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
17, 2008
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)
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(IRS
Employer Identification Number)
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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 17, 2008, Franklin Covey Co. (the Company) announced its financial
results for the fourth quarter and fiscal year ended August 31,
2008. 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 11, 2008, the Company announced that it would host a discussion for
shareholders and the financial community to review its financial results for the
fourth quarter and fiscal year ended August 31, 2008. The discussion
was held on Monday, November 17, 2008 at 8:00 a.m. Eastern time (6:00 a.m.
Mountain Daylight time).
Interested
persons could participate by dialing 1-800-798-2801 (International participants
may dial 1-617-614-6205), access code: 34993354. Alternatively, the
webcast was accessible at the following Web site:
http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=102601&eventID=2026161.
A replay
of the discussion will be available from November 17 through November 24, 2008
by dialing 1-888-286-8010 (International participants may dial 1-617-801-6888),
access code: 62565178. The webcast will also remain accessible
through November 24, 2008 on the Investor Relations area of the Company’s Web
site at: http://phx.corporate-ir.net/phoenix.zhtml?c=102601&p=irol-IRHome.
Item
9.01 Financial Statements
and Exhibits
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(d)
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Exhibits
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99.1
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Earnings
release dated November 17, 2008
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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.
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FRANKLIN
COVEY CO.
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||||
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Date:
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November 17, 2008
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By:
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/s/ Stephen D. Young
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Stephen
D. Young
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||||
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Chief
Financial
Officer
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Exhibit 99.1
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2200
West Parkway Boulevard
Salt
Lake City, Utah 84119-2331
www.franklincovey.com
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Press Release
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FRANKLINCOVEY
ANNOUNCES
FOURTH
QUARTER AND FULL YEAR 2008 OPERATING RESULTS
Salt Lake City, Utah –
November 17, 2008 – Franklin Covey Co. (NYSE: FC) today announced financial
results for its fourth quarter and fiscal year ended August 31,
2008. The Company’s financial results for the fourth quarter and
fiscal year 2008 are difficult to compare to prior periods due to the Company’s
sale of its Consumer Solutions Business Unit (CSBU) to a new private
equity-funded entity known as Franklin Covey Products, LLC, which was effective
July 6, 2008. The CSBU was primarily responsible for sales of the
Company’s consumer products, including the popular FranklinCovey PlannerTM,
binders, and related accessories, to consumers and small businesses through
retail, wholesale, Internet, and call center channels. Due to the
Company’s 19.5 percent voting interest and continuing involvement with Franklin
Covey Products, LLC, the Company will not present the financial results of the
CSBU in a discontinued operations format at August 31, 2008 or in future
periods.
Following
the sale of the CSBU, the Company will focus its full resources and efforts on
the continued expansion of its training, consulting, content-rich media, and
thought leadership businesses. Franklin Covey remains a global
business with directly owned offices and licensees that currently operate in 147
countries.
Bob
Whitman, Chairman and Chief Executive Officer of Franklin Covey, said, “During
fiscal 2008 we made substantial progress in our multi-year transformation of
Franklin Covey. With the sale of CSBU, we completed our exit of
businesses not core to our training and consulting focus; utilized the proceeds
from the sale of CSBU to repurchase more than three million common shares and to
increase our financial flexibility; reduced our capital intensity and cost
structure; simplified and enhanced our business model; and repositioned Franklin
Covey in the marketplace. Over the past several years we have
expanded the breadth of our offerings and introduced compelling new services to
help our clients: increase the loyalty of their customers; improve execution;
increase sales effectiveness; and lead in a way that focuses and engages
employees toward the most important objectives. These are all areas
our clients are finding particularly valuable in this difficult economic
climate. This has allowed us to increase our customer base, which we
believe will enable us to grow our revenues in future periods. We
have also implemented significant cost and capital spending initiatives to
streamline our cost
structure in fiscal 2009, and feel that our business model and innovative
offerings should enable us to drive sustainable growth over the long
term.”
During
the quarter ended August 31, 2008, the Company used substantially all of the net
proceeds from the sale of CSBU to purchase 3.0 million shares of its common
stock in a modified Dutch auction tender offer for $9.25 per share, plus
customary expenses, for a total cost of $28.2 million. The tender
offer closed on August 27, 2008 and due to the proximity of tender offer to the
Company’s fiscal year end, the acquisition of these shares did not have a
significant impact on the earnings per share calculation for the periods ended
August 31, 2008. However, the Company believes that the reduced
number of outstanding shares will have a meaningful effect on its earnings per
share performance in future periods.
Quarter Ended August 31,
2008
Reported
net sales for the quarter were significantly impacted by the sale of CSBU as
described above, and the resultant exclusion of the last two months of its
revenues. Reported net sales for the quarter totaled $52.3 million
compared to $67.2 million for the comparable quarter of fiscal
2007. Income from operations, which includes the gain from the sale
of the CSBU, totaled $5.8 million compared to $2.6 million in fiscal
2007. Net income was $2.2 million, or $0.11 per diluted share,
compared to $0.6 million, or $0.03 per diluted share, for the same period of the
prior year.
