DIMON INC, 10-Q, 1999-05-14

DIMON INC
10-Q, 1999-05-14
FARM PRODUCT RAW MATERIALS

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Page 19 - Exhibit Index

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549
_______________________

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 1999

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from_____to_____

Commission file number 0-25734; 1-13684

DIMON INCORPORATED
------------------

(Exact name of registrant as specified in its charter)

VIRGINIA 54-1746567
-------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)

512 Bridge Street, Danville, Virginia 24541
------------------------------------- -----
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (804) 792-7511
--------------
Not Applicable
--------------
(Former name, former address and former fiscal
year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days.

Yes [X] No [ ]

Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Outstanding at
Class of Common Stock May 10, 1999
--------------------- --------------
NO par value 44,525,004

<PAGE>

DIMON Incorporated and Subsidiaries

INDEX

PAGE NO.
--------
<S> <C>

Part I. Financial Information:

Consolidated Balance Sheet March 31, 1999
and June 30, 1998........................................................ 3 - 4

Statement of Consolidated Income - Three Months and Nine Months Ended
March 31, 1999 and 1998................................................... 5

Statement of Consolidated Cash Flows - Nine
Months Ended March 31, 1999 and 1998...................................... 6

Notes to Consolidated Financial Statements................................ 7 - 11

Management's Discussion and Analysis
of Financial Condition and Results of Operations.......................... 12 - 16

Part II. Other Information............................................... 17

</TABLE>

- - 2 -
<PAGE>

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements
<TABLE>
<CAPTION>
DIMON Incorporated and Subsidiaries
CONSOLIDATED BALANCE SHEET

March 31
1999 June 30
(Unaudited) 1998
(in thousands) ____________ ____________
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents................ $ 30,331 $ 18,729
Notes receivable......................... 4,016 5,600
Trade receivables, net of allowances..... 320,894 319,295
Inventories:
Tobacco............................... 411,528 588,143
Other................................. 25,365 24,483
Advances on purchases of tobacco......... 134,702 192,191
Recoverable income taxes................. 10,824 2,748
Prepaid expenses and other assets........ 16,883 24,794
Net assets of discontinued operations.... - 32,907
---------- -----------
Total current assets......... 954,543 1,208,890
---------- -----------

Investments and other assets
Equity in net assets of investee
companies.............................. 5,874 6,022
Other investments........................ 9,595 9,896
Notes receivable......................... 9,972 9,313
Other.................................... 8,631 13,796
---------- -----------
34,072 39,027
---------- -----------
Intangible assets
Excess of cost over related net assets of
businesses acquired.................... 173,573 179,589
Production and supply contracts.......... 22,829 26,442
Pension asset............................ 3,555 3,555
---------- -----------
199,957 209,586
---------- -----------
Property, plant and equipment
Land..................................... 19,909 20,085
Buildings................................ 180,011 174,310
Machinery and equipment.................. 214,781 237,368

Allowances for depreciation.............. (108,034) (113,663)
---------- -----------
306,667 318,100
---------- -----------
Deferred taxes and other deferred
charges.................................. 21,022 21,875
---------- -----------
$1,516,261 $1,797,478
========== ===========
See notes to consolidated financial statements

</TABLE>

- - 3 -
<PAGE>

<TABLE>
<CAPTION>
DIMON Incorporated and Subsidiaries
CONSOLIDATED BALANCE SHEET

March 31
1999 June 30
(Unaudited) 1998
(in thousands) ____________ ____________
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable to banks................... $ 95,063 $ 282,470
Accounts payable:
Trade.................................. 51,901 80,994
Officers and employees................. 5,661 7,664
Other.................................. 27,413 7,825
Advances from customers.................. 44,326 50,521
Accrued expenses......................... 45,832 57,294
Income taxes............................. - 5,150
Long-term debt current................... 10,126 10,588
---------- -----------
Total current liabilities.... 280,322 502,506
---------- -----------
Long-term debt
Revolving Credit Notes and Other......... 535,433 548,699
Convertible Subordinated Debentures...... 123,328 123,328
Senior Notes............................. 125,000 125,000
---------- -----------
783,761 797,027
---------- -----------
Deferred credits:
Income taxes............................. 23,942 36,723
Compensation and other benefits.......... 39,943 38,812
---------- -----------
63,885 75,535
---------- -----------
Minority interest in subsidiaries.......... 480 480
---------- -----------

Commitments and contingencies.............. - -
---------- -----------
Stockholders' equity
Preferred Stock--no par value:
Mar. 31 Jun. 30
------- -------
Authorized shares... 10,000 10,000
Issued shares....... - -
Common Stock--no par value:
Mar. 31 Jun. 30
------- -------
Authorized shares... 125,000 125,000
Issued shares....... 44,525 44,525 182,143 182,143
Retained earnings........................ 210,816 243,816
Equity-currency conversions.............. (3,781) (2,664)
Additional minimum pension liability..... (1,365) (1,365)
---------- -----------
387,813 421,930
---------- -----------
$1,516,261 $1,797,478
========== ===========
</TABLE>
- - 4-
<PAGE>

DIMON Incorporated and Subsidiaries
STATEMENT OF CONSOLIDATED INCOME
Three Months and Nine Months Ended March 31, 1999 and 1998
(Unaudited)

1999 1998 1999 1998
Third Third First Nine First Nine
(in thousands, except per share amounts) Quarter Quarter Months Months
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Sales and other operating revenues.......... $485,377 $627,721 $1,464,656 $1,658,733
Cost of goods and services sold............. 446,291 566,493 1,357,214 1,455,802
--------- --------- ----------- -----------
Gross profit................................ 39,086 61,228 107,442 202,931
Selling, administrative and
general expenses.......................... 27,601 30,718 86,657 87,701
Restructuring and other asset
impairment charges........................ 23,066 - 23,066 -
--------- --------- ----------- -----------
Operating Income (Loss)..................... (11,581) 30,510 (2,281) 115,230

Interest expense............................ 16,518 19,722 51,903 63,273
--------- --------- ----------- -----------
Income (loss) from continuing operations
before income taxes, equity in net income
(loss) of investee companies and
discontinued operations................... (28,099) 10,788 (54,184) 51,957
Income taxes (benefit)...................... (5,052) 2,283 (13,921) 12,829
--------- --------- ----------- -----------
Income (loss) from continuing operations
before equity in net income (loss)
of investee companies..................... (23,047) 8,505 (40,263) 39,128

