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):
November
16, 2009
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:
[
] 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
November 16, 2009, Franklin Covey Co. (the Company) announced its financial
results for the fourth quarter and fiscal year ended August 31,
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
8.01 Other Events
On
November 9, 2009, the Company announced that it would host a discussion for
shareholders and the financial community to review its financial results for the
fourth quarter and fiscal year ended August 31, 2009. The discussion
is scheduled to be held on Monday, November 16, 2009 at 5:00 p.m. Eastern time
(3:00 p.m. Mountain time).
Interested
persons may participate by dialing 1-866-362-4666 (International
participants may dial 1-617- 597-5313), access code:
32431051. Alternatively, the webcast was accessible at the following
Web site:
http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=102601&eventID=2534798.
A replay
of the discussion will be available from November 16 through November 23, 2009
by dialing 1-888-286-8010 (International participants may dial 1-617-801-6888),
access code: 71742931. The webcast will also remain accessible
through November 23, 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.
Item
9.01 Financial Statements and Exhibits
|
(d)
|
Exhibits
|
|
|
99.1
|
Earnings
release dated November 16, 2009
|
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.
|
||||
|
Date:
|
November 16, 2009
|
By:
|
/s/ Stephen D.
Young
|
|
|
Stephen D.
Young
|
||||
|
Chief Financial
Officer
|
||||
Exhibit
99.1
|
|
Press
Release
|
|
|
2200
West Parkway Boulevard
Salt
Lake City, Utah 84119-2331
www.franklincovey.com
|
||
FRANKLINCOVEY
ANNOUNCES FISCAL FOURTH QUARTER AND FULL YEAR 2009 RESULTS
Salt Lake City, Utah –
November 16, 2009 – Franklin Covey Co. (NYSE: FC), a global provider of training
and consulting services, today announced financial results for its fourth
quarter and fiscal year ended August 31, 2009. Reported net sales for
the fourth quarter of fiscal 2009 totaled $34.5 million compared to $30.6
million in the third quarter of fiscal 2009. During the fourth
quarter of fiscal 2008, the Company reported sales of $51.4
million. The vast majority of the year-over-year decline in sales 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 for the quarter totaled $4.6 million, or $(0.34) per diluted share,
including an impairment charge of $3.6 million, related to a promissory note
from the sale of the CSBU, as well as restructuring costs of $1.2 million, which
were used to pay severance. This compared to net income of $2.0
million, or $0.10 per diluted share, in the fourth quarter of fiscal 2008, which
included a $9.1 million gain from the sale of CSBU. Excluding the
impact of impairment, restructuring, and other special charges in the fourth
quarter, the Company’s income from operations was $1.4 million compared to a
loss of $6.1 million as reported.
“We were
encouraged to see our business strengthen during the quarter as we achieved
revenue growth and a significant increase in EBITDA on a sequential basis,
before restructuring, impairment, and other special charges. We ended
the year with strong sales in the month of August, and reported a significant
reduction in expenses as our cost saving initiatives continue to positively
impact our results,” said Bob Whitman, Chairman and Chief Executive Officer of
Franklin Covey. “We also had a number of important accomplishments
during the quarter which we expect will add to our growth pipeline in fiscal
2010 and beyond. The Leader in Me, our new
educational process for teaching leadership at the elementary school level, is
already being used by more than 150 elementary schools worldwide. Our
customer loyalty practice continues to add new customers, and our sales
performance, execution and speed of trust practices are also up
significantly. We expect that each of these practices could generate
anywhere from $10 million to $30 million in revenues over the coming
years. Combined with expected increases in the productivity of our
salespeople and growth among our international licensees, we believe we are well
positioned for revenue and margin expansion over the coming years.”
Fiscal Fourth Quarter 2009
Results
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.
Sales
from the Company’s Organizational Solutions Business Unit, which primarily
consist of training and consulting sales, decreased $4.7 million compared to the
prior year, but increased by $4.0 million compared to the fiscal third quarter
ended May 30, 2009. Domestic sales declined by $3.1 million compared
to the prior year and increased by $2.8 million compared to the fiscal third
quarter. Approximately $1.7 million of the year-over-year decline was
due to planned decreases in public programs, with the majority of the balance
due to lower sales through the Company’s direct offices, which continued to be
adversely affected by weak economic conditions. These declines were
partially offset by an increase in revenues from licensed facilitators within
client organizations. While domestic sales continue to be 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 materially impact
profitability. International sales declined by $1.6 million compared
to the prior year, and increased $1.1 million compared to the fiscal third
quarter. The Company’s international sales were impacted by a decline
in licensee royalty revenues and lower sales through the Company’s international
direct offices.
