<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 2000
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 81301
(Address of principal executive offices)
(970) 259-0554
(Registrant's telephone number, including area code)
Indicate by checkmark 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 X No .
--- ---
On July 6, 2000 the registrant had outstanding 1,956,784 shares of its common
stock, $.03 par value.
The exhibit index is located on page 14.
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ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 3-5
Statements of Income 3
Balance Sheets 4
Statements of Cash Flows 5
Notes to Interim Financial Statements 6-8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-12
Item 3. Quantitative and Qualitative Disclosures About Market Risk 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities and Use of Proceeds 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 13
</TABLE>
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended May 31,
2000 1999
<S> <C> <C>
REVENUES
Sales $ 4,429,953 $ 4,793,676
Franchise and royalty fees 807,720 795,854
Total revenues 5,237,673 5,589,530
COSTS AND EXPENSES
Cost of sales 2,260,787 2,536,494
Franchise costs 259,789 225,696
Sales and marketing 287,740 337,786
General and administrative 452,767 416,798
Retail operating 1,153,265 1,359,670
Depreciation and amortization 327,266 403,205
Total costs and expenses 4,741,614 5,279,649
INCOME FROM OPERATIONS 496,059 309,881
OTHER INCOME (EXPENSE)
Cost of unsolicited tender offer - (6,856)
Interest expense (148,859) (154,690)
Interest income 9,969 12,248
Other, net (138,890) (149,298)
INCOME BEFORE INCOME TAXES 357,169 160,583
PROVISION FOR INCOME TAXES 138,225 62,150
NET INCOME $ 218,944 $ 98,433
BASIC AND DILUTED EARNINGS PER COMMON SHARE $ .10 $ .04
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 2,243,913 2,599,599
DILUTIVE EFFECT OF EMPLOYEE STOCK OPTIONS 13,837 3,590
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING, ASSUMING DILUTION 2,257,750 2,603,189
</TABLE>
The accompanying notes are an integral part of these financial statements.
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ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
May 31, February 29,
ASSETS 2000 2000
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 215,825 $ 128,192
Accounts and notes receivable, less allowance for
doubtful accounts of $139,912 2,217,454 2,194,325
Refundable income taxes 63,041 76,689
Inventories 3,219,385 3,084,392
Deferred income taxes 188,999 188,999
Other 206,865 87,785
Total current assets 6,111,569 5,760,382
PROPERTY AND EQUIPMENT, NET 8,251,209 8,976,014
OTHER ASSETS
Accounts and notes receivable 97,485 55,343
Goodwill, less accumulated amortization of $623,073 and
$584,397 1,238,927 1,277,603
Other 498,274 370,514
Total other assets 1,834,686 1,703,460
Total assets $16,197,464 $16,439,856
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 1,905,655 $ 1,930,700
Line of credit 1,875,000 75,000
Accounts payable 1,040,969 1,055,910
Accrued salaries and wages 582,271 653,209
Other accrued expenses 544,458 456,300
Total current liabilities 5,948,353 4,171,119
LONG-TERM DEBT, LESS CURRENT MATURITIES 4,313,399 3,773,851
DEFERRED INCOME TAXES 61,797 61,797
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $.03 par value, 7,250,000 shares
authorized, 1,956,784 and 2,599,599 issued and
outstanding 58,704 71,606
Additional paid-in capital 3,114,537 5,879,753
Retained earnings 2,909,420 2,690,476
Less notes receivable from employees and directors (208,746) (208,746)
Total stockholders' equity 5,873,915 8,433,089
Total liabilities and stockholders' equity $16,197,464 $16,439,856
</TABLE>
The accompanying notes are an integral part of these financial statements.
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ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
May 31,
2000 1999
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 218,944 $ 98,433
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 327,266 403,205
(Gain) loss on sale of property and equipment 90 (8,367)
Changes in operating assets and liabilities:
Accounts and notes receivable (65,271) 298,619
Refundable income taxes 13,648 60,397
Inventories (134,993) 447,176
Other assets (119,080) (94,459)
Accounts payable (14,941) (133,119)
Accrued liabilities (38,780) (81,039)
Net cash provided by operating activities 186,883 990,846
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of assets 676,850 231,500
Purchases of property and equipment (223,835) (140,362)
(Increase) decrease in other assets (57,400) 3,631
Net cash provided by investing activities 395,615 94,769
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt 1,093,240 -
Payments on long-term debt (578,737) (530,916)
Proceeds from line of credit 3,670,000 1,225,000
Payments on line of credit (1,870,000) (2,025,000)
Repurchase of stock (2,840,618) (8,644)
Proceeds from exercise of stock options 31,250 -
Net cash used in financing activities (494,865) (1,339,560)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 87,633 (253,945)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 128,192 317,155
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 215,825 $ 63,210
</TABLE>
The accompanying notes are an integral part of these financial statements.
