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UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, DC
    20549
 Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 30, 2007.oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to          .   Commission File Number: 000-51535
  CARIBOU COFFEE COMPANY,
    INC.
 (Exact name of registrant as
    specified in its charter)
  Minnesota

41-1731219(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)3900 Lakebreeze Avenue North
    Brooklyn Center, Minnesota

55429(Zip Code)(Address of principal executive
    offices)   Registrants telephone number, including area code:
 (763) 592-2200
  Securities Registered Pursuant to Section 12(b) of the
    Act:
 None
  Securities Registered Pursuant to Section 12(g) of the
    Act:
 Common Stock, $0.01 Par Value Per Share
  o þ
  o þ
  þ o
  Form 10-K Form 10-K. þ
  Rule 12b-2
  Large accelerated
    filer o

Accelerated
    filer o

Non-accelerated
    filer o

Smaller reporting
    company þ    Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K.




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##### 





TABLE OF
    CONTENTS
   
 PART I.Item 1


Business


3Item 1A


Risk Factors


7Item 1B


Unresolved Staff Comments


12Item 2


Properties


13Item 3


Legal Proceedings


14Item 4


Submission of Matters to a Vote of Security
    Holders


14Item 4A


Executive Officers of the Registrant


15PART II.Item 5


Market for the Registrants Common Equity,
    Related Shareholder Matters and Issuer Purchases of Equity
    Securities


16Item 6


Selected Financial Data


17Item 7


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


20Item 8


Financial Statements and Supplementary Data


30Item 9


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


55Item 9A(T)


Controls and Procedures


55Item 9B


Other Information


55PART III.Item 10


Directors, Executive Officers and Corporate
    Governance


56Item 11


Executive Compensation


56Item 12


Security Ownership of Certain Beneficial Owners
    and Management and Related Shareholder Matters


56Item 13


Certain Relationships and Related Transactions,
    and Director Independence


56Item 14


Principal Accountant Fees and Services


56PART IV.Item 15


Exhibits and Financial Statement Schedules


57Signatures


60Fifth Amendment to Credit AgreementSixth Amendment to Second Amended and Restated Lease and License Financing and Purchase Option AgreementConsent of Independent Registered Public Accounting FirmCertificationCertificationCertificationCertification   2




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##### Table of Contents



PART I  Item 1.
    Business            Segment
    Financial Information
  Form 10-K.
  Retail.
    
    Increasing our Comparable Coffeehouse Sales and Enhancing
    Operating Margins.We will continue our efforts
    to increase our comparable coffeehouse sales, including
    increasing our brand awareness through marketing efforts and
    introducing new products and promotions. We believe that we have
    strong brand 3




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awareness in markets where we have a significant coffeehouse
    presence and that by building a similar coffeehouse base in
    other metropolitan areas, we will be able to drive customer
    awareness and comparable coffeehouse sales. As our comparable
    coffeehouse sales increase, we expect our operating margins to
    improve as we leverage our fixed expenses.  
    Continue to Open New Company-Operated Coffeehouse
    Locations.We have opened
    80 company-operated
    locations in the past two fiscal years, including 20 coffeehouse
    locations in 2007. We intend to further penetrate a number of
    our existing markets by opening additional Company-operated
    coffeehouses. In 2008, we intend to open five to ten new
    Company-operated coffeehouses. We have reduced the number of new
    stores we are opening in 2008 compared to 2007 as a response to
    changes in our prototype, the site selection criteria and
    changing market conditions. New coffeehouses may take longer to
    reach profitability, and we may not be successful in operating
    our new coffeehouses on a profitable basis.  Commercial.
    Franchise. multi-unit 30-40
       4




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Purchasing
            Competition
     5




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Service
    Marks and Trademarks
      Employees
    Government
    Regulation
   6




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Seasonality
    Available
    Information
  Form 10-K Home Investors
  Item 1A.
    Risk
    Factors  Certain statements we make in this filing, and other written
    or oral statements made by or on our behalf, may constitute
    forward-looking statements within the meaning of the
    federal securities laws. Words or phrases such as should
    result, are expected to, we
    anticipate, we estimate, we
    project, we believe, or similar expressions
    are intended to identify forward-looking statements. These
    statements are subject to certain risks and uncertainties that
    could cause actual results to differ materially from our
    historical experience and our present expectations or
    projections. We believe that these forward-looking statements
    are reasonable; however, you should not place undue reliance on
    such statements. Such statements speak only as of the date they
    are made, and we undertake no obligation to publicly update or
    revise any forward-looking statement, whether as a result of
    future events, new information or otherwise. The following risk
    factors, as well as the risks detailed in the
    Business section and others that we may add from
    time to time, are some of the factors that could cause our
    actual results to differ materially from the expected results
    described in our forward-looking statements.
  Risks
    Related to Our Business
  We
    have a history of net losses and may incur losses in the
    future.
     7




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We may
    need to raise additional capital in order to continue to grow
    our business, which subjects us to the risks that we may be
    unable to maintain or grow our business as planned or that our
    shareholders may be subject to substantial additional dilution.
    We are also subject to protective covenants that may restrict
    growth potential.
        We may
    need to record additional impairment losses in the future if our
    stores operating performances do not
    improve.
      We may
    not be able to renew leases or control rent increases at our
    retail locations or obtain leases for new
    coffeehouses.
   8




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The
    market price for our common stock may be volatile.
    
    any future sales of our common stock or other securities;
    a decline in any month or quarter of our net sales or earnings;
    a decline in any month or quarter of comparable sales;
    a deviation in our net sales, earning or comparable store sales
    from levels expected by securities analysts;
    changes in financial estimates by securities analysts; or
    changes in market valuation of other companies in the same or
    similar markets.  sm
  Recent
    changes in our senior management may cause uncertainty in, or be
    disruptive to, our business.
    We are
    susceptible to adverse trends and economic conditions in
    Minnesota and the Upper Midwest.
    Complaints
    or claims by current, former or prospective employees could
    adversely affect us.
   9




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Our
    disclosure controls and procedures may not prevent or detect all
    errors or acts of fraud.
    If we
    fail to maintain an effective system of internal controls over
    financial reporting, we may not be able to accurately report our
    financial results or prevent fraud. As a result, current and
    potential shareholders could lose confidence in our financial
    and other public reporting, which would harm our business and
    the trading price of shares of our common stock.
    We
    have a significant number of options outstanding to acquire
    shares of our common stock that, when exercised, will dilute
    existing shareholders and could decrease the market price of our
    common stock.
  Share-Based
  Changes
    in other existing financial accounting standards or practices or
    taxation rules or practices may adversely affect our results of
    operations.
   10




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Risks
    Related to Our Structure
  Arcapita
    has substantial control over us, and could limit other
    shareholders ability to influence the outcome of matters
    requiring shareholder approval and may support corporate actions
    that conflict with other shareholders
    interests.
  Form 10-K.
    Our
    compliance with Shariah principles may make it difficult for us
    to obtain financing and may limit the products we
    sell.
    We may
    be subject to adverse publicity resulting from statements about
    Arcapita or complaints or questions from our customers arising
    from such adverse publicity.
    Our
    annual results and comparable coffeehouse sales may fluctuate
    significantly and could fall below the expectations of
    securities analysts and investors, which could cause the market
    price of our common stock to decline.
   11




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Provisions
    in our articles of incorporation and bylaws and of Minnesota law
    have anti-takeover effects that could prevent a change in
    control that could be beneficial to our shareholders, which
    could depress the market price of shares of our common
    stock.
    
    authorize our board of directors to issue preferred stock and to
    determine the rights and preferences of those shares, which
    would be senior to our common stock, without prior shareholder
    approval;
    establish advance notice requirements for nominating directors
    and proposing matters to be voted on by shareholders at
    shareholder meetings;
    provide that directors may be removed by shareholders only for
    cause;
    limit the right of our shareholders to call a special meeting of
    shareholders; and
    impose procedural and other requirements that could make it
    difficult for shareholders to effect some corporate actions.  Because
    we do not intend to pay dividends, shareholders will benefit
    from an investment in shares of our common stock only if it
    appreciates in value.
    Item 1B.
    Unresolved
    Staff Comments   12




