- Consolidated revenue growth of 15.8% on a constant currency
basis, with 14.2% comparable sales growth1
- Consolidated Adjusted EBITDA increased 25.1% on a constant
currency basis1
- Adjusted EBITDA margin expanded 120 basis points to 7.8%1,
underscored by increased leverage from efficiencies and
scale
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, 2019.
Second Quarter 2019 Highlights – Excluding Venezuela
- Consolidated revenues decreased 1.8% to $721.0 million, in US
dollars, versus the second quarter of 2018, primarily due to the
depreciation of both the Argentine and Brazilian currencies. On a
constant currency basis2, consolidated revenues grew 15.8%
- Systemwide comparable sales2 rose 14.2% year-over-year and was
above blended inflation
- Adjusted EBITDA2 in US dollars increased 15.9% to $56.6 million
compared with the prior-year quarter; on a constant currency basis,
Adjusted EBITDA grew 25.1%
- Consolidated Adjusted EBITDA margin expanded 120 basis points
year-over-year to 7.8%
- Continued leverage in Payroll and General and Administrative
(G&A) with margins increasing 140 and 80 basis points,
respectively, versus the year-ago quarter
- Net income in US dollars increased 2.5% to $11.0 million, from
$10.7 million in the second quarter of 2018
___________________________ 1 Excluding Venezuela 2 For definitions
please refer to page 13 of this document
“As our three-pillar strategy gained further traction, Arcos
Dorados’ sales momentum accelerated substantially in the second
quarter and drove operating leverage in combination with our
improved operating efficiencies. In Brazil, excluding the impact of
the trucker’s strike that took place in the second quarter of 2018,
comparable sales were still well above inflation, and outpaced
those of Brazil’s food service sector.
Our Cooltura de Servicio program, together with higher customer
satisfaction surveys scores, were among the key drivers for our
strong results in the quarter. Significant contributors to the
14.2% and 25.1% increases in comparable sales and constant currency
adjusted EBITDA, respectively, were also the continued success of
our marketing and promotional campaigns, strong menu offerings,
delivery, as well even greater sales lift coming from our
Experience of the Future (“EOTF”) restaurants. Digital service
features and our affordability platform, which also comprise our
unmatched omnichannel guest experience, continued to drive higher
revenues as well.”
Given the strong success of EOTF restaurants at further
differentiating our market-leading brand in Brazil, Argentina,
Uruguay and Chile, we are planning to introduce this format in six
additional countries before the end of this year, flexibly
deploying capital where we see the greatest growth opportunities
within Arcos Dorados’ dominant geographic footprint.
Arcos Dorados’ strong performance year to date has strengthened
our conviction on the effectiveness of our three-pillar strategy.
This is comprised of delivering an enhanced customer experience,
providing the most relevant and desirable menu offerings and
running the best restaurants, to drive sustained, above-inflation
growth and achieve higher margins with our streamlined cost
structure. We remain committed to the growth investments we have
been making and to being the most sustainable and socially
beneficial restaurant company in Latin America and the Caribbean,
another crucial way in which we differentiate our brand,” said
Marcelo Rabach, Chief Executive Officer of Arcos Dorados.
Second Quarter 2019
Results
Consolidated
Figure 1. AD Holdings Inc Consolidated: Key Financial Results(In
millions of U.S. dollars, except as noted) 2Q18(a)
CurrencyTranslation- Excl.Venezuela(b)
ConstantCurrencyGrowth -Excl.Venezuela(c)
Venezuela(d) 2Q19(a+b+c+d) % AsReported
Total Restaurants (Units)
2,191
2,229
Sales by Company-operated Restaurants
718.5
(125.3
)
110.0
(14.8
)
688.4
-4.2
%
Revenues from franchised restaurants
35.5
(4.6
)
6.3
(1.9
)
35.3
-0.5
%
Total Revenues
754.0
(129.9
)
116.3
(16.7
)
723.7
-4.0
%
Adjusted EBITDA
45.4
(4.5
)
12.3
2.6
55.8
22.9
%
Adjusted EBITDA Margin
6.0
%
7.7
%
Net income (loss) attributable to AD
1.1
0.6
(0.3
)
9.0
10.4
845.5
%
No. of shares outstanding (thousands)
210,580
203,841
EPS (US$/Share)
0.01
0.05
(2Q19 = 2Q18 + 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 may contain
significant non-cash accounting charges to operations in this
market. Accordingly, the discussion of the Company’s operating
performance is focused on consolidated results that exclude
Venezuela.
