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actual results to differ materially from those expressed or implied by such
forward-looking statements. Such risks include (but are not limited to)
manufacturing inefficiencies as a result of the inventory reduction plan,
difficulties encountered with the consolidation and cost-reduction program,
increased competition, U.S. and foreign economic factors, foreign currency
exchange risk and interest rate fluctuation risk, among others.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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As discussed elsewhere, the Company is exposed to the following principal
market risks (i.e. risks of loss arising from adverse changes in market rates):
foreign exchange rates and interest rates on debt.
The Company's exposure to foreign currency exchange rate risk in its
international operations is principally limited to Mexico and, to a lesser
degree, Canada. Approximately 33% of the Company's fiscal 2000 net revenues were
derived in Mexico and Canada, combined (exclusive of intercompany activities).
Foreign exchange transaction gains and losses arise from monetary assets and
liabilities denominated in currencies other than the business unit's functional
local currency. It is estimated that a 10% change in both the Mexican peso and
Canadian dollar would impact reported operating profit by $500,000. This
quantitative measure has inherent limitations because it does not take into
account the changes in customer purchasing patterns or any adjustment to the
Company's financing or operating strategies in response to such a change in
rates. Moreover, this measure does not take into account the possibility that
these currency rates can move in opposite directions, such that gains from one
may offset losses from another.
In addition, the Company's cash flows and earnings are subject to changes
in interest rates. As of September 30, 2000, approximately 46% of total short
and long-term debt is fixed, at rates between 8% and 13.5%. The balance of the
Company debt is variable, principally based upon the prevailing U.S. bank prime
rate or LIBOR rate. Certain interest rate swaps, which expire in 2001 and 2005,
fix the rate of interest on $9.1 million of this debt at approximately 9%. A
change in the average prevailing interest rates of the remaining debt of 1%
would not have a material effect upon the Company's results of operations or
cash flows. This quantitative measure does not take into account the possibility
that the prevailing rates (U.S. bank prime and LIBOR) can move in opposite
directions and that the Company has, in most cases, the option to elect either
as the determining interest rate factor.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
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Report of Independent Certified Public Accountants 17
Consolidated Balance Sheets as of
September 30, 2000 and 1999 18-19
Consolidated Statements of Operations For the
Years Ended September 30, 2000, 1999 and 1998 20
Consolidated Statements of Comprehensive Income (Loss) For the
Years Ended September 30, 2000, 1999 and 1998 21
Consolidated Statements of Shareholders' Equity
For the Years Ended September 30, 2000, 1999 and 1998 22
Consolidated Statements of Cash Flows For the
Years Ended September 30, 2000, 1999 and 1998 23-24
Notes to Consolidated Financial Statements 25-42
Schedule For the Years Ended September 30, 2000, 1999 and 1998:
II. Valuation and Qualifying Accounts 43
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.
Consent of Independent Certified Public Accountants 44
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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS