RIO DE JANEIRO--(BUSINESS WIRE)--Brazil Fast Food Corp. (OTC Markets:BOBS) (“Brazil Fast Food”, or “the Company”), the second largest fast-food restaurant chain in Brazil with 1,085 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 master franchisee of Gastronomia & Negocios S.A. (former Grupo de Empresas Doggis S.A.), today announced financial results for the third quarter ended September 30, 2013.
Third Quarter 2013 Highlights
- System-wide sales totaled R$ 335.7 million, up 26% from R$266.5 million in the third quarter 2012
- Points of sale totaled 1,085, up from 983 at the end of the third quarter 2012
- Revenue totaled R$69.9 million, up 28% from R$54.6 million in the third quarter 2012
- Operating income increased 4% to R$7.8 million, from R$7.5 million in the third quarter 2012
- Net income was R$5.2 million, a decrease of 12% from R$5.9 million in the third quarter 2012
- Earnings per basic and fully diluted share was R$0.64, as compared to R$0.73 per basic and diluted share in the comparable year-ago quarter
“Our third quarter 2013 results were positively impacted by our recently inaugurated Pizza Hut owned-and-operated restaurants in São Paulo, and two major one-time events during the period, the seven-day Rock in Rio Festival that drew major international names to a very well attended event in an area where Bob’s had four points of sale, as well as the Catholic World Youth Conference that was attended by the Pope, where we pre-sold sandwiches to municipal volunteers. Nevertheless, continued countrywide civil unrest and protests caused by widespread disappointment in the economic performance and political leaders in Brazil had adverse effects on sales and forced some stores to close earlier than normal for security reasons. Our operating income and net income were negatively impacted by the rise in the purchase price of some products due to inflationary pressures and currency devaluation as well as aggressive value campaigns at Pizza Hut and KFC restaurants,” said Mr. Ricardo Bomeny, President and CEO of Brazil Fast Food.
All figures are presented in nominal terms, while the average inflation rate between September 30th 2012 and September 30th 2013 was 5.9%.
Third Quarter 2013 Results
Higher sales from company owned stores, and an increase in the number of franchised points of sale, led to system-wide sales growth of 26% in the third quarter, up from R$266.5 million to R$337.5 million.
Total revenue for the third quarter 2013 increased by 28% to R$69.9 million, compared to R$54.6 million in the third quarter 2012.
Net restaurant sales for Company-owned retail outlets were up 31.6% to R$57 million for the three months ended September 30, 2013, compared to R$43.3 million for the three months ended September 30, 2012. This increase in sales is attributed to the opening of nine new Pizza Hut restaurants in São Paulo to counterbalance Cumbica airport restaurant’s participation in IRB’s results, as well as the Rock in Rio Festival and the Catholic World Youth Conference in Rio de Janeiro.
Net revenue from franchises increased 13.9% year over year to R$12.9 million, up from R$11.3 million, driven by higher same store sales and an increase in franchised retail outlets to 1,007 on September 30, 2013, up from 916 in the same period a year ago.
Operating expenses grew 31.8% to R$62.0 million in the third quarter 2013 from R$47.1million in the third quarter of 2012. As a percentage of revenue, operating costs increased to 88.8% of total revenue in the third quarter of 2013 compared to 86.3% of total revenue in the same period of 2012.
Operating income for the third quarter of 2013 increased by 4% to R$7.8 million, compared to R$7.5 million in the third quarter of 2012.
EBITDA in the third quarter of 2013 was R$10.0 million, compared to R$8.9 million in the third quarter of 2012. Rock in Rio Festival had a result of approximately R$1.3 million. Please refer to Table 1 following the financial statements for a computation and description of EBITDA.
Interest income was at R$0.23 million in the third quarter of 2013, compared to interest expense of R$0.29 million in the third quarter of 2012.
Net income for the third quarter of 2013 fell to R$5.2 million, or R$0.64 per basic and diluted share, down 12% from net income of R$5.9 million, or R$0.73 per basic and diluted share, in the same period of 2012.
Nine Months 2013 Results
For the nine months ended in September 30, 2013, total net revenue was R$185.1 million, up 17% from R$158.1 million in the comparable period of 2012. Operating income was R$24.3 million, up 34.7% from R$18.1 million in the comparable period in 2012. Net income for the nine months ended September 30, 2013 was R$16.4 million, up from R$13 million in the comparable period in 2012, an increase of 26%. Basic and diluted earnings per share were R$2.01 for the nine months ended September 30, 2013 compared to R$1.60 for the nine months ended September 30, 2012.
