Market Overview

Arcos Dorados Reports Third Quarter 2017 Financial Results

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Achieved strong comparable sales and Adjusted EBITDA growth. Positive
volume trends continued across key markets. Improved operating result
drove Adjusted EBITDA margin expansion and positive net income in the
quarter.

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 third quarter ended September 30, 2017.

Third Quarter 2017 Key Results

  • As reported consolidated revenues increased 8.6% to $842.5 million
    versus the third quarter of 2016. On a constant currency basis1,
    consolidated revenues grew 17.5%, or 9.7% excluding Venezuela.
  • Systemwide comparable sales1 rose 20.3% year-over-year, or
    10.4% excluding Venezuela.
  • Adjusted EBITDA1 increased 17.5% to $74.2 million compared
    with the prior-year quarter.
  • Consolidated Adjusted EBITDA margin expanded 70 basis points to 8.8%.
  • As reported General and Administrative (G&A) expenses decreased 10
    basis points as a percentage of revenues.
  • As reported net income was $23.4 million, compared to net loss of $1.8
    million in the year-ago period.

"We had a strong third quarter as successful marketing and promotional
activities drove positive guest traffic in most markets, supporting
improved topline and strong consolidated Adjusted EBITDA growth. During
the period, comparable sales grew in real terms and we saw broad-based
strength in our business, as consumer behavior in Brazil and Argentina
continues to improve. Strong topline performance benefited cash
generation in the quarter and, combined with operating leverage we built
into our business, drove improved operating performance. We delivered 70
basis points of Adjusted EBITDA margin expansion and positive net income
of $23.4 million in the quarter. Our plan to expand our footprint and
modernize our base to keep guests coming back to our restaurants more
often remains on track and will see us capture the potential of the
McDonald's brand in the region," said Sergio Alonso, Chief Executive
Officer of Arcos Dorados.

Third Quarter 2017 Results

Consolidated

   
Figure 1. AD Holdings Inc Consolidated: Key Financial Results

(In millions of U.S. dollars, except as noted)

        3Q16

(a)

 

Currency
Translation

(b)

 

Constant
Currency
Growth
(c)

 

3Q17
(a+b+c)

 

% As
Reported

 

% Constant
Currency

Total Restaurants (Units)       2,140       2,160   0.9 %  
 
Sales by Company-operated Restaurants 742.8 (63.2 ) 123.8 803.4 8.2 % 16.7 %
Revenues from franchised restaurants 32.9 (5.6 ) 11.9 39.1 18.9 % 36.1 %
Total Revenues 775.7 (68.9 ) 135.7 842.5 8.6 % 17.5 %
Systemwide Comparable Sales 20.3 %
Adjusted EBITDA 63.2 -20.5 31.5 74.2 17.5 % 49.9 %
Adjusted EBITDA Margin 8.1 % 8.8 %
Net income (loss) attributable to AD (1.8 ) (20.5 ) 45.7 23.4 1376.2 % 2494.2 %
No. of shares outstanding (thousands) 210,711 211,072
EPS (US$/Share)       (0.01 )           0.11          

(3Q17 = 3Q16 + Currency Translation + Constant Currency
Growth). Refer to "Definitions" section for further detail.

 

Arcos Dorados' third quarter as reported revenues increased 8.6%, driven
by constant currency revenue growth of 17.5%, which was partially offset
by the negative impact of currency translation. The currency translation
impact mainly reflected the year-over-year average depreciation of the
Venezuelan bolivar and the Argentine peso, which was partially offset by
the appreciation of the Brazilian real. Constant currency revenue growth
reflected a 20.3% expansion in systemwide comparable sales, driven by
average check growth combined with positive traffic in most markets.

Third quarter consolidated as reported Adjusted EBITDA increased 17.5%,
supported by revenue growth and margin expansion. Brazil was the key
contributor to Adjusted EBITDA during the quarter, followed by SLAD. The
results were partially offset by a decline in NOLAD and the Caribbean
divisions.

The Adjusted EBITDA margin expanded by 70 basis points to 8.8%, with
margin improvements in Brazil and SLAD, partially offset by margin
declines in NOLAD and the Caribbean divisions. Continued leverage in
Food and Paper (F&P) drove the consolidated margin expansion. As part of
the Company plan, refranchising activity was lower in 3Q17 than in 3Q16.
Excluding the refranchising inflows, consolidated Adjusted EBITDA margin
increased by about 120 basis points.

