ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JAMBA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
September 27,
|
|
|
December 29,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(Unaudited)
|
|
|
|
|
(Dollars in thousands, except share and per share amounts)
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
14,257
|
|
|
$
|
19,730
|
|
Receivables, net of allowances of $427 and $618
|
|
|
11,705
|
|
|
|
16,932
|
|
Inventories
|
|
|
630
|
|
|
|
818
|
|
Prepaid expenses and other current assets
|
|
|
4,909
|
|
|
|
6,533
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
31,501
|
|
|
|
44,013
|
|
Property, fixtures and equipment, net of accumulated depreciation of $38,935 and $36,815
|
|
|
19,114
|
|
|
|
18,744
|
|
Goodwill
|
|
|
1,184
|
|
|
|
1,184
|
|
Trademarks and other intangible assets, net of accumulated amortization of $2,580 and $2,527
|
|
|
1,359
|
|
|
|
1,464
|
|
Other long-term assets
|
|
|
3,197
|
|
|
|
4,211
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
56,355
|
|
|
$
|
69,616
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
2,158
|
|
|
$
|
3,815
|
|
Accrued compensation and benefits
|
|
|
3,623
|
|
|
|
3,788
|
|
Workers’ compensation and health insurance reserves
|
|
|
647
|
|
|
|
633
|
|
Accrued jambacard liability
|
|
|
23,713
|
|
|
|
29,306
|
|
Accrued expenses
|
|
|
10,176
|
|
|
|
9,977
|
|
Other current liabilities
|
|
|
8,139
|
|
|
|
8,116
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
48,456
|
|
|
|
55,635
|
|
Deferred rent and other long-term liabilities
|
|
|
7,185
|
|
|
|
8,990
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
55,641
|
|
|
|
64,625
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value—30,000,000 shares authorized; 18,187,950 and 15,329,133 shares issued and outstanding, respectively, at September 27, 2016, and 17,938,820 and 15,080,003 shares issued and outstanding, respectively, at December 29, 2015
|
|
|
18
|
|
|
|
18
|
|
Additional paid-in capital
|
|
|
406,591
|
|
|
|
403,605
|
|
Treasury shares, at cost
|
|
|
(40,009
|
)
|
|
|
(40,009
|
)
|
Accumulated deficit
|
|
|
(365,886
|
)
|
|
|
(358,623
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders’ equity
|
|
|
714
|
|
|
|
4,991
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity
|
|
$
|
56,355
|
|
|
$
|
69,616
|
|
See Notes to Condensed Consolidated Financial
Statements.
JAMBA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
13-Week Period Ended
|
|
|
39-Week Period Ended
|
|
(Dollars in thousands, except share and per share amounts)
|
|
September 27, 2016
|
|
|
September 29, 2015
|
|
|
September 27, 2016
|
|
|
September 29, 2015
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company stores
|
|
$
|
14,350
|
|
|
$
|
28,213
|
|
|
$
|
40,177
|
|
|
$
|
124,301
|
|
Franchise and other revenue
|
|
|
7,711
|
|
|
|
7,284
|
|
|
|
22,178
|
|
|
|
17,826
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
22,061
|
|
|
|
35,497
|
|
|
|
62,355
|
|
|
|
142,127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
3,437
|
|
|
|
6,626
|
|
|
|
9,720
|
|
|
|
30,507
|
|
Labor
|
|
|
4,644
|
|
|
|
8,843
|
|
|
|
13,470
|
|
|
|
39,807
|
|
Occupancy
|
|
|
1,879
|
|
|
|
3,980
|
|
|
|
5,815
|
|
|
|
16,946
|
|
Store operating
|
|
|
2,381
|
|
|
|
5,901
|
|
|
|
7,015
|
|
|
|
21,994
|
|
Depreciation and amortization
|
|
|
1,068
|
|
|
|
1,143
|
|
|
|
4,244
|
|
|
|
4,360
|
|
General and administrative
|
|
|
9,699
|
|
|
|
9,003
|
|
|
|
26,732
|
|
|
|
26,393
|
|
Loss (gain) on disposal of assets
|
|
|
204
|
|
|
|
(16,076
|
)
|
|
|
501
|
|
|
|
(21,334
|
)
|
Store pre-opening
|
|
|
210
|
|
|
|
287
|
|
|
|
860
|
|
|
|
475
|
|
Impairment of long-lived assets
|
|
|
229
|
|
|
|
1,907
|
|
|
|
356
|
|
|
|
2,202
|
|
Store lease termination and closure costs
|
|
|
178
|
|
|
|
207
|
|
|
|
242
|
|
|
|
269
|
|
Other operating, net
|
|
|
104
|
|
|
|
375
|
|
|
|
620
|
|
|
|
2,414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and operating expenses
|
|
|
24,033
|
|
|
|
22,196
|
|
|
|
69,575
|
|
|
|
124,033
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from operations
|
|
|
(1,972
|
)
|
|
|
13,301
|
|
|
|
(7,220
|
)
|
|
|
18,094
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest (expense) income, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
50
|
|
|
|
49
|
|
|
|
195
|
|
|
|
78
|
|
Interest expense
|
|
|
(51
|
)
|
|
|
(53
|
)
|
|
|
(169
|
)
|
|
|
(162
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest (expense) income, net:
|
|
|
(1
|
)
|
|
|
(4
|
)
|
|
|
26
|
|
|
|
(84
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes
|
|
|
(1,973
|
)
|
|
|
13,297
|
|
|
|
(7,194
|
)
|
|
|
18,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit (expense)
|
|
|
9
|
|
|
|
(194
|
)
|
|
|
(69
|
)
|
|
|
(277
|
)
|
Net (loss) income
|
|
|
(1,964
|
)
|
|
|
13,103
|
|
|
|
(7,263
|
)
|
|
|
17,733
|
|
Less: Net income attributable to noncontrolling interest
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to Jamba, Inc.
|
|
$
|
(1,964
|
)
|
|
$
|
13,103
|
|
|
$
|
(7,263
|
)
|
|
$
|
17,681
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares used in the computation of (loss) earnings per share attributable to Jamba, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
15,292,699
|
|
|
|
15,808,680
|
|
|
|
15,181,695
|
|
|
|
16,084,411
|
|
Diluted
|
|
|
15,292,699
|
|
|
|
16,214,943
|
|
|
|
15,181,695
|
|
|
|
16,558,680
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) earnings per share attributable to Jamba, Inc. common stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.13
|
)
|
|
$
|
0.83
|
|
|
$
|
(0.48
|
)
|
|
$
|
1.10
|
|
Diluted
|
|
$
|
(0.13
|
)
|
|
$
|
0.81
|
|
|
$
|
(0.48
|
)
|
|
$
|
1.07
|
|
See Notes to Condensed Consolidated Financial
Statements.
JAMBA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS
(Unaudited)
|
|
39-Week Period Ended
|
|
(Dollars in thousands)
|
|
September
27, 2016
|
|
|
September 29, 2015
|
|
Cash flows used in operating activities:
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(7,263
|
)
|
|
$
|
17,733
|
|
Adjustments to reconcile net (loss) income to net cash used in
operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
4,244
|
|
|
|
4,360
|
|
Store closure costs and gain on disposals
|
|
|
683
|
|
|
|
(25,394
|
)
|
Jambacard breakage income
|
|
|
(2,180
|
)
|
|
|
(2,649
|
)
|
Gain on contingent consideration
|
|
|
-
|
|
|
|
(156
|
)
|
Gain on sale of investment in joint venture
|
|
|
-
|
|
|
|
(662
|
)
|
Stock-based compensation
|
|
|
2,366
|
|
|
|
3,633
|
|
Bad debt and purchase obligation reserves
|
|
|
(42
|
)
|
|
|
1,433
|
|
Deferred rent
|
|
|
(1,334
|
)
|
|
|
(1,330
|
)
|
Loss on investment
|
|
|
26
|
|
|
|
173
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
5,269
|
|
|
|
997
|
|
Inventories
|
|
|
188
|
|
|
|
486
|
|
Prepaid expenses and other current assets
|
|
|
1,624
|
|
|
|
1,441
|
|
Other long-term assets
|
|
|
987
|
|
|
|
(1,696
|
)
|
Accounts payable
|
|
|
(2,627
|
)
|
|
|
(2,884
|
)
|
Accrued compensation and benefits
|
|
|
(165
|
)
|
|
|
(2,904
|
)
|
Workers’ compensation and health insurance reserves
|
|
|
14
|
|
|
|
(471
|
)
|
Accrued jambacard liability
|
|
|
(3,413
|
)
|
|
|
(6,736
|
)
|
Accrued expenses
|
|
|
203
|
|
|
|
1,706
|
|
Other current liabilities
|
|
|
24
|
|
|
|
1,424
|
|
Other long-term liabilities
|
|
|
(809
|
)
|
|
|
600
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(2,205
|
)
|
|
|
(10,896
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows (used in) provided by investing activities:
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(3,884
|
)
|
|
|
(3,907
|
)
|
Proceeds from disposal of assets
|
|
|
-
|
|
|
|
46,926
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by investing activities
|
|
|
(3,884
|
)
|
|
|
43,019
|
|
|
|
|
|
|
|
|
|
|
Cash flows provided by (used in) financing activities:
|
|
|
|
|
|
|
|
|
Payment on capital lease obligations
|
|
|
(4
|
)
|
|
|
(28
|
)
|
Payments for treasury shares
|
|
|
-
|
|
|
|
(26,122
|
)
|
Proceeds pursuant to stock issuance
|
|
|
620
|
|
|
|
1,565
|
|
Payments to noncontrolling interest
|
|
|
-
|
|
|
|
(52
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
616
|
|
|
|
(24,637
|
)
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents
|
|
|
(5,473
|
)
|
|
|
7,486
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period
|
|
|
19,730
|
|
|
|
17,750
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
14,257
|
|
|
$
|
25,236
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
14
|
|
|
$
|
23
|
|
Cash paid for income taxes
|
|
$
|
13
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Noncash investing and financing activities:
|
|
|
|
|
|
|
|
|
Property, fixtures and equipment in accounts payable
|
|
$
|
971
|
|
|
$
|
383
|
|
Property, fixtures and equipment funded by a tenant allowance
|
|
$
|
380
|
|
|
$
|
-
|
|
Note taken for store disposal
|
|
$
|
-
|
|
|
$
|
2,000
|
|
See Notes to Condensed Consolidated Financial
Statements.
JAMBA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
|
1.
|
DESCRIPTION OF BUSINESS
|
Business
Jamba, Inc. consummated its initial public
offering in July 2005. On November 29, 2006, Jamba, Inc. consummated the merger with Jamba Juice Company whereby Jamba Juice Company,
which first began operations in 1990, became its wholly-owned subsidiary.
