[X] |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
[ ] |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Utah
(State of incorporation)
|
87-0401551
(I.R.S. employer identification number)
|
|
2200 West Parkway Boulevard
Salt Lake City, Utah
(Address of principal executive offices)
|
84119-2099
(Zip Code)
|
|
Registrant’s telephone number,
Including area code
|
(801) 817-1776
|
Title of Each Class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
Common Stock, $.05 Par Value
|
FC
|
New York Stock Exchange
|
Large Accelerated Filer
|
☐
|
Accelerated Filer
|
☒
|
Non-accelerated Filer
|
☐
|
Smaller Reporting Company
|
☒
|
Emerging Growth Company
|
☐
|
November 30,
|
August 31,
|
|||||||
2019
|
2019
|
|||||||
(unaudited)
|
||||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
32,761
|
$
|
27,699
|
||||
Accounts receivable, less allowance for doubtful accounts of $4,570 and $4,242
|
53,195
|
73,227
|
||||||
Inventories
|
3,155
|
3,481
|
||||||
Prepaid expenses and other current assets
|
14,092
|
14,933
|
||||||
Total current assets
|
103,203
|
119,340
|
||||||
Property and equipment, net
|
18,181
|
18,579
|
||||||
Intangible assets, net
|
46,519
|
47,690
|
||||||
Goodwill
|
24,220
|
24,220
|
||||||
Deferred income tax assets
|
5,158
|
5,045
|
||||||
Other long-term assets
|
14,010
|
10,039
|
||||||
$
|
211,291
|
$
|
224,913
|
|||||
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
||||||||
Current liabilities:
|
||||||||
Current portion of term notes payable
|
$
|
5,000
|
$
|
5,000
|
||||
Current portion of financing obligation
|
2,399
|
2,335
|
||||||
Accounts payable
|
6,970
|
9,668
|
||||||
Deferred subscription revenue
|
45,987
|
56,250
|
||||||
Other deferred revenue
|
6,674
|
5,972
|
||||||
Accrued liabilities
|
16,976
|
24,319
|
||||||
Total current liabilities
|
84,006
|
103,544
|
||||||
Term notes payable, less current portion
|
18,750
|
15,000
|
||||||
Financing obligation, less current portion
|
16,020
|
16,648
|
||||||
Other liabilities
|
8,800
|
7,527
|
||||||
Deferred income tax liabilities
|
180
|
180
|
||||||
Total liabilities
|
127,756
|
142,899
|
||||||
Shareholders’ equity:
|
||||||||
Common stock, $.05 par value; 40,000 shares authorized, 27,056 shares issued
|
1,353
|
1,353
|
||||||
Additional paid-in capital
|
217,946
|
215,964
|
||||||
Retained earnings
|
58,859
|
59,403
|
||||||
Accumulated other comprehensive income
|
232
|
269
|
||||||
Treasury stock at cost, 13,078 shares and 13,087 shares
|
(194,855
|
)
|
(194,975
|
)
|
||||
Total shareholders’ equity
|
83,535
|
82,014
|
||||||
$
|
211,291
|
$
|
224,913
|
Quarter Ended
|
||||||||
November 30,
|
November 30,
|
|||||||
2019
|
2018
|
|||||||
(unaudited)
|
||||||||
Net sales
|
$
|
58,613
|
$
|
53,829
|
||||
Cost of sales
|
16,584
|
17,046
|
||||||
Gross profit
|
42,029
|
36,783
|
||||||
Selling, general, and administrative
|
39,399
|
34,644
|
||||||
Depreciation
|
1,619
|
1,554
|
||||||
Amortization
|
1,170
|
1,238
|
||||||
Loss from operations
|
(159
|
)
|
(653
|
)
|
||||
Interest income
|
5
|
28
|
||||||
Interest expense
|
(606
|
)
|
(632
|
)
|
||||
Loss before income taxes
|
(760
|
)
|
(1,257
|
)
|
||||
Income tax benefit (provision)
|
216
|
(100
|
)
|
|||||
Net loss
|
$
|
(544
|
)
|
$
|
(1,357
|
)
|
||
Net loss per share:
|
||||||||
Basic and diluted
|
$
|
(0.04
|
)
|
$
|
(0.10
|
)
|
||
Weighted average number of common shares:
|
||||||||
Basic and diluted
|
13,982
|
13,917
|
||||||
COMPREHENSIVE LOSS
|
||||||||
Net loss
|
$
|
(544
|
)
|
$
|
(1,357
|
)
|
||
Foreign currency translation adjustments,
|
||||||||
net of income tax benefit
|
||||||||
of $- and $11
|
(37
|
)
|
(309
|
)
|
||||
Comprehensive loss
|
$
|
(581
|
)
|
$
|
(1,666
|
)
|
Quarter Ended
|
||||||||
November 30,
|
November 30,
|
|||||||
2019
|
2018
|
|||||||
(unaudited)
|
||||||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Net loss
|
$
|
(544
|
)
|
$
|
(1,357
|
)
|
||
Adjustments to reconcile net loss to net cash provided
|
||||||||
by operating activities:
|
||||||||
Depreciation and amortization
|
2,789
|
2,792
|
||||||
Amortization of capitalized curriculum costs
|
1,029
|
1,431
|
||||||
Stock-based compensation expense
|
1,851
|
946
|
||||||
Deferred income taxes
|
(115
|
)
|
(645
|
)
|
||||
Change in fair value of contingent consideration liabilities
|
91
|
24
|
||||||
Loss on disposal of assets
|
35
|
-
|
||||||
Changes in assets and liabilities:
|
||||||||
Decrease in accounts receivable, net
|
20,090
|
16,096
|
||||||
Decrease in inventories
|
328
|
233
|
||||||
Decrease in prepaid expenses and other assets
|
656
|
847
|
||||||
Decrease in accounts payable and accrued liabilities
|
(9,333
|
)
|
(5,098
|
)
|
||||
Decrease in deferred revenue
|
(9,006
|
)
|
(7,586
|
)
|
||||
Increase (decrease) in income taxes payable/receivable
|
(1,029
|
)
|
503
|
|||||
Decrease in other long-term liabilities
|
(6
|
)
|
(52
|
)
|
||||
Net cash provided by operating activities
|
6,836
|
8,134
|
||||||
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Purchases of property and equipment
|
(1,408
|
)
|
(1,431
|
)
|
||||
Curriculum development costs
|
(458
|
)
|
(689
|
)
|
||||
Purchase of note receivable from bank (Note 11)
|
(2,600
|
)
|
-
|
|||||
Net cash used for investing activities
|
(4,466
|
)
|
(2,120
|
)
|
||||
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Proceeds from line of credit borrowings
|
-
|
22,684
|
||||||
Payments on line of credit borrowings
|
-
|
(25,513
|
)
|
|||||
Proceeds from term notes payable financing
|
5,000
|
-
|
||||||
Principal payments on term notes payable
|
(1,250
|
)
|
(1,563
|
)
|
||||
Principal payments on financing obligation
|
(564
|
)
|
(505
|
)
|
||||
Purchases of common stock for treasury
|
(3
|
)
|
(7
|
)
|
||||
Payment of contingent consideration liabilities
|
(782
|
)
|
(217
|
)
|
||||
Proceeds from sales of common stock held in treasury
|
254
|
230
|
||||||
Net cash provided by (used for) financing activities
|
2,655
|
(4,891
|
)
|
|||||
Effect of foreign currency exchange rates on cash and cash equivalents
|
37
|
(191
|
)
|
|||||
Net increase in cash and cash equivalents
|
5,062
|
932
|
||||||
Cash and cash equivalents at the beginning of the period
|
27,699
|
10,153
|
||||||
Cash and cash equivalents at the end of the period
|
$
|
32,761
|
$
|
11,085
|
||||
