|
[X]
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
[ ]
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Utah
(State of incorporation)
|
87-0401551
(I.R.S. employer identification number)
|
|
2200 West Parkway Boulevard
Salt Lake City, Utah
(Address of principal executive offices)
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84119-2099
(Zip Code)
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|
Registrant’s telephone number,
Including area code
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(801) 817-1776
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Large accelerated filer
|
o
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Accelerated filer x
|
|
||
Non-accelerated filer
|
o
|
(Do not check if a smaller reporting company)
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Smaller reporting company
|
o
|
May 30,
|
August 31,
|
|||||||
2015
|
2014
|
|||||||
(unaudited)
|
||||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$ | 13,795 | $ | 10,483 | ||||
Accounts receivable, less allowance for doubtful accounts of $964 and $918
|
50,017 | 61,490 | ||||||
Receivable from related party
|
1,888 | 1,851 | ||||||
Inventories
|
4,934 | 6,367 | ||||||
Income taxes receivable
|
1,301 | 2,432 | ||||||
Deferred income tax assets
|
4,229 | 4,340 | ||||||
Prepaid expenses and other current assets
|
5,225 | 6,053 | ||||||
Total current assets
|
81,389 | 93,016 | ||||||
Property and equipment, net
|
15,731 | 17,271 | ||||||
Intangible assets, net
|
54,358 | 57,177 | ||||||
Goodwill
|
19,903 | 19,641 | ||||||
Long-term receivable from related party
|
1,505 | 3,296 | ||||||
Other long-term assets
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12,954 | 14,785 | ||||||
$ | 185,840 | $ | 205,186 | |||||
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
||||||||
Current liabilities:
|
||||||||
Current portion of financing obligation
|
$ | 1,428 | $ | 1,298 | ||||
Accounts payable
|
6,692 | 12,001 | ||||||
Accrued liabilities
|
20,222 | 29,586 | ||||||
Total current liabilities
|
28,342 | 42,885 | ||||||
Financing obligation, less current portion
|
24,992 | 26,078 | ||||||
Other liabilities
|
3,748 | 3,934 | ||||||
Deferred income tax liabilities
|
5,322 | 5,575 | ||||||
Total liabilities
|
62,404 | 78,472 | ||||||
Shareholders’ equity:
|
||||||||
Common stock, $.05 par value; 40,000 shares authorized, 27,056 shares issued
|
1,353 | 1,353 | ||||||
Additional paid-in capital
|
207,533 | 207,148 | ||||||
Retained earnings
|
61,943 | 58,496 | ||||||
Accumulated other comprehensive income
|
508 | 1,451 | ||||||
Treasury stock at cost, 10,561 shares and 10,266 shares
|
(147,901 | ) | (141,734 | ) | ||||
Total shareholders’ equity
|
123,436 | 126,714 | ||||||
$ | 185,840 | $ | 205,186 |
|
||||||||||||||||
Quarter Ended
|
Three Quarters Ended
|
|||||||||||||||
May 30,
|
May 31,
|
May 30,
|
May 31,
|
|||||||||||||
2015
|
2014
|
2015
|
2014
|
|||||||||||||
(unaudited)
|
(unaudited)
|
|||||||||||||||
Net sales:
|
||||||||||||||||
Training and consulting services
|
$ | 45,373 | $ | 44,381 | $ | 134,392 | $ | 129,399 | ||||||||
Products
|
1,710 | 1,694 | 4,846 | 4,767 | ||||||||||||
Leasing
|
1,223 | 1,056 | 3,259 | 2,889 | ||||||||||||
48,306 | 47,131 | 142,497 | 137,055 | |||||||||||||
Cost of sales:
|
||||||||||||||||
Training and consulting services
|
16,712 | 15,811 | 47,067 | 42,260 | ||||||||||||
Products
|
778 | 982 | 2,311 | 2,065 | ||||||||||||
Leasing
|
494 | 454 | 1,577 | 1,405 | ||||||||||||
17,984 | 17,247 | 50,955 | 45,730 | |||||||||||||
Gross profit
|
30,322 | 29,884 | 91,542 | 91,325 | ||||||||||||
Selling, general, and administrative
|
25,934 | 25,017 | 78,475 | 75,475 | ||||||||||||
Impairment of assets
|
1,082 | - | 1,082 | - | ||||||||||||
Depreciation
|
980 | 866 | 2,984 | 2,466 | ||||||||||||
Amortization
|
912 | 983 | 2,818 | 2,961 | ||||||||||||
Income from operations
|
1,414 | 3,018 | 6,183 | 10,423 | ||||||||||||
Interest income
|
104 | 74 | 322 | 325 | ||||||||||||
Interest expense
|
(532 | ) | (557 | ) | (1,605 | ) | (1,676 | ) | ||||||||
Discount on related party receivable
|
(233 | ) | (141 | ) | (364 | ) | (424 | ) | ||||||||
Income before income taxes
|
753 | 2,394 | 4,536 | 8,648 | ||||||||||||
Income tax benefit (provision)
|
438 | (472 | ) | (1,089 | ) | (3,036 | ) | |||||||||
Net income
|
$ | 1,191 | $ | 1,922 | $ | 3,447 | $ | 5,612 | ||||||||
Net income per share:
|
||||||||||||||||
Basic
|
$ | 0.07 | $ | 0.11 | $ | 0.20 | $ | 0.34 | ||||||||
Diluted
|
0.07 | 0.11 | 0.20 | 0.33 | ||||||||||||
Weighted average number of common shares:
|
||||||||||||||||
Basic
|
16,739 | 16,754 | 16,839 | 16,678 | ||||||||||||
Diluted
|
16,900 | 16,934 | 17,026 | 16,906 | ||||||||||||
COMPREHENSIVE INCOME
|
||||||||||||||||
Net income
|
$ | 1,191 | $ | 1,922 | $ | 3,447 | $ | 5,612 | ||||||||
Foreign currency translation adjustments,
|
||||||||||||||||
net of tax
|
(203 | ) | 13 | (943 | ) | (39 | ) | |||||||||
Comprehensive income
|
$ | 988 | $ | 1,935 | $ | 2,504 | $ | 5,573 |
Three Quarters Ended
|
||||||||
May 30,
|
May 31,
|
|||||||
2015
|
2014
|
|||||||
(unaudited)
|
||||||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Net income
|
$ | 3,447 | $ | 5,612 | ||||
Adjustments to reconcile net income to net cash provided
|
||||||||
by operating activities:
