e10vq
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
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| þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 |
For the quarterly period ended August 31, 2006
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| o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the transition period from to
Commission file number 0-14749
Rocky Mountain Chocolate Factory, Inc.
(Exact name of registrant as specified in its charter)
Colorado
(State of incorporation)
84-0910696
(I.R.S. Employer Identification No.)
265 Turner Drive, Durango, CO 81303
(Address of principal executive offices)
(970) 259-0554
(Registrant’s telephone number, including area code)
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 þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or
a non-accelerated filer. See definition of “accelerated filer and larger accelerated filer” in
Rule 12b of the Act. (Check one):
Large accelerated filer o Accelerated filer þ Non-accelerated filer o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange act). Yes o No þ
On September 29, 2006 the registrant had outstanding 6,082,457 shares of its common stock, $.03 par
value.
The exhibit index is located on page 20.
ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
FORM 10-Q
TABLE OF CONTENTS
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
STATEMENTS OF INCOME
(unaudited)
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Three Months Ended August 31, |
|
Six Months Ended August 31, |
| |
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2006 |
|
2005 |
|
2006 |
|
2005 |
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
$ |
5,238,115 |
|
|
$ |
5,109,738 |
|
|
$ |
10,587,272 |
|
|
$ |
9,141,268 |
|
Franchise and royalty fees |
|
|
1,541,454 |
|
|
|
1,473,422 |
|
|
|
2,960,709 |
|
|
|
2,808,693 |
|
Total revenues |
|
|
6,779,569 |
|
|
|
6,583,160 |
|
|
|
13,547,981 |
|
|
|
11,949,961 |
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|
|
|
|
|
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|
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Costs and Expenses |
|
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|
|
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|
|
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Cost of sales |
|
|
3,166,734 |
|
|
|
3,017,913 |
|
|
|
6,503,129 |
|
|
|
5,415,512 |
|
Franchise costs |
|
|
384,082 |
|
|
|
306,704 |
|
|
|
716,615 |
|
|
|
645,053 |
|
Sales and marketing |
|
|
353,538 |
|
|
|
284,911 |
|
|
|
704,752 |
|
|
|
590,660 |
|
General and administrative |
|
|
586,429 |
|
|
|
507,023 |
|
|
|
1,219,314 |
|
|
|
1,035,967 |
|
Retail operating |
|
|
403,393 |
|
|
|
473,546 |
|
|
|
812,204 |
|
|
|
862,474 |
|
Depreciation and amortization |
|
|
225,764 |
|
|
|
204,257 |
|
|
|
461,445 |
|
|
|
413,865 |
|
Total costs and expenses |
|
|
5,119,940 |
|
|
|
4,794,354 |
|
|
|
10,417,459 |
|
|
|
8,963,531 |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Income from Operations |
|
|
1,659,629 |
|
|
|
1,788,806 |
|
|
|
3,130,522 |
|
|
|
2,986,430 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Other Income (Expense) |
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|
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Interest expense |
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— |
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|
— |
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|
— |
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|
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(19,652 |
) |
Interest income |
|
|
12,061 |
|
|
|
17,527 |
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|
|
37,214 |
|
|
|
49,500 |
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Total other, net |
|
|
12,061 |
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|
|
17,527 |
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|
|
37,214 |
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|
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29,848 |
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|
|
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|
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Income Before Income Taxes |
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|
1,671,690 |
|
|
|
1,806,333 |
|
|
|
3,167,736 |
|
|
|
3,016,278 |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Provision for Income Taxes |
|
|
631,900 |
|
|
|
682,795 |
|
|
|
1,197,405 |
|
|
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1,140,155 |
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|
|
|
|
|
|
|
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Net Income |
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$ |
1,039,790 |
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$ |
1,123,538 |
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$ |
1,970,331 |
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$ |
1,876,123 |
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|
|
|
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Basic Earnings per Common Share |
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$ |
.17 |
|
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$ |
.18 |
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$ |
.32 |
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|
$ |
.30 |
|
Diluted Earnings per Common Share |
|
$ |
.17 |
|
|
$ |
.17 |
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|
$ |
.31 |
|
|
$ |
.28 |
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Weighted Average Common Shares
Outstanding |
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6,079,077 |
|
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6,270,974 |
|
|
|
6,153,611 |
|
|
|
6,218,478 |
|
Dilutive Effect of Stock Options |
|
|
217,699 |
|
|
|
469,741 |
|
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|
236,030 |
|
|
|
490,423 |
|
Weighted Average Common Shares
Outstanding, Assuming Dilution |
|
|
6,296,776 |
|
|
|
6,740,715 |
|
|
|
6,389,641 |
|
|
|
6,708,901 |
|
The accompanying notes are an integral part of these financial statements.
3
ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
BALANCE SHEETS
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August 31, |
|
February 28, |
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2006 |
|
2006 |
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|
(unaudited) |
|
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|
Assets |
|
|
|
|
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Current Assets |
|
|
|
|
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Cash and cash equivalents |
|
$ |
743,047 |
|
|
$ |
3,489,750 |
|
Accounts receivable, less allowance for doubtful accounts of $42,567 and
$46,920 respectively |
|
|
3,219,064 |
|
|
|
3,296,690 |
|
Notes receivable |
|
|
92,300 |
|
|
|
116,997 |
|
Inventories, less reserve for slow moving inventory of
$78,120 and $61,032, respectively |
|
|
4,141,334 |
|
|
|
2,938,234 |
|
Deferred income taxes |
|
|
117,715 |
|
|
|
117,715 |
|
Other |
|
|
486,895 |
|
|
|
481,091 |
|
Total current assets |
|
|
8,800,355 |
|
|
|
10,440,477 |
|
|
|
|
|
|
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Property and Equipment, Net |
|
|
6,277,082 |
|
|
|
6,698,604 |
|
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|
|
|
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|
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Other Assets |
|
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|
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|
|
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Notes receivable, less valuation allowance
of $52,005 |
|
|
241,930 |
|
|
|
278,741 |
|
Goodwill, net |
|
|
1,133,751 |
|
|
|
1,133,751 |
|
Intangible assets, net |
|
|
365,914 |
|
|
|
402,469 |
|
Other |
|
|
166,196 |
|
|
|
103,438 |
|
Total other assets |
|
|
1,907,791 |
|
|
|
1,918,399 |
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
16,985,228 |
|
|
$ |
19,057,480 |
|
|
|
|
|
|
|
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Liabilities and Stockholders’ Equity |
|
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Current Liabilities |
|
|
|
|
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|
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Accounts payable |
|
$ |
1,247,217 |
|
|
$ |
1,145,410 |
|
Accrued salaries and wages |
|
|
384,938 |
|
|
|
507,480 |
|
Other accrued expenses |
|
|
932,668 |
|
|
|
750,733 |
|
Dividend payable |
|
|
487,829 |
|
|
|
504,150 |
|
Total current liabilities |
|
|
3,052,652 |
|
|
|
2,907,773 |
|
|
|
|
|
|
|
|
|
|
Deferred Income Taxes |
|
|
663,889 |
|
|
|
663,889 |
|
|
|
|
|
|
|
|
|
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Commitments and Contingencies |
|
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Stockholders’ Equity |
|
|
|
|
|
|
|
|
Common stock, $.03 par value, 100,000,000 shares authorized, 6,080,307
and 6,281,920 issued and outstanding |
|
|
182,409 |
|
|
|
188,458 |
|
Additional paid-in capital |
|
|
7,167,013 |
|
|
|
10,372,530 |
|
Retained earnings |
|
|
5,919,265 |
|
|
|
4,924,830 |
|
Total stockholders’ equity |
|
|
13,268,687 |
|
|
|
15,485,818 |
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity |
|
$ |
16,985,228 |
|
|
$ |
19,057,480 |
|
The accompanying notes are an integral part of these financial statements.
