Brazil Fast Food Corp. (PINKSHEETS: BOBS) ("Brazil Fast Food", or "the
Company"), one of the largest food service groups in Brazil with 1,192 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 first quarter ended March 31,
2014.
Q1 2014 Highlights
-- System-wide sales totaled R$ 349.9 million, up 17.6% from Q1 2013
-- Revenue totaled R$ 66.5 million, up 14.2% from Q1 2013
-- Points of sale totaled 1,192 at March 31, 2014 (505 kiosks and 19
temporary points of sale), up from 1,049 at March 31, 2013
-- EBITDA was R$ 8.7 million, down 23.7% from R$ 11.4 million in Q1 2013
-- Operating income was R$ 6.6 million, down 35.2% from R $10.2 million in
Q1 2013
-- Net income was R$ 4.6 million, or R$ 0.56 per basic and diluted share
Note that all numbers are in Brazilian currency.
"We continued to experience a very challenging operating environment in Brazil's
fast food industry during the first quarter of 2014, characterized by escalating
costs for food and labor, muted growth in incomes and consumer spending. The
market environment has also turned increasingly competitive, due to significant
branding efforts of one of our established competitors sponsoring the upcoming
FIFA World Cup. Renewed efforts of established international brands to increase
share in Brazil created fierce competition between incumbents and expanding
international brands in fast food. This has required increased investment in
branding, facilities and promotions, and made it challenging to pass through
these higher costs to our customers. While our revenues continued to expand at
over 14%, our profitability dropped significantly as compared to the first
quarter of 2013, with operating income down 35,2%," said Mr. Ricardo Bomeny, CEO
and CFO of Brazil Fast Food.
"Looking in more detail at our brands, we are very pleased with the performance
of our Bob's franchised stores, where net franchise revenues grew 17% and
operating income grew by 22.2% to R$ 10.1 million with an operating margin of
73%. The number of franchise outlets grew to 1,093, from 972 on March 31, 2013.
Our owned-and-operated Bob's stores grew revenues by 2.8% over Q1 2013, but were
barely profitable for the quarter. We have recently made some changes to our
management structure and incentives for these stores that we believe will help
to restore a reasonable level of profitability.
"We were pleased with the continued expansion of Pizza Hut stores, where we
added 12 new stores and net revenues grew by 30.7% over Q1 2013, although
contribution to operating income is similar to last year. Our KFC stores
continued to struggle in the local market with a slight decline in revenues and
a $1.8 million operating loss for the quarter. We are in active discussions with
Yum! Brands as to how to better adapt the KFC concept, marketing, and menu
offerings to the Brazilian market so as to create a more vibrant future for this
brand," Mr. Bomeny said.
First Quarter 2014 Results
System-wide sales grew 17.6% in the first quarter to R$ 349.9 million, driven by
an increase in the number of franchised points of sale.
Total revenue for the first quarter of 2014 was R$ 66.5 million, an increase of
14.2% as compared to R$ 58.3 million in the first quarter of 2013, due to higher
revenues from franchisees and own-operated restaurants.
Net restaurant sales for company-owned restaurants increased 13.5%
year-over-year to R$ 52.7 million in the first quarter of 2014, driven by higher
sales at Bob's and Pizza Hut.
Net revenue from franchisees increased 16.9% year-over-year to R$ 13.9 million,
driven primarily by an increase in number of franchised retail outlets to 1,093,
as compared to 972 a year ago.
Operating expenses increased 24.7% to R$ 59.9 million in the first quarter of
2014 from R$ 48 million in the first quarter of 2013. As a percentage of
revenue, operating costs increased to 90% of total revenue in the first quarter
of 2014 from 82.4% of total revenue in the first quarter of 2013.
Operating income for the first quarter of 2014 was R$ 6.6 million, a decrease of
35.2% from R$ 10.2 million in the first quarter of 2013. Operating margin in the
first quarter of 2014 declined to 10%, as compared to 17.6% in the first quarter
of 2013.
