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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10–K

OR

    Franklin Covey Co.   
(Exact name of registrant as specified in its charter)

2200 West Parkway Boulevard
Salt Lake City, Utah 84119–2331
(Address of principal executive offices, including zip code)

Registrant's telephone number, including area code: (801) 817-1776

           Securities registered pursuant to Section 12(b) of the Act:

           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.        

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). YES       NO    X  

         As of February 28, 2003, the aggregate market value of the Registrant’s Common Stock held by non-affiliates of the Registrant was $14,087,150.

        As of November 21, 2003, the Registrant had 19,926,837 shares of Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Parts of the Registrant’s Proxy Statement for the Registrant’s Annual Meeting of Shareholders, which is scheduled to be held on January 9, 2004, are incorporated by reference in Part III of this Form 10-K.

INDEX TO FORM 10–K

PART I

Item 1. Business

General

        Franklin Covey Co. (the “Company”, “we”, “us”, “our” or “FranklinCovey”) is an international learning and performance solutions company dedicated to helping organizations and individuals focus on and execute their highest priorities. To achieve that goal, we provide training and education programs, educational materials, publications, assessment and measurement instruments, implementation processes and tools. We have organized our business to serve two main customer segments: organizations and individual consumers. We offer solutions for organizations through a combination of assessment instruments, including the xQ (Execution Quotient™) Profile and the 7 Habits Profile, training courses including FOCUS: Achieving Your Highest Priorities; Aligning Goals for Results; 7 Habits of Highly Effective People, and implementation tools based on the FranklinCovey Planning System including the FranklinCovey Planner, PDA (Personal Digital Assistants) devices like Palm®, PlanPlus for Microsoft Outlook®, wireless communication organizers, the Tablet PC and other tools. We measure the impact of training investments for our clients through pre- and post- assessment profiles and return on investment analysis.

        As noted above, one of our mainstay tools that assists our clients in implementing effectiveness training is the FranklinCovey Planning System. The FranklinCovey Planning System implements our principle-based training and learning by using tools such as the FranklinCovey Planner. The original FranklinCovey Planner consists of a paper–based, two–pages-per-day planning pages combined with a seven–ring binder, a variety of planning aids, monthly and annual calendars and a personal management section. FranklinCovey Planning Pages can also be purchased in a variety of formats, including one–page-per-day and two–pages-per-week versions. We also offer a variety of forms and accessories that allow our clients to expand and customize their FranklinCovey Planning System. A significant percentage of FranklinCovey Planner users continue to purchase new planning pages each year, creating substantial recurring sales.

        We have developed additional FranklinCovey Planning System tools to address the needs of more technology-oriented workers as well as those who require both greater mobility and ready access to large quantities of data. New FranklinCovey planning tools include PlanPlus™ for Microsoft Outlook software for desktop and handheld device usuage, and TabletPlanner software for Tablet PCs, both of which have won awards and critical acclaim from the media. PlanPlus™ incorporates FranklinCovey Planning productivity principles into the Outlook calendar and email system. TabletPlanner, developed in cooperation with Agilix Labs, includes screen views similar to the paper-based FranklinCovey Planner, natural handwriting interface, the full FranklinCovey Planning System with appointment scheduling, prioritized daily and master tasks and daily notes, digitial note-taking and synchronization with Outlook Exchange and an e-Binder concept allowing the collection of all important documents into one place.

        We offer a selection of top-selling PDAs, including, several PalmOne™ (merger of Palm and Handspring) handheld wireless communication and planning devices, Hewlett-Packard’s® iPAQ™ Pocket PC®, and the new converged devices that offer the best of both wireless and handheld functionality. FranklinCovey markets the FranklinCovey Planning System components directly to organizations and individuals, through its catalog, its retail stores, its e-commerce Internet site at www.franklincovey.com and through third-party channels. The FranklinCovey Planning System is now also available for the recently introduced Tablet PC through FranklinCovey TabletPlanner software.

