##### 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 April 1, 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
    
    55429Brooklyn Center, Minnesota
    
    (Zip Code)(Address of principal executive offices)
 (763) 592-2200
 Not Applicable
 þ o
  o o þ
 o þ
  Title
    
    Shares Outstanding as of May 9, 2007Common Stock, par value $0.01 per share
    
    19,319,858




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##### 



CARIBOU COFFEE COMPANY, INC.
 FORM 10-Q
 For the Thirteen Week Periods Ended April 1, 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
    
    
    17Item 4T.
    
    Controls and Procedures
    
    
    17PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    18Item 1A.
    
    Risk Factors
    
    
    18Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    18Item 3.
    
    Defaults Upon Senior Securities
    
    
    19Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    19Item 5.
    
    Other Information
    
    
    19Item 6.
    
    Exhibits
    
    
    19Signature
    
    
    20Section 302 CertificationSection 302 CertificationSection 906 CertificationSection 906 Certification
  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 EndedApril 1,
    
    
    April 2,2007
    
    
    2006(Unaudited)Coffeehouse sales
    
    $
    58,075,964
    
    
    $
    53,283,822Other sales
    
    
    3,776,666
    
    
    
    2,682,389Total net sales
    
    
    61,852,630
    
    
    
    55,966,211Cost of sales and related occupancy costs
    
    
    25,514,266
    
    
    
    23,266,067Operating expenses
    
    
    25,987,461
    
    
    
    23,100,856Opening expenses
    
    
    109,791
    
    
    
    415,251Depreciation and amortization
    
    
    6,017,584
    
    
    
    4,805,233General and administrative expenses
    
    
    6,604,222
    
    
    
    6,101,178Closing expense and disposal of assets
    
    
    726,978
    
    
    
    7,998Operating loss
    
    
    (3,107,672
    )
    
    
    (1,730,372
    )Other income (expense):Other income
    
    
    
    
    
    
    322,950Interest income
    
    
    33,237
    
    
    
    187,003Interest expense
    
    
    (129,719
    )
    
    
    (147,742
    )Loss before provision for income taxes and minority interest
    
    
    (3,204,154
    )
    
    
    (1,368,161
    )Provision for income taxes
    
    
    19,835
    
    
    
    147,039Loss before minority interest
    
    
    (3,223,989
    )
    
    
    (1,515,200
    )Minority interest
    
    
    27,061
    
    
    
    56,865Net loss
    
    $
    (3,251,050
    )
    
    $
    (1,572,065
    )Basic and diluted net loss per share
    
    $
    (0.17
    )
    
    $
    (0.08
    )Basic and diluted weighted average number of shares outstanding
    
    
    19,288,016
    
    
    
    19,274,102
  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
 April 1,
    
    
    December 31,2007
    
    
    2006(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    9,672,505
    
    
    $
    14,752,269Accounts receivable (net of allowance for doubtful accounts of $3,304
and $12,693 at April 1, 2007 and December 31, 2006)
    
    
    2,387,252
    
    
    
    1,663,139Other receivables
    
    
    1,624,451
    
    
    
    1,769,256Inventories
    
    
    9,910,035
    
    
    
    10,294,493Prepaid expenses and other current assets
    
    
    1,688,296
    
    
    
    1,339,596Total current assets
    
    
    25,282,539
    
    
    
    29,818,753Property and equipment, net of accumulated depreciation and amortization
    
    
    99,953,264
    
    
    
    104,754,885Notes receivable
    
    
    44,384
    
    
    
    48,413Restricted cash
    
    
    286,005
    
    
    
    286,005Other assets
    
    
    1,289,609
    
    
    
    1,399,542Total assets
    
    $
    126,855,801
    
    
    $
    136,307,598LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    7,755,397
    
    
    $
    9,681,879Accrued compensation
    
    
    3,950,503
    
    
    
    5,676,449Accrued expenses
    
    
    7,009,198
    
    
    
    7,518,379Deferred revenue
    
    
    7,011,775
    
    
    
    9,002,588Total current liabilities
    
    
    25,726,873
    
    
    