|
||||||||
Depreciation and amortization
|
5,808 | 5,417 | ||||||
Share-based compensation expense
|
1,602 | 2,860 | ||||||
Amortization of capitalized curriculum costs
|
3,047 | 1,930 | ||||||
Impairment of assets
|
1,082 | - | ||||||
Deferred income taxes
|
255 | 2,265 | ||||||
Reduction of estimated earn out liability
|
(79 | ) | (936 | ) | ||||
Changes in assets and liabilities:
|
||||||||
Decrease in accounts receivable, net
|
10,758 | 7,088 | ||||||
Decrease (increase) in inventories
|
1,250 | (1,023 | ) | |||||
Decrease in receivable from related party
|
1,214 | 2,122 | ||||||
Increase in prepaid expenses and other assets
|
337 | (781 | ) | |||||
Decrease in accounts payable and accrued liabilities
|
(14,165 | ) | (10,244 | ) | ||||
Decrease (increase) in income taxes payable/receivable
|
904 | (4,551 | ) | |||||
Decrease in other long-term liabilities
|
(44 | ) | (463 | ) | ||||
Net cash provided by operating activities
|
15,416 | 9,296 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Purchases of property and equipment
|
(1,619 | ) | (2,333 | ) | ||||
Curriculum development costs
|
(1,623 | ) | (6,403 | ) | ||||
Payment of contingent business acquisition costs
|
(262 | ) | (3,456 | ) | ||||
Acquisition of businesses
|
- | (2,711 | ) | |||||
Net cash used for investing activities
|
(3,504 | ) | (14,903 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Proceeds from line of credit borrowings
|
- | 26,706 | ||||||
Payments on line of credit borrowings
|
- | (24,179 | ) | |||||
Principal payments on financing obligation
|
(960 | ) | (848 | ) | ||||
Purchases of common stock for treasury
|
(7,889 | ) | (3,363 | ) | ||||
Proceeds from sales of common stock held in treasury
|
504 | 433 | ||||||
Net cash used for financing activities
|
(8,345 | ) | (1,251 | ) | ||||
Effect of foreign currency exchange rates on cash and cash equivalents
|
(255 | ) | (96 | ) | ||||
Net increase (decrease) in cash and cash equivalents
|
3,312 | (6,954 | ) | |||||
Cash and cash equivalents at the beginning of the period
|
10,483 | 12,291 | ||||||
Cash and cash equivalents at the end of the period
|
$ | 13,795 | $ | 5,337 | ||||
Supplemental disclosure of cash flow information:
|
||||||||
Cash paid for income taxes
|
$ | 1,783 | $ | 5,769 | ||||
Cash paid for interest
|
1,606 | 1,677 | ||||||
Non-cash investing and financing activities:
|
||||||||
Purchases of property and equipment financed by accounts payable
|
$ | 41 | $ | 76 |
1.
|
World Class Content – Our content is principle centered and based on natural laws of human behavior and effectiveness. Our content is designed to build new skillsets, establish new mindsets, and provide enabling toolsets.
|
2.
|
Breadth and Scalability of Delivery Options – We have a wide range of content delivery options, including: on-site training, training led through certified facilitators, on-line learning, blended learning, intellectual property licenses, and organization-wide transformational processes, including consulting and coaching.
|
3.
|
Global Capability – We operate four regional sales offices and a government services office in the United States; wholly-owned subsidiaries in Australia, Japan, and the United Kingdom; and contract with licensee partners who deliver our curriculum and provide services in over 150 other countries and territories around the world.
|
4.
|
Transformational Impact and Reach – We are committed to and measure ourselves by our clients’ achievement of transformational results.
|
May 30,
|
August 31,
|
|||||||
2015
|
2014
|
|||||||
Finished goods
|
$ | 4,871 | $ | 6,295 | ||||
Raw materials
|
63 | 72 | ||||||
$ | 4,934 | $ | 6,367 |
Quarter Ended
|
Three Quarters Ended
|
|||||||||||||||
May 30,
|
May 31,
|
May 30,
|
May 31,
|
|||||||||||||
2015
|
2014
|
2015
|
2014
|
|||||||||||||
Performance awards
|
$ | 446 | $ | 318 | $ | 1,221 | $ | 2,326 | ||||||||
Unvested share awards
|
113 | 75 | 288 | 258 | ||||||||||||
Employee stock purchase plan
|
33 | 32 | 93 | 85 | ||||||||||||
Fully-vested share awards
|
- | 191 | - | 191 | ||||||||||||
$ | 592 | $ | 616 | $ | 1,602 | $ | 2,860 |
Description
|
Amount
|
|||
Long-term receivables from FC
|
||||
Organizational Products (FCOP)
|
$ | 541 | ||
Capitalized curriculum
|
414 | |||
Prepaid expenses and other long-term assets
|
127 | |||
$ | 1,082 |
Quarter Ended
|
Three Quarters Ended
|
|||||||||||||||
May 30,
|
May 31,
|
May 30,
|
May 31,
|
|||||||||||||
2015
|
2014
|
2015
|
2014
|
|||||||||||||
Numerator for basic and
|
||||||||||||||||
diluted earnings per share:
|
||||||||||||||||
Net income
|
$ | 1,191 | $ | 1,922 | $ | 3,447 | $ | 5,612 | ||||||||
Denominator for basic and
|
||||||||||||||||
diluted earnings per share:
|
||||||||||||||||
Basic weighted average shares
|
||||||||||||||||
outstanding
|
16,739 | 16,754 | 16,839 | 16,678 | ||||||||||||
Effect of dilutive securities:
|
||||||||||||||||
Stock options and other
|
||||||||||||||||
share-based awards
|
161 | 180 | 187 | 228 | ||||||||||||
Diluted weighted average
|
||||||||||||||||
shares outstanding
|
16,900 | 16,934 | 17,026 | 16,906 | ||||||||||||
EPS Calculations:
|
||||||||||||||||
Net income per share:
|
||||||||||||||||
Basic
|
$ | 0.07 | $ | 0.11 | $ | 0.20 | $ | 0.34 | ||||||||
Diluted
|
0.07 | 0.11 | 0.20 | 0.33 |
Sales to
|
