Jamba Management Discusses Q4 2012 Results - Earnings Call Transcript

Mar. 5.13 | About: Jamba, Inc. (JMBA)

Jamba (NASDAQ:JMBA)

Q4 2012 Earnings Call

March 05, 2013 5:00 pm ET

Executives

Karen L. Luey - Chief Financial Officer, Principal Accounting Officer, Chief Administrative Officer, Executive Vice President and Secretary

James D. White - Chairman, Chief Executive Officer and President

Analysts

Scott Van Winkle - Canaccord Genuity, Research Division

Conrad Lyon - B. Riley & Co., LLC, Research Division

Gregory J. McKinley - Dougherty & Company LLC, Research Division

Chris Krueger - Northland Capital Markets, Research Division

Michael Toledano

Kurt M. Frederick - Wedbush Securities Inc., Research Division

Anton Brenner - Roth Capital Partners, LLC, Research Division

Operator

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Jamba Inc. Fourth Quarter 2012 Earnings Conference Call. [Operator Instructions] This conference is being recorded today, Tuesday, March 5, 2013. I would now like to turn the conference over to Karen Luey, Executive Vice President and Chief Financial Officer. Please go ahead.

Karen L. Luey

Thank you, operator, and good afternoon. With me on today's call is James D. White, our Chairman, President and CEO. During today's call, I will review our fourth quarter financial results. James will follow with an update on our BLEND Plan 2.0 initiative and accomplishments as well as review our BLEND Plan 3.0 initiative. We will then open up the call for questions.

I would like to remind all listeners that this call is being broadcast and recorded live over the Internet at jambajuice.com. The webcast is available on our website, and a replay will be available via telephone until March 26, 2013. This conference call will include forward-looking statements within the meanings of the securities law. These forward-looking statements will include things about the company's strategic priorities and certain statements of our expectations and plans. These forward-looking statements are subject to risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements that are contained in the company's filings with the SEC, including the Risk Factors section in our Form 10-K. The company does not assume any obligation to publicly release any revisions to the forward-looking statements discussed during the call.

With that said, I would like to turn it over to James.

James D. White

Thank you, Karen, and welcome to our call. I'm pleased with our fourth quarter results and our overall performance for 2012, a year in which we again delivered on all of our initiatives. The momentum we demonstrated throughout the year underscores the strengthening of all aspects of our business, and our first year of net income signals that we have a business model that can deliver accelerated, sustainable, profitable growth. We are very confident about our future, and as our yearly outlook indicates, we're also optimistic about 2013. I'll highlight some of our accomplishments and then expand on a few of them later.

Net income was $300,000 for the year compared to a net loss of $8.3 million for the prior year. This was an $8.6 million improvement in year-over-year profitability. Company-owned comparable store sales increased 5.1% for the year compared to prior year, reflecting a second consecutive year of comparable store sales growth. Both franchise-operated and systemwide comparable store sales also increased by 5.1% for the year. Total revenue for the year increased, as did adjusted operating profit, reflecting both same-store sales growth and the impact of ongoing cost savings initiatives.

40 new stores opened in the U.S. and 19 in international markets. Plus, we ended the year with over 400 JambaGO locations served. The revenue from our Jamba branded consumer products grew from $1.1 million in 2011 to $2.1 million in 2012, doubling.

I'll return to provide additional perspective on our results, our new BLEND Plan 3.0 strategic initiatives and our outlook for 2013. Now I'll ask Karen to review our financials.

Karen L. Luey

Thank you, James. As James said, fiscal 2012 was a good year. We accomplished the financial goals we outlined a year ago. As a result, we delivered our first year of profitability as a public company with net income of $0.3 million. We also completed our second consecutive year of positive same-store sales for the Jamba system with a 5.1% increase for fiscal 2012, and we generated $17.6 million in cash from operations. We ended the year with cash of more than $31 million and no debt on the balance sheet. So overall, our financial health continues to strengthen.

