SALT LAKE CITY, Nov. 21 /PRNewswire-FirstCall/ -- FranklinCovey (NYSE: FC)
today announced financial results for its fourth quarter and year ended August
31, 2003, and its outlook for fiscal 2004. For the fourth quarter ended
August 31, 2003, the Company reported an $18.1 million improvement in its
operating results, reducing its loss from operations to $15.7 million for the
fourth quarter of fiscal 2003 compared to a loss from operations of
$33.8 million for the comparable quarter of the prior year. This marks the
fourth consecutive quarter of significant year-over-year improvements in its
operating results. The $18.1 million improvement in operating results of the
quarter compared to the comparable quarter of last year is comprised of the
following: (1) a $7.3 million decline in sales, partially offset by gross
margin improvement (55.1% compared to 54.0%) resulting in a net $3.2 million
year-over-year decline in gross profit, (2) a $5.9 million improvement in
selling, general and administrative costs (including $3.4 million of retail
store closing costs), (3) a $5.0 million improvement in depreciation and
amortization expense, and (4) a $10.4 million improvement in reserves and
impairment charges.
For the year ended August 31, 2003, the Company reported a $74.9 million
improvement in operating results with a loss from operations of $47.7 million
compared to a $122.6 million loss from operation for the fiscal 2002. The
$74.9 million improvement in operating results for fiscal 2003 compared to
fiscal 2002 is comprised of the following: (1) a $25.8 million decline in
sales resulting in a net $14.1 million year-over-year decline in gross profit,
(2) a $33.6 million improvement in selling, general and administrative costs
(including $3.6 million of retail store closing costs), (3) an $8.2 million
improvement of depreciation and amortization expense, and (4) a $47.2 million
decline in reserves and impairment charges.
FranklinCovey also reported an improved net loss of $13.5 million before
preferred stock dividends ($0.78 per common share loss, after accounting for
preferred stock dividends) for the fourth quarter ended August 31, 2003
compared to a $36.9 million net loss before preferred stock dividends ($1.96
per common share loss, after accounting for preferred stock dividends) for the
same quarter of the prior year. For the fiscal year ended August 31, 2003,
the Company reported an improved net loss of $45.3 million before preferred
stock dividends ($2.69 loss per common share, after accounting for preferred
stock dividends) compared to a net loss of $100.6 million before preferred
stock dividends ($5.49 loss per common share, after accounting for preferred
dividends) for the prior fiscal year. The net loss for fiscal 2002 included a
$25.7 million tax benefit, a $64.9 million net 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 fourth quarter and
during the full year of fiscal 2003.
Stabilizing revenues: Total sales for the fourth quarter of fiscal 2003
declined $7.3 million, or 10%, as compared to last year's fourth quarter. As
a result of the Company's fiscal calendar, the fourth quarter ended August 31,
2003 had six fewer business days (or 7% fewer business days) as compared to
the same quarter of fiscal 2002. Sales from the Consumer Business Unit (CBU)
for the fourth quarter ended August 31, 2003 (also with 7% fewer business
days) declined 11% to $38.9 million compared to $43.8 million for the same
quarter last year. Included in CBU revenues are retail store sales, which
declined 13% (14% comparable store sales decline) for the fourth quarter,
primarily reflecting a 9% decline in store traffic. Sales of new products
that were introduced into the Target channel and the new superstores alliance
helped to stabilize CBU sales and are reported in other CBU sales. Other CBU
sales grew 17% to $6.4 million compared to $5.5 million for the same quarter
last year. Organizational Solutions Business Unit (OSBU) sales for the fourth
quarter of fiscal 2003 (with 7% fewer business days) were $28.0 million, an 8%
decline compared to $30.4 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 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 fiscal 2003, were $307.2 million compared to $333.0 million for
fiscal 2002. Sales for the year ended August 31, 2003, included
$192.2 million and $115.0 million from CBU and OSBU, compared to
$209.6 million and $123.4 million for the same period last year, respectively.
Selling, general and administrative expenses: Selling, general and
administrative expenses (SG&A) declined by $5.9 million for the fourth quarter
ended August 31, 2003, compared to last year's fourth quarter. SG&A declined
by $33.6 million for fiscal 2003, compared to fiscal 2002. The Company closed
22 of its domestic retail stores and another 10 of its international retail
stores during fiscal 2003, and intends to close additional stores during
fiscal 2004. These closures are comprised primarily of unprofitable stores
and stores located in markets where the Company has multiple retail
operations. As a result of the store closures during fiscal 2003, the Company
incurred $3.6 million of costs related to lease buy-outs, severance and other
closing costs, which were included in SG&A and expects to incur smaller but
similar costs during fiscal 2004. 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 into fiscal 2004, even after including future store closing costs.
