Arcos Dorados Reports Fourth Quarter & Full Year 2012 Financial Results

  Arcos Dorados Reports Fourth Quarter & Full Year 2012 Financial Results

Achieved double-digit organic revenue growth and high single-digit comparable
                   sales expansion for the year and quarter

Business Wire

BUENOS AIRES, Argentina -- March 8, 2013

Arcos Dorados Holdings, Inc.(NYSE: ARCO) (“Arcos Dorados” or the “Company”),
Latin America’s largest restaurant chain and the world’s largest McDonald’s
franchisee, today reported unaudited results for the fourth quarter and
audited results for the full year ended December 31, 2012.

Full Year 2012 Highlights

  *Revenues increased by 3.8% year-over-year to US$ 3,797.4 million, or by
    14.2% on an organic basis, as high single-digit comparable sales growth
    and revenues from new restaurants offset reported revenues lowered by the
    depreciation of local currencies versus the US dollar
  *Systemwide comparable sales increased by 9.2% year-over-year
  *130 gross new restaurants opened in 2012. Capital expenditures for the
    year totaled US$ 294.5 million and contributed to the overall restaurant
    count of 1,948
  *Adjusted EBITDA^1 improved versus the prior year, increasing 0.2% to US$
    340.6 million, or 1.2% on an organic basis
  *Net income was largely unchanged at US$ 114.3 million versus US$ 115.5
    million one year ago

Fourth Quarter 2012 Highlights

  *Revenues increased by 5.3% year-over-year to US$ 1,009.7 million or by
    13.8% on an organic basis, as strong comparable and new restaurant sales
    growth outweighed local currency depreciation
  *Systemwide comparable sales increased by 8.6% year-over-year, driven by
    average check growth
  *Adjusted EBITDA increased by 6.7% to US$ 111.6 million, including special
    items. Excluding currency translation and special items, Adjusted EBITDA
    was 4.7% higher year-over-year, despite a continued weak consumption
    environment in Brazil
  *Net income was US$ 44.2 million compared to US$46.2 million one year ago

“Arcos Dorados’ ability to achieve high single-digit comparable sales growth
in 2012 despite negligible economic expansion in our largest market
underscores the strength of our brand, operational excellence and our earnings
potential as Brazilian consumption recovers. In a soft market environment, we
distinguished ourselves through promotional strategies of our iconic products
and innovative offerings which resulted in double-digit organic revenue growth
and solid market share. The opening of 130 new restaurants in 2012 will drive
future earnings by capitalizing on a rapidly growing consumer base with a
preference for convenience and away-from-home dining options in Latin

“We expect double-digit top line growth in 2013 as a strong marketing calendar
and the largest product portfolio drive traffic and expand market share. The
efficiency improvements we achieved in 2012 will remain a key focus throughout
the organization in 2013.”

“Our near 30-year history in the region equips our strong leadership teams
with tested marketing strategies and operational expertise that have been
honed in tough economic environments. As one of the world’s most iconic brands
in an underpenetrated region, the underlying strength and long-term prospects
of our business remain indisputable,” said Woods Staton, Chairman and Chief
Executive Officer of Arcos Dorados.

Fourth Quarter 2012 Results

                   Financial Highlights (Million US$)
                              Special  Currency     Organic                      
                   4Q11        Items     Translation   Growth    4Q12        % As
                 (a)        (b)      (c)          (d)      (a+b+c+d)  Reported  %
Total              1,840                                         1,948
Sales by
Company-operated   917.6                 (78.1    )    125.7     965.1       5.2   %    13.7  %
Revenues from
franchised        40.9              (3.4     )   7.0     44.5      8.8   %   17.0  %
Total Revenues    958.5             (81.5    )   132.6   1,009.7   5.3   %   13.8  %
Comparable Sales                                                  8.6   %   
Adjusted EBITDA   104.6     11.1    (9.0     )   4.9     111.6     6.7   %   4.7   %
Adjusted EBITDA    10.9    %                                     11.1    %   1.3   %
Net Income
attributable to    46.2        3.5       (3.9     )    (1.7  )   44.2        -4.3  %    -3.6  %
No. of shares
outstanding       209,529                               209,529            
EPS ($ per        0.22                                  0.21               

(4Q12 = 4Q11 + Special items + Currency translation + Organic growth)

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.

Arcos Dorados’ fourth quarter revenues increased by 5.3% to US$ 1,009.7
million, as organic revenue growth of 13.8% was offset by depreciation of
local currencies, mainly in Brazil and SLAD. Strong organic revenues were
driven by systemwide comparable sales growth of 8.6% and US$ 57.3 million in
constant currency from the net addition of 108 restaurants during the last
12-month period. Brazil and SLAD were strong contributors to revenue growth,
with both reporting double-digit increases in organic revenues.

Systemwide comparable sales growth was driven by average check growth.
Promotions in the Company’s value platform designed to stimulate traffic
outperformed those of the prior-year period. The Happy Meal promotion during
the fourth quarter, including the Pokemon properties performed well. In the
fourth quarter, the Company also held its annual McDonald’s 5K-Women Run. With
over 60,000 participants, it is the biggest woman’s run in Latin America.

