6-K 1 dp444729_6k.htm FORM 6-K


 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 6-K
 

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16
OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934


For the month of March, 2014
____________________________
 
Commission File Number: 001-35129

Arcos Dorados Holdings Inc.
(Exact name of registrant as specified in its charter)

Roque Saenz Peña 432
B1636FFB Olivos, Buenos Aires, Argentina
(Address of principal executive office)


Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F
X
 
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):

Yes
   
No
X

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):

Yes
   
No
X
 

 



 
 

 

 
ARCOS DORADOS HOLDINGS INC.


TABLE OF CONTENTS



ITEM
 
1.
Press Release dated March 11, 2014 entitled “Arcos Dorados Reports Fourth Quarter and Full Year 2013 Financial Results”
 
 
 
 
 
 
 

 
 
 
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.
 
 
Arcos Dorados Holdings Inc.
 
     
     
 
By:
/s/ Juan David Bastidas
 
   
Name:
Juan David Bastidas
 
   
Title:
Chief Legal Counsel
 

Date: March 11, 2014
 
 
 
 
 

 
 
 
Item 1 
 
 
 
 
FOR IMMEDIATE RELEASE

ARCOS DORADOS REPORTS FOURTH QUARTER & FULL YEAR 2013 FINANCIAL RESULTS

Achieved double-digit organic revenue and Adjusted EBITDA growth in the quarter and full year on double-digit expansion in comparable sales


Buenos Aires, Argentina, March 11, 2014 – 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 unaudited results for the fourth quarter and audited results for the full year ended December 31, 2013.

Fourth Quarter 2013 Highlights
 
·
Revenues totaled $1.05 billion, an increase of 3.6% or 15.8% on an organic basis year-over-year, as double-digit comparable sales growth and the contribution from new restaurants more than offset local currency depreciation.
 
·
Systemwide comparable sales increased by 10.6% year-over-year.
 
 
·
Adjusted EBITDA increased by 5.7% to $118.0 million, on an as reported basis. Excluding currency translation and special items, Adjusted EBITDA was 20.0% higher year-over-year.
 
 
·
Net income was $32.1 million compared to $44.2 million one year ago, mainly due to a one-time charge related to the full redemption of the 2019 Notes, included within “Net interest expense”. Organic net income grew by 25.5%.

Full Year 2013 Highlights
 
·
Revenues amounted to $4.03 billion, a 6.2% year-over-year increase or 16.7% rise on an organic basis, as double-digit comparable sales growth and revenues from new restaurants more than offset local currency depreciation.
 
·
Systemwide comparable sales increased by 11.2% year-over-year.
 
·
130 new restaurants opened in 2013 and contributed to the overall restaurant count of 2,062. Capital expenditures for the year totaled $313.5 million.
 
·
Adjusted EBITDA improved versus the prior year and totaled $344.5 million, increasing 1.1%, or 18.7% on an organic basis.
 
·
The Company reported net income of $53.9 million, down from $114.3 million one year ago. The results mainly reflect higher foreign currency exchange losses and higher net interest expense, primarily due to one-time charges related to the debt restructuring in both 3Q13 and 4Q13. On an organic basis, net income increased by 16.2% to $103.4 million.
 
 
 
 
 

 
 
 
“I am pleased to report double-digit growth in our consolidated operating results for both the fourth quarter and full year 2013. Despite an economic deceleration in a number of key markets, revenue growth was solidly in line with guidance. Adjusted EBITDA exceeded our annual target, due to G&A leverage and proactive currency hedging.”

“We remain the dominant player in the industry, with an unparalleled restaurant portfolio. From this position of strength, and in response to a deterioration in the operating environment, we are adjusting the pace of our unit expansion for 2014. Nevertheless, we expect double-digit top line growth in 2014 and a higher baseline level of operating profitability as we focus on expanding market share, maximizing traffic and containing costs.”

“Our 30-year history in the region equips us with tested strategies to improve operating results in challenging market conditions. As the largest franchisee of one of the world’s most iconic brands in an underpenetrated region, I remain confident in the Company’s long-term prospects,” said Woods Staton, Chairman and Chief Executive Officer of Arcos Dorados.

