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):
July
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
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|
|
(State
or other jurisdiction of incorporation)
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(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))
Item
2.02 Results
of Operations and Financial Condition
On
July
11, 2006, Franklin Covey Co. (the Company) announced its financial results
for
the fiscal quarter ended May 27, 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.
Item
9.01 Financial
Statements and Exhibits
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(d)
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Exhibits
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| 99.1 Earnings release dated July 11, 2006 |
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 hereunto
duly authorized.
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FRANKLIN
COVEY CO.
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||||
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Date:
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July
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
 |
For
Further Information:
|
|
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2200
West Parkway
Boulevard
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Richard
R.
Putnam
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Salt
Lake City, Utah
84119-2331
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Investor
Relations
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www.franklincovey.com
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(801)
817-1776
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FRANKLINCOVEY
ANNOUNCES
THIRD
QUARTER AND FISCAL 2006 YEAR TO DATE RESULTS
Salt
Lake City, Utah -
July
11, 2006 - FranklinCovey (NYSE:
FC)
today
announced its financial results for the fiscal third quarter ended May 27,
2006.
FranklinCovey reported net income of $1.0 million before preferred stock
dividends ($0.00 earnings per common share after preferred stock dividends)
for
the quarter ended May 27, 2006, compared to $3.1 million before preferred stock
dividends and preferred stock recapitalization charge ($0.34 per common share
loss after accounting for dividends and the recapitalization charge) for the
same quarter of the prior year. The fiscal 2005 third quarter results included
a
$7.8 million charge for the recapitalization of its preferred stock. The Company
also reported a loss from operations of $1.4 million for its seasonally slowest
third quarter of fiscal 2006 compared to an operating loss of $0.7 million
for
the comparable quarter of the last year. The Company’s financial results during
the quarter were influenced primarily by the following as compared to the third
quarter of last year: (1) a $2.5 million decrease in sales, $2.3 million due
to
store closures and lower technology product sales in the retail stores, (2)
a
$2.0 million year-over-year decrease in gross margin resulting from the decrease
in sales and an 80 basis point decline in gross profit margin, primarily the
result of higher symposium costs, (3) a $0.5 million decrease in selling,
general and administrative (SG&A) costs, and (4) a $0.8 million decline in
depreciation and amortization expense. Operating results were also impacted
by
corrections made in the third fiscal quarter to prior financial statements
made
of our wholly-owned Mexico subsidiary which resulted in a decrease of $0.5
million in the international sales and a $0.5 million increase in SG&A
expense.
For
the
first three quarters of fiscal 2006, the Company reported $13.5 million of
net
income before preferred dividends (0.48 per diluted common share after
accounting for dividends), a $1.8 million improvement in its net income before
preferred dividends compared to $11.7 million of net income before preferred
stock dividends and the recapitalization charge ($0.18 per common share loss
after preferred stock dividends and the recapitalization charge) for the first
three quarters of fiscal 2005. The Company also reported a $3.8 million
improvement in operating results for the first three quarters of fiscal 2006
to
$13.3 million of operating income on revenues of $214.0 million compared to
an
operating income of $9.5 million on revenues of $217.4 million for the first
three quarters of last year. The Company provided the following details
underlying the continued improvement of operating results during the fiscal
third quarter and first three quarters of fiscal 2006.
Revenues:
Total
sales for the third quarter of fiscal 2006 declined $2.5 million. In addition
to
the $2.3 million decline coming from closed stores and decreased technologies
sales in the retail stores compared to last year’s third quarter, increases in
training sales, internationally and domestically, were more than offset by
the
impact from corrections made to the sales reported by the Mexico subsidiary
and
year-over-year sales decreases in SPG, marketing events, Consumer Direct,
Wholesale, and sales of the xQ survey’s to some large corporate clients last
year and not repeated this year. Organizational Solutions Business Unit (OSBU)
sales for the third quarter of fiscal 2006 were $31.2 million compared to $31.8
million for the same quarter last year. Domestic training sales growth was
more
than offset by sales decreases in SPG and marketing events and were $17.8
million compared to $18.7 million for the same quarter last year. International
revenues increased by 3% during the third quarter of fiscal 2006 to $13.4
million compared to $13.0 for the same quarter last year even after the Mexico
sales correction of $0.5 million made during the quarter.
