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
9, 2009
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))
[
] Pre-commencement communications pursuant to
Rule 13e-4(c) under the Exchange Act (17 CFR240.13e-4(c))
Item
2.02 Results of Operations and Financial
Condition
On July
9, 2009, Franklin Covey Co. (the Company) announced its financial results for
the fiscal quarter and three quarters ended May 30, 2009. 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
9.01 Financial Statements and Exhibits
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(d) Exhibits
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99.1
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Earnings
release dated July 9,
2009
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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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July 9, 2009
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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
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Press
Release
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2200
West Parkway Boulevard
Salt
Lake City, Utah 84119-2331
www.franklincovey.com
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FRANKLINCOVEY
ANNOUNCES FISCAL 2009 THIRD QUARTER RESULTS
Salt Lake City, Utah – July 9,
2009 – Franklin Covey Co. (NYSE: FC), a global provider of training and
consulting services, today announced financial results for its fiscal third
quarter ended May 30, 2009. Reported net sales for the quarter
totaled $30.6 million, compared to $59.1 million in the third quarter of fiscal
2008. The vast majority of this decline was attributable to the sale
of the Company’s Consumer Solutions Business Unit (CSBU) operations and the
resulting reduction in product sales. The net loss totaled $5.1
million, or $(0.38) per share, compared to a net loss of $1.5 million, or
($0.09) per diluted share, in the third quarter of fiscal 2008.
The
Company’s financial results are difficult to compare to the corresponding
quarter of the prior year due to the sale of its CSBU. Effective July
6, 2008, the CSBU was sold to a new private equity-funded entity known as
Franklin Covey Products, LLC. The CSBU was primarily responsible for sales of
the Company’s consumer products, including the popular Franklin Planner®,
binders, and related accessories, to consumers and small businesses through
retail, wholesale, Internet, and call center channels. Due to the
Company’s 19.5 percent voting interest and continuing involvement with Franklin
Covey Products, LLC, the Company is not presenting the financial results of the
CSBU in a discontinued operations format.
“We
continued to make improvements in our business this quarter as our revenue
booking momentum was solid and above that achieved during last year’s third
quarter and we won business with new and existing customers that is expected to
contribute to our sales in future quarters. We also executed on cost
savings initiatives and saw good traction in several of our new strategic
initiatives including our customer loyalty, execution, and speed of trust
practices,” said Bob Whitman, Chairman and Chief Executive Officer of Franklin
Covey. “We were disappointed to recognize a loss for the third quarter, although
a considerable portion of the net loss was due to a larger than anticipated
income tax provision, as our EBITDA improved significantly on a sequential
basis. Our third quarter revenue was lower than we anticipated due to
the deferral of some training and consulting deliveries, however we are
delivering these programs and expect to recognize the majority of these sales in
the fourth quarter. Overall, we are encouraged by the underlying trend in our
business during these difficult economic times and expect to report continued
progress in both revenue and cost reduction initiatives in the fourth quarter
and beyond.”
Sales
from the Company’s Organizational Solutions Business Unit, which primarily
consist of training and consulting sales, decreased $7.0 million compared to the
prior year. Domestic sales declined by $4.7
million. Approximately $1.8 million of the decline was due to planned
decreases in public programs, with the majority of the balance due to deferrals
of training and consulting engagements by clients whose operations are being
adversely affected by weak economic conditions. These deferrals were
partially offset by an increase in revenues from licensed facilitators within
client organizations. While domestic sales were affected by planned
decreases in the number of public programs offered during the quarter, due to
the essentially break-even nature of these programs, the reduction in the number
of programs did not have a material impact on
profitability. International sales declined by $2.3
million. Approximately $0.7 million of the decline was attributable
to the unfavorable impact of translating foreign sales to United States dollars
during the quarter and another $0.7 million was attributable to decreased
product sales as a portion of these sales were transitioned in connection with
the sale of CSBU. The remaining decrease was primarily due to lower
sales from the Company’s directly owned offices and licensee royalty revenues,
which were impacted by continued weakness in worldwide economic
conditions. Despite the decline in sales, gross margin increased
approximately 90 basis points to 61.8% based on an improved mix of higher-margin
training and consulting sales.
