##### 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 March 30, 2008.
 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
 Not Applicable
 þ 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
  Title
    
    Shares Outstanding as of April 24, 2008Common Stock, par value $0.01 per share
    
    19,370,590




---



##### 



CARIBOU COFFEE COMPANY, INC.
 FORM 10-Q
 For the Thirteen Week Period Ended March 30, 2008
 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
    
    
    14Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    23Item 4T.
    
    Controls and Procedures
    
    
    23PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    23Item 1A.
    
    Risk Factors
    
    
    24Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    24Item 3.
    
    Defaults Upon Senior Securities
    
    
    24Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    25Item 5.
    
    Other Information
    
    
    25Item 6.
    
    Exhibits
    
    
    26Signature
    
    
    27Section 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 EndedMarch 30,
    
    
    April 1,2008
    
    
    2007(Unaudited)Coffeehouse sales
    
    $
    56,620,063
    
    
    $
    58,075,964Other sales
    
    
    5,136,658
    
    
    
    3,776,666Total net sales
    
    
    61,756,721
    
    
    
    61,852,630Cost of sales and related occupancy costs
    
    
    26,212,708
    
    
    
    25,514,266Operating expenses
    
    
    25,394,862
    
    
    
    25,987,461Opening expenses
    
    
    85,027
    
    
    
    109,791Depreciation and amortization
    
    
    5,921,059
    
    
    
    6,017,584General and administrative expenses
    
    
    7,449,539
    
    
    
    6,604,222Closing expense and disposal of assets
    
    
    2,546,329
    
    
    
    726,978Operating loss
    
    
    (5,852,803
    )
    
    
    (3,107,672
    )Other income (expense):Interest income
    
    
    17,539
    
    
    
    33,237Interest expense
    
    
    (511,596
    )
    
    
    (129,719
    )Loss before provision for income taxes and minority interest
    
    
    (6,346,860
    )
    
    
    (3,204,154
    )Provision for income taxes
    
    
    5,985
    
    
    
    19,835Loss before minority interest
    
    
    (6,352,845
    )
    
    
    (3,223,989
    )Minority interest
    
    
    53,138
    
    
    
    27,061Net loss
    
    $
    (6,405,983
    )
    
    $
    (3,251,050
    )Basic and diluted net loss per share
    
    $
    (0.33
    )
    
    $
    (0.17
    )Basic and diluted weighted average number of shares outstanding
    
    
    19,370,590
    
    
    
    19,288,016
  3




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CARIBOU COFFEE COMPANY, INC. AND AFFILIATES
(A Majority Owned Subsidiary of Caribou Holding Company Limited)
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 March 30,
    
    
    December 30,2008
    
    
    2007(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    4,083,326
    
    
    $
    9,886,427Accounts
receivable (net of allowance for doubtful accounts of $20,860 and $7,989 at March 30, 2008 and December 30, 2007, respectively)
    
    
    3,790,354
    
    
    
    3,116,864Other receivables
    
    
    2,071,979
    
    
    
    1,544,281Income tax receivable
    
    
    120,706
    
    
    
    149,304Inventories
    
    
    9,409,089
    
    
    
    10,228,527Prepaid expenses and other current assets
    
    
    1,156,151
    
    
    
    1,690,668Total current assets
    
    
    20,631,605
    
    
    
    26,616,071Property and equipment, net of accumulated depreciation and amortization
    
    
    78,808,300
    
    
    
    83,798,120Notes receivable
    
    
    28,266
    
    
    
    32,296Restricted cash
    
    
    410,831
    
    
    
    410,831Other assets
    
    
    621,686
    
    
    
    982,334Total assets
    
    $
    100,500,688
    
    
    $
    111,839,652LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    8,823,455
    
    
    $
    9,650,326Accrued compensation
    
    
    5,968,885
    
    
    
    7,863,445Accrued expenses
    
    
    10,064,419
    
    
    
    9,318,442Deferred revenue
    
    
    7,139,138
    
    
    
    9,987,724Total current liabilities
    
    
    31,995,897
    
    
    
    36,819,937Asset retirement liability
    
    
    1,010,965
    
    
    
