Brazil Fast Food Announces Second Quarter 2012 Results

Mon Aug 20, 2012 12:25pm EDT

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Brazil Fast Food Announces Second Quarter 2012 Results

Brazil Fast Food Corp. (OTC Bulletin Board: BOBS) (“Brazil Fast Food”, or the “the Company”), the second largest fast-food restaurant chain in Brazil with 963 points of sale, operating under (i) the Bob’s brand, (ii) the Yoggi brand, (iii) KFC and Pizza Hut São Paulo as franchisee of Yum! Brands, and (iv) Doggis as franchisee of Gastronomia & Negocios S.A. (former Grupo de Empresas Doggis S.A.), today announced financial results for the second quarter 2012 ended June 30, 2012.

Second Quarter 2012 Highlights

  • System-wide sales totaled R$254.2 million, up 22.3% from the second quarter 2011
  • Revenue totaled R$55.1 million, up 8.0% from R$51.0 million in the second quarter 2011
  • Points of sale totaled 963 at June 30, 2012, up from 805 at the end of second quarter 2011
  • EBITDA was R$6.7 million, up 23.8% from the second quarter 2011
  • Operating income increased 23.9% year-over-year to R$5.0 million
  • Net income was R$3.6 million, or R$0.45 per basic and diluted share

“We are pleased to report a very strong quarter of profitability and EBITDA growth, reflecting the strength of our brands and shift towards more franchised stores,” said Ricardo Figueiredo Bomeny, CEO of Brazil Fast Food Corp. “We maintained a strong and liquid balance sheet, which gives us the flexibility to invest in future expansion.”

Second Quarter 2012 Results

System-wide sales grew 22.3% in the second quarter to R$254.2 million, driven by an increase in the number of franchised points of sale as well as higher sales from company-owned stores.

Total revenue for the second quarter 2012 increased by 8.0% to R$55.1 million compared to R$51.0 million in the second quarter 2011.

Net restaurant sales for company-owned retail outlets was up 5.0% year-over-year to R$40.2 million in the second quarter 2012, reflecting an increase in net revenues across the Company’s KFC and Pizza Hut brands, offset somewhat by a decrease in net revenues for the Company’s Bob’s and Doggis brand. In 2011 the Company converted all its own-operated Doggis’ stores to franchised stores.

Net revenue from franchisees increased 23.7% year-over-year to R$9.7 million, driven primarily by an increase in number of franchised retail outlets to 893, up from 736 in the same period a year ago. Other revenue and income totaled R$5.1 million in the second quarter 2012 up from R$4.8 million in the year ago period.

Operating expenses grew 6.6% to R$50.0 million in the second quarter 2012 from R$46.9 million in the second quarter of 2011. As a percentage of revenue, operating costs declined to 90.9% of total revenue in the second quarter of 2012 to 92.1% of total revenue in the same period of 2011.

Operating income for the second quarter of 2012 was R$5.0 million, compared to R$4.0 million in the second quarter of 2011. Operating margin in the second quarter of 2012 improved to 9.1% compared to 7.9% in the same period of 2011.

EBITDA in the second quarter of 2012 was R$6.7 million, compared to R$5.4 million in the second quarter of 2011. EBITDA margin was 12.1% compared to 10.5% in the comparable period of 2011. Please refer Table No. 4 in this press release for a reconciliation of EBITDA to its nearest GAAP equivalent.

Interest expense was R$0.2 million in the second quarter of 2012, compared to interest income of R$0.2 million in the second quarter of 2011.

Net income for the second quarter of 2012 was R$3.6 million, or R$0.45 per basic and diluted share, up 10.6% from net income of R$3.3 million, or R$0.41 per basic and diluted share in the same period of 2011.

Six Months 2011 Results

For the six months ended in June 30, 2012, total net revenue was R$115.6 million, up 9.1% from R$105.9 million in the comparable period of 2011. Operating income was R$10.6 million, up 18.4% from R$8.9 million in the comparable period in 2011. Operating margin was 9.1% for the six months ended June 30, 2012 compared to 8.4% in the comparable period in 2011. Net income for the six months ended June 30, 2012 was R$7.0 million, down 6.4% from R$7.5 million in the comparable period in 2010. Basic and diluted earnings per share were R$0.87 for the six months ended June 30, 2012 compared to R$0.93 for the six months ended June 30, 2011.

Financial Condition

As of June 30, 2012, Brazil Fast Food had R$23.5 million in cash and cash equivalents, up from R$21.4 million as of December 31, 2011. Working capital was R$15.2 million, as compared to R$16.9 million as of the end of 2011. Total shareholders' equity as of June 30, 2012 was R$53.2 million, compared to R$45.5 million at the end of 2011.

