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Cosi, Inc. Reports 2011 First Quarter Results

May 12, 2011 - Deerfield, IL

Così, Inc. (NASDAQ: COSI), the premiumconvenience restaurant company, today reported a net loss for the firstquarter ended March 28, 2011 of $(2,140,000), or $(0.04) per basic anddiluted common share, compared with a net loss of $(3,054,000), or $(0.06)per basic and diluted common share, for the 2010 first quarter.

Così's total revenues for the 2011 first quarter decreased by $3,890,000 to$23,709,000 from $27,599,000 in the 2010 first quarter. Company-owned netrestaurant sales were $23,005,000 for the first quarter compared to$27,074,000 for the 2010 first quarter with the resulting $4,069,000decline related primarily to the sale of thirteen Company-owned restaurantsto a franchisee during the second quarter of 2010. Franchise fees androyalty revenues for the quarter contributed $704,000 compared to $525,000in the 2010 first quarter. The increase over last year's first quarter wasdue primarily to royalties from the thirteen restaurants acquired by afranchisee from the Company during the second quarter of 2010.

System-wide comparable restaurant sales for the first quarter as measuredfor restaurants in operation for more than 15 months recorded an aggregate1.7% increase as compared to the first quarter of 2010. The breakdown incomparable sales between Company-owned and franchise-operated restaurantsis as follows:

For the 13 weeks ended
March 28, 2011
Company-owned 3.0%
Franchise-operated (0.5%)
Total System 1.7%

"We're pleased to announce our fourth consecutive quarter of positivecomparable sales growth as well as improvement in our operating margins inspite of the severe winter weather experienced in many of our marketsduring the first quarter," said James Hyatt, Così's President and ChiefExecutive Officer. "We remain focused on driving sales and traffic acrossall dayparts, while staying committed to controlling restaurant andadministrative costs."

2011 First Quarter Financial Performance Review

Così's aforementioned $4,069,000 decrease in first quarter Company-ownednet sales as compared to the 2010 first quarter was largely related to thesale of thirteen Company-owned restaurants in Washington D.C. to afranchisee during the 2010 second quarter. The decline was partially offsetby the 3.0% increase in Company-owned comparable net sales during thequarter which was comprised of a 1.5% increase in traffic and a 1.5%increase in average guest check.

For the first quarter, Così reported a 170 basis point decrease in costsand expenses related to Company-owned restaurant operations as a percentageof restaurant net sales compared with the first quarter of 2010. The changeresulted from decreases of 140 and 40 basis points, as a percentage of netsales, in labor and related benefits expense and cost of food and beverage,respectively, partially offset by a 10 basis point increase, as apercentage of net sales, in occupancy and other restaurant operatingexpenses. The decrease in labor and related benefits expense as apercentage of net sales was due primarily to the impact of a price increasetaken at the end of the second quarter of 2010 as well as the leveragingimpact of the comparable restaurant net sales increase on the fixed portionof these costs during the period. The decrease in the cost of food andbeverage as a percentage of net sales was due primarily to the impact of aprice increase taken at the end of the second quarter of 2010, improvedmargins on certain limited-time promotional menu offerings compared to lastyear's first quarter, and savings on certain commodities purchased ascompared to the same period last year.

During the same period, the Company reduced its general and administrativeexpenses by 8% or $265,000, to $3,056,000 or 12.9% of total revenues from$3,321,000 or 12.0% of total revenues in the 2010 first quarter.

Così reported that as of March 28, 2011 it had cash and cash equivalents of$9,284,000 and virtually no debt other than lease obligations.

About Così, Inc.

Così® ( is a national premium conveniencerestaurant chain that has developed featured foods built around a secret,generations-old recipe for crackly crust flatbread. This artisan bread isfreshly baked in front of customers throughout the day in open-flamestone-hearth ovens prominently located in each of the restaurants. Così'swarm and urbane atmosphere is geared towards its sophisticated, upscale,urban and suburban guests. There are currently 82 Company-owned and 59franchise restaurants operating in eighteen states, the District ofColumbia and the United Arab Emirates. The Così® vision is to becomeAmerica's favorite premium convenience restaurant by providing customersauthentic, innovative, savory food while remaining an affordable luxury.

