Day Runner, Reporting a Loss, May Boost Share Price by Selling
Less than a year after making a big acquisition to expand its international presence, Day Runner Inc., the nation’s biggest maker of loose-leaf paper organizers, said Thursday that it will post a loss for the fourth quarter and may put the company up for sale.
The Irvine-based firm said it has hired an investment banking company to explore a number of options to boost its share price. They include joint ventures, asset sales, a search for more financing or selling the company.
Day Runner said it expects a loss of $1.6 million to $2.2 million, or 14 cents to 18 cents per share, for the quarter ended June 30, compared with a profit of nearly $5 million, or 39 cents per share, in the fourth quarter a year ago. Analysts were expecting the company to post earnings of 10 cents a share, according to a survey by First Call Corp.
Sales for the fourth quarter ended June 30 were an estimated at $49 million to $51 million, compared with nearly $51 million a year earlier.
The disappointing financial results and move to explore “strategic alternatives” were announced about nine months after Day Runner purchased British competitor Filofax Group PLC for $84.5 million. At the time, Day Runner executives called Filofax “the logical international partner” and expected big things from the acquisition.
Day Runner has struggled of late. In January, the company cut 350 jobs, or 20% of its work force, because of slackening demand for its product. The company posted a loss of $4.6 million, or 37 cents a share, for the third quarter ended March 31.
The company’s stock has lost more than 50% of its value in the past year and nearly 13% since January. The shares closed Thursday at $12.63, up 25 cents, before trading was halted pending the release of the news.
James E. Freeman Jr., Day Runner’s chief executive, attributed the loss to “inventory tightening.” Large retailers, seeking to keep their inventories low, have not replenished their stocks of Day Runner products as quickly as they once did, he noted in a prepared statement.
The company has hired investment banking firm Wasserstein Perella & Co. to explore its options.
“Our relatively small size magnifies the effect upon us of shifts in the retail environment,” Freeman said the statement. “As we explore strategic alternatives, we will be seeking ways in which to become less vulnerable.”
Kevin Daly, an analyst at Hoefer & Arnett, an investment banking firm in San Francisco, said the company should have been aware of efforts by customers such as Office Depot and Wal-Mart to keep inventories slim and needed to do a “better job of staying closer to customers.”
Daly added that Day Runner executives might want to sell the company because they are having difficulty turning it around.
“Maybe they’re thinking, ‘If we can’t do this ourselves, we’ll find somebody to do it for us,’ ” he said.
