S.L. firm is back 'on a good path'

FranklinCovey said Tuesday it is "on a good path right now," drawing tantalizingly close to operating profitability.

The Salt Lake-based company reported a $5.8 million improvement in its operating results for the third fiscal quarter of 2005, to an operating loss of $200,000. During the same quarter last year, FranklinCovey reported an operating loss of $6 million.

The third quarter's results marked the 11th consecutive quarter of improvements in operating results, according to FranklinCovey Vice President Richard Putnam.

"I think we did pretty well, given that this is our slowest quarter," Putnam said. "We've gone about eight years since we had an operating profit, and this quarter we would have had an operating profit had it not been for a $1.2 million severance charge for one of our officers who left the company and received a severance agreement."

The company attributed the improved operating results to a $4.5 million increase in sales, an improvement in the company's gross profit margin and a decline in depreciation and other expenses.

However, the company still has some ground to make up. Net income for the quarter was $3.1 million before preferred stock dividends and a non-cash preferred stock recapitalization charge for the quarter. After figuring in the recapitalization charge and accounting for dividends, the company reported a 34-cent per-share loss on its common stock for the quarter.

The recapitalization during the third quarter included a $7.8 million charge for the recapitalization of its preferred stock and a $3 million income tax benefit, the company said.

Net sales for the quarter were $65.8 million, compared to $61.2 million during the same quarter one year ago. FranklinCovey's "Organizational Solutions Business Unit" led sales for the quarter, bringing in $33.8 million, compared to $28.1 million during the same quarter last year.

Sales from the company's consumer and small-business unit were down $1.2 million, to $32 million. Retail store sales dipped $2.6 million to $13.4 million for the quarter, the company reported.

"There were 29 fewer domestic stores open during the quarter compared to the same quarter last year," the company said in a prepared statement. "These stores accounted for $2.4 million of sales in the third quarter of 2004. The retail store sales decline was attributed to the loss of sales from closed retail stores, less foot traffic in the continuing stores, and a $1.2 million decline in electronic products sold during the quarter this year compared to the same quarter last year."