Supplemental disclosure of cash flow information:
|
||||||||
Cash paid for income taxes
|
$
|
932
|
$
|
242
|
||||
Cash paid for interest
|
580
|
651
|
||||||
Non-cash investing and financing activities:
|
||||||||
Purchases of property and equipment financed by accounts payable
|
$
|
249
|
$
|
447
|
||||
Use of note receivable to modify revenue contract (Note 11)
|
3,246
|
-
|
Accumulated
|
||||||||||||||||||||||||||||
Common
|
Common
|
Additional
|
Other
|
Treasury
|
Treasury
|
|||||||||||||||||||||||
Stock
|
Stock
|
Paid-In
|
Retained
|
Comprehensive
|
Stock
|
Stock
|
||||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Earnings
|
Income
|
Shares
|
Amount
|
||||||||||||||||||||||
Balance at August 31, 2019
|
27,056
|
$
|
1,353
|
$
|
215,964
|
$
|
59,403
|
$
|
269
|
(13,087
|
)
|
$
|
(194,975
|
)
|
||||||||||||||
Issuance of common stock from
|
||||||||||||||||||||||||||||
treasury
|
131
|
9
|
123
|
|||||||||||||||||||||||||
Purchase of treasury shares
|
(3
|
)
|
||||||||||||||||||||||||||
Stock-based compensation
|
1,851
|
|||||||||||||||||||||||||||
Cumulative translation
|
||||||||||||||||||||||||||||
adjustments
|
(37
|
)
|
||||||||||||||||||||||||||
Net loss
|
(544
|
)
|
||||||||||||||||||||||||||
Balance at November 30, 2019
|
27,056
|
$
|
1,353
|
$
|
217,946
|
$
|
58,859
|
$
|
232
|
(13,078
|
)
|
$
|
(194,855
|
)
|
Accumulated
|
||||||||||||||||||||||||||||
Common
|
Common
|
Additional
|
Other
|
Treasury
|
Treasury
|
|||||||||||||||||||||||
Stock
|
Stock
|
Paid-In
|
Retained
|
Comprehensive
|
Stock
|
Stock
|
||||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Earnings
|
Income
|
Shares
|
Amount
|
||||||||||||||||||||||
Balance at August 31, 2018
|
27,056
|
$
|
1,353
|
$
|
211,280
|
$
|
63,569
|
$
|
341
|
(13,159
|
)
|
$
|
(196,043
|
)
|
||||||||||||||
Issuance of common stock from
|
||||||||||||||||||||||||||||
treasury
|
64
|
11
|
166
|
|||||||||||||||||||||||||
Purchases of common shares
|
||||||||||||||||||||||||||||
for treasury
|
(7
|
)
|
||||||||||||||||||||||||||
Stock-based compensation
|
946
|
|||||||||||||||||||||||||||
Cumulative translation
|
||||||||||||||||||||||||||||
adjustments
|
(309
|
)
|
||||||||||||||||||||||||||
Cumulative effect of
|
||||||||||||||||||||||||||||
accounting change
|
(3,143
|
)
|
||||||||||||||||||||||||||
Net loss
|
(1,357
|
)
|
||||||||||||||||||||||||||
Balance at November 30, 2018
|
27,056
|
$
|
1,353
|
$
|
212,290
|
$
|
59,069
|
$
|
32
|
(13,148
|
)
|
$
|
(195,884
|
)
|
•
|
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 offerings, which includes the All Access Pass (available
in multiple languages), the Leader in Me membership, and other subscription offerings; intellectual property licenses; on-site training; training led through certified facilitators; on-line
learning; and organization-wide transformational processes, including consulting and coaching services.
|
•
|
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, the United Kingdom, Germany, Switzerland, and Austria; and we contract with licensee partners who deliver our content and provide related services in over 140 other countries and territories around
the world.
