-----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, VZ4dbpW5eUpdtNAGWM2T9zPrBo2+/ClRe5zCyv4EEehfoNaJ4xY6kUn1yO461PgX GFSEiRIalI3wWo/xvkkIug== 0000014995-98-000011.txt : 19980218 0000014995-98-000011.hdr.sgml : 19980218 ACCESSION NUMBER: 0000014995-98-000011 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980216 ITEM INFORMATION: FILED AS OF DATE: 19980217 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: 8-K/A SEC ACT: SEC FILE NUMBER: 001-08689 FILM NUMBER: 98540814 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 8-K/A 1 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): February 16, 1998 - ------------------------------------------------------------------------------ Dixon Ticonderoga Company - ------------------------------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 0-2655 23-0973760 - ------------------------------------------------------------------------------ (State or the Jurisdiction (Commission (IRS Employer Identification of incorporation) File Number) Number) 195 International Parkway, Heathrow, FL 32746 - ------------------------------------------------------------------------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code: (407) 829-9000 2 ITEM 2. Acquisition or Disposition of Assets - --------------------------------------------- On December 12, 1997, Dixon Ticonderoga Company's publicly held Mexican subsidiary, Dixon Ticonderoga de Mexico, S.A. de C.V. ("Dixon Mexico") completed its acquisition of all the capital stock of Vinci de Mexico, S.A. de C.V., ("Vinci") and certain assets of a related entity, for a total purchase price of 28.3 million pesos (or $3.5 million) in cash. The acquisition was financed entirely through Dixon Mexico's on-hand cash and cash equivalents. Dixon Mexico acquired the capital stock and assets from Grupo Ifam, S.A. de C.V. and Guillermo Almazan Cueto. Dixon Ticonderoga Company and Dixon Mexico had no prior relationship with the sellers. Vinci, a 50-year-old company with average annual revenues during the past five years of U.S. $8 million, manufactures and markets artist paints, chalks, modeling clay and crayons, as well as geometric sets, rulers and compasses. It operates a 50,000 square-foot manufacturing facility in Mexico City and currentlyemploys about 200 people. The assets acquired include manufacturing equipment which will continue to be utilized in the manufacture of all the aforementioned product lines. The Vinci brand name is well-known among consumers and educators in Mexico and elsewhere in Latin America. Management believes its products complement those currently sold by Dixon Mexico. Dixon Mexico manufactures wood-case graphite and coloring pencils, crayons, chalks, markers, erasers and allied products. It operates a 55,000 square-foot manufacturing facility in Tlalnepantla, D.F., Mexico and employs approximately 375 people in manufacturing, distribution, marketing and administrative operations. Dixon Mexico has 33 million shares outstanding, of which Dixon Ticonderoga Company owns 80%. The shares are traded on the Mexican Intermediate Market. 3 ITEM 7. Financial Statements and Exhibits PAGE - ------------------------------------------ ---- (a) Financial statements for business acquired: Vinci de Mexico, S.A. de C.V., Financial Statements or the Year Ended December 31, 1996: Report of Independent Accounts 4 Balance Sheet 5 Statement of Income 6 Statement of Stockholders' Equity 7 Statement of Changes In Financial Position 8 Notes to Financial Statements 9 - 19 Vinci De Mexico, S.A. de C.V., Financial Statements for the Nine Months Ended September 30, 1997 (Unaudited): Balance Sheet 20 Statement of Income 21 (b) Pro forma financial information: Introduction 22 Unaudited Pro Forma Condensed Balance Sheet as of September 30, 1997 23 Unaudited Pro Forma Condensed Statement of Operations for the Year Ended September 30, 1997 24 Notes to Unaudited Pro Forma Condensed Financial Statements 25 (c) Exhibits The following exhibit is required to be filed as part of this report on Form 8-K/A: (2) Share Purchase Agreement by and among Dixon Ticonderoga de Mexico, S.A. de C.V. and by Grupo Ifam, S.A. de C.V. and Guillermo Almazan Cueto with respect to the capital stock of Vinci de Mexico, S.A. de C.V. (English translation).* (23)Consent of Independent Accountants 27 * Incorporated by reference to the Company's current report on Form 8-K dated December 12, 1997, filed in Washington, D.C. Translation of a report originally issued in Spanish. (See Note 1 to the Financial Statements) To The Stockholders of Vinci de Mexico, S. A. de C. V.: We have audited the accompanying balance sheet of VINCI DE MEXICO, S. A. DE C. V. as of December 31, 1996, and the related statements of income, stockholders' equity and changes in financial position for the year then ended. These financial statements are the responsibility of the Company's Management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform our 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 statements presentation. We believe that our audit provides a reasonable basis for our opinion. As mentioned in Note 3 a), starting in 1996, the Company fully recognizes the effects of inflation on the financial information. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Vinci de Mexico, S. A. de C. V. as of December 31, 1996, and the results of its operations, changes in stockholders' equity and the changes in its financial position for the year then ended, in conformity with generally accepted accounting principles in Mexico. The translated financial statements in U.S. dollars as of December 31, 1996, are presented for purposes of additional analysis and are not a required part of the basic financial statements referred to above. We have reviewed such translation into U.S. dollars and, in our opinion, the translated amounts have been properly computed on the basis set forth in Note 1 to the financial statements. SALLES, SAINZ Y CIA., S. C. /s/ C.P. Manuel Sainz M. __________________________ C.P. Manuel Sainz M. Mexico, D. F. March 14, 1997 VINCI DE MEXICO, S. A. DE C.V. Balance Sheet as of December 31, 1996 Expressed In Terms Of The Purchasing Power Of The Mexican Peso As Of That Date Mexican U.S. Dollars CURRENT ASSETS: Pesos (Note 1) Cash and marketable securities $ 2,061,470 $ 262,578 Accounts receivable 12,066,244 1,536,925 Inventories 9,746,698 1,241,475 ___________ ___________ Total current assets 23,874,412 3,040,978 MACHINERY AND EQUIPMENT, net 16,495,504 2,101,097 OTHER ASSETS 901,704 114,854 ___________ ___________ $41,271,620 $ 5,256,929 =========== =========== CURRENT LIABILITIES: Bank loans $11,028,225 $1,404,708 Affiliated companies 5,028,115 640,451 Trade 3,983,917 507,447 Vinci A.G. 2,424,730 308,847 Other accounts payable & accrued liabilities 494,876 63,034 Taxes payable 4,969,837 633,028 _________ __________ Total current liabilities $27,929,700 $3,557,515 STOCKHOLDERS' EQUITY: Capital stock $60,477,298 $7,703,231 Contributions-future increase of capital stock 879 112 Retained earnings Legal reserve 896,916 114,244 Unappropriated 14,844,567 1,890,811 Net loss for the year (13,666,378) (1,740,740) ___________ __________ 2,075,105 264,315 Accumulated effect of restatement (49,211,362) (6,268,244) ___________ __________ Total stockholders' equity 13,341,920 1,699,414 ___________ __________ $41,271,620 $5,256,929 =========== ========== The accompanying notes are an integral part of this balance sheet. STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1996 EXPRESSED IN TERMS OF THE PURCHASING POWER OF THE MEXICAN PESO AS OF THAT DATE MEXICAN U.S. DOLLARS PESOS (Note 1) NET SALES $46,920,426 $5,976,439 COST OF SALES 35,470,034 4,517,958 ___________ __________ Gross Profit 11,450,392 1,458,481 OPERATING EXPENSES 15,592,380 1,986,062 ___________ __________ Operating Loss (4,141,988) (527,581) INTEGRAL COST OF FINANCING Interest paid 6,249,180 795,983 Interest gain (305,350) (38,894) Loss on exchange fluctuations 1,367,876 174,232 Gain on exhange fluctuations (1,290,244) (164,343) Gain on monetary position (1,723,801) (219,568) ____________ __________ 4,297,661 547,410 ____________ __________ OTHER EXPENSES (INCOME) Other expenses 5,018,365 639,209 Other income (729,601) (92,932) ___________ __________ 4,288,764 546,277 ___________ __________ Loss before provision for asset tax (12,728,413) (1,621,268) PROVISIONS FOR ASSET TAX 937,965 119,472 ___________ __________ Net loss for the period $(13,666,378) $(1,740,740) ============ =========== VINCI DE MEXICO, S. A. DE C.V. STATEMENT OF STOCKHOLDERS' EQUITY FOR THE YEAR ENDED DECEMBER 31, 1996 EXPRESSED IN TERMS OF THE PURCHASING POWER OF THE MEXICAN PESO AS OF THAT DATE
Contibutions for future Retained earnings Accumulated Capital increase of Legal Unappropriated effect of stock capital stock reserve earnings restatement Total - ------------------------------------------------------------------------------------------------------------------------ MEXICAN PESOS BALANCE AS OF DEC. 31, 1995 $41,751,448 $ -- $896,916 $ 17,781,667 $(50,093,980) $10,336,051 Correction to inventories valuation of prior years -- -- -- (2,937,100) -- (2,937,100) Contributions for the year 18,725,850 879 -- -- -- 18,726,729 Net loss for the year -- -- -- (13,666,378) -- (13,666,378) Recognition of the effects of inflation for the year -- -- -- -- 882,618 882,618 ___________ ____________ ________ ___________ ____________ ___________ BALANCE AS OF DEC. 31, 1996 $60,477,298 $ 879 $896,916 $ 1,178,189 $(49,211,362) $13,341,920 =========== ============ ======== ============ ============= =========== U.S. DOLLARS (NOTE 1) BALANCE AS OF DEC. 31, 1995 $ 5,318,046 $ -- $114,244 $ 2,264,921 $ (6,380,667) $ 1,316,544 Correction to inventories valuation of prior years -- -- -- (374,110) -- (374,110) Contributions for the year 2,385,185 112 -- -- -- 2,385,297 Net loss for the year -- -- -- (1,740,740) -- (1,740,740) Recognition of the effects of inflation for the year -- -- -- -- 112,423 112,423 ___________ ____________ ____________ ____________ ____________ ___________ BALANCE AS OF DEC. 31, 1996 $ 7,703,231 $ 112 $114,244 $ 150,071 $ (6,268,244) $ 1,699,414 =========== ============ ============ ============ ============ =========== The accompanying notes are an integral part of this statement.
