☑
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED AUGUST 31, 2017
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OR
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ___ TO ___
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Utah
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1-11107
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87-0401551
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(State or other jurisdiction of incorporation or organization)
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(Commission File No.)
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(IRS Employer Identification No.)
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Title of Each Class
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Name of Each Exchange on Which Registered
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Common Stock, $.05 Par Value
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New York Stock Exchange
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Large accelerated filer
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£
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Accelerated filer
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☑
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Non-accelerated filer
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£
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(Do not check if a smaller reporting company)
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Smaller reporting company
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£
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FranklinCovey Co.
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|||
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2 | |||
Business
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2 | ||
Risk Factors
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10 | ||
Unresolved Staff Comments
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20 | ||
Properties
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21 | ||
Legal Proceedings
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21 | ||
Mine Safety Disclosures
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22 | ||
22 | |||
Market for the Registrant's Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities
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22 | ||
Selected Financial Data
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25 | ||
Management's Discussion and Analysis of Financial Condition and Results of Operations
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26 | ||
Quantitative and Qualitative Disclosures About Market Risk
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51 | ||
Financial Statements and Supplementary Data
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53 | ||
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
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100 | ||
Controls and Procedures
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100 | ||
Other Information
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101 | ||
101 | |||
Directors, Executive Officers and Corporate Governance
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101 | ||
Executive Compensation
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102 | ||
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
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102 | ||
Certain Relationships and Related Transactions, and Director Independence
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103 | ||
Principal Accountant Fees and Services
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103 | ||
104 | |||
Exhibits and Financial Statement Schedules
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104 | ||
108 |
·
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New China Offices –On September 1, 2016 we opened three new sales offices in China. These offices are located in Beijing, Shanghai, and Guangzhou. Subsequent to August 31, 2017, we opened another sales office in Shenzhen, China. Our sales operations in China were previously managed by an independent licensee partner.
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·
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Acquisition of Robert Gregory Partners – In May 2017, we acquired the assets of Robert Gregory Partners, LLC (RGP), a corporate coaching firm with expertise in executive coaching, transition acceleration coaching, leadership development coaching, implementation coaching, and consulting. We anticipate that RGP services and methodologies will become key offerings in our training and consulting business.
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·
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Acquisition of Jhana Education – In July 2017, we acquired the stock of Jhana Education (Jhana), a company that specializes in the creation and dissemination of relevant, bite-sized content and learning tools for leaders and managers. We anticipate that the Jhana content and delivery methodologies acquired will become key features of our AAP offering.
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·
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License Rights for Intellectual Property – During fiscal 2017, we acquired the license rights for certain intellectual property owned by Higher Moment, LLC. The intellectual property is in part based on works authored and developed by Dr. Clayton Christensen, a well-known author and lecturer, who is a member of our Board of Directors. As we seek to expand offerings available on the AAP, we anticipate additional purchases or licenses of intellectual property in future periods.
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1.
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World Class Content – Rather than rely on "flavor of the month" training fads, our content is principle-centered and based on natural laws of human behavior and effectiveness. Our content is designed to build new skillsets, establish new mindsets, and provide enabling toolsets. When our content is applied consistently in an organization, we believe the culture of that organization will change to enable the organization to achieve its own great purposes. Our content is well researched, subjected to numerous field beta tests, and improved through a proven development process.
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2.
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Breadth and Scalability of Delivery Options – We have a wide range of content delivery options, including: the All Access Pass and other intellectual property licensing arrangements, on-site training, training led through certified facilitators, on-line learning, blended learning, and organization-wide transformational processes, including consulting and coaching.
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3.
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Global Capability – We not only operate domestically with sales personnel in the United States and Canada, but we also deliver content through our directly owned international offices and international licensee partners who deliver our content in over 150 other countries and territories around the world. This capability allows us to deliver content to a wide range of customers, from large, multinational corporations to smaller, local entities.
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·
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Direct Offices – This segment consists of our sales force that serves the United States and Canada; our international sales offices located in Japan, China, the United Kingdom, and Australia; and our public programs group.
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·
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Strategic Markets – This segment includes our government services office, the Sales Performance practice, the Customer Loyalty practice, and the "Global 50" group, which is specifically focused on sales to large, multi-national organizations.
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·
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Education practice – This segment is comprised of our domestic and international Education practice operations, which are centered on sales to educational institutions such as elementary schools, high schools, and colleges and universities.
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·
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International Licensees – This segment is primarily comprised of our international licensees' royalty revenues.
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·
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Quality of offerings, services, and solutions
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·
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Skills and capabilities of people
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·
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Innovative training and consulting services combined with effective products
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·
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Ability to add value to client operations
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·
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Reputation and client references
|
·
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Price
|
·
|
Availability of appropriate resources
|
·
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Global reach and scale
|
·
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Branding and name recognition in our marketplace
|
·
|
Governmental entities typically fund projects through appropriated monies. While these projects are often planned and executed as multi-year projects, the governmental entities usually reserve the right to change the scope of, or terminate, these projects for lack of approved funding and other discretionary reasons. Changes in governmental priorities or other political developments, including disruptions in governmental operations, could result in changes in the scope of, or in termination of, our existing contracts.
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·
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Governmental entities often reserve the right to audit our contract costs, including allocated indirect costs, and conduct inquiries and investigations of our business practices with respect to our government contracts. If the governmental entity finds that the costs are not reimbursable, then we will not be allowed to bill for those costs or the cost must be refunded to the client if it has already been paid to us. Findings from an audit also may result in our being required to prospectively adjust previously agreed upon rates for our work, which may affect our future margins.
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·
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If a governmental client discovers improper activities in the course of audits or investigations, we may become subject to various civil and criminal penalties and administrative sanctions, which may include termination of contracts, forfeiture of profits, suspension of payments, fines and suspensions or debarment from doing business with other agencies of that government. The inherent limitations of internal controls may not prevent or detect all improper or illegal activities, regardless of their adequacy.
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·
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Political and economic factors such as pending elections, the outcome of elections, revisions to governmental tax policies, sequestration, debt ceiling negotiations, and reduced tax revenues can affect the number and terms of new governmental contracts signed.
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·
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Restrictions on the movement of cash
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·
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Burdens of complying with a wide variety of national and local laws
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·
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The absence in some jurisdictions of effective laws to protect our intellectual property rights
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·
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Political instability
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·
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Currency exchange rate fluctuations
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·
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Longer payment cycles
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·
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Price controls or restrictions on exchange of foreign currencies
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·
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Fluctuations in our quarterly results of operations and cash flows
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·
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Increased overall market volatility
|
·
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Variations between our actual financial results and market expectations
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·
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Changes in our key balances, such as cash and cash equivalents
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·
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Currency exchange rate fluctuations
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·
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Unexpected asset impairment charges
|
·
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Increased or decreased analyst coverage
|
·
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Our clients' perceptions of our ability to add value through our programs and content
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·
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Competition
|
·
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General economic conditions
|
·
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Introduction of new programs or services by us or our competitors
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·
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Our ability to accurately estimate, attain, and sustain engagement sales, margins, and cash flows over longer contract periods
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·
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Seasonal trends, primarily as a result of scheduled training
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·
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Our ability to forecast demand for our products and services and thereby maintain an appropriate headcount in our employee base
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·
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Our ability to manage attrition
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·
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Develop new services, programs, or offerings
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·
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Take advantage of opportunities, including business acquisitions
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·
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Respond to competitive pressures
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ITEM 5. |
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
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High
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Low
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|||||||
Fiscal Year Ended August 31, 2017:
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||||||||
Fourth Quarter
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$
|
21.10
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$
|
17.35
|
||||
Third Quarter
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22.30
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15.20
|
||||||
Second Quarter
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21.45
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16.95
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||||||
First Quarter
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22.45
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15.44
|
||||||
Fiscal Year Ended August 31, 2016:
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||||||||
Fourth Quarter
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$
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17.53
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$
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13.45
|
||||
Third Quarter
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18.14
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13.83
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||||||
Second Quarter
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18.28
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14.36
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||||||
First Quarter
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17.81
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13.77
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Period
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Total Number of
Shares Purchased
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Average Price Paid
Per Share
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Total Number of Shares Purchased as Part of
Publicly Announced
Plans or Programs
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Maximum Dollar Value of Shares That May Yet Be Purchased Under the
Plans or Programs(1)
(in thousands)
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||||||||||||
June 1, 2017 to June 30, 2017
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-
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$
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-
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-
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$
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16,394
|
||||||||||
July 1, 2017 to July 31, 2017
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24,000
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18.46
|
24,000
|
15,951
|
||||||||||||
August 1, 2017 to August 31, 2017
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153,089
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18.14
|
153,089
|
13,174
|
||||||||||||
Total Common Shares(2)
|
177,089
|
$
|
18.18
|
177,089
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(1)
|
On January 23, 2015, our Board of Directors approved a new plan to repurchase up to $10.0 million of the Company's outstanding common stock. All previously existing common stock repurchase plans were canceled and the new common share repurchase plan does not have an expiration date. On March 27, 2015, our Board of Directors increased the aggregate value of shares of Company common stock that may be purchased under the January 2015 plan to $40.0 million so long as we have either $10.0 million in cash and cash equivalents or have access to debt financing of at least $10.0 million. Under the terms of this expanded common stock repurchase plan, we have purchased 1,539,828 shares of our common stock for $26.8 million through August 31, 2017.
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(2)
|
Amounts shown above exclude 6,365 shares of our common stock that were withheld for minimum statutory taxes on stock-based compensation awards issued to employees during the quarter ended August 31, 2017. The withheld shares were valued at the market price on the date that the shares were distributed to participants and were acquired at a weighted average price of $19.14 per share.
|
August 31,
|
2017(1)
|
2016
|
2015(2)
|
2014(2)
|
2013(2)
|
|||||||||||||||
In thousands, except per-share data
|
||||||||||||||||||||
Income Statement Data:
|
||||||||||||||||||||
Net sales
|
$
|
185,256
|
$
|
200,055
|
$
|
209,941
|
$
|
205,165
|
$
|
190,924
|
||||||||||
Gross profit
|
122,667
|
133,154
|
138,089
|
138,266
|
128,989
|
|||||||||||||||
Income (loss) from operations
|
(8,880
|
)
|
13,849
|
19,529
|
24,765
|
21,614
|
||||||||||||||
Income (loss) before income taxes
|
(10,909
|
)
|
11,911
|
17,412
|
21,759
|
19,398
|
||||||||||||||
Income tax benefit (provision)
|
3,737
|
(4,895
|
)
|
(6,296
|
)
|
(3,692
|
)
|
(5,079
|
)
|
|||||||||||
Net income (loss)
|
(7,172
|
)
|
7,016
|
11,116
|
18,067
|
14,319
|
||||||||||||||
Earnings (loss) per share:
|
||||||||||||||||||||
Basic
|
$
|
(.52
|
)
|
$
|
.47
|
$
|
.66
|
$
|
1.08
|
$
|
.83
|
|||||||||
Diluted
|
(.52
|
)
|
.47
|
.66
|
1.07
|
.80
|
||||||||||||||
Balance Sheet Data:
|
||||||||||||||||||||
Total current assets
|
$
|
91,835
|
$
|
89,741
|
$
|
95,425
|
$
|
93,016
|
$
|
81,108
|
||||||||||
Other long-term assets
|
16,925
|
13,713
|
14,807
|
14,785
|
9,875
|
|||||||||||||||
Total assets
|
210,731
|
190,871
|
200,645
|
205,186
|
189,405
|
|||||||||||||||
Long-term obligations
|
53,158
|
48,511
|
36,978
|
36,885
|
41,100
|
|||||||||||||||
Total liabilities
|
125,666
|
97,156
|
75,139
|
78,472
|
82,899
|
|||||||||||||||
Shareholders' equity
|
85,065
|
93,715
|
125,506
|
126,714
|
106,506
|
|||||||||||||||
Cash flows from operating activities
|
$
|
17,357
|
$
|
32,665
|
$
|
26,190
|
$
|
18,124
|
$
|
15,528
|
(1)
|
During fiscal 2017 we decided to allow new All Access Pass intellectual property agreements to receive updated content throughout the contracted period. Accordingly, we defer substantially all AAP revenues at the inception of the agreements and recognize the revenue over the lives of the arrangements. The transition to the AAP model resulted in significantly reduced revenues and operating income during fiscal 2017.