|
November 30,
|
August 31,
|
|||||||
2019
|
2019
|
|||||||
Finished goods
|
$
|
3,108
|
$
|
3,434
|
||||
Raw materials
|
47
|
47
|
||||||
$
|
3,155
|
$
|
3,481
|
YEAR ENDING AUGUST 31,
|
Amount
|
|||
2020
|
$
|
3,750
|
||
2021
|
5,000
|
|||
2022
|
5,000
|
|||
2023
|
5,000
|
|||
2024
|
5,000
|
|||
$
|
23,750
|
Balance at
|
Change in
|
Balance at
|
||||||||||||||
August 31, 2019
|
Fair Value
|
Payments
|
November 30, 2019
|
|||||||||||||
RGP Acquisition
|
$
|
1,761
|
$
|
(7
|
)
|
$
|
(500
|
)
|
$
|
1,254
|
||||||
Jhana Acquisition
|
3,468
|
98
|
(282
|
)
|
3,284
|
|||||||||||
$
|
5,229
|
$
|
91
|
$
|
(782
|
)
|
$
|
4,538
|
|
November 30,
|
||||
Balance Sheet Caption |
2019
|
||||
Assets:
|
|||||
Operating lease right of use assets
|
Other long-term assets
|
$
|
1,481
|
||
Liabilities:
|
|||||
Current:
|
|||||
Operating lease liabilities
|
Accrued liabilities
|
780
|
|||
Long-Term:
|
|||||
Operating lease liabilities
|
Other long-term liabilities
|
701
|
|||
$
|
1,481
|
||||
Weighted Average Remaining Lease Term:
|
|||||
Operating leases (years)
|
3.0
|
||||
Weighted Average Discount Rate:
|
|||||
Operating leases
|
4.2
|
%
|
YEAR ENDING AUGUST 31,
|
Amount
|
|||
Remainder of 2020
|
$
|
663
|
||
2021
|
479
|
|||
2022
|
134
|
|||
2023
|
117
|
|||
2024
|
94
|
|||
Thereafter
|
98
|
|||
Total operating lease payments
|
1,585
|
|||
Less imputed interest
|
(104
|
)
|
||
Present value of operating lease liabilities
|
$
|
1,481
|
YEAR ENDING AUGUST 31,
|
Amount
|
|||
Remainder of 2020
|
$
|
2,930
|
||
2021
|
2,341
|
|||
2022
|
1,514
|
|||
2023
|
1,514
|
|||
2024
|
1,527
|
|||
Thereafter
|
1,275
|
|||
$
|
11,101
|
Quarter Ended
|
||||||||
November 30,
|
November 30,
|
|||||||
2019
|
2018
|
|||||||
Long-term incentive awards
|
$
|
1,636
|
$
|
733
|
||||
Restricted stock awards
|
175
|
175
|
||||||
Employee stock purchase plan
|
40
|
38
|
||||||
$
|
1,851
|
$
|
946
|
•
|
Time-Based Award Shares – Twenty-five percent of the 2020 LTIP award shares vest to participants after three years of service. The total number of shares that may be earned by participants after
three years of service is 25,101 shares. The number of shares awarded in this tranche is not variable and will not fluctuate based on financial measures.
|
•
|
Performance-Based Award Shares – The remaining two tranches of the 2020 LTIP award are based on fiscal 2022 qualified adjusted earnings before interest, taxes, depreciation, and amortization
(Adjusted EBITDA) and fiscal 2022 subscription service sales, respectively. 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) or up to 200
percent of the participant’s award (maximum threshold) depending on the levels of qualified Adjusted EBITDA and subscription service sales achieved. The number of shares that may be earned for achieving 100 percent of the performance-based
objectives totals 75,315 shares. The maximum number of shares that may be awarded in connection with the performance-based tranches of the 2020 LTIP totals 150,630 shares.