Main variations in other operating income (expenses),
net
Included in Adjusted EBITDA: In the
second quarter of 2018, Arcos Dorados had recorded an inventory
write-down charge of $14.7 million related to its operations in
Venezuela, compared to only $0.6 million this year.
Excluded from Adjusted EBITDA:
There were no material income or expenses.
Second quarter net income attributable to the Company totaled
$10.4 million, compared to net income of $1.1 million in the same
period of 2018. The variation was mostly due to higher operating
income, combined with a positive variance in foreign currency
exchange results, partially offset by higher income tax and
interest expenses.
Arcos Dorados reported earnings per share of $0.05 in the second
quarter of 2019, compared to earnings per share of $0.01 in the
previous corresponding period. Primarily as a result of share
repurchases of 7,993,602, total weighted average shares for the
second quarter of 2019 decreased to 203,840,735 from 210,579,612 in
the prior-year quarter.
Consolidated – excluding Venezuela
Figure 2. AD Holdings Inc Consolidated - Excluding Venezuela:
Key Financial Results(In millions of U.S. dollars, except as
noted) 2Q18(a) CurrencyTranslation(b)
ConstantCurrencyGrowth(c) 2Q19(a+b+c) %
USDollars % ConstantCurrency Total Restaurants
(Units)
2,061
2,109
Sales by Company-operated Restaurants
701.3
(125.3
)
110.0
686.0
-2.2
%
15.7
%
Revenues from franchised restaurants
33.2
(4.6
)
6.3
35.0
5.3
%
19.0
%
Total Revenues
734.5
(129.9
)
116.3
721.0
-1.8
%
15.8
%
Systemwide Comparable Sales
14.2
%
Adjusted EBITDA
48.8
(4.5
)
12.3
56.6
15.9
%
25.1
%
Adjusted EBITDA Margin
6.6
%
7.8
%
Net income (loss) attributable to AD
10.7
0.6
(0.3
)
11.0
2.5
%
-2.8
%
No. of shares outstanding (thousands)
210,580
203,841
EPS (US$/Share)
0.05
0.05
Excluding the Company’s Venezuelan operation, revenues in US
dollars decreased 1.8% year-over-year, primarily due to the
negative currency translation impact of the 46% and 8%
year-over-year average depreciation, respectively, of the Argentine
peso and the Brazilian real against the US dollar. This impact was
partially offset by constant currency revenue growth of 15.8%.
Constant currency revenue growth was supported by a 14.2% increase
in systemwide comparable sales, with strong sales growth in
countries in each of the Company’s divisions, including in Brazil,
Chile, Ecuador, Peru, the French West Indies, Panama and Mexico.
Comparable sales, which were above the Company’s blended inflation
rate for the quarter, were driven by the Company’s promotional
strategy and menus across the region, which helped boost traffic
growth. Incremental volume stemmed from increasingly higher
delivery revenues and the continued roll-out of EOTF.
Adjusted EBITDA ($ million)
Breakdown of main variations contributing to 2Q19 Adjusted
EBITDA
Second quarter consolidated Adjusted EBITDA, excluding
Venezuela, increased 15.9% in US dollars, and 25.1% in constant
currency terms. The Adjusted EBITDA margin expanded 120 basis
points to 7.8%, with margin expansions in Brazil and NOLAD, and
margin contractions in the Caribbean and SLAD divisions. The
Company’s ongoing focus on top-line growth helped capture
efficiencies in Payroll costs and other cost line items, which were
partially offset by higher F&P costs as a percentage of sales,
stemming from the Company’s promotional strategy to drive
traffic.
Consolidated G&A decreased 9.7%, year-over-year, in US
dollars and was down 80 basis points as a percentage of revenues.
On a constant currency basis, G&A increased 10.8%.
