Brazil Fast Food Announces Fourth Quarter and Fiscal Year 2008 Results

Brazil Fast Food Corp. (OTC Bulletin Board: BOBS.OB) the second largest fast-food restaurant chain with 664 points of sale, operating under the Bob's, KFC, Pizza Hut, In Bocca al Lupo Café, and Doggis brands in Brazil, reported today financial results for the fourth quarter and fiscal year ended on December 31, 2008.

Fiscal Year 2008 Highlights

- System-wide sales totaled R$ 577 million, up 17% from 2007
- Revenue totaled R$ 123.4 million, up 7.8% from 2007
- Same own-store sales were up 8.4% compared to 2007
- Points of sale totaled 664 at the end of 2008, up from 580 at the end of 2007
- EBITDA was R$ 9.4 million, down from R$ 13.1 million in 2007
- Operating income was R$5.9 million
- Net loss was R$3.9 million, or $0.48 per basic and diluted share
- Net income for 2008 includes a financing cost and foreign currency exchange loss of R$6.7 million, and includes a one-time charge of R$2.7 million associated with recalculation of interest on fiscal debt that was added to the principal owed to the Federal government, absent those charges net income for 2008 would be R$5.5 million.

Fourth Quarter 2008 Highlights

- System-wide sales totaled R$ 172.9 million, up 19% from the fourth quarter of 2007
- Revenue totaled R$ 38.6 million, up 34.2% from the fourth quarter of 2007
- Same own-store sales were up 8.2% compared to the fourth quarter of 2007
- EBITDA was R$ 2.7 million, down from R$ 3.6 million in the fourth quarter of 2007
- Operating income was R$1.7 million
- Net loss was R$7.8 million, or $0.96 per basic and diluted share

'We are disappointed with our results for the quarter which were impacted by unexpected losses associated with the sharp depreciation of the Brazilian currency against the US Dollar as well as an adverse judgment in a tax dispute with the Brazilian federal government. We are pleased to note however, that the current economic slowdown has not impacted our sales for the quarter and absent the above mentioned one time charges we would have been profitable for the quarter as well as for the fiscal year 2008,' said Mr. Ricardo Bomeny, President and CEO of Brazil Fast Food. 'From an operating perspective our business is on track and our balance sheet remains strong with R$ 10.4 million of cash on hand. We are also encouraged by our progress in pursuing our multi-brand strategy as evidenced by our strong top-line growth for the fourth quarter which should continue into the first quarter of 2009, as only one month of our Pizza Hut's business unit results have been consolidated into our fourth quarter results.'

Fourth Quarter 2008 Results

System-wide sales grew 19% in the fourth quarter to R$ 172.9 million, driven by an increase in the number of franchised points of sale as well as the consolidation of Internacional Restaurantes do Brasil ('IRB'), Brazil Fast Food's Pizza Hut subsidiary.

Total revenue for the fourth quarter 2008 increased by 34.2% to R$38.6 million from R$28.8 million in the fourth quarter of 2007. Revenue growth was driven by the continued expansion of Brazil Fast Food's Bob's and KFC restaurant network as well as the consolidation of IRB's December sales which amounted to R$ 4.3 million.

Net revenue for company-owned and operated outlets was up 34.3% to R$29.3 million from the comparable period in 2007 due to the increase in the number of stores the Company owns and operates to 62, up from 58 at the end of 2007, as well as the expansion of its KFC points of sale and the consolidation of its Pizza Hut results for the month of December. Same own-store sales, which measure the performance of stores open for more than a year, were up 8.2% year over year driven by the Company's successful marketing campaigns.

Net revenue from franchisees increased 13.5% year-over-year to R$6.6 million driven by an increase in number of franchised retail outlets to 580, up from 522 in the same period a year ago. Other income totaled R$0.5 million.

Operating expenses were up 42% to R$36.9 million driven by higher franchisee costs associated with the growth in the number of franchised network stores, higher administrative as well as higher store costs as a result of and increase in wages negotiated with the union and higher raw material prices.

Operating income for the fourth quarter of 2008 was R$1.7 million, compared to an operating income of R$2.7 million in the fourth quarter of 2007. Operating margin in the fourth quarter of 2008 was 4.4% compared to 9.6% in the comparable period of 2007.

EBITDA in the fourth quarter of 2008 was R$2.7 million, compared to R$3.6 million in the fourth quarter of 2007. EBITDA margin was 7.1% in the fourth quarter of 2008, compared to 12.5% in the comparable period of 2007. A table reconciling EBITDA to its nearest GAAP equivalent is provided elsewhere in this press release.

