Transcript of C offee C ompany Connor Su (301215392) Xiaobai Ru (301186106) Ziqing Tang (301215541 )
- Slide 1
- C offee C ompany Connor Su (301215392) Xiaobai Ru (301186106)
Ziqing Tang (301215541
- Slide 2
- Top 10 Coffee Producing Countries: Brazil (22.5 million bags)
Colombia (10.5 million bags) Indonesia (6.7 million bags) Vietnam
(5.8 million bags) Mexico (5 million bags) Ethiopia (3.8 million
bags) India (3.8 million bags) Cte d'Ivoire (3.3 million bags)
Uganda (3 million bags)
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- Coffee Industry Description Coffee is manufactured from green
coffee beans that are roasted to give it its characteristic color,
smell, flavor and density. It is manufactured from two major
varieties of coffee beans, Arabica and Robusta, which have several
variations. DESCRIPTION HEADLINESKEY EXTERNAL DRIVER
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- Coffee Industry Description The Arabica blend generally tends
to have a richer flavor and is considered to be of higher quality,
compared with Robusta. Additionally, Arabica coffee is typically
found in a majority of gourmet and imported coffees, such as
Colombian, Ethiopian, Kenyan, Costa Rican and other high- quality
coffee imports. Comparatively, the Robusta blend is considered to
be of lower quality and is used in most instant, soluble and canned
coffee products sold in supermarkets and grocery stores.
DESCRIPTION HEADLINESKEY EXTERNAL DRIVER
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- Headlines In US In 2014, retail volume sales of coffee in the
US increase by 1%, whilst retail value sales increase by 6%, to
reach 800,730 tonnes and US$12.8 billion, respectively Fresh ground
coffee pods continues to lead value growth, with retail value sales
up by 32% to reach US$4.0 billion In Canada In 2014 retail sales
grow by 19% in current value terms and 4% in volume terms to reach
C$2.3 billion and 81,000 tonnes Fresh ground coffee pods posts the
fastest retail current value sales growth of 47% in 2014
DESCRIPTION HEADLINES KEY EXTERNAL DRIVER
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- Table 1: Retail Sales of Coffee by Category: Value 2009-2014
DESCRIPTION HEADLINES KEY EXTERNAL DRIVER
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- Key External Drivers Demand from grocery wholesaling The Coffee
Production industry is highly dependent on demand from downstream
suppliers, such as grocery wholesalers, which provide coffee
products to supermarkets. World price of coffee The world price of
coffee determines coffee producers costs and profitability because
coffee beans are a key input commodity in coffee production Demand
from supermarkets and grocery stores Coffee producers rely on
favorable supply-side contracts with downstream markets, such as
supermarkets and grocery stores. DESCRIPTION HEADLINES KEY EXTERNAL
DRIVER
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- Coffee Bean Price
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- Sugar Price
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- World price of crude oil Most of the Coffee Production
industrys key inputs, including coffee beans, are sourced from
globally-based coffee bean harvesters. As oil prices increase, the
fixed costs from transporting and distributing coffee or acquiring
input commodities, such as coffee beans, also rises, hampering
industry revenue. The world price of crude oil is anticipated to
decline in 2015. Trade-weighted index Or Canadian-dollar effective
exchange rate index As the US dollar appreciates relative to other
currencies, coffee becomes less expensive for domestic consumers to
purchase from global coffee producers, which intensifies
competition for industry operators. Due to the United States being
the worlds second- largest coffee importer, the value of the dollar
significantly affects demand for coffee. As the Canadian dollar
appreciates, coffee and tea produced by domestic manufacturers
becomes relatively more expensive for global consumers, which
hampers global consumers demand for industry products. Key External
Drivers DESCRIPTION HEADLINES KEY EXTERNAL DRIVER
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- I ndustry P erformance M ajor P roducts & M arkets
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- Industry Performance Current Performance In US : Current
Performance In Canada :
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- Products In US: In Canada:
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- Major Products In US Ground roasted coffee Ground roasted
coffee has traditionally been the largest product segment within
the industry, accounting for an estimated 73.6% of revenue in 2014.
This product segment is comprised of specialty and traditional
ground roasted coffee, which are expected to account for 37.5% and
36.1% of revenue, respectively. Specialty ground roasted coffee
includes ground espresso beans, among other specialized coffee
products, in a range of flavors. Within this market segment,
consumers are increasingly favoring specialized ground roasted
coffee instead of traditional ground roasted coffee. This segment
is anticipated to continue to decline slowly due to consumers
increasingly preferring to freshly grind their coffee when
preparing it at home.
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- Markets US Market: Canada Market:
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- Major Markets In US Consumers aged 60 and older About 76.0% of
people that are 60 years or older consume coffee daily. In 2008
(latest data available), 76.0% of this age group consumed coffee on
a daily basis, which shows a stable market. This demographic will
slightly expand their coffee consumption in future years, driven by
an increasing number of baby boomers. Notably, only 6.0% of
Americans that are 60 years or older consumed espresso- based
beverages and 24.0% of this market segment preferred gourmet
varieties of traditional coffee.
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- Major Markets In US Consumers aged 40 to 59 This age group has
the second-highest proportion of coffee drinkers in the United
States. According to the National Coffee Associations National
Coffee Drinking Trends survey, about 69.0% of people aged 40 to 59
consumed coffee on a daily basis. Comparatively, in 2008 (latest
data available), 66.0% of this demographic consumed coffee on a
daily basis. During the past five years, this market segment has
slightly curbed their demand for coffee products, which can be
attributed to growing competition of alternative caffeinated
beverages.
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- Major Markets In Canada Grocery stores and supermarkets Grocery
stores and supermarkets make up an estimated 42.1% of industry
revenue. Over the past five years, the number of grocery stores and
supermarkets in Canada has declined, which has allowed this major
market to strengthen its ability to negotiate low cost coffee and
tea products. Exports In 2014, industry exports are expected to
account for 40.7% of industry revenue. In particular, Canadian tea
and coffee producers derive a significant share of industry revenue
from exporting products to the United States, Australia, Japan and
the United Arab Emirates. (e.g. Canadian coffee and tea producers
derive a significant share of export revenue from re-exporting
industry products after the coffee beans are roasted and ground. )
Over the next five years, exports are anticipated to account for a
larger share of industry revenue, in line with growing global
demand for coffee, particularly from the United States, which will
prompt demand for re-exported industry products.
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- Major Companies In US: In Canada:
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- Company Shares of Coffee:% Retail Value 2010-2014
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- Comparison of Market Cap Among Major Competitors
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- Market Share Concentration Level (Concentration in this
Industry is High) The top four players in the Coffee Production
industry are estimated to account for 84.1% of total industry
revenue in 2014. Comparatively, market share has steadily increased
since 2009 due to rapid growth among the industrys key players.
Market share will increase over the next five years, as key players
continue to innovate their products, build strong brand loyalty,
implement marketing campaigns, conduct joint ventures with other
key players and diversify their product portfolios with specialized
coffee products, such as coffee with sustainable coffee beans.
