##### 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 28, 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 oAccelerated filer oNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company þ o þ
  Title
    
    Shares Outstanding as of November 7, 2008Common Stock, par value $0.01 per share
    
    19,371,000




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##### 



CARIBOU COFFEE COMPANY, INC.
 FORM 10-Q
 For the Thirteen Week Period Ended September 28, 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
    
    
    15Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    25Item 4T.
    
    Controls and Procedures
    
    
    25PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    26Item 1A.
    
    Risk Factors
    
    
    26Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    26Item 3.
    
    Defaults Upon Senior Securities
    
    
    26Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    26Item 5.
    
    Other Information
    
    
    27Item 6.
    
    Exhibits
    
    
    28Signature
    
    
    29EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
  2




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PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements.
 CARIBOU COFFEE COMPANY, INC. AND AFFILIATES
(A Majority Owned Subsidiary of Caribou Holding Company Limited)
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Thirteen Weeks Ended
    
    
    Thirty-Nine Weeks EndedSeptember 28,
    
    
    September 30,
    
    
    September 28,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(In thousands, except for per share amounts)(Unaudited)Coffeehouse sales
    
    $
    54,731
    
    
    $
    58,212
    
    
    $
    168,618
    
    
    $
    175,619Commercial and franchise sales
    
    
    6,179
    
    
    
    3,769
    
    
    
    17,232
    
    
    
    11,062Consolidated net sales
    
    
    60,910
    
    
    
    61,981
    
    
    
    185,850
    
    
    
    186,681Cost of sales and related occupancy costs
    
    
    26,992
    
    
    
    26,756
    
    
    
    80,209
    
    
    
    78,790Operating expenses
    
    
    24,571
    
    
    
    26,627
    
    
    
    75,785
    
    
    
    79,636Opening expenses
    
    
    62
    
    
    
    109
    
    
    
    198
    
    
    
    285Depreciation and amortization
    
    
    10,208
    
    
    
    7,143
    
    
    
    20,771
    
    
    
    19,146General and administrative expenses
    
    
    7,115
    
    
    
    6,852
    
    
    
    21,183
    
    
    
    20,609Closing expense and disposal of assets
    
    
    646
    
    
    
    2,872
    
    
    
    4,524
    
    
    
    3,733Operating loss
    
    
    (8,684
    )
    
    
    (8,378
    )
    
    
    (16,820
    )
    
    
    (15,518
    )Other income (expense):Interest income
    
    
    2
    
    
    
    54
    
    
    
    23
    
    
    
    133Interest expense
    
    
    (81
    )
    
    
    (130
    )
    
    
    (714
    )
    
    
    (426
    )Loss before (benefit) provision for
income taxes and minority interest
    
    
    (8,763
    )
    
    
    (8,454
    )
    
    
    (17,511
    )
    
    
    (15,811
    )(Benefit) provision for income taxes
    
    
    (36
    )
    
    
    (31
    )
    
    
    14
    
    
    
    (328
    )Loss before minority interest
    
    
    (8,727
    )
    
    
    (8,423
    )
    
    
    (17,525
    )
    
    
    (15,483
    )Minority interest
    
    
    39
    
    
    
    40
    
    
    
    79
    
    
    
    122Net loss
    
    $
    (8,766
    )
    
    $
    (8,463
    )
    
    $
    (17,604
    )
    
    $
    (15,605
    )Basic and diluted net loss per share
    
    $
    (0.45
    )
    
    $
    (0.44
    )
    
    $
    (0.91
    )
    
    $
    (0.81
    )Basic and diluted weighted average
number of shares outstanding
    
    
    19,371
    
    
    
    19,354
    
    
    
    19,371
    
    
    
    19,321
  3




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CARIBOU COFFEE COMPANY, INC. AND AFFILIATES
(A Majority Owned Subsidiary of Caribou Holding Company Limited)
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 September 28,
    
    
    December 30,2008
    
    
    2007(In thousands except per share amounts)(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    6,938
    
    
    $
    9,886Accounts receivable (net of allowance for doubtful accounts of $35 and
$8 at September 28, 2008 and December 30, 2007, respectively)
    
    
    3,683
    
    
    
    3,117Other receivables (net of allowance for doubtful accounts of $31 and
$9 at September 28, 2008 and December 30, 2007, respectively)
    
    
    1,230
    
    
    
    1,544Income tax receivable
    
    
    75
    
    
    
    149Inventories
    
    
    11,362
    
    
    
    10,229Prepaid expenses and other current assets
    
    
    921
    
    
    
    1,691Total current assets
    
    
    24,209
    
    
    
    26,616Property and equipment, net of accumulated depreciation and amortization
    
    
    64,802
    
    
    
    83,798Notes receivable
    
    
    20
    
    
    
    32Restricted cash
    
    
    12
    
    
    
    411Other assets
    
    
    488
    
    
    
    983Total assets
    
    $
    89,531
    
    
    $
    111,840LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    12,366
    
    
    $
    9,650Accrued compensation
    
    
    4,529
    
    
    
    7,864Accrued expenses
    
    
    7,202
    
    
    
    9,318Deferred revenue
    
    
    6,217
    
    
    
    9,988Total current liabilities
    
    
    30,314
    
    
    
    36,820Revolving credit facility
    
    
    3,000
    
    
    
    Asset retirement liability
    
    
    1,017
    
    
    
