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FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of September, 1997
DSG International Limited
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(Translation of registrant's name into English)
17/F Watson Centre, 16-22 Kung Yip Street,
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Kwai Chung, Hong Kong
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Tel. No. 852-2427-6951
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(Address of principal executive offices)
[Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.]
Form 20-F X Form 40-F
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[Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the information to
the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.]
Yes No X
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[If "yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82-__________.]
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DSG 1997
SECOND
QUARTER
REPORT
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REVIEW OF OPERATIONS SECOND QUARTER 1997 AND SIX MONTHS ENDED JUNE 30, 1997
To our Shareholders:
We are pleased to announce our second quarter and first half 1997 results.
SECOND QUARTER ENDING JUNE 30, 1997 COMPARED TO SECOND QUARTER ENDING JUNE 30,
1996
The net sales for DSG International Limited ("the Company") for the three-month
period ending June 30, 1997, were $64.2 million, an increase of 7.0% over the
same period in 1996. Although the Company's net income in 1997 was $1.4
million, compared with last year's $2.3 million, and earnings per share in the
second quarter of 1997 were $0.21, rather than $0.29, the Company is maintaining
its overall volume sales on disposable baby diapers and is broadening its niche
within the adult incontinence marketplace.
While 1997 has seen the Company creating further inroads in the disposable baby
diaper markets, especially within its Asian Pacific and Australian regions, long
range strategies were further implemented toward continuing the Company's
marketshare expansion in the area of adult incontinence. On April 1, 1997, the
Company acquired the entire share capital of a Wisconsin adult incontinence and
disposable baby diaper manufacturer for a cash consideration of $3.8 million.
Also within the second quarter, the Company acquired an adult incontinence
manufacturing firm and equipment in the Netherlands and a medical care
distribution company in Belgium for a total cash consideration of $1.4 million.
The incontinence business from the Netherlands was integrated into the Company's
Swiss operations.
Intense pricing and promotional competition continuously affected sales
performance for both North America and Europe. Gross profit as a percentage of
net sales for the second quarter of 1997 was 34.1%, slightly less than that of
the same period last year. Selling, general and administrative expenses as a
percentage of net sales increased to 29.8% for the second quarter of 1997. This
figure was up from 27.4% in 1996, due to increased advertising and promotional
expenses for the North American region; consequently, the Company's operating
margin narrowed from 7.3% in the second quarter of 1996 to 4.3% during the
second quarter of 1997.
Interest expenses for the Company in the second quarter of 1997 came to
$807,000, compared with $606,000 for the same period last year. Increased
borrowing to accommodate recent acquisitions, along with the working capital
requirements of these newly purchased companies, contributed to this change.
Other income for the Company resulted in a shift from $585,000, in the second
quarter of 1996, to $132,000 during the second quarter of 1997, primarily due to
variances in interest income.
SIX MONTHS CONCLUDING JUNE 30, 1997 COMPARED TO SIX MONTHS CONCLUDING JUNE 30,
1996
The Company's net sales for the six-month interval ending June 30, 1997, were
$121.0 million, close to the sales of $122.1 million for the corresponding 1996
period. During this six-month period in 1997, gross profit as a percentage of
net sales was 35.1%, showing an increase of 2.8% over the same duration in 1996.
This fluctuation was primarily the result of higher margin contributions from
the Company's Asian Pacific and Australian regions. Operating income for the
Company during the first half of 1997 was $6.1 million, a $0.2 million decline
from the comparative period's income in 1996. This was again the result of
increases in advertising and promotional expenses within the North American
market and additional selling, general and administrative expenses from the
newly purchased companies.
Interest expenses for the six-month period ending June 30, 1997, totaled $1.4
million, compared to $1.2 million for the same period in 1996, and resulted from
increased borrowing for the acquisition and working capital requirements of the
newly purchased companies. Following an unfavorable movement in European
currencies against the U.S. Dollar, the Company reported an exchange loss on
translation adjustment of $866,000 for the period ending June 30, 1997.
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STATEMENTS OF OPERATIONS AND BALANCE SHEET DATA
The Statements of Operations for three-month and six-month periods ending June
30, 1997 and 1996, and the Balance Sheet information as of June 30, 1997, are
derived from unaudited financial statement 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 these periods, however, are not necessarily
indicative of the results for the full year.
STATEMENTS OF OPERATIONS
(In thousands, except earnings per share)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net sales $64,183 $59,995 $120,951 $122,104
======= ======= ======== ========
Gross profit 21,884 20,810 42,416 39,468
Selling, general & administrative expenses 19,117 16,448 36,330 33,192
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Operating income 2,767 4,362 6,086 6,276
Interest expense (807) (606) (1,410) (1,198)
Exchange (loss) gain (222) (74) (866) 257
Other income 132 585 633 996
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Income before income taxes 1,870 4,267 4,443 6,331
Provision for income taxes (353) (1,975) (1,473) (2,933)
Minority interest in losses (99) (14) (99) (2)
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Net income $ 1,418 $ 2,278 $ 2,871 $ 3,396
======= ======= ======== ========
Earnings per share $ 0.21 $ 0.29 $ 0.43 $ 0.43
======= ======= ======== ========
Average number of shares outstanding 6,673 7,795 6,674 7,823
======= ======= ======== ========
</TABLE>
BALANCE SHEET DATA
(In thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
(unaudited)
<S> <C> <C>
Working capital $ 31,440 $ 31,714
Total assets 157,400 141,910
Long-term debt (including deferred purchase
consideration) 23,515 21,940
Shareholder's equity 76,220 74,639
</TABLE>
At June 30, 1997 the Company had cash of $11.1 million.
Regarding the Company's second quarter results, DSG Chairman Mr. Brandon
Wang stated, "I am pleased to welcome our newest acquisitions on board and am
particularly gratified with he commitment we have made to expanding our niche
within the adult incontinence market. With respect to the Company's net income,
it was negatively impacted by a total of $0.11 per share, primarily due to the
losses incurred in the newly acquired companies and the unfavorable European
currency movement against the U.S. Dollar. While we are continuing to move
toward further growth in disposable baby diaper sales, we are confident the
expansion we are achieving in the adult incontinence marketplace will provide us
with a more diversified position. As a significant percentage of the world's
population is aging, the demand for sophisticated, life-style enhancing products
is proportionately increasing, and DSG is in a position to successfully respond
to that need."
DSG International Limited and its predecessors have been in the business
of manufacturing and distributing disposable diapers since 1973. With
manufacturing plants in California, Georgia and Wisconsin, the Company also
maintains facilities in Hong Kong, Australia, Great Britain, Singapore, Canada,
Switzerland, China and Thailand. Additionally, the Company distributes its
products throughout Asia, Australia, North America and Europe. The Company
produces private label disposable diapers, adult incontinence products, feminine
napkins 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), Togs(R),
Cares(R), Vlesi(R), Dispo 123(TM) and Certainty(R).
August 15, 1997
[PHOTO APPEARS HERE]
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DSG INTERNATIONAL LTD
17th Floor Watson Centre
Kung Yip Street
Kwai Chung
Hong Kong
Tel: (852) 2427 6951
Fax: (852) 2480 4491
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DSG International Limited
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(Registrant)
Date: September 11, 1997 By /s/ Peter Chang
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Peter Chang
Vice President
