Achieved as reported revenue and mid-teen
comparable sales growth and delivered consolidated Adjusted EBITDA
margin expansion versus the prior year
Arcos Dorados Holdings, Inc. (NYSE:ARCO) (“Arcos Dorados” or the
“Company”), Latin America’s largest restaurant chain and the
world’s largest McDonald’s franchisee, today reported unaudited
results for the third quarter ended September 30, 2016.
Third Quarter 2016 Key Results
- As reported consolidated revenues
increased 2.9% to $775.7 million versus the third quarter of 2015.
On a constant currency basis1, consolidated revenues grew 15.3%, or
12.4% excluding Venezuela.
- Systemwide comparable sales rose 15.6%
year-over-year, or 11.8% excluding Venezuela.
- Adjusted EBITDA increased 24.0% to
$63.2 million year-over-year. Constant currency Adjusted EBITDA
grew 45.9% year-over-year, or 29.5% excluding Venezuela.
- Consolidated Adjusted EBITDA margin
expanded approximately 140 basis points, or 130 basis points
excluding Venezuela.
- As reported General and Administrative
expenses (G&A) decreased by $6.5 million, or 10.5%
year-over-year, and remained approximately flat on a constant
currency basis.
- As reported net loss was $1.8 million,
compared to a net loss of $35.9 million in the same period last
year.
“We achieved as reported revenue and mid-teen comparable sales
growth, and delivered a meaningful expansion in the consolidated
Adjusted EBITDA margin in the third quarter. The latter reflects
important efficiencies in payroll and reduced G&A costs,
providing us operating leverage in spite of challenging market
conditions. Our focus going forward is on modernizing restaurants,
piloting technology platforms and updating menu offerings to ensure
the best customer experience. These strategic changes are
positioning us at the forefront of a recovery in economic growth in
the region”, said Sergio Alonso, Chief Executive Officer of Arcos
Dorados.
Third Quarter 2016
Results
Consolidated
Figure 1. AD Holdings Inc Consolidated: Key Financial
Results
(In millions of U.S. dollars, except as
noted)
3Q15
(a)
CurrencyTranslation(b)
ConstantCurrencyGrowth(c)
3Q16
(a+b+c)
% AsReported
% ConstantCurrency
Total Restaurants (Units) 2,122
2,140 0.8 %
Sales by Company-operated Restaurants 724.3 (89.9 ) 108.3 742.8 2.5
% 15.0 % Revenues from franchised restaurants 29.4 (3.8 ) 7.3 32.9
12.0 % 24.9 %
Total Revenues 753.7 (93.7
) 115.6 775.7 2.9 % 15.3
% Systemwide Comparable Sales 15.6 %
Adjusted EBITDA
50.9 (11.2 ) 23.4 63.2
24.0 % 45.9 % Adjusted EBITDA Margin
6.8 % 8.1 %
Net income (loss) attributable to AD
(35.9 ) (12.3 ) 46.4 (1.8
) 94.9 % 129.2 % No. of shares
outstanding (thousands) 210,538 210,711
EPS (US$/Share)
-0.17
-0.01
(3Q16 = 3Q15 + Currency Translation + Constant Currency Growth).
Refer to “Definitions” section for further detail.
Arcos Dorados’ third quarter as reported revenues increased by
2.9% as constant currency revenue growth of 15.3% more than offset
depreciation of local currencies. While the Argentine peso and
Venezuelan bolivar both depreciated, the Brazilian real appreciated
8% year-over-year. Constant currency revenue growth was driven by a
15.6% expansion in systemwide comparable sales, due to average
check growth, partially offset by a modest decline in traffic.
Third quarter consolidated as reported Adjusted EBITDA increased
24.0% as constant currency growth more than offset the currency
translation impact, mainly in Argentina and Venezuela. Brazil was
the key contributor to expanded Adjusted EBITDA during the quarter,
followed by the Caribbean division and NOLAD, while SLAD’s result
declined due to margin contraction and the year-over-year
depreciation of the Argentine peso. Additionally, the Corporate
segment contributed positively to consolidated Adjusted EBITDA
during the quarter.
The Adjusted EBITDA margin expanded by almost 140 basis points
to 8.1%, supported by margin expansion in Brazil, the Caribbean
division, NOLAD and the Corporate segment, partially offset by
margin contraction in SLAD. The key drivers for margin expansion
were efficiencies in Payroll and G&A expenses, which more than
offset higher Food and Paper (F&P) costs as a percentage of
revenues. Additionally, Adjusted EBITDA benefited from the
refranchising of certain company-operated restaurants, as part of
the Company’s asset monetization strategy. Excluding the
refranchising inflows, consolidated Adjusted EBITDA margin
increased by about 60 basis points.
As reported, consolidated G&A decreased by 10.5%
year-over-year, or over 100 basis points as a percentage of
revenues. Importantly, G&A remained broadly flat year-over-year
on a constant currency basis. This reflects efficiencies related to
the reorganization plan implemented in the fourth quarter of 2015,
which more than offset inflation-driven growth in G&A expenses,
including Argentine peso denominated corporate expenses.
Consolidated – excluding Venezuela
Figure 2. AD Holdings Inc Consolidated - Excluding Venezuela:
Key Financial Results
(In millions of U.S. dollars, except as
noted)
3Q15
(a)
CurrencyTranslation(b)
ConstantCurrencyGrowth(c)
3Q16
(a+b+c)
% AsReported
% ConstantCurrency
Total Restaurants (Units) 1,988
2,007 1.0 %
Sales by Company-operated Restaurants 716.6 (70.3 ) 87.8 734.1 2.4
% 12.3 % Revenues from franchised restaurants 28.6 (1.6 ) 4.9 31.9
11.7 % 17.2 %
Total Revenues 745.1 (71.9
) 92.7 766.0 2.8 % 12.4
% Systemwide Comparable Sales 11.8 %
Adjusted EBITDA
51.4 (4.0 ) 15.2 62.6
21.8 % 29.5 % Adjusted EBITDA Margin
6.9 % 8.2 %
Net income (loss) attributable to AD
(32.3 ) (1.5 ) 35.3 1.5
104.8 % 109.3 % No. of shares
outstanding (thousands) 210,538 210,711
EPS (US$/Share)
-0.15
0.01
Excluding the Company’s Venezuelan operation, as reported
revenues increased by 2.8% year-over-year as constant currency
growth of 12.4% more than offset the depreciation of the Argentine
peso, as well as other currencies in the Company’s territory.
Constant currency growth was supported by an 11.8% increase in
systemwide comparable sales, driven by average check growth.
Adjusted EBITDA increased 21.8% on an as reported basis, as
constant currency growth more than offset currency translation
impacts. In constant currency terms, Adjusted EBITDA increased
29.5%. The Adjusted EBITDA margin expanded by about 130 basis
points to 8.2%. The result reflects efficiencies in Payroll costs
and G&A expenses, partially offset by higher F&P costs as a
percentage of revenues. Adjusted EBITDA excluding Venezuela also
benefited from the refranchising of certain company-operated
restaurants, as part of the Company’s asset monetization
initiative.
Non-operating Results
Non-operating results for the third quarter reflected a $3.3
million foreign currency exchange loss, versus a loss of $27.9
million last year. The result was due to the significantly higher
depreciation of the Brazilian real during the third quarter of 2015
versus the same period this year, combined with an increased net
exposure to the Brazilian real. Net interest expense increased $3.7
million year-over-year to $18.2 million in the quarter, mainly due
to higher interest expenses on the BRL-denominated debt, which more
than offset lower interest expenses on the 2023 USD notes.
The Company reported an income tax expense of $18.0 million in
the quarter, compared to an income tax expense of $14.1 million in
the prior year period.
Third quarter net loss attributable to the Company totaled $1.8
million, compared to a net loss of $35.9 million in the same period
of 2015. The improvement reflects stronger operating results
coupled with lower foreign exchange losses, partially offset by
higher net interest and income tax expenses. The third quarter 2016
operating result included the recognition of $5.8 million related
to the Company’s refranchising initiative, which was recorded
within “Other operating income (expense), net” line on the
Company’s income statement.
The Company reported a basic net loss per share of $0.01 in the
third quarter of 2016, compared to a loss per share of $0.17 in the
previous corresponding period. Total weighted average shares for
the third quarter of 2016 were 210,710,861, as compared to
210,537,949 in the third quarter of 2015, reflecting the issuance
of shares as a result of the partial vesting of restricted share
units.
