MONTEVIDEO, Uruguay--(BUSINESS WIRE)--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 three months ended December 31, 2020, and audited results for the full year 2020.
Fourth Quarter 2020 Highlights – Excluding Venezuela
- Consolidated revenues totaled $605.7 million, 19.5% lower in US dollars, or 5.3% lower on a constant currency basis1, versus the prior year period.
- Systemwide comparable sales1 declined 7.9% versus the prior year quarter, despite a tough comparison, reflecting another strong sequential quarterly improvement.
- Food and Paper costs declined by nearly 35 basis points as a percentage of sales at company-operated restaurants, compared with the prior year period.
- All four Divisions added to a positive Consolidated Adjusted EBITDA1 margin of 9.6%, compared to 5.5% in 3Q20 and 13.5% in 4Q19, which included a 130 basis point contribution from a non-cash bad debt reserve reversal in Puerto Rico.
- Basic net income per share was $0.12, compared to basic net income of $0.18 per share in the prior year quarter.
Full Year 2020 Highlights – Excluding Venezuela
- Consolidated revenues totaled $2.0 billion, a 32.9% decrease in US dollars, due to the impact of the COVID-19 pandemic and the depreciation of several local currencies. On a constant currency basis, consolidated revenues declined 20.0%.
- Systemwide comparable sales declined 22.3% versus 2019.
- Food and Paper costs were 10 basis points lower as a percentage of sales at company-operated restaurants versus 2019, successfully off-setting significant cost pressures.
- Consolidated Adjusted EBITDA of $72.5 million was 75.5% and 75.9% lower in US dollars and on a constant currency basis, respectively, impacted by the COVID-19 pandemic.
- Consolidated Adjusted EBITDA margin contracted 6.3 percentage points to 3.7%, primarily due to the impact of the pandemic on the Company’s ability to leverage its fixed costs.
- G&A expenses decreased 19.2% in US dollars and 2.0% in constant currency terms.
- Basic net loss per share was $(0.69), compared to net income per share of $0.43 in the previous year.
“In 2020 we faced the most unexpected and unprecedented crisis of our lifetimes, forcing us to find new ways to work in our restaurants and offices while managing a business with an enormous geographic footprint and a vast network of suppliers and sub-franchisees. We met the challenge because of our proactive and aggressive responses to the crisis. But also because we have historically taken a long-term, strategic approach to growth. Our best-in-class free-standing restaurant footprint supported the strong growth of Drive-thru, Delivery and Digital throughout the year. We strengthened the McDonald’s brand through significant market share gains in many key markets. The McProtegidos program also contributed to Brand trust, consolidating McDonald’s as the safest restaurant experience in the QSR industry. Financial results improved steadily during the second half of 2020 and our disciplined financial management ensured a relatively modest increase in financial leverage despite the material impact of the pandemic on full year results,” said Marcelo Rabach, Chief Executive Officer of Arcos Dorados.
“Looking ahead, we are increasing our commitment to make a positive influence on the communities we serve. I am proud to announce that Arcos Dorados is the first major restaurant operator in Latin America and the Caribbean to incorporate ESG indicators in its executive variable compensation program. Starting this year, in order to reach their full variable compensation targets, our bonus-eligible employees will need to meet objectives related to youth opportunity as well as responsible and ethical business practices. With respect to this year’s financial results, we expect some uncertainty in the short-term, but we firmly believe Arcos Dorados is poised for long-term success as market conditions normalize over the course of 2021,” he concluded.
Fourth Quarter 2020 Results
Consolidated
| Figure 1. AD Holdings Inc Consolidated: Key Financial Results (In millions of U.S. dollars, except as noted) |
||||||
| 4Q19 (a) |
Currency Translation - Excl. Venezuela (b) |
Constant Currency Growth - Excl. Venezuela (c) |
Venezuela (d) |
4Q20 (a+b+c+d) |
% As Reported |
|
| Total Restaurants (Units) | 2,293 |
2,236 |
||||
| Sales by Company-operated Restaurants | 715.3 |
(100.3) |
(34.3) |
(0.3) |
580.4 |
-18.9% |
| Revenues from franchised restaurants | 39.1 |
(6.6) |
(5.5) |
(0.1) |
27.0 |
-30.9% |
| Total Revenues | 754.4 |
(106.9) |
(39.7) |
(0.4) |
607.4 |
-19.5% |
| Adjusted EBITDA | 100.4 |
(10.1) |
(33.2) |
0.4 |
57.5 |
-42.8% |
| Adjusted EBITDA Margin | 13.3% |
9.5% |
||||
| Net income (loss) attributable to AD | 33.0 |
(4.5) |
(8.6) |
2.1 |
22.0 |
-33.1% |
| No. of shares outstanding (thousands) | 204,070 |
207,266 |
||||
| EPS (US$/Share) | 0.16 |
0.11 |
||||
(4Q20 = 4Q19 + Currency Translation Excl. Venezuela + Constant Currency Growth Excl. Venezuela + Venezuela). Refer to “Definitions” section for further detail. |
||||||
Arcos Dorados’ consolidated results may continue to be impacted by Venezuela’s macroeconomic volatility, including the ongoing hyperinflationary environment, which has historically led the Company to record significant non-cash accounting charges to operations in this market. As such, the discussion of the Company’s operating performance is focused on consolidated results that exclude Venezuela.
Main variations in Other Operating Income / (Expenses), net
Included in Adjusted EBITDA: The year-over-year variation is mainly explained by the positive impact of the recovery of a provision for contingencies in the fourth quarter of 2019 versus the negative impact of a tax-related provision in the fourth quarter of 2020, both in Brazil.
