Utah
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87-0401551
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(State or other jurisdiction of incorporation)
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(IRS Employer Identification Number)
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(d)
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Exhibits
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99.1
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Earnings release dated January 7, 2016
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FRANKLIN COVEY CO.
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Date:
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January 7, 2016
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By:
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/s/ Stephen D. Young
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Stephen D. Young
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Chief Financial Officer
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Press Release
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2200 West Parkway Boulevard
Salt Lake City, Utah 84119-2331
www.franklincovey.com
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§
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Revenue: Consolidated revenue for the first quarter was $45.2 million compared with $47.9 million in the first quarter of fiscal 2015. Compared with the first quarter of the prior year, a $1.1 million increase in revenue for the rest of the business during the quarter, was more than offset by the combined impact of two factors: (1) the non-repeat during the quarter of $2.7 million in revenue from a federal government agency contract which, due to administrative changes at the agency, has not yet been open for renewal in fiscal 2016; and (2) a $1.0 million reduction in revenue due to the year-over-year impact of changes in foreign exchange rates compared to the first quarter of last year. Partially offsetting these decreases was Education practice growth of $2.1 million, or 35%; increased international licensee sales where, excluding the impact of foreign exchange rates, international licensee revenues grew by 11% compared with the first quarter of the prior year; and a $0.4 million, or 20%, increase in the balance of the Company’s other government business.
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§
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Gross profit: First quarter gross profit was $30.1 million compared with $31.2 million in the first quarter of fiscal 2015. The decrease was primarily due to the impact of revenue factors previously described. The Company’s gross margin for the quarter ended November 28, 2015 increased to 66.5 percent of sales compared with 65.2 percent in the first quarter of the prior year, primarily due to an increase in the mix of facilitator sales, decreased costs and incentives associated with marketing events, and decreased costs associated with the delivery of online and digital content resulting from changes to online program operations during the first quarter of fiscal 2016.
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§
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Adjusted EBITDA: Adjusted EBITDA for the first quarter was $4.5 million, somewhat above the Company’s expectation, but below the $5.9 million of Adjusted EBITDA achieved in last year’s first quarter. This was due primarily to the same two factors previously discussed – the non-repeat of the federal government agency contract, which had a $2.1 million impact on Adjusted EBITDA; and the adverse impact of changes in foreign exchange rates, which totaled $0.6 million during the first quarter of fiscal 2016.
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§
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Net Income: First quarter 2016 net income was $0.8 million compared with $1.8 million in the first quarter of fiscal 2015, reflecting the above-noted factors.
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§
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Diluted EPS: Diluted EPS for the quarter ended November 28, 2015 was $.05 per share compared with $.11 per share in the first quarter of the prior year.
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§
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Cash and Liquidity Remain Strong: The Company’s balance sheet and liquidity position remained healthy through the first quarter of fiscal 2016. The Company had $22.3 million of cash at November 28, 2015, compared with $16.2 million at August 31, 2015, and had no borrowings on its revolving credit facility. Net working capital at November 28, 2015 increased to $58.7 million compared with $55.8 million on August 31, 2015. Cash provided by operating activities increased $9.0 million to $7.1 million compared with net cash used for operating activities of $1.9 million in the first quarter of the prior year.
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§
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Expected Completion of Tender Offer: The Company expects to complete its previously announced modified Dutch auction tender offer to purchase up to $35.0 million of its common stock on January 12, 2016.
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§
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Adjusted EBITDA Outlook: The Company affirms its previously-announced annual guidance range for Adjusted EBITDA of $34 million to $36 million, excluding the impact of changes in foreign exchange during the year.
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Investor Contact:
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Media Contact:
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Franklin Covey
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Franklin Covey
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Steve Young
801-817-1776
investor.relations@franklincovey.com
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Debra Lund
801-817-6440
Debra.Lund@franklincovey.com
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FRANKLIN COVEY CO.
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CONDENSED CONSOLIDATED INCOME STATEMENTS
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(in thousands, except per-share amounts, and unaudited)
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Quarter Ended
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November 28,
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November 29,
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2015
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2014
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Net sales
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$ | 45,218 | $ | 47,875 | ||||
Cost of sales
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15,147 | 16,671 | ||||||
Gross profit
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30,071 | 31,204 | ||||||
Selling, general, and administrative
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26,489 | 25,699 | ||||||
Depreciation
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912 | 964 | ||||||
Amortization
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910 | 953 | ||||||
Income from operations
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1,760 | 3,588 | ||||||
Interest expense, net
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(464 | ) | (428 | ) | ||||
Discount on related party receivable
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- | (130 | ) | |||||
Income before income taxes
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1,296 | 3,030 | ||||||
Income tax provision
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(506 | ) | (1,202 | ) | ||||
Net income
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$ | 790 | $ | 1,828 | ||||
Net income per common share:
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Basic
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$ | 0.05 | $ | 0.11 | ||||
Diluted
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0.05 | 0.11 | ||||||
Weighted average common shares:
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Basic
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16,218 | 16,870 | ||||||
Diluted
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16,352 | 17,092 | ||||||
Other data:
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Adjusted EBITDA(1)
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$ | 4,475 | $ | 5,879 | ||||
(1) The term Adjusted EBITDA (earnings before interest, income taxes, depreciation, | ||||||||
amortization, share-based compensation, and certain other items) is a non-GAAP | ||||||||
financial measure that the Company believes is useful to investors in evaluating its results. | ||||||||
For a reconciliation of this non-GAAP measure to the most comparable GAAP equivalent, | ||||||||
refer to the Reconciliation of Net Income to Adjusted EBITDA as shown below. |
FRANKLIN COVEY CO.
