-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GT/0DM0vj7qLE/4HfF449Z1JKyvCheZy47zRtTKNbV/ySsNwb6MmOwc5ukV4jbDi TYnUEzN3Ulji1HHJqFbxcw== 0000014995-04-000046.txt : 20040514 0000014995-04-000046.hdr.sgml : 20040514 20040514164949 ACCESSION NUMBER: 0000014995-04-000046 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20040331 FILED AS OF DATE: 20040514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DIXON TICONDEROGA CO CENTRAL INDEX KEY: 0000014995 STANDARD INDUSTRIAL CLASSIFICATION: PENS, PENCILS & OTHER ARTISTS' MATERIALS [3950] IRS NUMBER: 230973760 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08689 FILM NUMBER: 04808452 BUSINESS ADDRESS: STREET 1: 195 INTERNATIONAL PKWY STREET 2: STE 200 CITY: HEATHROW STATE: FL ZIP: 32746-5036 BUSINESS PHONE: 4078759000 MAIL ADDRESS: STREET 1: PO BOX 958413 STREET 2: STE 200 CITY: HEATHROW STATE: FL ZIP: 32795-8413 FORMER COMPANY: FORMER CONFORMED NAME: BRYN MAWR CORP/DE/ DATE OF NAME CHANGE: 19831002 FORMER COMPANY: FORMER CONFORMED NAME: BRYN MAWR GROUP INC DATE OF NAME CHANGE: 19730619 FORMER COMPANY: FORMER CONFORMED NAME: BRYN MAWR CAMP RESORTS INC DATE OF NAME CHANGE: 19700608 10-Q 1 form10q.txt FORM 10-Q FOR PERIOD ENDED MARCH 31, 2004 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, 2004 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ------------------ Commission file number 1-8689 DIXON TICONDEROGA COMPANY Incorporated pursuant to the Laws of Delaware State ------------------ Internal Revenue Service-- Employer Identification No. 23-0973760 195 International Parkway, Heathrow, FL 32746 (407) 829-9000 ------------------ 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 (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] The total number of shares of the registrant's Common Stock, $1 par value, outstanding on March 31, 2004, was 3,202,149. DIXON TICONDEROGA COMPANY AND SUBSIDIARIES ------------------------------------------ INDEX ----- Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Information Consolidated Balance Sheets -- March 31, 2004 and September 30, 2003 3 Consolidated Statements of Operations -- For The Three and Six Months Ended March 31, 2004 and 2003 4 Consolidated Statements of Comprehensive Income (Loss) -- For The Three and Six Months Ended March 31, 2004 and 2003 5 Consolidated Statements of Cash Flows -- For The Six Months Ended March 31, 2004 and 2003 6 Notes to Consolidated Financial Statements 7-10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11-14 Item 3. Quantitative and Qualitative Disclosures About Market Risk 15 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 16 Item 6. Exhibits and Reports on Form 8-K 16-18 Signatures 19 Certifications 20-25 2 PART I - FINANCIAL INFORMATION ------------------------------ Item 1. - ------- DIXON TICONDEROGA COMPANY AND SUBSIDIARIES ------------------------------------------ CONSOLIDATED BALANCE SHEETS ---------------------------
March 31, 2004 September 30, (Unaudited) 2003 ------------- ------------- ASSETS ------ CURRENT ASSETS: Cash and cash equivalents $ 831,884 $ 1,032,974 Receivables, less allowance for doubtful accounts of $1,360,090 at March 31, 2004 and $1,429,222 at September 30, 2003 26,005,082 28,326,743 Inventories 32,777,013 26,439,361 Other current assets 1,941,723 2,350,813 ------------- ------------- Total current assets 61,555,702 58,149,891 ------------- ------------- PROPERTY, PLANT AND EQUIPMENT: Land and buildings 8,090,158 8,056,169 Machinery and equipment 11,270,938 11,158,157 Furniture and fixtures 1,382,616 1,385,857 ------------- ------------- 20,743,712 20,600,183 ------------- ------------- Less accumulated depreciation (12,921,830) (12,490,680) ------------- ------------- 7,821,882 8,109,503 ------------- ------------- OTHER ASSETS 5,380,256 5,774,649 ------------- ------------- $74,757,840 $72,034,043 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES: Notes payable $11,618,782 $ 6,382,065 Current maturities of long-term debt 14,443,275 13,227,965 Accounts payable 9,883,374 9,102,711 Accrued liabilities 5,671,809 8,496,182 ------------- ------------- Total current liabilities 41,617,240 37,208,923 ------------- ------------- LONG-TERM DEBT 11,434,562 12,510,860 ------------- ------------- DEFERRED INCOME TAXES AND OTHER 1,025,241 894,601 ------------- ------------- MINORITY INTEREST 577,184 578,530 ------------- ------------- COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY: Preferred stock, par $1, authorized 100,000 shares, none issued - - Common stock, par $1, authorized 8,000,000 shares, issued 3,710,309 shares in 2004 and 2003 3,710,309 3,710,309 Capital in excess of par value 3,547,567 3,547,567 Retained earnings 22,826,584 23,679,772 Accumulated other comprehensive loss (6,122,731) (6,238,403) ------------- ------------- 23,961,729 24,699,245 ------------- ------------- Less shareholder loans (557,721) (557,721) ------------- ------------- Less treasury stock, at cost (508,160 shares) (3,300,395) (3,300,395) ------------- ------------- 20,103,613 20,841,129 ------------- ------------- $74,757,840 $72,034,043 ============= =============
The accompanying notes are an integral part of the consolidated financial statements. 3 DIXON TICONDEROGA COMPANY AND SUBSIDIARIES ------------------------------------------ CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) ------------------------------------------------- FOR THE THREE AND SIX MONTHS ENDED MARCH 31, 2003 AND 2002 ----------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED MARCH 31, MARCH 31, 2004 2003 2004 2003 ---- ---- ---- ---- REVENUES $18,950,950 $18,892,890 $34,429,570 $34,762,680 ------------- ------------- ------------- ------------- COST AND EXPENSES: Cost of goods sold 11,338,662 11,047,589 21,394,424 21,504,845 Selling and administrative expenses 6,111,058 6,753,058 11,829,348 12,481,294 Provision for restructuring and related costs -- 229,138 -- 303,688 Debt refinancing costs -- -- -- 624,662 Investment banking and related costs 340,310 -- 340,310 -- ------------- ------------- ------------- ------------- 17,790,030 18,029,785 33,564,082 34,914,489 ------------- ------------- ------------- ------------- OPERATING INCOME (LOSS) 1,160,920 863,105 865,488 (151,809) OTHER INCOME -- -- -- 440,820 INTEREST EXPENSE (832,917) (857,847) (1,607,005) (1,662,074) ------------- ------------- ------------- ------------- INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAX (BENEFIT) AND MINORITY INTEREST 328,003 5,258 (741,517) (1,373,063) INCOME TAX (EXPENSE) BENEFIT (285,479) 155,983 (104,740) 592,536 MINORITY INTEREST (16,091) (16,119) (6,931) (6,881) ------------- ------------- ------------- ------------- INCOME (LOSS) FROM CONTINUING OPERATIONS 26,433 145,122 (853,188) (787,408) DISCONTINUED OPERATIONS, NET OF INCOME TAXES -- (251,438) -- (251,438) ------------- ------------- ------------- ------------- NET INCOME (LOSS) $ 26,433 $ (106,316) $ (853,188) $(1,038,846) ============= ============= ============= ============= EARNINGS (LOSS) PER COMMON SHARE (BASIC): Continuing operations $ 0.01 $ 0.05 $ (0.27) $ (0.25) Discontinued operations -- (0.08) -- (0.08) ------------- ------------- ------------- ------------- Net income (loss) $ 0.01 $ (0.03) $ (0.27) $ (0.33) ============= ============= ============= ============= EARNINGS (LOSS) PER COMMON SHARE (DILUTED): Continuing operations $ 0.01 $ 0.05 $ (0.27) $ (0.25) Discontinued operations -- (0.08) -- (0.08) ------------- ------------- ------------- ------------- Net income (loss) $ 0.01 $ (0.03) $ (0.27) $ (0.33) ============= ============= ============= ============= Shares Outstanding: Basic 3,202,149 3,192,832 3,202,149 3,192,832 ============= ============= ============= ============= Diluted 3,227,176 3,192,832 3,202,149 3,192,832 ============= ============= ============= =============
