10-Q 1 fc-20230228x10q.htm 10-Q fc-20230228x10q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended February 28, 2023

[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 001-11107

Logo

Description automatically generated

FRANKLIN COVEY CO.

(Exact name of registrant as specified in its charter)



Utah		87-0401551
(State or other jurisdiction of incorporation or organization)		(I.R.S. employer identification no.)

2200 West Parkway Boulevard		84119-2099
Salt Lake City, Utah		(Zip Code)
(Address of principal executive offices)

Registrant’s telephone number,		(801) 817-1776
Including area code

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.05 Par Value	FC	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes T No £

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes T No £

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	£	Accelerated Filer	T
Non-accelerated Filer	£	Smaller Reporting Company	£
Emerging Growth Company	£

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. £

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes £ No T

Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock as of the latest practicable date:

13,852,825 shares of Common Stock as of March 31, 2023
‎

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FRANKLIN COVEY CO.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per-share amounts)



		February 28,		August 31,
		2023		2022
		(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	55,121	$	60,517
Accounts receivable, less allowance for doubtful accounts of $4,116 and $4,492		53,729		72,561
Inventories		3,468		3,527
Prepaid expenses and other current assets		18,532		19,278
Total current assets		130,850		155,883

Property and equipment, net		9,853		9,798
Intangible assets, net		42,651		44,833
Goodwill		31,220		31,220
Deferred income tax assets		3,555		4,686
Other long-term assets		15,956		12,735
	$	234,085	$	259,155

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of notes payable	$	5,835	$	5,835
Current portion of financing obligation		3,365		3,199
Accounts payable		8,488		10,864
Deferred subscription revenue		74,089		85,543
Other deferred revenue		14,619		14,150
Accrued liabilities		18,654		34,205
Total current liabilities		125,050		153,796

Notes payable, less current portion		4,823		7,268
Financing obligation, less current portion		6,233		7,962
Other liabilities		6,419		7,116
Deferred income tax liabilities		199		199
Total liabilities		142,724		176,341

Shareholders’ equity:
Common stock, $0.05 par value; 40,000 shares authorized, 27,056 shares issued		1,353		1,353
Additional paid-in capital		225,643		220,246
Retained earnings		88,427		82,021
Accumulated other comprehensive loss		(526)		(542)
Treasury stock at cost, 13,216 shares and 13,203 shares		(223,536)		(220,264)
Total shareholders’ equity		91,361		82,814
	$	234,085	$	259,155

See notes to condensed consolidated financial statements

‎

FRANKLIN COVEY CO.

CONDENSED CONSOLIDATED INCOME STATEMENTS AND STATEMENTS

OF COMPREHENSIVE INCOME

(in thousands, except per-share amounts)



		Quarter Ended			Two Quarters Ended
		February 28,		February 28,		February 28,		February 28,
		2023		2022		2023		2022
		(unaudited)				(unaudited)

Net sales	$	61,756	$	56,599	$	131,125	$	117,859
Cost of sales		14,546		12,485		31,173		26,146
Gross profit		47,210		44,114		99,952		91,713

Selling, general, and administrative		42,338		38,061		86,350		77,405
Depreciation		951		1,190		2,196		2,470
Amortization		1,093		1,346		2,185		2,776
Income from operations		2,828		3,517		9,221		9,062

Interest income		362		12		442		27
Interest expense		(409)		(423)		(819)		(869)
Income before income taxes		2,781		3,106		8,844		8,220
Income tax provision		(1,042)		(1,228)		(2,438)		(2,530)
Net income	$	1,739	$	1,878	$	6,406	$	5,690

Net income per share:
Basic	$	0.13	$	0.13	$	0.46	$	0.40
Diluted		0.12		0.13		0.44		0.40

Weighted average number of common shares:
Basic		13,900		14,312		13,888		14,279
Diluted		14,533		14,333		14,520		14,323


COMPREHENSIVE INCOME
Net income	$	1,739	$	1,878	$	6,406	$	5,690
Foreign currency translation adjustments,
net of income taxes of $0, $0, $0, and $0		146		(32)		16		(176)
Comprehensive income	$	1,885	$	1,846	$	6,422	$	5,514

See notes to condensed consolidated financial statements
‎

FRANKLIN COVEY CO.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)



