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
12, 2007
FRANKLIN
COVEY CO.
(Exact
name of registrant as specified in its charter)
Commission
File No. 1-11107
|
Utah
|
87-0401551
|
|
|
(State
or other jurisdiction of incorporation)
|
(IRS
Employer Identification Number)
|
|
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
April
12, 2007, Franklin Covey Co. (the Company) announced its financial results
for
the fiscal quarter and two quarters ended March 3, 2007. A copy of the earnings
release is being furnished as exhibit 99.1 to this current report on Form
8-K.
Certain
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
8.01 Other
Events
The
Company will host a discussion on Friday, April 13, 2007 at 11:00 a.m. Eastern
Time (9:00 a.m. Mountain Time) for shareholders and the financial community
to
review the Company’s fiscal 2007 second quarter financial results.
Interested
parties may participate in the discussion by calling 1-866-362-4832, access
code: 49639256 and by logging on to
http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=102601&eventID=1526727.
Item
9.01 Financial
Statements and Exhibits
| (d) |
Exhibits
|
99.1 Earnings
release dated April 12, 2007
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.
|
FRANKLIN
COVEY CO.
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||||
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Date:
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April
12, 2007
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By:
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/s/
STEPHEN D. YOUNG
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|
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Stephen
D. Young
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||||
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Chief
Financial Officer
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||||
Exhibit
99.1
 |
News
Bulletin
|
|
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2200
West Parkway Boulevard
Salt
Lake City, Utah 84119-2331
www.franklincovey.com
|
Richard
Putnam
Investor
Relations
(801)
817-1776
|
|
|
FRANKLINCOVEY
ANNOUNCES
SECOND
QUARTER FISCAL 2007 RESULTS
|
Salt
Lake City, Utah -
April
12, 2007 - FranklinCovey (NYSE:
FC)
announced its earnings and operating results for the quarter ended March 3,
2007. The Company reported operating income of $9.5 million for the second
quarter of fiscal 2007, compared to $10.6 million of operating income for the
same quarter of last year. The Company reported a better than expected 18%
increase in its Organizational Solutions Business Unit (OSBU) sales during
the
quarter which was offset by declines in its Consumer Solutions Business Unit
(CSBU) sales due in part to closed stores and a shift in weeks around the
holiday shopping season compared to last year. The Company had an increase
in
its effective tax rate (48.6% for the second quarter of fiscal 2007 compared
to
16.9% for the same period last year) due to the tax benefit recorded in fiscal
2006. However, because of the NOL-carry-forwards most of the income taxes will
be non-cash. Due in significant part to the change in tax rate, the Company
reported net income before preferred stock dividends of $4.7 million ($0.19
earnings per share after accounting for preferred stock dividends) for the
second quarter of fiscal 2007, compared to $9.2 million in net income ($0.39
per
share after accounting for preferred stock dividends) for the second quarter
of
fiscal 2006. The Company expects that its effective tax rate for fiscal 2007
will be at this higher rate.
The
Company’s year-over-year operating results during the second quarter were
influenced primarily by the following: (1) $4.9 million or 18% increase in
sales
through our OSBU which was offset by a $6.4 million decline in sales (due
in
part to store closures) through the CSBU resulting in a net $1.5 million
decrease in sales; (2) steady gross margin (61.4% in the second quarter of
fiscal 2007 compared to 61.5% in the second quarter of fiscal 2006) resulting
in
a net $1.0 million year-over-year decrease in gross profit; (3) a $1.2 million
increase in selling, general and administrative (SG&A) costs due in part to
increased commissions associated with higher sales in the OSBU and increased
legal fees; (4) a $1.2 million gain on the sale of the printing building;
and
(5) a $0.1 million increase in depreciation and amortization expense primarily
due to a $0.3 million impairment charge on the printing presses that are
anticipated to be sold in the third quarter of fiscal 2007.