STATEMENT OF CHANGES IN FINANCIAL POSITION FOR THE YEAR ENDED DECEMBER 31, 1996 EXPRESSED IN TERMS OF THE PURCHASING POWER OF THE MEXICAN PESO AS OF THAT DATE U.S. MEXICAN DOLLARS PESOS (Note 1) _____________ ____________ OPERATIONS Net loss for the year $ (13,666,378) $ (1,740,740) Add-Charges to income which did not require outlay of funds: Depreciation and amortization 1,523,737 194,084 Provision for doubtful accounts 5,012,000 638,398 Provision for slow moving inventories 300,000 38,212 _____________ ____________ (6,830,641) (870,046) (Increase) decrease in working capital: Accounts receivable 4,019,967 512,039 Inventories 776,141 98,860 Affiliated companies 1,769,308 225,364 Trade (154,768) (19,713) Vinci, A.G. (605,904) (77,176) Other accounts payable and accrued liabilities (3,361,706) (428,194) Taxes payable 1,834,201 233,629 _____________ ____________ Resources applied in operations (2,553,402) (325,237) FINANCING Contributions of capital stock 18,726,729 2,385,297 Increase in bank loans, net of payments (15,811,696) (2,013,998) _____________ ____________ Resources obtained from financing activity 2,915,033 371,299 INVESTMENT Retirements of machinery/equipment net 592,123 75,421 Decrease in other assets 1,095,865 139,585 _____________ ____________ Resources obtained from investment activity 1,687,988 215,006 _____________ ____________ Increase in cash and marketable securities during the year $ 2,049,619 $ 261,068 ============= ============ Translation of financial statements originally issued in Spanish VINCI DE MEXICO, S. A. DE C. V. NOTES TO FINANCIAL STATEMENTS AS OF DECEMBER 31, 1996 EXPRESSED IN TERMS OF THE PURCHASING POWER OF THE MEXICAN PESO AS OF THAT DATE (Stated in Mexican Pesos and U.S. Dollars) (1) Explanation added for translation into English: These financial statements are presented on the basis of generally accepted accounting principles in Mexico. Certain accounting practices applied by the Company that conform with generally accepted accounting principles in Mexico do not concur with generally accepted accounting principles in the United States. The principal differences in this regard consist of the recognition of the effects of inflation on the financial information in Mexico, as well as the application of the partial method of recognizing deferred income taxes. The translation to U.S. dollars was made by applying the current exchange rate at the end of the year to all the accounts. As of December 31, 1996, the exchange rate was $7.85 Mexican pesos per dollar. (2) Activities: The Company is engaged in the manufacturing of school supplies, as well as paints and colors for students and artists. (3) Significant accounting policies: The significant accounting policies followed by the Company, which are in accordance with generally accepted accounting principles in Mexico, are as follows: a) Recognition of the effects of inflation in the financial statements Starting in 1996, the Company fully recognizes the effects of inflation on the financial information, in conformity with the normative provisions contained in Bulletin B-10, hence, the amounts presented in the accompanying financial statements and their notes are stated in Mexican pesos of purchasing power as of the end of the year. The items derived from the recognition of the effects of inflation are shown below: INVENTORIES Inventories are priced at average cost which does not exceed market value. The charges to the cost of sales are made under the same method. Inventories are restated by applying the factors derived from the National Consumer Price Index (NCPI) published by the Central Bank of Mexico. MACHINERY AND EQUIPMENT Machinery and equipment are recorded originally at their cost of acquisition. The Company annually restates its fixed assets by applying the factors derived from the NCPI to both cost and accumulated depreciation. Depreciation is computed under the straight-line method on the basis of the useful lives of the assets, at the annual rates shown below: Machinery and equipment 10% Molds and dies 35% Computer equipment 25% and 30% Furniture and fixtures 10% RESTATEMENT OF CAPITAL STOCK AND RETAINED EARNINGS The restatement of capital stock and retained earnings was determined by applying the factors derived from the NCPI. This restatement represents the amount necessary to convert stockholders' contributions and retained earnings to Mexican pesos equivalent to those of the year-end. The restatement of capital stock and retained earnings was distributed among each one of the headings derived therefrom, consequently, each one is presented summarized by the sum of its nominal value and its related restatement, as shown below: Nominal values Restatement Total MEXICAN PESOS Capital stock $ 23,175,000 $ 37,302,298 $ 60,477,298 Contributions for future increase of capital stock 879 - 879 Legal reserve 25,000 871,916 896,916 Unappropriated earnings (16,278,649) 17,456,838 1,178,189 Accumulated effect of restatement - (49,211,362) (49,211,362) ----------- ------------ ------------ $ 6,922,230 $ 6,419,690 $ 13,341,920 =========== ============ ============ U. S. DOLLARS Capital stock 2,951,891 4,751,340 7,703,231 Contributions for future increase of capital stock 112 - 112 Legal reserve 3,184 111,059 114,244 Unappropriated earnings (2,073,476) 2,223,546 150,071 Accumulated effect of restatement - (6,268,244) (6,268,244) --------- ---------- ---------- 881,712 817,702 1,699,414 ========= ========== ========== RESTATEMENT OF INCOME FOR THE YEAR The items making up the statement of income were restated by inflation factors required to state them at Mexican pesos of purchasing power of the current year-end, as shown below: MEXICAN PESOS U.S. DOLLARS Values Values Restated Nominal Restated Nominal Net sales $ 46,920,426 $ 42,584,523 5,976,439 5,424,158 Cost of sales 35,470,034 32,204,726 4,517,958 4,102,043 ------------ ----------- --------- --------- Gross profit 11,450,392 10,379,797 1,458,481 1,322,115 Operating expenses 15,592,380 13,335,189 1,986,062 1,698,555 ------------ ----------- --------- --------- Operating loss (4,141,988) (2,955,392) (527,581) (376,440) Integral cost- financing 4,297,661 3,518,284 547,410 448,138 Other expenses 4,288,764 4,374,349 546,277 557,178 ------------ ----------- --------- --------- Loss before provision (12,728,413) (10,848,025) (1,621,268)(1,381,756) Provision for asset tax 937,965 937,965 119,472 119,472 ------------ ----------- --------- --------- Net loss for the year $(13,666,378) $ (11,785,990) (1,740,740)(1,501,228) ============ =========== ========= =========== GAIN ON MONETARY POSITION The gain on monetary position represented an income in the amount of $1,723,801 (U.S. dollars 219,568) which was determined by applying the inflation factor derived from the NCPI to the initial monthly monetary position. The total gain on monetary position is presented in the statement of income as part of the integral cost of financing. ACCUMULATED EFFECT OF RESTATEMENT The balance of this account represents the difference resulting between the restatement of inventories and machinery and equipment, compared with the restatement of capital stock and retained earnings, by applying the NCPI. b) Marketable securities Investments in marketable securities are recorded at market value. c) Deferred or prepaid income tax and employee profit sharing The prepaid or deferred effect of items which accrual or deduction for tax purposes and profit sharing are recognized in years in the short-term, other than the year of their book recognition, is not recorded inasmuch as this effect is not significant. As of December 31, 1996, there are temporary items that will generate increase or decrease in income tax and employee profit sharing in future years which have not been recorded, due to the fact that the turnaround time in which they should be applied for tax purposes is not known. Of these temporary differences the most significant one is represented by the difference between the deduction of purchases and the cost of sales recorded. d) Labor obligations Bulletin D-3 "Labor Obligations", issued by the Mexican Institute of Public Accountants, A.C. sets forth the recognition of labor obligations derived from formal and informal plans, with regard to remuneration's that will be paid to the workers or their benefits resulting from pension plans, seniority premiums, and any other remuneration established at the conclusion of the labor relation or starting at that moment. The recognition of these labor obligations implies the quantification of the net cost of the period, that is, of the amount that will affect the income (loss) for the year, as well as the determination of the liability accumulated at the date for each and every one of the workers eligible in the remuneration plans at retirement that have been established. INDEMNIFICATIONS The Company has a contingent liability for indemnifications payable to personnel that retires under certain circumstances. The Company follows the policy of expensing the payments for this item at the moment they are made. At December 31, 1996, the Company has established a formal plan for payment of indemnifications to its personnel, in the event of a voluntary retirement, which is managed by Fideicomisos Bancomer, S.A. The relevant information obtained from the actuarial study as of December 31, 1996, is shown below: MEXICAN PESOS U.S. DOLLARS Obligations for projected benefits $ 1,060,564 135,088 Obligations for current benefits 1,015,107 129,298 Assets of the plan 1,194,271 152,119 Transition assets 23,716 3,021 Projected net liability 109,991 14,012 Net cost for the period 23,636 3,011 Probable labor life 13 13 SENIORITY PREMIUMS In accordance with the Federal Labor Law, the Company has a labor liability for seniority premiums payable to employees who have completed 15 or more years of service. In conformity with Bulletin D-3 "Labor Obligations", the Company proceeded, based on actuarial calculations, to make the contributions to the fund it has established for paying seniority premiums which is managed by Fideicomisos Bancomer, S. A. The relevant information obtained from the actuarial study as of December 31, 