Brazil Fast Food Announces Third Quarter 2012 Results
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
Brazil Fast Food Corp. (OTC Bulletin Board: BOBS), 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.
“During the third quarter we achieved strong growth in EBITDA and net income, reflecting our continued shift towards a more profitable franchise strategy”
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.
BRAZIL FAST FOOD CORP. AND SUBSIDIARIES | ||||||||||||
Consolidated Balance Sheets – Assets (Unaudited) | ||||||||||||
| 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) | ||||||||||||
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) | |||||||||||
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) | |||||||||||||||
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 |