Ninth Consecutive Quarter of Operating Improvements
First Quarter Fiscal 2005 Results
SALT LAKE CITY, Jan. 11 /PRNewswire-FirstCall/ -- FranklinCovey (NYSE: FC)
reported net income before preferred stock dividends for the fiscal 2005
first quarter of $1.5 million, a $4.7 million improvement compared to a net
loss of $3.2 million for the same quarter in fiscal 2004. The Company
reported a $0.03 loss per share after accounting for preferred stock dividends
for the quarter ended November 27, 2004 compared to a $0.27 loss per share
after accounting for preferred stock dividends for the first quarter of fiscal
2004. The Company also reported its ninth consecutive quarter of significant
improvement in operating results with operating income of $2.3 million for the
first quarter of fiscal 2005, a $4.4 million improvement compared to a loss
from operations of $2.1 million for its first quarter of fiscal 2004. The
Company's financial results during the quarter were influenced primarily by
the following as compared to the first quarter of last year: (1) a
$1.9 million increase in sales of our Organizational Solutions Business Unit
(OSBU) offset by a $7.8 million decline in sales of the Consumer Business Unit
(CBU) resulting in a net $5.9 million decline in sales, partially offset by a
gross margin improvement (59.6% compared to 56.7%) resulting in a net
$1.4 million year-over-year decline in gross margin, (2) a $4.1 million
reduction in selling, general and administrative costs, and (3) a $1.4 million
decline in depreciation expense. The Company provided the additional
following details underlying the continued improvement of its operating
results during the first quarter of fiscal 2005.
Revenues: Total sales for the first quarter of fiscal 2005 declined
$5.9 million compared to last year's first quarter. OSBU sales grew
$1.9 million for the first quarter of fiscal 2005 to $29.0 million compared to
$27.1 million for the same quarter last year. The Company's domestic sales of
organizational training solutions contributed to OSBU's growth in sales.
International revenues also improved as a result of stronger international
currencies compared to the US dollar and increased royalties from licensees.
The Company expects OSBU sales to continue to improve as the Company's
offerings continue to gain traction.
Sales from the CBU for the quarter ended November 27, 2004, declined
$7.8 million to $40.1 million compared to $47.9 million for the same quarter
last year. Within the CBU, retail store sales declined $4.3 million or 19% to
$18.4 million compared to $22.7 million for the same quarter the prior year.
The decline in retail sales was primarily a result of having 16 fewer stores
open during the quarter compared to the first quarter last year, which had
$1.8 million in sales in the first quarter of fiscal 2004, and a 47% decline
in lower margin PDAs and related products sold during the quarter this year
compared to the same quarter last year which resulted in a 12% comparable
store sales decline. Consumer direct sales, product sales made through the
Company's catalog and e-Commerce channels, were $17.1 million compared to
$18.2 million for the same quarter of last year, reflecting continued sales
declines in technology products. Sales of products through other CBU channels
were $4.6 million compared to $7.1 million for the same quarter last year, a
decrease of $2.5 million resulting from order volume through office
superstores as we entered into those channels last year and significant
first-time product placement compared to replenishment orders during this
year.
Selling, general and administrative expenses: Selling, general and
administrative expenses (SG&A) declined by $4.1 million or 10% for the quarter
ended November 27, 2004, compared to last year. The improvement was primarily
due to focused efforts to reduce the Company's operating expenses and reduced
costs associated with fewer retail stores. The Company closed 18 of its
retail stores during fiscal 2004. The Company also intends to close
additional stores during fiscal 2005. These closures are comprised primarily
of less profitable stores and stores whose leases were expiring and were
located in markets where the Company has multiple retail operations.
Depreciation expense: Depreciation expenses continued to decline during
the first 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 $1.4 million in
depreciation expense during the first quarter compared to the same periods of
the prior year.
Other Announcements
The annual meeting of shareholders of FranklinCovey will not be held on
January 21, 2005 as previously scheduled. The annual meeting will be
rescheduled upon completion of the review process for the preliminary proxy
statement, which was filed with the Securities Exchange Commission on
December 8, 2004. Shareholders of the Company will be provided with a notice
regarding the rescheduled date of the annual meeting after the date is
determined.
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 130 retail stores, and
http://www.franklincovey.com . Nearly 1,500 FranklinCovey associates provide
professional services and products in 36 offices in 129 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 the ability of the Company to stabilize revenues,
general economic conditions, 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 2004 10-K report and subsequent 8-K
reports 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 subject to the outcome of various
factors, including those listed above, any one of which may cause future
results to differ materially from the Company's current expectations.
FRANKLIN COVEY CO.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Quarter Ended
November 27, November 29,
2004 2003
(Unaudited) (Unaudited)
Sales $69,104 $75,031
Cost of sales 27,945 32,505
Gross margin 41,159 42,526
Selling, general and administrative 35,960 40,016
Restructuring cost reversal (306)
Depreciation 2,178 3,591
Amortization 1,043 1,043
Income (loss) from operations 2,284 (2,124)
Interest income 118 86
Interest expense (38) (112)
Income (loss) before provision of
income taxes 2,364 (2,150)
Provision for income taxes (838) (1,030)
Net Income (loss) 1,526 (3,180)
Preferred dividends (2,184) (2,184)
Net loss attributable to common
shareholders $(658) $(5,364)
Net loss per share attributable to
common shareholders $(0.03) $(0.27)
Weighted average number of common and
common equivalent shares basic
and diluted 19,729 19,927
Sales Detail
Retail Stores $18,387 $22,668
Consumer Direct 17,137 18,212
Other 4,568 7,051
Total Consumer Strategic Business Unit 40,092 47,931
Organizational Sales Group 15,128 13,948
International 13,884 13,152
Total Organizational Strategic
Business Unit 29,012 27,100
Total $69,104 $75,031
SOURCE FranklinCovey
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Related links:
http://www.franklincovey.com
CONTACT:
Richard R. Putnam, Investor Relations of
FranklinCovey, +1-801-817-1776
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