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Così, Inc. Reports Fiscal 2015 Fourth Quarter and Year-End Results

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BOSTON, March 24, 2016 (GLOBE NEWSWIRE) -- Cosi, Inc. (NASDAQ: COSI), today reported 2015 fourth quarter and year-end results for the period ended December 28, 2015. For the 2015 fourth quarter the Company reported a net loss of ($3.6) million, or ($0.08) per diluted share, compared to ($4.5) million, or ($0.18) per diluted share, in the 2014 fourth quarter. For fiscal 2015, the Company reported a net loss of ($15.7) million, or ($0.36) per diluted share, compared to ($16.7) million, or ($0.82) per diluted share, in fiscal year 2014.

2015 Fourth Quarter Financial Metrics and Highlights:

  • Total revenues for the 2015 fourth quarter of $24.0 million increased $4.5 million, or 23.1%, when compared to the 2014 fourth quarter.
  • Company-owned net restaurant sales for the 2015 fourth quarter of $23.6 million increased $4.9 million, or 26.5%, when compared to the 2014 fourth quarter. This increase was the result of incremental net sales of $4.4 million from the 13 Hearthstone restaurants added to the Company-owned portfolio in the 2015 second quarter, $0.1 million from the comparable restaurant base, and $1.0 million from the non-comparable restaurant base, offset by net sales decreases from closed restaurants of $0.6 million.
  • System-wide comparable net restaurant sales, as measured for restaurants in operation for more than 15 consecutive months as Company-owned or franchised restaurants, recorded an aggregate increase of 0.7% when compared to the 2014 fourth quarter. The Hearthstone restaurants recorded an aggregate increase in comparable restaurant sales of 3.8% when compared to the 2014 fourth quarter. Although the Hearthstone restaurants do not meet the reported comparable restaurant criteria, the Company began disclosing their comparable net restaurant sales in October 2015. The breakdown in estimated comparable net restaurant sales for Company-owned, franchised restaurants, and Hearthstone restaurants is as follows:             
 
2015 Fourth Quarter Comparable Net Restaurant Sales
Reported Company-owned results 0.4%
Reported Franchised results 1.4%
Reported System-wide results 0.7%
Disclosed Hearthstone results 3.8%
    
  • Franchise fees and royalty revenues for the 2015 fourth quarter of $0.5 million decreased $0.4 million, or 45.3%, when compared to the 2014 fourth quarter. This variance was mostly the result of the Hearthstone merger in the 2015 second quarter.             

Fiscal 2015 Financial Metrics and Highlights:

  • Total revenues for the fiscal year 2015 of $89.9 million increased $12.1 million, or 15.6%, when compared to fiscal year 2014.
  • Company-owned net restaurant sales for fiscal year 2015 of $87.9 million increased $13.0 million, or 17.3%, when compared to fiscal year 2014. This increase was the result of incremental net sales of $13.4 million from the 13 Hearthstone restaurants added to the Company-owned portfolio in the 2015 second quarter, $1.0 million from the comparable restaurant base, and $3.5 million from the non-comparable restaurant base, offset by net sales decreases from closed restaurants of $5.0 million.
  • System-wide comparable net restaurant sales for fiscal year 2015, as measured for restaurants in operation for more than 15 consecutive months as Company-owned or franchised, recorded an aggregate increase of 0.3% compared to fiscal year 2014. The Hearthstone restaurants do not meet the reported comparable restaurant criteria. However, the Company began disclosing their comparable net restaurant sales results separately in October 2015. As a result their comparable net restaurant sales are not disclosed for the 52 week period ended December 28, 2015. The breakdown in estimated comparable net restaurant sales for Company-owned and franchised restaurants is as follows:             
 
Fiscal 2015 Comparable Net Restaurants Sales
Reported Company-owned results 1.6%
Reported Franchised results -1.9%
Reported System-wide results 0.3
%
    
  • Franchise fees and royalty revenues for fiscal 2015 of $2.0 million decreased ($0.8) million, or (1.4%) of total revenues, when compared to fiscal 2014.
  • Company-owned restaurant cash flow for fiscal 2015 of ($0.6) million improved by $2.5 million, or 2% of sales, when compared to fiscal 2014.  
  • General & administrative expenses for fiscal 2015 of $12.0 million decreased $0.5 million, or 2.6% of total revenues, when compared to fiscal 2014 as a result of savings related to the relocation of the corporate support center from Chicago, Illinois, to a smaller location in Boston, Massachusetts, combined with overhead savings in the second half of fiscal 2015, offset by costs associated with leadership turnover and non-recurring costs associated with the merger of Hearthstone Associates in the first half of 2015, as well as the non-cash expenses related to stock-compensation and bad-debt reserves.
  • The Company recorded asset impairments of $1.3 million in fiscal 2015, or 1.5% of total revenues, as a result of exiting and/or considering exiting unprofitable Company-owned restaurants.
  • The Company reported a cash and cash equivalents balance of $5.2 million as of December 28, 2015.