|
(2)
|
We elected to amend previously filed U.S. federal income tax returns to claim foreign tax credits instead of foreign tax deductions and recognized significant income tax benefits which reduced our effective income tax rate during these years.
|
1.
|
World Class Content – Our content is principle-centered and based on natural laws of human behavior and effectiveness. When our content is applied consistently in an organization, we believe the culture of that organization will change to enable the organization to achieve their own great purposes. Our content is designed to build new skillsets, establish new mindsets, and provide enabling toolsets.
|
2.
|
Transformational Impact and Reach – We hold ourselves responsible for and measure ourselves by our clients' achievement of transformational results. Our commitment to achieving lasting impact extends to all of our clients—from CEOs to elementary school students, and from senior management to front-line workers in corporations, governmental, and educational environments.
|
3.
|
Breadth and Scalability of Delivery Options – We have a wide range of content delivery options, including: the All Access Pass and other intellectual property licenses, on-site training, training led through certified facilitators, on-line learning, blended learning, and organization-wide transformational processes, including consulting and coaching.
|
4.
|
Global Capability – We have sales professionals in the United States and Canada who serve clients in the private sector and in governmental organizations; wholly owned subsidiaries in Australia, China, Japan, and the United Kingdom; and we contract with independent licensee partners who deliver our content and provide services in over 150 other countries and territories around the world.
|
YEAR ENDED
AUGUST 31,
|
2017
|
Percent change
|
2016
|
Percent change
|
2015
|
|||||||||||||||
Sales by Category:
|
||||||||||||||||||||
Training and consulting services
|
$
|
177,816
|
(6
|
)
|
$
|
189,661
|
(5
|
)
|
$
|
198,695
|
||||||||||
Products
|
3,881
|
(35
|
)
|
6,009
|
(13
|
)
|
6,885
|
|||||||||||||
Leasing
|
3,559
|
(19
|
)
|
4,385
|
1
|
4,361
|
||||||||||||||
$
|
185,256
|
(7
|
)
|
$
|
200,055
|
(5
|
)
|
$
|
209,941
|
|||||||||||
Sales by Segment:
|
||||||||||||||||||||
Direct offices
|
$
|
96,662
|
(7
|
)
|
$
|
103,605
|
(8
|
)
|
$
|
113,087
|
||||||||||
Strategic markets
|
22,974
|
(23
|
)
|
29,819
|
(19
|
)
|
37,039
|
|||||||||||||
Education practice
|
44,122
|
8
|
40,844
|
21
|
33,681
|
|||||||||||||||
International licensees
|
13,571
|
(21
|
)
|
17,113
|
3
|
16,547
|
||||||||||||||
Corporate and other
|
7,927
|
(9
|
)
|
8,674
|
(10
|
)
|
9,587
|
|||||||||||||
$
|
185,256
|
(7
|
)
|
$
|
200,055
|
(5
|
)
|
$
|
209,941
|
·
|
New All Access Pass Sales and the Renewal of Existing Client Contracts – We are focused on sales of AAP contracts and have restructured our domestic sales force and sales support functions to more effectively sell and support the AAP. We believe we are well positioned to expand sales of the All Access Pass in the United States and Canada and reach new clients. The fiscal 2017 acquisition of Jhana Education is expected to attract new clients through its delivery of content in bite-sized modules. We are currently in the process of translating AAP content into 15 new languages and expect to release the content and a new improved AAP portal in fiscal 2018. These additional languages will allow us to launch the AAP at our offices in Japan and China, as well as with many of our licensee partners.
|
·
|
Education Segment Sales – Our Education segment has consistently grown over the past several years. We intend to continue to invest in new content and additional sales personnel to reach out to new schools and retain existing schools. We believe there are significant growth opportunities, both domestically and internationally, for our Education segment and its well-known The Leader in Me offering.
|
·
|
Growth of our Direct Office and International Licensee Channels – We are actively focused on growing the size and productivity of our direct office channel through expansion of our sales force to reach potential clients. We believe that the structural changes made in fiscal 2017 will help us improve sales and lower costs in future periods. In addition, we believe the acquisition of Robert Gregory Partners, LLC in fiscal 2017 will open new opportunities as we seek to expand our coaching business. We are also actively seeking to expand the size and productivity of our international licensee partners through the development of additional content, such as the translated AAP offerings, and additional licensee support activities.
|
YEAR ENDED
AUGUST 31,
|
2017
|
2016
|
2015
|
|||||||||
Sales:
|
||||||||||||
Training and consulting services
|
96.0
|
%
|
94.8
|
%
|
94.6
|
%
|
||||||
Products
|
2.1
|
3.0
|
3.3
|
|||||||||
Leasing
|
1.9
|
2.2
|
2.1
|
|||||||||
Total sales
|
100.0
|
100.0
|
100.0
|
|||||||||
Cost of sales:
|
||||||||||||
Training and consulting services
|
30.5
|
29.6
|
31.6
|
|||||||||
Products
|
2.2
|
1.6
|
1.6
|
|||||||||
Leasing
|
1.1
|
1.2
|
1.0
|
|||||||||
Total cost of sales
|
33.8
|
32.4
|
34.2
|
|||||||||
Gross profit
|
66.2
|
67.6
|
65.8
|
|||||||||
Selling, general, and administrative
|
65.4
|
56.8
|
51.8
|
|||||||||
Contract termination costs
|
0.8
|
-
|
-
|
|||||||||
Restructuring costs
|
0.8
|
0.4
|
0.3
|
|||||||||
Impaired assets
|
-
|
-
|
0.6
|
|||||||||
Depreciation
|
2.1
|
1.9
|
2.0
|
|||||||||
Amortization
|
1.9
|
1.6
|
1.8
|
|||||||||
Total operating expenses
|
71.0
|
60.7
|
56.5
|
|||||||||
Income (loss) from operations
|
(4.8
|
)
|
6.9
|
9.3
|
||||||||
Interest income
|
0.2
|
0.2
|
0.2
|
|||||||||
Interest expense
|
(1.3
|
)
|
(1.1
|
)
|
(1.0
|
)
|
||||||
Discount on related party receivable
|
-
|
-
|
(0.2
|
)
|
||||||||
Income (loss) before income taxes
|
(5.9
|
)%
|
6.0
|
%
|
8.3
|
%
|
YEAR ENDED AUGUST 31,
|
2017
|
2016
|
$ Change
|
% Change
|
||||||||||||
SG&A expenses
|
$
|
114,207
|
$
|
108,930
|
$
|
5,277
|
5
|
|||||||||
China SG&A expenses
|
5,219
|
-
|
5,219
|
n/a
|
||||||||||||
Increase (decrease) to contingent payment liabilities
|
(1,936
|
)
|
1,538
|
(3,474
|
) |
(226
|
)
|
|||||||||
Stock-based compensation expense
|
3,658
|
3,121
|
537
|
17
|
||||||||||||
Consolidated SG&A expense
|
121,148
|
113,589
|
7,559
|
7
|
||||||||||||
Contract termination costs
|
1,500
|
-
|
1,500
|
n/a
|
||||||||||||
Restructuring costs
|
1,482
|
776
|
706
|
91
|
||||||||||||
Depreciation
|
3,879
|
3,677
|
202
|
5
|
||||||||||||
Amortization
|
3,538
|
3,263
|
275
|
8
|
||||||||||||
$
|
131,547
|
$
|
121,305
|
$
|
10,242
|
8
|
YEAR ENDED AUGUST 31,
|
2016
|
2015
|
$ Change
|
% Change
|
||||||||||||
SG&A expense
|
$
|
108,930
|
$
|
106,231
|
$
|
2,699
|
3
|
|||||||||
Increase to NinetyFive 5 contingent payment liability
|
1,538
|
35
|
1,503
|
4,294
|
||||||||||||
Stock-based compensation expense
|
3,121
|
2,536
|
585
|
23
|
||||||||||||
Consolidated SG&A expense
|
113,589
|
108,802
|
4,787
|
4
|
||||||||||||
Impaired assets
|
-
|
1,302
|
(1,302
|
)
|
(100
|
)
|
||||||||||
Restructuring costs
|
776
|
587
|
189
|
32
|
||||||||||||
Depreciation
|
3,677
|
4,142
|
(465
|
)
|
(11
|
)
|
||||||||||
Amortization
|
3,263
|
3,727
|
(464
|
)
|
(12
|
)
|
||||||||||
$
|
121,305
|
$
|
118,560
|
$
|
2,745
|
2
|
YEAR ENDED AUGUST 31, 2017 (unaudited)
|
||||||||||||||||
November 26
|
February 28
|
May 31
|
August 31
|
|||||||||||||
Net sales
|
$
|
39,787
|
$
|
42,196
|
$
|
43,751
|
$
|
59,523
|
||||||||
Gross profit
|
25,308
|
28,031
|
27,341
|
41,988
|
||||||||||||
Selling, general, and administrative
|
29,095
|
29,370
|
30,713
|
31,970
|
||||||||||||
Contract termination costs
|
-
|
1,500
|
-
|
-
|
||||||||||||
Restructuring costs
|
-
|
-
|
1,335
|
147
|
||||||||||||
Depreciation
|
866
|
928
|
949
|
1,136
|
||||||||||||
Amortization
|
722
|
721
|
835
|
1,261
|
||||||||||||
Income (loss) from operations
|
(5,375
|
)
|
(4,488
|
)
|
(6,491
|
)
|
7,474
|
|||||||||
Income (loss) before income taxes
|
(5,879
|
)
|
(5,002
|
)
|
(7,023
|
)
|
6,995
|
|||||||||
Net income (loss)
|
(3,958
|
)
|
(3,333
|
)
|
(4,541
|
)
|
4,659
|
|||||||||
Net income (loss) per share:
|
||||||||||||||||
Basic
|
$
|
(.29
|
)
|
$
|
(.24
|
)
|
$
|
(.33
|
)
|
$
|
.34
|
|||||
Diluted
|
(.29
|
)
|
(.24
|
)
|
(.33
|
)
|
.33
|
|||||||||
YEAR ENDED AUGUST 31, 2016 (unaudited)
|
||||||||||||||||
November 28
|
February 27
|
May 28
|
August 31
|
|||||||||||||
Net sales
|
$
|
45,218
|
$
|
45,269
|
$
|
44,738
|
$
|
64,831
|
||||||||
Gross profit
|
30,071
|
29,854
|
29,562
|
45,667
|
||||||||||||
Selling, general, and administrative
|
26,489
|
27,936
|
29,095
|
30,069
|
||||||||||||
Restructuring costs
|
-
|
376
|
-
|
400
|
||||||||||||
Depreciation
|
912
|
894
|
1,003
|
868
|
||||||||||||
Amortization
|
910
|
909
|
722
|
721
|
||||||||||||
Income (loss) from operations
|
1,760
|
(261
|
)
|
(1,258
|
)
|
13,609
|
||||||||||
Income (loss) before income taxes
|
1,296
|
(730
|
)
|
(1,741
|
)
|
13,086
|
||||||||||
Net income (loss)
|
790
|
(448
|
)
|
(1,052
|
)
|
7,726
|
||||||||||
Net income (loss) per share:
|
||||||||||||||||
Basic and diluted
|
$
|
.05
|
$
|
(.03
|
)
|
$
|
(.07
|
)
|
$
|
.55
|
YEAR ENDED AUGUST 31,
|
2017
|
2016
|
2015
|
|||||||||
Total cash provided by (used for):
|
||||||||||||
Operating activities
|
$
|
17,357
|
$
|
32,665
|
$
|
26,190
|
||||||
Investing activities
|
(21,675
|
)
|
(6,229
|
)
|
(4,874
|
)
|
||||||
Financing activities
|
3,134
|
(32,535
|
)
|
(14,903
|
)
|
|||||||
Effect of exchange rates on cash
|
(348
|
)
|
321
|
(662
|
)
|
|||||||
Increase (decrease) in cash and cash equivalents
|
$
|
(1,532
|
)
|
$
|
(5,778
|
)
|
$
|
5,751
|
Fiscal
|
Fiscal
|
Fiscal
|
Fiscal
|
Fiscal
|
||||||||||||||||||||||||
Contractual Obligations
|
2018
|
2019
|
2020
|
2021
|
2022
|
Thereafter
|
Total
|
|||||||||||||||||||||
Required lease payments on corporate campus
|
$
|
3,579
|
$
|
3,651
|
$
|
3,724
|
$
|
3,798
|
$
|
3,874
|
$
|
11,283
|
$
|
29,909
|
||||||||||||||
Term loans payable to bank(1)
|
6,736
|
10,581
|
2,557
|
-
|
-
|
-
|
19,874
|
|||||||||||||||||||||
Jhana Education contingent consideration payments(2)
|
2,371
|
599
|
831
|
1,020
|
1,160
|
1,219
|
7,200
|
|||||||||||||||||||||
Purchase obligations
|
6,608
|
-
|
-
|
-
|
-
|
-
|
6,608
|
|||||||||||||||||||||
Minimum operating lease payments
|
866
|
321
|
84
|
84
|
84
|
268
|
1,707
|
|||||||||||||||||||||
Robert Gregory Partners, LLC contingent consideration payments(2)
|
-
|
1,000
|
-
|
-
|
-
|
-
|
1,000
|
|||||||||||||||||||||
Minimum required payments for warehousing services(3)
|
216
|
180
|
-
|
-
|
-
|
-
|
396
|
|||||||||||||||||||||
Total expected contractual
obligation payments
|
$
|
20,376
|
$
|
16,332
|
$
|
7,196
|
$
|
4,902
|
$
|
5,118
|
$
|
12,770
|
$
|
66,694
|
(1)
|
Payment amounts shown include interest at 3.1 percent, which is the current rate on our Term Loan and revolving credit obligations.
|
(2)
|
The payment of contingent consideration from business acquisitions is based on current estimates and projections. We reassess the fair value of estimated contingent consideration payments each quarter based on information available. The actual payment of contingent consideration amounts may differ in amount and timing from those shown in the table.
|
(3)
|
Our required minimum payments for warehousing services contains an annual escalation based upon changes in the Employment Cost Index, the impact of which is not estimated in the above table. The warehousing services contract expires in June 2019.
|
·
|
Training and Consulting Services – We provide training and consulting services to both organizations and individuals in leadership, productivity, strategic execution, trust, sales force performance, customer loyalty, and communication effectiveness skills.
|
·
|
Products – We sell books, audio media, and other related products.
|
·
|
significant underperformance relative to historical or projected future operating results;
|
·
|
significant change in the manner of our use of acquired assets or the strategy for the overall business;
|
·
|
significant change in prevailing interest rates;
|
·
|
significant negative industry or economic trend;
|
·
|
significant change in market capitalization relative to book value; and/or
|
·
|
significant negative change in market multiples of the comparable company set.
|
AUGUST 31,
|
2017
|
2016
|
||||||
In thousands, except per-share data
|
||||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
8,924
|
$
|
10,456
|
||||
Accounts receivable, less allowance for doubtful accounts of $2,310 and $1,579
|
66,343
|
65,960
|
||||||
Receivable from related party
|
1,020
|
1,933
|
||||||
Inventories
|
3,353
|
5,042
|
||||||
Income taxes receivable
|
259
|
-
|
||||||
Prepaid expenses
|
3,569
|
2,949
|
||||||
Other current assets
|
8,367
|
3,401
|
||||||
Total current assets
|
91,835
|
89,741
|
||||||
Property and equipment, net
|
19,730
|
16,083
|
||||||
Intangible assets, net
|
57,294
|
50,196
|
||||||
Goodwill
|
24,220
|
19,903
|
||||||
Long-term receivable from related party
|
727
|
1,235
|
||||||
Other long-term assets
|
16,925
|
13,713
|
||||||
$
|
210,731
|
$
|
190,871
|
|||||
LIABILITIES AND SHAREHOLDERS' EQUITY
|
||||||||
Current liabilities:
|
||||||||
Current portion of financing obligation
|
$
|
1,868
|
$
|
1,662
|
||||
Current portion of term notes payable
|
6,250
|
3,750
|
||||||
Accounts payable
|
9,119
|
10,376
|
||||||
Deferred revenue
|
40,772
|
20,847
|
||||||
Accrued liabilities
|
22,617
|
17,422
|
||||||
Total current liabilities
|
80,626
|
54,057
|
||||||
Line of credit
|
4,377
|
-
|
||||||
Financing obligation, less current portion
|
21,075
|
22,943
|
||||||
Term notes payable, less current portion
|
12,813
|
10,313
|
||||||
Other liabilities
|
5,742
|
3,173
|
||||||
Deferred income tax liabilities
|
1,033
|
6,670
|
||||||
Total liabilities
|
125,666
|
97,156
|
||||||
Commitments and contingencies (Notes 7 and 8)
|
||||||||
Shareholders' equity:
|
||||||||
Common stock, $.05 par value; 40,000 shares authorized, 27,056 shares issued
|
1,353
|
1,353
|
||||||
Additional paid-in capital
|
212,484
|
211,203
|
||||||
Retained earnings
|
69,456
|
76,628
|
||||||
Accumulated other comprehensive income
|
667
|
1,222
|
||||||
Treasury stock at cost, 13,414 shares and 13,332 shares
|
(198,895
|
)
|
(196,691
|
)
|
||||
Total shareholders' equity
|
85,065
|
93,715
|
||||||
$
|
210,731
|
$
|
190,871
|
YEAR ENDED AUGUST 31,
|
2017
|
2016
|
2015
|
|||||||||
In thousands, except per-share amounts
|
||||||||||||
Net sales:
|
||||||||||||
Training and consulting services
|
$
|
177,816
|
$
|
189,661
|
$
|
198,695
|
||||||
Products
|
3,881
|
6,009
|
6,885
|
|||||||||
Leasing
|
3,559
|
4,385
|
4,361
|
|||||||||
185,256
|
200,055
|
209,941
|
||||||||||
Cost of sales:
|
||||||||||||
Training and consulting services
|
56,557
|
59,158
|
66,370
|
|||||||||
Products
|
3,990
|
3,206
|
3,306
|
|||||||||
Leasing
|
2,042
|
2,537
|
2,176
|
|||||||||
62,589
|
64,901
|
71,852
|
||||||||||
Gross profit
|
122,667
|
135,154
|
138,089
|
|||||||||
Selling, general, and administrative
|
121,148
|
113,589
|
108,802
|
|||||||||
Impaired assets
|
-
|
-
|
1,302
|
|||||||||
Contract termination costs
|
1,500
|
-
|
-
|
|||||||||
Restructuring costs
|
1,482
|
776
|
587
|
|||||||||
Depreciation
|
3,879
|
3,677
|
4,142
|
|||||||||
Amortization
|
3,538
|
3,263
|
3,727
|
|||||||||
Income (loss) from operations
|
(8,880
|
)
|
13,849
|
19,529
|
||||||||
Interest income
|
379
|
325
|
383
|
|||||||||
Interest expense
|
(2,408
|
)
|
(2,263
|
)
|
(2,137
|
)
|
||||||
Discount on related-party receivables
|
-
|
-
|
(363
|
)
|
||||||||
Income (loss) before income taxes
|
(10,909
|
)
|
11,911
|
17,412
|
||||||||
Benefit (provision) for income taxes
|
3,737
|
(4,895
|
)
|
(6,296
|
)
|
|||||||
Net income (loss)
|
$
|
(7,172
|
)
|
$
|
7,016
|
$
|
11,116
|
|||||
Net income (loss) per share:
|
||||||||||||
Basic and diluted
|
$
|
(0.52
|
)
|
$
|
0.47
|
$
|
0.66
|
|||||
Weighted average number of common shares:
|
||||||||||||
Basic
|
13,819
|
14,944
|
16,742
|
|||||||||
Diluted
|
13,819
|
15,076
|
16,923
|
|||||||||
COMPREHENSIVE INCOME (LOSS):
|
||||||||||||
Net income (loss)
|
$
|
(7,172
|
)
|
$
|
7,016
|
$
|
11,116
|
|||||
Foreign currency translation adjustments, net of income
|
||||||||||||
tax benefit of $37, $115, and $52
|
(555
|
)
|
1,030
|
(1,259
