EXHIBIT 99.1
For Immediate Release
ROCKY MOUNTAIN CHOCOLATE FACTORY, INC. REPORTS FISCAL YEAR 2018 OPERATING RESULTS
DURANGO, Colorado (May 10, 2018) – Rocky Mountain Chocolate Factory, Inc. (Nasdaq Global Market: RMCF) (the “Company”) today reported its operating results for the three months and fiscal year ended February 28, 2018 (the “fourth quarter of FY2018” and “FY2018,” respectively). The Company franchises and operates gourmet chocolate and confection stores and self-serve frozen yogurt cafés, and manufactures an extensive line of premium chocolates and other confectionery products.
FY2018 DETAILS
| | ● | Total revenue decreased 0.6 percent from $38.3 million during the fiscal year ended February 28, 2017 (“FY2017”) to $38.1 million during FY2018. |
| | ● | Net income decreased 14.1 percent to $3.0 million, or $0.50 per basic share and diluted share during FY2018, compared to net income of $3.5 million, or $0.59 per basic share and $0.58 per diluted share during FY2017. |
| | ● | Operating income decreased 5.5 percent to $5.2 million during FY2018, compared with operating income of $5.5 million during FY2017. |
| | ● | Adjusted EBITDA (a non-GAAP measure defined and reconciled later in this release) decreased 4.4 percent to $7.1 million during FY2018, versus $7.5 million during FY2017. |
| | ● | Same-store pounds of product purchased from the Company’s factory by franchisees and co-branded licensees decreased 4.9 percent during FY2018 compared to FY2017. |
| | ● | Factory sales increased 2.5 percent during FY2018, compared to FY2017. |
| | ● | Royalty and marketing fees decreased 10.7 percent during FY2018, primarily due to a 14.6 percent decrease in the average number of domestic franchised locations in operation during FY2018 compared to FY2017. |
| | ● | Franchise fees more than doubled during FY2018, primarily due to an increase in international license fees during FY2018, compared to FY2017. |
| | ● | The Company’s franchisees and licensees opened five international Rocky Mountain Chocolate Factory licensed locations, six domestic Rocky Mountain Chocolate Factory franchise locations, six co-branded Cold Stone Creamery locations, one international self-serve frozen yogurt café, and one domestic self-serve frozen yogurt café during FY2018. |
| | ● | On May 10, 2018, the Company announced that its 60th consecutive quarterly cash dividend in the amount of $0.12 per share will be paid on June 15, 2018 to shareholders of record at the close of business on June 5, 2018. |
FOURTH QUARTER OPERATING RESULTS
Total revenue increased 1.3 percent to $10.5 million during the fourth quarter of 2018 compared to $10.4 million during the three months ended February 28, 2017 (the “fourth quarter of 2017”).
Factory sales increased 3.0 percent during the fourth quarter of 2018, compared to the fourth quarter of 2017, primarily due to a 7.5 percent increase in shipments of product to customers outside of our network of franchise retail locations. This increase was partially offset by a 0.4 percent decrease in purchases by our network of franchised and licensed retail locations. Same-store pounds purchased by domestic Rocky Mountain Chocolate Factory franchise and license locations decreased 8.6 percent in the fourth quarter of 2018, compared with the fourth quarter of 2017.
Retail sales increased 4.4 percent during the fourth quarter of 2018, primarily the result of an increase in the number of retail units in operation as a result of the acquisition of a franchise location during July 2017. Same-store sales at Company-owned stores and cafés decreased 6.1 percent in the fourth quarter of 2018 compared to fourth quarter of 2017.
Royalty and marketing fees decreased 8.0 percent in the fourth quarter of 2018, primarily due to an 11.9 percent decrease in the number of domestic franchised locations in operation during the fourth quarter of 2018 compared to the fourth quarter of 2017. The Company’s franchisees and licensees opened one domestic Rocky Mountain Chocolate Factory franchise location, two international Rocky Mountain Chocolate Factory locations, one Cold Stone Creamery co-branded location and one international self-serve frozen yogurt café during the fourth quarter of 2018. Complete lists of stores and cafés currently in operation are available on the Company’s websites at www.rmcf.com and www.u-swirl.com.
