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Franklin Covey Reports Strong Third Quarter Fiscal 2012 Financial Results – Now Expects To Exceed The High End Of Its Previous Adjusted EBITDA Guidance Range For Fiscal 2012 Year

Adjusted EBITDA increased 10% to $5.8 million for the quarter. Net income reflected the increase in sales, improved operating margins, and a decreased effective income tax rate and rose to $1.6 million compared with $0.7 million in fiscal 2011. The Company’s net income benefited from improved pretax income and a significant decrease in the effective tax rate from 67% in fiscal 2011 to 42% in fiscal 2012, primarily due to the recognition of foreign tax credits during fiscal 2012. Due to the utilization of net operating loss carryforwards, the Company’s cash paid for taxes continues to remain significantly less than its income tax expense.

Third Quarter Financial Highlights

  • Sales grew in all of the Company’s major sales channels.
  • Gross profit increased to $26.1 million on increased sales and a slight increase in gross margin.
  • Adjusted EBITDA increased 10% to $5.8 million, compared with $5.2 million in fiscal 2011.
  • Adjusted EBITDA/Sales percentage increased to 13.9% from 12.8% last year.
  • Net income more than doubled to $1.6 million compared with $0.7 million in the prior year.
  • EPS grew by 125%, to $.09 per diluted share, from $.04 per diluted share in the third quarter of fiscal 2011.
  • Cash and cash equivalents totaled $6.5 million at May 26, 2012 with no borrowings on the line of credit facility.

Fiscal 2012 Year-to-Date Financial Results

Consolidated sales for the three quarters ended May 26, 2012 increased $3.7 million to $119.4 million compared with $115.8 million in fiscal 2011. Sales increased over the prior year despite the impact of expected sales declines from government services contracts that totaled $5.0 million for the first three quarters of fiscal 2012. Excluding the impact of decreased government services sales, U.S./Canada direct office sales increased 6% compared with the prior year. The Company’s sales also increased through all of its other major sales channels for the three quarters ended May 26, 2012. Increased sales and improved gross margins led to an increase in gross profit to $77.7 million compared with $74.0 million in fiscal 2011. Consolidated gross margin increased to 65.0% of sales compared with 63.9% of sales in the prior year, primarily due to increased international licensee royalties and book royalties received on new publications. The Company’s SG&A expenses increased $2.8 million primarily due to increased non-cash share-based compensation costs and increased advertising and promotional costs. Depreciation expense decreased by $0.3 million due to the full depreciation of certain assets during the third quarter of fiscal 2012. Amortization expense declined by $0.9 million compared to the prior year due to the full amortization of certain intangible assets in late fiscal 2011.

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