Equity in net income (loss) of investee
companies, net of income taxes............ 51 (231) (63) 573
--------- --------- ----------- -----------
Income (loss) from continuing operations.... (22,996) 8,274 (40,326) 39,701
Discontinued business:
Income (loss) from operations, net of
tax benefits............................ - 2,368 (841) 2,331
Gain on disposal, net of $4,288 tax....... - - 23,753 -
--------- --------- ----------- -----------
NET INCOME (LOSS)........................... $(22,996) $ 10,642 $ (17,414) $ 42,032
========= ========= =========== ===========
Basic Earnings Per Share
Income (loss) from continuing operations.. $(.52) $.19 $(.90) $.90
Discontinued operations................... - .05 .51 .05
------ ----- ------ -----
Net Income (Loss)......................... $(.52) $.24 $(.39) $.95
====== ===== ====== =====
Diluted Earnings Per Share
Income (loss) from continuing operations $(.52) $.19 $(.90) $.88
Discontinued operations................... - .05 .51 .05
------ ----- ------ -----
Net Income (Loss)......................... $(.52)* $.24 $(.39)* $.93
====== ===== ====== =====
Average number of shares outstanding:
Basic..................................... 44,525 44,525 44,525 44,456
Diluted................................... 44,525 48,994 44,525 49,114

Cash dividends per share.................... $.09 $.17 $ .35 $.49
====== ===== ====== =====
See notes to consolidated financial statements
* Assumed conversion of Convertible Debentures at the beginning
of the period has an antidilutive effect on earnings per share.
</TABLE>
- - 5-
<PAGE>
<TABLE>
<CAPTION>

DIMON Incorporated and Subsidiaries
STATEMENT OF CONSOLIDATED CASH FLOWS
Nine Months Ended March 31, 1999 and 1998
(Unaudited)

March 31 March 31
1999 1998
(in thousands) ___________ ___________
<S> <C> <C>
Operating activities
Net Income (Loss)........................... $(17,414) $ 42,032
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization............. 32,201 35,604
Restructuring and other asset
impairment charges...................... 23,066 -
Deferred items............................ (10,124) (12,560)
Gain on foreign currency transactions..... (540) (757)
Gain on disposition of fixed assets (443) (2,133)
Change in discontinued operations......... 1,023 -
Gain on disposition of discontinued
operations.............................. (23,753) -
Undistributed loss (earnings) of
investees............................... 63 (573)
Income applicable to minority interest.... - 80
Bad debt expense.......................... 360 950
Increase in accounts receivable........... (843) (6,339)
Decrease (increase) in inventories
and advances on purchases of tobacco.... 235,849 (23,793)
Increase in recoverable taxes............. (8,067) (2,995)
Decrease (increase) in prepaid expenses... 7,020 1,927
Decrease in accounts payable and
accrued expenses........................ (30,069) (22,237)
Decrease (increase) in advances
from customers.......................... (8,104) 6,149
Decrease in income taxes.................. (8,889) (2,333)
Other..................................... (364) 615
----------- ----------
Net cash provided by operating
activities............................ 190,972 13,637
----------- ----------
Investing activities
Purchase of property and equipment.......... (27,572) (27,949)
Proceeds from sale of property and
equipment................................. 2,617 16,964
Proceeds from sale of property and
equipment of Discontinued Operation....... 37,637 -
Payments received (advances) on notes
receivable and receivable from
investees................................. (980) 1,818
Payments received (advances) for
other investments and other assets........ 3,625 (2,195)
Purchase of subsidiary...................... - (14,590)
Purchase of remaining interest
in investee............................... - (2,200)
Proceeds from sale of Discontinued
Operation................................. 28,435 -
----------- ----------
Net cash provided (used) by
investing activities.................. 43,762 (28,152)
----------- ----------
Financing activities
Net change in short-term borrowings......... (192,104) (15,680)
Proceeds from long-term borrowings.......... 18,960 24
Repayment of long-term borrowings........... (33,225) (20,722)
Proceeds from sale of common stock.......... - 3,204
Cash dividends paid to
DIMON Incorporated stockholders........... (15,584) (21,785)
----------- ----------
Net cash used by financing activities....... (221,953) (54,959)
----------- ----------
Effect of exchange rate changes on cash....... (1,179) (1,552)
----------- ----------
Increase (decrease) in cash and
cash equivalents............................ 11,602 (71,026)
Increase (decrease) in cash from
consolidation of investee................... - 27
Cash and cash equivalents at
beginning of year........................... 18,729 107,131
----------- ----------
Cash and cash equivalents at
end of period........................... $ 30,331 $ 36,132
=========== ==========
</TABLE>
- 6 -
<PAGE>

DIMON Incorporated and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Basic earnings per share is computed by dividing earnings
by the weighted average number of shares outstanding
during each period. The diluted earnings per share
calculation assumes that all of the Convertible
Subordinated Debentures during the periods presented were
converted into Common Stock at the beginning of the
reporting period, or as of the date of issue, thereby
increasing the weighted average number of shares
considered outstanding during each period and reducing
the after-tax interest expense. The weighted average
number of shares outstanding are further increased by
common stock equivalents on employee stock options.

The following information reconciles the basic weighted
average number of shares outstanding to diluted shares
outstanding and diluted earnings per share:
<TABLE>
<CAPTION>

1999 1998 1999 1998
Third Third First Nine First Nine
(in thousands, except per share amounts) Quarter Quarter Months Months
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Basic Earnings Per Share
------------------------
Income (loss) from continuing operations...... $(22,996) $ 8,274 $(40,326) $39,701
Discontinued operations....................... - 2,368 22,912 2,331
--------- -------- --------- --------
Net Income (Loss)............................. $(22,996) $10,642 $(17,414) $42,032
========= ======== ========= ========

Shares
------
Weighted Average
Shares Outstanding........................ 44,525 44,525 44,525 44,456
========= ======== ========= ========

Basic Earnings Per Share
------------------------
Income (loss) from continuing operations...... $(.52) $.19 $(.90) $.90
Discontinued operations....................... - .05 .51 .05
------ ----- ------ -----
Net Income(Loss).............................. $(.52) $.24 $(.39) $.95
====== ===== ====== =====

