAP applied (to the
extent not inconsistent with GAAP) in a manner consistent with the
Interim Florimex Financial Statement; (ii) EBITDA shall be adjusted
to exclude amounts in respect to non-recurring income, but only in
respect of those items of non-recurring income set forth on Schedule
1.01(a), as reflected in the Final Florimex Financial Statement;
and (iii) EBITDA shall be adjusted to exclude (by adding back)
amounts in respect of non-recurring expense, but only in respect of
those items of non-recurring expenses set forth on Schedule 1.01(a),
as reflected in the Final Florimex Financial Statement.
2
- -110-
<PAGE>
"Employee Benefit Plan" means any plan, program, policy or
arrangement to, or on behalf of, one, or more than one, current
or former employee or director or any of their dependents.
"Environmental Laws" mean any federal, state, local or other
law and any regulations promulgated thereunder, relating to the
environment.
"Estimated Net Debt" means the Sellers' estimate of the
Net Debt as shown on the Interim Florimex Financial Statement.
"Estimated Purchase Price" means US$ 90,000,000, minus the
Estimated Net Debt as set forth in Sellers' estimate thereof
delivered to Buyers as of five business days prior to Closing,
payable at the Closing and pursuant to Section 2.02 hereof, and
subject to the Post Closing Adjustment.
"Final Net Debt" means the Net Debt as reflected on the Final
Florimex Financial Statement, reduced by payments made by the
Sellers from the date hereof to the Closing Date to pay down
indebtedness incurred under the loan agreements listed on Schedule
5.03 in connection with any lenders' refusal to consent to the
assumption of such loan to the Buyers; provided that any such
reduction shall not exceed the balance disclosed for such
indebtedness on the Final Florimex Financial Statement.
"Final Purchase Price" means the amount equal to six times
the amount of EBITDA as determined on the basis of the Final
Florimex Financial Statement, up to a maximum of US$ 90,000,000,
minus the Final Net Debt.
"Final Florimex Financial Statement" means the Florimex
Financial Statement prepared in accordance with Article III hereof
and accepted by the Sellers and the Buyers as the Final Florimex
Financial Statement, or, as the case may be, as revised by the
Accountants in accordance with the final and binding opinion of an
office of Deloitte & Touche pursuant to Section 3.02 hereof, and
as certified by the Accountants.
"Florimex Canada" means Florimex Canada Inc., a company
organized under the Laws of Canada.
"Florimex Financial Statement" means the audited consolidated
financial statements (consisting of a consolidated balance sheet
as of June 30, 1998, a consolidated statement of operations and
a consolidated statement of cash flows for the twelve months ended
June 30, 1998, and notes thereto) incorporating Florimex Germany,
Florimex USA and Florimex Canada, prepared in accordance with
Section 3.01.
"Florimex Germany" means Florimex Worldwide GmbH, a company
formed under the Laws of Germany.
"Florimex USA" means Florimex USA, Inc., a company organized under the
Laws of the Commonwealth of Virginia.
3
- -111-
<PAGE>
"GAAP" means generally accepted accounting principles in the United
States of America consistently applied throughout the specified period,
and in the immediately prior comparable period.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, commission, official or other
instrumentality of any country, state, province, county, city or other
political subdivision.
"Interim Florimex Financial Statement" means the consolidated,
unaudited interim financial statement (consisting of a consolidated
balance sheet as of June 30, 1998, and a consolidated statement of
operations for the twelve months ended June 30, 1998) incorporating
Florimex Germany, Florimex USA and Florimex Canada delivered to the
Buyers pursuant to Section 5.08 hereof.
"Knowledge of the Buyers" means the actual knowledge of any of
the following individuals: Robert J. Poirier and Chris Wilson.
"Knowledge of the Sellers" means the actual knowledge of any
of the following individuals: Claude Owen, Ritchie Bond, Dwight
Ferguson and Winfried Falk.
"Law or Laws" means any federal, state, local or other law
or governmental requirement of any kind, and the rules, regulations
and orders promulgated thereunder.
"Liabilities" mean the liabilities listed on the schedules to
Schedules 2.04(c)(i) and (ii) hereto.
"Liens" means any mortgage, deed of trust, pledge, assessment,
security interest, lease, lien, adverse claim, levy, charge or
other encumbrance except (a) Liens shown on the Interim Florimex
Financial Statement, (b) minor imperfections in title, if any, none
of which individually or together with other minor imperfections to
title materially impairs the value or use of the property subject
hereto, (c) Liens for current taxes not yet due, and (d) those
Liens that, individually or together, do not have any materially
adverse effect on the Companies."
"Losses" has the meaning ascribed to it in Section 12.01.
"Material Companies" mean Florimex Worldwide B.V., Florimex
Grundstucksverwal-tungsgesellschaft mbH, Kenya Flowers GmbH,
Florimex GmbH and Florimex Nuremberg GmbH.
"Material Contract" means any of the Contracts set forth
on Schedule 5.12.
"Material Intellectual Property" has the meaning ascribed
to it in Section 5.14(a).
"Net Debt" means all interest bearing debt of the Companies or Florimex
Germany, including obligations under capital leases, drawings in accordance
with mortgages and notes payable to banks or financial institutions, less cash
4
- -112-
<PAGE>
and cash equivalents as computed pursuant to GAAP, further reduced by
balances due to the Companies in connection with the settlement of
inter-company accounts pursuant to Section 9.03 hereof.
"Non-Material Companies" mean all of the Companies other than the
Material Companies.
"Non-Wholly Owned Companies" means the companies set forth in
Annex IV, the capital stock of which is held by DIMON or Florimex
Germany in the percentages as indicated in Annex IV and which are
not in liquidation.
"Party" means the Sellers or the Buyers.
"Person" means any natural person, partnership, joint venture,
corporation, limited liability company, proprietorship, or other business
organization, or trust, unincorporated organization or other entity or
Governmental or Regulatory Authority.
"Personal Property" means each item of personal property of the
Companies having a net book value in excess of $50,000, including the
material machinery and equipment in the warehouses and offices used by
the Companies including those reflected in the Florimex Financial
Statement and all properties acquired by the Companies since the date of
the Florimex Financial Statement; excluding property sold or otherwise
disposed of in the ordinary course of business.
"Post Closing Adjustment" means an adjustment, up or down, to the
Estimated Purchase Price made after the Closing Date in accordance with
Section 3.04 hereof, to reflect any variation in the Final Purchase Price
below or above the Estimated Purchase Price, which adjustment, in the
event that the Final Purchase Price is less than the Estimated
Purchase Price, shall consist of a reimbursement by the Sellers of a
portion of the Estimated Purchase Price, equal to such lesser amount,
to the Buyers, or, in the event that the Final Purchase Price is
greater than the Estimated Purchase Price, shall consist of a payment
by the Buyers of an amount equal to such greater amount, to the Sellers.
"Purchase Price" means the Estimated Purchase Price as long
as the Final Purchase Price has not been established, and the Final
Purchase Price once the Final Purchase Price has been established in
accordance with Article III.
"Representatives" has the meaning ascribed to it in Section 7.04.
"Sellers" mean DIMON and Florimex Germany, each with respect to the
Stock and Assets of the Companies or Company as set forth on Annex II,
Annex III and Annex IV.
"Software" means the computer software that was developed by and
is currently owned by the Companies and is material to the business or
operation of the Companies, taken as a whole, together with all
know-how and processes used in connection therewith, as listed on
Schedule 5.19(a).
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"Stock" means the shares of the issued and outstanding common
equity of the Companies, directly or indirectly owned, of record
and beneficially, by the Sellers, in the percentages as set forth
in Annex II attached hereto.
"USA Floral" means U.S.A. Floral Products, Inc., a corporation
organized under the Laws of Delaware.
"Wholly Owned Companies" means the companies listed on Annex II
attached hereto, which are 100% directly or indirectly owned
subsidiaries of Sellers and which are not in liquidation.
"Working Days" mean days between Monday and Friday, inclusive,
each ending at 12:00 midnight prevailing time in Richmond, Virginia,
on which banks in the State of New York are permitted by law to be
open for the transaction of business.
Section 1.02. Certain Words and Phrases. Unless the context of
this Agreement otherwise requires, (a) words of any gender include each
other gender; (b) words, including terms defined in Section 1.01 hereof,
using the singular or plural number also include the plural or singular
number, respectively; (c) the terms "hereof," "herein," "hereby" and
derivative or similar words refer to this Agreement; (d) the terms
"Article" or "Section" refer to the specified Article or Section of this
Agreement; and (e) the phrase "ordinary course of business" refers to
the business of the Companies when conducted in the ordinary and usual
manner consistent with the past practices of each respective Company.
All accounting terms used herein and not expressly defined herein shall
have the meanings given to them under GAAP. Any representation or
warranty contained herein as to the enforceability of a Contract or
other agreement as to a third party shall be subject to the effect of any
bankruptcy, insolvency, reorganization, moratorium or other similar law
affecting the enforcement of creditors' rights generally and to general
equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
ARTICLE II
PURCHASE AND SALE AND CLOSING
-----------------------------
Section 2.01. Purchase and Sale of Stock and Assets.
--------------------------------------
(a) At the Closing, and upon all of the terms and subject to
the fulfillment or waiver by the Party benefiting therefrom of all of
the conditions of this Agreement:
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(i) the Sellers shall sell, transfer, assign, convey
and deliver to the Buyers, and the Buyers shall purchase and
accept from the Sellers, all of the right, title and interest of
the Sellers in and to the Stock, free and clear of any and all
Liens, each Buyer as to the Stock of the Company as shown for
that Buyer on Annex I, and each Buyer for the amount of the
Purchase Price as set forth in Annex I and paid to each Seller
in the portions as set forth on Annex V;
(ii) The Sellers shall sell, assign, transfer, convey
and deliver to the applicable Buyer as set forth on Annex I,
free and clear of any and all Liens, and the applicable Buyer
shall purchase and accept from the Sellers at the Closing, the
Assets and all right, title, interest and obligation of the
Sellers therein; and
(iii) The Sellers shall assign, transfer and
deliver to the applicable Buyer as set forth on Annex I and
the applicable Buyer shall accept and assume from the Sellers
at the Closing, the Liabilities.
