SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 3, 1999
DAY RUNNER, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
0-19835 95-3624280
(Commission File Number) (I.R.S. Employer Identification No.)
15295 Alton Parkway
Irvine, CA 92618
(Address of principal executive offices)
Registrant's telephone number, including area code: 714/680-3500
<PAGE>
Item 5. Other Events.
See attached exhibits.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits
(a) Exhibits
Item No. Exhibit Index
99.1 Press Release issued August 31, 1999 by the Registrant
SIGNATURE
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 hereunto duly authorized.
DAY RUNNER, INC.
By:
James E. Freeman, Jr.
Chief Executive Officer
Dated: August 31, 1999
<PAGE>
EXHIBIT INDEX
Exhibit Number Description Page No.
99.1 Press Release issued August 31, 1999
by the Registrant
<PAGE>
EXHIBIT 99.1
Day Runner Reports Sales and Earnings for The Fourth Quarter
And Fiscal Year 1999
Tuesday, August 31, 1999 04:02 PM
Company Restates First Three Quarters of FY99
IRVINE, Calif., Aug. 31 /PRNewswire/ -- Day Runner, Inc. (Nasdaq: DAYR) today
announced results for the fourth quarter of fiscal 1999 and full year ended June
30, 1999. Sales for the quarter ended June 30, 1999 were $47,700,000, down 6.3%
from $50,927,000 for the quarter ended June 30, 1998. The Company reported a net
loss of ($5,249,000) for the fourth quarter, or ($0.44) per share, compared with
net income of 4,957,000, or $0.39 per diluted share, for the fourth quarter of
fiscal 1998.
For the full year ended June 30, 1999, sales were $196,212,000, up 16.9% from
fiscal 1998 sales of $167,841,000. The Company reported a net loss of
($3,998,000), or ($0.34) per share, for fiscal 1999 compared with net income of
$15,908,000, or $1.27 per diluted share, for fiscal 1998. Excluding one-time
costs related to activities associated with the Filofax acquisition, the net
loss for fiscal 1999 would have been ($3,367,000), or ($0.28) per share.
Day Runner attributed the decline in sales for the June quarter primarily to the
adverse effects of inventory tightening on the part of its major U.S. customers.
The Company attributed the increased sales for the year to the Filofax
acquisition, which closed in late October 1998.
Commenting on the results, James E. Freeman, Jr., Day Runner's chief executive
officer, stated, "We are disappointed that our fourth quarter results did not
meet our expectations announced on July 1, 1999. There were a number of reasons
for the shortfall. First, upon reviewing our reserves, we concluded that it was
prudent to increase our reserves for returns and for excess inventory. In doing
this, we took into account our recent experience with higher than usual product
returns and the fact that we now expect inventory tightening to continue to
constrain our sales and produce higher than usual returns through calendar
year-end. These reserves should be sufficient to address future returns and
excess inventory in the near term and should facilitate the pursuit of strategic
alternatives that we announced on July 1.
"Second, late in our year-end audit process, we discovered errors related to the
treatment of manufacturing variances and certain other costs. Upon learning of
these cost accounting errors, management acted promptly to correct them. The
appropriate treatment of these variances and costs is reflected in the fourth
quarter numbers we are reporting," Mr. Freeman said.
The Company also announced that because of these errors in the treatment of
manufacturing variances and certain other costs, it is restating its results for
the first three quarters of fiscal 1999. In discussing the restatement, Mr.
Freeman commented, "The cost accounting errors had the effect of overstating
inventory and understating cost of goods sold for the first nine months of our
fiscal year. We are, therefore, restating our quarterly results for the first
through the third quarters of fiscal 1999 to reflect the appropriate
adjustments. The restatements reduce net income in the first and second quarters
by $1,351,000 and $872,000, respectively, and decrease the Company's net loss in
the third quarter by $117,000. A summary of the effects of the restatements by
major financial statement line item and copies of the quarterly consolidated
statements of operations as previously reported and as restated are included in
this press release.
