Franklin Covey Co. (NYSE: FC), a global performance improvement company
that creates and distributes world-class content, training, processes,
and tools that organizations and individuals use to transform their
results, today announced financial results for its fiscal first quarter
ended December 1, 2012.
Net sales for the quarter ended December 1, 2012 increased 11% to $44.1
million, all of which was organic growth, compared with $39.5 million in
the first quarter of the prior year. Adjusted EBITDA for the quarter
increased $0.7 million to $7.1 million, an 11% increase compared with
$6.4 million in fiscal 2012. The Company's Adjusted EBITDA margin
(Adjusted EBITDA as a percent of sales) remained strong, and was
consistent with the prior fiscal year's first quarter at 16.1% of sales.
Income from operations increased by $1.6 million to $5.3 million, a 43%
increase compared with $3.7 million in the first quarter of fiscal 2012.
Net income improved by $1.2 million to $2.9 million, or $0.15 per
diluted share, a 74% increase compared with $1.7 million, or $0.09 per
diluted share, in the first quarter of fiscal 2012.
For the four-quarter period ended December 1, 2012, net sales increased
$14.1 million, or 9%, to $175.0 million, compared with $160.9 million in
the four-quarter period ended November 26, 2011. Adjusted EBITDA for the
four-quarter period ended December 1, 2012 increased to $27.8 million, a
27% increase compared with $21.8 million in the four-quarter period
ended November 26, 2011. Income from operations increased $7.8 million
to $19.2 million, a 69% increase compared with $11.4 million in the
four-quarter period ended November 26, 2011. Net income improved to $9.1
million, a 60% increase compared with $5.7 million during the
four-quarter period ended November 26, 2011.
Bob Whitman, Chairman and Chief Executive Officer, commented, "We are
very pleased to have achieved another quarter of significant growth in
revenue, Adjusted EBITDA, operating income, and earnings per share. This
performance reflects the transformational impact that Franklin Covey's
world-leading intellectual property and content is having on our client
organizations. The strength of our momentum and the size of our booking
pipeline over the past several years strongly underscore our expectation
of continued growth in revenue, profitability, and cash flows from
operations in fiscal 2013 and beyond."
Fiscal 2013 First Quarter Financial Results
The Company's consolidated sales increased to $44.1 million compared
with $39.5 million in the first quarter of fiscal 2012. Sales increased
at all of the Company's major channels, including its U.S./Canada direct
offices, the government services office, international direct offices,
international licensee channel, national account practices, and from
increased leasing revenues. Revenue in the Company's U.S./Canada direct
offices (including the government services office) increased 18%
compared with the first quarter of fiscal 2012. Sales growth was
generally broad-based across the Company's key Practice areas and the
Company benefitted from strong facilitator sales during the quarter.
Sales in the Company's international direct offices increased 11%
primarily due to sales growth in Japan and Australia as a result of
improved publishing and training sales. Many of the Company's
international licensee partners also recognized stronger sales during
the quarter, resulting in a 10% overall increase in royalty revenues.
The Company's national account practices reported a 13% increase in
revenues, led by increased education practice sales. Other revenues,
which consist primarily of leasing and shipping and handling revenues,
increased by 51%, primarily as a result of new leasing contracts at the
Company's corporate headquarters facility.
Gross profit increased to $29.6 million, an increase of 11% compared
with $26.5 million in the prior year's first quarter. Essentially all of
this increase was due to sales growth as the Company's gross margin
remained strong and was consistent with the prior year at 67.1% of sales.
Selling, general and administrative expenses (SG&A) increased $1.6
million compared with the first quarter of fiscal 2012, reflecting
increases in investments in hiring new sales-related personnel and
marketing. However, as a percent of sales, SG&A expenses decreased to
52.1 percent of sales in the first quarter of fiscal 2013 compared with
54.1 percent of sales in the prior year. The increase in SG&A expenses
was primarily due to a $2.3 million increase in associate costs,
primarily related to the addition of new personnel and increased
commissions on higher sales, and a $0.3 million increase in advertising
and promotional costs related to new strategic initiatives that we
believe had a favorable impact on the current quarter's sales. These
increases were partially offset by a $0.7 million decrease in non-cash
share-based compensation and decreases in various other expense
categories. Depreciation expense declined compared with the prior year
primarily due to the full depreciation of certain assets, which
contributed to improved income from operations during the first quarter
of fiscal 2013.
