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Next: DIMON INC, 10-Q, 2000-05-10 |
Page 1 of 22 |
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Page 15 - Exhibit Index |
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UNITED STATES |
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SECURITIES AND EXCHANGE COMMISSION |
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WASHINGTON, D.C. 20549 |
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________________________ |
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FORM 10-Q |
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) |
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OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the quarterly period ended March 31, 2000 |
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OR |
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) |
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OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from_____to_____ |
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Commission file number 0-25734; 1-13684 |
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DIMON INCORPORATED |
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(Exact name of registrant as specified in its charter) |
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VIRGINIA |
54-1746567 |
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(State or other jurisdiction |
(I.R.S. Employer |
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of incorporation or organization) |
Identification No.) |
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512 Bridge Street, Danville, Virginia |
24541 |
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(Address of principal executive offices) |
(Zip Code) |
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Registrant's telephone number, including area code (804) 792-7511 |
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Not Applicable |
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(Former name, former address and former fiscal year, if changed since last report)
|
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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. |
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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. |
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Outstanding at |
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Class of Common Stock |
May 1, 2000 |
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NO par value |
44,525,004 |
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DIMON Incorporated and Subsidiaries |
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INDEX |
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Page No. |
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Part I. |
Financial Information |
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Item 1. |
Financial Statements |
||
Consolidated Balance Sheet - March 31, 2000 and June 30, 1999............. |
3 - 4 |
||
Statement of Consolidated Income - Three Months and |
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Nine Months Ended March 31, 2000 and 1999.......................................... |
5 |
||
Statement of Consolidated Cash Flows - Nine |
|||
Months Ended March 31, 2000 and 1999.......................................... |
6 |
||
Notes to Consolidated Financial Statements .......................................... |
7 - 9 |
||
Item 2. |
Management's Discussion and Analysis |
||
of Financial Condition and Results of Operations.................................. |
10 - 13 |
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Part II. |
Other Information |
||
Item 6. |
Exhibits and Reports on Form 8-K ............................................................. |
13 |
|
-2- |
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Part I. Financial Information |
||||||||||||||
Item 1. Financial Statements |
||||||||||||||
DIMON Incorporated and Subsidiaries |
||||||||||||||
CONSOLIDATED BALANCE SHEET |
||||||||||||||
March 31 |
||||||||||||||
2000 |
June 30 |
|||||||||||||
(Unaudited) |
1999 |
|||||||||||||
(in thousands) |
_______________________________ |
|||||||||||||
ASSETS |
||||||||||||||
Current assets |
||||||||||||||
Cash and cash equivalents..... |
$ 35,162 |
$ 21,451 |
||||||||||||
Notes receivable...... |
5,195 |
4,744 |
||||||||||||
Trade receivables, net of allowances..... |
265,149 |
295,593 |
||||||||||||
Inventories: |
||||||||||||||
Tobacco........... |
307,895 |
417,620 |
||||||||||||
Other........... |
19,460 |
23,059 |
||||||||||||
Advances on purchases of tobacco..... |
117,120 |
130,855 |
||||||||||||
Current deferred and recoverable income taxes..... |
25,376 |
9,851 |
||||||||||||
Prepaid expenses and other assets...... |
12,677 |
19,327 |
||||||||||||
_______________________________ |
||||||||||||||
Total current assets............. |
788,034 |
922,500 |
||||||||||||
_______________________________ |
||||||||||||||
Investments and other assets |
||||||||||||||
Equity in net assets of investee companies......... |
3,245 |
6,119 |
||||||||||||
Other investments......... |
9,836 |
11,740 |
||||||||||||
