<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED OCTOBER 31, 1996
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 registrant (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 by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
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.
Outstanding at
Class December 5, 1996
---------------------------- ----------------
COMMON STOCK, $.01 PAR VALUE 6,793,628
1
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DEP CORPORATION
INDEX
Part I. FINANCIAL INFORMATION Page
----
ITEM 1. FINANCIAL STATEMENTS:
CONSOLIDATED CONDENSED BALANCE SHEETS - 3
October 31, 1996 and July 31, 1996
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS - 4
Three Month Periods Ended October 31, 1996 and 1995
CONSOLIDATED CONDENSED STATEMENTS OF RETAINED 5
EARNINGS AND ADDITIONAL PAID-IN CAPITAL -
Three Month Period Ended October 31, 1996
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS - 6
Three Month Periods Ended October 31, 1996 and 1995
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 11
CONDITION AND RESULTS OF OPERATIONS
Part II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 14
ITEM 2. CHANGES IN SECURITIES 14
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 15
ITEM 5. OTHER 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 15
SIGNATURE 16
EXHIBIT INDEX 17
2
<PAGE>
DEP CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
October 31, July 31,
1996 1996
-------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................................... $ 12,446,000 $ 11,118,000
Accounts receivable, net........................................... 13,203,000 15,750,000
Inventories at lower of cost (first-in, first-out) or market:
Raw materials ................................................... 5,310,000 4,719,000
Finished goods................................................... 8,504,000 7,280,000
-------------- --------------
13,814,000 11,999,000
Other current assets............................................... 3,706,000 3,339,000
-------------- --------------
Total current assets............................................. 43,169,000 42,206,000
Property and equipment, net......................................... 13,869,000 14,086,000
Intangibles, net.................................................... 32,294,000 32,651,000
Other assets........................................................ 760,000 895,000
-------------- --------------
$ 90,092,000 $ 89,838,000
-------------- --------------
-------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Liabilities not subject to compromise:
Current portion long-term debt.................................... $ 147,000 $ 144,000
Accrued expenses.................................................. 9,928,000 9,563,000
Accounts payable ................................................. 3,985,000 3,211,000
-------------- --------------
Total current liabilities........................................ 14,060,000 12,918,000
Liabilities subject to compromise................................... 68,970,000 67,783,000
Long-term debt, net of current portion.............................. 3,558,000 3,597,000
Other non-current liabilities....................................... 2,258,000 2,258,000
-------------- --------------
Total liabilities................................................ 88,846,000 86,556,000
Stockholders' equity:
Preferred stock, par value $.01; authorized 3,000,000;
none outstanding................................................ -- --
Class A common stock, par value $.01; authorized 14,000,000
shares; issued and outstanding 3,232,559 at October 31, 1996
and July 31, 1996............................................... 32,000 32,000
Class B common stock, par value $.01; authorized 7,000,000 shares;
issued and outstanding 3,249,581 at October 31, 1996 and
July 31, 1996................................................... 32,000 32,000
Additional paid-in capital........................................ 12,141,000 12,141,000
Retained deficit.................................................. (9,806,000) (7,743,000)
Foreign currency translation adjustment........................... (148,000) (175,000)
-------------- --------------
2,251,000 4,287,000
Less: treasury stock, at cost, 115,500 shares each of
Class A and Class B common stock................................ (1,005,000) (1,005,000)
-------------- --------------
1,246,000 3,282,000
-------------- --------------
$ 90,092,000 $ 89,838,000
-------------- --------------
-------------- --------------
</TABLE>
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
3
<PAGE>
DEP CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
October 31,
-------------------------------
1996 1995
------------- -------------
<S> <C> <C>
Net sales........................................ $ 28,013,000 $ 28,928,000
Cost of sales.................................... 10,788,000 10,425,000
------------- -------------
Gross profit..................................... 17,225,000 18,503,000
Selling, general and administrative expense...... 17,041,000 17,090,000
------------- -------------
Income from operations........................... 184,000 1,413,000
Other income (expense):
Interest, net.................................. (1,959,000) (1,866,000)
Other.......................................... 11,000 5,000
------------- -------------
(1,948,000) (1,861,000)
Loss before reorganization items
and income tax credit ......................... (1,764,000) (448,000)
Reorganization items............................. 299,000 98,000
------------- -------------
Loss before income tax credit .................. (2,063,000) (546,000)
Income tax credit .............................. -- (163,000)
------------- -------------
Net loss......................................... $ (2,063,000) $ (383,000)
