<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED APRIL 30, 1995
COMMISSION FILE #0-12862
DEP CORPORATION
A DELAWARE CORPORATION - I.R.S. NO. 95-2040819
2101 EAST VIA ARADO, RANCHO DOMINGUEZ, CA 90220
(310) 604-0777
Indicate by check mark whether the company (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934,
during the preceding 12 months (or for such shorter period that the company was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, exclusive of treasury stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Outstanding at
Class June 1, 1995
------------------------------------ --------------
<S> <C>
Class A Common stock, $.01 par value 3,117,060
Class B Common stock, $.01 par value 3,127,840
Index to Exhibits appears on page 16
</TABLE>
1
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DEP CORPORATION
INDEX
<TABLE>
<CAPTION>
Part I. Financial Information Page
--------------------- -----
<S> <C> <C>
ITEM 1. FINANCIAL STATEMENTS:
CONSOLIDATED CONDENSED BALANCE SHEETS - 3
April 30, 1995 and July 31, 1994
CONSOLIDATED CONDENSED STATEMENTS OF INCOME - 4
Three and Nine Month Periods Ended
April 30, 1995 and April 30, 1994
CONSOLIDATED CONDENSED STATEMENTS OF RETAINED 5
EARNINGS AND ADDITIONAL PAID-IN CAPITAL -
Nine Month Period Ended April 30, 1995
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS - 6
Nine Month Periods Ended
April 30, 1995 and April 30, 1994
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 7
ITEM 2. MANAGEMENT'S DISCUSSION OF RESULTS OF OPERATIONS 9
AND FINANCIAL CONDITION
Part II. Other Information 14
-----------------
SIGNATURE 15
</TABLE>
2
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DEP CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
April 30, July 31,
ASSETS 1995 1994
----------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents......................................................... $ 1,540,000 $ 947,000
Accounts receivable, net.......................................................... 13,983,000 16,769,000
Inventories at lower of cost (first-in, first-out) or market:
Raw materials .................................................................. 4,809,000 3,688,000
Finished goods.................................................................. 10,690,000 10,268,000
----------- ------------
15,499,000 13,956,000
Income taxes receivable........................................................... 2,607,000 3,180,000
Other current assets.............................................................. 1,768,000 4,145,000
----------- ------------
Total current assets............................................................ 35,397,000 38,997,000
Property and equipment, net........................................................ 15,608,000 17,211,000
Intangibles, net................................................................... 34,404,000 62,015,000
Other assets....................................................................... 3,686,000 3,872,000
----------- ------------
$89,095,000 $122,095,000
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion long-term debt (Note 4)........................................... $58,142,000 $ 3,828,000
Accrued expenses.................................................................. 7,293,000 7,719,000
Accounts payable ................................................................. 6,347,000 7,034,000
----------- ------------
Total current liabilities....................................................... 71,782,000 18,581,000
Long-term debt, net of current portion (Note 4).................................... 3,778,000 60,974,000
Other non-current liabilities...................................................... 2,969,000 4,385,000
Stockholders' equity:
Preferred stock, par value $.01; authorized
3,000,000 shares; none outstanding............................................. - -
Class A common stock, par value $.01; authorized 17,000,000
shares; issued and outstanding 3,232,560 at April 30, 1995 and
3,231,203 at July 31, 1994.................................................... 32,000 32,000
Class B common stock, par value $.01; authorized 17,000,000
shares; issued and outstanding 3,243,340 at April 30, 1995 and
3,231,201 at July 31, 1994.................................................... 32,000 32,000
Additional paid-in capital....................................................... 12,126,000 12,137,000
Retained earnings (deficit)...................................................... (442,000) 27,173,000
Foreign currency translation adjustment.......................................... (177,000) (214,000)
----------- ------------
Less: treasury stock, at cost, 115,500 shares each of 11,571,000 39,160,000
class A and class B common stock............................................... (1,005,000) (1,005,000)
----------- ------------
10,566,000 38,155,000
----------- ------------
$89,095,000 $122,095,000
=========== ============
</TABLE>
See notes to consolidated condensed financial statements
3
<PAGE> 4
DEP CORPORATION & SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
April 30, April 30,
1995 1994 1995 1994