As a percentage of revenues, G&A decreased 10 basis points. As reported,
consolidated G&A increased by 7.9% year-over-year.

Consolidated – excluding Venezuela

                             
Figure 2. AD Holdings Inc Consolidated - Excluding Venezuela: Key
Financial Results

(In millions of U.S. dollars, except as noted)

       

3Q16
(a)

 

Currency
Translation

(b)

 

Constant
Currency
Growth
(c)

 

3Q17
(a+b+c)

 

% As
Reported

 

% Constant
Currency

Total Restaurants (Units)       2,007       2,030   1.1 %  
 
Sales by Company-operated Restaurants 734.1 (12.7 ) 68.4 789.8 7.6 % 9.3 %
Revenues from franchised restaurants 31.9 0.0 5.7 37.6 17.9 % 17.8 %
Total Revenues 766.0 (12.6 ) 74.1 827.4 8.0 % 9.7 %
Systemwide Comparable Sales 10.4 %
Adjusted EBITDA 62.6 (0.3 ) 11.4 73.7 17.7 % 18.2 %
Adjusted EBITDA Margin 8.2 % 8.9 %
Net income (loss) attributable to AD 1.5 0.2 23.8 25.6 1557.7 % 1545.4 %
No. of shares outstanding (thousands) 210,711 211,072
EPS (US$/Share)       0.01             0.12          
 

Excluding the Company's Venezuelan operation, as reported revenues
increased 8.0% year-over-year. The result primarily reflects constant
currency revenue growth of 9.7%, partially offset by a negative impact
from currency translation, as the depreciation of the Argentine peso
more than offset the appreciation of the Brazilian real, and other
currencies in the Company's territories. Constant currency revenue
growth was supported by a 10.4% increase in systemwide comparable sales,
driven by average check growth and positive traffic in most markets.

Adjusted EBITDA increased 17.7% on an as reported basis, or 18.2% in
constant currency terms. The Adjusted EBITDA margin expanded 70 basis
points to 8.9%, mainly driven by efficiencies in F&P as a percentage of
revenues.

Non-operating Results

Non-operating results for the third quarter reflected a non-cash $5.6
million foreign currency exchange gain, versus a non-cash loss of $3.3
million last year. The appreciation of the Brazilian real from the
previous quarter-end, compared to a depreciation last year, generated a
non-cash net gain related to intercompany balances. This was partially
offset by a non-cash year-over-year lower foreign currency exchange gain
on intercompany balances, generated by the depreciation of the Mexican
peso from the previous quarter-end, compared to a higher depreciation in
the same period of last year. Net interest expense decreased $3.2
million year-over-year to $15.0 million in the quarter, given the lower
financing cost of the Company's restructured long-term debt.

The Company reported an income tax expense of $15.5 million in the
quarter, compared to an income tax expense of $18.0 million in the prior
year period.

Third quarter net income attributable to the Company totaled $23.4
million, compared to net loss of $1.8 million in the same period of
2016. The result reflects higher year-over-year operating results,
combined with the positive variance in non-cash foreign exchange
results, lower net interest expenses, as well as the lower income tax
expense.

The Company reported earnings per share of $0.11 in the third quarter of
2017, compared to a loss per share of $0.01 in the previous
corresponding period. Total weighted average shares for the third
quarter of 2017 were 211,072,340, as compared to 210,710,861 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)

       

3Q16
(a)

 

Currency
Translation

(b)

 

Constant
Currency
Growth
(c)

 

3Q17
(a+b+c)

 

% As
Reported

 

% Constant
Currency

Total Restaurants (Units)       890       910   2.2 %  
 
Total Revenues 357.0 9.7 11.7 378.4 6.0 % 3.3 %
Systemwide Comparable Sales 6.3 %
Adjusted EBITDA 39.2 1.3 8.8 49.3 25.7 % 22.5 %
Adjusted EBITDA Margin       11.0 %           13.0 %        
 

Brazil's as reported revenues increased by 6.0%, supported by the 2.7%
year-over-year average appreciation of the Brazilian real. Excluding the
impact of currency translation, constant currency revenues grew 3.3%
year-over-year and were negatively impacted by the refranchising of
certain company-operated restaurants during the last twelve months. An
increased number of franchised restaurants negatively impacts the
Company's total revenue comparisons, as company-operated restaurant
sales are replaced by rental income received from the Company's
sub-franchisees. In the quarter, total systemwide sales grew 8.0% in
constant currency, while systemwide comparable sales rose 6.3%, driven
by average check growth and positive traffic against an improving
consumer backdrop.

