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Brazil Fast Food Announces Second Quarter 2012 Results
August 20, 2012 · 0 Comments
RIO DE JANEIRO–(www.hospitalitybusinessnews.com) Brazil Fast Food Corp., the second largest fast-food restaurant chain in Brazil with 963 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 second quarter 2012 ended June 30, 2012.
“We are pleased to report a very strong quarter of profitability and EBITDA growth, reflecting the strength of our brands and shift towards more franchised stores”
Second Quarter 2012 Highlights
- System-wide sales totaled R$254.2 million, up 22.3% from the second quarter 2011
- Revenue totaled R$55.1 million, up 8.0% from R$51.0 million in the second quarter 2011
- Points of sale totaled 963 at June 30, 2012, up from 805 at the end of second quarter 2011
- EBITDA was R$6.7 million, up 23.8% from the second quarter 2011
- Operating income increased 23.9% year-over-year to R$5.0 million
- Net income was R$3.6 million, or R$0.45 per basic and diluted share
“We are pleased to report a very strong quarter of profitability and EBITDA growth, reflecting the strength of our brands and shift towards more franchised stores,” said Ricardo Figueiredo Bomeny, CEO of Brazil Fast Food Corp. “We maintained a strong and liquid balance sheet, which gives us the flexibility to invest in future expansion.”
Second Quarter 2012 Results
System-wide sales grew 22.3% in the second quarter to R$254.2 million, driven by an increase in the number of franchised points of sale as well as higher sales from company-owned stores.
Total revenue for the second quarter 2012 increased by 8.0% to R$55.1 million compared to R$51.0 million in the second quarter 2011.
Net restaurant sales for company-owned retail outlets was up 5.0% year-over-year to R$40.2 million in the second quarter 2012, 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 and Doggis brand. In 2011 the Company converted all its own-operated Doggis’ stores to franchised stores.
Net revenue from franchisees increased 23.7% year-over-year to R$9.7 million, driven primarily by an increase in number of franchised retail outlets to 893, up from 736 in the same period a year ago. Other revenue and income totaled R$5.1 million in the second quarter 2012 up from R$4.8 million in the year ago period.
Operating expenses grew 6.6% to R$50.0 million in the second quarter 2012 from R$46.9 million in the second quarter of 2011. As a percentage of revenue, operating costs declined to 90.9% of total revenue in the second quarter of 2012 to 92.1% of total revenue in the same period of 2011.
Operating income for the second quarter of 2012 was R$5.0 million, compared to R$4.0 million in the second quarter of 2011. Operating margin in the second quarter of 2012 improved to 9.1% compared to 7.9% in the same period of 2011.
EBITDA in the second quarter of 2012 was R$6.7 million, compared to R$5.4 million in the second quarter of 2011. EBITDA margin was 12.1% compared to 10.5% in the comparable period of 2011. Please refer 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 second quarter of 2012, compared to interest income of R$0.2 million in the second quarter of 2011.
Net income for the second quarter of 2012 was R$3.6 million, or R$0.45 per basic and diluted share, up 10.6% from net income of R$3.3 million, or R$0.41 per basic and diluted share in the same period of 2011.
Six Months 2011 Results
For the six months ended in June 30, 2012, total net revenue was R$115.6 million, up 9.1% from R$105.9 million in the comparable period of 2011. Operating income was R$10.6 million, up 18.4% from R$8.9 million in the comparable period in 2011. Operating margin was 9.1% for the six months ended June 30, 2012 compared to 8.4% in the comparable period in 2011. Net income for the six months ended June 30, 2012 was R$7.0 million, down 6.4% from R$7.5 million in the comparable period in 2010. Basic and diluted earnings per share were R$0.87 for the six months ended June 30, 2012 compared to R$0.93 for the six months ended June 30, 2011.
Financial Condition
As of June 30, 2012, Brazil Fast Food had R$23.5 million in cash and cash equivalents, up from R$21.4 million as of December 31, 2011. Working capital was R$15.2 million, as compared to R$16.9 million as of the end of 2011. Total shareholders’ equity as of June 30, 2012 was R$53.2 million, compared to R$45.5 million at the end of 2011.
In the first six months of 2012, Brazil Fast Food generated net cash flow from operating activities of R$8.5 million, representing a decrease of 11.9%, from R$9.6 million for the comparable period in 2011. The Company used R$9.0 million in cash towards investment in property and equipment to improve the Company’s retail operations, mainly setting up new owned-and-operated KFC and Pizza Hut stores.
