[X] |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
[ ] |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Utah
(State of incorporation)
|
87-0401551
(I.R.S. employer identification number)
|
|
2200 West Parkway Boulevard
Salt Lake City, Utah
(Address of principal executive offices)
|
84119-2099
(Zip Code)
|
|
Registrant’s telephone number,
Including area code
|
(801) 817-1776
|
Title of Each Class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
Common Stock, $.05 Par Value
|
FC
|
New York Stock Exchange
|
Large Accelerated Filer
|
☐ | |
Accelerated Filer
|
☒ |
Non-accelerated Filer
|
☐ |
Smaller Reporting Company
|
☒ | |
Emerging Growth Company
|
☐ |
February 29,
|
August 31,
|
|||||||
2020
|
2019
|
|||||||
(unaudited)
|
||||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
24,810
|
$
|
27,699
|
||||
Accounts receivable, less allowance for doubtful accounts of $4,076 and $4,242
|
48,722
|
73,227
|
||||||
Inventories
|
2,795
|
3,481
|
||||||
Prepaid expenses and other current assets
|
15,531
|
14,933
|
||||||
Total current assets
|
91,858
|
119,340
|
||||||
Property and equipment, net
|
18,368
|
18,579
|
||||||
Intangible assets, net
|
45,350
|
47,690
|
||||||
Goodwill
|
24,220
|
24,220
|
||||||
Deferred income tax assets
|
7,066
|
5,045
|
||||||
Other long-term assets
|
14,923
|
10,039
|
||||||
$
|
201,785
|
$
|
224,913
|
|||||
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
||||||||
Current liabilities:
|
||||||||
Current portion of term notes payable
|
$
|
5,000
|
$
|
5,000
|
||||
Current portion of financing obligation
|
2,465
|
2,335
|
||||||
Accounts payable
|
8,735
|
9,668
|
||||||
Deferred subscription revenue
|
46,746
|
56,250
|
||||||
Other deferred revenue
|
7,561
|
5,972
|
||||||
Accrued liabilities
|
18,717
|
24,319
|
||||||
Total current liabilities
|
89,224
|
103,544
|
||||||
Term notes payable, less current portion
|
17,500
|
15,000
|
||||||
Financing obligation, less current portion
|
15,379
|
16,648
|
||||||
Other liabilities
|
6,587
|
7,527
|
||||||
Deferred income tax liabilities
|
180
|
180
|
||||||
Total liabilities
|
128,870
|
142,899
|
||||||
Shareholders’ equity:
|
||||||||
Common stock, $.05 par value; 40,000 shares authorized, 27,056 shares issued
|
1,353
|
1,353
|
||||||
Additional paid-in capital
|
216,045
|
215,964
|
||||||
Retained earnings
|
59,956
|
59,403
|
||||||
Accumulated other comprehensive income
|
322
|
269
|
||||||
Treasury stock at cost, 13,209 shares and 13,087 shares
|
(204,761
|
)
|
(194,975
|
)
|
||||
Total shareholders’ equity
|
72,915
|
82,014
|
||||||
$
|
201,785
|
$
|
224,913
|
Quarter Ended
|
Two Quarters Ended
|
|||||||||||||||
February 29,
|
February 28,
|
February 29,
|
February 28,
|
|||||||||||||
2020
|
2019
|
2020
|
2019
|
|||||||||||||
(unaudited)
|
(unaudited)
|
|||||||||||||||
Net sales
|
$
|
53,745
|
$
|
50,356
|
$
|
112,357
|
$
|
104,185
|
||||||||
Cost of sales
|
15,079
|
14,990
|
31,662
|
32,037
|
||||||||||||
Gross profit
|
38,666
|
35,366
|
80,695
|
72,148
|
||||||||||||
Selling, general, and administrative
|
36,221
|
35,925
|
75,620
|
70,568
|
||||||||||||
Depreciation
|
1,653
|
1,697
|
3,273
|
3,251
|
||||||||||||
Amortization
|
1,170
|
1,300
|
2,340
|
2,538
|
||||||||||||
Loss from operations
|
(378
|
)
|
(3,556
|
)
|
(538
|
)
|
(4,209
|
)
|
||||||||
Interest income
|
13
|
9
|
18
|
22
|
||||||||||||
Interest expense
|
(557
|
)
|
(623
|
)
|
(1,162
|
)
|
(1,255
|
)
|
||||||||
Discount accretion on related party receivable
|
-
|
243
|
-
|
258
|
||||||||||||
Loss before income taxes
|
(922
|
)
|
(3,927
|
)
|
(1,682
|
)
|
(5,184
|
)
|
||||||||
Income tax benefit
|
2,019
|
410
|
2,235
|
310
|
||||||||||||
Net income (loss)
|
$
|
1,097
|
$
|
(3,517
|
)
|
$
|
553
|
$
|
(4,874
|
)
|
||||||
Net income (loss) per share:
|
||||||||||||||||
Basic and diluted
|
$
|
0.08
|
$
|
(0.25
|
)
|
$
|
0.04
|
$
|
(0.35
|
)
|
||||||
Weighted average number of common shares:
|
||||||||||||||||
Basic
|
13,841
|
13,937
|
13,911
|
13,927
|
||||||||||||
Diluted
|
13,990
|
13,937
|
14,118
|
13,927
|
||||||||||||
COMPREHENSIVE INCOME (LOSS)
|
||||||||||||||||
Net income (loss)
|
$
|
1,097
|
$
|
(3,517
|
)
|
$
|
553
|
$
|
(4,874
|
)
|
||||||
Foreign currency translation adjustments,
|
||||||||||||||||
net of income tax provision
|
||||||||||||||||
of $0, $(11), $0, and $0
|
90
|
438
|
53
|
129
|
||||||||||||
Comprehensive income (loss)
|
$
|
1,187
|
$
|
(3,079
|
)
|
$
|
606
|
$
|
(4,745
|
)
|
Two Quarters Ended
|
||||||||
February 29,
|
February 28,
|
|||||||
2020
|
2019
|
|||||||
(unaudited)
|
||||||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Net income (loss)
|
$
|
553
|
$
|
(4,874
|
)
|
|||
Adjustments to reconcile net income (loss) to net cash
|
||||||||
provided by operating activities:
|
||||||||
Depreciation and amortization
|
5,613
|
5,789
|
||||||
Amortization of capitalized curriculum costs
|
2,029
|
2,856
|
||||||
Stock-based compensation expense
|
3,644
|
1,989
|
||||||
Deferred income taxes
|
(2,012
|
)
|
(1,402
|
)
|
||||
Change in fair value of contingent consideration liabilities
|
(91
|
)
|
76
|
|||||
Loss on disposal of assets
|
38
|
-
|
||||||
Changes in assets and liabilities, net of effect of acquired business:
|
||||||||
Decrease in accounts receivable, net
|
24,556
|
21,197
|
||||||
Decrease in inventories
|
681
|
402
|
||||||
Decrease (increase) in prepaid expenses and other assets
|
(180
|
)
|
2,425
|
|||||
Decrease in accounts payable and accrued liabilities
|
(6,959
|
)
|
(6,298
|
)
|
||||
Decrease in deferred revenue
|
(8,888
|
)
|
(8,842
|
)
|
||||
Increase (decrease) in income taxes payable/receivable
|
(1,605
|
)
|
214
|
|||||
Decrease in other long-term liabilities
|
(6
|
)
|
(182
|
)
|
||||
Net cash provided by operating activities
|
17,373
|
13,350
|
||||||
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Purchases of property and equipment
|
(2,516
|
)
|
(2,195
|
)
|
||||
Curriculum development costs
|
(2,232
|
)
|
(1,256
|
)
|
||||
Purchase of note receivable from bank (Note 12)
