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Cosi, Inc. Reports 2015 Third Quarter Results

BOSTON, Nov. 12, 2015 (GLOBE NEWSWIRE) -- Così, Inc. (NASDAQ:COSI), the fast casual restaurant company, reported today a net loss for the 2015 third quarter of $(3.9) million, or $(0.08) per basic and diluted common share, compared with a net loss of $(4.1) million, or $(0.20) per basic and diluted common share, in the 2014 third quarter.

Così's total revenues for the 2015 third quarter increased by $4.3 million to $23.5 million from $19.2 million in the 2014 third quarter. Company-owned net restaurant sales increased by $4.5 million to $23.1 million from $18.6 million in the 2015 third quarter compared to the 2014 third quarter. Franchise fees and royalty revenues for the 2015 third quarter decreased by $0.2 million to $0.4 million compared to $0.6 million for the 2014 third quarter. The increase in revenues in the 2015 third quarter compared to the 2014 third quarter was driven primarily by the conversion of 13 franchise restaurants to Company-owned as a result of the Hearthstone merger completed on April 1, 2015.

System-wide comparable net restaurant sales for the 2015 third quarter, as measured for restaurants in operation for more than 15 months, recorded an aggregate decline of 0.3% compared to the 2014 third quarter. The breakdown in estimated comparable restaurant sales between Company-owned and Franchise-owned restaurants is as follows:

  13 Weeks Ended
  Sept. 28, 2015
Company-Owned *   (0.3 %)
Franchise   (0.2 %)
System-Wide   (0.3 %)
   
   


* Does not include Hearthstone locations. Comparative locations are defined as restaurants in operation for more than 15 months as Company-owned locations.

“We have continued to implement Hearthstone’s proven model of success across the entire system and are encouraged by the improved cash flows we are seeing in segments of our portfolio. At the same time, we have not seen the movement we expected in our most challenged restaurants, which continue to impact the cash flow gains we are seeing in the rest of our portfolio. We are working on a plan to deal with those restaurants,” stated RJ Dourney, Così's CEO & President. “We are also right-sizing our overhead and capital expenditures. We believe these three cash management levers, together with the improvements we are seeing in sales and operating margins, will position us well to go into 2016 with the resources we need to enter the next phase of our turnaround, Dourney went on to say.

2015 Third Quarter Financial Performance Review
In the three month period ended September 28, 2015, restaurant net sales increased 24.4%, or approximately $4.5 million, in the 2015 third quarter, as compared to the three month period ended September 29, 2014. This increase was the result of incremental net sales of $4.5 million from the 13 Hearthstone restaurants added to the corporate portfolio, and an increase of $1.0 million from the non-comparable restaurant base, offset by net sales decreases of $1.0 million from closed restaurants, and a decrease in comparable restaurant sales of -0.3%, which did not have a measurable impact when measured in dollars. The percentage decrease in comparable restaurant net sales for the three month period ended September 28, 2015, was the result of a 5.5% increase in average check and a 5.8% decrease in transactions. Cosi’s operating loss narrowed in the 2015 third quarter by $0.3 million, or 9%, to ($3.5) million, when compared to the 2014 third quarter.

Cost of food and beverages, as a percentage of restaurant net sales, for the 2015 third quarter, decreased by 1.6% when compared to the same period last year. This decrease was primarily the result of operational improvements and stability in the costs of certain contracted commodities.

Restaurant labor and related benefits, as a percentage of restaurant net sales, for the 2015 third quarter remained flat when compared to the same period last year, due to the investment in staffing and training required to drive future efficiencies, productivity, and overall guest experience.

Occupancy and other restaurant operating expenses, as a percentage of restaurant net sales, for the 2015 third quarter decreased 1.5%, when compared to the same period last year.  This decrease was mostly the result of the acquired Hearthstone restaurants with higher sales volumes and lower fixed costs.

The Company reduced its general and administrative expenses in the three month period ended September 28, 2015, by $0.04 million when compared to the three month period ended September 29, 2014. This decrease is the net savings of a $0.3 million reduction in operating expenses offset by an increase in non-cash expenses related to executive stock compensation of $0.3 million.

