United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: 0-23278
Brazil Fast Food Corp.
(Exact name of registrant as specified in its charter)
Delaware 13-3688737
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Praia do Flamengo, 200-22o. Andar, CEP 22210-030, Rio de Janeiro, Brazil
(Address of principal executive offices)
011-55-21-285-2424
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [ ] No
Applicable Only to Issuers Involved in Bankruptcy
Proceeding During the Preceding Five Years:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. [ ] Yes [ ] No
Applicable Only to Corporate Issuers:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
7,126,984 shares of Common Stock at June 13, 1996
<PAGE>
Part I - Financial Information
Item 1. Financial Statements
The condensed financial statements included herein have been prepared
by Brazil Fast Food Corp., formerly Trinity Americas Inc., (the "Company"),
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. While certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations, the Company believes that the disclosures made herein are
adequate to make the information presented not misleading.
<PAGE>
INDEX TO FINANCIAL STATEMENTS
-----------------------------
Page
----
Balance Sheets as of March 31, 1996 and August 31, 1995 F-2
Statements of Operations for the Three Months Ended March 31, 1996
and February 28, 1995 F-4
Statements of Cash Flows for the Three Months Ended March 31, 1996
and February 28, 1995 F-5
Notes to Unaudited Financial Statements F-6
F-1
<PAGE>
BRAZIL FAST FOOD CORP.
BALANCE SHEETS
AS OF MARCH 31, 1996 AND AUGUST 31, 1995
<TABLE>
<CAPTION>
MARCH 31, 1996 AUGUST 31, 1995
-------------- ---------------
(Unaudited)
ASSETS
------
<S> <C> <C>
Cash and cash equivalents R$ 6,420,000 R$ 228,000
Restricted cash and investments - 9,041,000
Customer accounts receivable, net 804,000 -
Inventories 505,000 -
Stock subscription receivable 153,000 -
Other current assets 188,000 22,000
------- -------
Total current assets 8,070,000 9,291,000
Property and equipment, net 7,406,000 -
Deferred charges 1,060,000 -
Purchase price in excess of net assets acquired, net 20,106,000 -
---------- ---------
Total assets R$36,642,000 R$9,291,000
---------- ---------
</TABLE>
See selected notes to financial statements.
F-2
<PAGE>
BRAZIL FAST FOOD CORP.
BALANCE SHEETS
AS OF MARCH 31, 1996 AND AUGUST 31, 1995
<TABLE>
<CAPTION>
MARCH 31, 1996 AUGUST 31, 1995
-------------- ---------------
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Note payable R$ 1,765,000 R$ -
Accounts payable and accrued liabilities 1,890,000 125,000
Payroll and related accruals 1,695,000 -
Taxes other than income taxes 294,000 -
Deferred income 624,000 -
Other current liabilities 2,025,000 -
---------- --------
Total current liabilities 8,293,000 125,000
---------- --------
LOANS AND FINANCING 2,468,000 -
--------- --------
DEFERRED INCOME 3,320,000 -
--------- --------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, $.0001 par value; 20,000,000 shares
authorized, 7,127,000 and 2,965,000 shares issued
and outstanding at March 31, 1996 and August 31, 1,000 -
1995, respectively
Additional paid-in capital 22,535,000 9,082,000
Retained earnings 25,000 84,000
---------- ---------
Total shareholders' equity 22,561,000 9,166,000
---------- ---------
Total liabilities and shareholders' equity R$36,642,000 R$9,291,000
---------- ---------
</TABLE>
See selected notes to financial statements.
F-3
<PAGE>
BRAZIL FAST FOOD CORP.
----------------------
STATEMENTS OF OPERATIONS
------------------------
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND FEBRUARY 28, 1995
---------------------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
MARCH 31, 1996 FEBRUARY 28, 1995
-------------- -----------------
<S> <C> <C>
NET OPERATING REVENUES:
Restaurant sales R$2,077,000 R$ -
Franchise income 52,000 -
Other income 35,000 -
--------- -------
Total net operating revenues 2,164,000 -
--------- -------
COSTS AND EXPENSES:
Cost of restaurant sales 867,000 -
Restaurant payroll and other employee benefits 410,000 -
Restaurant occupancy and other expenses 157,000 -
Depreciation and amortization 129,000 -
Other operating expenses 507,000 -
Selling expenses 94,000 -
General and administrative expenses 203,000 67,000
--------- --------
Total costs and expense 2,367,000 67,000
--------- --------
LOSS FROM OPERATION (203,000) (67,000)
--------- --------
Interest income 105,000 131,000
Interest expense (12,000) -
Other expense (31,000) -
--------- --------
Income (loss) before provision for income taxes (141,000) 64,000
Provision for income taxes 21,000 25,000
-------- --------
NET INCOME (LOSS) R$(162,000) R$ 39,000
------- -------
NET INCOME (LOSS) PER COMMON SHARE R$ ( .04) R$ .01
-------- -------
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 3,844,000 2,965,000
========= =========
</TABLE>
See selected notes to financial statements.
F-4
<PAGE>
BRAZIL FAST FOOD CORP.
----------------------
STATEMENTS OF CASH FLOWS
------------------------
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND FEBRUARY 28, 1995
---------------------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
MARCH 31, 1996 FEBRUARY 28, 1995
-------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) R$ (162,000) R$ 39,000
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 129,000
Changes in operating assets and liabilities:
Deferred income 3,944,000
Accounts payable and accrued expenses 303,000 25,000
----------- --------
Net cash provided by operating activities 4,214,000 64,000
----------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in restricted cash and investments (105,000) (131,000)
Release of restricted cash and investments 9,577,000 -
Payments to acquire company (16,846,000)
----------- --------
Net cash (used in) investing activities (7,374,000) (131,000)
------------ --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from private placement 9,532,000
----------- --------
Net cash provided by financing activities 9,532,000
----------- --------
Net increase (decrease) in cash and cash equivalents 6,372,000 (67,000)
CASH AND CASH EQUIVALENTS, beginning of period 48,000 383,000
------------ -------
CASH AND CASH EQUIVALENTS, end of period R$6,420,000 R$316,000
--------- -------
</TABLE>
See selected notes to financial statements.
F-5
<PAGE>
BRAZIL FAST FOOD CORP.
----------------------
SELECTED NOTES TO FINANCIAL STATEMENTS
--------------------------------------
MARCH 31, 1996
--------------
(UNAUDITED)
-----------
NOTE 1 - FINANCIAL STATEMENT PRESENTATION
- -----------------------------------------
The accompanying financial statements have been prepared by Brazil Fast Food
Corp. (previously known as Trinity Americas Inc.) ("the Company"), without
audit. In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations and cash flows at March 31, 1996 and for all periods
presented have been made. The results of operations for the period ended March
31, 1996 are not necessarily indicative of the operating results for a full
year.
Certain information and footnote disclosures prepared in accordance with general
accepted accounting principles and normally included in the financial statements
have been condensed or omitted. It is suggested that these financial statements
be read in conjunction with the financial statements and notes included in the
Company's Annual Report on Form 10-K for the year ended August 31, 1995, as well
as the Company's proxy statement dated February 12, 1996, for further discussion
and background of the acquisition discussed below.
The accompanying financial statements have been presented in Brazilian reais, in
accordance with generally accepted accounting principles in the United States.
In the accompanying financial statements, U.S. dollar amounts have been
translated into reais using the conversion rate as of March 31, 1996 and August
31, 1995 for the respective balance sheets. For the statements of operations
presented, the U.S. dollar activities of the Company (primarily the interest
income and general and administrative expenses of Trinity Americas Inc. prior to
the acquisition) were converted into reais on a monthly basis, based on the
average conversion rate for each month, and then adjusted to consider the effect
of inflation experienced in Brazil for the period presented. This methodology
has been employed to reflect the fact that Venbo will be operating exclusively
in Brazil for the near term. Management believes that this presentation will
provide readers a better understanding of performance. In addition, all future
reporting will continue to be in reais if and until such time another currency
is deemed more appropriate.
Prior to the acquisition of Venbo discussed in Note 2, the Company reported on
an August 31 fiscal year. Subsequent to the acquisition, the Company changed its
fiscal year to December 31 and filed a transition report on Form 10-Q for the
period from September 1, 1995 through December 31, 1995. It is expected that the
Company's 1996 Form 10-Q filings will be made in comparison to the nearest
comparable quarter for the prior period. Management believes this presentation
to be adequate due to the inherent lack of comparability of quarterly
information due to the Company's acquisition of an operating entity in 1996,
while the Registrant existed as a blind pool for all prior periods. Accordingly,
the accompanying balance sheet as of March 31, 1996 is compared to the latest
audited balance sheet of August 31, 1995 and statements of operations and cash
flows for the three month period ended March 31, 1996 are compared to the
previously filed three month period ended February 28, 1995.
<PAGE>
NOTE 2 - ORGANIZATION AND OPERATIONS
- ------------------------------------
The Company was incorporated in the State of Delaware on September 16, 1992 to
serve as a vehicle to effect a merger, exchange of capital stock, assets
acquisition or other similar business combination (a "Business Combination").
All activity of the Company through March 19, 1996 related to its formation,
fund-raising and search to effect a Business Combination.