(b) Notwithstanding anything to the contrary contained
in this Agreement, the transfer of title to the Stock and the
Assets and the assumption of the Liabilities shall become
effective only upon receipt by the Sellers of the Purchase Price.
Section 2.02. Purchase Price. On the Closing, as consideration
for the Stock and Assets, the Buyers shall pay to the Sellers the
Purchase Price as follows:
The Buyers shall pay the Estimated Purchase Price by wire
transfer(s) of immediately available funds in accordance with
instructions to be provided by the Sellers to the Buyers not less
than two Working Days prior to the Closing Date.
Section 2.03. Closing. The Closing will take place at the
offices of Hunton & Williams, 951 East Byrd Street, Richmond, Virginia
23219 or at such other places as the Parties mutually agree, at
10:00 A.M. prevailing time in Richmond, Virginia, on the Closing Date.
Section 2.04. Sellers' Deliveries at Closing. At the Closing,
the Sellers shall deliver, or cause to be delivered, to the Buyers:
(a) stock certificates, representing the Stock held by
DIMON, duly endorsed for transfer, in a form acceptable to the Parties;
(b) the legal opinion of Sellers' counsel in the form
customarily given in a transaction similar to the one contemplated
herein;
(c) validly executed Bill of Sale and Assignment and
Assumption Agreements in the forms of Schedule 2.04(c)(i) and (ii)
evidencing transfer of the Assets and Liabilities to the applicable
Buyer set forth on Annex I;
(d) a validly executed evidence of assignment or
termination of the profit and loss transfer agreements and domination
agreements between Florimex Germany on the one hand and the German
Companies on the other hand in accordance with Section 9.05;
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(e) evidence of waiver of certain rights of first
refusal held by minority shareholders of certain Non-Wholly Owned
Companies; and
(f) any other documents and certificates to be delivered
under Article X hereof.
Section 2.05. Buyers' Deliveries at Closing. At the
Closing, the Buyers shall deliver, or cause to be delivered, to the
Sellers:
(a) the Purchase Price by wire transfer as described
in Section 2.02(a);
(b) the legal opinion of Buyers' counsel in the form
customarily given in a transaction similar to the one contemplated
herein;
(c) any other documents and certificates to be
delivered under Article XI hereof.
Section 2.06. Mutual Deliveries at Closing. At the Closing,
the Buyers and Sellers shall sign, execute and deliver (a) deeds
or other appropriate documents of transfer, validly executed,
evidencing the transfer of the Stock to the Buyers and in a form
acceptable to the Parties and (b) the Tax Cooperation Agreement in
form of Schedule 2.06 hereto.
ARTICLE III
ADJUSTMENT OF PURCHASE PRICE
----------------------------
Section 3.01. Delivery of Florimex Financial Statement.
Within sixty (60) days of the Closing Date, Accountants shall,
at the expense of the Sellers, audit and deliver to the Buyer
and Buyers' accountants the Florimex Financial Statement and a
schedule thereto illustrating the computation of EBITDA under
the terms of this Agreement (the "EBITDA Schedule"), both of
which shall be prepared in accordance with GAAP and, to the extent
not inconsistent with GAAP, in a manner consistent with the
Interim Florimex Financial Statement and in accordance with
the past practices of the Companies as reflected in the financial
statements of the Companies for the immediately preceding
comparable period. At the time of delivery of the Florimex
Financial Statement, the Sellers shall cause to be made
available to the Buyers' accountants the workpapers of the
Accountants and shall allow the Buyers reasonable access to
Ritchie Bond in connection with the Buyers' review of the
Florimex Financial Statement. For the purposes of this Agreement,
the Florimex Financial Statement shall not be deemed to have been
delivered until such time as the EBITDA Schedule and the workpapers
are delivered in accordance with this Section 3.01.
Section 3.02. Final Florimex Financial Statement and
Dispute Resolution. Unless the Buyers object, in writing to
the Sellers within twenty (20) working days after delivery of
the Florimex Financial Statement by the Sellers, to the
computation of EBITDA or the determination of the Net
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<PAGE>
Debt as provided in the Florimex Financial Statement, the Florimex
Financial Statement shall constitute the Final Florimex Financial
Statement. The computation of EBITDA and the determination of Net
Debt from the Final Florimex Financial Statement shall provide the
basis for determining the Final Purchase Price. If the Buyers
have any objections to the computation of EBITDA or the
determination of Net Debt as provided in the Florimex Financial
Statement, they shall deliver a detailed statement describing
their objections to Accountants and the Sellers within twenty
(20) working days after receiving the Florimex Financial
Statement. The Buyers and the Sellers, after consultation
with the Accountants, will use their reasonable best efforts
to resolve any such objections. The Buyers and the Sellers will
select an office of Deloitte & Touche mutually agreeable to the
Parties to review the computation of EBITDA and the determination
of Net Debt. Deloitte & Touche shall review the computation of
EBITDA and the determination of Net Debt for mathematical
accuracy and confirm whether such items have been computed and
determined consistent with GAAP and, to the extent not
inconsistent with GAAP, in a manner consistent with the Florimex
Financial Statement. The Accountants shall either confirm such
computation and determination or make such adjustments thereto
as are necessary to correct any mathematical errors or conform
such computation and determination to GAAP and, to the extent
not inconsistent with GAAP, to the Florimex Financial Statement.
Such confirmation or adjustment, as the case may be, by Deloitte
& Touche and Accountants shall be completed within thirty (30)
days after the an office of Deloitte & Touche is selected by the
Parties and shall be final and binding absent manifest
mathematical error reasonably recognizable by the
Parties in respect of the computation of EBITDA and the
determination of Net Debt as provided in the Florimex
Financial Statement.
Section 3.03. Final Florimex Financial Statement Resulting
From Dispute Resolution. Accountants will revise EBITDA and
Net Debt as provided in the Florimex Financial Statement as
appropriate to reflect the resolution of the Buyers' objection
(as agreed by the Buyers, the Sellers and the Accountants or
as determined by such elected office of Deloitte & Touche
in accordance with Section 3.02 above) and deliver the revised
Florimex Financial Statement to the Buyers and the Sellers within
ten (10) days after the resolution of such objections. Such
revised Florimex Financial Statement shall be certified by
the Accountants and shall constitute the Final Florimex
Financial Statement.
Section 3.04. Post Closing Adjustment. On the basis of
EBITDA and Final Net Debt as provided in the Final Florimex
Financial Statement, the Final Purchase Price shall be computed.
In the event such computation shows that the Final Purchase Price
of the Companies is greater or lesser than the Estimated Purchase
Price, a Post Closing Adjustment will be made to the Estimated
Purchase Price. Any payments that are due to the Sellers or the
Buyers respectively, shall be made within ten (10) days from
delivery of the Final Florimex Financial Statement.
ARTICLE IV
[intentionally omitted]
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
The Sellers, jointly and severally, hereby represent and
warrant to the Buyers that the following is true and correct at
the date hereof, except that none of the Sections of this Article
shall apply to the Companies in Liquidation, except for
Section 5.21:
Section 5.01. Corporate Existence of Sellers. Sellers
are companies duly organized, validly existing and in good
standing under the Laws of their respective jurisdictions and,
except where failure to be so qualified would not have a material
adverse effect on the business or operations of the Companies,
taken as a whole, are qualified to do business under the Laws of
each jurisdiction of operation.
Section 5.02. Authorization; Enforceability. The Sellers
each have full corporate power and authority to enter into this
Agreement, to perform their respective obligations hereunder and
to consummate the transactions contemplated hereby. The
execution and delivery by the Sellers of this Agreement, and the
performance by the Sellers of their respective obligations hereunder,
have been duly and validly authorized by the Boards of Directors
or the equivalent thereof in the relevant jurisdiction or the sole
shareholder of the Sellers, no other corporate action on the part
of the Sellers or their respective stockholders being necessary.
This Agreement is, and the other documents and instruments
required hereby will be, when executed and delivered by the
parties hereto, the valid and binding obligations of the Sellers,
enforceable against the Sellers in accordance with their respective
terms.
Section 5.03. No Violation or Conflict by the Sellers. The
execution, delivery and performance of this Agreement by the
Sellers do not and will not (a) conflict with or result in a
violation of the Corporate Documents of the Sellers; (b) conflict
with or violate any Law, judgment, order or decree binding on the
Sellers or any material Contract to which any Seller is a party or
by which it is bound and which relates to the business of the
Companies, the breach of which, individually or in the aggregate
with other such breaches, could have a material adverse effect on
any Seller's ability to consummate any of the transactions
contemplated hereby, and (c) except as set forth on Schedule 5.03,
require the consent or approval of any other Person or give any
Person to any such material Contract any right of termination,
cancellation, acceleration or modification thereunder. Except
as set forth on Schedule 5.03, no notice to, filing or registration
with, or authorization, consent or approval of, any Governmental
or Regulatory Authority is necessary or is required to be made or
obtained by any Seller in connection with the execution and delivery
of this Agreement by the Sellers or the consummation by the Sellers
of the transactions contemplated hereby.
Section 5.04. Title to Stock. The Sellers directly or
indirectly own, beneficially and of record, the Stock, free and
clear of all Liens. Upon delivery of the Stock to the Buyers at
the Closing and upon the Buyers' payment of the Purchase Price
therefor, good and valid title to the Stock, free and clear of
all Liens, will pass to the Buyers.
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<PAGE>
Section 5.05. Organization of Companies. Each of the
Companies (i) is duly organized, validly existing and in good
standing under the Laws of their respective jurisdictions of
organization; (ii) has all requisite power to own its property
and to carry on its business as now being conducted; and (iii)
is permitted or qualified to do business in the jurisdiction in
which it operates, except where failure to be permitted or qualified
would not have a material adverse effect on the business or
operations of the Companies, taken as a whole.
