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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended February 28, 2022

[   ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 001-11107

Logo

Description automatically generated

FRANKLIN COVEY CO.

(Exact name of registrant as specified in its charter)

Utah

 

87-0401551

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. employer identification no.)

 

2200 West Parkway Boulevard

 

84119-2099

Salt Lake City, Utah

 

(Zip Code)

(Address of principal executive offices)

 

 

Registrant’s telephone number,

 

(801) 817-1776

Including area code

 

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $.05 Par Value

FC

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes T  No  £

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  T  No  £

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

£

Accelerated Filer

T

Non-accelerated Filer

£

Smaller Reporting Company

£

Emerging Growth Company

£

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. £

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes  £  No  T

Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock as of the latest practicable date:

14,342,897 shares of Common Stock as of March 31, 2022


 

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FRANKLIN COVEY CO.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per-share amounts)

February 28,

August 31,

2022

2021

(unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

61,062

$

47,417

Accounts receivable, less allowance for doubtful accounts of $4,504 and $4,643

47,726

70,680

Inventories

2,472

2,496

Prepaid expenses and other current assets

16,105

16,115

Total current assets

127,365

136,708

Property and equipment, net

10,032

11,525

Intangible assets, net

47,325

50,097

Goodwill

31,220

31,220

Deferred income tax assets

3,658

4,951

Other long-term assets

13,864

15,153

$

233,464

$

249,654

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

Current portion of notes payable

$

5,835

$

5,835

Current portion of financing obligation

3,040

2,887

Accounts payable

6,644

6,948

Deferred subscription revenue

68,583

74,772

Other deferred revenue

12,349

11,117

Accrued liabilities

23,302

34,980

Total current liabilities

119,753

136,539

Notes payable, less current portion

10,543

12,975

Financing obligation, less current portion

9,598

11,161

Other liabilities

7,067

8,741

Deferred income tax liabilities

375

375

Total liabilities

147,336

169,791

Shareholders’ equity:

Common stock, $0.05 par value; 40,000 shares authorized, 27,056 shares issued

1,353

1,353 

Additional paid-in capital

215,348

214,888

Retained earnings

69,281

63,591

Accumulated other comprehensive income

533

709

Treasury stock at cost, 12,730 shares and 12,889 shares

(200,387)

(200,678)

Total shareholders’ equity

86,128

79,863

$

233,464

$

249,654

See notes to condensed consolidated financial statements


2


 

FRANKLIN COVEY CO.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND STATEMENTS

OF COMPREHENSIVE INCOME (LOSS)

(in thousands, except per-share amounts)

Quarter Ended

Two Quarters Ended

February 28,

February 28,

February 28,

February 28,

2022

2021

2022

2021

(unaudited)

(unaudited)

Net sales

$

56,599

$

48,162 

$

117,859

$

96,486 

Cost of sales

12,485

10,822 

26,146

22,760 

Gross profit

44,114

37,340 

91,713

73,726 

Selling, general, and administrative

38,061

33,623 

77,405

67,306 

Depreciation

1,190

1,740 

2,470

3,481 

Amortization

1,346

1,133 

2,776

2,265 

Income from operations

3,517

844 

9,062

674 

Interest income

12

16 

27

40 

Interest expense

(423)

(540)

(869)

(1,108)

Income (loss) before income taxes

3,106

320 

8,220

(394)

Income tax provision

(1,228)

(366)

(2,530)

(544)

Net income (loss)

$

1,878

$

(46)

$

5,690

$

(938)

Net income (loss) per share:

Basic and diluted

$

0.13

$

(0.00)

$

0.40

$

(0.07)

Weighted average number of common shares:

Basic

14,312

14,082 

14,279

14,029 

Diluted

14,333

14,082 

14,323

14,029 

COMPREHENSIVE INCOME (LOSS)

Net income (loss)

$

1,878

$

(46)

$

5,690

$

(938)

Foreign currency translation adjustments,

net of income taxes of

$0, $0, $0, and $0

(32)

(33)

(176)

274 

Comprehensive income (loss)

$

1,846

$

(79)

$

5,514

$

(664)

See notes to condensed consolidated financial statements

3


 

FRANKLIN COVEY CO.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Two Quarters Ended

February 28,

February 28,

2022

2021

(unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES

Net income (loss)

$

5,690

$

(938)

Adjustments to reconcile net income (loss) to net cash

provided by operating activities:

Depreciation and amortization

5,246

5,746

Amortization of capitalized curriculum costs

1,620

1,750

Stock-based compensation

3,618

2,757

Deferred income taxes

1,277

(198)

Change in fair value of contingent consideration liabilities

48

46

Amortization of right-of-use operating lease assets

475

509

Changes in assets and liabilities:

Decrease in accounts receivable, net

22,925

14,978

Decrease in inventories

25

346

Decrease (increase) in prepaid expenses and other assets

353

(344)

Decrease in accounts payable and accrued liabilities

(11,165)

(244)

Decrease in deferred revenue

(5,518)

(1,497)

Decrease in income taxes payable/receivable

(238)

(87)

Decrease in other long-term liabilities

(1,118)

(912)

Net cash provided by operating activities

23,238

21,912

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of property and equipment

(1,264)

(877)

Curriculum development costs

(774)

(1,292)

Net cash used for investing activities

(2,038)

(2,169)

CASH FLOWS FROM FINANCING ACTIVITIES

Principal payments on notes payable

(2,500)

(2,500)

Principal payments on financing obligation

(1,409)

(1,269)

Purchases of common stock for treasury

(3,535)

(2,971)

Payment of contingent consideration liabilities

(671)

(540)

Proceeds from sales of common stock held in treasury

668

464

Net cash used for financing activities

(7,447)

(6,816)

Effect of foreign currency exchange rates on cash and cash equivalents

(108)

279

Net increase in cash and cash equivalents

13,645

13,206

Cash and cash equivalents at the beginning of the period

47,417 

27,137 

Cash and cash equivalents at the end of the period

$

61,062

$

40,343

Supplemental disclosure of cash flow information:

Cash paid for income taxes

$

1,302

$

788

Cash paid for interest

782

1,085

Non-cash investing and financing activities:

Purchases of property and equipment financed by accounts payable

$

160

$

48

Acquisition of right-of-use operating lease assets for operating lease liabilities

338

885

See notes to condensed consolidated financial statements

4


 

FRANKLIN COVEY CO.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(in thousands and unaudited)

Accumulated

Common

Common

Additional

Other

Treasury

Treasury

Stock

Stock

Paid-In

Retained

Comprehensive

Stock

Stock

Shares

Amount

Capital

Earnings

Income

Shares

Amount

Balance at August 31, 2021

27,056 

$

1,353 

$

214,888 

$

63,591 

$

709 

(12,889)

$

(200,678)

Issuance of common stock from

treasury

 

 

(3,033)

 

 

217 

3,378 

Purchases of common shares

for treasury

 

 

 

 

 

(85)

(3,488)

Stock-based compensation

 

 

1,649 

 

 

 

 

Cumulative translation

adjustments

 

 

 

 

(144)

 

 

Net income

 

 

 

3,812 

 

 

 

Balance at November 30, 2021

27,056 

1,353 

213,504 

67,403 

565 

(12,757)

(200,788)