The increase in sales was driven by both higher sales from the company-owned restaurants and by growth in the franchise business.
Based on the criterion of same-store sales, which only includes stores that have been open for more than one year and is a metric that is not in accordance with IFRS accounting principles but is often used in retail industry analysis, the greatest growth from the Company-owned restaurants was seen in KFC and Pizza Hut, driven primarily by aggressive value campaigns intent to increase these respective restaurants’ customer base in a moment of consumers' reducing expenditures and fierce competition. Net franchise revenues have increased 14.9% to R$35.6 million for the nine months ended September 30, 2013 from R$31.0 million in the comparable year-ago period. This growth was driven by the growth of the franchise business to 1,007 as of September 30, 2013 from 916 outlets as of September 30, 2012 with the Bob’s brand accounting for most of the franchise activity.
Operating income for the first nine months of 2013 from the franchise business was R$ 23.8 million, an increase of 16.1% from R$ 20.5 million in the year-ago period. The Company also recorded R$ 3.0 million gain on the sale of assets.
Financial Condition
As of September 30, 2013, Brazil Fast Food had R$52.9 million in cash and cash equivalents, up from R$32.0 million in cash and cash equivalents as of December 31, 2012. Cash and cash equivalents were affected by IRB’s extension of debt and new debt financing for its expansion.
Net working capital was R$42.1 million as of September 30, 2013, as compared to R$24.2 million as of December 31, 2012. Total shareholders' equity as of September 30, 2013 was R$77.4 million, compared to R$61.5 million at the end of fiscal 2012.
Business Outlook
“As discussed, we expect to face a more challenging operating environment over the next twelve months, due to reduced expectations for GDP growth, higher inflation and interest rates and a more fierce competitive environment, due to stepped up efforts of several large and well financed brands,” said Mr. Bomeny. “The company plans to make appropriate levels of investment in store renovations of the Bob’s outlets and branding that could have the potential of suppressing profitability in the near term. Despite these uncertainties, we remain committed to our business plan to build a strong consumer franchise that is well suited to the tastes of the Brazilian market.”
About Brazil Fast Food Corp.
Brazil Fast Food Corp., through its holding company in Brazil, BFFC do Brasil Participações Ltda. (“BFFC do Brasil”, formerly 22N Participações Ltda.), and its subsidiaries, manage one of the largest food service groups in Brazil and franchise units in Angola and Chile. Our subsidiaries are Venbo Comércio de Alimentos Ltda. (“Venbo”), LM Comércio de Alimentos Ltda. (“LM”), PCN Comércio de Alimentos Ltda. (“PCN”), CFK Comércio de Alimentos Ltda. (“CFK”, former Clematis Indústria e Comércio de Alimentos e Participações Ltda.), CFK São Paulo Comércio de Alimentos Ltda. (“CFK SP”), MPSC Comércio de Alimentos Ltda. (“MPSC”), FCK Comércio de Alimentos Ltda. (“FCK”, former Suprilog Logística Ltda.), DGS Comércio de Alimentos Ltda. (“DGS”), Yoggi do Brasil Ltda. (“Yoggi”), Schott Comércio de Alimentos Ltda. (“Schott”), Little Boss Comércio de Alimentos Ltda. (“Little Boss”), CLFL Comércio de Alimentos Ltda. (“CLFL”) and Internacional Restaurantes do Brasil S.A. (“IRB”). IRB has 40% of its capital held by Mascali Participações Ltda., another Brazilian limited liability company, whose main partner is the CEO of IRB.
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 financial reports, including the risk factors contained in the Company's most recent annual report and quarterly reports available on its website www.bffc.com.br.
