Rocky Mountain Chocolate Factory has hired a financial adviser to explore a sale of the company as it examines options to boost long-term shareholder value.
The announcement comes after a multiyear slide in the financial performance of RMCF. In the five years ending Feb. 28, the confectioner has seen revenue decline 3.35%, net income decline 7.81%, and cash flow decline 7.03%.
In the most recently reported quarter, the fourth quarter of fiscal 2019, net income decreased 18% to $386,000, or 6 cents per share, compared with net income of $471,000, or 8 cents per share, in the fourth quarter of fiscal 2018.
According to a company news release, the firm has no timetable for identifying a potential buyer or for selling the company.
In its latest annual filing with the Securities and Exchange Commission, RMCF lists total assets of $26.22 million, total liabilities of $26.22 million and no long-term debt.
Tracy Wojcik, corporate secretary, said RMCF does not intend to comment on a possible sale or partnership unless its board of directors approves a specific course of action.
New CEO remains silentRMCF CEO and Chairman of the Board Bryan Merryman, who was appointed Feb. 26 to replace company co-founder Franklin Crail, declined to be interviewed by the Herald.
Merryman, 58, had served as RMCF’s chief operating officer, chief financial officer and treasurer. Merryman, whose initial base annual salary will be $355,000, also will serve as the company’s principal financial officer and principal accounting officer. He joined RMCF in December 1997 as CFO.
Merryman made RMCF’s largest insider sale in the past 12 months, according to Simple Wall St. That transaction was for $103,000 worth of shares at a price of $10.33 each. On Tuesday, the stock was selling for $8.33 per share.
Crail, 77, who co-founded RMCF in May 1981 in Durango, will remain on the board of directors.
Merryman served as chief financial officer of Super Shops Inc., an aftermarket auto parts retailer and manufacturer, from July 1996 to November 1997. He also worked for 11 years at accounting company Deloitte & Touche LLP.
Merryman also currently serves as CEO of U-Swirl Inc., a self-serve yogurt company that is a subsidiary of RMCF. He has held the position since October 2014 and has served as chairman of the board of U-Swirl since January 2013.
Revenue falls in fourth quarterIn fiscal 2019 fourth-quarter results, RMCF reported total revenue decreased 10.2%, to $9.4 million, compared with $10.5 million during the three months ended Feb. 28, 2018.
Total factory sales decreased 6.7%, to $7 million, in the quarter compared with $7.5 million in same quarter in 2018. The firm reported that the decrease came primarily from a 24.1% decrease in shipments to customers outside RMCF’s network of franchise retail locations.
Retail sales declined 35.7%, to $686,000, compared with $1.06 million in the same quarter in 2018.
The firm reported the drop in retail sales largely stemmed from closure of some underperforming company-owned locations that was partially offset by an increase in same-store sales at company-owned stores.
Same-store sales at all company-owned stores increased 0.4% compared to the fourth quarter of 2018.
Revenue falls in fiscal 2019For fiscal year 2019, total revenue decreased 9.3%, to $34.5 million, compared with $38.1 million during 2018.
Total factory sales in 2019 decreased 7.2%, to $24.2 million, compared with $26.1 million in 2018. Retail sales declined 17.7%, to $3.4 million, compared with $4.1 million in 2018.
Net income decreased 24.5%, to $2.2 million, or 38 cents per share compared with $3 million, or 50 cents per share in 2018. Operating income decreased 42.4%, to $3 million, compared with $5.2 million in 2018.
Adjusted earnings before interest, taxes, depreciation and amortization decreased 23.4%, to $5.5 million, compared with $7.1 million in 2018.