    989,490Deferred rent liability
    
    
    10,858,343
    
    
    
    11,271,186Deferred revenue
    
    
    2,842,500
    
    
    
    2,853,500Income tax liability
    
    
    476,127
    
    
    
    473,064Minority interests in affiliates
    
    
    152,181
    
    
    
    144,176Total long term liabilities
    
    
    15,340,116
    
    
    
    15,731,416Shareholders 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
shares issued and outstanding at March 30, 2008 and
December 30, 2007
    
    
    193,706
    
    
    
    193,706Additional paid-in capital
    
    
    124,514,221
    
    
    
    124,231,862Accumulated deficit
    
    
    (71,543,252
    )
    
    
    (65,137,269
    )Total shareholders equity
    
    
    53,164,675
    
    
    
    59,288,299Total liabilities and shareholders equity
    
    $
    100,500,688
    
    
    $
    111,839,652
  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 EndedMarch 30,
    
    
    April 1,2008
    
    
    2007(Unaudited)Operating activitiesNet loss
    
    $
    (6,405,983
    )
    
    $
    (3,251,050
    )Adjustments to reconcile net loss to net cash used by operating activities:Depreciation and amortization
    
    
    6,420,772
    
    
    
    6,583,007Amortization of deferred financing fees
    
    
    373,234
    
    
    
    86,098Minority interests in affiliates
    
    
    53,138
    
    
    
    27,061Provision for closing expense and asset disposals
    
    
    473,502
    
    
    
    168,648Share-based compensation
    
    
    151,685
    
    
    
    142,000Non cash accretion expense
    
    
    21,475
    
    
    
    23,754Shareholder contribution
    
    
    130,674
    
    
    
    Changes in operating assets and liabilities:Accounts receivable and other receivables
    
    
    (1,197,158
    )
    
    
    (575,279
    )Income tax receivable
    
    
    28,598
    
    
    
    Inventories
    
    
    819,438
    
    
    
    384,458Prepaid expenses and other assets
    
    
    521,931
    
    
    
    (324,865
    )Accounts payable
    
    
    (826,871
    )
    
    
    (1,926,482
    )Accrued compensation
    
    
    (1,894,560
    )
    
    
    (1,725,946
    )Accrued expenses and income tax liability
    
    
    915,285
    
    
    
    366,883Deferred revenue
    
    
    (2,859,586
    )
    
    
    (2,085,813
    )Net cash used by operating activities
    
    
    (3,274,426
    )
    
    
    (2,107,526
    )Investing activitiesPayments for property and equipment
    
    
    (2,483,542
    )
    
    
    (3,008,653
    )Net cash used in investing activities
    
    
    (2,483,542
    )
    
    
    (3,008,653
    )Financing activitiesDistribution of minority interests earnings
    
    
    (45,133
    )
    
    
    (57,392
    )Issuance of common stock
    
    
    
    
    
    
    93,807Net cash (used) provided by financing activities
    
    
    (45,133
    )
    
    
    36,415Decrease in cash and cash equivalents
    
    
    (5,803,101
    )
    
    
    (5,079,764
    )Cash and cash equivalents at beginning of period
    
    
    9,886,427
    
    
    
    14,752,269Cash and cash equivalents at end of period
    
    $
    4,083,326
    
    
    $
    9,672,505Supplemental disclosure of cash flow informationNoncash financing and investing transactions:Accrual for leasehold improvements, furniture, and equipment
    
    $
    666,095
    
    
    $
    617,893
  5




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




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2. Summary of Significant Accounting Policies
 Revenue Recognition
     Operating Leases and Rent Expense
 Accounting for Leases, Accounting for Operating Leases With Scheduled Rent
Increases.
 3. Recent Accounting Pronouncements
 Fair Value Measurement
 The Fair Value Option for Financial Assets and
Financial Liabilities-Including an Amendment of FASB Statement No. 115
 7




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Noncontrolling Interests in Consolidated Financial
Statements
 4. Impairments, Coffeehouse Closing, Asset Disposals and Severance
    Thirteen Weeks EndedMarch 30,
    