On March 19, 1996 (the "Closing"), the Company acquired all of the outstanding
quotas (shares of capital stock) of Venbo Comercio de Alimentos Ltda. ("Venbo")
from Bob's Industria e Comercio Ltda. ("BIEC") and Arnaldo Bisoni ("Bisoni" and
with BIEC, collectively, the "Sellers") for $19,200,000 (the "Purchase Price"),
of which $16,700,000 was paid in cash at the Closing (inclusive of $100,000
which had been previously paid in October 1995 upon the parties' execution of
the Heads of Agreement), with the balance of $2,500,000 payable with interest at
the rate of 1 - 1/2% per annum over LIBOR due 720 days from the Closing. In
addition, the Company acquired all of the trademarks relating to Venbo's
business from Vendex International N.V., an affiliate of the Sellers, for
$1,800,000, payable to BIEC with interest at the rate of 6-1/2% per annum in
monthly installments equal to 4% of Venbo's net sales for each immediately
preceding month. The Company's acquisition of the quotas and trademarks is
hereinafter referred to as the "Acquisition".
Venbo, a Brazilian limited liability company which conducts business under the
tradename "Bob's", owns and, directly and through franchisees, operates the
second largest chain of hamburger fast food restaurants in Brazil, including 46
units in the State of Rio de Janeiro, 22 units in the State of Sao Paulo and 10
units in the capital cities of the States of Brazil.
In order to raise sufficient cash to complete the Acquisition and to fund the
Company's subsequent expansion strategy, the Company sold 3,115,701 shares of
its Common Stock to new investors in a private transaction (the "Private
Placement") at $3.20 per share, resulting in net proceeds to the Company of
approximately $10,000,000.
Funding of the cash portion of the Purchase Price was derived from the following
sources; (i) approximately $9,900,000 from the Company's own funds; (ii)
$4,000,000 from a Brazilian subsidiary of Coca-Cola, which was paid to the
Company concurrently with the consummation of the Acquisition, in consideration
for Coca-Cola products being designated the exclusive soft drink products for
all of the Company's restaurants for a ten-year term and for the Company's
agreement to participate at its own expense in joint promotions and marketing
programs with Coca-Cola during such term; and (iii) the balance of $2,800,000
from the proceeds of the Private Placement.
At the Closing, the Company issued 1,046,422 shares of its Common Stock to
Shampi Investments A.E.C. ("Shampi") in exchange for the assignment by Shampi to
the Company of Shampi's right to acquire the outstanding quotas of Venbo.
As a result of the Acquisition and the Private Placement: (I) Venbo became a
wholly-owned subsidiary of the Company, (ii) Shampi and the investors in the
Private Placement, collectively, acquired approximately 58.4% of the outstanding
Common Stock of the Company, (iii) designees of Shampi, being respectively,
Peter Van Voorst Vader, Omar Carneiro da Cunha and Bisoni, became three of the
five members of the Company's Board of Directors, and (iv) the Company's name
was changed to "Brazil Fast Food Corp.". Reference is made to the Company's
proxy statement dated February 12, 1996, for a discussion of Venbo's business
and the background of the Acquisition.
<PAGE>
NOTE 3 - RESTRICTED CASH AND CASH EQUIVALENTS
- ---------------------------------------------
The Company, pursuant to the terms of its initial public offering ("the
Offering"), held approximately R$ 9.6 million as of March 19, 1996, which
includes interest income, in a trust account which was primarily invested in a
short term U.S. Government Security. These funds were released, in connection
with the terms of the Offering, upon the consummation of the Acquisition
described above.
NOTE 4 - ACCOUNTING FOR ACQUISITION OF VENBO
- ---------------------------------------------
On March 19, 1996, the Company acquired all of the outstanding quotas (shares of
capital stock) of Venbo, as described in Note 2. The acquisition has been
accounted for as a purchase by the Company. The results of operations of Venbo
are included in the accompanying financial statements for the period from the
acquisition date, March 19, 1996, through March 31, 1996. In connection with the
acquisition, the Company has recorded approximately R$ 20.1 million of excess
purchase price over net assets acquired. This reflects a preliminary allocation
of purchase price and is subject to final determination. Goodwill resulting from
the acquisition will be amortized over a 20-year period.
The following represents selected pro forma results of operations information as
though the companies had been combined at the beginning of the three month
periods ended March 31, 1996, and 1995:
MARCH 31, 1996 MARCH 31, 1995
-------------- --------------
Revenues R$ 15,817,000 R$ 15,733,000
Net loss R$ (3,320,000) R$ (2,918,000)
Loss per share R$ (0.47) R$ (0.41)
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Brazil Fast Food Corp. (previously know as Trinity Americas Inc.) (the
"Company") was incorporated in September 1992 to serve as a vehicle to effect a
Business Combination with an operating business. On February 9, 1994, the
Company's Registration Statement covering 1,700,000 Units was declared effective
by the Securities and Exchange Commission, generating net proceeds of
approximately US $9.6 million.