"These errors affected our financial statements for fiscal 1999 only, and we do
not expect them to have any adverse effect on Day Runner going forward," Mr.
Freeman continued. "We have instituted additional procedures to ensure that such
errors do not recur.
"Consumer demand for our products remained healthy throughout fiscal 1999. Our
key retailers enjoyed good growth in their sales of our products, and we entered
fiscal 2000 with more shelf space than ever before. Although we now expect the
inventory tightening that had a negative effect on our U.S. sales for much of
fiscal 1999 will continue to constrain our sales through calendar 1999 year-end,
we believe that as we move farther into fiscal 2000 our sales of products to
these retailers will come to more closely reflect consumer demand. In addition,
we're currently conducting in-store testing of a major marketing initiative at a
number of retailers, and we're very pleased with the results thus far. Our
Filofax acquisition has continued to perform well and provides us with
additional opportunities. In fiscal 2000, we'll have the benefit of the first
full year of this acquisition. In short, we believe we will have a much better
year in fiscal 2000. We expect to return to profitability in the current quarter
and for fiscal 2000 as a whole, and we project EBITDA (earnings before interest,
taxes, depreciation and amortization) for the year of $31.5 million.
"Finally, in connection with our announced intent to seek strategic alternatives
for Day Runner, we have been working diligently to prepare for this process. We
did not actively pursue such alternatives while our audit was in process. Now we
are in a position to aggressively explore the alternatives available to the
Company, and we plan to do so in the coming weeks. Already, we have received a
number of unsolicited expressions of interest from third parties in acquiring
the Company," Mr. Freeman concluded.
The Company has not made a decision as to any specific strategic alternative,
and there cannot be any assurance that a transaction will result from the
Company's process of seeking strategic alternatives.
All forward-looking statements made in this news release, including those in
paragraphs four, seven, eight and nine and in the footnote to the Consolidated
Balance Sheet Data, reflect the Company's current expectations and involve
certain risks and uncertainties. There can be no assurance that the Company's
actual future performance will meet the Company's expectations. As discussed in
the Company's SEC filings, including its fiscal 1998 Annual Report on Form 10-K,
the Company is subject to a number of risks and its future operating results are
difficult to predict and subject to significant fluctuations. Factors that may
cause future results to differ materially from the Company's current
expectations include, among others: the timing and size of orders from large
customers; timing and size of orders for new products; large customers'
inventory management; competition, especially for retail shelf space; general
economic conditions, especially the sustainability of the current economic
expansion; the health of the retail environment; foreign exchange rate
fluctuations; supply constraints; and supplier performance. Among the effects of
these factors may be: lower than anticipated sales; higher than anticipated
product returns and/or excess inventory; negative effects on consumer purchases;
and lower than projected EBITDA for fiscal 2000. Notwithstanding the additional
internal control procedures instituted by the Company, there can be no guarantee
that further accounting errors will not occur. There can be no assurance that
the Company will timely enter into an amendment to its bank loan agreement or
that it will do so on favorable terms.
Day Runner, Inc. is the leading developer, manufacturer and marketer of
loose-leaf paper-based organizers for the North American and United Kingdom
retail markets and a leader in a number of key European markets. The Company
also develops, manufactures and markets a number of related organizing products,
including telephone/address books, appointment books, business accessories,
assignment books and other organizing tools for students, organizing and other
wall boards, laminated wall planners, and the Home Manager(TM)
on-the-refrigerator organizer.
(R)Day Runner and Filofax are registered trademarks of Day Runner, Inc., and
Home Manager is a trademark of Day Runner, Inc.
DAY RUNNER, INC.
