Struggling Day Runner Considers Selling Company


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 business said it has hired an investment banking firm to explore a number of alternatives to boost its share price. Those include seeking more financing, joint ventures, asset sales, 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 fourth 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 were estimated at $49 million to $51 million, compared with $51 million a year earlier.

The disappointing financial results and the move to explore "strategic alternatives" come about nine months after Day Runner purchased British competitor Filofax Group 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 last year and nearly 13% since January.

Chief Executive James E. Freeman Jr. attributed the loss to "inventory tightening."

Large retailers, seeking to keep their inventories low, have not replenished stock of Day Runner products as quickly as they once did, he noted in a statement.

The company has hired investment banking firm Wasserstein Perella & Co. to explore various options.

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.

Day Runner's stock closed Thursday at $12.63, up 25 cents, on Nasdaq before trading was halted pending the release of the news.

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