☑
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED AUGUST 31, 2019
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OR
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ___ TO ___
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Utah
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1-11107
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87-0401551
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(State or other jurisdiction of incorporation or organization)
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(Commission File No.)
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(IRS Employer Identification No.)
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Title of Each Class
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Name of Each Exchange on Which Registered
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Common Stock, $.05 Par Value
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New York Stock Exchange
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Large Accelerated Filer ☐
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Accelerated Filer ☑
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Non-accelerated Filer ☐
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Smaller Reporting Company ☑
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Emerging growth company ☐
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2
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|||
Business
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2
|
||
Risk Factors
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9
|
||
Unresolved Staff Comments
|
19
|
||
Properties
|
20
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||
Legal Proceedings
|
20
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||
Mine Safety Disclosures
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20
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||
21
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|||
Market for the Registrant’s Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities
|
21
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||
Selected Financial Data
|
23
|
||
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
24
|
||
Quantitative and Qualitative Disclosures About Market Risk
|
43
|
||
Financial Statements and Supplementary Data
|
44
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||
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
|
92
|
||
Controls and Procedures
|
92
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||
Other Information
|
93
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||
93
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|||
Directors, Executive Officers and Corporate Governance
|
93
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||
Executive Compensation
|
94
|
||
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
94
|
||
Certain Relationships and Related Transactions, and Director Independence
|
95
|
||
Principal Accountant Fees and Services
|
95
|
||
96
|
|||
Exhibits and Financial Statement Schedules
|
96
|
||
Form 10-K Summary
|
100
|
||
101
|
•
|
New Offices in Germany, Switzerland, and Austria – During fiscal 2019, we acquired the former independent licensee that provided services in these countries and transitioned
the operations into directly owned offices similar to the fiscal 2017 transition of our China licensee into a direct office operation. We believe that we will be able to significantly grow our business in these countries through this
acquisition.
|
•
|
License of “Multipliers” Leadership Content – During late fiscal 2019, we obtained a license to develop and sell Multipliers
leadership content written by Liz Wiseman. We are currently in the process of developing various offerings based on Multipliers content and are currently expecting to launch these courses in
the fall of 2020.
|
•
|
Offices in China – In fiscal 2017, we transitioned the operations of our licensee operations in China into direct offices. With offices in Shanghai, Beijing, Guangzhou, and
Shenzhen, we have grown our operations in China during the past three years and believe we are positioned for significant future growth.
|
•
|
Robert Gregory Partners – In third quarter of fiscal 2017, we acquired the assets of Robert Gregory Partners, LLC (RGP), a corporate coaching firm with expertise in
executive coaching, transition acceleration coaching, leadership development coaching, implementation coaching, and consulting. We believe these coaching services are important components of our various offerings.
|
•
|
Jhana Education – In the fourth quarter of fiscal 2017, we acquired the stock of Jhana Education (Jhana), a company that specializes in the creation and dissemination of
relevant, bite-sized content and learning tools for leaders and managers. These services have been a significant strategic addition to our All Access Pass and Leader in Me online offerings.
|
1.
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World Class Content – Rather than rely on “flavor of the month” training fads, 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. When our content is applied consistently in an organization, we believe the culture of that organization will change
to enable the organization to achieve its own great purposes. Our content is well researched, subjected to numerous field beta tests, and improved through a proven development process.
|
2.
|
Breadth and Scalability of Delivery Options – We have a wide range of content delivery options, including: The All Access Pass and Leader
in Me membership, other intellectual property licensing arrangements, on-site training, training led through certified facilitators, on-line learning, blended learning, and organization-wide transformational processes, including
consulting and coaching services.
|
3.
|
Global Capability – We not only operate domestically with sales personnel in the United States and Canada, but we also deliver content
through our directly owned international offices and independently owned international licensees who deliver our content in over 140 other countries and territories around the world. This capability allows us to deliver content to a wide
range of customers, from large multinational corporations to smaller local entities.
|
•
|
Quality of offerings, services, and solutions
|
•
|
Skills and capabilities of people
|
•
|
Innovative training and consulting services combined with effective products
|
•
|
Ability to add value to client operations
|
•
|
Reputation and client references
|
•
|
Price
|
•
|
Availability of appropriate resources
|
•
|
Global reach and scale
|
•
|
Branding and name recognition in our marketplace
|
•
|
Restrictions on the movement of cash
|
•
|
Burdens of complying with a wide variety of national and local laws, including tax laws
|
•
|
The absence in some jurisdictions of effective laws to protect our intellectual property rights
|
•
|
Political instability
|
•
|
Currency exchange rate fluctuations
|
•
|
Longer payment cycles
|
•
|
Price controls or restrictions on exchange of foreign currencies
|
•
|
Fluctuations in our quarterly results of operations and cash flows
|
•
|
Increased overall market volatility
|
•
|
Variations between our actual financial results and market expectations
|
•
|
Changes in our key balances, such as cash and cash equivalents
|
•
|
Currency exchange rate fluctuations
|
•
|
Unexpected asset impairment charges
|
•
|
Increased or decreased analyst coverage
|
•
|
Our clients’ perceptions of our ability to add value through our programs and content
|
•
|
Competition
|
•
|
General economic conditions
|
•
|
Introduction of new programs or services by us or our competitors
|
•
|
Governmental entities typically fund projects through appropriated monies. While these projects are often planned and executed as multi-year projects, the governmental entities usually reserve the right to
change the scope of, or terminate, these projects for lack of approved funding and other discretionary reasons. Changes in governmental priorities or other political developments, including disruptions in governmental operations, could
result in changes in the scope of, or in termination of, our existing contracts.
|
•
|
Governmental entities often reserve the right to audit our contract costs, including allocated indirect costs, and conduct inquiries and investigations of our business practices with respect to our
government contracts. If the governmental entity finds that the costs are not reimbursable, then we will not be allowed to bill for those costs or the cost must be refunded to the client if it has already been paid to us. Findings from an
audit also may result in our being required to prospectively adjust previously agreed upon rates for our work, which may affect our future margins.
|
•
|
If a governmental client discovers improper activities in the course of audits or investigations, we may become subject to various civil and criminal penalties and administrative sanctions, which may
include termination of contracts, forfeiture of profits, suspension of payments, fines and suspensions or debarment from doing business with other agencies of that government. The inherent limitations of internal controls may not prevent
or detect all improper or illegal activities, regardless of their adequacy.
|
•
|
Political and economic factors such as pending elections, the outcome of elections, revisions to governmental tax policies, sequestration, debt ceiling negotiations, and reduced tax revenues can affect the
number and terms of new governmental contracts signed.
|
•
|
Develop new services, programs, or offerings
|
•
|
Take advantage of opportunities, including business acquisitions
|
•
|
Respond to competitive pressures
|
August 31,
|
2019
|
2018
|
2017(1)
|
2016
|
2015(2)
|
|||||||||||||||
In thousands, except per-share data
|
||||||||||||||||||||
Income Statement Data:
|
||||||||||||||||||||
Net sales
|
$
|
225,356
|
$
|
209,758
|
$
|
185,256
|
$
|
200,055
|
$
|
209,941
|
||||||||||
Gross profit
|
159,314
|
148,289
|
122,667
|
133,154
|
138,089
|
|||||||||||||||
Income (loss) from operations
|
2,655
|
(3,366
|
)
|
(8,880
|
)
|
13,849
|
19,529
|
|||||||||||||
Income (loss) before income taxes
|
592
|
(5,520
|
)
|
(10,909
|
)
|
11,911
|
17,412
|
|||||||||||||
Income tax benefit (provision)
|
(1,615
|
)
|
(367
|
)
|
3,737
|
(4,895
|
)
|
(6,296
|
)
|
|||||||||||
Net income (loss)
|
(1,023
|
)
|
(5,887
|
)
|
(7,172
|
)
|
7,016
|
11,116
|
||||||||||||
Earnings (loss) per share:
|
||||||||||||||||||||
Basic and diluted
|
$
|
(.07
|
)
|
$
|
(.43
|
)
|
$
|
(.52
|
)
|
$
|
.47
|
$
|
.66
|
|||||||
Balance Sheet Data:
|
||||||||||||||||||||
Total current assets
|
$
|
119,340
|
$
|
100,163
|
$
|
91,835
|
$
|
89,741
|
$
|
95,425
|
||||||||||
Other long-term assets
|
10,039
|
12,935
|
16,005
|
13,713
|
14,807
|
|||||||||||||||
Total assets
|
224,913
|
213,875
|
210,731
|
190,871
|
200,645
|
|||||||||||||||
Long-term obligations
|
46,690
|
50,936
|
53,158
|
48,511
|
36,978
|
|||||||||||||||
Total liabilities
|
142,899
|
133,375
|
125,666
|
97,156
|
75,139
|
|||||||||||||||
Shareholders’ equity
|
82,014
|
80,500
|
85,065
|
93,715
|
125,506
|
|||||||||||||||
Cash flows from operating activities
|
$
|
30,452
|
$
|
16,861
|
$
|
17,357
|
$
|
32,665
|
$
|
26,190
|
(1)
|
During fiscal 2017 we decided to allow new All Access Pass agreements to receive updated content throughout the contracted period. Accordingly, we defer substantially all AAP revenues at the inception of the agreements and recognize
the revenue over the lives of the arrangements. The transition to the AAP model resulted in significantly reduced revenues and operating income during fiscal 2017.
|
(2)
|
We elected to amend previously filed U.S. federal income tax returns to claim foreign tax credits instead of foreign tax deductions and recognized significant income tax benefits which reduced our effective income tax rate during these
years.
|
1.
|
World Class Content – Our content is principle-centered and based on natural laws of human behavior and effectiveness. When our content is applied consistently in an
organization, we believe the culture of that organization will change to enable the organization to achieve their own great purposes. Our offerings are 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: the All Access Pass, the Leader
in Me membership, and other intellectual property licenses, on-site training, training led through certified facilitators, on-line learning, blended learning, and organization-wide transformational processes, including
consulting and coaching.
|
3.
|
Global Capability – We have sales professionals in the United States and Canada who serve clients in the private sector, in
government, and in educational institutions; wholly owned subsidiaries in Australia, China, Japan, the United Kingdom, Germany, Switzerland, and Austria; and we contract with independent licensee partners who deliver our content and
provide services in over 140 countries and territories around the world.
|
YEAR ENDED
AUGUST 31,
|
2019
|
%
change
|
2018
|
%
change
|
2017
|
|||||||||||||||
Enterprise Division:
|
||||||||||||||||||||
Direct offices
|
$
|
157,754
|
8
|
$
|
145,890
|
19
|
$
|
122,309
|
||||||||||||
International licensees
|
12,896
|
(3)
|
|
13,226
|
(3)
|
|
13,571
|
|||||||||||||
170,650
|
7
|
159,116
|
17
|
135,880
|
||||||||||||||||
Education Division
|
48,880
|
8
|
45,272
|
3
|
44,122
|
|||||||||||||||
Corporate and other
|
5,826
|
8
|
5,370
|
2
|
5,254
|
|||||||||||||||
Consolidated sales
|
$
|
225,356
|
7
|
$
|
209,758
|
13
|
$
|
185,256
|
•
|
New Subscription Service Sales and the Renewal of Existing Client Contracts – We are striving to fully integrate the subscription model throughout our Enterprise and
Education Division operations. We believe the subscription-based business model creates strategic and structural durability with our clients while providing significant visibility and predictability into future revenue and earnings.
These factors contribute to higher margins, high recurring revenue, and predictable cash flow-through of sales to earnings. Accordingly, we are focused on sales of multi-year subscription contracts and have restructured our sales force
and sales support functions to more effectively sell and support subscription services.
|
•
|
Aggressive Expansion of the Client Partner Model – We are focused on consistently increasing the number of new client partners to increase our sales force and market
penetration. We believe our client partner model is a key driver of future growth as new client partners on average break even during their first year and make significant contributions to sales growth thereafter. At August 31, 2019,
we had 245 client partners compared with 214 at the end of fiscal 2018.
|
•
|
Content Expansion – We believe that our offerings are based on best-in-class content driven by best-selling books and world-class thought leadership. Our content is
focused on performance improvement through behavior-changing outcome oriented training. The Company’s vision is to profoundly impact the way billions of people throughout the world live, work, and achieve their own great purposes. We
believe ongoing investment in our existing and new content will allow us to achieve this vision.
|
•
|
Continued Emphasis on Client Loyalty – Another of our underlying strategic objectives is to consistently deliver quality results to our clients. This concept is focused on
ensuring that our content and offerings are best-in-class, and that they have a measurable, lasting impact on our clients’ results. We believe that measurable improvement in our clients’ organizations is key to retaining current
clients and to obtaining new sales opportunities.