||||||||||||||||||||
Quarter Ended
|
External
|
Adjusted
|
||||||||||||||||||
May 30, 2015
|
Customers
|
Gross Profit
|
EBITDA
|
Depreciation
|
Amortization
|
|||||||||||||||
U.S./Canada
|
$ | 37,764 | $ | 22,580 | $ | 1,878 | $ | 527 | $ | 910 | ||||||||||
International
|
9,319 | 7,014 | 3,901 | 82 | 2 | |||||||||||||||
Total
|
47,083 | 29,594 | 5,779 | 609 | 912 | |||||||||||||||
Corporate and eliminations
|
1,223 | 728 | (915 | ) | 371 | - | ||||||||||||||
Consolidated
|
$ | 48,306 | $ | 30,322 | $ | 4,864 | $ | 980 | $ | 912 | ||||||||||
Quarter Ended
|
||||||||||||||||||||
May 31, 2014
|
||||||||||||||||||||
U.S./Canada
|
$ | 36,318 | $ | 21,924 | $ | 1,950 | $ | 446 | $ | 943 | ||||||||||
International
|
9,757 | 7,357 | 4,015 | 88 | 40 | |||||||||||||||
Total
|
46,075 | 29,281 | 5,965 | 534 | 983 | |||||||||||||||
Corporate and eliminations
|
1,056 | 603 | (832 | ) | 332 | - | ||||||||||||||
Consolidated
|
$ | 47,131 | $ | 29,884 | $ | 5,133 | $ | 866 | $ | 983 | ||||||||||
Three Quarters Ended
|
||||||||||||||||||||
May 30, 2015
|
||||||||||||||||||||
U.S./Canada
|
$ | 107,921 | $ | 65,716 | $ | 3,673 | $ | 1,614 | $ | 2,814 | ||||||||||
International
|
31,317 | 24,138 | 14,215 | 240 | 4 | |||||||||||||||
Total
|
139,238 | 89,854 | 17,888 | 1,854 | 2,818 | |||||||||||||||
Corporate and eliminations
|
3,259 | 1,688 | (3,298 | ) | 1,130 | - | ||||||||||||||
Consolidated
|
$ | 142,497 | $ | 91,542 | $ | 14,590 | $ | 2,984 | $ | 2,818 | ||||||||||
Three Quarters Ended
|
||||||||||||||||||||
May 31, 2014
|
||||||||||||||||||||
U.S./Canada
|
$ | 103,522 | $ | 65,562 | $ | 7,434 | $ | 1,227 | $ | 2,917 | ||||||||||
International
|
30,644 | 24,279 | 13,509 | 246 | 44 | |||||||||||||||
Total
|
134,166 | 89,841 | 20,943 | 1,473 | 2,961 | |||||||||||||||
Corporate and eliminations
|
2,889 | 1,484 | (3,169 | ) | 993 | - | ||||||||||||||
Consolidated
|
$ | 137,055 | $ | 91,325 | $ | 17,774 | $ | 2,466 | $ | 2,961 |
Quarter Ended
|
Three Quarters Ended
|
|||||||||||||||
May 30,
|
May 31,
|
May 30,
|
May 31,
|
|||||||||||||
2015
|
2014
|
2015
|
2014
|
|||||||||||||
Enterprise Adjusted EBITDA
|
$ | 5,779 | $ | 5,965 | $ | 17,888 | $ | 20,943 | ||||||||
Corporate expenses
|
(915 | ) | (832 | ) | (3,298 | ) | (3,169 | ) | ||||||||
Consolidated Adjusted EBITDA
|
4,864 | 5,133 | 14,590 | 17,774 | ||||||||||||
Share-based compensation expense
|
(592 | ) | (616 | ) | (1,602 | ) | (2,860 | ) | ||||||||
Reduction of contingent earn
|
||||||||||||||||
out liability
|
51 | 350 | 79 | 936 | ||||||||||||
Other
|
65 | - | - | - | ||||||||||||
Impairment of assets
|
(1,082 | ) | - | (1,082 | ) | - | ||||||||||
Depreciation
|
(980 | ) | (866 | ) | (2,984 | ) | (2,466 | ) | ||||||||
Amortization
|
(912 | ) | (983 | ) | (2,818 | ) | (2,961 | ) | ||||||||
Income from operations
|
1,414 | 3,018 | 6,183 | 10,423 | ||||||||||||
Interest income
|
104 | 74 | 322 | 325 | ||||||||||||
Interest expense
|
(532 | ) | (557 | ) | (1,605 | ) | (1,676 | ) | ||||||||
Discount on related party receivable
|
(233 | ) | (141 | ) | (364 | ) | (424 | ) | ||||||||
Income before income taxes
|
$ | 753 | $ | 2,394 | $ | 4,536 | $ | 8,648 |
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
·
|
Sales – Our consolidated sales increased 2.5 percent to $48.3 million, compared with $47.1 million in the third quarter of fiscal 2014. Despite $1.3 million of adverse impact from foreign exchange rates, the quarter ended May 30, 2015 represents our best ever third fiscal quarter sales. Further details regarding sales performance are provided later in this management’s discussion and analysis.
|
·
|
Gross Profit – Our gross profit for the quarter was $30.3 million compared with $29.9 million in the prior year and increased due to improved sales. Our consolidated gross margin, which is gross profit as a percentage of sales, was 62.7 percent compared with 63.4 percent in the prior year. Our gross margin decreased compared with the prior year due to the impact of changes in the mix of offerings sold, including less facilitator sales, increased costs of certain offerings, and increased capitalized curriculum amortization expense.
|
·
|
Operating Expenses – Our operating expenses increased by $2.0 million compared with the third quarter of the prior year, which was due to a $1.1 million impaired asset charge and a $0.9 million increase in selling, general, and administrative expenses, as previously described. Our operating income for the quarter was adversely impacted by $0.5 million of foreign exchange remeasurement losses.
|
·
|
Income Taxes – Our effective income tax rate for the third quarter of fiscal 2015 was a net benefit of 58 percent compared with an effective tax rate of approximately 20 percent in the prior year. The decrease in the effective tax rate was primarily due to the recognition of tax benefits from amending previously filed federal income tax returns to realize foreign tax credits that were previously treated as expired under the tax positions taken in the original returns. Our effective income tax rate during the third quarter of fiscal 2014 was lower than statutory rates primarily due to the recognition of income tax benefits resulting from the resolution of uncertain tax positions as the applicable statute of limitations expired during the quarter.