Diluted Earnings Per Share
--------------------------
Income (loss) from continuing operations...... $(22,996) $ 8,274 $(40,326) $39,701
Add after tax interest expense
applicable to 6 1/4% Convertible
Debentures issued April 1, 1997............. - * 1,175 - * 3,526
--------- -------- --------- --------
Income (loss) before discontinued
operations.................................. (22,996) 9,449 (40,326) 43,227
Discontinued operations....................... - 2,368 22,912 2,331
--------- -------- --------- --------
Net Income (Loss) as Adjusted................. $(22,996) $11,817 $(17,414) $45,558
========= ======== ========= ========

Shares
------
Weighted average number of common
shares outstanding.......................... 44,525 44,525 44,525 44,456
Shares applicable to stock options,
net of shares assumed to be
purchased from proceeds at
average market price........................ - 182 - 371
Assuming conversion of 6 1/4%
Debentures at beginning of period........... - * 4,287 - * 4,287
--------- -------- --------- --------
Average Diluted Shares Outstanding............ 44,525 48,994 44,525 49,114
========= ======== ========= ========

Diluted Earnings Per Share
--------------------------
Income (loss) from continuing operations...... $(.52) $.19 $(.90) $.88
Discontinued operations....................... - .05 .51 .05
------ ----- ------ -----
Net Income (Loss) as Adjusted................. $(.52) $.24 $(.39) $.93
====== ===== ====== =====

* Assumed conversion of Convertible Debentures at the beginning of the
period has an antidilutive effect on earnings per share.
</TABLE>

- - 7 -
<PAGE>

DIMON Incorporated and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. As of July 1, 1998 the Company adopted Statement of Financial
Standards No. 130, "Reporting Comprehensive Income" (SFAS 130). The
adoption of this statement had no impact on the Company's net income
or Stockholders' equity. SFAS 130 establishes new rules for the
reporting and presentation of comprehensive income and its components.
SFAS 130 requires equity currency conversion adjustments to be
included in other comprehensive income. Amounts in prior year
financial statements have been reclassified to conform to SFAS 130.

The components of comprehensive income were as follows:

<TABLE>
<CAPTION>
Nine Months Ended
March 31
-------------------------
(in thousands) 1999 1998
------- ------
<S> <C> <C>
Net income (loss).......................... $(17,414) $42,032
Increase in Equity Currency Conversion..... (1,117) (3,842)
--------- --------
Total comprehensive income (loss).......... $(18,531) $38,190
</TABLE>

3. The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have
been included.

4. On April 1, 1995, Dibrell Brothers, Incorporated (Dibrell) and Monk-
Austin, Inc. (Monk-Austin) merged into DIMON. In connection with the
merger, the Company incurred legal, accounting and financial
consultants costs of $8.1 million and commenced various activities to
restructure its worldwide operations. In June 1995, the Company
provided a restructuring reserve of $17.9 million pre-tax related
primarily for the elimination of duplicative facilities of tobacco
operations and a reduction in the number of employees. In 1996 a
restructuring provision of $15.4 million was made primarily for
additional severance costs. During the year ended June 30, 1996, the
Company severed a total of 367 employees most of which were
involuntarily separated. The severed employees were primarily in the
tobacco division and worked in various departments throughout the
Company. During the year ended June 30, 1997, additional
restructuring charges were accrued in the amount of $3.9 million, of
which $2.9 million relates to additional severance costs and $1
million relates to a reduction of capitalized idle plant expense. At
June 30, 1998, the remaining cash outlays associated with employee
separations are expected to total $5.0 million, of which $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.

During the nine months ended March 31, 1999, the Company paid out $1.2
million, principally for employee separations.

- - 8 -
<PAGE>

DIMON Incorporated and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. On March 22, 1999, the Company announced that it plans to close its
tobacco processing plant in Kinston, North Carolina, reduce staffing
at its processing facility in Farmville, North Carolina, and
substantially downsize its leaf tobacco buying department in the
United States. The Company also plans to close a processing facility
in Germany and a sales office in Brazil. These actions are the result
of smaller tobacco crops anticipated in 1999 and beyond. The
restructuring is expected to be completed prior to June 30, 1999, and
is expected to result in pre-tax charges of approximately $17 million,
of which approximately $11 million is non-cash.

During the quarter ended March 31, 1999, the Company terminated a
total of 180 employees, primarily in the United States, and expensed
$2.9 million. The severance is expected to be paid out during
calendar 1999.

Asset write downs incurred during the quarter ended March 31, 1999, in
connection with the restructuring included a charge of approximately
$11.1 million associated with the closing and planned disposal of
property, plant and equipment in the facilities mentioned above.

6. Global over capacity of tobacco caused management to believe that
certain assets should be analyzed for impairment. The analysis, based
on undiscounted cash flows, resulted in an impairment write-down of
approximately $9.1 million for assets which have been identified as
available-for-sale by the Company in accordance with Financial
Accounting Standards Board Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of," ("SFAS 121"). In accordance with SFAS 121, when an
impairment write down is required, the related assets are adjusted to
their estimated fair value. In determining fair value, the Company
considered the range of preliminary purchase prices being discussed
with potential buyers as well as third-party appraisals. The
estimated market value of the related assets, consisting primarily of
buildings and machinery and equipment, is approximately $17.4 million.

7. On September 30, 1998, the Company finalized the sale of the flower
operations, receiving approximately $66 million as a note. The buyer
assumed $31 million of the debt of Florimex Worldwide. The Company
recorded a gain on the sale of $23.8 million net of $4.3 million tax.
On October 2, 1998, the Company collected the $66 million for payment
of the note.

8. 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 1/4% 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 agreement. In August 1997, the Intabex purchase price was

- - 9 -
<PAGE>

DIMON Incorporated and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. (Continued)
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-K for
the year ended June 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 was a
director of and consultant to DIMON and the former Chairman of
Intabex. Mr. Taberer resigned as a director as of January 25, 1999.

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 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 were required to 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 applied first against $8.1 million
in accounts receivable and $3.4 million in other investments that
DIMON has established 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.
A corresponding reduction in DIMON's legal and professional expenses,
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.

- - 10 -
<PAGE>

DIMON Incorporated and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. (Continued)
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.

9. 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 8,
Intabex's former shareholders have indemnified DIMON against certain
liabilities in connection with the acquisition of Intabex, and DIMON
may set off any such indemnified liabilities against $90 million of
the Debentures.

