News Release Details

SALT LAKE CITY, Nov. 14 /PRNewswire-FirstCall/ -- FranklinCovey (NYSE: FC) today announced financial results for its fiscal year and fourth quarter ended August 31, 2006. For the fiscal year ended August 31, 2006, the Company reported a $5.6 million improvement in operating results with operating income of $14.0 million compared to an $8.4 million income from operations in fiscal 2005. For the fiscal year ended August 31, 2006, the Company reported an $18.4 million improvement in net income with $28.6 million of net income before preferred stock dividends ($1.18 earnings per diluted common share, after accounting for preferred stock dividends) compared to $10.2 million of net income before preferred stock dividends ($.34 loss per common share, after accounting for preferred dividends and recapitalization valuation non-cash charge) for the fiscal year 2005. Net income for the fiscal year ended August 31, 2006 included an income tax benefit of $14.9 million primarily from a reversal of a valuation allowance established in prior years against net deferred income tax assets.

The $5.6 million improvement in operating results for fiscal 2006 compared to fiscal 2005 is comprised of the following: (1) a $4.9 million decrease in sales, much more than 100% of which was due to closed stores, combined with an improved gross margin (60.1 % compared to 59.5%) resulting in a net $1.3 million year-over-year decrease in gross margin, (2) a $3.6 million decrease in selling, general and administrative costs, and (3) a $3.3 million reduction in depreciation and amortization expense.

For the fourth quarter ended August 31, 2006, the Company reported an improvement of $1.8 million in its operating results, with $0.7 million of operating income compared to a loss from operations of $1.0 million for the comparable quarter of the prior year. FranklinCovey also reported an improvement in its net results with $15.1 million of net income before preferred stock dividends ($0.70 earnings per diluted common share, after accounting for preferred stock dividends) for the fourth quarter ended August 31, 2006, compared to a $1.5 million net loss before preferred stock dividends ($.16 per common share loss, after accounting for preferred stock dividends) for the same quarter of the prior year. The fourth quarter net income included a $14.7 million tax benefit primarily from the reversal of the valuation allowance described above.

The year-over-year improvement in the operating results for the quarter is comprised of the following: (1) a $1.5 million decrease in sales, more than 100% of which was due to closed stores, resulting in a net $0.3 million year-over-year decrease in gross margin, (2) a $1.5 million decrease in selling, general and administrative costs, and (3) a $0.6 million reduction in depreciation and amortization expense.

The Company provided the following details underlying the continued improvement in its operating results during the fourth quarter and full year of fiscal 2006.

Revenues: Organizational Solutions Business Unit (OSBU) sales for the year were $127.8 million, a 4% increase compared to $122.9 million for fiscal year 2005. Sales in the OSBU for the fourth quarter of fiscal 2006 grew by 5% to $34.9 million, compared to $33.4 million for the same quarter last year. International sales during the quarter were up 3% while domestic sales grew by 6%.

Sales from the Consumer Solutions Business Unit (CSBU) for the fiscal year were $150.8 million compared to $160.7 million for fiscal year 2005 with store closures accounting for more than 100 percent of the decline with an impact of $12.4 million on total sales. CSBU sales for the fourth quarter ended August 31, 2006 declined to $29.8 million compared to $32.7 million for the same quarter last year, primarily a result of stores closures during the year. Comparable store sales increased 1% during the quarter compared to the same quarter last year. Consumer direct sales declined less than 1% during the fourth quarter to $13.4 million compared to $13.5 million for the same quarter last year. Wholesale revenues were $2.6 million during the quarter compared to $3.6 million for the same quarter of the prior year. Other CSBU sales increased by $0.1 million to $1.3 million compared to $1.2 million for the same quarter last year.

Selling, general and administrative expenses: Selling, general and administrative expenses (SG&A) declined by $3.6 million for the year ended August 31, 2006, compared to fiscal year 2005. SG&A decreased to $35.9 million during the fourth quarter of fiscal year 2006 compared to $37.3 million for the fourth quarter of fiscal 2005. The decreases were a result of closed retail stores and continued efforts to reduce operating costs.