The accompanying notes to consolidated financial statements are an integral part of these statements. 4 DIXON TICONDEROGA COMPANY AND SUBSIDIARIES ------------------------------------------ CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) ------------------------------------------------------------------ FOR THE THREE AND SIX MONTHS ENDED MARCH 31, 2004 AND 2003 ----------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED MARCH 31, MARCH 31, ------------------------- ------------------------- 2004 2003 2004 2003 ----------- ----------- ----------- ------------ NET INCOME (LOSS) $ 26,433 $(106,316) $(853,188) $(1,038,846) OTHER COMPREHENSIVE INCOME (LOSS): Current period adjustment to recognize fair value of cash flow hedges 36,295 23,390 116,170 37,647 Foreign currency translation adjustments 23,183 146,804 (498) (321,700) ----------- ----------- ----------- ------------ COMPREHENSIVE INCOME (LOSS) $ 85,911 $ 63,878 $(737,516) $(1,322,899) =========== =========== =========== ============
The accompanying notes to consolidated financial statements are an integral part of these statements. 5 DIXON TICONDEROGA COMPANY AND SUBSIDIARIES ------------------------------------------ CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) ------------------------------------------------- FOR THE SIX MONTHS ENDED MARCH 31, 2004 AND 2003 ------------------------------------------------
2004 2003 ---------------- --------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss from continuing operations $ (853,188) $ (787,408) Net loss from discontinued operations -- (251,438) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 1,078,102 1,197,665 Deferred taxes 308,102 497,432 Provision for doubtful accounts receivable 209,272 236,856 Gain attributable to foreign currency exchange (112,567) (45,675) Income attributable to minority interest 6,931 6,881 Changes in assets and liabilities: Receivables, net 2,058,204 1,667,022 Inventories (6,313,500) (3,866,556) Other current assets 409,365 1,089,308 Accounts payable and accrued liabilities (1,748,028) (7,081,707) Other assets (80,997) 82,466 ---------------- --------------- Net cash used in operations (5,038,304) (7,255,154) ---------------- --------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of plant and equipment, net (438,569) (746,501) ---------------- --------------- Net cash used in investing activities (438,569) (746,501) ---------------- --------------- CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from notes payable 5,430,577 2,166,530 Net proceeds from long-term debt 139,012 4,436,984 Debt refinancing costs -- (549,193) Other non-current liabilities -- (99,745) ---------------- --------------- Net cash provided by financing activities 5,569,589 5,954,576 ---------------- --------------- Effect of exchange rate changes on cash (293,806) (14,228) ---------------- --------------- Net decrease in cash and cash equivalents (201,090) (2,061,307) Cash and cash equivalents, beginning of period 1,032,974 2,589,493 ---------------- --------------- Cash and cash equivalents, end of period $ 831,884 $ 528,186 ================ =============== Supplemental Disclosures: Cash paid during the period: Interest $ 1,618,558 $ 3,326,285 Income taxes 557,202 548,014
The accompanying notes to consolidated financial statements are an integral part of these statements. 6 DIXON TICONDEROGA COMPANY AND SUBSIDIARIES ------------------------------------------ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ 1. BASIS OF PRESENTATION: The condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these unaudited financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's latest annual report on Form 10-K. In the opinion of the Company, all adjustments (solely of a normal recurring nature) necessary to present fairly the financial position of Dixon Ticonderoga Company and subsidiaries as of March 31, 2004, and the results of their operations and cash flows for the six months ended March 31, 2004 and 2003, have been included. The results of operations for such interim periods are not necessarily indicative of the results for the entire year. Certain prior year amounts have been reclassified to conform with the current year classifications. 2. INVENTORIES: Since amounts for inventories under the LIFO method are based on annual determinations of quantities and costs as of the end of the fiscal year, the inventories at March 31, 2004 (for which the LIFO method of accounting are used) are based on certain estimates relating to quantities and costs as of year end. Inventories consist of (in thousands): March 31, September 30, 2004 2003 ---------- -------------- Raw materials $ 12,664 $ 10,486 Work in process 2,739 2,198 Finished goods 17,374 13,755 ---------- -------------- $ 32,777 $ 26,439 ========== ============== 3. RECENT ACCOUNTING PRONOUNCEMENTS: In December 2003, the FASB issued Statement No. 132 (revised 2003), "Employers' Disclosures About Pensions and Other Post-Retirement Benefits, an amendment of FASB Statements No. 87, 88 and 106" (collectively "Statement No. 132(R)"). Statement No. 132(R) incorporates all of the disclosure requirements of Statement No. 132 "Employers Disclosures about Pensions and Other Post-Retirement Benefits" and increases annual disclosure requirements to include more details about pension plan assets, benefit obligations, cash flows, benefit costs and related information. The Company will be required to adopt the new annual disclosure requirements effective September 30, 2004. Statement No. 132(R) also amends Accounting Principles Board (APB) Opinion No. 28, "Interim Financial Reporting" to require interim-period disclosure of the components of net periodic benefit cost and, if significantly different from previously disclosed amounts, the amounts of contributions and projected contributions to fund pension plans and other post-retirement benefit plans. The Company was required to adopt the interim-period disclosure requirements of Statement No. 132(R) effective March 31, 2004. 7 Because Statement No. 132(R) pertains only to disclosure provisions, the Company's adoption of Statement No. 132(R) did not have an impact on the Company's financial condition, results of operations or cash flows. In March 2004, the FASB issued a proposed statement, "Share-Based Payment - an amendment of Statements No. 123 and 95" that addresses the accounting for share-based payment transactions in which an enterprise receives employee services in exchange for (a) equity instruments of the enterprise or (b) liabilities that are based on the fair value of the enterprise's equity instruments or that may be settled by the issuance of such equity instruments. The proposed statement would eliminate the ability to account for share-based compensation transactions using APB Opinion No. 25, "Accounting for Stock Issued to Employees", and generally would require instead that such transactions be accounted for using a fair-value-based method. The Company would be required to adopt this proposed statement in its 2006 fiscal year, and its adoption is not expected to have a material impact in the Company's financial condition, results of operations or cash flows. 