The Così® menu features Così® sandwiches, freshly-tossed salads,breakfast wraps, melts, soups, Così® Squagels®, flatbread pizzas, S'mores,snacks and other desserts, and a wide range of coffee and coffee-baseddrinks and other specialty beverages. Così® restaurants are designed to bewelcoming and comfortable with an eclectic environment. Così's sights,sounds, and spaces create a tasteful, relaxed ambience that provides afresh and new dining experience.

"Così," "(Sun & Moon Design)" and related marks are registered trademarksof Così, Inc. in the U.S.A. and certain other countries. Copyright © 2011Così, Inc. All rights reserved.

"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACTOF 1995. This press release contains statements that constituteforward-looking statements under the federal securities laws.Forward-looking statements are statements about future events andexpectations 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 ofthese words, identify forward-looking statements. We qualify anyforward-looking statements entirely by these cautionary factors.Forward-looking statements are based on management's beliefs, assumptionsand expectations of our future economic performance, taking into accountthe information currently available to management. Forward-lookingstatements involve risks and uncertainties that may cause our actualresults, performance or financial condition to differ materially from theexpectations of future results, performance or financial condition weexpress or imply in anyforward-looking statements. Factors that could contribute to thesedifferences include, but are not limited to: the cost of our principal foodproducts and supply and delivery shortages and interruptions; laborshortages or increased labor costs; changes in demographic trends andconsumer tastes and preferences, including changes resulting from concernsover nutritional or safety aspects of beef, poultry, produce, or otherfoods or the effects of food-borne illnesses, such as E. coli, "mad cowdisease" and avian influenza or "Bird Flu"; competition in our markets,both in our business and in locating suitable restaurant sites; ouroperation and execution in new and existing markets; expansion into newmarkets including foreign markets; our ability to attract and retainqualified franchisees and our franchisees' ability to open restaurants on atimely basis; our ability to locate suitable restaurant sites in new andexisting markets and negotiate acceptable lease terms; the rate of ourinternal growth and our ability to generate increased revenue from ourexisting restaurants; our ability to generate positive cash flow fromexisting and new restaurants; fluctuations in our quarterly results due toseasonality; increased government regulation and our ability to securerequired government approvals and permits; our ability to create customerawareness of our restaurants in new markets; the reliability of ourcustomer and market studies; cost effective and timely planning, design andbuild out of restaurants; our ability to recruit, train and retainqualified corporate and restaurant personnel and management; marketsaturation due to new restaurant openings; inadequate protection of ourintellectual property; our ability to obtain additional capital andfinancing; adverse weather conditions which impact customer traffic at ourrestaurants; and adverse economic conditions. Further information regardingfactors that could affect our results and the statements made herein areincluded in our filings with the Securities and Exchange Commission.

Additional information is available on Così's website at in the investor relations section.