        The principles we teach in our curriculum have also been published in book, audiotape and CD formats. Books sold by the Company include The 7 Habits of Highly Effective People®, Principle–Centered Leadership, First Things First, The 7 Habits of Highly Effective Families, Nature of Leadership and Living the 7 Habits, all by Stephen R. Covey, The 10 Natural Laws of Time and Life Management, What Matters Most and The Modern Gladiator by Hyrum W. Smith, The Power Principle by Blaine Lee, The 7 Habits of Highly Effective Teens by Sean Covey and Business Think by Dave Marcum and Steve Smith. These books, as well as audiotape and CD audio versions of many of these products, are sold through general retail channels, as well as through our own catalog, our e-commerce Internet site at www.franklincovey.com and our more than 150 retail stores.

        As noted above, we provide effectiveness solutions to organizations in business, industry, government entities, communities, to schools and educational institutions, and to individuals. We sell services to organizations and schools through our own direct sales forces. We then deliver training services to organizations, schools and individuals in one of four ways:

        In fiscal 2003, we provided products and services to 90 of the Fortune 100 companies and more than 75 percent of the Fortune 500 companies. We also provide products and services to a number of U.S. and foreign governmental agencies, including the U.S. Department of Defense, as well as numerous educational institutions. More than 350,000 individuals were trained during the year ended August 31, 2003.

        We also provide products, consulting and training services internationally, either through directly operated offices, or through licensed providers. At August 31, 2003, we had direct operations in Canada, Japan, Australia, Mexico, Brazil and the United Kingdom. We also had licensed operations in 55 countries.

        Unless the context requires otherwise, all references to the “Company”, “we”, “us”, “our” or to “FranklinCovey” herein refer to Franklin Covey Co. 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 84119-2331 and its telephone number is (801) 817-1776.

FranklinCovey Products

        An important principle taught in our productivity training is to have only one personal productivity system and to have all of ones’ information in that one system. Based upon that principle, we developed the FranklinCovey Planner as one of the basic tools for implementing the principles of our time management system. The original FranklinCovey Planner consists of a paper-based FranklinCovey planning system, a binder in which to carry it, various planning aids, weekly, monthly and annual calendars as well as personal management sections. We offer a broad line of renewal planners, forms and binders for the FranklinCovey Planner in various sizes and styles. For those clients who use digital or electronic productivity systems, we also offer a wide variety of electronic solutions incorporating the same principles as the original FranklinCovey Planner.

        Paper Planners. Paper planning page refills are available for the FranklinCovey Planner in various sizes and styles and consist of daily or weekly formats, with Appointment Schedules, Prioritized Daily Task Lists, Monthly Calendars, Daily Notes, and personal management pages for an entire year. FranklinCovey Planning Pages are offered in a number of designs to appeal to various customer segments. The Starter Pack, which includes personal management tabs and pages, a guide to using the planner, a pagefinder and weekly compass cards, combined with a binder and storage binder completes the FranklinCovey Planning System.

        Electronic Solutions. We also offer time and life management methodology within a complete Personal Information Management (“PIM”) system through the FranklinCovey Planning Software program. This system can be used in conjunction with the paper-based FranklinCovey Planner, electronic handheld organizers or used as a stand-alone planning and information management system. The FranklinCovey Planning Software permits users to generate and print data on FranklinCovey paper that can be inserted directly into the FranklinCovey Planner. The program operates in the Windows® 95, 98, 2000 and NT operating systems. The FranklinCovey Planning Software includes all necessary software, related tutorials and reference manuals.

        We also offer PlanPlus™ for Microsoft® Outlook® software designed to operate as an extension to Microsoft’s Outlook® software. This is intended especially for our corporate clients that have already standardized on Microsoft® for group scheduling, but wish to make the FranklinCovey Planning System available to their employees without creating the need to support two separate systems. As this kind of extension proves its value in the market, the FranklinCovey Planning Software extension model may be expanded to other platforms.

