Arcos Dorados Reports Third Quarter 2012 Financial Results

  Arcos Dorados Reports Third Quarter 2012 Financial Results

   On track with restaurant opening plan and achieved double-digit organic
  revenue growth, despite impact of weak Brazilian consumption on comparable
                                    sales

Business Wire

BUENOS AIRES, Argentina -- November 02, 2012

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 its unaudited results for the third quarter ended
September 30, 2012.

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 CAD related awards and other 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. Management
believes organic growth better reflects the underlying growth from the ongoing
activities of our business and provides improved comparability of results.

Additionally, the Company has modified the presentation of quarterly and
accumulated amounts in this release, providing an analysis by geographic
division. The information presented is the same as in prior releases.

Third quarter 2012 Highlights

  *Revenues decreased 2.2% year-over-year to US$ 961.9 million, but increased
    11.6% on an organic basis, as comparable sales growth and revenues from
    new stores did not fully offset a reduction in reported revenues from the
    impact of the depreciation of local currencies versus the US dollar
  *Systemwide comparable sales increased 6.5% year-over-year. The result is
    in addition to a 15.7% increase in comparable sales in 3Q11
  *103 net new restaurants opened during the last 12 months, contributing US$
    47.7 million to revenues in constant currency. The full-year opening plan
    is on track, with outstanding restaurants under construction
  *Adjusted EBITDA decreased 12.0% to US$ 83.6 million, due primarily to the
    24.5% depreciation of the Brazilian currency versus the prior year period.
    Excluding currency translation and special items, organic Adjusted EBITDA
    was 7.3% lower year-over-year
  *Net income amounted to US$ 32.6 million compared to US$ 19.6 million one
    year ago, when the Company incurred debt restructuring charges

“Third quarter results were impacted by continued low consumer activity in
Brazil. Excluding the depreciation of local currencies versus the US dollar,
we achieved double-digit organic revenue growth in addition to strong growth
in the year-ago period.”

“We continue to strategically expand our regional footprint and are on track
to execute our full year restaurant opening plan. Next year’s unit openings
are expected to continue at a strong pace and will tap into the rapid
population growth and the emerging middle class in our targeted markets.”

“While the long-term prospects of this region remain strong, the recovery in
Brazilian consumption is taking longer to materialize. In addition, we
continue to experience geopolitical and macroeconomic headwinds in several of
our markets. As a result, we are revising downward our full year guidance,”
said Woods Staton, Chairman and Chief Executive Officer of Arcos Dorados.

                 
Third quarter 2012 Results
Consolidated
                   
                   Financial Highlights (Million US$)
                   3Q11          Special   Currency      Organic   3Q12          % As       %
                 (a)          Items    Translation  Growth   (a+b+c+d)    Reported  Organic
                                 (b)       (c)           (d)
Total              1,777                                       1,880                 
Restaurants
Sales by
Company-operated   943.2         -         (130)         107.8     920.5         -2.4%      11.4%
Restaurants
Revenues from
franchised        40.8         -        (5.5)        6.1      41.4         1.4%      14.9%
restaurants
Total Revenues    984.0        -        (136.0)      113.9    961.9        -2.2%     11.6%
Comparable Sales                                                      6.5%      
Adjusted EBITDA   95.0         9.7      (14.1)       (6.9)    83.6         -12.0%    -7.3%
Adjusted EBITDA    9.7%                                            8.7%
Margin
Net Income
attributable to    0.0           26.3      (7.1)         (6.2)     32.6          66.5%      -31.6%
AD
No. of shares     209,529,412                              209,529,412           
outstanding
EPS ($ per        0.09                                     0.16                  
share)

(3Q12 = 3Q11 + Special items + Currency translation + Organic growth)

Arcos Dorados’ third quarter revenues decreased 2.2% to US$ 961.9 million, as
organic revenue growth of 11.6% was offset by depreciation of local
currencies, which reduced revenue when expressed in US dollars. The increase
in organic revenues was driven by systemwide comparable sales growth of 6.5%
and US$ 47.7 million in constant currency added by the net addition of 103
restaurants during the last 12-month period. The SLAD region delivered revenue
growth during the quarter, as did NOLAD and the Caribbean division.

Systemwide comparable sales growth of 6.5% was primarily a reflection of
average check growth. The result was impacted by lower regional sales of the
August Happy Meal promotion.