1996, is shown below: MEXICAN PESOS U.S. DOLLARS Obligations for projected benefits $ 467,777 59,583 Obligations for current benefits 446,373 56,856 Assets of the plan 511,830 65,194 Transition assets 15,250 1,942 Projected net liability 28,803 3,669 Net cost for the period 448 57 Probable labor life 13 13 e) Exchange fluctuations Foreign currency transactions are recorded at the exchange rates in effect when they occur. All foreign currency denominated assets and liabilities are adjusted at the end of the year based on the exchange rate in effect as of that date. Exchange fluctuations are considered as a part of the integral cost of financing in the statement of income. (4) Classification of accounts receivable: MEXICAN U.S. PESOS DOLLARS Trade receivables $ 16,190,773 2,062,282 Other receivables 12,349 1,573 Asset tax recoverable 142,991 18,213 Value added tax recoverable 707,741 90,148 Officers and employees 24,390 3,107 ____________ _________ 17,078,244 2,175,323 Less - Allowance for doubtful accounts 5,012,000 638,398 ____________ _________ $ 12,066,244 1,536,925 ============ ========= (5) Integration of inventories: MEXICAN U.S. PESOS DOLLARS Raw materials $ 2,737,309 348,662 Work in process 1,006,377 128,186 Finished goods 4,785,297 609,522 Tax warehouse 931,670 118,670 Spare parts 179,145 22,819 ------------ --------- 9,639,798 1,227,859 Restatement 406,900 51,828 Less- Allowance for slow-moving inventories 300,000 38,212 ------------ --------- $ 9,746,698 1,241,475 ============ ========= (6) Classification of machinery and equipment: MEXICAN PESOS Historical Restatement Total cost Machinery and equipment $ 6,614,274 $10,695,410 $17,309,684 Molds and dies 1,123,124 1,879,131 3,002,255 Furniture and fixtures 721,027 307,596 1,028,623 Computation equipment 468,101 469,209 937,310 ----------- ------------ ----------- 8,926,526 13,351,346 22,277,872 Less- Accumulated depreciation 2,220,456 3,561,912 5,782,368 ----------- ----------- ----------- $ 6,706,070 $ 9,789,434 $16,495,504 =========== =========== =========== U. S. DOLLARS Historical Restatement Total cost Machinery and equipment 842,486 1,362,316 2,204,802 Molds and dies 143,057 239,352 382,409 Furniture and fixtures 91,840 39,180 131,020 Computation equipment 59,624 59,765 119,389 ----------- ----------- ----------- 1,137,007 1,700,613 2,837,620 Less- Accumulated depreciation 282,828 453,695 736,523 ----------- ----------- ----------- 854,179 1,246,918 2,101,097 =========== =========== =========== In the event that assets should be sold at restated net values, this could generate income tax for the excess of restated value over the value in books determined in accordance with tax regulations. As a guarantee of adherence to the Federal Tax Debtor Support Program (PROAFI), the Company assigned the machinery and equipment invoices for security in the amount of $ 6,047,265 (770,264 U.S. dollars). (7) Summary of bank loans: Payable in Mexican pesos: MEXICAN PESOS U.S. DOLLARS Inverlat, S. A. de C. V. Non-performaning credit since March 20, 1995 at a normal 32.5% rate and a 48.75% arrears rate $ 1,800,000 229,273 Non-performing credit since April 11, 1995 at a normal 19.9% rate and a 29.85% arrears rate 560,000 71,329 Non-performing credit since April 17, 1995 at a normal 19.5% rate and a 29.25% arrears rate 1,000,000 127,374 Unpaid accrued interest 2,374,850 302,494 ----------- ---------- 5,734,850 730,470 ----------- ---------- Banca Quadrum, S. A. de C. V. Payment agreement in eighteen consecutive monthly amortizations starting February 1, 1997, at an Equilibrium Interbank Interest rate on unpaid balances (liquidated in advance - February 1997) 1,272,000 162,020 ----------- ---------- Union de Credito para la Contaduria Publica, S.A. de C.V. Promissory note with a maturity on January 2, 1997 at a 38.17% rate with accounts receivable as collateral (paid at maturity) 1,620,000 206,346 Unpaid accrued interest 18,635 2,373 ----------- ---------- 1,638,635 208,719 ----------- ---------- 8,645,485 1,101,209 ----------- ---------- Payable in US dollars: Woodforest National Bank: Direct loan with a maturity on April 24, 1997 in the amount of 300,000 US dollars, plus 3,499 US dollars interest, at a 6.45% rate 2,382,740 303,499 ----------- ---------- $11,028,225 1,404,708 =========== ========== (8) Foreign currency position: As of December 31, 1996, the Company had U.S. dollars denominated assets and liabilities, as shown below: U.S. DOLLARS Assets 609,666 Liabilities 814,412 ---------- Excess of liabilities over assets 204,746 ========== (9) Other expenses: This item primarily includes fines, surcharges, and restatements, resulting from the tax agreements entered into during the year. (10) Stockholders' investment: a) As of December 31, 1996, capital stock is represented by 23,175,000 common shares with a par value of one Mexican peso each, fully subscribed and paid. b) At the Ordinary General Stockholders' Meetings held on October 1, 1996, the stockholders resolved to increase capital stock in the amount of $18,725,850 (U.S. dollars 2,385,185) by capitalizing liabilities in favor