In the first six months of 2012, Brazil Fast Food generated net cash flow from operating activities of R$8.5 million, representing a decrease of 11.9%, from R$9.6 million for the comparable period in 2011. The Company used R$9.0 million in cash towards investment in property and equipment to improve the Company's retail operations, mainly setting up new owned-and-operated KFC and Pizza Hut stores.

Business Outlook

In May 2012, the Company acquired Yoggi do Brasil Ltda (“Yoggi”) which operates a franchise network of frozen yogurt in Brazil since 2008 with 48 franchised point of sales and 43 franchisees. Management anticipates synergy savings from this acquisition and foresees possible market consolidation. Brazil Fast Food expects to increase the total number of points of sale to 150 over the next five years.

“Under the KFC and Pizza Hut brand, we have own-operated stores, as franchisee of Yum! brands. We are focused on enhancing our own-stores profitability and operational margins in the coming quarters. We do not have any own-operated stores under the Doggis and Yoggi brands. Our growth strategy for these two brands is to expand through franchisees and to become a market leader in the hot dog and frozen yogurt segments. We believe there is a tremendous growth opportunity in Brazil and we will seek to expand our market share in these two segments. At the end of 2012, we expect Bobs’ brand to reach a total of 1000 points of sale, a 20.5% increase from 2011. Our objective is to continuously expand and increase our margins for our own-operated stores and franchised stores under the Bob’s brand,” concluded Mr. Bomeny.

About Brazil Fast Food Corp.

Brazil Fast Food Corp. owns and operates, both directly and through franchisees, the second largest fast-food restaurant chain in Brazil. The Bob’s trade name is used by Venbo Comércio de Alimentos Ltda., a subsidiary of Brazil Fast Food holding company, BFFC do Brasil Participações Ltda (formerly 22N Participações Ltda.). The “KFC” trade name is used by CFK Comércio de Alimentos Ltda. (formerly Clematis Indústria e Comércio de alimentos e Participações Ltda.), also a holding company subsidiary. The “Pizza Hut” trade name is used by Internacional Restaurantes do Brasil (“IRB”), also a 60% subsidiary of Brazil Fast Food holding company, BFFC do Brasil Participações Ltda. Recently, Company entered into an agreement with Grupo de Empresas Doggis S.A (“GED”) to cross-franchise the Bob’s and Doggis brands in Chile and Brazil, respectively. Brazil Fast Food will control the Doggis master franchise in Brazil and GED will control the Bob’s master franchise in Chile.

Safe Harbor Statement

This press release contains forward-looking statements within the meanings of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended, and within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve known or unknown risks, uncertainties and other factors that may cause the actual results to differ materially from those expressed or implied by such forward looking statements. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see the disclosures in the Company's filings with the Securities and Exchange Commission, including the risk factors contained in the Company's most recent annual report on Form 10-K and quarterly report Form 10-Q filed with the Securities and Exchange Commission.

--FINANCIAL TABLES FOLLOW—

 
BRAZIL FAST FOOD CORP. AND SUBSIDIARIES
 
Consolidated Balance Sheets – Assets (Unaudited)
(in thousands of Brazilian Reais, except share amounts)
 
Consolidated Balance Sheets – Liabilities and Shareholders’ Equity (Unaudited)
(in thousands of Brazilian Reais, except share amounts)
 
  June 30,   December 31,
2012 2011
(unaudited)
 
CURRENT ASSETS:
Cash and cash equivalents R$ 23,528 R$ 21,357
Inventories 2,619 3,985
Accounts receivable
Clients 5,779 5,660
Franchisees 13,056 12,247
Allowance for doubtful accounts (600 ) (801 )
Advances to suppliers 1,592 1,500
Prepaid expenses 823 3,478
Receivables from properties sale 1,623 3,523
Other current assets   6,848     4,083  
 
TOTAL CURRENT ASSETS 55,268 55,032
 
Other receivables and other assets 12,884 10,862
 
 
Deferred tax asset, net 6,898 8,378
 
Goodwill 2,699 799
 
Property and equipment, net 37,359 31,342
 
Intangible assets, net   5,061   4,472  
 
TOTAL ASSETS R$ 120,169   R$ 110,885  
 

 

 
June 30, December 31,
2012 2011
(unaudited)
 
 
CURRENT LIABILITIES:
Notes payable R$ 13,665 R$ 11,523
Accounts payable and accrued expenses 9,084 11,608
Payroll and related accruals 5,512 5,618
Taxes 3,684 5,020
Deferred income tax 612 1,262
Current portion of deferred income 4,247 1,118
Current portion of contingencies and reassessed taxes 2,062 1,940