Analysis by
Division2:
Brazil Division
Figure 3. Brazil Division: Key Financial Results
(In millions of U.S. dollars, except as
noted)
3Q15
(a)
CurrencyTranslation(b)
ConstantCurrencyGrowth(c)
3Q16a+b+c)
% AsReported
% ConstantCurrency
Total Restaurants (Units) 869
890 2.4 %
Total Revenues 311.8 27.1 18.2
357.0 14.5 % 5.8 % Systemwide
Comparable Sales 6.3 %
Adjusted EBITDA 26.2
2.7 10.3 39.2 49.6 % 39.5
% Adjusted EBITDA Margin 8.4 %
11.0 %
Brazil’s as reported revenues increased by 14.5%, supported by
constant currency growth as well as the 8% year-over-year average
appreciation of the Brazilian real. Excluding the benefit of
currency translation, constant currency revenues increased 5.8%
year-over-year, supported by 6.3% comparable sales growth and the
contribution of new restaurant openings, partially offset by the
refranchising of certain company-operated restaurants during the
last twelve months. The latter generated a net negative
contribution to constant currency revenue growth. Systemwide
comparable sales were driven by average check growth, partially
offset by a modest decline in traffic against a backdrop of
continued soft consumer spending. Traffic was also impacted by a
tough comparison with the Minions Happy Meal campaign in the prior
year quarter.
Marketing activities in the quarter included the “Novinhos
Cheddar” campaign, the launch of the McFlurry Kit Kat in the
dessert category and the continuation of the affordability
platform. The Happy Meal performed well with “Talking Tom” and “The
Secret Life of Pets” properties Also in the quarter, the Company
launched the McShake Ovomaltine, which has performed strongly since
its introduction.
As reported Adjusted EBITDA increased by 49.6% year-over-year
and 39.5% on a constant currency basis. The Adjusted EBITDA margin
expanded by about 260 basis points to 11.0%, as efficiencies in
Payroll, G&A and Occupancy and Other Operating expenses more
than offset higher F&P costs as a percentage of revenues.
Additionally, a positive variance in Other Operating Income as a
percentage of revenues, which included $5.8 million from the
Company’s refranchising initiative, contributed to margin expansion
in the quarter. Excluding the refranchising inflows, Brazil’s
Adjusted EBITDA margin increased by nearly 100 basis points.
Increased F&P costs as a percentage of revenues mainly reflect
the higher FX rate at which the Company hedged its exposure to
imported goods.
NOLAD
Figure 4. NOLAD Division: Key Financial Results
(In millions of U.S. dollars, except as
noted)
3Q15(a)
CurrencyTranslation(b)
ConstantCurrencyGrowth(c)
3Q16(a+b+c)
% AsReported
% ConstantCurrency
Total Restaurants (Units) 514
515 0.2 %
Total Revenues 93.5 (6.8 ) 8.1
94.7 1.4 % 8.6 % Systemwide
Comparable Sales 5.6 %
Adjusted EBITDA 9.0
(0.4 ) 1.9 10.5 17.3 %
21.4 % Adjusted EBITDA Margin 9.6 %
11.1 %
NOLAD’s as reported revenues increased by 1.4% year-over-year as
constant currency growth of 8.6% more than offset currency
translation impacts, mainly from the 14% year-over-year average
depreciation of the Mexican peso. Systemwide comparable sales
increased 5.6%, largely driven by average check growth combined
with a modest increase in traffic across the division.
Marketing initiatives in the quarter included the launch of the
new affordability platform, “McTrio 3x3”, “Talking Tom” in the
Happy Meal and the McFlurry Snickers in the dessert category, among
others.
As reported Adjusted EBITDA increased by 17.3%, or 21.4% on a
constant currency basis, continuing a trend of strong performance
and margin expansion. The Adjusted EBITDA margin expanded by about
150 basis points to 11.1% in the third quarter, mainly driven by
efficiencies in G&A, Occupancy and Other Operating expenses and
Payroll as a percentage of revenues. F&P costs as a percentage
of revenues remained broadly flat during the quarter.
SLAD
Figure 5. SLAD Division: Key Financial Results
(In millions of U.S. dollars, except as
noted)
3Q15(a)
CurrencyTranslation(b)
ConstantCurrencyGrowth(c)
3Q16(a+b+c)
% AsReported
% ConstantCurrency
Total Restaurants (Units) 383
383 0.0 %
Total Revenues 252.3 (92.0 )
61.8 222.1 -12.0 % 24.5 %
Systemwide Comparable Sales 25.3 %
Adjusted EBITDA
31.0 (10.8 ) 2.6 22.8
-26.4 % 8.4 % Adjusted EBITDA Margin
12.3 % 10.3 %
The SLAD division’s as reported revenues decreased by 12.0%
mainly due to the 62% year-over-year average depreciation of the
Argentine peso. On a constant currency basis, revenues increased
24.5% year-over-year. Systemwide comparable sales increased 25.3%,
primarily driven by average check growth and an increase in
traffic.
