<PAGE>
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 September 30, 1999
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.)
Av. Brasil, 6431, CEP 21040-360, Rio De Janeiro, Brazil
(Address of principal executive offices)
011-55-21-564-6452
(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.
3,233,410 shares of Common Stock at November 10, 1999
<PAGE>
Part 1 - Financial Information
Item 1. Financial Statements
The condensed financial statements included herein have been prepared by
Brazil Fast Food Corp. (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.
2
<PAGE>
BRAZIL FAST FOOD CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
================================================================================
ASSETS
------
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
------------------- -----------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents R$ 578 R$ 817
Accounts receivable, net of allowance for doubtful
accounts of R$187 2,263 2,146
Inventories 580 660
Prepaid expenses and other current assets 617 545
---------- ---------
TOTAL CURRENT ASSETS 4,038 4,168
PROPERTY AND EQUIPMENT, NET 23,259 22,587
DEFERRED CHARGES, NET 11,593 12,162
OTHER RECEIVABLES AND OTHER ASSETS 2,774 2,715
---------- ---------
TOTAL ASSETS R$41,664 R$41,632
========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<CAPTION>
CURRENT LIABILITIES:
Notes payable R$ 9,109 R$ 4,565
Accounts payable and accrued expenses 3,078 3,937
Payroll and related accruals 3,248 2,397
Taxes, other than income taxes 3,961 2,355
Deferred income 736 866
Other 532 237
---------- ---------
TOTAL CURRENT LIABILITIES 20,664 14,357
NOTES PAYABLE, less current portion 2,921 5,194
DEFERRED INCOME, less current portion 1,965 2,084
OTHER LIABILITIES 2,726 -
---------- ---------
TOTAL LIABILITIES 28,276 21,635
---------- ---------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value, 5,000 shares authorized; no
shares issued - -
Common stock, $.0001 par value, 40,000,000 shares authorized;
and 3,233,410 shares issued and outstanding 1 1
Additional paid-in capital 46,226 46,226
Deficit (32,387) (25,902)
Accumulated comprehensive loss (452) (328)
---------- ---------
TOTAL SHAREHOLDERS' EQUITY 13,388 19,997
---------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY R$41,664 R$41,632
========== =========
</TABLE>
See Selected Notes to Consolidated Financial Statements.
3
<PAGE>
BRAZIL FAST FOOD CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
================================================================================
For the Nine
Months Ended
September 30,
---------------------
1999 1998
--------- ---------
NET OPERATING REVENUES:
Restaurant sales R$ 40,782 R$ 48,183
Franchise income 2,265 1,418
Other income 1,961 1,595
--------- ---------
TOTAL NET OPERATING REVENUES 45,008 51,196
--------- ---------
COSTS AND EXPENSES:
Cost of restaurant sales 15,756 17,670
Restaurant payroll and other employee benefits 9,499 11,881
Restaurant occupancy and other expenses 5,023 5,536
Depreciation and amortization 2,366 2,909
Other operating expenses 6,166 7,733
Selling expenses 4,279 2,942
General and administrative expenses 3,299 6,884
--------- ---------
TOTAL COSTS AND EXPENSES 46,388 55,555
--------- ---------
(LOSS) FROM OPERATIONS (1,380) (4,359)
INTEREST (EXPENSE) (2,960) (1,753)
FOREIGN EXCHANGE (LOSS) (2,145) (154)
--------- ---------
NET (LOSS) (6,485) (6,266)
OTHER COMPREHENSIVE INCOME (LOSS):
FOREIGN CURRENCY TRANSLATION ADJUSTMENT (124) (59)
--------- ---------
COMPREHENSIVE LOSS R$ (6,609) R$ (6,325)
========= =========
BASIC NET (LOSS) PER COMMON SHARE R$ (2.04) R$ (2.01)
========= =========
WEIGHTED AVERAGE BASIC COMMON SHARES
OUTSTANDING 3,233,410 3,147,950
========= =========
See Selected Notes to Consolidated Financial Statements.