------------- -------------
------------- -------------
Net loss per share............................... $ (0.33) $ (0.06)
------------- -------------
------------- -------------
Weighted average shares outstanding.............. 6,251,140 6,248,051
------------- -------------
------------- -------------
</TABLE>
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
4
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DEP CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF RETAINED EARNINGS
AND ADDITIONAL PAID-IN CAPITAL
THREE MONTHS ENDED OCTOBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Additional Retained
Paid-in Capital Deficit
--------------- ------------
<S> <C> <C>
Balance at beginning of period............................. $ 12,141,000 $ (7,743,000)
Net loss................................................... - (2,063,000)
------------ ------------
Balance at end of period................................... $ 12,141,000 $ (9,806,000)
------------ ------------
------------ ------------
</TABLE>
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
5
<PAGE>
DEP CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
October 31,
-------------------------------
1996 1995
------------- -------------
<S> <C> <C>
Operating Activities:
Net loss......................................................... $ (2,063,000) $ (383,000)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization.................................. 845,000 1,213,000
Other.......................................................... 51,000 355,000
Changes in operating assets and liabilities:
Accounts receivable........................................... 2,532,000 4,838,000
Inventories................................................... (1,805,000) (1,112,000)
Income taxes receivable....................................... - 1,741,000
Other assets.................................................. (362,000) (492,000)
Accounts payable.............................................. 1,490,000 (1,384,000)
Accrued expenses.............................................. 800,000 (1,644,000)
------------ ------------
Net cash provided by operating activities........................ 1,488,000 3,132,000
Investing Activities:
Purchases of property and equipment.............................. (211,000) (77,000)
Other, net....................................................... 64,000 (46,000)
------------ ------------
Net cash used in investing activities............................ (147,000) (123,000)
Financing Activities:
Decrease in lines of credit and long-term debt,
including change in current portion........................... (35,000) (1,710,000)
Other............................................................ - 15,000
------------ ------------
Net cash used in financing activities............................. (35,000) (1,695,000)
------------ ------------
Increase in cash and cash equivalents............................. 1,306,000 1,314,000
Effect of exchange rate changes on cash........................... 22,000 2,000
Cash and cash equivalents at beginning of period.................. 11,118,000 4,611,000
------------ ------------
Cash and cash equivalents at end of period........................ $ 12,446,000 $ 5,927,000
------------ ------------
------------ ------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid (received) during the period for:
Interest...................................................... $ 626,000 $ 1,866,000
------------ ------------
------------ ------------
Income tax refunds............................................ $ (2,000) $ (1,970,000)
------------ ------------
------------ ------------
</TABLE>
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
6
<PAGE>
DEP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1: GENERAL
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 October 31, 1996, and the results of operations and statements of cash flows
for the three month period ended October 31, 1996.
The results of operations for the three month period ended October 31,
1996, 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, 1996.
NOTE 2: REORGANIZATION
On October 23, 1996, the Company's Second Amended Plan of Reorganization
(the "Plan of Reorganization") was confirmed by the United States Bankruptcy
Court for the District of Delaware (Case No. 96-480(HSB)) (the "Bankruptcy
Court"). None of the Company's foreign-based subsidiaries were part of the
chapter 11 filing.
By its terms, the Plan of Reorganization becomes effective (the "Effective
Date") on the first business day that is at least ten days after the Bankruptcy
Court order confirming the Plan of Reorganization is entered and on which no
stay of such order is then in effect. On October 23, 1996, the Bankruptcy Court
entered its order confirming the Plan of Reorganization. Accordingly, the
Effective Date of the Plan of Reorganization was November 4, 1996.
On April 1, 1996 (the "Filing Date"), the Company filed a voluntary
petition (the "Chapter 11 Case") under chapter 11 of the United States
Bankruptcy Code. On May 8, 1996, July 11, 1996 and August 23, 1996, the Company
filed amended plans of reorganization and related disclosure statements with the
Bankruptcy Court. On September 9, 1996, the Bankruptcy Court approved as
adequate the Disclosure Statement, thereby enabling the Company to solicit votes
on the Plan of Reorganization from the Company's secured lenders (collectively,
the "Lender Group") and stockholders. From the Filing Date until the Effective
Date, the Company operated its business as a debtor-in-possession subject to the
jurisdiction of the Bankruptcy Court. During such time, all claims against the
Company in existence prior to the Filing Date were stayed and have been
classified as "liabilities subject to compromise" in the consolidated balance
sheet.
