Day Runner Is Running Out of Time, Auditor Says
Battered Day Runner Inc. lost more than $100 million for its last fiscal year and faces such difficulties that its independent auditor expressed “substantial doubt” Wednesday that the maker of daily organizers can continue in business.
The warning from Deloitte & Touche LLP is part of the Fullerton company’s annual audited financial statement filed with the Securities and Exchange Commission.
The annual report listed a net loss of $106.6 million, or $44.79 a share, for its fiscal year ended June 30, compared with a loss of $4 million, or $1.68 a share, for the previous year. Annual sales dropped nearly 13% to $171.5 million from $196.2 million.
The accounting firm said Day Runner’s difficulties in meeting its loan payments, halting recurring losses and improving its negative working capital “raise substantial doubt about its ability to continue as a going concern.”
Day Runner said in a prepared statement that it is working toward a long-term financing agreement with its bankers and that its business remains “viable.”
The company also said it is working with investment banking firm Wasserstein Perella to “put the company back on sound footing.” It said its options include selling the business or its assets, forming strategic alliances and seeking additional financing.
Day Runner, which changed its management and board members during the summer, has failed to respond quickly enough to major industry changes and competition from electronic personal organizers like those made by Palm Inc.
The company also piled up huge losses from its acquisition of British rival Filofax Group two years ago.
“They’ve laid off almost everyone, lost or forced out senior management one-by-one and haven’t generated profits for a long, long time,” said Michael Crawford, an analyst with B. Riley & Co. in Los Angeles. “The company’s going to sink.”
CEO Stepped Down After Short Tenure
Crawford said he believes Day Runner’s creditors could end up in control of the ailing firm and liquidate its inventory and assets.
In May, James E. Freeman stepped down as chief executive after less than two years on the job. He later resigned from the board.
Freeman became chief executive at a time when Day Runner was riding high, posting record earnings and sales for fiscal 1998. Buoyed by that success, Freeman helped orchestrate the acquisition of Filofax for $84.5 million, 50% more than Filofax’s stock value. But the deal saddled Day Runner with a mountain of debt, resulting in huge interest payments.
For the rest of this fiscal year and next, the company said it expects “normal” levels of demand for its products. It did not elaborate.
Day Runner stock, which was removed from the Nasdaq exchange in June, closed unchanged Wednesday at 59 cents a share in slight over-the-counter trading.
