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Cosi, Inc. Reports 2011 Fourth Quarter and Full Year Results


March 29, 2012 - Deerfield, IL

Così, Inc. (NASDAQ: COSI), the fast casual restaurant company, today reported a net loss for the fourth quarter ended January 2, 2012 of $(2,274,000), or $(0.04) per basic and diluted common share, compared with a net loss of $(2,784,000), or $(0.05) per basic and diluted common share in the fourth quarter of 2010.

Così's total revenues for the 2011 fourth quarter increased 3.3% to $26,193,000 from $25,355,000 in the 2010 fourth quarter. The 2011 fourth quarter included one extra week of revenues versus the 2010 fourth quarter. Company-owned restaurant net sales increased by 2.8% in the fourth quarter to $25,334,000, compared to $24,632,000 in the previous year's quarter largely due to net sales of $1,375,000 from the one additional week of sales in 2011 and a 0.9% increase in comparable store net sales partially offset by a decline in sales from restaurants closed subsequent to the fourth quarter of 2010. Franchise fees and royalty revenues for the 2011 fourth quarter contributed $859,000 compared to $723,000 in the 2010 fourth quarter. The year over year fourth quarter increase in franchise fees and royalties was largely due to royalties associated with the additional week of sales in the 2011 fourth quarter, a 5.3% increase in comparable sales for the fourth quarter and a fee related to the termination of a franchise agreement during the 2011 fourth quarter.

System-wide comparable restaurant sales, assuming a 13 week quarter as measured for restaurants in operation for more than 15 months, recorded an aggregate 2.6% increase compared to the fourth quarter of 2010. The breakdown in comparable sales between Company-owned and franchise-operated restaurants are as follows:


For the 13 weeks ended
December 26, 2011
----------------------
Company-owned 0.9%
Franchise-operated 5.3%
Total System 2.6%

For the fiscal year ended January 2, 2012 Così reported a net loss of $(6,539,000) or $(0.13) per basic and diluted common share, compared with fiscal 2010, when Così's net loss was $(3,141,000), or $(0.06) per basic and diluted common share. The results for fiscal 2010 included a one-time gain of $5,100,000 or $0.10 per basic and diluted common share related to the sale of 13 Company-owned restaurants in Washington D.C. to a franchisee. Excluding the one-time gain, the net loss for fiscal 2011 improved by $1,702,000 as compared to fiscal 2010.

Così's total revenues for fiscal 2011 decreased 6.9% to $102,135,000 from $109,699,000 in fiscal 2010. Fiscal 2011 included one extra week of revenues versus fiscal 2010. Company-owned net restaurant sales declined 7.2% in fiscal 2011 to $98,920,000, compared to $106,636,000 in fiscal 2010 due primarily to a decline in net sales related to restaurants closed during and subsequent to fiscal 2010 and the sale of 13 Company-owned restaurants to a franchisee in the second quarter of 2010 partially offset by the additional week of sales in 2011 and a comparable 52 week net sales increase of 0.3%. Franchise fees and royalty revenues for fiscal 2011 contributed $3,215,000 compared to $3,063,000 in fiscal 2010. The year over year increase in franchise fees and royalties was largely the result of higher royalties associated with the 13 restaurants sold to a franchisee during 2010 and royalties associated with the additional week of sales in 2011 partially offset by higher fees recognized from terminated franchise agreements during 2010.

System-wide comparable restaurant sales for fiscal 2011, assuming a 52 week year as measured for restaurants in operation for more than 15 months, recorded an aggregate 0.2% increase compared to fiscal 2010. The breakdown in comparable sales between Company-owned and franchise-operated restaurants are as follows:

 For the 52 weeks ended December 26, 2011 ----------------------Company-owned 0.3%Franchise-operated 0.0%Total System 0.2%

"These results for 2011 reflect a continued improvement in operating margins combined with an improving trend in system-wide comparable sales," Carin Stutz, Così's President and Chief Executive Officer, said. "My confidence to capitalize on unlocking the long term potential of the Così brand is now stronger than ever as we now focus on driving sales and traffic while simplifying the guest experience, working to improve our operating margins and examining ways to further reduce administrative costs."

Così also reported that with one week remaining in the 2012 first quarter, system-wide comparable sales increased by almost 5.0% when compared on a like calendar week basis to the prior year. On a fiscal reporting basis, the 2012 first quarter system-wide comparable sales increase is expected to be slightly higher than the calendar week comparison based on a year over year holiday week shift that occurred at the beginning of the quarter.

2011 Fourth Quarter and Full Year Financial Performance Review
For the fourth quarter, Così reported a 140 basis point decrease in costs and expenses related to Company-owned restaurant operations as a percentage of restaurant net sales compared with the fourth quarter of 2010. The change resulted from decreases of 130 and 40 basis points, as a percentage of restaurant net sales, in occupancy and other restaurant operating expenses and labor and related benefits, respectively, partially offset by a 30 basis point increase in cost of food and beverage due primarily to commodity cost pressures. The decrease in labor and related benefits was largely due to better deployment of labor during peak and non-peak hours of operations and the favorable impact on labor of a price increase taken during 2011. The decrease in occupancy and other restaurant operating expenses was due primarily to the impact of the additional week of sales on the fixed portion of these costs during the period as well as lower utility costs as compared to the 2010 fourth quarter.

