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):
January
9, 2008
FRANKLIN
COVEY CO.
(Exact
name of registrant as specified in its charter)
Commission
File No. 1-11107
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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:
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[
]
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Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
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[
]
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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[
]
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR240.14d-2(b))
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[
]
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR240.13e-4(c))
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Item
2.02 Results of Operations and Financial Condition
On
January 9, 2008, Franklin Covey Co. (the Company) announced its financial
results for the fiscal quarter ended December 1, 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
On
January 4, 2008, Franklin Covey Co. announced it will host a discussion for
shareholders and the financial community to review its financial results for
the
fiscal quarter ended December 1, 2007. The discussion will be held on
Friday, January 11, 2008 at 11:00 a.m. Eastern Standard Time (9:00 a.m. Mountain
Standard Time).
Interested
persons can participate by calling 1-800-573-4842, access code: 11636978 and
by
logging on to http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=102601&eventID=1733914.
Item
9.01 Financial Statements and Exhibits
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(d)
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Exhibits
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99.1
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Earnings
release dated January 9, 2008
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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 hereunto
duly authorized.
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FRANKLIN
COVEY CO.
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Date:
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January
11, 2008
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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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Exhibit
99.1
News
Bulletin
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2200
West Parkway Boulevard
Salt
Lake City, Utah 84119-2331
www.franklincovey.com
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FRANKLINCOVEY
ANNOUNCES INCREASES
IN
FIRST QUARTER OPERATING RESULTS
Salt
Lake City, Utah – January
9, 2008 – Franklin Covey Co. (NYSE: FC) today announced
financial results for its first quarter of fiscal 2008. For the
quarter ended December 1, 2007, the Company reported consolidated income from
operations totaling $5.1 million, a $1.5 million increase over income from
operations of $3.6 million reported in the corresponding quarter of fiscal
2007. Net income available to common shareholders increased to $2.1
million ($0.10 diluted earnings per common share) for the quarter ended December
1, 2007, compared to $0.5 million ($0.02 diluted earnings per common share
after
preferred stock dividends) for the quarter ended December 2, 2006.
The
Company’s financial results for the quarter ended December 1, 2007 were
primarily attributable to the following factors: 1) Sales through the Company’s
Organizational Solutions Business Unit (OSBU) continued to improve and increased
$0.6 million compared to the prior year. However, increased OSBU
sales were offset by a $2.5 million decrease in Consumer Solutions Business
Unit
(CSBU) sales, which resulted in a net decrease in consolidated sales compared
to
fiscal 2007; 2) Gross margin, which is gross profit stated in terms of a
percentage of sales, improved to 62.4 percent of sales compared to 61.4 percent
in the prior year; 3) Operating expenses decreased by $1.9 million, which was
the result of decreased selling, general, and administrative expenses totaling
$2.1 million that were offset by a $0.2 million increase in depreciation
expense; 4) Net interest expense increased by $0.4 million; and 5) Preferred
dividends decreased by $0.9 million compared to the prior year.
The
following information presents further details regarding the Company’s financial
performance during the quarter ended December 1, 2007.
Sales
–
Consolidated sales decreased to $73.6 million compared to $75.5 million
in the first quarter of fiscal 2007. Although sales through the OSBU,
which primarily consist of training and consulting services sales, continue
to
strengthen and improved $0.6 million over the prior year, the increase was
insufficient to offset a $2.5 million decrease in CSBU sales, which consist
primarily of product sales. Increased OSBU sales during the quarter
continued the favorable trend of improving training sales that began in prior
fiscal years and was reflected by increases in both domestic and international
sales. The two percent increase in total international sales was
impacted by the fiscal 2007 sales and conversions of the Company’s wholly owned
subsidiary in Brazil and training operations in Mexico to licensee
operations. The Company now receives royalties from these operations
consistent with other licensees, which resulted in a $1.3 million difference
in
reported sales. Excluding the impact of the conversion of the Brazil
and Mexico offices, comparable sales from our wholly owned subsidiaries and
licensees increased 12 percent compared to the prior year.
Sales
through our CSBU channels declined primarily due to a $1.4 million decrease
in
consumer direct sales and a $1.0 million decrease in retail store
sales. Consumer direct sales declined primarily due to decreased
traffic through these channels, which includes eCommerce and the Company’s call
center. Retail sales declined primarily due to the effects of reduced
traffic, the elimination of low-margin technology sales, and closed
stores. Comparable store sales declined six percent compared to the
same quarter of fiscal 2007.