Franchise fees increased 42.5 percent in the fourth quarter of 2018, primarily resulting from an increase in international license fees during the fourth quarter of 2018 compared to the fourth quarter of 2017.
Income from operations increased 4.6 percent to $1,227,000 in the fourth quarter of 2018, compared with income from operations of $1,173,000 during the fourth quarter of 2017.
Interest expense, net of interest income, totaled $21,000 in the fourth quarter of 2018, compared with interest expense, net of interest income, of $29,000 in the fourth quarter of 2017. The decrease in net interest expense resulted from lower outstanding debt, the result of scheduled repayments towards a promissory note entered into in January 2014 to fund business acquisitions by U-Swirl, Inc.
The Company’s effective income tax rate in the fourth quarter of 2018 was 60.9 percent compared with 36.0 percent in the fourth quarter of 2017. This increase was due to the one-time revaluation of deferred tax assets and liabilities to the lower enacted U.S. corporate tax rate of 21% under the Tax Cuts and Jobs Act.
Net income decreased 35.6 percent to $471,000, or $0.08 per basic and diluted share in the fourth quarter of 2018, compared to net income of $732,000, or $0.13 per basic share and $0.12 per diluted share in the fourth quarter of 2017.
Adjusted EBITDA (a non-GAAP financial measure defined and reconciled later in this release) increased 3.9 percent during the fourth quarter of 2018 to $1.7 million, compared to $1.6 million in the fourth quarter of 2017.
FY2018 OPERATING RESULTS
Total revenue decreased 0.6 percent to $38.1 million during FY2018 compared to $38.3 million during FY2017.
Factory sales increased 2.5 percent during FY2018, compared to FY2017, primarily due to a 14.2 percent increase in shipments of product to customers outside our network of franchised retail stores, partially offset by a 2.7 percent decrease in shipments to our network of franchised and licensed stores. Same-store pounds purchased by domestic Rocky Mountain Chocolate Factory franchise and license locations decreased 4.9 percent in FY2018, compared with FY2017.
Retail sales decreased 7.7 percent during FY2018, primarily due to a decrease in the number of in retail units in operation during FY2018 due to the sale of certain Company-owned locations and the closure of a certain underperforming Company-owned location, partially offset by the acquisition of a franchised location. Same-store sales at all Company-owned stores and cafés decreased 3.9 percent in FY2018 compared to FY2017.
Royalty and marketing fees decreased 10.7 percent in FY2018, primarily due to a 14.6 percent decrease in the average number of domestic franchised locations in operation during FY2018 compared to FY2017. The Company’s franchisees and licensees opened six domestic Rocky Mountain Chocolate Factory franchise locations, five international locations, six Cold Stone Creamery co-branded locations, one domestic franchised self-serve frozen yogurt café and one international self-serve frozen yogurt café during FY2018. Complete lists of stores and cafés currently in operation are available on the Company’s websites at www.rmcf.com and www.u-swirl.com.
Franchise fees increased 109.9 percent in FY2018, resulting primarily from an increase in international license fees during FY2018 compared to FY2017.
Income from operations decreased 5.5 percent to $5.2 million in FY2018, compared with income from operations of $5.5 million during FY2017.
Interest expense, net of interest income, totaled $97,000 in FY2018, compared with interest expense, net of interest income, of $129,000 in FY2017. The decrease in net interest expense resulted from lower outstanding debt, the result of scheduled repayments towards a promissory note entered into in January 2014 to fund business acquisitions by U-Swirl, Inc.
The Company’s effective income tax rate in FY2018 was 42.2 percent compared with 36.1 percent in FY2017. This increase in the effective tax rate is primarily due to the revaluation of deferred tax assets and liabilities to the lower enacted U.S. corporate tax rate of 21% under the Tax Cuts and Jobs Act.
Net income decreased 14.1 percent to $3.0 million, or $0.50 per basic and diluted share in FY2018, compared to net income of $3.5 million, or $0.59 per basic share and $0.58 per diluted share in FY2017.
