Jamba Juice 2008 Annual Report Download - page 36

Table of Contents
Intangible assets subject to amortization (primarily franchise agreements, employment/nonsolicitation agreements, reacquired franchise rights and a
favorable lease portfolio) are tested for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable.
Intangible assets are amortized over their estimated useful lives using a method of amortization that reflects the pattern in which the economic benefits of the
intangible assets are consumed or otherwise realized. Useful lives for the franchise agreements and employment agreements are 13.4 years and 4.0 years,
respectively. The useful life of reacquired franchise rights represents the remaining term of the franchise agreement. The useful life of the favorable lease
portfolio is based on the related lease term.
The Company performed impairment tests on its intangible assets subject to amortization as of January 1, 2008 and no impairment loss was recognized
in fiscal 2007.
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Despite the challenges of fiscal 2007, we are optimistic for the long-term. We believe Jamba Juice offers a unique combination of experiences that are
unlike other food concepts, including making healthy living easier without sacrificing great taste, an emphasis on fruit as the core, a vibrant in-store
experience, and a commitment to the efficacy of our products.
We expect a slowing economy in fiscal 2008, which may lead to a cost-conscious consumer to be more selective in the restaurants visited. We believe the
investments made in fiscal 2007 to improve customer relevance and accessibility will pay off through improved comparable store sales and higher initial sales
volumes of Company Stores. For example, initiatives such as the On-The-Go Breakfast platform, the new menu board and the Jamba ready-to-drink licensed
beverages are expected to positively contribute to comparable store sales.
Given the challenging economic conditions, current customer frequency rates, current store level cash flow margins and our commitment and desire to
ensure that our new initiatives are operationally executed at a high level, we believe it is prudent to moderate our capital spending. Accordingly, we believe it is
appropriate to moderate new store growth for 2008 to 45-55 Company Stores.
In fiscal 2008, we expect continued cost pressures on our business from increases in wages, commodities and other operating expenses. We have
undertaken several projects, including the modification of our training program and the deployment of various supply chain rationalization projects in our
efforts to proactively mitigate these anticipated cost pressures. Over time, we also believe there are ways to expand our product offerings into lower cost,
complementary products which should further improve our margin. If our initiatives are successful, we believe the combination of improved sales
performance from our investments, while maintaining, and ultimately lowering, labor and costs should positively impact operating profit.
In fiscal 2008, we will reevaluate our general and administrative infrastructure to ensure we are optimizing our resources. We anticipate that, similar to
other companies, we will find ways to reallocate resources in order to deploy them in the most productive areas. In addition, management believes there are
opportunities to leverage our fixed costs. Accordingly, reducing general and administrative spending as a percentage of our total revenue will be a high priority
in fiscal 2008.
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In the results of operations section that follows, in providing an analysis of operating results for fiscal 2007 as compared to fiscal 2006, we have
included the results for fiscal 2006 on both a reported and proforma basis. This presentation reflects the fact that the reported results for the Company prior to
date of the Merger, November 29, 2006, reflect only the results of SACI. Accordingly, to facilitate an understanding of the Company’s trends and ongoing
performance, the Company has presented proforma results below for fiscal 2006 in addition to the reported results for this year. The proforma results for
fiscal 2006 gives effect to the Merger as if it had occurred at the beginning of fiscal 2006. Thus, the proforma results include both SACI and Jamba Juice
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