    989Deferred rent liability
    
    
    9,603
    
    
    
    11,271Deferred revenue
    
    
    2,716
    
    
    
    2,854Income tax liability
    
    
    431
    
    
    
    473Minority interests in affiliates
    
    
    108
    
    
    
    144Total long term liabilities
    
    
    16,875
    
    
    
    15,731Shareholders equity:Preferred stock, par value $.01, 20,000 shares authorized; no shares
issued and outstanding
    
    
    
    
    
    
    Common stock, par value $.01, 200,000 shares authorized; 19,371 shares
issued and outstanding at September 28, 2008 and
December 30, 2007
    
    
    194
    
    
    
    194Additional paid-in capital
    
    
    124,889
    
    
    
    124,232Accumulated deficit
    
    
    (82,741
    )
    
    
    (65,137
    )Total shareholders equity
    
    
    42,342
    
    
    
    59,289Total liabilities and shareholders equity
    
    $
    89,531
    
    
    $
    111,840
  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
 Thirty-Nine Weeks EndedSeptember 28,
    
    
    September 30,2008
    
    
    2007(In thousands)(Unaudited)Operating activitiesNet loss
    
    $
    (17,604
    )
    
    $
    (15,605
    )Adjustments to reconcile net loss to net cash (used) provided
by operating activities:Depreciation and amortization
    
    
    22,387
    
    
    
    20,812Amortization of deferred financing fees
    
    
    431
    
    
    
    258Minority interests in affiliates
    
    
    79
    
    
    
    122Provision for closing expense and asset disposals
    
    
    553
    
    
    
    2,549Share-based compensation
    
    
    420
    
    
    
    429Non cash accretion expense
    
    
    28
    
    
    
    68Shareholder contribution
    
    
    237
    
    
    
    Changes in operating assets and liabilities:Restricted cash
    
    
    399
    
    
    
    (127
    )Accounts receivable and other receivables
    
    
    (240
    )
    
    
    (458
    )Income tax receivable
    
    
    74
    
    
    
    (58
    )Inventories
    
    
    (1,133
    )
    
    
    (814
    )Prepaid expenses and other assets
    
    
    834
    
    
    
    651Accounts payable
    
    
    2,716
    
    
    
    (2,067
    )Accrued compensation
    
    
    (3,335
    )
    
    
    (1,016
    )Accrued expenses and income tax liability
    
    
    (2,309
    )
    
    
    (340
    )Deferred revenue
    
    
    (3,909
    )
    
    
    (2,540
    )Net cash (used) provided by operating activities
    
    
    (372
    )
    
    
    1,864Investing activitiesPayments for property and equipment
    
    
    (5,461
    )
    
    
    (11,443
    )Net cash used in investing activities
    
    
    (5,461
    )
    
    
    (11,443
    )Financing activitiesBorrowings under revolving credit facility
    
    
    3,000
    
    
    
    Distribution of minority interests earnings
    
    
    (115
    )
    
    
    (140
    )Issuance of common stock
    
    
    
    
    
    
    525Net cash provided by financing activities
    
    
    2,885
    
    
    
    385Decrease in cash and cash equivalents
    
    
    (2,948
    )
    
    
    (9,194
    )Cash and cash equivalents at beginning of period
    
    
    9,886
    
    
    
    14,752Cash and cash equivalents at end of period
    
    $
    6,938
    
    
    $
    5,558Supplemental disclosure of cash flow informationNoncash financing and investing transactions:Accrual for leasehold improvements, furniture, and equipment
    
    $
    
    
    
    $
    168
  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, dollar amounts in thousands except where otherwise noted)
 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
 Noncontrolling Interests in Consolidated Financial
Statements
 7




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4. Impairments, Coffeehouse Closings, Asset Disposals and Severance
     Thirteen Weeks Ended
    
    
    Thirty-Nine Weeks EndedSeptember 28,
    
    
    September 30,
    
    
    September 28,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(In thousands except coffeehouse closures)Coffeehouse closures
    
    
    2
    
    
    
    11
    
    
    
    24
    
    
    
    19Amount charged to operations for
closed coffeehouses:Lease reserve non-cash impact
    
    $
    (857
    )
    
    $
    61
    
    
    $
    (272
    )
    
    $
    144Costs to consolidate facilities
    
    
    
    
    
    
    (13
    )
    
    
    
    
    
    
    67Lease costs associated with lease
termination cash impact
    
    
    1,286
    
    
    
    693
    
    
    
    3,971
    
    
    
    1,184Total lease exit costs
    
    
    429
    
    
    
    741
    
    
    
    3,699
    
    
    
    1,395Net book value of closed coffeehouse
property and equipment
    
    
    217
    
    
    
    2,127
    
    
    
    825
    
    
    
    2,292Other property and equipment write-offs
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    46Coffeehouse closing expense and
disposal of assets
    
    $
    646
    
    
    $
    2,872
    
    
    $
    4,524
    
    
    $
    3,733
 8




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Balance at
    
    
    Additions
    
    
    DeductionsBeginning of
    
    
    Charged to
    
    
    from
    
    
    Balance atYear
    
    
    Expense
    
    
    Accrual
    
    
    End of Quarter(In thousands)Thirty-Nine Weeks Ended:September 28, 2008Lease exit accrual
    
    $
    467
    
    
    $
    3,699
    
    
    $
    3,942
    
    
    $
    224Management severance accrual
    
    
    1,353
    
    
    
