-----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, ANGGSDp4b7YZiYhy3cym7tjDCll7K2w3fnr5tZfiXkgatmFf2r/MIscMz+u3QK2Z gumsV2HElNugGT4m3a7oUA== 0000014995-95-000027.txt : 19951221 0000014995-95-000027.hdr.sgml : 19951221 ACCESSION NUMBER: 0000014995-95-000027 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951220 SROS: AMEX 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-02655 FILM NUMBER: 95602846 BUSINESS ADDRESS: STREET 1: 2600 MAITLAND CENTER PKWY STREET 2: STE 200 CITY: MAITLAND STATE: FL ZIP: 32751 BUSINESS PHONE: 4078759000 MAIL ADDRESS: STREET 1: 2600 MAITLAND CTR PARKWAY STREET 2: STE 200 CITY: MAITLAND STATE: FL ZIP: 32751 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-K 1 1995 FORM 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended 9/30/95 Commission file number 0-2655 DIXON TICONDEROGA COMPANY (Exact name of Company as specified in its charter) FORM 10-K X Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange - ---- Act of 1934 (Fee Required) For the fiscal year ended 9/30/95. Transition Report Pursuant to Section 13 or 15(d) of the Securities - ---- Exchange Act of 1934 (No Fee Required) For the transaction period from to . DELAWARE 23-0973760 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2600 Maitland Center Parkway, Suite 200, Maitland, FL 32751 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (407) 875-9000 Title of each class Name of each exchange on which registered COMMON STOCK, $1.00 PAR VALUE AMERICAN STOCK EXCHANGE 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 Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]. Based on the closing sales price on 11/30/95, the aggregate market value of the voting stock held by non-affiliates of the Company was $14,068,710. Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of 11/30/95: 3,193,320 shares of common stock, $1.00 Par Value. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of Form 10-K or any amendment to this Form 10-K. [ ] Documents Incorporated by Reference: Proxy statement to security holders incorporated into Part III for the fiscal year ended 9/30/95. 2 PART I ITEM 1. BUSINESS NEW DEVELOPMENTS AND BUSINESS STRATEGIES Dixon Ticonderoga Company (hereinafter the "Company") initiated many new strategies over the past several years. The Company has completed manufacturing plant and administrative office consolidations, and instituted many ambitious cost containment and cash flow initiatives. In addition, management has introduced a new total quality process into the organization, along with revamped human resources programs. These strategies have contributed to significantly improved operating results in recent years and a reduction in total indebtedness. Moreover, the Company has successfully disposed of idled properties, further reducing indebtedness. The Company has also made additional capital investments in its core businesses. During 1995, the Company celebrated its 200-year anniversary by achieving consolidated operating income in excess of $9 million and net operating earnings (before non-recurring items) of $2,618,000, representing increases of 30% over 1994. In addition, the Company concluded the wind-up of its real estate segment, allowing management to fully refocus on its core Consumer Products and industrial business groups. Moreover, the Company made provision for the ultimate settlement and related costs associated with several long-standing lawsuits. In 1995, the aforementioned non-recurring items resulted in a net loss from discontinued real estate operations of approximately $595,000 and an after-tax provision for litigation of $960,000, thus reducing net income to $1,063,000. Further information regarding these transactions is included elsewhere in this Form 10-K. 3 INDUSTRY SEGMENTS The Company has three principal continuing business segments: Consumer Products, Industrial Graphite and Lubricants, and Refractory Products. These segments, and the primary operations of each, are as follows: BUSINESS SEGMENTS OPERATIONS Consumer Products Manufacture and sale of writing and drawing pencils, pens, artist materials, felt tip markers, industrial markers, lumber crayons, typewriter correction materials and allied products. Industrial Graphite and Manufacture and sale to industry of processed Lubricants natural and synthetic bulk graphite, graphite oil, solvent and water-based lubricants, as well as colloidal graphitic suspensions. Refractory Products Manufacture and sale to industry of clay and graphite stopper heads, firebrick, non-graphitic refractory kiln furniture and furnace linings. Financial information regarding net revenues, operating profits and identifiable assets related to the Company's industry segments for the years ended September 30, 1995, 1994, and 1993, is contained in Note 11 to Consolidated Financial Statements. The Company's international operations are subject to certain risks inherent in carrying on business abroad, including the risk of currency fluctuations, currency remittance restrictions and unfavorable political conditions. It is the Company's opinion that there are presently no material political risks involved in doing business in the foreign countries (i.e. Mexico, Canada and Europe) in which its operations are being conducted. CONSUMER PRODUCTS The Company manufactures its leading brand TICONDEROGA and a full line of pencils in Versailles, Missouri. The Company also manufactures and markets advertising specialty pencils, pens and markers through its promotional products division. 4 The Company is also the producer of WEAREVER writing products at its facility in Deer Lake, Pennsylvania. In addition to the WEAREVER line of pens, the Company also manufactures and markets felt tip markers, mechanical pencils and the DIXON brand of pens and allied products at this facility. The Company also manufactures in Sandusky, Ohio (mainly for wholesale school suppliers and retailers) PRANG, COLORART, and other well known brands of wax crayons, chalks, dry and liquid tempera, water colors and art materials. This division also manufactures special markers for industrial use and paper-wrapped pencils, all of which are marketed and sold, together with the products manufactured by the Versailles and Deer Lake operations, by the U.S. Consumer Products group. Under an agreement with Warner Bros. Consumer Products, the Company also manufactures and markets in the U.S. and Canada a complete product line of pencils, pens, crayons, chalks, markers, paints, art kits and related items featuring the famous Looney Tunes characters. (See Note 12 to Consolidated Financial Statements.) Dixon Ticonderoga Inc., a wholly-owned subsidiary with a distribution center in Newmarket, Ontario, and a manufacturing plant in Acton Vale, Quebec, Canada, is engaged in the sale in Canada of black and color writing and drawing pencils, pens, lumber crayons, correction materials, erasers, rubber bands and allied products. It also distributes certain of the school product lines. The Acton Vale plant also produces eraser products and correction materials for distribution by the U.S. Consumer Products group. Dixon Ticonderoga de Mexico, Inc., S.A. de C.V., a majority-owned subsidiary (50.1%) of Dixon Ticonderoga Inc., is engaged in the manufacture and sale in Mexico of black and color writing and drawing pencils, typewriter correction materials, lumber crayons and allied products. This subsidiary also manufactures and sells in Mexico certain products of the type 5 manufactured at the Sandusky facility, as well as marker products manufactured at the Deer Lake facility. Dixon Europe, Limited, a wholly-owned subsidiary of the Company is engaged in the distribution of many Dixon Consumer Products in the United Kingdom and other European countries. INDUSTRIAL GRAPHITE AND LUBRICANTS Through its Graphite and Lubricants division, Dixon manufactures and sells processed natural and synthetic graphite, graphite oil, solvent and water-based lubricants as well as colloidal graphitic suspensions. The American Graphite division located in Manchester Township, New Jersey, and the Southwestern Graphite division located in Burnet, Texas, process and sell graphite to industrial customers, and are engaged in the processing and blending of various grades of foreign and domestic graphites for use in the manufacture and sale of related products. REFRACTORY PRODUCTS The New Castle Refractories division, with plants located in Ohio, Pennsylvania and West Virginia, manufactures various types of non-graphitic refractory kiln furniture used by the ceramic and glass industries; firebrick, various types and designs of non-graphitic refractory special shapes for ferrous and nonferrous metal industries; refractory shapes for furnace linings and industrial furnace construction; various grades of insulating firebrick and graphite stopper heads. REAL ESTATE OPERATIONS (Discontinued Operations) The Company previously developed Bryn Mawr Ocean Towers (three nine-story towers) on North Hutchinson Island, Florida, which were sold as condominiums. Pursuant to a formal plan and agreement dated September 29, 1995, the Company disposed of the remaining property dedicated to this project and has ceased any further real estate activities. This segment is 6 therefore treated as "Discontinued Operations." Management estimates the annual future cost savings to be approximately $150,000. (See Note 10 to Consolidated Financial Statements.) DISTRIBUTION Consumer products manufactured at the Sandusky, Ohio; Deer Lake, Pennsylvania; and Versailles, Missouri plants are distributed nationally through wholesale, commercial and retail stationers, school supply houses, industrial supply houses, blueprint and reproduction supply firms, art material distributors and retailers. The consumer products manufactured at the Canadian and Mexican plants are distributed nationally in these countries through wholesalers, distributors, school supply houses and retailers. The industrial products manufactured at the various plants are sold by direct sales, manufacturers' representatives and industrial distributors in North America. In addition, these products are sold worldwide, principally in Central and South America, Europe, the Philippines and Japan. RAW MATERIALS Graphite, which can be considered a strategic raw material for the Company's business, is sold by the Company in bulk and as a component, and is used in the manufacture of refractory products, lubricants and leads for wood-cased pencils. Graphite is purchased from Brazil, Madagascar, India, Mexico, People's Republic of China, Sri Lanka, West Germany and Zimbabwe. There were no significant raw material shortages of any consequence during 1995 nor any anticipated for future periods. TRADEMARKS, PATENTS AND COPYRIGHTS The Company owns a large number of trademarks, patents and copyrights in each industry segment related to products manufactured and marketed by it, which have been secured over many years. These have been of value in the growth of the business and should continue to be of value in the future. 