Marketing activities in the quarter included the Grand Big Mac
campaign, “Talking Tom” in the Happy Meal, the launch of the
McFlurry “Abuela Goye” in the dessert category and the continuation
of the Company’s affordability platform, among others.
Adjusted EBITDA decreased 26.4% on an as reported basis but rose
8.4% in constant currency terms. The Adjusted EBITDA margin
contracted by about 200 basis points to 10.3%, driven by higher
F&P and Occupancy and Other Operating expenses, partially
offset by efficiencies in Payroll costs as a percentage of
revenues. F&P costs rose as a percentage of revenues in the
quarter, primarily due to price adjustments below cost increases
designed to sustain traffic in Argentina’s difficult consumer
environment.
Caribbean Division
Figure 6. Caribbean Division: Key Financial Results
(In millions of U.S. dollars, except as
noted)
3Q15(a)
CurrencyTranslation(b)
ConstantCurrencyGrowth(c)
3Q16(a+b+c)
% AsReported
% ConstantCurrency
Total Restaurants (Units) 356
352 -1.1 %
Total Revenues 96.2 (22.0 ) 27.6
101.8 5.8 % 28.7 % Systemwide
Comparable Sales 37.0 %
Adjusted EBITDA 2.6
(7.2 ) 10.7 6.2 132.2 %
405.3 % Adjusted EBITDA Margin 2.8 %
6.0 %
The Caribbean division’s as reported revenues increased by 5.8%,
as constant currency growth exceeded currency translation impacts
derived from the remeasurement of the results of the Venezuelan
operation at a weaker year-over-year average exchange rate.
Revenues in constant currency rose 28.7% year-over-year. Systemwide
comparable sales increased by 37.0%, with average check growth more
than offsetting a decrease in traffic.
Marketing initiatives in the quarter included “Talking Tom” in
the Happy Meal, the Grand Big Mac campaign, the McFlurry “Jet
Cruji” and the continuation of “Almuerzos Colombianos” in the
affordability platform, among others.
As reported Adjusted EBITDA totaled $6.2 million in the third
quarter, compared with $2.6 million in the prior year quarter. The
Adjusted EBITDA margin expanded to 6.0% from 2.8%, driven by
efficiencies in all key cost line items.
Caribbean Division – excluding Venezuela
Figure 7. Caribbean Division - Excluding Venezuela: Key
Financial Results
(In millions of U.S. dollars, except as
noted)
3Q15(a)
CurrencyTranslation(b)
ConstantCurrencyGrowth(c)
3Q16(a+b+c)
% AsReported
% ConstantCurrency
Total Restaurants (Units) 222
219 -1.4 %
Total Revenues 87.6 (0.2 ) 4.7
92.1 5.1 % 5.4 % Systemwide
Comparable Sales 4.6 %
Adjusted EBITDA 3.1
(0.0 ) 2.5 5.6 79.5 %
80.0 % Adjusted EBITDA Margin 3.6 %
6.1 %
As reported revenues in the Caribbean division, excluding
Venezuela, increased by 5.1% as constant currency growth of 5.4%
more than offset currency translation impacts. Constant currency
growth was supported by the ongoing strong performance of the
Colombian operation. Comparable sales increased by 4.6%, mainly
driven by traffic growth.
Adjusted EBITDA totaled $5.6 million, compared to $3.1 million
in the same period of 2015. The Adjusted EBITDA margin expanded by
about 250 basis points to 6.1%, mainly driven by efficiencies in
F&P costs, G&A and Occupancy and Other Operating expenses,
partially offset by higher Payroll costs as a percentage of
revenues.
New Unit Development
New Unit Development
Figure 8. Total Restaurants (eop)*
September
2016
June
2016
March
2016
December
2015
September
2015
Brazil 890 884 883 883 869 NOLAD 515 516 516 518 514 SLAD 383 382
382 384 383 Caribbean 352 353 355 356 356
TOTAL 2,140
2,135 2,136 2,141 2,122 LTM Net
Openings 18 15 17 20 36 * Considers
Company-operated and franchised restaurants at period-end
The Company opened 33 new restaurants during the twelve-month
period ended September 30, 2016, resulting in a total of 2,140
restaurants. Also during the period, the Company added 133 Dessert
Centers bringing the total to 2,693. McCafés totaled 315 as of
September 30, 2016.