During the 2011 fourth quarter, the Company reported general and administrative expenses of $4,065,000 or 15.5% of total revenues as compared to $3,584,000 or 14.1% for the 2010 fourth quarter. The increase in 2011 expense as a percentage of total revenues as compared to 2010 was due primarily to higher legal fees and certain settlement-related costs as well as professional and board fees related to the chief executive officer search and certain other shareholder activities.

For the full year 2011, the 7.2% decrease in Company-owned restaurant net sales as compared to fiscal 2010 was due primarily to the closing of six under-performing restaurants during and subsequent to fiscal 2010 as well as the impact of the sale of thirteen Company-owned restaurants to a franchisee during the second quarter of 2010 which was partially offset by a 0.3% increase in Company-owned 52 week comparable sales and an additional week of sales in 2011. The Company-owned comparable sales increase of 0.3% was comprised of a 1.2% increase in average guest check partially offset by a 0.9% decrease in traffic.

For 2011, Così reported a 100 basis point decrease in costs and expenses related to Company-owned restaurant operations as a percentage of restaurant net sales compared with 2010. The change resulted from decreases of 120 and 20 basis points, as a percentage of restaurant net sales, in labor and related benefits and occupancy and other restaurant operating expenses, respectively, partially offset by a 40 basis point increase in cost of food and beverage largely due to an increase in commodity costs.

During fiscal 2011, general and administrative expenses increased by $132,000 to $13,824,000 from $13,692,000 due primarily to higher legal fees and certain settlement-related costs as well as professional and board fees related to the chief executive officer search and certain other shareholder activities. As a percentage of total revenues, general and administrative expenses increased to 13.5% in fiscal 2011 as compared to 12.5% in 2010.

Così reported that as of January 2, 2012 it had cash and cash equivalents of $7,222,000 and virtually no debt other than lease obligations.

Development Performance
Così ended fiscal 2011 with a total of 136 locations consisting of 80 Company-owned locations and 56 franchised locations. During the 2011 fourth quarter, two franchise locations were closed, one in Illinois and one in Massachusetts

About Così, Inc.
Così® (http://www.getcosi.com) is a national fast casual restaurant chain that has developed featured foods built around a secret, generations-old recipe for crackly crust flatbread. This artisan bread is freshly baked in front of customers throughout the day in open-flame stone-hearth ovens prominently located in each of the restaurants. Così's warm and urbane atmosphere is geared towards its sophisticated, upscale, urban and suburban guests. There are currently 80 Company-owned and 56 franchise restaurants operating in seventeen states, the District of Columbia and the United Arab Emirates. The Così® vision is to become America's favorite fast casual restaurant by providing customers authentic, 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-based drinks and other specialty beverages. Così® restaurants are designed to be welcoming and comfortable with an eclectic environment. Così's sights, sounds, and spaces create a tasteful, relaxed ambience that provides a fresh and new dining experience.