7 However, in the opinion of the Company, its business generally is not dependent upon the protection of any patent or patent application or the expiration of any patent. SEASONAL ASPECTS OF THE BUSINESS The Consumer Products business reflects greater portions (approximately 60%) of its sales in the third and fourth fiscal quarters of the year due to shipments of school orders to its distribution network. This practice, which is standard for this industry, usually causes the Company to incur additional bank borrowings during the period between shipment and payment. The Industrial Graphite and Lubricants and Refractory Products businesses have no material seasonal aspects. COMPETITION Each of the Company's industry segments is engaged in a highly competitive business with a number of competitors, some of whom are larger and have greater resources than the Company. Important to the Company's market position are the quality and performance of its products, its marketing and distribution systems, and the reputation developed over the many years that the Company has been in business. RESEARCH AND DEVELOPMENT The Company employs approximately 17 full-time professional employees in the area of quality control and product development. The Company has recently established a centralized research and development laboratory in its Sandusky, Ohio facility. For accounting purposes, research and development expenses in any year presented in the accompanying Consolidated Financial Statements were not material. EMPLOYEES The total number of persons employed by the Company was approximately 1,180 of which 750 were employed in the United States. 8 ITEM 2. PROPERTIES The following properties of the Company (except present Corporate Headquarters) are owned in fee and, except as indicated, are collateralized under the Company's loan agreement with First Union National Bank of North Carolina, its primary lender. Most of the buildings are of steel frame and masonry or concrete construction. SQUARE FEET LOCATION OF FLOOR SPACE Maitland, Florida (leased space for Corporate Headquarters)* 25,000 Heathrow, Florida (future site of Corporate Headquarters)* -- Sandusky, Ohio (Consumer Products) 276,000 Manchester Township, New Jersey (American Graphite) (Industrial Graphite and Lubricants) 76,000 Near Burnet, Texas (Southwestern Graphite) (Industrial Graphite and Lubricants) 73,000 Burnet, Texas (Warehouse - Southwestern Graphite) (Industrial Graphite and Lubricants) 10,000 New Castle, Pennsylvania (Refractory Products) 131,000 Newell, West Virginia (Refractory Products) 45,000 Massillon, Ohio (Refractory Products) 113,000 Zoar, Ohio (Refractory Products) 65,000 Acton Vale, Quebec, Canada (Dixon Ticonderoga Inc.) (Consumer Products) 32,000 Tlalnepantla, D.F., Mexico (Dixon Ticonderoga de Mexico, S.A. de C.V.) (Consumer Products)* 55,000 Versailles, Missouri (Consumer Products) 120,000 Shelbyville, Tennessee (Consumer Products) 94,000 Deer Lake, Pennsylvania (Consumer Products) 150,000 Vandalia, Illinois (idled) 67,000 * Not included as direct collateral under the loan agreement with First Union National Bank of North Carolina. The Company also owns a non-operating graphite mine near Burnet, Texas, included with land at historical cost in the consolidated balance sheets. 9 ITEM 3. LEGAL PROCEEDINGS In March 1986, The Dixon Venture ("Venture") (an unrelated company) filed a civil action in the New Jersey Superior Court seeking recovery of damages and costs allegedly incurred by Venture in connection with the clean- up of industrial property acquired from the Company in Jersey City, New Jersey in February, 1984. Venture's claims were brought pursuant to the New Jersey Environmental Clean-up Responsibility Act ("ECRA"), an environmental remedial statute dealing with the transfer of industrial property. Although the trial court entered final judgment dismissing all Venture's claims, the Appellate division and subsequently the Supreme Court, found that Venture's claim did state a cause of action upon which relief could be granted and allowed the case to go to trial on the merits. Significantly, however, the Supreme Court instructed the trial court to fashion a remedy best effectuating the understanding of the parties at the time of the original sale. It is noteworthy that the parties contracted for the sale fully eight months before the enactment of ECRA and that the closing was delayed into the ECRA compliance period by Venture. Further, the Supreme Court and subsequent Appellate decisions recognized that clean-up costs must bear some rational relationship to the agreed upon sales price or, it stood to reason, the Company would not have agreed to the original amount. The case presents issues for the equitable handling of a unique ECRA transaction and contract responsibilities requiring a tailored remedy. In July and August 1995, this matter was tried before the New Jersey Supreme Court. Post-trial briefs are due by late December 1995. It is our belief that a good portion of the cleanup costs may not be recoverable under the legal theories set forth by plaintiffs. Moreover, in view of the Supreme Court's mandate to fashion a remedy that "best effectuates" a common understanding of the parties, and given the fact that the sales price of the 10 subject property was $2.7 million, plaintiffs' damages claims seem inconsistent and disproportionate with the results contemplated by the Supreme Court. There are also a number of other factors such as plaintiffs' general knowledge of the existence of ECRA prior to closing which would, under the Supreme Court's decision in this case, render it inequitable to allocate to defendants most or all of the alleged cleanup costs. Due to the unique nature of this case, it is difficult to evaluate with specificity the damages outcome at this point in time. The Company will likely be liable for some portion of plaintiffs' reasonable costs of cleanup, but as of the present, such liability cannot be quantified with certainty. A portion of the 1995 provisions for litigation settlements and related costs represents the Company's best estimate of its ultimate obligation and legal costs associated with this case. All relevant insurance carriers have been put on notice of this claim. To date, two carriers have agreed to defend the case pursuant to a reservation of rights. It is our belief that most of the defense costs relating to the Venture litigation will be paid by insurance. Additionally, the insurance carriers previously agreed to substantially contribute toward a settlement of this matter. It also should be noted that the Company intends to pursue legal malpractice claims against the lawyers who represented it in the initial transaction and subsequent litigation pertaining to this facility to recover any damages which may be assessed against it in this matter. At this time, we believe these claims have substantial factual support. However, no opinion as to likely outcome can be made at this point. Also see Note 12 to Consolidated Financial Statements. ITEM 4. SUBMISSION ON MATTERS TO VOTE OF SECURITY HOLDERS None. 11 PART II ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS Dixon Ticonderoga Company common stock is traded on the American Stock Exchange. The following table sets forth the low and high per share prices as per the American Stock Exchange closing prices for the applicable quarter. FISCAL FISCAL QUARTER ENDING 1995 1994 -------------- ------------ ------------ LOW HIGH LOW HIGH --- ---- --- ---- December 31 7.38 9.88 5.88 6.88 March 31 8.50 11.13 6.13 7.25 June 30 7.13 8.88 6.58 9.75 September 30 7.25 8.38 8.88 10.38 Since fiscal 1990, the Board of Directors has suspended payment of dividends. The Board will continue to review the Company's future performance and determine the dividend policy on a quarter-to-quarter basis. The Company's loan agreement with its primary lenders, and the note agreement covering the 10.59% Senior Subordinated Notes, restricts the amount of dividends which can be paid in the future. (See Notes 3 and 4 to Consolidated Financial Statements). The number of record holders of the Company's common stock at November 30, 1995, was 476. 12 ITEM 6. SELECTED FINANCIAL DATA DIXON TICONDEROGA COMPANY AND SUBSIDIARIES FOR THE FIVE YEARS ENDED SEPTEMBER 30, 1995 (in thousands, except per share amounts) 1995 1994 1993 1992 1991 ------- ------- ------- ------- ------- REVENUES $95,565 $91,932 $82,138 $81,740 $78,324 ======= ======= ======= ======= ======= INCOME (LOSS) FROM CONTINUING OPERATIONS $ 1,658 $ 3,417 $ 476 $ 437 $(1,581) INCOME (LOSS) FROM DISCONTINUED OPERATIONS (595) (116) (146) (179) 794 CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE - - 235 - - ------- ------- ------- ------- ------- NET INCOME (LOSS) $ 1,063 $ 3,301 $ 565 $ 258 $ (787) ======= ======= ======= ======= ======= EARNINGS (LOSS) PER COMMON SHARE: CONTINUING OPERATIONS $ .52 $ 1.10 $ .15 $ .14 $ (.52) DISCONTINUED OPERATIONS (.19) (.04) (.04) (.06) .26 CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE - - .07 - - ------- ------- ------- ------- ------- NET INCOME (LOSS) $ .33 $ 1.06 $ .18 $ .08 $ (.26) ======= ======= ======= ======= ======= TOTAL ASSETS $70,158 $68,852 $63,946 $61,981 $62,212 ======= ======= ======= ======= ======= LONG-TERM DEBT $14,541 $19,141 $18,279 $23,083 $24,501 ======= ======= ======= ======= ======= DIVIDENDS PER COMMON SHARE $ - $ - $ - $ - $ - ======= ======= ======= ======= ======= 13 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS 1995 vs. 1994 Income from continuing operations before income taxes and minority interest decreased $1,000,000 in 1995. Included in 1995 are provisions of $1,530,000 for litigation settlements and legal costs related to several lawsuits (see Item 3 and Note 12 to Consolidated Financial Statements). In 1994, there was a gain on sale of subsidiary stock and other assets of $2,313,000 relating primarily to the sale of stock in our Mexico subsidiary (see Note 8 to Consolidated Financial Statements). Net corporate expenses decreased $690,000 in 1995, while interest expense decreased $678,000. The interest expense reduction was principally due to the Mexican subsidiary's low borrowing position subsequent to the aforementioned sale of stock. 