Excluded from Adjusted EBITDA: There were no material variations.
Fourth quarter net income attributable to the Company totaled $22.0 million, compared to net income of $33.0 million in the same period of 2019. Arcos Dorados’ recorded earnings of $0.11 per share in the fourth quarter of 2020 compared to earnings of $0.16 per share in the corresponding 2019 period. Total weighted average shares for the fourth quarter of 2020 amounted to 207,265,620 compared to 204,069,509 in the prior year’s quarter.
Consolidated – excluding Venezuela
| Figure 2. AD Holdings Inc Consolidated - Excluding Venezuela: Key Financial Results (In millions of U.S. dollars, except as noted) |
||||||
| 4Q19 (a) |
Currency Translation (b) |
Constant Currency Growth (c) |
4Q20 (a+b+c) |
% US
|
% Constant
|
|
| Total Restaurants (Units) | 2,173 |
2,126 |
||||
| Sales by Company-operated Restaurants | 713.5 |
(100.3) |
(34.3) |
578.9 |
-18.9% |
-4.8% |
| Revenues from franchised restaurants | 38.8 |
(6.6) |
(5.5) |
26.8 |
-31.0% |
-14.1% |
| Total Revenues | 752.3 |
(106.9) |
(39.7) |
605.7 |
-19.5% |
-5.3% |
| Systemwide Comparable Sales | -7.9% |
|||||
| Adjusted EBITDA | 101.7 |
(10.1) |
(33.2) |
58.4 |
-42.6% |
-32.7% |
| Adjusted EBITDA Margin | 13.5% |
9.6% |
-3.9% |
|||
| Net income (loss) attributable to AD | 37.2 |
(4.5) |
(8.6) |
24.1 |
-35.3% |
-23.1% |
| No. of shares outstanding (thousands) | 204,070 |
207,266 |
||||
| EPS (US$/Share) | 0.18 |
0.12 |
||||
Excluding Arcos Dorados’ Venezuelan operation, total revenues in US dollars decreased 19.5% year-over-year, heavily impacted by the significant average depreciation of key local currencies, including the Brazilian real and the Argentine peso. Constant currency revenues declined 5.3% in the quarter, impacted by the COVID-19 pandemic.
The percentage of restaurants operating at least one sales segment continued to increase sequentially from 55% at the end of the first quarter to 88%, 95% and 99% at the end of the second, third and fourth quarters, respectively. Importantly, 77% of restaurants were fully opened at the end of the fourth quarter, compared to 59% at the end of the third quarter. The Company was also able to operate the vast majority of its dessert centers, throughout most of the quarter.
The sequential improvement in quarterly sales performance established during the third quarter continued during the fourth quarter, despite the difficult comparison with the strong finish in 2019. Systemwide comparable sales for the fourth quarter were down 7.9%, following a decline of 27.2% and 51.0% in the third and second quarters, respectively.
Systemwide comparable sales continued growing versus the prior year in the Company’s free-standing restaurants, including in Brazil and in many of the markets of the Caribbean division, while sales and guest traffic in mall and food court restaurants remained challenging. The Drive-Thru and Delivery segments, which benefit from the Company’s unmatched and growing footprint of free-standing restaurants, continued supporting results and important market share gains across many of its largest markets.
Fourth quarter consolidated Adjusted EBITDA, excluding Venezuela, reached $58.4 million, and was positive in all four divisions, as a result of the strong sales recovery and efficient cost management during the COVID-19 pandemic. Adjusted EBITDA margin was down 390 basis points, or 260 basis points when adjusted for Puerto Rico’s $10 million non-cash bad debt reserve reversal included in the prior year result. Higher margins in the Caribbean and SLAD were offset by margin contractions in Brazil and NOLAD. Notably, the sustained recovery in sales, combined with operational adjustments and cost management actions, drove efficiency gains and generated margin expansion at the restaurant-level versus the prior year.
Consolidated G&A expenses decreased 15.4% year-over-year in US dollars, or 0.2% in constant currency terms, despite weighted inflation on G&A of 9.1%.
Non-operating Results
Arcos Dorados’ non-operating results for the fourth quarter, excluding Venezuela, included a $13.5 million non-cash foreign currency exchange gain, compared to a non-cash gain of $2.7 million in the same period of 2019. This year’s gain mainly reflects the impact of the appreciation of the Brazilian real, from the previous quarter end, on intercompany balances. The Company also recorded a gain of $7.6 million, related to transactions with certain securities. Net interest expense was $0.9 million higher year-over-year. Excluding Venezuela, the Company estimated income tax expenses of $6.2 million in the fourth quarter, compared to $14.8 million in the prior-year period.
Fourth quarter net income attributable to the Company, excluding Venezuela, totaled $24.1 million, compared to net income of $37.2 million in the prior year period. Earnings per share was $0.12 in the fourth quarter 2020, excluding Venezuela, compared to earnings per share of $0.18 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) |
||||||
| 4Q19 (a) |
Currency Translation (b) |
Constant Currency Growth (c) |
4Q20 (a+b+c) |
% As Reported |
% Constant Currency |
|
| Total Restaurants (Units) | 1,023 |
1,020 |
||||
| Total Revenues | 369.3 |
(78.0) |
(37.5) |
253.7 |
-31.3% |
-10.2% |
| Systemwide Comparable Sales | -10.6% |
|||||
| Adjusted EBITDA | 79.3 |
(10.0) |
(36.7) |
32.6 |
-58.9% |
-46.3% |
| Adjusted EBITDA Margin | 21.5% |
12.8% |
-8.7% |
|||
As reported revenues decreased 31.3%, mainly due to the 24% year-over-year average depreciation of the Brazilian real against the US dollar. Revenues declined 10.2% on a constant currency basis due to government-imposed operating restrictions related to the pandemic. Systemwide comparable sales decreased 10.6%, with a solid sequential improvement versus a decline of 26.2% in the third quarter and 46.3% in the second quarter.
