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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE FISCAL YEAR ENDED AUGUST 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM_______________ TO _______________
FRANKLIN COVEY CO.
(Formerly Franklin Quest Co.)
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(Exact name of registrant as specified in its charter)
UTAH 1-11107 87-0401551
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(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)
2200 WEST PARKWAY BOULEVARD
SALT LAKE CITY, UTAH 84119-2331
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(Address of principal executive offices, including zip code)
[X] Registrant's telephone number, including area code: (801) 975-1776
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on Which
Title of Each Class Registered
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Common Stock, $.05 Par Value New York Stock Exchange
[ ] Securities registered pursuant to Section 12(g) of the Act: None
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES [X] NO [ ]
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO
ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED,
TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY
AMENDMENT TO THIS FORM 10-K. [ ]
The aggregate market value of the Common Stock held by non-affiliates
of the Registrant on November 18, 1997, based upon the closing sale price of the
Common Stock of $22.25 per share on that date, was approximately $457,945,139.
Shares of the Common Stock held by each officer and director and by each person
who may be deemed to be an affiliate of the Registrant have been excluded.
As of November 18, 1997, the Registrant had 24,780,928 shares of Common
Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Parts of the following documents are incorporated by reference in
Parts, II, III and IV of this Form 10-K: (1) Registrant's Annual Report to
Shareholders for the fiscal year ended August 31, 1997 (Parts II and IV), and
(2) Proxy Statement for Registrant's Annual Meeting of Shareholders which is
scheduled to be held on January 9, 1998 (Part III).
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INDEX TO FORM 10-K
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PART I ..................................................................................................... 1
Item 1. Business............................................................................................. 1
General.............................................................................................. 1
Franklin Covey's Products............................................................................ 2
Planners and Organizers....................................................................... 2
Kits ..................................................................................... 3
Binders ..................................................................................... 3
Software ..................................................................................... 3
Personal Development Products................................................................. 3
Training, Facilitation and Consulting Services....................................................... 3
Workshops..................................................................................... 4
Sales and Marketing.................................................................................. 5
Product ..................................................................................... 5
Catalog ............................................................................ 5
Retail Stores........................................................................ 6
Direct Product....................................................................... 6
Training Sales................................................................................ 6
Printing Services............................................................................. 7
Strategic Distribution Alliances..................................................................... 7
International Operations............................................................................. 7
Clients.............................................................................................. 7
Competition.......................................................................................... 8
Training ..................................................................................... 8
Consulting.................................................................................... 8
Products ..................................................................................... 8
Manufacturing........................................................................................ 8
Trademarks, Copyrights and Intellectual Property..................................................... 9
Employees............................................................................................ 9
Item 2. Properties........................................................................................... 10
Item 3. Legal Proceedings.................................................................................... 10
Item 4. Submission of Matters to a Vote of Security Holders.................................................. 10
PART II ..................................................................................................... 11
Item 5. Market for the Registrant's Common Stock and Related Shareholder Matters............................. 11
Item 6. Selected Financial Data.............................................................................. 11
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations................ 11
Item 8. Financial Statements and Supplementary Data.......................................................... 11
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure................. 12
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PAGE
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PART III ..................................................................................................... 13
Item 10. Directors and Executive Officers of the Registrant................................................... 13
Item 11. Executive Compensation............................................................................... 13
Item 12. Security Ownership of Certain Beneficial Owners and Management....................................... 13
Item 13. Certain Relationships and Related Transactions....................................................... 13
PART IV ..................................................................................................... 14
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K...................................... 14
(a) Documents Filed............................................................................... 14
1. Financial Statements................................................................. 14
2. Financial Statement Schedule......................................................... 14
(b) Reports on Form 8-K........................................................................... 16
(c) Exhibits...................................................................................... 16
(d) Financial Statement Schedule.................................................................. 16
SIGNATURES ..................................................................................................... 21
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PART I
ITEM 1. BUSINESS
GENERAL
Franklin Covey Co. (the "Company" or "Franklin Covey") is an
international professional services and leadership development firm dedicated to
increasing the effectiveness of individuals and organizations. To achieve that
goal, the Company provides consulting services, seminars and workshops,
educational materials, publications and products designed to empower individuals
and organizations to become more effective. The offerings include a
comprehensive time and life management system which enables individuals to
better manage their time by identifying goals and prioritizing the tasks
necessary to achieve them. The Company also provides training, consulting
services and products designed to improve written and oral business
communication skills. Franklin Covey also offers fitness training services and
book and commercial printing services. To facilitate implementation of the
principles it teaches, the Company produces and markets its primary product, the
Franklin Covey System.
The basic Franklin Covey System consists of a paper-based, two-page per
day Franklin Covey Planner or 7 Habits Organizer, combined with a seven-ring
binder, and a variety of planning aids, weekly, monthly and annual calendars and
personal management sections. (The planner/organizer can also be purchased in
one-page per day or two-page per week versions.) The Company offers various
forms and accessories that allow users to expand and customize their Franklin
Covey System. Franklin Covey markets the Franklin Covey System and accessory
products directly to organizations, and through its sales catalog and its retail
stores. At August 31, 1997, Franklin Covey had 110 domestic retail stores
located in 38 states and the District of Columbia. A significant percentage of
the users of the Franklin Covey System continue to purchase a renewal planner
each year, creating substantial recurring sales.
The principles taught in the Company's curriculum have also been
published, in many cases, in book and audio tape form. Books sold by the Company
include The 7 Habits of Highly Effective People, Principle-Centered Leadership,
First Things First, and The 7 Habits of Highly Effective Families, all by
Stephen R. Covey, The 10 Natural Laws of Time and Life Management by Hyrum W.
Smith and The Power Principle by Blaine Lee. These books, as well as audio tape
versions of many of these products, are sold through general retail channels, as
well as through the Company's own catalog and retail stores.
Product sales, consisting primarily of the Franklin Covey System and
related products, accounted for approximately 70% of the Company's sales during
the fiscal year ended August 31, 1997.