Gross
margin declined from 62.7 percent in the fourth quarter of fiscal 2008 to 61.2
percent in the fourth quarter of fiscal 2009 as the improved mix of
higher-margin training and consulting sales was offset by decreased licensee
royalty revenues and higher costs related to the Company’s new
offerings.
Selling,
general and administrative (SG&A) expenses declined $10.9 million, primarily
due to the sale of the CSBU, as well as initiatives the Company has implemented
to reduce its cost structure over the past year. The year-over-year
improvement in SG&A costs was partially offset by $1.2 million in severance
costs related to the aforementioned cost savings initiatives.
As of
August 31, 2009, the Company had $1.7 million in cash and cash equivalents
compared to $1.2 million as of May 30, 2009. The Company had $12.9
million outstanding on its line of credit as of August 31, 2009, down from $16.1
million as of May 30, 2009.
Fiscal Full Year 2009
Results
Reported
net sales for fiscal year 2009 totaled $130.1 million compared to $259.2 million
in fiscal 2008. The vast majority of this decline was attributable to
the sale of the Company’s CSBU operations and the resulting reduction in product
sales. The net loss for fiscal 2009 totaled $10.8 million, or $(0.81)
per diluted share, including an impairment charge of $3.6 million, related to a
promissory note from the sale of the CSBU, as well as restructuring costs of
$2.0 million, which was used to pay severance costs. This compared to
net income of $5.5 million, or $0.28 per diluted share for fiscal 2008, which
included a gain of $9.1 million, from the sale of CSBU assets to Franklin Covey
Products, LLC.
Earnings Conference
Call
On
Monday, November 16, 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 fourth quarter and fiscal year ended August 31, 2009. Interested
persons may participate by dialing 1-866-362-4666 (International participants
may dial 1-617-597-5313), access code: 32431051. Alternatively, a
webcast will be accessible at the following Web site:
http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=102601&eventID=2534798. 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
November 23, 2009 by dialing 1-888-286-8010 (International participants may dial
1-617-801-6888), access code: 71742931. The webcast will remain
accessible through November 23, 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.
Non-GAAP Financial
Measures
Under
Generally Accepted Accounting Principles (GAAP), reported balances include
special items. In addition to the reported financial results
determined in accordance with GAAP, Franklin Covey Co. provides its statement of
operations for the quarter ended August 31, 2009, excluding special
charges. These non-GAAP financial measures exclude special items
which are those particular material expense items that the Company considers to
be unrelated to its ongoing, underlying business. The Company
believes that the identification of special items enhances the analysis of its
underlying business performance when comparing those results to that of a
previous or subsequent like period. However, it should be noted that
the determination of whether to classify an item as a special item involves
judgments by the Company’s management. A reconciliation of these
non-GAAP financial measures and the Company’s reported financial results
determined in accordance with GAAP is provided on the attached
schedule.
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 over 150 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.
|
Investor
Contact:
|
Media
Contact:
|
||
|
FranklinCovey
|
or
|
ICR,
LLC
|
FranklinCovey
|
|
Steve
Young
|
Kate
Messmer
|
Debra
Lund
|
|
|
801-817-1776
|
203-682-8338
|
801-817-6440
|
|
|
investor.relations@franklincovey.com
|
kate.messmer@icrinc.com
|
Debra.Lund@franklincovey.com
|
|
FRANKLIN COVEY CO.
