þ
|
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 FOR THE FISCAL YEAR ENDED AUGUST 31, 2008.
|
OR
|
|
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 FOR THE TRANSITION PERIOD FROM ___
TO ___
|
Utah
|
1-11107
|
87-0401551
|
||
(State
or other jurisdiction of incorporation or organization)
|
(Commission
File No.)
|
(IRS
Employer Identification
No.)
|
Title
of Each Class
|
Name
of Each Exchange on Which Registered
|
|
Common
Stock, $.05 Par Value
|
New
York Stock
Exchange
|
Large
accelerated filer
|
o |
Accelerated
filer x
|
|||
Non-accelerated
filer
|
o |
(Do
not check if a smaller reporting company)
|
Smaller
reporting company
|
o |
·
|
Restate
Management’s Report on Internal Control Over Financial Reporting, and
amend management’s assessment of the effectiveness of our disclosure
controls and procedures; and
|
·
|
File
a restated Report of Independent Registered Public Accounting Firm related
to internal control over financial
reporting.
|
AUGUST
31,
|
2008
|
2007
|
||||||
In
thousands, except per share data
|
||||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 15,904 | $ | 6,126 | ||||
Accounts
receivable, less allowance for doubtful accounts of $1,066 and
$821
|
28,019 | 27,239 | ||||||
Inventories
|
8,742 | 24,033 | ||||||
Deferred
income taxes
|
2,472 | 3,635 | ||||||
Receivable
from equity method investee
|
7,672 | - | ||||||
Prepaid
expenses and other assets
|
5,102 | 9,070 | ||||||
Total
current assets
|
67,911
|
70,103
|
||||||
Property
and equipment, net
|
26,928 | 36,063 | ||||||
Intangible
assets, net
|
72,320 | 75,923 | ||||||
Other
long-term assets
|
11,768 | 14,542 | ||||||
$ | 178,927 | $ | 196,631 | |||||
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Current
portion of long-term debt and financing obligation
|
$ | 670 | $ | 629 | ||||
Line
of credit
|
- | 15,999 | ||||||
Accounts
payable
|
8,713 | 12,190 | ||||||
Income
taxes payable
|
1,057 | 2,244 | ||||||
Tender
offer obligation
|
28,222 | - | ||||||
Accrued
liabilities
|
23,419 | 30,101 | ||||||
Total
current liabilities
|
62,081
|
61,163
|
||||||
Long-term
debt and financing obligation, less current portion
|
32,291 | 32,965 | ||||||
Other
liabilities
|
1,229 | 1,019 | ||||||
Deferred
income tax liabilities
|
4,572 | 565 | ||||||
Total
liabilities
|
100,173 | 95,712 | ||||||
Commitments
and contingencies (Notes 1, 8, 9, and 12)
|
||||||||
Shareholders’
equity:
|
||||||||
Common
stock, $.05 par value; 40,000 shares authorized, 27,056 shares
issued
|
1,353 | 1,353 | ||||||
Additional
paid-in capital
|
184,313 | 185,890 | ||||||
Common
stock warrants
|
7,597 | 7,602 | ||||||
Retained
earnings
|
25,337 | 19,489 | ||||||
Accumulated
other comprehensive income
|
1,058 | 970 | ||||||
Treasury
stock at cost, 10,203 shares and 7,296 shares
|
(140,904 | ) | (114,385 | ) | ||||
Total
shareholders’ equity
|
78,754 | 100,919 | ||||||
$ | 178,927 | $ | 196,631 |
YEAR
ENDED AUGUST 31,
|
2008
|
2007
|
2006
|
|||||||||
In
thousands, except per share amounts
|
||||||||||||
Net
sales:
|
||||||||||||
Training and consulting
services
|
$ | 138,112 | $ | 137,708 | $ | 122,418 | ||||||
Products
|
121,980 | 146,417 | 156,205 | |||||||||
260,092 | 284,125 | 278,623 | ||||||||||
Cost
of sales:
|
||||||||||||
Training and consulting
services
|
44,738 | 43,132 | 40,722 | |||||||||
Products
|
53,565 | 65,915 | 69,940 | |||||||||
98,303 | 109,047 | 110,662 | ||||||||||
Gross
profit
|
161,789 | 175,078 | 167,961 | |||||||||
Selling,
general, and administrative
|
141,318 | 149,220 | 144,747 | |||||||||
Gain
on sale of consumer solutions business unit
|
(9,131 | ) | - | - | ||||||||
Gain
on sale of manufacturing facility
|
- | (1,227 | ) | - | ||||||||
Restructuring
costs
