Hello and welcome to the Rocky Mountain Chocolate Factory Fourth Quarter Earnings Conference Call. All participants will be in listen-only mode. There will be an opportunity for you to ask questions at the end of today’s presentation. An operator will give instructions on how to ask your questions at that time. Some of the statements made during this call may be considered forward-looking statements that involve a number of risks and uncertainties. There are several factors that could cause actual results of Rocky Mountain Chocolate Factory to differ materially from these forward-looking statements. These factors include, but are not limited to, the potential need for additional financing, the availability of suitable locations for new stores and the availability of qualified franchisees to support new stores, customer acceptance of new products, dependence upon major customers, economic and consumer spending trends and such other factors listed from time-to-time in public announcements made in Rocky Mountain Chocolate Factory’s SEC reports. In addition, please be advised that the financial results for the fiscal periods presented in this call do not necessarily indicate the results that may be expected for any future quarters or the upcoming fiscal year. To Rocky Mountain Chocolate Factory’s knowledge, the information relayed in this conference call is correct as of the date of its transmission and the company does not undertake any obligation to update this information in the future. [Operator Instructions] Please note this conference is being recorded. Now I would like to turn the conference over to Rocky Mountain Chocolate Factory’s President, Mr. Franklin Crail. Please go ahead sir.

Okay, thank you, operator. Good afternoon, everyone and welcome to Rocky Mountain Chocolate Factory’s fourth quarter and fiscal 2013 year-end conference call. I am Frank Crail, President of Rocky Mountain Chocolate Factory and with me here today is Mr. Bryan Merryman, the company's Chief Operating Officer. We are going to start the call this afternoon with Bryan providing you a brief summary about the fourth quarter and fiscal year-end operating results. And at the conclusion of his presentation we will be happy to answer any questions that you may have. So at this time I will turn the call over to Bryan.

Thanks, Frank. I would also like to welcome everyone to the call today. I am going to start today with just talking about some of the major accomplishments we had during the year for fiscal 2013, then talk in a little bit more detail about the year and the quarter. For 2013, we continued modest top line revenue growth. Really, it's modest still due a weak economic environment and tight credit markets domestically. During the year, we purchased a 60% interest in U-Swirl, Inc., by acquiring and selling selected assets of Yogurtini International, contributing certain assets of Aspen Leaf Yogurt, LLC, and we also paid a small amount of cash to acquire that 60% interest. We believe these transactions will make U-Swirl a competitive, profitable force in the self serve frozen yogurt industry. It will end operating losses from Aspen Leaf Yogurt. We expect U-Swirl to be accretive to earnings next fiscal year. It creates a roll up vehicle for continued aggressive expansion in frozen yogurt and it creates numerous co-branding and co-tenancy opportunities for Rocky Mountain Chocolate Factory. Also during the year, we executed a licensing agreement with Kellogg's to feature Rocky Mountain Chocolate Factory’s brand on certain cereal products. The agreement contained the first right use also on certain snacks products, and we believe this is a true milestone and demonstrates the strength of the Rocky Mountain Chocolate Factory brand. For fiscal 2013, we had slightly positive same-store sales. We also executed 3 license agreements internationally during the year, one in Japan, one for South Korea and one for the Kingdom of Saudi Arabia. We also increased our quarterly dividend 10% to $0.11 per share and pursuant to a share repurchase plan that the Board approved back in 2008, we resumed share repurchases during the first six months…

Okay, thanks, Bryan. All right, at this point, we will be happy to answer any questions that you might have.

[Operator Instructions] The first question will come from James Fonda of Sidoti & Company.

Bryan, could you I guess talk about what those royalty and marketing fees would have looked like without the U-Swirl transaction in them?

Yes. The Rocky Mountain Chocolate Factory royalty and marketing fees were up slightly, not in the neighborhood of 12%. Most of that increase was driven by consolidating U-Swirl's royalty and marketing fees.

Our next question will come from Tom Kerr of Singular Research.

Two questions. The first one, can you go into more about the slowdown in the pace of rollouts on the Japanese side?

Sure. We had expected our partner to open up 10 units during the first year of the agreement. They have 5 open right now. They have 2 to 3 more units planned over the next several months. That's obviously behind schedule. They’ve had a number of factors relating to that. Number one, there has been a huge depreciation of the yen. It's kind of driven our average unit volumes from about 400 U.S. to about 320 U.S. It's putting financial pressure on them. They have also had some operating problems and so they are slowing their unit openings and focusing more an operations for now. And they are holding off on franchising until they get the operation better under control.

So the plan for 10 a year is kind of off track for now? Will that number be lowered or will it ever ramp up back up to that?

Well, I mean, we still feel that we have a very large opportunity in Japan. And at this point there is no exclusivity with this agreement because they didn't meet their development schedule and so we are still going to aggressively pursue the market. And if our partners can't grow at that rate, we will seek other partners as well, so that we are not just operating with one firm. So we can't necessarily accelerate it in the next 6 to 8 months, but we plan to open a lot more units in Japan, and 5 or 6 a year, that is not going to work for us. So we are considering our alternatives right now because we definitely want to expand at least that 10 units pace per year, if not faster.

Got it. So you can use other partner simultaneously, in other words?

