<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission file number 0-19835
DAY RUNNER, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-3624280
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
15295 Alton Parkway
Irvine, California 92718
(Address and zip code of principal executive offices)
(714) 680-3500
(Registrant's telephone number, including area code)
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 Registrant 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, as of the latest practicable
date:
Class Number of Shares Outstanding at May 3, 1996
Common stock, $0.001 par value 6,288,321
<PAGE>
DAY RUNNER, INC.
INDEX
COVER PAGE
INDEX
PART I FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets
March 31, 1996 and June 30, 1995
Consolidated Statements of Income
Three Months and Nine Months Ended
March 31, 1996 and 1995
Consolidated Statements of Cash Flows
Nine Months Ended March 31, 1996 and 1995
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements.
DAY RUNNER, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS
<TABLE>
<CAPTION>
March 31, June 30,
1996 1995
---------- ---------
(unaudited) (audited)
<S> <C> <C>
Current assets:
Cash and cash equivalents... ......... $26,299 $ 4,269
Accounts receivable (less allowance
for doubtful accounts and sales returns
and other allowances of $6,282 and $7,132
at March 31, 1996 and June 30, 1995,
respectively)......................... 5,499 19,373
Inventories............................ 19,128 26,609
Prepaid expenses and other current
assets................................ 1,683 1,686
Prepaid income taxes................... 1,079
Deferred income taxes.................. 5,174 5,174
------- -------
Total current assets.................. 58,862 57,111
------- -------
Property and equipment--At cost:
Machinery and equipment................ 5,633 4,678
Data processing equipment and software. 4,453 3,603
Leasehold improvements................. 1,470 1,246
Vehicles............................... 234 233
------- -------
Total................................ 11,790 9,760
Less accumulated depreciation and
amortization.......................... 5,543 4,078
------- -------
Property and equipment--net............ 6,247 5,682
Other assets............................... 642 857
------- -------
Total assets.............................. $65,751 $63,650
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of capital lease
obligations.......................... $ 8 $ 11
Current portion of long-term debt..... 26 141
Accounts payable...................... 4,034 9,200
Accrued expenses...................... 6,852 6,780
Income taxes payable.................. 2,719
------- ------
Total current liabilities.......... 10,920 18,851
------- ------
Long-term liabilities -
Capital lease obligations............... 4 12
------- ------
Stockholders' equity:
Preferred stock (1,000,000 shares authorized,
par value $0.001; no shares issued
or outstanding)
Common stock (14,000,000 shares authorized,
par value $0.001; 6,287,071 and 6,125,797
issued and outstanding at March 31, 1996
and June 30, 1995, respectively)......... 6 6
Additional paid-in capital.................. 21,134 19,942
Retained earnings........................... 33,642 24,802
Cumulative translation adjustment........... 45 37
------- -------
Total stockholders' equity............... 54,827 44,787
------- -------
Total liabilities and stockholders' equity.. $65,751 $63,650
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
DAY RUNNER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Sales.......................... $18,106 $20,422 $90,970 $88,654
Cost of goods sold............. 8,601 10,349 44,332 45,643
------- ------- ------- -------
Gross profit................... 9,505 10,073 46,638 43,011
------- ------- ------- -------
Operating expenses:
Selling, marketing
and distribution........... 5,381 6,118 21,224 23,648
General and administrative.. 3,103 3,141 10,713 9,033
------- ------- ------- -------
Total operating expenses.. 8,484 9,259 31,937 32,681
------- ------- ------- -------
Income from operations......... 1,021 814 14,701 10,330
Net interest income............ 252 153 410 206
------- ------- ------- -------
Income before provision
for income taxes............. 1,273 967 15,111 10,536
Provision for income taxes..... 528 315 6,271 4,430
------- ------- ------- -------
Net income..................... $ 745 $ 652 $ 8,840 $ 6,106
======= ======= ======= =======
Earnings per common and
common equivalent share....... $ 0.11 $ 0.10 $ 1.35 $ 0.96
======= ======= ======= =======
Weighted average number of common
and common equivalent shares... 6,657 6,309 6,564 6,373
======= ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
DAY RUNNER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
1996 1995
------------------
<S> <C> <C>
Cash flows from operating activities:
Net income.......................... $ 8,840 $ 6,106
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization..... 1,333 1,036
Provision for losses on
accounts receivable.............. 557 285
Write-off of barter credits....... 220
Purchase of advertising with
barter credits................... 56
Changes in operating assets and
liabilities:
Accounts receivable.............. 13,306 11,181
Inventories...................... 7,331 (4,914)
Prepaid expenses and other
current assets.... (71) (1,855)
Prepaid income taxes.............. (1,079)
Accounts payable.................. (5,092) (3,393)
Accrued expenses.................. 136 1,676
Income taxes payable.............. (2,719) (729)
------- -------
Net cash provided by
operating activities............... 22,762 9,449
------- -------
Cash flows from investing activities:
Net purchase of marketable securities. (8,895)
Acquisition of property and equipment. (1,914) (1,401)
Other assets.......................... (5) 43
------- -------
Net cash used in investing activities. (1,919) (10,253)
------- -------
Cash flows from financing activities:
Repayment of long-term debt............ (115) (115)
Repayment of capital lease obligations. (11) (15)
Net proceeds from issuance
of common stock..................... 1,192 575
------- -------
Net cash provided by
financing activities............... 1,066 445
------- -------
Effect of exchange rate changes in cash. 121 (42)
------- -------
Net increase (decrease) in cash
and cash equivalents................... 22,030 (401)
Cash and cash equivalents at beginning
of period.............................. 4,269 1,472
------- -------
Cash and cash equivalents at
end of period......................... $26,299 $ 1,071
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -
Cash paid during the period for:
Interest............................. $ 22 $ 42
======= =======
Income taxes $ 9,988 $ 5,223
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
DAY RUNNER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information relating to the three months and nine months
ended March 31, 1996 and 1995 is unaudited)
1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES
The accompanying consolidated balance sheet as of March 31,
1996, consolidated statements of income for the three months and nine
months ended March 31, 1996 and 1995 and consolidated statements of
cash flows for the nine months ended March 31, 1996 and 1995 are
unaudited but, in the opinion of management, include all adjustments
consisting of normal, recurring accruals necessary for a fair
presentation of the financial position and the results of operations
for such periods. Certain information and footnote disclosures
normally included in financial statements prepared in conformity with
generally accepted accounting principles have been omitted pursuant
to the requirements of the Securities and Exchange Commission,
although the Company believes that the disclosures included in the
financial statements included herein are adequate to make the
information therein not misleading. The financial statements
included herein should be read in conjunction with the Company's
audited consolidated financial statements for the year ended June 30,
1995, and the notes thereto, which are included in the Company's
Annual Report on Form 10-K.
The results of operations for the three months and nine months
ended March 31, 1996 and 1995 are not necessarily indicative of the
results for a full year. The seasonality of the Company's financial
results and the unpredictability of the factors affecting such
seasonality make the Company's quarterly and yearly financial results
difficult to predict and subject to significant fluctuation.
2. INVENTORIES
Inventories consist of the following (in thousands):
March 31, June 30,
1996 1995
---------- ---------
Raw materials...... $ 8,414 $ 8,152
Work in process.... 210 274
Finished goods..... 10,504 18,183
-------- ---------
Total $19,128 $26,609
======== =========
<PAGE>
3. LINE OF CREDIT
Effective on October 2, 1995, the Company amended its credit
agreement with its bank. The amended terms of the agreement allow the
Company to borrow up to $5,000,000 under a line of credit and open
commercial letters of credit or standby letters of credit up to
$5,000,000 through October 1, 1996. However, in no event may the
aggregate of borrowings and letters of credit exceed $5,000,000. Each
letter of credit shall be issued for a term not to exceed 180 days and
shall not expire subsequent to February 1, 1997. Borrowings are
collateralized by accounts receivable, inventories and certain other
assets. Borrowings under the line of credit bear interest either at
the bank's prime rate (8.25% at March 31, 1996) or at LIBOR (5.4375%
at March 31, 1996) plus 1.75%, at the Company's election.
Under the bank credit agreement, the Company also has a term
note expiring May 1, 1996 requiring monthly principal payments of
$13,000 plus interest at the bank's prime rate plus 1/2%. The unpaid
principal at March 31, 1996 was $26,000.
The credit agreement requires the Company to maintain total debt
to tangible net worth of not more than 1.5 to 1 and to maintain
certain other specified operating ratios. The agreement also
requires that the Company obtain the bank's approval to declare or pay
dividends in excess of $200,000.
4. STOCKHOLDERS' EQUITY
During the nine months ended March 31, 1996, certain officers
and employees exercised options to purchase an aggregate of 161,274
shares of the Company's Common Stock for an aggregate of $1,192,000.
