Despite a jump in sales and an aggressive strategy to streamline the company, Franklin Covey on Thursday reported another quarter of declining earnings.
The company reported it earned $2.8 million during the quarter ended Feb. 26, 2000, compared with $6.6 million for the same quarter the previous year.Franklin Covey's sales of electronic application tools, contract channel products and organizational training services increased 6 percent over the same quarter last year, to $145 million. But, sales gains in those areas were offset lower volume in other areas, increased investment in the company's online training and application tools, and continued corporate restructuring.
"This isn't one of our more robust quarters," Franklin Covey investor relations director Richard Putnam said. "But we think the things we're investing in at this time will provide growth, both in sales and in earnings, in the future. We're trying to do it right and not take any shortcuts at this time."
Franklin Covey, the product of a 1997 merger between leadership how-to and time management powerhouses Franklin Quest and Covey Leadership Center, has seen its stock price plummet from more than $30 per share five years ago to slightly more than $7 Thursday. Company officials admitted the combined organization has struggled to integrate, and the market has reflected its unsteady steps forward. Zacks Investment Research Inc., a Chicago-based investment resource for money managers, ranks Franklin Covey stock as a "hold."
The company last October announced a massive restructuring strategy, including the layoff of some 600 employees and a consolidation of its facilities. In its report Thursday, Franklin Covey stated it had reduced its work force by 317, with the remaining layoffs to take effect by the end of the fiscal year.
Franklin Covey on Thursday also announced a strategy to remove a three-pronged thorn in its side, in its effort to reduce stock dilution and increase shareholder value. The company wants to return more stock options to those who manage its operations, boost the stock price and reduce the number of options floating in the market, Putnam said.
To that end, the company has launched a tender offer, open through April 12, to buy all of its options on its common stock priced at $12.25 and higher. It also plans to implement a $30 million incentive-based compensation program (facilitated through loans from two local banks), which, according to Putnam, will "get the incentives to the right people, returning the levers to the hands of those people who actually run the company."
As a result, the company will likely see a drag on earnings through the end of the fiscal year, Putnam said. But, the company is banking its strategy will have long-term paybacks.
"These are decisions that are going to make a huge difference in the performance of the company, not so much in the short term as it will in the long term," he said. "But we also expect it will have a positive effect right now."