EXHIBIT 99.1
CONTACT: DSI TOYS, INC.Nasdaq: DSIT
Robert L. Weisgarber, CFO
Brook Wootton, Mgr. IR
(713) 365-9900
FOR RELEASE: NOVEMBER 23, 1999 7:00 AM CT
DSI TOYS, INC. ANNOUNCES NON-CASH RESTATEMENT
OF RESULTS FOR PRIOR PERIODS
DSI Toys, Inc., (NASDAQ: DSIT) today announced a non-cash restatement of
its previously reported financial results for its fiscal years ended January 31,
1996, 1997, 1998 and 1999 and subsequent quarterly periods in 1999. The Company
will file amendments to its annual and quarterly reports previously filed with
the SEC as soon as practicable.
The restatements result from an examination of certain split-dollar life
insurance arrangements and related accounting policies, which was undertaken by
the Company and its independent accounting firm, PricewaterhouseCoopers LLP, in
connection with the Company's ongoing discussions regarding potential changes to
these split-dollar life arrangements. The review focused on the accounting
treatment concerning the recording of premium costs paid by the Company with
respect to split-dollar life insurance arrangements with the Company's founder
and former sole shareholder, and his widow.
Under the restatements, the Company will expense previously capitalized
split-dollar life insurance premium costs of approximately $1.7 million over the
1996-1999 periods. The restatements represent only non-cash charges. The Company
will continue to expense the premium costs incurred in future periods until
proceeds from death benefits are available to reimburse the Company for premiums
advanced, unless the existing split-dollar life arrangements are sooner
modified.
The Company's restatement of its previously reported financial results
will reduce reported net income by approximately $33,000, or $0.01 per share for
the fiscal year ended January 31, 1996, and by approximately $265,000, or $0.06
per share for the fiscal year ended January 31, 1997. (All per share amounts
reported are for both basic and diluted per share amounts.) In addition, the
restatement will increase the Company's reported net losses by approximately
$357,000, or $0.07 per share for the fiscal year ended January 31, 1998, and by
approximately $265,000, or $0.04 per share for the fiscal year ended January 31,
1999. The restatement will also increase the net loss for the six months ended
July 31, 1999 by approximately $133,000, or $0.02 per share. The Company
anticipates the net effect of these adjustments will result in net income of
$2.3 million and $1.9 million for fiscal 1995 and 1996's financial results,
respectively, net losses of $5.5 million and $1.0 million for fiscal 1997 and
1998's financial results, respectively, and a net loss of approximately $283,000
for the six months ended July 31, 1999.
Based upon the cumulative effect of the restatements, the Company will
report retained earnings of $2.2 million and total shareholders' equity of
$861,000 as of January 31, 1999, and retained earnings of $1.9 million and total
shareholders' equity of $5.5 million as of July 31, 1999.
Page 1 of 4
6 MONTHS FISCAL FISCAL FISCAL FISCAL
ENDED YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
7/31/99 1/31/99 1/31/98 1/31/97 1/31/96
------------ ------------ ------------ ------------ ------------
Selling, general and
Administrative
expenses
As reported ...... $ 4,613,064 $ 10,967,001 $ 24,245,064 $ 15,569,422 $ 15,624,519
As restated ...... $ 4,745,771 $ 11,232,415 $ 24,602,478 $ 15,834,836 $ 15,657,519
Net income/(loss)
As reported ...... $ (150,390) $ (738,429) $ (5,185,697) $ 2,151,273 $ 2,326,624
As restated ...... $ (283,097) $ (1,003,843) $ (5,543,111) $ 1,885,859 $ 2,293,624
Retained earnings
As reported ...... $ 3,548,834 $ 3,699,224 $ 4,437,653 $ 9,623,350 $ 7,472,077
As restated ...... $ 1,872,313 $ 2,155,410 $ 3,159,252 $ 8,702,363 $ 6,816,505
Total Shareholders'
Equity
As reported ...... $ 7,162,724 $ 2,405,186 $ 3,158,506 $ (9,422,461) $(11,582,063)
As restated ...... $ 5,486,203 $ 861,372 $ 1,880,105 $(10,343,448) $(12,237,635)
The Company's President and CEO, Michael J. Lyden, stated: "We believe
that the restatements are necessary and proper. We wish to stress that they
do not impact our cash position or liquidity. The fundamentals of our
business operations and business plan remain unchanged."
