Franklin Covey Co. (FC, Financial) filed Quarterly Report for the period ended 2009-05-30.
Franklin Covey Co. is an international learning and performance solutions company dedicated to increasing the effectiveness of individuals and organizations. They provide consulting services training and education programs educational materials publications assessment and measurement tools implementation processes application tools and products designed to empower individuals and organizations to become more effective. Franklin Covey Co. has a market cap of $126.6 million; its shares were traded at around $6.68 with and P/S ratio of 0.4.
Gross profit consists of net sales less the cost of services provided or the cost of products sold. Our consolidated gross profit decreased to $18.9 million compared to $36.0 million in the corresponding quarter of the prior year. The decrease in gross profit was primarily attributable to decreased product sales resulting from the sale of CSBU. Our consolidated gross margin, which is gross profit stated in terms of a percentage of sales, was 61.8 percent of sales compared to 60.9 percent in fiscal 2008. The increase in our gross margin was due to the change in our sales mix, which is now comprised almost entirely of training and consulting sales that typically have higher margins than the majority of our product and leasing sales.
Selling, General and Administrative – Our selling, general, and administrative (SG&A) expenses decreased $16.0 million compared to the prior year. The decrease in SG&A expenses was primarily due to: 1) the sale of the CSBU, which reduced consolidated SG&A by approximately $14.2 million compared to fiscal 2008; 2) reduced compensation costs totaling $1.9 million resulting from lower sales and corresponding reductions to commissions and other variable compensation elements; 3) a $0.9 million reduction in advertising and promotional costs resulting from fewer public program events; and 4) the favorable impacts of our August 2008 restructuring plan on various areas of our operations. These decreases were partially offset by $0.9 million of severance costs, $0.5 million of increased warehousing costs that were previously charged to CSBU cost centers, and $0.4 million of increased share-based compensation costs due to reversals of share-based compensation expense in the prior year that did not repeat in fiscal 2009. Following the sale of our CSBU in the fourth quarter of fiscal 2008, we initiated a restructuring plan that reduced the number of our domestic regional sales offices, decentralized certain sales support functions, and significantly changed the operations of our Canadian subsidiary. The restructuring plan is intended to strengthen the remaining domestic sales offices and reduce our overall operating costs. We believe that this restructuring effort will further reduce SG&A expenses in future periods. Due to the condition of the current economy, we have initiated numerous cost savings efforts designed to reduce our overall operating costs and improve profitability. While we expect these efforts to have a significant impact on our cost structure, the outcome of these efforts may not reduce our costs as quickly or as effectively as originally planned.
Depreciation – Depreciation expense decreased $0.7 million compared to the prior year. The decrease was primarily due to the sale of the CSBU and an impairment charge totaling $0.3 million for payroll software that did not function as anticipated and was written off during the quarter ended May 31, 2008. Based upon expected fixed asset activity in fiscal 2009, we expect depreciation expense to total approximately $4 million for the fiscal year ended August 31, 2009.
Amortization – Amortization expense from definite-lived intangible assets increased compared to the prior year due to the acquisition of CoveyLink, which increased our intangible assets by $0.4 million. Due to the acquisition of CoveyLink, we expect that our amortization expense will increase slightly compared to the prior year and total approximately $3.8 million for fiscal 2009.
Our consolidated gross profit decreased to $59.3 million compared to $128.8 million for the three
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Franklin Covey Co. is an international learning and performance solutions company dedicated to increasing the effectiveness of individuals and organizations. They provide consulting services training and education programs educational materials publications assessment and measurement tools implementation processes application tools and products designed to empower individuals and organizations to become more effective. Franklin Covey Co. has a market cap of $126.6 million; its shares were traded at around $6.68 with and P/S ratio of 0.4.
Highlight of Business Operations:
In general, our financial results for the quarter ended May 30, 2009 were adversely affected by poor economic conditions in both the United States and in our worldwide operations. In light of the current economic conditions, we have taken steps to control our costs and improve our cash flows from operating activities, which we believe produced favorable results during the quarter and we expect will produce improved operations in future periods. For the quarter ended May 30, 2009, we recognized a loss from operations of $1.2 million compared to a $0.8 million loss from operations in the third quarter of fiscal 2008. Our pre-tax loss totaled $2.2 million compared to a $1.5 million pre-tax loss for the same quarter of fiscal 2008. Due to the impact of a $2.9 million provision for income taxes, we recognized a net loss of $5.1 million in the third quarter of fiscal 2009 compared to a net loss of $1.5 million in the quarter ending May 31, 2008.Gross profit consists of net sales less the cost of services provided or the cost of products sold. Our consolidated gross profit decreased to $18.9 million compared to $36.0 million in the corresponding quarter of the prior year. The decrease in gross profit was primarily attributable to decreased product sales resulting from the sale of CSBU. Our consolidated gross margin, which is gross profit stated in terms of a percentage of sales, was 61.8 percent of sales compared to 60.9 percent in fiscal 2008. The increase in our gross margin was due to the change in our sales mix, which is now comprised almost entirely of training and consulting sales that typically have higher margins than the majority of our product and leasing sales.
Selling, General and Administrative – Our selling, general, and administrative (SG&A) expenses decreased $16.0 million compared to the prior year. The decrease in SG&A expenses was primarily due to: 1) the sale of the CSBU, which reduced consolidated SG&A by approximately $14.2 million compared to fiscal 2008; 2) reduced compensation costs totaling $1.9 million resulting from lower sales and corresponding reductions to commissions and other variable compensation elements; 3) a $0.9 million reduction in advertising and promotional costs resulting from fewer public program events; and 4) the favorable impacts of our August 2008 restructuring plan on various areas of our operations. These decreases were partially offset by $0.9 million of severance costs, $0.5 million of increased warehousing costs that were previously charged to CSBU cost centers, and $0.4 million of increased share-based compensation costs due to reversals of share-based compensation expense in the prior year that did not repeat in fiscal 2009. Following the sale of our CSBU in the fourth quarter of fiscal 2008, we initiated a restructuring plan that reduced the number of our domestic regional sales offices, decentralized certain sales support functions, and significantly changed the operations of our Canadian subsidiary. The restructuring plan is intended to strengthen the remaining domestic sales offices and reduce our overall operating costs. We believe that this restructuring effort will further reduce SG&A expenses in future periods. Due to the condition of the current economy, we have initiated numerous cost savings efforts designed to reduce our overall operating costs and improve profitability. While we expect these efforts to have a significant impact on our cost structure, the outcome of these efforts may not reduce our costs as quickly or as effectively as originally planned.
Depreciation – Depreciation expense decreased $0.7 million compared to the prior year. The decrease was primarily due to the sale of the CSBU and an impairment charge totaling $0.3 million for payroll software that did not function as anticipated and was written off during the quarter ended May 31, 2008. Based upon expected fixed asset activity in fiscal 2009, we expect depreciation expense to total approximately $4 million for the fiscal year ended August 31, 2009.
Amortization – Amortization expense from definite-lived intangible assets increased compared to the prior year due to the acquisition of CoveyLink, which increased our intangible assets by $0.4 million. Due to the acquisition of CoveyLink, we expect that our amortization expense will increase slightly compared to the prior year and total approximately $3.8 million for fiscal 2009.
Our consolidated gross profit decreased to $59.3 million compared to $128.8 million for the three
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