    31,879,295Asset retirement liability
    
    
    895,938
    
    
    
    872,184Deferred rent liability
    
    
    11,550,916
    
    
    
    11,733,473Deferred revenue
    
    
    2,824,000
    
    
    
    2,919,000Income tax liability
    
    
    872,208
    
    
    
    342,108Minority interests in affiliates
    
    
    128,720
    
    
    
    159,050Total long term liabilities
    
    
    16,271,782
    
    
    
    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; 19,300,426
and 19,286,425 shares issued and outstanding at April 1, 2007 and
December 31, 2006, respectively
    
    
    193,004
    
    
    
    192,864Additional paid-in capital
    
    
    122,389,169
    
    
    
    122,153,502Accumulated deficit
    
    
    (37,725,027
    )
    
    
    (33,943,878
    )Total shareholders equity
    
    
    84,857,146
    
    
    
    88,402,488Total liabilities and shareholders equity
    
    $
    126,855,801
    
    
    $
    136,307,598
  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
 Thirteen Weeks EndedApril 1,
    
    
    April 2,2007
    
    
    2006(Unaudited)Operating activitiesNet loss
    
    $
    (3,251,050
    )
    
    $
    (1,572,065
    )Adjustments to reconcile net loss to net cash used by operating activities:Depreciation and amortization
    
    
    6,583,007
    
    
    
    5,280,967Amortization of deferred financing fees
    
    
    86,098
    
    
    
    86,097Minority interests in affiliates
    
    
    27,061
    
    
    
    56,865Provision for closing expense and asset disposals
    
    
    168,648
    
    
    
    7,998Share-based compensation
    
    
    142,000
    
    
    
    85,000Non cash accretion expense
    
    
    23,754
    
    
    
    20,995Changes in operating assets and liabilities:Accounts receivable and other receivables
    
    
    (575,279
    )
    
    
    693,491Income tax receivable
    
    
    
    
    
    
    82,395Inventories
    
    
    384,458
    
    
    
    726,245Prepaid expenses and other assets
    
    
    (324,865
    )
    
    
    (91,251
    )Accounts payable
    
    
    (1,926,482
    )
    
    
    (7,239,196
    )Accrued compensation
    
    
    (1,725,946
    )
    
    
    (2,221,028
    )Accrued expenses and income tax liability
    
    
    366,883
    
    
    
    408,687Deferred revenue
    
    
    (2,085,813
    )
    
    
    (2,665,521
    )Net cash used by operating activities
    
    
    (2,107,526
    )
    
    
    (6,340,321
    )Investing activitiesPayments for property and equipment
    
    
    (3,008,653
    )
    
    
    (7,010,896
    )Net cash used in investing activities
    
    
    (3,008,653
    )
    
    
    (7,010,896
    )Financing activitiesDistribution of minority interests earnings
    
    
    (57,392
    )
    
    
    (27,180
    )Issuance of common stock
    
    
    93,807
    
    
    
    45,121Repurchase of common stock
    
    
    
    
    
    
    (10,210
    )Sale of treasury stock
    
    
    
    
    
    
    19,221Net cash provided by financing activities
    
    
    36,415
    
    
    
    26,952Decrease in cash and cash equivalents
    
    
    (5,079,764
    )
    
    
    (13,324,265
    )Cash and cash equivalents at beginning of period
    
    
    14,752,269
    
    
    
    33,846,111Cash and cash equivalents at end of period
    
    $
    9,672,505
    
    
    $
    20,521,846Supplemental disclosure of cash flow informationNoncash financing and investing transactions:Accrual for leasehold improvements, furniture, and equipment
    
    $
    617,893
    
    
    $
    1,098,000
  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
   Reclassification
  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 EndedApril 1,
    
    
    April 2,2007
    
    
    2006Coffeehouse closures
    
    
    2
    
    
    
    2Amount charged to operations for closed coffeehouses:Amount charged to operations for lease costs associated with lease
termination-cash
    