Adjusted EBITDA (a non-GAAP financial measure defined and reconciled later in this release) declined 4.4 percent in FY2018 to $7.1 million, compared with $7.5 million in FY2017.
Non-GAAP Financial Measures
Adjusted EBITDA, a non-GAAP financial measure, is computed by adding depreciation and amortization, equity compensation expenses, and restructuring and acquisition-related charges to GAAP income from operations.
This non-GAAP financial measure may have limitations as an analytical tool, and this measure should not be considered in isolation or as a substitute for analysis of results as reported under GAAP. The Company believes that the adjusted EBITDA provides additional analytical information on the nature of ongoing operations excluding expenses not expected to recur in future periods, non-cash charges and variations in the effective tax rate among periods. For example, the Company believes that adjusted EBITDA is useful to investors because it provides a measure of operating performance and its ability to generate cash that is unaffected by non-cash accounting measures and non-recurring expenses. However, due to these limitations, the Company uses adjusted EBITDA as a measure of performance only in conjunction with GAAP measures of performance such as income from operations and net income. Reconciliations of this non-GAAP measure to their most comparable GAAP measure are included below.
Cash Dividends
On May 10, 2018, the Company announced that its 60th consecutive quarterly cash dividend of $0.12 per share will be paid on June 15, 2018 to shareholders of record at the close of business on June 5, 2018.
About Rocky Mountain Chocolate Factory, Inc.
Rocky Mountain Chocolate Factory, Inc., headquartered in Durango, Colorado, is an international franchiser of gourmet chocolate, confection and self-serve frozen yogurt stores and a manufacturer of an extensive line of premium chocolates and other confectionery products. As of May 10, 2018, the Company, through its subsidiaries and its franchisees and licensees operated 459 Rocky Mountain Chocolate Factory and self-serve frozen yogurt stores in 38 states, Canada, South Korea, Qatar, Panama, and The Republic of the Philippines. The Company’s common stock is listed on the NASDAQ Global Market under the symbol “RMCF.”
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 actual results to differ materially from those indicated or implied by forward-looking statements include, without limitation, changes in the confectionery business environment, seasonality, consumer interest in the Company’s products, general economic conditions, the success of the Company’s frozen yogurt business, receptiveness of our products internationally, 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, the effect of government regulations 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 forward-looking 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, please contact
Rocky Mountain Chocolate Factory, Inc. (970) 375-5678
(Financial Highlights Follow)
STORE INFORMATION
| | | New stores opened during | | | | | |
| | | the three months ended | | | Stores open as of | |
| | | February 28, 2018 | | | February 28, 2018 | |
United States | | | | | | | | |
Rocky Mountain Chocolate Factory | | | | | | | | |
Franchise Stores | | | 1 | | | | 183 | |
Company-Owned Stores | | | 0 | | | | 5 | |
Cold Stone Creamery | | | 1 | | | | 87 | |
International License Stores | | | 2 | | | | 67 | |
U-Swirl | | | | | | | | |
Franchise Stores | | | 0 | | | | 115 | |
Company-Owned Stores | | | 0 | | | | 5 | |