Franklin Covey provides its effectiveness training materials to
business, industry and individuals. The Company sells its services to the
organization market through its own direct sales force. It delivers its training
services to organizations in one of three ways. Franklin Covey consultants
provide on-site consulting or training classes for organizations. In these
situations, the Franklin Covey consultant can tailor the curriculum to the
client's specific business and objectives. The Company also conducts public
seminars in over 200 cities throughout the United States, where organizations
can send their employees in smaller numbers. These public seminars are also
marketed directly to the public through the Company's catalog, retail stores,
and by direct mail. The Company's programs are also designed to be facilitated
by licensed professional trainers and managers in client organizations, reducing
dependence on the Company's professional presenters, and creating continuing
revenue as participant materials are purchased for trainees by these
facilitators.
In 1997, the Company provided products and services to 82 of the
Fortune 100 and over 60% of the Fortune 500. The Company also provides its
products and services to a number of U.S. and foreign governmental agencies,
including the U.S. Department of Defense, and to educational institutions. The
Company also markets its services and products internationally outside the
United States and Canada (in 38 countries) through Company owned and/or licensed
operations.
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Professional services, including training presented by client
facilitators, accounted for approximately 25% of the Company's sales,
representing over 450,000 individuals trained, during the year ended August 31,
1997.
In April 1995, the Company acquired the assets of Time Systems, Inc.
("Time Systems"), a time management training and product company headquartered
in Phoenix, Arizona. In June 1995, the Company acquired the assets of LTS, Inc.,
a distributor of Time Systems products and training services located in Atlanta,
Georgia.
In December 1995, the Company acquired the assets of Productivity Plus,
Inc. ("Productivity Plus"), a time management company headquartered in Chandler,
Arizona. Productively Plus offers a paper-based, refillable planner/organizer
and accessories principally to customers in branches of the U.S. military.
Effective October 1, 1996, the Company acquired the assets of TrueNorth
Corporation, a training company headquartered in Salt Lake City, Utah. TrueNorth
provides post instruction personalized coaching to corporations and individuals
to augment the effectiveness and duration of quality training curricula.
Effective March 4, 1997, the Company acquired the assets of Premier
Agendas, Inc., and Premier School Agendas, Ltd. ("Premier"), the leading
provider of academic and personal planners for students from kindergarten to
college age throughout the United States and Canada. Premier has a user base of
approximately ten million students. The combined guaranteed purchase price was
approximately $23 million and additional payments may be made based on Premier's
operating results over the three years following its acquisition.
Effective May 30, 1997, Covey Leadership Center, Inc. ("Covey") was
merged with and into the Company (the "Merger") and the name of the Company was
changed to Franklin Covey Co. In connection with the Merger, 5,030,894 shares of
the Company's Common Stock were issued to shareholders of Covey and $27 million
in cash was paid to Stephen R. Covey for certain license rights (the "License
Rights"). Management believes that the Merger positions the Company as a leading
provider of products and training services designed to increase the
effectiveness of individuals and organizations. The Merger broadened the range
of products and services offered to include Covey's top-rated leadership
programs, "The 7 Habits of Highly Effective People" and "Principal Centered
Leadership," increased the Company's capacity to develop and market new programs
and products and created the potential for significant efficiencies and
synergies as distribution and production facilities were combined.
Unless the context requires otherwise, all references to the "Company"
or to "Franklin Covey" herein refer to the Company and each of its operating
divisions and subsidiaries. The Company's principal executive offices are
located at 2200 West Parkway Boulevard, Salt Lake City, Utah 84119 and its
telephone number is (801) 975-1776.
FRANKLIN COVEY'S PRODUCTS
Based upon its belief that organizational and individual productivity
require effective time management, the Franklin Covey System has been developed
as the basic tool for implementing the principles of Franklin Covey's time
management system. The Franklin Covey System consists of a paper-based Franklin
Covey Planner or 7 Habits Organizer, a binder in which to carry it, and various
planning aids, weekly, monthly and annual calendars and personal management
sections. Franklin Covey offers a broad line of planners, organizers and binders
for the Franklin Covey System, which are available in various sizes and styles.
During the fiscal year ended August 31, 1997, product sales, consisting
primarily of the Franklin Covey System and related products, amounted to
approximately $301 million and accounted for approximately 70% of Franklin
Covey's sales during the period.
PLANNERS AND ORGANIZERS. Renewal planners for the Franklin Covey System
are provided in five sizes and various styles. They consist of monthly
calendars, task lists and indexes, calendar pages for an entire year,
prioritized daily task lists, appointment schedules, daily expense records, a
daily record of events, and, in the 7 Habits Organizer, 52 weekly compass cards
for recording weekly roles and goals. The master planner pack adds address and
telephone directories, personal management sections, ready references, sections
for identifying values and goals, financial and key information pages, future
planning calendars for five years, colored tabs and dividers,
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and a pagefinder/ruler in a separate pack. The renewal planner ranges in price
from $19.00 to $37.00. The master planner pack is $6.00.
KITS. In connection with its training, facilitation and consulting
services, Franklin Covey sells content-based training products for use by time
management workshop facilitators and participants. Seminar kits include a vinyl
binder, master planner pack, renewal planner, storage binder and limited
training materials, personal assessment products called "profiles," and personal
application software. In addition, the Company sells a Standard Edition kit and
a Deluxe Edition kit which contain all of the materials in the seminar kit plus
a satellite notebook and additional training materials. Retail prices for the
Standard Edition kit and the Deluxe Edition kit range from $49.00 to $104.00.
Facilitator products include training videos, resource guides and presentation
aids. Participant products include course manuals, workbooks and organizers.
BINDERS. Franklin Covey offers ring binders in a variety of materials
and styles in each of the Franklin Covey System sizes. Binders are available in
heat-sealed or sewn vinyl, as well as in simulated leather, deluxe leather,
premium leather or tapestry covers. Binders are offered with or without a zipper
or snap closure and with a variety of pocketholders and inserts for calculators,
checkbooks, credit cards and writing instruments. The assortment of innovative
binder styles, colors and finishes offered by the Company has been designed by a
group of skilled in-house craftsmen to encourage existing clients to upgrade
their binders. Binders range in price from $11.95 to $225.00. A substantial
number of the Company's clients upgrade their binders from the original vinyl
binder generally received in a kit.
SOFTWARE. In 1991 the Company introduced its ASCEND(R) program, a
complete Personal Information Management ("PIM") system which can be used in
conjunction with the paper-based Franklin Covey Planner or used as a stand-alone
PIM system. ASCEND(R) permits users to generate and print data on Franklin Covey
paper which can be inserted directly into the Franklin Covey System. The
ASCEND(R) program operates in both the Windows(R) and Macintosh(R) environments.
