Cosi, Inc. (NASDAQ: COSI), the premiumconvenience restaurant company, today reported a net loss for the firstquarter ended March 31, 2008 of $(3,028,000), or $(0.08) per basic anddiluted common share, compared with a net loss of $(4,205,000), or $(0.11)per basic and diluted common share, for the 2007 first quarter. Excludingthe effect of discontinued operations in both quarters, Cosi's net loss inthe 2008 and 2007 first quarters was $(0.07) and $(0.10), respectively.Cosi reduced its operating loss in the first quarter compared with theyear-earlier period by approximately 32%, to $(2,788,000) from$(4,077,000).
Cosi's total revenues for the 2008 first quarter grew 6.7% to $33,191,000,from $31,121,000 in the 2007 first quarter.
James Hyatt, Cosi's President and Chief Executive Officer, said, "Cosi'sfirst quarter results and our trend line of performance, despite achallenging business environment and the adverse effect of holiday shiftsinto the quarter, demonstrate that our partners are making good progress inputting best practices to work to operate more efficiently and satisfy ourguests with a premium experience on a more consistent basis. As we enterour seasonally stronger months, I am very encouraged by the organizationalmomentum that is building. We are determined to keep our focus on drivingsales and operating margin improvement, recruiting outstanding franchisepartners and working closely with them for our mutual success."
2008 First Quarter Financial Performance and Restaurant Economics
Cosi achieved the aforementioned 6.7% increase in first quarter revenuesover the first quarter 2007, as well as flat quarter-over-quarterCompany-owned comparable sales, despite the adverse effects of the New Yearand Easter holidays falling within the quarter this year but outside thequarter last year. Contributing to Cosi's total revenues were theCompany's growth in restaurant net sales, excluding discontinuedoperations, to $32,459,000 from $30,689,000 in the prior year quarter andits growth in franchise fees and royalties to $732,000 from $432,000 in the2007 first quarter.
Cosi stated that excluding the impact for the five days related to the NewYear and Easter holidays, its sales momentum has continued on theaccelerating trend line that began in the 2007 fourth quarter.Specifically, adjusting for the five holiday-related days during the 2008first quarter, Cosi's Company-owned comparable sales increased 1.7%compared with the first quarter of 2007.
As further evidence of Cosi's sales momentum that was obscured by the firstquarter's holiday shifts, Cosi provided, on a one-time basis, comparablesales performance for the month of April 2008, as measured for restaurantsin operation for more than 15 months. On an aggregate basis, comparablesales for such Company-owned locations increased 6.3% in April 2008compared with April 2007.
Cosi stated that during the 2008 first quarter it was able to modestly growrestaurant cash flow, by 3.4%, and significantly reduce its operating loss,by 31.6%, compared to the prior year quarter.
Despite widespread commodity price pressures and the effect of higheroccupancy costs, Cosi was able to minimize increases in restaurant-levelcosts as a percentage of restaurant net sales. For the 2008 first quarter,Cosi reported a 30 basis point increase in costs and expenses related toCompany-owned restaurant operations as a percentage of restaurant net salescompared with the first quarter 2007. The increase resulted from a 10 basispoint increase in the cost of food and beverage as a percentage ofrestaurant net sales and a 60 basis point increase in occupancy and otherrestaurant operating expenses, offset by a 40 basis point reduction inlabor and related benefits on a quarter-over-quarter basis.
During the same period, the Company improved by 410 basis points itsgeneral and administrative expenses as a percentage of restaurant totalrevenues, to $5,038,000 from $5,981,000 in the first quarter 2007.
Cosi reported that as of March 31, 2008 cash, cash equivalents, andshort-term investments were $6,954,000 with virtually no debt. Totalstockholders' equity was $31,346,000.
Development Performance
Cosi ended the first quarter with a total of 144 locations consisting of102 Company-owned locations and 42 franchised locations. Eight franchisedlocations opened during the 2008 first quarter, and five company-ownedlocations were closed during the same period.
Subsequent to the end of the 2008 first quarter, one additional newfranchise location was opened. Cosi continues to expect franchisees to opena total of between 25 and 35 locations in 2008. The Company added that ithas commitments from 29 franchise area developers for 332 Cosi restaurantsincluding the 43 franchised locations already open.
Teleconference and Webcast Information
Cosi's senior management team will host a teleconference today at 5:00 p.m.ET to discuss the Company's 2008 first quarter financial results.
To participate in the teleconference, investors and analysts are invited tocall 800-561-2601 in the U.S., or 617-614-3518 outside of the U.S., andreference participant code 22119253. The conference call will also bewebcast simultaneously by accessing http://investors.getcosi.com/.
A replay will be available following the call until 12:00 AM ET on May 15,2008. To access the replay, call 888-286-8010 in the U.S., or 617-801-6888outside of the U.S., and reference the code 85942935.
About Cosi, Inc.
Cosi (http://www.getcosi.com) is a national premium convenience restaurantchain that has developed featured foods built around a secret,generations-old recipe for crackly crust flatbread. This artisan bread isfreshly baked in front of customers throughout the day in open flame stonehearth ovens prominently located in each of the restaurants. Cosi's warmand urbane atmosphere is geared towards its sophisticated, upscale, urbanand suburban guests. There are currently 102 Company-owned and 43 franchiserestaurants operating in eighteen states, the District of Columbia and theUnited Arab Emirates. The Cosi vision is to become America's favoritepremium convenience restaurant by providing customers authentic,innovative, savory food while remaining an affordable luxury.
The Cosi menu features Cosi sandwiches, freshly tossed salads, melts,soups, Cosi bagels, flatbread pizzas, S'mores, snacks and other desserts,and a wide range of coffee and coffee-based drinks and other specialtybeverages. Cosi restaurants are designed to be welcoming and comfortablewith an eclectic environment.
