Comparable sales growth of 5.9% coupled with
a 7.0% rise in consolidated revenues on a constant currency
basis1
Net income increased to $10.7 million from
$1.1 million in prior year1
Achieved a 7th consecutive
quarter of traffic growth
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
- On a constant currency basis2,
consolidated revenues grew 7.0%. As reported consolidated revenues
decreased 5.7% to $734.5 million versus the second quarter of
2017.
- Systemwide comparable sales2 rose 5.9%
year-over-year.
- As reported, Adjusted EBITDA2 decreased
17.1% to $48.8 million compared with the prior-year quarter.
- Consolidated Adjusted EBITDA margin
contracted 100 basis points year-over-year to 6.6%.
- As reported, General and Administrative
(G&A) expenses decreased by 1.7% versus the prior year
quarter.
- As reported, net income increased to
$10.7 million, from $1.1 million in the second quarter of
2017.
________________________ 1 Excluding Venezuela 2 For
definitions please refer to page 13 of this document.
“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.
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)
2Q17(a)
CurrencyTranslation-
Excl.Venezuela(b)
ConstantCurrencyGrowth
-Excl.Venezuela(c)
Venezuela(d)
2Q18(a+b+c+d)
% AsReported
% ConstantCurrency
Total Restaurants (Units) 2,160
2,191
1.4 % Sales by
Company-operated Restaurants 762.2 (94.3 ) 51.3 (0.8 ) 718.5 -5.7 %
259.3 % Revenues from franchised restaurants 36.5 (4.7 ) 3.4 0.3
35.5 -2.6 % 705.7 %
Total Revenues 798.7 (99.0
) 54.7 (0.5 ) 754.0 -5.6
% 279.7 % Systemwide Comparable Sales 363.1 %
Adjusted EBITDA 56.6 (4.6 ) (5.5
) (1.1 ) 45.4 -19.8 %
2857.4 % Adjusted EBITDA Margin 7.1 % 6.0 %
Net
income (loss) attributable to AD (4.1 )
(0.4 ) 10.1 (4.5 ) 1.1
125.9 % 37454.5 % No. of shares
outstanding (thousands) 210,881 210,580
EPS (US$/Share)
(0.02 )
0.01
(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)
2Q17(a)
CurrencyTranslation(b)
ConstantCurrencyGrowth(c)
2Q18(a+b+c)
% AsReported
% ConstantCurrency
Total Restaurants (Units) 2,030
2,061
1.5 % Sales by Company-operated
Restaurants 744.3 (94.3 ) 51.3 701.3 -5.8 % 6.9 % Revenues from
franchised restaurants 34.5 (4.7 ) 3.4 33.2 -3.8 % 9.7 %
Total
Revenues 778.8 (99.0 ) 54.7
734.5 -5.7 % 7.0 % Systemwide
Comparable Sales 5.9 %
Adjusted EBITDA 58.9
(4.6 ) (5.5 ) 48.8 -17.1
% -9.3 % Adjusted EBITDA Margin 7.6 % 6.6 %
Net income (loss) attributable to AD 1.1 (0.4
) 10.1 10.7 905.1 % 944.3
% No. of shares outstanding (thousands) 210,881 210,580
EPS (US$/Share) 0.01
0.05
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.
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)
2Q17(a)
CurrencyTranslation(b)
ConstantCurrencyGrowth(c)
2Q18(a+b+c)
% AsReported
% ConstantCurrency
Total Restaurants (Units) 910
933
2.5 % Total Revenues
354.9 (38.1 ) 0.1 317.0
-10.7 % 0.0 % Systemwide Comparable
Sales -1.0 %
Adjusted EBITDA 45.9 (4.1
) (7.3 ) 34.5 -24.8 %
-15.9 % Adjusted EBITDA Margin 12.9 %
10.9 %
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)
CurrencyTranslation(b)
ConstantCurrencyGrowth(c)
2Q18(a+b+c)
% AsReported
% ConstantCurrency
Total Restaurants (Units) 515
522
1.4 % Total Revenues
96.1 (1.8 ) 4.7 99.0 3.0
% 4.9 % Systemwide Comparable Sales 5.3 %
Adjusted EBITDA 8.4 0.0 (1.1 )
7.3 -13.4 % -13.6 % Adjusted
EBITDA Margin 8.7 %
7.3 %
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)
CurrencyTranslation(b)
ConstantCurrencyGrowth(c)
2Q18(a+b+c)
% AsReported
% ConstantCurrency
Total Restaurants (Units) 386
390
1.0 % Total Revenues
232.3 (61.5 ) 45.6 216.4
-6.9 % 19.6 % Systemwide Comparable
Sales 20.0 %
Adjusted EBITDA 17.9 (5.0
) 3.9 16.8 -6.1 % 21.6
% Adjusted EBITDA Margin 7.7 %
7.8 %
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)
CurrencyTranslation(b)
ConstantCurrencyGrowth(c)
2Q18(a+b+c)
% AsReported
% ConstantCurrency
Total Restaurants (Units) 349
346
-0.9 % Total Revenues
115.3 (2,177.0 ) 2,183.2 121.6
5.4 % 1893.6 % 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 %
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)
CurrencyTranslation(b)
ConstantCurrencyGrowth(c)
2Q18(a+b+c)
% AsReported
% ConstantCurrency
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.
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".
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180808005052/en/
Arcos Dorados Holdings, Inc.Investor RelationsArcos
DoradosDaniel Schleiniger, +54 11 4711 2675Vice President of
Corporate Communications & Investor
Relationsdaniel.schleiniger@ar.mcd.comorMediaInspIR
GroupBarbara Cano, +1
646-452-2334barbara@inspirgroup.comwww.arcosdorados.com/ir
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