    1,341
    
    
    
    2,075
    
    
    
    619Total
    
    $
    1,820
    
    
    $
    5,040
    
    
    $
    6,017
    
    
    $
    843
 Balance at
    
    Additions
    
    DeductionsBeginning of
    
    Charged to
    
    from
    
    Balance atYear
    
    Expense
    
    Accrual
    
    End of Quarter(In thousands)Thirty-Nine Weeks Ended:September 30, 2007Lease exit accrual
    
    $
    512
    
    
    $
    1,395
    
    
    $
    1,373
    
    
    $
    534
 5. Inventories
  September 28,
    
    
    December 30,2008
    
    
    2007(In thousands)(Unaudited)Coffee
    
    $
    4,914
    
    
    $
    3,485Other merchandise held for sale
    
    
    3,390
    
    
    
    4,346Supplies
    
    
    3,058
    
    
    
    2,398$
    11,362
    
    
    $
    10,229
  6. Equity and Share-Based Compensation
  9




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Weighted
    
    
    WeightedAverage
    
    
    Average
    
    
    AggregateNumber of
    
    
    Exercise
    
    
    Contract
    
    
    IntrinsicShares
    
    
    Price
    
    
    Life
    
    
    Value(In thousands)Outstanding, December 30, 2007
    
    
    2,571
    
    
    $
    7.46
    
    
    6.47 YrsGranted
    
    
    55
    
    
    $
    2.78Exercised
    
    
    
    
    
    $
    Forfeited
    
    
    (15
    )
    
    $
    8.11Outstanding, March 30, 2008
    
    
    2,611
    
    
    $
    7.35
    
    
    6.28 Yrs
    
    $
    Granted
    
    
    160
    
    
    $
    2.54Exercised
    
    
    
    
    
    $
    Forfeited
    
    
    (1,217
    )
    
    $
    7.04Outstanding, June 29, 2008
    
    
    1,554
    
    
    $
    7.10
    
    
    7.26 Yrs
    
    $
    Granted
    
    
    836
    
    
    $
    2.34Exercised
    
    
    
    
    
    $
    Forfeited
    
    
    (71
    )
    
    $
    4.27Outstanding, September 28, 2008
    
    
    2,319
    
    
    $
    5.47
    
    
    7.99 Yrs
    
    $
    Options vested at September 28, 2008
    
    
    822
    
    
    $
    7.63
    
    
    5.76 Yrs
    
    $
    
 7. Income Taxes
  8. Net Loss Per Share
  Thirteen Weeks Ended
    
    
    Thirty-nine Weeks EndedSeptember 28,
    
    
    September 30,
    
    
    September 28,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(In thousands, except for per share amounts)Net loss
    
    $
    (8,766
    )
    
    $
    (8,463
    )
    
    $
    (17,604
    )
    
    $
    (15,605
    )Weighted average common shares
outstanding (for basic and diluted
calculation)
    
    
    19,371
    
    
    
    19,354
    
    
    
    19,371
    
    
    
    19,321Basic and diluted net loss per share
    
    $
    (0.45
    )
    
    $
    (0.44
    )
    
    $
    (0.91
    )
    
    $
    (0.81
    )
  9. Master Franchise Agreement
   10




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10. Note Payable and Revolving Credit Facility
   11




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11. Commitments and Contingencies
    12. Segment Reporting
  Retail
  Commercial
  Franchise
  12




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Thirteen weeks ended September 28, 2008Unallocated(In thousands)
    
    Retail
    
    
    Commercial
    
    
    Franchise
    
    
    Corporate
    
    
    TotalConsolidated net sales
    
    $
    54,731
    
    
    $
    4,467
    
    
    $
    1,712
    
    
    $
    
    
    
    $
    60,910Costs of sales and related occupancy costs
    
    
    23,080
    
    
    
    2,858
    
    
    
    1,054
    
    
    
    
    
    
    
    26,992Operating expenses
    
    
    23,727
    
    
    
    568
    
    
    
    276
    
    
    
    
    
    
    
    24,571Opening expenses
    
    
    56
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    62Depreciation and amortization
    
    
    10,199
    
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    10,208General and administrative expenses
    
    
    2,195
    
    
    
    
    
    
    
    
    
    
    
    4,920
    
    
    
    7,115Closing expense and disposal of assets
    
    
    646
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    646Operating (loss) income
    
    $
    (5,172
    )
    
    $
    1,032
    
    
    $
    376
    
    
    $
    (4,920
    )
    
    $
    (8,684
    )Identifiable assets
    
    $
    55,097
    
    
    $
    141
    
    
    $
    13
    
    
    $
    9,551
    
    
    $
    64,802Net impairment charges
    
    $
    5,743
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    5,743Thirteen weeks ended September 30, 2007Unallocated(In thousands)
    
    Retail
    
    
    Commercial
    
    
    Franchise
    
    
    Corporate
    
    
    TotalConsolidated net sales
    
    $
    58,212
    
    
    $
    3,047
    
    
    $
    722
    
    
    $
    
    
    
    $
    61,981Costs of sales and related occupancy costs
    
    
    24,378
    
    
    
    1,955
    
    
    
    423
    
    
    
    
    
    
    
    26,756Operating expenses
    
    
    25,779
    
    
    
    595
    
    
    
    253
    
    
    
    
    