1994 vs. 1993: The improvement in income before income taxes amounted to $3,946,000 in 1994. The increase in gain on sale of subsidiary stock and other assets of $1,942,000 is primarily due to the sale of the stock in the Mexico subsidiary (see Note 8 to Consolidated Financial Statements). Consumer Products' increased revenue (primarily volume) led to better manufacturing efficiencies. New products and more aggressive marketing, particularly in the retail market, contributed to this volume increase. Refractory products' revenue improved with increases in volume and more favorable mix contributing to higher profitability. The interest expense increase was due primarily to higher average rates of interest in 1994. 14 1993 vs. 1992: Income from operations before income tax increased to $1,001,000 in 1993, compared with $625,000 in the prior year. This reflects a gain on sale of assets of $371,000. Income taxes increased, largely due to foreign taxes on higher income and effective tax rates. Net income from operations increased $72,000. In addition, 1993 results include $235,000 representing the cumulative effect of a change in accounting principle. Therefore, net income increased to $565,000 from $258,000 in the prior year. As discussed above, pretax results from operations improved overall in 1993. Total revenues remained level; but the Refractory segment showed an increase in both revenues and profits. U.S. Consumer Products suffered from foreign competition in certain product lines and increased distribution and promotional costs. Foreign Consumer Products operating income increased despite significant losses due to the decline of local currency values. Increased foreign operating income was largely offset by higher tax provisions. A sale of idle property in Ticonderoga, New York enhanced 1993 results. Total interest expense decreased due to lower effective interest rates. Discontinued Operations: The 1995 loss from discontinued operations of the real estate segment represents a net operating loss of $175,000 (net of a tax benefit of $104,000) and a loss on disposal of $420,000 (net of a tax benefit of $250,000). Net operating losses of the real estate segment were $116,000 and $146,000 in 1994 and 1993, respectively. 15 REVENUES Revenues in 1995 increased $3,632,000 over the prior year. The increases and decreases by segment are as follows: Increase % Increase (Decrease) (Decrease) Total Volume Price/Mix ---------- ------------------------ Consumer U.S. $4,624,000 9 8 1 Consumer Foreign (2,198,000) (13) (9) (4) Graphite & Lubricant 212,000 2 2 - Refractory 994,000 9 7 2 U.S. Consumer revenue volume increases were primarily in the office supply mega-store market. The decrease in Foreign Consumer revenue was primarily due to the majority-owned subsidiary in Mexico. Revenue in Mexico decreased $5,200,000 due to the decline of the peso value compared to the U.S. dollar. This decrease was partially offset by increased peso selling prices. Refractory revenue increased $994,000 primarily due to higher volume. Overall 1994 revenues increased $9,795,000 over the prior year. The increases and decreases by segment are as follows: Increase % Increase (Decrease) (Decrease) Total Volume Price/Mix ---------- ------------------------ Consumer U.S. $6,347,000 15 14 1 Consumer Foreign 1,807,000 11 12 (1) Graphite & Lubricant (352,000) (3) (2) (1) Refractory 1,993,000 20 7 13 The increase in U.S. Consumer Products volume was in both the commercial and mass retail markets and was enhanced by new product introductions. Foreign revenue increase was primarily by our subsidiary in Mexico. However, the foreign revenue increase is after revenue reductions in Canada and Mexico of $470,000 and $450,000, respectively, due to the decline of their local currency value (as compared with the U.S. dollar). 16 In 1993, revenues increased approximately $398,000 over the prior year. The increases and decreases by segment are as follows: Increase % Increase (Decrease) (Decrease) Total Volume Price/Mix ---------- ------------------------ Consumer U.S. $ 328,000 1 (1) 2 Consumer Foreign (790,000) (5) (4) (1) Graphite & Lubricant (510,000) (4) - (4) Refractory 1,370,000 16 11 5 Revenue in Canada and Mexico decreased ($580,000 and $60,000, respectively), due to the decline of their local currency value. OPERATING PROFITS Operating profits by segment increased $1,476,000 in 1995. Foreign operations increased $984,000. Our Canadian subsidiary increase of $396,000 reflected higher revenues and a stable year with respect to that country's currency. The increase in Mexico was primarily due to increased shipments to the U.S. and related plant efficiencies and currency gains. Refractory Products increased $372,000 on higher volume. Graphite and Lubricant and U.S. Consumer operating profits were relatively flat. U.S. Consumer revenue and gross profit increases were offset by increased selling and distribution costs, primarily incurred to service the office supply mega-store markets. In 1994, operating profits by segment increased $2,718,000. Consumer Products increased $2,132,000 on significantly higher revenues. A decrease in the value of the local currency in Mexico was offset by price increases and volume. Refractory products increased $500,000 on higher volume and favorable product mix. Operating profits by segment decreased by a total of approximately $79,000 in 1993. Refractory products increased $110,000 on higher volume. Graphite and Lubricant increased $60,000 due to improved profit margins. Foreign Consumer increased $530,000. The decline in value of local currencies was offset by higher volume and cost reductions in Canada and 17 price increases in Mexico. U.S. Consumer decreased $820,000. Volume decreases causing manufacturing inefficiencies and higher selling and promotional costs were the primary reasons for this decrease. MINORITY INTEREST Minority interest represents 49.9% of the net income of the consolidated subsidiary, Dixon Ticonderoga de Mexico, S.A. de C.V. ($1,150,000 in 1995), equivalent to the extent of the investment of the minority shareholders. As described in Note 8 to Consolidated Financial Statements, this minority interest was created by an initial public offering in September 1994. Accordingly, 1994 only reflects the portion of net income earned in the latter part of September 1994. EFFECT OF CERTAIN NEW ACCOUNTING PRONOUNCEMENTS As discussed in Note 1 to Consolidated Financial Statements, the Financial Accounting Standards Board (FASB) issued Statement No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." This statement, which must be adopted no later than fiscal 1997, establishes accounting standards with respect to the impairment of long-lived assets. Its adoption is not expected to materially affect the future results of operations or financial position of the Company. In 1995, the FASB also issued Statement No. 123, "Accounting for Stock- Based Compensation." The statement (effective for the Company in fiscal 1997) would provide certain specific disclosures regarding the value of stock option grants made in fiscal 1996 and thereafter. Its adoption is not expected to materially affect the future results of operations or financial position of the Company. 18 LIQUIDITY AND CAPITAL RESOURCES Since 1993, the financial condition of the Company improved significantly, principally due to its recent operating success and the completion of major financing initiatives. While consolidated operating income increased 30% to in excess of $9 million, cash flows from operating activities decreased approximately $2.85 million in 1995. This reduction is due to several factors, principally higher working capital requirements (primarily inventories) to support increasing business segments. Consumer Products inventories increased approximately 15% due to higher revenues; new purchased product lines; the servicing of the mass retail and office supply mega-store markets; and products manufactured by the Company's Mexico subsidiary during its local currency crises earlier in 1995. Industrial Graphite and Lubricants inventories also increased 15% due largely to a slowing of business in the powdered metal industry late in 1995. Despite increasing revenues, the Company managed to maintain its strong collection practices which have reduced average days outstanding in accounts receivable under normal terms. The Company reduced total accounts receivable in 1995 as compared with an increase of $3 million in the prior year. Cash flow from operating activities was also negatively affected by certain legal settlements and related costs associated with several ongoing lawsuits. As is the case historically, cyclical short-term borrowings (see below) financed peak mid-year increases in accounts receivable and inventories. The Company's investing activities included approximately $3 million in purchases of property and equipment in 1995. The higher level of purchases as compared with the prior year (approximately $1.8 million) is attributable to the Company's construction of a new corporate headquarters facility in Heathrow, Florida. In 1995, the Company incurred approximately $1.5 million 19 towards the completion of the facility scheduled for January 1996. The total estimated cost of the project is $3.4 million with construction costs financed ultimately through a separate fixed-rate permanent mortgage arrangement. Except as discussed above, all other major capital projects (principally