U-Swirl, Inc. Reports Third Quarter Operating Results
Size and Scope of Company's Operations to Benefit Substantially
From Acquisition of Two Self-Serve Frozen Yogurt Chains
HENDERSON, NV--(Marketwired - Jan 21, 2014) - U-Swirl, Inc.
(OTCQB: SWRL) ("the Company"), parent to U-SWIRL International,
Inc., through which it owns and franchises self-serve frozen yogurt
cafés, today announced operating results for the third quarter and
first nine months of FY2014.
THIRD QUARTER HIGHLIGHTS
- Total revenue increased 72 percent to $1,039,498 in the third
quarter of FY2014, compared with total revenue of $605,709 in the
quarter ended November 30, 2012.
- Company-owned frozen yogurt cafés generated $742,377 in net
sales during the most recent quarter, which represented a 52
percent increase when compared with $487,216 in the third quarter
of the previous fiscal year.
- Franchise royalties and fees rose 151 percent to $297,121 in
three months ended November 30, 2013, compared with $118,493 in the
prior-year period.
- The Company recorded a net loss of ($197,616), or ($0.01) per
share, in the most recent quarter, compared with a net loss of
($146,781), or ($0.03) per share, in the third quarter of the
previous fiscal year.
- One new franchised café opened in the three months ended
November 30, 2013, and the Company acquired franchise rights and
license agreements to 11 self-serve frozen yogurt cafés from
Josie's Frozen Yogurt, LLC.
- On January 17, 2014, subsequent to the end of the third fiscal
quarter, U-Swirl, Inc. acquired two frozen yogurt chains that
franchise and/or operate stores under the brand names
CherryBerry and Yogli Mogli.
MANAGEMENT COMMENTS
"While U-Swirl recorded a net loss in the seasonally slow third
fiscal quarter, approximately $12,000 of the loss was the result of
one-time costs associated with the acquisition of Josie's Frozen
Yogurt. We continued to move forward with an aggressive
acquisition program that is designed to take advantage of
consolidation opportunities in the self-serve frozen yogurt segment
of the $6 billion away-from-home frozen desserts industry," stated
Rico Conte, Chief Executive Officer of U-Swirl, Inc. "Early in
the quarter, we completed the acquisition of the franchise rights
to nine, and the license agreements to two, frozen yogurt cafés
operating under the name Josie's Frozen Yogurt, thereby
expanding our network of company-owned and franchised self-serve
frozen yogurt cafés to 85 locations in 25 states. As we have
noted earlier, our goal is to expand both internally and by
selectively acquiring other companies that are often struggling due
to a lack of capital or the 'critical mass' necessary for success
in the highly fragmented self-serve frozen yogurt
industry."
"Last week, we took a giant step forward with the acquisition of
two self-serve frozen yogurt chains that franchise and/or operate
at total of 182 stores under the brand names CherryBerry
and Yogli Mogli. These acquisitions increased the
number of franchised and company-operated stores in the U-Swirl
network by more than 200%. We are now recognized as a major
'player' in the frozen yogurt industry, having expanded our retail
store network more than nine-fold in the past 15 months. Our
Company and its franchisees are currently operating 267 cafés,
compared with only 85 stores at the end of this year's third fiscal
quarter, and we have a presence in 35 states and three foreign
countries. While the next few months will be challenging as we
integrate recent acquisitions into the U-Swirl family, we expect to
realize substantial long-term benefits from economies of scale,
volume purchasing leverage, and the elimination of duplicative
corporate overhead expenses."
"In addition to our acquisition strategy, we will continue to
work closely with our franchisees to identify attractive new store
opportunities, and we have many new locations in development,"
noted Conte. "We have also recently launched the offering of
U-Swirl-n-Go franchises, which are limited-product stores
within non-traditional locations, such as convenience stores,
airports, hotels and other mass gathering areas. The initial
investment for these franchises is substantially less, and flat
royalty fees, instead of fees based on a percentage of revenues,
are charged. We currently expect the first
U-Swirl-n-Go location to open this summer."
"Our parent company, Rocky Mountain Chocolate Factory, Inc.