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ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Nature of Operations
The Company is a retail operator and international franchiser. The Company is
also a manufacturer of an extensive line of premium chocolate candy for sale to
its franchised and Company-owned Rocky Mountain Chocolate Factory stores located
throughout the United States and in Guam, Canada and the United Arab Emirates.
The majority of the Company's revenues are generated from wholesale and retail
sales of candy. The balance of the Company's revenues are generated from
royalties and marketing fees, based on a franchisee's monthly gross sales, and
from franchise fees, which consist of fees earned from the sale of franchises.
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 generally accepted accounting
principles for interim financial reporting and Securities and Exchange
Commission regulations. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles 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 three months ended May
31, 2000 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 29, 2000.
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.
NOTE 3 - INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
May 31, 2000 February 29, 2000
<S> <C> <C>
Ingredients and supplies $ 1,351,943 $ 1,490,813
Finished candy 1,867,442 1,593,579
$ 3,219,385 $ 3,084,392
</TABLE>
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NOTE 4 - PROPERTY AND EQUIPMENT, NET
Property and equipment consists of the following:
<TABLE>
<CAPTION>
May 31, 2000 February 29, 2000
<S> <C>
Land $ 513,618 $ 513,618
Building 3,695,271 3,681,808
Machinery and equipment 7,269,496 7,590,205
Furniture and fixtures 1,902,580 2,127,282
Leasehold improvements 1,463,105 1,611,785
Transportation equipment 205,539 199,639
15,049,609 15,724,337
Less accumulated depreciation 6,798,400 6,748,323
Property and equipment, net $ 8,251,209 $ 8,976,014
</TABLE>
NOTE 5 - STOCKHOLDERS' EQUITY
On March 21, 2000, the Company commenced a tender offer to acquire shares of its
common stock. Pursuant to the tender offer, which was completed on May 1, 2000,
the Company acquired 447,595 shares of its issued and outstanding common stock
at a purchase price of $6.25 per share.
Between December 22, 1999 and February 7, 2000, the Company repurchased 213,470
shares of its issued and outstanding common stock on the open market at an
average price of $5.48 per share.
On May 15, 1998, certain of the Company's directors and executive officers
purchased 104,000 shares of the Company's issued and outstanding common stock at
$5.15 per share from La Salle National Bank of Chicago, Illinois, which obtained
these shares through foreclosure from certain shareholders unrelated to any
transactions of the Company. The Company loaned certain officers and directors
the funds to acquire 40,000 of the 104,000 shares purchased by them. The loans
are secured by the related shares, bear interest payable annually at 7.5% and
are due May 15, 2003.
NOTE 6 - SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Three Months Ended
May 31,
2000 1999
<S> <C> <C>
Interest paid $ 136,436 $ 159,501
Income taxes paid 88,141 1,753
</TABLE>
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NOTE 7 - OPERATING SEGMENTS
The Company classifies its business interests into three reportable segments:
Franchising, Retail stores and Manufacturing. 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 29, 2000.
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 intersegment sales prices are market based. Each segment is
managed separately because of the differences in required infrastructure and the
difference in products and services:
<TABLE>
<CAPTION>
Three Months Ended Franchising Manufacturing Retail Other Total
May 31, 2000
<S> <C> <C> <C> <C> <C>
Total revenues 807,720 2,947,759 1,999,027 - 5,754,506
Intersegment revenues - (516,833) - - (516,833)
Revenue from external
customers 807,720 2,430,926 1,999,027 - 5,237,673
Segment profit (loss) 341,616 826,061 (169,349) (641,159) 357,169
Total assets 834,235 9,161,686 4,083,310 2,118,233 16,197,464
Capital expenditures 5,373 82,014 114,622 21,826 223,835
Total depreciation &
amortization 24,214 118,110 135,441 49,501 327,266
Three Months Ended
May 31, 1999
Total revenues 795,854 2,814,849 2,500,173 - 6,110,876
Intersegment revenues - (521,346) - - (521,346)
Revenue from external
customers 795,854 2,293,503 2,500,173 - 5,589,530
Segment profit (loss) 316,628 593,275 (138,323) (610,997) 160,583
Total assets 871,502 8,310,487 5,696,892 2,317,934 17,196,815
Capital expenditures 25,508 47,266 4,116 63,472 140,362
Total depreciation &
amortization 46,732 131,084 177,486 47,903 403,205
</TABLE>
NOTE 8 - STORE SALES
In connection with the Company's plans to begin phasing out its Company-owned
stores, the Company completed the sale of three Company-owned stores for sales
proceeds of approximately $675,000 and gain of approximately $437,000.