|
)
|
|||||||
Comprehensive income (loss)
|
$
|
(7,727
|
)
|
$
|
8,046
|
$
|
9,857
|
YEAR ENDED AUGUST 31,
|
2017
|
2016
|
2015
|
|||||||||
In thousands
|
||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||||||||||
Net income (loss)
|
$
|
(7,172
|
)
|
$
|
7,016
|
$
|
11,116
|
|||||
Adjustments to reconcile net income (loss) to net cash provided
|
||||||||||||
by operating activities:
|
||||||||||||
Depreciation and amortization
|
7,443
|
6,943
|
7,875
|
|||||||||
Amortization of capitalized curriculum development costs
|
3,745
|
3,865
|
4,093
|
|||||||||
Deferred income taxes
|
(5,594
|
)
|
1,854
|
3,665
|
||||||||
Stock-based compensation expense
|
3,658
|
3,121
|
2,536
|
|||||||||
Impairment of assets
|
-
|
-
|
1,302
|
|||||||||
Excess tax expense (benefit) from stock-based compensation
|
(168
|
)
|
52
|
(137
|
)
|
|||||||
Increase (decrease) in contingent consideration liabilities
|
(1,936
|
)
|
1,538
|
35
|
||||||||
Changes in assets and liabilities, net of effect of acquired businesses:
|
||||||||||||
Decrease (increase) in accounts receivable, net
|
164
|
(576
|
)
|
(4,355
|
)
|
|||||||
Decrease (increase) in inventories
|
1,583
|
(908
|
)
|
2,239
|
||||||||
Decrease in receivable from related party
|
1,421
|
820
|
620
|
|||||||||
Increase in prepaid expenses and other assets
|
(4,861
|
)
|
(1,119
|
)
|
(2,010
|
)
|
||||||
Increase (decrease) in accounts payable and accrued liabilities
|
676
|
2,264
|
(5,654
|
)
|
||||||||
Increase in deferred revenue
|
19,142
|
8,112
|
2,481
|
|||||||||
Increase (decrease) in income taxes payable/receivable
|
(249
|
)
|
(316
|
)
|
2,548
|
|||||||
Decrease in other liabilities
|
(495
|
)
|
(1
|
)
|
(164
|
)
|
||||||
Net cash provided by operating activities
|
17,357
|
32,665
|
26,190
|
|||||||||
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||||||
Purchases of property and equipment
|
(7,187
|
)
|
(3,993
|
)
|
(2,446
|
)
|
||||||
Capitalized curriculum development costs
|
(6,466
|
)
|
(2,236
|
)
|
(2,166
|
)
|
||||||
Acquisition of businesses, net of cash acquired
|
(7,272
|
)
|
-
|
(262
|
)
|
|||||||
Acquisition of license rights
|
(750
|
)
|
-
|
-
|
||||||||
Net cash used for investing activities
|
(21,675
|
)
|
(6,229
|
)
|
(4,874
|
)
|
||||||
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||||||
Proceeds from line of credit borrowings
|
34,320
|
46,454
|
-
|
|||||||||
Payments on line of credit borrowings
|
(29,943
|
)
|
(46,454
|
)
|
-
|
|||||||
Proceeds from term notes payable financing
|
10,000
|
15,000
|
-
|
|||||||||
Principal payments on term notes payable
|
(5,000
|
)
|
(937
|
)
|
-
|
|||||||
Principal payments on financing obligation
|
(1,662
|
)
|
(1,472
|
)
|
(1,302
|
)
|
||||||
Purchases of common stock for treasury
|
(5,431
|
)
|
(43,586
|
)
|
(14,427
|
)
|
||||||
Payment of contingent consideration liability
|
-
|
(2,167
|
)
|
-
|
||||||||
Income tax benefit (expense) recorded in paid-in capital
|
168
|
(52
|
)
|
137
|
||||||||
Proceeds from sales of common stock held in treasury
|
682
|
679
|
689
|
|||||||||
Net cash provided by (used for) financing activities
|
3,134
|
(32,535
|
)
|
(14,903
|
)
|
|||||||
Effect of foreign currency exchange rates on cash and cash equivalents
|
(348
|
)
|
321
|
(662
|
)
|
|||||||
Net increase (decrease) in cash and cash equivalents
|
(1,532
|
)
|
(5,778
|
)
|
5,751
|
|||||||
Cash and cash equivalents at beginning of the year
|
10,456
|
16,234
|
10,483
|
|||||||||
Cash and cash equivalents at end of the year
|
$
|
8,924
|
$
|
10,456
|
$
|
16,234
|
||||||
Supplemental disclosure of cash flow information:
|
||||||||||||
Cash paid for income taxes
|
$
|
2,562
|
$
|
3,410
|
$
|
2,383
|
||||||
Cash paid for interest
|
2,314
|
2,231
|
2,130
|
|||||||||
Non-cash investing and financing activities:
|
||||||||||||
Purchases of property and equipment financed by accounts payable
|
$
|
697
|
$
|
334
|
$
|
134
|
Accumulated
|
||||||||||||||||||||||||||||
Other
|
||||||||||||||||||||||||||||
Common
|
Common
|
Additional
|
Retained
|
Comprehensive
|
Treasury
|
Treasury
|
||||||||||||||||||||||
Stock Shares
|
Stock Amount
|
Paid-In Capital
|
Earnings
|
Income
|
Stock Shares
|
Stock Amount
|
||||||||||||||||||||||
In thousands
|
||||||||||||||||||||||||||||
Balance at August 31, 2014
|
27,056
|
$
|
1,353
|
$
|
207,148
|
$
|
58,496
|
$
|
1,451
|
(10,266
|
)
|
$
|
(141,734
|
)
|
||||||||||||||
Issuance of common stock from
|
||||||||||||||||||||||||||||
treasury
|
(847
|
)
|
111
|
1,536
|
||||||||||||||||||||||||
Purchase of treasury shares
|
(778
|
)
|
(14,427
|
)
|
||||||||||||||||||||||||
Unvested share award
|
(336
|
)
|
24
|
336
|
||||||||||||||||||||||||
Stock-based compensation
|
2,536
|
|||||||||||||||||||||||||||
Cumulative translation
|
||||||||||||||||||||||||||||
adjustments
|
(1,259
|
)
|
||||||||||||||||||||||||||
Tax benefits recorded in
|
||||||||||||||||||||||||||||
paid-in capital
|
137
|
|||||||||||||||||||||||||||
Other
|
(3
|
)
|
3
|
|||||||||||||||||||||||||
Net income
|
11,116
|
|||||||||||||||||||||||||||
Balance at August 31, 2015
|
27,056
|
1,353
|
208,635
|
69,612
|
192
|
(10,909
|
)
|
(154,286
|
)
|
|||||||||||||||||||
Issuance of common stock from
|
||||||||||||||||||||||||||||
treasury
|
(143
|
)
|
57
|
823
|
||||||||||||||||||||||||
Purchase of treasury shares
|
(2,505
|
)
|
(43,586
|
)
|
||||||||||||||||||||||||
Unvested share award
|
(356
|
)
|
25
|
356
|
||||||||||||||||||||||||
Stock-based compensation
|
3,121
|
|||||||||||||||||||||||||||
Cumulative translation
|
||||||||||||||||||||||||||||
adjustments
|
1,030
|
|||||||||||||||||||||||||||
Tax expense recorded in
|
||||||||||||||||||||||||||||
paid-in capital
|
(52
|
)
|
||||||||||||||||||||||||||
Other
|
(2
|
)
|
2
|
|||||||||||||||||||||||||
Net income
|
7,016
|
|||||||||||||||||||||||||||
Balance at August 31, 2016
|
27,056
|
1,353
|
211,203
|
76,628
|
1,222
|
(13,332
|
)
|
(196,691
|
)
|
|||||||||||||||||||
Issuance of common stock from
|
||||||||||||||||||||||||||||
treasury
|
(2,103
|
)
|
188
|
2,785
|
||||||||||||||||||||||||
Purchase of treasury shares
|
(300
|
)
|
(5,431
|
)
|
||||||||||||||||||||||||
Unvested share award
|
(442
|
)
|
30
|
442
|
||||||||||||||||||||||||
Stock-based compensation
|
3,658
|
|||||||||||||||||||||||||||
Cumulative translation
|
||||||||||||||||||||||||||||
adjustments
|
(555
|
)
|
||||||||||||||||||||||||||
Tax benefit recorded in
|
||||||||||||||||||||||||||||
paid-in capital
|
168
|
|||||||||||||||||||||||||||
Other
|
|
|||||||||||||||||||||||||||
Net loss
|
(7,172
|
)
|
||||||||||||||||||||||||||
Balance at August 31, 2017
|
27,056
|
$
|
1,353
|
$
|
212,484
|
$
|
69,456
|
$
|
667
|
(13,414
|
)
|
$
|
(198,895
|
)
|
1.
|
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
AUGUST 31,
|
2017
|
2016
|
||||||
Finished goods
|
$
|
3,306
|
$
|
5,002
|
||||
Raw materials
|
47
|
40
|
||||||
$
|
3,353
|
$
|
5,042
|
AUGUST 31,
|
2017
|
2016
|
||||||
Deferred commissions
|
$
|
6,150
|
$
|
1,664
|
||||
Other current assets
|
2,217
|
1,737
|
||||||
$
|
8,367
|
$
|
3,401
|
Description
|
Useful Lives
|
Buildings
|
20 years
|
Machinery and equipment
|
5–7 years
|
Computer hardware and software
|
3–5 years
|
Furniture, fixtures, and leasehold improvements
|
5–7 years
|
AUGUST 31,
|
2017
|
2016
|
||||||
Land and improvements
|
$
|
1,312
|
$
|
1,312
|
||||
Buildings
|
30,044
|
32,201
|
||||||
Machinery and equipment
|
2,119
|
2,279
|
||||||
Computer hardware and software
|
22,647
|
18,552
|
||||||
Furniture, fixtures, and leasehold
|
||||||||
improvements
|
8,319
|
9,292
|
||||||
64,441
|
63,636
|
|||||||
Less accumulated depreciation
|
(44,711
|
)
|
(47,553
|
)
|
||||
$
|
19,730
|
$
|
16,083
|
AUGUST 31,
|
2017
|
2016
|
||||||
Accrued compensation
|
$
|
10,611
|
$
|
8,810
|
||||
Other accrued liabilities
|
12,006
|
8,612
|
||||||
$
|
22,617
|
$
|
17,422
|
2. |
BUSINESS ACQUISITIONS
|
Cash paid to RGP at closing
|
$
|
3,500
|
||
Fair value of contingent consideration
|
1,413
|
|||
Total purchase price
|
$
|
4,913
|
Accounts receivable
|
$
|
458
|
||
Prepaid expenses
|
136
|
|||
Intangible assets
|
3,811
|
|||
Goodwill
|
1,232
|
|||
Assets acquired
|
5,637
|
|||
Accounts payable
|
(51
|
)
|
||
Accrued expenses
|
(80
|
)
|
||
Deferred revenues