For the full year, our net income reflects an $8.6 million improvement over prior year's results of $8.3 million net loss as our overall business continues to grow. This has allowed us to reinvest in our company to accelerate our growth initiatives, further extend our brand awareness through strategic marketing initiatives and explore new revenue-generating opportunities. Same-store sales improved by 5.1% for both company and franchised stores during the year, driven by an average ticket increase of 260 basis points and traffic increase of 250 basis points. Our tax rebate for the full year was 20%.

On earnings per share basis, due to the anti-dilutive nature of the dividend paid on our preferred stock, loss per diluted share for fiscal 2012 was $0.03 compared to a $0.16 loss per diluted share in fiscal 2011. Adjusted operating profit, defined as total revenue less cost of sales, labor, occupancy and store operating expenses, increased by $7.3 million to $52.4 million and improved 300 basis points to 22.9%, which was at the high end of our guidance.

For 2012, store level 4-wall margin improved by 240 basis points to 18%, driven by our focus on expenses and also our company's same-store sales growth of 5.1%. Of significance is the 230-basis-point improvement in labor and 80-basis-point improvement in occupancy due to leveraging our fixed occupancy cost.

For the fourth quarter, we reduced the net loss by $2.9 million to $6.9 million or a diluted loss of $0.09 per share compared to a net loss of $9.8 million or diluted loss of $0.15 per share for the prior year same quarter. Total revenue for the fourth quarter was essentially flat at $44.2 million, and company store revenue decreased 1.9% to $40.8 million as compared to the prior year same quarter. Systemwide, our same-store sales increased 0.6% with company stores at a decrease of 1.2% and franchise with an increase of 2.3% for the fourth quarter of 2012. Of the company store decrease, average ticket was higher by 430 basis points and traffic was down 550 basis points.

The continued economic uncertainty and challenged consumer impacted our traffic for the quarter. We continually refine our promotional strategy to add value offerings that will drive sales and increase traffic with light and last [ph] users. New offerings like our extended fresh fruit and vegetable juice blends are relevant, habitual items that will contribute to our growth.

Our franchise and other revenue for the fourth quarter increased by 24.5% to $3.4 million compared to $2.8 million from the same prior year quarter. This was attributable to royalties related to the increase in number of global franchised stores opened throughout fiscal 2012, the increased in franchised comparable store sales and the 200% increase in CPG revenues to $0.8 million.

During the fourth quarter, our increased investment in brand building and marketing initiative to raise awareness resulted in marketing as a percent of revenue of 5.1% compared to 2.7% in the prior year same quarter. We partially balanced this investment by the progress we continue to make on identifying store labor efficiencies, which improved by 90 basis points over the prior year. Our store 4-wall margin for the fourth quarter was 5.3% as compared to 6.4% in the prior year. We continue to find ways to improve, which is reflected in our full year guidance of 20% 4-wall margin for 2013.

So let me discuss general and administrative expenses for the quarter. As the overall business continues to strengthen, we are accelerating our growth initiatives by strategically investing in infrastructure. We deployed additional resources to capture the significant opportunities with our JambaGo platform, which grew to 404 locations served by the end of fiscal 2012. An additional 1,000 locations served will be added during fiscal 2013. We also continue to invest in research and development for other potential revenue-generating opportunities. During the quarter, we recorded performance-based compensation expenses of $2.1 million provided under our management incentive plan for executing and meeting certain strategic and financial milestones for the second half of fiscal 2012. Share-based compensation for the quarter was $0.7 million. For the full year on a non-GAAP basis, as shown on our table, our G&A expense was in line with our guidance expectations for the year.

Our effective tax rate for the full year is an expense of 33.9%, and we continue to have a full valuation allowance against our deferred tax assets. Our cumulative federal net operating loss at the end of the year was approximately $112 million. We can and will utilize our tax NOL to offset federal and state income taxes, although we are forecasting to be in an Alternative Minimum Tax position where full NOLs cannot be utilized.

