Cosi reports Q4 net loss of US$2.3M, compared with net loss of US$2.8M in year-ago period; revnues up 3.3% to US$26.2M

Nevin Barich

DEERFIELD, Illinois , March 30, 2012 (press release) – 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.

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.

"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.

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