Gross
Profit –
Due to decreased sales, the Company’s consolidated gross profit decreased
to $45.9 million compared to $46.4 million in the first quarter of the prior
year. The impact of decreased sales was partially offset by improved
margins, which resulted from increased training sales as a percent of total
sales, since training and consulting sales generally have higher overall gross
margins than product sales, and improved margins on product sales primarily
resulting from the reconfiguration of the Company’s printing services in fiscal
2007. Consolidated gross margin for the quarter ended December 1,
2007 was 62.4 percent compared to 61.4 percent for the quarter ended December
2,
2006.
Operating
Expenses – Consolidated operating expenses decreased $1.9 million, due to
a $2.1 million decrease in selling, general, and administrative (SG&A)
expenses and a $0.2 million increase in depreciation
expense. Decreased SG&A expenses were primarily due to 1) the
sale of the Company’s wholly owned subsidiary in Brazil and training operations
in Mexico; 2) the reversal of share-based compensation expense primarily
resulting from the determination that no shares of stock will be issued from
a
fiscal 2006 long-term incentive award; and 3) decreased audit and related
consulting costs as prior year audit and consulting fees included additional
costs associated with the first year of compliance with section 404 of the
Sarbanes-Oxley Act of 2002. These decreases were partially offset by
increased commissions and selling bonuses incurred as a result of increased
training and consulting sales.
Depreciation
expense increased $0.2 million primarily due to additional purchases of
depreciable property during the prior fiscal year.
Interest
Expense
– Net interest expense increased $0.4 million primarily due to line of
credit borrowings resulting from the redemption of all remaining shares of
preferred stock during the third quarter of fiscal 2007.
Preferred
Dividends – Due to the redemption of all remaining shares of preferred
stock during fiscal 2007, the Company had no preferred dividends during the
quarter ended December 1, 2007.
Other
Items
The
Company will host an investor webinar to discuss with shareholders and the
financial community the Company’s financial results for its fiscal quarter ended
December 1, 2007. The discussion will be held on Friday, January 11,
2008 at 11:00 a.m. Eastern Standard Time (9:00 a.m. Mountain Standard
Time).
Interested
persons can participate by calling 1-800-573-4842, access code: 11636978 and
by
logging on to http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=102601&eventID=1733914.
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 41 offices servicing more than 100
countries.
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Investor
Contact:
FranklinCovey
Steve
Young
801-817-1776
Steve.Young@franklincovey.com
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Media
Contact:
FranklinCovey
Debra
Lund
801-817-6440
Debra.Lund@franklincovey.com
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CONDENSED
CONSOLIDATED INCOME
STATEMENTS
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||||||||
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(
in thousands, except per share amounts )
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Quarter
Ended
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||||||||
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December
1,
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December
2,
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|||||||
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2007
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2006
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(unaudited)
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Net
sales
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$ | 73,574 | $ | 75,530 | ||||
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Cost
of sales
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27,629 | 29,132 | ||||||
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Gross
profit
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45,945 | 46,398 | ||||||
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Selling,
general, and administrative
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38,771 | 40,849 | ||||||
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Depreciation
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1,198 | 1,037 | ||||||
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Amortization
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899 | 902 | ||||||
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Income
from operations
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5,077 | 3,610 | ||||||
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Interest
expense, net
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(901 | ) | (460 | ) | ||||
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Income
before income taxes
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4,176 | 3,150 | ||||||
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Income
tax provision
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2,117 | 1,734 | ||||||
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Net
income
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2,059 | 1,416 | ||||||
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Preferred
stock dividends
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- | (934 | ) | |||||
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Net
income available to common shareholders
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$ | 2,059 | $ | 482 | ||||
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Net
income per share available to common shareholders
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||||||||
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Basic
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$ | 0.11 | $ | 0.02 | ||||
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Diluted
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$ | 0.10 | $ | 0.02 | ||||
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Weighted
average common shares - Diluted
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||||||||
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Basic
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19,481 | 19,910 | ||||||
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Diluted
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19,760 | 20,192 | ||||||
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Sales
Detail:
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Retail
Stores
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$ | 13,135 | $ | 14,127 | ||||
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Catalog
/ e-commerce
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14,812 | 16,211 | ||||||
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Wholesale
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4,261 | 4,577 | ||||||
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CSBU
International
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2,671 | 2,386 | ||||||
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Other
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1,164 | 1,272 | ||||||
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Total
Consumer Solutions Business Unit
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36,043 | 38,573 | ||||||
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Domestic
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21,664 | 21,470 | ||||||
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International
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15,867 | 15,487 | ||||||
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Total
Organizational Solutions Business Unit
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37,531 | 36,957 | ||||||
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Total
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$ | 73,574 | $ | 75,530 | ||||