of Grupo Ifam, S.A. de C.V. c) Legal reserve is not available for distribution to the stockholders during the existence of the Company, except as stock dividends. d) As of December 31, 1996, stockholders' investment has the following tax restrictions: NET TAXABLE INCOME ACCOUNT (CUFIN) As of December 31, 1996, the balance of the "Net taxable income" tax account amounted to $12,093,688 (U.S. dollars 1,540,421). Dividends paid up to this amount are not subject to income tax payment. Payments in excess of this amount are subject to a 34% income tax payable by the Company. The balance of the CUFIN may be restated for inflation until the date of dividends payment and can be increased with the taxable income of future years. REDUCTIONS TO CAPITAL STOCK As of December 31, 1996, the balance of the "Restated paid-in capital" tax account amounted to $60,955,849 (U.S. dollars 7,764,186). Should there be a reimbursement made to the stockholders, the amount reimbursed in excess of the aforementioned amount should be treated as distributed earnings. (11) Asset tax: Asset tax is determined by applying a general 1.8% rate to the amount resulting from deducting the nominal value of certain debts from the restated value of assets. Payments made on income tax during the same period may be taken as a credit against this tax. Asset tax exceeding income tax the Company is subject to in the period may be refunded in the following ten fiscal years, provided that income tax exceeded asset tax in an amount equivalent to the restated value of asset tax. Furthermore, the difference resulting from deducting the asset tax from income tax for the last three years may be taken as a tax credit against the tax for the fiscal year. During the fiscal year ended December 31, 1996, the Company was subject to asset tax in the amount of $937,965 (U.S. dollars 119,472). (12) Income tax: The principal items affecting the Company's taxable income are as follows: MEXICAN U.S. PESOS DOLLARS Income before provision for asset tax $ (12,728,413) (1,621,268) Add (less) Tax inflationary component, net 3,545,628 451,621 Tax depreciation in excess of book depreciation (405,080) (51,597) Non deductible expenses 142,865 18,197 Purchases in excess of cost of sales (1,094,611) (139,425) Gain on monetary position (1,723,801) (219,568) Provisions for doubtful accounts and slow-moving inventories 5,312,000 676,610 Fines and surcharges 2,140,616 272,659 Restatement in accordance with the Bulletin B-10 730,213 93,010 ------------- -------- Tax loss $ (4,080,583) (519,761) ============= ======== (13) Employee profit sharing: Employee profit sharing for the year ended December 31, 1996, was determined as follows: MEXICAN U.S. PESOS DOLLARS Tax loss $ (4,080,583) (519,761) Add (less): Tax inflationary component (3,545,628) (451,621) Excess of depreciation on restatement over historic depreciation 880,200 112,115 ------------- -------- Employee profit sharing basis $ (6,746,011) (859,267) ============= ======== (14) Tax loss carryforwards: Tax losses may be restated starting with the first month of the second half of the fiscal year in which the loss was incurred, up to the last month of the first half of the fiscal year in which the loss will be carried forward. Tax loss carryforwards as of December 31, 1996 are summarized as shown below: Year Restated amount as Year it Incurred of December 31, 1996 Expires MEXICAN PESOS U.S. DOLLARS 1994 $ 3,029,360 385,861 2004 1995 8,022,096 1,021,806 2005 1996 4,455,926 567,569 2006 ------------ ----------- $ 15,507,382 1,975,236 ============= =========== (15) Related party transactions: The balances as of December 31, 1996, and the transactions during the year with affiliated companies were as follows (nominal values): BALANCES TRANSACTIONS MEXICAN PESOS Credit Expenses Increase of capital stock Grupo Ifam, S.A. de C.V. $ 246,934 $ 322,087 $17,875,879 Inversiones Fambes, S.A. de C.V. 4,640,256 2,373,377 - Peerless, S.A. de C.V. 140,925 1,221,453 - ---------- ---------- ----------- $5,028,115 $3,916,917 $17,875,879 ========== ========== =========== U.S. DOLLARS Grupo Ifam, S.A. de C.V. $ 31,453 $ 41,025 $2,276,921 Inversiones Fambes, S.A. de C.V. 591,048 302,306 - Peerless, S.A. de C.V. 17,950 155,582 - ---------- ---------- ---------- $ 640,451 $ 498,913 $2,276,921 ========== ========== =========== VINCI DE MEXICO, S.A. DE C.V. BALANCE SHEET AS OF SEPTEMBER 30, 1997 (UNAUDITED) EXPRESSED IN TERMS OF THE PURCHASING POWER OF THE MEXICAN PESO AS OF THAT DATE
