-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Di3Mq4ZS6Zba+3Q6SEAazi4pQafsL8p53HRJfXiuyf5+Wa6oYy0X4pmDhNRy8eMS 5wZmpzMpoA4toySXowhfrA== 0000853102-96-000015.txt : 19960625 0000853102-96-000015.hdr.sgml : 19960625 ACCESSION NUMBER: 0000853102-96-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960510 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DAY RUNNER INC CENTRAL INDEX KEY: 0000853102 STANDARD INDUSTRIAL CLASSIFICATION: 2780 IRS NUMBER: 953624280 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19835 FILM NUMBER: 96559655 BUSINESS ADDRESS: STREET 1: 15295 ALTON PARKWAY CITY: IRVINE STATE: CA ZIP: 92718 BUSINESS PHONE: 714/680-3500 MAIL ADDRESS: STREET 1: 15295 ALTON PARKWAY CITY: IRVINE STATE: CA ZIP: 92718 10-Q 1 DAY RUNNER FORM 10-Q 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 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 PART I FINANCIAL INFORMATION Item 1. Consolidated Financial Statements. DAY RUNNER, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands) ASSETS
March 31, June 30, 1996 1995 ---------- --------- (unaudited) (audited) 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 ======= =======
See accompanying notes to consolidated financial statements. DAY RUNNER, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In thousands, except per share amounts)
Three Months Ended Nine Months Ended March 31, March 31, 1996 1995 1996 1995 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 ======= ======= ======= =======
See accompanying notes to consolidated financial statements. DAY RUNNER, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands)
Nine Months Ended March 31, 1996 1995 ------------------ 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 ======= =======
See accompanying notes to consolidated financial statements. 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 ======== ========= 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.
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 ------ ------ ------ ------ --------- ---------- 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 ===== ===== ===== =====
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:
Three Months Ended March 31, Nine Months Ended March 31, 1996 1995 1996 1995 ------------- -------------- ------------ ------------------- (unaudited; dollars in thousands) 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% ======= ===== ======= ===== ======= ===== ======= =====
Distribution Channel:
Three Months Ended March 31, Nine Months Ended March 31, 1996 1995 1996 1995 -------------- ------------- ---------------- -------------- (unaudited; dollars in thousands) 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% ======= ===== ======= ===== ======= ===== ======= ======
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. 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. 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. 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 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. EX-27 2
5 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. 1,000 9-MOS JUN-30-1996 MAR-31-1996 26,299 0 11,781 6,282 19,128 58,862 11,790 5,543 65,751 10,920 0 0 0 6 54,821 65,751 90,970 90,970 44,332 44,332 31,937 0 (410) 15,111 6,271 8,840 0 0 0 8,840 1.35 1.35
-----END PRIVACY-ENHANCED MESSAGE-----