Business Outlook
In May 2012, the Company acquired Yoggi do Brasil Ltda (“Yoggi”) which operates a franchise network of frozen yogurt in Brazil since 2008 with 48 franchised point of sales and 43 franchisees. Management anticipates synergy savings from this acquisition and foresees possible market consolidation. Brazil Fast Food expects to increase the total number of points of sale to 150 over the next five years.
“Under the KFC and Pizza Hut brand, we have own-operated stores, as franchisee of Yum! brands. We are focused on enhancing our own-stores profitability and operational margins in the coming quarters. We do not have any own-operated stores under the Doggis and Yoggi brands. Our growth strategy for these two brands is to expand through franchisees and to become a market leader in the hot dog and frozen yogurt segments. We believe there is a tremendous growth opportunity in Brazil and we will seek to expand our market share in these two segments. At the end of 2012, we expect Bobs’ brand to reach a total of 1000 points of sale, a 20.5% increase from 2011. Our objective is to continuously expand and increase our margins for our own-operated stores and franchised stores under the Bob’s brand,” concluded Mr. Bomeny.
| BRAZIL FAST FOOD CORP. AND SUBSIDIARIES | ||||||||
| Consolidated Balance Sheets – Assets (Unaudited) | ||||||||
| (in thousands of Brazilian Reais, except share amounts) | ||||||||
| Consolidated Balance Sheets – Liabilities and Shareholders’ Equity (Unaudited) | ||||||||
| (in thousands of Brazilian Reais, except share amounts) | ||||||||
| June 30, | December 31, | |||||||
| 2012 | 2011 | |||||||
| "3">(unaudited) | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | R$ | 23,528 | R$ | 21,357 | ||||
| Inventories | 2,619 | 3,985 | ||||||
| Accounts receivable | ||||||||
| Clients | 5,779 | 5,660 | ||||||
| Franchisees | 13,056 | 12,247 | ||||||
| Allowance for doubtful accounts | (600 | ) | (801 | ) | ||||
| Advances to suppliers | 1,592 | 1,500 | ||||||
| Prepaid expenses | 823 | 3,478 | ||||||
| Receivables from properties sale | 1,623 | 3,523 | ||||||
| Other current assets | 6,848 | 4,083 | ||||||
| TOTAL CURRENT ASSETS | 55,268 | 55,032 | ||||||
| Other receivables and other assets | 12,884 | 10,862 | ||||||
| Deferred tax asset, net | 6,898 | 8,378 | ||||||
| Goodwill | 2,699 | 799 | ||||||
| Property and equipment, net | 37,359 | 31,342 | ||||||
| Intangible assets, net | 5,061 | 4,472 | ||||||
| TOTAL ASSETS | R$ | 120,169 | R$ | 110,885 | ||||
|
|
||||||||
| June 30, | December 31, | |||||||
| 2012 | 2011 | |||||||
| (unaudited) | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Notes payable | R$ | 13,665 | R$ | 11,523 | ||||
| Accounts payable and accrued expenses | 9,084 | 11,608 | ||||||
| Payroll and related accruals | 5,512 | 5,618 | ||||||
| Taxes | 3,684 | 5,020 | ||||||
| Deferred income tax | 612 | 1,262 | ||||||
| Current portion of deferred income | 4,247 | 1,118 | ||||||
| Current portion of contingencies and reassessed taxes | 2,062 | 1,940 | ||||||
|
Accounts payable related to Yoggi acquisition |
1,199 | - | ||||||
| TOTAL CURRENT LIABILITIES | 40,065 | 38,089 | ||||||
| Deferred income, less current portion | 2,910 | 4,057 | ||||||
| NOTES PAYABLE, less current portion | 5,330 | 5,068 | ||||||
| CONTINGENCIES AND REASSESSED TAXES, less | ||||||||
| current portion | 18,226 | 18,215 | ||||||
| Other liabilities | 450 | - | ||||||