Almost 55% of the division’s restaurants are street-facing, including more than 460 free-standing restaurants, which generated positive systemwide comparable sales growth on a year-over-year basis, on top of the prior year quarter’s strong results. Mall-based restaurant performance remained challenging in the quarter due to capacity restrictions impacting counter and dessert center sales. The Brazil division was operating substantially all its restaurants at the end of the quarter with 65% of restaurants operating all sales segments.
Marketing activities for the fourth quarter focused on the Company’s iconic products, such as a Cheddar McMelt campaign, which received strong consumer response through digital and social media. Also during the quarter, the Company received the prestigious Effie Advertiser of the Year award across all industries, which recognizes the use of world class creativity to drive strong business results. The Company continued strengthening the Drive-thru segment through exclusive digital promotions and dedicated media. Delivery was also a key sales driver during the quarter, growing triple digits versus the prior year. Downloads of the McDonald’s App outperformed the nearest competitor by 70% in the quarter.
As reported Adjusted EBITDA in the division reached $32.6 million in the quarter, up around 50% versus the third quarter. Compared with the prior year period, Adjusted EBITDA margin was down 870 basis points. Last year’s Adjusted EBITDA included the positive impact of the recovery of a provision for contingencies, whereas this year’s Adjusted EBITDA included the negative impact of a tax provision. Excluding these one-offs, Adjusted EBITDA margin contracted 490 basis points versus the prior year quarter as the decline in sales outpaced the reduction in costs and expenses.
NOLAD
| Figure 4. NOLAD Division: Key Financial Results (In millions of U.S. dollars, except as noted) |
||||||
| 4Q19 (a) |
Currency Translation (b) |
Constant Currency Growth (c) |
4Q20 (a+b+c) |
% As Reported |
% Constant Currency |
|
| Total Restaurants (Units) | 530 |
507 |
||||
| Total Revenues | 114.4 |
(4.4) |
(14.5) |
95.6 |
-16.5% |
-12.6% |
| Systemwide Comparable Sales | -14.8% |
|||||
| Adjusted EBITDA | 12.5 |
(0.1) |
(3.9) |
8.4 |
-32.7% |
-31.3% |
| Adjusted EBITDA Margin | 11.0% |
8.8% |
-2.2% |
|||
As reported revenues decreased 16.5%, or 12.6% on a constant currency basis, primarily due to the ongoing effects of the pandemic. Systemwide comparable sales decreased 14.8%, with a strong sequential improvement from declines of 35.6% in the third quarter and 50.7% in the second quarter.
Substantially all of the division’s restaurants were open with most operating all sales segments at the end of the fourth quarter. Around one third of the restaurants in Panama were closed in October, as shopping malls had not yet reopened in the country.
Marketing activities in the fourth quarter focused on the Company’s core products in all three markets, all with strong customer response and engagement. Delivery was also a key sales driver for the Company, enhanced by activations with the delivery aggregators promoting family bundles and special packs for group occasions. Also in the quarter, the Company continued strengthening the Drive-thru segment with operational improvements, enhancing customer experience and the launch of the loyalty program “Club VIP Automac” in all three markets.
As reported Adjusted EBITDA reached $8.4 million in the fourth quarter, up significantly from $0.7 million in the third quarter. The result represents a year-over-year decline of 32.7%, or 31.3% in constant currency terms, due to the decline in revenue and a 2.2 percentage point contraction in the Adjusted EBITDA margin as the decline in sales outpaced the reduction in costs and expenses during the quarter.
SLAD
| Figure 5. SLAD Division: Key Financial Results (In millions of U.S. dollars, except as noted) |
||||||
| 4Q19 (a) |
Currency Translation (b) |
Constant Currency Growth (c) |
4Q20 (a+b+c) |
% As Reported |
% Constant Currency |
|
| Total Restaurants (Units) | 404 |
391 |
||||
| Total Revenues | 169.3 |
(24.3) |
(6.9) |
138.1 |
-18.4% |
-4.1% |
| Systemwide Comparable Sales | -3.0% |
|||||
| Adjusted EBITDA | 14.0 |
(3.6) |
6.3 |
16.7 |
19.6% |
44.8% |
| Adjusted EBITDA Margin | 8.3% |
12.1% |
3.8% |
|||
As reported revenues decreased 18.4%, due largely to the 26% year-over-year average depreciation of the Argentine peso against the US dollar. Continued operating restrictions led to a constant currency revenue decline of 4.1%. Systemwide comparable sales decreased 3.0%, with another significant sequential improvement compared with a decline of 37.8% in the third quarter and 68.2% in the second quarter.
The SLAD division was operating 99% of its restaurants at the end of the quarter, and 73% were operating all sales segments, versus only 30% at the end of the third quarter.
Marketing activities for the fourth quarter focused on the Company’s core products and on leveraging its competitive advantages. Activities included the launch of a Drive-thru mobility campaign, focused on promoting the different kinds of mobility for the segment in Argentina. In Uruguay, the Company continued innovating with the launch of the Triple Quarter Pounder with Cheese, as a line extension of this beloved sandwich, driving incremental traffic. The Company also launched the McFlurry Crossover, with aspirational chocolate brands KitKat, Oreo and M&M’s mixed simultaneously.