|
2,064 | - | - | |||||||||
Impairment
of assets
|
1,483 | - | - | |||||||||
Depreciation
|
5,692 | 5,394 | 5,355 | |||||||||
Amortization
|
3,603 | 3,607 | 3,813 | |||||||||
Income from
operations
|
16,760 | 18,084 | 14,046 | |||||||||
Interest
income
|
157 | 717 | 1,334 | |||||||||
Interest
expense
|
(3,083 | ) | (3,136 | ) | (2,622 | ) | ||||||
Recovery
from legal settlement
|
- | - | 873 | |||||||||
Income before income
taxes
|
13,834 | 15,665 | 13,631 | |||||||||
Income
tax benefit (provision)
|
(7,986 | ) | (8,036 | ) | 14,942 | |||||||
Net income
|
5,848 | 7,629 | 28,573 | |||||||||
Preferred
stock dividends
|
- | (2,215 | ) | (4,385 | ) | |||||||
Net income available to common
shareholders
|
$ | 5,848 | $ | 5,414 | $ | 24,188 | ||||||
Net
income available to common shareholders per share:
|
||||||||||||
Basic
|
$ | .30 | $ | .28 | $ | 1.20 | ||||||
Diluted
|
$ | .29 | $ | .27 | $ | 1.18 | ||||||
Weighted
average number of common shares:
|
||||||||||||
Basic
|
19,577 | 19,593 | 20,134 | |||||||||
Diluted
|
19,922 | 19,888 | 20,516 | |||||||||
COMPREHENSIVE
INCOME
|
||||||||||||
Net
income
|
$ | 5,848 | $ | 7,629 | $ | 28,573 | ||||||
Foreign
currency translation adjustments
|
88 | 458 | 97 | |||||||||
Comprehensive
income
|
$ | 5,936 | $ | 8,087 | $ | 28,670 |
YEAR
ENDED AUGUST 31,
|
2008
|
2007
|
2006
|
|||||||||
In
thousands
|
||||||||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
||||||||||||
Net income
|
$ | 5,848 | $ | 7,629 | $ | 28,573 | ||||||
Adjustments to reconcile net
income to net cash providedby operating activities:
|
||||||||||||
Depreciation and
amortization
|
9,533 | 10,030 | 10,289 | |||||||||
Gain on sale of consumer
solutions business unit assets
|
(9,131 | ) | - | - | ||||||||
Deferred income
taxes
|
4,152 | 5,274 | (15,435 | ) | ||||||||
Share-based compensation cost
(benefit)
|
(259 | ) | 1,394 | 843 | ||||||||
Loss (gain) on disposals of
assets
|
460 | (1,247 | ) | - | ||||||||
Restructuring
charges
|
2,064 | - | - | |||||||||
Impairment of
assets
|
1,483 | - | - | |||||||||
Changes in assets and
liabilities:
|
||||||||||||
Increase in accounts receivable,
net
|
(7,204 | ) | (3,574 | ) | (1,919 | ) | ||||||
Decrease (increase) in
inventories
|
2,853 | (2,427 | ) | (845 | ) | |||||||
Increase in receivable from
equity method investee
|
(7,672 | ) | - | - | ||||||||
Decrease in prepaid expenses and
other assets
|
7,109 | 514 | 1,458 | |||||||||
Decrease in accounts payable and
accrued liabilities
|
(1,512 | ) | (4,388 | ) | (3,697 | ) | ||||||
Increase (decrease) in income
taxes payable
|
255 | 304 | (2,081 | ) | ||||||||
Increase (decrease) in other
long-term liabilities
|
(151 | ) | (151 | ) | (177 | ) | ||||||
Net cash provided by operating
activities
|
7,828 | 13,358 | 17,009 | |||||||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||||||||||
Proceeds from the sale of
consumer solutions business unit assets, net
|
28,241 | - | - | |||||||||
Purchases of property and
equipment
|
(4,164 | ) | (9,138 | ) | (4,350 | ) | ||||||
Capitalized curriculum
development costs
|
(4,042 | ) | (5,088 | ) | (4,010 | ) | ||||||
Investment in equity method
investee
|
(2,755 | ) | - | - | ||||||||
Proceeds from disposal of
consolidated subsidiaries
|
1,180 | 150 | - | |||||||||
Proceeds from sales of property
and equipment, net
|
60 | 2,596 | 93 | |||||||||
Net cash provided by (used for)
investing activities
|
18,520 | (11,480 | ) | (8,267 | ) | |||||||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||||||
Proceeds from line of credit
borrowing
|
69,708 | 50,951 | - | |||||||||
Payments on line of credit
borrowings
|
(85,707 | ) | (34,952 | ) | - | |||||||
Redemptions of Series A preferred
stock
|
