SALT LAKE CITY, July 11 /PRNewswire-FirstCall/ -- FranklinCovey (NYSE:
FC) today announced its financial results for its seasonally slowest fiscal
third quarter ended May 27, 2006. FranklinCovey reported net income of $1.0
million before preferred stock dividends ($0.00 earnings per common share
after preferred stock dividends) for the quarter ended May 27, 2006,
compared to $3.1 million before preferred stock dividends and preferred
stock recapitalization charge ($0.34 per common share loss after accounting
for dividends and the recapitalization charge) for the same quarter of the
prior year. The fiscal 2005 third quarter results included a $7.8 million
charge for the recapitalization of its preferred stock. The Company also
reported a loss from operations of $1.4 million in the third quarter of
fiscal 2006 compared to an operating loss of $0.7 million for the
comparable quarter of the last year. The Company's financial results during
the quarter were influenced primarily by the following as compared to the
third quarter of last year: (1) growth in training sales domestically and
internationally were more than offset by sales decreases attributable to
store closures, lower technology product sales in the retail stores and
sales decreases in the wholesale channel, resulting in a $2.5 million
decrease in sales, (2) a $2.0 million year-over-year decrease in gross
margin resulting from the decrease in sales and an 80 basis point decline
in gross profit margin, primarily the result of higher costs associated
with symposium events, (3) a $0.5 million decrease in selling, general and
administrative (SG&A) costs, and (4) a $0.8 million decline in depreciation
and amortization expense. Operating results were also impacted by
corrections made to the financial statements of our wholly-owned Mexico
subsidiary which resulted in a decrease of $0.5 million in the
international sales and a $0.5 million increase in SG&A expense.
For the first three quarters of fiscal 2006, the Company reported $13.5
million of net income before preferred dividends (0.48 per diluted common
share after accounting for dividends), a $1.8 million improvement in its
net income before preferred dividends compared to $11.7 million of net
income before preferred stock dividends and the recapitalization charge
($0.18 per common share loss after preferred stock dividends and the
recapitalization charge) for the first three quarters of fiscal 2005. The
Company also reported a $3.8 million improvement in operating results for
the first three quarters of fiscal 2006 to $13.3 million of operating
income on revenues of $214.0 million compared to an operating income of
$9.5 million on revenues of $217.4 million for the first three quarters of
last year. The Company provided the following details underlying the
continued improvement of operating results during the fiscal third quarter
and first three quarters of fiscal 2006.
Revenues: Total sales for the third quarter of fiscal 2006 declined
$2.5 million. In addition to the $2.3 million decline coming from closed
stores and decreased technologies sales in the retail stores compared to
last year's third quarter, increases in training sales, internationally and
domestically, were more than offset by the impact from corrections made to
the sales reported by the Mexico subsidiary and year-over-year sales
decreases in SPG and Wholesale. Organizational Solutions Business Unit
(OSBU) sales for the third quarter of fiscal 2006 were $31.2 million
compared to $31.8 million for the same quarter last year with domestic
training sales growth more than offset by sales decreases in SPG and other
speaking events and were $17.8 million compared to $18.7 million for the
same quarter last year. International revenues increased by 3% during the
third quarter of fiscal 2006 to $13.4 million compared to $13.0 for the
same quarter last year even after the Mexico sales correction of $0.5
million made during the quarter.
Sales increases in the Consumer and Small Business Unit (CSBU) for the
quarter ended May 27, 2006 were more than offset by retail store closures
resulting in a $1.9 million decline to $32.1 million compared to $34.0
million for the same quarter last year. Retail store sales declined $2.0
million to $11.5 million during the quarter compared to $13.5 million for
the same quarter of the prior year because of a $2.0 million decrease in
sales from closed stores and a $0.3 million decrease in technology product
sales. Partially offsetting the declines was a $0.3 million increase in
product sales of planners, binders and totes. Comparable store sales held
even during the quarter compared to the same quarter last year. There were
19 fewer domestic stores open during the quarter compared to the third
quarter of last year. Consumer direct sales were $12.5 million compared to
$12.1 million for the same quarter of last year. Wholesale sales were $6.9
million compared to $7.6 million for the same quarter last year.
Selling, general and administrative expenses: SG&A costs decreased by
$0.5 million during the quarter and declined by $2.1 million for the first
three quarters ended May 27, 2006, compared to the same period last year
and included a $0.5 million charge to administrative costs due to
corrections made in the quarter to the financial statements of the Mexico
subsidiary. The decrease during the quarter was primarily due to more
focused efforts to reduce the Company's operating expenses and the lower
costs associated with fewer retail stores partially off-set by increased
training sales personnel costs.
Depreciation and amortization: Depreciation and amortization expenses
(D&A) continued to decline during the third 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 $0.8 million in D&A during the third quarter and $2.8
million during the first three quarters of fiscal 2006, compared to the
respective periods of the prior year.
Other developments: The Company also announced that through the first
three quarters of fiscal 2006 that it had redeemed $20 million of its
Series A Preferred Stock resulting in a $1.3 million decrease in dividends
during the quarter. The Company also repurchased 485,000 shares for $3.9
million of its 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 . Nearly 1,500 FranklinCovey associates
provide professional services and products in 36 offices in 129 countries.
FRANKLIN COVEY CO.
CONDENSED CONSOLIDATED INCOME STATEMENT
( in thousands, except per share amounts )
Quarter Ended Three Quarters Ended
May 27, May 28, May 27, May 28,
2006 2005 2006 2005
(unaudited) (unaudited)
Net sales $63,282 $65,788 $213,966 $217,415
Cost of sales 26,990 27,520 85,094 87,495
Gross margin 36,292 38,268 128,872 129,920
Selling, general and administrative 35,629 36,095 108,885 110,964
Depreciation 1,134 1,848 3,763 6,346
Amortization 908 1,043 2,911 3,130
Income (loss) from operations (1,379) (718) 13,313 9,480
Interest income, net (356) 281 (1,013) 497
Gain on disposal of investment in
unconsolidated subsidiary 500 500
Legal settlement 873
Income (loss) before income taxes (1,735) 63 13,173 10,477
Income tax benefit (provision) 2,754 3,006 292 1,203
Net income 1,019 3,069 13,465 11,680
Preferred stock dividends (934) (2,184) (3,452) (6,551)
Loss on recapitalization of
preferred stock (7,753) (7,753)
Net income (loss) attributable to
common shareholders $85 $(6,868) $10,013 $(2,624)
Net income (loss) per share
attributable to common
shareholders - diluted $0.00 $(0.34) $0.48 $(0.18)
Weighted average common shares -
diluted 20,734 19,922 20,670 19,847
Sales Detail:
Retail Stores $11,493 $13,443 $50,001 $59,886
Catalog / e-commerce 12,504 12,144 50,291 49,390
Wholesale 6,920 7,627 17,148 16,107
Other 1,168 792 3,622 2,542
Total Consumer and Small Business
Unit 32,085 34,006 121,062 127,925
Domestic 17,807 18,736 49,423 48,303
International 13,390 13,046 43,481 41,187
Total Organizational Solutions
Business Unit 31,197 31,782 92,904 89,490
Total $63,282 $65,788 $213,966 $217,415
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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