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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

Non-GAAP Financial Information

Refer to the attached table for the reconciliation of a non-GAAP financial measure, “Adjusted EBITDA,” to consolidated net income, the most comparable GAAP financial measure. The Company defines Adjusted EBITDA as net income or loss from operations excluding the impact of interest expense, income tax expense, amortization, depreciation, share-based compensation expense, and other non-recurring items. The Company references this non-GAAP financial measure in its decision making because it provides supplemental information that facilitates consistent internal comparisons to the historical operating performance of prior periods and the Company believes it provides investors with greater transparency to evaluate operational activities and financial results.

About Franklin Covey Co.

Franklin Covey Co. (NYSE:FC) ( www.franklincovey.com), is a global provider of training and consulting services in the areas of leadership, productivity, strategy execution, customer loyalty, trust, sales performance, government, education and individual effectiveness. Over its history, Franklin Covey has worked with 90 percent of the Fortune 100, more than 75 percent of the Fortune 500, and thousands of small and mid-sized businesses, as well as numerous government entities and educational institutions. Franklin Covey has more than 40 direct and licensee offices providing professional services in over 140 countries.

FRANKLIN COVEY CO.
CONDENSED CONSOLIDATED INCOME STATEMENTS
( in thousands, except per share amounts )
           
Quarter Ended Three Quarters Ended
May 26, May 28, May 26, May 28,
2012 2011 2012 2011

(unaudited)

(unaudited)

 
Net sales $ 41,274 $ 40,897 $ 119,441 $ 115,791
 
Cost of sales   15,130     15,116     41,774     41,823  
Gross profit 26,144 25,781 77,667 73,968
 
Selling, general, and administrative 21,448 21,009 63,535 60,713
Depreciation 680 997 2,374 2,695
Amortization   622     916     1,879     2,766  
Income from operations 3,394 2,859 9,879 7,794
 
Interest expense, net   (611 )   (664 )   (1,863 )   (2,005 )
Income before income taxes 2,783 2,195 8,016 5,789
 
Income tax provision   (1,166 )   (1,471 )   (3,575 )   (3,966 )
Net income $ 1,617   $ 724   $ 4,441   $ 1,823  
 
Net income per common share:
Basic $ 0.09 $ 0.04 $ 0.25 $ 0.11
Diluted 0.09 0.04 0.24 0.11
 
Weighted average common shares:
Basic 17,797 17,067 17,765 17,030
Diluted 18,316 17,354 18,200 17,282
 
Other data:
Adjusted EBITDA (1) $ 5,752   $ 5,228   $ 17,433   $ 14,519  
 
(1) The term Adjusted EBITDA (earnings before interest, income taxes, depreciation, amortization, share-based compensation, and certain other items) is a non-GAAP financial measure that the Company believes is useful to investors in evaluating its results. For a reconciliation of this non-GAAP measure to the most comparable GAAP equivalent, refer to the Reconciliation of Net Income to Adjusted EBITDA as shown below.
 
 
FRANKLIN COVEY CO.
Reconciliation of Net Income to Adjusted EBITDA
(in thousands and unaudited)
                 
Quarter Ended Three Quarters Ended
May 26, May 28, May 29, May 26, May 28,
2012 2011 2010 2012 2011
Reconciliation of net income to Adjusted EBITDA:
Net income $ 1,617 $ 724 $ 135 $ 4,441 $ 1,823
Adjustments:
Interest expense, net 611 664 732 1,863 2,005
Income tax provision (benefit)

1,166

1,471 (1,165 ) 3,575 3,966
Amortization 622 916 929 1,879 2,766
Depreciation 680 997 915 2,374 2,695
Share-based compensation 1,056 456 331 3,301 1,264

Loss from discontinued operations, net of tax

  -     -     128     -     -  
 
Adjusted EBITDA $ 5,752   $ 5,228   $ 2,005   $ 17,433   $ 14,519  
 
Adjusted EBITDA margin 13.9 % 12.8 % 6.6 % 14.6 % 12.5 %
 
 
Trailing 4 Quarters Ended
May 26, May 28,
2012 2011
Reconciliation of net income to Adjusted EBITDA:
Net income $ 7,425 $ 1,303
Adjustments:
Interest expense, net 2,522 2,685

Income tax provision

3,249 8,469
Amortization 2,654 3,694
Depreciation 3,246 3,463
Share-based compensation 4,825 1,648
Severance costs 150 920
Income from discontinued operations, net of tax - (508 )
Gain from sale of discontinued operations, net of tax   -     (238 )
 
Adjusted EBITDA $ 24,071   $ 21,436  
 
Adjusted EBITDA margin 14.6 % 13.4 %
 
 
FRANKLIN COVEY CO.
Additional Sales Information
(in thousands and unaudited)
 
Quarter Ended Three Quarters Ended
May 26, May 28, May 26, May 28,
2012 2011 2012 2011
Sales Detail by Category:
Training and consulting services $ 38,213 $ 37,368 $ 110,201 $ 108,261
Products 2,291 2,958 7,057 5,777
Leasing   770     571     2,183     1,753  
 
Total $ 41,274   $ 40,897   $ 119,441   $ 115,791  
 
Sales Detail by Region/Type:
U.S./Canada direct $ 22,736 $ 22,535 $ 60,241 $ 62,643
International direct 5,612 5,319 20,693 19,423
Licensees 3,581 3,389 10,793 9,480
National account practices 5,917 5,249 17,197 14,011
Self-funded marketing 2,132 3,476 6,871 7,403
Other   1,296     929     3,646     2,831  
 
Total $ 41,274   $ 40,897   $ 119,441   $ 115,791  
 
 
FRANKLIN COVEY CO.
Selected Statement of Cash Flows Information
(in thousands and unaudited)
 
Three Quarters Ended
May 26, May 28,
2012 2011
 
Cash provided by operating activities $ 8,678 $ 6,213
 
Cash paid for purchases of property and equipment (1,428 ) (1,940 )
 
 
FRANKLIN COVEY CO.
Condensed Consolidated Balance Sheets
(in thousands)
       
 
May 26, August 31,
2012 2011
Assets (unaudited)
Current assets:
Cash $ 6,465 $ 3,016
Accounts receivable, less allowance for
doubtful accounts of $697 and $798 31,593 32,412
Receivable from related party 6,259 5,717
Inventories 3,775 4,301
Deferred income taxes 2,977 3,005
Other current assets   4,052     3,605  
Total current assets 55,121 52,056
 
Property and equipment, net 18,112 19,143
Intangible assets, net 59,825 61,703
Goodwill 9,172 9,172
Other assets   9,432     9,353  
$ 151,662   $ 151,427  
 
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of financing obligation $ 957 $ 857
Current portion of bank note payable 2,500 2,292
Accounts payable 6,263 9,154
Income taxes payable 251 285
Accrued liabilities   18,899     22,813  
Total current liabilities 28,870 35,401
 
Financing obligation, less current portion 28,778 29,507
Bank note payable, less current portion 833 2,708
Other liabilities 444 411
Deferred income tax liabilities   5,712     4,084  
Total liabilities   64,637     72,111  
 
Shareholders' equity:
Common stock 1,353 1,353
Additional paid-in capital 182,023 179,515
Common stock warrants 5,260 5,260
Retained earnings 22,710 18,269
Accumulated other comprehensive income 3,260 3,592
Treasury stock at cost, 9,307 and 9,386 shares   (127,581 )   (128,673 )
Total shareholders' equity   87,025     79,316  
$ 151,662   $ 151,427  




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