|
Quarter Ended
|
||||||||
November 30,
|
November 30,
|
|||||||
2019
|
2018
|
|||||||
Numerator for basic and
|
||||||||
diluted loss per share:
|
||||||||
Net loss
|
$
|
(544
|
)
|
$
|
(1,357
|
)
|
||
Denominator for basic and
|
||||||||
diluted loss per share:
|
||||||||
Basic weighted average shares
|
||||||||
outstanding
|
13,982
|
13,917
|
||||||
Effect of dilutive securities:
|
||||||||
Stock options and other
|
||||||||
stock-based awards
|
-
|
-
|
||||||
Diluted weighted average
|
||||||||
shares outstanding
|
13,982
|
13,917
|
||||||
EPS Calculations:
|
||||||||
Net loss per share:
|
||||||||
Basic and diluted
|
$
|
(0.04
|
)
|
$
|
(0.10
|
)
|
•
|
Direct Offices – Our Direct Office segment has a depth of expertise in helping organizations solve problems that require changes in human behavior, including leadership,
productivity, execution, trust, and sales performance. We have a variety of principle-based offerings that help build winning and profitable cultures. This segment includes our sales personnel that serve the United States and Canada; our
international sales offices located in Japan, China, the United Kingdom, Australia, and our new operations in Germany, Switzerland, and Austria; our government services sales channel; and our public programs operations.
|
•
|
International Licensees – Our independently owned international licensees provide our offerings and services in countries where we do not have a directly-owned office. These
licensee partners allow us to expand the reach of our services to large multinational organizations as well as smaller organizations in their countries. This segment’s results are primarily comprised of royalty revenues received from these
licensees.
|
•
|
Education Practice – Centered around the principles found in The Leader in Me, the Education practice is dedicated to helping
educational institutions build a culture that will produce great results. We believe these results are manifested by increases in student performance, improved school culture, decreased disciplinary issues, and increased teacher engagement
and parental involvement. This segment includes our domestic and international Education practice operations, which are focused on sales to educational institutions such as elementary schools, high schools, and colleges and universities.
|
•
|
Corporate and Other – Our corporate and other information includes leasing operations, shipping and handling revenues, royalty revenues from Franklin Planner Corp. (Note 11),
and certain corporate administrative expenses.
|
Sales to
|
||||||||||||
Quarter Ended
|
External
|
Adjusted
|
||||||||||
November 30, 2019
|
Customers
|
Gross Profit
|
EBITDA
|
|||||||||
Enterprise Division:
|
||||||||||||
Direct offices
|
$
|
42,111
|
$
|
31,411
|
$
|
5,710
|
||||||
International licensees
|
3,721
|
3,120
|
2,035
|
|||||||||
45,832
|
34,531
|
7,745
|
||||||||||
Education practice
|
11,082
|
6,657
|
(1,102
|
)
|
||||||||
Corporate and eliminations
|
1,699
|
841
|
(1,682
|
)
|
||||||||
Consolidated
|
$
|
58,613
|
$
|
42,029
|
$
|
4,961
|
||||||
Quarter Ended
|
||||||||||||
November 30, 2018
|
||||||||||||
Enterprise Division:
|
||||||||||||
Direct offices
|
$
|
38,471
|
$
|
27,070
|
$
|
3,640
|
||||||
International licensees
|
3,677
|
2,862
|
1,629
|
|||||||||
42,148
|
29,932
|
5,269
|
||||||||||
Education practice
|
10,347
|
6,393
|
(265
|
)
|
||||||||
