##### 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 September 30, 2007.
 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
    
    41-1731219(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)3900 Lakebreeze Avenue North 
Brooklyn Center, Minnesota(Address of principal executive offices)
    
    55429(Zip Code)
 (763) 592-2200
 Not Applicable
 þ o
  o o þ
 o þ
  Title
    
    Shares Outstanding as of November 5, 2007Common Stock, par value $0.01 per share
    
    19,370,590




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##### 



CARIBOU COFFEE COMPANY, INC.
 FORM 10-Q
 For the Thirteen Week Period Ended September 30, 2007
 Table of Contents
 PART I. FINANCIAL INFORMATIONItem 1.
    
    Financial Statements
    
    
    3Condensed Consolidated Statements of Operations
    
    
    3Condensed Consolidated Balance Sheets
    
    
    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
    
    
    11Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    20Item 4T.
    
    Controls and Procedures
    
    
    20PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    20Item 1A.
    
    Risk Factors
    
    
    21Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    21Item 3.
    
    Defaults Upon Senior Securities
    
    
    21Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    21Item 5.
    
    Other Information
    
    
    22Item 6.
    
    Exhibits
    
    
    22Signature
    
    
    
    
    23CertificationCertificationCertificationCertification
  2




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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
    
    
    Thirty-Nine Weeks EndedSeptember 30,
    
    
    October 1,
    
    
    September 30,
    
    
    October 1,2007
    
    
    2006
    
    
    2007
    
    
    2006(Unaudited)Coffeehouse sales
    
    $
    58,211,989
    
    
    $
    54,429,921
    
    
    $
    175,619,215
    
    
    $
    161,924,173Other sales
    
    
    3,768,684
    
    
    
    2,538,521
    
    
    
    11,061,473
    
    
    
    7,594,474Total net sales
    
    
    61,980,673
    
    
    
    56,968,442
    
    
    
    186,680,688
    
    
    
    169,518,647Cost of sales and related occupancy costs
    
    
    26,755,963
    
    
    
    23,725,262
    
    
    
    78,789,728
    
    
    
    70,755,516Operating expenses
    
    
    26,627,164
    
    
    
    23,941,709
    
    
    
    79,636,345
    
    
    
    70,149,599Opening expenses
    
    
    108,915
    
    
    
    463,062
    
    
    
    284,724
    
    
    
    1,245,616Depreciation and amortization
    
    
    7,143,094
    
    
    
    5,335,922
    
    
    
    19,145,894
    
    
    
    15,406,328General and administrative expenses
    
    
    6,851,462
    
    
    
    6,772,130
    
    
    
    20,609,025
    
    
    
    19,113,218Closing expense and disposal of assets
    
    
    2,871,719
    
    
    
    90,847
    
    
    
    3,732,583
    
    
    
    362,236Operating loss
    
    
    (8,377,644
    )
    
    
    (3,360,490
    )
    
    
    (15,517,611
    )
    
    
    (7,513,866
    )Other income (expense):Other income
    
    
    
    
    
    
    231,673
    
    
    
    
    
    
    
    796,238Interest income
    
    
    53,865
    
    
    
    202,901
    
    
    
    133,001
    
    
    
    523,293Interest expense
    
    
    (130,432
    )
    
    
    (144,824
    )
    
    
    (425,730
    )
    
    
    (478,662
    )Loss before (benefit) provision for
income taxes and minority interest
    
    
    (8,454,211
    )
    
    
    (3,070,740
    )
    
    
    (15,810,340
    )
    
    
    (6,672,997
    )(Benefit) provision for income taxes
    
    
    (31,468
    )
    
    
    (25,428
    )
    
    
    (327,565
    )
    
    
    256,928Loss before minority interest
    
    
    (8,422,743
    )
    
    
    (3,045,312
    )
    
    
    (15,482,775
    )
    
    
    (6,929,925
    )Minority interest
    
    
    40,316
    
    
    
    57,481
    
    
    
    121,850
    
    
    
    130,086Net loss
    
    $
    (8,463,059
    )
    
    $
    (3,102,793
    )
    
    $
    (15,604,625
    )
    
    $
    (7,060,011
    )Basic and diluted net loss per share
    
    $
    (0.44
    )
    
    $
    (0.16
    )
    
    $
    (0.81
    )
    
    $
    (0.37
    )Basic and diluted weighted average
number of shares outstanding
    
    
    19,354,140
    
    
    
    19,285,625
    
    
    
    19,320,737
    
    
    
    19,280,178
  3




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##### Table of Contents



CARIBOU COFFEE COMPANY, INC. AND AFFILIATES
(A Majority Owned Subsidiary of Caribou Holding Company Limited)
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 September 30,
    
    
    December 31,2007
    
    
    2006(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    5,557,851
    
    
    $
    14,752,269Accounts receivable (net of allowance for doubtful accounts of $23,926
and $12,693 at September 30, 2007 and December 31, 2006, respectively)
    
    
    2,569,568
    
    
    
    1,663,139Other receivables
    
    
    1,332,916
    
    
    
    1,769,256Income tax receivables
    
    
    58,450
    
    
    
    Inventories
    
    
    11,108,857
    
    
    
    10,294,493Prepaid expenses and other current assets
    
    
    765,196
    
    
    
    1,339,596Total current assets
    
    
    21,392,838
    
    
    
    29,818,753Property and equipment, net of accumulated depreciation and amortization
    
    
    91,539,471
    
    
    
    104,754,885Notes receivable
    
    
    36,325
    
    
    
    48,413Restricted cash
    
    
    412,875
    
    
    
    286,005Other assets
    
    
    1,065,251
    
    
    
    1,399,542Total assets
    
    $
    114,446,760
    
    
    $
    136,307,598LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    7,614,858
    
    
    $
    9,681,879Accrued compensation
    
    
    4,660,283
    
    
    
    5,676,449Accrued expenses
    
    
    6,669,738
    
    
    
    7,518,379Deferred revenue
    
    
    6,497,421
    
    
    
    9,002,588Total current liabilities
    
    
    25,442,300
    
    
    
    31,879,295Asset retirement liability
    
    
    940,381
    
    
    
    872,184Deferred rent liability
    
    
    11,344,973
    
    
    
    11,733,473Deferred revenue
    
    
    2,884,500
    
    
    
    2,919,000Income tax liability
    
    
    473,064
    
    
    
    342,108Minority interests in affiliates
    
    
    140,649
    
    
    
    159,050Total long term liabilities
    
    
    15,783,567
    
    
    
    16,025,815Shareholders equity:Preferred stock, par value $.01, 20,000,000 shares authorized; no
shares issued and outstanding
    
    
    
    
    
    
    Common stock, par value $.01, 200,000,000 shares authorized; 19,370,590
and 19,286,425 shares issued and outstanding at September 30, 2007 and
December 31, 2006, respectively
    
    
    193,706
    
    
    
    192,864Additional paid-in capital
    
    
    123,105,790
    
    
    
    122,153,502Accumulated deficit
    
    
    (50,078,603
    )
    
    
    (33,943,878
    )Total shareholders equity
    
    
    73,220,893
    
    
    
    88,402,488Total liabilities and shareholders equity
    
    $
    114,446,760
    
    
    $
    136,307,598
  4




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##### Table of Contents



CARIBOU COFFEE COMPANY, INC. AND AFFILIATES
(A Majority Owned Subsidiary of Caribou Holding Company Limited)
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Thirty-Nine Weeks EndedSeptember 30,
    
    
    October 1,2007
    
    
    2006(Unaudited)Operating activitiesNet loss
    
    $
    (15,604,625
    )
    
    $
    (7,060,011
    )Adjustments to reconcile net loss to net cash provided (used)
by operating activities:Depreciation and amortization
    
    
    20,812,441
    
    
    
    16,999,519Amortization of deferred financing fees
    
    
    258,294
    
    
    
    258,291Minority interests in affiliates
    
    
    121,850
    
    
    
    130,086Provision for closing expense and asset disposals
    
    
    2,337,271
    
    
    
    282,936Share-based compensation
    
    
    428,666
    
    
    
    329,000Non cash accretion expense
    
    
    68,197
    
    
    
    68,813Changes in operating assets and liabilities:Restricted cash
    
    
    (126,870
    )
    
    
    35,025Accounts receivable and other receivables
    
    
    (458,001
    )
    
    
    623,962Income tax receivable
    
    
    (58,450
    )
    
    
    135,750Inventories
    
    
    (814,364
    )
    
    
    379,043Prepaid expenses and other assets
    
    
    650,397
    
    
    
    (141,856
    )Accounts payable
    
    
    (2,067,021
    )
    
    
    (6,257,709
    )Accrued compensation
    
    
    (1,016,166
    )
    
    
    (2,051,595
    )Accrued expenses and income tax liability
    
    
    (128,071
    )
    
    
    2,212,822Deferred revenue
    
    
    (2,539,668
    )
    
    
    (3,315,608
    )Net cash provided by operating activities
    
    
    1,863,880
    
    
    
    2,628,468Investing activitiesPayments for property and equipment
    
    
    (11,442,511
    )
    
    
    (23,118,094
    )Net cash used in investing activities
    
    
    (11,442,511
    )
    
    
    (23,118,094
    )Financing activitiesDistribution of minority interests earnings
    
    
    (140,251
    )
    
    
    (99,785
    )Net proceeds (expenses) from initial public offering
    
    
    
    
    
    
    (69,292
    )Issuance of common stock
    
    
    524,464
    
    
    
    89,105Repurchase of common stock
    
    
    
    
    
    
    (11,651
    )Sale of treasury stock
    
    
    
    
    
    
    20,662Net cash provided (used ) by financing activities
    
    
    384,213
    
    
    
    (70,961
    )Decrease in cash and cash equivalents
    
    
    (9,194,418
    )
    
    
    (20,560,587
    )Cash and cash equivalents at beginning of period
    
    
    14,752,269
    
    
    
    33,846,111Cash and cash equivalents at end of period
    
    $
    5,557,851
    
    
    $
    13,285,524Supplemental disclosure of cash flow informationNon cash financing and investing transactions:Accrual for leasehold improvements, furniture, and equipment
    
    $
    168,298
    
    
    $
    1,429,188
  5




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##### Table of Contents



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
 Accounting for Leases, Accounting for Operating Leases With Scheduled Rent Increases.
 3. Recent Accounting Pronouncements
 Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities-Including an Amendment of FASB Statement No. 115,
 7




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4. Coffeehouse Closing and Asset Disposals
 Accounting for the Impairment or Disposal of
Long-Lived Assets.
  Thirteen Weeks Ended
    
    
    Thirty-Nine Weeks EndedSeptember 30,
    
    
    October 1,
    
    
    September 30,
    
    
    October 1,2007
    
    
    2006
    
    
    2007
    
    
    2006Coffeehouse closures
    
    
    11
    
    
    
    1
    
    
    
    19
    
    
    
    5Amount charged to
operations for
closed
coffeehouses:Amount charged to
operations for
lease costs
associated with
lease
terminations-cash
    
    $
    753,549
    
    
    $
    
    
    
    $
    1,328,353
    
    
    $
    Net book value of
closed coffeehouse
property and
equipment
    
    
    2,127,445
    
    
    
    51,547
    
    
    
    2,292,014
    
    
    
    225,503Amount charged to
operations for
other property and
equipment 

write-offs
    
    
    3,838
    
    
    
    
    
    
    
    45,256
    
    
    
    57,433Amount charged to
operations for
costs to
consolidate
facilities-cash
    
    
    (13,113
    )
    
    
    39,300
    
    
    
    66,960
    
    
    
    79,300Coffeehouse closing
expense and
disposal of assets
    
    $
    2,871,719
    
    
    $
    90,847
    
    
    $
    3,732,583
    
    
    $
    362,236Depreciation
expense related to
charges for
impaired assets
    
    $
    1,529,000
    
    
    $
    205,000
    
    
    $
    2,451,000
    
    
    $
    633,000
 Accounting for Costs Associated with Exit or Disposal Activities,
 Thirteen Weeks Ended
    
    
    Thirty-Nine Weeks EndedSeptember 30,
    
    
    October 1,
    
    
    September 30,
    
    
    October 1,2007
    
    
    2006
    
    
    2007
    
    
    2006Accrued exit costs beginning balance
    
    $
    531,561
    
    
    $
    540,343
    
    
    $
    511,641
    
    
    $
    601,712Expenses accrued
    
    
    47,038
    
    
    
    40,223
    
    
    
    235,704
    
    
    
    93,432Payments
    
    
    (44,303
    )
    