Section 5.06. Capitalization of Companies. The Stock has
been duly and validly issued and is fully paid and non-assessable.
It constitutes all of the issued and outstanding capital stock of
the Companies, except with respect to the Non-Wholly Owned
Companies. Except as disclosed on Schedule 5.06, there are no
options, warrants or other rights to subscribe for or purchase
any capital stock of the Companies or securities convertible into
or exchangeable for, or that otherwise confer on the holder any
right to acquire, any capital stock of the Companies, nor are
there any Contracts, commitments, agreements, understandings,
obligations, arrangements or restrictions, contingent or
otherwise, to which the Companies are party or by which the
Companies are bound relating to any shares of the capital stock
or other equity securities of the Companies, whether or not
outstanding. As of the Closing Date, each preference or other
right to acquire equity of any Company shall have been validly
and irrevocably waived in writing.
Section 5.07. No Violation or Conflict by Companies. The
execution, delivery and performance of this Agreement by the
Sellers do not and will not (a) conflict with or result in a
violation of the Corporate Documents of any Company; (b) conflict
with or violate any Law, judgment, order or decree binding on any
Company, or any Material Contract to which any Company is a party
or by which it is bound, the breach of which would have a material
adverse effect on the business, financial condition or results of
operation of any Company following the Closing Date or (c) except
as set forth in Schedule 5.07, require the consent or approval of
any other Person or give any other party to any Material Contract
to which any Company is a party any right of termination,
cancellation, acceleration or modification thereunder. Except as
set forth in Schedule 5.07, no notice to, filing or registration
with, or authorization, consent or approval of, any Governmental
or Regulatory Authority is necessary or is required to be made or
obtained by any Company in connection with the execution and
delivery of this Agreement by the Sellers or the consummation by
the Sellers of the transactions contemplated hereby.
Section 5.08. Interim Florimex Financial Statement/No
Material Changes. The Sellers have delivered to the Buyers the
consolidated, unaudited interim financial statement incorporating
Florimex Germany, Florimex USA and Florimex Canada, as a whole,
and the related statement of income for the period July 1, 1997
up to and including June 30, 1998, which is attached hereto as
Schedule 5.08 (the "Interim Florimex Financial Statement"). The
Interim Florimex Financial Statement fairly presents, in all
material respects, the financial position and results of
operations of Florimex Germany, Florimex USA and Florimex Canada
as of the date thereof and for the period then ended. The Interim
Florimex Financial Statement, has been prepared in accordance
with GAAP (excluding footnote disclosure). To the Knowledge of
the Sellers, there has been no material adverse change in the
condition, financial or otherwise, or in the results of operations,
of Florimex Germany, Florimex USA or Florimex Canada since the
date of the Florimex Financial Statement, whether as a result of
any legislative or regulatory change, revocation of any license
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or rights to do business, fire, explosion, accident, casualty,
labor trouble, flood, drought, riot, storm, condemnation or other
public force or act of God or otherwise.
Section 5.09. Taxes.
------
(a) Each Company and, as applicable, a Seller on behalf
of a Company, has filed or caused to be filed, within the times
prescribed by law, all federal, state, local and foreign tax returns
and tax reports, which it was required to have filed prior to the date
of this Agreement and the non-filing of which could reasonably be
deemed to be materially adverse to the Companies in the aggregate.
(b) Each Company and, as applicable, a Seller on behalf
of a Company, has paid, or there is an appropriate accrual in the
Interim Florimex Financial Statement with respect to the Companies
in the aggregate for, all income, profits, sales, real estate and
excise taxes (including additions to tax, penalties and interest)
which have become due and payable before the date hereof under any
of its or their tax returns or reports or pursuant to any assessment
with respect thereto.
(c) The amount of the Companies' aggregate liability for
unpaid taxes as of the date hereof and as of the Closing Date does
not and will not exceed the accrual therefor in the Interim Florimex
Financial Statement.
(d) Except as set forth on Schedule 5.09 hereto, no
taxing authority has notified any of the Material Companies of
any examination of any return or is currently examining any tax
return of any of the Material Companies, nor are there any
outstanding agreements or waivers extending the statutory period
of limitation applicable to any tax return of any of the Material
Companies. To the Knowledge of the Sellers and except as set
forth in Schedule 5.09 hereto, no taxing authority is currently
examining any tax return of any of the Non-Material Companies,
nor are there any outstanding agreements or waivers extending the
statutory period of limitation applicable to any tax return of
any of the Non-Material Companies.
(e) Except as set forth on Schedule 5.09 hereto, to
the Knowledge of the Sellers, no such notice or examination by
any taxing authority with respect to any of the Companies is
threatened. Except as disclosed on Schedule 5.09 and except
as provided for in the Interim Florimex Financial Statement,
no taxes with respect to the Material Companies have become
due and payable from the period of July 1, 1998 to the date
of this Agreement.
(f) No Company is a "real property holding
company" under Section 897(c)(2) of the U.S. Internal Revenue
Code of 1986, as amended.
Section 5.10. Personal Property. Except as set forth
in Schedule 5.10, each of the Companies has good, valid and
marketable title to its Personal Property. Except as set
forth in Schedule 5.10, the Personal Property is not subject
to any Lien. To the Knowledge of the Sellers, the Personal
Property is in good operating condition and repair, subject
to normal wear and tear, and is suitable for the purposes
for which it is presently used.
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Section 5.11. Real Property. Schedule 5.11 constitutes
an accurate and complete list of all real property owned, in
whole or in part, by the Companies and includes the name of
the record title holder thereof and a list of all of the
Sellers' or Companies' indebtedness secured by a Lien on
the real property. Except as set forth in Schedule 5.11,
each Company has good and marketable title to all the real
property specified as owned by it in Schedule 5.11, free and
clear of any Lien. To the Knowledge of the Sellers, all of
the material buildings, structures and appurtenances situated
on the land listed in Schedule 5.11 are in good operating condition,
taking into consideration normal wear and tear, and in a state
of good maintenance and repair, are adequate and suitable for
the purposes for which they are presently being used and, with
respect to each, the respective Company has rights of ingress
and egress for operation of its business in the ordinary course
as conducted as of the date hereof. None of such buildings,
structures or appurtenances, nor the operation or maintenance
thereof, which are owned or operated by the Material Companies,
and to the Knowledge of the Sellers, which are owned or operated
by the Non-Material Companies, violates any restrictive covenant
or any provision of any federal, state or local law, ordinance,
rule or regulation, or materially encroaches on any real
property owned by others, except such violations or encroachments
as do not individually or in the aggregate have a material
adverse effect upon the Companies' respective business or their
use or operation of such properties. Except as set forth in
Schedule 5.11, no condemnation proceeding is pending or, to the
Knowledge of Sellers, threatened which would preclude or impair
the use of any such real property by the Companies for the
purposes for which it is currently used.
Section 5.12. Material Contracts. Except as set forth in
Schedule 5.12, none of the Companies is bound by (a) any
material agreement, indenture or other instrument which
contains restrictions with respect to payment of dividends or
any other distribution in respect of capital stock, (b) any loan
or advance to the making of any such loan, in excess of US
$100,000, (c) any guarantee, other than in the ordinary course
of business, in respect of loans in excess of US$ 100,000 of any
other legal person other than another Company, (d) any service,
consulting or any other similar type contract requiring payment
exceeding US$ 100,000 per year, (e) any agreement entered into
outside the ordinary course of business which materially limits
the freedom of any of the Companies to engage in their respective
line of business or to compete with any other Person, (f) any
agreement not entered into in the ordinary course of business
which requires payments exceeding US$ 100,000 and has a
termination notice period of 90 days or more or (g) any agreement
which requires payments exceeding more than US$ 100,000 per year
and is expected to have a material adverse impact on the business
or operations of any of the Companies. Each agreement set
forth in Schedule 5.12 is in full force and effect and none of
the Companies violated any of the terms or conditions of such
agreement in any material respect and, to the Knowledge of
Sellers, all of the covenants that are required to be performed
by any other party thereto as of the date hereof have been performed.
Section 5.13. Insurance. Set forth in Schedule 5.13 hereof
is a complete list of material insurance policies which the
Companies have concluded and maintained in full force and effect.
All premiums on these insurance policies, which have become due
and payable on or before the date hereof, have been paid or
accrued for. No notifications have been received with regard
to the non-renewal of any policy.
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Section 5.14. Intellectual Property.
---------------------
(a) Schedule 5.14(a) contains an accurate and complete
list of all material patents, trade names, trademarks and service
marks, that are currently owned and used by the Companies
(collectively, the "Material Intellectual Property"). Unless
otherwise indicated in Schedule 5.14(a), each item constituting part
of the Material Intellectual Property has been duly registered
with, filed in or issued by, as the case may be, the United States
Patent and Trademark office or such other government agencies,
domestic or foreign as set forth on Schedule 5.14(a). Except as
stated in Schedule 5.14(a), there are no pending (or, to the
Knowledge of the Sellers, threatened) proceedings or litigation
or other adverse claims with respect to the Material Intellectual
Property, an adverse result in which would have a material adverse
effect on the business or operations of the Companies, taken as a
whole.
(b) Except as disclosed on Schedule 5.19(c), the Companies
have been granted licenses in respect of all items of intellectual
property not owned by any Company pursuant to the license agreements
listed in Schedule 5.14(b) hereto, which are valid and enforceable in
accordance with the terms and conditions hereof.
Section 5.15. Employment Relations.
--------------------
(a) Each Company is in compliance in all material
respects with all federal, state or other applicable labor laws,
domestic or foreign, and with the terms and conditions of employment
and wages and hours, and has not and is not engaged in any unlawful
labor practice.