Depreciation and amortization: Depreciation and amortization expenses (D&A) continued to decline during the fiscal year 2005 and fourth quarter, reflecting lower, more focused and better-managed capital expenditures and the effect of certain assets becoming fully depreciated and store closures. The Company reported declines of $3.3 million and $0.6 million in D&A during the fiscal year and fourth quarter ended August 31, 2006, respectively, compared to the same periods of the prior year.

Liquidity: The Company had $30.6 million in cash and cash equivalents at August 31, 2006. During fiscal 2006, the Company redeemed $20.0 million of its outstanding Series A Preferred Stock and purchased $5.1 million or 0.7 million shares of its Common Stock during fiscal 2006 under a plan that was approved by the Board of Directors in January 2006.

About FranklinCovey

FranklinCovey is a leading learning and performance services firm assisting professionals and organizations in measurably increasing their effectiveness in leadership, productivity, communication and sales. Clients include more than 90 of the Fortune 100, more than three-quarters of the Fortune 500, thousands of small and mid-sized businesses, as well as numerous government entities. Organizations and professionals access FranklinCovey services and products through consulting services, licensed client facilitators, one-on-one coaching, public workshops, catalogs, retail stores, and www.franklincovey.com . Nearly 1,500 FranklinCovey associates provide professional services and products to clients in more than 130 countries.

                                FRANKLIN COVEY CO.

                   CONSOLIDATED CONDENSED STATEMENTS OF INCOME
                    ( in thousands, except per share amounts )

                                Fiscal Year Ended          Quarter Ended
                                    August 31,               August 31,
                               2006          2005        2006         2005
                            (unaudited)  (unaudited)  (unaudited)  (unaudited)

    Net sales                $278,623      $283,542     $64,657      $66,128

    Cost of sales             111,238       114,847      26,144       27,352

    Gross profit              167,385       168,695      38,513       38,776

    Selling, general
     and administrative       144,747       148,305      35,862       37,342
    Depreciation                4,779         7,774       1,016        1,428
    Amortization                3,813         4,173         902        1,043
    Income (loss)
     from operations           14,046         8,443         733       (1,037)

    Interest expense
     and other, net              (415)          658        (275)        (340)
    Income (loss) before
     income taxes              13,631         9,101         458       (1,377)

    Income tax (provision)
     benefit                   14,942         1,085      14,650         (117)
    Net income (loss)          28,573        10,186      15,108       (1,494)

    Preferred dividends        (4,385)       (8,270)       (933)      (1,719)
    Loss on recapitalization
     of preferred stock                      (7,753)
    Net income (loss)
     available to
     common shareholders     $ 24,188      $ (5,837)   $ 14,175     $ (3,213)

    Income (loss) per share
     available to
     common shareholders:
       Basic                 $   1.20      $  (0.34)   $   0.71     $  (0.16)
       Diluted               $   1.18      $  (0.34)   $   0.70     $  (0.16)

    Weighted average
     number of common
     and common share
     equivalents:
       Basic                   20,134        19,949      19,883       20,264
       Diluted                 20,554        19,949      20,206       20,264

    Sales Detail:
       Retail Stores         $ 62,440      $ 74,331    $ 12,440     $ 14,445
       Consumer Direct         63,681        62,873      13,389       13,484
       Wholesale               19,783        19,691       2,635        3,584
       Other                    4,910         3,757       1,288        1,216
    Total CSBU Sales          150,814       160,652      29,752       32,729

       Domestic                71,108        68,816      21,685       20,513
       International           56,701        54,074      13,220       12,886
    Total OSBU Sales          127,809       122,890      34,905       33,399
    Total Net Sales          $278,623      $283,542    $ 64,657     $ 66,128

SOURCE  FranklinCovey
    -0-                             11/14/2006
    /CONTACT:  Richard R. Putnam, Investor Relations, +1-801-817-1776/
    /Web site:  http://www.franklincovey.com /
    (FC)

CO:  FranklinCovey
ST:  Utah
IN:  EDU PUB REA FIN
SU:  ERN

GV
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0957 11/14/2006 09:00 EST http://www.prnewswire.com