    
    April 1,2008
    
    
    2007Coffeehouse closures
    
    
    16
    
    
    
    2Amount charged to operations for closed coffeehouses:Amount charged to operations for closed coffeehouses lease reserve
non-cash
    
    $
    530,494
    
    
    $
    (16,540
    )Amount charged to operations for costs to consolidate facilities
    
    
    
    
    
    
    40,036Amount charged to operations for lease costs associated with lease
termination-cash
    
    
    1,665,785
    
    
    
    534,834Total exit costs
    
    
    2,196,279
    
    
    
    558,330Net book value of closed coffeehouse property and equipment
    
    
    350,050
    
    
    
    163,613Amount charged to operations for other property and equipment write-offs
    
    
    
    
    
    
    5,035Coffeehouse closing expense and disposal of assets
    
    $
    2,546,329
    
    
    $
    726,978
  Balance at
    
    
    Additions
    
    
    DeductionsBeginning of
    
    
    Charged to
    
    
    from
    
    
    Balance atThirteen Weeks Ended:
    
    Year
    
    
    Expense
    
    
    reserves
    
    
    End of QuarterMarch 30, 2008Exit costs
    
    $
    466,768
    
    
    $
    2,196,279
    
    
    $
    1,679,293
    
    
    $
    983,754Severance
    
    
    1,353,000
    
    
    
    754,895
    
    
    
    
    
    
    
    2,107,895Total
    
    $
    1,819,768
    
    
    $
    2,951,174
    
    
    $
    1,679,293
    
    
    $
    3,091,649
 Balance at
    
    
    Additions
    
    
    DeductionsBeginning of
    
    
    Charged to
    
    
    from
    
    
    Balance atThirteen Weeks Ended:
    
    Year
    
    
    Expense
    
    
    reserves
    
    
    End of QuarterApril 1, 2007Exit costs
    
    $
    511,641
    
    
    $
    558,330
    
    
    $
    636,070
    
    
    $
    433,901
 8




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5. Inventories
  March 30,
    
    
    December 30,2008
    
    
    2007(Unaudited)Coffee
    
    $
    3,447,551
    
    
    $
    3,485,133Other merchandise held for sale
    
    
    3,065,122
    
    
    
    4,345,584Supplies
    
    
    2,896,416
    
    
    
    2,397,810$
    9,409,089
    
    
    $
    10,228,527
  6. Equity and Share-Based Compensation
   Weighted
    
    
    WeightedAverage
    
    
    Average
    
    
    AggregateNumber of
    
    
    Exercise
    
    
    Contract
    
    
    IntrinsicShares
    
    
    Price
    
    
    Life
    
    
    ValueOutstanding, December 30, 2007
    
    
    2,570,746
    
    
    $
    7.46
    
    
    6.47 YrsGranted
    
    
    55,000
    
    
    $
    2.78Exercised
    
    
    
    
    
    $
    Forfeited
    
    
    (14,331
    )
    
    $
    8.11Outstanding, March 30, 2008
    
    
    2,611,415
    
    
    $
    7.35
    
    
    6.28 Yrs
    
    $
    Options vested at March 30, 2008
    
    
    1,794,976
    
    
    $
    7.17
    
    
    5.31 Yrs
    
    $
    
 9




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##### Table of Contents



7. Income Taxes
  8. Net Loss Per Share
  Thirteen Weeks EndedMarch 30,
    
    
    April 1,2008
    
    
    2007Net loss
    
    $
    (6,405,983
    )
    
    $
    (3,251,050
    )Weighted average common shares outstanding
(for basic and diluted calculation)
    
    
    19,370,590
    
    
    
    19,288,016Basic and diluted net loss per share
    
    $
    (0.33
    )
    
    $
    (0.17
    )
  9. Master Franchise Agreement
     10




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10. Note Payable and Revolving Credit Facility
  11. Commitments and Contingencies
  11




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12. Segment Reporting
  Retail
  Commercial
  Franchise
  12




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##### Table of Contents



Thirteen weeks ended March 30, 2008
 Unallocated(in thousands)
    
