Cosi, Inc. (NASDAQ:COSI), today reported 2016 first quarter results
for the period ended March 28, 2016. For the 2016 first quarter the
Company reported a net loss of ($3.5) million, or ($0.08) per
diluted share, compared to ($4.3) million, or ($0.12) per diluted
share, in the 2015 first quarter.
2016 First Quarter Revenue Highlights:
- Total revenues for the 2016 first quarter of $21.7 million
increased $3.8 million, or 21.1%, when compared to the 2015 first
quarter.
- Company-owned restaurant net sales for the 2016 first quarter
of $21.2 million increased $4.0 million, or 23.3%, when compared to
the 2015 first quarter.
- Company-owned restaurant net sales for the 2016 first quarter
of $17.0 million, adjusted to exclude the Hearthstone restaurants
acquired on April 1, 2015, decreased $0.2 million when compared to
the 2015 first quarter, due to the net unfavorable impact of
restaurants closed subsequent to the 2015 first quarter, partially
offset by higher comp sales and new restaurants.
- System-wide comparable restaurant net sales for the 2016 first
quarter, as measured for restaurants in operation for more than 15
consecutive months as Company-owned or franchised restaurants,
recorded an aggregate increase of 1.5% when compared to the 2015
first quarter. The Hearthstone restaurants recorded an aggregate
increase in comparable restaurant net sales for the 2016 first
quarter of 5.4% when compared to the 2015 first quarter. Although
the Hearthstone restaurants do not meet the reported comparable
restaurant criteria, the Company began disclosing their comparable
restaurant net sales in October 2015. The breakdown in estimated
comparable net restaurant sales for Company-owned, franchised
restaurants, and Hearthstone restaurants is as follows:
2016 First Quarter Comparable Restaurant Net Sales |
Reported
Company-owned results |
|
1.5 |
% |
Reported
Franchised results |
|
3.7 |
% |
Reported
System-wide results |
|
2.2 |
% |
Disclosed
Hearthstone results |
|
5.4 |
% |
|
|
|
|
- Franchise fees and royalty revenues for the 2016 first quarter
of $0.5 million decreased $0.2 million, or 34.4%, when compared to
the 2015 first quarter. This variance was the result of the
transition of the Hearthstone restaurants from franchised to
Company-owned as of April 1, 2015.
2016 First Quarter Costs and Expenses
Highlights:
- Cost of food and beverage. The cost of food and beverage as a
percentage of restaurant net sales for the 2016 first quarter
decreased by 1.6%, when compared to the 2015 first quarter.
This decrease was primarily the result of operational improvements
and stability in the costs of certain contracted commodities.
- Restaurant labor and related benefits. Restaurant labor and
related benefits as a percentage of sales for the 2016 first
quarter decreased by 3.5%, when compared to the 2015 first
quarter. This decrease was due to the concerted efforts on
hourly scheduling and manager configurations as well as other
productivity initiatives.
- Occupancy and other restaurant operating expenses.
Occupancy and other restaurant operating expenses, as a percentage
of sales, for the 2016 first quarter, decreased by 3.3% when
compared to the 2015 first quarter. This decrease was the
result of newly acquired restaurants with higher sales volumes and
lower fixed costs, as well as the closure of underperforming units
with high occupancy costs.
- General and administrative expenses. General and administrative
expenses for the 2016 first quarter decreased by approximately $0.3
million, when compared to the 2015 first quarter. This decrease was
the result of costs incurred in the 2015 first quarter related to
legal and professional fees associated with the Hearthstone
acquisition, and costs related to turnover in leadership roles, as
well as savings in payroll associated with reduction of headcount
in the corporate office during the 2015 fourth quarter.
