Jamba Juice 2007 Annual Report Download - page 51

Table of Contents
current-year financial statement, whereas the iron curtain approach quantifies misstatements based on the effects of correcting the misstatement existing in the
balance sheet at the end of the current year, irrespective of the misstatement’s year(s) of origin. Financial statements would require adjustment when either
approach results in quantifying a misstatement that is material. Correcting prior-year financial statements for immaterial errors would not require previously
filed reports to be amended. SAB 108 is effective for interim periods of the first fiscal year ending after November 15, 2006. The adoption of SAB 108 is not
expected to have an impact on the Company’s consolidated financial statements.
In September 2006, the FASB issued SFAS No. 157, (“SFAS 157”). SFAS 157 provides guidance for using fair value to
measure assets and liabilities. The standard expands required disclosures about the extent to which companies measure assets and liabilities at fair value, the
information used to measure fair value, and the effect of fair value measurements on earnings. SFAS 157 is effective for fiscal years beginning after
November 15, 2007. The Company is currently evaluating the impact of adopting SFAS 157 on its consolidated financial statements.
In February 2007, the FASB issued SFAS No. 159, 
. SFAS No. 159 permits companies to measure many financial instruments and certain other items at fair value at
specified election dates. Unrealized gains and losses on these items will be reported in earnings at each subsequent reporting date. The fair value option may be
applied instrument by instrument (with a few exceptions), is irrevocable and is applied only to entire instruments and not to portions of instruments. SFAS
No. 159 is effective for fiscal years beginning after November 15, 2007. The Company is currently assessing the impact of adopting SFAS No. 159 on its
consolidated financial statements.
 
The Company is exposed to financial market risks due primarily to changes in interest rates, which it moderates primarily by managing the maturities
of its financial instruments. The Company does not use derivatives to alter the interest characteristics of its financial instruments. Management does not
believe a change in interest rate will materially affect the Company’s financial position or results of operations. A one percent change of the interest rate would
result in an annual change in the results of operations of $0.9 million.
The Company purchases significant amounts of fruits and dairy products to support the needs of its Company Stores. The price and availability of
these commodities directly impacts the results of operations and can be expected to impact the future results of operations.
The Company purchases fruit based on short-term seasonal pricing agreements. These short-term agreements generally set the price of procured frozen
fruit and 100% pure fruit concentrates for less than one year based on estimated annual requirements. In order to mitigate the effects of price changes in any
one commodity on its cost structure, the Company contracts with multiple suppliers both domestically and internationally. These agreements typically set the
price for some or all of the Company’s estimated annual fruit requirements, protecting it from short-term volatility. Nevertheless, these agreements typically
contain a  clause, which, if utilized (such as when hurricanes in 2004 that destroyed the Florida orange crop and more recently with the freeze
that affected California citrus), may subject the Company to significant price increases.
The Company’s pricing philosophy is not to attempt to change consumer prices with every move up or down of the commodity market, but to take a
longer term view of managing margins and the value perception of its products in the eyes of its customers. Management’s objective is to maximize the
Company’s revenue through increased customer frequency. In cases such as the recent increase in orange prices, management has instituted a limited time
price surcharge on products made with orange juice.
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