Our balance sheet remains strong with $31.7 million in cash, cash equivalents and restricted cash and no debt at the end of the quarter. Our capital expenditures for the quarter were $1.9 million related to maintenance capital, the opening of 1 company-owned store, several revenue driving initiatives and investments in our information technology platform. Our total capital expenditure for the full year was $5.3 million. Our guidance for fiscal 2013 capital expenditure is a range of $9 million to $10 million and includes plans to open 5 to 10 company-owned stores, a refresh and remodel of up to 100 company-owned store locations, maintenance capital and information technology investment.

At the end of the quarter, we had 72,889 convertible shares outstanding. Currently, the number of convertible shares outstanding is 41,109 shares. The dividend outflow going forward will be in the range of 400,000 on an annual basis.

With that said, I'd like to turn the call back to James.

James D. White

Thank you, Karen. Throughout 2012, we focused on achieving the strategic priorities of our BLEND Plan 2.0, and as I said, we've met those plan commitments. Our efforts to reduce and eliminate unnecessary cost and expenses resulted in the elimination of more than $6 million in store level costs. We expanded our portfolio of on-trend, innovative beverages, food offerings across all day parts. We focused on driving profitable and efficient transactions with compelling, relevant and engaging marketing campaigns and promotions. Our comparable store sales systemwide are growing nicely, their rate of growth leading most of our peers for the full year at 5.1% despite the difficult consumer environment. We're building a robust consumer products growth platform that gives Jamba a strong retail presence and which last year grew revenues significantly. The accelerated development of our domestic and international franchise and nontraditional stores resulted in opening 39 new franchised stores. Internationally, our partners in Canada, South Korea and the Philippines plan to open 280 stores over the next 8 years, and we also announced today an agreement to move the brand into Mexico with a 80-store agreement over the next 10 years.

Our innovative JambaGo express self-service operation enjoyed exceptional growth, moving from pilot test to over 400 locations served. This business, which offers pre-blended smoothies and other Jamba-branded items, enables us to expand our brand presence, particularly in high-volume captive venues such as schools, stadiums and event centers.

So 2012 was an important year for Jamba. The promises we made have been kept, and we're now moving on. Our BLEND Plan 3.0, which we launched in January, is our new blueprint. It flows from the 2 prior plans that guided us through our turnaround and transformation. They took us from a loss of $149 million in 2008 to our move to profitability in 2012. Our new BLEND Plan 3.0 focuses our resources on sustained, accelerated and increasingly profitable growth.

There are 5 strategic imperatives: increase brand leadership with breakthrough innovative marketing and loyalty programs to drive traffic and establish Jamba as the top-of-mind healthy food and beverage brand; create an innovative in-store experience with refreshed interiors and on-trend juices, smoothies and menu extensions that will provide superior satisfaction; accelerate our retail growth in the U.S. and globally with the new concepts and formats including the JambaGo business; expand our portfolio of innovative Jamba-branded CPG products into relevant categories using a broadening business model of partnerships and distribution channels to drive growth; and finally, align and strengthen our leadership capacity to drive our strategic objectives, improve productivity and profitability, increase Jamba's outreach and impact on local communities and build a highly engaged culture that embodies Jamba's values.

While I won't go into detail on many of the plans, actions and initiatives that back each of these areas, I'd like to give you a feel for some of the things you can look for in the coming year from Jamba. Making Jamba a top-of-mind health, food and beverage brand will require exceptional innovation to differentiate the brand and drive both traffic and loyalty. For example, in January, we launched our first kid-focused offering. Jamba Kids Meals were informed by the USDA's dietary guidelines and designed in partnership with Jamba's Healthy Living Council of dietary and fitness experts. The meals included kid-size 9.5-ounce smoothies paired with a child-friendly food choice. The smoothies in 4 flavors have no added sugar and are made only from food, vegetable and juice.