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Item 2.
    Properties  Locations
    and Facilities
  Coffeehouse
    Locations
    State

CoffeehousesMinnesota(1)


208Illinois


57Ohio


37Michigan(2)


26North Carolina


19Georgia(3)


17Virginia(4)


15Wisconsin


13Maryland


10Colorado(2)


10Washington, D.C.(3)


9Iowa


6North Dakota


6Pennsylvania


5Kansas(3)


3South Dakota


2Missouri


1International(5)


40484     (1)
    
    includes one franchised location and six locations owned by
    joint ventures(2)
    
    includes three franchised locations(3)
    
    includes one franchised location(4)
    
    includes two franchised locations(5)
    
    represents thirty-five franchised locations in two Middle
    Eastern countries and 5 in South Korea    Headquarters
    and Roasting Facility
   13




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Item 3.
    Legal
    Proceedings        Item 4.
    Submission
    of Matters to a Vote of Security Holders   14




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Item 4A.
    Executive
    Officers of the Registrant    Name

Age

PositionRosalyn Mallet


52


President, Chief Operating Officer, and Interim Chief Executive
    OfficerKaye R. OLeary


48


Acting Chief Financial OfficerAmy K. ONeil


38


Senior Vice President of Store OperationsKathy F. Hollenhorst


45


Senior Vice President of MarketingDan E. Lee


51


General Counsel, Vice President and SecretaryKaren E. McBride-Raffel


42


Vice President of Human ResourcesMichael E. Peterson


45


Vice President, Controller and TreasurerChristopher B. Rich


52


Vice President of Global FranchisingHenry A. Stein


50


Vice President of Business Development and Commercial SalesR. Paul Turek


53


Vice President of Support Operations   Rosalyn Mallet
  Kaye R. OLeary
  Amy K. ONeil
  Kathy F. Hollenhorst
  Dan E. Lee
  Karen E. McBride-Raffel
 15




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##### Table of Contents



Michael E. Peterson
  Christopher B. Rich
  Henry A. Stein Coca-Cola
  R. Paul Turek
 PART II  Item 5.
    Market
    for the Registrants Common Equity, Related Shareholder
    Matters and Issuer Purchases of Equity Securities  Market
    for the Registrants Stock
    Market Price (High/Low)2007


2006For the Fiscal YearFirst Quarter

$
6.96 - 8.85


$
11.29 - 8.19Second Quarter

$
6.46 - 7.90


$
10.51 - 7.42Third Quarter

$
5.78 - 7.10


$
8.31 - 6.00Fourth Quarter

$
3.35 - 6.99


$
8.99 - 7.23     Dividend
    Policy
    Sales of
    Unregistered Securities
   16




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Item 6.
    Selected
    Financial Data      Fiscal Year EndedDecember 30,


December 31,


January 1,


January 2,


December 28,2007


2006


2006


2005


2003(In thousands, except per share and operating data)Statements of Operations Data:Net sales:Coffeehouses

$
240,267


$
225,649


$
191,310


$
157,169


$
121,779Other


16,567



10,580



6,682



3,323



1,922Total net sales


256,834



236,229



197,992



160,492



123,701Cost of sales and related occupancy costs


108,358



98,656



80,242



65,320



50,641Operating expenses


107,061



97,320



80,026



65,030



49,364Opening expenses


502



1,738



2,096



1,202



822Depreciation and amortization


32,151



21,548



16,376



13,382



10,453General and administrative expenses


32,324



25,943



22,742



15,535



12,343Closing expense and disposal of assets


6,839



510



572



1,034



166Operating loss


(30,401
)


(9,486
)


(4,062
)


(1,010
)


(88
)Other income (expense):Other income






1,059



1,336



378



35Interest income


181



554



266



6



9Interest expense


(576
)


(695
)


(1,602
)


(963
)


(511
)Loss before (benefit) provision for income taxes, minority
    interest and cumulative effect of accounting change


(30,796
)


(8,568
)


(4,062
)


(1,589
)


(555
)(Benefit) provision for income taxes


(297
)


313



79



220



228Loss before minority interest and cumulative effect of
    accounting change


(30,499
)


(8,881
)


(4,141
)


(1,809
)


(783
)Minority interest


164



178



319



265



154Loss before cumulative effect of accounting change


(30,663
)


(9,059
)


(4,460
)


(2,074
)


(937
)Cumulative effect of accounting change (net of income tax)(1)










(445
)






Net loss

$
(30,663
)

$
(9,059
)

$
(4,905
)

$
(2,074
)

$
(937
)Net loss per share:Net loss before cumulative effect of accounting change

$
(1.59
)

$
(0.47
)

$
(0.29
)

$
(0.15
)

$
(0.07
)Cumulative effect of accounting change

$



$



$
(0.03
)

$



$
Net loss

$
(1.59
)

$
(0.47
)

$
(0.32
)

$
(0.15
)

$
(0.07
)Basic and diluted shares used in calculation of net loss per
    share(2)


19,333



19,282



15,255



13,798



13,348 17




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Fiscal Year EndedDecember 30,


December 31,


January 1,


January 2,


December 28,2007


2006


2006


2005


2003(In thousands, except per share and operating data)Non-GAAP Financial Measures:EBITDA(3)

$
3,797


$
15,040


$
14,796


$
13,893


$
11,561Adjusted EBITDA(3)


3,797



15,040



15,911



14,393



11,561Operating Data:Percentage change in comparable coffeehouse sales(4)


0
%


(1
)%


6
%


8
%


3
%Company-Operated coffeehouse operating weeks


22,814



21,110



17,133



14,223



11,408Company-Operated:Coffeehouses open at beginning of year


440



386



304



251



203Coffeehouses opened during the year


20



60



86



57



50Coffeehouses closed during the year


(28
)


(6
)


(4
)


(4
)


(2
)Coffeehouses open at end of year:Total Company-Operated


432



440



386



304



251Franchised:Coffeehouses open at beginning of year


24



9



2







Coffeehouses opened during the year


28



20



7



2



Coffeehouses closed during the year






(5
)










Coffeehouses open at end of year:Total Franchised


52



24



9



2



Total coffeehouses open at end of year


484



464



395



306



251   As ofDecember 30,


December 31,


January 1,


January 2,


December 28,2007


2006


2006


2005


2003(In thousands)Balance Sheet Data:Cash and cash equivalents

$
9,886


$
14,752


$
33,846


$
7,618


$
4,779Total assets


111,840



136,308



147,960



86,207



62,010Total notes payable and revolving credit facility














19,924



5,334Accumulated deficit


(65,137
)


(33,944
)


(24,885
)


(19,979
)


(17,905
)Total shareholders equity


59,288



88,402



96,926



33,793



35,817     (1)
    
    In March 2005, the FASB issued Financial Interpretation
    No. 47 (FIN 47), Accounting for Asset
    Retirement Obligations-an interpretation of FASB Statement
    No. 143. FIN 47 requires the recognition of a
    liability for the fair value of a legally-required conditional
    asset retirement obligation when incurred, if the
    liabilitys fair value can be reasonably estimated.
    FIN 47 also clarifies when an entity would have sufficient
    information to reasonably estimate the fair value of an asset
    retirement obligation. The Company is required to record an
    asset and a corresponding liability for the present value of the
    estimated asset retirement obligation associated with the fixed
    assets and leasehold improvements at some of our coffeehouse
    locations. The asset is depreciated over the life of the
    corresponding lease while the liability accretes to the amount
    of the estimated retirement obligation. FIN 47 was
    effective for fiscal years ending after December 15, 2005.
    The Company adopted FIN 47 on October 3, 2005 with a
    $0.4 million cumulative effect of accounting change (net of
    tax) recorded in the Companys results of operations. This
    charge is a combination of depreciation and accretion expense.(2)
    