Non-operating Results
Non-operating results for the second quarter, excluding
Venezuela, contain a $4.3 million non-cash foreign currency
exchange gain, versus a non-cash gain of $0.8 million in 2018. Net
interest expense was $0.8 million higher year-over-year.
Arcos Dorados reported income tax expenses, excluding Venezuela,
of $5.8 million in the second quarter, compared to an income tax
expense of $2.0 million in the prior-year period.
Second quarter net income attributable to the Company, excluding
Venezuela, totaled $11.0 million, compared to net income of $10.7
million in the same period of 2018. The variation was mostly due to
higher operating income, combined with a positive variance in
foreign currency exchange results, partially offset by higher
income tax and interest expenses.
Arcos Dorados earnings per share remained flat at $0.05,
year-over-year, excluding Venezuela. Primarily as a result of share
repurchases of 7,993,602, total weighted average shares for the
second quarter of 2019 decreased to 203,840,735 from 210,579,612 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) 2Q18(a)
CurrencyTranslation(b) ConstantCurrencyGrowth(c)
2Q19(a+b+c) % AsReported % ConstantCurrency
Total Restaurants (Units)
933
975
Total Revenues
317.0
(29.3
)
41.6
329.3
3.9
%
13.1
%
Systemwide Comparable Sales
12.1
%
Adjusted EBITDA
34.5
(3.7
)
13.4
44.2
28.1
%
38.9
%
Adjusted EBITDA Margin
10.9
%
13.4
%
23.3
%
The Brazil division’s as reported revenues increased 3.9%,
despite the 8% year-over-year average depreciation of the Brazilian
real. Excluding currency translation, revenues grew 13.1%,
supported by systemwide comparable sales growth of 12.1%, well
above the country’s inflation, largely driven by traffic growth.
The strong performance in comparable sales mainly resulted from
intensified marketing initiatives, which helped boost volume
growth, combined with the strong execution of the Delivery business
segment and EOTF. The strong comparable sales performance in the
quarter also benefited from the comparison against the second
quarter of last year, when a trucker strike affected the overall
Brazilian economy.
Marketing initiatives during the second quarter continued to be
focused on driving top-line growth and delivered strong traffic.
Marketing activities included the launch of the “Novos Big”
campaign and the continuation of the Bacon Smokehouse premium
burger in the Signature collection, among others. The delivery
business, combined with the compelling offerings and promotions
offered through the McDonald’s App, were key drivers for the strong
comparable sales performance.
As reported Adjusted EBITDA increased 28.1% year-over-year and
38.9% on a constant currency basis. The Adjusted EBITDA margin
expanded 250 basis points to 13.4%, as efficiencies in Payroll
costs, mainly resulting from higher productivity and lower labor
claims, and G&A more than offset the shift in mix related to
the marketing campaigns executed during the quarter.
NOLAD
Figure 4. NOLAD Division: Key Financial Results(In millions of
U.S. dollars, except as noted) 2Q18(a)
CurrencyTranslation(b) ConstantCurrencyGrowth(c)
2Q19(a+b+c) % AsReported % ConstantCurrency
Total Restaurants (Units)
522
525
Total Revenues
99.0
(0.8
)
9.2
107.4
8.5
%
9.3
%
Systemwide Comparable Sales
7.3
%
Adjusted EBITDA
7.3
(0.2
)
1.9
9.0
24.1
%
26.3
%
Adjusted EBITDA Margin
7.3
%
8.4
%
13.6
%
NOLAD’s as reported revenues increased 8.5%, and 9.3% in
constant currency terms. The division’s systemwide comparable sales
increased well above blended inflation at 7.3%, driven by average
check growth and positive traffic, with strong performances in
Mexico and Panama. In Mexico, this was the ninth consecutive
quarter of strong comparable sales growth, which also benefited
from the calendar shift of the Easter holiday.
In NOLAD, the Company continued executing marketing activities
focused on increasing sales and guest counts. The affordability
platform and the dessert category continued to perform well in
Mexico and were key drivers for traffic growth during the quarter.
The delivery business was also an important contributor to strong
top-line growth during the quarter.
As reported Adjusted EBITDA for the division increased 24.1%, or
26.3% on a constant currency basis. The Adjusted EBITDA margin
expanded 110 basis points to 8.4%, mainly due to efficiencies in
Payroll, G&A and F&P costs.