All of our marketing programs will engage both consumers and communities and satisfy the expectations that Jamba makes it easier for everyone to make the right, healthy, delicious choices. We will sharpen our marketing to make clear both the value and on-trend relevance of our offering. We started the year with our Healthy Habits for the Whole Family Sweepstakes on Facebook, in which we are partnering with PayPal and Kinnect for Xbox 360 to support our customers' health and fitness goals for the year. We'll see more of these exciting and engaging activities throughout the year.

Our efforts to accelerate our global retail growth will have many dimensions. Certainly, international growth will continue, as evidenced by the announcement today to expand into Mexico. We are actively assessing other markets and believe there's potential for 1,000 units internationally. In the U.S., to facilitate franchise growth, we have an integrated business model that gives qualified franchisees the opportunity to become master developers. Earlier this year, we announced plans with a new franchise partner to open 15 stores in Missouri and Kansas over the next 9 years. We also disclosed our accelerated growth plans in California that will add up to 125 new stores in our founding state. And at this time, we can report our franchise offerings in California are nearly sold out already. Several celebrity athletes including Vernon Davis of the San Francisco 49ers also will be joining Jamba's franchise partners. More to come on this in the near future.

And we're very active with new concepts. As I said, JambaGo has expanded to more than 400 locations. We expect to add 1,000 more locations served in 2013. We've also launched a comprehensive store format and design initiative that will transform Jamba units. The units will include limited menu smoothie stations, drive-throughs and juice bars. Along with the new concepts, 75 to 100 existing units will be refreshed and redesigned each year over the next 4 years. We believe the new formats and the redesign will deliver consumer experiences that will maintain our industry leadership and differentiation.

We also will continue to build our consumer products growth platform with new products and new partners and relevant channels and markets. There are great licensing opportunities in several large product categories for a brand as iconic and powerful as Jamba. We're also pursuing opportunities for global licensing, exploring prospects for small bolt-on acquisitions like last year's acquisition of Talbott Teas. Revenue from CPG products grew significantly last year, and we look forward to strong future growth.

And of course, we will continue to focus on reducing cost and driving productivity enhancements. We plan to build our supply chain into a global, competitive advantage, leveraging new and existing relationships to drive greater efficiency and effectiveness in the supply chain, sourcing and distribution areas. During Q4, for example, we entered into a supply chain distribution agreement with Systems Services of America, SSA, that is providing both increased efficiencies and greater service to Jamba units. The savings that we realized by eliminating unnecessary costs and improving productivity will enable us to invest even more in our growth initiatives.

So 2013 will be another very important year and I believe a successful one. We see good progress ahead and are affirming our guidance. We expect company-owned comparable same-store sales growth of 4% to 6% and store level margins of 20%, income from operations of 2.5% to 3% of revenue, CPG revenue of $4 million to $5 million, which is a doubling from 2012, 60 to 80 new U.S. and international locations and 1,000 additional JambaGo locations served. As I said, I'm very pleased with Jamba's results and achievements. We are maintaining our heritage and are building Jamba as a leading globally recognized healthy active lifestyle brand. We have a very talented management team that work well together, and we have a winning business model guided by a strategic roadmap that will drive accelerated, profitable growth.

Before I conclude, I'd like to welcome our new partners across the globe into the Jamba family. I'd also like to thank the Jamba team members and franchise operators across the system for their continuing efforts and commitment to build and transform our company and deliver outstanding service to our customers.

I will now turn the call back to the operator so that we can open up for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of Scott Van Winkle with Cannacord Genuity.

Scott Van Winkle - Canaccord Genuity, Research Division

So I would love to talk about the refresh program. You're talking about up to 100 stores being refreshed. Do you have an idea -- I mean, obviously, you've tested it on kind of the level of lift or if it's a measurable lift, and I'm wondering if that has any contribution to your 4% to 6% comparable store sales growth expectation.