For
the
two quarters ended March 3, 2007, the Company reported operating income of
$13.1
million compared to $14.7 million of operating income for the first two quarters
of last year. For the first two quarters of fiscal 2007, the Company reported
$6.1 million of earnings before preferred stock dividends ($0.21 diluted
earnings per share after preferred stock dividends) compared to $12.4 million
of
net income before preferred stock dividends ($0.48 diluted earnings per share
after preferred stock dividends) for the first two quarters of fiscal 2006,
reflecting the higher tax rate impact for the two quarters in fiscal 2007.
The
Company provided the following details underlying the operating and net results
during the second quarter and first two quarters of fiscal 2007.
Revenues:
Total
sales for the second quarter of fiscal 2007 decreased $1.5 million compared
to
last year’s second quarter with one less business day during the quarter
compared to last year. OSBU sales grew $4.9 million or 18% to $32.7 million
in
the second quarter of fiscal 2007 compared to $27.8 million in the same quarter
last year. Domestic OSBU sales grew 26% primarily as a result of the increased
sales force and sales force effectiveness. International sales increased
$0.9
million on stronger sales from licensees and Company-owned operations. OSBU
revenues increased $9.5 million or 17% during the first two quarters of fiscal
2007 compared to the first two quarters of fiscal 2006.
Sales
from the CSBU for the quarter ended March 3, 2007, declined $6.4 million,
including a $2.4 million decline attributed to the 10 fewer stores open during
the quarter this year compared to the same quarter last year and a $1.0 million
decline in technology related products sold during the quarter this year
compared to the same quarter last year. Total CSBU sales during the second
quarter of fiscal 2007 were $44.1 million compared to $50.5 million for the
same
quarter last year. Retail store sales were $19.3 million during the second
fiscal quarter compared to $23.8 million for the same quarter the prior year.
Comparable store sales during the quarter were down 10% due in part to the
one
fewer business day the week after Christmas and the week after Thanksgiving
being included in the first fiscal quarter. Comparable store sales declined
6%
when comparable store weeks were compared and included comparable days around
the Christmas selling season. Consumer Direct sales were $17.1 million during
the second fiscal quarter compared to $19.6 million for the same quarter
of last
year. Sales of products through the wholesale channel to office superstores,
increased 14% to $3.6 million compared to $3.1 million for the same quarter
last
year due mainly to the timing of sales ordered by these entities compared
to
last year. Total CSBU revenues decreased $7.8 million to $86.5 million for
the
first two quarters of fiscal 2007 compared to $94.2 million for the first
two
quarters of fiscal year 2006.
Selling,
general and administrative expenses:
SG&A
costs increased by $1.2 million during the quarter. The increase was primarily
due to increased commissions associated with higher sales in the OSBU and
increased legal fees compared to the same quarter last year. In the second
quarter last year, the Company had a $0.3 million favorable settlement that
reduced its legal fees and was not repeated this year. The Company also
increased its investment into its sales force this year compared to last
year by
hiring more sales personel and increasing its advertising and marketing as
well
as curriculum development. The costs associated with these initiatives were
partially offset by cost reductions associated with store closures and other
cost-saving initiatives. The Company had 10 fewer stores open during the
quarter
compared to the same quarter last year. Fiscal year to date SG&A costs
increased $4.3 million compared to the same period of the prior
year.
Depreciation
and amortization:
The
Company reported an increase in depreciation and amortization expenses of
$0.1
million during the second quarter primarily due to a $0.3 million impairment
charge on the printing presses that are anticipated to be sold duing the
third
quarter of fiscal 2007. The Company had a $0.4 million decrease during the
first
two quarters of fiscal 2007, compared to the respective periods of the prior
year.
Other:
The
Company also reported that it purchased 0.3 million shares of its outstanding
common stock for $2.5 million during the second quarter of fiscal 2007 as
a part
of a previously announced $10.0 million authorization. The Company also sold
the
real estate and building which housed its printing operations for $2.5 million
and had a gain on the sale of $1.2 million.