|
||||||||||||||||
|
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
|
||||||||||||||||
|
(in
thousands, except per share amounts)
|
||||||||||||||||
|
Quarter
Ended
|
Fiscal
Year Ended
|
|||||||||||||||
|
August
31,
|
August
31,
|
August
31,
|
August
31,
|
|||||||||||||
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||
|
(unaudited)
|
(unaudited) |
(unaudited)
|
(unaudited) | |||||||||||||
|
Net
sales
|
$ | 34,489 | $ | 51,431 | $ | 130,118 | $ | 259,193 | ||||||||
|
Cost
of sales
|
13,391 | 19,164 | 49,705 | 98,165 | ||||||||||||
|
Gross
profit
|
21,098 | 32,267 | 80,413 | 161,028 | ||||||||||||
|
Selling,
general, and administrative
|
19,744 | 30,685 | 77,943 | 141,318 | ||||||||||||
|
Gain
on sale of consumer solutions business unit
|
- | (9,131 | ) | - | (9,131 | ) | ||||||||||
|
Restructuring
costs
|
1,204 | 2,064 | 2,047 | 2,064 | ||||||||||||
|
Impairment
of assets
|
3,569 | 1,483 | 3,569 | 1,483 | ||||||||||||
|
Depreciation
|
1,729 | 1,101 | 4,532 | 5,692 | ||||||||||||
|
Amortization
|
961 | 901 | 3,761 | 3,603 | ||||||||||||
|
Income
(loss) from operations
|
(6,109 | ) | 5,164 | (11,439 | ) | 15,999 | ||||||||||
|
Interest
expense, net
|
(782 | ) | (609 | ) | (3,022 | ) | (2,926 | ) | ||||||||
|
Income
before income taxes
|
(6,891 | ) | 4,555 | (14,461 | ) | 13,073 | ||||||||||
|
Income
tax benefit (provision)
|
2,314 | (2,585 | ) | 3,629 | (7,546 | ) | ||||||||||
|
Net
income (loss)
|
$ | (4,577 | ) | $ | 1,970 | $ | (10,832 | ) | $ | 5,527 | ||||||
|
Net
income (loss) per share available to common shareholders
|
||||||||||||||||
|
Basic
|
$ | (0.34 | ) | $ | 0.10 | $ | (0.81 | ) | $ | 0.28 | ||||||
|
Diluted
|
$ | (0.34 | ) | $ | 0.10 | $ | (0.81 | ) | $ | 0.28 | ||||||
|
Weighted
average common shares
|
||||||||||||||||
|
Basic
|
13,442 | 19,682 | 13,406 | 19,577 | ||||||||||||
|
Diluted
|
13,442 | 20,245 | 13,406 | 19,922 | ||||||||||||
|
Sales
Detail by Category:
|
||||||||||||||||
|
Training
and consulting services
|
$ | 31,096 | $ | 36,221 | $ | 114,910 | $ | 138,112 | ||||||||
|
Products
|
2,582 | 14,451 | 11,652 | 118,610 | ||||||||||||
|
Leasing
|
811 | 759 | 3,556 | 2,471 | ||||||||||||
|
Total
|
$ | 34,489 | $ | 51,431 | $ | 130,118 | $ | 259,193 | ||||||||
|
Sales
Detail by Business Unit:
|
||||||||||||||||
|
Domestic
|
$ | 23,467 | $ | 26,548 | $ | 83,193 | $ | 99,308 | ||||||||
|
International
|
10,211 | 11,809 | 43,369 | 50,179 | ||||||||||||
|
Total
Organizational Solutions Business Unit
|
33,678 | 38,357 | 126,562 | 149,487 | ||||||||||||
|
Retail
Stores
|
- | 3,508 | - | 42,167 | ||||||||||||
|
Catalog
/ e-commerce
|
- | 3,327 | - | 38,662 | ||||||||||||
|
Wholesale
|
- | 4,743 | - | 16,970 | ||||||||||||
|
CSBU
International
|
- | 567 | - | 7,259 | ||||||||||||
|
Other
|
- | 170 | - | 2,177 | ||||||||||||
|
Total
Consumer Solutions Business Unit
|
- | 12,315 | - | 107,235 | ||||||||||||
|
Leasing
|
811 | 759 | 3,556 | 2,471 | ||||||||||||
|
Total
|
$ | 34,489 | $ | 51,431 | $ | 130,118 | $ | 259,193 | ||||||||
|
FRANKIN
COVEY CO.
|
||||||
|
Reconciliation
of Non-GAAP Earnings
|
||||||
|
Pro
Forma
|
||||||
|
FY2009
|
Pro
Forma
|
FY2009
|
||||
|
Fourth
Quarter (in thousands)
|
Q4
|
Adjustments
|
Q4
|
|||
|
(unaudited)
|
||||||
|
Net
Sales
|
$ |
34,489
|
$ -
|
$ 34,489
|
||
|
Cost
of Sales
|
13,391
|
(568)
|
12,823
|
|||
|
Gross
Profit
|
21,098
|
568
|
21,666
|
|||
|
Selling,
general, and administrative
|
19,744
|
(1,379)
|
18,365
|
|||
|
Restructuring
& Impairment costs
|
4,773
|
(4,773)
|
-
|
|||
|
Depreciation
|
1,729
|
(774)
|
955
|
|||
|
Amortization
|
961
|
-
|
961
|
|||
|
Income
(loss) from operations
|
(6,109)
|
7,494
|
1,385
|
|||
|
Interest
expense, net
|
782
|
-
|
782
|
|||
|
Income
(loss) before taxes
|
(6,891)
|
7,494
|
603
|
|||
|
Income
tax provision (benefit)
|
(2,314)
|
2,561
|
247
|
|||
|
Net
income (loss)
|
$ |
(4,577)
|
$ 4,933
|
$ 356
|
||
|
Note:
Pro Forma adjustments include the note impairment, restructuring
severance
|
||||||
|
and
other costs, accelerated depreciation, and inventory
adjustments.
|
||||||
|
The
tax rate is also adjusted to 41%.
|
||||||