Indicate by check mark whether the registrant
files or will file annual reports under cover of Form 20-F or Form 40-F:
Indicate by check mark if the registrant
is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Indicate by check mark if the registrant
is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
SIGNATURE
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.
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Arcos Dorados Holdings Inc.
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By:
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/s/ Juan David Bastidas
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Name:
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Juan David Bastidas
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Title:
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Chief Legal Counsel
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Date: August 8,
2018
Item 1
FOR IMMEDIATE RELEASE
ARCOS DORADOS REPORTS SECOND QUARTER 2018
FINANCIAL RESULTS
Comparable sales growth of 5.9% coupled
with a 7.0% rise in consolidated revenues on a constant currency basis
1
Net income increased to $10.7 million from
$1.1 million in prior year
1
Achieved a 7
th
consecutive quarter of traffic growth
Montevideo, Uruguay, August 8, 2018 – Arcos Dorados Holdings,
Inc. (NYSE: ARCO) (“Arcos Dorados” or the “Company”), Latin America’s largest restaurant chain and
the world’s largest independent McDonald’s franchisee, today reported unaudited results for the second quarter ended
June 30, 2018.
Second Quarter 2018 Key Results –
Excluding Venezuela
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•
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On
a constant currency basis
2
, consolidated revenues grew 7.0%. As reported consolidated
revenues decreased 5.7% to $734.5 million versus the second quarter of 2017.
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•
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Systemwide comparable sales
2
rose 5.9% year-over-year.
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•
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As reported, Adjusted EBITDA
2
decreased 17.1% to $48.8 million compared with the prior-year
quarter.
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•
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Consolidated Adjusted EBITDA margin contracted 100 basis points year-over-year to 6.6%.
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•
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As reported, General and Administrative (G&A) expenses decreased by 1.7% versus the prior
year quarter.
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•
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As reported, net income increased to $10.7 million, from $1.1 million in the second quarter of
2017.
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“Value-driven pricing, a compelling product mix,
and the best restaurant experience in the QSR industry continued to draw more customers to our stores for the seventh consecutive
quarter. While a prolonged truck drivers’ strike impacted our ability to fully leverage our scale, the Company’s performance
in the second quarter underscores the strength of our business, enabling us to deliver steady results even in the face of short-term
spikes in volatility.
1
Excluding Venezuela
2
For definitions
please refer to page 13 of this document.
Despite the difficult economic climate in some of our key markets,
our strategy to drive top-line growth delivered a 7.0% increase in consolidated revenues on a constant currency basis, and we continue
to believe that we will expand our Adjusted EBITDA margin by 100 to 200 basis points over the next two to three years.
We remain focused on bringing more guests to our restaurants
more often and, looking forward, our strong restaurant portfolio, popular menu items and outstanding team continue to be our strategic
pillars to drive long term shareholder value," said Sergio Alonso, Chief Executive Officer of Arcos Dorados.
Second Quarter 2018 Results
Consolidated
Figure
1. AD Holdings Inc Consolidated: Key Financial Results
(In millions of U.S. dollars, except as noted)
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2Q17
(a)
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Currency
Translation - Excl. Venezuela
(b)
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Constant
Currency
Growth - Excl. Venezuela
(c)
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Venezuela
(d)
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2Q18
(a+b+c+d)
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%
As Reported
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%
Constant Currency
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Total
Restaurants (Units)
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2,160
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2,191
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1.4%
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Sales by
Company-operated Restaurants
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762.2
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(94.3)
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51.3
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(0.8)
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718.5
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-5.7%
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259.3%
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Revenues
from franchised restaurants
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36.5
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(4.7)
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3.4
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0.3
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35.5
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-2.6%
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705.7%
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Total
Revenues
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798.7
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(99.0)
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54.7
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(0.5)
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754.0
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-5.6%
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279.7%
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Systemwide
Comparable Sales
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|
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363.1%
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Adjusted
EBITDA
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56.6
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(4.6)
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(5.5)
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(1.1)
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45.4
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-19.8%
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2857.4%
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Adjusted
EBITDA Margin
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7.1%
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6.0%
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Net
income (loss) attributable to AD
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(4.1)
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(0.4)
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10.1
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(4.5)
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1.1
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125.9%
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37454.5%
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No. of
shares outstanding (thousands)
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210,881
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210,580
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EPS
(US$/Share)
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(0.02)
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0.01
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(2Q18 = 2Q17 + Currency
Translation Excl. Venezuela + Constant Currency Growth Excl. Venezuela + Venezuela). Refer to “Definitions” section
for further detail.
Arcos Dorados’ consolidated results continue to be
heavily impacted by Venezuela’s macroeconomic volatility, including the ongoing hyperinflationary environment and the
country’s heavily regulated currency. As such, reported results for the quarter reflect significant non-cash
accounting impacts from operations in that market. Thus, the discussion of the Company’s operating performance is
focused on consolidated results, excluding Venezuela.