(In thousands, except per share amounts)
Three Months Ended Fiscal Year Ended
June 30, June 30,
-------- --------
1999 1998 1999 1998
---- ---- ---- ----
Consolidated Statement
of Operations Data:
Net sales $47,700 $50,927 $196,212 $167,841
Cost of goods sold 30,000 24,870 108,087 80,663
------ ------ ------- ------
Gross profit 17,700 26,057 88,125 87,178
------ ------ ------ ------
Operating expenses:
Selling, marketing and
distribution 16,339 12,405 62,180 43,193
General and administrative 8,196 5,987 26,445 18,416
Costs related to activities
associated with the Filofax
acquisition -- -- 1,072 --
----- ----- ----- -----
Total operating expenses 24,535 18,392 89,697 61,609
------ ------ ------ ------
(Loss) income from operations (6,835) 7,665 (1,572) 25,569
Net interest expense (income) 2,056 (123) 5,215 (172)
----- ---- ----- ----
(Loss) income before (benefit)
provision for income taxes (8,891) 7,788 (6,787) 25,741
(Benefit) provision for income
taxes (3,642) 2,831 (2,789) 9,833
------ ----- ------ -----
Net (loss) income ($5,249) $4,957 $(3,998) $15,908
======= ====== ======= =======
(Loss) earnings per
common share:
Basic ($0.44) $0.42 $(0.34) $1.38
====== ===== ====== =====
Diluted ($0.44) $0.39 $(0.34) $1.27
====== ===== ====== =====
Weighted average number of common shares:
Basic 11,886 11,776 11,896 11,533
====== ====== ====== ======
Diluted 11,886 12,695 11,896 12,523
====== ====== ====== ======
June 30, June 30,
Consolidated Balance Sheet Data: 1999* 1998
----- ----
Working capital $69,668 $57,922
Cash and cash equivalents 9,132 2,923
Accounts receivable -- net 43,215 32,542
Inventories 42,361 37,610
Total assets 216,311 101,179
Short-term debt 2,328 2,716
Long-term liabilities 105,317 --
Stockholders' equity 70,397 74,532
* Reflects the classification of short- and long-term debt as the Company
forecasts these items to appear on the consolidated balance sheets to be filed
with its Form 10-K for the fiscal year ended June 30, 1999. The Company is
currently operating under waivers of certain of its bank loan covenants. The
Company is currently negotiating an amendment to its loan agreement and expects
to finalize it in September, prior to the issuance of its annual financial
statements. If the Company does not finalize such an amendment, short-term debt
on the Company's fiscal 1999 financial statements will be $107,645,000, and
long-term debt will be $0, which would result in working capital of
($35,649,000).
Product Category:
Three Months Ended June 30,
---------------------------
1999 1998
---- ----
Organizers and planners $20,061 42.0% $26,133 51.3%
Refills (which include
calendars) 12,194 25.6 15,891 31.2
Related organizing
products 15,445 32.4 8,903 17.5
------ ---- ----- ----
Total $47,700 100.0% $50,927 100.0%
======= ===== ======= =====
Fiscal Year Ended June 30,
--------------------------
1999 1998
---- ----
Organizers and planners $80,092 40.8% $83,069 49.5%
Refills (which include
calendars) 63,596 32.4 51,876 30.9
Related organizing
products 52,524 26.8 32,896 19.6
------ ---- ------ ----
Total $196,212 100.0% $167,841 100.0%
======== ===== ======== =====
Distribution Channel:
Three Months Ended June 30,
---------------------------
1999 1998
---- ----
Office products $16,009 33.6% $24,088 47.3%
Mass market 18,735 39.3 20,844 40.9
Foreign customers 10,612 22.2 3,955 7.8
Other channels 2,344 4.9 2,040 4.0
----- ---- ----- ----
Total $47,700 100.0% $50,927 100.0%
======= ===== ======= =====
Fiscal Year Ended June 30,
--------------------------
1999 1998
---- ----
Office products $68,839 35.1% $79,303 47.2%
Mass market 69,899 35.6 65,752 39.2
Foreign customers 45,987 23.4 12,182 7.3
Other channels 11,487 5.9 10,604 6.3
------ ------ -------- -----
Total $196,212 100.0% $167,841 100.0%
======== ====== ======== =====
DAY RUNNER, INC.
