UNITED
STATES
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):
November
14, 2007
FRANKLIN
COVEY CO.
(Exact
name of registrant as specified in its charter)
Commission
File No. 1-11107
|
Utah
|
87-0401551
|
|
|
(State
or other jurisdiction of incorporation)
|
(IRS
Employer Identification Number)
|
|
2200
West Parkway Boulevard
Salt
Lake City, Utah 84119-2099
(Address
of principal executive offices)(Zip Code)
Registrant’s
telephone number, including area code: (801)
817-1776
Former
name or former address, if changed since last report: Not
Applicable
______________________
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
¨ Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
¨ Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
¨ Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR240.14d-2(b))
¨ Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR240.13e-4(c))
Item
2.02 Results of Operations and Financial Condition
On
November 14, 2007, Franklin Covey Co. (the Company) announced its financial
results for the fourth quarter and fiscal year ended August 31,
2007. A copy of the earnings release is being furnished as exhibit
99.1 to this current report on Form 8-K.
Certain
information in this Report (including the exhibit) is furnished pursuant
to Item
2.02 and shall not be deemed to be “filed” for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise
subject to the liabilities of that section, nor shall it be deemed incorporated
by reference in any filing made by the Company under the Securities Act of
1933,
as amended, or the Exchange Act, except as expressly set forth by specific
reference in such a filing.
Item
8.01 Other Events
On
November 13, 2007, the Company announced it will host a discussion for
shareholders and the financial community to review its financial results
for the
fourth quarter and fiscal year ended August 31, 2007. The discussion
will be held on Thursday, November 15, 2007 at 11:00 a.m. Eastern Standard
Time
(9:00 a.m. Mountain Standard Time).
Interested
persons may participate in the discussion by calling 1-866-356-3095, access
code: 32331415 and by logging on to http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=102601&eventID=1695079.
Item
9.01 Financial Statements and Exhibits
| (d) | Exhibits |
| 99.1 | Earnings released dated November 14, 2007 |
SIGNATURES
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.
|
FRANKLIN
COVEY CO.
|
||||
|
Date:
|
November
14, 2007
|
By:
|
/s/
STEPHEN D.
YOUNG
|
|
|
Stephen
D.
Young
|
||||
|
Chief
Financial
Officer
|
||||
News
Bulletin
| 2200 West Parkway Boulevard | |||
| Salt Lake City, Utah 84119-2331 | |||
| www.franklincovey.com |
FRANKLINCOVEY
ANNOUNCES INCREASES
IN
FOURTH QUARTER AND FISCAL 2007 YEAR END OPERATING RESULTS
Salt
Lake City, Utah – November 14, 2007 – FranklinCovey (NYSE:
FC) today announced financial results for its fourth quarter and fiscal
year ended August 31, 2007. For the quarter ended August 31, 2007,
the Company reported income from operations of $2.6 million, a $1.9 million
improvement over operating income of $0.7 million in the comparable quarter
of
the prior year. Due primarily to the reversal of $20.3 million of
deferred income tax asset valuation allowances recorded in fiscal 2006, and
a
slight increase in the Company’s effective tax rate during fiscal 2007,
FranklinCovey reported net income of $0.6 million ($0.03 diluted earnings
per
common share) for the quarter ended August 31, 2007, compared to $15.1 million
before preferred stock dividends ($0.70 diluted earnings per common share
after
preferred stock dividends) for the same quarter of the prior
year. Due to the redemption of all remaining shares of preferred
stock during the third quarter of fiscal 2007, the Company had no preferred
dividends during the quarter ended August 31, 2007.
For
the
fiscal year ended August 31, 2007, the Company reported a $4.1 million
improvement in income from operations to $18.1 million, compared to $14.0
million in fiscal 2006, and income before income taxes increased to $15.7
million compared to $13.6 million in the prior year. Due to the
income tax benefit recorded from the reversal of deferred income tax asset
valuation allowances in the fourth quarter of fiscal 2006 as discussed above,
net income totaled $7.6 million before preferred stock dividends ($0.27 diluted
earnings per common share after preferred stock dividends) compared to net
income of $28.6 million before preferred stock dividends ($1.18 diluted earnings
per common share after preferred stock dividends) in fiscal 2006.
The
following information presents further details regarding the Company’s financial
performance during the fourth quarter and fiscal year ended August 31,
2007.
Fourth
Quarter Ended August 31, 2007
During
the fourth quarter, the Company’s financial results were primarily influenced by
increased training and consulting sales, increased gross profit, which
contributed to improved gross margin, increased operating expenses, increased
interest expense, and decreased preferred stock dividends. Further
information regarding these results is as follows:
Sales
– Consolidated sales increased to $67.2 million compared to $64.7
million in fiscal 2006. The improvement was due to a $4.9 million
increase in Organizational Solution Business Unit (OSBU) sales, which primarily
consist of training and consulting services sales. The increase in
OSBU sales was partially offset by a $2.4 million decrease in Consumer Solution
Business Unit Sales (CSBU), which consist primarily of product
sales. Increased OSBU sales during the quarter continued the
favorable fiscal 2007 trend of improving training sales, which was reflected
by
a 9 percent increase in domestic sales and a 24 percent increase in
international sales. The increases were primarily due to an expanding
sales force and strong booking rates.
