SALT LAKE CITY, April 14 /PRNewswire-FirstCall/ -- FranklinCovey
(NYSE: FC) today announced its financial results for the second quarter ended
March 1, 2003. The Company reported a $31.2 million improvement in its
operating results, reducing its loss from operations to $7.5 million for the
second quarter of fiscal 2003 compared to a loss from operations of
$38.7 million for the second quarter of fiscal 2002. For the first six months
of fiscal 2003, the Company reported a $54.2 million improvement in operating
results with a loss from operations of $14.8 million compared to a
$69.0 million loss for the first six months of fiscal 2002. FranklinCovey
provided details underlying the significant improvement in operating results,
said that it has paid-off substantially all of its debt and has strong
liquidity, and said that it expects to see significant improvements in its
operating results during the next six months of fiscal 2003 as compared to the
same period of the prior year.
-- Operating results for the second quarter and first six months --
FranklinCovey identified the following five key factors regarding its
operating performance and financial position:
-- Selling, general, and administrative expenses. Selling, general,
and administrative (SG&A) expenses declined by $12.7 million
compared to last year's second quarter and also declined by $21.1
million for the first six months compared to the same period of
the prior year (despite having an additional five business days
in this fiscal year's first quarter). With on-going cost cutting
initiatives, the Company expects to report significant year-over-
year decreases in SG&A expense during the second half of fiscal
2003.
-- Gross margin. Gross margin percentage improved from 54.9% for
the second quarter of fiscal 2002 to 55.8% during the second
quarter of fiscal 2003 due to lower obsolescence write offs and
improvements in inventory management procedures. These
improvements have also helped to hold the Company's gross margin
percentage even for the first six months of fiscal 2003, compared
to the same period of last year, despite discounting in the first
quarter of this fiscal year on electronic hand-held tools and
other planner products.
-- Depreciation and amortization. Depreciation and amortization
expenses continued to decline in the second quarter and the first
six months of fiscal 2003, reflecting lower, more-focused and
better-managed capital expenditures. Depreciation in the second
quarter of fiscal 2003 included $2.4 million of accelerated
depreciation on retail stores that are expected to close by early
fiscal 2004.
-- Stabilizing revenues. Primarily as a result of softer-than-
expected consumer sales through the Consumer Strategic Business
Unit (CSBU) during its second quarter of fiscal 2003, the Company
experienced a year-over-year revenue decline of $13.5 million or
13% as compared to last year's fiscal second quarter. Despite
lower-than-expected revenues for the second quarter of fiscal
2003, this still reflects an improvement versus last year's
second quarter where there was a 21% year-over-year decline in
revenues. With improved gross margins in the second quarter of
fiscal 2003, this $13.5 million reduction in year-over-year
revenues resulted in a $6.7 million reduction in gross margin,
which was more than offset by the above-mentioned $12.7 million
decline in SG&A expenses and decreases in depreciation and
amortization expenses, contributing to the $31.2 million
improvement in operating results for the second quarter, and the
$54.2 million improvement in operating results for the first six
months of fiscal 2003.
Sales for the quarter ended March 1, 2003 were $60.5 million for
CSBU compared to $69.7 million for the same quarter last year.
Included in CSBU, retail store sales were $40.3 million during
the quarter compared to $45.8 million for the same quarter of
fiscal 2002. Consistent with overall declining mall traffic
trends during the holiday season, comparable store foot traffic
through FranklinCovey stores declined by 10% during the quarter.
The decline in traffic had a direct impact on comparable store
sales, which declined 13% during the second quarter. Other CSBU
sales through the Catalog/eCommerce channel were $17.1 million
for the quarter compared to $21.0 million for the same quarter
last year primarily due to lower call volume through the
Company's call center. Organizational Strategic Business Unit
(OSBU) sales were $29.3 million during the second quarter
compared to $33.6 million during the second quarter of fiscal
2002.
