Cosi, Inc. (COSI) Q2 2012 Results Conference Call August 16, 2012 17:00 PM ET Executives Carin Stutz – President and CEO Bill Koziel – CFO Analysts Chris Krueger – Northland Capital Markets Howard Penney – Hedgeye Risk Management Kyle Krueger – Apollo Capital Presentation Operator
All such forward-looking statements involve risks and uncertainties that cause our future performance and financial results to differ materially and therefore you should not place undue reliance on these forward-looking statements.We refer all of you to our filings with the Securities and Exchange Commission for a more detailed discussion of the risks and uncertainties that may have a direct bearing on our operating results, our performance and our financial condition. For the call today, Carin will begin with comments about the business and we'll update you on various initiatives for 2012. I'll then take us through a review of the results for the quarter and then we'll open the call for your questions. So now, I'll turn it over to Carin. Carin Stutz Thank you, Bill and thanks to everyone for joining us on the call today. We feel it's been another good quarter of progress for the Cosi brand and we're really pleased what we've been able to accomplish in six months since I've been here with a focus on really stabilizing our core business, by improving our operations and the guest experience. I'm most proud of our team for the efforts they've made in better operations, throughput, cleanliness and profitability. It is noticeable and I've heard from some of you that are on the call today that you've seen the progress. We're on track with our three 2012 initiatives. And the first initiative is a focus on our food, improving and simplifying our menu. We spent the first six months working on current offerings, making sure that our most popular items are even more popular and done well, (inaudible) better ingredients to improve their flavor and appeal. We had some creative ideas to freshen up our recipes and ingredients and to leverage a key point of difference for us, more utilization of our stone-hearth ovens.
In order to supplement the work that we're doing, we've contracted Chef Charlie Baggs, a local Chicago culinary consultant and his team to help us with future menu innovations. As we've communicated on our last call, we've completed a 15% menu reduction. It is always a risk to make changes but often more of a risk to have a menu that you can't deliver well. These changes are setting us up to be stronger operationally for the long term and most importantly to increase guest satisfaction and guest count. We also introduced new menu boards that are cleaner, less cluttered, more contemporary and much easier to read.Our second initiative was to further improve the guest experience with throughput initiatives and operations simplifications. We've completed several of the initiatives from optimizing our kitchen equipment for improved quality and reduced cooking time to upgrading our POS configurations to simplify and shorten the order entry process. Early results indicated an immediate improvement of 10 to 15 seconds per guests. Now for the balance of the year, we're testing pagers to alert guests when their food is ready and we are in the process of completing the conversion of 10 more of our restaurants to the pay first model. This is what takes away the major confusion of how to use Cosi. All of these actions combined are improving the ambiance in our restaurants, further increasing our speed of service and reducing labor costs. Our third initiative is controlling costs and it's also progressing. Our improved performance is coming from managing cost of goods in a difficult commodity environment, restaurant labor productivity with our guest satisfaction on the rise and continued reductions in G&A. And we have taken a modest price increase of 1% for the year. For the results of these initiatives, in the second quarter Cosi achieved a profit and was cash flow positive. Yes, that's correct. Cosi achieved a profitable quarter after six months with this new leadership team. The Company earned $77,000 which is our first step in getting the core profitable and establishing a solid foundation for future growth in the business. Read the rest of this transcript for free on seekingalpha.com