SLAD
Figure 5. SLAD Division: Key Financial Results(In millions of
U.S. dollars, except as noted) 2Q18(a)
CurrencyTranslation(b) ConstantCurrencyGrowth(c)
2Q19(a+b+c) % AsReported % ConstantCurrency
Total Restaurants (Units)
390
393
Total Revenues
216.4
(94.2
)
63.0
185.2
-14.4
%
29.1
%
Systemwide Comparable Sales
27.7
%
Adjusted EBITDA
16.8
(7.1
)
4.4
14.1
-16.0
%
26.3
%
Adjusted EBITDA Margin
7.8
%
7.6
%
-1.9
%
SLAD’s as reported revenues decreased 14.4%, as constant
currency growth of 29.1% was more than offset by a negative
currency impact resulting from the 46% year-over-year average
depreciation of the Argentine peso against the US dollar. The
division’s systemwide comparable sales increased 27.7%, driven by
average check growth.
As part of the Company’s strategy, promotional activity
continued, including digital offerings through the McDonald’s app,
as well as appealing promotions in the breakfast daypart. The
division’s marketing activities also included new product launches
in both the affordability and premium platforms. During the
quarter, the Company extended the Signature collection into the
dessert category.
Adjusted EBITDA decreased 16.0% on an as reported basis and rose
26.3% in constant currency terms. The Adjusted EBITDA margin
contracted 20 basis points to 7.6%, mainly due to a shift in mix
resulting from promotional marketing campaigns, F&P cost
increases, higher outside services and utility costs in Argentina.
However, each of the other markets within the SLAD division posted
Adjusted EBITDA margin gains for the quarter.
Caribbean Division
Figure 6. Caribbean Division: Key Financial Results(In millions
of U.S. dollars, except as noted) 2Q18(a)
CurrencyTranslation- Excl.Venezuela(b)
ConstantCurrencyGrowth- Excl.Venezuela(c)
Venezuela(d) 2Q19(a+b+c+d) % As Reported
Total Restaurants (Units)
346
336
Total Revenues
121.6
(5.6
)
2.5
(16.7
)
101.8
-16.3
%
Adjusted EBITDA
3.5
(0.2
)
(1.6
)
2.6
4.3
21.1
%
Adjusted EBITDA Margin
2.9
%
4.2
%
44.8
%
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 may contain significant
non-cash accounting charges to operations in this market. Due to
the distortive effects that Venezuela represents, the discussion of
the Caribbean division’s operating performance is focused on
results that exclude the Company’s operations in this country.
Caribbean Division – excluding Venezuela
Figure 7. Caribbean Division - Excluding Venezuela: Key
Financial Results(In millions of U.S. dollars, except as noted)
2Q18(a) CurrencyTranslation(b)
ConstantCurrencyGrowth(c) 2Q19(a+b+c) %
USDollars % ConstantCurrency Total Restaurants
(Units)
216
216
Total Revenues
102.1
(5.6
)
2.5
99.0
-3.0
%
2.4
%
Systemwide Comparable Sales
1.9
%
Adjusted EBITDA
7.0
(0.2
)
(1.6
)
5.1
-27.2
%
-22.5
%
Adjusted EBITDA Margin
6.8
%
5.1
%
-24.9
%
Revenues in the Caribbean division, excluding Venezuela,
decreased 3.0% in US dollars, as constant currency growth of 2.4%
was more than offset by a negative currency translation impact
mainly resulting from the 14% year-over-year average depreciation
of the Colombian peso against the US dollar. Comparable sales grew
1.9%, driven by average check growth.
During the quarter, the division’s marketing activities included
Cutie Cars, Monster Jam and Ugly Dolls for the Happy Meal and the
launch of the McFlurry & Shakes Selva Negra in the dessert
category, among others. The Signature collection performed well
with the introduction of the Egg & Bacon premium burger.
Adjusted EBITDA totaled $5.1 million, compared to $7.0 million
in the same period of 2018. The Adjusted EBITDA margin contracted
170 basis points to 5.1%, mainly driven by higher F&P and
Payroll costs, combined with a negative shift in mix.