(b) No unlawful labor practice complaint against any
Company is pending before the National Labor Relations Board or any
corresponding or similar governmental agency or entity in any foreign
jurisdiction.
(c) There is no labor strike or stoppage actually pending
or, to the Knowledge of Sellers, threatened against any Company.
(d) No grievance on the part of any of the Companies'
employees that might have a material adverse effect upon any of the
Companies or the conduct of their respective businesses has been
filed, and no arbitration proceeding arising out of or under any
collective bargaining agreement is pending, nor to the Knowledge of
the Sellers has any claim therefor been asserted.
(e) Except for negotiations regarding a proposed collective
bargaining agreement that would be applicable to employees in the
Dutch flower business, no collective bargaining agreement is currently
being negotiated by any of the Companies and none of the Companies has
experienced any material strikes during the last three years. There
will not be any material violation of any employment agreements with
employees of the Material Companies or, to the Knowledge of the Sellers,
employees of any Non-Material Company, as a result of an announcement
of the transactions contemplated by this Agreement.
Section 5.16. No Litigation. Except as set forth on
Schedule 5.16 hereto, there is no material litigation or governmental
investigation pending or, to the Knowledge of the Sellers, proposed
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or threatened against any Company. With respect to each item of
litigation set forth on Schedule 5.16, the Companies have made adequate
provision in the Interim Florimex Financial Statement and accrued all
contingent liabilities therefor in conformance with F.A.S. 5 and
with GAAP generally and the aggregate accruals therefor reflected
on Schedule 5.16 are adequate.
Section 5.17. Books and Records. The books of account and
other records of any Company related to the operation of that
Company are in all material respects complete and correct and have
been maintained in accordance with good business practices. To
the Knowledge of the Sellers and except as disclosed on
Schedule 5.17, the Material Companies and the Non-Material
Companies do not have any of their respective material records,
systems, controls, data or information recorded, stored, maintained
or operated by any means (including any electronic, mechanical or
photographic process, whether computerized or not) which is not
under the respective ownership and control of the Material
Companies, or except which may be under the ownership or control
of third parties in the ordinary course of business, the
Non-Material Companies.
Section 5.18. No Broker. Except as set forth on Schedule 5.18,
neither the Sellers nor the Companies, have had any dealings,
negotiations or communications with any broker or other intermediary
in connection with the transactions contemplated by this Agreement,
and neither is committed to any liability for any brokers' or
finders' fees or any similar fees in connection with the transactions
contemplated herein.
Section 5.19. Software.
--------
(a) Identification and Performance. The computer software
that was developed by and is currently owned by the Companies and is
material to the business or operation of the Companies, taken as a
whole, together with all know-how and processes used in connection
therewith (i) is listed on Schedule 5.19(a) hereto (the "Software"),
and (ii) reasonably functions as intended by the Sellers. The
Sellers are not aware of any material issues with respect to the
two material software programs, which are indicated on Schedule 5.19(b)
as currently being implemented by the Companies, that would cause such
programs to function, once their implementation is complete, in a
manner materially different from the function currently intended
by Sellers.
(b) Except as disclosed in Schedule 5.19(b), Sellers
believe that the change in the century as of January 1, 2000 will
not cause the Software to function in a manner materially different
to its current function.
(c) Title. Except as otherwise expressly disclosed in
Schedule 5.19(c), all right, title and interest in and to the
Software are owned by the Companies, free and clear of all Liens,
and to the Knowledge of the Sellers, the Companies' use of the
Software and the Third-Party Software does not infringe on the rights
of any third parties, excluding licenses to customers. Except as
disclosed in on Schedule 5.19(c) the Companies have proper licenses
for software that (i) is not currently owned by the Companies,
(ii) may have been developed by third parties, and (iii) is currently
deemed to be material to the business of the Companies, taken as a
whole, and the Companies are in compliance with all such licenses.
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Section 5.20. Environmental Compliance, Cleanup, Permits and
Licenses. Except as indicated on Schedule 5.20 hereto, the
Companies are in compliance with theEnvironmental Laws with respect
to their respective properties, facilities and businesses except
where such noncompliance would not have a material adverse effect
on the business or operations of the Companies, taken as a whole.
To the Knowledge of the Sellers, except as disclosed on
Schedule 5.20 hereto, the Companies have not received any notice
of noncompliance with the Environmental Laws, and have not caused
or permitted their businesses or the real estate owned by them or
under their control, on or after the date the Companies acquired
such ownership or control, to be used to generate, manufacture,
refine, transfer, produce or process hazardous substances, or
other toxic substances or solid waste, except in compliance with
the Environmental Laws. To the Knowledge of the Sellers, the
Companies have not received notice that the Companies are
potentially responsible for the environmental cleanup of any
site under any applicable Environmental Law or at the request
of any private citizen or business entity, except as disclosed
on Schedule 5.20 hereto. With respect to items of environmental
cleanup identified on Schedule 5.20, the Companies' aggregate
liability with respect to such items shall not materially exceed
the aggregate estimated cost therefor that is disclosed for such
items on Schedule 5.20.
Section 5.21. Companies in Liquidation. To the Knowledge of
the Sellers, there is no material claim pending or threatened
against the Companies in Liquidation.
Section 5.22. Assets; Condition. The personal property
of Florimex Germany constituting a portion of the Assets are
in good and usable condition taking into account regular
maintenance and usual wear and tear and have been regularly
maintained.
Section 5.23. Employee Matters.
----------------
(a) Schedule 5.23(a) contains a list, complete and
accurate in all material respects, of all non-seasonal and
non-temporary employees currently employed by each Company
(the "Employees") as of the date hereof, indicating name,
position, age, seniority and monthly salary.
(b) Other than the Employees, at Closing the Company
will not employ any non-seasonal and non-temporary individuals,
with the exception of employees hired after the date hereof
with the Buyers' prior consent.
(c) Except as disclosed on Schedule 5.23(c), the
Companies have no outstanding financial obligations to any
Employees or former non-seasonal or non-temporary employees for
any periods preceding the Closing Date (other than as accounted
for in the Interim Florimex Financial Statement.
(d) Schedule 5.23(d) contains a complete and accurate
list of all senior management personnel of the Companies
("Key Employees"), indicating in each case name, remuneration
(broken down to base salary and bonus) for the Companies'
fiscal year ended June 30, 1998 and date of the current
employment agreement, if any, for each Key Employee. The basis
for calculating the bonus, if applicable, is indicated with
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respect to each Key Employee. Concurrently with the execution
of this Agreement, the Sellers will provide to the Buyers, as
part of their due diligence, true, complete and correct copies
of all current employment agreements with the Key Employees.
(e) Except as disclosed on Schedule 5.23(e), the
Companies have no outstanding financial obligations to any Key
Employees or former senior management (other than as accounted
for in the Interim Florimex Financial Statement and accrued
vacation or salary for the current month, should the Closing
Date not occur on the first day of a month) for any periods
preceding the Closing Date (other than accrued vacation or
salary for the current month, should the Closing Date not occur
on the first day of a month). All bonus payments owed to any
of the Key Employees for the fiscal year ended June 30, 1998
have been made, and no bonus obligations for any periods
preceding July 1, 1998 are outstanding other than as accounted
for in the Interim Florimex Financial Statement.
(f) The Companies have taken certain actions in
furtherance of the restructuring of the workforce of the
Companies as outlined in Schedule 1.01(b) hereto, which actions
have been accounted for in the Interim Florimex Financial
Statement. Prior to Closing, the Companies will not take any
further action in connection with such restructuring of the
workforce that is not reflected on the Interim Florimex Financial
Statement or listed on Schedule 1.01(b) without prior consent of
the Buyers.
Section 5.24. No Other Representations. Notwithstanding
anything to the contrary contained in this Agreement, it is the
explicit intent of each Party that the Sellers are making no
representation or warranty whatsoever, express or implied, except
those representations and warranties contained in this Article V.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
The Buyers, jointly and severally, hereby represent and warrant
to the Sellers as follows:
Section 6.01. Corporate Existence of Buyers. The Buyers are
corporations duly organized, validly existing and in good standing
under the Laws of their respective jurisdictions. To the Knowledge
of the Buyers, each of the Buyers has all requisite power to own
its property and to carry on its business as now being conducted.
To the Knowledge of the Buyers, all Buyers are permitted to do
business in the respective jurisdictions in which they operate.
Section 6.02. Authorization; Enforceability. The Buyers have
full corporate power and authority to enter into this Agreement, to
perform their obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery by
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the Buyers of this Agreement, and the performance by the Buyers
of their obligations hereunder, have been duly and validly
authorized by the Boards of Directors (or the equivalent thereof
in the relevant jurisdictions of the Buyers), no other action on
the part of the Buyers or their respective stockholders being
necessary. This Agreement is, and the other documents and
instruments required hereby will be, when executed and delivered by
the parties hereto, the valid and binding obligations of the Buyers,
enforceable against the Buyers in accordance with their respective
terms.
Section 6.03. No Violation or Conflict. The execution,
delivery and performance of this Agreement by the Buyers do not
and will not (a) conflict with or result in a violation of the
Corporate Documents of any Buyer; (b) conflict with or violate any
Law, judgment, order or decree binding on any Buyer or any Contract
to which any Buyer is a party or by which it is bound, the breach
of which, individually or in the aggregate, could have a material
adverse effect on any Buyer's ability to consummate the transactions
contemplated hereby; and (c) except as set forth on Schedule 6.03,
require the consent or approval of any other Person or give any
Person to any Contract any right of termination, cancellation,
acceleration or modification thereunder. Except as set forth on
Schedule 6.03, no notice to, filing or registration with, or
authorization, consent or approval of, any Governmental or
Regulatory Authority is necessary or is required to be made or
obtained by any Buyer in connection with the execution and
delivery of this Agreement by the Buyers or the
consummation by the Buyers of the transactions contemplated
hereby.