|
(2,600
|
)
|
-
|
|||||
Acquisition of business, net of cash acquired
|
-
|
(32
|
)
|
|||||
Net cash used for investing activities
|
(7,348
|
)
|
(3,483
|
)
|
||||
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Proceeds from line of credit borrowings
|
-
|
46,032
|
||||||
Payments on line of credit borrowings
|
-
|
(48,993
|
)
|
|||||
Proceeds from term notes payable financing
|
5,000
|
-
|
||||||
Principal payments on term notes payable
|
(2,500
|
)
|
(3,125
|
)
|
||||
Principal payments on financing obligation
|
(1,139
|
)
|
(1,020
|
)
|
||||
Purchases of common stock for treasury
|
(13,833
|
)
|
(12
|
)
|
||||
Payment of contingent consideration liabilities
|
(911
|
)
|
(301
|
)
|
||||
Proceeds from sales of common stock held in treasury
|
484
|
444
|
||||||
Net cash used for financing activities
|
(12,899
|
)
|
(6,975
|
)
|
||||
Effect of foreign currency exchange rates on cash and cash equivalents
|
(15
|
)
|
63
|
|||||
Net increase (decrease) in cash and cash equivalents
|
(2,889
|
)
|
2,955
|
|||||
Cash and cash equivalents at the beginning of the period
|
27,699
|
10,153
|
||||||
Cash and cash equivalents at the end of the period
|
$
|
24,810
|
$
|
13,108
|
||||
Supplemental disclosure of cash flow information:
|
||||||||
Cash paid for income taxes
|
$
|
1,381
|
$
|
831
|
||||
Cash paid for interest
|
1,144
|
1,276
|
||||||
Non-cash investing and financing activities:
|
||||||||
Purchases of property and equipment financed by accounts payable
|
$
|
985
|
$
|
369
|
||||
Use of notes receivable to modify revenue contract (Note 12)
|
3,246
|
-
|
Accumulated | ||||||||||||||||||||||||||||
Common
|
Common
|
Additional
|
Other
|
Treasury
|
Treasury
|
|||||||||||||||||||||||
Stock
|
Stock
|
Paid-In
|
Retained
|
Comprehensive
|
Stock
|
Stock
|
||||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Earnings
|
Income
|
Shares
|
Amount
|
||||||||||||||||||||||
Balance at August 31, 2019
|
27,056
|
$
|
1,353
|
$
|
215,964
|
$
|
59,403
|
$
|
269
|
(13,087
|
)
|
$
|
(194,975
|
)
|
||||||||||||||
Issuance of common stock from
|
||||||||||||||||||||||||||||
treasury
|
131
|
9
|
123
|
|||||||||||||||||||||||||
Purchase of treasury shares
|
(3
|
)
|
||||||||||||||||||||||||||
Stock-based compensation
|
1,851
|
|||||||||||||||||||||||||||
Cumulative translation
|
||||||||||||||||||||||||||||
adjustments
|
(37
|
)
|
||||||||||||||||||||||||||
Net loss
|
(544
|
)
|
||||||||||||||||||||||||||
Balance at November 30, 2019
|
27,056
|
1,353
|
217,946
|
58,859
|
232
|
(13,078
|
)
|
(194,855
|
)
|
|||||||||||||||||||
Issuance of common stock from
|
||||||||||||||||||||||||||||
treasury
|
(3,361
|
)
|
241
|
3,591
|
||||||||||||||||||||||||
Purchase of treasury shares
|
(393
|
)
|
(13,830
|
)
|
||||||||||||||||||||||||
Stock-based compensation
|
1,793
|
|||||||||||||||||||||||||||
Restricted stock award
|
(333
|
)
|
21
|
333
|
||||||||||||||||||||||||
Cumulative translation
|
||||||||||||||||||||||||||||
adjustments
|
90
|
|||||||||||||||||||||||||||
Net income
|
1,097
|
|||||||||||||||||||||||||||
Balance at February 29, 2020
|
27,056
|
$
|
1,353
|
$
|
216,045
|
$
|
59,956
|
$
|
322
|
(13,209
|
)
|
$
|
(204,761
|
)
|
Accumulated | ||||||||||||||||||||||||||||
Common
|
Common
|
Additional
|
Other
|
Treasury
|
Treasury
|
|||||||||||||||||||||||
Stock
|
Stock
|
Paid-In
|
Retained
|
Comprehensive
|
Stock
|
Stock
|
||||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Earnings
|
Income
|
Shares
|
Amount
|
||||||||||||||||||||||
Balance at August 31, 2018
|
27,056
|
$
|
1,353
|
$
|
211,280
|
$
|
63,569
|
$
|
341
|
(13,159
|
)
|
$
|
(196,043
|
)
|
||||||||||||||
Issuance of common stock from
|
||||||||||||||||||||||||||||
treasury
|
64
|
11
|
166
|
|||||||||||||||||||||||||
Purchases of common shares
|
||||||||||||||||||||||||||||
for treasury
|
(7
|
)
|
||||||||||||||||||||||||||
Stock-based compensation
|
946
|
|||||||||||||||||||||||||||
Cumulative translation
|
||||||||||||||||||||||||||||
adjustments
|
(309
|
)
|
||||||||||||||||||||||||||
Cumulative effect of
|
||||||||||||||||||||||||||||
accounting change
|
(3,143
|
)
|
||||||||||||||||||||||||||
Net loss
|
(1,357
|
)
|
||||||||||||||||||||||||||
Balance at November 30, 2018
|
27,056
|
1,353
|
212,290
|
59,069
|
32
|
(13,148
|
)
|
(195,884
|
)
|
|||||||||||||||||||
Issuance of common stock from
|
||||||||||||||||||||||||||||
treasury
|
53
|
11
|
162
|
|||||||||||||||||||||||||
Purchases of common shares
|
||||||||||||||||||||||||||||
for treasury
|
(5
|
)
|
||||||||||||||||||||||||||
Stock-based compensation
|
1,043
|
|||||||||||||||||||||||||||
Restricted stock award
|
(426
|
)
|
28
|
426
|
||||||||||||||||||||||||
Cumulative translation
|
||||||||||||||||||||||||||||
adjustments
|
438
|
|||||||||||||||||||||||||||
Net loss
|
(3,517
|
)
|
||||||||||||||||||||||||||
Balance at February 28, 2019
|
27,056
|
$
|
1,353
|
$
|
212,960
|
$
|
55,552
|
$
|
470
|
(13,109
|
)
|
$
|
(195,301
|
)
|
•
|
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 content is designed to build new skillsets, establish new mindsets, and provide enabling toolsets to
our clients.
|
•
|
Breadth and Scalability of Delivery Options – We have a wide range of content delivery options, including: subscription offerings, which includes the All Access Pass (available
in multiple languages), the Leader in Me membership, and other subscription offerings; intellectual property licenses; on-site training; training led through certified facilitators; on-line
learning; and organization-wide transformational processes, including consulting and coaching services.
|
•
|
Global Capability – We have sales professionals in the United States and Canada who serve clients in the private sector and in governmental organizations; wholly-owned
subsidiaries in Australia, China, Japan, the United Kingdom, Germany, Switzerland, and Austria; and we contract with licensee partners who deliver our content and provide related services in over 140 other countries and territories around
the world.
