SALT LAKE CITY, Jan. 9 /PRNewswire/ -- Franklin Covey (NYSE: FC) today
announced financial results for its first quarter of fiscal year 2002 ended
November 24, 2001. Sales from continuing operations for the first quarter of
fiscal 2002 decreased 33% to $84.3 million compared to $125.6 million for the
first quarter of fiscal 2001. The Company reported an after-tax loss of
$21.7 million and a $27.8 million loss attributable to the common stock
($1.40 loss per share, after accounting for preferred dividends and
discontinued operations) compared to $4.4 million in net income and a
$0.7 million loss attributable to the common stock ($0.03 loss per share,
after accounting for preferred dividends and discontinued operations) for the
same quarter in the prior year. EBITDA for the quarter was a negative
$20.0 million compared to positive EBITDA of $20.4 million for the same
quarter of fiscal 2001. The Company's fiscal first quarter of 2002 EBITDA and
net loss included an $11.8 million non-cash charge consisting of a
$10.0 million provision for losses on the management stock loans and
$1.8 million impairment of investment in Franklin Covey Coaching, LLC. Due to
the sale of Premier Agendas on December 21, 2001, the operating results of
Premier have been classified as discontinued operations.
The Company identified three major factors that impacted sales and EBITDA
during the quarter: 1) the direct impact of the events of September 11; 2) an
already weak economy that worsened during the quarter; and 3) a decline in
sales of handheld electronic organizers (PDA's) and related accessories of
approximately $10 million. Also, because of the Company's modified
5-4-4 reporting calendar, the first quarter of fiscal year 2002 had one less
business day compared to the first quarter of fiscal year 2001. This
difference will be picked up in the last quarter of fiscal 2002.
As a direct consequence of the events of September 11, the Company
experienced a number of cancellations and postponements of scheduled training
business. In addition, the booking pace for future organizational training
business declined due to concerns related to travel and economic conditions.
Retail sales were also negatively impacted with comparable store sales down
28% prior to September 11, but an overall 35% for the quarter. In addition,
the sales from the Company's historically strong fall catalog mailing, which
was mailed just days prior to September 11 and the subsequent anthrax scares
associated with the mail, declined more than 40% during the quarter compared
to the same quarter last year. This decline is consistent with those reported
for many other catalog-based businesses during the same time period.
Total Consumer Business Unit sales were $49.5 million during the first
quarter of fiscal 2002 compared to $74.9 million for the same quarter of
fiscal 2001. Included in the Consumer Business Unit, retail store sales were
$28.6 million during the quarter compared to $39.6 million for the same
quarter of fiscal 2001. Comparable store sales decreased 35% during the
quarter. The lower comparable store sales were a function of dramatically
lower sales of PDA's, some cannibalization of existing store sales by the new
stores that opened in the same markets, the impact of September 11 (where more
than 100 of the Company's stores in malls or shopping centers were closed for
at least one day) and the general unfavorable economy. The Company opened
6 new stores during the quarter bringing the total number of its stores to
172 compared to 149 a year ago. The Company noted that the combination of
nationwide declines in mall foot traffic leading to fewer transactions,
together with smaller average purchases due to lower technology sales
adversely impacted the Company's retail store sales. Catalog/e-commerce
revenues decreased 38% to $19.4 million compared to $31.6 million for the same
quarter a year ago. The decrease was primarily attributed to lower call
volume.
Total Organizational Business Unit sales for the quarter were
$34.9 million compared to $50.7 million during the first quarter of fiscal
2001. Included in the Organizational Business Unit, OSG sales decreased
38% to $22.0 million compared to $35.2 million for the same quarter of fiscal
2001. Lower revenues were attributed to postponed or canceled training
seminars due to difficulties and concerns related to travel and the overall
economy as well as restructuring activities within the business unit that were
undertaken and completed during the first quarter of fiscal 2002.
Organizational sales internationally, including direct and licensee
operations, were $12.9 million during the quarter compared to $15.5 million
for the same quarter last year.
Commencing in January 2001, the Company began to feel the impact of a
weakening economy. Prior to then, the Company had benefited from a growing
economy and strong demand for handheld electronic organizers. The Company
believes, however, that many of its customers view the products and services
offered by the Company as discretionary spending and, as general economic
conditions worsened, total revenues for fiscal 2001 were down 13% from fiscal
2000. This trend was accelerated by the events that occurred in the first
quarter of fiscal 2002 and the Company does not anticipate that revenues will
significantly increase from current levels unless and until the Company's
customers regain confidence in improving economic conditions and increase
their productivity and training budgets.
The significant decrease in revenues from prior year periods continued
through the Christmas buying season. While the Company has taken significant
steps to decrease costs in order to address continuing lower revenues and
currently has a very strong balance sheet after the benefit of the Premier
sale, with essentially no debt and more than $60 million ($3 per share) of
cash and cash equivalents, the Company is considering whether or not it should
conserve this cash position to provide it with adequate resources to maintain
flexibility in uncertain economic conditions. As a consequence, the Company
is considering the possible cutback, delay or termination of its previously
announced tender offer to purchase its common stock at $6 per share and
expects to announce a decision in the next week. The Company wants to be
confident that under any scenario it is maintaining sufficient resources to
fund initiatives aimed at strengthening its sales and profitability during
fiscal 2002 and beyond.
About Franklin Covey
Franklin Covey Co. 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 80 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 Franklin Covey services and
products through consulting services, licensed client facilitators, public
workshops, catalogs, 173 retail stores, http://www.franklincovey.com and
http://www.franklinplanner.com . More than 3,000 Franklin Covey associates provide
professional services and products in 44 offices in 38 countries.
Safe-Harbor Statement
This announcement contains forward-looking statements that necessarily are
based on certain assumptions and are subject to certain risks and
uncertainties, including general economic conditions, the effects of the
adoption of certain new accounting policies, competition in the Company's
targeted market place, market acceptance of new products or services,
increases or decreases in the Company's market share, growth or contraction of
the overall market for the products offered by the Company and its
competitors, changes in the training and spending policies of the Company's
clients, and other factors identified and discussed in the Company's 2001
10-K report filed with the Securities and Exchange Commission, many of which
are beyond the control or influence of the Company. There can be no assurance
that the Company's actual future performance will meet management's
expectations. These forward-looking statements are based on management's
expectations as of the date hereof, and are based on factors that may cause
future results to differ materially from the Company's current expectations.
FRANKLIN COVEY CO.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
( in thousands, except per share amounts )
Quarter Ended
November 24, November 25,
2001 2000
(Unaudited)
Sales $84,340 $125,616
Cost of sales 36,853 50,144
Gross margin 47,487 75,472
Selling, general and administrative 56,504 56,002
Equity in earnings of a subsidiary 863 885
Provision for losses on
management stock loans (9,971)
Impairment of invest in unconsolidated
subsidiary (1,861)
EBITDA (19,986) 20,355
Depreciation 8,277 6,065
Amortization 1,396 3,249
EBIT (29,659) 11,041
Interest income 851 164
Interest expense (2,166) (1,779)
Other expense 5,126
Income (loss) before provision for
income taxes (36,100) 9,426
Benefit for income taxes 14,440 (5,005)
Net income (loss) $(21,660) $4,421
Loss from discontinued operations,
net of tax benefit (3,992) (3,091)
Preferred dividends (2,130) (2,028)
Net loss attributable to common shareholders $(27,782) $(698)
Earnings per share (basic and diluted) $(1.40) $(0.03)
Weighted average number of common and
common equivalent shares basic and diluted 19,856 20,648
Sales Detail
Retail Stores $28,639 $39,631
Catalog / e-Commerce 19,444 31,586
Other 1,392 3,705
Total Consumer Business Unit 49,475 74,922
Organizational Sales Group 21,987 35,232
International 12,878 15,462
Total Organizational Business Unit 34,865 50,694
Total $84,340 $125,616
SOURCE Franklin Covey
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CONTACT:
Richard R. Putnam, Investor Relations of
Franklin Covey, +1-801-975-1776
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