Section 6.04. No Broker. Except as set forth on
Schedule 6.04, no Buyer has had any dealings, negotiations or
communications with any broker or other intermediary in
connection with the transactions contemplated by this
Agreement and is not committed to any liability for any
brokers' or finders' fees or any similar fees in connection with
the transactions contemplated herein.
Section 6.05. Purchase for Investment. The Buyers
acknowledge that the offer and sale of the Stock contemplated
herein have not been, and will not be, registered under the
Securities Act of 1933, as amended, or under any state securities
laws. Each Buyer represents that it is purchasing the Stock
for investment and not with a view to the distribution thereof,
except in accordance with applicable securities laws.
Section 6.06. Investigation by Buyers. Each Buyer has
conducted its own independent review and analysis of the
businesses, assets, condition, operations and prospects of
the Companies and acknowledges that it has been provided
reasonably sufficient information in respect of the properties,
premises and records of the Companies for this purpose and
has been afforded a reasonable opportunity, satisfactory in
light of the Parties' intentions with respect to the timing
of the signing of this Agreement and the Closing, to discuss
the foregoing with the management of Sellers and the Companies.
In entering into this Agreement, each Buyer has relied solely
upon its own investigation and analysis and the
representations and warranties contained herein, and each Buyer:
(a) has conducted, with the aid of counsel, an
independent analysis of all legal effect and consequence of
this Agreement and the consummation of transactions
contemplated herein under the Laws, including but not limited
to with respect to all matters of corporate, securities, tax,
intellectual property, employment, employee benefit and
labor law;
(b) except as otherwise set forth in this
Agreement, acknowledges that none of the Sellers, any Company,
or any of their respective directors, officers, employees,
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Affiliates, agents or representatives makes any representation
or warranty, either express or implied, as to the accuracy of
completeness of any of the information provided or made available
to any Buyer or its agents or representatives prior to the
execution of this Agreement; and
(c) understands that the Stock has not been, and will
not be, registered under the Securities Act of 1933, as amended;
and
(d) agrees, to the fullest extent permitted by law,
that none of the Sellers, any Company, or any of their respective
directors, officers, employees, Affiliates, agents or representatives
shall have any liability or responsibility whatsoever to any Buyer
on any basis (including, without limitation, in contract or tort,
under federal or state securities laws or otherwise) based upon
any information provided or made available, or statements made, to
the Buyers prior to the execution of this Agreement, except that
the foregoing limitations shall not apply (i) to the extent the
Sellers make the specific representations and warranties set
forth in this Agreement, but always subject to the limitations
and restrictions contained in this Agreement or (ii) in the
event of fraud.
Section 6.07. No Litigation. Except as set forth on
Schedule 6.07 hereto, there is no material litigation or governmental
investigation pending or proposed or threatened against USA Floral.
Section 6.08. International Operations. While subsidiaries
of the Buyers sell products to customers outside North America
(including an immaterial amount of sales to customers in Europe),
neither the Buyers nor their subsidiaries currently maintain any office
or installation in Europe.
Section 6.09. No Other Representations.
------------------------
Notwithstanding anything to the contrary contained in
this Agreement, it is the explicit intent of each Party that
the Buyers are making no representation or warranty
whatsoever, express or implied, except those representations and
warranties contained in this Article VI.
ARTICLE VII
COVENANTS OF SELLERS
--------------------
The Sellers, jointly and severally, covenant and agree with
the Buyers that, at all times from and after the date hereof until
the Closing Date, the Sellers will comply, and, to the extent applicable,
will cause each Company to comply, with the following covenants and
provisions, except to the extent the Buyers may otherwise consent
in writing and excluding the Companies in Liquidation.
Section 7.01. Conduct of Business of the Companies. Except as
otherwise expressly provided in this Agreement, during the period
from the date of this Agreement until the Closing Date, the Sellers
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will cause the Companies to conduct their respective operations
according to their ordinary course of business and consistent with
past practice. Without limiting the generality of the foregoing,
and except as otherwise expressly provided in this Agreement, prior
to the Closing Date, the Sellers will not allow any Company to:
(a) amend its Corporate Documents in any material respect;
(b) authorize for issuance or issue, sell or deliver
(whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise) any
stock of any class or any other securities;
(c) split, combine or reclassify any shares of its capital
stock, declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in
respect of its capital stock, or redeem or otherwise acquire any of
its securities;
(d) other than in the ordinary course of business, (i)
incur or assume any material long-term debt not currently outstanding,
(ii) assume, guarantee, endorse or otherwise become liable or
responsible for the obligations of any Person, other than another
Company, (iii) make any material loans, advances or capital
contributions to, or investments in, any other Person, (iv) enter
into any material contract or agreement other than in connection with
the transactions contemplated by this Agreement or (v) authorize any
capital expenditures other than capital expenditures up to 100% of
aggregate budgetary projections as set forth in Schedule 7.01(d);
(e) adopt or amend (except as may be required by Laws
or as provided in Schedule 9.02 of this Agreement) any material
bonus, profit sharing, compensation, severance, termination, stock
option, stock appreciation right, restricted stock, pension,
retirement, deferred compensation, employment, severance or other
material employee benefit agreements, trusts, plans, funds or other
material arrangements for the benefit or welfare of any present or
former director, officer or employee or the dependent or
beneficiary of any present or former director, officer or employee,
or (except for normal increases in the ordinary course of business
that are consistent with past practices and that, in the aggregate,
do not result in a material increase in benefits or compensation
expense to any Company) increase in any material respects the
compensation or fringe benefits of any director, officer or
employee or pay any benefit not required by any existing plan and
arrangement (including, without limitation, the granting of stock
options, stock appreciation rights, shares of restricted stock or
performance units) or enter into any contract, agreement,
commitment or arrangement to do any of the foregoing, except that
the Companies may (i) enter into any agreement with Winfried Falk
or Dwight Ferguson or (ii) amend any current agreements with
Winfried Falk or Dwight Ferguson, if the Buyers have consented
hereto;
(f) acquire, sell, lease, pledge, hypothecate, encumber,
mortgage or dispose of any material assets;
(g) pay fees incurred by the Sellers to Hunton & Williams
in connection with the transaction contemplated by this Agreement,
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or pay, discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued or unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction of liabilities
reflected or reserved against in the Interim Florimex Financial
Statement, or incurred in the ordinary course of business; or
(h) cancel any material insurance policies set forth
on Schedule 5.13;
(i) materially and adversely amend any of the
agreements as listed on Schedule 5.12, involving an amount in
excess of US$ 100,000 per year, without prior notification thereof
to the Buyers.
(j) agree in writing or otherwise to take any of the
foregoing actions.
Section 7.02. Compliance with Law. The Sellers shall
cause each Company to comply in all material respects with all
applicable Laws.
Section 7.03. Regulatory and Other Approvals. The Sellers
will (a) use reasonable best efforts and proceed diligently and
in good faith as promptly as practicable to obtain all consents,
approvals or actions of, to make all filings with and to give
all notices to Governmental or Regulatory Authorities or any
other Person required of the Sellers, or any Company to
consummate the transactions contemplated hereby, including
without limitation those described in Schedule 5.03, (b) provide
such other information and communications to such Governmental or
Regulatory Authorities or other Persons as such Governmental or
Regulatory Authorities or other Persons may reasonably request
and (c) use reasonable best efforts to cooperate with the Buyers
in obtaining all consents, approvals or actions of, making all
filings with and giving all notices to Governmental or Regulatory
Authorities or other Persons required of Buyers to consummate the
transactions contemplated hereby. The Sellers will provide
prompt notification to the Buyers when any such consent,
approval, action, filing or notice referred to in clause (a) above
is obtained, taken, made or given, or when notice or indication of
any delay or denial is first obtained, as applicable, and will
advise Buyers of any communications (and, unless precluded by
Law, provide copies of any such communications that are in writing)
with any Governmental or Regulatory Authority or other Person
regarding any of the transactions contemplated by this Agreement.
Section 7.04. Investigation by Buyers. The Sellers will
(a) provide each Buyer, its officers, employees, counsel,
accountants, financial advisors, consultants and other representatives
(together, "Representatives") with reasonable access, upon not less
than 24 hours' prior notice and during normal business hours, to
all officers, employees, agents and accountants of the Companies, and
their respective assets, properties, books and records as Buyers or
any such Representative may reasonably request, but only to the
extent that such access does not unreasonably interfere with the
business and operations of the Companies, and (b) furnish each
Buyer and such other Persons with all such information and data
concerning the business and operations of the Companies, as such
Buyer reasonably may request in connection with such investigation,
but only to the extent that furnishing any such information or data
would not violate any Law, order, Contract or license applicable to
any Company, or by which any Company's respective assets and
properties is bound.
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Section 7.05. Resignations. The Sellers shall cause any of
Claude Owen, Ritchie Bond or any other person who is not an employee
of a Company and is serving as the representative of DIMON on the
board of directors of each Company to execute resignation
letters dated as of the Closing Date and such directors shall be
relieved by the Sellers and the Companies of all liabilities and
indemnified by the Sellers and the Companies for any claims
arising out of or resulting from their service as directors.
ARTICLE VIII
COVENANTS OF BUYERS
-------------------
The Buyers, jointly and severally, covenant and agree with
Sellers that, at all times from and after the date hereof until
the Closing Date, the Buyers will comply with all covenants and
provisions of this Article VIII applicable to the Buyers, except
to the extent the Sellers may otherwise consent in writing.
Section 8.01. Compliance with Law. The Buyers shall comply
in all material respects with all applicable Laws.