Subsequent
to the quarter end, the Company redeemed the remaining outstanding Series
A
Preferred Stock and accrued dividends for $37.7 million. The Company also
entered into a credit agreement with its banks enabling it to borrow up to
$25
million for working capital and general purposes. The Company redeemed the
Preferred Stock with borrowings from the credit agreement and from its cash
balances at the beginning of April.
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, retail stores, and www.franklincovey.com
.
Nearly
1,500 FranklinCovey associates provide professional services and products
in 36
offices servicing more than 100 countries.
FRANKLIN
COVEY CO.
CONDENSED
CONSOLIDATED INCOME STATEMENTS
(in
thousands, except per share amounts)
|
Quarter
Ended
|
Two
Quarters Ended
|
||||||||||||
|
March
3,
|
February
25,
|
March
3,
|
February
25,
|
||||||||||
|
2007
|
2006
|
2007
|
2006
|
||||||||||
|
(unaudited)
|
(unaudited)
|
||||||||||||
|
Sales
|
$
|
76,876
|
$
|
78,333
|
$
|
152,405
|
$
|
150,684
|
|||||
|
Cost
of sales
|
29,687
|
30,160
|
58,819
|
58,104
|
|||||||||
|
Gross
margin
|
47,189
|
48,173
|
93,586
|
92,580
|
|||||||||
|
Selling,
general and administrative
|
36,666
|
35,488
|
77,514
|
73,255
|
|||||||||
|
Gain
on sale of manufacturing facility
|
(1,227
|
)
|
(1,227
|
)
|
|||||||||
|
Depreciation
|
1,366
|
1,221
|
2,403
|
2,629
|
|||||||||
|
Amortization
|
900
|
908
|
1,802
|
2,003
|
|||||||||
|
Operating
income
|
9,484
|
10,556
|
13,094
|
14,693
|
|||||||||
|
Interest
income
|
357
|
316
|
557
|
645
|
|||||||||
|
Interest
expense
|
(675
|
)
|
(660
|
)
|
(1,336
|
)
|
(1,303
|
)
|
|||||
|
Legal
settlement
|
873
|
873
|
|||||||||||
|
Income
before provision for taxes
|
9,166
|
11,085
|
12,315
|
14,908
|
|||||||||
|
Provision
for income taxes
|
4,452
|
1,872
|
6,186
|
2,462
|
|||||||||
|
Net
income
|
4,714
|
9,213
|
6,129
|
12,446
|
|||||||||
|
Preferred
stock dividends
|
(934
|
)
|
(1,139
|
)
|
(1,867
|
)
|
(2,518
|
)
|
|||||
|
Net
income available to common shareholders
|
$
|
3,780
|
$
|
8,074
|
$
|
4,262
|
$
|
9,928
|
|||||
|
Net
income available to common shareholders per share - diluted
|
$
|
0.19
|
$
|
0.39
|
$
|
0.21
|
$
|
0.48
|
|||||
|
Sales
Detail:
|
|||||||||||||
|
Retail
Stores
|
$
|
19,265
|
$
|
23,781
|
$
|
33,392
|
$
|
38,424
|
|||||
|
Consumer
Direct
|
17,062
|
19,613
|
36,998
|
38,789
|
|||||||||
|
Wholesale
|
3,581
|
3,138
|
8,158
|
9,250
|
|||||||||
|
CSBU
International
|
2,643
|
2,681
|
5,029
|
5,325
|
|||||||||
|
Other
|
1,583
|
1,291
|
2,877
|
2,454
|
|||||||||
|
Total
Consumer Solutions Business Unit
|
44,134
|
50,504
|
86,454
|
94,242
|
|||||||||
|
Domestic
|
19,313
|
15,347
|
37,034
|
31,677
|
|||||||||
|
International
|
13,429
|
12,482
|
28,917
|
24,765
|
|||||||||
|
Total
Organizational Solutions Business Unit
|
32,742
|
27,829
|
65,951
|
56,442
|
|||||||||
|
Total
|
$
|
76,876
|
$
|
78,333
|
$
|
152,405
|
$
|
150,684
|
|||||