"Così," "(Sun & Moon Design)" and related marks are registered trademarks of Così, Inc. in the U.S.A. and certain other countries. Copyright © 2011 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 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 As of January 2, 2012 and December 27, 2010 (dollars in thousands) January 2, December 27, 2012 2010 ------------- -------------AssetsCurrent assets: Cash and cash equivalents $ 7,222 $ 10,307 Accounts receivable, net 598 697 Notes receivable, current portion 448 506 Inventories 717 744 Prepaid expenses and other current assets 1,480 1,639 ------------- ------------- Total current assets 10,465 13,893 Furniture and fixtures, equipment and leasehold improvements, net 12,359 15,009Notes receivable, net of current portion 762 1,195Other assets 1,119 1,254 ------------- ------------- Total assets $ 24,705 $ 31,351 ============= ============= Liabilities and Stockholders' EquityCurrent liabilities: Accounts payable $ 3,717 $ 2,992 Accrued expenses 9,733 9,237 Deferred franchise revenue 61 61 Current portion of other long-term liabilities 195 545 ------------- ------------- Total current liabilities 13,706 12,835 Deferred franchise revenue 2,098 2,238 Other long-term liabilities, net of current portion 3,383 4,592 ------------- ------------- Total liabilities 19,187 19,665 ------------- ------------- Commitments and contingencies Stockholders' equity: Common stock - $.01 par value; 100,000,000 shares authorized, 52,967,365 and 51,682,891 shares issued, respectively 530 517 Additional paid-in capital 283,746 283,388 Treasury stock, 239,543 shares at cost (1,198) (1,198) Accumulated deficit (277,560) (271,021) ------------- ------------- Total stockholders' equity 5,518 11,686 ------------- ------------- Total liabilities and stockholders' equity $ 24,705 $ 31,351 ============= ============= The accompanying notes are an intergral part of these consolidated financial statements. Cosi, Inc. Consolidated Statements of OperationsFor the Three and Twelve Months Ended January 2, 2012 and December 27, 2010 (dollars in thousands, except per share data) 14 weeks 13 weeks 53 weeks 52 weeks ended ended ended ended January 2, December January 2, December 2012 27, 2010 2012 27, 2010 ----------- ----------- ----------- ----------- Revenues: Restaurant net sales $ 25,334 $ 24,632 $ 98,920 $ 106,636 Franchise fees and royalties 859 723 3,215 3,063 ----------- ----------- ----------- ----------- Total revenues 26,193 25,355 102,135 109,699 ----------- ----------- ----------- ----------- Costs and expenses: Cost of food and beverage 5,889 5,636 22,902 24,366 Restaurant labor and related benefits 9,354 9,182 36,068 40,161 Occupancy and other restaurant operating expenses 7,877 7,972 31,330 33,977 ----------- ----------- ----------- ----------- 23,120 22,790 90,300 98,504 General and administrative expenses 4,065 3,584 13,824 13,692 Depreciation and amortization 1,050 1,101 4,230 4,773 Provision for losses on asset impairments and disposals 232 511 431 732 Closed store costs 6 53 61 152 Lease termination expense, net 7 39 22 203 Gain on sale of assets - 61 (149) (5,205) ----------- ----------- ----------- ----------- Total costs and expenses 28,480 28,139 108,719 112,851 ----------- ----------- ----------- ----------- Operating loss (2,287) (2,784) (6,584) (3,152) ----------- ----------- ----------- -----------Other income (expense): Interest income - - - 1 Interest expense - - (1) (4) Other income 13 - 46 14 ----------- ----------- ----------- ----------- Total other income 13 - 45 11 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Net loss $ (2,274) $ (2,784) $ (6,539) $ (3,141) =========== =========== =========== =========== Per Share Data: ----------- ----------- ----------- ----------- Loss per share, basic and diluted $ (0.04) $ (0.05) $ (0.13) $ (0.06) ----------- ----------- ----------- ----------- Weighted average common shares outstanding 51,433,648 51,233,243 51,368,499 50,638,031 =========== =========== =========== =========== The accompanying notes are an intergral part of these consolidated financial statements. Cosi, Inc. Results of Operations as a Percentage of Revenue For the Three and Twelve Months Ended January 2, 2012 and December 27, 2010 14 weeks 13 weeks 53 weeks 52 weeks ended ended ended ended January 2, December January 2, December 2012 27, 2010 2012 27, 2010 ---------- ---------- ---------- ---------- Revenues: Restaurant net sales 96.7% 97.1% 96.9% 97.2% Franchise fees and royalties 3.3 2.9 3.1 2.8 ---------- ---------- ---------- ---------- Total revenues 100.0 100.0 100.0 100.0 ---------- ---------- ---------- ----------Cost and expenses: Cost of food and beverage (1) 23.2 22.9 23.2 22.8 Restaurant labor and related benefits (1) 36.9 37.3 36.5 37.7 Occupancy and other restaurant operating expenses (1) 31.1 32.4 31.7 31.9 ---------- ---------- ---------- ---------- 91.2 92.6 91.4 92.4General and administrative expenses: 15.5 14.1 13.5 12.5 Depreciation and amortization 4.0 4.3 4.1 4.4 Provision for losses on asset impairments and disposals 0.9 1.7 0.4 0.7 Closed store costs - 0.5 0.1 0.1 Lease termination expense, net - 0.2 - 0.2 Gain on sale of assets - 0.2 (0.1) (4.7) ---------- ---------- ---------- ---------- Total costs and expenses 108.7 111.0 106.4 102.9 ---------- ---------- ---------- ---------- Operating loss (8.7) (11.0) (6.4) (2.9) Net loss (8.7)% (11.0)% (6.4)% (2.9)% ========== ========== ========== ========== (1) Expressed as a pecentage of restaurant net sales versus all other items expressed as a percentage of total revenue Cosi, Inc. System-wide Number of Restaurants Fiscal Year 2011 2010 2009 -------------------- -------------------- -------------------- Company Franch Company Franch Company Franch -Owned ise Total -Owned ise Total -Owned ise Total ------- ------ ----- ------- ------ ----- ------- ------ ----- Restaurants at beginning of period 83 59 142 99 46 145 101 50 151Company-owned sold to franchisee - - - 13 13 - - - -New restaurants opened - - 0 - 2 2 2 6 8Restaurants permanently closed 3 3 6 3 2 5 4 10 14 ------- ------ ----- ------- ------ ----- ------- ------ -----Restaurants at end of period 80 56 136 83 59 142 99 46 145 ======= ====== ===== ======= ====== ===== ======= ====== =====

CONTACT:
William Koziel
(847) 597-8800

MarketWire

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