ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
JAMBA, INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
|
|
April 4,
|
|
|
January 3,
|
|
|
|
2017
|
|
|
2017
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
8,192
|
|
|
$
|
7,133
|
|
Receivables, net of allowances of $705 and $1,808
|
|
|
8,951
|
|
|
|
11,778
|
|
Inventories
|
|
|
465
|
|
|
|
534
|
|
Prepaid rent
|
|
|
815
|
|
|
|
1,053
|
|
Assets held for sale
|
|
|
136
|
|
|
|
206
|
|
Prepaid expenses and other current assets
|
|
|
3,495
|
|
|
|
3,000
|
|
Total current assets
|
|
|
22,054
|
|
|
|
23,704
|
|
Property, fixtures and equipment, net of accumulated depreciation of $30,869 and $38,645
|
|
|
11,844
|
|
|
|
12,512
|
|
Goodwill
|
|
|
1,183
|
|
|
|
1,183
|
|
Trademarks and other intangible assets, net of accumulated amortization of $785 and $2,606
|
|
|
1,299
|
|
|
|
1,327
|
|
Notes receivable and other long-term assets
|
|
|
2,822
|
|
|
|
2,894
|
|
Total assets
|
|
$
|
39,202
|
|
|
$
|
41,620
|
|
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
12,861
|
|
|
$
|
10,407
|
|
Accrued compensation and benefits
|
|
|
3,678
|
|
|
|
4,255
|
|
Accrued gift card liability
|
|
|
21,733
|
|
|
|
24,131
|
|
Other current liabilities
|
|
|
8,682
|
|
|
|
7,664
|
|
Total current liabilities
|
|
|
46,954
|
|
|
|
46,457
|
|
Deferred rent and other long-term liabilities
|
|
|
8,964
|
|
|
|
8,940
|
|
Total liabilities
|
|
|
55,918
|
|
|
|
55,397
|
|
Commitments and contingencies (Note 8)
|
|
|
|
|
|
|
|
|
Shareholders’ (deficit) equity:
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value—30,000,000 shares authorized; 18,281,474 and 15,422,657 shares issued and outstanding, respectively, at April 4, 2017, and 18,268,885 and 15,410,068 shares issued and outstanding, respectively, at January 3, 2017
|
|
|
18
|
|
|
|
18
|
|
Additional paid-in capital
|
|
|
407,786
|
|
|
|
407,273
|
|
Treasury shares, at cost, 2,858,817
|
|
|
(40,009
|
)
|
|
|
(40,009
|
)
|
Accumulated deficit
|
|
|
(384,511
|
)
|
|
|
(381,059
|
)
|
Total shareholders’ (deficit) equity
|
|
|
(16,716
|
)
|
|
|
(13,777
|
)
|
Total liabilities and shareholders' (deficit) equity
|
|
$
|
39,202
|
|
|
$
|
41,620
|
|
See Notes to Condensed Consolidated Financial Statements.
3
JAMBA, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per value data)
(Unaudited)
|
|
13-Week Period Ended
|
|
|
|
April 4,
|
|
|
March 29,
|
|
|
|
2017
|
|
|
2016
|
|
Revenue:
|
|
|
|
|
|
|
|
|
Company stores
|
|
$
|
11,107
|
|
|
$
|
11,953
|
|
Franchise and other revenue
|
|
|
6,506
|
|
|
|
6,801
|
|
Total revenue
|
|
|
17,613
|
|
|
|
18,754
|
|
|
|
|
|
|
|
|
|
|
Costs and operating expenses:
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
2,662
|
|
|
|
2,962
|
|
Labor
|
|
|
4,288
|
|
|
|
4,158
|
|
Occupancy
|
|
|
1,763
|
|
|
|
2,036
|
|
Store operating
|
|
|
1,798
|
|
|
|
2,021
|
|
Depreciation and amortization
|
|
|
881
|
|
|
|
1,502
|
|
General and administrative
|
|
|
8,601
|
|
|
|
7,610
|
|
Loss on disposal of assets
|
|
|
162
|
|
|
|
109
|
|
Store pre-opening
|
|
|
238
|
|
|
|
324
|
|
Store lease termination and closure
|
|
|
181
|
|
|
|
120
|
|
Other operating, net
|
|
|
76
|
|
|
|
612
|
|
Total costs and operating expenses
|
|
|
20,650
|
|
|
|
21,454
|
|
Income (loss) from operations
|
|
|
(3,037
|
)
|
|
|
(2,700
|
)
|
|
|
|
|
|
|
|
|
|
Other income (expenses):
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
54
|
|
|
|
71
|
|
Interest expense
|
|
|
(83
|
)
|
|
|
(59
|
)
|
Total other income (expenses), net
|
|
|
(29
|
)
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(3,066
|
)
|
|
|
(2,688
|
)
|
Income tax expense
|
|
|
(86
|
)
|
|
|
(132
|
)
|
Net income (loss)
|
|
$
|
(3,152
|
)
|
|
$
|
(2,820
|
)
|
|
|
|
|
|
|
|
|
|
Share Data:
|
|
|
|
|
|
|
|
|
Weighted-average shares used in the computation of income (loss) per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
15,411,695
|
|
|
|
15,084,037
|
|
Diluted
|
|
|
15,411,695
|
|
|
|
15,084,037
|
|
Income (loss) per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.20
|
)
|
|
$
|
(0.19
|
)
|
Diluted
|
|
$
|
(0.20
|
)
|
|
$
|
(0.19
|
)
|
See Notes to Condensed Consolidated Financial Statements.