Balance Sheet & Cash Flow Highlights
Cash and cash equivalents were $112.2 million at September 30,
2016. The Company’s total financial debt (including derivative
instruments) was $611.6 million. Net debt was $499.3 million and
the Net Debt/Adjusted EBITDA ratio was 2.0x at September 30,
2016.
Net cash provided by operating activities was $50.5 million in
the third quarter of 2016, while cash used in financing activities
amounted to $65.5 million. The latter included $61.0 million
related to the final payment of the remaining outstanding amount of
the BRL 2016 Notes which matured on July 13, 2016. During the
quarter, capital expenditures totaled $24.2 million.
Figure 9. Consolidated Financial Ratios
(In thousands of U.S. dollars, except
ratios)
September 30 December 31
2016 2015 Cash & cash equivalents 112,207
112,519 Total Financial Debt (i) 611,552 650,452 Net Financial Debt
(ii) 499,345 537,933 Total Financial Debt / LTM Adjusted EBITDA
ratio 2.5 2.8 Net Financial Debt / LTM Adjusted EBITDA ratio
2.0 2.3 (i)Total financial debt includes short-term debt,
long-term debt and derivative instruments (including the asset
portion of derivatives amounting to $0.99 million and $6.7 million
as a reduction of financial debt as of September 30, 2016 and
December 31, 2015, respectively). (ii) Total financial debt less
cash and cash equivalents.
First Nine Months of
2016
For the nine months ended September 30, 2016, the Company’s as
reported revenues declined by 7.3% to $2,121.5 million with
constant currency growth of 13.8% more than offset by currency
translation impacts. As reported Adjusted EBITDA was $152.2
million, a 13.7% increase compared to the first nine months of
2015. On a constant currency basis, Adjusted EBITDA increased by
49.0%. The reported Adjusted EBITDA margin expanded by about 130
basis points to 7.2%, as leverage in G&A expenses and Payroll
costs more than offset higher F&P costs as a percentage of
revenues. Adjusted EBITDA benefited from G&A savings as a
result of the optimization plan carried out in the fourth quarter
of 2015. Additionally, Adjusted EBITDA included $10.7 million from
the refranchising of some company-operated restaurants primarily in
Brazil. Excluding the refranchising inflows, the consolidated
Adjusted EBITDA margin increased by about 80 basis points.
Year-to-date consolidated net income amounted to $57.7 million,
compared with a loss of $57.2 million in the same period of 2015.
Net income in the first nine months of 2016 reflected stronger
operating results, which included $59.0 million from asset
monetization initiatives, coupled with a positive foreign exchange
result, partially offset by income tax and net interest expenses.
The net loss in the first nine months of 2015 reflected weaker
operating results, which included impairment charges and inventory
write downs related to the Venezuelan operation, coupled with
negative foreign exchange results and net interest expenses.
Excluding the Venezuelan operation, the Company’s revenues
declined by 7.7%, but increased by 10.9% on a constant currency
basis. Adjusted EBITDA increased by 7.1%, as reported, and 27.5% on
a constant currency basis. The reported Adjusted EBITDA margin
expanded by about 100 basis points to 7.4%, as leverage in G&A
and Payroll costs more than offset higher F&P as a percentage
of revenues.
During the first nine months of 2016, capital expenditures
totaled $52.1 million.
Quarter Highlights & Recent
Developments
Asset Monetization Initiative
The Company had received cumulative cash proceeds of around
$112.0 million through September 30, 2016 as a result of its asset
monetization initiatives, since they were launched. Approximately
$93.0 million related to the redevelopment of certain real estate
assets and $19.0 million to the refranchising of a number of
company-operated restaurants.
Brazilian Real (“BRL”) Denominated 2016
Notes
On July 13, 2016, the Company paid at maturity the remaining BRL
201 million of outstanding principal of the original BRL 675
million principal of the 2016 Notes. Proceeds from the four-year
BRL 613.9 million secured loan agreement obtained by the Company’s
Brazilian subsidiary on March 29, 2016 were the primary source of
financing for this payment.
Covenants under the Master Franchise
Agreement (MFA)
The MFA requires the Company, among other obligations, to
maintain a minimum fixed charge coverage ratio of 1.50x, as well as
a maximum leverage ratio of 4.25x. As of September 30, 2016, the
fixed charge coverage ratio was 1.67x and the leverage ratio was
4.08x.