4
ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
STATEMENTS OF CASH FLOWS
(unaudited)
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Six Months Ended |
| |
|
August 31, |
| |
|
2006 |
|
2005 |
Cash Flows From Operating activities |
|
|
|
|
|
|
|
|
Net income |
|
$ |
1,970,331 |
|
|
$ |
1,876,123 |
|
Adjustments to reconcile net income to net cash
Provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
461,445 |
|
|
|
413,865 |
|
Provision for obsolete inventory |
|
|
30,000 |
|
|
|
15,000 |
|
(Gain) loss on sale of property and equipment |
|
|
76,273 |
|
|
|
(1,390 |
) |
Expense recorded for stock options |
|
|
201,269 |
|
|
|
— |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
77,626 |
|
|
|
(361,266 |
) |
Refundable income taxes |
|
|
— |
|
|
|
364,630 |
|
Inventories |
|
|
(1,233,100 |
) |
|
|
(1,023,726 |
) |
Other current assets |
|
|
(3,596 |
) |
|
|
(257,965 |
) |
Accounts payable |
|
|
101,807 |
|
|
|
(399,345 |
) |
Accrued liabilities |
|
|
61,593 |
|
|
|
(287,274 |
) |
Net cash provided by operating activities |
|
|
1,743,648 |
|
|
|
338,652 |
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities |
|
|
|
|
|
|
|
|
Proceeds received on notes receivable |
|
|
61,508 |
|
|
|
126,484 |
|
Proceeds from sale of assets |
|
|
(16,012 |
) |
|
|
4,708 |
|
Purchases of property and equipment |
|
|
(119,640 |
) |
|
|
(826,897 |
) |
Decrease in other assets |
|
|
4,667 |
|
|
|
4,742 |
|
Net cash used in investing activities |
|
|
(69,477 |
) |
|
|
(690,963 |
) |
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities |
|
|
|
|
|
|
|
|
Payments on long-term debt |
|
|
— |
|
|
|
(1,665,084 |
) |
Repurchase and redemption of common stock |
|
|
(3,764,914 |
) |
|
|
(245,995 |
) |
Dividends paid |
|
|
(992,217 |
) |
|
|
(835,968 |
) |
Costs of stock dividend or stock split |
|
|
— |
|
|
|
(8,902 |
) |
Proceeds from exercise of stock options |
|
|
336,257 |
|
|
|
868,859 |
|
Net cash used in financing activities |
|
|
(4,420,874 |
) |
|
|
(1,887,090 |
) |
|
|
|
|
|
|
|
|
|
Net Decrease in Cash and Cash Equivalents |
|
|
(2,746,703 |
) |
|
|
(2,239,401 |
) |
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, Beginning of Period |
|
|
3,489,750 |
|
|
|
4,438,876 |
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, End of Period |
|
$ |
743,047 |
|
|
$ |
2,199,475 |
|
The accompanying notes are an integral part of these financial statements.
5
ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Nature of Operations
Rocky Mountain Chocolate Factory, Inc. is an international franchiser, confectionery manufacturer
and retail operator in the United States, Guam, Canada and the United Arab Emirates. The Company
manufactures an extensive line of premium chocolate candies and other confectionery products. The
Company’s revenues are currently derived from three principal sources: sales to franchisees and
others of chocolates and other confectionery products manufactured by the Company; the collection
of initial franchise fees and royalties from franchisees’ sales; and sales at Company-owned stores
of chocolates and other confectionery products. The following table summarizes the number of RMCF
stores at August 31, 2006:
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|
|
|
|
|
| |
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Sold, Not Yet Open |
|
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Open |
|
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Total |
|
Company owned stores |
|
|
— |
|
|
|
7 |
|
|
|
7 |
|
Company owned kiosks |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Franchise stores – Domestic stores |
|
|
21 |
|
|
|
243 |
|
|
|
264 |
|
Franchise Stores – Domestic kiosks |
|
|
2 |
|
|
|
20 |
|
|
|
22 |
|
Franchise units – International |
|
|
— |
|
|
|
36 |
|
|
|
36 |
|
|
|
|
23 |
|
|
|
306 |
|
|
|
329 |
|
Basis of Presentation
The accompanying financial statements have been prepared by the Company, without audit, and reflect
all adjustments which are, in the opinion of management, necessary for a fair statement of the
results for the interim periods. The statements have been prepared in accordance with accounting
principles generally accepted in the United States of America for interim financial reporting and
Securities and Exchange Commission regulations. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed or omitted pursuant to such
rules and regulations. In the opinion of management, the financial statements reflect all
adjustments (of a normal and recurring nature) which are necessary for a fair presentation of the
financial position, results of operations and cash flows for the interim periods. The results of
operations for the six months ended August 31, 2006 are not necessarily indicative of the results
to be expected for the entire fiscal year.
These financial statements should be read in conjunction with the financial statements and notes
thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended February 28,
2006.
Stock-Based Compensation
At August 31, 2006, the Company had stock-based compensation plans for employees and nonemployee
directors which authorized the granting of stock options.
Prior to March 1, 2006, the Company accounted for the plans under the measurement and recognition
provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to
Employees,” and related Interpretations, permitted under Statement of Financial Accounting Standard
No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”). As a result, employee stock
option-based compensation was included as a pro forma disclosure in the Notes to the Company’s
Financial Statements for prior year periods.
Effective March 1, 2006, the Company adopted the recognition provisions of Statement of Financial
Accounting Standard No. 123R, “Share-Based Payment” (“SFAS No. 123R”), using the
modified-prospective transition method. Under this transition method, compensation cost in 2006
includes the portion vesting in the period for (1) all share-based payments granted prior to, but
not vested, as of March 1, 2006, based on the grant date fair value estimated in accordance with
the original provisions of SFAS No. 123, and (2) all share-based payments
6
NOTE 1 — NATURE OF OPERATIONS AND BASIS OF PRESENTATION — CONTINUED
granted subsequent to March 1, 2006, based on the grant date fair value estimated in accordance
with the provisions of SFAS No. 123R. Results for the prior periods have not been restated.
The Company did not issue stock options and recorded $0 related equity-based compensation expense
during the three and six month periods ended August 31, 2006. Compensation costs related to
share-based compensation are generally amortized over the vesting period in selling, general and
administrative expenses in the statement of operations.
On February 21, 2006, the Company accelerated the vesting of all outstanding stock options and
recognized a share-based compensation charge related to this acceleration. The Company recognized
an additional share-based compensation charge of $131,000 for the three months ended August 31,
2006 related to this acceleration due to changes in certain estimates and assumptions related to
employee turnover since the acceleration date. Adjustments in future periods may be necessary as
actual results could differ from these estimates and assumptions.
Prior to adopting SFAS No. 123R, the Company presented all benefits from tax deductions arising
from equity-based compensation as a non-cash transaction in the Statement of Cash Flows. SFAS No.
123R requires that the tax benefits in excess of the compensation cost recognized for those
exercised options be classified as cash provided by financing activities. No excess tax benefit was
included in net cash provided by financing activities for the second quarter ended August 31, 2006.
The weighted-average fair value of stock options granted during the six-month periods ended August
31, 2006 and August 31, 2005 was $0 and $4.16 per share, respectively. As of August 31, 2006, there
was $0 (before any related tax benefit) of unrecognized compensation cost related to non-vested
share-based compensation that is expected to be recognized over the remainder of fiscal 2007.
| |
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months ended August 31, |
|
Six Months Ended August 31, |
| |
|
2006 |
|
2005 |
|
2006 |
|
2005 |
Net Income – as reported |
|
$ |
1,040 |
|
|
$ |
1,124 |
|
|
$ |
1,970 |
|
|
$ |
1,876 |
|
Add: Stock-based compensation expense
included in reported net income, net
of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Deduct: Stock-based compensation
expense determined under fair value
based method, net of tax |
|
|
— |
|
|
|
40 |
|
|
|
— |
|
|
|
80 |
|
Net Income – pro forma |
|
|
1,040 |
|
|
|
1,084 |
|
|
|
1,970 |
|
|
|
1,796 |
|
Basic Earnings per Share-as reported |
|
|
.17 |
|
|
|
.18 |
|
|
|
.32 |
|
|
|
.30 |
|
Diluted Earnings per Share-as reported |
|
|
.17 |
|
|
|
.17 |
|
|
|
.31 |
|
|
|
.28 |
|
Basic Earnings per Share-pro forma |
|
|
.17 |
|
|
|
.17 |
|
|
|
.32 |
|
|
|
.29 |
|
Diluted Earnings per Share-pro forma |
|
|
.17 |
|
|
|
.16 |
|
|
|
.31 |
|
|
|
.27 |
|
NOTE 2 — EARNINGS PER SHARE
Basic earnings per share is calculated using the weighted average number of common shares
outstanding. Diluted earnings per share reflects the potential dilution that could occur from
common shares issuable through stock options. For the three months ended August 31, 2006 and 2005,
146,560 and zero stock options, respectively, were excluded from the computation of earnings per
share because their effect would have been anti-dilutive. For the six months ended August 31, 2006
and 2005, 141,940 and zero stock options, respectively, were excluded from the computation of
earnings per share because their effect would have been anti-dilutive.
NOTE 3
— INVENTORIES
Inventories consist of the following:
| |
|
|
|
|
|
|
|
|
| |
|
August 31, 2006 |
|
February 28, 2006 |
Ingredients and supplies |
|
$ |
1,744,539 |
|
|
$ |
1,507,193 |
|
Finished candy |
|
|
2,396,795 |
|
|
|
1,431,041 |
|
|
|
$ |
4,141,334 |
|
|
$ |
2,938,234 |
|
7
NOTE 4 — PROPERTY AND EQUIPMENT, NET
Property and equipment consists of the following:
| |
|
|
|
|
|
|
|
|
| |
|
August 31, 2006 |
|
February 28, 2006 |
Land |
|
$ |
513,618 |
|
|
$ |
513,618 |
|
Building |
|
|
4,717,230 |
|
|
|
4,705,242 |
|
Machinery and equipment |
|
|
6,296,229 |
|
|
|
6,252,011 |
|
Furniture and fixtures |
|
|
752,745 |
|
|
|
817,137 |
|
Leasehold improvements |
|
|
590,979 |
|
|
|
641,637 |
|
Transportation equipment |
|
|
331,640 |
|
|
|
331,640 |
|
|
|
|
13,202,441 |
|
|
|
13,261,285 |
|
Less accumulated depreciation |
|
|
6,925,359 |
|
|
|
6,562,681 |
|
Property and equipment, net |
|
$ |
6,277,082 |
|
|
$ |
6,698,604 |
|
NOTE 5 — STOCKHOLDERS’ EQUITY
Stock Dividend
On February 15, 2005 the Board of Directors declared a 5 percent stock dividend payable on March
10, 2005 to shareholders of record as of February 28, 2005. Shareholders received one additional
share of Common Stock for every twenty shares owned prior to the record date. Subsequent to the
dividend there were 4,602,135 shares outstanding.