("Rocky Mountain"), which has over three decades of experience in
franchising in the retail chocolate business, is highly supportive
of our growth strategy," continued Conte. "We have benefited
greatly from Rocky Mountain's franchise development and support
capabilities, and its strong balance sheet has allowed us to move
quickly when attractive acquisition opportunities are
identified. For example, Rocky Mountain provided most of the
cash needed to acquire CherryBerry and Yogli
Mogli, through a convertible note arrangement that was
established specifically in support of our acquisition
program."
"The self-serve frozen yogurt industry has grown at a frantic
pace in recent years, and this has resulted in too many stores
being opened in a number of markets, often by companies and
franchisors that are undercapitalized and have minimal experience
in franchising," noted Bryan Merryman, Chief Operating Officer of
Rocky Mountain Chocolate Factory, Inc., which owns a majority
equity interest in U-Swirl, Inc. "We believe this is the ideal
time for U-Swirl, supported by Rocky Mountain's strong balance
sheet, extensive franchising experience, and infrastructure, to
seek out and acquire industry participants with solid brands that
have been unable to efficiently scale their operations, and/or
which are looking for an attractive 'exit strategy.' Whereas
there are dozens, if not hundreds, of frozen yogurt chains
currently operating in the U.S., we foresee the industry being
dominated by a few well-managed, well-financed firms within a few
years."
THIRD QUARTER RESULTS
For the three months ended November 30, 2013, Company-owned
frozen yogurt cafés generated $742,377 in net sales, for an
increase of 52% when compared with $487,216 in the third quarter of
FY2013. The improvement in net sales was due primarily to an
increase in the number of Company-owned locations, which ranged
from 8 to 12 in the most recent quarter, versus 6 in the prior-year
period. In November 2013, the Company closed four
underperforming Aspen Leaf Yogurt cafés.
Franchise royalties and fees increased 151% to $297,121 in the
three months ended November 30, 2013, compared with $118,493 in the
three months ended November 30, 2012, primarily due to an expansion
in the number of franchised cafés in operation to 85 at the end of
the most recent quarter, versus 30 a year earlier.
The Company recorded an operating loss of ($203,983) in the
third quarter of FY2014, compared with a net operating loss of
($146,665) in the prior-year quarter, partly due to higher
marketing and advertising expenses and increased general and
administrative expenses. Some of these costs were
non-recurring in nature, including one-time expenses related to the
acquisition of the Josie's franchise system.
Net interest expense increased to a benefit of $6,367 in the
third quarter of FY2014, versus net interest income of $116 a year
earlier, due to the retirement of $400,000 of notes payable and
accrued interest expense. Notes payable of $400,000 were
retired, together with accrued interest of $20,991.
The Company reported a net loss of ($197,616), or ($0.01) per
share, in the most recent quarter, compared with a net loss of
($146,781), or ($0.03) per share, in the third quarter of
FY2013.
The weighted average number of common shares outstanding
increased 210% to 15,393,297 in the quarter ended November 30,
2013, versus 4,966,990 in the third quarter of FY2013, reflecting
shares issued to Rocky Mountain Chocolate Factory in exchange for
certain assets in January 2013.
U-Swirl franchisees added one new café during the most recent
quarter, in the state of Mississippi. The Company also
acquired franchise rights or license agreements for 11 stores from
Josie's Frozen Yogurt, LLC. The Josie's stores are located in
Arizona, Indiana, Nevada, Ohio, Texas, South Carolina and
Virginia.
NINE-MONTH RESULTS
For the nine months ended November 30, 2013, net sales generated
by Company-owned frozen yogurt cafés increased 80% to $3,374,099,
compared with $1,877,288 in the first nine months of
FY2013. The increase was due primarily to an increase in the
number of Company-owned locations in operation during FY2014 when
compared with the corresponding period of the previous fiscal
year.
Franchise royalties and fees increased 156% to $1,075,265 in the
nine months ended November 30, 2013, compared with $419,817 in the
nine months ended November 30, 2012, primarily due to an increase
in the number of franchised cafés in operation.
Operating income improved to $150,909 in the first nine months
of FY2014, compared with a net operating loss of ($226,720) in the
corresponding period of the previous fiscal year.