- | (37,345 | ) | (20,000 | ) | |||||||
Change in restricted
cash
|
- | - | 699 | |||||||||
Principal payments on long-term
debt and financing obligation
|
(622 | ) | (605 | ) | (1,111 | ) | ||||||
Purchases of common stock for
treasury
|
- | (2,625 | ) | (5,167 | ) | |||||||
Proceeds from sales of common
stock from treasury
|
462 | 388 | 427 | |||||||||
Proceeds from management stock
loan payments
|
- | 27 | 134 | |||||||||
Payment of preferred stock
dividends
|
- | (2,215 | ) | (4,885 | ) | |||||||
Net cash used for financing
activities
|
(16,159 | ) | (26,376 | ) | (29,903 | ) | ||||||
Effect
of foreign currency exchange rates on cash and cash
equivalents
|
(411 | ) | 37 | 58 | ||||||||
Net
increase (decrease) in cash and cash equivalents
|
9,778 | (24,461 | ) | (21,103 | ) | |||||||
Cash
and cash equivalents at beginning of the year
|
6,126 | 30,587 | 51,690 | |||||||||
Cash
and cash equivalents at end of the year
|
$ | 15,904 | $ | 6,126 | $ | 30,587 | ||||||
Supplemental
disclosure of cash flow information:
|
||||||||||||
Cash paid for income
taxes
|
$ | 3,549 | $ | 2,370 | $ | 2,615 | ||||||
Cash paid for
interest
|
3,146 | 2,973 | 2,662 | |||||||||
Non-cash
investing and financing activities:
|
||||||||||||
Acquisition of treasury stock
from tender offer through liabilities
|
$ | 28,222 | $ | - | $ | - | ||||||
Accrued preferred stock
dividends
|
- | - | 934 | |||||||||
Promissory notes received from
sales of consolidated subsidiaries
|
- | 1,513 | - | |||||||||
Purchases of property and
equipment financed by accounts payable
|
314 | 895 | - |
Series
A Preferred Stock Shares
|
Series
A Preferred Stock Amount
|
Common
Stock Shares
|
Common
Stock Amount
|
Additional
Paid-In Capital
|
Common
Stock Warrants
|
Retained
Earnings (Accumulated Deficit)
|
Deferred
Compensa-tion
|
Accumulated
Other Comprehensive Income
|
Treasury
Stock Shares
|
Treasury
Stock Amount
|
||||||||||||||||||||||||||||||||||
In
thousands
|
||||||||||||||||||||||||||||||||||||||||||||
Balance
at August 31, 2005
|
2,294 | $ | 57,345 | 27,056 | $ | 1,353 | $ | 190,760 | $ | 7,611 | $ | (14,498 | ) | $ | (1,055 | ) | $ | 556 | (6,465 | ) | $ | (109,246 | ) | |||||||||||||||||||||
Preferred
stock dividends
|
(4,385 | ) | ||||||||||||||||||||||||||||||||||||||||||
Preferred
stock redemptions
|
(800 | ) | (20,000 | ) | ||||||||||||||||||||||||||||||||||||||||
Issuance
of common stock from treasury
|
(334 | ) | 69 | 743 | ||||||||||||||||||||||||||||||||||||||||
Purchase
of treasury shares
|
(690 | ) | (5,167 | ) | ||||||||||||||||||||||||||||||||||||||||
Unvested
share award
|
(458 | ) | 27 | 458 | ||||||||||||||||||||||||||||||||||||||||
Share-based
compensation
|
862 | |||||||||||||||||||||||||||||||||||||||||||
Reclassification
of deferred compensation upon adoption of SFAS 123R
|
(1,055 | ) | 1,055 | |||||||||||||||||||||||||||||||||||||||||
Receipt
of common stock as consideration for payment on management common stock
loans
|
301 | (24 | ) | (167 | ) | |||||||||||||||||||||||||||||||||||||||
Cumulative
translation adjustments
|
97 | |||||||||||||||||||||||||||||||||||||||||||
Net
income
|
28,573 | |||||||||||||||||||||||||||||||||||||||||||
Balance
at August 31, 2006
|
1,494 | $ | 37,345 | 27,056 | $ | 1,353 | $ | 185,691 | $ | 7,611 | $ | 14,075 | $ | - | $ | 653 | (7,083 | ) | $ | (113,379 | ) | |||||||||||||||||||||||
Preferred
stock dividends
|
(2,215 | ) | ||||||||||||||||||||||||||||||||||||||||||
Preferred
stock redemptions
|
(1,494 | ) | (37,345 | ) | ||||||||||||||||||||||||||||||||||||||||
Issuance
of common stock from treasury
|
(708 | ) | 100 | 1,096 | ||||||||||||||||||||||||||||||||||||||||
Purchase
of treasury shares
|
(345 | ) | (2,603 | ) | ||||||||||||||||||||||||||||||||||||||||