New Unit Development
Figure 8. Total Restaurants (eop)* June2019
March2019 December2018 September2018
June2018 Brazil
975
968
968
939
933
NOLAD
525
526
524
521
522
SLAD
393
394
394
390
390
Caribbean
336
337
337
345
346
TOTAL
2,229
2,225
2,223
2,195
2,191
* Considers Company-operated and franchised restaurants at
period-end
Figure 9. Current Footprint Store Type*
Ownership McCafes DessertCenters FS &
IS MS & FC CompanyOperated Franchised
Brazil
524
451
584
391
79
1,873
NOLAD
324
201
363
162
21
625
SLAD
232
161
344
49
130
365
Caribbean
261
75
250
86
37
323
TOTAL
1,341
888
1,541
688
267
3,186
* FS: Free-Standing; IS: In-Store; MS: Mall Store; FC: Food Court.
The Company opened 71 new restaurants during the twelve-month
period ended June 30, 2019, resulting in a total of 2,229
restaurants. Also during the period, the Company added 385 Dessert
Centers, bringing the total to 3,186 units. McCafés totaled 267
units at the end of the second quarter.
Balance Sheet & Cash Flow Highlights
Cash and cash equivalents were $137.2 million at June 30, 2019.
The Company’s total financial debt (including derivative
instruments) was $592.6 million. Net debt (Total Financial Debt
minus Cash and cash equivalents) was $455.3 million and the Net
Debt/Adjusted EBITDA ratio was 1.6x at the end of the reporting
period.
Figure 10. Consolidated Financial Ratios(In thousands of U.S.
dollars, except ratios)
June 30
December 31
2019
2018
Cash & cash equivalents (i)
137,238
197,282
Total Financial Debt (ii)
592,572
589,760
Net Financial Debt (iii)
455,334
392,478
Total Financial Debt / LTM Adjusted EBITDA ratio
2.0
2.3
Net Financial Debt / LTM Adjusted EBITDA ratio
1.6
1.5
(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 $51.8 million and $54.7 million as a reduction of financial debt
as of June 30, 2019 and December 31, 2018, respectively). (iii)
Total financial debt less cash and cash equivalents.
Net cash provided by operating activities totaled $32.7 million
in the second quarter, while cash used in net investing activities
totaled $56.1 million, which included capital expenditures of $57.6
million, compared to $39.4 million in the previous year’s quarter.
Cash used in financing activities amounted to $12.0 million, which
included $10.2 million of dividend payments.
First Half 2019
Excluding the Venezuelan operation and for the six months ended
June 30, 2019, the Company’s revenues, in US dollars, decreased by
5.7% to $1.4 billion, as constant currency growth of 13.8% was
offset by negative currency translation. Adjusted EBITDA was $118.4
million, a1.3% increase compared to the first half of 2018, in US
dollars. On a constant currency basis, Adjusted EBITDA increased by
14.3%. The reported Adjusted EBITDA margin expanded by 60 basis
points to 8.2%, as efficiencies in Payroll and G&A more than
offset higher F&P costs and Occupancy and Other Operating
expenses.
Year-to-date consolidated net income amounted to $25.5 million,
compared with net income of $24.3 million in the first half of
2018.
During the first half of 2019, capital expenditures totaled
$93.6 million.
Quarter Highlights & Recent
Developments
Appointment of Marcelo Rabach as the Chief
Executive Officer
On June 19, Arcos Dorados’ Board of Directors announced the
appointment of Marcelo Rabach as CEO of the Company effective July
1st, 2019. He succeeds Sergio Alonso. Mr. Rabach began his career
in the McDonald’s system almost 30 years ago as a crew member.
Prior to his promotion, Mr. Rabach was Arcos Dorados’ Chief
Operating Officer, a position he assumed in August 2015.
On August 2, Mr. Rabach was appointed to the Arcos Dorados’
Board of Directors.
Appointment of Luis Raganato as the Chief
Operating Officer
On June 19, Arcos Dorados’ Board of Directors also announced the
appointment of Mr. Luis Raganato, who served as the Company’s
Divisional President for its Caribbean Division as its new Chief
Operating Officer, effective July 1st, 2019. He succeeds Mr.
