View Filing Data

Document And Entity Information - shares	3 Months Ended
Document And Entity Information - shares	Nov. 30, 2017	Dec. 31, 2017
Document Type	10-Q
Document Period End Date	Nov. 30, 2017
Amendment Flag	false
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2018
Entity Registrant Name	FRANKLIN COVEY CO
Entity Central Index Key	0000886206
Current Fiscal Year End Date	--08-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		13,858,289

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Nov. 30, 2017	Aug. 31, 2017
Current assets:
Cash and cash equivalents	$ 8,087	$ 8,924
Accounts receivable, less allowance for doubtful accounts of $2,738 and $2,310	50,153	66,343
Receivable from related party	1,182	1,020
Inventories	3,309	3,353
Income taxes receivable	329	259
Prepaid expenses and other current assets	12,604	11,936
Total current assets	75,664	91,835
Property and equipment, net	21,435	19,730
Intangible assets, net	55,899	57,294
Goodwill	24,220	24,220
Long-term receivable from related party	754	727
Other long-term assets	16,889	16,925
Total assets	194,861	210,731
Current liabilities:
Current portion of financing obligation	1,922	1,868
Current portion of term notes payable	6,250	6,250
Accounts payable	7,068	9,119
Deferred revenue	35,250	40,772
Accrued liabilities	15,781	22,617
Total current liabilities	66,271	80,626
Line of credit	9,050	4,377
Financing obligation, less current portion	20,570	21,075
Term notes payable, less current portion	11,563	12,813
Other liabilities	5,626	5,742
Deferred income tax liabilities	39	1,033
Total liabilities	113,119	125,666
Shareholders' equity:
Common stock, $.05 par value; 40,000 shares authorized, 27,056 shares issued	1,353	1,353
Additional paid-in capital	209,840	212,484
Retained earnings	67,064	69,456
Accumulated other comprehensive income	590	667
Treasury stock at cost, 13,261 shares and 13,414 shares	(197,105)	(198,895)
Total shareholders' equity	81,742	85,065
Total liabilities and shareholders' equity	$ 194,861	$ 210,731

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) shares in Thousands, $ in Thousands	Nov. 30, 2017	Aug. 31, 2017
Allowance for doubtful accounts	$ 2,738	$ 2,310
Common stock, par value	$ 0.05	$ 0.05
Common stock, shares authorized	40,000	40,000
Common stock, shares issued	27,056	27,056
Treasury stock, shares	13,261	13,414

Condensed Consolidated Statements Of Operations And Statements Of Comprehensive Income (Loss) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Nov. 30, 2017	Nov. 26, 2016
Net sales	$ 47,932	$ 39,787
Cost of sales	15,064	14,479
Gross profit	32,868	25,308
Selling, general, and administrative	33,824	29,095
Depreciation	901	866
Amortization	1,395	722
Loss from operations	(3,252)	(5,375)
Interest income	61	116
Interest expense	(549)	(620)
Loss before income taxes	(3,740)	(5,879)
Income tax benefit	1,348	1,921
Net loss	$ (2,392)	$ (3,958)
Net loss per share:
Basic and diluted	$ (0.17)	$ (0.29)
Weighted average number of common shares:
Basic and diluted	13,725	13,791
COMPREHENSIVE INCOME (LOSS)
Net loss	$ (2,392)	$ (3,958)
Foreign currency translation adjustments, net of income tax benefit of $42 and $342	(77)	635
Comprehensive loss	$ (2,469)	$ (3,323)

Condensed Consolidated Statements Of Operations And Statements Of Comprehensive Income (Loss) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended
	Nov. 30, 2017	Nov. 26, 2016
Foreign currency translation adjustments, tax	$ 42	$ 342