    Retail
    
    
    Commercial
    
    
    Franchise
    
    
    Corporate
    
    
    TotalSales
    
    $
    56,620
    
    
    $
    3,551
    
    
    $
    1,586
    
    
    $
    
    
    
    $
    61,757Costs of sales and related occupancy costs
    
    
    23,301
    
    
    
    2,030
    
    
    
    882
    
    
    
    
    
    
    
    26,213Operating expenses
    
    
    24,487
    
    
    
    500
    
    
    
    408
    
    
    
    
    
    
    
    25,395Opening expenses
    
    
    85
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    85Depreciation and amortization
    
    
    5,913
    
    
    
    6
    
    
    
    2
    
    
    
    
    
    
    
    5,921General and administrative expenses
    
    
    2,509
    
    
    
    
    
    
    
    
    
    
    
    4,941
    
    
    
    7,450Closing expense and disposal of assets
    
    
    2,537
    
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    2,546Operating (loss) income
    
    $
    (2,212
    )
    
    $
    1,015
    
    
    $
    294
    
    
    $
    (4,950
    )
    
    $
    (5,853
    )Property and
equipment, net
    
    $
    68,817
    
    
    $
    62
    
    
    $
    16
    
    
    $
    9,913
    
    
    $
    78,808Net impairment
    
    $
    1,479
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1,479Net capital expenditures
    
    $
    1,794
    
    
    $
    1
    
    
    $
    1
    
    
    $
    688
    
    
    $
    2,484
 Thirteen weeks ended April 1, 2007
 Unallocated(in thousands)
    
    Retail
    
    
    Commercial
    
    
    Franchise
    
    
    Corporate
    
    
    TotalCoffeehouse sales
    
    $
    58,077
    
    
    $
    2,501
    
    
    $
    1,275
    
    
    $
    
    
    
    $
    61,853Costs of sales and related occupancy costs
    
    
    23,320
    
    
    
    1,493
    
    
    
    701
    
    
    
    
    
    
    
    25,514Operating expenses
    
    
    25,147
    
    
    
    506
    
    
    
    335
    
    
    
    
    
    
    
    25,988Opening expenses
    
    
    93
    
    
    
    
    
    
    
    17
    
    
    
    
    
    
    
    110Depreciation and amortization
    
    
    6,009
    
    
    
    6
    
    
    
    3
    
    
    
    
    
    
    
    6,018General and administrative expenses
    
    
    2,374
    
    
    
    
    
    
    
    
    
    
    
    4,230
    
    
    
    6,604Closing expense and disposal of assets
    
    
    727
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    727Operating income (loss)
    
    $
    407
    
    
    $
    496
    
    
    $
    219
    
    
    $
    (4,230
    )
    
    $
    (3,108
    )Property and
equipment, net
    
    $
    89,704
    
    
    $
    77
    
    
    $
    26
    
    
    $
    10,146
    
    
    $
    99,953Net impairment
    
    $
    412
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    412Net capital expenditures
    
    $
    2,587
    
    
    $
    
    
    
    $
    
    
    
    $
    422
    
    
    $
    3,009
  13




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
  FORWARD-LOOKING STATEMENTS
  Overview
    Critical Accounting Policies
  14




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Fiscal Periods
   Thirteen Weeks Ended March 30, 2008 vs. Thirteen Weeks Ended April 1, 2007
 Results of Operations
 :
 Thirteen Weeks Ended
    
    
    
    
    
    
    Thirteen Weeks EndedMarch 30,
    
    
    April 1,
    
    
    %
    
    
    March 30,
    
    
    April 1,2008
    
    
    2007
    
    
    Change
    
    
    2008
    
    
    2007(In thousands)
    
    
    
    
    
    
    As a % of total net salesStatement of Operations Data:Net sales:Coffeehouse
    
    $
    56,620
    
    
    $
    58,077
    
    
    
    (2.5
    )%
    
    
    91.7
    %
    
    
    93.9
    %Other
    
    
    5,137
    
    
    
    3,776
    
    
    
    36.0
    %
    
    
    8.3
    %
    
    
    6.1
    %Total net sales
    
    
    61,757
    
    
    