4. RESTRUCTURING AND RELATED COSTS: In fiscal 2003, the Company completed its comprehensive Restructuring and Cost Reduction Program, including the final phase of consolidation of its manufacturing operations. The Company had reserved $90,000 of employee severance and related costs as of September 30, 2003. The restructuring costs reserve and utilization since September 30, 2003 are summarized below (in thousands): Reserve balances at September 30, 2003 $ 90 Payments in the six months ended March 31, 2004 (54) ----------- Reserve balances at March 31, 2004 $ 36 =========== In the prior year period ended March 31, 2003, the Company incurred approximately $304,000 for costs associated with the shutdown of a manufacturing facility, which were not accruable in advance. 5. LONG-TERM DEBT: In connection with the completion of its debt restructuring in October 2002, the Company expensed approximately $625,000 of deferred financing costs in the six-month period ended March 31, 2003 associated with its previous senior debt arrangements with a consortium of lenders and its previous subordinated debt agreements. In March 2004, the Company and its subordinated lenders amended their warrant agreements to extend the vesting date of certain warrants from March 31 to May 31, 2004. 6. OTHER INCOME: Other income represents import duty rebates received in the period ended March 31, 2003. 8 7. LINE OF BUSINESS REPORTING: The Company's operations consist only of one principal business segment - its Consumer Group. The following information sets forth certain additional data pertaining to its operations for the three and six-month periods ended March 31, 2004 and 2003 (in thousands). Three Months Six Months -------------------------- ------------------------- Operating Operating Revenues Profit (Loss) Revenues Profit (Loss) ------------ ------------- ------------ ------------- 2004: United States $ 9,309 $ (251) $ 18,549 $ 57 Canada 1,532 127 3,127 145 Mexico 7,734 1,151 12,097 602 United Kingdom 375 41 656 48 China 1 93 1 13 ------------ ------------- ------------ ------------- $ 18,951 $ 1,161 $ 34,430 $ 865 ============ ============= ============ ============= 2003: United States $ 10,026 $ (560) $ 19,505 $ (1,619) Canada 1,543 (4) 3,283 158 Mexico 6,940 1,129 11,284 1,040 United Kingdom 307 16 593 22 China 77 282 98 247 ------------ ------------- ------------ ------------- $ 18,893 $ 863 $ 34,763 $ (152) ============ ============= ============ ============= The United States operating loss in each period includes unallocated corporate expenses. 8. STOCK OPTIONS - PRO FORMA DISCLOSURES: The Company has adopted the disclosure-only provisions of FASB Statements No. 123 and No. 148, and, accordingly, there is no compensation expense recognized for its stock option plans. Pro forma net income (loss) and income (loss) per share would have been as follows if the fair value estimates were used to record compensation expense:
Three Months Ended Six Months Ended March 31, March 31, 2004 2003 2004 2003 ----------- ----------- ------------- ------------- Net income (loss) reported $ 26,433 $(106,316) $(853,188) $(1,038,846) Estimated stock compensation expense 21,290 22,747 42,580 45,494 ----------- ----------- ------------- ------------- Pro forma net income (loss) $ 5,143 $(129,063) $(895,768) $(1,084,340) =========== =========== ============= ============= Pro forma income (loss) per share: Basic $ -- $ (.04) $ (.28) $ (.34) =========== =========== ============= ============= Diluted $ -- $ (.04) $ (.28) $ (.34) =========== =========== ============= =============
9 9. INVESTMENT BANKING AND RELATED COSTS: On January 9, 2004, the Company and Jarden Corporation (NYSE: JAH) signed an exclusivity agreement to allow Jarden to evaluate a potential transaction among the companies whereby Jarden or its affiliate may acquire all of the outstanding shares of the Company's common stock at a price of $5 per share, subject to, among other things, due diligence and entering into definitive acquisition agreements. The exclusivity agreement was later amended several times to extend the expiration date. On March 29, 2004, the companies terminated their discussions. The Company incurred approximately $340,000 in costs associated with the potential transaction which are classified as investment banking and related costs in the accompanying financial statements. 10 Item 2. - ------- MANAGEMENT'S DISCUSSION AND ANALYSIS OF --------------------------------------- FINANCIAL CONDITION AND RESULTS OF OPERATIONS --------------------------------------------- RESULTS OF OPERATIONS - --------------------- REVENUES for the quarter ended March 31, 2004 increased $58,000 from the same period last year. The changes are as follows: Increase % Increase (Decrease) (Decrease) --------------------------- (in thousands) Total Volume Price/Mix -------------- ----- ------ --------- U.S. Consumer (717) (7) (7) - Foreign Consumer 775 8 10 2 U.S. Consumer revenue decreased primarily in the educational and commercial markets as major wholesalers continued their shift in buying patterns to closer to the back-to-school season (the Company's later fiscal quarters) to better manage their inventory levels throughout the year. Foreign Consumer revenue increased primarily in Mexico on higher volume in the mass retail channel. Revenues for the six months ended March 31, 2004 decreased $333,000 from the same period last year. The changes are as follows: Increase % Increase (Decrease) (Decrease) --------------------------- (in thousands) Total Volume Price/Mix -------------- ----- ------ --------- U.S. Consumer (955) (5) (5) - Foreign Consumer 622 4 2 2 U.S. Consumer revenue decreased primarily in the educational market for the reasons discussed above. Foreign Consumer revenue increased primarily due to the higher volume in the Mexico mass market, despite the negative effects of the decrease in the value of the Mexican peso earlier in the fiscal year. While the Company has operations in Canada, Mexico and the U.K., historically only the operating results in Mexico have been materially impacted by currency fluctuations. There has been a significant devaluation of the Mexican peso at least once in each of the last three decades, the last one being in August of 1998. A less significant devaluation occurred in 2003. In the short term after such devaluations, consumer confidence has been shaken, leading to an immediate reduction in revenues in the months following the devaluation. Then, after the immediate shock, and as the peso stabilizes, revenues tend to grow. Selling prices tend to rise over the long term to offset any inflationary increases in costs. The peso, as well as any currency value, depends on many factors including international trade, investor confidence and government policy, to name a few. These factors are impossible for the Company to predict, and thus, an estimate of potential effect on results of operations for the future cannot be made. This currency risk in Mexico is presently managed through local currency financing and by export sales to the U.S. denominated in U.S. dollars. OPERATING INCOME increased $298,000 from the prior year quarter. U.S. operating results increased $308,000 despite the aforementioned decrease in revenue. This quarter includes $340,000 of investment banking and related costs (see Note 9 to Consolidated Financial Statements). Excluding these costs and restructuring charges of $229,000 in the prior year quarter, this U.S. operating results improved $420,000. This increase is primarily due to manufacturing cost reductions brought about by the Company's consolidation efforts and reduced selling costs (principally salaries, commissions and sales incentives) which contributed towards an improvement in consolidated selling and administrative costs (32.2% of revenue as compared to 35.7% in the prior year's quarter). Foreign Consumer operating profit was virtually unchanged as lower gross profit margins offset higher revenues in Mexico. 