Franklin Covey offers ASCEND(R) at a retail price of $99.95 which includes all
necessary software, related tutorials and reference manuals. Franklin Covey
offers ASCEND(R) through nationwide retail software stores, in its own retail
stores and catalog, and in a specially-designed "home user" version through
Sam's Club and Price Costco. Franklin Covey, through an alliance with Microsoft,
has developed and commenced distribution of the 7 Habits Organizer in an
electronic format known as 7 Habits Tools(TM). Microsoft has incorporated 7
Habits Tools into its popular scheduling software, Microsoft Schedule+. Franklin
Covey also provides 7 Habits Tools Add On(TM), a software product that features
advanced printing capabilities and other materials developed from The 7 Habits
of Highly Effective People. The Company has also coordinated its content with
the handheld PIM called The PalmPilot(TM), which is able to communicate with
ASCEND(R), Microsoft Schedule+ and 7 Habits Tools.
PERSONAL DEVELOPMENT PRODUCTS. To supplement its principal products,
Franklin Covey offers a number of accessories and related products, including
books, video tapes and audio cassettes focused on time management and other
topics. The Company also markets a variety of content-based personal development
products. These products include books, Priorities(TM) magazine, audio learning
systems such as multi-tape and workbook sets, CD-ROM software products,
calendars, posters and other specialty name brand items. The Company has also
identified the home and family market for development of principle-centered
personal development products. Franklin Covey published and launched Dr. Covey's
latest book addressing the habits of highly effective families in October 1997.
The Company offers numerous accessory forms, including check registers, spread
sheets, stationery, mileage logs, maps, menu planners, shopping lists and other
information management and project planning forms. The Company's accessory
products and forms are generally available in the Franklin Covey System sizes.
TRAINING, FACILITATION AND CONSULTING SERVICES
Franklin Covey's training, facilitation and consulting services are
delivered in the United States by the Company's Professional Services Group,
which consists of talented consultants selected through a competitive and
demanding process and highly qualified sales professionals.
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Franklin Covey currently employs 146 training consultants in major
metropolitan areas of the United States and 23 training consultants outside of
the United States. Training consultants are selected and trained from a large
number of experienced applicants. These consultants generally have several years
of training and/or consulting experience and excellent presentation skills. Once
selected, the training consultant goes through a rigorous training program
including multiple live presentations. The training program ultimately results
in the Company's certification of the consultant. Franklin Covey believes that
the caliber of its training consultants has helped build its reputation of
providing high quality seminars. The Company's Professional Services Group help
organizational clients diagnose inefficiencies in their organization and design
the core components of a client's organizational solutions. The efforts of the
consultants are enhanced by several proprietary consulting tools the Company has
designed for their use: Stakeholder Information Systems(TM) ("SIS"), used to
assess client needs; the Performance Cycle(R) ("P-Cycle"), utilized for
organizational diagnosis and re-design; and the Principle-Centered Change
Process(TM) ("PCCP"), a rigorous methodology for organizational change
management. These consultants represent a significant resource and are an
integral part of the Company's approach to new product development and
curriculum design; many of these individuals have been contributors to, or
co-authors of books.
Franklin Covey's Professional Services Group is organized in sales
teams in order to assure that both the consultant and the client sales
professional participate in the development of new business and the assessment
of client needs. Consultants are then entrusted with the actual delivery of the
content, seminars, processes and other solutions. Consultants follow up
continuously with client service teams, working with them to develop lasting
client impact and ongoing business opportunities.
WORKSHOPS. Franklin Covey offers a range of workshops designed to
empower organizations and individuals to effect principle-centered leadership
and change. The Company's workshops are oriented to address each of four levels
of leadership needs: personal, interpersonal, managerial and organizational. In
addition, the Company believes each of its workshops must provide an impactful
experience, must generate additional business and must be profitable. During
1997, the Company trained more than 450,000 individuals in its single and
multiple-day workshops and seminars.
Franklin Covey's workshops include its three-day 7 Habits workshop
based upon the material presented in The 7 Habits of Highly Effective People.
The 7 Habits workshop provides the foundation for continued client relationships
and generates more business as the Company's content and application tools are
delivered deeper and deeper into the organization. Additionally, a three-day
Principle-Centered Leadership course, which focuses on managerial and
organization aspects of client needs is offered.
Franklin Covey Leadership Week, which management believes is one of the
premier leadership programs in the United States, consists of a five-day session
focused on materials from Franklin Covey's 7 Habits of Highly Effective People
and Principle-Centered Leadership courses. Franklin Covey Leadership Week is
reserved for executive level management. As a part of the week's agenda,
executive participants design strategies for long-term implementation of the
Company's principles and content within their organizations.
Franklin Covey's single-day TimeQuest seminar and First Things First
workshop are designed to complement other Company curricula and compete in the
time management industry. These time management seminars are conducted by the
Company's training consultants for employees of clients an din public seminars
throughout the United States and in many foreign countries. Public seminars and
workshops utilizing the First Things First curriculum are also conducted in the
United States by SkillPath, Inc. ("SkillPath"), a national provider of training
seminars and workshops, under a license arrangement between Franklin Covey and
SkillPath. These courses are conducted using the materials presented in the
books entitled The 10 Natural Laws of Time and Life Management and First Things
First. Other single-day seminars and workshops include Presentation Advantage, a
seminar helping individuals and organizations make more effective business
presentations, Writing Advantage, a seminar that teaches better business writing
and communication skills, Planning for Results and Stress Management. The
Company's training consultants conduct these seminars and workshops for
employees of institutional clients and public seminar participants.
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In addition to providing consultants and presenters, Franklin Covey
also trains and certifies client facilitators to teach selected Company
workshops within the client organization. Franklin Covey believes
client-facilitated training is important to its fundamental strategy to create
recurring client revenue streams. After having been certified, clients purchase
manuals, profiles, planners, organizers and other products to conduct training
workshops within their organization, generally without the Company repeating the
sales process. This creates an annuity-type business, providing recurring
revenue, especially when combined with the fact that curriculum content in one
course leads the client to additional participation in other Company courses.
