STW Standard Commercial

DIMON Reports Second Quarter 2005 Financial Results; Company Confirms Fiscal 2005 Guidance and Announces Quarterly Dividend DANVILLE, Va., Nov. 9 /PRNewswire-FirstCall/ -- DIMON Incorporated (NYSE:DMN) today announced that net income for the quarter ended September 30, 2004, was $5.6 million, or $0.12 per basic share, compared to $5.5 million, or $0.12 per basic share, for the year earlier period. The Company's underlying net income for the quarter, a non-GAAP measure that excludes market valuation adjustments for derivative financial instruments, discontinued operations, and non-recurring items, was $13.7 million, or $0.31 per basic share, compared to $3.2 million, or $0.07 per basic share, on the same basis last year. The excluded market valuation adjustments result from interest rate swaps that must be marked-to-market each quarter, even though they are being held to maturity. In discussing the Company's forecast and actual operating performance, DIMON management consistently excludes these market valuation adjustments because they do not reflect the Company's operating activities, are non-cash in nature, and will reverse in their entirety (gains and losses will offset each other) during the remaining term of the associated interest rate swaps. Management also excludes results from discontinued operations, and gains and charges resulting from unusual transactions or events that are not reflective of its underlying operations, and that are not expected to recur. DIMON's net income for the six months ended September 30, 2004, was $19.0 million, or $0.42 per basic share, compared to $19.5 million, or $0.44 per basic share, for the year earlier period. Underlying net income for the six months, which excludes market valuation adjustments for derivative financial instruments, discontinued operations, and non-recurring items, was $24.3 million, or $0.54 per basic share, compared to underlying net income of $21.5 million, or $0.48 per basic share, on the same basis last year. Performance Summary Sales and other operating revenues for the second quarter were $341.1 million, compared to $214.4 million for the year earlier quarter. As anticipated, increased shipments from South America that were delayed from the prior quarter due to freight constraints contributed substantially to the sales gain. Shipments from North America, Africa, and Asia were also higher in comparison to the year earlier quarter. Sales and other operating revenues for the six months ended September 30, 2004 were $625.8 million, compared to $562.6 million for the year earlier period. Gross profit as a percentage of sales and other operating revenues for the second quarter was 16.5% compared to 19.4% for the year earlier quarter, reflecting the overall mix of products shipped. For the six months ended September 30, 2004, gross profit was 17.4% of revenues, compared to 19.6% for the year earlier period. Selling, general and administrative (SG&A) expenses for the second quarter were $31.4 million, up $4.4 million or 16.5% in comparison to the year earlier quarter. The current quarter expense included a $3.3 million accrual for the previously disclosed fine assessed on the Company by the Directorate General for Competition of the European Commission. Also, increased legal and professional expenses for the current quarter were only partially offset by reduced compensation expense. SG&A expenses for the six months ended September 30, 2004 were $60.3 million, down $3.9 million, or 6.0% in comparison to the year earlier period. A $6.0 million provision for settlement of the DeLoach litigation, recognized in the year earlier period, was responsible for the majority of the reduction. Interest expense for the second quarter increased by $2.1 million, or 20%, in comparison to the year earlier quarter, reflecting a combination of additional borrowing and increased effective interest rates. At September 30, 2004, total debt net of cash was $628.3 million, up $75.3 million, or 13.6%, in comparison to September 30, 2003. The increase primarily reflects a larger financing requirement for inventories committed to customers, but not yet shipped. DIMON's uncommitted inventories remain at a comfortable level. Outlook Brian J. Harker, Chairman and Chief Executive Officer, stated, "As anticipated, the Company's performance continued to benefit from record-sized South American crops during the quarter. The shortage of freight availability out of South America that we experienced in the prior quarter eased somewhat, and we were able to complete shipment of nearly 70% of the current year Brazilian crop by the end of September. The Company also enjoyed increased shipments from several other origins during the quarter. We made further progress with our restructuring efforts, as we successfully divested our Italian operations during the quarter, which are now recognized as discontinued operations