[GRAPHIC]
DSG INTERNATIONAL second quarter report
REVIEW OF OPERATIONS
SECOND QUARTER 2001
AND SIX MONTHS ENDED JUNE 30, 2001
To our Shareholders:
We are pleased to announce our second quarter and first half 2001 results.
DSG INTERNATIONAL POSTS Q2 REVENUE GAIN OF 60.5%
Net loss due primarily to non-recurring factors
Net sales for the quarter increased 60.5% to $82.3 million, compared to $51.3
million for the second quarter last year. Net loss for the quarter was $5.1
million, or $0.76 per share, compared to net income of $700,000, or $0.10 per
share, for the same period last year. The loss was due primarily to lower gross
margins on finished goods acquired from Drypers North America, increase selling,
general and administrative expense and restructuring costs as a result of the
Drypers acquisition and foreign exchange losses.
Brandon Wang, Chairman, said, "Even though we incurred a net loss in the
quarter, we are extremely satisfied with the quantum leap in revenue growth,
which will lead to future profitability. Our run rate has more than doubled in
North America and we saw sales in our Southeastern Asia markets increase by 27%
over last year."
"Many of the factors that resulted in the loss are temporary or one-time
conditions," said Wang. "For instance, the lower margins caused by inventory
acquired at net realizable value from Drypers will not be a continuing factor.
Much of the selling, general and administrative expense increase, as a
percentage of sales, resulted from our integration programs for the Drypers
operations. As our efficiencies increase, we should actually see a lower rate of
selling, general and administrative expense as a percentage of sales. We do
expect additional integration-related charges in the third quarter, which should
be the final ones resulting from the acquisition. Overall, we're very pleased
with our progress, especially with the dramatic increase in our market presence.
We believe DSG International is on plan to restore profitability."
Gross margin for the second quarter was 30.0% compared to 32.1% for the year ago
period. Selling, general and administrative expense, as a percentage of sales,
increased to 32.2% compared to 29.2% for the same period in 2000. As a result of
the financing of the Drypers acquisition, interest expense increased to $2.1
million during the second quarter. The exchange loss of $500,000 was attributed
to the fluctuation of Thai, Indonesian and Australian currencies against the
U.S. dollar.
For the six months ended June 30, 2001, net sales were $142.1 million, an
increase of 32.6% over the $107.1 million for the first half of 2000. Net loss
for the period was $5.2 million, or $0.78 per share, compared to net income of
$2.3 million, or $0.34 per share for the same period last year.
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 judgment 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.
September 21, 2001
STATEMENTS OF OPERATIONS
The Statements of Operations for the three-month and six-month periods ended
June 30, 2001 and 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 ncecessarily indicative of the results for the full year.
STATEMENTS OF OPERATIONS
(in thousands, except earnings per share)
Three months ended Six months ended
June 30, June 30,
---------------------- ------------------
2001 2000 2001 2000
-------- -------- -------- --------
Net sales $ 82,310 $ 51,270 $142,114 $107,138
======== ======== ======== ========
Gross profit 24,687 16,451 42,933 35,086
Gain on sale of property,
plant and equipment 5 10 24 33
Selling, general and
administrative expense (26,517) (14,986) (43,936) (30,739)
Restructuring expenses (256) -- (256) --
-------- -------- -------- -------
Operating income (loss) (2,081) 1,475 (1,235) 4,380
Interest expense (2,105) (362) (2,673) (758)
Exchange loss (500) (256) (848) (315)
Other income 5 160 151 180
-------- -------- -------- -------
Income (loss) before income
taxes (4,681) 1,017 (4,605) 3,487
Provision for income taxes (372) (338) (586) $(1,027)
Minority interest (39) 21 (9) (157)
======== ======== ======== =======
Net income loss $ (5,092) $ 700 $ (5,200) $ 2,303
Earnings (losses) per share $ (0,76) $ 0.10 $ (0.78) $ 0.34
======== ======== ======== =======
Weighted average number of
shares outstanding 6,675 6,675 6,675 6,675
======== ======== ======== =======
STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
Three months ended Six months ended
June 30, June 30,
2001 2000 2001 2000
Net income (loss) $(5,092) $ 700 $(5,200) $2,303
Other comprehensive expense
Foreign currency
translation adjustments (21) (676) (1,278) (1,896)
------- ----- ------- ------
Comprehensive income
(loss) $(5,113) $ 24 $(6,478) $ 407
======= ===== ======= ======
DSG INTERNATIONAL LTD.
17th Floor Watson Centre
Kung Yip Street
Kwai Chung
Hong Kong
Tel: (852) 2484 4820
Fax: (852) 2480 4491