|
(593
|
)
|
||
Liabilities assumed
|
(724
|
)
|
||
$
|
4,913
|
Weighted Average
|
|||||
Description
|
Amount
|
Life
|
|||
Customer list
|
$
|
2,249
|
10 years
|
||
Content
|
461
|
5 years
|
|||
Trade name
|
341
|
5 years
|
|||
Non-compete agreements
|
328
|
2 years
|
|||
Deferred contract revenue
|
237
|
2 years
|
|||
Coach relationships
|
150
|
10 years
|
|||
Acquired technology
|
45
|
3 years
|
|||
$
|
3,811
|
8 years
|
Cash paid to Jhana at closing
|
$
|
3,525
|
||
Fair value of contingent consideration
|
6,052
|
|||
Total purchase price
|
$
|
9,577
|
Cash
|
$
|
253
|
||
Accounts receivable
|
195
|
|||
Prepaid expenses and other current assets
|
86
|
|||
Deferred tax asset
|
3,138
|
|||
Intangible assets
|
6,076
|
|||
Goodwill
|
3,085
|
|||
Assets acquired
|
12,833
|
|||
Accounts payable
|
(185
|
)
|
||
Accrued expenses
|
(19
|
)
|
||
Deferred tax liability
|
(2,257
|
)
|
||
Deferred revenues
|
(795
|
)
|
||
Liabilities assumed
|
(3,256
|
)
|
||
$
|
9,577
|
Weighted Average
|
|||||
Description
|
Amount
|
Life
|
|||
Content
|
$
|
3,097
|
5 years
|
||
Acquired technology
|
1,474
|
3 years
|
|||
Customer list
|
1,016
|
5 years
|
|||
Trade name
|
445
|
5 years
|
|||
Non-compete agreements
|
44
|
3 years
|
|||
$
|
6,076
|
5 years
|
YEAR ENDED
|
||||||||
AUGUST 31,
|
2017
|
2016
|
||||||
Revenue
|
$
|
187,745
|
$
|
204,505
|
||||
Net income (loss)
|
(7,976
|
)
|
4,863
|
|||||
Diluted earnings (loss) per share
|
(0.58
|
)
|
0.32
|
3. |
ACCOUNTS RECEIVABLE
|
YEAR ENDED
|
||||||||||||
AUGUST 31,
|
2017
|
2016
|
2015
|
|||||||||
Beginning balance
|
$
|
1,579
|
$
|
1,333
|
$
|
918
|
||||||
Charged to costs and expenses
|
1,747
|
2,022
|
699
|
|||||||||
Deductions
|
(1,016
|
)
|
(1,776
|
)
|
(284
|
)
|
||||||
Ending balance
|
$
|
2,310
|
$
|
1,579
|
$
|
1,333
|
4. |
INTANGIBLE ASSETS AND GOODWILL
|
Gross Carrying
|
Accumulated
|
Net Carrying
|
||||||||||
AUGUST 31, 2017
|
Amount
|
Amortization
|
Amount
|
|||||||||
Definite-lived intangible assets:
|
||||||||||||
License rights
|
$
|
27,750
|
$
|
(17,802
|
)
|
$
|
9,948
|
|||||
Acquired content
|
62,094
|
(43,864
|
)
|
18,230
|
||||||||
Customer lists
|
20,092
|
(16,935
|
)
|
3,157
|
||||||||
Acquired technology
|
3,568
|
(2,136
|
)
|
1,432
|
||||||||
Trade names
|
2,036
|
(1,163
|
)
|
873
|
||||||||
Non-compete agreements and other
|
758
|
(104
|
)
|
654
|
||||||||
116,298
|
(82,004
|
)
|
34,294
|
|||||||||
Indefinite-lived intangible asset:
|
||||||||||||
Covey trade name
|
23,000
|
-
|
23,000
|
|||||||||
$
|
139,298
|
$
|
(82,004
|
)
|
$
|
57,294
|
||||||
AUGUST 31, 2016
|
||||||||||||
Definite-lived intangible assets:
|
||||||||||||
License rights
|
$
|
27,000
|
$
|
(16,790
|
)
|
$
|
10,210
|
|||||
Acquired content
|
58,564
|
(42,175
|
)
|
16,389
|
||||||||
Customer lists
|
16,827
|
(16,529
|
)
|
298
|
||||||||
Acquired technology
|
2,049
|
(2,049
|
)
|
-
|
||||||||
Trade names
|
1,250
|
(951
|
)
|
299
|
||||||||
105,690
|
(78,494
|
)
|
27,196
|
|||||||||
Indefinite-lived intangible asset:
|
||||||||||||
Covey trade name
|
23,000
|
-
|
23,000
|
|||||||||
$
|
128,690
|
$
|
(78,494
|
)
|
$
|
50,196
|
Category of Intangible Asset
|
Range of Remaining Estimated Useful Lives
|
Weighted Average Original Amortization Period
|
License rights
|
5 to 9 years
|
30 years
|
Acquired content
|
2 to 9 years
|
25 years
|
Customer lists
|
1 to 10 years
|
12 years
|
Acquired technology
|
3 years
|
3 years
|
Trade names
|
1 to 5 years
|
5 years
|
Non-compete agreements and other
|
1 to 10 years
|
4 years
|
YEAR ENDING
|
||||
AUGUST 31,
|
||||
2018
|
$
|
5,368
|
||
2019
|
4,790
|
|||
2020
|
4,324
|
|||
2021
|
3,809
|
|||
2022
|
3,498
|
Balance at August 31, 2015
|
$
|
19,903
|
||
Accumulated impairments
|
-
|
|||
Balance at August 31, 2016
|
19,903
|
|||
Acquisition of RGP (Note 2)
|
1,232
|
|||
Acquisition of Jhanna (Note 2)
|
3,085
|
|||
Accumulated impairments
|
-
|
|||
Balance at August 31, 2017
|
$
|
24,220
|
Allocated
|
||||||||||||
AUGUST 31,
|
2016
|
Goodwill
|
2017
|
|||||||||
Direct offices
|
$
|
10,790
|
$
|
2,592
|
$
|
13,382
|
||||||
Strategic markets
|
2,930
|
513
|
3,443
|
|||||||||
Education practice
|
2,176
|
154
|
2,330
|
|||||||||
International licensees
|
4,007
|
1,058
|
5,065
|
|||||||||
$
|
19,903
|
$
|
4,317
|
$
|
24,220
|
5. |
TERM LOANS PAYABLE AND REVOLVING LINE OF CREDIT
|
Original Principal
|
Quarterly Principal
|
Outstanding
|
||||||||||
Maturity Date
|
Amount
|
Payment Amount
|
Principal
|
|||||||||
May 24, 2019
|
$
|
15,000
|
$
|
938
|
$
|
10,313
|
||||||
August 29, 2019
|
5,000
|
313
|
3,750
|
|||||||||
August 29, 2020
|
5,000
|
313
|
5,000
|
|||||||||
$
|
19,063
|
YEAR ENDING
|
||||
AUGUST 31,
|
||||
2018
|
$
|
6,250
|
||
2019
|
10,313
|
|||
2020
|
2,500
|
|||
$
|
19,063
|
·
|
Available Credit – The maximum available credit was $40.0 million. The amount of available credit has been reduced to $30.0 million as of August 31, 2017 by the $5.0 million term loans (as discussed above) obtained during fiscal 2017.
|
·
|
Maturity Date – The maturity date of the Revolving Line of Credit is March 31, 2020.
|
·
|
Interest Rate – The effective interest rate continues to be LIBOR plus 1.85 percent per annum and the unused credit fee on the line of credit remains 0.25 percent per annum.
|
·
|
Financial Covenants – The Restated Credit Agreement requires us to be in compliance with specified financial covenants, including (a) a funded debt to EBITDAR (earnings before interest, taxes, depreciation, amortization, and rental expense) ratio of less than 3.00 to 1.00; (b) a fixed charge coverage ratio greater than 1.15 to 1.0; (c) an annual limit on capital expenditures (not including capitalized curriculum development) of $8.0 million; and (d) outstanding borrowings on the Revolving Line of Credit may not exceed 150 percent of consolidated accounts receivable.
|
6. |
FINANCING OBLIGATION
|
AUGUST 31,
|
2017
|
2016
|
||||||
Financing obligation payable in
|
||||||||
monthly installments of $297 at
|
||||||||
August 31, 2017, including
|
||||||||
principal and interest, with two
|
||||||||
percent annual increases
|
||||||||
(imputed interest at 7.7%),
|
||||||||
through June 2025
|
$
|
22,943
|
$
|
24,605
|
||||
Less current portion
|
(1,868
|
)
|
(1,662
|
)
|
||||
Total financing obligation,
|
||||||||
less current portion
|
$
|
21,075
|
$
|
22,943
|
YEAR ENDING
|
||||
AUGUST 31,
|
||||
2018
|
$
|
1,868
|
||
2019
|
2,092
|
|||
2020
|
2,335
|
|||
2021
|
2,600
|
|||
2022
|
2,887
|
|||
Thereafter
|
11,161
|
|||
$
|
22,943
|
YEAR ENDING
|
||||
AUGUST 31,
|
||||
2018
|
$
|
3,579
|
||
2019
|
3,651
|
|||
2020
|
3,724
|
|||
2021
|
3,798
|
|||
2022
|
3,874
|
|||
Thereafter
|
11,283
|
|||
Total future minimum financing
|
||||
obligation payments
|
29,909
|
|||
Less interest
|
(8,278
|
)
|
||
Present value of future minimum
|
||||
financing obligation payments
|
$
|
21,631
|
7. |
OPERATING LEASES
|
YEAR ENDING
|
||||
AUGUST 31,
|
||||
2018
|
$
|
866
|
||
2019
|
321
|
|||
2020
|
84
|
|||
2021
|
84
|
|||
2022
|
84
|
|||
Thereafter
|
268
|
|||
$
|
1,707
|
YEAR ENDING
|
||||
AUGUST 31,
|
||||
2018
|
$
|
3,648
|
||
2019
|
3,359
|
|||
2020
|
3,448
|
|||
2021
|
1,814
|
|||
2022
|
638
|
|||
Thereafter
|
1,767
|
|||
$
|
14,674
|
8. |
COMMITMENTS AND CONTINGENCIES
|
9. |
SHAREHOLDERS' EQUITY
|
10. |
FAIR VALUE OF FINANCIAL INSTRUMENTS
|
·
|
Level 1 valuations are based on quoted prices in active markets for identical instruments that the Company can access at the measurement date.
|
·
|
Level 2 valuations are based on inputs other than quoted prices included in Level 1 that are observable for the instrument, either directly or indirectly, for substantially the full term of the asset or liability including the following:
|
a.
|
quoted prices for similar, but not identical, instruments in active markets;
|
b.
|
quoted prices for identical or similar instruments in markets that are not active;
|
c.
|
inputs other than quoted prices that are observable for the instrument; or
|
d.
|
inputs that are derived principally from or corroborated by observable market data by correlation or other means.
|
·
|
Level 3 valuations are based on information that is unobservable and significant to the overall fair value measurement.