in our reported results. Reflecting a generally stable market state, looking forward, we continue to expect the Company's underlying net income to be toward the upper end of our previously disclosed guidance of between $0.45 and $0.55 per basic share for the fiscal year ending March 31, 2005. Our current outlook excludes estimated restructuring charges of $7 million, any effects from market valuation adjustments for derivatives, results from discontinued operations, and other non-recurring items." The timing and magnitude of fluctuations in the market valuation adjustments for derivative financial instruments (interest rate swaps) are driven primarily by often-volatile market expectations for changes in interest rates, and are inherently unpredictable. Because these adjustments are a component of net income prepared in accordance with generally accepted accounting principles, management is unable to provide forward looking earnings guidance on that basis. Dividend DIMON's Board of Directors, at its meeting held November 8, 2004, declared a quarterly dividend of $0.075 per share. The dividend will be payable December 15, 2004 to shareholders of record on December 1, 2004. Merger Agreement with Standard Commercial Corporation On November 8, 2004, DIMON and Standard Commercial Corporation (NYSE:STW) jointly announced that they have entered into a merger agreement. Under the terms of the agreement, Standard Commercial common shareholders would receive three shares of DIMON common stock for each share of Standard Commercial common stock. Please see the Merger Agreement news release for additional information. This press release contains "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations of future events. Such statements include, but are not limited to, statements about future financial and operating results, plans, objectives, expectations and intentions and other statements that are not historical facts. Such statements are based on the current beliefs and expectations of DIMON's management and are subject to significant risks and uncertainties. If underlying assumptions prove inaccurate or unknown risks or uncertainties materialize, actual results may differ materially from current expectations and projections. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: changes in the timing of anticipated shipments, changes in anticipated geographic product sourcing, political instability in sourcing locations, currency and interest rate fluctuations, shifts in the global supply and demand position for tobacco products, and the impact of regulation and litigation on the DIMON's and Standard Commercial's customers. Additional factors that could cause DIMON's and Standard Commercial's results to differ materially from those described in the forward-looking statements can be found in DIMON's Annual Reports on Form 10-K/A for the fiscal year ended March 31, 2004, and other filings with the Securities and Exchange Commission (the "SEC") which are available at the SEC's Internet site (http://www.sec.gov/). In connection with the proposed merger of DIMON and Standard Commercial, the parties will be filing a joint proxy statement/prospectus and other relevant documents concerning the merger with the U.S. Securities and Exchange Commission. Stockholders are urged to read the proxy statement/prospectus regarding the proposed transaction AND OTHER RELEVANT DOCUMENTS FILED WITH THE SEC because THEY will contain important information. Interested parties will be able to obtain a free copy of the proxy statement/prospectus, as well as other filings containing information about DIMON and Standard Commercial without charge at the SEC's Internet site (http://www.sec.gov/). Copies of the proxy statement/prospectus and the filings with the SEC that will be incorporated by reference in the proxy statement/prospectus can also be obtained, without charge, by directing a request to DIMON Incorporated, 512 Bridge Street, Post Office Box 681, Danville, Virginia 23543-0681, Attention: Investor Relations, (434) 792 7511. The respective directors and executive officers of DIMON and Standard Commercial and other persons may be deemed to be "participants" in the solicitation of proxies in respect of the proposed merger. Information regarding DIMON's directors and executive officers is available in its proxy statement filed with the SEC on July 13, 2004. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the proxy statement/prospectus and other relevant materials to be filed with the SEC when they become available. DIMON Incorporated is the world's second largest dealer of leaf tobacco with operations in more than 30 countries. For more information on DIMON, visit the Company's website at http://www.dimon.com/. Condensed Statement of Consolidated Income Three Months Six Months September 30 September 30 (Unaudited - 000's Except Per Share Data) 2004 2003 2004 2003 Sales and other operating revenues $341,068 $214,416 $625,796 $562,636 Cost of goods and services sold 284,961 172,735 516,705 452,396 Gross Profit 56,107 41,681 109,091 110,240 Selling, administrative and general expenses 31,373 26,928 60,312 64,180 Other income (2,735) - (4,630) - Restructuring and asset impairment charges 766 - 1,441 - Operating income 26,703 14,753 51,968 46,060 Interest expense 12,782 10,643 24,884 23,262 Interest income 995 885 1,921 1,359 Derivative financial instruments (income) (464) (3,876) (6,595) (1,838) Income tax expense 5,277 3,081 11,748 8,030 Equity in net income (loss) of investee companies 53 (256) 142 264 Minority interests (income) (124) (151) (359) (434) Income from continuing operations 10,280 5,685 24,353 18,663 Loss from discontinued operations, net of tax (4,693) (216) (5,392) (915) Extraordinary item - Iraqi receivable recovery, net of $957 income tax - - - 1,777 Net Income $5,587 $5,469 $18,961 $19,525 Basic Earnings Per Share: Income from continuing operations $0.23 $0.13 $0.54 $0.42 Loss from discontinued operations (0.11) (0.01) (0.12) (0.02) Extraordinary item - Iraqi receivable recovery - - - 0.04 Net income $0.12 $0.12 $0.42 $0.44 Diluted Earnings Per Share Income from continuing operations $0.23 $0.13 $0.54 $0.41 Loss from discontinued operations (0.11) (0.01) (0.12) (0.02) Extraordinary item - Iraqi receivable recovery - - - 0.04 Net income $ 0.12 $ 0.12 $ 0.42 $ 0.43 Average number of shares outstanding: Basic 44,873 44,602 44,860 44,570 Diluted 45,349 45,270 45,392 45,192 Cash dividends per share $.075 $.075 $0.15 $0.15 Reconciliation of Net Income Figures Used in Press Release Three Months Six Months September 30 September 30 (Unaudited - 000's Except Per Share Data) 2004 2003 2004 2003 GAAP Net Income $5,587 $5,469 $18,961 $19,525 Discontinued operations 4,693 216 5,392 915 Extraordinary item - Iraqi receivable recovery - - - (1,777) GAAP Net Income from Continuing Operations 10,280 5,685 24,353 18,663 Reconciling items, net of tax effect: Market valuation adjustments for derivatives (302) (2,519) (4,287) (1,078) Restructuring charges 498 - 937 - DGCOMP assessment - Spain 3,250 - 3,250 - Settlement charge for DeLoach litigation - - - 3,900 Non-GAAP Underlying Net Income $13,726 $3,166 $24,253 $21,485 Non-GAAP Underlying Net Income per Basic Share $0.31 $0.07 $0.54 $0.48 GAAP Net Income per Basic Share $0.12 $0.12 $0.42 $0.44 Note 1 - Derivative Financial Instruments: Effective July 1, 2000, the Company adopted Statement of Financial Accounting Standards Number 133 (FAS133), "Accounting for Derivative Instruments and Hedging Activities." FAS133 eliminates special hedge accounting if the interest rate swap instruments do not meet certain criteria, thus requiring the Company to recognize all changes in their fair value in its current earnings. For the quarters ended September 30, 2004 and 2003, the Company recognized non-cash income of $464 and $3,876, respectively, from the change in the fair value of swap instruments. For the six months ended September 30, 2004 and 2003, the Company recognized non-cash income of $6,595 and $1,838 respectively, from the change in the fair value of these derivative financial instruments. As a result of fluctuations in interest rates, and volatility in market expectations, the fair market value of interest rate swap instruments can be expected to appreciate or depreciate over time. The Company plans to continue its practice of economically hedging various components of its debt portfolio. However, as a result of FAS133, certain swap instruments have and may continue to create volatility in reported earnings. Note 2 - Discontinued Operations: During fiscal 2004, the Company's Board of Directors approved a plan designed to improve long-term profitability that included the disposal of its Italian processing facility. On September 30, 2004, concurrent with the sale of the Italian processing facility, the Company made a decision to discontinue Italian operations. Therefore, the results of operations, other than interest expense related to subsidiary debt guaranteed by the Company, have been reclassified and presented as discontinued operations in the financial statements for all periods presented. Note 3 - Extraordinary Item: On May 1, 2003, the Company received $2,734 from the United Nations Compensation Commission in connection with a claim filed by a predecessor company, Monk-Austin, Incorporated. The claim arose from an uncollected trade receivable from the Iraqi Tobacco Monopoly, which related to transactions that occurred prior to Iraq's invasion of Kuwait in August 1990. The predecessor company charged off the entire receivable, net of tax, as a $5,202 extraordinary loss during its fiscal year 1991. DATASOURCE: DIMON Incorporated CONTACT: Ritchie L. Bond of DIMON Incorporated, +1-434-791-6952 Web site: http://www.dimon.com/

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