Corporate and eliminations
|
1,334
|
458
|
(1,835
|
)
|
||||||||
Consolidated
|
$
|
53,829
|
$
|
36,783
|
$
|
3,169
|
Quarter Ended
|
||||||||
November 30,
|
November 30,
|
|||||||
2019
|
2018
|
|||||||
Segment Adjusted EBITDA
|
$
|
6,643
|
$
|
5,004
|
||||
Corporate expenses
|
(1,682
|
)
|
(1,835
|
)
|
||||
Consolidated Adjusted EBITDA
|
4,961
|
3,169
|
||||||
Stock-based compensation expense
|
(1,851
|
)
|
(946
|
)
|
||||
Increase in the fair value of contingent
|
||||||||
consideration liabilities
|
(91
|
)
|
(24
|
)
|
||||
Knowledge Capital wind-down costs
|
(389
|
)
|
-
|
|||||
Licensee transition costs
|
-
|
(60
|
)
|
|||||
Depreciation
|
(1,619
|
)
|
(1,554
|
)
|
||||
Amortization
|
(1,170
|
)
|
(1,238
|
)
|
||||
Loss from operations
|
(159
|
)
|
(653
|
)
|
||||
Interest income
|
5
|
28
|
||||||
Interest expense
|
(606
|
)
|
(632
|
)
|
||||
Loss before income taxes
|
(760
|
)
|
(1,257
|
)
|
||||
Income tax benefit (provision)
|
216
|
(100
|
)
|
|||||
Net loss
|
$
|
(544
|
)
|
$
|
(1,357
|
)
|
Quarter Ended
|
||||||||
November 30,
|
November 30,
|
|||||||
2019
|
2018
|
|||||||
Americas
|
$
|
44,036
|
$
|
40,918
|
||||
Asia Pacific
|
10,139
|
9,280
|
||||||
Europe/Middle East/Africa
|
4,438
|
3,631
|
||||||
$
|
58,613
|
$
|
53,829
|
Quarter Ended
|
Services and
|
Leases and
|
||||||||||||||||||
November 30, 2019
|
Products
|
Subscriptions
|
Royalties
|
Other
|
Consolidated
|
|||||||||||||||
Enterprise Division:
|
||||||||||||||||||||
Direct offices
|
$
|
27,251
|
$
|
14,288
|
$
|
572
|
$
|
-
|
$
|
42,111
|
||||||||||
International licensees
|
590
|
-
|
3,131
|
-
|
3,721
|
|||||||||||||||
27,841
|
14,288
|
3,703
|
-
|
45,832
|
||||||||||||||||
Education practice
|
3,585
|
6,818
|
679
|
-
|
11,082
|
|||||||||||||||
Corporate and eliminations
|
-
|
-
|
379
|
1,320
|
1,699
|
|||||||||||||||
Consolidated
|
$
|
31,426
|
$
|
21,106
|
$
|
4,761
|
$
|
1,320
|
$
|
58,613
|
||||||||||
Quarter Ended
|
||||||||||||||||||||
November 30, 2018
|
||||||||||||||||||||
Enterprise Division:
|
||||||||||||||||||||
Direct offices
|
$
|
25,009
|
$
|
12,675
|
$
|
787
|
$
|
-
|
$
|
38,471
|
||||||||||
International licensees
|
872
|
-
|
2,805
|
-
|
3,677
|
|||||||||||||||
25,881
|
12,675
|
3,592
|
-
|
42,148
|
||||||||||||||||
Education practice
|
3,917
|
5,713
|
717
|
-
|
10,347
|
|||||||||||||||
Corporate and eliminations
|
-
|
-
|
-
|
1,334
|
1,334
|
|||||||||||||||
Consolidated
|
$
|
29,798
|
$
|
18,388
|
$
|
4,309
|
$
|
1,334
|
$
|
53,829
|
•
|
Sales – Our consolidated net sales for the quarter ended November 30, 2019 increased nine percent, or $4.8 million, to $58.6 million,
compared with the first quarter of fiscal 2019. Sales increased nine percent in the Enterprise Division, increased seven percent in the Education Division, and grew in nearly all of our delivery channels within the Divisions. Our first
quarter fiscal 2020 sales reflected increased subscription and subscription-related sales at both our domestic and international locations, increased facilitator sales, increased Education segment revenues, and increased sales from the
acquisition of our Germany, Switzerland, and Austria licensee, which recognized $0.7 million of sales during the quarter ended November 30, 2019.
|
•
|
Cost of Sales/Gross Profit – Our cost of sales totaled $16.6 million for the quarter ended November 30, 2019, compared with $17.0 million in the first quarter of fiscal 2019.