Sales for the first six months of fiscal 2003 were $174.8 million
compared to $187.7 million for the same period of fiscal 2002.
With the Company's modified 5-4-4 reporting schedule, sales for
the first six months of fiscal 2003 were benefited because of
five additional business days as compared to the same period last
year. As a result of the Company's fiscal calendar, the fourth
quarter ended August 31, 2003 will have six fewer business days
as compared to the same quarter of fiscal 2002. Sales for the
six months ended March 1, 2003 included $113.2 million from CSBU,
compared to $122.4 million for the same period last year, and
$61.7 million from OSBU compared to $65.2 million for the same
period in fiscal 2002.
-- Impairments and loan loss reserves. Other factors contributing
to the improvement in operating results for the second quarter of
fiscal 2003 include an $18.8 million decrease of non-cash charges
for impaired assets and a $6.2 million decrease of non-cash
reserves for management stock loan losses. For the first six
months of fiscal 2003, non-cash charges for impaired assets and
loan loss reserves decreased by $21.6 million and $16.0 million
compared to the same period of the prior year.
-- The Company has paid-off essentially all of its debt and its liquidity
position remains strong - The Company is essentially debt free (it has
only $1.4 million of long-term debt, primarily from a mortgage on an
office/warehouse building in Canada), and the Company's cash position
at the end of its fiscal second quarter was $44.8 million, an increase
of $7.3 million, as compared to its $37.5 million cash balance at the
end of its first quarter of fiscal 2003. The Company also said that
it has real estate (including the Canadian building) and certain other
non-core assets, which if sold, could raise substantial additional
liquidity.
-- Operating results are expected to show significant year-over-year
improvements during the second half of fiscal 2003 -- With the
significant improvements in operating performance to date, the
projected operating trends for the second half of fiscal 2003 and the
expected traction from new products and offerings, the Company expects
to achieve a significant year-over-year improvement in operating
performance for fiscal 2003.
Last year's second quarter reported net income of $35.1 million ($1.66 net
income per share, after accounting for preferred dividends) included a
noncomparable $60.8 million net gain from the sale of Premier Agendas to
School Specialties completed in December 2001. Excluding this noncomparable
gain on sale, a $25.7 million net loss would have resulted for the second
quarter of last year compared to the Company's reported net loss for the
second quarter ended March 1, 2003 of $7.9 million ($0.50 net loss per share,
after accounting for preferred dividends). Last year's second quarter net
income also included a $12.5 million tax benefit compared to a $.5 million tax
provision recorded in the second quarter of fiscal 2003. For the first six
months of the prior fiscal year, the Company recorded noncomparable items
including a $4.9 million charge for an interest rate swap settlement, a
$6.0 million loss from discontinued operations, a $60.8 million net gain from
the sale of Premier Agendas and a $61.4 million net of tax charge for the
cumulative effect of an accounting change related to the valuation of
intangibles. Excluding these noncomparable items, last year's reported net
loss of $51.9 million ($2.83 net loss per share, after accounting for
preferred dividends) for the first six months would have resulted in a
$40.4 million net loss compared to a net loss of $16.0 million ($1.02 net loss
per share, after accounting for preferred dividends) for the first six months
of fiscal 2003. Also, the net loss for the first six months of fiscal 2002
benefited from a $26.9 million tax benefit compared to a $1.2 million tax
provision recorded during the first six months of fiscal 2003.
FranklinCovey also said that having received notice from the New York
Stock Exchange (NYSE) of non-compliance with the NYSE listing standards
related to the minimum standard of $1.00 per share price over a 30 trading-day
period, as well as the minimum market capitalization over a 30 trading-day
period, it has met with the NYSE and submitted a plan that it believes will
bring the Company back into compliance within the required timeframes. In this
regard, the Company must bring its 30-day average share price above $1.00 and
meet the minimum market capitalization within six months. If the NYSE accepts
the plan, the Company will be subject to quarterly monitoring for its
performance against the plan targets. If the NYSE does not accept the plan,
or the price of the Company's common stock does not rise above $1.00 per share
and our market capitalization does not exceed $15 million within the six-month
period, the Company will be subject to NYSE trading suspension and delisting.