4
JAMBA, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars In thousands)
(Unaudited)
|
|
13-Week Period Ended
|
|
|
|
April 4, 2017
|
|
|
March 29, 2016
|
|
Cash (used in) provided by operating activities:
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(3,152
|
)
|
|
$
|
(2,820
|
)
|
Adjustments to reconcile net income (loss) to net cash (used in) operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
881
|
|
|
|
1,502
|
|
Lease termination, store closure costs, impairment and gain on disposals
|
|
|
162
|
|
|
|
89
|
|
Gift card breakage income
|
|
|
(730
|
)
|
|
|
(705
|
)
|
Stock-based compensation
|
|
|
148
|
|
|
|
831
|
|
Bad debt and inventory reserves
|
|
|
111
|
|
|
|
-
|
|
Deferred rent
|
|
|
104
|
|
|
|
(300
|
)
|
Equity loss from joint ventures
|
|
|
29
|
|
|
|
26
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
2,683
|
|
|
|
864
|
|
Inventories
|
|
|
102
|
|
|
|
48
|
|
Prepaid expenses and other current assets
|
|
|
(257
|
)
|
|
|
1,375
|
|
Other long-term assets
|
|
|
42
|
|
|
|
61
|
|
Accounts payable and accrued expenses
|
|
|
2,509
|
|
|
|
(3,506
|
)
|
Accrued compensation and benefits
|
|
|
(577
|
)
|
|
|
(1,237
|
)
|
Accrued gift card liability
|
|
|
(1,668
|
)
|
|
|
(2,032
|
)
|
Other current liabilities
|
|
|
1,018
|
|
|
|
(199
|
)
|
Other long-term liabilities
|
|
|
(57
|
)
|
|
|
(481
|
)
|
Cash (used in) provided by operating activities
|
|
|
1,348
|
|
|
|
(6,484
|
)
|
|
|
|
|
|
|
|
|
|
Cash (used in) provided by investing activities:
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(501
|
)
|
|
|
(812
|
)
|
Proceeds from sale of assets
|
|
|
148
|
|
|
|
-
|
|
Cash (used in) provided by investing activities
|
|
|
(353
|
)
|
|
|
(812
|
)
|
|
|
|
|
|
|
|
|
|
Cash (used in) provided by financing activities:
|
|
|
|
|
|
|
|
|
Payment on capital lease obligations
|
|
|
(1
|
)
|
|
|
(1
|
)
|
Proceeds pursuant to stock plan
|
|
|
65
|
|
|
|
103
|
|
Cash (used in) provided by financing activities
|
|
|
64
|
|
|
|
102
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
1,059
|
|
|
|
(7,194
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
7,133
|
|
|
|
19,730
|
|
Cash and cash equivalents at end of period
|
|
$
|
8,192
|
|
|
$
|
12,536
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
-
|
|
|
$
|
8
|
|
Income taxes paid
|
|
$
|
1
|
|
|
$
|
9
|
|
|
|
|
|
|
|
|
|
|
Noncash investing and financing activities:
|
|
|
|
|
|
|
|
|
Property, fixtures and equipment in accounts payable
|
|
$
|
362
|
|
|
$
|
228
|
|
See Notes to Condensed Consolidated Financial Statements.
5
JAMBA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1.
|
DESCRIPTION OF BUSINESS
|
Jamba, Inc. through its wholly-owned subsidiary, Jamba Juice Company (“the Company”), is a global healthy lifestyle brand that inspires and simplifies healthful living through freshly blended whole fruit and vegetable smoothies, bowls, juices, cold-pressed shots, boosts, snacks, and meal replacements. Jamba’s blends are made with premium ingredients free of artificial flavors and preservatives so guests can feel their best and blend the most into life. The Company’s headquarters were relocated to Frisco, Texas, from Emeryville, California, in the fourth quarter of fiscal year 2016.
As of April 4, 2017, there were 868 Jamba Juice stores globally, consisting of 66 Company-owned and operated stores (“Company Stores”), 734 franchisee-owned and operated stores (“Franchise Stores”) in the United States and 68 Franchise Stores in international locations (“International Stores”).
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 January 3, 2017 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 period ended April 4, 2017 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 wholly-owned subsidiary, Jamba Juice Company. 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 January 3, 2017.
Use of estimates
The preparation of the Condensed Consolidated Financial Statements and accompanying notes are in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Preparing Condensed Consolidated Financial Statements 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.
Income (Loss) Per Share
Basic income (loss) per share is computed based on the weighted-average number of common shares outstanding during the period. Diluted income (loss) per share is computed based on the weighted-average number of common shares and potentially dilutive securities, which includes outstanding options and restricted stock awards granted under the Company’s stock option plans.
Anti-dilutive common stock equivalents totaling 2.0 million and 1.8 million were excluded from the calculation of diluted weighted-average shares outstanding for the 13-week periods ended April 4, 2017 and March 29, 2016, respectively. Basic and diluted income (loss) per share do not differ when there is a net loss position as potentially dilutive securities are anti-dilutive.
6
Assets Held for Sale
The Company classifies assets as held for sale and suspends depreciation and amortization when approval at the appropriate level has been provided, the assets can be immediately removed from operations, an active program has begun to locate a buyer, the assets are being actively marketed for sale at or near their current fair value, significant changes to the plan of sale are not likely and the sale is probable within one year. Upon classification as held for sale, long-lived assets are no longer depreciated, and an assessment of impairment is performed to identify and expense any excess of carrying value over fair value less costs to sell. Subsequent changes to the estimated fair value less costs to sell will impact the measurement of assets held for sale. To the extent fair value increases, any impairment previously recorded is reversed. If the carrying value of the assets held for sale exceeds the fair value less costs to sell, the Company will record a loss for the amount of the excess. The Company also reclassifies the associated prior year balances for assets reclassified to assets held for sale.
If the Company decides not to sell previously classified assets held for sale, the asset is reclassified back to their original asset group. The assets are recorded at the lower of the carrying value before being classified as held for sale adjusted for depreciation that would have been recognized during the time they were classified as held for sale or fair value at the date the Company decided not to sell. As of April 4, 2017, the total assets held for sale was $0.1 million and includes 13 Chicago stores, which is recorded in assets held for sale in the
Condensed Consolidated Balance Sheets
.
Fair Value of Financial Instruments
The following instruments are not measured at fair value on the Company’s Condensed 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 in the Company’s Condensed Consolidated Balance Sheets due to their 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.
Recently Adopted Accounting Pronouncements
Inventory
In July 2015, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2015-11,
Simplifying the Measurement of Inventory
. ASU 2015-11 applies to inventory that is measured using the 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 pronouncement is effective for reporting periods beginning after December 15, 2016. We adopted ASU 2015-11 effective January 4, 2017 and such adoption did not have a material impact on the Company’s Condensed Consolidated Financial Statements or related disclosures.
Stock Compensation
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. This standard, which was adopted in the first quarter of 2017, resulted in the recognition of previously unrecognized federal and state net operating loss carryforwards worth approximately $0.8 million, net of tax. Management has determined that it is not more likely than not that the benefit of these deferred tax assets will be realized and has established a full valuation allowance for this amount, resulting in a net zero impact to the financial statements. Additionally, the Company elected to account for forfeitures as they occur, and a cumulative-effect adjustment was made in the amount of $0.3 million and recorded in retained earnings as of April 4, 2017 on the Condensed Consolidated Balance Sheets.
