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 October 3, 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 October 3, 2010
 Table of Contents
 PART I. FINANCIAL INFORMATIONItem 1.
    
    Financial Statements
    
    
    3Condensed Consolidated Statements of Operations
    
    
    3Condensed Consolidated Balance Sheets
    
    
    4Condensed Consolidated Statement of Changes in Equity
    
    
    5Condensed Consolidated Statements of Cash Flows
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    16Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    28Item 4T.
    
    Controls and Procedures
    
    
    28PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    29Item 1A.
    
    Risk Factors
    
    
    29Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    29Item 3.
    
    Defaults Upon Senior Securities
    
    
    29Item 4.
    
    Reserved
    
    
    29Item 5.
    
    Other Information
    
    
    29Item 6.
    
    Exhibits
    
    
    30Signature
    
    
    31
  2




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##### 



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
    
    
    Thirty-Nine Weeks EndedOctober 3,
    
    
    September 27,
    
    
    October 3,
    
    
    September 27,2010
    
    
    2009
    
    
    2010
    
    
    2009(In thousands, except for per share amounts)(Unaudited)Coffeehouse sales
    
    $
    56,626
    
    
    $
    54,479
    
    
    $
    169,974
    
    
    $
    162,637Commercial and franchise sales
    
    
    13,547
    
    
    
    8,260
    
    
    
    36,134
    
    
    
    23,436Total net sales
    
    
    70,173
    
    
    
    62,739
    
    
    
    206,108
    
    
    
    186,073Cost of sales and related occupancy costs
    
    
    32,701
    
    
    
    27,849
    
    
    
    94,651
    
    
    
    81,438Operating expenses
    
    
    25,130
    
    
    
    24,426
    
    
    
    75,159
    
    
    
    71,684Depreciation and amortization
    
    
    3,099
    
    
    
    3,465
    
    
    
    9,271
    
    
    
    10,776General and administrative expenses
    
    
    7,421
    
    
    
    6,313
    
    
    
    21,563
    
    
    
    19,708Operating income
    
    
    1,822
    
    
    
    686
    
    
    
    5,464
    
    
    
    2,467Other income (expense):Interest income
    
    
    9
    
    
    
    10
    
    
    
    19
    
    
    
    17Interest expense
    
    
    (63
    )
    
    
    (68
    )
    
    
    (234
    )
    
    
    (189
    )Income before provision for (benefit
from) income taxes
    
    
    1,768
    
    
    
    628
    
    
    
    5,249
    
    
    
    2,295Provision for (benefit from) income taxes
    
    
    32
    
    
    
    (140
    )
    
    
    (106
    )
    
    
    (182
    )Net income
    
    
    1,736
    
    
    
    768
    
    
    
    5,355
    
    
    
    2,477Less: Net income attributable to
noncontrolling interest
    
    
    129
    
    
    
    114
    
    
    
    289
    
    
    
    309Net Income attributable to Caribou
Coffee Company, Inc.
    
    $
    1,607
    
    
    $
    654
    
    
    $
    5,066
    
    
    $
    2,168Basic net income attributable to Caribou
Coffee Company, Inc. common shareholders
per share
    
    $
    0.08
    
    
    $
    0.03
    
    
    $
    0.26
    
    
    $
    0.11Diluted net income attributable to
Caribou Coffee Company, Inc. common
shareholders per share
    
    $
    0.08
    
    
    $
    0.03
    
    
    $
    0.25
    
    
    $
    0.11Basic weighted average number of shares
outstanding
    
    
    19,610
    
    
    
    19,470
    
    
    
    19,599
    
    
    
    19,418Diluted weighted average number of
shares outstanding
    
    
    20,710
    
    
    
    20,169
    
    
    
    20,540
    
    
    
    19,830
  3




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##### 



CARIBOU COFFEE COMPANY, INC. AND AFFILIATES
(A Majority Owned Subsidiary of Caribou Holding Company Limited)
 CONDENSED CONSOLIDATED BALANCE SHEETS
 October 3,
    
    
    January 3,2010
    
    
    2010(In thousands, except per share amounts)(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    10,018
    
    
    $
    23,578Accounts receivable (net of allowance for doubtful accounts of $3 at
October 3, 2010 and January 3, 2010)
    
    
    9,130
    
    
    
    5,887Other receivables (net of allowance for doubtful accounts of $202 and
$128 at October 3, 2010 and January 3, 2010, respectively)
    
    
    1,806
    
    
    
    1,268Income tax receivable
    
    
    102
    
    
    
    193Inventories
    
    
    31,182
    
    
    
    13,278Prepaid expenses and other current assets
    
    
    1,085
    
    
    
    1,546Total current assets
    
    
    53,323
    
    
    
    45,750Property and equipment, net of accumulated depreciation and amortization
    
    
    42,228
    
    
    
    47,135Restricted cash
    
    
    605
    
    
    
    605Other assets
    
    
    403
    
    
    
    237Total assets
    
    $
    96,559
    
    
    $
    93,727LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    10,350
    
    
    $
    9,042Accrued compensation
    
    
    6,821
    
    
    
    6,296Accrued expenses
    
    
    6,476
    
    
    
    7,563Deferred revenue
    
    
    5,847
    
    
    
    8,747Total current liabilities
    
    
    29,494
    
    
    
    31,648Asset retirement liability
    
    
    1,176
    
    
    
    1,120Deferred rent liability
    
    
    6,716
    
    
    
    7,955Deferred revenue
    
    
    2,072
    
    
    
    2,072Income tax liability
    
    
    2
    
    
    
    156Total long term liabilities
    
    
    9,966
    
    
    
    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; 20,042 and
19,814 shares issued and outstanding at October 3, 2010 and January
3, 2010, respectively
    
    
    200
    
    
    
    198Additional paid-in capital
    
    
    127,964
    
    
    
    126,770Accumulated other comprehensive income (loss)
    
    
    21
    
    
    
    (7
    )Accumulated deficit
    
    
    (71,275
    )
    
    
    (76,341
    )Total Caribou Coffee Company, Inc. shareholders equity
    
    
    56,910
    
    
    
    50,620Noncontrolling interest
    
    
    189
    
    
    
    156Total equity
    
    
    57,099
    
    
    
    50,776Total liabilities and equity
    
    $
    96,559
    
    
    $
    93,727
  4




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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)
 AccumulatedCommon Stock
    
    
    Additional
    
    
    
    
    
    
    OtherNumber of
    
    
    
    
    
    
    Paid-In
    
    
    Noncontrolling
    
    
    Comprehensive
    
    
    AccumulatedShares
    
    
    Amount
    
    
    Capital
    
    
    Interest
    
    
    Income (loss)
    
    
    Deficit
    
    
    EquityBalance, January 3, 2010
    
    
    19,814
    
    
    $
    198
    
    
    $
    126,770
    
    
    $
    156
    
    
    $
    (7
    )
    
    $
    (76,341
    )
    
    $
    50,776Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    289
    
    
    
    
    
    
    
    5,066
    
    
    
    5,355Changes in fair value of
derivative financial
instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28
    
    
    
    
    
    
    
    28Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    5,383Share based compensation
    
    
    
    
    
    
    
    
    
    
    967
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    967Options exercised
    
    
    45
    
    
    
    
    
    
    
    302
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    302Restricted shares issued,
net of cancellations
    
    
    193
    
    
    
    2
    
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Distribution of
noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (256
    )
    
    
    
    
    
    
    
    
    
    
    (256
    )Stock repurchase
    
    
    (10
    )
    
    
    
    
    
    
    (73
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (73
    )Balance, October 3, 2010
    
    
    20,042
    
    
    $
    200
    
    
    $
    127,964
    
    
    $
    189
    
    
    $
    21
    
    
    $
    (71,275
    )
    
    $
    57,099
  5




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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
 Thirty-Nine Weeks EndedOctober 3,
    
    
    September 27,2010
    
    
    2009(In thousands)(Unaudited)Operating activitiesNet income attributable to Caribou Coffee Company, Inc.
    
    $
    5,066
    
    
    $
    2,168Adjustments to reconcile net income to net cash used by operating activities:Depreciation and amortization
    
    
    10,748
    
    
    
    12,360Amortization of deferred financing fees
    
    
    121
    
    
    
    99Noncontrolling interest
    
    
    289
    
    
    
    309Stock-based compensation
    
    
    967
    
    
    
    664Other
    
    
    (185
    )
    
    
    73Changes in operating assets and liabilities:Accounts receivable and other receivables
    
    
    (3,690
    )
    
    
    (469
    )Inventories
    
    
    (17,904
    )
    
    
    (2,240
    )Prepaid expenses and other assets
    
    
    472
    
    
    
    241Accounts payable
    
    
    284
    
    
    
    1,545Accrued expenses and other liabilities
    
    
    (1,501
    )
    
    
    (2,250
    )Deferred revenue
    
    
    (2,900
    )
    
    
    (3,918
    )Net cash (used) provided by operating activities
    
    
    (8,233
    )
    
    
    8,582Investing activitiesPayments for property and equipment
    
    
    (5,024
    )
    
    
    (845
    )Proceeds from the disposal of property
    
    
    22
    
    
    
    36Net cash used in investing activities
    
    
    (5,002
    )
    
    
    (809
    )Financing activitiesDistribution of noncontrolling interest
    
    
    (256
    )
    
    
    (195
    )Purchase of noncontrolling interest
    
    
    
    
    
    
    (105
    )Issuance of common stock
    
    
    302
    
    
    
    584Payment of debt financing fees
    
    
    (298
    )
    
    
    (31
    )Stock repurchase
    
    
    (73
    )
    
    
    Net cash (used) provided by financing activities
    
    
    (325
    )
    
    
    253(Decrease) increase in cash and cash equivalents
    
    
    (13,560
    )
    
    
    8,026Cash and cash equivalents at beginning of period
    
    
    23,578
    
    
    
    11,060Cash and cash equivalents at end of period
    
    $
    10,018
    
    
    $
    19,086Supplemental disclosure of cash flow informationNoncash financing and investing transactions:Accrual for leasehold improvements, furniture and equipment
    
    $
    1,024
    
    
    $
    
  6




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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
   7




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##### 



2. Summary of Significant Accounting Policies
 Revenue Recognition
      Operating Leases and Rent Expense
  3. Recent Accounting Pronouncements
  8




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##### 



4. Derivative Financial Instruments
     Thirteen Weeks Ended
    
    Thirty-Nine Weeks EndedOctober 3,
    
    September 27,
    
    October 3
    
    September 27,2010
    
    2009
    
    2010
    
    2009Derivatives designated as hedging instruments
    
    $
    7
    
    
    $
    (44
    )
    
    $
    (28
    )
    
    $
    (44
    )Derivatives not designated as hedging instruments
    
    $
    
    
    
    $
    96
    
    
    $
    
    
    
    $
    223
  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 equivalentsCash deposits
    
    $
    5,982
    
    
    $
    5,982
    
    
    $
    
    
    
    $
    Money market funds
    
    $
    4,036
    
    
    $
    4,036
    
    
    $
    
    
    
    $
    Derivatives
    
    $
    21
    
    
    $
    21
    
    
    $
    
    
    
    $
    
 9




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##### 



Total
    
    Level 1
    
    Level 2
    
    Level 3Assets:Cash and cash equivalentsCash deposits
    
    $
    1,557
    
    
    $
    1,557
    
    
    $
    
    
    
    $
    Money market funds
    
    $
    22,021
    
    
    $
    22,021
    
    
    $
    
    
    
    $
    Liabilities:Derivatives
    
    $
    7
    
    
    $
    7
    
    
    $
    
    
    
    $
    
   6. Inventories
  October 3,
    
    
    January 3,2010
    
    
    2010Coffee
    
    $
    24,219
    
    
    $
    5,615Other merchandise held for sale
    
    
    4,059
    
    
    
    4,029Supplies
    
    
    2,905
    
    
    
    3,634$
    31,183
    
    
    $
    13,278
  7. Equity and Stock Based Compensation
  10




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##### 



WeightedWeighted
    
    AverageNumber of
    
    Average
    
    ContractShares
    
    Exercise Price
    
    LifeOutstanding, January 3, 2010
    
    
    1,696
    
    
    $
    4.27
    
    
    7.54 YrsExercised
    
    
    (5
    )
    
    $
    5.72Forfeited
    
    
    (26
    )
    
    $
    6.09Outstanding, April 4, 2010
    
    
    1,665
    
    
    $
    4.23
    
    
    7.31 YrsExercised
    
    
    (25
    )
    
    $
    7.05Forfeited
    
    
    (10
    )
    
    $
    6.32Outstanding, July 4, 2010
    
    
    1,630
    
    
    $
    4.18
    
    
    7.10 YrsExercised
    
    
    (15
    )
    
    $
    6.41Forfeited
    
    
    (10
    )
    
    $
    6.22Outstanding, October 3, 2010
    
    
    1,605
    
    
    $
    4.15
    
    
    6.89 YrsOptions vested at October 3, 2010
    
    
    983
    
    
    $
    5.23
    
    
    6.28 Yrs
  WeightedWeighted
    
    AverageNumber of
    
    Average Grant Date
    
    ContractShares
    
    Fair Value
    
    LifeOutstanding, January 3, 2010
    
    
    300
    
    
    $
    5.83
    
    
    3.50 YrsGranted
    
    
    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 YrsGranted
    
    
    
    
    
    $Vested
    
    
    (78
    )
    
    $
    5.54Forfeited
    
    
    (20
    )
    
    $
    7.68Outstanding, October 3, 2010
    
    
    405
    
    
    $
    6.43
    
    
    2.91 Yrs
 8. Income Taxes
  11




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##### 



9. Net Income Per Share
  Thirteen Weeks Ended
    
    
    Thirty-Nine Weeks EndedOctober 3,
    
    
    September 27,
    
    
    October 3
    
    
    September 27,2010
    
    
    2009
    
    
    2010
    
    
    2009Net income attributable to Caribou
Coffee Company, Inc.
    
    $
    1,607
    
    
    $
    654
    
    
    $
    5,066
    
    
    $
    2,168Weighted average common shares outstanding
 basic
    
    
    19,610
    
    
    
    19,470
    
    
    
    19,599
    
    
    
    19,418Dilutive impact of stock-based compensation
    
    
    1,100
    
    
    
    699
    
    
    
    941
    
    
    
    412Weighted average common shares outstanding
 dilutive
    
    
    20,710
    
    
    
    20,169
    
    
    
    20,540
    
    
    
    19,830Basic net income per share
    
    $
    0.08
    
    
    $
    0.03
    
    
    $
    0.26
    
    
    $
    0.11Diluted net income per share
    
    $
    0.08
    
    
    $
    0.03
    
    
    $
    0.25
    
    
    $
    0.11
  10. Master Franchise Agreement
     12




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##### 



11. Revolving Credit Facility
      12. Commitments and Contingencies
  13. Segment Reporting
   13




---



##### 



Retail Coffeehouses
  Commercial
  Franchise
   Thirteen weeks ended October 3, 2010
 Retail
    
    
    
    
    
    
    
    
    
    
    UnallocatedCoffeehouses
    
    
    Commercial
    
    
    Franchise
    
    
    Corporate
    
    
    TotalTotal net sales
    
    $
    56,626
    
    
    $
    11,255
    
    
    $
    2,292
    
    
    $
    
    
    
    $
    70,173Costs of sales and related occupancy costs
    
    
    23,694
    
    
    
    7,706
    
    
    
    1,301
    
    
    
    
    
    
    
    32,701Operating expenses
    
    
    23,666
    
    
    
    1,140
    
    
    
    324
    
    
    
    
    
    
    
    25,130Depreciation and amortization
    
    
    3,079
    
    
    
    16
    
    
    
    4
    
    
    
    
    
    
    
    3,099General and administrative expenses
    
    
    2,276
    
    
    
    
    
    
    
    
    
    
    
    5,145
    
    
    
    7,421Operating income (loss)
    
    $
    3,911
    
    
    $
    2,393
    
    
    $
    663
    
    
    $
    (5,145
    )
    
    $
    1,822Identifiable assets
    
    $
    33,201
    
    
    $
    352
    
    
    $
    53
    
    
    $
    8,622
    
    
    $
    42,228Net capital expenditures
    
    $
    3,652
    
    
    $
    508
    
    
    $
    
    
    
    $
    333
    
    
    $
    4,493
 Thirteen weeks ended September 27, 2009
 Retail
    
    
    
    
    
    
    
    
    
    
    UnallocatedCoffeehouses
    
    
    Commercial
    
    
    Franchise
    
    
    Corporate
    
    
    TotalTotal net sales
    
    $
    54,479
    
    
    $
    6,557
    
    
    $
    1,703
    
    
    $
    
    
    
    $
    62,739Costs of sales and related occupancy costs
    
    
    22,644
    
    
    
    4,232
    
    
    
    973
    
    
    
    
    
    
    
    27,849Operating expenses
    
    
    23,127
    
    
    
    1,010
    
    
    
    289
    
    
    
    
    
    
    
    24,426Depreciation and amortization
    
    
    3,454
    
    
    
    10
    
    
    
    1
    
    
    
    
    
    
    
    3,465General and administrative expenses
    
    
    1,742
    
    
    
    
    
    
    
    
    
    
    
    4,571
    
    
    
    6,313Operating income (loss)
    
    $
    3,512
    
    
    $
    1,305
    
    
    $
    440
    
    
    $
    (4,571
    )
    
    $
    686Identifiable assets
    
    $
    40,896
    
    
    $
    107
    
    
    $
    9
    
    
    $
    7,932
    
    
    $
    48,944Net capital expenditures
    
    $
    483
    
    
    $
    4
    
    
    $
    
    
    
    $
    92
    
    
    $
    579
  14




---



##### 



Thirty-nine weeks ended October 3, 2010
 Retail
    
    
    
    
    
    
    
    
    
    
    UnallocatedCoffeehouses
    
    
    Commercial
    
    
    Franchise
    
    
    Corporate
    
    
    TotalTotal net sales
    
    $
    169,974
    
    
    $
    28,902
    
    
    $
    7,232
    
    
    $
    
    
    
    $
    206,108Costs of sales and related occupancy costs
    
    
    70,744
    
    
    
    19,668
    
    
    
    4,239
    
    
    
    
    
    
    
    94,651Operating expenses
    
    
    70,945
    
    
    
    3,223
    
    
    
    991
    
    
    
    
    
    
    
    75,159Depreciation and amortization
    
    
    9,218
    
    
    
    42
    
    
    
    11
    
    
    
    
    
    
    
    9,271General and administrative expenses
    
    
    6,245
    
    
    
    
    
    
    
    
    
    
    
    15,318
    
    
    
    21,563Operating income (loss)
    
    $
    12,822
    
    
    $
    5,969
    
    
    $
    1,991
    
    
    $
    (15,318
    )
    
    $
    5,464Identifiable assets
    
    $
    33,201
    
    
    $
    352
    
    
    $
    53
    
    
    $
    8,622
    
    
    $
    42,228Net capital expenditures
    
    $
    4,454
    
    
    $
    581
    
    
    $
    56
    
    
    $
    855
    
    
    $
    5,946
 Thirty-nine weeks ended September 27, 2009
 Retail
    
    
    
    
    
    
    
    
    
    
    UnallocatedCoffeehouses
    
    
    Commercial
    
    
    Franchise
    
    
    Corporate
    
    
    TotalTotal net sales
    
    $
    162,637
    
    
    $
    17,996
    
    
    $
    5,440
    
    
    $
    
    
    
    $
    186,073Costs of sales and related occupancy costs
    
    
    66,827
    
    
    
    11,529
    
    
    
    3,082
    
    
    
    
    
    
    
    81,438Operating expenses
    
    
    68,219
    
    
    
    2,582
    
    
    
    900
    
    
    
    
    
    
    
    71,684Depreciation and amortization
    
    
    10,741
    
    
    
    32
    
    
    
    3
    
    
    
    
    
    
    
    10,776General and administrative expenses
    
    
    5,591
    
    
    
    
    
    
    
    
    
    
    
    14,100
    
    
    
    19,708Operating (loss) income
    
    $
    11,259
    
    
    $
    3,853
    
    
    $
    1,455
    
    
    $
    (14,100
    )
    
    $
    2,467Identifiable assets
    
    $
    40,896
    
    
    $
    107
    
    
    $
    9
    
    
    $
    7,932
    
    
    $
    48,944Net capital expenditures
    
    $
    701
    
    
    $
    8
    
    
    $
    
    
    
    $
    319
    
    
    $
    1,028
   15




---



##### 



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
  FORWARD-LOOKING STATEMENTS
  Overview
    Critical Accounting Policies
  Income taxes
    16




---



##### 



Fiscal Periods
   Thirteen Weeks Ended October 3, 2010 vs. Thirteen Weeks Ended September 27, 2009
 Results of Operations
 :
 Thirteen Weeks Ended
    
    
    
    
    
    
    Thirteen Weeks EndedOctober 3,
    
    
    September 27,
    
    
    %
    
    
    October 3,
    
    
    September 27,2010
    
    
    2009
    
    
    Change
    
    
    2010
    
    
    2009(In thousands)
    
    
    
    
    
    
    As a % of total net salesStatement of Operations Data:Net sales:Coffeehouse
    
    $
    56,626
    
    
    $
    54,479
    
    
    
    3.9
    %
    
    
    80.7
    %
    
    
    86.8
    %Commercial and franchise
    
    
    13,547
    
    
    
    8,260
    
    
    
    64.0
    %
    
    
    19.3
    %
    
    
    13.2
    %Total net sales
    
    
    70,173
    
    
    
    62,739
    
    
    
    11.8
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales and related occupancy costs
    
    
    32,701
    
    
    
    27,849
    
    
    
    17.4
    %
    
    
    46.6
    %
    
    
    44.4
    %Operating expenses
    
    
    25,130
    
    
    
    24,426
    
    
    
    2.9
    %
    
    
    35.8
    %
    
    
    38.9
    %Depreciation and amortization
    
    
    3,099
    
    
    
    3,465
    
    
    
    (10.6
    )%
    
    
    4.4
    %
    
    
    5.5
    %General and administrative expenses
    
    
    7,421
    
    
    
    6,313
    
    
    
    17.6
    %
    
    
    10.6
    %
    
    
    10.1
    %Operating income
    
    
    1,822
    
    
    
    686
    
    
    
    165.6
    %
    
    
    2.6
    %
    
    
    1.1
    %Other income (expense):Interest income
    
    
    9
    
    
    
    10
    
    
    
    (10.0
    )%
    
    
    
    %
    
    
    
    %Interest expense
    
    
    (63
    )
    
    
    (68
    )
    
    
    (7.4
    )%
    
    
    (0.1
    )%
    
    
    (0.1
    )%Income before provision for (benefit
from) income taxes and noncontrolling
interest
    
    
    1,768
    
    
    
    628
    
    
    
    181.5
    %
    
    
    2.5
    %
    
    
    1.0
    %Provision for (benefit from) income taxes
    
    
    32
    
    
    
    (140
    )
    
    
    (122.9
    )%
    
    
    
    %
    
    
    (0.2
    )%Net income
    
    
    1,736
    
    
    
    768
    
    
    
    126.0
    %
    
    
    2.5
    %
    
    
    1.2
    %Less: Net income attributable to
noncontrolling interest
    
    
    129
    
    
    
    114
    
    
    
    13.2
    %
    
    
    0.2
    %
    
    
    0.2
    %Net income attributable to Caribou
Coffee Company, Inc.
    
    $
    1,607
    
    
    $
    654
    
    
    
    145.7
    %
    
    
    2.3
    %
    
    
    1.0
    %
 Net Sales
  Costs and Expenses
 Cost of sales and related occupancy costs.
 17




---



##### 



Operating expenses.
 Depreciation and amortization.
 General and administrative expenses.
 Interest income.
 Interest expense.
 Operating Segments
  Retail Coffeehouses
 Thirteen Weeks Ended
    
    
    
    
    Thirteen Weeks EndedOctober 3,
    
    
    September 27,
    
    
    %
    
    
    October 3,
    
    
    September 27,2010
    
    
    2009
    
    
    Change
    
    
    2010
    
    
    2009(In thousands)
    
    
    
    
    
    
    As a % of coffeehouse salesCoffeehouse sales, net
    
    $
    56,626
    
    
    $
    54,479
    
    
    
    3.9
    %
    
    
    100.0
    %
    
    
    100.0
    %Costs of sales and related occupancy costs
    
    
    23,694
    
    
    
    22,644
    
    
    
    4.6
    %
    
    
    41.8
    %
    
    
    41.6
    %Operating expenses
    
    
    23,666
    
    
    
    23,127
    
    
    
    2.3
    %
    
    
    41.8
    %
    
    
    42.5
    %Depreciation and amortization
    
    
    3,079
    
    
    
    3,454
    
    
    
    (10.9
    )%
    
    
    5.4
    %
    
    
    6.3
    %General and administrative expenses
    
    
    2,276
    
    
    
    1,742
    
    
    
    30.7
    %
    
    
    4.0
    %
    
    
    3.2
    %Operating income
    
    $
    3,911
    
    
    $
    3,512
    
    
    
    11.4
    %
    
    
    6.9
    %
    
    
    6.4
    %
 18




---



##### 



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 EndedOctober 3,
    
    
    September 27,
    
    
    %
    
    
    October 3,
    
    
    September 27,2010
    
    
    2009
    
    
    Change
    
    
    2010
    
    
    2009(In thousands)
    
    
    
    
    
    
    As a % of commercial salesSales, net
    
    $
    11,255
    
    
    $
    6,557
    
    
    
    71.6
    %
    
    
    100.0
    %
    
    
    100.0
    %Costs of sales and related occupancy costs
    
    
    7,706
    
    
    
    4,232
    
    
    
    82.1
    %
    
    
    68.5
    %
    
    
    64.5
    %Operating expenses
    
    
    1,140
    
    
    
    1,010
    
    
    
    12.9
    %
    
    
    10.1
    %
    
    
    15.4
    %Depreciation and amortization
    
    
    16
    
    
    
    10
    
    
    
    60.0
    %
    
    
    0.1
    %
    
    
    0.2
    %Operating income
    
    $
    2,393
    
    
    $
    1,305
    
    
    
    83.4
    %
    
    
    21.3
    %
    
    
    19.9
    %
 19




---



##### 



Sales
  Costs and Expenses
 Cost of sales and related occupancy costs.
 Operating expenses.
 Franchise
 Thirteen Weeks Ended
    
    
    
    
    Thirteen Weeks EndedOctober 3,
    
    
    September 27,
    
    
    %
    
    
    October 3,
    
    
    September 27,2010
    
    
    2009
    
    
    Change
    
    
    2010
    
    
    2009(In thousands)
    
    
    
    
    
    
    As a % of franchise salesSales, net
    
    $
    2,292
    
    
    $
    1,703
    
    
    
    34.6
    %
    
    
    100.0
    %
    
    
    100.0
    %Costs of sales and related occupancy costs
    
    
    1,301
    
    
    
    973
    
    
    
    33.7
    %
    
    
    56.8
    %
    
    
    57.1
    %Operating expenses
    
    
    324
    
    
    
    289
    
    
    
    12.1
    %
    
    
    14.1
    %
    
    
    17.0
    %Depreciation and amortization
    
    
    4
    
    
    
    1
    
    
    
    300.0
    %
    
    
    0.2
    %
    
    
    0.1
    %Operating income
    
    $
    663
    
    
    $
    440
    
    
    
    50.7
    %
    
    
    28.9
    %
    
    
    25.8
    %
  Sales
  20




---



##### 



Costs and Expenses
 Cost of sales and related occupancy costs.
 Operating expenses.
 Unallocated Corporate
 Thirteen Weeks Ended
    
    
    
    
    
    
    Thirteen Weeks EndedOctober 3,
    
    
    September 27,
    
    
    %
    
    
    October 3,
    
    
    September 27,2010
    
    
    2009
    
    
    Change
    
    
    2010
    
    
    2009(In thousands)
    
    
    
    
    
    
    As a % of total net salesGeneral and administrative expenses
    
    
    5,145
    
    
    
    4,571
    
    
    
    12.6
    %
    
    
    7.3
    %
    
    
    7.3
    %Operating loss
    
    $
    (5,145
    )
    
    $
    (4,571
    )
    
    
    12.6
    %
    
    
    7.3
    %
    
    
    7.3
    %
 General and administrative expenses.
 Thirty-Nine Weeks Ended October 3, 2010 vs. Thirty-Nine Weeks Ended September 27, 2009
 Results of Operations
 :
 Thirty-Nine Weeks Ended
    
    
    
    
    
    
    Thirty-Nine Weeks EndedOctober 3,
    
    
    September 27,
    
    
    %
    
    
    October 3,
    
    
    September 27,2010
    
    
    2009
    
    
    Change
    
    
    2010
    
    
    2009(In thousands)
    
    
    
    
    
    
    As a % of total net salesStatement of Operations Data:Net sales:Coffeehouse
    
    $
    169,974
    
    
    $
    162,637
    
    
    
    4.5
    %
    
    
    82.5
    %
    
    
    87.4
    %Commercial and franchise
    
    
    36,134
    
    
    
    23,436
    
    
    
    54.2
    %
    
    
    17.5
    %
    
    
    12.6
    %Total net sales
    
    
    206,108
    
    
    
    186,073
    
    
    
    10.8
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales and related occupancy costs
    
    
    94,651
    
    
    
    81,438
    
    
    
    16.2
    %
    
    
    45.9
    %
    
    
    43.8
    %Operating expenses
    
    
    75,159
    
    
    
    71,684
    
    
    
    4.8
    %
    
    
    36.5
    %
    
    
    38.5
    %Depreciation and amortization
    
    
    9,271
    
    
    
    10,776
    
    
    
    (14.0
    )%
    
    
    4.5
    %
    
    
    5.8
    %General and administrative expenses
    
    
    21,563
    
    
    
    19,708
    
    
    
    9.4
    %
    
    
    10.5
    %
    
    
    10.6
    %Operating income
    
    
    5,464
    
    
    
    2,467
    
    
    
    121.5
    %
    
    
    2.7
    %
    
    
    1.3
    %Other income (expense):Interest income
    
    
    19
    
    
    
    17
    
    
    
    11.8
    %
    
    
    
    %
    
    
    
    %Interest expense
    
    
    (234
    )
    