International Franchise Stores | | | 1 | | | | 1 | |
Total | | | 5 | | | | 463 | |
SELECTED BALANCE SHEET DATA
(in thousands)
| | | February 28, 2018 | | | February 28, 2017 | |
Current Assets | | $ | 15,571 | | | $ | 15,151 | |
Total Assets | | $ | 28,941 | | | $ | 29,418 | |
Current Liabilities | | $ | 8,208 | | | $ | 8,060 | |
Stockholder's Equity | | $ | 19,557 | | | $ | 18,829 | |
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share and per share data)
| | | Three Months Ended February 28, | | | Three Months Ended February 28, | |
| | | 2018 | | | 2017 | | | 2018 | | | 2017 | |
Revenues | | | | | | | | | | | | | | | | |
Factory sales | | $ | 7,480 | | | $ | 7,264 | | | | 71.2 | % | | | 70.1 | % |
Royalty and marketing fees | | | 1,835 | | | | 1,995 | | | | 17.5 | % | | | 19.3 | % |
Franchise fees | | | 119 | | | | 83 | | | | 1.1 | % | | | 0.8 | % |
Retail sales | | | 1,066 | | | | 1,021 | | | | 10.2 | % | | | 9.9 | % |
Total Revenues | | | 10,500 | | | | 10,363 | | | | 100.0 | % | | | 100.0 | % |
| | | | | | | | | | | | | | | | | |
Costs and expenses | | | | | | | | | | | | | | | | |
Cost of sales | | | 6,269 | | | | 6,362 | | | | 59.7 | % | | | 61.4 | % |
Franchise costs | | | 509 | | | | 496 | | | | 4.8 | % | | | 4.8 | % |
Sales and marketing | | | 704 | | | | 699 | | | | 6.7 | % | | | 6.7 | % |
General and administrative | | | 972 | | | | 903 | | | | 9.3 | % | | | 8.7 | % |
Retail operating | | | 615 | | | | 527 | | | | 5.9 | % | | | 5.1 | % |
Depreciation and amortization, exclusive of depreciation and amortization expense of $135 and $123 included in cost of sales, respectively | | | 204 | | | | 203 | | | | 1.9 | % | | | 2.0 | % |
Restructuring and acquisition related charges | | | - | | | | - | | | | 0.0 | % | | | 0.0 | % |
Total Costs and Expenses | | | 9,273 | | | | 9,190 | | | | 88.3 | % | | | 88.7 | % |
| | | | | | | | | | | | | | | | | |
Income from operations | | | 1,227 | | | | 1,173 | | | | 11.7 | % | | | 11.3 | % |
| | | | | | | | | | | | | | | | | |
Other income (expense) | | | | | | | | | | | | | | | | |
Interest expense | | | (25 | ) | | | (38 | ) | | | -0.2 | % | | | -0.4 | % |
Interest income | | | 4 | | | | 9 | | | | 0.0 | % | | | 0.1 | % |
Other, net | | | (21 | ) | | | (29 | ) | | | -0.2 | % | | | -0.3 | % |
| | | | | | | | | | | | | | | | | |
Income before income taxes | | | 1,206 | | | | 1,144 | | | | 11.5 | % | | | 11.0 | % |
| | | | | | | | | | | | | | | | | |
Provision for income taxes | | | 735 | | | | 412 | | | | 7.0 | % | | | 4.0 | % |
| | | | | | | | | | | | | | | | | |
Consolidated net income | | | 471 | | | | 732 | | | | 4.5 | % | | | 7.1 | % |
| | | | | | | | | | | | | | | | | |
Basic Earnings Per Common Share | | $ | 0.08 | | | $ | 0.13 | | | | | | | | | |
Diluted Earnings Per Common Share | | $ | 0.08 | | | $ | 0.12 | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Weighted Average Common Shares Outstanding | | | 5,903,436 | | | | 5,854,372 | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Dilutive Effect of Employee Stock Awards | | | 77,628 | | | | 123,658 | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Weighted Average Common Shares Outstanding, Assuming Dilution | | | 5,981,064 | | | | 5,978,030 | | | | | | | | | |
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share and per share data)
| | | Fiscal Year Ended February 28, | | | Fiscal Year Ended February 28, | |
| | | 2018 | | | 2017 | | | 2018 | | | 2017 | |
Revenues | | | | | | | | | | | | | | | | |
Factory sales | | $ | 26,057 | | | $ | 25,424 | | | | 68.4 | % | | | 66.4 | % |