10. 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 March 31,
1999, of $14.1 million, after the recent devaluation of the Brazilian
currency but 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 March 31, 1999, of $7.8
million, after the recent devaluation of the Brazilian currency but
before related tax benefits for all assessed interest. During the
fiscal year ended June 30, 1998, the Company had $22.8 million 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 remaining
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.

11. The results of operations for the three and nine months ended March
31, 1999 and 1998 are not necessarily indicative of the results to be
expected for the full year and should not be relied on as a basis for
projecting year end results. The Company's operations are seasonal
and quarterly comparisons are of little value. For additional
information regarding accounting principles and other financial data,
see Notes to Consolidated Financial Statements in the Annual Report on
Form 10-K for the fiscal year ended June 30, 1998.

12. Certain prior period amounts have been reclassified to conform to the
current period presentation.

- - 11 -
<PAGE>

DIMON Incorporated and Subsidiaries

Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations

RESULTS OF OPERATIONS:
---------------------

Three months ended March 31, 1999 compared to three months ended
March 31, 1998

Net sales and other operating revenues from continuing operations were
$485.4 million, a decrease of 22.7% or $142.3 million for the three months
ended March 31, 1999 from $627.7 million for the same period in 1998. The
decrease was due to decreases in quantities and average prices for both
foreign and U.S. grown tobaccos. Quantities of U.S. grown tobacco
decreased 17.1% and quantities of foreign grown tobacco decreased 11.4%
from the prior year. Lower quantities of foreign grown were most prevalent
in Europe and South America, partially offset by increased quantities in
Asia and Africa. The declines in quantities resulted in decreases of $51.7
million on U.S tobacco and $33.8 million on foreign grown tobaccos.
Average prices decreased by 4.7% on domestic tobacco and 13.1% on foreign
grown tobacco. The lower prices resulted in decreases of $11.8 million on
U.S. tobacco and $39.0 million on foreign grown tobacco. The lower
quantities and lower sales prices are both results of a general worldwide
oversupply of tobacco. Lower prices of foreign grown tobacco were also due
in part to a decline in purchase prices of tobacco. Decreases in service
and processing revenue accounted for an aggregate decrease of $6.0 million
on U.S. and foreign tobaccos.

The cost of sales and expenses from continuing operations, before
restructuring costs, decreased $123.3 million, or 20.6%, from $597.2
million in 1998 to $473.9 million in 1999. Most of this decrease is the
direct result of lower sales. In 1998, the Company recorded $10.0 million
in start-up costs for its operation in Tanzania. Operating margin, before
restructuring and net of the charge in 1998 related to Tanzania, decreased
$19.0 million or 62.4% from $30.5 million in 1998 to $11.5 million in 1999.
Liquidation of old crop tobaccos during a period of depressed leaf prices
worldwide resulted in significant margin erosion.

In response to decreased tobacco crops anticipated in 1999 and beyond, the
Company has initiated a restructuring plan to improve operating
efficiencies by reducing excess capacities. During the quarter ended March
31, 1999, the Company incurred $23.1 million in restructuring and other
asset impairment costs which included $20.2 related to facility write downs
and $2.9 million for personnel related costs.

Interest expense decreased $3.2 million or 16.2% from $19.7 million in 1998
to $16.5 million in 1999 primarily due to lower average borrowings.

The effective tax rate changed from 21.2% in 1998 to 18.0% in 1999
primarily due to changes in the distribution of taxable income between
taxing jurisdictions and the recognition of the deferred tax benefit
related to the restructuring and other asset impairment charges.

- - 12 -
<PAGE>

DIMON Incorporated and Subsidiaries

Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations

RESULTS OF OPERATIONS:
---------------------

Nine months ended March 31, 1999 compared to nine months ended
March 31, 1998

Net sales and other operating revenues from continuing operations were
$1,464.7 million, a decrease of 11.7% or $194.0 million for the nine months
ended March 31, 1999 from $1,658.7 million for the same period in 1998.
The decrease was due to decreases in quantities and prices for both foreign
and U.S. grown tobaccos. Quantities of U.S. grown tobacco decreased 4.5%
and quantities of foreign grown tobacco decreased 4.6% from the prior year.
Quantities decreased in Europe and South America, partially offset by
increased quantities in Africa. The declines in quantities resulted in
decreases of $31.5 million on U.S. grown tobacco and $11.3 million on
foreign grown tobaccos. Average prices declined by 0.7% on U.S. tobacco
and 8.9% on foreign grown tobacco. The lower prices resulted in decreases
of $4.6 million on U.S. tobacco and $109.8 million on foreign grown
tobacco. The lower quantities and lower sales prices are both results of a
general worldwide oversupply of tobacco. Lower prices of foreign grown
tobacco were also due in part to a decline in purchase prices of tobacco.
Decreases in service and processing revenue accounted for a decrease of
$17.9 million on foreign operations and $18.9 million on U.S. tobaccos.
The decrease in foreign is due primarily to decreased fertilizer sales to
farmers and the decrease in U.S. is due to less volume being processed for
the U.S. stabilization program.

The cost of sales and expenses from continuing operations, before
restructuring costs, decreased $99.6 million, or 6.5%, from $1,543.5
million in 1998 to $1,443.9 million in 1999. Most of this decrease is the
direct result of lower sales. In 1998, the company recorded $10.0 million
in start-up costs for its operation in Tanzania. In 1999, the Company
recorded a $5.6 million charge to provide for costs incurred on the 1998
crop in Tanzania. Operating margin, before restructuring, decreased $94.4
million or 81.9% from $115.2 million in 1998 to $20.8 million in 1999.
Liquidation of old crop tobaccos during a period of depressed leaf prices
worldwide resulted in significant margin erosion.

During the quarter ended March 31, 1999 the Company incurred $23.1 million
in restructuring and other asset impairment costs which included $20.2
related to facilities and $2.9 million for personnel related costs.

Interest expense decreased $11.4 million or 18.0% from $63.3 million in
1998 to $51.9 million in 1999 of which $4.1 million was due to lower rates
and $7.3 million was due to lower average borrowings.

The effective tax rate changed from 24.7% in 1998 to 25.7% in 1999
primarily due to changes in the distribution of taxable income between
taxing jurisdictions and the recognition of the deferred tax benefit
related to the restructuring and other asset impairment charges.

