UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended July 4, 2010.
or
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from to .
Commission File Number: 000-51535
CARIBOU COFFEE COMPANY, INC.
(Exact Name of Registrant as Specified in Its Charter)
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Minnesota
(State or other jurisdiction of
incorporation or organization)
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41-1731219
(I.R.S. Employer
Identification No.)
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3900 Lakebreeze Avenue North
Brooklyn Center, Minnesota
(Address of principal executive offices)
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55429
(Zip Code)
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Registrants Telephone Number, Including Area Code
: (763) 592-2200
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes
þ
No
o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the proceeding 12 months (or for such shorter period
that the registrant was required to submit and post such files). Yes
o
No
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See definition of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.
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Large Accelerated Filer
o
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Accelerated Filer
o
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Non-Accelerated Filer
o
(Do not check if a smaller reporting company)
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Smaller Reporting Company
þ
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes
o
No
þ
On August 5, 2010, 20,039,269 shares of Registrants $0.01 par value common stock were
outstanding.
CARIBOU COFFEE COMPANY, INC.
FORM 10-Q
For the Thirteen Week Period Ended July 4, 2010
Table of Contents
See accompanying notes.
1
PART I FINANCIAL INFORMATION
Item 1.
Financial Statements.
CARIBOU COFFEE COMPANY, INC. AND AFFILIATES
(A Majority Owned Subsidiary of Caribou Holding Company Limited)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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Thirteen Weeks Ended
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Twenty-Six Weeks Ended
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July 4,
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June 28,
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July 4,
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June 28,
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2010
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2009
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2010
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2009
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(In thousands, except for per share amounts)
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(Unaudited)
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Coffeehouse sales
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$
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57,751
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$
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55,294
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$
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113,348
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$
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108,158
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Commercial and franchise sales
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11,133
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7,660
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22,587
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15,176
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Total net sales
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68,884
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62,954
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135,935
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123,334
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Cost of sales and related occupancy costs
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30,551
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27,317
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61,950
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53,589
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Operating expenses
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25,067
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23,873
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50,029
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47,275
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Depreciation and amortization
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3,028
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3,570
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6,172
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7,311
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General and administrative expenses
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7,633
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6,789
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14,142
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13,378
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Operating income
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2,606
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1,405
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3,642
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1,781
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Other income (expense):
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Interest income
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5
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7
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10
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7
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Interest expense
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(64
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)
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(63
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)
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(171
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)
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(121
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)
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Income
before provision for (benefit from) income taxes
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2,547
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1,349
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3,481
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1,667
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Provision for (benefit from) income taxes
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20
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59
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(138
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)
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(42
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)
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Net income
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2,527
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1,290
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3,619
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1,709
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Less: Net income attributable to noncontrolling interest
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106
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122
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160
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195
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Net Income attributable to Caribou Coffee Company, Inc.
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$
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2,421
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$
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1,168
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$
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3,459
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$
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1,514
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Basic net income attributable to Caribou Coffee Company,
Inc. common shareholders per share
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$
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0.12
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$
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0.06
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$
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0.18
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$
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0.08
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Diluted net income attributable to Caribou Coffee
Company, Inc. common shareholders per share
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$
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0.12
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$
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0.06
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$
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0.17
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$
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0.08
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Basic weighted average number of shares outstanding
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19,515
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19,371
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19,514
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19,371
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Diluted weighted average number of shares outstanding
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20,520
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20,118
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20,381
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19,865
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See accompanying notes.
2
CARIBOU COFFEE COMPANY, INC. AND AFFILIATES
(A Majority Owned Subsidiary of Caribou Holding Company Limited)
CONDENSED CONSOLIDATED BALANCE SHEETS
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July 4,
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January 3,
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2010
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2010
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In thousands, except per share amounts
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(Unaudited)
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ASSETS
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Current assets:
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Cash and cash equivalents
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$
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16,188
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$
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23,578
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Accounts receivable (net of allowance for doubtful accounts of $21 and
$3 at July 4, 2010 and January 3, 2010, respectively)
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5,536
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5,887
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Other receivables (net of allowance for doubtful accounts of $191 and
$128 at July 4, 2010 and January 3, 2010, respectively)
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1,132
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1,268
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Income tax receivable
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164
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193
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Inventories
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24,776
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13,278
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Prepaid expenses and other current assets
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1,016
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1,546
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Total current assets
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48,812
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45,750
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Property and equipment, net of accumulated depreciation and amortization
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41,349
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47,135
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Restricted cash
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605
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605
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Other assets
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627
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237
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Total assets
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$
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91,393
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$
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93,727
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LIABILITIES AND SHAREHOLDERS EQUITY
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Current liabilities:
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Accounts payable
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$
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9,381
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$
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9,042
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Accrued compensation
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4,566
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6,296
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Accrued expenses
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6,379
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7,563
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Deferred revenue
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6,112
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8,747
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Total current liabilities
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26,438
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31,648
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Asset retirement liability
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1,157
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1,120
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Deferred rent liability
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6,725
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7,955
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Deferred revenue
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2,072
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2,072
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Income tax liability
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10
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156
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Total long term liabilities
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9,964
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11,303
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Equity:
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Caribou Coffee Company, Inc. Shareholders equity:
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Preferred stock, par value $.01, 20,000 shares authorized; no shares
issued and outstanding
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Common stock, par value $.01, 200,000 shares authorized; 20,039 and
19,814 shares issued and outstanding at July 4, 2010 and January 3,
2010, respectively
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200
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198
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Additional paid-in capital
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127,518
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126,770
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Accumulated comprehensive loss
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(12
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)
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(7
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)
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Accumulated deficit
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(72,882
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)
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(76,341
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)
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Total Caribou Coffee Company, Inc. shareholders equity
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54,824
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50,620
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Noncontrolling interest
|
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166
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156
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Total equity
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54,990
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50,776
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Total liabilities and equity
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$
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91,393
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$
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93,727
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See accompanying notes.
3
CARIBOU COFFEE COMPANY, INC. AND AFFILIATES
(A Majority Owned Subsidiary of Caribou Holding Company Limited)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(unaudited)
(in thousands)
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Common Stock
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Additional
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Accumulated
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Number of
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Paid-In
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Noncontrolling
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Other
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Accumulated
|
|
|
|
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Shares
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Amount
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Capital
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Interest
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|
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Comprehensive Loss
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Deficit
|
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Equity
|
|
Balance, January 3, 2010
|
|
|
19,814
|
|
|
$
|
198
|
|
|
$
|
126,770
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|
|
$
|
156
|
|
|
$
|
(7
|
)
|
|
$
|
(76,341
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)
|
|
$
|
50,776
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
160
|
|
|
|
|
|
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|
3,459
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|
|
|
3,619
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|
Changes in fair value of derivative financial instruments
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|
|
|
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|
|
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|
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|
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(5
|
)
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|
|
|
|
|
(5
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)
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share based compensation
|
|
|
|
|
|
|
|
|
|
|
618
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
618
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercised
|
|
|
30
|
|
|
|
|
|
|
|
205
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
205
|
|
Restricted shares issued, net of cancellations
|
|
|
205
|
|
|
|
2
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution of noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(150
|
)
|
|
|
|
|
|
|
|
|
|
|
(150
|
)
|
Stock repurchase
|
|
|
(10
|
)
|
|
|
|
|
|
|
(73
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(73
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, July 4, 2010
|
|
|
20,039
|
|
|
$
|
200
|
|
|
$
|
127,518
|
|
|
$
|
166
|
|
|
$
|
(12
|
)
|
|
$
|
(72,882
|
)
|
|
$
|
54,990
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
4
CARIBOU COFFEE COMPANY, INC. AND AFFILIATES
(A Majority Owned Subsidiary of Caribou Holding Company Limited)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
Twenty-Six Weeks Ended
|
|
|
|
July 4,
|
|
|
June 28,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
|
(Unaudited)
|
|
Operating activities
|
|
|
|
|
|
|
|
|
Net income attributable to Caribou Coffee Company, Inc.
|
|
$
|
3,459
|
|
|
$
|
1,514
|
|
Adjustments
to reconcile net income to net cash (used) provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
7,140
|
|
|
|
8,396
|
|
Amortization of deferred financing fees
|
|
|
97
|
|
|
|
78
|
|
Noncontrolling interest
|
|
|
160
|
|
|
|
195
|
|
Stock-based compensation
|
|
|
618
|
|
|
|
456
|
|
Other
|
|
|
(132
|
)
|
|
|
52
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable and other receivables
|
|
|
516
|
|
|
|
1,228
|
|
Inventories
|
|
|
(11,498
|
)
|
|
|
(440
|
)
|
Prepaid expenses and other assets
|
|
|
342
|
|
|
|
166
|
|
Accounts payable
|
|
|
339
|
|
|
|
1,013
|
|
Accrued expenses and other liabilities
|
|
|
(3,923
|
)
|
|
|
(1,752
|
)
|
Deferred revenue
|
|
|
(2,635
|
)
|
|
|
(3,377
|
)
|
|
|
|
|
|
|
|
Net cash (used) provided by operating activities
|
|
|
(5,517
|
)
|
|
|
7,529
|
|
Investing activities
|
|
|
|
|
|
|
|
|
Payments for property and equipment
|
|
|
(1,562
|
)
|
|
|
(453
|
)
|
Proceeds from the disposal of property
|
|
|
6
|
|
|
|
24
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(1,556
|
)
|
|
|
(429
|
)
|
Financing activities
|
|
|
|
|
|
|
|
|
Distribution of noncontrolling interest
|
|
|
(150
|
)
|
|
|
(73
|
)
|
Purchase of noncontrolling interest
|
|
|
|
|
|
|
(105
|
)
|
Issuance of common stock
|
|
|
205
|
|
|
|
|
|
Payment of debt financing fees
|
|
|
(299
|
)
|
|
|
(31
|
)
|
Stock repurchase
|
|
|
(73
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used by financing activities
|
|
|
(317
|
)
|
|
|
(209
|
)
|
|
|
|
|
|
|
|
(Decrease) increase in cash and cash equivalents
|
|
|
(7,390
|
)
|
|
|
6,891
|
|
Cash and cash equivalents at beginning of period
|
|
|
23,578
|
|
|
|
11,060
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
16,188
|
|
|
$
|
17,951
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information
|
|
|
|
|
|
|
|
|
Noncash financing and investing transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrual for leasehold improvements, furniture and equipment
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
5
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
The Company and Caribou refer to Caribou Coffee Company, Inc. and its affiliates,
collectively.
The unaudited condensed consolidated financial statements of the Company have been prepared in
accordance with U.S. generally accepted accounting principles for interim financial information and
with the rules and regulations of the Securities and Exchange Commission (the SEC). Accordingly,
they do not include all information and footnotes required by U.S. generally accepted accounting
principles for complete financial statements. In the opinion of management, these statements
include all adjustments considered necessary for the fair presentation of all interim periods
reported herein. All adjustments are of a normal recurring nature unless otherwise disclosed.
Management believes that the disclosures made are adequate for a fair presentation of the Companys
results of operations, financial position and cash flows. These condensed consolidated financial
statements should be read in conjunction with the year-end consolidated financial statements and
accompanying notes included in the Companys Annual Report on Form 10-K (File No. 000-51535).
