Caribou Coffee Reports Second Quarter 2008 Results

MINNEAPOLIS--(BUSINESS WIRE)--Caribou Coffee Company, Inc. (Nasdaq:CBOU), the second largest U.S.-based company-owned gourmet coffeehouse operator based on the number of coffeehouses, today reported financial results for second quarter 2008 (thirteen weeks ended June 29, 2008).


  • "Other Sales" increased 68% compared to the second quarter of 2007
  • Comparable Coffeehouse Net Sales decreased 1.7%
  • Opened 12 franchise units

Speaking on behalf of the Company, Rosalyn (Roz) Mallet commented, "The actions that we have taken over the past year are beginning to show positive results and we are making progress to improve the overall health of the company." Added Ms. Mallet, "Our commercial and franchise business are both delivering healthy growth, indicative of the strength of the Caribou Coffee brand."


Total net sales increased $0.4 million, or 0.5%, to $63.2 million for the quarter ended June 29, 2008, from $62.8 million for the quarter ended July 1, 2007. This increase was attributable to a 68% increase in Other Sales.

Coffeehouse sales were $57.3 million in fiscal second quarter 2008, a decrease of 3.5% from the same period in the prior year. The decrease primarily reflects a 1.7% decline in comparable coffeehouse sales and 318 fewer operating coffeehouse weeks in the second thirteen weeks of fiscal 2008 as compared to the same period in fiscal 2007. Other net sales were $5.9 million in fiscal second quarter 2008, an increase of 68% over fiscal second quarter 2007. The increase was due to higher sales from new and existing commercial customers, royalties and product sales from 36 franchise coffeehouses opened during last 12 months.

General and administrative expenses decreased $0.6 million, or 7.5%, to $6.6 million during the thirteen weeks ended June 29, 2008, from $7.2 million during the thirteen weeks ended July 1, 2007. The decrease in general and administrative expenses was largely due to lower labor costs.

Store closing expense and disposal of assets increased $1.2 million to $1.3 million during second quarter 2008, from $0.1 million during second quarter 2007. The increase in closing expense and disposal of assets is primarily attributable to asset write-off and lease termination costs associated with the closing of 6 underperforming company-owned coffeehouses during the thirteen weeks ended June 29, 2008.

Reported EBITDA was $2.9 million during the thirteen weeks ended June 29, 2008, compared to EBITDA of $2.4 million during the thirteen weeks ended July 1, 2007. The year over year EBITDA increase was impacted by a $1.2 million increase in closing expense and disposal of assets. (EBITDA is a non-GAAP measure. See EBITDA reconciliation at the end of this release).

Depreciation and amortization decreased $1.4 million, or 22.4%, to $4.6 million during the thirteen weeks ended June 29, 2008, from $6.0 million during the same period in the prior year. This decrease was due to fewer coffeehouse operating weeks in the second quarter of 2008 and the impairment of 38 company-operated coffeehouses during the last three quarters of fiscal 2007.

Coffeehouse depreciation and amortization includes $0.2 million in accelerated depreciation associated with coffeehouse asset impairments during the second quarter of fiscal 2008 as compared to $0.5 million during the same period in the prior year.

The Company's net loss for the second quarter of 2008, was $2.5 million or ($0.13) per share compared to a net loss of $3.9 million or ($0.20) per share for the same period in 2007.


Caribou Coffee will host a conference call on August 5, 2008, at 4:30 p.m. (Eastern Time) to discuss these results. Hosting the call will be Rosalyn (Roz) Mallet and Kaye O'Leary. The call will be webcast and can be accessed from the Company's website at The webcast link is in the Investor Relations section. The dial in number is 1-888-211-0353 or 1-913-312-0860 for international calls. Confirmation number is 2347705. If you are unable to join the call, a replay will be available beginning at 7:30 p.m. (Eastern Time) on August 5, 2008 through 11:59 p.m. on August 12, 2008 and can be accessed by dialing 1-888-203-1112 or international callers 1-719-457-0820 and enter pin number 2347705. In addition, the webcast will be archived on the Company's website.