Adjusted EBITDA

Adjusted EBITDA for the third quarter of 2012 was US$ 83.6 million, a 12.0%
decrease compared with the same period of 2011. During the quarter the Company
recognized a net gain related to its CAD incentive plan of US$ 2.9 million
which included (i) a charge of US$ 0.9 million from ongoing CAD accrual, which
was offset by (ii) a gain of US$ 3.8 million resulting from the hedge
announced in September 2012, which minimizes the impact of share price
variations over results. Additionally, in the third quarter of 2011, the
Company recognized a charge of US$ 8.5 million related to its CAD incentive
plan.

Summary of CAD accrual effects

                     
                        3Q12    3Q11    Var. $
CAD accrual             -0.9    -8.5    7.6
Hedge                   3.8     -       3.8
Net Effect in G&A       2.9     -8.5    11.4

Therefore, adjusting for special items (CAD in both periods, along with the
Brazil CIDE tax charge of US$ 3.0 million and the Venezuela royalty waiver of
US$ 1.2 million in 3Q12) and currency impact, organic Adjusted EBITDA
decreased 7.3%. The result reflects lower Adjusted EBITDA in the Brazil
division, while the remaining divisions grew.

The Adjusted EBITDA margin as a percentage of total revenues was 8.7% for the
quarter, down 1 percentage point from the third quarter of 2011. The decline
primarily reflects higher occupancy & other expenses and lower margins in the
Brazilian division mainly due to increased US dollar denominated F&P costs
that were impacted by a weaker Brazilian currency. Nevertheless the rest of
the divisions posted an improvement in F&P as a percentage of sales.
Additionally, margins expanded in SLAD and the Caribbean division and remained
stable in NOLAD. G&A as a percentage of sales decreased compared to the
year-ago period in all divisions.

Net income attributable to the Company was US$ 32.6 million in the third
quarter of 2012, compared with US$ 19.6 million in the same period of 2011, on
an as reported basis. The result reflects lower non-operating charges that
were partially offset by lower operating income and higher income taxes.

Non-operating Results

Improved non-operating results reflected lower overall funding costs as a
result of the debt restructuring process carried out during the last twelve
months. This process included the issuance of Real denominated debt in July
2011 and April 2012, along with the settlement of the majority of derivatives
related to existing US dollar denominated debt. It should be noted that the
Company recognized a charge of US$ 16.6 million (including US$ 13.9 million in
net interest expense) related to the debt restructuring of July, 2011.

Additionally, during the third quarter of 2011, the Company registered a
foreign exchange charge of US$ 20.1 million, mainly as a result of the impact
of the Real devaluation on intercompany debt and receivables, as explained in
3Q11. However, as a result of the Real denominated debt issuances of July 2011
and April 2012, the Company reduced the impact from variations of the
Brazilian currency. In addition, this exchange rate did not vary significantly
from June 30^th to September 30^th 2012, reducing the balance sheet impact.
Foreign exchange charges for the third quarter of 2012 were mainly related to
the Venezuelan operations.

Income tax expense for the quarter totaled US$ 11.4 million, resulting in an
effective tax rate of 26.0% for the quarter. This compares to an effective tax
rate of 32.3% in the year-ago period, which was impacted by non-deductible
charges.

The Company reported basic earnings per share (EPS) of US$ 0.16 in the third
quarter of 2012, compared to US$ 0.09 in the previous corresponding period,
which included debt restructuring charges.

Brazil Division

             
              Financial Highlights (Million US$)
              3Q11    Special   Currency      Organic   3Q12        % As       %
            (a)    Items    Translation  Growth   (a+b+c+d)  Reported  Organic
                      (b)       (c)           (d)
Total         627                                   691        10.2%    
Restaurants
Comparable                                                          3.2%
Sales
Revenues     507.7  -        (109.5)      46.5     444.7      -12.4%    9.2%
Adjusted     80.6   (3.0)    (13.2)       (14.1)   50.3       -37.6%    -17.5%
EBITDA

Brazil revenues declined 12.4% due to a higher average exchange rate as
compared to the previous year’s third quarter. Excluding currency movements,
organic revenues grew 9.2%. The result was driven by systemwide comparable
sales growth of 3.2% in the quarter, which was impacted by slow overall
consumption in the country as economic activity takes longer to recover than
expected.

