Revenue Totaled R$51.0 Million, Up 7.6% from the Second Quarter 2010 - Brazil Fast Food Announces Second Quarter 2011 Results
System-wide sales grew 19.8% in the second quarter to R$207.9 million, driven by an increase in franchised points of sale as well as higher sales from company-owned stores.
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 805 points of sale, operating under (i) the Bob’s brand, (ii) KFC and Pizza Hut São Paulo as franchisee of Yum! Brands, and (iii) Doggis as franchisee of Grupo de Empresas Doggis S.A., announced financial results for the second quarter ended June 30, 2011.
“The outlook for our business for the second half of the year remains positive and we will continue to invest in our brands in the quarters ahead.”
Second Quarter 2011 Highlights
- System-wide sales totaled R$207.9 million, up 19.8% from the second quarter 2010
- Revenue totaled R$51.0 million, up 7.6% from the second quarter 2010
- Points of sale totaled 805 at June 30, 2011, up from 735 at the end of second quarter 2010
- EBITDA was R$5.4 million, up 89.7% from the second quarter 2010
- Operating income was R$4.0 million, up 192.1% from the second quarter 2010
- Net income was R$3.3 million, or R$0.41 per basic and diluted share, up 1,197.6% from the second quarter 2010
“We are very pleased to report strong second quarter results, highlighted by significant operating margin improvement and robust net income growth. Our solid performance reflects our strategy to focus on our most profitable company-owned stores while growing our industry leading brands through new franchise relationships in favorable locations throughout Brazil,” said Mr. Ricardo Bomeny, President and CEO of Brazil Fast Food. “The outlook for our business for the second half of the year remains positive and we will continue to invest in our brands in the quarters ahead.”
Second Quarter 2011 Results
System-wide sales grew 19.8% in the second quarter to R$207.9 million, driven by an increase in franchised points of sale as well as higher sales from company-owned stores.
Total revenue for the second quarter 2011 increased by 7.6% to R$51.0 million from R$47.4 million in the second quarter 2010. Revenue growth was driven primarily by the continued expansion of Brazil Fast Food’s franchise network and higher sales from company-owned stores.
The Company ended the second quarter of 2011 with 805 points of sale, compared to 735 in the comparable period in 2010.
Net revenue for company-owned and operated outlets was up 9.0% year over year to R$38.3 million in the second quarter of 2011, 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 brand due to a reduction in company-owned Bob’s outlets from 55 as of June 30, 2010, to 39 at the end of second quarter 2011 and also offset somewhat by a decrease in Doggis net revenues.
Net revenue from franchisees increased 29.2% year over year to R$7.8 million, driven primarily by an increase in number of franchised retail outlets to 736, up from 650 in the same period a year ago. Other revenue and income totaled R$4.8 million in the second quarter of 2011.
Operating expenses grew 2.0% to R$46.9 million in the second quarter of 2011, primarily due to higher administrative expenses to support the growth of the business as well as increased store costs and expenses. As a percentage of revenue, operating costs declined from 97.1% of total revenue in the second quarter of 2010 to 92.1% of total revenue in the second quarter of 2011, mainly attributable to the company’s strategy to limit its direct operations to its most profitable outlets and also due to improved franchise margins.
Operating income for the second quarter of 2011 was R$4.0 million, compared to operating income of R$1.4 million in the second quarter of 2010. Operating margin in the second quarter of 2011 was 7.9% compared to 2.9% in the same period of 2010.
EBITDA in the second quarter of 2011 was R$5.4 million, compared to R$2.8 million in the second quarter of 2010. EBITDA margin was 10.5% in the second quarter of 2011, compared to 8.1% in the same period of 2010. A table reconciling EBITDA to its nearest GAAP equivalent is provided elsewhere in this press release.
Interest income was R$0.2 million in the second quarter of 2011, compared to interest expense of R$0.7 million in the second quarter of 2010. The reduction in interest expense is attributable to lower interest rates as well as a reduction in the Company's debt.
Net income for the second quarter of 2011 was R$3.3 million, or R$0.41 per basic and diluted share, compared to net income of R$0.3 million, or R$0.03 per basic and diluted share, in the same period of 2010.
Six Months 2011 Results
For the six months ended in June 30, 2011, total net revenue was R$105.9 million, up 8.7% from R$97.5 million in the comparable period of 2010. Operating income was R$8.9 million, up 142.9% from R$3.7 million in the comparable period in 2010. Operating margin was 8.4% for the six months ended June 30, 2011 compared to 3.8% in the comparable period in 2010. Net income for the six months ended June 30, 2011 was R$7.5 million, up 252.7% from R$2.1 million in the comparable period in 2010. Basic and diluted earnings per share were R$0.93 for the six months ended June 30, 2011 compared to R$0.26 for the six months ended June 30, 2010.
