8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 2, 2003

ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
(Exact name of registrant as specified in is charter)

Colorado
(State or other jurisdiction
of incorporation) 0-14749
(Commission
File Number) 84-0910696
(IRS Employer
Identification No.)

265 Turner Drive
Durango, Colorado 81303
(Address, including zip code, of principal executive offices)

Registrant’s telephone number, including area code: (970) 259-0554

TABLE OF CONTENTS

	Item 12. Results of Operations and Financial Condition.
	Item 7. Financial Statements and Exhibits.
SIGNATURE
INDEX TO EXHIBITS
EX-99.1 Press Release

Item 12. Results of Operations and Financial Condition.

     The Company has issued a press release for the three months ending August 31, 2003. The press release includes amounts determined in accordance with Generally Accepted Accounting Principles (GAAP) as well as some amounts which were not determined in accordance with GAAP. Non-GAAP measures include Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA).

Item 7. Financial Statements and Exhibits.

     (c)  Exhibits

Item	Exhibit
99.1	Press Release, dated October 2, 2003.

2

SIGNATURE

     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.

ROCKY MOUNTAIN CHOCOLATE FACTORY,
INC.

Date: October 2, 2003 By: /s/ Bryan J. Merryman
Bryan J. Merryman, Chief
Operating Officer, Chief
Financial Officer, Treasurer and
Director

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INDEX TO EXHIBITS

Item
Number	Exhibit
99.1	Press Release, dated October 2, 2003

4 EX-99.1 3 d09340exv99w1.htm EX-99.1 PRESS RELEASE

EXHIBIT 99.1

FOR IMMEDIATE RELEASE

ROCKY MOUNTAIN CHOCOLATE FACTORY, INC. REPORTS
RECORD SECOND QUARTER EARNINGS

DURANGO, Colorado (October 2, 2003) — Rocky Mountain Chocolate Factory, Inc. (Nasdaq/NMS: RMCF) (the “Company”) which franchises gourmet chocolate and confection stores and manufactures an extensive line of premium chocolates and other confectionery products, today reported its operating results for the second quarter and first half of FY2004.

For the quarter ended August 31, 2003, revenues increased 8.0 percent to $5.5 million, compared with $5.1 million in the second quarter of FY2003. Comparable-store sales at franchised retail outlets decreased 2.2 percent during the most recent quarter when measured against the three months ended August 31, 2002. The Company believes that the decline in comp-store sales reflects the impact of an uncertain economy upon customer traffic in shopping malls and tourist-oriented shopping venues.

Net earnings for the second quarter of FY2004 increased 10.4 percent to $680,000, compared with $616,000 in the prior-year period. Basic earnings per share increased 8.0 percent to $0.27 in the most recent quarter, compared with $0.25 in the second quarter of FY2003. Diluted earnings per share increased 8.7 percent to $0.25 in the second quarter of FY2004, compared with $0.23 in the prior-year period.

For the six months ended August 31, 2003, revenues increased 4.0 percent to $9.4 million, versus $9.0 million in the corresponding period of the previous fiscal year. Retail revenues increased 83.7 percent to $1.3 million (vs. $709,000) due to the repossession of 4 Company-financed stores from an insolvent franchisee. Comparable-store sales at franchised retail outlets for the six-month period ended August 31, 2003 decreased approximately 4.2 percent when measured against the first half of FY2003. Management believes this was due to a weak retail and economic environment.

Net earnings decreased 1.3 percent to $1.06 million for the six months ended August 31, 2003, compared with $1.07 million during the same period in FY2003. Basic earnings per share declined 2.3 percent to $0.42 during the first half of FY2004, versus $0.43 in the six months ended August 31, 2002. Diluted earnings per share were unchanged at $0.39 for the six-month periods ended August 31, 2003 and 2002.

“We are quite pleased to report record earnings and EBITDA (1), along with a narrowing in comp-store sales declines during our second quarter, especially in light of last year’s strong second quarter results and the continued impact of an uncertain economy upon consumer spending trends throughout America in recent months,” stated Frank Crail, Chairman and Chief Executive Officer of Rocky Mountain Chocolate Factory, Inc. “A significant number of our stores are located in tourist-oriented markets that have not fully recovered from the post-9/11 drop in travel. Our operating results for the second quarter and first half of Fiscal 2004 were in line with management’s expectations, and we continue to anticipate record earnings for the fiscal year ending February 29, 2004.”