Unvested
share award
|
(501 | ) | 32 | 501 | ||||||||||||||||||||||||||||||||||||||||
Share-based
compensation
|
1,394 | |||||||||||||||||||||||||||||||||||||||||||
Payments
on management common stock loans
|
27 | |||||||||||||||||||||||||||||||||||||||||||
Cumulative
translation adjustments
|
458 | |||||||||||||||||||||||||||||||||||||||||||
Common
stock warrant activity
|
(13 | ) | (9 | ) | ||||||||||||||||||||||||||||||||||||||||
Sale
of Brazil subsidiary
|
(141 | ) | ||||||||||||||||||||||||||||||||||||||||||
Net
income
|
7,629 | |||||||||||||||||||||||||||||||||||||||||||
Balance
at August 31, 2007
|
- | $ | - | 27,056 | $ | 1,353 | $ | 185,890 | $ | 7,602 | $ | 19,489 | $ | - | $ | 970 | (7,296 | ) | $ | (114,385 | ) | |||||||||||||||||||||||
Issuance
of common stock from treasury
|
(746 | ) | 96 | 1,234 | ||||||||||||||||||||||||||||||||||||||||
Purchase
of treasury shares
|
(12 | ) | (103 | ) | ||||||||||||||||||||||||||||||||||||||||
Treasury
shares acquired through tender offer
|
(3,027 | ) | (28,222 | ) | ||||||||||||||||||||||||||||||||||||||||
Unvested
share award
|
(572 | ) | 36 | 572 | ||||||||||||||||||||||||||||||||||||||||
Share-based
compensation
|
(259 | ) | ||||||||||||||||||||||||||||||||||||||||||
Cumulative
translation adjustments
|
88 | |||||||||||||||||||||||||||||||||||||||||||
Common
stock warrant activity
|
(5 | ) | ||||||||||||||||||||||||||||||||||||||||||
Net
income
|
5,848 | |||||||||||||||||||||||||||||||||||||||||||
Balance
at August 31, 2008
|
- | $ | - | 27,056 | $ | 1,353 | $ | 184,313 | $ | 7,597 | $ | 25,337 | $ | - | $ | 1,058 | (10,203 | ) | $ | (140,904 | ) |
1.
|
NATURE
OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
|
AUGUST
31,
|
2008
|
2007
|
||||||
Finished
goods
|
$ | 8,329 | $ | 20,268 | ||||
Work
in process
|
- | 743 | ||||||
Raw
materials
|
413 | 3,022 | ||||||
$ | 8,742 | $ | 24,033 |
Description
|
Useful
Lives
|
Buildings
|
15-39
years
|
Machinery
and equipment
|
3-7
years
|
Computer
hardware and software
|
3
years
|
Furniture,
fixtures, and leasehold improvements
|
5-8
years
|
AUGUST
31,
|
2008
|
2007
|
||||||
Unearned
revenue
|
$ | 4,564 | $ | 4,709 | ||||
Outsourcing
contract costs payable
|
4,446 | 4,357 | ||||||
Accrued
compensation
|
4,152 | 6,807 | ||||||
Customer
credits
|
2,191 | 2,570 | ||||||
Restructuring
costs
|
2,055 | - | ||||||
Other
accrued liabilities
|
6,011 | 11,658 | ||||||
$ | 23,419 | $ | 30,101 |
Description
|
Accrued
Restructuring Costs
|
|||
Balance
at August 31, 2007
|
$ | - | ||
Restructuring
charges
|
2,064 | |||
Amounts
utilized – employee severance
|
(9 | ) | ||
Balance
at August 31, 2008
|
$ | 2,055 |
2.
|
SALE
OF THE CONSUMER SOLUTIONS BUSINESS
UNIT
|
Description
|
||||
Cash
and cash equivalents
|
$ | 38 | ||
Accounts
receivable, net
|
6,675 | |||
Inventories
|
12,665 | |||
Other
current assets
|
2,291 | |||
Property
and equipment, net
|
8,435 | |||
Other
assets
|
158 | |||
Total
assets sold
|
$ | 30,262 | ||
Accounts
payable
|
$ | 3,589 | ||
Accrued
liabilities
|
6,748 | |||
Total
liabilities sold
|
$ | 10,337 |
Balance
Sheet
|
||||
Total
assets
|
$ | 45,588 | ||
Total
liabilities
|
37,013 | |||
Income
Statement
|
||||
Sales
|
13,149 | |||
Net
loss
|
(1,437 | ) |
3.
|
PROPERTY
AND EQUIPMENT
|
AUGUST
31,
|
2008
|
2007
|
||||||
Land
and improvements
|
$ | 1,626 | $ | 1,639 | ||||
Buildings
|
34,573 | 34,536 | ||||||
Machinery
and equipment
|
2,969 | 29,026 | ||||||
Computer
hardware and software
|
20,010 | 45,623 | ||||||
Furniture,
fixtures, and leasehold improvements
|
9,640 | 32,579 | ||||||
68,818 | 143,403 | |||||||
Less
accumulated depreciation
|
(41,890 | ) | (107,340 | ) | ||||
$ | 26,928 | $ | 36,063 |
4.
