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
12, 2005
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:
|
o
|
Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
|
|
o
|
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
|
o
|
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR
240.14d-2(b))
|
|
o
|
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR
240.13e-4(c))
|
Item
2.02 Results
of Operations and Financial Condition
On
July
12, 2005, Franklin Covey Co. (the Company) announced its financial results
for
the quarter ended May 28, 2005. A copy of the earnings release is being
furnished as exhibit 99.1 to this current report on Form 8-K.
The
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
|
(c)
|
Exhibits
|
|
99.1
Earnings release dated July 12,
2005
|
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 thereunto
duly authorized.
| FRANKLIN COVEY CO. | ||
| |
|
|
| Date: July 12, 2005 | By: | /s/ STEPHEN D. YOUNG |
|
Stephen D. Young |
||
| Chief Financial Officer | ||
News
Bulletin
|
2200
West Parkway Boulevard
Salt
Lake City, Utah 84119-2331
www.franklicovey.com
|
For
Further Information:
Richard
R. Putnam
Investor
Relations
(801)
817-1776
|
|
FRANKLINCOVEY
ANNOUNCES
ELEVENTH
CONSECUTIVE QUARTER OF SIGNIFICANT
YEAR-OVER-YEAR
OPERATING IMPROVEMENTS
AND
THIRD QUARTER FISCAL 2005 RESULTS
Salt
Lake City, Utah -
July
12, 2005 - FranklinCovey (NYSE:
FC)
today
announced its financial results for the fiscal third quarter ended May 28,
2005.
FranklinCovey reported net income of $3.1 million before preferred stock
dividends and a non-cash preferred stock recapitalization charge ($0.34 per
common share loss after accounting for dividends and the recapitalization
charge) for the quarter ended May 28, 2005, an $8.2 million improvement compared
to a $5.1 million net loss before preferred stock dividends ($0.37 per common
share loss, after preferred stock dividends) for the same quarter of the prior
year. The fiscal third quarter results included a non-cash $7.8 million charge
for the recapitalization of its preferred stock and a $3.0 million income tax
benefit. The Company also reported a $5.8 million improvement in its operating
results, reducing its loss from operations to $0.2 million for its seasonally
slowest third quarter of fiscal 2005 compared to an operating loss of $6.0
million for the comparable quarter of the last year. This marks the eleventh
consecutive quarter of significant year-over-year improvements in the Company’s
operating results. The Company’s financial results during the quarter were
influenced primarily by the following as compared to the third quarter of last
year: (1) a $4.5 million increase in sales, (2) a 460 basis point improvement
in
gross profit margin resulting in a $5.5 million year-over-year increase in
gross
margin, (3) a $0.8 million increase in selling, general and administrative
(SG&A) costs, (4) a $0.7 million decline in depreciation and amortization
expense, and (5) a $0.5 million gain on the disposal of an investment in an
unconsolidated subsidiary.
For
the
first three quarters of fiscal 2005, the Company reported $11.7 million of
net
income before preferred dividends and the recapitalization charge ($0.18 per
common share loss after accounting for dividends and the recapitalization
charge), a $19.8 million improvement in its net income before preferred
dividends compared to an $8.1 million net loss before preferred stock dividends
($0.73 per common share loss after preferred stock dividends) for the first
three quarters of fiscal 2004. The Company also reported a $17.2 million
improvement in operating results to $10.0 million of operating income on
revenues of $217.4 million compared to an operating loss of $7.2 million on
revenues of $215.0 million for the first three quarters of last year. The
Company provided the following details underlying the continued improvement
of
operating results during the fiscal third quarter and first three quarters
of
fiscal 2005.
Revenues:
Total
sales for the third quarter of fiscal 2005 grew $4.5 million compared to last
year’s third quarter. Organizational Solutions Business Unit (OSBU) sales lead
the growth for the third quarter of fiscal 2005 with $33.8 million of sales,
a
$5.7 million increase, or 20%, compared to $28.1 million of sales for the same
quarter last year. Domestic training sales grew 31% to $20.8 million compared
to
the same quarter last year. International revenues increased by 7% during the
third quarter of fiscal 2005 compared to the same quarter last year. OSBU sales
increases were primarily due to increased sales of the Company’s consulting and
training offerings and sales by foreign licensees.
Sales
from the Consumer and Small Business Unit (CSBU) for the quarter ended May
28,
2005, declined $1.2 million to $32.0 million compared to $33.1 million for
the
same quarter last year. Retail store sales declined $2.6 million or 16% to
$13.4
million during the quarter compared to $16.0 million for the same quarter of
the
prior year. Comparable store sales declined 2% during the quarter compared
to
the same quarter last year. There were 29 fewer domestic stores open during
the
quarter compared to the third quarter of last year; these stores accounted
for
$2.4 million of sales in the third quarter of fiscal 2004. The retail store
sales decline was attributed to the loss of sales from closed retail stores,
less foot traffic in the continuing stores and a $1.2 million decline in
electronic products sold during the quarter this year compared to the same
quarter last year. Consumer direct sales were $10.1 million compared to $9.7
million for the same quarter of last year. Wholesale sales were $7.6 million
compared to $6.8 million for the same quarter last year. Sales of products
through the consumer direct, wholesale and other channels increased $1.4 million
during the quarter compared to the same quarter last year to partially offset
the factors causing sales declines through the retail stores.
Selling,
general and administrative expenses:
SG&A
costs increased by $0.8 million or 2% during the quarter and declined by $4.2
million for the first three quarters ended May 28, 2005, compared to last year.
The increase during the quarter was primarily due to $1.2 million of severance
costs for a former executive officer incurred during the quarter and increased
training sales commissions partially off-set by more focused efforts to reduce
the Company’s operating expenses and the lower costs associated with fewer
retail stores.
Depreciation
and amortization:
Depreciation and amortization expenses (D&A) continued to decline during the
third quarter of fiscal 2005, reflecting lower, more focused and better-managed
capital expenditures and the effect of certain assets becoming fully
depreciated. The Company reported a decline of $0.7 million in D&A during
the third quarter and $3.0 million during the first three quarters of fiscal
2005, compared to the respective periods of the prior year.
Other
developments:
The
Company also announced in July 2005 that it had redeemed $30.0 million of its
Series A Preferred Stock from Knowledge Capital, an entity which holds the
majority of the preferred stock, using the proceeds from the sale of its real
estate announced last week. This $30.0 million redemption will give the Company
gretter flexibility to repurchase additional preferred stock at $25 per share,
shares of its common stock as well as certain other transactions without getting
prior approval from the preferred stockholders. There are approximately 2.3
million shares of the Series A Preferred Stock outstanding after the redemption
of shares from Knowledge Capital.
About
FranklinCovey
FranklinCovey
is a leading learning and performance services firm assisting professionals
and
organizations in measurably increasing their effectiveness in leadership,
productivity, communication and sales. Clients include 91 of the Fortune 100,
more than three-quarters of the Fortune 500, thousands of small and mid-sized
businesses, as well as numerous government entities. Organizations and
professionals access FranklinCovey services and products through consulting
services, licensed client facilitators, one-on-one coaching, public workshops,
catalogs, more than 100 retail stores, and www.franklincovey.com
.
Nearly
1,500 FranklinCovey associates provide professional services and products in
36
offices in 129 countries.
|
FRANKLIN
COVEY CO.
|
|||||||||||||
|
CONDENSED
CONSOLIDATED INCOME STATEMENTS
|
|||||||||||||
|
(
in thousands, except per share amounts )
|
|||||||||||||
|
Quarter
Ended
|
Three
Quarters Ended
|
||||||||||||
|
May
28,
|
May
29,
|
|
May
28,
|
|
May
29,
|
|
|||||||
|
|
|
2005
|
|
2004
|
|
2005
|
|
2004
|
|||||
|
(unaudited)
|
(unaudited)
|
||||||||||||
|
Net
sales
|
$
|
65,788
|
$
|
61,248
|
$
|
217,415
|
$
|
214,993
|
|||||
|
Cost
of sales
|
27,668
|
28,587
|
88,071
|
95,182
|
|||||||||
|
Gross
margin
|
38,120
|
32,661
|
129,344
|
119,811
|
|||||||||
|
Selling,
general and administrative
|
35,947
|
35,128
|
110,388
|
114,553
|
|||||||||
|
Gain
on disposal of investment in unconsolidated subsidiary
|
(500
|
)
|
(500
|
)
|
|||||||||
|
Depreciation
|
1,848
|
2,509
|
6,346
|
9,322
|
|||||||||
|
Amortization
|
1,043
|
1,043
|
3,130
|
3,130
|
|||||||||
|
Income
(loss) from operations
|
(218
|
)
|
(6,019
|
)
|
9,980
|
(7,194
|
)
|
||||||
|
Interest
income, net
|
281
|
58
|
497
|
118
|
|||||||||
|
Income
(loss) before income taxes
|
63
|
(5,961
|
)
|
10,477
|
(7,076
|
)
|
|||||||
|
Income
tax benefit (provision)
|
3,006
|
812
|
1,203
|
(1,021
|
)
|
||||||||
|
Net
income (loss)
|
3,069
|
(5,149
|
)
|
11,680
|
(8,097
|
)
|
|||||||
|
Preferred
stock dividends
|
(2,184
|
)
|
(2,184
|
)
|
(6,551
|
)
|
(6,551
|
)
|
|||||
|
Loss
on recapitalization of preferred stock
|
(7,753
|
)
|
(7,753
|
)
|
|||||||||
|
Net
loss attributable to common shareholders
|
$
|
(6,868
|
)
|
$
|
(7,333
|
)
|
$
|
(2,624
|
)
|
$
|
(14,648
|
)
|
|
|
Net
loss per share attributable to common
shareholders
|
$
|
(0.34
|
)
|
$
|
(0.37
|
)
|
$
|
(0.18
|
)
|
$
|
(0.73
|
)
|
|
|
Weighted
average common shares - basic and diluted
|
19,922
|
19,940
|
19,847
|
19,947
|
|||||||||
|
Sales
Detail:
|
|||||||||||||
|
Retail
Stores
|
$
|
13,443
|
$
|
16,005
|
$
|
59,886
|
$
|
71,341
|
|||||
|
Catalog
/ e-commerce
|
10,114
|
9,685
|
44,016
|
44,162
|
|||||||||
|
Wholesale
|
7,627
|
6,820
|
16,107
|
16,946
|
|||||||||
|
Other
|
792
|
629
|
2,542
|
1,850
|
|||||||||
|
Total
Consumer and Small Business Unit
|
31,976
|
33,139
|
122,551
|
134,299
|
|||||||||
|
Organizational
Solutions Group
|
20,766
|
15,862
|
53,677
|
42,920
|
|||||||||
|
International
|
13,046
|
12,247
|
41,187
|
37,774
|
|||||||||
|
Total
Organizational Solutions Business Unit
|
33,812
|
28,109
|
94,864
|
80,694
|
|||||||||
|
Total
|
$
|
65,788
|
$
|
61,248
|
$
|
217,415
|
$
|
214,993
|
|||||