|
Quarter Ended
|
Three Quarters Ended
|
|||||||||||||||||||||||
May 30,
2015
|
May 31,
2014
|
Percent Change
|
May 30,
2015
|
May 31,
2014
|
Percent Change
|
|||||||||||||||||||
Sales by Category:
|
||||||||||||||||||||||||
Training and consulting services
|
$ | 45,373 | $ | 44,381 | 2 | $ | 134,392 | $ | 129,399 | 4 | ||||||||||||||
Products
|
1,710 | 1,694 | 1 | 4,846 | 4,767 | 2 | ||||||||||||||||||
Leasing
|
1,223 | 1,056 | 16 | 3,259 | 2,889 | 13 | ||||||||||||||||||
$ | 48,306 | $ | 47,131 | 3 | $ | 142,497 | $ | 137,055 | 4 | |||||||||||||||
Sales by Channel:
|
||||||||||||||||||||||||
U.S./Canada direct
|
$ | 25,154 | $ | 24,801 | 1 | $ | 70,986 | $ | 69,867 | 2 | ||||||||||||||
International direct
|
5,436 | 5,781 | (6 | ) | 18,940 | 18,980 | - | |||||||||||||||||
International licensees
|
4,027 | 4,178 | (4 | ) | 12,845 | 12,451 | 3 | |||||||||||||||||
National account practices
|
10,843 | 9,691 | 12 | 31,053 | 26,938 | 15 | ||||||||||||||||||
Self-funded marketing
|
1,082 | 1,451 | (25 | ) | 3,847 | 4,246 | (9 | ) | ||||||||||||||||
Other
|
1,764 | 1,229 | 44 | 4,826 | 4,573 | 6 | ||||||||||||||||||
$ | 48,306 | $ | 47,131 | 3 | $ | 142,497 | $ | 137,055 | 4 |
Quarter Ended
|
||||||||||||||||
May 30,
2015
|
May 31,
2014
|
$
Change
|
%
Change
|
|||||||||||||
Selling, general, and administrative
|
$ | 25,934 | $ | 25,017 | $ | 917 | 4 | |||||||||
Impairment of assets
|
1,082 | - | 1,082 | n/a | ||||||||||||
Depreciation
|
980 | 866 | 114 | 13 | ||||||||||||
Amortization
|
912 | 983 | (71 | ) | (7 | ) | ||||||||||
$ | 28,908 | $ | 26,866 | $ | 2,042 | 8 |
Three Quarters Ended
|
||||||||||||||||
May 30,
2015
|
May 31,
2014
|
$
Change
|
%
Change
|
|||||||||||||
Selling, general, and administrative
|
$ | 78,475 | $ | 75,475 | $ | 3,000 | 4 | |||||||||
Impairment of assets
|
1,082 | - | 1,082 | n/a | ||||||||||||
Depreciation
|
2,984 | 2,466 | 518 | 21 | ||||||||||||
Amortization
|
2,818 | 2,961 | (143 | ) | (5 | ) | ||||||||||
$ | 85,359 | $ | 80,902 | $ | 4,457 | 6 |
Period
|
Total Number of Shares Purchased
|
Average Price Paid Per Share
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
Maximum Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs(1)
(in thousands)
|
||||||||||||
March 1, 2015 to April 4, 2015
|
- | $ | - | - | $ | 38,391 | ||||||||||
April 5, 2015 to May 2, 2015
|
272,006 | 19.00 | 272,006 | 33,223 | ||||||||||||
May 3, 2015 to May 30, 2015
|
40,233 | 18.93 | 40,233 | 32,461 | ||||||||||||
Total Common Shares
|
312,239 | (2) | $ | 18.99 | 312,239 |
(1)
|
On January 23, 2015, our Board of Directors approved a new plan to repurchase up to $10.0 million of the Company’s outstanding common stock. All previously existing common stock repurchase plans were canceled and the new common share repurchase plan does not have an expiration date. On March 27, 2015, our Board of Directors increased the aggregate value of shares of Company common stock that may be purchased under the January 2015 plan to $40.0 million so long as we have either $10.0 million in cash and cash equivalents or have access to debt financing of at least $10.0 million. Under the terms of this expanded common stock repurchase plan, we have purchased 401,198 shares of our common stock for $7.5 million through May 30, 2015.
|
(2)
|
Amount excludes 3,054 shares of our common stock that were withheld for minimum statutory taxes on share-based compensation awards issued to employees during the quarter ended May 30, 2015. The withheld shares were valued at the market price on the date that the shares were distributed to participants and were acquired at weighted average price of $18.97 per share.
|
(A)
|
Exhibits:
|
|
10.1
|
Fourth Modification Agreement by and between JPMorgan Chase Bank, N.A. and Franklin Covey Co., dated March 31, 2015 (filed as exhibit 10.1 to a current report on Form 8-K filed with the Commission on April 2, 2015 and incorporated by reference herein).
|
|
10.2
|
Consent and Agreement of Guarantor by and between JPMorgan Chase Bank, N.A. and Franklin Covey Co., dated March 31, 2015 (filed as exhibit 10.2 to a current report on Form 8-K filed with the Commission on April 2, 2015 and incorporated by reference herein).
|
|
31.1
|
Rule 13a-14(a) Certifications of the Chief Executive Officer.**
|
|
31.2
|
Rule 13a-14(a) Certifications of the Chief Financial Officer.**
|
|
32
|
Section 1350 Certifications.**
|
|
101.INS
|
XBRL Instance Document.
|
|
101.SCH
|
XBRL Taxonomy Extension Schema Document.
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
101.DEF
|
XBRL Taxonomy Definition Linkbase Document.
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document.
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
FRANKLIN COVEY CO.
|
||||
Date:
|
July 9, 2015
|
By:
|
/s/ Robert A. Whitman
|
|
Robert A. Whitman
|
||||
Chief Executive Officer
|
||||
(Duly Authorized Officer)
|
||||
Date:
|
July 9, 2015
|
By:
|
/s/ Stephen D. Young
|
|
Stephen D. Young
|
||||
Chief Financial Officer
|
||||
(Principal Financial and Accounting Officer)
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Franklin Covey Co.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: July 9, 2015
|
/s/ Robert A. Whitman
|
|
Robert A. Whitman
Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Franklin Covey Co.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date July 9, 2015
|
/s/ Stephen D. Young
|
|
Stephen D. Young
Chief Financial Officer
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.
