Jamba Juice 2013 Annual Report Download - page 56

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TABLE OF CONTENTS
ITEM
7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rates
We do not enter into market risk sensitive instruments for trading purposes. We are exposed to financial market risks due primarily to
changes in interest rates in our interest bearing accounts. We do not believe a change in interest rate will materially affect our 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 $0.3
million.
Commodities Prices
We are exposed to the impact of commodity and utility price fluctuations related to unpredictable factors such as weather and various
market conditions over which we do not have control. We purchase significant amounts of fruits and dairy products to support the needs of
our 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.
We purchase 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 our cost structure, we contract with multiple suppliers both domestically and internationally.
These agreements typically set the price for some or all of our estimated annual fruit requirements, protecting us from short-term volatility.
Nevertheless, these agreements typically contain a force majeure clause, which, if utilized (such as hurricanes in 2004 that destroyed the
Florida orange crop and more recently with the 2007 freeze that affected California citrus), may subject us to significant price increases.
Our 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 our products in the eyes of our customers. Our objective is to maximize
our revenue through increased customer traffic.
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