    61,853
    
    
    
    (0.2
    )%
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales and related occupancy costs
    
    
    26,213
    
    
    
    25,514
    
    
    
    2.7
    %
    
    
    42.4
    %
    
    
    41.2
    %Operating expenses
    
    
    25,395
    
    
    
    25,988
    
    
    
    (2.3
    )%
    
    
    41.1
    %
    
    
    42.0
    %Opening expenses
    
    
    85
    
    
    
    110
    
    
    
    (22.7
    )%
    
    
    0.1
    %
    
    
    0.2
    %Depreciation and amortization
    
    
    5,921
    
    
    
    6,018
    
    
    
    (1.6
    )%
    
    
    9.6
    %
    
    
    9.7
    %General and administrative expenses
    
    
    7,450
    
    
    
    6,604
    
    
    
    12.8
    %
    
    
    12.1
    %
    
    
    10.7
    %Closing expense and disposal of assets
    
    
    2,546
    
    
    
    727
    
    
    
    250.2
    %
    
    
    4.1
    %
    
    
    1.2
    %Operating loss
    
    
    (5,853
    )
    
    
    (3,108
    )
    
    
    (88.3
    )%
    
    
    (9.5
    )%
    
    
    (5.0
    )%Other income (expense):Interest income
    
    
    18
    
    
    
    33
    
    
    
    (45.5
    )%
    
    
    
    %
    
    
    0.1
    %Interest expense
    
    
    (512
    )
    
    
    (129
    )
    
    
    (296.9
    )%
    
    
    (0.8
    )%
    
    
    (0.2
    )%Loss before provision for income taxes
and minority interest
    
    
    (6,347
    )
    
    
    (3,204
    )
    
    
    (98.1
    )%
    
    
    (10.3
    )%
    
    
    (5.2
    )%Provision for income taxes
    
    
    6
    
    
    
    20
    
    
    
    (70.0
    )%
    
    
    
    %
    
    
    0.0
    %Loss before minority interest
    
    
    (6,353
    )
    
    
    (3,224
    )
    
    
    (97.1
    )%
    
    
    (10.3
    )%
    
    
    (5.2
    )%Minority interest
    
    
    53
    
    
    
    27
    
    
    
    96.3
    %
    
    
    0.1
    %
    
    
    0.0
    %Net loss
    
    $
    (6,406
    )
    
    $
    (3,251
    )
    
    
    (97.0
    )%
    
    
    (10.4
    )%
    
    
    (5.2
    )%
 Net Sales
  15




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##### Table of Contents



Costs and Expenses
 Cost of sales and related occupancy costs.
 Operating expenses.
 Opening expenses.
 Depreciation and amortization.
 General and administrative expenses.
 Closing expenses and disposal of assets.
 Interest income.
 Interest expense.
 16




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##### Table of Contents



Operating Segments
  Retail
 13 Weeks Ended
    
    
    13 Weeks EndedMarch 30,
    
    
    April 1,
    
    
    %
    
    
    March 30,
    
    
    April 1,2008
    
    
    2007
    
    
    Change
    
    
    2008
    
    
    2007(In Thousands)
    
    
    
    
    
    
    As a % of coffeehouse salesCoffeehouse sales
    
    $
    56,620
    
    
    $
    58,077
    
    
    
    (2.5
    )%
    
    
    100.0
    %
    
    
    100.0
    %Costs of sales and related occupancy costs
    
    
    23,301
    
    
    
    23,320
    
    
    
    (0.1
    )%
    
    
    41.2
    %
    
    
    40.2
    %Operating expenses
    
    
    24,487
    
    
    
    25,147
    
    
    
    (2.6
    )%
    
    
    43.2
    %
    
    
    43.3
    %Opening expenses
    
    
    85
    
    
    
    93
    
    
    
    (8.6
    )%
    
    
    0.2
    %
    
    
    0.2
    %Depreciation and amortization
    
    
    5,913
    
    
    
    6,009
    
    
    
    (1.6
    )%
    
    
    10.4
    %
    
    
    10.3
    %General and administrative expenses
    
    
    2,509
    
    
    