Upcoming Accounting Pronouncements
The Company is currently assessing the potential impact of the following pronouncements on its Condensed Consolidated Financial Statements and related disclosures:
7
Revenue Recognition
In May 2014, the FASB issued ASU 2014-09,
Revenue from Contracts with Customers
, which amended the existing accounting standards for revenue recognition. ASU 2014-09 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 August 2015, the FASB issued ASU 2015-14,
Revenue from Contracts with Customers –
Deferral of 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. Management believes adoption of the new revenue recognition standard will primarily impact the Company’s accounting for other fees charged to franchisees as well as transactions involving its advertising fund and gift card sales. Currently the Company anticipates to adopt the new revenue standard using the modified retrospective transition approach. Management is in the process of determining the financial statement impact and currently unable to estimate the impact on the Company’s Consolidated Financial Statements or related disclosures.
Leases
In February 2016, the FASB issued ASU 2016-02,
Leases
(“ASU 2016-02”), which will require lessees to recognize a lease liability and a right-of-use asset for all leases (with the exception of leases with terms less than 12 months) 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. Management believes the adoption of ASU 2016-02 will materially impact the Company’s Consolidated Financial Statements by significantly increasing non-current assets and non-current liabilities on the Consolidated Balance Sheets in order to record the right of use assets and related lease liabilities for existing operating leases. Management is in the process of determining the financial statement impact and currently unable to estimate the impact on the Company’s Consolidated Financial Statements or related disclosures.
Liabilities
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. Management is in the process of determining the financial statement impact and currently unable to estimate the impact on the Company’s Consolidated Financial Statements or related disclosures.
Other Accounting Pronouncements
The Company has not yet adopted and does not expect the adoption of the following pronouncements to have a significant impact on its Condensed Consolidated Financial Statements and related disclosures:
Financial Instruments
In January 2016, the FASB issued ASU 2016-01,
Financial Instruments - Overall
(Subtopic 825-10):
Recognition and Measurement of Financial Assets and Financial Liabilities
(“ASU 2016-01”). ASU 2016-01 addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. ASU 2016-01 will be effective for the Company beginning fiscal year 2018.
Statement of Cash Flows
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.
8
Stock Compensation
In January 2017, the FASB issued ASU 2017-09,
Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting
. The amendments provide guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting under Topic 718. This guidance will be effective for the Company’s fiscal year 2018, with early adoption permitted.
Intangibles
In January 2017, the FASB issued ASU 2017-04,
Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment
, which eliminates Step 2 from the goodwill impairment test. The impairment amount will be calculated at Step 1. The amendments also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. This guidance will be effective for the Company’s fourth quarter annual impairment test in fiscal year 2019, with early adoption permitted.
3.
|
SEVERANCE AND OTHER COMPENSATION
|
In connection with the relocation of the Company’s headquarters from Emeryville, California to Frisco, Texas, the Company incurred severance and retention obligations. At April 4, 2017, and January 3, 2017, $1.7 and $1.6 million of severance and $0.2 and $0.8 million of retention expenses are classified in accrued compensation and benefits and accounts payable, respectively, in the
Condensed Consolidated Balance Sheets
. The Company made severance and retention payments of $1.5 million during the
13-week period ended April 4, 2017.
The Company incurred additional expense related to these actions of $1.0 million during the
13-week period ended April 4, 2017.
The remaining severance and retention payments will be completed by the end of the second quarter in fiscal 2018.
4.
|
FAIR VALUE MEASUREMENT
|
Financial Assets and Liabilities
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. 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.
|
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 its quarterly impairment reviews, the Company had no impairment during the 13-week period ended April 4, 2017 and March 29, 2016.
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 New Credit Agreement also allows the Company 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% and has a five-year term. Under the terms of the New Credit Agreement, the Company is required to either maintain minimum cash or consolidated EBITDA levels and a minimum fixed charge coverage ratio. The New Credit Agreement terminates November 3, 2021. This credit facility is subject to customary affirmative and negative covenants for credit facilities of this type, including limitations on the Company with respect to liens, indebtedness,
9
guaranties, investments, distributions, mergers and acquisitions and disposition
s of assets. The credit facility is evidenced by a revolving note made by the Company in favor of the Lender, is guaranteed by the Company and is secured by substantially all of its assets including the assets of its subsidiar
y
and a pledge of stock of its subsidiar
y
.
To acquire the New Credit Agreement, the Company incurred upfront fees, which are being amortized over the term of the New Credit Agreement. As of April 4, 2017, the unamortized commitment fee amount was not material and is recorded in prepaid expenses in the
Condensed Consolidated Balance Sheets
.
During the 13-week period ended April 4, 2017, there were no borrowings under the New Credit Agreement.
As of April 4, 2017, the Company was in compliance with the financial covenants to the New Credit Agreement.
6.
|
SHARE-BASED COMPENSATION
|
The Jamba, Inc. 2013 Equity Incentive Plan (“the Plan”) authorizes the Company to provide incentive compensation in the form of stock options (“options”), restricted stock and stock units (“RSUs”), performance based and market based shares and units (“PSUs”) and (“MBRSUs”), other stock-based and restricted stock-based awards (“RSAs”), cash-based awards and deferred compensation awards. In addition, 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, was $0.1 million and $0.8 million for the 13-week periods ended April 4, 2017 and March 29, 2016, respectively. At April 4, 2017, unvested share-based compensation expense for options and restricted stock awards totaled $2.6 million. This expense will be recognized over the remaining weighted average service period of approximately 1.3 years. There was no income tax benefit related to share-based compensation expense during the 13-week periods ended April 4, 2017 and March 29, 2016.
Stock Options
— A summary of options activity under the Plan as of April 4, 2017, and changes during the 13-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 January 3, 2017
|
|
|
1,200
|
|
|
$
|
12.40
|
|
|
|
5.05
|
|
|
$
|
1,213
|
|
Granted
|
|
|
15
|
|
|
|
9.25
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(13
|
)
|
|
|
5.15
|
|
|
|
|
|
|
|
|
|
Canceled
|
|
|
(170
|
)
|
|
|
13.94
|
|
|
|
|
|
|
|
|
|
Balance at April 4, 2017
|
|
|
1,032
|
|
|
$
|
12.19
|
|
|
|
6.54
|
|
|
$
|
862
|
|
Vested and expected to vest—April 4, 2017
|
|
|
1,032
|
|
|
$
|
12.19
|
|
|
|
6.54
|
|
|
$
|
862
|
|
Exercisable—April 4, 2017
|
|
|
653
|
|
|
$
|
11.71
|
|
|
|
5.50
|
|
|
$
|
862
|
|
During the 13-week period ended April 4, 2017, options exercisable for 15,000 shares of the Company’s common stock were granted as an inducement award to a new employee at a weighted average grant date fair value of $3.54. During the 13-week period ended March 29, 2016, options exercisable for 150,000 shares of the Company’s common stock were granted under the 2013 Equity Incentive Plan at a weighted average grant date fair value of $4.75.