strategic manufacturing equipment) are discretionary in nature and thus no material purchase commitments exist. These expenditures will continue to be funded from operations and new and existing financing arrangements. In addition, the Company was successful in its program to sell idle assets, generating proceeds of approximately $1 million in the prior two years. The transaction involving the 1994 sale of subsidiary stock and the Company's use of proceeds is discussed below. The Company completed major financing activities during the past two years. In 1994, the Company successfully completed primary financing arrangements (in the initial amount of $35 million) with a new bank lender, First Union National Bank of North Carolina, to refinance certain short-term obligations and provide additional working capital. An additional seasonal $5 million in the working capital line of credit was added in 1995. Also in 1995, the interest rate under these facilities was reduced. As more fully described in Notes 3 and 4 to Consolidated Financial Statements, the arrangements (as amended) provide up to $15 million in additional financing as compared with the Company's agreement with its previous primary lender, and permits the Company to meet all current debt obligations. Moreover, the related revolving credit facility provides, under certain circumstances, for the payment of additional subordinated debt obligations (discussed below). The agreement also provides for the maintenance of certain financial covenants and ratios, with which the Company is presently in compliance, except as to the ratio of operating cash flow to fixed charges (as defined), 20 capital expenditures and certain payments and asset transactions, all of which relate to non-recurring activities and for which the Company has received a waiver of compliance. At September 30, 1995, the Company had approximately $8 million of unused lines of credit available under this financing arrangement. Also in 1994, the Company completed an initial public offering of the stock of its subsidiary, Dixon Ticonderoga de Mexico, S.A. de C.V. The net after-tax proceeds from the offering were approximately $5 million, and were principally used to reduce Company indebtedness. See Note 8 to Consolidated Financial Statements for further information regarding this transaction. The Company also has $10.3 million of Senior Subordinated Notes remaining outstanding with several insurance companies. The note agreement, as amended, provides for the payment of approximately $3.3 million annually, through August 1998, with the balance due August 1999. This agreement also provides for the maintenance of certain financial covenants and ratios, with which the Company is presently in compliance. The revolving credit agreements described above provided for the August 1994 and 1995 subordinated note payments and a credit line reserve for the 1996 payment. The Company intends to satisfy future subordinated note payments from funds provided by operations and/or an infusion of new equity or debt. As a result of its operating success and financing activities over the past two years, the Company reduced its consolidated debt (net of cash balances) by nearly $5 million, or 12%, despite increasing working capital financing requirements. The new and existing sources of financing, financing strategies discussed above and cash expected to be generated from future operations will, in management's opinion, be sufficient to fulfill all current and anticipated requirements of the Company's ongoing business. 21 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA DIXON TICONDEROGA COMPANY AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE PAGE Report of Independent Accountants 22 Consolidated Balance Sheets as of September 30, 1995 and 1994 23-24 Consolidated Statements of Operations For the Years Ended September 30, 1995, 1994 and 1993 25-26 Consolidated Statements of Shareholders' Equity For the Years Ended September 30, 1995, 1994 and 1993 27 Consolidated Statements of Cash Flows For the Years Ended September 30, 1995, 1994 and 1993 28-29 Notes to Consolidated Financial Statements 30-45 Schedule For the Years Ended September 30, 1995, 1994, and 1993: II. Valuation and Qualifying Accounts 46 Consent of Independent Accountants 47 Information required by other schedules called for under Regulation S-X is either not applicable or is included in the Consolidated Financial Statements or Notes thereto. 22 REPORT OF INDEPENDENT ACCOUNTANTS Shareholders and Board of Directors of Dixon Ticonderoga Company We have audited the accompanying consolidated financial statements and the financial statement schedule of Dixon Ticonderoga Company and subsidiaries as listed in the index on page 21 of this Form 10-K. These financial statements and the financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Dixon Ticonderoga Company at September 30, 1995 and 1994, and the consolidated results of its operations and its cash flows for each of the three years in the period ended September 30, 1995, in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein. COOPERS & LYBRAND L.L.P. Orlando, Florida November 30, 1995 23 DIXON TICONDEROGA COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 1995 AND 1994 ASSETS 1995 1994 ------ ----------- ----------- CURRENT ASSETS: Cash and cash equivalents $ 1,513,622 $ 1,822,764 Receivables, less allowance for doubtful accounts of $796,715 in 1995 and $564,905 in 1994 18,202,541 20,335,421 Inventories 32,638,385 28,881,083 Assets held for sale 436,306 256,947 Other current assets 2,254,101 1,924,754 ----------- ----------- Total current assets 55,044,955 53,220,969 ----------- ----------- CONDOMINIUMS UNDER DEVELOPMENT -- 773,067 ----------- ----------- PROPERTY, PLANT AND EQUIPMENT: Land and buildings 12,908,945 11,867,046 Machinery and equipment 16,986,408 18,983,203 Furniture and fixtures 902,043 843,316 ----------- ----------- 30,797,396 31,693,565 Less accumulated depreciation ( 17,229,617) ( 18,308,662) ----------- ----------- 13,567,779 13,384,903 ----------- ----------- OTHER ASSETS 1,545,110 1,473,059 ----------- ----------- $70,157,844 $68,851,998 =========== =========== 24 LIABILITIES AND SHAREHOLDERS' EQUITY 1995 1994 -------------------- ----------- ----------- CURRENT LIABILITIES: Notes payable $17,877,665 $11,054,169 Current maturities of long-term debt 4,587,016 4,431,570 Accounts payable 5,280,884 5,258,085 Accrued liabilities 8,388,309 8,626,772 ----------- ----------- Total current liabilities 36,133,874 29,370,596 ----------- ----------- LONG-TERM DEBT 14,540,884 19,140,668 ----------- ----------- OTHER NONCURRENT LIABILITIES 21,815 233,818 ----------- ----------- DEFERRED INCOME TAXES 1,155,473 1,144,799 ----------- ----------- MINORITY INTEREST 3,073,375 3,421,253 ----------- ----------- 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 3,448,466 shares in 1995 and 3,424,873 shares in 1994 3,448,466 3,424,873 Capital in excess of par value 2,166,329 2,042,639 Retained earnings 12,640,762 11,577,719 Cumulative translation adjustment (2,087,354) (531,455) ----------- ----------- 16,168,203 16,513,776 Less treasury stock, at cost (255,147 shares in 1995; 265,270 shares in 1994) (935,780) (972,912) ----------- ----------- 15,232,423 15,540,864 ----------- ----------- $70,157,844 $68,851,998 =========== =========== The accompanying notes to consolidated financial statements are an integral part of these balance sheets. 25 DIXON TICONDEROGA COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993 1995 1994 1993 ----------- ----------- ----------- REVENUES $95,565,000 $91,932,479 $82,138,339 ----------- ----------- ----------- COSTS AND EXPENSES: Cost of goods sold 62,193,918 62,246,254 56,608,419 Selling and administrative expenses 24,241,328 22,721,878 20,763,419 ----------- ----------- ----------- 86,435,246 84,968,132 77,371,838 ----------- ----------- ----------- OPERATING INCOME 9,129,754 6,964,347 4,766,501 ----------- ----------- ----------- INTEREST EXPENSE (3,652,824) (4,330,581) (4,136,518) PROVISIONS FOR LITIGATION SETTLEMENTS AND RELATED COSTS (1,530,377) -- -- GAIN ON SALE OF SUBSIDIARY STOCK AND OTHER ASSETS -- 2,313,470 371,386 ----------- ----------- ----------- (5,183,201) (2,017,111) (3,765,132) ----------- ----------- ----------- INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND MINORITY INTEREST 3,946,553 4,947,236 1,001,369 INCOME TAXES 1,137,897 1,518,053 525,463 ----------- ----------- ----------- 2,808,656 3,429,183 475,906 MINORITY INTEREST 1,150,690 11,469 -- ----------- ----------- ----------- INCOME FROM CONTINUING OPERATIONS BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 1,657,966 3,417,714 475,906 DISCONTINUED OPERATIONS (594,923) (116,481) (146,395) CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE -- -- 235,046 ----------- ----------- ----------- NET INCOME $ 1,063,043 $ 3,301,233 $ 564,557 =========== =========== =========== 26 EARNINGS (LOSS) PER COMMON SHARE: Continuing operations $ .52 $ 1.10 $ .15 Discontinued operations (.19) (.04) (.04) Cumulative effect of change in accounting principle -- -- .07 ----------- ----------- ----------- Net income $ .33 $ 1.06 $ .18 =========== =========== =========== The accompanying notes to consolidated financial statements are an integral part of these statements. 27
DIXON TICONDEROGA COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993 Common Capital in Cumulative Stock $1 Excess of Retained Translation Treasury Par Value Par Value Earnings Adjustment Stock ----------- ----------- ----------- ----------- ----------- BALANCE, September 30, 1992 $ 3,376,835 $ 1,750,529 $ 7,711,929 $ (247,016) $(1,044,368) Net income 564,557 Cumulative translation adjustment (380,403) Employee Stock Purchase Plan (10,176 shares) 18,642 37,325 ----------- ----------- ----------- ----------- ----------- BALANCE, September 30, 1993 $ 3,376,835 $ 1,769,171 $ 8,276,486 $ (627,419) $(1,007,043) Net income 3,301,233 Cumulative translation adjustment 95,964 Employee stock options exercised 48,038 253,958 Employee Stock Purchase Plan (9,305 shares) 19,510 34,131 ----------- ----------- ----------- ----------- ----------- BALANCE, September 30, 1994 $ 3,424,873 $ 2,042,639 $11,577,719 $ (531,455) $ (972,912) Net income 1,063,043 Cumulative translation adjustment (1,555,899) Employee stock options exercised 23,593 91,985 Employee Stock Purchase Plan (10,123 shares) 31,705 37,132 ----------- ----------- ----------- ----------- ----------- BALANCE, September 30, 1995 $ 3,448,466 $ 2,166,329 $12,640,762 $(2,087,354) $ (935,780) =========== =========== =========== =========== =========== The accompanying notes to consolidated financial statements are an integral part of these statements.