    2,374
    
    
    
    5.7
    %
    
    
    4.4
    %
    
    
    4.1
    %Closing expense and disposal of assets
    
    
    2,537
    
    
    
    727
    
    
    
    249.0
    %
    
    
    4.5
    %
    
    
    1.3
    %Operating (loss) income
    
    $
    (2,212
    )
    
    $
    407
    
    
    
    (643.5
    )%
    
    
    (3.9
    )%
    
    
    0.7
    %
  Coffeehouse sales
  Costs and Expenses
 Cost of sales and related occupancy costs.
 Operating expenses.
 Depreciation and amortization.
 17




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##### Table of Contents



General and administrative expenses.
 Closing expense and disposal of assets.
 Commercial
 13 Weeks Ended
    
    
    13 Weeks EndedMarch 30,
    
    
    April 1,
    
    
    %
    
    
    March 30,
    
    
    April 1,2008
    
    
    2007
    
    
    Change
    
    
    2008
    
    
    2007(In Thousands)
    
    
    
    
    
    
    As a % of commercial salesSales
    
    $
    3,551
    
    
    $
    2,501
    
    
    
    42.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Costs of sales and related occupancy costs
    
    
    2,030
    
    
    
    1,493
    
    
    
    36.0
    %
    
    
    57.2
    %
    
    
    59.7
    %Operating expenses
    
    
    500
    
    
    
    506
    
    
    
    (1.2
    )%
    
    
    14.1
    %
    
    
    20.2
    %Depreciation and amortization
    
    
    6
    
    
    
    6
    
    
    
    
    %
    
    
    0.2
    %
    
    
    0.2
    %Operating income
    
    $
    1,015
    
    
    $
    496
    
    
    
    104.6
    %
    
    
    28.6
    %
    
    
    19.8
    %
  Sales
  Costs and Expenses
 Cost of sales and related occupancy costs.
 18




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##### Table of Contents



Franchise
 13 Weeks Ended
    
    
    13 Weeks EndedMarch 30,
    
    
    April 1,
    
    
    %
    
    
    March 30,
    
    
    April 1,2008
    
    
    2007
    
    
    Change
    
    
    2008
    
    
    2007(In Thousands)
    
    
    
    
    
    
    As a % of franchise salesSales
    
    $
    1,586
    
    
    $
    1,275
    
    
    
    24.4
    %
    
    
    100.0
    %
    
    
    100.0
    %Costs of sales and related occupancy costs
    
    
    882
    
    
    
    701
    
    
    
    25.8
    %
    
    
    55.6
    %
    
    
    55.0
    %Operating expenses
    
    
    408
    
    
    
    335
    
    
    
    21.8
    %
    
    
    25.7
    %
    
    
    26.3
    %Opening expenses
    
    
    
    
    
    
    17
    
    
    
    (100.0
    )%
    
    
    
    %
    
    
    1.3
    %Depreciation and amortization
    
    
    2
    
    
    
    3
    
    
    
    (33.3
    )%
    
    
    0.1
    %
    
    
    0.2
    %Operating income
    
    $
    294
    
    
    $
    219
    
    
    
    34.2
    %
    
    
    18.5
    %
    
    
    17.2
    %
  Sales
  Costs and Expenses
 Cost of sales and related occupancy costs.
 Operating expenses.
 Unallocated Corporate
 13 Weeks Ended
    
    
    13 Weeks EndedMarch 30,
    
    
    April 1,
    
    
    %
    
    
    March 30,
    
    
    April 1,2008
    
    
    2007
    
    
    Change
    
    
    2008
    
    
    2007(In Thousands)
    
    
    
    
    
    
    As a % of total net salesGeneral and administrative expenses
    
    $
    4,941
    
    
    $
    4,230
    
    
    
    16.8
    %
    
    
    8.0
    %
    
    
    6.8
    %Closing expense and disposal of assets
    
    
    9
    
    
    
    
    
    
    
    n/a
    
    
    
    
    %
    
    
    
    %Operating (loss)
    
    $
    (4,950
    )
    
    $
    (4,230
    )
    