Additionally, the Company recorded a write-down of the carrying value of certain
long-lived assets at Company-owned stores of approximately $441,000.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
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. This Management's Discussion and Analysis of Financial Condition and
Results of Operations and other parts of this Quarterly Report on Form 10-Q
contain forward-looking statements that involve risks and uncertainties.
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 depend on many factors
not within the Company's control including the receptivity of its franchise
system and of customers in potential new distribution channels to its product
introductions and promotional programs.
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 made in this Quarterly Report on Form
10-Q.
Results of Operations
THREE MONTHS ENDED MAY 31, 2000 COMPARED TO THE THREE MONTHS ENDED
MAY 31, 1999
Net income was $218,900 for the three months ended May 31, 2000, or $.10 per
share, versus $98,400, or $.04 per share, for the three months ended May 31,
1999.
Revenues
<TABLE>
<CAPTION>
Three Months Ended
May 31, %
($'s in thousands) 2000 1999 Change Change
<S> <C> <C> <C> <C>
Factory sales $ 2,431.0 $ 2,293.5 137.5 6.0%
Retail sales 1,999.0 2,500.2 (501.2) (20.0%)
Franchise fees 90.4 69.0 21.4 31.0%
Royalty and Marketing fees 717.3 726.8 (9.5) (1.3%)
Total 5,237.7 $ 5,589.5 (351.8) (6.3%)
</TABLE>
Factory Sales
Factory sales increased $137,500, or 6.0%, to $2.4 million in the first quarter
of fiscal 2001, compared to $2.3 million in the first quarter of fiscal 2000.
This was due primarily to increased sales to franchisees. Sales to franchisees
grew due to an increase in the number of franchisees in the first quarter of
fiscal 2001 relative to the first quarter of fiscal 2000. This increase was
partially offset by a decrease in same store pounds purchased from the factory
by franchised stores of 1.2% in the first quarter of fiscal 2001 compared to the
first quarter of fiscal 2000.
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Retail Sales
Retail sales decreased $501,000, or 20%, to $2.0 million in the first quarter of
fiscal 2001, compared to $2.5 million in the first quarter of fiscal 2000. This
decrease resulted from a decrease in the average number of stores in operation
in the first quarter of fiscal 2001 (32) versus the same period last year (40)
and a decrease in comparable store sales of 8.1%. Slower sales of Beanie Babies
and related products in the children's/novelty section of the retail stores
contributed significantly to the decrease in comparable store sales.
Royalties, Marketing Fees and Franchise Fees
Royalties and marketing fees decreased $10,000, or 1.3%, to $717,000 in the
first quarter of fiscal 2001, compared to $727,000 in the first quarter of
fiscal 2000. This decrease resulted from a decrease in same store sales at
franchised stores of approximately 6.5%. Slower sales of Beanie Babies and
related products in the children's/novelty section of the retail stores
contributed significantly to the decrease in comparable store sales. Franchise
fee revenues increased in the first quarter of fiscal 2001 due to an increase in
the number of franchises sold versus the first quarter of fiscal 2000.
Costs and Expenses
Cost of Sales
Cost of sales as a percentage of sales decreased to 51.0% in the first quarter
of fiscal 2001 from 52.9% in the first quarter of fiscal 2000. This improvement
resulted from increased factory margins. Factory margins increased to 41.7% in
the first quarter of fiscal 2001 from 35.3% in the first quarter of fiscal 2000.
This improvement was due to certain changes to the Company's manufacturing
processes and cost structure. Company-owned store margins for the first quarter
of 2001 were consistent with the first quarter of fiscal 2000.
Franchise Costs
Franchise costs increased 15.1% from $226,000 in the first quarter of fiscal
2000 to $260,000 in the first quarter of fiscal 2001. As a percentage of total
royalty and marketing fees and franchise fee revenue, franchise costs increased
to 32.1% in the first quarter of fiscal 2001 from 28.4% in the first quarter of
fiscal 2000. This increase as a percentage of royalty, marketing and franchise
fees is primarily a result of increased franchise support costs and, to a lesser
extent, a 1.3% decrease in income from franchise fees and royalty and marketing
fees.
Sales and Marketing
Sales and Marketing decreased 14.8% to $288,000 in the first quarter of fiscal
2001 from $338,000 in the first quarter of fiscal 2000. This decrease is due to
more focused new channel sales efforts and an overall planned decrease in sales
and marketing costs.