|
Likely
|
Minimum
|
Maximum
|
||||||||||
RGP growth rate - Year 1
|
14.8
|
%
|
(12.0
|
)%
|
35.0
|
%
|
||||||
RGP growth rate - Year 2
|
10.0
|
%
|
(12.0
|
)%
|
35.0
|
%
|
||||||
RGP growth rate - Year 3
|
10.0
|
%
|
(12.0
|
)%
|
35.0
|
%
|
||||||
Add-on services growth rate - Year 1
|
60.0
|
%
|
(20.0
|
)%
|
130.0
|
%
|
||||||
Add-on services growth rate - Year 2
|
50.0
|
%
|
(20.0
|
)%
|
130.0
|
%
|
||||||
Add-on services growth rate - Year 3
|
40.0
|
%
|
(20.0
|
)%
|
130.0
|
%
|
Contingent consideration liability at August 31, 2015
|
$
|
2,565
|
||
Payment of first contingent consideration award
|
(2,167
|
)
|
||
Increase in contingent consideration liability
|
1,538
|
|||
Contingent consideration liability at August 31, 2016
|
1,936
|
|||
Decrease in contingent consideration liability
|
(1,936
|
)
|
||
Contingent consideration liability at August 31, 2017
|
$
|
-
|
YEAR ENDED
|
||||||||||||
AUGUST 31,
|
2017
|
2016
|
2015
|
|||||||||
Performance awards
|
$
|
2,902
|
$
|
2,492
|
$
|
1,890
|
||||||
Unvested stock awards
|
500
|
450
|
400
|
|||||||||
Fully vested stock awards
|
135
|
60
|
125
|
|||||||||
Compensation cost of the ESPP
|
121
|
119
|
121
|
|||||||||
$
|
3,658
|
$
|
3,121
|
$
|
2,536
|
Adjusted EBITDA
|
All Access Pass Sales
|
|||||||||||||||
Award
|
Award
|
|||||||||||||||
Goal
|
Number of
|
Tranche
|
Goal
|
Number of
|
Tranche
|
|||||||||||
(millions)
|
Shares
|
Status
|
(millions)
|
Shares
|
Status
|
|||||||||||
$
|
36.7
|
42,789
|
amortizing
|
$
|
30.1
|
18,338
|
vested
|
|||||||||
$
|
41.8
|
42,789
|
amortizing
|
$
|
35.4
|
18,338
|
vested
|
|||||||||
$
|
47.7
|
42,789
|
amortizing
|
$
|
40.8
|
18,338
|
vested
|
|||||||||
128,367
|
55,014
|
Adjusted EBITDA
|
OD Suite Sales
|
|||||||||||||||
Award
|
Award
|
|||||||||||||||
Goal
|
Number of
|
Tranche
|
Goal
|
Number of
|
Tranche
|
|||||||||||
(millions)
|
Shares
|
Status
|
(millions)
|
Shares
|
Status
|
|||||||||||
$
|
36.0
|
53,964
|
amortizing
|
$
|
107.0
|
23,128
|
vested
|
|||||||||
$
|
40.0
|
53,964
|
amortizing
|
$
|
116.0
|
23,128
|
criteria met
|
|||||||||
$
|
44.0
|
53,964
|
amortizing
|
$
|
125.0
|
23,128
|
criteria met
|
|||||||||
161,892
|
69,384
|
Adjusted EBITDA
|
OD Suite Sales
|
|||||||||||||||
Award
|
Award
|
|||||||||||||||
Goal
|
Number of
|
Tranche
|
Goal
|
Number of
|
Tranche
|
|||||||||||
(millions)
|
Shares
|
Status
|
(millions)
|
Shares
|
Status
|
|||||||||||
$
|
39.6
|
26,241
|
amortizing
|
$
|
107.0
|
11,247
|
vested
|
|||||||||
$
|
45.5
|
26,241
|
amortizing
|
$
|
118.0
|
11,247
|
criteria met
|
|||||||||
$
|
52.3
|
26,241
|
not probable
|
$
|
130.0
|
11,247
|
amortizing
|
|||||||||
78,723
|
33,741
|
Adjusted EBITDA
|
7 Habits Increased Sales
|
|||||||||||||||
Award
|
Award
|
|||||||||||||||
Goal
|
Number of
|
Tranche
|
Goal
|
Number of
|
Tranche
|
|||||||||||
(millions)
|
Shares
|
Status
|
(millions)
|
Shares
|
Status
|
|||||||||||
$
|
37.0
|
20,864
|
vested
|
$
|
5.0
|
8,942
|
vested
|
|||||||||
$
|
43.0
|
20,864
|
amortizing
|
$
|
10.0
|
8,942
|
vested
|
|||||||||
$
|
49.0
|
20,864
|
not probable
|
$
|
12.5
|
8,942
|
criteria met
|
|||||||||
62,592
|
26,826
|
Adjusted EBITDA
|
Productivity Practice Sales
|
|||||||||||||||
Award
|
Award
|
|||||||||||||||
Goal
|
Number of
|
Tranche
|
Goal
|
Number of
|
Tranche
|
|||||||||||
(millions)
|
Shares
|
Status
|
(millions)
|
Shares
|
Status
|
|||||||||||
$
|
33.0
|
15,887
|
vested
|
$
|
23.5
|
6,808
|
vested
|
|||||||||
$
|
40.0
|
15,887
|
amortizing
|
$
|
26.5
|
6,808
|
not probable
|
|||||||||
$
|
47.0
|
15,887
|
not probable
|
$
|
29.5
|
6,808
|
not probable
|
|||||||||
47,661
|
20,424
|
Adjusted EBITDA
|
Productivity Practice Sales
|
|||||||||||||||
Award
|
Award
|
|||||||||||||||
Goal
|
Number of
|
Tranche
|
Goal
|
Number of
|
Tranche
|
|||||||||||
(millions)
|
Shares
|
Status
|
(millions)
|
Shares
|
Status
|
|||||||||||
$
|
26.0
|
24,757
|
vested
|
$
|
20.5
|
10,610
|
vested
|
|||||||||
$
|
33.0
|
24,757
|
vested
|
$
|
23.5
|
10,610
|
vested
|
|||||||||
$
|
40.0
|
24,757
|
not vested
|
$
|
26.5
|
10,610
|
not vested
|
|||||||||
74,271
|
31,830
|
Weighted-
|
||||||||
Average Grant-
|
||||||||
Date Fair
|
||||||||
Number of
|
Value Per
|
|||||||
Shares
|
Share
|
|||||||
Unvested stock awards at
|
||||||||
August 31, 2016
|
25,032
|
$
|
17.98
|
|||||
Granted
|
29,834
|
17.60
|
||||||
Forfeited
|
-
|
-
|
||||||
Vested
|
(25,032
|
)
|
17.98
|
|||||
Unvested stock awards at
|
||||||||
August 31, 2017
|
29,834
|
$
|
17.60
|
Weighted
|
||||||||||||||||
Weighted
|
Average
|
|||||||||||||||
Avg. Exercise
|
Remaining
|
Aggregate
|
||||||||||||||
Number of
|
Price Per
|
Contractual
|
Intrinsic Value
|
|||||||||||||
Stock Options
|
Share
|
Life (Years)
|
(thousands)
|
|||||||||||||
Outstanding at August 31, 2016
|
631,250
|
$
|
11.41
|
|||||||||||||
Granted
|
-
|
-
|
||||||||||||||
Exercised
|
(62,500
|
)
|
9.00
|
|||||||||||||
Forfeited
|
-
|
-
|
||||||||||||||
Outstanding at August 31, 2017
|
568,750
|
$
|
11.67
|
2.8
|
$
|
4,055
|
||||||||||
Options vested and exercisable at
|
||||||||||||||||
August 31, 2017
|
568,750
|
$
|
11.67
|
2.8
|
$
|
4,055
|
Weighted
|
||||||||||||||||||||||
Number
|
Average
|
Options
|
||||||||||||||||||||
Outstanding
|
Remaining
|
Weighted
|
Exercisable at
|
Weighted
|
||||||||||||||||||
at August 31,
|
Contractual
|
Average
|
August 31,
|
Average
|
||||||||||||||||||
Exercise Prices
|
2017
|
Life (Years)
|
Exercise Price
|
2017
|
Exercise Price
|
|||||||||||||||||
$
|
9.00
|
62,500
|
3.4
|
$
|
9.00
|
62,500
|
$
|
9.00
|
||||||||||||||
$
|
10.00
|
168,750
|
2.8
|
$
|
10.00
|
168,750
|
$
|
10.00
|
||||||||||||||
$
|
12.00
|
168,750
|
2.8
|
$
|
12.00
|
168,750
|
$
|
12.00
|
||||||||||||||
$
|
14.00
|
168,750
|
2.8
|
$
|
14.00
|
168,750
|
$
|
14.00
|
||||||||||||||
568,750
|
568,750
|
12. |
IMPAIRED ASSETS
|
Long-term receivables from FCOP
|
$
|
541
|
||
Capitalized curriculum
|
414
|
|||
Investment cost method subsidiary
|
220
|
|||
Prepaid expenses and other long-term assets
|
127
|
|||
$
|
1,302
|
13. |
CONTRACT TERMINATION AND RESTRUCTURING COSTS
|
Description
|
Amount
|
|||
Severance costs
|
$
|
986
|
||
Office closure costs
|
496
|
|||
$
|
1,482
|
Description
|
Amount
|
|||
Severance costs
|
$
|
570
|
||
Office closure costs
|
17
|
|||
$
|
587
|
14. |
EMPLOYEE BENEFIT PLANS
|
15. |
INCOME TAXES
|
YEAR ENDED
|
||||||||||||
AUGUST 31,
|
2017
|
2016
|
2015
|
|||||||||
Current:
|
||||||||||||
Federal
|
$
|
69
|
|
$
|
(380
|
) |
$
|
(220
|
) | |||
State
|
(71
|
) |
(197
|
) |
(208
|
) | ||||||
Foreign
|
(2,320
|
) |
(2,553
|
) |
(2,691
|
) | ||||||
(2,322
|
) |
(3,130
|
) |
(3,119
|
) | |||||||
Deferred:
|
||||||||||||
Federal
|
(1,227
|
)
|
(1,584
|
) |
(3,239
|
) | ||||||
State
|
(17
|
) |
70
|
|
(138
|
) | ||||||
Foreign
|
468
|
|
50
|
|
200
|
|
||||||
Operating loss carryforward
|
6,964
|
|
-
|
-
|
||||||||
Valuation allowance
|
(129
|
) |
(301
|
) |
-
|
|||||||
6,059
|
|
(1,765
|
) |
(3,177
|
) | |||||||
$
|
3,737
|
|
$
|
(4,895
|
) |
$
|
(6,296
|
) |
YEAR ENDED
|
||||||||||||
AUGUST 31,
|
2017
|
2016
|
2015
|
|||||||||
Net income (loss)
|
$
|
3,737
|
|
$
|
(4,895
|
) |
$
|
(6,296
|
) | |||
Other comprehensive income
|
37
|
|
115
|
|
52
|
|
||||||
$
|
3,774
|
|
$
|
(4,780
|
) |
$
|
(6,244
|
) |
YEAR ENDED
|
||||||||||||
AUGUST 31,
|
2017
|
2016
|
2015
|
|||||||||
United States
|
$
|
(10,126
|
)
|
$
|
9,328
|
$
|
15,073
|
|||||
Foreign
|
(783
|
)
|
2,583
|
2,339
|
||||||||
$
|
(10,909
|
)
|
$
|
11,911
|
$
|
17,412
|
YEAR ENDED
AUGUST 31,
|
2017
|
2016
|
2015
|
|||||||||
Federal statutory income tax rate
|
35.0
|
%
|
(35.0
|
)%
|
(35.0
|
)%
|
||||||
State income taxes, net of federal effect
|
2.3
|
(1.9
|
) |
(2.3
|
) | |||||||
Valuation allowance
|
(1.2
|
)
|
(2.5
|
) |
-
|
|||||||
Foreign jurisdictions tax differential
|
(1.9
|
)
|
0.6
|
|
(1.2
|
) | ||||||
Tax differential on income subject to both U.S. and foreign taxes
|
0.4
|
(1.9
|
) |
(0.5
|
) | |||||||
Effect of claiming foreign tax credits instead of deductions for prior years
|
-
|
-
|
3.2
|
|
||||||||
Uncertain tax positions
|
4.4
|
0.4
|
|
0.9
|
|
|||||||
Non-deductible executive compensation
|
(1.6
|
)
|
-
|
(0.2
|
) | |||||||
Non-deductible meals and entertainment
|
(2.2
|
)
|
(1.6
|
) |
(1.1
|
) | ||||||
Other
|
(0.9
|
)
|
0.8
|
|
-
|
|||||||
34.3
|
%
|
(41.1
|
)%
|
(36.2
|
)%
|
AUGUST 31,
|
2017
|
2016
|
||||||
Deferred income tax assets:
|
||||||||
Net operating loss carryforward
|
$
|
10,310
|
$
|
-
|
||||
Sale and financing of corporate
|
||||||||
headquarters
|
8,420
|
9,013
|
||||||
Foreign income tax credit
|
||||||||
carryforward
|
4,382
|
2,784
|
||||||
Stock-based compensation
|
2,954
|
2,674
|
||||||
Inventory and bad debt reserves
|
1,643
|
1,147
|
||||||
Bonus and other accruals
|
1,574
|
1,017
|
||||||
Deferred revenue
|
510
|
405
|
||||||
Other
|
337
|
617
|
||||||
Total deferred income tax assets
|
30,130
|
17,657
|
||||||
Less: valuation allowance
|
(612
|
)
|
(301
|
)
|
||||
Net deferred income tax assets
|
29,518
|
17,356
|
||||||
Deferred income tax liabilities:
|
||||||||
Intangibles step-ups – indefinite lived
|
(8,539