Financial Condition
As of the balance sheet date on June 30, 2011 the Company had R$20.9 million in cash. Total shareholders' equity was R$40.5 million at the end of the second quarter of 2011, compared to R$33.2 million at the end of 2010.
Business Outlook
“Our primary goal in 2011 is to profitably grow and strategically position our leading brands in Brazil, while continuing to improve the efficiency and effectiveness of our existing operations. We also will continue to evaluate the acquisition or development of new brands opportunistically," said Mr. Ricardo Bomeny, President and CEO of Brazil Fast Food. "We see a continuation of the current favorable business environment in 2011 and expect to benefit from, among other factors, increased spending associated with the build-out to support the World Cup and Olympics to be hosted in 2014 and 2016, respectively," concluded Mr. Bomeny.
| BRAZIL FAST FOOD CORP. AND SUBSIDIARIES | ||||||||
| Consolidated Statements of Operations (Audited) | ||||||||
| (in thousands of Brazilian Reais, except share amounts) | ||||||||
| Three Months Ended June 30, | ||||||||
| 2011 | 2010 | |||||||
| REVENUES | ||||||||
| Net Revenues from Own-operated Restaurants | R$ | 38,322 | R$ | 35,173 | ||||
| Net Revenues from Franchisees | 7,824 | 6,054 | ||||||
| Revenues from Supply Agreements | 3,775 | 5,179 | ||||||
| Other Income | 1,065 | 1,000 | ||||||
| TOTAL REVENUES | 50,986 | 47,406 | ||||||
| OPERATING COST AND EXPENSES | ||||||||
| Store Costs and Expenses | (35,361 | ) | (34,010 | ) | ||||
| Franchise Costs and Expenses | (2,910 | ) | (3,272 | ) | ||||
| Marketing Expenses | (376 | ) | (1,069 | ) | ||||
| Administrative Expenses | (6,910 | ) | (5,791 | ) | ||||
| Other Operating Expenses | (1,363 | ) | (1,890 | ) | ||||
| Net result of assets sold | (26 | ) | 9 | |||||
| TOTAL OPERATING COST AND EXPENSES | (46,946 | ) | (46,023 | ) | ||||
| OPERATING INCOME | 4,040 | 1,383 | ||||||
| Interest Income (expenses), net | 186 | (660 | ) | |||||
| NET INCOME BEFORE INCOME TAX | 4,226 | 723 | ||||||
| Income taxes | (600 | ) | (451 | ) | ||||
| NET INCOME BEFORE NON-CONTROLLING INTEREST | 3,626 | 272 | ||||||
| Net income attributable to non-controlling interest | (330 | ) | (18 | ) | ||||
| NET INCOME ATTRIBUTABLE TO BRAZIL FAST FOOD CORP. | R$ | 3,296 | R$ | 254 | ||||
| NET INCOME PER COMMON SHARE | ||||||||
| BASIC AND DILUTED | R$ | 0.41 | R$ | 0.03 | ||||
| WEIGHTED AVERAGE COMMON | ||||||||
| SHARES OUTSTANDING: BASIC AND DILUTED | 8,129,437 | 8,157,902 | ||||||
| BRAZIL FAST FOOD CORP. AND SUBSIDIARIES | ||||||||
| Consolidated Statements of Operations (Audited) | ||||||||
| (in thousands of Brazilian Reais, except share amounts) | ||||||||
| Six Months Ended June 30, | ||||||||
| 2011 | 2010 | |||||||
| REVENUES | ||||||||
| Net Revenues from Own-operated Restaurants | R$ | 78,468 | R$ | 73,450 | ||||
| Net Revenues from Franchisees | 15,434 | 12,648 | ||||||
| Revenues from Supply Agreements | 10,567 | 8,592 | ||||||
| Other Income | 1,462 | 2,806 | ||||||
| TOTAL REVENUES | 105,931 | 97,496 | ||||||
| OPERATING COST AND EXPENSES | ||||||||
| Store Costs and Expenses | (73,371 | ) | (71,135 | ) | ||||
| Franchise Costs and Expenses | (5,478 | ) | (5,650 | ) | ||||
| Marketing Expenses | (1,391 | ) | (2,169 | ) | ||||
| Administrative Expenses | (13,814 | ) | (11,947 | ) | ||||
| Other Operating Expenses | (2,936 | ) | (2,907 | ) | ||||
| Net result of assets sold | (28 | ) | (18 | ) | ||||
| TOTAL OPERATING COST AND EXPENSES | (97,018 | ) | (93,826 | ) | ||||
| OPERATING INCOME | 8,913 | 3,670 | ||||||
| Interest Income (expense), net | 142 | (1,000 | ) | |||||
| NET INCOME BEFORE INCOME TAX | 9,055 | 2,670 | ||||||
| Income taxes | (1,192 | ) | (663 | ) | ||||
| NET INCOME BEFORE NON-CONTROLLING INTEREST | 7,863 | 2,007 | ||||||
| Net (income) loss attributable to non-controlling interest | (337 | ) | 127 | |||||