Consolidated – excluding Venezuela
Figure
2. AD Holdings Inc Consolidated - Excluding Venezuela: Key Financial Results
(In millions of U.S. dollars, except as noted)
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2Q17
(a)
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Currency
Translation
(b)
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Constant
Currency
Growth
(c)
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2Q18
(a+b+c)
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%
As Reported
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%
Constant Currency
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Total Restaurants (Units)
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2,030
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2,061
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1.5%
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Sales by Company-operated Restaurants
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744.3
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(94.3)
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51.3
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701.3
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-5.8%
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6.9%
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Revenues from franchised restaurants
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34.5
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(4.7)
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3.4
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33.2
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-3.8%
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9.7%
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Total Revenues
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778.8
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(99.0)
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54.7
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734.5
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-5.7%
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7.0%
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Systemwide Comparable Sales
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5.9%
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Adjusted EBITDA
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58.9
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(4.6)
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(5.5)
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48.8
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-17.1%
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-9.3%
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Adjusted EBITDA Margin
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7.6%
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6.6%
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Net income (loss) attributable
to AD
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1.1
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(0.4)
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10.1
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10.7
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905.1%
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944.3%
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No. of shares outstanding (thousands)
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210,881
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210,580
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EPS
(US$/Share)
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0.01
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0.05
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Excluding the Company’s Venezuelan operation, as reported
revenues decreased 5.7% year-over-year, primarily due to the negative impact of the 50% and 12% year-over-year average depreciations
of the Argentine peso and the Brazilian real, respectively. This was partially offset by constant currency revenue growth of 7.0%.
Constant currency revenue growth was supported by a 5.9% increase in systemwide comparable sales, largely driven by average check
growth combined with positive traffic.
Adjusted EBITDA
($ million)
Breakdown
of main variations contributing to 2Q18 Adjusted EBITDA
Second quarter consolidated as reported Adjusted EBITDA, excluding
Venezuela, decreased 17.1% or 9.3% in constant currency terms. The Adjusted EBITDA margin contracted by 100 basis points to 6.6%,
mainly driven by the step up in Royalty Fees as well as higher G&A and Occupancy and Other Operating Expenses as a percentage
of revenues. These were partially offset by efficiencies in Payroll and Food and Paper (F&P). Refranchising activity was also
higher during the same quarter of last year. Excluding the Royalty Fee and refranchising comparisons, the Adjusted EBITDA margin
would have been nearly flat, year-over-year.
As reported, consolidated G&A decreased by 1.7% year-over-year
and increased by 30 basis points as a percentage of revenues largely due to the timing of certain IT project expenses.
Main variations in other operating income (expenses), net
Included in Adjusted EBITDA
: In the second quarter of
2018, the Company recorded an inventory write down of $14.7 million in Venezuela, compared to an inventory write down of $3.5 million
in the second quarter of 2017. Proceeds from refranchising were less than $0.2 million in the second quarter of 2018, compared
to $3.1 million in the prior year comparable quarter.
Excluded from Adjusted EBITDA
: In the second quarter
of 2018, the Company did not record proceeds from its re-development initiative, compared with $4.2 million recorded in the
second quarter of 2017.
Non-operating Results
Non-operating results for the second quarter reflected a
$3.0 million non-cash foreign currency exchange loss, versus a non-cash loss of $15.6 million in 2017. Net interest expense
was $10.6 million lower year-over-year, largely explained by the incurrence, in the second quarter of last year, of certain
transaction costs in connection with the debt restructuring completed in April of 2017.
The Company reported an income tax expense of $2.2 million in
the quarter, compared to an income tax benefit of $6.0 million in the prior year period.
Second quarter net income attributable to the Company
totaled $10.7 million ($1.1 million, including Venezuela), compared to net income of $1.1 million (net loss of $4.1 million,
including Venezuela) in the same period of 2017. Last year’s higher operating income, which included $4.2 million from
the Company’s re-development initiative compared with no re-development proceeds in 2018, combined with a negative variance
in income tax expenses, was more than offset by positive variances in net interest expenses, derivative instruments and
foreign exchange results.
The Company reported earnings per share of $0.05 ($0.01, including
Venezuela) in the second quarter of 2018, compared to earnings per share of $0.01 (loss per share of $0.02, including Venezuela)
in the previous corresponding period. Total weighted average shares for the second quarter of 2018 were 210,579,612, as compared
to 210,881,194 in the prior year quarter.
Analysis by Division
:
Brazil Division
Figure
3. Brazil Division: Key Financial Results
(In millions of U.S. dollars, except as noted)
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2Q17
(a)
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Currency
Translation
(b)
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Constant
Currency
Growth
(c)
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2Q18
(a+b+c)
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%
As Reported
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%
Constant Currency
|
Total Restaurants (Units)
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910
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933
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2.5%
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Total Revenues
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354.9
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(38.1)
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0.1
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317.0
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-10.7%
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0.0%
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Systemwide Comparable Sales
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-1.0%
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Adjusted EBITDA
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45.9
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(4.1)
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(7.3)
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34.5
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-24.8%
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-15.9%
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Adjusted
EBITDA Margin
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12.9%
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10.9%
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Brazil’s as reported revenues decreased by 10.7%,
impacted by the 12% year-over-year average depreciation of the Brazilian real, the truck drivers’ strike and, to a
lesser extent, the FIFA World Cup. Excluding currency translation, constant currency revenues remained flat while systemwide
comparable sales declined 1.0%.