|
INTANGIBLE
ASSETS
|
AUGUST
31, 2008
|
Gross
Carrying Amount
|
Accumulated
Amortization
|
Net
Carrying Amount
|
|||||||||
Definite-lived
intangible assets:
|
||||||||||||
License
rights
|
$ | 27,000 | $ | (9,292 | ) | $ | 17,708 | |||||
Curriculum
|
58,237 | (29,896 | ) | 28,341 | ||||||||
Customer
lists
|
14,684 | (11,413 | ) | 3,271 | ||||||||
Trade
names
|
377 | (377 | ) | - | ||||||||
100,298 | (50,978 | ) | 49,320 | |||||||||
Indefinite-lived
intangible asset:
|
||||||||||||
Covey
trade name
|
23,000 | - | 23,000 | |||||||||
$ | 123,298 | $ | (50,978 | ) | $ | 72,320 | ||||||
AUGUST
31, 2007
|
||||||||||||
Definite-lived
intangible assets:
|
||||||||||||
License
rights
|
$ | 27,000 | $ | (8,355 | ) | $ | 18,645 | |||||
Curriculum
|
58,230 | (28,361 | ) | 29,869 | ||||||||
Customer
lists
|
18,124 | (13,715 | ) | 4,409 | ||||||||
Trade
names
|
1,277 | (1,277 | ) | - | ||||||||
104,631 | (51,708 | ) | 52,923 | |||||||||
Indefinite-lived
intangible asset:
|
||||||||||||
Covey
trade name
|
23,000 | - | 23,000 | |||||||||
$ | 127,631 | $ | (51,708 | ) | $ | 75,923 |
Category
of Intangible Asset
|
Range
of Remaining Estimated Useful Lives
|
Weighted
Average Amortization Period
|
||
License
rights
|
18
years
|
30
years
|
||
Curriculum
|
11
to 18 years
|
26
years
|
||
Customer
lists
|
3
years
|
14
years
|
YEAR
ENDING
AUGUST
31,
|
|||
2009
|
$ | 3,601 | |
2010
|
3,598 | ||
2011
|
3,456 | ||
2012
|
2,458 | ||
2013
|
2,449 |
6.
|
CURRENT
LINES OF CREDIT
|
7.
|
LONG-TERM
DEBT AND FINANCING OBLIGATION
|
AUGUST
31,
|
2008
|
2007
|
||||||
Financing
obligation on corporate campus, payable in monthly installments of $254
for the first five years with two percent annual increases thereafter
(imputed interest at 7.7%), through June 2025
|
$ | 32,283 | $ | 32,807 | ||||
Mortgage
payable in monthly installments of $9 CDN ($9 USD at August 31, 2008),
plus interest at the CDN prime rate (4.8% at August 31, 2008) through
January 2015, secured by real estate
|
678 | 787 | ||||||
32,961 | 33,594 | |||||||
Less
current portion
|
(670 | ) | (629 | ) | ||||
Total
long-term debt and financing obligation, less current
portion
|
$ | 32,291 | $ | 32,965 |
YEAR
ENDING
AUGUST
31,
|
|||
2009
|
$ | 670 | |
2010
|
726 | ||
2011
|
839 | ||
2012
|
963 | ||
2013
|
1,097 | ||
Thereafter
|
28,666 | ||
$ | 32,961 |
YEAR
ENDING
AUGUST
31,
|
|||
2009
|
$ | 3,045 | |
2010
|
3,055 | ||
2011
|
3,116 | ||
2012
|
3,178 | ||
2013
|
3,242 | ||
Thereafter
|
43,537 | ||
Total
future minimum financing obligation payments
|
59,173 | ||
Less
interest
|
(28,202 | ) | |
Present
value of future minimum financing obligation payments
|
$ | 30,971 |
8.
|
OPERATING
LEASES
|
YEAR
ENDING
AUGUST
31,
|
Required
Minimum Lease Payments
|
Receivable
from Franklin Covey Products
|
Net
Required Minimum Lease Payments
|
|||||||||
2009
|
$ | 1,671 | $ | (390 | ) | $ | 1,281 | |||||
2010
|
1,620 | (404 | ) | 1,216 | ||||||||
2011
|
1,608 | (422 | ) | 1,186 | ||||||||
2012
|
1,517 | (475 | ) | 1,042 | ||||||||
2013
|
1,178 | (529 | ) | 649 | ||||||||
Thereafter
|
3,427 | (1,751 | ) | 1,676 | ||||||||
$ | 11,021 | $ | (3,971 | ) | $ | 7,050 |
YEAR
ENDING
AUGUST
31,
|
||||
2009
|
$ | 3,585 | ||
2010
|
2,897 | |||
2011
|
2,020 | |||
2012
|
2,085 | |||
2013
|
1,837 | |||
Thereafter
|
15,361 | |||
$ | 27,785 |
9.