Fiscal 2015 Restaurant Counts:

  • There were 79 Company-owned, and 31 franchised restaurants, operating in 15 states, the District of Columbia, Costa Rica, and the United Arab Emirates in fiscal 2015, versus 64 and 47 respectively in fiscal 2014. The change in restaurant counts is described below:             
        
 Company-       
 owned Franchised  Total 
Fiscal 2014 Year-End Count 64  47  111 
Opened during Fiscal 2015    5  5 
Closed during Fiscal 2015 (2) (4) (6)
Converted to Company-Owned 17  (17) 0 
Fiscal 2015 Year-End Count 79  31  110 
          

Future Outlook:
The Company previously reported that it expects to deliver positive adjusted EBITDA in mid-2016 and lay the foundation required to grow in 2017. RJ Dourney, the Company's President & CEO, stated "We set out to reduce cash burn in the fourth quarter and not only were we able to accomplish that, but we also continue to see further reductions in 2016."

"We stabilized sales in the fourth quarter and expect to meet our conservative sales estimates for 2016. We also reached an inflection point in the fourth quarter and are moving the legacy portfolio of restaurants towards profitability, a trend that we continue to see in 2016," Dourney went on to say. 

Dourney then addressed the Company's objective in 2016, stating, "We are building a stable foundation in 2016 in order to grow the franchise system in 2017. I am excited about the recent developments in our existing franchised territories, and encouraged by the conversations we are having with a number of potential new partners."

 
 Cosi, Inc. 
 Consolidated Balance Sheets 
 (dollars in thousands, except per share amounts) 
      
   December 28,  December 29, 
   2015 2014
Assets   
Current assets:   
 Cash and cash equivalents$  5,152  $  21,053 
 Credit card receivable   343     507 
 Accounts receivable, net of allowances of $223 and $118, respectively   899     581 
 Inventories   1,051     825 
 Prepaid expenses and other current assets   1,335     1,279 
   Total current assets   8,780     24,245 
      
Furniture and fixtures, equipment and leasehold improvements, net   11,892     7,308 
Notes receivable, net of allowances of $1,001 and $450, respectively   -      551 
Intangible assets, net   2,642     -  
Goodwill    11,632     -  
Restricted cash   5,002     -  
Other assets   1,313     1,327 
   Total assets$  41,261  $  33,431 
      
Liabilities and Stockholders' Equity   
Current liabilities:   
 Accounts payable$  1,564  $  1,519 
 Accrued expenses   6,920     9,336 
 Deferred franchise revenue   -      18 
 Current portion of other long-term liabilities   105     177 
 Current portion of long-term debt   473     -  
   Total current liabilities   9,062     11,050 
      
 Deferred franchise revenue   1,726     1,724 
 Other long-term liabilities, net of current portion   1,625     1,663 
 Long-term debt, net    10,669     6,623 
 Deferred income tax   327     -  
   Total liabilities   23,409     21,060 
      
 Commitments and Contingencies   
      
Stockholders' equity:   
 Common stock - $.01 par value; 100,000,000 shares authorized,   
  47,972,150 and 38,410,196 shares issued, respectively   479     383 
 Additional paid-in capital   344,296     323,256 
 Treasury stock, 59,886 shares at cost   (1,198)    (1,198)
 Accumulated deficit   (325,725)    (310,070)
   Total stockholders' equity   17,852     12,371 
   Total liabilities and stockholders' equity$  41,261  $  33,431 
      
The accompanying notes are an integral part of these consolidated financial statements. 


Cosi, Inc 
Consolidated Statements of Operations and Comprehensive Loss 
(dollars in thousands, except per share data) 
          
    December 28, December 29,   
    2015 2014   
          
Revenues:      
  Restaurant net sales$  87,867  $  74,905    
  Franchise fees and royalties   2,023     2,853    
   Total revenues   89,890     77,758    
          