 
Fourth Quarter 2013 Results

Consolidated
 
 
 Financial Highlights (Million US$)
 
4Q12
(a)
Special Items
(b)
Currency Translation
(c)
Organic Growth
(d)
4Q13
(a+b+c+d)
% As Reported
% Organic
Total Restaurants
            1,948
     
              2,062
   
Sales by Company-operated Restaurants
965.1
 
(117.8)
             153.6
1,001.0
3.7%
15.9%
Revenues from franchised restaurants
44.5
 
(5.5)
                  6.0
45.0
1.1%
13.4%
Total Revenues
1,009.7
 
(123.3)
             159.6
1,046.0
3.6%
15.8%
Systemwide Comparable Sales
         
10.6%
 
Adjusted EBITDA
111.6
             1.5
(15.5)
               20.4
118.0
5.7%
20.0%
Adjusted EBITDA Margin
11.1%
     
11.3%
2.1%
 
Net Income attributable to AD
44.2
(13.5)
(7.5)
                  8.8
32.1
-27.4%
25.5%
No. of shares outstanding ('000)
        209,529
     
         209,867
   
EPS ($ per share)
0.21
     
0.15
   
 
(4Q13 = 4Q12 + Special items + Currency translation + Organic growth). Please refer to “Definitions” section for further detail.

Arcos Doradosfourth quarter revenues increased by 3.6% to $1.05 billion, as organic revenue growth of 15.8% was partially offset by the depreciation of local currencies, mainly in Brazil, Venezuela and Argentina. Strong organic revenue growth was driven by a 10.6% expansion in systemwide comparable sales and a contribution of $58.5 million in constant currency from the net addition of 114 restaurants during the last 12-month period. The Caribbean division and SLAD reported double-digit increases in comparable sales and organic revenues.
 
 
 
 
 
2

 
 

 
Marketing activities in the fourth quarter included strong promotions in the Company’s value platform across the region, and the successful launch of premium products such as the Cheddar Bacon Onion, and campaigns including Dijon and Tabasco. The Dessert category also outperformed internal targets.

Adjusted EBITDA ($ million)
Breakdown of main variations contributing to 4Q13 Adjusted EBITDA


Adjusted EBITDA for the fourth quarter was $118.0 million, representing a 5.7% increase compared to the same period of 2012. Adjusting for special items and currency impact, organic adjusted EBITDA grew by 20.0%, supported by double-digit comparable sales growth, the contribution from new restaurants and 85 basis points of organic G&A leverage.

Special items impacting Adjusted EBITDA consisted of:

($ million)
4Q13
4Q12
Variation
Recovery of Brazilian taxes (i)
-
$12.0
($12.0)
Reversal (accrual) of PAT provision in Brazil (ii)
$9.1
($2.0)
$11.1
Royalty waiver for Venezuela
$2.0
$1.2
$0.8
CADs net expense (iii)
($0.03)
($1.7)
$1.7
Total
$11.1
$9.6
$1.5
 
I.
Please refer to 4Q12 earnings release.
 
II.
Employee meals program in Brazil.
 
III.
Compensation expense. Includes the result from the total equity return swap entered into 3Q12 to hedge the expense.

The reported Adjusted EBITDA margin as a percentage of total revenues increased over 20 basis points to 11.3%, compared to the fourth quarter of 2012.
 
 
 
3

 
 
 
All divisions except the Caribbean achieved improved margins versus the previous year. Additionally, reported G&A as a percentage of revenues decreased by 105 basis points compared to the year-ago period.
 
Net income attributable to the Company was $32.1 million in the fourth quarter of 2013, compared to $44.2 million in the same period of 2012. The result reflects improved operating and foreign exchange results, which were more than offset by higher net interest expense, losses from derivative instruments and increased income tax recognized in the quarter.

Non-operating Results

Non-operating results for the quarter reflected (i) an increase in net interest and derivative instrument expenses, mainly attributable to a $10.8 million one-time charge related to the full redemption of the 2019 Notes, a $4.2 million loss incurred in connection with the unwind of the cross currency swap, and $2.9 million of additional interest year-over-year on incremental debt, and (ii) a foreign currency exchange loss of $3.5 million compared with a higher loss of $5.3 million in 4Q12.

