Brazil Fast Food Announces Fourth Quarter and Fiscal Year 2012 Results

Brazil Fast Food Announces Fourth Quarter and Fiscal Year 2012 Results

RIO DE JANEIRO--(BUSINESS WIRE)-- Brazil Fast Food Corp. (OTC Markets: BOBS) ("Brazil Fast Food," or the "the Company"), the second largest fast-food restaurant chain in Brazil with 1,031 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 fourth quarter and fiscal year ended December 31, 2012.

Fiscal Year 2012 Highlights

  • System-wide sales totaled R$ 1,104.4 million, up 16.7% from 2011
  • Revenue totaled R$ 247.9 million, up 9.3% from 2011
  • Points of sale totaled 1,031 at the end of 2012, up from 880 at the end of 2011
  • EBITDA was R$ 35.1 million, up 60.5% from R$ 21.9 million in 2011
  • Operating income was R$ 28.9 million, up 75.8% from R$ 16.4 million in 2011
  • Net income was R$ 20.7 million, or R$ 2.55 per basic and diluted share

Fourth Quarter 2012 Highlights

  • System-wide sales totaled R$ 329.5 million, up 18.6% from the fourth quarter of 2011
  • Revenue totaled R$ 71.9 million, up 18.8% from the fourth quarter of 2011
  • EBITDA was R$ 12.4 million compared to R$ 2.8 million in the fourth quarter of 2011
  • Operating income was R$ 10.8 million compared to R$ 2.0 million in the fourth quarter of 2011
  • Net income was R$ 7.7 million, or R$ 0.95 per basic and diluted share

"In 2012, we continue to see strong growth in our top line and a significant increase in profitability. This was primarily due to the expansion of our franchise base in key markets throughout Brazil, in line with our strategy of strengthening our brands and improving our margins and returns. We saw solid increases in same own-store sales across all of our brands due to face-lifts at many of our Bob's brand stores and promotions and marketing activities surrounding all of our brands. We also made a number of operational improvements at our KFC and Pizza Hut stores to create a platform for future expansion for these high-potential brands," said Mr. Ricardo Bomeny, President and CEO of Brazil Fast Food.

"Our fourth quarter performance was driven by a large number of store openings at year end, most of which were highly visible stores in good locations that performed well. We also saw improved performance following the conversion of underperforming Doggis stores to franchises and growth in franchise revenue that outpaced expenses. While we are pleased with our fourth quarter performance, it benefits from a favorable comparison to the year ago period, which included several non-recurring items, including operating expenses related to the Rock in Rio music festival which took place in Rio de Janeiro in 2011 and R$ 1.9 million in losses related to Doggis assets that were sold or impaired as part of the conversion to franchises."

Fourth Quarter 2012 Results

System-wide sales grew 18.6% in the fourth quarter to R$ 329.5 million, driven by an increase in the number of franchised points of sale.

Total revenue for the fourth quarter of 2012 was R$ 71.9 million, as compared to R$ 60.5 million in the fourth quarter of 2011, due to higher revenues from franchisees and own-operated restaurants.

Net restaurant sales for company-owned restaurants increased 11.3% year-over-year to R$ 50.9 million in the fourth quarter of 2012, driven primarily by higher sales at KFC and Pizza Hut but also at Bob's stores.

Net revenue from franchisees increased 30.6% year-over-year to R$ 14.3 million, driven primarily by an increase in number of franchised retail outlets to 956, as compared to 813 a year ago. Net revenue from trade partners and other income totaled R$ 6.6 million in the fourth quarter of 2012, as compared to R$ 3.7 million in the year-ago quarter.

Operating expenses increased 4.4% to R$ 61.0 million in the fourth quarter of 2012 from R$ 58.5 million in the year-ago quarter. As a percentage of revenue, operating costs declined to 84.9% of total revenue in the fourth quarter of 2012 from 96.7% of total revenue in the year-ago quarter. The Company recorded an asset impairment of R$ 1.9 million in the fourth quarter of 2011.

Operating income for the fourth quarter of 2012 was R$ 10.8 million, an increase of 440.2% from R$ 2.0 million in the year-ago quarter. Operating margin in the fourth quarter of 2012 improved to 15.1%, as compared to 3.3% in the year-ago quarter.