|
)
|
(8,528
|
)
|
||||
Intangibles step-ups – definite lived
|
(7,607
|
)
|
(6,003
|
)
|
||||
Intangible asset impairment and
|
||||||||
amortization
|
(4,875
|
)
|
(4,505
|
)
|
||||
Property and equipment depreciation
|
(4,960
|
)
|
(3,367
|
)
|
||||
Deferred commissions
|
(2,195
|
)
|
-
|
|||||
Unremitted earnings of foreign
|
||||||||
subsidiaries
|
(492
|
)
|
(574
|
)
|
||||
Other
|
(236
|
)
|
(399
|
)
|
||||
Total deferred income tax liabilities
|
(28,904
|
)
|
(23,376
|
)
|
||||
Net deferred income taxes
|
$
|
614
|
$
|
(6,020
|
)
|
AUGUST 31,
|
2017
|
2016
|
||||||
Other long-term assets
|
$
|
1,647
|
$
|
650
|
||||
Long-term liabilities
|
(1,033
|
)
|
(6,670
|
)
|
||||
Net deferred income tax liability
|
$
|
614
|
$
|
(6,020
|
)
|
|
Loss
|
Loss
|
Operating
|
||||||||||||||
Loss Carryforward
|
Loss Carryforward
|
Deductions
|
Deductions
|
Loss Carried
|
|||||||||||||
for Year Ended
|
Expires August 31,
|
Amount
|
in Prior Years
|
in Current Year
|
Forward
|
||||||||||||
December 31, 2012
|
2031
|
$
|
243
|
$
|
-
|
$
|
-
|
$
|
243
|
||||||||
December 31, 2013
|
2032
|
553
|
-
|
-
|
553
|
||||||||||||
December 31, 2014
|
2033
|
1,285
|
-
|
-
|
1,285
|
||||||||||||
December 31, 2015
|
2034
|
1,491
|
-
|
-
|
1,491
|
||||||||||||
December 31, 2016
|
2035
|
3,052
|
-
|
-
|
3,052
|
||||||||||||
July 15, 2017
|
2036
|
1,117
|
-
|
-
|
1,117
|
||||||||||||
Acquired NOL
|
7,741
|
-
|
-
|
7,741
|
|||||||||||||
August 31, 2017
|
2037
|
17,500
|
-
|
-
|
17,500
|
||||||||||||
$
|
25,241
|
$
|
-
|
$
|
-
|
$
|
25,241
|
Credit Generated in
|
Credits Used
|
Credits Used
|
Credits
|
||||||||||||||
Fiscal Year Ended
|
Credit Expires
|
Credits
|
in Prior
|
in Fiscal
|
Carried
|
||||||||||||
August 31,
|
August 31,
|
Generated
|
Years
|
2017
|
Forward
|
||||||||||||
2011
|
2021
|
$
|
3,445
|
$
|
(859
|
)
|
$
|
-
|
$
|
2,586
|
|||||||
2012
|
2022
|
2,563
|
(2,563
|
)
|
-
|
-
|
|||||||||||
2013
|
2023
|
2,815
|
(2,815
|
)
|
-
|
-
|
|||||||||||
2014
|
2024
|
1,378
|
(1,378
|
)
|
-
|
-
|
|||||||||||
2015
|
2025
|
1,422
|
(1,422
|
)
|
-
|
-
|
|||||||||||
2016
|
2026
|
1,569
|
(1,569
|
)
|
-
|
-
|
|||||||||||
2017
|
2027
|
1,796
|
-
|
-
|
1,796
|
||||||||||||
$
|
14,988
|
$
|
(10,606
|
)
|
$
|
-
|
$
|
4,382
|
YEAR ENDED
|
||||||||||||
AUGUST 31,
|
2017
|
2016
|
2015
|
|||||||||
Beginning balance
|
$
|
3,024
|
$
|
3,115
|
$
|
3,491
|
||||||
Additions based on tax positions
|
||||||||||||
related to the current year
|
10
|
199
|
244
|
|||||||||
Additions for tax positions in
|
||||||||||||
prior years
|
85
|
3
|
144
|
|||||||||
Reductions for tax positions of prior
|
||||||||||||
years resulting from the lapse of
|
||||||||||||
applicable statute of limitations
|
(634
|
)
|
(212
|
)
|
(339
|
)
|
||||||
Other reductions for tax positions of
|
||||||||||||
prior years
|
(126
|
)
|
(81
|
)
|
(425
|
)
|
||||||
Ending balance
|
$
|
2,359
|
$
|
3,024
|
$
|
3,115
|
2010-2017
|
Canada and Australia
|
2012-2017
|
Japan and the United Kingdom
|
2013-2017
|
United States – state and local income tax
|
2014-2017
|
United States – federal income tax
|
2016-2017
|
China
|
2017
|
Singapore
|
16. |
EARNINGS (LOSS) PER SHARE
|
YEAR ENDED
|
||||||||||||
AUGUST 31,
|
2017
|
2016
|
2015
|
|||||||||
Numerator for basic and
|
||||||||||||
diluted earnings per share:
|
||||||||||||
Net income (loss)
|
$
|
(7,172
|
)
|
$
|
7,016
|
$
|
11,116
|
|||||
Denominator for basic and
|
||||||||||||
diluted earnings per share:
|
||||||||||||
Basic weighted average shares
|
||||||||||||
outstanding
|
13,819
|
14,944
|
16,742
|
|||||||||
Effect of dilutive securities:
|
||||||||||||
Stock options and other
|
||||||||||||
stock-based awards
|
-
|
132
|
181
|
|||||||||
Diluted weighted average shares
|
||||||||||||
outstanding
|
13,819
|
15,076
|
16,923
|
|||||||||
EPS Calculations:
|
||||||||||||
Net income (loss) per share:
|
||||||||||||
Basic
|
$
|
(0.52
|
)
|
$
|
0.47
|
$
|
0.66
|
|||||
Diluted
|
(0.52
|
)
|
0.47
|
0.66
|
17. |
SEGMENT INFORMATION
|
·
|
Direct Offices – This division includes our geographic sales offices that serve the United States and Canada; our international sales offices located in Japan, China, the United Kingdom, and Australia; and our public programs group.
|
·
|
Strategic Markets – This division includes our government services office, the Sales Performance practice, the Customer Loyalty practice, and the "Global 50" group, which is specifically focused on sales to large, multi-national organizations.
|
·
|
Education practice – This division includes our domestic and international Education practice operations, which are centered on sales to educational institutions.
|
·
|
International Licensees – This division is primarily comprised of our international licensees' royalty revenues.
|
Sales to
|
||||||||||||
Fiscal Year Ended
|
External
|
Adjusted
|
||||||||||
August 31, 2017
|
Customers
|
Gross Profit
|
EBITDA
|
|||||||||
Direct offices
|
$
|
96,662
|
$
|
65,950
|
$
|
6,134
|
||||||
Strategic markets
|
22,974
|
13,601
|
(2,005
|
)
|
||||||||
Education practice
|
44,122
|
27,916
|
6,043
|
|||||||||
International licensees
|
13,571
|
10,483
|
6,005
|
|||||||||
Total
|
177,329
|
117,950
|
16,177
|
|||||||||
Corporate and eliminations
|
7,927
|
4,717
|
(8,478
|
)
|
||||||||
Consolidated
|
$
|
185,256
|
$
|
122,667
|
$
|
7,699
|
||||||
Fiscal Year Ended
|
||||||||||||
August 31, 2016
|
||||||||||||
Direct offices
|
$
|
103,605
|
$
|
74,632
|
$
|
17,791
|
||||||
Strategic markets
|
29,819
|
18,791
|
3,559
|
|||||||||
Education practice
|
40,844
|
24,513
|
4,787
|
|||||||||
International licensees
|
17,113
|
13,152
|
8,646
|
|||||||||
Total
|
191,381
|
131,088
|
34,783
|
|||||||||
Corporate and eliminations
|
8,674
|
4,066
|
(7,889
|
)
|
||||||||
Consolidated
|
$
|
200,055
|
$
|
135,154
|
$
|
26,894
|
||||||
Fiscal Year Ended
|
||||||||||||
August 31, 2015
|
||||||||||||
Direct offices
|
$
|
113,087
|
$
|
81,057
|
$
|
18,801
|
||||||
Strategic markets
|
37,039
|
21,680
|
8,418
|
|||||||||
Education practice
|
33,681
|
19,350
|
3,084
|
|||||||||
International licensees
|
16,547
|
12,343
|
6,645
|
|||||||||
Total
|
200,354
|
134,430
|
36,948
|
|||||||||
Corporate and eliminations
|
9,587
|
3,659
|
(5,090
|
)
|
||||||||
Consolidated
|
$
|
209,941
|
$
|
138,089
|
$
|
31,858
|
YEAR ENDED
|
||||||||||||
AUGUST 31,
|
2017
|
2016
|
2015
|
|||||||||
Enterprise Adjusted EBITDA
|
$
|
16,177
|
$
|
34,783
|
$
|
36,948
|
||||||
Corporate expenses
|
(8,478
|
)
|
(7,889
|
)
|
(5,090
|
)
|
||||||
Consolidated Adjusted EBITDA
|
7,699
|
26,894
|
31,858
|
|||||||||
Stock-based compensation
|
(3,658
|
)
|
(3,121
|
)
|
(2,536
|
)
|
||||||
Reduction (increase) in
|
||||||||||||
contingent consideration liability
|
1,936
|
(1,538
|
)
|
(35
|
)
|
|||||||
Costs to exit Japan publishing business
|
(2,107
|
)
|
-
|
-
|
||||||||
Contract termination costs
|
(1,500
|
)
|
-
|
-
|
||||||||
Restructuring costs
|
(1,482
|
)
|
(776
|
)
|
(587
|
)
|
||||||
ERP system implementation costs
|
(1,404
|
)
|
(448
|
)
|
-
|
|||||||
China office start-up costs
|
(505
|
)
|
(222
|
)
|
-
|
|||||||
Business acquisition costs
|
(442
|
)
|
-
|
-
|
||||||||
Impaired assets
|
-
|
-
|
(1,302
|
)
|
||||||||
Depreciation
|
(3,879
|
)
|
(3,677
|
)
|
(4,142
|
)
|
||||||
Amortization
|
(3,538
|
)
|
(3,263
|
)
|
(3,727
|
)
|
||||||
Income (loss) from operations
|
(8,880
|
)
|
13,849
|
19,529
|
||||||||
Interest income
|
379
|
325
|
383
|
|||||||||
Interest expense
|
(2,408
|
)
|
(2,263
|
)
|
(2,137
|
)
|
||||||
Discount on related party receivable
|
-
|
-
|
(363
|
)
|
||||||||
Income (loss) before income taxes
|
(10,909
|
)
|
11,911
|
17,412
|
||||||||
Benefit (provision) for income taxes
|
3,737
|
(4,895
|
)
|
(6,296
|
)
|
|||||||
Net income (loss)
|
$
|
(7,172
|
)
|
$
|
7,016
|
$
|
11,116
|
YEAR ENDED
|
||||||||||||
AUGUST 31,
|
2017
|
2016
|
2015
|
|||||||||
United States
|
$
|
137,219
|
$
|
155,153
|
$
|
162,594
|
||||||
Japan
|
14,482
|
14,997
|
14,446
|
|||||||||
China
|
11,552
|
3,884
|
2,424
|
|||||||||
United Kingdom
|
4,754
|
7,716
|
8,997
|
|||||||||
Canada
|
4,372
|
4,357
|
6,460
|
|||||||||
Australia
|
2,704
|
3,404
|
3,774
|
|||||||||
Western Europe
|
1,679
|
1,503
|
1,364
|
|||||||||
Thailand
|
1,147
|
1,226
|
1,055
|
|||||||||
Denmark/Scandinavia
|
775
|
863
|
729
|
|||||||||
Mexico/Central America
|
751
|
917
|
974
|
|||||||||
Middle East
|
723
|
584
|
670
|
|||||||||
Singapore
|
722
|
1,143
|
1,397
|
|||||||||
India
|
701
|
677
|
708
|
|||||||||
Central/Eastern Europe
|
638
|
644
|
492
|
|||||||||
Indonesia
|
614
|
579
|
651
|
|||||||||
Brazil
|
410
|
319
|
321
|
|||||||||
Malaysia
|
364
|
384
|
511
|
|||||||||
The Philippines
|
324
|
332
|
327
|
|||||||||
Others
|
1,325
|
1,373
|
2,047
|
|||||||||
$
|
185,256
|
$
|
200,055
|
$
|
209,941
|
AUGUST 31,
|
2017
|
2016
|
||||||
United States/Canada
|
$
|
33,146
|
$
|
27,288
|
||||
Japan
|
2,350
|
2,045
|
||||||
Australia
|
466
|
349
|
||||||
China
|
301
|
-
|
||||||
United Kingdom
|
240
|
114
|
||||||
Singapore
|
152
|
-
|
||||||
$
|
36,655
|
$
|
29,796
|
18. |
RELATED PARTY TRANSACTIONS
|
1.
