Rocky Mountain Chocolate Factory Audit 2

3582 words - 15 pages

MGMT 436
Larry Dudley
Group 3
Rocky Mountain Chocolate Factory Inc. Audit

Karla Schaapveld, Jeremy Smith, Mark Bourgoin, Matt Misitano,
Diego Elizalde, Jeff Stanton, and Reilly Kindred

CASE 22
Rocky Mountain Chocolate Factory Inc.
Jeremy Smith

I. CURRENT SITUATION

A. Current Performance
* 329 Franchised and 5 Company owned stores
* Increasing revenues year to year with $16.7 Million in 2008
* Sales have slowed due to economic downturn but the company is in an excellent financial position to withstand the recession

B. Strategic Posture

1. Mission
* Quality, Taste, Value, and Variety of products
* Quality of the product is the number one ...view middle of the document...

196, fig. 5-4).

A. Board of Directors

1. a. Chairman: Franklin Crail (CEO and President)

b. Directors: Bryan Merryman (VP, CFO, COO, and Treasurer), Lee Mortenson,
Gerald Kien, Clyde Engle, and Scott Capdevielle.

With the exception of Franklin Crail (co-founder of Rocky Mountain Chocolate Factory Inc.) and Bryan Merryman, the Board of Directors of Rocky Mountain Chocolate Factory Inc. is composed of entirely external/independent board members.

2. Directors do not receive any compensation for serving on the board, but they do receive compensation for serving on board committees, chairing committees, and participating in meetings. Directors who are not officers/employees of the company are entitled to stock option awards.

3. Rocky Mountain Chocolate Factory Inc. is publically traded as RMCF.O on Consolidated Issue listed on NASDAQ Global Market. It closed on April 21, 2011 at $10.40 (USD) a share. The Board of Directors has frequently paid out quarterly cash dividends, usually $0.10 to common share outstanding. This dividend, on average, has been three times that of the industry’s average.

According to the company’s most recent 10-K, there are currently 100,000,000 shares authorized; 6,026,938 and 5,989,858 shares of common stock issued and outstanding respectively. Each common stock is eligible to vote at the annual meeting. Each share of common stock entitles its holder to one vote on all matters voted on at the annual meeting (except the election of directors). Shareholders have cumulative voting rights in the election of directors.

There are also 250,000 authorized Preferred stock (with zero issued or outstanding), 50,000 shares of Series A Participating Preferred Stock, and 200,000 shares of Undesignated series stock.

4. The board members contribute vast experiences in leadership positions, with various companies. None of their experiences outside of Rocky Mountain Chocolate Factory seem to be in the food industry, though.

Franklin Crail co-founded the first Rocky Mountain Chocolate Factory store in May 1981. He has served as its President, Director, Chairman of the Board, and CEO. Prior to co-founding the company, he was co-founder and President of CNI Data Processing Inc. (a software firm which developed automated billing systems for the cable television industry).

Bryan Merryman is experienced in leverage buyout firms; retail and manufacturing of aftermarket auto parts; and audit, consulting, financial advisory, risk management, and tax. He has been with the company since 1997.

Lee Mortenson has been with the company since 1987 and has been engaging in consulting and investment activities since 2000. He was managing director of a private investment firm; has been President and CEO of a company that provided management consulting and investment services; has been involved in real estate development and manufacturing; and has been engaged in manufacturing apparel...

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