    In each year presented, the number of shares used in the
    calculation of basic and diluted net (loss) income per share is
    the same because all outstanding stock options were antidilutive.(3)
    
    EBITDA and Adjusted EBITDA are supplemental non-GAAP financial
    measures. EBITDA is equal to net (loss) income excluding:
    (a) interest expense; (b) interest income;
    (c) depreciation and amortization; and 18




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(d) income taxes. Our definition of Adjusted EBITDA is
    different from EBITDA because we further adjust net income for:
    (a) a one-time cost to consolidate corporate and operating
    locations; (b) a one-time compensation charge associated
    with amending the terms of our Chief Executive Officers
    employment agreement; and (c) a one-time recognition of
    derivative income associated with the decrease in fair value of
    the IPO  related underwriters over-allotment
    option. For a description of our use of EBITDA and Adjusted
    EBITDA and a reconciliation of net income (loss) to these
    non-GAAP financial measures, see the discussion and related
    table below.(4)
    
    Percentage change in comparable coffeehouse sales compares the
    net sales of coffeehouse during a fiscal period to the net sales
    from the same coffeehouses for the equivalent period in the
    prior year. A coffeehouse is included in this calculation
    beginning in its thirteenth full fiscal month of operations. A
    closed coffeehouse is included in the calculation for each full
    month that the coffeehouse was open in both fiscal periods.
    Franchised coffeehouses are not included in the comparable
    coffeehouse sales calculations.    
    Our coffeehouse leases are generally short-term
    (5-10 years) and we must depreciate all of the cost
    associated with those leases on a straight-line basis over the
    initial lease term excluding renewal options (unless such
    renewal periods are reasonably assured at the inception of the
    lease). We opened a
    net 229 company-operated
    coffeehouses, from the beginning of fiscal 2003 through 2007. As
    a result, we believe depreciation expense is disproportionately
    large when compared to the sales from a significant percentage
    of our coffeehouses that are in their initial years of
    operations. Also, many of the assets being depreciated have
    actual useful lives that exceed the initial lease term excluding
    renewal options. Additionally, depreciation and amortization is
    impacted by accelerated depreciation from asset impairments.
    Consequently, we believe that adjusting for depreciation and
    amortization is useful for evaluating the operating performance
    of our coffeehouses.
    The one-time cost to consolidate corporate and operating
    locations represents a $.5 million charge we recorded in
    fiscal 2004 for the remaining lease payments, reduced by
    estimated sublease rentals that could be reasonably obtained,
    for our previous headquarters and roasting facility. We vacated
    this facility when we consolidated our corporate offices and our
    roasting, packaging, warehousing and distribution activities,
    which we had previously operated out of three separate
    facilities, into a single facility. We believe it is useful to
    exclude this charge from Adjusted EBITDA because it was
    non-recurring and was not reflective of our operating
    performance.
    In June 2005, we recorded a one-time compensation charge of
    $1.7 million in connection with amending the terms of the
    employment agreement with our Chief Executive Officer. We
    believe that it is useful to exclude this expense from Adjusted
    EBITDA because it was non-recurring and was unrelated to our
    operations.
    In connection with our initial public offering
    (IPO), we granted the underwriters an option to
    purchase 803,700 shares of the our common stock at $14 per
    share for 30 days beginning on September 28, 2005 (the
    grant date). Since this option extended beyond the
    closing of the IPO, the option represented a call option that
    met the definition of a derivative under SFAS No. 133,
    Accounting for Derivative Instruments and Hedging Activities.
    Accordingly, the call option was separately accounted for at
    fair value with the change in fair value between the grant date
    and October 2, 2005 recorded as other income. We used the
    Black-Scholes valuation model to determine the fair value of the
    call option at the grant date and at October 2, 2005 using
    the following assumptions: 50% volatility factor, 30 day
    life and risk free interest rate of 3.43%. At September 28,
    2005, we recorded a liability of $657,989 with a corresponding
    decrease to additional paid in capital to record the fair value
    of the call option on such date. The fair value of the call
    option aggregated $34,880 on October 2, 2005 and we
    recorded the decrease in such fair value aggregating $623,109 as
    other income in the statement of operations for the
    thirteen-week period ended October 2, 2005. The
    underwriters did not exercise their option and it expired on
    October 28, 2005. We believe that it is useful to exclude
    this expense from Adjusted EBITDA because it was non-recurring
    and was unrelated to our operations. 19




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
    as measurements of operating performance because they assist us
    in comparing our operating performance on a consistent basis as
    they remove the impact of items not directly resulting from our
    coffeehouse operations;
    for planning purposes, including the preparation of our internal
    annual operating budget;
    to establish targets for certain management compensation
    matters; and
    to evaluate our capacity to incur and service debt, fund capital
    expenditures and expand our business.        Fiscal Year EndedDecember 30,


December 31,


January 1,


January 2,


December 28,2007


2006


2006


2005


2003(In thousands)Statement of Operations Data:Net loss

$
(30,663
)

$
(9,059
)

$
(4,905
)

$
(2,074
)

$
(937
)Interest expense


576



695



1,602



963



511Interest income


(181
)


(554
)


(266
)


(6
)


(9
)Depreciation and amortization(1)


34,362



23,645



18,284



14,791



11,768(Benefit) provision for income taxes


(297
)


313



79



220



228EBITDA


3,797



15,040



14,796



13,893



11,561Consolidation of corporate and operating locations














500



Derivative income










(623
)






Amendment of employment agreement










1,738







Adjusted EBITDA

$
3,797


$
15,040


$
15,911


$
14,393


$
11,561     (1)
    
    Includes depreciation and amortization associated with our
    headquarters and roasting facility that are categorized as
    general and administrative expenses and cost of sales and
    related occupancy costs on our statement of operations.  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations   20




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Overview
        Critical
    Accounting Policies
    Long-lived assets. Accounting for the Impairment or Disposal of Long-Lived
    Assets
  Stock options. Accounting for Stock Issued to Employees
 21




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, Share-Based Payment Accounting for Stock-Based
    Compensation.
  Lease accounting. Bulletin No. 85-3, Accounting for Operating Leases with Scheduled Rent
    Increases, Bulletin No. 88-1, Issues Relating to Accounting for Leases,
  Income taxes.
      Lease financing arrangement and revolving credit
    facility.
   22




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Fiscal
    Periods
   23




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Consolidated
    Results of Operations
    Fiscal
    Year 2007 Compared to Fiscal Year 2006
  Fiscal Year EndedDecember 30,


December 31,2007


2006Statement of Operations Data:Net Sales:Coffeehouses


93.5
%


95.5
%Other


6.5



4.5Total net sales


100.0



100.0Costs of sales and related occupancy costs


42.2



41.8Operating expenses


41.7



41.2Opening expenses


0.2



0.7Depreciation and amortization


12.5



9.1General and administrative expenses


12.6



11.0Closing expense and disposal of assets


2.6



0.2Operating loss


(11.8
)


(4.0
)Other income


0.0



0.5Interest income


0.0



0.2Interest expense


(0.2
)


(0.3
)Loss before (benefit) provision for income taxes, minority
    interest and cumulative effect of accounting change


(12.0
)


(3.6
)(Benefit) provision for income taxes


(0.1
)


0.1Loss before minority interest and cumulative effect of
    accounting change


(11.9
)


(3.7
)Minority interest


0.0



0.1Loss before cumulative effect of accounting change


(11.9
)


(3.8
)Cumulative effect of accounting change (net of income taxes)


0.0



0.0Net loss


(11.9
)%


(3.8
)%   Net
    Sales
    Costs
    and Expenses
  Cost of sales and related occupancy
    costs.
 24




---



##### Table of Contents



Operating expenses.
  Opening expenses.
  Depreciation and amortization.
  General and administrative expenses.
  Closing expenses and disposal of
    assets.
  Other Income.
  Interest income.
 25