| TOTAL LIABILITIES | 66,981 | 65,429 | ||||||
| SHAREHOLDERS’ EQUITY: | ||||||||
| Preferred stock, $.01 par value, 5,000 shares authorized; no | ||||||||
| shares issued | - | - | ||||||
| Common stock, $.0001 par value, 12,500,000 shares authorized; | ||||||||
| 8,472,927 shares issued for both 2012 and 2011; and 8,129,437 | ||||||||
| shares outstanding for both 2012 and 2011 | 1 | 1 | ||||||
| Additional paid-in capital | 61,148 | >61,148 | ||||||
| Treasury Stock (343,490 shares) | (2,060 | ) | (2,060 | ) | ||||
| Accumulated Deficit | (9,045 | ) | (16,092 | ) | ||||
| Accumulated comprehensive loss | (1,095 | ) | (1,128 | ) | ||||
| TOTAL SHAREHOLDERS’ EQUITY | 48,949 | 41,869 | ||||||
| Non-Controlling Interest | 4,239 | 3,587 | ||||||
| TOTAL EQUITY | 53,188 | 45,456 | ||||||
| TOTAL LIABILITIES AND EQUITY | R$ | 120,169 | 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 June 30, | ||||||||
| 2012 | 2011 | |||||||
| REVENUES | ||||||||
| Net Revenues from Own-operated Restaurants | R$ | 40,246 | R$ | 38,322 | ||||
| Net Revenues from Franchisees | 9,677 | 7,824 | ||||||
| Revenues from trade partners | 4,147 | 3,775 | ||||||
| Other Income | 982 | 1,065 | ||||||
| TOTAL REVENUES | 55,052 | 50,986 | ||||||
| OPERATING COST AND EXPENSES | ||||||||
| Store Costs and Expenses | (36,871 | ) | (34,992 | ) | ||||
| Franchise Costs and Expenses | (3,729 | ) | (2,910 | ) | ||||
| Marketing Expenses | (544 | ) | (376 | ) | ||||
| Administrative Expenses | (7,641 | ) | (6,910 | ) | ||||
| Other Operating Expenses | (1,387 | ) | (1,732 | ) | ||||
| Net result of assets sold | 127 | (26 | ) | |||||
| TOTAL OPERATING COST AND EXPENSES | (50,045 | ) | (46,946 | ) | ||||
| -90.9 | % | -92.1 | % | |||||
| OPERATING INCOME | 5,007 | 4,040 | ||||||
| Interest Income (expenses), net | (234 | ) | 186 | |||||
| NET INCOME BEFORE INCOME TAX | 4,773 | 4,226 | ||||||
| Income taxes | (882 | ) | (600 | ) | ||||
| NET INCOME BEFORE NON-CONTROLLING INTEREST | 3,891 | 3,626 | ||||||
| Net income attributable to non-controlling interest | (244 | ) | (330 | ) | ||||
| NET INCOME ATTRIBUTABLE TO BRAZIL FAST FOOD CORP. | R$ | 3,647 | R$ | 3,296 | ||||
| NET INCOME PER COMMON SHARE | ||||||||
| BASIC AND DILUTED | R$ | 0.45 | R$ | 0.41 | ||||
| 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) | ||||||||
| (in thousands of Brazilian Reais, except share amounts) | ||||||||
| Six Months Ended June 30, | ||||||||
| 2012 | 2011 | |||||||
| REVENUES | ||||||||
| Net Revenues from Own-operated Restaurants | R$ | 83,863 | R$ | 78,468 | ||||
| Net Revenues from Franchisees | 19,688 | 15,434 | ||||||
| Revenues from trade partners | 10,738 | & nbsp; |
10,567 | |||||
| Other Income | 1,302 | 1,462 | ||||||
| TOTAL REVENUES | 115,591 | 105,931 | ||||||
| OPERATING COST AND EXPENSES | ||||||||
| Store Costs and Expenses | (77,391 | ) | (72,082 | ) | ||||
| Franchise Costs and Expenses | (6,808 | ) | (5,478 | ) | ||||
| Marketing Expenses | (1,895 | ) | (1,391 | ) | ||||
| Administrative Expenses | (16,243 | ) | (14,678 | ) | ||||
| Other Operating Expenses | (2,785 | ) | (3,361 | ) | ||||
| Net result of assets sold | 83 | (28 | ) | |||||
| TOTAL OPERATING COST AND EXPENSES | (105,039 | ) | (97,018 | ) | ||||
| OPERATING INCOME | 10,552 | 8,913 | ||||||
| Interest Income (expense), net | (373 | ) | 142 | |||||
| NET INCOME BEFORE INCOME TAX | 10,179 | 9,055 | ||||||
| Income taxes | (2,706 | ) | (1,192 | ) | ||||
| NET INCOME BEFORE NON-CONTROLLING INTEREST | 7,473 | 7,863 | ||||||