Net interest expense totaled $20,654 in the first nine months of
FY2014, compared with net interest income of $48 in the
year-earlier period.
The Company reported net income of $130,255, or $0.01 per
diluted share, in the first nine months of FY2014, compared with a
net loss of ($226,672), or ($0.05) per share, in the first nine
months of FY2013.
The weighted average number of common shares outstanding
increased 199% to 14,730,088 in the first nine months of FY2014,
compared with 4,933,796 in the first nine months of FY2013.
About Rocky Mountain Chocolate Factory, Inc.
Rocky Mountain Chocolate Factory, Inc., headquartered in
Durango, Colorado, is an international franchisor of gourmet retail
chocolate stores and self-serve frozen yogurt cafés, and a
manufacturer of an extensive line of premium chocolates and other
confectionery products. As of January 21, 2014, the Company
and its franchisees, licensees and majority-owned subsidiary
(U-Swirl, Inc.) operated 623 stores and cafés in 44 states, Canada,
Japan, South Korea, The United Arab Emirates, Pakistan and Turkey..
The Company's common stock is listed on The Nasdaq Global Market
under the symbol "RMCF." Additional information is available
on the Internet at www.rmcf.com.
About U-Swirl, Inc.
U-Swirl, Inc. is an operator and franchisor of self-serve frozen
yogurt cafés that operate under the following names: U-SWIRL
Frozen Yogurt, CherryBerry, Aspen Leaf Yogurt, Yogli Mogli, Gracie
Bleu, and Josie's Frozen Yogurt. The cafés offer
frozen yogurt in up to 20 non-fat and low-fat flavors, including
tart, traditional, and no-sugar-added options, along with fresh
sorbet. Approximately 70 toppings such as fresh fruit, sauces,
candies, and granola are available to customize each serving of
yogurt to the customer's individual taste.
In January 2013, the Company acquired frozen yogurt café assets,
franchise rights and certain other assets from Rocky Mountain
Chocolate Factory, Inc. (NASDAQ: RMCF), primarily in exchange for
certain warrants/options, notes payable, and a controlling
ownership interest in the Company.
U-Swirl, Inc. is headquartered in Henderson, Nevada, and its
common stock trades on the OTCQB under the symbol "SWRL." As
of January 21, 2014, the Company and its franchisees operated 267
self-serve frozen yogurt cafés in 35 states and three foreign
countries.
Forward-Looking Statements
Certain statements in this press release are
"forward-looking statements." 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, market conditions, and
future business decisions, all of which are difficult or impossible
to predict accurately and many of which are beyond the Company's
control. 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, and it undertakes
no obligation to revise or update publicly any forward-looking
statements for any reason. 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.
|
|
STORE INFORMATION |
New stores opened during |
|
|
three months ended |
|
Stores open as of |
|
|
November 30, 2013 |
|
November 30, 2013 |
|
Franchise Stores |
|
1 |
|
77 |
|
Company-Owned Stores |
|
0 |
|
8 |
Total |
|
1 |
|
85 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SELECTED BALANCE SHEET DATA |
(in thousands) |
|
|
|
|
|
|
|
November 30, 2013 |
|
February 28, 2013 |
|
|
(unaudited) |
|
|
Current Assets |
|
$ |
956 |
|
$ |
604 |
Total
Assets |
|
$ |
3,731 |
|
$ |
3,718 |
Current Liabilities |
|
$ |
857 |
|
$ |
665 |
Stockholder's Equity |
|
$ |
1,940 |
|
$ |
1,693 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INTERIM UNAUDITED |
|
STATEMENTS OF OPERATIONS |
|
(in thousands, except per share data and
percentages) |
|
|
|
|
|
|
|
|
|
|
Three Months Ended November 30, |
|
|
Three Months Ended November 30, |
|
|
|
2013 |
|
|
2012 |
|
|
2013 |
|
|
2012 |
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchise, royalty and marketing fees |
