Arcos Dorados reports Q4 net earnings of US$46.2M, up 12.3% from year-ago period, partly due to execution of three capital market transactions; revenues up 10.5% to US$958.5M

BUENOS AIRES, Argentina , March 5, 2012 (press release) – Arcos Dorados Holdings Inc. (NYSE: ARCO) (“Arcos Dorados” or the “Company”), Latin America’s largest restaurant chain and the world’s largest McDonald’s franchisee, today reported results for the fourth quarter and full year ended December 31, 2011.

Full Year 2011 Highlights

* Revenues increased by 21.2% year-over-year, or by 17.7% on a constant currency basis, to US$ 3,657.6 million
* Systemwide comparable sales increased by 13.7% year-over-year
* Gross openings of 101 restaurants, led by an ambitious opening schedule culminating in a year-end restaurant base of 1,840
* Adjusted EBITDA1 increased by 13.6% year-over-year, or by 7.6% on a constant currency basis, to US$ 339.8 million
* Net income amounted to US$ 115.5 million, a 9% increase over one year ago
* Capital expenditure for the year totaled US$ 319.9 million and is consistent with the Company’s long-term growth strategy of boosting future growth through new and reimaged restaurants
* Execution of three major capital markets transactions including an IPO, secondary follow-on and debt restructuring, which reduces ongoing funding costs

Fourth Quarter 2011 Highlights

* Revenues increased by 10.5% year-over-year, or by 16.1% on a constant currency basis, to US$ 958.5 million
* Systemwide comparable sales increased by 11.5% year-over-year
* Adjusted EBITDA1 increased by 6.1% year-over-year, or by 10% on a constant currency basis, to US$ 104.6 million
* Net income amounted to US$ 46.2 million, a 12.3% increase over one year ago

“Arcos Dorados’ achievements in 2011 extend well beyond strong revenue and earnings growth. The execution of three highly successful capital markets transactions, a multinational strategic plan and an ambitious restaurant opening and reimaging program underscore the depth of talent at every level of our organization,” said Woods Staton, Chairman and CEO of Arcos Dorados.

“Following our fourth consecutive year of solid revenue growth, our leadership team has not only proven their ability to consistently grow sales, but also to achieve operational improvements. The third quarter restructuring of our debt profile also demonstrates the skill in optimizing Arcos Dorados’ capital structure and reducing non-operating costs.”

“We expect solid growth in 2012 and remain convinced of the robust long-term opportunities presented in this market. Having worked in the Latin American consumer industry for almost two decades on average, our team is used to varied economic cycles and occasional slowdowns. If anything, these factors underscore the importance of Arcos Dorados’ diversified geographic portfolio within Latin America,” Mr Staton continued.

Fourth Quarter Results

Arcos Dorados’ fourth quarter revenues increased by 10.5% to US$ 958.5 million. On a constant currency basis, revenue growth was 16.1%. The increase was driven by systemwide comparable sales growth of 11.5% and the net addition of 85 restaurants over the last 12-month period.

Systemwide comparable sales growth of 11.5% was primarily a reflection of average check following pricing and product mix changes when compared to one year ago.

Brazil revenue growth of 4.7% reflected a slight decrease in consumption with systemwide comparable sales growth of 6.3%. NOLAD’s (Mexico, Panama and Costa Rica) revenues gained by 7.2% year-over-year, with a systemwide comparable sales increase of 8.4%. Mexico’s improving performance indicates the turnaround strategy is tracking according to plan. SLAD’s (Argentina, Venezuela, Colombia, Chile, Perú, Ecuador, and Uruguay) revenues grew by 25.2% compared to the fourth quarter of 2010, mainly driven by a 27.8% increase in systemwide comparable sales. The Caribbean division (Puerto Rico, Martinique, Guadeloupe, Aruba, Curaçao, F. Guiana, Trinidad & Tobago, US Virgin Islands of St. Thomas and St. Croix) reported revenue growth of 1% compared to the final quarter of 2010, with a decline in systemwide comparable sales of 2.2%. The division’s decline reflects modest economic expansion due to weak tourism flows, among other reasons. In particular, Puerto Rico has experienced continued economic contraction over the past several years weakening consumption while higher oil prices have impacted a variety of input costs. In addition, the quarter included start-up costs of the newly opened Trinidad & Tobago territory.

