Q3 2013 Earnings Call Transcript

Transcript Call Date 01/14/2013

Retail sales increased 8%. We had an increase in the average number of units in operation from – to 15 in the current year from 12 in the prior year. This was partially offset by 8% decrease in company-owned same-store sales and the decrease in same-store sales was a result of Aspen Leaf Yogurt grand openings in the previous year.

Royalty and marketing fees increased 2.8%. This was driven by an increase in royalties related to the Company's purchase-based royalty structure and an increase in license locations. It was partially offset by a decline in franchise same-store sales of 0.7% and a decline in average domestic units in operation of 3.6%.

Franchise fees increased to $88,400 in the current year versus negative franchise fees of $21,600 in the prior year. We opened eight domestic franchise and license openings in the current year versus four in the prior year. In the prior year, the decrease in the franchise fee was for Aspen Leaf Yogurt locations that were already opened and we lowered our franchise fee and we refunded the difference between the new franchise fee and the fee that was paid previously by our franchisees.

Factory-adjusted gross margins increased 30 basis points to 31.2% from 30.9%. We reported a net loss of $509,000 in the current quarter compared to net income of $725,000 in the prior year, excluding Aspen Leaf Yogurt operating losses, the impairment of Aspen Leaf Yogurt assets and related restructuring cost, net income would have risen 4.9% in the quarter.

Fully diluted earnings per share were loss of $0.08 per share versus $0.12 per share in the prior year. During the quarter, we opened 12 stores including three Aspen Leaf Yogurt stores, three Cold Stone Creamery co-branded stores and two domestic franchise openings along with four international openings. During the quarter, we continued to generate excess cash flow and we finished the quarter with approximately $3.5 million in cash in the bank.

With that, I'll turn it back over to Frank.

Franklin E. Crail - Chairman, President and CEO: Thanks, Brian. At this time, we'll be happy to answer any questions that you might have.

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