---



##### Table of Contents



Interest expense.
  Operating
    Segments
    Retail
  Fiscal Year Ended


Fiscal Year EndedDecember 30,


December 31,


%


December 30,


December 31,2007


2006


Change


2007


2006As a % of coffeehouse salesCoffeehouse sales

$
240,267,522


$
225,649,268



6.5
%


100.0
%


100.0
%Costs of sales and related occupancy costs


98,376,910



92,681,243



6.1



40.9



41.1Operating expenses


103,521,358



94,924,416



9.1



43.1



42.1Opening expenses


493,072



1,705,665



(71.1
)


0.2



0.8Depreciation and amortization


32,115,864



21,521,738



49.2



13.4



9.5General and administrative expenses


10,057,207



9,556,431



5.2



4.2



4.2Closing expense and disposal of assets


7,042,222



390,672



1,702.6



2.9



0.2Operating (loss) income

$
(11,339,111
)

$
4,869,103



(332.9
)%


(4.7
)%


2.2
%     Coffeehouse
    sales
    Costs
    and Expenses
  Cost of sales and related occupancy
    costs.
  Operating expenses.
 26




---



##### Table of Contents



Opening expenses.
  Depreciation and amortization.
  General and administrative expenses.
  Closing expense and disposal of
    assets.
  Commercial
  Fiscal Year Ended


Fiscal Year EndedDecember 30,


December 31,


%


December 30,


December 31,2007


2006


Change


2007


2006As a % of commercial salesSales

$
12,425,859


$
8,603,740



44.4
%


100.0
%


100.0
%Costs of sales and related occupancy costs


7,819,012



4,947,273



58.0



62.9



57.5Operating expenses


2,323,113



1,378,553



68.5



18.7



16.0Depreciation and amortization


24,999



19,940



25.4



0.2



0.2Operating income

$
2,258,735


$
2,257,974




%


18.2
%


26.2
%    27




---



##### Table of Contents



Sales
    Costs
    and Expenses
  Cost of sales and related occupancy
    costs.
  Operating expenses.
  Franchise
  Fiscal Year Ended


Fiscal Year EndedDecember 30,


December 31,


%


December 30,


December 31,2007


2006


Change


2007


2006As a % of franchise salesSales

$
4,140,727


$
1,975,728



109.6
%


100.0
%


100.0
%Costs of sales and related occupancy costs


2,162,087



1,027,113



110.5



52.2



52.0Operating expenses


1,216,845



1,016,785



19.7



29.4



51.5Opening expenses


9,174



31,972



(71.3
)


0.2



1.6Depreciation and amortization


9,577



6,517



47.0



0.2



0.3Operating income (loss)

$
743,044


$
(106,659
)


796.7
%


17.9
%


(5.4
)%     Sales
    Costs
    and Expenses
  Cost of sales and related occupancy
    costs.
  Operating expenses.
 28




---



##### Table of Contents



Unallocated
    Corporate
  Fiscal Year Ended


Fiscal Year EndedDecember 30,


December 31,


%


December 30,


December 31,2007


2006


Change


2007


2006As a % of total net salesGeneral and administrative expenses

$
22,266,416


$
16,386,614



35.9
%


8.7
%


6.9
%Closing expense and disposal of assets


(203,023
)


119,789



(269.5
)


(0.1
)


0.1Operating loss

$
(22,063,393
)

$
(16,506,403
)


(33.7
)%


(8.6
)%


(7.0
)%   General and administrative
    expenses.
  Closing expenses and disposal of
    assets. Accounting for Costs
    Associated with Exit or Disposal Activities.
  Liquidity
    and Capital Resources
         29




---



##### Table of Contents



New
    Accounting Standards
  Fair Value Measurements SFAS No. 157-2, SFAS No. 157-2)
  The
    Fair Value Option for Financial Assets and Financial
    Liabilities-Including and Amendment of FASB Statement
    No. 115,
    Item 8.
    Financial
    Statements and Supplementary Data 30




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
           Share Based
    Payment. Accounting for Uncertainty in Income Taxes an
    interpretation of FASB Statement No. 109.
      31




---



##### Table of Contents



Caribou
    Coffee Company, Inc. and Affiliates
    (A Majority Owned Subsidiary of Caribou Holding Company
    Limited)
    Consolidated Balance Sheets
  December 30,


December 31,2007


2006Current assets:Cash and cash equivalents

$
9,886,427


$
14,752,269Accounts receivable (net of allowance for doubtful accounts of
    $7,989 and $12,693 at December 30, 2007 and
    December 31, 2006, respectively)


3,116,864



1,663,139Other receivables


1,544,281



1,769,256Income tax receivable


149,304



Inventories


10,228,527



10,294,493Prepaid expenses and other current assets


1,690,668



1,339,596Total current assets


26,616,071



29,818,753Property and equipment, net of accumulated depreciation and
    amortization


83,798,120



104,754,885Notes receivable-related party


32,296



48,413Restricted cash


410,831



286,005Other assets


982,334



1,399,542Total assets

$
111,839,652


$
136,307,598Current liabilities:Accounts payable

$
9,650,326


$
9,681,879Accrued compensation


7,863,445



5,676,449Accrued expenses


9,318,442



7,518,379Deferred revenue


9,987,724



9,002,588Total current liabilities


36,819,937



31,879,295Asset retirement liability


989,490



872,184Deferred rent liability


11,271,186



11,733,473Deferred revenue


2,853,500



2,919,000Income tax liability


473,064



342,108Minority interests in affiliates


144,176



159,050Total long term liabilities


15,731,416



16,025,815Commitments and contingenciesShareholders equity:Preferred stock, par value $.01, 20,000,000 shares
    authorized; no shares issued and outstanding






Common stock, par value $.01, 200,000,000 shares
    authorized; 19,370,590 and 19,286,425 shares issued and
    outstanding at December 30, 2007 and December 31,
    2006, respectively


193,706



192,864Additional paid-in capital


124,231,862



122,153,502Accumulated deficit


(65,137,269
)


(33,943,878
)Total shareholders equity


59,288,299



88,402,488Total liabilities and shareholders equity

$
111,839,652


$
136,307,598    32




---



##### Table of Contents



Caribou
    Coffee Company, Inc. and Affiliates
    (A Majority Owned Subsidiary of Caribou Holding Company
    Limited)
    Consolidated Statements of Operations
  Years EndedDecember 30,


December 31,2007


2006Coffeehouse sales

$
240,267,521


$
225,649,269Other sales


16,566,587



10,579,467Total net sales


256,834,108



236,228,736Cost of sales and related occupancy costs


108,358,009



98,655,629Operating expenses


107,061,316



97,319,754Opening expenses


502,246



1,737,637Depreciation and amortization


32,150,440



21,548,195General and administrative expenses


32,323,623



25,943,045Closing expense and disposal of assets


6,839,199



510,461Operating loss


(30,400,725
)


(9,485,985
)Other income (expense):Other income






1,059,936Interest income


181,151



553,767Interest expense


(576,281
)


(695,323
)Loss before (benefit) provision for income taxes, minority
    interest and cumulative effect of accounting change


(30,795,855
)


(8,567,605
)(Benefit) provision for income taxes


(296,931
)


313,327Loss before minority interest


(30,498,924
)


(8,880,932
)Minority interest


164,367



178,158Net loss

$
(30,663,291
)

$
(9,059,090
)Net loss per share:Net loss

$
(1.59
)

$
(0.47
)Basic and diluted weighted average number of shares outstanding


19,333,200



19,281,740    33




---



##### Table of Contents



Caribou
    Coffee Company, Inc. and Affiliates
    (A Majority Owned Subsidiary of Caribou Holding Company
    Limited)
    Consolidated Statements of Changes in Shareholders
    Equity
  Common Stock


AdditionalNumber of





Paid-In


Treasury


Accumulated


ShareholdersShares


Amount


Capital


Stock


Deficit


EquityBalance, January 1, 2006


19,269,133


$
192,699


$
121,626,855


$
(9,011
)

$
(24,884,788
)

$
96,925,755Stock repurchase


(1,302
)










(11,651
)






(11,651
)Share based compensation










507,000











507,000Issuance of treasury stock in connection with stock options


2,034











20,662







20,662Additional expenses related to initial public offering of common
    stock










(69,292
)










(69,292
)Exercise of stock options


16,560



165



88,939











89,104Net loss


















(9,059,090
)


(9,059,090
)Balance, December 31, 2006


19,286,425



192,864



122,153,502







(33,943,878
)


88,402,488Share based compensation










768,666











768,666Exercise of stock options


84,165



842



523,622











524,464Shareholder contribution










786,072











786,072Impact of adopting FASB Interpretation No. 48


















(530,100
)


(530,100
)Net loss


















(30,663,291
)


(30,663,291Balance, December 30, 2007


19,370,590


$
193,706


$
124,231,862


$



$
(65,137,269
)

$
59,288,299    34




---



##### Table of Contents



Caribou
    Coffee Company, Inc. and Affiliates
    (A Majority Owned Subsidiary of Caribou Holding Company
    Limited)
    Consolidated Statements of Cash Flows
  Years EndedDecember 30,


December 31,2007


2006Operating activitiesNet loss

$
(30,663,291
)

$
(9,059,090
)Adjustments to reconcile net loss to net cash provided by
    operating activities:Depreciation and amortization


34,361,879



23,645,110Amortization of deferred financing fees


344,392



344,392Minority interests in affiliates


164,367



178,158Provision for closing expense and asset disposals


3,348,896



263,172Shareholder contribution


786,072



Stock-based compensation


768,666



507,000Non cash accretion expense


117,306



111,187Changes in operating assets and liabilities:Restricted cash


(124,826
)


35,025Accounts receivable and other receivables


(1,212,633
)


(18,903
)Income tax receivable


(149,304
)


135,750Inventories


65,966



888,019Prepaid expenses and other assets


(278,256
)


(93,258
)Accounts payable


(31,553
)


(4,871,865
)Accrued compensation


2,186,996



213,792Accrued expenses and income tax liability


1,369,961



2,301,046Deferred revenue


919,636



792,328Net cash provided by operating activities


11,974,274



15,371,863Investing activitiesPayments for property and equipment


(17,185,339
)


(34,337,262
)Net cash used in investing activities


(17,185,339
)


(34,337,262
)Financing activitiesDistribution of minority interests earnings


(179,241
)


(157,266
)Net (expenses from initial public offering






(69,292
)Issuance of common stock


524,464



89,104Repurchase of common stock






(11,651
)Sale of treasury stock






20,662Net cash provided (used) by financing activities


345,223



(128,443
)(Decrease) increase in cash and cash equivalents


(4,865,842
)


(19,093,842
)Cash and cash equivalents at beginning of year


14,752,269



33,846,111Cash and cash equivalents at end of year

$
9,886,427


$
14,752,269Supplemental disclosure of cash flow informationCash paid (received) during the year for:Interest


231,890



350,931Income taxes


122,929



(79,538
)Accrual for leasehold improvements, furniture, and equipment

$
1,245,183


$
1,676,512    35




---



##### Table of Contents



CARIBOU
    COFFEE COMPANY, INC. AND AFFILIATES
    (A Majority Owned Subsidiary of Caribou Holding Company
    Limited)
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  1.
    Business
    and Summary of Significant Accounting Policies  Description
    of Business
    Principles
    of Consolidation
    Use of
    Estimates
    Fiscal
    Year End
    Cash
    and Cash Equivalents
    Fair
    Value of Financial Instruments
   36




---



##### Table of Contents



CARIBOU
    COFFEE COMPANY, INC. AND AFFILIATES
    (A Majority Owned Subsidiary of Caribou Holding Company
    Limited)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Inventories
  (first-in,
  Accounts
    Receivable
    Other
    Receivables
    Property
    and Equipment
    Accounting for Conditional Asset Retirement
    Obligations  an interpretation of FASB Statement
    No. 143.
    Deferred
    Financing Fees
   37




---



##### Table of Contents



CARIBOU
    COFFEE COMPANY, INC. AND AFFILIATES
    (A Majority Owned Subsidiary of Caribou Holding Company
    Limited)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Impairment
    of Long-Lived Assets and Long-Lived Assets to Be Disposed
    Of
    Stock
    Compensation
    Share-Based Payment Accounting for Stock Issued to
    Employees
  Accounting for
    Stock-Based Compensation
  Coffeehouse
    Preopening and Closing Expenses
  start-up
  Revenue
    Recognition
     38




---



##### Table of Contents



CARIBOU
    COFFEE COMPANY, INC. AND AFFILIATES
    (A Majority Owned Subsidiary of Caribou Holding Company
    Limited)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Advertising
    Operating
    Leases and Rent Expense
  Accounting for Leases Bulletin No. 85-3, Accounting for Operating Leases With Scheduled Rent
    Increases.
  Income
    Taxes
  Accounting for
    Income Taxes
  Accounting for Uncertainty in
    Income Taxes
 39




---



##### Table of Contents



CARIBOU
    COFFEE COMPANY, INC. AND AFFILIATES
    (A Majority Owned Subsidiary of Caribou Holding Company
    Limited)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Net
    Loss Per Share
    Reclassification
    2.
    Impairments,
    Coffeehouse Closings and Asset Disposals    Accounting for Costs
    Associated with Exit or Disposal Activities.
   Years EndedDecember 30,


December 31,2007


2006Coffeehouse closures


28



6Amount charged to operations for closed coffeehouses:Amount charged to operations for costs to consolidate facilities

$
(203,023
)

$
119,789Amount charged to operations for lease costs associated with
    lease termination-cash


3,076,016



127,500Total exit costs


2,872,993



247,289Cash closure costs for equipment removal from closed coffeehouses


617,311



Net book value of closed coffeehouse property and equipment


2,970,727



194,413Amount charged to operations for other property and equipment
    write-offs


378,168



68,759Coffeehouse closing expense and disposal of assets

$
6,839,199


$
510,461  40




---



##### Table of Contents



CARIBOU
    COFFEE COMPANY, INC. AND AFFILIATES
    (A Majority Owned Subsidiary of Caribou Holding Company
    Limited)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Balance at


Additions


DeductionsBeginning of


Charged to


from


Balance atYear Ended:

Year


Expense


Reserves


End of YearDecember 30, 2007Exit costs

$
511,641


$
2,872,993


$
2,917,866


$
466,768Severance






1,353,000







1,353,000Total

$
511,641


$
4,225,993


$
2,917,866


$
1,819,768     3.
    Recent
    Accounting Pronouncements  Fair Value Measurements SFAS No. 157-2, SFAS No. 157-2)
  The
    Fair Value Option for Financial Assets and Financial
    Liabilities-Including an Amendment of FASB Statement
    No. 115,
   41




---



##### Table of Contents



CARIBOU
    COFFEE COMPANY, INC. AND AFFILIATES
    (A Majority Owned Subsidiary of Caribou Holding Company
    Limited)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  4.
    Cash and
    Cash Equivalents    December 30,


December 31,2007


2006Operating funds

$
9,886,427


$
12,184,408Money market funds/short-term investments






2,567,861$
9,886,427


$
14,752,269   5.
    Restricted
    Cash    6.
    Inventories    December 30,


December 31,2007


2006Coffee

$
3,485,133


$
3,879,079Merchandise held for sale


4,345,584



3,627,035Supplies


2,397,810



2,788,379$
10,228,527


$
10,294,493     7.
    Property
    and Equipment    December 30,


December 31,2007


2006Leasehold improvements

$
90,400,637


$
95,044,683Furniture, fixtures, and equipment


114,343,734



103,580,625204,744,371



198,625,308Less accumulated depreciation and amortization


(120,946,251
)


(93,870,423
)$
83,798,120


$
104,754,885    42




---



##### Table of Contents



CARIBOU
    COFFEE COMPANY, INC. AND AFFILIATES
    (A Majority Owned Subsidiary of Caribou Holding Company
    Limited)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  8.
    Note
    Payable and Revolving Credit Facility            December 30,