Jamba, Inc. through its wholly-owned subsidiary,
Jamba Juice Company, is a healthy, active lifestyle brand with a robust, expanding global business driven by a portfolio of franchised
and company-owned Jamba Juice
®
stores and Jamba Juice Express™ formats. The Jamba
®
brand includes
innovative product platforms and both licensed and company driven consumer packaged goods. The Company is a leading restaurant
retailer of “better-for-you” specialty food and beverage offerings which include great tasting, whole fruit smoothies,
fresh squeezed juices and juice blends, Energy Bowls™ and a variety of food items including, hot oatmeal, breakfast wraps,
Artisan Flatbreads™, baked goods and snacks. Jamba Juice Company continues to expand the Jamba brand by direct selling of
consumer packaged goods (“CPG”) products, and by licensing its trademarks for CPG products sold through retail channels
such as grocery stores, warehouse clubs and convenience stores. The Company’s headquarters were located in Emeryville, California
and was relocated to Frisco, Texas in the fourth quarter of fiscal year 2016.
As of September 27, 2016, there were 896 Jamba
Juice stores globally, consisting of 69 Company-owned and operated stores (“Company Stores”), 759 franchisee-owned
and operated stores (“Franchise Stores”) in the United States and 68 Franchise Stores in international locations (“International
Stores”). The JambaGO
®
business consists of approximately 2,000 licensed units located across the United States.
|
2.
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
|
Basis of presentation and consolidation
The accompanying unaudited condensed consolidated
financial statements of Jamba, Inc. have been prepared pursuant to generally accepted accounting principles in the United States
of America (“U.S. GAAP”) for interim financial information and the rules and regulations of the United States Securities
and Exchange Commission (the “SEC”) for Form 10-Q. The December 29, 2015 Condensed Consolidated Balance Sheet was derived
from the audited financial statements, but does not include all disclosures required by U.S. GAAP. Certain information and note
disclosures normally included in annual financial statements have been condensed or omitted pursuant to the rules and regulations
of the SEC. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. The
results of the 13-week or 39-week periods ended September 27, 2016 are not necessarily indicative of the results of operations
to be expected for the entire fiscal year.
The condensed consolidated financial statements
include the accounts of the Company and its direct or indirect subsidiary, Jamba Juice Company. The accounts of Jamba Juice Southern
California, LLC (“JJSC”) are included through April 28, 2015, when the Company sold its 88% interest in JJSC to the
holder of JJSC’s non-controlling interest. All significant intercompany balances and transactions have been eliminated in
consolidation. Certain reclassifications were made to the Company’s prior financial statements to conform to current year
presentation. These condensed consolidated financial statements should be read in conjunction with the financial statements and
notes thereto included in the Annual Report on Form 10-K for the year ended December 29, 2015.
Effect of prior period misstatements
In the Condensed Consolidated Statements
of Operations for the 13-week and 39-week periods ended September 27, 2016, the Company corrected certain errors including an overstatement
of expenses included within depreciation expense of approximately $0.6 million and other income, net of approximately $0.3 million,
related to prior period financial statements. These adjustments related to both the prior quarters of 2016 and prior year 2015
results. The Company determined that the corrections were neither quantitatively or qualitatively material to those periods individually
and in the aggregate. In addition, these items are expected to have an immaterial impact on net income for the full 2016 fiscal
year.
Use of estimates
The preparation of financial statements in
conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities,
revenue and expenses and disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reported periods. Actual results could differ from those estimates.
Comprehensive Income
Comprehensive income is defined as the change
in equity during a period from transactions and other events, excluding changes resulting from investments from owners and distributions
to owners. The Company currently has no components of comprehensive income other than net income, therefore no separate statement
of comprehensive income is presented.
Earnings (Loss) Per Share
Earnings (loss) per share is computed in accordance
with Accounting Standards Codification (“ASC”) 260,
Earnings Per Share
. Basic earnings (loss) per share is computed
based on the weighted-average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed
based on the weighted-average number of common shares and potentially dilutive securities, which includes preferred stock outstanding,
outstanding warrants and outstanding options and restricted stock awards granted under the Company’s stock option plans.
Anti-dilutive common stock equivalents totaling
2.1 million and 1.9 million were excluded from the calculation of diluted weighted-average shares outstanding for the 13-week and
39-week periods ended September 27, 2016, respectively.
Anti-dilutive common stock equivalents totaling 2.0
million and 1.9 million were excluded from the calculation of diluted weighted-average shares outstanding for the 13-week and 39-week
periods ended September 29, 2015, respectively.
Fair Value Measurement
Fair value is an exit price, representing the
amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.
As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would
use in pricing an asset or a liability. Refer to Note 4, Fair Value Measurement, for examples of fair values for assets and liabilities.
A three-tier fair value hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation
methodologies in measuring fair value:
Level 1: Quoted prices are available in active
markets for identical assets or liabilities.
Level 2: Inputs are other than quoted prices in active
markets included in Level 1, which are either directly or indirectly observable.
Level 3: Unobservable inputs that are supported by little
or no market activity, therefore requiring an entity to develop its own assumptions that market participants would use in pricing.
Recent Accounting Pronouncements
The Company has not yet adopted and is currently
assessing the potential impact of the following pronouncements on its Consolidated Financial Statements and related disclosure:
In May 2014, the Financial Accounting Standards
Board (the “FASB”) issued amended guidance on revenue from contracts with customers which amended the existing accounting
standards for revenue recognition. Accounting Standards Update (“ASU”) 2014-09,
Revenue from Contracts with Customers
,
establishes principles for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that
reflects the expected consideration received in exchange for those goods or services. In July 2015, the FASB deferred the effective
date to fiscal years beginning after December 15, 2017 (including interim reporting periods within those periods). Early adoption
is permitted to the original effective date of the fiscal year beginning after December 15, 2016 (including interim reporting periods
within those periods). The amendment guidance may be applied retrospectively to each prior period presented with the option to
apply practical expedients or retrospectively with the cumulative effect recognized as of the date of initial application.
In February 2016, the FASB issued ASU 2016-02,
Leases,
which will require lessees to recognize a lease liability and a right-of-use asset for all leases (with the exception
of short-term leases) at the commencement date. The guidance will be effective for the Company beginning fiscal year 2019, with
early adoption permitted. The new standard is required to be applied with a modified retrospective approach to each prior reporting
period presented with various optional practical expedients.
In March 2016, the FASB issued ASU 2016-04
,
Recognition of Breakage for Certain Prepaid Stored-Value Products
. The new guidance creates an exception under ASC 405-20,
Liabilities-Extinguishments of Liabilities
, to derecognize financial liabilities related to certain prepaid stored-value
products using a revenue-like breakage model. The guidance will be effective for the Company beginning fiscal year 2018, with early
adoption permitted. This guidance can be applied either retrospectively to each period presented or as a cumulative-effect adjustment
as of the date of adoption.
In March 2016, the FASB issued ASU 2016-09,
Compensation-Stock Compensation: Improvements to Employee Share-Based Payment Accounting
. The updated guidance changes how
companies account for certain aspects of share-based payment awards to employees, including the accounting for income taxes, forfeitures
and statutory tax withholding requirements, as well as classification in the statement of cash flows. The guidance will be effective
for the Company beginning fiscal year 2017, with early application permitted.
In August 2016, the FASB issued ASU 2016-15,
Statement of Cash Flows—Classification of Certain Cash Receipts and Cash Payments,
which provides specific guidance
for certain cash flow classification issues, previously not specifically addressed, including classification for debt prepayment,
contingent consideration made after a business combination, insurance claim proceeds and corporate-owned life insurance policies,
distributions received from equity method investees and certain other items. The guidance will be effective for the Company beginning
fiscal year 2018, with early application permitted.
The Company has not yet adopted and
does not expect the adoption of the following pronouncements to have a significant impact on its Consolidated Financial Statements
and related disclosure:
In August 2014, the FASB issued ASU 2014-15,
Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern
. This update provides guidance
on management’s responsibility to evaluate whether there is substantial doubt about the ability to continue as a going concern
and to provide related disclosures. This guidance will be effective for annual periods ending after December 15, 2016 and interim
periods within annual periods beginning after December 15, 2016.
In July 2015, the FASB issued ASU 2015-11,
Simplifying the Measurement of Inventory.
This update applies to inventory that is measured using first-in, first-out (“FIFO”)
or average cost method and requires measurement of that inventory at the lower of cost or net realizable value. Net realizable
value is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion,
disposal and transportation. This guidance will be effective for the Company beginning fiscal year 2017, with early adoption permitted.
In January 2016, the FASB issued ASU 2016-01,
Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.
This update enhances the reporting model for financial instruments, which includes amendments to address aspects of recognition,
measurement, presentation and disclosure. The guidance will be effective for the Company beginning fiscal year 2018.
In November 2014, the Company announced plans
to transition to an asset light model through the refranchising of Company Stores. In connection with that planned transition,
99 Company Stores and one unopened Company Store met the criteria as assets held for sale as of December 30, 2014. During fiscal
2015, an additional 125 stores met the criteria to be classified as assets held for sale increasing the total to 224 stores of
which 176 stores were refranchised from assets held for sale. The 48 remaining stores were reclassified out of assets held for
sale back to their original asset group based on management’s decision to retain the stores. As of September 27, 2016 and
December 29, 2015 there were no stores in assets held for sale and a zero balance was reflected in the accompanying Condensed Consolidated
Balance Sheets.
Gain or loss on the disposal of assets held
for sale is recorded within (loss) gain on disposal of assets in the Condensed Consolidated Statements of Operations. The Company
recognized a loss on disposal of assets of $0.2 million and $0.5 million during the 13-week and 39-week periods ended September
27, 2016, respectively.
The Company refranchised 110 and 163 stores,
for total proceeds that include note receivables and receipts for inventory and operating fund of $36.1 million and $49.8 million
in the 13-week and 39-week periods ended September 29, 2015, respectively. The Company recorded a gain of $16.2 million and $21.5
million from the disposal of assets held for sale primarily relating to refranchising during the 13-week and 39-week periods ended
September 29, 2015, respectively.
|
4.
|
FAIR VALUE MEASUREMENT
|
Financial Assets and Liabilities
The following instruments are not measured
at fair value on the Company’s Consolidated Balance Sheets but require disclosure of their fair values: cash and cash equivalents,
accounts receivables, notes receivable and accounts payable. The estimated fair value of such instruments, excluding notes receivable,
approximates their carrying value as reported on the Consolidated Balance Sheets due to the short-term nature. The estimated fair
value of notes receivable approximates its carrying value due to the interest rates aligning with market rates. The fair value
of such financial instruments is determined using the income approach based on the present value of estimated future cash flows.
The fair value of these instruments would be categorized as Level 2 in the fair value hierarchy, with the exception of cash and
cash equivalents, which would be categorized as Level 1.