Principles of Consolidation
The Companys condensed consolidated financial statements include the accounts of Caribou
Coffee Company, Inc., affiliates that it controls and a third party finance company (which exists
for purposes of the Companys revolving credit facility, as described in the Companys Annual
Report on Form 10-K) where the Company is the primary beneficiary in a variable interest entity.
The affiliates are Caribou MSP Airport, a partnership in which the Company owns a 49% interest and
that operates six coffeehouses, and Caribou Coffee Development Company, Inc., a licensor of Caribou
Coffee branded coffeehouses. The Company controls the daily operations of Caribou Coffee
Development Company, Inc. and accordingly consolidates their results of operations. The Company
provided a loan to its partner in Caribou MSP Airport for all of the partners equity contribution
to the venture. Consequently, the Company bears all the risk of loss but does not control all
decisions that may have a significant effect on the success of the venture. Therefore, the Company
consolidates the Caribou MSP Airport, as it is the primary beneficiary in this variable interest
entity. All material intercompany balances and transactions between Caribou Coffee Company, Inc.,
Caribou MSP Airport and Caribou Coffee Development Company, Inc. and the third party finance
company have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally
accepted in the U.S. (GAAP) requires management to make estimates and assumptions that affect the
amounts reported in the accompanying consolidated financial statements. Actual results may differ
from those estimates, and such differences may be material to the consolidated financial
statements.
Fiscal Year End
The Companys fiscal year ends on the Sunday falling nearest to December 31. Each fiscal year
consists of four 13-week quarters in a 52-week year and three 13-week quarters and one 14-week
fourth quarter in a 53-week year. Fiscal year 2009 included 53 weeks. Each fiscal quarter reported
herein consists of two four-week months and one five-week month.
The Companys sales are somewhat seasonal, with the fourth quarter accounting for the highest
sales volumes. Operating results for the thirteen week period ended July 4, 2010 are not
necessarily indicative of future results that may be expected for the year ending January 2, 2011.
6
2. Summary of Significant Accounting Policies
Revenue Recognition
The Company recognizes retail coffeehouse sales for products and services when payment is
tendered at the point of sale. Sales tax collected from customers is presented net of amounts
expected to be remitted to various tax jurisdictions. Accordingly, sales taxes have no effect on
the Companys reported net sales in the accompanying statements of operations.
Revenue from the sale of products to commercial, franchise or on-line customers is recognized
when ownership and price risk of the products are legally transferred to the customer, which is
generally upon the shipment of goods. Revenues include any applicable shipping and handling costs
invoiced to the customer, and the expense of such shipping and handling costs is included in cost
of sales.
The Company sells stored value cards of various denominations. Cash receipts related to stored
value card sales are deferred when initially received and revenue is recognized when the card is
redeemed and the related products are delivered to the customer. Such amounts are classified as a
current liability on the Companys condensed consolidated balance sheets. The Company will honor
all stored value cards presented for payment; however, the Company has determined that the
likelihood of redemption is remote for certain card balances due to long periods of inactivity. In
these circumstances, to the extent management determines there is no requirement for remitting
balances to government agencies under unclaimed property laws, card and certificate balances may be
recognized in the consolidated statements of operations. The Company uses the redemption
recognition method and recognizes the estimated value of abandoned cards as a percentage of every
stored value card redeemed and includes the amount in coffeehouse sales. Such amounts represent the
Companys experience regarding unused balances related to stored value cards redeemed. The Company
excludes stored value card balances sold in jurisdictions which require remittance of unused
balances to government agencies under unclaimed property laws.
Territory development fees and initial franchise fees are recognized upon substantial
performance of services for a new territory or coffeehouse, which is generally upon the opening of
a new coffeehouse. Royalties based upon a percentage of reported sales are recognized on a monthly
basis when earned. Cash payments received in advance for territory development fees or initial
franchise fees are recorded as deferred revenue until earned.
All revenues are recognized net of any discounts, returns, allowances and sales incentives,
including coupon redemptions and rebates. The Company periodically participates in trade-promotion
programs such as shelf price reductions and consumer coupon programs that require the Company to
estimate and accrue the expected cost of such programs. Coupons are recognized as a liability when
distributed based upon expected consumer redemptions. The Company maintains liabilities based on
historical experience and managements judgment at the end of each period for the estimated
expenses incurred, but unpaid for these programs
Operating Leases and Rent Expense
Certain of the Companys lease agreements provide for scheduled rent increases during the
lease term or for rental payments commencing at a date other than the date of initial occupancy.
Rent expense is recorded on a straight-line basis over the initial lease term and renewal periods
that are reasonably assured. The difference between rent expense and rent paid is recorded as
deferred rent and is included in accrued expenses and deferred rent liability in the
consolidated balance sheets. Contingent rents, including those based on a percentage of retail
sales over stated levels, and rental payment increases based on a contingent future event are
accrued over the respective contingency periods when the achievement of such targets or events are
deemed to be probable by the Company.
3. Recent Accounting Pronouncements
In June 2009, the FASB issued guidance which amends certain ASC concepts related to
consolidation of variable interest entities. Among other accounting and disclosure requirements,
this guidance replaces the quantitative-based risks and rewards calculation for determining which
enterprise has a controlling financial interest in a variable interest entity with an approach
focused on identifying which enterprise has the power to direct the activities of a variable
interest entity and the obligation to absorb losses of the entity or the right to receive benefits
from the entity.
7
The Company adopted this guidance on January 4, 2010. The adoption of
this guidance did not have a material impact on its financial statements.
4. Derivative Financial Instruments
The Company evaluates various strategies in managing its exposure to market-based risks, such
as entering into hedging transactions to manage its exposure to fluctuating dairy commodity prices.
The Company records all derivatives on the condensed consolidated balance sheets at fair
value. For those cash flow hedges that have been designated and qualify as an effective accounting
hedge, the effective portion of the derivatives gain or loss is initially reported as a component
of other comprehensive income (OCI) and subsequently reclassified into net earnings when the
hedged exposure affects net income. For those cash flow hedges that are not designated or do not
qualify as an effective accounting hedge, the entire derivative gain or loss is recorded in
earnings as incurred.
As of both July 4, 2010 and January 3, 2010, the Company had accumulated net derivative losses
of less than $0.1 million in OCI and in accrued expenses, all of which pertains to derivatives
designated as cash flow hedging instruments that will be realized within 12 months and will also
continue to experience fair value changes before affecting earnings. Based on notional amounts, as
of July 4, 2010 the Company had dairy commodity futures contracts representing approximately four
hundred thousand gallons. The Companys cash flow derivative instruments contain
credit-risk-related contingent features. At July 4, 2010, the Company has no collateral posted
related to these contingent features.
For those derivatives designated as cash flow hedging instruments, a loss of less than $0.1
million was recognized in earnings for both the thirteen and twenty-six week periods ended July 4,
2010. There were no derivatives designated as hedging instruments during the thirteen and
twenty-six week periods ended June 28, 2009.
During the thirteen and twenty-six week periods ended July 4, 2010, the Company did not have
any commodity hedges not designated as hedging instruments. During the thirteen and twenty-six
week periods ended June 28, 2009, the Company recognized $0.1 million in losses and $0.1 in gains,
respectively, related to commodity hedges not designated as hedging instruments.
The recognized gains/losses related to commodity hedges not designated as hedging instruments
and commodity hedges designated as hedging instruments are recorded in the condensed consolidated
statements of operations as costs of goods sold and related occupancy expenses.
5. Fair Value Measurements
Generally Accepted Accounting Principles define fair value, establish a framework for
measuring fair value, and establish a fair value hierarchy that prioritizes the inputs used to
measure fair value:
|
|
|
Level 1: Observable inputs that reflect unadjusted quoted prices for identical assets
or liabilities traded in active markets.
|
|
|
|
|
Level 2: Inputs other than quoted prices included within Level 1 that are observable
for the asset or liability, either directly or indirectly.
|
|
|
|
|
Level 3: Inputs that are generally unobservable. These inputs may be used with
internally developed methodologies that result in managements best estimate of fair
value.
|
The following table presents the financial assets and liabilities measured at fair value on a
recurring basis as of July 4, 2010 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
16,188
|
|
|
$
|
16,188
|
|
|
$
|
|
|
|
$
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
|
|
$
|
12
|
|
|
$
|
12
|
|
|
$
|
|
|
|
$
|
|
|
8
The following table presents the financial assets and liabilities measured at fair value on a
recurring basis as of January 3, 2010 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
23,578
|
|
|
$
|
23,578
|
|
|
$
|
|
|
|
$
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
|
|
$
|
7
|
|
|
$
|
7
|
|
|
$
|
|
|
|
$
|
|
|
Cash and cash equivalents include cash held at FDIC-insured financial institutions and highly
liquid money market funds. The fair value of cash equivalents is determined using quoted market
prices in active markets for identical assets, thus they are considered to be Level 1 instruments.
Derivative assets consist of commodity futures contracts. Where applicable, the Company uses
quoted prices in an active market for identical derivative assets and liabilities that are traded
in exchanges. These derivative assets are included in Level 1.
6. Inventories
Inventories consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
July 4,
|
|
|
January 3,
|
|
|
|
2010
|
|
|
2010
|
|
Coffee
|
|
$
|
18,220
|
|
|
$
|
5,615
|
|
Other merchandise held for sale
|
|
|
3,801
|
|
|
|
4,029
|
|
Supplies
|
|
|
2,755
|
|
|
|
3,634
|
|
|
|
|
|
|
|
|
|
|
$
|
24,776
|
|
|
$
|
13,278
|
|
|
|
|
|
|
|
|
At July 4, 2010 and January 3, 2010, the Company had committed to fixed price purchase
commitments, primarily for green coffee, aggregating approximately $21.3 million and $15.1 million,
respectively. These fixed price contracts are for less than one year.
7. Equity and Stock Based Compensation
The Company maintains stock compensation plans, which provide for the granting of
non-qualified stock options and restricted stock to officers and key employees and certain
non-employees. Stock options have been granted at prices equal to the fair market values as of the
dates of grant. Options and restricted stock generally vest over four years and options generally
expire ten years from the grant date. Stock-based compensation expense for the thirteen weeks ended
July 4, 2010 and June 28, 2009 was approximately $0.4 million and $0.2 million, respectively, and
is included in general and administrative expenses in the condensed consolidated statements of
operations. Stock-based compensation for the twenty-six weeks ended July 4, 2010 and June 28, 2009
was approximately $0.6 million and $0.5 million respectively.