Financial Outlook
Based on Cosi’s 2015 results to date, the Company does not expect to generate positive cash flows from operations, excluding capital expenses, by the end of the 2015 fourth quarter as previously communicated. However, considering the expected results from re-balancing the portfolio, right sizing overhead costs and capital expenses, and the business outlook going into next year, the Company expects to generate positive EBITDA between the second and third quarters of 2016.  

Così reported that, as of September 28, 2015, it had cash and cash equivalents balances of $8.0 million.

The results disclosed in this press release are unaudited.

As previously announced, the Company expects to host an investor teleconference webcast at 5:00 p.m. Eastern Time on November 12, 2015, to discuss the Company's results for the 2015 third quarter. The webcast will be broadcast live and available for replay for a limited time thereafter at:

Audio
Dial-In Number:  877-474-9502
Secondary Dial-In Number:  857-244-7555
Participant Code: 47606753
Note:  Participants should dial in a few minutes prior to the start time

Webcast
Website link:  http://ir.getcosi.com
Note:  Live, then archived for one year

Replay
Dial-In Number: 888-286-8010
Secondary Dial-In Number:  617-801-6888
Participant Code:  68957723
Note:  Available from November 12, 2015 (at 9:00 p.m. ET) until November 19, 2015 (11:59 PM ET

About Così, Inc.
Così (http://www.getcosi.com) is an international fast casual restaurant company.  At the heart of every Cosi® restaurant is an open-flame stone-hearth oven where the Così® signature flatbread is made from scratch throughout the day.  The flatbread is made from a generations-old recipe and is part of many Così® favorites. Così® was founded on the idea that good-for-you food should be delicious.  Menu items are made using fresh ingredients and distinctive sauces and spreads to create edgy flavors.  The menu features made-to-order sandwiches, hand-tossed salads, bowls, breakfast wraps, melts, all natural soups, signature Squagels®, artisan flatbread pizzas, S`mores, snacks and desserts.  Guests can also enjoy handcrafted beverages and a variety of coffee-based and specialty beverages.

Così® employees create a welcoming environment where guests are invited to relax and enjoy great food.  In many cases, Così® is the cornerstone of the communities that they are in and take pride in supporting community organizations and local charities. There are currently 79 Company-owned and 30 franchise restaurants operating in fifteen states, the District of Columbia, Costa Rica and the United Arab Emirates.

"Così," "(Sun & Moon Design)" and related marks are registered trademarks of Così, Inc. in the U.S.A. and certain other countries. Copyright © 2015 Così, Inc. All rights reserved.

"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. This press release contains statements that constitute forward- looking statements under the federal securities laws. Forward-looking statements are statements about future events and expectations and not statements of historical fact. The words "believe," "may," "will," "should," "anticipate," "estimate," "expect," "intend," "objective," "seek," "plan," "strive," or similar words, or negatives of these words, identify forward- looking statements. We qualify any forward-looking statements entirely by these cautionary factors. Forward-looking statements are based on management's beliefs, assumptions and expectations of our future economic performance, taking into account the information currently available to management. Forward-looking statements involve risks and uncertainties that may cause our actual results, performance or financial condition to differ materially from the expectations of future results, performance or financial condition we express or imply in any forward-looking statements. Factors that could contribute to these differences include, but are not limited to: the results being reported in this release are unaudited and subject to change; the cost of our principal food products and supply and delivery shortages and interruptions; labor shortages or increased labor costs; changes in demographic trends and consumer tastes and preferences, including changes resulting from concerns over nutritional or safety aspects of beef, poultry, produce, or other foods or the effects of food-borne illnesses, such as E. coli, "mad cow disease" and avian influenza or "bird flu"; competition in our markets, both in our business and in locating suitable restaurant sites; our operation and execution in new and existing markets; expansion into new markets including foreign markets; our ability to attract and retain qualified franchisees and our franchisees' ability to open restaurants on a timely basis; our ability to locate suitable restaurant sites in new and existing markets and negotiate acceptable lease terms; the rate of our internal growth and our ability to generate increased revenue from our existing restaurants; our ability to generate positive cash flow from existing and new restaurants; fluctuations in our quarterly results due to seasonality; increased government regulation and our ability to secure required government approvals and permits; our ability to create customer awareness of our restaurants in new markets; the reliability of our customer and market studies; cost effective and timely planning, design and build out of restaurants; our ability to recruit, train and retain qualified corporate and restaurant personnel and management; market saturation due to new restaurant openings; inadequate protection of our intellectual property; our ability to obtain additional capital and financing; adverse weather conditions which impact customer traffic at our restaurants; and adverse economic conditions. Further information regarding factors that could affect our results and the statements made herein are included in our filings with the Securities and Exchange Commission.

