Rocky Mountain Chocolate Factory, Inc. (NASDAQ: RMCF) (the
"Company") today reported its operating results for the first
quarter ended May 31, 2013 (first quarter of FY2014). The Company
franchises and operates gourmet chocolate and confection stores and
manufactures an extensive line of premium chocolates and other
confectionery products. The Company's majority-owned subsidiary,
U-Swirl, Inc., franchises and operates self-serve frozen yogurt
cafes. The Company will host an investor conference call today at
4:15 p.m. Eastern Time to discuss its operating results and other
topics of interest (see details below).
HIGHLIGHTS
- Total revenue increased 5.4 percent to approximately $10.2
million in the first quarter of FY2014, compared with approximately
$9.7 million in the quarter ended May 31, 2012 (first quarter of
FY2013). Domestic franchise same-store sales rose 2.5% and
same-store pounds purchased increased 2.6% when compared with the
prior-year period.
- Retail gross margin improved to 65.7 percent of retail sales in
the first quarter of FY2014, compared with 63.2 percent in the
first quarter of FY2013.
- The Company's majority-owned subsidiary, U-Swirl, Inc. (OTCQB:
SWRL) ("U-Swirl"), reported income from operations of $168,000 in
the first quarter of FY2014, compared with an operating loss of
$100,000 associated with Aspen Leaf Yogurt operations in the
prior-year period.
- Factory gross margin declined to 30.4 percent of factory sales
in the first quarter of FY2014, versus 31.7 percent in the
prior-year quarter due to a decline in manufacturing efficiencies
associated with lower production volume resulting from a decline in
third-party sales in the first quarter of FY2014 when compared with
the first quarter of FY2013.
- Operating income increased 12.1 percent to approximately $1.8
million in the first quarter of FY2014, compared with operating
income of approximately $1.6 million in the first quarter of the
previous fiscal year.
- Net income attributable to RMCF shareholders rose 11.0 percent
to $1,179,307, or $0.19 per basic and diluted share, in the first
quarter of FY2014, compared with $1,062,329, or $0.17 per basic and
diluted share, in the first quarter of FY2013.
- International license agreements were signed in South Korea and
the Kingdom of Saudi Arabia. The first Rocky Mountain Chocolate
Factory store in South Korea, in Seoul, opened during the first
quarter of FY2014.
- U-Swirl, Inc. opened its first U-Swirl Frozen Yogurt / Rocky
Mountain Chocolate Factory co-branded store in the first quarter of
FY2014.
- After exceeding expectations in test market, Rocky Mountain
Chocolate Factory, Inc. and the Kellogg Company are pleased to
announce the expanded roll-out of Kellogg's Rocky Mountain
Chocolate Factory Chocolatey Almond cereal planned for early
2014.
MANAGEMENT COMMENTS
"We are pleased to report an 11.0 percent increase in net income
attributable to RMCF shareholders, on a 5.4 percent improvement in
total revenues, for the first quarter of Fiscal 2014," stated Bryan
Merryman, Chief Operating Officer and Chief Financial Officer of
Rocky Mountain Chocolate Factory, Inc. "Same-store sales continued
to increase, rising 2.5 percent in the most recent quarter after a
1.1 percent improvement in the first quarter of Fiscal 2013. Our
pretax profit margin widened to 18.0 percent of total revenues,
compared with 16.9 percent in the first quarter of the previous
fiscal year. Other performance metrics of note included a 250
basis-point improvement in our retail gross margin, which reflected
improved economies of scale at our majority-owned U-Swirl, Inc.
subsidiary.
"Shipments of products to customers outside our network of
franchised and company-operated stores declined 9.6 percent in the
most recent quarter, resulting in a 3.1 percent reduction in
factory sales and a 130-basis-point narrowing in factory gross
margin. We consider this a temporary situation related to inventory
adjustments and the timing of orders from one of our largest
third-party customers. While we believe sales to such third-party
customers will trail prior-year levels in the first half of Fiscal
2014, we expect shipments to strengthen in the third and fourth
quarters and to post a respectable gain for the fiscal year ending
February 28, 2014."
