<PAGE>
Page 1 of 13
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 June 30, 1997
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, 200-22c. 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 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.
12,304,484 shares of Common Stock at August 14, 1997
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Page 2 of 13
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.
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Page 3 of 13
BRAZIL FAST FOOD CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
================================================================================
ASSETS
June 30, 1997 December 31, 1996
------------- -----------------
(UNAUDITED)
CURRENT ASSETS:
Cash and cash equivalents R$ 940,000 R$ 1,556,000
Accounts receivable, net 1,397,000 1,567,000
Inventories 528,000 870,000
Prepaid and other assets 602,000 1,267,000
------------ ------------
TOTAL CURRENT ASSETS 3,467,000 5,260,000
PROPERTY AND EQUIPMENT, NET 24,015,000 24,612,000
DEFERRED CHARGES, NET 14,292,000 14,294,000
GOODWILL, NET 5,857,000 6,427,000
OTHER 36,000 20,000
------------ ------------
TOTAL ASSETS R$47,667,000 R$50,613,000
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable R$ 5,803,000 R$ 1,995,000
Accounts payable and accrued expenses 3,257,000 4,896,000
Payroll and related accruals 2,564,000 2,460,000
Taxes, other than income taxes 698,000 917,000
Deferred income 688,000 657,000
Other 971,000 462,000
------------ ------------
TOTAL CURRENT LIABILITIES 13,981,000 11,387,000
------------ ------------
NOTES PAYABLE, less current portion 706,000 2,729,000
DEFERRED INCOME, less current portion 2,665,000 2,997,000
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value, 5,000
shares authorized; no shares issued - -
Common stock, $.0001 par value, 20,000,000
shares authorized; 10,804,484 and
10,404,484 shares issued and outstanding
at June 30, 1997 and December 31,
1996, respectively 1,000 1,000
Additional paid-in capital 39,802,000 38,530,000
Retained earnings (deficit) (9,378,000) (5,038,000)
Cumulative translation adjustment (110,000) 7,000
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 30,315,000 33,500,000
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY R$47,667,000 R$50,613,000
------------ ------------
------------ ------------
See Selected Notes to Financial Statements.
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Page 4 of 13
BRAZIL FAST FOOD CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
================================================================================
<TABLE>
<CAPTION>
Venbo
For the Six January 1, 1996
Months Ended through
June 30, March 18,1996
------------ --------------
1997 1996 (Predecessor)
---- ----
<S> <C> <C> <C>
NET OPERATING REVENUES:
Restaurant sales R$35,636,000 R$16,800,000 R$16,427,000
Franchise income 713,000 163,000 176,000
Other income 828,000 347,000 124,000
------------ ------------ ------------
TOTAL NET OPERATING REVENUES 37,177,000 17,310,000 16,727,000
------------ ------------ ------------
COSTS AND EXPENSES:
Cost of restaurant sales 12,571,000 6,547,000 7,041,000
Restaurant payroll and other
employee benefits 8,832,000 3,956,000 3,538,000
Restaurant occupancy and
other expenses 3,537,000 1,383,000 1,188,000
Depreciation and amortization 2,038,000 1,148,000 739,000
Other operating expenses 5,653,000 3,265,000 3,407,000
Selling expenses 2,185,000 789,000 964,000
General and administrative expenses 5,793,000 2,858,000 3,952,000
------------ ------------ ------------
TOTAL COSTS AND EXPENSES 40,609,000 19,946,000 20,829,000
------------ ------------ ------------
(LOSS) FROM OPERATIONS (3,432,000) (2,636,000) (4,102,000)
INTEREST (EXPENSE) INCOME (908,000) 245,000 1,322,000
OTHER (EXPENSE) INCOME - (34,000) 299,000
------------ ------------ ------------
(LOSS) BEFORE PROVISION FOR
INCOME TAXES (4,340,000) (2,425,000) (2,481,000)
PROVISION FOR INCOME TAXES - 14,000 -
------------ ------------ ------------
NET (LOSS) R$(4,340,000) R$(2,439,000) R$(2,481,000)
------------ ------------ ------------
------------ ------------ ------------
NET (LOSS) PER COMMON SHARE R$ (.41) R$ (.46)
------------ ------------
------------ ------------
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 10,687,817 5,359,000
------------ -----------
------------ -----------
</TABLE>
See Selected Notes to Financial Statements.
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Page 5 of 13
BRAZIL FAST FOOD CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
================================================================================
For the Three Months
Ended June 30,
--------------------------------
1997 1996
------------ -------------
NET OPERATING REVENUES:
Restaurant sales R$16,921,000 R$14,555,000
Franchise income 365,000 107,000
Other income 375,000 309,000
------------ ------------
TOTAL NET OPERATING REVENUES 17,661,000 14,971,000
------------ ------------
COSTS AND EXPENSES:
Cost of restaurant sales 5,985,000 5,609,000
Restaurant payroll and other employee
benefits 4,261,000 3,513,000
Restaurant occupancy and other expenses 1,782,000 1,213,000
Depreciation and amortization 1,023,000 1,012,000
Other operating expenses 2,686,000 2,718,000
Selling expenses 1,135,000 688,000
General and administrative expenses 3,160,000 2,635,000
------------ ------------
TOTAL COSTS AND EXPENSES 20,032,000 17,388,000
------------ ------------
(LOSS) FROM OPERATIONS (2,371,000) (2,417,000)
INTEREST (EXPENSE) INCOME (460,000) 138,000
------------ ------------
(LOSS) BEFORE PROVISION FOR
INCOME TAXES (2,831,000) (2,279,000)
RECOVERY FOR INCOME TAXES - 10,000
------------ ------------
NET (LOSS) R$(2,831,000) R$(2,269,000)
------------ ------------
------------ ------------
NET (LOSS) PER COMMON SHARE R$ (.26) R$ (.31)
------------ ------------
------------ ------------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 10,771,151 7,245,000
------------ ------------
------------ ------------
See Selected Notes to Financial Statements.
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Page 6 of 13
BRAZIL FAST FOOD CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
Common Stock Additional Retained Cumulative
------------------------ Paid-In Earnings Translation
Shares Par Value Capital (Deficit) Adjustment Totals
------ --------- ------- -------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1997 10,404,484 R$1,000 R$38,530,000 R$(5,038,000) R$ 7,000 R$33,500,000
Issuance of shares for
private placements 400,000 - 1,272,000 - - 1,272,000
Net loss for the period - - - (4,340,000) - (4,340,000)
Cumulative translation
adjustment - - - - (117,000) (117,000)
---------- ------- ------------ ------------ ---------- ------------
Balance, June 30, 1997 10,804,484 R$1,000 R$39,802,000 R$(9,378,000) R$(110,000) R$30,315,000
---------- ------- ------------ ------------ ---------- ------------
---------- ------- ------------ ------------ ---------- ------------
</TABLE>
See Selected Notes to Financial Statements.
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Page 7 of 13
BRAZIL FAST FOOD CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
Venbo
For the Six January 1, 1996
Months Ended through
June 30, March 18,1996
----------------------------- ---------------
1997 1996 (Predecessor)
---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) R$(4,340,000) R$(2,439,000) R$(2,481,000)
Adjustments to reconcile net
(loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 2,038,000 1,148,000 544,000
Changes in operating assets and
liabilities, net of effects from
acquisition of businesses:
(Increase) decrease in:
Accounts receivable, net 170,000 75,000 605,000
Inventories 342,000 14,000 1,158,000
Other current assets 665,000 (518,000) 122,000
Other (16) - -
Deferred charges - (85,000) -
Increase (decrease) in:
Accounts payable and accrued
liabilities (1,639,000) (13,000) (2,376,000)
Payroll and related accruals 104,000 261,000 207,000
Taxes, other than income taxes (219,000) (53,000) (78,000)
Deferred income (301,000) 4,096,000 -
Other current liabilities 509,000 (765,000) (1,143,000)
------------ ------------ ------------
NET CASH (USED IN)
OPERATING ACTIVITIES (2,687,000) 1,721,000 (3,442,000)
------------ ------------ ------------
CASH FLOWS INVESTING ACTIVITIES:
Capital expenditures (869,000) (1,322,000) -
Increase in restricted cash and
investments - (110,000) -
Release of restricted cash and
investments - 10,348,000 -
Acquisitions of businesses - (19,327,000) -
------------ ------------ ------------
NET CASH (USED IN) INVESTING
ACTIVITIES (869,000) (10,411,000) -
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under lines of credit 1,785,000 - -
Proceeds from private placement 1,272,000 10,504,000 -
Repayments of note payable - (476,000) -
Increase in due to related parties - - 2,162,000
------------ ------------ ------------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 3,057,000 10,028,000 2,162,000
------------ ------------ ------------
EFFECT OF FOREIGN EXCHANGE RATES (117,000) - -
------------ ------------ ------------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS (616,000) 1,338,000 (1,280,000)
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD 1,556,000 28,000 1,280,000
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD R$ 940,000 R$ 1,366,000 R$ -
------------ ------------ ------------
------------ ------------ ------------
See Selected Notes to Financial Statements.