2016 First Quarter Restaurant Counts:
- As of March 28, 2016, there were 76 Company-owned and 31
franchise-owned restaurants operating in 15 states, the District of
Columbia, the United Arab Emirates, and Costa Rica. During the
three-month period ended March 28, 2016, we closed three
Company-owned restaurants in New York, NY, Mt. Kisco, NY, and
Columbus, OH. The change in restaurant counts is described
below:
|
For the Three-Months Period Ended |
|
March 28, 2016 |
|
March 30, 2015 |
|
Company-Owned |
Franchise |
Total |
|
Company-Owned |
Franchise |
Total |
|
Restaurants at
beginning of period |
79 |
31 |
110 |
|
64 |
47 |
111 |
|
New restaurants
opened |
- |
- |
- |
|
- |
2 |
2 |
|
Restaurants permanently
closed |
3 |
- |
3 |
|
1 |
- |
1 |
|
Restaurants at
end of period |
76 |
31 |
107 |
|
63 |
49 |
112 |
|
|
|
|
|
|
|
|
|
|
Future Outlook:
The Company previously reported that it expects to deliver
positive adjusted EBITDA between the second and third quarters of
2016 and lay the foundation required to grow in 2017. RJ Dourney,
the Company's President & CEO, stated, "Like most restaurant
companies, every year we experience the lowest point of our
seasonality in the first quarter. We knew that going into the
quarter, and were relentless in pursuing the results we knew we
needed to stay on track to begin generating cash between the second
and third quarters. We met our target cash balance for the quarter,
and are on track with our target for the second quarter.”
Dourney went on to say, “We reached an inflection point in the
fourth quarter last year, and we continued to see the momentum
building at all levels of the business this quarter. Comp sales
April year-to-date are consistent with our conservative target
range of 1.0%-2.0%, our largest markets are growing at 5.0% or
higher, and our restaurants are meeting our ambitious operating
cash flow targets.”
Dourney then addressed the Company’s strategic objectives,
stating, “We are working to deliver a stable operating and
financial foundation in 2016 by being laser focused on driving
traffic, generating cash, positioning our franchise system for
growth, and cultivating a culture of ownership and accountability.
I am confident that we will continue to move Cosi towards strategic
innovation and growth in 2017.”
Teleconference and Final Webcast
Information
Così expects to host an investor teleconference
and webcast at 5:00 p.m. Eastern Time today to discuss the
Company's 2016 first quarter results.
AudioDial-In Number: (844) 249-9380Secondary
(International) Dial-In Number: (270) 823-1523Participant
Code: 6309587Note: 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: (855) 859-2056Secondary Dial-In
Number: (404) 537-3406Participant Code: 6309587Note:
Available from May 12, 2016 (at 8:00 p.m. ET) until May 19, 2016
(8:00 PM ET)
Unaudited 2016 First Quarter Financial
Statements
Cosi, Inc. |
Consolidated Balance Sheets
(Unaudited) |
(dollars in thousands, except per share
amounts) |
|
|
|
|
|
|
|
|
|
March 28, 2016 |
|
December 28, 2015 |
|
|
|
|
|
|
Assets |
|
|
|
Current
assets: |
|
|
|
|
Cash and
cash equivalents |
$ |
3,200 |
|
|
$ |
5,152 |
|
|
Credit card
receivables |
|
547 |
|
|
|
343 |
|
|
Accounts
receivable, net of allowances of $41 and $223, respectively |
|
1,102 |
|
|
|
899 |
|
|
Inventories |
|
950 |
|
|
|
1,051 |
|
|
Prepaid