As reported Adjusted EBITDA totaled $16.7 million, an increase of 19.6% versus the prior year, or 44.8% in constant currency terms. The growth was driven by a recovery in the Chilean business compared with the fourth quarter of 2019, which was impacted by the country’s social unrest, combined with a solid result in Argentina. Adjusted EBITDA margin rose 3.8 percentage points, boosted by the strong recovery in sales that helped drive cost and expense leverage.
Caribbean Division
| Figure 6. Caribbean Division: Key Financial Results (In millions of U.S. dollars, except as noted) |
||||||
| 4Q19 (a) |
Currency Translation - Excl. Venezuela (b) |
Constant Currency Growth - Excl. Venezuela (c) |
Venezuela (d) |
4Q20 (a+b+c+d) |
% As Reported |
|
| Total Restaurants (Units) | 336 |
318 |
||||
| Total Revenues | 101.3 |
(0.2) |
19.2 |
(0.3) |
120.0 |
18.4% |
| Adjusted EBITDA | 13.0 |
0.1 |
2.4 |
0.5 |
16.0 |
22.9% |
| Adjusted EBITDA Margin | 12.9% |
13.4% |
0.5% |
|||
The Caribbean division’s results may continue to be impacted by Venezuela’s macroeconomic volatility, including the ongoing hyperinflationary environment, which has historically led the Company to record significant non-cash accounting charges to operations in this market. As such, the discussion of the Caribbean division’s operating performance focuses on results that exclude the Company’s operations in this country.
Caribbean Division – excluding Venezuela
| Figure 7. Caribbean Division - Excluding Venezuela: Key Financial Results (In millions of U.S. dollars, except as noted) |
||||||
| 4Q19 (a) |
Currency Translation (b) |
Constant Currency Growth (c) |
4Q20 (a+b+c) |
% US Dollars |
% Constant Currency |
|
| Total Restaurants (Units) | 216 |
208 |
||||
| Total Revenues | 99.3 |
(0.2) |
19.2 |
118.3 |
19.2% |
19.3% |
| Systemwide Comparable Sales | 7.4% |
|||||
| Adjusted EBITDA | 14.4 |
0.1 |
2.4 |
16.9 |
17.4% |
16.7% |
| Adjusted EBITDA Margin | 14.5% |
14.3% |
-0.2% |
|||
Revenues in the Caribbean division, excluding Venezuela, increased 19.2% in US dollars, or 19.3% in constant currency terms. Systemwide comparable sales increased 7.4%, sustaining the sequential improvement compared with the 1.0% increase in the third quarter and 40.4% decline in the second quarter. Total revenue growth also reflects 100% company-operated restaurants in Puerto Rico in the fourth quarter of 2020, versus 67% in the prior year quarter.
At the end of the quarter, 98% of the division’s restaurants were operational, with 90% operating all sales segments. Free-standing restaurants, which represent 72% of the division’s footprint, continued generating positive sales growth versus the prior year.
Marketing activities for the fourth quarter in Puerto Rico focused on celebrating the Company’s iconic products such as the “Spicy McNuggets” campaign, which received strong consumer response with inventories lasting just three weeks, compared to the original four-week plan. Also, the “J Balvin Meal” campaign, that showcased three iconic products (Big Mac, McFries and McFlurry), and helped strengthen the Brand's ties with a younger target audience. The Company continued offering product innovation to consumers with the launch of the “Double Tasty” in Colombia and “American BBQ” in Puerto Rico, generating incremental sales in the Premium business. Also during the quarter, sales in the Drive-thru segment benefitted from exclusive promotions and dedicated media, especially in Colombia.
As reported Adjusted EBITDA reached $16.9 million, growing 17.4% year-over-year, or 16.7% in constant currency terms, despite the fact that last year’s Adjusted EBITDA included a $10 million non-cash bad debt reserve reversal in Puerto Rico. Adjusted EBITDA margin contracted 20 basis points to 14.3%, but expanded 990 basis points excluding the non-cash reserve reversal from the prior year result. Notably, profitability benefitted from the growth of Drive-thru sales in Colombia as well as better results in the US dollar and euro-generating markets of Puerto Rico and the French West Indies, respectively.
New Unit Development
| Figure 8. Total Restaurants (eop)* | |||||
| December 2020 |
September 2020 |
June 2020 |
March 2020 |
December 2019 |
|
| Brazil | 1,020 |
1,023 |
1,024 |
1,025 |
1,023 |
| NOLAD | 507 |
513 |
530 |
531 |
530 |
| SLAD | 391 |
397 |
402 |
406 |
404 |
| Caribbean | 318 |
324 |
335 |
336 |
336 |
| TOTAL | 2,236 |
2,257 |
2,291 |
2,298 |
2,293 |
| * Considers Company-operated and franchised restaurants at period-end | |||||
| Figure 9. Current Footprint | |||||||
| Store Type* | Total Restaurants |
Ownership | McCafes | Dessert Centers |
|||
| FS & IS | MS & FC | Company Operated |
Franchised | ||||
| Brazil | 553 |
467 |
1,020 |
610 |
410 |
77 |
2,012 |
| NOLAD | 314 |
193 |
507 |
353 |
154 |
13 |
588 |
| SLAD | 229 |
162 |
391 |
344 |
47 |
122 |
390 |
| Caribbean | 251 |
67 |
318 |
269 |
49 |
31 |
324 |
| TOTAL | 1,347 |
889 |
2,236 |
1,576 |
660 |
243 |
3,314 |
| * FS: Free-Standing; IS: In-Store; MS: Mall Store; FC: Food Court. | |||||||
The Company opened 9 new restaurants during the twelve-month period ended December 31, 2020. In-line with its guidance, excluding Venezuela, the Company optimized its footprint by closing 56 restaurants in 2020, with about 60% of closings between Mexico and Argentina. At the end of the fourth quarter, the Company had 733 Experience of the Future Restaurants.
