Brazil Fast Food Announces Third Quarter 2012 Results

Wed Nov 14, 2012 4:00pm EST

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Brazil Fast Food Announces Third 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 983 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 third quarter 2012 ended September 30, 2012.

Third Quarter 2012 Highlights

  • System-wide sales totaled R$266.5 million, up 12.5% from the third quarter 2011
  • Revenue totaled R$60.5 million, in line with R$60.4 million in the third quarter 2011
  • Points of sale totaled 983 at September 30, 2012, up from 846 at the end of third quarter 2011
  • EBITDA was R$9.0 million, up 27.6% from the third quarter 2011
  • Operating income increased 36.0% year-over-year to R$7.5 million
  • Net income was R$5.9 million, or R$0.73 per basic and diluted share

“During the third quarter we achieved strong growth in EBITDA and net income, reflecting our continued shift towards a more profitable franchise strategy,” said Ricardo Figueiredo Bomeny, CEO of Brazil Fast Food Corp. “We believe that our brand portfolio provides the company with multiple avenues for future growth and will focus on increasing our market penetration, consumer recognition, and capital efficiency.”

Third Quarter 2012 Results

System-wide sales grew 12.5% in the third quarter to R$266.5 million, driven by an increase in the number of franchised points of sale.

Total revenue for the third quarter 2012 was R$60.5 million in line with R$60.4 million in the third quarter 2011, reflecting a reduction owned and operated stores in line with the Company’s strategy to increase the focus on franchise operations. In addition, third quarter 2011 results benefited from the positive impact of the Rock in Rio concert, while there was no comparable event in the same period of 2012.

Net restaurant sales for company-owned retail outlets declined 5.9% year-over-year to R$43.3 million in the third quarter 2012, reflecting a decrease in net revenues for the Company’s Bob’s and Doggis brand, which was partially offset by increases in net revenues across the Company’s KFC and Pizza Hut brands.

Net revenue from franchisees increased 28.0% year-over-year to R$11.3 million, driven primarily by an increase in number of franchised retail outlets to 916, up from 781 in the same period a year ago. Other revenue and income totaled R$5.9 million in the third quarter 2012 up from R$5.6 million in the year ago period.

Operating expenses declined 3.5% to R$53.0 million in the third quarter 2012 from R$54.9 million in the third quarter of 2011. As a percentage of revenue, operating costs declined to 87.6% of total revenue in the third quarter of 2012 from 90.0% of total revenue in the same period of 2011.

Operating income for the third quarter of 2012 was R$7.5 million, an increase of 36.0% from R$5.5 million in the third quarter of 2011. Operating margin in the third quarter of 2012 improved to 12.4% compared to 9.1% in the same period of 2011.

EBITDA in the third quarter of 2012 was R$9.0 million, up by 27.6% compared to R$7.0 million in the third quarter of 2011. EBITDA margin was 14.8% compared to 11.6% in the comparable period of 2011. Please refer Table No. 5 in this press release for a reconciliation of EBITDA to its nearest GAAP equivalent.

Interest expense was R$0.3 million in the third quarter of 2012, compared to interest income of R$0.5 million in the third quarter of 2011.

Net income for the third quarter of 2012 was R$5.9 million, or R$0.73 per basic and diluted share, as compared to a net loss of R$0.5 million, or R$0.07 per basic and diluted share in the same period of 2011.

Nine Months 2011 Results

For the nine months ended in September 30, 2012, total net revenue was R$176.0 million, up 5.8% from R$166.3 million in the comparable period of 2011. Operating income was R$18.1 million, up 25.1% from R$14.4 million in the comparable period in 2011. Operating margin was 10.3% for the nine months ended September 30, 2012 compared to 8.7% in the comparable period in 2011. Net income for the nine months ended September 30, 2012 was R$13.0 million, up 78.8% from R$7.0 million in the comparable period in 2011. Basic and diluted earnings per share were R$1.60 for the nine months ended September 30, 2012 compared to R$0.86 for the nine months ended September 30, 2011.

Financial Condition

As of September 30, 2012, Brazil Fast Food had R$28.4 million in cash and cash equivalents, up from R$21.4 million as of December 31, 2011. Working capital was R$22.8million, as compared to R$16.9 million as of the end of 2011. Total shareholders' equity as of September 30, 2012 was R$53.8 million, compared to R$41.9 million at the end of 2011.

In the first nine months of 2012, Brazil Fast Food generated net cash flow from operating activities of R$14.7 million, representing an increase of 33.8%, from R$11.0 million for the comparable period in 2011. The Company used R$12.9 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, and the acquisition of the Yoggi do Brasil Ltda (“Yoggi”) franchise network of frozen yogurt in Brazil.