Condensed Consolidated Statements Of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Nov. 30, 2017	Nov. 26, 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$ (2,392)	$ (3,958)
Adjustments to reconcile net loss to net cash provided by (used for) operating activities:
Depreciation and amortization	2,295	1,588
Stock-based compensation expense	956	1,214
Amortization of capitalized curriculum costs	1,277	977
Deferred income taxes	(1,799)
Increase (reduction) in contingent consideration liabilities	176	(1,013)
Changes in assets and liabilities:
Decrease in accounts receivable, net	16,148	10,850
Decrease (increase) in inventories	26	(191)
Increase in receivable from related party	(190)	(231)
Increase in prepaid expenses and other assets	(416)	(1,458)
Decrease in accounts payable and accrued liabilities	(8,125)	(6,562)
Decrease in deferred revenue	(5,570)	(553)
Increase in income taxes payable/receivable	(53)	(2,630)
Increase (decrease) in other long-term liabilities	5	(911)
Net cash provided by (used for) operating activities	2,338	(2,878)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment	(2,414)	(2,040)
Curriculum development costs	(703)	(666)
Acquisition of business	(1,109)
Net cash used for investing activities	(4,226)	(2,706)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from line of credit borrowings	24,633
Payments on line of credit borrowings	(19,960)
Proceeds from term notes payable financing		5,000
Principal payments on term notes payable	(1,250)	(1,250)
Principal payments on financing obligation	(451)	(401)
Purchases of common stock for treasury	(1,968)	(17)
Proceeds from sales of common stock held in treasury	158	153
Net cash provided by financing activities	1,162	3,485
Effect of foreign currency exchange rates on cash and cash equivalents	(111)	(481)
Net decrease in cash and cash equivalents	(837)	(2,580)
Cash and cash equivalents at the beginning of the period	8,924	10,456
Cash and cash equivalents at end of the period	8,087	7,876
Supplemental disclosure of cash flow information:
Cash paid for income taxes	640	688
Cash paid for interest	614	615
Non-cash investing and financing activities:
Purchases of property and equipment financed by accounts payable	$ 901	$ 300

Basis Of Presentation

3 Months Ended

Nov. 30, 2017

Basis Of Presentation

NOTE 1 – BASIS OF PRESENTATION

General

Franklin Covey Co. (hereafter referred to as us, we, our, or the Company) is a global company focused on individual and organizational performance improvement. Our mission is to “enable greatness in people and organizations everywhere,” and our employees worldwide are organized to help individuals and organizations achieve sustained superior performance through changes in human behavior. We are fundamentally a content and solutions company, and we believe that our offerings and services create the connection between capabilities and results. Our expertise extends to seven crucial areas: Leadership, Execution, Productivity, Trust, Educational Improvement, Sales Performance, and Customer Loyalty. We believe that our clients are able to utilize our content to create cultures whose hallmarks are high-performing, collaborative individuals, led by effective, trust-building leaders who execute with excellence and deliver measurably improved results for all of their key stakeholders.

In the training and consulting marketplace, we believe there are three important characteristics that distinguish us from our competitors.

World Class Content – Our content is principle-centered and based on natural laws of human behavior and effectiveness. When our content is applied consistently in an organization, we believe the culture of that organization will change to enable the organization to achieve their own great purposes. Our content is designed to build new skillsets, establish new mindsets, and provide enabling toolsets to our clients.

Breadth and Scalability of Delivery Options – We have a wide range of content delivery options, including: subscription-as-a-service (SaaS) offerings, which includes the All Access Pass and other subscription offerings; intellectual property licenses; on-site training; training led through certified facilitators; on-line learning; blended learning; and organization-wide transformational processes, including consulting and coaching.

Global Capability – We have sales professionals in the United States and Canada who serve clients in the private sector and in governmental organizations; wholly owned subsidiaries in Australia, China, Japan, and the United Kingdom; and we contract with licensee partners who deliver our content and provide services in over 150 other countries and territories around the world.

We are committed to, and measure ourselves by, our clients’ achievement of transformational results.

We have some of the best-known offerings in the training industry, including a suite of individual-effectiveness and leadership-development training content based on the best-selling books, The 7 Habits of Highly Effective People, The Speed of Trust, and The 4 Disciplines of Execution, and proprietary content in the areas of Execution, Sales Performance, Productivity, Educational Improvement, and Customer Loyalty. Our offerings are described in further detail at www.franklincovey.com.

The accompanying unaudited condensed consolidated financial statements reflect, in the opinion of management, all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position and results of operations of the Company as of the dates and for the periods indicated. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to Securities and Exchange Commission (SEC) rules and regulations. The information included in this quarterly report on Form 10-Q should be read in conjunction with the consolidated financial statements and related notes included in our annual report on Form 10-K for the fiscal year ended August 31, 2017.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Our fiscal year ends on August 31 of each year. During fiscal 2017, our Board of Directors approved a change to our fiscal quarter ending dates from a modified 52/53-week calendar, in which quarterly periods ended on different dates from year-to-year, to the last day of the calendar month in each quarter. The change was made to improve comparability between fiscal periods. Beginning with the second quarter of fiscal 2017, our fiscal quarters end on the last day of November, February, and May. We do not believe that the change in quarter ending dates had a material impact on the financial results for the quarter ended November 30, 2017.

Our sales primarily consist of training and consulting services. In fiscal 2017, we exited the publishing business in Japan, which significantly reduced our sales of tangible products in the first quarter of fiscal 2018. Due to the immateriality of product and leasing sales (approximately three percent of consolidated revenues during the first quarter of 2018 combined) compared with training and consulting sales, we have condensed our reported sales and cost of sales into one line for presentation purposes.

The results of operations for the quarter ended November 30, 2017 are not necessarily indicative of results expected for the entire fiscal year ending August 31, 2018, or for any future periods.