Definitions:
Systemwide comparable sales growth:
refers to the change, measured in constant currency, in our
Company-operated and franchised restaurant sales in one period from
a comparable period for restaurants that have been open for
thirteen months or longer. While sales by our franchisees are not
recorded as revenues by us, we believe the information is important
in understanding our financial performance because these sales are
the basis on which we calculate and record franchised revenues, and
are indicative of the financial health of our franchisee base.
Constant currency basis: refers to
amounts calculated using the same exchange rate over the periods
under comparison to remove the effects of currency fluctuations
from this trend analysis.
To better discern underlying business trends, this release uses
non-GAAP financial measures that segregate year-over-year growth
into two categories: (i) currency translation, (ii) constant
currency growth. (i) Currency translation reflects the impact on
growth of the appreciation or depreciation of the local currencies
in which we conduct our business against the US dollar (the
currency in which our financial statements are prepared). (ii)
Constant currency growth reflects the underlying growth of the
business excluding the effect from currency translation.
About Arcos Dorados
Arcos Dorados is the world’s largest McDonald’s franchisee in
terms of systemwide sales and number of restaurants, operating the
largest quick service restaurant chain in Latin America and the
Caribbean. It has the exclusive right to own, operate and grant
franchises of McDonald’s restaurants in 20 Latin American and
Caribbean countries and territories, including Argentina, Aruba,
Brazil, Chile, Colombia, Costa Rica, Curaçao, Ecuador, French
Guyana, Guadeloupe, Martinique, Mexico, Panama, Peru, Puerto Rico,
St. Croix, St. Thomas, Trinidad & Tobago, Uruguay and
Venezuela. The Company operates or franchises over 2,100
McDonald’s-branded restaurants with over 90,000 employees and is
recognized as one of the best companies to work for in Latin
America. Arcos Dorados is traded on the New York Stock Exchange
(NYSE: ARCO). To learn more about the Company, please visit the
Investors section of our website: www.arcosdorados.com/ir
Cautionary Statement on Forward-Looking Statements
This press release contains forward-looking statements. The
forward-looking statements contained herein include statements
about the Company’s business prospects, its ability to attract
customers, its affordable platform, its expectation for revenue
generation and its outlook and guidance for 2016. These statements
are subject to the general risks inherent in Arcos Dorados'
business. These expectations may or may not be realized. Some of
these expectations may be based upon assumptions or judgments that
prove to be incorrect. In addition, Arcos Dorados' business and
operations involve numerous risks and uncertainties, many of which
are beyond the control of Arcos Dorados, which could result in
Arcos Dorados' expectations not being realized or otherwise
materially affect the financial condition, results of operations
and cash flows of Arcos Dorados. Additional information relating to
the uncertainties affecting Arcos Dorados' business is contained in
its filings with the Securities and Exchange Commission. The
forward-looking statements are made only as of the date hereof, and
Arcos Dorados does not undertake any obligation to (and expressly
disclaims any obligation to) update any forward-looking statements
to reflect events or circumstances after the date such statements
were made, or to reflect the occurrence of unanticipated
events.
Use of Non-GAAP Financial Measures
In addition to financial measures prepared in accordance with
the general accepted accounting principles (GAAP), within this
press release and the accompanying tables, we use a financial
measure titled ‘Adjusted EBITDA’. We use Adjusted EBITDA to
facilitate operating performance comparisons from period to period.
Adjusted EBITDA is defined as our operating income plus
depreciation and amortization plus/minus the following losses/gains
included within other operating expenses, net and within general
and administrative expenses in our statement of income: gains from
sale or insurance recovery of property and equipment, write-offs of
property and equipment, impairment of long-lived assets,
stock-based compensation in connection with the Company’s initial
public listing, and the ADBV Long-Term Incentive Plan incremental
compensation from modification.
We believe Adjusted EBITDA facilitates company-to-company
operating performance comparisons by backing out potential
differences caused by variations such as capital structures
(affecting net interest expense and other financial charges),
taxation (affecting income tax expense) and the age and book
depreciation of facilities and equipment (affecting relative
depreciation expense), which may vary for different companies for
reasons unrelated to operating performance. For more information,
please see Adjusted EBITDA reconciliation in Note 9 of our
quarterly financial statements (6-K Form) filed today with the
S.E.C.
