ACCT 101 Research Project
Rocky Mountain Chocolate Factory, Inc.
Rocky Mountain Chocolate Factory, Inc., founded in 1981and incorporated in Colorado in
1982, is an international franchisor and confectionery manufacturer. They are
headquartered in Durango, CO and manufacture an extensive line of premium chocolate
candies and other confectionery products. As of March 31, 2012, there were 10
company-owned, 49 licensee owned, and 296 franchised Rocky Mountain Chocolate
Factory stores operating in 40 states, Canada, Japan, and the United Arab Emirates. They
compete with numerous businesses that offer similar products to those their stores offer
such as TCBY and Cold Stone Creamery. Many of these competitors have great name
recognition and financial marketing strategies similar to them. In addition, there is intense
competition among retailers for real estate sites, store personnel, and qualified franchises.
A negative economic trend in FY2008, 2009, and 2010 due to the global economic
recession impacted retailing and regional shopping mall customer traffic. The first three
quarters of FY2010 resulted in the worse economic and retail environment in their history.
They experienced a decrease in store sales of 6.7% in the first fiscal quarter. In the second
quarter of FY2010, there was a decrease of 4.6% in sales followed by a 3.2% decrease in
the third quarter. The fourth quarter of FY2010 experienced an increase of 1.4% compared
to FY 2009. The negative trend reversed slightly in FY2011 and FY2012 reporting a 0.6%
and 1.1% increase respectively.
As of February 29, 2012, working capital was $10.6 million compared to $9.8 million as of
February 28, 2011. The change in working capital was due to operating results minus the
payment of $2.4 million in cash dividends and the purchase of $3.3 million of property and
equipment related to store build out, plant investment, and upgrades to their IT
infrastructure. Cash and cash equivalent balances increased from $3.3 million as of
February 28, 2011 to $4.1 million as of February 29, 2012 as a result of cash flows
generated by operating activities being less than cash flows used in financing and investing
activities. The company’s ratio was 3.98 to 1 at February 29, 2012 in comparison to 3.67 to
1 at February 28, 2011. 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 million credit line of which the entire amount is
available pending borrowing limitations.
AS OF FEBRUARY 29
2012
Assets
Current Assets
Cash and cash equivalents $ 4,125,444
