SunTrust 36 th Annual Institutional Conference April 11, 2007
Safe Harbor We make forward-looking statements in this presentation which represent our expectations or beliefs about future events and financial performance. Forward-looking statements are identifiable by words such as believe, anticipate, expect, intend, plan, will, may and other similar expressions. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. Forward-looking statements are subject to known and unknown risks and uncertainties, including those described in the Company s filings with the Securities and Exchange Commission. In addition, actual results could differ materially from those suggested by the forward-looking statements, and therefore you should not place undue reliance on the forward-looking statements.
Michael Coles Chairman and Chief Executive Officer
Caribou Coffee - Investment Highlights Gourmet coffee among the fastest growing segments in the restaurant industry Second largest company-owned gourmet coffeehouse operator Significant growth opportunities Coffeehouse openings Non-coffeehouse sales Store level comparable sales and margin opportunities Experienced management team successfully implementing key strategic initiatives
INDUSTRY OVERVIEW
Coffee Industry Large and Growing Market $22 billion market in the U.S. Specialty Coffee Consumption Grew Over 48% in the U.S. from 2001-2006 Coffeehouses Account for 69% of Specialty Coffee Sales $11.8bn $11.4bn $11.0bn $10.6bn $10.2bn $10.0bn $9.6bn $9.2bn $8.8bn $8.4bn $8.0bn $8.4bn $9.0bn $9.6bn 2002 2003 2004 $11.1bn 2005 Specialty Coffee Experiencing Double-Digit Growth Source: Specialty Coffee Association of America, National Coffee Association, International Coffee Association.
Coffeehouses are the Pub of the 21 st Century Among fastest growing segments in the restaurant industry 22,000 17,400 18,600 21,400 13,739 17,000 12,600 15,400 10,826 11,883 12,096 12,000 10,000 9,624 7,000 2,000 2,085 165 3,600 3,175 425 6,700 5,696 1,004 8,245 1,755 2,976 4,574 5,517 6,504 7,661-3,000 1992 1994 1996 1998 2000 2002 2003 2004 2005 Starbucks Other U.S. Specialty Coffeehouses Source: Specialty Coffee Association of America and SEC filings. (1) Reflects Starbucks locations in U.S. and Canada.
Caribou Coffee An Experience that Makes the Day Better
Growth Strategy Enhanced Growth Opportunities versus One Year Ago Franchise U.S. and International Commercial Brand Licensing Focus on Growth at Existing Coffeehouses Drive comps via: Product Marketing Initiatives Continued Focus on Operational Excellence Balanced and Diversified Growth Strategy Improve Financial Performance Optimize ROIC Minimize Capital Requirements Grow Revenue, EBITDA and Achieve Positive Net Income
The Caribou Formula
Product: Selection and Preparation Sourcing Only the highest grade of arabica coffee beans Rainforest Alliance Fair Trade Blending Roastmasters create custom blends Roasting and Packaging Craft roasting in small batches to optimize flavor profile Valve technology ensures freshness Brewing High standards for in-store brewing Strict freshness policy
Product: Selected Drink Offerings Turtle Mocha Mint Condition Lite-White Berry Caramel Hi-Rise Latte Mocha Cappuccino Depth Charge Caramel Cooler Cold Press Pom-A-Mango Smoothie Iced Latte
Product: Selected 'Bou Gourmet Offerings 'Bou Gourmet rolled-out August 1, 2005 proprietary recipes High quality food that complements store image & premium quality beverages Exciting pipeline for 2007 First Quarter Launches Include: New Muffins Low Fat Banana Nut Bread Upgraded Biscotti Cheese Bagels Enhanced lunch program in in Chicago market
Product: Promotional Offerings Q1 2007 Promotional Offerings Northern Lite Lattes Bou Gourmet Bagels National Geographic Wild Adventure
Environment A Destination Place Mountain lodge environment: fireplaces, wood beams and earth tones Comfortable for in-store relaxation or high-level meetings Efficient for fast take-away, including drive-thru Free wireless internet access and kids corner
Service: "BAMA" Be Excellent, Not Average Act with Urgency Meeting Customers Expectations Make a Connection Exceeding Customers Expectations Anticipate Needs An experience that makes the day better
CARIBOU OPPORTUNITY Coffeehouse Growth
Coffeehouse Franchise Opportunity Management Expertise Michael Coles 21 years of franchising experience Chris Rich-VP Global Store Licensing 13 years with TGIF Negotiated agreements covering 50 countries Domestic Area Developers Well qualified Financial resources Market expertise Proven successful operators International Opportunities Middle East South Korea
Coffeehouse Franchise Rationale Management expertise Infrastructure in place Unique branded specialty coffee licensing opportunity Accelerate coffeehouse growth in U.S. Increase domestic market share Leverage internal resources, including training Allocate capital more efficiently
New Coffeehouse Franchise Agreements United States 2007 Franchise Agreements Hartsfield- Jackson Atlanta Airport (first opened December 2006) Dulles International Airport Washington, D.C. Denver International Airport Total of 7 locations by year-end 2007 International South Korea Announced December 2006 Three coffeehouses opened Q1 2007 Agreement allows for 50 coffeehouses over next 10 years