Accounting Pronouncements Issued and Adopted

In March 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-09, Compensation - Stock Compensation (Topic 718) - Improvements to Employee Share-Based Payment Accounting. The guidance in ASU 2016-09 simplifies several aspects of the accounting for stock-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification of items on the statement of cash flows. The guidance in ASU 2016-09 is effective for public companies’ annual periods, including interim periods within those fiscal years, beginning after December 15, 2016. On September 1, 2017, we adopted the provisions of ASU 2016-09. The adoption of this accounting standard did not have a material impact on our consolidated financial statements.

Accounting Pronouncements Issued Not Yet Adopted

On May 28, 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). This new standard was issued in conjunction with the International Accounting Standards Board (IASB) and is designed to create a single, principles-based process by which all businesses calculate revenue. The core principle of this standard is that an entity should recognize revenue for the transfer of goods or services equal to the amount that it expects to be entitled to receive for those goods or services. The standard also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. The new standard replaces numerous individual, industry-specific revenue rules found in generally accepted accounting principles in the United States. We are required to adopt this standard on September 1, 2018, and apply the new guidance during interim periods within fiscal 2019. The new standard may be adopted using the “full retrospective” or “modified retrospective” approach. We are continuing to assess the impact of adopting ASU 2014-09 on our financial position, results of operations, and related disclosures, and we have not yet determined the method of adoption nor the full impact that the standard will have on our reported revenue or results of operations. We currently believe that the adoption of ASU No. 2014-09 will not significantly change the recognition of revenues associated with the delivery of onsite presentations and facilitator material sales. However, the recognition of revenues associated with intellectual property licenses, such as our All Access Pass, and other revenue streams may be more significantly impacted by the new standard. The Company will continue to assess the new standard along with industry trends and additional interpretive guidance, and it may adjust its implementation plan accordingly. We do not expect the adoption of ASU 2014-09 to have any impact on our operating cash flows.

In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606) - Identifying Performance Obligations and Licensing. The guidance in ASU 2016-10 clarifies aspects of Topic 606 related to identifying performance obligations and the licensing implementation guidance, while retaining the related core principles for those areas. The effective date and transition requirements for ASU 2016-10 are the same as the effective date and transition requirements for Topic 606 (ASU 2014-09) discussed above. As of November 30, 2017, we have not yet determined the full impact that ASU No. 2016-10 will have on our reported revenue or results of operations.

On February 25, 2016, the FASB issued ASU No. 2016-02, Leases. The new lease accounting standard is the result of a collaborative effort with the IASB (similar to the new revenue standard described above), although some differences remain between the two standards. This new standard will affect all entities that lease assets and will require lessees to recognize a lease liability and a right-of-use asset for all leases (except for short-term leases that have a duration of less than one year) as of the date on which the lessor makes the underlying asset available to the lessee. For lessors, accounting for leases is substantially the same as in prior periods. For public companies, the new lease standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted for all entities. For leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, lessees and lessors must apply a modified retrospective transition approach. While we expect the adoption of this new standard will increase reported assets and liabilities, as of November 30, 2017, we have not yet determined the full impact that the adoption of ASU 2016-02 will have on our financial statements.

On December 22, 2017, President Trump signed the Tax Cut and Jobs Act into law. Based on this legislation, we expect a tax benefit between $1.2 million and $1.5 million, primarily due to re-measurement of deferred tax assets and liabilities. The statutory U.S. federal income tax rate for our current fiscal year ending August 31, 2018 is expected to be 26 percent. The statutory rate applicable in future years is expected to be 21 percent.

Inventories

3 Months Ended

Nov. 30, 2017

Inventories

NOTE 2 – INVENTORIES

Inventories are stated at the lower of cost or market, cost being determined using the first-in, first-out method, and were comprised of the following (in thousands):



		November 30,		August 31,
		2017		2017
Finished goods	$	3,284	$	3,306
Raw materials		25		47
	$	3,309	$	3,353

Fair Value Of Financial Instruments

3 Months Ended

Nov. 30, 2017

Fair Value Of Financial Instruments

NOTE 3 – FAIR VALUE OF FINANCIAL INSTRUMENTS

At November 30, 2017, the carrying value of our financial instruments approximated their fair values. The fair values of our contingent consideration liabilities from previous business acquisitions are considered “level 3” measurements because we use various estimates in the valuation models to project the timing and amount of future contingent payments. The valuation models described in our annual report on Form 10-K for the fiscal year ended August 31, 2017 were utilized during the current period (with updated estimates) to arrive at the estimated fair value of the contingent consideration liabilities. The fair value of the liabilities from the Robert Gregory Partners (RGP) and Jhana Education (Jhana) acquisitions changed as follows during the quarter ended November 30, 2017 (in thousands):