|
February 29,
|
August 31,
|
|||||||
2020
|
2019
|
|||||||
Finished goods
|
$
|
2,775
|
$
|
3,434
|
||||
Raw materials
|
20
|
47
|
||||||
$
|
2,795
|
$
|
3,481
|
YEAR ENDING AUGUST 31,
|
Amount
|
|||
2020
|
$
|
2,500
|
||
2021
|
5,000
|
|||
2022
|
5,000
|
|||
2023
|
5,000
|
|||
2024
|
5,000
|
|||
$
|
22,500
|
Jhana
|
RGP
|
Total
|
||||||||||
Balance at August 31, 2019
|
$
|
3,468
|
$
|
1,761
|
$
|
5,229
|
||||||
Change in fair value
|
98
|
(7
|
)
|
91
|
||||||||
Payments
|
(282
|
)
|
(500
|
)
|
(782
|
)
|
||||||
Balance at November 30, 2019
|
3,284
|
1,254
|
4,538
|
|||||||||
Change in fair value
|
153
|
(335
|
)
|
(182
|
)
|
|||||||
Payments
|
(129
|
)
|
-
|
(129
|
)
|
|||||||
Balance at February 29, 2020
|
$
|
3,308
|
$
|
919
|
$
|
4,227
|
Balance Sheet |
February 29, |
||||
Caption | 2020 | ||||
Assets:
|
|||||
Operating lease right of use assets
|
Other long-term assets
|
$
|
1,662
|
||
Liabilities:
|
|||||
Current:
|
|||||
Operating lease liabilities
|
Accrued liabilities
|
921
|
|||
Long-Term:
|
|||||
Operating lease liabilities
|
Other long-term liabilities
|
741
|
|||
$
|
1,662
|
||||
Weighted Average Remaining Lease Term:
|
|||||
Operating leases (years)
|
2.7
|
||||
Weighted Average Discount Rate:
|
|||||
Operating leases
|
4.2
|
%
|
YEAR ENDING AUGUST 31,
|
Amount
|
|||
Remainder of 2020
|
$
|
541
|
||
2021
|
727
|
|||
2022
|
202
|
|||
2023
|
116
|
|||
2024
|
93
|
|||
Thereafter
|
98
|
|||
Total operating lease payments
|
1,777
|
|||
Less imputed interest
|
(115
|
)
|
||
Present value of operating lease liabilities
|
$
|
1,662
|
YEAR ENDING AUGUST 31,
|
Amount
|
|||
Remainder of 2020
|
$
|
1,955
|
||
2021
|
2,341
|
|||
2022
|
1,514
|
|||
2023
|
1,514
|
|||
2024
|
1,527
|
|||
Thereafter
|
1,275
|
|||
$
|
10,126
|
Quarter Ended
|
Two Quarters Ended
|
|||||||||||||||
February 29,
|
February 28,
|
February 29,
|
February 28,
|
|||||||||||||
2020
|
2019
|
2020
|
2019
|
|||||||||||||
Long-term incentive awards
|
$
|
1,566
|
$
|
824
|
$
|
3,201
|
$
|
1,557
|
||||||||
Restricted stock awards
|
175
|
175
|
350
|
350
|
||||||||||||
Employee stock purchase plan
|
52
|
44
|
93
|
82
|
||||||||||||
$
|
1,793
|
$
|
1,043
|
$
|
3,644
|
$
|
1,989
|
Weighted
|
||||||||
Avg. Exercise
|
||||||||
Number of
|
Price Per
|
|||||||
Stock Options
|
Share
|
|||||||
Outstanding at August 31, 2019
|
568,750
|
$
|
11.67
|
|||||
Granted
|
-
|
-
|
||||||
Exercised
|
(350,000
|
)
|
(11.73
|
)
|
||||
Forfeited
|
-
|
-
|
||||||
Outstanding at February 29, 2020
|
218,750
|
$
|
11.57
|
|||||
Options vested and exercisable at
|
||||||||
February 29, 2020
|
218,750
|
$
|
11.57
|
Weighted-Average
|
||||||||
Grant Date
|
||||||||
Number of
|
Fair Value
|
|||||||
Shares
|
Per Share
|
|||||||
Restricted stock awards at
|
||||||||
August 31, 2019
|
28,525
|
$
|
24.54
|
|||||
Granted
|
21,420
|
32.68
|
||||||
Forfeited
|
-
|
-
|
||||||
Vested
|
(28,525
|
)
|
24.54
|
|||||
Restricted stock awards at
|
||||||||
February 29, 2020
|
21,420
|
$
|
32.68
|
•
|
Time-Based Award Shares – Twenty-five percent of the 2020 LTIP award shares vest to participants after three years of service. The total number of shares that may be earned by participants after
three years of service is 25,101 shares. The number of shares awarded in this tranche is not variable and will not fluctuate based on financial measures.
|
•
|
Performance-Based Award Shares – The remaining two tranches of the 2020 LTIP award are based on fiscal 2022 qualified adjusted earnings before interest, taxes, depreciation, and amortization
(Adjusted EBITDA) and fiscal 2022 subscription service sales, respectively. The number of shares that will vest to participants for these two tranches is variable and may be 50 percent of the award (minimum award threshold) or up to 200
percent of the participant’s award (maximum threshold) depending on the levels of qualified Adjusted EBITDA and subscription service sales achieved. The number of shares that may be earned for achieving 100 percent of the performance-based
objectives totals 75,315 shares. The maximum number of shares that may be awarded in connection with the performance-based tranches of the 2020 LTIP totals 150,630 shares.
|
Quarter Ended
|
Two Quarters Ended
|
|||||||||||||||
February 29,
|
February 28,
|
February 29,
|
February 28,
|
|||||||||||||
2020
|
2019
|
2020
|
2019
|
|||||||||||||
Numerator for basic and
|
||||||||||||||||
diluted loss per share:
|
||||||||||||||||
Net income (loss)
|
$
|
1,097
|
$
|
(3,517
|
)
|
$
|
553
|
$
|
(4,874
|
)
|
||||||
Denominator for basic and
|
||||||||||||||||
diluted loss per share:
|
||||||||||||||||
Basic weighted average shares
|
||||||||||||||||
outstanding
|
13,841
|
13,937
|
13,911
|
13,927
|
||||||||||||
Effect of dilutive securities:
|
||||||||||||||||
Stock options and other
|
||||||||||||||||
stock-based awards
|
149
|
-
|
207
|
-
|
||||||||||||
Diluted weighted average
|
||||||||||||||||
shares outstanding
|
13,990
|
13,937
|
14,118
|
13,927
|
||||||||||||
EPS Calculations:
|
||||||||||||||||
Net income (loss) per share:
|
||||||||||||||||
Basic and diluted
|
$
|
0.08
|
$
|
(0.25
|
)
|
$
|
0.04
|
$
|
(0.35
|
)
|
•
|
Direct Offices – Our Direct Office segment has a depth of expertise in helping organizations solve problems that require changes in human behavior, including leadership,
productivity, execution, trust, and sales performance. We have a variety of principle-based offerings that help build winning and profitable cultures. 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, Germany, Switzerland, and Austria; our government services sales channel; and our public programs operations.
|
•
|
International Licensees – Our independently owned international licensees provide our offerings and services in countries where we do not have a directly-owned office. These
licensee partners allow us to expand the reach of our services to large multinational organizations as well as smaller organizations in their countries. This segment’s results are primarily comprised of royalty revenues received from these
licensees.
|
•
|
Education Practice – Centered around the principles found in The Leader in Me, the Education practice is dedicated to helping
educational institutions build a culture that will produce great results. We believe these results are manifested by increases in student performance, improved school culture, decreased disciplinary issues, and increased teacher engagement
and parental involvement. This segment includes our domestic and international Education practice operations, which are focused on sales to educational institutions such as elementary schools, high schools, and colleges and universities.