James D. White

Well, the refresh program again, which we've laid out at 75 to 100 locations, certainly is baked into the full year guidance that we've provided. We're in kind of the early innings. We've got 3 locations that have been refreshed today, one relocation of a store and then 2 refreshed stores. The numbers that we have early innings are more focused on our fresh juice platform, and what I can tell you is we've tripled our fresh juice, which is a critical component of this refresh in those 3 stores. We did a grand reopening last week of our Santa Monica store, which is one of our top juice stores in the system, and that store has actually quadrupled their sales of fresh juice. So we've gone from juice representing about 3% of our sales to almost 12% of our sales. Again, this is just a few weeks of sales, but we love what we see. Karen mentioned on the call all the work we're doing, especially around fresh juice and these refreshes. They're made for a more inviting environment and to create more habituation from a consumer perspective. So we love [ph] what we see, and we expect to have up to 70 or so locations during the first half of this year that we've refreshed with the new design.

Scott Van Winkle - Canaccord Genuity, Research Division

And that incremental juice volume doesn't cannibalize the smoothie volume?

James D. White

There's going to be some, but it's all net positive, and we're driving more habituation, which obviously drives frequency.

Scott Van Winkle - Canaccord Genuity, Research Division

Yes. And then on your comps, can you give any indication on Q1 -- I mean, I want to make sure -- we all appreciate the incredible weather comparison you have in California in that March quarter. I would assume it's not going to look like that 4% to 6% trend for the year. Is there anything you can kind of frame up with that Q1 [indiscernible] that's a really tough period [ph]?

James D. White

Great question. I mean, so the first quarter is our toughest comparison for all of '13. We registered a 12.7 comp, as you might recall, a year ago. And what I can tell you, through 8, 9 weeks in the first quarter, we're slightly positive at this point. Obviously, tough weather comparisons, the same choppy environment everybody else is reporting, but we're actually very excited with where we're positioned, especially as we move into the stronger weather part of this quarter. And we're in the process in the next week or so of deploying our value strategy. We talked about a quarter ago the much stronger analytics that we're bringing to the table, and you'll see us put that to good use as we launch a value offering that will become a permanent part of what you'll see us do, which is a critical part of our light user strategy. You'll see less than a handful of smoothies. It will be at about a $2.49, $2.50 price point, which we think will give us a really exciting boost. And we're combining with that where it makes sense, national radio to really get the message out on the value offer. But we're actually very confident in our full year guidance, and through 8 or 9 weeks, we're positive. So we actually feel pretty good with where we sit.

Operator

Our next question comes from the line of Conrad Lyon with B. Riley Caris.

Conrad Lyon - B. Riley & Co., LLC, Research Division

Let me just follow on, on what you just talked about, the trends. I find that very encouraging given what happened in the fourth quarter. I know you promoted quite heavily, and there was even, at least down in my neck of the woods, a happy hour. Can you talk about how the happy hour is really starting to play out and if that can be a permanent strategy going forward?

James D. White

Well, you'll see us -- and we leveraged middle portion of last year kind of the happy hour strategy, primarily in Q3, and we saw just phenomenal lifts. We tested again early in this quarter kind of the happy hour strategy around Valentine's Day, and we saw about a 400-basis-point lift for that short period of time. But we're continuing to refine the work that we do around our value offering. It is primarily targeted at light users, which we think gives us a great opportunity to expand the user base for the brand. And we like what we're learning, and you'll see us apply some more permanent tactics moving forward. And I mentioned the value offering. So we're actually confident with what we're learning, and you'll see us apply very surgically those tactics across the year.

Conrad Lyon - B. Riley & Co., LLC, Research Division

Okay. And if I may ask this, so if I remember last time when it first came out, there was a net positive, meaning that even though the check average or the check effect was down, the traffic more than offset that. Is that dynamic the same or improving, I'm assuming?