Rabach. Mr. Raganato also began his career as a crew member with
McDonald’s over 30 years ago. He has held senior leadership
position across several geographies where the Company operates.
Luis Raganato holds a degree in Business Administration granted
by the Instituto Aeronáutico de Argentina, in addition to a
post-graduate degree in Marketing and Business granted by the
Escuela Superior de Estudios de Marketing in Madrid, Spain.
Appointment of Francisco Staton as
President for the Caribbean Division
Arcos Dorados’ Board of Directors appointed Francisco Staton as
President for the Caribbean Division, effective July 1st, 2019,
succeeding Luis Raganato. Mr. Staton, who is a member of the Board
of Directors for Arcos Dorados, was the Managing Director for
Colombia, whose role also included managing the markets of Aruba,
Curaçao and Trinidad & Tobago. He began his career at Arcos
Dorados in 2008, worked as a consultant with the Boston Consulting
Group, and rejoined Arcos Dorados in 2013 as Senior Director of
Business Development of the NOLAD Division.
Francisco Staton holds a degree in Architecture from Princeton
University and a Master in Business Administration from Columbia
University, in New York.
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
2,200 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 2019 Consolidated
Results
(In thousands of U.S. dollars, except per
share data)
Figure 11. Second Quarter 2019 Consolidated Results(In
thousands of U.S. dollars, except per share data) For
Three-Months ended For Six-Months ended June 30,
June 30,
2019
2018
2019
2018
REVENUES Sales by Company-operated restaurants
688,397
718,454
1,383,781
1,525,515
Revenues from franchised restaurants
35,348
35,516
70,962
78,342
Total Revenues
723,745
753,970
1,454,743
1,603,857
OPERATING COSTS AND EXPENSES Company-operated restaurant expenses:
Food and paper
(248,583
)
(249,569
)
(495,618
)
(534,836
)
Payroll and employee benefits
(142,759
)
(156,150
)
(284,815
)
(329,264
)
Occupancy and other operating expenses
(197,242
)
(199,923
)
(397,146
)
(416,545
)
Royalty fees
(38,433
)
(38,603
)
(77,763
)
(80,774
)
Franchised restaurants - occupancy expenses
(17,834
)
(15,787
)
(35,708
)
(34,942
)
General and administrative expenses
(53,500
)
(59,268
)
(105,859
)
(116,918
)
Other operating (expenses) income, net
351
(15,537
)
(768
)
(59,374
)
Total operating costs and expenses
(698,000
)
(734,837
)
(1,397,677
)
(1,572,653
)
Operating income
25,745
19,133
57,066
31,204
Net interest expense
(13,230
)
(12,457
)
(25,676
)
(27,097
)
Loss from derivative instruments
(1,199
)
(233
)
(430
)
(331
)
Foreign currency exchange results
4,110
(3,049
)
5,648
5,128
Other non-operating expenses, net
(12
)
(78
)
(97
)
(62
)
Income before income taxes
15,414
3,316
36,511
8,842
Income tax expense
(4,980
)
(2,210
)
(13,857
)
(7,173
)
Net income
10,434
1,106
22,654
1,669
Net income attributable to non-controlling interests
(11
)
(40
)
(69
)
(85
)
Net income attributable to Arcos Dorados Holdings Inc.
