Day Runner Predicts 2nd-Quarter Loss

Day Runner Inc., the Irvine maker of paper organizers, planners and software, said Wednesday that it expects to post a second-quarter loss of 14 cents to 24 cents a share.

Last year, the company earned 16 cents a share for its fiscal second quarter.

Day Runner said it also expects to report revenue of $56 million to $58 million for the fiscal second quarter ending Dec. 31, compared with $64.6 million for the same three-month period last year.

The company attributed the revenue and earnings shortfall to inventory tightening by its large U.S. customers, resulting in decreased sales and increased product returns.

The company expects to post second-quarter operating income of break-even to $1 million, compared with year-ago operating income of $4.6 million.

The company also said it doesn’t expect to achieve its target of $31.5 million in earnings before interest, taxes, depreciation and amortization in fiscal 2000. The company announced this target in August.

Day Runner added that it is “continuing the process of exploring strategic alternatives.”

The company announced in July that it had hired an investment banking firm to explore ways to boost its stock price. The options ranged from refinancing to selling the company. That announcement came less than a year after Day Runner bought British competitor Filofax Group for $84.5 million to expand its international presence.

Day Runner and others in the industry have struggled since last year as large retailers began trimming inventories and refraining from buying products until they were actually needed.

“They’re not alone,” said Alexander Paris Sr., an analyst with Barrington Research in Chicago. “Everybody in the office products business is having similar problems.”

But the inventory shifting has been harder on Day Runner than on some other companies, Paris said, because it coincided with borrowings to purchase Filofax and because Day Runner does not have ancillary businesses to buffer the loss of business.

“They had to go deeply in debt [when] the industry, at the same time, turned down sharply,” he said. “Everything went wrong at the same time.”

Eventually the industry will recover as it adapts to the changing inventory demands, Paris said, but how Day Runner fares depends on how long it can weather the change-over period.

Day Runner also said Wednesday that it expects to unveil a restructuring plan aimed at cutting costs by the end of January.

In explaining the expected loss for the December quarter, Day Runner also cited increased interest expenses, which include unamortized financing fees of $955,000 resulting from an October 1999 amendment to its bank loan.

Analysts had expected quarterly earnings of about 21 cents a share and annual earnings of 87 cents, according to estimates in a First Call/Thomson Financial survey of three analysts.

For the year ended June 30, Day Runner lost $4 million, or 34 cents a share, including a charge of $1.1 million, on sales of $196.2 million.

*

Times staff writer Leslie Earnest contributed to this report.