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Franklin Covey Co. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: January 5, 2012 10:04PM
Franklin Covey Co. (FC) filed Quarterly Report for the period ended 2011-11-26. Franklin Covey Co. has a market cap of $154.1 million; its shares were traded at around $8.69 with a P/E ratio of 32.2 and P/S ratio of 1.
Highlight of Business Operations:Our first fiscal quarter includes the months of September, October, and November. The first quarter of fiscal 2012, which ended on November 26, 2011, continued the favorable momentum that we experienced during fiscal 2011 as continued sales increases in the majority of our delivery channels essentially offset expected declines in governmental services sales. Consolidated sales increased to $39.5 million for the first quarter of fiscal 2012 compared with $39.4 million in fiscal 2011. Primarily due to increased book royalties and international licensee royalties, our gross profit improved to $26.5 million compared to $25.1 million in the prior year. Our income from operations improved to $3.7 million compared to $3.4 million in the first quarter of fiscal 2011 and our income from before income taxes also improved to $3.1 million compared with $2.7 million in fiscal 2011. Following the impact of accounting for income taxes (refer to discussion below), our net income was $1.7 million, or $.09 per diluted share, compared to $0.8 million, or $.05 per diluted share, in the first quarter of fiscal 2011.
Gross Profit – Our gross profit totaled $26.5 million compared to $25.1 million in the first quarter of fiscal 2011. Our consolidated gross margin, which is gross profit in terms of a percentage of sales, increased to 67.1 percent of sales compared to 63.6 percent in fiscal 2011. The improvement in our gross margin was primarily due to increased book royalties and increased foreign licensee royalty revenues, which have higher gross margins than the majority of our other revenue streams.
International Direct – Our three directly owned international offices are located in Australia, Japan, and the United Kingdom. The slight increase in international direct sales was primarily due to improved sales in Japan, which increased $0.2 million compared to the same quarter of fiscal 2011. The increase in sales was attributable to improved publishing sales, the favorable impact of translating sales to U.S. dollars, and improved training sales. Partially offsetting increased sales in Japan was a $0.1 million decrease in sales at our office in Australia. Sales at our office in the United Kingdom were essentially flat compared to the prior year.
Gross profit consists of net sales less the cost of services provided or the cost of products sold. For the quarter ended November 26, 2011, our consolidated gross profit increased to $26.5 million compared to $25.1 million in the first quarter of fiscal 2011. The increase in gross profit was primarily attributable to increased book royalties and increased licensee revenues sales as previously described. These increases contributed to an improvement in our consolidated gross margin, which is gross profit stated in terms of a percentage of sales. Our gross margin for the quarter ended November 26, 2011 increased to 67.1 percent of sales compared to 63.6 percent in fiscal 2011. Due to the nature and impact of the book royalties recognized during the quarter, we anticipate that our gross margin will decline slightly in future periods of fiscal 2012.
Selling, General and Administrative – Our selling, general, and administrative (SG&A) expenses increased $1.6 million compared to the prior year. As a percent of sales, SG&A expenses increased to 54.1 percent of sales in the first quarter of fiscal 2012 compared to 50.2 percent of sales in the prior year. The increase in SG&A expenses was primarily due to 1) a $0.8 million
Stocks Discussed: FC,