James D. White

It's either the same or improving. The point I'd make is the visibility that we have today allows us to pull the levers in a much more surgical fashion than we ever would have been able to do in the past.

Conrad Lyon - B. Riley & Co., LLC, Research Division

Got you, okay. Last question here. Can you provide any color on the JambaGo economics and kind of where it may look for the year?

James D. White

We're still early innings. Probably second half of the year will give a little bit more visibility. We're -- with about 400 units or so served at this point. We will add another 1,000 units across the year. We're still very much in kind of the second stage of kind of piloting JambaGo, but we'll have more to say later in the year on JambaGo in terms of the financials.

Operator

Your next question comes from the line of Greg McKinley with Dougherty & Company.

Gregory J. McKinley - Dougherty & Company LLC, Research Division

I'm wondering if you could just expand a little bit. You mentioned your product development initiatives for '13. You've alluded to some juice programs that I guess complement these remodels or refreshes, some limited menu smoothies. Maybe just give us a sense for what are -- what do you think the big impact of these menu initiatives will be, how significant will they be on the menu? Will it be high profile to the consumer? And what does a refresh store look like versus one that hasn't been refreshed?

James D. White

So a couple of thoughts that I'd leave you with as it relates to the overall look and feel of the refresh. The customer journey, we think, will be a lot cleaner. The stores, the 3 locations that have been refreshed or remodeled today are much more contemporary. And the centerpiece of the work is our fresh juice offering. So you'll see new ingredients being exposed to the consumer like fresh kale, fresh beans, ginger and a much broader fresh juice offering. So there will be a discernible -- discernibly different healthy halo that the consumer will immediately take away, which we think will have a significant impact on our health and wellness credentials, as evidenced by at least the early result that we're seeing out of the 3 locations. You'll see significant innovation around fresh juice. And again, as you play that out over time, you'll see 100 locations in our system with more to come either later in the year or early in '14 and what we plan to be is the clear leader in the fresh juice space with everybody included in that mix. But we expect to really focus a lot of time and attention around fresh juice. You'll see significant innovation continue to come from us on the smoothie front, and you'll see us smartly pair food items that work well with the specialty beverage.

Gregory J. McKinley - Dougherty & Company LLC, Research Division

Okay, okay. And then just from a numbers standpoint, can you update us on how we should look at your G&A expenses in '13 versus '12? And then when you talk about a 20% 4-wall margin, just so I make sure I'm measuring against the same metric you're measuring it against, you're comparing it against 18.0% in '12?

James D. White

Yes, I'll answer your second question last. So we would have improved the 4-wall margins on our company locations to 18% a year ago, and we expect that 4-wall margins on the company side of 20% as we close out the year. And just as a context, if you go back 4 years ago, that number would've been 12, so that's a 300-basis-point improvement, which is what we outlined for everyone that we do and we said we do it as we got to '13. And as it relates to G&A, if you wanted to model G&A, you'd look at it as being roughly flat with 2012 G&A all in including performance compensation. So all the growth initiatives have been factored in already to the G&A, and we'd be flat year-over-year.

Operator

Our next question comes from the line of Chris Krueger with Northland Capital Markets.

Chris Krueger - Northland Capital Markets, Research Division

Just wanted to ask a question on your sales trends. Can you talk about during the fourth quarter, maybe the month-to-month trends, if they're steady or if you exited at a better level than you entered or where -- how that worked? Also wondering if -- did you think there was any impact from the Hurricane Sandy in that region? And any other kind of regional standouts or underperformers or outperformers ought to be California or New York?

James D. White

Yes, of course, as we look at the fourth quarter, I mean, there's a -- you've got a mixed bag. You've got a challenged consumer. You've got lots of different things happening with the weather. So I wouldn't take apart the quarter. What I would say is we were going up against a comparison of 7.7% on the company side. So that would have been the most challenging comparison for the full year. And I'd focus everybody really on our full year performance, which came in at 5.1%, which would be at the top of the entire industry. And if we think about the full year in context, it's a pretty challenging year. And the point I'd make is we're getting much stronger as we play through. Even as we look at the first quarter, for us to be positive at this point, up against the 12.7% comparison given weather and economic conditions, we are very bullish on the year and on our business.

