-----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, ArDo2e2EFKildBDlelNyAa8O5H7pW1ZDwmdqWpxcqG7E4T/FBhoAv4+1jBnEnr4a SvFvE+cekWQmI4dKCUBhTw== 0000853102-99-000074.txt : 19990906 0000853102-99-000074.hdr.sgml : 19990906 ACCESSION NUMBER: 0000853102-99-000074 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990903 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990903 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DAY RUNNER INC CENTRAL INDEX KEY: 0000853102 STANDARD INDUSTRIAL CLASSIFICATION: BLANKBOOKS, LOOSELEAF BINDERS & BOOKBINDING & RELATED WORK [2780] IRS NUMBER: 953624280 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-19835 FILM NUMBER: 99706037 BUSINESS ADDRESS: STREET 1: 15295 ALTON PARKWAY CITY: IRVINE STATE: CA ZIP: 92718 BUSINESS PHONE: 7146803500 MAIL ADDRESS: STREET 1: 15295 ALTON PARKWAY CITY: IRVINE STATE: CA ZIP: 92718 8-K 1 FORM 8-K 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 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 EXHIBIT INDEX Exhibit Number Description Page No. 99.1 Press Release issued August 31, 1999 by the Registrant 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 -----END PRIVACY-ENHANCED MESSAGE-----