Adjusted EBITDA (US$ million)
Breakdown of main variations contributing to 4Q12 Adjusted EBITDA

Adjusted EBITDA for the fourth quarter was US$ 111.6 million, a 6.7% increase
compared to the same period of 2011. Adjusting for special items and currency
impact, organic adjusted EBITDA grew by 4.7%.

Special items in both periods consisted of:

  *A gain of US$ 12.0 million in 4Q12 from the recovery of Brazilian tax
    credits mainly related to certain input costs in prior years
  *A gain of US$ 5.3 million in 4Q11 related to rebates from Venezuelan
  *A gain in 4Q12 of US$ 1.2 million related to the royalty waiver for
  *A charge in 4Q11 of US$ 9.2 million related to the Brazil CIDE tax charge
    on royalty payments related to prior quarters in 2011
  *A net charge in 4Q12 related to the CAD incentive plan (including the
    hedging) of US$ 1.7 million. This compares with a gain of US$ 4.4 million
    in 4Q11

The Adjusted EBITDA margin as a percentage of total revenues increased by 14
basis points to 11.1% year-over-year in the quarter. With the exception of
SLAD, the remaining divisions posted improved margins versus the previous
year. In addition, organic G&A (constant currency and excluding special items)
as a percentage of revenues decreased for the third consecutive quarter
compared to the year-ago period.

Net income attributable to the Company was US$ 44.2 million in the fourth
quarter of 2012, compared to US$ 46.2 million in the same period of 2011. The
result reflects stable operating results and a decline in income taxes, which
was more than offset by lower non-operating results.

Non-operating Results

Non-operating results reflected stable overall funding costs (interest expense
plus loss from derivative instruments) despite higher debt levels, as a result
of the restructuring process carried out during the last twelve months (please
refer to prior releases). Other non-operating results decreased in 4Q12 when
compared to 4Q11. This primarily reflects a gain recorded in 2011 related to
the monetary actualization of certain tax credits in Brazil.

Income tax expense for the quarter totaled US$ 15.7 million, resulting in an
effective tax rate of 26.2% for the quarter compared to 30.5% in the year-ago
period. This lower effective tax rate was primarily the result of the
reduction of certain valuation allowances over deferred tax assets in 4Q12.

The Company reported basic earnings per share (EPS) of US$ 0.21 in the fourth
quarter of 2012, compared to US$ 0.22 in the previous corresponding period.

             Financial Highlights (Million US$)
                       Special  Currency     Organic                      
              4Q11      Items     Translation   Growth    4Q12        % As
            (a)      (b)      (c)          (d)      (a+b+c+d)  Reported  %
Total         662                                         731         10.4  %
Comparable                                                            6.3   %
Revenues     491.1           (69.7    )   61.7    483.1     -1.6  %   12.6  %
Adjusted     80.3    21.2    (10.2    )   (9.0  )  82.3      2.6   %   -11.2 %

Brazil revenues declined by 1.6% mainly due to a higher average exchange rate
as compared to the previous year’s fourth quarter. Excluding the 14.4% average
devaluation of the Real, organic revenues grew by 12.6%, driven by systemwide
comparable sales growth of 6.3% in the quarter. The overall Brazilian
consumption environment remained sluggish. In response, the Company defended
traffic through the inclusion of iconic products such as the Big Mac and the
addition of the new Gran Verano (“Grand Summer”) sandwich on the GPPP value

The net addition of 69 restaurants during the last 12-month period contributed
US$34.8 million to revenues in constant currency during the quarter. The
openings brought the year-end restaurant total to 731.

Adjusted EBITDA increased by 2.6% in the fourth quarter 2012. Special items in
the quarter included a charge in 4Q11 related the accrual of CIDE tax
corresponding to the first nine months of 2011, and the recovery of tax
credits from prior periods in 4Q12. Excluding currency translation and special
items, the impact of the Real devaluation over dollar denominated costs and
higher operating costs resulted in an 11.2% decline in organic Adjusted EBITDA
in the quarter.

             Financial Highlights (Million US$)
                      Special  Currency     Organic                      
              4Q11     Items     Translation   Growth    4Q12        % As
            (a)     (b)      (c)          (d)      (a+b+c+d)  Reported  %
Total         484                                        503         3.9   %
Comparable                                                           0.5   %
Revenues     89.8           3.4         8.3     101.5     13.0  %   9.2   %
Adjusted     4.7    -       0.3         4.1     9.1       92.5  %   87.1  %

NOLAD’s (Mexico, Panama and Costa Rica) revenues grew by 13.0% or 9.2% on an
organic basis, year-over-year. Modest systemwide comparable sales growth of
0.5%, reflected increased competition. Additionally, the net addition of 19
restaurants during the last 12-month period contributed US$ 8.5 million to
revenues in constant currency. Restaurant openings were mainly focused on
Costa Rica and Panama.

Adjusted EBITDA almost doubled year-over-year to US$ 9.1 million from US$ 4.7
million in the previous corresponding period. On an organic basis, growth was
87.1%. F&P efficiencies together with G&A leverage, among other efficiencies,
resulted in an Adjusted EBITDA margin of 9.0% in the quarter.

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