9
Stock option activity during the period indicated is as follows (in thousands, except per share and
life data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Weighted
|
|
|
|
Number of
|
|
|
Average
|
|
|
Average
|
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
Contract Life
|
|
Outstanding, January 3, 2010
|
|
|
1,696
|
|
|
$
|
4.27
|
|
|
7.54 Yrs
|
Granted
|
|
|
|
|
|
$
|
|
|
|
|
|
|
Exercised
|
|
|
(5
|
)
|
|
$
|
5.72
|
|
|
|
|
|
Forfeited
|
|
|
(26
|
)
|
|
$
|
6.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, April 4, 2010
|
|
|
1,665
|
|
|
$
|
4.23
|
|
|
7.31 Yrs
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
$
|
|
|
|
|
|
|
Exercised
|
|
|
(25
|
)
|
|
$
|
7.05
|
|
|
|
|
|
Forfeited
|
|
|
(10
|
)
|
|
$
|
6.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, July 4, 2010
|
|
|
1,630
|
|
|
$
|
4.18
|
|
|
7.10 Yrs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options vested at July 4, 2010
|
|
|
787
|
|
|
$
|
5.98
|
|
|
6.05 Yrs
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock activity during the period indicated is as follows (in thousands, except per
share and life data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Weighted
|
|
|
|
Number of
|
|
|
Average Grant Date
|
|
|
Average
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Contract Life
|
|
Outstanding, January 3, 2010
|
|
|
300
|
|
|
$
|
5.83
|
|
|
|
|
|
Granted
|
|
|
215
|
|
|
$
|
7.07
|
|
|
|
|
|
Forfeited
|
|
|
(9
|
)
|
|
$
|
8.15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, April 4, 2010
|
|
|
506
|
|
|
$
|
6.31
|
|
|
3.31 Yrs
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
$
|
|
|
|
|
|
|
Vested
|
|
|
(3
|
)
|
|
$
|
1.86
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, July 4, 2010
|
|
|
503
|
|
|
$
|
6.34
|
|
|
3.11 Yrs
|
|
|
|
|
|
|
|
|
|
|
|
|
8. Income Taxes
During the thirteen and twenty-six weeks ended July 4, 2010, the Company recognized a tax
provision of less than $0.1 million and tax benefit of $0.1 million, respectively. After
consideration of all evidence, both positive and negative, management has recorded a valuation
allowance against its deferred income tax assets at July 4, 2010 due to the uncertainty of
realizing such deferred income tax assets. During the thirteen and twenty-six weeks ended June 28,
2009, the Company recognized a tax provision of less than $0.1 million and tax benefit of less than
$0.1 million, respectively.
10
9. Net Income Per Share
Basic and diluted net income attributable to Caribou Coffee Company, Inc. common shareholders
per share for the thirteen week and twenty-six periods ended July 4, 2010 and June 28, 2009, were
as follows (in thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended
|
|
|
Twenty-Six Weeks Ended
|
|
|
|
July 4,
|
|
|
June 28,
|
|
|
July 4
|
|
|
June 28,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Net income attributable to Caribou
Coffee Company, Inc.
|
|
$
|
2,421
|
|
|
$
|
1,168
|
|
|
$
|
3,459
|
|
|
$
|
1,514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
- basic
|
|
|
19,515
|
|
|
|
19,371
|
|
|
|
19,514
|
|
|
|
19,371
|
|
Dilutive impact of stock-based compensation
|
|
|
1,005
|
|
|
|
747
|
|
|
|
867
|
|
|
|
494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
- dilutive
|
|
|
20,520
|
|
|
|
20,118
|
|
|
|
20,381
|
|
|
|
19,865
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share
|
|
$
|
0.12
|
|
|
$
|
0.06
|
|
|
$
|
0.18
|
|
|
$
|
0.08
|
|
Diluted net income per share
|
|
$
|
0.12
|
|
|
$
|
0.06
|
|
|
$
|
0.17
|
|
|
$
|
0.08
|
|
For the thirteen week periods ended July 4, 2010 and June 28, 2009, 0.2 million and 0.7
million stock options, respectively, and for the twenty-six week periods ended July 4, 2010 and
June 28, 2009, 0.4 million and 1.0 million stock options, respectively were excluded from the
calculation of shares applicable to diluted net income (loss) per share because their inclusion
would have been anti-dilutive.
10. Master Franchise Agreement
In November 2004, the Company entered into a Master Franchise Agreement with a franchisee. The
agreement provides the franchisee the right to develop, subfranchise or operate 250 Caribou Coffee
coffeehouses in 12 Middle Eastern countries. The Agreement expires in November 2012 and provides
for certain renewal options.
In connection with the agreement, the franchisee paid the Company a nonrefundable deposit
aggregating $3.3 million. In addition to the deposit, the franchisee is obligated to pay the
Company $20 thousand per franchised/subfranchised coffeehouse (initial franchise fee) opened for
the first 100 Caribou Coffee Coffeehouses and $15 thousand for each additional
franchised/subfranchised coffeehouse opened (after the first 100). The agreement provides for $5
thousand of the initial deposit received by the Company to be applied against the initial franchise
fee as discussed herein. Monthly royalty payments ranging from 3%-5% of gross sales are also due to
the Company.
As of July 4, 2010 and January 3, 2010, the Company included $2.1 million and $2.0 million,
respectively, of the deposit in long term liabilities as deferred revenue and $0.5 million and $0.5
million, respectively, in current liabilities as deferred revenue on its balance sheet. The
initial deposit will be amortized into income on a pro rata basis along with the initial franchise
fee payments received in connection with the execution of the franchise or subfranchise agreements
at the time of the coffeehouse opening. The current portion of deferred revenue represents the
franchise fees for the coffeehouses estimated to be opened during the subsequent twelve months per
the development schedule in the Master Franchise Agreement. At July 4, 2010, there were 70
coffeehouses operating under this Agreement. The franchisee and certain owners of the franchisee
also own indirect interests in Caribou Holding Company Limited.
11. Revolving Credit Facility
On February 19, 2010, the Company entered into a sale leaseback arrangement with a third
party finance company whereby from time to time the Company sells equipment to the finance company,
and, immediately following the sale, it leases back all of the equipment it sold to such third
party. The Company does not recognize any gain or loss on the sale of the assets. The maximum
amount of equipment the Company can sell and leaseback is $15.0 million, with an option for an
additional $10.0 million. The agreement expires on February 19, 2013. Annual rent payable under
the lease arrangement is equal to the amount outstanding under the lease financing arrangement
11
multiplied by the applicable Federal Funds effective rate plus a specified margin or the
lenders prime rate plus a specified margin.
The finance company funds its obligations under the lease financing arrangement through a
revolving credit facility that it entered into with a commercial lender also on February 19, 2010.
The terms of the revolving credit facility are economically equivalent to the lease financing
arrangement such that the amount of rent payments and unpaid acquisition costs under the lease
financing arrangement are at all times equal to the interest and principal under the revolving
credit facility. The Company consolidates the third party finance company as the Company is the
primary beneficiary in a variable interest entity due to the terms and provisions of the lease
financing arrangement. Accordingly, the Companys condensed consolidated balance sheets include all
assets and liabilities of the third party finance company under the captions property and equipment
and revolving credit facility, respectively. The Companys condensed consolidated statements of
operations include all the operations of the finance company including all interest expense related
to the revolving credit facility. Notwithstanding this presentation, the Companys obligations are
limited to its obligations under the lease financing arrangement and the Company has no obligations
under the revolving credit facility. The third party finance company was established solely for the
purpose of facilitating the Companys sale leaseback arrangement. The finance company does not have
any other assets or liabilities or income and expense other than those associated with the
revolving credit facility. At July 4, 2010 there was no property and equipment leased under this
arrangement. The lease financing arrangement has been structured to be consistent with Shariah
principles.
Both the lease financing arrangement and the revolving credit facility above were entered into
on February 19, 2010. Simultaneously, the Company terminated a similar lease financing arrangement
and revolving credit facility with a different commercial lender. Upon termination of old lease
financing arrangement and revolving credit facility, the Company wrote off $0.1 million in deferred
financing fees and capitalized $0.3 million in deferred financing fees related to the new lease
arrangement and revolving credit facility, which will be amortized over the three year life of the
agreements.
The terms of the sale leaseback agreement contain certain financial covenants and limitations
on the amount used for expansion activities based on leverage ratios and interest coverage ratios
of the Company. The Company is liable for 0.5% commitment fee on any unused portion of the
facility. There are no amounts outstanding under the new facility at July 4, 2010 or under the
previous facility at January 3, 2010.
Unamortized deferred financing fees capitalized on the balance sheet totaled $0.3 million and
$0.1 million as of July 4, 2010 and January 3, 2010 respectively. Interest payable under the new
revolving credit facility is equal to the amount outstanding under the facility multiplied by the
applicable LIBOR rate plus a specified margin.
12. Commitments and Contingencies
On July 26, 2005, three of the Companys former employees filed a lawsuit against us in the
State of Minnesota District Court for Hennepin County seeking monetary and equitable relief from us
under the Minnesota Fair Labor Standards Act, or the Minnesota FLSA, the federal FLSA and state
common law. The suit primarily alleged that the Company misclassified its retail coffeehouse
managers as exempt from the overtime provisions of the Minnesota FLSA and the federal FLSA and that
these managers are therefore entitled to overtime compensation for each week in which they worked
more than 40 hours from May 2002 to the present with respect to the claims under the federal FLSA
and for weeks in which they worked more than 48 hours from May 2003 to the present with respect to
the claims under the Minnesota FLSA. Plaintiffs sought payment of allegedly owed and unpaid
overtime compensation, liquidated damages, interest and among other things, attorneys fees and
costs.
On February 1, 2008, the Company entered into a Stipulation of Settlement (the Stipulation)
to settle the lawsuit. The Stipulation provides for a gross settlement payment of $2.7 million,
plus the employers share of payroll taxes. A partial settlement payment of $1.8 million was made
in the first quarter of 2008 and the final settlement payment of $1.0 million was made in the first
quarter of 2009.
In addition, from time to time, the Company becomes involved in certain legal proceedings in
the ordinary course of business. The Company does not believe that any such ordinary course legal
proceedings to which it is currently a party will have a material adverse effect on its financial
position or results of operations.
12
13. Segment Reporting
Segment information is prepared on the same basis that the Companys management reviews
financial information for decision making purposes. The Company has three reportable operating
segments: retail coffeehouses, commercial and franchise. Unallocated corporate includes expenses
pertaining to corporate administrative functions that support the operating segments but are not
specifically attributable to or managed by any segment and are not included in the reported
financial results of the operating segments. All of the segment sales are from external customers.
Retail Coffeehouses
The Companys retail segment operated 411 company-owned coffeehouses located in 16 states and
the District of Columbia, as of July 4, 2010. The coffeehouses offer customers high-quality premium
coffee and espresso-based beverages, and also offer specialty teas, baked goods, whole bean coffee,
branded merchandise and related products.
Commercial
The commercial segment sells high-quality premium whole bean and ground coffee to grocery
stores, mass merchandisers, club stores, office coffee and foodservice providers, hotels,
entertainment venues, and on-line customers.
Franchise
The franchise segment sells franchises to operate Caribou Coffee brand coffeehouses to
domestic and international franchisees. As of July 4, 2010, there were 128 franchised coffeehouses
in U.S and international markets.