Marketing activities in the quarter included the continuation of the
premium Signature Line and the introduction of core extensions such as
the "Duplo Quarterão," the "Grand Cheddar McMelt," and the "McFritas
Cheddar Bacon." Also in the quarter, the Company launched the McFlurry
and McShake "Prestígio" in the Dessert category and included "Despicable
Me 3" and "Emoji" in the Happy Meal.

As reported Adjusted EBITDA increased 25.7% year-over-year and 22.5% on
a constant currency basis. The Adjusted EBITDA margin expanded 200 basis
points to 13.0%, mainly driven by lower F&P costs, Occupancy and other
operating expenses and Royalty Fees as a percentage of revenues. Royalty
Fees benefited from growth support which McDonald's Corporation began
providing during the quarter. This growth support is expected to be
primarily directed toward the Brazil and SLAD divisions, where the
majority of the Company's investment is planned to occur over the next
few years.

NOLAD

                             
Figure 4. NOLAD Division: Key Financial Results

(In millions of U.S. dollars, except as noted)

       

3Q16
(a)

 

Currency
Translation

(b)

 

Constant
Currency
Growth
(c)

 

3Q17
(a+b+c)

 

% As
Reported

 

% Constant
Currency

Total Restaurants (Units)       515       514   -0.2%  
 
Total Revenues 94.7 0.9 6.6 102.3 8.0% 7.0%
Systemwide Comparable Sales 5.9%
Adjusted EBITDA 10.5 (0.2) (0.4) 9.9 -6.1% -4.2%
Adjusted EBITDA Margin       11.1%           9.7%        
 

NOLAD's as reported revenues increased 8.0% year-over-year, supported by
constant currency growth of 7.0% and a slightly positive currency
translation impact. Systemwide comparable sales increased 5.9%, driven
by average check growth combined with an increase in traffic across all
of the division's markets.

Marketing activities in the quarter included the continuation of the
affordability platform "McTrío 3x3" in Mexico and the launch of the
premium Guacamole and BBQ Crispy Onion burgers in the Signature Line.
The dessert category performed well with the continuation of the
McFlurry Hershey's Cookies and Crème Bites, and the launch of the
McFlurry Hershey's Mini Kisses. Also in the quarter, the Company
included "Despicable Me 3" in the Happy Meal.

As reported Adjusted EBITDA decreased by 6.1%, or 4.2% on a constant
currency basis. The Adjusted EBITDA margin contraction of 140 basis
points to 9.7% in the third quarter was primarily the result of higher
Occupancy and other operating expenses, largely due to higher utility
costs, Royalty Fees, and Payroll costs as a percentage of revenues. This
was partially offset by refranchising inflows. The increase in Royalty
Fees paid to McDonald's Corporation became effective August 3, 2017, as
per the Master Franchise Agreement.

SLAD

 
Figure 5. SLAD Division: Key Financial Results

(In millions of U.S. dollars, except as noted)

       

3Q16
(a)

 

Currency
Translation
(b)

 

Constant
Currency
Growth
(c)

 

3Q17
(a+b+c)

 

% As
Reported

 

% Constant
Currency

Total Restaurants (Units)       383       386   0.8 %  
 
Total Revenues 222.1 (24.1 ) 54.4 252.3 13.6 % 24.5 %
Systemwide Comparable Sales 24.9 %
Adjusted EBITDA 22.8 (2.7 ) 6.2 26.3 15.3 % 27.2 %
Adjusted EBITDA Margin       10.3 %           10.4 %        
 

SLAD's as reported revenues increased 13.6% as constant currency growth
of 24.5% more than offset negative currency translation impacts
resulting from the 16% year-over-year average depreciation of the
Argentine peso. Systemwide comparable sales increased 24.9%, driven by
the combination of average check growth and an increase in traffic.