Interest expense was R$9.7 million which included a non-recurring R$ 6.7 million loss associated with the depreciation of the Brazilian currency which adversely impacted the Company's US dollar denominated debt incurred to finance the IRB acquisition. Interest expense also included a non recurring charge of R$2.7 million due to a nominal readjustment of part of its fiscal long-term debt with the federal government.

Net loss for the fourth quarter of 2008 was R$7.8 million or R$0.96 per basic and diluted share, compared to net income and earnings per share of R$6.8 million and R$0.84 in the same period of 2007, respectively. Net income for the fourth quarter of 2008 includes a one-time financing cost and foreign currency exchange loss of R$6.7 million, as well as a one-time loss of R$2.7 million associated with recalculation of interest on fiscal debt that was added to the principal owed to the Federal government, absent those charges net income for fourth quarter of 2008 would be R$1.7 million.

Fiscal Year 2008 Results

For the twelve months ended in December 31, 2008, net revenue was R$123.4 million, up 7.8% from R$114.4 million in 2007. Operating income for fiscal year 2008 was R$5.9 million, down 38.3% from R$9.9 million in 2007. Operating margin was 4.7% for 2008 compared to 8.6% in 2007. EBITDA for 2008 was R$9,354 compared to R$13,106 in 2007. Excluding one time gains of approximately R$644 thousand and R$5.5 million related to a revaluation of tax assets, EBITDA would be up 16% in 2008 relative to 2007. Net loss for 2008 was R$3.9 million compared to net income of R$13.5 million in 2007. Basic and diluted loss per share was R$0.48 for 2008 compared to basic and diluted earnings per share of R$1.65 for 2007. Net income for 2008 includes a one-time financing and foreign currency exchange loss of R$6.7 million, as well as a one-time loss of R$2.7 million associated with the recalculation of interest on fiscal debt that was added to the principal owed to the Federal government, absent those charges net income for 2008 would be R$5.5 million.

Financial Condition

As of the balance sheet date on December 31, 2008 the Company had R$10.4 million in cash. Cash flow from operations for 2008 totaled R$5.6 million, compared to R$3.2 million in 2007. Capital expenditures totaled R$19.7 million in 2008 mostly for expanding the KFC restaurant network as well as acquiring IRB. Shareholders' equity was R$18.5 million at the end of the fourth quarter of 2008, compared to R$23.5 million at the end of 2007.

IRB Acquisition

On December 18, 2008 Brazil Fast Food completed the acquisition of 60% IRB, Pizza Hut's largest franchise in Brazil. The other 40% of IRB was acquired by Mescalli, a Brazilian company. The Company and its partner Mescalli paid US$5.5 million for IRB and incurred in R$6.7 million charge associated with financing agreement to support the acquisition. In December the Company found it was prudent to re-negotiate its financing agreement to eliminate exposure to foreign exchange rate. The total amount paid for 100% of IRB, including financial charges, was approximately R$15.7 million, with Brazil Fast Food bearing 60% of the total transaction. This amount is equivalent to a multiple of 4 times IRB's August 07/July 08 EBITDA, a very attractive valuation when compared to comparable value of restaurant business.

Business Outlook

'In 2008, we added three additional brands to our portfolio, in line with our multi-brand growth strategy. The acquisition of IRB brought us the Pizza Hut and In Bocca al Lupo Café brands, and our agreement with Grupo de Empresas Doggis S.A ('GED') to cross-franchise the Bob's and Doggis brands in Chile and Brazil, respectively, brought us the Doggis brand as well as the opportunity to expand the Bob's brand to the Chilean market,' said Mr. Ricardo Bomeny, President and CEO of Brazil Fast Food. 'In response to the on-going economic slowdown we have taken measures to reduce our costs by consolidating our administrative locations and by reducing corporate headcount, but we are maintaining our existing development commitments for our KFC, Pizza Hut and Doggis brands. As we look to the future we continue to see opportunities to grow our business by leveraging our industry-leading brands to expand our store count and by increasing the efficiency of our own-store operations,' concluded Mr. Bomeny.

The Company currently plans to have 720 points of sale by the end of 2009 up from 664 in 2008. The company expects to add 60 Bob's stores, including 2 stores in Chile, 6 KFC, 1 Pizza Hut, and 2 Doggis. The Company plans to expand the Bob's brand through franchising by targeting cities with 150,000 to 250,000 inhabitants where the competitive environment is more favorable, and income levels are adequate to support its lower cost store designs. KFC, Pizza Hut and Doggis expansion in 2009 will be driven by Company owned stores, with franchising driven growth for KFC and Pizza Hut brands expected to start in 2010.

About Brazil Fast Food Corp.

Brazil Fast Food Corp. owns and operates, both directly or 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, the 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.

Logos, product and company names mentioned are the property of their respective owners.

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