Business Outlook

“We expect to see continued positive trends in the business in our seasonally strong fourth quarter, as we execute our strategy to grow the number of franchised outlets and pursue operational efficiencies so as to achieve profitable operations across each of our brands. We have recently reduced the number of franchises for the Yoggi brand, due to slowing consumer demand for frozen yogurt, but we are working to modify the store concept and are optimistic about its longer-term potential. We believe that quick service restaurant sector remains very underpenetrated in Brazil and our goal is to develop leading brands that cater to the tastes of modern Brazilian consumer so as to lead the growth of the industry,” concluded Mr. Bomeny.

About Brazil Fast Food Corp.

Brazil Fast Food Corp. owns and operates, both directly and through franchisees, the third 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)

 

 

September, 30 December 31,
2012 2011
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (note 3) R$ 28,362 R$ 21,357
 
Inventories 2,658 3,985
Accounts receivable
 
Clients 5,861 5,660
Franchisees 13,888 12,247
 
Allowance for doubtful accounts (600 ) (801 )
 
Prepaid expenses 1,238 1,500
 
Advances to suppliers 2,108 3,478
 
Receivables from properties sale (notes 4 and 5) 365 3,523
 
Other current assets (note 4)   7,593     4,083  
 
TOTAL CURRENT ASSETS 61,473 55,032
 
Other receivables and other assets (note 4) 12,907 10,862
 
 
Deferred tax asset, net 6,825 8,378
 
Goodwill (note 2) 2,699 799
 
Property and equipment, net 37,604 31,342
 
Intangible assets, net 6,145 4,472
       
TOTAL ASSETS R$ 127,653   R$ 110,885  
 
 
September, 30 December 31,
2012 2011
(unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
CURRENT LIABILITIES:
Notes payable (note 8) R$ 12,115 R$ 11,523
 
Accounts payable and accrued expenses 9,734 11,608
 
Payroll and related accruals 6,656 5,618
Taxes 4,555 5,020
 
Deferred income tax 209 1,262
 
Current portion of deferred income (note 9) 2,519 1,118
 
Current portion of contingencies and reassessed taxes 2,075 1,940
 
Other current liabilities   791     -  
 
TOTAL CURRENT LIABILITIES 38,654 38,089
 
Deferred income, less current portion (note 7) 2,412 4,057
 
NOTES PAYABLE, less current portion (note 8) 9,306 5,068
 
CONTINGENCIES AND REASSESSED TAXES, less 17,860 18,215
current portion (note 6)
 
Other liabilities (note 9) 1,153 -
       
 
TOTAL LIABILITIES   69,385     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 (4,210 ) (16,092 )
 
Accumulated comprehensive loss   (1,095 )   (1,128 )
 
TOTAL SHAREHOLDERS’ EQUITY   53,784     41,869  
Non-Controlling Interest   4,484     3,587  
 
TOTAL EQUITY   58,268     45,456  
       
TOTAL LIABILITIES AND EQUITY R$ 127,653   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 September 30,
2012     2011
   
REVENUES
 
Net Revenues from Own-operated Restaurants R$ 43,304 R$ 46,020
 
Net Revenues from Franchisees 11,292 8,816
 
Revenues from trade Partners 5,236 4,177
 
Other Income   620         1,380  
TOTAL REVENUES   60,452         60,393  
 
OPERATING COSTS AND EXPENSES
 
Store Costs and Expenses (38,699 ) (40,232 )
 
Franchise Costs and Expenses (3,659 ) (3,032 )
 
Marketing Expenses (1,179 ) (1,200 )
 
Administrative Expenses (8,074 ) (8,939 )
 
Other Operating Expenses (1,132 ) (1,843 )
 
Net Result of Assets Sold (213 ) 363
           
TOTAL OPERATING COSTS AND EXPENSES   (52,956 )       (54,883 )
 
           
OPERATING INCOME   7,496         5,510  
 
Interest Income (expenses), net (293 ) 468
           
 
NET INCOME BEFORE INCOME TAX   7,203         5,978  
 
Income taxes   (899 )       (6,137 )
 
 
NET INCOME BEFORE NON-CONTROLLING INTEREST   6,304         (159 )
 
Net (income) loss attributable to non-controlling interest (380 ) (382 )
           
NET INCOME (LOSS) ATTRIBUTABLE TO BRAZIL FAST FOOD CORP. R$ 5,924       R$ (541 )
 
NET INCOME PER COMMON SHARE
 
BASIC AND DILUTED R$ 0.73       R$ (0.07 )
 
 
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)

 
Nine Months Ended September 30,
2012     2011
 
REVENUES
 
Net Revenues from Own-operated Restaurants 127,167 R$ 124,488
 
Net Revenues from Franchisees 30,980 24,250
 
Net Revenues from Trade Partners 15,974 14,744
 
Other Income 1,922     2,842  
 
TOTAL REVENUES 176,043     166,324  
 
OPERATING COSTS AND EXPENSES
 
Store Costs and Expenses (116,090 ) (112,314 )
 
