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Business Acquisitions | 12 Months Ended
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Aug. 31, 2017
Business Acquisitions [Abstract] |
Business Acquisitions | ﻿ 2.BUSINESS ACQUISITIONS ﻿ Robert Gregory Partners, LLC ﻿ On May 15, 2017, we acquired the assets of Robert Gregory Partners, LLC (RGP), a Dublin, Ohio based corporate coaching firm, for $3.5 million in cash plus potential contingent consideration totaling $4.5 million. Robert Gregory Partners is 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. The financial results of RGP have been included in our consolidated financial statements since the date of the acquisition. ﻿ The total purchase price consisted of the following (in thousands): ﻿
﻿ |  |  |
﻿ |  |  |
﻿Cash paid to RGP at closing |  | $ | 3,500
﻿Fair value of contingent consideration |  |  | 1,413
﻿ Total purchase price |  | $ | 4,913
﻿ The major classes of assets and liabilities to which we have allocated the preliminary purchase price were as follows (in thousands): ﻿
﻿ |  |  |
﻿ |  |  |
﻿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
﻿ The goodwill generated from the RGP acquisition was allocated to each of our operating segments. The goodwill was primarily attributed to increased synergies that are expected to be achieved from the integration of RGP’s coaching methodologies into our services and offerings. All of the goodwill from the RGP acquisition is expected to be deductible for income tax purposes. ﻿ The payment of contingent consideration is based on the achievement of specified financial results and the delivery of “add-on coaching services” content that will be included in our All Access Pass offering. During the quarter ended August 31, 2017, we paid the former owners of RGP $0.5 million of the contingent consideration for delivery of the content that has been integrated into our AAP offering. Due to the timing of the $0.5 million payment for add-on coaching services, this amount was included in the investing activities section of the accompanying consolidated statement of cash flows for fiscal 2017. Refer to Note 10 for further information regarding the fair value of the contingent consideration liability resulting from the RGP acquisition. ﻿ Following are the details of the purchase price allocated to the intangible assets acquired (in thousands): ﻿
﻿ |  |  |  |  |
﻿ |  |  |  |  |
﻿ |  |  |  |  | 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
﻿ Our consolidated financial statements include $1.2 million of revenue and $0.4 million of income from operations, excluding amortization of intangible assets, attributable to RGP since the date of the acquisition. For the twelve months ended December 31, 2016, RGP had revenues of $3.3 million (unaudited) and operating income of $1.1 million (unaudited). The costs to acquire RGP totaled approximately $0.1 million and were expensed as components of selling, general, and administrative expense in our consolidated financial statements. ﻿ Jhana Education ﻿ On July 11, 2017, we acquired all of the outstanding stock of Jhana Education (Jhana), a San Francisco based 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. The purchase price was $3.5 million in cash plus up to $7.2 million of contingent consideration. The financial results of Jhana have been included in our consolidated financial statements since the date of the acquisition. ﻿ The total purchase price consisted of the following (in thousands): ﻿
﻿ |  |  |
﻿ |  |  |
﻿Cash paid to Jhana at closing |  | $ | 3,525
﻿Fair value of contingent consideration |  |  | 6,052
﻿ Total purchase price |  | $ | 9,577
﻿ The major classes of assets and liabilities to which we have allocated the preliminary purchase price were as follows (in thousands): ﻿
﻿ |  |  |
﻿ |  |  |
﻿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
﻿ Following are the details of the purchase price allocated to the intangible assets acquired (in thousands): ﻿
﻿ |  |  |  |  |
﻿ |  |  |  |  |
﻿ |  |  |  |  | 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
﻿ The goodwill from the Jhana acquisition was assigned to the Direct Offices, Strategic Markets, and International Licensee segments. The goodwill was primarily attributed to increased synergies that are expected to be achieved from the integration of Jhana’s content and delivery methodologies into our services and offerings, especially in the All Access Pass. None of the goodwill from the Jhana acquisition is expected to be deductible for income tax purposes. ﻿ The first two contingent payments of $1.0 million each are expected to be paid during the first and second quarters of fiscal 2018 based on the specified measures in the acquisition agreement. The payment of the remaining $5.2 million of contingent consideration is based on Company revenues and AAP revenues over the measurement period, which ends in July 2026. Refer to Note 10 for further information regarding the fair value of contingent consideration resulting from the Jhana acquisition. ﻿ The acquisition of Jhana had an immaterial impact on our consolidated financial statements for the fiscal year ended August 31, 2017. For the year ending December 31, 2016, Jhana had revenues of $1.6 million (unaudited) and a loss before income taxes of $3.1 million (unaudited). The costs to acquire Jhana totaled approximately $0.1 million and were expensed as incurred. The acquisition costs were included in our selling, general, and administrative expenses. ﻿ Unaudited Pro Forma Information ﻿ The following are supplemental consolidated financial results of Franklin Covey Co. on an unaudited pro forma basis as if the acquisitions of RGP and Jhana had been completed on September 1, 2015 (in thousands, except per share amounts): ﻿
﻿ |  |  |  |  |  |
﻿ |  |  |  |  |  |
﻿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
﻿ These pro forma results were based on estimates and assumptions, which we believe are reasonable. They are not the results that would have been realized had we been a combined company during the periods presented, and are not necessarily indicative of our consolidated results of operations in future periods. The pro forma results include adjustments related to purchase accounting, primarily the amortization of intangible assets, interest expense, and inclusion of acquisition costs.

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