|
/s/ Robert A. Whitman
|
/s/ Stephen D. Young
|
||
Robert A. Whitman
Chief Executive Officer
|
Stephen D. Young
Chief Financial Officer
|
||
Date: July 9, 2015
|
Date: July 9, 2015
|
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Segment Information (Schedule Of EBITDA Segment) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
May. 30, 2015 |
May. 31, 2014 |
May. 30, 2015 |
May. 31, 2014 |
|
Segment Reporting Information [Line Items] | ||||
Enterprise Adjusted EBITDA | $ 4,864 | $ 5,133 | $ 14,590 | $ 17,774 |
Share-based compensation expense | (592) | (616) | (1,602) | (2,860) |
Reduction of contingent earn out liability | 51 | 350 | 79 | 936 |
Other | 65 | |||
Impairment of assets | (1,082) | (1,082) | ||
Depreciation | (980) | (866) | (2,984) | (2,466) |
Amortization | (912) | (983) | (2,818) | (2,961) |
Income from operations | 1,414 | 3,018 | 6,183 | 10,423 |
Interest income | 104 | 74 | 322 | 325 |
Interest expense | (532) | (557) | (1,605) | (1,676) |
Discount on related party receivable | (233) | (141) | (364) | (424) |
Income before income taxes | 753 | 2,394 | 4,536 | 8,648 |
Operating Segments [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Enterprise Adjusted EBITDA | 5,779 | 5,965 | 17,888 | 20,943 |
Depreciation | (609) | (534) | (1,854) | (1,473) |
Amortization | (912) | (983) | (2,818) | (2,961) |
Corporate And Eliminations [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Enterprise Adjusted EBITDA | (915) | (832) | (3,298) | (3,169) |
Depreciation | $ (371) | $ (332) | $ (1,130) | $ (993) |
Common Stock Buyback Plan (Details) - USD ($) $ in Thousands |
3 Months Ended | |||||
---|---|---|---|---|---|---|
Mar. 27, 2015 |
May. 30, 2015 |
Jan. 23, 2015 |
Aug. 31, 2014 |
May. 31, 2014 |
Aug. 31, 2013 |
|
Equity, Class of Treasury Stock [Line Items] | ||||||
Stock repurchase program, authorized amount | $ 40,000 | $ 10,000 | ||||
Cash and cash equivalents | $ 13,795 | $ 10,483 | $ 5,337 | $ 12,291 | ||
Stock repurchased during period, shares | 401,198 | |||||
Stock repurchased during period, value | $ 7,500 | |||||
Minimum [Member] | ||||||
Equity, Class of Treasury Stock [Line Items] | ||||||
Cash and cash equivalents | 10,000 | |||||
Available cash for debt financing for repurchase common stock | $ 10,000 |
Common Stock Buyback Plan |
9 Months Ended |
---|---|
May. 30, 2015 | |
Common Stock Buyback Plan [Abstract] | |
Common Stock Buyback Plan | NOTE 4 – COMMON STOCK BUYBACK PLAN
On January 23, 2015, our Board of Directors approved a new plan to repurchase up to $10.0 million of the Company’s outstanding common stock. All previously existing common stock repurchase plans were canceled and the new common share repurchase plan does not have an expiration date. On March 27, 2015, our Board of Directors increased the aggregate value of shares of Company common stock that may be purchased under the January 2015 plan to $40.0 million so long as we have either $10.0 million in cash and cash equivalents or have access to debt financing of at least $10.0 million. Following approval of this common stock repurchase plan, we have purchased a total of 401,198 shares of our common stock for $7.5 million through May 30, 2015.
The actual timing, number, and value of common shares repurchased under this plan will be determined at our discretion and will depend on a number of factors, including, among others, general market and business conditions, the trading price of common shares, and applicable legal requirements. The Company has no obligation to repurchase any common shares under the authorization, and the repurchase plan may be suspended, discontinued, or modified at any time for any reason.
|
Income Taxes (Narrative) (Details) - USD ($) $ / shares in Units, $ in Millions |
3 Months Ended | 9 Months Ended | |
---|---|---|---|
May. 30, 2015 |
May. 30, 2015 |
Aug. 31, 2014 |
|
Income Taxes [Abstract] | |||
Percentage of net tax benefit | 58.00% | ||
Effective income tax rate | 24.00% | ||
Cash paid for income taxes | $ 1.8 | ||
Foreign income tax credit carryforward | $ 1.7 | ||
Income tax benefit from foreign tax credits | $ 0.6 | ||
Income tax benefit per share, diluted | $ 0.03 |
Impairment Of Assets (Details) - May. 30, 2015 - USD ($) |
Total |
Total |
---|---|---|
Impairment Of Assets [Abstract] | ||
Long-term receivables from FC Organizational Products (FCOP) | $ 541,000 | |
Capitalized curriculum | 414,000 | |
Prepaid expenses and other long-term assets | 127,000 | |
Total impairment of assets | 1,082,000 | $ 1,082,000 |
Other long-term assets | $ 60,000 |
Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
May. 30, 2015 |
May. 31, 2014 |
May. 30, 2015 |
May. 31, 2014 |
|
Earnings Per Share [Abstract] | ||||
Net income | $ 1,191 | $ 1,922 | $ 3,447 | $ 5,612 |
Basic weighted average shares outstanding | 16,739 | 16,754 | 16,839 | 16,678 |
Stock options and other share-based awards | 161 | 180 | 187 | 228 |
Diluted weighted average shares outstanding | 16,900 | 16,934 | 17,026 | 16,906 |
Net income per share, Basic | $ 0.07 | $ 0.11 | $ 0.20 | $ 0.34 |
Net income per share, Diluted | $ 0.07 | $ 0.11 | $ 0.20 | $ 0.33 |
Segment Information (Narrative) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
May. 30, 2015 |
May. 31, 2014 |
May. 30, 2015 |
May. 31, 2014 |
|
Segment Information [Abstract] | ||||
Reduction of contingent earnout liability | $ (51) | $ (350) | $ (79) | $ (936) |
Line Of Credit Modification Agreement |
9 Months Ended |
---|---|
May. 30, 2015 | |
Line Of Credit Modification Agreement [Abstract] | |
Line Of Credit Modification Agreement | NOTE 3 – LINE OF CREDIT MODIFICATION AGREEMENT
On March 31, 2015, we entered into the Fourth Modification Agreement to our previously existing amended and restated secured credit agreement (the Restated Credit Agreement) with our existing lender. The primary purposes of the Fourth Modification Agreement are to (i) increase the maximum principal amount of the line of credit from $10.0 million to $30.0 million; (ii) extend the maturity date of the Restated Credit Agreement from March 31, 2016 to March 31, 2018; (iii) reduce the applicable interest rate from LIBOR plus 2.50 percent to LIBOR plus 1.85 percent per annum; (iv) reduce the unused commitment fee from 0.33 percent to 0.25 percent per annum; and (v) increase the cap for permitted business acquisitions from $5.0 million to $10.0 million. The Fourth Modification Agreement preserves our previously existing financial covenants and adds a new asset coverage ratio whereby we may not permit the outstanding balance of the line of credit to exceed 150 percent of our consolidated accounts receivable. The proceeds from the Restated Credit Agreement may continue to be used for general corporate purposes.