|
•
|
Corporate and Other – Our corporate and other information includes leasing operations, shipping and handling revenues, royalty revenues from Franklin Planner Corp. (Note 12),
and certain corporate administrative functions.
|
Sales to
|
||||||||||||
Quarter Ended
|
External
|
Adjusted
|
||||||||||
February 29, 2020
|
Customers
|
Gross Profit
|
EBITDA
|
|||||||||
Enterprise Division:
|
||||||||||||
Direct offices
|
$
|
37,973
|
$
|
28,702
|
$
|
4,734
|
||||||
International licensees
|
2,691
|
2,237
|
1,384
|
|||||||||
40,664
|
30,939
|
6,118
|
||||||||||
Education practice
|
10,893
|
6,460
|
(1,068
|
)
|
||||||||
Corporate and eliminations
|
2,188
|
1,267
|
(994
|
)
|
||||||||
Consolidated
|
$
|
53,745
|
$
|
38,666
|
$
|
4,056
|
||||||
Quarter Ended
|
||||||||||||
February 28, 2019
|
||||||||||||
Enterprise Division:
|
||||||||||||
Direct offices
|
$
|
36,414
|
$
|
27,294
|
$
|
2,543
|
||||||
International licensees
|
2,906
|
2,221
|
1,218
|
|||||||||
39,320
|
29,515
|
3,761
|
||||||||||
Education practice
|
9,698
|
5,429
|
(909
|
)
|
||||||||
Corporate and eliminations
|
1,338
|
422
|
(1,888
|
)
|
||||||||
Consolidated
|
$
|
50,356
|
$
|
35,366
|
$
|
964
|
||||||
Two Quarters Ended
|
||||||||||||
February 29, 2020
|
||||||||||||
Enterprise Division:
|
||||||||||||
Direct offices
|
$
|
80,085
|
$
|
60,113
|
$
|
10,444
|
||||||
International licensees
|
6,411
|
5,357
|
3,419
|
|||||||||
86,496
|
65,470
|
13,863
|
||||||||||
Education practice
|
21,974
|
13,117
|
(2,171
|
)
|
||||||||
Corporate and eliminations
|
3,887
|
2,108
|
(2,675
|
)
|
||||||||
Consolidated
|
$
|
112,357
|
$
|
80,695
|
$
|
9,017
|
||||||
Two Quarters Ended
|
||||||||||||
February 28, 2019
|
||||||||||||
Enterprise Division:
|
||||||||||||
Direct offices
|
$
|
74,885
|
$
|
54,364
|
$
|
6,183
|
||||||
International licensees
|
6,583
|
5,084
|
2,846
|
|||||||||
81,468
|
59,448
|
9,029
|
||||||||||
Education practice
|
20,044
|
11,822
|
(1,174
|
)
|
||||||||
Corporate and eliminations
|
2,673
|
878
|
(3,722
|
)
|
||||||||
Consolidated
|
$
|
104,185
|
$
|
72,148
|
$
|
4,133
|
Quarter Ended
|
Two Quarters Ended
|
|||||||||||||||
February 29,
|
February 28,
|
February 29,
|
February 28,
|
|||||||||||||
2020
|
2019
|
2020
|
2019
|
|||||||||||||
Segment Adjusted EBITDA
|
$
|
5,050
|
$
|
2,852
|
$
|
11,692
|
$
|
7,855
|
||||||||
Corporate expenses
|
(994
|
)
|
(1,888
|
)
|
(2,675
|
)
|
(3,722
|
)
|
||||||||
Consolidated Adjusted EBITDA
|
4,056
|
964
|
9,017
|
4,133
|
||||||||||||
Stock-based compensation expense
|
(1,793
|
)
|
(1,043
|
)
|
(3,644
|
)
|
(1,989
|
)
|
||||||||
Decrease (increase) in the fair value of
|
||||||||||||||||
contingent consideration liabilities
|
182
|
(52
|
)
|
91
|
(76
|
)
|
||||||||||
Knowledge Capital wind-down costs
|
-
|
-
|
(389
|
)
|
-
|
|||||||||||
Licensee transition costs
|
-
|
(428
|
)
|
-
|
(488
|
)
|
||||||||||
Depreciation
|
(1,653
|
)
|
(1,697
|
)
|
(3,273
|
)
|
(3,251
|
)
|
||||||||
Amortization
|
(1,170
|
)
|
(1,300
|
)
|
(2,340
|
)
|
(2,538
|
)
|
||||||||
Loss from operations
|
(378
|
)
|
(3,556
|
)
|
(538
|
)
|
(4,209
|
)
|
||||||||
Interest income
|
13
|
9
|
18
|
22
|
||||||||||||
Interest expense
|
(557
|
)
|
(623
|
)
|
(1,162
|
)
|
(1,255
|
)
|
||||||||
Discount accretion on related
|
||||||||||||||||
party receivable
|
-
|
243
|
-
|
258
|
||||||||||||
Loss before income taxes
|
(922
|
)
|
(3,927
|
)
|
(1,682
|
)
|
(5,184
|
)
|
||||||||
Income tax benefit
|
2,019
|
410
|
2,235
|
310
|
||||||||||||
Net income (loss)
|
$
|
1,097
|
$
|
(3,517
|
)
|
$
|
553
|
$
|
(4,874
|
)
|
Quarter Ended
|
Two Quarters Ended
|
|||||||||||||||
February 29,
|
February 28,
|
February 29,
|
February 28,
|
|||||||||||||
2020
|
2019
|
2020
|
2019
|
|||||||||||||
Americas
|
$
|
42,721
|
$
|
39,839
|
$
|
86,756
|
$
|
80,757
|
||||||||
Asia Pacific
|
7,089
|
7,398
|
17,228
|
16,678
|
||||||||||||
Europe/Middle East/Africa
|
3,935
|
3,119
|
8,373
|
6,750
|
||||||||||||
$
|
53,745
|
$
|
50,356
|
$
|
112,357
|
$
|
104,185
|
Quarter Ended
|
Services and
|
Leases and
|
||||||||||||||||||
February 29, 2020
|
Products
|
Subscriptions
|
Royalties
|
Other
|
Consolidated
|
|||||||||||||||
Enterprise Division:
|
||||||||||||||||||||
Direct offices
|
$
|
21,644
|
$
|
15,172
|
$
|
1,157
|
$
|
-
|
$
|
37,973
|
||||||||||
International licensees
|
410
|
-
|
2,281
|
-
|
2,691
|
|||||||||||||||
22,054
|
15,172
|
3,438
|
-
|
40,664
|
||||||||||||||||
Education practice
|
2,950
|
6,192
|
1,751
|
-
|
10,893
|
|||||||||||||||
Corporate and eliminations
|
-
|
-
|
935
|
1,253
|
2,188
|
|||||||||||||||
Consolidated
|
$
|
25,004
|
$
|
21,364
|
$
|
6,124
|
$
|
1,253
|
$
|
53,745
|
||||||||||
Quarter Ended
|
||||||||||||||||||||
February 28, 2019
|
||||||||||||||||||||
Enterprise Division:
|
||||||||||||||||||||
Direct offices
|
$
|
23,102
|
$
|
12,416
|
$
|
896
|
$
|
-
|
$
|
36,414
|
||||||||||
International licensees
|
517
|
-
|
2,389
|
-
|
2,906
|
|||||||||||||||
23,619
|
12,416
|
3,285
|
-
|
39,320
|
||||||||||||||||
Education practice
|
2,583
|
5,368
|
1,747
|
-
|
9,698
|
|||||||||||||||
Corporate and eliminations
|
-
|
-
|
-
|
1,338
|
1,338
|
|||||||||||||||
Consolidated
|
$
|
26,202
|
$
|
17,784
|
$
|
5,032
|
$
|
1,338
|
$
|
50,356
|
||||||||||
Two Quarters Ended
|
||||||||||||||||||||
February 29, 2020
|
||||||||||||||||||||
Enterprise Division:
|
||||||||||||||||||||
Direct offices
|
$
|
48,895
|
$
|
29,461
|
$
|
1,729
|
$
|
-
|
$
|
80,085
|
||||||||||
International licensees
|
1,000
|
-
|
5,411
|
-
|
6,411
|
|||||||||||||||
49,895
|
29,461
|
7,140
|
-
|
86,496
|
||||||||||||||||
Education practice
|
6,535
|
13,010
|
2,429
|
-
|
21,974
|
|||||||||||||||
Corporate and eliminations
|
-
|
-
|
1,314
|
2,573
|
3,887
|
|||||||||||||||
Consolidated
|
$
|
56,430
|
$
|
42,471
|
$
|
10,883
|
$
|
2,573
|
$
|
112,357
|
||||||||||
Two Quarters Ended
|
||||||||||||||||||||
February 28, 2019
|
||||||||||||||||||||
Enterprise Division:
|
||||||||||||||||||||
Direct offices
|
$
|
48,111
|
$
|
25,091
|
$
|
1,683
|
$
|
-
|
$
|
74,885
|
||||||||||
International licensees
|
1,389
|
-
|
5,194
|
-
|
6,583
|
|||||||||||||||
49,500
|
25,091
|
6,877
|
-
|
81,468
|
||||||||||||||||
Education practice
|
6,501
|
11,080
|
2,463
|
-
|
20,044
|
|||||||||||||||
Corporate and eliminations
|
-
|
-
|
-
|
2,673
|
2,673
|
|||||||||||||||
Consolidated
|
$
|
56,001
|
$
|
36,171
|
$
|
9,340
|
$
|
2,673
|
$
|
104,185
|
•
|
Sales – Our consolidated sales for the second quarter of fiscal 2020 increased 7% to $53.7 million, compared with sales of $50.4 million
in the second quarter of fiscal 2019. Sales growth during the quarter was broad-based across our Divisions. Enterprise Division sales during the second quarter of fiscal 2020 increased 3% to $40.7 million, compared with $39.3 million in
fiscal 2019, despite significant decreases in the Company’s China and Japan direct offices, and certain international licensees related to business disruption from the COVID-19 outbreak. Education Division revenues increased 12% to $10.9
million, compared with $9.7 million in the second quarter of fiscal 2019. Our sales growth was primarily driven by increased sales of subscription services in both the Enterprise and Education Divisions.
|
•
|
Cost of Sales/Gross Profit – Our cost of sales totaled $15.1 million for the quarter ended February 29, 2020, compared with $15.0 million in the prior year. Second quarter 2020
gross profit increased 9%, or $3.3 million, to $38.7 million compared with $35.4 million in fiscal 2019. Our gross margin for the quarter ended February 29, 2020 improved 171 basis points to 71.9% of sales compared with 70.2% in the second
quarter of the prior year, reflecting increased subscription revenues in the mix of services sold when compared with the prior year.
|
•
|
Operating Expenses – Our operating expenses for the quarter ended February 29, 2020 increased $0.1 million compared with the prior year, which was due to increased selling,
general, and administrative (SG&A) expenses. As a percent of sales, SG&A expenses decreased to 67.4 percent compared with 71.3 percent in the second quarter of fiscal 2019. Increased SG&A expense was primarily related to
increased commissions and bonuses on higher sales, increased investments in new sales and sales-related personnel, and a $0.8 million increase in non-cash stock-based compensation. These increases in operating expenses were partially
offset by $0.4 million of decreased licensee transition costs related to the fiscal 2019 acquisition of the Company’s licensee in Germany, Switzerland, and Austria (GSA); a $0.4 million decrease in our China office expenses resulting from
suspended business operations due to the COVID-19 outbreak; and cost savings from various other areas of the Company’s operations. At February 29, 2020, we had 255 client partners compared with 230 client partners at February 28, 2019.
|
•
|
Operating Loss and Net Income – Our loss from operations for the quarter ended February 29, 2020 improved to $(0.4) million compared with a loss of $(3.6) million in the second
quarter of the prior year. Our effective income tax benefit rate for the quarter ended February 29, 2020 was approximately 219 percent compared with an effective benefit rate of approximately 10 percent in the second quarter of fiscal
2019. The higher tax benefit rate in fiscal 2020 was primarily due to the exercise of stock options, which produced a $1.8 million tax benefit in the quarter. During the second quarter of fiscal 2020, we recognized net income of $1.1
million, or $.08 per diluted share, compared with a net loss of $(3.5) million, or $(.25) per share, in the prior year.
|
Quarter Ended
|
Quarter Ended
|
|||||||||||||||||||
February 29,
|
% of
|
February 28,
|
% of
|
|||||||||||||||||
2020
|
Sales
|
2019
|
Sales
|
Change
|
||||||||||||||||
Sales
|
$
|
37,973
|
100.0
|
$
|
36,414
|
100.0
|
$
|
1,559
|
||||||||||||
Cost of sales
|
9,271
|
24.4
|
9,120
|
25.0
|
151
|
|||||||||||||||
Gross profit
|
28,702
|
75.6
|
27,294
|
75.0
|
1,408
|
|||||||||||||||
SG&A expenses
|
23,968
|
63.1
|
24,751
|
68.0
|
(783
|
)
|
||||||||||||||
Adjusted EBITDA
|
$
|
4,734
|
12.5
|
$
|
2,543
|
7.0
|
$
|
2,191
|
Quarter Ended
|
Quarter Ended
|
|||||||||||||||||||
February 29,
|
% of
|
February 28,
|
% of
|
|||||||||||||||||
2020
|
Sales
|
2019
|
Sales
|
Change
|
||||||||||||||||
Sales
|
$
|
2,691
|
100.0
|
$
|
2,906
|
100.0
|
$
|
(215
|
)
|
|||||||||||
Cost of sales
|
454
|
16.9
|
685
|
23.6
|
(231
|
)
|
||||||||||||||
Gross profit
|
2,237
|
83.1
|
2,221
|
76.4
|
16
|
|||||||||||||||
SG&A expenses
|
853
|
31.7
|
1,003
|
34.5
|
(150
|
)
|
||||||||||||||
Adjusted EBITDA
|
$
|
1,384
|
51.4
|
$
|
1,218
|
41.9
|
$
|
166
|
Quarter Ended
|
Quarter Ended
|
|||||||||||||||||||
February 29,
|
% of
|
February 28,
|
% of
|
|||||||||||||||||
2020
|
Sales
|
2019
|
Sales
|
Change
|
||||||||||||||||
Sales
|
$
|
10,893
|
100.0
|
$
|
9,698
|
100.0
|
$
|
1,195
|
||||||||||||
Cost of sales
|
4,433
|
40.7
|
4,269
|
44.0
|
164
|
|||||||||||||||
Gross profit
|
6,460
|
59.3
|
5,429
|
56.0
|
1,031
|
|||||||||||||||
SG&A expenses
|
7,528
|
69.1
|
6,338
|
65.4
|
1,190
|
|||||||||||||||
Adjusted EBITDA
|
$
|
(1,068
|
)
|
(9.8
|
)
|
$
|
(909
|
)
|
(9.4
|
)
|
$
|
(159
|
)
|
Two Quarters
|
Two Quarters
|
|||||||||||||||||||
Ended
|
Ended
|
|||||||||||||||||||
February 29,
|
% of
|
February 28,
|
% of
|
|||||||||||||||||
2020
|
Sales
|
2019
|
Sales
|
Change
|
||||||||||||||||
Sales
|
$
|
80,085
|
100.0
|
$
|
74,885
|
100.0
|
$
|
5,200
|
||||||||||||
Cost of sales
|
19,972
|
24.9
|
20,521
|
27.4
|
(549
|
)
|
||||||||||||||
Gross profit
|
60,113
|
75.1
|
54,364
|
72.6
|
5,749
|
|||||||||||||||
SG&A expenses
|
49,669
|
62.0
|
48,181
|
64.3
|
1,488
|
|||||||||||||||
Adjusted EBITDA
|
$
|
10,444
|
13.0
|
$
|
6,183
|
8.3
|
$
|
4,261
|
Two Quarters
|
Two Quarters
|
|||||||||||||||||||
Ended
|
Ended
|
|||||||||||||||||||
February 29,
|
% of
|
February 28,
|
% of
|
|||||||||||||||||
2020
|
Sales
|
2019
|
Sales
|
Change
|
||||||||||||||||
Sales
|
$
|
6,411
|
100.0
|
$
|
6,583
|
100.0
|
$
|
(172
|
)
|
|||||||||||
Cost of sales
|
1,054
|
16.4
|
1,499
|
22.8
|
(445
|
)
|
||||||||||||||
Gross profit
|
5,357
|
83.6
|
5,084
|
77.2
|
273
|
|||||||||||||||
SG&A expenses
|
1,938
|
30.2
|
2,238
|
34.0
|
(300
|
)
|
||||||||||||||
Adjusted EBITDA
|
$
|
3,419
|
53.3
|
$
|
2,846
|
43.2
|
$
|
573
|
Two Quarters
|
Two Quarters
|
|||||||||||||||||||
Ended
|
Ended
|
|||||||||||||||||||
February 29,
|
% of
|
February 28,
|
% of
|
|||||||||||||||||
2020
|
Sales
|
2019
|
Sales
|
Change
|
||||||||||||||||
Sales
|
$
|
21,974
|
100.0
|
$
|
20,044
|
100.0
|
$
|
1,930
|
||||||||||||
Cost of sales
|
8,857
|
40.3
|
8,222
|
41.0
|
635
|
|||||||||||||||
Gross profit
|
13,117
|
59.7
|
11,822
|
59.0
|
1,295
|
|||||||||||||||
SG&A expenses
|
15,288
|
69.6
|
12,996
|
64.8
|
2,292
|
|||||||||||||||
Adjusted EBITDA
|
$
|
(2,171
|
)
|
(9.9
|
)
|
$
|
(1,174
|
)
|
(5.9
|
)
|
$
|
(997
|
)
|
Period
|
Total Number of Shares Purchased
|
Average Price Paid Per Share
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
Maximum Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs(1)
(in thousands)
|
||||||||||||
December 1, 2019 to December 31, 2019
|
289,608
|
$
|
35.14
|
5,000
|
$
|
39,824
|
||||||||||
January 1, 2020 to January 31, 2020
|
-
|
-
|
-
|
39,824
|
||||||||||||
February 1, 2020 to February 29, 2020
|
-
|
-
|
-
|
39,824
|