7
<PAGE>
At October 31, 1996, "liabilities subject to compromise" were comprised of
the following:
Secured liabilities payable to Lender Group $57,792,000
Accrued interest payable to Lender Group 3,412,000
Accounts payable to unsecured creditors 7,766,000
-----------
$68,970,000
-----------
-----------
Among other things, the Plan of Reorganization provides that the Company
will repay approximately $62,000,000 in long-term secured indebtedness held by
the Lender Group, plus interest at the prime rate plus 2%, which indebtedness
matures July 31, 2002. The Plan of Reorganization further provided: (i) that
on the Effective Date, the Lender Group would receive $150,000 in cash to
satisfy certain post-petition interest claims and at each of the Lender's option
to receive either (a) such Lender's pro-rata share of 625,000 shares of DEP
Common Stock, or (b) such Lender's pro-rata share of (1) 500,000 shares of DEP
Common Stock plus (2) Class 1 Warrants to purchase 500,000 shares of DEP Common
Stock (the "Lender's Stock Option"), and (ii) for satisfaction of unsecured
creditor claims, plus 5% interest, payable in monthly installments, commencing
November 1996 and continuing through March 15, 1998. Additionally, the Plan of
Reorganization required the Company to pledge to the Lender Group any net cash
proceeds, as defined, received by the Company in connection with the litigation
between the Company and S.C. Johnson & Son, Inc. ("S.C. Johnson") and
affiliates.
Prior to the Effective Date the Lenders initially elected under the
Lender's Stock Option to receive 542,488 shares of Common Stock and 330,000
shares subject to Class 1 Warrants. Subsequently, the Lenders, with the
Company's and the Bankruptcy Court's approval, amended their election to receive
only the 625,000 shares of Common Stock and forego any of the Class 1 Warrant
shares. Accordingly, after notice to interested parties and a waiting period
which will end on or about December 30, 1996, the Company will issue 625,000
shares of Common Stock to the Lender Group. No Class 1 Warrants will be issued.
NOTE 3: ACCRUED EXPENSES
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 4: NET LOSS PER SHARE
Net loss per share amounts are computed based on the weighted average
number of shares outstanding plus the shares that would be outstanding assuming
exercise of stock options, when dilutive, 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.
8
<PAGE>
NOTE 5: REORGANIZATION ITEMS
Reorganization items consisted of the following:
October 31
1996 1995
------ ------
Professional fees $ 429,000 $98,000
Interest income (130,000) -
--------- -------
$ 299,000 $98,000
--------- -------
--------- -------
NOTE 6: COMMON STOCK
As of the Effective Date, the Company's existing Class A and Class B common
stock, including those shares to be issued to the Lender Group, were
reclassified as one class of Common Stock having the same voting rights,
preferences and privileges.
NOTE 7: SUBSEQUENT EVENT
As of August 20, 1996, the Company and the Lender Group agreed to a
Consensual Plan of Reorganization, which provided for a new term loan agreement
(the "Credit Facility") the principal terms of which are contained in the Plan
of Reorganization.
The Credit Facility, among other things, provides the Company with
approximately $62,000,000 in long-term financing, with interest at the prime
rate plus two percent, maturing July 31, 2002. The Credit Facility requires
increasing quarterly principal payments commencing in the amount of $100,000 on
the Effective Date and progressively increasing to $2,000,000 at June 30, 2002,
with a balloon payment of approximately $37,000,000 due July 31, 2002. Under
the Credit Facility the Company is also obligated to pay the Lender Group an
additional $80,000 per month for a period of twelve months after the Effective
Date, in satisfaction of the Lender Group's professional fees and expenses
incurred during the Chapter 11 Case. At October 31, 1996, the liability for
such professional fees was classified in the accrued liabilities in the
consolidated balance sheet.