December 31,2007


2006Revolving credit facility

$



$
  43




---



##### Table of Contents



CARIBOU
    COFFEE COMPANY, INC. AND AFFILIATES
    (A Majority Owned Subsidiary of Caribou Holding Company
    Limited)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 30,


December 31,2007


2006Deferred financing fees

$
1,721,958


$
1,721,958Less accumulated amortization


(1,205,371
)


(860,979
)$
516,587


$
860,979     9.
    Equity
    and Stock Based Compensation          Years EndedDecember 30,

December 31,2007

2006Expected dividend yield

0%

0%Weighted average risk free interest rate

4.49%

4.78%Expected life

5 years

5 yearsVolatility

31% - 47%

47% - 50%  44




---



##### Table of Contents



CARIBOU
    COFFEE COMPANY, INC. AND AFFILIATES
    (A Majority Owned Subsidiary of Caribou Holding Company
    Limited)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Weighted


WeightedAverage


Average


AggregateNumber of


Exercise


Contract


IntrinsicShares


Price


Life


ValueOutstanding, January 1, 2006


2,204,199


$
7.21



7.66 YrsGranted


341,088


$
8.93Exercised


(18,594
)

$
5.90Forfeited


(105,093
)

$
7.96Outstanding, December 31, 2006


2,421,600


$
7.43



6.98 Yrs


$
2,668,323Granted


439,250


$
7.31Exercised


(84,165
)

$
6.23Forfeited


(205,939
)

$
7.31Outstanding, December 30, 2007


2,570,746


$
7.46



6.47 Yrs


$
Options vested and expected to vest at December 30, 2007


2,332,785


$
7.09



6.74 Yrs


$
Options vested at December 30, 2007


1,729,886


$
7.14



5.45 Yrs


$
    45




---



##### Table of Contents



CARIBOU
    COFFEE COMPANY, INC. AND AFFILIATES
    (A Majority Owned Subsidiary of Caribou Holding Company
    Limited)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Options Outstanding


Options ExercisableWeighted


Weighted





WeightedNumber of


Average


Average


Number of


AverageOptions


Remaining


Exercise


Options


ExerciseRange of Exercise Prices

Outstanding


Contractual Life


Price


Exercisable


Price$ 4.87 - $ 6.70


1,383,034



5.03 years


$
6.34



1,278,245


$
6.36$ 6.71 - $ 8.52


593,027



8.54 years


$
7.46



115,557


$
7.16$ 8.53 - $10.35


533,892



7.73 years


$
9.63



305,688


$
9.74$10.36 - $12.17


5,793



7.87 years


$
11.00



2,897


$
11.00$12.18 - $14.00


55,000



7.76 years


$
14.00



27,500


$
14.00Total


2,570,746



6.47 years


$
7.46



1,729,886


$
7.14   10.
    Leasing
    Arrangements and Commitments      Years EndedDecember 30,


December 31,2007


2006Minimum rentals

$
20,588,378


$
19,473,725Contingent rentals


2,146,392



2,053,60822,734,770



21,527,333Less sublease rentals


(339,829
)


(222,582
)$
22,394,941


$
21,304,751     2007

$
22,847,2282008


22,029,3622009


21,084,6652010


19,764,3762011


17,613,279Thereafter


47,701,424$
151,040,334    46




---



##### Table of Contents



CARIBOU
    COFFEE COMPANY, INC. AND AFFILIATES
    (A Majority Owned Subsidiary of Caribou Holding Company
    Limited)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  11.
    Income
    Taxes    Years EndedDecember 30,


December 31,2007


2006Current:U.S. Federal

$
(261,197
)

$
80,158State


(52,247
)


189,444Foreign


16,513



44,124$
(296,931
)

$
313,327     Years EndedDecember 30,


December 31,2007


2006Tax at U.S. Federal statutory rate

$
(10,526,475
)

$
(2,973,559
)Tax at State statutory rate net of federal benefit


(1,689,723
)


(488,260
)State income taxes, net of federal benefit


85,700



125,033Foreign tax


16,513



43,725Permanent differences


12,950



42,002Changes in valuation allowance


12,206,353



3,378,513(Decrease) increase to reserve for tax contingencies


(399,144
)


105,000Other, net


(3,105
)


80,873$
(296,931
)

$
313,327    47




---



##### Table of Contents



CARIBOU
    COFFEE COMPANY, INC. AND AFFILIATES
    (A Majority Owned Subsidiary of Caribou Holding Company
    Limited)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 30,


December 31,2007


2006Depreciation

$
7,667,546


$
3,746,096Deferred rent on leases


413,877



458,557Net operating loss carryforwards


10,918,738



5,203,334Coffeehouse closing and asset reserves


158,701



173,958Accrued expenses


1,990,958



810,290Deferred revenue


1,524,421



1,364,412Other


918,701



469,019State deferred


1,932,543



1,093,466Gross deferred income tax assets


25,525,485



13,319,132Less deferred income tax asset valuation allowance


(25,525,485
)


(13,319,132
)Net deferred income tax assets

$



$
       Year EndedDecember 30,2007Beginning balance

$
4,759,000Reductions for prior year positions


(32,165
)Reductions for current year positions


(960,080
)Reductions for expiration of statute of limitations


(365,392
)Ending balance

$
3,401,363        48




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##### Table of Contents



CARIBOU
    COFFEE COMPANY, INC. AND AFFILIATES
    (A Majority Owned Subsidiary of Caribou Holding Company
    Limited)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    12.
    Related
    Party Transactions  Notes
    from Affiliates
      13.
    Employee
    Benefit Plan    14.
    Master
    Franchise Agreement         49




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##### Table of Contents



CARIBOU
    COFFEE COMPANY, INC. AND AFFILIATES
    (A Majority Owned Subsidiary of Caribou Holding Company
    Limited)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    15.
    Net Loss
    Per Share    December 30,


December 31,2007


2006Net loss

$
(30,663,291
)

$
(9,059,090
)Weighted average number of shares outstanding (for basic
    calculation)


19,333,200



19,281,740Effects of dilutive stock options






Weighted average number of shares outstanding (for diluted
    calculation)


19,333,200



19,281,740Net loss per share  basic and diluted

$
(1.59
)

$
(0.47
)     16.
    Commitments
    and Contingencies   50




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##### Table of Contents



CARIBOU
    COFFEE COMPANY, INC. AND AFFILIATES
    (A Majority Owned Subsidiary of Caribou Holding Company
    Limited)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        17.
    Segment
    Reporting    Retail
    Commercial
    Franchise
   51




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##### Table of Contents



CARIBOU
    COFFEE COMPANY, INC. AND AFFILIATES
    (A Majority Owned Subsidiary of Caribou Holding Company
    Limited)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Fiscal
    2007
  UnallocatedRetail


Commercial


Franchise


Corporate


TotalCoffeehouse sales

$
240,267,522


$
12,425,859


$
4,140,727


$



$
256,834,108Costs of sales and related occupancy costs


98,376,910



7,819,012



2,162,087







108,358,009Operating expenses


103,521,358



2,323,113



1,216,845







107,061,316Opening expenses


493,072







9,174







502,246Depreciation and amortization


32,115,864



24,999



9,577







32,150,440General and administrative expenses


10,057,207











22,266,416



32,323,623Closing expense and disposal of assets


7,042,222











(203,023
)


6,839,199Operating (loss) income

$
(11,339,111
)

$
2,258,735


$
743,044


$
(22,063,393
)

$
(30,400,725
)Identifiable assets

$
73,700,103


$
66,411


$
16,712


$
10,014,894


$
83,798,120Net impairment

$
10,371,764


$



$



$



$
10,371,764Net capital expenditures

$
13,254,486


$



$



$
3,930,853


$
17,185,339   Fiscal
    2006
  UnallocatedRetail


Commercial


Franchise


Corporate


TotalCoffeehouse sales

$
225,649,268


$
8,603,740


$
1,975,728


$



$
236,228,736Costs of sales and related occupancy costs


92,681,243



4,947,273



1,027,113







98,655,629Operating expenses


94,924,416



1,378,553



1,016,785







97,319,754Opening expenses


1,705,665







31,972







1,737,637Depreciation and amortization


21,521,738



19,940



6,517







21,548,195General and administrative expenses


9,556,431











16,386,614



25,943,045Closing expense and disposal of assets


390,672











119,789



510,461Operating income (loss)