11 Operating income in the six months ended March 31, 2004 increased $1,017,000 over the same period last year. Excluding the aforementioned investment banking costs and prior year restructuring costs of $304,000 and debt refinancing costs of $625,000 (see Notes 4 and 5 to Consolidated Financial Statements), operating income increased $429,000. U.S. Consumer (excluding the aforementioned items) increased $1,087,000. Despite lower revenues, the Company's consolidation and cost reduction programs significantly improved U.S. gross margins. In addition, lower U.S. advertising, marketing, distribution and personnel costs decreased consolidated selling and administrative costs (34.3% of revenue as compared to 35.9% in the prior year). Foreign operating profit decreased $659,000, primarily in Mexico and China. Mexico experienced lower gross margins due to a less favorable mix of product sold and continuing competitive pricing pressures. Higher material costs decreased China's operating profits. OTHER INCOME in the prior year represents import duty rebates received. The Company's opportunity to receive import duty rebates in the future is subject to certain Federal legislation and other factors. INTEREST EXPENSE decreased $25,000 and $55,000 in the three and six months ended March 31, 2004, respectively, due to decreased average borrowing levels. INCOME TAX increased $441,000 and $697,000 in the three and six months ended March 31, 2004, respectively. The income tax expense in each period represents foreign tax expense only. Despite the continuing improvement in U.S. operating results, the Company incurred a U.S. tax loss in both periods and, accordingly, recorded further valuation allowances to offset any U.S. deferred tax assets created in these periods. MINORITY INTEREST represents approximately 3% of the net results from operations of the Company's Mexico subsidiary. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- The Company's cash flows used in operations improved $2.2 million in the six months ended March 31, 2004. Higher U.S. inventory levels due to the shift in buying patterns of certain of its customers and the addition of safety stock during a move of its distribution center adversely affected cash flows during the period. However, this was more than offset by enhanced accounts payable management and by lower cash flows needed to extinguish trade payables, interest and restructuring liabilities during the current year period. The Company's fiscal 2004 investing activities included approximately $439,000 in net purchases of property and equipment, compared to $747,000 in the prior year period. The reduction reflects the disposal of the Company's refractory division as well as lower capital purchases in Mexico during the period. Generally, all major capital projects are discretionary in nature. A purchase commitment exists with respect to certain computer software enhancements approximating $300,000. Capital expenditures are usually funded from operations and existing financing or new leasing arrangements. The Company's financing agreements with its senior lender and subordinated lenders run through fiscal 2005. Wells Fargo Foothill provides a three-year $28 million senior debt facility. The senior debt facility includes a $25 million revolving loan, which bears interest at either the prime rate, plus 0.75%, or the prevailing LIBOR rate, plus 3.5%. Borrowings under the revolving loan are based upon 85% of eligible U.S. and Canada accounts receivable, as defined; 50% of certain accounts receivable having extended payment terms; and varying advance rates for U.S. and Canada raw materials and finished goods inventories. The facility also includes term loans originally aggregating $3 million, which bear interest at either the prime rate, plus 1.5%, or the prevailing LIBOR rate, plus 4.25%. These loans are payable in monthly installments of $50,000, plus interest, with the balance due in a balloon payment in October 2005. The loan agreement also contains restrictions regarding the payment of dividends as well as subordinated debt payments (discussed below), a requirement to maintain a minimum level of earnings before interest, taxes, depreciation and amortization and net worth and a limitation on the amount of annual capital expenditures. In an attempt to better balance and manage overall interest rate exposure, the Company previously executed an interest rate swap agreement that effectively fixed the rate of interest on $8 million of its variable rate debt at 8.98% through August 2005. 12 These financing arrangements are collateralized by the tangible and intangible assets of the U.S. and Canada operations (including accounts receivable, inventories, property, plant and equipment, patents and trademarks) and a guarantee by and pledge of capital stock of the Company's subsidiaries. As of March 31, 2004, the Company had approximately $13 million of unused lines of credit available under the senior debt facility. The Company also has $16.5 million of Senior Subordinated Notes with a maturity date to 2005. The Company had only been required to pay monthly installments of $50,000 through December 2003 and $150,000 per month, commencing January 2004 through the maturity date. However, the Company has paid a total of $4.2 million in principal through March 31, 2004 and expects to make additional excess payments to its subordinated lenders through the maturity date in October 2005. Payments to the subordinated lenders are subject to certain restrictions imposed under the senior debt facility. Interest on the balance of subordinated debt is paid quarterly. If the Company is unable to make scheduled and excess payments totaling at least an additional $4.8 million by 2005 (due to restrictions imposed under the senior debt facility or otherwise) warrants issued to the noteholders equivalent to up to approximately 1.7% of the diluted common shares outstanding for each $1 million in remaining unpaid additional principal will become exercisable at an exercise price of $.01 per share. Under the subordinated note agreement, as amended, the first date at which a portion of the warrants issued to the subordinated noteholders will become exercisable is May 31, 2004, when warrants to purchase up to 2.5% of the diluted common shares outstanding will become exercisable if aggregate payments to the subordinated noteholders are less than $5.05 million through that date. The Company expects to make sufficient additional payments to avoid the grant of part or all of the May 31, 2004 warrants. The agreement also grants the subordinated lenders a lien on Company assets (junior in all aspects to the senior debt collateral agreements described above). The interest rate on the subordinated notes is 12.5% through maturity in October 2005. The subordinated note agreement includes certain other provisions, including restrictions as to the payment of dividends and the elimination or adjustment of financial covenants contained in the original agreement to conform to those contained in the senior debt agreements. In addition, the Company's Mexico subsidiary had approximately $15.5 million in bank lines