Stock Split
On May 18, 2005 the Board of Directors approved a four-for-three stock split payable June 13, 2005
to shareholders of record at the close of business on May 31, 2005. Shareholders received one
additional share of common stock for every three shares owned prior to the record date.
Immediately prior to the split there were 4,639,244 shares outstanding. Subsequent to the split
there were 6,186,007 shares outstanding.
All share and per share data have been restated in all years presented to give effect to the stock
dividends and stock splits.
Stock Repurchases
Between June 30, 2006 and August 25, 2006 the Company repurchased 42,699 shares at an average price
of $13.63 per share. Between March 24, 2006 and May 18, 2006 the Company repurchased 224,213 shares
at an average price of $14.20 per share. Between October 7, 2005 and February 3, 2006 the Company
repurchased 176,599 Company shares at an average price of $15.36 per share. Between April 18 and
April 20, 2005 the Company repurchased 17,647 shares at an average price of $13.94 per share.
Between March 11, 2004 and June 14, 2004 the Company repurchased 125,216 Company shares at an
average price of $6.74 per share.
Cash Dividend
The Company paid a quarterly cash dividend of $0.08 per common share on March 16, 2006 and June 16,
2006 to shareholders of record on March 8, 2006 and June 2, 2006, respectively. On August 16, 2006
the Company declared a quarterly cash dividend of $0.08 per common share payable on September 15,
2006 to shareholders of record on September 1, 2006.
The Company paid a quarterly cash dividend of $0.0675 per common share on March 16, 2005, June 16,
2005 and September 16, 2005 to shareholders of record on March 11, 2005, June 3, 2005 and September
1, 2005 respectively. The Company paid a quarterly cash dividend of $0.07 per common share on
December 16, 2005 to shareholders of record on December 1, 2005.
Future declaration of dividends will depend on, among other things, the Company’s results of
operations, capital requirements, financial condition and on such other factors as the Company’s
Board of Directors may in its discretion consider relevant and in the best long term interest of
the shareholders.
8
NOTE 6 — SUPPLEMENTAL CASH FLOW INFORMATION
| |
|
|
|
|
|
|
|
|
| |
|
Six Months Ended |
| |
|
August 31, |
| |
|
2006 |
|
2005 |
Cash paid (received) for: |
|
|
|
|
|
|
|
|
Interest |
|
$ |
— |
|
|
$ |
19,872 |
|
Income taxes |
|
|
1,060,033 |
|
|
|
362,166 |
|
|
|
|
|
|
|
|
|
|
Non-Cash Financing Activities |
|
|
|
|
|
|
|
|
Dividend Payable |
|
$ |
(16,321 |
) |
|
$ |
13,151 |
|
Issue stock for services |
|
|
(15,822 |
) |
|
|
— |
|
Fair value of assets received upon settlement
of note and accounts receivable
|
|
|
|
|
|
|
|
|
Store to be operated |
|
$ |
— |
|
|
$ |
200,000 |
|
Inventory |
|
|
— |
|
|
|
3,815 |
|
Note receivable |
|
|
— |
|
|
|
153,780 |
|
NOTE 7 — OPERATING SEGMENTS
The Company classifies its business interests into two reportable segments: Franchising and
Manufacturing. The Company’s retail stores provide an environment for testing consumer behavior,
various pricing strategies, new products and promotions, operating and training methods and
merchandising techniques. All Company-owned retail stores are evaluated by management in relation
to their contribution to franchising efforts and are included in the Franchising segment. The
accounting policies of the segments are the same as those described in the summary of significant
accounting policies in Note 1 to the Company’s financial statements included in the Company’s
annual report on Form 10-K for the year ended February 28, 2006. The Company evaluates performance
and allocates resources based on operating contribution, which excludes unallocated corporate
general and administrative costs and income tax expense or benefit. The Company’s reportable
segments are strategic businesses that utilize common merchandising, distribution, and marketing
functions, as well as common information systems and corporate administration. All inter-segment
sales prices are market based. Each segment is managed separately because of the differences in
required infrastructure and the difference in products and services:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
|
|
|
|
|
|
|
|
| August 31, 2006 |
|
Franchising |
|
Manufacturing |
|
Other |
|
Total |
Total revenues |
|
$ |
2,272,393 |
|
|
$ |
4,979,486 |
|
|
$ |
— |
|
|
$ |
7,251,879 |
|
Intersegment revenues |
|
|
— |
|
|
|
(472,310 |
) |
|
|
— |
|
|
|
(472,310 |
) |
Revenue from external
customers |
|
|
2,272,393 |
|
|
|
4,507,176 |
|
|
|
— |
|
|
|
6,779,569 |
|
Segment profit (loss) |
|
|
791,766 |
|
|
|
1,468,867 |
|
|
|
(588,943 |
) |
|
|
1,671,690 |
|
Total assets |
|
|
2,735,143 |
|
|
|
10,979,924 |
|
|
|
3,270,161 |
|
|
|
16,985,228 |
|
Capital expenditures |
|
|
9,739 |
|
|
|
48,098 |
|
|
|
6,805 |
|
|
|
64,642 |
|
Total depreciation &
amortization |
|
|
61,185 |
|
|
|
110,954 |
|
|
|
53,625 |
|
|
|
225,764 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| August 31, 2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
2,289,054 |
|
|
$ |
4,727,268 |
|
|
$ |
— |
|
|
$ |
7,016,322 |
|
Intersegment revenues |
|
|
— |
|
|
|
(433,162 |
) |
|
|
— |
|
|
|
(433,162 |
) |
Revenue from external
customers |
|
|
2,289,054 |
|
|
|
4,294,106 |
|
|
|
— |
|
|
|
6,583,160 |
|
Segment profit (loss) |
|
|
899,964 |
|
|
|
1,435,248 |
|
|
|
(528,879 |
) |
|
|
1,806,333 |
|
Total assets |
|
|
3,092,933 |
|
|
|
10,386,916 |
|
|
|
4,996,868 |
|
|
|
18,476,717 |
|
Capital expenditures |
|
|
12,720 |
|
|
|
250,918 |
|
|
|
138,957 |
|
|
|
402,595 |
|
Total depreciation &
amortization |
|
|
68,345 |
|
|
|
97,438 |
|
|
|
38,474 |
|
|
|
204,257 |
|
9
NOTE 7 — OPERATING SEGMENTS — CONTINUED
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended |
|
|
|
|
|
|
|
|
| August 31, 2006 |
|
Franchising |
|
Manufacturing |
|
Other |
|
Total |
Total revenues |
|
$ |
4,335,243 |
|
|
$ |
10,133,365 |
|
|
$ |
— |
|
|
$ |
14,468,608 |
|
Intersegment revenues |
|
|
— |
|
|
|
(920,627 |
) |
|
|
— |
|
|
|
(920,627 |
) |
Revenue from external
customers |
|
|
4,335,243 |
|
|
|
9,212,738 |
|
|
|
— |
|
|
|
13,547,981 |
|
Segment profit (loss) |
|
|
1,468,125 |
|
|
|
2,917,685 |
|
|
|
(1,218,074 |
) |
|
|
3,167,736 |
|
Total assets |
|
|
2,735,143 |
|
|
|
10,979,924 |
|
|
|
3,270,161 |
|
|
|
16,985,228 |
|
Capital expenditures |
|
|
22,803 |
|
|
|
71,811 |
|
|
|
25,026 |
|
|
|
119,640 |
|
Total depreciation &
amortization |
|
|
123,687 |
|
|
|
225,451 |
|
|
|
112,307 |
|
|
|
461,445 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| August 31, 2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
4,266,084 |
|
|
$ |
8,457,943 |
|
|
$ |
— |
|
|
$ |
12,724,027 |
|
Intersegment revenues |
|
|
— |
|
|
|
(774,066 |
) |
|
|
— |
|
|
|
(774,066 |
) |
Revenue from external
customers |
|
|
4,266,084 |
|
|
|
7,683,877 |
|
|
|
— |
|
|
|
11,949,961 |
|
Segment profit (loss) |
|
|
1,607,943 |
|
|
|
2,507,267 |
|
|
|
(1,098,932 |
) |
|
|
3,016,278 |
|
Total assets |
|
|
3,092,933 |
|
|
|
10,386,916 |
|
|
|
4,996,868 |
|
|
|
18,476,717 |
|
Capital expenditures |
|
|
83,602 |
|
|
|
544,577 |
|
|
|
198,718 |
|
|
|
826,897 |
|
Total depreciation &
amortization |
|
|
128,019 |
|
|
|
194,379 |
|
|
|
91,467 |
|
|
|
413,865 |
|
NOTE 8 – GOODWILL AND INTANGIBLE ASSETS
Intangible assets consist of the following:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
August 31, 2006 |
|
February 28, 2006 |
| |
|
|
|
|
|
Gross |
|
|
|
|
|
Gross |
|
|
| |
|
Amortization |
|
Carrying |
|
Accumulated |
|
Carrying |
|
Accumulated |
| |
|
Period |
|
Value |
|
Amortization |
|
Value |
|
Amortization |
Intangible assets subject to amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Store design |
|
10 Years |
|
$ |
205,777 |
|
|
|
95,648 |
|
|
$ |
205,777 |
|
|
$ |
85,093 |
|
Packaging licenses |
|
3-5 Years |
|
|
120,830 |
|
|
|
101,664 |
|
|
|
120,830 |
|
|
|
99,164 |
|
Packaging design |
|
10 Years |
|
|
430,973 |
|
|
|
194,354 |
|
|
|
430,973 |
|
|
|
170,854 |
|
Total |
|
|
|
|
|
|
757,580 |
|
|
|
391,666 |
|
|
|
757,580 |
|
|
|
355,111 |
|
| |
Intangible assets not subject to amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchising segment- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company stores goodwill |
|
|
|
|
|
|
1,275,962 |
|
|
|
336,847 |
|
|
|
1,275,962 |
|
|
|
336,847 |
|
Franchising goodwill |
|
|
|
|
|
|
295,000 |
|
|
|
197,682 |
|
|
|
295,000 |
|
|
|
197,682 |
|
Manufacturing segment-Goodwill |
|
|
|
|
|
|
295,000 |
|
|
|
197,682 |
|
|
|
295,000 |
|
|
|
197,682 |
|
Total Goodwill |
|
|
|
|
|
|
1,865,962 |
|
|
|
732,211 |
|
|
|
1,865,962 |
|
|
|
732,211 |
|
| |
