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
ReviewIn 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 OutlookBased 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:
AudioDial-In Number:
877-474-9502Secondary Dial-In Number: 857-244-7555Participant
Code: 47606753Note: Participants should dial in a few minutes
prior to the start time
WebcastWebsite link:
http://ir.getcosi.com Note: Live, then archived for one
year
ReplayDial-In Number: 888-286-8010Secondary
Dial-In Number: 617-801-6888Participant Code:
68957723Note: 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 athttp://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