5. OTHER TRANSACTIONS
During fiscal 1995 and calendar 1993, the Company entered
into barter agreements whereby it delivered $132,000 and $1,098,000,
respectively, of its inventory in exchange for future advertising
credits and other items. The credits, which expire in October 1998,
are valued at the lower of the Company's cost or market value of the
inventory transferred. The Company has recorded barter credits of
$36,000 in prepaid expenses and other current assets at March 31,
1996 and at June 30, 1995. At March 31, 1996 and June 30, 1995, other
assets include $579,000 and $799,000, respectively, of such credits.
These credits are charged to expense as they are used. During the nine
months ended March 31, 1995, the Company charged $56,000 to expense
for barter credits used for advertising. No amounts were charged to
expense for barter credits used for advertising during the nine months
ended March 31, 1996.
The Company assesses the recoverability of barter credits
periodically. Factors considered in evaluating the recoverability
include management's plans with respect to advertising or other
expenditures for which the barter credits can be used. Any
impairment losses are charged to operations as they are determinable.
During the nine months ended March 31, 1996, the Company charged
$220,000 to operations for such impairment losses. No amounts were
charged to operations during the nine months ended March 31, 1995 for
such impairment losses.
6. EARNINGS PER SHARE
Earnings per share information is computed using the weighted
average number of shares of common stock outstanding and dilutive
common equivalent shares from stock options and warrants. For the
three months and nine months ended March 31, 1996 and 1995, the
Company used the treasury stock method of computing earnings per
share.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with, and
is qualified in its entirety by, the Consolidated Financial
Statements and Notes thereto included elsewhere in this Quarterly
Report. Historical results and percentage relationships among any
amounts included in the Consolidated Financial Statements are not
necessarily indicative of trends in operating results for any future
period.
Since the Company's introduction of the first Day Runner System
organizer in 1982, the Company's revenues have been generated by
increased unit sales primarily of organizers and planners and
secondarily of refills. Sales increases have resulted from higher
sales of existing products, new products and product line extensions.
The Company focuses the great majority of its product development,
sales and marketing efforts on the office products channel, which
accounted for 41.4% of third quarter fiscal 1996 sales and 54.0% of
sales for the nine months ended March 31, 1996, and the mass market
channel, which accounted for 36.0% of third quarter fiscal 1996 sales
and 33.1% of sales for the nine months ended March 31, 1996.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the
percentages that income statement items bear to sales and the
percentage change in the dollar amounts of such items.
<PAGE>
<TABLE>
<CAPTION>
Percentage Change
Three Nine
Percentage of Sales Months Months
Three Nine Ended Ended
Months Ended Months Ended March 31, March 31,
March 31, March 31, 1995 1995
1996 1995 1996 1995 to 1996 to 1996
------ ------ ------ ------ --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Sales 100.0% 100.0% 100.0% 100.0% (11.3)% 2.6%
Cost of goods sold 47.5 50.7 48.7 51.5 (16.9) (2.9)
----- ----- ----- -----
Gross profit 52.5 49.3 51.3 48.5 (5.6) 8.4
----- ----- ----- -----
Operating expenses:
Selling, marketing
and distribution 29.7 29.9 23.3 26.7 (12.0) (10.3)
General and
administrative 17.2 15.4 11.8 10.2 (1.2) 18.6
----- ----- ----- -----
Total operating
expenses 46.9 45.3 35.1 36.9 (8.4) (2.3)
----- ----- ----- -----
Income from
operations 5.6 4.0 16.2 11.6 25.4 42.3
Net interest income 1.4 0.7 0.4 0.3 64.7 99.0
----- ----- ----- -----
Income before
provision
for income taxes 7.0 4.7 16.6 11.9 31.6 43.4
Provision for
income taxes 2.9 1.5 6.9 5.0 67.6 41.6
----- ----- ----- -----
Net income 4.1% 3.2% 9.7% 6.9% 14.3 44.8
===== ===== ===== =====
</TABLE>
<PAGE>
The following tables set forth, for the periods indicated, the
Company's approximate sales by product category and distribution
channel and as a percentage of total sales.