--FINANCIAL TABLES FOLLOW—
|
BRAZIL FAST FOOD CORP. AND SUBSIDIARIES Consolidated Quarterly Financial Information Balance Sheets – Assets (in thousands of Brazilian Reais, except share amounts) |
||||||||||
| September, 30 | December 31, | |||||||||
| 2013 | 2012 | |||||||||
| (unaudited) | ||||||||||
| ASSETS | ||||||||||
| CURRENT ASSETS: | ||||||||||
| Cash and cash equivalents (note 4) | R$ | 52,871 | R$ | 32,062 | ||||||
| Inventories | 2,623 | 3,228 | ||||||||
| Accounts receivable | ||||||||||
| Clients - food sales | 9,445 | 8,748 | ||||||||
| Franchisees | 17,468 | 17,226 | ||||||||
| Allowance for doubtful accounts | (255 | ) | (220 | ) | ||||||
| Prepaid expenses | 1,226 | 892 | ||||||||
| Advances to suppliers | 1,843 | 2,092 | ||||||||
| Bob's Marketing fund credits (note 5a) | 4,811 | - | ||||||||
| Other current assets (notes 5b and 6) | 6,131 | 6,601 | ||||||||
| TOTAL CURRENT ASSETS | 96,163 | 70,629 | ||||||||
| NON-CURRENT ASSETS: | ||||||||||
| Other receivables and other assets (note 5a and 6) | 13,496 | 13,667 | ||||||||
| Deferred tax asset, net | 8,421 | 8,565 | ||||||||
| Goodwill (note 3.3) | 1,121 | 1,121 | ||||||||
| Property and equipment, net (note 7) | 45,379 | 39,414 | ||||||||
| Intangible assets, net (note 8) | 11,529 | 8,280 | ||||||||
| TOTAL NON-CURRENT ASSETS | 79,946 | 71,047 | ||||||||
| TOTAL ASSETS | R$ | 176,109 | R$ | 141,676 | ||||||
|
BRAZIL FAST FOOD CORP. AND SUBSIDIARIES Consolidated Quarterly Financial Information Balance Sheets – Liabilities and Shareholders’ Equity (in thousands of Brazilian Reais, except share amounts) |
|||||||||||
| September, 30 | December 31, | ||||||||||
| 2013 | 2012 | ||||||||||
| (unaudited) | |||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
| CURRENT LIABILITIES: | |||||||||||
| Loans and financing (note 11) | R$ | 14,263 | R$ | 14,523 | |||||||
| Accounts payable and accrued expenses | 14,966 | 13,834 | |||||||||
| Payroll and related accruals | 8,987 | 4,782 | |||||||||
| Taxes | 6,031 | 7,848 | |||||||||
| Current portion of deferred income (note 10) | 7,789 | 3,398 | |||||||||
| Current portion of litigations and reassessed taxes (note 9) | 2,070 | 2,090 | |||||||||
| TOTAL CURRENT LIABILITIES | 54,106 | 46,475 | |||||||||
| Deferred income, less current portion (note 10) | 9,895 | 1,608 | |||||||||
| Loans and financing, less current portion (note 11) | 11,183 | 6,397 | |||||||||
| Litigations and reassessed taxes, less | |||||||||||
| current portion (note 9) | 16,712 | 18,472 | |||||||||
| Other liabilities (note 12) | 2,292 | 3,093 | |||||||||
| TOTAL NON-CURRENT LIABILITIES | 40,082 | 29,570 | |||||||||
| TOTAL LIABILITIES | 94,188 | 76,045 | |||||||||
| SHAREHOLDERS’ EQUITY: | |||||||||||
|
Preferred stock, $.01 par value, 5,000 shares authorized; no shares issued |
- | - | |||||||||
| Common stock, $.0001 par value, 12,500,000 shares authorized; | |||||||||||
|
8,472,927 shares issued for both 2013 and 2012; and 8,129,437 shares outstanding for both 2013 and 2012 |
1 | 1 | |||||||||
| Additional paid-in capital | 61,148 | 61,148 | |||||||||
| Treasury Stock (343,490 shares) | (2,060 | ) | (2,060 | ) | |||||||
| Retained Earnings | 19,878 | 3,527 | |||||||||
| Accumulated comprehensive loss | (1,597 | ) | (1,115 | ) | |||||||
| TOTAL SHAREHOLDERS’ EQUITY | 77,370 | 61,501 | |||||||||
| Non-Controlling Interest | 4,551 | 4,130 | |||||||||