Marketing activities in the quarter included the launch of
the FIFA World Cup-related “Sanduíches Campeões” campaign and the Player Escort program. Also
during the quarter, the Company launched the McFlurry and McShake “Ouro Branco” along with the “Triplo
Chocolate Kopenhagen” in the Dessert category. The “Justice League Action”
and “Jurassic World" Happy Meal also performed well.
As reported Adjusted EBITDA decreased 24.8%
year-over-year and 15.9% on a constant currency basis. The Adjusted EBITDA margin contracted 200 basis points to 10.9%, with
efficiencies in F&P costs offset by increases in most other expense line items as a percentage of sales. The second
quarter of 2017 included $2.9 million from refranchising, compared with $0.2 million for the same period in 2018. Excluding
refranchising activity from both years, the Adjusted EBITDA margin would have declined 130 basis points.
NOLAD
Figure
4. NOLAD Division: Key Financial Results
(In millions of U.S. dollars, except as noted)
|
|
2Q17
(a)
|
Currency
Translation
(b)
|
Constant
Currency
Growth
(c)
|
2Q18
(a+b+c)
|
%
As Reported
|
%
Constant Currency
|
Total Restaurants (Units)
|
515
|
|
|
522
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1.4%
|
|
|
|
|
|
|
|
|
Total Revenues
|
96.1
|
(1.8)
|
4.7
|
99.0
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3.0%
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4.9%
|
Systemwide Comparable Sales
|
|
|
|
|
|
5.3%
|
Adjusted EBITDA
|
8.4
|
0.0
|
(1.1)
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7.3
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-13.4%
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-13.6%
|
Adjusted
EBITDA Margin
|
8.7%
|
|
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7.3%
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NOLAD’s as reported revenues increased 3.0% year-over-year,
supported by constant currency growth of 4.9%, partially offset by a negative currency translation impact derived from a 5% year-over-year
average depreciation of the Mexican peso. Systemwide comparable sales increased 5.3%, driven by traffic growth. Despite the negative
effect of the Easter calendar shift, Mexico guest traffic continues to perform strongly, having recorded the fifth consecutive
quarter with positive comparable traffic growth. The Company’s innovative marketing and digital initiatives as well as its
focus on delivering an enhanced guest experience, continue to drive the improved performance.
Marketing activities in the quarter included a new phase of the
affordability platform “McTrío 3x3” in Mexico and the introduction of the “Cheesy Italiana” burger
in Costa Rica, among others. The dessert category performed well, with a new phase of the McFlurry Crunch Rocks and the McFlurry
Oreo. Also in the quarter, the Company included “Justice League Action” and “The Amazing World of Gumball”
in the Happy Meal.
As reported Adjusted EBITDA decreased by 13.4%, or by 13.6% on
a constant currency basis. The Adjusted EBITDA margin contraction of 140 basis points to 7.3% in the second quarter mainly reflects
the increase in Royalty Fees, which caused a 90 basis point margin reduction in the quarter. Additionally, efficiencies in F&P
costs were offset by an increase in other expense line items as a percentage of revenues.
SLAD
Figure
5. SLAD Division: Key Financial Results
(In millions of U.S. dollars, except as noted)
|
|
2Q17
(a)
|
Currency
Translation
(b)
|
Constant
Currency
Growth
(c)
|
2Q18
(a+b+c)
|
%
As Reported
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%
Constant Currency
|
Total Restaurants (Units)
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386
|
|
|
390
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1.0%
|
|
|
|
|
|
|
|
|
Total Revenues
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232.3
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(61.5)
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45.6
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216.4
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-6.9%
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19.6%
|
Systemwide Comparable Sales
|
|
|
|
|
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20.0%
|
Adjusted EBITDA
|
17.9
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(5.0)
|
3.9
|
16.8
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-6.1%
|
21.6%
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Adjusted
EBITDA Margin
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7.7%
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|
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7.8%
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SLAD’s as reported revenues decreased 6.9% as constant
currency growth of 19.6% was more than offset by negative currency translation impacts resulting from the 50% year-over-year average
depreciation of the Argentine peso. Systemwide comparable sales increased 20.0%, in line with blended inflation, driven by the
combination of average check growth and an increase in traffic.
Marketing activities in the quarter included the introduction
of the Blue Cheese & Bacon premium burger in the Signature Line, among others. Also in the quarter, the Company launched the
FIFA World Cup-related campaign “La Hinchada Pide Cuarto”, built on the iconic Quarter Pounder burger. The dessert
category performed well with the introduction of the McFlurry Milka Almendras and McFlurry Milka Triolade. The Happy Meal featured
“Justice League Action” and “The Amazing World of Gumball” during the quarter.