    
    (189
    )
    
    
    23.8
    %
    
    
    (0.1
    )%
    
    
    (0.1
    )%Income before benefit from income taxes
and noncontrolling interest
    
    
    5,249
    
    
    
    2,295
    
    
    
    128.7
    %
    
    
    2.5
    %
    
    
    1.2
    %Benefit from income taxes
    
    
    (106
    )
    
    
    (182
    )
    
    
    (41.8
    )%
    
    
    (0.1
    )%
    
    
    (0.1
    )%
 21




---



##### 



Thirty-Nine Weeks Ended
    
    
    
    
    
    
    Thirty-Nine Weeks EndedOctober 3,
    
    
    September 27,
    
    
    %
    
    
    October 3,
    
    
    September 27,2010
    
    
    2009
    
    
    Change
    
    
    2010
    
    
    2009(In thousands)
    
    
    
    
    
    
    As a % of total net salesNet income
    
    
    5,355
    
    
    
    2,477
    
    
    
    116.2
    %
    
    
    2.6
    %
    
    
    1.3
    %Less: Net income attributable to
noncontrolling interest
    
    
    289
    
    
    
    309
    
    
    
    (6.5
    )%
    
    
    0.1
    %
    
    
    0.2
    %Net income attributable to Caribou
Coffee Company, Inc.
    
    $
    5,066
    
    
    $
    2,168
    
    
    
    133.7
    %
    
    
    2.5
    %
    
    
    1.2
    %
 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.
 22




---



##### 



Operating Segments
  Retail Coffeehouses
 Thirty-Nine Weeks Ended
    
    
    Thirty-Nine Weeks EndedOctober 3,
    
    
    September 27,
    
    
    %
    
    
    October 3,
    
    
    September 27,2010
    
    
    2009
    
    
    Change
    
    
    2010
    
    
    2009(In thousands)
    
    
    
    
    
    
    As a % of coffeehouse salesCoffeehouse sales, net
    
    $
    169,974
    
    
    $
    162,637
    
    
    
    4.5
    %
    
    
    100.0
    %
    
    
    100.0
    %Costs of sales and related occupancy costs
    
    
    70,744
    
    
    
    66,827
    
    
    
    5.9
    %
    
    
    41.6
    %
    
    
    41.1
    %Operating expenses
    
    
    70,945
    
    
    
    68,219
    
    
    
    4.0
    %
    
    
    41.7
    %
    
    
    41.9
    %Depreciation and amortization
    
    
    9,218
    
    
    
    10,741
    
    
    
    (14.2
    )%
    
    
    5.4
    %
    
    
    6.6
    %General and administrative expenses
    
    
    6,245
    
    
    
    5,591
    
    
    
    11.7
    %
    
    
    3.7
    %
    
    
    3.4
    %Operating income
    
    $
    12,822
    
    
    $
    11,259
    
    
    
    13.9
    %
    
    
    7.5
    %
    
    
    6.9
    %
  Coffeehouse sales
  Costs and Expenses
 Cost of sales and related occupancy costs.
 Operating expenses.
 23




---



##### 



Depreciation and amortization.
 General and administrative expenses.
 Commercial
 Thirty-Nine Weeks Ended
    
    
    Thirty-Nine Weeks EndedOctober 3,
    
    
    September 27,
    
    
    %
    
    
    October 3,
    
    
    September 27,2010
    
    
    2009
    
    
    Change
    
    
    2010
    
    
    2009(In thousands)
    
    
    
    
    
    
    As a % of commercial salesSales, net
    
    $
    28,902
    
    
    $
    17,996
    
    
    
    60.6
    %
    
    
    100.0
    %
    
    
    100.0
    %Costs of sales and related occupancy costs
    
    
    19,668
    
    
    
    11,529
    
    
    
    70.6
    %
    
    
    68.1
    %
    
    
    64.1
    %Operating expenses
    
    
    3,223
    
    
    
    2,582
    
    
    
    24.8
    %
    
    
    11.2
    %
    
    
    14.3
    %Depreciation and amortization
    
    
    42
    
    
    
    32
    
    
    
    31.3
    %
    
    
    0.1
    %
    
    
    0.2
    %Operating income
    
    $
    5,969
    
    
    $
    3,853
    
    
    
    54.9
    %
    
    
    20.7
    %
    
    
    21.4
    %
  Sales
  Costs and Expenses
 Cost of sales and related occupancy costs.
 Operating expenses.
 24




---



##### 



Franchise
 Thirty-Nine Weeks Ended
    
    
    
    
    
    
    Thirty-Nine Weeks EndedOctober 3,
    
    
    September 27,
    
    
    %
    
    
    October 3,
    
    
    September 27,2010
    
    
    2009
    
    
    Change
    
    
    2010
    
    
    2009(In thousands)
    
    
    
    
    
    
    As a % of franchise salesSales, net
    
    $
    7,232
    
    
    $
    5,440
    
    
    
    32.9
    %
    
    
    100.0
    %
    
    
    100.0
    %Costs of sales and related occupancy costs
    
    
    4,239
    
    
    
    3,082
    
    
    
    37.5
    %
    
    
    58.6
    %
    
    
    56.7
    %Operating expenses
    
    
    991
    
    
    