expenses and other current assets |
|
1,362 |
|
|
|
1,335 |
|
|
Total current assets |
|
7,161 |
|
|
|
8,780 |
|
|
|
|
|
|
|
Furniture
and fixtures, equipment and leasehold improvements, net |
|
10,942 |
|
|
|
11,892 |
|
Notes
receivable, net of allowances $1,001, respectively |
|
- |
|
|
|
- |
|
Intangible
assets, net |
|
2,337 |
|
|
|
2,642 |
|
Goodwill |
|
11,632 |
|
|
|
11,632 |
|
Restricted
cash |
|
- |
|
|
|
5,002 |
|
Other
assets |
|
1,134 |
|
|
|
1,313 |
|
|
Total
assets |
$ |
33,206 |
|
|
$ |
41,261 |
|
|
|
|
|
|
|
Liabilities
and Stockholders' Equity |
|
|
|
Current
liabilities: |
|
|
|
|
Accounts
payable |
$ |
1,950 |
|
|
$ |
1,564 |
|
|
Accrued
expenses |
|
5,945 |
|
|
|
6,920 |
|
|
Current
portion of other long-term liabilities |
|
164 |
|
|
|
105 |
|
|
Current
portion of long-term debt |
|
- |
|
|
|
473 |
|
|
Total current liabilities |
|
8,059 |
|
|
|
9,062 |
|
|
|
|
|
|
|
|
Deferred
franchise revenue |
|
1,754 |
|
|
|
1,726 |
|
|
Other
long-term liabilities, net of current portion |
|
1,653 |
|
|
|
1,625 |
|
|
Long-term
debt, net |
|
6,939 |
|
|
|
10,669 |
|
|
Deferred
income tax |
|
412 |
|
|
|
327 |
|
|
Total liabilities |
|
18,817 |
|
|
|
23,409 |
|
|
|
|
|
|
|
|
Commitments
and Contingencies |
|
|
|
|
|
|
|
|
|
Stockholders' equity: |
|
|
|
|
Common
stock - $.01 par value; 100,000,000 shares authorized, |
|
|
|
|
|
47,803,961 and
47,972,150 shares issued, respectively |
|
478 |
|
|
|
479 |
|
|
Additional
paid-in capital |
|
344,376 |
|
|
|
344,296 |
|
|
Treasury
stock, 59,886 shares at cost |
|
(1,198 |
) |
|
|
(1,198 |
) |
|
Accumulated
deficit |
|
(329,267 |
) |
|
|
(325,725 |
) |
|
Total stockholders' equity |
|
14,389 |
|
|
|
17,852 |
|
|
Total liabilities and stockholders' equity |
$ |
33,206 |
|
|
$ |
41,261 |
|
Cosi, Inc. |
Consolidated Statements of Operations
(Unaudited) |
(dollars in thousands, except per share
data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
March 28, 2016 |
|
March 30, 2015 |
|
|
|
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
Restaurant
net sales |
$ |
21,221 |
|
|
$ |
17,207 |
|
|
|
|
|
Franchise
fees and royalties |
|
460 |
|
|
|
701 |
|
|
|
|
|
|
Total revenues |
|
21,681 |
|
|
|
17,908 |
|
|
|
|
|
|
|
|
|
|
|
|
Costs and
expenses: |
|
|
|
|
|
|
|
Cost of
food and beverage |
|
5,655 |
|
|
|
4,844 |
|
|
|
|
|
Restaurant
labor and related benefits |
|
8,004 |
|
|
|
7,097 |
|
|
|
|
|
Occupancy
and other restaurant operating expenses |
|
7,487 |
|
|
|
6,637 |
|
|
|
|
|
|
|
|
21,146 |
|
|
|
18,578 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and
administrative expenses |
|
2,290 |
|
|
|
2,617 |
|
|
|
|
|
Depreciation and amortization |
|
984 |
|
|
|
580 |
|
|
|
|
|
Provision
for losses on asset impairments |
|
|
|
|
|
|
|
|
and disposals |
|
43 |
|
|
|
- |
|
|
|
|
|
Closed
store costs expense (income) |
|
103 |
|
|
|
(39 |
) |
|
|
|
|
Lease
termination costs |
|
180 |
|
|
|
51 |
|
|
|
|
|
Loss on
sale of assets |
|
197 |
|
|
|
18 |
|
|
|
|
|
|
Total costs and
expenses |
|
24,943 |
|
|
|
21,805 |
|
|
|
|
|
|
Operating loss |
|
(3,262 |
) |
|
|
(3,897 |
) |
|
|
Other
income (expense): |
|
|
|
|
|
|
Interest
expense |
|
(169 |
) |
|
|
(256 |
) |
|
|
|
Debt
issuance and debt discount amortization |
|
(165 |
) |
|
|
(165 |
) |
|
|
|
Other
income |
|
139 |
|
|
|
3 |
|
|
|
|
|
|
Total other income
(expense) |
|
(195 |
) |
|
|
(418 |
