Rocky Mountain Chocolate Factory Reports 23% Increase in FY2007 Earnings Per Share

Fourth Quarter Diluted E.P.S. Rise 44% to $0.23 vs. $0.16

After-Tax Return on Beginning Shareholders' Equity Exceeds 30% for Fiscal Year

DURANGO, Colo., May 10 /PRNewswire-FirstCall/ -- Rocky Mountain Chocolate Factory, Inc. (Nasdaq: RMCF), which franchises gourmet chocolate and confection stores and manufactures an extensive line of premium chocolates and other confectionery products, today reported record earnings for the quarter and fiscal year ended February 28, 2007 (FY2007).

"We are very pleased to report another year of impressive net income growth, with diluted earnings per share increasing 23% to a record $0.75 in Fiscal 2007," noted Bryan Merryman, Chief Operating Officer and Chief Financial Officer of Rocky Mountain Chocolate Factory, Inc. "Our revenues rose over 12% to a record $31.6 million, while total system-wide sales of our franchised and company-owned stores increased 9% to $108.9 million, compared with $99.7 million in the previous fiscal year."

"Our franchisees opened 37 new stores during Fiscal 2007," continued Merryman. "This increased the total number of Rocky Mountain Chocolate Factory locations in operation to 322 as of February 28, 2007, and widened our lead as the largest chain of retail chocolate stores in the United States. We expect franchisees to open between 35 and 40 new stores in the current fiscal year, and the Company expects net income to increase 15 to 20 percent if current business and economic trends continue. Factors critical to the Company's anticipated earnings growth include, among others, unit openings, same-store sales and same-store pounds purchased from the factory."

For the three months ended February 28, 2007, revenues increased 10% to $8.9 million, compared with $8.1 million in the fourth quarter of the previous fiscal year. Comparable-store sales at franchised retail locations declined 1.9% when compared with the fourth quarter of FY2006.

Net earnings increased 34% to $1.4 million in the fourth quarter of FY2007, versus $1.1 million in the corresponding period of the previous fiscal year. Basic and diluted earnings per share increased 41% and 44%, respectively, to $0.24 basic and $0.23 diluted, in the most recent quarter, compared with $0.17 basic and $0.16 diluted in the year-earlier period.

For the fiscal year ended February 28, 2007, revenues increased 12.5% to $31.6 million, compared with $28.1 million in the fiscal year ended February 28, 2006. Total pounds of confectionery products purchased from the factory by franchisees increased 6% in FY2007, due to a net increase of 18 franchised stores in operation. Same-store pounds purchased from the factory declined 2.6% in FY2007, while comparable-store sales at franchised stores were unchanged relative to the previous fiscal year.

Net income increased 16.7% to a record $4.7 million in FY2007, compared with $4.1 million in FY2006. Basic and diluted earnings per share increased 18% and 23%, respectively, to $0.77 basic and $0.75 diluted, in the most recent fiscal year, compared with earnings per share of $0.65 basic and $0.61 diluted in the previous fiscal year. After-tax return on beginning shareholders' equity reached a record 30.6% in the fiscal year ended February 28, 2007.

"During Fiscal 2007, Rocky Mountain Chocolate Factory continued to generate an after-tax return on shareholders' equity that would, we believe, be the envy of most publicly traded companies, and our balance sheet remained strong at the end of the fiscal year," continued Merryman. "We had $2.8 million of cash in the bank as of February 28, 2007. The Company increased its quarterly cash dividend to a $0.36 annualized rate in November 2006, and the Board of Directors this week voted to increase the annualized quarterly cash dividend a further 11% to $0.40 per share. This will represent the ninth increase in quarterly dividend payout since September 2003."

In May 2006, the Company's Board of Directors authorized the repurchase of up to $2 million in common stock in the open market or in private transactions. On May 3, 2007 the Company completed this repurchase program, and the Board of Directors this week authorized the repurchase of an additional $5 million, or up to 350,000 shares, of common stock. During the past seven years, the Company has repurchased approximately 3,328,570 shares of its common stock under repurchase authorizations at an average price of $4.47 per share.

"Fiscal 2007 represented another year of progress towards our goal of building Rocky Mountain Chocolate Factory into the premier retail chocolatier in the United States, with systemwide sales breaking the $100 million mark for the first time in the Company's history," stated Frank Crail, Founder, Chairman and Chief Executive Officer of the Company. "We have continued to share our success with stockholders, as reflected in the recent announcement of our ninth quarterly cash dividend increase in less than four years. We expect the Board of Directors to consider further cash dividend increases in the future, so long as the Company's underlying financial performance and liquidity requirements support such distributions."

    The Company will host a conference call Thursday, May 10 2007 at 4:15 p.m.
EDT to discuss year-end results in greater detail and the outlook for FY2008.
The dial-in number for the conference call is 877-715-5282
(international/local participants dial 973-582-2850) and the access code is
8784081.  Parties interested in participating in the conference call should
dial in approximately five minutes prior to 4:15 PM EDT.  The call will also
be broadcast live on the Internet at
http://www.videonewswire.com/event.asp?id=39745.  A replay of the call will be
available through May 17, 2007 by dialing 877-519-4471 or for international
callers by dialing 973-341-3080, the replay Access Code is 8784081.  The call
will also be archived through August 9, 2007 at
http://www.videonewswire.com/event.asp?id=39745

Rocky Mountain Chocolate Factory, Inc., headquartered in Durango, Colorado, is an international franchiser of gourmet chocolate and confection stores and a manufacturer of an extensive line of premium chocolates and other confectionery products. The Company's common stock is listed on The Nasdaq Global Market under the symbol "RMCF".