Selling,
general and administrative (SG&A) expenses declined $16.0 million, primarily
due to the sale of the CSBU. The year-over-year improvement in
SG&A costs was partially offset by $0.9 million in severance costs related
to cost savings initiatives designed to reduce operating costs and improve
profitability in future periods.
As of May
30, 2009, the Company had $1.2 million in cash and cash equivalents and $16.1
million outstanding on its line of credit. Subsequent to quarter-end, the
Company entered into a second modification of its line of credit facility,
effectively retaining $20.0 million of borrowing capacity through June 30, 2009
and reducing overall borrowing capacity to $18.0 million at August 31, 2009 and
to $13.5 million at November 30, 2009.
Earnings Conference
Call
On
Thursday, July 9, 2009 at 5:00 p.m. Eastern time (3:00 p.m. Mountain time)
Franklin Covey will host a conference call to review its financial results for
the fiscal quarter ended May 30, 2009. Interested persons may
participate by dialing 1-888-396-2298 (International participants may dial
1-617-847-8708), access code: 19584003. Alternatively, a webcast will
be accessible at the following Web site:
http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=102601&eventID=2297700. Due
to the length of this address this URL may need to be copied/pasted into your
Internet browser’s address field. Remove the extra space if one
exists. A
replay
will be available through 11:59 p.m. Eastern time on July 16, 2009 by dialing
1-888-286-8010 (International participants may dial 1-617-801-6888), access
code: 12701391. The webcast will remain accessible through July 16,
2009 on the Investor Relations area of the Company’s web site at: http://phx.corporate-ir.net/phoenix.zhtml?c=102601&p=irol-IRHome.
Forward-Looking
Statements
This
press release contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Forward-looking
statements are based upon management's current expectations and are subject to
various risks and uncertainties including, but not limited to: expected sales;
reductions in capital requirements and cost structure; expected levels of
profitability; general economic conditions; market acceptance of new products or
services and marketing strategies; the ability to achieve sustainable growth in
future periods; the expected impact of the Company’s restructuring plan; and
other factors identified and discussed in the Company's most recent Annual
Report on Form 10-K and other periodic reports filed with the Securities and
Exchange Commission. Many of these conditions are beyond the
Company’s control or influence, any one of which may cause future results to
differ materially from the Company’s current expectations, and there can be no
assurance the Company’s actual future performance will meet management’s
expectations. These forward-looking statements are based on
management’s current expectations and the Company undertakes no obligation to
update or revise these forward-looking statements to reflect events or
circumstances subsequent to this press release.
About
Franklin Covey Co.
Franklin
Covey Co. (NYSE:FC) (www.franklincovey.com),
is a global provider of training and consulting services in the areas of
leadership, productivity, strategy execution, customer loyalty, trust, sales
performance, government, education and individual effectiveness. 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. Franklin Covey Co. has 40 direct
and licensee offices providing professional services in 147
countries.
On July
6, 2008, Franklin Covey Co. sold its Consumer Solutions Business Unit (CSBU) to
a new private equity-funded entity known as FranklinCovey Products, LLC., (www.franklinplanner.com)
the exclusive, worldwide licensee of the FranklinCovey™ brand. FranklinCovey
Products sells the popular Franklin Planner, binders and other related
productivity and organizational tools and accessories to consumers and small
businesses through retail, wholesale, Internet and call center channels.
Franklin Covey Co. has retained a 19.5 percent voting interest in
FranklinCovey Products, LLC. Franklin Covey Co. also uses the FranklinCovey
brand in all of its global training and consulting services. For more
information, please visit www.franklincovey.com.