Notes receivable.......... |
11,286 |
7,404 |
||||||||||||
Other....... |
8,750 |
7,059 |
||||||||||||
_______________________________ |
||||||||||||||
33,117 |
32,322 |
|||||||||||||
_______________________________ |
||||||||||||||
Intangible assets |
||||||||||||||
Excess of cost over related net assets of |
||||||||||||||
businesses acquired.................................................. ........ |
166,783 |
171,596 |
||||||||||||
Production and supply contracts......... |
15,503 |
19,091 |
||||||||||||
Pension asset........ |
3,982 |
3,982 |
||||||||||||
_______________________________ |
||||||||||||||
186,268 |
194,669 |
|||||||||||||
Property, plant and equipment |
||||||||||||||
Land...... |
18,188 |
19,772 |
||||||||||||
Buildings..... |
169,189 |
180,621 |
||||||||||||
Machinery and equipment........ |
195,255 |
208,498 |
||||||||||||
Allowances for depreciation........ |
(112,720) |
(109,145) |
||||||||||||
_______________________________ |
||||||||||||||
269,912 |
299,746 |
|||||||||||||
_______________________________ |
||||||||||||||
Deferred taxes and other deferred charges..... |
28,467 |
22,053 |
||||||||||||
_______________________________ |
||||||||||||||
$1,305,798 |
$1,471,290 |
|||||||||||||
========================== |
||||||||||||||
See notes to consolidated financial statements |
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-3- |
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DIMON Incorporated and Subsidiaries |
||||||||||||||||||||
CONSOLIDATED BALANCE SHEET |
||||||||||||||||||||
March 31 |
||||||||||||||||||||
2000 |
June 30 |
|||||||||||||||||||
(Unaudited) |
1999 |
|||||||||||||||||||
(in thousands) |
_______________________________ |
|||||||||||||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY |
||||||||||||||||||||
Current liabilities |
||||||||||||||||||||
Notes payable to banks .......................................... |
$ 214,958 |
$ 297,376 |
||||||||||||||||||
Accounts payable: |
||||||||||||||||||||
Trade .......................................... |
47,936 |
70,988 |
||||||||||||||||||
Officers and employees .......................................... |
5,317 |
6,135 |
||||||||||||||||||
Other....... |
18,736 |
17,046 |
||||||||||||||||||
Advances from customers...... |
40,485 |
33,342 |
||||||||||||||||||
Accrued expenses..... |
33,486 |
44,695 |
||||||||||||||||||
Income taxes .......................................... |
- |
2,277 |
||||||||||||||||||
Long-term debt current .......................................... |
8,701 |
7,039 |
||||||||||||||||||
_______________________________ |
||||||||||||||||||||
Total current liabilities .......................................... |
369,619 |
478,898 |
||||||||||||||||||
_______________________________ |
||||||||||||||||||||
Long-term debt |
||||||||||||||||||||
Revolving Credit Notes and Other .......................................... |
280,571 |
333,180 |
||||||||||||||||||
Convertible Subordinated Debentures .................................. |
73,328 |
73,328 |
||||||||||||||||||
Senior Notes .......................................... |
125,000 |
125,000 |
||||||||||||||||||
_______________________________ |
||||||||||||||||||||
478,899 |
531,508 |
|||||||||||||||||||
_______________________________ |
||||||||||||||||||||
Deferred credits: |
||||||||||||||||||||
Income taxes .......................................... |
33,825 |
24,033 |
||||||||||||||||||
Compensation and other benefits .......................................... |
36,534 |
39,786 |
||||||||||||||||||
_______________________________ |
||||||||||||||||||||
70,359 |
63,819 |
|||||||||||||||||||
_______________________________ |
||||||||||||||||||||
Minority interest in subsidiaries..... |
528 |
526 |
||||||||||||||||||
_______________________________ |
||||||||||||||||||||
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 .......................................... |
213,451 |
220,540 |
||||||||||||||||||
Accumulated other comprehensive income ......................... |
(9,201) |
(6,144) |
||||||||||||||||||
_______________________________ |
||||||||||||||||||||
386,393 |
396,539 |
|||||||||||||||||||
_______________________________ |
||||||||||||||||||||
$1,305,798 |
$1,471,290 |
|||||||||||||||||||
========================== |
||||||||||||||||||||
-4- |
||||||||||||||||||||
DIMON Incorporated and Subsidiaries |
||||||||||||||||||
STATEMENT OF CONSOLIDATED INCOME |
||||||||||||||||||
Three Months and Nine Months Ended March 31, 2000 and 1999 |
||||||||||||||||||
(Unaudited) |
||||||||||||||||||
2000 |
1999 |
2000 |
1999 |
|||||||||||||||
Third |
Third |
First Nine |
First Nine |
|||||||||||||||
(in thousands, except per share amounts) |
Quarter |
Quarter |
Months |
Months |
||||||||||||||
_____________________________________________________ |
||||||||||||||||||
Sales and other operating revenues ............................... |
$364,809 |
$485,377 |
$1,145,868 |
$1,464,656 |
||||||||||||||
Cost of goods and services sold ..................................... |
325,156 |
446,291 |
1,028,136 |
l,357,214 |
||||||||||||||
_____________________________________________________ |
||||||||||||||||||
Gross profit ........................................ |
39,653 |
39,086 |