4
<PAGE>
BRAZIL FAST FOOD CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
================================================================================
For the Three Months
Ended September 30,
---------------------
1999 1998
--------- ---------
NET OPERATING REVENUES:
Restaurant sales R$ 13,279 R$ 14,493
Franchise income 922 512
Other income 651 509
--------- ---------
TOTAL NET OPERATING REVENUES 14,852 15,514
--------- ---------
COSTS AND EXPENSES:
Cost of restaurant sales 5,219 5,402
Restaurant payroll and other employee benefits 3,009 3,586
Restaurant occupancy and other expenses 1,678 1,680
Depreciation and amortization 799 773
Other operating expenses 1,928 2,304
Selling expenses 1,674 930
General and administrative expenses 1,030 2,226
--------- ---------
TOTAL COSTS AND EXPENSES 15,337 16,901
--------- ---------
(LOSS) FROM OPERATIONS (485) (1,387)
INTEREST (EXPENSE) (924) (640)
FOREIGN EXCHANGE (LOSS) (550) (109)
--------- ---------
NET (LOSS) (1,959) (2,136)
OTHER COMPREHENSIVE INCOME (LOSS):
FOREIGN CURRENCY TRANSACTION ADJUSTMENT (21) (9)
--------- ---------
COMPREHENSIVE LOSS R$ (1,980) R$ (2,145)
========= =========
BASIC NET (LOSS) PER COMMON SHARE R$ (.61) R$ (.66)
========= =========
WEIGHTED AVERAGE BASIC COMMON SHARES
OUTSTANDING 3,233,410 3,233,410
========= =========
See Selected Notes to Consolidated Financial Statements.
5
<PAGE>
BRAZIL FAST FOOD CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
Common Stock Additional Cumulative
----------------------- Paid-In Translation
Shares Par Value Capital (Deficit) Adjustment Total
---------- ---------- --------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1999 3,233,410 R$ 1 R$46,226 R$(25,902) R$(328) R$19,997
Net loss - - - (6,485) - (6,485)
Cumulative translation
adjustment - - - - (124) (124)
---------- ---------- --------- ----------- ---------- ---------
Balance, September 30, 1999 3,233,410 R$ 1 R$46,226 R$(32,387) R$(452) R$13,388
========== ========== ========= =========== ========== =========
</TABLE>
See Selected Notes to Consolidated Financial Statements.
6
<PAGE>
BRAZIL FAST FOOD CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
For the Nine
Months Ended
September 30,
---------------------------
1999 1998
----------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net (loss) R$ (6,485) R$ (6,266)
Adjustments to reconcile net (loss) to net cash provided by
(used in) operating activities:
Net gain (loss) on sale of assets (224) 61
Depreciation and amortization 2,366 2,909
Changes in operating assets and expenses:
(Increase) decrease in:
Accounts receivable (117) 616
Inventories 80 236
Other current assets (72) (249)
Other assets (59) 29
Increase (decrease) in:
Accounts payable and accrued expenses (859) (1,450)
Payroll and related accruals 851 386
Taxes, other than income taxes 4,332 424
Deferred income (249) (664)
Other current liabilities 296 (353)
------ ------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (140) (4,321)
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES :
Capital expenditures (2,876) (1,933)
Proceeds from sales of assets 631 323
------ ------
NET CASH (USED IN) INVESTING ACTIVITIES (2,245) (1,610)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under lines of credit 2,271 3,383
Proceeds from private placement - 1,505
Proceeds from exercise of options - 23
------ ------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,271 4,911
------ ------
EFFECT OF FOREIGN EXCHANGE RATES (125) (58)
------ ------
NET (DECREASE) IN CASH AND CASH EQUIVALENTS (239) (1,078)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 817 1,522
------ ------
CASH AND CASH EQUIVALENTS, END OF PERIOD R$ 578 R$ 444
====== ======
</TABLE>
Non - Cash Investing Activities
- -------------------------------
In 1998, the Company disposed of certain assets and received receivables from
the purchasers in the amount of R$1,247.
