SECOND-QUARTER LOSS PLACES DEPIN NONCOMPLIANCE WITH BANK DEAL
Byline: Catherine M. Curan
NEW YORK--Suffering from declining sales of Agree and Halsa hair care products, Dep Corp. posted a loss in the second quarter, which forced the company into noncompliance with its bank agreement. In the quarter ended Jan. 31, Dep lost $779,000 against a year-ago loss of $4.3 million. The firm attributed the improvement to higher gross profit and lower selling, general and administrative expenses, offset by higher interest expense. Dep said it is discussing possible waivers of its financial covenants. It is not in compliance with its net worth, interest coverage, working capital and debt to EBITDA covenants. As of Feb. 1, the company began a cost-cutting program, firing 9 percent of its nonproduction staff and slashing the top five executives' salaries. Dep currently has about 350 employees, said Judy Berglass, vice president. Robert Berglass, Dep chairman and president, will take a 15 percent pay cut from last year's salary of $566,085. Four other top executives' salaries were cut 10 percent. Dep estimates the measures will generate savings of $1.2 million annually. Sales of the Los Angeles-based company slid 7 percent to $31 million from $33.3 million, hit by a 14 percent slump in sales of Agree and Halsa products. Dep acquired these lines from S.C. Johnson in August 1993, but began litigation in March 1994 to have the acquisition rescinded, and to recover monetary damages. Dep alleges S.C. Johnson "wrongfully altered its marketing and sales practices prior to the closing" of the sale of Halsa and Agree trademarks. The trial is currently scheduled to begin on Sept. 12. A spokesman for S.C. Johnson said the firm denies all the charges in the complaint and believes they are without merit. Excluding sales of these two lines, hair care sales were up 4 percent in the quarter, Dep said. Skin care brands were up 8 percent in the aggregate, with all lines posting increases. In the six months, losses narrowed to $745,000, from $4.6 million. Sales of Agree and Halsa declined 34 percent to about $7.6 million. Total sales in the half declined 1.3 percent to $62.4 million from $63.2 million. Berglass noted sales of L.A. Looks, Dep, Nature's Family Porcelana and Cuticura brands are growing. Berglass said the company expects international sales to grow more than 50 percent this year, up from about $15.3 million, or 11 percent of sales in fiscal 1994. International markets include China, where the company has a joint venture with a distributor, Canada, Europe and Latin America. D. Lee Johnson, vice president, declined to say whether the company expects to post a profit for the year.--Fairchild News Service
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