Income tax expense for the quarter totaled $21.3 million, resulting in an effective tax rate of 39.8% for the quarter, compared to 26.2% in the year-ago period. The higher 4Q13 effective tax rate was mainly explained by the reversal of certain valuation allowances over deferred tax assets in 4Q12 and by a one-time charge related to the full redemption of the 2019 Notes, that reduced income before taxes in 4Q13.

The Company reported basic earnings per share (EPS) of $0.15 in the fourth quarter of 2013, compared to $0.21 in the previous corresponding period.

 
Analysis by Division:

Brazil Division
 
 
 Financial Highlights (Million US$)
 
4Q12
(a)
Special Items
(b)
Currency Translation
(c)
Organic Growth
(d)
4Q13
(a+b+c+d)
% As Reported
% Organic
Total Restaurants
                731
     
                 812
11.1%
 
Systemwide Comparable Sales
         
2.2%
 
Revenues
            483.1
 
(51.0)
               45.8
              477.8
-1.1%
9.5%
Adjusted EBITDA
               82.3
(0.9)
(9.1)
                  9.8
                82.1
-0.3%
13.5%
 
Brazil revenues declined by 1.1% in the fourth quarter, however, excluding an 11% year-over-year average depreciation in the Brazilian Real, organic revenues grew by 9.5%. Product mix management and menu board adjustments drove a 2.2% increase in systemwide comparable sales. Throughout the year, the Company implemented a successful marketing calendar, which in the fourth quarter included the Tabasco Campaign and the addition of the Double Bacon sandwich in the GPPP value platform.
 
 
 
 
4

 
 

 
While the Company continued to gain market share, supported by brand strength and compelling marketing initiatives, performance in Brazil was affected by a soft consumption environment.

The net addition of 81 restaurants during the last 12-month period contributed $32.8 million to revenues in constant currency during the quarter. The openings brought the year-end restaurant total to 812.

Adjusted EBITDA decreased by 0.3% in the fourth quarter of 2013. Reported Adjusted EBITDA margin increased by 14 basis points to 17.2% and was driven by reduced payroll costs and G&A expenses, mainly as a consequence of the reversal of the PAT provision.

Special items impacting Adjusted EBITDA in the quarter included the reversal of the PAT provision in 4Q13 (compared to a charge in 4Q12) and the recovery of tax credits from prior periods in 4Q12. Excluding currency movements and the aforementioned special items, fourth quarter organic Adjusted EBITDA increased by 13.5%, driven by revenue growth and G&A leverage.

 
NOLAD
 
 
 Financial Highlights (Million US$)
 
4Q12
(a)
Special Items
(b)
Currency Translation
(c)
Organic Growth
(d)
4Q13
(a+b+c+d)
% As Reported
% Organic
Total Restaurants
                503
     
                 507
0.8%
 
Systemwide Comparable Sales
         
-2.3%
 
Revenues
            101.5
 
(0.3)
                  1.3
              102.4
0.9%
1.2%
Adjusted EBITDA
                 9.1
                -
(0.0)
                  0.6
                   9.6
6.0%
6.3%
 
NOLADs revenues grew by 0.9% or 1.2% on an organic basis, year-over-year. Systemwide comparable sales declined by 2.3%, mainly affected by a weak consumer environment in Mexico and Costa Rica. Additionally, the net addition of 4 restaurants during the last 12-month period contributed $3.6 million to revenues in constant currency.

Adjusted EBITDA increased by 6.0% to $9.6 million, from $9.1 million in the previous corresponding period. The reported Adjusted EBITDA margin increased by 45 basis points to 9.4%, due to lower Food and Paper and Occupancy & Other Operating Expenses as a percentage of revenues. On an organic basis, Adjusted EBITDA increased by 6.3%.