|
COMMITMENTS
AND CONTINGENCIES
|
YEAR
ENDING
AUGUST
31,
|
Estimated
Gross Minimum and Fixed Charges
|
Receivable
from Franklin Covey Products
|
Estimated
Net Minimum and Fixed Charges
|
|||||||||
2009
|
$ | 4,138 | $ | (2,159 | ) | $ | 1,979 | |||||
2010
|
4,138 | (2,159 | ) | 1,979 | ||||||||
2011
|
4,138 | (2,159 | ) | 1,979 | ||||||||
2012
|
4,138 | (2,159 | ) | 1,979 | ||||||||
2013
|
4,138 | (2,159 | ) | 1,979 | ||||||||
Thereafter
|
11,246 | (6,114 | ) | 5,132 | ||||||||
$ | 31,936 | $ | (16,909 | ) | $ | 15,027 |
10.
|
SHAREHOLDERS’
EQUITY
|
Fiscal
Year
|
Shares
of Preferred Stock Redeemed
|
Carrying
Value of Redeemed Preferred Shares
|
||||||
2007
|
1,494 | $ | 37,345 | |||||
2006
|
800 | 20,000 | ||||||
2005
|
1,200 | 30,000 | ||||||
3,494 | $ | 87,345 |
Fiscal
Year
|
Shares
Issued to ESPP Participants
|
Shares
Issued from the Exercise of Stock Options and Warrants
|
Total
Treasury Shares Issued for Stock Options, Warrants and
ESPP
|
Cash
Proceeds Received from the Issuance of Treasury Shares
|
||||||||||||
2008
|
68,702 | 15,371 | 84,073 | $ | 462 | |||||||||||
2007
|
55,513 | 37,500 | 93,013 | 321 | ||||||||||||
2006
|
32,993 | 38,821 | 71,814 | 424 |
·
|
On
the Breakeven Date, the Company has the right to purchase and redeem from
the loan participants the number of loan program shares necessary to
satisfy the participant’s obligation under the promissory
note. The redemption price for each such loan program share
will be equal to the closing price of the Company’s common stock on the
Breakeven Date.
|
·
|
If
the Company’s stock has not closed at or above the breakeven price on or
before March 30, 2013, the Company has the right to purchase and redeem
from the participants all of their loan program shares at the closing
price on that date as partial payment on the participant’s
obligation.
|
12.
|
FINANCIAL
INSTRUMENTS
|
YEAR
ENDED
AUGUST
31,
|
2008
|
2007
|
2006
|
|||||||||
Losses
on foreign exchange contracts
|
$ | (487 | ) | $ | (249 | ) | $ | (346 | ) | |||
Gains
on foreign exchange contracts
|
36 | 119 | 415 | |||||||||
Net
gain (loss) on foreign exchange contracts
|
$ | (451 | ) | $ | (130 | ) | $ | 69 |
Contract
Description
|
Notional
Amount in Foreign Currency
|
Notional
Amount in U.S. Dollars
|
||||||
British
Pounds
|
450 | $ | 809 | |||||
Japanese
Yen
|
27,000 | 254 | ||||||
Australian
Dollars
|
125 | 117 |
YEAR
ENDED
AUGUST
31,
|
2008
|
2007
|
2006
|
|||||||||
Performance
awards
|
$ | (1,338 | ) | $ | 835 | $ | 503 | |||||
Unvested
share awards
|
969 | 481 | 296 | |||||||||
Compensation
cost of the ESPP
|
79 | 75 | 37 | |||||||||
Stock
options
|
31 | 3 | 7 | |||||||||
$ | (259 | ) | $ | 1,394 | $ | 843 |
Number
of Shares
|
Weighted-Average
Grant-Date Fair Value Per Share
|
|||||||
Unvested
stock awards at August 31, 2007
|
410,670 | $ | 3.80 | |||||
Granted
|
36,000 | 7.50 | ||||||
Forfeited
|
- | - | ||||||
Vested
|
(352,170 | ) | 3.13 | |||||
Unvested
stock awards at August 31, 2008
|
94,500 | $ | 7.73 |
Number
of Stock Options
|
Weighted
Avg. Exercise Price Per Share
|
Weighted
Avg. Remaining Contractual Life (Years)
|
Aggregate
Intrinsic Value (thousands)
|
|||||||||||||
Outstanding
at August 31, 2007
|
2,058,300 | $ | 12.72 | |||||||||||||
Granted
|
- | - | ||||||||||||||
Exercised
|
(12,500 | ) | 1.70 | |||||||||||||
Forfeited
|
(18,000 | ) | 9.69 | |||||||||||||
Outstanding
at August 31, 2008
|
2,027,800 | $ | 12.82 | 1.8 | $ | 439 | ||||||||||
Options
