SALT LAKE CITY, July 13 /PRNewswire-FirstCall/ -- FranklinCovey (NYSE: FC)
today announced its financial results for the fiscal third quarter ended
May 29, 2004, seasonally, its slowest sales quarter. The Company reported an
$11.1 million improvement in its operating results, reducing its loss from
operations to $6.0 million for the third quarter of fiscal 2004 compared to an
operating loss of $17.1 million for the comparable quarter of the prior year.
This marks the seventh 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 $4.1 million decline in
sales resulting in a $3.0 million year-over-year decline in gross margin, (2)
a $7.9 million reduction in selling, general and administrative (SG&A) costs,
(3) a $5.0 million decline in depreciation and amortization expense, and (4) a
$1.2 million reduction in loan loss reserves.
FranklinCovey also reported a $5.1 million net loss before preferred stock
dividends ($0.37 per common share loss, after preferred stock dividends) for
the quarter ended May 29, 2004, a $10.6 million improvement compared to a
$15.7 million net loss before preferred stock dividends ($0.89 per common
share loss, after preferred stock dividends) for the same quarter of the prior
year.
For the first three quarters of fiscal 2004, the Company reported a
$24.7 million improvement in operating results reducing its loss from
operations to $7.2 million on revenues of $215.0 million compared to an
operating loss of $31.9 million on revenues of $240.2 million for the first
three quarters of last year. The Company reported a $23.7 million improvement
in its net loss, reducing its net loss to $8.1 million before preferred stock
dividends ($0.73 per common share loss after preferred stock dividends) for
the first three quarters of fiscal 2004 compared to a $31.8 million loss
before preferred stock dividends ($1.91 per common share loss after preferred
stock dividends) for the first three quarters of fiscal 2003. The Company
provided the following details underlying the continued improvement of
operating and net results during the third quarter and first three quarters of
fiscal 2004.
Revenues: Total sales for the third quarter of fiscal 2004 declined
$4.1 million compared to last year's third quarter, with closed stores and
declines in sales of PDA's and other technology devices accounting for more
than 100% of the decrease. Sales from the Consumer Business Unit (CBU) for
the quarter ended May 29, 2004, declined $4.0 million to $33.1 million
compared to $37.2 million for the same quarter last year, reflecting the
factors noted above. Retail store sales declined $5.2 million or 24% to
$16.0 million during the quarter compared to $21.2 million for the same
quarter of the prior year. Comparable store sales declined 15% during the
quarter compared to the same quarter last year, primarily because of a 58%
decline in technology device sales. There were 29 fewer domestic stores open
during the quarter compared to the third quarter last year; these stores
accounted for $2.4 million of sales in the third quarter of fiscal 2003. The
retail store sales decline was attributed to the closing of certain retail
stores this year, less foot traffic in the stores and a $2.8 million decline
in PDA's and related products sold during the quarter this year compared to
the same quarter last year. After factoring out the effects of the closed
stores and declines in sales of technology devices, retail sales stabilized.
Catalog/eCommerce sales were $9.7 million compared to $9.8 million for the
same quarter of last year. Other CBU sales were $7.4 million compared to
$6.2 million for the same quarter last year. Sales of products through the
office superstores and other third party retailers channel increased
$1.2 million to partially offset the factors causing sales declines through
the retail stores.
Organizational Solutions Business Unit (OSBU) sales held even for the
third quarter of fiscal 2004 with $28.1 million compared to $28.2 million for
the same quarter last year. International revenues increased by $3.0 million
for the third quarter of fiscal 2004 compared to the same quarter last year
offset domestic sales declines of $3.1 million. International sales increases
were primarily due to increased sales in Japan, the United Kingdom, Canada and
Mexico, increased royalties from licensees and favorable fluctuations in
currency rates. The Company expects OSBU sales to improve as the general
economy and hiring trends strengthen, corporate clients restore funding their
training budgets, and the Company's new offerings continue to gain traction.
Selling, general and administrative expenses: SG&A costs declined by
$7.9 million or 18% for the quarter and $22.3 million for the first three
quarters ended May 29, 2004, compared to last year. The improvements were
primarily due to focused efforts to reduce the Company's operating expenses
and the lower costs associated with fewer retail stores. The Company closed
10 of its international retail stores during fiscal 2003 and had 29 fewer
domestic retail stores open during its first three quarters of fiscal 2004.
The Company also intends to close additional stores during the fourth quarter
of 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 rest 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 third quarter of fiscal 2004, reflecting
lower, more focused and better-managed capital expenditures and the effect of
certain assets becoming fully depreciated and fewer store impairment charges
for closed retail stores. The Company reported a decline of $5.0 million in
D&A during the third quarter and $12.4 million during the first three quarters
of fiscal 2004, compared to the respective periods of the prior year.
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, its
ability to continue to reduce costs, 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 its subsequent quarterly 10-Q reports and interim 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 Three Quarters Ended
May 29, May 31, May 29, May 31,
2004 2003 2004 2003
(unaudited) (unaudited)
Sales $61,248 $65,380 $214,993 $240,216
Cost of sales 28,587 29,726 95,182 107,556
Gross margin 32,661 35,654 119,811 132,660
Selling, general and
administrative 35,128 43,073 114,553 136,876
Provision for losses
on management stock
loans 1,210 3,680
Recovery of investment
in unconsolidated
subsidiary (110) (1,740)
Impairment of assets 872
Depreciation 2,509 7,532 9,322 21,513
Amortization 1,043 1,052 3,130 3,376
Loss from operations (6,019) (17,103) (7,194) (31,917)
Equity in losses of
unconsolidated
subsidiary (128)
Interest income, net 58 92 118 386
Other expense (172)
Loss before income
taxes (5,961) (17,011) (7,076) (31,831)
Income tax benefit
(provision) 812 1,270 (1,021) 46
Net loss (5,149) (15,741) (8,097) (31,785)
Preferred stock
dividends (2,184) (2,184) (6,551) (6,551)
Net loss attributable
to common
shareholders $(7,333) $(17,925) $(14,648) $(38,336)
Net loss per share
attributable to
common shareholders $(0.37) $(0.89) $(0.73) $(1.91)
Weighted average
common shares --
basic and diluted 19,940 20,055 19,947 20,038
Sales Detail:
Retail Stores $16,005 $21,159 $71,341 $89,695
Catalog / e-commerce 9,685 9,804 44,162 46,022
Other 7,449 6,202 18,796 17,548
Total Consumer
Business Unit 33,139 37,165 134,299 153,265
Organizational
Solutions Group 15,862 18,993 42,920 56,001
International 12,247 9,222 37,774 30,950
Total Organizations
Business Unit 28,109 28,215 80,694 86,951
Total $61,248 $65,380 $214,993 $240,216
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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