 
 
 
5

 
 

 
SLAD
 
 
 Financial Highlights (Million US$)
 
4Q12
(a)
Special Items
(b)
Currency Translation
(c)
Organic Growth
(d)
4Q13
(a+b+c+d)
% As Reported
% Organic
Total Restaurants
                361
     
                 378
4.7%
 
Systemwide Comparable Sales
         
21.3%
 
Revenues
            222.6
 
(47.6)
               59.8
              234.8
5.5%
26.9%
Adjusted EBITDA
               24.8
                -
(6.6)
                  9.7
                27.9
12.7%
39.2%

 
SLADs revenues grew by 5.5% or 26.9% on an organic basis (excluding currency movements, mainly the devaluation of the Argentine Peso) compared to the fourth quarter of 2012. During the quarter, systemwide comparable sales increased by 21.3% on stable volumes. The Company implemented a successful marketing calendar, including the addition of the Premium Angus Burger line and Chicken McWraps to the Flavors Festival campaign, as well as the launch of McFlurry Vauquita in the Dessert category in Argentina. The net addition of 17 restaurants during the last 12-month period contributed $14.5 million to revenues in constant currency in the quarter.

Adjusted EBITDA increased by 12.7% year-over-year, or 39.2% on an organic basis, resulting in an Adjusted EBITDA margin of 11.9%. The 76 basis points margin expansion was supported by leverage in F&P and payroll costs. These factors were partially offset by higher Occupancy and Other Operating Expenses as a percentage of revenues.


Caribbean Division
 
 
 Financial Highlights (Million US$)
       
 
4Q12
(a)
Special Items
(b)
Currency Translation
(c)
Organic Growth
(d)
4Q13
(a+b+c+d)
% As Reported
% Organic
Total Restaurants
                353
     
                 365
3.4%
 
Systemwide Comparable Sales
         
27.2%
 
Revenues
            202.5
 
(24.3)
               52.8
              230.9
14.0%
26.1%
Adjusted EBITDA
               24.4
             0.8
(3.9)
                  3.2
                24.5
0.2%
14.0%
 
The Caribbean division reported revenue growth of 14.0% in the fourth quarter of 2013. Excluding currency movements (mainly the devaluation of the Venezuelan Bolivar), organic revenues increased by 26.1% compared to the fourth quarter of 2012. Systemwide comparable sales increased by 27.2%, driven by average check. Despite ongoing challenging conditions in Venezuela, brand preference remained strong. The Company maintained its leading market share through the execution of a strong marketing calendar, including the Cheddar Bacon Onion (beef and chicken), and the launch of McFlurry Tres Leches and McFlurry Flaquito Chocolate in the Dessert category. The net addition of 12 restaurants during the last 12-month period contributed $7.7 million to revenues in constant currency.

Adjusted EBITDA grew by 0.2% and amounted to $24.5 million in 4Q13. The Adjusted EBITDA margin declined 146 basis points to 10.6%, driven by higher payroll costs and new legislation on rents in Venezuela, which more than offset efficiencies in all other costs items in the division.
 
 
 
 
6

 
 
 
Special items impacting Adjusted EBITDA included the recognition of a royalty waiver from McDonald’s Corporation of $2.0 million in 4Q13, versus $1.2 million in 4Q12. On an organic basis, Adjusted EBITDA increased by 14.0% compared to the year-ago period.


New Unit Development

Total Restaurants (eop)*
 
Dec. ‘13
Sept. ‘13
June ‘13
Mar. ‘13
Dec. ‘12
Brazil
 
812
762
746
735
731
NOLAD
 
507
503
502
503
503
SLAD
 
378
372
369
366
361
Caribbean
 
365
356
354
355
353
TOTAL
 
2,062
1,993
1,971
1,959
1,948
LTM Net Openings
 
114
113
113
116
108

*Considers company-operated and franchised restaurants at period-end
Note: Information for SLAD and Caribbean reflects the new division restructuring

 
The Company completed 130 restaurant openings for the year ended December 31, 2013. The openings brought the year-end total to 2,062 restaurants. Also in 2013, the Company added 317 dessert centers and 20 McCafés, bringing the total to 2,259 and 348 respectively.


Balance Sheet & Cash Flow Highlights

Cash and cash equivalents were $175.6 million at December 31, 2013. The Companys total financial debt (including derivative instruments) was $785.0 million. Net debt was $609.4 million and the Net Debt/Adjusted EBITDA ratio was 1.8x at December 31, 2013.