117,732 |
107,442 |
||||||||||||||
Selling, administrative and general expenses ................ |
22,995 |
27,601 |
74,319 |
86,657 |
||||||||||||||
Restructuring and other asset impairment charges............ |
- |
23,066 |
- |
23,066 |
||||||||||||||
_____________________________________________________ |
||||||||||||||||||
Operating Income (Loss .......................................... |
16,658 |
(11,581) |
43,413 |
(2,281) |
||||||||||||||
Interest expense .......................................... |
14,061 |
16,518 |
44,056 |
51,903 |
||||||||||||||
_____________________________________________________ |
||||||||||||||||||
Income (loss) from continuing operations |
||||||||||||||||||
before income taxes, equity in net income |
||||||||||||||||||
(loss) of investee companies and |
||||||||||||||||||
discontinued operations .......................................... |
2,597 |
(28,099) |
(643) |
(54,184) |
||||||||||||||
Income taxes (benefit) .......................................... |
597 |
(5,052) |
(148) |
(13,921) |
||||||||||||||
_____________________________________________________ |
||||||||||||||||||
Income (loss) from continuing operations before |
||||||||||||||||||
equity in net income (loss) of investee companies |
||||||||||||||||||
and discontinued operations............................................... |
2,000 |
(23,047) |
(495) |
(40,263) |
||||||||||||||
Equity in net income (loss) of investee |
||||||||||||||||||
companies, net of income taxes ........................................ |
(66) |
51 |
84 |
(63) |
||||||||||||||
_____________________________________________________ |
||||||||||||||||||
Income (loss) from continuing operations .......................... |
1,934 |
(22,996) |
(411) |
(40,326) |
||||||||||||||
Discontinued business: |
||||||||||||||||||
Income (loss) from operations, net of $761 |
||||||||||||||||||
tax benefits .......................................... |
- |
- |
- |
(841) |
||||||||||||||
Gain on disposal, net of $4,288 tax............................... |
- |
- |
- |
23,753 |
||||||||||||||
_____________________________________________________ |
||||||||||||||||||
NET INCOME (LOSS) .......................................... |
$ 1,934 |
$(22,996) |
$ (411) |
$ (17,414) |
||||||||||||||
=================== ============================ |
||||||||||||||||||
Basic Earnings Per Share |
||||||||||||||||||
Income (loss) from continuing operations...................... |
$.04 |
$(.52) |
$(.01) |
$(.90) |
||||||||||||||
Discontinued operations ....................................... |
- |
- |
- |
.51 |
||||||||||||||
_____________________________________________________ |
||||||||||||||||||
Net Income (Loss)........................................... |
$.04 |
$(.52) |
$(.01) |
$(.39) |
||||||||||||||
=============================================== |
||||||||||||||||||
Diluted Earnings Per Share |
||||||||||||||||||
Income (loss) from continuing operations..................... |
$.04 |
$(.52) |
$(.01) |
$(.90) |
||||||||||||||
Discontinued operations .......................................... |
- |
- |
- |
.51 |
||||||||||||||
_____________________________________________________ |
||||||||||||||||||
Net Income (Loss) .......................................... |
$.04 |
* |
$(.52) |
* |
$(.01) |
* |
$(.39) |
* |
||||||||||
=============================================== |
||||||||||||||||||
Average number of shares outstanding: |
||||||||||||||||||
Basic .......................................... |
44,525 |
44,525 |
44,525 |
44,525 |
||||||||||||||
Diluted .......................................... |
44,525 |
* |
44,525 |
* |
44,525 |
* |
44,525 |
* |
||||||||||
Cash dividends per share .......................................... |
$.05 |
$.09 |
$.15 |
$.35 |
||||||||||||||
=============================================== |
||||||||||||||||||
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. |
||||||||||||||||||
-5- |
||||||||||||||||||
|
DIMON Incorporated and Subsidiaries |
|||||||||||||||||
STATEMENT OF CONSOLIDATED CASH FLOWS |
||||||||||||||||||
Nine Months Ended March 31, 2000 and 1999 |
||||||||||||||||||
(Unaudited) |
||||||||||||||||||
March 31 |
March 31 |
|||||||||||||||||
2000 |
1999 |
|||||||||||||||||
(in thousands) |
____________________________ |
|||||||||||||||||
Operating activities |
||||||||||||||||||
Net Income (Loss) .......................................... |
$ (411) |
$ (17,414) |
||||||||||||||||
Adjustments to reconcile net income (loss) |
||||||||||||||||||
to net cash provided by operating activities: |
||||||||||||||||||
Depreciation and amortization .......................................... |
29,990 |
32,201 |
||||||||||||||||
Restructuring and other asset impairment charges................................... |
- |
23,006 |
||||||||||||||||
Deferred items .......................................... |
(957) |
(10,124) |
||||||||||||||||
Gain on foreign currency transactions .......................................... |
(620) |
(540) |
||||||||||||||||
Gain on disposition of fixed assets |
(609) |
(443) |
||||||||||||||||
Change in discontinued operations .......................................... |
- |
1,023 |
||||||||||||||||