The fair value of options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions:
|
|
13-Week Period Ended
|
|
|
|
April 4, 2017
|
|
Risk-free interest rate
|
|
|
2.0
|
%
|
Expected term (in years)
|
|
|
5.39
|
|
Expected volatility
|
|
|
38.8
|
%
|
Expected dividend yield
|
|
|
0
|
%
|
10
Time-Based Restricted Stock Units
— Information regarding activities during the 13-week period ended April 4, 2017 for outstanding 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 January 3, 2017
|
|
|
68
|
|
|
$
|
13.11
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Vested
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
(6
|
)
|
|
|
14.04
|
|
Non-vested at April 4, 2017
|
|
|
62
|
|
|
$
|
13.02
|
|
During the 13-week periods ended April 4, 2017 and March 29, 2016, no RSUs were granted under the 2013 Equity Incentive Plan.
Restricted Stock Awards
—
RSAs are granted to members of the Company’s Board of Directors as part of their compensation. Awards are fully vested and expensed when granted. The fair value of restricted stock awards is the market close price of the Company’s common stock on the date of the grant. During the 13-week periods ended April 4, 2017 and March 29, 2016, no restricted stock awards were issued.
Performance-Based Restricted Stock Units
— No performance stock units were granted or vested during the 13-week period ended April 4, 2017 or March 29, 2016. Information regarding activities during fiscal 2017 for outstanding performance based RSUs is as follows (shares in thousands):
|
|
|
|
|
|
Weighted-Average
|
|
|
|
Number of
|
|
|
Grant Date
|
|
PSUs
|
|
Shares of PSUs
|
|
|
Fair Value
|
|
Non-vested at January 3, 2017
|
|
|
17
|
|
|
$
|
12.27
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Vested
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
(6
|
)
|
|
|
14.04
|
|
Non-vested at April 4, 2017
|
|
|
11
|
|
|
$
|
11.30
|
|
Market-Based Restricted Stock Units
—
Information regarding activities during fiscal 2017 for outstanding market-based RSUs is as follows (shares in thousands):
|
|
|
|
|
|
Weighted-Average
|
|
|
|
Number of
|
|
|
Grant Date
|
|
MBRSUs
|
|
Shares of MBRSUs
|
|
|
Fair Value
|
|
Non-vested at January 3, 2017
|
|
|
505
|
|
|
$
|
3.04
|
|
Granted
|
|
|
70
|
|
|
|
1.06
|
|
Vested
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
Non-vested at April 4, 2017
|
|
|
575
|
|
|
$
|
2.80
|
|
During the
13-week period ended April 4, 2017
, 70,000 market-based RSUs were granted under the 2013 Equity Incentive Plan at a weighted average grant date fair value of $1.06. There were no market-based RSUs granted during the 13-week period ended March 29, 2016.
The market-based RSU’s will vest upon achievement of compound annual stock price growth rate targets of 15%, 22.5% and 30%. The Company recognizes compensation expense related to market-based RSUs over the requisite service period on a straight-line basis. The requisite service period is a measure of the expected time to reach the respective vesting threshold. The Company estimated the expense and service period by utilizing a Monte Carlo simulation, considering only those stock price-paths in which the threshold was exceeded.
11
For the 13-week periods ended April 4, 2017 and March 29, 2016, the components of other operating, net were as follows (in thousands):
|
|
13-Week Period Ended
|
|
|
|
April 4, 2017
|
|
|
March 29, 2016
|
|
|
|
|
|
|
|
|
|
|
Gift card breakage income
|
|
$
|
(730
|
)
|
|
$
|
(705
|
)
|
Gift card expense
|
|
|
263
|
|
|
|
160
|
|
Consumer packaged goods and JambaGO® direct expense
|
|
|
(1
|
)
|
|
|
632
|
|
Franchise gift card discount expense
|
|
|
70
|
|
|
|
193
|
|
Franchise sublease income
|
|
|
(178
|
)
|
|
|
(261
|
)
|
Franchise bad debt
|
|
|
144
|
|
|
|
-
|
|
Franchise other expense
|
|
|
528
|
|
|
|
413
|
|
International expense
|
|
|
52
|
|
|
|
166
|
|
Other expense (income)
|
|
|
(72
|
)
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
Total other operating, net
|
|
$
|
76
|
|
|
$
|
612
|
|
8
.
|
COMMITMENTS AND CONTINGENCIES
|
The Company records a liability for litigation claims and contingencies when payment is probable and the amount of loss can be reasonably estimated.
During the 13-week period ended April 4, 2017, the Company increased a liability for an ongoing litigation matter by $1.0 million. The estimated losses are included in general and administrative expenses in the Company’s financial statements. In fiscal year 2016, the Company recognized $2.0 million for estimated losses associated with ongoing and settled litigation matters based on the available information at the time. The amounts recognized relate to aggregate amounts estimated for resolution of the Company’s ordinary course employment based litigation cases estimated at $1.0 million and a commercial vendor dispute settled for $1.0 million.
As of April 4, 2017 and January 3, 2017, the liabilities associated with these matters are recorded in accounts payable and accrued expenses in the Condensed Consolidated Balance Sheets and were $2.1 million and $1.4 million, respectively.
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.
9
.
|
RELATED-PARTY TRANSACTIONS
|
For the 13-week period ended April 4, 2017, the Company received $0.1 million from Sodexo related to licensing fees for Jamba units operated by Sodexo. For the 13-week period ended March 29, 2016, the Company received $0.1 million from Country Pure Foods related to vendor supply chain management fees and approximately $0.1 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.
In the second quarter of fiscal 2017, the Company refranchised 13 Company-owned stores and signed a 10-unit development agreement in the Chicago area for approximately $0.2 million.
During the fourth quarter of fiscal 2017, we recorded severance of $0.3 million for the departure of one senior executive. Additionally, during the first quarter of 2018, we recorded $0.3 million of severance for the departure of one senior executive.
12
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 January 3, 2017.