    
    
    26,627Opening expenses
    
    
    109
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    109Depreciation and amortization
    
    
    7,133
    
    
    
    8
    
    
    
    2
    
    
    
    
    
    
    
    7,143General and administrative expenses
    
    
    2,335
    
    
    
    
    
    
    
    
    
    
    
    4,517
    
    
    
    6,852Closing expense and disposal of assets
    
    
    2,872
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,872Operating (loss) income
    
    $
    (4,394
    )
    
    $
    489
    
    
    $
    44
    
    
    $
    (4,517
    )
    
    $
    (8,378
    )Identifiable assets
    
    $
    81,096
    
    
    $
    71
    
    
    $
    19
    
    
    $
    10,353
    
    
    $
    91,539Net impairment charges
    
    $
    1,529
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1,529
 13




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Thirty-nine weeks ended September 28, 2008Unallocated(In thousands)
    
    Retail
    
    
    Commercial
    
    
    Franchise
    
    
    Corporate
    
    
    TotalConsolidated net sales
    
    $
    168,618
    
    
    $
    12,502
    
    
    $
    4,730
    
    
    $
    
    
    
    $
    185,850Costs of sales and related occupancy costs
    
    
    69,799
    
    
    
    7,771
    
    
    
    2,639
    
    
    
    
    
    
    
    80,209Operating expenses
    
    
    73,149
    
    
    
    1,548
    
    
    
    1,088
    
    
    
    
    
    
    
    75,785Opening expenses
    
    
    167
    
    
    
    
    
    
    
    31
    
    
    
    
    
    
    
    198Depreciation and amortization
    
    
    20,749
    
    
    
    22
    
    
    
    
    
    
    
    
    
    
    
    20,771General and administrative expenses
    
    
    6,976
    
    
    
    
    
    
    
    
    
    
    
    14,207
    
    
    
    21,183Closing expense and disposal of assets
    
    
    4,412
    
    
    
    
    
    
    
    
    
    
    
    112
    
    
    
    4,524Operating (loss) income
    
    $
    (6,634
    )
    
    $
    3,161
    
    
    $
    972
    
    
    $
    (14,319
    )
    
    $
    (16,820
    )Identifiable assets
    
    $
    55,097
    
    
    $
    141
    
    
    $
    13
    
    
    $
    9,551
    
    
    $
    64,802Net impairment charges
    
    $
    7,460
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    7,460Thirty-nine weeks ended September 30, 2007Unallocated(In thousands)
    
    Retail
    
    
    Commercial
    
    
    Franchise
    
    
    Corporate
    
    
    TotalConsolidated net sales
    
    $
    175,619
    
    
    $
    8,229
    
    
    $
    2,833
    
    
    $
    
    
    
    $
    186,681Costs of sales and related occupancy costs
    
    
    71,967
    
    
    
    5,291
    
    
    
    1,532
    
    
    
    
    
    
    
    78,790Operating expenses
    
    
    77,177
    
    
    
    1,587
    
    
    
    872
    
    
    
    
    
    
    
    79,636Opening expenses
    
    
    276
    
    
    
    
    
    
    
    9
    
    
    
    
    
    
    
    285Depreciation and amortization
    
    
    19,120
    
    
    
    19
    
    
    
    7
    
    
    
    
    
    
    
    19,146General and administrative expenses
    
    
    7,246
    
    
    
    
    
    
    
    
    
    
    
    13,363
    
    
    
    20,609Closing expense and disposal of assets
    
    
    3,733
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,733Operating (loss) income
    
    $
    (3,900
    )
    
    $
    1,332
    
    
    $
    413
    
    
    $
    (13,363
    )
    
    $
    (15,518
    )Identifiable assets
    
    $
    81,096
    
    
    $
    71
    
    
    $
    19
    
    
    $
    10,353
    
    
    $
    91,539Net impairment charges
    
    $
    2,452
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    2,452
  14




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
  FORWARD-LOOKING STATEMENTS
  Overview
    Improving the profitability of our coffeehouses.
 Aligning the real estate portfolio.
 15




---



##### Table of Contents



Rationalizing the cost structure of the organization with our current revenue stream.
 Profitably growing our business channels  commercial and franchising.
 Critical Accounting Policies
  Fiscal Periods
   16




---



##### Table of Contents



Thirteen Weeks Ended September 28, 2008 Compared to Thirteen Weeks Ended September 30, 2007
 Results of Operations
 :
 Thirteen Weeks Ended
    
    
    
    
    
    
    Thirteen Weeks EndedSeptember 28,
    
    
    September 30,
    
    
    %
    
    
    September 28,
    
    
    September 30,2008
    
    
    2007
    
    
    Change
    
    
    2008
    
    
    2007(In thousands)
    
    
    
    
    
    
    As a % of consolidated net salesConsolidated Statement of Operations
Data:Net sales:Coffeehouse
    
    $
    54,731
    
    
    $
    58,212
    
    
    
    (6.0
    )%
    
    
    89.9
    %
    
    
    93.9
    %Commercial & franchise
    
    
    6,179
    
    
    
    3,769
    
    
    
    63.9
    %
    
    
    10.1
    %
    
    
    6.1
    %Consolidated net sales
    
    
    60,910
    
    
    
    61,981
    
    
    
    (1.7)
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales and related occupancy costs
    
    
    26,992
    
    
    