Cash generated from operating activities was $133.5 million in the fourth quarter of 2013, while cash used in financing activities amounted to $130.8 million. During the quarter, capital expenditures amounted to $164.3 million, including a $57.4 million real estate purchase in Venezuela.

 
 
 
7

 
 

Full Year 2013

For the full year ended December 31, 2013, the Company’s revenues reached $4.03 billion, up 6.2% or 16.7% on an organic basis. Systemwide comparable sales grew by 11.2%, supported by positive contributions from Brazil, SLAD and the Caribbean division.

Adjusted EBITDA was broadly stable year-over-year, increasing by 1.1% to $344.5 million. The Adjusted EBITDA margin contracted 43 basis points year-over-year to 8.5%, driven by higher F&P (due to the impact of the devaluation of local currencies on dollar-linked costs, mainly in Venezuela) and payroll costs as a percentage of sales, which more than offset lower G&A as a percentage of revenues.

On an organic basis, Adjusted EBITDA increased by 18.7%, driven by solid growth in Brazil and SLAD, while the organic Adjusted EBITDA margin increased by 14 basis points year-over-year, supported by 72 basis points of leverage in organic G&A.

Special items impacting the year-over-year change in Adjusted EBITDA consisted of:

($ million)
FY13
FY12
Variation
Recovery of Brazilian taxes (i)
-
$12.0
($12.0)
Reversal (accrual) of PAT provision in Brazil (ii)
$3.3
($3.3)
$6.5
Royalty waiver for Venezuela
$8.0
$5.0
$3.0
CADs net (expense) gain (iii)
($1.2)
$11.6
($12.9)
Total
$10.0
$25.4
($15.4)

 
I.
Please refer to 4Q12 earnings release.
 
II.
Employee meals program in Brazil.
 
III.
Compensation expense. Includes the result from the total equity return swap entered into 3Q12 to hedge the expense.

For the full year 2013, consolidated net income attributable to the Company amounted to $53.9 million, compared with $114.3 million registered in 2012. The decline primarily reflects higher foreign currency exchange losses (explained by the depreciation of local currencies, including the devaluation of the Bolivar in Venezuela), and also higher net interest expense (primarily due to one-time charges related to the debt restructuring), all of which were partially offset by slightly lower income tax expense. The effective tax rate was 44.2% in 2013, compared to 28.8% in 2012, and was impacted by the aforementioned one-time charges affecting net interest expense, as well as the loss incurred as a result of the devaluation in Venezuela, all of which have no related tax benefits. Excluding the impact of such charges, the effective tax rate would have remained at the low end of guidance. On an organic basis, net income was $103.4 million, increasing by 16.2%.

Cash generated by operating activities was $217.0 million for the year, while cash provided by financing activities amounted to $102.3 million. Additionally, total capital expenditures amounted to $313.5 million for the year, which includes a $57.4 million real estate purchase in Venezuela.
 
 
 
 
8

 
 
 
2014 Guidance

The Company’s outlook for full year 2014 growth versus 2013 is provided on an organic basis (constant currency and excluding special items in both years). Guidance for 2014 also excludes the Venezuelan business, as explained below.

 
2014
Revenue Growth
+ 13% - 16%
Adjusted EBITDA Growth
+ 15% - 18%
Effective Tax Rate
35% - 37%
Capital Expenditures (US$)
$200 million
Restaurant openings (Gross)
90

The increasingly complex operating environment in Venezuela has reduced the degree of certainty with respect to full year projections for the Venezuelan operation.
Importantly, the Company believes that its Venezuelan business will not require operating cash support during the 2014 calendar year. Please refer to the Company’s Form 6-K filed with the SEC today, which provides Venezuela’s revenue and operating income for 2011, 2012 and 2013.


Quarter Highlights & Recent Developments

Restaurant opening target for 2014-2016
The Company agreed with McDonald’s Corporation on February 11, 2014, to open a minimum of 250 restaurants during the 3-year period from 2014 to 2016.

