Brazil Fast Food Announces Third Quarter 2008 Results

Business Wire, Dec 1, 2008

RIO DE JANEIRO, Brazil -- Brazil Fast Food Corp. (OTC Bulletin Board: BOBS.OB) ("Brazil Fast Food", or the "the Company") the third largest fast-food restaurant chain with 635 points of sale, operating under the Bob's, KFC, Pizza Hut, In Bocca al Lupo Cafe, and Doggis brands in Brazil, reported financial results for the third quarter ended on September 30, 2008.

Third Quarter 2008 Highlights

* System-wide sales totaled R$ 143.7 million, up 21.2% from the third quarter of 2007

* Same store sales were up 17.8% from the third quarter of 2007

* EBITDA totaled R$ 3.6 million, down 2.3% from the third quarter of 2007

* Operating profit totaled R$1.9 million, up 3.1% from the third quarter of 2007

* Net income was R$1.9 million, up 19.2% from the third quarter of 2007

"We are very pleased with the progress we have made implementing our multi-brand strategy as we acquired control of Pizza Hut's largest franchisee in Brazil, with 14 restaurants in Sao Paulo, and entered an agreement to introduce the Doggis brand of hot dogs to the Brazilian market while simultaneously taking the Bob's brand to the Chilean market," said Mr. Ricardo Bomeny, President and CEO of Brazil Fast Food. "We have accomplished all of this while expanding our BOB's and KFC restaurant network, growing our same store sales, and improving our margins as we successfully implemented new marketing campaigns to strengthen our brands."

Third Quarter 2008 Results

System-wide sales grew 21.2% in the third quarter to R$ 143.7 million, driven by the increase in the number of franchised points of sales.

Total revenue for the third quarter 2008 decreased by 11.9% to R$29.8 million from R$33.8 million in the third quarter of 2007. The year ago comparable period included non-recurring revenue of R$4.2 million from the Pan-American games. Excluding such non-recurring revenue, Brazil Fast Food revenues would be slightly up driven by the continued expansion of Brazil Fast Food's Bob's and KFC restaurant network to 621stores in the third quarter of 2008 up from 564 during the comparable period in 2007.

Net revenue for company-owned and operated outlets was down 15.9% to R$21.7 million from the comparable period of 2007 due to the absence of non-recurrent revenue associated with the Pan-American games as well as the reduction in the number of stores the Company owns and operates from 59 to 58 in the same period. Same own-store sales, which measure the performance of stores open for more than a year, were up 24.3% year over year driven by positive response to the Company's new marketing campaigns focused on teens and young adults, improved customer experience, return on investments in store remodeling and new technology, as well as the lower number of own stores.

Net revenue from franchisees increased 25.3% year-over-year to R$5.7 million driven by an increase in number of franchised retail outlets to 558, up from 496 in the same period a year ago. Other income totaled R$0.4 million.

Operating expenses were down 12.8% to R$27.9 million driven by a 18.0% reduction in own store costs and expenses offset in part by higher franchisee costs associated with the growth in the number of franchised network stores as well as due to inflationary pressures in the economy that continued to impact food as well as basic raw material prices during the quarter.

Operating income for the third quarter of 2008 was R$1.9 million, compared to an operating income of R$1.8 million in the third quarter of 2007. Operating margin in the third quarter of 2008 was 6.3% compared to 5.4% in the comparable period of 2007.

EBITDA in the third quarter of 2008 was R$3.6 million, compared to R$3.5 million in the third quarter of 2007. EBITDA margin was 12.0% in the third quarter of 2008, compared to 10.3% in the comparable period of 2007. A table reconciling EBITDA to its nearest GAAP equivalent is provided elsewhere in this press release.

Net income for the third quarter of 2008 was R$1.9 million or R$0.24 per basic and diluted share, compared to R$1.6 million and R$0.20 in the same period of 2007, respectively.

Nine Months 2008 Results

For the nine months ended in September 30, 2008, net revenue was R$84.8 million, down 1.1% from R$85.7 million in the comparable period of 2007. Operating income for the nine months ended 2008 was R$4.1 million, down 41.5% from R$7.1 million in the comparable period in 2007. Operating margin was 4.9% for the nine months ended September 30, 2008 compared to 8.3% in the comparable period in 2007. Net Income for the nine months ended September 30, 2008 was R$4.0 million, a decrease of 39.1% from R$6.6 million in the comparable period in 2007. Basic and diluted earnings per share were R$0.49 for the nine months ended in September 30, 2008 compared to R$0.80 for the nine months ended on September 30, 2007.

"In the first half of 2008, our operations were negatively affected by rising inflationary pressures, tightening monetary policy as well as consumer spending that was more favorable to the durable goods segment of the retail market," said Mr. Ricardo Bomeny, Chairman and CEO of Brazil Fast Food. "In the third quarter, the macroeconomic environment turned slightly more positive to the food service and entertainment segment, and we benefited from favorable weather which allowed us to grow our same store sales nicely and to improve our operating margins."