vested and exercisable at August 31, 2008
|
2,027,800 | $ | 12.82 | 1.8 | $ | 439 |
Range
of
Exercise
Prices
|
Number
Outstanding at August 31, 2008
|
Weighted
Average Remaining Contractual Life (Years)
|
Weighted
Average Exercise Price
|
Options
Exercisable at August 31, 2008
|
Weighted
Average Exercise Price
|
|||||||||||||||||
$ | 2.78 – $8.19 | 226,300 | 1.6 | $ | 7.01 | 226,300 | $ | 7.01 | ||||||||||||||
$ | 9.69 – $9.69 | 194,500 | 0.7 | 9.69 | 194,500 | 9.69 | ||||||||||||||||
$ | 14.00 – $14.00 | 1,602,000 | 2.0 | 14.00 | 1,602,000 | 14.00 | ||||||||||||||||
$ | 17.69 – $17.69 | 5,000 | 0.3 | 17.69 | 5,000 | 17.69 | ||||||||||||||||
2,027,800 | 2,027,800 |
Description
|
Brazil
|
Mexico
|
Total
|
|||||||||
Cash
|
$ | 95 | $ | - | $ | 95 | ||||||
Accounts
receivable, net
|
374 | 210 | 584 | |||||||||
Inventories
|
155 | 134 | 289 | |||||||||
Other
current assets
|
220 | 28 | 248 | |||||||||
Property
and equipment, net
|
365 | 43 | 408 | |||||||||
Other
assets
|
51 | 375 | 426 | |||||||||
Total
assets sold
|
$ | 1,260 | $ | 790 | $ | 2,050 | ||||||
Accounts
payable
|
$ | 127 | $ | - | $ | 127 | ||||||
Accrued
liabilities
|
260 | - | 260 | |||||||||
Total
liabilities sold
|
$ | 387 | $ | - | $ | 387 |
15.
|
LEGAL
SETTLEMENT
|
16.
|
EMPLOYEE
BENEFIT PLANS
|
17.
|
INCOME
TAXES
|
YEAR
ENDED
AUGUST
31,
|
2008
|
2007
|
2006
|
|||||||||
Current:
|
||||||||||||
Federal
|
$ | (39 | ) | $ | (350 | ) | $ | 1,433 | ||||
State
|
(248 | ) | (135 | ) | (23 | ) | ||||||
Foreign
|
(3,346 | ) | (2,318 | ) | (1,903 | ) | ||||||
(3,633 | ) | (2,803 | ) | (493 | ) | |||||||
Deferred:
|
||||||||||||
Federal
|
$ | (4,276 | ) | $ | (4,880 | ) | $ | (4,380 | ) | |||
State
|
(205 | ) | (433 | ) | (376 | ) | ||||||
Foreign
|
12 | 49 | (132 | ) | ||||||||
Change
in valuation allowance
|
116 | 31 | 20,323 | |||||||||
(4,353 | ) | (5,223 | ) | 15,435 | ||||||||
$ | (7,986 | ) | $ | (8,036 | ) | $ | 14,942 |
YEAR
ENDED
AUGUST
31,
|
2008
|
2007
|
2006
|
|||||||||
United
States
|
$ | 8,857 | $ | 11,914 | $ | 10,881 | ||||||
Foreign
|
4,977 | 3,751 | 2,750 | |||||||||
$ | 13,834 | $ | 15,665 | $ | 13,631 |
YEAR
ENDED
AUGUST
31,
|
2008
|
2007
|
2006
|
|||||||||
Federal
statutory income tax rate
|
35.0 | % | 35.0 | % | 35.0 | % | ||||||
State
income taxes, net of federal effect
|
3.3 | 3.6 | 2.9 | |||||||||
Deferred
tax valuation allowance
|
- | - | (149.1 | ) | ||||||||
Foreign
jurisdictions tax differential
|
3.8 | 1.6 | 2.2 | |||||||||
Tax
differential on income subject to both U.S. and foreign
taxes
|
8.0 | 4.2 | 1.5 | |||||||||
Uncertain
tax positions
|
(1.5 | ) | (0.9 | ) | (9.4 | ) | ||||||
Tax
on management stock loan interest
|
5.0 | 5.0 | 4.5 | |||||||||
Non-deductible
executive compensation
|
2.1 | - | 0.6 | |||||||||
Other
|
2.0 | 2.8 | 2.2 | |||||||||
57.7 | % | 51.3 | % | (109.6 | )% |
YEAR
ENDED
AUGUST
31,
|
2008
|
2007
|
||||||
Deferred
income tax assets:
|
||||||||
Sale
and financing of corporate headquarters
|
$ | 11,912 | $ | 12,078 | ||||
Net
operating loss carryforward
|
7,815 | 9,818 | ||||||
Investment
in Franklin Covey Products
|
2,986 | - | ||||||
Foreign
income tax credit carryforward
|
2,159 | 2,246 | ||||||
Impairment
of investment in Franklin Covey Coaching, LLC
|
1,701 | 2,249 | ||||||
Bonus
and other accruals
|
1,135 | 1,432 | ||||||
Alternative
minimum tax carryforward
|
881 | 863 | ||||||
Inventory
and bad debt reserves
|
832 | 1,515 | ||||||
Deferred
compensation
|
503 | 912 | ||||||
Sales
