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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 29, 2024

[   ]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, $0.05 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:

13,266,000 shares of Common Stock, $0.05 par value per share, as of March 31, 2024


 

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FRANKLIN COVEY CO.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per-share amounts)

February 29,

August 31,

2024

2023

(unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

40,904

$

38,230

Accounts receivable, less allowance for doubtful accounts of $3,392 and $3,790

57,153

81,935

Inventories

4,196

4,213

Prepaid expenses and other current assets

20,182

20,639

Total current assets

122,435

145,017

Property and equipment, net

8,708

10,039

Intangible assets, net

38,371

40,511

Goodwill

31,220

31,220

Deferred income tax assets

1,655

1,661

Other long-term assets

19,544

17,471

$

221,933

$

245,919

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

Current portion of notes payable

$

3,335

$

5,835

Current portion of financing obligation

3,718

3,538

Accounts payable

7,734

6,501

Deferred subscription revenue

82,365

95,386

Other deferred revenue

22,012

12,137

Accrued liabilities

19,301

28,252

Total current liabilities

138,465

151,649

Notes payable, less current portion

1,577

1,535

Financing obligation, less current portion

2,515

4,424

Other liabilities

7,492

7,617

Deferred income tax liabilities

1,057

2,040

Total liabilities

151,106

167,265

Shareholders’ equity:

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

1,353

1,353 

Additional paid-in capital

225,776

232,373

Retained earnings

105,527

99,802

Accumulated other comprehensive loss

(1,075)

(987)

Treasury stock at cost, 13,801 shares and 13,974 shares

(260,754)

(253,887)

Total shareholders’ equity

70,827

78,654

$

221,933

$

245,919

See notes to condensed consolidated financial statements


2


 

FRANKLIN COVEY CO.

CONDENSED CONSOLIDATED INCOME STATEMENTS AND STATEMENTS

OF COMPREHENSIVE INCOME

(in thousands, except per-share amounts)

Quarter Ended

Two Quarters Ended

February 29,

February 28,

February 29,

February 28,

2024

2023

2024

2023

(unaudited)

(unaudited)

Net sales

$

61,336 

$

61,756 

$

129,736 

$

131,125 

Cost of sales

14,485 

14,546 

30,607 

31,173 

Gross profit

46,851 

47,210 

99,129 

99,952 

Selling, general, and administrative

40,771 

42,338 

84,976 

86,350 

Restructuring costs

1,726 

-

2,307 

-

Impairment of asset

928 

-

928 

-

Depreciation

913 

951 

2,005 

2,196 

Amortization

1,071 

1,093 

2,142 

2,185 

Income from operations

1,442 

2,828 

6,771 

9,221 

Interest income

301 

362 

589 

442 

Interest expense

(328)

(409)

(669)

(819)

Income before income taxes

1,415 

2,781 

6,691 

8,844 

Income tax provision

(541)

(1,042)

(966)

(2,438)

Net income

$

874 

$

1,739 

$

5,725 

$

6,406 

Net income per share:

Basic

$

0.07 

$

0.13 

$

0.43 

$

0.46 

Diluted

0.06 

0.12 

0.42 

0.44 

Weighted average number of common shares:

Basic

13,263 

13,900 

13,253 

13,888 

Diluted

13,484 

14,533 

13,560 

14,520 

COMPREHENSIVE INCOME

Net income

$

874 

$

1,739 

$

5,725 

$

6,406 

Foreign currency translation adjustments,

net of income taxes of $0, $0, $0, and $0

(139)

146 

(88)

16 

Comprehensive income

$

735 

$

1,885 

$

5,637 

$

6,422 

See notes to condensed consolidated financial statements

3


 

FRANKLIN COVEY CO.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Two Quarters Ended

February 29,

February 28,

2024

2023

(unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES

Net income

$

5,725 

$

6,406 

Adjustments to reconcile net income to net cash

provided by operating activities:

Depreciation and amortization

4,146 

4,381 

Amortization of capitalized curriculum costs

1,501 

1,648 

Impairment of asset

928 

-

Stock-based compensation

4,265 

6,050 

Deferred income taxes

(978)

1,130 

Change in fair value of contingent consideration liabilities

-

7 

Amortization of right-of-use operating lease assets

403 

411 

Changes in assets and liabilities:

Decrease in accounts receivable, net

24,694

19,050 

Decrease in inventories

11

71 

Decrease in prepaid expenses and other assets

27

1,333 

Decrease in accounts payable and accrued liabilities

(7,497)

(16,823)

Decrease in deferred revenue

(3,014)

(11,674)

Increase (decrease) in income taxes payable

191 

(455)

Decrease in other long-term liabilities

(190)

(327)

Net cash provided by operating activities

30,212

11,208 

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of property and equipment

(1,716)

(2,644)

Curriculum development costs

(3,770)

(5,277)

Net cash used for investing activities

(5,486)

(7,921)

CASH FLOWS FROM FINANCING ACTIVITIES

Principal payments on notes payable

(2,500)

(2,500)

Principal payments on financing obligation

(1,728)

(1,562)

Purchases of common stock for treasury

(18,413)

(4,665)

Payment of contingent consideration liabilities

-

(736)

Proceeds from sales of common stock held in treasury

684 

739 

Net cash used for financing activities

(21,957)

(8,724)

Effect of foreign currency exchange rates on cash and cash equivalents

(95)

41 

Net increase (decrease) in cash and cash equivalents

2,674 

(5,396)

Cash and cash equivalents at the beginning of the period

38,230 

60,517 

Cash and cash equivalents at the end of the period

$

40,904 

$

55,121 

Supplemental disclosure of cash flow information:

Cash paid for income taxes

$

1,644 

$

1,604 

Cash paid for interest

615 

738 

Non-cash investing and financing activities:

Purchases of property and equipment financed by accounts payable

$

109 

$

141 

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

128 

448 

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

Loss

Shares

Amount

Balance at August 31, 2023

27,056 

$

1,353 

$

232,373 

$

99,802 

$

(987)

(13,974)

$

(253,887)

Issuance of common stock from

treasury

(10,569)

601 

10,925 

Purchases of common shares

for treasury

(409)

(16,308)

Stock-based compensation

2,897 

Cumulative translation