##### 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 July 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 August 6, 2007Common Stock, par value $0.01 per share
    
    19,346,773




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##### Table of Contents



CARIBOU COFFEE COMPANY, INC.
 FORM 10-Q
 For the Thirteen Week Period Ended July 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
    
    
    20Item 4T. Controls and Procedures
    
    
    20PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    20Item 1A. Risk Factors
    
    
    21Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    21Item 3. Defaults Upon Senior Securities
    
    
    21Item 4. Submission of Matters to a Vote of Security Holders
    
    
    21Item 5. Other Information
    
    
    21Item 6. Exhibits
    
    
    22Signature
    
    
    23Section 302 CertificationSection 302 CertificationSection 1350 CertificationSection 1350 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 Ended
    
    
    Twenty-Six Weeks EndedJuly 1,
    
    
    July 2,
    
    
    July 1,
    
    
    July 2,2007
    
    
    2006
    
    
    2007
    
    
    2006(Unaudited)Coffeehouse sales
    
    $
    59,331,262
    
    
    $
    54,210,429
    
    
    $
    117,407,226
    
    
    $
    107,494,251Other sales
    
    
    3,516,123
    
    
    
    2,373,564
    
    
    
    7,292,789
    
    
    
    5,055,954Total net sales
    
    
    62,847,385
    
    
    
    56,583,993
    
    
    
    124,700,015
    
    
    
    112,550,205Cost of sales and related occupancy costs
    
    
    26,519,499
    
    
    
    23,764,186
    
    
    
    52,033,765
    
    
    
    47,030,254Operating expenses
    
    
    27,021,720
    
    
    
    23,107,034
    
    
    
    53,009,181
    
    
    
    46,207,890Opening expenses
    
    
    66,018
    
    
    
    367,303
    
    
    
    175,809
    
    
    
    782,554Depreciation and amortization
    
    
    5,985,216
    
    
    
    5,265,173
    
    
    
    12,002,800
    
    
    
    10,070,406General and administrative expenses
    
    
    7,153,341
    
    
    
    6,239,910
    
    
    
    13,757,563
    
    
    
    12,341,088Closing expense and disposal of assets
    
    
    133,886
    
    
    
    263,391
    
    
    
    860,864
    
    
    
    271,389Operating loss
    
    
    (4,032,295
    )
    
    
    (2,423,004
    )
    
    
    (7,139,967
    )
    
    
    (4,153,376
    )Other income (expense):Other income
    
    
    
    
    
    
    241,615
    
    
    
    
    
    
    
    564,565Interest income
    
    
    45,899
    
    
    
    133,389
    
    
    
    79,136
    
    
    
    320,392Interest expense
    
    
    (165,579
    )
    
    
    (186,096
    )
    
    
    (295,298
    )
    
    
    (333,838
    )Loss before (benefit) provision for
income taxes and minority interest
    
    
    (4,151,975
    )
    
    
    (2,234,096
    )
    
    
    (7,356,129
    )
    
    
    (3,602,257
    )(Benefit) provision for income taxes
    
    
    (315,932
    )
    
    
    135,317
    
    
    
    (296,097
    )
    
    
    282,356Loss before minority interest
    
    
    (3,836,043
    )
    
    
    (2,369,413
    )
    
    
    (7,060,032
    )
    
    
    (3,884,613
    )Minority interest
    
    
    54,473
    
    
    
    15,740
    
    
    
    81,534
    
    
    
    72,605Net loss
    
    $
    (3,890,516
    )
    
    $
    (2,385,153
    )
    
    $
    (7,141,566
    )
    
    $
    (3,957,218
    )Basic and diluted net loss per share
    
    $
    (0.20
    )
    
    $
    (0.12
    )
    
    $
    (0.37
    )
    
    $
    (0.21
    )Basic and diluted weighted average
number of shares outstanding
    
    
    19,320,055
    
    
    
    19,280,806
    
    
    
    19,304,035
    
    
    
    19,277,454
  3




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CARIBOU COFFEE COMPANY, INC. AND AFFILIATES
(A Majority Owned Subsidiary of Caribou Holding Company Limited)
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 July 1,
    
    
    December 31,2007
    
    
    2006(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    8,365,768
    
    
    $
    14,752,269Accounts receivable (net of allowance for doubtful accounts of $3,304and $12,693 at July 1, 2007 and December 31, 2006)
    
