Franklin Covey Reports Strong 2013 Fourth Quarter and Fiscal Year Financial Results

  Franklin Covey Reports Strong 2013 Fourth Quarter and Fiscal Year Financial
  Results

  Strongest Quarter and Fiscal Year Ever for the Company’s Current Business
   Fourth Quarter Revenues Up 21%, Adjusted EBITDA Up 30% Over Fiscal 2012
Full Fiscal Year 2013 Revenues Up 12%, Adjusted EBITDA Up 16% Over Prior Year
              Provides Adjusted EBITDA Guidance For Fiscal 2014

Business Wire

SALT LAKE CITY -- November 7, 2013

Franklin Covey Co. (NYSE: FC), a global performance improvement company that
creates and distributes world-class content, training, processes, and tools
that organizations and individuals use to transform their results, today
announced financial results for its fiscal fourth quarter and full fiscal year
ended August 31, 2013.

Fiscal 2013 Fourth Quarter Financial Highlights

  *Sales increased $10.6 million, or 21%, to $61.6 million, compared with
    $51.0 million for fiscal 2012.
  *Sales grew in nearly all major channels, including national account
    practices, U.S./Canada direct offices, international direct offices, and
    from international licensee partners.
  *Gross profit increased 22% to $42.7 million on increased sales and an
    improvement in gross margin to 69.4% compared with 68.6% for the fourth
    quarter of fiscal 2012.
  *Adjusted EBITDA increased $2.9 million, or 30%, to $12.5 million compared
    with $9.6 million for the prior year’s fourth quarter.
  *Net income increased $4.3 million, or 127%, to $7.7 million compared with
    $3.4 million for the fourth quarter of fiscal 2012.
  *EPS grew 161%, to $0.47 per diluted share, from $0.18 per diluted share in
    the prior year.
  *The Company’s cash balance remained strong and totaled $12.3 million at
    August 31, 2013 compared with $11.0 million at August 31, 2012.

Full Year Fiscal 2013 Financial Highlights

  *Consolidated sales grew $20.5 million, or 12%, to $190.9 million, compared
    with $170.5 million for fiscal 2012, the best fiscal year ever for the
    Company’s current business.
  *Sales grew in nearly all of the Company’s major sales channels.
  *Gross profit increased $16.3 million, or 14%, to $129.0 million, compared
    with $112.7 million for fiscal 2012 on increased sales and an improved
    gross margin.
  *Adjusted EBITDA increased 16% to $31.4 million, compared with $27.1
    million for fiscal 2012.
  *Adjusted EBITDA margin increased to 16.4% of sales from 15.9% in the prior
    year.
  *Net income grew $6.5 million, or 83%, to $14.3 million compared with $7.8
    million last year.
  *EPS grew 86% to $0.80 per diluted share, from $0.43 per diluted share for
    fiscal 2012.

Bob Whitman, Chairman and Chief Executive Officer of Franklin Covey,
commented, “Fiscal 2013 was an extremely strong year for Franklin Covey. We
were pleased to be able to significantly improve our financial results while
investing heavily in our future growth, despite government instability and
foreign exchange issues. We are pleased with our results for the year, and
enthusiastic about the prospect to accelerate growth in future periods.”

Fourth Quarter Financial Results

The Company’s consolidated sales increased to $61.6 million compared with
$51.0 million in the fourth quarter of fiscal 2012. Sales increased at nearly
all of the Company’s major channels, including its national account practices,
U.S./Canada direct offices, international direct offices, and international
licensee channel. The Company’s national account practices reported a 64%
increase in revenues, driven by increased Education and Sales Performance
Practice sales. The Education Practice, which delivers content based on The
Leader In Me to elementary schools in the United States and internationally,
increased sales by 67% compared with the prior year, as demand for this
whole-school transformation process continues to grow. Sales Performance
Practice sales were favorably impacted by the fiscal 2013 acquisition of
NinetyFive 5 LLC (NinetyFive 5), and grew by 82% compared with the prior year.
Revenue in the Company’s U.S./Canada direct offices (excluding the government
services region), increased 23% compared with the fourth quarter of fiscal
2012. Partially offsetting sales growth at the Company’s U.S./Canada direct
offices was a $1.9 million decrease in government services sales which was
primarily due to the timing of a large contract renewal that was postponed
until the Company’s first quarter of fiscal 2014. Sales growth was generally
broad-based across the Company’s key practice areas and the Company benefited
from strong facilitator sales and intellectual property license revenues
during the quarter. Sales increased 14% at the Company’s direct offices in
Japan, Australia, and the United Kingdom compared with the prior year, driven
primarily by a 15% increase in sales from the Company’s office in Japan as
well as increased sales in Australia. Many of the Company’s international
licensee partners also recognized stronger sales during the quarter, resulting
in an 8% overall increase in licensee revenues.