Chris Krueger - Northland Capital Markets, Research Division

Okay. You may have provided this, but what was the food to beverage attachment rate for the fourth quarter?

James D. White

The attachment would've been right at 20...

Karen L. Luey

It's about 20%, Chris.

James D. White

About 20%. It would have been 20% for the full year.

Karen L. Luey

And a little bit higher than 21% for the fourth quarter.

Operator

[Operator Instructions] Our next question comes from the line of Michael Toledano with Gilder Gagnon Howe.

Michael Toledano

I guess I'm wondering from a big picture perspective, what do you compete with as a healthy snack? Your customers are coming to you from where? What are their alternate -- what are they eating at now and you expect them to come to you instead?

James D. White

We see our customers coming from lots of different places, and it depends on what segment of the customer base. So you've got really almost nobody that plays in this healthier, better-for-you place, and that's the reason that we're confident and very bullish around the opportunities. So the healthiest of our consumers are juicing at home, and they're going to Whole Foods and going to lots of other places, and what we want to provide is an alternative to those healthier at home and other occasion opportunities. But you also have a big segment of customers that are trying to find ways for them and their families to lead healthier lives and that scans the broad gamut of from QSRs to fast casual places that people currently consume food. That's what we're competing with, lots of different places, and we think that's where the upside opportunity is for us.

Michael Toledano

And only the refreshed stores are going to have the new ingredients, the kale and the ginger or -- sorry, just so I understand.

James D. White

Yes, we're going to build in the new ingredients as we go, so as we scale, but we'll be at a scale of 70 to 100 locations by middle of this year, and we'll continue to build that out moving forward.

Michael Toledano

And how much of that, I mean, the 4% to 6% comps that you're guiding to, how much of that comes from the refreshes that you're planning and how much are the other factors that I'm not thinking about?

James D. White

We haven't shared those numbers.

Operator

Our next question comes from the line of Kurt Frederick with Wedbush Securities.

Kurt M. Frederick - Wedbush Securities Inc., Research Division

Just trying to understand [ph] the juice bars. I was wondering if you can give a little bit more data as far as -- I guess you said 70 first half of the year, 75 to 100 for the full year, just kind of like geographically like where they're really known to, and then on the supply side, kind of what that looks like as far as you feel that's kind of set up already and what the product margins look like compared to your other offerings.

James D. White

So the buildout is going to be primarily a whole company store. So we're going to prove this out in company store, so it'll really isolate this early portion of the rollout is going to be a combination of California and New York to start. And you'll see us bring the franchise system online as we get to 2014. Then you'll continue to see the scale on the company side. As it relates to the supply chain, the supply chain is going to be more local. As you think about the fresh offerings that we're adding into the mix, and we're building that as we go.

Kurt M. Frederick - Wedbush Securities Inc., Research Division

And as far as like the product margin, is it similar to your other products?

James D. White

Sorry, we missed you.

Karen L. Luey

I'm sorry, can you repeat that again for us?

Kurt M. Frederick - Wedbush Securities Inc., Research Division

I was wondering if the -- like your gross margin or your product margin for the smoothie or the juice bar, are they comparable?

James D. White

Yes, we'll build it over time where it'll end up being very comparable to what we do on our fresh juices today. But again, just as context, we, today, in 700 plus locations, do fresh carrot juice, fresh orange juice and we do wheatgrass, all of those in about 700 locations. So you'll see us mix out at the end of the day somewhere in that kind of range, in the juice offering range.

Operator

Our next question comes from the line of Tony Brenner with Roth Capital Partners.