"Following the restructuring of our frozen yogurt operations in
the second half of Fiscal 2013, including the transfer of our Aspen
Leaf Yogurt and Yogurtini assets and certain other consideration
for a 60 percent equity interest in U-Swirl, Inc., we are pleased
to report that U-Swirl was profitable in the most recent quarter,
compared with a net loss in the prior-year period. U-Swirl now has
approximately 74 self-serve franchised and company-operated frozen
yogurt stores in operation, compared with approximately 28 stores a
year earlier, allowing U-Swirl to realize important economies of
scale while positioning itself to potentially acquire additional
frozen yogurt operators and franchisors going forward. We believe
U-Swirl has an opportunity to become a leading consolidator in the
industry, while generating an attractive return for RMCF
shareholders, in coming years. We have also identified an
opportunity to further distinguish U-Swirl from its competitors,
while increasing sales opportunities for our chocolate factory in
Durango, through the opening of co-branded U-Swirl Frozen Yogurt /
Rocky Mountain Chocolate Factory stores, the first of which opened
in Tennessee in the first quarter of Fiscal 2014."
"International expansion continues to be an area of emphasis for
our Company, and I am pleased to report that we entered into
agreements with licensees in two additional countries -- South
Korea and Saudi Arabia -- during the first quarter of Fiscal 2014,"
continued Merryman. "The license agreement covering South Korea,
where the initial store opened in Seoul during the first quarter of
Fiscal 2014, requires the licensee to open five Rocky Mountain
Chocolate Factory stores within a 30-month period, with an option
to acquire a Master License Agreement covering the opening or
franchising of not less than 30 stores in South Korea. In the
Kingdom of Saudi Arabia, the licensee must initially open four
stores within 30 months, following which a Master License Agreement
for an additional six stores throughout the country may be granted
to the licensee. We continue to work with our licensee in Japan to
address certain operational issues that have slowed the pace of
anticipated openings in that country, but we remain optimistic that
the Pacific Rim will be a highly successful international market
for Rocky Mountain Chocolate Factory stores."
"On the trademark licensing front, the initial market test of
Kellogg's 'limited edition' Rocky Mountain Chocolate Factory
Chocolatey Almond breakfast cereal was a success. Kellogg Company
recently shared preliminary plans to expand the retail roll-out of
the specialty cereal in early 2014. This licensing agreement
illustrates the national recognition that our Rocky Mountain
Chocolate Factory brand name has developed among consumers over the
past 32 years, and we believe this roll-out will expose our brand
name to several million consumers, while promoting 'top-of-mind'
awareness that should benefit our Rocky Mountain Chocolate Factory
stores in regional malls and other retail venues."
"No longer burdened with operating losses from our frozen yogurt
operations, we expect the Company's earnings to recover
significantly in the fiscal year that ends February 28, 2014,"
added Merryman. "While the experienced management team at U-Swirl
is working diligently to achieve strategic objectives that we
believe can reward our shareholders in coming years, the RMCF
management team is now able to focus exclusively upon the growth
potential of our domestic and international chocolate and
confectionary manufacturing, franchising, licensing and co-branding
activities."
"We remain proud of our balance sheet and believe the Company is
financially well-positioned to pursue the long-term growth
initiatives that we have identified," noted Frank Crail, Founder
and Chief Executive Officer of Rocky Mountain Chocolate Factory,
Inc. "At the end of the most recent quarter we had approximately
$5.4 million of cash in the bank and no long- or short-term debt
outstanding. Working capital approximated $9.8 million and our
current ratio stood at a healthy 3.2-to-1. We recently paid our
40th consecutive quarterly cash dividend, in the amount of $0.11
per share, which provides investors with a current yield of 3.6
percent, based upon yesterday's closing stock price of $12.07 per
share."
FIRST QUARTER OPERATING RESULTS
For the three months ended May 31, 2013 (first quarter of
FY2014), revenue increased 5.4 percent to approximately $10.2
million, compared with revenue of approximately $9.7 million in the
quarter ended May 31, 2012 (first quarter of FY2013). The revenue
increase was attributable to higher sales from Company-owned
stores, an increase in royalty and marketing fees, and higher
franchise fees, partially offset by a decline in factory product
sales.
Same-store sales at domestic franchised retail outlets increased
2.5 percent in the first quarter of FY2014 when compared with the
prior-year period.