Gain on disposition of discontinued operations .......................................... |
- |
(23,753) |
||||||||||||||||
Undistributed loss (earnings) of investees .......................................... |
(84) |
63 |
||||||||||||||||
Bad debt expense .......................................... |
273 |
360 |
||||||||||||||||
Decrease (increase) in accounts receivable .......................................... |
30,518 |
(843) |
||||||||||||||||
Decrease in inventories and advances on |
|
|||||||||||||||||
purchases of tobacco .......................................... |
124,311 |
235,849 |
||||||||||||||||
Increase in current deferred and recoverable taxes .......................................... |
(3,423) |
(8,067) |
||||||||||||||||
Decrease in prepaid expenses .......................................... |
4,791 |
7,020 |
||||||||||||||||
Decrease in accounts payable and accrued expenses .......................................... |
(32,528) |
(30,069) |
||||||||||||||||
Decrease (increase) in advances from customers .......................................... |
9,900 |
(8,104) |
||||||||||||||||
Decrease in income taxes .......................................... |
(14,425) |
(8,889) |
||||||||||||||||
Other .......................................... |
1,135 |
(364) |
||||||||||||||||
____________________________ |
||||||||||||||||||
Net cash provided by operating activities .......................................... |
147,861 |
190,972 |
||||||||||||||||
____________________________ |
||||||||||||||||||
Investing activities |
||||||||||||||||||
Purchase of property and equipment |
(5,986) |
(27,572) |
||||||||||||||||
Proceeds from sale of property and equipment .......................................... |
8,917 |
2,617 |
||||||||||||||||
Proceeds from sale of property and equipment of |
||||||||||||||||||
Discontinued Operation .......................................... |
- |
37,637 |
||||||||||||||||
Payments received (advances) on notes receivable and |
||||||||||||||||||
receivable from investees. ........................................................ ........................ |
598 |
(980) |
||||||||||||||||
Payments received for other investments and other assets .................................. |
3,398 |
3,625 |
||||||||||||||||
Proceeds from sale of Discontinued Operation .......................................... |
- |
28,435 |
||||||||||||||||
____________________________ |
||||||||||||||||||
Net cash provided by investing activities .......................................... |
6,927 |
43,762 |
||||||||||||||||
____________________________ |
||||||||||||||||||
Financing activities |
||||||||||||||||||
Net change in short-term borrowings .......................................... |
(231,895) |
(192,104) |
||||||||||||||||
Proceeds from long-term borrowings .......................................... |
182,448 |
18,960 |
||||||||||||||||
Repayment of long-term borrowings .......................................... |
(85,232) |
(33,225) |
||||||||||||||||
Cash dividends paid to DIMON Incorporated stockholders .......................................... |
(6,678) |
(15,584) |
||||||||||||||||
____________________________ |
||||||||||||||||||
Net cash used by financing activities .......................................... |
(141,357) |
(221,953) |
||||||||||||||||
____________________________ |
||||||||||||||||||
Effect of exchange rate changes on cash .......................................... |
280 |
(1,179) |
||||||||||||||||
____________________________ |
||||||||||||||||||
Increase in cash and cash equivalents .......................................... |
13,711 |
11,602 |
||||||||||||||||
Cash and cash equivalents at beginning of year.......................................... |
21,451 |
18,729 |
||||||||||||||||
____________________________ |
||||||||||||||||||
Cash and cash equivalents at end of period.................. |
$ 35,162 |
$ 30,331 |
||||||||||||||||
============================= |
||||||||||||||||||
See Note 6 to consolidated financial statements for a description of a significant non-cash transaction. |
||||||||||||||||||
-6- |
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, if dilutive, during the periods presented were converted into Common Stock at the beginning of the reporting period, thereby increasing the weighted average number of shares considered outstanding during each period and reducing the after-tax interest expense. The weighted average number of shares outstanding are further increased by shares issuable upon exercise of employee stock options, if dilutive. |
||||||||||||||||
The following information reconciles the basic weighted average number of shares outstanding to diluted shares outstanding and diluted earnings per share: |
|||||||||||||||||
2000 |
1999 |
2000 |
1999 |
||||||||||||||
Third |
Third |
First Nine |
First Nine |
||||||||||||||
(in thousands, except per share amounts) |
Quarter |
Quarter |
Months |
Months |
|||||||||||||
_________________________________________ |
|||||||||||||||||
Basic Earnings Per Share |
|||||||||||||||||
Income (loss) from continuing operations........................... |
$1,934 |
$(22,996) |
$(411) |
$(40,326) |
|||||||||||||
Discontinued operations...................................................... |
