Chapter 11 Case Is Filed by DAK : Electronics: Recession and a credit crunch force the mail-order marketer with the offbeat catalogue into bankruptcy court.

DAK Industries Inc.’s summer 1992 catalogue gives no hint of trouble. DAK President Drew Kaplan, in his regular letter to ‘DAKonians,’ writes in his typically breezy fashion about the wonders of CD-ROM, the latest in home electronics technology.

But last week, Kaplan’s mood was more solemn, as DAK, one of the nation’s largest mail-order consumer electronics marketers, filed for Chapter 11 bankruptcy court protection.

The once-thriving Canoga Park company, known for its low prices and offbeat catalogues written by Kaplan, had seen its sales soar to $236 million in the fiscal year ended June 1, 1991, up 53% from $154 million in the previous year, according to bankruptcy documents.

DAK had $162 million in sales from June 2, 1991, to April 25, 1992.

However, the bankruptcy filing, made last week in federal court in Los Angeles, lists $58 million in assets and $48 million in debts. DAK’s biggest creditor is Tokai Bank of Japan, which is owed about $19 million.

Kaplan said DAK was forced to seek the bankruptcy shield because of a shortage of bank credit and capital, and continuing softness in the economies of the United States and the Far East, where DAK acquires many of its products.

“We had inadequate bank financing to support the sales last year,” Kaplan said. “That, and to a lesser extent the recession, have caused this problem.”

Kaplan said he expects the company to post its first annual loss in fiscal 1992, but he declined to estimate the size of the deficit.

Arnold Fishman, president of Marketing Logistics, a Lincolnshire, Ill., direct-sales consulting firm, said that profit margins among consumer electronics mail-order companies have been under pressure because of severe competition from retailers, who have been cutting prices.

For example, Sharper Image, a San Francisco-based retail and mail-order company that sells consumer electronics and high-tech novelty items, has lost $5.7 million in its last two fiscal years. Sharper Image has been moving away from selling electronics items in the past few years.

However, Fishman said he was surprised by DAK’s bankruptcy filing because he had considered it one of the stronger electronics mail-order companies. DAK’s products are “much less faddish and much more function-oriented” than Sharper Image merchandise, he said.

Fishman speculated that with DAK’s rapid growth in the past few years, “their inventory costs have escalated, and they may have got caught in a temporary cash shortage position.”

Also on Thursday, DAK laid off more than 100 of its 400 employees as part of an effort to reduce overhead. Despite the layoffs, Kaplan said, operations would continue as normal and there would be no disruption in customer services.

Kaplan said that DAK is currently negotiating with Tokai to restructure its debt. He said he has no idea how long the company will remain in bankruptcy. But, he said, “I see no reason that the company will not survive this.”

DAK sells a wide range of items, including computers, compact-disc players, bread makers and radar detectors. Kaplan personally tests the products, which he sells for low prices by cutting deals with manufacturers who want to unload excess inventory and “close-outs”--products that aren’t selling well.

The company also has an outlet adjacent to its Canoga Park headquarters where it sells new and used merchandise and has a Japanese subsidiary, DAK Japan Ltd., that buys products.

Kaplan, 45, a self-proclaimed gadget freak, founded DAK in 1964 while a psychology student at UCLA and remains the company’s sole owner.

DAK’s hallmark is its catalogue, 72 pages in its latest issue, which is mailed all over the country. The catalogues are filled with Kaplan’s chatty, and lengthy, first-person account of each product.

In the consumer electronics business, Kaplan’s thoroughness in testing new products is well-known.

A former supplier remembered Kaplan smashing apart a loudspeaker system with a hammer because it didn’t contain as many speakers in each unit as promised. Kaplan spends much of his time holed up in his gadget-filled hillside home in Tarzana, studying the equipment and preparing DAK’s catalogues.

Kaplan likes to give folksy names to the products in his catalogue.

He also isn’t hesitant to bash the competition, promoting a DAK software package as a better deal than programs offered at the Egghead software chain.

Despite his aggressive marketing, Kaplan remains publicity shy--and he doesn’t like having his photograph taken.

But he is well-paid for his efforts. According to bankruptcy documents, Kaplan received $570,000 in compensation during the past 12 months.