|
YEAR ENDED
AUGUST 31,
|
2019
|
2018
|
2017
|
|||||||||
Sales
|
100.0
|
100.0
|
100.0
|
|||||||||
Cost of sales
|
29.3
|
29.3
|
33.8
|
|||||||||
Gross profit
|
70.7
|
70.7
|
66.2
|
|||||||||
Selling, general, and administrative
|
64.5
|
67.3
|
65.4
|
|||||||||
Contract termination costs
|
-
|
-
|
0.8
|
|||||||||
Restructuring costs
|
-
|
-
|
0.8
|
|||||||||
Depreciation
|
2.8
|
2.4
|
2.1
|
|||||||||
Amortization
|
2.2
|
2.6
|
1.9
|
|||||||||
Total operating expenses
|
69.5
|
72.3
|
71.0
|
|||||||||
Income (loss) from operations
|
1.2
|
(1.6
|
)
|
(4.8
|
)
|
|||||||
Interest income
|
0.0
|
0.0
|
0.1
|
|||||||||
Interest expense
|
(1.0
|
)
|
(1.2
|
)
|
(1.3
|
)
|
||||||
Discount accretion on related party receivables
|
0.1
|
0.2
|
0.1
|
|||||||||
Income (loss) before income taxes
|
0.3
|
(2.6
|
)
|
(5.9
|
)
|
Year Ended August 31, 2019
|
% of
Sales
|
Year Ended August 31, 2018
|
% of
Sales
|
Change
|
||||||||||||||||
Sales
|
$
|
157,754
|
100.0
|
$
|
145,890
|
100.0
|
$
|
11,864
|
||||||||||||
Cost of sales
|
40,999
|
26.0
|
37,750
|
25.9
|
3,249
|
|||||||||||||||
Gross profit
|
116,755
|
74.0
|
108,140
|
74.1
|
8,615
|
|||||||||||||||
SG&A expenses
|
97,300
|
61.7
|
94,886
|
65.0
|
2,414
|
|||||||||||||||
Adjusted EBITDA
|
$
|
19,455
|
12.3
|
$
|
13,254
|
9.1
|
$
|
6,201
|
Year Ended August 31, 2019
|
% of
Sales
|
Year Ended August 31, 2018
|
% of
Sales
|
Change
|
||||||||||||||||
Sales
|
$
|
12,896
|
100.0
|
$
|
13,226
|
100.0
|
$
|
(330
|
)
|
|||||||||||
Cost of sales
|
2,665
|
20.7
|
3,195
|
24.2
|
(530
|
)
|
||||||||||||||
Gross profit
|
10,231
|
79.3
|
10,031
|
75.8
|
200
|
|||||||||||||||
SG&A expenses
|
4,159
|
32.3
|
4,950
|
37.4
|
(791
|
)
|
||||||||||||||
Adjusted EBITDA
|
$
|
6,072
|
47.0
|
$
|
5,081
|
38.4
|
$
|
991
|
Year Ended August 31, 2019
|
% of
Sales
|
Year Ended August 31, 2018
|
% of
Sales
|
Change
|
||||||||||||||||
Sales
|
$
|
48,880
|
100.0
|
$
|
45,272
|
100.0
|
$
|
3,608
|
||||||||||||
Cost of sales
|
18,507
|
37.9
|
16,618
|
36.7
|
1,889
|
|||||||||||||||
Gross profit
|
30,373
|
62.1
|
28,654
|
63.3
|
1,719
|
|||||||||||||||
SG&A expenses
|
26,820
|
54.8
|
25,944
|
57.3
|
876
|
|||||||||||||||
Adjusted EBITDA
|
$
|
3,553
|
7.3
|
$
|
2,710
|
6.0
|
$
|
843
|
Year Ended August 31, 2018
|
% of
Sales
|
Year Ended August 31, 2017
|
% of
Sales
|
Change
|
||||||||||||||||
Sales
|
$
|
145,890
|
100.0
|
$
|
122,309
|
100.0
|
$
|
23,581
|
||||||||||||
Cost of sales
|
37,750
|
25.9
|
40,609
|
33.2
|
(2,859
|
)
|
||||||||||||||
Gross profit
|
108,140
|
74.1
|
81,700
|
66.8
|
26,440
|
|||||||||||||||
SG&A expenses
|
94,886
|
65.0
|
77,458
|
63.3
|
17,428
|
|||||||||||||||
Adjusted EBITDA
|
$
|
13,254
|
9.1
|
$
|
4,242
|
3.5
|
$
|
9,012
|
Year Ended August 31, 2018
|
% of
Sales
|
Year Ended August 31, 2017
|
% of
Sales
|
Change
|
||||||||||||||||
Sales
|
$
|
13,226
|
100.0
|
$
|
13,571
|
100.0
|
$
|
(345
|
)
|
|||||||||||
Cost of sales
|
3,195
|
24.2
|
3,088
|
22.8
|
107
|
|||||||||||||||
Gross profit
|
10,031
|
75.8
|
10,483
|
77.2
|
(452
|
)
|
||||||||||||||
SG&A expenses
|
4,950
|
37.4
|
4,068
|
30.0
|
882
|
|||||||||||||||
Adjusted EBITDA
|
$
|
5,081
|
38.4
|
$
|
6,415
|
47.3
|
$
|
(1,334
|
)
|
Year Ended August 31, 2018
|
% of
Sales
|
Year Ended August 31, 2017
|
% of
Sales
|
Change
|
||||||||||||||||
Sales
|
$
|
45,272
|
100.0
|
$
|
44,122
|
100.0
|
$
|
1,150
|
||||||||||||
Cost of sales
|
16,618
|
36.7
|
16,206
|
36.7
|
412
|
|||||||||||||||
Gross profit
|
28,654
|
63.3
|
27,916
|
63.3
|
738
|
|||||||||||||||
SG&A expenses
|
25,944
|
57.3
|
20,721
|
47.0
|
5,223
|
|||||||||||||||
Adjusted EBITDA
|
$
|
2,710
|
6.0
|
$
|
7,195
|
16.3
|
$
|
(4,485
|
)
|
YEAR ENDED AUGUST 31, 2019 (unaudited)
|
||||||||||||||||
November 30
|
February 28
|
May 31
|
August 31
|
|||||||||||||
Net sales
|
$
|
53,829
|
$
|
50,356
|
$
|
56,006
|
$
|
65,165
|
||||||||
Gross profit
|
36,783
|
35,366
|
39,664
|
47,502
|
||||||||||||
Selling, general, and administrative
|
34,644
|
35,925
|
38,713
|
36,037
|
||||||||||||
Depreciation
|
1,554
|
1,697
|
1,556
|
1,558
|
||||||||||||
Amortization
|
1,238
|
1,300
|
1,259
|
1,179
|
||||||||||||
Income (loss) from operations
|
(653
|
)
|
(3,556
|
)
|
(1,864
|
)
|
8,728
|
|||||||||
Income (loss) before income taxes
|
(1,257
|
)
|
(3,927
|
)
|
(2,418
|
)
|
8,194
|
|||||||||
Net income (loss)
|
(1,357
|
)
|
(3,517
|
)
|
(2,024
|
)
|
5,875
|
|||||||||
Net income (loss) per share:
|
||||||||||||||||
Basic
|
$
|
(.10
|
)
|
$
|
(.25
|
)
|
$
|
(.14
|
)
|
$
|
.42
|
|||||
Diluted
|
(.10
|
)
|
(.25
|
)
|
(.14
|
)
|
.41
|
|||||||||
YEAR ENDED AUGUST 31, 2018 (unaudited)
|
||||||||||||||||
November 30
|
February 28
|
May 31
|
August 31
|
|||||||||||||
Net sales
|
$
|
47,932
|
$
|
46,547
|
$
|
50,461
|
$
|
64,818
|
||||||||
Gross profit
|
32,868
|
32,744
|
34,916
|
47,761
|
||||||||||||
Selling, general, and administrative
|
33,824
|
35,097
|
34,910
|
37,294
|
||||||||||||
Depreciation
|
901
|
1,379
|
1,267
|
1,615
|
||||||||||||
Amortization
|
1,395
|
1,395
|
1,326
|
1,251
|
||||||||||||
Income (loss) from operations
|
(3,252
|
)
|
(5,127
|
)
|
(2,587
|
)
|
7,601
|
|||||||||
Income (loss) before income taxes
|
(3,740
|
)
|
(5,765
|
)
|
(3,088
|
)
|
7,074
|
|||||||||
Net income (loss)
|
(2,392
|
)
|
(2,740
|
)
|
(2,534
|
)
|
1,779
|
|||||||||
Net income (loss) per share:
|
||||||||||||||||
Basic and diluted
|
$
|
(.17
|
)
|
$
|
(.20
|
)
|
$
|
(.18
|
)
|
$
|
.13
|
YEAR ENDED AUGUST 31,
|
2019
|
2018
|
2017
|
|||||||||
Total cash provided by (used for):
|
||||||||||||
Operating activities
|
$
|
30,452
|
$
|
16,861
|
$
|
17,357
|
||||||
Investing activities
|
(6,873
|
)
|
(10,634
|
)
|
(21,675
|
)
|
||||||
Financing activities
|
(5,932
|
)
|
(4,679
|
)
|
3,134
|
|||||||
Effect of exchange rates on cash
|
(101
|
)
|
(319
|
)
|
(348
|
)
|
||||||
Increase (decrease) in cash and cash equivalents
|
$
|
17,546
|
$
|
1,229
|
$
|
(1,532
|
)
|
Fiscal
|
Fiscal
|
Fiscal
|
Fiscal
|
Fiscal
|
||||||||||||||||||||||||
Contractual Obligations
|
2020
|
2021
|
2022
|
2023
|
2024
|
Thereafter
|
Total
|
|||||||||||||||||||||
Required lease payments on corporate campus
|
$
|
3,724
|
$
|
3,798
|
$
|
3,874
|
$
|
3,952
|
$
|
4,031
|
$
|
3,301
|
$
|
22,680
|
||||||||||||||
Term loan payable to bank(1)
|
5,653
|
5,504
|
5,299
|
5,094
|
-
|
-
|
21,550
|
|||||||||||||||||||||
Purchase obligations
|
4,510
|
-
|
-
|
-
|
-
|
-
|
4,510
|
|||||||||||||||||||||
Jhana contingent consideration payments(2)
|
888
|
1,076
|
1,282
|
588
|
-
|
-
|
3,834
|
|||||||||||||||||||||
Minimum operating lease payments
|
752
|
472
|
112
|
97
|
79
|
92
|
1,604
|
|||||||||||||||||||||
RGP contingent consideration payments(2)
|
1,000
|
500
|
-
|
-
|
-
|
-
|
1,500
|
|||||||||||||||||||||
Minimum required payments for warehousing services(3)
|
195
|
-
|
-
|
-
|
-
|
-
|
195
|
|||||||||||||||||||||
Total expected contractual
obligation payments
|
$
|
16,722
|
$
|
11,350
|
$
|
10,567
|
$
|
9,731
|
$
|
4,110
|
$
|
3,393
|
$
|
55,873
|
(1)
|
Payment amounts shown include interest at 4.1 percent, which is the current rate on our term loan obligation under the 2019 Credit Agreement.
|
(2)
|
The payment of contingent consideration resulting from prior business acquisitions is based on current estimates and projections. We reassess the fair value of estimated contingent consideration payments each quarter based on
information available. The actual payment of contingent consideration amounts may differ in amount and timing from those shown in the table.
|
(3)
|
The warehousing services contract expires in June 2020.
|
•
|
significant underperformance relative to historical or projected future operating results;
|
•
|
significant change in the manner of our use of acquired assets or the strategy for the overall business;
|
•
|
significant change in prevailing interest rates;
|
•
|
significant negative industry or economic trend;
|
•
|
significant change in market capitalization relative to book value; and/or
|
•
|
significant negative change in market multiples of the comparable company set.
|
AUGUST 31,
|
2019
|
2018
|
||||||
In thousands, except per-share data
|
||||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
27,699
|
$
|
10,153
|
||||
Accounts receivable, less allowance for doubtful accounts of $4,242 and $3,555
|
73,227
|
71,914
|
||||||
Inventories
|
3,481
|
3,160
|
||||||
Income taxes receivable
|
-
|
179
|
||||||
Prepaid expenses
|
3,906
|
3,864
|
||||||
Other current assets
|
11,027
|
10,893
|
||||||
Total current assets
|
119,340
|
100,163
|
||||||
Property and equipment, net
|
18,579
|
21,401
|
||||||
Intangible assets, net
|
47,690
|
51,934
|
||||||
Goodwill
|
24,220
|
24,220
|
||||||
Deferred income tax assets
|
5,045
|
3,222
|
||||||
Other long-term assets
|
10,039
|
12,935
|
||||||
$
|
224,913
|
$
|
213,875
|
|||||
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
||||||||
Current liabilities:
|
||||||||
Current portion of term notes payable
|
$
|
5,000
|
$
|
10,313
|
||||
Current portion of financing obligation
|
2,335
|
2,092
|
||||||
Accounts payable
|
9,668
|
9,790
|
||||||
Income taxes payable
|
764
|
-
|
||||||
Deferred subscription revenue
|
56,250
|
47,417
|
||||||
Other deferred revenue
|
5,972
|
4,471
|
||||||
Accrued liabilities
|
23,555
|
20,761
|
||||||
Total current liabilities
|
103,544
|
94,844
|
||||||
Line of credit
|
-
|
11,337
|
||||||
Term notes payable, less current portion
|
15,000
|
2,500
|
||||||
Financing obligation, less current portion
|
16,648
|
18,983
|
||||||
Other liabilities
|
7,527
|
5,501
|
||||||
Deferred income tax liabilities
|
180
|
210
|
||||||
Total liabilities
|
142,899
|
133,375
|
||||||
Commitments and contingencies (Notes 6, 8 and 9)
|
||||||||
Shareholders’ equity:
|
||||||||
Common stock, $.05 par value; 40,000 shares authorized, 27,056 shares issued
|
1,353
|
1,353
|
||||||
Additional paid-in capital
|
215,964
|
211,280
|
||||||
Retained earnings
|
59,403
|
63,569
|
||||||
Accumulated other comprehensive income
|
269
|
341
|
||||||
Treasury stock at cost, 13,087 shares and 13,159 shares
|
(194,975
|
)
|
(196,043
|
)
|
||||
Total shareholders’ equity
|
82,014
|
80,500
|
||||||
$
|
224,913
|
$
|
213,875
|
YEAR ENDED AUGUST 31,
|
2019
|
2018
|
2017
|
|||||||||
In thousands, except per-share amounts
|
||||||||||||
Net sales
|
$
|
225,356
|
$
|
209,758
|
$
|
185,256
|
||||||
Cost of sales
|
66,042
|
61,469
|
62,589
|
|||||||||
Gross profit
|
159,314
|
148,289
|
122,667
|
|||||||||
Selling, general, and administrative
|
145,319
|
141,126
|
121,148
|
|||||||||
Contract termination costs
|
-
|
-
|
1,500
|
|||||||||
Restructuring costs
|
-
|
-
|
1,482
|
|||||||||
Depreciation
|
6,364
|
5,161
|
3,879
|
|||||||||
Amortization
|
4,976
|
5,368
|
3,538
|
|||||||||
Income (loss) from operations
|
2,655
|
(3,366
|
)
|
(8,880
|
)
|
|||||||
Interest income
|
37
|
104
|
223
|
|||||||||
Interest expense
|
(2,358
|
)
|
(2,676
|
)
|
(2,408
|
)
|
||||||
Discount accretion on related-party receivables
|
258
|
418
|
156
|
|||||||||
Income (loss) before income taxes
|
592
|
(5,520
|
)
|
(10,909
|
)
|
|||||||
Benefit (provision) for income taxes
|
(1,615
|
)
|
(367
|
)
|
3,737
|
|||||||
Net loss
|
$
|
(1,023
|
)
|
$
|
(5,887
|
)
|
$
|
(7,172
|
)
|
|||
Net loss per share:
|
||||||||||||
Basic and diluted
|
$
|
(0.07
|
)
|
$
|
(0.43
|
)
|
$
|
(0.52
|
)
|
|||
Weighted average number of common shares:
|
||||||||||||
Basic and diluted
|
13,948
|
13,849
|
13,819
|
|||||||||
COMPREHENSIVE LOSS:
|
||||||||||||
Net loss
|
$
|
(1,023
|
)
|
$
|
(5,887
|
)
|
$
|
(7,172
|
)
|
|||
Foreign currency translation adjustments, net of income
|
||||||||||||
tax benefit (provision) of $(5), $(75), and $37
|
(72
|
)
|
(326
|
)
|
(555
|
)
|
||||||
Comprehensive loss
|
$
|
(1,095
|
)
|
$
|
(6,213
|
)
|
$
|
(7,727
|
)
|
YEAR ENDED AUGUST 31,
|
2019
|
2018
|
2017
|
|||||||||
In thousands
|
||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||||||||||
Net loss
|
$
|
(1,023
|
)
|
$
|
(5,887
|
)
|
$
|
(7,172
|
)
|
|||
Adjustments to reconcile net loss to net cash provided
|
||||||||||||
by operating activities:
|
||||||||||||
Depreciation and amortization
|
11,359
|
10,525
|
7,443
|
|||||||||
Amortization of capitalized curriculum development costs
|
4,954
|
5,280
|
3,745
|
|||||||||
Deferred income taxes
|
(1,051
|
)
|
(2,535
|
)
|
(5,594
|
)
|
||||||
Stock-based compensation expense
|
4,789
|
2,846
|
3,658
|
|||||||||
Excess tax benefit from stock-based compensation
|
-
|
-
|
(168
|
)
|
||||||||
Increase (decrease) in contingent consideration liabilities
|
1,334
|
1,014
|
(1,936
|
)
|
||||||||
Changes in assets and liabilities, net of effect of acquired businesses:
|
||||||||||||
Decrease (increase) in accounts receivable, net
|
(1,770
|
)
|
(5,679
|
)
|
164
|
|||||||
Decrease (increase) in inventories
|
(260
|
)
|
157
|
1,583
|
||||||||
Decrease in receivable from related party
|
535
|
213
|
1,421
|
|||||||||
Decrease (increase) in prepaid expenses and other assets
|
32
|
(1,335
|
)
|
(4,861
|
)
|
|||||||
Increase in accounts payable and accrued liabilities
|
2,932
|
1,746
|
676
|
|||||||||
Increase in deferred revenue
|
8,828
|
11,613
|
19,142
|
|||||||||
Increase (decrease) in income taxes payable/receivable
|
889
|
109
|
(249
|
)
|
||||||||
Decrease in other liabilities
|
(1,096
|
)
|
(1,206
|
)
|
(495
|
)
|
||||||
Net cash provided by operating activities
|
30,452
|
16,861
|
17,357
|
|||||||||
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||||||
Purchases of property and equipment
|
(4,153
|
)
|
(6,528
|
)
|
(7,187
|
)
|
||||||
Capitalized curriculum development costs
|
(2,688
|
)
|
(2,998
|
)
|
(6,466
|
)
|
||||||
Acquisition of businesses, net of cash acquired
|
(32
|
)
|
(1,108
|
)
|
(7,272
|
)
|
||||||
Acquisition of license rights
|
-
|
-
|
(750
|
)
|
||||||||
Net cash used for investing activities
|
(6,873
|
)
|
(10,634
|
)
|
(21,675
|
)
|
||||||
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||||||
Proceeds from line of credit borrowings
|
82,282
|
93,391
|
34,320
|
|||||||||
Payments on line of credit borrowings
|
(93,619
|
)
|
(86,431
|
)
|
(29,943
|
)
|
||||||
Proceeds from term notes payable financing
|
20,000
|
-
|
10,000
|
|||||||||
Principal payments on term notes payable
|
(12,813
|
)
|
(6,250
|
)
|
(5,000
|
)
|
||||||
Principal payments on financing obligation
|
(2,092
|
)
|
(1,868
|
)
|
(1,662
|
)
|
||||||
Purchases of common stock for treasury
|
(12
|
)
|
(2,006
|
)
|
(5,431
|
)
|
||||||
Payment of contingent consideration liabilities
|
(653
|
)
|
(2,323
|
)
|
-
|
|||||||
Income tax benefit recorded in paid-in capital
|
-
|
-
|
168
|
|||||||||
Proceeds from sales of common stock held in treasury
|
975
|
808
|
682
|
|||||||||
Net cash provided by (used for) financing activities
|
(5,932
|
)
|
(4,679
|
)
|
3,134
|
|||||||
Effect of foreign currency exchange rates on cash and cash equivalents
|
(101
|
)
|
(319
|
)
|
(348
|
)
|
||||||
Net increase (decrease) in cash and cash equivalents
|
17,546
|
1,229
|
(1,532
|
)
|
||||||||
Cash and cash equivalents at beginning of the year
|
10,153
|
8,924
|
10,456
|
|||||||||
Cash and cash equivalents at end of the year
|
$
|
27,699
|
$
|
10,153
|
$
|
8,924
|
||||||
Supplemental disclosure of cash flow information:
|
||||||||||||
Cash paid for income taxes
|
$
|
1,778
|
$
|
2,512
|
$
|
2,562
|
||||||
Cash paid for interest
|
2,386
|
2,655
|
2,314
|
|||||||||
Non-cash investing and financing activities:
|
||||||||||||
Purchases of property and equipment financed by accounts payable
|
$
|
410
|
$
|
1,018
|
$
|
697
|
||||||
Consideration for business acquisition from liabilities of acquiree
|
798
|
-
|
-
|
Accumulated
|
||||||||||||||||||||||||||||
Other
|
||||||||||||||||||||||||||||
Common
|
Common
|
Additional
|
Retained
|
Comprehensive
|
Treasury
|
Treasury
|
||||||||||||||||||||||
Stock Shares
|
Stock Amount
|
Paid-In Capital
|
Earnings
|
Income
|
Stock Shares
|
Stock Amount
|
||||||||||||||||||||||
In thousands
|
||||||||||||||||||||||||||||
Balance at August 31, 2016
|
27,056
|
$
|
1,353
|
$
|
211,203
|
$
|
76,628
|
$
|
1,222
|
(13,332
|
)
|
$
|
(196,691
|
)
|
||||||||||||||
Issuance of common stock from
|
||||||||||||||||||||||||||||
treasury
|
(2,103
|
)
|
188
|
2,785
|
||||||||||||||||||||||||
Purchase of treasury shares
|
(300
|
)
|
(5,431
|
)
|
||||||||||||||||||||||||
Restricted share award
|
(442
|
)
|
30
|
442
|
||||||||||||||||||||||||
Stock-based compensation
|
3,658
|
|||||||||||||||||||||||||||
Cumulative translation
|
||||||||||||||||||||||||||||
adjustments
|
(555
|
)
|
||||||||||||||||||||||||||
Tax benefit recorded in
|
||||||||||||||||||||||||||||
paid-in capital
|
168
|
|||||||||||||||||||||||||||
Net loss
|
(7,172
|
)
|
||||||||||||||||||||||||||
Balance at August 31, 2017
|
27,056
|
1,353
|
212,484
|
69,456
|
667
|
(13,414
|
)
|
(198,895
|
)
|
|||||||||||||||||||
Issuance of common stock from
|
||||||||||||||||||||||||||||
treasury
|
(3,702
|
)
|
337
|
4,510
|
||||||||||||||||||||||||
Purchase of treasury shares
|
(105
|
)
|
(2,006
|
)
|
||||||||||||||||||||||||
Restricted share award
|
(348
|
)
|
23
|
348
|
||||||||||||||||||||||||
Stock-based compensation
|
2,846
|
|||||||||||||||||||||||||||
Cumulative translation
|
||||||||||||||||||||||||||||
adjustments
|
(326
|
)
|
||||||||||||||||||||||||||
Net loss
|
(5,887
|
)
|
||||||||||||||||||||||||||
Balance at August 31, 2018
|
27,056
|
1,353
|
211,280
|
63,569
|
341
|
(13,159
|
)
|
(196,043
|
)
|
|||||||||||||||||||
Issuance of common stock from
|
||||||||||||||||||||||||||||
treasury
|
321
|
43
|
654
|
|||||||||||||||||||||||||
Purchase of treasury shares
|
1
|
(12
|
)
|
|||||||||||||||||||||||||
Restricted share award
|
(426
|
)
|
28
|
426
|
||||||||||||||||||||||||
Stock-based compensation
|
4,789
|
|||||||||||||||||||||||||||
Cumulative translation
|
||||||||||||||||||||||||||||
adjustments
|
(72
|
)
|
||||||||||||||||||||||||||
Cumulative effect of new
|
||||||||||||||||||||||||||||
accounting principle
|
(3,143
|
)
|
||||||||||||||||||||||||||
Net loss
|
(1,023
|
)
|
||||||||||||||||||||||||||
Balance at August 31, 2019
|
27,056
|
$
|
1,353
|
$
|
215,964
|
$
|
59,403
|
$
|
269
|
(13,087
|
)
|
$
|
(194,975
|
)
|
1.