| NET INCOME ATTRIBUTABLE TO BRAZIL FAST FOOD CORP. | R$ | 7,526 | R$ | 2,134 | ||||
| NET INCOME PER COMMON SHARE | ||||||||
| BASIC AND DILUTED | R$ | 0.93 | R$ | 0.26 | ||||
| WEIGHTED AVERAGE COMMON | ||||||||
| SHARES OUTSTANDING: BASIC AND DILUTED | 8,132,012 | 8,137,762 | ||||||
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Note: as of June 30, 2011 the US dollar was quoted at R$1.56 |
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| BRAZIL FAST FOOD CORP. AND SUBSIDIARIES |
| RECONCILIATION OF EBITDA TO NET INCOME |
| EBITDA represents earnings before net interest expense, income tax provision, depreciation and amortization. Our management believes EBITDA is useful to investors because it is frequently used by securities analysts, investors and other interested parties in evaluating companies in our industry. In addition, our management believes that EBITDA is useful in evaluating our operating performance compared to that of other companies in our industry because the calculation of EBITDA generally eliminates the effects of financing and income taxes and the accounting effects of capital spending, which items may vary for different companies for reasons unrelated to overall operating performance. As a result, our management uses EBITDA as a measure to evaluate the performance of our business. However, EBITDA is not a recognized measurement under generally accepted accounting principles, or GAAP, and when analyzing our operating performance, investors should use EBITDA in addition to, and not as an alternative for, income from operations and net income, each as determined in accordance with GAAP. Not all companies use identical calculations, and our presentation of EBITDA may not be comparable to similarly titled measures of other companies. Furthermore, EBITDA is not intended to be a measure of free cash flow for our management’s discretionary use, as it does not consider certain cash requirements such as a tax and debt service payments. |
| (in thousands of Brazilian Reais) | Three Months Ended June 30, | ||||||
| 2011 | 2010 | ||||||
| NET INCOME (LOSS) |
R$ |
3,296 |
R$ |
254 |
|||
| Interest expenses, Monetary and Foreign exchange loss | (186 | ) | 660 | ||||
| Income taxes | 600 | 451 | |||||
| Depreciation and amortization - Stores | 1,505 | 1,320 | |||||
| Depreciation - Headquarters | 161 | 149 | |||||
| EBITDA |
R$ |
5,376 |
R$ |
2,834 |
|||
| BRAZIL FAST FOOD CORP. AND SUBSIDIARIES | |||||||||||||
| Consolidated Balance Sheet (Audited) | |||||||||||||
| (in thousands of Brazilian Reais, except share amounts) | |||||||||||||
| June 30, | December 31, | ||||||||||||
| 2011 | 2010 | ||||||||||||
| ASSETS | |||||||||||||
| CURRENT ASSETS: | |||||||||||||
| Cash and cash equivalents | R$ | 20,927 | R$ | 16,742 | |||||||||
| Inventories | 3,781 | 3,454 | |||||||||||
| Accounts receivable | |||||||||||||
| Clients | 7,804 | 8,285 | |||||||||||
| Franchisees | 8,672 | 9,483 | |||||||||||
| Allowance for doubtful accounts | (899 | ) | (1,838 | ) | |||||||||
| Prepaid expenses | 2,221 | 1,350 | |||||||||||
| Advances to suppliers | 2,779 | 2,426 | |||||||||||
| Receivables from properties sale | 3,633 | 3,633 | |||||||||||
| Other current assets | 5,031 | 4,249 | |||||||||||
| TOTAL CURRENT ASSETS | 53,949 | 47,784 | |||||||||||
| Other receivables and other assets | 14,617 | 16,258 | |||||||||||
| Deferred tax asset, net | 11,842 | 11,992 | |||||||||||
| Goodwill | 799 | 799 | |||||||||||
| Property and equipment, net | 29,263 | 29,862 | |||||||||||
| Deferred charges, net | 5,424 | 5,866 | |||||||||||
| TOTAL ASSETS | R$ | 115,894 | R$ | 112,561 | |||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||||
| CURRENT LIABILITIES: | |||||||||||||
| Notes payable | R$ | 9,463 | R$ | 12,972 | |||||||||
| Accounts payable and accrued expenses | 21,002 | 25,848 | |||||||||||