	Balance at		Increases in		Payments/			Balance at
	August 31, 2017		Fair Value		Decreases		November 30, 2017
RGP Acquisition	$	913	$	-	$	-	$	913
Jhana Acquisition		6,052		176		(1,109)		5,119
	$	6,965	$	176	$	(1,109)	$	6,032

Approximately $1.8 million of the Jhana contingent consideration liability was recorded as a component of accrued liabilities in our condensed consolidated balance sheet at November 30, 2017. The remainder of our contingent consideration liability is classified as a component of other long-term liabilities. Due to the timing of the first Jhana contingent liability payment, the amount was classified as a component of investing activities on our condensed consolidated statement of cash flows for the quarter ended November 30, 2017.

Adjustments to the fair value of our contingent consideration liabilities are included in selling, general, and administrative expense in the accompanying condensed consolidated statements of operations.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Stock-Based Compensation

3 Months Ended

Nov. 30, 2017

Stock-Based Compensation

NOTE 4 – STOCK-BASED COMPENSATION

The cost of our stock-based compensation plans is included in selling, general, and administrative expenses in the accompanying condensed consolidated statements of operations. The total cost of our stock-based compensation plans was as follows for the periods presented (in thousands):



		Quarter Ended
		November 30,		November 26,
		2017		2016
Performance awards	$	791	$	1,078
Unvested share awards		131		113
Employee stock purchase plan		34		23
	$	956	$	1,214

During the quarter ended November 30, 2017, we issued 251,234 shares of our common stock to employees for stock-based compensation awards. Our stock-based compensation plans allow shares to be withheld to cover statutory income taxes if so elected by the award recipient. During the first quarter of fiscal 2018, we withheld 102,765 shares of our common stock to cover statutory taxes on stock-based compensation awards that vested during the quarter. The following is a description of the developments in our stock-based compensation plans during the quarter ended November 30, 2017.

Performance Awards

On November 14, 2017, the Organization and Compensation Committee (the Compensation Committee) of the Board of Directors granted a new performance-based long-term incentive plan (LTIP) award to our executive officers and members of senior management. The fiscal 2018 LTIP award has three tranches, which consist of the following: 1) shares that vest after three years of service; 2) fiscal 2020 qualified adjusted earnings before interest, taxes, depreciation, and amortization (Adjusted EBITDA); and 3) fiscal 2020 subscription sales. Twenty-five percent of a participant’s award vests after three years of service, and the number of shares awarded in this tranche will not fluctuate based on financial measures. The number of shares granted in this tranche totals 42,883 shares. The remaining two tranches of the award are divided between the achievement of certain levels of Adjusted EBITDA and subscription sales recognized in fiscal 2020. The number of shares that will vest to participants for these two tranches is variable and may be 50 percent of the award (minimum award threshold) up to 200 percent of the participant’s award (maximum threshold). The maximum number of shares that may be awarded in connection with these tranches totals 257,300 shares.

The fiscal 2018 LTIP has a three-year life and expires on August 31, 2020.

Compensation expense recognized during the quarter ended November 30, 2017, for performance awards includes expense related to awards granted in previous periods for which the performance conditions are probable of being achieved.

Employee Stock Purchase Plan

We have an employee stock purchase plan (ESPP) that offers qualified employees the opportunity to purchase shares of our common stock at a price equal to 85 percent of the average fair market value of our common stock on the last trading day of each fiscal quarter. During the quarter ended November 30, 2017, we issued 9,887 shares of our common stock to participants in the ESPP.

Earnings (Loss) Per Share

3 Months Ended

Nov. 30, 2017

Earnings (Loss) Per Share

NOTE 5 – EARNINGS (LOSS) PER SHARE

The following is a reconciliation from basic earnings (loss) per share (EPS) to diluted EPS (in thousands, except per-share amounts).



	Quarter Ended
		November 30,		November 26,
		2017		2016
Numerator for basic and
diluted earnings per share:
Net loss	$	(2,392)	$	(3,958)

Denominator for basic and
diluted earnings per share:
Basic weighted average shares
outstanding		13,725		13,791
Effect of dilutive securities:
Stock options and other
stock-based awards		-		-
Diluted weighted average
shares outstanding		13,725		13,791

EPS Calculations:
Net loss per share:
Basic	$	(0.17)	$	(0.29)
Diluted		(0.17)		(0.29)

Since we incurred a net loss for the quarter ended November 30, 2017, no potentially dilutive securities are included in the calculation of diluted earnings per share because such effect would be anti-dilutive. The number of dilutive stock options and other stock-based awards for the quarter ended November 30, 2017 would have been approximately 281,000 shares. Other securities, including stock-based compensation instruments, may have a dilutive effect upon our EPS calculation in future periods if we achieve specified targets.