returns and contingencies
|
414 | 468 | ||||||
Other
|
559 | 810 | ||||||
Total
deferred income tax assets
|
30,897 | 32,391 | ||||||
Less:
valuation allowance
|
(2,475 | ) | (2,591 | ) | ||||
Net
deferred income tax assets
|
28,422 | 29,800 | ||||||
Deferred
income tax liabilities:
|
||||||||
Intangibles
step-ups – definite lived
|
(11,863 | ) | (12,821 | ) | ||||
Intangibles
step-ups – indefinite lived
|
(8,647 | ) | (8,633 | ) | ||||
Property
and equipment depreciation
|
(7,294 | ) | (3,574 | ) | ||||
Intangible
asset impairment and amortization
|
(2,018 | ) | (893 | ) | ||||
Unremitted
earnings of foreign subsidiaries
|
(586 | ) | (630 | ) | ||||
Other
|
(85 | ) | (78 | ) | ||||
Total
deferred income tax liabilities
|
(30,493 | ) | (26,629 | ) | ||||
Net
deferred income taxes
|
$ | (2,071 | ) | $ | 3,171 |
YEAR
ENDED
AUGUST
31,
|
2008
|
2007
|
||||||
Current
assets
|
$ | 2,472 | $ | 3,635 | ||||
Long-term
assets
|
29 | 101 | ||||||
Long-term
liabilities
|
(4,572 | ) | (565 | ) | ||||
Net
deferred income tax asset (liability)
|
$ | (2,071 | ) | $ | 3,171 |
YEAR
ENDED
AUGUST
31,
|
2008
|
2007
|
2006
|
|||||||||
Domestic
pre-tax book income
|
$ | 8,857 | $ | 11,914 | $ | 10,881 | ||||||
Deferred
taxable loss on sale of assets to Franklin Covey Products
|
5,203 | - | - | |||||||||
Deferred
gain for book purposes on sale of assets to Franklin Covey
Products
|
2,755 | - | - | |||||||||
Interest
on management common stock loans
|
1,968 | 2,243 | 1,771 | |||||||||
Property
and equipment depreciation and dispositions
|
(10,459 | ) | 1,170 | (3,114 | ) | |||||||
Amortization/write-off
of intangible assets
|
(2,028 | ) | (2,814 | ) | (1,944 | ) | ||||||
Changes
in accrued liabilities
|
(2,373 | ) | (1,217 | ) | (4,096 | ) | ||||||
Share-based
compensation
|
(1,144 | ) | 933 | 599 | ||||||||
Other
book versus tax differences
|
(541 | ) | (468 | ) | (1,297 | ) | ||||||
$ | 2,238 | $ | 11,761 | $ | 2,800 |
Description
|
||||
Balance
at September 1, 2007
|
$ | 4,349 | ||
Additions
based on tax positions related to fiscal 2008
|
267 | |||
Additions
for tax positions in prior years
|
31 | |||
Reductions
for tax positions of prior years resulting from the lapse of applicable
statute of limitations
|
(292 | ) | ||
Other
reductions for tax positions of prior years
|
(123 | ) | ||
Balance
at August 31, 2008
|
$ | 4,232 |
2001-2008
|
Canada
|
2003-2008
|
Japan,
United Kingdom
|
2004-2008
|
United
States – state and local income tax
|
2005-2008
|
United
States – federal income tax
|
18.
|
EARNINGS
PER SHARE
|
YEAR
ENDED
AUGUST
31,
|
2008
|
2007
|
2006
|
|||||||||
Net
income
|
$ | 5,848 | $ | 7,629 | $ | 28,573 | ||||||
Preferred
stock dividends
|
- | (2,215 | ) | (4,385 | ) | |||||||
Net
income available to common shareholders
|
$ | 5,848 | $ | 5,414 | $ | 24,188 | ||||||
Weighted
average common shares outstanding – Basic
|
19,577 | 19,593 | 20,134 | |||||||||
Effect
of dilutive securities:
|
||||||||||||
Stock
options
|
10 | 29 | 52 | |||||||||
Unvested
stock awards
|
213 | 266 | 281 | |||||||||
Common
stock warrants(1)
|
122 | - | 49 | |||||||||
Weighted
average common shares outstanding – Diluted
|
19,922 | 19,888 | 20,516 | |||||||||
Basic
EPS
|
$ | .30 | $ | .28 | $ | 1.20 | ||||||
Diluted
EPS
|
$ | .29 | $ | .27 | $ | 1.18 |
|
(1)
|
For
the fiscal year ended August 31, 2007, the conversion of 6.2 million
common stock warrants is not assumed because such conversion would be
anti-dilutive.
|
19.
|
SEGMENT
INFORMATION
|