of credit ($4 million unused) as of March 31, 2004, expiring at various dates from September 2004 through December 2004, which bear interest at a rate based upon either a floating U.S. bank rate or the rate of certain Mexico government securities. The Company relies heavily upon the availability of the lines of credit in the U.S. and Mexico for liquidity in its operations. The Company believes that amounts available from its lines of credit under its senior debt and under lines of credit available to its Mexican subsidiary are sufficient to fulfill all current and anticipated operating requirements of its business through 2005. The Company's Mexico subsidiary cannot assure that each of its lines of credit will continue to be available after their respective expiration dates, or that replacement lines of credit will be secured. However, the Company believes there should be sufficient amounts available under its present or future facilities or lines of credit to cover any potential shortfalls due to any expiring lines of credit. The Company has recently been assisted by investment bankers and certain other outside consultants to advise and assist it in evaluating certain strategic alternatives, including capital restructuring, mergers and acquisitions, and/or other measures designed to maximize shareholder value. The Company continues to pursue strategic alternatives, including a potential sale. On January 9, 2004, the Company and Jarden Corporation (NYSE: JAH) signed an exclusivity agreement to allow Jarden to evaluate a potential transaction among the companies whereby Jarden or its affiliate may acquire all of the outstanding shares of the Company's common stock at a price of $5 per share, subject to, among other things, due diligence and entering into definitive acquisition agreements. The exclusivity agreement was later amended several times to extend the expiration date. On March 29, 2004, the companies terminated their discussions. 13 RECENT ACCOUNTING PRONOUNCEMENTS - -------------------------------- In December 2003, the FASB issued Statement No. 132 (revised 2003), "Employers' Disclosures About Pensions and Other Post-Retirement Benefits, an amendment of FASB Statements No. 87, 88 and 106" (collectively "Statement No. 132(R)"). Statement No. 132(R) incorporates all of the disclosure requirements of Statement No. 132 "Employers Disclosures about Pensions and Other Post-Retirement Benefits" and increases annual disclosure requirements to include more details about pension plan assets, benefit obligations, cash flows, benefit costs and related information. The Company will be required to adopt the new annual disclosure requirements effective September 30, 2004. Statement No. 132(R) also amends Accounting Principles Board Opinion No. 28, "Interim Financial Reporting" to require interim-period disclosure of the components of net periodic benefit cost and, if significantly different from previously disclosed amounts, the amounts of contributions and projected contributions to fund pension plans and other post-retirement benefit plans. The Company was required to adopt the interim-period disclosure requirements of Statement No. 132(R) effective March 31, 2004. Because Statement No. 132(R) pertains only to additional disclosures included herein, the Company's adoption of Statement No. 132(R) did not have an impact on the Company's financial condition, results of operations or cash flows. In March 2004, the FASB issued a proposed statement, "Share-Based Payment - an amendment of Statements No. 123 and 95" that addresses the accounting for share-based payment transactions in which an enterprise receives employee services in exchange for (a) equity instruments of the enterprise or (b) liabilities that are based on the fair value of the enterprise's equity instruments or that may be settled by the issuance of such equity instruments. The proposed statement would eliminate the ability to account for share-based compensation transactions using APB Opinion No. 25, "Accounting for Stock Issued to Employees", and generally would require instead that such transactions be accounted for using a fair-value-based method. The Company would be required to adopt this proposed statement in its 2006 fiscal year, and its adoption is not expected to have a material impact in the Company's financial condition, results of operations or cash flows. FORWARD-LOOKING STATEMENTS - -------------------------- The statements in this Quarterly Report on Form 10-Q that are not purely historical are "forward-looking statements" within the meaning of section 27A of the Securities Act of 1933 and section 21E of the Securities Exchange Act of 1934, including statements about the Company's expectations, beliefs, intentions or strategies regarding the future. Forward-looking statements include statements regarding, among other things, the effects of the devaluation of the Mexican peso; the sufficiency and continued availability of the Company's lines of credit and its ability to meet its current and anticipated obligations, including payments due under its subordinated debt; management's expectation for savings from the restructuring and cost-reduction program; the Company's ability to increase sales in its core businesses; its expectations regarding the Company's ability to utilize certain tax benefits in the future; and the avoidance of the exercisability of part or all of the warrants issued to the Company's subordinated noteholders. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors that could cause the actual results to differ materially from those expressed or implied by such forward-looking statements. Such risks include (but are not limited to) the risk that the shareholders' ownership will be diluted by the issuance of common stock to the Company's subordinated lenders; the Company's lenders will not continue to fund the Company in the future; the cancellation of the lines of credit available to the Company's Mexico subsidiary; the inability to maintain and/or secure new sources of capital; manufacturing inefficiencies; difficulties encountered with the consolidation and cost-reduction program; increased competition; decrease in revenues; U.S. and foreign economic factors; foreign currency exchange risk; and interest rate fluctuation risk, among others. 14 Item 3. - ------- QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ---------------------------------------------------------- As discussed elsewhere, the Company is exposed to the following principal market risks (i.e. risks of loss arising from adverse changes in market rates): foreign exchange rates and interest rates on debt. The Company's exposure to foreign currency exchange rate risk in its international operations is principally limited to Mexico and, to a lesser degree, Canada. Approximately 39% of the Company's fiscal 2003 net revenues were derived in Mexico and Canada, combined (exclusive of intercompany activities). Foreign exchange transaction gains and losses arise from monetary assets and liabilities denominated in currencies other than the business unit's functional local currency. It is estimated that a 10% change in both the Mexican peso and Canadian dollar exchange rates would impact reported operating profit by approximately $500,000. This quantitative measure has inherent limitations because it does not take into account the changes in customer purchasing patterns or any adjustment to the Company's financing or operating strategies in response to such a change in rates. Moreover, this measure