JAMBA, INC. OVERVIEW
Jamba, Inc. through its wholly-owned subsidiary, Jamba Juice Company (“the Company”), is a global healthy lifestyle brand that inspires and simplifies healthful living through freshly blended whole fruit and vegetable smoothies, bowls, juices, cold-pressed shots, boosts, snacks, and meal replacements. Jamba’s blends are made with premium ingredients free of artificial flavors and preservatives so guests can feel their best and blend the most into life. The Company’s headquarters were relocated to Frisco, Texas, from Emeryville, California, in the fourth quarter of fiscal year 2016.
2017 First Quarter Financial Summary
|
•
|
Franchisees opened 15 new Jamba Juice stores globally; which included 11 traditional stores, 1 non-traditional store, 1 drive thru store in the U.S. and 2 new International Stores.
|
|
•
|
At April 4, 2017, there were 868 stores globally; which included 66 Domestic Company Stores, 734 Domestic Franchise Stores and 68 International Franchise Stores.
|
|
•
|
System-wide comparable sales (includes both Company and Franchise Stores) declined 2.5% for the quarter. Company Store comparable sales decreased 4.5% for the quarter and Franchise Store comparable sales decreased 2.2% for the quarter compared to the prior year. System-wide and Franchise Store comparable store sales are non-GAAP financial measures and represent the change in year-over-year sales, opened for at least one full fiscal year.
|
|
•
|
Total revenue for the quarter decreased $1.1 million to $17.6 million from $18.7 million for the prior quarter, primarily due the decline in comparable store sales, store closures and the exit of JambaGO
®
and Ready to Drink during fiscal year 2016.
|
|
•
|
Net loss for the quarter was $3.2 million compared to $2.8 million for the prior quarter.
|
13
RESULTS OF OPERATIONS — 13-WEEK PERIOD ENDED
APRIL 4, 2017
AS COMPARED TO
THE
13-WEEK PERIOD ENDED
MARCH 29, 2016
(UNAUDITED)
The discussion that follows should be read in conjunction with the Condensed Consolidated Financial Statements and notes thereto. The following table sets forth selected operating data as a percentage of total revenue (unless otherwise noted), of certain items included in our Condensed Consolidated Statements of Operations, for the periods indicated.
|
|
13-Week
Period Ended
April 4, 2017
|
|
|
%
(1)
|
|
|
13-Week
Period Ended
March 29, 2016
|
|
|
%
(1)
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company stores
|
|
$
|
11,107
|
|
|
|
63.1
|
%
|
|
$
|
11,953
|
|
|
|
63.7
|
%
|
Franchise and other revenue
|
|
|
6,506
|
|
|
|
36.9
|
%
|
|
|
6,801
|
|
|
|
36.3
|
%
|
Total revenue
|
|
|
17,613
|
|
|
|
100.0
|
%
|
|
|
18,754
|
|
|
|
100.0
|
%
|
Costs and operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
2,662
|
|
|
|
24.0
|
%
|
|
|
2,962
|
|
|
|
24.8
|
%
|
Labor
|
|
|
4,288
|
|
|
|
38.6
|
%
|
|
|
4,158
|
|
|
|
34.8
|
%
|
Occupancy
|
|
|
1,763
|
|
|
|
15.9
|
%
|
|
|
2,036
|
|
|
|
17.0
|
%
|
Store operating
|
|
|
1,798
|
|
|
|
16.2
|
%
|
|
|
2,021
|
|
|
|
16.9
|
%
|
Depreciation and amortization
|
|
|
881
|
|
|
|
5.0
|
%
|
|
|
1,502
|
|
|
|
8.0
|
%
|
General and administrative
|
|
|
8,601
|
|
|
|
48.8
|
%
|
|
|
7,610
|
|
|
|
40.6
|
%
|
Loss (gain) on disposal of assets
|
|
|
162
|
|
|
|
0.9
|
%
|
|
|
109
|
|
|
|
0.6
|
%
|
Store pre-opening
|
|
|
238
|
|
|
|
1.4
|
%
|
|
|
324
|
|
|
|
1.7
|
%
|
Store lease termination and closure
|
|
|
181
|
|
|
|
1.0
|
%
|
|
|
120
|
|
|
|
0.6
|
%
|
Other operating, net
|
|
|
76
|
|
|
|
0.4
|
%
|
|
|
612
|
|
|
|
3.3
|
%
|
Total costs and operating expenses
|
|
|
20,650
|
|
|
|
117.2
|
%
|
|
|
21,454
|
|
|
|
114.4
|
%
|
Income (loss) from operations
|
|
|
(3,037
|
)
|
|
|
(17.2
|
%)
|
|
|
(2,700
|
)
|
|
|
(14.4
|
)%
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
54
|
|
|
|
0.3
|
%
|
|
|
71
|
|
|
|
0.4
|
%
|
Interest expense
|
|
|
(83
|
)
|
|
|
(0.5
|
)%
|
|
|
(59
|
)
|
|
|
(0.3
|
)%
|
Total other income (expense), net
|
|
|
(29
|
)
|
|
|
(0.2
|
)%
|
|
|
12
|
|
|
|
0.1
|
%
|
Income (loss) before income taxes
|
|
|
(3,066
|
)
|
|
|
(17.4
|
)%
|
|
|
(2,688
|
)
|
|
|
(14.3
|
)%
|
Income tax expense
|
|
|
(86
|
)
|
|
|
(0.5
|
)%
|
|
|
(132
|
)
|
|
|
(0.7
|
)%
|
Net income (loss)
|
|
|
(3,152
|
)
|
|
|
(17.9
|
)%
|
|
|
(2,820
|
)
|
|
|
(15.0
|
)%
|
(1)
|
Cost of sales, labor, occupancy and store operating expenses percentages are calculated using Company Stores revenue. All other line items are calculated using total revenue. Certain percentage amounts do not sum to total due to rounding.
|
Known Events, Trends or Uncertainties Impacting or Expected to Impact Comparisons of Reported or Future Results
Management reviews and discusses its operations based on both financial and non-financial metrics. Among the key financial metrics upon which management focuses, is reviewing the performance based on the Company’s consolidated GAAP results, including Company Store comparable sales, franchise and other revenue, and income from operations. Management also uses 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 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 and Express format. 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 includes closed locations for the periods in which they have comparable sales.
14
Company-owned stores that were sold in refranchising transactions are included in the store base for each accounting period of the fiscal quarter in wh
ich the store was sold to the extent the sale is consummated at least three days prior to the end of such accounting period, but only for the days such stores have been company-owned. Thereafter, such stores are excluded from the store base until such stor
es have been franchise-operated for at least one full fiscal period at which point such stores are included in the store base and compared to sales in the comparable period of the prior year. 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.
As a result of the 53 week fiscal 2016, reported 2017 comparable sales for fiscal comparisons are offset by one week. The comparable sales calculations presented in this Form 10-Q accurately reflect the change in sales for comparable stores in the reported fiscal period. However, as a result of the one week offset, management also reviewed and previously reported comparable sales calculations on a calendar, rather than fiscal basis. Management believes this calendar comparison offers a more clear understanding of comparable sales performance of the business as it compares truly comparable time periods, rather than fiscal periods that compare periods with a one week shift.
During fiscal 2016, we underwent significant changes in our business model, leadership, key personnel, and relocation of our corporate office. These changes resulted in a significant increase in non-routine transactions and impacted certain routine processes needed to effectively accumulate and present consolidated financial results. We identified that our risk assessment process, which was intended to identify new transactions and changes to existing processes and design appropriate control activities over financial reporting, was not sufficient to prevent or detect material misstatement on a timely basis. Consequently, a material weakness in internal control over financial reporting resulted and is described in “ITEM 4. Controls and Procedures.” Management has begun implementing a plan to assess risks of material misstatement over financial reporting, including the enhancement of internal control activities, and training of key process owners. Management, with the oversight of the Audit Committee has dedicated significant incremental resources to successfully implement and test effectiveness of the enhanced controls throughout fiscal 2017. G&A expenses are expected to be negatively impacted by costs in connection with the remediation plan in fiscal 2017.
Key Financial Metrics
The following table sets forth operating data that do not otherwise appear in our Condensed Consolidated Financial Statements for the periods indicated:
|
|
13-Week Period Ended
|
|
Increase/(decrease)
|
|
April 4, 2017
|
|
|
March 29, 2016
|
|
Percentage change in comparable store sales
|
|
|
|
|
|
|
|
|
Company stores
(1)
|
|
|
(4.5
|
)%
|
|
|
0.2
|
%
|
Franchise stores
|
|
|
(2.2
|
)%
|
|
|
(2.4
|
)%
|
System-wide
(2)
|
|
|
(2.5
|
)%
|
|
|
(2.1
|
)%
|
Percentage change in comparable company store sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Traffic
|
|
|
(7.2
|
)%
|
|
|
(4.5
|
)%
|
Average check
|
|
|
2.7
|
%
|
|
|
4.7
|
%
|
Total comparable company store sales
|
|
|
(4.5
|
)%
|
|
|
0.2
|
%
|
Certain percentage amounts do not sum to total due to rounding.
(1)
|
Percentage change in comparable sales compares sales during the current fiscal year to sales from the same stores for the prior fiscal year. A store is included in this calculation after its first full fiscal year of operations. Company Store comparable sales excludes sales from Franchise and International Stores. Franchise Store comparable sales excludes sales from Company, and International Stores. Closed locations are included for the periods in which they have comparable sales.
|
(2)
|
Percentage change in system-wide comparable sales compares the combined sales of Company and Franchise Stores, excluding Jamba Juice Express, during the current fiscal year to the combined sales from the same Company and Franchise Stores for the prior fiscal year. A Company or Franchise Store is included in this calculation after its first full fiscal period of operations. System-wide comparable store sales do not include International Stores, Jamba Juice Express and JambaGO
®
. Closed locations are included for the periods in which they have comparable sales.
|
15
The following table sets forth certain data relating to Company Stores, Franchise
Stores
and International Stores for the periods
indicated:
|
|
13-Week Period Ended
|
|
|
13-Week Period Ended
|
|
|
|
April 4, 2017
|
|
|
March 29, 2016
|
|
|
|
Domestic
|
|
|
International
|
|
|
Domestic
(1)
|
|
|
International
|
|
Company Stores:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
|
66
|
|
|
|
-
|
|
|
|
70
|
|
|
|
-
|
|
Company Stores opened
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Company Stores closed
|
|
|
-
|
|
|
|
-
|
|
|
|
(2
|
)
|
|
|
-
|
|
Company Stores sold to franchisees
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total Company Stores
|
|
|
66
|
|
|
|
-
|
|
|
|
68
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchise and International Stores:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
|
726
|
|
|
|
70
|
|
|
|
706
|
|
|
|
75
|
|
Franchise Stores opened
|
|
|
13
|
|
|
|
2
|
|
|
|
10
|
|
|
|
3
|
|
Franchise Stores closed
|
|
|
(5
|
)
|
|
|
(4
|
)
|
|
|
(7
|
)
|
|
|
(13
|
)
|
Franchise Stores purchased from the Company
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total Franchise and International Stores
|
|
|
734
|
|
|
|
68
|
|
|
|
709
|
|
|
|
65
|
|
1)
|
As communicated on March 20, 2017, the Company now excludes Express format stores counts. Store counts exclude Express in both 2016 and 2017 for comparability.
|
Revenue
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 and license income from sales of Jamba-branded Consumer Packaged Goods (“CPG”) products. Total revenue decreased for the 13-week period ended in April 4, 2017 by $1.1 million or 6.1% compared to March 29, 2016.
The following table summarizes revenue for the periods indicated (dollars in thousands):
|
|
13-Week
Period Ended
April 4, 2017
|
|
|
% of
Total
Revenue
|
|
|
13-Week
Period Ended
March 29, 2016
|
|
|
% of
Total
Revenue
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company stores
|
|
$
|
11,107
|
|
|
|
63.1
|
%
|
|
$
|
11,953
|
|
|
|
63.7
|
%
|
Franchise and other revenue
|
|
|
6,506
|
|
|
|
36.9
|
%
|
|
|
6,801
|
|
|
|
36.3
|
%
|
Total revenue
|
|
$
|
17,613
|
|
|
|
100.0
|
%
|
|
$
|
18,754
|
|
|
|
100.0
|
%
|
The decrease in total revenue was primarily due to a decrease in the number of Company Stores for the quarter compared to the prior year and the decline in same store sales. For the quarter ended April 4, 2017 we owned 66 Company Stores compared to 68 in the prior year.
Company Store revenue
Company Store revenue for the 13-week period ended April 4, 2017 decreased $0.8 million or 7.1%, compared to the 13-week period ended March 29, 2016. The decrease in Company Store revenue was due to a decrease in comparable store sales and reduction in the number of Company Stores as illustrated by the following table:
|
|
Company Store
Change in
Revenue
|
|
|
|
(in thousands)
|
|
First Quarter 2017 vs. First Quarter 2016
|
|
|
|
|
Company Stores comparable sales increase/(decrease)
|
|
$
|
(533
|
)
|
Reduction in number of Company Stores, net
|
|
|
(313
|
)
|
Total change in Company Store revenue
|
|
$
|
(846
|
)
|
16
Company Store comparable sales decreased $0.5 million for the 13-week period ended April 4, 2017, or 4.5%, attributable to a 7.2% decrease in transaction count, partially offset by a 2.7% increase in the average check amount. The increase in average check was driven by a price increase as well as product mix shifts as we continue to increase sales of Energy bowls and other higher priced items.
Franchise and other revenue
Franchise and other revenue for the 13-week period ended April 4, 2017 decreased by $0.3 million or 4.3%, compared to the 13-week period ended March 29, 2016. The decrease was primarily due to the exit of JambaGO
®
in the fourth quarter of 2016 and decreases in franchise same store sales of 2.2%, partially offset by an increase in royalties received related to the net increase in the number of Franchise and International Stores. The number of Franchise Stores and International Stores as of April 4, 2017 and March 29, 2016 was 802 and 774, respectively.
Cost of Sales
Cost of sales is primarily comprised of produce, dairy, and other products used to make smoothies, juices, bowls and paper products. The following table summarizes cost of sales for the periods indicated (dollars in thousands):
|
|
13-Week Period Ended
|
|
|
|
|
|
|
|
|
April 4, 2017
|
|
|
March 29, 2016
|
|
|
% Change
|
|
|
Cost of sales
|
|
$
|
2,662
|
|
|
$
|
2,962
|
|
|
|
(10.1
|
)%
|
|
Percentage of company stores revenue
|
|
|
24.0
|
%
|
|
|
24.8
|
%
|
|
|
|
|
|
Cost of sales for the 13-week period ended April 4, 2017 as a percentage of Company Store revenue, was favorable 0.8% compared to March 29, 2016, primarily due to favorable commodity costs led by strawberries and mangos, menu price increases and product mix shifts; partially offset by various merchandise sales with higher cost structure.
Labor
Labor costs are comprised of store management salaries and bonuses, hourly team member payroll, training costs and other associated fringe benefits. The following table summarizes labor expenses for the periods indicated (dollars in thousands):
|
|
13-Week Period Ended
|
|
|
|
|
|
|
|
|
April 4, 2017
|
|
|
March 29, 2016
|
|
|
% Change
|
|
|
Labor
|
|
$
|
4,288
|
|
|
$
|
4,158
|
|
|
|
3.1
|
%
|
|
Percentage of company stores revenue
|
|
|
38.6
|
%
|
|
|
34.8
|
%
|
|
|
|
|
|
The 3.8% increase in labor for the 13-week period ended April 4, 2017, as a percentage of Company Store revenue, was primarily attributable to increased wage rates, healthcare and workman’s compensation expense, and the decrease in sales; partially offset by labor hour efficiencies and lower store bonuses.
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. The following table summarizes occupancy expenses for the periods indicated (dollars in thousands):
|
|
13-Week Period Ended
|
|
|
|
|
|
|
|
|
April 4, 2017
|
|
|
March 29, 2016
|
|
|
% Change
|
|
|
Occupancy
|
|
$
|
1,763
|
|
|
$
|
2,036
|
|
|
|
(13.4
|
)%
|
|
Percentage of company stores revenue
|
|
|
15.9
|
%
|
|
|
17.0
|
%
|
|
|
|
|
|
The 1.1% decrease in occupancy costs for the 13-week period ended April 4, 2017, as a percentage of Company Store revenue, was primarily due to changes in the composition of the store base; partially offset by the decrease in sales.
17
Store Operatin
g expenses
Store operating expenses consist of various store-level costs such as utilities, marketing, repairs and maintenance, credit card fees and other store operating expenses.
The following table summarizes store operating expenses for the periods indicated (dollars in thousands):
|
|
13-Week Period Ended
|
|
|
|
|
|
|
|
|
April 4, 2017
|
|
|
March 29, 2016
|
|
|
% Change
|
|
|
Store operating
|
|
$
|
1,798
|
|
|
$
|
2,021
|
|
|
|
(11.0
|
)%
|
|
Percentage of company stores revenue
|
|
|
16.2
|
%
|
|
|
16.9
|
%
|
|
|
|
|
|
The decrease of 0.7% in total store operating expenses for the 13-week period ended April 4, 2017, as a percentage of Company Store revenue, is primarily due to lower hardware and software expenses and store level advertising; offset by the decrease in sales, higher gift card printing expenses, and increased repairs.
Depreciation and Amortization
Depreciation and amortization expenses include the depreciation of fixed assets and the amortization of intangible assets. The following table summarizes depreciation and amortization expenses for the periods indicated (dollars in thousands):
|
|
13-Week Period Ended
|
|
|
|
|
|
|
|
|
April 4, 2017
|
|
|
March 29, 2016
|
|
|
% Change
|
|
|
Depreciation and amortization
|
|
$
|
881
|
|
|
$
|
1,502
|
|
|
|
(41.3
|
)%
|
|
Percentage of total revenue
|
|
|
5.0
|
%
|
|
|
8.0
|
%
|
|
|
|
|
|
The 3.0% decrease in depreciation and amortization as a percent of total revenue in April 4, 2017 was primarily due to the disposition of assets from the previous Emeryville headquarters and store refranchising activity.
General and Administrative (“G&A”)
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 costs related to the move of the support center to Frisco, Texas, settlement and legal costs. The following table summarizes G&A expenses for the periods indicated (dollars in thousands):
|
|
13-Week Period Ended
|
|
|
|
|
|
|
|
|
April 4, 2017
|
|
|
March 29, 2016
|
|
|
% Change
|
|
|
General and administrative
|
|
$
|
8,601
|
|
|
$
|
7,610
|
|
|
|
13.0
|
%
|
|
Percentage of total revenue
|
|
|
48.8
|
%
|
|
|
40.6
|
%
|
|
|
|
|
|
Total G&A expenses for April 4, 2017 increased by $1.0 million, or 13.0%, compared to March 29, 2016. The increase in total G&A expenses of 8.2% as a percent of total revenue was primarily due to corporate relocation expenses, liability for ongoing legal action, and higher audit and related expenses. These increases were partially offset by efficiencies gained from organization structure changes resulting from our shift to an asset light model.
Other Operating, Net
Other operating, net consists of income from breakage from our gift cards (known as jambacard
®
), gift card related fees, expenses related to our franchisees, sublease income, international expenses, gain/loss on investments, bad debt expense, and CPG and JambaGO
®
activities.