| TOTAL EQUITY | 81,921 | 65,631 | |||||||||
| TOTAL LIABILITIES AND EQUITY | R$ | 176,109 | R$ | 141,676 | |||||||
|
BRAZIL FAST FOOD CORP. AND SUBSIDIARIES Consolidated Quarterly Financial Information Statements of Operations (Unaudited) (in thousands of Brazilian Reais, except share amounts) |
|||||||||||
| Three Months Ended September 30, | |||||||||||
| 2013 | 2012 | ||||||||||
| (unaudited) | (reclassified) | ||||||||||
| REVENUES FROM RESTAURANTS AND FRANCHISEES | |||||||||||
| Net revenues from own-operated restaurants (note 13) | R$ | 56,996 | R$ | 43,304 | |||||||
| Net revenues from franchisees (note 13) | 12,859 | 11,292 | |||||||||
| TOTAL REVENUES FROM RESTAURANTS AND FRANCHISEES | 69,855 | 54,596 | |||||||||
| Store Costs and Expenses (note 13) | (52,089 | ) | (39,878 | ) | |||||||
| Franchise Costs and Expenses (note 13) | (4,477 | ) | (3,659 | ) | |||||||
| Administrative Expenses | (8,687 | ) | (8,074 | ) | |||||||
| Income from supply agreements | 5,931 | 5,236 | |||||||||
| Other income | 238 | 620 | |||||||||
| Other Operating Expenses | (2,592 | ) | (1,132 | ) | |||||||
| Net result of assets sold and impairment of assets (note 6) | (388 | ) | (213 | ) | |||||||
| OPERATING INCOME | 7,791 | 7,496 | |||||||||
| Interest Expense | 230 | (293 | ) | ||||||||
| NET INCOME BEFORE INCOME TAX | 8,021 | 7,203 | |||||||||
| Income taxes | (2,678 | ) | (899 | ) | |||||||
| NET INCOME BEFORE NON-CONTROLLING INTEREST | 5,343 | 6,304 | |||||||||
| Net loss attributable to non-controlling interest | (151 | ) | (380 | ) | |||||||
|
NET INCOME ATTRIBUTABLE TO BRAZIL FAST FOOD CORP. |
R$ | 5,192 | R$ | 5,924 | |||||||
| NET INCOME PER COMMON SHARE | |||||||||||
| BASIC AND DILUTED | R$ | 0.64 | R$ | 0.73 | |||||||
| WEIGHTED AVERAGE COMMON | |||||||||||
| SHARES OUTSTANDING: BASIC AND DILUTED | 8,129,437 | 8,129,437 | |||||||||
|
BRAZIL FAST FOOD CORP. AND SUBSIDIARIES Consolidated Quarterly Financial Information Statements of Comprehensive Loss (Unaudited) (in thousands of Brazilian Reais) |
||||||||||
| Nine Months Ended September 30, | ||||||||||
| 2013 | 2012 | |||||||||
| (unaudited) | (reclassified) | |||||||||
| REVENUES FROM RESTAURANTS AND FRANCHISEES | ||||||||||
| Net revenues from own-operated restaurants (note 13) | R$ | 149,518 | R$ | 127,167 | ||||||
| Net revenues from franchisees (note 13) | 35,598 | 30,980 | ||||||||
| TOTAL REVENUES FROM RESTAURANTS AND FRANCHISEES | 185,116 | 158,147 | ||||||||
| Store Costs and Expenses (note 13) | (142,489 | ) | (119,164 | ) | ||||||
| Franchise Costs and Expenses (note 13) | (11,785 | ) | (10,467 | ) | ||||||
| Administrative Expenses | (23,653 | ) | (24,317 | ) | ||||||
| Income from supply agreements | 19,480 | 15,974 | ||||||||
| Other income | 612 | 1,922 | ||||||||
| Other Operating Expenses | (5,180 | ) | (3,917 | ) | ||||||
| Net result of assets sold and impairment of assets (note 6) | 2,208 | (130 | ) | |||||||
| OPERATING INCOME | 24,309 | 18,048 | ||||||||
| Interest Expense | (90 | ) | (666 | ) | ||||||
| NET INCOME BEFORE INCOME TAX | 24,219 | 17,382 | ||||||||
| Income taxes | (7,447 | ) | (3,605 | ) | ||||||
| NET INCOME BEFORE NON-CONTROLLING INTEREST | 16,772 | 13,777 | ||||||||
| Net loss attributable to non-controlling interest | (421 | ) | (806 | ) | ||||||
|
NET INCOME ATTRIBUTABLE TO BRAZIL FAST FOOD CORP. |
R$ | 16,351 | R$ | 12,971 | ||||||