|
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
AUGUST 31,
|
2019
|
2018
|
||||||
Finished goods
|
$
|
3,434
|
$
|
3,130
|
||||
Raw materials
|
47
|
30
|
||||||
$
|
3,481
|
$
|
3,160
|
AUGUST 31,
|
2019
|
2018
|
||||||
Deferred commissions
|
$
|
8,337
|
$
|
6,958
|
||||
Other current assets
|
2,690
|
3,935
|
||||||
$
|
11,027
|
$
|
10,893
|
Description
|
Useful Lives
|
Buildings
|
20 years
|
Machinery and equipment
|
5–7 years
|
Computer hardware and software
|
3–5 years
|
Furniture, fixtures, and leasehold improvements
|
5–7 years
|
AUGUST 31,
|
2019
|
2018
|
||||||
Land and improvements
|
$
|
1,312
|
$
|
1,312
|
||||
Buildings
|
30,038
|
30,038
|
||||||
Machinery and equipment
|
1,162
|
1,723
|
||||||
Computer hardware and software
|
28,665
|
27,066
|
||||||
Furniture, fixtures, and leasehold
|
||||||||
improvements
|
8,409
|
8,272
|
||||||
69,586
|
68,411
|
|||||||
Less accumulated depreciation
|
(51,007
|
)
|
(47,010
|
)
|
||||
$
|
18,579
|
$
|
21,401
|
AUGUST 31,
|
2019
|
2018
|
||||||
Accrued compensation
|
$
|
14,003
|
$
|
11,858
|
||||
Other accrued liabilities
|
9,552
|
8,903
|
||||||
$
|
23,555
|
$
|
20,761
|
August 31,
|
ASC 606
|
September 1,
|
||||||||||
2018
|
Adjustments
|
2018
|
||||||||||
Assets:
|
||||||||||||
Other current assets
|
$
|
10,893
|
$
|
109
|
$
|
11,002
|
||||||
Deferred income tax assets
|
3,222
|
1,005
|
4,227
|
|||||||||
Liabilities and Shareholders' Equity:
|
||||||||||||
Deferred subscription revenue
|
47,417
|
1,453
|
48,870
|
|||||||||
Other deferred revenue
|
4,471
|
555
|
5,026
|
|||||||||
Other liabilities
|
5,501
|
2,249
|
7,750
|
|||||||||
Retained earnings
|
63,569
|
(3,143
|
)
|
60,426
|
August 31,
|
August 31,
|
|||||||||||
2019
|
2019
|
Impact of
|
||||||||||
As Reported
|
Without ASC 606
|
ASC 606
|
||||||||||
Net sales
|
$
|
225,356
|
$
|
225,222
|
$
|
134
|
||||||
Cost of sales
|
66,042
|
66,042
|
-
|
|||||||||
Selling, general, and administrative
|
145,319
|
145,329
|
(10
|
)
|
||||||||
Income tax provision
|
(1,615
|
)
|
(1,580
|
)
|
(35
|
)
|
||||||
Net loss
|
(1,023
|
)
|
(1,132
|
)
|
109
|
|||||||
Net loss per share:
|
||||||||||||
Basic and diluted
|
$
|
(0.07
|
)
|
$
|
(0.08
|
)
|
August 31,
|
August 31,
|
|||||||||||
2019
|
2019
|
Impact of
|
||||||||||
As Reported
|
Without ASC 606
|
ASC 606
|
||||||||||
Assets:
|
||||||||||||
Other current assets
|
$
|
11,027
|
$
|
10,908
|
$
|
119
|
||||||
Deferred income tax assets
|
5,045
|
4,075
|
970
|
|||||||||
Total assets
|
224,913
|
223,824
|
1,089
|
|||||||||
Liabilities and Shareholders' Equity:
|
||||||||||||
Deferred subscription revenue
|
$
|
56,250
|
$
|
55,247
|
$
|
1,003
|
||||||
Other deferred revenue
|
5,972
|
5,417
|
555
|
|||||||||
Other liabilities
|
7,527
|
4,961
|
2,566
|
|||||||||
Retained earnings
|
59,403
|
62,438
|
(3,035
|
)
|
||||||||
Total liabilities and shareholders' equity
|
224,913
|
223,824
|
1,089
|
2. |
REVENUE RECOGNTION
|
•
|
Identification of the contract with a customer
|
•
|
Identification of the performance obligations in the contract
|
•
|
Determination of the transaction price
|
•
|
Allocation of the transaction price to the performance obligations in the contract
|
•
|
Recognition of revenue when the Company satisfies the performance obligations
|
3. |
BUSINESS ACQUISITIONS
|
Cash paid at closing
|
$
|
159
|
||
Accounts receivable from GSA licensee
|
798
|
|||
Total purchase price
|
$
|
957
|
Cash acquired
|
$
|
127
|
||||
Accounts receivable
|
564
|
|||||
Inventories
|
80
|
|||||
Prepaid expenses and other current assets
|
45
|
|||||
Intangible assets
|
741
|
|||||
Property and equipment
|
27
|
|||||
Other long-term assets
|
11
|
|||||
Assets acquired
|
1,595
|
|||||
Accounts payable
|
(208
|
)
|
||||
Accrued liabilities
|
(383
|
)
|
||||
Income taxes payable
|
(47
|
)
|
||||
Liabilities assumed
|
(638
|
)
|
||||
$
|
957
|
Weighted Average
|
|||||
Description
|
Amount
|
Life
|
|||
Reacquisition of license rights
|
$
|
360
|
3 years
|
||
Localized content
|
202
|
3 years
|
|||
Customer relationships
|
179
|
3 years
|
|||
$
|
741
|
Cash paid to RGP at closing
|
$
|
3,500
|
||
Fair value of contingent consideration
|
1,413
|
|||
Total purchase price
|
$
|
4,913
|
Accounts receivable
|
$
|
458
|
||
Prepaid expenses
|
136
|
|||
Intangible assets
|
3,811
|
|||
Goodwill
|
1,232
|
|||
Assets acquired
|
5,637
|
|||
Accounts payable
|
(51
|
)
|
||
Accrued liabilities
|
(80
|
)
|
||
Deferred revenues
|
(593
|
)
|
||
Liabilities assumed
|
(724
|
)
|
||
$
|
4,913
|
Weighted Average
|
|||||
Description
|
Amount
|
Life
|
|||
Customer list
|
$
|
2,249
|
10 years
|
||
Content
|
461
|
5 years
|
|||
Trade name
|
341
|
5 years
|
|||
Non-compete agreements
|
328
|
2 years
|
|||
Deferred contract revenue
|
237
|
2 years
|
|||
Coach relationships
|
150
|
10 years
|
|||
Acquired technology
|
45
|
3 years
|
|||
$
|
3,811
|
8 years
|
Cash paid to Jhana at closing
|
$
|
3,525
|
||
Fair value of contingent consideration
|
6,052
|
|||
Total purchase price
|
$
|
9,577
|
Cash
|
$
|
253
|
||
Accounts receivable
|
195
|
|||
Prepaid expenses and other current assets
|
86
|
|||
Deferred tax asset
|
3,138
|
|||
Intangible assets
|
6,076
|
|||
Goodwill
|
3,085
|
|||
Assets acquired
|
12,833
|
|||
Accounts payable
|
(185
|
)
|
||
Accrued liabilities
|
(19
|
)
|
||
Deferred tax liability
|
(2,257
|
)
|
||
Deferred revenues
|
(795
|
)
|
||
Liabilities assumed
|
(3,256
|
)
|
||
$
|
9,577
|
Weighted Average
|
|||||
Description
|
Amount
|
Life
|
|||
Content
|
$
|
3,097
|
5 years
|
||
Acquired technology
|
1,474
|
3 years
|
|||
Customer list
|
1,016
|
5 years
|
|||
Trade name
|
445
|
5 years
|
|||
Non-compete agreements
|
44
|
3 years
|
|||
$
|
6,076
|
5 years
|
YEAR ENDED
|
||||
AUGUST 31,
|
2017
|
|||
Revenue
|
$
|
187,745
|
||
Net loss
|
(7,976
|
)
|
||
Diluted loss per share
|
(0.58
|
)
|
4. |
ACCOUNTS RECEIVABLE
|
YEAR ENDED
|
||||||||||||
AUGUST 31,
|
2019
|
2018
|
2017
|
|||||||||
Beginning balance
|
$
|
3,555
|
$
|
2,310
|
$
|
1,579
|
||||||
Charged to costs and expenses
|
1,212
|
2,029
|
1,747
|
|||||||||
Deductions
|
(525
|
)
|
(784
|
)
|
(1,016
|
)
|
||||||
Ending balance
|
$
|
4,242
|
$
|
3,555
|
$
|
2,310
|
5. |
INTANGIBLE ASSETS AND GOODWILL
|
Gross Carrying
|
Accumulated
|
Net Carrying
|
||||||||||
AUGUST 31, 2019
|
Amount
|
Amortization
|
Amount
|
|||||||||
Finite-lived intangible assets:
|
||||||||||||
License rights
|
$
|
28,099
|
$
|
(20,063
|
)
|
$
|
8,036
|
|||||
Acquired content
|
62,307
|
(48,449
|
)
|
13,858
|
||||||||
Customer lists
|
20,266
|
(18,450
|
)
|
1,816
|
||||||||
Acquired technology
|
3,568
|
(3,149
|
)
|
419
|
||||||||
Trade names
|
2,036
|
(1,602
|
)
|
434
|
||||||||
Non-compete agreements and other
|
758
|
(631
|
)
|
127
|
||||||||
117,034
|
(92,344
|
)
|
24,690
|
|||||||||
Indefinite-lived intangible asset:
|
||||||||||||
Covey trade name
|
23,000
|
-
|
23,000
|
|||||||||
$
|
140,034
|
$
|
(92,344
|
)
|
$
|
47,690
|
||||||
AUGUST 31, 2018
|
||||||||||||
Finite-lived intangible assets:
|
||||||||||||
License rights
|
$
|
27,750
|
$
|
(18,889
|
)
|
$
|
8,861
|
|||||
Acquired content
|
62,102
|
(46,147
|
)
|
15,955
|
||||||||
Customer lists
|
20,092
|
(17,835
|
)
|
2,257
|
||||||||
Acquired technology
|
3,568
|
(2,642
|
)
|
926
|
||||||||
Trade names
|
2,036
|
(1,441
|
)
|
595
|
||||||||
Non-compete agreements and other
|
758
|
(418
|
)
|
340
|
||||||||
116,306
|
(87,372
|
)
|
28,934
|
|||||||||
Indefinite-lived intangible asset:
|
||||||||||||
Covey trade name
|
23,000
|
-
|
23,000
|
|||||||||
$
|
139,306
|
$
|
(87,372
|
)
|
$
|
51,934
|
Category of Intangible Asset
|
Range of Remaining Estimated
Useful Lives
|
Weighted Average Original
Amortization Period
|
||
License rights
|
3 to 8 years
|
29 years
|
||
Acquired content
|
2 to 8 years
|
25 years
|
||
Customer lists
|
2 to 8 years
|
12 years
|
||
Acquired technology
|
1 year
|
3 years
|
||
Trade names
|
1 to 4 years
|
5 years
|
||
Non-compete agreements and other
|
1 to 9 years
|
4 years
|
YEAR ENDING
|
||||
AUGUST 31,
|
||||
2020
|
$
|
4,564
|
||
2021
|
4,049
|
|||
2022
|
3,557
|
|||
2023
|
2,612
|
|||
2024
|
2,612
|
Direct offices
|
$
|
16,825
|
||
International licensees
|
5,065
|
|||
Education practice
|
2,330
|
|||
$
|
24,220
|
6. |
TERM LOANS PAYABLE AND REVOLVING LINE OF CREDIT
|
YEAR ENDING
|
||||
AUGUST 31,
|
||||
2020
|
$
|
5,000
|
||
2021
|
5,000
|
|||
2022
|
5,000
|
|||
2023
|
5,000
|
|||
$
|
20,000
|
•
|
Available Credit – $15.0 million less outstanding standby letters of credit, which totaled $0.1 million at August 31, 2019.
|
•
|
Maturity Date – August 7, 2024.
|
•
|
Interest Rate – The effective interest rate is LIBOR plus 1.85 percent per annum and the unused commitment fee on the line of credit is 0.20 percent per annum.
|
7. |
FINANCING OBLIGATION
|
AUGUST 31,
|
2019
|
2018
|
||||||
Financing obligation payable in
|
||||||||
monthly installments of $309 at
|
||||||||
August 31, 2019, including
|
||||||||
principal and interest, with two
|
||||||||
percent annual increases
|
||||||||
(imputed interest at 7.7%),
|
||||||||
through June 2025
|
$
|
18,983
|
$
|
21,075
|
||||
Less current portion
|
(2,335
|
)
|
(2,092
|
)
|
||||
Total financing obligation,
|
||||||||
less current portion
|
$
|
16,648
|
$
|
18,983
|
YEAR ENDING
|
||||
AUGUST 31,
|
||||
2020
|
$
|
2,335
|
||
2021
|
2,600
|
|||
2022
|
2,887
|
|||
2023
|
3,199
|
|||
2024
|
3,538
|
|||
Thereafter
|
4,424
|
|||
$
|
18,983
|
YEAR ENDING
|
||||
AUGUST 31,
|
||||
2020
|
$
|
3,724
|
||
2021
|
3,798
|
|||
2022
|
3,874
|
|||
2023
|
3,952
|
|||
2024
|
4,031
|
|||
Thereafter
|
3,301
|
|||
Total future minimum financing
|
||||
obligation payments
|
22,680
|
|||
Less interest
|
(5,009
|
)
|
||
Present value of future minimum
|
||||
financing obligation payments
|
$
|
17,671
|
8. |
OPERATING LEASES
|
YEAR ENDING
|
||||
AUGUST 31,
|
||||
2020
|
$
|
752
|
||
2021
|
472
|
|||
2022
|
112
|
|||
2023
|
97
|
|||
2024
|
79
|
|||
Thereafter
|
92
|
|||
$
|
1,604
|
YEAR ENDING
|
||||
AUGUST 31,
|
||||
2020
|
$
|
3,890
|
||
2021
|
2,341
|
|||
2022
|
1,514
|
|||
2023
|
1,514
|
|||
2024
|
1,527
|
|||
Thereafter
|
1,275
|
|||
$
|
12,061
|
9. |
COMMITMENTS AND CONTINGENCIES
|
10. |
SHAREHOLDERS’ EQUITY
|
11. |
FAIR VALUE OF FINANCIAL INSTRUMENTS
|
•
|
Level 1 valuations are based on quoted prices in active markets for identical instruments that the Company can access at the measurement date.
|
•
|
Level 2 valuations are based on inputs other than quoted prices included in Level 1 that are observable for the instrument, either directly or indirectly, for substantially the full term of the asset or
liability including the following:
|
a.
|
quoted prices for similar, but not identical, instruments in active markets;
|
b.
|
quoted prices for identical or similar instruments in markets that are not active;
|
c.
|
inputs other than quoted prices that are observable for the instrument; or
|
d.
