##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 Form 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended July 4, 2010.
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from           to           .
 Commission File Number: 000-51535
 
 CARIBOU COFFEE COMPANY, INC.
 (Exact Name of Registrant as Specified in Its Charter)
 Minnesota(State or other jurisdiction of 
incorporation or organization)
    
    41-1731219(I.R.S. Employer
Identification No.)
 3900 Lakebreeze Avenue North 
Brooklyn Center, Minnesota(Address of principal executive offices)
    
    55429(Zip Code)
 : (763) 592-2200
 þ o
 o o
  Large Accelerated Filer o
    
    Accelerated Filer o
    
    Non-Accelerated Filer o
(Do not check if a smaller reporting company)
    
    Smaller Reporting Company þ
 o þ




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##### 



CARIBOU COFFEE COMPANY, INC.
 FORM 10-Q
 For the Thirteen Week Period Ended July 4, 2010
 Table of Contents
 PART I. FINANCIAL INFORMATIONItem 1. Financial Statements
    
    2Condensed Consolidated Statements of Operations
    
    2Condensed Consolidated Balance Sheets
    
    3Condensed Consolidated Statement of Changes in Equity
    
    4Condensed Consolidated Statements of Cash Flows
    
    5Notes to Condensed Consolidated Financial Statements
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    15Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    27Item 4T. Controls and Procedures
    
    27PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    28Item 1A. Risk Factors
    
    28Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    28Item 3. Defaults Upon Senior Securities
    
    28Item 4. Reserved
    
    28Item 5. Other Information
    
    28Item 6. Exhibits
    
    29Signature
    
    30EX-31.1EX-31.2EX-32.1EX-32.2
   1




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements.
 CARIBOU COFFEE COMPANY, INC. AND AFFILIATES
(A Majority Owned Subsidiary of Caribou Holding Company Limited)
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Thirteen Weeks Ended
    
    
    Twenty-Six Weeks EndedJuly 4,
    
    
    June 28,
    
    
    July 4,
    
    
    June 28,2010
    
    
    2009
    
    
    2010
    
    
    2009(In thousands, except for per share amounts)(Unaudited)Coffeehouse sales
    
    $
    57,751
    
    
    $
    55,294
    
    
    $
    113,348
    
    
    $
    108,158Commercial and franchise sales
    
    
    11,133
    
    
    
    7,660
    
    
    
    22,587
    
    
    
    15,176Total net sales
    
    
    68,884
    
    
    
    62,954
    
    
    
    135,935
    
    
    
    123,334Cost of sales and related occupancy costs
    
    
    30,551
    
    
    
    27,317
    
    
    
    61,950
    
    
    
    53,589Operating expenses
    
    
    25,067
    
    
    
    23,873
    
    
    
    50,029
    
    
    
    47,275Depreciation and amortization
    
    
    3,028
    
    
    
    3,570
    
    
    
    6,172
    
    
    
    7,311General and administrative expenses
    
    
    7,633
    
    
    
    6,789
    
    
    
    14,142
    
    
    
    13,378Operating income
    
    
    2,606
    
    
    
    1,405
    
    
    
    3,642
    
    
    
    1,781Other income (expense):Interest income
    
    
    5
    
    
    
    7
    
    
    
    10
    
    
    
    7Interest expense
    
    
    (64
    )
    
    
    (63
    )
    
    
    (171
    )
    
    
    (121
    )Income
before provision for (benefit from) income taxes
    
    
    2,547
    
    
    
    1,349
    
    
    
    3,481
    
    
    
    1,667Provision for (benefit from) income taxes
    
    
    20
    
    
    
    59
    
    
    
    (138
    )
    
    
    (42
    )Net income
    
    
    2,527
    
    
    
    1,290
    
    
    
    3,619
    
    
    
    1,709Less: Net income attributable to noncontrolling interest
    
    
    106
    
    
    
    122
    
    
    
    160
    
    
    
    195Net Income attributable to Caribou Coffee Company, Inc.
    
    $
    2,421
    
    
    $
    1,168
    
    
    $
    3,459
    
    
    $
    1,514Basic net income attributable to Caribou Coffee Company,
Inc. common shareholders per share
    
    $
    0.12
    
    
    $
    0.06
    
    
    $
    0.18
    
    
    $
    0.08Diluted net income attributable to Caribou Coffee
Company, Inc. common shareholders per share
    
    $
    0.12
    
    
    $
    0.06
    
    
    $
    0.17
    
    
    $
    0.08Basic weighted average number of shares outstanding
    
    
    19,515
    
    
    
    19,371
    
    
    
    19,514
    
    
    
    19,371Diluted weighted average number of shares outstanding
    
    
    20,520
    
    
    
    20,118
    
    
    
    20,381
    
    
    
    19,865
  2




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CARIBOU COFFEE COMPANY, INC. AND AFFILIATES
(A Majority Owned Subsidiary of Caribou Holding Company Limited)
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 July 4,
    
    
    January 3,2010
    
    
    2010In thousands, except per share amounts(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    16,188
    
    
    $
    23,578Accounts receivable (net of allowance for doubtful accounts of $21 and
$3 at July 4, 2010 and January 3, 2010, respectively)
    
    
    5,536
    
    
    
    5,887Other receivables (net of allowance for doubtful accounts of $191 and
$128 at July 4, 2010 and January 3, 2010, respectively)
    
    
    1,132
    
    
    
    1,268Income tax receivable
    
    
    164
    
    
    
    193Inventories
    
    
    24,776
    
    
    
    13,278Prepaid expenses and other current assets
    
    
    1,016
    
    
    
    1,546Total current assets
    
    
    48,812
    
    
    
    45,750Property and equipment, net of accumulated depreciation and amortization
    
    
    41,349
    
    
    
    47,135Restricted cash
    
    
    605
    
    
    
    605Other assets
    
    
    627
    
    
    
    237Total assets
    
    $
    91,393
    
    
    $
    93,727LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    9,381
    
    
    $
    9,042Accrued compensation
    
    
    4,566
    
    
    
    6,296Accrued expenses
    
    
    6,379
    
    
    
    7,563Deferred revenue
    
    
    6,112
    
    
    
    8,747Total current liabilities
    
    
    26,438
    
    
    
    31,648Asset retirement liability
    
    
    1,157
    
    
    
    1,120Deferred rent liability
    
    
    6,725
    
    
    
    7,955Deferred revenue
    
    
    2,072
    
    
    
    2,072Income tax liability
    
    
    10
    
    
    
    156Total long term liabilities
    
    
    9,964
    
    
    
    11,303Equity:Caribou Coffee Company, Inc. Shareholders equity:Preferred stock, par value $.01, 20,000 shares authorized; no shares
issued and outstanding
    
    
    
    
    
    
    Common stock, par value $.01, 200,000 shares authorized; 20,039 and
19,814 shares issued and outstanding at July 4, 2010 and January 3,
2010, respectively
    
    
    200
    
    
    
    198Additional paid-in capital
    
    
    127,518
    
    
    
    126,770Accumulated comprehensive loss
    
    
    (12
    )
    
    
    (7
    )Accumulated deficit
    
    
    (72,882
    )
    
    
    (76,341
    )Total Caribou Coffee Company, Inc. shareholders equity
    
    
    54,824
    
    
    
    50,620Noncontrolling interest
    
    
    166
    
    
    
    156Total equity
    
    
    54,990
    
    
    
    50,776Total liabilities and equity
    
    $
    91,393
    
    
    $
    93,727
  3




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CARIBOU COFFEE COMPANY, INC. AND AFFILIATES
(A Majority Owned Subsidiary of Caribou Holding Company Limited)
 
 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(unaudited)
(in thousands)
 Common Stock
    
    
    Additional
    
    
    
    
    
    
    AccumulatedNumber of
    
    
    
    
    
    
    Paid-In
    
    
    Noncontrolling
    
    
    Other
    
    
    AccumulatedShares
    
    
    Amount
    
    
    Capital
    
    
    Interest
    
    
    Comprehensive Loss
    
    
    Deficit
    
    
    EquityBalance, January 3, 2010
    
    
    19,814
    
    
    $
    198
    
    
    $
    126,770
    
    
    $
    156
    
    
    $
    (7
    )
    
    $
    (76,341
    )
    
    $
    50,776Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    160
    
    
    
    
    
    
    
    3,459
    
    
    
    3,619Changes in fair value of derivative financial instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    (5
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    3,614Share based compensation
    
    
    
    
    
    
    
    
    
    
    618
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    618Options exercised
    
    
    30
    
    
    
    
    
    
    
    205
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    205Restricted shares issued, net of cancellations
    
    
    205
    
    
    
    2
    
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Distribution of noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (150
    )
    
    
    
    
    
    
    
    
    
    
    (150
    )Stock repurchase
    
    
    (10
    )
    
    
    
    
    
    
    (73
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (73
    )Balance, July 4, 2010
    
    
    20,039
    
    
    $
    200
    
    
    $
    127,518
    
    
    $
    166
    
    
    $
    (12
    )
    
    $
    (72,882
    )
    
    $
    54,990
  4




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CARIBOU COFFEE COMPANY, INC. AND AFFILIATES
(A Majority Owned Subsidiary of Caribou Holding Company Limited)
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Twenty-Six Weeks EndedJuly 4,
    
    
    June 28,2010
    
    
    2009(In thousands)(Unaudited)Operating activitiesNet income attributable to Caribou Coffee Company, Inc.
    
    $
    3,459
    
    
    $
    1,514Adjustments
to reconcile net income to net cash (used) provided by operating activities:Depreciation and amortization
    
    
    7,140
    
    
    
    8,396Amortization of deferred financing fees
    
    
    97
    
    
    
    78Noncontrolling interest
    
    
    160
    
    
    
    195Stock-based compensation
    
    
    618
    
    
    
    456Other
    
    
    (132
    )
    
    
    52Changes in operating assets and liabilities:Accounts receivable and other receivables
    
    
    516
    
    
    
    1,228Inventories
    
    
    (11,498
    )
    
    
    (440
    )Prepaid expenses and other assets
    
    
    342
    
    
    
    166Accounts payable
    
    
    339
    
    
    
    1,013Accrued expenses and other liabilities
    
    
    (3,923
    )
    
    
    (1,752
    )Deferred revenue
    
    
    (2,635
    )
    
    
    (3,377
    )Net cash (used) provided by operating activities
    
    
    (5,517
    )
    
    
    7,529Investing activitiesPayments for property and equipment
    
    
    (1,562
    )
    
    
    (453
    )Proceeds from the disposal of property
    
    
    6
    
    
    
    24Net cash used in investing activities
    
    
    (1,556
    )
    
    
    (429
    )Financing activitiesDistribution of noncontrolling interest
    
    
    (150
    )
    
    
    (73
    )Purchase of noncontrolling interest
    
    
    
    
    
    
    (105
    )Issuance of common stock
    
    
    205
    
    
    
    Payment of debt financing fees
    
    
    (299
    )
    
    
    (31
    )Stock repurchase
    
    
    (73
    )
    
    
    Net cash used by financing activities
    
    
    (317
    )
    
    
    (209
    )(Decrease) increase in cash and cash equivalents
    
    
    (7,390
    )
    
    
    6,891Cash and cash equivalents at beginning of period
    
    
    23,578
    
    
    
    11,060Cash and cash equivalents at end of period
    
    $
    16,188
    
    
    $
    17,951Supplemental disclosure of cash flow informationNoncash financing and investing transactions:Accrual for leasehold improvements, furniture and equipment
    
    $
    
    
    
    $
    
  5




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CARIBOU COFFEE COMPANY, INC. AND AFFILIATES
 (A Majority Owned Subsidiary of Caribou Holding Company Limited)
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 1. Basis of Presentation
   Principles of Consolidation
  Use of Estimates
  Fiscal Year End
   6




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2. Summary of Significant Accounting Policies
 Revenue Recognition
      Operating Leases and Rent Expense
  3. Recent Accounting Pronouncements
  7




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4. Derivative Financial Instruments
       5. Fair Value Measurements
  
    
    Level 1: Observable inputs that reflect unadjusted quoted prices for identical assets
or liabilities traded in active markets.
    
    Level 2: Inputs other than quoted prices included within Level 1 that are observable
for the asset or liability, either directly or indirectly.
    
    Level 3: Inputs that are generally unobservable. These inputs may be used with
internally developed methodologies that result in managements best estimate of fair
value.
  Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Assets:Cash and cash equivalents
    
    $
    16,188
    
    
    $
    16,188
    
    
    $
    
    
    
    $
    Liabilities:Derivatives
    
    $
    12
    
    
    $
    12
    
    
    $
    
    
    
    $
    
 8




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##### Table of Contents



Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Assets:Cash and cash equivalents
    
    $
    23,578
    
    
    $
    23,578
    
    
    $
    
    
    
    $
    Liabilities:Derivatives
    
    $
    7
    
    
    $
    7
    
    
    $
    
    
    
    $
    
   6. Inventories
  July 4,
    
    
    January 3,2010
    
    
    2010Coffee
    
    $
    18,220
    
    
    $
    5,615Other merchandise held for sale
    
    
    3,801
    
    
    
    4,029Supplies
    
    
    2,755
    
    
    
    3,634$
    24,776
    
    
    $
    13,278
  7. Equity and Stock Based Compensation
  9




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Weighted
    
    
    WeightedNumber of
    
    
    Average
    
    
    AverageShares
    
    
    Exercise Price
    
    
    Contract LifeOutstanding, January 3, 2010
    
    
    1,696
    
    
    $
    4.27
    
    
    7.54 YrsGranted
    
    
    
    
    
    $
    Exercised
    
    
    (5
    )
    
    $
    5.72Forfeited
    
    
    (26
    )
    
    $
    6.09Outstanding, April 4, 2010
    
    
    1,665
    
    
    $
    4.23
    
    
    7.31 YrsGranted
    
    
    
    
    
    $
    Exercised
    
    
    (25
    )
    
    $
    7.05Forfeited
    
    
    (10
    )
    
    $
    6.32Outstanding, July 4, 2010
    
    
    1,630
    
    
    $
    4.18
    
    
    7.10 YrsOptions vested at July 4, 2010
    
    
    787
    
    
    $
    5.98
    
    
    6.05 Yrs
  Weighted
    
    
    WeightedNumber of
    
    
    Average Grant Date
    
    
    AverageShares
    
    
    Fair Value
    
    
    Contract LifeOutstanding, January 3, 2010
    
    
    300
    
    
    $
    5.83Granted
    
    
    215
    
    
    $
    7.07Forfeited
    
    
    (9
    )
    
    $
    8.15Outstanding, April 4, 2010
    
    
    506
    
    
    $
    6.31
    
    
    3.31 YrsGranted
    
    
    
    
    
    $Vested
    
    
    (3
    )
    
    $
    1.86Forfeited
    
    
    
    
    
    $Outstanding, July 4, 2010
    
    
    503
    
    
    $
    6.34
    
    
    3.11 Yrs
 8. Income Taxes
  10




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9. Net Income Per Share
  Thirteen Weeks Ended
    
    
    Twenty-Six Weeks EndedJuly 4,
    
    
    June 28,
    
    
    July 4
    
    
    June 28,2010
    
    
    2009
    
    
    2010
    
    
    2009Net income attributable to Caribou
Coffee Company, Inc.
    
    $
    2,421
    
    
    $
    1,168
    
    
    $
    3,459
    
    
    $
    1,514Weighted average common shares outstanding
- basic
    
    
    19,515
    
    
    
    19,371
    
    
    
    19,514
    
    
    
    19,371Dilutive impact of stock-based compensation
    
    
    1,005
    
    
    
    747
    
    
    
    867
    
    
    
    494Weighted average common shares outstanding
- dilutive
    
    
    20,520
    
    
    
    20,118
    
    
    
    20,381
    
    
    
    19,865Basic net income per share
    
    $
    0.12
    
    
    $
    0.06
    
    
    $
    0.18
    
    
    $
    0.08Diluted net income per share
    
    $
    0.12
    
    
    $
    0.06
    
    
    $
    0.17
    
    
    $
    0.08
  10. Master Franchise Agreement
    11. Revolving Credit Facility
  11




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12. Commitments and Contingencies
    12




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13. Segment Reporting
  Retail Coffeehouses
  Commercial
  Franchise
   Thirteen weeks ended July 4, 2010
 UnallocatedRetail Coffeehouses
    
    
    Commercial
    
    
    Franchise
    
    
    Corporate
    
    
    TotalTotal net sales
    
    $
    57,751
    
    
    $
    8,660
    
    
    $
    2,474
    
    
    $
    
    
    
    $
    68,885Costs of sales and related occupancy costs
    
    
    23,475
    
    
    
    5,668
    
    
    
    1,408
    
    
    
    
    
    
    
    30,551Operating expenses
    
    
    23,598
    
    
    
    1,104
    
    
    
    365
    
    
    
    
    
    
    
    25,067Depreciation and amortization
    
    
    3,010
    
    
    
    14
    
    
    
    4
    
    
    
    
    
    
    
    3,028General and administrative expenses
    
    
    2,122
    
    
    
    
    
    
    
    
    
    
    
    5,511
    
    
    
    7,633Operating income (loss)
    
    $
    5,546
    
    
    $
    1,874
    
    
    $
    697
    
    
    $
    (5,511
    )
    
    $
    2,606Identifiable assets
    
    $
    33,392
    
    
    $
    233
    
    
    $
    57
    
    
    $
    7,667
    
    
    $
    41,349Net capital expenditures
    
    $
    199
    
    
    $
    73
    
    
    $
    
    
    
    $
    328
    
    
    $
    600
 13




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Thirteen weeks ended June 28, 2009
 UnallocatedRetail Coffeehouses
    
    
    Commercial
    
    
    Franchise
    
    
    Corporate
    
    
    TotalTotal net sales
    
    $
    55,294
    
    
    $
    5,735
    
    
    $
    1,925
    
    
    $
    
    
    
    $
    62,954Costs of sales and related occupancy costs
    
    
    22,463
    
    
    
    3,784
    
    
    
    1,070
    
    
    
    
    
    
    
    27,317Operating expenses
    
    
    22,712
    
    
    
    872
    
    
    
    286
    
    
    
    
    
    
    
    23,870Depreciation and amortization
    
    
    3,557
    
    
    
    12
    
    
    
    1
    
    
    
    
    
    
    
    3,570General and administrative expenses
    
    
    1,887
    
    
    
    
    
    
    
    
    
    
    
    4,905
    
    
    
    6,789Operating income (loss)
    
    $
    4,675
    
    
    $
    1,067
    
    
    $
    568
    
    
    $
    (4,905
    )
    
    $
    1,405Identifiable assets
    
    $
    43,727
    
    
    $
    113
    
    
    $
    10
    
    
    $
    8,491
    
    
    $
    52,341Net capital expenditures
    
    $
    150
    
    
    $
    4
    
    
    $
    
    
    
    $
    104
    
    
    $
    258
 Twenty-six weeks ended July 4, 2010
 UnallocatedRetail Coffeehouses
    
    
    Commercial
    
    
    Franchise
    
    
    Corporate
    
    
    TotalTotal net sales
    
    $
    113,348
    
    
    $
    17,647
    
    
    $
    4,940
    
    
    $
    
    
    
    $
    135,935Costs of sales and related occupancy costs
    
    
    47,050
    
    
    
    11,962
    
    
    
    2,938
    
    
    
    
    
    
    
    61,950Operating expenses
    
    
    47,279
    
    
    
    2,083
    
    
    
    667
    
    
    
    
    
    
    
    50,029Depreciation and amortization
    
    
    6,139
    
    
    
    26
    
    
    
    7
    
    
    
    
    
    
    
    6,172General and administrative expenses
    
    
    4,054
    
    
    
    
    
    
    
    
    
    
    
    10,088
    
    
    
    14,142Operating income (loss)
    
    $
    8,826
    
    
    $
    3,576
    
    
    $
    1,328
    
    
    $
    (10,088
    )
    
    $
    3,642Identifiable assets
    
    $
    33,392
    
    
    $
    233
    
    
    $
    57
    
    
    $
    7,667
    
    
    $
    41,349Net capital expenditures
    
    $
    775
    
    
    $
    73
    
    
    $
    57
    
    
    $
    521
    
    
    $
    1,426
 Twenty-six weeks ended June 28, 2009
 UnallocatedRetail Coffeehouses
    
    
    Commercial
    
    
    Franchise
    
    
    Corporate
    
    
    TotalTotal net sales
    
    $
    108,158
    
    
    $
    11,439
    
    
    $
    3,737
    
    
    $
    
    
    
    $
    123,334Costs of sales and related occupancy costs
    
    
    44,183
    
    
    
    7,297
    
    
    
    2,109
    
    
    
    
    
    
    
    53,589Operating expenses
    
    
    45,092
    
    
    
    1,572
    
    
    
    611
    
    
    
    
    
    
    
    47,275Depreciation and amortization
    
    
    7,287
    
    
    
    22
    
    
    
    2
    
    
    
    
    
    
    
    7,311General and administrative expenses
    
    
    3,849
    
    
    
    
    
    
    
    
    
    
    
    9,529
    
    
    
    13,378Operating (loss) income
    
    $
    7,747
    
    
    $
    2,548
    
    
    $
    1,015
    
    
    $
    (9,529
    )
    
    $
    1,781Identifiable assets
    
    $
    43,727
    
    
    $
    113
    
    
    $
    10
    
    
    $
    8,491
    
    
    $
    52,341Net capital expenditures
    
    $
    217
    
    
    $
    4
    
    
    $
    
    
    
    $
    228
    
    
    $
    449
  14




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
  FORWARD-LOOKING STATEMENTS
  Overview
    Critical Accounting Policies
  15




---



##### Table of Contents



Fiscal Periods
   Thirteen Weeks Ended July 4, 2010 vs. Thirteen Weeks Ended June 28, 2009
 Results of Operations
 :
 Thirteen Weeks Ended
    
    
    
    
    
    
    Thirteen Weeks EndedJuly 4,
    
    
    June 28,
    
    
    %
    
    
    July 4,
    
    
    June 28,2010
    
    
    2009
    
    
    Change
    
    
    2010
    
    
    2009(In thousands)
    
    
    
    
    
    
    As a % of total net salesStatement of Operations Data:Net sales:Coffeehouse
    
    $
    57,751
    
    
    $
    55,294
    
    
    
    4.4
    %
    
    
    83.8
    %
    
    
    87.8
    %Commercial and franchise
    
    
    11,133
    
    
    
    7,660
    
    
    
    45.4
    %
    
    
    16.2
    %
    
    
    12.2
    %Total net sales
    
    
    68,884
    
    
    
    62,954
    
    
    
    9.4
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales and related occupancy costs
    
    
    30,551
    
    
    
    27,317
    
    
    
    11.8
    %
    
    
    44.4
    %
    
    
    43.4
    %Operating expenses
    
    
    25,067
    
    
    
    23,873
    
    
    
    5.0
    %
    
    
    36.4
    %
    
    
    37.9
    %Depreciation and amortization
    
    
    3,028
    
    
    
    3,570
    
    
    
    (15.2
    )%
    
    
    4.4
    %
    
    
    5.7
    %General and administrative expenses
    
    
    7,633
    
    
    
    6,789
    
    
    
    12.4
    %
    
    
    11.1
    %
    
    
    10.8
    %Operating income
    
    
    2,606
    
    
    
    1,405
    
    
    
    85.5
    %
    
    
    3.8
    %
    
    
    2.2
    %Other income (expense):Interest income
    
    
    5
    
    
    
    7
    
    
    
    (28.6
    )%
    
    
    
    %
    
    
    
    %Interest expense
    
    
    (64
    )
    
    
    (63
    )
    
    
    1.6
    %
    
    
    (0.1
    )%
    
    
    (0.1
    )%Income before provision for income taxes and
noncontrolling interest
    
    
    2,547
    
    
    
    1,349
    
    
    
    88.8
    %
    
    
    3.7
    %
    
    
    2.1
    %Provision for income taxes
    
    
    20
    
    
    
    59
    
    
    
    (66.1
    )%
    
    
    
    %
    
    
    0.1
    %Net income
    
    
    2,527
    
    
    
    1,290
    
    
    
    96.0
    %
    
    
    3.7
    %
    
    
    2.0
    %Less: Net income attributable to noncontrolling interest
    
    
    106
    
    
    
    122
    
    
    
    (13.1
    )%
    
    
    0.2
    %
    
    
    0.2
    %Net income attributable to Caribou Coffee Company, Inc.
    
    $
    2,421
    
    
    $
    1,168
    
    
    
    107.3
    %
    
    
    3.5
    %
    
    
    1.9
    %
 Net Sales
  Costs and Expenses
 Cost of sales and related occupancy costs.
 16




---



##### Table of Contents



Operating expenses.
 Depreciation and amortization.
 General and administrative expenses.
 Interest income.
 Interest expense.
 Operating Segments
  Retail Coffeehouses
 Thirteen Weeks Ended
    
    
    Thirteen Weeks EndedJuly 4,
    
    
    June 28,
    
    
    
    
    
    
    July 4,
    
    
    June 28,2010
    
    
    2009
    
    
    %      Change
    
    
    2010
    
    
    2009(In thousands)
    
    
    
    
    
    
    As a % of coffeehouse salesCoffeehouse sales, net
    
    $
    57,751
    
    
    $
    55,294
    
    
    
    4.4
    %
    
    
    100.0
    %
    
    
    100.0
    %Costs of sales and related occupancy costs
    
    
    23,475
    
    
    
    22,463
    
    
    
    4.5
    %
    
    
    40.6
    %
    
    
    40.6
    %Operating expenses
    
    
    23,598
    
    
    
    22,712
    
    
    
    3.9
    %
    
    
    40.9
    %
    
    
    41.1
    %Depreciation and amortization
    
    
    3,010
    
    
    
    3,557
    
    
    
    (15.4
    )%
    
    
    5.2
    %
    
    
    6.4
    %General and administrative expenses
    
    
    2,122
    
    
    
    1,887
    
    
    
    12.5
    %
    
    
    3.7
    %
    
    
    3.4
    %Operating income
    
    $
    5,546
    
    
    $
    4,675
    
    
    
    18.6
    %
    
    
    9.6
    %
    
    
    8.5
    %
 17




---



##### Table of Contents



Coffeehouse sales
  Costs and Expenses
 Cost of sales and related occupancy costs.
 Operating expenses.
 Depreciation and amortization.
 General and administrative expenses.
 Commercial
 Thirteen Weeks Ended
    
    
    Thirteen Weeks EndedJuly 4,
    
    
    June 28,
    
    
    
    
    
    
    July 4,
    
    
    June 28,2010
    
    
    2009
    
    
    %      Change
    
    
    2010
    
    
    2009(In thousands)
    
    
    
    
    
    
    As a % of commercial salesSales, net
    
    $
    8,660
    
    
    $
    5,735
    
    
    
    51.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Costs of sales and related occupancy costs
    
    
    5,668
    
    
    
    3,784
    
    
    
    49.8
    %
    
    
    65.5
    %
    
    
    66.0
    %Operating expenses
    
    
    1,104
    
    
    
    872
    
    
    
    26.5
    %
    
    
    12.7
    %
    
    
    15.2
    %Depreciation and amortization
    
    
    14
    
    
    
    12
    
    
    
    27.3
    %
    
    
    0.2
    %
    
    
    0.2
    %Operating income
    
    $
    1,874
    
    
    $
    1,067
    
    
    
    75.5
    %
    
    
    21.6
    %
    
    
    18.6
    %
  18




---



##### Table of Contents



Sales
  Costs and Expenses
 Cost of sales and related occupancy costs.
 Operating expenses.
 Franchise
 Thirteen Weeks Ended
    
    
    Thirteen Weeks EndedJuly 4,
    
    
    June 28,
    
    
    
    
    
    
    July 4,
    
    
    June 28,2010
    
    
    2009
    
    
    %      Change
    
    
    2010
    
    
    2009(In thousands)
    
    
    
    
    
    
    As a % of franchise salesSales, net
    
    $
    2,474
    
    
    $
    1,925
    
    
    
    28.6
    %
    
    
    100.0
    %
    
    
    100.0
    %Costs of sales and related occupancy costs
    
    
    1,408
    
    
    
    1,070
    
    
    
    31.6
    %
    
    
    56.9
    %
    
    
    55.6
    %Operating expenses
    
    
    365
    
    
    
    286
    
    
    
    27.6
    %
    
    
    14.8
    %
    
    
    14.9
    %Depreciation and amortization
    
    
    4
    
    
    
    1
    
    
    
    300.0
    %
    
    
    0.2
    %
    
    
    0.1
    %Operating income
    
    $
    697
    
    
    $
    568
    
    
    
    22.9
    %
    
    
    28.2
    %
    
    
    29.5
    %
  Sales
  19




---



##### Table of Contents



Costs and Expenses
 Cost of sales and related occupancy costs.
 Operating expenses.
 Unallocated Corporate
 Thirteen Weeks Ended
    
    
    Thirteen Weeks EndedJuly  4,
    
    
    June 28,
    
    
    
    
    
    
    July 4,
    
    
    June 28,2010
    
    
    2009
    
    
    %      Change
    
    
    2010
    
    
    2009(In thousands)
    
    
    
    
    
    
    As a % of total net salesGeneral and administrative expenses
    
    
    5,511
    
    
    
    4,905
    
    
    
    12.4
    %
    
    
    8.0
    %
    
    
    7.8
    %Operating loss
    
    $
    (5,511
    )
    
    $
    (4,905
    )
    
    
    12.4
    %
    
    
    8.0
    %
    
    
    7.8
    %
 General and administrative expenses.
 Twenty-Six Weeks Ended July 4, 2010 vs. Twenty-Six Weeks Ended June 28, 2009
 Results of Operations
 :
 Twenty-Six Weeks Ended
    
    
    
    
    
    
    Twenty-Six Weeks EndedJuly 4,
    
    
    June 28,
    
    
    %
    
    
    July 4,
    
    
    June 28,2010
    
    
    2009
    
    
    Change
    
    
    2010
    
    
    2009(In thousands)
    
    
    
    
    
    
    As a % of total net salesStatement of Operations Data:Net sales:Coffeehouse
    
    $
    113,348
    
    
    $
    108,158
    
    
    
    4.8
    %
    
    
    83.4
    %
    
    
    87.7
    %Commercial and franchise
    
    
    22,587
    
    
    
    15,176
    
    
    
    48.8
    %
    
    
    16.6
    %
    
    
    12.3
    %Total net sales
    
    
    135,935
    
    
    
    123,334
    
    
    
    10.2
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales and related occupancy costs
    
    
    61,950
    
    
    
    53,589
    
    
    
    15.6
    %
    
    
    45.6
    %
    
    
    43.5
    %Operating expenses
    
    
    50,029
    
    
    
    47,275
    
    
    
    5.8
    %
    
    
    36.8
    %
    
    
    38.3
    %Depreciation and amortization
    
    
    6,172
    
    
    
    7,311
    
    
    
    (15.6
    )%
    
    
    4.5
    %
    
    
    5.9
    %General and administrative expenses
    
    
    14,142
    
    
    
    13,378
    
    
    
    5.7
    %
    
    
    10.4
    %
    
    
    10.8
    %Operating income
    
    
    3,642
    
    
    
    1,781
    
    
    
    104.5
    %
    
    
    2.7
    %
    
    
    1.4
    %Other income (expense):Interest income
    
    
    10
    
    
    
    7
    
    
    
    42.9
    %
    
    
    
    %
    
    
    
    %Interest expense
    
    
    (171
    )
    
    
    (121
    )
    
    
    41.3
    %
    
    
    (0.1
    )%
    
    
    (0.1
    )%Income before benefit from income taxes and noncontrolling interest
    
    
    3,481
    
    
    
    1,667
    
    
    
    108.8
    %
    
    
    2.6
    %
    
    
    1.4
    %Benefit from income taxes
    
    
    (138
    )
    
    
    (42
    )
    
    
    226.2
    %
    
    
    (0.1
    )%
    
    
    
    %Net income
    
    
    3,619
    
    
    
    1,709
    
    
    
    111.7
    %
    
    
    2.7
    %
    
    
    1.4
    %Less: Net income attributable to noncontrolling interest
    
    
    160
    
    
    
    195
    
    
    
    (17.9
    )%
    
    
    0.1
    %
    
    
    0.2
    %Net income attributable to Caribou Coffee Company, Inc.
    
    $
    3,459
    
    
    $
    1,514
    
    
    
    128.4
    %
    
    
    2.5
    %
    
    
    1.2
    %
 20




---



##### Table of Contents



Net Sales
  Costs and Expenses
 Cost of sales and related occupancy costs.
 Operating expenses.
 Depreciation and amortization.
 General and administrative expenses.
 Interest income.
 Interest expense.
 21




---



##### Table of Contents



Operating Segments
  Retail Coffeehouses
 Twenty-Six Weeks Ended
    
    
    Twenty-Six Weeks EndedJuly 4,
    
    
    June 28,
    
    
    
    
    
    
    July 4,
    
    
    June 28,2010
    
    
    2009
    
    
    %      Change
    
    
    2010
    
    
    2009(In thousands)
    
    
    
    
    
    
    As a % of coffeehouse salesCoffeehouse sales, net
    
    $
    113,348
    
    
    $
    108,158
    
    
    
    4.8
    %
    
    
    100.0
    %
    
    
    100.0
    %Costs of sales and related occupancy costs
    
    
    47,050
    
    
    
    44,183
    
    
    
    6.5
    %
    
    
    41.5
    %
    
    
    40.9
    %Operating expenses
    
    
    47,279
    
    
    
    45,092
    
    
    
    4.9
    %
    
    
    41.7
    %
    
    
    41.7
    %Depreciation and amortization
    
    
    6,139
    
    
    
    7,287
    
    
    
    (15.8
    )%
    
    
    5.4
    %
    
    
    6.7
    %General and administrative expenses
    
    
    4,054
    
    
    
    3,849
    
    
    
    5.3
    %
    
    
    3.6
    %
    
    
    3.6
    %Operating income
    
    $
    8,826
    
    
    $
    7,747
    
    
    
    13.7
    %
    
    
    7.8
    %
    
    
    7.2
    %
  Coffeehouse sales
  Costs and Expenses
 Cost of sales and related occupancy costs.
 Operating expenses.
 22




---



##### Table of Contents



Depreciation and amortization.
 General and administrative expenses.
 Commercial
 Twenty-Six Weeks Ended
    
    
    Twenty-Six Weeks EndedJuly 4,
    
    
    June 28,
    
    
    %      Change
    
    
    July 4,
    
    
    June 28,2010
    
    
    2009
    
    
    
    
    
    
    2010
    
    
    2009(In thousands)
    
    
    
    
    
    
    As a % of commercial salesSales, net
    
    $
    17,647
    
    
    $
    11,439
    
    
    
    54.3
    %
    
    
    100.0
    %
    
    
    100.0
    %Costs of sales and related occupancy costs
    
    
    11,962
    
    
    
    7,297
    
    
    
    63.9
    %
    
    
    67.8
    %
    
    
    63.8
    %Operating expenses
    
    
    2,083
    
    
    
    1,572
    
    
    
    32.6
    %
    
    
    11.8
    %
    
    
    13.7
    %Depreciation and amortization
    
    
    26
    
    
    
    22
    
    
    
    23.8
    %
    
    
    0.1
    %
    
    
    0.2
    %Operating income
    
    $
    3,576
    
    
    $
    2,548
    
    
    
    40.2
    %
    
    
    20.3
    %
    
    
    22.3
    %
  Sales
  Costs and Expenses
 Cost of sales and related occupancy costs.
 Operating expenses.
 23




---



##### Table of Contents



Franchise
 Twenty-Six Weeks Ended
    
    
    Twenty-Six Weeks EndedJuly 4,
    
    
    June 28,
    
    
    %      Change
    
    
    July 4,
    
    
    June 28,2010
    
    
    2009
    
    
    
    
    
    
    2010
    
    
    2009(In thousands)
    
    
    
    
    
    
    As a % of franchise salesSales, net
    
    $
    4,940
    
    
    $
    3,737
    
    
    
    32.2
    %
    
    
    100.0
    %
    
    
    100.0
    %Costs of sales and related occupancy costs
    
    
    2,938
    
    
    
    2,109
    
    
    
    39.3
    %
    
    
    59.5
    %
    
    
    56.5
    %Operating expenses
    
    
    667
    
    
    
    611
    
    
    
    9.2
    %
    
    
    13.5
    %
    
    
    16.4
    %Depreciation and amortization
    
    
    7
    
    
    
    2
    
    
    
    250.0
    %
    
    
    0.1
    %
    
    
    0.1
    %Operating income
    
    $
    1,328
    
    
    $
    1,015
    
    
    
    31.0
    %
    
    
    26.9
    %
    
    
    27.1
    %
  Sales
  Costs and Expenses
 Cost of sales and related occupancy costs.
 Operating expenses.
 Unallocated Corporate
 Twenty-Six Weeks Ended
    
    
    Twenty-Six Weeks EndedJuly  4,
    
    
    June 28,
    
    
    %      Change
    
    
    July 4,
    
    
    June 28,2010
    
    
    2009
    
    
    
    
    
    
    2010
    
    
    2009(In thousands)
    
    
    
    
    
    
    As a % of total net salesGeneral and administrative expenses
    
    
    10,088
    
    
    
    9,529
    
    
    
    5.9
    %
    
    
    7.4
    %
    
    
    7.7
    %Operating loss
    
    $
    (10,088
    )
    
    $
    (9,529
    )
    
    
    5.9
    %
    
    
    7.4
    %
    
    
    7.7
    %
 General and administrative expenses.
 24




---



##### Table of Contents



Liquidity and Capital Resources
  Twenty-Six Weeks EndedJuly 4,
    
    
    June 28,
    
    
    Increase /2010
    
    
    2009
    
    
    (Decrease)(In thousands)Net cash (used) provided by operating activities
    
    $
    (5,517
    )
    
    $
    7,529
    
    
    $
    (13,046
    )Net cash used in investing activities
    
    
    (1,556
    )
    
    
    (429
    )
    
    
    (1,127
    )Net cash used by financing activities
    
    
    (317
    )
    
    
    (209
    )
    
    
    (108
    )Net change in cash and cash equivalents
    
    $
    (7,390
    )
    
    $
    6,891
    
    
    $
    (14,281
    )
      Off-Balance Sheet Arrangements
  25




---



##### Table of Contents



Recent Accounting Pronouncements
  Key Financial Metrics
   Thirteen Weeks Ended
    
    
    Twenty-Six Weeks EndedJuly 4, 2010
    
    
    June 28, 2009
    
    
    July 4, 2010
    
    
    June 28, 2009(In thousands, except operating data)Non-GAAP Metrics:EBITDA(1)
    
    $
    6,013
    
    
    $
    5,385
    
    
    $
    10,623
    
    
    $
    9,982Operating Data:Percentage change in comparable coffeehouse
net sales(2)
    
    
    4.8
    %
    
    
    (3.3
    %)
    
    
    5.0
    %
    
    
    (4.2
    %)Company-Owned:Coffeehouses open at beginning of period
    
    
    413
    
    
    
    414
    
    
    
    413
    
    
    
    414Coffeehouses opened during the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Coffeehouses closed during the period
    
    
    2
    
    
    
    
    
    
    
    2
    
    
    
    Coffeehouses open at end of period:Total Company-Owned
    
    
    411
    
    
    
    414
    
    
    
    411
    
    
    
    414Franchised:Coffeehouses open at beginning of period
    
    
    123
    
    
    
    101
    
    
    
    121
    
    
    
    97Coffeehouses opened during the period
    
    
    5
    
    
    
    8
    
    
    
    7
    
    
    
    14Coffeehouses closed during the period
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    3Coffeehouses open at end of period:Total Franchised
    
    
    128
    
    
    
    108
    
    
    
    128
    
    
    
    108Total coffeehouses open at end of period
    
    
    539
    
    
    
    522
    
    
    
    539
    
    
    
    522
 
 (1)
    
    See reconciliation and discussion of non-GAAP measures which follow at the end of this
section.(2)
    
    Percentage change in comparable coffeehouse net sales compares the net sales of coffeehouses
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 net sales calculations.  26




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##### Table of Contents




    
    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 208 company-owned coffeehouses from the
beginning of fiscal 2003 through the end of the first twenty-six weeks of 2010. 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. Consequently, we believe that adjusting
for depreciation and amortization is useful for evaluating the operating performance of our
coffeehouses.
  
    
    As a measurement of operating performance because it assists us in comparing our
operating performance on a consistent basis, as it removes the impact of items not directly
resulting from our coffeehouse operations;
    
    For planning purposes, including the preparation of our internal annual operating
budget;
    
    To evaluate our capacity to incur and service debt, fund capital expenditures and
expand our business.
  Thirteen Weeks Ended
    
    
    Twenty-Six Weeks EndedJuly 4, 2010
    
    
    June 28, 2009
    
    
    July 4, 2010
    
    
    June 28, 2009(In thousands)Net income attributable to Caribou Coffee Company, Inc.
    
    $
    2,421
    
    
    $
    1,168
    
    
    $
    3,459
    
    
    $
    1,514Interest expense
    
    
    64
    
    
    
    63
    
    
    
    171
    
    
    
    121Interest income
    
    
    (5
    )
    
    
    (7
    )
    
    
    (10
    )
    
    
    (7
    )Depreciation and amortization(1)
    
    
    3,513
    
    
    
    4,102
    
    
    
    7,141
    
    
    
    8,396Provision (benefit) from income taxes
    
    
    20
    
    
    
    59
    
    
    
    (138
    )
    
    
    (42
    )EBITDA
    
    $
    6,013
    
    
    $
    5,385
    
    
    $
    10,623
    
    
    $
    9,982
 
 (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 3. Quantitative and Qualitative Disclosures about Market Risks.
  
 Item 4T. Controls and Procedures.
  27




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PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings.
    
 Item 1A. Risk Factors.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
 Unregistered Sales of Equity Securities
  Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities.
  
 Item 4. Reserved.
  
 Item 5. Other Information.
  28




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##### Table of Contents



Item 6. Exhibits.
 3.1*
    
    Form of Amended and Restated Articles of Incorporation of the
Company (incorporated by reference to Exhibit 3.1 to the Companys
Registration Statement of 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 of
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 of
Form S-1/A filed September 6, 2005).10.14*
    
    Lease and License Financing and Purchase Option Agreement between
Caribou Coffee Company Inc. and Arabica Funding, Inc., dated
February 19, 2010.10.15*
    
    Credit Agreement among Arabica Funding, Inc., as Borrower, and
Wells Fargo Bank, N.A., as Administrative Agent, dated as of
February 19, 2010.31.1
    
    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.
 
 Asterisk (*)
    
    indicates exhibit previously filed with the Securities and Exchange Commission as
indicated in parentheses. 29




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SIGNATURE
  CARIBOU COFFEE COMPANY, INC.By:
    /s/ Michael TattersfieldMichael TattersfieldChief Executive Officer and President  30