SALT LAKE CITY, Nov. 29 /PRNewswire-FirstCall/ -- FranklinCovey (NYSE: FC)
today announced financial results for its fourth quarter and fiscal year ended
August 31, 2004. For the fourth quarter ended August 31, 2004, the Company
reported a $13.9 million improvement in its operating results, reducing its
loss from operations to $1.9 million compared to a loss from operations of
$15.7 million for the comparable quarter of the prior year. This marks the
eighth consecutive quarter of significant year-over-year improvements in its
operating results. The $13.9 million improvement in the operating results for
the quarter compared to the same quarter of last year is comprised of the
following: (1) a $6.5 million decline in sales, approximately $5.7 million of
which related to declines from store closures and reduced sales of handheld
devices, that was partially offset by gross margin improvement (58.5% compared
to 55.1%) resulting in a net $1.6 million year-over-year decline in gross
margin, (2) a $12.7 million reduction in selling, general and administrative
costs, including a $2.9 million decrease in retail store closing costs, and
(3) a $2.4 million reduction in depreciation and amortization expense.
For the year ended August 31, 2004, the Company reported a $38.6 million
improvement in operating results with a loss from operations of $9.1 million
compared to a $47.7 million loss from operations in fiscal 2003. The
$38.6 million improvement in operating results for fiscal 2004 compared to
fiscal 2003 is comprised of the following: (1) a $31.7 million decline in
sales resulting in a net $14.4 million year-over-year decline in gross margin,
(2) a $35.1 million reduction in selling, general and administrative costs,
including a $1.4 million decrease in retail store closing costs, (3) a
$14.8 million reduction in depreciation and amortization expense, and (4) a
$3.1 million decline in reserves and impairment charges.
FranklinCovey also reported an improvement in its net results to a
$2.1 million net loss before preferred stock dividends ($0.21 per common share
loss, after accounting for preferred stock dividends) for the fourth quarter
ended August 31, 2004 compared to a $13.5 million net loss before preferred
stock dividends ($.78 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, 2004, the Company reported an improvement in its net results
to a $10.2 million net loss before preferred stock dividends ($.96 loss per
common share, after accounting for preferred stock dividends) compared to a
net loss of $45.3 million before preferred stock dividends ($2.69 loss per
common share, after accounting for preferred dividends) for the prior fiscal
year. The net loss for fiscal 2003 included a $2.5 million tax benefit
compared to $1.3 tax provision for fiscal 2004. The Company provided the
following details underlying the continued improvement in its operating
results during the fourth quarter and full year of fiscal 2004.
Revenues: Retail store closures and a continued decline in technology
product sales accounted for $6.3 million of the total sales decline of
$6.5 million for the fourth quarter of fiscal 2004 as compared to last year's
fourth quarter sales. Excluding those two factors, sales substantially
stabilized in its domestic training and direct channel product sales and grew
in international sales and in the Company's core product line of paper-based
planning pages, binders and software.
Sales from the Consumer Business Unit (CBU) for the fourth quarter ended
August 31, 2003 declined $7.1 million to $31.8 million compared to
$38.9 million for the same quarter last year. Included in CBU revenues are
retail store sales, which declined 26% or $5.8 million. Growth in the
Company's core product sales through its retail stores partially off-set the
retail store closures and declines in technology product sold in the retail
stores, which accounted for $5.7 million of the total decrease in revenues.
The Company reported a 16% comparable store sales decline for the fourth
quarter reflecting a 21% decline in comparable store traffic as compared to
the same quarter last year. Core product sales through the Company's Consumer
Direct channel (sales of products through the catalog and e-commerce channels)
more than off-set the technology product sales declines and grew by 7% to
$10.9 million compared to $10.2 for the same quarter last year. Other CBU
sales declined 33% to $4.3 million compared to $6.4 million for the same
quarter last year, which included initial orders related to introductory
loading in fiscal 2003 to superstores such as Office Max, Office Depot,
Staples and Target.