|
inputs that are derived principally from or corroborated by observable market data by correlation or other means.
|
•
|
Level 3 valuations are based on information that is unobservable and significant to the overall fair value measurement.
|
Increase in
|
||||||||||||||||
AUGUST 31,
|
2018
|
Fair Value
|
Payments
|
2019
|
||||||||||||
RGP contingent liability
|
$
|
606
|
$
|
1,155
|
$
|
-
|
$
|
1,761
|
||||||||
Jhana contingent liability
|
3,942
|
179
|
(653
|
)
|
3,468
|
|||||||||||
$
|
4,548
|
$
|
1,334
|
$
|
(653
|
)
|
$
|
5,229
|
Likely
|
Minimum
|
Maximum
|
||||||||||
RGP growth rate - Year 1
|
14.8
|
%
|
(12.0
|
)%
|
35.0
|
%
|
||||||
RGP growth rate - Year 2
|
10.0
|
%
|
(12.0
|
)%
|
35.0
|
%
|
||||||
RGP growth rate - Year 3
|
10.0
|
%
|
(12.0
|
)%
|
35.0
|
%
|
||||||
Add-on services growth rate - Year 1
|
60.0
|
%
|
(20.0
|
)%
|
130.0
|
%
|
||||||
Add-on services growth rate - Year 2
|
50.0
|
%
|
(20.0
|
)%
|
130.0
|
%
|
||||||
Add-on services growth rate - Year 3
|
40.0
|
%
|
(20.0
|
)%
|
130.0
|
%
|
YEAR ENDED
|
||||||||||||
AUGUST 31,
|
2019
|
2018
|
2017
|
|||||||||
Performance awards
|
$
|
3,853
|
$
|
2,034
|
$
|
2,902
|
||||||
Restricted stock awards
|
700
|
642
|
500
|
|||||||||
Fully vested stock awards
|
60
|
15
|
135
|
|||||||||
Compensation cost of the ESPP
|
176
|
155
|
121
|
|||||||||
$
|
4,789
|
$
|
2,846
|
$
|
3,658
|
Weighted-
|
||||||||
Average Grant-
|
||||||||
Date Fair
|
||||||||
Number of
|
Value Per
|
|||||||
Shares
|
Share
|
|||||||
Restricted stock awards at
|
||||||||
August 31, 2018
|
23,338
|
$
|
30.00
|
|||||
Granted
|
28,525
|
24.54
|
||||||
Forfeited
|
-
|
-
|
||||||
Vested
|
(23,338
|
)
|
30.00
|
|||||
Restricted stock awards at
|
||||||||
August 31, 2019
|
28,525
|
$
|
24.54
|
Weighted
|
||||||||||||||||
Weighted
|
Average
|
|||||||||||||||
Avg. Exercise
|
Remaining
|
Aggregate
|
||||||||||||||
Number of
|
Price Per
|
Contractual
|
Intrinsic Value
|
|||||||||||||
Stock Options
|
Share
|
Life (Years)
|
(thousands)
|
|||||||||||||
Outstanding at August 31, 2018
|
568,750
|
$
|
11.67
|
|||||||||||||
Granted
|
-
|
-
|
||||||||||||||
Exercised
|
-
|
-
|
||||||||||||||
Forfeited
|
-
|
-
|
||||||||||||||
Outstanding at August 31, 2019
|
568,750
|
$
|
11.67
|
0.8
|
$
|
14,287
|
||||||||||
Options vested and exercisable at
|
||||||||||||||||
August 31, 2019
|
568,750
|
$
|
11.67
|
0.8
|
$
|
14,287
|
Weighted
|
||||||||||||||||||||||
Number
|
Average
|
Options
|
||||||||||||||||||||
Outstanding
|
Remaining
|
Weighted
|
Exercisable at
|
Weighted
|
||||||||||||||||||
at August 31,
|
Contractual
|
Average
|
August 31,
|
Average
|
||||||||||||||||||
Exercise Prices
|
2019
|
Life (Years)
|
Exercise Price
|
2019
|
Exercise Price
|
|||||||||||||||||
$
|
9.00
|
62,500
|
1.4
|
$
|
9.00
|
62,500
|
$
|
9.00
|
||||||||||||||
$
|
10.00
|
168,750
|
0.8
|
$
|
10.00
|
168,750
|
$
|
10.00
|
||||||||||||||
$
|
12.00
|
168,750
|
0.8
|
$
|
12.00
|
168,750
|
$
|
12.00
|
||||||||||||||
$
|
14.00
|
168,750
|
0.8
|
$
|
14.00
|
168,750
|
$
|
14.00
|
||||||||||||||
568,750
|
568,750
|
13. |
CONTRACT TERMINATION AND RESTRUCTURING COSTS
|
Description
|
Amount
|
|||
Severance costs
|
$
|
986
|
||
Office closure costs
|
496
|
|||
$
|
1,482
|
14. |
EMPLOYEE BENEFIT PLANS
|
15. |
INCOME TAXES
|
YEAR ENDED
|
||||||||||||
AUGUST 31,
|
2019
|
2018
|
2017
|
|||||||||
Current:
|
||||||||||||
Federal
|
$
|
93
|
$
|
29
|
$
|
69
|
||||||
State
|
(14
|
)
|
210
|
(71
|
)
|
|||||||
Foreign
|
(2,745
|
)
|
(2,947
|
)
|
(2,320
|
)
|
||||||
(2,666
|
)
|
(2,708
|
)
|
(2,322
|
)
|
|||||||
Deferred:
|
||||||||||||
Federal
|
3,112
|
1,426
|
(1,227
|
)
|
||||||||
State
|
102
|
(314
|
)
|
(17
|
)
|
|||||||
Foreign
|
(120
|
)
|
(281
|
)
|
468
|
|||||||
Operating loss carryforward
|
(1,625
|
)
|
2,636
|
6,964
|
||||||||
Adjustment for changes in U.S.
|
||||||||||||
income tax rates
|
-
|
1,654
|
-
|
|||||||||
Valuation allowance
|
(418
|
)
|
(2,780
|
)
|
(129
|
)
|
||||||
1,051
|
2,341
|
6,059
|
||||||||||
$
|
(1,615
|
)
|
$
|
(367
|
)
|
$
|
3,737
|
YEAR ENDED
|
||||||||||||
AUGUST 31,
|
2019
|
2018
|
2017
|
|||||||||
Net income (loss)
|
$
|
(1,615
|
)
|
$
|
(367
|
)
|
$
|
3,737
|
||||
Other comprehensive income
|
(5
|
)
|
(75
|
)
|
37
|
|||||||
$
|
(1,620
|
)
|
$
|
(442
|
)
|
$
|
3,774
|
YEAR ENDED
|
||||||||||||
AUGUST 31,
|
2019
|
2018
|
2017
|
|||||||||
United States
|
$
|
(1,910
|
)
|
$
|
(8,960
|
)
|
$
|
(10,126
|
)
|
|||
Foreign
|
2,502
|
3,440
|
(783
|
)
|
||||||||
$
|
592
|
$
|
(5,520
|
)
|
$
|
(10,909
|
)
|
YEAR ENDED
AUGUST 31,
|
2019
|
2018
|
2017
|
|||||||||
Federal statutory income tax rate
|
(21.0
|
)%
|
25.7
|
%
|
35.0
|
%
|
||||||
State income taxes, net of federal effect
|
(5.4
|
)
|
2.6
|
2.3
|
||||||||
Effect of change in U.S. federal tax rate
|
-
|
30.0
|
-
|
|||||||||
Valuation allowance
|
(70.8
|
)
|
(50.4
|
)
|
(1.2
|
)
|
||||||
Foreign jurisdictions tax differential
|
(72.8
|
)
|
(6.8
|
)
|
(1.9
|
)
|
||||||
Tax differential on income subject to both U.S. and foreign taxes
|
(64.7
|
)
|
2.3
|
0.4
|
||||||||
Uncertain tax positions
|
34.0
|
(5.1
|
)
|
4.4
|
||||||||
Non-deductible executive compensation
|
(8.8
|
)
|
(2.7
|
)
|
(1.6
|
)
|
||||||
Non-deductible meals and entertainment
|
(52.9
|
)
|
(8.9
|
)
|
(2.2
|
)
|
||||||
Payout of deferred compensation (NQDC)
|
0.3
|
4.4
|
-
|
|||||||||
Other
|
(10.7
|
)
|
2.2
|
(0.9
|
)
|
|||||||
(272.8
|
)%
|
(6.7
|
)%
|
34.3
|
%
|
AUGUST 31,
|
2019
|
2018
|
||||||
Deferred income tax assets:
|
||||||||
Net operating loss carryforward
|
$
|
7,516
|
$
|
9,039
|
||||
Foreign income tax credit
|
||||||||
carryforward
|
8,140
|
6,562
|
||||||
Sale and financing of corporate
|
||||||||
headquarters
|
4,431
|
4,919
|
||||||
Stock-based compensation
|
1,973
|
1,174
|
||||||
Bonus and other accruals
|
1,622
|
1,511
|
||||||
Inventory and bad debt reserves
|
1,376
|
1,046
|
||||||
Deferred revenue
|
829
|
236
|
||||||
Other
|
264
|
323
|
||||||
Total deferred income tax assets
|
26,151
|
24,810
|
||||||
Less: valuation allowance
|
(3,815
|
)
|
(3,397
|
)
|
||||
Net deferred income tax assets
|
22,336
|
21,413
|
||||||
Deferred income tax liabilities:
|
||||||||
Intangibles step-ups – indefinite lived
|
(5,424
|
)
|
(5,427
|
)
|
||||
Intangibles step-ups – finite lived
|
(3,406
|
)
|
(4,103
|
)
|
||||
Intangible asset impairment and
|
||||||||
amortization
|
(2,906
|
)
|
(3,023
|
)
|
||||
Property and equipment depreciation
|
(2,880
|
)
|
(3,518
|
)
|
||||
Deferred commissions
|
(2,056
|
)
|
(1,596
|
)
|
||||
Unremitted earnings of foreign
|
||||||||
subsidiaries
|
(456
|
)
|
(380
|
)
|
||||
Other
|
(343
|
)
|
(354
|
)
|
||||
Total deferred income tax liabilities
|
(17,471
|
)
|
(18,401
|
)
|
||||
Net deferred income taxes
|
$
|
4,865
|
$
|
3,012
|
AUGUST 31,
|
2019
|
2018
|
||||||
Long-term assets
|
$
|
5,045
|
$
|
3,222
|
||||
Long-term liabilities
|
(180
|
)
|
(210
|
)
|
||||
Net deferred income tax asset
|
$
|
4,865
|
$
|
3,012
|
|
Loss
|
Loss
|
Operating
|
||||||||||||||
Loss Carryforward
|
Expires
|
Deductions
|
Deductions
|
Loss Carried
|
|||||||||||||
for Year Ended
|
August 31,
|
Amount
|
in Prior Years
|
in Current Year
|
Forward
|
||||||||||||
December 31, 2012
|
2031
|
$
|
243
|
$
|
-
|
$
|
(243
|
)
|
$
|
-
|
|||||||
December 31, 2013
|
2032
|
553
|
-
|
(553
|
)
|
-
|
|||||||||||
December 31, 2014
|
2033
|
1,285
|
-
|
(1,019
|
)
|
266
|
|||||||||||
December 31, 2015
|
2034
|
1,491
|
-
|
-
|
1,491
|
||||||||||||
December 31, 2016
|
2035
|
3,052
|
-
|
-
|
3,052
|
||||||||||||
July 15, 2017
|
|||||||||||||||||
Acquired NOL
|
2036
|
1,117
|
-
|
-
|
1,117
|
||||||||||||
7,741
|
-
|
(1,815
|
)
|
5,926
|
|||||||||||||
August 31, 2017
|
2037
|
16,361
|
-
|
(6,834
|
)
|
9,527
|
|||||||||||
August 31, 2018
|
No expiration
|
10,506
|
-
|
-
|
10,506
|
||||||||||||
$
|
34,608
|
$
|
-
|
$
|
(8,649
|
)
|
$
|
25,959
|
Credit Generated in
|
Credits Used
|
Credits Used
|
Credits
|
||||||||||||||
Fiscal Year Ended
|
Credit Expires
|
Credits
|
in Prior
|
in Fiscal
|
Carried
|
||||||||||||
August 31,
|
August 31,
|
Generated
|
Years
|
2019
|
Forward
|
||||||||||||
2011
|
2021
|
$
|
3,445
|
$
|
(414
|
)
|
$
|
-
|
$
|
3,031
|
|||||||
2012
|
2022
|
2,563
|
(2,563
|
)
|
-
|
-
|
|||||||||||
2013
|
2023
|
2,815
|
(2,815
|
)
|
-
|
-
|
|||||||||||
2014
|
2024
|
1,378
|
(1,378
|
)
|
-
|
-
|
|||||||||||
2015
|
2025
|
1,422
|
(1,422
|
)
|
-
|
-
|
|||||||||||
2016
|
2026
|
1,569
|
(1,569
|
)
|
-
|
-
|
|||||||||||
2017
|
2027
|
1,804
|
-
|
-
|
1,804
|
||||||||||||
2018
|
2028
|
1,727
|
-
|
-
|
1,727
|
||||||||||||
2019
|
2029
|
1,578
|
-
|
-
|
1,578
|
||||||||||||
$
|
18,301
|
$
|
(10,161
|
)
|
$
|
-
|
$
|
8,140
|
YEAR ENDED
|
||||||||||||
AUGUST 31,
|
2019
|
2018
|
2017
|
|||||||||
Beginning balance
|
$
|
2,111
|
$
|
2,359
|
$
|
3,024
|
||||||
Additions based on tax positions
|
||||||||||||
related to the current year
|
157
|
27
|
10
|
|||||||||
Additions for tax positions in
|
||||||||||||
prior years
|
7
|
367
|
85
|
|||||||||
Reductions for tax positions of prior
|
||||||||||||
years resulting from the lapse of
|
||||||||||||
applicable statute of limitations
|
(370
|
)
|
(253
|
)
|
(634
|
)
|
||||||
Other reductions for tax positions of
|
||||||||||||
prior years
|
(10
|
)
|
(389
|
)
|
(126
|
)
|
||||||
Ending balance
|
$
|
1,895
|
$
|
2,111
|
$
|
2,359
|
2012-2019
|
Canada and Australia
|
||
2013-2019
|
Japan
|
||
2014-2019
|
Germany, Switzerland, and Austria
|
||
2015-2019
|
United Kingdom
|
||
2015-2019
|
United States – state and local income tax
|
||
2016-2019
|
United States – federal income tax
|
||
2016-2019
|
China
|
||
2017-2019
|
Singapore
|
16. |
EARNINGS (LOSS) PER SHARE
|
YEAR ENDED
|
||||||||||||
AUGUST 31,
|
2019
|
2018
|
2017
|
|||||||||
Numerator for basic and
|
||||||||||||
diluted earnings per share:
|
||||||||||||
Net loss
|
$
|
(1,023
|
)
|
$
|
(5,887
|
)
|
$
|
(7,172
|
)
|
|||
Denominator for basic and
|
||||||||||||
diluted earnings per share:
|
||||||||||||
Basic weighted average shares
|
||||||||||||
outstanding
|
13,948
|
13,849
|
13,819
|
|||||||||
Effect of dilutive securities:
|
||||||||||||
Stock options and other
|
||||||||||||
stock-based awards
|
-
|
-
|
-
|
|||||||||
Diluted weighted average shares
|
||||||||||||
outstanding
|
13,948
|
13,849
|
13,819
|
|||||||||
EPS Calculations:
|
||||||||||||
Net loss per share:
|
||||||||||||
Basic and diluted
|
$
|
(0.07
|
)
|
$
|
(0.43
|
)
|
$
|
(0.52
|
)
|
17. |
SEGMENT INFORMATION
|
•
|
Direct Offices – This segment includes our sales personnel that serve the United States and Canada; our international sales offices located in Japan, China, the United
Kingdom, Australia, and Germany, Switzerland, and Austria; our governmental sales channel; and our public program operations.
|
•
|
International Licensees – This segment is primarily comprised of our international licensees’ royalty revenues.
|
•
|
Education Practice – This group includes our domestic and international Education practice operations, which are focused on sales to educational institutions.
|
•
|
Corporate and Other – Our corporate and other information includes leasing operations, shipping and handling revenues, and certain corporate administrative expenses.
