In the Malaysia-Thailand region, the Company expects double digit declines in U.S. dollar net sales for the remainder of the fiscal year. While the Company is hopeful that the rate of the sales decline in local currency in Thailand has slowed and local currency sales growth will continue in Malaysia, the lower value of their currencies, which currently have stabilized, is expected to continue to negatively impact both the translated value of the U.S. dollar sales and to increase the cost of products purchased from Amway Corporation. In the Australia-New Zealand region, the positive results of initiatives designed to motivate distributors are expected to continue. The Company anticipates sponsoring and the core distributor force will grow in this region, leading to a continued increase in local currency sales through the second half of the fiscal year. For the remainder of fiscal 1998, the Company expects net sales and income to continue at the significantly lower levels experienced during the first half of the fiscal year. In particular, margins are expected to be adversely impacted both because the Malaysia-Thailand region was historically the Company's most profitable region and because the Company is unable to fully absorb China's cost structure at the current sales level, resulting in an inability to receive any advantage from Amway China's tax holiday. The effective tax rate is expected to continue to be significantly higher than fiscal 1997 as the Company is unable to receive a tax benefit from China's net loss. Results for the second half of fiscal 1998 are principally dependent upon the severity of the regulatory environment in China and the economic impact of the financial turmoil in Southeast Asia, both of which are outside of the Company's control. The Company is hopeful that the hostile environment towards direct selling in China will be resolved positively in the near term, enabling distributors to gain a greater confidence in the Amway business opportunity. If this should happen, it should result in a more normalized level of sales and sponsoring. Available cash is expected to decline during the remainder of fiscal 1998 due to planned capital expenditures in China and a decrease in the cash balances in Malaysia, Thailand and Taiwan where the devaluation of the local currencies has reduced the translated cash balances held in those markets. Capital expenditures for fiscal 1998 are expected to be $49 million, including $42 million for expansion in China. The Company continues to believe that investing in the expansion in China will benefit its long-term growth potential. The Company continues its plans to build a manufacturing plant in China, near Shanghai; it is awaiting certain government approvals regarding the output of the plant under the direct selling laws prior to funding the joint venture. The Company believes that available cash on hand and internally generated funds will be sufficient to meet its presently anticipated expenses, material commitments, working capital and capital expenditure requirements. The parent company receives the majority of its cash flow through dividends from its affiliates. The decline in the performance in several key markets and the need for Amway China to retain its available cash for planned capital needs are expected to limit the amount of cash available to the parent company in the latter part of the fiscal year. This could require the borrowing of cash at the parent on a short-term basis in the near term. At February 28, 1998, the Company had 56,441,960 shares of common stock outstanding, net of the share repurchase at the end of the third quarter of last year. This results in a more favorable per share comparison in the first nine months of fiscal 1998. Risks and Uncertainties in Forward-Looking Statements The statements contained in this release that are not historical facts are forward-looking statements. These forward-looking statements involve risks and uncertainties with respect to the Company's markets. With respect to operations in China in fiscal 1998, these risks and uncertainties include: (i) adverse regulatory developments in China which would impact the Company's ability to operate under its Sales Plan and (ii) the possibility of governmental action in China which would substantially restrict the Company's ability to obtain products to sell to its distributors which are not made in the Guangzhou facility, including the ability to test market certain of its current product lines or the ability to introduce additional products for test marketing in China, (iii) the ability of the Company to generate net income in China to take advantage of its tax holiday in that market and to maintain sufficient local manufacturing levels necessary to qualify for such holiday and (iv) the ability of the Company to effectively manage transition issues associated with the previous expansion of its operations to additional cities in China. In addition, the forward-looking statements contained herein are subject to other risks and uncertainties with respect to the Company's markets, which could cause results to differ materially such as, without limitation, the spread of economic turmoil in Southeast Asia, further devaluation of the Thai baht and the Malaysian ringgitt, the occurrence of adverse currency volatility in