        We are an OEM provider of the PalmOne™ handhelds, which has become another successful planning tool that uses the FranklinCovey Planning Software and is sold through our FranklinCovey channels. In an effort to combine the functionality of paper and the capabilities of the Palm®, we introduced products that can add paper-based planning to these electronic planners as well as binders and carrying cases specific to the PalmOne™ product line. We have also expanded the handheld line to include other electronic organizers with the FranklinCovey Planning Software such as the iPAQ™ Pocket PC from Hewlett-Packard® and the Trio™ by Handspring®, now part of PalmOne™.

        We also provide The 7 Habits of Highly Effective People® training course in online and CD-ROM versions. This edition delivers the rich, compelling content from the 3-day classroom workshop in a flexible self-paced version via the Internet or CD-ROM that is available when and where employees need it. The Online Edition is presented in a multi-media format with video segments, voiceovers, a learning journal, interactive exercises, and other techniques. Included with the course is a 360-Degree profile and e-Coaching.

        The FranklinCovey Planning System is now also available for the recently introduced Tablet PC through FranklinCovey TabletPlanner software. The software was developed in cooperation with Agilix Labs and includes the following features: screen views similar to the paper-based FranklinCovey Planner, natural handwriting interface, the full FranklinCovey Planning System with appointment scheduling, prioritized daily and master tasks and daily notes, digital note-taking and synchronization with Outlook Exchange and an e-Binder concept allowing the collection of all important documents into one place.

        Binders. To further customize the FranklinCovey Planning System, we offer binders and electronic organizer accessories (briefcases, portfolios, business totes, messenger bags, etc.) in a variety of materials, styles and sizes. These materials include high quality leathers, fabrics, synthetics and vinyl in a variety of color and design options. Binder styles include zipper closures, snap closures, and open formats with pocket configurations to accommodate credit cards, business cards, checkbooks, electronic devices and writing instruments. Most of the leather items are proprietary FranklinCovey designs. However, we also offer products from such leading manufacturers as Kenneth Cole.

        Personal Development and Accessory Products. To supplement our principal products, we offer a number of accessories and related products, including books, videotapes and audio cassettes focused on time management, leadership, personal improvement and other topics. We also market a variety of content–based personal development products. These products include books, audio learning systems such as multi-tape, CDs and workbook sets, CD-ROM software products, calendars, posters and other specialty name brand items. We offer numerous accessory forms through our Forms Wizard software, which allows customization of forms, including check registers, spreadsheets, stationery, mileage logs, maps, menu planners, shopping lists and other information management and project planning forms. Our accessory products and forms are generally available in all the FranklinCovey Planner sizes.

Training and Productivity Solutions for Organizations

        FranklinCovey is a leading provider of effectiveness training, productivity tools and assessment services for organizations including corporations, Government, education and non-profit firms. These services are marketed and delivered world-wide through our Organizational Solutions Business Unit (OSBU), which consists of talented consultants, selected through a competitive and demanding process, and sales professionals.

        FranklinCovey currently employs 94 training consultants in major metropolitan areas of the United States, with an additional 19 training consultants outside of the United States. Our training consultants are selected from a large number of experienced applicants. These consultants generally have several years of training and/or consulting experience and are known for their 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. FranklinCovey believes that the caliber of its training consultants has helped build its reputation for providing high quality seminars. The OSBU can also help organizational clients diagnose inefficiencies in their organization and design the core components of a client’s organizational solutions. The new xQ Survey is an exclusive FranklinCovey assessment tool that gathers information, from an employee perspective, on how well organizational goals are understood and are being carried out. The survey questions, administered through a Web-based system, probe for details to uncover underlying focus and teamwork barriers or issues.

        FranklinCovey’s OSBU is organized in geographic regional 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 content, seminars, processes and other solutions. Consultants follow up with client service teams, working with them to develop lasting client impact and ongoing business opportunities.

        Training and Education Programs. We offer a range of training programs designed to measurably improve the effectiveness of individuals and organizations. Our programs are oriented to address personal, interpersonal, managerial and organizational needs. In addition, we believe that our learning process provides an engaging and behavior-changing experience, which frequently generates additional business. During fiscal year 2003, more than 350,000 individuals were trained using the Company’s curricula in its single and multiple–day workshops and seminars.

        Our single–day FOCUS: Achieving Your Highest Priorities workshop teaches productivity skills integrated with a powerful planning system to help individuals clarify, focus on, and execute their highest priorities, both personally and professionally. This seminar is conducted by our training consultants for employees of clients and in public seminars throughout the United States and in many foreign countries. The single-day Aligning Goals for Results workshop helps managers identify the highest priorities for their teams and then lead those teams to execute tasks day-after-day.

        We also deliver multiple-day workshops, primarily in the Leadership area. Included in these offerings is the 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 content and application tools are delivered deeper into the client’s organization. Additionally, a three–day 4 Roles of Leadership course is offered, which focuses on the managerial aspects of client needs. FranklinCovey Leadership Week consists of a five–day session focused on materials from FranklinCovey’s The 7 Habits of Highly Effective People® and The 4 Roles of Leadership courses. FranklinCovey Leadership Week is reserved for supervisory level management of our corporate clients. As a part of the week’s agenda, executive participants plan and design strategies to successfully implement key organizational goals or initiatives.

        In addition to providing consultants and presenters, we also train and certify client facilitators to teach selected FranklinCovey workshops within their organizations. We believe client–facilitated training is important to our fundamental strategy of creating pervasive on-going client impact and revenue streams. After having been certified, client facilitators can purchase manuals, profiles, planners and other products to conduct training workshops within their organization, generally without us repeating the sales process. This creates programs which have an on-going impact on our customers and which generate annuity–type revenues. This is aided by the fact that curriculum content in one course leads the client to additional participation in other Company courses. Since 1988, we have trained more than 20,000 client facilitators. Client facilitators are certified only after graduating from one of our certification workshops and completing post–course certification requirements.

        We regularly sponsor public seminars in cities throughout the United States and in several foreign countries. The frequency of seminars in each city or country depends on the concentration of our clients and the level of promotion and resulting demand, and generally ranges from semi–monthly to quarterly. Our smaller institutional clients often utilize the public seminars to train their employees.

        In April 2002, we introduced The 7 Habits of Highly Effective People® training course in online and CD-ROM versions. The need for reaching more employees faster and more inexpensively are the key drivers behind the growth of e-learning in the marketplace. The 7 Habits Online Edition addresses that need, offering a flexible alternative to classroom training.

Segment Information

        The following table sets forth, for the periods indicated, the Company’s revenue from external customers for each of its operating segments:

We market products and services to organizations, schools and individuals both domestically and internationally through FranklinCovey retail stores, catalogs, www.franklincovey.com, our organizational and educational sales forces and other distribution channels. Additional financial information related to our operating segments, as well as geographical information can be found in the notes to our consolidated financial statements (Note 20).

        Retail Stores. Beginning in late 1985, we began a retail strategy by opening retail stores in areas of high client density. The initial stores were generally located in lower traffic destination locations. We have since revised our strategy by locating retail stores in high-traffic retail centers, primarily large shopping centers and malls, to serve existing clients and to attract increased numbers of walk-in clients. Our retail stores average approximately 1,900 square feet. Our retail strategy focuses on providing high quality client service at the point of sale. We believe this approach increases client satisfaction as well as the frequency and volume of purchases. At August 31, 2003, FranklinCovey had 153 domestic retail stores located in 37 states and the District of Columbia.

        We believe that our retail stores serve as attractive distribution centers for existing clients and also encourage walk-in traffic and impulse buying. Store clients are also an excellent source of participants for FranklinCovey's public seminars. The stores also provide the opportunity to assess client reaction to new product offerings and to test-market new products.

        We believe that our retail stores have an upscale image consistent with our marketing strategy. 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. These sales associates have been trained to use the original FranklinCovey Planning System, as well as the various electronic versions we offer, enabling them to assist and advise clients in selection and use of our products. During peak periods, additional personnel are added to promote prompt and courteous client service.