Total factory sales decreased 3.1 percent to approximately $6.3
million in the first quarter of FY2014, versus approximately $6.5
million in the first quarter of FY2013, due to a 9.6 percent
decline in shipments of product to customers outside the Company's
network of franchised and licensed retail stores and a 5.4 percent
decrease in the average number of domestic Rocky Mountain Chocolate
Factory stores in operation. These decreases were partially offset
by a 2.6 percent increase in same-store pounds purchased by the
Company's network of franchised stores. Factory gross margin
decreased 130 basis points to 30.4 percent of factory sales in the
most recent quarter, compared with 31.7 percent in the prior-year
period, due primarily to a decline in manufacturing efficiencies
associated with 6.0 percent lower factory production volumes in the
first quarter of FY2014.
Royalties and marketing fees increased 19.3 percent to
approximately $1.7 million in the first quarter of FY2014, compared
with approximately $1.4 million in the prior-year quarter, due to a
16.9 percent increase in the number of domestic franchise stores in
operation. This increase was primarily the result of royalty and
marketing fees associated with the U-Swirl franchise system,
partially offset by a decrease in the number of domestic Rocky
Mountain Chocolate Factory franchised stores in operation.
Franchise fee revenues increased 123.0 percent to $276,400 in
the first quarter of FY2014, compared with franchise fees of
$123,900 in the prior-year quarter, due primarily to the license
fees associated with license agreements in South Korea and the
Kingdom of Saudi Arabia. This increase was partially offset by a
decrease in the number of domestic franchise store openings from
two in the first quarter of FY2013 to one opening in the first
quarter of FY2014.
Retail sales increased 18.2 percent to approximately $1.9
million, from approximately $1.6 million in the prior-year quarter,
primarily due to changes in units in operation resulting from the
acquisition of a majority ownership in U-Swirl, Inc. Same-store
sales at Company-owned locations increased 6.0 percent in the most
recent quarter relative to the first quarter of FY2013. Retail
gross margin improved from 63.2 percent of retail sales in the
first quarter of FY2013 to 65.7 percent of retail sales in the
first quarter of FY2014.
Net income attributable to the Company's shareholders increased
11.0 percent to $1,179,307, or $0.19 per basic and diluted share,
in the first quarter of FY2014, compared with net income
attributable to RMCF shareholders of $1,062,329, or $0.17 per basic
and diluted share, in the first quarter of FY2013.
During the first quarter of FY2014, domestic franchisees opened
one new Rocky Mountain Chocolate Factory store in Rapid City, SD
and three new U-Swirl Frozen Yogurt stores in Wayne, NJ,
Collierville, TN and Houston, TX. One new Cold Stone Creamery
co-branded store opened in Twin Falls, ID. International licensees
opened one new Rocky Mountain Chocolate Factory store in Seoul,
South Korea. The complete lists of stores are available on the
Companies' websites at www.rmcf.com and www.u-swirl.com.
On June 14, 2013, the Company paid its 40th consecutive
quarterly cash dividend, in the amount of $0.11 per share, to
shareholders of record at the close of business on June 4,
2013.
Investor Conference Call
The Company will host an investor conference
call today, July 11, 2013 at 4:15 p.m. EDT to discuss its operating
results for the quarter ended May 31, 2013, along with other topics
of interest. To access the conference call, please dial
877-374-8416 (international participants dial 412-317-6716)
approximately five minutes prior to 4:15 p.m. EDT and ask to be
connected to the "Rocky Mountain Chocolate Factory Conference
Call". A replay of the conference call will be available one hour
after completion of the call until Thursday, July 18, 2013 at 5:00
p.m. EDT by dialing 877-344-7529 (international callers dial
412-317-0088) and entering the conference I.D. #10030995.
About Rocky Mountain Chocolate Factory,
Inc.
Rocky Mountain Chocolate Factory, Inc., headquartered in
Durango, Colorado, is an international franchiser of gourmet
chocolate and confection stores and a manufacturer of an extensive
line of premium chocolates and other confectionery products. The
Company's majority-owned subsidiary, U-Swirl, Inc., franchises and
operates self-serve frozen yogurt cafes. As of July 10, 2013, the
Company, U-Swirl and its franchisees operated 430 Rocky Mountain
Chocolate Factory and self-serve frozen yogurt stores in 41 states,
Canada, Japan, South Korea and the United Arab Emirates. The
Company's common stock is listed on The Nasdaq Global Market under
the symbol "RMCF." The common stock of U-Swirl, Inc. trades on the
OTCQB market under the symbol "SWRL."