| Net (income) loss attributable to non-controlling interest | (426 | ) | (337 | ) | ||||
| NET INCOME ATTRIBUTABLE TO BRAZIL FAST FOOD CORP. | R$ | 7,047 | R$ | 7,526 | ||||
| NET INCOME PER COMMON SHARE | ||||||||
| BASIC AND DILUTED | R$ | 0.87 | R$ | 0.93 | ||||
| WEIGHTED AVERAGE COMMON | ||||||||
| SHARES OUTSTANDING: BASIC AND DILUTED | 8,129,437 | 8,132,012 | ||||||
| BRAZIL FAST FOOD CORP. AND SUBSIDIARIES | ||||||||
| Consolidated Statements of Cash Flows (Unaudited) | ||||||||
| (in thousands of Brazilian Reais) | ||||||||
| Six Months Ended June 30, | ||||||||
| 2012 | 2011 | |||||||
| CASH FLOW FROM OPERATING ACTIVITIES: | ||||||||
| NET INCOME ATTRIBUTABLE TO BRAZIL FAST FOOD CORP. | R$ | 7,473 | R$ | 7,863 | ||||
| Adjustments to reconcile net income to cash provided by | ||||||||
| (used in) operating activities: | ||||||||
| Depreciation and amortization | 3,663 | 3,445 | ||||||
| Loss on assets sold, net | (83 | ) | 28 | |||||
| Deferred tax | 830 | (434 | ) | |||||
| Changes in assets and liabilities: | ||||||||
| (Increase) decrease in: | ||||||||
| Accounts receivable | (1,129 | ) | 353 | |||||
| Inventories | 1,366 | (327 | ) | |||||
| Prepaid expenses, advances to suppliers and other current assets | (202 | ) | (1,224 | ) | ||||
| Other assets | (2,022 | ) | 859 | |||||
| (Decrease) increase in: | ||||||||
| Accounts payable and accrued expenses | (2,524 | ) | (4,846 | ) | ||||
| Payroll and related accruals | (106 | ) | 1,488 | |||||
| Taxes other than income taxes | (1,336 | ) | (1,726 | ) | ||||
| Deferred income | 1,982 | 4,204 | ||||||
| Contingencies and reassessed taxes | 133 | (39 | ) | |||||
| Other liabilities | 450 | (3 | ) | |||||
| CASH FLOWS PROVIDED BY OPERATING ACTIVITIES | 8,495 | 9,641 | ||||||
| CASH FLOW FROM INVESTING ACTIVITIES: | ||||||||
| Additions to property and equipment | (10,491 | ) | (2,556 | ) | ||||
|
Yoggi acquisition |
(701 | ) | - | |||||
| Proceeds from sale of property, equipment and deferred charges | 2,205 | 2,104 | ||||||
| CASH FLOWS USED IN INVESTING ACTIVITIES | (8,987 | ) | (452 | ) | ||||
| CASH FLOW FROM FINANCING ACTIVITIES: | ||||||||
| Non-Controlling Paid in Capital | 226 | (119 | ) | |||||
| Net Borrowing (Repayments) under lines of credit | 2,404 | (4,846 | ) | |||||
| CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES | 2,630 | (4,965 | ) | |||||
| EFFECT OF FOREIGN EXCHANGE RATE | 33 | (39 | ) | |||||
| NET INCREASE IN CASH AND CASH EQUIVALENTS | 2,171 | 4,185 | ||||||
| CASH AND CASH EQU IVALENTS AT BEGINNING OF PERIOD |
21,357 | 16,742 | ||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | R$ | 23,528 | R$ | 20,927 | ||||
| Table 4 | |||||||
| BRAZIL FAST FOOD CORP. AND SUBSIDIARIES | |||||||
| RECONCILIATION OF EBITDA TO NET INCOME | |||||||
| Three Months Ended June 30, | |||||||
| 2012 | 2011 | ||||||
| NET INCOME | R$ | 3,647 | R$ | 3,296 | |||
|
Interest expenses, Monetary and Foreign exchange loss |
234 |
(186) |
|||||
| Income taxes | 882 | 600 | |||||
| Depreciation and amortization | 1,895 | 1,666 | |||||
| EBITDA | R$ | 6,658 | R$ | 5,376 | |||
| Six Months Ended June 30, | |||||||
| 2012 | 2011 | ||||||
| NET INCOME | R$ | 7,047 | R$ | 7,526 | |||
| Interest expenses, Monetary and Foreign exchange loss | 373 |
(142) |
|||||
| Income taxes | 2,706 | 1,192 | |||||
| Depreciation and amortization | 3,663 | 3,445 | |||||
| EBITDA | R$ | 13,789 | R$ | 12,021 | |||
By erichertha