The net addition of 64 restaurants during the last 12-month period contributed
US$29.3 million to revenues in constant currency during the quarter.

Adjusted EBITDA decreased 37.6% in the third quarter, primarily due to
currency translation. As a reference, the average exchange rate was R$1.63 in
3Q2011 and R$2.03 in 3Q2012. The mild comparable sales growth, the Real
devaluation effect over dollar denominated costs along with higher operating
expenses as a percentage of revenues negatively impacted adjusted EBITDA
margins in 3Q12. These factors offset the improvement in G&A leverage. As a
result, organic Adjusted EBITDA contracted 17.5%, excluding the CIDE tax on
royalty payments (US$3.0 million) that was not recognized until 4Q11. This tax
is ongoing and will no longer be considered a special item in 2013 for
comparison purposes. In September 2012, the successful Big Mac sandwich was
featured in the Value Platform offering and drove traffic going into the
fourth quarter.

NOLAD

             
              Financial Highlights (Million US$)
              3Q11   Special   Currency      Organic   3Q12        % As       %
            (a)   Items    Translation  Growth   (a+b+c+d)  Reported  Organic
                     (b)       (c)           (d)
Total         473                                  496        4.9%     
Restaurants
Comparable                                                         1.3%
Sales
Revenues     93.7  -        (3.8)        8.2      98.0       4.6%      8.7%
Adjusted     7.0   -        (0.1)        0.4      7.2        3.7%      5.2%
EBITDA

NOLAD’s (Mexico, Panama and Costa Rica) revenues grew 4.6% or 8.7% on an
organic basis, year-over-year. The increase included systemwide comparable
sales growth of 1.3%, which reflected lower sales of the Happy Meal/Family
business in August. Additionally, the net addition of 23 restaurants during
the last 12-month period contributed US$ 6.0 million to revenues in constant
currency.

Adjusted EBITDA grew 3.7% in the quarter, or 5.2% on an organic basis. F&P
efficiencies stemming from improved controllable expenses provided by the MFY
platform offset the mild comparable sales increase and resulted in a stable
Adjusted EBITDA margin of 7.4%.

SLAD

             
              Financial Highlights (Million US$)
              3Q11    Special   Currency      Organic   3Q12        % As       %
            (a)    Items    Translation  Growth   (a+b+c+d)  Reported  Organic
                      (b)       (c)           (d)
Total         533                                   556        4.3%     
Restaurants
Comparable                                                          15.4%
Sales
Revenues     314.7  -        (19.9)       56.3     351.0      11.6%     17.9%
Adjusted     36.3   1.2      (3.0)        8.4      43.0       18.4%     23.1%
EBITDA

SLAD’s (Argentina, Venezuela, Colombia, Chile, Perú, Ecuador, and Uruguay)
revenues grew by 11.6% and 17.9% on an organic basis compared to the third
quarter of 2011. Systemwide comparable sales increased 15.4% and the net
addition of 23 restaurants during the last 12-month period contributed US$
12.0 million to revenues in constant currency in the quarter.

Adjusted EBITDA increased as temporary royalty relief in Venezuela (US$ 1.2
million), along with F&P efficiencies and G&A leverage, offset the negative
impact of higher payroll costs as a percentage of sales. On an organic basis,
Adjusted EBITDA rose 23.1%, while margins also improved to 12.2% in the
quarter.

Caribbean Division

             
              Financial Highlights (Million US$)
              3Q11   Special   Currency      Organic   3Q12        % As       %
            (a)   Items    Translation  Growth   (a+b+c+d)  Reported  Organic
                     (b)       (c)           (d)
Total         144                                  137        -4.9%    
Restaurants
Comparable                                                         1.9%
Sales
Revenues     68.0  -        (2.8)        2.9      68.1       0.2%      4.3%
Adjusted     1.8   -        (0.4)        2.9      4.3        143.2%    166.1%
EBITDA

The Caribbean division (Puerto Rico, Martinique, Guadeloupe, Aruba, Curaçao,
French Guiana, Trinidad & Tobago, US Virgin Islands of St. Thomas and St.
Croix) reported stable revenues, with reported growth of 0.2%. On an organic
basis, revenues gained 4.3% compared to the third quarter of 2011. Systemwide
comparable sales increased 1.9%, in part due to the successful roll out of the
combined beverage business (CBB) earlier this year, helping to offset
prevailing economic conditions.

