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):
May
22, 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:
[
] Written communications pursuant to Rule 425
under the Securities Act (17 CFR 230.425)
[
] Soliciting material pursuant to Rule 14a-12
under the Exchange Act (17 CFR 240.14a-12)
[
] Pre-commencement communications pursuant to
Rule 14d-2(b) under the Exchange Act (17 CFR240.14d-2(b))
[X] Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR240.13e-4(c))
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Item
1.01
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Entry
into a Material Definitive
Agreement
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On May
22, 2008, Franklin Covey Co. (the Company) announced that it will join with
Peterson Partners V, L.P. to create a new limited liability company, Franklin
Covey Products, LLC (Franklin Covey Products), to pursue the strategic objective
of expanding the sales of Franklin Covey branded consumer products throughout
the world. In connection with the creation of Franklin Covey
Products, on May 22, 2008 the Company entered into a definitive agreement to
sell substantially all of the assets of its Consumer Solutions Business Unit
(CSBU) to Franklin Covey Products (the Sale Agreement). The sale
price is $32.0 million in cash plus the amount, if any, by which the closing
date net current assets exceeds a specified amount of current net assets or
minus the amount, if any, by which the specified current net assets exceeds the
actual current net assets at the closing date.
Pursuant
to the terms of the Sale Agreement, the Company will contribute (i)
approximately $1.7 million on the closing date of the sale as consideration for
a 19.5 percent voting interest in Franklin Covey Products plus (ii) a $1.0
million interest-bearing preferred contribution that provides no additional
ownership or voting rights. The remaining interest in Franklin Covey
Products will be primarily held by Peterson Partners V, L.P., an affiliate of
Peterson Partners, Inc., a Salt Lake City, Utah based investment firm that
specializes in small to mid-size companies. Founded in 1995, Peterson
Partners has a track record of successful investments including JetBlue, Making
Memories, EnergySolutions, Winder Farms, MITY Enterpises, Inc. and Diamond
Rental. A founding general partner of Peterson Partners and a
significant investor in Peterson Partners V, L.P. is Joel C. Peterson, a member
of the Company’s Board of Directors. Due to this relationship, Mr.
Peterson recused himself from the negotiations and Board of Director discussions
regarding the sale of CSBU.
The CSBU
is primarily focused on sales of the Company’s products to individual customers
and small business organizations and includes the operations of the Company’s
domestic retail stores, consumer direct channels (primarily eCommerce and call
center), wholesale operations, international product channels in certain
countries, and other related distribution channels, including government product
sales and domestic printing and publishing operations. Some of the
Company’s best-known consumer products include the FranklinCovey Planner™ as
well as a variety of binders, totes, and other productivity and organizational
tools and accessories.
The sale
of CSBU assets is expected to be completed approximately 60 days from the
signing of the Sale Agreement. The closing of the transaction is
subject to a number of customary conditions stated in the Sale Agreement, which
also contains representations and warranties of both parties, indemnification
agreements, and other customary covenants.
In
addition to the Sale Agreement, the Company expects to complete a licensing
agreement, shared services agreement, and lease agreements with Franklin Covey
Products prior to the closing of the sale. The management and
operations of CSBU are expected to remain on the Company’s campus located in
Salt Lake City, Utah for the foreseeable future.
The
proposed sale of the CSBU has been approved by the Company’s Board of Directors
and does not require shareholder approval. The Company also obtained
a fairness opinion from ThinkPanmure, LLC (San Francisco), which served as the
Company’s financial advisor in connection with the transaction.
The
Company anticipates using a portion of the proceeds from the sale of CSBU to
acquire shares of its common stock through a Dutch auction tender offer, which
is expected to begin shortly after the closing of the sale
transaction.
The
foregoing description of the Sale Agreement does not purport to be complete and
is qualified in its entirety by reference to the Sale Agreement, which the
Company expects to file as part of an amendment to this Form 8-K as soon as
practicable.
CAUTIONARY
STATEMENT
The Sale
Agreement will be included to provide investors and shareholders with
information regarding its terms and conditions. Except for its status
as a contractual document that establishes and governs the legal relations among
the parties thereto with respect to the transaction described in this Form 8-K,
the Sale Agreement is not intended to be a source of factual, business, or
operational information about the parties.