|
|
297 |
|
|
|
119 |
|
|
28.6 |
% |
|
19.6 |
% |
|
Retail sales |
|
|
742 |
|
|
|
487 |
|
|
71.4 |
% |
|
80.4 |
% |
|
Total
Revenues |
|
|
1,039 |
|
|
|
606 |
|
|
100.0 |
% |
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Food,
beverage and packaging costs |
|
|
277 |
|
|
|
165 |
|
|
26.7 |
% |
|
27.2 |
% |
|
Labor
and related expenses |
|
|
256 |
|
|
|
130 |
|
|
24.6 |
% |
|
21.5 |
% |
|
Occupancy and related expenses |
|
|
203 |
|
|
|
117 |
|
|
19.5 |
% |
|
19.3 |
% |
|
Marketing and advertising |
|
|
73 |
|
|
|
18 |
|
|
7.0 |
% |
|
3.0 |
% |
|
General and administrative |
|
|
373 |
|
|
|
245 |
|
|
35.9 |
% |
|
40.4 |
% |
|
Depreciation and amortization |
|
|
61 |
|
|
|
78 |
|
|
5.9 |
% |
|
12.9 |
% |
|
Total
Costs and Expenses |
|
|
1,243 |
|
|
|
753 |
|
|
119.6 |
% |
|
124.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
(204 |
) |
|
|
(147 |
) |
|
-19.6 |
% |
|
-24.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest benefit (expense) |
|
|
6 |
|
|
|
- |
|
|
0.6 |
% |
|
0.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
|
(198 |
) |
|
|
(147 |
) |
|
-19.1 |
% |
|
-24.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
|
- |
|
|
|
- |
|
|
0.0 |
% |
|
0.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
(198 |
) |
|
|
(147 |
) |
|
-19.1 |
% |
|
-24.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted Earnings (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per
Common Share |
|
$ |
(0.01 |
) |
|
$ |
(0.03 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Common Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, Basic and Diluted |
|
|
15,393,297 |
|
|
|
4,966,990 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INTERIM UNAUDITED |
|
STATEMENTS OF OPERATIONS |
|
(in thousands, except per share data and
percentages) |
|
|
|
|
|
Nine Months Ended November 30, |
|
|
Nine Months Ended November 30, |
|
|
|
2013 |
|
|
2012 |
|
|
2013 |
|
|
2012 |
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchise, royalty and marketing fees |
|
|
1,075 |
|
|
|
420 |
|
|
24.2 |
% |
|
18.3 |
% |
|
Retail sales |
|
|
3,374 |
|
|
|
1,877 |
|
|
75.8 |
% |
|
81.7 |
% |
|
Total
Revenues |
|
|
4,449 |
|
|
|
2,297 |
|
|
100.0 |
% |
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Food,
beverage and packaging costs |
|
|
1,107 |
|
|
|
609 |
|
|
24.9 |
% |
|
26.5 |
% |
|
Labor
and related expenses |
|
|
875 |
|
|
|
426 |
|
|
19.7 |
% |
|
18.5 |
% |
|
Occupancy and related expenses |
|
|
683 |
|
|
|
344 |
|
|
15.4 |
% |
|
15.0 |
% |
|
Marketing and advertising |
|
|
162 |
|
|
|
57 |
|
|
3.6 |
% |
|
2.5 |
% |
|
General and administrative |
|
|
1,199 |
|
|
|
857 |
|
|
26.9 |
% |
|
37.3 |
% |
|
Depreciation and amortization |
|
|
272 |
|
|
|
231 |
|
|
6.1 |
% |
|
10.1 |
% |
|
Total
Costs and Expenses |
|
|
4,298 |
|
|
|
2,524 |
|
|
96.6 |
% |
|
109.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
151 |
|
|
|
(227 |
) |
|
3.4 |
% |
|
-9.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(21 |
) |
|
|
- |
|
|
-0.5 |
% |
|
0.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
|
130 |
|
|
|
(227 |
) |
|
2.9 |
% |
|
-9.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
|
- |
|
|
|
- |
|
|
0.0 |
% |
|
0.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
130 |
|
|
|
(227 |
) |
|
2.9 |
% |
|
-9.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted Earnings (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per
Common Share |
|
$ |
0.01 |
|
|
$ |
(0.05 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Common Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, Basic and Diluted |
|
|
14,730,088 |
|
|
|
4,933,796 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For Further Information, Please Contact U-Swirl, Inc. (702)
586-8700 of via email at Email Contact
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