The tables below present information by operating segment for the thirteen and twenty-six
weeks ended July 4, 2010 and June 28, 2009 (in thousands):
Thirteen weeks ended July 4, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated
|
|
|
|
|
|
|
Retail Coffeehouses
|
|
|
Commercial
|
|
|
Franchise
|
|
|
Corporate
|
|
|
Total
|
|
Total net sales
|
|
$
|
57,751
|
|
|
$
|
8,660
|
|
|
$
|
2,474
|
|
|
$
|
|
|
|
$
|
68,885
|
|
Costs of sales and related occupancy costs
|
|
|
23,475
|
|
|
|
5,668
|
|
|
|
1,408
|
|
|
|
|
|
|
|
30,551
|
|
Operating expenses
|
|
|
23,598
|
|
|
|
1,104
|
|
|
|
365
|
|
|
|
|
|
|
|
25,067
|
|
Depreciation and amortization
|
|
|
3,010
|
|
|
|
14
|
|
|
|
4
|
|
|
|
|
|
|
|
3,028
|
|
General and administrative expenses
|
|
|
2,122
|
|
|
|
|
|
|
|
|
|
|
|
5,511
|
|
|
|
7,633
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
$
|
5,546
|
|
|
$
|
1,874
|
|
|
$
|
697
|
|
|
$
|
(5,511
|
)
|
|
$
|
2,606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Identifiable assets
|
|
$
|
33,392
|
|
|
$
|
233
|
|
|
$
|
57
|
|
|
$
|
7,667
|
|
|
$
|
41,349
|
|
Net capital expenditures
|
|
$
|
199
|
|
|
$
|
73
|
|
|
$
|
|
|
|
$
|
328
|
|
|
$
|
600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
Thirteen weeks ended June 28, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated
|
|
|
|
|
|
|
Retail Coffeehouses
|
|
|
Commercial
|
|
|
Franchise
|
|
|
Corporate
|
|
|
Total
|
|
Total net sales
|
|
$
|
55,294
|
|
|
$
|
5,735
|
|
|
$
|
1,925
|
|
|
$
|
|
|
|
$
|
62,954
|
|
Costs of sales and related occupancy costs
|
|
|
22,463
|
|
|
|
3,784
|
|
|
|
1,070
|
|
|
|
|
|
|
|
27,317
|
|
Operating expenses
|
|
|
22,712
|
|
|
|
872
|
|
|
|
286
|
|
|
|
|
|
|
|
23,870
|
|
Depreciation and amortization
|
|
|
3,557
|
|
|
|
12
|
|
|
|
1
|
|
|
|
|
|
|
|
3,570
|
|
General and administrative expenses
|
|
|
1,887
|
|
|
|
|
|
|
|
|
|
|
|
4,905
|
|
|
|
6,789
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
$
|
4,675
|
|
|
$
|
1,067
|
|
|
$
|
568
|
|
|
$
|
(4,905
|
)
|
|
$
|
1,405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Identifiable assets
|
|
$
|
43,727
|
|
|
$
|
113
|
|
|
$
|
10
|
|
|
$
|
8,491
|
|
|
$
|
52,341
|
|
Net capital expenditures
|
|
$
|
150
|
|
|
$
|
4
|
|
|
$
|
|
|
|
$
|
104
|
|
|
$
|
258
|
|
Twenty-six weeks ended July 4, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated
|
|
|
|
|
|
|
Retail Coffeehouses
|
|
|
Commercial
|
|
|
Franchise
|
|
|
Corporate
|
|
|
Total
|
|
Total net sales
|
|
$
|
113,348
|
|
|
$
|
17,647
|
|
|
$
|
4,940
|
|
|
$
|
|
|
|
$
|
135,935
|
|
Costs of sales and related occupancy costs
|
|
|
47,050
|
|
|
|
11,962
|
|
|
|
2,938
|
|
|
|
|
|
|
|
61,950
|
|
Operating expenses
|
|
|
47,279
|
|
|
|
2,083
|
|
|
|
667
|
|
|
|
|
|
|
|
50,029
|
|
Depreciation and amortization
|
|
|
6,139
|
|
|
|
26
|
|
|
|
7
|
|
|
|
|
|
|
|
6,172
|
|
General and administrative expenses
|
|
|
4,054
|
|
|
|
|
|
|
|
|
|
|
|
10,088
|
|
|
|
14,142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
$
|
8,826
|
|
|
$
|
3,576
|
|
|
$
|
1,328
|
|
|
$
|
(10,088
|
)
|
|
$
|
3,642
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Identifiable assets
|
|
$
|
33,392
|
|
|
$
|
233
|
|
|
$
|
57
|
|
|
$
|
7,667
|
|
|
$
|
41,349
|
|
Net capital expenditures
|
|
$
|
775
|
|
|
$
|
73
|
|
|
$
|
57
|
|
|
$
|
521
|
|
|
$
|
1,426
|
|
Twenty-six weeks ended June 28, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated
|
|
|
|
|
|
|
Retail Coffeehouses
|
|
|
Commercial
|
|
|
Franchise
|
|
|
Corporate
|
|
|
Total
|
|
Total net sales
|
|
$
|
108,158
|
|
|
$
|
11,439
|
|
|
$
|
3,737
|
|
|
$
|
|
|
|
$
|
123,334
|
|
Costs of sales and related occupancy costs
|
|
|
44,183
|
|
|
|
7,297
|
|
|
|
2,109
|
|
|
|
|
|
|
|
53,589
|
|
Operating expenses
|
|
|
45,092
|
|
|
|
1,572
|
|
|
|
611
|
|
|
|
|
|
|
|
47,275
|
|
Depreciation and amortization
|
|
|
7,287
|
|
|
|
22
|
|
|
|
2
|
|
|
|
|
|
|
|
7,311
|
|
General and administrative expenses
|
|
|
3,849
|
|
|
|
|
|
|
|
|
|
|
|
9,529
|
|
|
|
13,378
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) income
|
|
$
|
7,747
|
|
|
$
|
2,548
|
|
|
$
|
1,015
|
|
|
$
|
(9,529
|
)
|
|
$
|
1,781
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Identifiable assets
|
|
$
|
43,727
|
|
|
$
|
113
|
|
|
$
|
10
|
|
|
$
|
8,491
|
|
|
$
|
52,341
|
|
Net capital expenditures
|
|
$
|
217
|
|
|
$
|
4
|
|
|
$
|
|
|
|
$
|
228
|
|
|
$
|
449
|
|
All of the Companys assets are located in the United States, and approximately 1% of the
Companys consolidated sales come from outside the United States. No customer accounts for 10% or
more of the Companys sales.
14
Item 2.
Managements Discussion and Analysis of Financial Condition and Results of Operations.
The information in this Managements Discussion and Analysis section should be read in
conjunction with the unaudited condensed consolidated financial statements and the notes included
in Item 1 of Part I of this Form 10-Q and the audited consolidated financial statements and notes,
and Managements Discussion and Analysis of Financial Condition and Results of Operations for the
fiscal year ended January 3, 2010 contained in the our Form 10-K (File No. [000-51535]).
FORWARD-LOOKING STATEMENTS
Certain statements in this report and other written or oral statements made by or on behalf of
Caribou Coffee are forward-looking statements within the meaning of the federal securities laws.
Statements regarding future events and developments and our future performance, as well as
managements current expectations, beliefs, plans, estimates or projections relating to the future,
are forward-looking statements within the meaning of these laws. These forward-looking statements
are subject to a number of risks and uncertainties. Among the important factors that could cause
actual results to differ materially from those indicated by such forward-looking statements are:
fluctuations in quarterly and annual results, incurrence of net losses, adverse effects of
management focusing on implementation of a growth strategy, failure to develop and maintain the
Caribou Coffee brand and other factors disclosed in the our filings with the Securities and
Exchange Commission. We undertake no obligation to update any forward-looking statements in order
to reflect events or circumstances that may arise after the date of this report.
Overview
We are the second largest company-owned gourmet coffeehouse operator in the United States
based on the number of coffeehouses. As of July 4, 2010, we had 539 retail locations, including 128
franchised. Our coffeehouses are located in 19 states, the District of Columbia and international
markets. We focus on offering our customers high-quality gourmet coffee and espresso-based
beverages, as well as specialty teas, baked goods, whole bean coffee, branded merchandise and
related products. Additionally, we sell our high-quality whole bean and ground coffee to grocery
stores, mass merchandisers, office coffee providers, airlines, hotels, sports and entertainment
venues, college campuses and on-line customers. We focus on creating a unique experience for
customers through a combination of high-quality products, a comfortable and welcoming coffeehouse
environment and customer service.
We will continue our efforts to increase comparable coffeehouse sales, including increasing
brand awareness through marketing efforts and introducing new products and promotions. As our
comparable coffeehouse sales increase, we expect our operating margins at those coffeehouses to
improve as we expect to have greater ability to leverage our fixed expense.
We intend to strategically expand our coffeehouse locations in our existing markets. Our goal
is to expand our concept into a nationally recognized brand in the United States by opening new
company-operated coffeehouses and partnering with qualified developers to open franchised
coffeehouses while adding select international locations through franchising.
Critical Accounting Policies
The preparation of our financial statements requires management to make estimates, judgments
and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses
during the periods presented. Our Annual Report on Form 10-K for the fiscal year ended January 3,
2010, (File No. [000-51535]) includes a summary of the critical accounting policies we believe are
the most important to aid in understanding our financial condition and results of operations. We
believe those critical accounting policies are significant or involve additional management
judgment due to the sensitivity of the methods, assumptions, and estimates necessary in determining
the related asset and liability amounts.
15
Fiscal Periods
Our fiscal year ends on the Sunday falling nearest to December 31. Each fiscal year consists
of four 13-week quarters in a 52-week year and three 13-week quarters and one 14-week fourth
quarter in a 53-week year. Fiscal year 2009 included 53 weeks. Each fiscal quarter reported herein
will consist of two four-week months and one five-week month.
Our sales are somewhat seasonal, with the fourth quarter accounting for the highest sales
volumes. Operating results for the thirteen week period ended July 4, 2010 are not necessarily
indicative of future results that may be expected for the year ending January 2, 2011.
Thirteen Weeks Ended July 4, 2010 vs. Thirteen Weeks Ended June 28, 2009
Results of Operations
The following table presents the consolidated statements of operations as well as the
percentage relationship to total net sales of items included in our consolidated statement of
operations
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended
|
|
|
|
|
|
|
Thirteen Weeks Ended
|
|
|
|
July 4,
|
|
|
June 28,
|
|
|
%
|
|
|
July 4,
|
|
|
June 28,
|
|
|
|
2010
|
|
|
2009
|
|
|
Change
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
As a % of total net sales
|
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coffeehouse
|
|
$
|
57,751
|
|
|
$
|
55,294
|
|
|
|
4.4
|
%
|
|
|
83.8
|
%
|
|
|
87.8
|
%
|
Commercial and franchise
|
|
|
11,133
|
|
|
|
7,660
|
|
|
|
45.4
|
%
|
|
|
16.2
|
%
|
|
|
12.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales
|
|
|
68,884
|
|
|
|
62,954
|
|
|
|
9.4
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
Cost of sales and related occupancy costs
|
|
|
30,551
|
|
|
|
27,317
|
|
|
|
11.8
|
%
|
|
|
44.4
|
%
|
|
|
43.4
|
%
|
Operating expenses
|
|
|
25,067
|
|
|
|
23,873
|
|
|
|
5.0
|
%
|
|
|
36.4
|
%
|
|
|
37.9
|
%
|
Depreciation and amortization
|
|
|
3,028
|
|
|
|
3,570
|
|
|
|
(15.2
|
)%
|
|
|
4.4
|
%
|
|
|
5.7
|
%
|
General and administrative expenses
|
|
|
7,633
|
|
|
|
6,789
|
|
|
|
12.4
|
%
|
|
|
11.1
|
%
|
|
|
10.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
2,606
|
|
|
|
1,405
|
|
|
|
85.5
|
%
|
|
|
3.8
|
%
|
|
|
2.2
|
%
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
5
|
|
|
|
7
|
|
|
|
(28.6
|
)%
|
|
|
|
%
|
|
|
|
%
|
Interest expense
|
|
|
(64
|
)
|
|
|
(63
|
)
|
|
|
1.6
|
%
|
|
|
(0.1
|
)%
|
|
|
(0.1
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes and
noncontrolling interest
|
|
|
2,547
|
|
|
|
1,349
|
|
|
|
88.8
|
%
|
|
|
3.7
|
%
|
|
|
2.1
|
%
|
Provision for income taxes
|
|
|
20
|
|
|
|
59
|
|
|
|
(66.1
|
)%
|
|
|
|
%
|
|
|
0.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
2,527
|
|
|
|
1,290
|
|
|
|
96.0
|
%
|
|
|
3.7
|
%
|
|
|
2.0
|
%
|
Less: Net income attributable to noncontrolling interest
|
|
|
106
|
|
|
|
122
|
|
|
|
(13.1
|
)%
|
|
|
0.2
|
%
|
|
|
0.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Caribou Coffee Company, Inc.
|
|
$
|
2,421
|
|
|
$
|
1,168
|
|
|
|
107.3
|
%
|
|
|
3.5
|
%
|
|
|
1.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
Net sales increased $5.9 million, or 9.4%, to $68.9 million in the second thirteen weeks of
2010 from $63.0 million in the second thirteen weeks of 2009. Each of our business segments
contributed significantly to our consolidated revenue growth. Coffeehouse net sales increased $2.5
million, or 4.4%, to $57.8 million in the second thirteen weeks of 2010 from $55.3 million in the
second thirteen weeks of 2009 due to increased traffic. Commercial and franchise sales increased by
$3.5 million, or 45.4%, to $11.1 million for the second thirteen weeks of 2010 from $7.6 million
for the second thirteen weeks of 2009 due to additional sales to new and existing customers and
franchises.