Certain
of the contractual representations or warranties made by the parties in the Sale
Agreement are subject to a standard of materiality that may be different from
what shareholders of the Company may view as material to their
interests. Representations and warranties may be used as a tool to
allocate risks between the respective parties to the Sale Agreement, including
where the parties do not have complete knowledge of all the
facts. Investors in the Company’s securities are not third-party
beneficiaries under the Sale Agreement and should not rely on the
representations, warranties, and covenants or any description thereof as
characterizations of the actual state of facts or condition of the parties or
any of their affiliates.
FORWARD
LOOKING STATEMENTS
This
current report and the exhibits furnished herewith contain forward-looking
statements related to, among other things, the completion of the sale of CSBU,
the tender offer, and the other transactions contemplated by the Sale
Agreement. These statements are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of
1995. Investors are cautioned that forward-looking statements
inherently involve risks and uncertainties that could cause actual results to
differ materially from those contemplated in the forward-looking
statements. Such risks and uncertainties include, but are not limited
to, the ability of the parties to the Sale Agreement to satisfy the conditions
to closing specified in the Sale Agreement, and other risks and uncertainties
outlined in the Company’s documents filed with the SEC, including the Company’s
most recent annual report on Form 10-K for the fiscal year ended August 31, 2007
as filed with the Securities and Exchange Commission. All
forward-looking statements and other information in this current report are
based upon information available as of the date of this report. Such
information may change or become invalid after the date of this report, and, by
making these forward-looking statements, the Company undertakes no obligation to
update these statements after the date of this report, except as required by
law.
TENDER
OFFER STATEMENT
This
communication is for informational purposes only and is not an offer to buy, or
the solicitation of an offer to sell, any shares. The full details of
any tender offer, including complete instructions on how to tender shares, will
be included in the offer to purchase, the letter of transmittal and related
materials, which would be mailed to shareholders promptly following commencement
of the offer. Shareholders should read carefully the offer to
purchase, the letter of transmittal and other related materials when they are
available because
they will contain important information. Shareholders may obtain free
copies, when available, of the offer to purchase and other related materials
that will be filed by Franklin Covey Co. with the Securities and Exchange
Commission at the Commission’s website at www.sec.gov. When
available, shareholders also may obtain a copy of these documents, free of
charge, from the Company’s information agent to be appointed in connection with
the offer.
Item
2.04 Triggering Events That Accelerate or Increase
a Direct FinancialObligation or an Obligation under an Off-Balance Sheet
Arrangement
The Sale
Agreement described in Item 1.01 above creates an instance of non-compliance
with certain covenants related to material changes and transfers of assets in
the Company’s $25.0 million revolving line of credit agreements. The
Company has obtained the necessary consents from the lending institutions to
waive these instances of non-compliance with the applicable loan covenants and
thus prevent the acceleration of payments on amounts outstanding on the line of
credit agreements.
Item
7.01 Regulation FD Disclosure
On May
22, 2008, the Company issued a press release announcing that it had entered into
the Sale Agreement as described in Item 1.01 above. A copy of the
press release is attached hereto as Exhibit 99.1 and incorporated by reference
herein.
The Company will hold an investor web
cast on Friday, May 23, 2008 at 9:00 a.m. (Mountain Daylight Time) to discuss
the Sale Agreement and other business matters. Interested parties may
participate in the web cast by calling (800) 435-1398, participant code:
38649130; or by logging on to http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=102601&eventID=1857100.
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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Press
release announcing the sale of Consumer Solutions Business Unit dated May
22, 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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May 22, 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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Chief Financial
Officer
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Exhibit 99.1
FranklinCovey
and Peterson Partners Form New Company to Acquire FranklinCovey’s Consumer
Business Unit.
FranklinCovey
to Use Proceeds From Sale to Repurchase Common Stock.
SALT LAKE CITY, May 22,
2008, — FranklinCovey
(NYSE: FC) today
announced that it has entered into an agreement with Peterson Partners to create
a new company, Franklin Covey Products, LLC. This new company will
purchase substantially all of the assets of FranklinCovey’s Consumer
Solutions Business Unit (CSBU) and, pursuant to a comprehensive license
agreement, will continue expanding CSBU’s planner and other branded consumer
products businesses through its proprietary channels and through third-party
retailers worldwide. FranklinCovey will focus its full resources on
the continued expansion of its training, consulting, content-rich media and
thought leadership businesses, which currently operate in 147
countries.
The new
company, which will be controlled by Peterson Partners, will purchase the CSBU
assets for $32.0M in cash subject to adjustments for net working
capital. FranklinCovey will invest $1.7M to purchase a 19.5% voting
interest in the new company, will make a $1.0M interest bearing preferred
capital contribution and will also have the opportunity to earn contingent
license fees as the new company achieves certain performance objectives.