Third Quarter 2016 Consolidated Results
(In thousands of U.S. dollars, except per share data)
Figure 10. Third Quarter & First Nine Months 2016
Consolidated Results
(In thousands of U.S. dollars, except per
share data)
For Three-Months ended For Nine-Months
ended September 30, September 30,
2016 2015
2016 2015 REVENUES
Sales by Company-operated restaurants 742,767 724,326
2,032,856 2,196,499 Revenues from franchised restaurants
32,889 29,369
88,615 91,255
Total Revenues
775,656 753,695
2,121,471
2,287,754 OPERATING COSTS AND EXPENSES
Company-operated restaurant expenses: Food and paper (269,737 )
(256,781 ) (740,453 ) (776,799 ) Payroll and employee benefits
(160,671 ) (162,712 ) (444,682 ) (498,809 ) Occupancy and other
operating expenses (198,449 ) (195,309 ) (557,546 ) (599,835 )
Royalty fees (37,689 ) (36,601 ) (103,388 ) (111,901 ) Franchised
restaurants - occupancy expenses (14,233 ) (12,961 ) (40,023 )
(42,051 ) General and administrative expenses (55,818 ) (62,342 )
(157,817 ) (195,488 ) Other operating income (expenses), net
(502 ) (6,151 ) 46,921
(22,742 )
Total operating costs and expenses
(737,099 )
(732,857 ) (1,996,988 )
(2,247,625 ) Operating income
38,557 20,838
124,483
40,129 Net interest expense (18,196 ) (14,482 )
(53,233 ) (47,679 ) Gain (Loss) from derivative instruments (22 )
(97 ) (52 ) (222 ) Foreign currency exchange results (3,306 )
(27,939 ) 28,900 (47,951 ) Other non-operating expense, net
(796 ) (18 ) (1,562 )
(182 )
Income (loss) before income taxes
16,237 (21,698 )
98,536 (55,905
) Income tax (expense) benefit (18,003 )
(14,134 ) (40,732 )
(1,077 )
Net income (loss) (1,766
) (35,832 )
57,804 (56,982 ) Less:
Net income attributable to non-controlling interests
(68 ) (92 ) (145 ) (202 )
Net income (loss) attributable to Arcos Dorados Holdings
Inc. (1,834 )
(35,924 ) 57,659
(57,184 ) Earnings (loss) per share
information ($ per share): Basic net income per common share
$ (0.01 ) $ (0.17 )
$ 0.27 $ (0.27 )
Weighted-average number of common shares outstanding-Basic
210,710,861 210,537,949
210,625,380 210,401,634
Adjusted EBITDA Reconciliation
Operating income 38,557 20,838 124,483
40,129 Depreciation and amortization 24,736 27,399 74,326 83,259
Operating charges excluded from EBITDA computation
(135 ) 2,709 (46,640 )
10,465
Adjusted EBITDA
63,158 50,946
152,169 133,853
Adjusted EBITDA Margin as % of total revenues
8.1 % 6.8 %
7.2 % 5.9 %
Third Quarter 2016 Results by Division
(In thousands of U.S. dollars)
Figure 11. Third Quarter & First Nine Months 2016
Consolidated Results by Division
(In thousands of U.S. dollars)
3Q YTD Three-Months ended
% Incr. Constant Nine-Months
ended % Incr. Constant September
30, / Currency September
30, / Currency 2016
2015 (Decr) Incr/(Decr)%
2016 2015 (Decr)
Incr/(Decr)% Revenues Brazil 357,034
311,815 14.5 % 5.8 % 955,062 1,028,589 -7.1 % 4.9 % Caribbean
101,759 96,152 5.8 % 28.7 % 298,045 292,860 1.8 % 27.6 % NOLAD
94,743 93,451 1.4 % 8.6 % 268,203 271,217 -1.1 % 6.9 % SLAD 222,120
252,277 -12.0 % 24.5 % 600,161 695,088 -13.7 % 24.0 %
TOTAL
775,656 753,695 2.9 % 15.3
% 2,121,471 2,287,754 -7.3 %
13.8 % Operating Income
(loss) Brazil 27,602 12,739 116.7 % 102.3 % 71,962
58,522 23.0 % 42.1 % Caribbean (2,594 ) (5,376 ) -51.7 % -253.1 %
(16,959 ) (29,980 ) 43.4 % 137.9 % NOLAD 5,441 2,122 156.4 % 153.5
% 55,800 1,535 3535.2 % 4008.9 % SLAD 19,543 26,632 -26.6 % 11.5 %
44,496 61,445 -27.6 % 11.4 % Corporate and Other (11,435 ) (15,279
) -25.2 % 8.1 % (30,816 ) (51,393 ) 40.0 % 11.4 %
TOTAL
38,557 20,838 85.0 % 152.2
% 124,483 40,129 210.2 %
349.9 % Adjusted
EBITDA Brazil 39,172 26,177 49.6 % 39.5 % 104,967
100,602 4.3 % 19.9 % Caribbean 6,150 2,649 132.2 % 405.3 % 10,067