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Investor
Contact:
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Media
Contact:
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|||
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FranklinCovey
Steve
Young
801-817-1776
investor.relations@franklincovey.com
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or
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ICR,
LLC
Kate
Messmer
203-682-8338
kate.messmer@icrinc.com
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FranklinCovey
Debra
Lund
801-817-6440
Debra.Lund@franklincovey.com
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FRANKLIN COVEY CO.
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CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
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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
30,
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May
31,
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May
30,
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May
31,
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|||||||||||||
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2009
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2008
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2009
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2008
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(unaudited)
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(unaudited)
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(unaudited)
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(unaudited)
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|||||||||||||
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Net
sales
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$ | 30,645 | $ | 59,061 | $ | 95,629 | $ | 207,763 | ||||||||
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Cost
of sales
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11,710 | 23,093 | 36,314 | 79,001 | ||||||||||||
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Gross
profit
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18,935 | 35,968 | 59,315 | 128,762 | ||||||||||||
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Selling,
general, and administrative
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18,179 | 34,210 | 59,043 | 110,634 | ||||||||||||
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Depreciation
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994 | 1,679 | 2,804 | 4,590 | ||||||||||||
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Amortization
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995 | 902 | 2,799 | 2,702 | ||||||||||||
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Income
(loss) from operations
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(1,233 | ) | (823 | ) | (5,331 | ) | 10,836 | |||||||||
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Equity
in losses of equity method investee
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(224 | ) | - | - | - | |||||||||||
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Interest
expense, net
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(721 | ) | (670 | ) | (2,239 | ) | (2,318 | ) | ||||||||
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Income
before income taxes
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(2,178 | ) | (1,493 | ) | (7,570 | ) | 8,518 | |||||||||
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Income
tax benefit (provision)
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(2,875 | ) | 11 | 1,315 | (4,961 | ) | ||||||||||
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Net
income (loss)
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$ | (5,053 | ) | $ | (1,482 | ) | $ | (6,255 | ) | $ | 3,557 | |||||
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Net
income (loss) per share available to common shareholders
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||||||||||||||||
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Basic
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$ | (0.38 | ) | $ | (0.09 | ) | $ | (0.47 | ) | $ | 0.18 | |||||
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Diluted
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$ | (0.38 | ) | $ | (0.09 | ) | $ | (0.47 | ) | $ | 0.18 | |||||
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Weighted
average common shares
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||||||||||||||||
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Basic
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13,420 | 16,132 | 13,394 | 19,542 | ||||||||||||
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Diluted
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13,420 | 16,132 | 13,394 | 19,815 | ||||||||||||
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Sales
Detail by Category:
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Training
and consulting services
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$ | 27,767 | $ | 33,864 | $ | 83,814 | $ | 101,891 | ||||||||
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Products
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1,958 | 24,654 | 9,070 | 104,159 | ||||||||||||
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Leasing
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920 | 543 | 2,745 | 1,713 | ||||||||||||
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Total
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$ | 30,645 | $ | 59,061 | $ | 95,629 | $ | 207,763 | ||||||||
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Sales
Detail by Business Unit:
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Domestic
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$ | 20,627 | $ | 25,365 | $ | 59,726 | $ | 72,759 | ||||||||
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International
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9,098 | 11,406 | 33,158 | 38,370 | ||||||||||||
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Total
Organizational Solutions Business Unit
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29,725 | 36,771 | 92,884 | 111,129 | ||||||||||||
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Retail
Stores
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- | 7,896 | - | 38,659 | ||||||||||||
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Catalog
/ e-commerce
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- | 6,949 | - | 35,335 | ||||||||||||
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Wholesale
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- | 5,046 | - | 12,227 | ||||||||||||
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CSBU
International
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- | 1,119 | - | 6,692 | ||||||||||||
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Other
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- | 737 | - | 2,008 | ||||||||||||
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Total
Consumer Solutions Business Unit
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- | 21,747 | - | 94,921 | ||||||||||||
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Leasing
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920 | 543 | 2,745 | 1,713 | ||||||||||||
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Total
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$ | 30,645 | $ | 59,061 | $ | 95,629 | $ | 207,763 | ||||||||