See Selected Notes to Consolidated Financial Statements.
7
<PAGE>
BRAZIL FAST FOOD CORP. AND SUBSIDIARIES
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
================================================================================
NOTE 1 - FINANCIAL STATEMENT PRESENTATION
The accompanying financial statements have been prepared by Brazil Fast
Food Corp. (the "Company"), without audit. In the opinion of management,
all adjustments (which include only normal recurring adjustments) necessary
to present fairly the financial position, results of operations and cash
flows at September 30, 1999 and for all periods presented have been made.
The results of operations for the period ended September 30, 1999 are not
necessarily indicative of the operating results for a full year. Unless
otherwise specified all reference in these financial statements to (i )
"Reais", or "R$" are to the Brazilian Real (singular), or to Brazilian
Reais (plural), the legal currency of Brazil, and (ii ) "U.S. Dollars" or
"S" are to United States' dollars.
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 consolidated
financial statements and notes included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1998.
NOTE 2 - MANAGEMENT PLANS REGARDING GOING CONCERN
Since the acquisition on Venbo by the Company in 1996, the Company has
sustained net losses totaling approximately R$32.4 million. To date, the
Company has been dependent upon its initial capital, additional equity and
debt financing to fund its operating losses and capital expansion.
Currently, the Company has no debt financing available under its current
credit lines, other than the ability to finance certain acquisitions of
property and equipment.
Management plans to address its immediate and future cash flow needs by
focusing on a number of areas including: the sale of Company-owned stores;
reduction of expenses, including head count reductions; the expansion of
its franchisee base, which would generate additional cash flows from
royalties and franchise fees without significant capital expenditure; the
introduction of new programs and menu expansion to meet the wants of the
consumer. In order to act on these plans and sustain current operations,
the Company is dependent upon the continued forbearance of its creditors,
as well as additional financing.
8
<PAGE>
BRAZIL FAST FOOD CORP. AND SUBSIDIARIES
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
================================================================================
NOTE 2 - MANAGEMENT PLANS REGARDING GOING CONCERN (cont'd)
There can be no assurance that management's plans will be realized, or that
additional financing will be available to the Company when needed, or at
terms that are desirable. Furthermore, there can be no assurance that the
Company will continue to receive the forbearance of its creditors, or that
it will locate suitable new franchisees, or desirable locations for new
franchisees to open stores. The Company's ability to further reduce
expenses and head count is directly impacted by its need to maintain and
infrastructure to support its current and future chain of locations. The
Company's ability to remarket Company-owned stores to franchisees, and to
generate cash flows from such activities, is impacted by the ability to
locate suitable buyers with the interest and capital to compete such
transactions, and the time to complete such sales. Additionally, the
Company's ability to achieve its plans if further impacted by the
instability of the economic environment in Brazil, which has a direct
impact on the desire and ability of consumers to visit fast food outlets.
The Company is also dependent upon the continued employment of key
personnel. These factors, among other, raise substantial doubt about the
Company's ability to continue as a going concern.
NOTE 3 - RECLASSIFICATIONS
Certain reclassifications have been made to the 1998 financial statements
to conform with the current period presentation.
NOTE 4 - SHAREHOLDERS' EQUITY
In June 1999, the Company's shareholders approved a four for one reverse
stock split of its common shares. All share and per share amounts have been
retroactively restated to present the effects of the reverse stock split.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND LIQUIDITY AND CAPITAL RESOURCES
RESULTS OF OPERATIONS
Introduction
The world financial market disruptions that were initiated by the Asian
financial crisis in late 1997 and exacerbated by the near-collapse of the
Russian economy in mid-1998 ultimately spread to Brazil in late 1998. Bank
interest rates surged upward beyond 35% per annum, while interest rates on
consumer credit transactions rose to in excess of 8% per month. Unemployment
rose substantially, particularly in cities such as Rio de Janeiro and Sao Paulo,
as businesses attempted to cope with curtailed credit facilities and reduced
economic growth. In January 1999, the Brazilian government devalued the Real in
an effort to combat the onset of an economic recession. All of these events led
to a slowdown in Brazilian retail traffic, generally, and to a significant
reduction in the Company's sales for the first three months of 1999 in
particular.