Caribou Coffee Company, Inc., founded in 1992 and headquartered in Minneapolis, Minnesota, is the second largest company-owned gourmet coffeehouse operator in the United States based on the number of coffeehouses. As of June 29, 2008, Caribou Coffee had 490 coffeehouses, which includes 75 franchised locations. Caribou Coffee offers its customers high-quality gourmet coffee and espresso-based beverages, as well as specialty teas, baked goods, whole bean coffee, branded merchandise and related products. In addition, Caribou Coffee sells products to club stores, grocery stores, mass merchandisers, office coffee providers, airlines, hotels, sports and entertainment venues, college campuses and other commercial customers. In addition, Caribou Coffee licenses third parties to use the Caribou Coffee brand on quality food and merchandise items. Caribou Coffee focuses on creating a unique experience for customers through a combination of high-quality products, a comfortable and welcoming coffeehouse environment and a unique style of customer service. For more information, visit the Caribou Coffee web site at .


Certain statements in this release, 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 management's 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 Company's filings with the Securities and Exchange Commission. The Company undertakes no obligation to update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this release.

(A Majority Owned Subsidiary of Caribou Holding Company Limited)

Thirteen Weeks Ended Twenty-Six Weeks Ended
------------------------- ---------------------------
June 29, July 1, June 29, July 1,
2008 2007 2008 2007
------------ ------------ ------------- -------------
sales $57,267,099 $59,331,262 $113,887,162 $117,407,226
Other sales 5,916,290 3,516,123 11,052,948 7,292,789
------------ ------------ ------------- -------------
Total net sales 63,183,389 62,847,385 124,940,110 124,700,015
Cost of sales
and related
occupancy costs 27,004,012 26,519,499 53,216,720 52,033,765
expenses 25,815,112 27,021,720 51,209,974 53,009,181
Opening expenses 50,425 66,018 135,452 175,809
Depreciation and
amortization 4,645,264 5,985,216 10,566,323 12,002,800
General and
expenses 6,617,706 7,153,341 14,067,245 13,757,563
Closing expense
and disposal of
assets 1,332,414 133,886 3,878,743 860,864
------------ ------------ ------------- -------------
Operating loss (2,281,544) (4,032,295) (8,134,347) (7,139,967)
Other income
Interest income 2,752 45,899 20,291 79,136
expense (121,863) (165,579) (633,459) (295,298)
------------ ------------ ------------- -------------
Loss before
(benefit) for
income taxes
and minority
interest (2,400,655) (4,151,975) (8,747,515) (7,356,129)
(benefit) for
income taxes 43,861 (315,932) 49,846 (296,097)
------------ ------------ ------------- -------------
Loss before
interest (2,444,516) (3,836,043) (8,797,361) (7,060,032)
interest (12,956) 54,473 40,182 81,534
------------ ------------ ------------- -------------
Net loss $(2,431,560) $(3,890,516) $ (8,837,543) $ (7,141,566)
============ ============ ============= =============
Basic and
diluted net
loss per share $ (0.13) $ (0.20) $ (0.46) $ (0.37)
============ ============ ============= =============
Basic and
average number
of shares
outstanding 19,370,590 19,320,055 19,370,590 19,304,035
============ ============ ============= =============

(A Majority Owned Subsidiary of Caribou Holding Company Limited)

June 29, December 30,
2008 2007
------------- -------------
Current assets:
Cash and cash equivalents $ 6,749,930 $ 9,886,427
Accounts receivable (net of allowance for
doubtful accounts of $50,669 and $7,989
at June 29, 2008 and December 30, 2007,
respectively) 3,090,036 3,116,864
Other receivables (net of allowance for
doubtful accounts of $60,828 and $9,399
at June 29, 2008 and December 30, 2007,
respectively) 1,280,274 1,544,281
Income tax receivable 92,645 149,304
Inventories 10,260,257 10,228,527
Prepaid expenses and other current assets 841,412 1,690,668
------------- -------------
Total current assets 22,314,554 26,616,071
Property and equipment, net of
accumulated depreciation and
amortization 74,403,518 83,798,120
Notes receivable 24,237 32,296
Restricted cash 12,229 410,831
Other assets 532,300 982,334
------------- -------------
Total assets $ 97,286,838 $111,839,652
============= =============

