Dep Corp., a Los Angeles manufacturer of toiletries, emerged from Chapter 11 Bankruptcy Court protection on Monday with new financing, new stock and a handful of new beauty products aimed at making over the company's profit picture.
"We'll be able now to put this behind us and regain our focus," said Robert Berglass, president and chairman of Dep. "It will take time with our existing products to build them back, but we have the knowledge and the know-how in this company to do this."
Dep, which takes its name from its original product, a gooey concoction that keeps hair firmly in place, is known for a shelf full of products devoted to making customers more attractive: Lilt home hair permanents, Lavoris mouthwash, Topol tooth whitener, Porcelana blemish-fading cream, Natures Family and Cuticura skin care products, and Agree and Halsa shampoos and conditioners.
It is those last two products, the company contends, that burst its bubble. Dep has been losing money virtually ever since it bought the Agree and Halsa hair-care lines from Racine, Wis.-based S.C. Johnson & Son in August 1993. Lawsuits were filed by both sides, and Dep has vowed it will continue to seek damages and cancellation of the sale.
Disappointing sales of Agree and Halsa led to losses that put Dep out of compliance with its loan agreements, which caused its interest rates to rise sharply, Berglass said. Although the Rancho Dominguez-based company never missed a principal or interest payment, it was scrambling to find cash to operate the business. The company said it was forced to resort to the Chapter 11 filing April 1 to gain breathing room to renegotiate its debt.
In the last 18 months, Dep has shrunk its work force by about 20%, to about 300 employees, and has slashed overhead and expenses by more than $3 million annually.
The company recently reported financial results for the fiscal year ended July 31 that were better than those projected in court filings. Dep posted operating income of $3.1 million on net sales of $119.1 million for fiscal 1996, compared with operating income of $1.5 million on net sales of $127.7 million for fiscal 1995. Net loss for fiscal 1996 was $8 million, or $1.27 per share, compared with a net loss of $27 million, or $4.32 per share.
The reorganized Dep will focus on "trying to gear in on products that provide a better value" with lower prices and larger sizes, Berglass said. "The value-conscious consumer is just about everybody these days."
Dep recently launched a department-store-style skin-care line called Basique, which is carried by mass merchandisers and discount stores at prices that are half or a third less expensive than department store skin products, he said. (Estee Lauder Cos., maker of Clinique cosmetics, quickly responded with a lawsuit, and Dep is repackaging the look-alike line.)
Dep executives recognize that the company's giant competitors have more financial muscle to advertise and promote their products, so Dep is focusing on print, rather than TV, advertising and unusual promotions, Berglass said, citing a current contest offering L.A. Looks purchasers a chance at a walk-on part on "Melrose Place."
Under its second amended reorganization plan, which was confirmed by the U.S. Bankruptcy Court on Oct. 23, Dep has obtained $62 million in long-term financing at 2 percentage points above the prime rate.