Full redemption of 2019 Notes
In December 2013, the Company exercised its option to redeem all of the outstanding principal amount of Arcos Dorados B.V. 7.50% Senior Notes due 2019 at a redemption price equal to 109.129% of the principal amount of the Notes, plus accrued and unpaid interest. The transaction resulted in a one-time, non-operating charge of $10.8 million in net interest expense, which was recognized in the fourth quarter of 2013.

Reversal of the PAT provision in Brazil
After being notified of the confirmation of a preliminary ruling issued in October of 2013 by Brazilian authorities in favor of the Company regarding an employee meals program, also known as Programa de Alimentação do Trabalhador (PAT), in 4Q13 the Company reversed a provision that was in place from August 2012 through September 2013. The reversal amounted to $9.1 million and, combined with lower payroll costs in 4Q13 when compared to 4Q12, resulted in a 4Q13 benefit of $11.1 million year-over-year. The ruling will result in reduced payroll costs going forward.

 
 
 
9

 

 
Dividend
On January 3, 2014, the Company paid the fourth installment of its 2013 Dividends.  The total amount paid was $12.5 million or $0.0596 per share on outstanding Class A and Class B shares, thus completing a total payment for the year of $50.0 million or $0.24 per share for the full year 2013.

Daniel Schleiniger Appointed as Investor Relations Director
Daniel Schleiniger joined the Company as the new Corporate Director of Investor Relations. Daniel began his career as a corporate banking relationship manager for one of Brazil’s largest banks and has held positions in equity research, investor relations, financial planning and analysis as well as treasury and portfolio management. Daniel holds a bachelor of science degree in chemistry from the University of Delaware (USA) and an MBA in Finance from the same academic institution. Daniel will be based in Miami.

Annual General Shareholders Meeting
On March 6, 2014, the Board set the date for the Company’s Annual General Shareholders’ Meeting. The AGM will be held on April 21, 2014, in Bogotá, Colombia, at 10:00 a.m. (local time), to all shareholders as of record on March 19, 2014.


Investor Relations Contact
Daniel Schleiniger
Arcos Dorados – IR Director
daniel.schleiniger@ar.mcd.com
+54 11 4711-2675
www.arcosdorados.com

Media Contact:
Farrell Kramer
MBS Value Partners
farrell.kramer@mbsvalue.com
+1 212 710-9685

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.
Organic: To better discern underlying business trends, this release uses non-GAAP financial measures that segregate year-over-year growth into three categories: (i) currency translation, (ii) special items and (iii) organic 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) Special items include the impact of events that management does not consider part of the underlying performance of the business. (iii) Organic growth reflects the underlying growth of the business excluding the effect from currency translation and special items.
 
 
 
 
10

 
 
 
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 2,062 McDonald’s-branded restaurants with over 90,000 employees serving approximately 4.3 million customers a day, as of December 2013. 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

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 for 2013. 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.

Use of Non-GAAP Financial Measures

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 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 expenses, net and within general and administrative expenses in our statement of income: gains from sale of property and equipment, write-off of property and equipment, contract termination losses, and impairment of long-lived assets and goodwill, and stock-based compensation and bonuses incurred in connection with the Company’s initial public listing.
 
 
 
 
11

 
 

 
Fourth Quarter & Full Year 2013 Consolidated Results
(In thousands of U.S. dollars, except per share data)

 
For Three-Months ended
 
For Twelve-Months ended
 
Dec 31,
 
Dec 31,
 
2013
 
2012
 
2013
 
2012
REVENUES
             
Sales by Company-operated restaurants
 1,000,966
 
 965,142
 
 3,859,883
 
 3,634,371
Revenues from franchised restaurants
 45,037
 
 44,535
 
 173,427
 
 163,023
Total Revenues
 1,046,003
 
 1,009,677
 
 4,033,310
 
 3,797,394
OPERATING COSTS AND EXPENSES
             
Company-operated restaurant expenses:
             
Food and paper
(342,959)
 
(333,338)
 
(1,350,515)
 
(1,269,146)
Payroll and employee benefits
(198,994)
 
(198,094)
 
(814,112)
 
(753,120)
Occupancy and other operating expenses
(268,646)
 
(258,633)
 
(1,055,188)
 