Costs and Expenses
Cost of sales and related occupancy costs.
Cost of sales and related occupancy costs increased
$3.2 million, or 11.8%, to $30.6 million in the second thirteen weeks of 2010, from $27.3 million
in the second thirteen weeks of
16
2009, primarily due to higher sales. On a dollar basis, this growth was attributable to
increased volume across each of our operating segments. As a percentage of total net sales, cost of
sales and related occupancy costs increased to 44.4% in the second thirteen weeks of 2010 from
43.4% in the second thirteen weeks of 2009. The increase as a percentage of sales was due to an
overall mix change with a higher percentage of sales coming from the commercial and franchise
segments.
Operating expenses.
Operating expenses increased $1.2 million, or 5.0%, to $25.1 million in
the second thirteen weeks of fiscal 2010, from $23.9 million in the second thirteen weeks of 2009.
On a dollar basis, this increase was primarily driven by an increase in variable expenses related
to our increase in sales volume. Operating expenses as a percentage of total net sales decreased to
36.4% in the second thirteen weeks of 2010 from 37.9% in the second
thirteen weeks of 2009 as we experienced operating efficiencies while
making investments in marketing and product platforms to build our
brand, drive traffic and increase the average amount our guests spend
during each visit.
Depreciation and amortization.
Depreciation and amortization decreased $0.6 million, or 15.2%,
to $3.0 million in the second thirteen weeks of 2010, from $3.6 million in the second thirteen weeks
of 2009. This decrease in
dollars is due to a lower depreciable asset base from reduced capital
spending in 2009 and 2010 compared with previous years.
General and administrative expenses.
General and administrative increased $0.8 million, or
12.4%, to $7.6 million in the second thirteen weeks of 2010, from $6.8 million in the second
thirteen weeks of 2009. As a percentage of total net sales, general and administrative expenses
were 11.1% in the second thirteen weeks of 2010, compared to 10.8% in the second thirteen weeks of
2009. This increase is due to resources added in support of our
marketing, product management and commercial activities in the latter half
of 2009.
Interest income.
Interest income decreased slightly in the second thirteen weeks of 2010, as
compared to the second thirteen weeks of 2009 due to less cash on hand during the period.
Interest expense.
Interest expense remained relatively flat at $0.1 million for both the
second thirteen weeks of 2010 and 2009. We had no outstanding borrowings during the second
thirteen weeks of 2010 or 2009.
Operating Segments
Segment information is prepared on the same basis that our management reviews financial
information for decision making purposes. We have three reportable operating segments: retail,
commercial and franchise. Unallocated corporate includes expenses pertaining to corporate
administrative functions that support the operating segments but are not specifically attributable
to or managed by any segment and are not included in the reported financial results of the
operating segments. The following tables summarize our results of operations by segment for the
second thirteen weeks of fiscal 2010 and 2009.
Retail Coffeehouses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended
|
|
|
Thirteen Weeks Ended
|
|
|
|
July 4,
|
|
|
June 28,
|
|
|
|
|
|
|
July 4,
|
|
|
June 28,
|
|
|
|
2010
|
|
|
2009
|
|
|
% Change
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
As a % of coffeehouse sales
|
|
Coffeehouse sales, net
|
|
$
|
57,751
|
|
|
$
|
55,294
|
|
|
|
4.4
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
Costs of sales and related occupancy costs
|
|
|
23,475
|
|
|
|
22,463
|
|
|
|
4.5
|
%
|
|
|
40.6
|
%
|
|
|
40.6
|
%
|
Operating expenses
|
|
|
23,598
|
|
|
|
22,712
|
|
|
|
3.9
|
%
|
|
|
40.9
|
%
|
|
|
41.1
|
%
|
Depreciation and amortization
|
|
|
3,010
|
|
|
|
3,557
|
|
|
|
(15.4
|
)%
|
|
|
5.2
|
%
|
|
|
6.4
|
%
|
General and administrative expenses
|
|
|
2,122
|
|
|
|
1,887
|
|
|
|
12.5
|
%
|
|
|
3.7
|
%
|
|
|
3.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
5,546
|
|
|
$
|
4,675
|
|
|
|
18.6
|
%
|
|
|
9.6
|
%
|
|
|
8.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
The retail segment operates company-owned coffeehouses. As of July 4, 2010, there were 411
company-owned coffeehouses in 16 states and the District of Columbia.
Coffeehouse sales
Coffeehouse sales increased $2.5 million, or 4.4%, to $57.8 million in the second thirteen
weeks of 2010 from $55.3 million in the second thirteen weeks of 2009. This increase is
attributable to a 4.8% increase in comparable coffeehouse sales in the second thirteen weeks of
2010 as compared to the same period in 2009. The increase in comparable coffeehouse sales was
driven by increased traffic in our coffeehouses and a higher average guest check, primarily due to
higher food sales, attributable to the launch of hot cereal in our coffeehouses.
Costs and Expenses
Cost of sales and related occupancy costs.
Cost of sales and related occupancy costs
increased $1.0 million, or 4.5%, to $23.5 million in the second thirteen weeks of 2010, from $22.5
million for the second thirteen weeks of 2009. The increase in total dollars was driven primarily
by increased cost of goods related to our 4.8% growth in comparable coffeehouse sales. Cost of sales
and related occupancy costs as a percentage of coffeehouse net sales remained flat at 40.6% for the
second thirteen weeks of 2010 and the second thirteen weeks of 2009 due to higher costs associated
with a shift to higher quality product platforms launched in our retail coffeehouse segment,
particularly shifting from a powder based chocolate ingredient to real, all natural chocolate in
all of our chocolate based beverages, offset by sales leverage gained on largely fixed occupancy
costs.
Operating expenses.
Operating expenses increased $0.9 million, or 3.9%, to $23.6 million for
the second thirteen weeks of 2010, from $22.7 million for the second thirteen weeks of 2009. On a
dollar basis, this increase was due to an increase in variable expenses, such as supplies and
credit card fees related to our 4.8% increase in comparable coffeehouses sales, as well as $0.2
million in incremental spending on marketing and product management initiatives in the retail
coffeehouse segment, when compared to the prior year. As a percentage of coffeehouse net sales,
operating expenses decreased to 40.9% in the second thirteen weeks of 2010 from 41.1% in the second
thirteen weeks of 2009. This decrease is primarily attributable to leverage gained from our
increase in sales, particularly in labor costs.
Depreciation and amortization.
Depreciation and amortization decreased $0.6 million, or
15.4%, to $3.0 million for the second thirteen weeks of 2010, from $3.6 million for the second
thirteen weeks of 2009. This decrease is due to our lower depreciable asset base due to lower
levels of capital spending in 2009 and the first and second quarters of 2010.
General and administrative expenses.
General and administrative expenses increased $0.2
million, or 12.5%, to $2.1 million for the second thirteen weeks of 2010 from $1.9 million for the
second thirteen weeks of 2009. The increase was primarily due to higher payroll related costs,
particularly medical costs, in our retail coffeehouse field support and multi-unit management
teams.
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended
|
|
|
Thirteen Weeks Ended
|
|
|
|
July 4,
|
|
|
June 28,
|
|
|
|
|
|
|
July 4,
|
|
|
June 28,
|
|
|
|
2010
|
|
|
2009
|
|
|
% Change
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
As a % of commercial sales
|
|
Sales, net
|
|
$
|
8,660
|
|
|
$
|
5,735
|
|
|
|
51.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
Costs of sales and related occupancy costs
|
|
|
5,668
|
|
|
|
3,784
|
|
|
|
49.8
|
%
|
|
|
65.5
|
%
|
|
|
66.0
|
%
|
Operating expenses
|
|
|
1,104
|
|
|
|
872
|
|
|
|
26.5
|
%
|
|
|
12.7
|
%
|
|
|
15.2
|
%
|
Depreciation and amortization
|
|
|
14
|
|
|
|
12
|
|
|
|
27.3
|
%
|
|
|
0.2
|
%
|
|
|
0.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
1,874
|
|
|
$
|
1,067
|
|
|
|
75.5
|
%
|
|
|
21.6
|
%
|
|
|
18.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The commercial segment sells high-quality premium whole bean and ground coffee to grocery
stores, mass merchandisers, club stores, office coffee and foodservice providers, hotels,
entertainment venues and on-line customers. In addition, we sell our blended coffees and license our brand to Keurig for sale
and use in its K-Cup single serve line of business.
18
Sales
Sales increased $3.0 million, or 51.0%, to $8.7 million in the second thirteen weeks of 2010,
from $5.7 million in the second thirteen weeks of 2009. This increase is primarily attributable to
the incremental sales to existing grocery stores, club stores and mass merchandisers, in which
Caribou handles sales and distribution, as well as increased sales to Keurig Incorporated, an
industry leader in single cup brewing technology. The increase in sales to Caribou managed accounts
was primarily driven by increased distribution gained in the second half of 2009. At the beginning
of 2010, Caribou Coffee was found in over forty states and in seven thousand stores through our
Caribou managed sales channel. We did not experience large new customer door growth in the second
quarter of 2010. The increase in sales to Keurig has primarily been driven by an increased sales
and penetration of Keurig single-cup brewing machines.
Costs and Expenses
Cost of sales and related occupancy costs.
Cost of sales and related occupancy costs
increased $1.9 million, or 49.8%, to $5.7 million for the second thirteen weeks of 2010, from $3.8
million for the second thirteen weeks of 2009. On a dollar basis, this increase in cost of sales
was primarily related to the 51.0% increase in sales volume in this segment. As a percentage of
sales, cost of sales decreased to 65.5% for the second thirteen weeks of 2010, from 66.0% for the
second thirteen weeks of 2009. The decrease in cost of sales as a percentage of sales was due to
lower levels of trade promotions and allowances specifically in the latter half of the second
thirteen weeks of 2010 compared to the latter half of the same period in 2009.