On March 19, 1996 (the "Closing"), the Company acquired all of the outstanding
quotas (shares of capital stock) of Venbo Comercio de Alimentos Ltda. ("Venbo")
from Bob's Industria a Comercio Ltda. ("BIEC") and Arnaldo Bisoni ("Bisoni" and
with BIEC, collectively, the "Sellers") for $19,200,000 (the "Purchase Price"),
of which $16,700,000 was paid in cash at the Closing (inclusive of $100,000
which had been previously paid in October 1995 upon the parties' execution of
the Heads of Agreement), with the balance of $2,500,000 payable with interest at
the rate of 1-1/8% per annum over LIBOR due 720 days from the Closing. In
addition, the Company acquired all of the trademarks relating to Venbo's
business from Vendex International N.V., an affiliate of the Sellers, for
$1,800,000, payable to BIEC with interest at the rate of 6-7/8% per annum in
monthly installments equal to 4% of Venbo's net sales for each immediately
preceding month. The Company's acquisition of the quotas and trademarks in
hereinafter referred to as the "Acquisition".
Venbo, a Brazilian limited liability company which conducts business under the
tradename "Bob's", owns and, directly and through franchisees, operates the
second largest chain of hamburger fast food restaurants in Brazil, including 46
units in the State of Rio de Janeiro, 22 units in the State of Sao Paulo and 10
units in the capital cities of other States of Brazil.
In order to raise sufficient cash to complete the Acquisition and to fund the
Company's subsequent expansion strategy, the Company sold 3,115,701 shares of
its Common Stock to new investors in a private transaction (the "Private
Placement") at $3.20 per share, resulting in net proceeds to the Company of
approximately $10,000,000.
Funding of the cash portion of the Purchase Price was derived from the following
sources: (i) approximately $9,900,000 from the Company's own funds; (ii)
$4,000,000 from a Brazilian subsidiary of Coca-Cola, which was paid to the
Company concurrently with the consummation of the Acquisition, in consideration
for Coca-Cola products being designated the exclusive soft drink products for
all of the Company's restaurants for a ten-year term and for the Company's
agreement to participate at its own expense in joint promotions and marketing
programs with Coca-Cola during such term; and (iii) the balance of $2,800,000
from the proceeds of the Private Placement.
At the Closing, the Company issued 1,046,422 shares of its Common Stock to
Shampi Investments A.E.C. ("Shampi") in exchange for the assignment by Shampi to
the Company of Shampi's right to acquire the outstanding quotas of Venbo.
As a result of the Acquisition and the Private Placement; (i) Venbo became a
wholly-owned subsidiary of the Company, (ii) Shampi and the investors in the
Private Placement, collectively, acquired approximately 58.4% of the outstanding
Common Stock of the Company, (iii) designees of Shampi, being respectively,
Peter van Voorst Vader, Omar Carneiro de Cunha and Bisoni, became three of the
five members of the Company's Board of Directors, and (iv) the Company's name
was changed to "Brazil Fast Food Corp.". Reference is made to the Company's
proxy statement dated February 12, 1996, for a discussion of Venbo's business
and the background of the Acquisition.
<PAGE>
Results of Operations
- ---------------------
For the three months ended March 31, 1996 the Company had a net loss of R$
162,000, as compared to net income of R$ 39,000 for the three months ended
February 28, 1995. For the three months ended March 31, 1996, the net loss was
primarily attributable to interest and dividend income of R$ 105,000, offset by
a loss from operations of R$ 203,000 resulting from the combined operations of
Venbo (since its acquisition on March 19, 1996) and Brazil Fast Food Corp. Prior
to the acquisition, the Company's operated as a blind pool and, according,
results of operations for periods prior to the acquisition relate to interest
and dividend income, offset by general and administrative expenses and income
taxes.
Liquidity and Capital Resources
- -------------------------------
At March 31, 1996, the Company had cash and cash equivalents of R$ 6,420,000 and
a working capital deficit of R$ 223,000. The cash available is the result of the
acquisition described above, along with cash generated from the private
placement and agreement with Coca-Cola described above. The Company believes,
based on current projections, that it will be able to generate cash flows from
operations subsequent to the acquisition. The Company believes that its
available liquid assets on hand, along with cash flows generated from
operations, should be sufficient for its presently contemplated operations and
growth.
<PAGE>
Part II - Other Information
Not Applicable
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Brazil Fast Food Corp.
(registrant)
Dated: June 13, 1996
By:/s/Peter van Voorst Vader
Peter van Voorst Vader
Chief Executive Officer
By:/s/Marcos Bastos Rocha
Marcos Bastos Rocha
Chief Financial Officer