Adjusted EBITDA decreased 6.1% on an as reported basis and rose
21.6% in constant currency terms, which was above the division’s blended inflation. The Adjusted EBITDA margin expanded 10
basis points to 7.8%, as efficiencies in Payroll and Occupancy and Other Operating Expenses were partially offset by higher Royalty
Fees and F&P costs as a percentage of revenues.
Caribbean Division
Figure
6. Caribbean Division: Key Financial Results
(In millions of U.S. dollars, except as noted)
|
|
2Q17
(a)
|
Currency
Translation
(b)
|
Constant
Currency
Growth
(c)
|
2Q18
(a+b+c)
|
%
As Reported
|
%
Constant Currency
|
Total Restaurants (Units)
|
349
|
|
|
346
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-0.9%
|
|
|
|
|
|
|
|
|
Total Revenues
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115.3
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(2,177.0)
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2,183.2
|
121.6
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5.4%
|
1893.6%
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Systemwide Comparable Sales
|
|
|
|
|
|
2735.5%
|
Adjusted EBITDA
|
2.1
|
(1,623.6)
|
1,625.0
|
3.5
|
67.1%
|
76651.1%
|
Adjusted
EBITDA Margin
|
1.8%
|
|
|
2.9%
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|
|
The Caribbean division’s results continue to be heavily
impacted by Venezuela’s macroeconomic volatility, including the ongoing hyperinflationary environment and the country’s
heavily regulated currency. As such, reported results in the quarter reflect significant non-cash accounting impacts from operations
in that market. Thus, the discussion of the Caribbean division’s operating performance is focused on results, excluding Venezuela.
Caribbean Division – excluding Venezuela
Figure
7. Caribbean Division - Excluding Venezuela: Key Financial Results
(In millions of U.S. dollars, except as noted)
|
|
2Q17
(a)
|
Currency
Translation
(b)
|
Constant
Currency
Growth
(c)
|
2Q18
(a+b+c)
|
%
As Reported
|
%
Constant Currency
|
Total Restaurants (Units)
|
219
|
|
|
216
|
-1.4%
|
|
|
|
|
|
|
|
|
Total Revenues
|
95.4
|
2.5
|
4.2
|
102.1
|
7.1%
|
4.4%
|
Systemwide Comparable Sales
|
|
|
|
|
|
5.1%
|
Adjusted EBITDA
|
4.4
|
0.3
|
2.3
|
7.0
|
56.8%
|
51.1%
|
Adjusted
EBITDA Margin
|
4.7%
|
|
|
6.8%
|
|
|
As reported revenues in the Caribbean division, excluding Venezuela,
increased 7.1%, driven by constant currency growth of 4.4% and a positive currency translation impact. Comparable sales increased
by 5.1%, well above blended inflation, driven by average check growth. Marketing activities in the quarter included the launch
of the Buttermilk Crispy Tenders and the Bistró burger in the premium category, among others. Also in the quarter, the Company
introduced the Malteada and McFlurry MiniChips in the dessert category, and included “Justice League Action” in the
Happy Meal.
Adjusted EBITDA totaled $7.0 million, compared to $4.4 million
in the same period of 2017. The Adjusted EBITDA margin expanded 210 basis points to 6.8%, reflecting efficiencies in all cost line
items, except Royalty Fees. In addition, this quarter’s results included an insurance recovery from the damages caused by
last year’s hurricanes in Puerto Rico and the US Virgin Islands.
New Unit Development
Figure
8. Total Restaurants (eop)*
|
|
|
|
|
|
|
June
2018
|
March
2018
|
December
2017
|
September
2017
|
June
2017
|
Brazil
|
933
|
929
|
929
|
910
|
910
|
NOLAD
|
522
|
522
|
519
|
514
|
515
|
SLAD
|
390
|
391
|
390
|
386
|
386
|
Caribbean
|
346
|
348
|
350
|
350
|
349
|
TOTAL
|
2,191
|
2,190
|
2,188
|
2,160
|
2,160
|
* Considers Company-operated and franchised restaurants
at period-end
|
|
|
|
The Company opened 46 new restaurants during the twelve-month
period ended June 30, 2018, resulting in a total of 2,191 restaurants. Also during the period, the Company added 247 Dessert Centers,
bringing the total to 2,973. McCafés totaled 316 as of June 30, 2018.
Balance Sheet & Cash Flow Highlights
Cash and cash equivalents, including short-term investments,
were $218.9 million at June 30, 2018. The Company’s total financial debt (including derivative instruments) was $583.7 million.
Net debt (Total Financial Debt
minus
Cash and cash equivalents) was $364.8 million and the Net Debt/Adjusted EBITDA ratio
was 1.4x at June 30, 2018.