Non-financial Assets and Liabilities
The Company’s non-financial assets and
liabilities primarily consist of long-lived assets, trademarks and other intangibles, and are reported at carrying value. They
are not required to be measured at fair value on a recurring basis. The Company evaluates long-lived assets for impairment when
facts and circumstances indicate that their carrying values may not be recoverable. Trademarks and other intangibles are evaluated
for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired.
As a result of the quarterly impairment reviews,
the Company recognized total losses of $0.4 million and $2.2 million for the 39-week periods ended September 27,
2016 and September 29, 2015, respectively, included in impairment of long-lived assets in the Condensed Consolidated Statements
of Operations. The loss in fiscal 2016 related to the impairment of fixed assets of several operating stores. The loss in
fiscal 2015 primarily related to stores classified as assets held for sale to reflect the adjustment to fair value.
On February 14, 2012, the Company entered into
a Credit Agreement with Wells Fargo Bank, National Association which, as amended on November 1, 2012, July 22, 2013, November 4,
2013, December 30, 2014 and December 29, 2015 (as amended, the “Credit Agreement”), made available to the Company a
revolving line of credit in the amount of $10.0 million. On July 22, 2016, the Credit Agreement expired with no amounts drawn on
the credit facility since its inception. To acquire the credit facility, the Company incurred upfront fees which were amortized
over the term of the Credit Agreement. During the term of the Credit Agreement, the unamortized commitment fee amount was not material.
After the expiration of the Credit Agreement,
the Company subsequently collateralized the existing letters of credit with a restricted cash collateral account. Refer to Note
11, Subsequent Events, for additional information regarding the Company’s credit facility.
|
6.
|
SHARE-BASED COMPENSATION
|
On May 17, 2016, at its 2016 Annual Meeting
of Stockholders, the Company’s stockholders, upon the recommendation of the Board of Directors, approved an additional 900,000
shares of common stock to be offered or issued under the Company’s 2013 Equity Incentive Plan (“the Plan”).
In addition to the shareholder-approved shares
mentioned in the preceding paragraph, the Company periodically authorizes grants of stock-based compensation as inducement awards
to new employees. This type of award does not require shareholder approval in accordance with Rule 5635(c)(4) of the Nasdaq listing
rules.
Share-based compensation expense, which is
included in general and administrative expenses in the Condensed Consolidated Statements of Operations, was $0.7 million and $2.4
million for the 13-week and 39-week periods ended September 27, 2016 and $1.0 million and $3.6 million for the 13-week and 39-week
periods ended September 29, 2015, respectively. At September 27, 2016, unvested share-based compensation for stock options and
restricted stock awards, net of forfeitures, totaled $4.0 million. This expense will be recognized over the remaining weighted-average vesting period of approximately two years.
Stock Options
— A summary
of stock option activity under the Plan as of September 27, 2016, and changes during the 39-week period then ended are presented
below (shares in thousands):
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
|
|
|
|
Number of
|
|
|
Weighted-Average
|
|
|
Contractual Term
|
|
|
Aggregate
|
|
Options
|
|
Shares
|
|
|
Exercise Price
|
|
|
Remaining (years)
|
|
|
Intrinsic Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 29, 2015
|
|
|
1,530
|
|
|
$
|
12.42
|
|
|
|
5.76
|
|
|
$
|
3,960
|
|
Granted
|
|
|
300
|
|
|
|
13.26
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(132
|
)
|
|
|
4.64
|
|
|
|
|
|
|
|
|
|
Canceled
|
|
|
(310
|
)
|
|
|
14.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 27, 2016
|
|
|
1,388
|
|
|
$
|
12.81
|
|
|
|
5.72
|
|
|
$
|
1,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest—September 27, 2016
|
|
|
1,269
|
|
|
$
|
12.74
|
|
|
|
5.46
|
|
|
$
|
1,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable—September 27, 2016
|
|
|
573
|
|
|
$
|
11.68
|
|
|
|
1.86
|
|
|
$
|
1,576
|
|
During the 13-week and 39-week periods ended
September 27, 2016, options exercisable for 18,000 and 300,000 shares of the Company’s common stock were granted under the
Plan at a weighted-average grant date fair value of $3.96 and $4.69, respectively. The fair value of stock options was estimated
at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions:
|
|
39-Week
Period Ended
|
|
|
|
September 27, 2016
|
|
|
|
|
|
Risk-free interest rate
|
|
|
1.34
|
%
|
Expected term (in years)
|
|
|
5.21
|
|
Expected volatility
|
|
|
44.0
|
%
|
Expected dividend yield
|
|
|
0
|
%
|
During the 13-week and 39-week periods ended
September 29, 2015, stock options of 6,500 and 962,000 were granted under the 2013 Equity Incentive Plan at a weighted-average
grant date fair value of $6.51 and $6.04 per share, respectively.
Restricted Stock
— Information
regarding activities during the 39-week period ended September 27, 2016 for outstanding restricted stock units (“RSUs”)
granted under the 2013 Equity Incentive Plan is as follows (shares in thousands):
|
|
|
|
|
Weighted-Average
|
|
|
|
Number of
|
|
|
Grant Date
|
|
RSUs
|
|
Shares of RSUs
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
Non-vested at December 29, 2015
|
|
|
190
|
|
|
$
|
14.09
|
|
Granted
|
|
|
549
|
|
|
|
3.70
|
|
Vested
|
|
|
(110
|
)
|
|
|
14.01
|
|
Forfeited
|
|
|
(33
|
)
|
|
|
13.93
|
|
|
|
|
|
|
|
|
|
|
Non-vested at September 27, 2016
|
|
|
596
|
|
|
$
|
2.58
|
|
During the 13-week and 39-week periods ended
September 27, 2016, RSUs of 75,000 and 549,000 were granted at a weighted-average grant date fair value of $3.32
and $3.70 per share, respectively. The grant date fair value is primarily driven by achieving the growth rate targets of the
market-based restricted stock units, included in the Chief Executive Officer’s equity awards and the inducement grant awards
as discussed further in the paragraphs below. During the 13-week and 39-week periods ended September 29, 2015, RSUs of 4,000 and
39,000 were granted under the Plan at a weighted-average grant date fair value of $13.71 and $15.64 per share, respectively.
Performance Stock
—
Information regarding activities during the 39-week period ended September 27, 2016 for outstanding performance stock units (“PSUs”)
granted under the Plan is as follows (shares in thousands):
|
|
|
|
|
Weighted-Average
|
|
|
|
Number of
|
|
|
Grant Date
|
|
PSUs
|
|
Shares of PSUs
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
Non-vested at December 29, 2015
|
|
|
57
|
|
|
$
|
13.89
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Vested
|
|
|
(2
|
)
|
|
|
14.04
|
|
Forfeited
|
|
|
(46
|
)
|
|
|
13.85
|
|
|
|
|
|
|
|
|
|
|
Non-vested at September 27, 2016
|
|
|
9
|
|
|
$
|
14.04
|
|
No performance stock units were granted during
the 39-week periods ended September 27, 2016 and September 29, 2015. During the 39-week period ended September 27, 2016, PSUs of
2,000 were vested and PSUs of 46,200 were forfeited. During the 39-week period ended September 29, 2015, PSUs of 32,000 were vested
and PSUs of 24,000 were forfeited.
In January 2016, in connection with the hiring
of the Company’s new Chief Executive Officer, the Company agreed to grant equity awards which included an award of 350,000
market-based restricted stock units vesting upon achievement of compound annual stock price growth rate targets of 15%, 22.5% and
30% over a three-year period, 50,000 “premium-priced” stock options with an exercise price determined based on a 15%
compound annual stock price growth rate over three years and 150,000 stock options granted at 100% of fair market value on the
grant date. The 150,000 stock options granted at 100% of fair market value on the grant date were granted in March 2016 and the
50,000 “premium-priced” stock options were granted in April 2016. The 350,000 market-based restricted stock units were
granted in May 2016. These awards are included in the stock option and RSU tables presented above.
In addition, during the 13-week period ended
September 27, 2016, the Company agreed to grant inducement awards in connection with employee hiring which included an award of
70,000 market-based restricted stock units vesting upon achievement of compound annual stock price growth rate targets of 15%,
22.5% and 30%, 15,000 stock options granted at 100% fair market value on the grant date and 5,000 time-based restricted stock units.
These equity awards vest over a three to four-year period. During the 39-week period ended September 27, 2016, in connection with
employee hiring, the Company agreed to grant inducement awards which included an award of 155,000 market-based restricted stock
units vesting upon achievement of compound annual stock price growth rate targets of 15%, 22.5% and 30%, 90,000 stock options granted
at 100% of fair market value on the grant date and 11,000 time-based restricted stock units. These equity awards vest over a three
to four-year period and all inducement awards are included in the stock option and RSU tables presented above.
On August 4, 2016, the Company announced that
its Board of Directors has approved the terms of a share repurchase plan. Pursuant to the program, the Company is authorized to
repurchase up to $20.0 million of its common stock subject to available cash resources over the next two-year period. Under
the program, the Company may repurchase shares on the open market, through privately negotiated transactions or otherwise, at times,
in amounts and at prices considered appropriate by the Company. The number of shares to be purchased and the timing of any
purchases are subject to various factors, including the price of the Company’s common stock, the Company’s capital
position, the amount of retained earnings of the Company, general market conditions and other economic factors and corporate and
regulatory requirements, and may be modified, suspended or terminated at any time. During the 13-week and 39-week periods ended
September 27, 2016, the Company did not repurchase shares.
On October 29, 2014, the Company’s Board
of Directors authorized the repurchase of up to $25.0 million of shares of common stock over an 18-month period (the "2014
Stock Repurchase Program"). The Company’s Board of Directors authorized an increase to the Stock Repurchase Program
of $15.0 million to a total of $40.0 million in May 2015 and an additional $5.0 million to a total of $45.0 million in September
2015, which expired on May 4, 2016. Shares repurchased under the Stock Repurchase Program are considered treasury stock until retired.
The Company did not repurchase shares under this program in fiscal 2016. The Company's total shares of common stock repurchased
since inception through September 27, 2016 was 2.9 million, at an average price per share of $13.99.
