UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of
The
Securities Exchange Act of 1934
Date
of
Report (Date of Earliest Event Reported):
April
11, 2006
FRANKLIN COVEY CO.
(Exact
name of registrant as specified in its charter)
Commission
File No. 1-11107
|
Utah
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87-0401551
|
|
|
(State
or other jurisdiction of incorporation)
|
(IRS
Employer Identification Number)
|
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2200
West Parkway Boulevard
Salt
Lake City, Utah 84119-2099
(Address
of principal executive offices)(Zip Code)
Registrant’s
telephone number, including area code: (801)
817-1776
Former
name or former address, if changed since last report: Not
Applicable
______________________
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
o Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
o Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
o Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Item
2.02
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Results
of Operations and Financial
Condition
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On
April
11, 2006, Franklin Covey Co. (the Company) announced its financial results
for
the fiscal quarter ended February 25, 2006. A copy of the earnings release
is
being furnished as exhibit 99.1 to this current report on Form 8-K.
The
information in this Report (including the exhibit) is furnished pursuant to
Item
2.02 and shall not be deemed to be “filed” for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise
subject to the liabilities of that section, nor shall it be deemed incorporated
by reference in any filing made by the Company under the Securities Act of
1933,
as amended, or the Exchange Act, except as expressly set forth by specific
reference in such a filing.
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Item
9.01
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Financial
Statements and Exhibits
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(c)
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Exhibits
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99.1
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Earnings
release dated April 11, 2006
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SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
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FRANKLIN
COVEY CO.
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||||
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Date:
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April
11, 2006
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By:
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/s/
STEPHEN D. YOUNG
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Stephen
D. Young
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||||
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Chief
Financial Officer
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||||
News
Bulletin
| 2200 West Parkway Boulevard |
For
Further Information:
|
|
| Salt Lake City, Utah 84119-2331 |
Richard
R.
Putnam
|
|
| www.franklincovey.com |
Investor
Relations
|
|
|
(801)
817-1776
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FRANKLINCOVEY
ANNOUNCES
FOURTEENTH
CONSECUTIVE QUARTER OF SIGNIFICANT
OPERATING
IMPROVEMENTS AND SECOND QUARTER FISCAL 2006 RESULTS
Salt
Lake City, Utah -
April
11, 2006 - FranklinCovey (NYSE:
FC)
reported
its fourteenth consecutive quarter of significant improvements in operating
results with operating income of $10.6 million for the second quarter of fiscal
2006, a $2.6 million or 33% improvement compared to $7.9 million of operating
income for the same quarter of last year. The Company also reported net income
before preferred stock dividends of $9.2 million for the second quarter of
fiscal 2006, a $2.1 million or 30% improvement compared to $7.1 million in
net
income for the second quarter of fiscal 2005. The Company reported diluted
earnings per share of $0.39 after accounting for preferred stock dividends
for
the quarter ended February 25, 2006 compared to $0.19 per share after accounting
for preferred stock dividends for the second quarter of fiscal 2005. The
Company’s year-over-year operating results during the second quarter were
influenced primarily by the following: (1) a $4.2 million decrease in sales
due
to a $4.9 million decrease from closed stores and $0.4 million from decreased
technology product sales which were partially offset by growth in the other
CSBU
and OSBU channels with a 60 basis point gross margin improvement (61.5% compared
to 60.9% for the same quarter last year) resulting in a net $2.0 million
year-over-year decrease in gross profit, (2) a $3.5 million or a 9% decrease
in
selling, general and administrative (SG&A) costs primarily resulting from
store closures and initiatives to reduce overall operating costs, and (3) a
$1.2
million decline in depreciation and amortization expense.
For
the
two quarters ended February 25, 2006, the Company reported a $4.5 million or
44%
improvement in operating results with operating income of $14.7 million compared
to $10.2 million of operating income for the first two quarters of last year.
For the first two quarters of fiscal 2006, the Company reported a $3.8 million
or 45% improvement in net income, with $12.4 million of earnings before
preferred stock dividends ($0.48 diluted earnings per share after preferred
stock dividends) compared to $8.6 million of net income before preferred stock
dividends ($0.16 diluted earnings per share after preferred stock dividends)
for
the first two quarters of fiscal 2005. The Company provided the following
details underlying the continued improvement in operating and net results during
the second quarter and first two quarters of fiscal 2006.
Revenues:
Total
sales for the second quarter of fiscal 2006 decreased $4.2 million compared
to
last year’s second quarter. Organizational Solutions Business Unit (OSBU) sales
were unchanged in the second quarter of fiscal 2006 compared to the same quarter
last year at $30.4 million. Domestic OSBU sales, excluding sales of its Sales
Performance Group (SPG), grew 9%. Sales from the SPG declined $2.2 million
due
primarily to a large sale delivered in the second quarter of fiscal 2005 and
which was not repeated in the second quarter of fiscal 2006. Overall domestic
OSBU sales excluding SPG grew $1.3 million or 9% compared to a strong second
quarter last year. International sales increased $0.9 million even after a
$0.7
million unfavorable impact of foreign currency translation. OSBU revenues
increased $4.0 million or 7% during the first two quarters of fiscal 2006
compared to the first two quarters of fiscal 2005.