	Two Quarters Ended
		February 28,		February 28,
		2023		2022
		(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	6,406	$	5,690
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization		4,381		5,246
Amortization of capitalized curriculum costs		1,648		1,620
Stock-based compensation		6,050		3,618
Deferred income taxes		1,130		1,277
Change in fair value of contingent consideration liabilities		7		48
Amortization of right-of-use operating lease assets		411		475
Changes in assets and liabilities:
Decrease in accounts receivable, net		19,050		22,925
Decrease in inventories		71		25
Decrease in prepaid expenses and other assets		1,333		353
Decrease in accounts payable and accrued liabilities		(16,823)		(11,165)
Decrease in deferred revenue		(11,674)		(5,518)
Increase in income taxes payable		(455)		(238)
Decrease in other long-term liabilities		(327)		(1,118)
Net cash provided by operating activities		11,208		23,238

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment		(2,644)		(1,264)
Curriculum development costs		(5,277)		(774)
Net cash used for investing activities		(7,921)		(2,038)

CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes payable		(2,500)		(2,500)
Principal payments on financing obligation		(1,562)		(1,409)
Purchases of common stock for treasury		(4,665)		(3,535)
Payment of contingent consideration liabilities		(736)		(671)
Proceeds from sales of common stock held in treasury		739		668
Net cash used for financing activities		(8,724)		(7,447)
Effect of foreign currency exchange rates on cash and cash equivalents		41		(108)
Net increase (decrease) in cash and cash equivalents		(5,396)		13,645
Cash and cash equivalents at the beginning of the period		60,517		47,417
Cash and cash equivalents at the end of the period	$	55,121	$	61,062

Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	1,604	$	1,302
Cash paid for interest		738		782

Non-cash investing and financing activities:
Purchases of property and equipment financed by accounts payable	$	141	$	160
Acquisition of right-of-use operating lease assets for operating lease liabilities		448		338

See notes to condensed consolidated financial statements
‎

FRANKLIN COVEY CO.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(in thousands and unaudited)

Accumulated

Common

Additional

Other

Treasury

Stock

Paid-In

Retained

Comprehensive

Stock

Amount

Capital

Earnings

Loss

Amount

Balance at August 31, 2022

27,056

1,353

220,246

82,021

(542)

(13,203)

(220,264)

Issuance of common stock from

treasury

(568)

935

Purchases of common shares

for treasury

(18)

(835)

Stock-based compensation

2,735

Cumulative translation

adjustments

FRANKLIN COVEY CO [FC] Filings
10-Q	[2023-04-05]
10-Q	[2023-01-09]
10-K	[2022-11-14]
10-Q	[2022-07-07]
10-Q	[2022-04-06]
10-Q	[2022-01-07]
10-K	[2021-11-12]
10-Q	[2021-07-08]
10-Q	[2021-04-08]
10-Q	[2021-01-08]
10-K	[2020-11-16]
10-Q	[2020-07-10]
10-Q	[2020-04-09]
10-Q	[2020-01-09]
10-K	[2019-11-14]
10-Q	[2019-07-09]
10-Q	[2019-04-09]
10-Q	[2019-01-09]
10-K	[2018-11-14]
10-Q	[2018-07-10]
10-Q	[2018-04-09]
10-Q	[2018-01-09]
10-K	[2017-11-14]
10-Q	[2017-07-10]
10-Q	[2017-04-07]
10-Q	[2017-01-05]
10-K	[2016-11-14]
10-Q	[2016-07-07]
10-Q	[2016-04-07]
10-Q	[2016-01-07]
10-K	[2015-11-13]
10-Q	[2015-07-09]
10-Q	[2015-04-09]
10-Q	[2015-01-08]
10-K	[2014-11-14]
10-Q	[2014-07-10]
10-Q	[2014-04-10]
10-Q	[2014-01-09]
10-K	[2013-11-14]
10-Q	[2013-07-11]
10-Q	[2013-04-11]
10-Q	[2013-01-10]
10-K	[2012-11-14]
10-Q	[2012-07-03]
10-Q	[2012-04-04]
10-Q	[2012-01-05]

FRANKLIN COVEY CO [FC] Filings

FORM 10-Q

CONDENSED CONSOLIDATED BALANCE SHEETS

CONDENSED CONSOLIDATED INCOME STATEMENTS AND STATEMENTS

OF COMPREHENSIVE INCOME

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY