Jamba, Inc. Reports Financial Results for Second Quarter 2010

Jamba, Inc. (NASDAQ:JMBA) reported unaudited financial results for the fiscal second quarter ended July 13, 2010. The results showed net income and a strengthened liquidity position that enabled the company to take several actions to accelerate its strategic initiatives. The Company also reported improved sequential comparable store sales for the quarter.

“Our results during the quarter built on our first quarter accomplishments with several notable achievements that signal the solid pace of Jamba’s transformation”

Highlights for the 12 weeks ended July 13, 2010, compared to the 12 weeks ended July 14, 2009:

• Net income for Q210 was $1.6 million, an improvement of $6.7 million over the prior year period, driven primarily by a decrease in impairment of long-lived assets, a reduction in interest expense, and a gain from the Company’s refranchising activities, partially offset by one-time charges to settle outstanding litigation.
• Diluted earnings per share was $0.02 per share for the 12 weeks ended July 13, 2010 compared to a loss per share of ($0.10) for the prior year period.
• Total revenue for Q210 decreased (10.9%) to $74.1 million from $83.2 million for Q209 reflecting a decrease of $9.1 million primarily due to the reduction in the number of company-owned stores and the decrease in comparable store sales.
• Company-owned comparable store sales for Q210 decreased (2.4%) compared to (13.7%) for the prior year period. This result reflects a 90 basis point sequential improvement over Q110. ⁽¹⁾
• Store-level EBITDA⁽²⁾ for Q210 decreased $2.2 million to $16.3 million compared to $18.5 million for the prior year period. Adjusted for the impact of refranchised stores, Adjusted Store-level EBITDA⁽³⁾ decreased $1.6 million to $15.5 million for the 12 week period compared to $17.1 million for the prior year period.
• Consolidated EBITDA⁽²⁾ for Q210 decreased $3.4 million to $6.9 million compared to $10.3 million for the prior year period. Adjusted for the impact of refranchised stores, Adjusted Consolidated EBITDA⁽³⁾ decreased $2.8 million to $6.1 million for Q210 compared to $8.9 million for the prior year period.
• General and administrative expenses for Q210 increased 14.4% to $9.4 million, compared to $8.2 million in the prior year period, primarily attributable to one-time charges to settle outstanding litigation and associated legal fees.

“Our results during the quarter built on our first quarter accomplishments with several notable achievements that signal the solid pace of Jamba’s transformation,” said James D. White, chairman, president and chief executive officer, Jamba, Inc.

“The strength of our balance sheet, along with positive cash flow, increased our financial capability which allowed us to make investments to accelerate our growth and advance our agenda. We took advantage of opportunities to settle outstanding litigation, step up our activity on consumer products, licensing agreements and development work, and add top talent to our senior team. These investments and charges affect our G&A and we expect them to have an excellent payback. We are already increasing our annual targets for new licensing agreements and international expansion.”

“Jamba’s marketing initiatives are continuing to drive traffic,” said Mr. White. "Our fifth sequential quarter over quarter improvement of 90 basis points in our comparable store sales came despite continued economic headwinds and negative weather impact in California, which accounts for approximately 70 percent of our Company store locations and where we experienced some of the coolest summer weather in 40 years.”

During the quarter, Jamba also had significant accomplishments with its franchising and refranchising initiatives. The Company reached a landmark agreement with a premier retailer in South Korea, which operates approximately 4,500 stores across several brands, for the development of up to 200 Jamba Juice locations. Domestically, through today, Jamba has completed the refranchising of 102 stores. Along with the refranchising are the development requirements to build additional new store locations.

Jamba’s branded consumer products initiative is also in high gear with its frozen smoothie kits and ice cream novelties gaining acceptance across more than 10,000 retail outlets. “Consumer response to our Jamba-branded products has been positive. Our increased focus on licensing should quicken the pace of our accomplishments. For the year, we are targeting three-to-five new licensing agreements,” noted Mr. White.

“We are also focused on delivering innovative products. During the quarter, Jamba introduced five new smoothies, including our coffee smoothies designed for consumers seeking a cool coffee alternative. Our hot blended beverages are now available in almost 400 stores and we anticipate a broader roll-out of coffee this fall,” stated Mr. White.

“We are refining our outlook for 2010 based on the unseasonably cool weather and difficult operating environment in California experienced over the past two quarters, the settlement of outstanding litigation, and our investment in strengthening our operations and management team,” concluded Mr. White.

Updated Outlook for 2010

The Company's updated targets for 2010 are:

• Deliver company store comparable store sales of (3%) to flat;
• Reduce G&A by 8-10% (excluding share-based compensation and non-recurring charges) from 2009 levels;
• Deliver Store-level EBITDA margins⁽²⁾ of 15-17%;
• Grow via franchise development with the addition of 30-50 franchise stores;
• Expand into one additional major international market besides South Korea;
• Add three-to-five licensing agreements in relevant categories;
• Complete the refranchising of up to 150 company-owned stores.

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