SOURCE: Cosi, Inc.

August 10, 2009 16:30 ET

Così, Inc. Reports 2009 Second Quarter Results

DEERFIELD, IL--(Marketwire - August 10, 2009) - Così, Inc. (NASDAQ: COSI), the premium convenience restaurant company, today reported a net loss for the second quarter ended June 29, 2009 of $(969,000), or $(0.02) per basic and diluted common share, compared with a net loss of $(1,729,000), or $(0.04) per basic and diluted common share, for the 2008 second quarter.

Così's total revenues for the 2009 second quarter decreased 13.9% to $31,636,000 from $36,723,000 in the 2008 second quarter. Company-owned net restaurant sales, excluding discontinued operations, declined 14.3% in the quarter to $31,015,000, compared to $36,207,000 in the previous year's quarter. Franchise fees and royalty revenues for the quarter contributed $621,000 compared to $516,200 in the 2008 second quarter.

System-wide comparable restaurant sales for the second quarter as measured for restaurants in operation for more than 15 months recorded an aggregate decline of 12.2% as compared to the second quarter of 2008. The breakdown in comparable sales between Company-owned and franchise-operated restaurants is as follows:

                        For the 13 weeks ended
                            June 29, 2009
                        ----------------------
Company-owned                   (12.7%)
Franchise-operated               (9.8%)
Total System                    (12.2%)

James Hyatt, Così's President and Chief Executive Officer, said, "The impact of the recession on consumer and business spending has created a difficult environment for Così, especially in our catering business given our high density of locations in major metropolitan business areas. We remain intensely focused on working collaboratively with our franchise partners to drive sales and improve operating margins, while remaining diligent about controlling administrative costs."

2009 Second Quarter Financial Performance Review

Contributing to Così's aforementioned 14.3% decrease in second quarter Company-owned net sales as compared to the second quarter last year was the decline in Company-owned comparable sales as well as the impact of closing five locations since the end of the 2008 second quarter. The Company-owned comparable sales decline of 12.7%, which was comprised of a 9.8% decrease in traffic and a 2.9% decrease in average check, was impacted by a 27.5% decrease in overall catering sales during the second quarter as compared to the 2008 second quarter.

For the second quarter, Così reported a 390 basis point increase in costs and expenses related to Company-owned restaurant operations as a percentage of restaurant net sales compared with the second quarter of 2008. The increase resulted from a 260 and 180 basis point increase, as a percentage of net sales, in labor and related benefits and occupancy and other restaurant operating expenses, respectively, due primarily to the impact of the comparable restaurant net sales decrease on the fixed portion of these costs during the period. The increase was partially offset by a 50 basis point improvement in the cost of food and beverage in the second quarter of 2009 as compared to the second quarter of 2008 as the Company saw commodity costs for wheat and dairy products decline year-over-year.

During the same period, the Company improved by 470 basis points its general and administrative expenses as a percentage of total revenues, to $3,731,000 or 11.8% from $6,069,000 or 16.5% in the 2008 second quarter.

Così reported that as of June 29, 2009 it had cash and cash equivalents of $5,184,000 and virtually no debt other than lease obligations.

Business Update

Così stated that despite the recession, it remains focused on improving the guest experience while continuing to provide fresh and innovative product offerings. James Hyatt said, "We are pleased with the continued improvement in our guest satisfaction ratings during the second quarter which validates our ongoing commitment to excellence in customer service."

In keeping with its heritage of developing unique product offerings, Così stated that it recently launched a steak gorgonzola sandwich and a steak salad as well as a limited time lobster salad sandwich and melt offering. Early indications are that these value-driven offerings are being well received by guests.

Così also announced that it was rated as the number one fast-casual family restaurant by Parents Magazine reinforcing its goal of providing a great dining experience for the entire family. Così also reported that it has retained a new advertising agency to broaden and enhance its initiatives to increase traffic and sales while continuing to expand awareness of the brand.

Development Performance

Così finished the 2009 second quarter with a total of 144 locations consisting of 98 Company-owned locations and 46 franchised locations. During the 2009 second quarter, one franchise location was opened in the District of Columbia and four franchise locations were closed during the quarter including one in Minnesota that was re-opened as a Company-owned location.

Investor Teleconference

As previously announced, Così has temporarily suspended its quarterly investor conference call. Management has continued to focus all of its efforts on creating shareholder value by driving revenue growth, improvements in operating margin and continued reductions in general and administrative expenses while also supporting the continued long-term growth of the franchise system.

About Così, Inc.

Così (http://www.getcosi.com) is a national premium convenience 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 98 Company-owned and 46 franchise restaurants operating in eighteen states, the District of Columbia and the United Arab Emirates. The Così vision is to become America's favorite premium convenience restaurant by providing customers authentic, innovative, savory food while remaining an affordable luxury.