Since 1988, Franklin Covey has trained more than 14,000 client facilitators.
Client facilitators are certified only after graduating from one of Franklin
Covey's certification workshops and completing post-course certification
requirements.
Franklin Covey regularly sponsors public seminars in cities throughout
the United States and in several foreign countries. Frequency of the seminars in
each city or country depends on the concentration of Franklin Covey System
clients, the level of promotion and resulting demand, and generally ranges from
semi-monthly to quarterly. Smaller institutional clients often utilize the
public seminars to train their employees.
In 1996, Franklin Covey introduced the Franklin Covey Leadership
Library series of video workshops. The Franklin Covey Leadership Library is a
series of stand-alone video workshops that can be used in informal settings as
discussion starters, in staff meetings or as part of an in-house leadership
development program.
The Franklin Covey Institute of Fitness (formerly the National
Institute of Fitness) provides on-site training to individuals in fitness,
exercise, nutrition and diet and has been recognized for its quality, economy
and service. The Franklin Covey Institute of Fitness offers single week or
multi-week training programs on-site at its fitness training complex located
near St. George, Utah. The Company has developed a special health and fitness
module to be a part of the Franklin Covey System, and clients at the Franklin
Covey Institute of Fitness are trained in the Franklin Covey System.
Sales of Training Services for the fiscal year ended August 31, 1997
were approximately $107 million and accounted for 25% of Franklin Covey's total
sales during the period.
SALES AND MARKETING
Franklin Covey believes that its control over the channels through
which its seminars and products are distributed has allowed it to maintain
prices consistent with their quality and value and to provide high levels of
client service. The following table sets forth, for the periods indicated, the
Company's sales and percentage of total sales for each of its principal
distribution channels:
AUGUST 31,
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1995 1996 1997
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Product Sales........................... $192,356 69.4% $236,039 71.1% $301,687 69.6%
Training Services....................... 68,168 24.6 70,812 21.3 107,417 24.8
Printing Services....................... 16,598 6.0 25,155 7.6 24,168 5.6
Total Sales........................ $277,122 100.0% $332,006 100.0% $433,272 100.0%
PRODUCT. Franklin Covey uses catalogs, retail stores and a direct
product sales force to market its products to organizations and individuals.
CATALOG. Franklin Covey periodically mails catalogs to its
clients including a reference catalog, holiday catalog, catalogs timed to
coincide with planner renewals and catalogs related to special events, such as
store openings or new product offerings. Catalogs may be targeted to specific
geographic areas or user groups as appropriate. Catalogs are typically printed
in full color with an attractive selling presentation highlighting product
benefits and features.
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Franklin Covey maintains a client service department which
clients may call toll-free, 24 hours a day, Monday through Saturday, to inquire
about a product or place an order. Through Franklin Covey's computerized order
entry system, client representatives have access to client preferences, prior
orders, billings, shipments and other information on a real-time basis. Each of
the Company's more than 650 client representatives has the authority to
immediately solve any client service problem.
Franklin Covey utilizes a zone picking system for processing
orders. This system enables the Company to respond rapidly to client orders.
Client information stored within the order entry system is also used for
additional purposes, including target marketing of specific products to existing
clients and site selection for Company retail stores. Franklin Covey believes
that its order entry system helps assure client satisfaction through both rapid
delivery and accurate order shipment.
RETAIL STORES. Beginning in late 1985, Franklin Covey began
opening retail stores in areas of high client density. The initial stores were
generally located in lower traffic destination locations. The Company has
adopted a strategy of locating retail stores in high-traffic retail centers,
primarily large shopping malls, to serve existing clients and to attract
increased numbers of walk-in clients. Franklin Covey believes that higher costs
associated with locating retail stores in these centers have been offset by
increased sales in these locations. Franklin Covey's retail stores, which
average approximately 2,000 square feet, are stocked almost entirely with
Franklin Covey products. The Company's retail stores strategy focuses on
providing exceptional client service at the point of sale which Franklin Covey
believes increases client satisfaction and frequency and volume of purchases. At
August 31, 1997, Franklin Covey had 110 domestic retail stores located in 38
states and the District of Columbia.
Franklin Covey attracts existing clients to its retail stores
by informing them of store openings through direct mail. The Company believes
that its retail stores encourage walk-through traffic and impulse-buying and
that store clients are a source of participants for Franklin Covey's public
seminars. The stores have also provided the Company with an opportunity to
assess client reaction to new product offerings.
Franklin Covey believes that its retail stores have a high-end
image consistent with its marketing strategy. Franklin Covey's products are
generally grouped in sections supporting the different sizes of the Franklin
Covey System. Products are attractively presented and displayed with an emphasis
on integration of related products and accessories. Stores are staffed with a
manager, an assistant manager and additional sales personnel as needed. Franklin
Covey employees have been trained in the Franklin Covey System, enabling them to
assist and advise clients in selection and use of the Company's products. During
peak periods, additional personnel are added to promote prompt and courteous
client service.
DIRECT PRODUCT. As part of its strategy to adapt Franklin
Covey's services and products to additional market segments, the Company
develops and markets customized forms, pagefinders, tabs, binders and sales and
training materials for specific applications such as for use by salespersons,
real estate professionals and government employees. Franklin Covey believes that
the Franklin Covey System is effective in communicating uniform marketing plans,
product information and procedures to large numbers of employees, sales
representatives and distributors.
Productivity Plus markets The Ultimate Organizer, a
paper-based refillable planner organizer, together with annual renewal calendars
and accessories. Approximately 85% of Ultimate Organizer sales are to customers
within branches of the U.S. military.
TRAINING SALES. Franklin Covey's sales professionals market the
Company's training and consulting services to institutional clients and public
seminar clients. The Company's training sales are largely made through its staff
of in-house sales professionals and marketing personnel.
Franklin Covey employs 214 sales professionals who service major
metropolitan areas throughout the United States and sell training services to
institutional clients. Franklin Covey employs an additional 50 sales
professionals outside of the United States. Sales professionals must have
significant selling experience prior to employment by the Company and are
trained and evaluated at Franklin Covey and in their respective sales
territories
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during the first six months of employment. Sales professionals typically call
upon persons responsible for corporate employee training, such as corporate
training directors or human resource officers. Sales professionals work closely
with training consultants in their territories to schedule and tailor seminars
and workshops to meet specific objectives of institutional clients.