By the end of the second quarter of 1999, the Brazilian economy began to show
signs of a recovery. The January 1999 currency devaluation had increased the
attractiveness of Brazilian products in world markets. Further, the Brazilian
Central Bank initiated a series of interest rate reductions which lowered
interest rates from approximately 42% per annum at the end of March 1999 to
approximately 19% per annum by the end of September 1999. As agricultural and
industrial production slightly increased with the expansion of available credit
facilities, employment and retail sales levels began to rise by the end of the
second quarter of 1999 after several months of stagnation or decline.
As the Brazilian economy improved during the second and third quarters of
1999, the Company's sales also increased. However, the Company remains burdened
with a significantly higher level of indebtedness and interest expense than it
had experienced prior to the commencement of the economic recession in late
1998.
Restaurant Sales
Net restaurant sales for Company-owned stores were R$40,782,000 and
R$48,183,000 for the nine months ended September 30, 1999 and 1998,
respectively. Same stores sales for the nine months ended September 30, 1999
declined approximately 2.2% when compared with the nine months ended September
30, 1998. Same store sales for the three months ended September 30, 1999
increased approximately 2.6% when contrasted with the comparable 1998 fiscal
period.
In addition to the macroeconomic factors described above, the approximately
15.4% decrease in third quarter 1999 revenues is attributable to the decrease in
the number of Company-owned retail outlets from 75 at September 30, 1998 to 65
at September 30, 1999, reflecting implementation of the Company's strategy to
limit its direct operations to highly profitable outlets, and to focus its
future growth on developing and expanding its franchise network.
The decrease in 1999 sales was partially offset by an overall 2% increase
in selling prices, introduction of new lines of bacon and chicken products and
an improved incentive program for store personnel.
Franchise Income
Franchise income was R$2,265,000 and R$1,418,000 for the nine months ended
September 30, 1999 and 1998, respectively. The 1999 increase of 59.7% was
principally attributable to the expansion of franchised locations, which grew
from 79 units at September 30, 1998 to 107 units at September 30, 1999.
The growth in the number of franchisees resulted in the Company's receipt
of both increased initial franchise fees and increased royalty income.
The 1999 increase in average franchise income was attributable in part to
the opening of new outlets with higher sales levels than those previously in
operation.
10
<PAGE>
Other Income
Other income, which is mainly derived from suppliers pursuant to license and
exclusivity agreements and marketing fees, was R$1,961,000 and R$1,595,000 for
the nine months ended September 30, 1999 and 1998, respectively.
Cost of Restaurant Sales
Cost of restaurant sales expressed as a percentage of net operating revenues
were 35.7 and 34.5% for the nine months ended September 30, 1999 and 1998,
respectively.
The 1999 increase is primarily attributable to an approximately 58%
increase in the cost of imported food products and paper goods following the
January 1999 Brazilian currency devaluation and from a 1% increase in sales
taxes.
Restaurant Payroll and Other Employee Benefits
Restaurant payroll and other employee benefits expressed as a percentage of
net operating revenues decreased from 23.2% in the nine months ended September
30, 1998 to 21.1% in the nine months ended September 30, 1999.
The 1999 decrease was attributable to lower night shift wages and
transportation benefits for new hires and to reduced daily hours of employment
for store personnel, the benefits of which were partially offset by salary
increases mandated by union agreements.
Restaurant Occupancy Costs and Other Expenses
Restaurant Occupancy Costs and Other Expenses expressed as a percentage of
net operating revenues were approximately 11.2% and 10.8% for the nine months
ended September 30, 1999 and 1998, respectively.
The 1999 increase was mainly due to the portion of minimum rent which is
linked to the Brazilian inflation rate.