Right, we can, and it’s an option that we haven’t 100% decided to pursue, but it’s definitely on the table.

Okay. Lastly in terms of other licensing deals like Kellogg's that some of guys are aggressively pursuing, is that a growth area? Can you accelerate that in any way?

Well, hopefully the acceleration will happen from the attention that we get from the cereal rollout. It’s available nationally right now. We have only some very preliminary sales information from the very first week or so of the rollout. We won't have real meaningful sales information until the beginning of June, but all indications, it's off to a very good start and that the consumer loves a cereal. If it performs, it will go from this test phase into a rollout phase and we don't really have a good feel for how large that can be. We know right now we are getting a lot of attention from the cereal, it’s selling well, it’s branded almost a 100% Rocky Mountain Chocolate Factory on the box. I think everybody is happy with it. If it clears the test phase and enters into the rollout phase, we're very optimistic it will lead to other licensing deals. So there's not a lever for us to be super aggressive about pursuing it right now, but if this is very successful, we can certainly trade that lever.

[Operator Instructions] The next question will come from George Whiteside of SWS Financial Services.

It certainly looks as though you had an acceptable quarter given the variety of circumstances that you've run into. In terms of your licensee in Japan and having to have a better target in terms of openings, are there plans to enter into other licensing agreements overseas to, in effect, accelerate the opening of doors in line with your original plans?

Well, we're in -- we just started the international effort a little over a year ago and we've signed 3 agreements outside of Canada which we have before this in UAE. And so we are up to 5 international agreements right now, working on it for a very short period of time. It is a top priority of the company to continue expanding around the world and we are in discussion with various people and in a number of countries. And so we are certainly focused on it and we are going to rollout the international expansion as fast as we possibly can. But it does take time and it takes time to set something up in a country, figure out the logistics, open the store, open 2 or 3 test locations, make sure those consumers acceptance and then to start to grow more rapidly and it’s all about finding real qualified partners. So we are definitely focused on it and it will be one of our main strategies going forward.

Understandable. Now in connection with that, you have South Korea and Saudi Arabia. How do their agreement terms compare with the Japan contract?

Well, every country's negotiated a little differently, there's upfront fees and then there's total fee that relates to license agreement. There's also royalties charged on every agreement and then depending on where we think the potential in the country is for units, there's different units that are required under the agreement. In Japan, it’s a 100 units. In Saudi Arabia, it starts out as 4 units with options to take it to another 25 locations. And in South Korea, it starts out with 5 locations, with an option to take it to 30 units. So the potential under the agreement for those 2 stores, is 55 units. The potential in Japan is 100 units. That’s not necessarily potential, that’s just what the development schedule requires. So every country is different in region, population and demand for the product.

On the financial side, you had commented on taking a charge because of the restructuring of your yogurt operation. Does that imply that some of the units that you had opened under Rocky Mountain weren’t folded in to U-Swirl?

No, we broke down the assets of Aspen Leaf Yogurt to their estimated fair market value. We did that in the third quarter. And then in the fourth quarter, we had a variety of charges relating to the acquisition of Yogurtini and the disposition of both Yogurtini and Aspen Leaf Yogurt. And all of the units with Aspen Leaf Yogurt were sold to U-Swirl and they continue to operate those units. There was a number of units that went on -- that we financed the sale of those units that were company-owned through recourse notes and through non-recourse notes. But none of those stores have ceased operations.

[Operator Instructions] We do have a final -- a follow-up question from George Whiteside of SWS Financial Services.

In regard to your Kellogg relationship, do you -- is that a royalty situation, where you get paid on the basis of their volume in sales once they have launched the product in the stores?

That’s correct.

And so they have not gone through the consumer testing process yet. So, it's not ready to be rolled out into the marketplace I assume?

Well, it's being tested with our first type of cereal and it is rolled out, it’s available nationally right now in Target. So at every Target store that has a grocery store has our cereal in their store right now. And so the cereal is available nationally as we speak.

So we should see it in the stores.

Yes. If you go into your local Target store, if it has a grocery store, you should be able to purchase our cereal and you should see it. It's being featured very prominently. Sometimes on an endcap there is a lot of promotion around it right now. And all indications is it is selling very well.

Excellent. Back to the U-Swirl situation, at one point you had commented that -- or expected that in 2014 fiscal year that it would be accretive to earnings. So are you anticipating that this first quarter will be profitable?

We don't -- we haven’t given any guidance on the first quarter and I don't have any guidance for you here today, George. We just -- it's going to look like. We will be reporting our first quarter in early July and we will have update on the integration and operation has gone for U-Swirl it will be consolidated into our financial statements for the entire quarter and we will be able to address it more thoroughly then.

Thank you. We show no further questions at this time. I would like to turn the conference back over to Mr. Crail for his closing remarks.

Thank you, operator. Thank you again, everyone, for attending our conference call this afternoon. We will be looking forward to talking to you again at the end of the first quarter. So have a wonderful day and thank you, again.

Thank you, sir. To access the digital replay of this conference, you may dial 1 (877) 344-7529 or 1 (412) 317-0088 beginning at 6:00 PM EST today. You will be prompted to enter a conference number, which will be 10029247. You will be prompted to record your name and company when joining. The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.