other markets in which the Company operates, especially Taiwan and Australia and possible adverse economic conditions in those countries, stricter enforcement of government restrictions on imports or pricing in response to the worsening economic conditions in Malaysia or the creation of such restrictions in any of the Company's other markets, the extent and pace of strengthened and new distributor leadership development in Taiwan by those leaders who have returned from China, the possibility of adverse publicity in the Company's markets, adverse government regulations or government action in the Company's markets and a deterioration of the Company's positive relationship with its distributor leadership. The Company Headquartered in Hong Kong, Amway Asia Pacific Ltd. is the exclusive distribution vehicle for Amway Corporation in Australia, Brunei, People's Republic of China, Macau, Malaysia, New Zealand, Taiwan and Thailand. Amway Asia Pacific Ltd. is one of the largest direct selling companies in the region, based on sales of Amway consumer products offered through a core distributor force of approximately 667,000 independent distributors at August 31, 1997. Amway Asia Pacific Ltd. is listed on the New York Stock Exchange (AAP) and the Australian Stock Exchange (AMW). Amway Asia Pacific Ltd. Condensed Consolidated Balance Sheet Data February 28, 1998 and August 31, 1997 (U.S. dollars in thousands) February 28, 1998 August 31, 1997 (Unaudited) Cash and cash equivalents $165,939 $207,915 Short-term investments 1,757 48,613 Inventories 105,546 106,227 Total current assets 321,702 409,663 Total assets $441,267 $520,143 Current liabilities 182,756 223,186 Long-term debt, less current maturities 5 26 Total liabilities $183,345 $224,291 Minority interests 35,915 43,368 Total shareholders' equity $222,007 $252,484 Amway Asia Pacific Ltd. Unaudited Net Sales by Country (U.S. dollars in millions) Country Second Quarter % change Six Months % change ended from prior ended from prior February 28 year February 28 year 1998 1997 1998 1997 China(1) $30.9 $53.0 (41.6) $65.2 $103.5 (37.0) Taiwan 43.9 45.9 (4.5) 79.4 90.7 (12.5) Region Total 74.8 98.9 (24.4) 144.6 194.2 (25.5) Malaysia(2) 25.1 29.0 (13.4) 54.3 68.7 (20.9) Thailand 26.4 45.3 (41.8) 53.2 95.7 (44.4) Region Total 51.5 74.3 (30.7) 107.5 164.4 (34.6) Australia 29.0 25.7 12.7 65.5 57.9 13.2 New Zealand 5.4 6.3 (13.7) 12.2 13.9 (12.9) Region Total 34.4 32.0 7.5 77.7 71.8 8.1 Total Net Sales $160.7 $205.2 (21.7) $329.8 $430.4 (23.4) Change in Local Currency Net Sales by Country (Unaudited) % Change from Prior Year Country Second Quarter Six Months China(1) (41.7) (37.1) Taiwan 14.4 0.2 Malaysia (2) 37.1 12.4 Thailand 5.9 (9.0) Australia 32.6 29.1 New Zealand 3.1 0.1 (1) Includes Hong Kong and Macau. (2) Includes Brunei. Amway Asia Pacific Ltd. Unaudited Consolidated Statements of Income Three Months ended February 28, 1998 and 1997 (U.S. dollars and shares in thousands, except per share amounts) Three Months Ended February 28 1998 1997 % Change Net sales $160,678 $205,201 (21.7) Cost of sales 66,771 76,199 (12.4) 93,907 129,002 (27.2) Operating expenses: Distributor incentives 43,791 53,576 (18.3) Distribution expenses 11,409 12,154 (6.1) Selling & administrative expenses 25,522 28,457 (10.3) Total operating expenses 80,722 94,187 (14.3) Operating income 13,185 34,815 (62.1) Other income, net 681 6,002 (88.7) Income before taxes & minority interest 13,866 40,817 (66.0) Income taxes 6,216 13,320 (53.3) Minority interest in net income of consolidated subsidiaries 2,111 2,783 (24.1) Net income $5,539 $24,714 (77.6) Earnings per share $.10 $.41 (76.2) Weighted average number of shares outstanding 56,442 60,055 (6.0) Effective Weighted Average Translation Rates per U.S. Dollar Three Months Ended February 28 1998 1997 Chinese renminbi 8.28 8.30 Hong Kong dollar 7.74 7.74 New Taiwan dollar 32.89 27.47 Malaysia ringgitt 3.96 2.50 Thai baht 46.78 25.74 Australian dollar 1.51 1.28 New Zealand dollar 1.71 1.43 Amway Asia Pacific Ltd. Unaudited Consolidated Statements of Income Six Months ended February 28, 1998 and 1997 (U.S. dollars and shares in thousands, except per share amounts) Six Months Ended February 28 1998 1997 % Change Net sales $329,802 $430,401 (23.4) Cost of sales 132,668 158,096 (16.1) 197,134 272,305 (27.6) Operating expenses: Distributor incentives 88,110 111,915 (21.3) Distribution expenses 24,531 23,585 4.0 Selling & administrative expenses 54,718 57,266 (4.4) Total operating expenses 167,359 192,766 (13.2) Operating income 29,775 79,539 (62.6) Other income, net 3,775 12,665 (70.2) Income before taxes & minority interest 33,550 92,204 (63.6) Income taxes 14,173 30,287 (53.2) Minority interest in net income of consolidated subsidiaries 5,313 7,313 Net income $14,064 $54,604 (74.2) Earnings per share $.25 $.91 (72.6) Weighted average number of shares outstanding 56,442 60,051 (6.1) Effective Weighted Average Translation Rates per U.S. Dollar Six Months Ended February 28 1998 1997 Chinese renminbi 8.28 8.30 Hong Kong dollar 7.74 7.73 New Taiwan dollar 31.46 27.48 Malaysia ringgitt 3.56 2.51 Thai baht 41.86 25.57 Australian dollar 1.45 1.27 New Zealand dollar 1.64 1.43 SOURCE Amway Asia Pacific Ltd. -0- 04/07/98 /CONTACT: Holly A. Clemente for Amway Asia Pacific Ltd., 616-787-8688/ /Web site: http://www.amway.com/ (AAP)