Product Category:
<TABLE>
<CAPTION>
Three Months Ended March 31, Nine Months Ended March 31,
1996 1995 1996 1995
------------- -------------- ------------ -------------------
(unaudited; dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Organizers and planners.. $10,421 57.5% $15,096 73.9% $55,573 61.6% $59,901 67.6%
Refills (which include
calendars).............. 6,840 37.8 4,794 23.5 33,213 36.5 26,918 30.3
Other.................... 845 4.7 532 2.6 2,184 2.4 1,835 2.1
------- ----- ------ ----- ------- ---- ------- -----
Total.................. $18,106 100.0% $20,422 100.0% $90,970 100.0% $88,654 100.0%
======= ===== ======= ===== ======= ===== ======= =====
</TABLE>
Distribution Channel:
<TABLE>
<CAPTION>
Three Months Ended March 31, Nine Months Ended March 31,
1996 1995 1996 1995
-------------- ------------- ---------------- --------------
(unaudited; dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Office products $ 7,491 41.4% $ 8,793 43.1% $49,133 54.0% $46,003 51.9%
Mass market 6,521 36.0 8,686 42.5 30,101 33.1 31,652 35.7
Foreign customers 1,301 7.2 490 2.4 4,560 5.0 3,348 3.8
Other 2,793 15.4 2,453 12.0 7,176 7.9 7,651 8.6
------- ----- ------ ----- -------- ----- ------- -----
Total $18,106 100.0% $20,422 100.0% $90,970 100.0% $88,654 100.0%
======= ===== ======= ===== ======= ===== ======= ======
</TABLE>
<PAGE>
THREE MONTHS ENDED MARCH 31, 1996 COMPARED WITH
THE THREE MONTHS ENDED MARCH 31, 1995
SALES. Sales consist of revenues from gross product shipments
net of allowances for returns, rebates and credits. In the third
quarter of fiscal 1996, sales decreased by $2,316,000, or 11.3%,
primarily because of lower sales to and lack of anticipated growth with
Wal-Mart. Sales of organizers and planners fell by $4,675,000 or 31.0%;
sales of refills grew by $2,046,000, or 42.7%; and sales of miscellaneous
products grouped together as "other" grew by $313,000, or 58.8%. Product
sales were primarily to the office products channel and secondarily to mass
market customers. Sales to office products customers declined by $1,302,000,
or 14.8%; sales to mass market customers declined by $2,165,000, or 24.9%.
Lower sales to these channels were partially offset by growth of $811,000, or
165.5%, in sales to foreign customers and growth of $340,000, or 13.9%, in
sales to miscellaneous customers grouped together as "other".
GROSS PROFIT. Gross profit is sales less cost of goods sold,
which is comprised of materials, labor and manufacturing overhead.
Gross profit may be affected by, among other things, product mix,
production levels, changes in vendor and customer prices and
discounts, sales volume and growth rate, purchasing and manufacturing
efficiencies, tariffs, duties and inventory carrying costs. Gross
profit as a percentage of sales increased from 49.3% in the third
quarter of fiscal 1995 to 52.5% in the third quarter of fiscal 1996
primarily as a result of increased purchasing efficiencies.
OPERATING EXPENSES. Compared with the third quarter of fiscal
1995, total operating expenses decreased by $775,000, or 8.4%, in the
third quarter of fiscal 1996 but increased as a percentage of sales
from 45.3% to 46.9%. Primarily because of lower advertising and
promotional expenses, selling, marketing and distribution expenses
decreased $737,000 and declined as a percentage of sales from 29.9%
to 29.7%. General and administrative expenses decreased by $38,000
primarily due to a net decrease in miscellaneous expenses, but
grew from 15.4% to 17.2% as a percentage of sales because of the
Company's lower sales.
NET INTEREST INCOME. Primarily because of the Company's higher
levels of cash available for short-term investment, net interest
income in the third quarter of fiscal 1996 increased by $99,000
compared with the third quarter of fiscal 1995 and increased as a
percentage of sales from 0.7% to 1.4%.
INCOME TAXES. The Company's effective tax rate was 41.5% for the
third quarter of fiscal 1996, compared with 32.6% for the third quarter
of fiscal 1995 (an effective tax rate which reflected the use of
research and development tax credits in that quarter).
NINE MONTHS ENDED MARCH 31, 1996 COMPARED WITH
THE NINE MONTHS ENDED MARCH 31, 1995
SALES. In the nine months ended March 31, 1996 compared with the
nine months ended March 31, 1995, sales increased by $2,316,000, or
2.6%, due primarily to increased unit sales of refills (which include
calendars and accessories). Sales of refills grew by $6,295,000, or
23.4%; sales of miscellaneous products grouped together as "other"
grew by $349,000, or 19.0%; and sales of organizers and planners
declined by $4,328,000, or 7.2%. Product sales were primarily to the
office products channel and secondarily to mass market customers.
Sales to office products customers grew by $3,130,000, or 6.8%; and
sales to foreign customers grew by $1,212,000, or 36.2%. Higher sales
to these channels were partially offset by a decline of $1,551,000, or
4.9%, in sales to mass market customers and a decline of $475,000, or
6.2%, in sales to miscellaneous customers grouped together as "other."
GROSS PROFIT. Gross profit as a percentage of sales increased
from 48.5% in the first nine months of fiscal 1995 to 51.3% in first
nine months of fiscal 1996 primarily as a result of increased
purchasing and manufacturing efficiencies and secondarily as a result
of lower returns.
OPERATING EXPENSES. Total operating expenses decreased by
$744,000, or 2.3%, in the first nine months of fiscal 1996 compared
with the first nine months of fiscal 1995, and declined as a
percentage of sales from 36.9% to 35.1%. Due primarily to lower
advertising and promotional expenses and secondarily to lower sales
commissions, selling, marketing and distribution expenses decreased
$2,424,000 and declined as a percentage of sales from 26.7% to 23.3%.
Primarily because of increased personnel costs, general and
administrative expenses increased by $1,680,000 and from 10.2% to
11.8% as a percentage of sales.
NET INTEREST INCOME. Primarily because of the Company's higher
levels of cash available for short-term investment, net interest
income in the first nine months of fiscal 1996 increased by $204,000
compared with the first nine months of fiscal 1995 and increased as a
percentage of sales from 0.3% to 0.4%.
INCOME TAXES. Primarily because of the improved financial results
of certain of the Company's foreign subsidiaries, the effective tax rate for the
first nine months of fiscal 1996 was 41.5%,compared with 42.0% for the first
nine months of fiscal 1995.
<PAGE>
SEASONAL FLUCTUATIONS
The Company has historically experienced and expects to continue
to experience seasonal fluctuations in its sales and other financial
results that it believes have resulted and will continue to result
primarily from its customers' and users' buying patterns. These buying
patterns have typically adversely affected orders for the Company's products
in the third quarter of each fiscal year.
Although it is difficult to predict the future seasonality of sales, the
Company believes that future seasonality should be influenced at least in
part by customer and user buying patterns similar to those that have
historically affected the Company. Quarterly financial results are also
affected by timing and size of orders from large customers, new product
introductions and line extensions, timing and size of orders for new
products, changes in product or customer mix, competition, large customers'
inventory management, vendor and customer pricing, general economic conditions,
the health of the retail environment, production levels, supply
constraints, manufacturing delays and suppler performance. The
seasonality of the Company's financial results and the
unpredictability of the factors affecting such seasonality make the
Company's quarterly and yearly financial results difficult to
predict and subject to significant fluctuation.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents at March 31, 1996
increased to $26,299,000 from $4,269,000 at June 30, 1995. In the
nine months ended March 31, 1996, net cash of $22,762,000 and
$1,066,000 provided by operating activities and financing activities,
respectively, offset net cash of $1,919,000 used in investing
activities. Of the $22,762,000 net amount provided by the Company's
operating activities, $8,840,000 was provided by net income,
$13,306,000 was provided by a decrease in accounts receivable,
$7,331,000 was provided by a decrease in inventories, and $1,333,000
was provided by depreciation and amortization, which amounts were
partially offset by a decrease of $5,092,000 in accounts payable, a
decrease of $2,719,000 in income taxes payables and an increase of
$1,079,000 in prepaid income taxes. Of the $1,066,000 net amount
provided by the Company's financing activities, $1,192,000 was
provided by the issuance of Common Stock upon the exercise of options.
The $1,919,000 used in the Company's investing activities was used to
acquire primarily machinery and equipment and secondarily computer
equipment and software.
Because of the Company's seasonal sales patterns, accounts
receivable (net) at March 31, 1996 decreased by 71.6% from the fiscal
1995 year-end amount. Compared with the March 31, 1995 amount,
accounts receivable decreased by 6.5%. The average collection period
of accounts receivable at March 31, 1996 was 43 days, compared with 42
and 44 days at June 30, 1995 and March 31, 1995, respectively.