For the 13-week and 39-week periods
ended September 27, 2016 and September 29, 2015, the components of other operating, net, were as follows (in thousands):
|
|
13-Week Period Ended
|
|
|
39-Week Period Ended
|
|
|
|
September
27, 2016
|
|
|
September 29, 2015
|
|
|
September 27, 2016
|
|
|
September 29, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jambacard breakage income
|
|
$
|
(535
|
)
|
|
$
|
(653
|
)
|
|
$
|
(2,180
|
)
|
|
$
|
(2,649
|
)
|
Jambacard expense
|
|
|
236
|
|
|
|
246
|
|
|
|
620
|
|
|
|
484
|
|
CPG and JambaGO® direct expense
|
|
|
260
|
|
|
|
474
|
|
|
|
1,411
|
|
|
|
1,717
|
|
Franchise jambacard discount expense
|
|
|
98
|
|
|
|
176
|
|
|
|
411
|
|
|
|
615
|
|
Sublease income
|
|
|
(180
|
)
|
|
|
(143
|
)
|
|
|
(477
|
)
|
|
|
(59
|
)
|
Franchise other expense
|
|
|
5
|
|
|
|
70
|
|
|
|
364
|
|
|
|
603
|
|
Bad debt
|
|
|
42
|
|
|
|
213
|
|
|
|
42
|
|
|
|
1,011
|
|
International expense
|
|
|
162
|
|
|
|
170
|
|
|
|
486
|
|
|
|
529
|
|
Loss (gain) on investments
|
|
|
-
|
|
|
|
(31
|
)
|
|
|
26
|
|
|
|
173
|
|
Other expense (income)
|
|
|
16
|
|
|
|
(147
|
)
|
|
|
(83
|
)
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other operating, net
|
|
$
|
104
|
|
|
$
|
375
|
|
|
$
|
620
|
|
|
$
|
2,414
|
|
|
9.
|
COMMITMENTS AND CONTINGENCIES
|
The Company is a defendant in litigation arising
in the normal course of business. Although there can be no assurance as to the ultimate disposition of these matters, it is
the opinion of the Company’s management, based upon the information available at this time, that the expected outcome of
these matters, individually or in the aggregate, will not have a material adverse effect on the results of operations, liquidity
or financial condition of the Company.
|
10.
|
RELATED-PARTY TRANSACTIONS
|
During the 39-week period ending September
27, 2016, the Company received $0.2 million from Country Pure Foods related to vendor supply chain management fees and approximately
$0.2 million from Sodexo related to licensing fees for Jamba units operated by Sodexo. One Jamba Juice Director is on the Board
of Directors of Country Pure Foods and another Jamba Juice Director is an executive with Sodexo.
On October 5, 2016, the Company announced plans
to exit JambaGO
®
by the end of the fiscal year 2016. As of September 27, 2016, the JambaGO
®
business
consisted of approximately 2,000 licensed units located across the United States. During the fourth quarter, the Company expects
to incur exit costs of up to $2.2 million and non-cash expenses of approximately $2.3 million relating to impairment or accelerated
depreciation of property, plant and equipment.
On November 3, 2016, the Company entered into
a credit agreement with Cadence Bank, NA (“New Credit Agreement”). The New Credit Agreement provides an aggregate principal
amount of up to $10.0 million. The credit facility also allows us to request an additional $5.0 million for an aggregate principal
amount of up to $15.0 million. The New Credit Agreement accrues interest at a per annum rate equal to the LIBOR rate plus 2.50%.
The New Credit Agreement contains customary affirmative and negative covenants and has a five-year term.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis in conjunction
with our financial statements and related notes included elsewhere in this report. Except for historical information, the discussion
in this report contains certain forward-looking statements that involve risks and uncertainties. We have based these forward-looking
statements on our current expectations and assumptions about future events. In some cases, you can identify forward-looking statements
by terminology, such as “may,” “should,” “could,” “predict,” “potential,”
“continue,” “expect,” “anticipate,” “future,” “intend,” “plan,”
“believe,” “estimate,” “forecast” and similar expressions (or the negative of such expressions).
Forward-looking statements include, but are not limited to, statements concerning projected new store openings, revenue growth
rates and capital expenditures. Forward-looking statements are based on our beliefs as well as assumptions based on information
currently available to us, including financial and operational information, the volatility of our stock price and current competitive
conditions. As a result, these statements are subject to various risks and uncertainties. For a discussion of material risks and
uncertainties that the Company faces, see the discussion titled “Risk Factors” in our Annual Report on Form 10-K for
the fiscal year ended December 29, 2015.
JAMBA, INC. OVERVIEW
Jamba, Inc. through its wholly-owned
subsidiary, Jamba Juice Company, is a healthful, active lifestyle brand with a robust global business driven by a portfolio
of franchised and company-owned Jamba Juice
®
stores and Jamba Juice Express™ formats. The
Jamba
®
brand includes innovative product platforms and both licensed and company driven consumer packaged
goods (“CPG”). Jamba is a leading restaurant retailer of “better-for-you” specialty beverage and food offerings which
include great tasting, whole fruit smoothies, fresh squeezed juices and juice blends, Energy Bowls™, and a variety of
food items including, hot oatmeal, breakfast wraps, sandwiches, Artisan Flatbreads™, baked goods and snacks. Jamba
Juice Company continues to expand the Jamba brand by direct selling of CPG products, and by licensing its trademarks for CPG
products sold through retail channels such as grocery stores, warehouse clubs and convenience stores and focusing on the
benefits of blending.
All references to store counts, including data
for new store openings, are reported net of related store closures, unless otherwise noted.
EXECUTIVE OVERVIEW
During the third quarter, we accelerated the
momentum related to the turnaround initiated earlier in the year. Operating performance during the third quarter was mixed, with
sales and net income performance below internal expectations, but ahead of industry benchmarks for top line sales. While maintaining
our focus on stellar retail performance, we also focused on critical transition efforts, including the move into our new offices
in Frisco, Texas while continuing to rebuild the leadership and support teams that were affected by the move from Emeryville, California.
This included the addition of Rachel Phillips-Luther as Chief Marketing Officer (“CMO”), previously the CMO for Zoes
Kitchen, and a number of other critical hires across the organization. In addition to the transition and relocation, we have continued
to re-assess the viability of all lines of business and subsequent to the quarter end announced our decision to exit JambaGO
®
.
Additionally, we announced that we will explore opportunities to refranchise our Chicago market, as a continuation of our refranchising initiative from 2014, as well as the single Company-opened
store still operating in Emeryville. Each of these decisions are rooted
in the desire to refocus attention to the core store operating business and the continued growth of the franchise system.
We remain focused on delivering our five key
strategies to re-energize the business:
|
·
|
Build an Iconic Brand
|
|
·
|
Establish a Customer and Store-Centric Operating Environment
|
|
·
|
Drive Sales and Transactions through Innovation
|
|
·
|
Improve Store Profitability through Simplification
|
|
·
|
Expand Our Global Footprint
|
2016 Third Quarter Financial Summary
|
·
|
Total revenue for the quarter decreased 37.9% to $22.1 million from $35.5 million for the prior year, primarily due to the reduction in the number of Company Stores as part of our refranchising strategy.
|
|
·
|
Company Store comparable sales declined 0.8% and Franchise Store comparable sales declined 1.1%. System-wide comparable sales (includes both Company and Franchise Stores) declined 1.1%. System-wide and Franchise Store comparable store sales are non-GAAP financial measures and represent the change in year-over-year sales, for stores opened for at least one full fiscal year.
|
|
·
|
Net (loss) income attributable to Jamba, Inc. was $(2.0) million compared to $13.1 million for the prior year. Non-recurring transition costs of $3.0 million are included in 2016 results. Included in the 2015 results was a $16.1 million gain on disposal of assets relating to our refranchising strategy.
|
|
·
|
General and administrative expenses for the 13-weeks ended September 27, 2016 increased 7.7% to $9.7 million compared with $9.0 million for the prior year period. Included in the 2016 results were $3.0 million of expenses related to the relocation of our Corporate headquarters.
|
|
·
|
Total Company-owned stores at the end of the third quarter of 2016 was 69, compared to 94 at the end of the third quarter of 2015.
|
Fiscal 2016 Third Quarter Business Highlights
During the third quarter, we focused on smoothie,
juice and bowl options featuring on-trend ingredients including our Protein Smoothies and Island Getaway Smoothies. Our local marketing
efforts in supporting both established and emerging markets focused on Jamba’s heritage as a strong community partner and
our use of premium ingredients, amplifying our “Make it Real” consumer messaging.
“Island Getaway Smoothies”, Gotta
Guava™ Smoothie and Tropical Sunburst™ Smoothie, launched late in the second quarter and sales of those items continued
to grow during the summer months. Our Protein Smoothies were developed to give guests’ replenishment after workouts and as
a meal replacement, and after a successful Q2 launch in California, were launched nationally in the third quarter. Late in the
quarter we introduced our fall favorite, the Pumpkin Smash and a new line up of Almond Milk Smoothies. While these products resonated
with existing guests, traffic count results in the third quarter were below our expectations and future product innovation will
focus on incremental traffic growth.
We will continue to provide consumers with
fresh, nutrient dense, on-trend beverages and food, at affordable prices while we refine our marketing efforts through the balance
of the year and focus on an early 2017 relaunch of the Jamba brand. Ongoing product development will focus on keeping Jamba positioned
at the intersection of fit and fun with a renewed focus on the benefits of blending.
Driving convenience for our guests was
also a focus in the third quarter. We saw an increased adoption of the Jamba Juice mobile application (“app”),
following an update that was executed in the second quarter, which provides Jamba guests with access to regionalized menus
and the ability to customize smoothies, juices and bowls as part of their enhanced order ahead experience. Work is
underway to further enhance the capabilities of the app in accordance with our ongoing commitment to meet the continually
evolving needs of today’s tech-savvy consumer.
Additionally, we continued to expand and refine
programs with strategic partners in the digital and social media space, including Fishbowl, MomentFeed and others. Membership in
our Jamba Insider Rewards (“JIR”) program increased with more than three million loyalty members now engaged.
With our shift to a franchise business model,
we are highly focused on improving franchisee profitability and 4-wall store margins. During the third quarter of 2016, we continued
to operationalize several key initiatives that were launched in 2015, which had a significant positive impact on costs of goods
sold. Our supply chain optimization efforts have significantly aided in offsetting the inflationary impact of commodity price increases.
Efforts to improve the profitability has allowed
our franchisees to continue to open new stores both domestically and internationally. As of September 27, 2016, there were 896
Jamba Juice
®
stores globally, represented by 69 Company Stores and 759 Franchise Stores, of which 47 were Jamba
Juice Express™ in the United States and 68 International Stores. The system is comprised of approximately 92% U.S. Franchise
and International Store locations and 8% Company Store locations.
Global new unit development will continue to
be a key driver in achieving our stated long term objectives. In 2016, we had international master development agreements with
partners in Indonesia, Thailand, South Korea, the Philippines, Mexico and the countries of the Gulf Cooperation Council (Bahrain,
Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates). During the third quarter, we opened our first location in Indonesia
and anticipate that Thailand will open stores before the end of fiscal 2016 subject to an evolving political situation following
the recent death of Thailand’s long reigning king.
Support Center Relocation
During the second quarter, we announced the
relocation of our corporate headquarters from Emeryville, California to Frisco, Texas, a suburb of Dallas. The move will be substantially
completed as we enter the fourth quarter. The stated objectives of the move are to reduce costs, provide improved access to skilled
restaurant talent and establish a more central location for our market expansion plans. We expect to incur expenses of approximately
$7.8 million as a result of the move from California, associated with personnel relocation, employee attrition, retention, severance
and replacement, office relocation and other costs. These charges are expected to be incurred from the second quarter of fiscal
year 2016 through the first quarter of 2017. As of the third quarter, we have incurred to date approximately $5.6 million in expense
and $1.1 million of capital expenditures.