Segment Information

3 Months Ended

Nov. 30, 2017

Segment Information

NOTE 6 – SEGMENT INFORMATION

Our sales are primarily comprised of training and consulting services. During the first quarter of fiscal 2018, we reorganized our operations into two new divisions: the Enterprise Division and the Education Division. The Enterprise Division consists of sales channels that are primarily focused on sales of the All Access Pass and related services to both corporate and governmental entities. Paul S. Walker was named President of the Enterprise Division during the quarter ended November 30, 2017. The Education Division is focused on sales to educational institutions, including elementary schools, middle schools, high schools, and colleges and universities. M. Sean Covey was appointed President of the Education Division during the quarter ended November 30, 2017. Our internal reporting structure was revised to reflect these changes and is now comprised of three operating segments and a corporate services group. The former Strategic Markets operating segment was absorbed by the Direct Office operating segment since their target customers and sales methodologies are essentially identical. The remaining operating segments were determined to be reportable segments under the applicable accounting guidance. The following is a brief description of our reportable segments:

Direct Offices – This group includes our sales personnel that serve the United States and Canada; our international sales offices located in Japan, China, the United Kingdom, and Australia; our governmental sales channel; and our public program operations.

Education Practice – This group includes our domestic and international Education practice operations, which are focused on sales to educational institutions.

International Licensees – This division is primarily comprised of our international licensees’ royalty revenues. The international licensees are included in the Enterprise Division.

Corporate and Other – Our corporate and other information includes leasing operations, shipping and handling revenues, and certain corporate administrative expenses.

We determined that the Company’s chief operating decision maker continues to be the CEO, and the primary measurement tool used in business unit performance analysis is Adjusted EBITDA, which may not be calculated as similarly titled amounts disclosed by other companies. For reporting purposes, our consolidated Adjusted EBITDA may be calculated as our income or loss from operations excluding stock-based compensation, depreciation expense, amortization expense, and certain other charges such as restructuring charges, impaired asset charges, and adjustments for changes in the fair value of contingent liabilities from business acquisitions. Prior period segment financial information was reclassified to conform to our current reporting and operating structure.

Our operations are not capital intensive and we do not own any manufacturing facilities or equipment. Accordingly, we do not allocate assets to the divisions for analysis purposes. Interest expense and interest income are primarily generated at the corporate level and are not allocated. Income taxes are likewise calculated and paid on a corporate level (except for entities that operate in foreign jurisdictions) and are not allocated for analysis purposes.

We account for the following segment information on the same basis as the accompanying condensed consolidated financial statements (in thousands).



		Sales to
Quarter Ended		External				Adjusted
November 30, 2017		Customers		Gross Profit		EBITDA

Direct offices	$	34,197	$	24,561	$	3,078
Education practice		9,176		5,430		(670)
International licensees		3,320		2,503		1,412
Total		46,693		32,494		3,820
Corporate and eliminations		1,239		374		(3,218)
Consolidated	$	47,932	$	32,868	$	602

Quarter Ended
November 26, 2016

Direct offices	$	26,383	$	16,937	$	(1,761)
Education practice		8,743		5,024		233
International licensees		3,431		2,652		1,308
Total		38,557		24,613		(220)
Corporate and eliminations		1,230		695		(2,599)
Consolidated	$	39,787	$	25,308	$	(2,819)

As a result of the change in our segments, all of the goodwill previously included in the Strategic Markets segment was reassigned to the Direct Office segment. As of November 30, 2017, our goodwill balances were $16.8 million in the Direct Offices segment, $2.3 million in the Education Practice segment, and $5.1 million in the International Licensee segment. In conjunction with the change in reportable segments, we evaluated goodwill in the Direct Offices and Strategic Markets reportable segments for impairment, both before and after the segment change, and determined that goodwill was not impaired.

A reconciliation of our consolidated Adjusted EBITDA to consolidated net loss is provided below (in thousands).



	Quarter Ended
		November 30,		November 26,
		2017		2016
Enterprise Adjusted EBITDA	$	3,820	$	(220)
Corporate expenses		(3,218)		(2,599)
Consolidated Adjusted EBITDA		602		(2,819)
Stock-based compensation expense		(956)		(1,214)
Reduction (increase) in contingent
consideration liabilities		(176)		1,013
China office start-up costs		-		(479)
ERP system implementation costs		(426)		(288)
Depreciation		(901)		(866)
Amortization		(1,395)		(722)
Loss from operations		(3,252)		(5,375)
Interest income		61		116
Interest expense		(549)		(620)
Loss before income taxes		(3,740)		(5,879)
Income tax benefit		1,348		1,921
Net loss	$	(2,392)	$	(3,958)