|
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
|
2.
|
provide reasonable assurance that the transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with the authorization of management and/or of our Board of Directors; and
|
3.
|
provide reasonable assurance regarding the prevention or timely detection of any unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.
|
[a] | [b] | [c] | ||||||||||
Plan Category
|
Number of securities to be issued upon exercise of outstanding options, warrants, and rights
|
Weighted-average exercise price of outstanding options, warrants, and rights
|
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column [a])
|
|||||||||
(in thousands)
|
(in thousands)
|
|||||||||||
Equity compensation plans approved by security holders(1)(4)
|
1,129
|
(2)
|
$
|
11.41
|
1,481
|
(3)
|
(1) |
Excludes 29,834 shares of unvested (restricted) stock awards and stock units that are subject to forfeiture.
|
(2) |
Amount includes 560,110 performance share awards that may be awarded under the terms of various long-term incentive plans. The number of shares eventually awarded to participants through our long-term incentive plans is variable and based upon the achievement of specified financial goals. The weighted average exercise price of outstanding options, warrants, and rights does not include the impact of performance awards. For further information on our share-based compensation plans, refer to the notes to our financial statements as presented in Item 8 of this report.
|
(3) |
Amount is based upon the number of performance-based plan shares expected to be awarded at August 31, 2017 and may change in future periods based upon the achievement of specified goals and revisions to estimates.
|
(4) |
At August 31, 2017, we had approximately 987,000 shares authorized for purchase by participants in our Employee Stock Purchase Plan.
|
1.
|
Financial Statements. The consolidated financial statements of the Company and Report of Independent Registered Public Accounting Firm thereon included in the Annual Report to Shareholders on Form 10-K for the year ended August 31, 2017, are as follows:
|
2.
|
Financial Statement Schedules.
|
3.
|
Exhibit List.
|
Exhibit No.
|
Exhibit
|
Incorporated By Reference
|
Filed Herewith
|
2.1
|
|
(9)
|
|
2.2
|
|
(10)
|
|
3.1
|
|
(4)
|
|
3.2
|
|
(7)
|
|
3.3
|
|
(16)
|
|
4.1
|
Specimen Certificate of the Registrant's Common Stock, par value $.05 per share
|
(2)
|
4.2
|
|
(3)
|
|
4.3
|
|
(3)
|
|
4.4
|
|
(4)
|
|
4.5
|
|
(4)
|
|
10.1*
|
|
(8)
|
|
10.2*
|
Forms of Nonstatutory Stock Options
|
(1)
|
|
10.3
|
|
(5)
|
|
10.4
|
|
(5)
|
|
10.5
|
|
(6)
|
|
10.6
|
|
(11)
|
|
10.7
|
|
(11)
|
|
10.8
|
|
(11)
|
|
10.9
|
|
(11)
|
|
10.10
|
|
(11)
|
|
10.11
|
|
(11)
|
|
10.12
|
|
(12)
|
|
10.13
|
|
(12)
|
|
10.14*
|
|
(13)
|
|
10.15
|
|
(14)
|
10.16
|
|
(14)
|
|
10.17
|
|
(14)
|
|
10.18
|
|
(15)
|
|
10.19
|
|
(17)
|
|
10.20
|
|
(18)
|
|
10.21*
|
|
(19)
|
|
10.22
|
|
(20)
|
|
10.23
|
|
(21)
|
|
10.24*
|
|
(22)
|
|
10.25
|
|
(23)
|
|
10.26
|
|
(24)
|
|
10.27
|
|
(24)
|
|
10.28
|
|
(25)
|
|
10.29
|
|
(26)
|
|
10.30
|
|
(27)
|
|
10.31
|
|
(27)
|
21
|
Subsidiaries of the Registrant
|
éé
|
|
23.1
|
Consent of Independent Registered Public Accounting Firm
|
éé
|
|
23.2
|
Consent of Independent Registered Public Accounting Firm
|
éé
|
|
31.1
|
Rule 13a-14(a) Certification of the Chief Executive Officer
|
éé
|
|
31.2
|
Rule 13a-14(a) Certification of the Chief Financial Officer
|
éé
|
|
32
|
Section 1350 Certifications
|
éé
|
|
101.INS
|
XBRL Instance Document
|
éé
|
|
101.SCH
|
XBRL Taxonomy Extension Schema
|
éé
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase
|
éé
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase
|
éé
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase
|
éé
|
|
101.PRE
|
XBRL Extension Presentation Linkbase
|
éé
|
(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 Schedule 13D (CUSIP No. 534691090 as filed with the Commission on June 14, 1999). Registration No. 005-43123.
|
(4)
|
Incorporated by reference to Report on Form 8-K filed with the Commission on March 10, 2005.**
|
(5)
|
Incorporated by reference to Report on Form 8-K filed with the Commission on June 27, 2005.**
|
(6)
|
Incorporated by reference to Report on Form 8-K filed with the Commission on October 24, 2005.**
|
(7)
|
Incorporated by reference to Definitive Proxy Statement on Form DEF 14A filed with the Commission on December 12, 2005.**
|
(8)
|
Incorporated by reference to Definitive Proxy Statement on Form DEF 14A (Appendix A) filed with the Commission on February 1, 2005.**
|
(9)
|
Incorporated by reference to Report on Form 8-K/A filed with the Commission on May 29, 2008.**
|
(10)
|
Incorporated by reference to Report on Form 10-Q filed July 10, 2008, for the Quarter ended May 31, 2008.**
|
(11)
|
Incorporated by reference to Report on Form 8-K filed with the Commission on July 11, 2008.**
|
(12)
|
Incorporated by reference to Report on Form 10-Q filed with the Commission on April 9, 2009.**
|
(13)
|
Incorporated by reference to Definitive Proxy Statement on Form DEF 14A (Appendix A) filed with the Commission on December 15, 2010.**
|
(14)
|
Incorporated by reference to Report on Form 8-K filed with the Commission on March 17, 2011.**
|
(15)
|
Incorporated by reference to Report on Form 8-K filed with the Commission on July 28, 2011.**
|
(16)
|
Incorporated by reference to Report on Form 8-K filed with the Commission on February 1, 2012.**
|
(17)
|
Incorporated by reference to Report on Form 8-K filed with the Commission on March 15, 2012.**
|
(18)
|
Incorporated by reference to Report on Form 8-K filed with the Commission on June 19, 2012.**
|
(19)
|
Incorporated by reference to Report on Form 8-K filed with the Commission on March 14, 2012.**
|
(20)
|
Incorporated by reference to Report on Form 8-K filed with the Commission on March 14, 2013.**
|
(21)
|
Incorporated by reference to Report on Form 8-K filed with the Commission on March 27, 2013.**
|
(22)
|
Incorporated by reference to Definitive Proxy Statement on Form DEF 14A (Appendix A) filed with the Commission on December 22, 2014.**
|
(23)
|
Incorporated by reference to Report on Form 8-K filed with the Commission on April 2, 2015.**
|
(24)
|
Incorporated by reference to Report on Form 8-K filed with the Commission on May 24, 2016.**
|
(25)
|
Incorporated by reference to Report on Form 8-K filed with the Commission on March 3, 2017.**
|
(26)
|
Incorporated by reference to Report on Form 8-K filed with the Commission on June 1, 2017.**
|
(27)
|
Incorporated by reference to Report on Form 8-K filed with the Commission on August 29, 2017.**
|
|
By:
|
/s/ Robert A. Whitman
|
|
|
Robert A. Whitman
Chairman and Chief Executive Officer
|
Signature
|
Title
|
Date
|
/s/ Robert A. Whitman
|
Chairman of the Board
and Chief Executive Officer
|
November 14, 2017
|
Robert A. Whitman
|
||
/s/ Anne Chow
|
Director
|
November 14, 2017
|
Anne Chow
|
||
/s/ Clayton M. Christensen
|
Director
|
November 14, 2017
|
Clayton M. Christensen
|
||
/s/ Michael Fung
|
Director
|
November 14, 2017
|
Michael Fung
|
||
/s/ Dennis G. Heiner
|
Director
|
November 14, 2017
|
Dennis G. Heiner
|
||
/s/ Donald J. McNamara
|
Director
|
November 14, 2017
|
Donald J. McNamara
|
||
/s/ Joel C. Peterson
|
Director
|
November 14, 2017
|
Joel C. Peterson
|
||
/s/ E. Kay Stepp
|
Director
|
November 14, 2017
|
E. Kay Stepp
|
||
/s/ Stephen D. Young
|
Chief Financial Officer
and Chief Accounting Officer
|
November 14, 2017
|
Stephen D. Young
|