Gross profit for the first quarter of fiscal 2020 increased 14 percent to $42.0 million compared with $36.8 million in the first quarter of fiscal 2019, and increased primarily due to increased sales. Our consolidated gross margin
increased to 71.7 percent of sales compared with 68.3 percent in the prior year, reflecting increased higher margin subscription revenues over the prior year.
|
•
|
Operating Expenses – Our operating expenses for the quarter ended November 30, 2019 increased $4.8 million compared with the prior year, which was primarily due to increased
selling, general, and administrative (SG&A) expenses. Increased SG&A expenses were primarily related to increased investments in new sales and sales related personnel; increased commissions and bonuses on higher sales; a $0.9
million increase in non-cash stock-based compensation; the addition of personnel in Germany, Switzerland, and Austria, who were employed by a licensee during the first quarter of fiscal 2019; increased thought leadership and marketing
expense; and costs we were required to pay that were associated with the wind-down of Knowledge Capital.
|
•
|
Operating Loss and Net Loss – Our loss from operations for the quarter ended November 30, 2019 improved to $(0.2) million compared with a loss of $(0.7) million in the first
quarter of fiscal 2019. Net loss for the first quarter of fiscal 2020 was $(0.5) million, or $(.04) per share, compared with a net loss of $(1.4) million, or $(.10) per share, in the prior year.
|
Quarter Ended
|
Quarter Ended
|
|||||||||||||||||||
November 30,
|
% of
|
November 30,
|
% of
|
|||||||||||||||||
2019
|
Sales
|
2018
|
Sales
|
Change
|
||||||||||||||||
Sales
|
$
|
42,111
|
100.0
|
$
|
38,471
|
100.0
|
$
|
3,640
|
||||||||||||
Cost of sales
|
10,700
|
25.4
|
11,401
|
29.6
|
(701
|
)
|
||||||||||||||
Gross profit
|
31,411
|
74.6
|
27,070
|
70.4
|
4,341
|
|||||||||||||||
SG&A expenses
|
25,701
|
61.0
|
23,430
|
60.9
|
2,271
|
|||||||||||||||
Adjusted EBITDA
|
$
|
5,710
|
13.6
|
$
|
3,640
|
9.5
|
$
|
2,070
|
Quarter Ended
|
Quarter Ended
|
|||||||||||||||||||
November 30,
|
% of
|
November 30,
|
% of
|
|||||||||||||||||
2019
|
Sales
|
2018
|
Sales
|
Change
|
||||||||||||||||
Sales
|
$
|
3,721
|
100.0
|
$
|
3,677
|
100.0
|
$
|
44
|
||||||||||||
Cost of sales
|
601
|
16.2
|
815
|
22.2
|
(214
|
)
|
||||||||||||||
Gross profit
|
3,120
|
83.8
|
2,862
|
77.8
|
258
|
|||||||||||||||
SG&A expenses
|
1,085
|
29.2
|
1,233
|
33.5
|
(148
|
)
|
||||||||||||||
Adjusted EBITDA
|
$
|
2,035
|
54.7
|
$
|
1,629
|
44.3
|
$
|
406
|
Quarter Ended
|
Quarter Ended
|
|||||||||||||||||||
November 30,
|
% of
|
November 30,
|
% of
|
|||||||||||||||||
2019
|
Sales
|
2018
|
Sales
|
Change
|
||||||||||||||||
Sales
|
$
|
11,082
|
100.0
|
$
|
10,347
|
100.0
|
$
|
735
|
||||||||||||
Cost of sales
|
4,425
|
39.9
|
3,954
|
38.2
|
471
|
|||||||||||||||
Gross profit
|
6,657
|
60.1
|
6,393
|
61.8
|
264
|
|||||||||||||||
SG&A expenses
|
7,759
|
70.0
|
6,658
|
64.3
|
1,101
|
|||||||||||||||
Adjusted EBITDA
|
$
|
(1,102
|
)
|
(9.9
|
)
|
$
|
(265
|
)
|
(2.6
|
)
|
$
|
(837
|
)
|
Period
|
Total Number of Shares Purchased
|
Average Price Paid Per Share
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
Maximum Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs(1)
(in thousands)
|
||||||||||||
September 1, 2019 to September 30, 2019
|
-
|
$
|
-
|
-
|
$
|
13,174
|
||||||||||
October 1, 2019 to October 31, 2019
|
-
|
-
|
-
|
13,174
|
||||||||||||
November 1, 2019 to November 30, 2019
|
-
|
-
|
-
|
40,000
|
||||||||||||
Total Common Shares
|
-
|
$
|
-
|
-
|
(1)
|
On November 15, 2019, our Board of Directors approved a new plan to repurchase up to $40.0 million of our outstanding common stock. The previously existing common stock repurchase plan was
canceled and the new common share repurchase plan does not have an expiration date. Under the terms of the previously existing purchase plan, we purchased 1,539,828 shares of our common stock for $26.8 million. We did not purchase any
