Jamba Juice 2007 Annual Report Download - page 60

Table of Contents
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which potentially subjects the Company to a concentration of business risk. If this supplier had operational problems or ceased making product available to
the Company, operations could be adversely affected.
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The
Company places its cash and cash equivalents with high-quality financial institutions. Balances in the Company’s cash accounts frequently exceed the
Federal Deposit Insurance Corporation insurance limit.
Self-Insurance Reserves—The Company uses a combination of insurance and self-insurance to provide for the liabilities for workers’ compensation,
healthcare benefits, general liability, property insurance, director and officers’ liability and vehicle liability. Liabilities associated with the self-insured risks
are not discounted and are estimated, in part, by considering historical claims experience, demographic factors, severity factors, and other actuarial
assumptions. The estimated accruals for these liabilities, portions of which are calculated by independent third-party actuaries, could be significantly affected
if future occurrences and claims differ from these assumptions and historical trends. The workers’ compensation self-insurance reserve is included in
“Workers’ compensation and health self-insurance reserves” in the consolidated balance sheets and was $2.5 million as of January 9, 2007.
Cash and Cash Equivalents —The Company considers all highly liquid instruments with maturities of three months or less when purchased to be
cash equivalents. As of January 9, 2007, January 10, 2006, and December 31, 2005, the Company did not have any investments with maturities greater than
three months.
Cash Held in Trust—Investments held in trust as of January 10, 2006 and December 31, 2005 were held in cash, not cash equivalents. The
Company invested in various short-term tax free money market funds promulgated under the Investment Company Act of 1940. Dividend and interest income
earned on such investments were the Company’s sole source of income until the consummation of the Merger.
Receivables—Receivables primarily represent amounts due for royalty fees, advertising fees, and jambacards issued by the franchisees. The allowance
for doubtful accounts is the Company’s estimate of the amount of probable credit losses in the Company’s existing accounts receivable.
Inventories—Inventories include only the purchase cost and are stated at the lower of cost or market. Cost is determined using the first-in, first-out
method (FIFO). Inventories consist of food, beverages and available-for-sale promotional products.
Property, Fixtures, and Equipment—Property, fixtures, and equipment acquired in the Merger are stated at estimated fair value as of the Merger Date
less accumulated depreciation and amortization recorded subsequent to the Merger. Property, fixtures and equipment acquired subsequent to the Merger are
stated at cost less accumulated depreciation and amortization. Depreciation of furniture, fixtures, and equipment is calculated using the straight-line method
over the estimated remaining useful life of the asset, generally ranging from three to seven years. Leasehold improvements are amortized over the shorter of their
estimated useful lives or the related lease term, which is generally 10 years. The costs of repair and maintenance are expensed when incurred, while
expenditures for refurbishments and improvements that significantly add to the productive capacity or extend the useful life of an asset are capitalized.
Capitalized Interest—The Company capitalizes interest costs related to purchase and construction of qualifying assets. During fiscal 2006, no interest
costs were capitalized. Capitalized interest is amortized over the life of the assets.
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