    
    2,419,726
    
    
    
    1,663,139Other receivables
    
    
    1,408,098
    
    
    
    1,769,256Income tax receivables
    
    
    151,569
    
    
    
    Inventories
    
    
    9,293,846
    
    
    
    10,294,493Prepaid expenses and other current assets
    
    
    1,062,154
    
    
    
    1,339,596Total current assets
    
    
    22,701,161
    
    
    
    29,818,753Property and equipment, net of accumulated depreciation and amortization
    
    
    98,519,739
    
    
    
    104,754,885Notes receivable
    
    
    40,354
    
    
    
    48,413Restricted cash
    
    
    317,075
    
    
    
    286,005Other assets
    
    
    1,180,636
    
    
    
    1,399,542Total assets
    
    $
    122,758,965
    
    
    $
    136,307,598LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    6,498,771
    
    
    $
    9,681,879Accrued compensation
    
    
    6,256,906
    
    
    
    5,676,449Accrued expenses
    
    
    6,593,959
    
    
    
    7,518,379Deferred revenue
    
    
    6,575,408
    
    
    
    9,002,588Total current liabilities
    
    
    25,925,044
    
    
    
    31,879,295Asset retirement liability
    
    
    926,588
    
    
    
    872,184Deferred rent liability
    
    
    11,080,991
    
    
    
    11,733,473Deferred revenue
    
    
    2,910,500
    
    
    
    2,919,000Income tax liability
    
    
    533,873
    
    
    
    342,108Minority interests in affiliates
    
    
    148,642
    
    
    
    159,050Total long term liabilities
    
    
    15,600,594
    
    
    
    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; 19,319,858
and 19,286,425 shares issued and outstanding at July 1, 2007 and
December 31, 2006, respectively
    
    
    193,199
    
    
    
    192,864Additional paid-in capital
    
    
    122,655,671
    
    
    
    122,153,502Accumulated deficit
    
    
    (41,615,543
    )
    
    
    (33,943,878
    )Total shareholders equity
    
    
    81,233,327
    
    
    
    88,402,488Total liabilities and shareholders equity
    
    $
    122,758,965
    
    
    $
    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
 Twenty-Six Weeks EndedJuly 1,
    
    
    July 2,2007
    
    
    2006(Unaudited)Operating activitiesNet loss
    
    $
    (7,141,566
    )
    
    $
    (3,957,218
    )Adjustments to reconcile net loss to net cash provided (used)
by operating activities:Depreciation and amortization
    
    
    13,109,014
    
    
    
    11,047,983Amortization of deferred financing fees
    
    
    172,196
    
    
    
    172,196Minority interests in affiliates
    
    
    81,534
    
    
    
    72,605Provision for closing expense and asset disposals
    
    
    205,989
    
    
    
    271,389Share-based compensation
    
    
    278,666
    
    
    
    175,000Non cash accretion expense
    
    
    54,404
    
    
    
    50,924Changes in operating assets and liabilities:Accounts receivable and other receivables
    
    
    (387,370
    )
    
    
    1,108,321Income tax receivable
    
    
    (151,569
    )
    
    
    135,750Inventories
    
    
    1,000,647
    
    
    
    986,122Prepaid expenses and other assets
    
    
    293,082
    
    
    
    (334,208
    )Accounts payable
    
    
    (3,183,108
    )
    
    
    (6,869,855
    )Accrued compensation
    
    
    580,457
    
    
    
    (635,849
    )Accrued expenses and income tax liability
    
    
    (685,332
    )
    
    
    571,201Deferred revenue
    
    
    (2,435,680
    )
    
    
    (2,800,704
    )Net cash provided (used) by operating activities
    
    
    1,791,364
    
    
    
    (6,343
    )Investing activitiesPayments for property and equipment
    
    
    (8,309,760
    )
    
    
    (15,270,509
    )Net cash used in investing activities
    
    
    (8,309,760
    )
    
    
    (15,270,509
    )Financing activitiesDistribution of minority interests earnings
    
    
    (91,942
    )
    
    
    (84,573
    )Net proceeds (expenses) from initial public offering
    
    
    
    
    
    
    (69,292
    )Issuance of common stock
    
    
    223,837
    
    
    
    74,122Repurchase of common stock
    
    
    
    
    
    
    (11,651
    )Sale of treasury stock
    
    
    
    
    