    26,756
    
    
    
    0.9
    %
    
    
    44.3
    %
    
    
    43.2
    %Operating expenses
    
    
    24,571
    
    
    
    26,627
    
    
    
    (7.7
    )%
    
    
    40.3
    %
    
    
    43.0
    %Opening expenses
    
    
    62
    
    
    
    109
    
    
    
    (43.1
    )%
    
    
    0.1
    %
    
    
    0.2
    %Depreciation and amortization
    
    
    10,208
    
    
    
    7,143
    
    
    
    42.9
    %
    
    
    16.8
    %
    
    
    11.5
    %General and administrative expenses
    
    
    7,115
    
    
    
    6,852
    
    
    
    3.8
    %
    
    
    11.7
    %
    
    
    11.0
    %Closing expense and disposal of assets
    
    
    646
    
    
    
    2,872
    
    
    
    (77.5
    )%
    
    
    1.1
    %
    
    
    4.6
    %Operating loss
    
    
    (8,684
    )
    
    
    (8,378
    )
    
    
    (3.7
    )%
    
    
    (14.3
    )%
    
    
    (13.5
    )%Other income (expense):Interest income
    
    
    2
    
    
    
    54
    
    
    
    (96.3
    )%
    
    
    
    %
    
    
    0.1
    %Interest expense
    
    
    (81
    )
    
    
    (130
    )
    
    
    (37.7
    )%
    
    
    (0.1
    )%
    
    
    (0.2
    )%Loss before benefit for income taxes and
minority interest
    
    
    (8,763
    )
    
    
    (8,454
    )
    
    
    (3.7
    )%
    
    
    (14.4
    )%
    
    
    (13.6
    )%Benefit for income taxes
    
    
    (36
    )
    
    
    (31
    )
    
    
    16.1
    %
    
    
    (0.1
    )%
    
    
    
    %Loss before minority interest
    
    
    (8,727
    )
    
    
    (8,423
    )
    
    
    (3.6
    )%
    
    
    (14.3
    )%
    
    
    (13.6
    )%Minority interest
    
    
    39
    
    
    
    40
    
    
    
    (2.5
    )%
    
    
    0.1
    %
    
    
    0.1
    %Net loss
    
    $
    (8,766
    )
    
    $
    (8,463
    )
    
    
    (3.6
    )%
    
    
    (14.4
    )%
    
    
    (13.7
    )%
 Operating Segments
     17




---



##### Table of Contents



13 Weeks Ended
    
    
    13 Weeks EndedSeptember 28,
    
    
    September 30,
    
    
    %
    
    
    September 28,
    
    
    September 30,2008
    
    
    2007
    
    
    Change
    
    
    2008
    
    
    2007(In thousands)
    
    
    
    
    
    
    As a % of applicable salesRetail:Coffeehouse sales
    
    $
    54,731
    
    
    $
    58,212
    
    
    
    (6.0
    )%
    
    
    100.0
    %
    
    
    100.0
    %Costs of sales and related occupancy costs
    
    
    23,080
    
    
    
    24,378
    
    
    
    (5.3
    )%
    
    
    42.2
    %
    
    
    41.9
    %Operating expenses
    
    
    23,727
    
    
    
    25,779
    
    
    
    (8.0
    )%
    
    
    43.3
    %
    
    
    44.3
    %Opening expenses
    
    
    56
    
    
    
    109
    
    
    
    (48.6
    )%
    
    
    0.1
    %
    
    
    0.2
    %Depreciation and amortization
    
    
    10,199
    
    
    
    7,133
    
    
    
    43.0
    %
    
    
    18.6
    %
    
    
    12.2
    %General and administrative expenses
    
    
    2,195
    
    
    
    2,335
    
    
    
    (6.0
    )%
    
    
    4.0
    %
    
    
    4.0
    %Closing expense and disposal of assets
    
    
    646
    
    
    
    2,872
    
    
    
    (77.5
    )%
    
    
    1.2
    %
    
    
    4.9
    %Segment operating loss
    
    $
    (5,172
    )
    
    $
    (4,394
    )
    
    
    (17.7
    )%
    
    
    (9.4
    )%
    
    
    (7.5
    )%Commercial:Sales
    
    $
    4,467
    
    
    $
    3,047
    
    
    
    46.6
    %
    
    
    100.0
    %
    
    
    100.0
    %Costs of sales and related occupancy costs
    
    
    2,858
    
    
    
    1,955
    
    
    
    46.2
    %
    
    
    64.0
    %
    
    
    64.2
    %Operating expenses
    
    
    568
    
    
    
    595
    
    
    
    (4.5
    )%
    
    
    12.7
    %
    
    
    19.5
    %Depreciation and amortization
    
    
    9
    
    
    
    8
    
    
    
    12.5
    %
    
    
    0.2
    %
    
    
    0.3
    %Segment operating income
    
    $
    1,032
    
    
    $
    489
    
    
    
    111.0
    %
    
    
    23.1
    %
    
    
    16.0
    %Franchise:Sales
    
    $
    1,712
    
    
    $
    722
    
    
    
    137.1
    %
    
    
    100.0
    %
    
    
    100.0
    %Costs of sales and related occupancy costs
    
    
    1,054
    
    
    
    423
    
    
    
    149.2
    %
    
    
    61.6
    %
    
    
    58.6
    %Operating expenses
    
    
    276
    
    
    