does not take into account the possibility that these currency rates can move in opposite directions, such that gains from one may offset losses from another. In addition, the Company's cash flows and earnings are subject to changes in interest rates. As of March 31, 2004, approximately 50% of total short and long-term debt is fixed, at rates between 8% and 12.5%. The balance of the Company debt is variable, principally based upon the prevailing U.S. bank prime rate, the rate of Mexico government securities or the LIBOR rate. An interest rate swap, which expires in 2005, fixes the rate of interest on $8 million of this debt at 8.98%. A change in the average prevailing interest rates of the remaining debt of 1% would have an estimated annual impact of $150,000 upon the Company's pre-tax results of operations and cash flows. This quantitative measure does not take into account the possibility that the prevailing rates can move in opposite directions and that the Company has, in most cases, the option to elect the determining interest rate factor. Item 4. - ------- CONTROLS AND PROCEDURES ----------------------- Within the 90-day period prior to the date of this report, the Company's Co-Chief Executive Officers, Chief Financial Officer and Chief Accounting Officer evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures and concluded that such disclosure controls and procedures are effective. There have been no significant changes in internal controls or in other factors, which could significantly affect internal controls subsequent to the date that the officers carried out their evaluations. 15 PART II. OTHER INFORMATION --------------------------- ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - ---------------------------------------- (a) Documents filed as part of this report: -------------------------------------- 1. Financial statements -------------------- See index under Item 1. Financial Information. 2. Exhibits -------- The following exhibits are required to be filed as part of this Quarterly Report on Form 10-Q: (2) c. Asset Purchase Agreement dated December 23, 2002, between Dixon Ticonderoga Company, as Seller and New Castle Refractories Company, Inc., Inc., as Buyer with addenda. 7 (3) (i) Restated Certificate of Incorporation 2 (3) (ii) Amended and Restated Bylaws 1 (4) a. Specimen Certificate of Company Common Stock 2 (4) b. Amended and Restated Stock Option Plan 3 (10) b. 12.00% Senior Subordinated Notes, Due 2003, Note and Warrant Purchase Agreement 1 (10) c. 12.00% Senior Subordinated Notes, Due 2003, Common Stock Purchase Warrant Agreement 1 (10) j. Amendment No. 1 to 12.00% Senior Subordinated Notes, Due 2003, Note and Warrant Purchase Agreement. 4 (10) m. Amendment No. 2 to Note and Warrant Purchase Agreement. 5 (10) n. Loan and Security Agreement by and among Dixon Ticonderoga Company and its Subsidiaries and Foothill Capital Corporation. 6 (10) o. Dixon Ticonderoga Company Amended and Restated Note and Warrant Purchase Agreement, 12.5% Senior Subordinated Notes, due October 3, 2005. 6 (10) p. Warrant Amendment Agreement (21) Subsidiaries of the Company. 7 (31.1) Chairman of the Board and Co-Chief Executive Officer Certification pursuant to Exchange Act Rule 13a-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 16 (31.2) Vice Chairman of the Board and Co-Chief Executive Officer Certification pursuant to Exchange Act Rule 13a-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (31.3) Executive Vice President of Finance and Chief Financial Officer Certification pursuant to Exchange Act Rule 13a-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (32.1) Chairman of the Board and Co-Chief Executive Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (32.2) Vice Chairman of the Board and Co-Chief Executive Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (32.3) Executive Vice President of Finance and Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (99.A11) Code of Ethics 8 1Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended September 30, 1996, file number 0-2655, filed in Washington, D.C. 2Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the period ended March 31, 1997, file number 0-2655, filed in Washington, D.C. 3Incorporated by reference to Appendix 3 to the Company's Proxy Statement dated January 27, 1997, file number 0-2655, filed in Washington, D.C. 4Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended September 30, 1999, file number 0-2655, filed in Washington, D.C. 5Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended September 30, 2002, file number 0-2655, filed in Washington, D.C. 6Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the period ended December 31 2002, file number 0-2655, filed in Washington, D.C. 7Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended September 30, 2003, file number 0-2655 filed in Washington, D.C. 8Incorporated by reference to the Company's report on Form 10-K/A, Amendment No. 1, for the year ended September 30, 2003, file number 0-2655, filed in Washington, D.C. (b) Reports on Form 8-K: On February 11, 2004, the Company filed a Form 8-K which included as an exhibit its press release dated December 29, 2003, regarding its first fiscal quarter results and the extension of its exclusivity agreement with Jarden Corporation. 17 On February 27, 2004, the Company filed a Form 8-K which included as an exhibit its press release regarding a further extension of its exclusivity agreement with Jarden Corporation. On March 15, 2004, the Company filed a Form 8-K which included as an exhibit its press release regarding a further extension of its exclusivity agreement with Jarden Corporation. On March 29, 2004, the Company filed a Form 8-K which included as an exhibit its press release regarding the termination of its discussions with Jarden Corporation. 18 SIGNATURES ---------- Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DIXON TICONDEROGA COMPANY Date: May 14, 2004 By: /s/ GINO N. PALA ------------ --------------------- Gino N. Pala Chairman of Board, Co-Chief Executive Officer and Director Date: May 14, 2004 By: /s/ RICHARD A. ASTA ------------ --------------------- Richard A. Asta Executive Vice President of Finance, Chief Financial Officer and Director Date: May 14, 2004 By: /s/ JOHN ADORNETTO ------------ --------------------- John Adornetto Vice President, Corporate Controller and Chief Accounting Officer 19 EX-10 2 warrantamendment.txt EXHIBIT 10(P):WARRANT AMENDMENT AGREEMENT Exhibit 10(p) ------------- DIXON TICONDEROGA COMPANY ------------------------- AMENDMENT AGREEMENT ------------------- AMENDMENT TO MARCH 2004 2.5% WARRANTS AND 9.5% WARRANTS ------------------------------------------------------- As of March 31, 2004 This Amendment Agreement (this "Amendment Agreement") is made as of March 31, 2004, among DIXON TICONDEROGA COMPANY, a Delaware corporation (the "Company") and each of The Equitable Life Assurance Society of the United States, John Hancock Life Insurance Company (formerly known as John Hancock Mutual Life Insurance Company), and Signature 1A (Cayman), Ltd. (each a "Noteholder" and, collectively, the "Noteholders"). 1. PRELIMINARY STATEMENTS. 1.1. Note and Warrant Issuances Pursuant to that certain Note and Warrant Purchase Agreement, dated as of September 26, 1996, as amended from time to time and as amended and restated by the Amended and Restated Note and Warrant Purchase Agreement dated as of October 3, 2002 (the "Note and Warrant Agreement") the Company (i) issued and sold $16,500,000 in original aggregate principal amount of its 12.5% Senior Subordinated Notes due September 26, 2003 (the "Notes", as they may be amended, restated or otherwise modified from time to time) and (ii) issued to each Noteholder one March 2004 2.5% Warrant, one March 2005 2.5% Warrant, and one 9.5% Warrant (each as defined in the Note and Warrant Agreement), in each case dated as of October 3, 2002 and registered in the name of such Noteholder (for the respective number of shares of Common Stock set forth below such Noteholder's name on Annex 1 to the Note and Warrant Agreement). 1.2. Amendment. Whereas, the Company has requested and, subject to the terms and conditions hereof, the Noteholders have agreed to amend certain provisions of the March 2004 2.5% Warrants and the 9.5% Warrants. 2. DEFINED TERMS. Capitalized terms used herein and not otherwise defined herein have the meanings ascribed to them in the Note and Warrant Agreement, the March 2004 2.5% Warrants or the 9.5% Warrants, as the case may be. 3. AMENDMENTS. Subject to Section 5, the March 2004 2.5% Warrants and the 9.5% Warrants are amended in the manner specified in Exhibit A and Exhibit B to this Amendment Agreement (such amendments are herein referred to as the "Amendments"); such March 2004 2.5% Warrants and 9.5% Warrants shall be deemed for all purposes to be so amended, without further action on the part of any Person. Each Noteholder may, but shall not be required to, at its option, elect to exchange the warrants held by it for new warrants of the same type incorporating the language of the Amendments. 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. To induce the Noteholders to enter into this Amendment Agreement the Company represents and warrants as follows: 4.1. Organization, Power and Authority, etc. The Company is a corporation duly incorporated and validly existing in good standing under the laws of Delaware and has all requisite corporate power and authority to enter into and perform its obligations under this Amendment Agreement. 4.2. Legal Validity. The execution and delivery of this Amendment Agreement by the Company and compliance by the Company with its obligations hereunder: (a) are within the corporate powers of the Company; and (b) are legal and do not conflict with, result in any breach of, constitute a default under, or result in the creation of any Lien upon any Property of the Company under the provisions of: (i) any charter instrument or bylaw to which the Company is a party or by which the Company or any of its Property may be bound; (ii) any order, judgment, decree or ruling of any court, arbitrator or governmental authority applicable to either the Company or its Property; or (iii) any agreement or instrument to which the Company is a party or by which the Company or any of its Property may be bound or any statute or other rule or regulation of any governmental authority applicable to the Company or its Property, except where such conflict, breach or default could not reasonably be expected to have a Material Adverse Effect. This Amendment Agreement has been duly authorized by all necessary action on the part of the Company, has been executed and delivered by a duly authorized officer of the Company, and constitutes a legal, valid and binding obligation of the Company, enforceable in accordance with its terms, except that enforceability may be limited by applicable bankruptcy, reorganization, arrangement, insolvency, moratorium, or other similar laws affecting the enforceability of creditors' rights generally and subject to the availability of equitable remedies. 4.3. No Defaults. No event has occurred and no condition exists that, immediately prior to, or upon the execution and delivery of this Amendment Agreement, would constitute a Default or an Event of Default. 5. EFFECTIVENESS OF AMENDMENTS. The Amendments shall become effective as of the date hereof (the "Effective Date") upon the satisfaction of the following conditions: 5.1. Execution and Delivery of This Amendment Agreement. The Company and each of the Noteholders shall have executed and delivered this Amendment Agreement. 5.2. Expenses. The Company shall have paid all costs and expenses of the Noteholders in accordance with Section 6.4 hereof and the terms of the Note and Warrant Agreement. 5.3. Warranties and Representations True. The warranties and representations contained in Section 4 shall be true on the Effective Date with the same effect as though made on that date. 6. MISCELLANEOUS. 6.1. Future References, etc. This Amendment Agreement shall be construed in connection with and as a part of the March 2004 2.5% Warrants and the 9.5% Warrants and, except as expressly amended by this Amendment Agreement, all terms, conditions and covenants contained in the March 2004 2.5% Warrants and the 9.5% Warrants, and all other terms of each of the Transaction Documents, are hereby ratified and shall be and remain in full force and effect. Any and all notices, requests, certificates and other instruments executed and delivered after the execution and delivery of this Amendment Agreement may refer to the March 2004 2.5% Warrants and the 9.5% Warrants without making specific reference to this Amendment Agreement, but nevertheless all such references shall include this Amendment Agreement unless the context otherwise requires. 6.2. Counterparts. This Amendment Agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument. Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all, of the parties hereto. 6.3. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN NEW YORK. 6.4. Fees and Expenses. On the Effective Date, the Company shall pay all costs and expenses of the Noteholders relating to this Amendment Agreement, including, but not limited to, the statement for reasonable fees and disbursements of their special counsel (including, without limitation, the fees and disbursements of their special counsel) presented to the Company on the Effective Date. The Company will also pay, upon receipt thereof, each additional statement for reasonable fees and disbursements of the Noteholders' special counsel rendered after the Effective Date in connection with this Amendment Agreement. The obligations of the Company under this Section 6.4 shall survive the termination of this Amendment Agreement. [Remainder of page intentionally left blank; next page is signature page.] IN WITNESS WHEREOF, the Company and the Noteholders have executed this Amendment Agreement as of the date first written above. DIXON TICONDEROGA COMPANY By: /s/ Richard A. Asta --------------------------------- Name: Richard A. Asta Title: Treasurer THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES By: /s/ James C. Pendergast ------------------------------- Name: James C. Pendergast Title: Managing Director JOHN HANCOCK LIFE INSURANCE COMPANY By: /s/ Gary M. Pelletier ------------------------------- Name: Gary M. Pelletier Title: Managing Director SIGNATURE 1A (CAYMAN), LTD. By: John Hancock Life Insurance Company, as Portfolio Advisor By: /s/ Peter S. Parson ------------------------------- Name: Peter S. Parson Title: Director Exhibit A --------- AMENDMENTS TO MARCH 2004 2.5% WARRANTS -------------------------------------- 1. Amendment of Section 1.2 of the March 2004 2.5% Warrants. Section 1.2 of each of the March 2004 2.5% Warrants is hereby amended and restated in its entirety to read as follows: "1.2. Timing of Exercise; Warrant Termination. This Warrant may be exercised on and after June 1, 2004. If the Company reduces the principal amount of the Restated