Gross profit increased 22% to $42.7 million compared with $35.0 million in the
fourth quarter of fiscal 2012. The increase in gross profit was attributable
to increased sales, as described above, and improved gross margin. The
Company’s gross margin for the quarter ended August 31, 2013 increased to
69.4% of sales compared with 68.6% in the prior year. The improvement in gross
margin was primarily due to increased facilitator sales in the U.S./Canada
direct offices during the quarter and increased intellectual property license
revenues, which have higher margins than the majority of the Company’s other
services and products.

Selling, general and administrative expenses (SG&A) increased $6.0 million
compared with the fourth quarter of fiscal 2012, reflecting increased
commissions on higher sales, ongoing investments in hiring new sales-related
personnel, and marketing initiatives. The increase in SG&A expenses over the
prior year was primarily due to 1) a $3.8 million increase in associate costs
resulting from increased commissions on higher sales and new sales-related
personnel; 2) a $1.1 million increase in non-cash share-based compensation
expense primarily resulting from a new performance-based award granted in the
fourth quarter; 3) a $0.6 million increase in advertising and promotional
costs that were primarily related to strategic initiatives which we believe
had a favorable impact on the fourth quarter’s sales; and 4) a $0.3 million
increase in travel expenses related primarily to marketing activities and
increased sales activity during the quarter. Amortization expense increased by
$0.4 million compared with the prior year due to the acquisition of NinetyFive
5 in the third quarter of fiscal 2013.

Adjusted EBITDA increased $2.9 million, or 30%, to $12.5 million compared with
$9.6 million in the prior year. Income from operations increased $1.3 million,
or 17%, to $9.0 million compared with $7.7 million in the fourth quarter of
fiscal 2012. The Company’s income before income taxes increased $2.8 million,
or 48%, to $8.5 million compared with $5.7 million in the prior year. Due to
benefits from the utilization of foreign tax credits, the Company’s effective
income tax rate decreased substantially compared with the prior year. The
favorable impact of improved operations combined with a reduced effective
income tax rate contributed to a $4.3 million, or 127%, increase in net
income, to $7.7 million, or $0.47 per diluted share, compared with $3.4
million, or $0.18 per diluted share in the fourth quarter of the prior year.

Full Fiscal Year 2013 Financial Results

Consolidated sales for the full fiscal year ended August 31, 2013 increased
$20.5 million to $190.9 million compared with $170.5 million in fiscal 2012.
Sales increased over the prior year through nearly all of our major delivery
channels. Sales growth during fiscal 2013 was driven primarily by the
Company’s U.S./Canada direct offices (excluding the government services
region), where sales increased 18% compared with the prior year, and a $9.0
million, or 64%, increase in Education Practice sales compared with the prior
year. Increased sales and improved gross margin led to an increase in gross
profit to $129.0 million compared with $112.7 million in fiscal 2012.
Consolidated gross margin increased to 67.6% of sales compared with 66.1% of
sales in the prior year, primarily due to increased facilitator sales,
increased intellectual property license sales, and increased international
licensee revenues.

The Company’s SG&A expenses increased $11.7 million, or 13%, compared with
fiscal 2012. The increase in SG&A expenses was primarily due to an $8.6
million increase in associate costs resulting from increased sales commissions
and bonuses on improved sales and operating results, and the addition of new
sales personnel; a $1.7 million increase in advertising and promotional costs
for strategic marketing initiatives that we believe had a favorable impact on
overall fiscal 2013 sales; and a $1.2 million increase in travel expenses
related primarily to marketing activities and increased training activity
during the fiscal year. Amortization expense for fiscal 2013 increased by $0.7
million compared with fiscal 2012 due to the acquisition of NinetyFive 5 in
the third quarter of fiscal 2013.

Adjusted EBITDA increased to $31.4 million, growth of 16%, compared with $27.1
million in fiscal 2012. Income before income taxes increased $5.7 million, or
41%, to $19.4 million, compared with $13.7 million in the prior year. Due to
benefits from the utilization of foreign tax credits, the Company’s effective
income tax rate for the fiscal year decreased to 26 percent compared with 43
percent in fiscal 2012. The combination of improved operations and a reduced
effective income tax rate contributed to a $6.5 million, or 83%, increase in
net income, to $14.3 million, or $0.80 per diluted share, compared with $7.8
million, or $0.43 per diluted share, in fiscal 2012.

At August 31, 2013, the Company had $12.3 million in cash and cash
equivalents, compared with $11.0 million at August 31, 2012. Net working
capital increased to $38.2 million at August 31, 2013 compared with $27.5
million on August 31, 2012 and the Company had no borrowings on its revolving
line of credit facility at August 31, 2013.