Inventories decreased by 28.1% compared with the fiscal 1995 year-
end amount primarily due to tighter management of inventory and
decreased by 17.9% from the March 31, 1995 amount primarily due to an
increase in the Company's reserve for excess and obsolete inventory.
At March 31, 1996, Day Runner had no borrowings under its bank
line of credit but had used the line of credit to secure outstanding
letters of credit of approximately $1,000,000, which reduced the amount
available under the line of credit to approximately $4,000,000.
Effective on October 2, 1995, the Company amended its credit agreement,
the new terms of which provide for borrowings or letters of credit up
to an aggregate of $5,000,000. Borrowings under the line of credit
bear interest at either the bank's prime rate or LIBOR plus 1.75%, at
the Company's election, and are due and payable in full on October 1,
1996. (See Note 3 to Consolidated Financial Statements.)
The Company has not incurred significant losses or gains from
foreign currency exchange rate fluctuations. The continuing expansion
of the Company's Hong Kong, Mexican and United Kingdom subsidiaries
could, however, result in larger gains or losses as a result of
fluctuations in foreign currency exchange rates as those subsidiaries
conduct business in whole or in part in foreign currencies.
The Company believes that cash flow from operations, vendor
credit, its existing working capital and its bank line of credit will
be sufficient to satisfy the Company's anticipated cash requirements at
least through the next 12 months. Nonetheless, the Company may seek
additional sources of capital as necessary or appropriate to finance
acquisitions or to otherwise finance the Company's growth or
operations; however, there can be no assurance that such funds if
needed will be available on favorable terms, if at all.
FORWARD LOOKING STATEMENTS
With the exception of the actual reported financial results and other
historical information, the statements made in the Management's Discussion
and Analysis of Financial Condition and Results of Operations are forward
looking statements that involve risks and uncertainties, including but not
limited to: timing and size of orders from large customers, timing and size
of orders for new products, competition, large customers' inventory
management, general economic conditions, the health of the retail
environment, supply constraints, supplier performance and other risks
indicated in the Company's filings with the Securities and Exchange
Commission.
<PAGE>
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Certificate of Incorporation of the Company, as amended(1)
3.2 Bylaws of the Company, as amended(2)
27.1 Financial Data Schedule, which is submitted electonically to
the Securities and Exchange Commission for information only
and not filed.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the
quarter ended March 31, 1996.
- - ----------------------------------
(1) Incorporated by reference to the Company's Transition Report on Form 10-K
(File No. 0-19835) filed with the Commission on September 27, 1994.
(2) Incorporated by reference to the Company's Current Report on Form 8-K
(Registration No. 0-19835) filed with the Commission on August 5, 1993.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Date: May 10, 1996
Day Runner, Inc.
By: /s/ MARK A. VIDOVICH
------------------------
Mark A. Vidovich
Chairman of the Board
and Chief Executive Officer
By: /s/ DENNIS K. MARQUARDT
---------------------------
Dennis K. Marquardt
Executive Vice President,
Finance & Administration and
Chief Financial Officer
<PAGE>
INDEX TO EXHIBITS
SEQUENTIALLY
NUMBERED
EXHIBIT NUMBER AND DESCRIPTION PAGE
- - ------------------------------ ------------
27.1 Financial Data Schedule, which is submitted electronically
to the Securities and Exchange Commission for information
only and not filed.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet and the consolidated statement of income filed as
part of the annual report on Form 10-Q and is qualified in its entirety by
reference to such annual report on Form 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 26,299
<SECURITIES> 0
<RECEIVABLES> 11,781
<ALLOWANCES> 6,282
<INVENTORY> 19,128
<CURRENT-ASSETS> 58,862
<PP&E> 11,790
<DEPRECIATION> 5,543
<TOTAL-ASSETS> 65,751
<CURRENT-LIABILITIES> 10,920
<BONDS> 0
0
0
<COMMON> 6
<OTHER-SE> 54,821
<TOTAL-LIABILITY-AND-EQUITY> 65,751
<SALES> 90,970
<TOTAL-REVENUES> 90,970
<CGS> 44,332
<TOTAL-COSTS> 44,332
<OTHER-EXPENSES> 31,937
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (410)
<INCOME-PRETAX> 15,111
<INCOME-TAX> 6,271
<INCOME-CONTINUING> 8,840
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,840
<EPS-PRIMARY> 1.35
<EPS-DILUTED> 1.35
</TABLE>
