Franklin Covey Co (FC), a global provider of training and consulting services, has announced 8.95 percent decline in profit for the quarter ended May 31, 2014, due to decline in margins. The company earned $1.92 million or $0.11 a share in the third-quarter compared with $2.11 million or $0.13 a share a year ago.
Revenue during the third-quarter climbed 5.06 percent to $47.13 million from $44.86 million in the last year period.
Gross margin contracted by 221 basis points over the last year period to 63.41 percent. Total expenses as a percentage of revenues increased to 93.60 percent from 90.94 percent in the same period last year. That has resulted in contraction of 265 basis points in operating margins to 6.40 percent.
The company reported operating income of $3.02 million, compared with operating income of $4.06 million in the previous year period.
As on May 31, 2014, the company's cash balance stood at $5.34 million, down 40.05 percent or $3.57 million from Jun. 01, 2013.
Bob Whitman, chairman and chief executive officer, commented, "We are very pleased with our continued progress on each of our major strategic objectives. We are encouraged by the repeat of more than 90% of the prior year’s revenue, our strong booking pace, the size of our prospective business pipelines, and the strength of the launch of our re-created 7 Habits Signature Program. Throughout the past years, we have made significant ongoing investments in our content, offerings, and organizational capabilities. We expect that the accelerated benefits and flow-through from these investments will be evident in our fiscal fourth quarter results, and in fiscal 2015 and beyond. We expect fiscal fourth quarter 2014 revenue, Adjusted EBITDA, operating income, and net income to be highest ever for a fourth quarter, also resulting in our highest-ever annual results in each of these areas for fiscal 2014 as a whole."
Working Capital
Franklin Covey Co has witnessed an increase in the working capital over the last year. The company's working capital stood at $37.45 million as at May 31, 2014, up $8.64 million or 29.99 percent from $28.81 million on Jun. 01, 2013. It registered an increase in current ratio to 2.19 as at May 31, 2014 from 1.89 on Jun. 01, 2013.
The company's cash conversion cycle (CCC) was increased to 75 days for third quarter from 58 days for the last year period. CCC is a liquidity metric which expresses the length of time (in days) that a company uses to sell inventory, collect receivables and pay its accounts payable. Decreasing or steady CCCs are good for business.
Days' sales outstanding moved up to 91 days for third quarter compared with 73 days for the last year period. This indicates the company has extended credit period to clients for making payment.
The company's days' inventory outstanding increased to 28 days for third quarter compared with 23 days for the last year period. This suggests the company took more time to convert the inventory into sales.
Days' payable outstanding went up to 44 days for third quarter compared with 39 days for the last year period. This reflects that the company has made late payment to vendors compared to prior year period.
Debt Position
Franklin Covey Co has witnessed a decline in the total debt over the last one year. As on May 31, 2014, total debt stood at $27.68 million, down 6.53 percent or $1.93 million, from Jun. 01, 2013. The company total debt was 15.08 percent of total assets as on May 31, 2014, compared with 17.48 percent on Jun. 01, 2013.
Interest coverage ratio, which determines how easily a company can pay interest expenses on outstanding debt, has declined to 6.25 from 9.67 in the same period last year.
Shares of Franklin Covey Co gained $0.02 or 0.10 percent to settle at $20.60 on Thursday.