||||||||||||
Total Common Shares
|
289,608
|
$
|
35.14
|
5,000
|
(1)
|
On November 15, 2019, our Board of Directors approved a new plan to repurchase up to $40.0 million of our outstanding common stock. The previously existing common stock repurchase plan was canceled and the new common share repurchase
plan does not have an expiration date. Under the terms of this new purchase plan, we purchased 5,000 shares of our common stock for $0.2 million during the quarter ended February 29, 2020.
|
(A)
|
Exhibits:
|
|
31.1
|
Rule 13a-14(a) Certifications of the Chief Executive Officer.**
|
|
31.2
|
Rule 13a-14(a) Certifications of the Chief Financial Officer.**
|
|
32
|
Section 1350 Certifications.**
|
|
101.INS
|
XBRL Instance Document.
|
|
101.SCH
|
XBRL Taxonomy Extension Schema Document.
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
101.DEF
|
XBRL Taxonomy Definition Linkbase Document.
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document.
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
**Filed herewith.
|
FRANKLIN COVEY CO.
|
||||
Date:
|
April 9, 2020
|
By:
|
/s/ Robert A. Whitman
|
|
Robert A. Whitman
|
||||
Chief Executive Officer
|
||||
(Duly Authorized Officer)
|
||||
Date:
|
April 9, 2020
|
By:
|
/s/ Stephen D. Young
|
|
Stephen D. Young
|
||||
Chief Financial Officer
|
||||
(Principal Financial and Accounting Officer)
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Franklin Covey Co.;
|
||
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
||
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
||
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
||
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
||
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
||
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
||
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
||
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to
the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
||
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
||
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over
financial reporting.
|
|
|
|
|
|
|
Date: April 9, 2020
|
/s/ Robert A. Whitman
|
|
|
Robert A. Whitman
Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Franklin Covey Co.;
|
||
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
||
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
||
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
||
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
||
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
||
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
||
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
||
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to
the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
||
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
||
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over
financial reporting.
|
|
|
|
|
|
|
Date: April 9, 2020
|
/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: April 9, 2020
|
Date: April 9, 2020
|
G)E4WI.5&-Z:V,Y
M9"(_/@T*/'@Z>&UP;65T82!X;6QN H*.'6O.PF5T,70_
Leases (Future Minimum Lease Payments Under Operating Leases) (Details) $ in Thousands |
Feb. 29, 2020
USD ($)
|
---|---|
Leases [Abstract] | |
Remainder of 2020 | $ 541 |
2021 | 727 |
2022 | 202 |
2023 | 116 |
2024 | 93 |
Thereafter | 98 |
Total operating lease payments | 1,777 |
Less imputed interest | (115) |
Present value of operating lease liabilities | $ 1,662 |
Fair Value Of Financial Instruments (Narrative) (Details) - USD ($) $ in Thousands |
Feb. 29, 2020 |
Nov. 30, 2019 |
Aug. 31, 2019 |
---|---|---|---|
Contingent consideration | $ 4,227 | $ 4,538 | $ 5,229 |
Jhana [Member] | |||
Contingent consideration | 3,308 | 3,284 | 3,468 |
Jhana [Member] | Accrued Liabilities [Member] | |||
Contingent consideration | 1,300 | ||
RGP [Member] | |||
Contingent consideration | 919 | $ 1,254 | $ 1,761 |
RGP [Member] | Accrued Liabilities [Member] | |||
Contingent consideration | $ 500 |
Segment Information |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Feb. 29, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | NOTE 11 – SEGMENT INFORMATION Segment Information Our sales are primarily comprised of training and consulting services. Our internal reporting and operating structure is currently organized around two divisions. The Enterprise Division, which consists of our Direct Office and International Licensee segments and the Education Division, which is comprised of our Education practice. Based on the applicable guidance, our operations are comprised of three reportable segments and a corporate services group. The following is a brief description of our reportable segments:
We have determined that the Company’s chief operating decision maker is the CEO, and the primary measurement tool used in business unit performance analysis is Adjusted EBITDA, which may not be calculated as similarly titled amounts disclosed by other companies. Adjusted EBITDA is a non-GAAP financial measure. For reporting purposes, our consolidated Adjusted EBITDA may be calculated as our net income or loss excluding interest expense, income taxes, depreciation expense, amortization expense, stock-based compensation expense, and certain other charges such as adjustments for changes in the fair value of contingent liabilities arising from business acquisitions. We reference this non-GAAP financial measure in our decision making because it provides supplemental information that facilitates consistent internal comparisons to the historical operating performance of prior periods and we believe it provides investors with greater transparency to evaluate operational activities and financial results. Our operations are not capital intensive and we do not own any manufacturing facilities or equipment. Accordingly, we do not allocate assets to the reportable segments for analysis purposes. Interest expense and interest income are primarily generated at the corporate level and are not allocated. Income taxes are likewise calculated and paid on a corporate level (except for entities that operate in foreign jurisdictions) and are not allocated for analysis purposes. We periodically make minor changes to our reporting structure in the normal course of operations. The segment information presented below reflects certain revisions to our reporting structure which occurred during the second quarter of fiscal 2019. Prior period segment information has been revised to conform with our current segment reporting. We account for the following segment information on the same basis as the accompanying condensed consolidated financial statements (in thousands).