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Net sales..................... $ 29,239,000 $35,109,000 $ 91,591,000 $98,313,000
Cost of sales................. 11,518,000 12,428,000 33,883,000 36,573,000
------------ ----------- ------------ -----------
Gross profit.................. 17,721,000 22,681,000 57,708,000 61,740,000
Selling, general and
administrative expenses...... 19,869,000 21,222,000 58,353,000 64,899,000
Write-down in value of Agree/
Halsa assets (Note 3)........ 25,166,000 -- 25,166,000 --
------------ ----------- ------------ -----------
Income (loss) from operations. (27,314,000) 1,459,000 (25,811,000) (3,159,000)
Other income (expense):
Interest, net............... (1,578,000) (1,099,000) (4,550,000) (3,223,000)
Other....................... (38,000) 29,000 (119,000) 61,000
------------ ----------- ------------ -----------
(1,616,000) (1,070,000) (4,669,000) (3,162,000)
------------ ----------- ------------ -----------
Income (loss) before income
taxes........................ (28,930,000) 389,000 (30,480,000) (6,321,000)
Income taxes (benefit)........ (2,060,000) 131,000 (2,865,000) (1,978,000)
------------ ----------- ------------ -----------
Net income (loss)............. $(26,870,000) $ 258,000 $(27,615,000) $(4,343,000)
============ =========== ============ ===========
Net income (loss) per share: $ (4.30) $ 0.04 $ (4.42) $ (0.69)
============ =========== ============ ===========
</TABLE>
See notes to consolidated condensed financial statements.
4
<PAGE> 5
DEP CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF RETAINED EARNINGS
AND ADDITIONAL PAID-IN CAPITAL
NINE MONTHS ENDED APRIL 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Additional Retained
Paid-in Capital Earnings
--------------- -----------
<S> <C> <C>
Balance at beginning of period . . . . . . . . . . . . . . . . . $12,137,000 $ 27,173,000
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (27,615,000)
Adjustment to stock issuance . . . . . . . . . . . . . . . . . . (11,000) --
----------- ------------
Balance at end of period . . . . . . . . . . . . . . . . . . . . $12,126,000 $ (442,000)
=========== ============
</TABLE>
See notes to consolidated condensed financial statements
5
<PAGE> 6
DEP CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
April 30,
OPERATING ACTIVITIES: 1995 1994
------------ -----------
<S> <C> <C>
Net loss............................................ $(27,615,000) $(4,343,000)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization..................... 4,120,000 4,101,000
Write-down in value of Agree and Halsa assets..... 25,166,000 -
Deferred taxes.................................... (894,000)
Other............................................. 404,000 95,000
Changes in operating assets and liabilities:
Decrease in accounts receivable.................. 2,478,000 1,130,000
Increase in inventories.......................... (1,532,000) (3,159,000)
(Increase) decrease in income taxes receivable.... 573,000 (852,000)
Decrease in other assets......................... 1,855,000 190,000
Increase (decrease) in accounts payable.......... (678,000) 1,201,000
Increase (decrease) accrued expenses............. 73,000 (678,000)
------------ -----------
Net cash provided by (used in) operating activities.. 3,950,000 (2,315,000)
INVESTING ACTIVITIES:
Purchases of property and equipment (net)........... (482,000) (1,333,000)
Sale of trademark................................... 435,000 -
Acquisition of Agree and Halsa product lines, net of
inventory acquired of $2,500,000................. (45,746,000)
Other, net.......................................... (429,000) (193,000)
------------ -----------
Net cash used in investing activities................ (476,000) (47,272,000)
FINANCING ACTIVITIES:
Increase (decrease) in lines of credit and
long-term debt, including change in current
portion.......................................... (2,882,000) 51,537,000
Other............................................... (11,000) -
------------ -----------
Net cash provided by (used in) financing activities.. (2,893,000) 51,537,000
Increase in cash and cash equivalents................ 581,000 1,950,000
Effect of exchange rate changes on cash.............. 12,000 (15,000)
Cash and cash equivalents at beginning of period..... 947,000 1,062,000
------------ -----------
Cash and cash equivalents at end of period........... $ 1,540,000 $ 2,997,000
============ ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest......................................... $ 4,220,000 $ 2,627,000
============ ===========
Income taxes (refunds)........................... $ (2,598,000) $ 36,000
============ ===========
</TABLE>
See notes to consolidated condensed financial statements
6
<PAGE> 7
DEP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1:
In the opinion of the Company, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting of only
normal recurring accruals) necessary to fairly present the financial position
as of April 30, 1995, and the results of operations and the statements of cash
flows for the three and nine month periods ended April 30, 1995 and 1994.