Along with the relocation, during the quarter,
we announced the appointment of Rachel Phillips-Luther as CMO. Phillips-Luther joined Jamba, Inc. from Zoes Kitchen in Dallas
where she also served as CMO. In addition, the relocation from California required us to replace a substantial number of positions
across all functions. This transition, while broad-based, allowed us to re-align our support team with the skills required to support
an asset-light, franchise business model. Hiring in the new organization is substantially complete in Development, Finance, IT
and Operations and continues in the Marketing and Supply Chain teams which are expected to be completed early in the fourth quarter.
Other Activities
Subsequent to the quarter, after a detailed
analysis of the performance and potential of JambaGO
®
, we announced that we would be managing a controlled exit
to be substantially completed by the end of 2016. JambaGO
®
was performing below expectations and declining across
several key metrics. As a result of our analysis, we anticipated that these numbers would continue to decline into 2017 under current
operating conditions, contributing to the decision to exit this line of the business. Revenue attributable to JambaGO
®
for the 13-week period ended September 27, 2016 was $0.9 million compared to $1.2 million for the 13-week period ended September
29, 2015. For the year, revenue attributable to JambaGO
®
for the 39-week period ended September 27, 2016 was $2.2
million compared to $2.6 million for the 39-week period ended September 29, 2015. We will manage a controlled exit to cease operating,
return and or de-image the equipment currently placed in the market. We are anticipating a cash charge of up to $2.2 million and
a non-cash charge, relating to impairment or accelerated depreciation of property, plant and equipment, of approximately $2.3 million
in 2016 related to the exit of JambaGO
®
.
We announced in the fourth quarter that we
are exploring the refranchising of our company-owned operations in the Chicago area,
as a continuation of our refranchising initiative from 2014, and the Company Store in Emeryville, California. There are 13 stores for sale in the Chicago market and one store for
sale in Emeryville. We indicated that the sale of these stores if completed, would negatively impact total revenue, but positively
impact net income. The Chicago transaction would include a development agreement to grow the market over the next several years.
RESULTS OF OPERATIONS — 13-WEEK PERIOD ENDED SEPTEMBER
27, 2016 AS COMPARED TO 13-WEEK PERIOD ENDED SEPTEMBER 29, 2015 (UNAUDITED)
(in thousands)
|
|
13-Week
Period Ended
September 27, 2016
|
|
|
%
(1)
|
|
|
13-Week
Period Ended
September 29, 2015
|
|
|
%
(1)
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company stores
|
|
$
|
14,350
|
|
|
|
65.0
|
%
|
|
$
|
28,213
|
|
|
|
79.5
|
%
|
Franchise and other revenue
|
|
|
7,711
|
|
|
|
35.0
|
%
|
|
|
7,284
|
|
|
|
20.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
22,061
|
|
|
|
100.0
|
%
|
|
|
35,497
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
3,437
|
|
|
|
24.0
|
%
|
|
|
6,626
|
|
|
|
23.5
|
%
|
Labor
|
|
|
4,644
|
|
|
|
32.4
|
%
|
|
|
8,843
|
|
|
|
31.3
|
%
|
Occupancy
|
|
|
1,879
|
|
|
|
13.1
|
%
|
|
|
3,980
|
|
|
|
14.1
|
%
|
Store operating
|
|
|
2,381
|
|
|
|
16.6
|
%
|
|
|
5,901
|
|
|
|
20.9
|
%
|
Depreciation and amortization
|
|
|
1,068
|
|
|
|
4.8
|
%
|
|
|
1,143
|
|
|
|
3.2
|
%
|
General and administrative
|
|
|
9,699
|
|
|
|
44.0
|
%
|
|
|
9,003
|
|
|
|
25.4
|
%
|
Loss (gain) on disposal of assets
|
|
|
204
|
|
|
|
0.9
|
%
|
|
|
(16,076
|
)
|
|
|
(45.3
|
)%
|
Store pre-opening
|
|
|
210
|
|
|
|
1.0
|
%
|
|
|
287
|
|
|
|
0.8
|
%
|
Impairment of long-lived assets
|
|
|
229
|
|
|
|
1.0
|
%
|
|
|
1,907
|
|
|
|
5.4
|
%
|
Store lease termination and closure costs
|
|
|
178
|
|
|
|
0.8
|
%
|
|
|
207
|
|
|
|
0.6
|
%
|
Other operating, net
|
|
|
104
|
|
|
|
0.5
|
%
|
|
|
375
|
|
|
|
1.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and operating expenses
|
|
|
24,033
|
|
|
|
108.9
|
%
|
|
|
22,196
|
|
|
|
62.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from operations
|
|
|
(1,972
|
)
|
|
|
(8.9
|
)%
|
|
|
13,301
|
|
|
|
37.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense), net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
50
|
|
|
|
0.2
|
%
|
|
|
49
|
|
|
|
0.1
|
%
|
Interest expense
|
|
|
(51
|
)
|
|
|
(0.2
|
)%
|
|
|
(53
|
)
|
|
|
(0.1
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense), net
|
|
|
(1
|
)
|
|
|
0.0
|
%
|
|
|
(4
|
)
|
|
|
0.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes
|
|
|
(1,973
|
)
|
|
|
(8.9
|
)%
|
|
|
13,297
|
|
|
|
37.5
|
%
|
Income tax benefit (expense)
|
|
|
9
|
|
|
|
0.0
|
%
|
|
|
(194
|
)
|
|
|
(0.5
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
(1,964
|
)
|
|
|
(8.9
|
)%
|
|
|
13,103
|
|
|
|
36.9
|
%
|
Less: Net income attributable to noncontrolling interest
|
|
|
-
|
|
|
|
0.0
|
%
|
|
|
-
|
|
|
|
0.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to Jamba, Inc.
|
|
$
|
(1,964
|
)
|
|
|
(8.9
|
)%
|
|
$
|
13,103
|
|
|
|
36.9
|
%
|
(1)
|
Cost of sales, labor, occupancy and store operating percentages are calculated using Company Stores revenue. All other line items are calculated using Total revenue.
|
Revenue
(in thousands)
|
|
13-Week
Period Ended
September 27, 2016
|
|
|
% of
Total
Revenue
|
|
|
13-Week
Period Ended
September 29, 2015
|
|
|
% of
Total
Revenue
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company stores
|
|
$
|
14,350
|
|
|
|
65.0
|
%
|
|
$
|
28,213
|
|
|
|
79.5
|
%
|
Franchise and other revenue
|
|
|
7,711
|
|
|
|
35.0
|
%
|
|
|
7,284
|
|
|
|
20.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
22,061
|
|
|
|
100.0
|
%
|
|
$
|
35,497
|
|
|
|
100.0
|
%
|
Total revenue is comprised of revenue from
Company Stores, royalties and fees from Franchise Stores in the U.S. and from International Stores, income from JambaGO
®
locations, license income from sales of Jamba-branded CPG products and direct sales of CPG products. Total revenue for the 13-week
period ended September 27, 2016 was $22.1 million, a decrease of $13.4 million, or 37.9%, compared to $35.5 million for the
13-week period ended September 29, 2015. The decrease in total revenue was primarily due to a decrease in Company Stores for the
quarter compared to the prior year. For the quarter ended September 27, 2016 we had 69 Company Stores compared to 94 in the prior
year.
Company Store revenue
Company Store revenue for the 13-week period
ended September 27, 2016 was $14.4 million, a decrease of $13.9 million or 49.1%, compared to Company Store revenue of $28.2 million
for the 13-week period ended September 29, 2015. The decrease in Company Store revenue was due to a decrease in the number of Company
Stores primarily as a result of our refranchising activities, as well as, a decline in same store sales as illustrated by the following
table:
|
|
Company Store
Decrease in
Revenue
|
|
|
|
(in thousands)
|
|
Third Quarter 2016 vs. Third Quarter 2015:
|
|
|
|
|
Company Stores comparable sales decrease
|
|
$
|
(115
|
)
|
Reduction in number of Company Stores, net
|
|
|
(13,748
|
)
|
|
|
|
|
|
Total change in Company Store revenue
|
|
$
|
(13,863
|
)
|
Company Store comparable sales decreased $0.1
million for the 13-week period ended September 27, 2016, or 0.8%, attributable to a decrease in transaction count of 1.8% and an
increase of 0.9% in average check as compared to the same period in the prior year. Company Store comparable sales represents the
change in year-over-year sales for all Company Stores opened for at least a full fiscal year. As of September 27, 2016, 97% of
our Company Stores had been open for at least one full year.
Franchise and other revenue
Franchise and other revenue was $7.7 million,
an increase of $0.4 million or 5.9% for the 13-week period ended September 27, 2016, compared to $7.3 million for the 13-week period
ended September 29, 2015. The increase was primarily due to the increase in royalties associated with the net increase in the number
of Franchise and International Stores partially offset by Franchise Store comparable store sales decrease of 1.1%.
The aggregate number of Franchise and International
Stores as of September 27, 2016 and September 29, 2015 was 827 and 790, respectively.
Cost of Sales
Cost of sales is mostly comprised of fruit,
dairy, and other products used to make smoothies and juices, paper products and delivery fees at Company Stores. As a percentage
of Company Store revenue, cost of sales increased to 24.0% for the 13-week period ended September 27, 2016, compared to 23.5% for
the 13-week period ended September 29, 2015. The increase in cost of sales as a percentage of Company Store revenue was primarily
due to higher discounts (approximately 0.8%), menu mix (approximately 0.2%) and change in the store portfolio mix (approximately
0.1%), partially offset by favorable commodities (approximately 0.7%). Cost of sales for the 13-week period ended September 27,
2016 was $3.4 million, a decrease of $3.2 million, or 48.1%, compared to $6.6 million for the 13-week period ended September 29,
2015, primarily related to the lower Company Store base as a result of refranchising initiatives.
Labor
Labor costs are comprised of store management
salaries and bonuses, hourly team member payroll, training costs and other associated fringe benefits. As a percentage of Company
Store revenue, labor costs were 32.4% for the 13-week period ended September 27, 2016 compared to 31.3% for the 13-week period
ended September 29, 2015. The increase was primarily attributable to change in the store portfolio mix (approximately 2.0%) and
wage rate increases (approximately 3.0%) partially offset by favorable workers’ compensation costs (approximately 2.5%) and
health and other fringe benefits (approximately 1.5%). Labor costs for the 13-week period ended September 27, 2016 were $4.6 million,
a decrease of $4.2 million, or 47.5%, compared to $8.8 million for the 13-week period ended September 29, 2015, which is primarily
due to the decrease in number of Company Stores as a result of our refranchising activities.
Occupancy
Occupancy costs include both fixed and variable
portions of rent, common area maintenance charges, property taxes, licenses and property insurance for all Company Store locations.