    253
    
    
    
    9.1
    %
    
    
    16.1
    %
    
    
    35.0
    %Opening expenses
    
    
    6
    
    
    
    
    
    
    
    100.0
    %
    
    
    0.3
    %
    
    
    0.0
    %Depreciation and amortization
    
    
    
    
    
    
    2
    
    
    
    (500.0
    )%
    
    
    
    %
    
    
    0.3
    %Segment operating income
    
    $
    376
    
    
    $
    44
    
    
    
    754.5
    %
    
    
    22.0
    %
    
    
    6.1
    %
 Net Sales
  Costs and Expenses
 Cost of sales and related occupancy costs.
  18




---



##### Table of Contents



Operating expenses.
 Opening expenses.
 Depreciation and amortization.
 General and administrative expenses.
 Closing expenses and disposal of assets.
 Interest expense.
 19




---



##### Table of Contents



Thirty-Nine Weeks Ended September 28, 2008 Compared to Thirty-Nine Weeks Ended September 30, 2007
 Results of Operations
 :
 Thirty-nine Weeks Ended
    
    
    
    
    
    
    Thirty-nine Weeks EndedSeptember 28,
    
    
    September 30,
    
    
    %
    
    
    September 28,
    
    
    September 30,2008
    
    
    2007
    
    
    Change
    
    
    2008
    
    
    2007(In thousands)
    
    
    
    
    
    
    As a % of consolidated net salesStatement of Operations Data:Net sales:Coffeehouse
    
    $
    168,618
    
    
    $
    175,619
    
    
    
    (4.0
    )%
    
    
    90.7
    %
    
    
    94.1
    %Other
    
    
    17,232
    
    
    
    11,062
    
    
    
    55.8
    %
    
    
    9.3
    %
    
    
    5.9
    %Consolidated net sales
    
    
    185,850
    
    
    
    186,681
    
    
    
    (0.4
    )%
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales and related occupancy costs
    
    
    80,209
    
    
    
    78,790
    
    
    
    1.8
    %
    
    
    43.1
    %
    
    
    42.2
    %Operating expenses
    
    
    75,785
    
    
    
    79,636
    
    
    
    (4.8
    )%
    
    
    40.8
    %
    
    
    42.7
    %Opening expenses
    
    
    198
    
    
    
    285
    
    
    
    (30.5
    )%
    
    
    0.1
    %
    
    
    0.1
    %Depreciation and amortization
    
    
    20,771
    
    
    
    19,146
    
    
    
    8.5
    %
    
    
    11.2
    %
    
    
    10.3
    %General and administrative expenses
    
    
    21,183
    
    
    
    20,609
    
    
    
    2.8
    %
    
    
    11.4
    %
    
    
    11.0
    %Closing expense and disposal of assets
    
    
    4,524
    
    
    
    3,733
    
    
    
    21.2
    %
    
    
    2.4
    %
    
    
    2.0
    %Operating loss
    
    
    (16,820
    )
    
    
    (15,518
    )
    
    
    (8.4
    )%
    
    
    (9.0
    )%
    
    
    (8.3
    )%Other income (expense):Interest income
    
    
    23
    
    
    
    133
    
    
    
    (82.7
    )%
    
    
    
    %
    
    
    
    %Interest expense
    
    
    (714
    )
    
    
    (426
    )
    
    
    67.6
    %
    
    
    (0.4
    )%
    
    
    (0.2
    )%Loss before provision (benefit) for
income taxes and minority interest
    
    
    (17,511
    )
    
    
    (15,811
    )
    
    
    10.8
    %
    
    
    (9.4
    )%
    
    
    (8.5
    )%Provision (benefit) for income taxes
    
    
    14
    
    
    
    (328
    )
    
    
    (104.3
    )%
    
    
    
    %
    
    
    (0.2
    )%Loss before minority interest
    
    
    (17,525
    )
    
    
    (15,483
    )
    
    
    13.2
    %
    
    
    (9.4
    )%
    
    
    (8.3
    )%Minority interest
    
    
    79
    
    
    
    122
    
    
    
    (35.2
    )%
    
    
    
    %
    
    
    0.1
    %Net loss
    
    $
    (17,604
    )
    
    $
    (15,605
    )
    
    
    12.8
    %
    
    
    (9.4
    )%
    
    
    (8.4
    )%
 Operating Segments
  39 Weeks Ended
    
    
    
    
    
    
    39 Weeks EndedSeptember 28,
    
    
    September 30,
    
    
    %
    
    
    September 28,
    
    
    September 30,2008
    
    
    2007
    
    
    Change
    
    
    2008
    
    
    2007(In thousands)
    
    
    
    
    
    
    As a % of applicable salesRetail:Coffeehouse sales
    
    $
    168,618
    
    
    $
    175,619
    
    
    
    (4.0
    )%
    
    
    100.0
    %
    
    
    100.0
    %Costs of sales and related occupancy costs
    
    
    69,799
    
    
    
    71,967
    
    
    
    (3.0
    )%
    
    
    41.4
    %
    
    
    41.0
    %Operating expenses
    
    
    73,149
    
    
    
    77,177
    
    
    
    (5.2
    )%
    
    
    43.4
    %
    
    
    43.9
    %Opening expenses
    
    
    167
    
    
    
    276
    
    
    
