SALT LAKE CITY, Oct. 12 /PRNewswire/ -- Franklin Covey Co. (NYSE: FC)
today announced a strategic realignment and organizational restructure of its
core businesses to lay strategic, operational, organizational and financial
foundations for profitable growth. The restructuring aligns its products,
services and channels to focus its resources on providing integrated solutions
to individuals and organizations.
Strategic Foundation
Building upon its world-class products, training and services, Franklin
Covey will focus on providing integrated strategic solutions in Productivity,
Leadership, Communication, Sales and other areas. Each solution set includes
capabilities in assessment, measurement, consulting, training, implementation
processes and application tools. Franklin Covey is acquiring additional
competencies to add to its capabilities to deliver integrated solutions.
In this connection, Franklin Covey announced the acquisition of the
Professional Resources Organization (the Jack Phillips Group), a leading
measurement assessment firm specializing in measuring the impact and return on
investment in training and consulting. Stephen M.R. Covey, Executive Vice
President, Franklin Covey, said, "Having the ability to measure the results of
the training and consulting services we offer, provides us with a significant
competitive advantage in the industry. The ability for training companies to
demonstrate to their clients substantial return on investment of their
training dollars, is ranked by Merrill Lynch and Salomon Smith Barney analysts
as one of the most important capabilities in differentiating among training
firms."
As previously announced, the acquisition of Khalsa Associates, a leading
sales training company, strengthens Franklin Covey's position in the sales
training field. In July, Microsoft announced that it had signed an agreement
with Franklin Covey to train its world-wide sales force and its 21,000 sales
channel partners utilizing Franklin Covey's unique consultative sales training
program.
Franklin Covey also plans to make significant investments in on-line
planning, on-line training, on-line profiling and electronic products to meet
the needs of its professional and organizational clients.
As part of the strategic realignment, Franklin Covey is undertaking an
intense scrutiny of every part of its business. John L. Theler, Chief
Financial Officer, Franklin Covey, said, "Non-strategic functions will be
out-sourced, sold or re-positioned in order to focus on growing our business.
In this connection, we have entered into a contract to sell Publishers Press,
our commercial printing arm, and expect the sale will close by the end of the
first quarter of fiscal 2000."
Operational Foundation
To prepare for growth, Franklin Covey has also focused on refining its
business model and processes. As a result of this process, Franklin Covey
expects to reduce the Company's 4,200 associate base to approximately 3,600
worldwide. Franklin Covey anticipates this will generate annualized cost
savings of approximately $20 million. To date, approximately 30% of this
reduction has occurred. Theler commented, "To relieve as much of the
financial stress on the individual as possible, we have designed a package
which offers each individual the option of taking a severance or salary
continuation with outplacement services."
Organizational Foundation
The Company announced the establishment of eight regional sales offices in
New York, Chicago, Los Angeles, San Francisco, Columbus, Dallas, Atlanta and
Washington, D.C. "We are in the process of moving our organizational sales
force into the field to be closer to our customers and achieve deeper market
penetration and growth," said Covey. "This will elevate our ability to help
clients succeed, which is our first consideration, and also increase sales
productivity." Franklin Covey will significantly reduce its leased space in
its Provo, Utah facilities and consolidate most of the remaining operations to
its Salt Lake City headquarters.
To help facilitate implementation of the new strategy, the Company
announced the appointment of Douglas Smith and John Harding as Executive Vice
Presidents. Smith will lead the Company's efforts to provide electronic
products and delivery systems, while Harding will lead the Company's strategic
solution categories.
Financial Foundation
A critical part of the compelling business model and realignment program
is building a firm financial foundation. Theler commented, "We received a
$75 million capital infusion from Knowledge Capital in June of this year to
provide the capital necessary to begin implementation of our strategic
initiatives. An additional $25 million is currently available under our
credit facility, and our banks expect to lead a syndicate to significantly
expand the credit facility by early 2000. Further, we believe we'll generate
$60 million of after-tax cash flow from operations in fiscal year 2000, and
generate additional funds from certain asset sales. We believe these sources
will provide more than adequate funding for the anticipated growth during the
coming year."
Results for the Quarter Ended August 31, 1999
As a result of the planned associate terminations and facility closures,
the Company recorded a $16.2 million pre-tax restructuring charge during the
fourth quarter of fiscal 1999. The Company also recognized a $16.6 million
pre-tax charge to write-off certain impaired assets related to discontinued
lines of services and products, and an additional $10.2 million charge to
operations for write-offs and necessary reserves increases, primarily related
to inventory and receivables.
The Company's sales increased 7% to $168.2 million for the quarter
compared to the previous years fourth quarter of $156.6 million. The loss for
the quarter was $21.6 million, which includes the above mentioned pre-tax
charges, compared to prior year net income of $15.6 million. The reported
loss per share was $1.15 for the quarter compared to net income per share of
$0.67 for the same quarter last year. Excluding the impact of the
restructuring, impairment, write-offs and reserves charges, net income would
have been $9.6 million or earnings per share of $0.37.