Adjusted EBITDA grew by US$ 2.5 million and reached US$ 4.3 million for the
quarter. The adjusted EBITDA margin increased to 6.3% of revenues, mainly
driven by efficiencies in payroll as well as fixed cost leverage.

New Unit Development

                      
Total Restaurants       Sept. ‘12  June ‘12  March ‘12  Dec ‘11  Sept. ‘11
(eop)
Brazil                  691        677       666        662      627
NOLAD                   496         492        490         484       473
SLAD                    556         553        548         547       533
Caribbean               137        136       139        147      144
TOTAL                   1,880      1,858     1,843      1,840    1,777
                                                                     
LTM Net Openings        103        91        86         85       64

*Considers company-operated and franchised restaurants at period-end

The Company continued to expand at a faster year-over-year pace for the twelve
months ended September 30, 2012, adding 103 net new restaurants throughout its
territories. Having commenced construction on all outstanding units, Arcos
expects to achieve its full year target of 130 gross openings. More than half
of the openings are located within Brazil, where fundamentals and potential
for the business remain strong, as demonstrated by superior average restaurant
revenues. In addition, the Company is advancing with its restaurant expansion
plan for the following year and is developing a strong pipeline of attractive
growth opportunities in key locations. As of the quarter end, 73% of Arcos
Dorados’ restaurants were Company operated.

Balance Sheet & Cash Flow Highlights

Cash and cash equivalents were US$ 244.1 million at September 30, 2012. The
Company’s total financial debt (including derivative instruments) was US$
653.1 million, which included US$ 306.7 million corresponding to the
accounting balance of the 2019 US Dollar Notes and R$ 675 million (equivalent
to US$ 336.2 million) related to the BRL 2016 Notes issued in July, 2011, and
April, 2012. Net debt was US$ 409.0 million and the solid Net Debt/Adjusted
EBITDA ratio was 1.2 at September 30, 2012.

Cash generated from operating activities was US$ 91.2 million in the third
quarter of 2012. During the quarter, capital expenditures amounted to US$ 75.6
million.

First nine months 2012

For the nine months ended September 30, 2012, the Company’s revenues grew by
3.3% (14.4% on an organic basis) to US$ 2,787.7 million. Additionally,
adjusted EBITDA reached US$ 229.0 million, representing a 2.7% decrease
(increase of 0.2% on an organic basis) compared to the first nine months of
2011. Results were impacted by lower results in the Brazil division, which
offset improvements in SLAD and NOLAD. Despite the impact of currency and soft
consumption in Brazil on revenues, G&A has stabilized and is showing leverage
sequentially. Year-to-date consolidated net income amounted to US$ 70.1
million, in line with US$ 69.3 million in the first nine months of 2011. The
year-to-date effective tax rate was 30.4%. Additionally, total capital
expenditure amounted to US$ 171.1 million for the period, compared with US$
182.5 million in the first nine months of 2011. As a reference, capital
expenditure amounts are affected by currency variations.

Quarter Highlights & Recent Developments

Guidance 2012

Given soft comparable sales growth in October and the absence of clear signs
of a recovery in consumption in the Brazilian market, the Company expects the
following growth rates with respect to 2011, in constant currency and
excluding the CAD related impact on results from the stock variations of 2012.
(Please note CAD variation impacts have been reduced through an Equity Swap as
of September, 2012):

  *Revenue growth at the low end of the range of 15-17%
  *Adj. EBITDA growth in the range of 3-5%; and an
  *Effective tax rate for the year in the range of 31-33%.

The capital expenditures plan remains unchanged and includes 130 gross
openings, with total capital expenditures for the full year of approximately
US$ 300-320 million.

Board Member Appointment

Mr. Alejandro Ramírez Magaña was appointed an independent board member of the
Company. Mr. Ramírez Magaña is the General Director of Cinépolis, the largest
cineplex chain in Latin America and the fourth largest in the world. He
recently co-chaired the 2012 Annual Meeting of the World Economic Forum and
was also appointed by President Calderón as Chair of the G20’s Business Summit
(B20), in Mexico in June, 2012. Mr. Ramírez holds a Bachelor of Arts in
Economics from Harvard University, a Masters of Sciences in Development
Economics from the University of Oxford and an MBA from Harvard Business
School.

