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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, 1998
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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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 23, 1998 By /s/Peter Chang
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Peter Chang
Vice President
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DISPOSABLE
SOFT [LOGO]
GOODS
SECOND QUARTER REPORT 1998
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REVIEW OF OPERATIONS
SECOND QUARTER 1998
AND SIX MONTHS ENDED
JUNE 30, 1998
To our Shareholders:
We are pleased to announce our second quarter and first half 1998 results.
SECOND QUARTER ENDED JUNE 30, 1998 COMPARED TO SECOND
QUARTER ENDED JUNE 30, 1997
Net sales for DSG International Limited ("the Company") for the three-month
period ended June 30, 1998 declined 22.7% to $49.6 million compared with $64.2
million for the same period in 1997. The Company's net loss was $0.8 million in
the second quarter of 1998, compared with net income of $1.4 million for the
same period in 1997.
The financial and economic situation in Asia Pacific continued to impact on the
Company's operations in the region. The Company's sales in the Asia Pacific
region declined both in dollar terms and in volume. The Company's sales in
North America showed a slight volume improvement over the first quarter of 1998
that was attributed to the everyday-low-price strategy. However, the Company's
sales declined when compared against the sales for the second quarter in 1997.
In Europe, the Company's sales had negatively impacted as a result of the
Company's Swiss operation losing a major customer in baby diapers in the second
quarter of 1998.
Gross profit as a percentage of net sales was 28.4% in the second quarter of
1998 compared with 34.1% for the same period in 1997. The decrease was
primarily due to lower unit selling price in North America and the adverse
impact of higher cost of imported raw materials in the Asia Pacific region.
Selling, general and administrative expenses as a percentage of net sales was
29.2% in the second quarter of 1998, a reduction of 0.6% compared with 29.8% for
the second quarter of 1997.
Interest expense for the Company in the second quarter of 1998 was $601,000,
compared with $807,000 for the same period last year due to retirement of
borrowings. Other income for the Company increased from $132,000 in the second
quarter of 1997, to $304,000 during the second quarter of 1998, primarily due to
an increase in interest income.
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SIX MONTHS CONCLUDING JUNE 30, 1998 COMPARED TO SIX MONTHS CONCLUDING JUNE 30,
1997
The Company's net sales for the six-month period ended June 30, 1998 declined
15.4% to $102.3 million, compared with $121.0 million for the corresponding
period in 1997. Gross profit as a percentage of net sales decreased to 27.7% in
the six-month period ended June 30, 1998, from 35.1% in the same period in 1997.
Selling, general and administrative expenses declined by $6.7 million to $29.6
million for the first half of 1998, from $36.3 million for the corresponding
period in 1997. The Company's operating loss was $1.3 million during the first
half of 1998 compared with operating income of $6.1 million during the same
period in 1997.
Interest expense for the six-month period ended June 30, 1998, totaled $1.2
million, compared to $1.4 million for the same period in 1997 as a result of
retirement of borrowings.
Mr. Brandon Wang, Chairman of the Company, stated "For the second quarter, we
have seen some volume improvement in North America. The currency and economic
situation continues to linger in the Asia Pacific region and the economy may not
recover for a while. The Company is implementing a strategy to expeditously
establish local manufacturing facilities in some of our key Asia Pacific
markets. We expect the start up operations in Indonesia sometime during the
fourth quarter. This "go local" strategy, will allow us not only to reduce costs
but more importantly, it will allow us to build the foundation for market
expansion when the economy of the region recovers."
DSG International Limited and its predecessors have been in the business of
manufacturing and distributing disposable diapers since 1973. With
manufacturing plants in Georgia and Wisconsin, the Company also maintains
manufacturing operations in Hong Kong, Australia, Great Britain, 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), Certainty(R) and Handy(TM).
September 2, 1998
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STATEMENTS OF OPERATIONS AND
BALANCE SHEET DATA
The Statements of Operations for the three-month and six-month periods ending
June 30, 1998 and 1997, and the Balance Sheet information as of June 30, 1998,
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 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,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net sales $49,601 $64,183 $102,306 $120,951
======= ======= ======== ========
Gross profit 14,064 21,884 28,343 42,416
Selling, general &
administrative
expenses 14,490 19,117 29,614 36,330
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Operating (loss)
income (426) 2,767 (1,271) 6,086
Interest expense (601) (807) (1,200) (1,410)
Exchange (loss) gain (101) (222) 123 (866)
Other income 304 132 482 633
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(Loss) income before
income taxes (824) 1,870 (1,866) 4,443
Provision for
income taxes (157) (353) (354) (1,473)
Minority interest 195 (99) 353 (99)
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Net (loss) income $ (786) $ 1,418 $ (1,867) $ 2,871
======= ======= ======== ========
(Loss) earnings
per share
- --basic and diluted $ (0.12) $ 0.12 $ (0.28) $ 0.43
======= ======= ======== ========
Weighted average
number of shares
outstanding 6,675 6,673 6,675 6,674
======= ======= ======== ========
</TABLE>
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STATEMENTS OF COMPREHENSIVE
INCOME
(in thousands)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1998 1997 1998 1997
Net (loss) income $(786) $1,418 $(1,867) $2,871
Other comprehensive
expense, before tax
Foreign currency
translation
adjustments (2,118) (443) (2,110) (1,169)
Provision for
income taxes -- -- -- --
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Other comprehensive
expense, net of tax (2,118) (443) (2,110) (1,169)
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Comprehensive
income (expense) $(2,904) $975 $(3,977) $1,702
======= ======= ======= ======
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During the year, the Company adopted the Statement of Financial Accounting
Standards ("SFAS") No. 130 Reporting Comprehensive Income, issued by the
Financial Accounting Standards Board. SFAS No. 130 requires the reporting of
comprehensive income in addition to net income from operations. Comprehensive
income is a more inclusive financial reporting methodology that includes
disclosure of certain financial information that historically has not been
recognized in the calculation of net income. The inclusion represents all
changes in equity except those resulting from investments by, and distributions
to owners.
BALANCE SHEET DATA
(in thousands)
JUNE 30, December 31,
1998 1997
(unaudited)
Working capital $29,828 $30,823
Total assets 119,543 130,273
Long-term debt (including
deferred purchase consideration) 19,395 21,281
Shareholders' equity 60,801 64,778
At June 30, 1998 the Company had cash totaling $12.5 million.
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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