    
    (52,060
    )
    
    
    (213,049
    )
    
    
    (166,638
    )Accrued exit costs ending balance
    
    $
    534,296
    
    
    $
    528,506
    
    
    $
    534,296
    
    
    $
    528,506
 5. Inventories
  September 30,
    
    
    December 31,2007
    
    
    2006(Unaudited)Coffee
    
    $
    3,646,999
    
    
    $
    3,879,079Other merchandise held for sale
    
    
    3,976,184
    
    
    
    3,627,035Supplies
    
    
    3,485,674
    
    
    
    2,788,379$
    11,108,857
    
    
    $
    10,294,493
  8




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6. Equity and Share-Based Compensation
   Weighted
    
    
    WeightedAverage
    
    
    Average
    
    
    AggregateNumber of
    
    
    Exercise
    
    
    Contract
    
    
    IntrinsicShares
    
    
    Price
    
    
    Life
    
    
    ValueOutstanding, December 31, 2006
    
    
    2,421,600
    
    
    $
    7.43
    
    
    6.98 YrsGranted
    
    
    132,726
    
    
    $
    7.84Exercised
    
    
    (14,101
    )
    
    $
    6.69Forfeited
    
    
    (23,562
    )
    
    $
    7.85Outstanding, April 1, 2007
    
    
    2,516,663
    
    
    $
    7.45
    
    
    6.86 Yrs
    
    $
    (529,135
    )Granted
    
    
    210,000
    
    
    $
    7.57Exercised
    
    
    (19,332
    )
    
    $
    6.70Forfeited
    
    
    (110,500
    )
    
    $
    7.19Outstanding, July 1, 2007
    
    
    2,596,831
    
    
    $
    7.48
    
    
    6.81 Yrs
    
    $
    (1,133,690
    )Granted
    
    
    96,524
    
    
    $
    6.00Exercised
    
    
    (50,732
    )
    
    $
    5.93Forfeited
    
    
    (49,196
    )
    
    $
    7.28Outstanding, September 30, 2007
    
    
    2,593,427
    
    
    $
    7.46
    
    
    6.73 Yrs
    
    $
    (2,141,570
    )Options vested at September 30, 2007
    
    
    1,637,313
    
    
    $
    6.96
    
    
    5.57 Yrs
    
    $
    (541,772
    )
 7. Income Taxes
    8. Net Loss Per Share
  9




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Thirteen Weeks Ended
    
    
    Thirty-Nine Weeks EndedSeptember 30,
    
    
    October 1,
    
    
    September 30,
    
    
    October 1,2007
    
    
    2006
    
    
    2007
    
    
    2006Net loss
    
    $
    (8,463,059
    )
    
    $
    (3,102,793
    )
    
    $
    (15,604,625
    )
    
    $
    (7,060,011
    )Weighted average common shares
outstanding (for basic and diluted
calculation)
    
    
    19,354,140
    
    
    
    19,285,625
    
    
    
    19,320,737
    
    
    
    19,280,178Basic and diluted net loss per share
    
    $
    (0.44
    )
    
    $
    (0.16
    )
    
    $
    (0.81
    )
    
    $
    (0.37
    )
  9.  Master Franchise Agreement
     10. Commitments and Contingencies
  10




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
  FORWARD-LOOKING STATEMENTS
  Overview
  11




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Critical Accounting Policies
  Income taxes Accounting for Uncertainty in Income Taxes
 Fiscal Periods
   12




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##### Table of Contents



Thirteen Weeks Ended September 30, 2007 vs. Thirteen Weeks Ended October 1, 2006
 Results of Operations
 :
 Thirteen Weeks Ended
    
    
    
    
    
    
    Thirteen Weeks EndedSeptember 30,
    
    
    October 1,
    
    
    %
    
    
    September 30,
    
    
    October 1,2007
    
    
    2006
    
    
    Change
    
    
    2007
    
    
    2006(In thousands)
    
    
    
    
    
    
    As a % of total net salesStatement of Operations Data:Net sales:Coffeehouse
    
    $
    58,212
    
    
    $
    54,430
    
    
    
    6.9
    %
    
    
    93.9
    %
    
    
    95.5
    %Other sales
    
    
    3,769
    
    
    
    2,538
    
    
    