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Reconciliation of Net Income to Adjusted EBITDA
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(in thousands and unaudited)
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Quarter Ended
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November 28,
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November 29,
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2015
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2014
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Reconciliation of net income to Adjusted EBITDA:
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Net Income
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$ | 790 | $ | 1,828 | ||||
Adjustments:
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Interest expense, net
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464 | 428 | ||||||
Discount on related party receivable
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- | 130 | ||||||
Income tax provision
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506 | 1,202 | ||||||
Amortization
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910 | 953 | ||||||
Depreciation
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912 | 964 | ||||||
Share-based compensation
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763 | 402 | ||||||
Increase (reduction) to contingent earnout liability
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130 | (28 | ) | |||||
Adjusted EBITDA
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$ | 4,475 | $ | 5,879 | ||||
Adjusted EBITDA margin
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9.9 | % | 12.3 | % |
FRANKLIN COVEY CO.
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Additional Sales Information
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(in thousands and unaudited)
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Quarter Ended | ||||||||
November 28,
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November 29,
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2015
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2014
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Sales by Division:
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Direct offices
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$ | 23,661 | $ | 25,476 | ||||
Strategic markets
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7,184 | 9,801 | ||||||
Education practice
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8,005 | 5,918 | ||||||
Licensees
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4,684 | 4,539 | ||||||
Corporate and other
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1,684 | 2,141 | ||||||
Total
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$ | 45,218 | $ | 47,875 | ||||
Sales by Category:
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Training and consulting services
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$ | 43,194 | $ | 45,473 | ||||
Products
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912 | 1,314 | ||||||
Leasing
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1,112 | 1,088 | ||||||
45,218 | 47,875 | |||||||
Cost of Goods Sold by Category:
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Training and consulting services
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14,058 | 15,421 | ||||||
Products
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522 | 637 | ||||||
Leasing
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567 | 613 | ||||||
15,147 | 16,671 | |||||||
Gross Profit
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$ | 30,071 | $ | 31,204 |
FRANKLIN COVEY CO.
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Condensed Consolidated Balance Sheets
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(in thousands and unaudited)
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November 28,
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August 31,
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|||||||
2015
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2015
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Assets
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Current assets:
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Cash
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$ | 22,324 | $ | 16,234 | ||||
Accounts receivable, less allowance for
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doubtful accounts of $1,404 and $1,333
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49,688 | 65,182 | ||||||
Receivable from related party
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3,168 | 2,425 | ||||||
Inventories
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4,196 | 3,949 | ||||||
Income taxes receivable
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432 | - | ||||||
Deferred income taxes
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2,472 | 2,479 | ||||||
Prepaid expenses and other current assets
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5,560 | 5,156 | ||||||
Total current assets
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87,840 | 95,425 | ||||||
Property and equipment, net
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15,428 | 15,499 | ||||||
Intangible assets, net
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52,539 | 53,449 | ||||||
Goodwill
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19,903 | 19,903 | ||||||
Long-term receivable from related party
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1,622 | 1,562 | ||||||
Other assets
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14,177 | 14,807 | ||||||
$ | 191,509 | $ | 200,645 | |||||
Liabilities and Shareholders' Equity
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Current liabilities:
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Current portion of financing obligation
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$ | 1,519 | $ | 1,473 | ||||
Accounts payable
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6,201 | 8,306 | ||||||
Income taxes payable
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- | 221 | ||||||
Accrued liabilities
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21,391 | 29,634 | ||||||
Total current liabilities
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29,111 | 39,634 | ||||||
Financing obligation, less current portion
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24,205 | 24,605 | ||||||
Other liabilities
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3,931 | 3,802 | ||||||
Deferred income tax liabilities
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7,178 | 7,098 | ||||||
Total liabilities
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64,425 | 75,139 | ||||||
Shareholders' equity:
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Common stock
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1,353 | 1,353 | ||||||
Additional paid-in capital
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209,295 | 208,635 | ||||||
Retained earnings
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70,402 | 69,612 | ||||||
Accumulated other comprehensive income
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93 | 192 | ||||||
Treasury stock at cost, 10,893 and 10,909 shares
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(154,059 | ) | (154,286 | ) | ||||
Total shareholders' equity
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127,084 | 125,506 | ||||||
$ | 191,509 | $ | 200,645 |
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