Anton Brenner - Roth Capital Partners, LLC, Research Division

It looks like your CPG revenues in the fourth quarter were well under what they were projected to be. I wonder what the reason for that was and why you're then projecting a double in those revenues for 2013?

James D. White

Great question. We were about $1 million for the full year under what we had laid out as a plan, and it's purely a timing issue. And what I would say is we gave a range of $4 million to $5 million for '13, and with that timing adjustment, you'll see us perform closer to the high end of the range for the full year in '13. So closer to $5 million than $4 million, and the miss in Q4 and for the full year would have been just a timing issue.

Anton Brenner - Roth Capital Partners, LLC, Research Division

The timing issue relates to the energy drink?

James D. White

No, it would relate to the portfolio overall.

Anton Brenner - Roth Capital Partners, LLC, Research Division

You don't want to be more explicit than that?

James D. White

No, it would be the portfolio overall.

Operator

Our next question is a follow-up question from the line of Greg McKinley with Dougherty & Company.

Gregory J. McKinley - Dougherty & Company LLC, Research Division

Just a couple quick things. First of all, where does your full franchise pipeline stand right now in terms of committed units?

James D. White

So I'd answer that point in a couple of ways. We announced late in the fourth quarter that we were going to franchise 100 locations in California. So that was a very specific program that had 125 trade areas, 100 traditional and 25 mall locations. That program in total is almost completely sold out, and that will be a pipeline that will build over the course of the next 5 to 8 years. As it relates to the full pipeline, we are on a trajectory of being able to add 30 to 50 domestic locations on a go-forward basis for the foreseeable future. A portion of that are commitments related to the refranchising from a few years ago and a big chunk of that are the new development agreements that we signed across the last several years including the big agreement we signed for the states of Missouri and Kansas in that partner.

Gregory J. McKinley - Dougherty & Company LLC, Research Division

And then how about -- so that's 30 to 50 annually domestically. What does the international pipeline look like?

James D. White

So international, with a deal that we announced today for Mexico, which is 80 locations over the next decade, sits at full pipeline with the stores that are open today, which is a little bit over 30 at 400. And again, we've said all along, we think there is potential 4,000 locations for the brand. So if you have -- on a forward-looking basis, over the next 8 years, there's about 280 locations that will open in a combination of South Korea, the Philippines and Canada, and then you add to that the 80 locations in Mexico, over 10 years.

Gregory J. McKinley - Dougherty & Company LLC, Research Division

Okay. So roughly about another 400 over the next 10 years?

James D. White

In that kind of range, yes.

Gregory J. McKinley - Dougherty & Company LLC, Research Division

Okay. And just from a bookkeeping standpoint, what are your NOLs right now? What do you expect your tax rate to be either on effective or cash basis in '13? And then can you walk us through the share count situation again, basic versus diluted and the conversion of those preferred?

Karen L. Luey

Yes, so let's take the tax question first. So today, we're sitting -- or as of year end, Greg, we're sitting at NOLs of 112 million. We believe that our effective tax rate, due to the Alternative Minimum Tax position that we're in, will probably be around the 25% range for 2013. And with respect to the share count, again on a fully diluted basis, on an as converted consideration, our fully diluted share count is about 87 million shares. And today, we have about 41,109 convertible share -- preferred shares still outstanding.

Gregory J. McKinley - Dougherty & Company LLC, Research Division

Okay. And so in quarters where you're producing a loss, that 87 million turns into what?

Karen L. Luey

That 87 million turns into about 77 million, 78 million.

Operator

At this time, I would like to turn the conference back to Mr. White for any closing remarks.

James D. White

Thanks for joining us on the call. We look forward to seeing you as we move into the first quarter of the year. Thanks for joining us.

Operator

Thank you. Ladies and gentlemen, this concludes the Jamba, Inc. Fourth Quarter 2012 Earnings Conference Call. We thank you for your participation. You may now disconnect.

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