Additional information is available on Così's website at
http://www.getcosi.com in the investor relations section.


 Cosi, Inc. 
 Consolidated Balance Sheets 
 (dollars in thousands) 
           
      September 28, 2015   December 29, 2014
      (Unaudited)    
Assets      
Current assets:      
  Cash and cash equivalents $   8,047     $   21,053  
  Credit card receivable     789         507  
  Accounts receivable, net of allowances of $286 and $118, respectively     896         581  
  Inventories     1,020         825  
  Prepaid expenses and other current assets     1,722         1,279  
  Total current assets     12,474         24,245  
           
Furniture and fixtures, equipment and leasehold improvements, net     12,656         7,308  
Notes receivable, net of allowances of $675 and $450, respectively     326         551  
Intangible assets, net     2,795         -  
Goodwill and indefinite-lived assets     9,797         -  
Restricted cash     5,001         -  
Other assets     1,348         1,327  
  Total assets $   44,397     $   33,431  
           
Liabilities and Stockholders' Equity      
Current liabilities:      
  Accounts payable $   1,891     $   1,519  
  Accrued expenses     6,456         9,336  
  Deferred franchise revenue     -          18  
  Current portion of other long-term liabilities     50         177  
  Current portion of long-term debt     611         -  
  Total current liabilities     9,008         11,050  
           
  Deferred franchise revenue     1,733         1,724  
  Other long-term liabilities, net of current portion     1,707         1,663  
  Long-term debt, net     10,658         6,623  
  Total liabilities     23,106         21,060  
           
  Commitments and Contingencies      
           
Stockholders' equity       
  Common stock - $.01 par value; 100,000,000 shares authorized,      
    48,109,677 and 38,410,196 shares issued and outstanding, respectively     480         383  
  Additional paid-in capital     344,179         323,256  
  Treasury stock, 59,886 shares at cost     (1,198 )       (1,198 )
  Accumulated deficit     (322,170 )       (310,070 )
  Total stockholders' equity     21,291         12,371  
  Total liabilities and stockholders' equity $   44,397     $   33,431  
           
The accompanying notes are an integral part of these consolidated financial statements.    
           

 

Cosi, Inc.
Consolidated Statements of Operations (Unaudited)
(dollars in thousands, except share and per share data)
                   
                   
      Three Months Ended   Nine Months Ended
      September 28,   September 29,   September 28,   September 29,
        2015       2014       2015       2014  
                   
Revenues:              
Restaurant net sales $   23,113     $   18,574     $   64,347     $   56,309  
Franchise fees and royalties     404         635         1,527         1,945  
    Total revenues     23,517         19,209         65,874         58,254  
                   
Costs and expenses:              
  Cost of food and beverage     5,959         5,087         17,317         14,624  
  Restaurant labor and related benefits     8,843         7,114         24,527         21,640  
  Occupancy and other restaurant operating expenses     8,127         6,816         23,296         20,896  
    Operating costs and expenses     22,929         19,017         65,140         57,160  
  General and administrative     3,073         3,110         8,873         9,164  
  Depreciation and amortization     885         573         2,311         1,812  
  Restaurant pre-opening expenses     4         -         5         -  
  Provision for losses on asset impairments and disposals     -         217         -         241  
  Closed store costs      12         100         25         196  
  Lease termination costs     42         62         235         1,317  
  Loss (gain) on sale of fixed assets     94         -         112         (50 )
    Total costs and expenses     27,039         23,079         76,701         69,840  
                   