General and Administrative
General and administrative expenses increased 8.6% to $453,000 in the first
quarter of fiscal 2001 from $417,000 in the first quarter of fiscal 2000. As a
percentage of total revenues, general and administrative expenses increased to
8.6% in fiscal 2001 compared to 7.5% in fiscal 2000. This increase, as a
percentage of total revenues, resulted from increased general and administrative
costs and a 6.3% decrease in total revenues.
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Retail Operating Expenses
Retail operating expenses decreased from $1.36 million in the first quarter of
fiscal 2000 to $1.15 million in the first quarter of fiscal 2001, representing a
decrease of 15.2%. This decrease was due primarily to a decrease in the average
number of stores open during the first quarter of fiscal 2001 (32) versus the
first quarter of fiscal 2000 (40). Retail operating expenses, as a percentage of
retail sales, increased from 54.4% in the first quarter of fiscal 2000 to 57.7%
in the first quarter of fiscal 2001 due to the decrease in same store sales of
8.1%.
Depreciation and Amortization
Depreciation and amortization decreased 18.8% to $327,000 in the first quarter
of fiscal 2001 from $403,000 in the first quarter of fiscal 2000. The decrease
in depreciation and amortization is due primarily to lower depreciation expense
as a result of fewer Company-owned stores and fewer fixtures used in outside
channels.
Other Expense
Other expense of $139,000 incurred in the first quarter of fiscal 2001
represents 7.0% decline from the $149,000 incurred in the first quarter of
fiscal 2000 due primarily to non-recurring costs of approximately $7,000 in
fiscal 2000 related to the unsolicited tender offer for 100% of the Company's
outstanding common stock by Whitman's Candies, Inc., which commenced in May 1999
and was withdrawn on November 4, 1999 and lower interest expense on lower
average outstanding amounts of long-term debt.
Income Tax Expense
The Company's effective income tax rate in the first quarter of fiscal 2001 was
38.7%, which is approximately the same rate as the first quarter of fiscal 2000.
LIQUIDITY AND CAPITAL RESOURCES
As of May 31, 2000 working capital was $163,000, compared with $1.59 million as
of February 29, 2000, a decrease of $1.43 million. The decrease in working
capital was due to increased short-term borrowings, the proceeds of which were
used to purchase shares of the Company's common stock.
Cash and cash equivalent balances increased from $128,000 as of February 29,
2000 to $216,000 as of May 31, 2000 as a result of cash flows generated by
investing and operating activities in excess of cash flows used by financing
activities. The Company's current ratio was 1.03 to 1 at May 31, 2000 in
comparison with 1.38 to 1 at February 29, 2000.
The Company's long-term debt is comprised primarily of a real estate mortgage
facility used to finance the Company's factory expansion (unpaid balance as of
May 31, 2000 of $1.9 million), and chattel mortgage notes (unpaid balance as of
May 31, 2000 of $4.3 million) used to fund the fiscal 1996 and 1997
Company-owned store expansion and improve and automate the Company's factory
infrastructure.
The Company has a $3.0 million ($1.1 million available as of May 31, 2000)
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, 2001.
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 2001.
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YEAR 2000 MATTERS
In prior years, the Company discussed the nature and progress of its plans to
become year 2000 ready. In late 1999, the Company completed remediation and
testing of its technology systems. As a result of those planning and
implementation efforts, the Company has experienced no significant disruptions
in mission critical information technology and non-information technology
systems as of May 15, 2000 and believes those systems successfully responded to
the Year 2000 date change. The Company expensed less than $50,000 during fiscal
2000 in connection with remediating its systems. The Company is not aware of any
material problems resulting from Year 2000 issues, either with its products, its
internal systems, or the products and services of third parties. The Company
will continue to monitor its mission critical computer applications and those of
its suppliers and vendors throughout the year 2000 to ensure that any latent
year 2000 matters that may arise are addressed promptly.
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.
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.
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<PAGE> 13
As of May 31, 2000, approximately $562,000 of the Company's long-term debt was
subject to a variable interest rate. The Company also has a $3.0 million bank
line of credit that bears interest at a variable rate. As of May 31, 2000, $1.9
million 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.
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 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
27.1 Financial Data Schedule for the three months ended
May 31, 2000.
B. Reports on Form 8-K
None
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.
ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
(Registrant)
Date: July 12, 2000 /s/ Bryan J. Merryman
------------------------------------------------
Bryan J. Merryman, Chief Operating Officer,
Chief Financial Officer, Treasurer and Director
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EXHIBIT INDEX
Exhibit No. Description
----------- -----------
27.1 Financial Data Schedule for the three months ended May 31, 2000.
