Brazil Fast Food Announces Third Quarter 2012 Results Business Wire RIO DE JANEIRO -- November 14, 2012 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 365 3,523 5) 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 2,075 1,940 reassessed taxes Other current liabilities 791 - TOTAL CURRENT LIABILITIES 38,654 38,089 Deferred income, less current portion (note 2,412 4,057 7) 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 R$ 43,304 R$ 46,020 Restaurants 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 6,304 (159 ) INTEREST Net (income) loss attributable to (380 ) (382 ) non-controlling interest NET INCOME (LOSS) ATTRIBUTABLE TO R$ 5,924 R$ (541 ) BRAZIL FAST FOOD CORP. NET INCOME PER COMMON SHARE BASIC AND DILUTED R$ 0.73 R$ (0.07 ) WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: BASIC AND 8,129,437 8,129,437 DILUTED 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 127,167 R$ 124,488 Restaurants 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 13,777 7,704 INTEREST Net (income) loss attributable to (806 ) (719 ) non-controlling interest NET INCOME ATTRIBUTABLE TO BRAZIL FAST 12,971 R$ 6,985 FOOD CORP. 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 R$ 13,777 R$ 7,704 INTEREST 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 (1,878 ) (2,366 ) suppliers and other current assets Other assets (2,045 ) (1,337 ) (Decrease) increase in: Accounts payable and accrued (1,874 ) (5,452 ) expenses 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) 14,651 10,950 OPERATING ACTIVITIES CASH FLOW FROM INVESTING ACTIVITIES: Additions to property and (12,929 ) (4,239 ) equipment Proceeds from sale of property, 2,618 3,795 equipment and intangible assets Yoggi acquisition (note 2) (1,109 ) - Exchange of shares (notes 2 and 4) (1,089 ) - Acquisition of Company's own - (114 ) shares CASH FLOWS USED IN INVESTING (12,509 ) (558 ) ACTIVITIES CASH FLOW FROM FINANCING ACTIVITIES: Non-controlling paid in capital - 871 Net Borrowings (Repayments) under 4,830 (4,376 ) lines of credit CASH FLOWS PROVIDED BY (USED IN) 4,830 (3,505 ) FINANCING ACTIVITIES EFFECT OF FOREIGN EXCHANGE RATE 33 (8 ) NET INCREASE IN CASH AND CASH 7,005 6,879 EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING 21,357 16,742 OF PERIOD CASH AND CASH EQUIVALENTS AT END OF R$ 28,362 R$ 23,621 PERIOD 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 293 (468 ) Foreign exchange loss 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 666 (610 ) Foreign exchange loss 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. Contact: Brazil Fast Food Corp Ricardo Figueiredo Bomeny, CEO +1-55-21-2536-7501 (Brazil) email@example.com www.bffc.com.br or CCG Investor Relations Inc. Crocker Coulson, +1-646-213-1915 (New York) President firstname.lastname@example.org www.ccgir.com
Brazil Fast Food Announces Third Quarter 2012 Results
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