Total intangible assets |
|
|
|
|
|
$ |
2,623,542 |
|
|
$ |
1,123,877 |
|
|
$ |
2,623,542 |
|
|
$ |
1,087,322 |
|
Amortization expense related to intangible assets totaled $36,555 and $36,346 during the six
months ended August 31, 2006 and 2005, respectively. The aggregate estimated amortization expense
for intangible assets remaining as of August 31, 2006 is as follows:
| |
|
|
|
|
Remainder of fiscal 2007 |
|
$ |
36,600 |
|
2008 |
|
|
73,100 |
|
2009 |
|
|
73,100 |
|
2010 |
|
|
73,100 |
|
2011 |
|
|
64,400 |
|
Thereafter |
|
|
45,614 |
|
Total |
|
$ |
365,914 |
|
NOTE 9 – STORE PURCHASE
Effective May 1, 2005 the Company financed a note in the amount of $153,780 and took possession of
a previously financed franchise store and related inventory in satisfaction of $357,595 of notes
and accounts receivable. The Company currently intends to retain and operate the store.
10
NOTE 10 — RECENT ACCOUNTING PRONOUNCEMENTS
In March 2006, the Emerging Issues Task Force (“EITF”) reached a consensus on EITF Issue No. 06-3,
“How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in
the Income Statement (that is, Gross versus Net Presentation). Taxes within the scope of EITF Issue
No. 06-3 include any taxes assessed by a governmental authority that are directly imposed on a
revenue-producing transaction between a seller and a customer and may include, but are not limited
to, sales taxes, use taxes, value-added taxes, and some excise taxes. The EITF concluded that the
presentation of these taxes on either a gross (included in revenues and costs) or a net (excluded
from revenues) basis is an accounting policy decision that should be disclosed. For any such taxes
that are reported on a gross basis, a company should disclose the amounts of those taxes in interim
and annual financial statements. The Company’s policy is to exclude all such taxes from revenue.
EITF 06-3 is effective for interim and annual reporting periods beginning after December 15, 2006.
The adoption of EITF 06-3 will not have any effect on the Company’s financial statements.
In July 2006, the FASB issued Interpretation 48 (“FIN 48”), “Accounting for Uncertainty in Income
Taxes,” an interpretation of SFAS No. 109, “Accounting for Income Taxes.” FIN 48 clarifies the
accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in
accordance with SFAS No. 109. The interpretation applies to all tax positions accounted for in
accordance with Statement 109 and requires a more-likely-than-not recognition threshold. A tax
position that meets the more-likely-than-not recognition threshold is initially and subsequently
measured as the largest amount of tax benefit that is greater than 50 percent likely of being
realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant
information. Subsequent recognition, derecognition, and measurement is based on management’s best
judgment given the facts, circumstances and information available at the reporting date. FIN 48 is
effective for fiscal years beginning after December 15, 2006. Early adoption is permitted as of the
beginning of an enterprise’s fiscal year, provided the enterprise has not yet issued financial
statements, including financial statements for any interim period, for that fiscal year. Based upon
the Company’s preliminary evaluation of the effects of this guidance, we do not believe that it
will have a significant impact on the Company’s financial statements.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
A Note About Forward-Looking Statements
The following discussion and analysis of the financial condition and results of operations of the
Company should be read in conjunction with the unaudited financial statements and related Notes of
the Company included elsewhere in this report. The nature of the Company’s operations and the
environment in which it operates subject it to changing economic, competitive, regulatory and
technological conditions, risks and uncertainties. The statements, other than statements of
historical fact, included in this report are forward-looking statements. Many of the
forward-looking statements contained in this document may be identified by the use of
forward-looking words such as “will,” “intend,” “believe,” “expect,” “anticipate,” “should,”
“plan,” “estimate” and “potential,” or similar expressions. Factors which could cause results to
differ include, but are not limited to: changes in the confectionery business environment,
seasonality, consumer interest in the Company’s products, general economic conditions, consumer
trends, costs and availability of raw materials, competition and the effect of government
regulation. Government regulation which the Company and its franchisees either are or may be
subject to and which could cause results to differ from forward-looking statements include, but are
not limited to: local, state and federal laws regarding health, sanitation, safety, building and
fire codes, franchising, employment, manufacturing, packaging and distribution of food products and
motor carriers. For a detailed discussion of the risks and uncertainties that may cause the
Company’s actual results to differ from the forward-looking statements contained herein, please see
the “Risk Factors” contained in the Company’s 10-K for the fiscal year ended February 28, 2006
which can be viewed at the SEC’s website at www.sec.gov or through our website at www.rmcf.com.
These forward-looking statements apply only as of the date of this report. As such they should not
be unduly relied upon for more current circumstances. Except as required by law, the Company is not
obligated to release publicly any revisions to these forward-looking statements that might reflect
events or circumstances occurring after the date of this report or those that might reflect the
occurrence of unanticipated events.
11
The Company is a product-based international franchiser. The Company’s revenues and profitability
are derived principally from its franchised system of retail stores that feature chocolate and
other confectionery products. The Company also sells its candy in selected locations outside its
system of retail stores to build brand awareness. The Company operates seven retail units as a
laboratory to test marketing, design and operational initiatives.
The Company is subject to seasonal fluctuations in sales because of the location of its
franchisees, which are located in street fronts, tourist locations, factory outlets and regional
malls. Seasonal fluctuation in sales cause fluctuations in quarterly results of operations.
Historically, the strongest sales of the Company’s products have occurred during the Christmas
holiday and summer vacation seasons. Additionally, quarterly results have been, and in the future
are likely to be, affected by the timing of new store openings and sales of franchises. Because of
the seasonality of the Company’s business and the impact of new store openings and sales of
franchises, results for any quarter are not necessarily indicative of results that may be achieved
in other quarters or for a full fiscal year.
The most important factors in continued growth in the Company’s earnings are ongoing unit growth,
increased same store sales and increased same store pounds purchased from the factory.
Historically, unit growth has more than offset decreases in same store sales and same store pounds
purchased.
The Company’s ability to successfully achieve expansion of its Rocky Mountain Chocolate Factory
franchise system depends on many factors not within the Company’s control including the
availability of suitable sites for new store establishment and the availability of qualified
franchisees to support such expansion.
Efforts to reverse the decline in same store pounds purchased from the factory by franchised stores
and to increase total factory sales depends on many factors not within the Company’s control
including the receptivity of its franchise system of its product introductions and promotional
programs. Same store pounds purchased from the factory by franchised stores were approximately the
same as the prior year period in the first quarter but declined 7.3% in the second quarter and 3.6%
in the first six months of Fiscal 2007.
As a result, the actual results realized by the Company could differ materially from the results
discussed in or contemplated by the forward-looking statements made herein. Words or phrases such
as “will,” “anticipate,” “expect,” “believe,” “intend,” “estimate,” “project,” “plan” or similar
expressions are intended to identify forward-looking statements. Readers are cautioned not to place
undue reliance on the forward-looking statements in this Quarterly Report on Form 10-Q.
