SALT LAKE CITY, April 13 /PRNewswire-FirstCall/ -- FranklinCovey
(NYSE: FC) reported an $8.4 million improvement with $1.0 million in operating
income for its second quarter ended February 28, 2004, compared to an
operating loss of $7.5 million for the comparable quarter of the prior year.
This marks the sixth consecutive quarter of significant year-over-year
improvements in the Company's operating results. The Company's financial
results during the quarter were influenced primarily by the following as
compared to the second quarter of last year: (1) a $11.1 million decline in
sales, partially offset by a gross margin improvement (56.7% compared to 55.8%
for the same quarter last year) resulting in a net $5.5 million year-over-year
decline in gross profit, (2) a $6.5 million improvement in selling, general
and administrative (SG&A) costs, and (3) a $5.0 million decline in
depreciation and amortization expense.
FranklinCovey also reported $0.2 of net income before preferred stock
dividends ($0.10 per common share loss, after preferred stock dividends) for
the quarter ended February 28, 2004, an $8.2 million improvement compared to a
$7.9 million net loss before preferred stock dividends ($0.50 per common share
loss, after preferred stock dividends) for the same quarter of the prior year.
For the first two quarters of fiscal 2004, the Company reported a $13.6
million improvement in operating results reducing its operating loss to $1.2
million compared to an operating loss of $14.8 million for the first two
quarters of last year. The Company reported a $13.1 million improvement in
its net loss, reducing its net loss to $2.9 million before preferred stock
dividends ($0.37 per common share loss after preferred stock dividends) for
the first two quarters of fiscal 2004 compared to a $16.0 million loss before
preferred stock dividends ($1.02 per common share loss after preferred stock
dividends) for the first two quarters of fiscal 2003. The Company provided
the following details underlying the continued improvement of operating and
net results during the second quarter and first two quarters of fiscal 2004.
Revenues: Total sales for the second quarter of fiscal 2004 declined
$11.1 million compared to last year's second quarter. Sales from the Consumer
Business Unit (CBU) for the quarter ended February 28, 2004, declined $8.5
million to $53.2 million compared to $61.7 million for the same quarter last
year. Retail store sales accounted for $7.7 million of the CBU revenue
decline and were $32.7 million during the quarter compared to $40.3 million
(8% comparable store sales decline) for the same quarter the prior year.
There were 26 fewer domestic stores open during the quarter compared to the
second quarter last year; these stores accounted for $3.1 million of sales in
the second 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 16% decline in PDA's and related products sold during the quarter this
year compared to the same quarter last year. Catalog/eCommerce sales were
$16.3 million compared to $17.1 million for the same quarter of last year.
Sales of products through the office superstores and other third party
retailers channel increased, but were offset by reduced sales revenue reported
as a result of the out-sourcing of government product sales which reduced
revenue but increased profitability. This resulted in flat Other CBU sales of
$4.3 million compared to $4.3 million for the same quarter last year.
Organizational Solutions Business Unit (OSBU) sales declined $2.6 million
for the second quarter of fiscal 2004 to $25.5 million compared to $28.1
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, which have
higher gross margins, 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 and hiring trends strengthen, corporate clients again begin to
fund their training budgets, and the Company's new offerings continue to gain
traction.
Selling, general and administrative expenses: SG&A costs declined by $6.5
million or 14% for the quarter and $14.4 million for the first two quarters
ended February 28, 2004, compared to last year. The improvements were
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 6 stores during its first two quarters 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 during the second half of fiscal 2004, even after including
expected retail store closing costs.
Depreciation and amortization: Depreciation and amortization expenses
(D&A) continued to decline during the second 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 $5.0 million in D&A during the second quarter and $7.4 million
during the first two quarters of fiscal 2004, compared to the respective
periods of the prior year.
Fiscal 2004 Outlook
The Company also provided an outlook for the remainder of fiscal 2004.
The Company expects continued significant improvements in operating results
during the next two quarters as compared to the prior year's quarters,
resulting in a more than $30 million operating improvement for fiscal 2004
compared to the prior year, excluding store closures and other unanticipated
one-time write-offs. The Company believes this significant improvement will
result from expected continued reductions in operating costs and
year-over-year stabilization of sales in the second half.
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 140 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 Two Quarters Ended
Feb. 28 Mar. 1 Feb. 28 Mar. 1
2004 2003 2004 2003
(unaudited) (unaudited)
Sales $78,715 $89,790 $153,746 $174,836
Cost of sales 34,090 39,712 66,595 77,830
Gross margin 44,625 50,078 87,151 97,006
Selling, general and administrative 39,410 45,895 79,426 93,803
Provision for losses on management
stock loans 2,313 2,470
Recovery of investment in
unconsolidated subsidiary (740) (1,630)
Impairment of assets 872 872
Depreciation 3,222 8,068 6,813 13,981
Amortization 1,043 1,151 2,087 2,324
Operating income (loss) 950 (7,481) (1,175) (14,814)
Equity in earnings (losses) of
unconsolidated subsidiary (82) (128)
Interest income 141 138 227 404
Interest expense (56) (37) (167) (111)
Other expense (172)
Income (loss) before provision for
taxes 1,035 (7,462) (1,115) (14,821)
Provision for income taxes 803 476 1,833 1,224
Net income (loss) 232 (7,938) (2,948) (16,045)
Preferred stock dividends (2,184) (2,184) (4,368) (4,367)
Net loss attributable to common
shareholders $(1,952) $(10,122) $(7,316) $(20,412)
Net loss attributable to common
shareholders per share $(0.10) $(0.50) $(0.37) $(1.02)
Weighted average number of common
and
common equivalent shares --
Basic and Diluted 19,940 20,052 19,953 20,030
Sales Detail:
Retail Stores $32,668 $40,338 $55,336 $68,536
Catalog / e-Commerce 16,265 17,085 34,477 36,218
Other 4,297 4,318 11,348 11,346
Total Consumer Business Unit 53,230 61,741 101,161 116,100
Organizations Solutions Group 13,110 18,097 27,058 37,008
International 12,375 9,952 25,527 21,728
Total Organizational Solutions
Business Unit 25,485 28,049 52,585 58,736
Total $78,715 $89,790 $153,746 $174,836
SOURCE Franklin Covey
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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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