    48.5
    
    
    
    6.1
    
    
    
    4.5Total net sales
    
    
    61,981
    
    
    
    56,968
    
    
    
    8.8
    
    
    
    100.0
    
    
    
    100.0Cost of sales and related occupancy costs
    
    
    26,756
    
    
    
    23,725
    
    
    
    12.8
    
    
    
    43.2
    
    
    
    41.6Operating expenses
    
    
    26,627
    
    
    
    23,942
    
    
    
    11.2
    
    
    
    43.0
    
    
    
    42.0Opening expenses
    
    
    109
    
    
    
    463
    
    
    
    (76.5
    )
    
    
    0.2
    
    
    
    0.8Depreciation and amortization
    
    
    7,143
    
    
    
    5,336
    
    
    
    33.9
    
    
    
    11.5
    
    
    
    9.4General and administrative expenses
    
    
    6,852
    
    
    
    6,772
    
    
    
    1.2
    
    
    
    11.0
    
    
    
    11.9Closing expense and disposal of assets
    
    
    2,872
    
    
    
    91
    
    
    
    3061.0
    
    
    
    4.6
    
    
    
    0.2Operating loss
    
    
    (8,378
    )
    
    
    (3,361
    )
    
    
    (149.3
    )
    
    
    (13.5
    )
    
    
    (5.9
    )Other income (expense):Other income
    
    
    
    
    
    
    232
    
    
    
    (100.0
    )
    
    
    0.0
    
    
    
    0.4Interest income
    
    
    54
    
    
    
    203
    
    
    
    (73.5
    )
    
    
    0.1
    
    
    
    0.4Interest expense
    
    
    (130
    )
    
    
    (145
    )
    
    
    (9.9
    )
    
    
    (0.2
    )
    
    
    (0.3
    )Loss before (benefit ) provision for
income taxes and minority interest
    
    
    (8,454
    )
    
    
    (3,071
    )
    
    
    (175.3
    )
    
    
    (13.6
    )
    
    
    (5.4
    )(Benefit )provision for income taxes
    
    
    (31
    )
    
    
    (25
    )
    
    
    (23.8
    )
    
    
    0.0
    
    
    
    0.0Loss before minority interest
    
    
    (8,423
    )
    
    
    (3,046
    )
    
    
    (176.6
    )
    
    
    (13.6
    )
    
    
    (5.4
    )Minority interest
    
    
    40
    
    
    
    57
    
    
    
    (29.9
    )
    
    
    0.0
    
    
    
    0.1Net loss
    
    $
    (8,463
    )
    
    $
    (3,103
    )
    
    
    (172.8
    )
    
    
    (13.6
    )%
    
    
    (5.5
    )%
 Net Sales
  Costs and Expenses
 Cost of sales and related occupancy costs.
 13




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##### Table of Contents



Operating expenses.
 Opening expenses.
 Depreciation and amortization.
 General and administrative expenses.
 Closing expenses and disposal of assets.
 Other Income.
 Interest income.
 Interest expense.
 14




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##### Table of Contents



Thirty-Nine Weeks Ended September 30, 2007 vs. Thirty-Nine Weeks Ended October 1, 2006
 Results of Operations
 :
 Thirty-Nine Weeks Ended
    
    
    
    
    
    
    Thirty-Nine Weeks EndedSeptember 30,
    
    
    October 1,
    
    
    %
    
    
    September 30,
    
    
    October 1,2007
    
    
    2006
    
    
    Change
    
    
    2007
    
    
    2006(In thousands)
    
    
    
    
    
    
    As a % of total net salesStatement of Operations Data:Net sales:Coffeehouse
    
    $
    175,619
    
    
    $
    161,924
    
    
    
    8.5
    %
    
    
    94.1
    %
    
    
    95.5
    %Other sales
    
    
    11,062
    
    
    
    7,595
    
    
    
    45.7
    
    
    
    5.9
    
    
    
    4.5Total net sales
    
    
    186,681
    
    
    
    169,519
    
    
    
    10.1
    
    
    
    100.0
    
    
    
    100.0Cost of sales and related occupancy costs
    
    
    78,790
    
    
    
    70,755
    
    
    
    11.4
    
    
    
    42.2
    
    
    
    41.7Operating expenses
    
    
    79,636
    
    
    