FranklinCovey intends to utilize the sale proceeds to repurchase a substantial
number of shares of its common stock pursuant to a Dutch auction tender offer,
which it anticipates would commence shortly after the closing of the
transaction.
Peterson
Partners, a leading Intermountain West investment firm based in Salt Lake City,
Utah, specializes in investing in small to mid-sized companies and has a track
record of successful investments including JetBlue, Making Memories,
EnergySolutions, 3form, Cranium, Asurion, Instashred, Winder Farms, MITY
Enterprises and Diamond Rental. Founded in 1995, Peterson Partners has managed
over $400 million in committed capital through five funds.
Sarah
Merz, current President of the CSBU, will be named Chief Executive Officer of
Franklin Covey Products, LLC and will serve on its board of
managers. Robert A. Whitman, Chairman and Chief Executive Officer of
Franklin Covey, has agreed to also serve as Chairman of the board of managers of
FranklinCovey Products, LLC for a period of three years. Whitman will serve
without compensation. The jobs and responsibilities of CSBU’s other
officers and employees are not expected to be affected by the
transaction. Merz and her other senior officers will own
significant equity interests in Franklin Covey Products, LLC.
The CSBU
is primarily focused on sales of the Company’s planners and other hard goods
products to individual customers and small business organizations and includes
the operations of the company’s domestic retail stores, consumer direct
channels, wholesale operations, international product channels and other related
distribution channels, including government product sales and domestic printing
and publishing operations. Some of the Company’s best-known consumer
products include the popular FranklinCovey Planning System™, PlanPlus Planning
Software,™ and PlanPlus Online™, as well as a line of binders,
business cases, totes, and other productivity and organizational tools and
accessories. Franklin Covey Products, LLC will assume all of CSBU’s
channels and offerings, and plans to further expand CSBU’s already strong
pipeline of new products and offerings.
FranklinCovey to Focus on
Accelerating Growth in its Training, Consulting, Content-Rich Media and Thought
Leadership Businesses
“Over the
past several years, the strategic focus of both our CSBU and Organizational
Solutions Business Unit (OSBU) has changed significantly. The OSBU’s
business has grown significantly, both domestically and
internationally," said Robert A. Whitman, Chairman and Chief Executive of
FranklinCovey. “While its historical time management and individual
effectiveness solutions have also grown, it has added new solution categories,
including Leadership, Execution, and Customer Loyalty, which have grown even
more rapidly. As a consequence, the extent of overlap between our
training and consulting offerings and our hard goods products has diminished.
Meanwhile, the CSBU has expanded its distribution into more than 13,000
third-party outlets, including office superstores and other large retail
chains. In the process, CSBU has grown its annual planner sales from
approximately 4.8M units to almost 5.2M units in the past three
years.
"Over the
last five years, FranklinCovey has achieved a very substantial financial
turnaround in both major business units. After significant analysis
and deliberation, however, it became apparent to us that the business units
would be able to operate more effectively as separate companies, each with clear
and distinct strategic objectives, market definitions, and competitive
sets. Each business can now focus its full attention on building
value within its own markets, while continuing to partner with each other on key
initiatives.”
Franklin Covey Products,
LLC
Jordan
Clements, Managing Partner, Peterson Partners, said, “This transaction
represents a tremendous opportunity for Peterson Partners to invest in the
premier company in the stable, billion-dollar planner industry. Franklin Covey
Products, LLC will be led by a smart and determined management team, which has
proven to be outstanding at the continuous process of building value in a
company. We’re tremendously impressed with our new CEO, Sarah
Merz. We anticipate that our human and investment capital will
augment Sarah’s already successful team. We are also looking forward to a long
and close relationship with FranklinCovey, an organization for which we have
enormous respect. Peterson Partners has tremendous regard for Bob Whitman and
his leadership abilities were integral to Peterson’s investment decision.
Bob’s continuing participation as Chairman of the new company is a huge
plus for Franklin Covey Products, LLC.”
Under the
terms of the transaction, all products to be sold by the new company will
continue to carry the FranklinCovey brand name. The FranklinCovey retail stores
will also continue to operate under the FranklinCovey name, which Franklin Covey
Products Co. will license from FranklinCovey. The licensing agreement makes the
transaction seamless with no negative effect on customers or clients of either
organization.
The
transaction is expected to close in approximately sixty days. While
closing is subject to customary conditions, due diligence and the negotiation of
key agreements has been largely completed prior to the signing of the sale
agreement. The management and operations of Franklin Covey Products,
LLC are expected to remain on FranklinCovey’s campus located in Salt Lake City,
Utah.
