Hello and welcome to Rocky Mountain Chocolate Factory Incorporated Fourth Quarter 2016 Earnings Conference Call. [Operator Instructions] After today’s presentation there will be an opportunity to ask questions. Please note this event is being recorded. The statements made on this conference call which are not historical facts or forward-looking based upon the company’s current plan and strategies and reflect the company’s current assessment of the risks and uncertainties related to its business including such things as product demand and market acceptance, the economic and business environment and the impact of government pressures, currency risks, capacity, efficiency and supply constraints and other risks detailed in the company’s press releases, shareholder communication and Securities and Exchange Commission filings. For additional information the company urges you to consider reviewing its 10-Q and 10-K SEC filings. I would now like to turn the conference over to Frank Crail, Chief Executive Officer. Please go ahead.

Thank you, Operator. Good afternoon, everyone, and welcome to Rocky Mountain Chocolate Factory’s fourth quarter and fiscal 2016 year-end conference call. I’m Frank Crail, President of Rocky Mountain Chocolate Factory. And with me here today is Mr. Bryan Merryman, the company’s Chief Operating Officer. We’re going to start the call today with Bryan giving you a summary of both our fourth quarter and fiscal 2016 year-end operating results. And at the conclusion of this presentation we’ll be happy to answer any questions that you may have. So at this time, I’d like to turn the call over to Bryan.

Thank you, Frank. I’d also like to welcome everyone to today’s call. I’m going to start with details on operating results from the year-ended 2016, February 29, and then get into a little detail on the fourth quarter. Then I’ll turn the conference back over to Frank for question-and-answers. Total revenues for the year declined 2.5% from $41.5 million last year to $40.5 million this year. This was driven by factory sales increase of 1.8%, primarily due to 8.1% increase in shipments to customers outside of our network of domestic franchised and licensed stores. This increase was partially offset by lower domestic Rocky Mountain Chocolate Factory stores in operation and a 1.5% decline in same store pounds purchased. Royalty and marketing fees decreased 3.1%. We had a decline in domestic Rocky Mountain Chocolate Factory units in operation of 5.3%. And we also had a decline of 11.1% in total franchised units in operations, the result of store closures and acquired yogurt franchise systems, in line with expectations that poor performing stores would close. We had fewer acquisitions and store openings this year to offset these declining units. We also had a system-wide same-store sale increase of 0.7%. Rocky Mountain Chocolate Factory stores’ same-store sales were up 1.6% and our yogurt stores declined on a same-store sales basins 1.4%. Franchise fees decreased 6.5%, due to fewer international license fees. Retail sales declined 19.4%; this was the result of the sale of three U-Swirl locations and the closure of two underperforming U-Swirl company-owned locations. We also sold two Rocky Mountain Chocolate Factory company-owned locations. We had a 0.8% decrease in company-owned stores’ same-store retail sales. Factory adjusted margins decreased 140 basis points. This was the result of a change in customer and product mix resulting from the addition of new customers and…

Okay. Thanks, Bryan. Operator, at this time, we’d be happy to answer any questions that anyone might have.

[Operator Instructions] And our first question comes from Tim Call with Capital Management Group. Please go ahead.

Congratulations with growing your system-wide chocolate store base, but sequentially in year-over-year. What’s the outlook for international chocolate store growth today, and has the bank lending environment eased at all for Cold Stone Creamery co-branding opportunities to grow?

I believe that we’ll see continued international growth opportunities and see more international openings and we do have domestically. I believe also that on a longer-term basis. International would be a contributor to our profitability long-term. We don’t expect it to move the needle in the short-term, but I still see faster growth international than we’ll see domestically. And what was the second part of your question? I’m sorry.

The lending environment for Cold Stone Creamery stores to have moved to co-branded with Rocky Mountain?

I’m not sure the lending environment really was an impediment to growth in terms of Cold Stone Creamery stores, remodeling their stores, so that become a co-branded Cold Stone Rocky Mountain Chocolate Factory store. I think that’s more applicable to standalone Rocky Mountain Chocolate Factory stores. And I think, well, that lending environment is somewhat not much for the kind of franchise that we attract.

What are the expansion opportunities for things like candy bars serial and internet sales?