Marketing activities in the quarter included the continuation of the
affordability platform "Combo del Día." Also in the quarter, the Company
launched the Guacamole burger in the Signature Line and the McFlurry
Abuela Goye in the dessert category. The Happy Meal performed well with
"Despicable Me 3" and "Emoji" during the quarter.

Adjusted EBITDA increased 15.3% on an as reported basis and rose 27.2%
in constant currency terms. The Adjusted EBITDA margin expanded 10 basis
points to 10.4%, mainly driven by efficiencies in F&P costs, partially
offset by higher Payroll expenses. Royalty Fees increased as a
percentage of revenues effective August 3, 2017, which was partially
offset by the growth support that McDonald's Corporation began providing
during the quarter.

Caribbean Division

                             
Figure 6. Caribbean Division: Key Financial Results

(In millions of U.S. dollars, except as noted)

       

3Q16
(a)

 

Currency
Translation
(b)

 

Constant
Currency
Growth
(c)

 

3Q17
(a+b+c)

 

% As
Reported

 

% Constant
Currency

Total Restaurants (Units)       352       350   -0.6 %  
 
Total Revenues 101.8 (55.4 ) 63.0 109.4 7.5 % 61.9 %
Systemwide Comparable Sales 87.2 %
Adjusted EBITDA 6.2 (20.0 ) 19.5 5.6 -8.7 % 316.6 %
Adjusted EBITDA Margin       6.0 %           5.1 %        
 

The Caribbean division's as reported revenues increased 7.5%, as
constant currency growth of 61.9% exceeded currency translation impacts
derived from the remeasurement of the results of the Venezuelan
operation at a weaker year-over-year average exchange rate. Systemwide
comparable sales increased 87.2%, with inflation-driven average check
growth more than offsetting a slight decrease in total traffic in the
division.

Marketing activities in the quarter included the launch of the
affordability platform "McCombo del Día" in Colombia and the
continuation of the BBQ Crispy Onion premium burger in the Signature
Line. Also in the quarter, the Company introduced the McFlurry Jet
Cookies and Cream in the dessert category and included "Despicable Me 3"
and "Emoji" in the Happy Meal.

As reported Adjusted EBITDA totaled $5.6 million in the third quarter,
compared with $6.2 million in the prior year quarter. The Adjusted
EBITDA margin contracted 90 basis points to 5.1%, mainly driven by
higher F&P costs and Occupancy and Other Operating expenses, partially
offset by efficiencies in Payroll and G&A expenses as a percentage of
revenues.

The Caribbean division's third quarter results were impacted by the
effects of hurricanes Irma and Maria in Puerto Rico and the US Virgin
Islands. The Company is working to restore full operations in these
markets as soon as possible and does not expect its medium to long-term
consolidated results to suffer materially given that it has sufficient
insurance coverage for both the property loss and the interruption to
its business that resulted from these disasters.

Caribbean Division – excluding Venezuela

                             
Figure 7. Caribbean Division - Excluding Venezuela: Key Financial
Results

(In millions of U.S. dollars, except as noted)

       

3Q16
(a)

 

Currency
Translation
(b)

 

Constant
Currency
Growth
(c)

 

3Q17
(a+b+c)

 

% As
Reported

 

% Constant
Currency

Total Restaurants (Units)       219       220   0.5 %  
 
Total Revenues 92.1 0.8 1.5 94.4 2.5 % 1.6 %
Systemwide Comparable Sales 0.0 %
Adjusted EBITDA 5.6 0.2 (0.7 ) 5.1 -9.1 % -12.2 %
Adjusted EBITDA Margin       6.1 %           5.4 %        
 

As reported revenues in the Caribbean division, excluding Venezuela,
increased 2.5%, driven by constant currency growth of 1.6% and a
positive currency translation impact. Comparable sales remained flat as
average check growth was offset by a decline in traffic, primarily in
Puerto Rico and the US Virgin Islands.

Adjusted EBITDA totaled $5.1 million, compared to $5.6 million in the
same period of 2016. The Adjusted EBITDA margin contracted 70 basis
points to 5.4%, mainly driven by higher Occupancy and Other Operating
expenses, F&P costs and Royalty Fees, partially offset by efficiencies
in Payroll and G&A expenses as a percentage of revenues.