    
    20,662Net cash provided (used ) by financing activities
    
    
    131,895
    
    
    
    (70,732
    )Decrease in cash and cash equivalents
    
    
    (6,386,501
    )
    
    
    (15,347,584
    )Cash and cash equivalents at beginning of period
    
    
    14,752,269
    
    
    
    33,846,111Cash and cash equivalents at end of period
    
    $
    8,365,768
    
    
    $
    18,498,527Supplemental disclosure of cash flow informationNon cash financing and investing transactions:Accrual for leasehold improvements, furniture, and equipment
    
    $
    446,606
    
    
    $
    1,507,696
  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 Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities-Including an Amendment of FASB Statement No. 115,
 7




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4. Coffeehouse Closing and Asset Disposals
 Accounting for the Impairment or Disposal of
Long-Lived Assets.
  Thirteen Weeks Ended
    
    
    Twenty-Six Weeks EndedJuly 1,
    
    
    July 2,
    
    
    July 1,
    
    
    July 2,2007
    
    
    2006
    
    
    2007
    
    
    2006Coffeehouse closures
    
    
    6
    
    
    
    2
    
    
    
    8
    
    
    
    4Amount charged to
operations for closed
coffeehouses:Amount charged to
operations for lease
costs associated with
lease termination-cash
    
    $
    56,510
    
    
    $
    
    
    
    $
    574,804
    
    
    $
    Net book value of closed
coffeehouse property and
equipment
    
    
    956
    
    
    
    173,956
    
    
    
    164,569
    
    
    
    173,956Amount charged to
operations for other
property and equipment
write-offs
    
    
    36,383
    
    
    
    49,435
    
    
    
    41,418
    
    
    
    57,433Amount charged to
operations for costs to
consolidate
facilities-cash
    
    
    40,037
    
    
    
    40,000
    
    
    
    80,073
    
    
    
    40,000Coffeehouse closing
expense and disposal of
assets
    
    $
    133,886
    
    
    $
    263,391
    
    
    $
    860,864
    
    
    $
    271,389Depreciation expense
related to charges for
impaired assets
    
    $
    510,000
    
    
    $
    346,000
    
    
    $
    922,000
    
    
    $
    428,000
 Accounting for Costs Associated with Exit or Disposal Activities,
 Thirteen Weeks Ended
    
    
    Twenty-Six Weeks EndedJuly 1,
    
    
    July 2,
    
    
    July 1,
    
    
    July 2,2007
    
    
    2006
    
    
    2007
    
    
    2006Accrued exit costs beginning balance
    
    $
    433,901
    
    
    $
    543,840
    
    
    $
    511,641
    
    
    $
    601,712Expenses accrued
    
    
    138,142
    
    
    
    40,000
    
    
    
    188,666
    
    
    
    40,000Payments
    
    
    (40,482
    )
    
    
    (43,497
    )
    
    
    (168,746
    )
    
    
    (101,369
    )Accrued exit costs ending balance
    
    $
    531,561
    
    
    $
    540,343
    
    
    $
    531,561
    
    
    $
    540,343
 5. Inventories
  July 1,
    
    
    December 31,2007
    
    
    2006(Unaudited)Coffee
    
    $
    2,680,879
    
    
    $
    3,879,079Other merchandise held for sale
    
    
    3,260,092
    
    
    
    3,627,035Supplies
    
    
    3,352,875
    
    
    
    2,788,379$
    9,293,846
    
    
    $
    10,294,493
 8




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6. Equity and Share-Based Compensation
   Weighted
    
    
    Weighted
    
    
    AggregateNumber of
    
    
    Average
    
    
    Average
    
    
    IntrinsicShares
    
    
    Exercise Price
    
    
    Contract Life
    
    
    ValueOutstanding, December 31, 2006
    
    
    2,421,600
    
    
    $
    7.43
    
    
    6.98 YrsGranted
    
    
    132,726
    
    
    $
    7.84Exercised
    
    
    (14,101
    )
    
    $
    6.69Forfeited
    
    
    (23,562
    )
    
    $
    7.85Outstanding, April 1, 2007
    
    
    2,516,663
    
    
    $
    7.45
    
    
    6.86 Yrs
    
    $
    (529,135
    )Granted
    
    
    210,000
    
    
    $
    7.57Exercised
    
    
    (19,332
    )
    
    $
    6.70Forfeited
    
    
    (110,500
    )
    