    $
    518,294
    
    
    $
    Net book value of closed coffeehouse property and equipment
    
    
    163,613
    
    
    
    Amount charged to operations for other property and equipment write-offs
    
    
    5,035
    
    
    
    7,998Amount charged to operations for costs to consolidate facilities-cash
    
    
    40,036
    
    
    
    Coffeehouse closing expense and disposal of assets
    
    $
    726,978
    
    
    $
    7,998Depreciation expense related to charges for impaired assets
    
    $
    412,000
    
    
    $
    82,000
 Accounting for Costs Associated with Exit or Disposal Activities,
 Thirteen Weeks EndedApril 1,
    
    
    April 2,2007
    
    
    2006Accrued exit costs beginning balance
    
    $
    511,641
    
    
    $
    601,712Expenses accrued
    
    
    50,524
    
    
    
    Payments
    
    
    (128,264
    )
    
    
    (57,872
    )Accrued exit costs ending balance
    
    $
    433,901
    
    
    $
    543,840
 5. Inventories
  April 1,
    
    
    December 31,2007
    
    
    2006(Unaudited)Coffee
    
    $
    3,429,745
    
    
    $
    3,879,079Other merchandise held for sale
    
    
    3,657,023
    
    
    
    3,627,035Supplies
    
    
    2,823,267
    
    
    
    2,788,379$
    9,910,035
    
    
    $
    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
    )Options vested at April 1, 2007
    
    
    1,547,658
    
    
    $
    6.73
    
    
    5.79 Yrs
    
    $
    791,993
 7. Income Taxes
     8. Net Loss Per Share
  9




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Thirteen Weeks EndedApril 1,
    
    
    April 2,2007
    
    
    2006Net loss
    
    $
    (3,251,050
    )
    
    $
    (1,572,065
    )Weighted average common shares
outstanding (for basic and diluted
calculation)
    
    
    19,288,016
    
    
    
    19,274,102Basic and diluted net loss per share
    
    $
    (0.17
    )
    
    $
    (0.08
    )
  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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Thirteen Weeks Ended April 1, 2007 vs. Thirteen Weeks Ended April 2, 2006
 Results of Operations
 :
 Thirteen Weeks Ended
    
    
    
    
    
    
    Thirteen Weeks EndedApril 1,
    
    
    April 2,
    
    
    %
    
    
    April 1,
    
    
    April 2,2007
    
    
    2006
    
    
    Change
    
    
    2007
    
    
    2006(In thousands)
    
    
    
    
    
    
    As a % of total net salesStatement of Operations Data:Net sales:Coffeehouse
    
    $
    58,076
    
    
    $
    53,283
    
    
    
    9.0
    %
    
    
    93.9
    %
    
    
    95.2
    %Other
    
    
    3,777
    
    
    
    2,682
    
    
    
    40.8
    %
    
    
    6.1
    %
    
    
    4.8
    %Total net sales
    
    
    61,853
    
    
    
    55,966
    
    
    
    10.5
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales and related occupancy costs
    
    
    25,514
    
    
    
    23,266
    
    
    
    9.7
    %
    
    
    41.3
    %
    
    
    41.6
    %Operating expenses
    
    
    25,987
    
    
    
    23,101
    
    
    
    12.5
    %
    
    
    42.0
    %
    
    
    41.3
    %Opening expenses
    
    
    110
    
    
    
    415
    
    
    
    (73.5
    )%
    
    
    0.2
    %
    
    
    0.7
    %Depreciation and amortization
    
    
    6,018
    
    
    
    4,805
    
    
    
    25.2
    %
    
    
    9.7
    %
    
    
    8.6
    %General and administrative expenses
    
    
    6,604
    
    
    
    6,101
    
    
    
    8.2
    %
    
    
    10.7
    %
    
    
    10.9
    %Closing expense and disposal of assets
    
    
    727
    
    
    
    8
    
    
    
    n/a
    
    
    
    1.2
    %
    
    
    0.0
    %Operating loss
    
    
    (3,107
    )
    
    
    (1,730
    )
    
