DURANGO, CO - (Marketwired - Oct 14, 2014) - U-Swirl, Inc. (OTCQB: SWRL) ("U-Swirl" or "the Company"), parent to U-SWIRL International, Inc., through which it owns and franchises self-serve frozen yogurt cafés, today reported its operating results for the second quarter and first half of FY2015.
"U-Swirl reported record net income of $463,241 for the first half of Fiscal 2015, despite incurring over $628,000 in non-recurring charges related to the closure or sale of non-performing stores, changes in corporate management, and acquisition-related costs," commented Bryan Merryman, Chairman and Chief Executive Officer of U-Swirl, Inc. "While this represented a 41 percent improvement over earnings of $327,871 in the first half of Fiscal 2014, the Company would have reported an approximate 142 percent increase in operating income if the Company had not incurred the above-noted non-recurring charges. This shows that we are beginning to leverage certain economies of scale and realize cost savings that were anticipated when we developed our consolidation strategy for the self-serve frozen yogurt segment of the $6 billion away-from-home frozen desserts industry."
"During the past two years, U-Swirl has aggressively expanded its 'footprint' in the self-serve frozen yogurt industry by acquiring seven franchising companies and positioning itself as the fourth-largest franchisor of frozen yogurt cafés in the world," continued Merryman. "We consider this Phase 1 of our consolidation strategy. Our emphasis during the current fiscal year is to take the appropriate steps to maximize the returns on our investments in these acquisitions. A key element in this second phase of our consolidation strategy involves the recent restructuring of the corporate management team at U-Swirl. As the Company's new Chairman and CEO, I am proud to be working with a new team of career executives with extensive experience in operations, finance, franchise marketing and franchisee support. We have already launched an expense rationalization strategy that should generate significant savings over the next 12-18 months by (1) closing U-Swirl's corporate headquarters in Nevada and co-locating it with the facilities of our parent company, Rocky Mountain Chocolate Factory in Durango, Colorado; (2) eliminating duplicate personnel and redundant operational activities; and (3) taking advantage of the accounting and support infrastructure available within the RMCF organization."
"We have always known that a successful consolidation strategy within an industry that has many small and undercapitalized participants would require not only an aggressive acquisition program, but also the implementation of effective measures to reduce costs and maximize operational efficiencies. With the recent launch of the second phase of our strategy now underway, we are confident in our ability to significantly enhance shareholder values over the next few years, while pursuing our goal of building U-Swirl into the largest and most profitable company in the self-serve frozen yogurt industry," concluded Merryman.
For the three months ended August 31, 2014 (second quarter of FY2015), Company-owned frozen yogurt cafés generated $1,305,268 in net sales, an increase of 4 percent when compared with $1,253,473 in the second quarter of the previous fiscal year. The improvement in net sales was due primarily to the acquisition of Company-operated locations in January 2014, partially offset by the closing of under-performing locations in the prior fiscal year. As of August 31, 2014, the Company operated 9 self-serve frozen yogurt cafés, compared with 12 Company-owned cafés at August 31, 2013.
Franchise royalties and fees increased 170 percent to $1,186,655 in the second quarter of FY2015, compared with $438,987 in the prior-year quarter, primarily due to an expansion in the number of franchised cafés in operation. The number of franchised cafés operating for all or part of the second quarter of FY2015 totaled 287, which represented an increase of 322 percent when compared with 68 franchised cafés in the second quarter of FY2014.
Total revenue increased 47 percent to approximately $2.5 million in the second quarter of FY2015, versus approximately $1.7 million in the corresponding period of the previous fiscal year.
The Company's total costs and expenses rose 58% to $2,398,106 in the three months ended August 31, 2014, compared with $1,520,010 in the quarter ended August 31, 2013. Expense and income categories in the most recent quarter that were not evident in the prior-year quarter included $107,165 in franchise development costs, $503,526 in non-recurring restructuring charges, and a positive adjustment of $64,588 related to the valuation of a derivative associated with the convertible note agreement with Rocky Mountain Chocolate Factory.
Income from operations decreased 46 percent to $93,817, compared with $172,450 in the quarter ended August 31, 2013, primarily due to the non-recurring restructuring charges noted above, which involved certain expenses related to management changes and the closure or sale of certain assets.
Net interest expense declined to $7,139 in the most recent quarter, versus net interest expense of $12,658 in the second quarter of FY2014.
The Company reported net income of $86,678, or $0.00 per basic and diluted share, for the second quarter of FY2015, which represented a 46 percent decrease when compared with net income of $159,792 in the second quarter of FY2014.
The weighted average number of common shares outstanding, assuming dilution increased 44 percent to 23,546,340 in the most recent quarter, versus 16,335,295 in the prior-year quarter, reflecting shares issued pursuant to the exercise of outstanding Class C warrants and shares issued as part of the purchase consideration in certain acquisitions during FY2014.