Results of Operations
Three Months Ended August 31, 2006 Compared to the Three Months Ended
August 31, 2005
Basic earnings per share decreased 5.6% from $.18 for the three months ended August 31, 2005 to
$.17 for the three months ended August 31, 2006. Revenues increased 3.0% from fiscal 2006 to fiscal
2007. Operating income decreased 7.2% from $1.8 million in fiscal 2006 to $1.7 million in fiscal
2007. Net income decreased 7.5% from $1.1 million in fiscal 2006 to $1.0 million in fiscal 2007.
The decrease in earnings per share, operating income, and net income for the second quarter of
fiscal 2007 versus the same period in fiscal 2006 was due primarily to the shifting of a large
specialty market shipment from the second quarter last year into the third quarter in Fiscal 2007
and increased stock option compensation expense offset by growth in the average number of franchise
stores in operation and corresponding increases in revenues.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
|
|
|
|
|
| |
|
August 31, |
|
|
|
|
|
% |
| ($’s in thousands) |
|
2006 |
|
2005 |
|
Change |
|
Change |
Factory sales |
|
$ |
4,507.2 |
|
|
$ |
4,294.2 |
|
|
$ |
213.0 |
|
|
|
5.0 |
% |
Retail sales |
|
|
730.9 |
|
|
|
815.6 |
|
|
|
(84.7 |
) |
|
|
(10.4 |
%) |
Franchise fees |
|
|
179.7 |
|
|
|
199.8 |
|
|
|
(20.1 |
) |
|
|
(10.1 |
%) |
Royalty and Marketing fees |
|
|
1,361.8 |
|
|
|
1,273.6 |
|
|
|
88.2 |
|
|
|
6.9 |
% |
Total |
|
$ |
6,779.6 |
|
|
$ |
6,583.2 |
|
|
$ |
196.4 |
|
|
|
3.0 |
% |
12
Factory Sales
Factory sales increased for the three months ended August 31, 2006 due to an increase in the number
of franchise stores in operation. The average number of franchised stores in operation increased to
295 in the second quarter of fiscal 2007 from 279 in the same period in fiscal 2006. Offsetting
this increase was a 41.8% decrease in product shipments to customers outside the system of
franchised retail stores. The decrease in product shipments was caused by a year-over-year timing
difference in shipment dates. Also offsetting this increase was a 7.3% decrease in same store
pounds purchased from the factory by franchised stores. The Company believes that this decrease in
same store pounds reflects an unseasonably hot summer in many regions of the country, along with a
modest softening in the retail sector of the economy. Historically, retail sales of chocolate
products suffer when weather conditions are unusually hot in particular markets.
Retail Sales
Retail sales decreased 10.4% in the second quarter of fiscal 2007 due to a decrease in the average
number of stores in operation from 10 in fiscal 2006 to 8 in fiscal 2007. Same store retail sales
increased 9.1% in the second quarter of fiscal 2007 compared to the same period in the prior year.
Royalties, Marketing Fees and Franchise Fees
The increase in royalties and marketing fees resulted from growth in the average number of domestic
units in operation. The average number of domestic units in operation grew 6.1% from 246 in the
second quarter of fiscal 2006 to 261 in the second quarter of 2007. Partially offsetting this
increase was a decline in same store sales of 1.1% in the second quarter of fiscal 2007 compared to
the same period last year. Franchise fee revenues in the second quarter of fiscal 2007 decreased
10.1% due to a decrease in the number of franchises sold versus the second quarter of fiscal 2006.
Costs and Expenses
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three months ended |
|
|
|
|
|
% |
| ($’s in thousands) |
|
2006 |
|
2005 |
|
Change |
|
Change |
Cost of sales — factory |
|
$ |
2,877.4 |
|
|
$ |
2,700.0 |
|
|
$ |
177.4 |
|
|
|
6.6 |
% |
Cost of sales — retail |
|
|
289.3 |
|
|
|
317.9 |
|
|
|
(28.6 |
) |
|
|
(9.0 |
%) |
Franchise costs |
|
|
384.1 |
|
|
|
306.7 |
|
|
|
77.4 |
|
|
|
25.2 |
% |
Sales and marketing |
|
|
353.5 |
|
|
|
284.9 |
|
|
|
68.6 |
|
|
|
24.1 |
% |
General and administrative |
|
|
586.4 |
|
|
|
507.0 |
|
|
|
79.4 |
|
|
|
15.7 |
% |
Retail operating |
|
|
403.4 |
|
|
|
473.6 |
|
|
|
(70.2 |
) |
|
|
(14.8 |
%) |
Total |
|
$ |
4,894.1 |
|
|
$ |
4,590.1 |
|
|
|
304.0 |
|
|
|
6.6 |
% |
Gross margin
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three months ended |
|
|
|
|
|
% |
| ($’s in thousands) |
|
2006 |
|
2005 |
|
Change |
|
Change |
Factory |
|
$ |
1,629.8 |
|
|
$ |
1,594.2 |
|
|
$ |
35.6 |
|
|
|
2.2 |
% |
Retail |
|
|
441.6 |
|
|
|
497.7 |
|
|
|
(56.1 |
) |
|
|
(11.3 |
%) |
Total |
|
$ |
2,071.4 |
|
|
$ |
2,091.9 |
|
|
|
(20.5 |
) |
|
|
(1.0 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Percent) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Factory |
|
|
36.2 |
% |
|
|
37.1 |
% |
|
|
(0.9 |
%) |
|
|
(2.4 |
%) |
Retail |
|
|
60.4 |
% |
|
|
61.0 |
% |
|
|
(0.6 |
%) |
|
|
(1.0 |
%) |
Total |
|
|
39.5 |
% |
|
|
40.9 |
% |
|
|
(1.4 |
%) |
|
|
(3.4 |
%) |
Costs and Expenses
Cost of Sales
Factory margins declined 90 basis points from fiscal 2006 to fiscal 2007 due primarily to mix of
product sold during the second quarter of fiscal 2007 versus the same period in the prior year.
Reduction in Company-owned store margin is due to changes in mix of product sold.
13
Franchise Costs
The increase in franchise costs is primarily due to increased professional fees related to
franchise operations and an increase in stock option compensation expense. As a percentage of total
royalty and marketing fees and franchise fee revenue, franchise costs increased to 24.9% in the
second quarter of fiscal 2007 from 20.8% in the second quarter of fiscal 2006. This increase as a
percentage of royalty, marketing and franchise fees is primarily a result of higher franchise costs
relative to revenues.
Sales and Marketing
The increase in sales and marketing is due primarily to stock option compensation expense as well
as increased costs for marketing support of the franchisees and promotional costs related to
specialty market sales.
General and Administrative
The increase in general and administrative costs is due primarily to stock option compensation
expense as well as costs incurred upon closure in the second quarter of fiscal 2007 of two of the
Company-owned stores. As a percentage of total revenues, general and administrative expenses
increased to 8.6% in fiscal 2007 compared to 7.7% in fiscal 2006.
Retail Operating Expenses
The decrease in retail operating expenses was due primarily to a decrease in the average number
of stores during the second quarter of fiscal 2007 versus the second quarter fiscal 2006 due to the
closing of two stores. Retail operating expenses, as a percentage of retail sales, decreased from
58.1% in the second quarter of fiscal 2006 to 55.2% in the second quarter of fiscal 2007 due to a
smaller decrease in revenues relative to the decrease in costs.
Depreciation and Amortization
Depreciation and amortization of $226,000 in the second quarter of fiscal 2007 increased 10.5% from
$204,000 incurred in the second quarter of fiscal 2006 due to increased fixed assets in service and
related depreciation expense.
Other, Net
Other, net of $12,000 realized in the second quarter of fiscal 2007 represents a decrease of $5,500
from the $17,500 realized in the second quarter of fiscal 2006, due primarily to lower interest
income from notes receivable and invested cash. Notes receivable balances are declining due to
payments and the Company has been using its excess cash to repurchase stock.
Income Tax Expense
The Company’s effective income tax rate in the second quarter of fiscal 2007 was 37.8%, which is
the same rate as the second quarter of fiscal 2006.
Six Months Ended August 31, 2006 Compared to the Six Months Ended August 31, 2005
Basic earnings per share increased 6.7% from $.30 for the six months ended August 31, 2005 to $.32
for the six months ended August 31, 2006. Revenues increased 15.8% from fiscal 2005 to fiscal 2006.
Operating income increased 4.8% from $3.0 million in fiscal 2006 to $3.1 million in fiscal 2007.
Net income increased 5.0% from $1.9 million in fiscal 2006 to $2.0 million in fiscal 2007. The
increase in earnings per share, operating income, and net income for the first six months of fiscal
2007 versus the same period in fiscal 2006 was due primarily to growth in the average number of
franchise stores in operation and the corresponding increases in revenues offset by the shifting of
a large specialty market shipment from the second quarter last year into the third quarter of
fiscal 2007, increased stock option compensation expense and increased professional fees.