Depreciation and Amortization
Depreciation and amortization expense expressed as a percentage of net
operating revenues was approximately 5.3% and 5.7% for the nine months ended
September 30, 1999 and 1998, respectively.
The 1999 decrease is attributable to the completion of depreciation upon
several assets (leasehold improvements) and to the 1998 year end write-off of
all goodwill, which reduced 1999 amortization levels.
Other Operating Expenses
Other operating expenses expressed as a percentage of net operating revenues
were approximately 14.2% and 15.1% for the nine months ended September 30, 1999
and 1998, respectively. The decrease is due to reductions and non-renewals of
professional service contracts covering such tasks as repair, maintenance and
money collection and the assumption by Franchisees of certain special event
expenses, partially offset by inflation-driven adjustments under certain on-
going service contracts.
Selling Expenses
Selling expenses as a percentage of net operating revenues were 9.5% and
5.8% for the nine months ended September 30, 1999 and 1998, respectively.
11
<PAGE>
General and Administrative Expenses
General and administrative expenses expressed as a percentage of net operating
revenues were approximately 7.6% and 13.5% for the nine months ended September
30, 1999 and 1998, respectively. The 1999 reduction is mainly due to:
* a total headcount reduction of 14 administrative employees (including 2
senior managers and 3 managers).
* non-recurring expenses incurred in the first nine months of 1998 of
approximately R$200,000 related to labor compensation on dismissal of
administrative personnel.
* restructuring of the Company's middle management, including (i) the
outsourcing of some departments in order to reduce administrative charges
since November 1998 and (ii) the optimization of some functions and
positions.
* relocation of the Company's executive and principal administrative offices
to a Company-owned facility in July 1998.
* the termination of an accounting service agreement in September 1998 with
a total net saving of approximately R$100,000 per month.
Interest Income and Expense
Net interest expense expressed as a percentage of net operating revenues were
approximately 6.8% and 3.4% for the nine months ended September 30, 1999 and
1998, respectively.
The 1999 increase is primarily due to interest rate increases and an
increase in the Company's level of indebtedness.
Foreign Exchange Loss
Foreign exchange loss of R$2,145,000 for the nine months ended September 30,
1999 was primarily due to the January 1999 devaluation of the Brazilian
currency, as the Company's bank indebtedness is indexed to the U.S. dollar.
LIQUIDITY AND CAPITAL RESOURCES
Since March 19, 1996, the Company has funded its operating losses of
R$32,387,000 and made acquisitions of businesses and capital improvements
(including store remodeling) by using cash remaining at the closing of its
acquisition of Venbo, by borrowing funds from various sources and private
placements of securities. As of September 30, 1999, the Company had cash on hand
of R$578,000 and a working capital deficiency of R$16,626,000.
The Company's capital requirements are primarily for expansion of its retail
operations. Currently, five of the Company's stores are in owned facilities and
all the others are in leased facilities. For the nine months ended September 30,
1999, the Company's EBITDA was R$986,000. During the same period, the Company's
average cost to open a store approximated R$300,000 to R$500,000, including
leasehold improvements, equipment and beginning inventory, as well as expenses
for store design, site selection, lease negotiation, construction supervision
and obtaining permits. The Company currently estimates that its capital
expenditures for fiscal 1999, which will be used to maintain its restaurant
network, will approximate R$1,000,000. The Company anticipates that its primary
use of its cash resources during 1999 will be to service its debt obligations.
During 1999, the Company intends to focus its efforts on expanding both the
number of its franchisees and its franchised outlets, neither of which are
expected to involve significant capital expenditures by the Company.
In the first nine months of 1999, the Company had net cash used in operating
activities of R$140,000 and had net cash used in investing activities of
R$2,245,000. The primary use of cash for investing activities was for capital
expenditures related to the Company's retail store expansion.
12
<PAGE>
Management plans to address its immediate and future cash flow needs
include focusing on a number of areas including
* the sale of Company-owned stores
* reduction of expenses, including headcount reductions
* the expansion of its franchisee base, which may be expected to generate
additional cash flows from royalties and franchise fees without
significant capital expenditure
* the introduction of new programs and menu expansions to meet consumer
wishes.