Franklin Covey also employs 146 training consultants throughout the
United States who present institutional and public seminars in their respective
territories and 27 training consultants outside of the United States. Training
consultants work with sales professionals and institutional clients to
incorporate a client's policies and objectives in seminars and present ways that
employee goals may be aligned with those of the institution.
Public seminars are planned, implemented and coordinated with training
consultants by a staff of marketing and administrative personnel at the
Company's corporate offices. These seminars provide training for the general
public and are also used as a marketing tool for attracting corporate and other
institutional clients. Corporate training directors are often invited to attend
public seminars to preview the seminar curricula prior to engaging Franklin
Covey to train in-house employees. Smaller institutional clients often enroll
their employees in public seminars when a private seminar is not cost effective.
In the public seminars, attendees are also invited to provide names of potential
persons and companies who may be interested in Franklin Covey's seminars and
products. These referrals are generally used as prospects for Franklin Covey's
sales professionals.
PRINTING SERVICES. Through the acquisition of Publishers Press in
December 1994 Franklin Covey acquired greater control over printing of the
materials for the Franklin Covey System and of other related products.
Publishers Press also provides book and commercial printing services to clients
in the western United States.
STRATEGIC DISTRIBUTION ALLIANCES
Franklin Covey has pursued an aggressive strategy to create strategic
alliances with innovative and respected organizations in an effort to develop
effective distribution of its products and services. The principal distribution
alliances currently maintained by Franklin Covey are: Simon & Schuster and
Golden Family Entertainment in publishing books for the Company; Microsoft to
market the 7 Habits name in software; Wyncom to promote and facilitate Dr.
Covey's personal appearances; Nightingale-Conant to market and distribute audio
and video tapes of the Company's book titles; and Skillpath to market and
present the Company's time management seminars.
INTERNATIONAL OPERATIONS
Franklin Covey provides its products and services internationally
through Company-owned operations and through non-exclusive license arrangements
with 18 foreign licensees operating 31 foreign offices. Franklin Covey has
direct operations in Great Britain, Canada, Hong Kong, Japan, Australia, Taiwan,
New Zealand, Mexico and Switzerland. Franklin Covey also operates retail stores
in Canada, Hong Kong and Mexico. Franklin Covey's four most popular books, The 7
Habits of Highly Effective People, Principle-Centered Leadership, The 10 Natural
Laws of Time and Life Management and First Things First are currently published
in multiple languages.
CLIENTS
Franklin Covey has developed a broad base of institutional and
individual clients. The Company has more than 8,000 institutional clients
consisting of corporations, governmental agencies and other organizations. The
Company believes its products, workshops and seminars encourage strong client
loyalty. Employees in each of Franklin Covey's distribution channels focus on
providing timely and courteous responses to client requests and inquiries.
Institutional clients frequently receive assistance in designing and developing
customized forms, tabs, pagefinders and binders necessary to satisfy specific
needs.
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COMPETITION
TRAINING. Competition in the organizational training industry is highly
fragmented with few large competitors. Franklin Covey estimates that the
industry represents more than $6 billion in annual revenues and that the largest
traditional organizational training firms have sales in the $100 million range.
Based upon Franklin Covey's fiscal 1997 sales of approximately $107 million, the
Company believes it is a leading competitor in the organizational training
market. Other significant competitors in the leadership training market are
Development Dimensions International, Zenger Miller, Organizational Dynamics
Inc. and the Center for Creative Leadership.
CONSULTING. Franklin Covey's PCCP change management methodology, which
it initiated in 1996, is directly linked to culture change. Effective culture
change is achieved through creating a principle-centered foundation within an
organization and by aligning systems and structures with that foundation.
Franklin Covey believes its approach to culture change is distinguishable from
the approach taken by more traditional change management and re-engineering
firms, as Franklin Covey's approach complements rather than competes with the
offerings of such firms.
PRODUCTS. The paper-based time management and personal organization
products market is intensely competitive and subject to rapid change. Franklin
Covey competes directly with other companies that manufacture and market
calendars, planners, personal organizers, appointment books, diaries and related
products through retail, mail order and other direct sales channels. In this
market, several competitors have widespread name recognition. The Company
believes its principal competitors include Day-Timer, At-A-Glance and Day
Runner. Franklin Covey also competes, to a lesser extent, with companies that
market substitutes for paper-based products, such as electronic organizers,
software PIMs and hand-held computers. Franklin Covey's ASCEND(R) software
competes directly with numerous other PIMs. Many of Franklin Covey's competitors
have significant marketing, product development, financial and other resources.
Given the relative ease of entry in Franklin Covey's product markets,
the number of competitors could increase, many of whom may imitate the Company's
methods of distribution, products and seminars, or offer similar products and
seminars at lower prices. Some of these companies may have greater financial and
other resources than the Company. Franklin Covey believes that the Franklin
Covey System and related products compete primarily on the basis of user appeal,
client loyalty, design, product breadth, quality, price, functionality and
client service. Franklin Covey also believes that the Franklin Covey System has
obtained market acceptance primarily as a result of the high quality of
materials, innovative design, the Company's attention to client service, and the
strong loyalty and referrals of its existing clients. Franklin Covey believes
that its integration of training services with products has become a competitive
advantage. Moreover, management believes that the Company is a market leader in
the United States among a small number of integrated providers of time
management products and services. Increased competition from existing and future
competitors could, however, have a material adverse effect on the Company's
sales and profitability.
MANUFACTURING
The manufacturing operations of Franklin Covey consist primarily of
printing, assembling, packaging and shipping components used in connection with
the Franklin Covey product line.
Franklin Covey currently prints the various Franklin Covey Planners and
other related forms and tabs. The Company believes the acquisition of its own
internal printing capacity has enabled it to control production costs of printed
materials, exercise greater control over production schedules and timing of
inventories, increase quality control and reduce risks associated with
dependence on outside suppliers.
Franklin Covey obtains its high quality paper from a supplier in
Wisconsin that is a subsidiary of a Fortune 500 company. The paper is
manufactured in two separate facilities to reduce the risk of a supply
disruption. The Company believes there are several alternative suppliers
available to meet Franklin Covey's paper needs. If Franklin Covey were required
to obtain paper from another source, any resulting delay or disruption is not
expected to have an adverse effect on its long-term business or financial
condition.