He currently serves as committee advisor for the World Bank and the United
Nations Development Programme (UNDP). In 2005, he was also appointed as “Young
Global Leader” by the Davos World Economic Forum, in Switzerland.

With this appointment, the Company’s Board now comprises 9 members.

CAD Hedge

On September 5, 2012, the Company announced that it had entered into a Total
Return Equity Swap transaction to reduce most of the impact that its stock
price variation has on its income statement as a result of recognizing the
compensation expense from the Long Term Incentive Plan (the CAD program). The
goal of the transaction is to reduce the future volatility of Arcos Dorados’
results of operations resulting from fluctuations in its stock price.

Under the Total Return Equity Swap, the Company receives (or pays) the gains
(or losses) plus dividends on a notional number of 2,272,551 of its Class A
shares. The reference price for the Total Return Equity Swap is $13.7689 per
share.

Dividend

On October 26, 2012, the Company paid the third installment of its 2012
Dividends. The total amount paid was US$ 12.5 million or US$ 0.0597 per share
on outstanding Class A and Class B shares, to shareholders of record at
October 24, 2012. Subsequent payment dates are to be determined by the Board
of Directors.

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.

About Arcos Dorados

Arcos Dorados is the world’s largest McDonald’s franchisee in terms of
systemwide sales and number of restaurants, operating the largest quick
service restaurant (“QSR”) chain in Latin America and the Caribbean. It has
the exclusive right to own, operate and grant franchises of McDonald’s
restaurants in 20 Latin American and Caribbean countries and territories,
including Argentina, Aruba, Brazil, Chile, Colombia, Costa Rica, Curaçao,
Ecuador, French Guyana, Guadeloupe, Martinique, Mexico, Panama, Peru, Puerto
Rico, St. Croix, St. Thomas, Trinidad & Tobago, Uruguay and Venezuela. The
Company operates or franchises 1,840 McDonald’s-branded restaurants with over
90,000 employees serving approximately 4.3 million customers a day, as of
December 2011. Recognized as one of the best companies to work for in Latin
America, Arcos Dorados is traded on the New York Stock Exchange (NYSE: ARCO).
To learn more about the Company, please visit the Investors section of our
website: 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 2012. 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: compensation expense related to a special
award granted to our chief executive officer, incremental compensation expense
related to our 2008 long-term incentive plan, 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.



Third quarter 2012 Consolidated Results (Unaudited)
(In thousands of U.S. dollars, except per share data)
                                           
                                             For Three-Months ended
                                             September 30,
                                              2012           2011        
REVENUES
Sales by Company-operated restaurants          920,513           943,166
Revenues from franchised restaurants          41,394          40,837      
Total Revenues                                961,907         984,003     
                                                               
OPERATING COSTS AND EXPENSES
Company-operated restaurant expenses:
Food and paper                                 (323,061    )     (328,173    )
Payroll and employee benefits                  (186,320    )     (189,371    )
Occupancy and other operating expenses         (250,436    )     (242,345    )
Royalty fees                                   (45,662     )     (45,732     )
Franchised restaurants - occupancy             (13,348     )     (13,252     )
expenses
General and administrative expenses            (76,614     )     (89,403     )
Other operating expenses, net                 (6,410      )    (1,466      )
Total operating costs and expenses            (901,851    )    (909,742    )
Operating income                              60,056          74,261      
Net interest expense                           (13,812     )     (27,996     )
Gain from derivative instruments               289               4,675
Foreign currency exchange results              (1,960      )     (20,909     )
Other non-operating expenses, net             (463        )    (725        )
Income before income taxes                    44,110          29,306      
Income tax expense                            (11,449     )    (9,476      )
Net income                                    32,661          19,830      
Less: Net income attributable to              (53         )    (248        )
non-controlling interests
Net income attributable to Arcos Dorados      32,608          19,582      
Holdings Inc.
                                                               
Earnings per share information ($ per                         
share):
Basic net income per common share
attributable to Arcos Dorados Holdings       $ 0.16           $ 0.09        
Inc.
Weighted-average number of common shares      209,529,412     209,529,412 
outstanding-Basic
                                                               