        We closed 22 retail in the United States and 10 in international locations stores during fiscal year 2003 and intend to close additional stores during fiscal 2004. These closures are comprised of unprofitable stores and stores located in markets where the Company has multiple retail operations. The Company may also close additional retail store locations if future analysis demonstrates that operating performance may be improved through further retail store closures.

        Catalog/e-Commerce. We periodically mail catalogs to our clients, including a fall catalog, holiday catalogs, spring and summer 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. We also market the FranklinCovey Planning System through our e-commerce Internet site at www.franklincovey.com. Customers may order catalogs and other marketing materials as well as the Company's product line through this Internet portal.

        During fiscal 2001, we entered into a long-term contract with EDS of Dallas, Texas, to provide a large part of our customer relationship management (CRM) in servicing our Catalog and e-Commerce customers. We use EDS to maintain a client service department, which clients may call toll-free, 24 hours a day, Monday through Saturday, to inquire about a product or to place an order. Through a 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 more than 125 customer service representatives has the authority to immediately solve client service problems.

        The integrated CRM system provided by EDS allows orders from our customers to be processed through its warehousing and distribution systems. 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. We believe that the order entry system helps assure client satisfaction through both rapid delivery and accurate order shipment.

        Other Channels. We have an alliance with the MeadWestvaco to sell our products through the contract stationer channel. MeadWestvaco wholesales products to contract stationer businesses such as Boise Cascade, Office Express and Staples, which then sell office products through catalog order entry systems to businesses and organizations. MeadWestvaco also represents FranklinCovey in the office superstore category by wholesaling the FranklinCovey Planning System to Staples, Office Depot and OfficeMax. We also recently entered into an agreement with Target Stores, in which we designed a new line of paper planning products branded under the "365 by FranklinCovey" under-brand label.

        Organizational Solutions Group. Our sales professionals market training, consulting and measurement services to institutional clients and public seminar clients.

        We employ 100 sales professionals and business developers located in six major metropolitan areas throughout the United States who sell integrated offerings to institutional clients. We also employ an additional 54 sales professionals and business developers outside of the United States in six countries. Our sales professionals have selling experience prior to employment by the Company and are trained and evaluated in their respective sales territories. Sales professionals typically call upon persons responsible for corporate employee training, such as corporate training directors or human resource officers. Increasingly, sales professionals also call upon line leaders. Our sales professionals work closely with training consultants in their territories to schedule and tailor seminars and workshops to meet specific objectives of institutional clients.

        We also employ 94 training consultants throughout the United States, who present institutional and public seminars in their respective territories, and an additional 19 training consultants outside of the United States. Training consultants work with sales professionals and institutional clients to incorporate a client's goals, 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 organizations and 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 content prior to engaging FranklinCovey 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 our seminars and products. These referrals are generally used as prospects for our sales professionals.

        We also provide The 7 Habits of Highly Effective Teens as a workshop or as a year-long curriculum to schools and school districts and other organizations working with youth. Based on the 7 Habits of Highly Effective Teens book, it helps to teach students and teachers better studying skills, learning habits, and interpersonal development. In December 2001, we sold the stock of Premier Agendas to School Specialty. Pursuant to a license from FranklinCovey, Premier is expected to continue to expose over 20 million K-12 students to FranklinCovey's world-renowned 7 Habits content. We retained the educator leadership and effectiveness training portion of Premier's business.

        International Sales. We provide products, training and printing services internationally through Company-owned and licensed operations. We have Company-owned operations and offices in Australia, Brazil, Canada, Japan, Mexico and the United Kingdom. We also have licensed operations in Argentina, Bahamas, Belgium, Bermuda, Bulgaria, Chile, China, Colombia, Croatia, Czech Republic, Denmark, Ecuador, Egypt, Estonia, Finland, France, Germany, Greece, Greenland, Hong Kong, Hungary, India, Indonesia, Israel, Italy, Korea, Latvia, Lebanon, Lithuania, Luxembourg, Malaysia, Netherlands, Nigeria, Norway, Panama, Philippines, Poland, Portugal, Puerto Rico, Russia, Saudi Arabia, Singapore, Slovak Republic, Slovenia, South Africa, Spain, Sri Lanka, Sweden, Taiwan, Thailand, Trinidad/Tobago, Turkey, UAE, Uruguay, and Venezuela. There are also licensee retail operations in Hong Kong, Japan, Singapore and Taiwan. Our seven most popular books, The 7 Habits of Highly Effective People(R), Principle-Centered Leadership, The 10 Natural Laws of Time and Life Management, First Things First, The Power Principle, The 7 Habits of Highly Effective Families and The 7 Habits of Highly Effective Teens are currently published in multiple languages.