$
4,869,103


$
2,257,974


$
(106,659
)

$
(16,506,403
)

$
(9,485,985
)Identifiable assets

$
94,544,367


$
82,095


$
28,913


$
10,099,510


$
104,754,885Net impairment

$
1,224,799


$



$



$



$
1,224,799Net capital expenditures

$
30,487,216


$
14,053


$



$
3,835,993


$
34,337,262    52




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##### Table of Contents



CARIBOU
    COFFEE COMPANY, INC. AND AFFILIATES
    (A Majority Owned Subsidiary of Caribou Holding Company
    Limited)
    NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  18.
    Selected
    Quarterly Financial Data (Unaudited)  Fiscal QuartersYear Ended December 30, 2007

First


Second


Third


FourthNet sales

$
61,852,630


$
62,847,385


$
61,980,673


$
70,153,420Cost of sales and related occupancy costs


25,514,266



26,519,499



26,755,963



29,568,281Operating loss


(3,107,672
)


(4,032,295
)


(8,377,644
)


(14,883,114
)(1)Net loss


(3,251,050
)


(3,890,516
)


(8,463,059
)


(15,058,666
)(1)Net loss per shareBasic


(0.17
)


(0.20
)


(0.44
)


(0.78
)Diluted


(0.17
)


(0.20
)


(0.44
)


(0.78
)   Fiscal QuartersYear Ended December 31, 2006

First


Second


Third


FourthNet sales

$
55,966,211


$
56,583,993


$
56,968,442


$
66,710,090Cost of sales and related occupancy costs


23,266,067



23,764,186



23,725,262



27,900,114Operating loss


(1,730,372
)


(2,423,004
)


(3,360,490
)


(1,972,119
)(2)Net loss


(1,572,065
)


(2,385,153
)


(3,102,793
)


(1,999,079
)(2)Net loss per shareBasic


(0.08
)


(0.12
)


(0.16
)


(0.10
)Diluted


(0.08
)


(0.12
)


(0.16
)


(0.10
)     (1)
    
    During the fourth quarter of fiscal year 2007 the Company
    recognized the following:Closing expense and disposal of assets charge of $3,106,616
    related to the closing of 9 coffeehouses during the quarter.Accelerated depreciation of $7,920,140 related to the impairment
    of 27 coffeehouses.Litigation settlement charge of $2,000,000 related to the
    stipulation of settlement described in Note 16.Severance benefit expense of 1,353,000 payable to the
    Companys former CEO as described in Note 2.(2)
    
    During the fourth quarter of fiscal year 2006 the Company
    recognized the following:Closing expense and disposal of assets charge of $148,225
    related to the closing of 1 coffeehouse during the quarter.Accelerated depreciation of $591,778 related to the impairment
    of 4 coffeehouses. 53




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##### Table of Contents



CARIBOU
    COFFEE COMPANY, INC. AND AFFILIATES
  Schedule II 
    Valuation and Qualifying Accounts and Reserves
  Balance at


AdditionsBeginning of


Charged to


Deductions from


Balance atYears Ended:

Year


Expense


Reserves


End of YearDecember 31, 2006Allowance for doubtful accounts

$
237,595


$



$
224,902
(1)

$
12,693Deferred income tax asset valuation allowance

$
9,940,619


$
3,378,513


$



$
13,319,132Inventory reserve

$
444,281


$
346,298


$
416,290
(2)

$
374,289December 30, 2007Allowance for doubtful accounts

$
12,693


$
5,545


$
10,249
(1)

$
7,989Deferred income tax asset valuation allowance

$
13,319,132


$
12,206,353


$



$
25,525,485Inventory reserve

$
374,289


$
81,129


$
213,041
(2)

$
242,377     (1)
    
    Deductions represent the write-off of accounts deemed
    uncollectible.(2)
    
    Deductions represent the write-off of obsolete inventory. 54




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##### Table of Contents



Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A(T).
    Controls
    and Procedures  Conclusion
    regarding the Effectiveness of Disclosure Controls and
    Procedures
  Rules 13a-15(e) 15d-15(e)
  Report of
    Management on Internal Control over Financial
    Reporting
    Internal Control 
    Integrated Framework
    Item 9B.
    Other
    Information   55




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##### Table of Contents



PART III  Item 10.
    Directors,
    Executive Officers and Corporate Governance    About Us Form 8-K
  Item 11.
    Executive
    Compensation  Form 10-K.
  Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Shareholder Matters  Form 10-K.
  Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence  Form 10-K.
  Item 14.
    Principal
    Accounting Fees and Services  Form 10-K.
 56




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##### Table of Contents



PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules  Form 10-K.
  Index to Consolidated Financial Statements.
  Form 10-K:
  PageReport of Independent Registered Public Accounting Firm


31Consolidated Balance Sheets as of December 30, 2007 and
    December 31, 2006


32Consolidated Statements of Operations for the Years Ended
    December 30, 2007 and December 31, 2006


33Consolidated Statements of Changes in Shareholders Equity
    for the Years Ended December 30, 2007 and December 31,
    2006


34Consolidated Statements of Cash Flows for the Years Ended
    December 30, 2007 and December 31, 2006


35Notes to Consolidated Financial Statements


36   Index to Financial Statement Schedules.
      Listing of Exhibits
  ExhibitNumber



Description of Exhibits3
.1



Form of Amended and Restated Articles of Incorporation of the
    Company (incorporated by reference to Exhibit 3.1 to the
    Companys Registration Statement on Form S-1/A filed August
    25, 2005).3
.2



Form of Amended and Restated Bylaws of the Company (incorporated
    by reference to Exhibit 3.2 to the Companys Registration
    Statement on Form S-1/A filed August 25, 2005).4
.1



Form of Registrants Common Stock Certificate (incorporated
    by reference to Exhibit 4.1 to the Companys Registration
    Statement on Form S-1/A filed September 6, 2005).10
.1



1994 Stock Awards Plan (incorporated by reference to Exhibit
    10.1 to the Companys Registration Statement on Form S-1
    filed July 19, 2005).10
.2



Form of 1994 Stock Awards Plan Stock Option Grant and Agreement
    (incorporated by reference to Exhibit 10.2 to the Companys
    Registration Statement on Form S-1 filed July 19, 2005).10
.3



2001 Stock Incentive Plan (incorporated by reference to Exhibit
    10.3 to the Companys Registration Statement on Form S-1
    filed July 19, 2005).10
.4



Amendment No. 1 to the 2001 Stock Incentive Plan (incorporated
    by reference to Exhibit 10.4 to the Companys Registration
    Statement on Form S-1 filed July 19, 2005).10
.5



Form of 2001 Stock Incentive Plan Stock Option Grant and
    Agreement (incorporated by reference to Exhibit 10.5 to the
    Companys Registration Statement on Form S-1 filed July 19,
    2005).10
.6



2005 Equity Incentive Plan (incorporated by reference to Exhibit
    10.6 to the Companys Registration Statement on Form S-1/A
    filed August 25, 2005).10
.7



Description of Annual Support Center and Field Management Bonus
    Plan (incorporated by reference to Exhibit 10.1 to the
    Companys on Form 8-K filed May 26, 2006).10
.8*



Amended and Restated Employment Agreement between Caribou Coffee
    Company, Inc. and Michael J. Coles, dated June 29, 2005
    (incorporated by reference to Exhibit 10.9 to the Companys
    Registration Statement on Form S-1 filed July 19, 2005). 57




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##### Table of Contents



ExhibitNumber



Description of Exhibits10
.9*



Employment Agreement between Caribou Coffee Company, Inc. and
    George E. Mileusnic, dated July 18, 2005 (incorporated by
    reference to Exhibit 10.11 to the Companys Registration
    Statement on Form S-1 filed July 19, 2005).10
.10*