“Peterson
Partners has a proven track record of success. We are delighted that
Peterson Partners is excited about the strategic opportunity offered by Franklin
Covey Products, LLC, since Peterson Partners shares our commitment to the CSBU
employees, and to Salt Lake City. Because this is an intricate and
long-term relationship, it was important to find a partner committed to the
FranklinCovey brand, customers and employees,” said Bob Whitman.
Joel C.
Peterson, a founding general partner and significant investor in Peterson
Partners, is also a member of FranklinCovey’s board of directors. Mr.
Peterson insulated himself from any substantive knowledge about a possible
transaction, and recused himself from any involvement in discussions or
deliberations within both FranklinCovey or Peterson Partners. A
special recapitalization committee was formed more than a year ago to consider
the possibility of a transaction. This committee and the
FranklinCovey board, with guidance from their financial advisor, ThinkPanmure,
LLC, and their legal advisors Dorsey & Whitney, LLP, and Jones Day,
conducted a rigorous market due diligence and board review process prior to
authorizing execution of the agreement.
Audio Web
Cast
The
Company will hold an investor web cast on Friday, May 23, 2008 at 9:00 a.m.
(Mountain Daylight Time) to discuss the Sale Agreement and other business
matters. Interested parties may participate in the web cast by
calling (800) 435-1398, participant code: 38649130; or by logging on to http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=102601&eventID=1857100.
About
FranklinCovey
FranklinCovey
is a global leader in effectiveness training, productivity tools and assessment
services for organizations and individuals. FranklinCovey helps companies
succeed by unleashing the power of their workforce to focus and execute on top
business priorities. Clients include 90 percent of the Fortune 100,
more than 75 percent of the Fortune 500, thousands of small and mid-sized
businesses, as well as numerous government entities and educational
institutions. Organizations and individuals access FranklinCovey products and
services through corporate training, licensed client facilitators, one-on-one
coaching, public workshops, catalogs, more than 70 retail stores, and www.franklincovey.com.
FranklinCovey has nearly 1,500 associates providing professional services and
products in 39 offices and in 95 countries.
About Peterson
Partners
Peterson
Partners, a leading Intermountain West investment firm based in Salt Lake City,
Utah, specializes in investing in small to mid-sized companies, and has a track
record of successful investments including JetBlue, Making Memories,
EnergySolutions, 3form, Cranium, Asurion, Instashred, Winder Farms, MITY
Enterprises, and Diamond Rental. Founded in 1995, Peterson Partners has managed
over $400 million in committed capital through five funds.
Forward-Looking
Statements
This
press release contains forward-looking statements related to, among other
things, the completion of the sale of the CSBU, the tender offer, and the other
transactions contemplated by the sale agreement. These statements are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Investors are cautioned that forward-looking
statements inherently involve risks and uncertainties that could cause actual
results to differ materially from those contemplated in the forward-looking
statements. Such risks and uncertainties include, but are not limited to,
the ability of the parties to the sale agreement to satisfy the conditions to
closing specified in the sale agreement, and other risks and uncertainties
outlined in the Company’s documents filed with the SEC, including the Company’s
most recent annual report on Form 10-K for the fiscal year ended August 31, 2007
as filed with the Securities and Exchange Commission. All forward-looking
statements and other information in this press release are based upon
information available as of the date of this press release. Such
information may change or become invalid after the date of this press release,
and, by making these forward-looking statements, the Company undertakes no
obligation to update these statements after the date of this press release,
except as required by law.
Tender Offer
Statement
This
press release is for informational purposes only and is not an offer to buy, or
the solicitation of an offer to sell, any shares. The full details of any tender
offer, including complete instructions on how to tender shares, will be included
in the offer to purchase, the letter of transmittal and related materials, which
would be mailed to shareholders promptly following commencement of the offer.
Shareholders should read carefully the offer to purchase, the letter of
transmittal and other related materials when they are available because they
will contain important information. Shareholders may obtain free copies, when
available, of the offer to purchase and other related materials that will be
filed by FranklinCovey with the Securities and Exchange Commission at the
Commission’s website at www.sec.gov. When
available, shareholders also may obtain a copy of these documents, free of
charge, from FranklinCovey’s information agent to be appointed in connection
with the offer.
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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
801-244-4474
Debra.Lund@franklincovey.com
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Investor
Contact:
Peterson
Partners
Jordan
Clements
801-365-0180
Jordan@petersonpartnerslp.com
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