Smaller players will focus on niche markets, supplying specialty
high-value products that have shorter production runs and lower
volumes. However, large players, like Green Mountain Coffee
Roasters, will continue to find it profitable to develop a
specialized, high-value product portfolio
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- S tarbucks C offee
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- I ntroduction Starbucks is the premier roaster, marketer and
retailer of specialty coffee in the world, operating in 65
countries. Trade on : NASDAQ under the symbol "SBUX." Core product
: coffee, tea, other beverages and fresh food items Objective :
maintain Starbucks standing as one of the most recognized and
respected brands in the world INTRODUCTION BUSINESS FINANCIAL
STATEMENT RISK FACTOR MARKET RISK SUMMARY
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- S tock P rice INTRODUCTION BUSINESS FINANCIAL STATEMENT RISK
FACTOR MARKET RISK SUMMARY
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- B usiness S egment Americas (including of the US, Canada, and
Latin America) Europe, Middle East, and Africa ( EMEA ) China/ Asia
Pacific ( CAP ) Channel Development All other segments INTRODUCTION
BUSINESS FINANCIAL STATEMENT RISK FACTOR MARKET RISK SUMMARY
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- R evenue C omponents Starbucks generate nearly all of revenues
through company-operated stores licensed stores consumer packaged
goods ("CPG") foodservice operations INTRODUCTION BUSINESS
FINANCIAL STATEMENT RISK FACTOR MARKET RISK SUMMARY
- Slide 29
- R evenue C omponents INTRODUCTION BUSINESS FINANCIAL STATEMENT
RISK FACTOR MARKET RISK SUMMARY
- Slide 30
- C ost S tructure INTRODUCTION BUSINESS FINANCIAL STATEMENT RISK
FACTOR MARKET RISK SUMMARY
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- F irm S trategy Continuous expansion of global store base
Increase market share Offer products across new categories and
through diverse channels Superior customer service High degree of
customer loyalty INTRODUCTION BUSINESS FINANCIAL STATEMENT RISK
FACTOR MARKET RISK SUMMARY
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- F inancial S tatement Consolidated Statements of Comprehensive
Income Consolidated Balance Sheets Consolidated Statements of Cash
Flows INTRODUCTIONBUSINESS FINANCIAL STATEMENT RISK FACTOR MARKET
RISK SUMMARY
- Slide 33
- C onsolidated S tatements of C omprehensive I ncome
INTRODUCTIONBUSINESS FINANCIAL STATEMENT RISK FACTOR MARKET RISK
SUMMARY
- Slide 34
- C onsolidated B alance S heets INTRODUCTIONBUSINESS FINANCIAL
STATEMENT RISK FACTOR MARKET RISK SUMMARY
- Slide 35
- C onsolidated B alance S heets INTRODUCTIONBUSINESS FINANCIAL
STATEMENT RISK FACTOR MARKET RISK SUMMARY
- Slide 36
- C onsolidated S tatements of C ash F lows INTRODUCTIONBUSINESS
FINANCIAL STATEMENT RISK FACTOR MARKET RISK SUMMARY
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- C onsolidated S tatements of C ash Flows INTRODUCTIONBUSINESS
FINANCIAL STATEMENT RISK FACTOR MARKET RISK SUMMARY
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- R isk F actors Economic conditions in the US and certain
international markets Success depends substantially on the value of
brands and failure to preserve brand value could have a negative
impact on financial results. Unauthorized access or destruction of
customer or employee personal and financial data
INTRODUCTIONBUSINESS FINANCIAL STATEMENT RISK FACTOR MARKET RISK
SUMMARY
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- R isk F actors Incidents involving food-borne illnesses, food
tampering, food contamination or mislabelling Unsuccessful in
implementing important strategic initiatives or effectively
managing growth Intense competition in each of channels and markets
Highly dependent on the financial performance of Americas operating
segment INTRODUCTIONBUSINESS FINANCIAL STATEMENT RISK FACTOR MARKET
RISK SUMMARY
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- Increasingly dependent on the success of CAP and EMEA operating
segments (inherent risks of conducting business abroad) foreign
currency exchange rate fluctuations change or uncertainties in
legal, regulatory, social and political conditions in markets
import or other business licensing requirements R isk F actors
INTRODUCTIONBUSINESS FINANCIAL STATEMENT RISK FACTOR MARKET RISK
SUMMARY
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- R isk F actors Increases in the cost of high-quality arabica
coffee beans or decreases in the availability of high-quality
arabica coffee beans Financial condition and results of operations
are sensitive Interruption of supply chain affect ability to
produce or deliver products Failure to meet market expectations for
financial performance INTRODUCTIONBUSINESS FINANCIAL STATEMENT RISK
FACTOR MARKET RISK SUMMARY
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- The loss of key personnel or difficulties recruiting and
retaining qualified personnel Rely heavily on information
technology in operations Failure to comply with applicable laws and
regulations R isk F actors INTRODUCTIONBUSINESS FINANCIAL STATEMENT
RISK FACTOR MARKET RISK SUMMARY
- Slide 43
- P rimary M arket R isk Quantitative and Qualitative Disclosures
About Market Risk Commodity Price Risk Foreign Currency Exchange
Risk Equity Security Price Risk Interest Rate Risk
INTRODUCTIONBUSINESS FINANCIAL STATEMENT RISK FACTOR MARKET RISK
SUMMARY
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- C ommodity P rice R isk Note: The information provided relates
only to the hedging instruments and does not represent the
corresponding changes in the underlying hedged items (in millions).