The Così menu features Così sandwiches, freshly tossed salads, melts, soups, Così bagels, 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," "Così (w/hearth design)," "Simply Good Taste" and related marks are registered trademarks of Così, Inc.

Copyright © 2009 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 or interruptions; labor shortages or increased labor costs; changes in consumer preferences and demographic trends; expansion into new markets including foreign markets; our ability to locate suitable restaurant sites in new and existing markets and negotiate acceptable lease terms; competition in our markets, both in our business and in locating suitable restaurant sites; our operation and execution in new and existing markets; our ability to recruit, train and retain qualified corporate and restaurant personnel and management; cost effective and timely planning, design and build-out of restaurants; our ability to attract and retain qualified franchisees; the availability and cost of additional financing, both to fund our existing operations and to open new restaurants; 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; the reliability of our customer and market studies; fluctuations in our quarterly results due to seasonality; increased government regulation and our ability to secure required governmental approvals and permits; our ability to create customer awareness of our restaurants in new markets; market saturation due to new restaurant openings; inadequate protection of our intellectual property; 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 the company's website at http://www.getcosi.com in the investor relations section.

                                Cosi, Inc.
                        Consolidated Balance Sheets
                As of June 29, 2009 and December 29, 2008
          (dollars in thousands, except share and per share data)



                                        June 29, 2009    December 29, 2008
                                      -----------------  -----------------
                                         (Unaudited)         (Note 1)
Assets
Current assets:
  Cash and cash equivalents           $           5,184  $           5,589
  Accounts receivable, net                          662                916
  Inventories                                       948                998
  Prepaid expenses and other current
   assets                                         1,316              3,650
                                      -----------------  -----------------
            Total current assets                  8,110             11,153

Furniture and fixtures, equipment and
 leasehold improvements, net                     26,123             29,779
Intangibles, security deposits and
 other assets, net                                1,759              1,849
                                      -----------------  -----------------
            Total assets              $          35,992  $          42,781
                                      =================  =================

Liabilities and Stockholders' Equity
Current liabilities:
  Accounts payable                    $           2,733  $           3,378
  Accrued expenses                                8,093              9,835
  Deferred franchise revenue                         44                149
  Current liabilities of discontinued
   operations                                         -                  4
  Current portion of other long-term
   liabilities                                      414                668
                                      -----------------  -----------------
            Total current liabilities            11,284             14,034

  Deferred franchise revenue                      2,580              2,545
  Other long-term liabilities, net of
   current portion                                6,813              7,176
                                      -----------------  -----------------
            Total liabilities                    20,677             23,755
                                      -----------------  -----------------
Commitments and contingencies

Stockholders' equity:
  Common stock - $.01 par value;
   100,000,000 shares authorized,
   40,866,474 and 40,663,164 shares
   issued, respectively                             409                407
  Additional paid-in capital                    277,175            276,593
  Treasury stock, 239,543 shares at
   cost                                          (1,198)            (1,198)
  Accumulated deficit                          (261,071)          (256,776)
                                      -----------------  -----------------
            Total stockholders'
             equity                              15,315             19,026
                                      -----------------  -----------------
            Total liabilities and
             stockholders' equity     $          35,992  $          42,781
                                      =================  =================

The accompanying notes are an integral part of these consolidated financial
statements.






                                Cosi, Inc.
                  Consolidated Statements of Operations
For the Three and Six Month Periods Ended June 29, 2009 and June 30, 2008
          (dollars in thousands, except share and per share data)


                           Three Months Ended         Six Months Ended
                          June 29,     June 30,     June 29,     June 30,
                            2009         2008         2009         2008
                        -----------  -----------  -----------  -----------
                        (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)
Revenues:
Restaurant net sales    $    31,015  $    36,207  $    59,139  $    68,666
Franchise fees and
 royalties                      621          516        1,163        1,248
                        -----------  -----------  -----------  -----------
    Total revenues           31,636       36,723       60,302       69,914
                        -----------  -----------  -----------  -----------

Costs and expenses:

Cost of food and
 beverage                     6,915        8,261       13,152       15,797
Restaurant labor and
 related benefits            10,896       11,778       21,505       23,016
Occupancy and other
 restaurant operating
 expenses                     9,044        9,930       18,011       19,685
                        -----------  -----------  -----------  -----------
                             26,855       29,969       52,668       58,498
General and
 administrative
 expenses                     3,731        6,069        7,704       11,106
Depreciation and
 amortization                 1,779        2,056        3,743        4,167
Restaurant pre-opening
 expenses                         -           73            -          100
Provision for losses on
 asset impairments
 and disposals                  238          267          238          267
Closed store costs                2           13           45           47
Lease termination
 expense                          5            -          207          243
                        -----------  -----------  -----------  -----------
    Total costs and
     expenses                32,610       38,447       64,605       74,428
                        -----------  -----------  -----------  -----------
    Operating loss             (974)      (1,724)      (4,303)      (4,514)