Current liabilities:
Accounts payable $ 7,764,996 $ 9,650,326
Accrued compensation 7,464,583 7,863,445
Accrued expenses 7,032,004 9,318,442
Deferred revenue 6,530,320 9,987,724
------------- -------------
Total current liabilities 28,791,903 36,819,937

Revolving credit facility 3,000,000 --
Asset retirement liability 1,009,709 989,490
Deferred rent liability 10,307,717 11,271,186
Deferred revenue 2,742,000 2,853,500
Income tax liability 477,710 473,064
Minority interests in affiliates 73,575 144,176
------------- -------------
Total long term liabilities 17,610,711 15,731,416
Shareholders' equity:
Preferred stock, par value $.01,
20,000,000 shares authorized; no shares
issued and outstanding -- --
Common stock, par value $.01, 200,000,000
shares authorized; 19,370,590 shares
issued and outstanding at June 29, 2008
December 30, 2007 193,706 193,706
Additional paid-in capital 124,665,330 124,231,862
Accumulated deficit (73,974,812) (65,137,269)
------------- -------------
Total shareholders' equity 50,884,224 59,288,299
------------- -------------
Total liabilities and shareholders'
equity $ 97,286,838 $111,839,652
============= =============

Coffeehouse Openings and Closings

13 Weeks Ended 26 Weeks Ended
June 29, July 1, June 29, July 1,
2008 2007 2008 2007

Comparable Coffeehouse Sales
(Company-Owned) (1.7%) 1% (2.0%) 0%

Coffeehouses open at beginning of
period 421 442 432 440
Coffeehouses opened during the
period 0 5 5 9
Coffeehouses closed during the
period 6 6 22 8
Total Company-Owned at period
end 415 441 415 441

Coffeehouses open at beginning of
period 63 33 52 24
Coffeehouses opened during the
period 12 6 23 15
Coffeehouses closed during the
period 0 0 0 0
Total Franchised at period end 75 39 75 39


(1) 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.


The following is a reconciliation of the Company's net loss to EBITDA.

Thirteen Weeks Twenty-Six Weeks
Ended Ended
June 29, July 1, June 29, July 1,
2008 2007 2008 2007
-------- -------- -------- --------
(In thousands)
Net loss $(2,432) $(3,890) $(8,838) $(7,142)
Interest expense 122 166 634 295
Interest income (3) (46) (20) (79)
Depreciation and amortization(1) 5,207 6,526 11,627 13,110
Provision (benefit) for income
taxes 44 (316) 50 (296)
-------- -------- -------- --------
EBITDA $ 2,938 $ 2,440 $ 3,453 $ 5,888
======== ======== ======== ========

(1) Includes depreciation and amortization associated with the headquarters and roasting facility that are categorized as general and administrative expenses and cost of sales and related occupancy costs on the statement of operations.

EBITDA is equal to net income (loss) excluding: (a) interest expense; (b) interest income; (c) depreciation and amortization; and (d) income taxes.

Management believes EBITDA is useful to investors in evaluating the Company's operating performance for the following reason:

-- Coffeehouse leases are generally short-term (5-10 years) and
Caribou 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). The Company
opened a net 212 company-operated coffeehouses from the
beginning of fiscal 2003 through the end of the second
thirteen weeks of fiscal 2008. As a result, management
believes depreciation expense is disproportionately large when
compared to the sales from a significant percentage of the
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, management believes that adjusting for
depreciation and amortization is useful for evaluating the
operating performance of the coffeehouses.

Management uses EBITDA:

-- As a measurement of operating performance because it assists
management in comparing its operating performance on a
consistent basis as it removes the impact of items not
directly resulting from coffeehouse operations;

-- For planning purposes, including the preparation of our
internal annual operating budget;

-- To establish targets for certain management compensation
matters; and

-- To evaluate the Company's capacity to incur and service debt,
fund capital expenditures and expand the business.

EBITDA as calculated by Caribou Coffee 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 cash flow needs; and (c) should not be considered an alternative to net income, operating income, cash flows from operating activities or Caribou Coffee's other financial information as determined under GAAP.

SOURCE: Caribou Coffee Company, Inc.



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