Accounts payable related to Yoggi acquisition

  1,199     -  
 
TOTAL CURRENT LIABILITIES 40,065 38,089
 
Deferred income, less current portion 2,910 4,057
 
NOTES PAYABLE, less current portion 5,330 5,068
 
CONTINGENCIES AND REASSESSED TAXES, less
current portion 18,226 18,215
 
Other liabilities   450   -  
 
TOTAL LIABILITIES   66,981     65,429  
 
SHAREHOLDERS’ EQUITY:
Preferred stock, $.01 par value, 5,000 shares authorized; no
shares issued - -
Common stock, $.0001 par value, 12,500,000 shares authorized;
8,472,927 shares issued for both 2012 and 2011; and 8,129,437
shares outstanding for both 2012 and 2011 1 1
Additional paid-in capital 61,148 61,148
Treasury Stock (343,490 shares) (2,060 ) (2,060 )
Accumulated Deficit (9,045 ) (16,092 )
Accumulated comprehensive loss   (1,095 )   (1,128 )
 
TOTAL SHAREHOLDERS’ EQUITY   48,949     41,869  
Non-Controlling Interest   4,239     3,587  
 
TOTAL EQUITY   53,188     45,456  
       
TOTAL LIABILITIES AND EQUITY R$ 120,169   R$ 110,885  
 
BRAZIL FAST FOOD CORP. AND SUBSIDIARIES
 
Consolidated Statements of Operations (Unaudited)
(in thousands of Brazilian Reais, except share amounts)
 
  Three Months Ended June 30,
2012   2011
 
REVENUES
Net Revenues from Own-operated Restaurants R$ 40,246 R$ 38,322
Net Revenues from Franchisees 9,677 7,824
Revenues from trade partners 4,147 3,775
Other Income   982     1,065  
TOTAL REVENUES   55,052     50,986  
 
OPERATING COST AND EXPENSES
Store Costs and Expenses (36,871 ) (34,992 )
Franchise Costs and Expenses (3,729 ) (2,910 )
Marketing Expenses (544 ) (376 )
Administrative Expenses (7,641 ) (6,910 )
Other Operating Expenses (1,387 ) (1,732 )
Net result of assets sold   127   (26 )
TOTAL OPERATING COST AND EXPENSES   (50,045 )   (46,946 )
-90.9 % -92.1 %
       
OPERATING INCOME   5,007     4,040  
 
Interest Income (expenses), net   (234 ) 186  
 
NET INCOME BEFORE INCOME TAX   4,773     4,226  
 
Income taxes   (882 )   (600 )
 
NET INCOME BEFORE NON-CONTROLLING INTEREST   3,891     3,626  
 
Net income attributable to non-controlling interest (244 ) (330 )
       
NET INCOME ATTRIBUTABLE TO BRAZIL FAST FOOD CORP. R$ 3,647   R$ 3,296  
 
NET INCOME PER COMMON SHARE
BASIC AND DILUTED R$ 0.45   R$ 0.41  
 
 
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING: BASIC AND DILUTED 8,129,437 8,129,437
 
BRAZIL FAST FOOD CORP. AND SUBSIDIARIES
 
Consolidated Statements of Operations (Unaudited)
(in thousands of Brazilian Reais, except share amounts)
 
  Six Months Ended June 30,
2012   2011
 
REVENUES
Net Revenues from Own-operated Restaurants R$ 83,863 R$ 78,468
Net Revenues from Franchisees 19,688 15,434
Revenues from trade partners 10,738 10,567
Other Income   1,302     1,462  
TOTAL REVENUES   115,591     105,931  
 
OPERATING COST AND EXPENSES
Store Costs and Expenses (77,391 ) (72,082 )
Franchise Costs and Expenses (6,808 ) (5,478 )
Marketing Expenses (1,895 ) (1,391 )
Administrative Expenses (16,243 ) (14,678 )
Other Operating Expenses (2,785 ) (3,361 )
Net result of assets sold   83     (28 )
TOTAL OPERATING COST AND EXPENSES (105,039 ) (97,018 )
       
OPERATING INCOME   10,552     8,913  
 
Interest Income (expense), net   (373 )   142  
 
NET INCOME BEFORE INCOME TAX   10,179     9,055  
 
Income taxes   (2,706 )   (1,192 )
 
NET INCOME BEFORE NON-CONTROLLING INTEREST   7,473     7,863  
 
Net (income) loss attributable to non-controlling interest (426 ) (337 )
       