14
Revenues
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Six Months Ended |
|
|
|
|
|
|
|
|
| |
|
August 31, |
|
|
|
|
|
|
% |
|
| ($’s in thousands) |
|
2006 |
|
|
2005 |
|
|
Change |
|
|
Change |
|
Factory sales |
|
$ |
9,212.7 |
|
|
$ |
7,683.9 |
|
|
$ |
1,528.8 |
|
|
|
19.9 |
% |
Retail sales |
|
|
1,374.5 |
|
|
|
1,457.4 |
|
|
|
(82.9 |
) |
|
|
(5.7 |
%) |
Franchise fees |
|
|
306.8 |
|
|
|
361.8 |
|
|
|
(55.0 |
) |
|
|
(15.2 |
%) |
Royalty and marketing fees |
|
|
2,654.0 |
|
|
|
2,446.9 |
|
|
|
207.1 |
|
|
|
8.5 |
% |
Total |
|
$ |
13,548.0 |
|
|
$ |
11,950.0 |
|
|
$ |
1,598.0 |
|
|
|
13.4 |
% |
Factory Sales
Factory sales increased for the six months ended August 31, 2006 due to an increase of 56.2% in
product shipments to specialty markets and growth in the average number of stores in operation to
296 in the first six months of fiscal 2007 from 278 in the same period in fiscal 2006. Partially
offsetting this increase was a 3.6% decrease in same store pounds purchased from the factory by
franchised stores when compared to the six months ended August 31, 2005. The Company believes that
this same store pounds decrease reflects an unseasonably hot summer in many regions of the country,
along with a modest softening in the retail sector of the economy. Historically, retail sales of
chocolate products suffer when weather conditions are unusually hot in particular markets.
Retail Sales
Retail sales decreased 5.7% in the first six months of fiscal 2007 due to a decrease in the average
number of stores in operation from 9 in fiscal 2006 to 8 in fiscal 2007. Same store retail sales
increased 7.0% in the first six months of fiscal 2007 compared to the same period in the prior
year.
Royalties, Marketing Fees and Franchise Fees
The increase in royalties and marketing fees resulted from growth in the average number of domestic
units in operation. The average number of domestic units in operation grew 6.5% from 246 in the
first six months of fiscal 2006 to 262 in 2007. Same store sales decreased 0.1% in the first six
months of fiscal 2007 compared to the same period last year. Franchise fee revenues in the first
six months of fiscal 2007 decreased 15.2% due to a decrease in the number of franchises sold versus
the same period last year.
Costs and Expenses
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Six months ended |
|
|
|
|
|
% |
| ($’s in thousands) |
|
2005 |
|
2005 |
|
Change |
|
Change |
Cost of sales — factory |
|
$ |
5,960.0 |
|
|
$ |
4,847.4 |
|
|
$ |
1,112.6 |
|
|
|
23.0 |
% |
Cost of sales — retail |
|
|
543.1 |
|
|
|
568.1 |
|
|
|
(25.0 |
) |
|
|
(4.4 |
%) |
Franchise costs |
|
|
716.6 |
|
|
|
645.0 |
|
|
|
71.6 |
|
|
|
11.1 |
% |
Sales and marketing |
|
|
704.8 |
|
|
|
590.7 |
|
|
|
114.1 |
|
|
|
19.3 |
% |
General and administrative |
|
|
1,219.3 |
|
|
|
1,036.0 |
|
|
|
183.3 |
|
|
|
17.7 |
% |
Retail operating |
|
|
812.2 |
|
|
|
862.5 |
|
|
|
(50.3 |
) |
|
|
(5.8 |
%) |
Total |
|
$ |
9,956.0 |
|
|
$ |
8,549.7 |
|
|
$ |
1,406.3 |
|
|
|
16.4 |
% |
Gross margin
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Six months ended |
|
|
|
|
|
% |
| ($’s in thousands) |
|
2006 |
|
2005 |
|
Change |
|
Change |
Factory |
|
$ |
3,252.7 |
|
|
$ |
2,836.5 |
|
|
$ |
416.2 |
|
|
|
14.7 |
% |
Retail |
|
|
831.4 |
|
|
|
889.3 |
|
|
|
(57.9 |
) |
|
|
(6.5 |
%) |
Total |
|
$ |
4,084.1 |
|
|
$ |
3,725.8 |
|
|
$ |
358.3 |
|
|
|
9.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Percent) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Factory |
|
|
35.3 |
% |
|
|
36.9 |
% |
|
|
(1.6 |
%) |
|
|
(4.3 |
%) |
Retail |
|
|
60.5 |
% |
|
|
61.0 |
% |
|
|
(0.5 |
%) |
|
|
(0.8 |
%) |
Total |
|
|
38.6 |
% |
|
|
40.8 |
% |
|
|
(2.2 |
%) |
|
|
(5.4 |
%) |
15
Costs and Expenses
Cost of Sales
Factory margins declined 160 basis points from fiscal 2006 to fiscal 2007 due primarily to mix of
product sold during the first six months of fiscal 2006 versus the same period in the prior year.
Reduction in Company-owned store margin is due to changes in mix of product sold.
Franchise Costs
The increase in franchise costs is due primarily to increased professional fees related to
franchise operations as well as increased stock option compensation expense. As a percentage of
total royalty and marketing fees and franchise fee revenue, franchise costs increased to 24.2% in
the first six months of fiscal 2007 from 23.0% in the first six months of fiscal 2006. This
increase as a percentage of royalty, marketing and franchise fees is primarily a result of higher
franchise costs relative to revenues.
Sales and Marketing
The increase in sales and marketing is due primarily to increased costs for marketing support of
the franchisees, promotional costs related to sales to specialty markets and increased stock option
compensation expense.
General and Administrative
The increase in general and administrative costs is due primarily to public company costs, costs
incurred upon closure in the second quarter of fiscal 2007 of two Company-owned stores and
increased stock option compensation expense. The public company costs are primarily professional
fees as they relate to compliance with the Sarbanes-Oxley Act of 2002. As a percentage of total
revenues, general and administrative expenses increased to 9.0% in fiscal 2007 compared to 8.7% in
fiscal 2006.
Retail Operating Expenses
This decrease was due primarily to a decrease in the average number of stores during the first six
months of fiscal 2007 versus the first six months of fiscal 2006. Retail operating expenses, as a
percentage of retail sales, remained relatively consistent from 59.2% in the first six months of
fiscal 2006 to 59.1% in the first six months of fiscal 2007.
Depreciation and Amortization
Depreciation and amortization of $461,000 in the first six months of fiscal 2007 increased 11.5%
from $414,000 incurred in the first six months of fiscal 2006 due primarily to increased fixed
assets in service and related depreciation expenses.
Other, Net
Other, net of $37,200 realized in the first six months of fiscal 2007 represents an increase of
$7,400 from the $29,800 in the first six months of fiscal 2006, due primarily to lower interest
expense on lower average outstanding balances of long-term debt. The Company also realized
decreased interest income on notes receivable and invested cash due to the use of excess cash to
repurchase Company stock. The Company paid its long-term debt in full during the first quarter of
fiscal 2006.
Income Tax Expense
The Company’s effective income tax rate in the first six months of fiscal 2007 was 37.8% which is
the same rate as the first six months of fiscal 2006.
16
Liquidity and Capital Resources
As of August 31, 2006, working capital was $5.7 million, compared with $7.5 million as of February
28, 2006, a decrease of $1.8 million. The decrease in working capital was primarily due to
repurchase and retirement of $3.8 million of the Company’s common stock in the first six months of
fiscal 2007.
Cash and cash equivalent balances decreased from $3.5 million as of February 28, 2006 to $743,000
as of August 31, 2006 as a result of cash flows provided by operating activities less than cash
flows used by financing and investing activities. The Company’s current ratio was 2.88 to 1 at
August 31, 2006 in comparison with 3.59 to 1 at February 28, 2006. The Company monitors current and
anticipated future levels of cash and cash equivalents in relation to anticipated operating,
financing and investing requirements.
The Company has a $5.0 million ($5.0 million available as of August 31, 2006) working capital line
of credit collateralized by substantially all of the Company’s assets with the exception of the
Company’s retail store assets. The line is subject to renewal in July, 2007.
The Company believes cash flows generated by operating activities and available financing will be
sufficient to fund the Company’s operations at least through the end of fiscal 2007.
Impact of Inflation
Inflationary factors such as increases in the costs of ingredients and labor directly affect the
Company’s operations. Most of the Company’s leases provide for cost-of-living adjustments and
require the Company to pay taxes, insurance and maintenance expenses,
all of which are subject to inflation. Additionally the Company’s future lease costs for new facilities may include potentially
escalating costs of real estate and construction. There is no assurance that the Company will be
able to pass on increased costs to its customers.
Depreciation expense is based on the historical cost to the Company of its fixed assets, and is
therefore potentially less than it would be if it were based on current replacement cost. While
property and equipment acquired in prior years will ultimately have to be replaced at higher
prices, it is expected that replacement will be a gradual process over many years.