Figure
9. Consolidated Financial Ratios
(In thousands of U.S. dollars, except ratios)
|
|
|
|
June 30
|
December 31
|
|
2018
|
2017
|
Cash & cash equivalents (i)
|
218,937
|
328,079
|
Total Financial Debt (ii)
|
583,728
|
621,460
|
Net Financial Debt (iii)
|
364,791
|
293,381
|
Total Financial Debt / LTM Adjusted EBITDA ratio
|
2.2
|
2.0
|
Net Financial Debt / LTM Adjusted EBITDA ratio
|
1.4
|
1.0
|
(i) Cash & cash equivalents includes
Short-term investment
|
(ii)Total financial debt includes
long-term debt and derivative instruments (including the asset portion of derivatives amounting to $57.3 million and $35.1
million as a reduction of financial debt as of June 30, 2018 and December 31, 2017, respectively).
|
(iii) Total financial debt less cash and cash equivalents.
|
|
|
Net cash provided by operating activities totaled $57.5 million
for the quarter, and cash used in net investing activities totaled $29.3 million, which included capital expenditures of $39.4
million. Cash used in financing activities amounted to $32.6 million including $20.0 million of treasury stock purchases and $10.6
million of dividend payments.
First Half 2018
Excluding the Venezuelan operation and for the six months ended
June 30, 2018, the Company’s as reported revenues decreased by 0.2% to $1,537.3 million, as constant currency growth of 8.8%
was offset by negative currency translation. As reported Adjusted EBITDA was $116.8 million, a 2.1% decrease compared to the first
half of 2017. On a constant currency basis, Adjusted EBITDA increased by 3.4%. The reported Adjusted EBITDA margin contracted by
20 basis points to 7.6%, as efficiencies in F&P and Payroll mostly offset the increase in Royalty Fees.
Year-to-date consolidated net income amounted to $24.3 million,
compared with net income of $42.1 million in the first half of 2017. The prior year result included $56.1 million from the Company’s
re-development initiative compared with $0.2 million this year. The result also reflects lower net interest expenses, lower losses
from derivative instruments, lower income tax and a positive variance in foreign currency exchange results in the first half of
2018.
During the first half of 2018, capital expenditures totaled $63.1
million.
Quarter Highlights & Recent Developments
Share Repurchase Program
On May 22, 2018, the Board of Directors approved the adoption
of a share repurchase program, pursuant to which the Company may repurchase from time to time up to $60 million of issued and outstanding
Class A shares of no par value of the Company. The repurchase program began on May 22, 2018 and will expire at the close of business
on May 22, 2019. As of June 30, 2018, the Company purchased 2,656,552 shares with a total cost of $20 million.
Argentina accounting developments – highly inflationary
status
Effective July 1, 2018, Argentina is considered to be highly
inflationary. Under U.S. GAAP, an economy is considered to be highly inflationary when the three-year cumulative rate of inflation
meets or exceeds 100%. Under the highly inflationary basis of accounting, the financial statements of the Company’s Argentine
subsidiaries will be remeasured in accordance with ASC 830 "Foreign Currency Matters".
Dividends
On April 5, 2018, the Company paid the first of the two equal
installments of $0.05 per share to all Class A and Class B shareholders of record as of April 2, 2018. The second installment will
be paid on October 5, 2018 to shareholders of record as of October 2, 2018.
Investor Relations Contact
|
Media Contact
|
Daniel Schleiniger
|
InspIR Group
|
Vice President of Corporate Communications & Investor Relations
|
Barbara Cano
|
Arcos Dorados
|
barbara@inspirgroup.com
|
daniel.schleiniger@ar.mcd.com
|
+1 646 452 2334
|
+54 11 4711 2675
|
|
www.arcosdorados.com/ir
|
|
|
|
|
|
|
|
|
|
|
|
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.
Excluding Venezuela basis:
due to the ongoing political and macroeconomic uncertainty prevailing in Venezuela, and in order to provide greater clarity and
visibility on the Company’s financial and operating overall performance, this release focuses on the results on an “Excluding-Venezuela”
basis, which is non-GAAP measure.
Adjusted EBITDA
:
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 non-GAAP 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 income (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 and goodwill; and incremental compensation
related to the modification of our 2008 long-term incentive plan.
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. Figure 10 of this earnings release include a reconciliation for Adjusted EBITDA. 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.
About Arcos Dorados
Arcos Dorados is the world’s largest
independent 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 2,190 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
2018. 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.