“Although comp-store sales continued to trail prior-year levels in the most recent quarter, the 2.2 percent decline was smaller than that recorded in the first quarter (6.2%),” observed Bryan Merryman, Chief Operating Officer and Chief Financial Officer of the Company. “Our franchisees opened 10 new stores in the second quarter and 13 new stores during the first half of the fiscal year. We expect 10-14 new store openings during the third quarter, and full year openings should reach the upper end of our target range of 25-30 units. Franchisee interest in our new ‘kiosk’ retail

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concept has accelerated sharply in recent months, and we expect franchisees to be operating a total of 9-10 kiosks by the Christmas holiday shopping season. We continue to be very pleased with the performance of our new ‘in-line’ store design and the ‘kiosk’ concept in regional shopping mall environments.”

“Our balance sheet and cash flows remain healthy,” continued Merryman. “EBITDA (1) and income from operations totaled $1.3 million and $1.1 million, respectively, in the second quarter, versus $1.2 million and $1.0 million in the prior-year period. We ended the quarter with $2.8 million of cash in the bank, a current ratio of 2.9-to-1.0, and a debt-to-equity ratio of 34%.”

(Note: Footnote 1 below provides a discussion of how and why the Company uses EBITDA, a non-GAAP measure of earnings before interest, taxes, depreciation and amortization in this release. Further in this release are tables that reconcile this non-GAAP measurement to GAAP financial information.)

During the second quarter of FY2004, franchisees opened new stores in Bellevue, Washington; Chattanooga, Tennessee; Davenport, Iowa; Glendale, Arizona; Orlando (Festival Bay), Florida; Allen, Texas; Frisco, Texas; Laredo, Texas; Colorado Springs (Briargate), Colorado; and Blue Mountain, Ontario, Canada. Eight of the locations incorporate the new store design that was introduced during FY2002, and the store in Glendale, Arizona, represents the fifth ‘kiosk’ unit to open since February 2002.

The Company will host a conference call Thursday, October 2, 2003 at 4:15 p.m. EDT to discuss first quarter results in greater detail and the outlook for the balance of Fiscal 2004. The dial-in number for the conference call is 800-915-4836 (international/local participants dial 973-317-5319). Parties interested in participating in the conference call should dial in approximately five minutes prior to 4:15 PM EST. The call will also be broadcast live on the Internet at http://www.firstcallevents.com/service/ajwz389649313gf12.html. A replay of the call will be available through October 9, 2003 by dialing 800-428-6051 or for international callers by dialing 973-709-2089, the replay Access Code is 308631. The call will also be archived through January 2, 2004 at http://www.firstcallevents.com/service/ajwz389649313gf12.html.

Rocky Mountain Chocolate Factory, Inc., headquartered in Durango, Colorado, is an international franchiser of gourmet chocolate and confection stores and a manufacturer of an extensive line of premium chocolates and other confectionery products. The Company and its franchisees currently operate 237 stores in 37 states, Canada, Guam and the United Arab Emirates. The Company’s common stock is listed on The Nasdaq National Market under the symbol “RMCF”.

This press release contains forward-looking information that involves 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 include, without limitation, seasonality, consumer interest in the Company’s products, general economic conditions, consumer trends, costs and availability of raw materials, competition, 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 cautionary statements contained or referred to in this press release should be considered in connection with any subsequent written or oral forward-looking statements that the Company or persons acting on its behalf may issue.

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For Further Information, Contact Bryan J. Merryman COO/CFO (970) 259-0554
OR
RJ Falkner & Company, Inc., Investor Relations Counsel at (800) 377-9893 or via
email at info@rjfalkner.com

FOOTNOTE 1: EBITDA is defined as earnings before interest, taxes, depreciation and amortization. EBITDA is presented solely as a supplemental disclosure because the Company believes that it is a widely used measure of operating performance and is a principal basis for valuation. The Company uses EBITDA as a primary measure of the operating performance of the Company. EBITDA should not be construed as an alternative to operating income as an indicator of the Company’s operating performance, cash flow from operating activities, as a measure of liquidity, or any other measure determined in accordance with accounting principles generally accepted in the United States of America. The Company has significant uses of cash flows, including capital expenditures, interest payments, taxes and debt principal repayments that are not reflected in EBITDA. Also, other companies that report EBITDA information may calculate EBITDA in a different manner than the Company

The following table reconciles operating income to EBITDA.