As a percentage of Company Store revenue, occupancy costs decreased to 13.1% for the 13-week period ended September 27, 2016, compared
to 14.1% for the 13-week period ended September 29, 2015. The decrease in occupancy costs as a percentage of Company Store revenue
was primarily due to change in store portfolio, including the closure of stores in New York and Chicago, that had higher occupancy
costs as a percent of sales for the quarter. Occupancy costs for the 13-week period ended September 27, 2016 were $1.9 million,
a decrease of $2.1 million, or 52.8%, compared to $4.0 million for the 13-week period ended September 29, 2015, which is primarily
due to the decrease in number of Company Stores as a result of our refranchising activities.
Store Operating
Store operating expenses consist
primarily of various store-level costs such as utilities, marketing, repairs and maintenance, credit card fees and other
store operating expenses. As a percentage of Company Store revenue, total store operating expenses decreased to 16.6% for the
13-week period ended September 27, 2016, compared to 20.9% for the 13-week period ended September 29, 2015. The decrease in
total store operating expenses as a percentage of Company Store revenue was primarily due to the change in the store
portfolio mix (approximately 3.9%), lower local store marketing costs (approximately 0.7%) and utilities (approximately
0.9%). This decrease is partially offset by increased software/hardware expense (approximately 0.7%), training (approximately
0.2%) and blender expense (approximately 0.2%). Store operating expenses for the 13-week period ended September 27, 2016
were $2.4 million, a decrease of $3.5 million or 59.7%, compared to $5.9 million for the 13-week period ended September
29, 2015, primarily due to the decrease in the number of Company Stores as a result of our refranchising activities.
Depreciation and Amortization
Depreciation and amortization expenses
include the depreciation of fixed assets and the amortization of intangible assets. As a percentage of total revenue,
depreciation and amortization increased to 4.8% for the 13-week period ended September 27, 2016, compared to 3.2% for the
13-week period ended September 29, 2015. The increase in depreciation and amortization as a percentage of total revenue was
primarily due to the discontinuation of depreciation relating to stores in assets held for sale prior to their refranchising
in the prior year and an increase in depreciation relating to capitalized information technology corporate programs in the
current year, partially offset by a correction of an immaterial prior period adjustment which overstated depreciation expense
by approximately $0.6 million for the 13-week period ending September 27, 2016. Depreciation and amortization for both the
13-week periods ended September 27, 2016 and 2015 was $1.1 million.
General and Administrative
General and administrative (“G&A”)
expenses include costs associated with our corporate headquarters (in Emeryville, California and Frisco, Texas), field supervision,
performance related incentives, outside and contract services, accounting and legal fees, travel and travel-related expenses, share-based
compensation and other G&A expenses. Also included in G&A are non-recurring costs related to the move of the support center
to Frisco, Texas, settlement, legal and other transitional charges. Total G&A expenses for the 13-week period ended September
27, 2016 were $9.7 million, an increase of $0.7 million, or 7.7%, compared to $9.0 million for the 13-week period ended September
29, 2015. The increase in total G&A expenses results from increased payroll expenses due to severance and retention bonuses
(approximately $0.2 million) associated with the relocation of the corporate headquarters to Frisco, Texas, increased professional
fees associated with litigation and temporary help (approximately $0.7 million), and increased occupancy costs due to rent in the
Frisco, Texas office (approximately $0.2 million). These increases were offset by a decrease in shared based compensation
expense (approximately $0.3 million).
Loss (gain) on Disposal of Assets
Loss (gain) on disposal of assets includes
losses from disposal of assets and gains from the refranchising of Company Stores and sales of related furniture, fixtures and
equipment. For the 13-week period ended September 27, 2016, loss on disposal of assets was $0.2 million compared to a $16.1 million
gain for the 13-week period ended September 29, 2015, a change of $16.3 million. The change was primarily due to the gain on refranchising
of Company Stores in fiscal 2015 relating to our refranchising initiative. The refranchising initiative was substantially completed
in the fourth quarter of fiscal 2015.
Store Pre-Opening
For the 13-week period ended September 27,
2016, store pre-opening expense was $0.2 million compared to $0.3 million for the 13-week period ended September 29, 2015, a decrease
of approximately $0.1 million due to fewer store openings in the current year.
Impairment of Long-Lived Assets
For the 13-week period ended September 27,
2016, impairment of long-lived assets was $0.2 million compared to $1.9 million for the 13-week period ended September 29, 2015.
Impairment in 2015 primarily related to the loss recorded to reflect the current fair value for a group of stores classified as
assets held for sale.
Store Lease Termination and Closure
For the 13-week period ended September 27,
2016 and September 29, 2015, store lease termination and closure costs were $0.2 million.
Other Operating, Net
Other operating, net consists primarily
of income from jambacard breakage, jambacard-related fees, franchise expense, international expense, gain or loss on
investments, bad debt expense and CPG and JambaGO
®
activities. For the 13-week period ended September 27,
2016, other operating, net was an expense of $0.1 million compared to an expense of $0.4 million for the 13-week period ended
September 29, 2015. Changes in the components of other operating, net include a decrease in bad debt (approximately $0.2
million), a decrease in CPG and JambaGO
®
direct expense (approximately $0.2 million), partially offset by a
decrease in jambacard breakage income (approximately $0.1 million). The decrease in other operating, net also includes a
correction of an immaterial prior period adjustment that overstated other operating expenses by approximately $0.3 million
for the 13-week period ending September 27, 2016.
Income Tax Expense
We have recorded income tax
expense for both the 13-week periods ended September 27, 2016 and September 29, 2015, respectively. Our effective income tax
rates were (0.5%) and 2.0% for the 13-week periods ended September 27, 2016 and September 29, 2015, respectively. For the 13-week
period ended September 27, 2016, the effective tax rate was primarily affected by pre-tax loss, foreign withholding and state minimum
taxes. For the 13-week period ended September 29, 2015, the effective tax rate was primarily affected by pre-tax income, a change
in the valuation allowance relating to deductible temporary differences, the alternative minimum taxes and foreign withholding
taxes.
RESULTS OF OPERATIONS — 39-WEEK PERIOD ENDED SEPTEMBER
27, 2016 AS COMPARED TO 39-WEEK PERIOD ENDED SEPTEMBER 29, 2015 (UNAUDITED)
(in thousands)
|
|
39-Week
Period Ended
September 27, 2016
|
|
|
%
(1)
|
|
|
39-Week
Period Ended
September 29, 2015
|
|
|
%
(1)
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company stores
|
|
$
|
40,177
|
|
|
|
64.4
|
%
|
|
$
|
124,301
|
|
|
|
87.5
|
%
|
Franchise and other revenue
|
|
|
22,178
|
|
|
|
35.6
|
%
|
|
|
17,826
|
|
|
|
12.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
62,355
|
|
|
|
100.0
|
%
|
|
|
142,127
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
9,720
|
|
|
|
24.2
|
%
|
|
|
30,507
|
|
|
|
24.5
|
%
|
Labor
|
|
|
13,470
|
|
|
|
33.5
|
%
|
|
|
39,807
|
|
|
|
32.0
|
%
|
Occupancy
|
|
|
5,815
|
|
|
|
14.5
|
%
|
|
|
16,946
|
|
|
|
13.6
|
%
|
Store operating
|
|
|
7,015
|
|
|
|
17.5
|
%
|
|
|
21,994
|
|
|
|
17.7
|
%
|
Depreciation and amortization
|
|
|
4,244
|
|
|
|
6.8
|
%
|
|
|
4,360
|
|
|
|
3.1
|
%
|
General and administrative
|
|
|
26,732
|
|
|
|
42.9
|
%
|
|
|
26,393
|
|
|
|
18.6
|
%
|
Loss (gain) on disposal of assets
|
|
|
501
|
|
|
|
0.8
|
%
|
|
|
(21,334
|
)
|
|
|
(15.0
|
)%
|
Store pre-opening
|
|
|
860
|
|
|
|
1.4
|
%
|
|
|
475
|
|
|
|
0.3
|
%
|
Impairment of long-lived assets
|
|
|
356
|
|
|
|
0.6
|
%
|
|
|
2,202
|
|
|
|
1.5
|
%
|
Store lease termination and closure costs
|
|
|
242
|
|
|
|
0.4
|
%
|
|
|
269
|
|
|
|
0.2
|
%
|
Other operating, net
|
|
|
620
|
|
|
|
1.0
|
%
|
|
|
2,414
|
|
|
|
1.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and operating expenses
|
|
|
69,575
|
|
|
|
111.6
|
%
|
|
|
124,033
|
|
|
|
87.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from operations
|
|
|
(7,220
|
)
|
|
|
(11.6
|
)%
|
|
|
18,094
|
|
|
|
12.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense), net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
195
|
|
|
|
0.3
|
%
|
|
|
78
|
|
|
|
0.1
|
%
|
Interest expense
|
|
|
(169
|
)
|
|
|
(0.3
|
)%
|
|
|
(162
|
)
|
|
|
(0.1
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense), net
|
|
|
26
|
|
|
|
0.0
|
%
|
|
|
(84
|
)
|
|
|
(0.1
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes
|
|
|
(7,194
|
)
|
|
|
(11.5
|
)%
|
|
|
18,010
|
|
|
|
12.7
|
%
|
Income tax expense
|
|
|
(69
|
)
|
|
|
(0.1
|
)%
|
|
|
(277
|
)
|
|
|
(0.2
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
(7,263
|
)
|
|
|
(11.6
|
)%
|
|
|
17,733
|
|
|
|
12.5
|
%
|
Less: Net income attributable to noncontrolling interest
|
|
|
-
|
|
|
|
0.0
|
%
|
|
|
52
|
|
|
|
0.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to Jamba, Inc.
|
|
$
|
(7,263
|
)
|
|
|
(11.6
|
)%
|
|
$
|
17,681
|
|
|
|
12.4
|
%
|
(1)
|
Cost of sales, labor, occupancy and store operating percentages are calculated using Company Stores revenue. All other line items are calculated using Total revenue.
|
Revenue
(in thousands)
|
|
39-Week
Period Ended
September 27, 2016
|
|
|
% of
Total
Revenue
|
|
|
39-Week
Period Ended
September 29, 2015
|
|
|
% of
Total
Revenue
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company stores
|
|
$
|
40,177
|
|
|
|
64.4
|
%
|
|
$
|
124,301
|
|
|
|
87.5
|
%
|
Franchise and other revenue
|
|
|
22,178
|
|
|
|
35.6
|
%
|
|
|
17,826
|
|
|
|
12.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
62,355
|
|
|
|
100.0
|
%
|
|
$
|
142,127
|
|
|
|
100.0
|
%
|
Total revenue is comprised of revenue from
Company Stores, royalties and fees from Franchise Stores in the U.S. and from International Stores, income from JambaGO
®
locations, license income from sales of Jamba-branded CPG products and direct sales of CPG products. Total revenue for the 39-week
period ended September 27, 2016 was $62.4 million, a decrease of $79.8 million, or 56.1%, compared to $142.1 million for the
39-week period ended September 29, 2015. The decrease in total revenue was primarily due to a decrease in Company Stores for the
year compared to the prior year. As of September 27, 2016 we had 69 Company Stores compared to 94 in the prior year.