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The planners, organizers and other forms printed internally are cut,
collated and finished in the Company's facilities. The products are then
assembled and packaged for placement into inventory. Franklin Covey generally
maintains three to four months of inventory. Franklin Covey primarily uses UPS,
along with Federal Express and common carriers to ship its products to clients
and to the Franklin Covey retail stores. Automated production, assembly and
material handling equipment is used in the manufacturing process to insure
consistent quality of production materials and to control costs and maintain
efficiencies.
Binders used for Franklin Covey's products are produced from either
leather, simulated leather, tapestry or vinyl materials. All of the vinyl
binders are produced by multiple and alternative product suppliers. The
tapestry, leather and simulated leather binders are manufactured by both third
party and by Franklin Covey. The Company believes that its knowledge and
experience in the manufacturing of binders allows it to better control the
quality and cost of binders manufactured by outside suppliers. Franklin Covey
believes it enjoys good relations with its suppliers and vendors and does not
anticipate any difficulty in obtaining the required binders and materials needed
in its business.
The Company has implemented special procedures to insure a high
standard of quality for its leather binders, most of which are manufactured by
suppliers in the United States, Canada, Korea and China. Representatives of the
Company attend leather shows and supervise the buying process by leather
suppliers who purchase and inventory leather before producing and selling the
finished binders to Franklin Covey.
Franklin Covey also purchases numerous accessories, including pens,
books, video tapes, calculators and other products, from various suppliers for
resale to its clients. These items are manufactured by a variety of outside
contractors located in the United States and abroad. The Company does not
believe that it is dependent on any one or more of such contractors and
considers its relationships with such suppliers to be good.
TRADEMARKS, COPYRIGHTS AND INTELLECTUAL PROPERTY
Franklin Covey seeks to protect its intellectual property through a
combination of trademarks, copyrights and confidentiality agreements. The
Company claims rights for over 100 trademarks in the United States and has
obtained registration in the United States and many foreign countries for many
of its trademarks, including TimeQuest, The 7 Habits of Highly Effective People,
First Things First, Principle-Centered Leadership, "What Matters Most?",
Franklin Covey Planner, Franklin Day Planner, Ascend, Values Quest, Writing
Advantage, and The Seven Habits. Franklin Covey considers its trademarks and
other proprietary rights to be important and material to its business. Each of
the marks set forth in italics above is a registered mark or a mark for which
protection is claimed.
Franklin Covey owns all copyrights on its planners, organizers and the
text and other printed information provided in its training seminars, the
programs contained within ASCEND(R) and its instructional materials including
the Professional Consulting Group training materials. Franklin Covey has been
issued copyright registrations in the United States covering the Franklin Covey
System and its time management seminar. Franklin Covey believes it owns all
copyrights or is in the process of obtaining copyright registration of all
seminar and training materials comprising material components of its programs
and books. Franklin Covey places copyright notices on its instructional,
marketing and advertising materials. In order to maintain the proprietary nature
of its product information, Franklin Covey enters into written confidentiality
agreements with certain executives, product developers, sales professionals,
training consultants, other employees and licensees. Although Franklin Covey
believes its protective measures with respect to its proprietary rights are
important, there can be no assurance that such measures will provide significant
protection from competitors.
EMPLOYEES
As of August 31, 1997, Franklin Covey had 4,741 full and part-time
employees, including 2,274 in sales, marketing and training; 732 in client
service and product development; 948 in production operations and distribution;
and 783 in administration and support staff. None of Franklin Covey's associates
are represented by a union or other collective bargaining group. Management
believes that its relations with its associates are good.
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Franklin Covey does not currently foresee a shortage in qualified personnel
needed to operate the Company's business.
ITEM 2. PROPERTIES
Franklin Covey's principal business operations and executive offices
are located primarily in Salt Lake City, Utah and Provo, Utah. The Company's
Salt Lake City facilities currently consist of approximately 800,000 square
feet, including approximately 491,000 square feet for manufacturing,
distribution and warehousing, and approximately 309,000 square feet for
administration. All of Franklin Covey's Salt Lake City facilities are owned by
the Company, subject to mortgages of approximately $4.0 million as of August 31,
1997. The four buildings in Provo are located in a fifteen mile area. Franklin
Covey occupies all or a portion of each of these buildings, with total leased
space of approximately 173,000 square feet as of August 31, 1997, with leases
that terminate intermittently through the year 2009. Franklin Covey's 110 retail
stores are operated under leases with remaining terms of up to seven years; some
of these leases include rentals based on a percentage of sales. The Company also
maintains sales, administrative and/or warehouse facilities in or near Salt Lake
City; Phoenix; Atlanta; Dallas; Washington, D.C.; Bellingham, Washington; Tokyo;
London; Hong Kong; Toronto; Vancouver; Montreal; Burlington; Brisbane,
Australia; Taipei, Taiwan; Monterrey, Mexico; Mexico City, Mexico; and Auckland,
New Zealand under leases which expire intermittently through the year 2004. In
connection with operation of the Franklin Covey Institute of Fitness, Franklin
Covey utilizes approximately 115,000 square feet of fitness and training
facilities located on 61 acres near St. George, Utah. In connection with the
acquisition of Time Systems, Franklin Covey assumed leases totaling
approximately 50,000 square feet in Phoenix, Arizona, which expire through
August 1998. All of Franklin's facilities are used exclusively by Franklin and
its divisions and are believed to be adequate and suitable for its current
needs.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to, nor is any of its property subject to,
any material pending legal proceedings, nor are any such proceedings known to
the Company to be contemplated.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year ended August 31, 1997.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
The Company's Common Stock is listed and traded on the New York Stock
Exchange ("NYSE") under the symbol "FC." The following table sets forth, for
the periods indicated, the high and low sale prices for the Company's Common
Stock, as reported on the NYSE Composite Tape, for the fiscal years ended August
31, 1997 and 1996, respectively.