    70,150
    
    
    
    13.5
    
    
    
    42.7
    
    
    
    41.4Opening expenses
    
    
    285
    
    
    
    1,246
    
    
    
    (77.1
    )
    
    
    0.2
    
    
    
    0.7Depreciation and amortization
    
    
    19,146
    
    
    
    15,406
    
    
    
    24.3
    
    
    
    10.3
    
    
    
    9.1General and administrative expenses
    
    
    20,609
    
    
    
    19,113
    
    
    
    7.8
    
    
    
    11.0
    
    
    
    11.3Closing expense and disposal of assets
    
    
    3,733
    
    
    
    362
    
    
    
    930.4
    
    
    
    2.0
    
    
    
    0.2Operating loss
    
    
    (15,518
    )
    
    
    (7,513
    )
    
    
    (106.5
    )
    
    
    (8.4
    )
    
    
    (4.4
    )Other income (expense):Other income
    
    
    
    
    
    
    796
    
    
    
    (100.0
    )
    
    
    0.0
    
    
    
    0.5Interest income
    
    
    133
    
    
    
    523
    
    
    
    (74.6
    )
    
    
    0.1
    
    
    
    0.3Interest expense
    
    
    (426
    )
    
    
    (479
    )
    
    
    (11.1
    )
    
    
    (0.2
    )
    
    
    (0.3
    )Loss before (benefit) provision for
income taxes and minority interest
    
    
    (15,811
    )
    
    
    (6,673
    )
    
    
    (136.9
    )
    
    
    (8.5
    )
    
    
    (3.9
    )(Benefit ) provision for income taxes
    
    
    (328
    )
    
    
    257
    
    
    
    (227.5
    )
    
    
    (0.2
    )
    
    
    0.2Loss before minority interest
    
    
    (15,483
    )
    
    
    (6,930
    )
    
    
    (123.4
    )
    
    
    (8.3
    )
    
    
    (4.1
    )Minority interest
    
    
    122
    
    
    
    130
    
    
    
    (6.3
    )
    
    
    0.1
    
    
    
    0.1Net loss
    
    $
    (15,605
    )
    
    $
    (7,060
    )
    
    
    (121.0
    )
    
    
    (8.4
    )%
    
    
    (4.2
    )%
 Net Sales
  Costs and Expenses
 Cost of sales and related occupancy costs.
 Operating expenses.
 15




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##### Table of Contents



Opening expenses.
 Depreciation and amortization.
 General and administrative expenses.
 Closing expenses and disposal of assets.
 Other Income.
 Interest income.
 Interest expense.
 Income tax provision.
 16




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##### Table of Contents



Liquidity and Capital Resources
  Thirty-Nine Weeks EndedSeptember 30,
    
    
    October 1,
    
    
    Increase /2007
    
    
    2006
    
    
    (Decrease)(In thousands)Net cash provided by operating activities
    
    $
    1,864
    
    
    $
    2,628
    
    
    $
    (764
    )Net cash used in investing activities
    
    
    (11,442
    )
    
    
    (23,118
    )
    
    
    11,675Net cash provided (used) by financing activities
    
    
    384
    
    
    
    (71
    )
    
    
    455Net change in cash and cash equivalents
    
    $
    (9,194
    )
    
    $
    (20,561
    )
    
    $
    11,367
      17




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##### Table of Contents



Off-Balance Sheet Arrangements
  Recent Accounting Pronouncements
 Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities-Including an Amendment of FASB Statement No. 115,
 Key Financial Metrics
   Thirteen Weeks Ended
    
    
    Thirty-Nine Weeks EndedSeptember 30,
    
    
    October 1,
    
    
    September 30,
    
    
    October 1,2007
    
    
    2006
    
    
    2007
    
    
    2006(In thousands, except operating data)Non-GAAP Metrics:EBITDA(1)
    
    $
    (715
    )
    
    $
    2,766
    
    
    $
    5,173
    
    
    $
    10,153Operating Data:Percentage change in comparable
coffeehouse net sales(2)
    
    
    1
    %
    
    
    (1
    )%
    
    
    0
    %
    
    
    (2
    )%Company-Owned:Coffeehouses open at beginning of period
    
    
    441
    
    
    
    405
    
    
    
    440
    
    
    