|
Segment Information (Schedule Of Segment Operations) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
May. 30, 2015 |
May. 31, 2014 |
May. 30, 2015 |
May. 31, 2014 |
|
Segment Reporting Information [Line Items] | ||||
Sales to external customers | $ 48,306 | $ 47,131 | $ 142,497 | $ 137,055 |
Gross profit | 30,322 | 29,884 | 91,542 | 91,325 |
Adjusted EBITDA | 4,864 | 5,133 | 14,590 | 17,774 |
Depreciation | 980 | 866 | 2,984 | 2,466 |
Amortization | 912 | 983 | 2,818 | 2,961 |
Operating Segments [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Sales to external customers | 47,083 | 46,075 | 139,238 | 134,166 |
Gross profit | 29,594 | 29,281 | 89,854 | 89,841 |
Adjusted EBITDA | 5,779 | 5,965 | 17,888 | 20,943 |
Depreciation | 609 | 534 | 1,854 | 1,473 |
Amortization | 912 | 983 | 2,818 | 2,961 |
Corporate And Eliminations [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Sales to external customers | 1,223 | 1,056 | 3,259 | 2,889 |
Gross profit | 728 | 603 | 1,688 | 1,484 |
Adjusted EBITDA | (915) | (832) | (3,298) | (3,169) |
Depreciation | 371 | 332 | 1,130 | 993 |
United States/Canada [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Sales to external customers | 37,764 | 36,318 | 107,921 | 103,522 |
Gross profit | 22,580 | 21,924 | 65,716 | 65,562 |
Adjusted EBITDA | 1,878 | 1,950 | 3,673 | 7,434 |
Depreciation | 527 | 446 | 1,614 | 1,227 |
Amortization | 910 | 943 | 2,814 | 2,917 |
International [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Sales to external customers | 9,319 | 9,757 | 31,317 | 30,644 |
Gross profit | 7,014 | 7,357 | 24,138 | 24,279 |
Adjusted EBITDA | 3,901 | 4,015 | 14,215 | 13,509 |
Depreciation | 82 | 88 | 240 | 246 |
Amortization | $ 2 | $ 40 | $ 4 | $ 44 |
Basis Of Presentation |
9 Months Ended | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
May. 30, 2015 | |||||||||||||||||
Basis Of Presentation [Abstract] | |||||||||||||||||
Basis Of Presentation | NOTE 1 – BASIS OF PRESENTATION
Franklin Covey Co. (hereafter referred to as us, we, our, or the Company) is a global company focused on individual and organizational performance improvement. Our mission is to “enable greatness in people and organizations everywhere,” and our employees worldwide are organized to help individuals and organizations achieve sustained superior performance through changes in human behavior. Our expertise extends to seven crucial areas: Leadership, Execution, Productivity, Trust, Sales Performance, Customer Loyalty, and Educational Improvement. We believe that our clients are able to utilize our content to create cultures whose hallmarks are high-performing, collaborative individuals, led by effective, trust-building leaders who execute with excellence and deliver measurably improved results for all of their key stakeholders.
In the training and consulting marketplace, we believe there are four important characteristics that distinguish us from our competitors.
We have some of the best-known offerings in the training industry, including a suite of individual-effectiveness and leadership-development training content based on the best-selling books, The 7 Habits of Highly Effective People, The Speed of Trust, and The 4 Disciplines of Execution, and proprietary content in the areas of Execution, Sales Performance, Productivity, Customer Loyalty, and Education. Our offerings are described in further detail at www.franklincovey.com.
The accompanying unaudited condensed consolidated financial statements reflect, in the opinion of management, all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position and results of operations of the Company as of the dates and for the periods indicated. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to Securities and Exchange Commission (SEC) rules and regulations. The information included in this quarterly report on Form 10-Q should be read in conjunction with the consolidated financial statements and related notes included in our annual report on Form 10-K for the fiscal year ended August 31, 2014.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
The Company utilizes a modified 52/53-week fiscal year that ends on August 31 of each year. Corresponding quarterly periods generally consist of 13-week periods that ended on November 29, 2014, February 28, 2015, and May 30, 2015 during fiscal 2015. Under the modified 52/53-week fiscal year, the three quarters ended May 30, 2015 had one less business day than the three quarters ended May 31, 2014. Unless otherwise noted, references to fiscal years apply to the 12 months ended on August 31 of the specified year.
The results of operations for the quarter and three quarters ended May 30, 2015 are not necessarily indicative of results expected for the entire fiscal year ending August 31, 2015, or for any future periods.
At May 30, 2015, the carrying value of our financial instruments approximated their fair values. The fair value of the contingent earn out payment liability from the acquisition of Ninety-Five 5, LLC in a prior period is considered a “level 3” measurement because we estimate projected earnings during the earn out period utilizing various potential pay-out scenarios. There have been no significant changes in our valuation process, key assumptions, or sensitivity to change in such assumptions from those disclosed at August 31, 2014. At May 30, 2015 the fair value of this liability was $2.5 million, which was recorded as a component of other long-term liabilities on our consolidated balance sheet.
|
Sale Of Knowledge Capital Shares (Details) - Knowledge Capital [Member] |
May. 30, 2015
item
shares
|
May. 20, 2015
shares
|
---|---|---|
Common stock owned by related party | 2,800,000 | |
Shares sold by related party | 400,000 | |
Number of board members with equity interest in related party | item | 2 |
Basis Of Presentation (Details) - May. 30, 2015 $ in Millions |
USD ($)
item
|
---|---|
Basis Of Presentation [Abstract] | |
Number of regional offices | 4 |
Number of countries in which entity operates | 150 |
Fair value of other long-term liabilities | $ | $ 2.5 |
Line Of Credit Modification Agreement (Details) - Revolving Line Of Credit [Member] - USD ($) $ in Millions |
Mar. 31, 2015 |
Mar. 30, 2015 |
---|---|---|
Debt Instrument [Line Items] | ||
Maximum borrowing capacity | $ 30.0 | $ 10.0 |
Maturity date | Mar. 31, 2018 | Mar. 31, 2016 |
Percentage added to LIBOR rate | 1.85% | 2.50% |
Unused commitment fee | 0.25% | 0.33% |
Maximum asset coverage ratio | 150.00% | |
Limit on capital expenditures | $ 10.0 | $ 5.0 |
Inventories |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
May. 30, 2015 | |||||||||||||||||||||||||||||||||||||||||||
Inventories [Abstract] | |||||||||||||||||||||||||||||||||||||||||||
Inventories | NOTE 2 – INVENTORIES
Inventories are stated at the lower of cost or market, cost being determined using the first-in, first-out method, and were comprised of the following (in thousands).