HIGH LOW
------- -------
FISCAL YEAR ENDED AUGUST 31, 1997:
First Quarter.................................. $21 3/8 $17 3/8
Second Quarter................................. 22 7/8 20 1/4
Third Quarter.................................. 24 20 5/8
Fourth Quarter................................. 28 1/4 24 1/8
FISCAL YEAR ENDED AUGUST 31, 1996:
First Quarter.................................. $25 5/8 $18 1/4
Second Quarter................................. 24 1/2 17 7/8
Third Quarter.................................. 29 1/8 19 3/4
Fourth Quarter................................. 20 18 1/4
The Company did not pay or declare dividends on its Common Stock during
the fiscal years ended August 31, 1996 and 1997. The Company currently
anticipates that it will retain all available funds to finance its future growth
and business expansion. The Company does not presently intend to pay cash
dividends in the foreseeable future.
As of November 18, 1997, the Company had 24,780,928 shares of its
Common Stock outstanding, held by approximately 400 shareholders of record.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is incorporated by reference to
page 1 of the Company's 1997 Annual Report to Shareholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this Item is incorporated by reference to
pages 25 through 29 of the Company's 1997 Annual Report to Shareholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is incorporated by reference to
pages 30 through 43 of the Company's 1997 Annual Report to Shareholders.
11
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item is incorporated by reference to
the sections entitled "Election of Directors," "Executive Officers" and
"Executive Compensation" in the Company's definitive Proxy Statement for the
annual meeting of shareholders which is scheduled to be held on January 9, 1998.
The definitive Proxy Statement will be filed with the Securities and Exchange
Commission pursuant to Regulation 14A of the Securities Exchange Act of 1934, as
amended.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to
the sections entitled "Election of Directors--Director Compensation" and
"Executive Compensation" in the Company's definitive Proxy Statement for the
annual meeting of shareholders which is scheduled to be held on January 9, 1998.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference to
the section entitled "Principal Holders of Voting Securities" in the Company's
definitive Proxy Statement for the annual meeting of shareholders which is
scheduled to be held on January 9, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference to
the section entitled "Certain Relationships and Related Transactions" in the
Company's definitive Proxy Statement for the annual meeting of shareholders
which is scheduled to be held on January 9, 1998.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents Filed
1. Financial Statements. The following Consolidated Financial
Statements of the Company and Report of Independent Public
Accountants included in the Annual Report to Shareholders for
the year ended August 31, 1997 are incorporated by reference
in Item 8 hereof:
- Report of Arthur Andersen LLP, Independent Public
Accountants, for the year ended August 31, 1997 and
1996
- Consolidated Balance Sheets at August 31, 1997 and
1996
- Consolidated Statements of Income for the years ended
August 31, 1997, 1996 and 1995
- Consolidated Statements of Shareholders' Equity for
the years ended August 31, 1997, 1996 and 1995
- Consolidated Statements of Cash Flows for the years
ended August 31, 1997, 1996 and 1995
- Notes to Consolidated Financial Statements
Report of Price Waterhouse LLP, Independent Public
Accountants for the year ended August 31, 1995 (See
page 17 herein).
2. Financial Statement Schedule. The following Consolidated
Financial Statement Schedule for the three years ended August
31, 1997 is filed as part of this Report and should be read in
conjunction with the Company's Consolidated Financial
Statements and Notes thereto:
SCHEDULE PAGE
-------- ----
Report of Arthur Andersen LLP, Independent Public Accountants, on
Consolidated Financial Statement Schedule for the years ended
August 31, 1997 and 1996 18
Report of Price Waterhouse LLP, Independent Public Accountants, on
Consolidated Financial Statement Schedule for year ended August 31,
1995 19
II -- Valuation and Qualifying Accounts and Reserves 20
Financial statements and schedules other than those
listed are omitted for the reason that they are not
required or are not applicable, or the required
information is shown in the Financial Statements or
Notes thereto, or contained in this Report.
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3. Exhibit List.
EXHIBIT INCORPORATED FILED
NO. EXHIBIT BY REFERENCE HEREWITH
- ------- ------------------------------------------------------------- ------------ --------
3.1 Revised Articles of Incorporation of the Registrant (1)
3.2 Amended and Restated Bylaws of the Registrant (1)
4 Specimen Certificate of the Registrant's Common Stock, par
value $.05 per share (2)
10.1 Amended and Restated 1992 Employee Stock Purchase Plan (3)
10.2 First Amendment to Amended and Restated 1992 Stock
Incentive Plan (4)
10.3 Franklin 401(k) Profit Sharing Plan (1)
10.4 Forms of Nonstatutory Stock Options (1)
10.5 Shipley Acquisition Agreement (4)
10.6 Stock Exchange Agreement-- Publishers Press, Inc. (5)
10.9 Merger Agreement-- Covey Leadership Center, Inc. (6)
10.10 Lease Agreements, as amended and proposed to be amended, by and
between Covey Corporate Campus One, L.L.C. and Covey Corporate Campus
Two, LLC (Landlord) and Covey Leadership Center, Inc. (Tenant) which
were assumed by Franklin Covey Co. in the Merger
with Covey Leadership Center, Inc. (7)
13 Annual Report to Shareholders for the year ended August 31, 1997.
Certain portions of this exhibit are incorporated by reference into
Items 6 through 8 of this Annual Report on Form 10-K and, except as so
incorporated by reference, the Annual Report to Shareholders is not
deemed to be filed as part of this
Report. (7)
22 Subsidiaries of the Registrant (7)
23.1 Consent of Arthur Andersen LLP, independent public
accountants (7)
23.2 Consent of Price Waterhouse LLP, independent public
accountants (7)
27 Financial Data Schedule (7)
- -----------------------
(1) Incorporated by reference to Registration Statement on Form S-1 filed with
the Commission on April 17, 1992, Registration No. 33-47283.
(2) Incorporated by reference to Amendment No. 1 to Registration Statement on
Form S-1 filed with the Commission on May 26, 1992, Registration No.
33-47283.
(3) Incorporated by reference to Form 10-K filed November 27, 1992, for the
fiscal year ended August 31, 1992.
15
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(4) Incorporated by reference to Registration Statement on Form S-1 filed with
the Commission on January 3, 1994, Registration No. 33-73728.
(5) Incorporated by reference to Reports on Form 8-K and Form 8-K/A dated
January 3, 1995 and February 28, 1995.
(6) Incorporated by reference to Report on Form 8-K dated June 3, 1997.
(7) Filed herewith and attached to this Report following page 22 hereof.