Adjusted EBITDA Reconciliation
Operating income                               60,056            74,261
Depreciation and amortization                  22,568            18,089
Other operating items excluded from EBITDA    987             2,662       
computation
Adjusted EBITDA                               83,611          95,012      
Adjusted EBITDA Margin as % of total           8.7         %     9.7         %
revenues
                                                                             

                                           
                                             
First Nine Months 2012 Consolidated Results (Unaudited)
(In thousands of U.S. dollars, except per share data)
                                             
                                             For Nine-Months ended
                                             September 30,
                                              2012           2011        
REVENUES
Sales by Company-operated restaurants          2,669,229         2,586,560
Revenues from franchised restaurants          118,488         112,589     
Total Revenues                                2,787,717       2,699,149   
                                                               
OPERATING COSTS AND EXPENSES
Company-operated restaurant expenses:
Food and paper                                 (935,808    )     (908,343    )
Payroll and employee benefits                  (555,026    )     (517,077    )
Occupancy and other operating expenses         (725,371    )     (684,999    )
Royalty fees                                   (132,599    )     (125,687    )
Franchised restaurants - occupancy             (41,197     )     (37,645     )
expenses
General and administrative expenses            (229,205    )     (253,848    )
Other expenses, net                           (11,966     )    (604        )
Total operating costs and expenses            (2,631,172  )    (2,528,203  )
Operating income                              156,545         170,946     
Net interest expense                           (39,751     )     (48,195     )
Loss from derivative instruments               (1,037      )     (7,550      )
Foreign currency exchange results              (13,071     )     (19,045     )
Other non-operating expenses, net             (1,723      )    (1,908      )
Income before income taxes                    100,963         94,248      
Income tax expense                            (30,672     )    (24,422     )
Net income                                    70,291          69,826      
Less: Net income attributable to              (180        )    (519        )
non-controlling interests
Net income attributable to Arcos Dorados      70,111          69,307      
Holdings Inc.
                                                               
Earnings per share information ($ per                         
share):
Basic net income per common share
attributable to Arcos Dorados Holdings       $ 0.33           $ 0.32        
Inc.
Weighted-average number of common shares      209,529,412     217,405,469 
outstanding-Basic
                                                               
Adjusted EBITDA Reconciliation
Operating income                               156,545           170,946
Depreciation and amortization                  65,306            49,212
Other operating items excluded from EBITDA    7,103           15,048      
computation
Adjusted EBITDA                               228,954         235,206     
Adjusted EBITDA Margin as % of total           8.2         %     8.7         %
revenues
                                                                             

                                                       
                                                          
Third quarter and First nine months 2012 Results by Division (Unaudited)
(In thousands of U.S. dollars)
                                                         
            Three-Months          % Incr.   Constant      Nine-Months             % Incr.   Constant
            ended                /                      ended                  /       
            September30,                   Curr.         September30,                     Curr.
                                  (Decr.)   Incr/(Decr)                           (Decr.)   Incr/(Decr)
            2012      2011               %             2012       2011                %
Revenues                                                           
Brazil      444,742    507,683    -12.4%    9.2%          1,314,454   1,399,746   -6.1%     10.5%
Caribbean   68,091     67,963     0.2%      4.3%          203,547     200,019     1.8%      4.8%
NOLAD       98,027     93,681     4.6%      8.7%          282,513     265,424     6.4%      12.5%
SLAD        351,047   314,676   11.6%    17.9%         987,203    833,960    18.4%    23.8%
TOTAL       961,907   984,003   -2.2%    11.6%         2,787,717  2,699,149  3.3%     14.4%
                                                                                            
Operating
Income
Brazil      39,002     63,468     -38.5%    -23.3%        123,656     175,097     -29.4%    -17.5%
Caribbean   989        (1,475)    -167.1%   -189.6%       (3,324)     (937)       -254.7%   -199.8%
NOLAD       713        316        125.6%    52.8%         (1,989)     (5,857)     66.0%     44.7%
SLAD        36,067     29,967     20.4%     29.2%         84,471      63,677      32.7%     40.6%
Corporate   (16,715)  (18,015)  -7.2%    6.9%          (46,269)   (61,034)   24.2%    13.4%
and Other
TOTAL       60,056    74,261    -19.1%   -5.8%         156,545    170,946    -8.4%    2.4%
                                                                                            