Fiscal 2014 Outlook

Based on its strong fiscal 2013 financial performance and the strength of its
booking pace and awarded revenue in the fourth quarter of fiscal 2013, the
Company expects Adjusted EBITDA for fiscal 2014 to increase to between $35
million and $37 million—up from $31.4 million in fiscal 2013.

Earnings Conference Call

As previously announced, on Thursday, November 7, 2013, at 5:00 p.m. Eastern
time (3:00 p.m. Mountain time) Franklin Covey will host a conference call to
review its financial results for the quarter and full fiscal year ended August
31, 2013. Interested persons may participate by dialing 800-447-0521
(International participants may dial 847-413-3238), access code: 35977352.
Alternatively, a webcast will be accessible at the following Web site:
http://www.media-server.com/m/p/6p32ifs6. A replay will be available from
November 7 (7:30 p.m. ET) through November 14, 2013 by dialing 888-843-7419
(International participants may dial 630-652-3042), access code: 35977352#.
The webcast will remain accessible through November 14, 2013 on the Investor
Relations area of the Company’s Web site at:
http://investor.franklincovey.com/phoenix.zhtml?c=102601&p=irol-IRHome.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995 including those
statements related to the Company’s future results and profitability; expected
Adjusted EBITDA in fiscal 2014; anticipated future sales; and goals relating
to the growth of the Company. Forward-looking statements are based upon
management’s current expectations and are subject to various risks and
uncertainties including, but not limited to: general economic conditions; the
expected number of booked days to be delivered; market acceptance of new
products or services and marketing strategies; the ability to achieve
sustainable growth in future periods; and other factors identified and
discussed in the Company’s most recent Annual Report on Form 10-K and other
periodic reports filed with the Securities and Exchange Commission. Many of
these conditions are beyond the Company’s control or influence, any one of
which may cause future results to differ materially from the Company’s current
expectations, and there can be no assurance that the Company’s actual future
performance will meet management’s expectations. These forward-looking
statements are based on management’s current expectations and the Company
undertakes no obligation to update or revise these forward-looking statements
to reflect events or circumstances subsequent to this press release, except as
required by law.

Non-GAAP Financial Information

Refer to the attached table for the reconciliation of a non-GAAP financial
measure, “Adjusted EBITDA,” to consolidated net income, the most comparable
GAAP financial measure. The Company defines Adjusted EBITDA as net income or
loss excluding the impact of interest expense, income tax expense,
amortization, depreciation, share-based compensation expense, and certain
other non-recurring items. The Company references this non-GAAP financial
measure in its decision making because it provides supplemental information
that facilitates consistent internal comparisons to the historical operating
performance of prior periods and the Company believes it provides investors
with greater transparency to evaluate operational activities and financial
results. We do not provide forward-looking GAAP measures or a reconciliation
of the forward-looking Adjusted EBITDA to GAAP measures because of our
inability to project certain of the costs included in the calculation of
Adjusted EBITDA.

About Franklin Covey Co.

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


FRANKLIN COVEY CO.
Condensed Consolidated Income Statements
(in thousands, except per-share amounts, and unaudited)
                                                          
                                                                     
                     Quarter Ended                   Fiscal Year Ended
                     August 31,     August 31,       August 31,      August 31,
                     2013           2012             2013            2012
                                                                     
Net sales            $ 61,574       $ 51,015         $ 190,924       $ 170,456
                                                                     
Cost of sales         18,862       15,999         61,935        57,773  
Gross profit           42,712         35,016           128,989         112,683
                                                                     
Selling,
general, and           31,880         25,927           101,176         89,462
administrative
Depreciation           833            768              3,008           3,142
Amortization          990          620            3,191         2,499   
Income from            9,009          7,701            21,614          17,580
operations
                                                                     
Interest               (399   )       (600   )         (1,718  )       (2,464  )
expense, net
Discount on
related party          (102   )       (1,369 )         (519    )       (1,369  )
receivable
Other income,         1            -              21            -       
net
Income before          8,509          5,732            19,398          13,747
income taxes
                                                                     
Income tax            (790   )      (2,333 )        (5,079  )      (5,906  )
provision
Net income           $ 7,719       $ 3,399         $ 14,319       $ 7,841   
                                                                     
Net income per
common share:
Basic                $ 0.47         $ 0.19           $ 0.83          $ 0.44
Diluted                0.47           0.18             0.80            0.43
                                                                     
Weighted
average common
shares:
Basic                  16,352         17,793           17,348          17,772
Diluted                16,479         18,839           17,971          18,360
                                                                     
Other data:
Adjusted             $ 12,488      $ 9,623         $ 31,402       $ 27,056  
EBITDA^(1)
                                                                     
(1) The term Adjusted EBITDA (earnings before interest, income taxes,
depreciation, amortization, share-based
compensation, and certain other items) is a non-GAAP financial measure that the
Company believes is useful
to investors in evaluating its results. For a reconciliation of this non-GAAP
measure to the most comparable
GAAP equivalent, refer to the Reconciliation of Net Income to Adjusted EBITDA as
shown below.