The results of operations for the three and nine month periods ended April 30,
1995, are not necessarily indicative of the results to be expected for any
other period or for the full year.
These quarterly financial statements should be read in conjunction with the
Company's audited financial statements contained in the annual report on Form
10-K for the year ended July 31, 1994.
Note 2:
Provisions for certain expenses, including coupon redemption and cooperative
advertising, are based on full year assumptions. Such expenses are charged to
operations in the year incurred and are included in the accompanying
consolidated condensed financial statements either equally among the four
fiscal quarters or based upon estimated annual sales.
Note 3:
As previously disclosed, since the acquisition of the Agree and Halsa
product lines in August 1993 from S.C. Johnson & Son, Inc., there have been
continuing declines in the sales volume and profit contribution of such products
and the Company has been reviewing whether an impairment in the carrying value
of the Agree and Halsa intangible assets has occurred. Such declines have
continued through the period ended April 30, 1995, and have resulted in
operating results for Agree and Halsa which are significantly lower than
anticipated at the time of the acquisition. In this regard, the Company has
revised its forecasts for the future operations of the product lines, which has
resulted in a significant reduction in projected future cash flows.
Accordingly, the Company has determined that its projected results for Agree and
Halsa would not support the future amortization of the remaining intangible
assets related to Agree and Halsa.
As part of its analysis, during the three months ended April 30, 1995, the
Company engaged the services of an independent valuation consultant to assist
the Company in the determination of the fair market value of Agree and Halsa
intangible assets. The methodology employed by such consultant to assess the
recoverability of the intangible assets was based upon a market approach which
considered, among other things, transactions of entities that were considered
to be similar to Agree and Halsa, and other information derived from other
publicly traded companies
7
<PAGE> 8
focusing on the personal care industry. Based on the results of the valuation,
management concluded that the fair value of the intangible assets of Agree and
Halsa was approximately $12,500,000, requiring a write-down in the carrying
value of the intangibles at April 30, 1995, of $24,718,000. Such write-down
was included in operations for the three months ended April 30, 1995. In
addition, due to the repackaging and restaging of such products, the Company
also wrote-off tools and molds of $448,000.
Note 4:
By its terms, the Company's Revolving Credit and Term Loan Agreement dated
August 6, 1993, as amended, (the "Bank Facility") obliges the Company to
maintain certain financial covenants. As a result of the current nine month
period operating loss, the Company would not have been in compliance with such
covenants with respect to the third quarter without its group of seven banks'
(the "Bank Group") waiver thereof.
On April 18, 1995, the Company and its Bank Group executed a Conditional Waiver
dated as of April 14, 1995 (the "Waiver"). The Waiver waived any
non-compliance with respect to the period from January 31, 1995 through April
30, 1995 (the "Waiver Period") relating to the Company's net worth, debt to
EBITDA and interest coverage financial covenant ratios set forth in the Bank
Facility. It also waived any non-compliance arising with respect to the Waiver
Period relating to the Company's leverage ratio covenant (to the extent that it
results from a write-down, if any, of the carrying value of the Agree and Halsa
intangibles), and any non-compliance with the working capital covenant (to the
extent it would have resulted from the reclassification of the Company's
indebtedness under the Bank Facility as short-term debt due to non-compliance
with any of the above described covenants).
Note 5:
Net income per share amounts are computed based on the weighted average number
of shares outstanding, exclusive of treasury shares, plus the shares that would
be outstanding assuming exercise of dilutive stock options, which are
considered common stock equivalents. The number of shares that would be issued
upon the exercise of stock options has been reduced by the number of shares
that could have been purchased from the proceeds at the average market price of
the Company's common stock.
The number of shares used in the computation for the three and nine month
periods ended April 30, 1995, were 6,244,900 and 6,243,841, respectively, as
compared to 6,238,652 and 6,254,101 for the comparable periods of the prior
year.
8
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Net sales for the three and nine month periods ended April 30, 1995, were
$29,239,000 and $91,591,000, respectively, or 17% and 7% lower than net sales
of $35,109,000 and $98,313,000 for the comparable periods of the prior year.
Consumer Products net sales for the three and nine months ended April 30, 1995,
decreased by 19% and 8%, respectively, from the prior year periods.
Hair care net sales decreased 18% and 4%, respectively, for the three and nine
month periods ended April 30, 1995, principally due to lower sales of Agree and
Halsa. Aggregate net sales of Agree and Halsa were approximately $5,500,000
and $18,200,000, respectively, for the three and nine month periods ended April
30, 1995, or 44% and 23% lower than the comparable periods of the prior year.
Hair care net sales excluding Agree and Halsa decreased 2% for the three months
ended April 30, 1995, and increased 6% for the nine months ended April 30,
1995, compared to the prior year periods.
Skin care net sales increased 12% for the three and nine month periods ended
April 30, 1995, over the comparable periods of the prior year. Natures Family
experienced double digit sales growth in each of the current periods compared
to the prior year periods.
Oral care net sales for the three and nine month periods ended April 30, 1995,
decreased by 45% and 38%, respectively, compared to the same periods of the
prior year. All oral care brands were adversely impacted by intense
competition and new product introductions by competitors. Crystal Fresh
Lavoris is selling at minimal levels compared to the prior year and no longer
represents a significant component of oral care sales.
Domestic net sales of Consumer Products decreased 20% and 13%, respectively,
for the three and nine month periods ended April 30, 1995, compared to the
prior year. Again, the decreases were primarily due to the decline in the net
sales of Agree and Halsa. For the three and nine month periods ended April 30,
1995, domestic net sales of Agree and Halsa were approximately $3,050,000 and
$10,600,000, respectively, or 52% and 41% lower than the comparable periods of
the prior year. These declines were offset, in part, by sales growth of L.A.
Looks styling and Dep gel products in both the three and nine month periods
compared to the prior year. Domestic net sales of hair care products,
excluding Agree and Halsa, decreased 3% for the three month period ended April
30, 1995, but increased 3% for the nine month period ended April 30, 1995,
compared to the prior year.
International net sales of Consumer Products decreased 11% for the three months
ended April 30, 1995, primarily due to lower sales of Agree and Halsa in
Canada. For the nine month period ended April 30, 1995, international net
sales of Consumer Products increased 33%
9
<PAGE> 10
compared to the prior year period. Through December 31, 1993, Agree products
sold in Australia were distributed by a licensee and the Company's revenues for
the first five months of fiscal 1994 reflected only royalty income equal to a
percentage of the licensee's net sales. For the three and nine month periods
ended April 30, 1995 international net sales, excluding Agree and Halsa,
increased 28% and 34%, respectively.
Gross profit for the three and nine month periods ended April 30, 1995, was
$17,721,000 and $57,708,000, respectively, compared to $22,681,000 and
$61,740,000 for the same periods of the prior year. As a percentage of sales,
gross profit for the current periods was 61% and 63%, respectively, compared to
65% and 63% for the comparable periods of the prior year. For the nine month
period ended April 30, 1994, gross profit was adversely impacted by a provision
for packaging changeover. The gross profit percentages in the current periods
were lower than historic rates due to lower sales of higher margin products.
For the three and nine month periods ended April 30, 1995, selling, general and
administrative expenses ("SG&A") were $19,869,000 and $58,353,000,
respectively. This compares to $21,222,000 and $64,899,000 for the same
periods of the prior year. As a percentage of net sales, SG&A expenses were
68% and 64%, respectively, compared with 60% and 66% for the prior year. The
increase in SG&A as a percentage of sales for the three month period ended
April 30, 1995, was the result of an increase in consumer promotion expense, as
well as the effect of fixed costs on lower overall net sales.
For the nine month period ended April 30, 1995, SG&A was also favorably
impacted by the higher proportion of international sales, as such sales
typically incur lower SG&A expense than domestic sales. International
operations include export sales, where third party distributors generally incur
the advertising and promotional expenditures, and royalty income where there
are no related selling costs recorded by the Company. As a result, income from
international operations as a percent of net sales is generally higher than
domestic operations.
As previously reported in February 1995, the Company initiated a plan to reduce
its operating expenses. As part of this plan, the Company laid-off
approximately 9% of its non-production work force, reduced the annual base
salary of four top executive officers by 10%, and reduced the salary of its
Chairman and President by 15%. The estimated effect of these actions will be
to reduce costs by approximately $1,200,000 annually. The benefit of such work
force and salary reductions in the three month period ended April 30, 1995, net
of severance costs, approximated $81,000. For the fourth quarter of fiscal
1995, such net benefit will approximate $279,000. In accordance with generally
accepted accounting principles, the severance costs associated with this action
were accounted for in the quarter ended April 30, 1995.
As previously disclosed, since the acquisition of the Agree and Halsa product
lines in August 1993 from S.C. Johnson & Son, Inc., there have been continuing
declines in the sales volume and profit contribution of such products and the
Company has been reviewing whether an impairment in the carrying value of the
Agree and Halsa intangible assets has occurred. Such declines have continued
through the period ended April 30, 1995, and have resulted in operating results
for Agree and Halsa which are significantly lower than anticipated at the time
of the
10
<PAGE> 11
acquisition. In this regard, the Company has revised its forecasts for the
future operations of the product lines, which has resulted in a significant
reduction in projected future cash flows. Accordingly, the Company has
determined that its projected results for Agree and Halsa would not support
the future amortization of the remaining intangible assets related to Agree
and Halsa.
As part of its analysis, during the three months ended April 30, 1995, the
Company engaged the services of an independent valuation consultant to assist
the Company in the determination of the fair market value of Agree and Halsa
intangible assets. The methodology employed by such consultant to assess the
recoverability of the intangible assets was based upon a market approach which
considered, among other things, transactions of entities that were considered
to be similar to Agree and Halsa, and other information derived from other
publicly traded companies focusing on the personal care industry. Based
on the results of the valuation, management concluded that the fair value of
the intangible assets of Agree and Halsa was approximately $12,500,000,
requiring a write-down in the carrying value of the intangibles at April 30,
1995, of $24,718,000. Such write-down was included in operations for the three
months ended April 30, 1995. In addition, due to the repackaging and restaging
of such products, the Company also wrote-off tools and molds of $448,000. As
previously reported, the Company has initiated litigation against S.C. Johnson
& Son, Inc. seeking rescission of the Agree and Halsa acquisition and damages.
The judge has recently rescheduled the trial to commence on October 31, 1995.
For the three and nine month periods ended April 30, 1995, net other expenses
were $1,616,000 and $4,669,000, respectively, as compared to $1,070,000 and
$3,162,000 for the same periods of the prior year. The increased expense was
due to higher interest expense which resulted from a higher effective interest
rate during the current periods compared to the prior year. Based on the
higher interest rates currently in effect, management anticipates that interest
expense for the fourth quarter of fiscal 1995 will be greater than that
incurred in the fourth quarter of fiscal 1994.
The Company provides interim period tax allocations based on its estimated
annual effective tax rate. For the three and nine months ended April 30, 1995,
the Company recorded a tax benefit of $2,060,000 and $2,865,000, respectively,
compared to a tax expense of $131,000 and a tax benefit of $1,978,000 for the
comparable periods of the prior year. For financial reporting purposes, the
net tax benefit of the write-down of the Agree and Halsa intangibles was
limited to the amount of the net deferred tax liability prior to such
write-down.