They purchase commodity inputs, including coffee, dairy products
and diesel that are used in their operations and are subject to
price fluctuations that impact their financial results. They use a
combination of pricing features embedded within supply contracts
and financial derivatives to manage their commodity price risk
exposure, such as fixed-price and price-to-be-fixed contracts for
coffee purchases. The following table summarizes the potential
impact as of September 28, 2014 to Starbucks future net earnings
and other comprehensive income ("OCI") from changes in commodity
prices. INTRODUCTIONBUSINESS FINANCIAL STATEMENT RISK FACTOR MARKET
RISK SUMMARY
- Slide 45
- F oreign C urrency E xchange R isk To reduce cash flow
volatility from foreign currency fluctuations, they enter into
derivative instruments to hedge portions of cash flows of
anticipated revenue streams and inventory purchases in currencies
other than their functional currency, the US dollar, as well as the
translation risk of certain balance sheet items. The following
table summarizes the potential impact as of September 28, 2014 to
Starbucks future net earnings and other comprehensive income
("OCI") from changes in the fair value of these derivative
financial instruments due to a change in the value of the US dollar
as compared to foreign exchange rates. Note: The information
provided relates only to the hedging instruments and does not
represent the corresponding changes in the underlying hedged items
(in millions). INTRODUCTIONBUSINESS FINANCIAL STATEMENT RISK FACTOR
MARKET RISK SUMMARY
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- E quity S ecurity P rice R isk Minimal exposure to price
fluctuations on equity mutual funds and equity exchange-traded
funds Trading securities portfolio approximates a portion of
liability under Starbuckss Management Deferred Compensation Plan
("MDCP") Performed a sensitivity analysis based on a 10% change in
the underlying equity prices of investments INTRODUCTIONBUSINESS
FINANCIAL STATEMENT RISK FACTOR MARKET RISK SUMMARY
- Slide 47
- I nterest R ate R isk Long-term Debt They utilize short-term
and long-term financing and may use interest rate hedges to manage
their overall interest expense related to their existing fixed-rate
debt, as well as to hedge the variability in cash flows due to
changes in the benchmark interest rate related to anticipated debt
issuances. As of September 28, 2014, they did not have any interest
rate hedge agreements outstanding. The following table summarizes
the impact of a change in interest rates as of September 28, 2014
on the fair value of Starbucks debt (in millions):
INTRODUCTIONBUSINESS FINANCIAL STATEMENT RISK FACTOR MARKET RISK
SUMMARY
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- Available-for-Sale Securities - The available-for-sale
securities comprise a diversified portfolio consisting mainly of
fixed-income instruments. The primary objective of these
investments is to preserve capital and liquidity. They performed a
sensitivity analysis based on a 100 basis point change in the
underlying interest rate of our available-for-sale securities as of
September 28, 2014, and determined that such a change would not
have a significant impact on the fair value of these instruments. I
nterest R ate R isk INTRODUCTIONBUSINESS FINANCIAL STATEMENT RISK
FACTOR MARKET RISK SUMMARY
- Slide 49
- Interest Rates - interest rate swap agreements to hedge the
variability in cash flows Foreign Currency - forward and swap
contracts to hedge portions of cash flows of anticipated revenue
streams and inventory purchases in currencies -forward contracts to
hedge the foreign currency exposure of net investment in certain
foreign operations -foreign currency swap contracts that are not
designated as hedging instruments to mitigate the translation risk
of certain balance sheet items S ummary INTRODUCTIONBUSINESS