28 DIXON TICONDEROGA COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993 1995 1994 1993 ----------- ----------- ----------- Cash flows from operating activities: Net income from continuing operations $ 1,657,966 $ 3,417,714 $ 710,952 Net loss from discontinued operations (594,923) (116,481) (146,395) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,379,728 2,502,451 2,703,873 Gain on sale of subsidiary stock and other assets -- (2,313,470) (371,386) Deferred taxes 365,802 508,111 (753,266) Income attributable to minority interest 1,150,690 11,469 -- (Income) loss attributable to currency translation (511,424) 110,830 22,434 Cumulative effect of change in accounting principle -- -- (235,046) Changes in assets [(increase) decrease] and liabilities [increase(decrease)]: Receivables, net 194,045 (3,053,682) (1,849,000) Inventories (4,929,306) (698,187) (1,530,966) Other current assets (452,261) (577,543) 548,426 Accounts payable and accrued liabilities 296,368 3,060,868 2,149,578 Condominiums under development 574,087 120,587 12,422 Other assets (460,081) (452,193) (61,805) ----------- ----------- ----------- Net cash provided by (used in) operating activities (329,309) 2,520,474 1,199,821 ----------- ----------- ----------- Cash flows from investing activities: Purchases of plant and equipment (3,007,547) (1,842,331) (2,558,458) Proceeds from sale of assets -- 573,708 397,068 Proceeds from sale of subsidiary stock -- 5,734,723 -- ----------- ----------- ----------- Net cash provided by (used in) investing activities (3,007,547) 4,466,100 (2,161,390) ----------- ----------- ----------- 29 1995 1994 1993 ----------- ----------- ----------- Cash flows from financing activities: Principal reductions of Senior Subordinated Notes (3,325,000) (3,325,000) -- Proceeds from additions to long-term debt -- 9,666,667 -- Proceeds from additions to notes payable 8,040,299 7,937,368 2,070,996 Principal reductions of long-term debt (1,131,276) (5,980,120) (1,500,000) Principal reductions of notes payable -- (14,248,878) -- Other non-current liabilities (109,626) 113,341 (7,277) Employee Stock Purchase Plan 68,837 53,641 55,967 Exercise of stock options 115,578 301,996 - ----------- ----------- ----------- Net cash provided by (used in) financing activities 3,658,812 (5,480,985) 619,686 ----------- ----------- ----------- Effect of exchange rate changes on cash (631,098) (14,866) (402,837) ----------- ----------- ----------- Net increase (decrease) in cash and cash equivalents (309,142) 1,490,723 (744,720) Cash and cash equivalents, beginning of year 1,822,764 332,041 1,076,761 ----------- ----------- ----------- Cash and cash equivalents, end of year $ 1,513,622 $ 1,822,764 $ 332,041 =========== =========== =========== Supplemental Disclosures: Cash paid (received) during the year for: Interest $ 3,697,023 $ 4,282,857 $ 4,199,972 Income taxes 1,616,427 400,411 (153,607) The accompanying notes to consolidated financial statements are an integral part of these statements. 30 DIXON TICONDEROGA COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Business: Dixon Ticonderoga Company is a diversified manufacturer and marketer of writing and art products as well as a producer of graphite, lubricant and refractory products. Its largest principal customers are school products distributors, mass merchandisers and industrial manufacturers, although none account for over 5% of revenues. Principles of consolidation: The consolidated financial statements include the accounts of Dixon Ticonderoga Company and all of its subsidiaries (the "Company"). All significant intercompany transactions and balances have been eliminated in consolidation. Minority interest represents the minority shareholders' proportionate share of the equity of the Company's Mexico subsidiary (49.9%). Translation of foreign currencies: In accordance with Financial Accounting Standards Board (FASB) Statement No. 52, results from Canada, Mexico and United Kingdom operations are translated using average exchange rates during the period. Assets and liabilities denominated in local currency are translated into U.S. dollars at current exchange rates with the gain or loss being recorded in shareholders' equity. Gains and losses from foreign currency transactions are included in the Consolidated Statement of Operations. Cash and cash equivalents: Cash and cash equivalents include investment instruments with a maturity of three months or less at time of purchase. Inventories: Inventories are stated at the lower of cost or market. Certain inventories amounting to $15,250,000 and $13,586,000, at September 30, 1995 and 1994, respectively, are stated on the last-in, first-out (LIFO) method of determining inventory costs. Under the first-in, first-out (FIFO) method of accounting, these inventories would be $1,282,000 and $1,480,000 higher at September 30, 1995 and 1994, respectively. All other inventories are accounted for using the FIFO method. All inventories that are stated on the LIFO method were acquired in 1983 as a result of an acquisition. This acquisition was treated as a purchase and accordingly, inventory was recorded at its fair market value for financial accounting purposes. As a result, the financial accounting basis for the LIFO inventories exceeds the LIFO tax basis by approximately $1,339,000 and $1,203,000 at September 30, 1995 and 1994, respectively. 31 Inventories consist of (in thousands): September 30, 1995 1994 -------- -------- Raw material $ 12,450 $ 12,273 Work in process 4,462 4,494 Finished goods 15,726 12,114 -------- -------- $ 32,638 $ 28,881 ======== ======== Assets held for sale: Assets held for sale represent idled and other assets specifically identified for sale within the next fiscal year. The assets are stated at their aggregate net book value which does not exceed estimated net realizable value. During 1994, the Company reclassified an idle plant in Shelbyville, Tennessee (net book value of approximately $1.6 million) as property, plant and equipment to reflect management's intent to utilize the facility. Property, plant and equipment: Property, plant and equipment are stated at cost. Depreciation is provided principally on a straight-line basis over the estimated useful lives of the respective assets. When assets are sold or retired, their cost and related accumulated depreciation are removed from the accounts. Any gain or loss is included in income. Income taxes: The Company recognizes deferred tax assets and liabilities for future tax consequences of events that have been included in the financial statements or tax returns. Under this method, amounts for deferred tax assets and liabilities are determined based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable for the period and the change during the period in deferred tax assets and liabilities. Accounting for long-lived assets: The FASB recently issued Statement No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." This statement, which must be adopted no later than fiscal 1997, establishes accounting standards with respect to the impairment of long- lived assets. Its adoption is not expected to materially affect the future results of operations or financial position of the Company. 32 Reclassifications: Certain prior year amounts have been reclassified to conform with the current year classifications. (2) ACCRUED LIABILITIES: The major components of accrued liabilities are as follows (in thousands): September 30, 1995 1994 -------- -------- Salaries and wages $ 1,650 $ 1,957 Employee benefit plans 798 787 Income taxes 1,173 2,060 Other 4,767 3,823 -------- -------- $ 8,388 $ 8,627 ======== ======== (3) NOTES PAYABLE: In 1994, the Company entered into financing arrangements with a new lender to refinance certain short-term obligations and provide additional working capital. The loan and security agreement initially provided for a total of $35 million in financing through May 1997. This included a revolving line of credit facility in the amount of $25 million with interest at either the lender's prime rate (8.75% at September 30, 1995) plus 0.5% or the prevailing LIBOR rate (approximately 6% at September 30, 1995) plus 2.5%. In 1995, the Company executed an interest rate "swap" agreement which effectively fixes the rate on $5 million of this facility at 8.87% for five years. An additional seasonal $5 million in the revolving line of credit was added in 1995. Borrowings under the revolving credit facility ($17,168,000 as of September 30, 1995) are based upon eligible accounts receivable and inventories of the Company's U.S. and Canada operations, as defined. The loan and security agreement (as amended) also provides for a credit line reserve of $3,325,000 for the August 1996 subordinated notes principal payment (see Note 4). In addition, the loan and security agreement provides for a $10 million term loan (see Note 4). The 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 pledge of the capital stock of the Company's subsidiaries. The loan and security agreement (as amended) contains provisions pertaining to the maintenance of certain financial ratios and annual capital expenditure levels, as well as restrictions as to payment of cash or other dividends. As of September 30, 1995, the Company was in compliance with all such provisions, except as to the ratio of operating cash flow to fixed charges (as defined), capital expenditures and certain payments and asset transactions, all of which relate to non- recurring activities and for which the Company has received a waiver of compliance. 