The Caribbean division's third quarter results, excluding Venezuela,
were impacted by the effects of hurricanes Irma and Maria in Puerto Rico
and the US Virgin Islands. The Company is working to restore full
operations in these markets as soon as possible and does not expect its
medium to long-term consolidated results to suffer materially given that
it has sufficient insurance coverage for both the property loss and the
interruption to its business that resulted from these disasters.

New Unit Development

                         
Figure 8. Total Restaurants (eop)*                        
        September

2017

  June

2017

  March

2017

  December

2016

  September

2016

Brazil       910   910   904   902   890
NOLAD 514 515 517 517 515
SLAD 386 386 385 384 383
Caribbean 350 349 350 353 352
TOTAL 2,160 2,160 2,156 2,156 2,140
LTM Net Openings       20   25   20   15   18
*   Considers Company-operated and franchised restaurants at period-end
 

The Company opened 39 new restaurants during the twelve-month period
ended September 30, 2017, resulting in a total of 2,160 restaurants.
Also during the period, the Company added 189 Dessert Centers, bringing
the total to 2,791. McCafés totaled 317 as of September 30, 2017.

Balance Sheet & Cash Flow Highlights

Cash and cash equivalents were $269.8 million at September 30, 2017. The
Company's total financial debt (including derivative instruments) was
$645.0 million. Net debt (Total Financial Debt minus Cash and
cash equivalents) was $375.2 million and the Net Debt/Adjusted EBITDA
ratio was 1.3x at September 30, 2017.

Net cash provided by operating activities totaled $67.0 million for the
quarter, and cash used in financing activities amounted to $1.7 million.
Cash used in net investing activities totaled $33.3 million, which
included $11.3 million from asset monetization proceeds less total
capital expenditures of $43.4 million.

 
Figure 9. Consolidated Financial Ratios

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

      September 30   December 31
        2017   2016
Cash & cash equivalents 269,764 194,803
Total Financial Debt (i) 644,967 610,170
Net Financial Debt (ii) 375,203 415,367
Total Financial Debt / LTM Adjusted EBITDA ratio 2.3 2.6
Net Financial Debt / LTM Adjusted EBITDA ratio       1.3   1.7

(i)

 

Total financial debt includes short-term debt, long-term debt and
derivative instruments.

(ii)

Total financial debt less cash and cash equivalents.

 

Financial Results for the First Nine Months of
2017

For the nine months ended September 30, 2017, the Company's as reported
revenues increased by 14.2% to $2,422.6 million, largely driven by
constant currency growth of 17.6%. As reported Adjusted EBITDA was
$193.5 million, a 27.2% increase compared to the first nine months of
2016. On a constant currency basis, Adjusted EBITDA increased by 46.1%.
The reported Adjusted EBITDA margin expanded by 80 basis points to 8.0%,
driven by lower F&P costs, Occupancy and Other Operating expenses, and
G&A as a percentage of revenues, partially offset by higher Payroll
expenses.

Consolidated net income amounted to $59.9 million, compared with net
income of $57.7 million in the first nine months of 2016. The result
reflects higher operating results in the first nine months of 2017,
which were offset by a negative variance in non-cash foreign currency
exchange results and net interest expenses. The Company reported an
income tax expense of $31.9 million in the first nine months of 2017,
compared to an income tax expense of $40.7 million in the comparable
prior year period.

Excluding the Venezuelan operation, the Company's as reported revenues
increased by 13.4%, and 10.6% on a constant currency basis. As reported
Adjusted EBITDA rose by 25.3%, and by 17.9%, on a constant currency
basis. The reported Adjusted EBITDA margin expanded by 80 basis points
to 8.2%, mainly driven by efficiencies in F&P costs as a percentage of
revenues.

During the first nine months of 2017, capital expenditures totaled
$108.6 million.

Quarter Highlights & Recent Developments

Re-Development Initiative

Since the Company announced its re-development initiative in March 2015
and through September 30, 2017, it has received cumulative cash proceeds
of approximately $150 million, from the re-development of certain
properties primarily in Mexico. The Company used $80 million of these
funds for debt reduction.

The Company expects the total proceeds from this initiative to reach
approximately $170 million with the final amounts to be collected by the
end of 2017.