| Payroll and related accruals | 8,059 | 6,571 | |||||||||||
| Taxes | 3,210 | 4,936 | |||||||||||
| Current portion of deferred income tax | 1,105 | 1,190 | |||||||||||
| Current portion of deferred income | 2,201 | 993 | |||||||||||
|
Current portion of contingencies and reassessed taxes |
1,530 | 1,580 | |||||||||||
| Other current liabilities | 76 | 79 | |||||||||||
| TOTAL CURRENT LIABILITIES | 46,646 | 54,169 | |||||||||||
| Deferred income, less current portion | 5,698 | 2,702 | |||||||||||
| Deferred income tax | 763 | 1,262 | |||||||||||
| NOTES PAYABLE, less current portion | 879 | 1,107 | |||||||||||
| CONTINGENCIES AND REASSESSED TAXES, less | |||||||||||||
| current portion | 19,262 | 19,251 | |||||||||||
| TOTAL LIABILITIES | 73,248 | 78,491 | |||||||||||
| SHAREHOLDERS’ EQUITY: | |||||||||||||
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Preferred stock, $.01 par value, 5,000 shares authorized; no shares issued |
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Common stock, $.0001 par value, 12,500,000 shares authorized; 8,472,927 and 8,472,927 shares issued; 8,129,437 and 8,137,762 shares outstanding |
1 | 1 | |||||||||||
| Additional paid-in capital | 61,148 | 61,148 | |||||||||||
| Treasury Stock (343,490 and 335,165 shares) | (2,065 | ) | (1,946 | ) | |||||||||
| Accumulated Deficit | (17,420 | ) | (24,946 | ) | |||||||||
| Accumulated comprehensive loss | (1,130 | ) | (1,091 | ) | |||||||||
| TOTAL SHAREHOLDERS’ EQUITY | 40,534 | 33,166 | |||||||||||
| Non-Controlling Interest | 2,112 | 904 | |||||||||||
| TOTAL EQUITY | 42,646 | 34,070 | |||||||||||
| TOTAL LIABILITIES AND EQUITY | R$ | 115,894 | R$ | 112,561 | |||||||||
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BRAZIL FAST FOOD CORP. AND SUBSIDIARIES Consolidated Statements of Cash Flows (Audited) (in thousands of Brazilian Reais) |
||||||||
| Six Months Ended June, 30 | ||||||||
| 2011 | 2010 | |||||||
| CASH FLOW FROM OPERATING ACTIVITIES: | ||||||||
| NET INCOME ATTRIBUTABLE TO BRAZIL FAST FOOD CORP. | R$ | 7,863 | R$ | 2,007 | ||||
| Adjustments to reconcile net income to cash provided by | ||||||||
| (used in) operating activities: | ||||||||
| Depreciation and amortization | 3,445 | 3,084 | ||||||
| Loss on assets sold, net | 28 | 18 | ||||||
| Deferred tax | (434) | - | ||||||
| Changes in assets and liabilities: | ||||||||
| (Increase) decrease in: | ||||||||
| Accounts receivable | 353 | 316 | ||||||
| Inventories | (327) | 1,520 | ||||||
| Prepaid expenses, advances to suppliers and other current assets | (1,224) | (2,600) | ||||||
| Other assets | 859 | (1,206) | ||||||
| (Decrease) increase in: | ||||||||
| Accounts payable and accrued expenses | (4,846) | 2,349 | ||||||
| Payroll and related accruals | 1,488 | 2,545 | ||||||
| Taxes other than income taxes | (1,726) | 293 | ||||||
| Deferred income | 4,204 | (979) | ||||||
| Contingencies and reassessed taxes | (39) | 635 | ||||||
| Other liabilities | (3) | (70) | ||||||
| CASH FLOWS PROVIDED BY OPERATING ACTIVITIES | 9,641 | 7,912 | ||||||
| CASH FLOW FROM INVESTING ACTIVITIES: | ||||||||
| Additions to property and equipment | (2,556) | (4,139) | ||||||
| Proceeds from sale of property, equipment and deferred charges | 2,104 | - | ||||||
| CASH FLOWS USED IN INVESTING ACTIVITIES | (452) | (4,139) | ||||||
| CASH FLOW FROM FINANCING ACTIVITIES: | ||||||||
| Acquisition of Company's own shares | (119) | - | ||||||
| Net Repayments under lines of credit | (4,846) | (1,648) | ||||||
| CASH FLOWS USED IN FINANCING ACTIVITIES | (4,965) | (1,648) | ||||||
| EFFECT OF FOREIGN EXCHANGE RATE | (39) | 18 | ||||||
| NET INCREASE IN CASH AND CASH EQUIVALENTS | 4,185 | 2,143 | ||||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 16,742 | 13,250 | ||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | R$ | 20,927 | R$ | 15,393 | ||||
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