|
Sales to
|
||||||||||||
Fiscal Year Ended
|
External
|
Adjusted
|
||||||||||
August 31, 2019
|
Customers
|
Gross Profit
|
EBITDA
|
|||||||||
Enterprise Division:
|
||||||||||||
Direct offices
|
$
|
157,754
|
$
|
116,755
|
$
|
19,455
|
||||||
International licensees
|
12,896
|
10,231
|
6,072
|
|||||||||
170,650
|
126,986
|
25,527
|
||||||||||
Education Division
|
48,880
|
30,373
|
3,553
|
|||||||||
Corporate and eliminations
|
5,826
|
1,955
|
(8,474
|
)
|
||||||||
Consolidated
|
$
|
225,356
|
$
|
159,314
|
$
|
20,606
|
||||||
Fiscal Year Ended
|
||||||||||||
August 31, 2018
|
||||||||||||
Enterprise Division:
|
||||||||||||
Direct offices
|
$
|
145,890
|
$
|
108,140
|
$
|
13,254
|
||||||
International licensees
|
13,226
|
10,031
|
5,081
|
|||||||||
159,116
|
118,171
|
18,335
|
||||||||||
Education Division
|
45,272
|
28,654
|
2,710
|
|||||||||
Corporate and eliminations
|
5,370
|
1,464
|
(9,167
|
)
|
||||||||
Consolidated
|
$
|
209,758
|
$
|
148,289
|
$
|
11,878
|
||||||
Fiscal Year Ended
|
||||||||||||
August 31, 2017
|
||||||||||||
Enterprise Division:
|
||||||||||||
Direct offices
|
$
|
122,309
|
$
|
81,700
|
$
|
4,242
|
||||||
International licensees
|
13,571
|
10,483
|
6,415
|
|||||||||
135,880
|
92,183
|
10,657
|
||||||||||
Education Division
|
44,122
|
27,916
|
7,195
|
|||||||||
Corporate and eliminations
|
5,254
|
2,568
|
(10,153
|
)
|
||||||||
Consolidated
|
$
|
185,256
|
$
|
122,667
|
$
|
7,699
|
YEAR ENDED
|
||||||||||||
AUGUST 31,
|
2019
|
2018
|
2017
|
|||||||||
Segment Adjusted EBITDA
|
$
|
29,080
|
$
|
21,045
|
$
|
17,852
|
||||||
Corporate expenses
|
(8,474
|
)
|
(9,167
|
)
|
(10,153
|
)
|
||||||
Consolidated Adjusted EBITDA
|
20,606
|
11,878
|
7,699
|
|||||||||
Stock-based compensation
|
(4,789
|
)
|
(2,846
|
)
|
(3,658
|
)
|
||||||
Reduction (increase) in
|
||||||||||||
contingent consideration liabilities
|
(1,334
|
)
|
(1,014
|
)
|
1,936
|
|||||||
Costs to exit Japan publishing business
|
-
|
-
|
(2,107
|
)
|
||||||||
Contract termination costs
|
-
|
-
|
(1,500
|
)
|
||||||||
Restructuring costs
|
-
|
-
|
(1,482
|
)
|
||||||||
ERP system implementation costs
|
-
|
(855
|
)
|
(1,404
|
)
|
|||||||
Licensee transition costs
|
(488
|
)
|
-
|
(505
|
)
|
|||||||
Business acquisition costs
|
-
|
-
|
(442
|
)
|
||||||||
Depreciation
|
(6,364
|
)
|
(5,161
|
)
|
(3,879
|
)
|
||||||
Amortization
|
(4,976
|
)
|
(5,368
|
)
|
(3,538
|
)
|
||||||
Income (loss) from operations
|
2,655
|
(3,366
|
)
|
(8,880
|
)
|
|||||||
Interest income
|
37
|
104
|
223
|
|||||||||
Interest expense
|
(2,358
|
)
|
(2,676
|
)
|
(2,408
|
)
|
||||||
Accretion of discount on related
|
||||||||||||
party receivable
|
258
|
418
|
156
|
|||||||||
Income (loss) before income taxes
|
592
|
(5,520
|
)
|
(10,909
|
)
|
|||||||
Benefit (provision) for income taxes
|
(1,615
|
)
|
(367
|
)
|
3,737
|
|||||||
Net loss
|
$
|
(1,023
|
)
|
$
|
(5,887
|
)
|
$
|
(7,172
|
)
|
YEAR ENDED
|
||||||||||||
AUGUST 31,
|
2019
|
2018
|
2017
|
|||||||||
United States
|
$
|
166,696
|
$
|
151,022
|
$
|
136,206
|
||||||
Japan
|
14,227
|
15,670
|
14,482
|
|||||||||
China
|
13,586
|
14,176
|
11,552
|
|||||||||
United Kingdom
|
7,763
|
7,411
|
4,754
|
|||||||||
Canada
|
5,424
|
4,722
|
4,372
|
|||||||||
Australia
|
3,690
|
4,148
|
2,704
|
|||||||||
Western Europe
|
3,211
|
2,016
|
1,679
|
|||||||||
Thailand
|
1,340
|
1,219
|
1,147
|
|||||||||
Brazil
|
1,141
|
1,285
|
1,423
|
|||||||||
Middle East
|
951
|
840
|
723
|
|||||||||
Singapore
|
877
|
865
|
722
|
|||||||||
Mexico/Central America
|
842
|
872
|
751
|
|||||||||
Denmark/Scandinavia
|
710
|
752
|
775
|
|||||||||
India
|
707
|
647
|
701
|
|||||||||
Indonesia
|
696
|
715
|
614
|
|||||||||
Central/Eastern Europe
|
637
|
757
|
638
|
|||||||||
The Philippines
|
401
|
353
|
324
|
|||||||||
Malaysia
|
356
|
338
|
364
|
|||||||||
Others
|
2,101
|
1,950
|
1,325
|
|||||||||
$
|
225,356
|
$
|
209,758
|
$
|
185,256
|
Fiscal Year Ended
|
Services and
|
Leases and
|
||||||||||||||||||
August 31, 2019
|
Products
|
Subscriptions
|
Royalties
|
Other
|
Consolidated
|
|||||||||||||||
Enterprise Division:
|
||||||||||||||||||||
Direct offices
|
$
|
102,557
|
$
|
52,536
|
$
|
2,661
|
$
|
-
|
$
|
157,754
|
||||||||||
International licensees
|
2,439
|
-
|
10,457
|
-
|
12,896
|
|||||||||||||||
104,996
|
52,536
|
13,118
|
-
|
170,650
|
||||||||||||||||
Education Division
|
23,779
|
22,151
|
2,950
|
-
|
48,880
|
|||||||||||||||
Corporate and eliminations
|
-
|
-
|
-
|
5,826
|
5,826
|
|||||||||||||||
Consolidated
|
$
|
128,775
|
$
|
74,687
|
$
|
16,068
|
$
|
5,826
|
$
|
225,356
|
||||||||||
Fiscal Year Ended
|
||||||||||||||||||||
August 31, 2018
|
||||||||||||||||||||
Enterprise Division:
|
||||||||||||||||||||
Direct offices
|
$
|
100,730
|
$
|
42,465
|
$
|
2,695
|
$
|
-
|
$
|
145,890
|
||||||||||
International licensees
|
2,484
|
-
|
10,742
|
-
|
13,226
|
|||||||||||||||
103,214
|
42,465
|
13,437
|
-
|
159,116
|
||||||||||||||||
Education Division
|
26,061
|
15,587
|
3,624
|
-
|
45,272
|
|||||||||||||||
Corporate and eliminations
|
-
|
-
|
-
|
5,370
|
5,370
|
|||||||||||||||
Consolidated
|
$
|
129,275
|
$
|
58,052
|
$
|
17,061
|
$
|
5,370
|
$
|
209,758
|
||||||||||
Fiscal Year Ended
|
||||||||||||||||||||
August 31, 2017
|
||||||||||||||||||||
Enterprise Division:
|
||||||||||||||||||||
Direct offices
|
$
|
99,616
|
$
|
20,452
|
$
|
2,241
|
$
|
-
|
$
|
122,309
|
||||||||||
International licensees
|
2,938
|
-
|
10,633
|
-
|
13,571
|
|||||||||||||||
102,554
|
20,452
|
12,874
|
-
|
135,880
|
||||||||||||||||
Education Division
|
31,017
|
10,440
|
2,665
|
-
|
44,122
|
|||||||||||||||
Corporate and eliminations
|
-
|
-
|
-
|
5,254
|
5,254
|
|||||||||||||||
Consolidated
|
$
|
133,571
|
$
|
30,892
|
$
|
15,539
|
$
|
5,254
|
$
|
185,256
|
AUGUST 31,
|
2019
|
2018
|
||||||
United States/Canada
|
$
|
31,129
|
$
|
34,237
|
||||
Japan
|
1,456
|
1,450
|
||||||
China
|
441
|
581
|
||||||
Singapore
|
370
|
315
|
||||||
United Kingdom
|
207
|
276
|
||||||
Australia
|
164
|
250
|
||||||
Germany, Switzerland, and Austria
|
10
|
-
|
||||||
$
|
33,777
|
$
|
37,109
|
18. |
RELATED PARTY TRANSACTIONS
|
AUGUST 31,
|
2019
|
2018
|
||||||
Other current assets
|
$
|
999
|
$
|
1,123
|
||||
Other long-term assets
|
-
|
411
|
||||||
$
|
999
|
$
|
1,534
|
1.
|
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
|
2.
|
provide reasonable assurance that the transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being
made only in accordance with the authorization of management and/or of our Board of Directors; and
|
3.
|
provide reasonable assurance regarding the prevention or timely detection of any unauthorized acquisition, use, or disposition of our assets that could have a material effect on our financial statements.
|
Plan Category
|
[a]
Number of securities to be issued upon exercise of outstanding options, warrants, and rights
|
[b]
Weighted-average exercise price of outstanding options, warrants,
and rights
|
[c]
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column [a])
|
|||||||||
(in thousands)
|
(in thousands)
|
|||||||||||
Equity compensation plans approved by security holders
|
1,347
|
(1)(2)
|
$
|
11.67
|
1,565
|
(3)(4)
|
(1) |
Excludes 28,525 shares of unvested (restricted) stock awards that are subject to forfeiture.
|
(2) |
Amount includes 778,605 performance share awards that may be awarded under the terms of various long-term incentive plans. The number of shares eventually awarded to participants through our long-term incentive plans is variable
and based upon the achievement of specified financial goals. For performance-based compensation awards where the number of shares may fluctuate within a range based on the achievement of the specified goal, this amount includes the
maximum number of shares that may be awarded to participants. The actual number of shares issued to participants therefore, may be less than the amount disclosed. The weighted average exercise price of outstanding options, warrants,
and rights does not include the impact of performance awards or restricted stock units. For further information on our stock-based compensation plans, refer to the notes to our financial statements as presented in Item 8 of this
report.
|
(3) |
Amount is comprised of the remaining shares authorized under our 2019 Omnibus Incentive Plan and 2017 Employee Stock Purchase Plan. The number of performance-based plan shares expected to be awarded at August 31, 2019 may change
in future periods based upon the achievement of specified goals and revisions to estimates.
|
(4) |
At August 31, 2019, we had approximately 903,000 shares authorized for purchase by participants in our Employee Stock Purchase Plan.
|
1.
|
Financial Statements. The consolidated financial statements of the Company and Report of Independent Registered Public
Accounting Firm thereon included in the Annual Report to Shareholders on Form 10-K for the year ended August 31, 2019, are as follows:
|
2.
|
Financial Statement Schedules.
|
3.
|
Exhibit List.
|
Exhibit No.
|
Exhibit
|
Incorporated By Reference
|
Filed Herewith
|
2.1
|
(8)
|
||
2.2
|
(9)
|
||
3.1
|
(4)
|
||
3.2
|
(7)
|
||
3.3
|
(15)
|
||
4.1
|
Specimen Certificate of the Registrant’s Common Stock, par value $.05 per share
|
(2)
|
4.2
|
(3)
|
||
4.3
|
(3)
|
||
4.4
|
(4)
|
||
4.5
|
(4)
|
||
10.1*
|
Forms of Nonstatutory Stock Options
|
(1)
|
|
10.2
|
(5)
|
||
10.3
|
(5)
|
||
10.4
|
(6)
|
||
10.5
|
(10)
|
||
10.6
|
(10)
|
||
10.7
|
(10)
|
||
10.8
|
(10)
|
||
10.9
|
(10)
|
||
10.10
|
(11)
|
||
10.11
|
(11)
|
||
10.12*
|
(12)
|
||
10.13
|
(13)
|
||
10.14
|
|
(13)
|
10.15
|
(13)
|
||
10.16
|
(14)
|
||
10.17
|
(16)
|
||
10.18
|
(17)
|
||
10.19*
|
(18)
|
||
10.20
|
(19)
|
||
10.21
|
(20)
|
||
10.22*
|
(21)
|
||
10.23
|
(22)
|
||
10.24
|
(23)
|
||
10.25
|
(23)
|
||
10.26
|
(24)
|
||
10.27
|
(25)
|
||
10.28
|
(26)
|
||
10.29
|
(26)
|
||
10.30*
|
|
(27)
|
10.31
|
(28)
|
||
10.32*
|
(29)
|
||
10.32
|
(30)
|
||
10.33
|
(30)
|
||
21
|
éé
|
||
23
|
éé
|
||
31.1
|
éé
|
||
31.2
|
éé
|
||
32
|
éé
|
||
101.INS
|
XBRL Instance Document
|
éé
|
|
101.SCH
|
XBRL Taxonomy Extension Schema
|
éé
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase
|
éé
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase
|
éé
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase
|
éé
|
|
101.PRE
|
XBRL Extension Presentation Linkbase
|
éé
|
(1)
|
Incorporated by reference to Registration Statement on Form S-1 filed with the Commission on April 17, 1992, Registration No. 33-47283.
|
(2)
|
Incorporated by reference to Amendment No. 1 to Registration Statement on Form S-1 filed with the Commission on May 26, 1992, Registration No. 33-47283.
|
(3)
|
Incorporated by reference to Schedule 13D (CUSIP No. 534691090 as filed with the Commission on June 14, 1999). Registration No. 005-43123.
|
(4)
|
Incorporated by reference to Report on Form 8-K filed with the Commission on March 10, 2005.**
|
(5)
|
Incorporated by reference to Report on Form 8-K filed with the Commission on June 27, 2005.**
|
(6)
|
Incorporated by reference to Report on Form 8-K filed with the Commission on October 24, 2005.**
|
(7)
|
Incorporated by reference to the Definitive Proxy Statement on Form DEF 14A filed with the Commission on December 12, 2005.**
|
(8)
|
Incorporated by reference to Report on Form 8-K/A filed with the Commission on May 29, 2008.**
|
(9)
|
Incorporated by reference to Report on Form 10-Q filed July 10, 2008, for the Quarter ended May 31, 2008.**
|
(10)
|
Incorporated by reference to Report on Form 8-K filed with the Commission on July 11, 2008.**
|
(11)
|
Incorporated by reference to Report on Form 10-Q filed with the Commission on April 9, 2009.**
|
(12)
|
Incorporated by reference to the Definitive Proxy Statement on Form DEF 14A (Appendix A) filed with the Commission on December 15, 2010.**
|
(13)
|
Incorporated by reference to Report on Form 8-K filed with the Commission on March 17, 2011.**
|
(14)
|
Incorporated by reference to Report on Form 8-K filed with the Commission on July 28, 2011.**
|
(15)
|
Incorporated by reference to Report on Form 8-K filed with the Commission on February 1, 2012.**
|
(16)
|
Incorporated by reference to Report on Form 8-K filed with the Commission on March 15, 2012.**
|
(17)
|
Incorporated by reference to Report on Form 8-K filed with the Commission on June 19, 2012.**
|
(18)
|
Incorporated by reference to Report on Form 8-K filed with the Commission on March 14, 2012.**
|
(19)
|
Incorporated by reference to Report on Form 8-K filed with the Commission on March 14, 2013.**
|
(20)
|
Incorporated by reference to Report on Form 8-K filed with the Commission on March 27, 2013.**
|
(21)
|
Incorporated by reference to the Definitive Proxy Statement on Form DEF 14A (Appendix A) filed with the Commission on December 22, 2014.**
|
(22)
|
Incorporated by reference to Report on Form 8-K filed with the Commission on April 2, 2015.**
|
(23)
|
Incorporated by reference to Report on Form 8-K filed with the Commission on May 24, 2016.**
|
(24)
|
Incorporated by reference to Report on Form 8-K filed with the Commission on March 3, 2017.**
|
(25)
|
Incorporated by reference to Report on Form 8-K filed with the Commission on June 1, 2017.**
|
(26)
|
Incorporated by reference to Report on Form 8-K filed with the Commission on August 29, 2017.**
|
(27)
|
Incorporated by reference to the Definitive Proxy Statement on Form DEF 14A (Appendix A) filed with the Commission on December 22, 2017.**
|
(28)
|
Incorporated by reference to Report on Form 8-K filed with the Commission on August 20, 2018.**
|
(29)
|
Incorporated by reference to the Definitive Proxy Statement on Form DEF 14A (Appendix A) filed with the Commission on December 20, 2018.**
|
(30)
|
Incorporated by reference to Report on Form 8-K filed with the Commission on August 8, 2019.**
|
|
By:
|
/s/ Robert A. Whitman
|
|
|
Robert A. Whitman
Chairman and Chief Executive Officer
|
Signature
|
Title
|
Date
|
/s/ Robert A. Whitman
|
Chairman of the Board
and Chief Executive Officer
|
November 14, 2019
|
Robert A. Whitman
|
||
/s/ Anne Chow
|
Director
|
November 14, 2019
|
Anne Chow
|
||
/s/ Clayton M. Christensen
|
Director
|
November 14, 2019
|
Clayton M. Christensen
|
||
/s/ Michael Fung
|
Director
|
November 14, 2019
|
Michael Fung
|
||
/s/ Dennis G. Heiner
|
Director
|
November 14, 2019
|
Dennis G. Heiner
|
||
/s/ Donald J. McNamara
|
Director
|
November 14, 2019
|
Donald J. McNamara
|
||
/s/ Joel C. Peterson
|
Director
|
November 14, 2019
|
Joel C. Peterson
|
||
/s/ E. Kay Stepp
|
Director
|
November 14, 2019
|
E. Kay Stepp
|
||
/s/ Derek van Bever
|
Director
|
November 14, 2019
|
Derek van Bever
|
||
/s/ Stephen D. Young
|
Chief Financial Officer
and Chief Accounting Officer
|
November 14, 2019
|
Stephen D. Young
|
1.
|
I have reviewed this yearly report on Form 10-K 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: November 14, 2019
|
/s/ Robert A. Whitman
|
|
|
Robert A. Whitman
Chief Executive Officer
|
1.