For the three and nine month periods ended April 30, 1995, the Company recorded
net losses of $26,870,000 and $27,615,000, respectively, compared to net income
of $258,000 and a net loss of $4,343,000 for the same periods of the prior
year. The losses in the current periods were due to the $24,072,000 after-tax
write-down of the Agree and Halsa assets, lower net sales, higher interest
expense and a lower tax benefit.
LIQUIDITY AND CAPITAL RESOURCES
By its terms, the Company's Revolving Credit and Term Loan Agreement dated
August 6, 1993, as amended, (the "Bank Facility") obliges the Company to
maintain certain financial covenants.
11
<PAGE> 12
As a result of the current nine month period operating loss, the Company would
not have been in compliance with such covenants with respect to the third
quarter without its group of seven banks' (the "Bank Group") waiver thereof.
The Conditional Waiver dated as of April 14, 1995, among the Company and the
Bank Group (the "Waiver"), waived any non-compliance with respect to the period
from January 31, 1995 through April 30, 1995 (the "Waiver Period"), relating to
the Company's net worth, debt to EBITDA and interest coverage financial
covenant ratios set forth in the Bank Facility. It also waived any
non-compliance arising with respect to the Waiver Period relating to the
Company's leverage ratio covenant (to the extent that it results from a
write-down, if any, of the carrying value of the Agree and Halsa intangibles),
and any non-compliance with the working capital covenant (to the extent it
would have resulted from the reclassification of the Company's indebtedness
under the Bank Facility as short-term debt due to non-compliance with any of
the above described covenants).
The Waiver also temporarily reduced the working capital line of the Bank
Facility during the Waiver Period from $28 million to $25 million. As of June
2, 1995, the Company's outstanding borrowings on such line were $21,120,000.
Based upon its currently projected earnings and cash flows, management believes
that such working capital line will be sufficient to finance the Company's
operations through at least the end of fiscal 1995. However, there can be no
assurance that the Company will achieve such projections for the fourth quarter
of fiscal 1995.
The Waiver is conditioned on the Company's development and presentation of a
strategic business plan to the Bank Group no later than July 31, 1995, and the
Company anticipates presenting such plan on schedule. Management currently
anticipates that when the fourth quarter results are determined, the Company
will not be in compliance with the financial covenants set forth in the Bank
Facility. Following presentation of the final strategic plan to the Bank
Group, the Company intends to negotiate with the Bank Group to further amend
the financial covenants, based on the Company's anticipated operations and
financial condition. There is no assurance that the Bank Group will agree to
such amendment or grant any waivers which would then be necessary. If the
Company requires and is unable to obtain additional funds, its ability to
continue operations would be curtailed. The Company's ability to borrow from
third parties is significantly limited by the terms of the Bank Facility. In
addition, the Bank Group may take the position that it has the right to declare
immediately due and payable all amounts due under the Bank Facility and to
foreclose upon the collateral pledged by the Company to secure such borrowings.
In such event, the Company may be unable to continue its operations, except to
the extent permitted by the Bank Group.
Since the inception of the Bank Facility in August 1993, the Company has
consistently made timely payment to the Bank Group of all principal and
interest due under the Bank Facility and currently anticipates continuing to do
so for at least the balance of fiscal 1995.
The current bank repayment schedule requires a principal payment of $9,567,000
on December 30, 1995. Based upon the Company's current projections, cash
generated from operations will not be sufficient to pay such amount without the
sale of assets or receipt of proceeds from the pending S.C. Johnson & Son, Inc.
litigation prior to such date. Accordingly, management is endeavoring to sell
assets in order to fund the December 30, 1995 principal
12
<PAGE> 13
payment. There can be no assurance that the Company will have sufficient funds
available to make such payment.