Balance Sheet & Cash Flow Highlights
Cash and cash equivalents were $166.0 million and total financial debt (including the value of derivative instruments) was $673.2 million, as of December 31, 2020. Net debt (Total Financial Debt minus Cash and cash equivalents) was $507.2 million, up $33.4 million versus the prior year end, as cash provided by operating activities and the Company’s hedging strategy mostly offset the issuance of an additional $150 million of the 2027 Notes. The Net Debt/Adjusted EBITDA ratio was 7.4x at the end of the reporting period.
| Figure 10. Consolidated Financial Ratios (In thousands of U.S. dollars, except ratios) |
||
| December 31 | December 31 | |
2020 |
2019 |
|
| Cash & cash equivalents (i) | 165,989 |
121,905 |
| Total Financial Debt (ii) | 673,232 |
595,781 |
| Net Financial Debt (iii) | 507,243 |
473,876 |
| Total Financial Debt / LTM Adjusted EBITDA ratio | 9.9 |
2.0 |
| Net Financial Debt / LTM Adjusted EBITDA ratio | 7.4 |
1.6 |
| (i) Cash & cash equivalents includes Short-term investment | ||
| (ii)Total financial debt includes long-term debt, short-term debt, and derivative instruments (including the asset portion of derivatives amounting to $122.6 million and $57.8 million as a reduction of financial debt as of December 31, 2020 and December 31, 2019, respectively). | ||
| (iii) Total financial debt less cash and cash equivalents. | ||
Net cash generated from operating activities for the three months ended December 31, totaled $66.2 million, while cash used in net investing activities totaled $25.0 million. Capital expenditures in the quarter totaled $21.5 million, compared to $98.1 million in the previous year’s period. Net cash used in financing activities was $15.1 million.
Full Year 2020 – Excluding Venezuela
Excluding the Venezuelan operation and for the year ended December 31, 2020, the Company’s revenues, in US dollars, decreased by 32.9% to $2.0 billion, impacted by the COVID-19 pandemic and the depreciation of several of the region’s key currencies. This led to a significant de-leveraging of the Company’s costs and expenses, resulting in a consolidated Adjusted EBITDA margin contraction of 6.3 percentage points to 3.7% versus the prior year.
Consolidated net loss for full year 2020 amounted to $(141.8) million, compared with net income of $88.5 million in 2019. The Company recorded net loss per share of $(0.69), compared to earnings per share of $0.43 in the previous year.
Net cash provided by operating activities for 2020 totaled $16.0 million, while cash used in net investing activities totaled $88.7 million. Capital expenditures for full year 2020 totaled $86.3 million, compared to $265.2 million in the previous year. Net cash provided by financing activities was $125.6 million, which included the issuance of an additional $153.4 million in 2027 Notes as part of a liability management transaction in September and October 2020.
Recent Developments
Executive Variable Compensation Program
Arcos Dorados will incorporate Environmental, Social and Governance (ESG) indicators, beginning in 2021, for determining a portion of the variable compensation of its bonus-eligible employees. For the first year, the Company selected indicators related to youth opportunity as well as responsible and ethical business practices.
2021 Annual General Shareholders’ Meeting (AGM)
On March 12, 2021, the Company announced the date for its AGM, which will be held on April 28,
2021, in Bogota, Colombia, at 10:00 a.m. (local time), for all shareholders of record as of March 26, 2021. AGM materials are available on the investor relations website: www.arcosdorados.com/ir
Fourth Quarter and Full Year 2020 Earnings Webcast
A webcast to discuss the information contained in this press release will be held today, March 17, 2021, at 10 a.m. ET. In order to access the webcast, members of the investment community should follow this link Arcos Dorados Investor Update.
A replay of the webcast will be available later today through May 11, 2021 in the investor section of the Company’s website: www.arcosdorados.com/ir.
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; 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 11 of this earnings release include a reconciliation for Adjusted EBITDA. For more information, please see Adjusted EBITDA reconciliation in Note 21 of our 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, 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 with more than 2,200 restaurants, operated by the Company or by its sub-franchisees, that together employ over 100 thousand people (as of 12/31/2020). The Company is also committed to the development of the communities in which it operates, to providing young people their first formal job opportunities and to utilize its Scale for Good to achieve a positive environmental impact. Arcos Dorados is listed for trading 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 2020. 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.