|
I have reviewed this yearly report on Form 10-K 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 November 14, 2019
|
/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: November 14, 2019
|
Date: November 14, 2019
|
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Related Party Transactions (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Aug. 31, 2019 | |||||||||||||||||||||||||||||||
Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||
Components Of Other Current And Other Long-Term Assets |
|
Nature Of Operations And Summary Of Significant Accounting Policies (Useful Life Of Property And Equipment) (Details) |
12 Months Ended |
---|---|
Aug. 31, 2019 | |
Buildings [Member] | |
Property, Plant and Equipment [Line Items] | |
Useful life | 20 years |
Machinery And Equipment [Member] | Minimum [Member] | |
Property, Plant and Equipment [Line Items] | |
Useful life | 5 years |
Machinery And Equipment [Member] | Maximum [Member] | |
Property, Plant and Equipment [Line Items] | |
Useful life | 7 years |
Computer Hardware And Software [Member] | Minimum [Member] | |
Property, Plant and Equipment [Line Items] | |
Useful life | 3 years |
Computer Hardware And Software [Member] | Maximum [Member] | |
Property, Plant and Equipment [Line Items] | |
Useful life | 5 years |
Furniture, Fixtures, And Leasehold Improvements [Member] | Minimum [Member] | |
Property, Plant and Equipment [Line Items] | |
Useful life | 5 years |
Furniture, Fixtures, And Leasehold Improvements [Member] | Maximum [Member] | |
Property, Plant and Equipment [Line Items] | |
Useful life | 7 years |
Nature Of Operations And Summary Of Significant Accounting Policies (Schedule Of Statements Of Operations Impacted By Adoption Of New Accounting Standard) (Details) - USD ($) $ / shares in Units, $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Aug. 31, 2019 |
Aug. 31, 2018 |
Aug. 31, 2017 |
|
Net sales | $ 225,356 | $ 209,758 | $ 185,256 |
Cost of sales | 66,042 | 61,469 | 62,589 |
Selling, general, and administrative | 145,319 | 141,126 | 121,148 |
Income tax provision | (1,615) | (367) | 3,737 |
Net loss | $ (1,023) | $ (5,887) | $ (7,172) |
Net loss per share: | |||
Basic and diluted | $ (0.07) | $ (0.43) | $ (0.52) |
ASU 2014-09 [Member] | Without ASC 606 [Member] | |||
Net sales | $ 225,222 | ||
Cost of sales | 66,042 | ||
Selling, general, and administrative | 145,329 | ||
Income tax provision | (1,580) | ||
Net loss | $ (1,132) | ||
Net loss per share: | |||
Basic and diluted | $ (0.08) | ||
ASU 2014-09 [Member] | Impact Of ASC 606 [Member] | |||
Net sales | $ 134 | ||
Selling, general, and administrative | (10) | ||
Income tax provision | (35) | ||
Net loss | $ 109 |
Nature Of Operations And Summary Of Significant Accounting Policies |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Aug. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Nature Of Operations And Summary Of Significant Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Nature Of Operations And Summary Of Significant Accounting Policies | Franklin Covey Co. (hereafter referred to as we, us, our, or the Company) is a global company specializing in organizational performance improvement. We help individuals and organizations achieve results that require a change in human behavior and our mission is to “enable greatness in people and organizations everywhere.” We have some of the best-known offerings in the training industry, including a suite of individual-effectiveness and leadership-development training and products based on the best-selling books, The 7 Habits of Highly Effective People, The Speed of Trust, The Leader In Me, and The Four Disciplines of Execution, and proprietary content in the areas of Execution, Sales Performance, Productivity, Customer Loyalty, and Educational improvement. Our offerings are described in further detail at www.franklincovey.com and elsewhere in this report. Through our organizational research and curriculum development efforts, we seek to consistently create, develop, and introduce new services and products that help individuals and organizations achieve their own great purposes. Fiscal Year Our fiscal year ends on August 31 of each year and our fiscal quarters end on the last day of November, February, and May. Unless otherwise noted, references to fiscal years apply to the 12 months ended August 31 of the specified year. Basis of Presentation The accompanying consolidated financial statements include the accounts of the Company and our wholly-owned subsidiaries, which consist of Franklin Development Corp., and our offices in Japan, China, the United Kingdom, Australia, Germany, Switzerland, and Austria. Intercompany balances and transactions are eliminated in consolidation. Pervasiveness of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. Actual results could differ from those estimates. Reclassifications Certain reclassifications have been made to our prior period financial statements to conform with the current period presentation. On our August 31, 2018 consolidated balance sheet, we have separately classified subscription revenue and other deferred revenue to conform to the current presentation of these balances. As product and leasing revenues have become immaterial to the presentation of our consolidated sales, we have combined revenues from services, products, and leasing into one line item on our consolidated statements of operations for all periods presented in this report. Cash and Cash Equivalents Some of our cash is deposited with financial institutions located throughout the United States of America and at banks in foreign countries where we operate subsidiary offices, and at times may exceed insured limits. We consider all highly liquid debt instruments with a maturity date of three months or less to be cash equivalents. We did not hold a significant amount of investments that would be considered cash equivalent instruments at August 31, 2019 or 2018. Of our $27.7 million in cash at August 31, 2019, $10.6 million was held outside the U.S. by our foreign subsidiaries. We routinely repatriate cash from our foreign subsidiaries and consider cash generated from foreign activities a key component of our overall liquidity position. Inventories Inventories are stated at the lower of cost or net realizable value, cost being determined using the first-in, first-out method. Elements of cost in inventories generally include raw materials and direct labor. Cash flows from the sale of inventory are included in cash flows provided by operating activities in our consolidated statements of cash flows. Our inventories are comprised primarily of training materials, books, and training-related accessories, and consisted of the following (in thousands):
Provision is made to reduce excess and obsolete inventories to their estimated net realizable value. In assessing the valuation of inventories, we make judgments regarding future demand requirements and compare these estimates with current and committed inventory levels. Inventory requirements may change based on projected customer demand, training curriculum life-cycle changes, and other factors that could affect the valuation of our inventories. Other Current Assets Significant components of our other current assets were as follows (in thousands):
We defer commission expense on subscription-based sales and recognize the commission expense with the recognition of the corresponding revenue. Property and Equipment Property and equipment are recorded at cost. Depreciation expense, which includes depreciation on our corporate campus that is accounted for as a financing obligation (Note 7), and the amortization of assets recorded under capital lease obligations, is calculated using the straight-line method over the lesser of the expected useful life of the asset or the contracted lease period. We generally use the following depreciable lives for our major classifications of property and equipment:
Our property and equipment were comprised of the following (in thousands):
We expense costs for repairs and maintenance as incurred. Gains and losses resulting from the sale of property and equipment are recorded in operating income (loss). Depreciation of capitalized portal costs is included in depreciation expense in the accompanying consolidated statements of operations. During each of the fiscal years ended August 31, 2018 and 2017, we capitalized $0.1 million of interest expense in connection with the installation of our new enterprise resource planning system and the development of our improved All Access Pass (AAP) portal. Impairment of Long-Lived Assets Long-lived tangible assets and finite-lived intangible assets are reviewed for possible impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. We use an estimate of undiscounted future net cash flows of the assets over the remaining useful lives in determining whether the carrying value of the assets is recoverable. If the carrying values of the assets exceed the anticipated future cash flows of the assets, we recognize an impairment loss equal to the difference between the carrying values of the assets and their estimated fair values. Impairment of long-lived assets is assessed at the lowest levels for which there are identifiable cash flows that are independent from other groups of assets. The evaluation of long-lived assets requires us to use estimates of future cash flows. If forecasts and assumptions used to support the realizability of our long-lived tangible and finite-lived intangible assets change in the future, significant impairment charges could result that would adversely affect our results of operations and financial condition. Indefinite-Lived Intangible Assets and Goodwill Impairment Testing Intangible assets that are deemed to have an indefinite life and acquired goodwill are not amortized, but rather are tested for impairment on an annual basis or more often if events or circumstances indicate that a potential impairment exists. The Covey trade name intangible asset has been deemed to have an indefinite life. This intangible asset is tested for impairment using qualitative factors or the present value of estimated royalties on trade name related revenues, which consist primarily of training seminars and work sessions, international licensee sales, and related products. Based on the fiscal 2019 evaluation of the Covey trade name, we believe the fair value of the Covey trade name substantially exceeds its carrying value. No impairment charges were recorded against the Covey trade name during the periods presented in this report. Goodwill is recorded when the purchase price for an acquisition exceeds the estimated fair value of the net tangible and identified intangible assets acquired. An annual (or interim test if events and circumstances indicate a test should be performed) goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount, and an impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. We tested goodwill for impairment at August 31, 2019 at the reporting unit level using a quantitative approach. The estimated fair value of each reporting unit was calculated using a combination of the income approach (discounted cash flows) and the market approach (using market multiples derived from a set of companies with comparable market characteristics). On an interim basis, we consider whether events or circumstances are present that may lead to the determination that goodwill may be impaired. If, based on events or changing circumstances, we determine it is more likely than not that the fair value of a reporting unit does not exceed its carrying value, we would be required to test goodwill for impairment. Determining the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions. These estimates and assumptions include revenue growth rates and operating margins used to calculate projected future cash flows, risk-adjusted discount rates, future economic and market conditions, and determination of appropriate market comparables. We base our fair value estimates on assumptions we believe to be reasonable, but that are unpredictable and inherently uncertain. Actual future results may differ from those estimates. In addition, we make certain judgments and assumptions in allocating shared assets and liabilities to determine the carrying values for each of our reporting units. The timing and frequency of our goodwill impairment tests are based on an ongoing assessment of events and circumstances that would indicate a possible impairment. Based on the results of our goodwill impairment testing, we determined that no impairment existed at either of August 31, 2019 or 2018 as each reporting unit’s estimated fair value exceeded its carrying value. We will continue to monitor our goodwill and intangible assets for impairment and conduct formal tests when impairment indicators are present. For more information regarding our intangible assets and goodwill, refer to Note 5. Capitalized Curriculum Development Costs During the normal course of business, we develop training courses and related materials that we sell to our clients. Capitalized curriculum development costs include certain expenditures to develop course materials such as video segments, course manuals, and other related materials. Our capitalized curriculum development spending in fiscal 2019, which totaled $2.7 million, was primarily for various Education practice offerings and courses for the All Access Pass, including Unconscious Bias. Curriculum costs are capitalized when there is a major revision to an existing course that requires a significant re-write of the course materials. Costs incurred to maintain existing offerings are expensed when incurred. In addition, development costs incurred in the research and development of new offerings and software products to be sold, leased, or otherwise marketed are expensed as incurred until economic and technological feasibility has been established. Capitalized development costs are amortized over three- to five-year useful lives, which are based on numerous factors, including expected cycles of major changes to our content. Capitalized curriculum development costs are reported as a component of other long-term assets in our consolidated balance sheets and totaled $7.0 million and $9.3 million at August 31, 2019 and 2018. Amortization of capitalized curriculum development costs is reported as a component of cost of sales in the accompanying consolidated statements of operations. Accrued Liabilities Significant components of our accrued liabilities were as follows (in thousands):
Contingent Consideration Payments from Business Acquisitions Business acquisitions may include contingent consideration payments based on various future financial measures related to the acquired entity. Contingent consideration is required to be recognized at fair value as of the acquisition date. We estimate the fair value of these liabilities based on financial projections of the acquired company and estimated probabilities of achievement. Based on updated estimates and projections, the contingent consideration liabilities are adjusted at each reporting date to their estimated fair value. Changes in fair value subsequent to the acquisition date are reported in selling, general, and administrative expense in our consolidated statements of operations, and may have a material impact on our operating results. Variations in the fair value of contingent consideration liabilities may result from changes in discount periods or rates, changes in the timing and amount of earnings estimates, and changes in probability assumptions with respect to the likelihood of achieving various payment criteria. Foreign Currency Translation and Transactions The functional currencies of our foreign operations are the reported local currencies. Translation adjustments result from translating our foreign subsidiaries’ financial statements into United States dollars. The balance sheet accounts of our foreign subsidiaries are translated into United States dollars using the exchange rate in effect at the balance sheet dates. Revenues and expenses are translated using average exchange rates for each month during the fiscal year. The resulting translation differences are recorded as a component of accumulated other comprehensive income in shareholders’ equity. Foreign currency transaction losses totaled $0.2 million, $0.5 million, and $0.2 million for the fiscal years ended August 31, 2019, 2018, and 2017, respectively, and are included as a component of selling, general, and administrative expenses in our consolidated statements of operations. Sales Taxes We collect sales tax on qualifying transactions with customers based upon applicable sales tax rates in various jurisdictions. We account for sales taxes collected using the net method; accordingly, we do not include sales taxes in net sales reported in our consolidated statements of operations. Revenue Recognition We account for revenue in accordance with Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606), which we adopted on September 1, 2018 using the modified retrospective method (see also Note 2). Prior to the adoption of Topic 606, we recognized revenue when: 1) persuasive evidence of an arrangement existed, 2) delivery of the product occurred or the services were rendered, 3) the price to the customer was fixed or determinable, and 4) collectability was reasonably assured. These principles governed our revenue recognition policies and procedures for fiscal 2018 and fiscal 2017 as presented in this report. For training and service sales, these conditions were generally met upon presentation of the training seminar or delivery of the consulting services based upon daily rates. For most of our product sales, these conditions were met upon shipment of the product to the customer. For intellectual property license sales, the revenue recognition conditions were generally met at the later of delivery of the content to the client or the effective date of the arrangement. Our subscription revenues from the All Access Pass and the Leader in Me membership were recognized over the duration of the underlying contracts since our clients had the right to content updates during the contracted period. Revenue recognition for multiple-element arrangements required judgment to determine if multiple elements existed, whether elements could be accounted for as separate units of accounting, and if so, the fair value for each of the elements. A deliverable constituted a separate unit of accounting when it had standalone value to our clients. We entered into arrangements that included various combinations of multiple training offerings, consulting services, and intellectual property licenses. The timing of delivery and performance of the elements typically varied from contract to contract. Generally, these items qualified as separate units of accounting because they had value to the customer on a standalone basis. We determined the fair value to be used for allocating revenue to the elements based on (i) vendor-specific objective evidence of fair value (VSOE), (ii) third-party evidence (TPE), and (iii) best estimate of selling price (BESP). Our international strategy includes the use of licensees in countries where we do not have a wholly-owned direct office. Licensee companies are unrelated entities that have been granted a license to translate our content and offerings, adapt the content to the local culture, and sell our content in a specific country or region. Licensees are required to pay us royalties based upon a percentage of their sales to clients. We recognize royalty income each period based upon the sales information reported to us from our licensees. Refer to disaggregated revenue information presented in Note 17 for our royalty revenues in the fiscal years presented in this report. Revenue is recognized as the net amount to be received after deducting estimated amounts for discounts and product returns. Stock-Based Compensation We record the compensation expense for all stock-based payments, including grants of stock options and the compensatory elements of our employee stock purchase plan, in our consolidated statements of operations based upon their fair values over the requisite service period. For more information on our stock-based compensation plans, refer to Note 12. Shipping and Handling Fees and Costs All shipping and handling fees billed to customers are recorded as a component of net sales. All costs incurred related to the shipping and handling of products are recorded in cost of sales. Advertising Costs Costs for advertising are expensed as incurred. Advertising costs included in selling, general, and administrative expenses totaled $4.6 million, $6.9 million, and $6.4 million for the fiscal years ended August 31, 2019, 2018, and 2017. Income Taxes Our income tax provision has been determined using the asset and liability approach of accounting for income taxes. Under this approach, deferred income taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. The income tax provision represents income taxes paid or payable for the current year plus the change in deferred taxes during the year. Deferred income taxes result from differences between the financial and tax bases of our assets and liabilities and are adjusted for tax rates and tax laws when changes are enacted. A valuation allowance is provided against deferred income tax assets when it is more likely than not that all or some portion of the deferred income tax assets will not be realized. Interest and penalties related to uncertain tax positions are recognized as components of income tax benefit or expense in our consolidated statements of operations. We may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement. We provide for income taxes, net of applicable foreign tax credits, on temporary differences in our investment in foreign subsidiaries, which consist primarily of unrepatriated earnings. Comprehensive Loss Comprehensive loss includes changes to equity accounts that were not the result of transactions with shareholders. Comprehensive loss is comprised of net income or loss and other comprehensive income and loss items. Our other comprehensive income and losses generally consist of changes in the cumulative foreign currency translation adjustment, net of tax. Accounting Pronouncements Issued and Adopted Revenue Recognition In May 2014, the Financial Accounting Standards Board (FASB) issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). This new standard was issued in conjunction with the International Accounting Standards Board (IASB) and is designed to create a single, principles-based process by which all businesses calculate revenue. The core principle of this standard is that an entity should recognize revenue for the transfer of goods or services equal to the amount that it expects to be entitled to receive for those goods or services. The new standard replaces numerous individual, industry-specific revenue rules found in generally accepted accounting principles in the United States. We adopted ASU No. 2014-09 on September 1, 2018 using the “modified retrospective” approach. Under this transition method, we applied the new standard to contracts that were not completed as of the adoption date and recognized a cumulative effect adjustment which reduced our retained earnings by $4.1 million ($3.1 million, net of tax) on September 1, 2018, which primarily consisted of initial licensing fees on international locations. The comparative period information for fiscal 2018 and fiscal 2017 has not been restated and continues to be presented according to accounting standards for revenue recognition in effect during the periods presented. The primary impact of ASU No. 2014-09 on our revenue recognition policies is a change in the way we account for our initial license fee associated with licensing an international location. The Company previously recorded the non-refundable initial license fee from licensing an international location as revenue at the time the license period begins if all other revenue requirements had been met. However, under Topic 606, the Company will recognize revenue on the upfront license fees over the duration of the contract. Under Topic 606, we account for the All Access Pass as a single performance obligation and recognize the associated transaction price on a straight-line basis over the term of the underlying contract. This determination was reached after considering that our web-based functionality and content, in combination with our intellectual property, each represent inputs that transform into a combined output that represents the intended outcome of the AAP, which is to provide a continuously accessible, customized, and dynamic learning and development solution only accessible through the AAP platform. We do not expect the accounting for fulfillment costs or costs incurred to obtain a contract to be materially effected in any period due to the adoption of ASU 2014-09. Refer to Note 2 for further details regarding our revenue recognition accounting policies under Topic 606. The cumulative after-tax effects of the changes made to our consolidated balance sheet from the adoption of Topic 606 were as follows (in thousands):
The following line items in our consolidated statement of operations were impacted by the adoption of the new revenue recognition standard for the year ended August 31, 2019 (in thousands, except per-share data):
Selected consolidated balance sheet line items as of August 31, 2019, which were impacted by the adoption of the new standard, are as follows (in thousands):
The adoption of ASC Topic 606 did not have a material impact on our cash flows from operating, investing, or financing activities. Stock-Based Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation: Improvements to Nonemployee Share-Based Payment Accounting (Topic 718). ASU No. 2018-07 expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The amendments in this update specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments used effectively to provide financing to the issuer or awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers. The new guidance is effective for interim and annual periods beginning after December 15, 2018, with early application permitted. We adopted the provisions of ASU No. 2018-07 on June 1, 2019. However, we have not previously granted awards to non-employees (except for members of the Board of Directors) and there was no cumulative impact from the adoption ASU No. 2018-07. Accounting Pronouncements Issued Not Yet Adopted Leases (Topic 842) In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which supersedes FASB Accounting Standards Codification (ASC) Topic 840, Leases. Under the new guidance, we will recognize liabilities and corresponding “right-of-use” (ROU) assets for most leases but will recognize lease expenses similar to current lease accounting. The lease liability will be equal to the present value of lease payments not yet paid and the ROU asset will be based on the liability, adjusted for initial direct costs, prepaid lease payments, and lease incentives. For lessors, accounting for leases is substantially the same as in prior periods. In July 2018, the FASB issued an adoption approach that allows entities to apply the new guidance and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption without restating prior periods. We will adopt the new leasing standard on September 1, 2019 using this transition method. At August 31, 2019, our leases primarily consist of the lease on our corporate campus, and operating leases for office space, warehousing space, and equipment. The lease for our corporate campus is currently accounted for as a financing obligation and related building asset on our consolidated balance sheets, as the contract represented a failed sale-leaseback under Topic 840. In transition to Topic 842, we will be required to reassess whether the previously failed sale-leaseback will meet the sale criteria under the new leasing standard. We currently believe that the sale criteria under the new leasing standard will not be met and we will continue to account for the corporate campus lease as a finance obligation upon transition. For our operating leases, we will elect to apply the package of practical expedients, which allows us to not reassess prior conclusions related to contracts containing leases, lease classification, and initial direct costs. We continue to finalize our implementation efforts and currently estimate that the adoption of the new leasing standard will result in recognition of approximately $1.4 million to $1.6 million of lease liabilities for operating leases and a corresponding amount for ROU assets on the date of adoption. The new lease standard also provides practical expedients for an entity’s ongoing accounting. We currently expect to elect the short-term lease recognition exemption for all leases that qualify, which means leases with initial terms of 12 months or less will not be recorded on the balance sheet. We do not expect the adoption of the new lease standard to have a material impact on our consolidated statements of operations or cash flows. Credit Losses on Financial Instruments In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This accounting standard changes the methodology for measuring credit losses on financial instruments, including trade accounts receivable, and the timing of when such losses are recorded. ASU No. 2016-13 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. Early adoption is permitted for fiscal years, and interim periods within those years, beginning after December 15, 2018. The Company is currently evaluating the impact of ASU No. 2016-13 on its financial position, results of operations, and liquidity. Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (ASU 2018-15). This guidance clarifies the accounting for implementation costs in a cloud computing arrangement that is a service contract and aligns the requirements for capitalizing those costs with the capitalization requirements for costs incurred to develop or obtain internal-use software. The new standard is effective for interim and annual periods beginning after December 15, 2019, and early adoption is permitted. We are currently evaluating the effects, if any, the adoption of ASU 2018-15 may have on our financial position, results of operations, cash flows, or disclosures.