Forward-Looking Statements
Certain statements in this press release are "forward-looking
statements" within the meaning of Section 27A of the Securities Act
of 1933 and Section 21E of the Securities Exchange Act of 1934.
These statements involve risks and uncertainties, and the Company
undertakes no obligation to update any forward-looking information.
Risks and uncertainties that could cause cash flows to decrease or
actual results to differ materially include, without limitation,
seasonality, consumer interest in the Company's products, general
economic conditions, consumer and retail trends, costs and
availability of raw materials, competition, the success of the
Company's co-branding agreement with Cold Stone Creamery Brands,
the success of international expansion efforts, including but not
limited to new store openings, the success of the U-Swirl, Inc. and
other risks. Readers are referred to the Company's periodic reports
filed with the SEC, specifically the most recent reports which
identify important risk factors that could cause actual results to
differ from those contained in the forward-looking statements. The
information contained in this press release is a statement of the
Company's present intentions, beliefs or expectations and is based
upon, among other things, the existing business environment,
industry conditions, market conditions and prices, the economy in
general and the Company's assumptions. The Company may change its
intentions, beliefs or expectations at any time and without notice,
based upon any changes in such factors, in its assumptions or
otherwise. The cautionary statements contained or referred to in
this press release should be considered in connection with any
subsequent written or oral forward-looking statements that the
Company or persons acting on its behalf may issue.
For Further Information, Contact Bryan J.
Merryman COO/CFO (970) 259-0554
(Financial Highlights Follow)
STORE INFORMATION
New stores opened
during
three months ended Stores open as of
May 31, 2013 May 31, 2013
------------------- -------------------
United States
Rocky Mountain Chocolate Factory
Franchise Stores 1 224
Company-Owned Stores 0 7
Cold Stone Creamery 1 56
U-Swirl, Inc.
Franchise Stores 3 59
Company-Owned Stores 0 12
International License Stores 1 67
------------------- -------------------
Total 6 425
=================== ===================
SELECTED CONSOLIDATED BALANCE SHEET DATA
(in thousands)
May 31, 2013 February 28, 2013
(unaudited)
Current Assets $ 14,262 $ 14,544
Total Assets $ 23,471 $ 23,834
Current Liabilities $ 4,453 $ 5,563
Stockholder's Equity $ 18,158 $ 17,389
Interim Unaudited
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
Three Months Ended May 31, Three Months Ended May 31,
2013 2012 2013 2012
Revenues
Factory sales $ 6,285 $ 6,488 61.8% 67.2%
Royalty and
marketing fees 1,723 1,444 16.9% 15.0%
Franchise fees 276 124 2.7% 1.3%
Retail sales 1,893 1,602 18.6% 16.6%
Total Revenues 10,177 9,658 100.0% 100.0%
Costs and expenses
Cost of sales 5,027 5,022 49.4% 52.0%
Franchise costs 479 545 4.7% 5.6%
Sales and
marketing 505 461 5.0% 4.8%
General and
administrative 1,271 840 12.5% 8.7%
Retail operating 841 931 8.3% 9.6%
Depreciation and
amortization 236 237 2.3% 2.5%
Total Costs and
Expenses 8,359 8,036 82.1% 83.2%
Income from
operations 1,818 1,622 17.9% 16.8%
Interest income 12 11 0.1% 0.1%
Income before
income taxes 1,830 1,633 18.0% 16.9%
Provision for
income taxes 584 571 5.7% 5.9%
Consolidated Net
income 1,246 1,062 12.2% 11.0%
Less: Net income
attributable to
non-controlling
interest 67 - 0.7% 0.0%
Net income
attributable to
RMCF $ 1,179 $ 1,062 11.6% 11.0%
Basic Earnings Per
Common Share $ 0.19 $ 0.17
Diluted Earnings
Per Common Share $ 0.19 $ 0.17
Weighted Average
Common Shares
Outstanding 6,074,332 6,159,445
Dilutive Effect of
Employee Stock
Options 237,416 151,317
Weighted Average
Common Shares
Outstanding,
Assuming Dilution 6,311,748 6,310,762
For Further Information, Contact Bryan J. Merryman COO/CFO
(970) 259-0554
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