(in thousands)		Three Months ended August 31,				Six Months Ended August 31,
		2003		2002		2003		2002
Operating income			1,109		1,019		1,741		1,776
Depreciation and amortization			227		206		428		412
	EBITDA		1,336		1,225		2,169		2,188

STORE INFORMATION

		New stores opened
		during the six months		Stores open as of
		ended August 31, 2003		August 31, 2003
United States:
	Franchised Stores		11		202
	Company-owned Stores		—		8
International Licensed Stores			2		27
Total			13		237

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STATEMENTS OF INCOME
(in thousands, except per share data)

		Three Months Ended August 31,						Three Months Ended August 31,
		2003			2002			2003			2002
Revenues
	Factory sales	$	3,405		$	3,590			62.2	%		70.9	%
	Royalty and marketing fees		998			1,010			18.3	%		19.9	%
	Franchise fees		163			80			3.0	%		1.6	%
	Retail sales		905			387			16.5	%		7.6	%
	Total revenues		5,471			5,067			100.0	%		100.0	%
Costs and Expenses
	Cost of sales		2,657			2,499			48.6	%		49.3	%
	Franchise costs		252			307			4.6	%		6.1	%
	Sales and marketing		252			323			4.6	%		6.4	%
	General and administrative		511			498			9.3	%		9.8	%
	Retail operating		463			215			8.5	%		4.2	%
	Depreciation and amortization		227			206			4.1	%		4.1	%
	Total costs and expenses		4,362			4,048			79.7	%		79.9	%
Income from Operations			1,109			1,019			20.3	%		20.1	%
Other Income (Expense)
	Interest expense		(39	)		(88	)		(0.7	%)		(1.7	%)
	Interest income		23			59			0.4	%		1.2	%
	Other, net		(16	)		(29	)		(0.3	%)		(0.5	%)
Income Before Income Taxes			1,093			990			20.0	%		19.6	%
Provision for Income Taxes			413			374			7.6	%		7.4	%
Net Income		$	680		$	616			12.4	%		12.2	%
Basic Earnings per Common Share		$	.27		$	0.25
Diluted Earnings per Common Share		$	.25		$	0.23
Weighted Average Common Shares Outstanding			2,529,833			2,498,699
Dilutive Effect of Employee Stock Options			184,291			207,378
Weighted Average Common Shares Outstanding, Assuming Dilution			2,714,124			2,706,077

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Interim Unaudited
STATEMENTS OF INCOME
(in thousands, except per share data)

		Six Months Ended August 31,						Six Months Ended August 31,
		2003			2002			2003			2002
Revenues
	Factory sales	$	5,976		$	6,219			63.6	%		68.8	%
	Royalty and marketing fees		1,810			1,875			19.3	%		20.7	%
	Franchise fees		310			236			3.3	%		2.6	%
	Retail sales		1,302			709			13.9	%		7.9	%
	Total revenues		9,398			9,039			100.0	%		100.0	%
Costs and Expenses
	Cost of sales		4,583			4,236			48.8	%		46.9	%
	Franchise costs		499			599			5.3	%		6.6	%
	Sales and marketing		506			637			5.4	%		7.0	%
	General and administrative		941			966			10.0	%		10.7	%
	Retail operating		699			413			7.4	%		4.6	%
	Depreciation and amortization		428			412			4.6	%		4.6	%
	Total costs and expenses		7,656			7,263			81.5	%		80.4	%
Income from Operations			1,742			1,776			18.5	%		19.6	%
Other Income (Expense)
	Interest expense		(82	)		(174	)		(0.8	%)		(1.9	%)
	Interest income		46			127			0.5	%		1.4	%
	Other, net		(36	)		(47	)		(0.3	%)		(0.5	%)
Income Before Income Taxes			1,706			1,729			18.2	%		19.1	%
Provision for Income Taxes			645			654			6.9	%		7.2	%
Net Income			1,061		$	1,075			11.3	%		11.9	%
Basic Earnings per Common Share		$	.42		$	.43
Diluted Earnings per Common Share		$	.39		$	.39
Weighted Average Common Shares Outstanding			2,521,674			2,491,693
Dilutive Effect of Employee Stock Options			168,302			245,601
Weighted Average Common Shares Outstanding, Assuming Dilution			2,689,976			2,737,294

SELECTED BALANCE SHEET DATA
(in thousands)

			February 28, 2003
	August 31, 2003		(audited)
Current Assets	$	8,660	$	7,654
Total assets	$	16,594	$	16,084
Current Liabilities	$	2,990	$	2,873
Long-Term Debt, Less Current Maturities	$	2,457	$	3,073
Stockholders’ Equity	$	10,900	$	9,891

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EX-99.1

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