- - 13 -
<PAGE>

DIMON Incorporated and Subsidiaries

Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)

FINANCIAL CONDITION:
-------------------

The purchasing and processing activities of the Company's tobacco business
are seasonal. The Company's need for capital fluctuates accordingly and,
at any of several seasonal peaks, the Company's outstanding indebtedness
may be significantly greater or lesser than at year end. The Company
historically has needed capital in excess of cash flow from operations to
finance inventory and accounts receivable and, more recently, to finance
acquisitions of foreign tobacco operations. The Company also prefinances
tobacco crops in certain foreign countries by making cash advances to
farmers prior to and during the growing season.

DIMON's working capital decreased from $706.4 million at June 30, 1998 to
$674.2 million at March 31, 1999. The current ratio of 2.4 to 1 at June 30,
1998 increased to 3.4 to 1 at March 31, 1999. At March 31, 1999, current
assets decreased $254.3 million, or 21.0%, and current liabilities
decreased $222.2 million, or 44.2%, from June 30, 1998. Current assets
decreased primarily due to decreases in tobacco inventories, advances on
purchases of tobacco, net assets of discontinued operations, and prepaid
expenses of $176.6 million, $57.5 million, $32.9 million and $7.9 million,
respectively, offset partially by increases in cash and recoverable income
tax of $11.6 million and $8.1 million, respectively. The decreases in
tobacco inventories and advances on purchases of tobacco are due to the
Company focusing on the reduction of inventories and advances to strengthen
its balance sheet. The sale of the flower operations accounts for the
changes in net assets of discontinued operations. Current liabilities
decreased primarily due to decreases in notes payable, accounts payable
trade, accrued expenses, advances from customers, and income taxes of
$187.4 million, $29.1 million, $11.5 million, $6.2 million and $5.2
million, respectively, offset partially by the increase in accounts payable
other of $19.6 million. Most of the decreases in current liabilities
relate to decreases in inventories. Additionally, notes payable decreased
due to the proceeds on the sale of Florimex. The increase in accounts
payable other is due primarily to seasonal aspects of net payables for
farmers in Brazil and to restructuring. The Company is focused on the
reduction of inventory and advances on purchases of tobacco to strengthen
its balance sheet and improve operating efficiencies and margins. Tobacco
inventories and advances on purchases of tobacco have decreased by
approximately $310 million compared to the same period last year. In
addition, the level of uncommitted inventories has decreased by over $140
million since June 30, 1998, despite a continuing difficult trading
environment for the entire leaf industry. Current uncommitted inventories
are at appropriate levels, and while the upcoming South American crops may
create additional inventories in the normal course of business, the Company
expects continued reductions in uncommitted inventories on a seasonally
adjusted basis. However, uncommitted inventories present continuing
financial risk to the Company.

At March 31, 1999, DIMON had seasonally adjusted lines of credit of $1.1
million, excluding the long-term credit agreements. These lines bear
interest at annual rates ranging from 5.03% to 18.50%. At March 31, 1999,
unused lines of credit amounted to $673.6 million, net of $116 million of
letters of credit and guarantees that reduce lines of credit. Total
maximum outstanding borrowings excluding the long-term credit agreements
during the three months ended March 31, 1999 were $372.9 million.

To ensure long-term liquidity, DIMON entered into a $500 million Credit
Facility, effective June 27, 1997, with 20 banks which replaced DIMON's
$240 million existing credit facility. The Company had $200 million of
borrowings under these agreements at March 31, 1999. The Company uses the
Credit Facility to classify $300 million of working capital loans to

- - 14 -
<PAGE>

DIMON Incorporated and Subsidiaries

Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)

FINANCIAL CONDITION (Continued)

Revolving Credit Notes. The 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 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 (7.75% at March 31, 1999). 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 is presently renegotiating its
Credit Facility. In view of the reduced financing needs, the expected size
of the facility may be lower and at terms less favorable than those
currently in place.

The Company believes that its lines of credit, customer advances, and cash
from operations are sufficient to fund the Company's purchasing and capital
needs for fiscal 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 on favorable terms.
Reliance on available credit presents financial risk to the Company going
forward.

Cash flows provided by operating activities increased $177.4 million from
$13.6 million to $191.0 million for the nine months ended March 31, 1999
over the same period last year, due primarily to decreases in inventories
and advances on purchases of tobacco and restructuring charge, offset
partially by the decrease in net income, the gain on disposition of
discontinued operations and the decrease in advances from customers. Cash
flows provided by investing activities increased $71.9 million primarily
due to the proceeds from sale of discontinued operations, the proceeds from
the sale of property and equipment of Discontinued Operation and the
purchase of subsidiary in 1998, offset partially by decreased proceeds from
the sale of property and equipment. Cash flows used by financing
activities increased $167.0 million primarily due to the decrease in the
net change in short-term borrowings and repayment of long-term borrowings,
partially offset by the increase in proceeds from long-term borrowings.

OUTLOOK AND OTHER INFORMATION:

Although the Company believes that there continues to be certain positive
fundamentals in the tobacco business on a global basis, the Company does
not expect the currency devaluations in east Asia and eastern Europe and
the related effect on purchasing power of customers in those areas to
improve in the near term. The Company also believes that threats of
additional lawsuits in the U.S. with increased excise taxes resulting in
increased retail prices and thus lower expected consumption of cigarettes
in the U.S. continues to impact the purchasing decisions, relating to both
U.S. and foreign leaf tobacco, of certain of the Company's primary U.S.
based customers. While recent smaller crops in the United States have
mitigated this situation to a certain extent, the leaf industry has not yet
fully recovered from the imbalance in supply and demand that has been
created by these issues. The Company believes that the risk of further
delays in shipments and the realization of lower average prices could
continue in future periods.

- - 15 -
<PAGE>

DIMON Incorporated and Subsidiaries

Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)

OUTLOOK AND OTHER INFORMATION (Continued)

The Company has experienced significant operational challenges in Africa,
especially in Tanzania. Such challenges in Tanzania include the start up
of a new factory in October 1998, an unreliable infrastructure which
hinders efficient distribution and losses on farmer advances. Given these
challenges, the Company believes it is not likely that there will be a
significant improvement in sales or operating profit in Tanzania for the
remainder of the 1999 fiscal year or in the 2000 fiscal year.

See "Factors That May Affect Future Results," below, for important
warnings about the forward-looking statements included in this section.