A reconciliation of our consolidated Adjusted EBITDA to consolidated net income (loss) is provided below (in thousands).
Revenue by Category The following table presents our revenue disaggregated by geographic region (in thousands).
The following table presents our revenue disaggregated by type of service (in thousands).
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Term Notes Payable |
6 Months Ended | ||||||||||||||||||||||||||||||||||||
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Feb. 29, 2020 | |||||||||||||||||||||||||||||||||||||
Term Notes Payable [Abstract] | |||||||||||||||||||||||||||||||||||||
Term Notes Payable | NOTE 3 – TERM NOTES PAYABLE Pursuant to the credit agreement we obtained in August 2019 (the 2019 Credit Agreement), we have the ability to borrow up to $25.0 million in term loans. At August 31, 2019, we had borrowed $20.0 million of the available term loan amount. During November 2019, we borrowed the remaining $5.0 million term loan available on the 2019 Credit Agreement. The additional $5.0 million term loan has the same terms and conditions as the previous term loan and does not change the amount of our quarterly principal payments. However, the maturity date of the term loans is extended for one year as a result of the additional payments. At February 29, 2020, our future principal payments on the term loans are as follows (in thousands):
|
Revenue |
6 Months Ended |
---|---|
Feb. 29, 2020 | |
Revenue [Abstract] | |
Revenue | NOTE 7 – REVENUE Contract Balances Our deferred revenue totaled $56.9 million at February 29, 2020 and $65.8 million at August 31, 2019, of which $2.6 million and $3.6 million were classified as components of other long-term liabilities at February 29, 2020, and August 31, 2019, respectively. The amount of deferred revenue that was generated from subscription offerings totaled $48.0 million at February 29, 2020 and $58.2 million at August 31, 2019. During the quarter and two quarters ended February 29, 2020, we recognized $21.4 million and $42.5 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. ASC 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 February 29, 2020, we had $82.7 million of remaining performance obligations, including the amount of deferred revenue related to our subscription offerings, of which approximately 75 percent will be recognized over the next 12 months. The remaining performance obligation does not include other deferred revenue, as amounts included in other deferred revenue include items such as deposits that are generally refundable at the client’s request prior to the satisfaction of the obligation. Disaggregated Revenue Information Refer to Note 11, Segment Information, to these condensed consolidated financial statements for our disaggregated revenue information.
|
Investment In FC Organizational Products (Narrative) (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Feb. 29, 2020 |
Feb. 29, 2020 |
Nov. 04, 2019 |
Aug. 31, 2019 |
|
Related Party Transaction [Line Items] | ||||
Receivable from related party | $ 3.2 | |||
Note receivable purchased from FCOP's third-party bank | $ 2.6 | |||
Minimum royalties | $ 1.3 | $ 1.3 | ||
Term of license agreement | 30 years | |||
License Contract [Member] | ||||
Related Party Transaction [Line Items] | ||||
Capitalized contract cost | $ 3.2 | $ 3.2 | ||
FCOP [Member] | ||||
Related Party Transaction [Line Items] | ||||
Percent ownership interest in related party | 19.50% | 19.50% | ||
Receivable from related party | $ 1.0 | |||
FPC [Member] | ||||
Related Party Transaction [Line Items] | ||||
Receivable from related party | $ 0.9 | $ 0.9 | ||
Cash from related parties | 1.9 | |||
Royalty revenue | $ 0.9 | $ 1.3 |
Segment Information (Narrative) (Details) |
6 Months Ended |
---|---|
Feb. 29, 2020
segment
item
| |
Segment Information [Abstract] | |
Number of divisions | 2 |
Number of operating reportable segments | segment | 3 |
Number of corporate services group | 1 |
Inventories (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||
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Feb. 29, 2020 | |||||||||||||||||||||||||||||||||||||||||||
Inventories [Abstract] | |||||||||||||||||||||||||||||||||||||||||||
Components Of Inventories |
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Stock-Based Compensation (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Feb. 29, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total Cost Of Stock-Based Compensation |
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Stock Option Activity |
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Restricted Stock Award Activity |
|
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Inventories |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Feb. 29, 2020 | |||||||||||||||||||||||||||||||||||||||||||
Inventories [Abstract] | |||||||||||||||||||||||||||||||||||||||||||
Inventories | NOTE 2 – INVENTORIES Inventories are stated at the lower of cost or net realizable value, cost being determined using the first-in, first-out method, and were comprised of the following (in thousands):
|
Document And Entity Information - shares |
6 Months Ended | |
---|---|---|
Feb. 29, 2020 |
Mar. 31, 2020 |
|
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Document Period End Date | Feb. 29, 2020 | |
Entity File Number | 1-11107 | |
Entity Registrant Name | FRANKLIN COVEY CO | |
Entity Incorporation, State Country Name | Utah | |
Entity Tax Identification Number | 870401551 | |
Entity Address, Address Line One | 2200 West Parkway Boulevard | |
Entity Address, City or Town | Salt Lake City | |
Entity Address, State or Province | Utah | |
Entity Address, Postal Zip Code | 84119-2099 | |
City Area Code | 801 | |
Local Phone Number | 817-1776 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 13,869,729 | |
Amendment Flag | false | |
Entity Central Index Key | 0000886206 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2020 | |
Current Fiscal Year End Date | --08-31 |
Condensed Consolidated Statements Of Operations And Statements Of Comprehensive Income (Loss) (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Feb. 29, 2020 |
Feb. 28, 2019 |
Feb. 29, 2020 |
Feb. 28, 2019 |
|
Condensed Consolidated Statements Of Operations And Statements Of Comprehensive Income (Loss) [Abstract] | ||||
Foreign currency translation adjustments, tax | $ 0 | $ (11) | $ 0 | $ 0 |
Income (Loss) Per Share (Computation Of Loss Per Share) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Feb. 29, 2020 |
Feb. 28, 2019 |
Feb. 29, 2020 |
Feb. 28, 2019 |
|
Numerator for basic and diluted loss per share: | ||||
Net income (loss) | $ 1,097 | $ (3,517) | $ 553 | $ (4,874) |
Denominator for basic and diluted loss per share: | ||||
Basic weighted average shares outstanding | 13,841 | 13,937 | 13,911 | 13,927 |
Effect of dilutive securities: | ||||
Stock options and other stock-based awards | 149 | 207 | ||
Diluted weighted average shares outstanding | 13,990 | 13,937 | 14,118 | 13,927 |
EPS Calculations: | ||||
Net income (loss) per share: Basic and diluted | $ 0.08 | $ (0.25) | $ 0.04 | $ (0.35) |
Stock-Based Compensation (Total Cost Of Stock-Based Compensation) (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Feb. 29, 2020 |
Feb. 28, 2019 |
Feb. 29, 2020 |
Feb. 28, 2019 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Compensation cost | $ 1,793 | $ 1,043 | $ 3,644 | $ 1,989 |
Long-Term Incentive Awards [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Compensation cost | 1,566 | 824 | 3,201 | 1,557 |
Restricted Stock Awards [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Compensation cost | 175 | 175 | 350 | 350 |
Employee Stock Purchase Plan [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Compensation cost | $ 52 | $ 44 | $ 93 | $ 82 |
Term Notes Payable (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||
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Feb. 29, 2020 | |||||||||||||||||||||||||||||||||||||
Term Notes Payable [Abstract] | |||||||||||||||||||||||||||||||||||||
Future Principal Payments By Fiscal Year |
|