Reported
consolidated training and consulting service sales decreased $2.8 million
primarily due to the conversion of the Company’s Brazil office and Mexico
training operation into licensee operations, which reduced sales by $1.8
million, and due to decreased domestic training sales, primarily attributable to
planned decreases in the number of public programs offered. Product
sales decreased primarily due to the sale of CSBU.
Income
from operations for the fourth quarter of fiscal 2008 included a gain of $9.1
million from the sale of CSBU assets as previously described and a $5.7 million
decrease in selling, general, and administrative expenses. In
addition, during the quarter ended August 31, 2008, the Company incurred a $2.1
million charge for restructuring costs and expensed $1.5 million related to an
impaired asset. The Company’s income tax provision increased to $2.9
million from $1.1 million primarily due to increased pre-tax income compared to
fiscal 2007.
Fiscal Year Ended August 31,
2008
Reported
net sales for fiscal 2008 were significantly impacted by the sale of CSBU as
described above, and the resultant exclusion of the last two months of its
revenues during the fiscal year. For the fiscal year ended August 31,
2008, reported net sales totaled $260.1 million compared to $284.1 million in
fiscal 2007. The decrease was primarily due to the fourth quarter
sale of the CSBU and declining product sales that occurred throughout fiscal
2008 prior to the sale. Training and consulting services sales
increased $0.4 million, despite the effect of converting Brazil and Mexico to
licensee operations, primarily due to improved sales in the Company’s
international operations.
Gross
profit totaled $161.8 million for fiscal 2008 compared to $175.1 million in the
prior year. Gross margin, which is gross profit stated in terms of a
percentage of sales, improved to 62.2 percent compared to 61.6 percent in fiscal
2007. The increased gross margin percentage reflects increased sales
of higher-margin training and consulting services during fiscal year
2008. Net income increased $0.4 million, or 8 percent, to $5.8
million compared to $5.4 million in fiscal 2007 and earnings per diluted share
increased 7 percent to $0.29 per share in fiscal 2008 compared to $0.27 per
share in the prior year.
Other
Matters
Sale
of CSBU Assets and Investment in Franklin Covey Products, LLC
On July
6, 2008, the Company completed its previously announced sale of substantially
all of the assets of its CSBU to Franklin Covey Products,
LLC. Franklin Covey Products, LLC, which is controlled by Peterson
Partners, a private equity firm, purchased the CSBU assets for $32.0 million in
cash plus a $1.2 million adjustment for net working capital on the date of the
sale. The Company invested $1.8 million to purchase a 19.5 percent
voting interest in the new company and made a $1.0 million priority capital
contribution with a 10 percent return. In accordance with applicable
accounting guidance, the Company deferred a portion of the gain equal to its
investment in Franklin Covey Products, LLC. The Company will
recognize the deferred gain over the life of the long-term assets acquired by
Franklin Covey Products, LLC or when cash is received for payment of the
priority contribution. The Company also has the opportunity to earn
contingent license fees if Franklin Covey Products, LLC achieves certain
performance objectives.
Earnings Conference
Call
On
Monday, November 17, 2008 at 8:00 a.m. Eastern time (6:00 a.m. Mountain time)
Franklin Covey will host a conference call to review its financial results for
the fiscal fourth quarter and full year ended August 31, 2008. The
Participants may dial 1-800-798-2801 (International participants
may
dial
1-617-614-6205), access code: 34993354. Alternatively, a webcast will
be accessible at the following Web site:
http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=102601&eventID=2026161. A
replay will be available through 11:59 p.m. Eastern time on November 23, 2008 by
dialing 1-888-286-8010 (International participants may dial 1-617-801-6888),
access code: 62565178.
Forward-Looking
Statements
This
press release contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Forward-looking
statements are based upon management’s current expectations and are subject to
various risks and uncertainties including, but not limited to: the expansion of
the Company’s training, consulting, content-rich media, and thought leadership
businesses; reductions in capital requirements and cost structure; general
economic conditions; market acceptance of new products or services and marketing
strategies; the ability to achieve sustainable growth in future periods; the
impact of the Company’s tender offer on future earnings per share performance;
and other factors identified and discussed in the Company’s most recent Annual
Report on Form 10-K and other periodic reports filed with the Securities and
Exchange Commission. Many of these conditions are beyond the
Company’s control or influence, any one of which may cause future results to
differ materially from the Company’s current expectations, and there can be no
assurance the Company's actual future performance will meet management’s
expectations. These forward-looking statements are based on
management’s current expectations and the Company undertakes no obligation to
update or revise these forward-looking statements to reflect events or
circumstances subsequent to this press release.
About
FranklinCovey
FranklinCovey
(NYSE: FC) is the global consulting and training leader in the areas of strategy
execution, customer loyalty, leadership, and individual
effectiveness. Clients include 90 percent of the Fortune 100, more
than 75 percent of the Fortune 500, thousands of small- and mid-sized
businesses, as well as numerous government entities and educational
institutions. FranklinCovey (www.franklincovey.com)
has 46 direct and licensee offices providing professional services in 147
countries.
