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Franklin Covey Reports Strong Second Quarter Fiscal 2012 Financial Results

Stocks in this article: FC

Adjusted EBITDA increased 47% to $5.3 million for the quarter. Net income reflected increased sales and improved operating margins and rose to $1.2 million compared with $0.3 million in fiscal 2011. The Company’s net income benefited from improved pretax income and a significant decrease in the effective tax rate from 64% in fiscal 2011 to 46% in fiscal 2012, primarily due to the recognition of foreign tax credits during fiscal 2012. However, due to the utilization of net operating loss carryforwards, the Company’s cash paid for taxes remains significantly less than its effective tax rate.

Second Quarter Financial Highlights

  • Sales grew in all of the Company’s primary delivery channels.
  • Gross profit increased 8% to $25.0 million.
  • Adjusted EBITDA increased 47% to $5.3 million, compared with $3.6 million in the prior year.
  • Adjusted EBITDA/Sales percentage increased to 13.8% from 10.2% last year.
  • Net income increased to $1.2 million compared with $0.3 million in the second quarter of fiscal 2011.
  • EPS grew by 200%, to $.06 per diluted share, from $.02 per diluted share in the second quarter of fiscal 2011.
  • Cash and cash equivalents totaled $8.2 million at February 25, 2012 with no borrowings on the revolving line of credit.

Fiscal 2012 Year-to-Date Financial Results

Consolidated sales for the two quarters ended February 25, 2012 increased $3.3 million to $78.2 million compared with $74.9 million in fiscal 2011. Sales increased over the prior year despite the impact of expected sales declines from government services contracts that totaled $4.4 million for the first two quarters of fiscal 2012. Excluding the impact of decreased government services sales, U.S./Canada direct office sales increased by 8% compared with the prior year. Sales increased at all of the Company’s other primary delivery channels for the two quarters ended February 25, 2012. Increased sales led to an increase in gross profit to $51.5 million compared with $48.2 million in fiscal 2011. Consolidated gross margin increased to 65.9% of sales compared with 64.3% of sales in fiscal 2011, primarily due to increased international licensee royalties and book royalties received primarily in the first quarter on new publications. The Company’s SG&A expenses increased $2.4 million primarily due to increased associate costs and non-cash share-based compensation costs. Amortization expense decreased $0.6 million due to the full amortization of certain intangible assets in the fourth quarter of fiscal 2011.

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