Jamba Juice 2007 Annual Report Download - page 62

Table of Contents
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such as the ongoing maintenance and improvements of the assets, changes in economic conditions and changes in operating performance. As the Company
assesses the ongoing expected cash flows and carrying amounts of its long-lived assets, these factors could cause the Company to realize material impairment
charges. There was no asset impairment recorded for fiscal 2006.
When stores that are under long-term leases close, the Company records a liability for the future minimum lease payments and related ancillary costs,
net of estimated cost recoveries that may be achieved through subletting properties or through favorable lease terminations, discounted using a weighted-average
cost of capital. Management of the Company estimates future cash flows based on their experience and knowledge of the market in which the closed store is
located and, when necessary, uses real estate brokers. However, these estimates project future cash flows several years into the future and are affected by
factors such as inflation, real estate markets, and economic conditions. No stores have closed since the completion of the Merger.
Jambacards—The Company, through its subsidiary, Jamba Juice Company, has been selling jambacards to its customers in its retail stores and
through its website since November 2002. The Company’s jambacards do not have an expiration date. An obligation is recorded at the time of either an initial
load or a subsequent reload in the accrued store value cards line item on the Company’s consolidated balance sheet. The Company recognizes income from
jambacards when (i) the jambacard is redeemed by the customer or (ii) the likelihood of the jambacard being redeemed by the customer is remote (also referred
to as “jambacard breakage”) and the Company determines that it does not have a legal obligation to remit the unredeemed jambacards to the relevant
jurisdictions. The Company determines the jambacard breakage rate based upon its historical redemption patterns. The Company applies an estimated
jambacard breakage rate after three years of inactivity when based on historical information, it determines the likelihood of redemption becomes remote.
Jambacard breakage income is included in other operating expenses in the consolidated statements of operations. The Company recorded $0.3 million of
jambacard breakage income during fiscal 2006.
During fiscal 2006, the Company sold $8.7 million of its jambacards. In addition, the Company also sold reloaded cards for $0.9 million during fiscal
2006. Customers redeemed $4.4 million at the stores, which is included in revenue in the consolidated statements of operations.
Deferred Rent—The Company’s lease agreements generally provide for scheduled rent increases during the lease terms, or for rental payments
commencing at a date other than the date of possession. Rent expense is recognized on a straight-line basis over the respective terms of the leases. The difference
between the amount charged to operations and cash paid under the leases is recorded as deferred rent. In accordance with SFAS No. 141, deferred rent recorded
by Jamba Juice Company prior to the Merger has not been recorded by the Company in purchase accounting. Deferred rent resulting from the difference
between the amounts charged to operations and cash paid under the leases for periods subsequent to the Merger is being recorded by the Company.
Construction Allowances—The Company receives construction allowances from landlords, which are deferred and amortized on a straight-line basis
over the life of the lease as a reduction of rent expense. Construction allowances are recorded in deferred rent and other long-term liabilities. In accordance with
SFAS No. 141, construction allowances recorded by Jamba Juice Company prior to the Merger have not been recorded by the Company in purchase
accounting.
Revenue Recognition—Revenue from Company Stores is recognized when product is sold. Revenue from store value cards, such as the jambacard are
recognized upon redemption. Until redemption, outstanding customer balances are recorded as a liability. See above for discussion on recognition of jambacard
breakage.
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