Interest income                   1           27            2           72
Interest expense                 (1)          (2)          (3)          (3)
Other income                      5            -            9            -
                        -----------  -----------  -----------  -----------
    Loss from
     continuing
     operations                (969)      (1,699)      (4,295)      (4,445)
Discontinued
 operations:
    Loss from
     discontinued
     operations                   -          (30)           -         (312)
                        -----------  -----------  -----------  -----------

    Net loss            $      (969) $    (1,729) $    (4,295) $    (4,757)
                        ===========  ===========  ===========  ===========

Per Share Data:
  Loss per share,
   basic and diluted
    Continuing
     operations         $     (0.02) $     (0.04) $     (0.11) $     (0.11)
    Discontinued
     operations         $         -  $         -  $         -  $     (0.01)
                        -----------  -----------  -----------  -----------
    Net loss            $     (0.02) $     (0.04) $     (0.11) $     (0.12)
                        ===========  ===========  ===========  ===========

  Weighted average
   shares outstanding:   40,381,372   40,030,460   40,321,325   39,980,356
                        ===========  ===========  ===========  ===========

The accompanying notes are an integral part of these consolidated financial
statements.






Cosi, Inc.
Results of Operatins as a Percent of Sales


                                 Three Months Ended     Six Months Ended
                                -------------------   -------------------
                                June 29,   June 30,   June 29,   June 30,
                                  2009       2008       2009       2008
                                --------   --------   --------   --------

Revenues:
Restaurant net sales                98.0 %     98.6 %     98.1 %     98.2 %
Franchise fees and royalties         2.0        1.4        1.9        1.8
                                --------   --------   --------   --------
    Total revenue                  100.0      100.0      100.0      100.0
                                --------   --------   --------   --------
Cost and expenses:
Cost of food and beverage (1)       22.3       22.8       22.2       23.0
Restaurant labor and related
 benefits (1)                       35.1       32.5       36.4       33.5
Occupancy and other restaurant
 operating expenses (1)             29.2       27.4       30.5       28.7
                                --------   --------   --------   --------
                                    86.6       82.7       89.1       85.2
General and administrative
 expenses                           11.8       16.5       12.8       15.9
Depreciation and amortization        5.6        5.6        6.2        6.0
Restaurant pre-opening expenses        -        0.2          -        0.1
Provision for losses on asset
 impairments
 and disposals                       0.8        0.7        0.4        0.4
Closed store costs                     -          -        0.1        0.1
Lease termination expense              -          -        0.3        0.3
                                --------   --------   --------   --------
    Total costs and expenses       103.1      104.7      107.1      106.5
                                --------   --------   --------   --------
Operating loss                      (3.1)      (4.7)      (7.1)      (6.5)
Interest income                        -        0.1          -        0.1
Interest expense                       -          -          -          -
Other income                           -          -          -          -
                                --------   --------   --------   --------
    Loss from continuing
     operations                     (3.1)      (4.6)      (7.1)      (6.4)
Discontinued operations:
    Loss from discontinued
     operations                        -       (0.1)         -       (0.4)
                                --------   --------   --------   --------
  Net loss                          (3.1)%     (4.7)%     (7.1)%     (6.8)%
                                ========   ========   ========   ========

(1) These are 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
                       June 29, 2009                 June 30, 2008
                 --------------------------- ------------------------------
                 Company-                    Company-
                  Owned   Franchise  Total    Owned      Franchise  Total
                 -------- --------- -------- --------    --------- --------
Restaurants at
 beginning of
 period                97        49      146      102           42      144
New restaurants
 opened                 1         1        2        1            2        3
Restaurants
 permanently
 closed                 -         4        4        1            1        2
                 -------- --------- -------- --------    --------- --------
Restaurants at
 end of period         98        46      144      102           43      145
                 ======== ========= ======== ========    ========= ========

                               For the Six Months Ended
                       June 29, 2009                 June 30, 2008
                 --------------------------- ------------------------------
                 Company-                    Company-
                  Owned   Franchise  Total    Owned      Franchise  Total
                 -------- --------- -------- --------    --------- --------
Restaurants at
 beginning of
 period               101        50      151      107 (a)       34      141
New restaurants
 opened                 1         3        4        1           10       11
Restaurants
 permanently
 closed                 4         7       11        6            1        7
                 -------- --------- -------- --------    --------- --------
Restaurants at
 end of period         98        46      144      102           43      145
                 ======== ========= ======== ========    ========= ========

(a) Includes three locations that are classified as discontinued operations

Contact Information

  • CONTACT:
    William Koziel
    (847) 597-8800