Well, I think the candy bars serials, we have less opportunities going right now, then we do with the ability of expand our online sales to Rocky Mountain Chocolate Factory or rmcf.com. I think there is a great opportunity for that, I think that in our plans for the fiscal year that we are in right now is to grow that business significantly. From a small base, but still grow at significantly. We won’t really know how successful we are with those efforts until Q3, Q4. That business will be a gifting business and we’ll be seasonal like most chocolate sales.

Thank you.

The next question is a follow-up from Tim Call with Capital Management Group. Please go ahead.

I just had a couple of more questions. The interest expenses here fell around 17%, because you’re paying off your promissory note as it comes due. As that continues, should we expect interest expense this coming up year to also fall around 17% or more?

I think it will be approximately in that range, yes. And we’ll continue to pay that down in interest expense, will continue to go down.

And you expect to pay down debt as it comes due?

Yes, that’s our plan. It’s not to pay that down, that debt, any earlier than it is due.

In the balance sheet, cash is almost twice the level of current liabilities and your free cash flow remains very strong. Does that mean there is a chance later on this year that you might increase the annual dividend beyond $0.48 and are share buyback still a possibility.

Well, I’ll answer that question this way. We have and we will continue to pay dividends, buy back stock, invest in the business within the constraints of the cash flow, that’s generated by operations. So, specifically, we don’t have plans to increase the dividend and that’s going to depend on whether we grow earnings and free cash flow and what the level of investment we’re going to make in our factory. And so, that is not a given, but it is something that we continually look at.

Thank you.

The next question comes from Vincent Rudisill, [ph] a private investor. Please go ahead.

Thank you. Could you tell us what your long-term debt was on the balance sheet at the end of the fiscal year?

It was roughly $4.1 million total long-term debt and that is the current long-term purchase [ph].

And I believe you were owed $7 million from U-Swirl. What is - what happens with that?

The note that was between U-Swirl, Inc. and Rocky Mountain Chocolate Factory, because we consolidated U-Swirl was eliminated in consolidation. And that note has been satisfied through the foreclosure process. And so, that note is no longer in existence.

Okay, all right. Thank you.

[Operator Instructions] The next question comes from Bill Wolfenden with Cottonwood Investments. Please go ahead.

Hi, I have a couple of big-picture questions. The first one is, if you could just talk broadly why the same-store sales were so strong in the fourth quarter? And secondly, what are the plans for U-Swirl, because obviously that business wasn’t doing that well yet to foreclose on it, so I’m just trying to figure out how that fits into your business.

Well, I think U-Swirl continues to fit into our business. It’s not too dissimilar from Rocky Mountain Chocolate Factory’s franchise system in terms of the infrastructure that you need to support those franchisees. It’s a contributor in terms of cash flow. And through the foreclosure process we got access to $3.3 million in cash and almost $2.2 million in tax assets. And so, I think it fits into what we’re doing. And hopefully at some point, we’ll see more units opening and closing as we get through the process of closing the weaker stores and we see a less saturated frozen yogurt market nationally. So that’s the U-Swirl question. And I think that the fourth quarter same-store sales; there is no new trend there. They were up slightly on the year; they did better in the fourth quarter than they had on year. But if you look at the year number, on same-store sales, it’s much weaker than last year, but in line with the previous four years. And so, I don’t think there is any new trend in same-store sales. We had four years of slightly positive same-stores sales, in one year our same-store sales were very strong.

Great, and if I can just follow-up, is the cash flow profile, i.e., margins et cetera for U-Swirl similar to that of Rocky Mountain or is it lower?

Well, on the Rocky Mountain side or on the U-Swirl side we don’t purchase the product, that’s purchased by the franchise system. So the revenue that’s generated per store is much lower in the yogurt business than it is in the chocolate business.

Okay. Thanks.

This concludes our question-and-answer session. I would like to turn the conference back over to Frank Crail for any closing remarks.

Thank you. And I’d like to thank everyone that listen to our conference call this afternoon and we look forward to talking to you again at the end of the first quarter. Have a great day and thank you again. Bye.

To access the digital replay of this conference you may dial 1-877-344-7529 or 1-412-317-0088, beginning at approximately 5:30 PM Eastern Time today. You will be prompted to enter a conference number, which will be 10085943. Please record your name and company when joining. The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.