Royalty and marketing fees | | | 7,225 | | | | 8,095 | | | | 19.0 | % | | | 21.1 | % |
Franchise fees | | | 682 | | | | 325 | | | | 1.8 | % | | | 0.8 | % |
Retail sales | | | 4,111 | | | | 4,452 | | | | 10.8 | % | | | 11.6 | % |
Total Revenues | | | 38,075 | | | | 38,296 | | | | 100.0 | % | | | 100.0 | % |
| | | | | | | | | | | | | | | | | |
Costs and expenses | | | | | | | | | | | | | | | | |
Cost of sales | | | 21,177 | | | | 20,736 | | | | 55.6 | % | | | 54.1 | % |
Franchise costs | | | 2,098 | | | | 2,067 | | | | 5.5 | % | | | 5.4 | % |
Sales and marketing | | | 2,489 | | | | 2,658 | | | | 6.5 | % | | | 6.9 | % |
General and administrative | | | 3,905 | | | | 4,005 | | | | 10.3 | % | | | 10.5 | % |
Retail operating | | | 2,389 | | | | 2,404 | | | | 6.3 | % | | | 6.3 | % |
Depreciation and amortization, exclusive of depreciation and amortization expense of $523 and $448 included in cost of sales, respectively | | | 796 | | | | 841 | | | | 2.1 | % | | | 2.2 | % |
Restructuring and acquisition related charges | | | - | | | | 60 | | | | 0.0 | % | | | 0.2 | % |
Total Costs and Expenses | | | 32,854 | | | | 32,771 | | | | 86.3 | % | | | 85.6 | % |
| | | | | | | | | | | | | | | | | |
Income from operations | | | 5,221 | | | | 5,525 | | | | 13.7 | % | | | 14.4 | % |
| | | | | | | | | | | | | | | | | |
Other income (expense) | | | | | | | | | | | | | | | | |
Interest expense | | | (121 | ) | | | (171 | ) | | | -0.3 | % | | | -0.4 | % |
Interest income | | | 24 | | | | 42 | | | | 0.1 | % | | | 0.1 | % |
Other, net | | | (97 | ) | | | (129 | ) | | | -0.3 | % | | | -0.3 | % |
| | | | | | | | | | | | | | | | | |
Income before income taxes | | | 5,124 | | | | 5,396 | | | | 13.5 | % | | | 14.1 | % |
| | | | | | | | | | | | | | | | | |
Provision for income taxes | | | 2,160 | | | | 1,946 | | | | 5.7 | % | | | 5.1 | % |
| | | | | | | | | | | | | | | | | |
Consolidated net income | | | 2,964 | | | | 3,450 | | | | 7.8 | % | | | 9.0 | % |
| | | | | | | | | | | | | | | | | |
Basic Earnings Per Common Share | | $ | 0.50 | | | $ | 0.59 | | | | | | | | | |
Diluted Earnings Per Common Share | | $ | 0.50 | | | $ | 0.58 | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Weighted Average Common Shares Outstanding | | | 5,884,337 | | | | 5,843,245 | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Dilutive Effect of Employee Stock Awards | | | 96,099 | | | | 150,447 | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Weighted Average Common Shares Outstanding, Assuming Dilution | | | 5,980,436 | | | | 5,993,692 | | | | | | | | | |
GAAP RECONCILIATION
ADJUSTED EBITDA
(in thousands)
| | | Three Months Ended February 28, | | | | | |
| | | 2018 | | | 2017 | | | Change | |
GAAP: Income from Operations | | $ | 1,227 | | | $ | 1,173 | | | | 4.6 | % |
Depreciation and Amortization | | | 339 | | | | 326 | | | | | |
Equity Compensation Expense | | | 134 | | | | 137 | | | | | |
Restructuring and acquisition related charges | | | - | | | | - | | | | | |
Non-GAAP, adjusted EBITDA | | $ | 1,700 | | | $ | 1,636 | | | | 3.9 | % |
| | | Fiscal Year Ended February 28, | | | | | |
| | | 2018 | | | 2017 | | | Change | |
GAAP: Income from Operations | | $ | 5,221 | | | $ | 5,525 | | | | -5.5 | % |
Depreciation and Amortization | | | 1,319 | | | | 1,289 | | | | | |
Equity Compensation Expense | | | 592 | | | | 585 | | | | | |
Restructuring and acquisition related charges | | | - | | | | 60 | | | | | |
Non-GAAP, adjusted EBITDA | | $ | 7,132 | | | $ | 7,459 | | | | -4.4 | % |
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