The following table summarizes other operating, net expenses for the periods indicated (dollars in thousands):
|
|
13-Week Period Ended
|
|
|
|
|
|
|
|
|
April 4, 2017
|
|
|
March 29, 2016
|
|
|
% Change
|
|
|
Other operating, net
|
|
$
|
76
|
|
|
$
|
612
|
|
|
|
(87.6
|
)%
|
|
Percentage of total revenue
|
|
|
0.4
|
%
|
|
|
3.3
|
%
|
|
|
|
|
|
18
For the 13-week period ended April 4, 2017, other operating, net decreased approximately $0.5 million compared to March 29, 2016. Changes in the components of other operating, net include a decrease in CPG and JambaGO
®
direct expenses related to the exit of JambaGO
®
; partially offset by an increase franchise marketing expenses.
Income Tax Expense
We have recorded income tax expense for both the 13-week periods ended April 4, 2017 and March 29, 2016, respectively. Our effective income tax rates were (2.8%) and (4.9%) for the 13-week periods ended April 4, 2017 and March 29, 2016, respectively. For the 13-week periods ended April 4, 2017 and March 29, 2016, the effective tax rates were primarily affected by the pretax loss, the foreign withholding and the U.S. alternative minimum taxes.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows Summary
The following table summarizes our cash flows for the 13-week periods ended April 4, 2017 and March 29, 2016 (in thousands):
|
|
13-Week Period Ended
|
|
|
|
April 4, 2017
|
|
|
March 29, 2016
|
|
Cash (used in) provided by operating activities
|
|
$
|
1,348
|
|
|
$
|
(6,484
|
)
|
Cash (used in) provided by investing activities
|
|
|
(353
|
)
|
|
|
(812
|
)
|
Cash (used in) provided by financing activities
|
|
|
64
|
|
|
|
102
|
|
Net increase (decrease) in cash and cash equivalents
|
|
$
|
1,059
|
|
|
$
|
(7,194
|
)
|
Liquidity
As of April 4, 2017, we had cash and cash equivalents of $8.2 million compared to $7.1 million as of January 3, 2017. As of April 4, 2017 and January 3, 2017, we had no short term or long term debt. During the 13-week period ended April 4, 2017, our primary sources of liquidity are cash flows provided by operating activities.
We expect that our cash on hand, future cash flows provided by operating activities will be sufficient to fund our working capital and general corporate needs and the non-discretionary capital expenditures for at least the next twelve months and the foreseeable future. The use of cash to fund discretionary capital expenditures will be based on the need to conserve our capital.
On February 14, 2012, the Company entered into a Credit Agreement with Wells Fargo Bank, National Association (the “Lender”), and as amended on November 1, 2012, July 22, 2013, November 4, 2013 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 with Wells Fargo expired. 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 New Credit Agreement 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 makes available to the Company a revolving line of credit in the amount of up to $15.0 million which accrues interest at a per annum rate equal to the LIBOR rate plus 2.50%. Under the terms of the New Credit Agreement, we are required to maintain certain leverage and coverage ratios and are subject to limits on annual capital expenditures. The New Credit Agreement terminates November 3, 2021. The credit facility is subject to customary affirmative and negative covenants for credit facilities of this type, including limitations on the Company with respect to liens, indebtedness, investments, fundamental changes (merge, dissolve, liquidate, etc.), dispositions, restricted payments and guarantees. The credit facility is evidenced by a revolving loan, is guaranteed by the Company and is secured by substantially all of our assets including the asset of our subsidiary.
To acquire the New Credit Agreement, the Company incurred upfront fees, which are being amortized over the term of the New Credit Agreement. As of April 4, 2017, the unamortized commitment fee for the New Credit Agreement was not material and is recorded in prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets.
As of April 4, 2017, the Company was in compliance with the financial covenants to the New Credit Agreement.
Since the inception of the Wells Fargo line of credit and the New Credit Agreement, we did not borrow on the facilities and uti
lized them primarily for collateral against letters of credit, which reduce the amount available to draw. As of April 4, 2017, there were $0.3 million letters of credit outstanding.
In the future, we may enter equipment leasing arrangements and incur additional indebtedness as
19
necessary and as permitted under our
New
Credit Agreement. We cannot assure, however, that such financing will be available on favorable terms or at all.
The adequacy of our available funds will depend on many factors, including the m
acroeconomic 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, ou
r foremost priorities for the near term continue to be preserving and generating cash sufficient to fund our liquidity needs.
Operating Activities
Net cash provided by operating activities was $1.3 million for the 13-week period ended April 4, 2017, compared to $6.5 million used in operating activities for the 13-week period ended March 29, 2016, reflecting a net increase in cash flows of $7.8 million. This increase in cash provided by operating activities was primarily due to a net increase in cash provided by operating assets and liabilities (approximately $8.9 million) partially offset to a decrease in net loss after adjustments for noncash items (approximately $0.7 million). Net loss after adjustments for noncash items increased primarily due to a decrease in cash flows driven by a decline in Company Store revenue, which
was primarily due to a decrease in Company Stores for the quarter compared to the prior year and a decrease in same store sales
. The Company expects that operating cash flow will be generated through a combination of company store profitability and franchise royalty fees and a reduced cost structure.
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 $0.4 million for the 13-week period ended April 4, 2017, compared to $0.8 million for the 13-week period ended March 29, 2016. The $0.4 million change in net cash used in investing activities during the 13-week period ended April 4, 2017 was primarily due to a decrease in capital expenditures.
Financing Activities
Net cash provided by financing activities was $0.1 million for both the 13-week periods ended April 4, 2017 and March 29, 2016 and relates to proceeds received from stock plan activity
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 January 3, 2017.
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 day-to-day volatility based on weather and varies by season. A significant portion of our revenue is realized during the second and third quarters of the fiscal year, which include the summer months. The first and fourth quarters of the fiscal year, which encompasses the winter months and the holiday season, has traditionally been our lowest revenue volume quarter. Although we have expanded the number of stores offering our bowls, hot oatmeal, hot beverages, sandwiches and Artisan Flatbread selections, our business will likely continue to be subject to seasonal patterns for the foreseeable future, given that the largest portion of our sales continues to be from the sale of smoothies during the warmer parts of the year. Because of the seasonality of the business, results for an individual quarter are not necessarily indicative of the results, which may be achieved for the full fiscal year.
20
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 January 3, 2017.
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.
21