10,423
1,066
22,585
1,584
Earnings per share information ($ per share): Basic net
income per common share
0.05
0.01
$
0.11
$
0.01
Weighted-average number of common shares outstanding-Basic
203,840,735
210,579,612
203,937,437
210,824,698
Adjusted EBITDA Reconciliation Operating income
25,745
19,133
57,066
31,204
Depreciation and amortization
30,321
25,573
59,268
52,090
Operating charges excluded from EBITDA computation
(250
)
698
99
716
Adjusted EBITDA
55,816
45,404
116,433
84,010
Adjusted EBITDA Margin as % of total revenues
7.7
%
6.0
%
8.0
%
5.2
%
Second Quarter 2019 Consolidated
Results – Excluding Venezuela
(In thousands of U.S. dollars, except per
share data)
Figure 12. Second Quarter 2019 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,
2019
2018
2019
2018
REVENUES Sales by Company-operated restaurants
686,021
701,294
1,378,703
1,466,250
Revenues from franchised restaurants
35,004
33,240
70,264
71,039
Total Revenues
721,025
734,534
1,448,967
1,537,289
OPERATING COSTS AND EXPENSES Company-operated restaurant expenses:
Food and paper
(248,102
)
(246,306
)
(495,366
)
(510,416
)
Payroll and employee benefits
(142,470
)
(155,693
)
(284,247
)
(325,337
)
Occupancy and other operating expenses
(196,037
)
(195,070
)
(394,691
)
(402,330
)
Royalty fees
(38,433
)
(39,082
)
(77,763
)
(82,190
)
Franchised restaurants - occupancy expenses
(17,712
)
(15,150
)
(35,460
)
(32,929
)
General and administrative expenses
(52,348
)
(57,918
)
(103,612
)
(113,492
)
Other operating (expenses) income, net
945
(555
)
2,023
(2,780
)
Total operating costs and expenses
(694,157
)
(709,774
)
(1,389,116
)
(1,469,474
)
Operating income
26,868
24,760
59,851
67,815
Net interest expense
(13,230
)
(12,426
)
(25,676
)
(27,066
)
Loss from derivative instruments
(1,199
)
(233
)
(430
)
(331
)
Foreign currency exchange results
4,336
755
5,783
(1,070
)
Other non-operating expenses, net
(12
)
(78
)
(97
)
(64
)
Income before income taxes
16,763
12,778
39,431
39,284
Income tax expense
(5,775
)
(2,034
)
(13,847
)
(14,930
)
Net income
10,988
10,744
25,584
24,354
Net income attributable to non-controlling interests
(11
)
(40
)
(69
)
(85
)
Net income attributable to Arcos Dorados Holdings Inc.
10,977
10,704
25,515
24,269
Earnings per share information ($ per share): Basic net
income per common share
$
0.05
$
0.05
$
0.13
$
0.12
Weighted-average number of common shares outstanding-Basic
203,840,735
210,579,612
203,937,437
210,824,698
Adjusted EBITDA Reconciliation Operating income
26,868
24,760
59,851
67,815
Depreciation and amortization
29,982
24,367
58,405
49,323
Operating charges excluded from EBITDA computation
(250
)
(301
)
99
(291
)
Adjusted EBITDA
56,600
48,826
118,355
116,847
Adjusted EBITDA Margin as % of total revenues
7.8
%
6.6
%
8.2
%
7.6
%
Second Quarter 2019 Results by
Division
(In thousands of U.S. dollars)
Figure 13. Second Quarter 2019 Consolidated Results by
Division(In thousands of U.S. dollars) 2Q YTD
Three-Months ended
% Incr.
Constant
Six-Months ended
% Incr.
Constant
June 30,
/
Currency
June 30,
/
Currency
2019
2018
(Decr)
Incr/(Decr)%
2019
2018
(Decr)
Incr/(Decr)%
Revenues Brazil
329,298
316,973
3.9
%
13.1
%
670,063
681,656
-1.7
%
10.7
%
Caribbean
101,766
121,568
199,459
268,442
Caribbean - Excl. Venezuela
99,047
102,132
-3.0
%
2.4
%
193,684
201,874
-4.1
%
1.0
%
NOLAD
107,445
99,009
8.5
%
9.3
%
206,801
196,160
5.4
%
7.5
%
SLAD
185,235
216,420
-14.4
%
29.1
%
378,420
457,599
-17.3
%
26.8
%
TOTAL
723,744
753,970
1,454,743
1,603,857
TOTAL - Excl. Venezuela
721,025
734,534
-1.8
%
15.8
%
1,448,968
1,537,289
-5.7
%
13.8
%
Operating Income
(loss) Brazil
28,486
21,926
29.9
%
41.0
%
60,581