Adjusted
EBITDA
Brazil      50,342     80,625     -37.6%    -22.1%        158,636     209,191     -24.2%    -11.3%
Caribbean   4,285      1,762      143.2%    166.1%        8,690       8,044       8.0%      16.6%
NOLAD       7,217      6,961      3.7%      5.2%          17,647      14,829      19.0%     20.5%
SLAD        42,985     36,296     18.4%     26.6%         104,929     79,229      32.4%     39.7%
Corporate   (21,218)  (30,632)  -30.7%   -22.4%        (60,948)   (76,087)   19.9%    11.2%
and Other
TOTAL       83,611    95,012    -12.0%   2.1%          228,954    235,206    -2.7%    8.8%
                                                                                            

                          
Average Exchange Rate per Quarter

                 Brazil   Mexico   Argentina
                                   
3Q12             2.03     13.15    4.61
3Q11       1.63    12.30   4.17
Local $ per 1 US$


                                                         
                                                             
Summarized Consolidated Balance Sheet
(In thousands of U.S. dollars)
                                                             
                                        As of,               As of,
                                        September 30, 2012   December 31, 2011
                                        (Unaudited)
                                                             
ASSETS
Current assets
Cash and cash equivalents               244,137              176,301
Accounts and notes receivable, net      84,616               93,862
Other current assets (1)                306,910              318,451
Total current assets                    635,663              588,614
                                                             
Non-current assets
Property and equipment, net             1,098,845            1,023,180
Net intangible assets and goodwill      60,268               58,419
Deferred income taxes                   118,004              142,848
Other non-current assets (2)            63,426               62,345
Total non-current assets                1,340,543            1,286,792
Total assets                            1,976,206            1,875,406
                                                             
LIABILITIES AND EQUITY
Current liabilities
Accounts payable                        154,975              184,113
Taxes payable (3)                       122,043              138,989
Accrued payroll and other               242,809              183,549
liabilities
Other current liabilities (4)           29,293               35,030
Provision for contingencies             135                  41,959
Financial debt (5)                      2,141                5,652
Total current liabilities               551,396              589,292
                                                             
Non-current liabilities
Accrued payroll and other               45,513               52,065
liabilities
Provision for contingencies             17,998               23,077
Financial debt (5)                      656,215              526,693
Deferred income taxes                   3,956                4,650
Total non-current liabilities           723,682              606,485
Total liabilities                       1,275,078            1,195,777
Equity
Class A shares of common stock          351,654              351,654
Class B shares of common stock          132,915              132,915
Additional paid-in capital              15,196               5,734
Retained earnings                       356,540              336,707
Accumulated other comprehensive         (156,275)            (148,389)
loss
Total Arcos Dorados Holdings Inc        700,030              678,621
shareholders’ equity
                                                             
Non-controlling interest in             1,098                1,008
subsidiaries
Total Equity                            701,128              679,629
                                                            
Total liabilities and equity            1,976,206            1,875,406

(1) Includes "Other receivables", "Inventories", "Prepaid expenses and other
current assets", "Derivative instruments", "Deferred income taxes" and
"McDonald’s Corporation’s indemnification for contingencies ".
(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", "Long-term debt" and "Derivative instruments"


                                                               
                                                                  
Consolidated Financial Ratios
(In thousands of U.S. dollars, except ratios)
                                                                  
                                             As of                As of
                                             September 30, 2012  December 31,
                                             (Unaudited)          2011
Cash & cash equivalents                      244,137              176,301
Total Financial Debt (i)                     653,093              532,345
Net Financial Debt (ii)                      408,956              356,044
Total Financial Debt / LTM Adjusted EBITDA   2.0                  1.6
ratio
Net Financial Debt / LTM Adjusted EBITDA     1.2                  1.0
ratio

(i) Total financial debt includes short-term debt, long-term debt and
derivative instruments (including the asset portion of derivatives amounting
to $5,263 as a reduction of financial debt)
(ii) Total financial debt less cash and cash equivalents

Contact:

Investor Relations Contact
Arcos Dorados - Director, Investor Relations
Sofia Chellew, (+5411) 4711-2515
sofia.chellew@ar.mcd.com
www.arcosdorados.com
 
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