Seasonality
The Company is subject to seasonal fluctuations in sales, which cause fluctuations in quarterly
results of operations. Historically, the strongest sales of the Company’s products have occurred
during the Christmas holiday and summer vacation seasons. In addition, quarterly results have been,
and in the future are likely to be, affected by the timing of new store openings and sales of
franchises. Because of the seasonality of the Company’s business and the impact of new store
openings and sales of franchises, results for any quarter are not necessarily indicative of results
that may be achieved in other quarters or for a full fiscal year.
New Accounting Pronouncements
In March 2006, the Emerging Issues Task Force (“EITF”) reached a consensus on EITF Issue No. 06-3,
“How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in
the Income Statement (that is, Gross versus Net Presentation). Taxes within the scope of EITF Issue
No. 06-3 include any taxes assessed by a governmental authority that are directly imposed on a
revenue-producing transaction between a seller and a customer and may include, but are not limited
to, sales taxes, use taxes, value-added taxes, and some excise taxes. The EITF concluded that the
presentation of these taxes on either a gross (included in revenues and costs) or a net (excluded
from revenues) basis is an accounting policy decision that should be disclosed. For any such taxes
that are reported on a gross basis, a company should disclose the amounts of those taxes in interim
and annual financial statements. The Company’s policy is to exclude all such taxes from revenue.
EITF 06-3 is effective for interim and annual reporting periods beginning after December 15, 2006.
The adoption of EITF 06-3 will not have any effect on the Company’s financial statements.
17
In July 2006, the FASB issued Interpretation 48 (“FIN 48”), “Accounting for Uncertainty in Income
Taxes,” an interpretation of SFAS No. 109, “Accounting for Income Taxes.” FIN 48 clarifies the
accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in
accordance with SFAS No. 109. The interpretation applies to all tax positions accounted for in
accordance with Statement 109 and requires a more-likely-than-not recognition threshold. A tax
position that meets the more-likely-than-not recognition threshold is initially and subsequently
measured as the largest amount of tax benefit that is greater than 50 percent likely of being
realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant
information. Subsequent recognition, derecognition, and measurement is based on management’s best
judgment given the facts, circumstances and information available at the reporting date. FIN 48 is
effective for fiscal years beginning after December 15, 2006. Early adoption is permitted as of the
beginning of an enterprise’s fiscal year, provided the enterprise has not yet issued financial
statements, including financial statements for any interim period, for that fiscal year. Based upon
the Company’s preliminary evaluation of the effects of this guidance, we do not believe that it
will have a significant impact on the Company’s financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company does not engage in commodity futures trading or hedging activities and does not enter
into derivative financial instrument transactions for trading or other speculative purposes. The
Company also does not engage in transactions in foreign currencies or in interest rate swap
transactions that could expose the Company to market risk. However, the Company is exposed to some
commodity price and interest rate risks.
The Company frequently enters into purchase contracts of between six to eighteen months for
chocolate and certain nuts. These contracts permit the Company to purchase the specified commodity
at a fixed price on an as-needed basis during the term of the contract. Because prices for these
products may fluctuate, the Company may benefit if prices rise during the terms of these contracts,
but it may be required to pay above-market prices if prices fall and it is unable to renegotiate
the terms of the contract.
As of August 31, 2006, all of the Company’s long-term debt was paid in full. The Company also has a
$5.0 million bank line of credit that bears interest at a variable rate. As of August 31, 2006, no
amount was outstanding under the line of credit. The Company does not believe that it is exposed to
any material interest rate risk related to its long-term debt or the line of credit.
The Chief Financial Officer and Chief Operating Officer of the Company has primary responsibility
over the Company’s long-term and short-term debt and for determining the timing and duration of
commodity purchase contracts and negotiating the terms and conditions of those contracts.
Item 4. Controls and Procedures
Under the supervision and with the participation of management, including the principal executive
officer and principal financial officer, the Company has evaluated the effectiveness of the design
and operation of the disclosure controls and procedures within 90 days of the filing date of this
quarterly report, and, based on their evaluation, the Company’s principal executive officer and
principal financial officer have concluded that these controls and procedures are effective. There
were no significant changes in the Company’s internal controls, financial or otherwise, or in other
factors that could significantly affect these controls subsequent to the date of their evaluation.
Disclosure controls and procedures are the Company’s controls and other procedures that are
designed to ensure that information required to be disclosed in the reports that the Company files
or submits under the Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls
and procedures include, without limitation, controls and procedures designed to ensure that
information required to be disclosed in the reports that the Company files under the Exchange Act
is accumulated and communicated to management, including the principal executive officer and the
principal financial officer, as appropriate to allow timely decisions regarding required
disclosure.
18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not currently involved in any legal proceedings that are material to
the Company’s business or financial condition.
Item 1A. Risk Factors
No material change. See “A Note About Forward-Looking Statements” above.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
| |
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| |
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(c) Total Number of |
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| |
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Shares Purchased as |
|
(d) Approximate Dollar Value |
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|
(a) Total Number |
|
(b) Average Price |
|
Part of Publicly |
|
of Shares that May Yet Be |
| |
|
of Shares |
|
Paid per |
|
Announced Plans or |
|
Purchased Under the Plans or |
| Period |
|
Purchased |
|
Share |
|
Programs (1) |
|
Programs (2) |
June 2006 |
|
|
1,700 |
|
|
$ |
12.80 |
|
|
|
1,700 |
|
|
$ |
2,082,863 |
|
July 2006 |
|
|
20,583 |
|
|
|
13.34 |
|
|
|
20,583 |
|
|
|
1,808,317 |
|
August 2006 |
|
|
20,416 |
|
|
|
13.99 |
|
|
|
20,416 |
|
|
|
1,522,640 |
|
Total |
|
|
42,699 |
|
|
$ |
13.63 |
|
|
|
42,699 |
|
|
$ |
1,522,640 |
|
|
|
|
| (1) |
|
During the second quarter of Fiscal 2007 ending August 31, 2006, the Company
purchased 42,699 shares in the open market. |
| |
| (2) |
|
On May 4, 2006 and May 25, 2006 the Company announced plans to repurchase up to
$2,000,000 of the Company’s common stock in the open market or in private transactions,
whenever deemed appropriate by management. The plans were only to expire once the
designated amounts were reached. The May 4, 2006 plan was completed in July 2006. |
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
The 2006 Annual Meeting of the Shareholders of the Company was held in Durango,
Colorado on July 21, 2006.
1. Election of six Directors. Messrs. Franklin E. Crail, Bryan J. Merryman, Gerald A.
Kien, Lee N. Mortenson, Fred M. Trainor and Clyde Wm. Engle were elected to the
Company’s Board of Directors. The results of the voting were as follows: 5,667,049
votes in favor of Franklin E. Crail, with 24,901 votes withheld; 5,606,746 votes in
favor of Bryan J. Merryman, with 85,204 votes withheld; 5,595,309 votes in favor of
Gerald A. Kien, with 27,341 votes withheld; 5,266,227 votes in favor of Lee N.
Mortenson, with 356,423 votes withheld; 5,322,226 votes in favor of Fred M. Trainor,
with 300,424 votes withheld; and 5,218,564 votes in favor of Clyde Wm. Engle, with
404,386 votes withheld.