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Financing Obligation (Future Principal Maturities) (Details) - Financing Obligation [Member] $ in Thousands |
Aug. 31, 2019
USD ($)
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Future Principal Maturities Financing Obligation [Line Items] | |
2020 | $ 2,335 |
2021 | 2,600 |
2022 | 2,887 |
2023 | 3,199 |
2024 | 3,538 |
Thereafter | 4,424 |
Total | $ 18,983 |
Earnings (Loss) Per Share (Computation Of EPS) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
12 Months Ended | ||
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Aug. 31, 2019 |
Aug. 31, 2018 |
Aug. 31, 2017 |
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Numerator for basic and diluted earnings per share: | |||
Net loss | $ (1,023) | $ (5,887) | $ (7,172) |
Denominator for basic and diluted earnings per share: | |||
Basic weighted average shares outstanding | 13,948 | 13,849 | 13,819 |
Diluted weighted average shares outstanding | 13,948 | 13,849 | 13,819 |
EPS Calculations: | |||
Net loss per share: Basic and diluted | $ (0.07) | $ (0.43) | $ (0.52) |
Accounts Receivable (Tables) |
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Accounts Receivable [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Activity In Allowance For Doubtful Accounts |
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Related Party Transactions |
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Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||
Related Party Transactions | 18.RELATED PARTY TRANSACTIONS Knowledge Capital Investment Group At each of August 31, 2019 and 2018, Knowledge Capital Investment Group (Knowledge Capital) held 2.8 million shares of our common stock. Two members of our Board of Directors, including our CEO, have an equity interest in Knowledge Capital. FC Organizational Products We own a 19.5 percent interest in FC Organizational Products, LLC, an entity that purchased substantially all of our consumer solution business unit assets in fiscal 2008 for the purpose of selling planners and related organizational products under a comprehensive licensing agreement. On the date of the sale closing, we invested approximately $1.8 million to purchase a 19.5 percent voting interest in FCOP, and made a $1.0 million priority capital contribution with a 10 percent return. At the time of the transaction, we determined that FCOP was not a variable interest entity. As a result of FCOP’s structure as a limited liability company with separate owner capital accounts, we determined that our investment in FCOP is more than minor and we are required to account for our investment in FCOP using the equity method of accounting. We have not recorded our share of FCOP’s losses in the accompanying consolidated statements of operations because we have impaired and written off investment balances, as defined within the applicable accounting guidance, in previous periods in excess of our share of FCOP’s losses through August 31, 2019. Due to significant operating losses incurred after the establishment of FCOP, we reconsidered whether FCOP was a variable interest entity as defined under ASC 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. The operations of FCOP are primarily financed by the sale of planning products and accessories, and our primary exposure related to FCOP is from amounts owed to us by FCOP. We receive reimbursement from FCOP for certain operating costs and rental payments for the office space that FCOP occupies. We classify our receivables from FCOP based upon expected payment. Receivables from FCOP are reported as components of other current and other long-term assets based on their expected payment dates and consisted of the following (in thousands):
During the past few years, we received larger payments from FCOP on our receivables than previously anticipated. Based on the payments received during fiscal 2019 and amounts expected to be received during fiscal 2020, all remaining receivables from FCOP at August 31, 2019 are now classified as current assets. Accordingly, we accelerated the accretion of the remaining discount on these receivables during fiscal 2019, which totaled $0.2 million. The amounts receivable from FCOP at August 31, 2018 are presented net of a $0.3 million discount. On November 4, 2019, FCOP sold substantially all of its assets to Franklin Planner Corporation (FPC), a new unrelated entity. FPC is expected to continue FCOP’s business of selling planners and other related consumer products. In connection with this transaction, we exchanged approximately $3.2 million of receivables, including $2.6 million of cash used by the Company to purchase FCOP’s bank debt on the transaction date, for an amended 30-year license agreement. The amended license agreement grants the right to use certain of our trademarks and other intellectual property in connection with certain consumer products and provides us with minimum royalties of approximately $1.3 million per year. FPC assumed the amended master license agreement from FCOP upon the purchase of FCOP assets. CoveyLink Acquisition and Contractual Payments During fiscal 2009, we acquired the assets of CoveyLink Worldwide, LLC (CoveyLink). CoveyLink conducts training and provides consulting based upon the book The Speed of Trust by Stephen M.R. Covey, who is the brother of one of our executive officers. Prior to the acquisition date, CoveyLink had granted us a non-exclusive license for content related to The Speed of Trust book and related training courses for which we paid CoveyLink specified royalties. As part of the CoveyLink acquisition, an amended and restated license for intellectual property was signed that granted us an exclusive, perpetual, worldwide, transferable, royalty-bearing license to use, reproduce, display, distribute, sell, prepare derivative works of, and perform the licensed material in any format or medium and through any market or distribution channel. We are required to pay Stephen M.R. Covey royalties for the use of certain intellectual property developed by him. The amount expensed for these royalties totaled $1.7 million, $1.8 million, and $1.5 million during the fiscal years ended August 31, 2019, 2018, and 2017. As part of the acquisition of CoveyLink, we signed an amended license agreement as well as a speaker services agreement. Based on the provisions of the speakers’ services agreement, we pay Stephen M.R. Covey a portion of the speaking revenues received for his presentations. We expensed $1.2 million, $0.9 million, and $1.2 million for payment on these presentations during the fiscal years ended August 31, 2019, 2018 and 2017. We had $0.6 million and $0.7 million accrued for these royalties and speaking fees at August 31, 2019 and 2018, respectively, which were included as components of accrued liabilities on our consolidated balance sheets. Acquired License Rights for Intellectual Property During the third quarter of fiscal 2017, we acquired the license rights for certain intellectual property owned by Higher Moment, LLC for $0.8 million. The intellectual property is in part based on works authored and developed by Dr. Clayton Christensen, a well-known author and lecturer, who is a member of our Board of Directors. However, Dr. Christensen does not have an ownership interest in Higher Moment, LLC. The initial license period is five years and the agreement may be renewed for successive five-year periods for $0.8 million at each renewal date. The agreement may be terminated by either party at any time, but if we choose to terminate the agreement prior to the third renewal date, we are required to pay $0.3 million to Higher Moment, LLC. Other Related Party Transactions We pay an executive officer of the Company a percentage of the royalty proceeds received from the sales of certain books authored by him in addition to his annual salary. During the fiscal years ended August 31, 2019, 2018, and 2017, we expensed $0.1 million, $0.2 million, and $0.2 million for these royalties, and we had $0.1 million accrued at each of August 31, 2019 and 2018 as payable under the terms of these arrangements. These amounts are included as components of accrued liabilities in our consolidated balance sheets. We pay a company owned by the brother of a member of our executive management team for the production of video segments used in our offerings. During fiscal 2019, we paid $0.8 million to this company for services provided.
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Employee Benefit Plans |
12 Months Ended |
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Aug. 31, 2019 | |
Employee Benefit Plans [Abstract] | |
Employee Benefit Plans | 14.EMPLOYEE BENEFIT PLANS Profit Sharing Plans We have defined contribution profit sharing plans for our employees that qualify under Section 401(k) of the Internal Revenue Code. These plans provide retirement benefits for employees meeting minimum age and service requirements. Qualified participants may contribute up to 75 percent of their gross wages, subject to certain limitations. These plans also provide for matching contributions to the participants that are paid by the Company. The matching contributions, which were expensed as incurred, totaled $2.2 million, $2.1 million, and $1.9 million during the fiscal years ended August 31, 2019, 2018, and 2017. We do not sponsor or participate in any defined-benefit pension plans. Non-Qualified Deferred Compensation Plan We had a non-qualified deferred compensation (NQDC) plan that provided certain key officers and employees the ability to defer a portion of their compensation until a later date. Deferred compensation amounts used to pay benefits were held in a “rabbi trust,” which invested in insurance contracts, various mutual funds, and shares of our common stock as directed by the plan participants. However, due to legal changes resulting from the American Jobs Creation Act of 2004, we determined to cease compensation deferrals to the NQDC plan after December 31, 2004. Following the cessation of deferrals to the NQDC plan, the number of participants remaining in the plan declined steadily, and our Board of Directors decided to partially terminate the NQDC plan. Following this decision, all of the plan’s assets were liquidated, the plan’s liabilities were paid, and the only remaining items in the NQDC plan are shares of our common stock owned by the remaining plan participants. At August 31, 2019 and 2018, the cost basis of the shares of our common stock held by the rabbi trust was $0.2 million. Shares of our common stock held in the rabbi trust are included as components of treasury stock on the accompanying consolidated balance sheets.
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Shareholders' Equity |
12 Months Ended |
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Aug. 31, 2019 | |
Shareholders' Equity [Abstract] | |
Shareholders' Equity | 10.SHAREHOLDERS’ EQUITY Preferred Stock We have 14.0 million shares of preferred stock authorized for issuance. At August 31, 2019 and 2018, no shares of preferred stock were issued or outstanding. Treasury Stock 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. Through August 31, 2019, we have purchased 1,539,828 shares of our common stock for $26.8 million under the terms of this expanded common stock repurchase plan. 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 our common shares, and applicable legal requirements. We have 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. The cost of common stock purchased for treasury as shown on our consolidated statement of cash flows for the year ending August 31, 2019 is comprised of the cost of 561 shares that were withheld for statutory income taxes on stock-based compensation awards issued to participants during the fiscal 2019. The withheld shares were valued at the market price on the date the shares were distributed to participants, which totaled approximately $12,000. For the fiscal years ended August 31, 2018 and 2017, we withheld 104,699 shares and 51,156 shares for statutory taxes on stock-based compensation awards, which had a total market value of $2.0 million and $0.9 million, respectively.
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Term Loans Payable And Revolving Line Of Credit |
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Term Loans Payable And Revolving Line Of Credit [Abstract] | |||||||||||||||||||||||||||||||||||||
Term Loans Payable And Revolving Line Of Credit | 6.TERM LOANS PAYABLE AND REVOLVING LINE OF CREDIT On August 7, 2019, we entered into a new credit agreement (the 2019 Credit Agreement) with our existing lender, which replaced the amended and restated credit agreement, dated March 2011 (the Original Credit Agreement). The 2019 Credit Agreement provides up to $25.0 million in term loans and a $15.0 million revolving line of credit. Upon entering into the 2019 Credit Agreement, we borrowed $20.0 million through a term loan and used the proceeds to repay all indebtedness under the Original Credit Agreement. Surplus proceeds from the term loan are classified as cash and cash equivalents on our consolidated balance sheet. Within one year of the date of the 2019 Credit Agreement, we may request an additional $5.0 million term loan. Interest on all borrowings under the 2019 Credit Agreement is due and payable on the first day of each month and will be equal to LIBOR plus 1.85 percent, which pricing matches that of the Original Credit Agreement. The effective interest rate on our term loan and revolving line of credit was 4.1 percent at August 31, 2019 and 3.9 percent at August 31, 2018. We incurred approximately $0.1 million of legal fees to obtain the 2019 Credit Agreement. The 2019 Credit Agreement preserves the financial covenants in the Original Credit Agreement, which are (i) a Funded Indebtedness to Adjusted EBITDAR Ratio of less than 3.00 to 1.00; (ii) a Fixed Charge Coverage ratio not less than 1.15 to 1.00; (iii) an annual limit on capital expenditures (excluding capitalized curriculum development costs) of $8.0 million; and (iv) consolidated accounts receivable of not less than 150% of the aggregate amount of the outstanding borrowings on the revolving line of credit, the undrawn amount of outstanding letters of credit, and the amount of unreimbursed letter of credit disbursements. In the event of noncompliance with these financial covenants and other defined events of default, the lender is entitled to certain remedies, including acceleration of the repayment of any amounts outstanding on the 2019 Credit Agreement. At August 31, 2019, we believe that we were in compliance with the terms and covenants applicable to the 2019 Credit Agreement. The 2019 Credit Agreement is secured by substantially all of the assets of the Company and certain of our subsidiaries and contains customary representations, warranties, and covenants. Term Loans Payable As previously described, we borrowed $20.0 million on a term loan and used the proceeds to repay all indebtedness under the Original Credit Agreement. Within one year of the date of the 2019 Credit Agreement, we may request an additional $5.0 million term loan with the same terms as the original $20.0 million term loan. Principal payments on the term loans of $1.25 million will be due and payable on the first day of each January, April, July, and October ($5.0 million per year) until the term loan obligation is repaid. Quarterly principal payments remain the same whether or not we choose to obtain the additional $5.0 million term loan. Accordingly, at August 31, 2019, the principal of the $20.0 million term loan will be repaid over four years as shown below (in thousands):
Revolving Line of Credit The key terms and conditions of our revolving line of credit associated with the 2019 Credit Agreement are as follows:
At August 31, 2019, we did not have any borrowings on the revolving line of credit. We had $11.3 million outstanding on our revolving line of credit at August 31, 2018.
