SALT LAKE CITY, July 11 /PRNewswire-FirstCall/ -- FranklinCovey (NYSE: FC)
today announced its financial results for the third quarter ended
May 31, 2003. The Company reported a $2.6 million improvement in its
operating results, reducing its loss from operations to $17.1 million for the
third quarter of fiscal 2003 compared to a loss from operations of
$19.8 million for the same quarter of the prior year. For the first three
quarters of fiscal 2003, the Company reported a $56.8 million improvement in
operating results with a loss from operations of $31.9 million compared to an
$88.8 million loss from operation for the first three quarters of fiscal 2002.
The Company reported a $15.7 million net loss before preferred stock dividends
($0.89 per common share loss, after accounting for preferred stock dividends)
for the third quarter of fiscal 2003 compared to an $11.8 million net loss
before preferred stock dividends ($0.70 per common share loss, after
accounting for preferred stock dividends) for the same quarter in the prior
year. The quarter ended May 25, 2002 benefited from a $1.3 million larger
equity in earnings of an unconsolidated subsidiary and a $5.6 million larger
tax benefit than the quarter ended May 31, 2003. For the first three quarters
of fiscal 2003, the Company reported a net loss of $31.8 million before
preferred stock dividends ($1.91 loss per common share, after accounting for
preferred stock dividends) compared to a net loss of $63.7 million before
preferred stock dividends ($3.53 loss per common share, after accounting for
preferred dividends) for the same period of the prior year. The first three
quarters of fiscal 2002 had a $33.7 million tax benefit, a $60.8 million gain
on the sale of discontinued operations and a $61.4 million charge from a
cumulative change in accounting principle. The Company provided the following
details underlying the continued improvement of operating results during the
third quarter and during the first three quarters of fiscal 2003.
Selling, general and administrative expenses: Selling, general and
administrative (SG&A) expenses declined by $6.6 million compared to last
year's third quarter and also declined by $27.7 million for the first three
quarters compared to the same period of last year. The Company expects to
close approximately 40 of its retail stores during the fourth quarter of
fiscal 2003 and through the second quarter of fiscal 2004. These closures are
comprised of unprofitable stores and stores located in markets where the
Company has multiple retail operations. As a result of these store closures,
the Company may incur significant costs related to lease buy-outs, severance
and other closing costs. 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 on-going cost-cutting
initiatives, excluding future store closing costs, the Company expects the
year over year decreases in SG&A to continue in the fourth quarter of fiscal
2003 and into fiscal year 2004.
Depreciation and amortization: Depreciation and amortization (D&A)
expenses continued to decline during the third quarter of fiscal 2003,
reflecting lower, more focused and better-managed capital expenditures.
Depreciation expense for the third quarter of fiscal 2003 included
$2.3 million of accelerated depreciation on assets of certain retail stores,
which are expected to be closed during the fourth quarter or early in fiscal
2004. The Company reported a $3.2 million decline in D&A expense during the
first three quarters even after considering $4.7 million in accelerated
depreciation on assets of certain retail stores that were closed or are
expected to be closed in the near future. The Company expects D&A expense to
further decline in fiscal 2004 as a result of the lower capital expenditures,
store closures and other assets that will be fully depreciated during fiscal
2004.
Stabilizing revenues: Total sales for the third quarter of fiscal 2003
declined $5.7 million, or 8%, as compared to last year's third quarter. With
a single digit decline in third quarter revenues, compared to a 19%
year-over-year decline in the third quarter of last year, the Company
continues to narrow its quarterly revenue declines. Sales from the Consumer
Strategic Business Unit (CSBU) for the third quarter ended May 31, 2003 were
$37.2 million, an 8% decline, compared to $40.3 million for the same quarter
last year. Included in CSBU revenues are store sales, which declined 5% for
the third quarter, primarily reflecting a 5% decline in store traffic.
Comparable store sales for the quarter declined 7% compared to the same period
last year. The comparable store sales decrease is an improvement following
10 straight quarters of double-digit, year-over-year declines in comparable
store sales. While the third quarter traditionally represents the seasonally
weakest quarter in CSBU sales, the Company was encouraged by the continued
narrowing of sales declines and the continued strengthening of sales of new
products that have been introduced to help improve sales. Organizational
Strategic Business Unit (OSBU) sales for the third quarter of fiscal 2003 were
$28.2 million, an 8% decline compared to $30.8 million for the same quarter
last year and were impacted by the continued economic weakness in the training
industry. The Company expects OSBU sales to continue 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.