Franchise Costs and Expenses (10,467 ) (8,510 )
 
Marketing Expenses (3,074 ) (2,591 )
 
Administrative Expenses (24,317 ) (23,617 )
 
Other Operating Expenses (3,917 ) (5,204 )
 
Net Result of Assets Sold (130 ) 335
     
 
TOTAL OPERATING COSTS AND EXPENSES (157,995 ) (151,901 )
     
OPERATING INCOME 18,048     14,423  
 
Interest Income (Expense), net (666 ) 610
     
NET INCOME BEFORE INCOME TAX 17,382     15,033  
 
Income taxes (3,605 )   (7,329 )
 
NET INCOME BEFORE NON-CONTROLLING INTEREST 13,777     7,704  
 
Net (income) loss attributable to non-controlling interest (806 ) (719 )
     
NET INCOME ATTRIBUTABLE TO BRAZIL FAST FOOD CORP. 12,971   R$ 6,985  
 
NET INCOME PER COMMON SHARE
 
BASIC AND DILUTED 1.60   R$ 0.86  
 
 
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING: BASIC AND DILUTED 8,129,437 8,131,147
 
 
         
 

BRAZIL FAST FOOD CORP. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)
(in thousands of Brazilian Reais)

 
Nine Months Ended September, 30
2012     2011
CASH FLOW FROM OPERATING ACTIVITIES:
NET INCOME BEFORE NON-CONTROLLING INTEREST R$ 13,777 R$ 7,704
Adjustments to reconcile net income to cash provided by
(used in) operating activities:
 
Depreciation and amortization 5,495 5,329
 
(Gain) Loss on assets sold, net 130 (335 )
 
Deferred income tax 500 5,054
 
Changes in assets and liabilities:
(Increase) decrease in:
 
Accounts receivable (2,043 ) (1,281 )
 
Inventories 1,327 (534 )
 
Prepaid expenses, advances to suppliers and other current assets (1,878 ) (2,366 )
 
Other assets (2,045 ) (1,337 )
(Decrease) increase in:
 
Accounts payable and accrued expenses (1,874 ) (5,452 )
 
Payroll and related accruals 1,038 1,926
 
Taxes (465 ) (685 )
 
Deferred income (244 ) 2,643
 
Contingencies and reassessed taxes (220 ) 289
 
Other liabilities   1,153     (5 )
 
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES   14,651     10,950  
 
CASH FLOW FROM INVESTING ACTIVITIES:
 
 
Additions to property and equipment (12,929 ) (4,239 )
 
Proceeds from sale of property, equipment and intangible assets 2,618 3,795
 

Yoggi acquisition (note 2)

(1,109 ) -
 
Exchange of shares (notes 2 and 4) (1,089 ) -
 
Acquisition of Company's own shares   -     (114 )
 
CASH FLOWS USED IN INVESTING ACTIVITIES   (12,509 )   (558 )
 
CASH FLOW FROM FINANCING ACTIVITIES:
 
Non-controlling paid in capital - 871
 
Net Borrowings (Repayments) under lines of credit   4,830     (4,376 )
 
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES   4,830     (3,505 )
 
EFFECT OF FOREIGN EXCHANGE RATE   33     (8 )
 
NET INCREASE IN CASH AND CASH EQUIVALENTS 7,005 6,879
 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD   21,357     16,742  
 
CASH AND CASH EQUIVALENTS AT END OF PERIOD R$ 28,362   R$ 23,621  
 
 
       
 

BRAZIL FAST FOOD CORP. AND SUBSIDIARIES

 

RECONCILIATION OF EBITDA TO NET INCOME

 
Three Months Ended September 30,
2012     2011
 
NET INCOME R$ 5,924 R$ (541 )
Interest expenses, Monetary and Foreign exchange loss 293 (468 )
Income taxes 899 6,137
Depreciation and amortization   1,832   1,884  
EBITDA R$ 6,658 R$ 7,012  
       
 
Nine Months Ended September 30,
2012     2011
 
NET INCOME R$ 12,971 R$ 6,985
Interest expenses, Monetary and Foreign exchange loss 666 (610 )
Income taxes 3,605 7,329
Depreciation and amortization   5,495   5,329  
EBITDA R$ 22,737 R$ 19,033  
 
 

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
+1-55-21-2536-7501 (Brazil)
ir@bffc.com.br
www.bffc.com.br
or
CCG Investor Relations Inc.
Crocker Coulson, +1-646-213-1915 (New York)
President
crocker.coulson@ccgir.com
www.ccgir.com

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