    $
    7.19Outstanding, July 1, 2007
    
    
    2,596,831
    
    
    $
    7.48
    
    
    6.81 Yrs
    
    $
    (1,133,690
    )Options vested at July 1, 2007
    
    
    1,573,625
    
    
    $
    6.76
    
    
    5.62 Yrs
    
    $
    442,213
 7. Income Taxes
  8. Net Loss Per Share
  Thirteen Weeks Ended
    
    
    Twenty-Six Weeks EndedJuly 1,
    
    
    July 2,
    
    
    July 1,
    
    
    July 2,2007
    
    
    2006
    
    
    2007
    
    
    2006Net loss
    
    $
    (3,890,516
    )
    
    $
    (2,385,153
    )
    
    $
    (7,141,566
    )
    
    $
    (3,957,218
    )Weighted average common shares
outstanding (for basic and diluted
calculation)
    
    
    19,320,055
    
    
    
    19,280,806
    
    
    
    19,304,035
    
    
    
    19,277,454Basic and diluted net loss per share
    
    $
    (0.20
    )
    
    $
    (0.12
    )
    
    $
    (0.37
    )
    
    $
    (0.21
    )
 9




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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
   Thirteen Weeks Ended July 1, 2007 vs. Thirteen Weeks Ended July 2, 2006
 Results of Operations
 :
 12




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Thirteen Weeks Ended
    
    
    
    
    
    
    Thirteen Weeks EndedJuly 1,
    
    
    July 2,
    
    
    %
    
    
    July 1,
    
    
    July 2,2007
    
    
    2006
    
    
    Change
    
    
    2007
    
    
    2006Statement of Operations Data:
    
    (In thousands)
    
    
    
    
    
    
    As a % of total net salesNet sales:Coffeehouse
    
    $
    59,331
    
    
    $
    54,210
    
    
    
    9.4
    %
    
    
    94.4
    %
    
    
    95.8
    %Other sales
    
    
    3,516
    
    
    
    2,374
    
    
    
    48.1
    
    
    
    5.6
    
    
    
    4.2Total net sales
    
    
    62,847
    
    
    
    56,584
    
    
    
    11.1
    
    
    
    100.0
    
    
    
    100.0Cost of sales and related occupancy costs
    
    
    26,519
    
    
    
    23,764
    
    
    
    11.6
    
    
    
    42.2
    
    
    
    42.0Operating expenses
    
    
    27,022
    
    
    
    23,107
    
    
    
    16.9
    
    
    
    43.0
    
    
    
    40.8Opening expenses
    
    
    66
    
    
    
    368
    
    
    
    (82.0
    )
    
    
    0.1
    
    
    
    0.7Depreciation and amortization
    
    
    5,985
    
    
    
    5,265
    
    
    
    13.7
    
    
    
    9.5
    
    
    
    9.3General and administrative expenses
    
    
    7,153
    
    
    
    6,240
    
    
    
    14.6
    
    
    
    11.4
    
    
    
    11.0Closing expense and disposal of assets
    
    
    134
    
    
    
    263
    
    
    
    (49.0
    )
    
    
    0.2
    
    
    
    0.5Operating loss
    
    
    (4,032
    )
    
    
    (2,423
    )
    
    
    (66.5
    )
    
    
    (6.4
    )
    
    
    (4.3
    )Other income (expense):Other income
    
    
    
    
    
    
    242
    
    
    
    (100.0
    )
    
    
    0.0
    
    
    
    0.4Interest income
    
    
    46
    
    
    
    133
    
    
    
    (65.4
    )
    
    
    0.1
    
    
    
    0.2Interest expense
    
    
    (166
    )
    
    
    (186
    )
    
    
    (10.8
    )
    
    
    (0.3
    )
    
    
    (0.3
    )Loss before (benefit ) provision for
income taxes and minority interest
    
    
    (4,152
    )
    
    
    (2,234
    )
    
    
    (85.9
    )
    
    
    (6.6
    )
    
    
    (4.0
    )(Benefit )provision for income taxes
    
    
    (316
    )
    
    
    135
    
    
    
    334.1
    
    
    
    (0.5
    )
    
    
    0.2Loss before minority interest
    
    
    (3,836
    )
    
    
    (2,369
    )
    
    
    (62.0
    )
    
    
    (6.1
    )
    
    
    (4.2
    )Minority interest
    
    
    54
    
    
    
    16
    
    
    