|
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
May. 30, 2015 |
Aug. 31, 2014 |
---|---|---|
Condensed Consolidated Balance Sheets [Abstract] | ||
Allowance for doubtful accounts | $ 964 | $ 918 |
Common stock, par value | $ 0.05 | $ 0.05 |
Common stock, shares authorized | 40,000,000 | 40,000,000 |
Common stock, shares issued | 27,056,000 | 27,056,000 |
Treasury stock, shares | 10,561,000 | 10,266,000 |
Inventories (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||
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May. 30, 2015 | |||||||||||||||||||||||||||||||||||||||||||
Inventories [Abstract] | |||||||||||||||||||||||||||||||||||||||||||
Components Of Inventories |
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Document And Entity Information - shares |
9 Months Ended | |
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May. 30, 2015 |
Jun. 30, 2015 |
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Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Document Period End Date | May 30, 2015 | |
Amendment Flag | false | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2015 | |
Entity Registrant Name | FRANKLIN COVEY CO | |
Entity Central Index Key | 0000886206 | |
Current Fiscal Year End Date | --08-31 | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 16,564,200 |
Share-Based Compensation (Tables) |
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Share-Based Compensation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total Cost Of Share-Based Compensation |
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Condensed Consolidated Income Statements And Statements Of Comprehensive Income - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
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May. 30, 2015 |
May. 31, 2014 |
May. 30, 2015 |
May. 31, 2014 |
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Net sales: | ||||
Training and consulting services | $ 45,373 | $ 44,381 | $ 134,392 | $ 129,399 |
Products | 1,710 | 1,694 | 4,846 | 4,767 |
Leasing | 1,223 | 1,056 | 3,259 | 2,889 |
Total net sales | 48,306 | 47,131 | 142,497 | 137,055 |
Cost of sales: | ||||
Training and consulting services | 16,712 | 15,811 | 47,067 | 42,260 |
Products | 778 | 982 | 2,311 | 2,065 |
Leasing | 494 | 454 | 1,577 | 1,405 |
Total cost of sales | 17,984 | 17,247 | 50,955 | 45,730 |
Gross profit | 30,322 | 29,884 | 91,542 | 91,325 |
Selling, general, and administrative | 25,934 | 25,017 | 78,475 | 75,475 |
Impairment of assets | 1,082 | 1,082 | ||
Depreciation | 980 | 866 | 2,984 | 2,466 |
Amortization | 912 | 983 | 2,818 | 2,961 |
Income from operations | 1,414 | 3,018 | 6,183 | 10,423 |
Interest income | 104 | 74 | 322 | 325 |
Interest expense | (532) | (557) | (1,605) | (1,676) |
Discount on related party receivable | (233) | (141) | (364) | (424) |
Income before income taxes | 753 | 2,394 | 4,536 | 8,648 |
Income tax benefit (provision) | 438 | (472) | (1,089) | (3,036) |
Net income | $ 1,191 | $ 1,922 | $ 3,447 | $ 5,612 |
Net income per share: | ||||
Basic | $ 0.07 | $ 0.11 | $ 0.20 | $ 0.34 |
Diluted | $ 0.07 | $ 0.11 | $ 0.20 | $ 0.33 |
Weighted average number of common shares: | ||||
Basic | 16,739 | 16,754 | 16,839 | 16,678 |
Diluted | 16,900 | 16,934 | 17,026 | 16,906 |
COMPREHENSIVE INCOME: | ||||
Net income | $ 1,191 | $ 1,922 | $ 3,447 | $ 5,612 |
Foreign currency translation adjustments, net of tax | (203) | 13 | (943) | (39) |
Comprehensive income | $ 988 | $ 1,935 | $ 2,504 | $ 5,573 |
Income Taxes |
9 Months Ended |
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May. 30, 2015 | |
Income Taxes [Abstract] | |
Income Taxes |
NOTE 7 – INCOME TAXES
For the quarter ended May 30, 2015 we recorded a net income tax rate benefit of approximately 58 percent and an effective income tax rate of approximately 24 percent for the three quarters ended May 30, 2015. The decrease in our effective rate during the quarter ended May 30, 2015 was primarily due to the recognition of tax benefits from finalizing the calculations of the impact of amending previously filed federal income tax returns to realize foreign tax credits previously treated as expired under the tax positions taken in the original returns. The income tax benefit from these foreign tax credits totaled $0.6 million, or $0.03 per diluted share. Our effective income tax rate during the third quarter of fiscal 2014 was lower than statutory rates primarily due to the recognition of income tax benefits resulting from the resolution of uncertain tax positions as the applicable statute of limitations expired during the quarter.
We paid $1.8 million in cash for income taxes (excluding the receipt of a $1.7 million refund received from a foreign jurisdiction for an estimated income tax payment made in fiscal 2014) during the three quarters ended May 30, 2015. We anticipate that our total cash paid for income taxes will be less than our income tax provision from fiscal 2015 through fiscal 2017 as we utilize foreign tax credit carryforwards and other deferred income tax assets. After utilization of our foreign tax credit carryforwards, which we currently expect to be fully used by the end of fiscal 2017, we anticipate that our cash paid for income taxes will increase and approximate our annual income tax provision.
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Impairment Of Assets |
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May. 30, 2015 | |||||||||||||||||||||||||||||||||
Impairment Of Assets [Abstract] | |||||||||||||||||||||||||||||||||
Impairment Of Assets |
NOTE 6 – IMPAIRMENT OF ASSETS
Our assets impaired during the quarter ended May 30, 2015 were comprised of the following (in thousands):
The following is a description of the facts and circumstances regarding the impairment of these assets.
Long-Term FCOP Receivables – During the quarter ended May 30, 2015 we determined that the operating agreements between the Company and FCOP allow us to collect reimbursement for certain rental expenses prior to the annual required distribution of earnings to FCOP’s creditors. Such rents were previously treated as lower in priority and therefore, were considered long-term receivables. Although this determination is expected to improve our cash flows and collections of rents receivable from FCOP in the short term, it also reduces the amount of cash we are expecting to receive from the required distribution of earnings to pay long-term receivable balances. After this determination was made, the present value of our previously recorded long-term receivables was more than the present value of expected corresponding cash flows. Accordingly, we recalculated our discount on the long-term receivables and impaired the remaining balance.
Capitalized Curriculum – During the third quarter of fiscal 2015, we determined that it would be beneficial to discontinue a component of one of our existing offerings and we received legal notice that another offering contained names trademarked by another entity. Since the Company currently offers a similar program, the decision was made to discontinue the offering rather than modify the curriculum as required by applicable trademark law. Accordingly, we impaired the remaining unamortized carrying value of these offerings. These items were classified as components of other long-term assets on our consolidated balance sheets.
