SALT LAKE CITY, July 12 /PRNewswire-FirstCall/ -- FranklinCovey (NYSE: FC)
today announced its financial results for the fiscal third quarter ended
May 28, 2005. FranklinCovey reported net income of $3.1 million before
preferred stock dividends and a non-cash preferred stock recapitalization
charge ($0.34 per common share loss after accounting for dividends and the
recapitalization charge) for the quarter ended May 28, 2005, an $8.2 million
improvement compared to a $5.1 million net loss before preferred stock
dividends ($0.37 per common share loss, after preferred stock dividends) for
the same quarter of the prior year. The fiscal third quarter results included
a non-cash $7.8 million charge for the recapitalization of its preferred stock
and a $3.0 million income tax benefit. The Company also reported a
$5.8 million improvement in its operating results, reducing its loss from
operations to $0.2 million for its seasonally slowest third quarter of fiscal
2005 compared to an operating loss of $6.0 million for the comparable quarter
of the last year. This marks the eleventh 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 third quarter of last year: (1) a $4.5 million
increase in sales, (2) a 460 basis point improvement in gross profit margin
resulting in a $5.5 million year-over-year increase in gross margin, (3) a
$0.8 million increase in selling, general and administrative (SG&A) costs, (4)
a $0.7 million decline in depreciation and amortization expense, and (5) a
$0.5 million gain on the disposal of an investment in an unconsolidated
subsidiary.
For the first three quarters of fiscal 2005, the Company reported
$11.7 million of net income before preferred dividends and the
recapitalization charge ($0.18 per common share loss after accounting for
dividends and the recapitalization charge), a $19.8 million improvement in its
net income before preferred dividends compared to an $8.1 million net loss
before preferred stock dividends ($0.73 per common share loss after preferred
stock dividends) for the first three quarters of fiscal 2004. The Company
also reported a $17.2 million improvement in operating results to
$10.0 million of operating income on revenues of $217.4 million compared to an
operating loss of $7.2 million on revenues of $215.0 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 2005.
Revenues: Total sales for the third quarter of fiscal 2005 grew $4.5
million compared to last year's third quarter. Organizational Solutions
Business Unit (OSBU) sales lead the growth for the third quarter of fiscal
2005 with $33.8 million of sales, a $5.7 million increase, or 20%, compared to
$28.1 million of sales for the same quarter last year. Domestic training
sales grew 31% to $20.8 million compared to the same quarter last year.
International revenues increased by 7% during the third quarter of fiscal 2005
compared to the same quarter last year. OSBU sales increases were primarily
due to increased sales of the Company's consulting and training offerings and
sales by foreign licensees.
Sales from the Consumer and Small Business Unit (CSBU) for the quarter
ended May 28, 2005, declined $1.2 million to $32.0 million compared to
$33.1 million for the same quarter last year. Retail store sales declined
$2.6 million or 16% to $13.4 million during the quarter compared to
$16.0 million for the same quarter of the prior year. Comparable store sales
declined 2% during the quarter compared to the same quarter last year. There
were 29 fewer domestic stores open during the quarter compared to the third
quarter of last year; these stores accounted for $2.4 million of sales in the
third quarter of fiscal 2004. The retail store sales decline was attributed
to the loss of sales from closed retail stores, less foot traffic in the
continuing stores and a $1.2 million decline in electronic products sold
during the quarter this year compared to the same quarter last year.
Consumer direct sales were $10.1 million compared to $9.7 million for the same
quarter of last year. Wholesale sales were $7.6 million compared to
$6.8 million for the same quarter last year. Sales of products through the
consumer direct, wholesale and other channels increased $1.4 million during
the quarter compared to the same quarter last year to partially offset the
factors causing sales declines through the retail stores.
Selling, general and administrative expenses: SG&A costs increased by
$0.8 million or 2% during the quarter and declined by $4.2 million for the
first three quarters ended May 28, 2005, compared to last year. The increase
during the quarter was primarily due to $1.2 million of severance costs for a
former executive officer incurred during the quarter and increased training
sales commissions partially off-set by more focused efforts to reduce the
Company's operating expenses and the lower costs associated with fewer retail
stores.
Depreciation and amortization: Depreciation and amortization expenses
(D&A) continued to decline during the third quarter of fiscal 2005, reflecting
lower, more focused and better-managed capital expenditures and the effect of
certain assets becoming fully depreciated. The Company reported a decline of
$0.7 million in D&A during the third quarter and $3.0 million during the first
three quarters of fiscal 2005, compared to the respective periods of the prior
year.
Other developments: The Company also announced in July 2005 that it had
redeemed $30.0 million of its Series A Preferred Stock from Knowledge Capital,
an entity which holds the majority of the preferred stock, using the proceeds
from the sale of its real estate announced last week. This $30.0 million
redemption will give the Company greater flexibility to repurchase additional
preferred stock at $25 per share, shares of its common stock as well as
certain other transactions without getting prior approval from the preferred
stockholders. There are approximately 2.3 million shares of the Series A
Preferred Stock outstanding after the redemption of shares from Knowledge
Capital.
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 100 retail stores, and
http://www.franklincovey.com . Nearly 1,500 FranklinCovey associates provide
professional services and products in 36 offices in 129 countries.
FRANKLINCOVEY CO.
CONDENSED CONSOLIDATED INCOME STATEMENT
( in thousands, except per share amounts )
Quarter Ended Three Quarters Ended
May 28, May 29, May 28, May 29,
2005 2004 2005 2004
(unaudited) (unaudited)
Net sales $65,788 $61,248 $217,415 $214,993
Cost of sales 27,668 28,587 88,071 95,182
Gross margin 38,120 32,661 129,344 119,811
Selling, general and
administrative 35,947 35,128 110,388 114,553
Gain on disposal of
investment in
unconsolidated
subsidiary (500) (500)
Depreciation 1,848 2,509 6,346 9,322
Amortization 1,043 1,043 3,130 3,130
Income (loss) from
operations (218) (6,019) 9,980 (7,194)
Interest income, net 281 58 497 118
Income (loss) before
income taxes 63 (5,961) 10,477 (7,076)
Income tax benefit
(provision) 3,006 812 1,203 (1,021)
Net income (loss) 3,069 (5,149) 11,680 (8,097)
Preferred stock
dividends (2,184) (2,184) (6,551) (6,551)
Loss on
recapitalization
of preferred stock (7,753) (7,753)
Net loss attributable
to common
shareholders $(6,868) $(7,333) $(2,624) $(14,648)
Net loss per share
attributable to
common shareholders $(0.34) $(0.37) $(0.18) $(0.73)
Weighted average
common shares - basic
and diluted 19,922 19,940 19,847 19,947
Sales Detail:
Retail Stores $13,443 $16,005 $59,886 $71,341
Catalog /
e-commerce 10,114 9,685 44,016 44,162
Wholesale 7,627 6,820 16,107 16,946
Other 792 629 2,542 1,850
Total Consumer and
Small Business Unit 31,976 33,139 122,551 134,299
Organizational
Solutions Group 20,766 15,862 53,677 42,920
International 13,046 12,247 41,187 37,774
Total Organizational
Solutions Business
Unit 33,812 28,109 94,864 80,694
Total $65,788 $61,248 $217,415 $214,993
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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