    (237.5
    )
    
    
    0.1
    
    
    
    0.0Net loss
    
    $
    (3,890
    )
    
    $
    (2,385
    )
    
    
    (63.2
    )
    
    
    (6.2)
    %
    
    
    (4.2)
    %
 Net Sales
  Costs and Expenses
 Cost of sales and related occupancy costs.
 Operating expenses.
 13




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




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Twenty-Six Weeks Ended July 1, 2007 vs. Twenty-Six Weeks Ended July 2, 2006
 Results of Operations
 :
 Twenty-Six Weeks Ended
    
    
    
    
    
    
    Twenty-Six Weeks EndedJuly 1,
    
    
    July 2,
    
    
    %
    
    
    July 1,
    
    
    July 2,2007
    
    
    2006
    
    
    Change
    
    
    2007
    
    
    2006Statement of Operations Data:
    
    (In thousands)
    
    
    
    
    
    
    As a % of total net salesNet sales:Coffeehouse
    
    $
    117,407
    
    
    $
    107,494
    
    
    
    9.2
    %
    
    
    94.2
    %
    
    
    95.5
    %Other sales
    
    
    7,293
    
    
    
    5,056
    
    
    
    44.2
    
    
    
    5.8
    
    
    
    4.5Total net sales
    
    
    124,700
    
    
    
    112,550
    
    
    
    10.8
    
    
    
    100.0
    
    
    
    100.0Cost of sales and related occupancy costs
    
    
    52,034
    
    
    
    47,030
    
    
    
    10.6
    
    
    
    41.7
    
    
    
    41.8Operating expenses
    
    
    53,008
    
    
    
    46,208
    
    
    
    14.7
    
    
    
    42.5
    
    
    
    41.1Opening expenses
    
    
    176
    
    
    
    783
    
    
    
    (77.5
    )
    
    
    0.1
    
    
    
    0.7Depreciation and amortization
    
    
    12,003
    
    
    
    10,070
    
    
    
    19.2
    
    
    
    9.7
    
    
    
    8.9General and administrative expenses
    
    
    13,758
    
    
    
    12,341
    
    
    
    11.5
    
    
    
    11.0
    
    
    
    11.0Closing expense and disposal of assets
    
    
    861
    
    
    
    271
    
    
    
    217.7
    
    
    
    0.7
    
    
    
    0.2Operating loss
    
    
    (7,140
    )
    
    
    (4,153
    )
    
    
    (71.9
    )
    
    
    (5.7
    )
    
    
    (3.7
    )Other income (expense):Other income
    
    
    
    
    
    
    565
    
    
    
    (100.0
    )
    
    
    0.0
    
    
    
    0.5Interest income
    
    
    79
    
    
    
    320
    
    
    
    (75.3
    )
    
    
    0.0
    
    
    
    0.3Interest expense
    
    
    (295
    )
    
    
    (334
    )
    
    
    (11.7
    )
    
    
    (0.2
    )
    
    
    (0.3
    )Loss before (benefit) provision for
income taxes and minority interest
    
    
    (7,356
    )
    
    
    (3,602
    )
    
    
    (104.2
    )
    
    
    (5.9
    )
    
    
    (3.2
    )(Benefit ) provision for income taxes
    
    
    (296
    )
    
    
    282
    
    
    
    (205.0
    )
    
    
    (0.2
    )
    
    
    0.3Loss before minority interest
    
    
    (7,060
    )
    
    
    (3,884
    )
    
    
    (81.7
    )
    
    
    (5.7
    )
    
    
    (3.5
    )Minority interest
    
    
    82
    
    
    
    73
    
    
    
    (12.3
    )
    
    
    0.0
    
    
    
    0.0Net loss
    
    $
    (7,142
    )
    
    $
    (3,957
    )
    
    
    (80.5
    )
    
    
    (5.7)
    %
    
    
    (3.5)
    %
 Net Sales
  Costs and Expenses
 Cost of sales and related occupancy costs.
 Operating expenses.
 Opening expenses.
 15




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##### Table of Contents



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




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##### Table of Contents



Liquidity and Capital Resources
  Increase /Twenty-Six Weeks Ended
    
    
    (Decrease)(In thousands)
    
    July 1, 2007
    
    
    July 2, 2006Net cash provided (used) by operating activities
    
    $
    1,791
    
    
    
    (6
    )
    