MEXICAN U.S. DOLLARS CURRENT ASSETS: PESOS Cash and marketable securities $ 4,510,463 $ 577,302 Accounts receivable 12,133,590 1,553,000 Inventories 9,723,921 1,244,583 ____________ __________ Total current assets 26,367,974 3,374,885 MACHINERY AND EQUIPMENT, net 16,132,996 2,064,891 OTHER ASSETS 1,374,781 175,961 ____________ __________ $ 43,875,751 $5,615,737 ============ ========== CURRENT LIABILITIES: Bank loans $ 7,004,570 $ 896,528 Affiliated companies 7,108,105 909,779 Trade 9,237,129 1,182,277 Other accounts payable and accrued liabilities 3,416,740 437,314 Taxes payable 2,521,841 322,775 Employee profit sharing 199,000 25,470 ____________ ___________ Total current liabilities 29,487,385 3,774,143 STOCKHOLDERS' EQUITY: Capital stock 69,624,625 8,911,382 Contributions-future increase of capital stock 766,984 98,168 Retained earnings: Legal reserve 1,004,187 128,529 Unappropriated 1,319,100 168,834 Net loss for the year (234,187) (29,974) ____________ __________ 2,089,100 267,389 Accumulated effect of restatement (58,092,343) (7,435,345) ____________ ___________ Total stockholders' equity 14,388,366 1,841,594 ____________ ___________ $ 43,875,751 $5,615,737 ============ =========== VINCI DE MEXICO, S.A. DE C.V. STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED) EXPRESSED IN TERMS OF THE PURCHASING POWER OF THE MEXICAN PESO AS OF THAT DATE MEXICAN U.S. DOLLARS PESOS NET SALES $50,117,341 $6,414,609 COST OF SALES 38,120,324 4,879,089 ___________ __________ Gross Profit 11,997,017 1,535,520 OPERATING EXPENSES 15,474,823 1,980,651 ___________ __________ Operating Loss (3,477,806) (445,131) INTEGRAL COST OF FINANCING: Interest paid 1,831,677 234,440 Interest gain (105,485) (13,501) Loss on exchange fluctuations 454,317 58,149 Gain on exhange fluctuations (682,310) (87,330) Gain on monetary position (953,623) (122,057) ___________ __________ 544,576 69,701 ___________ __________ OTHER EXPENSES (INCOME): Other expenses 2,849,251 364,681 Other income (7,683,095) (983,373) ___________ __________ (4,833,844) (618,692) ___________ __________ Income before provisions for asset tax and employee profit sharing 811,462 103,860 PROVISIONS FOR: Asset tax 846,649 108,364 Employee profit sharing 199,000 25,470 ___________ __________ 1,045,649 133,834 ___________ __________ Net loss for the period $ (234,187) $ (29,974) =========== ========== DIXON TICONDEROGA COMPANY UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS INTRODUCTION The unaudited pro forma condensed balance sheet as of September 30, 1997 assumes that the acquisition of all the capital stock of Vinci de Mexico, S.A. de C.V., and the assets of a related entity had occurred on September 30, 1997 and accordingly, is reflected in the financial position of Dixon Ticonderoga Company as of that date. The unaudited pro forma condensed statement of operations for the year ended September 30, 1997 presents the results of operations of Dixon Ticonderoga Company assuming the acquisition had been consummated as of the beginning of that period. The unaudited pro forma condensed financial statements have been prepared by Dixon Ticonderoga Company and all calculations have been made upon assumptions deemed appropriate. The unaudited pro forma condensed financial statements were prepared using the prevailing accounting policies of both Dixon Ticonderoga Company and Vinci de Mexico, S.A. de C.V. The preliminary allocations of the purchase price, in accordance with generally accepted accounting principles, are included in the unaudited pro forma condensed financial statements. The unaudited pro forma financial information does not purport to be indicative of the results of operations or the financial position which would have actually been obtained if the acquisition had been consummated on the dates indicated. In addition, the unaudited pro forma financial information does not purport to be indicative of results of operations or financial position which may be achieved in the future. The unaudited pro forma financial information should be read in conjunction with consolidated financial statements and notes thereto contained in the Dixon Ticonderoga Company 1997 Annual Report on Form 10-K. DIXON TICONDEROGA COMPANY UNAUDITED PRO FORMA CONDENSED BALANCE SHEET YEAR ENDED SEPTEMBER 30, 1997
AS Vinci de Mexico PRO FORMA PRO REPORTED S.A.de C.V.(a) ADJUSTMENTS FORMA CURRENT ASSETS Cash and cash equivalents $ 5,607,587 $ 577,302 $(3,533,829)(b) $ 2,651,060 Receivables, net 25,969,659 1,553,000 68,732 (b) 27,591,391 Inventories 31,580,175 1,244,583 -- 32,824,758 Other current assets 3,225,881 -- -- 3,225,881 ------------ ------------ -------------- ------------- Total current assets 66,383,302 3,374,885 (3,465,097) 66,293,090 ------------ ------------ -------------- ------------- PROPERTY, PLANT AND EQUIPMENT 35,030,105 4,156,423 271,855 (b) 38,520,239 (938,144)(b) Less accumulated depreciation (19,542,880) (938,144) 938,144 (b) (19,542,880) ------------ ------------ -------------- ------------- 15,487,225 3,218,279 271,855 18,977,359 ------------ ------------ -------------- ------------- OTHER ASSETS 2,290,712 175,961 425,445(b)(c) 2,892,118 ------------ ------------ -------------- ------------- $ 84,161,239 $ 6,769,125 $(2,767,797) $ 88,162,567 ============ ============ ============== ============= CURRENT LIABILITIES: Notes payable $ 16,058,080 $ 896,528 $ -- $ 16,954,608 Current portion of long term debt 1,745,080 -- -- 1,745,080 Accounts payable 7,077,955 2,092,056 -- 9,170,011 Accrued liabilities 12,712,385 785,559 153,590 (b) 13,651,534 ------------ ------------ -------------- ------------- Total current liabilities 37,593,500 3,774,143 153,590 41,521,233 ------------ ------------ -------------- ------------- LONG TERM DEBT 23,555,618 -- -- 23,555,618 ------------ ------------ -------------- ------------- DEFERRED INCOME TAXES AND OTHER 1,142,631 -- 73,595 (b) 1,216,226 ------------ ------------ -------------- ------------- MINORITY INTEREST 2,006,865 -- -- 2,006,865 ------------ ------------ -------------- ------------- SHAREHOLDERS' EQUITY Common stock 3,591,681 2,629,425 (2,629,425)(b) 3,591,681 Capital in excess of par value 2,770,668 98,168 (98,168)(b) 2,770,668 Retained earnings 17,127,698 267,389 (267,389)(b) 17,127,698 Cumulative translation adjustment (2,768,856) -- -- (2,768,856) ------------ ------------ -------------- ------------- 20,721,191 2,994,982 (2,994,982) 20,721,191 Less treasury stock (858,566) -- -- (858,566) ------------ ------------ -------------- ------------- TOTAL SHAREHOLDERS' EQUITY 19,862,625 2,994,982 (2,994,982) 19,862,625 ------------ ------------ -------------- ------------- $84,161,239 $6,769,125 $(2,767,797) $88,162,567 ============ ============ ============== =============
DIXON TICONDEROGA COMPANY UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS YEAR ENDED SEPTEMBER 30, 1997
AS Vinci de Mexico PRO FORMA PRO REPORTED S.A.de C.V.(a) ADJUSTMENTS FORMA REVENUES $115,054,806 $ 7,289,813 $ -- $122,344,619 ------------ ------------ ------------- ------------ COSTS AND EXPENSES: Cost of goods sold 72,916,837 5,605,972 -- 78,522,809 Selling and 31,252,037 2,147,878 21,272 (c) administrative expenses 27,186 (d) 33,448,373 ------------ ------------ ------------- ------------ 104,168,874 7,753,850 48,458 111,971,182 ------------ ------------ ------------- ------------ OPERATING INCOME (LOSS) 10,885,932 (464,037) (48,458) 10,373,437 INTEREST EXPENSE 3,799,760 501,618 -- 4,301,378 ------------ ------------ ------------- ------------ INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND MINORITY INTEREST 7,086,172 (965,655) (48,458) 6,072,059 INCOME TAXES (BENEFIT) 2,676,458 163,848 (483,949) (e) 2,356,357 ------------ ------------ ------------- ------------ 4,409,714 (1,129,503) 435,491 3,715,702 MINORITY INTEREST 808,536 (225,901) (f) 87,098 (g) 669,733 ------------- ------------ ------------- ------------ NET INCOME (LOSS) $ 3,601,178 $ (1,129,503) $ 574,294 $ 3,045,969 ============= ============ ============= ============ EARNINGS PER SHARE: Primary $ 1.05 $ .89 ============= ============ Fully Diluted $ 1.00 $ .85 ============= ============ WEIGHTED AVERAGE SHARES OUTSTANDING: Primary 3,433,801 3,433,801 ============= ============ Fully Diluted 3,602,120 3,602,120 ============= ============ NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS a) Balance sheet data condensed from the unaudited balance sheet of Vinci de Mexico S.A. de C.V., with the addition of approximately $1.15 million of machinery and equipment of a related entity also purchased in the trans- action. Statement of operations data for the first year ended September 30, 1997 were derived from the internal financial statements of Vinci de Mexico S.A. de C.V., for the three months ended December 31, 1996 combined with the unaudited statement of operations of Vinci de Mexico S.A. de C.V., for the nine months ended September 30, 1997 (included herein). The aforementioned statement of operations data have been adjusted to exclude the effects of inflation in conformity with U.S. generally accepted accounting principles. Balance sheet and statement of operations data are translated at the exchange rate of 7.813 Mexican pesos per dollar, the exchange rate at September 30, 1997. b) To reflect the acquisition of Vinci de Mexico, S.A. de C.V. (and assets of a related entity) under the purchase method of accounting. c) To recognize amortization of goodwill in the amount of $425,445 over the estimated period of benefit of 20 years. d) To recognize depreciation for the purchase adjustment of machinery and equipment over the estimated useful life of 10 years. e) To adjust income taxes on combined operations to the prevailing statutory rate. f) To reflect minority interest in the results of operations of Vinci de Mexico, S.A. de C.V. g) To reflect minority interest in cumulative pro forma adjustments. 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. Dated: February 16, 1998 By: /s/ Gino N. Pala ----------------- ---------------- Gino N. Pala, Chairman of the Board, President Chief Executive Officer and Director Exhibit (23) CONSENT OF INDEPENDENT ACCOUNTANTS TO WHOM IT MAY CONCERN: We consent to the use of our report dated March 14, 1997 with respect to the balance sheet of Vinci de Mexico, S.A. de C.V., as of December 31, 1996, and the related statements of income and changes in financial position for the year then ended included herein and to the incorporation by reference of such report in the registration statements on Form S-8 (File Nos. 33-20054, 33-23380 and 333-22205) and on Form S-2 (File No. 333-22119) of Dixon Ticonderoga Company. SALLES, SAINZ y CIA., S.C. /s/ C.P. Manuel Sainz M. ------------------------- Mexico, D.F. February 11, 1998
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