Franklin Covey(FC) - 2020 Q4 - Annual Report

Financial Performance - Consolidated net sales for the fiscal year ended August 31, 2020, totaled $198.5 million[15] - Net sales for fiscal 2020 were$198,456,000, a decrease of 12% from $225,356,000 in fiscal 2019[150] - Gross profit for fiscal 2020 was$145,370,000, down from $159,314,000 in fiscal 2019, reflecting a decline of approximately 8.7$(9,435,000), compared to a loss of $(1,023,000) in fiscal 2019, indicating a significant increase in losses[150] - Cash flows from operating activities decreased to$27,563,000 in fiscal 2020, compared to $30,452,000 in fiscal 2019, a decline of about 6.2$59,453,000 in fiscal 2020 from $82,014,000 in fiscal 2019, reflecting a decline of approximately 27.5$1.6 million in severance costs related to restructuring activities during the fourth quarter of fiscal 2020[203] Impact of COVID-19 - COVID-19 adversely impacted financial results in the third and fourth quarters of fiscal 2020, leading to decreased sales due to office and school closures[25] - The company accelerated digital engagement with clients during the pandemic, leveraging the AAP and Leader in Me subscription services for remote access to content[26] - The COVID-19 pandemic significantly impacted financial results in the third and fourth quarters, leading to postponed or canceled training and coaching events[166] Business Operations and Strategy - The company transitioned operations in Germany, Switzerland, and Austria from independent licensees to directly owned offices, aiming for significant business growth in these regions[22] - The company plans to expand its global reach by increasing the number of client partners, having opened direct offices in Germany, Switzerland, and Austria[186] - The company added 320 new schools to the Leader in Me program, with nearly 2,200 schools renewing their memberships, surpassing fiscal 2019 numbers[171] - New offerings based on bestselling books, including "Multipliers" and "Unconscious Bias," were developed and released during fiscal 2020, with plans for further releases in fiscal 2021[187] Competition and Market Position - The U.S. training industry is estimated to be $82.5 billion, with Franklin Covey positioned as a significant competitor in the performance skills and education market[34] - The training and consulting services industry is intensely competitive, with competitors continually introducing new programs that may impact the company's ability to sell its offerings[67] - The company faces intense competition for skilled personnel, which is critical for its growth and ability to deliver services effectively[80] Intellectual Property and Compliance - The company holds over 640 trademarks and 220 registered copyrights, emphasizing the importance of intellectual property to its business[38] - The company relies on a combination of confidentiality policies, nondisclosure agreements, and copyright and trademark laws to protect its intellectual property, which is crucial for its financial success[74] - Compliance with evolving data protection laws, such as GDPR and CCPA, may impose significant costs and operational changes[94] - The company is subject to numerous and sometimes conflicting regulations across different countries, which could result in fines and damage to its reputation if violated[121] Employee and Talent Management - Over 71% of new hires from June 1, 2019, to May 31, 2020, were women, reflecting the company's commitment to diversity and inclusion[42] - The employee turnover rate in the United States and Canada was 10.7% during the period from June 1, 2019, to May 31, 2020, which is considered reasonable for the industry[47] - The company offers 100% salary continuance for up to 12 weeks in a rolling 12-month period for qualifying medical leaves, along with various employee benefits[48] - The Organization and Compensation Committee has made Talent Stewardship a standing agenda item to improve practices in attracting, developing, and retaining top talent[50] Financial Risks and Future Outlook - Future capital needs may necessitate raising additional funds through debt or equity offerings, which could dilute current shareholders' ownership[107] - The company may struggle to meet analyst expectations, which could negatively impact its stock price and lead to potential securities litigation[110] - The company's stock price has historically experienced significant volatility due to fluctuations in quarterly results, market conditions, and currency exchange rates[114] - Recent international trade developments, including proposed tariffs by the United States, may negatively impact global economic conditions and the company's financial results[116] - The company operates in multiple countries, exposing it to complex management, legal, and economic risks, including currency exchange rate fluctuations and compliance with local laws[117] - The company has significant intangible assets and goodwill that may be impaired if cash flows from related activities decline[124] - The company did not pay or declare dividends during the fiscal years ended August 31, 2020, or 2019, and plans to retain funds for liabilities and growth opportunities[135]