Strategic Distribution Alliances

        We have created strategic alliances with innovative and respected organizations in an effort to develop effective distribution of our products and services. The principal distribution alliances currently maintained by FranklinCovey are: Simon & Schuster and Saint Martin's Press in publishing books for the Company; Lumicore to promote and facilitate Dr. Covey's personal appearances and teleconferences; Nightingale-Conant to market and distribute audio and video tapes of the Company's book titles; MeadWestvaco to market and distribute selected FranklinCovey Planners and accessories through the At-A-Glance catalog office supply channels and in the office superstores channel; PalmOne(TM)to serve as the official training organization for its PalmOne™products; distribution agreements with Hewlett Packard and Acer in connection with the Tablet PC; Agilix Labs in development of the TabletPlanner Software; and Microsoft in conjunction with the Tablet PC training, PlanPlus and TabletPlanner marketing.

Clients

        We have a relatively broad base of institutional and individual clients. We have more than 2,000 institutional clients consisting of corporations, governmental agencies, educational institutions and other organizations. We believe our products, workshops and seminars encourage strong client loyalty. Employees in each of our distribution channels focus on providing timely and courteous responses to client requests and inquiries. Institutional clients may choose to receive assistance in designing and developing customized forms, tabs, pagefinders and binders necessary to satisfy specific needs.

Competition

        Training. Competition in the performance skills organizational training and education industry is highly fragmented with few large competitors. We estimate 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 to $150 million range. Based upon FranklinCovey's fiscal 2003 organizational sales of approximately $115 million, we believe we are a leading competitor in the organizational training and education market. Other significant competitors in the training market are Development Dimensions International, Achieve Global (formerly Zenger Miller), Organizational Dynamics Inc., Provant, Forum Corporation, EPS Solutions and the Center for Creative Leadership.

        Products. The paper-based time management and personal organization products market is intensely competitive and subject to rapid change. FranklinCovey 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 strong name recognition. We believe our principal competitors include DayTimer, At-A-Glance and Day Runner. We also compete with companies that market substitutes for paper-based products, such as electronic organizers, software PIMs and handheld computers. Our FranklinCovey Planning Software competes directly with numerous other PIMs. Many FranklinCovey competitors have significant marketing, product development, financial and other resources. An emerging potential source of competition is the appearance of calendars and event-planning services available at no charge on the Web. There is no indication that the current level of features has proven to be attractive to the traditional planner customer as a stand-alone service, but as these products evolve and improve, they could pose a competitive threat.

        Given the relative ease of entry in FranklinCovey's product and training markets, the number of competitors could increase, many of whom may imitate our 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 us. We believe that the FranklinCovey Planner and related products compete primarily on the basis of user appeal, client loyalty, design, product breadth, quality, price, functionality and client service. We also believe that the FranklinCovey Planner has obtained market acceptance primarily as a result of the concepts embodied in the FranklinCovey Planner, the high quality of materials, innovative design, our attention to client service, and the strong loyalty and referrals of our existing clients. We believe that our integration of training services with products has become a competitive advantage. Moreover, we believe that we are a market leader in the United States among a small number of integrated providers of productivity and time management products and services. Increased competition from existing and future competitors could, however, have a material adverse effect on our sales and profitability.