Section 8.02. Regulatory and Other Approvals. The Buyers
will (a) use reasonable best efforts and proceed diligently and
in good faith as promptly as practicable to obtain all consents,
approvals or actions of, to make all filings with and to give
all notices to Governmental or Regulatory Authorities or any
other Person required of the Buyers to consummate the
transactions contemplated hereby, including without limitation
those described in Schedule 6.03, (b) provide such other
information and communications to such Governmental or Regulatory
Authorities or other Persons as such Governmental or Regulatory
Authorities or other Persons may reasonably request and (c) use
reasonable best efforts to cooperate with Sellers in obtaining all
consents, approvals or actions of, making all filings with and
giving all notices to Governmental or Regulatory Authorities or
other Persons required of Sellers to consummate the transactions
contemplated hereby. The Buyers will provide prompt notification
to Sellers when any such consent, approval, action, filing or
notice referred to in clause (a) above is obtained, taken,
made or given, or when notice or indication of any delay or
denial is first obtained, as applicable, and will advise Sellers
of any communications (and, unless precluded by Law, provide
copies of any such communications that are in writing) with any
Governmental or Regulatory Authority or other Person regarding
any of the transactions contemplated by this Agreement.
ARTICLE IX
OTHER COVENANTS AND AGREEMENTS OF BUYERS AND SELLERS
----------------------------------------------------
Section 9.01. Release of Guarantees. Each Buyer
acknowledges that DIMON and Florimex Germany have provided
guarantees with respect to certain indebtedness of the
Companies, the details of which are described on Schedule 9.01
attached hereto. Prior to or at the Closing, such guarantees
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shall be terminated and released. Each Buyer shall take all
commercially reasonable actions to assist DIMON and Florimex
Germany in obtaining the release of such guarantees,
including but not limited to substituting the guarantees of
the Buyers for those guarantees of DIMON or Florimex Germany
that are listed on Schedule 9.01 in the respective amounts
of such guarantees not to exceed those indicated on
Schedule 9.01. Each Buyer shall indemnify and hold DIMON
and Florimex Germany harmless against any payment that
DIMON or Florimex Germany is required to make from and
after the Closing in respect of such guarantees in the
respective amounts of such guarantees not to exceed those
indicated on such Schedule 9.01.
Section 9.02. Employment, Employee Benefit Plan and
Other Matters. Sellers and Buyers acknowledge that certain
employees of the Companies receive benefits under Employee
Benefit Plans of DIMON as disclosed on Schedule 9.02 hereto.
The Sellers and Buyers will agree as to the terms and timing
of the transfer to the Buyers of the obligation to provide
such benefits. Concurrently with the execution of this
Agreement, the Sellers will provide to the Buyers true,
complete and correct copies of all Employee Benefit Plans
of DIMON under which benefits are provided to the individuals
identified on Schedule 9.02. The Parties acknowledge that
the relocation of Dwight Ferguson to Washington, D.C.,
including the reimbursement of his expenses, will be arranged
by DIMON in accordance with DIMON's existing relocation policy.
Section 9.03. Settlement of Inter-Company Accounts. Other
than as set forth on Schedule 9.03, which shall be updated as
of the Closing Date (provided that no such post-execution
update shall reflect any material adverse effect upon the
financial position of the Companies taken as a whole), all
of the inter-company accounts between DIMON, on the one hand,
and Florimex Germany or any of the Companies, on the other hand,
will be finally settled and extinguished on or before the
Closing Date, which settlement shall not have had a material
adverse effect upon the financial position of the Companies
taken as a whole. The items listed on Schedule 9.03 shall be
settled after the Closing in a manner consistent with past
practices of DIMON, Florimex Germany and the Companies,
provided that the Buyers shall not be required to make any
such post-closing settlement of the inter-company accounts
to the extent that such settlement could reasonably be expected
to have a material adverse effect on the financial position of
the Companies taken as a whole.
Section 9.04. Fulfillment of Conditions. The Sellers
and the Buyers shall use their reasonable best efforts and
proceed diligently and in good faith, prior to the Closing
Date, (i) to satisfy each condition to the obligations of
the Sellers or Buyers, as the case may be, contained in
this Agreement, and (ii) to effect the transfer of the Stock
as contemplated in this Agreement, and will not take or fail
to take any action that would reasonably be expected to
result in the nonfulfillment of such condition prior to
the Closing Date.
Section 9.05. Profit and Loss Allocation. The Sellers
and the Buyers agree that the profit and loss of Florimex
Germany and its subsidiaries that are participants in the
Organschaft and taxes with respect thereto for the fiscal
year ended June 30, 1998, and for the interim period from
July 1, 1998 until and including the Closing Date shall be
allocated to and shall inure to the benefit of the Sellers,
and that the profit and loss of Florimex Germany and its
subsidiaries that are participants in the Organschaft and
taxes with respect thereto after the Closing Date shall be
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allocated to and inure to the benefit of the Buyers. The
Sellers covenant and agree that, at or before Closing, they
will, in a manner reasonably acceptable to Buyers, assign
or terminate all existing profit and loss transfer
agreements and/or domination agreements and all agreements
of like import, with respect to Florimex Germany and its
subsidiaries that are participants in the Organschaft so
as to effectuate the purpose and intent of the immediately
preceding sentence, and shall cooperate with the Buyers to
execute all such documents and do all such other acts and
things as may be reasonably necessary in order to give
effect to this Section 9.05.
ARTICLE X
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYERS
---------------------------------------------
Each and every obligation of the Buyers to be performed
on the Closing Date shall be subject to the satisfaction
before or at the Closing of the express conditions precedent
set forth below (unless expressly waived in writing by the
Buyers at any time at or before the Closing), and the
Sellers shall use reasonable best efforts to cause each of
such conditions to be satisfied.
Section 10.01. Performance. The Sellers shall have
performed and complied in all material respects with all of
their covenants and agreements under this Agreement that are
to be performed or complied with by it before or on the
Closing Date, and the Buyers shall have received at the
Closing a certificate, dated the Closing Date, signed by
the Sellers, to such effect.
Section 10.02. Proceedings and Examinations. All
proceedings, corporate or other, to be taken by the Sellers
in connection with the transactions contemplated by this
Agreement, and all documents incident thereto, shall be
reasonably satisfactory in form and substance to the
Buyers, and the Sellers shall have made available to the
Buyers for examination the originals or true and correct
copies of all documents that the Buyers may reasonably
request in connection with the transactions contemplated by
this Agreement.
Section 10.03. No Actions. There shall not be in effect
any Law, and no investigation, suit, action or other proceeding
shall be threatened or pending before any court or governmental
agency that seeks restraint, prohibition, damages or other
relief in connection with this Agreement or the consummation
of the transactions contemplated hereby.
Section 10.04. Representations and Warranties. The
representations and warranties made by the Sellers in this
Agreement shall be true and correct in all material
respects at the Closing Date with the same force and effect as
though such representations and warranties had been made on
the Closing Date, and the Buyers shall have received at the
Closing a certificate in the form attached hereto as
Schedule 10.04, dated the Closing Date, signed by the Sellers,
to such effect.
Section 10.05. Deliveries. The Sellers shall have
delivered to the Buyers the items referred to in Section 2.04,
executed and in proper form.
Section 10.06. Regulatory Consents and Approvals. All
consents, approvals and actions of, filings with and notices
to any Governmental or Regulatory Authority necessary to
permit the parties hereto to perform their obligations under
this Agreement and to consummate the transactions contemplated
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hereby shall have been duly obtained, made or given and shall
be in full force and effect, and all terminations or
expirations of waiting periods imposed by any Governmental
or Regulatory Authority necessary for the consummation of the
transactions contemplated by this Agreement shall have occurred.
Section 10.07. Third Party Consents. The consents (or in
lieu thereof waivers) listed in Schedule 10.07 hereto shall have
been obtained and shall be in full force and effect.
Section 10.08. Additional Certificates. Buyers shall
have received such other certificates of officers of the Sellers
and the Companies as it may reasonably request.
ARTICLE XI
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS
----------------------------------------------
Each and every obligation of the Sellers to be performed on
the Closing Date shall be subject to the satisfaction before or at
the Closing of the express conditions precedent set forth below
(unless expressly waived in writing by the Sellers at any time at
or before the Closing), and the Buyers shall use reasonable best
efforts to cause each of such conditions to be satisfied.
Section 11.01. Performance. The Buyers shall have performed
and complied in all material respects with all of its covenants and
agreements under this Agreement that are to be performed or complied
with by it before or on the Closing Date, and the Sellers shall have
received at the Closing a certificate, dated the Closing Date,
signed by the Buyers, to such effect.
Section 11.02. Proceedings and Examinations. All
proceedings, corporate or other, to be taken by the Buyers in
connection with the transactions contemplated by this Agreement,
and all documents incident thereto, shall be reasonably
satisfactory in form and substance to the Sellers, and the
Buyers shall have made available to the Sellers for examination
the originals or true and correct copies of all documents that
the Sellers may reasonably request in connection with the
transactions contemplated by this Agreement.
Section 11.03. No Actions. There shall not be in effect any
Law, and no investigation, suit, action or other proceeding shall
be threatened or pending before any court or governmental agency
that seeks restraint, prohibition, damages or other relief in
connection with this Agreement or the consummation of the
transactions contemplated hereby.
Section 11.04. Representations and Warranties. The
representations and warranties made by the Buyers in this
Agreement shall be true and correct in all material respects
at the Closing Date with the same force and effect as though
such representations and warranties had been made on the
Closing Date (except to the extent that such representations
and warranties expressly speak as of a different date), and
the Sellers shall have received at the Closing a certificate
in the form attached hereto as Schedule 11.04, dated the
Closing Date, signed by the Buyers, to such effect.
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Section 11.05. Deliveries. The Buyers shall have
delivered to the Sellers the items referred to in Section 2.05,
executed and in proper form.
Section 11.06. Regulatory Consents and Approvals. All
consent, approvals and actions of, filings with and notices
to any Governmental or Regulatory Authority necessary to
permit the parties hereto to perform their obligations under
this Agreement and to consummate the transactions contemplated
hereby shall have been duly obtained, made or given and shall
be in full force and effect, and all terminations or expirations
of waiting periods imposed by any Governmental or Regulatory
Authority necessary for the consummation of the transactions
contemplated by this Agreement shall have occurred.