Operating expenses.
Operating expenses increased $0.2 million, or 26.5%, to $1.1 million for
the second thirteen weeks of 2010, from $0.9 million for the second thirteen weeks of 2009. The
increase is attributable to higher labor, marketing, and other operating costs as we invest in our
team and infrastructure to support our growing commercial segment. As a percentage of sales,
operating expenses decreased to 12.7% in the second thirteen weeks of 2010 from 15.2% in the second
thirteen weeks of 2009 due to leverage on higher sales.
Franchise
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended
|
|
|
Thirteen Weeks Ended
|
|
|
|
July 4,
|
|
|
June 28,
|
|
|
|
|
|
|
July 4,
|
|
|
June 28,
|
|
|
|
2010
|
|
|
2009
|
|
|
% Change
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
As a % of franchise sales
|
|
Sales, net
|
|
$
|
2,474
|
|
|
$
|
1,925
|
|
|
|
28.6
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
Costs of sales and related occupancy costs
|
|
|
1,408
|
|
|
|
1,070
|
|
|
|
31.6
|
%
|
|
|
56.9
|
%
|
|
|
55.6
|
%
|
Operating expenses
|
|
|
365
|
|
|
|
286
|
|
|
|
27.6
|
%
|
|
|
14.8
|
%
|
|
|
14.9
|
%
|
Depreciation and amortization
|
|
|
4
|
|
|
|
1
|
|
|
|
300.0
|
%
|
|
|
0.2
|
%
|
|
|
0.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
697
|
|
|
$
|
568
|
|
|
|
22.9
|
%
|
|
|
28.2
|
%
|
|
|
29.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The franchise segment sells franchises to operate Caribou Coffee brand coffeehouses to
domestic and international franchisees. As of July 4, 2010, there were 128 franchised coffeehouses
in the U.S and international markets.
Sales
Sales increased $0.6 million, or 28.6%, to $2.5 million in the second thirteen weeks of 2010,
from $1.9 million in the second thirteen weeks of 2009 primarily due to higher product sales to our
franchisees, especially internationally, due to product pipeline fill for new stores to be opened
in 2010.
19
Costs and Expenses
Cost of sales and related occupancy costs.
Cost of sales and related occupancy costs
increased $0.3 million, or 31.6%, to $1.4 million for the second thirteen weeks of 2010, from $1.1
million for the second thirteen weeks of 2009. As a percentage of sales, cost of sales and related
occupancy costs increased to 56.9% for the second thirteen weeks of 2010, from 55.6% for the second
thirteen weeks of 2009. The increase in cost of sales and related occupancy costs as a percentage
of sales was primarily due to a change in revenue mix in the franchise segment, as a greater
portion of sales were product sales.
Operating expenses.
Operating expenses remained relatively flat for the second thirteen weeks
of 2010 compared to the second thirteen weeks of 2009. Operating expenses in this segment are
primarily related to labor, travel, and other administrative costs.
Unallocated Corporate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended
|
|
|
Thirteen Weeks Ended
|
|
|
|
July 4,
|
|
|
June 28,
|
|
|
|
|
|
|
July 4,
|
|
|
June 28,
|
|
|
|
2010
|
|
|
2009
|
|
|
% Change
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
As a % of total net sales
|
|
General and administrative expenses
|
|
|
5,511
|
|
|
|
4,905
|
|
|
|
12.4
|
%
|
|
|
8.0
|
%
|
|
|
7.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
$
|
(5,511
|
)
|
|
$
|
(4,905
|
)
|
|
|
12.4
|
%
|
|
|
8.0
|
%
|
|
|
7.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses.
General and administrative expenses increased $0.6
million, or 12.4%, to $5.5 million for the second thirteen weeks of 2010, from $4.9 million for the
second thirteen weeks of 2009. As a percentage of total net sales, general and administrative
expenses increased to 8.0% in the second thirteen weeks of 2010, from 7.8% in the second thirteen
weeks of 2009, due to higher payroll costs for support personnel hired in the latter half of 2009.
Twenty-Six Weeks Ended July 4, 2010 vs. Twenty-Six Weeks Ended June 28, 2009
Results of Operations
The following table presents the consolidated statements of operations as well as the
percentage relationship to total net sales of items included in our consolidated statement of
operations
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twenty-Six Weeks Ended
|
|
|
|
|
|
|
Twenty-Six Weeks Ended
|
|
|
|
July 4,
|
|
|
June 28,
|
|
|
%
|
|
|
July 4,
|
|
|
June 28,
|
|
|
|
2010
|
|
|
2009
|
|
|
Change
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
As a % of total net sales
|
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coffeehouse
|
|
$
|
113,348
|
|
|
$
|
108,158
|
|
|
|
4.8
|
%
|
|
|
83.4
|
%
|
|
|
87.7
|
%
|
Commercial and franchise
|
|
|
22,587
|
|
|
|
15,176
|
|
|
|
48.8
|
%
|
|
|
16.6
|
%
|
|
|
12.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales
|
|
|
135,935
|
|
|
|
123,334
|
|
|
|
10.2
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
Cost of sales and related occupancy costs
|
|
|
61,950
|
|
|
|
53,589
|
|
|
|
15.6
|
%
|
|
|
45.6
|
%
|
|
|
43.5
|
%
|
Operating expenses
|
|
|
50,029
|
|
|
|
47,275
|
|
|
|
5.8
|
%
|
|
|
36.8
|
%
|
|
|
38.3
|
%
|
Depreciation and amortization
|
|
|
6,172
|
|
|
|
7,311
|
|
|
|
(15.6
|
)%
|
|
|
4.5
|
%
|
|
|
5.9
|
%
|
General and administrative expenses
|
|
|
14,142
|
|
|
|
13,378
|
|
|
|
5.7
|
%
|
|
|
10.4
|
%
|
|
|
10.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
3,642
|
|
|
|
1,781
|
|
|
|
104.5
|
%
|
|
|
2.7
|
%
|
|
|
1.4
|
%
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
10
|
|
|
|
7
|
|
|
|
42.9
|
%
|
|
|
|
%
|
|
|
|
%
|
Interest expense
|
|
|
(171
|
)
|
|
|
(121
|
)
|
|
|
41.3
|
%
|
|
|
(0.1
|
)%
|
|
|
(0.1
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before benefit from income taxes and noncontrolling interest
|
|
|
3,481
|
|
|
|
1,667
|
|
|
|
108.8
|
%
|
|
|
2.6
|
%
|
|
|
1.4
|
%
|
Benefit from income taxes
|
|
|
(138
|
)
|
|
|
(42
|
)
|
|
|
226.2
|
%
|
|
|
(0.1
|
)%
|
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
3,619
|
|
|
|
1,709
|
|
|
|
111.7
|
%
|
|
|
2.7
|
%
|
|
|
1.4
|
%
|
Less: Net income attributable to noncontrolling interest
|
|
|
160
|
|
|
|
195
|
|
|
|
(17.9
|
)%
|
|
|
0.1
|
%
|
|
|
0.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Caribou Coffee Company, Inc.
|
|
$
|
3,459
|
|
|
$
|
1,514
|
|
|
|
128.4
|
%
|
|
|
2.5
|
%
|
|
|
1.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
Net Sales
Net sales increased $12.6 million, or 10.2%, to $135.9 million in the first twenty-six weeks
of 2010 from $123.3 million in the first twenty-six weeks of 2009. Each of our business segments
contributed significantly to our consolidated revenue growth. Coffeehouse net sales increased $5.2
million, or 4.8%, to $113.3 million in the first twenty-six weeks of 2010 from $108.1 million in
the first twenty-six weeks of 2009. Commercial and franchise sales increased by $7.4 million, or
48.8%, to $22.6 million for the first twenty-six weeks of 2010 from $15.2 million for the first
twenty-six weeks of 2009. Commercial segment sales grew by $6.2 million or 54.3%, based on
increased sales to existing customers, primarily due to distribution growth achieved during the
second half of 2009. Franchise sales grew by $1.2 million or 32.2% primarily due to new franchise
and license locations added in the second half of last year, as well as international product sales
related to new store development pipeline fill.
Costs and Expenses
Cost of sales and related occupancy costs.
Cost of sales and related occupancy costs increased
$8.4 million, or 15.6%, to $62.0 million in the first twenty-six weeks of 2010, from $53.6 million
in the first twenty-six weeks of 2009, primarily due to higher sales. On a dollar basis, this
growth was attributable to increased volume across each of our operating segments. As a percentage
of total net sales, cost of sales and related occupancy costs increased to 45.6% in the first
twenty-six weeks of 2010 from 43.5% in the first twenty-six weeks of 2009. The increase as a
percentage of sales was due to an overall mix change with a higher percentage of sales coming from
the commercial and franchise segments. In addition, we invested in higher levels of trade
promotional programs in our commercial segment and invested in higher quality product platforms
launched in our retail coffeehouse segment.
Operating expenses.
Operating expenses increased $2.7 million, or 5.9%, to $50.0 million in
the first twenty-six weeks of fiscal 2010, from $47.3 million in the first twenty-six weeks of
2009. On a dollar basis, this increase was primarily driven by an increase in variable expenses
related to our increase in sales volume, as well as a $1.1 million increase in marketing and
product management initiatives as compared to the comparable period of the prior year. Operating
expenses as a percentage of total net sales decreased to 36.8% in the first twenty-six weeks of
2010 from 38.3% in the first twenty-six weeks of 2009 as we were able to gain leverage on these
categories from our increase in sales, particularly in labor costs needed to support our operating
segments.
Depreciation and amortization.
Depreciation and amortization decreased $1.1 million, or 15.6%,
to $6.2 million in the first twenty-six weeks of 2010, from $7.3 million in the first twenty-six
weeks of 2009. As a percentage of total net sales, depreciation and amortization was 4.5% in the
first twenty-six weeks of 2010, compared to 5.9% in the first twenty-six weeks of 2009. This
decrease in dollars is due to a lower depreciable asset base from reduced capital spending in 2009
and the first and second quarters of 2010 compared to previous years, and the decrease as a percent
of sales is due to better leverage from our increasing sales volume.
General and administrative expenses.
General and administrative expenses increased $0.7
million, or 5.6%, to $14.1 million in the first twenty-six weeks of 2010, from $13.4 million in the
first twenty-six weeks of 2009. As a percentage of total net sales, general and administrative
expenses was 10.4% in the first twenty-six weeks of 2010, compared to 10.9% in the first twenty-six
weeks of 2009. This increase in expense is due to higher payroll costs for support personnel hired in the
later half of 2009.
Interest income.
Interest income increased slightly in the first twenty-six weeks of 2010,
as compared to the first twenty-six weeks of 2009 due to more cash on hand in 2010.
Interest expense.
Interest expense remained relatively flat at $0.2 million and $0.1 million,
respectively, for both the first twenty-six weeks of 2010 and 2009. We had no outstanding
borrowings during first twenty-six weeks of 2010 or 2009.
21
Operating Segments
Segment information is prepared on the same basis that our management reviews financial
information for decision making purposes. We have three reportable operating segments: retail,
commercial and franchise. Unallocated corporate includes expenses pertaining to corporate
administrative functions that support the operating segments but are not specifically attributable
to or managed by any segment and are not included in the reported financial results of the
operating segments. The following tables summarize our results of operations by segment for the
first twenty-six weeks of fiscal 2010 and 2009.