Manufacturing and Distribution

        The manufacturing operations of FranklinCovey consist primarily of printing, collating, assembling and packaging components used in connection with our paper product lines. We operate our central manufacturing services out of Salt Lake City. We have also developed partner printers, both domestically and internationally, who can meet our quality standards, thereby facilitating efficient delivery of product in a global market. We believe this has positioned us for greater flexibility and growth capacity. Automated production, assembly and material handling equipment are used in the manufacturing process to ensure consistent quality of production materials and to control costs and maintain efficiencies. By operating in this fashion, we have gained greater control of production costs, schedules and quality control of printed materials.

        During fiscal 2001, we entered into a long-term contract with EDS to provide warehousing and distribution services of our product line. EDS maintains a facility at the Company's headquarters as well as at other locations throughout North America.

        Binders used for our products are produced from either leather, simulated leather, tapestry or vinyl materials. These binders are produced by multiple and alternative product suppliers. We currently enjoy good relations with our suppliers and vendors and do not anticipate any difficulty in obtaining the required binders and materials needed for our business. We have implemented special procedures to ensure a high standard of quality for binders, most of which are manufactured by suppliers in the United States, Europe, Canada, Korea, Mexico and China.

        We also purchase numerous accessories, including pens, books, videotapes, calculators and other products, from various suppliers for resale to our clients. These items are manufactured by a variety of outside contractors located in the United States and abroad. We do not believe that we are entirely dependent on any one or more of such contractors and consider our relationships with such suppliers to be good.

Trademarks, Copyrights and Intellectual Property

        We seek to protect our intellectual property through a combination of trademarks, copyrights and confidentiality agreements. We claim rights for more 120 trademarks in the United States and have obtained registration in the United States and many foreign countries for many of our trademarks, including FranklinCovey, The 7 Habits of Highly Effective People®, Principle-Centered Leadership, Aligning Goals for Results, FOCUS: Achieving Your Highest Priorities, FranklinCovey Planner, PlanPlus, and The Seven Habits. We consider our trademarks and other proprietary rights to be important and material to our business. Each of the marks set forth in italics above is a registered mark or a mark for which protection is claimed.

        We own all copyrights on our planners, books, manuals, text and other printed information provided in our training seminars, the programs contained within FranklinCovey Planner Software and its instructional materials, and our software and electronic products, including audio tapes and video tapes. We license, rather than sell, all facilitator workbooks and other seminar and training materials in order to limit its distribution and use. FranklinCovey places trademark and copyright notices on its instructional, marketing and advertising materials. In order to maintain the proprietary nature of our product information, FranklinCovey enters into written confidentiality agreements with certain executives, product developers, sales professionals, training consultants, other employees and licensees. Although we believe the protective measures with respect to our proprietary rights are important, there can be no assurance that such measures will provide significant protection from competitors.

Employees

        As of August 31, 2003, FranklinCovey had 1,425 full and part-time associates, including 300 in sales, marketing and training; 700 in customer service and retail; 141 in production operations and distribution; and 284 in administration and support staff. During fiscal 2002, the Company outsourced a significant part of its information technology services, customer service, distribution and warehousing operations to EDS. A number of the Company's former employees involved in these operations are now employed by EDS to provide those services to FranklinCovey. None of FranklinCovey's associates are represented by a union or other collective bargaining group. Management believes that its relations with its associates are satisfactory. FranklinCovey does not currently foresee a shortage in qualified personnel needed to operate the Company's business.

Available Information

        The Company's principal executive offices are located at 2200 West Parkway Boulevard, Salt Lake City, Utah 84119-2331 and its telephone number is (801) 817-1776.

        We regularly file reports with the Securities Exchange Commission (SEC). These reports include, but are not limited to, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, current reports on Form 8-K, and security transaction reports on Forms 3, 4, or 5. The public may read and copy any materials that the Company files with the SEC at the SEC's Public Reference Room located at 450 Fifth Street, NW, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains electronic versions of the Company's reports on its website at www.sec.gov.

        The Company makes our Annual Report on Form 10K, Quarterly Reports on Form 10Q, current reports on Form 8K, and other reports filed or furnished with the SEC available to the public, free of charge, through our website at www.franklincovey.com. These reports are provided through our website as soon as reasonably practicable after we file or furnish these reports with the SEC.