(b) Reports on Form 8-K
The Company filed a report on Form 8-K on June 3, 1997 to
report consummation of the Merger with Covey.
(c) Exhibits
Exhibits to this Report are attached following page 22 hereof.
(d) Financial Statement Schedule
See pages 18 through 20 herein.
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REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Stockholders
of Franklin Covey Co.
Our audit of the consolidated financial statements referred to in our report
dated September 20, 1995 appearing on page 17 of this Annual Report on Form 10-K
of Franklin Covey Co. (which consolidated financial statements are incorporated
by reference in this Annual Report on Form 10- K) also included an audit of the
Financial Statement Schedule listed in Item 14 (a) of this Form 10-K. In our
opinion, this Financial Statement Schedule presents fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Salt Lake City, Utah
September 20, 1995
SEC 3130.63
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
To Franklin Covey Co.:
We have audited in accordance with generally accepted auditing
standards, the consolidated financial statements as of August 31, 1997 and 1996,
and for the years then ended included in Franklin Covey Co.'s (formerly Franklin
Quest Co., a Utah Corporation) annual report to shareholders incorporated by
reference in this Form 10-K, and have issued our report thereon dated September
26, 1997. Our audits were made for the purpose of forming an opinion on those
statements taken as a whole. The schedule listed in the index on page 14 is the
responsibility of the Company's management and is presented for the purpose of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. The schedule data for the years ended August 31,
1997 and 1996 has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements as of August 31, 1997 and 1996 and
for the years then ended taken as a whole.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Salt Lake City, Utah
September 26, 1997
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Franklin Covey Co.
In our opinion, the consolidated statements of income, of shareholders' equity
and of cash flows as of and for the year ended August 31, 1995 (appearing on
pages 31 through 43 of the Franklin Covey Co. 1997 Annual Report to shareholders
which has been incorporated by reference in this Form 10-K Annual Report)
present fairly, in all material respects, the results of operations and cash
flows of Franklin Covey Co. and its subsidiaries for the year ended August 31,
1995, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examination, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above. We have not audited the consolidated financial statements of Franklin
Covey Co. for any period subsequent to August 31, 1995.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Salt Lake City, Utah
September 20, 1995
SEC 5010.53
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SCHEDULE II
FRANKLIN COVEY CO.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE THREE YEARS ENDED AUGUST 31, 1997
(DOLLARS IN THOUSANDS)
Column A Column B Column C Column D Column E
- ----------- ------------------- ------------------------------ ---------- ------------
ADDITIONS
------------------------------
CHARGED TO CHARGED
BALANCE AT COSTS AND TO OTHER BALANCE AT
DESCRIPTION BEGINNING OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS END OF PERIOD
- ----------- ------------------- -------- -------- ---------- -------------
Year ended August 31, 1995:
Allowance for doubtful
accounts $ 593 $ 348 $ 259(1) $ (528)(3) $ 672
Allowance for inventories 856 166(2) 1,022
------ ------ ------- ------- ------
$1,449 $ 348 $ 425 $ (528) $1,694
====== ====== ======= ======= ======
Year ended August 31, 1996:
Allowance for doubtful
accounts $ 672 $ 301 $ 12(1) $ (96)(3) $ 889
Allowance for inventories 1,022 7,267 62(2) (2,973)(4) 5,378
------ ------ ------- ------- ------
$1,694 $7,568 $ 74 $(3,069) $6,267
====== ====== ======= ======= ======
Year ended August 31, 1997:
Allowance for doubtful
accounts $ 889 $1,038 $ 1,322(1) $(1,318)(3) $1,931
Allowance for inventories 5,378 4,254 400(2) (5,557)(4) 4,475
------ ------ ------- ------- ------
$6,267 $5,292 $ 1,722 $(6,875) $6,406
====== ====== ======= ======= ======
(1) Represents the addition of the allowances for doubtful accounts of acquired
companies.
(2) Represents the addition of the allowances for inventories of acquired
companies.
(3) Represents a write-off of accounts deemed uncollectible.
(4) Reduction in the allowance is due to a write-off of obsolete inventories.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on November 24 , 1997.
FRANKLIN COVEY CO.
By: /s/ JON H. ROWBERRY
-------------------------------
Jon H. Rowberry, President,
Chief Operating Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ HYRUM W. SMITH Chairman of the Board and Chief November 24, 1997
- ------------------------------------------------- Executive Officer
Hyrum W. Smith
/s/ STEPHEN R. COVEY Co-Chairman of the Board November 24, 1997
- -------------------------------------------------
Stephen R. Covey
/s/ JON H. ROWBERRY President, Chief Operating November 24, 1997
- ------------------------------------------------- Officer and Director
Jon H. Rowberry
/s/ STEPHEN M. R. COVEY Executive Vice President and November 24, 1997
- ------------------------------------------------- Director
Stephen M. R. Covey
/s/ JOHN L. THELER Executive Vice President and November 24, 1997
- ------------------------------------------------- Chief Financial Officer and
John L. Theler Director (Principal Financial and
Accounting Officer)
/s/ JAMES M. BEGGS Director November 24, 1997
- -------------------------------------------------
James M. Beggs
- ------------------------------------------------- Director November ___, 1997
Robert F. Bennett
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SIGNATURE TITLE DATE
--------- ----- ----
/s/ BEVERLY B. CAMPBELL Director November 22, 1997
- -------------------------------------------------
Beverly B. Campbell
/s/ ROBERT H. DAINES Director November 24, 1997
- -------------------------------------------------
Robert H. Daines
Director November ____, 1997
- -------------------------------------------------
E. J. "Jake" Garn
/s/ DENNIS G. HEINER Director November 21, 1997
- -------------------------------------------------
Dennis G. Heiner
/s/ DANIEL P. HOWELLS Director November 24, 1997
- -------------------------------------------------
Daniel P. Howells
/s/ THOMAS H. LENAGH Director November 24, 1997
- -------------------------------------------------
Thomas H. Lenagh
/s/ JOEL C. PETERSON Director November 24, 1997
- -------------------------------------------------
Joel C. Peterson
/s/ E. KAY STEPP Director November 24, 1997
- -------------------------------------------------
E. Kay Stepp
Director November ___, 1997
- -------------------------------------------------
Robert A. Whitman
22