33 The weighted average interest rate of the Company's outstanding notes payable (including foreign borrowings) was 9.4%, 12.9% and 8.3% as of September 30, 1995, 1994 and 1993, respectively. (4) LONG-TERM DEBT: Long-term debt consists of the following (in thousands): September 30, 1995 1994 -------- -------- Senior subordinated debt $ 10,350 $ 13,675 Bank term loan 8,667 9,667 Other 111 231 -------- -------- 19,128 23,573 Less-current maturities 4,587 4,432 -------- -------- $ 14,541 $ 19,141 ======== ======== In accordance with the 10.59% Senior Subordinated Notes Agreement, the Company is obligated to pay interest semiannually and $3,325,000 of principal annually through August 1998, with the final balance due August 1999. The loan and security agreement with the Company's primary lender (see Note 3) provided for the August 1994 and 1995 principal payments and a credit line reserve for the future 1996 payment. The note agreement (as amended) contains provisions which limit the payment of dividends and require the maintenance of certain financial ratios. Under the agreement, there are no dividends available for payment as of September 30, 1995. Among other provisions, the Company must also maintain a ratio of cash flow available for interest charges, as defined, of 1.75 to 1. As of September 30, 1995, the Company is in compliance with all such provisions. The loan and security agreement with the Company's primary lender (see Note 3) also includes a term loan in the original amount of $10 million. Interest on the term loan is payable monthly at either the bank's prime rate (8.75% at September 30, 1995) plus 0.5% or the prevailing LIBOR rate (approximately 6% at September 30, 1995) plus 2.5%. In 1995, the Company executed an interest rate "swap" agreement which effectively fixes the term loan rate at 8.75% through its maturity. The term loan is payable in varying monthly installments through May 2001. Aggregate maturities of long-term debt are as follows (in thousands): 1996 $ 4,587 1997 4,841 1998 4,881 1999 2,042 2000 1,667 Thereafter 1,110 ------- $19,128 ======= 34 (5) INCOME TAXES: The Company adopted FASB Statement No. 109 effective fiscal 1993. The financial effect of this statement has been reported in the 1993 consolidated statement of operations as the cumulative effect of a change in accounting principle. The effect was a net increase in income of $235,046 or $.07 per share, and a corresponding decrease in net deferred tax liability as of October 1, 1992. The components of net deferred tax liability recognized in the accompanying consolidated balance sheet as of September 30, 1995, are as follows (in thousands): 1995 1994 ------- ------- U.S. current deferred tax assets (included in other current assets) $ 1,267 $ 667 Foreign current deferred tax liability (included in accrued liabilities) (1,071) (928) U.S. and foreign, noncurrent deferred tax liability (1,155) (1,145) ------- ------- Net deferred tax liability $ (959) $(1,406) ======= ======= Deferred tax assets: Vacation pay $ 168 146 Accrued pension 147 147 Accrued legal 381 Accrued environmental costs 151 143 Accounts receivable 216 123 Foreign net operating loss carryforward 492 482 Valuation allowance (492) (482) ------- ------- Total deferred tax assets 1,063 559 ------- ------- Deferred tax liabilities: Inventories (786) (717) Depreciation (464) (444) Property, plant and equipment (525) (553) Foreign dividend income (200) (200) Other (47) (51) ------- ------- Total deferred tax liability (2,022) (1,965) ------- ------- Net deferred tax liability $ (959) $(1,406) ======= ======= It is the policy of the Company to accrue deferred income taxes on temporary differences related to the financial statement carrying amounts and tax bases of investments in foreign subsidiaries which are expected to reverse in the foreseeable future. Certain undistributed earnings of foreign subsidiaries that are essentially permanent in duration and not expected to reverse in the foreseeable future approximate $7,600,000 as of September 30, 1995. The determination of the unrecognized deferred tax liability for such temporary differences is not practicable. 35 The provision for income taxes (benefit) from continuing operations is comprised of the following (in thousands): 1995 1994 1993 ------ ------ ------ Current: U.S. Federal $ 795 $ 76 $ - State 44 70 70 Foreign 215 1,391 27 ------ ------ ------ $1,054 $1,537 $ 97 ------ ------ ------ Deferred: U.S. Federal (612) 88 (29) Foreign 696 (107) 457 ------ ------ ------ 84 (19) 428 ------ ------ ------ $1,138 $1,518 $ 525 ====== ====== ====== Foreign deferred tax provision in 1995 and benefit in 1994 is comprised principally of temporary differences related to Mexico asset purchases. Foreign deferred tax provision in 1993 reflects the utilization of Mexico net operating loss carryforwards amounting to $245,000. U.S. deferred benefit in 1995 results primarily from expenses accrued but not deductible for taxes. The Company has net operating loss carryforwards for its United Kingdom subsidiary of approximately $1,950,000 without an expiration date. 36 The differences between the provision for income taxes computed at the U.S. statutory federal income tax rate and the provision in the consolidated financial statements are as follows (in thousands): 1995 1994 1993 ------ ------ ------ Amount computed using the statutory rate $1,342 $1,682 $ 340 Foreign income (329) (203) (5) State taxes, net of federal benefit 29 46 46 Permanent differences 104 154 127 Difference between tax and book basis of subsidiary stock - 386 - Utilization of NOL valuation allowance - (400) - NOL from utilization of foreign tax credits - (113) - Others (8) (34) 17 ------ ------ ------ Provision for income taxes $1,138 $1,518 $ 525 ====== ====== ====== Permanent differences result primarily from intercompany net income that is eliminated from the consolidated statements of operations but are taxed in various jurisdictions. (6) EMPLOYEE BENEFIT PLANS: The Company maintains several defined benefit pension plans covering substantially all union employees. The benefits are based upon fixed dollar amounts per years of service. The assets of the various plans (principally corporate stocks and bonds, insurance contracts and cash equivalents) are managed by independent trustees. The policy of the Company and its subsidiaries is to fund the minimum annual contributions required by applicable regulations. 37 The following table sets forth the plans' funded status (accumulated benefits exceed assets in all plans) at September 30, 1995 and 1994 (in thousands): September 30, 1995 1994 ------- ------- Actuarial present value of: Accumulated benefit obligation $(3,366) $(3,228) ======= ======= Projected benefit obligation $(3,366) $(3,228) Plan assets at market value 2,030 1,776 ------- ------- Projected benefit obligation in excess of plan assets (1,336) (1,452) Unrecognized net gain from past experience different from assumptions 441 457 Unrecognized net obligation being recognized over periods from 10 to 16 years 800 886 ------- ------- Pension liability $ (95) $ (109) ======= ======= Net periodic pension costs include the following components (in thousands): 1995 1994 1993 ----- ----- ----- Service costs - benefits earned during period $ 100 $ 99 $ 80 Interest cost on projected benefit obligation 184 179 177 Actual (return) loss on plan assets (150) 28 (147) Net amortization and deferral 155 (44) 106 ----- ----- ----- Net periodic pension cost $ 289 $ 262 $ 216 ===== ===== ===== In determining the projected benefit obligation, the assumed discount rates ranged from 6.0% to 7.5% for 1995, 4.5% to 7.5% for 1994, and 5% to 6% for 1993. The expected long-term rates of return on assets used in determining net periodic pension cost ranged from 7.5% to 8.5% for 1995, 7.5% to 9% for 1994, and 6% to 9% for 1993. There are no assumed rates of increase in compensation expense in any year, as benefits are fixed and do not vary with compensation levels. 38 The Company also maintains a defined-contribution plan (401K) for all non-union domestic employees who meet minimum service requirements. Company contributions under the plan consist of a basic 3% of the compensation of participants for the plan year, and for those participants who elected to make voluntary contributions to the plan, matching contributions up to an additional 4%, as specified in the plan. Charges to operations for this plan for the years ended September 30, 1995, 1994 and 1993 were $552,000, $479,000, and $456,000, respectively. In fiscal 1994, the Company adopted FASB Statement No. 106 "Employers Accounting for Postretirement Benefits Other Than Pensions". This statement generally requires the accrual of health care benefits and other postretirement benefits over the course of the employees' active service. For substantially all current employees, there are no postretirement benefits provided, except for pension plans. The current expenses and the effect of adopting the new statement are not material. (7) SHAREHOLDERS' EQUITY: The Company provides an employee stock purchase plan under which 100,000 shares of its common stock can be issued. Among the terms of this plan, eligible employees may purchase through payroll deductions shares of the Company's common stock up to 10% of their compensation at the lower of 85% of the fair market value of the stock on the first or last day of the plan year (May 1 and April 30). On May 1, 1995, 1994 and 1993, 10,123, 9,305, and 10,176 shares, respectively, were issued under this plan. At September 30, 1995, there are 31,403 shares available for future purchases under the plan. In addition, the Company has granted options to key employees, under the 1979 and 1988 Dixon Ticonderoga Company Executive Stock Plans to purchase shares of its common stock at the market price on the date of grant. Options under the 1979 Plan (as amended) become exercisable one year after date of grant and are exercisable during a period not to exceed ten years from date of grant. Under the 1988 Plan (as amended) options vest 25% after one year; 25% after two years; and 50% after three years, and remain exercisable for a period of three years from the date of vesting. All options expire three months after termination of employment. At September 30, 1995, there were 271,234 options exercisable and 247,348 shares available for future grants under the Plans. The following table summarizes the combined stock options activity for 1995, 1994 and 1993: 39