Sales
from the Consumer and Small Business Unit (CSBU) for the quarter ended May
27,
2006, declined $1.9 million to $32.1 million compared to $34.0 million for
the
same quarter last year. Retail store sales declined $2.0 million to $11.5
million during the quarter compared to $13.5 million for the same quarter of
the
prior year because of a $2.0 million decrease in sales from closed stores and
a
$0.3 million decrease in technology product sales. Partially offsetting the
declines was a $0.3 million increase in product sales of planners, binders
and
totes. Comparable store sales were flat with a 0% decline during the quarter
compared to the same quarter last year. There were 19 fewer domestic stores
open
during the quarter compared to the third quarter of last year. Consumer direct
sales were $12.5 million compared to $12.1 million for the same quarter of
last
year. Wholesale sales were $6.9 million compared to $7.6 million for the same
quarter last year.
Selling,
general and administrative expenses:
SG&A
costs decreased by $0.5 million during the quarter and declined by $2.1 million
for the first three quarters ended May 27, 2006, compared to the same period
last year and included a $0.5 million charge to administrative costs due to
corrections made in the quarter to the financial statements of the Mexico
subsidiary. The decrease during the quarter was primarily due to more focused
efforts to reduce the Company’s operating expenses and the lower costs
associated with fewer retail stores partially off-set by increased training
sales personnel costs.
Depreciation
and amortization:
Depreciation and amortization expenses (D&A) continued to decline during the
third 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 $0.8 million in D&A during
the third quarter and $2.8 million during the first three quarters of fiscal
2006, compared to the respective periods of the prior year.
Other
developments:
The
Company also announced that through the first three quarters of fiscal 2006
that
it had redeemed $20 million of its Series A Preferred Stock and 485,000 shares
for $3.9 million of its 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
.
Nearly
1,500 FranklinCovey associates provide professional services and products in
36
offices in 129 countries.
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FRANKLIN
COVEY CO.
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CONDENSED
CONSOLIDATED INCOME STATEMENT
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|||||||||||||
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(
in thousands, except per share amounts )
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|||||||||||||
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Quarter
Ended
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Three
Quarters Ended
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||||||||||||
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May
27,
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May
28,
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May
27,
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May
28,
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||||||||||
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2006
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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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Net
sales
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$
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63,282
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$
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65,788
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$
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213,966
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$
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217,415
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|||||
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Cost
of sales
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26,990
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27,520
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85,094
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87,495
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|||||||||
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Gross
margin
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36,292
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38,268
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128,872
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129,920
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|||||||||
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Selling,
general and administrative
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35,629
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36,095
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108,885
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110,964
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|||||||||
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Depreciation
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1,134
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1,848
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3,763
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6,346
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|||||||||
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Amortization
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908
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1,043
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2,911
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3,130
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|||||||||
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Income
(loss) from operations
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(1,379
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)
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(718
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)
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13,313
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9,480
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|||||||
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Interest
income, net
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(356
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)
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281
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(1,013
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)
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497
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|||||||
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Gain
on disposal of investment in unconsolidated subsidiary
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500
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500
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|||||||||||
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Legal
settlement
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873
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||||||||||||
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Income
(loss) before income taxes
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(1,735
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)
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63
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13,173
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10,477
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||||||||
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Income
tax benefit (provision)
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2,754
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3,006
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292
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1,203
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|||||||||
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Net
income
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1,019
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3,069
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13,465
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11,680
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|||||||||
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Preferred
stock dividends
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(934
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)
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(2,184
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)
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(3,452
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)
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(6,551
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)
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|||||
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Loss
on recapitalization of preferred stock
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(7,753
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)
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(7,753
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)
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|||||||||
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Net
income (loss) attributable to common shareholders
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$
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85
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$
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(6,868
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)
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$
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10,013
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$
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(2,624
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)
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Net
income (loss) per share attributable to common shareholders -
diluted
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$
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0.00
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$
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(0.34
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)
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$
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0.48
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$
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(0.18
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)
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|||
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Weighted
average common shares - diluted
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20,734
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19,922
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20,670
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19,847
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|||||||||
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Sales
Detail:
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|||||||||||||
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Retail
Stores
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$
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11,493
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$
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13,443
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$
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50,001
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$
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59,886
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|||||
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Catalog
/ e-commerce
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12,504
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12,144
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50,291
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49,390
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|||||||||
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Wholesale
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6,920
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7,627
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17,148
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16,107
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|||||||||
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Other
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1,168
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792
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3,622
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2,542
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|||||||||
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Total
Consumer and Small Business Unit
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32,085
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34,006
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121,062
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127,925
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|||||||||
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Domestic
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17,807
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18,736
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49,423
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48,303
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|||||||||
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International
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13,390
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13,046
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43,481
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41,187
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|||||||||
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Total
Organizational Solutions Business Unit
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31,197
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31,782
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92,904
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89,490
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|||||||||
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Total
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$
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63,282
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$
|
65,788
|
$
|
213,966
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$
|
217,415
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