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Investor
Contact:
FranklinCovey
Steve
Young
801-817-1776
Steve.Young@franklincovey.com
|
or
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ICR,
LLC
Kate
Messmer
203-682-8338
kate.messmer@icrinc.com
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Media
Contact:
FranklinCovey
Debra
Lund
801-817-6440
Debra.Lund@franklincovey.com
|
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FRANKLIN COVEY CO.
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CONDENSED CONSOLIDATED INCOME
STATEMENTS
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||||||||||||||||
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(
in thousands, except per share amounts )
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||||||||||||||||
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Quarter
Ended
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Fiscal
Year Ended
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|||||||||||||||
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August
31,
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August
31,
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August
31,
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August
31,
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|||||||||||||
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2008
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2007
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2008
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2007
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|||||||||||||
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(unaudited)
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(unaudited)
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(unaudited)
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(unaudited) | |||||||||||||
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Net
sales
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$ | 52,330 | $ | 67,210 | $ | 260,092 | $ | 284,125 | ||||||||
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Cost
of sales
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19,477 | 25,880 | 98,303 | 109,047 | ||||||||||||
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Gross
profit
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32,853 | 41,330 | 161,789 | 175,078 | ||||||||||||
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Selling,
general, and administrative
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30,685 | 36,418 | 141,318 | 149,220 | ||||||||||||
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Gain
on sale of consumer solutions business unit
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(9,131 | ) | - | (9,131 | ) | - | ||||||||||
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Gain
on sale of manufacturing facility
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- | - | - | (1,227 | ) | |||||||||||
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Restructuring
costs
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2,064 | - | 2,064 | - | ||||||||||||
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Impairment
of assets
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1,483 | - | 1,483 | - | ||||||||||||
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Depreciation
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1,101 | 1,406 | 5,692 | 5,394 | ||||||||||||
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Amortization
|
901 | 899 | 3,603 | 3,607 | ||||||||||||
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Income
from operations
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5,750 | 2,607 | 16,760 | 18,084 | ||||||||||||
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Interest
expense, net
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(609 | ) | (898 | ) | (2,926 | ) | (2,419 | ) | ||||||||
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Income
before income taxes
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5,141 | 1,709 | 13,834 | 15,665 | ||||||||||||
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Income
tax provision
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(2,923 | ) | (1,097 | ) | (7,986 | ) | (8,036 | ) | ||||||||
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Net
income
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2,218 | 612 | 5,848 | 7,629 | ||||||||||||
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Preferred
stock dividends
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- | - | - | (2,215 | ) | |||||||||||
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Net
income available to common shareholders
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$ | 2,218 | $ | 612 | $ | 5,848 | $ | 5,414 | ||||||||
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Net
income per share available to common shareholders:
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||||||||||||||||
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Basic
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$ | 0.11 | $ | 0.03 | $ | 0.30 | $ | 0.28 | ||||||||
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Diluted
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$ | 0.11 | $ | 0.03 | $ | 0.29 | $ | 0.27 | ||||||||
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Weighted
average common shares:
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||||||||||||||||
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Basic
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19,682 | 19,461 | 19,577 | 19,593 | ||||||||||||
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Diluted
|
20,245 | 19,752 | 19,922 | 19,888 | ||||||||||||
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Sales
Detail by Category:
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||||||||||||||||
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Training
and consulting services
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$ | 36,222 | $ | 39,042 | $ | 138,112 | $ | 137,708 | ||||||||
|
Products
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16,108 | 28,168 | 121,980 | 146,417 | ||||||||||||
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Total
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$ | 52,330 | $ | 67,210 | $ | 260,092 | $ | 284,125 | ||||||||
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Sales
Detail by Business Unit:
|
||||||||||||||||
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Domestic
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$ | 24,851 | $ | 26,876 | $ | 91,287 | $ | 93,308 | ||||||||
|
International
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14,407 | 14,841 | 59,100 | 57,674 | ||||||||||||
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Total
Organizational Solutions Business Unit
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39,258 | 41,717 | 150,387 | 150,982 | ||||||||||||
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Retail
Stores
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3,508 | 10,914 | 42,167 | 54,316 | ||||||||||||
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Catalog
/ e-commerce
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3,327 | 9,343 | 38,662 | 48,018 | ||||||||||||
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Wholesale
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4,743 | 2,931 | 16,970 | 17,991 | ||||||||||||
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CSBU
International
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603 | 1,188 | 7,295 | 7,342 | ||||||||||||
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Other
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891 | 1,117 | 4,611 | 5,476 | ||||||||||||
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Total
Consumer Solutions Business Unit
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13,072 | 25,493 | 109,705 | 133,143 | ||||||||||||
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Total
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$ | 52,330 | $ | 67,210 | $ | 260,092 | $ | 284,125 | ||||||||