Product sales increased 2% during the fourth quarter on the strength of
7% comparable store sales growth versus the prior fourth quarter. Catalog
sales continued to decline due to the increases in stores and Internet sales.
Premier School Agendas showed strong growth, generating $56.9 million in sales
during the quarter, a 25% increase compared to the same quarter last year.
Core training sales decreased 2% on a year over year comparison.
International sales were flat compared with the same quarter in the prior
year. Other sales, which include Publishers Press, declined 15% in the
quarter compared to last year due to the sale of the National Institute of
Fitness.
Results for the Year Ended August 31, 1999
Sales for fiscal 1999 were $554.9 million, up 2% compared $546.6 million
for fiscal 1998. The loss was $8.8 million for fiscal 1999, including the
pre-tax charges for restructuring and impairments, compared to earnings of
$40.1 million for fiscal 1998. The reported loss per share was $0.51 compared
to earnings per share of $1.62 in fiscal 1998. Excluding the impact of the
fourth quarter restructuring, impairment, write-offs and reserves charges, net
income would have been $22.5 million or $1.00 per share.
Product sales for the year were $264.3 million, up 2% compared to last
year. The Product sales increase included a 2% increase in comparable store
sales. Training and Education sales increased 2% to $210.6 million during the
year compared to fiscal 1998. International sales increased 12% to
$50.5 million compared to fiscal 1998. The growth came mainly from the
acquisition of the Company's licensee operation in Japan.
About Franklin Covey
Franklin Covey is the leading global professional services firm offering
learning and performance solutions to assist professionals and organizations
to increase their effectiveness in Productivity, Leadership, Communication and
Sales. Organizational clients include 80 of the Fortune 100, more than
three-quarters of the Fortune 500, thousands of smaller and mid-sized
businesses as well as numerous government entities. Organizations and their
professionals access Franklin Covey's products and services through
professional consulting services, licensed client facilitators, public
workshops, catalogs, retail stores and the Internet (franklincovey.com). More
than 3,500 Franklin Covey associates provide professional services and
products in 44 offices in 33 countries in 32 languages.
This announcement contains forward-looking statements that necessarily are
based on certain assumptions and are subject to certain risks and
uncertainties, including the effects of competition, lack of market acceptance
of new products or services, failure to gain market share in target markets
and other factors identified and discussed in the Company's 1998 10-K and
subsequent 10-Q reports filed with the Securities Exchange Commission. There
can be no assurance that the Company's actual future performance will meet the
Company'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 INCOME
(in thousands, except per share amounts)
Three Months Ended Twelve Months Ended
August 31, August 31,
1999 1998 1999 1998
(unaudited) (unaudited)
Sales $168,205 $156,587 $554,923 $546,612
Cost of sales 80,494 61,014 243,132 213,888
Gross margin 87,711 95,573 311,791 332,724
Selling, general and
administrative 67,916 58,020 235,084 221,303
Provision for restructuring 16,200 -- 16,200 --
Loss on impaired assets 16,560 -- 16,560 --
Depreciation 6,080 4,603 20,799 17,294
Amortization 5,024 4,163 18,741 15,734
Income from operations (24,069) 28,787 4,407 78,393
Interest income 267 531 1,278 1,954
Interest expense (2,621) (2,660) (9,911) (8,316)
Income before provision
for income taxes (26,423) 26,658 (4,226) 72,031
Provision for income taxes (4,776) 11,063 4,546 29,893
Net income before cumulative
effect of accounting change (21,647) 15,595 (8,772) 42,138
Cumulative effect of
accounting change,
net of tax -- -- -- (2,080)
Net income $(21,647) $15,595 $(8,772) $40,058
Preferred Dividends $(1,875) -- $(1,875) --
Income available
to shareholders $(23,522) $15,595 $(10,647) $40,058
Earnings per share
Basic $(1.15) $0.68 $(0.51) $1.66
Diluted $(1.15) $0.67 $(0.51) $1.62
Weighted average o/s shares
Basic 20,378 22,809 20,881 24,091
Diluted 25,796 23,234 22,392 24,726
Sales Detail:
Consumer Products $57,141 $55,762 $264,333 $258,972
Training and Education 93,738 82,250 210,621 207,015
International 10,610 10,646 50,535 45,069
Other 6,716 7,928 29,434 35,556
Total Sales $168,205 $156,586 $554,923 $546,612
SOURCE Franklin Covey Co.
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Related links:
http://www.franklincovey.com
Company News On-Call:
http://www.prnewswire.com/comp/107086.html or fax,
800-758-5804, ext. 107086
CONTACT:
John L. Theler, Chief Financial Officer, or
Richard R. Putnam, Investor Relations, or Greg Link, Public
Relations, all of Franklin Covey Co., 801-975-1776
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