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 7,
2019
Item 1
FOR
IMMEDIATE RELEASE
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ARCOS DORADOS REPORTS SECOND QUARTER 2019
FINANCIAL RESULTS
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·
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Consolidated
revenue growth of 15.8% on a constant currency basis, with 14.2% comparable sales growth
1
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·
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Consolidated
Adjusted EBITDA increased 25.1% on a constant currency basis
1
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·
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Adjusted
EBITDA margin expanded 120 basis points to 7.8%
1
, underscored by increased
leverage from efficiencies and scale
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Montevideo, Uruguay, August 7,
2019 – 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
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•
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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
basis
2
, consolidated revenues grew 15.8%
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•
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Systemwide comparable sales
2
rose 14.2% year-over-year and was above blended inflation
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•
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Adjusted EBITDA
2
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%
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•
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Consolidated Adjusted EBITDA
margin expanded 120 basis points year-over-year to 7.8%
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•
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Continued leverage in Payroll
and General and Administrative (G&A) with margins increasing 140 and 80 basis points,
respectively, versus the year-ago quarter
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•
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Net income in US dollars
increased 2.5% to $11.0 million, from $10.7 million in the second quarter of 2018
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____________________
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)
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|
2Q18
(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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2Q19
(a+b+c+d)
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% As
Reported
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Total
Restaurants (Units)
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2,191
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2,229
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Sales by Company-operated
Restaurants
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718.5
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(125.3)
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110.0
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(14.8)
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688.4
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-4.2%
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Revenues from franchised
restaurants
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35.5
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(4.6)
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6.3
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(1.9)
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35.3
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-0.5%
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Total Revenues
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754.0
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(129.9)
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116.3
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(16.7)
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723.7
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-4.0%
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Adjusted EBITDA
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45.4
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(4.5)
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12.3
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2.6
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55.8
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22.9%
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Adjusted EBITDA
Margin
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6.0%
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7.7%
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Net income (loss)
attributable to AD
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1.1
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0.6
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(0.3)
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9.0
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10.4
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845.5%
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No. of shares outstanding
(thousands)
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210,580
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203,841
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EPS
(US$/Share)
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0.01
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0.05
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(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)
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2Q18
(a)
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Currency
Translation
(b)
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Constant
Currency
Growth
(c)
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2Q19
(a+b+c)
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%
US Dollars
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%
Constant Currency
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Total
Restaurants (Units)
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2,061
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2,109
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Sales by Company-operated
Restaurants
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701.3
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(125.3)
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110.0
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686.0
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-2.2%
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15.7%
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Revenues from franchised
restaurants
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33.2
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(4.6)
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6.3
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35.0
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5.3%
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19.0%
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Total Revenues
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734.5
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(129.9)
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116.3
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721.0
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-1.8%
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15.8%
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Systemwide Comparable
Sales
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14.2%
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Adjusted EBITDA
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48.8
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(4.5)
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12.3
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56.6
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15.9%
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25.1%
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Adjusted EBITDA
Margin
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6.6%
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7.8%
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Net income (loss)
attributable to AD
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10.7
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0.6
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(0.3)
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11.0
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2.5%
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-2.8%
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No. of shares outstanding
(thousands)
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210,580
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203,841
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EPS
(US$/Share)
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0.05
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0.05
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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)
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2Q18
(a)
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Currency
Translation
(b)
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Constant
Currency
Growth
(c)
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2Q19
(a+b+c)
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%
As Reported
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%
Constant Currency
|
Total
Restaurants (Units)
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933
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975
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Total Revenues
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317.0
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(29.3)
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41.6
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329.3
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3.9%
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13.1%
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Systemwide Comparable
Sales
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12.1%
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Adjusted EBITDA
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34.5
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(3.7)
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13.4
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44.2
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28.1%
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38.9%
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Adjusted
EBITDA Margin
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10.9%
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13.4%
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23.3%
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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)
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|
2Q18
(a)
|
Currency
Translation
(b)
|
Constant
Currency
Growth
(c)
|
2Q19
(a+b+c)
|
%
As Reported
|
%
Constant Currency
|
Total
Restaurants (Units)
|
522
|
|
|
525
|
|
|
|
|
|
|
|
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Total Revenues
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99.0
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(0.8)
|
9.2
|
107.4
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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)
|
Currency
Translation
(b)
|
Constant
Currency
Growth
(c)
|
2Q19
(a+b+c)
|
%
As Reported
|
%
Constant Currency
|
Total
Restaurants (Units)
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390
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393
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Total Revenues
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216.4
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(94.2)
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63.0
|
185.2
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-14.4%
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29.1%
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Systemwide Comparable
Sales
|
|
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27.7%
|
Adjusted EBITDA
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16.8
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(7.1)
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4.4
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14.1
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-16.0%
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26.3%
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Adjusted
EBITDA Margin
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7.8%
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|
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7.6%
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-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)
|
Currency
Translation - Excl. Venezuela
(b)
|
Constant
Currency
Growth - Excl. Venezuela
(c)
|
Venezuela
(d)
|
2Q19
(a+b+c+d)
|
% As
Reported
|
Total
Restaurants (Units)
|
346
|
|
|
|
336
|
|
|
|
|
|
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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%
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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 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)
|
Currency Translation
(b)
|
Constant
Currency
Growth
(c)
|
2Q19
(a+b+c)
|
% US Dollars
|
% Constant Currency
|
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)*
|
|
|
|
|
|
|
June
2019
|
March
2019
|
December
2018
|
September
2018
|
June
2018
|
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
|
Dessert Centers
|
|
FS
& IS
|
MS
& FC
|
Company
Operated
|
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 1
st
, 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 1
st
, 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.
Investor Relations Contact
Patricio Iñaki Esnaola
Director of Investor Relations
Arcos Dorados
patricio.esnaola@ar.mcd.com
+54 11 4711 2561
www.arcosdorados.com/ir
Media
Contact
InspIR
Group
Barbara
Cano
barbara@inspirgroup.com
+1
646 452 2334
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".
|