Costs and expenses:      
  Cost of food and beverage   23,489     20,078    
  Restaurant labor and related benefits   33,168     29,046    
  Occupancy and other restaurant operating expenses   31,815     27,720    
       88,472     76,844    
  General and administrative expenses   11,972     12,359    
  Depreciation and amortization   3,200     2,394    
  Restaurant pre-opening expenses   6     15    
  Provision for losses on asset impairments      
   and disposals   1,344     346    
  Closed store costs   126     172    
  Lease termination costs   286     1,468    
  Gain on sale of fixed assets   -      (50)   
   Total costs and expenses   105,406     93,548    
   Operating loss   (15,516)    (15,790)   
Other income (expense):      
 Interest expense   (1,029)    (471)   
 Debt issuance and debt discount amortization    (658)    (446)   
 Other income   40     82    
   Total other expense    (1,647)    (835)   
   Net loss before income taxes   (17,163)    (16,625)   
 Benefit from income tax   1,508     -     
   Net loss and comprehensive loss$  (15,655) $  (16,625)   
          
Per Share Data:      
 Loss per share, basic and diluted$  (0.36) $  (0.82)   
          
  Weighted average common shares outstanding   44,094,340     20,271,585    
          
The accompanying notes are an integral part of these consolidated financial statements.   


Cosi, Inc.
Consolidated Statements of Cash Flows
(in thousands)
 
   December 28,  December 29,    
   2015 2014  
        
Cash flows from operating activities:     
 Net loss$  (15,655) $  (16,625)  
 Adjustments to reconcile net loss to net cash used in     
  operating activities     
  Depreciation and amortization   3,200     2,394   
  Amortization of debt issuance and debt discount costs   658     446   
  Gain on sale of assets   -      (50)  
  Asset impairments and disposals   1,344     374   
  Deferred income tax   (1,508)    -    
  Provision for bad debts   167     226   
  Provision for uncollectible notes receivable   551     -    
  Provision for lease termination reserve   286     (249)  
  Stock-based compensation expense   1,207     509   
  Interest expense paid in kind   -      470   
  Changes in operating assets and liabilities, net of effect of acquisitions       
    Credit cards receivable   163     (100)  
    Accounts receivable   (137)    (213)  
    Inventories   (84)    (46)  
    Prepaid expenses and other current assets   170     69   
    Other assets   33     101   
    Accounts payable and accrued expenses    (4,302)    (888)  
    Deferred franchise revenue    (10)    206   
    Other liabilities   (402)    (671)  
    Net cash used in operating activities   (14,319)    (14,047)  
        
Cash flows from investing activities:     
 Capital expenditures   (4,769)    (1,880)  
 Proceeds from sale of assets   -      72   
 Cash paid for purchases of stores   (250)    -    
    Net cash used in investing activities   (5,019)    (1,808)  
        
Cash flows from financing activities:     
 Net proceeds from issuance of private placement   15,264     -    
 Restricted cash   (5,002)    -    
 Principal payments on long-term debt   (6,825)    -    
 Proceeds from issuance of long-term debt   -      7,500   
 Proceeds from issuance of common stock   -      24,473   
 Proceeds from the issuance of warrants   -      11   
 Issuance of long-term debt and stock warrants   -      (690)  
    Net cash provided by financing activities   3,437     31,294   
        
Net (decrease)/ increase in cash and cash equivalents   (15,901)    15,439   
Cash and cash equivalents, beginning of year   21,053     5,614   
Cash and cash equivalents, end of year$  5,152  $  21,053   
        
Supplemental disclosures of cash flow information:     
Cash paid for:     
 Corporate franchise and income taxes$  376  $  376   
 Interest$  970  $  -    
        
Non-cash Financing activities:     
 Issuance of common stock for acquisition (Note 1)$  4,665  $  -    
 Issuance of stock warrants$  -   $  1,571   
        
The accompanying notes are an integral part of these consolidated financial statements.  
    

Teleconference and Webcast Information
As previously announced, the Company expects to host an investor teleconference and webcast at 5:00 p.m. Eastern Time on March 24, 2016, to discuss the Company's results for the 2015 fiscal year end results.  The webcast will be broadcast live and available for replay for a limited time thereafter at:

Audio
Dial-In Number:  877 516 3513
Secondary (International) Dial-In Number:  281 973 6108
Participant Code: 63339310
Note:  Participants should dial in a few minutes prior to the start time

Webcast
Website link:  http://ir.getcosi.com 
Note:  Live, then archived for one year

Replay
Dial-In Number: 855 859 2056
Secondary Dial-In Number:  404 537 3406
Participant Code: 63339310
Note:  Available from March 24, 2016 (at 8:00 p.m. ET) until March 31, 2016 (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 76 Company-owned and 31 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 © 2016 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 at
http://www.getcosi.com in the investor relations section.

CONTACT: Miguel Rossy-Donovan Chief Financial Officer (857) 415-5020 InvestorRelations@getcosi.com

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