                                                          
FRANKLIN COVEY CO.
Reconciliation of Net Income to Adjusted EBITDA
(in thousands and unaudited)
                                                                     
                     Quarter Ended                   Fiscal Year Ended
                     August 31,     August 31,       August 31,      August 31,
                     2013           2012             2013            2012
Reconciliation
of net income
to Adjusted
EBITDA:
Net Income           $ 7,719        $ 3,399          $ 14,319        $ 7,841
Adjustments:
Other income,          (1     )       -                (21     )       -
net
Interest               399            600              1,718           2,464
expense, net
Discount on
related party          102            1,369            519             1,369
receivable
Income tax             790            2,333            5,079           5,906
provision
Amortization           990            620              3,191           2,499
Depreciation           833            768              3,008           3,142
Share-based           1,656        534            3,589         3,835   
compensation
                                                                     
Adjusted             $ 12,488      $ 9,623         $ 31,402       $ 27,056  
EBITDA
                                                                     
Adjusted               20.3   %       18.9   %         16.4    %       15.9    %
EBITDA margin
                                                                     
                                                                     
                                                                     
FRANKLIN COVEY CO.
Additional Sales Information
(in thousands and unaudited)
                                                                     
                     Quarter Ended                   Fiscal Year Ended
                     August 31,     August 31,       August 31,      August 31,
                     2013           2012             2013            2012
Sales Detail
by Category:
Training and
consulting           $ 57,472       $ 48,579         $ 178,656       $ 158,779
services
Products               3,119          1,399            8,114           8,456
Leasing               983          1,037          4,154         3,221   
                                                                     
Total                $ 61,574      $ 51,015        $ 190,924      $ 170,456 
                                                                     
Sales Detail
by
Region/Type:
U.S./Canada          $ 29,049       $ 26,458         $ 96,899        $ 86,698
direct offices
International          9,217          8,080            29,558          28,773
direct offices
International          3,785          3,507            15,452          14,301
licensees
National
account                16,686         10,170           37,042          27,367
practices
Self-funded            1,661          1,497            5,866           8,368
marketing
Other                 1,176        1,303          6,107         4,949   
                                                                     
Total                $ 61,574      $ 51,015        $ 190,924      $ 170,456 
                                                                               
                                                                               

                                                           
FRANKLIN COVEY CO.
Condensed Consolidated Balance Sheets
(in thousands and unaudited)
                                                                  
                                               August 31,         August 31,
                                               2013               2012
Assets
Current assets:
Cash                                           $ 12,291           $ 11,011
Accounts receivable, less allowance for          52,684             38,087
doubtful accounts of $982 and $851
Receivable from related party                    3,305              3,588
Inventories                                      4,321              4,161
Deferred income taxes                            4,685              3,634
Prepaid expenses and other current              3,822            3,714    
assets
Total current assets                             81,108             64,195
                                                                  
Property and equipment, net                      17,180             18,496
Intangible assets, net                           60,654             59,205
Goodwill                                         16,135             9,172
Long-term receivable from related party          4,453              3,478
Other assets                                    9,875            9,534    
                                               $ 189,405         $ 164,080  
                                                                  
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of financing obligation        $ 1,139            $ 992
Current portion of bank note payable             -                  2,500
Accounts payable                                 9,294              7,758
Income taxes payable                             1,365              869
Accrued liabilities                             31,140           24,530   
Total current liabilities                        42,938             36,649
                                                                  
Financing obligation, less current               27,376             28,515
portion
Bank note payable, less current portion          -                  208
Other liabilities                                6,106              1,152
Deferred income tax liabilities                 6,479            7,001    
Total liabilities                               82,899           73,525   
                                                                  
Shareholders' equity:
Common stock                                     1,353              1,353
Additional paid-in capital                       210,227            182,534
Common stock warrants                            -                  5,260
Retained earnings                                40,429             26,110
Accumulated other comprehensive income           1,686              3,410
Treasury stock at cost, 10,759 and 9,365        (147,189 )        (128,112 )
shares
Total shareholders' equity                      106,506          90,555   
                                               $ 189,405         $ 164,080  

Contact:

Franklin Covey
Investor Contact:
Steve Young, 801-817-1776
investor.relations@franklincovey.com
Media Contact:
Debra Lund,801-817-6440
Debra.Lund@franklincovey.com