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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark One)
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report
For the transition period from ________________ to ________________

Commission file number: 001-35129
Arcos Dorados Holdings Inc.
(Exact name of Registrant as specified in its charter)
British Virgin Islands
(Jurisdiction of incorporation or organization)
Dr. Luis Bonavita 1294, Office 501
Montevideo, Uruguay, 11300 WTC Free Zone
(Address of principal executive offices)
Juan David Bastidas
Chief Legal Officer
Arcos Dorados Holdings Inc.
Dr. Luis Bonavita 1294, 5th floor, Office 501, WTC Free Zone
Montevideo, Uruguay 11300
Telephone: +598 2626-3000
Fax: +598 2626-3018
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol
 
Name of each exchange on which registered
Class A shares, no par value
 
ARCO
 
New York Stock Exchange

Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
(Title of Class)
Indicate the number of outstanding shares of each of the issuer’s classes of capital stock or common stock as of the close of the period covered by the annual report.
Class A shares: 124,070,029
Class B shares: 80,000,000
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes x No o

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yes o No x

Note - Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No o




Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
x
Accelerated filer
Non-accelerated filer  
Emerging growth company  
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. o
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. x

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP
x
International Financial Reporting Standards as issued by the International Accounting Standards Board  
o
Other  
o
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
  o Item 17 o Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes No x







Table of Contents

ARCOS DORADOS HOLDINGS INC.
TABLE OF CONTENTS
 
 
Page

i

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ii

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iii

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PRESENTATION OF FINANCIAL AND OTHER INFORMATION
All references to “U.S. dollars,” “dollars,” “U.S.$” or “$” are to the U.S. dollar. All references to “Argentine pesos” or “ARS$” are to the Argentine peso. All references to “Brazilian reais” or “R$” are to the Brazilian real. All references to “Mexican pesos” or “Ps.” are to the Mexican peso. All references to “Venezuelan bolívares” or “Bs.” are to the Venezuelan bolívar, the legal currency of Venezuela. See “Item 3. Key Information—A. Selected Financial Data—Exchange Rates and Exchange Controls” for information regarding exchange rates for the Argentine, Brazilian and Mexican currencies.
Definitions
In this annual report, unless the context otherwise requires, all references to “Arcos Dorados,” the “Company,” “we,” “our,” “ours,” “us” or similar terms refer to Arcos Dorados Holdings Inc., together with its subsidiaries. All references to “systemwide” refer only to the system of McDonald’s-branded restaurants operated by us or our franchisees in 20 countries and territories in Latin America and the Caribbean, including Argentina, Aruba, Brazil, Chile, Colombia, Costa Rica, Curaçao, Ecuador, French Guiana, Guadeloupe, Martinique, Mexico, Panama, Peru, Puerto Rico, Trinidad and Tobago, Uruguay, the U.S. Virgin Islands of St. Croix and St. Thomas, and Venezuela, which we refer to as the “Territories,” and do not refer to the system of McDonald’s-branded restaurants operated by McDonald’s Corporation, its affiliates or its franchisees (other than us).
We own our McDonald’s franchise rights pursuant to a Master Franchise Agreement for all of the Territories, except Brazil, which we refer to as the MFA, and a separate, but substantially identical, Master Franchise Agreement for Brazil, which we refer to as the Brazilian MFA. We refer to the MFA and the Brazilian MFA, as amended or otherwise modified to date, collectively as the MFAs. We commenced operations on August 3, 2007, as a result of our purchase of McDonald’s operations and real estate in the Territories (except for Trinidad and Tobago), which we refer to collectively as the “McDonald’s LatAm” business, and the acquisition of McDonald’s franchise rights pursuant to the MFAs, which together with the purchase of the McDonald’s LatAm business, we refer to as the “Acquisition.”
Financial Statements
We maintain our books and records in U.S. dollars and prepare our financial statements in accordance with accounting principles and standards generally accepted in the United States, or “U.S. GAAP.”
The financial information contained in this annual report includes our consolidated financial statements at December 31, 2019 and 2018 and for the years ended December 31, 2019, 2018 and 2017, which have been audited by Pistrelli, Henry Martin y Asociados S.R.L., member firm of Ernst & Young Global, as stated in their report included elsewhere in this annual report.
We were incorporated on December 9, 2010 as a direct, wholly owned subsidiary of Arcos Dorados Limited, the prior holding company for the Arcos Dorados business. On December 13, 2010, Arcos Dorados Limited effected a downstream merger into and with us, with us as the surviving entity. The merger was accounted for as a reorganization of entities under common control in a manner similar to a pooling of interest and the consolidated financial statements reflect the historical consolidated operations of Arcos Dorados Limited as if the reorganization structure had existed since Arcos Dorados Limited was incorporated in July 2006.
Our fiscal year ends December 31. References in this annual report to a fiscal year, such as “fiscal year 2019,” relate to our fiscal year ended on December 31 of that calendar year.
Operating Data
Our operating segments are composed of four geographic regions of operation: (i) the South Latin American division, or “SLAD,” which is comprised of Argentina, Chile, Ecuador, Peru and Uruguay, (ii) the Caribbean division, which is comprised of Aruba, Colombia, Curaçao, French Guiana, Guadeloupe, Martinique, Puerto Rico, Trinidad and Tobago, the U.S. Virgin Islands of St. Croix and St. Thomas, and Venezuela, (iii) Brazil and (iv) the North Latin American division, or “NOLAD,” which is comprised of Costa Rica, Mexico and Panama.

iv


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We operate McDonald’s-branded restaurants under two different operating formats: those directly operated by us, or “Company-operated” restaurants, and those operated by franchisees, or “franchised” restaurants. All references to “restaurants” are to our freestanding, food court, in-store and mall store restaurants and do not refer to our McCafé locations or Dessert Centers. Systemwide data represents measures for both our Company-operated restaurants and our franchised restaurants.
We are the majority stakeholder in two joint ventures with third parties that collectively own 15 restaurants in Argentina and Chile. We consider these restaurants to be Company-operated restaurants. We also have granted developmental licenses to 11 restaurants. Developmental licensees own or lease the land and buildings on which their restaurants are located and pay a franchise fee to us in addition to the continuing franchise fee due to McDonald’s. We consider these restaurants to be franchised restaurants.
Market Share and Other Information
Market data and certain industry forecast data used in this annual report were obtained from internal reports and studies, where appropriate, as well as estimates, market research, publicly available information (including information available from the United States Securities and Exchange Commission, or the SEC, website) and industry publications, including the United Nations Economic Commission for Latin America and the Caribbean and the CIA World Factbook. Industry publications generally state that the information they include has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. Similarly, internal reports and studies, estimates and market research, which we believe to be reliable and accurately extracted by us for use in this annual report, have not been independently verified. However, we believe such data is accurate and agree that we are responsible for the accurate extraction of such information from such sources and its correct reproduction in this annual report.
Basis of Consolidation
The accompanying consolidated financial statements have been prepared on the accrual basis of accounting and include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
Rounding
We have made rounding adjustments to some of the figures included in this annual report. Accordingly, numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that preceded them.
FORWARD-LOOKING STATEMENTS
This annual report contains statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Many of the forward-looking statements contained in this annual report can be identified by the use of forward-looking words such as “anticipate,” “believe,” “could,” “expect,” “should,” “plan,” “intend,” “estimate” and “potential,” among others.
Forward-looking statements appear in a number of places in this annual report and include, but are not limited to, statements regarding our intent, belief or current expectations. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. Such statements are subject to risks and uncertainties, and actual results may differ materially from those expressed or implied in the forward-looking statements due to of various factors, including, but not limited to, those identified in “Item 3. Key Information—D. Risk Factors” in this annual report. These risks and uncertainties include factors relating to:
effects of COVID-19 pandemic and private or government measures that could negatively affect the global economy and our markets’ economy and business;

changes in our liquidity or the availability of lines of credit and other sources of financing, including as a result of the COVID-19 pandemic;

general economic, political, demographic and business conditions in Latin America and the Caribbean;

v


Table of Contents

fluctuations in inflation and exchange rates in Latin America and the Caribbean;
our ability to implement our growth strategy;
the success of operating initiatives, including advertising and promotional efforts and new product and concept development by us and our competitors;
our ability to compete and conduct our business in the future;
changes in consumer tastes and preferences, including changes resulting from concerns over nutritional or safety aspects of beef, poultry, french fries or other foods or the effects of health pandemics and food-borne illnesses, such as COVID-19, “mad cow” disease and avian influenza or “bird flu,” and changes in spending patterns and demographic trends, such as the extent to which consumers eat meals away from home;
the availability, location and lease terms for restaurant development;
our intention to focus on our restaurant reimaging plan;
our franchisees, including their business and financial viability and the timely payment of our franchisees’ obligations due to us and to McDonald’s;
our ability to comply with the requirements of the MFAs, including McDonald’s standards;
our decision to own and operate restaurants or to operate under franchise agreements;
the availability of qualified restaurant personnel for us and for our franchisees, and the ability to retain such personnel;
changes in commodity costs, labor, supply, fuel, utilities, distribution and other operating costs;
changes in labor laws;
our ability, if necessary, to secure alternative distribution of supplies of food, equipment and other products to our restaurants at competitive rates and in adequate amounts, and the potential financial impact of any interruptions in such distribution;
changes in government regulation;
material changes in tax legislation;
other factors that may affect our financial condition, liquidity and results of operations; and
other risk factors discussed under “Item 3. Key Information—D. Risk Factors.”
Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them in light of new information or future developments or to release publicly any revisions to these statements in order to reflect later events or circumstances or to reflect the occurrence of unanticipated events.
ENFORCEMENT OF JUDGMENTS
We are incorporated under the laws of the British Virgin Islands with limited liability. We are incorporated in the British Virgin Islands because of certain benefits associated with being a British Virgin Islands company, such as political and economic stability, an effective judicial system, a favorable tax system, the absence of exchange control or currency restrictions, and the availability of professional and support services. However, the British Virgin Islands has a less developed body of securities laws as compared to the United States and provides protections for investors to a significantly lesser extent. In addition, British Virgin Islands companies may not have standing to sue before the federal courts of the United States.

vi


Table of Contents

A majority of our directors and officers, as well as certain of the experts named herein, reside outside of the United States. A substantial portion of our assets and several of such directors, officers and experts are located principally in Argentina, Brazil and Uruguay. As a result, it may not be possible for investors to effect service of process outside Argentina, Brazil and Uruguay upon such directors or officers, or to enforce against us or such parties in courts outside Argentina, Brazil and Uruguay judgments predicated solely upon the civil liability provisions of the federal securities laws of the United States or other non-Argentine, Brazilian or Uruguayan regulations, as applicable. In addition, local counsel to the Company have advised that there is doubt as to whether the courts of Argentina, Brazil or Uruguay would enforce in all respects, to the same extent and in as timely a manner as a U.S. court or non-Argentine, Brazilian or Uruguayan court, an original action predicated solely upon the civil liability provisions of the U.S. federal securities laws or other non-Argentine, Brazilian or Uruguayan regulations, as applicable; and that the enforceability in Argentine, Brazilian or Uruguayan courts of judgments of U.S. courts or non-Argentine, Brazilian or Uruguayan courts predicated upon the civil liability provisions of the U.S. federal securities laws or other non-Argentine, Brazilian or Uruguayan regulations, as applicable, will be subject to compliance with certain requirements under Argentine, Brazilian or Uruguayan law, including the condition that any such judgment does not violate Argentine, Brazilian or Uruguayan public policy.
We have been advised by Maples and Calder, our counsel as to British Virgin Islands law, that the United States and the British Virgin Islands do not have a treaty providing for reciprocal recognition and enforcement of judgments of courts of the United States in civil and commercial matters and that a final judgment for the payment of money rendered by any general or state court in the United States based on civil liability, whether or not predicated solely upon the U.S. federal securities laws, would not be automatically enforceable in the British Virgin Islands. We have been advised by Maples and Calder that a final and conclusive judgment obtained in U.S. federal or state courts under which a sum of money is payable (i.e., not being a sum claimed by a revenue authority for taxes or other charges of a similar nature by a governmental authority, or in respect of a fine or penalty or multiple or punitive damages) may be the subject of an action on a debt in the court of the British Virgin Islands under British Virgin Islands common law.


vii


Table of Contents

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
A.    Directors and Senior Management
Not applicable.
B.    Advisers
Not applicable.
C.    Auditors
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
A.    Offer Statistics
Not applicable.
B.    Method and Expected Timetable
Not applicable.
ITEM 3. KEY INFORMATION
A.    Selected Financial Data
The selected balance sheet data as of December 31, 2019 and 2018 and the income statement data for the years ended December 31, 2019, 2018 and 2017 of Arcos Dorados Holdings Inc. are derived from the consolidated financial statements included elsewhere in this annual report, which have been audited by Pistrelli, Henry Martin y Asociados S.R.L., member firm of Ernst & Young Global. The selected balance sheet data as of December 31, 2017, 2016 and 2015 and the income statement data for the years ended December 31, 2016 and 2015 of Arcos Dorados Holdings Inc. are derived from consolidated financial statements audited by Pistrelli, Henry Martin y Asociados S.R.L., which are not included herein.
Our operating segments are composed of four geographic regions of operation: (i) the South Latin American division, or “SLAD,” which is comprised of Argentina, Chile, Ecuador, Peru and Uruguay, (ii) the Caribbean division which is comprised of Aruba, Colombia, Curaçao, French Guiana, Guadeloupe, Martinique, Puerto Rico, Trinidad and Tobago, the U.S. Virgin Islands of St. Croix and St. Thomas and Venezuela (iii) Brazil and (iv) the North Latin American division, or “NOLAD,” which is comprised of Costa Rica, Mexico and Panama.
We were incorporated on December 9, 2010 as a direct, wholly-owned subsidiary of Arcos Dorados Limited, the prior holding company for the Arcos Dorados business. On December 13, 2010, Arcos Dorados Limited effected a downstream merger into and with us, with us as the surviving entity. The merger was accounted for as a reorganization of entities under common control in a manner similar to a pooling of interest and the consolidated financial statements reflect the historical consolidated operations of Arcos Dorados Limited as if the reorganization structure had existed since Arcos Dorados Limited was incorporated in July 2006. We did not commence operations until the Acquisition on August 3, 2007.
We maintain our books and records in U.S. dollars and prepare our consolidated financial statements in accordance with U.S. GAAP. This financial information should be read in conjunction with “Presentation of Financial and Other Information,” “Item 5. Operating and Financial Review and Prospects” and our consolidated financial statements, including the notes thereto, included elsewhere in this annual report.




1


Table of Contents

 
 
For the Years Ended December 31,
 
 
2019
 
2018
 
2017
 
2016
 
2015
 
 
(in thousands of U.S. dollars, except for per share data)
Income Statement Data:
 
 
 
 
 
 
 
 
 
 
Sales by Company-operated restaurants
 
$
2,812,287
 
 
$
2,932,609
 
 
$
3,162,256
 
 
$
2,803,334
 
 
$
2,930,379
 
Revenues from franchised restaurants
 
146,790
 
 
148,962
 
 
157,269
 
 
125,296
 
 
122,361
 
Total revenues
 
2,959,077
 
 
3,081,571
 
 
3,319,525
 
 
2,928,630
 
 
3,052,740
 
Company-operated restaurant expenses:
 
 
 
 
 
 
 
 
 
 
Food and paper
 
(1,007,584)
 
 
(1,030,499)
 
 
(1,110,240)
 
 
(1,012,976)
 
 
(1,037,487)
 
Payroll and employee benefits
 
(567,653)
 
 
(607,793)
 
 
(683,954)
 
 
(607,082)
 
 
(660,773)
 
Occupancy and other operating
 
(799,633)
 
 
(803,539)
 
 
(842,519)
 
 
(752,428)
 
 
(793,622)
 
Royalty fees
 
(155,388)
 
 
(157,886)
 
 
(163,954)
 
 
(142,777)
 
 
(149,089)
 
Franchised restaurants—occupancy expenses
 
(61,278)
 
 
(67,927)
 
 
(69,836)
 
 
(55,098)
 
 
(54,242)
 
General and administrative expenses
 
(212,515)
 
 
(229,324)
 
 
(244,664)
 
 
(221,075)
 
 
(270,680)
 
Other operating income (expenses), net
 
4,910
 
 
(61,145)
 
 
68,577
 
 
41,386
 
 
6,560
 
Total operating costs and expenses
 
(2,799,141)
 
 
(2,958,113)
 
 
(3,046,590)
 
 
(2,750,050)
 
 
(2,959,333)
 
Operating income
 
159,936
 
 
123,458
 
 
272,935
 
 
178,580
 
 
93,407
 
Net interest expense
 
(52,079)
 
 
(52,868)
 
 
(68,357)
 
 
(66,880)
 
 
(64,407)
 
Gain (loss) from derivative instruments
 
439
 
 
(565)
 
 
(7,065)
 
 
(3,065)
 
 
(2,894)
 
Foreign currency exchange results
 
12,754
 
 
14,874
 
 
(14,265)
 
 
32,354
 
 
(54,032)
 
Other non-operating (expenses) income, net
 
(2,097)
 
 
270
 
 
(435)
 
 
(2,360)
 
 
(627)
 
Income (loss) before income taxes
 
118,953
 
 
85,169
 
 
182,813
 
 
138,629
 
 
(28,553)
 
Income tax expense
 
(38,837)
 
 
(48,136)
 
 
(53,314)
 
 
(59,641)
 
 
(22,816)
 
Net income (loss)
 
80,116
 
 
37,033
 
 
129,499
 
 
78,988
 
 
(51,369)
 
Less: Net income attributable to non-controlling interests
 
(220)
 
 
(186)
 
 
(333)
 
 
(178)
 
 
(264)
 
Net income (loss) attributable to Arcos Dorados Holdings Inc.
 
79,896
 
 
36,847
 
 
129,166
 
 
78,810
 
 
(51,633)
 
Earnings (Loss) per share:
 
 
 
 
 
 
 
 
 
 
Basic net income (loss) per common share attributable to Arcos Dorados
 
$
0.39
 
 
$
0.18
 
 
$
0.61
 
 
$
0.37
 
 
$
(0.25)
 
Diluted net income (loss) per common share attributable to Arcos Dorados
 
$
0.39
 
 
$
0.18
 
 
$
0.61
 
 
$
0.37
 
 
$
(0.25)
 

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As of December 31,
 
 
 
2019
 
2018
 
2017
 
2016
 
2015
 
 
 
(in thousands of U.S. dollars, except for share data)
 
Balance Sheet Data:
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalent
 
$
121,880
 
 
$
197,282
 
 
$
308,491
 
 
$
194,803
 
 
$
112,519
 
 
Total current assets
 
405,368
 
 
464,562
 
 
653,037
 
 
445,190
 
 
378,996
 
 
Property and equipment, net
 
960,986
 
 
856,192
 
 
890,736
 
 
847,966
 
 
833,357
 
 
Total non-current assets
 
2,152,317
 
 
1,113,477
 
 
1,150,706
 
 
1,059,863
 
 
1,024,206
 
 
Total assets
 
2,557,685
 
 
1,578,039
 
 
1,803,743
 
 
1,505,053
 
 
1,403,202
 
 
Accounts payable
 
259,577
 
 
242,455
 
 
303,452
 
 
217,914
 
 
187,685
 
 
Short-term debt and current portion of long-term debt
 
16,529
 
 
4,192
 
 
4,359
 
 
28,099
 
 
163,740
 
 
Total current liabilities
 
595,447
 
 
493,312
 
 
605,583
 
 
548,308
 
 
577,314
 
 
Long-term debt, excluding current portion
 
623,575
 
 
626,424
 
 
629,142
 
 
551,580
 
 
491,327
 
 
Total non-current liabilities
 
1,540,672
 
 
691,968
 
 
702,018
 
 
605,169
 
 
538,998
 
 
Total liabilities
 
2,136,119
 
 
1,185,280
 
 
1,307,601
 
 
1,153,477
 
 
1,116,312
 
 
Total common stock
 
516,119
 
 
512,760
 
 
509,647
 
 
506,884
 
 
504,772
 
 
Total equity
 
421,566
 
 
392,759
 
 
496,142
 
 
351,576
 
 
286,890
 
 
Total liabilities and equity
 
2,557,685
 
 
1,578,039
 
 
1,803,743
 
 
1,505,053
 
 
1,403,202
 
 
Shares outstanding
 
204,070,029
 
 
205,232,247
 
 
211,072,508
 
 
210,711,224
 
 
210,538,896
 
 

3


Table of Contents









 
For the Years Ended December 31,
 
 
2019
 
2018
 
2017
 
2016
 
2015
 
 
(in thousands of U.S. dollars, except percentages)
Other Data:
 
 
 
 
 
 
 
 
 
 
Total Revenues
 
 
 
 
 
 
 
 
 
 
Brazil
 
$
1,385,566
 
 
$
1,345,453
 
 
$
1,496,573

 
 
$
1,333,237

 
 
$
1,361,989

 
Caribbean division(1)
 
399,251
 
 
483,743
 
 
474,822
 
 
 
409,671
 
 
 
398,144
 
 
NOLAD
 
431,266
 
 
406,848
 
 
386,874
 
 
 
363,965
 
 
 
367,364
 
 
SLAD
 
742,994
 
 
845,527
 
 
961,256
 
 
 
821,757
 
 
 
925,243
 
 
Total
 
2,959,077
 
 
3,081,571
 
 
3,319,525
 
 
 
2,928,630
 
 
 
3,052,740
 
 
Operating Income
 
 
 
 
 
 
 
 
 
 
Brazil
 
$
164,342
 
 
$
159,511
 
 
$
160,608

 
 
$
122,636

 
 
$
116,820

 
Caribbean division(1)
 
(1,100)
 
 
(49,567)
 
 
1,538
 
 
 
(12,392)
 
 
 
(40,102)
 
 
NOLAD
 
16,539
 
 
7,726
 
 
99,152
 
 
 
45,145
 
 
 
8,710
 
 
SLAD
 
42,410
 
 
53,777
 
 
71,718
 
 
 
66,359
 
 
 
78,022
 
 
Corporate and others and purchase price allocation
 
(62,255)
 
 
(47,989)
 
 
(60,081)
 
 
 
(43,168)
 
 
 
(70,043)
 
 
Total
 
159,936
 
 
123,458
 
 
272,935
 
 
 
178,580
 
 
 
93,407
 
 
Operating Margin(2)
 
 
 
 
 
 
 
 
 
 
Brazil
 
11.9
%
 
11.9
%
 
10.7
 
%
 
9.2
 
%
 
8.6
 
%
Caribbean division(1)
 
(0.3)
 
 
(10.2)
 
 
0.3
 
 
 
(3.0)
 
 
 
(10.1)
 
 
NOLAD
 
3.8
 
 
1.9
 
 
25.6
 
 
 
12.4
 
 
 
2.4
 
 
SLAD
 
5.7
 
 
6.4
 
 
7.5
 
 
 
8.1
 
 
 
8.4
 
 
Total
 
5.4
 
 
4.0
 
 
8.2
 
 
 
6.1
 
 
 
3.1
 
 
Adjusted EBITDA(3)
 
 
 
 
 
 
 
 
 
 
Brazil
 
$
227,844
 
 
$
218,391
 
 
$
218,172

 
 
$
168,076

 
 
$
174,102

 
Caribbean division(1)
 
24,955
 
 
(8,281)
 
 
40,844
 
 
 
18,049
 
 
 
2,059
 
 
NOLAD
 
39,027
 
 
32,313
 
 
33,717
 
 
 
36,288
 
 
 
31,424
 
 
SLAD
 
63,120
 
 
73,670
 
 
87,083
 
 
 
76,327
 
 
 
100,718
 
 
Corporate and others
 
(63,171)
 
 
(58,096)
 
 
(74,879)
 
 
 
(60,295)
 
 
 
(78,132)
 
 
Total
 
291,775
 
 
257,997
 
 
304,937
 
 
 
238,445
 
 
 
230,171
 
 
Adjusted EBITDA Margin(4)
 
 
 
 
 
 
 
 
 
 
Brazil
 
16.4
%
 
16.2
%
 
14.6
 
%
 
12.6
 
%
 
12.8
 
%
Caribbean division(1)
 
6.2
 
 
(1.7)
 
 
8.6
 
 
 
4.4
 
 
 
0.5
 
 
NOLAD
 
9.0
 
 
7.9
 
 
8.7
 
 
 
10.0
 
 
 
8.6
 
 
SLAD
 
8.5
 
 
8.7
 
 
9.1
 
 
 
9.3
 
 
 
10.9
 
 
Total
 
9.9
 
 
8.4
 
 
9.2
 
 
 
8.1
 
 
 
7.5
 
 
Other Financial Data:
 
 
 
 
 
 
 
 
 
 
Working capital(5)
 
 
(190,079)
 
 
$
(28,750)
 
 
$
47,454

 
 
$
(103,118)

 
 
$
(198,318)

 
Capital expenditures(6)
 
267,893
 
 
197,041
 
 
175,636
 
 
 
92,282
 
 
 
92,055
 
 
Dividends declared per common share
 
$
0.11
 
 
$
0.10
 
 
$

 
 
$

 
 
$

 


4


Table of Contents


 
 
As of December 31,
 
 
2019
 
2018
 
2017
 
2016
 
2015
Number of systemwide restaurants
 
2,293
 
 
2,223
 
 
2,188
 
 
2,156
 
 
2,141
 
Brazil
 
1,023
 
 
968
 
 
929
 
 
902
 
 
883
 
Caribbean division
 
336
 
 
337
 
 
350
 
 
353
 
 
356
 
NOLAD
 
530
 
 
524
 
 
519
 
 
517
 
 
518
 
SLAD
 
404
 
 
394
 
 
390
 
 
384
 
 
384
 
Number of Company-operated restaurants
 
1,580
 
 
1,540
 
 
1,546
 
 
1,553
 
 
1,588
 
Brazil
 
612
 
 
584
 
 
579
 
 
584
 
 
615
 
Caribbean division
 
251
 
 
251
 
 
263
 
 
266
 
 
267
 
NOLAD
 
364
 
 
362
 
 
363
 
 
365
 
 
364
 
SLAD
 
353
 
 
343
 
 
341
 
 
338
 
 
342
 
Number of franchised restaurants
 
713
 
 
683
 
 
642
 
 
603
 
 
553
 
Brazil
 
411
 
 
384
 
 
350
 
 
318
 
 
268
 
Caribbean division
 
85
 
 
86
 
 
87
 
 
87
 
 
89
 
NOLAD
 
166
 
 
162
 
 
156
 
 
152
 
 
154
 
SLAD
 
51
 
 
51
 
 
49
 
 
46
 
 
42
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
Currency devaluations in Venezuela have had a significant effect on our income statements and have impacted the comparability of our income statements. See “Item 5. Operating and Financial Review and Prospects-A. Operating Results-Foreign Currency Translation-Venezuela.”
(2)
Operating margin is operating income divided by total revenues, expressed as a percentage.
(3)
Adjusted EBITDA is a measure of our performance that is reviewed by our management. Adjusted EBITDA does not have a standardized meaning and, accordingly, our definition of Adjusted EBITDA may not be comparable to Adjusted EBITDA as used by other companies. Total Adjusted EBITDA is a non-GAAP measure. For our definition of Adjusted EBITDA, see “Item 5. Operating and Financial Review and Prospects-A. Operating Results-Key Business Measures.”
(4)
Adjusted EBITDA margin is Adjusted EBITDA divided by total revenues, expressed as a percentage.
(5)
Working capital equals current assets minus current liabilities.
(6)
Includes property and equipment expenditures and purchase of restaurant businesses paid at the acquisition date.

5


Table of Contents

Presented below is the reconciliation between net income and Adjusted EBITDA on a consolidated basis:
 
 
For the Years Ended December 31,

Consolidated Adjusted EBITDA Reconciliation
 
2019
 
2018
 
2017
 
2016
 
2015
 
 
(in thousands of U.S. dollars)
Net income (loss) attributable to Arcos Dorados Holdings Inc.
 
$
79,896

 
 
$
36,847

 
 
$
129,166

 
 
$
78,810

 
 
$
(51,633)
 
Plus (Less):
 
 
 
 
 
 
 
 
 
 
Net interest expense
 
52,079
 
 
 
52,868
 
 
 
68,357
 
 
 
66,880
 
 
 
64,407
 
(Gain) loss from derivative instruments
 
(439)
 
 
 
565
 
 
 
7,065
 
 
 
3,065
 
 
 
2,894
 
Foreign currency exchange results
 
(12,754)
 
 
 
(14,874)
 
 
 
14,265
 
 
 
(32,354)
 
 
 
54,032
 
Other non-operating expenses (income), net
 
2,097
 
 
 
(270)
 
 
 
435
 
 
 
2,360
 
 
 
627
 
Income tax expense
 
38,837
 
 
 
48,136
 
 
 
53,314
 
 
 
59,641
 
 
 
22,816
 
Net income attributable to non-controlling interests
 
220
 
 
 
186
 
 
 
333
 
 
 
178
 
 
 
264
 
Operating income
 
159,936
 
 
 
123,458
 
 
 
272,935
 
 
 
178,580
 
 
 
93,407
 
Plus (Less):
 
 
 
 
 
 
 
 
 
 
Items excluded from computation that affect operating income:
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
 
123,218
 
 
 
105,800
 
 
 
99,382
 
 
 
92,969
 
 
 
110,715
 
Gains from sale or insurance recovery of property and equipment

 
(5,175)
 
 
 
(4,973)
 
 
 
(95,081)
 
 
 
(57,244)
 
 
 
(12,308)
 
Write-offs of property and equipment
 
4,733
 
 
 
4,167
 
 
 
8,528
 
 
 
5,776
 
 
 
6,038
 
Impairment of long-lived assets
 
8,790
 
 
 
18,950
 
 
 
17,564
 
 
 
7,697
 
 
 
12,343
 
Impairment of goodwill
 
273
 
 
 
167
 
 
 
200
 
 
 
5,045
 
 
 
679
 
Stock-based compensation related to the special awards in connection with the initial public offering under the 2011 Plan
 
 
 
 
 
 
 
 
 
 
 
 
 
210
 
Reorganization and optimization plan
 
 
 
 
11,003
 
 
 
 
 
 
5,341
 
 
 
18,346
 
2008 Long-Term Incentive Plan incremental compensation from modification
 
 
 
 
(575)
 
 
 
1,409
 
 
 
281
 
 
 
741
 
Adjusted EBITDA
 
291,775
 
 
 
257,997
 
 
 
304,937
 
 
 
238,445
 
 
 
230,171
 
Exchange Rates and Exchange Controls
In 2019, 66.7% of our total revenues were derived from our restaurants in Brazil, Argentina and Mexico. While we maintain our books and records in U.S. dollars, our revenues are conducted in the local currency of the territories in which we operate, and as such may be affected by changes in the local exchange rate to the U.S. dollar. The exchange rates discussed in this section have been obtained from each country’s central bank. However, in most cases, for consolidation purposes, we use a foreign currency to U.S. dollar exchange rate provided by Bloomberg that differs slightly from that reported by the aforementioned central banks.
Brazil
Exchange Rates
The Brazilian real depreciated 47.0% against the U.S. dollar in 2015, and appreciated 19.4% in 2016, 1.7% in 2017, depreciated 19% in 2018, depreciated 25.5% in 2019 and depreciated 18.3% in the first quarter of 2020. As of April 24, 2020, the exchange rate for the purchase of U.S. dollars as reported by the Central Bank of Brazil was R$5.65 per U.S. dollar.