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Intangible Assets And Goodwill (Tables) |
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Intangible Assets |
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Range Of Remaining Estimated Useful Lives And Weighted-Average Amortization |
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Amortization Expense For Intangible Assets Over The Next Five Years |
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Schedule Of Reclassified Goodwill From Strategic Market To Direct Office Segment |
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Fair Value Of Financial Instruments (Tables) |
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Schedule Of Contingent Consideration Liabilities |
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Schedule Of Growth Rates To Fair Value Contingent Consideration |
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Earnings (Loss) Per Share (Tables) |
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Earnings (Loss) Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Computation Of EPS |
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Business Acquisitions (Schedule Of Pro Forma) (Details) $ / shares in Units, $ in Thousands |
12 Months Ended |
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Aug. 31, 2017
USD ($)
$ / shares
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Business Acquisitions [Abstract] | |
Revenue | $ 187,745 |
Net loss | $ (7,976) |
Diluted loss per share | $ / shares | $ (0.58) |
Commitments And Contingencies (Narrative) (Details) - USD ($) $ in Thousands |
12 Months Ended | |||
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Jul. 01, 2016 |
Aug. 31, 2019 |
Aug. 31, 2018 |
Aug. 31, 2017 |
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HPE outsourcing contract, fixed charge per month | $ 19 | |||
HPE outsourcing contract, expiration date | Jun. 30, 2020 | |||
HPE outsourcing contract, expense | $ 3,100 | $ 2,900 | $ 2,600 | |
Cost of sales | 66,042 | 61,469 | 62,589 | |
Purchase commitments | 4,500 | |||
Amount of letters of credit | $ 100 | 100 | ||
Letters of credit, expiration date | Jan. 01, 2020 | |||
Amount drawn on letters of credit | $ 0 | 0 | ||
Freight [Member] | ||||
Cost of sales | $ 2,100 | $ 1,900 | $ 1,500 |
Income Taxes (Benefit (Provision) For Income Taxes From Continuing Operations) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
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Aug. 31, 2019 |
Aug. 31, 2018 |
Aug. 31, 2017 |
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Income Taxes [Abstract] | |||
Current, Federal | $ 93 | $ 29 | $ 69 |
Current, State | (14) | 210 | (71) |
Current, Foreign | (2,745) | (2,947) | (2,320) |
Current | (2,666) | (2,708) | (2,322) |
Deferred, Federal | 3,112 | 1,426 | (1,227) |
Deferred, State | 102 | (314) | (17) |
Deferred, Foreign | (120) | (281) | 468 |
Operating loss carryforward | (1,625) | 2,636 | 6,964 |
Adjustment for changes in U.S. income tax rates | 1,654 | ||
Valuation allowance | (418) | (2,780) | (129) |
Deferred | 1,051 | 2,341 | 6,059 |
Benefit (provision) for income taxes | $ (1,615) | $ (367) | $ 3,737 |
Commitments And Contingencies |
12 Months Ended |
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Aug. 31, 2019 | |
Commitments And Contingencies [Abstract] | |
Commitments And Contingencies | 9.COMMITMENTS AND CONTINGENCIES Warehouse Outsourcing Contract Effective July 1, 2016, we entered into a warehousing services agreement with an independent warehouse and distribution company to provide product kitting, warehousing, and order fulfillment services at a facility in Des Moines, Iowa. Under the terms of this contract, we pay a fixed charge of approximately $19,000 per month for account management services and variable charges for other warehousing services based on specified activities, including shipping charges. The warehouse charges may be increased each year of the contract based upon changes in the Employment Cost Index. The original warehousing and distribution contract expired on June 30, 2019, and we extended the contract with essentially the same terms until June 30, 2020. During fiscal years 2019, 2018, and 2017, we expensed $3.1 million, $2.9 million, and $2.6 million for services provided under the terms of our warehouse and distribution outsourcing contract. The total amount expensed each year includes freight charges, which are billed to the Company based upon activity. Freight charges included in the warehouse and distribution outsourcing costs totaled $2.1 million, $1.9 million, and $1.5 million during the fiscal years ended August 31, 2019, 2018, and 2017. Because of the variable component of the agreement, our payments for warehouse and distribution services may fluctuate in the future due to changes in sales and levels of specified activities. Purchase Commitments During the normal course of business, we issue purchase orders to various vendors for products and services. At August 31, 2019, we had open purchase commitments totaling $4.5 million for products and services to be delivered primarily in fiscal 2020. Letters of Credit At August 31, 2019 and 2018, we had standby letters of credit totaling $0.1 million. These letters of credit were primarily required to secure commitments for certain insurance policies and expire in January 2020. No amounts were drawn on the letters of credit at either August 31, 2019 or August 31, 2018. Legal Matters and Loss Contingencies We are the subject of certain legal actions, which we consider routine to our business activities. At August 31, 2019, we believe that, after consultation with legal counsel, any potential liability to us under these other actions will not materially affect our financial position, liquidity, or results of operations.
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Intangible Assets And Goodwill |
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Intangible Assets And Goodwill [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible Assets And Goodwill | 5.INTANGIBLE ASSETS AND GOODWILL Intangible Assets Our intangible assets were comprised of the following (in thousands):
Our intangible assets are amortized over the estimated useful life of the asset. The range of remaining estimated useful lives and weighted-average amortization period over which we are amortizing the major categories of finite-lived intangible assets at August 31, 2019 were as follows:
Our aggregate amortization expense from finite-lived intangible assets totaled $5.0 million, $5.4 million, and $3.5 million for the fiscal years ended August 31, 2019, 2018, and 2017. Amortization expense from our intangible assets over the next five years is expected to be as follows (in thousands):
Goodwill There were no changes to our consolidated goodwill balance during fiscal 2019 and we do not have any accumulated impairment charges against the carrying value of our goodwill. At August 31, 2019 and 2018, goodwill was allocated to our segments as shown below (in thousands):
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Segment Information (Tables) |
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Segment Information [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Segment Operations |
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Reconciliation Of Adjusted EBITDA |
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Consolidated Revenues From Continuing Operations By Country |
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Schedule Of Revenue Disaggregate By Activities |
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Long-Lived Assets By Countries |
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Term Loans Payable And Revolving Line Of Credit (Tables) |
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Term Loans Payable And Revolving Line Of Credit [Abstract] | |||||||||||||||||||||||||
Principal Payments By Fiscal Year |
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Stock-Based Compensation Plans (Tables) |
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Stock-Based Compensation Plans [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total Cost Of Share-Based Compensation |
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Unvested Stock Awards |
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Stock Option Activity |
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Stock Options Outstanding And Exercisable |
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Revenue Recognition (Narrative) (Details) - USD ($) $ in Thousands |
12 Months Ended | |
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Aug. 31, 2019 |
Aug. 31, 2018 |
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Deferred revenue | $ 65,800 | $ 52,900 |
Other long-term liabilities | 3,600 | 1,000 |
Deferred subscription revenue | 56,250 | $ 47,417 |
Deferred subscription revenue previously recognized | 74,700 | |
Remaining performance obligations | $ 88,100 | |
Percentage of remaining performance obligations will be recognized | 75.00% | |
Minimum [Member] | ||
Receivables collection period | 30 days | |
Maximum [Member] | ||
Receivables collection period | 120 days | |
Direct Sales Force Commissions [Member] | ||
Capitalized contract cost | $ 9,000 | |
Direct Sales Force Commissions [Member] | Other Current Assets [Member] | ||
Capitalized contract cost | 8,300 | |
Direct Sales Force Commissions [Member] | Other Long-Term Liabilities [Member] | ||
Capitalized contract cost | 700 | |
Obtain Revenue Contracts [Member] | ||
Capitalized contract cost | 13,700 | |
Selling, General, And Administrative Expense [Member] | ||
Capitalized contract cost, amortized | $ 11,700 |
Intangible Assets And Goodwill (Narrative) (Details) - USD ($) $ in Millions |
12 Months Ended | ||
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Aug. 31, 2019 |
Aug. 31, 2018 |
Aug. 31, 2017 |
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Intangible Assets And Goodwill [Abstract] | |||
Aggregate amortization expense from finite-lived intangible assets | $ 5.0 | $ 5.4 | $ 3.5 |
Shareholders' Equity (Narrative) (Details) - USD ($) |
12 Months Ended | |||||
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Mar. 27, 2015 |
Jan. 23, 2015 |
Aug. 31, 2019 |
Aug. 31, 2018 |
Aug. 31, 2017 |
Aug. 31, 2016 |
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Class of Stock [Line Items] | ||||||
Shares of preferred stock authorized for issuance | 14,000,000 | |||||
Preferred stock issued | 0 | 0 | ||||
Preferred stock outstanding | 0 | 0 | ||||
Amount authorized under common stock repurchase plan | $ 40,000,000 | |||||
Number of shares withheld for minimum statutory taxes | 561 | 104,699 | 51,156 | |||
Values of withheld shares | $ 12,000 | $ 2,000,000 | $ 900,000 | |||
Stock repurchased during period, shares | 10,000,000 | 1,539,828 | ||||
Stock repurchased during period, value | $ 26,800,000 | |||||
Cash and cash equivalents | 10,000,000 | $ 27,699,000 | $ 10,153,000 | $ 8,924,000 | $ 10,456,000 | |
Minimum [Member] | ||||||
Class of Stock [Line Items] | ||||||
Available cash for debt financing | $ 10,000,000 |
Contract Termination And Restructuring Costs (Schedule Of Restructuring Charges) (Details) - USD ($) $ in Thousands |
12 Months Ended | |
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Aug. 31, 2019 |
Aug. 31, 2017 |
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Total restructuring charge | $ 1,482 | |
Fiscal 2017 Restructuring Costs [Member] | ||
Total restructuring charge | $ 3,600 | |
US and Canada Direct Office Restructuring [Member] | Fiscal 2017 Restructuring Costs [Member] | ||
Severance costs | $ 986 | |
Office closure costs | 496 | |
Total restructuring charge | $ 1,482 |
Income Taxes (Allocation Of Total Income Tax Provision(Benefit)) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
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Aug. 31, 2019 |
Aug. 31, 2018 |
Aug. 31, 2017 |
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Income Taxes [Abstract] | |||
Net income (loss) | $ (1,615) | $ (367) | $ 3,737 |
Other comprehensive income | (5) | (75) | 37 |
Total income tax provision (benefit) | $ (1,620) | $ (442) | $ 3,774 |
Revenue Recognition |
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Revenue Recognition [Abstract] | |||||||||||||||||||||
Revenue Recognition | 2.REVENUE RECOGNTION We account for revenue in accordance with Topic 606, which was adopted on September 1, 2018 using the modified retrospective method (Note 1). We earn revenue from contracts with customers primarily through the delivery of our All Access Pass and the Leader in Me membership subscription offerings, through the delivery of training days and training course materials, and through the licensing of rights to sell our content into geographic locations where the Company does not maintain a direct office. We also earn revenues from leasing arrangements that are not accounted for under Topic 606. Returns and refunds are generally immaterial, and we do not have any significant warranty obligations. Under Topic 606, we recognize revenue upon the transfer of control of promised products and services to customers in an amount equal to the consideration we expect to receive in exchange for those products or services. Although rare, if the consideration promised in a contract includes variable amounts, we evaluate the estimate of variable consideration to determine whether the estimate needs to be constrained. We include the variable consideration in the transaction price only to the extent that it is probable a significant reversal of the amount of cumulative revenue recognized will not occur. We determine the amount of revenue to be recognized through application of the following steps:
Taxes assessed by a government authority that are collected from a customer are excluded from net revenue. Services and Products We deliver Company-led training days from our offerings, such as The 7 Habits of Highly Effective People, at a customer’s location based upon a daily consultant rate and a set price for training materials. These revenues are recognized as the training days occur and the services are performed. Customers also have the option to purchase training materials and present our offerings through internal facilitators and not through the use of a Franklin Covey consultant. Revenue is recognized from these product sales when the materials are shipped. Shipping revenues associated with product sales are recorded in revenue with the corresponding shipping cost being recorded as a component of cost of sales. Subscription Revenues Subscription revenues primarily relate to the Company’s All Access Pass and the Leader in Me membership offerings. We have determined that it is most appropriate to account for the AAP as a single performance obligation and recognize the associated transaction price ratably over the term of the underlying contract beginning on the commencement date of each contract, which is the date the Company’s platforms and resources are made available to the customer. This determination was reached after considering that our web-based functionality and content, in combination with our intellectual property, each represent inputs that transform into a combined output that represents the intended outcome of the AAP, which is to provide a continuously accessible, customized, and dynamic learning and development solution only accessible through the AAP platform. We typically invoice our customers annually upon execution of the contract or subsequent renewals. Amounts that have been invoiced are recorded in accounts receivable and in unearned revenue or revenue, depending on whether transfer of control has occurred. Our Leader in Me offering is bifurcated into a portal membership obligation and a coaching delivery obligation. We have determined that it is appropriate to recognize revenue related to the portal membership over the term of the underlying contract and to recognize revenue from coaching as those services are performed. The combined contract amount is recorded in deferred subscription revenue until the performance obligations are satisfied. Any additional coaching or training days which are contracted independent of the Leader in Me contract are recorded as revenue in accordance with our general policy for services and products as previously described. Royalties Our international strategy includes the use of licensees in countries where we do not have a wholly-owned direct office. Licensee companies are unrelated entities that have been granted a license to translate our content and offerings, adapt the content to the local culture, and sell our content in a specific country or region. Licensees are required to pay us royalties based upon a percentage of their sales to clients. We recognize royalty income each reporting period based upon the sales information reported to us from our licensees. When sales information is not received from a particular licensee at the end of a reporting period, the Company estimates the amount of royalties to be received for the period that is being reported based upon prior forecasts and historical performance. These estimated royalties are recorded as revenue and are adjusted, if necessary, in the subsequent period. The primary impact of ASU No. 2014-09 on our financial statements is a change in the way we account for the initial license fee associated with licensing an international location. The Company previously recorded the non-refundable initial license fee from licensing an international location as revenue at the time the license period began if all other revenue requirements had been met. However, under Topic 606, we recognize revenue on the upfront fees over the term of the initial contract. Contracts with Multiple Performance Obligations We periodically enter into contracts that include multiple performance obligations. A performance obligation is a promise in a contract to transfer products or services that are distinct, or that are distinct within the context of the contract. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when the performance obligation is satisfied. Determining whether products and services meet the distinct criteria that should be accounted for separately or combined as one unit of accounting requires significant judgment. When determining whether goods and services meet the distinct criteria, we consider various factors for each agreement including the availability of the services and the nature of the offerings and services. We allocate the transaction price to each performance obligation on a relative standalone selling price (SSP) basis. Judgment is required to determine the SSP for each distinct performance obligation. The SSP is the price which the Company would sell a promised product or service separately to a customer. In determining the SSP, we consider the size and volume of transactions, price lists, historical sales, and contract prices. We may modify our pricing from time-to-time in the future, which could result in changes to the SSP. Contract Balances As described above, subscription revenue is generally recognized ratably over the term of the underlying contract beginning on the commencement date of each contract. The timing of when these contracts are invoiced, cash is collected, and revenue is recognized impacts our accounts receivable and deferred revenue accounts. We generally bill our clients in advance for subscription offerings or within the month that the training and products are delivered. As such, consideration due to the Company for work performed is included in accounts receivable and we do not have a significant amount of contract assets. Our receivables are generally collected within 30 to 120 days but typically no longer than 12 months. Deferred revenue primarily consists of billings or payments received in advance of revenue being recognized from our subscription offerings. Furthermore, our clients, to expend funds in a particular budget cycle, may prepay for services or products which are also a component of our consolidated deferred revenue. Our deferred revenue totaled $65.8 million at August 31, 2019 and $52.9 million at August 31, 2018, of which $3.6 million and $1.0 million were classified as components of other long-term liabilities at August 31, 2019 and August 31, 2018, respectively. The amount of deferred revenue that was generated from subscription offerings totaled $58.2 million at August 31, 2019 and $48.4 million at August 31, 2018. During the fiscal year ended August 31, 2019, we recognized $74.7 million of previously deferred subscription revenue. Remaining Performance Obligations When possible, we enter into multi-year non-cancellable contracts which are invoiced either upon execution of the contract or at the beginning of each annual contract period. Topic 606 introduced the concept of remaining transaction price which represents contracted revenue that has not yet been recognized, including unearned revenue and unbilled amounts that will be recognized as revenue in future periods. Transaction price is influenced by factors such as seasonality, the average length of the contract term, and the ability of the Company to continue to enter multi-year non-cancellable contracts. At August 31, 2019 we had $88.1 million of remaining performance obligations, including the amount of deferred revenue related to our subscription offerings, of which approximately 75 percent will be recognized over the next 12 months. The remaining performance obligation does not include other deferred revenue as amounts included in other deferred revenue include items such as deposits that are generally refundable at the client’s request prior to the satisfaction of the obligation. Costs Capitalized to Obtain Contracts We capitalize the incremental costs of obtaining non-cancellable subscription revenue, primarily from the All Access Pass and the Leader in Me membership offerings. These incremental costs consist of sales commissions paid to our sales force and include the associated payroll taxes and fringe benefits. As the same commission rates are paid annually when the customer renews their contract, the capitalized commission costs are amortized ratably on an annual basis. At August 31, 2019 we have capitalized $9.0 million of direct sales commissions, of which $8.3 million is included in other current assets and $0.7 million is included in other long-term liabilities based on expected recognition of the commissions. During the fiscal year ended August 31, 2019, we capitalized $13.7 million of costs to obtain revenue contracts and amortized $11.7 million to selling, general, and administrative expense. Refer to Note 17 (Segment Information) to these consolidated financial statements for our disaggregated revenue information.
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