- |
- |
- |
22,912 |
|||||||||||||
_________________________________________ |
|||||||||||||||||
Net Income (Loss) ............................................................... |
$1,934 |
$(22,996) |
$(411) |
$(17,414) |
|||||||||||||
========================================= |
|||||||||||||||||
Shares |
|||||||||||||||||
Weighted Average Shares Outstanding............................... |
44,525 |
44,525 |
44,525 |
44,525 |
|||||||||||||
========================================= |
|||||||||||||||||
Basic Earnings Per Share |
|||||||||||||||||
Income (loss) from continuing operations........................... |
$.04 |
$(.52) |
$(.01) |
$(.90) |
|||||||||||||
Discontinued operations...................................................... |
- |
- |
- |
.51 |
|||||||||||||
_________________________________________ |
|||||||||||||||||
Net Income (Loss)............................................................. |
$.04 |
$(.52) |
$(.01) |
$(.39) |
|||||||||||||
========================================= |
|||||||||||||||||
Diluted Earnings Per Share |
|||||||||||||||||
Income (loss) from continuing operations |
$1,934 |
$(22,996) |
$(411) |
$(40,326) |
|||||||||||||
Add after-tax interest expense applicable |
|||||||||||||||||
to 6.25% Convertible Debentures.................................... |
- |
* |
- |
* |
- |
* |
- |
* |
|||||||||
_________________________________________ |
|||||||||||||||||
Income (loss) before discontinued operations....................... |
$1,934 |
$(22,996) |
$(411) |
$(40,326) |
|||||||||||||
Discontinued operations......................................................... |
- |
- |
- |
22,912 |
|||||||||||||
_________________________________________ |
|||||||||||||||||
Net Income (Loss) as Adjusted....................................... |
$1,934 |
$(22,996) |
$(411) |
$(17,414) |
|||||||||||||
========================================= |
|||||||||||||||||
Shares |
|||||||||||||||||
Weighted average number of common shares outstanding |
44,525 |
44,525 |
44,525 |
44,525 |
|||||||||||||
Shares applicable to stock options, net of shares |
|||||||||||||||||
assumed to be purchased from proceeds at |
|||||||||||||||||
average market price........................................................ |
- |
- |
- |
- |
|||||||||||||
Assuming conversion of 6.25% Debentures at |
|||||||||||||||||
beginning of period.......................................................... |
- |
* |
- |
* |
- |
* |
- |
* |
|||||||||
_________________________________________ |
|||||||||||||||||
Average Diluted Shares Outstanding.................................. |
44,525 |
* |
44,525 |
* |
44,525 |
* |
44,525 |
* |
|||||||||
========================================= |
|||||||||||||||||
Diluted Earnings Per Share |
|||||||||||||||||
Income (loss) from continuing operations.......................... |
$.04 |
* |
$(.52) |
* |
$(.01) |
* |
$(.90) |
* |
|||||||||
Discontinued operations...................................................... |
- |
- |
- |
.51 |
* |
||||||||||||
_________________________________________ |
|||||||||||||||||
Net Income (Loss) as Adjusted........................................... |
$.04 |
* |
$(.52) |
* |
$(.01) |
* |
$(.39) |
* |
|||||||||
========================================= |
|||||||||||||||||
* Assumed conversion of Convertible Debentures at the beginning of the period has an antidilutive effect on earnings per share. |
|||||||||||||||||
-7- |
DIMON Incorporated and Subsidiaries |
||||||||||||
2. |
The components of comprehensive income were as follows: |
|||||||||||
Nine Months Ended |
||||||||||||
March 31 |
||||||||||||
_____________________ |
||||||||||||
2000 |
1999 |
|||||||||||
(in thousands) |
_____________________
|
|||||||||||
Net loss............. |
$ (411) |
$(17,414) |
||||||||||
Decrease in Equity Currency Conversions.............. |
(3,057) |
(1,117) |
||||||||||
_____________________ |
||||||||||||
Total comprehensive loss............ |
$(3,468) |
$(18,531) |
||||||||||
================== |
||||||||||||
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. |
In 1995, the Company commenced various activities to restructure its worldwide operations. During fiscal years 1996 and 1997 the Company had additional restructuring charges. The reserve balances at June 30, 1999, of $6,807 relating to employee separations, are included in accrued expenses and deferred compensation and other benefits. Remaining cash outlays at June 30, 1999 are expected to total $4,107, of which approximately $999 will be expended in fiscal year 2000. Remaining amounts of the reserve relate primarily to the pension plan charge and other deferred compensation, which will be reduced as required for funding appropriate pension and other payments in future years. |
|||||||||||
During the nine months ended March 31, 2000, the Company paid out $697, principally for employee separations. |
||||||||||||
5. |