Sales
from the Consumer and Small Business Unit (CSBU) for the quarter ended February
25, 2006, declined $4.2 million due to a $4.9 million decline attributed to
the
24 fewer stores open during the quarter this year compared to the same quarter
last year and a $0.4 million decline in PDA’s and related products sold during
the quarter this year compared to the same quarter last year. Total CSBU sales
during the second quarter of fiscal 2006 were $47.9 million compared to $52.1
million for the same quarter last year. Retail store sales were $23.8 million
during the second fiscal quarter compared to $28.1 million for the same quarter
the prior year. Comparable store sales during the quarter grew 3% due to
increased sales of FranklinCovey Planners, totes and binders compared to the
same quarter last year and helped to partially offset the impact of fewer open
stores and decreased technology product sales during the quarter. Consumer
Direct sales grew 4% to $19.2 million during the second fiscal quarter compared
to $18.4 million for the same quarter of last year. Sales of products through
the wholesale channel to office superstores, decreased $1.3 million to $3.6
million compared to $4.9 million for the same quarter last year due mainly
to
the timing of sales ordered by these entities during this year compared to
last
year at the same time. CSBU revenues decreased $4.9 million to $89.0 million
during the first two quarters of fiscal 2006 compared to $93.9 million for
the
first two quarters of fiscal year 2005.
Selling,
general and administrative expenses:
SG&A
costs decreased by $3.5 million or 9% during the quarter, even after added
costs
associated with store closures. SG&A as a percentage of sales declined to
45% from 47% as efforts to trim expenses continued. Store closing costs are
included in SG&A expense and have a one-time impact in the current period,
but decrease costs going forward. The Company had 24 fewer stores open at the
end of the quarter compared to the same period last year. Fiscal year to date
SG&A costs declined $1.6 million or 2% as compared to the prior
year.
Depreciation
and amortization:
Depreciation and amortization expenses continued to decline during the second
quarter of fiscal 2006, reflecting lower, more focused and better-managed
capital expenditures, and the effect of certain assets becoming fully
depreciated. The Company reported a decline of $1.2 million in these expenses
during the second quarter and a $2.0 million decrease during the first two
quarters of fiscal 2006, compared to the respective periods of the prior year.
Other:
The
Company also reported a legal settlement in conjunction with a lawsuit with
one
of its vendors which added $0.9 million to net income during the quarter.
Additionally, the Company redeemed $10.0 million of its outstanding Series
A
Preferred stock during the second quarter and $20.0 million of the Series A
Preferred Stock during the first two quarters of fiscal 2006, reducing the
outstanding Series A Preferred stock to $37.3 million. The Company also
purchased 0.2 million shares of its outstanding common stock for $1.6 million
during the second quarter of fiscal 2006 as a part of an announced $10.0 million
authorization to buyback additional preferred or common stock.
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 91 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, more than 90 retail stores, and www.franklincovey.com
.
More
than 1,500 FranklinCovey associates provide professional services and products
in 36 offices in 129 countries.
Franklin
Covey Co.
CONDENSED
CONSOLIDATED INCOME STATEMENTS
(in
thousands, except per share amounts)
|
Quarter
Ended
|
Two
Quarters Ended
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||||||||||||
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February
25,
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February
26,
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February
25,
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February
26,
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||||||||||
|
2006
|
2005
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2006
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2005
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|||||||||
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(unaudited)
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(unaudited)
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||||||||||||
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Sales
|
$
|
78,333
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$
|
82,523
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$
|
150,684
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$
|
151,627
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|||||
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Cost
of sales
|
30,160
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32,306
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58,104
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59,975
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|||||||||
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Gross
margin
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48,173
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50,217
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92,580
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91,652
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|||||||||
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Selling,
general and administrative
|
35,488
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38,939
|
73,255
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74,868
|
|||||||||
|
Depreciation
|
1,221
|
2,320
|
2,629
|
4,498
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|||||||||
|
Amortization
|
908
|
1,043
|
2,003
|
2,087
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|||||||||
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Operating
income
|
10,556
|
7,915
|
14,693
|
10,199
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|||||||||
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Interest
income
|
316
|
165
|
645
|
282
|
|||||||||
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Interest
expense
|
(660
|
)
|
(29
|
)
|
(1,303
|
)
|
(66
|
)
|
|||||
|
Legal
settlement
|
873
|
873
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|||||||||||
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Income
before provision for taxes
|
11,085
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8,051
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14,908
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10,415
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|||||||||
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Provision
for income taxes
|
1,872
|
965
|
2,462
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1,803
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|||||||||
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Net
income
|
9,213
|
7,086
|
12,446
|
8,612
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|||||||||
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Preferred
stock dividends
|
(1,139
|
)
|
(2,184
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)
|
(2,518
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)
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(4,368
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)
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|||||
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Net
income attributable to common shareholders
|
$
|
8,074
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$
|
4,902
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$
|
9,928
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$
|
4,244
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|||||
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Net
income attributable to common shareholders per
share
|
$
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0.39
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$
|
0.19
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$
|
0.48
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$
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0.16
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|||||
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Sales
Detail:
|
|||||||||||||
|
Retail
Stores
|
$
|
23,836
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$
|
28,055
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$
|
38,506
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$
|
46,443
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|||||
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Consumer
Direct
|
19,200
|
18,387
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37,788
|
37,245
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|||||||||
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Wholesale
|
3,620
|
4,897
|
10,229
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8,480
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|||||||||
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Other
|
1,291
|
765
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2,454
|
1,750
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|||||||||
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Total
Consumer and Small Business Unit
|
47,947
|
52,104
|
88,977
|
93,918
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|||||||||
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Domestic
|
15,223
|
16,162
|
31,616
|
29,568
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|||||||||
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International
|
15,163
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14,257
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30,091
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28,141
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|||||||||
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Total
Organizational Solutions Business Unit
|
30,386
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30,419
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61,707
|
57,709
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|||||||||
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Total
|
$
|
78,333
|
$
|
82,523
|
$
|
150,684
|
$
|
151,627
|
|||||