(984,004)
Royalty fees
(49,154)
 
(47,948)
 
(188,885)
 
(180,547)
Franchised restaurants - occupancy expenses
(15,620)
 
(14,860)
 
(63,273)
 
(56,057)
General and administrative expenses
(77,473)
 
(85,414)
 
(317,745)
 
(314,619)
Other operating (expenses) income, net
(2,474)
 
 8,705
 
(15,070)
 
(3,261)
Total operating costs and expenses
(955,320)
 
(929,582)
 
(3,804,788)
 
(3,560,754)
Operating income
 90,683
 
 80,095
 
 228,522
 
 236,640
Net interest expense
(29,585)
 
(14,496)
 
(88,156)
 
(54,247)
(Loss) Gain from derivative instruments
(4,099)
 
 146
 
(4,141)
 
(891)
Foreign currency exchange results
(3,528)
 
(5,349)
 
(38,783)
 
(18,420)
Other non-operating income (expenses), net
 10
 
(396)
 
(848)
 
(2,119)
Income before income taxes
 53,481
 
 60,000
 
 96,594
 
 160,963
Income tax expense
(21,298)
 
(15,703)
 
(42,722)
 
(46,375)
Net income
 32,183
 
 44,297
 
 53,872
 
 114,588
Less: Net income attributable to non-controlling interests
(93)
 
(76)
 
(18)
 
(256)
Net income  attributable to Arcos Dorados Holdings Inc.
 32,090
 
 44,221
 
 53,854
 
 114,332
Earnings per share information ($ per share):
             
Basic net income per common share
 $ 0.15
 
 $ 0.21
 
 $ 0.26
 
 $ 0.55
Weighted-average number of common shares outstanding-Basic
 209,867,426
 
 209,529,412
 
 209,754,176
 
 209,529,412
Adjusted EBITDA Reconciliation
             
Operating income
 90,683
 
 80,095
 
 228,522
 
 236,640
Depreciation and amortization
 28,381
 
 27,022
 
 114,860
 
 92,328
Operating (income) charges excluded from EBITDA computation
(1,069)
 
 4,490
 
 1,085
 
 11,593
Adjusted EBITDA
 117,995
 
 111,607
 
 344,467
 
 340,561
Adjusted EBITDA Margin as % of total revenues
11.3%
 
11.1%
 
8.5%
 
9.0%

 
 
 
12

 
 

Fourth Quarter & Full Year 2013 Results by Division
(In thousands of U.S. dollars)

 
4Q
 
FY
 
Three-Months ended
% Incr.
Constant
 
Twelve-Months ended
% Incr.
Constant
 
Dec 31,
/
Curr.
 
Dec 31,
/
Curr.
 