    900
    
    
    
    10.1
    %
    
    
    13.7
    %
    
    
    16.5
    %Depreciation and amortization
    
    
    11
    
    
    
    3
    
    
    
    266.7
    %
    
    
    0.2
    %
    
    
    0.1
    %Operating income
    
    $
    1,991
    
    
    $
    1,455
    
    
    
    36.8
    %
    
    
    27.5
    %
    
    
    26.7
    %
  Sales
  Costs and Expenses
 Cost of sales and related occupancy costs.
 Operating expenses.
 Unallocated Corporate
 Thirty-Nine Weeks Ended
    
    
    Thirty-Nine Weeks EndedOctober 3,
    
    
    September 27,
    
    
    %
    
    
    October 3,
    
    
    September 27,2010
    
    
    2009
    
    
    Change
    
    
    2010
    
    
    2009(In thousands)
    
    
    
    
    
    
    As a % of total net salesGeneral and administrative expenses
    
    $
    15,318
    
    
    $
    14,100
    
    
    
    8.6
    %
    
    
    7.4
    %
    
    
    7.6
    %Operating loss
    
    $
    (15,318
    )
    
    $
    (14,100
    )
    
    
    8.6
    %
    
    
    7.4
    %
    
    
    7.6
    %
 General and administrative expenses.
 25




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##### 



Liquidity and Capital Resources
  Thirty-Nine Weeks EndedOctober 3,
    
    
    September 27,
    
    
    Increase /2010
    
    
    2009
    
    
    (Decrease)(In thousands)Net cash (used) provided by operating activities
    
    $
    (8,232
    )
    
    $
    8,582
    
    
    $
    (16,814
    )Net cash used in investing activities
    
    
    (5,002
    )
    
    
    (809
    )
    
    
    (4,193
    )Net cash (used) provided by financing activities
    
    
    (326
    )
    
    
    253
    
    
    
    (579
    )Net change in cash and cash equivalents
    
    $
    (13,560
    )
    
    $
    8,026
    
    
    $
    (21,586
    )
      Off-Balance Sheet Arrangements
  26




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##### 



Recent Accounting Pronouncements
  Key Financial Metrics
   Thirteen Weeks Ended
    
    
    Thirty-Nine Weeks EndedOctober 3, 2010
    
    
    September 27, 2009
    
    
    October 3, 2010
    
    
    September 27, 2009(In thousands, except operating data)Non-GAAP Metrics:EBITDA(1)
    
    $
    5,300
    
    
    $
    4,536
    
    
    $
    15,923
    
    
    $
    14,518Operating Data:Percentage change in comparable coffeehouse
net sales(2)
    
    
    4.4
    %
    
    
    (0.5
    %)
    
    
    4.8
    %
    
    
    (3.0
    %)Company-Owned:Coffeehouses open at beginning of period
    
    
    411
    
    
    
    414
    
    
    
    413
    
    
    
    414Coffeehouses opened during the period
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Coffeehouses closed during the period
    
    
    (1
    )
    
    
    (1
    )
    
    
    (3
    )
    
    
    (1
    )Coffeehouses open at end of period:Total Company-Owned
    
    
    410
    
    
    
    413
    
    
    
    410
    
    
    
    413Franchised:Coffeehouses open at beginning of period
    
    
    128
    
    
    
    108
    
    
    
    121
    
    
    
    97Coffeehouses opened during the period
    
    
    6
    
    
    
    4
    
    
    
    13
    
    
    
    18Coffeehouses closed during the period
    
    
    (5
    )
    
    
    0
    
    
    
    (5
    )
    
    
    (3
    )Coffeehouses open at end of period:Total Franchised
    
    
    129
    
    
    
    112
    
    
    
    129
    
    
    
    112Total coffeehouses open at end of period
    
    
    539
    
    
    
    525
    
    
    
    539
    
    
    
    525
 
 (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.  27




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##### 




    
    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 207 company-owned coffeehouses from the
beginning of fiscal 2003 through the end of the first thirty-nine 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
    
    Thirty-Nine Weeks EndedOctober 3, 2010
    
    
    September  27, 2009
    
    
    October 3, 2010
    
    
    September 27, 2009(In thousands)Net income attributable to Caribou
Coffee Company, Inc.
    
    $
    1,607
    
    
    $
    654
    
    
    $
    5,066
    
    
    $
    2,168Interest expense
    
    
    63
    
    
    
    68
    
    
    
    234
    
    
    
    189Interest income
    
    
    (9
    )
    
    
    (10
    )
    
    
    (19
    )
    
    
    (17
    )Depreciation and amortization(1)
    
    
    3,607
    
    
    
    3,964
    
    
    
    10,748
    
    
    
    12,360Provision (benefit) from income taxes
    
    
    32
    
    
    
    (140
    )
    
    
    (106
    )
    
    
    (182
    )EBITDA
    
    $
    5,300
    
    
    $
    4,536
    
    
    $
    15,923
    
    
    $
    14,518
 
 (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.
  28




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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.
  29




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##### 



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.
  30




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##### 



SIGNATURE
  CARIBOU COFFEE COMPANY, INC.By:
    /s/ Michael TattersfieldMichael TattersfieldChief Executive Officer and President  31