EBITDA in the first quarter of 2014 was R$ 8.7 million, down by 23.7% as
compared to R$ 11.4 million in the first quarter of 2013. EBITDA margin was 13%,
as compared to 19.5% in the first quarter of 2013. Please refer to Table No. 4
in this press release for a reconciliation of EBITDA to its nearest GAAP
equivalent.
Interest expense was R$ 1.1 million in the first quarter of 2014, as compared to
interest income of R$ 0.1 million in the first quarter of 2013.
Net income in the first quarter of 2014 was R$ 4.6 million, or R$ 0.56 per basic
and diluted share, as compared to R$ 6.7 million, or R$ 0.83 per basic and
diluted share in the first quarter of 2013.
Financial Condition
As of March 31, 2014 the Company had R$ 53.1 million in cash and equivalents, up
from R$ 50.1 million as of March 31, 2013. Working capital was R$ 41.6 million
at March 31, 2014, compared with R$ 41.9 million as of March 31, 2013. Debt
obligations with financial institutions were R$23.5 million as of March 31,
2014, compared with R$23.6 million as of March 31, 2013. Total shareholders'
equity was R$ 85.5 million at March 31, 2014, compared to R$ 80.8 million at
March 31, 2013.
Recent Events
There were no developments during the first quarter of 2014 regarding the
Company's administrative appeal against the penalty charged by the Brazilian
Internal Revenue Service related to the its restructuring in 2006.
Business Outlook
In 2014, the company expects to continue a higher level of investment in
facilities, advertising and promotion in order to support the growth of its
brands in Brazil and respond to international competitors. This will continue to
put pressure in profitability and operating results in the near future.
"Despite the near-term challenges due to the macro-economy and escalating
competition, we strongly believe that we have the right brand assets and
management team in place to drive continued growth. In the first quarter of 2014
we invested $7.8 million in new stores that includes a new multi-brand format
combining Bob's, Doggis and Yoggi in one location, a new standalone Yoggi store
concept called Yoggi Desigual, and expansion of Pizza Huts in high-traffic
locations," Mr. Bomeny said.
"For 2014, to support our expansion and competitive position, we will also be
making a significant investment in branding and promotion activities. Bob's
recently presented its new visual identity, with a different store design and
ambiance, communications, equipment and ingredients, to its franchisees at its
National Convention. We will make a significant investment to refresh our
owned-and-operated stores and will continuously incentivize our franchisees to
do the same. While we expect to see continued margin pressure due to these
activities, our goal is to achieve some improvement in our overall profit
margins from Q1 2014 levels. Our strong balance sheet provides us with the
ability to pursue this expansion strategy without recourse to outside financing.
"Brazil's economy has slowed significantly, with real GDP growth for 2014
expected to be in the range of 2% and inflation north of 6%, primarily due to
rising food and labor prices. This will create difficulties across the
restaurant industry and create near-term financial headwinds for Brazil Fast
Food. But we continue to believe that the opportunity to build a significant
player in the fast food industry is compelling and that we are on the right path
to build long-term value with our unique business," concluded Mr. Bomeny.
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"),DGS Comércio de Alimentos Ltda. ("DGS"), CLFL Comércio de Alimentos
Ltda. ("CLFL"), Little Boss Comércio de Alimentos Ltda. ("Little Boss"), Separk
Comércio de Alimentos Ltda. ("Separk"), Schott Comércio de Alimentos Ltda.
("Schott"), FCK Franquias e Participações Ltda. ("FCK", former Suprilog
Logística Ltda.), Yoggi do Brasil Ltda. ("Yoggi"), and Internacional
Restaurantes do Brasil S.A. ("IRB"). IRB has 40% of its capital held by
individuals, including 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 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 previous public
disclosures.