Investment In FC Organizational Products

3 Months Ended

Nov. 30, 2017

Investment In FC Organizational Products

NOTE 7 – INVESTMENT IN FC ORGANIZATIONAL PRODUCTS

We own a 19.5 percent interest in FC Organizational Products (FCOP), an entity that purchased substantially all of our consumer solution business unit assets in fiscal 2008 for the purpose of selling planners and related organizational products under a comprehensive licensing agreement. Due to significant operating losses incurred after the establishment of FCOP, we reconsidered whether FCOP was a variable interest entity as defined under FASC 810, and determined that FCOP was a variable interest entity. We further determined that we are not the primary beneficiary of FCOP because we do not have the ability to direct the activities that most significantly impact FCOP’s economic performance, which primarily consist of the day-to-day sale of planning products and related accessories, and we do not have an obligation to absorb losses or the right to receive benefits from FCOP that could potentially be significant.

We account for our investment in FCOP using the equity method of accounting. However, we have not recorded our share of FCOP’s losses in the accompanying condensed consolidated statements of operations because we have impaired and written off investment balances in previous periods, as defined within the applicable accounting guidance, in excess of our share of FCOP’s losses through November 30, 2017.

The operations of FCOP are primarily financed by the sale of planning products and accessories in the normal course of business. The majority of FCOP’s sales and cash flows are seasonal and occur between October and January. Accordingly, we generally receive payment on outstanding receivables during our second and third quarters of each fiscal year. At November 30, 2017, we had $1.9 million (net of $0.6 million discount) receivable from FCOP, compared with $1.7 million (net of $0.7 million discount) receivable at August 31, 2017. These receivables are classified as components of current and long-term assets in our condensed consolidated balance sheets based on expected payment dates. The long-term receivables have been discounted using a rate of 15 percent.

Basis Of Presentation (Policy)

3 Months Ended

Nov. 30, 2017

General

In the training and consulting marketplace, we believe there are three important characteristics that distinguish us from our competitors.

We are committed to, and measure ourselves by, our clients’ achievement of transformational results.

The results of operations for the quarter ended November 30, 2017 are not necessarily indicative of results expected for the entire fiscal year ending August 31, 2018, or for any future periods.

Accounting Pronouncements Issued And Adopted

Accounting Pronouncements Issued and Adopted

Accounting Pronouncements Issued Not Yet Adopted

Inventories (Tables)

3 Months Ended

Nov. 30, 2017

Components Of Inventories



		November 30,		August 31,
		2017		2017
Finished goods	$	3,284	$	3,306
Raw materials		25		47
	$	3,309	$	3,353

Fair Value Of Financial Instruments (Tables)

3 Months Ended

Nov. 30, 2017

Schedule Of Contingent Consideration Liability



	Balance at		Increases in		Payments/			Balance at
	August 31, 2017		Fair Value		Decreases		November 30, 2017
RGP Acquisition	$	913	$	-	$	-	$	913
Jhana Acquisition		6,052		176		(1,109)		5,119
	$	6,965	$	176	$	(1,109)	$	6,032

Stock-Based Compensation (Tables)

3 Months Ended

Nov. 30, 2017

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Total Cost Of Share-Based Compensation



		Quarter Ended
		November 30,		November 26,
		2017		2016
Performance awards	$	791	$	1,078
Unvested share awards		131		113
Employee stock purchase plan		34		23
	$	956	$	1,214

Earnings (Loss) Per Share (Tables)

3 Months Ended

Nov. 30, 2017

Computation Of EPS



	Quarter Ended
		November 30,		November 26,
		2017		2016
Numerator for basic and
diluted earnings per share:
Net loss	$	(2,392)	$	(3,958)

Denominator for basic and
diluted earnings per share:
Basic weighted average shares
outstanding		13,725		13,791
Effect of dilutive securities:
Stock options and other
stock-based awards		-		-
Diluted weighted average
shares outstanding		13,725		13,791

EPS Calculations:
Net loss per share:
Basic	$	(0.17)	$	(0.29)
Diluted		(0.17)		(0.29)

Segment Information (Tables)

3 Months Ended

Nov. 30, 2017

Schedule Of Segment Operations



		Sales to
Quarter Ended		External				Adjusted
November 30, 2017		Customers		Gross Profit		EBITDA

Direct offices	$	34,197	$	24,561	$	3,078
Education practice		9,176		5,430		(670)
International licensees		3,320		2,503		1,412
Total		46,693		32,494		3,820
Corporate and eliminations		1,239		374		(3,218)
Consolidated	$	47,932	$	32,868	$	602