    (39.5
    )%
    
    
    0.1
    %
    
    
    0.2
    %Depreciation and amortization
    
    
    20,749
    
    
    
    19,120
    
    
    
    8.5
    %
    
    
    12.3
    %
    
    
    10.9
    %General and administrative expenses
    
    
    6,976
    
    
    
    7,246
    
    
    
    (3.7
    )%
    
    
    4.1
    %
    
    
    4.1
    %Closing expense and disposal of assets
    
    
    4,412
    
    
    
    3,733
    
    
    
    18.2
    %
    
    
    2.6
    %
    
    
    2.1
    %Segment operating loss
    
    $
    (6,634
    )
    
    $
    (3,900
    )
    
    
    70.1
    %
    
    
    (3.9
    )%
    
    
    (2.2
    )%
 20




---



##### Table of Contents



39 Weeks Ended
    
    
    
    
    
    
    39 Weeks EndedSeptember 28,
    
    
    September 30,
    
    
    %
    
    
    September 28,
    
    
    September 30,2008
    
    
    2007
    
    
    Change
    
    
    2008
    
    
    2007(In thousands)
    
    
    
    
    
    
    As a % of applicable salesCommercial:Sales
    
    $
    12,502
    
    
    $
    8,229
    
    
    
    51.9
    %
    
    
    100.0
    %
    
    
    100.0
    %Costs of sales and related occupancy costs
    
    
    7,771
    
    
    
    5,291
    
    
    
    46.9
    %
    
    
    62.1
    %
    
    
    64.3
    %Operating expenses
    
    
    1,548
    
    
    
    1,587
    
    
    
    (2.5
    )%
    
    
    12.4
    %
    
    
    19.3
    %Depreciation and amortization
    
    
    22
    
    
    
    19
    
    
    
    15.8
    %
    
    
    0.2
    %
    
    
    0.2
    %Segment operating income
    
    $
    3,161
    
    
    $
    1,332
    
    
    
    137.3
    %
    
    
    25.3
    %
    
    
    16.2
    %Franchise:Sales
    
    $
    4,730
    
    
    $
    2,833
    
    
    
    67.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Costs of sales and related occupancy costs
    
    
    2,639
    
    
    
    1,532
    
    
    
    72.3
    %
    
    
    55.8
    %
    
    
    54.1
    %Operating expenses
    
    
    1,088
    
    
    
    872
    
    
    
    24.8
    %
    
    
    23.0
    %
    
    
    30.8
    %Opening expenses
    
    
    31
    
    
    
    9
    
    
    
    244.4
    %
    
    
    0.7
    %
    
    
    0.3
    %Depreciation and amortization
    
    
    
    
    
    
    7
    
    
    
    
    %
    
    
    
    %
    
    
    0.2
    %Segment operating income
    
    $
    972
    
    
    $
    413
    
    
    
    135.4
    %
    
    
    20.5
    %
    
    
    14.6
    %
 Net Sales
  Costs and Expenses
 Cost of sales and related occupancy costs.
  Operating expenses.
 Opening expenses.
 21




---



##### Table of Contents



Depreciation and amortization.
 General and administrative expenses.
 Closing expenses and disposal of assets.
 Interest expense.
 Liquidity and Capital Resources
  Thirty-nine Weeks EndedSeptember 28,
    
    September 30,2008
    
    2007(In thousands)Net cash (used) provided by operating activities
    
    $
    (372
    )
    
    $
    1,864Net cash used in investing activities
    
    
    (5,461
    )
    
    
    (11,443
    )Net cash provided by financing activities
    
    
    2,885
    
    
    
    385Net change in cash and cash equivalents
    
    $
    (2,948
    )
    
    $
    (9,194
    )
     22




---



##### Table of Contents



Off-Balance Sheet Arrangements
  Recent Accounting Pronouncements
 Fair Value Measurement
 Noncontrolling Interests in Consolidated Financial
Statements
 Key Financial Metrics
  23




---



##### Table of Contents



Thirteen Weeks Ended
    
    
    Thirty-nine Weeks EndedSeptember 28,
    
    
    September 30,
    
    
    September 28,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(In thousands, except operating data)Non-GAAP Metrics:EBITDA (1)
    
    $
    2,037
    
    
    $
    (715
    )
    
    $
    5,488
    
    
    $
    5,173Operating Data:Percentage change in comparable
coffeehouse net sales (2)
    
    
    (4.7
    %)
    
    
    1
    %
    
    
    (2.9
    %)
    
    
    0
    %Company-Owned:Coffeehouses open at beginning of period
    
    
    415
    
    
    
    441
    
    
    
    432
    
    
    
    440Coffeehouses opened during the period
    
    
    2
    
    
    
    2
    
    
    
    7
    
    
    
    11Coffeehouses closed during the period
    
    
    2
    
    
    
    11
    
    
    
    24
    
    
    
    19Coffeehouses open at end of period:Total Company-Owned
    
    
    415
    
    
    
    432
    
    
    
    415
    
    
    
    432Franchised:Coffeehouses open at beginning of period
    
    
    75
    
    
    
    39
    
    
    
    52
    
    
    
    24Coffeehouses opened during the period
    
    
    5
    
    
    
    2
    
    
    
    28
    
    
    
    17Coffeehouses closed during the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Coffeehouses open at end of period:Total Franchised
    
    
    80
    
    
    
    41
    
    
    
    80
    
    
    