In fiscal year 1999, the Company closed its processing plant in Kinston, North Carolina, adopted plans to close one of its processing plants in Brazil and to close one of its processing plants in Germany. Additionally, due to substantially smaller tobacco crops anticipated in 1999 and beyond, the Company reduced staffing in Farmville, North Carolina, and substantially downsized its leaf tobacco buying department in the United States. This restructuring resulted in pre-tax charges of $15,812, of which $10,695 was non-cash. Of the $4,009 reserve balance at June 30, 1999 relating to employee separations, the company expects to pay out $3,712 in fiscal year 2000. |
|||||||||||
During the nine months ended March 31, 2000, the Company paid out $2,634 for employee separations. The plant in Brazil was sold in July 1999, and the building in Kinston was sold in November 1999. Both sales were made at amounts substantially equal to values considered in the reserve for asset writedowns. |
||||||||||||
6. |
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 Incorporated and Subsidiaries |
||
7. |
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, 1999, of $11,158, 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, 1999, of $10,733, 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. |
|
8. |
The results of operations for the three and nine months ended March 31, 2000 and 1999 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, 1999. |
|
9. |
Certain prior period amounts have been reclassified to conform to the current period presentation. |
|
-9- |
||
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, 2000 Compared to Three Months Ended March 31, 1999: |
||
Net sales and other operating revenues from continuing operations were $364.8 million, a decrease of $120.6 million, or 24.8%, from $485.4 million in 1999. The decrease in sales was primarily due to lower quantities of both U.S. and foreign grown tobacco, offset partially by higher U.S. prices and increased U.S. service revenues. Quantities of U.S. grown tobacco decreased 27.4% and resulted in a sales decrease of $65.3 million. Quantities of foreign grown tobacco decreased 26.1% and resulted in a sales decrease of $58.9 million. Quantities of foreign grown tobacco were lower in Africa, South America and Asia, offset partially by an increase in quantities in Europe. The decreases in quantities in both Africa and South America are partially attributable to adverse weather conditions, resulting in decreased sales of $59.6 million. In Africa a typhoon impeded the shipping process from Malawi and Zimbabwe. In South America the current Brazil crop has been delayed one month due to weather conditions. Prices of U.S. grown tobacco resulted in a $3.9 million increase over 1999 primarily due to product mix. Lower foreign service revenues resulted in a decrease of $1.8 million. Higher U.S. service fees resulted in an increase of $1.8 million. |
||
The cost of sales and expenses from continuing operations, before restructuring, decreased $125.7 million, or 26.5%, from $473.9 million in 1999 to $348.2 million in 2000. Most of the decrease relates to decreased quantities of both foreign and U.S. tobacco. Gross profit increased $0.6 million, or 1.5%, from $39.1 million in 1999 to $39.7 million in 2000. The increase in gross profit on decreased quantities is attributable to losses incurred in 1999 on old crop tobacco as well as decreased costs in 2000 due to the Company's global restructuring plan initiated in 1999. Cost of sales and expenses also decreased by $4.6 million as selling, administrative and general expenses declined primarily due to decreased personnel costs. |
||
During the quarter ended March 31, 1999 the Company initiated a restructuring plan to improve operating efficiencies by reducing excess capacities. In implementing the plan, the Company incurred total charges of $23.1 million which consisted of $20.2 million related to facility write downs and $2.9 million for personnel related costs. |
||
Interest expense decreased $2.5 million, or 14.9%, from $16.5 million in 1999 to $14.0 million in 2000. The decrease was primarily due to lower average borrowings, partially offset by higher rates. |
||
The effective tax rate was 23% in 2000 compared to 18% in 1999. Changes in the effective rate are primarily due to the distribution of income between taxing jurisdictions. |
||
-10- |
||
DIMON Incorporated and Subsidiaries |
|
Nine Months Ended March 31, 2000 Compared to Nine Months Ended March 31, 1999: |
|
Net sales and other operating revenues from continuing operations were $1,145.9 million, a decrease of $318.8 million, or 21.8%, for the nine months ended March 31, 2000 from $1,464.7 million for the same period in 1999. The decrease is primarily due to lower quantities of U.S. and foreign grown tobacco and lower prices for foreign grown tobacco, offset partially by higher prices for U.S. grown tobacco and increased service and processing fees. Quantities of U.S. grown tobacco decreased 33.1% and resulted in decreases of $219.9 million, due to decreased volumes from domestic cigarette manufacturers. Quantities of foreign grown tobacco decreased 10.4% and resulted in decreases of $81.1 million. Quantities of foreign grown tobacco were lower in Africa, Asia and South America, partially offset by higher quantities in Europe. Prices of foreign grown tobacco resulted in a decrease of $36.8 million and related primarily to lower green tobacco prices in South America and Asia. Prices of U.S. tobacco resulted in an increase of $9.9 million and were related primarily to product mix. Service and other processing revenues increased $9.1 million, primarily due to increased revenues related to services provided to the U.S. Flue Cured Stabilization program. |