The annual principal payments due under the Credit Facility inclusive of
the 12 monthly professional fee payments for the years ended July 31, are as
follows:
1997 $ 1,375,000
1998 1,400,000
1999 3,500,000
2000 5,250,000
2001 6,750,000
Thereafter 43,654,000
9
<PAGE>
The Credit Facility also contains various financial covenant requirements,
including minimum current and fixed charge coverage ratios, maximum capital
expenditures and leverage ratios.
The Plan of Reorganization further provides that on the Effective Date, the
Lender Group will receive $150,000 in cash to satisfy certain post-petition
interest claims.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Consolidated net sales for the three months ended October 31, 1996, were
$28,013,000 compared to $28,928,000 for the same period in the prior year.
Consolidated net sales declined primarily due to the continued decline in sales
of Agree and Halsa. Excluding Agree and Halsa, consolidated net sales increased
4%. Consumer Products net sales accounted for 96% of the consolidated net sales
for each of the three month periods ended October 31, 1996 and 1995.
Consumer Products net sales decreased by 4%, primarily as a result of
continued lower worldwide sales of Agree and Halsa. Aggregate net sales of
Agree and Halsa were approximately $4,370,000 for the three months ended
October 31, 1996, or approximately 28% lower than the comparable period in the
prior year. Consumer Products net sales, excluding Agree and Halsa increased
3%.
Hair care net sales for the three months ended October 31, 1996, decreased
2% compared to the same period in the prior year. Excluding Agree and Halsa,
hair care net sales increased 8% due to increased sales volume of the Dep and
L.A. Looks product lines.
Net sales of skin care products and oral care products each declined 9% for
the three months ended October 31, 1996, from the comparable period of the prior
year. All of the three skin care brands experienced declines in unit volume.
Excluding discontinued product sales, oral care sales for the current period
were even with the comparable period of the prior year. The decline in oral
care net sales was due to the loss of sales from the Jordan Toothbrush product
line which was discontinued in fiscal 1996.
Gross profits for the three months ended October 31, 1996, were $17,225,000
or 61% of net sales compared to $18,503,000 or 64% of net sales in the prior
year. The decrease in absolute dollars was due to the lower sales volume while
the decrease in the percentage of net sales was the result of a higher
proportion of sales of lower margin products.
Selling, general and administrative expenses ("SG&A") for the three month
periods ended October 31, 1996 and 1995, were $17,041,000 and $17,090,000,
respectively, and as a percentage of net sales were 61% and 59%, respectively.
In dollar terms, the lower SG&A of the current period was the result of lower
variable expenses, resulting from lower net sales and the effects of the cost
reduction program initiated in January 1996, offset, in part, by increased
advertising and promotion expenses and approximately $600,000 of expenses
related to the recall of the basique skin care line. This recall was initiated
pursuant to a preliminary injunction issued in the Clinique Laboratories, Inc.
trademark infringement litigation, as described in the Company's Annual Report
on Form 10-K for the year ended July 31, 1996. The increase in SG&A, as a
percentage of net sales, was the result of the aforementioned increase in
advertising, promotion and basique recall expenses.
11
<PAGE>
Operating income (before reorganization items) decreased to $184,000 for
the three months ended October 31, 1996, from $1,413,000 for the prior year,
primarily as a result of the lower gross profits, higher advertising and
promotion expenses and the $600,000 of basique recall costs.
For the three months ended October 31, 1996, net other expenses increased
to $1,948,000 from $1,861,000 in the comparable period of the prior year. The
increase is due to higher interest expense. The increase in the current
period's interest expense was due to a higher average principal balance
resulting from the deferral of interest during the Chapter 11 Case. In
addition, the interest expense for the comparable period of the prior year
included approximately $200,000 as a result of the Company's noncompliance with
certain financial covenants under its former bank facility.
Reorganization expenses related to the Chapter 11 Case for the three month
period ended October 31, 1996, totaled $299,000 compared to $98,000 in the prior
year's period. The $299,000 was comprised of $429,000 in professional fees,
offset, in part, by $130,000 of interest income earned on payment deferral of
pre-petition liabilities.
Since the Company incurred a loss in the three month period ended
October 31, 1996, and had previously utilized all of its income tax
carryback benefits, there was no tax provision.