    386Coffeehouses opened during the period
    
    
    2
    
    
    
    12
    
    
    
    11
    
    
    
    35Coffeehouses closed during the period
    
    
    11
    
    
    
    1
    
    
    
    19
    
    
    
    5Coffeehouses open at end of period:Total Company-Owned
    
    
    432
    
    
    
    416
    
    
    
    432
    
    
    
    416Franchised:Coffeehouses open at beginning of period
    
    
    39
    
    
    
    11
    
    
    
    24
    
    
    
    9Coffeehouses opened during the period
    
    
    2
    
    
    
    5
    
    
    
    17
    
    
    
    12Coffeehouses closed during the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5Coffeehouses open at end of period:Total Franchised
    
    
    41
    
    
    
    16
    
    
    
    41
    
    
    
    16Total coffeehouses open at end of period
    
    
    473
    
    
    
    432
    
    
    
    473
    
    
    
    432
 18




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##### Table of Contents



(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.   
    
    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 285 coffeehouses from the beginning of fiscal 2002
through the end of the first thirty-nine weeks of fiscal 2007. As a result, we believe
depreciation expense is disproportionately large when compared to the sales from a
significant percentage of our coffeehouses that are in their initial years of operations.
Also, many of the assets being depreciated have actual useful lives that exceed the initial
lease term excluding renewal options. 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 establish targets for certain management compensation matters; and
    
    To evaluate our capacity to incur and service debt, fund capital expenditures and
expand our business.
  Thirteen Weeks Ended
    
    
    Thirty-Nine Weeks EndedSeptember 30,
    
    
    October 1,
    
    
    September 30,
    
    
    October 1,2007
    
    
    2006
    
    
    2007
    
    
    2006(In thousands)Net loss
    
    $
    (8,463
    )
    
    $
    (3,103
    )
    
    $
    (15,605
    )
    
    $
    (7,060
    )Interest expense
    
    
    130
    
    
    
    145
    
    
    
    426
    
    
    
    479Interest income
    
    
    (54
    )
    
    
    (203
    )
    
    
    (133
    )
    
    
    (523
    )Depreciation and
amortization(1)
    
    
    7,703
    
    
    
    5,952
    
    
    
    20,813
    
    
    
    17,000(Benefit)/Provision
for income taxes
    
    
    (31
    )
    
    
    (25
    )
    
    
    (328
    )
    
    
    257EBITDA
    
    $
    (715
    )
    
    $
    2,766
    
    
    $
    5,173
    
    
    $
    10,153
 
 (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. 19




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk.
 Primary Market Risk Exposures
  Financial Instruments and Derivative Commodity Instruments
  
 Item 4T. Controls and Procedures.
  
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  20




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##### Table of Contents



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. Submission of Matters to a Vote of Security Holders.
  21




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##### Table of Contents



Votes in
    
    Votes
    
    votes
    
    Votes
    
    BrokerFavor
    
    Against
    
    Withheld
    
    Abstentions
    
    Non-VotesElection of Directors:Kip R. Caffey
    
    
    18,026,461
    
    
    
    0
    
    
    
    241,177
    
    
    
    0
    
    
    
    0Michael J. Coles
    
    
    17,693,676
    
    
    
    0
    
    
    
    573,962
    
    
    
    0
    
    
    
    0Wallace B. Doolin
    
    
    17,979,881
    
    
    
    0
    
    
    
    287,757
    
    
    
    0
    
    
    
    0Charles L. Griffith
    
    
    17,698,382
    
    
    
    0
    
    
    
    569,256
    
    
    
    0
    
    
    
    0Jeffrey C. Neal
    
    
    18,024,151
    
    
    
    0
    
    
    
    243,487
    
    
    
    0
    
    
    
    0Charles H. Ogburn
    
    
    17,700,937
    
    
    
    0
    
    
    
    566,701
    
    
    
    0
    
    
    
    0Ratification of independent registered
public accounting firm
    
    
    18,044,408
    
    
    
    179,489
    
    
    
    0
    
    
    
    43,741
    
    
    
    0
 
 Item 5. Other Information.
  
 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).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.
 
  22




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SIGNATURE
  CARIBOU COFFEE COMPANY, INC.By:
    /s/ George E. MileusnicGeorge E. MileusnicChief Financial Officer  23