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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended May 31, 2022

[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 001-11107

Logo

Description automatically generated

FRANKLIN COVEY CO.

(Exact name of registrant as specified in its charter)


Utah		87-0401551
(State or other jurisdiction of incorporation or organization)		(I.R.S. employer identification no.)

2200 West Parkway Boulevard		84119-2099
Salt Lake City, Utah		(Zip Code)
(Address of principal executive offices)

Registrant’s telephone number,		(801) 817-1776
Including area code

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.05 Par Value	FC	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes T No £

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes T No £

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	£	Accelerated Filer	T
Non-accelerated Filer	£	Smaller Reporting Company	£
Emerging Growth Company	£

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. £

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes £ No T

Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock as of the latest practicable date:

13,858,140 shares of Common Stock as of June 30, 2022
‎

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FRANKLIN COVEY CO.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per-share amounts)



		May 31,		August 31,
		2022		2021
		(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	52,068	$	47,417
Accounts receivable, less allowance for doubtful accounts of $4,345 and $4,643		50,430		70,680
Inventories		3,356		2,496
Prepaid expenses and other current assets		16,233		16,115
Total current assets		122,087		136,708

Property and equipment, net		9,591		11,525
Intangible assets, net		45,993		50,097
Goodwill		31,220		31,220
Deferred income tax assets		6,269		4,951
Other long-term assets		13,236		15,153
	$	228,396	$	249,654

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of notes payable	$	5,835	$	5,835
Current portion of financing obligation		3,119		2,887
Accounts payable		8,067		6,948
Deferred subscription revenue		66,646		74,772
Other deferred revenue		16,646		11,117
Accrued liabilities		28,570		34,980
Total current liabilities		128,883		136,539

Notes payable, less current portion		8,490		12,975
Financing obligation, less current portion		8,794		11,161
Other liabilities		6,908		8,741
Deferred income tax liabilities		375		375
Total liabilities		153,450		169,791

Shareholders’ equity:
Common stock, $0.05 par value; 40,000 shares authorized, 27,056 shares issued		1,353		1,353
Additional paid-in capital		217,862		214,888
Retained earnings		76,443		63,591
Accumulated other comprehensive income (loss)		(203)		709
Treasury stock at cost, 13,218 shares and 12,889 shares		(220,509)		(200,678)
Total shareholders’ equity		74,946		79,863
	$	228,396	$	249,654

See notes to condensed consolidated financial statements

‎

FRANKLIN COVEY CO.

CONDENSED CONSOLIDATED INCOME STATEMENTS AND STATEMENTS

OF COMPREHENSIVE INCOME

(in thousands, except per-share amounts)



		Quarter Ended			Three Quarters Ended
		May 31,		May 31,		May 31,		May 31,
		2022		2021		2022		2021
		(unaudited)				(unaudited)

Net sales	$	66,176	$	58,736	$	184,035	$	155,223
Cost of sales		15,044		12,829		41,190		35,589
Gross profit		51,132		45,907		142,845		119,634

Selling, general, and administrative		42,637		40,132		120,042		107,439
Depreciation		1,217		1,423		3,686		4,904
Amortization		1,329		1,238		4,106		3,503
Income from operations		5,949		3,114		15,011		3,788

Interest income		21		16		48		56
Interest expense		(405)		(525)		(1,274)		(1,633)
Income before income taxes		5,565		2,605		13,785		2,211
Income tax benefit (provision)		1,597		10,149		(933)		9,605
Net income	$	7,162	$	12,754	$	12,852	$	11,816

Net income per share:
Basic	$	0.51	$	0.90	$	0.90	$	0.84
Diluted		0.51		0.90		0.90		0.84

Weighted average number of common shares:
Basic		14,173		14,145		14,244		14,068
Diluted		14,175		14,156		14,273		14,133


COMPREHENSIVE INCOME
Net income	$	7,162	$	12,754	$	12,852	$	11,816
Foreign currency translation adjustments,
net of income taxes of
$0, $0, $0, and $0		(736)		(151)		(912)		123
Comprehensive income	$	6,426	$	12,603	$	11,940	$	11,939

See notes to condensed consolidated financial statements
‎

FRANKLIN COVEY CO.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)



	Three Quarters Ended
		May 31,		May 31,
		2022		2021
		(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	12,852	$	11,816
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization		7,792		8,407
Amortization of capitalized curriculum costs		2,374		2,583
Stock-based compensation		5,987		5,127
Deferred income taxes		(1,409)		(10,521)
Change in fair value of contingent consideration liabilities		60		164
Amortization of right-of-use operating lease assets		695		758
Changes in assets and liabilities, net of effect of acquired business:
Decrease in accounts receivable, net		19,794		12,391
Decrease (increase) in inventories		(888)		322
Decrease in prepaid expenses and other assets		321		1,393
Increase (decrease) in accounts payable and accrued liabilities		(4,294)		4,629
Decrease in deferred revenue		(2,760)		(4,172)
Increase (decrease) in income taxes payable/receivable		355		(653)
Decrease in other long-term liabilities		(1,343)		(1,392)
Net cash provided by operating activities		39,536		30,852

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment		(2,080)		(1,185)
Curriculum development costs		(1,379)		(1,827)
Acquisition of business, net of cash acquired		-		(10,554)
Net cash used for investing activities		(3,459)		(13,566)

CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes payable		(4,585)		(3,750)
Principal payments on financing obligation		(2,135)		(1,922)
Purchases of common stock for treasury		(23,850)		(2,971)
Payment of contingent consideration liabilities		(1,099)		(899)
Proceeds from sales of common stock held in treasury		1,006		783
Net cash used for financing activities		(30,663)		(8,759)
Effect of foreign currency exchange rates on cash and cash equivalents		(763)		93
Net increase in cash and cash equivalents		4,651		8,620
Cash and cash equivalents at the beginning of the period		47,417		27,137
Cash and cash equivalents at the end of the period	$	52,068	$	35,757

Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	1,744	$	1,454
Cash paid for interest		1,295		1,634

Non-cash investing and financing activities:
Purchases of property and equipment financed by accounts payable	$	165	$	105
Acquisition of right-of-use operating lease assets for operating lease liabilities		344		885
Use of notes payable to acquire business		-		3,766

See notes to condensed consolidated financial statements
‎

FRANKLIN COVEY CO.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(in thousands and unaudited)

Accumulated

Common

Additional

Other

Treasury

Stock

Paid-In

Retained

Comprehensive

Stock

Amount

Capital

Earnings

Income (Loss)

Amount

Balance at August 31, 2021

27,056

1,353

214,888

63,591

709

(12,889)

(200,678)

Issuance of common stock from

treasury

(3,033)

217

3,378

Purchases of common shares