Fourth Quarter & Full Year 2020 Consolidated Results
(In thousands of U.S. dollars, except per share data)
| Figure 11. Fourth Quarter & Full Year 2020 Consolidated Results (In thousands of U.S. dollars, except per share data) |
|||||||||||||
| For Three-Months ended | For Twelve-Months ended | ||||||||||||
| December 31, | December 31, | ||||||||||||
2020 |
2019 |
2020 |
2019 |
||||||||||
| REVENUES | |||||||||||||
| Sales by Company-operated restaurants |
|
580,397 |
|
|
715,300 |
|
|
1,894,618 |
|
|
2,812,287 |
|
|
| Revenues from franchised restaurants |
|
26,996 |
|
|
39,066 |
|
|
89,601 |
|
|
146,790 |
|
|
| Total Revenues |
|
607,392 |
|
|
754,366 |
|
|
1,984,219 |
|
|
2,959,077 |
|
|
| OPERATING COSTS AND EXPENSES | |||||||||||||
| Company-operated restaurant expenses: | |||||||||||||
| Food and paper |
|
(205,296 |
) |
|
(255,776 |
) |
|
(677,087 |
) |
|
(1,007,584 |
) |
|
| Payroll and employee benefits |
|
(111,546 |
) |
|
(140,364 |
) |
|
(413,074 |
) |
|
(567,653 |
) |
|
| Occupancy and other operating expenses |
|
(166,094 |
) |
|
(201,081 |
) |
|
(624,154 |
) |
|
(799,633 |
) |
|
| Royalty fees |
|
(33,886 |
) |
|
(38,969 |
) |
|
(110,957 |
) |
|
(155,388 |
) |
|
| Franchised restaurants - occupancy expenses |
|
(12,736 |
) |
|
(7,777 |
) |
|
(43,512 |
) |
|
(61,278 |
) |
|
| General and administrative expenses |
|
(46,774 |
) |
|
(55,302 |
) |
|
(171,382 |
) |
|
(212,515 |
) |
|
| Other operating income (expenses), net |
|
(9,340 |
) |
|
5,528 |
|
|
(10,807 |
) |
|
4,910 |
|
|
| Total operating costs and expenses |
|
(585,672 |
) |
|
(693,741 |
) |
|
(2,050,973 |
) |
|
(2,799,141 |
) |
|
| Operating (loss) income |
|
21,720 |
|
|
60,625 |
|
|
(66,754 |
) |
|
159,936 |
|
|
| Net interest expense |
|
(14,816 |
) |
|
(13,879 |
) |
|
(59,068 |
) |
|
(52,079 |
) |
|
| Gain (loss) from derivative instruments |
|
(1,915 |
) |
|
(1,350 |
) |
|
(2,297 |
) |
|
439 |
|
|
| Gain from securities |
|
7,606 |
|
|
- |
|
|
25,676 |
|
|
- |
|
|
| Foreign currency exchange results |
|
13,288 |
|
|
2,639 |
|
|
(31,707 |
) |
|
12,754 |
|
|
| Other non-operating expenses, net |
|
2,427 |
|
|
216 |
|
|
2,296 |
|
|
(2,097 |
) |
|
| Income before income taxes |
|
28,310 |
|
|
48,251 |
|
|
(131,854 |
) |
|
118,953 |
|
|
| Income tax expense |
|
(6,188 |
) |
|
(15,187 |
) |
|
(17,532 |
) |
|
(38,837 |
) |
|
| Net (loss) income |
|
22,122 |
|
|
33,064 |
|
|
(149,386 |
) |
|
80,116 |
|
|
| Net (loss) income attributable to non-controlling interests |
|
(86 |
) |
|
(105 |
) |
|
(65 |
) |
|
(220 |
) |
|
| Net (loss) income attributable to Arcos Dorados Holdings Inc. |
|
22,036 |
|
|
32,959 |
|
|
(149,451 |
) |
|
79,896 |
|
|
| Earnings per share information ($ per share): | |||||||||||||
| Basic net income per common share | $ |
0.11 |
|
$ |
0.16 |
|
$ |
(0.73 |
) |
$ |
0.39 |
|
|
| Weighted-average number of common shares outstanding-Basic |
|
207,265,620 |
|
|
204,069,509 |
|
|
205,417,516 |
|
|
204,003,977 |
|
|
| Adjusted EBITDA Reconciliation | |||||||||||||
| Operating income |
|
21,720 |
|
|
60,625 |
|
|
(66,754 |
) |
|
159,936 |
|
|
| Depreciation and amortization |
|
30,390 |
|
|
33,548 |
|
|
126,853 |
|
|
123,218 |
|
|
| Operating charges excluded from EBITDA computation |
|
5,353 |
|
|
6,204 |
|
|
8,012 |
|
|
8,621 |
|
|
| Adjusted EBITDA |
|
57,463 |
|
|
100,377 |
|
|
68,111 |
|
|
291,775 |
|
|
| Adjusted EBITDA Margin as % of total revenues |
|
9.5 |
% |
|
13.3 |
% |
|
3.4 |
% |
|
9.9 |
% |
|
Fourth Quarter & Full Year 2020 Consolidated Results – Excluding Venezuela
(In thousands of U.S. dollars, except per share data
| Figure 12. Fourth Quarter & Full Year 2020 Consolidated Results - Excluding Venezuela (In thousands of U.S. dollars, except per share data) |
|||||||||
| For Three-Months ended | For Twelve-Months ended | ||||||||
| December 31, | December 31, | ||||||||
2020 |
2019 |
2020 |
2019 |
||||||
| REVENUES | |||||||||
| Sales by Company-operated restaurants |
|
578,929 |
|
713,521 |
|
1,890,645 |
|
2,803,363 |
|
| Revenues from franchised restaurants |
|
26,784 |
|
38,806 |
|
89,081 |
|
145,532 |
|
| Total Revenues |
|
605,713 |
|
752,327 |
|
1,979,725 |
|
2,948,895 |
|
| OPERATING COSTS AND EXPENSES | |||||||||
| Company-operated restaurant expenses: | |||||||||