Should the Company's shares cease to be traded on the NYSE, the Company
believes an alternate trading venue would be available.
About Franklin Covey Co.
FranklinCovey is a global leader in effectiveness training, productivity
tools, and assessment services for organizations and individuals.
FranklinCovey helps companies succeed by unleashing the power of their
workforce to focus and execute on top business priorities. Clients include
90 percent of the Fortune 100, more than 75 percent of the Fortune 500,
thousands of small and mid-sized businesses, as well as numerous government
entities and educational institutions. Organizations and individuals access
FranklinCovey products and services through corporate training, licensed
client facilitators, one-on-one coaching, public workshops, catalogs, over
180 retail stores, and http://www.franklincovey.com . More than 2,000 FranklinCovey
associates provide professional services and products in 39 offices and in
95 countries.
FRANKLIN COVEY CO.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Quarter Ended Six Months Ended
March 1, February 23, March 1, February 23,
2003 2002 2003 2002
(unaudited) (unaudited)
Sales $89,790 $103,326 $174,836 $187,665
Cost of sales 39,712 46,561 77,830 83,414
Gross margin 50,078 56,765 97,006 104,251
Selling, general and
administrative 45,895 58,556 93,803 114,918
Provision for losses on
management stock loans 2,313 8,485 2,470 18,456
Impairment (recovery) of
investment in
unconsolidated subsidiary (740) 14,462 (1,630) 16,323
Impairment of assets 872 4,518 872 4,518
Depreciation 8,068 8,424 13,981 16,670
Amortization 1,151 1,042 2,324 2,369
Loss from operations (7,481) (38,722) (14,814) (69,003)
Equity in earnings
(losses) of
unconsolidated
subsidiary (82) 1,028 (128) 1,891
Interest income 138 1,026 404 1,877
Interest expense (37) (588) (111) (2,694)
Other income (expense) 637 (172) 637
Gain (loss) on interest
rate swap settlement 232 (4,894)
Loss from continuing
operations before
income taxes (7,462) (36,387) (14,821) (72,186)
Provision (benefit)
for income taxes 476 (12,539) 1,224 (26,859)
Loss from continuing
operations (7,938) (23,848) (16,045) (45,327)
Loss from discontinued
operations, net of tax (1,823) (5,996)
Gain on sale of
discontinued operations,
net of tax 60,774 60,774
Income (loss) before
cumulative effect
of accounting change (7,938) 35,103 (16,045) 9,451
Cumulative effect of
accounting change,
net of tax (61,386)
Net income (loss) (7,938) 35,103 (16,045) (51,935)
Preferred stock
dividends (2,184) (2,183) (4,367) (4,313)
Net income (loss)
attributable to
common shareholders $(10,122) $32,920 $(20,412) $(56,248)
Loss from continuing
operations, including
preferred dividends,
per share $(0.50) $(1.31) $(1.02) $(2.49)
Net income (loss)
attributable to
common shareholders
per share $(0.50) $1.66 $(1.02) $(2.83)
Weighted average number
of common and common
equivalent shares -
Basic and diluted 20,052 19,882 20,030 19,897
Sales Detail:
Retail Stores $40,338 $45,794 $68,536 $74,433
Catalog / e-Commerce 17,085 21,010 36,218 40,864
Other 3,110 2,896 8,422 7,131
Total Consumer
Strategic
Business Unit 60,533 69,700 113,176 122,428
Organizations Solutions
Group 19,305 23,605 39,932 43,835
International 9,952 10,021 21,728 21,402
Total Organizations
Strategic Business
Unit 29,257 33,626 61,660 65,237
Total $89,790 $103,326 $174,836 $187,665
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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