    Operating loss     (3,522 )       (3,870 )       (10,827 )       (11,586 )
                   
Other income (expense):              
  Interest, net     (228 )       (171 )       (795 )       (410 )
  Debt issuance and discount amortization     (165 )       (164 )       (493 )       (164 )
  Other income (expense)     3         57         15         72  
    Total other expense     (390 )       (278 )       (1,273 )       (502 )
                   
    Net loss  $   (3,912 )   $   (4,148 )   $   (12,100 )   $   (12,088 )
                   
Per Share Data:              
  Loss per share, basic and diluted $   (0.08 )   $   (0.20 )   $   (0.28 )   $   (0.64 )
                   
  Weighted average shares outstanding basic and diluted:     46,722,660         20,334,567         43,216,165         18,846,038  
                   
                   
The accompanying notes are an integral part of these consolidated financial statements.            
                   

 

      Three Months Ended Nine Months Ended  
      Sept 28,   Sept 29,   Sept 28,   Sept 29,  
        2015       2014       2015       2014    
                     
Revenues:                
  Restaurant net sales     98.3   %     96.7   %     97.7   %     96.7   %
  Franchise fees and royalties     1.7         3.3         2.3         3.3    
    Total revenues     100.0         100.0         100.0         100.0    
Cost and expenses:                
  Cost of food and beverage (1)     25.8         27.4         26.9         26.0    
  Restaurant labor and related benefits (1)     38.3         38.3         38.1         38.4    
  Occupancy and other restaurant operating expenses (1)     35.2         36.7         36.2         37.1    
          99.3         102.4         101.2         101.5    
  General and administrative expenses     13.1         16.2         13.5         15.7    
  Depreciation and amortization     3.8         3.0         3.5         3.1    
  Restaurant pre-opening expenses     -         -         -         -    
  Provision for losses on asset impairments and disposals     -         1.1         -         0.4    
  Closed store costs expense     0.1         0.6         -         0.4    
  Lease termination expense     0.2         0.3         0.4         2.3    
  Loss (gain) on sale of fixed assets     0.4         -          0.2         (0.1 )  
    Total costs and expenses     115.0         120.1         116.4         119.9    
    Operating loss     (15.0 )       (20.1 )       (16.4 )       (19.9 )  
Other income (expense)                
  Interest, net     (1.0 )       (0.9 )       (1.2 )       (0.7 )  
  Misc income     -         -         -         -    
  Debt issuance amortization     (0.7 )       (0.8 )       (0.7 )       (0.3 )  
  Other income (expense)     -         0.3         -         0.1    
  Total other income (expense)     (1.7 )       (1.4 )       (1.9 )       (0.9 )  
    Net loss     (16.6 ) %     (21.5 ) %     (18.4 ) %     (20.8 ) %
                     
  (1 ) Expressed as a percentage of restaurant net sales versus all other              
  items expressed as a percentage of total revenues.                

 

  For the Three-Month Period Ended
  September 28, 2015   September 29, 2014
  Company-
Owned
  Franchise   Total   Company-
Owned
  Franchise   Total
                       
Restaurants at beginning of period   78     32     110     66     48     114
Franchise-owned converted to Company-owned   1     1     -     1     1     -
New restaurants opened   -     1     1     -     -     -
Restaurants permanently closed   -     2     2     4     -     4
Restaurants at end of period   79     30     109     63     47     110
                       
  For the Nine-Month Period Ended
  September 28, 2015   September 29, 2014
  Company-
Owned
  Franchise   Total   Company-
Owned
  Franchise   Total
                       
Restaurants at beginning of period   64     47     111     70     52     122
Franchise-owned converted to Company-owned   17     17     -     3     3     -
New restaurants opened   -     4     4     -     -     -
Restaurants permanently closed   2     4     6     10     2     12
Restaurants at end of period   79     30     109     63     47     110
                       

 


 

 

CONTACT:
Miguel Rossy-Donovan
Chief Financial Officer
(857) 415-5020

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Cosi, Inc