| Food and paper |
|
(205,192) |
|
(255,369) |
|
(676,707) |
|
(1,006,551) |
|
| Payroll and employee benefits |
|
(111,513) |
|
(140,065) |
|
(412,228) |
|
(566,581) |
|
| Occupancy and other operating expenses |
|
(165,300) |
|
(199,921) |
|
(621,039) |
|
(794,870) |
|
Royalty fees |
|
(33,886) |
|
(38,969) |
|
(110,957) |
|
(155,388) |
|
| Franchised restaurants - occupancy expenses |
|
(12,648) |
|
(7,633) |
|
(43,136) |
|
(60,766) |
|
| General and administrative expenses |
|
(45,690) |
|
(54,001) |
|
(168,036) |
|
(207,992) |
|
| Other operating (expenses) income, net |
|
(7,870) |
|
8,129 |
|
(6,664) |
|
11,433 |
|
| Total operating costs and expenses |
|
(582,099) |
|
(687,829) |
|
(2,038,767) |
|
(2,780,715) |
|
| Operating (loss) income |
|
23,615 |
|
64,498 |
|
(59,042) |
|
168,180 |
|
| Net interest expense |
|
(14,817) |
|
(13,879) |
|
(59,072) |
|
(52,078) |
|
| Gain (loss) from derivative instruments |
|
(1,915) |
|
(1,350) |
|
(2,297) |
|
439 |
|
| Gain from financial instruments |
|
7,606 |
|
- |
|
25,676 |
|
- |
|
| Foreign currency exchange results |
|
13,451 |
|
2,696 |
|
(31,734) |
|
13,337 |
|
| Other non-operating (loss) expenses, net |
|
2,427 |
|
216 |
|
2,296 |
|
(2,097) |
|
| Income before income taxes |
|
30,367 |
|
52,181 |
|
(124,173) |
|
127,781 |
|
| Income tax expense |
|
(6,183) |
|
(14,839) |
|
(17,586) |
|
(39,053) |
|
| Net (loss) income |
|
24,184 |
|
37,342 |
|
(141,758) |
|
88,728 |
|
| Net (loss) income attributable to non-controlling interests |
|
(86) |
|
(105) |
|
(65) |
|
(220) |
|
| Net (loss) income attributable to Arcos Dorados Holdings Inc. |
|
24,098 |
|
37,237 |
|
(141,823) |
|
88,508 |
|
| Earnings per share information ($ per share): | |||||||||
| Basic net income per common share | $ |
0.12 |
$ |
0.18 |
$ |
(0.69) |
$ |
0.43 |
|
| Weighted-average number of common shares outstanding-Basic |
|
207,265,620 |
|
204,069,509 |
|
205,417,516 |
|
204,003,977 |
|
| Adjusted EBITDA Reconciliation | |||||||||
| Operating income |
|
23,615 |
|
64,498 |
|
(59,042) |
|
168,180 |
|
| Depreciation and amortization |
|
30,169 |
|
33,171 |
|
125,450 |
|
121,554 |
|
| Operating charges excluded from EBITDA computation |
|
4,568 |
|
4,080 |
|
6,118 |
|
6,498 |
|
| Adjusted EBITDA |
|
58,352 |
|
101,749 |
|
72,526 |
|
296,232 |
|
| Adjusted EBITDA Margin as % of total revenues |
|
9.6% |
|
13.5% |
|
3.7% |
|
10.0% |
|
Fourth Quarter & Full Year 2020 Results by Division
(In thousands of U.S. dollars)
| Figure 13. Fourth Quarter & Full Year 2020 Consolidated Results by Division (In thousands of U.S. dollars) |
|||||||||
| 4Q | FY | ||||||||
| Three-Months ended | % Incr. | Constant | Twelve-Months ended | % Incr. | Constant | ||||
| December 31, | / | Currency | December 31, | / | Currency | ||||
2020 |
2019 |
(Decr) | Incr/(Decr)% | 2020 |
2019 |
(Decr) | Incr/(Decr)% | ||
| Revenues | |||||||||
| Brazil | 253,729 |
369,302 |
-31.3% |
-10.2% |
862,748 |
1,385,566 |
-37.7% |
-20.3% |
|
| Caribbean | 119,983 |
101,329 |
18.4% |
n/a |
381,090 |
399,251 |
-4.5% |
n/a |
|
| Caribbean - Excl. Venezuela | 118,304 |
99,290 |
19.2% |
19.3% |
376,596 |
389,069 |
-3.2% |
-1.7% |
|
| NOLAD | 95,583 |
114,438 |
-16.5% |
-12.6% |
311,887 |
431,266 |
-27.7% |
-25.0% |
|
| SLAD | 138,097 |
169,297 |
-18.4% |
-4.1% |
428,494 |
742,994 |
-42.3% |
-26.3% |
|
| TOTAL | 607,392 |
754,366 |
-19.5% |
n/a |
1,984,219 |
2,959,077 |
-32.9% |
n/a |
|
| TOTAL - Excl. Venezuela | 605,713 |
752,327 |
-19.5% |
-5.3% |
1,979,725 |
2,948,895 |
-32.9% |
-20.0% |
|
| Operating Income (loss) | |||||||||
| Brazil | 18,491 |
62,131 |
-70.2% |
-61.2% |
16,121 |
164,342 |
-90.2% |
-90.3% |
|
| Caribbean | 9,740 |
1,003 |
870.1% |
n/a |
4,494 |
(1,101) |
-508.6% |
n/a |
|
| Caribbean - Excl. Venezuela | 11,634 |
4,876 |
138.7% |
136.8% |
12,206 |
7,143 |
71.0% |
44.8% |
|
| NOLAD | (944) |
5,929 |
-115.9% |
-119.7% |
(16,680) |
16,539 |
-200.8% |
-217.9% |
|
| SLAD | 11,221 |
10,100 |
11.1% |
49.1% |
(16,626) |
42,410 |
-139.2% |
-152.4% |
|
| Corporate and Other | (16,789) |
(18,538) |
9.4% |
-10.2% |
(54,063) |
(62,254) |
-13.2% |
-9.6% |
|
| TOTAL | 21,719 |
60,625 |
-64.2% |
n/a |
(66,754) |
159,936 |
-141.7% |
n/a |
|
| TOTAL - Excl. Venezuela | 23,613 |