Second Quarter 2018 Consolidated Results
(In thousands of U.S. dollars, except per share data)
Figure
10. Second Quarter & First Half 2018 Consolidated Results
(In thousands of U.S. dollars, except per
share data)
|
|
|
|
|
For
Three-Months ended
|
|
For
Six-Months ended
|
|
June
30,
|
|
June
30,
|
|
2018
|
2017
|
|
2018
|
2017
|
REVENUES
|
|
|
|
|
|
Sales by Company-operated restaurants
|
718,454
|
762,221
|
|
1,525,515
|
1,507,630
|
Revenues from franchised restaurants
|
35,516
|
36,477
|
|
78,342
|
72,548
|
Total
Revenues
|
753,970
|
798,698
|
|
1,603,857
|
1,580,178
|
OPERATING COSTS AND EXPENSES
|
|
|
|
|
|
Company-operated restaurant expenses:
|
|
|
|
|
|
Food and paper
|
(249,569)
|
(272,741)
|
|
(534,836)
|
(536,205)
|
Payroll and employee benefits
|
(156,150)
|
(168,617)
|
|
(329,264)
|
(334,893)
|
Occupancy and other operating expenses
|
(199,923)
|
(206,944)
|
|
(416,545)
|
(409,747)
|
Royalty fees
|
(38,603)
|
(38,845)
|
|
(80,774)
|
(77,357)
|
Franchised restaurants - occupancy expenses
|
(15,787)
|
(16,540)
|
|
(34,942)
|
(32,651)
|
General and administrative expenses
|
(59,268)
|
(60,844)
|
|
(116,918)
|
(115,747)
|
Other operating (expenses) income, net
|
(15,537)
|
1,417
|
|
(59,374)
|
51,336
|
Total
operating costs and expenses
|
(734,837)
|
(763,114)
|
|
(1,572,653)
|
(1,455,264)
|
Operating
income
|
19,133
|
35,584
|
|
31,204
|
124,914
|
Net interest expense
|
(12,457)
|
(23,043)
|
|
(27,097)
|
(39,458)
|
Loss from derivative instruments
|
(233)
|
(6,589)
|
|
(331)
|
(7,231)
|
Foreign currency exchange results
|
(3,049)
|
(15,552)
|
|
5,128
|
(24,111)
|
Other non-operating expenses, net
|
(78)
|
(430)
|
|
(62)
|
(1,125)
|
Income
(expense) before income taxes
|
3,316
|
(10,030)
|
|
8,842
|
52,989
|
Income tax (expense) benefit
|
(2,210)
|
5,987
|
|
(7,173)
|
(16,351)
|
Net
income (loss)
|
1,106
|
(4,043)
|
|
1,669
|
36,638
|
(Less): Net income attributable to non-controlling interests
|
(40)
|
(71)
|
|
(85)
|
(148)
|
Net
income (loss) attributable to Arcos Dorados Holdings Inc.
|
1,066
|
(4,114)
|
|
1,584
|
36,490
|
Earnings per share information ($ per share):
|
|
|
|
|
|
Basic net income per common share
|
$ 0.01
|
$ (0.02)
|
|
$ 0.01
|
$ 0.17
|
Weighted-average number of common shares outstanding-Basic
|
210,579,612
|
210,881,194
|
|
210,824,698
|
210,796,678
|
Adjusted
EBITDA Reconciliation
|
|
|
|
|
|
Operating income
|
19,133
|
35,584
|
|
31,204
|
124,914
|
Depreciation and amortization
|
25,573
|
24,440
|
|
52,090
|
47,892
|
Operating charges excluded from EBITDA computation
|
698
|
(3,426)
|
|
716
|
(53,524)
|
Adjusted
EBITDA
|
45,404
|
56,598
|
|
84,010
|
119,282
|
Adjusted EBITDA Margin as %
of total revenues
|
6.0%
|
7.1%
|
|
5.2%
|
7.5%
|
Second Quarter 2018 Consolidated Results – Excluding
Venezuela
(In thousands of U.S. dollars, except per share data)
Figure
11. Second Quarter & First Half 2018 Consolidated Results - Excluding Venezuela
(In thousands of U.S. dollars, except per
share data)
|
|
|
|
|
For
Three-Months ended
|
|
For
Six-Months ended
|
|
June
30,
|
|
June
30,
|
|
2018
|
2017
|
|
2018
|
2017
|
REVENUES
|
|
|
|
|
|
Sales by Company-operated restaurants
|
701,294
|
744,252
|
|
1,466,250
|
1,471,271
|
Revenues from franchised restaurants
|
33,240
|
34,546
|
|
71,039
|
68,467
|
Total
Revenues
|
734,534
|
778,798
|
|
1,537,289
|
1,539,738
|
OPERATING COSTS AND EXPENSES
|
|
|
|
|
|
Company-operated restaurant expenses:
|
|
|
|
|
|
Food and paper
|
(246,306)
|
(262,098)
|
|
(510,416)
|
(517,961)
|
Payroll and employee benefits
|
(155,693)
|
(166,628)
|
|
(325,337)
|
(330,240)
|
Occupancy and other operating expenses
|
(195,070)
|
(201,693)
|
|
(402,330)
|
(399,109)
|
Royalty fees
|
(39,082)
|
(38,405)
|
|
(82,190)
|
(76,003)
|
Franchised restaurants - occupancy expenses
|
(15,150)
|
(15,804)
|
|
(32,929)
|
(31,284)
|
General and administrative expenses
|
(57,918)
|
(58,933)
|
|
(113,492)
|
(111,786)
|
Other operating (expenses) income, net
|
(555)
|
4,389
|
|
(2,780)
|
54,881
|
Total
operating costs and expenses
|
(709,774)
|
(739,172)
|
|
(1,469,474)
|
(1,411,502)
|
Operating
income
|
24,760
|
39,626
|
|
67,815
|
128,236
|
Net interest expense
|
(12,426)
|
(23,048)
|
|
(27,066)
|
(39,485)
|
Loss from derivative instruments
|
(233)
|
(6,589)
|
|
(331)
|
(7,231)
|
Foreign currency exchange results
|
755
|
(12,679)
|
|
(1,070)
|
(21,042)
|
Other non-operating expenses, net
|
(78)
|
(439)
|
|
(64)
|
(1,125)
|
Income
(expense) before income taxes
|
12,778
|
(3,129)
|
|
39,284
|
59,353
|
Income tax (expense) benefit
|
(2,034)
|
4,265
|
|
(14,930)
|
(17,134)
|
Net
income
|
10,744
|
1,136
|
|
24,354
|
42,219
|
(Less): Net income attributable to non-controlling interests
|
(40)
|
(71)
|
|
(85)
|
(148)
|
Net
income attributable to Arcos Dorados Holdings Inc.