Quarter Ended
November 26, 2016

Direct offices	$	26,383	$	16,937	$	(1,761)
Education practice		8,743		5,024		233
International licensees		3,431		2,652		1,308
Total		38,557		24,613		(220)
Corporate and eliminations		1,230		695		(2,599)
Consolidated	$	39,787	$	25,308	$	(2,819)

Reconciliation Of Adjusted EBITDA



	Quarter Ended
		November 30,		November 26,
		2017		2016
Enterprise Adjusted EBITDA	$	3,820	$	(220)
Corporate expenses		(3,218)		(2,599)
Consolidated Adjusted EBITDA		602		(2,819)
Stock-based compensation expense		(956)		(1,214)
Reduction (increase) in contingent
consideration liabilities		(176)		1,013
China office start-up costs		-		(479)
ERP system implementation costs		(426)		(288)
Depreciation		(901)		(866)
Amortization		(1,395)		(722)
Loss from operations		(3,252)		(5,375)
Interest income		61		116
Interest expense		(549)		(620)
Loss before income taxes		(3,740)		(5,879)
Income tax benefit		1,348		1,921
Net loss	$	(2,392)	$	(3,958)

Basis Of Presentation (Narrative) (Details) $ in Millions	3 Months Ended	12 Months Ended
Basis Of Presentation (Narrative) (Details) $ in Millions	Nov. 30, 2017 country item	Aug. 31, 2018 USD ($)
Business Acquisition [Line Items]
Number of areas of expertise \| item	7
Number of important distinguishing characteristics from competitors \| item	3
Number of countries in which entity operates \| country	150
Scenario, Forecast [Member]
Business Acquisition [Line Items]
Federal statutory income tax rate		26.00%
Minimum [Member] \| Scenario, Forecast [Member]
Business Acquisition [Line Items]
Tax benefit from change in tax law \| $		$ 1.2
Maximum [Member] \| Scenario, Forecast [Member]
Business Acquisition [Line Items]
Tax benefit from change in tax law \| $		$ 1.5

Inventories (Components Of Inventories) (Details) - USD ($) $ in Thousands	Nov. 30, 2017	Aug. 31, 2017
Finished goods	$ 3,284	$ 3,306
Raw materials	25	47
Inventories	$ 3,309	$ 3,353

Fair Value Of Financial Instruments (Narrative) (Details) - USD ($) $ in Thousands	Nov. 30, 2017	Aug. 31, 2017
Contingent consideration	$ 6,032	$ 6,965
Robert Gregory Partners, LLC [Member]
Contingent consideration	913	913
Jhana Education [Member]
Contingent consideration	5,119	$ 6,052
Jhana Education [Member] \| Accrued Liabilities [Member]
Contingent consideration	$ 1,800

Fair Value Of Financial Instruments (Schedule Of Contingent Consideration Liability) (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Nov. 30, 2017	Nov. 26, 2016	Aug. 31, 2017
Business Acquisition, Contingent Consideration [Line Items]
Contingent consideration liability at beginning of year	$ 6,965
Increases in Fair Value	176	$ (1,013)	$ 176
Payments/Decreases			(1,109)
Contingent consideration liability at end of quarter	6,032		6,965
Robert Gregory Partners, LLC [Member]
Business Acquisition, Contingent Consideration [Line Items]
Contingent consideration liability at beginning of year	913
Increases in Fair Value
Payments/Decreases
Contingent consideration liability at end of quarter	913		913
Jhana Education [Member]
Business Acquisition, Contingent Consideration [Line Items]
Contingent consideration liability at beginning of year	6,052
Increases in Fair Value			176
Payments/Decreases			(1,109)
Contingent consideration liability at end of quarter	$ 5,119		$ 6,052

Stock-Based Compensation (Narrative) (Details)		3 Months Ended
Stock-Based Compensation (Narrative) (Details)	Nov. 14, 2017 item shares	Nov. 30, 2017 shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares issued under terms of the award		251,234
Number of shares reduced, withheld for minimum statutory taxes		102,765
Fiscal 2018 Long Term Incentive Plan Award [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of tranches \| item	3
Life of awards	3 years
Expiration date	Aug. 31, 2020
Employee Stock Purchase Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Price of common stock as a percent of the average fair market value		85.00%
Shares issued to employee stock purchase plan participants		9,887
Tranche One [Member] \| Fiscal 2018 Long Term Incentive Plan Award [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
New shares granted	42,883
Percent of shares plan participants are entitled to	25.00%
Vesting period of awards	3 years
Tranche Two and Three [Member] \| Fiscal 2018 Long Term Incentive Plan Award [Member] \| Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Percent of performance award to be granted	50.00%
Tranche Two and Three [Member] \| Fiscal 2018 Long Term Incentive Plan Award [Member] \| Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Percent of performance award to be granted	200.00%
New shares granted	257,300

