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Franklin Covey Reports Strong Second Quarter Fiscal 2012 Financial Results

Second Quarter Financial Results

The Company’s consolidated sales increased to $38.6 million in the second quarter of fiscal 2012 compared with $35.5 million in the same quarter of fiscal 2011. Sales increased through all of the Company’s primary delivery channels when compared with the prior year. Excluding the impact of anticipated sales declines from contracts with a governmental agency, sales through the Company’s U.S./Canada direct offices increased 4% over fiscal 2011. Sales in the Company’s international direct offices increased primarily due to a $0.9 million improvement in sales in Japan, and many of the Company’s international licensee partners also recognized stronger sales during the quarter, resulting in a 14% increase in royalty revenues. The Company’s National Account practices reported a 34% increase in revenues, led by a $0.8 million improvement in the Sales Performance practice and a $0.7 million increase in revenues from the Education practice. Self-funded marketing revenues, which include public programs, book and audio sales and royalties, and delivered speeches, increased by $0.1 million primarily on the strength of royalties related to new books.

Gross profit increased to $25.0 million compared with $23.1 million primarily due to increased consolidated sales. The Company’s gross margin declined slightly to 64.7% of sales compared to 65.1% of sales in the prior year.

Selling, general and administrative expenses (SG&A) increased by $0.8 million primarily due to a $1.0 million increase in associate costs primarily resulting from increased commissions and bonuses on improved sales compared to the prior year and a $0.6 million increase in non-cash share-based compensation costs. These increases were partially offset by a $0.4 million reimbursement of previously expensed legal fees associated with the settlement of litigation during the quarter and by reduced rent and utility costs. Depreciation increased by $0.1 million primarily due to newly acquired capital assets and amortization expense declined by $0.3 million compared to the prior year primarily due to the full amortization of certain intangible assets.

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