Section 11.07. Third Party Consents. The consents (or
in lieu thereof waivers) listed in Schedule 11.07 hereto shall
have been obtained and shall be in full force and effect.
Section 11.08. Other Agreements. The transaction
contemplated by Section 9.01 shall have been completed to the
reasonable satisfaction of Sellers.
Section 11.09. Additional Certificates. Sellers shall
have received such other certificates of officers of the Buyers
as it may reasonably request.
ARTICLE XII
INDEMNITIES AND ADDITIONAL COVENANTS
------------------------------------
Section 12.01. Sellers' Indemnity.
------------------
(a) Generally. The Sellers, jointly and severally,
hereby agree to indemnify and hold each of the Buyers harmless
from and against, and agree to defend promptly the Buyers from
and to reimburse the Buyers for, any and all losses, damages,
costs, expenses, liabilities, obligations and claims of any kind,
including, without limitation, reasonable attorneys' fees and
other legal costs and expenses (hereinafter referred to
collectively as "Losses"), that the Buyers may at any time
suffer or incur, or become subject to, as a result of or in
connection with: (i) any breach or inaccuracy of any of the
representations and warranties made by the Sellers, in or
pursuant to this Agreement; (ii) any liability for additional
taxes (including penalties and interest, if any, with respect
thereto) assessed as a result of any examination disclosed on
Schedule 5.09 in response to the representations and
warranties in Section 5.09; (iii) any liability resulting from
the litigation disclosed on Schedule 5.16 in excess of the
aggregate of the amounts disclosed on Schedule 5.16 in response
to the representation and warranties in Section 5.16; (iv) any
liability resulting from the environmental matters disclosed on
Schedule 5.20 in excess of the aggregate of the amounts disclosed
in Schedule 5.20; and (v) any failure by the Sellers to perform
any of their covenants, agreements, obligations or undertakings
set forth in this Agreement or in any document or instrument
delivered pursuant hereto; provided, however, the Buyers
shall have the right to indemnification under Section 12.01(a)
only if such right is asserted (whether or not such Losses have
actually been incurred) on or before the date one year after the
Closing Date, except that (x) the representations and
warranties set forth in Sections 5.04, 5.05, 5.06 and 5.09 and
the indemnification in clause (i) above with respect thereto
shall continue to be in full force and effect for a period equal
26
- -134-
<PAGE>
to the applicable statutory time limits under the applicable Laws
and (y) the representations and warranties set forth in
Section 5.20 and the indemnification in clause (i) above with
respect thereto shall continue to be in full force and effect
for a period equal to three years from the Closing Date.
(b) Limitations. None of the Sellers shall be required
to indemnify the Buyers under Section 12.01(a) unless and until
the amount of all Losses for which indemnification is sought
with respect thereto exceeds US$ 1,000,000, at which point the
Sellers will be required to indemnify the Buyers for all such
Losses in excess of US$ 1,000,000; provided however that the
limitation contained in this sentence shall not apply with respect
to (i) any breach of the representations and warranties set forth
in Sections 5.04, 5.05 or 5.06; (ii) any tax liability
resulting from a breach of the representation and warranty in
Section 5.09(b) in excess of the aggregate of the amounts accrued
for tax liabilities on the Final Florimex Financial Statement,
(iii) any liability resulting from a breach of the representation
and warranty in Section 5.16 with respect to the litigation
disclosed on Schedule 5.16 in excess of the aggregate amounts
disclosed for such litigation on Schedule 5.16; (iii) any
liability resulting from a breach of the representation
and warranty in Section 5.20 with respect to the environmental
matters disclosed on Schedule 5.20 in excess of the aggregate
amounts disclosed for such matters on Schedule 5.20. The maximum
amount of Losses for which the Sellers shall, jointly and
severally, be liable shall be an amount equal to seventy-five
percent (75%) of the sum of the Final Purchase Price and the Final
Net Debt.
(c) Procedures. In the event that the Buyers have a
claim that is covered by the indemnity provisions of Section
12.01(a), notice shall be promptly given by the Buyers to the
Sellers. Provided that the Sellers admit in writing to the Buyers
that such claim is covered by the indemnity provisions of
Section 12.01(a), the Sellers shall have the right to contest
and defend by all appropriate legal proceedings relating to such
claim and to control all settlements (unless the Buyers agree
to assume the cost of settlement and to forgo such indemnity)
and to select lead counsel to defend any and all such claims at
the sole cost and expense of the Sellers; provided, however,
that the Sellers may not effect any settlement that could result
in any cost, expense, liability or harm to the business or
reputation of the Buyers unless the Buyers consent in writing
to such settlement and the Sellers agree to indemnify the Buyers
therefor. The Buyers may select counsel to participate in any
defense at its own cost and expense. In connection with any
such claim, action or proceeding, the parties shall cooperate
with each other and provide each other with access to relevant
books and records in their possession.
Section 12.02. Buyers' Obligation in Respect of Companies
in Liquidation. After the Closing Date, the Buyers shall
proceed diligently and complete as soon as possible the
liquidation of the Companies in Liquidation.
Section 12.03. Indemnity Amounts to be Computed on
After-Tax Basis. The amount of any indemnification payable
under any of the provisions of this Article XII shall be (i)
net of any income tax benefit realized or the then-present
value (based on a discount rate of 5%) of any such income tax
benefit to be realized by any indemnified party (or, where
any Buyer is an indemnified party, any of the Companies) by
reason of the facts and circumstances giving rise to the
27
- -135-
<PAGE>
indemnification, and (ii) increased by the amount of any income
tax required to be paid by the indemnified party on the accrual
or receipt of the indemnification payment (including any amount
payable pursuant to this clause (ii)). For purposes of the
preceding sentence, the amount of any state, provincial, or
local income tax benefit or cost shall take into account any
federal or national income tax effect of such benefit or cost.
ARTICLE XIII
MISCELLANEOUS
-------------
Section 13.01. Governing Law and Jurisdiction. This
Agreement and any agreement resulting herefrom shall be
construed and interpreted according to the laws of the
Commonwealth of Virginia without regard to the conflicts of law
rules thereof. Each party to this Agreement: (a) agrees that
any legal action or proceeding under this Agreement shall be
brought in the courts of the Commonwealth of Virginia or in
the United States District Court sitting in Richmond, Virginia;
(b) irrevocably submits to the jurisdiction of such courts;
(c) agrees not to assert any claim or defense that it is not
personally subject to the jurisdiction of such courts, that
any such forum is not convenient or the venue thereof is
improper, or that this Agreement or the subject matter hereof
may not be enforced in such courts; and (d) agrees to accept
service of process on it by certified or registered mail or
by any other method authorized by law.
Section 13.02. Notices. All communications, notices
and disclosures required or permitted by this Agreement shall
be in writing and shall be deemed to have been given when
delivered personally or by messenger or by overnight
delivery service, or when mailed by registered or certified
mail, postage prepaid, return receipt requested, or when
received via telecopy, telex or other electronic transmission,
in all cases addressed to the Person for whom it is intended
at his address set forth below or to such other address as a
party shall have designated by fifteen (15) days notice in
writing to the other party in the manner provided by this Section:
If to Sellers: DIMON Incorporated
512 Bridge Street
Danville, Virginia 24543 0681
Facsimile No.: 804/791-0377
Attention: Mr. Claude B. Owen, Jr.
With a copy to: Hunton & Williams
951 East Byrd Street
Richmond, Virginia 23219-4074
Facsimile No.: 804/788-8218
Attention: Thurston R. Moore, Esquire
28
- -136-
<PAGE>
If to Buyers: U.S.A. Floral Products Inc.
1025 Thomas Jefferson Street, N.W.
Suite 300 East
Washington, DC 20036
Facsimile: 202/333-0803
Attention: Robert J. Poirier
With a copy to: Morgan, Lewis & Bockius LLP
One Oxford Centre
Thirty-Second Floor
Pittsburgh, PA 15219
Facsimile: 412/560-3399
Attention: David A. Gerson, Esquire
Section 13.03. Entire Agreement. This Agreement supersedes
all prior discussions and agreements between the parties with
respect to the subject matter hereof and contains the sole and
entire agreement between the parties hereto with respect to
the subject matter hereof; provided, however, that nothing
herein shall affect (i) the validity of the Confidentiality
Agreement and (ii) any other written agreements or understandings
entered into by the parties or their Affiliates contemporaneously
with the execution and delivery of this Agreement, all of which
shall remain in full force and effect.
Section 13.04. Expenses. Except as otherwise expressly
provided in this Agreement, whether or not the transactions
contemplated hereby are consummated, each party will pay its
own costs and expenses incurred in connection with the
negotiation, execution and closing of this Agreement and
the transactions contemplated hereby (except that DIMON
shall be responsible for the costs and expenses of
Florimex Germany incurred in connection with the
transactions contemplated by this Agreement).
Section 13.05. Public Announcements. At all times at
or before the Closing, neither party to this Agreement will
issue or make any reports, statements or releases to the
public or generally to the employees, customers, suppliers
or other Persons with respect to this Agreement or the
transactions contemplated hereby, except to the extent
necessary to comply, or on the advice of counsel,
desirable to avoid the appearance of noncompliance with,
all legal and other formalities necessary to effect the
transactions contemplated by this Agreement, without the
consent of the other Party, which consent shall not be
unreasonably withheld. Each Party will also obtain each other
Party's prior approval of any press release to be issued
immediately following the Closing announcing the consummation
of the transactions contemplated by this Agreement.
If either Party is unable to obtain the approval of its
public report, statement or release from the other Party
and such report, statement or release is, upon the advice
of legal counsel to such Party, required by Law in order to
discharge such Party's legal or contractual disclosure
obligations, then such Party may make or issue the required
report, statement or release and promptly furnish the other
Party with a copy thereof.