EBITDA in the fourth quarter of 2012 was R$ 12.4 million, up 337.3% as compared to R$ 2.8 million in the year-ago quarter. EBITDA margin was 17.2%, as compared to 4.7% in the year-ago quarter. Please refer to Table No. 4 in this press release for a reconciliation of EBITDA to its nearest GAAP equivalent.

Interest expense was R$ 0.2 million in the fourth quarter of 2012, as compared to R$ 0.7 million in the year-ago quarter.

Net income in the fourth quarter of 2012 was R$ 7.7 million, or R$ 0.95 per basic and diluted share, as compared to R$ 1.9 million, or R$ 0.23 per basic and diluted share in the year-ago quarter.

Fiscal Year 2012 Results

For the twelve months ended December 31, 2012, total revenue was R$ 247.9 million, up 9.3% from R$ 226.8 million in 2011. Same own-store sales, which measure the performance of stores open for more than a year, were up 2.9% for Bob's, 4.1% for KFC and 9.0% for Pizza Hut for the twelve months ended December 31, 2012, versus comparable periods in 2011, driven by face-lifts at some stores, promotions and marketing campaigns. Operating income in 2012 was R$ 28.9 million, up 75.8% from R$ 16.4 million in 2011. Operating margin was 11.7% for 2012 compared to 7.2% in 2011. EBITDA in 2012 was R$ 35.1 million, as compared to R$ 21.9 million in 2011. Net income in 2012 was R$ 20.7 million, as compared to net income of R$ 8.9 million in 2011. Basic and diluted net income per share was R$ 2.55 in 2012, as compared to basic and diluted net income per share of R$ 1.09 in 2011.

Financial Condition

As of December 31, 2012 the Company had R$ 32.1 million in cash, up from R$ 21.4 million as of December 31, 2011. Working capital was R$ 24.2 million at the end of 2012, up from R$ 16.9 million as of December 31, 2011. Total shareholders' equity was R$ 61.5 million at the end of 2012, compared to R$ 41.9 million at the end of 2011.

Key Events

On May 3, 2012, Brazil Fast Food and Yum! Restaurants International (YRI) announced the satisfactory completion of the first phase of their efforts to expand the KFC brand in Brazil, pursuant to which the Company was engaged to provide franchise support services to KFC franchisees and to develop the KFC brand, upon its reentry into Brazil. Brazil Fast Food and YRI will remain close partners as the Company will continue to contribute to the development of YRI's brands as a KFC franchisee focused in Rio de Janeiro and São Paulo and as a Pizza Hut franchisee with operations in the São Paulo metropolitan area.

On May 17, 2012, Brazil Fast Food completed the acquisition of Yoggi, a frozen yogurt brand in Brazil, to expand its product portfolio in the food service industry. Yoggi was founded in 2008 and now has a total of 41 points of sale in Brazil operated by franchisees across the country.

On October 22, 2012, the Company's stock was deregistered from the U.S. Securities and Exchange Commission (the "SEC"). The stock is currently quoted on the U.S. OTC Pink market under the symbol BOBS. The decision to deregister was driven by a desire to achieve substantial annual savings by reducing accounting, legal and administrative costs associated with being an SEC registrant. The Company's 2012 annual report will be uploaded to the company's website (at www.bffc.com.br), rather than on the SEC's website.

Business Outlook

In 2013, despite a more aggressive competition scenario including international brands, the Company will continue to implement its multi-brand strategy and plans to add 150 points of sale in its system.

"We have a very strong balance sheet to support future expansion, with R$ 24.7 million in cash generated from operations in 2012 and R$ 32.1 million in cash as of the end of 2012," said Mr. Bomeny. "We are confident in our ability to expand each of our brands in 2013 and beyond.

"Our flagship Bob's brand recently celebrated its 60th anniversary, and we plan on increasing our market penetration by adding new stores, especially in the interior of Brazil, enhancing brand awareness and continuously improving operations. Building upon our new slogan 'can't control it,' we introduced new flavors of ice cream and sandwiches with edible wraps.

"We completed the first phase of our agreement with Yum! Restaurants International ("YRI"), under which we provided franchising services to KFC franchisees and helped develop the KFC brand throughout Brazil. We will continue to work closely with YRI; however, we will now focus on increasing the profitability of our own KFC and Pizza Hut stores in Rio de Janeiro and São Paulo metropolitan areas.