Adjusted EBITDA1 for the fourth quarter of 2011 was US$ 104.6 million, a 6.1% increase over the same period of 2010 (or 10.0% on a constant currency basis). The 2011 improvement in Adjusted EBITDA1 was mainly driven by revenue growth and a reduction in Food & Paper costs as a percentage of sales, partially offset by higher payroll, G&A, and other operating expenses.

Food and Paper costs for the quarter included the effect of negotiations made with certain suppliers in Venezuela pursuant to which we obtained one-time rebates for the year. Excluding this effect in the quarter, Food & Paper costs improved 50 b.p.s. over the fourth quarter of 2010, mainly driven by improvements in Brazil and SLAD.

The increase in payroll expenses is a result of wage increases in line with the trends seen throughout prior quarters. G&A included in adjusted EBITDA increased due to higher corporate expenses stemming from increased payroll as inflation in Argentina, which contains the majority of corporate personnel, sharply exceeded currency devaluation. Headcount increases to facilitate regional growth also pushed up costs. Increased payroll expenses were partially offset by a gain recorded in 2011 related to share-based compensation (resulting from the ongoing CAD program), mainly due to a decrease in the share price during the fourth quarter of 2011 in comparison to an expense recorded in the same period of 2010.

Other operating expenses increased in the fourth quarter of 2011 when compared to the fourth quarter of 2010, mainly due to an increase in the provision for contingencies of US$ 12.4 million driven by a modification in the interpretation of the fiscal authorities regarding taxes impacting royalty payments in Brazil (CIDE) as from January 1, 2011, on an ongoing basis.

The improvement in adjusted EBITDA1 was mainly driven by SLAD and was partially offset by lower adjusted EBITDA1 in Brazil and the Caribbean division. The decrease in adjusted EBITDA1 in Brazil was primarily attributed to the above mentioned charge in the provision for contingencies. The decrease in adjusted EBITDA1 in the Caribbean division was mainly due to the aforementioned weakened economic environment.

Thus, the Adjusted EBITDA1 margin as a percentage of total revenues was 10.9% for the quarter, down 0.5 percentage points compared to the fourth quarter of 2010.

It is also important to remember that in the fourth quarter of 2010 the Company recognized special charges in its operating results in connection with its share-based compensation plans as a result of replacing the formulas previously used with the estimated initial public offering price for the purposes of measuring the liability awards. These charges were excluded from Adjusted EBITDA1 and included: (i) US$ 15.6 million in G&A related to the incremental compensation expense incurred in connection with the Company´s long–term incentive plan (CAD’s) and (ii) US$ 9.8 million in other operating results related to the award granted to our CEO.

Thus, operating income for the quarter improved by US$29.2 million or 57.7% with respect to the fourth quarter of 2010.

Net income attributable to the Company was US$ 46.2 million in the fourth quarter of 2011, reflecting an increase of 12.3% in comparison to US$ 41.1 million in the same period of 2010, and is mainly explained by improved operating and non-operating results that were partly offset by higher tax charges.

Non-operating results improved as a result of (i) lower overall financing costs (including derivatives) mainly due to a “Debt Restructuring” last July. This included the settlement of the majority of the Company’s derivative instruments and the issuance of a BRL bond, resulting in a slight increase in interest expenses that was more than offset by a US$ 9.0 million reduction in losses from derivative instruments; (ii) an improvement in other non-operating results in the fourth quarter of 2011, since in the fourth quarter of 2010 the Company registered a charge of US$ 25.3 million within other non-operating results, related to the Brazilian Amnesty Program, as described in the Company’s financial statements for 2010. These non-operating improvements were partially offset by a charge of US$ 4.9 million in the fourth quarter of 2011 from currency fluctuations mainly related to foreign currency intercompany assets and liabilities.

The income tax expense for the period totaled US$ 20.2 million, resulting in an effective tax rate of 30.5% for the quarter. In addition, in 4Q10, the Company recognized an income tax benefit related to the reversal of the valuation allowance over deferred tax assets mainly in Brazil, resulting from ongoing strong profits.