Prepaid Expenses and Other Long-Term Assets – In connection with a component of one of our offerings that was discontinued (as described above), we had prepaid royalties by an unrelated developer. Based on the decision to impair the curriculum, we determined that recovery of the prepaid royalties was remote and we expensed the carrying value of these prepaid assets. Approximately $60,000 of this balance was previously included in other long-term assets.
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Inventories (Details) - USD ($) $ in Thousands |
May. 30, 2015 |
Aug. 31, 2014 |
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Inventories [Abstract] | ||
Finished goods | $ 4,871 | $ 6,295 |
Raw materials | 63 | 72 |
Inventories | $ 4,934 | $ 6,367 |
Impairment Of Assets (Tables) |
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Impairment Of Assets [Abstract] | |||||||||||||||||||||||||||||||||
Schedule Of Impairment Of Assets |
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Investment In FC Organizational Products |
9 Months Ended |
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May. 30, 2015 | |
Investment In FC Organizational Products [Abstract] | |
Investment In FC Organizational Products | NOTE 10 – INVESTMENT IN FC ORGANIZATIONAL PRODUCTS
We own a 19.5 percent interest in FC Organizational Products (FCOP), an entity that purchased substantially all of our consumer solution business unit assets in fiscal 2008 for the purpose of expanding the sales of planners and related organizational products under a comprehensive licensing agreement. During a previous period, we reconsidered whether FCOP was a variable interest entity as defined under FASC 810, and determined that FCOP was a variable interest entity. We further determined that we are not the primary beneficiary of FCOP because we do not have the ability to direct the activities that most significantly impact FCOP’s economic performance, which primarily consist of the day-to-day sale of planning products and related accessories, and we do not have an obligation to absorb losses or the right to receive benefits from FCOP that could potentially be significant. Our voting rights and management board representation approximate our ownership interest and we are unable to exercise control through voting interests or through other means.
We are required to account for our investment in FCOP using the equity method of accounting. However, we have not recorded our share of FCOP’s losses in the accompanying condensed consolidated income statements because we have impaired and written off investment balances in previous periods, as defined within the applicable accounting guidance, in excess of our share of FCOP’s losses through May 30, 2015.
Our primary exposure related to FCOP is from amounts owed to us by FCOP. We receive reimbursement from FCOP for certain operating costs and for working capital or other advances that we may make to FCOP although we are not contractually required to make advances to FCOP. During the quarter ended May 30, 2015, we determined that we will receive payment from FCOP for certain rent expenses earlier than previously estimated and we recognized additional leasing revenues from FCOP totaling $0.2 million due to the change in the priority of the payment of these items. Although we were able to record additional leasing revenues and our cash flows on current related party receivables will improve in the short term, the present value of our share of cash distributions to cover remaining long-term receivables was reduced and was less than the present value of the receivables previously recorded and accordingly, the Company recalculated its discount on the long-term receivables and impaired the remaining balance, which totaled $0.5 million.
The operations of FCOP are primarily financed by the sale of planning products and accessories in the normal course of business. The majority of FCOP’s sales and cash flows are seasonal and occur between October and January. Accordingly, we generally receive payment on outstanding receivables during our second and third quarters of each fiscal year. During the three quarters ended May 30, 2015 we received $2.8 million of cash from FCOP for payment on these receivables. We had $3.4 million (net of $1.1 million discount) receivable at May 30, 2015 and $5.1 million (net of $2.1 million discount) receivable at August 31, 2014 from FCOP, which are classified as components of current and long-term assets in our condensed consolidated balance sheets based on expected payment dates. The long-term receivables have been discounted using a rate of 15 percent.
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Earnings Per Share |
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Earnings Per Share |
NOTE 8 – EARNINGS PER SHARE
The following is a reconciliation from basic earnings per share (EPS) to diluted EPS (in thousands, except per-share amounts).
Other securities, including performance share-based compensation instruments, may have a dilutive effect on our EPS calculation in future periods if our financial results reach specified targets.
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Segment Information |
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Segment Information |
NOTE 9 – SEGMENT INFORMATION
Our sales are primarily comprised of training and consulting sales and related products. Based on the consistent nature of our services and products and the types of customers for these services, we function as a single operating segment. However, to improve comparability with previous periods, operating information for our U.S./Canada, international, and corporate services operations is presented below. Our U.S./Canada operations are responsible for the sale and delivery of our training and consulting services in the United States and Canada. Our international sales group includes the financial results of our directly owned foreign offices and royalty revenues from licensees. Our corporate services information includes leasing income and certain corporate operating expenses.
The Company’s chief operating decision maker is the Chief Executive Officer, and the primary measurement tool used in business unit performance analysis is Adjusted EBITDA, which may not be calculated as similarly titled amounts calculated by other companies. For segment reporting purposes, our consolidated Adjusted EBITDA can be calculated as our income from operations excluding share-based compensation, depreciation expense, amortization expense, and certain other charges such as adjustments for changes in the fair value of contingent earn out liabilities from previous business acquisitions and impairment of assets.
In the normal course of business, we may make structural and cost allocation revisions to our enterprise information to reflect new reporting responsibilities within the organization. There were no significant organizational or structural changes during the quarter or three quarters ended May 30, 2015 that would affect the comparability of the enterprise information presented below. We account for our enterprise information on the same basis as the accompanying condensed consolidated financial statements.
ENTERPRISE INFORMATION (in thousands)
A reconciliation of our consolidated Adjusted EBITDA to consolidated income before income taxes is provided below (in thousands).
We reassess the fair value of expected contingent consideration and the corresponding liability resulting from the fiscal 2013 acquisition of NinetyFive 5, LLC (Ninety Five 5) each period. The reduction of the liability during the three quarters ended May 30, 2015 totaled approximately $79,000 and is reflected in selling, general, and administrative expenses on our consolidated income statements. However, the impact of these adjustments is not included in our consolidated Adjusted EBITDA calculations as shown above.
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Sale Of Knowledge Capital Shares |
9 Months Ended |
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May. 30, 2015 | |
Sale Of Knowledge Capital Shares [Abstract] | |
Sale Of Knowledge Capital Shares | NOTE 11 – SALE OF KNOWLEDGE CAPITAL SHARES
Pursuant to a fiscal 2011 warrant exercise agreement with Knowledge Capital Investment Group (Knowledge Capital), we filed a registration statement with the SEC on Form S-3 to register shares held by Knowledge Capital. This registration statement was declared effective on January 26, 2015. On May 20, 2015, Knowledge Capital sold 400,000 shares of our common stock on the open market and we did not purchase any of these shares. At May 30, 2015, Knowledge Capital held 2.8 million shares of our common stock. Two members of our Board of Directors, including our Chief Executive Officer, have an equity interest in Knowledge Capital.
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