SALT LAKE CITY, Jan. 13 /PRNewswire-FirstCall/ -- FranklinCovey (NYSE: FC)
reported a $5.2 million improvement in its operating results, reducing its
loss from operations to $2.1 million for its first quarter ended November 29,
2003 compared to a loss from operations of $7.3 million for the comparable
quarter of the prior year. This marks the fifth consecutive quarter of
significant year-over-year improvements in Company's operating results. 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
$10.0 million decline in sales, partially offset by a gross margin improvement
(56.7% compared to 55.2%) resulting in a net $4.4 million year-over-year
decline in gross profit, (2) a $7.9 million improvement in selling, general
and administrative costs, and (3) a $2.5 million decline in depreciation and
amortization expense.
FranklinCovey also reported a $4.9 million improvement in its net loss,
reducing its net loss to $3.2 million before preferred stock dividends
($0.27 per common share loss, after accounting for preferred stock dividends)
for the first quarter ended November 29, 2003 compared to an $8.1 million net
loss before preferred stock dividends ($0.51 per common share loss, after
accounting for preferred stock dividends) for the same quarter of the prior
year. The Company provided the following details underlying the continued
improvement of operating results during the first quarter of fiscal 2004.
Revenues: Total sales for the first quarter of fiscal 2004 declined
$10.0 million compared to last year's first quarter. Sales from the Consumer
Business Unit (CBU) for the quarter ended November 29, 2003, declined
$6.4 million to $47.9 million compared to $54.4 million for the same quarter
last year. Retail store sales, accounted for $5.5 million of the CBU revenue
decline and were $22.7 million during the quarter compared to $28.2 million
(11% comparable store sales decline) for the same quarter the prior year.
There were 34 fewer stores open during the quarter compared to the first
quarter last year, which had $3.1 million in sales in the first quarter of
fiscal 2003. The retail store sales decline was primarily attributed to the
smaller number of stores open in the quarter and to a 17% decline in PDA's and
related products sold during the quarter this year compared to the same
quarter last year. Catalog/eCommerce sales were $18.2 million compared to
$19.1 million for the same quarter of last year. Sales of products through
the Target retail store channel and the office superstores grew strongly, but
were partially offset by the out-sourcing of government product sales. This
resulted in Other CBU sales of $7.1 million compared to $7.0 million for the
same quarter last year.
Organizational Solutions Business Unit (OSBU) sales declined $3.6 million
for the first quarter of fiscal 2004 to $27.1 million compared to
$30.7 million for the same quarter last year. The Company's efforts to scale
back organizational consulting and the number of public seminars offered while
focusing more of its efforts on organizational training solutions contributed
to the decline in sales. International revenues improved primarily due to the
translation of foreign sales as foreign currencies strengthened against the
United States dollar, and increased royalties from licensees. The Company
expects OSBU sales to improve as the general economy strengthens, corporate
clients again begin to fund their training budgets, and the Company's new
offerings continue to gain traction.
Selling, general and administrative expenses: Selling, general and
administrative expenses (SG&A) declined by $7.9 million or 16% for the quarter
ended November 29, 2003, compared to last year. The improvement was primarily
due to focused efforts to reduce the Company's operating expenses and fewer
retail stores. The Company closed 22 of its domestic retail stores and
another 10 of its international retail stores during fiscal 2003, and another
2 stores during its first quarter of fiscal 2004. The Company also intends to
close additional stores during fiscal 2004. These closures are comprised
primarily of unprofitable stores and stores located in markets where the
Company has multiple retail operations. The Company may also close additional
retail store locations if future analysis demonstrates that operating
performance may be improved through further retail store closures. With the
annualized impact of implemented cost reductions and on-going cost-cutting
initiatives, the Company expects the year-over-year decreases in SG&A to
continue throughout fiscal 2004, even after including expected retail store
closing costs.
Depreciation and amortization: Depreciation and amortization expenses
(D&A) continued to decline during the first quarter of fiscal 2004, reflecting
lower, more focused and better-managed capital expenditures and the effect of
certain assets becoming fully depreciated. The Company reported a decline of
$2.5 million in D&A during the first quarter compared to the same periods of
the prior year.
Other Announcements
The Company also received official notification from the New York Stock
Exchange (NYSE) that the Company has been removed from the NYSE's "Watch List"
and is now considered a "company in good standing" in relation to the NYSE's
continued listing standards. The NYSE's decision was a result of the
Company's previous cure to the minimum price standard achieved in September
2003 and as a result of the Company's positive performance with respect to the
business plan that it had submitted to the NYSE last year.
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, 150 retail stores, and
http://www.franklincovey.com . Nearly 2,000 FranklinCovey associates provide
professional services and products in 39 offices in 95 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 2003 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 29, November 30,
2003 2002
(Unaudited) (Unaudited)
Sales $75,031 $85,046
Cost of sales 32,505 38,118
Gross margin 42,526 46,928
Selling, general and administrative 40,016 47,908
Provision for losses on management
stock loans 157
Recovery of investment in
unconsolidated subsidiary (890)
Depreciation 3,591 5,914
Amortization 1,043 1,173
Loss from operations (2,124) (7,334)
Equity in losses of unconsolidated
subsidiary (46)
Interest income 86 267
Interest expense (112) (73)
Other expense (172)
Loss before provision of income
taxes (2,150) (7,358)
Provision for income taxes (1,030) (748)
Net loss (3,180) (8,106)
Preferred dividends (2,184) (2,184)
Net loss attributable to common
shareholders $(5,364) $(10,290)
Net loss per share attributable to
common shareholders $(0.27) $(0.51)
Weighted average number of common
and common equivalent shares basic
and diluted 19,927 20,009
Sales Detail
Retail Stores $22,668 $28,198
Catalog/e-Commerce 18,212 19,133
Other 7,051 7,028
Total Consumer Strategic Business Unit 47,931 54,359
Organizational Sales Group 13,948 18,911
International 13,152 11,776
Total Organizational Strategic
Business Unit 27,100 30,687
Total $75,031 $85,046
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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