YEAR 2000 ISSUE

To prepare for the upcoming millenium change, DIMON is continuing its
efforts in assessment, remediation and testing of its critical applications
at all Company sites (See 1998 Annual Report - Management's Discussion and
Analysis of Financial Condition and Results of Operations - Year 2000
Issue). DIMON's Year 2000 project is presently on schedule with a target
date for corporate readiness set for mid-1999 Most of the Company's
primary processing facilities have completed the above mentioned
preparatory phases and are presently developing contingency plans. Through
March 31, 1999, DIMON has spent $6.2 million of its anticipated $7.0
million Year 2000 project budget. Total expenditures for all global
remediation efforts are not expected to exceed $6.6 million. Each
location's preparation includes development of contingency plans 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. The Company
does not expect the financial impact of becoming Year 2000 compliant to be
material to the Company's consolidated financial position or results of
operations.

FACTORS THAT MAY AFFECT FUTURE RESULTS:

The foregoing discussion may contain forward-looking statements, generally
identified by phrases such as "the Company expects," "believes,"
"anticipates" or words of similar effect. Certain important factors that
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 the
remainder of fiscal year 1999 and beyond to differ materially from those
expressed in any forward-looking statements made by the Company are
discussed above under "OUTLOOK AND OTHER INFORMATION" and in the
Company's Annual Report on Form 10-K for the year ended June 30, 1998,
under the caption "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Factors that May Affect Future
Results."

- - 16 -
<PAGE>

DIMON Incorporated and Subsidiaries

PART II. OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

( a ) Exhibits 10.1 - Amendment No. 2 dated February 12,
1999 to the $500,000,000 Credit
Agreement dated June 27, 1997

10.2 - Amendment No. 3 dated April 30,
1999 to the $500,000,000 Credit
Agreement dated June 27, 1997

27 - Financial Data Schedule

( b ) Reports on Form 8-K - None

- - 17 -
<PAGE>

DIMON Incorporated and Subsidiaries

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this amendment to be
signed on its behalf by the undersigned thereunto duly
authorized.

DIMON Incorporated

/s/ Jerry L. Parker
-----------------------
Date: May 14, 1999 Jerry L. Parker
Senior Vice President
- Controller
(Principal Accounting Officer)

- - 18 -
<PAGE>

DIMON Incorporated and Subsidiaries

EXHIBIT INDEX
-------------------------

Exhibit Page No.
- ---------- -------------
<S> <C>

10.1 Amendment No. 2 dated February 12, 1999 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 Cooperative Centrale
Raiffaisen-Boerenleenbank B.A., "Rabobank Nederland,"
New York Branch and Societe Generale as co-agents....... 20 - 27

10.2 Amendment No. 3 dated April 30, 1999 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
Cooperative Centrale Raiffaisen-Boerenleenbank
B.A., "Rabobank Nederland," New York Branch and
Societe Generale as co-agents........................... 28 - 33

27 Financial Data Schedule................................. 34

</TABLE>

- - 19 -
<PAGE>

Exhibit 10.1
------------

AMENDMENT NO. 2 TO CREDIT AGREEMENT

THIS AMENDMENT NO. 2 TO CREDIT AGREEMENT, dated as of February 12, 1999
(the "Amendment"), is by and among DIMON INCORPORATED, a Virginia corporation
(the "Borrower"), the several lenders identified on the signature pages
hereto (the "Lenders"), NATIONSBANK, N.A., as administrative agent for the
Lenders (in such capacity, the "Administrative Agent"), FIRST UNION NATIONAL
BANK ("FUNB"), as documentation agent for the Lenders (in such capacity, the
"Documentation Agent"), and COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK
B.A., "RABOBANK NEDERLAND," NEW YORK BRANCH ("Rabobank") and SOCIETE GENERALE
("SocGen"), as co-agents for the Lenders (in such capacity, the "Co-Agents").

W I T N E S S E T H:

WHEREAS, pursuant to a Credit Agreement dated as of June 27, 1997, as
amended pursuant to that certain Amendment No. 1 to Credit Agreement dated as
of May 6, 1998 (as previously amended, the "Credit Agreement") among the
Borrower, the Lenders, the Administrative Agent, the Documentation Agent and
the Co-Agents, the Lenders have extended commitments to make certain credit
facilities available to the Borrower;

WHEREAS, the parties hereto have agreed to enter into this Amendment in
order to effect certain amendments to the Credit Agreement.

NOW, THEREFORE, in consideration of the agreements herein contained, the
parties hereby agree as follows:

PART I
DEFINITIONS

SUBPART 1.1. Certain Definitions. Unless other-wise defined
herein or the context otherwise requires, the following terms used in
this Amendment, including its preamble and recitals, have the following
meanings:

"Amendment Effective Date" is defined in
Subpart 3.1.

SUBPART 1.2. Other Definitions. Unless otherwise defined herein
or the context otherwise requires, terms used in this Amendment,
including its preamble and recitals, have the meanings provided in the
Credit Agreement (as amended hereby).

PART II
AMENDMENTS TO CREDIT AGREEMENT

Effective on (and subject to the occurrence of) the Amendment Effective
Date, the Credit Agreement is hereby amended in accordance with this Part II.

SUBPART 2.1. Amendments to Section 6.3. Section 6.3 of the Credit
Agreement is hereby amended in its entirety to read as follows:

- -20-
<PAGE>

Section 6.3 Consolidated Fixed Charge Coverage Ratio.
----------------------------------------
Maintain a Consolidated Fixed Charge Coverage Ratio, calculated on the
last day of each fiscal quarter ending on the dates set forth below, of not
less than the ratio set forth opposite such date:

Fiscal Quarter End Ratio
------------------ -----------
September 30, 1997 0.80:1.0
December 31, 1997 1.10:1.0
March 31, 1998 through
March 31, 1999 0.90:1.0
June 30, 1999 and each fiscal
quarter end occurring thereafter 1.25:1.0

PART III
CONDITIONS TO EFFECTIVENESS

SUBPART 3.1. Amendment Effective Date. This Amendment shall be
and become effective as of the date hereof (the "Amendment Effective
Date") when all of the conditions set forth in this Subpart 3.1 shall
have been satisfied.

SUBPART 3.1.1. Execution of Counterparts of Amendment.
The Administrative Agent shall have received counterparts of
this Amendment, which collectively shall have been duly
executed on behalf of the Borrower and the Required Lenders.