</TABLE>
<PAGE>
Page 8 of 13
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
------------------------------------------------------------------------
RESULTS OF OPERATIONS
- ---------------------
As the nature of the Company's operations subsequent to its acquisition (the
"Acquisition") of Venbo Comercio de Alimentos LTDA. ("Venbo") on March 19,
1996 are significantly different from its operations prior to the Acquisition
the following unaudited comparative financial data of the Company for the
three months ended June 30, 1997 and 1996 are included herein in an effort to
facilitate a meaningful presentation of the Company's post-Acquisition
operating results.
The accompanying financial statements have been indexed and expressed in
currency of constant purchasing power at June 30, 1997 by using a monthly
index derived from the Indice Geral de Precos - Mercado (IGP-M). The Company
believes that the IGP-M index is an appropriate general price level inflation
indication to be used under US GAAP. For the twelve months ended June 30,
1997, the inflation as measured by the IGP-M was 8.10%.
Three Months Three Months
Ended Ended
June 30, 1996 % June 30, 1997 %
----------------- --------------
(In thousands) (In thousands)
Net Operating revenues:
- - - Restaurant sales R$ 14,555 R$ 16,921
- - - Franchise Related Income 107 365
- - - Other Income 309 375
--------- ---------
Total net operating revenues 14,971 100.0 17,661 100.0
--------- ---------
Cost and expenses:
- - - Cost of restaurant sales 5,609 37.5 5,985 33.9
- - - Restaurant payroll and other
employee benefits 3,513 23.5 4,261 24.1
- - - Restaurant occupancy and other
expenses 1,213 8.1 1,782 10.0
- - - Depreciation and amortization 1,012 6.8 1,023 5.8
- - - Other operating expenses 2,718 18.2 2,686 15.2
- - - Selling expenses 688 4.6 1,135 6.4
- - - General and administrative expenses 2,635 17.6 3,160 17.9
--------- ---------
Total costs and expenses 17,388 116.3 20,032 113.3
--------- ---------
Loss from operations (2,417) (16.1) (2,371) (13.4)
--------- ---------
- - - Interest income (expense) 138 .9 (460) (2.6)
--------- ----- --------- ----
(Loss) before Income Taxes (2,279) (15.2) (2,831) (16.0)
Income Taxes (Provision) Recovery 10 (0.0) 0 0.0
--------- ---------
Net Income (loss) R$ (2,269) (15.2) R$ (2,831) (16.0)
========= =========
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Page 9 of 13
Restaurant Sales
- ----------------
Net restaurant sales for Company-owned stores were R$ 14,555,000 and R$
16,921,000, for the second quarter of 1996 and 1997, respectively.
The increase of 16% is principally due to an increase in the number of
company owned stores from 66 at June 30, 1996 to 87 at June 30, 1997.
Franchise Income
- ----------------
Franchise income was R$ 107,000 and R$ 365,000, respectively, for the second
quarter of 1996 and 1997. The quarter to quarter increase is primarily due to
the expansion of the number of franchise stores from 23 in 1996 to 42 in 1997.
Cost of Restaurant Sales
- ------------------------
Cost of restaurant sales expressed as a percentage of net operating revenues
decreased from 37.5% for the quarter ended June 30, 1996 to 33.9%
for the quarter ended June 30, 1997. This reduction reflects renegotiated
prices with suppliers and alternative sourcing of supplies.
Restaurant Payroll and Other Employee Benefits
- ----------------------------------------------
Restaurant payroll and other employee benefits expressed as a percentage of net
operating revenues were approximately 23.5% and 24.1%, for the second
quarter ended June 30, 1996 and 1997, respectively. The slight increase is
attributable to increased salaries mandated by union-driven agreements during
the second half of 1996 as well as increased medical and transportation costs.
These increased costs were offset by a reduced headcount in 1997 and the
adoption of a new recruitment program in 1997 allowing for a greater degree of
flexibility in manpower usage and lower costs of recruitment and replacement of
staff.
Restaurant Occupancy Costs and Other Expenses
- ---------------------------------------------
Restaurant occupancy and other expenses expressed as a percentage of net
operating revenues were approximately 8.1% and 10.0%, for the
quarter ended June 30, 1996 and 1997, respectively. The increase is primarily
related to the increased number of leased stores in 1997 as compared with 1996.