The Company reported basic earnings per share (EPS) of US$ 0.22 in the fourth quarter of 2011, compared to US$ 0.17 in the previous corresponding period. The increase was a result of both higher net income and a lower weighted-average number of outstanding shares (please refer to Axis Split-off and IPO explanations in previous releases).

Full Year 2011 – Highlights & Results

For the twelve months ended December 31, the Company’s revenues grew by 21.2% (17.7% on a constant currency basis) to US$ 3,657.6 million, with revenue growth in all divisions. Additionally, adjusted EBITDA1 reached US$ 339.8 million, an increase of 13.6% compared to the prior year (or 7.6% in constant currency). The improvement was driven by growth in the Brazil, SLAD, and NOLAD divisions, and partly offset by a decline in the Caribbean division. Throughout the year, the Company continued to develop its diverse markets through product innovation and promotions and maintained or improved service levels. Food & Paper costs improved as a percentage of sales as the Company continues to strengthen its supply network and improves alignment with its marketing strategies throughout the region. And, since we report in US dollars, G&A has been impacted by the significantly higher increase in Argentine inflation than currency devaluation. As well, the amount reflects development to accommodate continued expansion and growth. Operating income for the full year 2011 reached US$ 250.8 million, reflecting an increase of 22.6% over full year 2010. Finally, consolidated net income totaled US$ 115.5 million, increasing by 9% over full year 2010. Additionally, during 2011 the Company executed an IPO in April, a follow-on offering in October and a debt restructuring in July, which allowed the Company to reduce overall funding costs while maintaining a stable debt profile.

Balance Sheet & Cash Flow Highlights

Cash and cash equivalents were US$ 176.3 million at December 31, 2011. The Company’s total financial debt (including derivative instruments) was US$ 532.3 million, which included US$ 306.5 million corresponding to the accounting balance of the 2019 USD Notes and R$ 400 million related to the BRL 2016 Notes issued in July, 2011. Net debt (total financial debt less cash and cash equivalents) was US$ 356 million and the Net Debt/Adjusted EBITDA1 ratio was 1.0x at December 31, 2011. Cash generated from operating activities was US$ 110.1 million in the fourth quarter of 2011, and US$ 261.6 million for the full year ended December 31, 2011, in line with the previous year. Additionally, dividends totaling US$ 25 million were paid in the quarter. During the quarter, capital expenditures amounted to US$ 137.4 million, reflecting an important portion of gross restaurant openings executed in the period. As a consequence, capital expenditures for the full year 2011 totaled US$ 319.9 million.

Quarter Highlights & Recent Developments


On December 30, 2011, the Company paid a cash dividend of US$ 12.5 million or US$ 0.0597 per share on outstanding Class A and Class B shares to shareholders of record at December 28, 2011. This resulted in an annual dividend payment for the year 2011 of US$ 56.6 million.

Secondary Offering

On October 19, 2011, the Company completed a secondary public offering of 44,457,958 Class A shares (including over-allotment), listed on the New York Stock Exchange at a price of US$ 22.00 per share. The selling shareholders received the net proceeds from the offering and included DLJ South American Partners L.P., DLJSAP Restco Co-Investments LLC, Capital International Private Equity Fund V, L.P., CGPE V, L.P. and Gavea Investment AD, L.P. The Company’s controlling shareholder did not sell any shares in the offering.

Annual General Shareholders’ Meeting

On February 29, 2012, the Board set the date for the company’s Annual General Shareholders’ Meeting. The AGM will be held on April 9, 2012, at 10:00 a.m. (local time), to all shareholders as of record on March 5, 2012.

Outlook for the year 2012:

Based on constant currency and excluding the impact on results from stock price variations, the Company expects the following variations with respect to the previous year. Revenue growth in the range of 15-17%; Adj. EBITDA1 growth in the range of 10-12%; and an Effective tax rate for the year in the range of 31-33%.

Capital Expenditures for the year are expected to be between US$ 340 million – US$ 350 million, considering approximately 130 gross openings.


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.

About Arcos Dorados

Arcos Dorados is the world’s largest McDonald’s franchisee in terms of systemwide sales and number of restaurants, operating the largest quick service restaurant (“QSR”) 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 1,840 McDonald’s-branded restaurants with over 86,000 employees serving approximately 4.3 million customers a day, as of December 2011. 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:

© 2021 Business Wire, Inc., All rights reserved.