|
The cost of sales and expenses decreased $341.4 million, or 23.6%, from $1,443.9 million in 1999 to $1,102.5 million in 2000. Most of this decrease relates to the lower quantities of U.S. and foreign grown tobacco and lower prices of foreign grown tobacco. Gross profit increased $10.3 million, or 9.6%, from $107.4 million in 1999 to $117.7 million in 2000. Gross profit as a percentage of sales increased from 7.3% in 1999 to 10.3% in 2000. In 1999 the Company liquidated inventories of old crop tobaccos during a period of depressed leaf prices and also recorded a $5.6 million charge on the 1998 crop in Tanzania. Also, in 1999 the Company initiated a global restructuring plan to match capacities more closely to demand. Both the resolution of inventory problems and the global restructuring plan have resulted in positive variances in gross profit as compared to 1999. Cost of sales and expenses also decreased $12.3 million as selling, administrative and general expenses decreased primarily due to decreased personnel and legal and professional costs. |
|
During 1999 the Company initiated a restructuring plan to improve operating efficiencies by reducing excess capacities. In implementing the plan, the Company incurred total charges of $23.1 million which consisted of $20.2 million related to facility write downs and $2.9 million for personnel related costs. |
|
Interest expense decreased by $7.8 million, or 15.1%, from $51.9 million in 1999 to $44.1 million in 2000. The decrease was primarily due to lower average borrowings, offset partially by an increase in rates. |
|
The effective income tax rate was 23.0% in 2000 compared to 25.7% in 1999. Changes in the effective tax rate are primarily due to the distribution of income between taxing jurisdictions. |
|
FINANCIAL CONDITION: |
|
The purchasing and processing activities of the Company's tobacco business are seasonal. The Company's need for working 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 working capital in excess of cash flow from operations to finance inventory and accounts receivable. 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 changed from $443.6 million at June 30, 1999 to $418.4 million at March 31, 2000. The current ratio of 1.9 to 1 at June 30, 1999 changed to 2.1 to 1 at March 31, 2000. At March 31, 2000, current assets decreased $134.5 million, or 14.6%, and current liabilities decreased $109.3 million, or 22.8%, from June 30, 1999. Current assets decreased primarily due to decreases in tobacco inventories of $109.7 million and in accounts receivable of $30.4 million. The decreases in tobacco inventory and accounts receivable are due to the Company's continued focus on reducing inventories and on collection of accounts receivable to strengthen its balance sheet. Current liabilities decreased primarily due to the decreases in notes payable to banks of $82.4 million and accounts payable trade of $23.1 million. The decrease in notes payable to banks is due primarily to the reductions in inventories. The decreases in accounts payable trade relate primarily to the completion of the buying cycle in South America. |
|
-11- |
|
DIMON Incorporated and Subsidiaries |
|
At March 31, 2000, DIMON had seasonally adjusted lines of credit of $654.4 million. At March 31, 2000, the Company had borrowed $215.0 million under its $654.4 million lines of credit with a weighted average interest rate of 7.05%. At March 31, 2000, unused lines of credit amounted to $372.2 million. Total maximum outstanding borrowings, excluding the long-term credit agreements, during the nine months ended March 31, 2000 were $541.9 million. At March 31, 2000, the Company had $51.9 million of letters of credit outstanding and an additional $15.3 million of letters of credit lines available. |
|
To ensure long-term liquidity, DIMON entered into a $300 million Credit Facility, effective June 29, 1999, with a group of banks. The Company is presently negotiating a new $250 million Credit Facility to replace the existing $300 million facility, on terms substantially equivalent to the existing agreement. It is the Company's intent to finance at least $250 million on a long-term basis. The reduction in the amount of the proposed facility reflects the Company's continued success in reduction of consolidated borrowings and credit requirements. The present 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, including certain borrowing base restrictions, and restrict acquisitions. The Company continuously monitors its compliance with these covenants. At March 31, 2000, a violation of a required borrowing-base covenant was waived by the lenders, and the Company entered into an amendment of the Credit Facility on May 9, 2000, to modify its covenants. The Credit Facility's initial term expires on June 29, 2001, 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 (9.0% at March 31, 2000). The Company pays a commitment fee of 1% 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 March 31, 2000, the Company had no material capital expenditure commitments. The Company believes that the above sources of funds are sufficient to fund the Company's anticipated needs for fiscal 2000. There can be no assurance, however, that these sources of capital will be available in the future or, if available, that these or alternative sources will be available on favorable terms. Reliance on available credit presents financial risk to the Company going forward. |