Stock-Based Compensation (Total Cost Of Share-Based Compensation) (Details) - USD ($) $ in Thousands	3 Months Ended
	Nov. 30, 2017	Nov. 26, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation cost	$ 956	$ 1,214
Performance Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation cost	791	1,078
Unvested Share Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation cost	131	113
Employee Stock Purchase Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation cost	$ 34	$ 23

Earnings (Loss) Per Share (Narrative) (Details)	3 Months Ended
Earnings (Loss) Per Share (Narrative) (Details)	Nov. 30, 2017 shares
Earnings Per Share [Line Items]
Pontentially dilutive securities were included in the calculation of diluted earnings per share	0
Dilutive securities that would have been included in the computation of diluted EPS	281,000

Earnings (Loss) Per Share (Computation Of EPS) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Nov. 30, 2017	Nov. 26, 2016
Numerator for basic and diluted earnings per share:
Net loss	$ (2,392)	$ (3,958)
Denominator for basic and diluted earnings per share:
Basic weighted average shares outstanding	13,725	13,791
Diluted weighted average shares outstanding	13,725	13,791
EPS Calculations:
Net loss per share: Basic	$ (0.17)	$ (0.29)
Net loss per share: Diluted	$ (0.17)	$ (0.29)

Segment Information (Narrative) (Details) $ in Thousands	3 Months Ended
Segment Information (Narrative) (Details) $ in Thousands	Nov. 30, 2017 USD ($) item	Aug. 31, 2017 USD ($)
Segment Information [Line Items]
Number of operating segments \| item	3
Number of corporate services group \| item	1
Goodwill	$ 24,220	$ 24,220
Direct Offices [Member]
Segment Information [Line Items]
Goodwill	16,800
Education Practice [Member]
Segment Information [Line Items]
Goodwill	2,300
International Licensees [Member]
Segment Information [Line Items]
Goodwill	$ 5,100

Segment Information (Schedule Of Segment Operations) (Details) - USD ($) $ in Thousands	3 Months Ended
	Nov. 30, 2017	Nov. 26, 2016
Segment Reporting Information [Line Items]
Sales to external customers	$ 47,932	$ 39,787
Gross profit	32,868	25,308
Adjusted EBITDA	602	(2,819)
Operating Segments [Member]
Segment Reporting Information [Line Items]
Sales to external customers	46,693	38,557
Gross profit	32,494	24,613
Adjusted EBITDA	3,820	(220)
Operating Segments [Member] \| Direct Offices [Member]
Segment Reporting Information [Line Items]
Sales to external customers	34,197	26,383
Gross profit	24,561	16,937
Adjusted EBITDA	3,078	(1,761)
Operating Segments [Member] \| Education Practice [Member]
Segment Reporting Information [Line Items]
Sales to external customers	9,176	8,743
Gross profit	5,430	5,024
Adjusted EBITDA	(670)	233
Operating Segments [Member] \| International Licensees [Member]
Segment Reporting Information [Line Items]
Sales to external customers	3,320	3,431
Gross profit	2,503	2,652
Adjusted EBITDA	1,412	1,308
Corporate And Eliminations [Member]
Segment Reporting Information [Line Items]
Sales to external customers	1,239	1,230
Gross profit	374	695
Adjusted EBITDA	$ (3,218)	$ (2,599)

Segment Information (Reconciliation Of Adjusted EBITDA) (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Nov. 30, 2017	Nov. 26, 2016	Aug. 31, 2017
Segment Reporting Information [Line Items]
Consolidated Adjusted EBITDA	$ 602	$ (2,819)
Stock-based compensation expense	(956)	(1,214)
Reduction (increase) to contingent consideration liability	(176)	1,013	$ (176)
China office start-up costs		(479)
ERP system implementation costs	(426)	(288)
Depreciation	(901)	(866)
Amortization	(1,395)	(722)
Loss from operations	(3,252)	(5,375)
Interest income	61	116
Interest expense	(549)	(620)
Loss before income taxes	(3,740)	(5,879)
Income tax benefit	1,348	1,921
Net loss	(2,392)	(3,958)
Operating Segments [Member]
Segment Reporting Information [Line Items]
Consolidated Adjusted EBITDA	3,820	(220)
Corporate And Eliminations [Member]
Segment Reporting Information [Line Items]
Consolidated Adjusted EBITDA	$ (3,218)	$ (2,599)

Investment In FC Organizational Products (Narrative) (Details) - FC Organizational Products [Member] - USD ($) $ in Millions	3 Months Ended
	Nov. 30, 2017	Aug. 31, 2017
Related Party Transaction [Line Items]
Percent ownership interest in related party	19.50%
Receivable from related party	$ 1.9	$ 1.7
Discount on receivable from related party	$ 0.6	$ 0.7
Discount rate on long-term receivable from related party	15.00%