In order to act on these plans and sustain current operations, the Company
is dependent upon the continued forbearance of its creditors, as well as
additional financing.
There can be no assurance that management's plans will be realized, or that
additional financing will be available to the Company when needed, or at terms
that are desirable. Furthermore, there can be no assurance that the Company will
continue to receive the forbearance of its creditors, or that it will locate
suitable new franchisees, or desirable locations for new franchisees to open
stores. The Company's ability to further reduce expenses and head count is
directly impacted by its need to maintain an infrastructure to support its
current and future changing of locations. The Company's ability to re-market
Company-owned stores to franchisees, and to generate cash flows from such
activities, is impacted by the ability to locate suitable buyers with the
interest and capital to complete such transactions, and the time to complete
such sales. Additionally, the Company's ability to achieve its plans is further
impacted by the instability of the economic environment in Brazil, which has a
direct impact on the desire and ability of consumers to visit fast food outlets.
The Company is also dependent upon the continued employment of key personnel.
These factors, among others, raise substantial doubt about the Company's ability
to continue as a going concern.
YEAR 2000
The Company has performed a review of its Year 2000 preparedness relative to
its products and systems, its accounting software and its computer hardware. The
Company believes that it will not incur material costs in connection with
becoming Year 2000 compliant. In addition, the Company has received
communications from its significant third party vendors and service providers
stating that they are generally on target to become Year 2000 compliant in 1999
if they have not already done so. There can be no assurance that these third
party vendors and service providers will complete their own Year 2000 compliant
projects in a timely manner and that failure to do so would not have an adverse
impact on the Company's business.
QUANTITATIVE AND QUALITATIVE INFORMATION ABOUT MARKET RISK
The Company does not engage in trading market risk sensitive instruments
and does not purchase hedging instruments or "other than trading" instruments
that are likely to expose the Company to market risk, whether interest rate,
foreign currency exchange, commodity price or equity price risk. The Company has
issued no debt instruments, entered into no forward or future contracts,
purchased no options and entered into no swaps. The Company's primary market
risk exposure is that of interest rate risk. A change in Brazilian interest
rates would affect the rate at which the Company could borrow funds under its
several credit facilities with Brazilian banks and financial institutions.
13
<PAGE>
FORWARD-LOOKING STATEMENTS
Forward-looking statements in this report, including without limitation
statements relating to the Company's plans, strategies, objectives,
expectations, intentions and adequacy of resources, are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Investors are cautioned that such forward-looking statements involve risks and
uncertainties, including those risk factors set forth in the Company's periodic
filings made with the Securities and Exchange Commission, most recently in its
Annual Report on Form 10-K for the year ended December 31, 1998. Investors are
urged to read such periodic filings.
PART II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule
(b) None
14
<PAGE>
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: November 11, 1999
By: /s/ Peter van Voorst Vader
----------------------------------
Peter van Voorst Vader
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Carlos Henrique da Silva Rego
----------------------------------
Carlos Henrique da Silva Rego
Chief Financial Officer
(Principal Financial and
Accounting Officer)
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 578
<SECURITIES> 0
<RECEIVABLES> 2,450
<ALLOWANCES> (187)
<INVENTORY> 580
<CURRENT-ASSETS> 4,038
<PP&E> 45,334
<DEPRECIATION> (10,482)
<TOTAL-ASSETS> 41,664
<CURRENT-LIABILITIES> 20,664
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> 13,387
<TOTAL-LIABILITY-AND-EQUITY> 41,664
<SALES> 40,782
<TOTAL-REVENUES> 43,517
<CGS> 15,756
<TOTAL-COSTS> 29,141
<OTHER-EXPENSES> 1,595
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,960
<INCOME-PRETAX> (6,485)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,485)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,485)
<EPS-BASIC> (2.04)
<EPS-DILUTED> (2.04)
</TABLE>