-FINANCIAL TABLES FOLLOW-
BRAZIL FAST FOOD CORP. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(in thousands of Brazilian Reais, except share amounts)
Three Months Ended March 31,
----------------------------------
Note 2014 2013
------ ---------------- ----------------
(unaudited)
REVENUES FROM RESTAURANTS AND
FRANCHISEES
Net revenues from own-operated
restaurants 13 R$ 52.681 R$ 46.419
Net revenues from franchisees 13 13.863 11.860
---------------- ----------------
TOTAL REVENUES FROM RESTAURANTS
AND FRANCHISEES 66.544 58.279
---------------- ----------------
Store Costs and Expenses 13 (52.404) (45.511)
Franchise Costs and Expenses 13 (3.751) (3.584)
Administrative Expenses (8.169) (7.552)
Income from supply agreements 5.768 6.446
Other income 583 147
Other Operating Expenses (1.771) (1.012)
Net result of assets sold and
impairment of assets 6 (170) 3.030
---------------- ----------------
OPERATING INCOME 6.630 10.243
---------------- ----------------
Interest Expense (1.054) (83)
---------------- ----------------
NET INCOME BEFORE INCOME TAX 5.576 10.160
---------------- ----------------
Income taxes (1.212) (3.086)
---------------- ----------------
NET INCOME BEFORE NON-CONTROLLING
INTEREST 4.364 7.074
---------------- ----------------
Net loss attributable to non-
controlling interest 226 (328)
---------------- ----------------
NET INCOMEATTRIBUTABLE TO BRAZIL
FAST FOOD CORP. R$ 4.590 R$ 6.746
================ ================
NET INCOME PER COMMON SHARE
BASIC AND DILUTED R$ 0,56 R$ 0,83
================ ================
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING: BASIC AND
DILUTED 8.129.437 8.129.437
BRAZIL FAST FOOD CORP. AND SUBSIDIARIES
BALANCE SHEETS - ASSETS
(in thousands of Brazilian Reais, except share amounts)
March, 31 December 31,
--------------- ---------------
Note 2014 2013
------------------ --------------- ---------------
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash
equivalents 4 R$ 53.097 R$ 50.083
Inventories 2.954 3.090
Accounts receivable
Clients - food sales 10.730 11.051
Franchisees 19.815 20.872
Allowance for
doubtful accounts (164) (163)
Prepaid expenses 2.036 747
Advances to suppliers 2.855 2.962
Bob's Marketing fund
credits 5a - 717
Other current assets 5b and 6 3.433 3.761
--------------- ---------------
TOTAL CURRENT
ASSETS 94.756 93.120
--------------- ---------------
NON-CURRENT ASSETS:
Other receivables and
other assets 5a and 6 14.086 13.118
Deferred tax asset, net 10.644 10.644
Goodwill 3,3 1.121 1.121
Property and equipment,
net 7 49.222 47.240
Intangible assets, net 8 13.486 13.463
--------------- ---------------
TOTAL NON-CURRENT
ASSETS 88.559 85.586
--------------- ---------------
--------------- ---------------
TOTAL ASSETS R$ 183.315 R$ 178.706
=============== ===============
BRAZIL FAST FOOD CORP. AND SUBSIDIARIES
BALANCE SHEETS - LIABILITIES AND EQUITY
(in thousands of Brazilian Reais, except share amounts)
March, 31 December 31,
--------------- ---------------
Note 2014 2013
------ --------------- ---------------
(unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Loans and financing 11 R$ 13.050 R$ 12.816
Accounts payable and accrued
expenses 14.338 13.941
Payroll and related accruals 7.262 6.501
Taxes 4.772 7.884
Current portion of deferred income 10 11.056 7.537
Current portion of litigations and
reassessed taxes 9 2.381 2.381
Other current liabilities 294 144
--------------- ---------------
TOTAL CURRENT LIABILITIES 53.153 51.204
--------------- ---------------
Deferred income, less current
portion 10 7.546 8.877
Loans and financing, less current
portion 11 10.418 10.744
Litigations and reassessed taxes,
less
current portion 9 19.983 20.190
Other liabilities 12 2.173 2.170
--------------- ---------------