Income from operations increased $1.6 million to $5.3 million, a 43%
increase compared with $3.7 million in the first quarter of fiscal 2012.
Net income improved by $1.2 million, or 74%, to $2.9 million, or $0.15
per diluted share, compared with $1.7 million, or $0.09 per diluted
share in fiscal 2012.
The Company's balance sheet and liquidity position remained strong
through the first quarter as the Company had $7.3 million in cash and
cash equivalents at December 1, 2012 compared with $11.0 million at
August 31, 2012. Net working capital increased to $30.1 million at
December 1, 2012 compared with $27.5 million on August 31, 2012. The
Company had no borrowings on its line of credit facility at December 1,
Fiscal 2013 First Quarter Financial Highlights
Fiscal 2013 Outlook
The Company reaffirms its previous guidance that Adjusted EBITDA for
fiscal 2013 is expected to range from $30 million to $32 million.
Earnings Conference Call
On Thursday, January 3, 2013, at 5:00 p.m. Eastern time (3:00 p.m.
Mountain time) Franklin Covey will host a conference call to review its
financial results for the fiscal quarter ended December 1, 2012.
Interested persons may participate by dialing 800-264-7882
(International participants may dial 847-413-3708), access code:
33961606. Alternatively, a webcast will be accessible at the following
Web site: http://edge.media-server.com/m/p/3dhuu593/lan/en.
A replay will be available from January 3 (7:30 p.m. ET) through January
10, 2013 by dialing 888-843-7419 (International participants may dial
630-652-3042), access code: 33961606#. The webcast will remain
accessible through January 10, 2013 on the Investor Relations area of
the Company's Web site at: http://investor.franklincovey.com/phoenix.zhtml c=102601&p=irol-IRHome.
This press release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995
including those statements related to the Company's future results and
profitability; expected Adjusted EBITDA in fiscal 2013; anticipated
future sales; and goals relating to the growth of the Company.
Forward-looking statements are based upon management's current
expectations and are subject to various risks and uncertainties
including, but not limited to: general economic conditions; the expected
number of booked days to be delivered; market acceptance of new products
or services and marketing strategies; the ability to achieve sustainable
growth in future periods; and other factors identified and discussed in
the Company's most recent Annual Report on Form 10-K and other periodic
reports filed with the Securities and Exchange Commission. Many of these
conditions are beyond the Company's control or influence, any one of
which may cause future results to differ materially from the Company's
current expectations, and 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 current
expectations and the Company undertakes no obligation to update or
revise these forward-looking statements to reflect events or
circumstances subsequent to this press release.
Non-GAAP Financial Information
Refer to the attached table for the reconciliation of a non-GAAP
financial measure, "Adjusted EBITDA," to consolidated net income, the
most comparable GAAP financial measure. The Company defines Adjusted
EBITDA as net income or loss from operations excluding the impact of
interest expense, income tax expense, amortization, depreciation,
share-based compensation expense, and other non-recurring items. The
Company references this non-GAAP financial measure in its decision
making because it provides supplemental information that facilitates
consistent internal comparisons to the historical operating performance
of prior periods and the Company believes it provides investors with
greater transparency to evaluate operational activities and financial
results. We do not provide forward-looking GAAP measures or a
reconciliation of the forward-looking Adjusted EBITDA to GAAP measures
because of our inability to project certain of the costs included in the
calculation of Adjusted EBITDA.
About Franklin Covey Co.
Franklin Covey Co. (NYSE:FC) (www.franklincovey.com),
is a global provider of training and consulting services in the areas of
leadership, productivity, strategy execution, customer loyalty, trust,
sales performance, government, education and individual effectiveness.
Over its history, Franklin Covey has worked with 90 percent of the
Fortune 100, more than 75 percent of the Fortune 500, and thousands of
small and mid-sized businesses, as well as numerous government entities
and educational institutions. Franklin Covey has more than 40 direct and
licensee offices providing professional services in over 140 countries.
FRANKLIN COVEY CO.
CONDENSED CONSOLIDATED INCOME STATEMENTS
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.
Reconciliation of Net Income to Adjusted
Additional Sales Information
Condensed Consolidated Balance Sheets
Accounts receivable, less allowance for doubtful accounts of $667
Liabilities and Shareholders' Equity
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