| NET INCOME PER COMMON SHARE | ||||||||||
| BASIC AND DILUTED | R$ | 2.01 | R$ | 1.60 | ||||||
| WEIGHTED AVERAGE COMMON | ||||||||||
| SHARES OUTSTANDING: BASIC AND DILUTED | 8,129,437 | 8,129,437 | ||||||||
|
BRAZIL FAST FOOD CORP. AND SUBSIDIARIES Consolidated Quarterly Financial Information Statements of Cash Flows (Unaudited) (in thousands of Brazilian Reais) |
|||||||||||
| Nine Months Ended September, 30 | |||||||||||
| 2013 | 2012 | ||||||||||
| CASH FLOW FROM OPERATING ACTIVITIES: | (unaudited) | (unaudited) | |||||||||
| NET INCOME BEFORE NON-CONTROLLING INTEREST | R$ | 16,772 | R$ | 7,473 | |||||||
| Adjustments to reconcile net income to cash provided by | |||||||||||
| (used in) operating activities: | |||||||||||
| Depreciation and amortization | 6,153 | 3,663 | |||||||||
| (Gain) Loss on assets sold, net | (2,208 | ) | (83 | ) | |||||||
| Deferred income tax | 144 | 830 | |||||||||
| Changes in assets and liabilities: | |||||||||||
| (Increase) decrease in: | |||||||||||
| Accounts receivable | (904 | ) | (1,129 | ) | |||||||
| Inventories | 605 | 1,366 | |||||||||
| Prepaid expenses, advances to suppliers and other current assets | (4,426 | ) | (202 | ) | |||||||
| Other assets | 171 | (2,022 | ) | ||||||||
| (Decrease) increase in: | |||||||||||
| Accounts payable and accrued expenses | 1,132 | (2,524 | ) | ||||||||
| Payroll and related accruals | 4,205 | (106 | ) | ||||||||
| Taxes | (1,817 | ) | (1,336 | ) | |||||||
| Deferred income | 12,678 | 1,982 | |||||||||
| Litigations and reassessed taxes | (1,780 | ) | 133 | ||||||||
| Other liabilities | (801 | ) | 450 | ||||||||
| CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES | 29,924 | 8,495 | |||||||||
| CASH FLOW FROM INVESTING ACTIVITIES: | |||||||||||
| Additions to property and equipment, net of proceed of sales | (13,079 | ) | (8,286 | ) | |||||||
| Yoggi acquisition | - | (701 | ) | ||||||||
| CASH FLOWS USED IN INVESTING ACTIVITIES | (13,079 | ) | (8,987 | ) | |||||||
| CASH FLOW FROM FINANCING ACTIVITIES: | |||||||||||
| Non-controlling paid in capital | - | 226 | |||||||||
| Net Borrowings (Repayments) under lines of credit | 4,526 | 2,404 | |||||||||
| CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES | 4,526 | 2,630 | |||||||||
| EFFECT OF FOREIGN EXCHANGE RATE | (562 | ) | 33 | ||||||||
| NET INCREASE IN CASH AND CASH EQUIVALENTS | 20,809 | 2,171 | |||||||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 32,062 | 21,357 | |||||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | R$ | 52,871 | R$ | 23,528 | |||||||
|
BRAZIL FAST FOOD CORP. AND SUBSIDIARIES |
||||||||
|
RECONCILIATION OF EBITDA TO NET INCOME |
||||||||
| Three Months Ended September 31, | ||||||||
| 2013 | 2012 | |||||||
| NET INCOME | R$ | 5.192 | R$ | 5,924 | ||||
| Interest expenses, Monetary and Foreign exchange loss | (230 | ) | 293 | |||||
| Income taxes | 2,678 | 899 | ||||||
| Depreciation and amortization | 2,318 | 1,832 | ||||||
| EBITDA | R$ | 9,958 | R$ | 8,948 | ||||
| Nine Months Ended September 30, | ||||||||
| 2013 | 2012 | |||||||
| NET INCOME | R$ | 16,351 | R$ | 12,971 | ||||
| Interest expenses, Monetary and Foreign exchange loss | 90 | 666 | ||||||
| Income taxes | 7,447 | 3.605 | ||||||
| Depreciation and amortization | 6,153 | 5,495 | ||||||
| EBITDA | R$ | 30,041 | R$ | 22,737 | ||||
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.