Company Store revenue
Company Store revenue for the 39-week period
ended September 27, 2016 was $40.2 million, a decrease of $84.1 million or 67.7%, compared to Company Store revenue of $124.3 million
for the 39-week period ended September 29, 2015. The decrease in Company Store revenue was primarily due to a decrease in the number
of Company Stores primarily as a result of our refranchising activities, partially offset by an increase in Company Store comparable
sales as illustrated by the following table:
|
|
Company Store
Decrease in
Revenue
|
|
|
|
(in thousands)
|
|
Year-To-Date Q3 2016 vs. Year-To-Date Q3 2015:
|
|
|
|
|
Company Stores comparable sales increase
|
|
$
|
644
|
|
Reduction in number of Company Stores, net
|
|
|
(84,768
|
)
|
|
|
|
|
|
Total change in Company Store revenue
|
|
$
|
(84,124
|
)
|
Company Store comparable sales increased $0.6
million for the 39-week period ended September 27, 2016, or 1.6%, attributable to an increase of 3.2% in average check offset by
a decrease in transaction count of 1.6% as compared to the same period in the prior year. Company Store comparable sales represents
the change in year-over-year sales for all Company Stores opened for at least a full fiscal year. As of September 27, 2016, 97%
of our Company Stores had been open for at least one full year.
Franchise and other revenue
Franchise and other revenue was $22.2 million,
an increase of $4.4 million or 24.4% for the 39-week period ended September 27, 2016 compared to $17.8 million for the 39-week
period ended September 29, 2015. The increase was primarily due to the increase in royalties associated with the net increase in
the number of Franchise and International Stores in addition to the Franchise Store comparable store sales increase of 0.2%.
The aggregate number of Franchise and International
Stores as of September 27, 2016 and September 29, 2015 was 827 and 790, respectively.
Cost of Sales
Cost of sales is mostly comprised of fruit,
dairy, and other products used to make smoothies and juices, paper products and delivery fees at Company Stores. As a percentage
of Company Store revenue, cost of sales decreased to 24.2% for the 39-week period ended September 27, 2016, compared to 24.5% for
the 39-week period ended September 29, 2015. The decrease in cost of sales as a percentage of Company Store revenue was primarily
due to retail price increase (approximately 0.5%), favorable commodities (approximately 0.4%) and menu mix (approximately 0.3%).
This decrease is offset by a change in the store portfolio mix (approximately 0.6%) and discounts (approximately 0.3%). Cost of
sales for the 39-week period ended September 27, 2016 was $9.7 million, a decrease of $20.8 million, or 68.1%, compared to $30.5
million for the 39-week period ended September 29, 2015, primarily related to the lower Company Store base as a result of refranchising
initiatives.
Labor
Labor costs are comprised of store management
salaries and bonuses, hourly team member payroll, training costs and other associated fringe benefits. As a percentage of Company
Store revenue, labor costs were 33.5% for the 39-week period ended September 27, 2016 compared to 32.0% for the 39-week period
ended September 29, 2015. The increase was primarily attributable to an increase in wage rate (approximately 2.9%) along with a
change in the store portfolio mix (approximately 1.3%), partially offset by favorable fringe benefits (approximately 1.2%) and
improved efficiencies (approximately 1.6%). Labor costs for the 39-week period ended September 27, 2016 were $13.5 million, a decrease
of $26.3 million, or 66.2%, compared to $39.8 million for the 39-week period ended September 29, 2015, which is primarily due to
the decrease in number of Company Stores as a result of our refranchising activities.
Occupancy
Occupancy costs include both fixed and variable
portions of rent, common area maintenance charges, property taxes, licenses and property insurance for all Company Store locations.
As a percentage of Company Store revenue, occupancy costs increased to 14.5% for the 39-week period ended September 27, 2016, compared
to 13.6% for the 39-week period ended September 29, 2015. The increase in occupancy costs as a percentage of Company Store revenue
was primarily due to the refranchising of Company Stores that carried a lower rent as a percentage of Company Store revenue. Occupancy
costs for the 39-week period ended September 27, 2016 were $5.8 million, a decrease of $11.1 million, or 65.7%, compared to $16.9
million for the 39-week period ended September 29, 2015, which is primarily due to the decrease in number of Company Stores as
a result of our refranchising activities.
Store Operating
Store operating expenses consist primarily
of various store-level costs such as utilities, marketing, repairs and maintenance, credit card fees and other store operating
expenses. As a percentage of Company Store revenue, total store operating expenses decreased to 17.5% for the 39-week period ended
September 27, 2016, compared to 17.7% for the 39-week period ended September 29, 2015. The decrease in total store operating expenses
as a percentage of Company Store revenue was primarily due to lower local marketing costs (approximately 2.5%) and partially offset
by a change in the store portfolio mix (approximately 2.4%). Total store operating expenses for the 39-week period ended September
27, 2016 were $7.0 million, a decrease of $15.0 million, or 68.1%, compared to $22.0 million for the 39-week period ended
September 29, 2015, primarily due to the decrease in number of Company Stores as a result of our refranchising activities.
Depreciation and Amortization
Depreciation and amortization expenses
include the depreciation of fixed assets and the amortization of intangible assets. As a percentage of total revenue,
depreciation and amortization increased to 6.8% for the 39-week period ended September 27, 2016, compared to 3.1% for the
39-week period ended September 29, 2015. The increase in depreciation and amortization as a percentage of total revenue was
primarily due to the discontinuation of depreciation relating to stores in assets held for sale prior to their refranchising
in the prior year and an increase in depreciation relating to capitalized information technology corporate programs in the
current year, partially offset by a correction of an immaterial prior period adjustment which overstated depreciation expense
by approximately $0.6 million for the 39-week period ending September 27, 2016. Depreciation and amortization for the 39-week
period ended September 27, 2016 was $4.2 million, a decrease of $0.1 million, or 2.7%, compared to $4.4 million for the
39-week period ended September 29, 2015.
General and Administrative
G&A expenses include costs associated with
our corporate headquarters (in Emeryville, California and Frisco, Texas), field supervision, performance related incentives, outside
and contract services, accounting and legal fees, travel and travel-related expenses, share-based compensation and other G&A
expenses. Also included in G&A are non-recurring costs related to the move of the support center to Frisco, Texas, settlement,
legal and other transitional charges. Total G&A expenses for the 39-week period ended September 27, 2016 were $26.7 million,
an increase of $0.3 million, or 1.3%, compared to $26.4 million for the 39-week period ended September 29, 2015. The increase in
total G&A expenses was primarily due to increased professional fees associated with litigation and temporary help (approximately
$1.0 million), increased legal expenses (approximately $0.5 million), and increased occupancy costs due to additional rent in the
Frisco, Texas office (approximately $0.2 million), partially offset by a decline in share-based compensation expenses (approximately
$1.3 million).
Loss (gain) on Disposal of Assets
Loss (gain) on disposal of assets includes
losses from disposal of assets and gains from the refranchising of Company Stores and sales of related furniture, fixtures and
equipment. For the 39-week period ended September 27, 2016, loss on disposal of assets was $0.5 million compared to a $21.3 million
gain for the 39-week period ended September 29, 2015, a change of $21.8 million. The change was primarily due to the gain on refranchising
of Company Stores in fiscal 2015 relating to our refranchising initiative. The refranchising initiative was substantially completed
in the fourth quarter of fiscal 2015.
Store Pre-Opening
For the 39-week period ended September 27,
2016, store pre-opening expense was $0.9 million compared to $0.5 million for the 39-week period ended September 29, 2015, an increase
of $0.4 million. The increase was primarily due to an increase in the number of Franchise Stores opened this year.
Impairment of Long-Lived Assets
For the 39-week period ended September 27,
2016 impairment of long-lived assets was $0.4 million compared to $2.2 million for the 39-week period ended September 29, 2015.
Impairment in 2015 primarily related to the loss recorded to reflect the current fair value for a group of stores classified as
assets held for sale.
Store Lease Termination and Closure
For the 39-week period ended September 27,
2016 store lease termination and closure costs was $0.2 million compared to $0.3 million for the 39-week period ended September
29, 2015 due to fewer company closures in the current year.
Other Operating, Net
Other operating, net consists primarily
of income from jambacard breakage, jambacard-related fees, franchise related expenses and sublease income, international
expense, gain/loss on investments, bad debt expense and CPG and JambaGO
®
activities. For the 39-week period
ended September 27, 2016, other operating, net was $0.6 million compared to $2.4 million for the 39-week period ended
September 29, 2015. Changes in the components of other operating, net include a decrease in bad debt (approximately $1.0
million), an increase in sublease income due to an increase in subleased refranchise stores (approximately $0.4 million), a
decrease in CPG and JambaGO
®
direct expense (approximately $0.3 million), a decrease in franchise expenses
(approximately $0.4 million), partially offset by a decrease in jambacard breakage income (approximately $0.5 million). The
decrease in franchise expenses was primarily related to a correction of an immaterial prior period adjustment that overstated
other operating expenses by approximately $0.3 million for the 39-week period ending September 27, 2016.
Income Tax Expense
We have recorded
income tax expense for both the 39-week periods ended September 27, 2016 and September 29, 2015, respectively. Our effective
income tax rates were (1.0%) and 1.6% for the 39-week periods ended September 27, 2016 and September 29, 2015, respectively. For
the 39-week period ended September 27, 2016, the effective tax rate was primarily affected by pre-tax loss, foreign withholding
and state minimum taxes. For the 39-week period ended September 29, 2015, the effective tax rate was primarily affected by
pre-tax income, a change in the valuation allowance relating to deductible temporary differences,
the alternative minimum taxes and foreign withholding taxes.
KEY FINANCIAL METRICS AND NON-GAAP MEASURES
We review and discuss our operations based
on both financial and non-financial metrics. Among the key financial metrics upon which management focuses is reviewing our performance
based on our consolidated GAAP results, including Company Store comparable sales. We also use certain supplemental, non-GAAP financial
metrics in evaluating financial results, including Franchise Store comparable sales and system-wide comparable sales.
Company Store comparable sales represents the
change in year-over-year sales for all Company Stores opened for at least one full year. Franchise Store comparable sales, a non-GAAP
financial measure, represents the change in year-over-year sales for all Franchise Stores opened for at least one full year, as
reported by franchisees and excludes International Stores. System-wide comparable store sales, a non-GAAP financial measure, represents
the change in year-over-year sales for all Company and Franchise Stores opened for at least one full year and is based on sales
by both company-owned and domestic franchise-operated stores, as reported by franchisees, which are in the store base. System-wide
comparable store sales do not include International Stores, JambaGO
®
units and Jamba Juice Express™. Comparable
store sales exclude closed locations.