Sales
through our CSBU channels declined primarily due to a $1.7 million decrease
in
Consumer Direct sales and a $1.4 million decrease in retail store
sales. Consumer direct sales declined primarily due to decreased
traffic through these channels and decreased public seminar
sales. Retail sales declined primarily due to the effects of reduced
traffic and closed stores. Comparable store sales declined 11 percent
compared to the same quarter of fiscal 2006. Partially offsetting
these declines was a $0.9 million improvement in wholesale sales during the
quarter.
Gross
Profit – The Company’s consolidated gross profit increased to
$41.2 million compared to $38.5 million in fiscal 2006. The
improvement was due to increased training and consulting services sales,
which
contributed to improved consolidated gross margin, since our training and
consulting sales have higher overall gross margins than our product
sales. Gross margin for the fourth quarter of fiscal 2007 was 61.2
percent compared to 59.6 percent for the same quarter of fiscal
2006.
Operating
Expenses – Consolidated operating expenses increased $0.8 million,
due to $0.6 million of increased selling, general, and administrative (SG&A)
expenses and $0.2 million of increased depreciation
expense. Increased SG&A expenses were primarily due to increased
commissions and selling bonuses incurred as a result of increased training
and
consulting sales. Depreciation expense increased primarily due to
additional purchases of depreciable property during fiscal 2007.
Interest
Expense – Net interest expense increased $0.6 million primarily
due to line of credit borrowings resulting from the redemption of all remaining
shares of preferred stock during the third quarter of fiscal 2007.
Fiscal
Year Ended August 31, 2007
Consistent
with sales performance identified in the fourth quarter of fiscal 2007, the
Company’s stronger financial performance in fiscal 2007 was primarily influenced
by significantly increased OSBU sales that were partially offset by declining
product sales through CSBU channels. Other factors which affected our
financial performance for the fiscal year ended August 31, 2007 were as
follows.
Sales
– Total sales increased $5.5 million, to $284.1 million compared
to $278.6 million in fiscal 2006, primarily on the strength of improved OSBU
sales, which generally consist of training and consulting service
sales. Total OSBU sales were $139.1 million in fiscal 2007 compared
to $120.6 million in fiscal 2006, which represents a 15 percent improvement
in
year-over-year sales. Increased OSBU sales were the result of
domestic sales performance, which increased 14 percent, and international
sales
performance, which increased 18 percent over the prior year. These
sales increases reflected both an increase in the size of our sales force
and an
increase in their productivity both domestically and
internationally.
Increased
OSBU sales were partially offset by declines in product sales through our
CSBU
channels. Total CSBU sales were $145.0 million for fiscal 2007
compared to $158.0 million in fiscal 2006. Decreased CSBU sales were
primarily due to performance in our retail stores and consumer direct channels
during the fiscal year. The decline in retail sales was primarily due
to the impact of stores closed in late fiscal 2006 and during fiscal 2007,
reduced sales of low-margin technology and specialty products resulting from
our
decision to discontinue many of these items, and decreased store
traffic. These factors combined to produce a 6 percent decline in
year-over-year comparable store sales in fiscal 2007 compared to fiscal
2006. At August 31, 2007, we were operating 87 domestic retail
locations compared to 89 locations at August 31, 2006. Consumer
direct sales decreased primarily due to a decline in the conversion rate
of
customers visiting our website as consumers searched for discounted items,
decreased consumer traffic through the call center channel, and decreased
public
seminar sales, resulting from fewer programs held during the fiscal
year. Wholesale sales totaled $18.0 million compared to $17.8 million
in fiscal 2006.
Gross
Profit – The Company’s consolidated gross profit for fiscal 2007
increased to $174.4 million compared to $167.4 million in fiscal
2006. The improvement was due to increased OSBU sales, which
contributed to improved consolidated gross margin, since our training and
consulting sales have higher gross margins than the majority of our product
sales. Gross margin for fiscal 2007 was 61.4 percent compared to 60.1
percent in fiscal 2006.
Operating
Expenses – Consolidated operating expenses increased $4.2 million,
not including the impact of a $1.2 million gain from the sale of a manufacturing
facility. Selling, general, and administrative expenses increased
$4.5 million, which was primarily attributable to increased compensation
costs
from increased training and consulting sales. These increases were
partially offset by decreased depreciation expense of $0.1 million and decreased
amortization expense of $0.2 million.
Other
Items
Redemption
of Preferred Stock – During the third quarter of fiscal 2007, the
Company redeemed the remaining $37.3 million of its Series A Preferred Stock,
which contributed to a $2.2 million decrease in fiscal 2007 dividends compared
to fiscal 2006. Although the Company borrowed from a newly obtained
line of credit to facilitate the redemption and will incur interest expense
in
future periods, the Company believes that the redemption will improve its
cash
flows and results of operations in future periods.