shares of our common stock under this new repurchase plan during the quarter ended November 30, 2019.
The actual timing, number, and value of common shares repurchased under this plan will be determined at our discretion and will depend on a number of factors, including, among others, general
market and business conditions, the trading price of common shares, and
applicable legal requirements. We have no obligation to repurchase any common shares under the authorization, and the repurchase plan may be suspended, discontinued, or modified at any time
for any reason.
The table above excludes 88 shares of our common stock that were withheld for statutory taxes on shares distributed to a participant in our Non-Qualified Deferred Compensation plan during the
quarter ended November 30, 2019. The withheld shares were valued at the
market price on the date that the shares were distributed to participants and were acquired at a weighted average price of $37.32 per share.
|
(A)
|
Exhibits:
|
|
31.1
|
Rule 13a-14(a) Certifications of the Chief Executive Officer.**
|
|
31.2
|
Rule 13a-14(a) Certifications of the Chief Financial Officer.**
|
|
32
|
Section 1350 Certifications.**
|
|
101.INS
|
XBRL Instance Document.
|
|
101.SCH
|
XBRL Taxonomy Extension Schema Document.
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
101.DEF
|
XBRL Taxonomy Definition Linkbase Document.
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document.
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
FRANKLIN COVEY CO.
|
||||
Date:
|
January 9, 2020
|
By:
|
/s/ Robert A. Whitman
|
|
Robert A. Whitman
|
||||
Chief Executive Officer
|
||||
(Duly Authorized Officer)
|
||||
Date:
|
January 9, 2020
|
By:
|
/s/ Stephen D. Young
|
|
Stephen D. Young
|
||||
Chief Financial Officer
|
||||
(Principal Financial and Accounting Officer)
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Franklin Covey Co.;
|
||
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
|
||
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
|
||
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
||
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
||
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
||
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
|
||
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
||
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors
(or persons performing the equivalent functions):
|
||
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report
financial information; and
|
||
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
|
|
|
|
|
Date: January 9, 2020
|
/s/ Robert A. Whitman
|
|
|
Robert A. Whitman
Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Franklin Covey Co.;
|
||
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
|
||
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
|
||
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
||
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
||
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
||
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
|
||
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
||
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors
(or persons performing the equivalent functions):
|
||
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report
financial information; and
|
||
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
|
|
|
|
|
Date: January 9, 2020
|
/s/ Stephen D. Young
|
|
|
Stephen D. Young
Chief Financial Officer
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at
the dates and for the periods indicated.
|
|
|
|
|
|
|||
/s/ Robert A. Whitman
|
|
/s/ Stephen D. Youg
|
|
Robert A. Whitman
Chief Executive Officer |
|
|
Stephen D. Young
Chief Financial Officer |
Date: January 9, 2020
|
Date: January 9, 2020
|