    41Total coffeehouses open at end of period
    
    
    495
    
    
    
    473
    
    
    
    495
    
    
    
    473
 
 (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 164 company-owned coffeehouses from the
beginning of fiscal 2004 through the end of the first thirty-nine 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;
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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 Ended
    
    
    Thirty-nine Weeks EndedSeptember 28,
    
    
    September 30,
    
    
    September 28,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(In thousands)Net loss
    
    $
    (8,766
    )
    
    $
    (8,463
    )
    
    $
    (17,604
    )
    
    $
    (15,605
    )Interest expense
    
    
    81
    
    
    
    130
    
    
    
    714
    
    
    
    426Interest income
    
    
    (2
    )
    
    
    (54
    )
    
    
    (23
    )
    
    
    (133
    )Depreciation and amortization (1)
    
    
    10,760
    
    
    
    7,703
    
    
    
    22,387
    
    
    
    20,813(Benefit) provision for income taxes
    
    
    (36
    )
    
    
    (31
    )
    
    
    14
    
    
    
    (328
    )EBITDA
    
    $
    2,037
    
    
    $
    (715
    )
    
    $
    5,488
    
    
    $
    5,173
 
 (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.
  25




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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
  Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  26




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##### Table of Contents



Votes in
    
    Votes
    
    Votes
    
    Votes
    
    BrokerElection of Directors:
    
    Favor
    
    Against
    
    Withheld
    
    Abstentions
    
    Non-VotesKip R. Caffey
    
    
    17,878,399
    
    
    
    0
    
    
    
    465,529
    
    
    
    0
    
    
    
    0Michael J. Coles
    
    
    17,788,553
    
    
    
    0
    
    
    
    555,375
    
    
    
    0
    
    
    
    0Wallace B. Doolin
    
    
    17,795,025
    
    
    
    0
    
    
    
    548,903
    
    
    
    0
    
    
    
    0Gary A. Graves
    
    
    17,798,486
    
    
    
    0
    
    
    
    545,442
    
    
    
    0
    
    
    
    0Charles L. Griffith
    
    
    17,879,321
    
    
    
    0
    
    
    
    464,607
    
    
    
    0
    
    
    
    0Charles H. Ogburn
    
    
    17,879,189
    
    
    
    0
    
    
    
    464,739
    
    
    
    0
    
    
    
    0Sarah Palisi Chapin
    
    
    17,820,422
    
    
    
    0
    
    
    
    523,506
    
    
    
    0
    
    
    
    0Ratification of
independent
registered public
accounting firm
    
    
    18,136,367
    
    
    
    143,048
    
    
    
    0
    
    
    
    64,513
    
    
    
    0
 
 Item 5. Other Information.
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##### Table of Contents



Item 6. Exhibits.
 3.1*
    
    Form of Amended and Restated Articles of Incorporation of the
Company (incorporated by reference to Exhibit 3.1 to the Companys
Registration Statement of Form S-1/A filed August 25, 2005).3.2*
    
    Form of Amended and Restated Bylaws of the Company (incorporated by
reference to Exhibit 3.2 to the Companys Registration Statement of
Form S-1/A filed August 25, 2005).4.1*
    
    Form of Registrants Common Stock Certificate (incorporated by
reference to Exhibit 4.1 to the Companys Registration Statement of
Form S-1/A filed September 6, 2005).10.1*
    
    Employment agreement between Caribou Coffee Company, Inc. and
Michael Tattersfield, dated August 1, 2008 (incorporated by
reference to Exhibit 10.1 of the Companys Form 8-K filed on August
4, 2008).10.2*
    
    Stock Option Grant and Agreement between Caribou Coffee Company,
Inc. and Michael Tattersfield, dated August 1, 2008 (incorporated by
reference to Exhibit 10.2 of the Companys Form 8-K filed on August
4, 2008).10.3*
    
    Letter Agreement setting forth Michael Tattersfields agreement to
invest in shares of the Company between Caribou Coffee Company, Inc.
and Michael Tattersfield, dated August 1, 2008 (incorporated by
reference to Exhibit 10.3 of the Companys Form 8-K filed on August
4, 2008).10.4*
    
    Separation Agreement between Caribou Coffee Company, Inc. and
Rosalyn Mallet, dated August 29, 2008 (incorporated by reference to
Exhibit 10.1 of the Companys Form 8-K filed on September 3, 2008).10.5*
    
    Employment Agreement between Caribou Coffee Company, Inc. and
Timothy J. Hennessy, dated September 9, 2008 (incorporated by
reference to Exhibit 10.1 of the Companys Form 8-K filed on
September 9, 2008).10.6*
    
    Stock Option Grant and Agreement between Caribou Coffee Company,
Inc. and Timothy J. Hennessy, dated September 9, 2008 (incorporated
by reference to Exhibit 10.2 of the Companys Form 8-K filed on
September 9, 2008).10.7*
    
    Letter Agreement setting forth Timothy J. Hennessys agreement to
invest in shares of the Company between Caribou Coffee Company, Inc.
and Timothy J. Hennessy, dated September 9, 2008 (incorporated by
reference to Exhibit 10.3 of the Companys Form 8-K filed on
September 9, 2008).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.
  28




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##### Table of Contents



SIGNATURE
  CARIBOU COFFEE COMPANY, INC.By:
    /s/ Timothy J. HennessyTimothy J. HennessyChief Financial Officer  29