Jamba Juice 2009 Annual Report Download - page 59

Table of Contents
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(in 000’s)
 















Other operating expense $ 4,806 1.5% $675 2.9% $5,520 2.1%
Other operating expenses consist primarily of franchise support expenses, losses on disposals and amortization of jambacard liability, offset by income
from jambacard breakage. These amounts include $2.8 million for fiscal 2007 and $0.7 million (reported) and $4.0 million (proforma) for fiscal 2006, for
franchise support expenses, which are costs associated with franchise employee support provided to JJC Florida LLC, which owns 13 stores, and a Midwest
franchisee whose stores we acquired in the fourth quarter of fiscal 2006. Franchise support expenses are offset by franchise support revenue, which is
recorded in franchise and other revenue. Also contributing to other operating expenses were losses on disposal of assets of $1.2 million in fiscal 2007 and $0.6
million (reported) and $1.9 million (proforma) in fiscal 2006, and amortization of jambacard liability of $2.1 million in fiscal 2007 and $0 (reported) and $0
million (proforma) in fiscal 2006. Offsetting these costs was $1.5 million in fiscal 2007 and $0.3 million (reported) and $1.1 million (proforma) in fiscal
2006 of income recognized from jambacard breakage.
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Goodwill impairment of $111.0 million and trademark impairment of $89.6 million was recorded in fiscal 2007 to reflect the impairment losses related
to the difference between the fair value and recorded value for goodwill and trademarks. For more information, please see the “Critical Accounting Policies and
Estimates” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations. No goodwill or trademark impairment was
recognized by the Company on a proforma or reported basis in fiscal 2006.

Gain from derivative instruments of $59.4 million and loss of $57.4 million (reported) for fiscal 2007 and fiscal 2006, respectively, represents the
unrealized gain or loss due to the change in the fair value of our warrants. Our warrants are recorded as derivative liabilities, instead of equity instruments. For
more information, please see the “Critical Accounting Policies and Estimates” section of Management’s Discussion and Analysis of Financial Condition and
Results of Operations.
Interest income decreased to $3.5 million for fiscal 2007 from $4.2 million (reported) and $3.7 million (proforma) for fiscal 2006. Interest income
represents interest earned on cash held in our investment account. The decrease in interest income was primarily due to the deployment of cash to fund new
Company Stores openings and the acquisition of stores from franchisees. Cash on hand as of January 1, 2008 was $23.0 million.
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Our income tax benefit (expense) was $52.1 million in fiscal 2007 and $2.5 million (reported) and $(0.4) million (proforma) in fiscal 2006. The
effective tax rates were (31.5)%, (4.1)% and 0%, respectively. The two most significant items affecting our effective tax rate for fiscal 2007 are the unrealized
gain on our derivative liability of $59.4 million and the impairment of goodwill of $91.5 million which is the portion of the goodwill impairment that does not
have a future tax benefit. The most significant item affecting the 2006 effective tax rate was the unrealized loss on our derivative liability of $57.4 million. The
unrealized change in the fair value of derivatives and the impairment of goodwill recorded in the consolidated financial statements do not result in taxable
income or tax deductible expenses.
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