1995 1994 1993 ---------------- ---------------- ---------------- Number of Option Number of Option Number of Option Shares Price Shares Price Shares Price ------ ----- ------ ----- ------ ----- Options outstanding 34,726 $4.20 54,913 $4.20 54,913 $4.20 beginning of year 39,300 4.62 39,300 4.62 39,300 4.62 53,902 4.75 81,752 4.75 81,752 4.75 21,400 5.22 21,400 5.22 21,400 5.22 2,000 5.13 2,000 5.13 2,000 5.13 7,000 8.53 7,000 8.53 36,000 7.75 39,000 7.75 2,000 6.13 Options exercised (16,969) 4.75 (20,187) 4.20 - - (6,000) 5.22 (27,850) 4.75 (500) 5.13 (125) 7.75 Options granted 2,000 8.13 2,000 6.13 7,000 8.53 80,000 8.63 39,000 7.75 20,000 9.49 Options expired (2,000) 8.13 (3,000) 7.75 - - or canceled (500) 7.75 (1,000) 8.63 ------- ------- ------- 271,234 196,328 245,365 ======= ======= =======
In March 1995, the Company declared a dividend distribution of one Preferred Stock Purchase Right on each share of Company common stock. Each Right will entitle the holder to buy one-thousandth of a share of a new series of preferred stock at a price of $30.00 per share. The Rights will be exercisable only if a person or group (other than the Company's chairman, Gino N. Pala, and his family members) acquires 20% or more of the outstanding shares of common stock of the Company or announces a tender offer following which it would hold 30% or more of such outstanding common stock. The Rights entitle the holders other than the acquiring person to purchase Company common stock having a market value of two times the exercise prices of the Right. If, following the acquisition by a person or group of 20% or more of the Company's outstanding shares of common stock, the Company were acquired in a merger or other business combination, each Right would be exercisable for that number of the acquiring company's shares of common stock having a market value of two times of exercise prices of the Right. The Company may redeem the Rights at one cent per Right at any time until ten days following the occurrence of an event that causes the Rights to become exercisable for common stock. The Rights expire in ten years. 40 (8) GAIN ON SALE OF SUBSIDIARY STOCK AND OTHER ASSETS: In September 1994, the Company completed an initial public offering of the stock of its wholly-owned subsidiary, Dixon Ticonderoga de Mexico, S.A. de C.V. ("Dixon Mexico"). The underwriter for the offering was Casa de Bolsa Prime, S.A. de C.V. The offering represented 49.9% of the shares of Dixon Mexico and was placed in the new Mexican Intermediate Market. A total of 16,627,760 shares were sold at a per-share price of N$1.35 (new pesos) in a mixed offering. Of this amount, 4,163,605 shares (or approximately 25%) were sold in a primary offering with the net proceeds going to Dixon Mexico for working capital and/or the reduction of cyclical bank borrowings. The balance (12,464,155 shares or approximately 75%) represented a secondary offering of shares owned by the Company with the net proceeds going to reduce U.S. debt. The net proceeds (after underwriting commissions and related expenses) were approximately N$5 million from the primary offering and N$16 million from the secondary offering (or U.S. $1.4 million and U.S. $4.7 million, respectively). Proceeds from the offering (after taxes of approximately U.S. $1.0 million) reduced the Company's consolidated debt (net of cash balances) by approximately U.S. $5 million. The net after- tax gain from the transaction was approximately U.S. $1.6 million. (The gain on sale of company-owned shares was approximately U.S. $970,000 and on the sale of new shares in the subsidiary was U.S. $630,000). The Underwriting Agreement between the Company, Dixon Mexico and Casa de Bolsa Prime, S.A. de C.V., provided for a firm offering of shares as described above at the per-share price of N$1.35, less underwriting commissions of 5%, plus other customary expenses. Prior to the offering, there were no relationships between Casa de Bolsa Prime, S.A. de C.V. and either the Company or Dixon Mexico. After the successful completion of the offering, the Company maintained 50.1% controlling ownership of Dixon Mexico and five of nine seats on its board of directors. The remaining four seats on the Dixon Mexico board of directors will be held by designees of Casa de Bolsa Prime, S.A. de C.V. or other investors having a minimum of 10% ownership in Dixon Mexico. To protect the continuing business relationships between the Company and Dixon Mexico and ensure the continuity of management planning, development and administration of the operation, the Company executed a trademark license agreement and various other business agreements with Dixon Mexico. The trademark license agreement is for a minimum term of ten years. All other agreements are for a minimum term of five years. In return for the rights, services and assistance provided by the Company under these agreements, Dixon Mexico will pay to the Company a total fee of 1.5% of its total monthly sales. 41 Also in fiscal 1994, the Company sold idle property in Westampton, New Jersey, generating net proceeds of $460,000 (which approximated its net book value), as well as certain idle equipment. In addition, the Company expensed approximately $300,000 to provide for contingencies related to a previous sale of property. In fiscal 1993, the Company sold idle property in Ticonderoga, New York, generating net proceeds of approximately $397,000. This sale resulted in an aggregate gain of approximately $371,000. (9) EARNINGS PER COMMON SHARE: Earnings per common share have been computed based upon the total weighted average number of common shares outstanding (3,180,626, 3,114,538, and 3,096,324 in 1995, 1994 and 1993, respectively). (10) DISCONTINUED OPERATIONS: Pursuant to a formal plan and agreement dated September 29, 1995, the Company transferred the remaining property and its developmental rights dedicated to the Bryn Mawr Ocean Towers Condominium project to its Association. Discontinued operations in 1995 reflect a loss on disposal of $420,000 (net of a tax benefit of $250,000). The Real Estate segment is being accounted for as a discontinued operation as of September 30, 1995, and, accordingly, its operating results are reported in this manner in all years presented in the accompanying Consolidated Financial Statements and related data. Revenues of the Real Estate segment were $135,000 in 1994. There were no revenues in 1995 or 1993. Net real estate operating losses were $279,000, $126,000 and $146,000 in 1995, 1994 and 1993, respectively. Related income tax benefits were $104,000 and $10,000 in 1995 and 1994, respectively. 42 (11) LINE OF BUSINESS REPORTING: The Company has three principal lines of business -- Consumer Products, Industrial Graphite and Lubricants and Refractory Products. The following information sets forth certain data pertaining to each line of business as of September 30, 1995, 1994 and 1993, and for the years then ended (in thousands). Industrial Graphite Consumer and Refractory Total Products Lubricants Products Company -------- ---------- ----------- ------- Net revenues: 1995 $70,451 $12,375 $12,739 $95,565 1994 $68,025 $12,163 $11,745 $91,933 1993 $59,872 $12,514 $ 9,752 $82,138 Operating profits: 1995 $ 6,597 $ 2,698 $ 1,076 $10,371 1994 $ 5,453 $ 2,738 $ 704 $ 8,895 1993 $ 3,321 $ 2,654 $ 202 $ 6,177 Certain corporate expenses have been allocated based upon respective segment sales. Interest expense was $3,653, $4,330 and $4,136; litigation settlements and related costs were $1,530 in 1995; general corporate expenses were $1,241, $1,931 and $1,411 in 1995, 1994 and 1993 respectively; gains on sales of assets were $2,313 in 1994 and $371 in 1993, resulting in income from continuing operations before income taxes of $3,947, $4,947, and $1,001 in 1995, 1994 and 1993, respectively. Industrial Graphite Consumer and Refractory Total Products Lubricants Products Company -------- ---------- ----------- ------- Identifiable assets: 1995 $51,373 $ 9,376 $ 4,425 $65,174 1994 $51,090 $ 8,979 $ 4,576 $64,645 1993 $45,944 $ 8,931 $ 4,699 $59,574 Corporate assets were $4,984, $3,423, and $3,468, at September 30, 1995, 1994 and 1993, respectively. Assets of discontinued operations were $783 and $904 at September 30, 1994 and 1993, respectively. 43 Industrial Graphite Consumer and Refractory Total Products Lubricants Products Company -------- ---------- ----------- ------- Depreciation and amortization: 1995 $ 1,347 $ 207 $ 249 $ 1,803 1994 $ 1,578 $ 204 $ 233 $ 2,015 1993 $ 1,845 $ 180 $ 278 $ 2,303 Expenditures for plant and equipment: 1995 $ 1,029 $ 203 $ 258 $ 1,490 1994 $ 898 $ 382 $ 322 $ 1,602 1993 $ 1,904 $ 298 $ 150 $ 2,352 Corporate depreciation and amortization were $577, $487, and $401 for the years ended September 30, 1995, 1994 and 1993, respectively. Corporate expenditures for equipment were $1,601, $89, and $389 in 1995, 1994 and 1993, respectively. Foreign operations: Operating Identifiable Revenues Profits Assets -------- --------- ------------ 1995: Canada $ 7,623 $ 576 $ 6,839 Mexico 7,588 2,997 8,085 United Kingdom 839 (40) 648 1994: Canada $ 7,087 $ 180 $ 4,433 Mexico 10,551 2,431 10,475 United Kingdom 617 (62) 483 1993: Canada $ 7,255 $ (128) $ 4,441 Mexico 8,800 2,233 7,789 United Kingdom 393 (91) 397 44 (12) COMMITMENTS AND CONTINGENCIES: Under an agreement with Warner Bros. Consumer Products, the Company manufactures and markets in the U.S. and Canada a complete line of products featuring the famous Looney Tunes characters. Under the terms of the agreement, the Company is obligated to pay a total of $536,000 through 1996 for the right to market and sell all types of pencils, pens, crayons, chalks, markers, paints, art kits and related items. Through fiscal 1995, the Company has prepaid $364,000 (of which approximately $306,000 was earned by Warner Bros.). In 1995, the Company entered into employment agreements with two executives which provide for the continuation of salary (currently aggregating $27,500 per month) and related employee benefits for a period of 24 months following their termination of employment under certain changes in control of the Company. In addition, all options held by the executives would become immediately exercisable upon the