Section 13.06. Confidentiality. Each party hereto will
hold, and will use all commercially reasonable efforts to
cause its Affiliates, and their respective Representatives,
29
- -137-
<PAGE>
to hold, in strict confidence from any Person (other than
any such Affiliate or Representative), all documents and
information concerning the other Party or any of its Affiliates
furnished to it by the other Party or such other Party's
Representatives in connection with this Agreement or the
transactions contemplated hereby in accordance with the
terms of the Confidentiality Agreement.
Section 13.07. Further Assurances; Post-Closing Cooperation.
--------------------------------------------
(a) Subject to the terms and conditions of this
Agreement, after the Closing, each of the Parties hereto shall,
at such Party's own expense, execute and deliver such other
documents and instruments, provide such materials and
information and take such other actions as may reasonably
be necessary, proper or advisable, to the extent permitted
by Law, to fulfill its obligations under this Agreement.
(b) Following the Closing, each Party will, at such
Party's own expense, afford every other Party, its counsel and
its accountants, during normal business hours, reasonable
access to the books, records and other data relating to the
business or condition of the Companies in its possession with
respect to periods prior to the Closing and the right to make
copies and extracts therefrom, to the extent that such access
may be reasonably required by the requesting party in connection
with (i) the preparation of tax returns, (ii) the determination
or enforcement of rights and obligations under this Agreement,
(iii) compliance with the requirements of any Governmental or
Regulatory Authority, (iv) the determination or enforcement
of the rights and obligations of any indemnified party
hereunder or (v) in connection with any actual or threatened
action or proceeding. Further, each Party agrees for a
period extending six (6) years after the Closing Date not
to destroy or otherwise dispose of any such books, records
and other data unless such Party shall first offer in
writing to surrender such books, records and other data
to the other Party and such other Party shall not agree
in writing to take possession thereof during the ten (10)
day period after such offer is made.
(c) If, in order properly to prepare its tax returns,
other documents or reports required to be filed with
Governmental or Regulatory Authorities or its financial
statements or to fulfill its obligations hereunder, it is
necessary that a Party be furnished with additional information,
documents or records relating to the business or condition of
the Companies not referred to in paragraph (b) above, and such
information, documents or records are in the possession or
control of the other Party, such other Party agrees to use
all commercially reasonable efforts to furnish or make
available such information, documents or records (or copies
thereof) at the recipient's request, cost and expense. Any
information obtained by any party in accordance with this
paragraph shall be held confidential by such party in accordance
with Section 13.06.
Section 13.08. Waiver. Any term or condition of this
Agreement may be waived at any time by the party that is
entitled to the benefit thereof, but no waiver shall be
effective unless set forth in a written instrument duly
executed by or on behalf of the party waiving such term or
condition. No waiver by any party of any term or condition of
this Agreement, in any one or more instances, shall be deemed
to be or construed as a waiver of the same or any other term
or condition of this Agreement on any future occasion. All
remedies, either under this Agreement or by Law or otherwise
afforded, will be cumulative and not alternative.
30
- -138-
<PAGE>
Section 13.09. Amendment. This Agreement may be amended,
supplemented or modified only by a written instrument duly
executed by or on behalf of each party hereto.
Section 13.10. No Third Party Beneficiary. The terms
and provisions of this Agreement are intended solely for the
benefit of each party hereto and their respective successors
or permitted assigns, and it is not the intention of the parties
to confer third-party beneficiary rights upon any other Person.
No third party is entitled to rely on any of the
representations, warranties or agreements contained in this
Agreement. None of the Sellers or the Buyers shall have any
liability to any third party because of any such reliance.
Section 13.11. No Assignment; Binding Effect. Neither
this Agreement nor any right, interest or obligation hereunder
may be assigned by any Party hereto without the prior written
consent of each other Party hereto and any attempt to do so
will be void, except for assignments and transfers by operation
of Law. Subject to the preceding sentence, this Agreement is
binding upon, inures to the benefit of and is enforceable by
the parties hereto and their respective successors and assigns.
Section 13.12. Headings. The headings used in this
Agreement have been inserted for convenience of reference only
and do not define or limit the provisions hereof.
Section 13.13. Invalid Provisions. If any provision of
this Agreement is held to be illegal, invalid or unenforceable
under any present or future Law, and if the rights or
obligations of any party hereto under this Agreement will
not be materially and adversely affected thereby, (a) such
provision will be fully severable, (b) this Agreement will
be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part hereof,
(c) the remaining provisions of this Agreement will remain
in full force and effect and will not be affected by the
illegal, invalid or unenforceable provision or by its severance
herefrom and (d) in lieu of such illegal, invalid or
unenforceable provision, there will be added automatically
as a part of this Agreement a legal, valid and enforceable
provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible.
Section 13.14. Counterparts. This Agreement may be
executed in any number of counterparts, each of which will
be deemed an original, but all of which together will
constitute one and the same instrument.
Section 13.15. Waiver of Jury Trial. Each party hereto
irrevocably waives all right to trial by jury in any action,
proceeding or counterclaim (whether based upon any contract,
tort or otherwise) arising out of or relating to this agreement,
the transactions contemplated hereby or in the negotiation,
administration, performance or enforcement thereof.
Section 13.16. Specific Performance. The parties hereto
agree that irreparable damage would occur in the event any of
the provisions of this Agreement were not performed in accordance
with the terms hereof and that the parties shall be entitled to
specific performance of the terms hereof, in addition to any
other remedy at law or equity for the breach of any
representation, warranty or covenant contained herein.
31
- -139-
<PAGE>
Section 13.17. Termination. Time is of essence of this
Agreement. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned as follows:
(a) at any time prior to the Closing Date by mutual written
agreement of Sellers and Buyers; or (b) by Buyers at any time
prior to the Closing Date within 20 business days following
Buyers' becoming aware of any uncured material breach of
Articles VII or IX hereof or on the Closing Date if any of
the conditions set forth in Article X of this Agreement
shall not have been fulfilled by the Closing Date; or
(c) by Sellers at any time prior to the Closing Date within
20 business days following the Sellers' becoming aware of
any uncured material breach of Articles VIII or IX hereof or
on the Closing Date if any of the conditions set forth in
Article XI of this Agreement shall not have been fulfilled
by the Closing Date; or (d) by Sellers on or after the
Closing Date, if by that date, despite substantial
adherence to the terms of this Agreement by Buyers, all
conditions to Closing provided herein other than the
third-party consents listed on Schedules 10.07 and
11.07 hereto, have not been obtained; or (e) by Sellers
or Buyers on or after December 31, 1998 if Closing
has not occurred on or before December 31, 1998.
32
- -140-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Stock
Purchase Agreement to be duly executed and delivered by the
duly authorized officer of each party hereto as of the date
first above written.
U.S.A. FLORAL PRODUCTS, INC.
By: /s/ Robert J. Poirier
Name: Robert J. Poirier
Title: Chairman of U.S.A.
Floral Products, Inc.
DIMON INCORPORATED
By: /s/ Claude B. Owen, Jr.
Name: Claude B. Owen, Jr.
Title: Chairman and Chief
Executive Officer
FLORIMEX WORLDWIDE GMBH
By: /s/ Claude B. Owen, Jr.
Name: Claude B. Owen, Jr.
Title: Chairman and Chief
Executive Officer
33
- -141-
<PAGE>
<TABLE>
<CAPTION>
Exhibit 21
----------
SUBSIDIARIES OF REGISTRANT (at June 30, 1998)
---------------------------------------------
PERCENTAGE OF VOTING
JURISDICTION SECURITIES OWNED
IN WHICH -------------------------------
NAME ORGANIZED BY REGISTRANT BY AFFILIATE
====================================================================================================
<S> <C> <C> <C>
DIMON International Tabak B.V. (A) The Netherlands 100.00%
DIMON International A.G. (A) Switzerland 100.00% (B)
Intabex Netherlands B.V. (A) The Netherlands 100.00%
DIMON Do Brasil Tabacos Ltda. (A) Brazil 100.00% (C)
Contentnea, Inc. (A) Delaware 100.00%
Kin-Farm, Inc. (A) North Carolina 100.00% (D)
Intabex Holdings Worldwide S.A. (A) Luxembourg 100.00%
Olima Holdings AG (A) Switzerland 100.00% (B)
DIMON International Tabak AG (S.A. Ltd.) (A) Switzerland 100.00% (F)
Compania de Filipinas S.A. (A) Spain 100.00% (E)
DIMON Exportadora de Fumos Ltda. (A) Brazil 50.00% (G)
(A) Included in the Consolidated Financial Statements
(B) Owned by DIMON International, Tabak B.V.
(C) Owned by Intabex Netherlands B.V.
(D) Owned by Contentnea, Inc.
(E) Owned by Intabex Holdings Worldwide S.A.
(F) Owned by Olima Holdings AG
(G) Owned by Compania de Filipinas S.A.
</TABLE>
-142-
<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 3, 1998 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/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Charlotte, North Carolina
September 3, 1998
-143-
<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 3, 1998
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/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Charlotte, North Carolina
September 3, 1998
-144-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<CASH> 18,729
<SECURITIES> 0
<RECEIVABLES> 319,295
<ALLOWANCES> 2,799
<INVENTORY> 612,626
<CURRENT-ASSETS> 1,208,890
<PP&E> 431,763
<DEPRECIATION> (113,663)
<TOTAL-ASSETS> 1,797,478
<CURRENT-LIABILITIES> 502,506
<BONDS> 797,027
<COMMON> 182,143
0
0
<OTHER-SE> 239,787
<TOTAL-LIABILITY-AND-EQUITY> 1,797,478
<SALES> 2,171,803
<TOTAL-REVENUES> 2,171,803
<CGS> 1,911,843
<TOTAL-COSTS> 1,911,843
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 274
<INTEREST-EXPENSE> 83,769
<INCOME-PRETAX> 55,989
<INCOME-TAX> 14,725
<INCOME-CONTINUING> 41,829
<DISCONTINUED> 1,820
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 43,649
<EPS-PRIMARY> .98
<EPS-DILUTED> .98
</TABLE>