Sales for the first three quarters of fiscal 2003 were $240.2 million
compared to $258.8 million for the same period of fiscal 2002. With the
Company's modified 5-4-4 week reporting calendar, sales for the first three
quarters 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
first three quarters ended May 31, 2003 included $153.3 million and
$87.0 million for CSBU and OSBU, compared to $165.8 million and $93.0 million
for the same period last year.
Loan loss reserves and impairments: Operating results of the third
quarter also included a $1.2 million addition to the management stock loan
loss reserve compared to a $0.2 million charge to operations during the same
quarter of last year. For the first three quarters of fiscal 2003, charges
for loan loss reserves and impaired assets decreased by $15.0 million and
$21.7 million compared to the same period of the prior year.
The Company ended the quarter with $42.3 million in cash and cash
equivalents at May 31, 2003. With revenue declines narrowing, cost reductions
in SG&A and D&A expected to continue, strong liquidity, and minimal long-term
debt, the Company believes it is well positioned to substantially improve its
operating performance in fiscal 2004.
About Franklin Covey
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 160 retail stores and
http://www.franklincovey.com. More than 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 general economic conditions, the effects of the
Company's continuing cost-cutting efforts, 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 2002 10-K
and subsequent 10Q 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 based on factors that
may cause future results to differ materially from the Company's current
expectations.
FRANKLIN COVEY CO.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
( in thousands, except per share amounts )
Quarter Ended Three Quarters Ended
May 31, May 25, May 31, May 25,
2003 2002 2003 2002
(unaudited) (unaudited)
Sales $65,380 $71,091 $240,216 $258,757
Cost of sales 29,726 31,786 107,556 115,201
Gross margin 35,654 39,305 132,660 143,556
Selling, general and
administrative 43,073 49,688 136,876 164,606
Provision for losses
on management
stock loans 1,210 247 3,680 18,703
Impairment (recovery)
of investment in
unconsolidated
subsidiary (110) (1,740) 16,323
Impairment of assets 872 4,518
Depreciation 7,532 7,995 21,513 24,664
Amortization 1,052 1,125 3,376 3,495
Loss from operations (17,103) (19,750) (31,917) (88,753)
Equity in earnings
(losses) of
unconsolidated
subsidiary 1,274 (128) 3,165
Loss on interest
swap settlement (4,894)
Interest income
(expense) and
other - net 92 153 214 (27)
Loss from continuing
operations before
income taxes (17,011) (18,323) (31,831) (90,509)
Income tax benefit 1,270 6,834 46 33,693
Loss from continuing
operations (15,741) (11,489) (31,785) (56,816)
Loss from discontinued
operations, net of tax (274) (6,270)
Gain on sale of
discontinued operation,
net of tax 60,774
Loss before cumulative
effect of
accounting change (15,741) (11,763) (31,785) (2,312)
Cumulative effect of
change in accounting
principle,
net of tax (61,386)
Net loss (15,741) (11,763) (31,785) (63,698)
Preferred stock
dividends (2,184) (2,184) (6,551) (6,497)
Net loss attributable
to common
shareholders $(17,925) $(13,947) $(38,336) $(70,195)
Loss per share from
continuing operations
less preferred
dividends $(0.89) $(0.69) $(1.91) $(3.19)
Loss per share
attributable to
common share holders $(0.89) $(0.70) $(1.91) $(3.53)
Weighted average
common shares - basic
and diluted 20,055 19,929 20,038 19,869
Sales Detail:
Retail Stores $21,159 $22,336 $89,695 $96,769
Catalog / e-commerce 9,804 11,284 46,022 52,148
Other 6,202 6,668 17,548 16,875
Total Consumer
Business Unit 37,165 40,288 153,265 165,792
Organizational
Solutions Group 18,993 21,020 56,001 61,779
International 9,222 9,783 30,950 31,186
Total Organizations
Business Unit 28,215 30,803 86,951 92,965
Total $65,380 $71,091 $240,216 $258,757
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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