This press release contains forward-looking information that involves risks and uncertainties, and the Company undertakes no obligation to update any forward-looking information. Risks and uncertainties that could cause actual results to differ materially include, without limitation, seasonality, consumer interest in the Company's products, general economic conditions, consumer trends, costs and availability of raw materials, competition, the effect of government regulations, and other risks disclosed in the Company's filings with the Securities and Exchange Commission.

    For Further Information, Contact Bryan J. Merryman COO/CFO (970) 259-0554



                              STORE INFORMATION

                               New stores opened during
                                    the year ended          Stores open as of
                                  February 28, 2007         February 28, 2007

    United States:
      Franchised Stores                  32                         279
      Company-owned Stores                0                           5
    International Licensed Stores         5                          38
    Total                                37                         322



                             STATEMENTS OF INCOME
                    (in thousands, except per share data)

                              Three Months Ended         Three Months Ended
                                 February 28,               February 28,
                               2007         2006         2007         2006

    Revenues
      Factory sales           $6,365       $5,534        71.3%        68.1%
      Royalty and marketing
       fees                    1,676        1,502        18.8%        18.5%
      Franchise fees             173          159         1.9%         1.9%
      Retail sales               717          932         8.0%        11.5%
      Total revenues           8,931        8,127       100.0%       100.0%

    Costs and Expenses
      Cost of sales            4,442        4,250        49.7%        52.3%
      Franchise costs            423          404         4.7%         5.0%
      Sales and marketing        466          409         5.2%         5.0%
      General and
       administrative            748          657         8.4%         8.1%
      Retail operating           359          469         4.0%         5.8%
      Depreciation and
       amortization              191          238         2.2%         2.9%
      Total costs and
       expenses                6,629        6,427        74.2%        79.1%

    Income from Operations     2,302        1,700        25.8%        20.9%

    Other Income (Expense)
      Interest expense            --           --          --           --
      Interest income             18           25         0.2%         0.3%
      Other, net                  18           25         0.2%         0.3%

    Income Before Income
     Taxes                     2,320        1,725        26.0%        21.2%

    Provision for Income
     Taxes                       877          652         9.8%         8.0%

    Net Income                $1,443       $1,073        16.2%        13.2%

    Basic Earnings per
     Common Share              $0.24        $0.17
    Diluted Earnings per
     Common Share              $0.23        $0.16

    Weighted Average
     Common Shares
     Outstanding           6,112,102    6,296,207
    Dilutive Effect of
     Employee Stock
     Options                 193,643      308,038
    Weighted Average
     Common Shares
     Outstanding,
     Assuming Dilution     6,305,745    6,604,245



                             STATEMENTS OF INCOME
                    (in thousands, except per share data)

                             Year ended February 28,   Year ended February 28,
                                2007         2006         2007         2006
    Revenues
      Factory sales            $22,709      $19,297        71.9%        68.7%
      Royalty and marketing
       fees                      5,604        5,048        17.8%        18.0%
      Franchise fees               634          683         2.0%         2.4%
      Retail sales               2,626        3,046         8.3%        10.9%
      Total revenues            31,573       28,074       100.0%       100.0%

    Costs and Expenses
      Cost of sales             15,989       13,957        50.6%        49.7%
      Franchise costs            1,570        1,466         5.0%         5.2%
      Sales and marketing        1,538        1,321         4.9%         4.7%
      General and
       administrative            2,539        2,239         8.0%         8.0%
      Retail operating           1,502        1,756         4.8%         6.3%
      Depreciation and
       amortization                874          876         2.8%         3.1%
      Total costs and
       expenses                 24,012       21,615        76.1%        77.0%

    Income from Operations       7,561        6,459        23.9%        23.0%

    Other Income (Expense)
      Interest expense              --          (20)         --%        (0.1%)
      Interest income               67           96         0.2%         0.4%
      Other, net                    67           76         0.2%         0.3%

    Income Before Income
     Taxes                       7,628        6,535        24.1%        23.3%

    Provision for Income
     Taxes                       2,883        2,470         9.1%         8.8%

    Net Income                  $4,745       $4,065        15.0%        14.5%

    Basic Earnings per
     Common Share                $0.77        $0.65
    Diluted Earnings per
     Common Share                $0.75        $0.61

    Weighted Average Common
     Shares Outstanding      6,125,831    6,268,202
    Dilutive Effect of
     Employee Stock Options    216,524      407,411
    Weighted Average Common
     Shares Outstanding,
     Assuming Dilution       6,342,355    6,675,613



                         SELECTED BALANCE SHEET DATA
                                (in thousands)

                                     February 28, 2007     February 28, 2006

    Current Assets                        $10,759               $10,440
    Total assets                          $18,456               $19,057
    Current Liabilities                    $3,256                $2,908
    Stockholders' Equity                  $14,515               $15,486

SOURCE Rocky Mountain Chocolate Factory, Inc.