NET INCOME ATTRIBUTABLE TO BRAZIL FAST FOOD CORP. R$ 7,047   R$ 7,526  
 
NET INCOME PER COMMON SHARE
BASIC AND DILUTED R$ 0.87   R$ 0.93  
 
 
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING: BASIC AND DILUTED 8,129,437 8,132,012
 
BRAZIL FAST FOOD CORP. AND SUBSIDIARIES
 
Consolidated Statements of Cash Flows (Unaudited)
(in thousands of Brazilian Reais)
 
Six Months Ended June 30,
2012   2011
CASH FLOW FROM OPERATING ACTIVITIES:
NET INCOME ATTRIBUTABLE TO BRAZIL FAST FOOD CORP. R$ 7,473 R$ 7,863
Adjustments to reconcile net income to cash provided by
(used in) operating activities:
Depreciation and amortization 3,663 3,445
Loss on assets sold, net (83 ) 28
Deferred tax 830 (434 )
 
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable (1,129 ) 353
Inventories 1,366 (327 )
Prepaid expenses, advances to suppliers and other current assets (202 ) (1,224 )
Other assets (2,022 ) 859
(Decrease) increase in:
Accounts payable and accrued expenses (2,524 ) (4,846 )
Payroll and related accruals (106 ) 1,488
Taxes other than income taxes (1,336 ) (1,726 )
Deferred income 1,982 4,204
Contingencies and reassessed taxes 133 (39 )
Other liabilities   450     (3 )
 
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES   8,495     9,641  
 
CASH FLOW FROM INVESTING ACTIVITIES:
Additions to property and equipment (10,491 ) (2,556 )

Yoggi acquisition

(701 ) -
Proceeds from sale of property, equipment and deferred charges   2,205     2,104  
 
CASH FLOWS USED IN INVESTING ACTIVITIES   (8,987 )   (452 )
 
CASH FLOW FROM FINANCING ACTIVITIES:
Non-Controlling Paid in Capital 226 (119 )
Net Borrowing (Repayments) under lines of credit   2,404     (4,846 )
 
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES   2,630     (4,965 )
 
EFFECT OF FOREIGN EXCHANGE RATE   33     (39 )
 
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,171 4,185
 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD   21,357     16,742  
 
CASH AND CASH EQUIVALENTS AT END OF PERIOD R$ 23,528   R$ 20,927  
   
Table 4
 
BRAZIL FAST FOOD CORP. AND SUBSIDIARIES
 
RECONCILIATION OF EBITDA TO NET INCOME
 
Three Months Ended June 30,
2012   2011
 
NET INCOME R$ 3,647 R$ 3,296

Interest expenses, Monetary and Foreign exchange loss

234

(186)

Income taxes 882 600
Depreciation and amortization   1,895   1,666
EBITDA R$ 6,658 R$ 5,376
 
Six Months Ended June 30,
2012 2011
 
NET INCOME R$ 7,047 R$ 7,526
Interest expenses, Monetary and Foreign exchange loss 373

(142)

Income taxes 2,706 1,192
Depreciation and amortization   3,663   3,445
EBITDA R$ 13,789 R$ 12,021
 

EBITDA represents earnings before net interest expense, income tax provision, depreciation and amortization. Our management believes EBITDA is useful to investors because it is frequently used by securities analysts, investors and other interested parties in evaluating companies in our industry. In addition, our management believes that EBITDA is useful in evaluating our operating performance compared to that of other companies in our industry because the calculation of EBITDA generally eliminates the effects of financing and income taxes and the accounting effects of capital spending, which items may vary for different companies for reasons unrelated to overall operating performance. As a result, our management uses EBITDA as a measure to evaluate the performance of our business. However, EBITDA is not a recognized measurement under generally accepted accounting principles, or GAAP, and when analyzing our operating performance, investors should use EBITDA in addition to, and not as an alternative for, income from operations and net income, each as determined in accordance with GAAP. Not all companies use identical calculations, and our presentation of EBITDA may not be comparable to similarly titled measures of other companies. Furthermore, EBITDA is not intended to be a measure of free cash flow for our management’s discretionary use, as it does not consider certain cash requirements such as a tax and debt service payments.

Brazil Fast Food Corp.
Ricardo Figueiredo Bomeny, CEO
Phone: +1-55-21-2536-7501 (Brazil)
Email: ir@bffc.com.br
URL: www.bffc.com.br
or
CCG Investor Relations Inc.
Crocker Coulson, President
Phone: +1-646-213-1915 (New York)
Email: crocker.coulson@ccgir.com
URL: www.ccgir.com

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