DSI Toys designs, develops, markets and distributes toys and children's
consumer electronics. Core product categories are juvenile audio products
(including Tech-Link(TM) and Digi-Tech(TM) walkie-talkies, pre-teen audio
products and Kawasaki(R) musical toys), girls' toys (including dolls, play sets
and accessories), and boys' toys (including Kawasaki(R) and Burnin' Thunder(TM)
radio control vehicles, BLOCKMEN(R) construction sets, and western and military
action toys). The Company's web sites can be reached at http://www.dsitoys.com
and http://www.blockmen.com.
This release, other than historical information, includes forward-looking
statements with respect to future results of operations, future business and
operations and certain other matters. These statements are made under the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995 and
involve risks and uncertainties which could cause actual results to differ
materially from those in the forward-looking statements, including but not
limited to the following: effects of accounting treatment changes on future
results of operations, the effect of seasonal buying patterns and changes
therein, changing consumer preferences, the risk of lack of customer acceptance
of newly introduced products, loss of Company customers, and others identified
in the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and
other Securities and Exchange Commission filings. Readers are cautioned not to
place undue reliance on these forward-looking statements which speak only as of
the date hereof. The Company undertakes no obligation to revise forward-looking
statements to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.
(Financial Statements On Following Pages)
Page 2 of 4
DSI TOYS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS - RESTATED
6 MONTHS FISCAL YEAR
1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------
Net sales ............................... $ 18,574,638 $ 52,722,517 $ 73,624,398 $ 63,219,212 $ 63,146,080
Costs of goods sold ..................... 13,987,652 42,058,919 55,285,501 42,023,044 43,428,075
------------ ------------ ------------ ------------ ------------
Gross profit ............................ 4,586,986 10,663,598 18,338,897 21,196,168 19,718,005
Selling, general and
administrative expenses ................ 4,745,771 11,232,415 24,602,478 15,834,836 15,657,519
------------ ------------ ------------ ------------ ------------
Operating income (loss) ................. (158,785) (568,817) (6,263,581) 5,361,332 4,060,486
Interest expense ........................ 252,990 874,907 1,360,067 2,599,942 700,986
Other income ............................ (44,084) (106,881) (231,968) (344,469) (383,801)
------------ ------------ ------------ ------------ ------------
Income (loss) before income taxes
and extraordinary item .............. (367,691) (1,336,843) (7,391,680) 3,105,859 3,743,301
Provision for (benefit from) income taxes (84,594) (333,000) (2,329,323) 1,220,000 1,449,677
------------ ------------ ------------ ------------ ------------
Income (loss) before extraordinary item . (283,097) (1,003,843) (5,062,357) 1,885,859 2,293,624
Extraordinary item (net of tax) ......... -- -- (480,754) -- --
------------ ------------ ------------ ------------ ------------
Net income (loss) ....................... $ (283,097) $ (1,003,843) $ (5,543,111) $ 1,885,859 $ 2,293,624
============ ============ ============ ============ ============
BASIC EARNINGS PER SHARE
Earnings (loss) per share before
extraordinary item ............... $ (0.04) $ (0.17) $ (0.98) $ 0.54 $ 0.66
Extraordinary item .................. -- -- (0.09) -- --
------------ ------------ ------------ ------------ ------------
Earnings (loss) per share ........... $ (0.04) $ (0.17) $ (1.07) $ 0.54 $ 0.66
============ ============ ============ ============ ============
Weighted average shares outstanding . 6,975,365 6,000,000 5,205,479 3,500,000 3,500,000
============ ============ ============ ============ ============
DILUTED EARNINGS PER SHARE
Earnings (loss) per share before
extraordinary item ............... $ (0.04) $ (0.17) $ (0.97) $ 0.50 $ 0.66
Extraordinary item .................. -- -- (0.09) -- --
------------ ------------ ------------ ------------ ------------
Earnings (loss) per share ........... $ (0.04) $ (0.17) $ (1.06) $ 0.50 $ 0.66
============ ============ ============ ============ ============
Weighted average shares outstanding . 6,975,365 6,000,000 5,205,479 3,739,146 3,500,000
============ ============ ============ ============ ============
Page 3 of 4
DSI TOYS, INC.
