SALT LAKE CITY, March 16 /PRNewswire/ -- Franklin Covey (NYSE: FC)
reported today sales and earnings for the second quarter ended February 27,
1999. Sales for the quarter were $137.1 million compared to $138.6 million, a
decrease of $1.5 million from the same quarter in fiscal 1998. Earnings for
the second quarter were $6.6 million compared to $12.5 million in the
comparable quarter of fiscal 1998. Diluted earnings per share for the second
quarter of fiscal 1999 were $0.31 per share compared to $0.49 per share for
the second quarter of fiscal 1998.
Sales for the first six months of fiscal 1999 were $277.4 million, a
decrease of $5.0 million over the same period of fiscal 1998. Earnings
decreased to $17.5 million, compared to $24.0 million for the first six months
of fiscal 1998. Diluted earnings per share for the first six months of fiscal
1999 were $0.81 compared to $0.94 per share for the same period of fiscal
1998.
The Company noted that the decline in earnings was attributable to lower
sales as well as higher cost of sales related to product mix shifts, more
aggressive discounting, and the write-off of excess dated inventory. Product
sales were essentially the same as the prior year. Growth in the contract
stationer channel and in third party technology products was offset by
weakness in catalog sales. Retail store sales were slightly ahead of last
year with comparative store sales up 1%. The Company ended the quarter with
125 retail stores in operation. The shift in business to the contract
stationer channel and third party technology products, along with the
Company's initial distribution of product through Office Depot, also had the
effect of reducing gross margin rates.
Franklin Covey's Training and Education business was behind the prior year
by 12%, primarily due to a shortfall in corporate sales. The recent
reorganization of this unit, however, has begun to show results, as the new
order rate has begun to improve. Additionally, the reception to the new What
Matters Most curriculum has been strong. In the International business, sales
were flat from the prior year, with the exception of Japan where revenues were
up as the result of the Company's purchase of the business of its licensee
there in April of 1998.
Commenting on the quarter and the outlook for the remainder of the year,
John L. Theler, Chief Financial Officer, summarized, "The results of the
second quarter are disappointing and represent a combination of sales below
expectations and pressure on margins. We still have much to do to bring the
Company in line with our own expectations as well as those of our
shareholders. As we look ahead, we would expect the forces that led to these
results to continue. We believe this will lead us to a loss in the third
quarter and results for the full year of approximately $1.50 per share."
Jon H. Rowberry, Chief Executive Officer, concluded by stating,
"Notwithstanding our current disappointing results, we remain optimistic about
the future. We are currently investing heavily to develop electronic
solutions that will meet the needs of our customers now and in the future. As
we introduce new products and establish strategic alliances during the coming
year, we expect to see a positive impact on both revenue growth and earnings."
Franklin Covey also announced the repurchase of 372,000 shares of the
Company's common stock during the quarter at an average price of $15.42 per
share under the Company's share buyback plan. The Company currently has
1,620,000 shares available to repurchase under the current plan.
The Company also announced the signing of a letter of intent with
Art Pack, LLC, of Salt Lake City, to sell its commercial printing division of
Publishers Press. The transaction is expected to close by the end of May.
Terms of the agreement were not disclosed. The transaction is subject to
normal due diligence and regulatory reviews.
Franklin Covey is a leading global provider of leadership development and
productivity services and product solutions based on proven principles. More
than 17 million individuals use Franklin Covey's agendas and planners, and its
training products and related materials are printed in 32 languages throughout
the world. Franklin Covey trains approximately 750,000 participants annually
in training seminars teaching principles to help them achieve "What Matters
Most."
This announcement contains forward-looking statements that necessarily are
based on certain assumptions and are subject to certain risks and
uncertainties, including the effects of competition, lack of market acceptance
of new products or services, failure to gain market share in target markets
and other factors identified and discussed in the Company's 1998 10-K and
subsequent 10-Q reports filed with the Securities Exchange Commission. There
can be no assurance that the Company's actual future performance will meet the
Company'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 INCOME
(in thousands, except per share amounts)
Quarter Ended Six Months Ended
Feb. 27, Feb. 28, Feb. 27, Feb. 28,
1999 1998 1999 1998
(unaudited) (unaudited)
Sales $137,089 $138,564 $277,451 $282,483
Cost of sales 57,961 53,496 111,892 110,146
Gross margin 79,128 85,068 165,559 172,337
Selling, general and
administrative 56,100 54,208 112,521 109,458
Depreciation 4,779 4,587 9,424 8,287
Amortization 4,619 3,705 9,009 7,389
Income from operations 13,630 22,568 34,605 47,203
Interest income 382 533 743 891
Interest expense (2,707) (1,798) (5,228) (3,524)
Income before provision
for income taxes 11,305 21,303 30,120 44,570
Provision for income taxes 4,748 8,841 12,650 18,497
Income before cumulative
change in accounting principle 6,557 12,462 17,470 26,073
Cumulative change in
accounting principle,
net of tax (2,080)
Net income $6,557 $12,462 $17,470 $23,993
Earnings per share:
Basic $0.31 $0.50 $0.82 $0.97
Diluted $0.31 $0.49 $0.81 $0.94
Weighted average common shares:
Basic 21,194 24,774 21,304 24,769
Diluted 21,352 25,423 21,552 25,480
Sales Detail:
Consumer Product $80,946 $80,166 $157,827 $157,818
Training and Education 35,065 39,737 75,645 83,180
International 14,010 10,777 28,711 23,047
Other 7,068 7,884 15,268 18,438
Total Sales $137,089 $138,564 $277,451 $282,483
SOURCE Franklin Covey Co.
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Related links:
http://www.franklincovey.com
Company News On-Call:
http://www.prnewswire.com/comp/107086.html or fax,
800-758-5804, ext. 107086
CONTACT:
Jon H. Rowberry, Chief Executive Officer,
John L. Theler, Chief Financial Officer, or Richard R. Putnam,
Investor Relations, all of Franklin Covey Co., 801-975-1776
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