For the six months ended August 31, 2014 (first half of FY2015), Company-owned frozen yogurt cafés reported $2,783,456 in net sales, an increase of 6 percent when compared with $2,631,722 in the first half of FY2014.
Franchise royalties and fees increased 184 percent to $2,209,546 in the first half of FY2015, compared with $778,144 in the corresponding period of the previous year, primarily due to an expansion in the number of franchised cafés in operation.
Total revenue increased 46 percent to approximately $5.0 million in the six months ended August 31, 2014, versus approximately $3.4 million in the first half of FY2014.
The Company's total costs and expenses rose 48% to $4,519,773 in the first half of FY2015, compared with $3,054,974 in the prior-year period. Expense and income categories in the first half of FY2015 that were not incurred in the first half of FY2014 included $223,521 in franchise development costs, $124,551 in asset acquisition expenses, $503,526 in non-recurring restructuring charges, and a positive adjustment of $240,791 related to the valuation of a derivative associated with the convertible note agreement with Rocky Mountain Chocolate Factory.
Income from operations increased 33 percent to $473,229, compared with $354,892 in the six months ended August 31, 2013, primarily due to increased franchise royalties and fees, partially offset by non-recurring restructuring and acquisition-related charges related to management changes, the closure or sale of certain assets, and the acquisitions of three frozen yogurt franchising companies in January and February of 2014.
Net interest expense declined to $9,988 in the first half of FY2015, versus net interest expense of $27,021 in the first half of FY2014.
The Company reported net income of $463,241, or $0.02 per basic and $0.01 per diluted share, for the first half of FY2015, which represented a 41 percent improvement in earnings when compared with net income of $327,871, or $0.02 per basic and diluted share, in the first half of FY2014.
The weighted average number of common shares outstanding, assuming dilution increased 48 percent to 23,427,437 in the six months ended August 31, 2014, versus 15,844,524 in the prior-year period, shares issued pursuant to the exercise of outstanding Class C warrants and shares issued as part of the purchase consideration in certain acquisitions during FY2014.
Adjusted EBITDA, a non-GAAP financial measure, is computed by adding depreciation and amortization, equity compensation expenses, impairment charges, restructuring charges, acquisition-related costs and fair value adjustments to GAAP income from operations.
Rocky Mountain Chocolate Factory, Inc., headquartered in Durango, Colorado, is an international franchisor of gourmet retail chocolate stores and self-serve frozen yogurt cafés, and a manufacturer of an extensive line of premium chocolates and other confectionery products. As of October 14, 2014, the Company and its franchisees, licensees and majority-owned subsidiary (U-Swirl, Inc.) operated 642 stores and cafés in 42 states, Canada, Japan, South Korea, The United Arab Emirates, The Kingdom of Saudi Arabia, Pakistan and Turkey. The Company's common stock is listed on The Nasdaq Global Market under the symbol "RMCF." Additional information is available on the Internet at www.rmcf.com.
U-Swirl, Inc. is an operator and franchisor of self-serve frozen yogurt cafés that operate under the following names: U-SWIRL Frozen Yogurt, CherryBerry, Yogurtini, Fuzzy Peach, Aspen Leaf Yogurt, Yogli Mogli, Gracie Bleu, and Josie's Frozen Yogurt. The cafés offer frozen yogurt in up to 20 non-fat and low-fat flavors, including tart, traditional, and no-sugar-added options, along with fresh sorbet. Approximately 70 toppings such as fresh fruit, sauces, candies, and granola are available to customize each serving of yogurt to the customer's individual taste.
In January 2013, the Company acquired frozen yogurt café assets, franchise rights and certain other assets from Rocky Mountain Chocolate Factory, Inc. (NASDAQ: RMCF), primarily in exchange for certain warrants/options, notes payable, and a controlling ownership interest in the Company.
U-Swirl, Inc. is headquartered in Durango, Colorado, and its common stock trades on the OTCQB under the symbol "SWRL." As of October 14, 2014, the Company and its franchisees operated 288 self-serve frozen yogurt cafés in 38 states and 4 foreign countries.
Certain statements in this press release are "forward-looking statements." These statements involve risks and uncertainties, and the Company undertakes no obligation to update any forward-looking information. Risks and uncertainties that could cause cash flows to decrease or actual results to differ materially include, without limitation, seasonality, consumer interest in the Company's products, general economic conditions, consumer and retail trends, costs and availability of raw materials, competition, market conditions, and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the Company's control. 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, and it undertakes no obligation to revise or update publicly any forward-looking statements for any reason. 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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U-Swirl, Inc.
(970) 375-5678
U-Swirl, Inc. is an operator and franchisor of self-serve frozen yogurt cafés that operate under the following names: U-SWIRL Frozen Yogurt, CherryBerry, Yogurtini, Fuzzy Peach, Aspen Leaf Yogurt, Yogli Mogli, Gracie Bleu, and Josie's Frozen Yogurt