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Javo Beverage (JAVO.OB) Reports Q2 Results, Improvement Plans for Second Half of 2010

|Includes: Javo Beverage Company Inc. (JAVO)

Javo® Beverage Company Inc. today posted its results for the second quarter of 2010, and outlined its strategy to improve results in the upcoming quarter.

The company’s second-quarter gross sales rose 3.0 percent to $7.3 million, up from $7.1 million reported for the second quarter of 2009.

Javo’s primary source of revenue is dispensed products. Gross sales from these products increased 3.4 percent to $6.7 million from the same quarter of 2009. The company attributes the growth to an increased number of beverage dispensing locations serving Javo’s coffee and tea products.

Gross profit for the second quarter was $2.4 million, down $375,000 from the second quarter of last year. Gross profit as a percentage of net sales for the quarter was 39.6 percent as compared to 45.7 percent in the prior year period. The company attributes the decline in gross margin primarily to an increase in sugar and coffee commodity prices and the increased costs associated with the removal, refurbishment and re-installation of low productivity dispensers. Effective in the third quarter, the company will implement a 4-percent price increase to offset the rise in commodity costs.

The company’s net loss for the quarter was $3.1 million, or ($0.01) per share, compared with $4.7 million, or $(0.02) per share, in the second quarter of 2009.

Stanley Greanias, CEO of Javo, acknowledged the company needs to strengthen certain aspects of its operations, and outlined its plans to do so.

“While we are pleased with the recent progress in some areas of our business, we realize there are areas for improvement. Therefore, the board of directors and management are undertaking a strategic business review of all departments and operations in order to better align our business for long-term sustainable growth and profitability. I joined JAVO because I believe we have high quality products, a flexible operating platform and a tremendous market opportunity. With over 11,000 installed dispensers, we feel that we are well positioned to capitalize on the opportunities with both new and existing customers by enhancing our distribution network and improving our dispenser productivity,” Greanias stated in the press release.

The company detailed its plan to improve operating performance for the second half of 2010 and beyond, including the improvement of average revenue per dispenser; plans to enhance its distribution network with specialty coffee distributors; and its strategy to add non-owned dispenser revenue for customers that want to purchase their own beverage equipment.

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