    
    (17.0
    )%
    
    
    (8.0
    )%
    
    
    (6.8
    )%
 General and administrative expenses.
 19




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##### Table of Contents



Liquidity and Capital Resources
  Thirteen Weeks EndedMarch 30,
    
    
    April 30,
    
    
    Increase /2008
    
    
    2007
    
    
    (Decrease)(In thousands)Net cash (used) by operating activities
    
    $
    (3,274
    )
    
    $
    (2,107
    )
    
    $
    (1,167
    )Net cash used in investing activities
    
    
    (2,484
    )
    
    
    (3,009
    )
    
    
    525Net cash (used) provided by financing activities
    
    
    (45
    )
    
    
    36
    
    
    
    (81
    )Net change in cash and cash equivalents
    
    $
    (5,803
    )
    
    $
    (5,080
    )
    
    $
    (723
    )
      20




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##### Table of Contents



Off-Balance Sheet Arrangements
  Recent Accounting Pronouncements
 Fair Value Measurement
 The Fair Value Option for Financial Assets and
Financial Liabilities-Including an Amendment of FASB Statement No. 115
 Noncontrolling Interests in Consolidated Financial
Statements
 Key Financial Metrics
  21




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##### Table of Contents



Thirteen Weeks EndedMarch 30, 2008
    
    
    April 1, 2007(In thousands, except operating data)Non-GAAP Metrics:EBITDA(1)
    
    $
    515
    
    
    $
    3,449Operating Data:Percentage change in comparable
coffeehouse net sales(2)
    
    
    (2.3
    )%
    
    
    (1
    )%Company-Owned:Coffeehouses open at beginning of period
    
    
    432
    
    
    
    440Coffeehouses opened during the period
    
    
    5
    
    
    
    4Coffeehouses closed during the period
    
    
    16
    
    
    
    2Coffeehouses open at end of period:Total Company-Owned
    
    
    421
    
    
    
    442Franchised:Coffeehouses opened at beginning of period
    
    
    52
    
    
    
    24Coffeehouses opened during the period
    
    
    11
    
    
    
    9Coffeehouses closed during the period
    
    
    
    
    
    
    Coffeehouses open at end of period:Total Franchised
    
    
    63
    
    
    
    33Total coffeehouses open at end of period
    
    
    484
    
    
    
    475
 
 (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 a net 218 company-owned coffeehouses from the
beginning of fiscal 2003 through the end of the first thirteen weeks of fiscal 2008. 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
 22




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##### Table of Contents




    
    To evaluate our capacity to incur and service debt, fund capital expenditures and
expand our business.
  Thirteen Weeks EndedMarch 30, 2008
    
    
    April 1, 2007(Thousands)Net loss
    
    $
    (6,406
    )
    
    $
    (3,251
    )Interest expense
    
    
    512
    
    
    
    130Interest income
    
    
    (18
    )
    
    
    (33
    )Depreciation and amortization(1)
    
    
    6,421
    
    
    
    6,583Provision for income taxes
    
    
    6
    
    
    
    20EBITDA
    
    $
    515
    
    
    $
    3,449
 
 (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.
  
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  23




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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.
 24




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##### Table of Contents



Item 4. Submission of Matters to a Vote of Security Holders.
  
 Item 5. Other Information.
  25




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##### Table of Contents



Item 6. Exhibits.
 3.1*
    
    Form of Amended and Restated Articles of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 to the Companys
Registration Statement of Form S-1/A filed August 25, 2005).3.2*
    
    Form of Amended and Restated Bylaws of the Company (incorporated by
reference to Exhibit 3.2 to the Companys Registration Statement of
Form S-1/A filed August 25, 2005).4.1*
    
    Form of Registrants Common Stock Certificate (incorporated by
reference to Exhibit 4.1 to the Companys Registration Statement of
Form S-1/A filed September 6, 2005).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.
  26




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##### Table of Contents



SIGNATURE
  CARIBOU COFFEE COMPANY, INC.By:
    /s/ ROSALYN MALLETRosalyn MalletPresident, Chief Operating Officer
and Interim Chief Executive Officer  27