(In thousands, except per share amounts)
Consolidated Statements of Operations Data:
Three Months Ended
------------------
March 31,1999 December 31, 1999 September 30, 1999
------------- ----------------- ------------------
As As As
As Previously As Previously As Previously
Restated Reported Restated Reported Restated Reported
-------- -------- -------- -------- -------- --------
Sales $36,216 $36,216 $64,565 $64,565 $47,731 $47,731
Cost of goods
sold 19,721 19,908 33,506 32,100 24,860 22,680
------ ------ ------ ------ ------ ------
Gross profit 16,495 16,308 31,059 32,465 22,871 25,051
------ ------ ------ ------ ------ ------
Operating
expenses:
Selling, marketing
and distribution 14,666 14,666 18,910 18,910 12,265 12,265
General and
administrative 7,145 7,145 6,447 6,447 4,657 4,657
Costs related
to activities
associated
with the Filofax
acquisition -- -- 1,072 1,072 -- --
Total operating
expenses 21,811 21,811 26,429 26,429 16,922 16,922
------ ------ ------ ------ ------ ------
(Loss) income
from operations (5,316) (5,503) 4,630 6,036 5,949 8,129
Net interest expense
(income) 1,770 1,770 1,356 1,356 33 33
----- ----- ----- ----- -- --
(Loss) income
before provision
for income taxes (7,086) (7,273) 3,274 4,680 5,916 8,096
(Benefit)
provision for
income taxes (2,638) (2,708) 1,244 1,778 2,247 3,076
------ ------ ----- ----- ----- -----
Net (loss) income $(4,448) $(4,565) $2,030 $2,902 $3,669 $5,020
======= ======= ====== ====== ====== ======
(Loss) earnings
per common share:
Basic $(0.37) $(0.38) $0.17 $0.24 $0.31 $0.42
====== ====== ===== ===== ===== =====
Diluted $(0.37) $(0.38) $0.16 $0.23 $0.29 $0.40
====== ====== ===== ===== ===== =====
Weighted average number of common shares:
Basic 11,900 11,900 11,883 11,883 11,931 11,931
====== ====== ====== ====== ====== ======
Diluted 11,900 11,900 12,564 12,564 12,656 12,656
====== ====== ====== ====== ====== ======
Effects of restatements on consolidated balance sheets:
-------------------------------------------------------
March 31,1999 December 31, 1999 September 30, 1999
------------- ----------------- ------------------
As As As
As Previously As Previously As Previously
Restated Reported Restated Reported Restated Reported
-------- -------- -------- -------- -------- --------
Inventories $42,937 $46,336 $44,301 $47,887 $39,485 $41,665
Retained
earnings $66,327 $68,433 $70,775 $72,998 $68,745 $70,096
Effects of restatements on consolidated statements of income:
-------------------------------------------------------------
Three Months Ended
------------------
March 31, December 31, September 30,
1999 1998 1998
---- ---- ----
As As As
As Previously As Previously As Previously
Restated Reported Restated Reported Restated Reported
-------- -------- -------- -------- -------- --------
Cost of
goods sold $19,721 $19,908 $33,506 $32,100 $24,860 $22,680
(Loss) income
before provision
for income
taxes $(7,086) $(7,273) $3,274 $4,680 $5,916 $8,096
Net (loss)
income $(4,448) (4,565) $2,030 $2,902 $3,669 $5,020
(Loss) earnings
per common share:
Basic $(0.37) $(0.38) $0.17 $0.24 $0.31 $0.42
Diluted $(0.37) $(0.38) $0.16 $0.23 $0.29 $0.40
SOURCE Day Runner, Inc.
CONTACT: Jenifer Kirtland, 714-680-3500, ext. 3697, or James E. Freeman, Jr.,
Chief Executive Officer,714-680-3500, ext. 3373, both of Day Runner, Inc.
Quote for referenced ticker symbols: DAYR
(C) 1999, PR Newswire