Retail Coffeehouses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twenty-Six Weeks Ended
|
|
|
Twenty-Six Weeks Ended
|
|
|
|
July 4,
|
|
|
June 28,
|
|
|
|
|
|
|
July 4,
|
|
|
June 28,
|
|
|
|
2010
|
|
|
2009
|
|
|
% Change
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
As a % of coffeehouse sales
|
|
Coffeehouse sales, net
|
|
$
|
113,348
|
|
|
$
|
108,158
|
|
|
|
4.8
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
Costs of sales and related occupancy costs
|
|
|
47,050
|
|
|
|
44,183
|
|
|
|
6.5
|
%
|
|
|
41.5
|
%
|
|
|
40.9
|
%
|
Operating expenses
|
|
|
47,279
|
|
|
|
45,092
|
|
|
|
4.9
|
%
|
|
|
41.7
|
%
|
|
|
41.7
|
%
|
Depreciation and amortization
|
|
|
6,139
|
|
|
|
7,287
|
|
|
|
(15.8
|
)%
|
|
|
5.4
|
%
|
|
|
6.7
|
%
|
General and administrative expenses
|
|
|
4,054
|
|
|
|
3,849
|
|
|
|
5.3
|
%
|
|
|
3.6
|
%
|
|
|
3.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
8,826
|
|
|
$
|
7,747
|
|
|
|
13.7
|
%
|
|
|
7.8
|
%
|
|
|
7.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The retail segment operates company-owned coffeehouses. As of July 4, 2010, there were 411
company-owned coffeehouses in 16 states and the District of Columbia.
Coffeehouse sales
Coffeehouse sales increased $5.2 million, or 4.8%, to $113.3 million in the first twenty-six
weeks of 2010 from $108.2 million in the first twenty-six weeks of 2009. This increase is
attributable to a 5.0% increase in comparable coffeehouse sales in the first twenty-six weeks of
2010 as compared to the same period in 2009. The increase in comparable coffeehouse sales was
driven by increased traffic in our coffeehouses and a higher average guest check, primarily due to
higher food sales, attributable to the launch of hot cereal in our coffeehouses.
Costs and Expenses
Cost of sales and related occupancy costs.
Cost of sales and related occupancy costs
increased $2.9 million, or 6.5%, to $47.1 million in the first twenty-six weeks of 2010, from $44.2
million for the first twenty-six weeks of 2009. The increase in total dollars was driven primarily
by increase cost of goods related to our 5.0% growth in comparable coffeehouse sales. Cost of sales
and related occupancy costs as a percentage of coffeehouse net sales increased to 41.5% for the
first twenty-six weeks of 2010 from 40.9% for the first twenty-six weeks of 2009. The increase was
primarily due to a shift to higher quality product platforms launched in our retail coffeehouse
segment, particularly shifting from a powder based chocolate ingredient to real, all natural
chocolate in all of our chocolate based beverages.
Operating expenses.
Operating expenses increased $2.2 million, or 4.9%, to $47.3 million for
the first twenty-six weeks of 2010, from $45.1 million for the first twenty-six weeks of 2009. On
a dollar basis, this increase was due to an increase in variable expenses, such as supplies and
credit card fees related to our 5.0% increase in comparable coffeehouses sales, as well as $1.2
million in incremental spending on marketing and product management initiatives in the retail
coffeehouse segment, when compared to the prior year. As a percentage of coffeehouse net sales,
operating expenses remained at 41.7% in the first twenty-six weeks of 2010 and the first twenty-six
weeks of 2009.
22
Depreciation and amortization.
Depreciation and amortization decreased $1.2 million, or
15.8%, to $6.1 million for the first twenty-six weeks of 2010, from $7.3 million for the first
twenty-six weeks of 2009. This decrease is due to our lower depreciable asset base due to lower
levels of capital spending in 2009 and the first and second quarters of 2010.
General and administrative expenses.
General and administrative expenses increased $0.3
million, or 5.3%, to $4.1 million for the first twenty-six weeks of 2010 from $3.8 million for the
first twenty-six weeks of 2009. The increase was primarily due to higher payroll related costs,
particularly medical costs, in our retail coffeehouse field support and multi-unit management
teams.
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twenty-Six Weeks Ended
|
|
|
Twenty-Six Weeks Ended
|
|
|
|
July 4,
|
|
|
June 28,
|
|
|
% Change
|
|
|
July 4,
|
|
|
June 28,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
As a % of commercial sales
|
|
Sales, net
|
|
$
|
17,647
|
|
|
$
|
11,439
|
|
|
|
54.3
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
Costs of sales and related occupancy costs
|
|
|
11,962
|
|
|
|
7,297
|
|
|
|
63.9
|
%
|
|
|
67.8
|
%
|
|
|
63.8
|
%
|
Operating expenses
|
|
|
2,083
|
|
|
|
1,572
|
|
|
|
32.6
|
%
|
|
|
11.8
|
%
|
|
|
13.7
|
%
|
Depreciation and amortization
|
|
|
26
|
|
|
|
22
|
|
|
|
23.8
|
%
|
|
|
0.1
|
%
|
|
|
0.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
3,576
|
|
|
$
|
2,548
|
|
|
|
40.2
|
%
|
|
|
20.3
|
%
|
|
|
22.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The commercial segment sells high-quality gourmet whole bean and ground coffee to grocery
stores, mass merchandisers, office coffee providers, airlines, hotels, sports and entertainment
venues, college campuses and on-line customers.
Sales
Sales increased $6.2 million, or 54.3%, to $17.6 million in the first twenty-six weeks of
2010, from $11.4 million in the first twenty-six weeks of 2009. This increase is primarily
attributable to the incremental sales to existing grocery stores, club stores and mass
merchandisers, in which Caribou handles sales and distribution, as well as increased sales to Keurig Incorporated, an industry leader in single cup brewing technology. The increase in sales to
Caribou managed accounts was primarily driven by increased distribution gained in the second half
of 2009. At the beginning of 2010, Caribou Coffee was found in over forty states and in seven
thousand stores through our Caribou managed sales channel. We did not experience large new customer
door growth in the first half of 2010. The increase in sales to Keurig has primarily been driven by
an increased sales and penetration of Keurig single-cup brewing machines.
Costs and Expenses
Cost of sales and related occupancy costs.
Cost of sales and related occupancy costs
increased $4.7 million, or 63.9%, to $12.0 million for the first twenty-six weeks of 2010, from
$7.3 million for the first twenty-six weeks of 2009. On a dollar basis, this increase in cost of
sales was primarily related to the 54.3% increase in sales volume in this segment. As a percentage
of sales, cost of sales increased to 67.8% for the first twenty-six weeks of 2010, from 63.8% for
the first twenty-six weeks of 2009. The increase in cost of sales as a percentage of sales was due
to increased investment in trade promotions and allowances. We have increased these programs as a
method to support the brand through increased distribution as well as increased trial and awareness
from a consumer standpoint.
Operating expenses.
Operating expenses increased $0.5 million, or 32.6%, to $2.1 million for
the first twenty-six weeks of 2010, from $1.6 million for the first twenty-six weeks of 2009. The
increase is attributable to higher labor, marketing, and other operating costs as we invest in our
team and infrastructure to support our growing commercial segment. As a percentage of sales,
operating expenses decreased to 11.8% in the first twenty-six weeks of 2010 from 13.7% in the first
twenty-six weeks of 2009 due to leverage on higher sales.
23
Franchise
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twenty-Six Weeks Ended
|
|
|
Twenty-Six Weeks Ended
|
|
|
|
July 4,
|
|
|
June 28,
|
|
|
% Change
|
|
|
July 4,
|
|
|
June 28,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
As a % of franchise sales
|
|
Sales, net
|
|
$
|
4,940
|
|
|
$
|
3,737
|
|
|
|
32.2
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
Costs of sales and related occupancy costs
|
|
|
2,938
|
|
|
|
2,109
|
|
|
|
39.3
|
%
|
|
|
59.5
|
%
|
|
|
56.5
|
%
|
Operating expenses
|
|
|
667
|
|
|
|
611
|
|
|
|
9.2
|
%
|
|
|
13.5
|
%
|
|
|
16.4
|
%
|
Depreciation and amortization
|
|
|
7
|
|
|
|
2
|
|
|
|
250.0
|
%
|
|
|
0.1
|
%
|
|
|
0.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
1,328
|
|
|
$
|
1,015
|
|
|
|
31.0
|
%
|
|
|
26.9
|
%
|
|
|
27.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The franchise segment sells franchises to operate Caribou Coffee brand coffeehouses to
domestic and international franchisees. As of July 4, 2010, there were 128 franchised coffeehouses
in the U.S and international markets.
Sales
Sales increased $1.2 million, or 32.2%, to $4.9 million in the first twenty-six weeks of 2010,
from $3.7 million in the first twenty-six weeks of 2009 primarily due to higher product sales to
our franchisees, especially internationally, due to product pipeline fill for new stores to be
opened in 2010.
Costs and Expenses
Cost of sales and related occupancy costs.
Cost of sales and related occupancy costs
increased $0.8 million, or 39.3%, to $2.9 million for the first twenty-six weeks of 2010, from $2.1
million for the first twenty-six weeks of 2009. As a percentage of sales, cost of sales increased
to 59.5% for the first twenty-six weeks of 2010, from 56.5% for the first twenty-six weeks of 2009.
The increase in cost of sales as a percentage of sales was primarily due to a change in revenue mix
in the franchise segment, as a greater portion of sales were product sales.
Operating expenses.
Operating expenses remained relatively flat at $0.7 million for the first
twenty-six weeks of 2010 compared to $0.6 million for the first twenty-six weeks of 2009. Operating
expenses in this segment are primarily related to labor, travel, and other administrative costs.
Unallocated Corporate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twenty-Six Weeks Ended
|
|
|
Twenty-Six Weeks Ended
|
|
|
|
July 4,
|
|
|
June 28,
|
|
|
% Change
|
|
|
July 4,
|
|
|
June 28,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
As a % of total net sales
|
|
General and administrative expenses
|
|
|
10,088
|
|
|
|
9,529
|
|
|
|
5.9
|
%
|
|
|
7.4
|
%
|
|
|
7.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
$
|
(10,088
|
)
|
|
$
|
(9,529
|
)
|
|
|
5.9
|
%
|
|
|
7.4
|
%
|
|
|
7.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses.
General and administrative expenses increased $0.6
million, or 5.9%, to $10.1 million for the first twenty-six weeks of 2010, from $9.5 million for
the first twenty-six weeks of 2009. As a percentage of total net sales, general and administrative
expenses decreased to 7.4% in the first twenty-six weeks of 2010, from 7.7% in the first twenty-six
weeks of 2009, due to leverage on higher net sales.