<PAGE>
Page 10 of 13
Depreciation and Amortization
- -----------------------------
Depreciation and amortization expressed as a percentage of net operating
revenues was approximately 6.8% and 5.8% for the quarters ended June 30,
1996 and 1997, respectively. Depreciation and amortization expenses in 1997
remained fairly consistent as compared with 1996.
Other Operating Expenses
- ------------------------
Other operating expenses expressed as a percentage of net operating revenues
were approximately 18.2% and 15.2%, for the quarters ended June 30, 1996 and
1997, respectively. Other operating expenses in 1997 have remained fairly
constant when compared with 1996.
Selling Expenses
- ----------------
Selling expenses, expressed as a percentage of total net operating revenues,
were approximately 4.6% and 6.4%, for the quarters ended June 30, 1997 and
1996, respectively. Selling expenses increased by R$447,000 or 65% in 1997 as
compared with 1996. This increase reflects increased marketing activities
started in the second half of fiscal 1996, including increased marketing
expenditures related to new store openings.
General and Administrative Expenses
- -----------------------------------
General and administrative expenses, expressed as a percentage of total net
operating revenues, were approximately 17.6% and 17.9% for the
quarters ended June 30, 1996 and 1997, respectively. General and
administrative expenses increased by R$525,000 or 20%. This increase is
primarily due to increased professional fees as well as costs attributable to
the increased number of Company stores.
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Page 11 of 13
Liquidity and Capital Resources
Since its Acquisition on March 19, 1996, the Company has funded its
operating losses and made acquisitions of businesses and capital improvements
(including furniture, fixtures and equipment) by using cash remaining at the
closing of the Acquisition, cash flow generated by operations and by borrowing
funds from various sources. As of June 30, 1997, the Company had cash on hand
of R$ 940,000 and a working capital deficiency of R$ 10,514,000.
The Company's capital requirements are primarily for expansion of its
retail operations. Currently, 78 of the Company's stores are in leased
facilities and 9 are owned by the Company. During fiscal 1996, the Company's
average cost to open a store approximated R$ 300,000 to R$ 400,000, including
leasehold improvements, equipment and beginning inventory, as well as all
expenses for store design, site selection, lease negotiation, construction
supervision and permitting. The Company currently estimates that the capital
expenditures through fiscal 1997 will approximate R$ 3,000,000.
In August 1997, the Company completed a private placement of 1,500,000
shares of its common stock to an institutional investor receiving proceeds of
$4,500,000.
The Company's continued operations are dependent in part upon its ability
to increase sales volume through enhancements of its stores, including but not
limited to new computerized systems, air conditioning and refurbishment of
interior designs. These activities, as well as sales promotional activities,
require a substantial amount of cash which the Company believes will be
generated from its current operations. The Company's working capital deficit, as
well as its need to improve its facilities, will be supported by cash flow from
operations, the proceeds of equity sales, and its borrowing facilities.
The Company has also embarked on a plan to substantially reduce its costs,
specifically in the area of food purchases and general administrative expenses.
In the opinion of management, these actions, coupled with cash flow from
operations, vendor financing, available bank and equipment lines of credit and
its proposed sale of equity, discussed above, will provide sufficient working
capital for it to continue through the end of 1997.
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Page 12 of 13
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule
(b) None
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Page 13 of 13
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report, as amended, to be signed on its
behalf by the undersigned thereunto duly authorized.
Brazil Fast Food Corp.
(registrant)
Dated: August 19, 1997
By: /s/ Peter van Voorst Vader
Peter van Voorst Vader
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Marcos Bastos Rocha
Marcos Bastos Rocha
Chief Financial Officer
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 940
<SECURITIES> 0
<RECEIVABLES> 1,397
<ALLOWANCES> 0
<INVENTORY> 528
<CURRENT-ASSETS> 3,467
<PP&E> 27,375
<DEPRECIATION> 3,360
<TOTAL-ASSETS> 47,667
<CURRENT-LIABILITIES> 13,981
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> 30,314
<TOTAL-LIABILITY-AND-EQUITY> 47,667
<SALES> 35,636
<TOTAL-REVENUES> 37,177
<CGS> 12,571
<TOTAL-COSTS> 40,609
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 908
<INCOME-PRETAX> (4,340)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,340)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,340)
<EPS-PRIMARY> (.41)
<EPS-DILUTED> (.41)
</TABLE>