Item 5. Other Information
None
19
Item 6. Exhibits
| |
|
|
3.1
|
|
Articles of Incorporation of the Registrant, as amended,
incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K of the
Registrant filed on August 1, 1988 |
|
|
|
3.2
|
|
By-laws of the Registrant, as amended on November 25, 1997,
incorporated by reference to Exhibit 3.2 to the Annual Report on Form 10-K of
the Registrant for the fiscal year ended February 28, 1998 |
|
|
|
4.1
|
|
Specimen Common Stock Certificate, incorporated by reference
to Exhibit 4.1 to Current Report on Form 8-K of the Registrant filed on August
1, 1988 |
|
|
|
4.2 *
|
|
Business Loan Agreement dated July 31, 2006 between Wells
Fargo Bank and the Registrant. |
|
|
|
4.3 *
|
|
Promissory Note dated July 31, 2006 in the amount of
$5,000,000 between Wells Fargo Bank and the Registrant |
|
|
|
10.1
|
|
Form of Stock Option Agreement for the Registrant,
incorporated by reference to Exhibit 10.3 to the Annual Report on Form 10-K of
the Registrant for the fiscal year ended February 28, 1986 |
|
|
|
10.2
|
|
Incentive Stock Option Plan of the Registrant as amended July
27, 1990, incorporated by reference to Exhibit 10.2 to the Annual Report on
Form 10-K of the Registrant for the fiscal year ended February 28, 1991 |
|
|
|
10.3
|
|
Form of Employment Agreement between the Registrant and its
officers, incorporated by reference to Exhibit 99.2 to Schedule on Form 14D9
of the Registrant filed on May 21, 1999 |
|
|
|
10.4
|
|
Current form of franchise agreement used by the Registrant
incorporated by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q
of the Registrant for the quarter ended May 31, 2005. |
|
|
|
10.5
|
|
Form of Real Estate Lease between the Registrant as Lessee
and franchisee as Sublessee, incorporated by reference to Exhibit 10.7 to
Registration Statement on Form S-18 (Registration No. 33-2016-D) |
|
|
|
10.6
|
|
Form of Nonqualified Stock Option Agreement for Nonemployee
Directors for the Registrant, incorporated by reference to Exhibit 10.8 to the
Annual Report on Form 10-K of the Registrant for the fiscal year ended
February 28, 1991 |
|
|
|
10.7
|
|
Nonqualified Stock Option Plan for Nonemployee Directors
dated March 20, 1990, incorporated by reference to Exhibit 10.9 to the Annual
Report on Form 10-K of the Registrant for the fiscal year ended February 28,
1991 |
|
|
|
10.8
|
|
1995 Stock Option Plan of the Registrant, incorporated by
reference to Exhibit 10.9 to Registration Statement on Form S-1 (Registration
No. 33-62149) filed August 25, 1995 |
|
|
|
10.9
|
|
Forms of Incentive Stock Option Agreement for 1995 Stock
Option Plan, incorporated by reference to Exhibit 10.10 to Registration
Statement on Form S-1 (Registration No. 33-62149) filed on August 25, 1995 |
|
|
|
10.10
|
|
Forms of Nonqualified Stock Option Agreement for 1995 Stock
Option Plan, incorporated by reference to Exhibit 10.11 to Registration
Statement on Form S-1 (Registration No. 33-62149) filed on August 25, 1995 |
20
| |
|
|
10.11
|
|
Form of Indemnification Agreement between the Registrant and
its directors, incorporated by reference to Exhibit 10.12 to the Annual Report
on Form 10-K of the Registrant for the fiscal year ended February 28, 1998 |
|
|
|
10.12
|
|
Form of Indemnification Agreement between the Registrant and
its officers, incorporated by reference to Exhibit 10.13 to the Annual Report
on Form 10-K of the Registrant for the fiscal year ended February 28, 1998 |
|
|
|
10.13
|
|
2000 Nonqualified Stock Option Plan for Nonemployee
Directors of the Registrant, incorporated by reference to Exhibit 99.1 to
Registration Statement on Form S-8 (Registration No. 333-109936 filed on
October 23, 2003. |
|
|
|
10.14
|
|
Commodity Contract with Guittard Chocolate Company,
incorporated by reference to Exhibit 10.15 to the Annual Report on Form 10-K
of the Registrant for the fiscal year ended February 28, 2006 |
|
|
|
10.15
|
|
Rocky Mountain Chocolate Factory, Inc. 2004 Stock Option
Plan, incorporated by reference to Exhibit 99.1 to Registration Statement on
Form S-8 (Registration No. 333-119107) filed September 17, 2004 |
|
|
|
31.1 *
|
|
Certification Filed Pursuant To Section 302 Of The
Sarbanes-Oxley Act of 2002, Chief Executive Officer |
|
|
|
31.2 *
|
|
Certification Filed Pursuant To Section 302 Of The
Sarbanes-Oxley Act of 2002, Chief Financial Officer |
|
|
|
32.1 *
|
|
Certification Furnished Pursuant To Section 906 Of The
Sarbanes-Oxley Act of 2002, Chief Executive Officer |
|
|
|
32.2 *
|
|
Certification Furnished Pursuant To Section 906 of The
Sarbanes-Oxley Act of 2002, Chief Financial Officer |
21
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
| |
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|
|
ROCKY MOUNTAIN CHOCOLATE FACTORY, INC. |
|
|
|
(Registrant) |
|
|
|
|
|
|
|
Date: October 5, 2006
|
|
/s/ Bryan J. Merryman
|
|
|
|
|
Bryan J. Merryman, Chief Operating Officer, |
|
|
|
|
Chief Financial Officer, Treasurer and Director |
|
|
22
Exhibit Index
| |
|
|
| Exhibits |
|
|
3.1
|
|
Articles of Incorporation of the Registrant, as amended,
incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K of the
Registrant filed on August 1, 1988 |
|
|
|
3.2
|
|
By-laws of the Registrant, as amended on November 25, 1997,
incorporated by reference to Exhibit 3.2 to the Annual Report on Form 10-K of
the Registrant for the fiscal year ended February 28, 1998 |
|
|
|
4.1
|
|
Specimen Common Stock Certificate, incorporated by reference
to Exhibit 4.1 to Current Report on Form 8-K of the Registrant filed on August
1, 1988 |
|
|
|
4.2 *
|
|
Business Loan Agreement dated July 31, 2006 between Wells
Fargo Bank and the Registrant. |
|
|
|
4.3 *
|
|
Promissory Note dated July 31, 2006 in the amount of
$5,000,000 between Wells Fargo Bank and the Registrant |
|
|
|
10.1
|
|
Form of Stock Option Agreement for the Registrant,
incorporated by reference to Exhibit 10.3 to the Annual Report on Form 10-K of
the Registrant for the fiscal year ended February 28, 1986 |
|
|
|
10.2
|
|
Incentive Stock Option Plan of the Registrant as amended July
27, 1990, incorporated by reference to Exhibit 10.2 to the Annual Report on
Form 10-K of the Registrant for the fiscal year ended February 28, 1991 |
|
|
|
10.3
|
|
Form of Employment Agreement between the Registrant and its
officers, incorporated by reference to Exhibit 99.2 to Schedule on Form 14D9
of the Registrant filed on May 21, 1999 |
|
|
|
10.4
|
|
Current form of franchise agreement used by the Registrant
incorporated by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q
of the Registrant for the quarter ended May 31, 2005. |
|
|
|
10.5
|
|
Form of Real Estate Lease between the Registrant as Lessee
and franchisee as Sublessee, incorporated by reference to Exhibit 10.7 to
Registration Statement on Form S-18 (Registration No. 33-2016-D) |
|
|
|
10.6
|
|
Form of Nonqualified Stock Option Agreement for Nonemployee
Directors for the Registrant, incorporated by reference to Exhibit 10.8 to the
Annual Report on Form 10-K of the Registrant for the fiscal year ended
February 28, 1991 |
|
|
|
10.7
|
|
Nonqualified Stock Option Plan for Nonemployee Directors
dated March 20, 1990, incorporated by reference to Exhibit 10.9 to the Annual
Report on Form 10-K of the Registrant for the fiscal year ended February 28,
1991 |
|
|
|
10.8
|
|
1995 Stock Option Plan of the Registrant, incorporated by
reference to Exhibit 10.9 to Registration Statement on Form S-1 (Registration
No. 33-62149) filed August 25, 1995 |
|
|
|
10.9
|
|
Forms of Incentive Stock Option Agreement for 1995 Stock
Option Plan, incorporated by reference to Exhibit 10.10 to Registration
Statement on Form S-1 (Registration No. 33-62149) filed on August 25, 1995 |
|
|
|
10.10
|
|
Forms of Nonqualified Stock Option Agreement for 1995 Stock
Option Plan, incorporated by reference to Exhibit 10.11 to Registration
Statement on Form S-1 (Registration No. 33-62149) filed on August 25, 1995 |
23
| |
|
|
| Exhibits |
|
|
10.11
|
|
Form of Indemnification Agreement between the Registrant and
its directors, incorporated by reference to Exhibit 10.12 to the Annual Report
on Form 10-K of the Registrant for the fiscal year ended February 28, 1998 |
|
|
|
10.12
|
|
Form of Indemnification Agreement between the Registrant and
its officers, incorporated by reference to Exhibit 10.13 to the Annual Report
on Form 10-K of the Registrant for the fiscal year ended February 28, 1998 |
|
|
|
10.13
|
|
2000 Nonqualified Stock Option Plan for Nonemployee
Directors of the Registrant, incorporated by reference to Exhibit 99.1 to
Registration Statement on Form S-8 (Registration No. 333-109936 filed on
October 23, 2003. |
|
|
|
10.14
|
|
Commodity Contract with Guittard Chocolate Company,
incorporated by reference to Exhibit 10.15 to the Annual Report on Form 10-K
of the Registrant for the fiscal year ended February 28, 2006 |
|
|
|
10.15
|
|
Rocky Mountain Chocolate Factory, Inc. 2004 Stock Option
Plan, incorporated by reference to Exhibit 99.1 to Registration Statement on
Form S-8 (Registration No. 333-119107) filed September 17, 2004 |
|
|
|
31.1 *
|
|
Certification Filed Pursuant To Section 302 Of The
Sarbanes-Oxley Act of 2002, Chief Executive Officer |
|
|
|
31.2 *
|
|
Certification Filed Pursuant To Section 302 Of The
Sarbanes-Oxley Act of 2002, Chief Financial Officer |
|
|
|
32.1 *
|
|
Certification Furnished Pursuant To Section 906 Of The
Sarbanes-Oxley Act of 2002, Chief Executive Officer |
|
|
|
32.2 *
|
|
Certification Furnished Pursuant To Section 906 of The
Sarbanes-Oxley Act of 2002, Chief Financial Officer |
24