date of termination and remain exercisable for 90 days thereafter. In 1995, the Company incurred approximately $1.5 million towards the completion of a new corporate headquarters facility. The total estimated cost of the project, scheduled for completion in fiscal 1996, is $3.4 million. The Company in the normal conduct of its business, is a party in certain litigation. In addition, ongoing litigation includes a claim under New Jersey's Environmental Clean-Up Responsibility Act (ECRA) by a 1984 purchaser of industrial property from the Company. In 1995, the Company provided approximately $1.5 million for settlement and related legal costs associated with three separate lawsuits, including the aforementioned ECRA claim. The net after-tax provision relating to these lawsuits is $960,000 (or 30 cents per share). The Company has evaluated the merits of these cases and other litigation and believes their outcome will not have a further material effect on the Company's future results of operations or financial position. The Company is aware of several environmental matters related to certain facilities. The Company assesses the extent of these matters on an ongoing basis. In the opinion of management (after taking into account accruals), the resolution of these matters will not materially affect the Company's future results of operations or financial position. In conjunction with the sale of a discontinued business in a previous year, the Company guaranteed a loan to the buyer. The loan balance is approximately $340,000 as of September 30, 1995. In the opinion of management, the guarantee will not ultimately have any material effect on the Company's future results of operations or financial position. 45 (13) SUMMARY OF QUARTERLY FINANCIAL INFORMATION (UNAUDITED) (In Thousands, Except Per Share Data): 1995: First Second Third Fourth ---- ----- ------ ----- ------ Revenues $21,393 $19,371 $28,446 $26,355 Operating income 1,373 1,623 3,181 2,953 Income before taxes 618 784 2,185 360* Minority interest (58) (332) (154) (607) Discontinued operations (20) (30) (100) (445) Net income 302 140 1,185 (564)* Earnings per share .10 .04 .37 (.18)* 1994: First Second Third Fourth ---- ----- ------ ----- ------ Revenues $18,431 $19,472 $27,916 $26,113 Operating income 991 1,078 2,561 2,334 Income before taxes 72 163 1,416 3,296** Minority interest -- -- -- (11) Discontinued operations (36) (27) (27) (26) Net income 27 29 1,001 2,244** Earnings per share .01 .01 .31 .71** * Reflects provision for litigation settlements and related costs as described in Note 12. ** Reflects the gain on sale of subsidiary stock and other assets as described in Note 8. 46 DIXON TICONDEROGA COMPANY AND SUBSIDIARIES SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS FOR THE THREE YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993 Deductions Balance at Additions From Balance Beginning Charged Reserves at Close Description of Period to Income (1) of Period ----------- ---------- --------- ---------- --------- ALLOWANCE FOR DOUBTFUL ACCOUNTS: Year ended September 30, 1995 $ 564,905 $ 421,850 $ 190,040 $ 796,715 ========= ========= ========= ========= Year ended September 30, 1994 $ 610,427 $ 198,647 $ 244,169 $ 564,905 ========= ========= ========= ========= Year Ended September 30, 1993 $ 581,447 $ 220,125 $ 191,145 $ 610,427 ========= ========= ========= ========= (1) Write-off of accounts considered to be uncollectible (net of recoveries). 47 CONSENT OF INDEPENDENT ACCOUNTANTS Shareholders and Board of Directors of Dixon Ticonderoga Company We consent to the incorporation by reference into the previously filed registration statements of Dixon Ticonderoga Company on Form S-8 (File Nos. 33-20054 and 33-23380) of our report, dated November 30, 1995, on our audit of the consolidated financial statements and financial statement schedule of Dixon Ticonderoga Company as of September 30, 1995, 1994 and 1993, and for the years then ended, which report is included in this Annual Report on Form 10-K. COOPERS & LYBRAND L.L.P. Orlando, Florida December 15, 1995 48 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY Information required under this Item with respect to Directors will be contained in the Company's 1995 Proxy Statement, pursuant to Regulation 14A, which is incorporated herein by reference. The following table sets forth the names and ages of the Company's Executive Officers, together with all positions and offices held with the Company by such Executive Officers. All Executive Officers are subject to re-election or re-appointment by the Board of Directors at the first Directors' Meeting succeeding the next Annual Meeting of shareholders. Name Age Title ---- --- ----- Gino N. Pala 67 Chairman of the Board since February (Father-in-law of 1989; President and Chief Executive Richard F. Joyce) Officer since July 1985; prior thereto President and Co-chief Executive Officer since 1978. John F. Millar 59 Executive Vice President/Industrial Division since November 1985; prior thereto Treasurer since September 1983; prior thereto Treasurer of the Joseph Dixon Crucible Company since July 1977. Richard A. Asta 39 Executive Vice President of Finance and Chief Financial Officer since February 1991; prior thereto Senior Vice President - Finance and Chief Financial Officer since March 1990. Richard F. Joyce 40 Vice Chairman of the Board since (Son-in-law of January 1990; Executive Vice Gino N. Pala) President and Chief Legal Executive since February 1991; prior thereto Corporate Counsel since July 1990. 49 Name Age Title ---- --- ----- Leonard D. Dahlberg, Jr. 44 Executive Vice President of Manufacturing/Consumer Products Division since August 1995; prior thereto Senior Vice President of Manufacturing since February 1993; prior thereto Vice President of Manufacturing since March 1990; prior thereto Vice President and director of corporate purchasing since September 1985. Kenneth A. Baer 49 Treasurer since November 1985; prior thereto Assistant Secretary and Treasurer since September 1983. Laura Van Camp 44 Secretary since January 1986; prior thereto secretary to President and Chief Executive Officer since February 1982. John Adornetto 54 Vice President and Corporate Controller since January 1991; prior thereto Corporate Controller since September 1978. Arthur Frederickson 59 Executive Vice President of Sales and Marketing/Consumer Products Division since August 1995; prior thereto Senior Vice President of Sales and Marketing since October 1992; prior thereto Senior Vice President of Sales since May 1991; prior thereto Director of Sales/Western Region since January 1990; prior thereto Western Regional Manager since April 1989. Richard H. D'Antonio 47 Vice President of Information Services since October 1993; prior thereto Principal of RHD Management Consulting since May 1990. 50 ITEM 11. EXECUTIVE COMPENSATION Information required under this Item will be contained in the Company's 1995 Proxy Statement which is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information required under this Item will be contained in the Company's 1995 Proxy Statement which is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information required under this Item will be contained in the Company's 1995 Proxy Statement which is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K (a) Documents filed as part of this report: 1. Financial statements See index under Item 8. Financial Statements and Supplementary Data. 2. Exhibits The following exhibit is required to be filed as part of this annual report, on Form 10-K: (21) Subsidiaries of the Company. (b) Reports on Form 8-K: None. 51 SIGNATURES ---------- Pursuant to the requirements of Section 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized. DIXON TICONDEROGA COMPANY /s/ Gino N. Pala --------------------------- Gino N. Pala, President and Chief Executive Officer Pursuant to the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the Company in the capacities indicated. /s/ Gino N. Pala Chairman of Board, President, Chief - -------------------------------- Executive Officer and Director Gino N. Pala /s/ Richard F. Joyce Vice Chairman, Executive Vice President/ ________________________________ Corporate Counsel and Director Richard F. Joyce /s/ Richard A. Asta Executive Vice President of Finance, - -------------------------------- Chief Financial Officer and Director Richard A. Asta Director - -------------------------------- Fred H. Hawkins Director - -------------------------------- Bobby Brantley /s/ John E. Ramondo Director - -------------------------------- John E. Ramondo /s/ Joseph R. Sadowski Director - -------------------------------- Joseph R. Sadowski /s/ Philip M. Shasteen Director - -------------------------------- Philip M. Shasteen /s/ Samuel B. Casey, Jr. Director - -------------------------------- Samuel B. Casey, Jr. /s/ Ben Berzin, Jr. Director - -------------------------------- Ben Berzin, Jr. 52 DIXON TICONDEROGA COMPANY AND SUBSIDIARIES EXHIBIT (21) TO 1995 ANNUAL REPORT ON FORM 10-K SUBSIDIARIES OF THE COMPANY All of the Company's subsidiaries as of September 30, 1995, are listed below. All subsidiaries are included in the consolidated financial statements of the Company. State Or Percentage of Jurisdiction Voting Of Organization Securities Owned --------------- ---------------- Bryn Mawr Ocean Resorts, Inc. (a) Florida 100% Dixon Ticonderoga, Inc. Ontario, Canada 100% Dixon Ticonderoga Company de Mexico, S.A. de C.V. (subsidiary of Dixon Ticonderoga, Inc.) Mexico 50.1% Ticonderoga Graphite Inc. (a) New York 100% Dixon Europe, Limited United Kingdom 100% (a) Inactive EX-27 2 1995 FORM 10-K FDS
5 This schedule contains summary financial information extracted from the Consolidated Balance Sheets, the Consolidated Statement of Operations and the Consolidated Statement of Cash Flows, and is qualified in its entirety by reference to such financial statements. YEAR SEP-30-1995 SEP-30-1995 1,513,622 0 18,999,256 796,715 32,638,385 55,044,955 30,797,396 17,299,617 70,157,844 36,133,874 0 3,448,466 0 0 11,783,957 70,157,844 95,565,000 95,565,000 62,193,918 62,193,918 24,241,328 1,530,377 3,652,824 3,946,553 1,137,897 1,657,966 (594,923) 0 0 1,063,043 .33 .33
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