2013
2012
(Decr.)
Incr/(Decr) %
 
2013
2012
(Decr.)
Incr/(Decr) %
Revenues
                 
Brazil
 477,834
 483,102
-1.1%
9.5%
 
 1,842,324
 1,797,556
2.5%
13.3%
Caribbean
 230,907
 202,466
14.0%
26.1%
 
 830,447
 754,730
10.0%
19.7%
NOLAD
 102,449
 101,528
0.9%
1.2%
 
 407,772
 384,041
6.2%
4.3%
SLAD
 234,813
 222,581
5.5%
26.9%
 
 952,767
 861,067
10.6%
26.7%
TOTAL
 1,046,003
 1,009,677
3.6%
15.8%
 
 4,033,310
 3,797,394
6.2%
16.7%
                   
                   
Operating Income
                 
Brazil
 70,731
 69,683
1.5%
12.9%
 
 188,445
 193,339
-2.5%
8.0%
Caribbean
 14,846
 14,906
-0.4%
23.8%
 
 37,837
 40,692
-7.0%
12.7%
NOLAD
(471)
(3,568)
-86.8%
-86.0%
 
(5,314)
(5,557)
4.4%
13.5%
SLAD
 23,790
 19,463
22.2%
53.0%
 
 84,324
 74,824
12.7%
33.6%
Corporate and Other
(18,213)
(20,389)
-10.7%
12.4%
 
(76,770)
(66,658)
-15.2%
-37.8%
TOTAL
 90,683
 80,095
13.2%
29.2%
 
 228,522
 236,640
-3.4%
9.0%
                   
                   
Adjusted EBITDA
                 
Brazil
 82,071
 82,318
-0.3%
10.8%
 
 245,957
 240,954
2.1%
13.0%
Caribbean
 24,497
 24,444
0.2%
16.3%
 
 67,180
 69,109
-2.8%
10.2%
NOLAD
 9,638
 9,091
6.0%
6.3%
 
 27,397
 26,738
2.5%
1.9%
SLAD
 27,940
 24,802
12.7%
39.2%
 
 105,495
 93,756
12.5%
31.6%
Corporate and Other
(26,151)
(29,048)
-10.0%
4.4%
 
(101,562)
(89,996)
-12.9%
-27.8%
TOTAL
 117,995
 111,607
5.7%
19.6%
 
 344,467
 340,561
1.1%
12.8%



Average Exchange Rate per Quarter

   
Brazil
Mexico
Argentina
         
4Q13
 
2.28
13.01
6.07
4Q12
 
2.06
12.95
4.80
Local $ per 1 US$

 
 
 
13

 
 

 Summarized Consolidated Balance Sheet
(In thousands of U.S. dollars)

   
 December 31, 2013
 December 31, 2012
       
ASSETS
 
Current assets
     
Cash and cash equivalents
175,648
184,851
Accounts and notes receivable, net
110,696
105,019
Other current assets (1)
380,107
311,628
Total current assets
666,451
601,498
   
                      -
 
Non-current assets
   
Property and equipment, net
1,244,311
1,176,350
Net intangible assets and goodwill
70,375
67,271
Deferred income taxes
97,687
133,708
Other non-current assets (2)
101,435
70,336
Total non-current assets
1,513,808
1,447,665
Total assets
 
           2,180,259
           2,049,163
LIABILITIES AND EQUITY
   
Current liabilities
   
Accounts payable
311,060
244,365
Taxes payable (3)
137,492
125,713
Accrued payroll and other liabilities
141,970
150,690
Other current liabilities (4)
52,562
50,845
Provision for contingencies
1,748
507
Financial debt (5)
14,324
6,154
Total current liabilities
659,156
578,274
Non-current liabilities
   
Accrued payroll and other liabilities
35,446
40,115
Provision for contingencies
13,074
20,092
Financial debt (5)
771,171
655,365
Deferred income taxes
6,113
9,007
Total non-current liabilities
825,804
724,579
Total liabilities
 
           1,484,960
           1,302,853
Equity
     
Class A shares of common stock
358,820
             351,654
Class B shares of common stock
132,915
             132,915
Additional paid-in capital
 17,250
 18,634
Retained earnings
404,287
             400,761
Accumulated other comprehensive losses
(218,735)
(158,821)
Total Arcos Dorados Holdings Inc shareholders’ equity
             694,537
             745,143
Non-controlling interest in subsidiaries
762
                 1,167
Total equity
 
             695,299
             746,310
Total liabilities and equity
           2,180,259
           2,049,163
(1) Includes "Other receivables", "Inventories", "Prepaid expenses and other current assets", "Derivative instruments", "McDonald´s Corporation´ indemnification for contingencies" and "Deferred income taxes".
 
(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", "Long-term debt" and "Derivative instruments".
 



 
14

 

 
Consolidated Financial Ratios
(In thousands of U.S. dollars, except ratios)

 
As of
As of
 
December 31,
December 31,
 
2013
2012
Cash & cash equivalents
175,648
184,851
Total Financial Debt (i)
785,005
659,788
Net Financial Debt (ii)
609,357
474,937
Total Financial Debt / LTM Adjusted EBITDA ratio
2.3
1.9
Net Financial Debt / LTM Adjusted EBITDA ratio
1.8
1.4
     
     
     
(i)
Total financial debt includes short-term debt, long-term debt and derivative instruments (including the asset portion of derivatives amounting to $0.5 million and $1.7 million as a reduction of financial debt as of December 31, 2013 and 2012, respectively).
(ii)  Total financial debt less cash and cash equivalents.

 
 
15