|
10,704
|
1,065
|
|
24,269
|
42,071
|
Earnings per share information ($ per share):
|
|
|
|
|
|
Basic net income per common share
|
$ 0.05
|
$ 0.01
|
|
$ 0.12
|
$ 0.20
|
Weighted-average number of common shares outstanding-Basic
|
210,579,612
|
210,881,194
|
|
210,824,698
|
210,796,678
|
Adjusted
EBITDA Reconciliation
|
|
|
|
|
|
Operating income
|
24,760
|
39,626
|
|
67,815
|
128,236
|
Depreciation and amortization
|
24,367
|
22,722
|
|
49,323
|
44,642
|
Operating charges excluded from EBITDA computation
|
(301)
|
(3,428)
|
|
(291)
|
(53,519)
|
Adjusted
EBITDA
|
48,826
|
58,920
|
|
116,847
|
119,359
|
Adjusted EBITDA Margin as %
of total revenues
|
6.6%
|
7.6%
|
|
7.6%
|
7.8%
|
Second Quarter 2018 Results by Division
(In thousands of U.S. dollars)
Figure
12. Second Quarter & First Half 2018 Consolidated Results by Division
(In thousands of U.S. dollars)
|
|
|
|
|
|
|
2Q
|
|
1H
|
|
Three-Months
ended
|
% Incr.
|
Constant
|
|
Six-Months
ended
|
% Incr.
|
Constant
|
|
June
30,
|
/
|
Currency
|
|
June
30,
|
/
|
Currency
|
|
2018
|
2017
|
(Decr)
|
Incr/(Decr)%
|
|
2018
|
2017
|
(Decr)
|
Incr/(Decr)%
|
Revenues
|
|
|
|
|
|
|
|
|
|
Brazil
|
316,973
|
354,939
|
-10.7%
|
0.0%
|
|
681,656
|
714,934
|
-4.7%
|
2.3%
|
Caribbean
|
121,568
|
115,297
|
5.4%
|
1893.6%
|
|
268,442
|
222,515
|
20.6%
|
1292.7%
|
Caribbean - Excl. Venezuela
|
102,132
|
95,397
|
7.1%
|
4.4%
|
|
201,874
|
182,075
|
10.9%
|
7.5%
|
NOLAD
|
99,009
|
96,126
|
3.0%
|
4.9%
|
|
196,160
|
180,468
|
8.7%
|
8.2%
|
SLAD
|
216,420
|
232,336
|
-6.9%
|
19.6%
|
|
457,599
|
462,261
|
-1.0%
|
19.7%
|
TOTAL
|
753,970
|
798,698
|
-5.6%
|
279.7%
|
|
1,603,857
|
1,580,178
|
1.5%
|
189.8%
|
TOTAL - Excl. Venezuela
|
734,534
|
778,798
|
-5.7%
|
7.0%
|
|
1,537,289
|
1,539,738
|
-0.2%
|
8.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (loss)
|
|
|
|
|
|
|
|
|
|
Brazil
|
21,926
|
32,652
|
-32.8%
|
-25.0%
|
|
56,987
|
63,959
|
-10.9%
|
-5.3%
|
Caribbean
|
(3,124)
|
(4,039)
|
22.7%
|
40240.6%
|
|
(34,891)
|
(4,305)
|
-710.5%
|
46802.2%
|
Caribbean - Excl. Venezuela
|
2,503
|
3
|
83333.3%
|
78300.0%
|
|
1,720
|
(983)
|
275.0%
|
234.2%
|
NOLAD
|
2,004
|
7,052
|
-71.6%
|
-73.2%
|
|
3,954
|
58,208
|
-93.2%
|
-92.9%
|
SLAD
|
12,137
|
14,084
|
-13.8%
|
14.3%
|
|
30,007
|
30,942
|
-3.0%
|
18.2%
|
Corporate and Other
|
(13,810)
|
(14,165)
|
2.5%
|
-31.2%
|
|
(24,853)
|
(23,890)
|
-4.0%
|
-34.3%
|
TOTAL
|
19,133
|
35,584
|
-46.2%
|
4523.4%
|
|
31,204
|
124,914
|
-75.0%
|
1564.9%
|
TOTAL - Excl. Venezuela
|
24,760
|
39,626
|
-37.5%
|
-33.7%
|
|
67,815
|
128,236
|
-47.1%
|
-45.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
|
|
|
|
|
|
|
|
Brazil
|
34,502
|
45,892
|
-24.8%
|
-15.9%
|
|
83,229
|
90,654
|
-8.2%
|
-2.1%
|
Caribbean
|
3,542
|
2,120
|
67.1%
|
76651.1%
|
|
(22,109)
|
7,758
|
-385.0%
|
25958.1%
|
Caribbean - Excl. Venezuela
|
6,964
|
4,442
|
56.8%
|
51.1%
|
|
10,728
|