Impact from hurricanes in Puerto Rico and the
US Virgin Islands

During the month of September, Puerto Rico and the US Virgin Islands
were impacted by hurricanes Irma and Maria. The Company does not expect
a material impact on its financial results given that it has sufficient
insurance coverage for both the property loss and the interruption to
its business that resulted from these disasters. In the short-term, the
Company is working with its insurance providers to assess and fully
cover the impact of the damages in these two markets, and expects to
have the majority of its restaurants back in operation by the end of the
year.

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.

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 and related contingencies
of property and equipment; impairment of long-lived assets and goodwill;
reorganization and optimization plan expenses; 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 2,100 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 2017. 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.

Third Quarter 2017 Consolidated Results
(In thousands of
U.S. dollars, except per share data)

 
Figure 10. Third Quarter & First Nine Months of 2017 Consolidated
Results

(In thousands of U.S. dollars, except per share data)

      For Three-Months ended   For Nine-Months ended
September 30, September 30,
        2017   2016 2017   2016
REVENUES    
Sales by Company-operated restaurants 803,351 742,767 2,310,980 2,032,856
Revenues from franchised restaurants         39,115       32,889     111,664       88,615  
Total Revenues         842,466       775,656     2,422,644       2,121,471  
OPERATING COSTS AND EXPENSES
Company-operated restaurant expenses:
Food and paper (283,892 ) (269,737 ) (820,097 ) (740,453 )
Payroll and employee benefits (174,023 ) (160,671 ) (508,914 ) (444,682 )
Occupancy and other operating expenses (213,467 ) (198,449 ) (623,215 ) (557,546 )
Royalty fees (40,092 ) (37,689 ) (117,450 ) (103,388 )
Franchised restaurants - occupancy expenses (17,000 ) (14,233 ) (49,651 ) (40,023 )
General and administrative expenses (60,203 ) (55,818 ) (175,950 ) (157,817 )
Other operating income, net         (6,021 )     (502 )   45,314       46,921  
Total operating costs and expenses         (794,698 )     (737,099 )   (2,249,963 )     (1,996,988 )
Operating income         47,768       38,557     172,681       124,483  
Net interest expense (15,045 ) (18,196 ) (54,503 ) (53,233 )
Gain (Loss) from derivative instruments 195 (22 ) (7,036 ) (52 )
Foreign currency exchange results 5,635 (3,306 ) (18,476 ) 28,900
Other non-operating expense, net         517       (796 )   (607 )     (1,562 )
Income (loss) before income taxes         39,070       16,237     92,059       98,536  
Income tax (expense) benefit         (15,537 )     (18,003 )   (31,888 )     (40,732 )
Net income (loss)         23,533       (1,766 )   60,171       57,804  
Less: Net income attributable to non-controlling interests         (128 )     (68 )   (277 )     (145 )
Net income (loss) attributable to Arcos Dorados Holdings Inc.         23,405       (1,834 )   59,894       57,659  
Earnings (loss) per share information ($ per share):
Basic net income per common share $ 0.11 $ (0.01 ) $ 0.28 $ 0.27
Weighted-average number of common shares outstanding-Basic         211,072,340       210,710,861     210,889,576       210,625,380  
Adjusted EBITDA Reconciliation                  
Operating income 47,768 38,557 172,681 124,483
Depreciation and amortization 25,298 24,736 73,190 74,326
Operating charges excluded from EBITDA computation         1,170       (135 )   (52,354 )     (46,640 )
Adjusted EBITDA         74,236       63,158     193,517       152,169  
Adjusted EBITDA Margin as % of total revenues         8.8 %     8.1 %   8.0 %     7.2 %
 

Third Quarter 2017 Results by Division
(In thousands of
U.S. dollars)

                                     
Figure 11. Third Quarter & First Nine Months of 2017 Consolidated
Results by Division

(In thousands of U.S. dollars)

      3Q   YTD
Three-Months ended   % Incr.   Constant Nine-Months ended   % Incr.   Constant
September 30,   /   Currency September 30,   /   Currency
        2017   2016   (Decr)   Incr/(Decr)% 2017   2016   (Decr)   Incr/(Decr)%

