SALT LAKE CITY, April 11 /PRNewswire-FirstCall/ -- FranklinCovey (NYSE:
FC) reported its fourteenth consecutive quarter of significant improvements
in operating results with operating income of $10.6 million for the second
quarter of fiscal 2006, a $2.6 million or 33% improvement compared to $7.9
million of operating income for the same quarter of last year. The Company
also reported net income before preferred stock dividends of $9.2 million
for the second quarter of fiscal 2006, a $2.1 million or 30% improvement
compared to $7.1 million in net income for the second quarter of fiscal
2005. The Company reported diluted earnings per share of $0.39 after
accounting for preferred stock dividends for the quarter ended February 25,
2006 compared to $0.19 per share after accounting for preferred stock
dividends for the second quarter of fiscal 2005. The Company's
year-over-year operating results during the second quarter were influenced
primarily by the following: (1) a $4.2 million decrease in sales due to a
$4.9 million decrease from closed stores and $0.4 million from decreased
technology product sales which were partially offset by growth in the other
CSBU and OSBU channels with a 60 basis point gross margin improvement
(61.5% compared to 60.9% for the same quarter last year) resulting in a net
$2.0 million year-over-year decrease in gross profit, (2) a $3.5 million or
a 9% decrease in selling, general and administrative (SG&A) costs primarily
resulting from store closures and initiatives to reduce overall operating
costs, and (3) a $1.2 million decline in depreciation and amortization
expense.
For the two quarters ended February 25, 2006, the Company reported a
$4.5 million or 44% improvement in operating results with operating income
of $14.7 million compared to $10.2 million of operating income for the
first two quarters of last year. For the first two quarters of fiscal 2006,
the Company reported a $3.8 million or 45% improvement in net income, with
$12.4 million of earnings before preferred stock dividends ($0.48 diluted
earnings per share after preferred stock dividends) compared to $8.6
million of net income before preferred stock dividends ($0.16 diluted
earnings per share after preferred stock dividends) for the first two
quarters of fiscal 2005. The Company provided the following details
underlying the continued improvement in operating and net results during
the second quarter and first two quarters of fiscal 2006.
Revenues: Total sales for the second quarter of fiscal 2006 decreased
$4.2 million compared to last year's second quarter. Organizational
Solutions Business Unit (OSBU) sales were unchanged in the second quarter
of fiscal 2006 compared to the same quarter last year at $30.4 million.
Domestic OSBU sales, excluding sales of its Sales Performance Group (SPG),
grew 9%. Sales from the SPG declined $2.2 million due primarily to a large
sale delivered in the second quarter of fiscal 2005 and which was not
repeated in the second quarter of fiscal 2006. Overall domestic OSBU sales
excluding SPG grew $1.3 million or 9% compared to a strong second quarter
last year. International sales increased $0.9 million even after a $0.7
million unfavorable impact of foreign currency translation. OSBU revenues
increased 4.0 million or 7% during the first two quarters of fiscal 2006
compared to the first two quarters of fiscal 2005.
Sales from the Consumer and Small Business Unit (CSBU) for the quarter
ended February 25, 2006, declined $4.2 million due to a $4.9 million
decline attributed to the 24 fewer stores open during the quarter this year
compared to the same quarter last year and a $0.4 million decline in PDA's
and related products sold during the quarter this year compared to the same
quarter last year. Total CSBU sales during the second quarter of fiscal
2006 were $47.9 million compared to $52.1 million for the same quarter last
year. Retail store sales were $23.8 million during the second fiscal
quarter compared to $28.1 million for the same quarter the prior year.
Comparable store sales during the quarter grew 3% due to increased sales of
FranklinCovey Planners, totes and binders compared to the same quarter last
year and helped to partially offset the impact of fewer open stores and
decreased technology product sales during the quarter. Consumer Direct
sales grew 4% to $19.2 million during the second fiscal quarter compared to
$18.4 million for the same quarter of last year. Sales of products through
the wholesale channel to office superstores, decreased $1.3 million to $3.6
million compared to $4.9 million for the same quarter last year due mainly
to the timing of sales ordered by these entities during this year compared
to last year at the same time. CSBU revenues decreased $4.9 million to
$89.0 million during the first two quarters of fiscal 2006 compared to
$93.9 million for the first two quarters of fiscal year 2005.
Selling, general and administrative expenses: SG&A costs decreased by
$3.5 million or 9% during the quarter, even after added costs associated
with store closures. SG&A as a percentage of sales declined to 45% from 47%
as efforts to trim expenses continued. Store closing costs are included in
SG&A expense and have a one-time impact in the current period, but decrease
costs going forward. The Company had 24 fewer stores open at the end of the
quarter compared to the same period last year. Fiscal year to date SG&A
costs declined $1.6 million or 2% as compared to the prior year.
Depreciation and amortization: Depreciation and amortization expenses
continued to decline during the second quarter of fiscal 2006, reflecting
lower, more focused and better-managed capital expenditures, and the effect
of certain assets becoming fully depreciated. The Company reported a
decline of $1.2 million in these expenses during the second quarter and a
$2.0 million decrease during the first two quarters of fiscal 2006,
compared to the respective periods of the prior year.
Other: The Company also reported a legal settlement in conjunction with
a lawsuit with one of its vendors which added $0.9 million to net income
during the quarter. Additionally, the Company redeemed $10.0 million of its
outstanding Series A Preferred stock during the second quarter and $20.0
million of the Series A Preferred Stock during the first two quarters of
fiscal 2006, reducing the outstanding Series A Preferred stock to $37.3
million. The Company also purchased 0.2 million shares of its outstanding
common stock for $1.6 million during the second quarter of fiscal 2006 as a
part of an announced $10.0 million authorization to buyback additional
preferred or common stock.
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 90 retail
stores, and http://www.franklincovey.com . More than 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 Two Quarters Ended
February 25, February 26, February 25, February 26,
2006 2005 2006 2005
(unaudited) (unaudited)
Sales $78,333 $82,523 $150,684 $151,627
Cost of sales 30,160 32,306 58,104 59,975
Gross margin 48,173 50,217 92,580 91,652
Selling,
general and
administrative 35,488 38,939 73,255 74,868
Depreciation 1,221 2,320 2,629 4,498
Amortization 908 1,043 2,003 2,087
Operating income 10,556 7,915 14,693 10,199
Interest income 316 165 645 282
Interest expense (660) (29) (1,303) (66)
Legal settlement 873 873
Income before
provision for taxes 11,085 8,051 14,908 10,415
Provision for
income taxes 1,872 965 2,462 1,803
Net income 9,213 7,086 12,446 8,612
Preferred stock
dividends (1,139) (2,184) (2,518) (4,368)
Net income
attributable to
common shareholders $8,074 $4,902 $9,928 $4,244
Net income
attributable to
common shareholders
per share $0.39 $0.19 $0.48 $0.16
Sales Detail:
Retail Stores $23,836 $28,055 $38,506 $46,443
Consumer Direct 19,200 18,387 37,788 37,245
Wholesale 3,620 4,897 10,229 8,480
Other 1,291 765 2,454 1,750
Total Consumer and
Small Business Unit 47,947 52,104 88,977 93,918
Domestic 15,223 16,162 31,616 29,568
International 15,163 14,257 30,091 28,141
Total Organizational
Solutions Business
Unit 30,386 30,419 61,707 57,709
Total $78,333 $82,523 $150,684 $151,627
SOURCE FranklinCovey
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Related links:
http://www.franklincovey.com
CONTACT:
Investor Relations, Richard R. Putnam of
FranklinCovey, +1-801-817-1776
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