SUBPART 3.1.2. Amendment Fee. The Borrower shall pay to each
Lender which executes this Amendment an amendment fee equal to
three and one-half basis points (3.5bps) on such Lender's
Commitment .

SUBPART 3.1.4. Other Documents. The Administrative Agent
shall have received such other documentation as the Administrative
Agent may reasonably request in connection with the foregoing, all
in form reasonably satisfactory to the Administrative Agent.

PART IV
MISCELLANEOUS

SUBPART 4.1. Cross-References. References in this Amendment to
any Part or Subpart are, unless otherwise specified, to such Part or
Subpart of this Amendment.

SUBPART 4.2. Instrument Pursuant to Credit Agreement. This
Amendment is a Credit Document executed pursuant to the Credit Agreement
and shall (unless otherwise expressly indicated therein) be construed,
administered and applied in accordance with the terms and provisions of
the Credit Agreement.

SUBPART 4.3. References in Other Credit Documents. At such time
as this Amendment shall become effective pursuant to the terms of
Subpart 3.1, all references in the Credit Documents to the "Credit
Agreement" shall be deemed to refer to the Credit Agreement as amended
by this Amendment.

- -21-
<PAGE>

SUBPART 4.4. Survival. Except as expressly modified and amended in
this Amendment, all of the terms and provisions and conditions of each of the
Credit Documents shall remain unchanged.

SUBPART 4.5. Counterparts. This Amendment may be executed by the
parties hereto in several counterparts, each of which shall be deemed to
be an original and all of which shall constitute together but one and
the same agreement.

SUBPART 4.6. Governing Law. THIS AMENDMENT SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE
COMMONWEALTH OF VIRGINIA WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW
PRINCIPLES THEREOF.

SUBPART 4.7. Successors and Assigns. This Amendment shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.

SUBPART 4.8. Acknowledgement of Mergers of Certain Subsidiaries. The
Lenders hereby acknowledge that Florimex Worldwide, Inc. and DIMON
International, Inc. have been merged into the Borrower.

- -22-
<PAGE>

Each of the parties hereto has caused a counterpart of this Amendment to be
duly executed and delivered as of the date first above written.

BORROWER: DIMON INCORPORATED
- --------

By /s/ James A. Cooley
________________________________________

Title Senior Vice President and Treasurer

By /s/ Bonita L. Finney
________________________________________
Title Assistant Treasurer

[Signatures Continued]

- -23-
<PAGE>

LENDERS: NATIONSBANK, N.A., as a Lender and
- ------- in its capacity as Administrative Agent

By /s/ William F. Sweeney
________________________________________
Name: William F. Sweeney
Title: Vice President

FIRST UNION NATIONAL BANK, as a Lender
and in its capacity as Documentation Agent

By /s/ Susan K. Doyle
________________________________________
Name: Susan K. Doyle
Title: Senior Vice President

COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., "RABOBANK
NEDERLAND," NEW YORK BRANCH, as a Lender
and in its capacity as a Co-Agent

By /s/ Theodore W. Cox
________________________________________
Name: Theodore W. Cox
Title: Vice President

By /s/ Ian Reece
________________________________________
Name: Ian Reece
Title: Senior Credit Officer

SOCIETE GENERALE, as a Lender and
in its capacity as a Co-Agent

By /s/ Ralph Sahed
________________________________________
Name: Ralph Sahed
Title: Director

BANK OF AMERICA NT & SA

By /s/ William F. Sweeney
________________________________________
Name: William F. Sweeney
Title: Vice President

[Signatures continued]

- -24-
<PAGE>
CRESTAR BANK

By /s/ C. Gray Key
________________________________________
Name: C. Gray Key
Title: Vice President

WACHOVIA BANK, N.A.

By /s/ Keith A. Sherman
________________________________________
Name: Keith A. Sherman
Title: Senior Vice President

BANK OF TOKYO-MITSUBISHI TRUST COMPANY

By /s/ J. William Rhodes
________________________________________
Name: J. William Rhodes
Title: Vice President

ABN AMRO BANK N.V. NEW YORK BRANCH

By /s/ Richard H. West
________________________________________
Name: Richard H. West
Title: Group Vice President

By /s/ Christopher M. Plumb
________________________________________
Name: Christopher M. Plumb
Title: Vice President

THE BANK OF NOVA SCOTIA

By___________________________
Name: None
Title:

THE SUMITOMO BANK, LIMITED,
NEW YORK BRANCH

By /s/ J. Bruce Meredith
________________________________________
Name: J. Bruce Meredith
Title: Senior Vice President

[Signatures continued]
- -25-
<PAGE>

BAYERISCHE HYPO-UND VEREINSBANK AG,
NEW YORK BRANCH

By /s/ William Schwarze
________________________________________
Name: William Schwarze
Title: Director

By /s/ J. Coussa
________________________________________
Name: J. Coussa
Title: Managing Director

NATEXIS BANQUE
(fka Banque Francaise Du Commerce Exterieur)

By___________________________
Name: None
Title:

CORESTATES BANK, N.A.

By /s/ William C. Moses
________________________________________
Name: William C. Moses
Title: Vice President

ISTITUTO BANCARIO SAN PAOLO DI TORINO-
ISTITUTO MOBILIARE ITALIANO, S.P.A.

By /s/ Robert Wurster
________________________________________
Name: Robert Wurster
Title: First Vice President

By /s/ Carl Persico
________________________________________
Name: Carl Persico
Title: Deputy General Manager

STANDARD CHARTERED BANK

By /s/ William Zenario
________________________________________
Name: William Zenario
Title: Vice president

By /s/ Peter G. R. Dodds
________________________________________
Name: Peter G. R. Dodds
Title: Senior Credit Officer/Coin 98/62

[Signatures continued]
- -26-
<PAGE>
BANCA MONTE DEI PASCHI DI SIENA S.P.A.