Item 2. Properties

Franklin Covey’s principal business operations and executive offices are located in Salt Lake City, Utah. The following is a summary of our owned and leased properties. Our facility lease agreements are accounted for as operating leases, which expire at various dates through the year 2016.

United States Administrative Offices:
          Salt Lake City, Utah (7 locations) – 2 leased
          Provo Utah (1 location) – leased

   International Administrative Offices:
          Canada (1 location)
          Latin America (3 locations) – all leased
          Asia Pacific (2 locations) – both leased
          Europe (1 location) – leased

Regional Sales Offices:
           United States (7 locations) – all leased

Distribution Facilities:
          Asia Pacific (2 locations) – both leased
          Canada (1 location)
          Latin America (1 location)– leased
          Europe (1 location) – leased

Manufacturing Facilities:
           United States (1 location)

Retail Stores:
           United States (153 locations) – all leased

We consider our existing facilities sufficient for our current and anticipated level of operations in the upcoming fiscal year. However, we are actively seeking to sell our administrative offices located in Salt Lake City, Utah and to execute a sale-leaseback agreement on all five buildings. During fiscal 2003, we closed 22 retail store locations in the United States as well as 10 international store locations located in Canada and Mexico. We have also closed four stores in fiscal 2004 and expect to close additional retail locations during fiscal 2004.

Item 3. Legal Proceedings

During fiscal 2002, the Company received a subpoena from the Securities and Exchange Commission (the “SEC”) seeking documents and information relating to the Company’s management stock loan program and previously announced, and withdrawn, tender offer. The Company has provided the documents and information requested by the SEC, including the testimonies of its Chief Executive Officer, Chief Financial Officer, and other key employees. The Company has cooperated, and will continue to fully cooperate, in providing requested information to the SEC. The SEC has stated that the formal inquiry is not an indication that the SEC has concluded that there has been a violation of any law or regulation. The Company believes that it has complied with the laws and regulations applicable to its management stock loan program and withdrawn tender offer.

The Company is also the subject of certain legal actions, which we consider routine to our business activities. At August 31, 2003, management believes that, after consultation with legal counsel, any potential liability to the Company under such actions will not materially affect our financial position, liquidity, or results of operations.

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 our fiscal year ended August 31, 2003.

PART II

Item 5. Market for the Registrant’s Common Equity 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, 2003 and 2002.

The Company did not pay or declare dividends on its common stock during the fiscal year years ended August 31, 2003 and 2002. The Company currently anticipates that it will retain all available funds to finance our future growth and business opportunities. The Company does not intend to pay cash dividends on our common stock in the foreseeable future.

As of November 21, 2003, the Company had 19,926,837 shares of its common stock outstanding, which was held by approximately 350 shareholders of record.

On April 14, 2003, the Company announced that we had received notification of non-compliance from the NYSE regarding our stock price being below $1.00 per share and having market capitalization totaling less than the $15 million minimum. Subsequent to this notification, we met with the NYSE and submitted a plan that outlined the steps to obtain compliance with NYSE listing standards within the required timeframe of six months for the $1.00 per share minimum price requirement and 18 months for the $15 million minimum market capitalization requirement. The NYSE accepted our plan on April 22, 2003. With that acceptance, the NYSE extended to the Company a six-month period to achieve the minimum $1.00 per share common stock price and 18 months to exceed the minimum market capitalization requirement. On September 23, 2003 we announced that the Company had successfully completed a six-month review by the NYSE and we received notification that the Company is now in compliance with the $1.00 per share minimum price standard and that no further action will be taken by the NYSE on this standard. The NYSE may continue to monitor the Company through September 2004 with respect to the minimum market capitalization requirement. However, in the event that the price of our common stock does not remain above $1.00 per share and our market capitalization does not remain above $15 million, the trading of our common stock may be suspended and delisted from the NYSE. In that event, our common stock would most likely trade on an alternate venue, which may adversely affect the price of our common stock and the liquidity in the market for our common stock.

Item 6. Selected Financial Data

Financial Highlights