We review the increase or decrease in Company
Store comparable sales, Franchise Store comparable sales and system-wide comparable sales compared with the same period in the
prior year to assess business trends and make certain business decisions. We believe that Franchise Store comparable sales and
system-wide comparable sales data, non-GAAP financial measures, are useful in assessing the overall performance of the Jamba brand
and, ultimately, the performance of the Company.
The following table sets forth operating data
that do not otherwise appear in our condensed consolidated financial statements as of, and for, the 13-week and 39-week periods
ended September 27, 2016 and the 13-week and 39-week periods ended September 29, 2015:
|
|
13-Week Period Ended
|
|
|
39-Week Period Ended
|
|
|
|
September 27, 2016
|
|
|
September 29, 2015
|
|
|
September 27, 2016
|
|
|
September 29, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage change in Company Store comparable sales
(1)
|
|
|
(0.8
|
)%
|
|
|
6.6
|
%
|
|
|
1.6
|
%
|
|
|
1.1
|
%
|
Percentage change in Franchise Store comparable sales
(1)
|
|
|
(1.1
|
)%
|
|
|
5.3
|
%
|
|
|
0.2
|
%
|
|
|
2.5
|
%
|
Percentage change in system-wide comparable sales
(2)
|
|
|
(1.1
|
)%
|
|
|
5.6
|
%
|
|
|
0.4
|
%
|
|
|
2.0
|
%
|
Total Company Stores
|
|
|
69
|
|
|
|
94
|
|
|
|
69
|
|
|
|
94
|
|
Total Franchise Stores
|
|
|
759
|
|
|
|
720
|
|
|
|
759
|
|
|
|
720
|
|
Total International Stores
|
|
|
68
|
|
|
|
70
|
|
|
|
68
|
|
|
|
70
|
|
|
(1)
|
Percentage change in Company Store or Franchise Store comparable sales compares the sales of the specified stores during the specified period to the sales from the same set of stores for the equivalent period in the prior year. A store is included in this calculation after one full year of operations. Company Store comparable sales do not include Franchise Store sales.
|
|
(2)
|
Percentage change in system-wide comparable sales compares the combined sales of Company and Franchise Stores during the specified period to the combined sales from the same Company and Franchise Stores for the equivalent period in the prior year. A store is included in this calculation after one full year of operations.
|
The following table sets forth certain data
relating to Company Stores, Franchise and International Stores for the periods indicated:
|
|
39-Week Period Ended
September 27, 2016
|
|
|
39-Week Period Ended
September 29, 2015
|
|
|
|
Domestic
|
|
|
International
|
|
|
Domestic
|
|
|
International
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company Stores:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
|
70
|
|
|
|
-
|
|
|
|
263
|
|
|
|
-
|
|
Company Stores opened
|
|
|
2
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Company Stores closed
|
|
|
(3
|
)
|
|
|
-
|
|
|
|
(6
|
)
|
|
|
-
|
|
Company Stores sold to franchisees
|
|
|
-
|
|
|
|
-
|
|
|
|
(163
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Company Stores
|
|
|
69
|
|
|
|
-
|
|
|
|
94
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchise and International Stores:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
|
748
|
|
|
|
75
|
|
|
|
543
|
|
|
|
62
|
|
Franchise Stores opened
|
|
|
36
|
|
|
|
10
|
|
|
|
31
|
|
|
|
15
|
|
Franchise Stores closed
|
|
|
(25
|
)
|
|
|
(17
|
)
|
|
|
(17
|
)
|
|
|
(7
|
)
|
Franchise Stores purchased from the Company
|
|
|
-
|
|
|
|
-
|
|
|
|
163
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Franchise and International Stores
|
|
|
759
|
|
|
|
68
|
|
|
|
720
|
|
|
|
70
|
|
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows Summary
The following table summarizes our cash flows
for the 39-week periods ended September 27, 2016 and September 29, 2015 (in thousands):
|
|
39-Week Period Ended
|
|
|
|
September 27, 2016
|
|
|
September 29, 2015
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
$
|
(2,205
|
)
|
|
$
|
(10,896
|
)
|
Net cash (used in) provided by investing activities
|
|
|
(3,884
|
)
|
|
|
43,019
|
|
Net cash provided by (used in) financing activities
|
|
|
616
|
|
|
|
(24,637
|
)
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents
|
|
$
|
(5,473
|
)
|
|
$
|
7,486
|
|
Liquidity
As of September 27, 2016, we had cash and cash
equivalents of $14.3 million compared to $19.7 million as of December 29, 2015. As of September 27, 2016 and December 29, 2015,
we had no short term or long term debt. Our primary sources of liquidity are cash flows provided by operating activities. For the
39-week period ended September 27, 2016, the Company used $2.2 million in cash for operating activities. The negative cash flow
from operating activities resulted primarily from the costs the Company incurred as a result of the relocation of the corporate
headquarters.
We expect that our cash on hand and future
cash flows provided by operating activities and our refranchising initiative will be sufficient to fund our working capital and
general corporate needs and the non-discretionary capital expenditures for the foreseeable future. During the remainder of 2016,
our primary liquidity and capital requirements are for working capital and general corporate needs, costs associated with the relocation
of the Company’s corporate headquarters and cost related to the exit of JambaGO
®
. The use of cash to fund
discretionary capital expenditures will be based on the need to conserve our capital.
As of the third quarter, we have incurred to
date approximately $5.6 million in expense and $1.1 million of capital expenditures related to the relocation of our corporate
headquarters. In aggregate, we expect to incur approximately $7.8 million in personnel relocation, employee attrition, retention,
severance and replacement, office relocation and other costs related to our relocation of our corporate headquarters, and approximately
$2.0 million in capital costs related to the buildout of our corporate headquarters and data center migration.
On July 22, 2016, the credit facility with
Wells Fargo expired. Since the inception of the line of credit, we did not borrow on the facility and utilized it primarily for
collateral against letters of credit. The existing letters of credit balance of $0.4 million is collateralized by cash.
On November 3, 2016
,
we entered into
a credit agreement with Cadence Bank, NA (“New Credit Agreement”). The New Credit Agreement provides an aggregate principal
amount of up to $10.0 million. The credit facility also allows us to request an additional $5.0 million for an aggregate principal
amount of up to $15.0 million. The New Credit Agreement accrues interest at a per annum rate equal to the LIBOR rate plus 2.50%.
The New Credit Agreement contains customary affirmative and negative covenants and has a five-year term.
The adequacy of our available funds will depend
on many factors, including the macroeconomic environment, the operating performance of our Company Stores, the successful expansion
of our franchise and licensing programs and the successful rollout and consumer acceptance of our new beverage and food initiatives.
Given these factors, our foremost priorities for the near term continue to be preserving and generating cash sufficient to fund
our liquidity needs.
Operating Activities
Net cash used in operating activities was
$2.2 million for the 39-week period ended September 27, 2016, compared to $10.9 million for the 39-week period ended September
29, 2015, reflecting a net decrease in cash flows used in operating activities of $8.7 million. The decrease in cash used in operating
activities was primarily due to the changes in operating assets and liabilities (approximately $9.3 million), including an increase
in collections of receivables and changes in accounts payable and accrued expenses.
The amount of cash provided by our operating
activities during any particular fiscal year is highly subject to variations in the seasons. The first and fourth quarters of the
fiscal year encompass the winter and holiday seasons when we traditionally generate our lowest revenue, and our second and third
quarters of the fiscal year encompass the warmer seasons where a significant portion of our revenue and cash flows are realized.
For more information on seasonality, refer to the section below entitled “
Seasonality and Quarterly Results
.”
Investing Activities
Net cash used in investing activities was $3.9
million for the 39-week period ended September 27, 2016, compared to net cash provided by investing activities of $43.0 million
for the 39-week period ended September 29, 2015. The $46.9 million change in net cash used in investing activities during the 39-week
period ended September 27, 2016 was due to a decrease in proceeds from disposal of fixed assets (approximately $46.9 million) due
to refranchising activity that occurred in fiscal year 2015.
For the 39-week period ended September 27,
2016, cash used for capital expenditures was $3.9 million, which includes store refreshes and redesigns and investing in improvements
to our technology infrastructure, as well as maintenance capital. Additionally, we expect to incur an additional $2 to $3 million
depending on our liquidity needs, which includes one-time outlays to complete the update of our servers as part of a broader data
migration effort and complete the buildout of the Frisco Support Center as well as capital spending in the normal course of business.
Financing Activities
Net cash provided by financing activities was
$0.6 million for the 39-week period ended September 27, 2016, compared to net cash used in financing activities of $24.6 million
for the 39-week period ended September 29, 2015. The $25.3 million change in net cash provided by financing activities was primarily
due to the repurchase of the shares of our common stock (approximately $26.1 million) under the stock repurchase plan approved
by our Board of Directors in 2014 that occurred during the 39-week period ended September 29, 2015, partially offset by a decrease
in receipts from our stock issuance plans, including from the exercise of stock options (approximately $0.9 million).
Contractual Obligations
There have been no significant changes to our
contractual obligations table as disclosed in our Annual Report on Form 10-K for the year ended December 29, 2015.
COMMODITY PRICES, AVAILABILITY AND GENERAL RISK CONDITIONS
We contract for significant amounts of individually
quick frozen fruit, fruit concentrate and dairy products to support the needs of both our Company Stores and Franchise Stores.
The price and availability of these commodities directly impact our results of operations and can be expected to impact our future
results of operations.
SEASONALITY AND QUARTERLY RESULTS
Our business is subject to seasonal fluctuations.
We expect to realize significant portions of our revenue during the second and third quarters of the fiscal year, which align with
the warmer summer season. In addition, quarterly results are affected by the timing of the opening of new stores and weather conditions.
However, geographic diversification of our store locations may conceal or diminish the financial statement impact of such seasonal
influences. Because of the seasonality of our business, results for any quarter are not necessarily indicative of the results that
may be achieved for the full fiscal year or any subsequent quarter.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in
accordance with accounting principles generally accepted in the United States of America requires management to adopt accounting
policies and make significant judgments and estimates to develop amounts reflected and disclosed in the financial statements. In
many cases, there are alternative policies or estimation techniques that could be used. We maintain a process to review the
application of our accounting policies and to evaluate the appropriateness of the many estimates that we are required to make in
order to prepare the financial statements. However, even under optimal circumstances, estimates routinely require adjustment
based on changing circumstances and the receipt of new or better information. There have been no significant changes to the
policies and estimates as discussed in our Annual Report on Form 10-K for the year ended December 29, 2015.
Recent Accounting Pronouncements
See Recent Accounting Pronouncements section
of Note 2 to our Notes to Condensed Consolidated Financial Statements for information about new accounting standards.