By /s/ S. M. Sondak
________________________________________
Name: S. M. Sondak
Title: F.V.P. & Dep. General Manager

By /s/ Brian R. Landy
________________________________________
Name: Brian R. Landy
Title: Vice President

CREDIT LYONNAIS ATLANTA AGENCY

By /s/ David M. Cawrse
________________________________________
Name: David M. Cawrse
Title: First Vice President & Manager

THE SANWA BANK, LIMITED, ATLANTA AGENCY

By___________________________
Name: None
Title:

- -27-
<PAGE>

Exhibit 10.2
------------

AMENDMENT NO. 3 TO CREDIT AGREEMENT

NationsBank Corporate Center
Charlotte, NC 28255
Tel 704-386-5000

NationsBank

April 30, 1999

DIMON Incorporated
512 Bridge Street
Danville, Virginia 24543
Attention: James A. Cooley
Senior Vice President and CFO

Re: Credit Agreement dated as of June 27, 1997 (the "Credit
Agreement") among DIMON Incorporated (the "Borrower"),
the several lenders party thereto (the "Lenders"),
NationsBank, N. A., as Administrative Agent, First
Union National Bank, as Documentation Agent and
Cooperatieve Centrale Raiffeisen-Boerenleebank B.A.,
"RaboBank Nederland," New York Branch and Societe
Generale, as Co-Agents

Dear Jim:

The defined terms in the above referenced Credit Agreement are incorporated
herein by reference.

Pursuant to your request, the undersigned Lenders hereby agree with you to
amend the Credit Agreement by addeing a new Section 6.5 which shall read as
follows:

Section 6.5 Calculations.
------------
For purposes of calculating the financial covenants contained
Section 6.2 and Section 6.3 contained in this Article VI, the Borrower
shall be permitted to exclude during the appropriate Calculation Periods
the effect of one-time restructuring and other asset impairment charges
incurred during the fiscal quarters ending March 31, 1999 and June 30,
1999 in an aggregate amount not to exceed $26,000,000.

The consent and amendment set forth above shall be and become effective
as of the date hereof when counterparts of this letter agreement shall
have been duly executed on behalf of (A) the Borrower and (B) the
Required Lenders.

Except as waived or amended hereby, all of the terms and provisions of the
Credit Agreement shall remain in full force and effect.

This letter may be executed in any number of counterparts (including
facsimile counterparts), each of which shall constitute an original but all
of which when taken together shall constitute but one contract.

- -28-
<PAGE>

April 30, 1999
Page 2

THIS LETTER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE COMMONWEALTH OF VIRGINIA.

Sincerely,

NATIONSBANK, N.A.

By /s/ William Sweeny
________________________________
Name: William Sweeny
Title Vice President

ABN AMRO BANK N.V. NEW YORK BRANCH

By None
________________________________
Name:
Title

BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION

By None
________________________________
Name:
Title

THE BANK OF NOVA SCOTIA

By None
________________________________
Name:
Title

BANK OF TOKYO - MITSUBISHI TRUST
COMPANY, f/k/a THE BANK OF TOKYO TRUST COMPANY

By None
________________________________
Name:
Title

COOPERATIVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK NEDERLAND,"
NEW YORK BRANCH

By None
________________________________
Name:
Title

- -29-
<PAGE>

April 30, 1999
Page 3

CRESTAR BANK

By /s/ C. Gray Key
________________________________
Name: C. Gray Key
Title Vice President

FIRST UNION NATIONAL BANK

By /s/ Susan Doyle
________________________________
Name: Susan Doyle
Title Senior Vie President

SIGNET BANK/VIRGINIA

By /s/ Susan Doyle
________________________________
Name: Susan Doyle
Title Senior Vie President

SOCIETE GENERALE

By /s/ Christopher J. Speltz
________________________________
Name: Christopher J. Speltz
Title Director, Head of SG - Dallas

THE SUMITOMO BANK, LIMITED

By /s/ J. Bruce Meredith
________________________________
Name: J. Bruce Meredith
Title Senior Vice President

WACHOVIA BANK, N.A.

By /s/ Keith Sherman
________________________________
Name: Keith Sherman
Title Senior vice President

- -30-
<PAGE>

April 30, 1999
Page 4

ISTITUTO BANCARIO SAN PAOLO DI TORINO MOBILIARO ITALIANO S.p.A.

By None
________________________________
Name:
Title

BANCA MONTE DEI PASCHI DI SIENA SPA

By /s/ G. Natalicchi
________________________________
Name: G. Natalicchi
Title Senior Vice President & General Manager

By /s/ Brian R. Landy
________________________________
Name: Brian R. Landy
Title Vice President

BAYERISCHE HYPO-UND VEREINSBANK AG,
NEW YORK BRANCH

By None
________________________________
Name:
Title

NATEXIS BANQUE
(fka Banque Francaise Du Commerce Exterieur)

By None
________________________________
Name:
Title

STANDARD CHARTERED BANK

By None
________________________________
Name:
Title

- -31-
<PAGE>

April 30, 1999
Page 5

CREDIT LYONNAIS ATLANTA AGENCY

By None
________________________________
Name:
Title

THE SANWA BANK, LIMITED, ATLANTA AGENCY

By None
________________________________
Name:
Title

- - 32 -
<PAGE>

April 30, 1999
Page 6

ACCEPTED AND AGREED:

BORROWER:
- --------

DIMON INCORPORATED

By /s/ James A. Cooley
________________________________
Name: James A. Cooley
Title Senior Vice President and Treasurer

By /s/ Bonita L. Finney
________________________________
Name: Bonita L. Finney
Title Assistant Treasurer

- -33-
<PAGE>

<ARTICLE> 5
<MULTIPLIER> 1,000

<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 30,331
<SECURITIES> 0
<RECEIVABLES> 320,894
<ALLOWANCES> 6,079
<INVENTORY> 436,893
<CURRENT-ASSETS> 954,543
<PP&E> 414,701
<DEPRECIATION> (108,034)
<TOTAL-ASSETS> 1,516,261
<CURRENT-LIABILITIES> 280,322
<BONDS> 783,761
<COMMON> 182,143
0
0
<OTHER-SE> 205,670
<TOTAL-LIABILITY-AND-EQUITY> 1,516,261
<SALES> 1,464,656
<TOTAL-REVENUES> 1,464,656
<CGS> 1,357,214
<TOTAL-COSTS> 1,357,214
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 360
<INTEREST-EXPENSE> 51,903
<INCOME-PRETAX> (54,184)
<INCOME-TAX> (13,921)
<INCOME-CONTINUING> (40,326)
<DISCONTINUED> 22,912
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (17,414)
<EPS-PRIMARY> (.39)
<EPS-DILUTED> (.39)
<PAGE>

</TABLE>