(484 ) 2180.0 % 5808.7 % NOLAD 10,518 8,963 17.3 % 21.4 % 25,983
21,442 21.2 % 22.7 % SLAD 22,796 30,983 -26.4 % 8.4 % 54,880 75,012
-26.8 % 8.7 % Corporate and Other (15,478 ) (17,826 ) -13.2 % 12.3
% (43,728 ) (62,719 ) 30.3 % 9.6 %
TOTAL 63,158
50,946 24.0 % 45.9
% 152,169 133,853 13.7
% 49.0 % Figure 12. Average Exchange
Rate per Quarter* Brazil
Mexico Argentina
Venezuela 3Q16 3.25 18.76 14.95
646.01 3Q15 3.54 16.44
9.25 199.11 * Local $ per 1 US$
Summarized Consolidated Balance Sheets
(In thousands of U.S. dollars)
Figure 13. Summarized Consolidated Balance Sheets
(In thousands of U.S. dollars)
September 30 December 31
2016 2015 ASSETS
Current assets Cash and cash equivalents 112,207 112,519
Accounts and notes receivable, net 66,643 63,348 Other current
assets (1) 205,300 203,129
Total current assets 384,150
378,996 Non-current assets Property and
equipment, net 848,637 833,357 Net intangible assets and goodwill
47,064 49,486 Deferred income taxes 75,164 63,321 Other non-current
assets (2) 86,267 78,042
Total non-current assets 1,057,132
1,024,206 Total assets
1,441,282 1,403,202
LIABILITIES AND EQUITY
Current liabilities Accounts
payable 185,457 187,685 Taxes payable (3) 103,487 97,587 Accrued
payroll and other liabilities 131,486 93,112 Other current
liabilities (4) 12,805 30,824 Provision for contingencies 469 512
Financial debt (5) 21,188 165,866 Deferred income taxes
1,890 1,728
Total current
liabilities 456,782
577,314 Non-current liabilities Accrued
payroll and other liabilities 23,439 19,381 Provision for
contingencies 24,553 20,066 Financial debt (6) 591,358 491,327
Deferred income taxes 7,249 8,224
Total non-current liabilities
646,599 538,998 Total
liabilities 1,103,381
1,116,312 Equity Class A shares of common
stock 373,967 371,857 Class B shares of common stock 132,915
132,915 Additional paid-in capital 13,000 12,606 Retained earnings
250,817 193,158 Accumulated other comprehensive losses
(433,364 ) (424,263 )
Total Arcos Dorados Holdings
Inc shareholders’ equity 337,335
286,273 Non-controlling interest in
subsidiaries 566 617
Total
equity 337,901
286,890 Total liabilities and equity
1,441,282 1,403,202 (1)
Includes "Other receivables", "Inventories", "Prepaid expenses and
other current assets", and "Deferred income taxes". (2) Includes
"Miscellaneous", "Collateral deposits", "Derivative instruments"
and "McDonald´s Corporation indemnification for contingencies". (3)
Includes "Income taxes payable" and "Other taxes payable". (4)
Includes "Royalties payable to McDonald´s Corporation" and
"Interest payable". (5) Includes "Short-term debt", "Current
portion of long-term debt" and "Derivative instruments". (6)
Includes "Long-term debt, excluding current portion" and
"Derivative instruments".
1 For a definition of constant currency results please refer to
page 14 of this document.
2 As from January 1, 2016, the Company made changes in the
allocation of certain expenses previously included in the corporate
segment to the operating divisions in order to align the financial
statement presentation with the revised allocation used by the
Company’s management as from that date. In accordance with ASC 280,
Segment Reporting, the Company has restated its comparative segment
information based on the new allocation of expenses.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161102005475/en/
Investor RelationsArcos DoradosDaniel Schleiniger, +54 11
4711 2675Sr. Director of Corporate Communications & Investor
Relationsdaniel.schleiniger@ar.mcd.comorMediaMBS Value
PartnersKatja Buhrer, +1 917 969
3438katja.buhrer@mbsvalue.comwww.arcosdorados.com/ir
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