    
    (79.6
    )%
    
    
    (5.1
    )%
    
    
    (3.1)
    %Other income (expense):Other income
    
    
    
    
    
    
    323
    
    
    
    n/a
    
    
    
    0.0
    %
    
    
    0.6
    %Interest income
    
    
    33
    
    
    
    187
    
    
    
    (82.4
    )%
    
    
    0.0
    %
    
    
    0.3
    %Interest expense
    
    
    (130
    )
    
    
    (148
    )
    
    
    (12.2)
    %
    
    
    (0.2
    )%
    
    
    (0.3
    )%Loss before provision for income taxes
and minority interest
    
    
    (3,204
    )
    
    
    (1,368
    )
    
    
    (134.2
    )%
    
    
    (5.3
    )%
    
    
    (2.5
    )%Provision for income taxes
    
    
    20
    
    
    
    147
    
    
    
    86.4
    %
    
    
    0.0
    %
    
    
    0.2
    %Loss before minority interest
    
    
    (3,224
    )
    
    
    (1,515
    )
    
    
    (112.8
    )%
    
    
    (5.3
    )%
    
    
    (2.7
    )%Minority interest
    
    
    27
    
    
    
    57
    
    
    
    (52.6)
    %
    
    
    0.0
    %
    
    
    0.1
    %Net loss
    
    $
    (3,251
    )
    
    $
    (1,572
    )
    
    
    (106.8)
    %
    
    
    (5.3
    )%
    
    
    (2.8)
    %
 Net Sales
  Costs and Expenses
 Cost of sales and related occupancy costs.
 Operating expenses.
 13




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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.
 Liquidity and Capital Resources
  14




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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
  15




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Thirteen Weeks EndedApril 1, 2007
    
    April 2, 2006(In thousands, except operating data)Non-GAAP Metrics:EBITDA(1)
    
    $
    3,449
    
    
    $
    3,817Operating Data:Percentage change in comparable coffeehouse
net sales(2)
    
    
    (1
    )%
    
    
    (1
    )%Company-Owned:Coffeehouses open at beginning of period
    
    
    440
    
    
    
    386Coffeehouses opened during the period
    
    
    4
    
    
    
    10Coffeehouses closed during the period
    
    
    2
    
    
    
    2Coffeehouses open at end of period:Total Company-Owned
    
    
    442
    
    
    
    394Franchised:Coffeehouses open at beginning of period
    
    
    24
    
    
    
    9Coffeehouses opened during the period
    
    
    9
    
    
    
    1Coffeehouses closed during the period
    
    
    
    
    
    
    2Coffeehouses open at end of period:Total Franchised
    
    
    33
    
    
    
    8Total coffeehouses open at end of period
    
    
    475
    
    
    
    402
 
 (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 283 coffeehouses from the beginning of fiscal 2002
through the end of the first thirteen 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;
 16




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##### Table of Contents




    
    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 EndedApril 1, 2007
    
    
    April 2, 2006(Thousands)Net loss
    
    $
    (3,251
    )
    
    $
    (1,572
    )Interest expense
    
    
    130
    
    
    
    148Interest income
    
    
    (33
    )
    
    
    (187
    )Depreciation and
amortization(1)
    
    
    6,583
    
    
    
    5,281Provision for income taxes
    
    
    20
    
    
    
    147EBITDA
    
    $
    3,449
    
    
    $
    3,817
 
 (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 Risk.
 Primary Market Risk Exposures
  Financial Instruments and Derivative Commodity Instruments
  
 Item 4T. Controls and Procedures.
  17




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##### Table of Contents



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
 18




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##### Table of Contents



Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  
 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).10.1*
    
    Offer Letter from Caribou Coffee Company, Inc. to Rosalyn T. Mallet,
dated February 28, 2007 (incorporated by reference to Exhibit 10.1
to the Companys Form 8-K/A filed April 30, 2007).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.
 
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##### Table of Contents



SIGNATURE
  CARIBOU COFFEE COMPANY, INC.By:
    
    /s/ George E. Mileusnic

George E. MileusnicChief Financial Officer
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