24
Liquidity and Capital Resources
The following table summarizes our cash flow activity and should be read in conjunction with
the Condensed Consolidated Statements of Cash Flows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twenty-Six Weeks Ended
|
|
|
|
|
|
|
July 4,
|
|
|
June 28,
|
|
|
Increase /
|
|
|
|
2010
|
|
|
2009
|
|
|
(Decrease)
|
|
|
|
(In thousands)
|
|
Net cash (used) provided by operating activities
|
|
$
|
(5,517
|
)
|
|
$
|
7,529
|
|
|
$
|
(13,046
|
)
|
Net cash used in investing activities
|
|
|
(1,556
|
)
|
|
|
(429
|
)
|
|
|
(1,127
|
)
|
Net cash used by financing activities
|
|
|
(317
|
)
|
|
|
(209
|
)
|
|
|
(108
|
)
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
$
|
(7,390
|
)
|
|
$
|
6,891
|
|
|
$
|
(14,281
|
)
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents as of July 4, 2010 were $16.2 million, compared to cash and cash
equivalents of $23.6 million as of January 3, 2010. Generally, our principal requirements for cash
are capital expenditures and funding operations. Capital expenditures included maintenance and
remodeling of existing coffeehouses, general and administrative expenditures for items like
management information systems and costs for new production equipment. Currently our requirements
for capital have been funded through cash flow from operations.
Net cash used by operating activities for the first twenty-six weeks of 2010 was $5.5 million
compared to net cash provided by operating activities of $7.5 million for the first twenty-six
weeks of 2009. The $13.0 million decrease in cash used by operating activities was the result of
cash used in working capital, primarily inventory as we build inventory levels to support our
growing business, particularly our commercial business.
Net cash used in investing activities during the first twenty-six weeks of 2010 was $1.6
million, compared to net cash used in investing activities of $0.4 million for the first twenty-six
weeks of 2009. The increase in capital expenditures was primarily for equipment in our support
center facility.
Net cash used by financing activities for the first twenty-six weeks of 2010 was $0.3 million
compared to net cash used by financing activities of $0.2 million for the first twenty-six weeks of
2009. The increase in financing cash used is due to the costs associated with our new credit
facility. In the first quarter of 2010 we announced that our board of directors had authorized up to $10 million
in a share repurchase program. In the first twenty-six weeks of 2010 we repurchased approximately
10,000 shares at a weighted average market price of $7.30 per share.
Our future capital requirements and the adequacy of available funds will depend on many
factors, including the pace of our expansion, real estate markets, the availability of suitable
site locations and the nature of the arrangements negotiated with landlords for new coffeehouses as
well as lease termination costs associated with existing underperforming coffeehouse leases.
Expenses associated with the lease terminations for existing underperforming coffeehouse leases are
variable from coffeehouse to coffeehouse and are dependent upon the amount of time left on the
lease, local real estate market conditions, as well as other factors. We expect capital
expenditures for fiscal 2010 to be in the range of $10 to $12 million. We believe that our current
liquidity and cash flow from operations will provide sufficient liquidity to fund our operations
for at least 12 months.
Off-Balance Sheet Arrangements
Other than our coffeehouse leases, we do not have any off-balance sheet arrangements. As of
July 4, 2010, we were committed to fixed and price-to-be-fixed green coffee purchase contracts with
deliveries expected through December 2011. We only contract for green coffee expected to be used
in the normal course of business. We believe, based on relationships established with our
suppliers in the past, the risk of non-delivery on such purchase commitments is remote.
25
Recent Accounting Pronouncements
In June 2009, the FASB issued guidance which amends certain ASC concepts related to
consolidation of variable interest entities. Among other accounting and disclosure requirements,
this guidance replaces the quantitative-based risks and rewards calculation for determining which
enterprise has a controlling financial interest in a variable interest entity with an approach
focused on identifying which enterprise has the power to direct the activities of a variable
interest entity and the obligation to absorb losses of the entity or the right to receive benefits
from the entity. The Company adopted this guidance on January 4, 2010. The adoption of this
guidance did not have a material impact on its financial statements.
Key Financial Metrics
We review our operations based on both financial and non-financial metrics. Among the key
financial metrics upon which management focuses in reviewing our performance are comparable
coffeehouse net sales, EBITDA (a non-GAAP measure), cash flow from operations before general and
administrative expenses, general and administrative expenses and capital expenditures. Among the
key non-financial metrics upon which management focuses in reviewing performance are the number of
new coffeehouse openings, average check and transaction count.
The following table sets forth non-GAAP metrics and operating data that do not otherwise
appear in our consolidated financial statements as of and for the thirteen and twenty-six weeks
ended July 4, 2010 and June 28, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended
|
|
|
Twenty-Six Weeks Ended
|
|
|
|
July 4, 2010
|
|
|
June 28, 2009
|
|
|
July 4, 2010
|
|
|
June 28, 2009
|
|
|
|
|
|
|
|
(In thousands, except operating data)
|
|
Non-GAAP Metrics:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA(1)
|
|
$
|
6,013
|
|
|
$
|
5,385
|
|
|
$
|
10,623
|
|
|
$
|
9,982
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage change in comparable coffeehouse
net sales(2)
|
|
|
4.8
|
%
|
|
|
(3.3
|
%)
|
|
|
5.0
|
%
|
|
|
(4.2
|
%)
|
Company-Owned:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coffeehouses open at beginning of period
|
|
|
413
|
|
|
|
414
|
|
|
|
413
|
|
|
|
414
|
|
Coffeehouses opened during the period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coffeehouses closed during the period
|
|
|
2
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coffeehouses open at end of period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Company-Owned
|
|
|
411
|
|
|
|
414
|
|
|
|
411
|
|
|
|
414
|
|
Franchised:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coffeehouses open at beginning of period
|
|
|
123
|
|
|
|
101
|
|
|
|
121
|
|
|
|
97
|
|
Coffeehouses opened during the period
|
|
|
5
|
|
|
|
8
|
|
|
|
7
|
|
|
|
14
|
|
Coffeehouses closed during the period
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coffeehouses open at end of period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Franchised
|
|
|
128
|
|
|
|
108
|
|
|
|
128
|
|
|
|
108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total coffeehouses open at end of period
|
|
|
539
|
|
|
|
522
|
|
|
|
539
|
|
|
|
522
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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.
|
EBITDA is equal to net income (loss) excluding: (a) interest expense; (b) interest income; (c)
depreciation and amortization; and (d) income taxes.
26
We believe EBITDA is useful to investors in evaluating our operating performance for the
following reason:
|
|
|
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 208 company-owned coffeehouses from the
beginning of fiscal 2003 through the end of the first twenty-six weeks of 2010. 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.
|
Our management uses EBITDA:
|
|
|
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 evaluate our capacity to incur and service debt, fund capital expenditures and
expand our business.
|
EBITDA as calculated by us is not necessarily comparable to similarly titled measures used by
other companies. In addition, EBITDA: (a) does not represent net income or cash flows from
operating activities as defined by GAAP; (b) is not necessarily indicative of cash available to
fund our cash flow needs; and (c) should not be considered an alternative to net income, operating
income, cash flows from operating activities or our other financial information as determined under
GAAP.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended
|
|
|
Twenty-Six Weeks Ended
|
|
|
|
July 4, 2010
|
|
|
June 28, 2009
|
|
|
July 4, 2010
|
|
|
June 28, 2009
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
Net income attributable to Caribou Coffee Company, Inc.
|
|
$
|
2,421
|
|
|
$
|
1,168
|
|
|
$
|
3,459
|
|
|
$
|
1,514
|
|
Interest expense
|
|
|
64
|
|
|
|
63
|
|
|
|
171
|
|
|
|
121
|
|
Interest income
|
|
|
(5
|
)
|
|
|
(7
|
)
|
|
|
(10
|
)
|
|
|
(7
|
)
|
Depreciation and amortization(1)
|
|
|
3,513
|
|
|
|
4,102
|
|
|
|
7,141
|
|
|
|
8,396
|
|
Provision (benefit) from income taxes
|
|
|
20
|
|
|
|
59
|
|
|
|
(138
|
)
|
|
|
(42
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
$
|
6,013
|
|
|
$
|
5,385
|
|
|
$
|
10,623
|
|
|
$
|
9,982
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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.
Not applicable.
Item 4T.
Controls and Procedures.
We carried out an evaluation, under the supervision and with the participation of our
management, including the chief executive officer and the chief financial officer, of the
effectiveness of the design and the operations of our disclosure controls and procedures, as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the
Exchange Act). Based upon that evaluation, our chief executive officer and chief financial
officer concluded that our disclosure controls and procedures are effective, as of July 4, 2010, in
ensuring
27
that material information relating to us required to be disclosed by us in reports that we
file or submit under the Exchange Act is recorded, processed, summarized and reported within the
time periods specified in the SEC rules and forms. There were no changes in our internal control
over financial reporting during the quarter ended July 4, 2010, that have materially affected, or
are reasonably likely to materially affect, our internal control over financial reporting.
PART II OTHER INFORMATION
Item 1.
Legal Proceedings.
On July 26, 2005, three of the Companys former employees filed a lawsuit against us in the
State of Minnesota District Court for Hennepin County seeking monetary and equitable relief from us
under the Minnesota Fair Labor Standards Act, or the Minnesota FLSA, the federal FLSA and state
common law. The suit primarily alleged that the Company misclassified its retail coffeehouse
managers as exempt from the overtime provisions of the Minnesota FLSA and the federal FLSA and that
these managers are therefore entitled to overtime compensation for each week in which they worked
more than 40 hours from May 2002 to the present with respect to the claims under the federal FLSA
and for weeks in which they worked more than 48 hours from May 2003 to the present with respect to
the claims under the Minnesota FLSA. Plaintiffs sought payment of allegedly owed and unpaid
overtime compensation, liquidated damages, interest and among other things, attorneys fees and
costs.
On February 1, 2008, the Company entered into a Stipulation of Settlement (the Stipulation)
to settle the lawsuit. The Stipulation provides for a gross settlement payment of $2.7 million,
plus the employers share of payroll taxes. A partial settlement payment of $1.8 million was made
in the first quarter of 2008 and the final settlement payment of $1.0 million was made in the first
quarter of 2009.
In addition, from time to time, the Company becomes involved in certain legal proceedings in
the ordinary course of business. The Company does not believe that any such ordinary course legal
proceedings to which it is currently a party will have a material adverse effect on its financial
position or results of operations.
Item 1A.
Risk Factors.
There have been no material changes from the risk factors disclosed in the Risk Factors
section of our Annual Report on Form 10-K for the year ended January 3, 2010.
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.
Unregistered Sales of Equity Securities
Not applicable.
Use of Proceeds
Not applicable.
Item 3.
Defaults Upon Senior Securities.
Not applicable.
Item 4.
Reserved.
Not applicable.
Item 5.
Other Information.
Not applicable.
28
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 Companys
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 Companys Registration Statement of
Form S-1/A filed August 25, 2005).
|
|
|
|
4.1*
|
|
Form of Registrants Common Stock Certificate (incorporated by
reference to Exhibit 4.1 to the Companys Registration Statement of
Form S-1/A filed September 6, 2005).
|
|
|
|
10.14*
|
|
Lease and License Financing and Purchase Option Agreement between
Caribou Coffee Company Inc. and Arabica Funding, Inc., dated
February 19, 2010.
|
|
|
|
10.15*
|
|
Credit Agreement among Arabica Funding, Inc., as Borrower, and
Wells Fargo Bank, N.A., as Administrative Agent, dated as of
February 19, 2010.
|
|
|
|
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.
|
|
|
|
Asterisk (*)
|
|
indicates exhibit previously filed with the Securities and Exchange Commission as
indicated in parentheses.
|
29
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
CARIBOU COFFEE COMPANY, INC.
|
|
|
By:
|
/s/ Michael Tattersfield
|
|
|
|
Michael Tattersfield
|
|
|
|
Chief Executive Officer and President
|
|
|
Date: August 5, 2010
30
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