Employment Agreement between Caribou Coffee Company, Inc. and
    Amy K. ONeil, dated July 18, 2005 (incorporated by
    reference to Exhibit 10.12 to the Companys Registration
    Statement on Form S-1 filed July 19, 2005).10
.11*



Form of Directors and Officers Indemnification Agreement
    (incorporated by reference to Exhibit 10.13 of the
    Companys Form 10-K for the year ended January 1, 2006).10
.12



Master Franchise Agreement between Caribou Coffee Company, Inc.
    and Al-Sayer Enterprises (incorporated by reference to Exhibit
    10.14 to the Companys Registration Statement on
    Form S-1/A
    filed September 14, 2005).10
.13*



Offer Letter from Caribou Coffee Company, Inc. to Janet D.
    Astor, dated November 29, 2004 (incorporated by reference to
    Exhibit 10.15 to the Companys Registration Statement on
    Form S-1/A
    filed August 25, 2005).10
.14*



Severance Agreement between Caribou Coffee Company, Inc. and
    Janet D. Astor, dated December 13, 2004 (incorporated by
    reference to Exhibit 10.16 to the Companys Registration
    Statement on
    Form S-1/A
    filed August 25, 2005).10
.15*



Offer Letter from Caribou Coffee Company, Inc. to Kathy F.
    Hollenhorst, dated April 13, 2005 (incorporated by reference to
    Exhibit 10.17 to the Companys Registration Statement on
    Form S-1/A
    filed August 25, 2005).10
.16



Commercial Lease between Caribou Coffee Company, Inc. and Twin
    Lakes III LLC, dated September 5, 2003 (incorporated by
    reference to Exhibit 10.18 to the Companys Registration
    Statement on Form S-1/A filed August 25, 2005).10
.17



Second Amended and Restated Lease and License Financing and
    Purchase Option Agreement between Caribou Coffee Company, Inc.
    and Arabica Funding, Inc., dated June 29, 2004 (incorporated by
    reference to Exhibit 10.19 to the Companys Registration
    Statement on Form S-1/A filed August 25, 2005)10
.18



Amendment to Second Amended and Restated Lease and License
    Financing and Purchase Option Agreement between Caribou Coffee
    Company, Inc. and Arabica Funding, Inc., dated March 25, 2005
    (incorporated by reference to Exhibit 10.20 to the
    Companys Registration Statement on Form S-1/A filed August
    25, 2005).10
.19



Second Amendment to Second Amended and Restated Lease and
    License Financing and Purchase Option Agreement between Caribou
    Coffee Company, Inc. and Arabica Funding, Inc., dated May 10,
    2005 (incorporated by reference to Exhibit 10.21 to the
    Companys Registration Statement on
    Form S-1/A
    filed August 25, 2005).10
.20



Second Amended and Restated Call Option Letter from Arabica
    Funding, Inc. to Caribou Coffee Company, Inc., dated June 29,
    2004 (incorporated by reference to Exhibit 10.22 to the
    Companys Registration Statement on Form S-1/A filed August
    25, 2005).10
.21



Second Amended and Restated Put Option Letter from Caribou
    Coffee Company, Inc. to Arabica Funding, Inc., dated June 29,
    2004 (incorporated by reference to Exhibit 10.23 to the
    Companys Registration Statement on Form S-1/A filed August
    25, 2005).10
.22



Second Amended and Restated Tax Matters Agreement between
    Caribou Coffee Company, Inc. and Arabica Funding, Inc., dated
    June 29, 2004 (incorporated by reference to Exhibit 10.24 to the
    Companys Registration Statement on Form S-1/A filed August
    25, 2005).10
.23



Second Amended and Restated Supplemental Agreement between
    Caribou Coffee Company, Inc. and Arabica Funding, Inc., dated
    June 29, 2004 (incorporated by reference to Exhibit 10.25 to the
    Companys Registration Statement on Form S-1/A filed August
    25, 2005).10
.24



Credit Agreement among Arabica Funding, Inc., as Borrower, The
    Several Lenders from Time to Time Parties thereto, and Fleet
    National Bank, as Administrative Agent, dated as of June 29,
    2004 (incorporated by reference to Exhibit 10.26 to the
    Companys Registration Statement on
    Form S-1/A
    filed August 25, 2005). 58




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##### Table of Contents



ExhibitNumber



Description of Exhibits10
.25



Amendment to Credit Agreement among Arabica Funding, Inc., as
    Borrower, The Several Lenders from Time to Time Parties Thereto,
    and Fleet National Bank, as Administrative Agent, dated as of
    March 2005 (incorporated by reference to Exhibit 10.27 to the
    Companys Registration Statement on Form S-1/A filed August
    25, 2005).10
.26*



Offer Letter from Caribou Coffee Company, Inc. to Rosalyn
    Mallet, dated February 28, 2007 (incorporated by reference to
    Exhibit 10.1 of the Companys Form 8-K/A filed on April 30,
    2007).10
.27*



Letter Agreement modifying Mr. Coles amended and restated
    employment agreement between Caribou Coffee Company, Inc. and
    Michael J. Coles, dated November 12, 2007 (incorporated by
    reference to Exhibit 10.1 of the Companys Form 8-K filed
    on November 13, 2007).10
.28



Fifth Amendment to Credit Agreement among Arabica Funding, Inc.,
    as Borrower, The Several Lenders from Time to Time Parties
    Thereto, and Bank of America, N.A. as successor-by-merger to
    Fleet National Bank, as Administrative Agent, dated as of
    February 13, 200810
.29



Sixth Amendment to Second Amended and Restated Lease and License
    Financing and Purchase Option Agreement between Caribou Coffee
    Company, Inc. and Arabica Funding, Inc., dated February 13, 200821
.1



List of Subsidiaries (incorporated by reference to Exhibit 21.1
    to the Companys Registration Statement on Form S-1/A filed
    September 14, 2005).23
.1



Consent of Independent Registered Public Accounting Firm31
.1



Certification Pursuant to Rule 13a  14(a), as Adopted
    Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31
.2



Certification Pursuant to Rule 13a  14(a), as Adopted
    Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32
.1



Certification Pursuant to 18 U.S.C. Section 1350, as
    Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
    2002.32
.2



Certification Pursuant to 18 U.S.C. Section 1350, as
    Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
    2002.     *
    
    Indicates management contracts and compensatory arrangements
    required to be filed pursuant to Item 15(b) of this annual
    report.  Exhibits.
    Financial Statement Schedules.
   59




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##### Table of Contents



SIGNATURES    Caribou Coffee Company,
    Inc.
  By:
    /s/  ROSALYN
    MALLET   Title:
    President, Chief Operating Officer       Signature

Title

Date/s/  ROSALYN
    MALLETRosalyn
    Mallet

President, Chief Operating Officer and Interim Chief Executive
    Officer
    (principal executive officer)

March 21, 2008/s/  KAYE
    R. OLEARYKaye
    R. OLeary

Acting Chief Financial Officer
    (principal financial officer)

March 21, 2008/s/  MICHAEL
    E. PETERSONMichael
    E. Peterson

Controller
    (principal accounting officer)

March 21, 2008/s/  GARY
    A. GRAVESGary
    A. Graves

Non-Executive Chairman of
    the Board of Directors

March 21, 2008/s/  CHARLES
    H. OGBURNCharles
    H. Ogburn

Director

March 21, 2008/s/  CHARLES
    L. GRIFFITHCharles
    L. Griffith

Director

March 21, 2008/s/  JEFFERY
    C. NEALJeffery
    C. Neal

Director

March 21, 2008/s/  SARAH
    PALISI CHAPINSarah
    Palisi Chapin

Director

March 21, 2008/s/  KIP
    R. CAFFEYKip
    R. Caffey

Director

March 21, 2008/s/  WALLACE
    B. DOOLINWallace
    B. Doolin

Director

March 21, 2008/s/  MICHAEL
    J. COLESMichael
    J. Coles

Director

March 21, 2008  60