"Over the last four years, we faced many challenges adapting the Doggis model from Chile to the Brazilian market. In 2012, we took a number of actions to effectively reduce cost of goods sold and the total investment required to open a store. Today, we believe the brand's franchise business model, visual identity, pricing and product offering are properly positioned for future success. We are also exploring new store formats and distribution channels to improve penetration of the Doggis brand throughout Brazil, particularly in those areas unoccupied by hot-dog specialists with a national presence.

"Our newest brand, Yoggi, is recovering from an overall slowdown in consumer demand as many of the brands and stores that came to market at the peak of the recent frozen yogurt boom have been consolidated or left the market. We believe that Yoggi has the potential to become the segment leader in Brazil, and we are very excited about the potential for new products featuring the Açaí, the Amazon black-violet berry known for its nutritional value. We have had good results implementing a self-service concept for our Yoggi brand stores and we believe that we now have a winning product that will enable us to develop a presence in the frozen yogurt segment that is suited to Brazilian consumer tastes," Mr. Bomeny concluded.

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, manages one of the largest food service groups in Brazil and franchises 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 S.A. ("DGS"), Yoggi do Brasil Ltda. ("Yoggi") 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 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 on the Company's website and 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.

           

BRAZIL FAST FOOD CORP. AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENTS

(in thousands of Brazilian Reais, except share amounts)

 

Three Months Ended

December 31,

Year Ended

December 31,

2012       2011 2012       2011       2010
REVENUES
Net Revenues from Own-operated Restaurants

R$

50,940

R$

45,761

R$

178,107

R$

170,249

R$

154,591

Net Revenues from Franchisees 14,335 10,973 45,315 35,223 28,386
Net Revenues from Trade Partners 6,210 4,447 22,184 19,191 21,104
Other Income   367     (712 )   2,289     2,130     2,198  
TOTAL REVENUES   71,852     60,469     247,895     226,793     206,279  
 
OPERATING COST AND EXPENSES
Store Costs and Expenses (42,162 ) (40,816 ) (158,252 ) (153,130 ) (142,950 )
Franchise Costs and Expenses (5,183 ) (3,194 ) (15,650 ) (11,704 ) (10,718 )
Marketing Expenses (2,398 ) (1,735 ) (5,472 ) (4,326 ) (5,054 )
Administrative Expenses (9,319 ) (8,376 ) (33,636 ) (31,993 ) (28,074 )
Other Operating Expenses (1,667 ) (2,433 ) (5,584 ) (7,637 ) (7,644 )
Impairment of Assets (1,883 ) (1,883 )
Net result of assets sold   (281 )   (25 )   (411 )   310     7,367  
TOTAL OPERATING COST AND EXPENSES   (61,010 )   (58,462 )   (219,005 )   (210,363 )   (187,073 )
OPERATING INCOME 10,842 2,007 28,890 16,430 19,206
 
Interest Expense, net   199     687     (467 )   1,297     (1,606 )
NET INCOME BEFORE INCOME TAX   11,041     2,694     28,423     17,727     17,600  
 
Income taxes - deferred 4,694 2,315 1,089 (2,432 ) (4,057 )
Income taxes - current   (7,552 )   (2,047 )   (7,552 )   (4,629 )   (2,278 )
NET INCOME (LOSS) BEFORE NON-CONTROLLING INTEREST   8,183     2,962     21,960     10,666     11,265  
 
Net (income) loss attributable to non-controlling interest   (446 )   (1,093 )   (1,252 )   (1,812 )   384  
NET INCOME (LOSS) ATTRIBUTABLE TO BRAZIL FAST FOOD CORP.   7,737     1,869     20,708     8,854     11,649  
 

NET INCOME (LOSS) PER COMMON SHARE

BASIC AND DILUTED 0.95 0.23 2.55 1.09 1.43
 

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

BASIC AND DILUTED 8,129,437 8,130,717 8,129,437 8,130,717 8,137,762
 
 
       

BRAZIL FAST FOOD CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS - LIABILITIES AND STOCKHOLDERS' EQUITY

(In thousands of Brazilian Reais, except share amounts)

 

December 31,

2012

               

2011

CURRENT ASSETS:
Cash and cash equivalents R$ 32,062 R$ 21,357
Inventories 3,228 3,985
Accounts receivable 25,754 17,106
Prepaid expenses 892 3,478
Advances to suppliers 2,092 1,500
Receivables from properties sale - 3,523
Other current assets 6,601 4,083
TOTAL CURRENT ASSETS 70,629 55,032
 

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