[GRAPHIC]
DISPOSABLE SOFT GOODS
FOURTH QUARTER REPORT 2000
REVIEW OF OPERATIONS
FOURTH QUARTER 2000
AND YEAR ENDED DECEMBER 31, 2000
To our Shareholders:
We are pleased to announce the financial results for the fourth quarter ended
December 31, 2000.
The Company's net sales for the quarter ended December 31, 2000 were $53.3
million compared to $53.2 million for the same period in 1999. The Company
reported a profit of $0.1 million, or $0.02 per share, for the three months,
compared to a net income of $1.8 million or $0.27 per share for the fourth
quarter of 1999.
For the fiscal year ended December 31, 2000, the Company recorded net sales of
$214.7 million, compared to $205.8 million in 1999. Net income for the 12 months
was $3.3 million, or $0.49 per share, compared to $4.4 million for 1999.
Brandon Wang, Chairman, said, "Although fourth quarter revenues were
approximately the same as in the fourth quarter of 1999, we continued the
double-digit sales growth of our Asia and Australia regions, for both the
quarter and the year ended December 31. For 2000, sales in volume in Asia were
up 50% and up 10% in Australia over 1999. European sales declined due to the
divestiture of our operation in Switzerland. North American sales were somewhat
lower in the fourth quarter compared to a year ago and about the same for 2000
over 1999. However, our acquisition of the Drypers North American operations in
March 2001 will mean dramatic revenue growth for our North American region. In
fact, our North American run rate should more than double once the Drypers
operations have been integrated and assimilated into our organization, which we
expect to accomplish quickly."
Wang said the gross margin for the fourth quarter of 2000 was 30.6% compared to
33.4% for the year-ago quarter. Lower gross margins were due to increased costs
of raw materials, primarily wood pulp, and North American volumes that were
slightly lower compared to 1999. The Company realized a gain of $214,000 on the
sale of its Swiss adult incontinence operation in October 2000, due to the
netting off of realized capital reserves and cumulative foreign currency
translation losses. Other income for the quarter was $464,000, compared to
$757,000 in the year-ago period, with the latter including a reclassification
from SG&A expenses to a gain of disposal of assets.
For the twelve months ended December 31, 2000, gross margin was 32.2% compared
to 32.9% in 1999, because of significantly higher wood pulp costs throughout
2000. "Although volume
was up 50% in Asia, much of that growth came from value brands which have a
higher cost of sales," said Wang. "At the same time, the higher volumes and
productivity in both Asia and Australia helped alleviate the impact of higher
cost of sales." SG&A expense increased by $1.3 million in 2000 due to increased
advertising and promotional activities in Asia and Australia.
Tax expense was $1.6 million in 2000, compared to $1.0 million in 1999, with the
latter including the favorable effect of a tax refund for the Company's North
American operations.
"We believe DSG International is well-positioned for the future. We're very
encouraged and optimistic about continued growth in Asia and Australia, and the
addition of the former Drypers North American markets to our AHP operations in
the U.S. has created a significant entity in the disposable personal care
products industry. The combination of AHP and Drypers will provide a new level
of service to our branded and private label customers in the U.S. and
significantly expands our presence in this key market," said Wang.
DSG International Limited and its predecessors have been in the business of
manufacturing and distributing disposable diapers since 1973. With manufacturing
plants in Georgia, Wisconsin, Ohio and Washington, the Company also maintains
manufacturing operations in Hong Kong, Australia, Great Britain, China,
Thailand, Indonesia and Malaysia. Additionally, the Company distributes its
products throughout Asia, Australia, North America and Europe. The Company
produces private label disposable diapers, adult incontinence products and
training pants at certain of its operations. Its best selling brands include
"Fitti(R)", "Pet Pet(R)", "Cosies(R)", "Cosifits(R)", "Baby Love(R)",
"Babyjoy(R)", "Lullaby(R)", "Cares(R)", "Cuddles(R)", "Super Fan-nies(R)",
"Dispo 123(TM)", "Handy(TM)", "Certainty(R), "Merit(R) and "Drypers(R)".
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
This news release may contain forward-looking statements or predictions. These
statements represent our judgement as of this date and are subject to risks and
uncertainties that could cause actual results or events to differ materially
from those expressed in such forward-looking statements. Potential risks and
uncertainties are discussed in depth in DSG International Ltd filings with the
SEC copies of which may be accessed through the SEC's World Wide Web site at
http: //www.sec.gov.
May 16, 2001
STATEMENTS OF OPERATIONS AND BALANCE SHEET DATA
The Statements of Operations for the three-month period and year ending
December 31, 2000 and 1999, and the Balance Sheet information as of December 31,
2000, are derived from unaudited financial statements which, in the opinion of
the management, include all necessary adjustments, consisting only of normally
recurring adjustments, for a fair presentation of the results of operations for
these time frames. The results for the periods, however, are not necessarily
indicative of the results for the full years.
SUMMARY OF RESULTS
(Dollars in thousands, except per share amounts, unaudited)
Three months ended Year ended
December 31, December 31,
2000 1999 2000 1999
Net sales $ 53,332 $53,237 $214,661 $205,842
======== ======= ======== ========
Gross profit 16,320 17,761 69,129 67,722
Gain on disposals of
property, plant and
equipment 89 102 244 1,034
Selling, general &
administrative expenses (15,771) (15,871) (62,598) (61,321)
-------- ------- -------- --------
Operating income 638 1,992 6,775 7,435
Interest expense (410) (472) (1,594) (2,208)
Exchange loss (771) (307) (1,356) (997)
Gain on disposal of
subsidiaries 214 -- 214 --
Other income 464 757 922 1,314
-------- ------- -------- --------
Income before income taxes 135 1,970 4,961 5,544
Provision for income taxes (98) (397) (1,557) (987)
Minority interest 92 243 (141) (122)
-------- ------- -------- --------
Net income $ 129 $ 1,816 $ 3,263 $ 4,435
======== ======= ======== ========
Earnings per share $ 0.02 $ 0.27 $ 0.49 $ 0.66
======== ======= ======== ========
Weighted average number
of shares outstanding 6,675 6,675 6,675 6,675
======== ======= ======== ========
STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands, unaudited)
Three months ended Year ended
December 31, December 31,
2000 1999 2000 1999
Net income $ 129 $ 1,816 $3,263 $4,435
Other comprehensive
income (loss):
Foreign currency
translation
adjustments 2,357 1,040 (1,017) 665
------ ------- ------- ------
Comprehensive income $2,486 $2,856 $2,246 $5,100
====== ======= ======= ======
BALANCE SHEET DATA
(Dollars in thousands, unaudited)
December 31, December 31,
2000 2000
Working capital $ 33,277 $ 36,000
Total assets 112,069 121,847
Long-term debt 5,577 11,894
Shareholders' equity 63,747 70,302
On December 31, 2000, the Company had cash and cash equivalents of $10.3
million.
DSG INTERNATIONAL LTD.
17th Floor Watson Centre
Kung Yip Street
Kwai Chung
Hong Kong
Tel: (852) 2484 4820
Fax: (852) 2480 4491