Depreciation and amortization: Depreciation and amortization expenses
(D&A) continued to decline during the fourth quarter of fiscal 2003,
reflecting lower, more focused and better-managed capital expenditures and the
effect of certain assets becoming fully depreciated. The Company reported
declines of $5.0 million and $8.2 million in D&A during the fourth quarter and
fiscal year ended August 31, 2003 compared to the same periods of the prior
year. D&A include $5.0 million in impairment charges in fiscal 2003 and
$1.0 million in fiscal 2002 on assets of certain retail stores that were
closed or are expected to be closed. The Company expects D&A to further
decline in fiscal 2004 as a result of the lower capital expenditures, store
closures and other assets that will become fully depreciated during fiscal
2004.
Loan loss reserves and impairments: Operating results for the fourth
quarter also included a $0.2 million addition to the management stock loan
loss reserve compared to a $6.1 million addition to this reserve during the
same quarter of last year. For fiscal 2003, charges for loan loss reserves
and impaired assets decreased by $20.9 million and $26.4 million,
respectively, compared to the same period of the prior year.
Liquidity: The Company had $41.9 million in cash and cash equivalents at
August 31, 2003, compared to $47.0 million at August 31, 2002. With revenue
declines continuing to narrow, cost reductions in SG&A and D&A expected to
continue, and minimal long-term debt, the Company believes it is well
positioned to improve its operating performance in fiscal 2004.
Fiscal 2004 Outlook
FranklinCovey also discussed current trends that show its revenue and cost
reduction initiatives are beginning to bear fruit. The Company expects
revenues to continue to stabilize during fiscal 2004 due to better operations
in both of its business units. The Company also expects to report
significantly improved operating results during fiscal 2004, reflecting
stabilized revenues and continued reductions in operating costs.
Other Announcements
The Company also announced January 9, 2004, as the date for its Annual
Shareholders Meeting. Proxy materials and the annual report will be mailed to
shareholders of record as of November 21, 2003, on approximately December 12,
2003.
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 150 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,
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 2002 10-K report and subsequent 10-Q
and 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.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Three Months Ended Twelve Months Ended
August 31, August 31,
2003 2002 2003 2002
(unaudited) (unaudited) (unaudited) (unaudited)
Sales $66,944 $74,241 $307,160 $332,998
Cost of sales 30,045 34,169 137,601 149,369
Gross margin 36,899 40,072 169,559 183,629
Selling, general and
administrative 46,436 52,304 183,312 216,910
Provision for losses on
management stock loans 223 6,072 3,903 24,775
Impairment (recovery) of
investment in unconsolidated
subsidiary 96 (1,644) 16,323
Loss on impaired assets 4,666 872 9,184
Depreciation 4,881 9,679 26,395 34,343
Amortization 1,010 1,171 4,386 4,667
Loss from operations (15,747) (33,820) (47,665) (122,573)
Equity in earnings (losses)
of unconsolidated
subsidiary 1,151 (128) 4,316
Interest income 141 1,024 665 3,112
Interest expense (111) (32) (248) (2,784)
Loss on settlement of
interest rate swap (4,894)
Other income (expense),
net (242) 7 (414) 644
Loss before income
taxes (15,959) (31,670) (47,790) (122,179)
Income tax benefit
(provision) 2,491 (7,980) 2,537 25,713
Loss from continuing
operations (13,468) (39,650) (45,253) (96,466)
Income (loss) from
discontinued operations,
net of taxes (1,314) (7,584)
Gain on sale of
discontinued operations,
net of taxes 4,077 64,851
Cumulative effect of
accounting change,
net of taxes (61,386)
Net loss (13,468) (36,887) (45,253) (100,585)
Preferred dividends (2,183) (2,184) (8,735) (8,681)
Net loss attributable
to common
shareholders $(15,651) $(39,071) $(53,988) $(109,266)
Loss from continuing
operations and
preferred stock
dividends (basic and
diluted) $(0.78) $(2.10) $(2.69) $(5.29)
Loss per share attributable
to common shareholders
(basic and diluted) $(0.78) $(1.96) $(2.69) $(5.49)
Weighted average number
of common and common
equivalent shares
(basic and diluted) 20,049 19,967 20,041 19,895
Sales Detail:
Retail Stores $22,359 $25,727 $112,054 $122,496
Catalog / e-commerce 10,155 12,654 56,177 64,802
Other 6,387 5,451 23,935 22,326
Total CBU Sales 38,901 43,832 192,166 209,624
Organizational
Solutions Group 18,305 20,316 74,306 82,095
International 9,738 10,093 40,688 41,279
Total OSBU Sales 28,043 30,409 114,994 123,374
Total Sales $66,944 $74,241 $307,160 $332,998
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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