Revenues

   
Brazil 378,404 357,034 6.0 % 3.3 % 1,093,338 955,062 14.5 % 3.1 %
Caribbean 109,426 101,759 7.5 % 61.9 % 331,941 298,045 11.4 % 54.3 %
NOLAD 102,301 94,743 8.0 % 7.0 % 282,770 268,203 5.4 % 8.1 %
SLAD 252,335 222,120 13.6 % 24.5 % 714,595 600,161 19.1 % 26.6 %
TOTAL 842,466 775,656 8.6 % 17.5 % 2,422,644 2,121,471 14.2 % 17.6 %
 
 

Operating Income (loss)

Brazil 35,073 27,602 27.1 % 23.7 % 99,032 71,962 37.6 % 24.1 %
Caribbean (448 ) (2,594 ) 82.7 % 916.0 % (4,754 ) (16,959 ) 72.0 % 334.7 %
NOLAD 4,396 5,441 -19.2 % -13.9 % 62,606 55,800 12.2 % 21.4 %
SLAD 22,684 19,543 16.1 % 29.0 % 53,625 44,496 20.5 % 29.2 %
Corporate and Other (13,937 ) (11,435 ) -21.9 % -33.7 % (37,828 ) (30,816 ) -22.8 % -31.2 %
TOTAL 47,768 38,557 23.9 % 81.4 % 172,681 124,483 38.7 % 71.9 %
 
 

Adjusted EBITDA

Brazil 49,258 39,172 25.7 % 22.5 % 139,912 104,967 33.3 % 20.2 %
Caribbean 5,615 6,150 -8.7 % 316.6 % 13,372 10,067 32.8 % 432.0 %
NOLAD 9,879 10,518 -6.1 % -4.2 % 23,456 25,983 -9.7 % -8.1 %
SLAD 26,290 22,796 15.3 % 27.2 % 64,790 54,880 18.1 % 25.6 %
Corporate and Other (16,806 ) (15,478 ) -8.6 % -16.1 % (48,013 ) (43,728 ) -9.8 % -14.8 %
TOTAL       74,236     63,158     17.5 %   49.9 %   193,517     152,169     27.2 %   46.1 %
 
                     
Figure 12. Average Exchange Rate per Quarter*
        Brazil   Mexico   Argentina   Venezuela
3Q17       3.16   17.81   17.27   3,035.00
3Q16       3.25   18.76   14.95   646.01

*

 

Local $ per 1 US$

 

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

             
Figure 13. Summarized Consolidated Balance Sheets

(In thousands of U.S. dollars)

      September 30   December 31
        2017   2016
ASSETS
Current assets
Cash and cash equivalents 269,764 194,803
Accounts and notes receivable, net 82,675 83,239
Other current assets (1)       154,848     167,148  
Total current assets       507,287     445,190  
Non-current assets
Property and equipment, net 897,169 847,966
Net intangible assets and goodwill 42,553 43,044
Deferred income taxes 66,360 70,446
Other non-current assets (2)       131,923     98,407  
Total non-current assets       1,138,005     1,059,863  
Total assets       1,645,292     1,505,053  
LIABILITIES AND EQUITY
Current liabilities
Accounts payable 218,293 217,914
Taxes payable (3) 105,842 112,593
Accrued payroll and other liabilities 147,579 144,442
Other current liabilities (4) 19,972 24,620
Provision for contingencies 756 764
Financial debt (5) 18,179 47,975
Deferred income taxes       0     0  
Total current liabilities       510,621     548,308  
Non-current liabilities
Accrued payroll and other liabilities 27,731 23,760
Provision for contingencies 25,032 17,348
Financial debt (6) 644,705 562,195
Deferred income taxes       2,213     1,866  
Total non-current liabilities       699,681     605,169  
Total liabilities       1,210,302     1,153,477  
Equity
Class A shares of common stock 376,732 373,969
Class B shares of common stock 132,915 132,915
Additional paid-in capital 13,293 13,788
Retained earnings 331,862 271,968
Accumulated other comprehensive losses       (420,462 )   (441,649 )
Total Arcos Dorados Holdings Inc shareholders' equity       434,340     350,991  
Non-controlling interest in subsidiaries       650     585  
Total equity       434,990     351,576  
Total liabilities and equity       1,645,292     1,505,053  

(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
Instrument", 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".

 

____________________________

1   For definitions please refer to page 14 of this document.

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