About
FranklinCovey
FranklinCovey
is a leading learning and performance services firm assisting professionals
and
organizations in measurably increasing their effectiveness in leadership,
productivity, communication and sales. Clients include 91 of the Fortune
100,
more than three-quarters of the Fortune 500, thousands of small and mid-sized
businesses, as well as numerous government entities. Organizations and
professionals access FranklinCovey services and products through consulting
services, licensed client facilitators, one-on-one coaching, public workshops,
catalogs, retail stores, and www.franklincovey.com . Nearly
1,500 FranklinCovey associates provide professional services and products
in 41
offices servicing more than 100 countries.
| Investor Contact: | Media Contact: | ||
| FranklinCovey | FranklinCovey | ||
| Steve Young | Debra Lund | ||
| 801-817-1776 | 801-817-6440 | ||
| Steve.Young@FranklinCovey.com |
Debra.Lund@FranklinCovey.com
|
FRANKLIN
COVEY CO.
CONDENSED
CONSOLIDATED INCOME STATEMENTS
(
in
thousands, except per share amounts )
|
Quarter
Ended
|
Fiscal
Year Ended
|
|||||||||||||||
|
August
31,
|
August
31,
|
August
31,
|
August
31,
|
|||||||||||||
|
2007
|
2006
|
2007
|
2006
|
|||||||||||||
|
(unaudited)
|
(unaudited)
|
|||||||||||||||
|
Net
sales
|
$ |
67,210
|
$ |
64,657
|
$ |
284,125
|
$ |
278,623
|
||||||||
|
Cost
of sales
|
26,056
|
26,143
|
109,748
|
111,238
|
||||||||||||
|
Gross
profit
|
41,154
|
38,514
|
174,377
|
167,385
|
||||||||||||
|
Selling,
general, and administrative
|
36,418
|
35,863
|
149,220
|
144,747
|
||||||||||||
|
Gain
on sale of manufacturing facility
|
-
|
-
|
(1,227 | ) |
-
|
|||||||||||
|
Depreciation
|
1,230
|
1,016
|
4,693
|
4,779
|
||||||||||||
|
Amortization
|
899
|
902
|
3,607
|
3,813
|
||||||||||||
|
Income
from operations
|
2,607
|
733
|
18,084
|
14,046
|
||||||||||||
|
Interest
expense, net
|
(898 | ) | (275 | ) | (2,419 | ) | (1,288 | ) | ||||||||
|
Legal
settlement
|
-
|
-
|
-
|
873
|
||||||||||||
|
Income
before income taxes
|
1,709
|
458
|
15,665
|
13,631
|
||||||||||||
|
Income
tax benefit (provision)
|
(1,097 | ) |
14,650
|
(8,036 | ) |
14,942
|
||||||||||
|
Net
income
|
612
|
15,108
|
7,629
|
28,573
|
||||||||||||
|
Preferred
stock dividends
|
-
|
(933 | ) | (2,215 | ) | (4,385 | ) | |||||||||
|
Net
income available to common shareholders
|
$ |
612
|
$ |
14,175
|
$ |
5,414
|
$ |
24,188
|
||||||||
|
Net
income per share available to common shareholders
|
||||||||||||||||
|
Basic
|
$ |
0.03
|
$ |
0.71
|
$ |
0.28
|
$ |
1.20
|
||||||||
|
Diluted
|
$ |
0.03
|
$ |
0.70
|
$ |
0.27
|
$ |
1.18
|
||||||||
|
Weighted
average common shares - Diluted
|
||||||||||||||||
|
Basic
|
19,461
|
19,883
|
19,593
|
20,134
|
||||||||||||
|
Diluted
|
19,752
|
20,160
|
19,888
|
20,516
|
||||||||||||
|
Sales
Detail:
|
||||||||||||||||
|
Retail
Stores
|
$ |
10,914
|
$ |
12,319
|
$ |
54,316
|
$ |
62,156
|
||||||||
|
Catalog
/ e-commerce
|
12,077
|
13,779
|
59,790
|
65,480
|
||||||||||||
|
Wholesale
|
2,931
|
2,009
|
17,991
|
17,782
|
||||||||||||
|
CSBU
International
|
1,188
|
1,242
|
7,342
|
7,716
|
||||||||||||
|
Other
|
1,143
|
1,288
|
5,565
|
4,910
|
||||||||||||
|
Total
Consumer Solutions Business Unit
|
28,253
|
30,637
|
145,004
|
158,044
|
||||||||||||
|
Domestic
|
24,116
|
22,043
|
81,447
|
71,595
|
||||||||||||
|
International
|
14,841
|
11,977
|
57,674
|
48,984
|
||||||||||||
|
Total
Organizational Solutions Business Unit
|
38,957
|
34,020
|
139,121
|
120,579
|
||||||||||||
|
Total
|
$ |
67,210
|
$ |
64,657
|
$ |
284,125
|
$ |
278,623
|
||||||||