Jamba Juice 2009 Annual Report Download - page 75

Table of Contents
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affect the reported amounts of assets, liabilities, revenue and expenses and disclosure of contingent assets and liabilities at the date of the financial statements.
Actual results could differ from those estimates, and such differences could affect the results of operations reported in future periods.
Concentrations of Risk—The Company maintains food distribution contracts primarily with one supplier, Southwest Traders, Inc. This supplier
provided approximately 81% of cost of sales for fiscal 2008 and fiscal 2007 and approximately 82% in fiscal 2006, 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 is self-insured through September 30, 2008 for existing and prior years’ exposures related to workers’
compensation and healthcare benefits. 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 could be significantly
affected if future occurrences and claims differ from these assumptions and historical trends.
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 December 30, 2008 and January 1, 2008, the Company did not have any investments with maturities greater than three months.
Restricted Cash and Investments— The Company held $7.7 million in restricted cash, of which $5.0 million was classified as a current asset and
$2.7 million classified as a long-term asset, at December 30, 2008, representing cash held in a certificate of deposit to collateralize the Company’s letters of
credit, which is required since the Company was self-insured for workers’ compensation and health insurance. Also included in restricted cash is $3.0 million
related to the Company’s Financing Agreement (See Note 9).
The Company held $4.9 million in restricted cash at January 1, 2008. Approximately $3.0 million, classified as a long-term asset, represents cash held
in a certificate of deposit to collateralize the Company’s letters of credit and approximately $1.9 million was classified as a current asset. Of the $1.9 million
current restricted cash, $1.4 million related to letters of credit required for the Company’s workers’ compensation and $0.5 million represents the cash
holdback related to one of the Company’s acquisitions. The $0.5 million holdback was released in April 2008.
Receivables—Receivables primarily represent amounts due from royalty fees, advertising fees, construction allowances 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.
Property, fixtures and equipment acquired subsequent to the Merger
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