Organizational Solutions Business Unit (OSBU) sales for the fourth quarter
of fiscal 2004 grew slightly to $28.7 million, compared to $28.0 million for
the same quarter last year. International sales were up 8% while domestic
sales declined slightly by less than 1%. The Company noted that its rate of
booking training seminars with organizational clients has continued to
strengthen indicating expected growth of OSBU sales going into fiscal 2005.
Sales for fiscal 2004 were $275.4 million compared to $307.2 million for
fiscal 2003. Sales for the year ended August 31, 2004, included
$166.1 million and $109.4 million from CBU and OSBU, compared to
$192.2 million and $115.0 million for the same period last year, respectively.
Selling, general and administrative expenses: Selling, general and
administrative expenses (SG&A) declined by $12.7 million for the fourth
quarter ended August 31, 2004, compared to last year's fourth quarter. SG&A
declined by $35.1 million for fiscal 2004, compared to fiscal 2003. The
Company closed 18 of its domestic retail 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 2004, the Company incurred $2.3 million of costs
related to lease terminations, severance and other closing costs, which were
included in SG&A. The Company anticipates that it will close additional
retail store locations in the future, which may improve operating performance.
With the annualized impact of cost reductions already implemented and on-going
cost reduction initiatives, the Company expects SG&A to continue to decrease
into fiscal 2005.
Depreciation and amortization: Depreciation and amortization expenses
(D&A) continued to decline during the fourth quarter of fiscal 2004,
reflecting lower, more focused and better-managed capital expenditures and the
effect of certain assets becoming fully depreciated. The Company reported
declines of $2.4 million and $14.8 million in D&A during the fourth quarter
and fiscal year ended August 31, 2004 compared to the same periods of the
prior year. D&A includes $0.3 million in impairment charges in fiscal 2004
and $5.0 million in fiscal 2003 on assets of certain retail stores that were
closed. The Company expects D&A to decline further in fiscal 2005 as a result
of lower capital expenditures, store closures and other assets that will
become fully depreciated during fiscal 2005.
Liquidity: The Company had $41.9 million in cash and cash equivalents at
August 31, 2004, compared to $41.9 million at August 31, 2003. 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 further improve its liquidity and operating performance in
fiscal 2005.
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 130 retail stores, and
http://www.franklincovey.com .
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 2003 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,
2004 2003 2004 2003
(unaudited) (unaudited) (unaudited) (unaudited)
Net Sales $60,440 $66,944 $275,434 $307,160
Cost of sales 25,112 30,045 120,294 137,601
Gross margin 35,328 36,899 155,140 169,559
Selling, general
and
administrative 33,703 46,436 148,257 183,312
Provision for
losses on
management stock
loans 223 3,903
Impairment
(recovery) of
investment in
unconsolidated
subsidiary 96 (1,644)
Loss on impaired
assets 872
Depreciation 2,452 4,881 11,774 26,395
Amortization 1,044 1,010 4,173 4,386
Loss from
operations (1,871) (15,747) (9,064) (47,665)
Equity in losses
of unconsolidated
subsidiary (128)
Interest income 169 141 481 665
Interest expense (23) (111) (218) (248)
Other expense, net (242) (414)
Loss before income
taxes (1,725) (15,959) (8,801) (47,790)
Income tax
(provision)
benefit (328) 2,491 (1,349) 2,537
Net loss (2,053) (13,468) (10,150) (45,253)
Preferred
dividends (2,183) (2,183) (8,735) (8,735)
Net loss
attributable to
common
shareholders $(4,236) $(15,651) $(18,885) $(53,988)
Loss per share
attributable to
common
shareholders
(basic and
diluted) $(0.21) $(0.78) $(0.96) $(2.69)
Weighted average
number of common
and common
equivalent shares
(basic and
diluted) 19,726 20,049 19,734 20,041
Sales Detail:
Retail Stores $16,580 $22,359 $87,922 $112,054
Consumer Direct 10,898 10,155 55,059 56,177
Other 4,291 6,387 23,088 23,935
Total CBU Sales 31,769 38,901 166,069 192,166
Organizational
Solutions
Group 18,127 18,305 61,047 74,306
International 10,544 9,738 48,318 40,688
Total OSBU
Sales 28,671 28,043 109,365 114,994
Total Net
Sales $60,440 $66,944 $275,434 $307,160
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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