CONSOLIDATED BALANCE SHEET - RESTATED
JULY 31, JANUARY 31, JANUARY 31, JANUARY 31, JANUARY 31,
1999 1999 1998 1997 1996
------------ ------------ ------------ ------------ ------------
ASSETS
Current assets:
Cash ...................................... $ 701,066 $ 554,197 $ 383,690 $ 1,501,992 $ 2,660,455
Restricted cash ........................... 150,000 150,000 150,000 150,000 150,000
Accounts receivable, net .................. 6,819,261 1,069,725 8,008,288 3,231,789 4,235,665
Due from shareholder ...................... -- -- -- 151,667 819,283
Shareholder insurance proceeds receivable . -- -- -- 511,765 --
Inventories ............................... 7,757,936 4,207,704 6,437,418 4,615,087 3,409,962
Income tax receivable ..................... -- -- 642,264 -- --
Prepaid expenses .......................... 1,433,014 1,503,970 894,704 1,462,189 1,130,006
Deferred income taxes ..................... 801,000 801,000 183,000 362,000 351,000
------------ ------------ ------------ ------------ ------------
Total current assets ................. 17,662,277 8,286,596 16,699,364 11,986,489 12,756,371
Property and equipment, net ...................... 1,920,838 1,642,672 1,252,572 1,190,498 1,514,096
Advances to shareholder (life insurance premiums) -- -- -- -- 487,504
Deferred debt issuance costs ..................... -- -- -- 679,906 842,963
Deferred income taxes ............................ 1,388,687 1,117,000 1,752,000 -- --
Other assets ..................................... 309,008 364,511 224,783 537,868 145,316
------------ ------------ ------------ ------------ ------------
$ 21,280,810 $ 11,410,779 $ 19,928,719 $ 14,394,761 $ 15,746,250
============ ============ ============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities .. $ 10,293,569 $ 6,799,290 $ 9,740,201 $ 6,259,101 $ 5,492,704
Current portion of long-term debt ......... 3,772,134 824,675 585,783 2,755,789 3,359,210
Income taxes payable ...................... 467,397 271,920 108,630 193,211 314,874
Deferred income taxes ..................... -- -- -- 158,000 79,408
------------ ------------ ------------ ------------ ------------
Total current liabilities ............ 14,533,100 7,895,885 10,434,614 9,366,101 9,246,196
Long-term debt ................................... 1,147,718 2,540,522 7,495,000 8,203,108 11,187,702
Notes payable - shareholder ...................... -- -- -- 6,000,000 7,000,000
Deferred income taxes ............................ 113,789 113,000 119,000 1,169,000 549,987
------------ ------------ ------------ ------------ ------------
Total liabilities .................... 15,794,607 10,549,407 18,048,614 24,738,209 27,983,885
Shareholders' equity:
Preferred stock ........................... -- -- -- -- --
Common Stock .............................. 87,190 87,190 87,190 62,190 622
Additional paid-in capital ................ 4,979,701 21,162,568 21,162,568 3,443,093 3,504,661
Common stock warrants ..................... 102,500 102,500 102,500 100,000 100,000
Accumulated other comprehensive income .... 3,894 14,296 29,187 9,498 1,169
Retained earnings ......................... 1,872,313 2,155,410 3,159,252 8,702,363 6,816,505
------------ ------------ ------------ ------------ ------------
7,045,598 23,521,964 24,540,697 12,317,144 10,422,957
Less: treasury stock ...................... (1,559,395) (22,660,592) (22,660,592) (22,660,592) (22,660,592)
------------ ------------ ------------ ------------ ------------
Total shareholders' equity ........... 5,486,203 861,372 1,880,105 (10,343,448) (12,237,635)
------------ ------------ ------------ ------------ ------------
$ 21,280,810 $ 11,410,779 $ 19,928,719 $ 14,394,761 $ 15,746,250
============ ============ ============ ============ ============
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