) |
|
|
|
|
|
Net loss before income
taxes |
|
(3,457 |
) |
|
|
(4,315 |
) |
|
|
|
Provision
for income tax expense |
|
(85 |
) |
|
|
- |
|
|
|
|
|
|
Net loss |
$ |
(3,542 |
) |
|
$ |
(4,315 |
) |
|
|
Per Share
Data: |
|
|
|
|
|
|
Loss per
share, basic and diluted |
$ |
(0.08 |
) |
|
$ |
(0.12 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding, |
|
|
|
|
|
|
|
|
basic and diluted |
|
46,713,329 |
|
|
|
37,199,402 |
|
|
|
Cosi, Inc. |
Consolidated Statements of Cash Flows
(Unaudited) |
(in thousands) |
|
|
|
|
|
|
|
|
|
March 28, 2016 |
|
March 30, 2015 |
|
|
|
|
|
|
|
|
|
|
Cash flows
from operating activities: |
|
|
|
|
|
|
Net
loss |
$ |
(3,542 |
) |
|
$ |
(4,315 |
) |
|
|
|
Adjustments
to reconcile net loss to net cash used in |
|
|
|
|
|
|
|
operating
activities |
|
|
|
|
|
|
|
Depreciation and
amortization |
|
984 |
|
|
|
580 |
|
|
|
|
|
Amortization of debt
issuance and debt discount costs |
|
165 |
|
|
|
165 |
|
|
|
|
|
Loss on sale of
assets |
|
197 |
|
|
|
18 |
|
|
|
|
|
Deferred income
tax |
|
85 |
|
|
|
- |
|
|
|
|
|
Non-cash portion of
asset impairments and disposals |
|
43 |
|
|
|
- |
|
|
|
|
|
Provision for bad
debts |
|
3 |
|
|
|
76 |
|
|
|
|
|
Provision for lease
termination reserve |
|
180 |
|
|
|
51 |
|
|
|
|
|
Non-cash gain on
settlement of Holdback Agreement |
|
(124 |
) |
|
|
- |
|
|
|
|
|
Stock-based
compensation expense |
|
203 |
|
|
|
108 |
|
|
|
|
|
Interest expense paid
in kind |
|
- |
|
|
|
256 |
|
|
|
|
|
Changes in operating
assets and liabilities, net of effect of acquisitions |
|
|
|
|
|
|
|
Credit
card receivables |
|
(204 |
) |
|
|
(917 |
) |
|
|
|
|
Accounts
receivable |
|
(206 |
) |
|
|
(287 |
) |
|
|
|
|
Inventories |
|
101 |
|
|
|
92 |
|
|
|
|
|
Prepaid
expenses and other current assets |
|
(27 |
) |
|
|
250 |
|
|
|
|
|
Other
assets |
|
145 |
|
|
|
(1 |
) |
|
|
|
|
Accounts
payable and accrued expenses |
|
(591 |
) |
|
|
(1,762 |
) |
|
|
|
|
Deferred
franchise revenue |
|
28 |
|
|
|
(17 |
) |
|
|
|
|
Other
liabilities |
|
(93 |
) |
|
|
(247 |
) |
|
|
|
|
Net
cash used in operating activities |
|
(2,653 |
) |
|
|
(5,950 |
) |
|
|
|
|
|
|
|
|
|
|
Cash flows
from investing activities: |
|
|
|
|
|
|
Capital
expenditures |
|
(219 |
) |
|
|
(1,225 |
) |
|
|
|
Proceeds
from sale of assets |
|
251 |
|
|
|
- |
|
|
|
|
|
Net cash provided by
(used in) investing activities |
|
32 |
|
|
|
(1,225 |
) |
|
|
|
|
|
|
|
|
|
|
Cash flows
from financing activities: |
|
|
|
|
|
|
Principal
payments on long-term debt |
|
(4,333 |
) |
|
|
- |
|
|
|
|
Return of
excess restricted cash held in escrow account |
|
5,002 |
|
|
|
- |
|
|
|
|
|
Net cash provided by
financing activities |
|
669 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
Net
decrease in cash and cash equivalents |
|
(1,952 |
) |
|
|
(7,175 |
) |
|
|
Cash and
cash equivalents, beginning of year |
|
5,152 |
|
|
|
21,053 |
|
|
|
Cash and
cash equivalents, end of period |
$ |
3,200 |
|
|
$ |
13,878 |
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information: |
|
|
|
|
|
Cash paid
for: |
|
|
|
|
|
|
Interest |
$ |
- |
|
|
$ |
- |
|
|
|
|
Corporate
franchise and income taxes |
$ |
34 |
|
|
$ |
32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 75 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.
CONTACT:
Miguel Rossy-Donovan
Chief Financial Officer
(857) 415-5020
InvestorRelations@getcosi.com