Income (Loss) Per Share (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Feb. 29, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income (Loss) Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Computation Of Loss Per Share |
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Condensed Consolidated Statements Of Operations And Statements Of Comprehensive Income (Loss) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Feb. 29, 2020 |
Feb. 28, 2019 |
Feb. 29, 2020 |
Feb. 28, 2019 |
|
Condensed Consolidated Statements Of Operations And Statements Of Comprehensive Income (Loss) [Abstract] | ||||
Net sales | $ 53,745 | $ 50,356 | $ 112,357 | $ 104,185 |
Cost of sales | 15,079 | 14,990 | 31,662 | 32,037 |
Gross profit | 38,666 | 35,366 | 80,695 | 72,148 |
Selling, general, and administrative | 36,221 | 35,925 | 75,620 | 70,568 |
Depreciation | 1,653 | 1,697 | 3,273 | 3,251 |
Amortization | 1,170 | 1,300 | 2,340 | 2,538 |
Loss from operations | (378) | (3,556) | (538) | (4,209) |
Interest income | 13 | 9 | 18 | 22 |
Interest expense | (557) | (623) | (1,162) | (1,255) |
Discount accretion on related party receivable | 243 | 258 | ||
Loss before income taxes | (922) | (3,927) | (1,682) | (5,184) |
Income tax benefit | 2,019 | 410 | 2,235 | 310 |
Net income (loss) | $ 1,097 | $ (3,517) | $ 553 | $ (4,874) |
Net income (loss) per share: | ||||
Basic and diluted | $ 0.08 | $ (0.25) | $ 0.04 | $ (0.35) |
Weighted average number of common shares: | ||||
Basic | 13,841 | 13,937 | 13,911 | 13,927 |
Diluted | 13,990 | 13,937 | 14,118 | 13,927 |
COMPREHENSIVE INCOME (LOSS) | ||||
Net income (loss) | $ 1,097 | $ (3,517) | $ 553 | $ (4,874) |
Foreign currency translation adjustments, net of income tax provision of $0, $(11), $0, and $0 | 90 | 438 | 53 | 129 |
Comprehensive income (loss) | $ 1,187 | $ (3,079) | $ 606 | $ (4,745) |
Basis Of Presentation |
6 Months Ended | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Feb. 29, 2020 | |||||||||||||
Basis Of Presentation [Abstract] | |||||||||||||
Basis Of Presentation | NOTE 1 – BASIS OF PRESENTATION General Franklin Covey Co. (hereafter referred to as us, we, our, or the Company) is a global company focused on organizational performance improvement. Our mission is to “enable greatness in people and organizations everywhere,” and our global structure is designed to help individuals and organizations achieve sustained superior performance through changes in human behavior. We are fundamentally a content and solutions company, and we believe that our offerings and services create the connection between capabilities and results. Our expertise extends to seven crucial areas: Leadership, Execution, Productivity, Trust, Educational Improvement, Sales Performance, and Customer Loyalty. We believe that our clients are able to utilize our content to create cultures whose hallmarks are high-performing, collaborative individuals, led by effective, trust-building leaders who execute with excellence and deliver measurably improved results for all of their key stakeholders. In the training and consulting marketplace, we believe there are three important characteristics that distinguish us from our competitors.
We are committed to, and measure ourselves by, our clients’ achievement of transformational results. We have some of the best-known offerings in the training industry, including a suite of individual-effectiveness and leadership-development training content based on the best-selling books, The 7 Habits of Highly Effective People, The Speed of Trust, The Leader in Me, and The 4 Disciplines of Execution, and proprietary content in the areas of Execution, Sales Performance, Productivity, Educational Improvement, and Customer Loyalty. Our offerings are described in further detail at www.franklincovey.com. The information posted on our website is not incorporated into this report. The accompanying unaudited condensed consolidated financial statements reflect, in the opinion of management, all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position and results of operations of the Company as of the dates and for the periods indicated. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to Securities and Exchange Commission (SEC) rules and regulations. The information included in this quarterly report on Form 10-Q should be read in conjunction with the consolidated financial statements and related notes included in our annual report on Form 10-K for the fiscal year ended August 31, 2019. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Our fiscal year ends on August 31 of each year and our fiscal quarters end on the last day of November, February, and May of each year. The results of operations for the quarter ended February 29, 2020 are not necessarily indicative of results expected for the entire fiscal year ending August 31, 2020, or for any future periods. Accounting Pronouncements Issued and Adopted In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842), which supersedes FASB Accounting Standards Codification (ASC) Topic 840, Leases. The new guidance requires lessees to recognize a lease liability and corresponding right-of-use asset for all leases greater than 12 months. Recognition, measurement, and presentation of expenses depends upon whether the lease is classified as a finance or operating lease. We adopted the new lease guidance prospectively on September 1, 2019. As part of the adoption of ASU 2016-02, we elected to apply the package of practical expedients, which allows us to not reassess prior conclusions related to lease classification, not to recognize short-term leases on our balance sheet, and not to separate lease and non-lease components for our leases. On September 1, 2019, the adoption of ASU 2016-02 resulted in the recognition of $1.5 million of lease liabilities and right-of-use assets on our condensed consolidated balance sheets for operating leases. For lessors, accounting for leases is substantially the same as in prior periods and there was no impact from the adoption of ASU 2016-02 for those leases where we are the lessor. Refer to Note 5, Leases for further information regarding our leasing activity. 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 previous leasing guidance. In transition to Topic 842, we reassessed whether the previously failed sale-leaseback met the sale criteria under the new leasing standard. Based on this assessment, we determined that the sale criteria under the new leasing standard was not met and we will continue to account for the corporate campus lease as a finance obligation on our consolidated balance sheet in future periods.
Accounting Pronouncements Issued Not Yet Adopted 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. We expect to adopt the provisions of ASU No. 2016-13 on September 1, 2020 and are currently evaluating the impact of this guidance on our financial position, results of operations, and disclosures. 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.
|
Leases (Assets And Liabilities Related To Operating Leases) (Details) $ in Thousands |
Feb. 29, 2020
USD ($)
|
---|---|
Assets: | |
Operating lease right of use assets | $ 1,662 |
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List] | us-gaap:OtherAssetsNoncurrent |
Liabilities: | |
Current: Operating lease liabilities | $ 921 |
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List] | us-gaap:AccruedLiabilitiesCurrent |
Long-Term: Operating lease liabilities | $ 741 |
Operating Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List] | us-gaap:OtherLiabilitiesNoncurrent |
Operating lease liabilities | $ 1,662 |
Weighted Average Remaining Lease Term: Operating leases (years) | 2 years 8 months 12 days |
Weighted Average Discount Rate: Operating leases | 4.20% |
Term Notes Payable (Future Principal Payments By Fiscal Year) (Details) - Term Loan [Member] $ in Thousands |
Feb. 29, 2020
USD ($)
|
---|---|
Debt Instrument [Line Items] | |
2020 | $ 2,500 |
2021 | 5,000 |
2022 | 5,000 |
2023 | 5,000 |
2024 | 5,000 |
Total | $ 22,500 |
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