Limited Footprint Provides Growth Opportunity 442 company-owned coffeehouses and 8 franchised coffeehouses in 18 states and the District of Columbia* (6) (196) (2) (13) (30) Market Expansion 1992 1994 1995 1996 2001 2004 2005 2006 *Excludes 25 international franchise coffeehouses. As of April 01, 2007 (7) (4) (2) (6) (1) (61) (1) (37)) (20) (5) (12) (16) (21) Washington D.C. (10) Markets Minnesota Illinois Ohio Michigan North Carolina Georgia Maryland Wisconsin Virginia Washington, D.C. Pennsylvania Iowa North Dakota South Dakota Nebraska Colorado Indiana Kansas Missouri
Significant Growth in Coffeehouses Stores Open at Period End -50 50 150 250 350 450 550 514* 464 395 306 251 185 203 152 2000 2001 2002 2003 2004 2005 2006 2007E Co. Owned Franchise * Assumes mid-point of guidance issued January 8, 2007
Comparable Coffeehouse Sales Trends 11.0% 9.0% 7.0% 5.0% 3.0% 1.0% (1.0%) (3.0%) 2002 2003 2004 2005 2006 2007E 1Q 07 (5.0%) 2007E = 0% to +5% Guidance issued January 8, 2007
CARIBOU OPPORTUNITY Non-Coffeehouse
Compelling Commercial Business Opportunity Grocery Stores & Mass Merchandisers Office Coffee & Food Service Providers Sports, Entertainment & Health/Fitness
Strategic Partners Product Licensing Nationwide Launch July 2006 Midwest Launch March 2006
Strategic Partners Product Licensing Nationwide Launch Summer 2007 Nationwide Launch Spring 2007
Experienced Management Team Executive Position Years of Experience Years at Caribou Michael Coles CEO 40+ 4 Roz Mallet President & COO 30 < 1 George Mileusnic CFO 29 6 Amy O Neil SVP, Store Operations 13 13 Henry Stein VP, Business Development & Commercial Sales 25 3 Kathy Hollenhorst VP, Marketing 20 2 Chris Rich VP, Franchising 20 < 2
George Mileusnic Chief Financial Officer
Financial Opportunity Comparable coffeehouse sales New coffeehouse openings Increase in non-coffeehouse sales Improved financial performance Leverage fixed costs Balance sheet supports growth
Annual Revenue Trends $250.0 $236 $200.0 $198 $160 ($ in millions) $150.0 $100.0 $101 $108 $124 $50.0 $0.0 CAGR: 2001 2002 2003 2004 2005 2006 2001-2003 2003 2006 +10.7% +24.1%
Net Income Impacted by Infrastructure Growth ($ millions) 2001 2002 2003 2004 2005 2006 General & Administrative Expense ($9.6) ($10.3) ($12.3) ($15.5) ($22.7) ($25.9) (1) Adjusted EBITDA $11.3 $11.8 $11.6 $14.4 $15.9 $15.0 Depreciation & Amortization / Other (2) ($7.0) ($8.1) ($11.8) ($15.3) ($19.4) ($23.6) Net Income / (Loss) $3.2 $3.1 ($0.9) ($2.1) ($4.9) ($9.1) Cap Ex $15.3 $12.2 $20.7 $32.4 $43.2 $34.3 Total Coffeehouses (3) 185 203 251 306 395 464 (1) See the Company s 2005 10-K at www.cariboucoffee.com for a reconciliation of fiscal year 2001 through 2005 net loss to Adjusted EBITDA. See the Company s 10-K filed April 2, 2007 at www.cariboucoffee.com for a reconciliation of the fiscal 2006 net loss to adjusted EBTIDA. (2) Includes one time non recurring expenses excluded from adjusted EBITDA (3)Company owned and franchised coffeehouses opened at end of period.
Unit Level Economics * Average Investment ($ in 000s) Capital Expenditures (Net of Tenant Improvements Allowances) Initial Inventory $365 - $415 $10 Total $375 - $425 Comparable Coffeehouse Sales Range Year 1 (Months 13th -24th) Year 2 (Months 25th 36th) Mid Teens Mid Single Digits Mature Store Performance (New stores open at ~ 80% of a mature store level) Sales Store-Level Cash Flow Margin Year 3 Contribution $500 $700 17% 20% $85 $140 Year 3 Cash-on-Cash ROI ~30% Average Store Payback 4 5 Years * Historical average range /future expectations
Balance Sheet to Support Growth Cash approximately $14.8 million Credit Facility $60 million available (As of December 31, 2006)
Caribou Coffee - Investment Highlights Gourmet coffee among the fastest growing segments in the restaurant industry Second largest company-owned gourmet coffeehouse operator Significant growth opportunities Coffeehouse openings Non-coffeehouse sales Store level comparable sales and margin opportunities Experienced management team successfully implementing key strategic initiatives
Appendix
EBITDA Reconciliation The table below reconciles net income (loss) to EBITDA and Adjusted EBITDA for the periods presented. December 31, 2006 January 1, 2006 Fiscal Year Ended January 2, 2005 (In thousands) December 28, 2003 December 29, 2002 Statement of Operations Data: Net income (loss)... $ (9,059) $ (4,905) $ (2,074) $ (937) $ 3,113 Interest expense... 695 1,603 963 511 496 Interest income... (554) (266) (6) (9) (29) Depreciation and amortization(1)... 23,645 18,284 14,791 11,768 8,050 Provision for income taxes... 313 80 219 228 156 EBITDA... 15,040 14,796 13,893 11,561 11,786 Consolidation of corporate and operating locations... 500 Derivative income... (623) Amendment of employment agreement... 1,738 Adjusted EBITDA... $ 15,040 $ 15,911 $ 14,393 $ 11,561 $ 11,786 (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.