FINANCIAL STATEMENT RISK FACTORMARKET RISK SUMMARY
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- Commodities -coffee futures contracts and collars (the
combination of a purchased call option and a sold put option) to
hedge a portion of anticipated cash flows under our
price-to-be-fixed green coffee contracts - dairy and diesel fuel
swap contracts, as well as dairy futures and collars that are not
designated as hedging instruments to mitigate the price uncertainty
of a portion of our future purchases of dairy products and diesel
fuel S ummary INTRODUCTIONBUSINESS FINANCIAL STATEMENT RISK
FACTORMARKET RISK SUMMARY
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- G ain and L osses on D erivative C ontracts
INTRODUCTIONBUSINESS FINANCIAL STATEMENT RISK FACTORMARKET RISK
SUMMARY S ummary
- Slide 52
- C hanges in AOCI INTRODUCTIONBUSINESS FINANCIAL STATEMENT RISK
FACTORMARKET RISK SUMMARY S ummary
- Slide 53
- G REEN M OUNTAIN C OFFEE
- Slide 54
- I NTRODUCTION Formerly called: Green Mountain Coffee Roasters
Type: Public corporation Traded as: NASDAQ: GMCRS&P 500
Component Industry: Processed & Packaged Goods Products: Coffee
& Coffee Keurig Green Mountain is publicly traded coffee
roaster and manufacturer of singe-cup coffee brewers and portion
packs Offers over 100 different coffee selections, including
certified organic, Fair Trade Certified, estate, specially blends
and flavoured coffees I NTRODUCTION BUSINESS FINANCIAL STATEMENT
RISK FACTOR MARKET RISK SUMMARY
- Slide 55
- I NTRODUCTION BUSINESS FINANCIAL STATEMENT RISK FACTOR MARKET
RISK SUMMARY
- Slide 56
- B USINESS Overview Strengths and Strategy The Products
Marketing and distribution INTRODUCTION BUSINESS FINANCIAL
STATEMENT RISK FACTOR MARKET RISK SUMMARY
- Slide 57
- B USINESS Overview A leader in specialty coffee, coffeemakers,
teas and other beverages in the United States and Canada
Multi-brand beverage and brewer portfolio Market and sell products
to retailers including supermarket, restaurants and online Develop
innovative new brewing systems and beverages Target opportunities
primarily in American and Canadian households, food service,
educational and office locations INTRODUCTION BUSINESS FINANCIAL
STATEMENT RISK FACTOR MARKET RISK SUMMARY
- Slide 58
- B USINESS Strengths and Strategy Primary consumer benefits
delivered Quality Convenience Choice The key elements of business
strategy Increase adoption Expand beverage choices Expand in
current channels Launch new, innovative beverage system
technologies and platforms Continue international expansion
INTRODUCTION BUSINESS FINANCIAL STATEMENT RISK FACTOR MARKET RISK
SUMMARY
- Slide 59
- B USINESS The Products Portion packs including single-serve
K-Cup, Vue and Rivo packs Brewers and accessories a leader in sales
of coffeemakers in the U.S. and Canada Other products and royalties
bagged coffee and cans and fractional packages INTRODUCTION
BUSINESS FINANCIAL STATEMENT RISK FACTOR MARKET RISK SUMMARY
- Slide 60
- B USINESS Marketing and Distribution Customer growth in the
U.S. and Canada Multiple channels of distribution AH channel AFH
channel E-commerce platforms: websites and social media pages
INTRODUCTION BUSINESS FINANCIAL STATEMENT RISK FACTOR MARKET RISK
SUMMARY
- Slide 61
- F inancial S tatement Consolidated Balance Sheets Consolidated
Statements of Operations Consolidated Statements of Comprehensive
Income Consolidated Statements of Cash Flows INTRODUCTIONBUSINESS
FINANCIAL STATEMENT RISK FACTOR MARKET RISK SUMMARY
- Slide 62
- F inancial S tatementBalance Sheets INTRODUCTIONBUSINESS
FINANCIAL STATEMENT RISK FACTOR MARKET RISK SUMMARY
- Slide 63
- F inancial S tatementStatements of Operations
INTRODUCTIONBUSINESS FINANCIAL STATEMENT RISK FACTOR MARKET RISK
SUMMARY
- Slide 64
- F inancial S tatement Statements of Comprehensive Income
INTRODUCTIONBUSINESS FINANCIAL STATEMENT RISK FACTOR MARKET RISK
SUMMARY