Notes by an aggregate of at least $4,000,000 but not more than $4,499,999 during the period from October 3, 2002 to the close of business on May 31, 2004, the number of shares issuable upon exercise of this Warrant shall automatically reduce by forty percent (40%). If the Company reduces the principal amount of the Restated Notes by an aggregate of at least $4,500,000 but not more than $4,749,999 during the period from October 3, 2002 to the close of business on May 31, 2004, the number of shares issuable upon exercise of this Warrant shall automatically reduce by eighty percent (80%). If the Company reduces the principal amount of the Restated Notes by an aggregate of at least $5,050,000 during the period from October 3, 2002 to the close of business on May 31, 2004, this Warrant shall terminate and be of no further force or effect. In no event shall this Warrant be exercisable after December 31, 2007." Exhibit B --------- AMENDMENTS TO 9.5% WARRANTS --------------------------- 1. Amendment of Section 14 of the 9.5% Warrants. Section 14 of each of the 9.5% Warrants is hereby amended by amending and restating the following definition in its entirety to read as follows: "March 2004 2.5% Warrants--shall mean those certain warrants issued to the Equitable Life Assurance Society of the United States, John Hancock Life Insurance Company (formerly known as John Hancock Mutual Life Insurance Company) and Signature 1A (Cayman), Ltd. and their successors, assigns and transferees." EX-31 3 section302.txt CERTIFICATION: SECTION 302 Exhibit 31.1 ------------ CHAIRMAN OF THE BOARD AND CO-CHIEF EXECUTIVE OFFICER ---------------------------------------------------- CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13A-14 AS ADOPTED ------------------------------------------------------------- PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 --------------------------------------------------------- I, Gino N. Pala, Chairman of the Board and Co-Chief Executive Officer of Dixon Ticonderoga Company, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Dixon Ticonderoga Company for the quarter ended March 31, 2004; 2. Based on my knowledge, this quarterly report does not contain any untrue statements of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a)designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b)evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c)presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a)all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 14, 2004 By: /s/ GINO N. PALA ------------ ---------------- Gino N. Pala Chairman of Board, Co-Chief Executive Officer and Director Exhibit 31.2 ------------ VICE CHAIRMAN OF BOARD AND CO-CHIEF EXECUTIVE OFFICER ----------------------------------------------------- CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13A-14 AS ADOPTED ------------------------------------------------------------- PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 --------------------------------------------------------- I, Richard F. Joyce, Vice Chairman of Board, Co-Chief Executive Officer, President and Director of Dixon Ticonderoga Company, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Dixon Ticonderoga Company for the quarter ended March 31, 2004; 2. Based on my knowledge, this quarterly report does not contain any untrue statements of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a)designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b)evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c)presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a)all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 14, 2004 By: /s/ RICHARD F. JOYCE ------------ -------------------- Richard F. Joyce Vice Chairman of Board, Co-Chief Executive Officer, President and Director Exhibit 31.3 ------------ EXECUTIVE VICE PRESIDENT OF FINANCE AND CHIEF FINANCIAL OFFICER --------------------------------------------------------------- CERTIFICATION PURSUANT TO EXCHANGE ACT RULE 13A-14 AS ADOPTED ------------------------------------------------------------- PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 --------------------------------------------------------- I, Richard A. Asta, Executive Vice President of Finance, Chief Financial Officer and Director of Dixon Ticonderoga Company, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Dixon Ticonderoga Company for the quarter ended March 31, 2004; 2. Based on my knowledge, this quarterly report does not contain any untrue statements of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a)designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b)evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c)presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a)all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 14, 2004 By: /s/ RICHARD A. ASTA ------------ ------------------- Richard A. Asta Executive Vice President of Finance, Chief Financial Officer and Director EX-32 4 section906.txt CERTIFICATION: SECTION 906 Exhibit 32.1 ------------ CHAIRMAN OF THE BOARD AND CO-CHIEF EXECUTIVE OFFICER ---------------------------------------------------- CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, ------------------------------------------------- AS ADOPTED PURSUANT TO SECTION 906 ---------------------------------- OF THE SARBANES-OXLEY ACT OF 2002. ---------------------------------- In connection with the Quarterly Report of Dixon Ticonderoga Company (the "Company") on Form 10-Q for the period ending March 31, 2004, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Gino N. Pala, Chairman of Board and Co-Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. Date: May 14, 2004 By: /s/ GINO N. PALA ----------------- ---------------- Gino N. Pala Chairman of Board, Co-Chief Executive Officer and Director Exhibit 32.2 ------------ VICE CHAIRMAN OF BOARD AND CO-CHIEF EXECUTIVE OFFICER ----------------------------------------------------- CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, ------------------------------------------------- AS ADOPTED PURSUANT TO SECTION 906 ---------------------------------- OF THE SARBANES-OXLEY ACT OF 2002. ---------------------------------- In connection with the Quarterly Report of Dixon Ticonderoga Company (the "Company") on Form 10-Q for the period ending March 31, 2004, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Richard F. Joyce, Vice Chairman of Board and Co-Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. Date: May 14, 2004 By: /s/ RICHARD F. JOYCE ----------------- -------------------- Richard F. Joyce Vice Chairman of Board, Co-Chief Executive Officer, President and Director Exhibit 32.3 ------------ EXECUTIVE VICE PRESIDENT OF FINANCE AND CHIEF FINANCIAL OFFICER --------------------------------------------------------------- CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, ------------------------------------------------- AS ADOPTED PURSUANT TO SECTION 906 ---------------------------------- OF THE SARBANES-OXLEY ACT OF 2002. ---------------------------------- In connection with the Quarterly Report of Dixon Ticonderoga Company (the "Company") on Form 10-Q for the period ending March 31, 2004, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Richard A. Asta, Executive Vice President of Finance and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. Date: May 14, 2004 By: /s/ RICHARD A. ASTA ----------------- ------------------- Richard A. Asta Executive Vice President of Finance, Chief Financial Officer and Director -----END PRIVACY-ENHANCED MESSAGE-----