TOTAL NON-CURRENT LIABILITIES 40.120 41.981
--------------- ---------------
--------------- ---------------
TOTAL LIABILITIES 93.273 93.185
--------------- ---------------
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value,
5,000 shares authorized; no
shares issued - -
Common stock, $.0001 par value,
12,500,000 shares authorized; 8,472,927
shares issued for both 2014 and 2013;
and 8,121,937 and 8,129,437 shares
outstanding for both 2014 and 2013 1 1
Additional paid-in capital 61.148 61.148
Treasury Stock (350,990 and
343,490) 14 (2.358) (2.060)
Retained Earnings 28.040 23.450
Accumulated comprehensive loss (1.314) (1.769)
--------------- ---------------
TOTAL SHAREHOLDERS' EQUITY 85.517 80.770
--------------- ---------------
Non-Controlling Interest 4.525 4.751
--------------- ---------------
TOTAL EQUITY 90.042 85.521
--------------- ---------------
--------------- ---------------
TOTAL LIABILITIES AND EQUITY R$ 183.315 R$ 178.706
=============== ===============
BRAZIL FAST FOOD CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of Brazilian Reais)
Three Months Ended March, 31
--------------------------------
2014 2013
--------------- ---------------
CASH FLOW FROM OPERATING ACTIVITIES: (unaudited)
NET INCOME BEFORE NON-CONTROLLING INTEREST R$ 4.364 R$ 7.074
Adjustments to reconcile net income to cash
provided by (used in) operating
activities:
Depreciation and amortization 2.629 2.076
(Gain) Loss on assets sold, net 170 (3.030)
Deferred income tax - 104
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable 1.379 (785)
Inventories 136 (284)
Prepaid expenses, advances to suppliers
and other current assets (137) 573
Other assets (968) 359
(Decrease) increase in:
Accounts payable and accrued expenses 397 3.961
Payroll and related accruals 761 1.223
Taxes (3.112) (1.483)
Deferred income 2.188 1.825
Litigations and reassessed taxes (207) (818)
Other liabilities 153 (697)
--------------- ---------------
CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES 7.753 10.098
--------------- ---------------
CASH FLOW FROM INVESTING ACTIVITIES:
Puechase of Company's share (298) -
Additions to property and equipment, net of
proceed of sales (4.724) 1.039
--------------- ---------------
CASH FLOWS USED IN INVESTING ACTIVITIES (5.022) 1.039
--------------- ---------------
CASH FLOW FROM FINANCING ACTIVITIES:
Net Borrowings (Repayments) under lines of
credit (92) (4.604)
--------------- ---------------
CASH FLOWS PROVIDED BY (USED IN)
FINANCING ACTIVITIES (92) (4.604)
--------------- ---------------
EFFECT OF FOREIGN EXCHANGE RATE 375 19
--------------- ---------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 3.014 6.552
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 50.083 32.062
--------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD R$ 53.097 R$ 38.614
=============== ===============
BRAZIL FAST FOOD CORP. AND SUBSIDIARIES
RECONCILIATION OF EBITDA TO NET INCOME
Three Months Ended March 31,
--------------------------------
2014 2013
--------------- ---------------
NET INCOME R$ 4.590 R$ 6.746
Interest expenses, Monetary and Foreign
exchange loss 760 (21)
Income taxes 1.212 2.950
Depreciation and amortization 2.128 1.719
--------------- ---------------
EBITDA R$ 8.689 R$ 11.393
--------------- ---------------
* The Company Management reviewed the computation of previously disclosure of
2013 EBITDA in order to include the effect of non-controlling interest.
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.
FOR FURTHER INFORMATION PLEASE CONTACT:
Contact:
Brazil Fast Food Corp.
Ricardo Figueiredo Bomeny
CEO
Phone: +1-55-21-2536-7501 (Brazil)
Email: ir@bffc.com.br
URL: www.bffc.com.br
Crocker Coulson
Phone: +1-323-270-8886
Email: crocker.coulson@gmail.com
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