For the three month period ended October 31, 1996, the Company recorded a
net loss of $2,063,000 or $.33 per share compared to a net loss of $383,000 or
$.06 per share in the prior year's period. The increase in the net loss of the
current period was primarily the result of lower sales and lower gross margins
from such sales, higher advertising and promotion costs, the basique recall
costs and reorganization expenses.
LIQUIDITY AND CAPITAL RESOURCES
Pursuant to the Plan of Reorganization, the Bankruptcy Court approved the
Credit Facility between the Company and the Lender Group which, among other
things, provides that the Company will repay approximately $62,000,000 in long-
term secured indebtedness, plus interest at the prime rate plus 2%, which
indebtedness matures on July 31, 2002. The Credit Facility has increasing
quarterly principal payments commencing in the amount of $100,000 on the
Effective Date and progressively increasing to $2,000,000 at June 2002, with a
balloon payment of approximately $36,100,000 due July 31, 2002.
In conjunction with the Chapter 11 Case, on May 3, 1996, the Bankruptcy
Court granted the Company the full use of its cash collateral and existing bank
arrangements to conduct its operations. To date the Company's suppliers have
granted the Company payment terms, most of which are commensurate with terms
provided to the Company prior to the Chapter 11 Case. Accordingly, cash flow
and liquidity improved significantly as payments on pre-petition liabilities
were suspended until approved by the Bankruptcy Court.
12
<PAGE>
As of October 31, 1996, the Company had cash and cash equivalents of
approximately $12,400,000. The cash balance at October 31, 1996, was favorably
impacted by the deferral of $6,100,000 in pre-petition amounts owing to
unsecured creditors and $3,400,000 related to interest due the Lender Group.
Under the Plan of Reorganization pre-petition unsecured creditor claims will be
payable, plus 5% interest, in equal monthly installments commencing November
1996 through March 15, 1998, and interest due the Lender Group to the Effective
Date will be added to the Credit Facility's principal balance.
From the Filing Date until the Effective Date, the Company operated its
business as a debtor-in-possession subject to the jurisdiction of the Bankruptcy
Court. During such time, all claims against the Company in existence prior to
the Filing date, including those due under the Credit Facility and accounts
payable, were stayed and have been classified as non-current liabilities under
the caption "liabilities subject to compromise" in the consolidated balance
sheet. (See "Note 2 of the Notes to Consolidated Condensed Financial
Statements.")
Working capital was significantly impacted by the classification of
liabilities subject to compromise as non-current liabilities. In addition, for
the three month period ended October 31, 1996, working capital was impacted by a
decrease in accounts receivable and increases in inventory and accounts payable.
The decrease in accounts receivable was due to lower sales volume in the three
month period ended October 31, 1996, compared to the three month period ended
July 31, 1996. The increase in inventory was the result of lower than expected
sales volume. The increase in accounts payable was the result of continuing
improvement in creditor terms as a result of the Company's anticipated emergence
from the Chapter 11 Case.
13
<PAGE>
Part II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to the Company's Annual Report on Form 10-K for the year
ended July 31, 1996, for a description of certain pending legal proceedings
involving the Company.
The bankruptcy reorganization initiated by the Company under chapter 11 of
the United States Bankruptcy Code was concluded when the Company's Plan of
Reorganization became effective on November 4, 1996, as further described in the
Form 10-K.
In the Clinique Laboratories, Inc. ("Clinique") trademark infringement
litigation, Clinique is continuing to pursue the claims alleged in the complaint
related to the Company's test market of a new skin care line of products under
the name "basique simplified skin care." Such litigation is in the early stages
of discovery.
In the S.C. Johnson & Son, Inc. litigation, the status conference in the
fraudulent transfer action has been rescheduled for January 3, 1997, before the
Bankruptcy Court.
ITEM 2. CHANGES IN SECURITIES
In connection with the Company's Plan of Reorganization, which became
effective on November 4, 1996, the Company amended its Certificate of
Incorporation to reclassify all outstanding shares of its Class A common stock
and Class B common stock into a single class of Common Stock, $.01 par value,
with each share having one vote and otherwise possessing on a equal basis all
rights afforded common stockholders under the Delaware General Corporation Law.
Such Common Stock now trades on the Nasdaq SmallCap Market under the symbol
"DEPC."
Pursuant to the Plan of Reorganization, the Company has agreed to issue to
its senior lenders, on a pro rata basis, shares of the Company's Common Stock.