64,498 |
-63.4% |
-54.9% |
(59,042) |
168,180 |
-135.1% |
-149.7% |
|
| Adjusted EBITDA | |||||||||
| Brazil | 32,575 |
79,262 |
-58.9% |
-46.3% |
76,155 |
227,844 |
-66.6% |
-58.9% |
|
| Caribbean | 16,033 |
13,043 |
22.9% |
n/a |
28,847 |
24,955 |
15.6% |
n/a |
|
| Caribbean - Excl. Venezuela | 16,922 |
14,416 |
17.4% |
16.7% |
33,263 |
29,412 |
13.1% |
8.8% |
|
| NOLAD | 8,447 |
12,545 |
-32.7% |
-31.3% |
10,207 |
39,027 |
-73.8% |
-77.9% |
|
| SLAD | 16,709 |
13,968 |
19.6% |
44.8% |
3,272 |
63,120 |
-94.8% |
-100.0% |
|
| Corporate and Other | (16,305) |
(18,442) |
11.6% |
-7.0% |
(50,370) |
(63,171) |
-20.3% |
0.1% |
|
| TOTAL | 57,459 |
100,376 |
-42.8% |
n/a |
68,111 |
291,775 |
-76.7% |
n/a |
|
| TOTAL - Excl. Venezuela | 58,348 |
101,749 |
-42.6% |
-32.7% |
72,527 |
296,232 |
-75.5% |
-75.9% |
|
| Figure 14. Average Exchange Rate per Quarter* | ||||
| Brazil | Mexico | Argentina | ||
4Q20 |
5.40 |
20.53 |
80.03 |
|
4Q19 |
4.12 |
19.23 |
59.36 |
|
| * Local $ per 1 US$ | ||||
Summarized Consolidated Balance Sheets
(In thousands of U.S. dollars)
| Figure 15. Summarized Consolidated Balance Sheets (In thousands of U.S. dollars) |
||||||
| December 31 | December 31 | |||||
2020 |
2019 |
|||||
| ASSETS | ||||||
| Current assets | ||||||
| Cash and cash equivalents | 165,989 |
121,880 |
||||
| Short-term investment | - |
25 |
||||
| Accounts and notes receivable, net | 94,249 |
99,862 |
||||
| Other current assets (1) | 155,293 |
183,601 |
||||
| Total current assets | 415,531 |
405,368 |
||||
| Non-current assets | ||||||
| Property and equipment, net | 796,532 |
960,986 |
||||
| Net intangible assets and goodwill | 37,046 |
43,044 |
||||
| Deferred income taxes | 55,567 |
68,368 |
||||
| Derivative instruments | 121,901 |
57,828 |
||||
| Leases right of use assets, net | 790,969 |
922,165 |
||||
| Other non-current assets (2) | 76,408 |
99,926 |
||||
| Total non-current assets | 1,878,423 |
2,152,317 |
||||
| Total assets | 2,293,954 |
2,557,685 |
||||
| LIABILITIES AND EQUITY | ||||||
| Current liabilities | ||||||
| Accounts payable | 209,535 |
259,577 |
||||
| Taxes payable (3) | 91,284 |
123,805 |
||||
| Accrued payroll and other liabilities | 79,218 |
86,379 |
||||
| Other current liabilities (4) | 56,726 |
27,068 |
||||
| Provision for contingencies | 2,024 |
2,035 |
||||
| Financial debt (5) | 7,856 |
26,436 |
||||
| Operating lease liabilities | 56,828 |
70,147 |
||||
| Total current liabilities | 503,471 |
595,447 |
||||
| Non-current liabilities | ||||||
| Accrued payroll and other liabilities | 21,884 |
23,497 |
||||
| Provision for contingencies | 24,924 |
24,123 |
||||
| Financial debt (6) | 787,979 |
627,173 |
||||
| Deferred income taxes | 5,067 |
4,297 |
||||
| Operating lease liabilities | 752,613 |
861,582 |
||||
| Total non-current liabilities | 1,592,467 |
1,540,672 |
||||
| Total liabilities | 2,095,938 |
2,136,119 |
||||
| Equity | ||||||
| Class A shares of common stock | 386,603 |
383,204 |
||||
| Class B shares of common stock | 132,915 |
132,915 |
||||
| Additional paid-in capital | 11,540 |
13,375 |
||||
| Retained earnings | 290,895 |
471,149 |
||||
| Accumulated other comprehensive losses | -584,860 |
(519,505) |
||||
| Common stock in treasury | -39,547 |
(60,000) |
||||
| Total Arcos Dorados Holdings Inc shareholders’ equity | 197,546 |
421,138 |
||||
| Non-controlling interest in subsidiaries | 470 |
428 |
||||
| Total equity | 198,016 |
421,566 |
||||
| Total liabilities and equity | 2,293,954 |
2,557,685 |
||||
| (1) Includes "Other receivables", "Inventories", "Prepaid expenses and other current assets", "McDonald's Corporation's indemnification for contingencies", and "Derivative Intruments". | ||||||
| (2) Includes "Miscellaneous", "Collateral deposits", and "McDonald´s Corporation indemnification for contingencies". | ||||||
| (3) Includes "Income taxes payable" and "Other taxes payable". | ||||||
| (4) Includes "Royalties payable to McDonald´s Corporation" and "Interest payable". | ||||||
| (5) Includes "Short-term debt", "Current portion of long-term debt" and "Derivative instruments". | ||||||
| (6) Includes "Long-term debt, excluding current portion" and "Derivative instruments". | ||||||