 Cosi, Inc. Consolidated Balance Sheets As of March 28, 2011 and December 27, 2010 (dollars in thousands, except share and per share data) March 28, December 27, 2011 2010 ----------- ------------ (Unaudited) (Note 1)AssetsCurrent assets: Cash and cash equivalents $ 9,284 $ 10,307 Accounts receivable, net 709 697 Notes receivable, current portion 574 506 Inventories 731 744 Prepaid expenses and other current assets 1,460 1,639 ----------- ------------ Total current assets 12,758 13,893 Furniture and fixtures, equipment and leasehold improvements, net 14,208 15,009Notes receivable, net of current portion 1,057 1,195Other assets 1,221 1,254 ----------- ------------ Total assets $ 29,244 $ 31,351 =========== ============ Liabilities and Stockholders' EquityCurrent liabilities: Accounts payable $ 3,080 $ 2,992 Accrued expenses 9,380 9,237 Deferred franchise revenue 61 61 Current portion of other long-term liabilities 435 545 ----------- ------------ Total current liabilities 12,956 12,835 Deferred franchise revenue 2,238 2,238 Other long-term liabilities, net of current portion 4,360 4,592 ----------- ------------ Total liabilities 19,554 19,665 ----------- ------------Commitments and contingencies Stockholders' equity: Common stock - $.01 par value; 100,000,000 shares authorized, 51,738,891 and 51,682,891 shares issued, respectively 517 517 Additional paid-in capital 283,532 283,388 Treasury stock, 239,543 shares at cost (1,198) (1,198) Accumulated deficit (273,161) (271,021) ----------- ------------ Total stockholders' equity 9,690 11,686 ----------- ------------ Total liabilities and stockholders' equity $ 29,244 $ 31,351 =========== ============ The accompanying notes are an integral part of these consolidatedfinancial statements. Cosi, Inc. Consolidated Statements of Operations For the Three Month Periods Ended March 28, 2011 and March 29, 2010 (dollars in thousands, except share and per share data) Three Months Ended March 28, March 29, 2011 2010 ----------- ----------- (Unaudited) (Unaudited)Revenues:Restaurant net sales $ 23,005 $ 27,074Franchise fees and royalties 704 525 ----------- ----------- Total revenues 23,709 27,599 ----------- ----------- Costs and expenses:Cost of food and beverage 5,296 6,329Restaurant labor and related benefits 8,742 10,664Occupancy and other restaurant operating expenses 7,703 9,044 ----------- ----------- 21,741 26,037General and administrative expenses 3,056 3,321Depreciation and amortization 1,065 1,380Closed store costs 21 -Lease termination expense 17 1Gain on sale of assets (41) (87) ----------- ----------- Total costs and expenses 25,859 30,652 ----------- ----------- Operating loss (2,150) (3,053) Other income (expense): Interest expense - (1) Other income 10 - ----------- ----------- Net loss $ (2,140) $ (3,054) =========== =========== Per Share Data: ----------- ----------- Loss per share, basic and diluted $ (0.04) $ (0.06) =========== =========== Weighted average shares outstanding: 51,254,279 48,982,134 =========== =========== The accompanying notes are an integral part of these consolidatedfinancial statements. Cosi, Inc.Results of Operations as a Percent of Revenues Three Months Ended March 28, March 29, 2011 2010 ------------ ------------ Revenues:Restaurant net sales 97.0% 98.1%Franchise fees and royalties 3.0 1.9 ------------ ------------ Total revenues 100.0 100.0 ------------ ------------Cost and expenses:Cost of food and beverage (1) 23.0 23.4Restaurant labor and related benefits (1) 38.0 39.4Occupancy and other restaurant operating expenses (1) 33.5 33.4 ------------ ------------ 94.5 96.2General and administrative expenses 12.9 12.0Depreciation and amortization 4.5 5.0Closed store costs 0.1 -Lease termination expense 0.1 -Gain on sale of assets (0.2) (0.3) ------------ ------------ Total costs and expenses 109.1 111.1 ------------ ------------ Operating loss (9.1) (11.1) Other income 0.1 - ------------ ------------ Net loss (9.0)% (11.1)% ============ ============ (1) Expressed as a percentage of restaurant net sales versus all other items expressed as a percentage of total revenues. Cosi, Inc.System-wide Restaurants For the Three Months Ended March 28, 2011 March 29, 2010 ------------------------ ------------------------- Company- Company- Owned Franchise Total Owned Franchise Total -------- --------- ----- --------- --------- -----Restaurants at beginning of period 83 59 142 99 46 145New restaurants opened - - - - - -Restaurants permanently closed 1 - 1 - 2 2 -------- --------- ----- --------- --------- -----Restaurants at end of period 82 59 141 99 44 143 ======== ========= ===== ========= ========= ===== 

William Koziel
(847) 597-8800


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