In accordance with financial accounting requirements, unless and until the
financial covenants of the Bank Facility are amended to reflect the Company's
current operations and financial condition, all outstanding debt under the Bank
Facility will be classified as a current obligation.
Due to the reclassification of $44,664,000 of the outstanding balance of the
Bank Facility as current debt, as of April 30, 1995, the Company had a working
capital deficiency of $36,385,000 compared to positive working capital of
$20,416,000 at July 31, 1994.
In addition, working capital for the period ended April 30, 1995, was affected
by reductions in accounts receivable and other current assets but offset, in
part, by an increase in inventories. The reduction in accounts receivable
principally resulted from lower sales in the two months ended April 30, 1995,
as compared to the two months ended July 30, 1994; the decrease in other
current assets was primarily due to prepaid advertising at July 31, 1994, which
did not repeat in the current period; while the increase in inventory relates
to the lower than expected sales in the three months ended April 30, 1995 and
anticipated sales for the fourth quarter.
13
<PAGE> 14
Part II. Other Information
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K:
a. Exhibits
11 Statement re: Computation of per share earnings
27 Financial Data Schedule
b. Reports
The Company filed a Form 8-K on April 27, 1995,
setting forth under Item 5 the signing of a
Conditional Waiver with its Bank Group, with respect
to the Company's Revolving Credit and Term Loan
Agreement.
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DEP CORPORATION
Date: June 14, 1995 /s/ Grant Johnson
---------------------------------------
Grant Johnson
Vice President,
Principal Financial Officer and
Chief Accounting Officer
15
<PAGE> 16
EXHIBIT INDEX
<TABLE>
<CAPTION>
DESCRIPTION EXHIBIT NO.
- ----------- -----------
<S> <C>
Computation of Per Share Earnings 11
Financial Data Schedule 27
</TABLE>
16
<PAGE> 1
EXHIBIT 11
DEP CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
April 30, April 30,
-------------------- -------------------
1995 1994 1995 1994
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Primary:
Net income (loss) ($26,870) $258 ($27,615) ($4,343)
======== ===== ======== =======
Shares:
Weighted average shares outstanding 6,245 6,231 6,244 6,226
Shares issuable from assumed exercise of
outstanding options - 8 - 28
-------- ----- -------- -------
Adjusted weighted average shares outstanding 6,245 6,239 6,244 6,254
======== ===== ======== =======
Income (loss) per share ($4.30) $0.04 ($4.42) ($0.69)
======== ===== ======== =======
</TABLE>
Fully diluted shares are not shown because there is no difference between
primary and fully diluted.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED CONDENSED BALANCE SHEET AT APRIL 30, 1995
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-START> AUG-01-1994
<PERIOD-END> APR-30-1995
<CASH> 1,540,000
<SECURITIES> 0
<RECEIVABLES> 13,983,000<F1>
<ALLOWANCES> 0
<INVENTORY> 15,499,000
<CURRENT-ASSETS> 35,397,000
<PP&E> 15,608,000<F2>
<DEPRECIATION> 0
<TOTAL-ASSETS> 89,095,000
<CURRENT-LIABILITIES> 71,782,000
<BONDS> 3,778,000
<COMMON> 64,000<F3>
0
0
<OTHER-SE> 10,502,000
<TOTAL-LIABILITY-AND-EQUITY> 89,095,000
<SALES> 91,591,000
<TOTAL-REVENUES> 0
<CGS> 33,883,000
<TOTAL-COSTS> 117,402,000<F4>
<OTHER-EXPENSES> 119,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,550,000
<INCOME-PRETAX> (30,480,000)
<INCOME-TAX> (2,865,000)
<INCOME-CONTINUING> (27,615,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (27,615,000)
<EPS-PRIMARY> (4.42)
<EPS-DILUTED> 0
<FN>
<F1>Accounts receivable net of allowance for doubtful accounts.
<F2>Property, plant and equipment net of accumulated depreciation.
<F3>Common stock includes both Class A and Class B common stock.
<F4>Includes 25,166,000 related to the write-down in value of Agree and Halsa
assets.
</FN>
</TABLE>