- Slide 65
- F inancial S tatementStatements of Cash Flows
INTRODUCTIONBUSINESS FINANCIAL STATEMENT RISK FACTOR MARKET RISK
SUMMARY
- Slide 66
- F inancial S tatement Statements of Cash Flows (continued)
INTRODUCTIONBUSINESS FINANCIAL STATEMENT RISK FACTOR MARKET RISK
SUMMARY
- Slide 67
- R isk F actor Financial performance is highly dependent upon
the sales of Keurig Brewing systems and portion packs Ongoing
investment in the cold platform is risky, and could disrupt ongoing
business INTRODUCTIONBUSINESS FINANCIAL STATEMENT RISK FACTOR
MARKET RISK SUMMARY
- Slide 68
- R isk F actor Changes in the beverage environment and retail
landscape could impact financial results Increased competition
could hurt business Intellectual property may not be valid,
enforceable, or commercially valuable INTRODUCTIONBUSINESS
FINANCIAL STATEMENT RISK FACTOR MARKET RISK SUMMARY
- Slide 69
- R isk F actor Continued innovation and the successful
development and timely launch of new platforms, products and
product extensions are critical to financial results and
achievement of growth strategy Obsolete inventory may result in
reduced prices or write-downs INTRODUCTIONBUSINESS FINANCIAL
STATEMENT RISK FACTOR MARKET RISK SUMMARY
- Slide 70
- R isk F actor Consolidation in the retail channel or the loss
of key retail or grocery customers could adversely affect financial
performance. Price increases may not be sufficient to offset cost
increases and maintain profitability or may result in sales volume
declines INTRODUCTIONBUSINESS FINANCIAL STATEMENT RISK FACTOR
MARKET RISK SUMMARY
- Slide 71
- R isk F actor Due to the seasonality of many of products and
other factors such as adverse weather conditions, our operating
results are subject to fluctuations Increases or changes in income
or indirect tax rates could have a material adverse impact on
financial results INTRODUCTIONBUSINESS FINANCIAL STATEMENT RISK
FACTOR MARKET RISK SUMMARY
- Slide 72
- R isk F actor Laws and regulations could adversely affect our
business Climate change may have a long-term adverse impact on our
business and results of operations Litigation pending could
materially impact on business and result of operations
INTRODUCTIONBUSINESS FINANCIAL STATEMENT RISK FACTOR MARKET RISK
SUMMARY
- Slide 73
- M arket R isk Quantitative and Qualitative Disclosures about
Market Risk Interest Rate Risks Commodity Price Risks Foreign
Currency Exchange Rate Risk INTRODUCTIONBUSINESS FINANCIAL
STATEMENT RISK FACTOR MARKET RISK SUMMARY
- Slide 74
- M arket R isk Interest Rate Risks At September 27, 2014, the
company had $28.4 million of outstanding debt obligations subject
to variable interest rates. Should all our variable interest rates
increase by 100 basis points, we would incur additional expense of
$0.3 million annually Should Canadian Bankers Acceptance Rate
increase by 100 basis points over US Libor rates, we would incur
additional interest expense of $0.9 million annually, pursuant to
the cross-currency swap agreement INTRODUCTIONBUSINESS FINANCIAL
STATEMENT RISK FACTOR MARKET RISK SUMMARY
- Slide 75
- M arket R isk Interest Rate Risks As discussed further under
the heading Liquidity and Capital Resources the Company is party to
interest rate swap agreements. On September 27, 2014, the effect of
Companys interest rate swap agreements was to limit the interest
rate exposure on $130.0 million of the outstanding balance of the
term loan A facility under the Restated Credit Agreements to a
fixed rate versus the 30-day Libor rate The total notional amount
covered by these interest rate swaps will terminate in November
2015. INTRODUCTIONBUSINESS FINANCIAL STATEMENT RISK FACTOR MARKET
RISK SUMMARY
- Slide 76
- M arket R isk Commodity Price Risks at September 27, 2014 (in
thousands) The C price of coffee is subject to substantial price
fluctuations caused by multiple factors, including but not limited