56,987
6.3
%
19.8
%
Caribbean
(256
)
(3,124
)
(1,337
)
(34,891
)
Caribbean - Excl. Venezuela
868
2,503
-65.3
%
-62.1
%
1,448
1,720
-15.8
%
-2.9
%
NOLAD
3,756
2,004
87.4
%
93.2
%
5,096
3,954
28.9
%
34.0
%
SLAD
9,186
12,137
-24.3
%
29.0
%
20,899
30,007
-30.3
%
19.4
%
Corporate and Other
(15,428
)
(13,810
)
-11.7
%
-66.9
%
(28,173
)
(24,853
)
-13.4
%
-75.1
%
TOTAL
25,744
19,133
57,066
31,204
TOTAL - Excl. Venezuela
26,868
24,760
8.5
%
14.4
%
59,851
67,815
-11.7
%
-0.4
%
Adjusted EBITDA
Brazil
44,198
34,502
28.1
%
38.9
%
91,102
83,229
9.5
%
23.1
%
Caribbean
4,289
3,542
8,139
(22,109
)
Caribbean - Excl. Venezuela
5,075
6,964
-27.2
%
-22.5
%
10,062
10,728
-6.2
%
0.1
%
NOLAD
9,003
7,251
24.1
%
26.3
%
15,751
14,546
8.3
%
11.0
%
SLAD
14,111
16,799
-16.0
%
26.3
%
30,264
39,784
-23.9
%
17.2
%
Corporate and Other
(15,785
)
(16,690
)
5.4
%
-35.4
%
(28,823
)
(31,440
)
8.3
%
-35.1
%
TOTAL
55,816
45,404
116,433
84,010
TOTAL - Excl. Venezuela
56,602
48,826
15.9
%
25.1
%
118,356
116,847
1.3
%
14.3
%
Figure 14. Average Exchange Rate per Quarter* Brazil
Mexico Argentina 2Q19
3.92
19.11
43.93
2Q18
3.61
19.40
23.51
* Local $ per 1 US$
Summarized Consolidated Balance
Sheets
(In thousands of U.S. dollars)
Figure 15. Summarized Consolidated Balance Sheets(In thousands
of U.S. dollars)
June 30
December 31
2019
2018
ASSETS
Current assets Cash and cash equivalents
137,238
197,282
Accounts and notes receivable, net
80,214
84,287
Other current assets (1)
164,800
182,993
Total current assets
382,252
464,562
Non-current assets Property and equipment, net
894,167
856,192
Net intangible assets and goodwill
41,595
41,021
Deferred income taxes
59,981
58,334
Derivative instruments
51,830
54,735
Leases right of use assets
874,900
-
Other non-current assets (2)
107,783
103,195
Total non-current assets
2,030,256
1,113,477
Total assets
2,412,508
1,578,039
LIABILITIES AND EQUITY
Current liabilities Accounts payable
231,224
242,455
Taxes payable (3)
94,595
114,849
Accrued payroll and other liabilities
94,900
94,166
Other current liabilities (4)
23,365
24,527
Provision for contingencies
2,413
2,436
Financial debt (5)
14,604
14,879
Leases operating liabilities
60,691
-
Total current liabilities
521,792
493,312
Non-current liabilities Accrued payroll and other
liabilities
19,707
35,322
Provision for contingencies
29,390
26,073
Financial debt (6)
629,799
629,616
Deferred income taxes
1,845
957
Leases operating liabilities
829,794
-
Total non-current liabilities
1,510,535
691,968
Total liabilities
2,032,327
1,185,280
Equity Class A shares of common stock
383,198
379,845
Class B shares of common stock
132,915
132,915
Additional paid-in capital
12,300
14,850
Retained earnings
413,086
413,074
Accumulated other comprehensive losses
(501,654
)
(502,266
)
Common stock in treasury
(60,000
)
(46,035
)
Total Arcos Dorados Holdings Inc shareholders’ equity
379,845
392,383
Non-controlling interest in subsidiaries
336
376
Total equity
380,181
392,759
Total liabilities and equity
2,412,508
1,578,039
(1) Includes "Other receivables", "Inventories", "Prepaid expenses
and other current assets", and "McDonald's Corporation's
indemnification for contingencies". (2) Includes "Miscellaneous",
"Collateral deposits", 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".
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190807005142/en/
Investor Relations Contact Patricio Iñaki Esnaola
Director of Investor Relations Arcos Dorados
patricio.esnaola@ar.mcd.com +54 11 4711 2561 Media Contact
InspIR Group Barbara Cano barbara@inspirgroup.com +1 646 452 2334
www.arcosdorados.com/ir
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