The Company and its senior lenders (the "Lender Group") recently agreed to a
modification of the election previously made by the Lender Group, as described
in the Company's Annual Report on Form 10-K, to receive a combination of shares
and stock purchase warrants under the Plan of Reorganization. Such modification
was approved by the United States Bankruptcy Court on December 2, 1996. As a
result of such modification, the Lender Group will not receive any warrants but
instead will receive, on a pro rata basis, an aggregate of 625,000 shares of the
Company's Common Stock. Such shares are being issued pursuant to the exemption
from registration provided by Section 1145 of the United States Bankruptcy Code.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
See "Note 2 of the Notes to Consolidated Condensed Financial Statements"
appearing elsewhere herein, which is incorporated here by reference.
14
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
As described under "Note 2 of the Notes to Consolidated Condensed Financial
Statements," on September 9, 1996, the Bankruptcy Court approved as adequate the
Company's Disclosure Statement for use by the Company in soliciting votes on the
Plan of Reorganization from the Lender Group and the Company's stockholders.
Such Disclosure Statement thereupon was mailed to the Company's stockholders and
Lender Group, with a deadline of October 16, 1996, for the receipt of ballots
accepting or rejecting the Plan of Reorganization. One hundred percent (100%)
of the Lender Group and approximately ninety-nine percent (99%) of the Class A
and Class B stockholders voted to accept the Plan of Reorganization. On
October 23, 1996, the Bankruptcy Court entered its order confirming the Plan of
Reorganization.
ITEM 5. OTHER
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) EXHIBITS
Exhibit Number Description
11 Computation of Loss per Share
27 Financial Data Schedule
b) REPORTS ON FORM 8-K
1. The Company filed a Form 8-K on August 27, 1996, setting forth
under Item 5 that on August 22, 1996, the Company had reached an
agreement with its Lender Group on an Amended Plan of
Reorganization to be filed in connection with the Company's
Chapter 11 Case.
2. The Company filed a Form 8-K on November 7, 1996, setting forth
under Item 3 that on October 23, 1996, the United States
Bankruptcy Court confirmed the Company's Second Amended Plan of
Reorganization.
15
<PAGE>
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.
December 12, 1996 DEP CORPORATION
/s/ Grant W. Johnson
------------------------------
Grant W. Johnson
Senior Vice President,
Principal Financial Officer
and Chief Accounting Officer
16
<PAGE>
EXHIBIT INDEX
DESCRIPTION EXHIBIT NO.
----------- -----------
Computation of Per Share Earnings 11
Financial Data Schedule 27
17
<PAGE>
DEP CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Ended
October 31,
----------------------
1996 1995
-------- --------
Net loss............................................ $ (2,063) $ (383)
-------- --------
-------- --------
Shares:
Weighted average shares outstanding................ 6,251 6,248
-------- --------
-------- --------
Loss per share...................................... $ (0.33) $ (0.06)
-------- --------
-------- --------
Exhibit 11
18
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) The
Company's consolidated condensed balance sheet at October 31, 1996, and
consolidated condensed statement of operations for the quarter then ended
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) financial
statements.
(A) Identify specific financial statements.
(B) Identify filing.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> AUG-01-1996
<PERIOD-END> OCT-31-1996
<CASH> 12,446,000
<SECURITIES> 0
<RECEIVABLES> 13,203,000 <F1>
<ALLOWANCES> 0
<INVENTORY> 13,814,000
<CURRENT-ASSETS> 43,169,000
<PP&E> 13,869,000 <F2>
<DEPRECIATION> 0
<TOTAL-ASSETS> 90,092,000
<CURRENT-LIABILITIES> 14,060,000
<BONDS> 3,558,000
0
0
<COMMON> 64,000 <F3>
<OTHER-SE> 1,182,000
<TOTAL-LIABILITY-AND-EQUITY> 90,092,000
<SALES> 28,013,000
<TOTAL-REVENUES> 0
<CGS> 10,788,000
<TOTAL-COSTS> 27,829,000
<OTHER-EXPENSES> 310,000 <F4>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,959,000
<INCOME-PRETAX> (2,063,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,063,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,063,000)
<EPS-PRIMARY> (.33)
<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 $299,000 related to reorganization items.
</TABLE>