7,835
|
36.9%
|
28.6%
|
NOLAD
|
7,251
|
8,369
|
-13.4%
|
-13.6%
|
|
14,546
|
13,575
|
7.2%
|
7.7%
|
SLAD
|
16,799
|
17,881
|
-6.1%
|
21.6%
|
|
39,784
|
38,501
|
3.3%
|
24.0%
|
Corporate and Other
|
(16,690)
|
(17,664)
|
5.5%
|
-18.1%
|
|
(31,440)
|
(31,206)
|
-0.7%
|
-21.0%
|
TOTAL
|
45,404
|
56,598
|
-19.8%
|
2857.4%
|
|
84,010
|
119,282
|
-29.6%
|
1689.8%
|
TOTAL - Excl. Venezuela
|
48,826
|
58,920
|
-17.1%
|
-9.3%
|
|
116,847
|
119,359
|
-2.1%
|
3.4%
|
Figure
13. Average Exchange Rate per Quarter*
|
|
|
|
|
Brazil
|
Mexico
|
Argentina
|
2Q18
|
|
3.61
|
19.40
|
23.51
|
2Q17
|
|
3.21
|
18.55
|
15.72
|
* Local $ per 1 US$
|
|
|
|
|
Summarized Consolidated Balance Sheets
(In thousands of U.S. dollars)
Figure
14. Summarized Consolidated Balance Sheets
(In thousands of U.S. dollars)
|
|
|
June
30
|
December
31
|
|
|
2018
|
2017
|
ASSETS
|
|
Current assets
|
|
|
|
Cash and cash equivalents
|
208,932
|
308,491
|
Short-term investment
|
10,005
|
19,588
|
Accounts and notes receivable, net
|
73,637
|
111,302
|
Other current assets (1)
|
147,505
|
213,656
|
Total
current assets
|
440,079
|
653,037
|
Non-current assets
|
|
|
Property and equipment, net
|
813,389
|
890,736
|
Net intangible assets and goodwill
|
38,898
|
47,729
|
Deferred income taxes
|
70,765
|
74,299
|
Other non-current assets (2)
|
149,468
|
137,942
|
Total
non-current assets
|
1,072,520
|
1,150,706
|
Total
assets
|
|
1,512,599
|
1,803,743
|
LIABILITIES AND EQUITY
|
|
|
Current liabilities
|
|
|
Accounts payable
|
195,928
|
303,452
|
Taxes payable (3)
|
84,172
|
136,918
|
Accrued payroll and other liabilities
|
100,294
|
119,088
|
Other current liabilities (4)
|
21,771
|
23,715
|
Provision for contingencies
|
2,197
|
2,529
|
Financial debt (5)
|
14,453
|
19,881
|
Total
current liabilities
|
418,815
|
605,583
|
Non-current liabilities
|
|
|
Accrued payroll and other liabilities
|
33,074
|
29,366
|
Provision for contingencies
|
26,172
|
25,427
|
Financial debt (6)
|
626,597
|
636,648
|
Deferred income taxes
|
10,639
|
10,577
|
Total
non-current liabilities
|
696,482
|
702,018
|
Total
liabilities
|
1,115,297
|
1,307,601
|
Equity
|
|
|
|
Class A shares of common stock
|
379,693
|
376,732
|
Class B shares of common stock
|
132,915
|
132,915
|
Additional paid-in capital
|
13,165
|
14,216
|
Retained earnings
|
377,774
|
401,134
|
Accumulated other comprehensive losses
|
(486,644)
|
(429,347)
|
Common stock in treasury
|
(20,000)
|
0
|
Total
Arcos Dorados Holdings Inc shareholders’ equity
|
396,903
|
495,650
|
Non-controlling interest in subsidiaries
|
399
|
492
|
Total
equity
|
|
397,302
|
496,142
|
Total
liabilities and equity
|
1,512,599
|
1,803,743
|
(1) Includes "Other receivables", "Inventories", "Prepaid expenses and other current assets", and "McDonald's Corporation's indemnification for contingencies".
(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".