    
    1,797Net cash used in investing activities
    
    
    (8,310
    )
    
    
    (15,271
    )
    
    
    6,961Net cash provided (used) by financing activities
    
    
    132
    
    
    
    (71
    )
    
    
    203Net change in cash and cash equivalents
    
    $
    (6,387
    )
    
    
    (15,348
    )
    
    
    8,961
      Off-Balance Sheet Arrangements
  17




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##### Table of Contents



Recent Accounting Pronouncements
 Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities-Including an Amendment of FASB Statement No. 115,
 Key Financial Metrics
   Thirteen Weeks Ended
    
    
    Twenty-Six Weeks EndedJuly 1, 2007
    
    
    July 2, 2006
    
    
    July 1, 2007
    
    
    July 2, 2006(In thousands, except operating data)Non-GAAP Metrics:EBITDA(1)
    
    $
    2,439
    
    
    $
    3,569
    
    
    $
    5,888
    
    
    $
    7,387Operating Data:Percentage change in comparable coffeehouse
net sales(2)
    
    
    1
    %
    
    
    (4
    )%
    
    
    0
    %
    
    
    (2
    )%Company-Owned:Coffeehouses open at beginning of period
    
    
    442
    
    
    
    394
    
    
    
    440
    
    
    
    386Coffeehouses opened during the period
    
    
    5
    
    
    
    13
    
    
    
    9
    
    
    
    23Coffeehouses closed during the period
    
    
    6
    
    
    
    2
    
    
    
    8
    
    
    
    4Coffeehouses open at end of period:Total Company-Owned
    
    
    441
    
    
    
    405
    
    
    
    441
    
    
    
    405Franchised:Coffeehouses open at beginning of period
    
    
    33
    
    
    
    8
    
    
    
    24
    
    
    
    9Coffeehouses opened during the period
    
    
    6
    
    
    
    6
    
    
    
    15
    
    
    
    7Coffeehouses closed during the period
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    5Coffeehouses open at end of period:Total Franchised
    
    
    39
    
    
    
    11
    
    
    
    39
    
    
    
    11Total coffeehouses open at end of period
    
    
    480
    
    
    
    416
    
    
    
    480
    
    
    
    416
 
 (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. 18




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##### Table of Contents




    
    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 twenty-six weeks of fiscal 2007. As a result, we believe
depreciation expense is disproportionately large when compared to the sales from a
significant percentage of our coffeehouses that are in their initial years of operations.
Also, many of the assets being depreciated have actual useful lives that exceed the initial
lease term excluding renewal options. Consequently, we believe that adjusting for
depreciation and amortization is useful for evaluating the operating performance of our
coffeehouses.
  
    
    As a measurement of operating performance because it assists us in comparing our
operating performance on a consistent basis as it removes the impact of items not directly
resulting from our coffeehouse operations;
    
    For planning purposes, including the preparation of our internal annual operating budget;
    
    To establish targets for certain management compensation matters; and
    
    To evaluate our capacity to incur and service debt, fund capital expenditures and expand our business.
  Thirteen Weeks Ended
    
    
    Twenty-Six Weeks EndedJuly 1, 2007
    
    
    July 2, 2006
    
    
    July 1, 2007
    
    
    July 2, 2006Net loss
    
    $
    (3,891
    )
    
    $
    (2,385
    )
    
    $
    (7,142
    )
    
    $
    (3,957
    )Interest expense
    
    
    166
    
    
    
    186
    
    
    
    295
    
    
    
    334Interest income
    
    
    (46
    )
    
    
    (133
    )
    
    
    (79
    )
    
    
    (320
    )Depreciation and
amortization(1)
    
    
    6,526
    
    
    
    5,766
    
    
    
    13,110
    
    
    
    11,048(Benefit) provision
for income taxes
    
    
    (316
    )
    
    
    135
    
    
    
    (296
    )
    
    
    282EBITDA
    
    $
    2,439
    
    
    $
    3,569
    
    
    $
    5,888
    
    
    $
    7,387
 
 (1)
    
    Includes depreciation and amortization associated with our headquarters and roasting facility
that are categorized as general and administrative expenses and cost of sales and related
occupancy costs on our statement of operations. 19




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##### Table of Contents



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




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##### Table of Contents



Item 1A. Risk Factors.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
 Unregistered Sales of Equity Securities
  Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  
 Item 5. Other Information.
  21




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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.
  22




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