|
Cash flows provided from operating activities decreased $43.1 million from $191.0 million to $147.9 million for the nine months ended March 31, 2000 from the same period last year, due primarily to the lower decreases in inventories and advances on purchases of tobacco in 2000 compared to 1999 and in restructuring and other asset impairment charges, offset partially by the decrease in accounts receivable, 1999 gain on disposition of discontinued operations, the increase in customer advances and the increase in net income. Cash flows provided by investing activities decreased to $6.9 million in 2000 from $43.8 million in 1999 primarily due to the 1999 proceeds from the sale of discontinued operation, offset partially by the decrease in purchase of property and equipment and the increase in proceeds from the sale of property and equipment. Cash flows used in financing activities were $80.6 million less in 2000 than in 1999 primarily due to increased proceeds from long-term borrowings and decreased cash dividends paid, offset partially by decreased short-term borrowings and repayment of long-term borrowings. |
|
-12- |
|
DIMON Incorporated and Subsidiaries |
||||||
OUTLOOK AND OTHER INFORMATION: |
||||||
Although the Company believes that there are certain positive fundamentals in the tobacco business on a global basis, in the near term, conditions in foreign supply have negatively affected the Company's results from operations. Shipments from Brazil and Africa have been delayed due to weather conditions. In addition, Zimbabwe is experiencing a period of civil unrest in combination with a deteriorating economy which has led to fuel shortages and an artificially high rate of exchange. If the current political situation continues, the Company could experience significant delays in marketing the crop in fiscal 2001. Also, the Company does not expect the currency devaluations in eastern Europe and former Russian republics 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 tobacco related 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., will continue 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 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. |
||||||
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. Though operating profit has improved in fiscal 2000, the Company believes it is not likely that there will be a significant improvement in sales in Tanzania in the 2001 fiscal year. |
||||||
See "Factors That May Affect Future Results," below, for important warnings about the forward-looking statements included in this section. |
||||||
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 2000 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, 1999, under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations - Factors that May Affect Future Results." |
||||||
PART II. OTHER INFORMATION |
||||||
Item 6. |
Exhibits and Reports on Form 8-K |
|||||
(a) |
Exhibits |
10.1 |
- |
Third Amendment and Waiver to Credit Agreement ($300,000,000 Credit Agreement dated June 29, 1999), dated as of May 9, 2000 (the "Amendment"), by and among DIMON Incorporated, a Virginia corporation, the several leaders identified on the signature pages thereto, Bank of America, N.A., formerly NationsBank, N.A., as administrative agent for the lenders, First Union National Bank, as syndication agent for the lenders, and Cooperative Centrale Raiffeisen-Boerenleenbank B.A. and Robobank International, as managing agent for the lenders |
||
27 |
- |
Financial Data Schedule |
||||
(b) |
Reports on Form 8-K |
- |
None |
|||
-13- |
||||||
DIMON Incorporated and Subsidiaries |
||
SIGNATURES |
||
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly a uthorized. |
||
DIMON Incorporated |
||
/s/ Jerry L. Parker |
||
___________________________________________ |
||
Date: May 10, 2000 |
Jerry L. Parker |
|
Senior Vice President - Controller |
||
(Principal Accounting Officer) |
||
-14- |
||
DIMON Incorporated and Subsidiaries |
|||
EXHIBIT INDEX |
|||
Exhibits |
Page No. |
||
10.1 |
Third Amendment and Waiver to Credit Agreement ($300,000,000 Credit Agreement dated June 29, 1999), dated as of May 9, 2000 (the "Amendment"), by and among DIMON Incorporated, a Virginia corporation, the several leaders identified on the signature pages thereto, Bank of America, N.A., formerly NationsBank, N.A., as administrative agent for the lenders, First Union National Bank, as syndication agent for the lenders, and Cooperative Centrale Raiffeisen-Boerenleenbank B.A. and Robobank International, as managing agent for the lenders.............................................................. |
16 - 21 |
|
27 |
Financial Data Schedule.......................................... |
22 |
|
-15- |
|||
|