to weather and political and economic conditions in
coffee-producing countries Gross profit margins can be
significantly impacted by changes in the C price of coffee
INTRODUCTIONBUSINESS FINANCIAL STATEMENT RISK FACTOR MARKET RISK
SUMMARY
- Slide 77
- M arket R isk Commodity Price Risks at September 27, 2014 (in
thousands) Enter into fixed coffee purchase commitments in an
attempt to secure an adequate supply of coffee. These agreements
are tied to specific market prices (defined by both the origin of
the coffee and the time of delivery) but company has significant
flexibility in selecting the date of the market price to be used in
each contract. INTRODUCTIONBUSINESS FINANCIAL STATEMENT RISK FACTOR
MARKET RISK SUMMARY
- Slide 78
- M arket R isk Commodity Price Risks at September 27, 2014 (in
thousands) At September 27, 2014, the Company had approximately
$407.7 million in green coffee purchase commitments, of which
approximately 88% had a fixed price. At September 28, 2013, the
Company had approximately $245.1 million in green coffee purchase
commitments, of which approximately 84% had a fixed price.
INTRODUCTIONBUSINESS FINANCIAL STATEMENT RISK FACTOR MARKET RISK
SUMMARY
- Slide 79
- M arket R isk Foreign Currency Exchange Rate Risk Foreign
operations are related to Canada segment, which is subject to
risks, including, but not limited to, unique economic conditions,
changes in political climate, different tax structures, other
regulations and restrictions, and foreign exchange rate volatility.
Accordingly, future results could be materially adversely affected
by changes in these or other factors Source green coffee, certain
production equipment, and components of brewers and manufacturing
of brewers from countries outside the United States, which are
subject to the same risks described for Canada above. However, most
of green coffee and brewer purchases are transacted in the United
States dollars Revenues are adversely affected when the United
States dollar strengthens against the Canadian dollar and are
positively affected when the United States dollar weakens against
the Canadian dollar INTRODUCTIONBUSINESS FINANCIAL STATEMENT RISK
FACTOR MARKET RISK SUMMARY
- Slide 80
- M arket R isk Foreign Currency Exchange Rate Risk The majority
of the transactions conducted by Canada segment are in the Canadian
dollar. As a result, revenues are adversely affected when the
United States dollar strengthens against the Canadian dollar and
are positively affected when the United States dollar weakens
against the Canadian dollar. Conversely, expenses are positively
affected when the United States dollar strengths against the
Canadian dollar and adversely affected when the United State dollar
weakens against the Canadian dollar INTRODUCTIONBUSINESS FINANCIAL
STATEMENT RISK FACTOR MARKET RISK SUMMARY
- Slide 81
- S ummary Interest Rate INTRODUCTIONBUSINESS FINANCIAL STATEMENT
RISK FACTORMARKET RISK SUMMARY The Company enters into interest
rate swap agreements to limit a portion of its exposure to variable
interest rates by entering into interest rate swap agreements which
effectively fix the rates In accordance with the interest swap
agreements and on a monthly basis, interest expense is calculated
based on the floating 30-day Libor rate and the fixed rate.
- Slide 82
- INTRODUCTIONBUSINESS FINANCIAL STATEMENT RISK FACTORMARKET RISK
SUMMARY If interest expense as calculated is greater based on the
30-day Libor rate, the interest rate swap counterparty pays the
difference to the Company; If interest expense as calculated is
greater based on the fixed rate, the Company pays the difference to
the interest rate swap counterparty. S ummary Interest Rate
- Slide 83
- INTRODUCTIONBUSINESS FINANCIAL STATEMENT RISK FACTORMARKET RISK
SUMMARY S ummaryGain or Loss
- Slide 84
- INTRODUCTIONBUSINESS FINANCIAL STATEMENT RISK FACTORMARKET RISK
SUMMARY S ummaryGain or Loss